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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-21711
THE MARQUEE GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 13-3878295
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(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)
888 SEVENTH AVENUE, NEW YORK, NY 10019
(Address of Principal Executive Offices) (Zip code)
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212-728-2000
(Registrant's Telephone Number, Including Area Code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
AT NOVEMBER 12, 1998, THERE WERE 18,085,614 SHARES OUTSTANDING OF THE
REGISTRANT'S COMMON STOCK, PAR VALUE $.01 PER SHARE.
TRANSITIONAL DISCLOSURE FORMAT. YES [ ] NO [X]
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THE MARQUEE GROUP, INC.
TABLE OF CONTENTS
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PAGE NO.
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Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1998 (unaudited) and
December 31, 1997 ........................................................ 3
Condensed Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 1998 and 1997 (unaudited) ..................... 4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1998 and 1997 (unaudited) .................................. 5
Condensed Consolidated Statements of Stockholders' Equity for the Nine
Months Ended September 30, 1998 (unaudited) .............................. 6
Notes to Condensed Consolidated Financial Statements ...................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ............................................................... 10
Part II Other Information ......................................................... 18
Item 1. Legal Proceedings ......................................................... 18
Item 2. Changes in Securities and Use of Proceeds ................................. 18
Item 6. Exhibits and Reports on Form 8-K .......................................... 19
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ITEM 1. FINANCIAL STATEMENTS
THE MARQUEE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
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SEPTEMBER 30, DECEMBER 31,
1998 1997
--------------- -------------
(UNAUDITED) (NOTE 1)
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ASSETS
Current assets
Cash and cash equivalents ................................................... $ 4,500 $ 8,944
Cash escrow ................................................................. 746 704
Accounts receivable, net .................................................... 14,791 6,930
Prepaid production costs .................................................... 1,193 553
Prepaid expenses and other current assets ................................... 595 436
-------- --------
Total current assets ...................................................... 21,825 17,567
Property and equipment, net .................................................. 2,895 2,040
Receivables--non current ..................................................... 1,365 668
Notes receivable ............................................................. 2,135 1,887
Deposits and deferred expenses ............................................... 2,314 677
Intangible assets--net ....................................................... 59,648 23,951
-------- --------
$ 90,182 $ 46,790
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses ....................................... $ 8,728 $ 4,592
Acquisition indebtedness--current portion ................................... 1,515 775
Escrow payable .............................................................. 685 527
Deferred revenues ........................................................... 523 626
-------- --------
Total current liabilities ................................................. 11,451 6,520
Notes payable--bank .......................................................... 33,140
Acquisition indebtedness--non-current ........................................ 3,777 2,144
Deferred rent ................................................................ 651 696
Deferred income taxes ........................................................ 964 960
Common stock (545 shares) subject to put options ............................. 3,420 3,184
Stockholders' equity
Preferred stock, $.01 par value; 5,000 shares authorized, no shares issued
Common stock, $.01 par value; 25,000 shares authorized, 18,086
(September 30, 1998) and 17,913 (December 31, 1997) shares issued
and outstanding ........................................................... 175 174
Additional paid-in capital .................................................. 39,593 36,885
Accumulated deficit ......................................................... (3,003) (3,781)
Cumulative translation adjustment ........................................... 14 8
-------- --------
Total stockholders' equity ................................................ 36,779 33,286
-------- --------
$ 90,182 $ 46,790
======== ========
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Note: The condensed consolidated balance sheet at December 31, 1997 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes to condensed consolidated financial statements.
3
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THE MARQUEE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
---------- --------- ------------ ------------
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Revenues ............................................ $14,199 $5,817 $ 35,470 $ 11,991
Operating expenses .................................. 8,739 3,716 23,726 7,664
General and administrative expenses ................. 2,865 1,500 8,239 4,502
Non cash compensation ............................... (157) 81 367 165
Depreciation and amortization ....................... 660 72 1,463 91
------- ------ -------- --------
Income/(loss) from operations ....................... 2,092 448 1,675 (431)
Interest expense, net ............................... 227 222 120 224
Financing expense ................................... -- 756 -- 756
------- ------ -------- --------
Income/(loss) before income taxes ................... 1,865 (530) 1,555 (1,411)
Income taxes ........................................ 423 77 541 77
------- ------ -------- --------
Net income/(loss) ................................... 1,442 (607) 1,014 (1,448)
Accretion of obligation related to the put option
issued in connection with the ProServ
acquisition ........................................ 79 -- 236 --
------- ------ -------- --------
Net income/(loss) applicable to common
stockholders ....................................... $ 1,363 $ (607) $ 778 $ (1,488)
======= ====== ======== ========
Net income/(loss) per share--basic and dilutive ..... $ .08 $ (.08) $ .05 $ (.20)
======= ====== ======== ========
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See accompanying notes to condensed consolidated financial statements.
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THE MARQUEE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
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NET CASH USED IN OPERATING ACTIVITIES .................................. $ (3,547) $ (2,184)
INVESTING ACTIVITIES
Recent Acquisitions, net of cash acquired ............................. (30,736) --
Purchase of equipment and leasehold improvements, net of landlord
contribution ........................................................ (702) (1,240)
Employee loan ......................................................... -- (424)
Deposits and deferred expenses ........................................ (970) (2,200)
Increase in other assets .............................................. (568)
--------- --------
Net cash used in investing activities ............................... (32,408) (4,432)
--------- --------
FINANCING ACTIVITIES
Proceeds under Credit Agreement ....................................... 33,140 --
Proceeds from Bridge Financing ........................................ -- 10,500
Costs related to stock offerings ...................................... (187) (131)
Costs related to Credit Agreement ..................................... (667) --
Costs related to Tender Offer ......................................... -- (9,580)
Payment of acquisition indebtedness ................................... (775) (500)
--------- --------
Net cash provided by financing activities ........................... 31,511 289
--------- --------
NET DECREASE/INCREASE IN CASH .......................................... (4,444) (6,327)
CASH AT BEGINNING OF PERIOD ............................................ 8,944 7,231
--------- --------
CASH AT END OF PERIOD .................................................. $ 4,500 $ 904
========= ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
Issuance of common stock to an employee ............................... $ 100 --
========= ========
In connection with Recent Acquisitions
Issuance of common stock ............................................ $ 2,616 --
========= ========
Notes payable ....................................................... $ 2,594 --
========= ========
Obligation to issue common stock in future .......................... $ 416 --
========= ========
Note received in connection with sale of an interest in an associated
company ............................................................... $ 300 --
========= ========
Issuance of options to purchase 105 shares of Common stock in connection
with Bridge Financing for the Tender Offer ............................ $ 394
========
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See accompanying notes to condensed consolidated financial statements.
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THE MARQUEE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
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ADDITIONAL CUMULATIVE TOTAL
NUMBER OF COMMON PAID-IN ACCUMULATED TRANSLATION STOCKHOLDERS'
SHARES STOCK CAPITAL DEFICIT ADJUSTMENT EQUITY
----------- ---------- ------------ ------------- ------------- --------------
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Balance--December 31, 1997 ..... 17,913 $174 $36,885 $ (3,781) 8 $33,286
Issuance of common stock:
In connection with
acquisitions ................ 549 5 2,611 2,616
To an employee ................ 16 100 100
Cancellation of IPO Escrow
Shares ........................ (392) (4) 4 --
QBQ Escrow Shares .............. 180 180
Secondary Offering costs ....... (187) (187)
Foreign currency translation
adjustment .................... 6 6
Net income for period .......... 778 778
------ ----- ------- -------- --- -------
Balance--September 30, 1998
(unaudited) ................... 18,086 $175 $39,593 $ (3,003) $14 $36,779
====== ===== ======= ======== === =======
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See accompanying notes to condensed consolidated financial statements.
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THE MARQUEE GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- MERGER WITH SFX ENTERTAINMENT
On July 23, 1998, The Marquee Group, Inc. (the "Company") entered into an
Agreement and Plan of Merger, as amended (the "Merger Agreement"), with SFX
Entertainment, Inc. ("Parent") and SFX Acquisition Corp., a wholly-owned
subsidiary of Parent ("Sub"), pursuant to which Sub will merge with and into
the Company (the "Merger") and the Company will continue as the surviving
corporation of the Merger. Pursuant to the Merger Agreement, upon the
consummation of the Merger, each outstanding share of common stock, $.01 par
value, of the Company will be converted into the right to receive from Parent
0.1111 shares of Class A Common Stock, $.01 par value, of Parent (the "SFX
Class A Common Stock")(the "Exchange Ratio"). If the SFX Class A Common Stock
Price (as defined below) is greater than $42.75, then the Exchange Ratio shall
be the quotient obtained by dividing $4.75 by the SFX Class A Common Stock
Price. The term "SFX Class A Common Stock Price" means the average of the last
reported sale price for the fifteen consecutive trading days ending on the
fifth trading day prior to the effective time of the Merger on the primary
exchange on which the SFX Class A Common Stock is traded (the NASDAQ National
Market).
Additionally, the Merger Agreement places certain restrictions on the
conduct of business by the Company, including a restriction on the incurrence
of indebtedness and the making of capital expenditures.
The consummation of the Merger is subject to the satisfaction of a number
of conditions set forth in the Merger Agreement, including approval by the
Company's stockholders. Certain of these conditions have been satisfied as of
November 12, 1998, including the expiration of the applicable waiting period
for the merger under the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended. The Merger is expected to be consummated in the first quarter of
1999.
NOTE 2 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Item 310(b) of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for an interim period
are not necessarily indicative of the results that may be expected for a full
year. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1997.
The Company was formed in July 1995 for the purpose of providing
integrated event management, television programming and production, marketing,
talent representation and consulting services in the sports, news and
entertainment industries. In furtherance of its business strategy, the Company
acquired by merger on December 12, 1996, concurrently with the closing of its
initial public offering ("IPO"), Sports Marketing & Television International,
Inc. ("SMTI"), which provides production and marketing services to sporting
events, sports television shows, and professional and collegiate leagues and
organizations, and Athletes and Artists, Inc. ("A&A"), a sports and media
representation firm. The acquisitions of SMTI and A&A are referred to as the
"1996 Acquisitions". In October 1997, the Company acquired ProServ, Inc. and
ProServ Television, Inc. (collectively, "ProServ") (the "ProServ Acquisition")
and QBQ Entertainment, Inc. ("QBQ") (the "QBQ Acquisition") (collectively, the
"1997 Acquisitions"). The Company also completed the secondary offering (the
"Second Offering") of 8,500,000 shares of its common stock at $5.00 per share
in the fourth quarter of 1997. In August and September 1998, the Company
acquired Alphabet City Industries, Inc. and Alphabet City Sports Records, Inc.,
Cambridge Holding Corporation, Park Associates Limited, Tony Stephens
Associates Limited, and Tollin/Robbins
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Productions (collectively, the "Recent Acquisitions"). Accordingly, the
accompanying condensed consolidated financial statements include the accounts
of the Company, the 1997 Acquisitions and the Recent Acquisitions from their
respective dates of acquisition. All significant intercompany transactions and
accounts have been eliminated.
NOTE 3 -- EARNINGS PER COMMON SHARE
Basic earnings per share applicable to common stockholders is based upon
the net loss after reduction of amounts, if any, for accretion of the
obligation related to the put option issued in connection with the ProServ
Acquisition divided by the weighted average number of shares of common stock
outstanding during the year. Shares of common stock placed in escrow upon
completion of the Company's initial public offering have been excluded from the
calculation of basic earnings per share. The Company's outstanding options,
warrants and contingently issuable shares are not included for diluted earnings
per share because the effect would be anti-dilutive for 1997. The following
table sets forth the computation of the adjusted weighted average number of
common stock outstanding:
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SEPTEMBER 30, 1998
---------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- ------------------
(IN THOUSANDS) (IN THOUSANDS)
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Denominator for basic earnings per share--weighted
average shares .............................................. 16,859 16,660
Effect of dilutive securities--Employee stock options ......... 177 141
------ ------
Denominator for dilutive earnings per share--adjusted
weighted average shares ..................................... 17,036 16,801
====== ======
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NOTE 4 -- NON-CASH COMPENSATION CHARGE
In connection with the acquisition of QBQ in October 1997, the Company
placed in escrow 78,702 shares of its common stock issued to the seller as a
portion of the purchase price. As of March 31, 1998, the Company has determined
that it is probable that the financial thresholds required to be met for the
release of these escrowed shares will be achieved in 1998, and, accordingly has
recorded a charge of $180,000 for the nine months ended September 30, 1998 as
non-cash compensation in the accompanying condensed consolidated statements of
operations. This compensation charge will be adjusted based upon the changes in
the fair market value of the shares subject to the escrow arrangement through
the actual release date.
NOTE 5 -- BANK CREDIT AGREEMENT
On July 31, 1998, the Company and its subsidiaries entered into a Credit
Agreement, as amended, (the "Credit Agreement") with BankBoston, NA, which
provides for a revolving line of credit for loans and letters of credit
(subject to a $2 million sublimit) of up to $35 million in the aggregate. The
revolving credit facility under the Credit Agreement may be used to finance
acquisitions and to fund working capital needs. Loans under the Credit
Agreement bear interest at a floating rate equal to a base rate which
approximates prime plus an applicable margin, or a Eurocurrency rate plus an
applicable margin. The applicable margin is dependent on the Company achieving
certain leverage ratios. In August and September 1998, the Company borrowed a
total of approximately $33.1 million under the revolving credit facility in
connection with the Recent Acquisitions, with the interest rate associated with
such borrowings of approximately 8.3% for domestic borrowings and 10.5% for
British \P borrowings (at September 30, 1998). The obligations of the Company
under the Credit Agreement are secured by a first priority security interest in
all existing and future acquired property of the Company, including the capital
stock of its subsidiaries. The Company's obligations under the Credit Agreement
are also guaranteed by the Company's present and future subsidiaries and
secured by a first priority security interest in all existing and future
property of these subsidiaries. The Credit Agreement also contains financial
leverage and coverage ratios, which may inhibit the Company's ability to incur
other indebtedness, and restrictions on capital expenditures, distributions and
other payments. However, the Company will be permitted to incur
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additional indebtedness outside of the Credit Agreement to acquire businesses
secured solely by the assets of such acquired businesses, as long as the
Company is in compliance with the financial covenants of the Credit Agreement
exclusive of such indebtedness and the related borrowing base applicable to the
businesses acquired. The term of the Credit Agreement is three years with
borrowing availability reduced periodically commencing January 1, 2000. See
"Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" for additional
information.
NOTE 6 -- RECENT ACQUISITIONS
On August 3, 1998, the Company consummated its acquisition of
substantially all of the assets of Alphabet City Industries, Inc. and all of
the outstanding stock of Alphabet City Sports Records, Inc., both of which are
sports and music marketing companies which develop strategic alliances among
sports leagues, music companies and corporate sponsors (collectively, the
"Alphabet City Acquisition"). The aggregate purchase price for the Alphabet
City Acquisition was approximately $3.4 million in cash (excluding assumed
liabilities) and 200,000 shares of the Company's common stock. In addition, the
Company may be obligated to make significant additional payments (up to $9
million) based upon the financial performance of the acquired businesses.
On August 6, 1998, the Company consummated its acquisition of all of the
outstanding stock of Cambridge Holding Corporation ("Cambridge"), a golf
representation company, whose client roster includes a mix of established PGA
Tour winners and many prospects on the Nike Tour (the "Cambridge Acquisition").
The aggregate purchase price for Cambridge was approximately $3.5 million in
cash and 89,536 shares of the Company's common stock. In addition, the Company
may be obligated to make additional payments aggregating approximately $2.0
million based upon the future financial performance of Cambridge.
On August 13, 1998, the Company acquired Park Associates Limited ("PAL"),
a sports and media talent representation firm in the United Kingdom. (the "PAL
Acquisition"). The initial consideration for the PAL Acquisition was
approximately pounds sterling 1.6 million (approximately $2.6 million) in cash
and 117,440 shares of the Company's common stock. In addition, the Company will
pay an additional pounds sterling 800,000 (approximately $1.3 million) in cash
and pounds sterling 200,000 (approximately $330,000) in common stock (based on
the closing price of such stock as reported in The Wall Street Journal during
the twenty days prior to the date of each payment) in five equal annual
installments.
On September 2, 1998, the Company consummated its acquisition of Tony
Stephens Associates Limited ("TSA"), a major soccer talent representation firm
in the United Kingdom (the "TSA Acquisition"). The initial consideration for
the TSA Acquisition was approximately pounds sterling 1.8 million
(approximately $3.0 million), of which pounds sterling 1.4 million
(approximately $2.5 million) was paid in cash and 142,291 shares of the
Company's common stock were issued. In addition, the Company will pay an
additional pounds sterling 200,000 (approximately $330,000) in cash and pounds
sterling 50,000 (approximately $83,000) in the form of shares of the Company's
common stock.
On September 18, 1998, the Company consummated its acquisition of all the
issued and outstanding equity interests in Halcyon Days, Productions, Inc.,
Robbins Entertainment Group, Inc. and Tollin/ Robbins Management, LLC
(collectively, "Tollin/Robbins") (the "Tollin/Robbins Acquisition"). Tollin/
Robbins is an award-winning independent film and television production company.
The initial consideration for the Tollin/Robbins Acquisition was $20.5 million
in cash. In addition, the two sellers will each receive $800,000 in cash,
payable in four equal annual installments beginning September 1, 1999 and will
receive additional consideration based on the EBITDA (as defined in the
acquisition agreement) of the acquired entities through 2003, payable in shares
of the Company's common stock and cash.
The funds used to consummate each of the Recent Acquisitions were
principally obtained from borrowings under the Credit Agreement.
9
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ITEM 2 -- MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the accompanying
condensed consolidated financial statements and related notes thereto. The
following discussion contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements are prospective and involve risks and uncertainties; therefore, the
Company's future results of operations could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to uncertainties related to the Company's business
and growth strategies, difficulties in achieving cost savings and revenue
enhancements and difficulties in integrating the acquired companies. The
Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
GENERAL
The Company was formed in July 1995 for the purpose of providing
integrated event management, television programming and production, marketing,
talent representation and consulting services in the sports, news and other
entertainment industries. From the time of its formation until the consummation
of the acquisitions of Sports Marketing & Television International, Inc. and
Athletes and Artists, Inc., (collectively, the "1996 Acquisitions"), the
Company was engaged in developing its sports television production, marketing
and consulting business. The 1996 Acquisitions were financed with proceeds from
the Company's initial public offering in December 1996 (the "IPO"). In October
1997, the Company acquired ProServ, Inc. and a related company ("ProServ") and
QBQ Entertainment, Inc. ("QBQ"), (collectively, the "1997 Acquisitions"). The
Company also completed its secondary public offering of 8,500,000 shares of the
Company's common stock at $5.00 per share in October and November 1997 (the
"Second Offering"). In August and September 1998, the Company acquired Alphabet
City Industries, Inc., Alphabet City Sports Records, Inc, Cambridge Holding
Corporation, Park Associates Limited, Tony Stephens Associates Limited, and
Tollin/Robbins Productions, (collectively, the "Recent Acquisitions"). The
funds used to consummate each of the Recent Acquisitions were principally
obtained from borrowings under the Credit Agreement, as defined herein.
The primary sources of the Company's revenues are fees from providing
event management, television programming and production, sports marketing and
consulting services and commissions from representation of sports, news and
entertainment personalities. Revenues from event management services are
recognized when the events are held. Revenues from television programming and
production services are recognized when the programs are available for
broadcast. Marketing revenues are recognized for guaranteed amounts when
contractual obligations are met (subsequent royalties are recorded when
received). Revenues from advertising services are recognized in the month the
advertisement is broadcast or printed. Commissions based on profit or gross
receipt participations are recorded upon the determination of such amounts.
Consulting revenue is recognized as services are provided. Commissions from the
Company's talent representation services are recognized as revenue when they
become payable to the Company under the terms of the Company's agreements with
its clients. Generally, such commissions are payable by clients upon their
receipt of payments for performance of services.
The Company's revenues may vary from quarter to quarter, due to the timing
of certain significant events and the resulting recognition of revenues from
such events. Historically, the fourth quarter produced the highest percentage
of revenues for the year, principally from the Company's management and
marketing of The Breeders' Cup Championship and from representation agreements
with professional hockey players, which results in revenue to the Company upon
the commencement of the National Hockey League season. As a result of the
Company's entry into the business of representing professional football players
and the 1997 Acquisitions, it is anticipated that the Company's revenues and
expenses will
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increase, and the Company expects that these increased revenues and expenses
will be recorded substantially in the third as well as the fourth quarter.
A significant portion of the Company's revenues to date has been derived
from a small number of events and clients. On a pro forma basis for the 1997
Acquisitions and the Recent Acquisitions, The Breeders' Cup Championship would
have accounted for approximately 11% of the Company's revenues for the year
ended December 31, 1997. The Breeders' Cup agreement terminates on December 31,
2000, with an automatic renewal under certain circumstances, unless terminated
earlier in accordance with the terms of the agreement, including the
termination, for any reason, of the Company's employment of Michael Letis or
Michael Trager or the unavailability of Mr. Letis or Mr. Trager to perform the
services necessary to enable the Company to comply with the terms of The
Breeders' Cup agreement.
The Company has recorded and will continue to record substantial
compensation charges and other non-cash charges to operations in connection
with the 1997 Acquisitions, the Recent Acquisitions and the issuance of
securities to certain officers, directors and consultants. In connection with
the 1997 Acquisitions and the Recent Acquisitions, the Company recorded as
intangibles the excess of the purchase price over the net tangible assets
acquired of approximately $60 million which will be amortized over ten to
twenty years. In the nine months ended September 1998, the Company recorded a
charge to operations of $180,000 as non-cash compensation, in recognition of
the probability of QBQ achieving certain financial thresholds which would
require the release of the shares of the Company's common stock placed in
escrow in connection with the acquisition of QBQ (the "QBQ Acquisition"). This
compensation charge will be adjusted based upon the changes in the fair market
value of the shares subject to the escrow arrangement through the actual
release date. The Company may also record additional non-cash compensation
expense during the period if the shares of the Company's common stock subject
to an escrow agreement entered into in connection with the IPO (except for
shares held by The Sillerman Companies, Inc. ("TSC"), with respect to which TSC
has waived its rights) are released from escrow because certain thresholds for
the release are met. In connection with the merger, the holders of such escrow
shares executed release agreements whereby each of the holders waived any and
all rights to receive such escrow shares, effective as of the date of the
closing of the merger (except for TSC's waiver, which was effective in July
1998). These charges are not deductible for income tax purposes and may have
the effect of significantly increasing the Company's losses or reducing or
eliminating earnings, if any, at such time. In addition, the Company will
record charges to operations over the next two years aggregating $0.6 million
related to the Company's potential obligation to repurchase the shares of
common stock issued in connection with the acquisition of ProServ (the "ProServ
Acquisition"). The Company will also record charges to operations aggregating
$1.3 million over the remaining three to eight years related to imputed
interest on the indebtedness to the former stockholders of Sports Marketing and
Television International, Inc. ("SMTI"), Athletes & Artists, Inc. ("A&A"), QBQ
and certain of the businesses acquired in the Recent Acquisitions. Further, in
connection with an officer's employment agreement, the Company will recognize a
non-cash compensation charge of $300,000 over the next three years.
RECENT DEVELOPMENTS -- MERGER WITH SFX ENTERTAINMENT
On July 23, 1998, The Marquee Group, Inc. (the "Company") entered into an
Agreement and Plan of Merger, as amended (the "Merger Agreement"), with SFX
Entertainment, Inc. ("Parent") and SFX Acquisition Corp., a wholly-owned
subsidiary of Parent ("Sub"), pursuant to which Sub will merge with and into
the Company (the "Merger") and the Company will continue as the surviving
corporation of the Merger. Pursuant to the Merger Agreement, upon the
consummation of the Merger, each outstanding share of common stock, $.01 par
value, of the Company will be converted into the right to receive from Parent
0.1111 shares of Class A Common Stock, $.01 par value, of Parent (the "SFX
Class A Common Stock")(the "Exchange Ratio"). If the SFX Class A Common Stock
Price (as defined below) is greater than $42.75, then the Exchange Ratio shall
be the quotient obtained by dividing $4.75 by the SFX Class A Common Stock
Price. The term "SFX Class A Common Stock Price" means the average of the last
reported sale price for the fifteen consecutive trading days ending on the
fifth trading day prior to the effective time of the Merger on the primary
exchange on which the SFX Class A Common Stock is traded (the NASDAQ National
Market).
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Additionally, the Merger Agreement places certain restrictions on the
conduct of business by the Company, including a restriction on the incurrence
of indebtedness and the making of capital expenditures.
The consummation of the Merger is subject to the satisfaction of a number
of conditions set forth in the Merger Agreement, including approval by the
Company's stockholders. Certain of the conditions have been satisfied as of
November 12, 1998, including the expiration of the applicable waiting period
for the merger under the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended. The Merger is expected to be consummated in the first quarter of
1999.
RESULTS OF OPERATIONS
The Company's consolidated financial statements are not directly
comparable from period to period because the Company consummated the 1997
Acquisitions in October 1997. The Recent Acquisitions were completed during
August and September 1998, and the results of their operations are included in
the following discussions only on a pro forma basis. The supplemental
discussion and analysis of the results of operations on a pro forma basis for
the 1997 Acquisitions include the Company, ProServ and QBQ, as if they had
always been members of the same operating group for the applicable period. The
pro forma results of operations discussions for the Recent Acquisitions include
the Company, the 1997 Acquisitions, Alphabet City, Cambridge, PAL, TSA and
Tollin/Robbins (each as defined herein), as if they had always been members of
the same operating group.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997
For the three months ended September 30, 1998, the company generated
revenues of approximately $14.2 million compared to $5.8 million for the three
months ended September 30, 1997. The increase in revenues of approximately $8.4
million is principally attributable to the inclusion of the operations of the
1997 Acquisitions ($6.7 million) and the inclusion of the Recent Acquisitions
($1.7 million). On a pro forma basis, giving effect to the 1997 Acquisitions
and the Recent Acquisitions as if they had occurred as of January 1, 1997, the
Company's revenues in the 1998 quarter were $15.7 million compared to $14.4
million for the same period in 1997. The increases were primarily attributable
to programming and production activities ($1.3 million) related to the
Professional Bowlers Association ("PBA") Tour broadcasts on CBS and ESPN, the
syndicated series More than a Game, and the Nickelodeon productions Keenan &
Kell, All That, and Cousin Skeeter. In addition, the Company was executive
producer for a soon to be released Paramount movie titled Varsity Blues. The
Company's talent representation fees increased ($.5 million), primarily the
result of booking the Billy Joel Tour and increased European talent
representation fees, partially offset by reduced representation fees of NFL
football athletes. Sales and marketing revenues increased ($0.2 million)
primarily as a result of activity associated with the PBA Tour. These increases
were partially offset by reduced event management revenue ($.9 million)
associated with the elimination of the Canon Golf Shootout which was managed in
1997 and not renewed by the sponsor in 1998.
The Company's operating expenses of $8.7 million for the three months
ended September 30, 1998 increased $5.0 million from $3.7 million for the prior
year period. The increase is principally attributable to the inclusion of the
operations of the 1997 Acquisitions ($3.8 million) and the inclusion of the
Recent Acquisitions ($0.8 million). Operating expenses increased approximately
$.8 million primarily due to increased activity associated with the PBA Tour
broadcasts. On a pro forma basis, giving effect to the 1997 Acquisitions and
the Recent Acquisitions as if they had occurred as of January 1, 1997, the
Company's operating expenses increased approximately $0.6 million for the three
months ended September 30, 1998 compared to the same period in 1997.
General and administrative expenses were approximately $2.9 million for
the three months ended September 30, 1998 as compared to $1.5 million for the
same period in 1997. The increase was principally the result of the inclusion
of the operations of the 1997 Acquisitions ($0.8 million) and the Recent
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Acquisitions ($.2 million). On a pro forma basis, giving effect to the 1997
Acquisitions and the Recent Acquisitions as if they had occurred as of January
1, 1997, general and administrative expenses increased $0.3 million for the
three months ended September 30, 1998 from approximately $3.5 million in the
prior year period.
The Company's income from operations was $2.1 million for the three months
ended September 30, 1998 as compared to $0.4 million for the same period in
1997. The increase is principally the result of the inclusion of the activities
of the 1997 Acquisitions. The 1998 quarter was favorably impacted by the
decrease in the non-cash compensation expense ($0.2 million) related to the QBQ
escrow shares. Adversely impacting the 1998 quarter is the charge for the
amortization of goodwill for the 1997 Acquisitions and the Recent Acquisitions
($0.6 million). On a pro forma basis giving effect to the 1997 Acquisitions and
the Recent Acquisitions as if they had occured as of January 1, 1997, the
Company would have reported income from operations of $2.2 million for the
period ended September 30, 1998 compared to $1.3 million for the same period in
1997.
The Company's net income applicable to common stockholders for the three
months ended September 30, 1998 was $1.4 million compared to a net loss of $.6
million for the same period in 1997. The 1997 quarter includes a one-time
financing charge of approximately $0.9 million, including interest, related to
the bridge financing for the Company's tender offer for its warrants. The 1998
quarter results include the non cash charge of $0.1 million related to the
accretion of the Company's potential obligation in connection with the put
option on common stock issued in connection with the ProServ Acquisition.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997
For the nine months ended September 30, 1998 the Company generated
revenues of approximately $35.5 million compared to $12.0 million for the nine
months ended September 30, 1997. The increase in revenues of approximately
$23.5 million is principally attributable to the inclusion of the operations of
the 1997 Acquisitions ($19.4 million) and the inclusion of the operations of
the Recent Acquisitions ($1.8 million). Revenues for the nine months ended
September 30, 1998, excluding these acquisitions, increased approximately $2.3
million. The increase was principally attributable to programming and
production activity ($1.8 million) related to the PBA Tour broadcasts on ESPN
and CBS, the syndicated series More Than a Game, and increased boxing
productions on ESPN. On a pro forma basis, giving effect to the 1997
Acquisitions and the Recent Acquisitions as if they had occurred as of January
1, 1997, the Company's revenues for the nine months ended September 30, 1998
were $48.8 million compared to $37.2 million for the same period in 1997. The
increase on a pro forma basis of $11.6 million is related to the matters
discussed above as well as increased revenues generated for The Guardian Cup
($3.0 million), an ATP tennis tournament held in the United Kingdom in February
1998, partially offset by reduced revenues from the AT&T Challenge Cup, an ATP
tennis tournament in Atlanta, and the loss of the sponsorship for a golf event
staged in Europe ($2.0 million) in 1997. In addition, the Company generated
revenues for securing the naming rights of a new arena being built in Los
Angeles and the procurement of various other endorsements ($1.2 million) during
the nine months ended September 30, 1998. Talent representation fees increased
$2.7 million due to the Billy Joel tour and the addition of certain European
soccer players. Programming and production activities increased approximately
$4.5 million related to the production of syndicated series Keenan & Kell, All
That, Cousin Skeeter, Arli$$, and a Paramount movie Varsity Blues.
The Company's operating expenses of $23.7 million for the nine months
ended September 30, 1998 increased $16.0 million from $7.7 million for the
prior year nine month period. The increase was principally the result of the
inclusion of the operations of the 1997 Acquisitions ($12.2 million) and the
inclusion of the Recent Acquisitions ($.9 million). The Company's operating
expenses increased approximately $2.9 million for the nine months ended
September 30, 1998 primarily due to the activity associated with the PBA Tour
broadcast on ESPN and CBS, production of More Than a Game, and ESPN boxing. The
Company's operating expenses increased approximately $8.0 million for the nine
months ended September 30, 1998 compared to the same period in 1997 on a pro
forma basis giving effect to the 1997 Acquisitions and the Recent Acquisitions
as if they had occurred as of January 1, 1997. The increase
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is principally the result of matters previously discussed as well as costs
associated with the ATP Tennis tournament in the United Kingdom ($3.0 million),
increased talent representation expenses ($1.7 million) associated with
increased revenues, and increased television production and distribution
expenses for certain sporting events for which the Company has distribution
rights.
General and administrative expenses were approximately $8.2 million for
the nine months ended September 30, 1998 as compared to $4.5 million for the
same period in 1997. The increase was principally the result of the inclusion
of the operations of the 1997 Acquisitions ($2.8 million), the inclusion of the
operations of the Recent Acquisitions ($.2 million), and increased staff and
occupancy costs required to support the Company's expanded business operations.
General and administrative expenses increased $1.8 million for the nine months
ended September 30, 1998 from approximately $9.4 million in the same period in
1997 on a pro forma basis giving effect to the 1997 Acquisitions and the Recent
Acquisitions as if they had occurred as of January 1, 1997. The increase is the
result of higher occupancy and staff costs required to support the Company's
expanded business operations.
The Company's income from operations was $1.7 million for the nine months
ended September 30, 1998 compared to an operating loss of $0.4 million for the
same period in 1997. The nine month period ended September 30, 1998 was
impacted by a non cash compensation charge of $0.4 million as a result of the
determination that the financial thresholds required to be met for the release
of the QBQ escrow shares would probably be achieved in 1998. This compensation
charge will be adjusted based upon the change in the fair value of the QBQ
escrow shares through the actual release date of such shares. Another factor
impacting the nine months 1998 period is the charge for amortization of
goodwill for the 1997 Acquisitions ($0.9 million) and the Recent Acquisitions
($.3 million).
The Company's net income applicable to common stockholders for the nine
months ended September 30, 1998 was $0.8 million compared to a net loss of $1.5
million for the same period in 1997. The nine months 1998 results include non
cash charges mentioned above as well as a charge of $.2 million related to the
accretions of the Company's potential obligation in connection with the put
option on common stock issued in connection with the ProServ Acquisition.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company's principal sources of funds have been from the net proceeds
from the Company's IPO in December 1996 of approximately $15.6 million, net
proceeds of approximately $38.4 million from the Second Offering in 1997 and
borrowings of $33.1 million under the Credit Agreement (as defined herein) in
August and September 1998. The Company has paid approximately $58.9 million in
connection with all of the Company's acquisitions, and approximately $10.5
million was used to finance the Company's tender offer for its then outstanding
warrants. Working capital as of September 30, 1998 was approximately $10.4
million.
ACQUISITIONS
In 1997, the Company purchased ProServ for an aggregate purchase price of
$10.8 million in cash and the issuance of 250,000 shares of the Company's
common stock and repaid approximately $2.4 million of the outstanding
indebtedness of ProServ. The shares issued in connection with the purchase of
ProServ are subject to certain put and call options. The holder of the put
option, at any time within the 60 day period following the second anniversary
of the consummation of the ProServ Acquisition, may elect to transfer to the
Company up to all of the remaining common stock of the Company held by the
option holder at a price per share of $7.70 (up to approximately $1.9 million
in the aggregate). In addition, at any time between the 61st and 90th day
following the second anniversary of the consummation of the ProServ
Acquisition, the Company may purchase 50% of the common stock of the Company
held by option holder at a price per share of $7.70 (up to $962,500 in the
aggregate). The Company may also be obligated to make additional earn-out
payments of up to $2.5 million over the next 4 years based on the financial
performance of ProServ.
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In 1997, the Company also purchased certain assets of QBQ for an aggregate
purchase price of approximately $6.7 million, of which $2.0 million was paid by
the issuance of 314,812 shares of the Company's common stock, $1.0 million will
be payable in equal annual installments over eight years, subject to
acceleration in certain circumstances and $615,000 will be payable in annual
installments over five years. In addition, the Company deposited 78,702 shares
of its common stock with a value of approximately $500,000 into an escrow
account. The Company has determined that it was probable that these shares will
be released from escrow and, accordingly, has recorded a charge to operations
of $180,000 as non-cash compensation. In connection with the QBQ Acquisition,
the Company loaned $1.5 million to the sole shareholder of QBQ, on a
non-recourse basis, secured by the Company's common stock issued in the QBQ
Acquisition. The acquisition agreement also provides that, at any time within
the 30-day period following the first to occur of (1) the second anniversary of
the consummation of the QBQ Acquisition or (2) an Acceleration Event (as
defined in the QBQ acquisition agreement), QBQ may, at its option, elect to
transfer to the Company up to 75% of the shares it received in connection with
the QBQ Acquisition for an aggregate purchase price of up to $1.5 million. In
addition, at any time within the 30-day period following the first to occur of
the second anniversary of the closing of the QBQ Acquisition or a Pledge Event
(as defined in the QBQ acquisition agreement), the Company may, at its option,
elect to purchase 50% of such shares from QBQ for an aggregate of $1.5 million.
In addition, if the QBQ escrow shares are released from escrow at any time
within the first 30 days after the second anniversary of the consummation of
the QBQ Acquisition or an Acceleration Event, (1) QBQ may, at its option, elect
to transfer up to 75% of the QBQ escrow shares to the Company for an aggregate
purchase price of up to $375,000 and (2) the Company may, at its option, elect
to purchase up to 50% of the QBQ escrow shares for an aggregate purchase price
of up to $750,000. The Company may also be obligated to make significant
additional earn-out payments over the next 3 years based on the financial
performance of QBQ.
In connection with the 1996 Acquisitions, the Company paid $9.0 million
and agreed to pay $2.5 million to the former stockholders of SMTI and A&A in
five equal annual installments, which began on April 1, 1997. The second
installment of $500,000 was paid in April 1998.
On August 3, 1998, the Company consummated its acquisition of
substantially all of the assets of Alphabet City Industries, Inc. and all of
the outstanding stock of Alphabet City Sports Records, Inc., both of which are
sports and music marketing companies which develop strategic alliances among
sports leagues, music companies and corporate sponsors (collectively, the
"Alphabet City Acquisition"). The aggregate purchase price for the Alphabet
City Acquisition was approximately $3.4 million in cash (excluding assumed
liabilities) and 200,000 shares of the Company's common stock. In addition, the
Company may be obligated to make significant additional payments (up to $9.0
million) based upon the financial performance of the acquired businesses.
On August 6, 1998, the Company consummated its acquisition of all of the
outstanding stock of Cambridge Holding Corporation ("Cambridge"), a golf
representation company, whose client roster includes a mix of established PGA
Tour winners and many prospects on the Nike Tour (the "Cambridge Acquisition").
The aggregate purchase price for Cambridge was approximately $3.5 million in
cash and 89,536 shares of the Company's common stock. In addition, the Company
may be obligated to make additional payments aggregating approximately $2.0
million based upon the future financial performance of Cambridge.
On August 13, 1998, the Company acquired Park Associates Limited ("PAL"),
a sports and media talent representation firm in the United Kingdom (the "PAL
Acquisition"). The initial consideration for the PAL Acquisition was
approximately pounds sterling 1.6 million (approximately $2.6 million) in cash
and 117,440 shares of the Company's common stock. In addition, the Company will
pay an additional pounds sterling 800,000 (approximately $1.3 million) in cash
and pounds sterling 200,000 (approximately $330,000) in the Company common
stock (based on the closing price of such stock as reported in The Wall Street
Journal during the twenty days prior to the date of each payment) in five equal
annual installments.
On September 2, 1998, the Company consummated its acquisition of Tony
Stephens Associates Limited ("TSA"), a major soccer talent representation firm
in the United Kingdom (the "TSA Acquisition"). The initial consideration for
the TSA Acquisition was approximately pounds sterling 1.8 million
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(approximately $3.0 million), of which pounds sterling 1.4 million
(approximately $2.5 million) was paid in cash and 142,291 shares of the
Company's common stock were issued. In addition, the Company will pay an
additional pounds sterling 200,000 (approximately $330,000) in cash and pounds
sterling 50,000 (approximately $83,000) in the form of shares of the Company's
common stock.
On September 18, 1998, the Company acquired Tollin/Robbins Productions, an
independent television and film production and a talent management company
("Tollin/Robbins"), for an aggregate purchase price of $22.0 million ($1.6
million of which will be payable in four equal annual installments beginning on
September 1, 1999) (the "Tollin/Robbins Acquisition"). In addition, the Company
will pay certain additional amounts payable in cash and common stock of the
Company based upon the financial performance of Tollin/Robbins. Tollin/Robbins
produces television series for HBO and Nickelodeon and theatrical motion
pictures for Paramount Pictures.
The Company financed the cash portion of each of the Recent Acquisitions
principally with approximately $33.1 million in borrowings under the Credit
Agreement.
CREDIT AGREEMENT
On July 31, 1998, the Company entered into a credit agreement with
BankBoston, N A. (the "Credit Agreement"), which provides for a revolving line
of credit for loans and letters of credit (subject to a $2.0 million sublimit)
of up to $35.0 million in the aggregate. As of October 30, 1998, the Company
had outstanding approximately $33.1 million of borrowings under the credit
facility. The revolving credit facility under the Credit Agreement may be used
to finance acquisitions and for working capital needs. Loans under the Credit
Agreement bear interest at a floating rate equal to (1) a base rate (which
approximates prime) plus an applicable margin or (2) a Eurocurrency rate plus
an applicable margin, whichever is applicable. The applicable margin is
dependent on the Company achieving certain leverage ratios. In August and
September 1998, the Company borrowed approximately $33.1 million under the
revolving credit facility in connection with the Recent Acquisitions, with the
interest rate associated with such borrowings being 8.3% for domestic
borrowings and 10.5% for British pounds sterling loans (at September 30, 1998).
The Company's obligations under the Credit Agreement are secured by a first
priority security interest in all existing and future acquired property of the
Company including the capital stock of its subsidiaries. The Company's
obligations under the Credit Agreement are also guaranteed by the Company's
present and future subsidiaries and secured by a first priority security
interest in all existing and future property of these subsidiaries. The Credit
Agreement also contains financial leverage and coverage ratios, which may
inhibit the Company's ability to incur other indebtedness, and restrictions on
capital expenditures, distributions and other payments. However, the Company
will be permitted to incur additional indebtedness outside of the Credit
Agreement to acquire businesses secured solely by the assets of the acquired
businesses, as long as the Company is in compliance with the financial
covenants of the Credit Agreement exclusive of such indebtedness and the
related borrowing base related to the businesses acquired. The term of the
Credit Agreement is three years, with borrowing availability reduced
periodically, commencing January 1, 2000.
Management of the Company believes that the Company's working capital and
cash flow generated from operations, as well as the availability to make
additional borrowings under the Credit Agreement, are sufficient to meet the
Company's working capital requirements for the foreseeable future. However, if
the Company is required to repurchase its shares issued in connection with 1997
Acquisitions, or make any of the earn-out payments described above, there can
be no assurance that the Company will have funds available for such repurchases
or to make the additional earn-out payments. In addition, the Company's
strategy has historically involved continued expansion through additional
acquisitions, both within its existing lines of businesses and within
complementary lines of businesses. Pursuant to such strategy, the Company is
currently negotiating with respect to certain additional acquisitions, although
it has not entered into any definitive agreements with respect to such
acquisitions, and there can be no assurance that it will do so. Additional
acquisitions will involve additional debt financing (which would require
additional payments of principal and interest on such indebtedness and would
adversely impact the Company's cash flows) and/or the issuance of equity
securities (which may dilute the ownership interests of the Company's then
existing stockholders). However, there can be no assurance that the
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Company will be able to obtain such financing on terms acceptable to the
Company or at all. Any such acquisitions may result in charges to operations
relating to interest expense or the recognition and amortization of goodwill,
which would have the effect of increasing the Company's losses or reducing or
eliminating earnings, if any.
YEAR 2000 COMPLIANCE
The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable year. The
Company's exposure to potential Year 2000 problems exists in two general areas:
technological operations in the sole control of the Company, and technological
operations dependent in some way on one or more third parties. Failure to
achieve high levels of Year 2000 compliance in either area could have a
material adverse impact on the Company.
In the area of technological operations under the Company's exclusive
control, the Company has performed an internal assessment of its information
technology systems and believes such systems are Year 2000 compliant. In
addition, the Company is currently involved in the identification and
assessment of its non-information technology systems. The Company does not
anticipate incurring significant costs in making its non-information technology
systems Year 2000 compliant.
In the area of technological operations dependent in some way on one or
more third parties, the situation is much less in the Company's ability to
predict or control. The Company intends to make efforts to ensure that the
third parties on which it is heavily reliant are Year 2000 compliant, but
cannot predict the likelihood of such compliance occurring nor the direct or
indirect costs to the Company of non-compliance by those third parties or of
securing such services from compliant third parties. However, the Company does
not anticipate that it will be subject to a material impact in this area.
At present, it is anticipated that the Company's action plan with respect
to addressing Year 2000 problems will be successfully completed in all material
respects in advance of January 1, 2000, and that its cost to the Company will
not be material. The Company does not currently anticipate a need to develop a
contingency plan for Year 2000 issues.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("FAS 131"), which is effective for years
beginning after December 15, 1997. FAS 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. FAS 131 is effective for financial
statements for fiscal years beginning after December 15, 1997, and therefore
the Company will adopt the new requirements in 1998. Management has not yet
completed its review of FAS 131 and therefore has not determined what
reportable segments will be presented.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On May 5, 1998, a class action complaint was filed in Chancery Court in
the State of Delaware, New Castle County, CA #16355NC against the Company,
certain of its directors and SFX Entertainment, Inc. ("Parent", and
collectively with the Company and its directors, the "Defendants"). The
complaint alleged that Parent proposed an acquisition of the Company and that
the proposed acquisition would be unfair to the Company's public stockholders.
The complaint sought an order enjoining the proposed transaction, or, in the
alternative, awarding rescissory and compensatory damages.
On July 22, 1998, the parties entered into a Memorandum of Understanding,
pursuant to which the parties have reached an agreement providing for a
settlement of the action (the "Settlement"). Pursuant to the Settlement, the
Parent acknowledged that the legal action was a significant factor in improving
the terms of its offer to acquire the Company. The Settlement also provides for
the Defendants to pay plaintiffs' counsel an aggregate of $310,000, including
all fees and expenses as approved by the court. The Settlement is conditioned
on the (1) closing of the merger, (2) completion of confirmatory discovery and
(3) approval of the court. Pursuant to the Settlement, the Defendants have
denied, and continue to deny, that they have acted improperly in any way or
breached any fiduciary duty.
On October 16, 1998, Parent and the Company entered into amendment no. 3
to the Merger Agreement ("Amendment No. 3") to reflect revisions to certain
terms of the Merger, including the Exchange Ratio. In entering into Amendment
No. 3, Parent and the Company took into consideration the concerns and
interests of the plaintiffs in the litigation and, it is therefore their
intention to attempt to finalize a revised Memorandum of Understanding with
plaintiff's counsel. There can be no assurance, however, that the parties will
enter into a revised Memorandum of Understanding or that the court will approve
any settlement on the terms and conditions provided for therein, or at all.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(c) On August 3, 1998, the Company issued 200,000 shares of the Company's
common stock in connection with the Alphabet City Acquisition.
On August 6, 1998, the Company issued 89,536 shares of the Company's
common stock in connection with the acquisition of Cambridge.
On August 13, 1998, the Company issued 117,440 shares of the Company's
common stock in connection with the PAL Acquisition. In addition, the Company
will issue an additional pounds sterling 200,000 (approximately $330,000) of
its common stock to the sellers in the PAL Acquisition in five equal annual
installments.
On September 2, 1998, the Company issued 142,291 shares of the Company's
common stock in connection with the TSA Acquisition. In addition, the Company
will issue an additional pounds sterling 50,000 (approximately $83,000) of its
common stock to the sellers in the TSA Acquisition.
The above transactions were private transactions not involving a public
offering and were exempt from the registration provisions of the Securities Act
of 1933, as amended ("Securities Act"), pursuant to Section 4(2) thereof. The
sale of securities was without the use of an underwriter, and the shares bear a
restrictive legend permitting the transfer thereof only upon registration of
the shares or an exemption under the Securities Act.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description
- - ------- -----------
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Registration Statement
on Form SB-2 (Reg. No. 333-11287) filed with the Commission on September
3, 1996).
3.2 Amended and Restated By-laws of the Company (incorporated by reference to
Exhibit 3.2 to Amendment No. 1 to the Registration Statement on Form SB-2
(Reg. No. 333-11287) filed with the Commission on October 25, 1996).
10.1 Agreement and Plan of Merger, dated as of July 23, 1998, among SFX
Entertainment, Inc., SFX Acquisition Corp. and The Marquee Group, Inc.
(incorporated by reference to the Report on Form 8-K of SFX
Entertainment, Inc. (File No. 0-24017) filed with the Commission on
August 5, 1998).
10.2 Marketing Agreement, dated as of October 1, 1997, by and between Sports
Marketing & Television International, Inc. and Breeders' Cup Limited
(portions have been omitted pursuant to a request for confidential
treatment and filed separately with the Commission) (incorporated by
reference to the Report on Form 8-K of the Company (File No. 0-21711)
filed with the Commission on August 5, 1998).
10.3 Stock and Asset Purchase Agreement, dated as of August 3, 1998, by and
among Alphabet City Sports Records, Inc., Alphabet City Industries, Inc.,
Kenneth Dichter, Jesse Itzler, The Marquee Group, Inc. and Marquee
Records, Inc. (incorporated by reference to the Report on Form 8-K of the
Company (File No. 0-21711) filed with the Commission on August 13, 1998).
10.4 Credit Agreement, dated as of July 31, 1998, among The Marquee Group,
Inc., the Subsidiaries of The Marquee Group, Inc. and BankBoston, N.A.
(incorporated by reference to the Report on Form 8-K of the Company (File
No. 0-21711) filed with the Commission on August 13, 1998).
10.5* Share Purchase Agreement, dated August 13, 1998, by and among Jonathan
Roy Holmes, Peter McGarvey and Others, and The Marquee Group, Inc., and
The Marquee Group (UK) Limited.
10.6* Share Purchase Agreement for the Sale and Purchase of all the Issued
Share Capital of Tony Stephens Associates Limited, dated as of September
2, 1998, by and among Anthony Everett Stephens, Gillian Ann Stephens and
The Marquee Group, Inc.
10.7 Purchase Agreement, dated September 18, 1998, by and between The Marquee
Group, Inc., Michael Tollins and Brian Robbins (incorporated by reference
to the Report on Form 8-K of the Company (File No. 0-21711) filed with
the Commission on October 5, 1998).
10.8 Amendment No. 1, dated as of September 21, 1998, to the Agreement and
Plan of Merger among SFX Entertainment, Inc., SFX Acquisition Corp. and
The Marquee Group, Inc. (incorporated by reference to the Report on Form
8-K of the Company (File No. 0-21711) filed with the Commission on
October 9, 1998).
10.9 Amendment No. 2, dated as of October 5, 1998, to the Agreement and Plan
of Merger among SFX Entertainment, Inc., SFX Acquisition Corp. and The
Marquee Group, Inc. (incorporated by reference to the Report on Form 8-K
of the Company (File No. 0-21711) filed with the Commission on October 9,
1998).
10.10 Amendment No. 3, dated as of October 16, 1998, to the Agreement and Plan
of Merger among SFX Entertainment, Inc., SFX Acquisition Corp. and The
Marquee Group, Inc. (incorporated by reference to the Report on Form 8-K
of SFX Entertainment, Inc. (File No. 0-24017) filed with the Commission
on October 20, 1998).
19
<PAGE>
10.11* Amendment No. 1 to the Credit Agreement, dated as of August 12, 1998,
among The Marquee Group Inc., the Subsidiaries of The Marquee Group, Inc.
and BankBoston, N.A.
10.12* Amendment No. 2 to the Credit Agreement, dated as of August 31, 1998,
among The Marquee Group, Inc., the Subsidiaries of The Marquee Group,
Inc. and BankBoston, N.A.
10.13* Amendment No. 3 to the Credit Agreement, dated as of November 13, 1998,
among The Marquee Group, Inc., the Subsidiaries of The Marquee Group,
Inc. and BankBoston, N.A.
27* Financial Data Schedule
- - ----------
* Filed herewith
(b) Reports on Form 8-K:
On August 5, 1998, the Company filed a Report on Form 8-K pursuant to Item
5 disclosing its entry into an agreement pursuant to which SFX Entertainment,
Inc. would acquire the Company.
On August 13, 1998, the Company filed a Report on Form 8-K pursuant to
Item 2 disclosing the consummation of its acquisition of Alphabet City
Industries, Inc. and Alphabet City Sports Records, Inc. Pursuant to Item 5, the
Company disclosed the execution of a credit agreement. The Form 8-K was amended
on October 16, 1998, to include certain pro-forma financial information with
respect to such acquisition.
On August 28, 1998, the Company filed a Report on Form 8-K pursuant to
Item 2 disclosing the consummation of its acquisition of Park Associates
Limited. The Form 8-K was amended on October 16, 1998, to include certain
pro-forma financial information with respect to such acquisition.
On September 16, 1998, the Company filed a Report on Form 8-K pursuant to
Item 2 disclosing the consummation of its acquisition of Tony Stephens
Associates Limited. The Form 8-K was amended on October 16, 1998, to include
certain pro-forma financial information with respect to such acquisition.
On October 5, 1998, the Company filed a Report on Form 8-K pursuant to
Item 2 disclosing the consummation of its acquisition of Tollin/Robbins
Productions. The Form 8-K was amended on October 16, 1998, to include certain
pro-forma financial information with respect to such acquisition.
On October 9, 1998, the Company filed a Report on Form 8-K pursuant to
Item 5 disclosing the execution of amendments to the agreement pursuant to
which SFX Entertainment, Inc. would acquire the Company.
On October 20, 1998, the Company filed a Report on Form 8-K pursuant to
Item 5 disclosing the execution of an amendment to the agreement pursuant to
which SFX Entertainment, Inc. would acquire the Company.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE MARQUEE GROUP, INC.
By: /s/ Jan E. Chason
----------------------------------
Jan E. Chason
Chief Financial Officer and
Treasurer
Date: November 16, 1998
21
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------------ -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Registration Statement on Form SB-2 (Reg.
No. 333-11287) filed with the Commission on September 3, 1996).
3.2 Amended and Restated By-laws of the Company (incorporated by reference to Exhibit
3.2 to Amendment No. 1 to the Registration Statement on Form SB-2 (Reg.
No. 333-11287) filed with the Commission on October 25, 1996).
10.1 Agreement and Plan of Merger, dated as of July 23, 1998, among SFX Entertainment,
Inc., SFX Acquisition Corp. and The Marquee Group, Inc. (incorporated by reference to
the Report on Form 8-K of SFX Entertainment, Inc. (File No. 0-24017) filed with the
Commission on August 5, 1998).
10.2 Marketing Agreement, dated as of October 1, 1997, by and between Sports Marketing &
Television International, Inc. and Breeders' Cup Limited (portions have been omitted
pursuant to a request for confidential treatment and filed separately with the Commission)
(incorporated by reference to the Report on Form 8-K of the Company (File
No. 0-21711) filed with the Commission on August 5, 1998).
10.3 Stock and Asset Purchase Agreement, dated as of August 3, 1998, by and among
Alphabet City Sports Records, Inc., Alphabet City Industries, Inc., Kenneth Dichter,
Jesse Itzler, The Marquee Group, Inc. and Marquee Records, Inc. (incorporated by
reference to the Report on Form 8-K of the Company (File No. 0-21711) filed with the
Commission on August 13, 1998).
10.4 Credit Agreement, dated as of July 31, 1998, among The Marquee Group, Inc., the
Subsidiaries of The Marquee Group, Inc. and BankBoston, N.A. (incorporated by
reference to the Report on Form 8-K of the Company (File No. 0-21711) filed with the
Commission on August 13, 1998).
10.5* Share Purchase Agreement, dated August 13, 1998, by and among Jonathan Roy
Holmes, Peter McGarvey and Others, and The Marquee Group, Inc., and The Marquee
Group (UK) Limited.
10.6* Share Purchase Agreement for the Sale and Purchase of all the Issued Share Capital of
Tony Stephens Associates Limited, dated as of September 2, 1998, by and among
Anthony Everett Stephens, Gillian Ann Stephens and The Marquee Group, Inc.
10.7 Purchase Agreement, dated September 18, 1998, by and between The Marquee Group,
Inc., Michael Tollins and Brian Robbins (incorporated by reference to the Report on
Form 8-K of the Company (File No. 0-21711) filed with the Commission on October 5,
1998).
10.8 Amendment No. 1, dated as of September 21, 1998, to the Agreement and Plan of
Merger among SFX Entertainment, Inc., SFX Acquisition Corp. and The Marquee
Group, Inc. (incorporated by reference to the Report on Form 8-K of the Company
(File No. 0-21711) filed with the Commission on October 9, 1998).
10.9 Amendment No. 2, dated as of October 5, 1998, to the Agreement and Plan of Merger
among SFX Entertainment, Inc., SFX Acquisition Corp. and The Marquee Group, Inc.
(incorporated by reference to the Report on Form 8-K of the Company (File
No. 0-21711) filed with the Commission on October 9, 1998).
10.10 Amendment No. 3, dated as of October 16, 1998, to the Agreement and Plan of Merger
among SFX Entertainment, Inc., SFX Acquisition Corp. and The Marquee Group, Inc.
(incorporated by reference to the Report on Form 8-K of SFX Entertainment, Inc. (File
No. 0-24017) filed with the Commission on October 20, 1998).
10.11* Amendment No. 1 to the Credit Agreement, dated as of August 12, 1998, among The
Marquee Group Inc., the Subsidiaries of The Marquee Group, Inc. and BankBoston,
N.A.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------------- -----------
<S> <C>
10.12* Amendment No. 2 to the Credit Agreement, dated as of August 31, 1998, among The
Marquee Group, Inc., the Subsidiaries of The Marquee Group, Inc. and BankBoston,
N.A.
10.13* Amendment No. 3 to the Credit Agreement, dated as of November 13, 1998, among The
Marquee Group, Inc., the Subsidiaries of The Marquee Group, Inc. and BankBoston,
N.A.
27* Financial Data Schedule
</TABLE>
- - ----------
* Filed herewith
23
<PAGE>
Dated 13 August 1998
----------------------
(1) JONATHAN ROY HOLMES, PETER MCGARVEY AND OTHERS
(2) THE MARQUEE GROUP, INC.
(3) THE MARQUEE GROUP (UK) LIMITED
-------------------------------
SHARE PURCHASE AGREEMENT
FOR THE SALE AND PURCHASE OF
ALL THE ISSUED SHARE CAPITAL OF
PARK ASSOCIATES LIMITED
-------------------------------
BIRD & BIRD
90 FETTER LANE
LONDON EC4A 1JP
Tel: 0171 415 6000
Fax: 0171 415 6111
ref:CMC/RMD/MARQU/002
<PAGE>
CONTENTS
1 DEFINITIONS AND INTERPRETATION....................................2
2 SALE OF THE SHARES................................................7
3 CONSIDERATION.....................................................8
4 COMPLETION........................................................9
5 COMPLETION NET ASSET STATEMENT...................................12
6 REPRESENTATIONS AND WARRANTIES...................................14
7 CONFIDENTIALITY..................................................19
8 PROTECTIVE COVENANTS.............................................20
9 ANNOUNCEMENTS....................................................21
10 NOTICES AND RECEIPTS.............................................21
11 RESOLUTIONS AND WAIVERS..........................................22
12 GENERAL..........................................................22
13 WHOLE AGREEMENT..................................................23
14 GOVERNING LAW....................................................23
15 PURCHASERS' WARRANTIES AND COVENANT..............................23
SCHEDULE 1
THE SELLERS, THEIR SHAREHOLDINGS AND CONSIDERATION..........................26
SCHEDULE 2
PARTICULARS OF THE COMPANY..................................................28
SCHEDULE 3
DETAILS OF LEASE............................................................29
SCHEDULE 4
THE WARRANTIES..............................................................30
SCHEDULE 5
PROPERTY LICENCE............................................................58
<PAGE>
THIS AGREEMENT is made on the day of 1998
BETWEEN
(1) THE PERSONS WHOSE NAMES AND ADDRESSES ARE SHOWN IN SCHEDULE 1 (each a
"SELLER" and together the "SELLERS");
(2) THE MARQUEE GROUP, INC. a company incorporated under the laws of the
state of Delaware, the principal office of which is at 888 Seventh
Avenue, New York, NY 10019, USA ("MARQUEE INC.");
(3) MARQUEE GROUP (UK) LIMITED, a company incorporated under the laws of
England & Wales with company number 3584251 and whose registered office
is at 90 Fetter Lane, London EC4A 1JP ("MARQUEE UK").
RECITALS
(A) Park Associates Limited (the "COMPANY") (certain particulars of which are
set out in Schedule 2) is a private company limited by shares
incorporated in England and Wales on 11 November 1980 under the Companies
Acts 1948 to 1976 having an authorised capital of(pound)1,000,000 divided
into 994,590 "C" ordinary shares, 3,400 "D" ordinary shares and 510 "E"
ordinary shares, all of(pound)1 each and 1200 "F" ordinary shares, 1200
"H" ordinary shares, 300 "G" ordinary shares and 300 "J" ordinary shares
of 50p each, of which 45,900 "C" ordinary shares, 3,400 "D" ordinary
shares, 510 "E" ordinary shares , 1200 "F" ordinary shaers, 1200 "H"
ordinary shares, 300 "G" ordinary shares and 300 "J" ordinary shares have
been issued fully paid or credited as fully paid (the "SHARES").
(B) The Sellers are the registered holders and (except in the case of the
Shares held by the Trustees) the beneficial owners of the Shares set
opposite their respective names in Schedule 1.
(C) Marquee (UK) is a wholly owned subsidiary of Marquee Inc. (together the
"PURCHASERS" and "PURCHASER" shall be construed accordingly).
(D) The Sellers wish to sell and, in reliance upon the representations,
warranties, and undertakings set out in this Agreement, the Purchasers
are willing to purchase all the issued share capital of the Company on
the terms and subject to the conditions set out in this Agreement.
OPERATIVE PROVISIONS
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and the Schedules
1
<PAGE>
"ACCOUNTS" means all or any one of the audited balance sheet of the
Company as at the Accounts Date and the audited profit and loss account
of the Company for the financial period ended on the Accounts Date and
the notes to such accounts and the directors reports and the other
documents required by law to be annexed thereto;
"ACCOUNTS DATE" means 31 December 1997;
"ANNIVERSARY DATES" means the first, the second, the third, the fourth
and the fifth anniversary of the Effective Date;
"AGREED TERMS" means terms contained in a form which has been agreed and
initialled by or on behalf of the parties for the purpose of
identification immediately prior to the signing of this Agreement;
"BUSINESS DAY " means Monday to Friday inclusive but excluding any day
which is a bank or public holiday in the country concerned;
"CASH CONSIDERATION" means that part of the consideration for the sale of
the Shares as is payable in cash under Clause 3;
"CHANGE OF CONTROL" means the change of control (as defined in Section
840 Taxes Act 1988) of Marquee Inc. (other than as a result of the
acquisition of shares in Marquee Inc. by SFX Entertainment Inc.) and as a
result of such change of control, Mr Robert Gutowski ceasing to be
President and Chief Executive Officer of Marquee Inc. (whether
immediately on change of control or subsequently);
"COMMON STOCK" means the shares of no par value in the Common Stock of
Marquee Inc. quoted on the American Stock Exchange;
"COMPLETION" means completion of the sale and purchase of the Shares in
accordance with Clause 4;
"COMPLETION DATE" means the date on which Completion takes place;
"COMPLETION NET ASSET STATEMENT" means the statement of the Net Assets as
at the Effective Date to be prepared in accordance with Clause 5;
"CONSIDERATION" means the Cash Consideration, the Loan Notes and the
Consideration Shares;
"CONSIDERATION SHARES" means the Initial Consideration Shares and the
Deferred Consideration Shares;
"CONSULTANCY AGREEMENT" means a five year consultancy agreement in agreed
terms
2
<PAGE>
to be entered into between the Company and Peter McGarvey;
"DEFERRED CONSIDERATION SHARES" means the Common Stock of Marquee Inc. to
be issued to the Sellers in accordance with the provisions of Clause 3.3
and ranking pari passu with the existing Common Stock of Marquee Inc. at
the date of issue;
"DISCLOSURE LETTER" means the letter from the Warrantors to the
Purchasers of the Effective Date and which has been delivered to the
Purchasers prior to the signing of this Agreement;
"EFFECTIVE DATE" means 1 July 1998;
"HOLDING COMPANY" has the meaning given to it in Section 736 and 736A of
the Companies Act 1985;
"INITIAL CONSIDERATION SHARES" means the Common Stock of Marquee Inc. to
be issued by Marquee Inc. at Completion pursuant to Clause 3.2(a) and
ranking pari passu with the existing Common Stock of Marquee Inc. at the
date of issue;
"INSOLVENCY ACT" means the Insolvency Act 1986;
"ISSUE PRICE" means the average closing price of shares of Common Stock
as printed in the eastern edition of the Wall Street Journal over the 20
trading days ending three days prior to the Effective Date or the
relevant Anniversary Date, as appropriate, (provided that no account
shall be taken of any trading day in respect of which the said edition is
not published) as converted to Pounds Sterling by the application of the
average spot rate of exchange for the purchase of Pounds Sterling with US
Dollars, as published by the eastern edition of the Wall Street Journal
at the close of business on the twenty business days ending three days
prior to the Effective Date or the relevant Anniversary Date, as
appropriate (provided that no account shall be taken of any business day
in respect of which the said eastern edition of the Wall Street Journal
is not published);
"INTELLECTUAL PROPERTY RIGHTS" means all and any patents, trademarks,
service marks, trade names, registered designs, unregistered design
rights, copyrights and rights in confidential information, and all and
any other intellectual property rights, whether registered or
unregistered, and including all applications and rights to apply for any
of the same;
"LEASE" means the leasehold interest details of which are set out in
Schedule 3;
"LOAN NOTES" means the series of (pound)800,000 nominal unsecured loan
notes of Marquee Inc. in the agreed terms;
"MARQUEE INC. SHARES" means those of the Shares as set out in Part B of
Schedule 1
3
<PAGE>
to be purchased by Marquee Inc. pursuant to the terms of this Agreement;
"MARQUEE INC.'S STOCKBROKERS" means Continental Stock Transfer & Trust
Company;
"MARQUEE UK SHARES" means those of the Shares as set out in Part A of
Schedule 1 to be purchased by Marquee UK pursuant to the terms of this
Agreement;
"NET ASSETS" means the total current assets of the Company less the total
current liabilities of the Company at 12.01 am on the Effective Date;
"PARTIES" means the parties to this Agreement;
"PERSONAL GUARANTEES" means both (i) the Specific Counter Indemnity
entered into by Struan Marshall and Peter McGarvey on 24 October 1996 in
Coutts & Co's standard form and the Charge over Credit Balance entered
into by Peter McGarvey on 24 October 1996 in consideration of Coutts & Co
executing a guarantee of CHF 200,000 and (ii) a Second Legal mortgage
over the property known as Westhorpe Lodge, Westhorpe, Southwell,
Nottinghamshire entered into by Jon Holmes and Mrs M Holmes limited to
the sum of (pound)135,000 and a Specific Counter Indemnity entered into
by Jon Holmes in Coutts & Co's standard form in consideration of Coutts &
Co executing a guarantee of CHF 200,000, each of Coutts & Co's guarantees
relating to the guarantees provided by Swiss Bank Corporation for CHF
200,000 in favour of Federation Internationale de Football Association
("FIFA") in relation to the FIFA Licenses granted to Struan Marshall and
Jon Holmes.
"PROPERTY LICENCE" means a licence to be granted to the Company by Peter
McGarvey and Mrs M. Holmes in respect of the property known as 6 George
Street, Nottingham, a copy of which is set out in Schedule 5.
"PURCHASERS' ACCOUNTANTS" means Ernst & Young;
"PURCHASERS' SOLICITORS" means Bird & Bird, 90 Fetter Lane, London EC4A
1JP;
"SELLERS' ACCOUNTANTS" means Grant Thornton of 30 Hounds Gate Nottingham
NG1 7DH;
"SELLERS' SOLICITORS" means Freeth Cartwright Hunt Dickins, 29 Upper
Parliament Street, Nottingham NG1 2AQ;
"SERVICE AGREEMENT" means the service agreement in the agreed terms to be
entered into between the Company and Jon Holmes;
"TAX" shall have the meaning ascribed to it in the Tax Deed;
"TAXES ACT 1988" means the Income and Corporation Taxes Act 1988;
4
<PAGE>
"TAX DEED" means the deed in relation to tax in the agreed terms;
"TAXATION WARRANTIES" means each and every warranty contained in Section
[D] of Schedule 4;
"TRUSTEES" means Jonathon Roy Holmes and Margaret Holmes as trustees of
The Jon Holmes Discretionary Settlement 1998;
"UNTRADEABLE SHARES" means any Initial Consideration Shares or any issued
Deferred Consideration Shares which remain subject to the restrictions of
Clause 3.7;
"WARRANTIES" means all and any of the representations, warranties and
undertakings referred to in Clause 6 and Schedule 4; and
"WARRANTORS" means J. R Holmes and P. McGarvey.
1.2 References in this Agreement to any statutory provisions shall be
construed as references to those provisions as respectively amended,
consolidated or re-enacted (whether before or after the Effective Date)
from time to time and shall include any provisions of which they are
consolidations or re-enactments (whether with or without amendment)
except to the extent that any amendment, consolidation or re-enactment
made after the Effective Date creates or increases the liability of the
parties under this Agreement or the Tax Deed.
1.3 Where any Warranty is qualified by the expression "so far as the
Warrantors are aware" or "to the best of the Warrantors' knowledge
information and belief" or any similar expression that statement shall be
deemed to include an additional statement that it has been made after due
and careful enquiry unless stated otherwise. For the purposes of
establishing whether due and careful enquiry has been made the Warrantors
shall be deemed to have given the relevant matter due and careful thought
and to have taken appropriate advice from, and made proper enquiries of,
the other Sellers, the Company's auditors, tax advisors, insurance
brokers, legal advisors and employees but otherwise they shall not be
under any obligation to have taken specialist advice or to have employed
or consulted any third parties.
1.4 The Schedules form part of this Agreement and shall have the same force
and effect as if set out in the body of this Agreement and any reference
to this Agreement shall include the Schedules.
1.5 In this Agreement:-
(a) the masculine gender shall include the feminine and neuter and the
singular number shall include the plural and vice versa;
(b) references to persons shall include bodies corporate, unincorporated
associations
5
<PAGE>
and partnerships;
(c) any headings or side notes or, in the case of any legislation
specifically referred to, the inclusion in parentheses of the title
to the relevant Part, Section, Schedule or paragraph contained in
such legislation are for the sake of convenience only and shall not
affect the construction of this Agreement; and
(d) references to any party include a reference to the estate, personal
representative, successor, or permitted assigns of that party; and
(e) a person shall be deemed to be connected with another if that person
is connected with another within the meaning of section 839 of the
Taxes Act 1988.
1.6 Except where the contrary is stated, any reference in this Agreement to a
Clause or Schedule is to a Clause or Schedule of this Agreement, and any
reference within a Clause or Schedule to a sub-clause, paragraph or other
sub-division is a reference to such sub-clause, paragraph or other
sub-division so numbered or lettered in that Clause or Schedule.
1.7 In construing this Agreement
(a) the rule known as the ejusdem generis rule shall not apply and
accordingly general words introduced by the word "other" shall not
be given a restrictive meaning by reason of the fact that they are
preceded by words indicating a particular class of acts, matters or
things; and
(b) general words shall not be given a restrictive meaning by reason of
the fact that they are followed by particular examples intended to
be embraced by the general terms.
1.8 All obligations and liabilities under this Agreement or the Tax Deed of
either of the Purchasers shall be joint and several.
2 SALE OF THE SHARES
2.1 Each of the Sellers shall sell with full title guarantee (except for the
Trustees who shall sell with limited title guarantee) those of the Shares
set out opposite his name in Schedule 1 and the Purchasers relying on the
representations, warranties and undertakings of and indemnities by the
Sellers set out in this Agreement shall purchase the Shares on the terms
of this Agreement free from all claims, liens charges encumbrances and
equities and together with all rights attaching or accruing to them.
2.2 Each of the Sellers severally covenants with the Purchasers that save as
accurately and fairly disclosed in the Disclosure Letter:
(a) he has the right to sell and transfer the full legal and beneficial
interest in the
6
<PAGE>
Shares set out opposite his name in Part A and/or Part B Schedule 1
(as appropriate) to the Purchasers on the terms set out in this
Agreement; and
(b) on or after Completion he will, at his own cost and expense, execute
and do (or procure to be executed and done by any necessary party)
all such deeds, documents, acts and things as either of the
Purchasers may from time to time reasonably require in order to vest
any of the Shares set opposite his name in Part A or Part B of
Schedule 1 (as appropriate) in the relevant Purchaser or its
assignee or as otherwise may be necessary to give full effect to
this Agreement; and
(c) he has the requisite power and authority to enter into and perform
this Agreement and (as appropriate) the Tax Deed and such entry and
performance will not breach, violate, infringe or otherwise affect
the rights of any person;
(d) this Agreement and (if appropriate) the Tax Deed will, when
executed, constitute binding obligations on him in accordance with
their respective provisions;
(e) the execution and delivery of, and performance by him of his
obligations under, this Agreement and (if appropriate) the Tax Deed
will not constitute a default under any instrument or arrangement
binding on him or otherwise to which he is a party or result in a
breach of any order, judgment or decree of any court or governmental
agency to which he is a party or by which he is bound;
(f) neither he nor any person connected with him has any interest,
directly or indirectly, in any business that has a close trading
relationship with or is or is likely to be competitive with the
business of the Company or in any asset which within the two years
preceding the date of this Agreement has been acquired or disposed
of by or leased to the Company;
(g) there is no option, right of pre-emption, right to acquire,
mortgage, charge, pledge, lien or other form of security or
encumbrance over or affecting any of the Shares set out opposite his
name in either Part A or Part B of Schedule 1 nor is there any
commitment to create or to give any of the foregoing and no person
has claimed to be entitled to any of the foregoing.
2.3 Each of the Sellers hereby waives any rights of pre-emption conferred
upon him by the Articles of Association of the Company or in any other
way in respect of the Shares.
2.4 The parties shall not be obliged to complete the sale and purchase of any
of the Shares unless the sale and purchase of all the Shares is completed
simultaneously in accordance with this Agreement.
3 CONSIDERATION
7
<PAGE>
3.1 The consideration for the sale of the Marquee UK Shares to Marquee UK
shall be (pound)1,600,000 and shall consist of the sum of
(pound)1,600,000 payable in cash on Completion (the "Cash Consideration")
and shall be satisfied by the payment by Marquee UK to the Sellers of the
cash amounts as set out in Part A of Schedule 1;
3.2 The consideration for the sale of the Marquee Inc. Shares to Marquee Inc.
shall be (pound)1,400,000, subject to any adjustment pursuant to Clause 5
and shall consist of:
(a) the sum of (pound)400,000 which shall be satisfied by the allotment
and issue as fully paid and non-assessable by Marquee Inc. to the
Sellers of such number of Initial Consideration Shares which, at the
Issue Price, have a value of (pound)400,000 in aggregate;
(b) the sum of (pound)800,000 which shall be satisfied by the allotment
by Marquee Inc. to the Sellers of the Loan Notes;
(c) the sum of (pound)200,000 which shall be satisfied by the allotment
and issue as fully paid and non-assessable by Marquee Inc. to the
Sellers of the Deferred Consideration Shares in accordance with the
provisions of Clause 3.4.
3.3 The Sellers shall be entitled to the Consideration in the proportions
shown in Parts A and B of Schedule 1.
3.4 Subject to any adjustment pursuant to Clause 5 upon each of the
Anniversary Dates Marquee Inc. shall issue to the Sellers such number of
Deferred Consideration Shares as shall, at the Issue Price, have a value
of(pound)40,000 in aggregate and shall deliver to the Sellers definitive
share certificates for such Consideration Shares. Provided that in the
event of any increase in the value of the Deferred Consideration Shares
to be issued on the first Anniversary Date pursuant to Clause 5.8 the
additional Deferred Consideration Shares shall be issued to the
Warrantors in equal proportions.
3.5 In the event of a Change of Control, any Consideration which remains
outstanding pursuant to Clause 3.4, shall be due for payment within 14
days of the date of the Change of Control and shall be satisfied by the
payment of cash to the Sellers in the percentages set out against their
respective names in Part B of Schedule 1 subject always to the proviso in
clause 3.4.
3.6 If Marquee Inc. consolidates, sub-divides or reorganises its share
capital, declares any distribution or makes any issue by way of
capitalisation or rights to holders of its Common Stock during or by
reference to any period relevant for calculating the Issue Price the
amount of Deferred Consideration Shares or the Issue Price will be
adjusted as Marquee Inc's Stockbrokers for the time being (acting
reasonably as experts and not as arbitrators) certify to be in their
opinion fair and reasonable.
3.7 Without the written consent of Marquee Inc. none of the Sellers shall
dispose of, charge or otherwise encumber any interest in any of the
Consideration Shares or any other
8
<PAGE>
securities for the time being representing or derived from those shares
(whether by way of consolidation, sub-division, capitalisation or rights
issue or otherwise) during the period of one year from the date of
allotment of the relevant Consideration Shares.
4 COMPLETION
4.1 Completion shall take place immediately following signature and exchange
of this Agreement when:
(a) the Sellers shall deliver or cause to be delivered to the Purchasers
(as appropriate):
(i) transfers of the Shares duly completed in favour of either
Marquee Inc. or Marquee UK (as appropriate) or as it may
direct;
(ii) the share certificates representing the Shares (or an express
indemnity in a form satisfactory to the Purchasers in the
case of any found to be missing);
(iii) all the Statutory and Minute Books of the Company and its
Common Seal and the Certificates of Incorporation on Change
of Names (if any);
(iv) the Tax Deed duly executed by each of the Warrantors;
(v) a letter of resignation (expressed to be with effect from the
end of the meeting) of the Board of the Company referred to
in sub-clause (d) below, from Peter McGarvey resigning office
as Director of the Company, executed as a deed in the agreed
terms;
(vi) the resignation of the auditors of the Company in accordance
with section 394 of the Companies Act 1985, confirming that
there are no circumstances connected with their resignation
which should be brought to the notice of the members or
creditors of the Company and that there are no fees due to
them;
(vii) the letter terminating the employment of Margaret Holmes as
an employee of the Company;
(viii) the Property Licence duly executed by Peter McGarvey and Mrs
M. Holmes;
(ix) the Service Agreement, duly executed by Jon Holmes;
(x) the Consultancy Agreement, duly executed by Peter McGarvey;
and
(xi) the Disclosure Letter.
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(b) the Warrantors shall procure that all indebtedness due from any of
the Warrantors or any person connected with them to the Company
shall have been satisfied in full prior to the Effective Date;
(c) all indebtedness due from the Company to any of the Warrantors (full
particulars of which are contained in the Disclosure Letter but
excluding remuneration accrued but not yet due for payment) shall
have been satisfied in full without payment of interest prior to the
Effective Date;
(d) the Sellers shall cause a meeting of the Board of the Company to be
held at which the Board shall:-
(i) appoint such persons as the Purchasers may nominate as
Directors and Secretary of the Company;
(ii) accept the letters of resignation referred to in sub-clause
(a)(v) and (a)(vi) above;
(iii) vote in favour of the registration of the Purchasers and/or
their nominees as members of the Company subject only to the
production of duly stamped and completed transfers in favour
of the Purchasers and/or their nominees in respect of the
Shares;
(iv) appoint Ernst & Young as auditors;
(e) the parties shall join in procuring that all existing bank mandates
in force for the Company shall be altered (in such manner as the
Purchasers shall at Completion require) so as (inter alia) to
reflect the resignations and appointments referred to above.
(f) the Purchasers shall not be obliged to complete this Agreement
unless the Sellers comply fully with the requirements of paragraphs
(a), (b), (d), and (e) of this Clause;
4.2 Upon completion of all the matters referred to in sub-clause 4.1 Marquee
UK shall:
(a) pay to the Sellers' Solicitors (whose receipt shall be a sufficient
discharge therefor) the Cash Consideration by way of telegraphic
transfer;
(b) deliver to the Sellers' Solicitors a duly executed counterpart of
the Tax Deed;
(c) deliver to the Sellers' Solicitors a duly executed counterpart of
the Disclosure Letter.
4.3 Upon Completion of all the matters referred to in sub-clause 4.1 Marquee
Inc. shall:
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(a) allot the Initial Consideration Shares and issue the Loan Notes to
the Sellers and deliver to the Sellers' Solicitors definitive share
certificates in respect of the Initial Consideration Shares and
certificates in the agreed terms in respect of the Loan Notes in the
names of the Sellers; and
(b) deliver to the Sellers' Solicitors a duly executed counterpart of:
(i) the Tax Deed;
(ii) the Property Licence;
(iii) the Service Agreement;
(iv) the Consultancy Agreement; and
(v) the Disclosure Letter;
(c) the Sellers shall not be obliged to complete this Agreement unless
the Purchasers have complied fully with their respective
requirements of Clause 4.2 and paragraphs (a) and (b) of this
Clause.
4.4 If in any respect either the Sellers or the Purchasers fail to comply
with all the provisions of Clauses 4.1, 4.2 and 4.3 on the date for
Completion then the other of them may:
(a) defer Completion to a date not more than 28 days after the date for
Completion set by this Clause 4 (and so that the provisions of this
sub-clause 4.4 shall apply to Completion as so deferred); or
(b) proceed to Completion as far as practicable; or
(c) rescind this Agreement (without prejudice to its accrued rights and
remedies).
4.5 Marquee Inc. shall procure as soon as reasonably practicable following
Completion (and in any event within 7 days after Completion) the full and
unconditional release of the Personal Guarantees and Marquee Inc. shall
fully indemnify the Warrantors and Struan Marshall and Mrs M. Holmes
against any liability, loss, cost or claim arising out of or in
connection with the Personal Guarantees at any time after the Effective
Date.
5 COMPLETION NET ASSET STATEMENT
5.1 The Sellers and the Purchasers shall as soon as practical and in any
event within five days of the date of Completion instruct the Sellers'
Accountants at the cost of Marquee Inc. to:
(a) prepare the Completion Net Asset Statement using the accounting
policies and methods used in the preparation of the Accounts
together with an opinion by the
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Sellers' Accountants that the Completion Net Asset Statement
presents on these accounting policies and methods a true and fair
view of the Net Assets of the Company at the Effective Date;
(b) submit the Completion Net Asset Statement in draft to the parties
within 30 days from Completion.
5.2 The Purchasers and the Sellers shall use their best endeavours to procure
that the Sellers' Accountants and the Purchasers' Accountants shall have
access to all the books and records of the Company for the purposes of
enabling them to prepare or check, as the case may be, the draft
Completion Net Asset Statement.
5.3 Upon the completion of the preparation of the draft Completion Net Asset
Statement by the Sellers' Accountants the draft Completion Net Asset
Statement shall be presented to the Purchasers' Accountants for their
approval. Marquee Inc. shall procure that the Purchasers' Accountants
communicate their decision as to whether or not they approve the draft
Completion Net Asset Statement to the Sellers and Marquee Inc. within 14
days of such presentation ("THE APPROVAL PERIOD") and shall, in the event
of non approval, specify with reasonable particularity the reasons for
non approval. In the event that the Purchasers' Accountants fail to
communicate their decision to the Sellers and Marquee Inc. within the
Approval Period they shall be deemed to have approved the draft
Completion Net Asset Statement.
5.4 In the event that the Purchasers' Accountants do not approve the draft
Completion Net Asset Statement within the Approval Period the Sellers and
Marquee Inc. shall use their best endeavours to procure that the Sellers'
Accountants and the Purchasers' Accountants meet together promptly and in
any case within a period of 14 days of the end of the Approval Period to
resolve any dispute that has arisen between them with regard to the draft
Completion Net Asset Statement.
5.5 Any dispute with respect to the draft Completion Net Asset Statement
which is not settled within 28 days of the end of the Approval Period
shall (unless the Sellers and Marquee Inc. otherwise agree in writing) be
referred for final determination to an Independent Accountant nominated
jointly by the Sellers and Marquee Inc. (or failing such nomination
within ten days of one party serving notice upon the other party to make
such nomination) nominated at the request of either party by the
President for the time being of the Institute of Chartered Accountants in
England and Wales. The Independent Accountant shall be instructed to
render his decision (which shall be communicated in writing to the
Sellers and Marquee Inc. and shall be final and binding on the Sellers
and Marquee Inc.) within 21 days of his appointment. The fees and costs
of the Independent Accountant shall be borne and paid by the Sellers and
Marquee Inc. in such proportions as the Independent Accountant shall
consider appropriate. The parties shall provide to the Independent
Accountant all such information assistance and documentation as he may
reasonably require.
5.6 Upon the approval of the Completion Net Asset Statement under Clause 5.3
or 5.4 or the determination of any dispute under Clause 5.5 the Sellers
and Marquee Inc. shall use
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their best endeavours to procure that the Sellers' Accountants and the
Purchasers' Accountants immediately issue to the Sellers' Solicitors and
the Purchasers' Solicitors respectively the Completion Net Asset
Statement signed by the Sellers' Accountants and the Purchasers'
Accountants respectively in the form so approved, resolved or decided
which shall in the absence of manifest error be final and binding on the
Sellers and the Purchasers.
5.7 In the event that the Completion Net Asset Statement shows that the value
of the Net Assets is less than (pound)0 then the Consideration shall be
deemed to be reduced by an amount equal to the shortfall and the amount
of such reduction will be deducted from the first instalment and (as
necessary) each succeeding instalment of the Consideration payable under
Clause 3.4 until the full amount of the reduction has been satisfied; and
5.8 In the event that the Completion Net Asset Statement shows that the value
of the Net Assets is greater than (pound)0 then the Consideration shall
be deemed to be increased by an amount equal to the surplus and the
amount of such increase shall be added to the first instalment of the
Consideration payable under Clause 3.4.
6 REPRESENTATIONS AND WARRANTIES
6.1 The Warrantors hereby jointly and severally represent, warrant and
undertake to the Purchasers and each of them that:
(a) except as accurately and fairly disclosed to the Purchasers in the
Disclosure Letter, each of the statements set out in Schedule 4 is
true and accurate as at the Effective Date; and
(b) all information contained in the Disclosure Letter is true and
accurate as at the Effective Date and fairly presented and nothing
of which the Warrantors were aware as at the Effective Date has been
omitted from the Disclosure Letter which renders any of that
information misleading as at the Effective Date.
6.2 Each of the Warranties set out in the several paragraphs of Schedule 4 is
separate and independent and except as expressly provided to the contrary
in this Agreement is not limited:
(a) by reference to any other paragraphs of Schedule 4; or
(b) by anything in this Agreement or the Tax Deed;
and (save as provided in Clause 6.22 below) none of the Warranties
shall be treated as qualified by any actual or constructive
knowledge on the part of the Purchaser or any of its agents.
6.3 Each of the Warrantors agree with the Purchasers (as trustee for the
Company and its employees) to waive any rights or claims which he may
have against the Company and
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its employees in respect of any misrepresentation, inaccuracy or omission
in or from any information or advice supplied or given to the Warrantors
by any of the Company or its employees in connection with the giving of
the Warranties and the preparation of the Disclosure Letter.
6.4 Without restricting the rights of the Purchasers or the ability of the
Purchasers to claim damages on any basis available to them in the event
of any breach of any of the Warranties, the Warrantors undertake with the
Purchasers that the Warrantors will, pay to the Purchasers within 7 days
of the earlier of agreement between the Warrantors and the Purchasers
and, in default of such agreement, final determination by order of a
court of competent jurisdiction a sum by way of damages as so agreed or
fully determined as being the amount necessary to put the Purchasers into
the position which would have existed if the Warranties had been true and
accurate and had not been misleading or breached (as the case may be)
together with all costs and expenses reasonably and properly incurred by
the Purchasers as a result of such breach.
6.5 In the event that the Purchasers obtain judgment (without leave to appeal
being granted) against the Warrantors or reaches agreement with the
Warrantors in respect of any claim for breach of the Warranties pursuant
to the Tax Deed or otherwise pursuant to this Agreement (other than a
claim arising under sub-clauses 2.1 (c) (d) and (e) of the Tax Deed) then
any amount which shall have been agreed or finally adjudged or determined
to be owing by the Warrantors to the Purchasers shall, where and to the
full extent possible, be satisfied by the cancellation of any outstanding
Loan Notes or any Untradeable Shares held by the Warrantors or by way of
deduction from any instalment (each an "OUTSTANDING INSTALMENT") of the
Consideration due to the Warrantors which remains to be satisfied
pursuant to Clause 3.4 and in the following order of priority:
(a) firstly by way of cancellation of any outstanding Loan Notes held by
the Warrantors (and pro rata as between the Warrantors) and by
deduction from the value of any Outstanding Instalment due to the
Warrantors, taking the Loan Notes and Outstanding Instalments in
reverse order of maturity, and in the case of any Loan Notes and
Outstanding Instalments which fall due for redemption or
satisfaction on the same date the deduction from the value of the
relevant Outstanding Instalment shall take place in priority to the
cancellation of the relevant Loan Notes;
(b) thereafter by the Warrantors offering and the Purchaser accepting
the cancellation of any issued Deferred Consideration Shares held by
the Warrantors which remain subject to the restrictions contained in
Clause 3.7 (and pro rata as between the Warrantors); and
(c) thereafter by the Warrantors offering and the Purchasers accepting
the cancellation of any Initial Consideration Shares held by the
Warrantors which remain subject to the restrictions contained in
Clause 3.7 (and pro rata as between the Warrantors)
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and for the purposes of paragraphs (b) and (c) of this Clause the
value attributable to the relevant Untradeable Shares for the
purposes of such cancellation shall be their Issue Price.
6.6 The Purchasers shall be entitled to take action in respect of any breach
or non-fulfilment of any of the representations, warranties,
undertakings, covenants or agreements on the part of the Warrantors or
any of them contained in or made pursuant to this Agreement both before
and after Completion and (save as provided in Clause 6.22 below) such
action may be taken after Completion in respect of any breach or
non-fulfilment discoverable by the Purchasers on or before Completion and
Completion shall not constitute a waiver of any of the Purchasers'
rights.
6.7 The Warrantors shall have no liability for a claim for breach of the
Warranties where the amount of such claim is less than (pound)5,000 and
the liability of the Warrantors in respect of the Warranties:
(a) shall not (when aggregated with any liability under the Tax Deed)
(i) arise unless the amount of all claims (ignoring for this
purposes any individual claims of less than (pound)5,000 each) made
in respect of the Warranties and/or the Tax Deed (or which would
have been made but for the operation of this paragraph or the
corresponding provision in the Tax Deed) exceeds (pound)50,000 or
(ii) exceed the sum of (pound)3,000,000 as adjusted pursuant to
Clause 5; and
(b) shall terminate (but without prejudice to the rights and obligations
of the parties under the Tax Deed);
(i) on the seventh anniversary of the Effective Date in respect
of those matters set out in Part D (Taxation) of Schedule 4;
and
(ii) on 30 April 2000 in respect of all other matters contained in
Schedule 4;
provided that the limitations contained in this Clause 6.7 shall not
apply to any claim which (or the delay in discovery of which) is a
consequence of fraud, dishonesty or wilful concealment on the part
of the Warrantors, their agents or advisors.
6.8 Any payment made (or suffered by cancellation or deduction pursuant to
Clause 6.5) by the Warrantors for any breach of the Warranties or a
liability under the Tax Deed shall be deemed to be a reduction in the
Consideration.
6.9 The Warranties are given subject to any matters accurately and fairly
disclosed in the Disclosure Letter and to the contents of the documents
contained in the indexed bundle annexed thereto and any other specific
information relating to the Company of which either of the Purchasers has
actual (but not imputed or implied) knowledge at the date
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hereof.
6.10 No liability shall arise on the part of the Warrantors in respect of any
breach of the Warranties:
(a) which arises as a result of any liability to Tax arising or being
increased as a result of any change in the basis or method of
calculation of Tax after the Effective Date with retrospective
effect;
(b) which arises as a result of any retrospective increase in rates of
Tax introduced after the Effective Date;
(c) which arises as a result of any legislation or other governmental
regulation not in force at the Effective Date; whether or not having
retroactive or retrospective effect;
(d) which arises as a result of any voluntary act, omission or
transaction of either of the Purchasers or the Company after
Completion which is outside the ordinary course of business of the
Company;
(e) which arises as a result of any act, transaction, or omission
carried out by the Warrantors at either of the Purchasers' request
and direction unless necessary to comply with any applicable law or
statutory regulation enacted prior to the Effective Date;
(f) which would not have arisen but for any winding up or cessation
after Completion of any business or trade carried on by the Company
except to the extent that such winding up or cessation is caused by
the subject matter of one or more claims under the Warranties and/or
under the Tax Deed;
(g) which arises as a result of any act, omission, transaction or
arrangement of the Company after the Effective Date (whether or not
in the ordinary course of business of the Company) pursuant to a
legally binding obligation incurred on or before the Effective Date
details of which have been accurately and fairly disclosed in the
Disclosure Letter;
(h) where and to the extent that specific provision or reserve
(including provision for deferred tax) is made for the matter giving
rise to the liability in the Accounts or in the calculation of Net
Assets for the purposes of the Completion Net Asset Statement;
(i) arising solely from a change after Completion of the Company's
accounting policy or practice or a change of the accounting
reference date of the Company.
6.11 To the extent that any breach of the Warranties is capable of remedy the
Purchasers shall first afford the Warrantors 28 days to remedy the breach
complained of and for
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such purposes the Purchasers at the Warrantors' cost shall make available
to the Warrantors all assistance and all papers documents and information
in its possession, custody and control which the Warrantors may
reasonably require.
6.12 In the event that the Company or either of the Purchasers shall become
aware of any matter which is likely to constitute a breach of Warranty
the Purchasers shall as soon as reasonably practicable notify in writing
the Warrantors giving reasonable details of such matter and if so
requested by the Warrantors and at the Warrantors' cost shall provide
copies of available relevant documentation and thereafter shall keep the
Warrantors informed of developments and communications relating thereto.
In any event notice of any claim under the Warranties must be served by
the Purchasers on the Warrantors in writing specifying in reasonable
detail the nature of the claim and the breach that results (having regard
to the information then available to the Purchasers) and where reasonably
practicable the amount claimed before the date specified in Clause 6.7(b)
and any claim shall (if not previously satisfied or withdrawn) be deemed
to have been waived or withdrawn at the expiration of nine months after
the date upon which written notice thereof is given to the Warrantors (or
such longer period as the Warrantors may permit) unless legal proceedings
shall already have been issued against and served on the Warrantors.
6.13 Subject to the Warrantors indemnifying and securing the Purchaser and the
Company to their reasonable satisfaction against any liabilities, costs
or expenses which may be incurred in taking such action the Purchasers
shall take or procure that the Company takes such action as the
Warrantors may reasonably request to dispute, compromise or defend any
claim or demand giving rise to the claim for breach of Warranty or to
mitigate any resulting loss.
6.14 Where the Company or the Purchasers or any of them is entitled (whether
by reason of insurance or otherwise) to recover from a third party any
sum in respect of the damage or liability the subject of a claim under
the Warranties the Purchasers shall if so required by the Warrantors
(subject to the Warrantors indemnifying and securing the Purchaser and
the Company to their reasonable satisfaction against any liabilities,
costs or expenses which may be incurred in taking such action) procure
that the Company takes action as the Warrantors may reasonably require to
enforce such recovery and any claim against the Warrantors shall be
limited (in addition to the other limitations on the liability of the
Warrantors referred to in this Clause 6) to the amount by which the
amount of the Purchasers' claim as a result of such breach shall exceed
the amount so recovered (less any reasonable costs, charges and expenses
properly incurred by the Purchasers or the Company in connection
therewith).
6.15 Where in relation to any matter which has been the subject of any claim
for breach of the Warranties the Purchasers or the Company shall recover
any sum (whether by payment, discount, credit or otherwise) referable to
that matter the Purchasers shall forthwith repay to the Warrantors any
sums paid by the Warrantors in respect of such claim (or an appropriate
part thereof) not exceeding the sum recovered.
6.16 If and to the extent that the Warrantors make a payment to a Purchaser in
respect of any
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breach of the Warranties relating to any liabilities in respect of which
a Purchaser or the Company have a right to reimbursement (in whole or in
part) against any third party the Purchasers shall upon the request of
the Warrantors assign or procure to be assigned to them for no
consideration but at the cost of the Warrantors the benefit of the right
of reimbursement.
6.17 In the event of the Warrantors being liable to either of the Purchasers
under the Warranties in respect of an obligation of the Company to pay
Tax and in certain circumstances the payment of Tax will be repaid to the
Company or some other liability to Tax reduced directly in consequence
(in whole or in part) of the payment of Tax by the Company the liability
of the Warrantors shall be reduced and any amount paid to either of the
Purchasers by the Warrantors in respect of the liability to Tax shall be
refunded when and to the extent that the Company actually receives such
repayment or reduction in liability and the Purchasers shall procure that
the Company makes all reasonable claims to obtain the repayment or
reduction when it becomes aware that it is entitled to do so.
6.18 Any breach of the Warranties shall give rise only to an action in damages
by the Purchasers.
6.19 The provisions of Clause 2.2 of the Tax Deed shall additionally apply in
relation to any claim which could be made under the taxation warranties
as it applies to a claim under the Tax Deed.
6.20 Nothing herein shall in any way diminish the Purchasers' common law duty
to mitigate their loss.
6.21 The Purchasers undertake to retain or procure the retention by the
Company of all such books, records, accounts, correspondence and other
papers of the Company as are material in the context of the liability of
the Warrantors under the Warranties or the Tax Deed during the
subsistence of the liability of the Warrantors under the Warranties or
(as the case may be) the Tax Deed.
6.22 The Purchasers jointly and severally warrant and undertake to and for the
benefit of the Warrantors that (having made due enquiry of its advisors)
they are not aware of any fact, circumstance or information as at the
Effective Date upon the basis of which either of them has or may have a
claim against the Warrantors and/or Sellers under this Agreement or any
of the other documents referred to herein other than under sub- clauses
2.1(c), (d) and (e) of the Tax Deed (whether for breach of the Warranties
or under the Tax Deed or on any other account whatsoever). The Purchasers
acknowledge that the Warrantors are entering into this Agreement on the
basis that the foregoing warranty is true and accurate in all respects
and, without restricting the rights of the Warrantors, the Purchasers
hereby agree that in the event of such warranty being found to have been
broken, misleading or untrue by reason of either of the Purchasers being
at the time of the Effective Date aware of any such fact, circumstance or
information then the Purchasers shall have no right to make any claim
against the Warrantors and/or
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the Sellers under this Agreement or any of the other documents referred
to herein in respect of such fact, circumstance or information.
7 CONFIDENTIALITY
7.1 Each of the Sellers hereby undertakes to each of the Purchasers (for
themselves and each as trustee for the Company) that he will:
(a) not at any time after the date of this Agreement (save as required
by law or regulatory authority) divulge or communicate to any person
other than to officers or employees of the Company whose province it
is to know the same or on the instructions of the Board of Directors
of the Company any confidential information concerning the business,
accounts, finance or contractual arrangements or other dealings
transactions or affairs of the Company which may have come to his
knowledge prior to Completion; and
(b) use his reasonable endeavours to prevent publication or disclosure
of any confidential information concerning such matters;
provided that such undertakings shall cease to have effect in
relation to any confidential information which comes into the public
domain otherwise than through the fault of any of the Sellers.
8 PROTECTIVE COVENANTS
8.1 Each Warrantor covenants with each of the Purchasers (for themselves and
each as trustee for the Company) that he will not, in the case of
J.R.Holmes for a period of 5 years from the Effective Date or in the case
of P.McGarvey for a period of 2 years from the Effective Date:
(a) be concerned in any business carrying on business within the United
Kingdom of Great Britain and Northern Ireland (and the Channel
Islands and the Isle of Man) or within the Republic of Ireland which
is competitive or likely to be competitive with any of the
businesses carried on by the Company at Completion; or
(b) except on behalf of the Company canvass or solicit orders for
services similar to those being provided by the Company at
Completion from any person who is at Completion or has been at any
time within the year prior to Completion a customer of the Company;
or
(c) induce or attempt to induce any supplier of the Company to cease to
supply, or to restrict or vary the terms of supply, to the Company;
or
(d) induce or attempt to induce any employee of the Company to leave the
employment of the Company; or
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(e) use or (in so far as it lies within his control) allow to be used
(except by the Company) any trade name used by the Company at
Completion or any other name intended or likely to be confused with
such a trade name.
8.2 For the purposes of this Clause:
(a) a Warrantor is concerned in a business if he carries it on as
principal or agent or if:
(i) he is a partner, director, employee, seconde, consultant or
agent in, of or to any person who carries on the business; or
(ii) he has any direct or indirect financial interest (as
shareholder or otherwise) in any person who carries on the
business disregarding any financial interest of a person in
securities which are listed on the American Stock Exchange or
the London Stock Exchange or traded on the Alternative
Investment Market, if that person, the remaining Sellers and
any person connected with him or them are interested in
securities which amount to less than three per cent of the
issued securities of that class and which, in all
circumstances, carry less than three per cent of the voting
rights (if any) attaching to the issued securities of that
class.
8.3 Each of the restrictions in each paragraph or sub-clause above shall be
enforceable by the Purchaser independently of each of the others and its
validity shall not be affected if any of the others is invalid; if any of
those restrictions is void but would be valid if some part of the
restrictions were deleted the restriction in question shall apply with
such modification as may be necessary to make it valid without in any way
extending the scope of the restrictions.
8.4 The Warrantors acknowledge that the above provisions of this Clause are
no more extensive than is reasonable to protect the Purchasers as the
purchasers of the Shares.
8.5 If any provision of this Agreement or of any other agreement or
arrangement of which it forms part is subject to registration under the
Restrictive Trade Practices Act 1976, it shall not take effect until the
day after particulars of the agreement or arrangement have been given to
the Director General of Fair Trading under section 24 of that Act.
9 ANNOUNCEMENTS
Neither the Sellers nor the Purchasers shall make or permit any person
connected with any of them to make any announcement concerning the sale and
purchase of the Shares or any ancillary matter before, on or after Completion
except as required by law or other applicable regulation or with the written
approval of the other, such approval not to be unreasonably withheld or
delayed.
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10 NOTICES AND RECEIPTS
10.1 Any notice or other document to be served under this Agreement may be
delivered or sent by first class registered post (or airmail if to a
destination outside the country where it is despatched) or facsimile
process to the party to be served at his address appearing in this
Agreement or at such other address as he may have notified to the other
parties in accordance with this Clause.
10.2 Any notice or document shall be deemed to have been served:
(a) if delivered, at the time of delivery; or
(b) if posted, at 10.00 am on the second or (if sent to a destination
outside the country where it is despatched) seventh business day in
the country of the recipient after it was put into the post; or
(c) if sent by facsimile process, at the expiration of 2 hours after the
time of despatch, if despatched before 3.00 pm on any business day
in the country of the recipient, and in any other case at 10.00 am
on the business day in the country of the recipient following the
date of despatch.
10.3 In proving service of a notice or document it shall be sufficient to
prove that delivery was made or that the envelope containing the notice
or document was properly addressed and posted as a prepaid registered
post or airmail letter or that the facsimile message was properly
addressed and despatched as the case may be.
10.4 The receipt of the Sellers' Solicitors for any sum or document to be paid
or delivered to a Seller will discharge the Purchasers' obligation to pay
or deliver it to that Seller.
10.5 The Purchasers agree that service or delivery of any documents on either
of them (including service of any proceedings) may be effected by service
upon the Purchasers' Solicitors in accordance with this Clause 10.
11 RESOLUTIONS AND WAIVERS
11.1 In relation to the Company the Sellers shall procure the convening of all
meetings, the giving of all waivers and consents and the passing of all
resolutions as are necessary under the Companies Act 1985, its Articles
of Association or any agreement or obligations affecting it to give
effect to this Agreement.
11.2 For so long after Completion as it remains the registered holder of any
of the Shares each of the Sellers will hold them and any distributions,
property and rights hereafter deriving from them in trust for Marquee
Inc. or Marquee UK (as appropriate) and will deal with the Shares and any
distributions, property and rights hereafter deriving from them as
Marquee Inc. or Marquee UK (as appropriate) directs and will on request
by Marquee Inc. or Marquee UK (as appropriate) execute an instrument of
proxy or other
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document which enables Marquee Inc. or Marquee UK (as appropriate) or its
representative to attend and vote at any meeting of the Company.
12 GENERAL
12.1 Each of the obligations, warranties and undertakings set out in this
Agreement which is not fully performed at Completion will continue in
force after Completion.
12.2 None of the rights or obligations under this Agreement may be assigned or
transferred without the prior written consent of all the parties.
12.3 Where any obligation, representation, warranty or undertaking in this
Agreement is expressed to be made, undertaken or given by the Sellers,
they shall be jointly and severally responsible in respect of it unless
otherwise stated.
12.4 The Purchasers may release or compromise in whole or in part the
liability of any of the Sellers under this Agreement or grant any time or
other indulgence without affecting the liability of any other of the
Sellers.
12.5 Time is of the essence in relation to this Agreement.
12.6 Each party shall pay the costs and expenses incurred by him or it in
connection with the entering into and completion of this Agreement.
12.7 This Agreement may be executed in any number of counterparts, all of
which, taken together shall constitute one and the same Agreement and any
party may enter into this Agreement by executing a counterpart.
13 WHOLE AGREEMENT
13.1 This Agreement and the documents referred to in it contain the whole
agreement between the parties relating to the transactions contemplated
by this Agreement and supersede all previous agreements, arrangements and
understandings between the parties relating to these transactions.
13.2 The parties acknowledge that in agreeing to enter into this Agreement he
or it has not relied on any representation, warranty or other assurance
except those set out in this Agreement and waives all rights and
remedies, which, but for this Clause might be available to it in respect
of such representation, warranty or other assurance provided that nothing
in this Clause shall limit or exclude any liability for fraudulent
misrepresentation.
14 GOVERNING LAW
This Agreement is governed by and shall be construed in accordance with
English law. Each of the parties submits to the exclusive jurisdiction of
the English courts for all
22
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purposes relating to this Agreement.
15 PURCHASERS' WARRANTIES AND COVENANT
15.1 Marquee Inc. covenants that it shall use its reasonable endeavours to
file the reports required to be filed by it under the US Securities
Exchange Act 1934, as amended (the "EXCHANGE ACT") and the rules and
regulations of the US Securities and Exchange Commission (the
"COMMISSION") thereunder, and it shall, if feasible, take such further
action as any holder of Consideration Shares may reasonably request, all
to the extent required from time to time to enable such holder to sell
Consideration Shares without registration under the US Securities Act of
1933 (the "SECURITIES ACT") within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be
amended from time to time or (b) any similar rules or regulations
hereafter adopted by the Commission. Upon the written request of any
holder of Consideration Shares, the Purchaser shall deliver to such
holder a written statement as to whether it has complied with such
requirements.
15.2 Provided that a period of at least 2 years has elapsed since the later of
the date any Consideration Shares were acquired from Marquee Inc. or an
affiliate of Marquee Inc. (within the meaning of Rule 144 under the
Securities Act), Marquee Inc. shall, upon the request of any holder
thereof who is not an affiliate of Marquee Inc. and has not been an
affiliate of Marquee Inc. during the preceding 3 months, use its
reasonable efforts (subject to applicable law) to arrange for the
exchange of the certificates representing such Consideration Shares for
new certificates omitting any legend relating to restrictions on the
transfer of such Consideration Shares.
15.3 The Purchasers hereby jointly and severally warrant and represent to the
Sellers that:
(a) neither the execution of this Agreement by the Purchasers or the
Loan Notes by Marquee Inc. nor the completion of the transaction as
contemplated by this Agreement will violate, conflict with or result
in the breach of any term, limitation in or provisions of, or
constitute a default (or an event that, with the giving of notice or
the lapse of time or both, would constitute a default) under the
terms, provisions or conditions of the constitutional documents of
the Purchasers or any agreement to which either of the Purchasers
are a party or by which the Purchasers are bound, or violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchasers;
(b) no consent or approval by, notice to or registration with any
governmental or other authority is required on the part of either of
the Purchasers in connection with the execution of this Agreement or
the Loan Notes or the completion of the transaction as contemplated
in it;
(c) the Consideration Shares, when issued pursuant to this Agreement,
shall be duly authorised, validly issued, fully paid and
nonassessable and the certificates
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representing the Consideration Shares and the Loan Notes, when
delivered pursuant to this Agreement, shall be in due and proper
form and shall be duly and validly executed by the officers of
Marquee Inc. named thereon;
(d) the execution, delivery and performance by the Purchasers of the
Agreement and the Loan Notes, and all other documents contemplated
hereby and thereby, the fulfilment of and the compliance with the
respective terms and provisions hereof and thereof, and the
consummation by the Purchasers of the transactions contemplated
hereby and thereby, have been duly authorised by the Board of
Directors of the Purchasers (as appropriate, which authorisation has
not been modified or rescinded and is in full force and effect) and
no other corporate action is necessary for either of the Purchasers
to enter into this Agreement and the Loan Notes, and all other
documents contemplated hereby and thereby, and to consummate the
transactions contemplated hereby and thereby;
(e) where appropriate, this Agreement and the Loan Notes constitute
valid and binding obligations of the Purchasers, enforceable against
such of the Purchasers (as appropriate) in accordance with their
respective terms;
IN WITNESS of which this Agreement has been executed by the parties or their
duly authorised representatives on the date which appears first on page 1.
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<PAGE>
SCHEDULE 1
THE SELLERS, THEIR SHAREHOLDINGS AND CONSIDERATION
PART A
<TABLE>
<CAPTION>
CASH CONSIDERATION
CLASS OF NO. OF PAYABLE
NAME ADDRESS SHARES SHARES
<S> <C> <C> <C> <C>
Jonathan Roy Westhorpe Lodge, Westhorpe, C 18,020 (pound)534,000
Holmes Southwell, Nottinghamshire
Peter McGarvey 3 Manor Court C 22,140 (pound)656,000
Willoughby on the Wolds,
Leicestershire
LE12 3SS
Trustees of the Jon Westhorpe Lodge, C 5740 (pound)170,000
Holmes Westhorpe,
Discretionary Southwell,
Settlement 1998 Nottinghamshire
Gary Lineker Fairways, Titlarks Road, Ascot H 275 (pound)44,000
Berkshire SL5 0JD
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
David Gower Meade Hill, Church Lane, H 150 (pound)24,000
Braishfield, Romsey, Hampshire
SO51 0QH
Will Carling Old Pond House, Village Road, H 100 (pound)16,000
Dorney, Windsor
SL4 6QJ
Diana Van Hall Cottage, Old Road, H 275 (pound)44,000
Bunnens Ruddington, Nottingham
NG11 6NF
Struan Marshall Flat J, The Boundary, Fox Road, H 200 (pound)32,000
West Bridgford, Nottingham,
NG2 6AL
Vivien Fountain 7 St Helens Crescent, Burton Joyce, H 100 (pound)16,000
Nottingham
NG14 5DW
John Bromley 20 Hill Crest Road H 100 (pound)16,000
Camberley, Surrey GU15 1LG
Sally McGarvey 5 Foxes Close J 300 (pound)48,000
Hermitage Walk
The Park, Nottingham
NG7 1DR
TOTAL (POUND)1,6000,000
</TABLE>
26
<PAGE>
PART B
<TABLE>
<CAPTION>
INITIAL CONSIDERATION LOAN NOTES % OF ANY DEFERRED
CLASS OF NO. OF SHARES PAYABLE PAYABLE CONSIDERATION
NAME ADDRESS SHARES SHARES PAYABLE
<S> <C> <C> <C> <C> <C> <C>
Jonathan Roy Westhorpe Lodge, D 1760 (pound)176,000 (pound)352,000 NIL
Holmes Westhorpe, Southwell, E 264 NIL NIL 44%
Nottinghamshire
Peter McGarvey 3 Manor Court D 1640 (pound)164,000 (pound)328,000 NIL
Willoughby on the E 246 NIL NIL 41%
Wolds, Leicestershire
LE12 3SS
Gary Lineker Fairways, Titlarks Road, F 275 (pound)11,000 (pound)22,000 2.75%
Ascot
Berkshire SL5 0JD
David Gower Meade Hill, Church F 150 (pound)6,000 (pound)12,000 1.5%
Lane, Braishfield,
Romsey, Hampshire
SO51 0QH
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Will Carling Old Pond House, F 100 (pound)4,000 (pound)8,000 1.0%
Village Road, Dorney,
Windsor
SL4 6QJ
Diana Van Hall Cottage, Old Road, F 275 (pound)11,000 (pound)22,000 2.75%
Bunnens Ruddington,
Nottingham
NG11 6NF
Struan Marshall Flat J, The Boundary, F 200 (pound)8,000 (pound)16,000 2.0%
Fox Road, West
Bridgford, Nottingham,
NG2 6AL
Vivien Fountain 7 St Helens Crescent, F 100 (pound)4,000 (pound)8,000 1.0%
Burton Joyce,
Nottingham
NG14 5DW
John Bromley 20 Hill Crest Road F 100 (pound)4,000 (pound)8,000 1.0%
Camberley, Surrey
GU15 1LG
Sally McGarvey 5 Foxes Close G 300 (pound)12,000 (pound)24,000 3.0%
Hermitage Walk
The Park, Nottingham
NG7 1DR
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL (POUND)400,000 (POUND)800,000 100%
</TABLE>
29
<PAGE>
SCHEDULE 2
PARTICULARS OF THE COMPANY
(1) Company Number: 1527571
(2) Share Capital: (i) Authorised:- (pound)1,000,000
(ii) Issued:- (pound)51,310
(3) Registered Holders: See Schedule 1
(4) Registered Office: 6 George Street, Nottingham, Nottinghamshire, NG1 3BE
(5) Directors: Jonathan Roy Holmes
Peter McGarvey
(6) Secretary: Jonathan Roy Holmes
(7) Auditors: Grant Thornton
(8) Accounting reference date: 31 December
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<PAGE>
SCHEDULE 3
DETAILS OF LEASE
PARTIES
Ice Developments Limited (1) and Park Associates Limited (2).
PROPERTY
Part of the First Floor, 68 South Lambeth Road, SW8 as shown on the plan to the
Lease.
RENT PER ANNUM
(pound)7,750
TERM
From 8 September 1997 to 7 September 2002.
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<PAGE>
SCHEDULE 4
THE WARRANTIES
A. General
B. Accounts/Financial
C. Business
D. Tax
E. Intellectual Property etc
F. Directors/Employees etc
A. GENERAL
A.1 THE RECITALS AND THE SCHEDULES
The information relating to the Sellers and the Company contained in
the Recitals and Schedules 1 and 2 to this Agreement is true and
accurate.
A.2 AUTHORITY AND CAPACITY
A.2.1 The execution and delivery of, and the performance by, each
Seller of its obligations under this Agreement and the Tax Deed
will not:
(a) relieve any other party to a contract with the Company of its
obligations or enable that party to vary or terminate its
rights or obligations under that contract; or
(b) result in the creation or imposition of any lien, charge or
encumbrance of any nature on any of the property or assets of
the Company.
A.3 MEMORANDUM AND ARTICLES OF ASSOCIATION
The copy of the Memorandum and Articles of Association of the Company
delivered by the Warrantors to the Purchasers is true complete and
accurate in all respects and has embodied in it or annexed to it true,
accurate and complete copies of all resolutions agreements and consents
required by law to be so embodied or annexed.
A.4 COMPLIANCE WITH COMPANIES ACTS
A.4.1 As far as the Warrantors are aware the Company and its respective
officers (in their capacities as such) have complied with the
provisions of the Companies Act 1985 and in particular (without
prejudice to the generality of the foregoing) all documents
required to be filed with the Registrar of Companies in respect
of the Company have been duly filed.
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<PAGE>
A.4.2 The Statutory Books and Minute Books of the Company have been
properly written up and contain a true accurate and complete
record of the matters which should be dealt with in such books
and no notice or allegation that any of them is incorrect or
should be rectified has been received.
A.4.3 All returns and particulars, resolutions and other documents
which the Company is required by law to file with or deliver to
the Registrar of Companies have been correctly made up and duly
filed or delivered.
A.5 OWNERSHIP OF THE SHARES
A.5.1 The Shares constitute the whole of the issued and allotted share
capital of the Company.
A.5.2 No person is entitled, or has claimed to be entitled, to require
the Company to issue any share or loan capital either now or at
any future date whether contingently or not.
A.6 SUBSIDIARIES, ASSOCIATIONS AND BRANCHES
The Company:
A.6.1 does not hold or beneficially own and has not agreed to acquire
any securities of any other corporation (whether incorporated in
the United Kingdom or elsewhere); or
A.6.2 is not and has not agreed to become a member of any partnership
or other unincorporated association, joint venture or consortium
(other than recognised trade associations); or
A.6.3 does not have outside the United Kingdom any branch or any
permanent establishment.
A.7 OWNERSHIP OF ASSETS
A.7.1 The Company owns all the assets necessary to enable it to
continue to run its business in the manner and on the scale in
which it has been conducted in the year preceding the date of
this Agreement.
A.7.2 Particulars of all fixed assets acquired or agreed to be acquired
by the Company since the Accounts Date are set out in the
Disclosure Letter.
A.7.3 Except for current assets offered for sale or sold in the
ordinary course of trading, the Company has not since the
Accounts Date disposed of any of the assets included in the
Accounts or any assets acquired or agreed to be
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<PAGE>
acquired since the Accounts Date.
A.7.4 None of the property, assets, undertaking, goodwill or uncalled
capital of the Company is subject to any encumbrance (including,
without limitation, any debenture, mortgage, charge, lien,
deposit by way of security, bill of sale, lease, hire-purchase,
credit-sale or other agreement for payment on deferred terms,
option or right of pre-emption) or any agreement or commitment to
give or create any of the foregoing.
A.8 VULNERABLE TRANSACTIONS
A.8.1 The Company has not been party to a transaction pursuant to or as
a result of which an asset owned, purportedly owned or otherwise
held by it is liable to be transferred or re-transferred to
another person or which gives or may give rise to a right of
compensation or other payment in favour of another person in the
event of the insolvency of any person other than the Company.
A.8.2 No transaction at an undervalue (within the meaning of section
423 of the Insolvency Act 1986) (a) relating to any of the Shares
or (b) to which the Company has been a party, has been effected
prior to the date of this Agreement.
A.9 COMPLIANCE WITH STATUTES
As far as the Warrantors are aware the Company has not, nor has any of
its respective officers, agents or employees (during the course of their
duties), done or omitted to do anything which is a contravention of any
statute, order, regulation or the like giving rise to any fine, penalty
or other liability on the part of the Company.
A.10 LICENCES AND CONSENTS
The Company has all licences (including statutory licences) and consents
necessary to own and operate its assets and to carry on its business as
it does at present and none of the Warrantors is aware of anything that
might prejudice the continuation or renewal of any of those licences or
consents.
A.11 INSIDER CONTRACTS
A.11.1 The Company is not party to any contract or arrangement in which
any of the Warrantors or any person connected with any of them is
interested, directly or indirectly.
A.11.2 The Company is not party to, nor has its profits or turnover
during the five financial periods ended on the Accounts Date been
affected by, any contract
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<PAGE>
or arrangement which is not of an entirely arm's length nature.
A.11.3 None of the Sellers nor any person connected with any of them is
a party to any outstanding agreement or arrangement for the
provision of finance, goods, services or other facilities to or
by the Company or in any way relating to the Company or its
affairs.
A.12 LITIGATION
A.12.1 The Company is not engaged in any litigation or arbitration
proceedings and there are no such proceedings pending or
threatened by the Company.
A.12.2 The Warrantors do not know of anything which is likely to give
rise to any litigation or arbitration proceedings by or against
the Company.
A.12.3 As far as the Warrantors are aware the Company is not the subject
of any investigation or inquiry by any governmental,
administrative or regulatory body.
A.13 INSOLVENCY
A.13.1 No receiver or administrative receiver has been appointed in
respect of the Company or in respect of the whole or any part of
the assets or undertaking of the Company.
A.13.2 No administration order has been made and no petition has been
presented for such an order in respect of the Company.
A.13.3 No meeting has been convened at which a resolution will be
proposed nor has any resolution been passed nor has any petition
been presented or order made for the winding up of the Company.
A.13.4 The Company has not stopped or suspended payment of its debts,
become unable to pay its debts (within the meaning of Section 123
of the Insolvency Act) or otherwise become insolvent.
A.13.5 No unsatisfied judgment, order or award is outstanding against
the Company and no written demand under Section 123(1)(a) of the
Insolvency Act has been made against the Company and no distress
or execution has been levied on, or other process commenced
against, any asset of the Company.
A.13.6 No voluntary arrangement has been proposed under Section 1 of the
Insolvency Act in respect of the Company.
A.13.7 No circumstances have arisen which entitle any person to take any
action, appoint any person, commence proceedings or obtain any
order of the type
35
<PAGE>
mentioned in paragraphs A.13.1 to A.13.6.
36
<PAGE>
B. ACCOUNTS/FINANCIAL
B.1 ACCOUNTS
B.1.1 The Accounts:
(a) have been prepared under the historic cost convention (as
modified for the revaluation of land and buildings) and in
accordance with generally accepted accounting principles and
practices, the Companies Act 1985 and other applicable
statutes and regulations; and
(b) correctly state the assets of the Company and give a true
and fair view of the state of affairs of the Company as at
the Accounts Date and of the profit or loss of the Company
for the period ended on the Accounts Date.
B.1.2 Without prejudice to the generality of the Warranty
contained in paragraph B.1.1, the Accounts:
(a) comply with the requirements of the Companies Act 1985 and
of any other relevant legislation;
(b) have been prepared on a consistent accounting basis with the
corresponding audited accounts of the Company for the
preceding financial year;
(c) are not affected by and do not include any unusual or
non-recurring items;
(d) contain either adequate provision to cover, or full
particulars in notes of, all the known liabilities and other
financial commitments (whether ascertained or contingent and
whether or not quantified or disputed) of the Company as at
the Accounts Date;
(e) make proper and adequate provision for:
(i) all bad and doubtful debts;
(ii) depreciation and obsolescence in respect of plant
machinery fixtures and fittings and vehicles;
(iii) all amounts required to be deducted from any payments
made to any person whether under the Pay As You Earn
regulations legislation relating to National
Insurance Contributions relating to Statutory Sick
Pay or any
37
<PAGE>
other legislation whatsoever.
B.1.3 The debts included in the Accounts have realised or will realise,
in the ordinary course of collection, their nominal amounts less
any provision for bad and doubtful debts included in the
Accounts.
B.1.4 As far as the Warrantors are aware no debt owing to the Company
at the date of this Agreement (other than debts included in the
Accounts) will not in the ordinary course of collection realise
its nominal amount plus any accrued interest.
B.1.5 There is no material difference between the accounting and
taxation treatment of any item in the Accounts and of any asset
acquired since the Accounts Date.
B.1.6 The Company is the owner free from encumbrances or other third
party rights in the nature of security or title retention of all
its undertaking and assets which are included or which ought to
have been included in the Accounts or which have been acquired
since the Accounts Date and all such assets are in its possession
or under its control.
B.2 MANAGEMENT ACCOUNTS
The unaudited management accounts of the Company for the period of five
months ended 31 May 1998 (a copy of which is attached to the Disclosure
Letter) have been prepared on a consistent basis and do not misstate to a
material extent the assets and liabilities of the Company and its results
for the period ended 31 May 1998.
B.3 ACCOUNTING RECORDS
All proper and necessary accounting and other books and records
(including all invoices and other records required for value added tax
purposes) of the Company relating to its financial and trading position
have been fully properly and accurately written up on a proper and
consistent basis.
B.4 POSITION SINCE THE ACCOUNTS DATE
Since the Accounts Date:
B.4.1 the business of the Company has been carried on in the ordinary
and usual course and there has not been any material change in
the nature of the assets and liabilities shown in the Accounts;
B.4.2 there has been no deterioration in the turnover, or trading
prospects of the Company;
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<PAGE>
B.4.3 no directors fees have been paid and no resolution (whether by
the appropriate Board of Directors or by the appropriate General
Meeting) that such fees be paid in respect of the current or any
previous financial year has been proposed or passed by the
Company;
B.4.4 the Company has not disbursed any cash except in the ordinary
course of its business and all amounts received by the Company
have been deposited with the Company's bankers and appear in the
appropriate books of account;
B.4.5 no dividends or other distributions have been declared, paid or
made by the Company;
B.4.6 the Company has not entered into any capital transaction as
vendor, purchaser, lessor or lessee or otherwise undertaken any
material commitment on its capital account.
B.5 BORROWINGS ETC
B.5.1 The Company has not received notice (whether formal or informal)
from any person who is currently, or who has at any time since
the Accounts Date been a lender to it requiring repayment of any
indebtedness or intimating the enforcement by any such lender of
any security which it may hold over any assets of the Company and
the Warrantors are not aware of any circumstances likely to give
rise to any such notice being given or which would enable any
such notice to be given.
B.5.2 The total amount borrowed by the Company from its bankers does
not exceed its overdraft facilities as set out in the Disclosure
Letter.
B.5.3 Since the Accounts Date the Company has not lent any money which
has not been repaid to it or acquired the benefit of any debt
(present or future) save for debts in respect of the normal
course of trading.
B.5.4 The Company has no outstanding loan capital nor any money
borrowed (other than under the overdraft facilities disclosed in
relation to 5.2 above), including money raised by factoring.
B.5.5 The Company has no outstanding liability (whether present or
future) in respect of any guarantee or indemnity.
B.5.6 Since the Accounts Date the Company has paid each of its
creditors on or before the relevant due date for payment (save
for any disputed amounts) and has not made any agreement to
postpone or delay any payment of its debts and "paid" in this
context means that either cash has been paid or a cheque has been
given or despatched to the relevant creditor and has not been
cancelled by the Company.
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<PAGE>
B.6 PLANT AND EQUIPMENT
Of the plant, machinery, fixtures, fittings, equipment, vehicles,
furniture, materials and other assets (not being current assets) included
in the Accounts or acquired by the Company since the Accounts Date:
B.6.1 none has been sold or disposed of at a figure lower than book
value or an open market arm's length value whichever is the
higher;
B.6.2 none has been or has been agreed to be let on hire or hire
purchase or sold on deferred terms; and
B.6.3 none was acquired at a price in excess of market value at the
time of acquisition.
B.7 GOVERNMENT GRANTS
The Company is not subject to any arrangement for receipt or repayment of
any grant, subsidy or financial assistance from any government department
or other body.
B.8 BANK ACCOUNTS
The statement of the Company's bank accounts and of the credit or debit
balances on them attached to the Disclosure Letter is correct as at the close
of business on 29 June 1998 and the Company does not have any other bank or
deposit account (whether in credit or overdrawn) not included in the statement
and since the date of that statement there has not been any payment out of any
of the accounts except for payments in the ordinary course of business and the
balance on the accounts is not substantially different from the balances shown
on the statement.
40
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C. BUSINESS
C.1 SUPPLIERS AND CUSTOMERS
The Warrantors have no reason to believe (but without having made any
enquiry of any third party) that any supplier customer or person who has
had regular dealings with the Company within the twelve months prior to
the Effective Date will cease dealing with the Company or may
substantially reduce its dealings with the Company after Completion as a
result of the acquisition by the Purchasers of the Company.
C.2 TRADING CONTRACTS AND OUTSTANDING OFFERS
C.2.1 The Company has observed and performed in all material respects
the terms and conditions on its part to be observed and
performed under its current trading contracts.
C.2.2 The Company will not be required after the Effective Date to
undertake any work or supply any goods or services under a
contract entered into on or before the Effective Date except on
normal commercial terms.
C.2.3 No offer, tender or the like which is capable of being converted
into an obligation of the Company by an acceptance or other act
of some other person is outstanding, except in the ordinary
course of its business.
C.3 MATERIAL CONTRACTS
The Company is not party to any contract, arrangement, or obligation
which, whether by reason of its nature, term, scope, price or otherwise,
which:
C.3.1 is not in the ordinary course of its business; or
C.3.2 is incapable of performance in accordance with its terms within
six months of the date on which it was entered into or
undertaken; or
C.3.3 is expected to result in a loss to the Company on completion of
performance; or
C.3.4 is of an unusually onerous nature or cannot be fulfilled or
performed by the Company on time and without undue or unusual
expenditure of money and effort.
C.3.5 requires an aggregate consideration payable by the Company in
excess of (pound)10,000; or
C.3.6 involves payment by the Company by reference to fluctuations in
the Index of Retail Prices or any other index; or
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C.3.7 requires payment of any sum by the Company in any currency other than
sterling; or
C.3.8 is for the provision of management or similar services to the Company and
which is not terminable by it on less than three months' notice without
compensation.
C.4 AGENCIES, ETC.
The Company is not party to any agreement or arrangement which restricts
its freedom to carry on the whole or any part of its business in any part
of the world in such manner as it thinks fit.
C.5 ANTI-COMPETITIVE ARRANGEMENTS
C.5.1 The Company is not at the Effective Date, a party to any
agreement, arrangement, concerted practice or course of conduct
which:
(a) is subject to registration under the Restrictive Trade
Practices Acts 1976 and 1977;
(b) contravenes the provisions of the Resale Prices Act 1976
or any secondary legislation or adopted under the Fair
Trading Act 1973;
(c) infringes Article 85 or 86 of the Treaty establishing the
European Economic Community or any other anti-trust or
similar legislation in any jurisdiction in which the
Company carries on business or has assets or sales; or
(d) is void or unenforceable (whether in whole or in part) or
may render the Company liable to proceedings under any
such legislation as is referred to in paragraphs (a) to
(c) above.
C.5.2 The Company has not given any undertaking and no order has been
made against or in relation to the Company pursuant to any
anti-trust or similar legislation in any jurisdiction in which
the Company carries on business or has assets or sales.
C.6 PLANT IN WORKING ORDER
All vehicles and computer equipment owned or used by the Company:
C.6.1 is in satisfactory working order;
C.6.2 has been properly serviced and maintained;
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C.6.3 is not surplus to the Company's requirements; and
C.6.4 is in the possession of the Company.
C.7 INSURANCE
C.7.1 All the assets and undertaking of the Company of an insurable
nature are and have at all material times been insured in
amounts representing their full replacement or reinstatement
value against fire and other risks normally insured against by
persons carrying on the same classes of business as those
carried on by the Company and the Company is now and has at all
material times been adequately covered against accident, damage,
injury, third party loss, loss of profits and other risks
normally covered by insurance.
C.7.2 The list of current policies of insurance of the Company
attached to the Disclosure Letter is true and complete and no
premium due to be paid and payable in respect of any policy is
outstanding.
C.7.3 There are no circumstances which would or might entitle the
Company to make a claim under any policy of insurance or which
under the terms of any policy of insurance would or might be
required to be notified to the insurers and there are no pending
claims under any policy of insurance which have not been
admitted by the insurers.
C.7.4 No liability in respect of any claim made or pending against the
Company will exceed in amount the limit of insurance cover in
force for the benefit of the Company against such a claim and
there is no insurance policy under which the Company may be
required to bear any excess provision out of its own funds.
C.8 PROPERTIES
Except in respect of the Property Licence and the Lease, the Company has
no right or interest in land property or buildings.
C.9 NO POWERS OF ATTORNEY
The Company has not granted any power of attorney or similar authority
which remains in force.
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D. TAXATION
In this Part D of Schedule 4 "tax" and "tax authority" shall have the same
meanings as they have for the purposes of the Tax Deed, and clause 1 of the Tax
Deed shall apply for the purposes of this Part D of Schedule 4.
D.1 GENERAL
D.1.1 Tax returns
All necessary information, notices, computations and returns
which are required by law to have been submitted by the Company
to the Inland Revenue, H M Customs and Excise and any other
relevant tax or excise authorities, whether of the United
Kingdom or elsewhere, have been submitted within the prescribed
time limits including for the avoidance of doubt all claims,
disclaimers and elections which on or before the Effective Date
are required by law to have been made, given or delivered for
tax purposes. All such information, notices, computations and
returns submitted to the Inland Revenue, H M Customs and Excise
and such other authorities were at the date to which they were
made up true and accurate in all material respects and are not
the subject of any material dispute with such authorities.
D.1.2 Tax liabilities
(a) All tax prior to the Effective Date for which the Company
is liable or for which it is liable to account has been
duly paid (insofar as such tax ought to have been paid) and
the Company has made full provision in the Accounts in
respect of all tax for which it will or may become
chargeable or accountable in respect of all accounting
periods or other tax periods ending on or before the
Accounts Date.
(b) The Company has properly and punctually deducted and
accounted for tax which it has been required by law to
deduct or for which it has been required to account in
respect of any payments made or deemed to have been made by
it. In particular the Company has properly operated the
PAYE system and has duly made all deductions and payments
required to be made in respect of national insurance
contributions (including employer's contributions).
D.1.3 Penalties and interest
The Company has not within the past twelve months paid or become
liable to pay, nor, so far as the Warrantors are aware, are
there any circumstances by reason of which it is likely to
become liable to pay, any penalty, fine, surcharge or interest
in respect of tax.
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D.1.4 Investigations
There is no material dispute or disagreement outstanding nor so
far as the Warrantors are aware is any contemplated at the
Effective Date with any tax authority regarding:
(a) the computation of any gains, profits or losses of the
Company for tax purposes;
(b) any liability or potential liability to tax (including
penalties or interest) recoverable from the Company; or
(c) the availability to the Company of any relief from tax.
D.1.5 Deductions
All rents, interest and annual payments paid or payable by the
Company since the Accounts Date are wholly allowable as
deductions or charges in computing income for the purposes of
corporation tax.
D.1.6 Residence
The Company is, and has since its incorporation been, resident
for tax purposes only in the United Kingdom.
D.1.7 No transactions between persons under common control.
No transactions or arrangements involving the Company have taken
place or are in existence which are such that any of the
provisions of s.770 to s.773 Taxes Act 1988 have been or, so far
as the Warrantors are aware, could be applied to them.
D.1.8 Loans
The Company is not a party to any loan relationship (within the
meaning of s.81 Finance Act 1996) which has an unallowable
purpose (within the meaning of paragraph 13 of Schedule 9 to
that Act) and the Company applies an authorised accounting
method within s.85 of that Act in relation to its treatment in
the Accounts of all loan relationships to which the Company is a
party.
D.1.9 Disclosure Letter
The Disclosure Letter lists all concessions, agreements and/or
other formal or informal arrangements with any tax authority
(other than such as are published by a tax authority in the UK)
from which the Company has or will benefit, or
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by which the Company is bound and (in either case) which are
being applied at the Effective Date.
D.1.10 Records
The Company maintains proper and up to date information and
records of all transactions and activities in which it has been
involved and of its tax affairs which will or are likely to be
relevant in calculating any tax liability of the Company:
(a) for any accounting or other period ending, or in respect
of any event occurring, on or before the Effective Date
in relation to which no final agreement relating to tax
has yet been reached with the relevant tax authority; and
(b) for any such period ending or event occurring after the
Effective Date; and
(c) as required by law.
D.1.11 Expenses
The aggregate amount of payments or expenditure made or incurred
by the Company since the Accounts Date (other than dividends and
disclosed capital expenditure) which will not be wholly
deductible in computing the taxable profits of the Company or
which will not be a charge on an income for the purposes of
corporation tax is consistent with the level of such payments in
previous accounting periods.
D.1.12 Assets
(a) The Company has not since the Accounts Date disposed of
any asset otherwise than in the ordinary course of its
trade.
(b) In respect of any disposal by the Company immediately
following the Effective Date of an asset which it owned
at the Effective Date:
(i) for a consideration equal to the value of that asset
taken for the purposes of the Accounts (if it was
owned by the Company on the Accounts Date) the tax
liability thereby incurred would not exceed the
amount taken into account in computing the provision
for deferred tax as stated in the Accounts; and
(ii) for a consideration equal to that for which the
asset was acquired (if it was acquired after the
Accounts Date) no liability to tax would arise.
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D.1.13 The Company has not on or before the Effective Date been party
to any scheme or arrangement:
(a) in respect of which any tax clearance has not been
obtained which could have been obtained; or
(b) which was or included a reorganisation or reduction of
share capital of the Company.
D.1.14 The Company has not been party to any scheme or arrangement as a
result of which on the future disposal of any asset owned on the
Effective Date the allowable loss or chargeable gain otherwise
arising or any liability to tax is liable to be adjusted by any
tax authority.
D.1.15 The Company has not carried out or been engaged in any
transaction or arrangement in respect of which there has been or
may have been substituted for the consideration given or
received by the Company (including a nil consideration) a
different consideration for tax purposes and the Company has no
obligation to enter into any such transaction or arrangement in
the future.
D.2 CAPITAL ALLOWANCES
D.2.1 All expenditure which the Company has incurred or is liable to
incur under any subsisting commitment on the provision of plant
or machinery has qualified or will qualify (if not deductible as
a trading expense) for capital allowances.
D.2.2 All allowances available to the Company in respect of capital
expenditure incurred prior to the Effective Date or to be
incurred under any subsisting commitment will be available in
computing the taxable profits of the Company.
D.2.3 The Company has not elected to have any asset treated as a
short-life asset under s.37 Capital Allowances Act 1990.
D.2.4 None of the assets of the Company is or may be a long-life asset
within the meaning of Chapter 4A or Part II Capital Allowances
Act 1990.
D.2.5 The Disclosure Letter contains accurate details of the written
down values for the purposes of capital allowances of the
capital assets of the Company (including industrial buildings,
plant and machinery and patents) as at the Accounts Date.
D.2.6 The Company is not in dispute with any person as to any
entitlement to capital allowances under s.51 Capital Allowances
Act 1990 and at the Effective Date as far as the Warrantors are
aware there are no circumstances which might give rise to such a
dispute.
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D.3 CAPITAL GAINS
D.3.1 No election under s.35(5) Taxation of Chargeable Gains Act 1992
has been made in relation to the Company.
D.3.2 The Company is not a member of a group of companies as defined
in s.170 Taxation of Chargeable Gains Act 1992.
D.4 STAMP DUTY
All documents in the possession of the Company and in the
enforcement of which the Company may be interested have been
duly stamped. There is no liability to any fine or penalty in
respect of stamp duty or stamp duty reserve tax nor as far as
the Warrantors are aware are there any circumstances which may
result in the Company becoming liable to any such fine or
penalty.
D.5 VALUE ADDED TAX
D.5.1 Registration
The Company is duly registered for the purposes of value added
tax.
D.5.2 VAT group
The Company is not treated for value added tax purposes as a
member of any group of companies.
D.5.3 Exemption
The Company is not partially exempt for the purposes of value
added tax.
D.5.4 The Company is not the owner or to be treated as the owner of a
capital item to which Part XV Value Added Tax Regulations 1995
applies.
D.5.5 Neither the Company nor any relevant associate of the Company
(within the meaning of paragraph 3 (7) of Schedule 10 Value
Added Tax Act 1994) has been a party to any arrangements
relating to an election in accordance with paragraph 2 and 3 of
Schedule 10 Value Added Tax Act 1994 nor are they liable nor is
it likely that they will be liable to a self-supply charge
within the meaning of paragraphs 5 and 6 of Schedule 10 Value
Added Tax Act 1994.
D.6 CAPITAL TRANSFER TAX AND INHERITANCE TAX
D.6.1 No transfer of value (as defined by the Inheritance Tax Act
1984) or disposal by way of gift (within the meaning of s.102
Finance Act 1986) has at any time
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been made by the Company.
D.6.2 The Company has not been entitled to an interest in possession
in settled property (as defined for the purposes of inheritance
tax).
D.6.3 No Inland Revenue charge (as defined in s.237 Inheritance Tax
Act 1984) is outstanding over any asset of the Company or in
relation to any of the shares in the capital of the Company.
D.6.4 As far as the Warrantors are aware there are no circumstances in
existence whereby the power mentioned in s.212 (1) Inheritance
Tax Act 1984 could be exercised in relation to the shares or any
assets of the Company.
D.7 CLOSE COMPANIES
D.7.1 The Company is a close company for tax purposes as defined in
s.414 Taxes Act 1988.
D.7.2 The Company is not, nor has it at any time been, a close
investment-holding company as defined in s.13A Taxes Act 1988.
D.7.3 The Company has not since 5 April 1965 done anything so as to
give rise to an assessment under s.419 (as extended by s.422)
Taxes Act 1988 (loan to participators and associates).
D.8 DISTRIBUTIONS
D.8.1 The Company has not since its incorporation:
(a) made any distribution or deemed distribution within the
meanings of ss.209, 210 or 418 Taxes Act 1988
(distributions and deemed distributions) except as
provided for in its audited accounts;
(b) repaid, redeemed or purchased or agreed to repay, redeem
or purchase any of its share capital, or capitalised or
agreed to capitalise in the form of redeemable shares or
debentures, any profits or reserves of any class or
description.
D.8.2 The Company has not issued any share capital which is of a
relevant class as defined in s.249(2) Taxes Act 1988 nor does
the Company own any such share capital (shares carrying the
right to bonus share capital).
D.8.3 The Company has not issued any security (as defined in s.254(1)
Taxes Act 1988) outstanding on the Effective Date in
circumstances such that any interest or other payment payable in
respect of it may be treated as a distribution under s.209 Taxes
Act 1988.
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E. INTELLECTUAL PROPERTY ETC
E.1 SECRET OR CONFIDENTIAL INFORMATION OR PROPERTY
The Company has not at any time (save in the ordinary course of business
or to its professional advisers) disclosed to any person other than the
Purchasers:
E.1.1 any of its secret or confidential information or property
(including, without limitation, financial and technical
information, designs, drawings, plans, statistics, documents,
files, records and papers); or
E.1.2 any other information relating to its business or affairs the
disclosure of which might or could cause loss or damage to or
adversely affect the Company; or
E.1.3 any secret or confidential information relating to its
manufacturers, suppliers, customers, clients and agents or to
any other person who has or has had any dealings with it.
E.2 INTELLECTUAL PROPERTY RIGHTS
E.2.1 The Company does not own, use, infringe or require to use any
letters patent, trade mark, service mark, registered design,
registrable business name, copyright or similar Intellectual
Property Right.
E.2.2 Full details of all registered Intellectual Property Rights
(including applications to register the same) and all
commercially significant unregistered Intellectual Property
Rights owned or used by the Company are set out in the
Disclosure Letter.
E.2.3 The Company is the sole legal and beneficial owner of or
applicant for the Intellectual Property Rights referred to in
paragraph E.2.2 above free of all encumbrances.
E.2.4 Full details are set out in the Disclosure Letter of all licence
and other agreements relating to Intellectual Property Rights to
which the Company is a party (whether as licensor or licensee)
or which relate to any Intellectual Property Right owned by the
Company. The Company is not in breach of any such agreement and,
so far as the Warrantors are aware, no third party is in breach
of any such agreement.
E.2.5 All the Intellectual Property Rights described in paragraph
E.2.3 above and all agreements disclosed in relation to
paragraph E.2.4 above are valid and subsisting and nothing has
been done or omitted to be done by the Company, and the
Warrantors are unaware of any act or omission of any third
party, which would jeopardise the validity or subsistence of any
of such Intellectual Property Rights or such agreements.
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E.2.6 The Company owns or has licensed to it all Intellectual Property
Rights it requires to carry on its business as such business has
been carried on during the year prior to the Effective Date and
such rights and the Company's ability to use such rights will
not be affected by the acquisition of the Company by the
Purchasers.
E.2.7 The Warrantors are not aware of any unauthorised use by any
person of any Intellectual Property Rights or confidential
information of the Company.
E.3 COMPUTER KNOW-HOW AND MARKETING INFORMATION
E.3.1 For the purposes of paragraphs E.3.2, E.3.3 and E.3.4 below:
(a) "Computer Know-How" means all information (including that
comprised in or derived from data, discs, tapes, manuals,
source codes, flow-charts and specifications) relating to
the use or programming of any computer which is not
intended by the persons in possession of the information
for use by unauthorised persons and any computer software
in whatever form held; and
(b) "Marketing Information" means all information relating to
the marketing of any products or services (including
customer names and lists, sales targets, sales
statistics, market share statistics, marketing surveys
and reports, marketing research and any advertising or
other promotional materials).
E.3.2 All Computer Know-How and Marketing Information used by the
Company is owned by or is the subject of a valid grant of rights
to the Company and is not subject to any restriction which
materially and adversely affects the Company's ability to use it
for the purposes of its business.
E.3.3 The Company has not disclosed nor is obliged to disclose any
Computer Know- How or Marketing Information of a confidential
nature to any person other than its employees save in the
ordinary course of business.
E.3.4 The Company is not in breach of any agreement under which any
Computer Know-How or Marketing Information was or is to be made
available to it.
E.4 DATA AND RECORDS
E.4.1 All the records and systems (including but not limited to
computer systems), data and information of the Company are
recorded, stored, maintained or operated or otherwise held by
the Company 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
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exclusive ownership and control of the Company.
E.4.2 The Company has not disclosed to any third party any such
records, control or other systems, data and information as is
referred to in subparagraph E.4.1 above save in the ordinary
course of business or to its professional advisers.
E.4.3 As far as the Warrantors are aware the Company has complied with
all relevant requirements of the Data Protection Act 1984,
including the following:
(a) the data protection principles established in that Act;
(b) requests from data subjects for access to data held by
it; and
(c) the requirements relating to the registration of data
users.
E.4.4 The Company has not received a notice or allegation from either
the data protection registrar or a data subject alleging
non-compliance with the data protection principles or
prohibiting the transfer of data to a place outside the United
Kingdom.
E.4.5 No individual has claimed or will have the right to claim
compensation from any of the Company under that Act for loss or
unauthorised disclosure of data prior to the Effective Date.
E.5 BUSINESS NAMES
The Company does not carry on business under a name other that
its own corporate name.
E.6 YEAR 2000
E.6.1 All computer software used by the Company is Year 2000
compliant.
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F. EMPLOYEES
F.1 PARTICULARS OF EMPLOYEES
F.1.1 The persons whose names are set out in the list attached to the
Disclosure Letter are all the employees of the Company and the
particulars of their employment set out in that list are
accurate. No person who was formerly employed by any company has
a right to return to work.
F.1.2 The terms and conditions of employment of all employees of the
Company are set out in the employment contract copies of which
are enclosed with the Disclosure Letter.
F.1.3 All subsisting contracts of employment to which the Company is a
party are terminable by it on three months' notice or less
without compensation (other than compensation in accordance with
the Employment Rights Act 1996).
F.1.4 No employee of the Company has been given notice of termination
of his employment (or had his employment terminated without
notice) since the Accounts Date and no employee of the Company
has left its employment of his own accord since that date or
indicated his intention of doing so.
F.1.5 Full particulars are contained in the Disclosure Letter of any
outstanding offer of employment made to any person by the
Company and there is no person who has accepted an offer of
employment made by the Company but whose employment has not yet
started.
F.1.6 Full particulars are contained in the Disclosure Letter of any
agreement for the provision of consultancy services or the
services of personnel to the Company and of the terms applicable
to the secondment to the Company of any person.
F.2 SALARY COSTS
F.2.1 Since the Accounts Date no change has been made (or agreed) in
the rate of remuneration or the emoluments or pension benefits
of any employee of the Company.
F.2.2 Since the Accounts Date no change has been made (or agreed) in
the rate of remuneration or the emoluments or pension benefits
of any director or ex- director of the Company and no change has
been made (or agreed) in the terms of engagement (including as
to the level of fees) of any director of the Company.
F.3 COMPENSATION AND OTHER SUMS DUE TO EMPLOYEES
F.3.1 The Company does not have any liability to pay compensation for
loss of office
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or employment to any present or former officer or employee or to
make any payment under the provisions of the Employment Rights
Act 1996, the Sex Discrimination Acts 1975 and 1986, the Race
Relations Act 1976, the Disability Discrimination Act 1995, the
Equal Pay Act 1970 and/or Article 119 of the Treaty of Rome and
no such sums have been paid since the Accounts Date.
F.3.2 Except in respect of normal accruals of remuneration or
emoluments of employment, no sum is payable to or for the
benefit of any employee or director of the Company.
F.3.3 The Company has no obligation to make any payment on redundancy
in excess of the statutory redundancy payment and the Company
has not operated any discretionary practice of making any such
excess payments.
F.4 NO BONUS SCHEMES
There is no scheme or arrangement in operation by or in relation to the
Company under which any employee or other person is entitled to a
commission or remuneration of any other sort calculated by reference to
the whole or part of the turnover, profits or sales of the Company.
F.5 LABOUR RELATIONS
F.5.1 There is not and during the three years preceding the Effective
Date there has not been any industrial action affecting the
Company and to the best of the knowledge, information and belief
of the Warrantors there are no facts or circumstances which are
likely to give rise to such industrial action.
F.5.2 The Company is not a party to any collective agreement or trade
dispute (within the meaning of the Trade Union and Labour
Relations (Consolidations) Act 1992)) or any dismissal
procedures agreement (within the meaning of the Employment
Rights Act 1996) or any proceedings before any court or tribunal
under or by virtue of the provisions of the said Act of 1992 and
to the best of the knowledge, information and belief of the
Warrantors there are no facts or circumstances which are likely
to give rise to the Company becoming a party to any such
agreement or becoming involved in any such dispute or
proceedings.
F.5.3 The Company has in all material respects complied with its
obligations to employees and former employees and any relevant
trade union. No claim has been made or threatened against the
Company or against any person whom the Company is or may be
liable to compensate or indemnify and no enquiry or
investigation has been made or threatened by the Commission for
Racial Equality, the Equal Opportunities Commission or any
health and safety enforcement body, in respect of any act,
event, omission or other matter arising
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out of or in connection with:
(a) any application for employment by any person;
(b) the employment or termination of employment of any
person;
(c) any retirement/death/disability benefit or any other
benefit of whatever type;
and, after making due and careful enquiries, the Warrantors are
not aware of any circumstance which may give rise to any such
claim or investigation.
F.6 LOANS TO EMPLOYEES
The Company has not made any loan or advance to any of its present or
future officers or employees which is outstanding.
F.7 NO PENSION SCHEMES
The Company has not in the two years before the Effective Date paid,
provided or contributed towards, and the Company is not under any
obligation or commitment (whether or not legally enforceable) to pay,
provide or contribute towards, any retirement/death/disability benefit
for or in respect of any present or past employee (or any spouse, child
or dependant of any of them) of the Company or of any predecessor in
business of the Company.
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G. LEASE
G.1 TITLE
G.1.1 The Lease is the only property, owned, controlled, used or
occupied by the Company and the Company is in exclusive
occupation of it.
G.1.2 The property comprised in and demised by the Lease is in this
clause referred to as the 'Property'.
G.1.3 So far as the Warrantors are aware all consents necessary to the
grant of the lease under which the Company holds the Property
were obtained.
G.1.4 The Company has paid the rent under the Lease and observed and
performed the covenants on the part of the lessee and the
conditions contained in the lease (which expression includes
underleases) under which the Property is held and the last
demands for rent (or receipts if issued) were unqualified and to
the best of the Seller's knowledge and belief the Lease is valid
and in full force.
G.1.5 Consent required from the landlord's mortgagee to the grant of
the Lease was obtained.
G.1.6 There are no notices negotiations or proceedings pending in
relation to rent reviews nor is any rent liable at the Effective
Date to be reviewed.
G.1.7 There is no obligation to reinstate the Property by removing or
dismantling any alteration made to the same by the Company or so
far as the Warrantors are aware any predecessor in title to the
Company.
G.1.8 No notice or other requirement has been given by the landlord
under the Lease.
G.1.9 The Warrantors are not aware of any circumstances which would
entitle any such landlord to exercise any powers of entry or
take possession whether by means of peaceable re-entry or
proceedings or which would otherwise restrict the continued
possession and enjoyment of the Property.
G.1.10 Neither the Warrantors nor the Company has received notice of any
outstanding breach of covenant under the Lease.
G.2 FREE FROM ENCUMBRANCES
G.2.1 The Lease is free from any mortgage, debenture or charge
(whether specific or floating legal or equitable) rent-charge,
lien or other encumbrance securing the repayment of monies or
other obligation or liability whether of the Company or any
other party.
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G.2.2 The Property is not so far as the Warrantors are aware subject
to any liability for the payment of any outgoings of a recurring
nature other than national non-domestic rates, water and
sewerage services charges, insurance premiums, rents and service
charges.
G.2.3 The Lease is not to the best of the Warrantors' knowledge and
belief subject to any covenants, restrictions, stipulations,
easements, profits a prendre, wayleaves, licences, grants,
exceptions or reservations overriding interests or other such
rights the benefit of which is vested in third parties nor any
agreement to create the same except in so far as the same are
set out in the Lease.
G.2.4 Where any such matters as are referred to in paragraphs 2.1, 2.2
and 2.3 above have been disclosed in the Disclosure Letter the
obligations and liabilities imposed and arising under them have
been fully observed and performed and all payments in respect of
them due and payable have been duly paid.
G.2.5 The Lease is not subject to any agreement or right to acquire
the same nor any option, right of pre-emption or right of first
refusal and there are no outstanding actions claims or demands
between the Company and any third party affecting or in respect
of the Lease.
G.2.6 There is no person who is in occupation or who has notified to
the Company that he claims any rights or easements of any kind
in respect of the Property adversely to the estate, interest,
right or title of the Company therein.
G.3 PRESENT USE
G.3.1 The present use of the Property is offices within the meaning of
Class B1 of the Town & Country Planning (Use Classes) Order 1987
and copies of the permissions authorising that use have been
supplied.
G.3.2 The Company has not carried out any development, alterations or
other works which would require any permission or consent under
the Planning Acts or any bye-laws or building regulations or
other relevant legislation have been carried out without all
those permissions and consents having been obtained and all
conditions attached to those permissions and consents have been
observed and performed.
G.3.3 No breach by the Company of the Planning Acts or of any relevant
bye-laws, building regulations and other legislation has been
committed by the Company so far as the Warrantors are aware in
relation to the Property.
G.4 NOTICES AND COMPULSORY ACQUISITION
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Neither the Warrantors nor the Company has received any notice
affecting the Property from the local or other competent
authority or from any third party concerning the compulsory
acquisition of the Property or which would adversely affect the
Property.
G.5 REPAIR
The Warrantors know of no subsisting collateral warranties,
guarantees, indemnities or latent defect insurance policies the
benefit of which is vested in the Company.
G.6 SERVICES
The Property is served by drainage, water, electricity and gas services
and the passage and provision of those services has not been interrupted
since the commencement of the Lease and neither the Warrantors nor the
Company knows of any imminent or likely interruption of such passage or
provision.
G.7 FACILITIES
None of the facilities necessary for the enjoyment and current use of the
Property are enjoyed on terms entitling any person to terminate or
curtail them so far as the Warrantors are aware.
G.8 ACCESS
The means of access to or egress from the Property are set out in the
Lease.
G.9 DISPUTES
There are no disputes regarding boundaries, easements, covenants or other
matters relating to the Property or its use of which the Company is
aware.
G.10 FIXTURES & FITTINGS
All fixtures and fittings at the Property (other than landlord's fixtures
and fittings) are the absolute property of the Company free from
encumbrances.
G.11 UNREGISTERED TITLE
The Lease is properly constituted by, and can be deduced from, duly
stamped documents of title which are in the possession or under the
control of the Company or the Sellers. No event has occurred in
consequence of which registration should have been effected at HM Land
Registry.
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G.12 CONTINGENT LEASEHOLD LIABILITIES
G.12.1 The Company has not been a guarantor of a tenant's covenants in any
lease.
G.12.2 The Company has not surrendered the lease of any leasehold property to
the reversioner without first investigating the reversioner's title and
without receiving from the reversioner an absolute release from the
tenant's covenants in the relevant lease and from all liability arising
under that lease.
G.12.3 Except as disclosed in the Disclosure Letter, the Company has not
assigned any leasehold property of which it was the original tenant in
respect of which it entered into a covenant with the landlord to observe
and perform the tenant's covenants under that lease without receiving a
full and effective indemnity in respect of its liability under that
lease.
G.13 STATUTORY OBLIGATIONS
G.13.1 The Company has not been notified of any requirements as to fire
precautions and means of escape in case of fire or requirements under
the Public Health Acts, the Housing Acts, the Highways Acts, the
Offices, Shops and Railway Premises Act 1963, the Health and Safety at
Work, etc. Act 1974, the Factory Acts and the London Building Acts in
respect of the Property.
G.13.2 There are not so far as the Warrantors are aware in force or required to
be in force any licences whether under the Licensing Act 1988 or
otherwise which apply to the Property or relate to or regulate any
activities carried on therein.
59
<PAGE>
SCHEDULE 5
PROPERTY LICENCE
60
<PAGE>
/s/ Jonathan Roy Holmes
- - -----------------------
SIGNED by Jonathan Roy Holmes )
in the presence of: )
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Peter McGarvey
- - ------------------
SIGNED by Peter McGarvey )
in the presence of: )
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Gary Lineker
- - ----------------------
SIGNED by Gary Lineker )
acting by his duly appointed )
attorney
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
61
<PAGE>
/s/ David Gower
- - ---------------------
SIGNED by David Gower )
acting by his duly appointed )
attorney
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Will Carling
- - ----------------------
SIGNED by Will Carling )
acting by his duly appointed )
attorney
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Diana Van Bunnens
- - ---------------------------
SIGNED by Diana Van Bunnens )
acting by her duly appointed )
attorney
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
62
<PAGE>
/s/ Struan Marshall
- - -------------------------
SIGNED by Struan Marshall )
acting by his duly appointed )
attorney
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Vivien Fountain
- - -------------------------
SIGNED by Vivien Fountain )
acting by her duly appointed )
attorney
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
/s/ John Bromley
- - ----------------------
SIGNED by John Bromley )
acting by his duly appointed )
attorney
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
63
<PAGE>
/s/ Sally McGarvey
- - ------------------------
SIGNED by Sally McGarvey )
acting by her duly appointed )
attorney
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Jonathan Holmes
- - -------------------------
SIGNED by Jonathan Holmes )
as trustee of the Jon Holmes )
Discretionary Settlement 1998
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Margaret Holmes
- - --------------------------
SIGNED by Margaret Holmes )
as trustee of the Jon Holmes )
Discretionary Settlement 1998
acting by her duly appointed attorney
Jon Holmes in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
64
<PAGE>
/s/ Jan Chason
- - --------------------
SIGNED by Jan Chason )
the duly authorised representative of )
Marquee Group (UK) Limited
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Jan Chason
- - --------------------
SIGNED by Jan Chason )
the duly authorised representative of )
The Marquee Group Inc.
in the presence of:
Witness Signature:
Witness Address:
Witness Occupation:
65
<PAGE>
Dated 2 September 1998
------------------
(1) ANTHONY EVERETT STEPHENS AND GILLIAN ANN STEPHENS
- AND -
(2) THE MARQUEE GROUP INC.
SHARE PURCHASE AGREEMENT
FOR THE SALE AND PURCHASE OF
ALL THE ISSUED SHARE CAPITAL OF
TONY STEPHENS ASSOCIATES LIMITED
BIRD & BIRD
90 FETTER LANE
LONDON EC4A 1JP
Tel: 0171 415 6000
Fax: 0171 415 6111
ref:CMC/RMD/MARQU/002
<PAGE>
CONTENTS
1 DEFINITIONS AND INTERPRETATION....................................1
2 SALE OF THE SHARES................................................6
3 CONSIDERATION.....................................................7
4 COMPLETION........................................................8
5 INTERIM PAYMENT..................................................10
6 REPRESENTATIONS AND WARRANTIES...................................13
7 CONFIDENTIALITY..................................................19
8 PROTECTIVE COVENANTS.............................................19
9 ANNOUNCEMENTS....................................................21
10 NOTICES AND RECEIPTS.............................................21
11 RESOLUTIONS AND WAIVERS..........................................21
12 ASSIGNMENT.......................................................22
13 GENERAL..........................................................22
14 WHOLE AGREEMENT..................................................23
15 GOVERNING LAW....................................................23
16 PURCHASER'S WARRANTIES AND COVENANT..............................23
SCHEDULE 1
THE SELLERS AND THEIR SHAREHOLDINGS.........................................25
SCHEDULE 2
PARTICULARS OF THE COMPANY..................................................26
SCHEDULE 3
THE WARRANTIES..............................................................27
SCHEDULE 4
THE PROPERTY LICENCE........................................................50
<PAGE>
THIS AGREEMENT is made on the day of 1998
BETWEEN
(1) THE PERSONS WHOSE NAMES AND ADDRESSES ARE SHOWN IN SCHEDULE 1 (each a
"SELLER" and together the "SELLERS");
(2) THE MARQUEE GROUP, INC. a company incorporated under the laws of the
state of Delaware, the principal office of which is at 888 Seventh
Avenue, New York, NY 10019, USA (the "PURCHASER")
RECITALS
(A) Tony Stephens Associates Limited (the "COMPANY") (certain particulars of
which are set out in Schedule 2) is a private company limited by shares
incorporated in England and Wales on 3 November 1987 under the Companies
Acts 1985 having an authorised capital of (pound)1,000 divided into 1000
ordinary shares of (pound)1 each of which 500 shares have been issued
fully paid or credited as fully paid (the "SHARES").
(B) The Sellers are the registered holders and the beneficial owners of the
Shares set opposite their respective names in Schedule 1.
(C) The Sellers wish to sell and, in reliance upon the representations,
warranties, and undertakings set out in this Agreement, the Purchaser is
willing to purchase all the issued share capital of the Company on the
terms and subject to the conditions set out in this Agreement.
OPERATIVE PROVISIONS
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and the Schedules
"ACCOUNTS" means all or any one of the audited balance sheet of the
Company as at the Accounts Date and the audited profit and loss account
of the Company for the financial period ended on the Accounts Date and
the notes to such accounts and the directors reports and the other
documents required by law to be annexed thereto;
"ACCOUNTS DATE" means 30 April 1998;
"ANNIVERSARY DATES" means the first, the second, the third, the fourth
and the fifth anniversary of Completion;
"AGREED TERMS" means terms contained in a form which has been agreed and
initialled by or on behalf of the parties for the purpose of
identification immediately prior to the signing of this Agreement;
1
<PAGE>
"BUSINESS DAY " means Monday to Friday inclusive but excluding any day
which is a bank or public holiday in the country concerned;
"CASH CONSIDERATION" means that part of the consideration for the sale of
the Shares as is payable in cash under Clause 3;
"CHANGE OF CONTROL" means the change of control (as defined in Section
840 Taxes Act 1988) of the Purchaser (other than as a result of the
acquisition of shares in the Purchaser by SFX Entertainment Inc.) and as
a result of such change of control, Mr Robert Gutkowski ceasing to be
President and Chief Executive Officer of the Purchaser (whether
immediately on change of control or subsequently);
"COMMON STOCK" means the shares of no par value in the Common Stock of
the Purchaser quoted on the American Stock Exchange;
"COMPLETION" means completion of the sale and purchase of the Shares in
accordance with Clause 4;
"COMPLETION DATE" means the date on which Completion takes place;
"CONSIDERATION" means the Cash Consideration, the Loan Notes and the
Consideration Shares;
"CONSIDERATION SHARES" means the Initial Consideration Shares and the
Deferred Consideration Shares;
"DEFERRED CONSIDERATION SHARES" means the Common Stock of the Purchaser
to be issued to the Sellers in accordance with the provisions of Clause
3.3 and ranking pari passu with the existing Common Stock of the
Purchaser at the date of issue;
"DISCLOSURE LETTER" means the letter from the Warrantors to the Purchaser
of today's date and which has been delivered to the Purchaser prior to
the signing of this Agreement;
"HOLDING COMPANY" and "SUBSIDIARY" have the meaning given in Section 736
and 736A of the Companies Act 1985;
"INITIAL CONSIDERATION SHARES" means the Common Stock of the Purchaser to
be issued by the Purchaser at Completion pursuant to Clause 3.1(b) and
ranking pari passu with the existing Common Stock of the Purchaser at the
date of issue;
"INSOLVENCY ACT" means the Insolvency Act 1986;
"ISSUE PRICE" means the average closing price of shares of Common Stock
as printed in the eastern edition of the Wall Street Journal over the 20
trading days ending three days prior to Completion or the relevant
Anniversary Date, as appropriate, (provided
2
<PAGE>
that no account shall be taken of any trading day in respect of which the
said edition is not published) as converted to Pounds Sterling by the
application of the average spot rate of exchange for the purchase of
Pounds Sterling with US Dollars, as published by the eastern edition of
the Wall Street Journal at the close of business on the twenty business
days ending three days prior to Completion or the relevant Anniversary
Date, as appropriate (provided that no account shall be taken of any
business day in respect of which the said eastern edition of the Wall
Street Journal is not published);
"INTELLECTUAL PROPERTY RIGHTS" means all and any patents, trademarks,
service marks, trade names, registered designs, unregistered design
rights, copyrights and rights in confidential information, and all and
any other intellectual property rights, whether registered or
unregistered, and including all applications and rights to apply for any
of the same;
"LOAN NOTES" means the series of (pound)200,000 nominal unsecured loan
notes of the Purchaser in the agreed terms;
"PARTIES" means the parties to this Agreement;
PERMITTED ACTIVITIES" means those activities to be carried out by
Sponsasport Limited (of which Anthony Stephens is a Director and
shareholder and Gillian Stephens is Company Secretary and shareholder)
directly in connection with the following contracts and any other
activities of Sponsasport Limited approved in writing by the Purchaser
from time to time:
(a) Licence Agreement dated 16 October 1997 between (1) Sponsasport
Limited (2) Asda Stores Limited trading as George Clothing (3) Alan
Shearer (4) Shearer Promotions Limited.
(b) Letter dated 9 October 1997 from Umbro International to Sponsasport
Limited consenting to the above Agreement.
(c) Letter of agreement dated 22 December 1997 between Sponsasport
Limited and Umbro Europe Limited relating to the above Agreement.
(d) Agreement dated 1 July 1997 between (1) Newcastle United Football
Company Limited (2) Alan Shearer (3) Shearer Promotions Limited (4)
Sponsasport Limited.
"PERSONAL GUARANTEE" means a legal charge over 16 New Street,
Stratford-upon-Avon dated 9 July 1996 in the names of A.E. & G.A.
Stephens in favour of Barclays Bank Plc, a guarantee in the sum of
(pound)150,000 from A.E. & G.A. Stephens dated 9 July 1996 in favour of
Barclays Bank Plc, assignments of life policies in the name of A.E.
Stephens with the Scottish Mutual Assurance Society (policy numbers
652666 and 454928) in favour of Barclays Bank plc relating to the
guarantee provided by Swiss
3
<PAGE>
Bank Corporation for CHF 200,000 in favour of Federation Internationale
de Football Association ("FIFA") in relation to the FIFA License granted
to Anthony Stephens;
"PROPERTY LICENCE" means a licence in the agreed terms and as set out in
Schedule 4 to be entered into between the Sellers and the Company
relating to occupation of office premises at The Chantry, Leymere,
Meriden, West Midlands, CV7 7SB;
"PURCHASER'S ACCOUNTANTS" means Ernst & Young;
"PURCHASER'S SOLICITORS" means Bird & Bird, 90 Fetter Lane, London EC4A
1JP;
"PURCHASER'S STOCKBROKERS" means Continental Stock Transfer & Trust
Company;
"SELLERS' ACCOUNTANTS" means Richard E. Woodhall & Co., 17 Fairyfield
Court, Great Bar, Birmingham B43 6AJ;
"SELLERS' SOLICITORS" means Freeth Cartwright Hunt Dickins, 29 Upper
Parliament Street, Nottingham NG1 2AQ;
"SERVICE AGREEMENT" means the service agreement in the agreed terms to be
entered into between the Company and Tony Stephens;
"TAX" shall have the meaning ascribed to it in the Tax Deed;
"TAXES ACT 1988" means the Income and Corporation Taxes Act 1988;
"TAX DEED" means the deed in relation to tax in the agreed terms;
"TAXATION WARRANTIES" means each and every warranty contained in Section
[D] of Schedule 3;
"UNTRADEABLE SHARES" means any Initial Consideration Shares or any issued
Deferred Consideration Shares which remain subject to the restrictions of
Clause 3.6;
"WARRANTIES" means all and any of the representations, warranties and
undertakings referred to in Clause 6 and Schedule 3; and
"WARRANTORS" means Anthony Everett Stephens and Gillian Ann Stephens.
1.2 References in this Agreement to any statutory provisions shall be
construed as references to those provisions as respectively amended,
consolidated or re-enacted (whether before or after Completion) from time
to time and shall include any provisions of which they are consolidations
or re-enactments (whether with or without amendment) except to the extent
that any amendment, consolidation or re-enactment made after Completion
creates or increases the liability of the parties under this Agreement or
the Tax Deed.
4
<PAGE>
1.3 Where any Warranty is qualified by the expression "so far as the
Warrantors are aware" or "to the best of the Warrantors' knowledge
information and belief" or any similar expression that statement shall be
deemed to include an additional statement that it has been made after due
and careful enquiry unless stated otherwise. For the purposes of
establishing whether due and careful enquiry has been made the Warrantors
shall be deemed to have given the relevant matter due and careful thought
and to have taken appropriate advice from, and made proper enquiries of
the Company's auditors, tax advisors, insurance brokers, legal advisors
and employees but otherwise they shall not be under any obligation to
have taken specialist advice or to have employed or consulted any third
parties.
1.4 The Schedules form part of this Agreement and shall have the same force
and effect as if set out in the body of this Agreement and any reference
to this Agreement shall include the Schedules.
1.5 In this Agreement:-
(a) the masculine gender shall include the feminine and neuter and the
singular number shall include the plural and vice versa;
(b) references to persons shall include bodies corporate,
unincorporated associations and partnerships;
(c) any headings or side notes or, in the case of any legislation
specifically referred to, the inclusion in parentheses of the title
to the relevant Part, Section, Schedule or paragraph contained in
such legislation are for the sake of convenience only and shall not
affect the construction of this Agreement; and
(d) references to any party include a reference to the estate, personal
representative, successor, or permitted assigns of that party; and
(e) a person shall be deemed to be connected with another if that
person is connected with another within the meaning of section 839
of the Taxes Act 1988.
1.6 Except where the contrary is stated, any reference in this Agreement to a
Clause or Schedule is to a Clause or Schedule of this Agreement, and any
reference within a Clause or Schedule to a sub-clause, paragraph or other
sub-division is a reference to such sub-clause, paragraph or other
sub-division so numbered or lettered in that Clause or Schedule.
1.7 In construing this Agreement
(a) the rule known as the ejusdem generis rule shall not apply and
accordingly general words introduced by the word "other" shall not
be given a restrictive
5
<PAGE>
meaning by reason of the fact that they are preceded by words
indicating a particular class of acts, matters or things; and
(b) general words shall not be given a restrictive meaning by reason of
the fact that they are followed by particular examples intended to
be embraced by the general terms.
2 SALE OF THE SHARES
2.1 Each of the Sellers shall sell with full title guarantee those of the
Shares set out opposite his name in Schedule 1 and the Purchaser relying
on the representations, warranties and undertakings of and indemnities by
the Sellers set out in this Agreement shall purchase the Shares on the
terms of this Agreement free from all claims, liens charges encumbrances
and equities and together with all rights attaching or accruing to them.
2.2 Each of the Sellers severally covenants with the Purchaser that save as
accurately and fairly disclosed in the Disclosure Letter:
(a) he has the right to sell and transfer the full legal and beneficial
interest in the Shares set out opposite his name in Schedule 1 to
the Purchaser on the terms set out in this Agreement; and
(b) on or after Completion he will, at his own cost and expense,
execute and do (or procure to be executed and done by any necessary
party) all such deeds, documents, acts and things as the Purchaser
may from time to time reasonably require in order to vest any of
the Shares set opposite his name in Schedule 1 in the Purchaser or
its assignee or as otherwise may be necessary to give full effect
to this Agreement; and
(c) he has the requisite power and authority to enter into and perform
this Agreement and (as appropriate) the Tax Deed and such entry and
performance will not breach, violate, infringe or otherwise affect
the rights of any person;
(d) this Agreement and (if appropriate) the Tax Deed will, when
executed, constitute binding obligations on him in accordance with
their respective provisions;
(e) the execution and delivery of, and performance by him of his
obligations under, this Agreement and (if appropriate) the Tax Deed
will not constitute a default under any instrument or arrangement
binding on him or otherwise to which he is a party or result in a
breach of any order, judgment or decree of any court or
governmental agency to which he is a party or by which he is bound;
(f) neither he nor any person connected with him has any interest,
directly or indirectly, in any business that has a close trading
relationship with or is or is likely to be competitive with the
business of the Company or in any asset which
6
<PAGE>
within the two years preceding the date of this Agreement has been
acquired or disposed of by or leased to the Company;
(g) there is no option, right of pre-emption, right to acquire,
mortgage, charge, pledge, lien or other form of security or
encumbrance over or affecting any of the Shares set out opposite
his name in Schedule 1 nor is there any commitment to create or to
give any of the foregoing and no person has claimed to be entitled
to any of the foregoing.
2.3 Each of the Sellers hereby waives any rights of pre-emption conferred
upon him by the Articles of Association of the Company or in any other
way in respect of the Shares.
2.4 The parties shall not be obliged to complete the sale and purchase of any
of the Shares unless the sale and purchase of all the Shares is completed
simultaneously in accordance with this Agreement.
3 CONSIDERATION
3.1 The consideration for the sale of the Shares shall be (pound)2,096,768,
subject to any adjustments pursuant to Clause 5 and shall consist of:
(a) the sum of (pound)1,414,268 payable in cash on Completion (the
"Cash Consideration") and shall be satisfied by payment to the
Sellers of the cash amounts as set out in Schedule 1;
(b) the sum of (pound)432,500 which shall be satisfied by the allotment
and issue as fully paid and non-assessable by the Purchaser to the
Sellers of such number of Initial Consideration Shares as shall, at
the Issue Price, have a value of (pound)432,500 in aggregate;
(c) the sum of (pound)200,000 which shall be satisfied by the allotment
by the Purchaser to the Sellers of the Loan Notes;
(d) the sum of (pound)50,000 which shall be satisfied by the allotment
and issue as fully paid and non-assessable by the Purchaser to the
Sellers of the Deferred Consideration Shares in accordance with the
provisions of Clause 3.3.
3.2 The Sellers shall be entitled to the Consideration in equal proportions.
3.3 Upon each of the Anniversary Dates the Purchaser shall issue to the
Sellers such number of Deferred Consideration Shares as shall, at the
Issue Price, have a value of (pound)10,000 in aggregate and shall deliver
to the Sellers definitive share certificates for such Consideration
Shares.
3.4 In the event of a Change of Control, any Consideration which remains
outstanding pursuant to Clause 3.3, shall be due for payment within 14
days of the date of the
7
<PAGE>
Change of Control and shall be satisfied by the payment of cash to the
Sellers in the percentages set out against their respective names in
Schedule 1.
3.5 If the Purchaser consolidates, sub-divides or reorganises its share
capital, declares any distribution or makes any issue by way of
capitalisation or rights to holders of its Common Stock during or by
reference to any period relevant for calculating the Issue Price the
amount of Deferred Consideration Shares or the Issue Price will be
adjusted as the Purchaser's Stockbrokers for the time being (acting
reasonably as experts and not as arbitrators) certify to be in their
opinion fair and reasonable.
3.6 Without the written consent of the Purchaser and save in respect of any
transfers of such number of Consideration Shares which at the Issue Price
have an aggregate maximum value of (pound)100,000 by the Sellers to
individuals who are clients of the Company none of the Sellers shall
dispose of, charge or otherwise encumber any interest in any of the
Consideration Shares or any other securities for the time being
representing or derived from those shares (whether by way of
consolidation, sub-division, capitalisation or rights issue or otherwise)
during the period of one year from the date of allotment of the relevant
Consideration Shares.
4 COMPLETION
4.1 Completion shall take place immediately following signature and exchange
of this Agreement when:
(a) the Sellers shall deliver or cause to be delivered to the Purchaser
(i) transfers of the Shares duly completed in favour of the
Purchaser and/or its nominees notified by the Purchaser;
(ii) the share certificates representing the Shares (or an express
indemnity in a form satisfactory to the Purchaser in the case
of any found to be missing);
(iii) all the Statutory and Minute Books of the Company and its
Common Seal and the Certificate of Incorporation;
(iv) the Tax Deed duly executed by each of the Warrantors;
(v) a letter of resignation (expressed to be with effect from the
end of the meeting of the Board of the Company referred to in
sub-clause (d) below), from Gillian Stephens resigning office
as Director and Secretary of the Company, executed as a deed
in the agreed terms;
(vi) the resignation of the auditors of the Company in accordance
with section 394 of the Companies Act 1985, confirming that
there are no circumstances connected with their resignation
which should be brought to the notice of the members or
creditors of the Company and that there are no fees due to
them;
8
<PAGE>
(vii) the Service Agreement, duly executed by Anthony Stephens;
(viii) the Property Licence duly executed by the Sellers; and
(ix) the Disclosure Letter.
(b) the Warrantors shall procure that all indebtedness due from any of
the Warrantors or any person connected with them to the Company
shall have been satisfied in full prior to Completion;
(c) all indebtedness due from the Company to any of the Warrantors
(full particulars of which are contained in the Disclosure Letter
but excluding remuneration accrued but not yet due for payment)
shall have been satisfied in full without payment of interest prior
to Completion;
(d) the Sellers shall cause a meeting of the Board of the Company to be
held at which the Board shall:-
(i) appoint such persons as the Purchaser may nominate as
Directors and Secretary of the Company;
(ii) accept the letters of resignation referred to in sub-clause
(a)(v) and (a)(vi) above;
(iii) vote in favour of the registration of the Purchaser and/or
its nominees as members of the Company subject only to the
production of duly stamped and completed transfers in favour
of the Purchaser and/or its nominees in respect of the
Shares;
(iv) approve the Property Licence;
(v) change the accounting reference date of the Company to 31
December;
(vi) appoint Ernst & Young as auditors;
(e) the parties shall join in procuring that all existing bank mandates
in force for the Company shall be altered (in such manner as the
Purchaser shall at Completion require) so as (inter alia) to
reflect the resignations and appointments referred to above.
(f) the Purchaser shall not be obliged to complete this Agreement
unless the Sellers comply fully with the requirements of paragraphs
(a), (b), (d), and (e) of this Clause;
4.2 Upon completion of all the matters referred to in sub-clause 4.1 the
Purchaser shall:
9
<PAGE>
(a) pay to the Sellers' Solicitors (whose receipt shall be a sufficient
discharge therefor) the Cash Consideration by way of telegraphic
transfer;
(b) allot the Initial Consideration Shares and issue the Loan Notes to
the Sellers and within five days of Completion deliver to the
Sellers' Solicitors definitive share certificates in respect of the
Initial Consideration Shares and certificates in the agreed terms
in respect of the Loan Notes in the names of the Sellers; and
(c) deliver to the Sellers' Solicitors a duly executed counterpart of:
(i) the Tax Deed;
(ii) the Service Agreement;
(iii) the Property Licence;
(iv) the Disclosure Letter;
(d) the Sellers shall not be obliged to complete this Agreement unless
the Purchaser complies fully with the requirements of paragraphs
(a), (b) and (c) of this Clause.
4.3 If in any respect either the Sellers or the Purchaser fail to comply with
all the provisions of Clauses 4.1 and 4.2 on the date for Completion then
the other of them may:
(a) defer Completion to a date not more than 28 days after the date for
Completion set by this Clause 4 (and so that the provisions of this
sub-clause 4.3 shall apply to Completion as so deferred); or
(b) proceed to Completion as far as practicable; or
(c) rescind this Agreement (without prejudice to its accrued rights and
remedies).
4.4 The Purchaser (with the reasonable cooperation of the Sellers) shall
procure as soon as reasonably practicable following Completion and in any
event within 28 days of Completion the full and unconditional release of
the Personal Guarantee and the Purchaser shall fully indemnify the
Sellers against any liability, loss, cost or claim arising out of or in
connection with the Personal Guarantee at any time after Completion.
5 INTERIM PAYMENT
5.1 On 31 August 1998 the Company paid pension contributions for the benefit
of the Sellers in the aggregate amount of (pound)125,000 (the "PENSION
PAYMENT") of which (pound)85,000 represented an amount equal to four
twelfths of (pouND)255,000.
10
<PAGE>
5.2 The Purchaser shall procure that the Purchaser's Accountants shall within
60 days after the end of the Company's current financial period ending 31
December 1998 (the "FINANCIAL PERIOD"):
(a) prepare and audit the Company's accounts for the Financial (the
"1998 ACCOUNTS") using the accounting policies and methods used in
the preparation of the Accounts and so as to give a true and fair
view of the profits or losses of the Company for the Financial
Period; and
(b) prepare a statement (the "PROFIT STATEMENT") of the Company's net
profit before taxation for the Financial Period (the "ADJUSTED
PROFIT") as ascertained from the 1998 Accounts but after adding
back:
(i) any dividends or other distributions declared or paid in
respect of the Financial Period;
(ii) the bonuses in the aggregate gross sum (before PAYE taxation)
of (pound)42,950 (and any related employer's national
insurance contributions) paid to Richard Howarth and Helene
Hollier on 31 August 1998;
(iii) the gross amount (before PAYE taxation) of any bonus payments
paid or payable pursuant to the Service Agreement and any
related employer's national insurance contributions;
(iv) the amount of the Pension Payment;
(v) any liability incurred to the Purchaser or its subsidiaries
or associated companies for management or similar charges;
(vi) any directors fees paid or payable to any directors of the
Company nominated by the Purchaser;
(vii) any liabilities or losses incurred otherwise than in the
ordinary and proper course of the Company's business as
carried on at the Completion Date;
and also containing a calculation of the amount (the
"PRE-COMPLETION PROFIT") equal to one half of the Adjusted Profit.
5.3 Upon the completion of the preparation of the 1998 Accounts and the
Profit Statement by the Purchaser's Accountants they shall be presented
to the Sellers' Accountants for their approval. The Sellers shall procure
that the Sellers' Accountants communicate their decision as to whether or
not they approve the Profit Statement to the Sellers and the Purchaser
within 14 days of such presentation (the "APPROVAL PERIOD") and shall, in
the event of non approval, specify with reasonable particularity the
reasons for non approval. In the event that the Sellers' Accountants fail
to communicate their decision
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to the Sellers and Purchaser within the Approval Period they shall be
deemed to have approved the Profit Statement.
5.4 The Purchaser and the Sellers shall use their best endeavours to procure
that the Sellers' Accountants and the Purchaser's Accountants shall have
access to all the books and records of the Company for the purposes of
enabling them to prepare or check, as the case may be, the Profit
Statement.
5.5 In the event that the Sellers' Accountants do not approve the Profit
Statement within the Approval Period the Sellers and the Purchaser shall
use their best endeavours to procure that the Sellers' Accountants and
the Purchaser's Accountants meet together promptly and in any case within
a period of 14 days of the end of the Approval Period to resolve any
dispute that has arisen between them with regard to the Profit Statement.
5.6 Any dispute with respect to the Profit Statement which is not settled
within 28 days of the end of the Approval Period shall (unless the
Sellers and the Purchaser otherwise agree in writing) be referred for
final determination to an Independent Accountant nominated jointly by the
Sellers and the Purchaser (or failing such nomination within ten days of
one party serving notice upon the other party to make such nomination)
nominated at the request of either party by the President for the time
being of the Institute of Chartered Accountants in England and Wales. The
Independent Accountant shall be instructed to render his decision (which
shall be communicated in writing to the Sellers and the Purchaser and
shall be final and binding on the Sellers and the Purchaser) within 21
days of his appointment. The fees and costs of the Independent Accountant
shall be borne and paid by the Sellers and the Purchaser in such
proportions as the Independent Accountant shall consider appropriate. The
parties shall provide to the Independent Accountant all such information
assistance and documentation as he may reasonably require.
5.7 Upon the approval of the Profit Statement under clauses 5.3 or 5.5 or the
determination of any dispute under clause 5.6 the Sellers and Purchaser
shall use their best endeavours to procure that the Sellers' Accountants
and the Purchaser's Accountants immediately issue the Profit Statement
signed by the Sellers' Accountants and the Purchaser's Accountants
respectively in the form so approved, resolved or decided which shall in
the absence of manifest error be final and binding on the Sellers and the
Purchaser.
5.8 If the Pre-Completion Profit as stated in the Profit Statement is less
than (pound)85,000, the Sellers shall within 7 days after the issue of
the Profit Statement pursuant to clause 5.7 pay an amount to the
Purchaser equal to the amount of the shortfall and the Consideration
shall be deemed to be reduced by the same amount.
5.9 If the Pre-Completion Profit as stated in the Profit Statement is more
than (pound)85,000 then the Purchaser shall within 7 days after the issue
of the Profit Statement pursuant to clause 5.7 pay an amount to the
Sellers equal to the amount of the excess and the Consideration shall be
deemed to be increased by the same amount.
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5.10 In the event that any payment due under clauses 5.8 or 5.9 is not paid on
its due date then it will bear interest from the due date until the date
of actual payment at the rate of 3% per annum over the base rate from
time to time of Barclays Bank plc such interest to be payable upon
demand.
5.11 As further protection for the Sellers in respect of their rights and
obligations under this clause 5, the Purchaser undertakes and agrees to
procure that prior to the end of the Financial Period unless otherwise
agreed by the Sellers:
(a) there will be no change in the Company's accounting reference date;
(b) the Company shall not engage in any transactions except on an arms
length basis and in the ordinary course of its business as carried
on at the Completion Date;
(c) there shall be no material departure by the Company from the nature
of the business and the manner in which it is carried on as at the
Completion Date;
(d) nothing shall be done or omitted to be done which is intended
adversely to affect the amount of the Adjusted Profit;
(e) the Company shall not transfer or dispose of the whole or any part
of its business or merge all or any part of its business with any
other company, firm or business and the Company shall continue to
operate as a separate limited company;
(f) (save where the Purchaser is advised by a licensed insolvency
practitioner that the Company is trading whilst insolvent) the
Purchaser shall not take any steps to wind up the Company;
(g) no action shall be taken which has the effect of impeding the
Company's ability to carry on its business in the ordinary and
usual course on a basis consistent with the business carried on at
the Completion Date;
(h) the Company enjoys adequate working capital for the purposes of its
business and the development thereof;
(i) there shall be no material change in the basis on which, and the
manner in which, the Company acts for its clients and charges for
its services;
(j) the Company shall endeavour to retain its employees and there shall
be no material adverse change in the manner in which the Company
deals with its employees or the employees' terms and conditions of
employment.
6 REPRESENTATIONS AND WARRANTIES
6.1 The Warrantors hereby jointly and severally represent, warrant and
undertake to the Purchaser that:
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(a) except as accurately and fairly disclosed to the Purchaser in the
Disclosure Letter, each of the statements set out in Schedule 3 is
true and accurate as at Completion; and
(b) all information contained in the Disclosure Letter is true and
accurate as at Completion and fairly presented and nothing of which
the Warrantors were aware as at Completion has been omitted from
the Disclosure Letter which renders any of that information
misleading as at Completion.
6.2 Each of the Warranties set out in the several paragraphs of Schedule 3 is
separate and independent and except as expressly provided to the contrary
in this Agreement is not limited:
(a) by reference to any other paragraphs of Schedule 3; or
(b) by anything in this Agreement or the Tax Deed;
and (save as provided in Clause 6.22 below) none of the Warranties
shall be treated as qualified by any actual or constructive
knowledge on the part of the Purchaser or any of its agents.
6.3 Each of the Warrantors agree with the Purchaser (as trustee for the
Company and its employees) to waive any rights or claims which he may
have against the Company and its employees in respect of any
misrepresentation, inaccuracy or omission in or from any information or
advice supplied or given to the Warrantors by any of the Company or its
employees in connection with the giving of the Warranties and the
preparation of the Disclosure Letter.
6.4 Without restricting the rights of the Purchaser or the ability of the
Purchaser to claim damages on any basis available to it in the event of
any breach of any of the Warranties, the Warrantors undertake with the
Purchaser that the Warrantors will, pay to the Purchaser within 7 days of
the earlier of agreement between the Warrantors and the Purchaser and, in
default of such agreement, final determination by order of a court of
competent jurisdiction a sum by way of damages as so agreed or finally
determined as being the amount necessary to put the Purchaser into the
position which would have existed if the Warranties had been true and
accurate and had not been misleading or breached (as the case may be)
together with all costs and expenses reasonably and properly incurred by
the Purchaser as a result of such breach.
6.5 In the event that the Purchaser obtains judgment (without leave to appeal
being granted) against the Warrantors or reaches agreement with the
Warrantors in respect of any claim for breach of the Warranties pursuant
to the Tax Deed or otherwise pursuant to this Agreement (other than a
claim arising under sub-clauses 2.1(c) and 2.2 of the Tax Deed)] then any
amount which shall have been agreed or finally adjudged or determined to
be owing by the Warrantors to the Purchaser shall, where and to the full
extent possible, be satisfied by the cancellation of any outstanding Loan
Notes or any
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Untradeable Shares held by the Warrantors or by way of deduction from any
instalment (each an "OUTSTANDING INSTALMENT") of the Consideration due to
the Warrantors which remains to be satisfied pursuant to Clause 3.3 and
in the following order of priority:
(a) firstly by way of cancellation of any outstanding Loan Notes held
by the Warrantors (and pro rata as between the Warrantors) and by
deduction from the value of any Outstanding Instalment due to the
Warrantors, taking the Loan Notes and Outstanding Instalments in
reverse order of maturity, and in the case of any Loan Notes and
Outstanding Instalments which fall due for redemption or
satisfaction on the same date the deduction from the value of the
relevant Outstanding Instalment shall take place in priority to the
cancellation of the relevant Loan Notes;
(b) thereafter by the Warrantors offering and the Purchaser accepting
the cancellation of any issued Deferred Consideration Shares held
by the Warrantors which remain subject to the restrictions
contained in Clause 3.6 (and pro rata as between the Warrantors);
and
(c) thereafter by the Warrantors offering and the Purchaser accepting
the cancellation of any Initial Consideration Shares held by the
Warrantors which remain subject to the restrictions contained in
Clause 3.6 (and pro rata as between the Warrantors)
and for the purposes of paragraphs (b) and (c) of this Clause the value
attributable to the relevant Untradeable Shares for the purposes of such
cancellation shall be their Issue Price.
6.6 The Purchaser shall be entitled to take action in respect of any breach
or non-fulfilment of any of the representations, warranties,
undertakings, covenants or agreements on the part of the Warrantors or
any of them contained in or made pursuant to this Agreement both before
and after Completion and (save as provided in Clause 6.22 below) such
action may be taken after Completion in respect of any breach or
non-fulfilment discoverable by the Purchaser on or before Completion and
Completion shall not constitute a waiver of any of the Purchaser's
rights.
6.7 The Warrantors shall have no liability for a claim for breach of the
Warranties where the amount of such claim is less than (pound)5,000 and
the liability of the Warrantors in respect of the Warranties:
(a) shall not (when aggregated with any liability under the Tax Deed)
(i) arise unless the amount of all claims (ignoring for this
purposes any individual claims of less than (pound)5,000 each) made
in respect of the Warranties and/or the Tax Deed (or which would
have been made but for the operation of this paragraph or the
corresponding provision in the Tax Deed) exceeds (pound)30,000 or
(ii) exceed the sum of 2,096,768 as adjusted pursuant to Clause 5;
and
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(b) shall terminate (but without prejudice to the rights and
obligations of the parties under the Tax Deed);
(i) on the seventh anniversary of Completion in respect of those
matters set out in Part D (Taxation) of Schedule 3; and
(ii) on 30 April 2000 in respect of all other matters contained in
Schedule 3;
provided that the limitations contained in this Clause 6.7 shall
not apply to any claim which (or the delay in discovery of which)
is a consequence of fraud, dishonesty or wilful concealment on the
part of the Warrantors, their agents or advisors.
6.8 Any payment made (or suffered by cancellation or deduction pursuant to
Clause 6.5) by the Warrantors for any breach of the Warranties or a
liability under the Tax Deed shall be deemed to be a reduction in the
Consideration.
6.9 The Warranties are given subject to any matters accurately and fairly
disclosed in the Disclosure Letter and to the contents of the documents
contained in the indexed bundle annexed thereto and any other specific
information relating to the Company of which the Purchaser has actual
(but not imputed or implied) knowledge at the date hereof.
6.10 No liability shall arise on the part of the Warrantors in respect of any
breach of the Warranties:
(a) which arises as a result of any liability to Tax arising or being
increased as a result of any change in the basis or method of
calculation of Tax after Completion with retrospective effect;
(b) which arises as a result of any retrospective increase in rates of
Tax introduced after Completion;
(c) which arises as a result of any legislation or other governmental
regulation not in force at Completion; whether or not having
retroactive or retrospective effect;
(d) which arises as a result of any voluntary act, omission or
transaction of the Purchaser or the Company after Completion which
is outside the ordinary course of business of the Company;
(e) which arises as a result of any act, transaction, or omission
carried out by the Warrantors at the Purchaser's request and
direction unless necessary to comply with any applicable law or
statutory regulation enacted prior to Completion;
(f) which would not have arisen but for any winding up or cessation
after Completion of any business or trade carried on by the Company
except to the extent that such winding up or cessation is caused by
the subject matter of one or more claims under the Warranties
and/or under the Tax Deed;
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(g) which arises as a result of any act, omission, transaction or
arrangement of the Company after Completion (whether or not in the
ordinary course of business of the Company) pursuant to a legally
binding obligation incurred on or before Completion details of
which have been accurately and fairly disclosed in the Disclosure
Letter;
(h) where and to the extent that specific provision or reserve
(including provision for deferred tax) is made for the matter
giving rise to the liability in the Accounts;
(i) arising solely from a change after Completion of the Company's
accounting policy or practice or a change of the accounting
reference date of the Company.
6.11 To the extent that any breach of the Warranties is capable of remedy the
Purchaser shall first afford the Warrantors 28 days to remedy the breach
complained of and for such purposes the Purchaser at the Warrantors' cost
shall make available to the Warrantors all assistance and all papers
documents and information in its possession, custody and control which
the Warrantors may reasonably require.
6.12 In the event that the Company or the Purchaser shall become aware of any
matter which is likely to constitute a breach of Warranty the Purchaser
shall as soon as reasonably practicable notify in writing the Warrantors
giving reasonable details of such matter and if so requested by the
Warrantors and at the Warrantors' cost shall provide copies of available
relevant documentation and thereafter shall keep the Warrantors informed
of developments and communications relating thereto. In any event notice
of any claim under the Warranties must be served by the Purchaser on the
Warrantors in writing specifying in reasonable detail the nature of the
claim and the breach that results (having regard to the information then
available to the Purchaser) and where reasonably practicable the amount
claimed before the date specified in Clause 6.7(b) and any claim shall
(if not previously satisfied or withdrawn) be deemed to have been waived
or withdrawn at the expiration of nine months after the date upon which
written notice thereof is given to the Warrantors (or such longer period
as the Warrantors may permit) unless legal proceedings shall already have
been issued against and served on the Warrantors.
6.13 Subject to the Warrantors indemnifying and securing the Purchaser and the
Company to their reasonable satisfaction against any liabilities, costs
or expenses which may be incurred in taking such action the Purchaser
shall take or procure that the Company takes such action as the
Warrantors may reasonably request to dispute, compromise or defend any
claim or demand giving rise to the claim for breach of Warranty or to
mitigate any resulting loss.
6.14 Where the Company or the Purchaser or any of them is entitled (whether by
reason of insurance or otherwise) to recover from a third party any sum
in respect of the damage or liability the subject of a claim under the
Warranties the Purchaser shall if so required by the Warrantors (subject
to the Warrantors indemnifying and securing the Purchaser
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and the Company to their reasonable satisfaction against any liabilities,
costs or expenses which may be incurred in taking such action) procure
that the Company takes action as the Warrantors may reasonably require to
enforce such recovery and any claim against the Warrantors shall be
limited (in addition to the other limitations on the liability of the
Warrantors referred to in this Clause 6) to the amount by which the
amount of the Purchaser's claim as a result of such breach shall exceed
the amount so recovered (less any reasonable costs, charges and expenses
properly incurred by the Purchaser or the Company in connection
therewith).
6.15 Where in relation to any matter which has been the subject of any claim
for breach of the Warranties the Purchaser or the Company shall recover
any sum (whether by payment, discount, credit or otherwise) referable to
that matter the Purchaser shall forthwith repay to the Warrantors any
sums paid by the Warrantors in respect of such claim (or an appropriate
part thereof) not exceeding the sum recovered.
6.16 If and to the extent that the Warrantors make a payment to the Purchaser
in respect of any breach of the Warranties relating to any liabilities in
respect of which the Purchaser or the Company have a right to
reimbursement (in whole or in part) against any third party the Purchaser
shall upon the request of the Warrantors assign or procure to be assigned
to them for no consideration but at the cost of the Warrantors the
benefit of the right of reimbursement.
6.17 In the event of the Warrantors being liable to the Purchaser under the
Warranties in respect of an obligation of the Company to pay Tax and in
certain circumstances the payment of Tax will be repaid to the Company or
some other liability to Tax reduced directly in consequence (in whole or
in part) of the payment of Tax by the Company the liability of the
Warrantors shall be reduced and any amount paid to the Purchaser by the
Warrantors in respect of the liability to Tax shall be refunded when and
to the extent that the Company actually receives such repayment or
reduction in liability and the Purchaser shall procure that the Company
makes all reasonable claims to obtain the repayment or reduction when it
becomes aware that it is entitled to do so.
6.18 Any breach of the Warranties shall give rise only to an action in damages
by the Purchaser.
6.19 The provisions of Clause 2.3 of the Tax Deed shall additionally apply in
relation to any claim which could be made under the taxation warranties
as it applies to a claim under the Tax Deed.
6.20 Nothing herein shall in any way diminish the Purchaser's common law duty
to mitigate its loss.
6.21 The Purchaser undertakes to retain or procure the retention by the
Company of all such books, records, accounts, correspondence and other
papers of the Company as are material in the context of the liability of
the Warrantors under the Warranties or the Tax Deed during the
subsistence of the liability of the Warrantors under the Warranties or
(as the case may be) the Tax Deed.
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6.22 The Purchaser warrants and undertakes to and for the benefit of the
Warrantors that (having made due enquiry of its advisors) it is not aware
of any fact, circumstance or information as at Completion upon the basis
of which it has or may have a claim against the Warrantors and/or Sellers
under this Agreement or any of the other documents referred to herein
other than under sub-clauses 2.1(c) and 2.2 of the Tax Deed (whether for
breach of the Warranties or under the Tax Deed or on any other account
whatsoever). The Purchaser acknowledges that the Warrantors are entering
into this Agreement on the basis that the foregoing warranty is true and
accurate in all respects and, without restricting the rights of the
Warrantors, the Purchaser hereby agrees that in the event of such
warranty being found to have been broken, misleading or untrue by reason
of the Purchaser being at Completion aware of any such fact, circumstance
or information then the Purchaser shall have no right to make any claim
against the Warrantors and/or the Sellers under this Agreement or any of
the other documents referred to herein in respect of such fact,
circumstance or information.
7 CONFIDENTIALITY
7.1 Each of the Sellers hereby undertakes to the Purchaser, for itself and as
trustee of the Company that he will:
(a) not at any time after the date of this Agreement (save as required
by law or regulatory authority) divulge or communicate to any
person other than to officers or employees of the Company whose
province it is to know the same or on the instructions of the Board
of Directors of the Company any confidential information concerning
the business, accounts, finance or contractual arrangements or
other dealings transactions or affairs of the Company which may
have come to his knowledge prior to Completion; and
(b) use his reasonable endeavours to prevent publication or disclosure
of any confidential information concerning such matters;
provided that such undertakings shall cease to have effect in
relation to any confidential information which comes into the
public domain otherwise than through the fault of any of the
Sellers.
8 PROTECTIVE COVENANTS
8.1 Anthony Stephens and Gillian Stephens jointly and severally covenant with
the Purchaser (for itself and as trustee for the Company) that they will
not for a period of 5 years from Completion:
(a) except in relation to the Permitted Activities be concerned in any
business carrying on business within the United Kingdom or Great
Britain and Northern Ireland (including the Channel Islands and the
Isle of Man) or within the Republic of Ireland which is competitive
or likely to be competitive with any of the businesses carried on
by the Company at Completion; or
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(b) except on behalf of the Company or in relation to the Permitted
Activities canvass or solicit orders for services similar to those
being provided by the Company at Completion from any person who is
at Completion or has been at any time within the year prior to
Completion a customer of the Company; or
(c) induce or attempt to induce any supplier of the Company to cease to
supply, or to restrict or vary the terms of supply, to the Company;
or
(d) induce or attempt to induce any employee of the Company to leave
the employment of the Company; or
(e) use or (in so far as it lies within his control) allow to be used
(except by the Company) any trade name used by the Company at
Completion or any other name intended or likely to be confused with
such a trade name; or
(f) spend more than 6 hours per month on Permitted Activities.
8.2 For the purposes of this Clause:
(a) Tony Stephens is concerned in a business if he carries it on as
principal or agent or if:
(i) he is a partner, director, employee, seconde, consultant or
agent in, of or to any person who carries on the business; or
(ii) he has any direct or indirect financial interest (as
shareholder or otherwise) in any person who carries on the
business disregarding any financial interest of a person in
securities which are listed on the American Stock Exchange or
the London Stock Exchange or traded on the Alternative
Investment Market, if that person, the remaining Sellers and
any person connected with him or them are interested in
securities which amount to less than three per cent of the
issued securities of that class and which, in all
circumstances, carry less than three per cent of the voting
rights (if any) attaching to the issued securities of that
class.
8.3 Each of the restrictions in each paragraph or sub-clause above shall be
enforceable by the Purchaser independently of each of the others and its
validity shall not be affected if any of the others is invalid; if any of
those restrictions is void but would be valid if some part of the
restrictions were deleted the restriction in question shall apply with
such modification as may be necessary to make it valid without in any way
extending the scope of the restrictions.
8.4 Tony Stephens acknowledges that the above provisions of this Clause are
no more extensive than is reasonable to protect the Purchaser as the
purchaser of the Shares.
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8.5 If any provision of this Agreement or of any other agreement or
arrangement of which it forms part is subject to registration under the
Restrictive Trade Practices Act 1976, it shall not take effect until the
day after particulars of the agreement or arrangement have been given to
the Director General of Fair Trading under section 24 of that Act.
9 ANNOUNCEMENTS
Neither the Sellers nor the Purchaser shall make or permit any person connected
with any of them to make any announcement concerning the sale and purchase of
the Shares or any ancillary matter before, on or after Completion except as
required by law or other applicable regulation or with the written approval of
the other, such approval not to be unreasonably withheld or delayed.
10 NOTICES AND RECEIPTS
10.1 Any notice or other document to be served under this Agreement may be
delivered or sent by first class registered post (or airmail if to a
destination outside the country where it is despatched) or facsimile
process to the party to be served at his address appearing in this
Agreement or at such other address as he may have notified to the other
parties in accordance with this Clause.
10.2 Any notice or document shall be deemed to have been served:
(a) if delivered, at the time of delivery; or
(b) if posted, at 10.00 am on the second or (if sent to a destination
outside the country where it is despatched) seventh business day in
the country of the recipient after it was put into the post; or
(c) if sent by facsimile process, at the expiration of 2 hours after
the time of despatch, if despatched before 3.00 pm on any business
day in the country of the recipient, and in any other case at 10.00
am on the business day in the country of the recipient following
the date of despatch.
10.3 In proving service of a notice or document it shall be sufficient to
prove that delivery was made or that the envelope containing the notice
or document was properly addressed and posted as a prepaid registered
post or airmail letter or that the facsimile message was properly
addressed and despatched as the case may be.
10.4 The receipt of the Sellers' Solicitors for any sum or document to be paid
or delivered to a Seller will discharge the Purchaser's obligation to pay
or deliver it to that Seller.
10.5 The Purchaser agrees that service or delivery of any documents on it
(including service of any proceedings) may be effected by service upon
the Purchaser's Solicitors in accordance with this Clause 10.
11 RESOLUTIONS AND WAIVERS
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11.1 In relation to the Company the Sellers shall procure the convening of all
meetings, the giving of all waivers and consents and the passing of all
resolutions as are necessary under the Companies Act 1985, its Articles
of Association or any agreement or obligations affecting it to give
effect to this Agreement.
11.2 For so long after Completion as it remains the registered holder of any
of the Shares each of the Sellers will hold them and any distributions,
property and rights hereafter deriving from them in trust for the
Purchaser and will deal with the Shares and any distributions, property
and rights hereafter deriving from them as the Purchaser directs and will
on request by the Purchaser execute an instrument of proxy or other
document which enables the Purchaser or its representative to attend and
vote at any meeting of the Company.
12 ASSIGNMENT
None of the rights or obligations under this Agreement may be assigned or
transferred without the prior written consent of all the parties, save
that the Purchaser may (without the Sellers' consent) assign any or all
of its rights (but not its obligations) under this Agreement to any
subsidiary, holding company, or subsidiary of any holding company, of the
Purchaser provided that any such assignment shall be on terms that if an
assignee of any of the Purchaser's rights ceases to be a subsidiary,
holding company, or subsidiary of any holding company, of the Purchaser,
the assignee shall, before so ceasing, reassign to the Purchaser (or any
subsidiary, holding company or subsidiary of any holding company of the
Purchaser) all such rights and provided further that any such assignment
shall not in any way extend the scope or nature of any of the obligations
or restrictions of the Sellers and/or the Warrantors under this Agreement
or limit the scope or nature of their rights under this Agreement.
13 GENERAL
13.1 Each of the obligations, warranties and undertakings set out in this
Agreement which is not fully performed at Completion will continue in
force after Completion.
13.2 Where any obligation, representation, warranty or undertaking in this
Agreement is expressed to be made, undertaken or given by the Sellers,
they shall be jointly and severally responsible in respect of it unless
otherwise stated.
13.3 The Purchaser may release or compromise in whole or in part the liability
of any of the Sellers under this Agreement or grant any time or other
indulgence without affecting the liability of any other of the Sellers.
13.4 Time is of the essence in relation to this Agreement.
13.5 Each party shall pay the costs and expenses incurred by him or it in
connection with the entering into and completion of this Agreement.
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13.6 This Agreement may be executed in any number of counterparts, all of
which, taken together shall constitute one and the same Agreement and any
party may enter into this Agreement by executing a counterpart.
14 WHOLE AGREEMENT
14.1 This Agreement and the documents referred to in it contain the whole
agreement between the parties relating to the transactions contemplated
by this Agreement and supersede all previous agreements, arrangements and
understandings between the parties relating to these transactions.
14.2 The parties acknowledge that in agreeing to enter into this Agreement he
or it has not relied on any representation, warranty or other assurance
except those set out in this Agreement and waives all rights and
remedies, which, but for this Clause might be available to it in respect
of such representation, warranty or other assurance provided that nothing
in this Clause shall limit or exclude any liability for fraudulent
misrepresentation.
15 GOVERNING LAW
This Agreement is governed by and shall be construed in accordance with
English law. Each of the parties submits to the exclusive jurisdiction of
the English courts for all purposes relating to this Agreement.
16 PURCHASER'S WARRANTIES AND COVENANT
16.1 The Purchaser covenants that it shall use its reasonable endeavours to
file the reports required to be filed by it under the US Securities
Exchange Act 1934, as amended (the "EXCHANGE ACT") and the rules and
regulations of the US Securities and Exchange Commission (the
"COMMISSION") thereunder, and it shall, if feasible, take such further
action as any holder of Consideration Shares may reasonably request, all
to the extent required from time to time to enable such holder to sell
Consideration Shares without registration under the US Securities Act of
1933 (the "SECURITIES ACT") within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be
amended from time to time or (b) any similar rules or regulations
hereafter adopted by the Commission. Upon the written request of any
holder of Consideration Shares, the Purchaser shall deliver to such
holder a written statement as to whether it has complied with such
requirements.
16.2 Provided that a period of at least 2 years has elapsed since the later of
the date any Consideration Shares were acquired from the Purchaser or an
affiliate of the Purchaser (within the meaning of Rule 144 under the
Securities Act), the Purchaser shall, upon the request of any holder
thereof who is not an affiliate of the Purchaser and has not been an
affiliate of the Purchaser during the preceding 3 months, use its
reasonable efforts
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(subject to applicable law) to arrange for the exchange of the
certificates representing such Consideration Shares for new certificates
omitting any legend relating to restrictions on the transfer of such
Consideration Shares.
16.3 The Purchaser hereby warrants and represents to the Sellers that:
(a) neither the execution of this Agreement or the Loan Notes by the
Purchaser nor the completion of the transaction as contemplated by
this Agreement will violate, conflict with or result in the breach
of any term, limitation in or provisions of, or constitute a
default (or an event that, with the giving of notice or the lapse
of time or both, would constitute a default) under the terms,
provisions or conditions of the constitutional documents of the
Purchaser or any agreement to which the Purchaser is a party or by
which the Purchaser is bound, or violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the
Purchaser;
(b) no consent or approval by, notice to or registration with any
governmental or other authority is required on the part of the
Purchaser in connection with the execution of this Agreement or the
Loan Notes or the completion of the transaction as contemplated in
it;
(c) the Consideration Shares, when issued pursuant to this Agreement,
shall be duly authorised, validly issued, fully paid and
nonassessable and the certificates representing the Consideration
Shares and the Loan Notes, when delivered pursuant to this
Agreement, shall be in due and proper form and shall be duly and
validly executed by the officers of the Purchaser named thereon;
(d) the execution, delivery and performance by the Purchaser of the
Agreement and the Loan Notes, and all other documents contemplated
hereby and thereby, the fulfilment of and the compliance with the
respective terms and provisions hereof and thereof, and the
consummation by the Purchaser of the transactions contemplated
hereby and thereby, have been duly authorised by the Board of
Directors of the Purchaser (which authorisation has not been
modified or rescinded and is in full force and effect) and no other
corporate action is necessary for the Purchaser to enter into this
Agreement and the Loan Notes, and all other documents contemplated
hereby and thereby, and to consummate the transactions contemplated
hereby and thereby;
(e) this Agreement and the Loan Notes constitute valid and binding
obligations of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms;
IN WITNESS of which this Agreement has been executed by the parties or their
duly authorised representatives on the date which appears first on page 1.
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SCHEDULE 1
THE SELLERS AND THEIR SHAREHOLDINGS
ANTHONY EVERETT STEPHENS 250 Shares
7 Leymere Close
Meriden
West Midlands
CV7 7SB
GILLIAN ANN STEPHENS 250 Shares
7 Leymere Close
Meriden
West Midlands
CV7 7SB
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SCHEDULE 2
PARTICULARS OF THE COMPANY
(1) Company Number: 2187441
(2) Share Capital: (i) Authorised:- (pound)1,000
(ii) Issued:- (pound)500
(3) Registered Holders: See Schedule 1
(4) Registered Office: The Chantry, Leymere Close, Meriden,
West Midlands CV7 7SB
(5) Directors: Anthony Everett Stephens, Gillian Ann Stephens
(6) Secretary: Gillian Ann Stephens
(7) Auditors: Richard E Woodhall & Co
(8) Accounting reference date: 30 April
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SCHEDULE 3
THE WARRANTIES
A. General
B. Accounts/Financial
C. Business
D. Tax
E. Intellectual Property etc
F. Directors/Employees etc
A. GENERAL
A.1 THE RECITALS AND THE SCHEDULES
The information relating to the Sellers and the Company contained in the
Recitals and Schedules 1 and 2 to this Agreement is true and accurate.
A.2 AUTHORITY AND CAPACITY
A.2.1 The execution and delivery of, and the performance by, each
Seller of its obligations under this Agreement and the Tax Deed
will not:
(a) relieve any other party to a contract with the Company of
its obligations or enable that party to vary or terminate
its rights or obligations under that contract; or
(b) result in the creation or imposition of any lien, charge or
encumbrance of any nature on any of the property or assets
of the Company.
A.3 MEMORANDUM AND ARTICLES OF ASSOCIATION
The copy of the Memorandum and Articles of Association of the Company
delivered by the Warrantors to the Purchaser is true complete and
accurate in all respects and has embodied in it or annexed to it true,
accurate and complete copies of all resolutions agreements and consents
required by law to be so embodied or annexed.
A.4 COMPLIANCE WITH COMPANIES ACTS
A.4.1 As far as the Warrantors are aware the Company and its
respective officers (in their capacities as such) have complied
with the provisions of the Companies Act 1985 and in particular
(without prejudice to the generality of the foregoing) all
documents required to be filed with the Registrar of Companies
in respect of the Company have been duly filed.
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A.4.2 The Statutory Books and Minute Books of the Company have been
properly written up and contain a true accurate and complete
record of the matters which should be dealt with in such books
and no notice or allegation that any of them is incorrect or
should be rectified has been received.
A.4.3 All returns and particulars, resolutions and other documents
which the Company is required by law to file with or deliver to
the Registrar of Companies have been correctly made up and duly
filed or delivered.
A.5 OWNERSHIP OF THE SHARES
A.5.1 The Shares constitute the whole of the issued and allotted share
capital of the Company.
A.5.2 No person is entitled, or has claimed to be entitled, to require
the Company to issue any share or loan capital either now or at
any future date whether contingently or not.
A.6 SUBSIDIARIES, ASSOCIATIONS AND BRANCHES
The Company:
A.6.1 does not hold or beneficially own and has not agreed to acquire
any securities of any other corporation (whether incorporated in
the United Kingdom or elsewhere); or
A.6.2 is not and has not agreed to become a member of any partnership
or other unincorporated association, joint venture or consortium
(other than recognised trade associations); or
A.6.3 does not have outside the United Kingdom any branch or any
permanent establishment.
A.7 OWNERSHIP OF ASSETS
A.7.1 The Company owns all the assets necessary to enable it to
continue to run its business in the manner and on the scale in
which it has been conducted in the year preceding the date of
this Agreement.
A.7.2 Particulars of all fixed assets acquired or agreed to be
acquired by the Company since the Accounts Date are set out in
the Disclosure Letter.
A.7.3 Except for current assets offered for sale or sold in the
ordinary course of trading, the Company has not since the
Accounts Date disposed of any of the assets included in the
Accounts or any assets acquired or agreed to be acquired since
the Accounts Date.
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A.7.4 None of the property, assets, undertaking, goodwill or uncalled
capital of the Company is subject to any encumbrance (including,
without limitation, any debenture, mortgage, charge, lien,
deposit by way of security, bill of sale, lease, hire-purchase,
credit-sale or other agreement for payment on deferred terms,
option or right of pre-emption) or any agreement or commitment
to give or create any of the foregoing.
A.8 VULNERABLE TRANSACTIONS
A.8.1 The Company has not been party to a transaction pursuant to or
as a result of which an asset owned, purportedly owned or
otherwise held by it is liable to be transferred or
re-transferred to another person or which gives or may give rise
to a right of compensation or other payment in favour of another
person in the event of the insolvency of any person other than
the Company.
A.8.2 No transaction at an undervalue (within the meaning of section
423 of the Insolvency Act 1986) (a) relating to any of the
Shares or (b) to which the Company has been a party, has been
effected prior to the date of this Agreement.
A.9 COMPLIANCE WITH STATUTES
As far as the Warrantors are aware the Company has not, nor has any of
its respective officers, agents or employees (during the course of their
duties), done or omitted to do anything which is a contravention of any
statute, order, regulation or the like giving rise to any fine, penalty
or other liability on the part of the Company.
A.10 LICENCES AND CONSENTS
The Company has all licences (including statutory licences) and consents
necessary to own and operate its assets and to carry on its business as
it does at present and none of the Warrantors is aware of anything that
might prejudice the continuation or renewal of any of those licences or
consents.
A.11 INSIDER CONTRACTS
A.11.1 The Company is not party to any contract or arrangement in which
any of the Warrantors or any person connected with any of them
is interested, directly or indirectly.
A.11.2 The Company is not party to, nor has its profits or turnover
during the five financial periods ended on the Accounts Date
been affected by, any contract or arrangement which is not of an
entirely arm's length nature.
A.11.3 None of the Sellers nor any person connected with any of them is
a party to any outstanding agreement or arrangement for the
provision of finance,
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goods, services or other facilities to or by the Company or in
any way relating to the Company or its affairs.
A.12 LITIGATION
A.12.1 The Company is not engaged in any litigation or arbitration
proceedings and there are no such proceedings pending or
threatened by the Company.
A.12.2 The Warrantors do not know of anything which is likely to give
rise to any litigation or arbitration proceedings by or against
the Company.
A.12.3 As far as the Warrantors are aware the Company is not the
subject of any investigation or inquiry by any governmental,
administrative or regulatory body.
A.13 INSOLVENCY
A.13.1 No receiver or administrative receiver has been appointed in
respect of the Company or in respect of the whole or any part of
the assets or undertaking of the Company.
A.13.2 No administration order has been made and no petition has been
presented for such an order in respect of the Company.
A.13.3 No meeting has been convened at which a resolution will be
proposed nor has any resolution been passed nor has any petition
been presented or order made for the winding up of the Company.
A.13.4 The Company has not stopped or suspended payment of its debts,
become unable to pay its debts (within the meaning of Section
123 of the Insolvency Act) or otherwise become insolvent.
A.13.5 No unsatisfied judgment, order or award is outstanding against
the Company and no written demand under Section 123(1)(a) of the
Insolvency Act has been made against the Company and no distress
or execution has been levied on, or other process commenced
against, any asset of the Company.
A.13.6 No voluntary arrangement has been proposed under Section 1 of
the Insolvency Act in respect of the Company.
A.13.7 No circumstances have arisen which entitle any person to take
any action, appoint any person, commence proceedings or obtain
any order of the type mentioned in paragraphs A.13.1 to A.13.6.
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B. ACCOUNTS/FINANCIAL
B.1 ACCOUNTS
B.1.1 The Accounts:
(a) have been prepared under the historic cost convention (as
modified for the revaluation of land and buildings) and in
accordance with generally accepted accounting principles
and practices, the Companies Act 1985 and other applicable
statutes and regulations; and
(b) correctly state the assets of the Company and give a true
and fair view of the state of affairs of the Company as at
the Accounts Date and of the profit or loss of the Company
for the period ended on the Accounts Date.
B.1.2 Without prejudice to the generality of the Warranty contained in
paragraph B.1.1, the Accounts:
(a) comply with the requirements of the Companies Act 1985 and
of any other relevant legislation;
(b) have been prepared on a consistent accounting basis with
the corresponding audited accounts of the Company for the
preceding financial year;
(c) are not affected by and do not include any unusual or
non-recurring items;
(d) contain either adequate provision to cover, or full
particulars in notes of, all the known liabilities and
other financial commitments (whether ascertained or
contingent and whether or not quantified or disputed) of
the Company as at the Accounts Date;
(e) make proper and adequate provision for:
(i) all bad and doubtful debts;
(ii) depreciation and obsolescence in respect of plant
machinery fixtures and fittings and vehicles;
(iii) all amounts required to be deducted from any payments
made to any person whether under the Pay As You Earn
regulations legislation relating to National
Insurance Contributions relating to Statutory Sick
Pay or any other legislation whatsoever.
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B.1.3 The debts included in the Accounts have realised or will
realise, in the ordinary course of collection, their nominal
amounts less any provision for bad and doubtful debts included
in the Accounts.
B.1.4 As far as the Warrantors are aware no debt owing to the Company
at the date of this Agreement (other than debts included in the
Accounts) will not in the ordinary course of collection realise
its nominal amount plus any accrued interest.
B.1.5 There is no material difference between the accounting and
taxation treatment of any item in the Accounts and of any asset
acquired since the Accounts Date.
B.1.6 The Company is the owner free from encumbrances or other third
party rights in the nature of security or title retention of all
its undertaking and assets which are included or which ought to
have been included in the Accounts or which have been acquired
since the Accounts Date and all such assets are in its
possession or under its control.
B.2 ACCOUNTING RECORDS
The unaudited management accounts of the Company for the period of five
months ended 31 May 1998 (a copy of which is attached to the Disclosure
Letter) have been prepared on a consistent basis and do not misstate to a
material extent the assets and liabilities of the Company and its results
for the period ended 31 May 1998.
B.3 ACCOUNTING RECORDS
All proper and necessary accounting and other books and records
(including all invoices and other records required for value added tax
purposes) of the Company relating to its financial and trading position
have been fully properly and accurately written up on a proper and
consistent basis.
B.4 POSITION SINCE THE ACCOUNTS DATE
Since the Accounts Date:
B.4.1 the business of the Company has been carried on in the ordinary
and usual course and there has not been any material change in
the nature of the assets and liabilities shown in the Accounts;
B.4.2 there has been no deterioration in the turnover, or trading
prospects of the Company;
B.4.3 no directors fees have been paid and no resolution (whether by
the appropriate Board of Directors or by the appropriate General
Meeting) that such fees be paid in respect of the current or any
previous financial year has
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been proposed or passed by the Company;
B.4.4 the Company has not disbursed any cash except in the ordinary
course of its business and all amounts received by the Company
have been deposited with the Company's bankers and appear in the
appropriate books of account;
B.4.5 no dividends or other distributions have been declared, paid or
made by the Company;
B.4.6 the Company has not entered into any capital transaction as
vendor, purchaser, lessor or lessee or otherwise undertaken any
material commitment on its capital account.
B.5 BORROWINGS ETC
B.5.1 The Company has not received notice (whether formal or informal)
from any person who is currently, or who has at any time since
the Accounts Date been a lender to it requiring repayment of any
indebtedness or intimating the enforcement by any such lender of
any security which it may hold over any assets of the Company
and the Warrantors are not aware of any circumstances likely to
give rise to any such notice being given or which would enable
any such notice to be given.
B.5.2 The total amount borrowed by the Company from its bankers does
not exceed its overdraft facilities as set out in the Disclosure
Letter.
B.5.3 Since the Accounts Date the Company has not lent any money which
has not been repaid to it or acquired the benefit of any debt
(present or future) save for debts in respect of the normal
course of trading.
B.5.4 The Company has no outstanding loan capital nor any money
borrowed (other than under the overdraft facilities disclosed in
relation to 5.2 above), including money raised by factoring.
B.5.5 The Company has no outstanding liability (whether present or
future) in respect of any guarantee or indemnity.
B.5.6 Since the Accounts Date the Company has paid each of its
creditors on or before the relevant due date for payment (save
for any disputed amounts) and has not made any agreement to
postpone or delay any payment of its debts and "paid" in this
context means that either cash has been paid or a cheque has
been given or despatched to the relevant creditor and has not
been cancelled by the Company.
B.6 PLANT AND EQUIPMENT
Of the plant, machinery, fixtures, fittings, equipment, vehicles,
furniture, materials and
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other assets (not being current assets) included in the Accounts or
acquired by the Company since the Accounts Date:
B.6.1 none has been sold or disposed of at a figure lower than book
value or an open market arm's length value whichever is the
higher;
B.6.2 none has been or has been agreed to be let on hire or hire
purchase or sold on deferred terms; and
B.6.3 none was acquired at a price in excess of market value at the
time of acquisition.
B.7 GOVERNMENT GRANTS
The Company is not subject to any arrangement for receipt or repayment of
any grant, subsidy or financial assistance from any government department
or other body.
B.8 BANK ACCOUNTS
The statement of the Company's bank accounts and of the credit or debit
balances on them attached to the Disclosure Letter is correct as at the
close of business on 28 August 1998 and the Company does not have any
other bank or deposit account (whether in credit or overdrawn) not
included in the statement and since the date of that statement there has
not been any payment out of any of the accounts except for payments in
the ordinary course of business and the balance on the accounts is not
substantially different from the balances shown on the statement.
B.9 WORKING CAPITAL
The Company has sufficient working capital for the continuation of its
business as carried on prior to Completion and to make the payment of ACT
due in respect of the net dividend of (pound)36,808 paid on 31 August
1998.
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C. BUSINESS
C.1 SUPPLIERS AND CUSTOMERS
The Warrantors have no reason to believe (but without having made any
enquiry of any third party) that any supplier customer or person who has
had regular dealings with the Company within the twelve months prior to
Completion will cease dealing with the Company or may substantially
reduce its dealings with the Company after Completion as a result of the
acquisition by the Purchaser of the Company.
C.2 TRADING CONTRACTS AND OUTSTANDING OFFERS
C.2.1 The Company has observed and performed in all material respects
the terms and conditions on its part to be observed and
performed under its current trading contracts.
C.2.2 The Company will not be required after Completion to undertake
any work or supply any goods or services under a contract
entered into on or before Completion except on normal commercial
terms.
C.2.3 No offer, tender or the like which is capable of being converted
into an obligation of the Company by an acceptance or other act
of some other person is outstanding, except in the ordinary
course of its business.
C.3 MATERIAL CONTRACTS
The Company is not party to any contract, arrangement, or obligation
which, whether by reason of its nature, term, scope, price or otherwise,
which:
C.3.1 is not in the ordinary course of its business; or
C.3.2 is incapable of performance in accordance with its terms within
six months of the date on which it was entered into or
undertaken; or
C.3.3 is expected to result in a loss to the Company on completion of
performance; or
C.3.4 is of an unusually onerous nature or cannot be fulfilled or
performed by the Company on time and without undue or unusual
expenditure of money and effort.
C.3.5 requires an aggregate consideration payable by the Company in
excess of (pound)10,000; or
C.3.6 involves payment by the Company by reference to fluctuations in
the Index of Retail Prices or any other index; or
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C.3.7 requires payment of any sum by the Company in any currency other
than sterling; or
C.3.8 is for the provision of management or similar services to the
Company and which is not terminable by it on less than three
months' notice without compensation.
C.4 AGENCIES, ETC.
The Company is not party to any agreement or arrangement which restricts
its freedom to carry on the whole or any part of its business in any part
of the world in such manner as it thinks fit.
C.5 ANTI-COMPETITIVE ARRANGEMENTS
C.5.1 The Company is not at Completion, a party to any agreement,
arrangement, concerted practice or course of conduct which:
(a) is subject to registration under the Restrictive Trade
Practices Acts 1976 and 1977;
(b) contravenes the provisions of the Resale Prices Act 1976 or
any secondary legislation or adopted under the Fair Trading
Act 1973;
(c) infringes Article 85 or 86 of the Treaty establishing the
European Economic Community or any other anti-trust or
similar legislation in any jurisdiction in which the
Company carries on business or has assets or sales; or
(d) is void or unenforceable (whether in whole or in part) or
may render the Company liable to proceedings under any such
legislation as is referred to in paragraphs (a) to (c)
above.
C.5.2 The Company has not given any undertaking and no order has been
made against or in relation to the Company pursuant to any
anti-trust or similar legislation in any jurisdiction in which
the Company carries on business or has assets or sales.
C.6 PLANT IN WORKING ORDER
All vehicles and computer equipment owned or used by the Company:
C.6.1 is in satisfactory working order;
C.6.2 has been properly serviced and maintained;
C.6.3 is not surplus to the Company's requirements; and
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C.6.4 is in the possession of the Company.
C.7 INSURANCE
C.7.1 All the assets and undertaking of the Company of an insurable
nature are and have at all material times been insured in
amounts representing their full replacement or reinstatement
value against fire and other risks normally insured against by
persons carrying on the same classes of business as those
carried on by the Company and the Company is now and has at all
material times been adequately covered against accident, damage,
injury, third party loss, loss of profits and other risks
normally covered by insurance.
C.7.2 The list of current policies of insurance of the Company
attached to the Disclosure Letter is true and complete and no
premium due to be paid and payable in respect of any policy is
outstanding.
C.7.3 There are no circumstances which would or might entitle the
Company to make a claim under any policy of insurance or which
under the terms of any policy of insurance would or might be
required to be notified to the insurers and there are no pending
claims under any policy of insurance which have not been
admitted by the insurers.
C.7.4 No liability in respect of any claim made or pending against the
Company will exceed in amount the limit of insurance cover in
force for the benefit of the Company against such a claim and
there is no insurance policy under which the Company may be
required to bear any excess provision out of its own funds.
C.8 PROPERTIES
Except in respect of the Property Licence, the Company has no right or
interest in land property or buildings.
C.9 NO POWERS OF ATTORNEY
The Company has not granted any power of attorney or similar authority
which remains in force.
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D. TAXATION
In this Part D of Schedule 4 "tax" and "tax authority" shall have the same
meanings as they have for the purposes of the Tax Deed, and clause 1 of the Tax
Deed shall apply for the purposes of this Part D of Schedule 4.
D.1 GENERAL
D.1.1 Tax returns
All necessary information, notices, computations and returns
which are required by law to have been submitted by the Company
to the Inland Revenue, H M Customs and Excise and any other
relevant tax or excise authorities, whether of the United
Kingdom or elsewhere, have been submitted within the prescribed
time limits including for the avoidance of doubt all claims,
disclaimers and elections which on or before Completion are
required by law to have been made, given or delivered for tax
purposes. All such information, notices, computations and
returns submitted to the Inland Revenue, H M Customs and Excise
and such other authorities were at the date to which they were
made up true and accurate in all material respects and are not
the subject of any material dispute with such authorities.
D.1.2 Tax liabilities
(a) All tax prior to Completion for which the Company is liable
or for which it is liable to account has been duly paid
(insofar as such tax ought to have been paid) and the
Company has made full provision in the Accounts in respect
of all tax for which it will or may become chargeable or
accountable in respect of all accounting periods or other
tax periods ending on or before the Accounts Date.
(b) The Company has properly and punctually deducted and
accounted for tax which it has been required by law to
deduct or for which it has been required to account in
respect of any payments made or deemed to have been made by
it. In particular the Company has properly operated the
PAYE system and has duly made all deductions and payments
required to be made in respect of national insurance
contributions (including employer's contributions).
D.1.3 Penalties and interest
The Company has not within the past twelve months paid or become
liable to pay, nor, so far as the Warrantors are aware, are
there any circumstances by reason of which it is likely to
become liable to pay, any penalty, fine, surcharge or interest
in respect of tax.
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D.1.4 Investigations
There is no material dispute or disagreement outstanding nor so
far as the Warrantors are aware is any contemplated at
Completion with any tax authority regarding:
(a) the computation of any gains, profits or losses of the
Company for tax purposes;
(b) any liability or potential liability to tax (including
penalties or interest) recoverable from the Company; or
(c) the availability to the Company of any relief from tax.
D.1.5 Deductions
All rents, interest and annual payments paid or payable by the
Company since the Accounts Date are wholly allowable as
deductions or charges in computing income for the purposes of
corporation tax.
D.1.6 Residence
The Company is, and has since its incorporation been, resident
for tax purposes only in the United Kingdom.
D.1.7 No transactions between persons under common control.
No transactions or arrangements involving the Company have taken
place or are in existence which are such that any of the
provisions of s.770 to s.773 Taxes Act 1988 have been or, so far
as the Warrantors are aware, could be applied to them.
D.1.8 Loans
The Company is not a party to any loan relationship (within the
meaning of s.81 Finance Act 1996) which has an unallowable
purpose (within the meaning of paragraph 13 of Schedule 9 to
that Act) and the Company applies an authorised accounting
method within s.85 of that Act in relation to its treatment in
the Accounts of all loan relationships to which the Company is a
party.
D.1.9 Disclosure Letter
The Disclosure Letter lists all concessions, agreements and/or
other formal or informal arrangements with any tax authority
(other than such as are published by a tax authority in the UK)
from which the Company has or will benefit, or by which the
Company is bound and (in either case) which are being applied at
Completion.
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D.1.10 Records
The Company maintains proper and up to date information and
records of all transactions and activities in which it has been
involved and of its tax affairs which will or are likely to be
relevant in calculating any tax liability of the Company:
(a) for any accounting or other period ending, or in respect of
any event occurring, on or before Completion in relation to
which no final agreement relating to tax has yet been
reached with the relevant tax authority; and
(b) for any such period ending or event occurring after
Completion; and
(c) as required by law.
D.1.11 Expenses
The aggregate amount of payments or expenditure made or incurred
by the Company since the Accounts Date (other than dividends and
disclosed capital expenditure) which will not be wholly
deductible in computing the taxable profits of the Company or
which will not be a charge on an income for the purposes of
corporation tax is consistent with the level of such payments in
previous accounting periods.
D.1.12 Assets
(a) The Company has not since the Accounts Date disposed of any
asset otherwise than in the ordinary course of its trade.
(b) In respect of any disposal by the Company immediately
following Completion of an asset which it owned at
Completion:
(i) for a consideration equal to the value of that asset
taken for the purposes of the Accounts (if it was
owned by the Company on the Accounts Date) the tax
liability thereby incurred would not exceed the
amount taken into account in computing the provision
for deferred tax as stated in the Accounts; and
(ii) for a consideration equal to that for which the
asset was acquired (if it was acquired after the
Accounts Date) no liability to tax would arise.
D.1.13 The Company has not on or before Completion been party to any
scheme or arrangement:
(a) in respect of which any tax clearance has not been obtained
which could
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have been obtained; or
(b) which was or included a reorganisation or reduction of
share capital of the Company.
D.1.14 The Company has not been party to any scheme or arrangement as a
result of which on the future disposal of any asset owned on
Completion the allowable loss or chargeable gain otherwise
arising or any liability to tax is liable to be adjusted by any
tax authority.
D.1.15 The Company has not carried out or been engaged in any
transaction or arrangement in respect of which there has been or
may have been substituted for the consideration given or
received by the Company (including a nil consideration) a
different consideration for tax purposes and the Company has no
obligation to enter into any such transaction or arrangement in
the future.
D.2 CAPITAL ALLOWANCES
D.2.1 All expenditure which the Company has incurred or is liable to
incur under any subsisting commitment on the provision of plant
or machinery has qualified or will qualify (if not deductible as
a trading expense) for capital allowances.
D.2.2 All allowances available to the Company in respect of capital
expenditure incurred prior to Completion or to be incurred under
any subsisting commitment will be available in computing the
taxable profits of the Company.
D.2.3 The Company has not elected to have any asset treated as a
short-life asset under s.37 Capital Allowances Act 1990.
D.2.4 None of the assets of the Company is or may be a long-life asset
within the meaning of Chapter 4A or Part II Capital Allowances
Act 1990.
D.2.5 The Disclosure Letter contains accurate details of the written
down values for the purposes of capital allowances of the
capital assets of the Company (including industrial buildings,
plant and machinery and patents) as at the Accounts Date.
D.2.6 The Company is not in dispute with any person as to any
entitlement to capital allowances under s.51 Capital Allowances
Act 1990 and at Completion as far as the Warrantors are aware
there are no circumstances which might give rise to such a
dispute.
D.3 CAPITAL GAINS
D.3.1 No election under s.35(5) Taxation of Chargeable Gains Act 1992
has been made in relation to the Company.
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<PAGE>
D.3.2 The Company is not a member of a group of companies as defined
in s.170 Taxation of Chargeable Gains Act 1992.
D.4 STAMP DUTY
All documents in the possession of the Company and in the
enforcement of which the Company may be interested have been
duly stamped. There is no liability to any fine or penalty in
respect of stamp duty or stamp duty reserve tax nor as far as
the Warrantors are aware are there any circumstances which may
result in the Company becoming liable to any such fine or
penalty.
D.5 VALUE ADDED TAX
D.5.1 Registration
The Company is duly registered for the purposes of value added
tax.
D.5.2 VAT group
The Company is not treated for value added tax purposes as a
member of any group of companies.
D.5.3 Exemption
The Company is not partially exempt for the purposes of value
added tax.
D.5.4 The Company is not the owner or to be treated as the owner of a
capital item to which Part XV Value Added Tax Regulations 1995
applies.
D.5.5 Neither the Company nor any relevant associate of the Company
(within the meaning of paragraph 3 (7) of Schedule 10 Value
Added Tax Act 1994) has been a party to any arrangements
relating to an election in accordance with paragraph 2 and 3 of
Schedule 10 Value Added Tax Act 1994 nor are they liable nor is
it likely that they will be liable to a self-supply charge
within the meaning of paragraphs 5 and 6 of Schedule 10 Value
Added Tax Act 1994.
D.6 CAPITAL TRANSFER TAX AND INHERITANCE TAX
D.6.1 No transfer of value (as defined by the Inheritance Tax Act
1984) or disposal by way of gift (within the meaning of s.102
Finance Act 1986) has at any time been made by the Company.
D.6.2 The Company has not been entitled to an interest in possession
in settled property (as defined for the purposes of inheritance
tax).
D.6.3 No Inland Revenue charge (as defined in s.237 Inheritance Tax
Act 1984) is outstanding over any asset of the Company or in
relation to any of the shares in the capital of the Company.
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<PAGE>
D.6.4 As far as the Warrantors are aware there are no circumstances in
existence whereby the power mentioned in s.212 (1) Inheritance
Tax Act 1984 could be exercised in relation to the shares or any
assets of the Company.
D.7 CLOSE COMPANIES
D.7.1 The Company is a close company for tax purposes as defined in
s.414 Taxes Act 1988.
D.7.2 The Company is not, nor has it at any time been, a close
investment-holding company as defined in s.13A Taxes Act 1988.
D.7.3 The Company has not since 5 April 1965 done anything so as to
give rise to an assessment under s.419 (as extended by s.422)
Taxes Act 1988 (loan to participators and associates).
D.8 DISTRIBUTIONS
D.8.1 The Company has not since its incorporation:
(a) made any distribution or deemed distribution within the
meanings of ss.209, 210 or 418 Taxes Act 1988
(distributions and deemed distributions) except as provided
for in its audited accounts;
(b) repaid, redeemed or purchased or agreed to repay, redeem or
purchase any of its share capital, or capitalised or agreed
to capitalise in the form of redeemable shares or
debentures, any profits or reserves of any class or
description.
D.8.2 The Company has not issued any share capital which is of a
relevant class as defined in s.249(2) Taxes Act 1988 nor does
the Company own any such share capital (shares carrying the
right to bonus share capital).
D.8.3 The Company has not issued any security (as defined in s.254(1)
Taxes Act 1988) outstanding on Completion in circumstances such
that any interest or other payment payable in respect of it may
be treated as a distribution under s.209 Taxes Act 1988.
43
<PAGE>
E. INTELLECTUAL PROPERTY ETC
E.1 SECRET OR CONFIDENTIAL INFORMATION OR PROPERTY
The Company has not at any time (save in the ordinary course of
business or to its professional advisers) disclosed to any person other than
the Purchaser:
E.1.1 any of its secret or confidential information or property
(including, without limitation, financial and technical
information, designs, drawings, plans, statistics, documents,
files, records and papers); or
E.1.2 any other information relating to its business or affairs the
disclosure of which might or could cause loss or damage to or
adversely affect the Company; or
E.1.3 any secret or confidential information relating to its
manufacturers, suppliers, customers, clients and agents or to
any other person who has or has had any dealings with it.
E.2 INTELLECTUAL PROPERTY RIGHTS
E.2.1 The Company does not own, use, infringe or require to use any
letters patent, trade mark, service mark, registered design,
registrable business name, copyright or similar Intellectual
Property Right.
E.2.2 Full details of all registered Intellectual Property Rights
(including applications to register the same) and all
commercially significant unregistered Intellectual Property
Rights owned or used by the Company are set out in the
Disclosure Letter.
E.2.3 The Company is the sole legal and beneficial owner of or
applicant for the Intellectual Property Rights referred to in
paragraph E.2.2 above free of all encumbrances.
E.2.4 Full details are set out in the Disclosure Letter of all licence
and other agreements relating to Intellectual Property Rights to
which the Company is a party (whether as licensor or licensee)
or which relate to any Intellectual Property Right owned by the
Company. The Company is not in breach of any such agreement and,
so far as the Warrantors are aware, no third party is in breach
of any such agreement.
E.2.5 All the Intellectual Property Rights described in paragraph
E.2.3 above and all agreements disclosed in relation to
paragraph E.2.4 above are valid and subsisting and nothing has
been done or omitted to be done by the Company, and the
Warrantors are unaware of any act or omission of any third
party, which would jeopardise the validity or subsistence of any
of such Intellectual Property Rights or such agreements.
E.2.6 The Company owns or has licensed to it all Intellectual Property
Rights it
44
<PAGE>
requires to carry on its business as such business has been
carried on during the year prior to Completion and such rights
and the Company's ability to use such rights will not be
affected by the acquisition of the Company by the Purchaser.
E.2.7 The Warrantors are not aware of any unauthorised use by any
person of any Intellectual Property Rights or confidential
information of the Company.
E.3 COMPUTER KNOW-HOW AND MARKETING INFORMATION
E.3.1 For the purposes of paragraphs E.3.2, E.3.3 and E.3.4 below:
(a) "Computer Know-How" means all information (including that
comprised in or derived from data, discs, tapes, manuals,
source codes, flow-charts and specifications) relating to
the use or programming of any computer which is not
intended by the persons in possession of the information
for use by unauthorised persons and any computer software
in whatever form held; and
(b) "Marketing Information" means all information relating to
the marketing of any products or services (including
customer names and lists, sales targets, sales statistics,
market share statistics, marketing surveys and reports,
marketing research and any advertising or other promotional
materials).
E.3.2 All Computer Know-How and Marketing Information used by the
Company is owned by or is the subject of a valid grant of rights
to the Company and is not subject to any restriction which
materially and adversely affects the Company's ability to use it
for the purposes of its business.
E.3.3 The Company has not disclosed nor is obliged to disclose any
Computer Know- How or Marketing Information of a confidential
nature to any person other than its employees save in the
ordinary course of business.
E.3.4 The Company is not in breach of any agreement under which any
Computer Know-How or Marketing Information was or is to be made
available to it.
E.4 DATA AND RECORDS
E.4.1 All the records and systems (including but not limited to
computer systems), data and information of the Company are
recorded, stored, maintained or operated or otherwise held by
the Company 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.
E.4.2 The Company has not disclosed to any third party any such
records, control or other systems, data and information as is
referred to in subparagraph E.4.1
45
<PAGE>
above save in the ordinary course of business or to its
professional advisers.
E.4.3 As far as the Warrantors are aware the Company has complied with
all relevant requirements of the Data Protection Act 1984,
including the following:
(a) the data protection principles established in that Act;
(b) requests from data subjects for access to data held by it;
and
(c) the requirements relating to the registration of data
users.
E.4.4 The Company has not received a notice or allegation from either
the data protection registrar or a data subject alleging
non-compliance with the data protection principles or
prohibiting the transfer of data to a place outside the United
Kingdom.
E.4.5 No individual has claimed or will have the right to claim
compensation from any of the Company under that Act for loss or
unauthorised disclosure of data prior to Completion.
E.5 BUSINESS NAMES
The Company does not carry on business under a name other that its own
corporate name.
E.6 YEAR 2000
E.6.1 All computer software used by the Company is Year 2000 compliant.
46
<PAGE>
F. EMPLOYEES
F.1 PARTICULARS OF EMPLOYEES
F.1.1 The persons whose names are set out in the list attached to the
Disclosure Letter are all the employees of the Company and the
particulars of their employment set out in that list are
accurate. No person who was formerly employed by any company has
a right to return to work.
F.1.2 The terms and conditions of employment of all employees of the
Company are set out in the employment contract copies of which
are enclosed with the Disclosure Letter.
F.1.3 All subsisting contracts of employment to which the Company is a
party are terminable by it on three months' notice or less
without compensation (other than compensation in accordance with
the Employment Rights Act 1996).
F.1.4 No employee of the Company has been given notice of termination
of his employment (or had his employment terminated without
notice) since the Accounts Date and no employee of the Company
has left its employment of his own accord since that date or
indicated his intention of doing so.
F.1.5 Full particulars are contained in the Disclosure Letter of any
outstanding offer of employment made to any person by the
Company and there is no person who has accepted an offer of
employment made by the Company but whose employment has not yet
started.
F.1.6 Full particulars are contained in the Disclosure Letter of any
agreement for the provision of consultancy services or the
services of personnel to the Company and of the terms applicable
to the secondment to the Company of any person.
F.2 SALARY COSTS
F.2.1 Since the Accounts Date no change has been made (or agreed) in
the rate of remuneration or the emoluments or pension benefits
of any employee of the Company.
F.2.2 Since the Accounts Date no change has been made (or agreed) in
the rate of remuneration or the emoluments or pension benefits
of any director or ex- director of the Company and no change has
been made (or agreed) in the terms of engagement (including as
to the level of fees) of any director of the Company.
F.3 COMPENSATION AND OTHER SUMS DUE TO EMPLOYEES
F.3.1 The Company does not have any liability to pay compensation for
loss of office or employment to any present or former officer or
employee or to make any
47
<PAGE>
payment under the provisions of the Employment Rights Act 1996,
the Sex Discrimination Acts 1975 and 1986, the Race Relations
Act 1976, the Disability Discrimination Act 1995, the Equal Pay
Act 1970 and/or Article 119 of the Treaty of Rome and no such
sums have been paid since the Accounts Date.
F.3.2 Except in respect of normal accruals of remuneration or
emoluments of employment, no sum is payable to or for the
benefit of any employee or director of the Company.
F.3.3 The Company has no obligation to make any payment on redundancy
in excess of the statutory redundancy payment and the Company
has not operated any discretionary practice of making any such
excess payments.
F.4 NO BONUS SCHEMES
There is no scheme or arrangement in operation by or in relation to the
Company under which any employee or other person is entitled to a
commission or remuneration of any other sort calculated by reference to
the whole or part of the turnover, profits or sales of the Company.
F.5 LABOUR RELATIONS
F.5.1 There is not and during the three years preceding Completion
there has not been any industrial action affecting the Company
and to the best of the knowledge, information and belief of the
Warrantors there are no facts or circumstances which are likely
to give rise to such industrial action.
F.5.2 The Company is not a party to any collective agreement or trade
dispute (within the meaning of the Trade Union and Labour
Relations (Consolidations) Act 1992)) or any dismissal
procedures agreement (within the meaning of the Employment
Rights Act 1996) or any proceedings before any court or tribunal
under or by virtue of the provisions of the said Act of 1992 and
to the best of the knowledge, information and belief of the
Warrantors there are no facts or circumstances which are likely
to give rise to the Company becoming a party to any such
agreement or becoming involved in any such dispute or
proceedings.
F.5.3 The Company has in all material respects complied with its
obligations to employees and former employees and any relevant
trade union. No claim has been made or threatened against the
Company or against any person whom the Company is or may be
liable to compensate or indemnify and no enquiry or
investigation has been made or threatened by the Commission for
Racial Equality, the Equal Opportunities Commission or any
health and safety enforcement body, in respect of any act,
event, omission or other matter arising out of or in connection
with:
48
<PAGE>
(a) any application for employment by any person;
(b) the employment or termination of employment of any person;
(c) any retirement/death/disability benefit or any other
benefit of whatever type;
and, after making due and careful enquiries, the Warrantors are
not aware of any circumstance which may give rise to any such
claim or investigation.
F.6 LOANS TO EMPLOYEES
The Company has not made any loan or advance to any of its present or
future officers or employees which is outstanding.
F.7 NO PENSION SCHEMES
The Company has not in the two years before Completion paid, provided or
contributed towards, and the Company is not under any obligation or
commitment (whether or not legally enforceable) to pay, provide or
contribute towards, any retirement/death/disability benefit for or in
respect of any present or past employee (or any spouse, child or
dependant of any of them) of the Company or of any predecessor in
business of the Company.
49
<PAGE>
SCHEDULE 4
THE PROPERTY LICENCE
50
<PAGE>
/s/ Tony Stephens
- - -----------------------
SIGNED by Tony Stephens )
in the presence of: )
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Gillian Stephens
- - --------------------------
SIGNED by Gillian Stephens )
in the presence of: )
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Jan Chason
- - --------------------
SIGNED by Jan Chason )
the duly authorised representative of )
The Marquee Group Inc. )
51
<PAGE>
THE MARQUEE GROUP, INC.
CREDIT AGREEMENT
Amendment No. 1
This Amendment, dated as of August 12, 1998 (this "Amendment"), is
among The Marquee Group, Inc., a Delaware corporation (the "Company"), its
subsidiaries set forth on the signature pages hereof (the "Subsidiaries") and
BankBoston, N.A., as Agent for the Lenders under the Credit Agreement (as
defined below). The parties agree as follows:
1. Credit Agreement; Definitions. This Amendment amends the Credit
Agreement dated as of July 31, 1998 among the parties hereto and the Lenders
(as in effect prior to giving effect to this Amendment, the "Credit
Agreement"). Terms defined in the Credit Agreement as amended hereby (the
"Amended Credit Agreement") and not otherwise defined herein are used with the
meaning so defined.
2. Amendment of Credit Agreement. Effective upon the date hereof, the
Credit Agreement is amended as follows:
2.1. Amendment of Definition of English Borrower. Section 1.48 of
the Credit Agreement is amended to read in its entirety as follows:
"1.48 "English Borrower" means Marquee Group (UK) Limited, a
company organized under the laws of England."
2.2. Amendment of Exhibit 2.2.3. Exhibit 2.2.3 to the Credit
Agreement is replaced in its entirety with Exhibit 2.2.3 hereto.
3. Representation and Warranty. In order to induce the Agent to enter
into this Amendment, each of the Company and the Subsidiaries jointly and
severally represents and warrants that, after giving effect to this Amendment,
no Default exists.
4. General. The Amended Credit Agreement and all of the Credit
Documents are each confirmed as being in full force and effect. This Amendment,
the Amended Credit Agreement and the other Credit Documents referred to herein
or therein constitute the entire understanding of the parties with respect to
the subject matter hereof and thereof and supersede all prior and current
understandings and agreements, whether written or oral. Each of this Amendment
and the Amended Credit Agreement is a Credit Document and may be executed in
any number of counterparts, which together shall constitute one instrument, and
shall bind and inure to the benefit of the parties and their respective
successors
<PAGE>
and assigns, including as such successors and assigns all holders of any Credit
Obligation. This Amendment shall be governed by and construed in accordance
with the laws (other than the conflict of law rules) of The Commonwealth of
Massachusetts.
[The rest of this page is left intentionally blank.]
-2-
<PAGE>
Each of the undersigned has caused this Amendment to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first written above.
THE MARQUEE GROUP, INC.
By /s/ Jan E. Chason
---------------------------------
Jan E. Chason
Chief Financial Officer
ATHLETES AND ARTISTS, INC.
SPORTS MARKETING AND TELEVISION
INTERNATIONAL, INC.
QBQ ENTERTAINMENT, INC.
PROSERV, INC.
PROSERV UK, INC.
MARQUEE ALPHABET CITY RECORDS, INC.
By /s/ Jan E. Chason
---------------------------------
As Chief Financial Officer of each
of the foregoing corporations
BANKBOSTON, N.A.,
as Agent under the Credit Agreement
By /s/ Daniel Kortick
---------------------------------
Title:
-3-
<PAGE>
Exhibit 2.2.3
FORM OF ENGLISH NOTE
R-__ ______, 1998
FOR VALUE RECEIVED, the undersigned, Marquee Group (UK) Limited, a
company organized under the laws of England (the "Company"), hereby promises to
pay [__________] (the "Lender") or order, on the Final Maturity Date, the
aggregate unpaid principal amount of the loans made by the Lender to the
Company as part of the Loan pursuant to the Credit Agreement referred to below.
The Company promises to pay interest from the date hereof, computed as provided
in the Credit Agreement, on the aggregate principal amount of such loans from
time to time unpaid at the per annum rate applicable to such unpaid principal
amount as provided in such Credit Agreement, all such interest being payable at
the times specified in the Credit Agreement, except that all accrued interest
shall be paid at the stated or accelerated maturity hereof or upon the
prepayment in full hereof.
Payments hereunder shall be made to BankBoston, N.A., as agent for the
Lender, at 100 Federal Street, Boston, Massachusetts 02110, or at 39 Victoria
Street, London, England SW1H 0ED.
All loans made by the Lender as part of the Loan pursuant to the
Credit Agreement referred to below and all repayments of the principal thereof
shall be recorded by the Lender and, prior to any transfer hereof, appropriate
notations to evidence the foregoing information with respect to each such loan
then outstanding shall be endorsed by the Lender on the schedule attached
hereto or on a continuation of such schedule attached to and made a part
hereof; provided, however, that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Company
under this Note, such Credit Agreement or any other Credit Document.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of July
31, 1998, as from time to time amended and in effect (the "Credit Agreement"),
among The Marquee Group, Inc., certain of its Subsidiaries (including the
Company), the Lender and the Agent. The principal of this Note is prepayable in
the amounts and under the circumstances set forth in the Credit Agreement, and
may be prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement. Terms defined in the Credit Agreement are used herein with
the meanings so defined.
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
-4-
<PAGE>
The parties hereto hereby waive presentment, demand, notice, protest
and all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of payment,
forbearance or other indulgence without notice.
MARQUEE GROUP (UK) LIMITED
By
--------------------------------
Title:
-5-
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
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- - ------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
THE MARQUEE GROUP, INC.
CREDIT AGREEMENT
Amendment No. 2
This Amendment, dated as of August 31, 1998 (this "Second Amendment"),
is among The Marquee Group, Inc., a Delaware corporation (the "Company"), its
subsidiaries set forth on the signature pages hereof (the "Subsidiaries") and
BankBoston, N.A., as Agent for the Lenders under the Credit Agreement (as
defined below). The parties agree as follows:
1. Credit Agreement; Definitions. This Second Amendment amends the
Credit Agreement dated as of July 31, 1998 among the parties hereto and the
Lenders (as heretofore amended and in effect prior to giving effect to this
Second Amendment, the "Credit Agreement"). Terms defined in the Credit
Agreement as amended hereby (the "Amended Credit Agreement") and not otherwise
defined herein are used with the meaning so defined.
2. Amendment of Credit Agreement. Effective upon the date all the
conditions set forth in Section 4 hereof are satisfied (the "Amendment Date"),
the Credit Agreement is amended as follows:
2.1. Amendment of Recitals. The Recitals of the Credit Agreement
are amended by substituting "(pound)3,100,000" for "(pound)1,600,000".
2.2. Amendment of Section 2.2.1. Section 2.2.1 of the Credit
Agreement is amended by substituting "(pound)3,100,000" for
"(pound)1,600,000".
3. Representation and Warranty. In order to induce the Agent to enter
into this Second Amendment, each of the Company and the Subsidiaries jointly
and severally represents and warrants that, after giving effect to this Second
Amendment, no Default exists.
4. Conditions. The effectiveness of this Second Amendment shall be
subject to the satisfaction of the following conditions:
4.1. Legal Opinion. On the Amendment Date, the Agent shall have
received from Bird & Bird, special counsel for the Company and its
Subsidiaries, their opinion with respect to the English Borrower
required by Section 5.3.4 of the Amended Credit Agreement, which
opinion shall be in form and substance satisfactory to the Agent.
4.2. Payment of Agent's Legal Expenses. The Company shall
have paid the reasonable legal fees and expenses of the Agent with
respect to this Second Amendment and the transactions contemplated
hereby.
<PAGE>
4.3. Proper Proceedings. This Second Amendment, each other Credit
Document and the transactions contemplated hereby and thereby shall
have been authorized by all necessary proceedings of each Obligor and
any of their respective Affiliates party thereto. All necessary
consents, approvals and authorizations of any governmental or
administrative agency or any other Person with respect to any of the
transactions contemplated hereby or by any other Credit Document shall
have been obtained and shall be in full force and effect. The Agent
shall have received copies of all documents, including certificates,
records of corporate and partnership proceedings and opinions of
counsel, which the Agent may have reasonably requested in connection
therewith, such documents where appropriate to be certified by proper
corporate, partnership or governmental authorities.
5. Covenants. The English Borrower covenants that within 30 days of
the Amendment Date:
5.1. Perfection of Security. The English Borrower shall duly
authorize, execute, acknowledge, deliver, file, register and record
such security agreements, notices, transfer powers and other
instruments as the Agent may request in order to perfect the security
interests and encumbrances purported or required in connection with
the acquisition by the English Borrower of Park Associates Limited and
of the business to be acquired with the proceeds of the increase in
the English Loan contemplated by this Second Amendment.
5.2. Amendment to Articles of Association of Park Associates
Limited. The English Borrower shall amend the Articles of Association
of Park Associates Limited so as to delete Article 10 thereof.
6. Further Assurances. Each of the English Borrower and the Company
and its other Subsidiaries will, promptly upon the request of the Agent from
time to time, execute, acknowledge, deliver, file and record all such
instruments and notices, and take all such other action, as the Agent deems
necessary or advisable to carry out the intent and purposes of this Second
Amendment.
7. General. The Amended Credit Agreement and all of the Credit
Documents are each confirmed as being in full force and effect. This Second
Amendment, the Amended Credit Agreement and the other Credit Documents referred
to herein or therein constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior and
current understandings and agreements, whether written or oral. Each of this
Second Amendment and the Amended Credit Agreement is a Credit Document and may
be executed in any number of counterparts, which together shall constitute one
instrument, and shall bind and inure to the benefit of the parties and their
respective successors and assigns, including as such successors and assigns all
holders of any Credit Obligation. This Second Amendment
-2-
<PAGE>
shall be governed by and construed in accordance with the laws (other
than the conflict of law rules) of The Commonwealth of Massachusetts.
[The rest of this page is intentionally blank.]
-3-
<PAGE>
Each of the undersigned has caused this Second Amendment to be
executed and delivered by its duly authorized officer as an agreement under
seal as of the date first written above.
THE MARQUEE GROUP, INC.
By /s/ Jan E. Chason
---------------------------------------
Jan E. Chason
Chief Financial Officer
MARQUEE GROUP (UK) LIMITED
ATHLETES AND ARTISTS, INC.
SPORTS MARKETING AND TELEVISION
INTERNATIONAL, INC.
QBQ ENTERTAINMENT, INC.
PROSERV, INC.
PROSERV UK, INC.
MARQUEE ALPHABET CITY RECORDS, INC.
By /s/ Jan E. Chason
---------------------------------------
As Chief Financial Officer of each
of the foregoing corporations
BANKBOSTON, N.A.,
as Agent under the Credit Agreement
By Daniel Kortick
---------------------------------------
Title:
Amendment No. 2 to Credit Agreement
<PAGE>
THE MARQUEE GROUP, INC.
CREDIT AGREEMENT
Amendment No. 3
This Amendment, dated as of November 13, 1998 (this "Third
Amendment"), is among The Marquee Group, Inc., a Delaware corporation (the
"Company"), its subsidiaries set forth on the signature pages hereof (the
"Subsidiaries") and BankBoston, N.A., as Agent for the Lenders under the Credit
Agreement (as defined below). The parties agree as follows:
1. Credit Agreement; Definitions. This Third Amendment amends the
Credit Agreement dated as of July 31, 1998 among the parties hereto and the
Lenders (as heretofore amended and in effect prior to giving effect to this
Third Amendment, the "Credit Agreement"). Terms defined in the Credit Agreement
as amended hereby (the "Amended Credit Agreement") and not otherwise defined
herein are used with the meaning so defined.
7
2. Amendment of Credit Agreement. Effective upon the date all the
conditions set forth in Section 4 hereof are satisfied (the "Amendment Date"),
the Credit Agreement is amended as follows:
2.1. Amendment of Section 6.5.1. Section 6.5.1 of the Credit
Agreement is amended so that the table therein reads in its entirety
as follows:
<TABLE>
<CAPTION>
Period Ending Percentage
------------- ----------
<S> <C>
Initial Closing Date through
September 30, 1998 450%
October 1, 1998 through
June 30, 1999 425%
July 1, 1999 through
Final Maturity Date 350%
</TABLE>
3. Representation and Warranty. In order to induce the Agent to enter
into this Third Amendment, each of the Company and the Subsidiaries jointly and
severally represents and warrants that, after giving effect to this Third
Amendment, no Default exists.
4. Conditions. The effectiveness of this Third Amendment shall be
subject to the satisfaction of the following conditions:
<PAGE>
4.1. Payment of Fees. The Company shall have paid (a) to the
Agent an amendment fee in the amount of $25,000 and (b) all
outstanding legal fees and expenses of the Agent's counsel that have
accrued through the Amendment Date with respect to this Third
Amendment and any other operations under the Credit Documents.
5. General. The Amended Credit Agreement and all of the Credit
Documents are each confirmed as being in full force and effect. This Third
Amendment, the Amended Credit Agreement and the other Credit Documents referred
to herein or therein constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior and
current understandings and agreements, whether written or oral. Each of this
Third Amendment and the Amended Credit Agreement is a Credit Document and may
be executed in any number of counterparts, which together shall constitute one
instrument, and shall bind and inure to the benefit of the parties and their
respective successors and assigns, including as such successors and assigns all
holders of any Credit Obligation. This Third Amendment shall be governed by and
construed in accordance with the laws (other than the conflict of law rules) of
The Commonwealth of Massachusetts.
[The rest of this page is intentionally blank.]
-2-
<PAGE>
Each of the undersigned has caused this Third Amendment to be executed
and delivered by its duly authorized officer as an agreement under seal as of
the date first written above.
THE MARQUEE GROUP, INC.
By /s/ Jan E. Chason
-----------------------------------
Jan E. Chason
Chief Financial Officer
MARQUEE GROUP (UK) LIMITED
ATHLETES AND ARTISTS, INC.
SPORTS MARKETING AND TELEVISION
INTERNATIONAL, INC.
QBQ ENTERTAINMENT, INC.
PROSERV, INC.
PROSERV UK, INC.
MARQUEE ALPHABET CITY RECORDS, INC.
By /s/ Jan E. Chason
-----------------------------------
As Chief Financial Officer of each
of the foregoing corporations
BANKBOSTON, N.A.,
as Agent under the Credit Agreement
By /s/ Daniel Kortick
-----------------------------------
Title:
Amendment No. 3 to Credit Agreement
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,246
<SECURITIES> 0
<RECEIVABLES> 14,791
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,825
<PP&E> 3,304
<DEPRECIATION> 409
<TOTAL-ASSETS> 90,182
<CURRENT-LIABILITIES> 11,451
<BONDS> 0
0
0
<COMMON> 175
<OTHER-SE> 36,604
<TOTAL-LIABILITY-AND-EQUITY> 90,182
<SALES> 35,470
<TOTAL-REVENUES> 35,470
<CGS> 0
<TOTAL-COSTS> 31,965
<OTHER-EXPENSES> 1,830
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> 1,555
<INCOME-TAX> 541
<INCOME-CONTINUING> 1,014
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,014
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
