<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 25, 1999
Four Media Company
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(Exact name of registrant as specified in its charter)
Delaware 0-21943 95-459940
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(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
2813 West Alameda Avenue
Burbank, California 91505
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(Address of principal executive offices) (Zip Code)
(818) 840-7000
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(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
-------------------------------------
Four Media Company, a Delaware corporation (the "Company"), issued a
press release on May 26, 1999 announcing that it had acquired all of the
outstanding shares of TVi Limited ("TVi") from Carlton Communications Plc
("Carlton") on May 25, 1999 (the "Acquisition"). TVi is a London-based provider
of technical and creative services to the entertainment industry and is a major
supplier to international entertainment content distributors. Pursuant to a
share purchase agreement, dated May 25, 1999 (the "Share Purchase Agreement"),
by and between TVP Group Plc, a wholly-owned subsidiary of the Company ("TVP"),
and Carlton, TVP purchased all of the issued and allotted shares of TVi for
approximately US$10.1 million in cash. The Share Purchase Agreement and the
press release of the Company are attached hereto as Exhibits 2.1 and 99.1,
respectively, and are incorporated herein by reference. The purchase price was
determined by arm's length negotiations between the Company and Carlton and no
material relationship existed between the parties. The source of funds for the
Acquisition was the Company's $200.0 million credit facility with a bank
syndicate, including Canadian Imperial Bank of Commerce.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
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7(a) Financial Statements of Business Acquired. It is impractical to
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provide the required financial statements for TVi at this time. The Company
intends to file the required financial statements as soon as possible, but not
later than 60 days after the date this Form 8-K is required to be filed.
7(b) Pro Forma Financial Information. It is impractical to provide
-------------------------------
the required pro forma financial information at this time. The Company intends
to file the required pro forma financial information as soon as possible, but
not later than 60 days after the date this Form 8-K is required to be filed.
7(c) Exhibits
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2.1 Share Purchase Agreement, dated as of May 25, 1999, by and
between TVP Group Plc and Carlton Communications Plc.
99.1 Press Release of Four Media Company, dated May 26, 1999.
3
<PAGE>
SIGNATURE
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 hereunto duly authorized.
Dated: June 7, 1999
FOUR MEDIA COMPANY
By: /s/ William E. Niles
--------------------
William E. Niles
Vice President of Business Affairs, General
Counsel and Secretary
4
<PAGE>
EXHIBIT INDEX
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2.1 Share Purchase Agreement, dated as of May 25, 1999, by and
between TVP Group Plc and Carlton Communications Plc.
99.1 Press Release of Four Media Company, dated May 26, 1999.
5
<PAGE>
EXHIBIT 2.1
DATED 25 MAY 1999
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SHARE PURCHASE AGREEMENT
CARLTON COMMUNICATIONS Plc (1)
TVP GROUP PLC (2)
LAWRENCE GRAHAM
190 Strand
London WC2R 1JN
Tel: 0171-379 0000
Fax: 0171-379 6854
Ref.: TJC/958313.06
<PAGE>
CONTENTS
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<TABLE>
<CAPTION>
No. Heading Page
- --- ------- ----
<C> <S> <C>
1. Definitions 1
2. The Shares 10
3. Intra-Group Debt 10
4. Completion 11
5. Bank Reconciliation 12
6. Warranties 13
7. Indemnities 18
8. Restrictive Covenants 18
9. Purchaser's Warranty 22
10. Assignability 22
11. General Provisions 22
12. Announcements 23
13. Costs 23
14. Notices 23
15. Effect of Completion 24
16. Further Assurances 24
17. Vendor's Covenant 24
18. Purchaser's Undertaking 26
19. Governing Law and Jurisdiction 26
<CAPTION>
The Agreed Forms
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<C> <S> <C>
A. The Carlton Digital Agreement
B. The Carlton International Agreement
C. The Carlton Television Agreement
D. The Carlton Video Agreement
E. Pension Notice
<C> <S> <C>
THE FIRST SCHEDULE Basic Information concerning the Company 27
THE SECOND SCHEDULE Particulars of Subsidiaries 28
THE THIRD SCHEDULE Property 29
THE FOURTH SCHEDULE Warranties 30
THE FIFTH SCHEDULE Tax Indemnities 51
</TABLE>
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THIS AGREEMENT is made the 25th day of May 1999
BETWEEN:
(1) CARLTON COMMUNICATIONS Plc (Registered no. 348312) whose registered
office is at 25 Knightsbridge, London, SW1X 7XZ ("the Vendor")
(2) TVP GROUP PLC (Registered no.2448588) whose registered office is at
Lynton House, 7-12 Tavistock Square, London, WC1H 9LT ("the Purchaser")
WHEREAS
(A) TVI Limited ("the Company") has an authorised and issued share capital
particulars whereof together with other details are set out in the First
Schedule hereto.
(B) The Vendor is the beneficial owner of or is otherwise able to procure the
transfer of the entire issued share capital of the Company.
(C) The Vendor is desirous of selling and the Purchaser is willing to
purchase the Shares (as hereinafter defined) on the terms of this
Agreement.
(D) The Purchaser has lent to the Company an amount equal to the Intra Group
Debt (as hereinafter defined) on interest bearing terms and repayable on
demand. It is a condition precedent to this Agreement that the Company
shall repay the Intra Group Debt prior to Completion using funds provided
by the Purchaser.
NOW IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
1.1 In this Agreement and the Schedules hereto the following expressions
shall unless the context otherwise requires have the meanings following:-
"Accounts" the audited balance sheet as at the Balance
Sheet Date and audited profit and loss account
for the year ended on the Balance Sheet Date
of the Company;
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"Accounts Relief" means a Relief or a right to repayment of
Taxation which was treated as an asset of a
Group Company in the Accounts or was taken
into account in computing (and so reducing or
eliminating) any provision for deferred
Taxation which appears in the Accounts or
which would have appeared in the Accounts but
for the presumed availability of such Relief
or right to repayment or Taxation and
references to the loss of an Accounts Relief
shall include any cancellation, counteraction,
nullification, disallowance, set-off or claw-
back of an Accounts Relief;
"Associate" any person or company who is a connected
person as that expression is defined by
Section 839 of the ICTA;
"Balance Sheet Date" 30 September 1998;
"Business Day" a day on which banks shall be open in London
for the conduct of generally banking business
(excluding Saturdays);
"the Carlton Digital the agreement in the Agreed Form marked `A' to
Agreement" be entered into on Completion by the Company
and Carlton Digital Limited;
"Carlton International the agreement in the Agreed Form marked `B' to
Agreement" be entered into on Completion by the Company
and Carlton International Limited;
"Carlton Television the agreement in the agreed form marked `C' to
Agreement" be entered into on completion by the Company
and Carlton Television Limited;
"the Carlton Video the agreement in the Agreed Form marked `D' to
Agreement" be entered into on Completion by the Company
and Carlton Video Limited;
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-3-
"the Carlton the Carlton Digital Agreement, the Carlton
Agreements" International Agreement, the Carlton Video
Agreement and the Carlton Television
Agreement;
"Claim" any claim assessment notice demand letter or
other document issued or action taken by or on
behalf of any Taxation Authority whereby a
Group Company or the Purchaser is to be or is
sought to be made subject to a Liability to
Taxation or any existing Liability to Taxation
is or is sought to be increased;
"Companies Act" the Companies Acts 1985 (as amended);
"Completion" completion of the sale and purchase of the
Shares in accordance with the provisions of
Clause 4 hereof;
"Completion Date" the date of Completion;
"Consideration" (Pounds)2,600,000 payable in cash on
Completion subject to adjustment in accordance
with Clause 5;
"Disclosure Letter" the letter of even date herewith from the
Vendor to the Purchaser making certain
disclosures against the Warranties ;
"Encumbrance" includes any interest or equity of any person
(including, without prejudice to the
generality of the foregoing, any right to
acquire, option or right of pre-emption), or
any mortgage, charge, pledge, lien,
assignment, hypothecation, security interest,
title retention or any other security
agreement or arrangement;
EBITDA earnings before interest, taxes, depreciation
and amortisation of the Company in respect of
the relevant period as disclosed by the
management accounts of the Company having
added back:
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(i) the shortfall on the rental cost of
occupying the properties at St Ann's
Court and Greek Street such shortfall
arising because the rent received in
respect of those parts of such property
that are subject to sub-letting
arrangements is less than the rental
cost payable to the landlord by the
Company; and
(ii) those items which are dealt with under
or within "other income or expenses" in
the management accounts of the Company,
with an intention, overall, of reflecting
accurately the adjustments made by the parties
in order to agree that EBITDA of the Company
for the 12 months ended 31 March 1999 shall
have been approximately (Pounds)1,700,000;
"Event" includes (without limitation) any act omission
or transaction occurring or deemed to occur
pursuant to any Taxation Statute whether or
not the Company is a party thereto and
includes Completion, the ceasing of a company
to be a member of any group, any change in the
residence of any person for the purposes of
Taxation, death or dissolution of any person,
the receipt or accrual of any income, profits
or gains, the declaration, making or payment
of any distribution and any transfer, payment,
loan or advance;
"Group Companies" the Company and its Subsidiaries;
"Group Relief" relief surrendered or claimed under Chapter IV
of Part X ICTA, advance corporation tax
surrendered or any refund of Taxation
surrendered or claimed;
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"Industrial Property patents, trade marks, registered designs,
Rights" pending application for any of the foregoing,
trade or business names and copyright and all
other similar industrial, intellectual or
commercial rights;
"Intra-Group Debt" the indebtedness (which arose otherwise than
in the ordinary course of trading) of
(Pounds)3,700,000 owed by the Company to
Central Independent Television plc;
"Leases" the leases in relation to the Property set out
in the Third Schedule;
"Liability to Taxation" Means:-
(a) a liability of a Group Company to make an
actual payment of or in respect of
Taxation including for the avoidance of
doubt any Stamp Duty payable by a Group
Company in relation to all documents in
the enforcement of which a Company or a
Subsidiary may be interested. ;
(b) the loss by a Group Company of any
Accounts Relief and in such a case the
Liability to Taxation shall be the amount
of the Accounts Relief so lost or if such
Accounts Relief is a deduction from or is
offset against income profits or gains,
the amount of Taxation which would (on
the basis of tax rates current at the
date of this Agreement) have been saved
thereby but for such loss of the Accounts
Relief on the assumption that the Group
Company's income profit or gains are such
that the Accounts Relief could have been
fully offset in computing such income,
profits or gains; and
<PAGE>
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(c) the use by a Group Company (in whole or
in part) of any Accounts Relief or any
Purchaser's Relief to reduce or eliminate
any liability to taxation which would
otherwise have arisen and in such a case
the Liability to Taxation shall be the
amount of the Accounts Relief or the
Purchaser's Relief so used or if such
Accounts Relief or Purchaser's Relief is
a deduction from or is offset against
income profits or gains, the amount of
Taxation which is (on the basis of tax
rates current at the date of this
Agreement) saved by such use on the
assumption that a Group Company income
profit or gains are such that the
Accounts Relief or the Purchaser's Relief
could have been fully offset in computing
such income, profits or gains;
"Management Accounts" the management accounts of the Company for the
six month period from the Balance Sheet Date
to the Management Accounts Date;
"Management Accounts 31 March 1999
Date"
"Property" or "Properties" the properties short particulars whereof are
set out in the Third Schedule hereto and
includes any part or parts thereof;
"Purchaser's Relief" any Relief which arises as a consequence of or
by reference to an Event occurring after the
Balance Sheet Date or in respect of any period
commencing after the Balance Sheet Date
(provided that in relation to a Relief arising
as a consequence of or by reference to an
Event occurring in the period between the
Balance Sheet Date and Completion or in
respect of the period between the Balance
Sheet Date and Completion the Relief arises in
the ordinary course of business);
<PAGE>
-7-
"Purchaser's Solicitors" Lawrence Graham of 190 Strand, London WC2R
1JN;
"Reliefs" means all amounts available to reduce either
income, profits or gains or Taxation and
includes (without limitations) all losses
allowances exemptions set-offs deductions
credits repayments and rights to repayments of
Taxation;
"Shares" the shares of the Company beneficially owned
by the Vendor comprising all the issued and
allotted shares of the Company;
"the Subsidiaries" the subsidiaries of the Company certain
details of which are set out in the Second
Schedule;
"Taxation" means:-
(a) any charge, tax, duty, levy or liability
imposed by national or any other person
pursuant to any Taxation Statute and
includes (without limitation) corporation
tax, advance corporation tax, income tax,
capital gains tax, value added tax,
customs and other import duties, national
insurance contributions, stamp duty,
stamp duty reserve tax, inheritance tax
and any amount which a Group Company is
liable to account for by way of deduction
or withholding, and any payment
whatsoever which a Group Company may be
or become bound to make to any person
pursuant to any Taxation Statute;
<PAGE>
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(b) and includes outside the United Kingdom
all taxes, levies, duties, imposts,
charges and withholdings of any nature
whatsoever, including (without
limitation) taxes on gross or net income,
profits or gains and taxes on receipts,
sales, use, occupation, franchise, value
added and personal property;
(c) any penalties fines costs charges
interest or damages payable in connection
with any Taxation; and
(d) all reasonable costs and expenses
incurred by a Group Company or the
Purchaser in connection with any Claim to
which the Tax Indemnities relate;
"Taxation Authority" any national government, authority or body
whatsoever whether of the United Kingdom or
elsewhere empowered to impose collect or
administer Taxation;
"Tax Indemnities" the indemnities provided by Clause 7.1 hereto
and the Fifth Schedule;
"Taxation Statute" any statute enactment law regulation or
practice enacted or issued or coming into
force providing for or imposing any Taxation;
"Technicolor Project" the proposed venture between the Company and
Technicolor Limited or another subsidiary of
the Vendor for the provision of telecine-
related services at Technicolor Limited's site
in West Drayton;
"VAT Group" means any group of companies for the purposes
of section 43 VATA of which a Group Company is
or has been a member on or before the date
hereof;
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"Vendor's Group" the Vendor and any subsidiary of the Vendor
(within the meaning of Section 736 Companies
Act 1985) and which term shall include any
company (other than the Group Companies) which
has been a subsidiary of the Vendor (within
the said Section 736) within the last ten
years;
"Vendor's Solicitors" Macfarlanes, of 10 Norwich Street, London EC4A
1BD;
"ICTA" the Income and Corporation Taxes Act 1988;
"CAA" the Capital Allowances Act 1990;
"IHTA" the Inheritance Tax Act 1984;
"FA" Finance Act;
"TCGA" the Taxation of Chargeable Gains Act 1992;
"VATA" the Value Added Tax Act 1994;
"TMA" the Taxes Management Act 1970.
1.2 References to the consequences of Events, acts or transactions effected
prior to Completion shall include the combined effect of two or more
Events, acts or transactions the first of which shall have taken place or
be deemed to have taken place on or before the Completion Date provided
that the first occurs in the ordinary course of business and Events acts
or transactions after Completion occur outside the ordinary course of
business.
1.3 Any document expressed to be "in the Agreed Form" means in a form
approved and for the purpose of identification signed by or on behalf of
the parties hereto.
1.4 The expression "Warranties" shall mean those representations and
warranties contained in Clause 6 and the Fourth Schedule hereto.
1.5 Save where the context otherwise precludes, or where expressly stated to
the contrary, the expression "the Company" shall mean the Company and
each of the Subsidiaries.
1.6 References to Clauses, Sub-clauses and Schedules are references to
Clauses and Sub-clauses of this Agreement and Schedules to this
Agreement.
<PAGE>
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1.7 In this Agreement and the Schedules hereto the masculine gender shall
include the feminine and neuter, the singular number shall include the
plural and vice versa, and references to persons shall include bodies
corporate, unincorporated associations and partnerships.
1.8 Other than as expressly defined in this Clause 1, in this Agreement words
and phrases the definition of which is contained or referred to in Part
XXVI of the Companies Act 1985 shall be construed as defined therein.
1.9 Any reference to any statute or statutory provision includes a reference
to any subordinate legislation made under that statutory provision before
the date of this Agreement, to any modification, re-enactment or
extension of that statute or statutory provision made before that date
and to any former statute or statutory provision which it consolidated or
re-enacted before that date.
1.10 The headings in this Agreement are inserted for convenience only and
shall not affect the construction hereof.
1.11 References to income, profits or gains includes income, profits or gains
(including capital gains) of any description or from any source and also
includes any other measure by reference to which Taxation is computed and
references to profits earned accrued or received include profits deemed
to have been or treated as earned, accrued or received for Taxation
purposes.
2. THE SHARES
2.1 The Vendor shall sell and the Purchaser shall purchase with effect from
the Completion Date the Shares with full title guarantee free from any
Encumbrance for the Consideration.
2.2 A sum of (Pounds)2,600,000 in respect of the Consideration shall be
payable in cash in full on Completion.
3. INTRA-GROUP DEBT
It shall be a condition precedent to this Agreement that the Purchaser
shall procure that the Company repays in full the outstanding balance of
the Intra-Group Debt with the effect that prior to such repayment the
Vendor shall not be obliged to sell and the Purchaser shall not be
obliged to purchase the Shares pursuant to this Agreement.
<PAGE>
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4. COMPLETION
4.1 Completion shall take place at the offices of the Purchaser's Solicitors
immediately after the execution of this Agreement when:-
4.1.1 the Vendor shall deliver or cause to be delivered to the
Purchaser:-
(a) a duly executed transfer in common form in favour of the
Purchaser together with the relative share certificate in
respect of the Shares;
(b) the certificate of incorporation, all certificates on change
of name, the seal and statutory books of the Company and the
Subsidiaries made up to accurately reflect the position of the
Company immediately prior to Completion;
(c) the Leases of the Property;
(d) written resignation letters executed under seal by each of the
directors (other than Candida Fry and Keith Williams) and
secretaries of the Company and the Subsidiaries as each such
letter in the Agreed Form; and
(e) the Carlton Agreements duly executed by the relevant parties.
4.1.2 the Vendor and the Purchaser shall jointly procure that the
Directors shall hold a meeting of the Board of the Company at
which
(a) the Directors shall appoint such persons as the Purchaser may
nominate as directors of the Company and at which the written
resignation letters referred to in Clause 4.1.1(d) shall be
presented;
(b) the Directors shall vote in favour of the registration of the
Purchaser as the sole member of the Company subject to the
production of a duly stamped and completed Transfer;
(c) the Directors shall resolve that the registered office of the
Company shall be changed to 190 Strand, London WC2R 1JN; and
(d) the Directors shall resolve that the accounting reference date
of the Company shall be changed to 31 December;
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4.2 the Purchaser shall procure:
4.2.1 the Purchaser's Solicitors transfer (or hold to the order of the
Vendor or its Solicitors) the sum of (Pounds)2,600,000 in payment
of that part of the Consideration payable on Completion by CHAPS
into the account of the Vendor's Solicitors (whose receipt shall
be sufficient discharge therefor); and
4.2.2 deliver to the Vendor's Solicitors counterparts of the Carlton
Agreements, duly executed by the Company.
4.3 The performance by the Vendor of its obligations under Clause 4.1 shall
be a condition precedent to the performance by the Purchaser of its
obligations under Clauses 4.1.2, 4.1.3 and 4.2 to the intent that, if the
Vendor shall fail or shall be unable to perform any of its obligations
under Clause 4.1 the Purchaser shall at its option cease to be liable to
perform its obligations under Clause 4.2.
4.4 The performance by the Purchaser of its obligations under Clauses 4.1.2,
4.1.3 and 4.2 shall be a condition precedent to the performance by the
Vendor of its obligations under Clause 4.1 to the intent that if the
Purchaser shall fail or shall be unable to perform any of its obligations
under Clauses 4.1.2, 4.1.3 and 4.2 the Vendor shall at its option cease
to be liable to perform its obligations under Clause 4.1.
5. BANK RECONCILIATION
5.1 Within one month after the date of Completion the Purchaser undertakes to
the Vendor that it shall send to the Vendor a cash reconciliation
statement of the Company ("the Cash Reconciliation Statement") setting
out the cash at the bank available to the Company as at the Completion
Date (the "Cash Balance") having credited amounts deposited on or before
the close of business on 24 May 1999 and debited the amount of any
cheques or CHAPS transfers or similar issued by the Company on or before
the close of business on 24 May 1999.
5.2 In the event that the Cash Balance is less than (Pounds)0 the Vendor
shall pay to the Purchaser by way of a reduction of the Consideration the
amount of such shortfall.
5.3 In the event that the Cash Balance is greater than (Pounds)0 the
Purchaser shall pay to the Vendor by way of an increase of the
Consideration the amount of such excess.
<PAGE>
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5.4 Any adjustment to the amount of the Consideration shall be agreed between
the parties within two months of the Completion Date and shall be paid by
the Vendor or the Purchaser (as appropriate) within five days after such
agreement and any amount not paid when due shall carry interest at the
base rate of National Westminster Bank PLC (from time to time) from the
due date until the date of actual payment.
5.5 The Purchaser shall have no right of set-off in respect of any amount
owing to the Vendor pursuant to the terms of this Clause 5.
6. WARRANTIES
6.1 The Purchaser acknowledges to and agrees with the Vendor that it has not
entered into this Agreement in reliance on any representations,
warranties or undertakings of any kind other than the Warranties (as
qualified by the Disclosure Letter).
6.2 The Purchaser confirms to the Vendor that at the time of execution of
this Agreement it has no actual knowledge of any specific claim under the
Warranties capable of being made against the Vendor following execution
of this Agreement. For the avoidance of doubt, such knowledge shall not
in any way prejudice the Purchaser from making claims under the Tax
Indemnity in relation to such matters.
6.3 The Vendor hereby warrants and represents to the Purchaser in the terms
of the Warranties as at the date of this Agreement.
6.4 The Purchaser shall not be entitled to claim that any fact renders any of
the Warranties untrue or misleading or caused them to be breached if it
has been fairly disclosed to the Purchaser in the Disclosure Letter.
6.5 Save where express contrary provision is made, any statement in the
Warranties which refers to the awareness or knowledge or belief of the
Vendor or any similar or cognate expression shall be deemed to be the
actual knowledge or belief of the Vendor having made reasonable enquiry
of Keith Williams, William Rollason, Brian Kelly and Patrick Holzen,
Keith Williams and Patrick Holzen themselves having made reasonable
enquiry into the subject matter of that Warranty.
6.6 The Purchaser shall not be entitled to recover damages or otherwise
obtain reimbursement or restitution more than once in respect of any
individual breach of the Warranties or any claim under the Tax
Indemnities.
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6.7 The Vendor shall not be liable for breach of any Warranties to the extent
that the subject of the claim has been or is made good or is otherwise
capable of being made good without cost to the Purchaser.
6.8 If, in respect of any matter which would give rise to a breach of the
Warranties the Purchaser is entitled to claim under any policy of
insurance, then no such matter shall be the subject of a claim under the
Warranties unless and until a member of the Group shall have made a claim
against its insurers and any such insurance claim shall then reduce by
the amount recovered or extinguish any such claims for breach of the
Warranties net of the reasonable expenses of making such claim and any
increase in the insurance premium of the Company as a result of the such
claim.
6.9 The liability of the Vendor in respect of any breach of the Warranties
and under the Tax Indemnities shall be limited (except in the case of
fraud on the part of the Vendor when no such limitation shall apply) as
follows:-
6.9.1 the Purchaser shall not be entitled to bring a claim for any
breach of any of the Warranties and/or any matter giving rise to a
claim under the Tax Indemnities in respect of which the amount
which the Purchaser would otherwise (but for the provisions of
this paragraph 6.9.1) be entitled to recover would be less than
(Pounds)10,000;
6.9.2 subject to paragraph 6.9.1, the Purchaser shall not be entitled to
recover any amount in respect of a breach of the Warranties or any
amount under the Tax Indemnities unless the amount recoverable,
when aggregated with all other amounts recoverable for breach of
the Warranties and/or under the Tax Indemnities exceeds
(Pounds)100,000, in which event the whole amount of such claims
shall be recoverable and not just the excess over (Pounds)100,000.
6.9.3 the aggregate liability of the Vendor for damages for breach of
the Warranties and under the Tax Indemnities shall be limited to
(Pounds)6,300,000; and
6.9.4 all liability of the Vendor in relation to any claim for breach of
the Warranties shall cease on the Expiry Date save to the extent
of and in relation to such claim of which written notice
(incorporating to the extent reasonably practicable, an estimate
of the amount of the loss suffered or incurred and the basis of
the claim) has been given to the
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Vendor by or on behalf of the Purchaser prior to the Expiry Date.
The Expiry Date for this purpose shall be the date which falls on
the second anniversary of the date of this Agreement or in the
case of any such claim the subject matter of which relates to
Taxation or under the Taxation Indemnities the seventh anniversary
of the date of this Agreement (except in the case of a claim under
Clause 1.2.2 of the Fifth Schedule (Taxation Indemnities) where
the Expiry Date for this purpose shall be the tenth anniversary of
the date of this Agreement).
6.10 The Warranties are separate and independent and shall remain in full
force and effect notwithstanding Completion.
6.11 The Vendor undertakes (in the event of any claim being made against it in
connection with the sale of the Shares to the Purchaser) not to and
waives any right to make any claim against the Company, or a director or
an employee of the Company, on whom any of them may have relied before
agreeing to any term of this Agreement or authorising any statement in
the Disclosure Letter save to the extent such director or employee has
acted fraudulently or wilfully concealed a matter on which the Vendor has
so relied.
6.12 The Vendor shall not be liable under the Warranties in respect of any
claim based upon a liability which is contingent only unless and until
such contingent liability becomes an actual liability PROVIDED THAT this
paragraph shall not operate to avoid a claim made in respect of a
contingent liability notified within the applicable time specified in
paragraph 6.9.4 whenever the contingent liability becomes an actual
liability.
6.13 The Vendor shall have no liability in respect of any breach of the
Warranties:-
6.13.1 to the extent that specific provision or reserve (whether by
specific provision or reserve or within a relevant general
provision or reserve) in respect of the liability or other matter
giving rise to the claim in question was made in the Accounts;
6.13.2 to the extent that the claim in question arises, or is increased
as a result of any increase in rates of Taxation or any change in
the law or published practice of a Revenue authority made after
the date of this Agreement with retrospective effect.
6.13.3 to the extent that the claim in question would not have arisen
but for a voluntary act or transaction, which could reasonably
have been avoided,
<PAGE>
-16-
carried out by the Purchaser or any of its Group Companies
(including the Companies or any of the Subsidiaries) after the
date of this Agreement otherwise than in the ordinary course of
business and which the Purchaser or (as the case may be) such
Group Company was aware;
6.13.4 if the Vendor pays either to the Purchaser or directly to any
Group Company an amount in respect of a claim under the Warranties
and the Purchaser (or the relevant Group Company) (as the case may
be) subsequently recovers from a third party (including, without
limitation, under any insurance policy) an amount in respect of
that claim then the Purchaser shall repay or procure that the
relevant Group Company repays as soon as practicable to the Vendor
so much of the amount paid by him as does not exceed the amount
recovered from the third party less all costs and charges and
expenses reasonably incurred by the Purchaser or the relevant
Group Company in obtaining that payment and in recovering that
amount from the third party and any applicable tax.
6.14 If any matter comes to the notice of the Purchaser which in the
reasonable opinion of the Purchaser is likely to give rise to a liability
under the Warranties, the Purchaser shall (and shall procure that the
relevant Group Company shall):-
6.14.1 as soon as reasonably practicable give written notice of that
matter to the Vendor specifying in reasonable detail the nature of
the potential liability, and, so far as is practicable, the amount
likely to be claimed in respect of it provided that, subject to
Clause 6.9.4 above, failure to give notice in accordance with this
clause will not preclude the Purchaser's right to bring a claim
for breach of the Warranties;
6.14.2 (save in the event that any such act may in the reasonable
opinion of the Purchaser materially and adversely affect the
business of the Company as a whole (in which event the Purchaser
shall consult fully with the Vendor and take account of all
reasonable opinions and representations made by the Vendor)) not
make any admission of liability, agreement or compromise with any
person, body or authority in relation to that matter without the
prior written consent of the Vendor such consent not to be
unreasonably withheld or delayed;
6.14.3 give the Vendor and their professional advisers reasonable access
in normal office hours and having given reasonable notice to the
Purchaser, to the relevant premises and relevant personnel of the
Purchaser and/or
<PAGE>
-17-
the relevant Group Company (as the case may be), and to any
relevant chattels, accounts, document and records within the power
or control of the Purchaser and/or the relevant Group Company so
as to enable the Vendor and their professional advisers to examine
such relevant premises, chattels, accounts, documents and records
and to take copies of such relevant material at their own expense
provided always that confidentiality in respect of such
information is preserved;
6.14.4 subject to the Vendor indemnifying the Purchaser and/or the
relevant Group Company to the Purchaser's reasonable satisfaction
against any liability, costs, damages or expenses which may be
incurred, take such action as the Vendor may reasonably request to
avoid, dispute, resist, compromise or defend any claim arising out
of the matter in question provided such action will not in the
opinion of the Purchaser adversely affect the business of the
Company or the Purchaser.
6.15 For the avoidance of doubt:
6.15.1 the only Warranties given in relation to real property are those
set out in paragraph 9 of the Fourth Schedule;
6.15.2 the only Warranties given in relation to debts owed to the Company
are those set out in paragraph 2.5.1, 2.5.2 and 2.5.3 of the
Fourth Schedule;
6.15.3 the only Warranties given in relation to Industrial Property
Rights are those set out in paragraphs 5.4.1, 5.4.2 and 7 of the
Fourth Schedule; and
6.15.4 the only Warranties given in relation to disputes with employees
in relation to their employment with the Company are those set out
in paragraphs 5.4.3 and 6.5 of the Fourth Schedule.
6.16 The Purchaser shall not be able to make, and the Vendor shall have no
liability in respect of, any claim for breach of the Warranties in
paragraph 2.3 of the Fourth Schedule unless the subject matter of such
claim is a relevant fact, matter or circumstance. For this purpose a
relevant fact, matter or circumstance is one which is not warranted under
any of the other paragraphs of the Fourth Schedule ("a relevant fact,
matter or circumstance"). For the avoidance of doubt, a fact, matter or
circumstance which is not warranted under any of the other paragraphs of
the Fourth Schedule by reason of such other paragraph containing a
materiality standard or qualification (whether or not monetary) shall not
be regarded as a relevant fact, matter or circumstance in interpreting
this Clause 6.16.
<PAGE>
-18-
7. INDEMNITIES
7.1 The Vendor hereby indemnifies the Purchaser in the terms of the Fifth
Schedule hereto.
7.2 The Vendor hereby agrees forthwith to indemnify the Company in respect of
any debts due from the Company arising under or of section 75 of the
Pensions Act 1995whether as a result of its ceasing to participate in the
Carlton Communication Group Pension Scheme or otherwise.
7.3 The Vendor hereby indemnifies the Purchaser without limitation in respect
of any loss suffered by the Company as a result of a breach of the
Warranty set out in paragraph 10.1 of the Fourth Schedule.
8. RESTRICTIVE COVENANTS
8.1 For the purpose of assuring to the Purchaser the full benefit of the
businesses and goodwill of the Company the Vendor hereby undertakes by
way of further consideration for the obligations of the Purchaser under
this Agreement as separate and independent agreements that (save, in any
case, with the prior written consent of the Purchaser):-
8.1.3 it will not for the period of two years immediately following the
Completion Date disclose to any person other than its Associates
or itself use for any purpose (other than, in either case, in
fulfilling its statutory and/or regulatory obligations) and shall
use its best endeavours to prevent the wrongful publication or
wrongful disclosure by any Vendor Group Company of any
confidential information which is the property of the Company or
its subsidiaries including any details of the Company's terms of
trade with its customers;
8.1.2 during the period of two years immediately following the
Completion Date neither the Vendor nor any subsidiary of the
Vendor will, (i) either on its own account or in conjunction with
or on behalf of any other person, firm or company set up and
commence any trade or business which is directly competitive with
the trade or business engaged in by the Company as of the
Completion Date or (ii) acquire any Directly Competitive Business
(as defined below);
8.1.3 in the event that during the period of two years immediately
following the Completion Date the Vendor or any subsidiary of the
Vendor shall
<PAGE>
-19-
acquire (as part of a transaction) an Indirectly Competitive
Business (as defined below) the Vendor shall inform Robert Walston
or Jess Brown on behalf of the Purchaser of such acquisition
within 90 days of such acquisition and shall thereafter enter into
discussions with Robert Walston or Jess Brown on behalf of the
Purchaser with a view to establishing so soon as shall be
reasonably practicable whether the Purchaser or its parent company
or its ultimate parent company would wish to purchase such
Indirectly Competitive Business and, if so, upon what terms;
8.1.4 in the event that during the period of two years immediately
following the Completion Date the Vendor or any subsidiary of the
Vendor shall acquire (as part of a transaction) an Indirectly
Competitive Business which is not acquired by the Purchaser or its
parent company or its ultimate parent company pursuant to the
process referred to in Clause 8.1.3, the Vendor agrees with the
Purchaser that during the period of two years immediately
following the Completion Date (or so much of such period as shall
remain following the acquisition of such Indirectly Competitive
Business) neither the Vendor nor the Indirectly Competitive
Business shall procure any subsidiary of the Vendor which shall
then be trading with the Company to cease or reduce the supply of
services by the Company to such subsidiary with the purpose of
procuring or arranging that such services shall be supplied to
such subsidiary by such Indirectly Competitive Business. (For the
avoidance of doubt, this Clause 8.1.4 shall not be construed so as
to impose any positive obligation on the Vendor to require any
subsidiary of the Vendor to continue to seek any supply of
services from the Company, any such supply of services being a
matter for negotiation and\or agreement between each such
subsidiary and the Company);
8.1.5 during the period of two years immediately following the
Completion Date it will not either on its own account or in
conjunction with or on behalf of any other person, firm or company
directly solicit or attempt to entice away from the Company any
officer, manager or other person employed by the Company as at the
Completion Date whether or not such person would commit a breach
of his contract of employment by reason of leaving the service of
the Company;
<PAGE>
-20-
8.1.6 during the period of two years immediately following the
Completion Date the Vendor will not employ any of Candida Fry,
Jill Jones, Simon Wilkinson, Andrew Evans, Patrick Holzen, Roger
Boorman, Simon Hadfield, Jethro Harris and Shane Warden;
8.1.7 within four weeks of the Completion Date the Vendor shall send
(with a copy to Robert Walston or Jess Brown on behalf of the
Purchaser) Keith Williams and the managing director or (as
appropriate) chief executive of each of Quantel Limited, The
Moving Picture Company Limited, Carlton Television Limited,
Technicolor Limited, Solid State Logic Limited and, if any, any
Indirectly Competitive Business (collectively the "Notice
Companies") an instruction (having first afforded Robert Walston
or Jess Brown on behalf of the Purchaser a reasonable opportunity
to comment on the draft terms of such instruction) to the effect,
in each case, that for so long only as such company (including for
this purpose such company (if any) which is a subsidiary of the
Vendor as shall be managed by Keith Williams) shall remain a
subsidiary of the Vendor and during the period of two years
immediately following the Completion Date such company (including
for this purpose such company (if any) which is a subsidiary of
the Vendor as shall be managed by Keith Williams) shall not employ
any of Candida Fry, Jill Jones, Simon Wilkinson, Andrew Evans,
Patrick Holzen, Roger Boorman, Simon Hadfield, Jethro Harris and
Shane Warden;
8.1.8 on or around six months following the Completion Date and on or
around the first anniversary of the Completion Date and on or
around eighteen months following the Completions Date, to send
(with a copy to Robert Walston or Jess Brown on behalf of the
Purchaser) Keith Williams and the managing director or (as
appropriate) chief executive of each Notice Company (if, in each
case, such company shall remain a subsidiary of the Vendor at such
time) a copy of the instruction referred to in Clause 8.1.7 by way
of a reminder of its terms.
8.2 Notwithstanding any other provision of Clause 8 or any other provision of
this Agreement neither the Vendor nor any subsidiary or associate of the
Vendor shall be restricted from continuing any of the activities, and
developing the same, carried on by the Vendor and\or any subsidiary or
associate of the Vendor as at the Completion Date including, without
limitation and for the avoidance of doubt, (i) the telecine-related
activities carried on or to be carried on by Technicolor Limited
<PAGE>
-21-
(or another subsidiary of the Vendor) which may become the subject of an
outsourcing or joint venturing arrangement with the Purchaser if terms
can be agreed, whether or not such arrangement is agreed and (ii) the
activities of Independent Television Facilities Company Limited, a
company in which the Vendor has an interest through its interest in the
share capital of ITV PLC;
8.3 For the purposes of this Clause 8 and subject as mentioned below in this
Clause 8.3, a Directly Competitive Business shall be, a company (or group
of companies) or business (or collection of businesses) ("Target Group")
with respect to which a minimum of 50% of the Target Group's aggregate
annual revenues (as disclosed by its latest (as at the time of
acquisition) available annual audited accounts or, as appropriate, annual
audited consolidated accounts or, if annual audited accounts are not
available, its management accounts) are earned from activities which
compete directly with the trade or business carried on by the Company as
of the Completion Date. For the avoidance of doubt, a Directly
Competitive Business shall not include, (i) the telecine-related
activities carried on or to be carried on by Technicolor Limited which
may become the subject of an outsourcing or joint venturing arrangement
with the Purchaser if terms can be agreed, whether or not such
arrangement is agreed and (ii) the activities of Independent Television
Facilities Company Limited, a company in which the Vendor has an interest
through its interest in the share capital of ITV PLC.
8.4 For the purposes of this Clause 8, an Indirectly Competitive Business
shall be a Target Group which is, among other things, competing direclty
with the trade or business carried on by the Company as of the Completion
Date and such Target Group's aggregate annual revenues (as disclosed by
its latest (as at the time of acquisition) available annual audited
accounts or, as appropriate, audited consolidated accounts or, if audited
accounts are not available, its latest (as at the time of acquisition)
management accounts) are earned from activities which compete directly
with the trade or business carried on by the Company as of the Completion
Date and such revenues are less than 50% of the aggregate annual audited
revenues of the Target Group (as disclosed by its latest (as at the time
of acquisition) available annual audited accounts or, as appropriate,
annual audited consolidated accounts or, if annual audited accounts are
not available, its latest (as at the time of acquisition) management
accounts.
8.5 The restrictions contained in Clause 8.1 are considered reasonable by the
parties but in the event that any such restriction shall be found to be
void but would be
<PAGE>
-22-
valid if some part thereof were deleted or the period reduced such
restriction shall apply with such modification as shall be necessary to
make it valid and effective.
9. PURCHASER'S WARRANTY
The Purchaser has full power to enter and perform this Agreement, which
will when executed constitute binding obligations on the Purchaser in
accordance with their terms.
10. ASSIGNABILITY
10.1 This Agreement shall not be assignable by any party hereto without the
prior written consent of the other save as set out in this Clause 10.
10.2 The Purchaser may assign this Agreement to any Associate of the Purchaser
to which the Shares are transferred PROVIDED THAT such transfer shall
have been notified to the Vendor prior to such transfer and be on terms
that in the event that such Associate were to cease to be a member of the
Purchaser's Group such Associate shall be deemed to have re-assigned this
Agreement to the Purchaser.
10.3 The Vendor may assign the terms of this Agreement (other than Clause 8)
to any Associate of the Vendor PROVIDED THAT the Vendor, prior to such
assignment, enters into a guarantee in a form reasonably satisfactory to
the Purchaser guaranteeing the obligations and liabilities of the Vendor
to the Purchaser under the terms of this Agreement and be on terms that
in the event that such Associate of the Vendor were to cease to be a
member of the Vendor's Group such Associate shall be deemed to have re-
assigned to the Vendor or, at the election of the Vendor, another
Associate of the Vendor.
11. GENERAL PROVISIONS
11.1 This Agreement (together with any document annexed hereto and signed by
or on behalf of the parties hereto) constitutes the whole Agreement
between the parties hereto and no variations hereof shall be effective
unless made in writing.
11.2 The provisions of this Agreement in so far as the same shall not have
been performed at Completion shall remain in full force and effect.
11.3 The Purchaser may release or compromise the liability of the Vendor
hereunder or grant to the Vendor time or other indulgence without
affecting the liability of the Vendor hereunder.
<PAGE>
-23-
12. ANNOUNCEMENTS
12.1 Subject to the provisions of Clause 12.2, neither party shall issue (or
cause to be issued) any press release or publish any circular to
shareholders or any other public document or make any statement or
disclosure to any person who is not a party (other than to their
respective professional advisers) in each case relating to or connected
with or arising out of this Agreement or the matters contained in it,
without obtaining the previous written approval of the other party to its
contents and the manner of its presentation and publication or disclosure
(such approval not to be unreasonably withheld or delayed).
12.2 The provisions of Clause 12.1 do not apply to any announcement relating
to or connected with or arising out of this Agreement required to be made
by virtue of the regulations or rules of or made by London Stock Exchange
Limited or NASDAQ or by law (including applicable securities laws) but in
such circumstances the party seeking to make the announcement will use
its reasonable endeavours to consult with the other party on the contents
of such announcement. Neither party shall be obliged to consult the other
if this would in itself constitute a breach of any such regulations or
rules or be unlawful.
13. COSTS
Each party to this Agreement shall pay its own costs of and incidental to
this Agreement and the sale and purchase hereby agreed to be made
14. NOTICES
Any notice required to be given by any party hereto to any other shall be
in writing and may be served personally or by post and if served by post
shall be served by prepaid registered letter sent through the post to the
address of the party to be served as shown in this Agreement or such
other address as may from time to time be notified for this purpose; and
14.1 in the case of the Purchaser shall be addressed for the attention
of the Company Secretary (with a copy sent by facsimile
transmission for information purposes only to Four Media Company,
625 Arizona Avenue, Santa Monica, CA 90401, USA on 001 587 310
1277 marked for the attention of William E. Niles); and
14.2 in the case of the Vendor shall be addressed for the attention of
the Company Secretary with a copy for the attention of Bill
Rollason;
<PAGE>
-24-
and any notice so served shall be deemed to have been served three days
after the time on which it is posted and in proving such service it shall
be sufficient to prove that the notice was properly addressed and posted.
15. EFFECT OF COMPLETION
15.1 The terms of this Agreement (insofar as not performed at Completion or
specifically otherwise provided for in this Agreement) shall continue in
full force and effect after (and notwithstanding) Completion.
15.2 The remedies in respect of any breach of any Warranty hereunder shall
continue to subsist notwithstanding Completion.
16. FURTHER ASSURANCES
Following Completion the Vendor shall from time to time forthwith upon
being so requested by the Purchaser at the Vendor's expense do or procure
the doing of all acts and/or execute or procure the execution of all such
documents in a form reasonably satisfactory to the Purchaser for the
purpose of vesting in the Purchaser the full legal and beneficial title
to the Shares and otherwise giving to the Purchaser the full benefit of
this Agreement.
17. VENDOR'S COVENANT
17.1 The Vendor covenants with the Purchaser that it shall at the request of
the Purchaser save for the avoidance of doubt in relation to the Carlton
Agreements and rate arrangements with CTE (Carlton) and Carlton Screen
Advertising (annexed in the bundle to the Disclosure Letter numbered in
the index thereto 6.19 and 6.20 respectively) and the Licence (as defined
in Clause 17.3 below), release the Company from any contract or
arrangement with the Vendor or any of its Associates which is of an
onerous nature and shall indemnify the Company in respect of any
liability incurred by the Company as a result of the Vendor failing to
fulfil its obligations under this Clause 17.1.
17.2 The Vendor covenants with the Purchaser that, in the event of the Company
incurring liability for which the Company may have a claim under the
terms of the insurance of the Company in place prior to Completion, it
shall (at the cost of the Purchaser other than in relation to a breach of
the Warranties) use its reasonable endeavours to assist the Company in
making such claim pursuant to the terms of such insurance.
<PAGE>
-25-
17.3 The Vendor covenants with the Purchaser to procure that Carlton Books
Limited ("CBL") shall pursuant to the terms of the licence to occupy,
dated today's date, in respect of part of the Properties and made between
the Purchaser (1) and CBL (2) ("the Licence") vacate the said premises at
the end of the Licence Period (as defined in the Licence) and will
indemnify the Purchaser against all costs expenses and liability incurred
by the Purchaser as a consequence of the failure by CBL so to do.
17.4 The Vendor covenants with the Purchaser that it:
17.4.1 it will procure Technicolor Limited (or another subsidiary of the
Vendor) accepts (in relation to an assignment, as assignee and in
relation to a novation, as obligor in respect of all obligations
of the Company) an assignment or novation (as may be appropriate)
of, (i) all contracts (including the relevant agreement between
the Company and Gollifer Associates Architects dated 25 March
1999) entered into by the Company prior to the date of this
Agreement with respect to building work at the Technicolor West
Drayton site in relation to the Technicolor Project and (ii) all
contracts (if any) entered into by the Company prior to the date
of this Agreement with respect to equipment purchases for
equipment to be located at the Technicolor West Drayton site (and
related costs) in relation to the Technicolor Project; and
17.4.2 will assume any obligation or liability of the Company relating
to any other arrangement entered into by the Company prior to
Completion relating to the Technicolor Project, including, for the
avoidance doubt the full amount of the capital commitment
disclosed in paragraph C of the Disclosure Letter as being
(Pounds)218,000 (plus VAT) in respect of building work in relation
to a site at West Drayton;
and shall indemnify, hold harmless and defend the Company in respect of
any liability incurred by the Company as a result of the Vendor failing
to fulfil its obligations under this Clause 17.4.
17.5 The Purchaser undertakes to the Vendor not to discharge any liability
resulting from any matters referred to in Clause 17.4 without the prior
consent of the Vendor (such consent not to be unreasonably withheld).
<PAGE>
-26-
18. PURCHASER'S UNDERTAKING
The Purchaser undertakes to the Vendor to procure that the Company will
immediately following Completion serve upon the Trustees of the Carlton
Communications Group Pension Scheme ("the Scheme") notice in accordance
with section 37(1) of the rules of the Scheme terminating its liability
to contribute to the Scheme with immediate effect. Such notice shall be
in Agreed Form.
19. GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by English law and the parties hereby
submit to the non-exclusive jurisdiction of the English Courts.
AS WITNESS whereof this Agreement has been entered into the day and year first
above written.
<PAGE>
-27-
THE FIRST SCHEDULE
------------------
BASIC INFORMATION CONCERNING THE COMPANY
A. The Company
1. Registered Number : 1352093
2. Date of incorporation : 8 February 1978
3. Address of registered office : 25 Knightsbridge
LONDON SW1X 7RX
4. Authorised share capital : 50,000 Ordinary Shares of (Pounds)1 each
50,000 Deferred Shares of (Pounds)1 each
5. Issued share capital : 50,000 Ordinary Shares of (Pounds)1 each
50,000 Deferred Shares of (Pounds)1 each
6. Directors:
Full Names
Candida Jane Drake
William Peter Rollason
Keith Williams
7. Secretary:
Full Name
David Abdoo
<PAGE>
-28-
THE SECOND SCHEDULE
-------------------
PARTICULARS OF SUBSIDIARIES
<TABLE>
<CAPTION>
Name Date and Place of Issued Share Capital Held by Beneficially
Incorporation and owned by
Registered Number
<S> <C> <C> <C> <C>
Video Time Limited 19 June 1962 800 Ordinary Shares TVi Limited TVi Limited
England of (Pounds)1
728186
Video Time 1999 10 August 1981 15,000 Ordinary TVi Limited TVi Limited
Limited England Shares of (Pounds)1
1578915
</TABLE>
<PAGE>
-29-
THE THIRD SCHEDULE
------------------
PROPERTY
Underleases at Film House 142/150 Wardour Street London W1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Date Premises Term Tenant Passing rent p.a. Interim s/charge p.a.
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
06.08.81 Ground floor 20 years from 29.09.1980 TVi Limited (Pounds)375,000 (Pounds)42,200
- --------------------------------------------------------------------------------------------------------------------
12.12.80 Ground floor annex 20 years from 29.09.1980 TVi Limited (Pounds)82,500 (Pounds)10,500
- --------------------------------------------------------------------------------------------------------------------
25.03.86 Basement 25.12.1985 to 28.09.2000 TVi Limited (Pounds)118,000 (Pounds)43,300
- --------------------------------------------------------------------------------------------------------------------
16.07.87 Basement annex 25.12.1985 to 28.09.2000 TVi Limited (Pounds)34,500 (Pounds)11,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-30-
THE FOURTH SCHEDULE
-------------------
WARRANTIES AND REPRESENTATIONS: CLAUSE 5
In paragraphs 1 and 8 of this Schedule (save where the context otherwise
requires) the expression "the Company" shall mean each of the Company and each
of its Subsidiaries and in all other paragraphs of this Schedule the Company
shall mean the Company only.
The warranties and representations referred to in Clause 5 of the foregoing
Agreement are that:-
1. CONSTITUTION OF THE COMPANY
1.1 Share Capital
-------------
The matters set out in the First and Second Schedule are complete and
accurate and all the issued shares set out in the First Schedule are
beneficially owned by the Vendor free from all liens charges and
encumbrances or interests in favour of any other person.
1.2 Memorandum and Articles
-----------------------
The copy of the Memorandum and Articles of Association of the Company
annexed to the Disclosure Letter is accurate and complete at the date of
Completion .
1.3 Options etc.
------------
No person has the right (whether exercisable now or in the future and
whether contingent or not) to call for the issue of any share or loan
capital of the Company under any option or other agreement (including
conversion rights and rights of pre-emption) and no claim has been made
by any person to be entitled to any such right.
1.4 Returns and compliance with Company Law etc.
--------------------------------------------
The Company has in all relevant respects complied with the provisions of
the Companies Acts the Financial Services Act 1986 and the European
Communities Act 1972 and all returns particulars resolutions and other
documents required by such legislation to be delivered on behalf of the
Company to the Registrar of Companies have been properly made and
delivered.
<PAGE>
-31-
1.6 Statutory Books
---------------
The register of members and other statutory registers of the Company have
been properly kept and in all material respects contain an accurate and
complete record of the matters which should be dealt with therein; no
notice or allegation that any of the same is incorrect or should be
rectified has been received by the Vendor.
1.7 Insolvency
----------
No order has been made or resolution passed for the winding up of the
Company, nor is there any unfulfilled or unsatisfied judgment or court
order outstanding against the Company or distress execution or other
process been levied in respect of the Company nor, so far as the Vendor
is aware, has any petition been presented for the winding up of the
Company.
1.8 Particulars of Subsidiaries
---------------------------
The particulars of the Subsidiaries set out in the Second Schedule above
are true and complete and the shares of the Subsidiaries are held and
owned as shown in the Second Schedule free from all encumbrances and with
all rights now or hereafter attaching thereto and the Company has no
other subsidiaries as defined by Section 736 of the Companies Act 1985
(as amended by the Companies Act 1989).
1.9 The Shares
----------
1.9.1 Commission
----------
No one is entitled to receive from the Company any finders fee,
brokerage, or other commission in connection with the purchase of
shares in the Company or any Associate company of the Company.
1.9.2 New Issues since the Balance Sheet Date
---------------------------------------
Save as provided in this Agreement no share or loan capital has
been issued or agreed to be issued by the Company since the
Balance Sheet Date.
1.9.3 There are no agreements or arrangements in force which provide for
the present or future issue, allotment or transfer of or grant to
any person the right (whether conditional or otherwise) to call
for the issue, allotment or transfer of any share or loan capital
of the Company (including any option of pre-emption or
conversion).
<PAGE>
-32-
1.10 Capacity of Vendor
------------------
The Vendor has full power to enter and perform this Agreement, which when
executed will constitute binding obligations on the Vendor in accordance
with their terms.
2. ACCOUNTS AND MANAGEMENT ACCOUNTS
2.1 Accounts warranty
-----------------
The Accounts:-
2.1.1 have been prepared in accordance with the requirements of the
Companies Acts and generally accepted accountancy principles in
the United Kingdom;
2.1.2 give a true and fair view of the assets and liabilities of the
Company at the Balance Sheet Date and the profit (or loss) of the
Company for the financial period ended on that date;
2.1.3 apply accounting policies which have been consistently applied in
the audited balance sheet and profit and loss accounts for the two
financial years prior to the Balance Sheet Date;
2.1.4 are not save to the extent expressly stated in such accounts
affected by any extraordinary or exceptional item required to be
disclosed in accordance with requirements of FRS3;
2.1.5 are not, save, (i) to the extent expressly disclosed by such
Accounts and (ii) to the extent the Purchaser is aware, affected
by any non-recurring items which would taken together affect
adversely and materially EBITDA in respect of the six months ended
on the Balance Sheet Date.
2.2 Disclosure
----------
The Accounts disclose all items required by generally accepted accounting
principles.
2.3 Management Accounts
-------------------
2.3.1 The Management Accounts have been prepared in a manner consistent
with the basis of the preparation of the Accounts save that the
Management Accounts are not prepared so as to make such
disclosures
<PAGE>
-33-
or to contain such notes as may be necessary or appropriate to
conform with UK generally accepted accounting principles.
2.3.2 The Management Accounts give a fair and reasonable view of the
assets and liabilities of the Company at the Management Accounts
Date and the profit (or loss) of the Company for the six month
period ended on that date.
2.3.3 The Management Accounts are not, save, (i) to the extent expressly
disclosed by the Management Accounts and (ii) to the extent the
Purchaser is aware, affected by any non-recurring items which
would affect taken together adversely and materially EBITDA in
respect of the six months ended on the Management Accounts Date.
2.4 Books and Records
-----------------
All accounting, records of the Company have been maintained in accordance
with Section 221 (1) and Section 221 (2) of the Companies Act.
2.5 Debts
-----
2.5.1 The agreed debtor list contained in the Agreed Bundle (as defined
in the Disclosure Letter) is at the Management Accounts Date
accurate in all material respects. A review of the debtors on
that list has been performed by the Company in conjunction with
the Purchaser in order to ascertain whether any specific bad debt
provisions ought to be made in respect of any of the debts set out
on that list. So far as the Vendor is aware, specific provisions
have been made in the books of the Company in respect of any such
debts which in the reasonable opinion of the Company are
irrecoverable.
2.5.2 Since the Management Accounts Date the Company has carried on its
business in the ordinary course and on normal trading terms and
the Vendor is not aware of any disputes in relation to debts owed
to the Company in aggregate in excess of (Pounds)10,000.
2.5.3 The Company has not factored its debts or agreed to do so.
<PAGE>
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3. FINANCE
3.1 Financial Position
-------------------
There has been no material deterioration (outside the ordinary course of
the business of the Company) in the financial position or turnover of the
Company since the Balance Sheet Date.
3.2 Capital Commitments
-------------------
There were no commitments on capital account in respect of any individual
items in excess in aggregate of (Pounds)15,000 outstanding at the Balance
Sheet Date (save as disclosed in the Accounts) and since the said date
the Company has not entered into, or agreed to enter into, any capital
commitments.
3.3 Borrowings
----------
Other than the Intra Group Debt, the Company and its Subsidiaries have no
debts other than trade debts incurred in the ordinary course of the
business.
3.4 Bank accounts
-------------
A statement of the bank accounts of the Company and of the credit or
debit balances on such accounts as at a date not more than seven days
before the date of this Agreement is annexed to the Disclosure Letter.
The Company has not any other bank or deposit accounts (whether in credit
or overdrawn) not included in such statement.
3.5 Distributions and Loan Repayments
---------------------------------
3.5.1 Since the Balance Sheet Date no distributions of capital or income
have been declared made or paid in respect of any share capital of
the Company.
3.5.2 All dividends or distributions of profits declared, made, or paid
by the Company since the date of incorporation of the Company have
been lawful.
<PAGE>
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4. OWNERSHIP OF ASSETS
4.1 Assets
------
4.1.1 Except for current assets disposed of by the Company in the
ordinary course of its business the Company is the owner of all
assets included in the Accounts or which have been acquired by the
Company since the Balance Sheet Date.
4.1.2 The Company has not disposed or agreed to dispose of any of its
assets (save in the ordinary course of its business) or granted or
agreed to grant, any Encumbrance in respect of the whole or any
part of its estate or interest in any of the assets (including the
undertaking goodwill and uncalled capital of the Company) included
in the Accounts or acquired or agreed to be acquired since the
Balance Sheet Date.
4.1.3 Since the Balance Sheet Date, save for disposals in the ordinary
course of its business, the assets of the Company have been in the
possession of, or under the control of the Company.
4.3 Plant
-----
So far as the Vendor is aware all the machinery and plant including fixed
plant and machinery, (and all vehicles and office and other equipment
material to the business) which are material to the operation of the
business of the Company are in satisfactory working order and have been
regularly and properly maintained.
4.4 Insurances
----------
4.4.1 The policies of insurance which have been maintained up to
Completion by the Company afford the Company cover against such
risks as are commonly covered by insurance by companies carrying
on the same type of business as the Company.
4.4.2 All insurance was in full force and effect for the period up to
Completion and the Vendor is not aware of anything that has been
done or omitted to be done prior to Completion which would make
any such policy of insurance void or voidable.
4.4.3 There is no claim outstanding under any such policy in excess of
(Pounds)10,000 nor are there claims outstanding under any such
policy which in aggregate exceed (Pounds)25,000.
<PAGE>
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4.4.4 The Company has paid all sums falling due prior to Completion in
respect of premia on all policies of insurance maintained by the
Company for the period to Completion.
5. BUSINESS OF THE COMPANY
5.1 Changes since the Balance Sheet Date
------------------------------------
Since the Balance Sheet Date the Company:-
5.1.1 has carried on its business in the ordinary course;
5.1.2 has not entered into any transaction nor assumed any liability nor
made any payment not provided for in the Accounts which is not in
the ordinary course of its business;
5.1.3 has carried on the business without any interruption or alteration
in the nature scope or manner of its business;
5.1.4 other than in relation to the Inter-Group Debt, has not borrowed
or raised any money or taken any financial facility (except such
short term borrowings from its bankers as are disclosed in the
Disclosure Letter other than with any trade creditors in the
ordinary course of the business);
5.1.5 has not dealt with its creditors in a manner materially
inconsistent with the manner that they were dealt with in the
financial period of the Company which ended on the Balance Sheet
Date
5.2 Licences etc.
-------------
5.2.1 So far as the Vendor is aware all necessary licences consents
permits and authorities which are necessary to the operation of
the business carried on by the Company (public and private) have
been obtained by the Company to enable the Company to carry on its
business effectively in the places and in the manner in which such
business is now carried on and so far as the Vendor is aware all
such licences consents permits and authorities are valid and
subsisting.
5.2.2 So far as the Vendor is aware, the Company is not in breach of any
of the material terms and conditions of any such licences or
consents and there are no factors known to the Vendor that might
in any way
<PAGE>
-37-
prejudice the continuation or renewal of any of such licences or
consents.
5.3 Breach of statutory provisions, etc.
------------------------------------
5.3.1 Neither the Company, nor any of its officers or employees (during
the course of their duties in relation to the Company) have
committed, or omitted to do, any act or thing the commission or
omission of which is, or could be, in contravention of any Act,
Order, Regulation, or the like in the United Kingdom or elsewhere
which is punishable by fine or other penalty where the aggregate
liability of the Company for such contravention could exceed
(Pounds)10,000, nor has the Company received notice of any such
contravention.
5.3.2 So far as the Vendor is aware, the Company has duly complied with
all relevant requirements of the Data Protection Act 1984.
5.3.3 The Company has not and nor has any of its Subsidiaries in the
last two years, as a counterparty thereto, been a party to a
transaction at an undervalue or a preference as those expressions
are used in sections 238 and 239 respectively of the Insolvency
Act 1986;
5.4 Litigation
----------
5.4.1 The Company is not engaged in any litigation or arbitration
proceedings.
5.4.2 So far as the Vendor is aware no litigation or arbitration
proceedings are pending or threatened by or against the Company
and the Vendor is not aware of any circumstances likely to give
rise to any litigation or arbitration.
5.4.3 So far as the Vendor is aware the Company is not subject to any
order or judgment given by any Court or governmental agency and
has not been a party to any undertaking or assurance given to any
Court or governmental agency which is still in force.
5.5 Guarantees, Options, etc
------------------------
The Company is not a party to any option or pre-emption right, or a party
to any guarantee or suretyship or any other obligation (howsoever called)
to pay, purchase or provide funds (whether by the advance of money, the
purchase of or subscription for shares or other securities, the purchase
of assets or services, or
<PAGE>
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otherwise) for the payment of, indemnity against the consequence of
default in the payment of, or otherwise to be responsible for, any
indebtedness of any other person.
5.6 Tenders, etc
------------
No offer or tender not in the ordinary course of business is outstanding
which is capable of being converted into an obligation of the Company in
aggregate for more than (Pounds)10,000 by an acceptance or other act of
some other person.
5.7 Powers of Attorney, etc
-----------------------
There are no powers of attorney given by the Company in force and no
person, as agent or otherwise of the Company, is entitled or authorised
to bind or commit the Company to any obligations not in the ordinary
course of the Company's business.
5.8 Other Party's Defaults
----------------------
So far as the Vendor is aware, no party to any agreement with or
obligation to the Company is in default thereunder being a default which
would be material in the context of the financial or trading position of
the Company nor (so far as the Vendor is aware) are there any
circumstances likely to give rise to such a default.
5.9 Material Contracts
------------------
The Company is not party to any legally binding contract (excluding, for
these purposes, any contract which would be disclosed under paragraph 3.2
(Capital Commitments), paragraph 9 (PROPERTIES), paragraph 6 (EMPLOYMENT)
of this Schedule 4) which:-
5.9.1 contains obligations of the Company which the Company will be
unable to perform within the period of 6 months which commences
with the Completion Date; or
5.9.2 is a contract with a customer of the Company and includes
obligations on the Company to provide retrospective rebates in
relation to work carried out for such customer by the Company
prior to the Completion Date; or
5.9.3 contains an obligation of the Company to perform an individual
item of work for a customer of the Company for which such customer
will be obliged to pay the Company a sum in excess of
(Pounds)25,000 (exclusive of
<PAGE>
-39-
any Value Added Tax) which the Company will not be able to perform
by the time required by such contract; or
5.9.4 is a contract for hire purchase or purchase by way of credit sale
or periodical payment in respect of an asset the aggregate
purchase price of which under such contract will exceed
(Pounds)25,000 (exclusive of any Value Added Tax); or
5.9.5 is a contract with any trade union or body or organisation
representing collectively the Company's employees; or
5.9.6 will involve the supply of goods to the Company the aggregate
sales value of which will represent in excess of 5 per cent of the
audited turnover of the Company (as disclosed by the Accounts) for
its last completed financial period; or
5.9.7 is a contract for services (other than contracts for the supply of
electricity or office services) which would require an expenditure
in excess of (Pounds)25,000 (exclusive of any Value Added Tax) by
the Company in the period of 6 months commencing on the Completion
Date; or
5.9.8 requires the Company to pay any commission, finders fee or royalty
in excess of (Pounds)25,000 (exclusive of Value Added Tax); or
5.9.9 was entered into otherwise than in the ordinary course of the
Company's business.
5.10 Consequence of share acquisition by the Purchaser
-------------------------------------------------
The acquisition of the Shares of the Company by the Purchaser or the
compliance with the terms of this Agreement will not:-
5.10.1 relieve any person (including for the avoidance of doubt the
Vendor and any of its Associates) of any obligation to the Company
(whether contractual or otherwise) or enable any person to
determine any such obligation or any right or benefit enjoyed by
the Company or to exercise any right whether under an agreement
with or otherwise in respect of the Company;
5.10.2 result in any present or future indebtedness of the Company
becoming due or capable of being declared due and payable prior to
its stated maturity;
<PAGE>
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nor so far as the Vendor is aware, and for the purpose of this Warranty
5.10 awareness means the actual knowledge of William Rollason and Keith
Williams without making any enquiry whatsoever, has any existing customer
of the Company notified the Company in the 12 weeks preceding the date of
this Agreement that such customer would cease to do business with the
Company by reason of the Company no longer being owned by the Vendor .
5.11 Investment Grants
-----------------
No investment grants have been paid to the Company.
5.12 Sureties
--------
No person other than the Company has given any guarantee of or security
for any overdraft loan or loan facility granted to the Company.
5.13 Documents
---------
All title deeds and material agreements to which the Company is a party
are in the possession of the Company and are properly stamped.
6. EMPLOYMENT
6.1 Directors
---------
The particulars shown in the First Schedule are true and complete and no
person not named therein as such is a director or shadow director (as
defined in Section 741 of the Companies Act 1985) of the Company.
6.2 Particulars of Employees
------------------------
In respect of any employees or officers of the Company with a salary set
out in the Schedule of Employees annexed to the Disclosure Letter in
excess of (Pounds)20,000, and so far as the Vendor is aware in respect of
any other employee or officer of the Company:
6.2.1 the particulars shown in the Schedule of Employees annexed to the
Disclosure Letter show all remuneration payable and other benefits
provided or which the Company is bound to provide (whether now or
in the future) to each officer and employee of the Company or
Associate of any such person, and are true and complete and
include particulars of all
<PAGE>
-41-
profit sharing incentive and bonus arrangements to which the
Company is a party whether legally binding on the Company or not
6.2.2 since the date of the Schedule of Employees annexed to the
Disclosure Letter no material change has been made outside the
ordinary course of the business in the rate of remuneration, or
the emoluments or pension benefits of any officer ex-officer or
employee of the Company and no change has been made in the terms
of engagement of any such officer or employee, and no additional
officers or employees have been appointed.
6.2.3 no moneys or benefits, other than in respect of remuneration or
emoluments of employment or staff loans less than (Pounds)250 per
person or season ticket loans, are payable to, or for the benefit
of, any officer or employee of the Company or any Associate of any
such person.
6.2.4 no present officer or employee of the Company has given or
received notice terminating his employment except as expressly
contemplated under this Agreement.
6.2.5 no employee will be prejudiced in relation to an employee share
scheme as a result of the sale of the Company such that the
employee would be entitled to make a claim against the Company or
its employer.
6.3 Service Contracts
-----------------
There is not outstanding any contract of service between the Company and
any of its directors officers or employees which is not terminable by the
Company without compensation (other than any compensation payable by
statute) on more than three month's notice given at any time.
6.4 Pensions
--------
6.4.1 Particulars of all pension and life assurance schemes in which the
Company participates have been disclosed in the Disclosure Letter
including any agreements to pay ex gratia pensions and other ex
gratia relevant benefits.
6.4.2 All pension schemes in which the Company has participated are
exempt approved schemes within the meaning of Section 592 of the
Income and Corporation Taxes Act 1988.
<PAGE>
-42-
6.4.3 No employee of the Company is entitled to benefits other than as
set out in the booklet issued in relation to the Carlton
Communications Group Pension Scheme ("the Scheme") dated July
1998.
6.4.4 So far as the Vendor is aware no discretion under the Scheme has
been exercised in relation to any employee or former employee of
the Company in the last 24 months to provide benefits under such
scheme which would not otherwise be provided.
6.4.5 No claims have been made or threatened and no complaints are
outstanding against the Company and the Vendor is not aware of any
grounds for any claim or complaint under any Internal Dispute
Resolution procedure nor with OPAS, the Pension Ombudsman or OPRA.
6.5 Disputes with Employees
-----------------------
The Vendor is not aware of any outstanding claim against the Company by
any person who is now or has been an officer or employee of the Company
or any dispute between the Company and a material number or class of its
employees and no payments are due by the Company under the provisions of
the Employment Protection (Consolidation) Act 1978 as amended by the
Employment Act 1982.
7. INDUSTRIAL PROPERTY RIGHTS
7.1 The Company has not (otherwise than in the ordinary and normal course of
business) disclosed or permitted to be disclosed or undertaken or
arranged to disclose to any person other than the Purchaser any of its
know-how, trade secrets, confidential information, price lists or lists
of customers or suppliers.
7.2 The Company is not a party to any secrecy agreement or agreement which
may restrict the use or disclosure of information other than in the
ordinary course of business.
7.3 The Company does not own or use any Industrial Property Rights in
connection with its business other than licences for computer software or
similar, used in the day to day management of its business.
<PAGE>
-43-
TAX WARRANTIES
--------------
8. TAXATION
8.1 The Company has no liability in respect of Taxation (whether actual or
contingent and whether or not such Taxation is chargeable against or
attributable to any other person) that is not fully disclosed or provided
for in the Accounts and, in particular, has no outstanding liability
for:-
(a) Taxation in any part of the word assessable or payable by
reference to profits, gains, income or distributions earned,
received or paid or arising or deemed to arise on or at any time
prior to the Balance Sheet Date or in respect of any period
starting before the Balance Sheet Date; or
(b) for purchase, value added, sales or other similar tax in any part
of the world referable to transactions effected on or before the
Balance Sheet Date; or
(c) payroll or any similar tax (including PAYE and National Insurance)
in respect of any period starting before the Balance Sheet Date
that is not provided for in full in the Accounts.
8.2 The Company has no liability in respect of Taxation (whether actual or
contingent and whether or not such Taxation is chargeable against or
attributable to any other person) which relates to the period between the
Balance Sheet Date and Completion and arises outside the ordinary course
of business.
8.3 The Company has within the last six accounting periods made or caused to
be made within the requisite periods all notices, returns, computations,
payments, deductions and withholdings required to be made, and has
supplied or caused to be supplied all information required to be
supplied, to any Taxation Authority, including (but without limitation)
the Inland Revenue and Customs & Excise and all such returns,
computations and information are correct, up-to date and made on a proper
basis and are not, nor so far as the Vendor is aware are likely to be,
the subject of any material dispute.
8.4 So far as the Vendor is aware the Company has not received from any
Taxation Authority any payment to which it was not entitled nor, so far
as the Vendor is aware, has the Company received any Taxation assessment
in which its Taxation liability was understated.
<PAGE>
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8.5 Within the last six accounting periods all claims for group relief within
Chapter IV of Part X ICTA, the surrender of advance corporation tax and
the surrender or claim of any refund of Taxation have been correctly
dealt with and the appropriate elections accepted by the Inland Revenue
and the Company has received all payments due to it for the surrender of
group relief and/or surplus ACT and/or tax refunds.
8.6 The Company has not within the last six accounting periods paid or become
liable to pay, nor, so far as the Vendor is aware, are there any
circumstances by reason of which the Company is likely to become liable
to pay any penalty, fine surcharge or interest relating to Taxation.
8.7 The Company has not within the last six accounting periods been the
subject of a discovery or investigation other than of a routine nature by
any Taxation Authority and, so far as the Vendor is aware, there are no
facts which are likely to cause a discovery or investigation to be made.
The Disclosure Letter contains details of any audits of or visits to the
Company by the Inland Revenue, H.M. Customs & Excise, the Contributions
Agency or any other Taxation Authority occurring in the twelve months
preceding Completion and of any such audits and visits planned for the
future of which the Vendor is aware.
8.8 All particulars furnished to the Inland Revenue or other Taxation
Authority, in connection with the application for any consent or
clearance on behalf of the Company, or affecting the Company, fully and
accurately disclose all facts and circumstances material for the decision
of those authorities; any consent or clearance is valid and effective;
and any transaction, for which consent or clearance has previously been
obtained, has been carried into effect (if at all) only in accordance
with the terms of the relative application, consent or clearance and the
Company has not been a party to or otherwise involved in any transaction
scheme or arrangement in respect of which clearance could have or should
have been obtained.
8.9 There are set out in the Disclosure Letter details of any special
arrangement (being an arrangement which is not based on a strict and
detailed application of the relevant legislation or on generally
published statements of practice or generally published extra statutory
concessions) operated by the Company with the agreement of any Taxation
Authority and the Company has not taken any action which has had, or
might have, the result of altering, prejudicing or in any way disturbing
any such arrangement which it has previously negotiated.
<PAGE>
-45-
8.10 There are set out in the Disclosure Letter details of all elections,
claims for relief (whether by way of deduction, reduction, set-off,
exemption, repayment, allowance or otherwise), surrenders, disclaimers,
applications for postponement and appeals against assessments made by the
Company (whether alone or jointly with any other person) in connection
with Taxation during the last six accounting periods including details of
any open assessments for any accounting periods of the Company or other
matters where the tax affairs of the Company have not yet been agreed
with the relevant Taxation Authority and there are also set out in the
Disclosure Letter details of all such elections, claims for relief,
surrenders, disclaimers, applications for postponement and appeals
against assessments the making of which were taken into account in the
preparation of the Accounts.
8.11 No election under s.35 TCGA has been made by the Company and the Accounts
are prepared on the basis that no such election will be made.
8.12 No claim has been made, apart from those set out in the Disclosure Letter
which affects the amount of the consideration which would be allowable
under s.38 TCGA on a disposal by the Company of an asset including
(without limitation) a claim under s.152 TCGA.
8.13 The Company has never been resident for Taxation purposes in any
jurisdiction other than the United Kingdom and the Company has no branch,
agency, place of business or permanent establishment outside the United
Kingdom.
8.14 The Company has not been a close company at any time within the last six
accounting periods for the purposes of ICTA.
8.15 In the period between the acquisition of the Company by the Vendor and
15th March 1988 the Company did not without prior Treasury consent enter
into any of the transactions specified in ss.765-767 ICTA.
8.16 The Disclosure Letter contains details of all assets acquired by a Group
Company from any other Group Company within the last six accounting
periods under ss.171 TCGA and which are still held by a Group Company.
8.17 The Company has not, since the Balance Sheet Date, acquired any assets in
circumstances where there may be substituted for any Taxation purpose
(other than under ss.171-179 TCGA) a different consideration from the
actual consideration given or received by it.
<PAGE>
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8.18 So far as the Vendor is aware no loss which might accrue to the Company
on the disposal of any asset is liable to be reduced as arising from a
depreciatory transaction as defined in ss.176 and 177 TCGA.
8.19 No rents, interest, annual payments or other sums in excess of
(Pounds)10,000 of an income nature paid or payable since the Balance
Sheet Date by the Company or which the Company is under an obligation to
pay in the future are or will not be wholly allowable as a deduction in
calculating the profits of the Company for Taxation purposes.
8.20 Since the Balance Sheet Date the Company has not made any payment or
provided any benefit for any officer or employee or ex-officer or ex-
employee of the Company (and it is not under any obligation to do so)
which is not allowable as a deduction in calculating the profits of the
Company for Taxation purposes.
8.21 The Company did not, before 1 April 1996, issue or own any deep discount
securities (s.57 and Sch. 4 ICTA), deep gain securities (Sch. 11 FA 1989)
or convertible securities (s.56 and Sch. 10 FA 1990) such that accrued
discounts up to that date may become chargeable to the Company as a
result of some future event.
8.22 The Company is not, nor has it been since the Balance Sheet Date, the
holder of a qualifying asset, subject to a qualifying liability or a
party to a currency contract for the purposes of FA 1993 Part II Chapter
II (the FOREX legislation).
8.23 Since the Balance Sheet Date the Company has not been a party to a
contract which is a qualifying contract for the purposes of s.147 FA 1994
(the financial instruments legislation).
8.24 Since the Balance Sheet Date the Company has been accounting on an
authorised accruals basis in respect of all loan relationships which are
creditor relationships as defined in s.103 FA 1996 and in respect of each
such relationship the accruals are computed only by reference to
interest, and the Company is not connected with the debtor within s.87 FA
1996.
8.25 The Company has not accrued a debit for interest which is currently
unpaid.
8.26 Since the Balance Sheet Date the Company has not appropriated any of its
assets to or from trading stock.
<PAGE>
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8.27 The Company has not, at any time in the preceding six accounting periods,
been engaged in or been a party to any of the transactions set out in ss.
213-218 ICTA (demergers).
8.28 So far as the Vendor is aware nothing has been done, and no event or
series of events has occurred, which might cause, in relation to the
Company, the disallowance of the carry forward or carry back of losses,
excess charges or ACT.
8.29 Since the Balance Sheet Date no event has occurred otherwise than in the
ordinary course of business by reason of which any balancing charge may
fall to be made against or any disposal value may fall to be brought into
account by the Company under CAA or other legislation relating to capital
allowances.
8.30 The Company has not made any claim for capital allowances in respect of an
asset which is leased to or from or hired to or from the Company and no
election affecting the Company has been made or agreed to be made under
ss. 53 or 55 CAA in respect of any such assets.
8.31 Since the commencement of the long life assets legislation the Company has
not acquired any long life assets as defined by s.38A(2) CAA.
8.32 Ss. 59-59B CAA do not apply to any fixtures acquired by the Company for a
capital sum so as to determine the disposal value of the seller of the
fixture.
8.33 So far as the Vendor is aware the Company is a taxable person registered
as such for VAT and for the purpose of VATA has in all material respects
made, given, obtained and kept full, complete, correct and up-to-date
records, invoices and other documents appropriate or required for those
purposes and is not in arrears with any payments or returns due and has
not been required by the Commissioners of Customs & Excise to give
security under para. 4 of Sch. 11 VATA.
8.34 The Company is not nor has it been during the six years ending on the
Balance Sheet Date partially exempt for VAT purposes.
8.35 The Disclosure Letter contains details of all elections to waive exemption
made by the Company or any person in relation to which the Company is a
relevant associate under Sch. 10 VATA and the Company has not charged VAT
in respect of any properties currently owned by a Group Company on any
rents or other amounts where no valid election has been made.
<PAGE>
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8.36 The Company has not within the preceding ten years acquired or constructed
nor has it disposed of any land, buildings or computer equipment to which
Regs. 112-116 SI 2518/1995 apply (capital goods scheme).
8.37 All VAT, import duty and other Taxation or charges payable upon the
importation of goods and all excise duties payable to H.M. Customs &
Excise payable in respect of any assets (including trading stock) imported
or owned by the Company have been paid in full.8.38So far as the Vendor is
aware all documents by virtue of which the Company has any right, title or
interest have been duly stamped.
8.39 Since the Balance Sheet Date the Company has not incurred any liability to
or been accountable for any stamp duty reserve tax and there has been no
agreement within s.87(1) FA 1986 which could lead to the Company incurring
such a liability or becoming so accountable.
8.40 So far as the Vendor is aware the Company has not been a party to or
otherwise involved in a transaction or series of transactions where the
main purpose was the avoidance, reduction or deferral of Taxation such
that any part of such transaction may be disregarded or reconstructed and
the Company has not been involved in any transaction whereby the value of
any of the Company's assets has been reduced to obtain a tax free benefit
if disposed of.
9. PROPERTIES
9.1 The particulars of the Properties and the payments of rent and interim
service charge due in respect of them as shown in the Third Schedule are
true and correct.
9.2 The Properties comprise all the property owned occupied or otherwise used
in connection with its business by the Company.
9.3 The Company does not have any continuing liability in respect of any other
property formerly owned or occupied by the Company either as original
contracting party or by virtue of any direct covenant having been given on
a sale or assignment to the Company or as a guarantor of the obligations
of any other person in relation to such property.
9.4 Any written replies given by or on behalf of the Vendor to enquiries
before contract raised by or on behalf of the Purchaser relating in any
way to the Properties are true complete and accurate in all respects
excluding for these purposes any of such replies which were capable of
independent verification by:
<PAGE>
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(a) inspection and survey of the Properties or any part thereof;
(b) searches and enquiries of the local or other public authority; or
(c) inspection of the documents disclosed to the Purchaser.
9.6 So far as the Vendor is aware the current use of the Properties by the
Company is lawful for planning purposes and so far as the Vendor is aware
the Property complies with all fire precaution and building regulations.
9.7 The Vendor gives the same covenants and warranties as to title as would
be implied under Section 4 of the Law of Properties (Miscellaneous
Provisions) Act 1994 by an assurance of the Property by the Vendor to the
Purchaser with full title guarantee but any covenant to be so implied
shall be limited so as not to affect the Vendor with any liability for a
subsisting breach of any covenant or condition concerning the state and
repair of the Properties.
10. GENERAL
10.1 Loans to the Vendor
-------------------
Other than trade debts incurred in the proper and ordinary course of the
business of the Company and the Intra-Group Debt, no outstanding loans
between the Company and the Vendor or its Associates will exist following
the Completion Date.
10.2 Investment, associations and branches
-------------------------------------
The Company:-
10.2.1 is not the holder or beneficial owner of and has not agreed to
acquire any class of the share or other capital of any other
company or corporation (whether incorporated in the United Kingdom
or elsewhere) other than the Subsidiaries;
10.2.2 is not and has not agreed to become a member of any partnership,
joint venture, consortium or other unincorporated association;
10.2.3 has no branch outside England and no permanent establishment (as
that expression is defined in the respective Double Taxation
Relief Orders current at the date hereof) outside the United
Kingdom.
<PAGE>
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10.3 Subsidiaries
------------
10.3.1 The Subsidiaries are dormant as defined in section 250(3) of the
Companies Act.
10.3.2 Neither of the Subsidiaries have traded or incurred any liability
since becoming dormant (as defined above) nor do either of them
have any outstanding liabilities which arose prior to them
becoming so dormant.
<PAGE>
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THE FIFTH SCHEDULE
------------------
TAX INDEMNITIES: CLAUSE 6
1. COVENANT
1.1 SUBJECT as hereinafter provided the Vendor hereby covenants to pay to the
Purchaser an amount equal to:-
1.1.1 any Liability to Taxation resulting from or by reference to any
income profits or gains earned accrued or received by a Group
Company on or before Completion or any Event occurring on or
before Completion whether alone or in conjunction with other
Events and whether or not such Taxation is chargeable against or
attributable to any other person;
1.1.2 any liability of a Group Company to repay in whole or in part any
payment for Group Relief received pursuant to any agreement or
arrangement entered into on or before Completion or any payment
which a Group Company fails to obtain for Group Relief which was
taken into account as an asset in the Accounts;
1.1.3 any liability of a Group Company to make a payment by way of
reimbursement, recharge, indemnity or damages (whether for breach
of contract or arising in tort) connected in any way with Taxation
and resulting from or by reference to any income profits or gains
earned accrued or received on or before Completion or any Event
occurring on or before Completion;
1.1.4 any Taxation for which a Group Company becomes liable in
consequence of the failure by:-
(i) any company which has at any time (whether before or after
Completion) been a member of a group of which any Group
Company has at any time prior to Completion been a member or
from which a Group Company has received or become entitled to
receive on or before Completion in respect of shares in that
other company any capital distribution (as defined in section
122(5)(b) of TCGA); or
(ii) any other person
<PAGE>
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to discharge Taxation within a specified period or otherwise provided
that in the case of any other person this Clause shall only apply insofar
as such Taxation results from or by reference to any income profits or
gains earned accrued or received on or before Completion or any Event
occurring on or before Completion;
1.2 Without reference to any of the financial de minimis limitations in
Clause 6.9 of the Main Agreement, the Vendor hereby covenants to pay to
the Purchaser an amount equal to:-
1.2.1 any Taxation arising to a Group Company under ss. 171-179 TCGA as
a result of Completion of this Agreement or by reference to assets
acquired by a Group Company prior to Completion.
1.2.2 any Liability to Taxation or increased Liability to Taxation
(whether it is a primary or secondary liability) of a Group
Company which arises (whether pre-Completion or post-Completion)
as a result of a claim to roll-over or hold-over a gain including
(without limitation) a claim under ss. 152-154 TCGA where the
claim in question was made prior to Completion and was made by a
Group Company or any member of the Vendor's Group
1.2.3 any liability or any increased Liability to Taxation of a Group
Company which arises as a result of or by reference to any
reduction or disallowance of Group Relief that would otherwise
have been available to the Group Company where and to the extent
that such reduction or disallowance occurs as a result of or by
reference to any total or partial withdrawal effected by any
member of the Vendor's Group after Completion of any surrender of
Group Relief that was submitted by any member of the Vendor's
Group to any relevant Taxation Authority on or before Completion
in respect of any accounting period ending on or before
Completion, save where any such surrender is made at the expressed
written request or with the written consent of the Purchaser.
1.3 The liability of the Vendor shall bind any of its successors.
1.4 Any payments made under this Schedule shall so far as possible be treated
as an adjustment to the consideration paid under the Agreement.
<PAGE>
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2. VAT INDEMNITY
Without prejudice to Clause 1 above the Vendor hereby agrees to pay to
the Purchaser an amount equal to any Liability to Taxation of any Group
Company as a result of its being treated as a member of a VAT Group
during any prescribed accounting period as defined in VATA s25(1) which
ended on or prior to or was current at Completion and the next following
prescribed accounting period together with all costs and expenses
incurred and payable by a Group Company in connection with any such
Liability to Taxation.
3. EXCLUSIONS
3.1 The covenant contained in this Schedule does not cover any Liability to
Taxation to the extent that:-
3.1.1 provision or reserve (not being a deferred taxation reserve)
specifically in respect thereof has been made in the Accounts or
the Liability to Taxation is otherwise reflected in the Accounts;
or
3.1.2 the Company is or may become wholly or primarily liable as a
result of transactions in the ordinary course of business after
the date of the Accounts.
3.1.3 the claim in question would not have arisen but for a voluntary
act or transaction, which could reasonably have been avoided,
carried out by the Purchaser or any of its Group Companies after
the date of this Agreement otherwise than in the ordinary course
of business and which the Purchaser or (as the case may be) such
Group Company was aware or ought reasonably to have been aware
might give rise to that claim including, for the avoidance of
doubt, the withdrawal of or disclaimer of any relief or election
which is taken into account in the Accounts;
3.1.4 the Purchaser has made or makes recovery in respect of such
Liability to Taxation under any other provision of this Agreement.
3.1.5 the Liability to Taxation arises, or is increased, as a result of
any increase in rates of taxation or any change in the law,
regulation, directive or requirement or published practice of a
Taxation Authority, occurring after the date of this Agreement.
<PAGE>
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3.1.6 the Liability to Taxation arises as a result of a change after
Completion in any accounting policy, any tax reporting practice,
or the length of any accounting period for tax purposes of the
Company other than a change in accounting policies needed to bring
the Accounts into line with generally accepted accounting
standards in the UK.
3.1.7 the Taxation arises or is increased as a result of the Company
failing to submit the returns and computations required to be made
by them or not submitting such returns and computations within the
appropriate time limits or submitting such returns and
computations otherwise than on a proper basis, in each case after
Completion provided that if the returns and computation have been
prepared by the Vendor liability is not excluded to the extent
that the error or delay is attributable to the Vendor.
3.1.8 the Liability to Taxation arises or is increased as a result of
the failure of the Purchaser to comply with its obligations
contained in Clause 10 (Corporation Tax Returns).
3.1.9 any Relief arising in respect of an Event occurring or period
ending on or prior to Completion other than if an Accounts Relief
or a Purchaser's Relief is available and is used, or is for no
consideration made available by the Vendor to the Company and is
used to set against or otherwise mitigate the Liability to
Taxation (including but not limited to any Relief available under
any Sections 393, 393A, 402 to 413, or Section 240 ICTA 1988 or
Section 102 Finance Act 1989) (and so that (a) for this purpose
any Relief arising in respect of an accounting period falling
partly before and partly after Completion shall be apportioned on
a time basis, unless some other basis is more reasonable and (b)
any Relief that is so available in relation to more than one
Liability to Taxation to which this Schedule applies shall be
deemed, so far as possible and reasonable, to be used in such a
way as to reduce to the maximum extent possible the Vendor's total
liability hereunder); or
3.1.10 the Liability to Taxation arises under Regulation 107 or 108 or
Part XV of the Value Added Tax Regulations 1995 by reason of any
event or change in circumstances occurring after Completion.
<PAGE>
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3.2 Without prejudice to the generality of Clause 3.1.2 above the following
shall not be regarded as being within the ordinary course of business of
a Group Company for the purpose of this Schedule:-
3.2.1 any Taxation arising under Part XVII ICTA (Tax Avoidance);
3.2.2 any Taxation arising in connection with any distribution (as
defined in Part VI ICTA) or any deemed distribution;
3.2.3 any Taxation arising in respect of the acquisition disposal or
supply of any assets goods services or business facilities for a
consideration deemed for Taxation purposes to be in excess of that
actually given or received;
3.2.4 any disposal or deemed disposal of chargeable assets.
3.3 Clause 6.9 of the Agreement shall apply to this Schedule.
3.4 No claim may be made by the Purchaser under this Schedule in relation to
a quarterly payment of corporation tax or interest thereon.
4. DISPUTES AND CONDUCT OF CLAIMS
4.1 If the Purchaser or the Company shall become aware of a Claim (which term
shall include, for the purpose of this Clause 4, any fact or matter or
circumstance from which it appears that a Group Company may suffer a
charge under ss.171-179 TCGA as a consequence of the sale of Shares
pursuant to this Agreement), relevant for the purposes of this Schedule
the Purchaser shall or shall procure that the Company will as soon as
reasonably practicable (and in any event no later than 10 Business Days
before the expiry of any time limit for making any appeal or, if later, 3
Business Days after the Purchaser or the Group Company becomes aware of
the claim in question) give written notice thereof to the Vendor at the
address given.
4.2 If the Vendor indemnifies the Purchaser and a Group Company to their
reasonable satisfaction against any liabilities and reasonable costs or
expenses which may be incurred thereby including any additional Liability
to Taxation the Purchaser shall allow the Vendor to take or shall procure
that a Group Company will take such action as the Vendor may reasonably
request in writing to avoid resist appeal dispute or compromise the Claim
(including, for the avoidance of doubt, negotiations with any Taxation
Authority or other body or expert relevant to the matter in question) (a
Claim where action is so requested being hereinafter referred
<PAGE>
-56-
to as a "Dispute"). PROVIDED ALWAYS THAT the Purchaser shall not be
obliged to nor be required to procure that a Group Company shall take any
such action if having given the Vendor written notice of the receipt of
such assessment or other matter or circumstance or document relevant to
any Dispute the Purchaser has not within 10 Business Days thereafter
received written instructions from the Vendor in accordance with the
preceding provisions of this Sub-Clause to do so.
4.3 Notwithstanding that the conduct of a Dispute may be dealt with in
accordance with the Vendor's request under sub-paragraph 4.2 above:
4.3.1 the Company and the Purchaser shall be kept fully informed of all
matters pertaining thereto and shall be entitled to receive copies
of all correspondence pertaining thereto;
4.3.2 all communications pertaining to the Dispute which are to be
transmitted to the Inland Revenue H.M. Customs & Excise or any
other appropriate statutory or governmental authority or body
shall first be transmitted to the Purchaser and the Company (no
later than 10 Business Days before the expiry of any time limit
for making any appeal) for approval and shall only be finally
transmitted if such approval is given such approval not to be
unreasonably withheld or delayed;
4.3.4 the Vendor shall make no settlement or compromise of the Dispute
without the prior approval of the Purchaser such approval not to
be unreasonably withheld or delayed.
4.4. For the purposes of this Clause 4 the Purchaser agrees to provide the
Vendor (or its duly authorised professional advisers) with such
reasonable assistance as it may require including reasonable access to
its books and records.
5. PAYMENTS
5.1 The Vendor will make payments to the Purchaser under the provisions of
this Schedule in full in cleared funds and without any deduction
whatsoever save as may be required by law as follows:-
5.1.1 where a Group Company is due to make an actual payment of Taxation
to which this Schedule relates five Business Days before that
payment is due;
<PAGE>
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5.1.2 in the case of the nullification cancellation or set-off of a
right to repayment of Taxation the date on which that repayment
would have been due;
5.1.3 in the case of the loss of any Accounts Relief (other than a right
to repayment of Taxation) the earliest date on which a Group
Company would have been required to make an actual payment of
Taxation which it would not have been required to make but for the
loss of that Accounts Relief (on the assumption that the Group
Company's income profit or gains are such that the Accounts Relief
could have been fully offset in computing such income, profits or
gains);
5.1.4 in the case of the utilisation of any Accounts Relief or
Purchaser's Relief the earliest date on which a Group Company
would have been required to make an actual payment of Taxation but
for the utilisation of that Accounts Relief or Purchaser's Relief
(on the assumption that the Group Company's income profit or gains
are such that the Accounts Relief or Purchaser's Relief could have
been fully offset in computing such income, profits or gains);
5.1.5 in the case of reasonable costs and expenses incurred by the
Purchaser or a Group Company in connection with any Liability to
Taxation or any other matter not dealt with elsewhere in this
Clause 5, 10 Business Days after the service by the Purchaser of a
notice containing a written demand therefor.
5.2 Where there is or has been a Dispute and the Dispute relates to a Claim
where the Taxation the subject matter thereof has to be paid before the
action requested by the Vendor in respect of the Claim can effectively be
taken payment in respect thereof shall be made by the Vendor in full in
cleared funds 3 Business Days before such Taxation must be paid to enable
the Purchaser to comply with the Vendor's request.
6. WITHHOLDINGS AND DEDUCTIONS
6.1 If any withholdings or deductions are required by law to be made in
respect of any payment (other than interest payable pursuant to Clause 7
below) under this Schedule or if any such payment is subject to any
Taxation in the hands of the Purchaser (or would have been so subject but
for the utilisation of any Accounts Relief or any Purchaser's Relief) the
Vendor shall be liable to pay to the Purchaser
<PAGE>
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such further sums as shall leave the Purchaser with the same amount as it
would have been entitled to receive under this Schedule in the absence of
any such deductions, withholdings or Taxation liabilities.
6.2 If the Purchaser receives a refund for any deduction, withholding or
Liability to Taxation to which Clause 6.1 applies, the Purchaser shall
reimburse to the Vendor an amount equal to such part of any payment made
by the Vendor to the Purchaser under Clause 6.1.
6.3 In the event of the Purchaser assigning the benefit of this Agreement or
of this Schedule, Clause 6.1 shall not apply to any deduction or
withholding or to any Liability to Taxation incurred by any assignee of
the Purchaser to the extent to which it exceeds the deduction,
withholding or Liability to Taxation which would have been applicable in
respect of a payment to the original Purchaser or chargeable on the
original Purchaser if there had been no such assignment.
7. INTEREST
In the event that any payment pursuant to this Schedule has not been
received by the Company or the Purchaser by the date for payment in
accordance with Clause 5 of this Schedule interest shall be payable to
the Purchaser as appropriate in respect of the sum unpaid at a rate of 1%
above the National Westminster Bank PLC base rate for the time being in
force calculated on a daily basis.
8. CORRESPONDING SAVINGS
8.1 If the auditors for the time being of the Company (at the request and
expense of the Vendor) certify that a Relevant Amount exists for the
purposes of this Clause, Clause 8.3 shall apply except to the extent to
which credit has been given for the Relevant Amount in relation to any
claim under the Warranties.
8.2 A Relevant Amount shall be determined for the purposes of this Clause as
follows:-
8.2.1 if a Liability to Taxation to which clause 1 applies (and in respect of
which the Vendor has made a payment to the Purchaser under this Schedule)
gives rise to a Relief which reduces or eliminates an actual Liability to
Taxation of the Company whenever arising (other than one to which clause
1 applies), the amount of the actual Liability to Taxation which is
eliminated or the amount by which it is reduced shall be a Relevant
Amount;
<PAGE>
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8.3 Where, pursuant to Clause 8.1, this Clause 8.3 applies to a Relevant
Amount:-
8.3.1 the Relevant Amount shall first be set-off against any payment then due
from the Vendor under this Schedule;
8.3.2 to the extent that there is an excess, a refund shall be made to the
Vendor of any previous payment or payments made by it under this Schedule
and not previously refunded under this sub-clause up to the amount of
such excess; and
8.3.3 to the extent that the excess referred to in paragraph 8.3.2 is not
exhausted under that sub-clause, the remainder of that excess shall be
carried forward and set-off against any future payments which become due
from the Vendor under this Schedule.
9. RECOVERY FROM OTHER PERSONS
If any payment is or becomes due from the Vendor under this Schedule, and
a Group Company is or becomes entitled to recover from any person
(including any Taxation Authority) any sum in respect of the Liability to
Taxation to which that payment relates, then the Purchaser shall promptly
notify the Vendor of its entitlement and shall, if required by the Vendor
and at the Vendor's expense, take all appropriate steps to enforce that
recovery (keeping the Vendor fully and promptly informed of the progress
of any action taken); and if the Vendor has made a payment under this
Schedule in respect of the Liability to Taxation in question, the
Purchaser shall account to the Vendor for whichever is the lesser of:-
9.1 any sums recovered by a Group Company in respect of that Liability to
Taxation (including any interest or repayment supplement paid by the
Taxation Authority or other person on or in respect thereof less any
Taxation chargeable on a Group Company in respect of that interest); and
9.2 the amount paid by the Vendor.
10. CORPORATION TAX RETURNS
10.1 The Vendor or its duly authorised agents shall, at the Vendor's cost and
expense, prepare the corporation tax returns claims computations and
elections of the Group Companies for all accounting periods ended on or
before Completion, to the extent that they have not been prepared before
Completion, and submit them to the Purchaser at least one month before
the due date for such corporation tax returns
<PAGE>
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and computations (or in the case of matters relating to S.179 TCGA such
other time as the parties shall agree in writing).
10.2 The Purchaser shall procure that the Group Companies cause the returns
and computations mentioned in paragraph 10.1 to be authorised, signed and
submitted to the relevant Taxation Authority without amendment or with
such amendment as the Vendor may agree, such agreement not to be
unreasonably withheld or delayed.
10.3 The Vendor or its duly authorised agents shall, at the Vendor's cost and
expense, prepare all documentation and have conduct of all matters
(including correspondence) relating to the corporation tax returns and
computations of the Group Companies for all accounting periods ended on
or before Completion and the Purchaser shall procure that the Group
Companies afford such access to their books, accounts and records as is
necessary and reasonable to enable the Vendor or its duly authorised
agents to prepare those returns and computations and conduct matters
relating to them in accordance with the Vendor's rights under this Clause
10 PROVIDED THAT any information given to the Vendor or its duly
authorised agents shall be kept confidential and shall not be divulged to
any third party other than a relevant Taxation Authority.
10.4 The Vendor or its duly authorised professional advisers shall keep the
Purchaser fully informed of its conduct of the Taxation affairs of the
Group Companies pursuant to this Clause 10 and shall provide the
Purchaser:
(i) in the case of an assessment or a time limit for appeal within
seven Business Days of receipt by the Vendor (or its duly
authorised professional advisers); or
(ii) in the case of all other correspondence and communications
(written or otherwise) within 28 days of such receipt
pertaining thereto which are received from any Taxation Authority. All
such communications (including corporation tax returns, claims,
computations and elections) which are to be transmitted to any Taxation
Authority shall first be submitted to the Purchaser for approval and
shall only be finally transmitted if such approval is given (not to be
unreasonably withheld or delayed) and the Purchaser or its duly
authorised professional advisers shall be afforded the opportunity of
attending any meetings with any relevant Taxation Authority in connection
with the matters contemplated by this Clause 10.
<PAGE>
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10.5 In relation to the first accounting period of the Company ending on or
after Completion, the Purchaser shall keep the Vendor informed of the
progress of the corporation tax returns, claims, computations and
elections of the Company and of all relevant negotiations with the
appropriate Taxation Authority and promptly send copies of all returns,
claims, correspondence and other documents relevant thereto ("Tax
Documents") to the Vendor;
10.6 The Vendor shall be given the opportunity to comment on all such Tax
Documents before they are submitted or sent to the appropriate Taxation
Authority to the extent to which they relate to the part of the said
accounting period ending on Completion. If a time limit applies, the
Purchaser shall ensure that the Vendor receives the relevant Tax Document
no later than 10 Business Days before the expiry of the time limit.
10.7 For the avoidance of doubt any matter relating to s.179 TCGA shall be
dealt with by the Vendor subject to the Vendor keeping the Purchaser
informed of the progress of any such matters and providing the Purchaser
with copies of all correspondence and other documents thereto and subject
to the Purchaser having an opportunity to comment on all such
correspondence and documents within a reasonable time (such comments not
to be unreasonably withheld or delayed).
11. PURCHASER INDEMNITY
11.1 The Purchaser covenants to pay to the Vendor an amount equal to:-
11.1.1 any liability to taxation of the Vendor or any person connected
with the Vendor (including any liability under Section 767A ICTA
1988) which is primarily a liability of the Company and which the
Vendor or such connected person is required to discharge by reason
of the failure of the Company to discharge that liability and the
Vendor or such connected person at any time before Completion
being a member of the same group of companies for taxation
purposes as the Company concerned;
11.1.2 any liability to taxation in relation to supplies made by a
Group Company after Completion for which the Vendor or any member
of its group (within the meaning of Section 43 VATA) is liable as
a result of the Vendor or any member of its group (within the
meaning of the said Section 43) being treated as a member of the
same group with the Company for the purposes of the said Section
43 during any prescribed accounting period (as defined in Section
25(1) VATA) which was
<PAGE>
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current at Completion and the next following prescribed accounting
period and this covenant shall cover all reasonable costs and
expenses properly incurred and payable by the Vendor or any member
of the Vendor's group (within the meaning of the said Section 43)
in connection with any such liability.
11.1.3 any liability or any increased liability to taxation of any
member of the Vendor's Group which arises as a result of or by
reference to any reduction or disallowance of Group Relief that
would otherwise have been available to the Group Company where and
to the extent that such reduction or disallowance occurs as a
result of or by reference to:
(i) any total or partial withdrawal effected by a Group Company
after Completion of any surrender of Group Relief that was
submitted by a Group Company to any relevant Tax Authority on
or before Completion in respect of any accounting period
ending on or before Completion; or
(ii) any total or partial disclaimer made by a Group Company after
Completion of any relief available to a Group Company in
respect of any accounting period ended on or before
Completion
save where any such withdrawal or disclaimer is made at the
expressed written request or with the written consent of the
Vendor
11.1.4 any liability to taxation of any member of the Vendor's Group
pursuant to S. 190 TCGA in respect of any chargeable gain of a
Group Company.
11.2 The covenants contained in Clause 11.1 shall:-
11.2.1 extend to any reasonable costs properly incurred by the Vendor or
such other person in connection with such taxation or a claim
under Clause 11.2; but
11.2.2 not apply to taxation to the extent that the Purchaser could
claim payment in respect of it under this Schedule.
11.3 The Purchaser shall pay any amount which is required to be paid by it
pursuant to Clause 11.2 on or before the fifth Business Day before the
date on which the taxation in question has to be paid to the appropriate
Taxation Authority in order to avoid incurring a liability to interest or
a charge or penalty in respect of that
<PAGE>
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taxation or, if later, not more than five Business Days following the
date on which the Vendor notifies the Purchaser of its liability to make
such payment.
12. ENFORCEABILITY
The provisions contained in this Schedule are considered reasonable by
the parties but in the event that any such provision shall be found to be
void but would be valid if some other part thereof were deleted or the
period of application reduced such provision shall apply with such
modification as may be necessary to make it valid and effective.
13. NO WAIVER
The Purchaser may release or compromise the liability of the Vendor
hereunder or grant to the Vendor time or other indulgence without
affecting the liability of the Vendor hereunder.
<PAGE>
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Signed on behalf of )
CARLTON COMMUNICATIONS Plc )
by Brian Kelly ) /s/ Brian Kelly
EXECUTED as a deed )
By TVP GROUP PLC )
by the signatures of two )
directors or a director and ) /s/ Robert Walston
the secretary ) /s/ Jess Brown
Robert Walston
Jess Brown
<PAGE>
EXHIBIT 99.1
[LOGO OF FOUR MEDIA COMPANY]
FOR IMMEDIATE RELEASE
- ---------------------
FOUR MEDIA COMPANY ACQUIRES TVI LIMITED
- Second London Acquisition Further Expands UK Operations Base -
Burbank, California, May 26, 1999 -- Four Media Company (Nasdaq: FOUR)
today announced that it has acquired all of the outstanding shares of TVI
Limited ("TVI") from Carlton Communications Plc in a cash transaction valued at
approximately $10.1 million. Founded in 1985, TVI is a major supplier to
international content distributors, providing services such as finishing and
distribution for television series as well as feature film mastering for
worldwide distribution. Capabilities include editing, film transfer, sound
editing and mixing, and DVD and CD-ROM authoring. TVI also has full bandwidth
capability for international transmission of digital content.
Commenting on the transaction, Robert T. Walston, Chairman and Chief Executive
Officer of Four Media Company, stated, "The acquisition of TVI significantly
expands our London operations and firmly establishes Four Media Company as a
leading service provider in the growing U.K. market. TVI has earned a solid
reputation as a well-managed operation and we look forward to using management's
extensive industry experience to further our presence in the U.K. and European
markets. With this acquisition, we continue our strategy of expanding the
global outsourcing solutions for our entertainment industry clients as well as
enhancing shareholder value through accretive acquisitions."
"The combination of TVI and Four Media Company is an excellent strategic fit,"
stated Keith Williams, Managing Director of TVI. "Expanding the global reach of
TVI through Four Media's extensive U.S. and Asia operations will enable TVI to
better serve its clients, including Carlton Communications, and we look forward
to benefiting from the synergies of this relationship. TVI recently achieved
the highest recorded first-half profits since its merger with Videotime in 1995.
We have worked very hard to improve customer service, focusing our attention on
quality and reliability. The profits are a just reward for those efforts."
Steven Cain, Chief Executive of Carlton Communications Plc, added, "TVI is a
great business and we look forward to working with Four Media Company in the
future."
- continued -
<PAGE>
Page 2
While expanding existing facilities, TVI will add several new services before
the end of the year. STREAM, TVI's DVD authoring division, is doubling its
capacity, and has secured long-term supply agreements with two major DVD
publishers. A fifth sound suite went into operation in March, and QuickTrack
expects to sign a supply contract with a major international telecommunications
company in the next few weeks.
Four Media Company is a leading provider of technical and creative services to
owners, producers and distributors of television programming, feature films and
other entertainment product, both domestically and internationally. The
Company's services integrate a variety of systems and processes to enhance the
creation and distribution of entertainment content. Four Media's client base
includes the world's largest entertainment companies. As a result of its
investments and acquisitions, Four Media Company is one of the largest and most
diversified providers of technical and creative services to the entertainment
industry, which enables the Company to offer its customers a single source for
such services.
This press release contains forward-looking statements which are made pursuant
to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of
1995. Words such as "intends," "believes" and similar expressions reflecting
something other than historical fact are intended to identify forward-looking
statements, but are not the exclusive means of identifying such statements.
These forward-looking statements involve a number of risks and uncertainties,
including the timely development and market acceptance of products and
technologies, successful integration of acquisitions, the ability to secure
additional sources of financing, the ability to reduce operating expenses and
other factors described in the Company's filings with the Securities and
Exchange Commission. The actual results that the Company achieves may differ
materially from any forward-looking statement due to such risks and
uncertainties. The Company undertakes no obligations to revise or update any
forward-looking statements in order to reflect events or circumstances that may
arise after the date of this release.
# # #
For additional information contact:
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Robert T. Walston
Chairman and Chief Executive Officer
Sandra C. Mays
Vice President, Investor Relations
Four Media Company
2813 West Alameda Avenue
Burbank, CA 91505
(818) 840-7356 (phone)
(818) 846-5197 (fax)
www.4mc.com (web)
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