<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K/A
AMENDMENT NO. 1
To Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
__________________________________
February 25, 1999
------------------
Date of Report
DOLLAR FINANCIAL GROUP, INC.
----------------------------
(Exact name of registrant as specified in its charter)
New York 333-18221 13-2997911
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
1436 Lancaster Avenue, Suite 210, Berwyn, Pennsylvania 19312-1288
(Address of principal executive offices) (zip code)
(610) 296-3400
--------------
Registrant's telephone number, including area code
<PAGE>
This Amendment No. 1 ("Amendment") amends and restates in their entirety Item 2
and Item 7 of the Current Report on Form 8-K of Dollar Financial Group, Inc.
(the "Company"), as filed with the Securities and Exchange Commission on
February 25, 1999.
Item 2. Acquisition or Disposition of Assets
On February 10, 1999, Dollar Financial Group, Inc. ("Company") and DFG
Acquisition Limited, an indirect subsidiary of the Company, entered
into an Agreement for the sale and purchase of shares with Henry
Hallam, Rachel Hallam and shareholders signatory thereto, to acquire
all of the outstanding shares of Instant Cash Loans Limited ("ICL")
which operates eleven stores in the United Kingdom. The aggregate
purchase price for this acquisition was $11.4 million and was funded
with the issuance of the Company's 10 7/8% Senior Subordinated Notes
Due 2006.
On February 17, 1999, National Money Mart Company, a subsidiary of the
Company, entered into an Asset Purchase Agreement with King Mortgage
Limited and Denis Willner, to purchase the remaining 86.5% partnership
interest in its Calgary Money Mart Partnership ("Calgary"). Calgary
operates six stores in Alberta, Canada. The aggregate purchase price
for this acquisition was $5.6 million and was funded with the issuance
of the Company's 10 7/8% Senior Subordinated Notes Due 2006.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
The following financial statements of ICL and Calgary are
attached hereto and made a part hereof:
(i) Instant Cash Loans, LTD.
(1) Auditors' Report for the year ended July 31, 1998
(2) Auditors' Report for the year ended July 31, 1997
(3) Balance Sheets as of July 31, 1998 and 1997 and Interim
Unaudited Balance Sheet as of January 31, 1999.
(4) Profit and Loss Account for the years ended July 31,
1998 and 1997 and Interim Unaudited Profit and Loss
Account for the six months ended January 31, 1999 and
1998.
(5) Notes to Audited Financial Statements and Interim
Unaudited Financial Statements including Cash Flow
Statements for the years ended June 30, 1998 and 1997
and Interim Unaudited Statements of Cash Flows for the
six months ended January 31, 1998 and 1997.
2
<PAGE>
(ii) Calgary Money Mart Partnership
(1) Auditors' Report
(2) Balance Sheets as of June 30, 1998 and 1997 and Interim
Unaudited Balance Sheet as of December 31, 1998.
(3) Statements of Net Earnings for the years ended June 30,
1998 and 1997 and Interim Unaudited Statements of Net
Earnings for the six months ended December 31, 1998 and
1997.
(4) Statements of Cash Flows for the years ended June 30,
1998 and 1997 and Interim Unaudited Statements of Cash
Flows for the six months ended December 31, 1998 and
1997.
(5) Notes to Audited Financial Statements and Interim
Unaudited Financial Statements.
(b) Pro Forma Financial Information.
The following unaudited consolidated pro forma financial
statements of the Company, reflecting the acquisitions of ICL
and Calgary, are attached hereto and made a part hereof:
(i) Unaudited Condensed Combined Consolidated Pro Forma
Financial Data.
(ii) Unaudited Condensed Combined Consolidated Pro Forma
Balance Sheet as of December 31, 1998.
(iii) Unaudited Condensed Combined Consolidated Pro Forma
Statement of Operations for the year ended June 30, 1998.
(iv) Unaudited Condensed Combined Consolidated Pro Forma
Statement of Operations for the six months ended December
31, 1998.
(v) Notes to Unaudited Condensed Combined Pro Forma Financial
Data.
(c) Exhibits
10.24 Agreement for the sale and purchase of shares of
Instant Cash Loans, LTD. dated February 10, 1999 with
Dollar Financial Group, Inc., DFG Acquisition, LTD.,
Henry Hallam, Rachel Hallam and shareholders signatory
thereto.
10.25 Purchase Agreement dated February 17, 1999 by and among
National Money Mart Company (a subsidiary of Dollar
Financial Group, Inc.), King Mortgage LTD. and Denis
Willner to purchase the remaining 86.5% partnership
interest in Calgary Money Mart Partnership.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 and 15(d) 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: April 26 , 1999.
DOLLAR FINANCIAL GROUP, INC.
a New York corporation
By: /s/ Richard S. Dorfman
--------------------------
Name: Richard S. Dorfman
Title: Executive Vice President and
Chief Financial Officer
4
<PAGE>
INSTANT CASH LOANS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 JULY 1998
The directors present their report and the audited financial statements for the
year ended 31 July 1998.
Principal activity
The principal activity of the company is that of cheque clearing and secured
loans.
Directors
The directors of the company who served during the whole of the period from 1
August 1997 to the date of this report, unless otherwise stated, and their
interests in the shares of the company at 31 July 1998 as recorded in the
register of directors' interests were as follows:
<TABLE>
<CAPTION>
31 July 1998 31 July 1997
50p Ordinary 50p Ordinary
shares shares
No. No.
<S> <C> <C>
H Hallam 2,278 2,278
A Bennett - -
S W Payne (Resigned 20 February 1998) - -
</TABLE>
Statement of directors' responsibilities
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that year. In preparing
those financial statements, the directors are required to:
- select suitable accounting policies and apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
continued. . . . . . .
5
<PAGE>
2
INSTANT CASH LOANS LIMITED
DIRECTORS'REPORT
FOR THE YEAR ENDED 31 JULY 1998
(CONTINUED)
Small company exemptions
This report is prepared in accordance with the special provisions of Part VII of
the Companies Act 1985 relating to small companies.
On behalf of the board
/s/ H Hallam
------------------------
H Hallam
Registered office: Adam House, Players Street Nottingham
NG7 SLZ
Director
Court
11 February 1999
6
<PAGE>
3
Hacker Young Chartered Accountants
22 Th. RopeWalk Nottlngham NG1 5DT
AUDITORS' REPORT TO THE SHAREHOLDERS OF
INSTANT CASH LOANS LIMITED
FOR THE YEAR ENDED 31 JULY 1998
We have audited the financial statements on pages 4 to 14 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 8 and 9.
Respective responsibilities of directors and auditors
As described on page 1, the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made
by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or error or other
irregularity. In forming our opinion we also evaluated the overall adequacy of
the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state
of the company's affairs as at 31 July 1998 and of its profit for the year then
ended and have been properly prepared in accordance with the Companies Act 1985.
/s/ Hacker Young
----------------------
Hacker Young
Registered Auditor
11 February 1999
Chartered Accountants
7
<PAGE>
Hacker Young Chartered Accountants
22 Th. RopeWalk Nottlngham NG1 5DT
AUDITORS' REPORT
TO THE SHAREHOLDERS OF INSTANT CASH LOANS LIMITED
FOR THE YEAR ENDED 31 JULY 1997
We have audited the financial statements on pages 4 to 11 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 6 and 7.
Respective responsibilities of directors and auditors
As described on page 1, the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made
by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state
of the company's affairs as at 31 July 1997 and of its profit for the year then
ended and have been properly prepared in accordance with the Companies Act 1985
as applicable to small companies.
/s/ Hacker Young
---------------------
Hacker Young
Registered Auditor
Chartered Accountants
30 April 1998
8
<PAGE>
4
INSTANT CASH LOANS LIMITED
PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
(Unaudited)
For the year ended For the six months
Note July 31, ended January 31,
1998 1997 1999 1998
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
TURNOVER OF CHEQUES CASHED 45,563,176 23,859,150 30,258,205 18,774,325
========== ========== ========== ==========
Income 2,916,110 1,711,435 2,015,622 1,225,404
Cost of sales (5,938) (6,116) (2,737) (1,267)
---------- ---------- ---------- ----------
Gross profit 2,910,172 1,705,319 2,012,885 1,224,137
Administrative expenses (1,784,865) (1,055,241) (1,104,314) (801,964)
---------- ---------- ---------- ----------
Operating profit 2 1,125,307 650,078 908,571 422,173
Interest payable 4 (51,817) (74,001) (50,857) (26,771)
---------- ---------- ---------- ----------
Profit on ordinary activities before taxation 1,073,490 576,077 857,714 395,402
Taxation 5 (334,195) (169,533) (265,891) -
---------- ---------- ---------- ----------
Profit on ordinary activities after taxation 739,295 406,544 591,823 395,402
Dividends 6 (750,000) - - -
---------- ---------- ---------- ----------
Accumulated (loss)/profit for the year (10,705) 406,544 591,823 395,402
Retained profits brought forward 557,922 151,378 547,217 557,922
---------- ---------- ---------- ----------
Retained profit carried forward 547,217 557,922 1,139,040 953,324
========== ========== ========== ==========
</TABLE>
The notes on pages 8 to 14 form an integral part of these accounts
9
<PAGE>
5
INSTANT CASH LOANS LIMITED
BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
July 31, January 31,
1998 1997 1999
Note (Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed assets
Tangible assets 7 271,794 88,877 454,634
Current assets
Stocks 2,318 2,980 1,356
Debtors 8 2,166,338 1,244,253 2,913,486
Cash at bank and in hand 496,566 162,985 626,317
---------- --------- ----------
2,665,222 1,410,218 3,541,159
Creditors: amounts falling due 9
within one year (1,696,421) (661,308) (2,269,484)
---------- --------- ----------
Net current assets 968,801 748,910 1,271,675
--------- -------- ---------
Total assets less current
liabilities 1,240,595 837,787 1,726,309
Creditors: amounts falling due
after more than one year 10 (553,378) (139,865) (447,269)
--------- -------- ---------
687,217 697,922 1,279,040
========= ======== =========
Capital and reserves
Called up share capital 11 2,278 2,278 2,278
Share premium account 137,722 137,722 137,722
Profit and loss account 547,217 557,922 1,39,040
--------- -------- ---------
Total shareholders' funds 687,217 697,922 1,279,040
========= ======== =========
</TABLE>
These financial statements are prepared in accordance with the special
provisions of Part VII of the Companies Act 1985 relating to small companies.
The directors are of the opinion that the company is entitled to those special
exemptions on the grounds that it has met the qualifications for a small company
as specified in sections 246 and 247.
The financial statements on pages 4 to 14 were approved by the board of
directors and signed on its behalf by:
/s/ H Hallam
- -----------------------
H Hallam Director
11 February 1999
The notes on pages 8 to 14 form an integral part of these accounts.
10
<PAGE>
6
INSTANT CASH LOANS LIMITED
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
(Unaudited)
For the year ended For the six months
July 31, ended January 31,
1998 1997 1999 1998
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Profit for the financial year 739,295 406,544 591,823 395,402
Other gains/(losses) - - - -
------- ------- ------- -------
Total gains recognised since last annual report 739,295 406,544 591,823 395,402
======= ======= ======= =======
</TABLE>
NOTE OF HISTORICAL COST PROFITS AND LOSSES
<TABLE>
<CAPTION>
(Unaudited)
For the year ended For the six months
July 31, ended January 31,
1998 1997 1999 1998
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Reported profit on ordinary activities before taxation 1,073,490 576,077 857,714 395,402
Difference between a historical cost depreciation charge
and the actual depreciation charge for the year
calculated on the revalued amount - - - -
--------- ------- ------- -------
Historical cost profit on ordinary activities before
taxation 1,073,490 576,077 857,714 395,402
========= ======= ======= =======
</TABLE>
The notes on pages 8 to 14 form an integral part of these accounts
11
<PAGE>
7
INSTANT CASH LOANS LIMITED
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
(Unaudited)
For the year ended January 31,
July 31,
1998 1997 1999
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Profit for the financial year 739,295 406,544 591,823
Dividends (750,000) - -
-------- ------- ---------
Net (subtraction from)/addition to shareholders' funds (10,705) 406,544 391,823
Opening shareholders' funds 697,922 291,378 687,217
-------- ------- ---------
Closing shareholders' funds 687,217 697,922 1,279,040
======== ======= =========
</TABLE>
The notes on pages 8 to 14 form an integral part of these accounts
12
<PAGE>
8
INSTANT CASH LOAN LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
1 ACCOUNTING POLICIES
The accounts have been prepared in accordance with the Financial Reporting
Standard for Smaller Entities. A summary of the principal accounting
policies is set out below, all of which have been applied throughout the
current year and preceding year.
Basis of accounting
The financial statements have been prepared under the historical cost
accounting rules.
The company has taken advantage of the exemption from preparing a cash flow
statement conferred by Financial Reporting Standard No.1 on the grounds
that it qualifies as a small company under the Companies Act 1985.
Trading activities
The whole of the company's trading for the year and preceding year is
generated from continuing operations.
Turnover
Turnover represents money earned from secured loans, profits made from the
cashing of cheques and sales of goods purchased. In the current year the
company has accounted for profits from the cashing of cheques on the date
of the transaction. The effect of this treatment has been to increase
turnover and profits by (Pounds)41,652.
Bad and doubtful debts
The directors make specific provisions against cheques when these are
returned unpaid. The aggregate provisions which are made during the year
are charged against the operating profit.
Cheques which are subsequently recovered are credited to the operating
profit on the date of recovery. Included in the accounts is a specific
provision for cheques which are recovered in the period between 31 July and
the date on which the accounts are approved by the board.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost (or valuation) less accumulated
depreciation.
Depreciation of fixed assets is calculated to write off their cost or
valuation less any residual value over their estimated useful lives as
follows:
Leasehold property improvements Over the period of the lease
Plant and equipment 33% per annum straight line basis
Motor vehicles 20% per annum straight line basis
Fixtures and equipment 33% per annum straight line basis
Profits or losses on the disposal of tangible fixed assets are included in
the calculation of operating profit.
13
<PAGE>
9
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
1 ACCOUNTING POLICIES continued
Leases and hire purchase contracts
Tangible fixed assets acquired under finance leases and hire purchase
contracts are capitalised at the estimated fair value at the date of
inception of each lease or contract. Assets under hire purchase agreements
are depreciated over their expected useful lives. Assets under finance
lease agreements are depreciated over the shorter of the lease term and
their expected useful lives. The total finance charges are allocated over
the period of the lease in such a way as to give a reasonably constant
charge on the outstanding liability.
Rentals paid under operating leases are charged to the profit and loss
account as incurred.
Stocks
Stocks are valued at the lower of cost and net realisable value.
Taxation
Corporation tax payable is provided on taxable profits at the appropriate
rate.
Deferred taxation is provided on the liability method in respect of the
taxation effect of all timing differences only to the extent that tax
liabilities will crystallise in the foreseeable future.
2 OPERATING PROFIT
<TABLE>
<CAPTION>
For the year ended For the six months
July 31, ended January 31,
1998 1997 1999 1998
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Operating profit is stated after crediting
Profit on sale of assets and after charging 347 - - -
======= ====== ======= ======
Auditors' remuneration 4,900 4,700 2,500 2,300
Operating leases
Rent 126,529 66,243 108,871 75,335
Hire purchase interest 3,298 514 1,832 1,832
Depreciation of tangible fixed assets
owned assets 80,653 74,082 75,134 30,804
======= ====== ======= ======
</TABLE>
3 DIRECTORS
<TABLE>
<CAPTION>
For the year ended For the six months
July 31, ended January 31,
1998 1997 1999 1998
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Directors' emoluments 130,520 131,971 57,424 64,826
======= ======= ======= ======
</TABLE>
14
<PAGE>
10
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
4 INTEREST PAYABLE
<TABLE>
<CAPTION>
For the year ended For the six months
July 31, ended January 31,
1998 1997 1999
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Finance lease and hire purchase contracts 3,298 514 1,832
Other interest payable 48,519 73,487 49,025
------ ------ ------
51,817 74,001 50,857
====== ====== ======
</TABLE>
5 TAXATION
The tax charge is based on the results for the year and comprises:
<TABLE>
<CAPTION>
For the year ended For the six months
July 31, ended January 31,
1998 1997 1999 1998
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
UK Corporation tax on profit on ordinary activities at
31%% (1997 27.4%%) 320,234 169,533 265,891 -
Under provision in earlier years 13,961 - - -
------- ------- ------- -------
334,195 169,533 265,891 -
======= ======= ======= =======
</TABLE>
6 DIVIDENDS
<TABLE>
<CAPTION>
For the year ended For the six months
July 31, ended January 31,
1998 1997 1999 1998
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Equity- ordinary/final 750,000 - - -
======= ======= ====== ======
</TABLE>
The company has declared a proposed dividend on the 'A' ordinary shares.
The intention of the directors is to satisfy the proposed dividend by
assigning the assets and liabilities relating to the secured lending
business of the company.
15
<PAGE>
11
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
7 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Fixtures Land
Motor Plant and and and
Vehicles Machinery Fittings Buildings Total
Cost (Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
1 August 1997 51,460 43,602 168,237 13,662 276,961
Additions 118,000 39,134 125,089 - 282,223
Disposals (25,700) (680) - - (26,380)
------- ------- ------- ------ -------
31 July 1998 143,760 82,056 293,326 13,662 532,804
Additions 17,088 44,053 196,833 - 257,974
------- ------- ------- ------ -------
31 January 1999 160,848 126,109 490,159 13,662 790,778
======= ======= ======= ====== =======
Depreciation
1 August 1997 11,767 32,391 130,266 13,660 188,084
Charge for the year 22,334 11,513 46,804 2 80,653
Disposals (7,668) (59) - - (7,727)
------ ------ ------- ------ -------
31 July 1998 26,433 43,845 177,070 13,662 261,010
Charge for the period 16,376 11,286 47,472 - 75,134
------ ------ ------- ------ -------
31 January 1999 42,809 55,131 224,542 13,662 336,144
====== ====== ======= ====== =======
Net book amount
31 January 1999 118,039 70,978 265,617 - 454,634
======= ====== ======= ====== =======
31 July 1998 117,327 38,211 116,256 - 271,794
======= ====== ======= ====== =======
31 July 1997 39,693 11,211 37,971 2 88,877
======= ====== ======= ====== =======
</TABLE>
The net book value of assets held under hire purchase agreements at the
year end was (Pounds)68,467 (1997: 4,280). Depreciation charged on these
assets for the year amounted to (Pounds)10,533 (1997: (Pounds)2,140).
8 DEBTORS
Amounts falling due within one year
<TABLE>
<CAPTION>
July 31, January 31,
1998 1997 1999
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Trade debtors 1,810,915 1,133,483 2,573,696
Advance Corporation Tax 187,500 - 187,500
Other debtors 167,923 110,770 152,290
--------- --------- ---------
2,166,338 1,244,253 2,913,486
========= ========= =========
</TABLE>
16
<PAGE>
12
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
9 CREDITORS: amounts falling due within one year
<TABLE>
<CAPTION>
July 31, January 31,
1998 1997 1999
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Bank overdraft - 233,501 272,557
Bank loans 125,000 - 166,667
Trade creditors 81,205 59,238 26,191
Corporation tax 320,234 169,853 588,921
Other taxation and social security 59,657 39,553 57,924
Dividend 750,000 - 750,000
ACT Payable 187,500 - 187,500
Obligations under finance leases and hire purchase
contracts 17,775 1,189 17,775
Directors' loans 3,032 46,222 37,312
Other creditors 58,196 25,331 14,682
Accruals and deferred income 93,822 86,421 149,955
--------- ------- ---------
1,696,421 661,308 2,269,484
========= ======= =========
</TABLE>
Bank loans and overdrafts are secured by a fixed and floating charge over
the assets of the company. Obligations under finance leases and hire
purchase contracts are secured on the assets to which they relate.
10 CREDITORS: amounts falling due after more than one year
<TABLE>
<CAPTION>
July 31, January 31,
1998 1997 1999
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Bank loans 375,000 - 277,779
Other loan 139,865 139,865 139,865
Obligations under finance leases and hire purchase
contracts 38,513 - 29,625
-------- ------- -------
553,378 139,865 447,269
======== ======= =======
</TABLE>
11 CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
July 31, January 31,
1998 1997 1999
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Ordinary shares of 50p each
Authorised 2,278 2,278 2,278
======== ======= =======
Allotted called up and fully paid
2,278 Class A ordinary 50p shares 1,139 1,139 1,139
2,278 Class B ordinary 50p shares 1,139 1,139 1,139
-------- ------- -------
2,278 2,278 2,278
======== ======= =======
</TABLE>
17
<PAGE>
13
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
12 GUARANTEES AND OTHER FINANCIAL COMMITMENTS
Financial commitments under non-cancellable operating leases will result in
the following payments falling due in the year to 31st July 1999
<TABLE>
<CAPTION>
July 31, January 31,
1998 1997 1999
Land Land Land
and and and
Buildings Buildings Buildings
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Expiring
Within one year - 22,675 -
Within two to five years 74,398 - 91,537
After five years 97,956 46,950 126,203
------- ------ -------
172,354 69,625 217,740
======= ====== =======
</TABLE>
CAPITAL COMMITMENTS
At 31 July 1998 the company was committed to the following capital
expenditure.
<TABLE>
<CAPTION>
July 31, January 31,
1998 1997 1999
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Authorised but not contracted for - 45,000 -
======= ======= =======
Contracted for but not included in these financial
statements 53,941 - 20,000
======= ======= =======
</TABLE>
13 POST BALANCE SHEET EVENTS
12.1 The company opened a new branch in Sunderland in August 1998.
12.2 The company entered into an annual lease commitment in respect of land
and buildings for the new branch in August 1998, amounting to
(Pounds)18,250 and which expires after more than 5 years.
12.3 The directors are currently in the process of negotiating the sale of
all of the shares in Instant Cash Loans Limited to a company incorporated
in the U.S.A. A sale agreement has not been signed but the directors
anticipate that the sale will affect the accounts as follows:
(i) Instant Cash Loans Limited will become a wholly owned subsidiary
of a parent company incorporated in the U.S.A.
(ii) The net book value of the secured lending assets & liabilities
shall be extracted from the company by dividend distribution.
(iii) The cheque clearing trade will continue in its present form for
the foreseeable future.
18
[CAPTION]
<PAGE>
14
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
14 DIFFERENCES BETWEEN UNITED KINGDOM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("UK GAAP") AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("US
GAAP") (Unaudited)
The accompanying financial statements have been prepared in accordance with
UK GAAP, and are presented in British Pounds. As described in the Company's
accounting policies, in accordance with Financial Reporting Standard No. 1
under UK GAAP, statements of cash flows were not required to be presented
in the accompanying audited financial statements on the grounds that it
qualifies as a small company under the Companies Act 1985. Statements of
cash flows are provided below in accordance with UK GAAP and would not be
materially different if prepared under US GAAP. The accounting policies of
the Company also comply, with all material respects, with US GAAP as of
July 31, 1998 and 1997 and at January 31, 1999 and therefore the financial
results would not require amendment if the financial statements were to be
prepared in accordance with US GAAP.
19
<PAGE>
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
INSTANT CASH LOANS LIMITED
CASH FLOW STATEMENT
FOR THE YEARS ENDED 31 JULY 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
Note (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Net cash inflow from
operating activities 1 514,085 323,861
Returns on investments and
servicing of finance
Interest paid (51,767) (57,287)
Interest element of higher
purchase payments (3,298) (514)
-------- -------
(55,065) (57,801)
Taxation
Corporation tax paid (183,814) (96,380)
Capital expenditure
and financial investment
Purchase of tangible fixed
assets (203,223) (86,984)
Sale of tangible fixed assets 19,000 -
-------- -------
(184,223) (86,984)
------- -------
90,983 82,696
Equity dividends paid - -
------- -------
90,983 82,696
Financing
Issuing of ordinary share
capital - -
Other loan advances - -
Bank loan advances 500,000 -
Capital element of hire purchase
payments (23,901) (2,853)
-------- -------
476,099 (2,853)
------- -------
Increase in cash 567,082 79,843
======= =======
</TABLE>
The notes on pages 2 to 4 form an integral part of this cash flow statement
20
<PAGE>
2.
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
INSTANT CASH LOANS LIMITED
NOTES TO THE CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 JULY 1998
Reconciliation of net cash flow to movement in net debt (note 2)
<TABLE>
<CAPTION>
1998 1997
(Pounds) (Pounds)
<S> <C> <C>
Increase in cash in the period 567,082 79,843
Cash inflow from increase in debt (500,000) -
Cash outflow from payment of hire
purchase financing 23,901 2,853
-------- --------
Change in net debt resulting from 90,983 82,696
cash flows
New finance leases (79,000) -
Net debt at start of year (211,570) (294,266)
-------- --------
Net debt at end of year (199,587) (211,570)
======== ========
</TABLE>
21
<PAGE>
3.
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
INSTANT CASH LOANS LIMITED
NOTES TO THE CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 JULY 1998 AND 1997
1. Reconciliation of operating profit to operating cash flows
<TABLE>
<CAPTION>
1998 1997
(Pounds) (Pounds)
<S> <C> <C>
Operating profit 1,125,307 650,078
Depreciation charges 80,653 74,082
Profit on disposal of fixed assets (347) -
Decrease/(increase) in stocks 662 (260)
(Increase) in debtors (734,585) (523,049)
Increase/(decrease) in creditors 42,395 123,010
--------- --------
Net cash inflow from operating
activities 514,085 323,861
========= ========
</TABLE>
2. Analysis of changes in net debt
<TABLE>
<CAPTION>
Other
At Cash Non-cash At
1 August 1997 Flows changes 31July 1998
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Cash at Bank and in hand 162,985 333,581 - 496,566
Overdrafts (233,501) 233,501 - -
-------
567,082
Debt due within one year - (500,000) 375,000 (125,000)
Debt due after one year (139,865) - (375,000) (514,865)
Hire purchase contracts (1,189) 23,901 (79,000) (56,288)
--------- -------- -------- -----------
TOTAL (211,570) 90,983 (79,000) (199,587)
========= ======== ======== ===========
</TABLE>
22
<PAGE>
4.
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
INSTANT CASH LOANS LIMITED
NOTES TO THE CASH FLOW STATEMENT
FOR THE YEARS ENDED 31 JULY 1998 AND 1997
2. Analysis of changes in net debt (continued)
<TABLE>
<CAPTION>
Other
At Cash Non-cash At
1 August 1996 Flows changes 31 July 1997
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Cash at Bank and in hand 125,449 37,536 - 162,985
Overdrafts (275,808) 42,307 - (233,501)
-------
79,843
Debt due within one year - - -
Debt due after one year (139,865) - - (139,865)
Hire purchase contracts (4,042) 2,853 - (1,189)
--------- ------- -------- --------
TOTAL (294,266) 82,696 - (211,570)
======== ======= ======== ========
</TABLE>
23
<PAGE>
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
INSTANT CASH LOANS LIMITED
INTERIM CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
Note (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Net cash inflow
form operating activities 1 230,467 159,793
Returns on investments and
servicing of finance
Interest paid - (49,025) (24,939)
Interest element of higher
purchase payments (1,832) (1,832)
--------- ---------
(50,857) (26,771)
Taxation
Corporation tax paid - -
Capital expenditure
and financial investment
Purchase of tangible fixed assets (257,974) (174,638)
Sale of tangible fixed assets - -
--------- ---------
(257,974) (174,638)
--------- ---------
(78,364) (41,616)
Financing
Bank loan advances - 350,000
Bank loan payments (55,554) -
Capital element of hire purchase
payments (8,888) (15,014)
--------- --------
(64,442) 334,986
--------- ---------
(Decrease) increase in cash (142,806) 293,370
========= =========
</TABLE>
24
<PAGE>
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
INSTANT CASH LOANS LIMITED
NOTES TO THE INTERIM CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 1999 AND 1998
Reconciliation of net cash flow to movement in net debt (note 2)
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Increase in cash in the period (142,806) 293,370
Cash inflow from increase in debt 55,554 (350,000)
Cash outflow from payment of hire
purchase financing 8,888 15,014
---------------------- ------------------
Change in net debt resulting from
cash flows (78,364) (41,616)
New finance leases - (79,000)
Net debt at start of period (199,587) (211,570)
---------------------- ------------------
Net debt at end of period (277,951) (332,186)
====================== ==================
</TABLE>
25
<PAGE>
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
INSTANT CASH LOANS LIMITED
NOTES TO THE INTERIM CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 1999 AND 1998
1. Reconciliation of operating
profit to operating cash flows
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Operating profit 708,571 395,402
Depreciation charges 75,134 30,804
Decrease in stocks 962 177
Increase in debtors (547,148) (365,471)
(Decrease)/increase in creditors (7,052) 98,881
--------------- -------------
Net cash inflow from operating
activities
230,467 159,793
=============== =============
</TABLE>
2. Analysis of change in net debt
<TABLE>
<CAPTION>
At Other
1 August Cash Non-cash At
1998 Flows changes 31 January 1999
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Cash at Bank and in hand 496,566 129,751 626,317
Overdrafts (272,557) (272,557)
----------
(142,806)
Debt due in one year (125,000) 55,554 (97,221) (166,667)
Debt due after one year (514,865) 97,221 (417,644)
Hire purchase contracts (56,288) 8,888 (47,400)
--------------------------------------------------------------
TOTAL (199,587) (78,364) - (277,951)
==============================================================
</TABLE>
26
<PAGE>
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
INSTANT CASH LOANS LIMITED
NOTES TO THE INTERIM CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 1999 AND 1998
2. Analysis of change in net debt (continued)
<TABLE>
<CAPTION> Other
At Cash Non-cash At
1 August 1997 Flows changes 31 January 1998
(Pounds)1 (Pounds)1 (Pounds)1 (Pounds)1
<S> <C> <C> <C> <C>
Cash at Bank and in hand 162,985 236,611 399,596
Overdrafts (233,501) 56,759 (176,742)
-------------
293,370
Debt due in one year - (350,000) 225,000 (125,000)
Debt due after one year (139,865) (225,000) (364,865)
Hire purchase contracts (1,189) 15,014 (79,000) (65,175)
--------------------------------------------------------------
TOTAL (211,570) (41,616) (79,000) (332,186)
==============================================================
</TABLE>
27
<PAGE>
INSTANT CASH LOANS LIMITED
NOTES ON FINANCIAL STATEMENTS
Unaudited with respect to January 31, 1999 and 1998
15 DIRECTORS' TRANSACTIONS
13.1 During the year, a number of unredeemed pledges valued at
(Pounds)15,032 were sold to The Gold Shop, a business owned by Mrs R.
Hallam, shareholder and wife of H. Hallam, director.
3.2 On 12 January 1998, the company purchased a motor vehicle from H.
Hallam, director for (Pounds)15,000.
28
<PAGE>
AUDITORS' REPORT
To the partners of
Calgary Money Marts
We have audited the balance sheets of Calgary Money Marts (a partnership) as at
June 30, 1998 and 1997 and the statements of partners' capital, net earnings and
cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial positions of the partnership as at June 30, 1998 and
1997 and the results of its operations and the changes in its financial position
for the years then ended in accordance with generally accepted accounting
principles.
/s/ Ernst & Young LLP
----------------------
Edmonton, Canada Ernst & Young LLP
April 21, 1999 Chartered Accountants
29
<PAGE>
Calgary Money Marts (a partnership)
BALANCE SHEETS
As at June 30,
<TABLE>
<CAPTION>
1998 1997
$ $
- ---------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash 2,001,232 1,340,977
Accounts receivable 23,634 13,678
Prepaid expenses and deposits 6,710 1,050
- ---------------------------------------------------------------------------
2,031,576 1,355,705
Capital assets [note 2] 76,146 57,497
- ---------------------------------------------------------------------------
2,107,722 1,413,202
===========================================================================
LIABILITIES AND PARTNERS' CAPITAL
Current
Accounts payable and accrued liabilities 9,406 4,500
- ---------------------------------------------------------------------------
Commitments [note 3]
Partners' capital
National Money Mart Co. (18,629) (6,920)
King Mortgage Ltd. 2,116,945 1,415,622
- ---------------------------------------------------------------------------
2,098,316 1,408,702
- ---------------------------------------------------------------------------
2,107,722 1,413,202
===========================================================================
</TABLE>
See accompanying notes
30
<PAGE>
Calgary Money Marts (a partnership)
INTERIM BALANCE SHEET
As at December 31,
<TABLE>
<CAPTION>
(Unaudited)
1998
$
- ------------------------------------------------------------------------
<S> <C>
ASSETS
Current
Cash 2,605,747
Accounts receivable 25,500
Prepaid expenses and deposits 3,748
- ------------------------------------------------------------------------
2,634,995
Capital assets [note 2] 83,320
- ------------------------------------------------------------------------
2,718,315
========================================================================
LIABILITIES AND PARTNERS' CAPITAL
Current
Accounts payable and accrued liabilities 114,846
- ------------------------------------------------------------------------
Commitments [note 3]
Partners' capital
National Money Mart Co. (35,525)
King Mortgage Ltd. 2,638,994
- ------------------------------------------------------------------------
2,603,469
- ------------------------------------------------------------------------
2,718,315
========================================================================
</TABLE>
See accompanying notes
31
<PAGE>
Calgary Money Marts (a partnership)
STATEMENTS OF PARTNERS' CAPITAL
Year ended June 30,
<TABLE>
<CAPTION>
National King
Money Mart Co. Mortgage Ltd. Total
----------------------- ------------------------- --------------------------
1998 1997 1998 1997 1998 1997
$ $ $ $ $ $
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Partners' capital
beginning of year (6,920) 5,044 1,415,622 1,140,895 1,408,702 1,145,939
Net earnings for
the year 230,459 155,376 1,476,648 995,561 1,707,107 1,150,937
- ---------------------------------------------------------------------------------------------------------------
223,539 160,420 2,892,270 2,136,456 3,115,809 2,296,876
Drawings (242,168) (167,340) (775,325) (720,834) (1,017,493) (888,174)
- ---------------------------------------------------------------------------------------------------------------
Partners' capital
end of year (18,629) (6,920) 2,116,945 1,415,622 2,098,316 1,408,702
===============================================================================================================
</TABLE>
See accompanying notes
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Six months ended December 31,
<TABLE>
<CAPTION>
National King
Money Mart Co. Mortgage Ltd. Total
----------------------- ------------------------- --------------------------
1998 1998 1998
$ $ $
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital
beginning of period (18,629) 2,116,945 2,098,316
Net earnings for
the period 131,349 841,605 972,954
- ---------------------------------------------------------------------------------------------------------------
112,720 2,958,550 3,071,270
Drawings (148,245) (319,556) (467,801)
- ---------------------------------------------------------------------------------------------------------------
Partners' capital
end of period (35,525) 2,638,994 2,603,469
===============================================================================================================
</TABLE>
See accompanying notes
32
<PAGE>
Calgary Money Marts (a partnership)
STATEMENTS OF NET EARNINGS
Year ended June 30,
<TABLE>
<CAPTION>
1998 1997
$ $
- ------------------------------------------------------------
<S> <C> <C>
REVENUE
Cheque cashing 2,555,173 1,930,642
Miscellaneous 188,445 187,760
- ------------------------------------------------------------
2,743,618 2,118,402
- ------------------------------------------------------------
EXPENSES
Salaries and benefits 430,131 394,030
Rent 147,578 143,701
Management fees [note 4] 120,000 120,000
Telephone and utilities 54,838 52,417
NSF cheques 53,947 35,822
Bank charges and interest 49,031 42,370
Travel and promotion 33,568 39,880
Security 33,221 28,851
Office 26,110 26,139
Advertising 22,289 34,541
Amortization 19,766 11,317
Repairs and maintenance 14,628 10,430
Taxes and licenses 10,248 10,327
Insurance 8,590 8,991
Professional fees 8,553 8,649
Software 4,013
- ------------------------------------------------------------
1,036,511 967,465
- ------------------------------------------------------------
Net earnings for the year 1,707,107 1,150,937
============================================================
</TABLE>
See accompanying notes
33
<PAGE>
Calgary Money Marts (a partnership)
INTERIM STATEMENTS OF NET EARNINGS
(Unaudited)
Six month period ended December 31,
<TABLE>
<CAPTION>
1998 1997
$ $
- -----------------------------------------------------------
<S> <C> <C>
REVENUE
Cheque cashing 1,462,905 1,283,155
Miscellaneous 96,280 76,057
- -----------------------------------------------------------
1,559,185 1,359,212
- -----------------------------------------------------------
EXPENSES
Salaries and benefits 243,174 208,950
Rent 82,605 72,353
Management fees 60,000 60,000
Telephone and utilities 31,806 26,018
NSF cheques 30,500 40,581
Bank charges and interest 30,203 24,439
Security 21,506 15,070
Travel and promotion 20,057 19,381
Office 14,940 12,774
Insurance 12,397 9,906
Amortization 11,611 9,883
Advertising 8,731 5,921
Repairs and maintenance 8,649 8,516
Professional fees 8,122 6,414
Taxes and licenses 1,930 761
- -----------------------------------------------------------
586,231 520,967
- -----------------------------------------------------------
Net earnings for the period 972,954 838,245
</TABLE>
34
<PAGE>
Calgary Money Marts (a partnership)
STATEMENTS OF CASH FLOWS
Year ended June 30,
<TABLE>
<CAPTION>
1998 1997
$ $
- ----------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net earnings for the year 1,707,107 1,150,937
Add item not involving cash for operations:
Amortization 19,766 11,317
- ----------------------------------------------------------------------------
1,726,873 1,162,254
Net change in non-cash working capital:
Accounts receivable (9,956) (3,378)
Prepaid expenses and deposits (5,660)
Accounts payable and accrued liabilities 4,906
- ----------------------------------------------------------------------------
1,716,163 1,158,876
- ----------------------------------------------------------------------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Partners drawings (1,017,493) (888,174)
- ----------------------------------------------------------------------------
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES
Purchase of capital assets (38,415) (48,917)
- ----------------------------------------------------------------------------
Increase in cash for the year 660,255 221,785
Cash, beginning of year 1,340,977 1,119,192
- ----------------------------------------------------------------------------
Cash, end of year 2,001,232 1,340,977
============================================================================
</TABLE>
See accompanying notes
35
<PAGE>
Calgary Money Marts (a partnership)
INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
Six month period ended December 31,
<TABLE>
<CAPTION>
1998 1997
$ $
- ----------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Cash receipts from customers 1,557,319 1,318,631
Cash paid to suppliers and employees (466,218) (410,501)
- ----------------------------------------------------------------------------
Cash flows from operating activities 1,091,101 908,130
- ----------------------------------------------------------------------------
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES
Purchase of capital assets (18,785) -
- ----------------------------------------------------------------------------
Cash flows used in investing activities (18,785) -
- ----------------------------------------------------------------------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Partners drawings (467,801) (400,981)
- ----------------------------------------------------------------------------
Cash flows used in financing activities (467,801) (400,981)
- ----------------------------------------------------------------------------
Increase (decrease) in cash for the period 604,515 507,149
Cash, beginning of period 2,001,232 1,340,977
- ----------------------------------------------------------------------------
Cash, end of period 2,605,747 1,848,126
============================================================================
</TABLE>
36
<PAGE>
Calgary Money Marts (a partnership) operates a cheque cashing business in
Calgary, Canada.
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These financial statements are prepared in accordance with Canadian generally
accepted accounting principles and are presented in Canadian dollars. The
accounting policies of the partnership also comply, in all material respects,
with US generally accepted accounting principles.
These financial statements reflect only the assets, liabilities, revenues and
expenses of the partnership. Other assets, liabilities, revenues and expenses,
including income taxes on partnership income of the partners are not included in
these financial statements.
Capital assets
Capital assets are recorded at cost. Amortization is provided at the following
rates and methods per annum:
Computer equipment 30% declining balance
Furniture and fixtures 20% declining balance
Leasehold improvements 20% straight-line
2. CAPITAL ASSETS
Capital assets consist of the following:
<TABLE>
<CAPTION>
1998 1997
------------------------------- --------
Accumulated Net book Net book
Cost amortization value value
$ $ $ $
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer equipment 57,628 21,118 36,510 41,579
Furniture and fixtures 81,891 68,901 12,990 15,918
Leasehold improvements 128,748 102,102 26,646
- -------------------------------------------------------------------------------------
268,267 192,121 76,146 57,497
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998 (Unaudited)
-------------------------------------
Accumulated Net book
Cost amortization value
$ $ $
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment 57,628 26,593 31,035
Furniture and fixtures 90,966 71,107 19,859
Leasehold improvements 138,458 106,032 32,426
- -------------------------------------------------------------------------------------
287,052 203,732 83,320
=====================================================================================
</TABLE>
37
<PAGE>
3. COMMITMENTS
The future minimum lease payments under long-term operating leases for office
and business premises are as follows:
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1998 1998
$ $
<S> <C> <C>
1999 158,085 155,558
2000 137,393 132,986
2001 122,291 117,414
2002 115,213 112,995
2003 83,252 36,803
- -------------------------------------------------------------
616,234 555,756
=============================================================
</TABLE>
4. RELATED PARTY TRANSACTION
Management fees of $120,000 (1997 - $120,000) were paid to a partner, King
Mortgage Ltd. During the unaudited six months ended December 31, 1998
management fees of $60,000 (1997 - $60,000) were paid to a partner, King
Mortgage Ltd.
5. SUBSEQUENT EVENT
On February 17, 1999, National Money Mart Company, a wholly owned subsidiary of
Dollar Financial Group Inc. purchased the remaining interest in the partnership
that they did not previously own.
6. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or
after January 1, 2000, and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems failure
which could affect an entity's ability to conduct normal business operations.
It is not possible to be certain that all aspects of the Year 2000 Issue
affecting the entity, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
7. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES (UNAUDITED)
The accompanying consolidated financial statements have been prepared in
accordance with Canadian GAAP and are presented in Canadian Dollars. The
accounting policies of the Company also comply, in all material respects, with
US GAAP as of June 30, 1998 and 1997 and at December 31, 1998 and therefore the
financial results would not require amendment if the financial statements were
to be prepared in accordance with US GAAP.
38
<PAGE>
UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL DATA
The following unaudited condensed combined pro forma balance sheet as of
December 31, 1998 and the unaudited condensed combined pro forma statements of
operations for the year ended June 30, 1998 and for the six months ended
December 31, 1998 set forth herein give effect to the acquisition by Dollar
Financial Group, Inc. ("Company" or "DFG") of Instant Cash Loans, LTD. ("ICL")
on February 10, 1999 and to the acquisition by National Money Mart Company, a
subsidiary of the Company, of Calgary Money Mart Partnership ("Calgary") on
February 17, 1999 (collectively the "Acquisitions"). The unaudited condensed
combined pro forma balance sheet assumes the acquisitions of ICL and Calgary
occurred on December 31, 1998. The unaudited condensed combined pro forma
statements of operations for the twelve months ended June 30, 1998 and for the
six months ended December 31, 1998 assume that these acquisitions had occurred
as of the beginning of the periods presented. See notes to the unaudited
condensed combined pro forma financial statements for further explanation of
these transactions.
The unaudited condensed combined pro forma financial statements are not
necessarily indicative of what the Company's results of operations and balance
sheet would have been had the Acquisitions been consummated at the indicated
dates, nor are they indicative of the Company's results of operations and
balance sheet of any future period.
For convenient translation purposes, an exchange rate of
$1.00=(Pounds).6020 has been utilized in connection with the acquisition of ICL,
which is a United Kingdom corporation, and $1.00=C$1.5344 has been utilized in
connection with the acquisition of Calgary, which is a Canadian partnership. For
purposes of translating ICL's and Calgary's operating results for the year ended
June 30, 1998, an average exchange rate of $1.00=(Pounds).6073 and
$1.00=C$1.4170 has been used; for purposes of translating ICL's and Calgary's
operating results for the six months ended December 31, 1998, an average
exchange rate of $1.00=(Pounds).6007 and $1.00=C$1.5281 has been used.
39
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
UNAUDITED CONDENSED COMBINED CONSOLIDATED
PROFORMA BALANCE SHEET
DECEMBER 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Historical(c)
-------------
Pro Forma Pro Forma
DFG ICL Calgary Adjustments(a) Combined
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 61,979 $1,040 $1,698 $ 64,717
Accounts receivable 12,462 4,528 17 17,007
Property and equipment, net 8,841 756 54 9,651
Intangible assets 95,930 0 0 $13,172 109,102
Prepaid expenses and other assets 6,619 2 3 6,624
-------------------------------------------------------------------
Total assets $185,831 $6,326 $1,772 $13,172 $207,101
===================================================================
Liabilities and shareholder's equity
Accounts payable and accrued expenses $ 23,324 $2,716 $ 75 $ 26,115
Revolving credit facilities 18,500 0 0 18,500
Long-term debt 112,656 1,485 0 $16,994 131,135
Shareholder's equity 31,351 2,125 1,697 (3,822) 31,351
-------------------------------------------------------------------
Total liabilities and shareholder's equity $185,831 $6,326 $1,772 $13,172 $207,101
===================================================================
</TABLE>
40
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
UNAUDITED CONDENSED COMBINED CONSOLIDATED PRO FORMA
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1998
(In thousands)
<TABLE>
<CAPTION>
Historical(b)
-------------
Adjustments Pro Forma
for as
DFG ICL Calgary Acquisitions Adjusted
-------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $111,185 $4,801 $1,936 ($442) (d),(j) $117,480
Store and regional expenses:
Salaries and benefits 33,670 733 303 (36) (d) 34,670
Occupancy 9,656 293 104 10,053
Depreciation 2,018 94 14 2,126
Other 24,002 1,148 225 (25) (d) 25,350
-------------------------------------------------- ---------------
Total store and regional expenses 69,346 2,268 646 (61) 72,199
Corporate expenses 12,462 642 85 (167) (e) 13,022
Loss on store closings and sales 45 0 0 45
Other depreciation and amortization 4,776 40 0 439 (f) 5,255
Interest expense 12,945 86 0 1,849 (g) 14,880
Writedown of goodwill 12,870 0 0 12,870
-------------------------------------------------- ---------------
(Loss) income before income taxes (1,259) 1,765 1,205 (2,502) (791)
Income tax provision 5,538 550 0 124 (h) 6,212
-------------------------------------------------- ---------------
Net (loss) income ($6,797) $1,215 $1,205 ($2,626) ($7,003)
================================================== ===============
Pro forma adjusted EBITDA (i) $ 34,518
===============
</TABLE>
41
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
INTERIM UNAUDITED CONSOLIDATED PRO FORMA
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Historical(c)
-------------
Adjustments Pro Forma
for as
DFG ICL Calgary Acquisitions Adjusted
-------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 56,020 $3,320 $1,100 ($266) (d),(j) $ 60,174
Store and regional expenses:
Salaries and benefits 17,026 469 171 (15) (d) 17,651
Occupancy 4,662 226 59 4,947
Depreciation 1,005 94 8 1,107
Other 11,844 874 133 (13) (d) 12,838
-------------------------------------------------- ---------------
Total store and regional expenses 34,537 1,663 371 (28) 36,543
Corporate expenses 6,346 459 42 (97) (e) 6,750
Loss on store closings and sales 50 0 0 50
Other depreciation and amortization 2,823 30 0 219 (f) 3,072
Recapitalization costs 2,551 0 0 2,551
Non-cash compensation 10,024 0 0 10,024
Interest expense 6,498 84 0 925 (g) 7,507
-------------------------------------------------- ---------------
(Loss) income before income taxes and
extraordinary item (6,809) 1,084 687 (1,285) (6,323)
Income tax (benefit) provision (363) 438 0 124 (h) 199
-------------------------------------------------- ---------------
Income (loss) before extraordinary item (6,446) 646 687 (1,409) (6,522)
Extraordinary loss on debt extinguishment
(net of income tax benefit of $45) 85 0 0 85
-------------------------------------------------------------------------
Net (loss) income ($6,531) $ 646 $ 687 ($1,409) ($6,607)
=========================================================================
Pro forma adjusted EBITDA (i) $ 18,157
===============
</TABLE>
42
<PAGE>
NOTES TO UNAUDITED CONDENSED COMBINED
PRO FORMA FINANCIAL DATA
Acquisitions
The acquisition of ICL for $11.4 million was funded solely with the
issuance of the Company's 10 7/8% Senior Subordinated Notes due 2006. The
acquisition was accounted for under the purchase method of accounting.
The acquisition of Calgary for $5.6 million was also funded solely with the
issuance of the Company's 10 7/8% Senior Subordinated Notes due 2006 and was
accounted for under the purchase method of accounting.
The proforma results of operations adjustments for the year ended June 30,
1998 and for the six months ended December 31, 1998 are those necessary to
reflect the Company's net income as if the Acquisitions had taken place as of
the beginning of the periods presented.
The pro forma adjustments are based upon available information and upon
certain assumptions that the Company believes are reasonable. The unaudited pro
forma financial statement data are provided for informational purposes only and
are not necessarily indicative of the Company's results of operations that would
actually have been obtained had such acquisitions been completed as of the
beginning of the periods presented, or that may be obtained in the future.
Notes
(a) Represents the recording of assets and liabilities of ICL and Calgary under
the purchase method of accounting as though the acquisition had occurred on
December 31, 1998. These amounts include recording the excess of cost over
the fair value of net assets acquired (goodwill).
(b) Represents the historical consolidated statement of operations of the
Company for the twelve months ended June 30, 1998.
(c) Represents the historical consolidated financial statements of the Company
as of and for the six months ended December 31, 1998.
(d) Represents the revenues of the pawn brokering segment of ICL, (which was
not purchased by the Company) of $226,000 and $78,000 for the year ended
June 30, 1998 and the six months ended December 31, 1998, respectively.
Also, reflects the salaries and benefits and other expenses of the pawn
brokering segment of ICL of $36,000 and $25,000 for the year ended June 30,
1998 and $15,000 and $13,000 for the six months ended December 31, 1998,
respectively.
(e) Reflects the management fees paid to former officers for ICL and Calgary of
$82,000 and $85,000, respectively for the year ended June 30, 1998 and
$58,000 and $39,000, respectively for the six months ended December 31,
1998.
(f) Reflects an increase in amortization expense in excess of historical
amounts as a result of the aggregate excess of the purchase price over the
fair value of identifiable net assets, or goodwill, of approximately $13.2
million, amortized using the straight line method over a useful life of
thirty years, resulting in additional amortization of $439,000 and $219,000
for the year ended June 30, 1998 and the six months ended December 31,
1998, respectively.
(g) Reflects an adjustment for interest expense of $1,849,000 and $925,000 for
the year ended June 30, 1998 and the six months ended December 31, 1998,
respectively, through the issuance of the Company's 10 7/8% Senior
Subordinated Notes Due 2006.
43
<PAGE>
(h) Represents the income tax impact of the Acquisitions as if the acquired
companies were wholly owned by the Company for the year ended June 30, 1998
and for the six months ended December 31, 1998, based on the Company's
estimated tax rate of 34%, after giving effect to the pro forma adjustments
including the non-deductible amortization of intangible assets (goodwill).
The pro forma adjustment is less than the statutory rate of 34% due to non
deductible amortization of intangible assets, interest expense from the
issuance of the Company's 10 7/8% Senior Subordinated Notes Due 2006, and a
provision for income taxes on the historical results of Calgary which was
previously elected to be taxed as a partnership, for which no income taxes
were provided in Calgary's historical statement of retained earnings.
(i) Adjusted EBITDA is earnings before interest, taxes, depreciation,
amortization, noncash charges, recapitalization costs and loss on store
closings and sales. Adjusted EBITDA does not represent cash flows as
defined by generally accepted accounting principles and does not
necessarily indicate that cash flows are sufficient to fund all of the
Company's cash needs. Adjusted EBITDA should not be considered in
isolation or as a substitute for net income (loss), cash flows from
operating activities, or other measures of liquidity determined in
accordance with generally accepted accounting principles. The Adjusted
EBITDA margin represents Adjusted EBITDA as a percentage of revenues.
Management believes that these ratios should be reviewed by prospective
investors because the Company uses them as one means of analyzing its
ability to service its debt, the Company's lenders use them for the purpose
of analyzing the Company's performance with respect to the Company's new
revolving credit facility and the Indenture, and the Company understands
that they are used by certain investors as one measure of a company's
historical ability to service its debt. Not all companies calculate EBITDA
in the same fashion and therefore these ratios as presented may not be
comparable to other similarly titled measures of other companies.
(j) Increase in returned items from post-dated checks due to the elimination of
the use of check guarantee cards. During the year ended June 30, 1998 and
the six months ended December 31, 1998, ICL was protected from returned
items for any check under (Pounds)1,500 by the issuing bank when a check
guarantee identification was presented. This protection was subsequently
eliminated and the charge, had this change been effective as of the
beginning of the periods presented, is approximately $216,000 and $188,000
for the year ended June 30, 1998 and the six months ended December 31,
1998, respectively.
44
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.24 Agreement for the sale and purchase of shares of Instant Cash
Loans, LTD. dated February 10, 1999 with Dollar Financial Group,
Inc., DFG Acquisition, LTD., Henry Hallam, Rachel Hallam and
shareholders signatory thereto.
10.25 Purchase Agreement dated February 17, 1999 by and among national
Money Mart Company (a subsidiary of Dollar Financial Group,
Inc.), King Mortgage LTD. And Denis Willner to purchase the
remaining 86.5% partnership interest in Calgary Money Mart
Partnership.
</TABLE>
45
<PAGE>
EXHIBIT 10.24
DATED February 1999
---------------------------------
(1) RACHEL HALLAM AND OTHERS
(2) HENRY HALLAM
(3) DFG ACQUISITION LIMITED
(4) DOLLAR FINANCIAL GROUP, INC.
____________________________________________
AGREEMENT
---------
for the sale and purchase of shares in
INSTANT CASH LOANS LIMITED
____________________________________________
Ref: C45/D500-001
Date: 10 February 1999 (v.3)
<PAGE>
CONTENTS
- --------
<TABLE>
<CAPTION>
Clause Heading
- ------ -------
<S> <C>
1 Definitions and Interpretations
2 Sale and purchase of the Shares
3 Consideration
4 Completion
5 Warranties
6 Breach of Warranty
7 Undertakings by the Warrantors
8 Restrictions on the Warrantors
9 Guarantee
10 Nature of obligations
11 Announcements
12 General
13 Communications
14 Proper Law
Schedule Description
- -------- -----------
1 Details of the Vendors
2 Particulars of the Company
3 The Properties
4 Warranties
5 Tax Deed
6 Payment of the Subsequent Consideration
7 Vendor Limitations
Appendix Description
- -------- -----------
A The Accounts
B Management Accounts
Documents in the Agreed Form
- ----------------------------
Disclosure Letter
Directors' Letter of Resignation
Auditors' resignation
Letters of release from Vendors
Mr Hallam's service agreement
Power of attorney
First and Subsequent Loan Notes
Bank Guarantee
Rachael Hallam's Loan Note
</TABLE>
<PAGE>
THIS AGREEMENT is made on February 1999 BETWEEN:-
- -------------- -------
(1) The persons whose names and addresses are set out in the first
schedule ("Vendors"); and
---------
(2) HENRY HALLAM of Nuthall Lodge, 29 Nottingham Road, Nottingham, NG16
1DH ("Mr Hallam");
-------------
(3) DFG ACQUISITION LIMITED a company registered in England under No.
3701758 whose registered office is at c/o Ernst & Young, Rolls House,
7 Rolls Building, Fetter Lane, London EC4A 1NH ("Purchaser"); and
-----------
(4) DOLLAR FINANCIAL GROUP, INC. a company registered in the U.S.A. of
Daylesford Plaza, Suite 210, 1436 Lancaster Avenue, Berwyn, PA 19312,
U.S.A. ("Guarantor").
-----------
1. DEFINITIONS AND INTERPRETATION
- ----------------------------------------
1.1 In this agreement unless the context otherwise requires:-
"Accounts" means the audited balance sheet as at the Balance Sheet Date and
----------
the audited profit and loss account for the period ended on the Balance
Sheet Date of the Company together with the notes and directors' reports
and other documents annexed to them; (and for the purposes of
identification only copies of the Accounts have been signed by or on behalf
of the parties to this agreement and are annexed as appendix "A");
"Agreed Form" means in a form agreed by and signed by or on behalf of the
-------------
parties to this agreement;
"Associate" means any person with whom any of the Warrantors may be
-----------
connected within the meaning of section 839 of the Taxes Act or for
whom any of them may be a personal representative;
"Auditors" means the auditors for the time being of the Company;
----------
"Balance Sheet Date" means 31 July 1998;
--------------------
"Bank" means the National Westminster Bank plc;
------
"Bank Guarantee" means the guarantee in the Agreed Form from the Bank to
----------------
the Vendors guaranteeing payment of the First Loan Notes and the
Subsequent Loan Notes;
"business day" means a day on which banks generally are open in the City of
--------------
London for the transaction of normal banking business;
<PAGE>
"Companies Act" means the Companies Act 1985 (as amended or re-enacted by
---------------
the Companies Act 1989);
"Company" means Instant Cash Loans Limited, details of which are set out in
---------
the second schedule;
"Completion" means the date upon which completion of the sale and purchase
------------
of the Shares takes (or should take) place pursuant to this agreement
or (as the case may be) the date of actual completion of the sale and
purchase of the Shares;
"Consideration" means the aggregate consideration for the Shares as
---------------
referred to in clause 3 and the sixth schedule and "Initial
--------
Consideration" means the aggregate consideration for the Shares as
--------------
referred to in clause 3.2.1; "Subsequent Consideration" shall bear the
---------------------------
meaning given to it in clause 3 and the sixth schedule;
"Contribution Agreement" means the Contribution Agreement of even date
------------------------
between the Warrantors;
"Customer's Cheque" means a cheque drawn by the Company's customer in
-------------------
favour of the Company;
"Disclosure Letter" means the letter in the Agreed Form from the Warrantors
-------------------
to the Purchaser dated as at the date of this agreement;
"EBITDA" means earnings before interest, taxes, depreciation, and
--------
amortisation;
"Earn Out Period" shall have the meaning given to it by the sixth schedule;
-----------------
"event" includes any act, omission, transaction or circumstance (including
-------
any of such matters provided for under this agreement);
"First Loan Notes" means the loan notes in the Agreed Form to be issued by
------------------
the Purchaser to the Vendors credited as fully paid for the Initial
Consideration;
"First Party Cheque Cashing" means the payment by the Company to its
----------------------------
customer of an amount equal to the par value of a post dated
Customer's Cheque (less an amount on account of the Company's fees);
"Interest" means 2 percentage points above the base rate from time to time
----------
of the Bank;
<PAGE>
"Management Accounts" means the management accounts of the Company for the
---------------------
period from the Balance Sheet Date to 31 December 1998 (and for the
purposes of identification only, copies of the Management Accounts
have been signed by and on behalf of the parties to this agreement and
are annexed as Appendix "B");
"Pawn Broking Agreement" means the deed of even date between the Company
------------------------
and Rachel Djadi-Hallam assigning various pawn broking and other
agreements to Rachel Djadi-Hallam;
"Pre-Sale Dividends" a dividend of approximately (Pounds)750,000 net of ACT
--------------------
which was declared by the Company's directors in favour of Rachel
Djadi-Hallam on the date of this agreement to be satisfied by the
transfer of certain agreements pursuant to an agreement annexed to the
Disclosure Letter;
"Properties" means the properties briefly described in the Property
------------
Schedule or any one or more of them or any part of or interest in any
of such properties;
"Property Schedule" means the third schedule;
-------------------
"Purchaser's Solicitors" means Titmuss Sainer Dechert of 2 Serjeants' Inn,
------------------------
London EC4Y 1LT;
"Revenue" means all fiscal authorities (national or local) whether of the
---------
United Kingdom or elsewhere;
"Salary" means any accrued outstanding salary which may be due to Mr Hallam
--------
by the Company as at Completion and is to be waived pursuant to clause
7.7;
"Shares" means the whole of the issued and allotted share capital of the
--------
Company at Completion;
"Subsequent Loan Notes" means loan notes in the Agreed Form to be issued by
-----------------------
the Purchaser to the Vendors credited as fully paid in accordance with
the sixth schedule;
"Taxation" includes all forms of taxation, duties (including stamp duty),
----------
levies, imposts, charges, withholdings, national insurance and other
contributions and PAYE liabilities (including in all cases any
penalty, fine, interest or surcharge in respect of the same) whenever
created or imposed and whether of the United Kingdom or elsewhere;
<PAGE>
"Tax Deed" means a deed in the form set out in the fifth schedule duly
----------
executed by the Covenantors referred to in it;
"Taxes Act" means the Income and Corporation Taxes Act 1988;
-----------
"Third Party Cheque Cashing" means the payment by the Company to its
----------------------------
customer of an amount equal to the par value of a Third Party Cheque
(less an amount on account of the Company's fees); and a "Third Party
------------
Cheque" means a cheque drawn by a third party in favour of the
-------
Company's customer (and not in favour of any other person or drawn by
the customer in favour of the Company);
"Vendors' Loan Notes" means the loan notes entered into between the Company
---------------------
and each of the Vendors dated 7 March 1996;
"Vendors' Solicitors" means Browne Jacobson of 44 Castle Gate, Nottingham,
---------------------
NG1 7BJ;
"Warranties" means the representations, warranties and undertakings on the
------------
part of the Warrantors contained in the fourth schedule and which are
made by the Warrantors pursuant to clause 5; and
"Warrantors" means the Vendors and Mr Hallam and any one or more of them.
------------
1.2 In this agreement unless the context otherwise requires:-
1.2.1 any reference to a clause, schedule or appendix (other than to a schedule
to a statutory provision) is a reference to a clause of or schedule or
appendix to this agreement; and the schedules and appendices form part
of and are deemed to be incorporated in and in references to this
agreement;
1.2.2 any reference to a statute or statutory provision includes a reference to
that provision as amended, re-enacted or replaced and any regulations
or orders made under such provisions from time to time whether before
or after the date of this agreement and any former statutory provision
replaced (with or without modification) by the provision referred to
except to the extent that any amendment, re-enactment or replacement
coming into force after the date of this agreement would increase or
extend the liability of the parties to one another;
<PAGE>
1.2.3 any reference to persons includes a reference to firms, corporations or
unincorporated associations;
1.2.4 any reference to the singular includes a reference to the plural and vice
versa; and any reference to the masculine includes a reference to the
feminine and vice versa;
1.2.5 a reference to an SSAP is a reference to a Statement of Standard
Accounting Practice which has been adopted as an accounting standard
by the Accounting Standards Board;
1.2.6 any agreement, warranty, representation, indemnity, covenant or
undertaking on the part of two or more persons shall be deemed to be
given or made by such persons jointly and severally save for
Warranties 1.1.1 to 1.1.2.7.2 which are given severally only by each
Warrantor in respect of himself or herself and in respect of no other
Warrantor and Warranty 7.5 which shall be given solely by Rachel
Djadi-Hallam and Henry Hallam, jointly and severally; and
1.2.7 words and expressions defined in the Companies Act bear the same
respective meanings.
1.3 Headings and titles are used for ease of reference only and do not affect
the interpretation of this agreement.
1.4 Any matter which shall be relevant to any of the Warranties and which be
known to at least one of the Warrantors, shall be deemed to be known
by the other Warrantors as well.
1.5 If any statement is qualified by the expression "to the best of the
-------------- ---
Warrantors' knowledge information and belief" or "so far as the
--------------------------------------------- --------------
Warrantors are aware" or any similar expression, that expression shall
---------------------
be deemed to include a warranty by the makers thereof that the
statement has been made by them after due and careful enquiry, save
that the Warrantors shall not be required to make any enquiry of any
past or present customer of the Company, and the Warrantors shall in
particular be deemed to have knowledge of anything of which the
following persons, viz the Auditors (in relation to Warranties 3 and
8), Swiftscan Limited (in relation to Warranties 5.4 and 5.5) and the
Vendor's Solicitors ought reasonably to have knowledge given their
particular position in and responsibilities to the Vendors and the
Company.
<PAGE>
2 SALE AND PURCHASE OF THE SHARES
- -----------------------------------------
2.1 The Vendors shall sell the Shares to the Purchaser and the Purchaser,
relying on the Warranties and the other obligations of the Warrantors
under this agreement, shall purchase the Shares.
2.2 The Vendors shall sell the Shares with full title guarantee free from
all liens, charges, encumbrances and adverse claims (and whether or
not the Vendors know or could reasonably be expected to know about
such matters) together with all rights now or hereafter attaching to
them including all dividends declared or payable or distributions made
or proposed on or after the Balance Sheet Date (other than the Pre-
Sale Dividends).
2.3 The Vendors irrevocably and unconditionally waive (and shall procure
such a waiver by their nominee(s) of) all rights of pre-emption or
other restrictions on transfer which they or such nominee(s) may have,
whether under the Articles of Association of the Company or otherwise,
in respect of the transfer to the Purchaser or its nominee(s) of the
Shares or any of them and shall execute and deliver (or procure the
execution and delivery of) all such deeds of waiver in respect thereof
as the Purchaser may require.
2.4 The Purchaser shall not be obliged to complete the purchase of some
only of the Shares unless the purchase of all the Shares is completed
simultaneously in accordance with the provisions of this agreement.
3 CONSIDERATION
- -----------------------
3.1 The aggregate consideration payable for the Shares shall be the
Initial Consideration (described in clause 3.2) and the Subsequent
Consideration (which shall be determined and satisfied in accordance
with the sixth schedule subject to a maximum of (Pounds)2,000,000).
3.2 The Initial Consideration shall be the sum of (Pounds)6,020,000 which
shall be satisfied by the issue at Completion to the Vendors of the
First Loan Notes (accompanied by a Bank Guarantee in respect thereof
duly executed by the Bank).
3.3 The Initial Consideration and the Subsequent Consideration shall be
apportioned between the various Vendors in accordance with the first
schedule.
<PAGE>
3.4 Mr Hallam has agreed to become a party to this agreement and to
undertake the obligations imposed on him pursuant to it in
consideration of:
3.4.1 the Purchaser and the Guarantor agreeing to become a party to this
agreement at Mr Hallam's request;
3.4.2 the Purchaser undertaking to procure that the Company will enter into
a service agreement in the Agreed Form with Mr Hallam at Completion;
and
3.4.3 the payment to Mr Hallam of the sum of (Pounds)1 by the Purchaser,
(the receipt of which he acknowledges).
4 COMPLETION
- --------------------
4.1 Completion shall take place at the offices of the Purchaser's
Solicitors immediately after the exchange of this agreement when the
parties shall comply with their respective obligations as set out in
this clause.
4.2 The Warrantors shall deliver to the Purchaser or (at the option of the
Purchaser) to its nominee(s):-
4.2.1 duly executed share transfers in respect of the Shares in favour of
the Purchaser or as it may direct, together with the relevant share
certificates or other documents of title and any power of attorney or
other authority under which such transfers have been executed and an
indemnity in such form as the Purchaser shall require in relation to
any missing certificates;
4.2.2 written resignations and releases executed as deeds in the Agreed Form
from all persons (other than any directors or secretaries remaining at
the request of the Purchaser or appointed at the instance of the
Purchaser) who, on or immediately prior to Completion, may be
directors or secretaries of the Company, resigning their offices and
releasing the Company from all claims and rights of action existing at
the date of this agreement whether by way of compensation,
remuneration, redundancy payments or otherwise;
4.2.3 the unqualified resignation with effect from Completion of the present
Auditors as auditors of the Company by notice in accordance with
section 392 of the Companies Act which shall contain a statement in
accordance with section 394 of the Companies Act together with
confirmation that they have no claims against the Company for unpaid
fees or expenses;
<PAGE>
4.2.4 the common seal, the certificate of incorporation and copies of the
Memorandum and Articles of Association (containing copies of all such
resolutions and agreements as are referred to in section 380 of the
Companies Act) of the Company and the registers and books required by
the Companies Act to be kept by it all of which shall be written up to
date as at Completion;
4.2.5 all deeds and documents of title relating to the Properties (including
all insurance policies, premium receipts, maintenance contracts and
other documents relating to the Properties in the Company's possession
or under its control) and certified copies of any documents being held
by mortgagees;
4.2.6 a letter from the Warrantors specifying the whereabouts of any other
documents, books and records of the Company which shall not be held at
---
the Properties and directing the holders of them to deliver them up to
the Purchaser's authorised representatives immediately upon request;
4.2.7 certificates or statements from each of the banks at which the Company
maintain accounts of the amounts standing to the credit or debit of
such accounts at the close of business on the second business day
preceding Completion together with a list of all unpresented cheques
and uncleared lodgements which upon presentation or clearance would be
debited or credited to such accounts;
4.2.8 letters of release executed as deeds and such other evidence as the
Purchaser may require of the irrevocable and unconditional release and
discharge of the Company from all liabilities or obligations pursuant
to any bonds, guarantees, indemnities, securities or obligations given
or entered into by the Company to or in favour of any person in
respect of any liabilities or obligations of the Warrantors;
4.2.9 a service agreement in the Agreed Form between the Company and Mr
Hallam signed by him;
4.2.10 powers of attorney in the Agreed Form in relation to the Shares duly
executed by each Vendor;
4.2.11 the Tax Deed;
4.2.12 confirmation that the shareholders agreement dated 7 March 1996
between the Warrantors has been terminated and that the debenture
securing the Vendor's
<PAGE>
Loan Notes has been released;;
4.2.13 a copy of the Accounts in the Agreed Form signed by the Auditors; and
4.2.14 if required by the Purchaser, evidence to the satisfaction of the
Purchaser that any person executing this agreement or any document to
be executed pursuant to it has authority to do so.
4.3 The Warrantors shall on the Completion Date:-
4.3.1 procure that none of them or any of their Associates has any claims or
rights of action against the Company and that none of them or any of
their Associates is in any way obligated or indebted to the Company;
and
4.3.2 deliver to the Purchaser's Solicitors letters executed as deeds in the
Agreed Form confirming that they have complied with clause 4.3.1, and
irrevocably and unconditionally releasing the Company from all
obligations and liabilities as contemplated by clause 4.3.1.
4.4 The Warrantors shall procure that a Board Meeting of the Company will
be held which will transact the following business:-
4.4.1 (subject only to them being stamped) the approval of the transfer of
shares referred to in clause 4.2.1 and the Purchaser and/or its
nominee(s) being entered in the Register of Members as the holders of
the shares specified in those transfers;
4.4.2 the appointment of such persons as the Purchaser may nominate as
directors and secretary of the Company;
4.4.3 the acceptance of the various resignations of officers and auditors
referred to in this clause;
4.4.4 the appointment of such firm of chartered accountants as the Purchaser
may require as auditors to the Company;
4.4.5 the change of the registered office, the accounting reference date and
the bank mandates of the Company in accordance with the Purchaser's
requirements;
4.4.6 such other business as the Purchaser may reasonably require.
4.5 Subject to the conclusion of the matters referred to in the previous
provisions of this clause the Purchaser shall deliver to the Vendors'
Solicitors:-
4.5.1.1 a counterpart Tax Deed duly executed by the Purchaser;
<PAGE>
4.5.1.2 letters of release of the irrevocable and unconditional release and
discharge of the Warrantors from all liabilities and obligations
pursuant to the following guarantees and mortgages given by them in
relation to the Company:-
4.5.1.3 an unlimited guarantee dated 22 March 1995 and given by Mr Hallam in
favour of the Bank;
4.5.1.4 a legal mortgage over the property at 241 Main Street Bulwell dated 11
May 1995 given by Rachel Djadi-Hallam to the Bank;
4.5.1.5 a deed of postponement dated 22 March 1995 and given by Mr Hallam in
favour of the Bank;
4.5.1.6 a second legal mortgage over 29 Nottingham Road, Nottingham dated 29
September 1995 and given by Rachel Djadi-Hallam in favour of the Bank;
4.5.1.7 the First Loan Notes; and
4.5.1.8 the Bank Guarantee executed by the Bank in respect of the First Loan
Notes.
4.5.2 if required by the Vendor, evidence to the satisfaction of the Vendor
that any person executing this agreement or any document to be
executed pursuant to it has authority to do so.
4.6 The Purchaser shall deliver to Mr Hallam a counterpart of the service
agreement in the Agreed Form to be entered into by the Company with Mr
Hallam duly signed on behalf of the Company.
4.7 The Vendors confirm that the Vendors' Solicitors may receive (and give
a good receipt for) the Initial Consideration (and all documents
expressed to be delivered to them at Completion) as agent for the
Vendors and the Purchaser shall not be concerned with the basis upon
which the Initial Consideration (or such documents) shall be
distributed between the various Vendors by the Vendors' Solicitors.
5 WARRANTIES AND REPRESENTATIONS
- ----------------------------------------
5.1 The Warrantors represent and warrant to and undertake with the
Purchaser that, save only as and to the extent fairly disclosed to the
Purchaser in this agreement or in the Disclosure Letter, each of the
Warranties:-
5.1.1 is now and will be at Completion true and accurate; and
5.1.2 is not to be affected or limited by any previous or other disclosures,
express or implied, to the Purchaser, its officers, representatives or
professional advisers.
<PAGE>
5.2 The Warrantors acknowledge that they have previously made
representations to the Purchaser and the Guarantor in the terms of the
Warranties with the intention of inducing the Purchaser and the
Guarantor to enter into this agreement; and the Purchaser and the
Guarantor confirm and the Vendors the Warrantors acknowledge that the
Purchaser and the Guarantor have relied on those representations and
have accordingly been induced by the Warrantors to enter into this
agreement.
5.3 Each of the Warranties, covenants, indemnities and undertakings set
out in this agreement or the Tax Deed is separate and independent.
5.4 The Warrantors agree with the Purchaser for itself and as trustee for
the Company and each of their respective officers and employees to
irrevocably and unconditionally waive any rights remedies or claims
which they may have in respect of any misrepresentation in or omission
from any information or advice supplied or given by the Company or its
respective officers, employees and on which they have relied in giving
the Warranties, unless such misrepresentation or omission was made
fraudulently in preparing the Disclosure Letter or in agreeing to give
the Tax Deed or unless such rights, remedies and claims arise under
the Contribution Agreement of even date made between the Warrantors.
6 BREACH OF WARRANTY
- ----------------------------
6.1 Without restricting the rights or the ability of the Purchaser to
claim damages on any basis (but subject always to the provisions of
the seventh schedule) if it shall be found that any matter which is
the subject of any of the Warranties is not as represented, warranted
or undertaken and the Purchaser or the Company has suffered a loss as
a consequence then, if the Purchaser shall so elect by notice in
writing to them, the Warrantors shall on demand pay to the Purchaser:-
6.1.1 a sum equal to the amount by which the value (or amount) at Completion
of any asset or liability of the Company (computed for this purpose on
the basis that proper provision was made in accordance with the
criteria specified in paragraph 3.1 of the fourth schedule, for the
facts and circumstances in relation to which such breach arose) was
less or, in the case of a liability,
<PAGE>
greater than the value (or amount) at Completion of such asset or
liability (computed for this purpose on the assumption that the facts
and circumstances had been such as to involve no such breach); or if
the Purchaser so elects
6.1.2 a sum equal to the amount by which the value of the Shares shall be
less than it would have been if any such Warranty had been true and
accurate; and in calculating such sum the parties to this agreement
acknowledge that the Consideration was determined by reference to the
EBITDA of the Company for the year ending on the Balance Sheet Date
multiplied by 4.5 and in calculating damages in the event of a breach
of Warranty which arises from circumstances which if they were to
continue would affect the future profitability of the Company
pursuant to a claim made on the basis of this clause 6.1.2 the
Warrantors acknowledge that it would be reasonable to apply such a
formula; and (in either case)
6.1.3 all reasonable costs and expenses incurred by the Company and/or the
Purchaser as a result of such breach.
7 UNDERTAKINGS BY THE WARRANTORS
- ----------------------------------------
7.1 The Warrantors undertake to the Purchaser that as soon as possible
following Completion they will procure the execution of any document
which the Purchaser may reasonably require them to have executed so as
to vest effectively the beneficial and legal ownership of the Shares
in the Purchaser or as it may direct free from all liens, charges,
encumbrances and adverse claims and otherwise to give effect to the
terms of this agreement.
7.2 The Warrantors shall indemnify the Company against all claims which
may be made against it by any person whose resignation from office or
relinquishment of rights the Warrantors may be obliged to procure in
order to comply with this agreement where such claims arise by reason
of the resignation or removal from office or termination of employment
of such person and against all reasonable costs incurred by it which
are incidental to any such claim.
7.3 The Vendors undertake with the Purchaser that, if and for so long as
they remain the registered holders of any of the Shares after
Completion, they will hold the Shares and the dividends and other
distributions of profits (other than the Pre-Sale Dividend) or surplus
or other assets in respect of such Shares and
<PAGE>
all rights arising out of or in connection with them in trust for the
Purchaser and will at all times after Completion deal with and dispose
of such Shares, dividends, distributions and rights as the Purchaser
shall direct and (if so requested by the Purchaser) execute all
instruments of proxy or other documents which may be necessary or
proper to enable the Purchaser to attend and vote at any meeting of
the Company.
7.4 The Warrantors undertake to the Purchaser that they shall pay to the
Purchaser forthwith on demand an amount equal to any fines or other
financial penalties imposed on the Company or its officers at any time
in the future in relation to any contravention of the Consumer Credit
Act 1974 or the Data Protection Act 1984 by reason of any act or
omission which shall have been committed on or prior to the date of
this agreement together with an amount equal to all costs, charges,
expenses, liabilities and losses which the Company or its officers
shall incur in connection with defending any proceedings which shall
be brought against it (or them) in relation to such matters (and for
the avoidance of doubt the Warrantors shall not be liable for loss of
future profits or goodwill).
7.5 The Warrantors undertake to the Purchaser that they shall pay to the
Purchaser forthwith on demand an amount equal to the Excess Returns;
and for this purpose "Excess Returns" means the amount (if any) by
----------------
which:-
7.5.1 the par value of the Customer Cheques and Third Party Cheques encashed
by the Company prior to the date hereof which shall be returned unpaid
by the paying bank to the presenting bank during the one month
following Completion (irrespective of when the relevant cheques were
encashed by the Company) shall exceed;
7.5.2 0.21% of the par value of the Customer Cheques and Third Party Cheques
encashed by the Company during the same period.
7.6 Provided that:-
7.6.1 the liability of each Warrantor under clauses 7.4 and 7.5 (together
with the liability under the Warranties and the Tax Deed) shall not
exceed the amount of the Consideration received or receivable by each
Warrantor pursuant to this agreement, (save that Mr Hallam and Rachel
Djadi-Hallam's
<PAGE>
liability shall be limited to the amount of the Consideration received
or receivable by Rachel Djadi-Hallam pursuant to this agreement);
7.6.2 where the Warrantors have settled in full a claim under clauses 7.4
and 7.5 and the Purchaser or the Company or their respective
successors or assigns (as the case may be) is entitled to recover any
sum ("the Recoverable Sum") from some other person, firm or company in
-------------------
respect of the matter giving rise to that claim, the Purchaser shall
procure that it or the Company (as the case may be) at the Warrantors'
cost and subject to being indemnified and secured by the Warrantors to
the reasonable satisfaction of the Purchaser against all losses,.
liabilities, costs and expenses thereby incurred, shall pursue a claim
for the Recoverable Sum, provided that in the reasonable opinion of
the Purchaser no such claim shall harm the goodwill or the
profitability of the Company, the Purchaser, or any company which
shall be a subsidiary or a holding company of either the Purchaser or
the Company. The Purchaser shall account to the Warrantors for any
amount so recovered after having deducted any costs or expenses
incurred by the Purchaser (and not exceeding any amount paid by the
Warrantors under this clause 7.6 but including any expenses borne by
the Warrantors);
7.6.3 the amount or amounts paid by the Warrantors under clauses 7.4 and 7.5
shall be deemed to constitute a reduction in the Consideration.
7.7 Mr Hallam undertakes to the Purchaser that the Salary has not been
paid to him (or anyone else) prior to Completion. Furthermore, Mr
Hallam unconditionally and irrevocably releases the Company from its
obligations to pay the Salary.
7.8.1 Each of the Vendors undertakes to the Purchaser that they shall not
redeem in whole or in part the Vendors' Loan Notes at any time prior
to the second anniversary of the date of this agreement; and
7.8.1 each of the Vendors unconditionally and irrevocably waives any right
howsoever arising to interest which has already accrued or which may
accrue at any time after the date of this agreement pursuant to the
Vendors' Loan Notes.
<PAGE>
7.9 Rachel Djadi-Hallam undertakes to the Purchaser that any liability she
incurs pursuant to the Pawn Broking Agreement may (if so required) be
set off in whole or in part against any sum(s) the Purchaser may owe
her as Subsequent Consideration and the Purchaser will then account to
the Company for such sum(s).
8 RESTRICTIONS ON THE WARRANTORS
- ----------------------------------------
8.1 In this clause:-
"Business" means the Company's business of First Party Cheque Cashing
--------
and Third Party Cheque cashing or any part thereof.
"directly or indirectly" means (without prejudice to the generality of
----------------------
the expression) either alone or jointly or in partnership with any
other person, firm or company or (except as the holder for investment
purposes only of securities in any company not exceeding 5 per cent in
nominal value of the securities of that class in issue or shares) as
the holder of any interest in or as an employee director agent or
representative of or consultant to any other person firm or company;
and
"Restriction Period" means the period of 5 years from Completion.
------------------
8.2 Each Warrantor severally undertakes to the Purchaser (for itself and
for the benefit of the Company) that he will not (other than for and
on behalf of the Company) without the prior written consent of the
Purchaser directly or indirectly:-
8.2.1 at any time during the Restriction Period, be engaged or concerned or
interested or participate in or carry on any business which is the
same as or similar to or in competition with the Business within a
radius of 5 miles of any of the Properties or within a radius of 5
miles from any other retail premises from which the Company, the
Purchaser or any subsidiary of the Company or the Purchaser shall
carry on the Business at any time during the Earn Out Period;
8.2.2 at any time during the Restriction Period, in relation to a business
which may in any way be the same as or similar to or in competition
with the Business, canvass, solicit or entice the custom of or deal
with to any person who at the date of this agreement or at any time
during the period of two years prior to
<PAGE>
Completion has been a customer of or in the habit of dealing with the
Business; or
8.2.3 at any time during the Restriction Period, in relation to a business
which may in any way be the same as or similar to or in competition
with the Business, offer employment to or employ or offer or conclude
any contract for services with any person who at any time during the
two years before Completion shall have been a director, employee,
consultant or agent of the Company entitled to emoluments (including
commission if any) exceeding the annual rate of (Pounds)10,000; or
8.2.4 at any time during the Restriction Period, knowingly assist any
competitor of the Company to a material extent in carrying on or
developing any business which may in any way be the same as or similar
to or in competition with the Business; or
8.2.5 at any time during the Restriction Period, in relation to a business
which may in any way be the same as or similar to or in competition
with the Business, seek to contract with or engage (in such a way as
to affect the Business adversely) any person who has been contracted
with or engaged to deliver goods or services to the Company at any
time during the period of twelve months prior to the date of this
agreement; or
8.2.6 at any time, solicit or entice or endeavour to entice any employee of
the Company or the Purchaser away from the Company or the Purchaser,
as the case may be; or
8.2.7 at any time, entice or endeavour to entice any person to breach his
contract for services with the Company or the Purchaser;
8.2.8 at any time, (except as required by law) disclose to any person or use
for his own benefit (or that of any other person) any information or
know-how of a confidential nature concerning and relating to the
goodwill of the Company including (without limitation) information and
know-how as to procedures, techniques, customers, finances, business
policy and expansion or forward planning programmes which he shall
have acquired before Completion; or
8.2.9 at any time, falsely represent himself as being connected with or
interested in the Company; or
<PAGE>
8.2.10 at any time, do or say anything likely or calculated to lead any
person, firm or company to withdraw from or cease to continue offering
to the Company any rights then enjoyed by it or in any other way to
cease to do business or reduce the amount of business it transacts
with any member of the Group; or
8.2.11 at any time carry on a business under the names "Money Shop" or
"Instant Cash Loans" or any part combination or abbreviation of such
names or any similar or other names likely to confuse or mislead any
part of the public.
8.3 For the purpose of assuring to the Purchaser the reasonableness of the
provisions of sub-clause 8.2 (but for no other purpose) each of
Warrantors represent and warrant to the Purchaser that so far as they
are aware at least 75% of the number of the Company's customers for
whom the Company encashed a cheque during the period of 12 months
prior to the date of this agreement lived within a radius of 5 miles
from the Property at which their cheques were encashed at the time
their cheques were encashed by the Company provided that the Purchaser
agrees that if this warranty is untrue it shall only make a claim
against a Warrantor if that Warrantor shall also be in breach of the
provisions of clause 8.2 above.
8.4 Each of the Warrantors acknowledge and agree with the Purchaser that:-
8.4.1 each of the sub-clauses contained in clause 8.2 constitutes an
entirely separate severable and independent covenant by and
restriction on him;
8.4.2 the duration, extent and application of each of the restrictions
contained in clause 8.2 are no greater than is necessary for the
protection of the goodwill and trade connections of the Business and
the value of the Company; and
8.4.3 if any restriction contained in clause 8.2 shall be found void but
would be valid if some part thereof were deleted such restriction
shall apply with any such deletion as may be necessary to make it
valid and effective.
9 GUARANTEE
- -------------------
9.1 In consideration of the Vendors entering into this agreement with the
Purchaser at the request of the Guarantor (and for other valuable
consideration the receipt and sufficiency of which the Guarantor
acknowledges), the Guarantor guarantees to the Vendors the due and
punctual payment of all monies due by the Purchaser to the Vendors and
performance of all the
<PAGE>
Purchaser's other obligations arising under this agreement including
the repayment of the Vendors' Loan Notes in accordance with clause 7.8
of this agreement.
9.2 The Guarantor's guarantee ("Guarantee") shall constitute a direct
-----------
primary and unconditional liability to:-
9.2.1 pay on demand to the Vendors any sum or sums which the Purchaser may
become liable to pay; or
9.2.2 perform on demand any obligations of the Purchaser arising under this
agreement without the need for any claim or recourse on the part of
the Vendors against the Purchaser; and
9.2.3 to indemnify the Vendors from all reasonable costs and expenses
arising by reason of any default on the part of the Purchaser.
9.3 The Guarantee shall not be affected by:-
9.3.1 by any time or indulgence granted to the Purchaser by the Vendors or
any variation, act, omission, deed or matter of whatever description
whereby the Guarantor as surety only would or might have been
released;
9.3.2 by any legal limitation, disability or other circumstances (including
for the avoidance of doubt any winding up or cessation of trade)
relating to the Purchaser; or
9.3.3 any irregularity, unenforceability or invalidity of any obligations of
the Purchaser under this agreement.
9.4 The Guarantee shall be a continuing guarantee and shall remain in
force until all the Purchaser's obligations under this agreement have
been performed.
10 NATURE OF OBLIGATIONS
- -------------------------------
10.1 Each of the obligations, representations, warranties, indemnities and
undertakings entered into or made by or on behalf of any of the
parties to this agreement (excluding any obligation fully performed at
Completion) shall continue in full force and effect notwithstanding
Completion taking place.
10.2 The rights and remedies of the Purchaser in respect of a breach of any
provision of this agreement or pursuant to the Tax Deed shall not be
affected by Completion or by whether the matters constituting such
breach or other matters were known or could have been known by the
Purchaser prior to
<PAGE>
Completion and no such actual or constructive knowledge shall in any
way constitute a waiver of any of the Purchaser's rights.
10.3 Subject to the seventh schedule any right or remedy of the Purchaser
in respect of a breach of any provision of this agreement shall be in
addition and without prejudice to all other rights and remedies of the
Purchaser and the exercise or failure to exercise any such right or
remedy shall not constitute a waiver or by the Purchaser of that or of
any of its other rights or remedies.
10.4.1 None of the rights or obligations referred to in this agreement may be
assigned or transferred to any other person without the prior written
consent of all the parties to this agreement save as provided in
clause 10.4.2.
10.4.2 This agreement shall be personal to the parties to it and may not be
assigned by them save that the benefit (but not the burden) of any of
its provisions may be assigned by the Purchaser to:-
10.4.2.1 any company (an "associated company") which shall be a wholly owned
--------------------
subsidiary of the Purchaser or which shall be a holding company of
100% of the shares of the Purchaser or a wholly owned subsidiary of
such holding company but only for so long as such company remains an
associated company of the Purchaser; or
10.4.2.2 the Purchaser's bankers and/or insurers for the time being.
10.5 This agreement shall be binding against and be for the benefit of each
party's personal representatives or other permitted successors in
title.
10.6 Any liability of any of the Warrantors to the Purchaser under this
agreement or the Tax Deed may in whole or in part be released,
compounded or compromised or time or indulgence given by the Purchaser
(in its absolute discretion) as regards any of the Warrantors without
in any way prejudicing or affecting the Purchaser's rights against
any of the others of them in respect of the same or a like liability
whether joint or several or otherwise.
10.7 If all or any part of this agreement is notifiable under the
Restrictive Trade Practices Act 1976 ("the Act"), no provision
---------
contained or implied in the agreement which constitutes a restriction
within the meaning of the Act shall come into effect until the day
after particulars of this agreement (or a memorandum of it) has (have)
been delivered to the Office of Fair Trading in
<PAGE>
accordance with the Act; and for the purposes of this clause,
"agreement" includes this agreement and any ancillary deed or
-----------
agreement which together with this agreement constitutes a single
agreement within the meaning of the Act.
11 ANNOUNCEMENTS
- ----------------------
The parties undertake that none of them shall make any announcement or
issue any circular to the press or shareholders (otherwise than as
required by law or in accordance with the requirements of any
recognised stock exchange concerning the terms and conditions of this
agreement) without the text of such announcement or circular first
being approved by the other parties (such approval not to be
unreasonably withheld or delayed)
12 GENERAL
- -----------------
12.1 Any variation of this agreement shall be binding only if it is
recorded in a document signed by or on behalf of the parties to this
agreement.
12.2 Each party shall pay its own costs in relation to the negotiations
leading up to the sale of the Shares and to the preparation, execution
and carrying into effect of this agreement and of all the other
documents referred to in it
13 COMMUNICATIONS
- ------------------------
13.1 All communications between the parties with respect to this agreement
shall be in writing and delivered by hand or sent by pre-paid post,
(first class if inland, airmail if overseas) or facsimile telecopier
("fax") to the address of the addressee as set out in clause 13.3, or
------
to such other address or fax number in England as the addressee may
from time to time have notified for the purposes of this clause.
13.2 Communications shall be deemed to have been received:-
13.2.1 if delivered by hand, on the day of delivery;
13.2.2 if sent by first class post, two business days after posting exclusive
of the day of posting (or five business days in the case of a posting
to an address outside the United Kingdom);
13.2.3 if sent by fax at the time of transmission or, if the time of
transmission is not during the addressee's normal business hours, at
9.30 a.m. on the next business day provided that notice is followed by
service by hand or post;
<PAGE>
13.3 Communications to:-
13.3.1 each of the Vendors and Mr Hallam, shall be sent to their respective
addresses set out in this agreement;
13.3.2 the Purchaser shall be sent to the following address: Dollar Financial
Group Inc., Daylesford Plaza, Suite 210, 1436 Lancaster Avenue,
Benwyn, P.A. 19312, U.S.A. Fax No: 001 610 296 7844 Marked for the
attention of: Donald Gayhardt
13.3.3 the Guarantor, shall be sent to the following address:-1436 Lancaster
Avenue Suite, 210 Berwyn PA 19312 USA Fax No: 00 1 610 296 7844 Marked
for the attention of: Don Gayhardt
13.4 Communications addressed to the Purchaser and the Guarantor shall, at
the same time as they are sent to the relevant party be copied to Mr
Geoffrey Walters at the Purchaser's Solicitors;
13.5 In proving service:-
13.5.1 by delivery by hand, it shall be necessary only to produce a receipt
for the communication signed by or on behalf of the addressee;
13.5.2 by post, it shall be necessary only to prove that the communication
was contained in an envelope which was duly addressed and posted in
accordance with this clause; and
13.5.3 by fax it shall be necessary only for the communication or a
confirmatory letter to have been delivered by hand or sent by first
class post on the same day but failure of the addressee to receive
such confirmation shall not invalidate the relevant communication
deemed given by fax.
14 PROPER LAW
- --------------------
This agreement shall be governed by English Law and the parties
irrevocably submit to the exclusive jurisdiction of the English
Courts.
SIGNED AS A DEED by )
RACHEL HALLAM )
in the presence of:- )
<PAGE>
SIGNED AS A DEED by )
CHRISTOPHER GILLAM )
in the presence of:- )
SIGNED AS A DEED by )
MARTIN JOYCE )
in the presence of:- )
SIGNED AS A DEED by )
HENRY HALLAM )
in the presence of:- )
EXECUTED AS A DEED by )
DFG ACQUISITION LIMITED)
acting by )
)
)
)
Director:
Director/Secretary:
EXECUTED AS A DEED by )
DOLLAR FINANCIAL )
GROUP, INC )
acting by )
)
)
)
Director:
Director:
<PAGE>
FIRST SCHEDULE
- --------------
THE VENDORS
- -----------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Column 1 Column 2 Column 3 Column 4
- -------- --------- -------- ---------
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name and address Number of Shares held Proportion of the Proportion of the
Initial Consideration Subsequent
to be satisfied at Consideration to be
Completion by the issue satisfied by the issue
of the First Loan Notes of Subsequent Loan
Notes
Rachel Hallam 2,278 `A' ordinary shares (Pounds)3,570,000 63.95%
Nuthall Lodge
29 Nottingham Road
Nottingham
NG16 1DH
Christopher Gillam 1,139 `B' ordinary shares (Pounds)1,225,000 18.025%
Whitewell Hall
Whitewell on the Hill
York
Y06 7JJ
Martin Joyce 1,139 `B' ordinary shares (Pounds)1,225,000 18.025%
Low Hall
Curly Hill
Middleton
Ilkley
LS29 0AQ
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SECOND SCHEDULE
- ---------------
THE COMPANY
- -----------
Registered number:- 2685515
Date of Incorporation:- 7 February 1992
Incorporated under the Companies Act 1985
Registered Office:- Adam House
Players Court
Players Street
Nottingham
NG7 5LZ
Authorised Capital:- (Pounds)2,278 divided into 2,278 `A' ordinary shares of
50p each and 2.278 `B' ordinary shares of 50p each
Issued Capital:- 2,278 `A' ordinary shares of 50p each and 2.278 `B' ordinary
shares of 50p each
Shareholders:- Rachel Djadi-Hallam 2,278 `A' ordinary shares
Martin Andrew Joyce 1,139 `B' ordinary shares
Christopher James Gillam 1,139 `B' ordinary shares
Directors:- Henry Hallam
Alan Stuart Pilkington-Bennett
Secretary:- Rachel Djadi-Hallam
Accounting Reference Date:- 31 July
Subsisting Mortgages and Charges:-
<PAGE>
<TABLE>
<CAPTION>
Charge 1
- --------
<S> <C>
Instrument: Mortgage Debenture in favour of National Westminster Bank plc
Date: 22 March 1995
Amount secured: all monies due or to become due from the Company on any account
whatsoever to the National Westminster Bank plc
Property charged: specific equitable charge over all freehold and leasehold properties
and/or the proceeds of sale thereof, fixed and floating charges over the
undertaking and all property and assets present and future including
goodwill, bookdebts and the benefits of any licences
Charge 2
- --------
Instrument: Fixed and floating charge in favour of Rachel Djadi-Hallam,
Christopher Gillam and Martin Joyce
Date: 7 March 1996
Amount Secured all monies due pursuant to the 2001 loan note
Property charged: Fixed and floating charges over the undertaking and all
property and assets present and future including goodwill,
bookdebts, uncalled capital buildings, fixtures, fixed plant and
machinery.
</TABLE>
<PAGE>
THIRD SCHEDULE
- --------------
THE PROPERTIES
- --------------
<TABLE>
<S> <C>
1. 94 and 100 Corporation Street Priory Square Birmingham West Midlands B4 6SX.
2. Ground Floor Unit 2 Commercial Union House Great Moor Street Bolton BL1 1NH.
3. Ground Floor Shop 21 Nelson Street Bristol BS1 2LA.
4. Ground Floor and Basement 99 St Mary Street Cardiff CF1 1NP.
5. Ground and First Floor 8 Cross Cheaping Burgess House Coventry CV1 1HF.
6. Ground Floor 84 Prospect Street and First Floors of 82 and 83 Prospect Street Kingston Upon Hull Humberside.
7. Ground Floor and Basement 23 Nelson Street Newcastle Upon Tyne and Wear NE1 5AN.
8. Ground Floor Unit B1 Adam House Players Court Radford Nottingham NG7 5LZ.
9. Ground Floor 38 Upper Parliament Street Nottingham NG1 2AG.
10. Basement Ground Floor and First Floor 27 King Street Sheffield S3 8LF.
11. Ground Floor 23-25 Hanover Buildings Southampton Hampshire S01 1JU.
12. Basement Ground and First Floors 26 Fawcett Street and 4 5 and 6 Athenaeum Street
Sunderland Tyne and Wear SR1 1RH.
</TABLE>
<PAGE>
FOURTH SCHEDULE
- ---------------
WARRANTIES
- ----------
Part 1
- ------
GENERAL
- -------
1.1 The Vendors and Mr Hallam
-------------------------
1.1.1 The Vendors are the beneficial and legal owners of the Shares as set
out in the first schedule and are entitled to sell the Shares to the
Purchaser free from all liens charges and encumbrances without the
consent of any third party.
1.1.2 Each Warrantor warrants and represents in respect of himself or
herself that:-
1.1.2.1 he or she has full power and authority to enter into this agreement
and the other documents to be executed in connection with it, all of
which constitute (or will when executed constitute) legal and valid
binding obligations on them enforceable in accordance with their
respective terms.
1.1.2.2 no bankruptcy order has been made in respect of himself or herself or
a petition for such an order presented;
1.1.2.3 no application has been made in respect of himself or herself for an
interim order under section 253 Insolvency Act 1986;
1.1.2.4 he or she is not able to pay any debt as that expression is defined
in section 268 Insolvency Act 1986;
1.1.2.5 no person has been appointed by the court to prepare a report in
respect of himself or herself under section 273 Insolvency Act 1986;
1.1.2.6 no interim receiver has been appointed of the property of himself or
herself under section 286 Insolvency Act 1986.;
1.1.2.7 he or she has never been:-
1.1.2.7.1 disqualified from acting as a director of any company; or
1.1.2.7.2 prosecuted for any offence (other than an offence under the Road
Traffic Acts for which a custodial sentence could not be imposed).
1.2 The Shares
----------
The Shares constitute the whole of the issued and allotted share
capital of the Company and are fully paid or credited as fully paid.
<PAGE>
1.3 Accuracy of information
-----------------------
All replies given by any of the Warrantors or their agents to the
Purchaser or its agents relating to the business, activities,
affairs, or assets or liabilities of the Company in the replies made
by the Vendors' Solicitors or the Vendors to the questionnaires sent
by the Purchaser's Solicitors, the Purchaser or Ernst & Young in
relation to the Company) in the course of the negotiations leading up
to this agreement, copies of which are attached to the Disclosure
Letter, was, when given, and is now true, complete and accurate and
not misleading save that this warranty shall not extend the scope or
ambit or breadth of any warranty or indemnity contained in this
Agreement or give any additional warranty or warranty greater than
the Warranties in respect of any matter document or thing the subject
to the Warranties.
1.4 Accuracy of Disclosure Letter
-----------------------------
All statements of fact and information contained in and all documents
annexed to the Disclosure Letter are true, complete and accurate and
not misleading, all statements of opinion in the Disclosure Letter
have been made after due and careful enquiry and are reasonably
believed to be correct and nothing has been omitted from the
Disclosure Letter which renders any of such statements incomplete,
inaccurate or misleading save that this warranty shall not extend the
scope or ambit or breadth of any warranty or indemnity contained in
this Agreement or give any additional warranty or warranty greater
than the Warranties in respect of any matter document or thing the
subject to the Warranties.
Part 2
- ------
THE COMPANY
- -----------
2.1 The Company
-----------
2.1.1 The Company is a private company limited by shares incorporated in
England and the information set out in the second schedule is
correct.
2.1.2 The Company's sole business is that of First Party Cheque Cashing,
and Third Party Cheque Cashing and (in its Nottingham store only)
pawnbroking and it has never carried on any other business.
<PAGE>
2.2 Subsidiaries etc
----------------
2.2.1 The Company does not have and never has had any subsidiaries or
subsidiary undertakings and nor does the Company control or take part
in the management of any other company or business organisation and it
has never done so or agreed to do so.
2.2.2 The Company is not, never has been and has not agreed to become the
registered holder or beneficial owner of any share or loan capital in
any company.
2.3 Directors
---------
The Company does not have any directors, shadow directors or alternate
or associate directors other than the persons listed in the second
schedule.
2.4 Trading names etc
-----------------
The Company uses (and during the past three years has used) no name
other than its corporate name and the name Money Shop for any purpose.
2.5 Agents
------
2.5.1 No person is authorised to act as agent for the Company or to bind the
Company otherwise than the directors of the Company acting as the
Board and certain employees who have authority to enter into routine
trading contracts in the normal course of their duties as specified in
the Disclosure Letter.
2.5.2 There are no powers of attorney given by the Company which are in
force.
2.6 Share capital
-------------
2.6.1 Since the Balance Sheet Date, no share or convertible securities of
the Company (or any rights or interests therein) have been created,
allotted or issued or agreed to be created, allotted or issued.
2.6.2 There are no outstanding rights to call for the creation, allotment,
issue, transfer or conversion at any time of any share or loan capital
of the Company (or any rights or interests therein).
2.6.3 No shares in the capital of the Company have been issued and no
transfer of shares in the capital of the Company has been registered
otherwise than in accordance with the Articles of Association of the
Company from time to time in force and all such transfers have been
duly stamped.
<PAGE>
2.7 First Party Cheque Cashing
--------------------------
The Disclosure Letter contains an accurate and detailed explanation of
the procedures which the Company instructs its employees to follow in
relation to First Party Cheque Cashing, together with
2.7.1 an explanation of the manner in which the Company carries on the
business of First Party Cheque Cashing;
2.7.2 details of any advice (professional or otherwise) received on the
drafting of the Company's standard terms of business in relation to
First Party Cheque Cashing, together with an explanation of the
reasons for the changes made from time to time;
2.7.3 details of the Company's policies applied to determine whether it will
encash a First Party Cheque, including the creditworthiness and
suitability of a prospective customer and for enquiries made of the
customer;
2.7.4 details of the procedures and documents which the Company follows and
produces in order to comply with the requirements of the Consumer
Credit Act 1974 in relation to its business of First Party Cheque
Cashing;
2.7.5 copies of all correspondence, notices or other documents sent between
the Company and the Office of Fair Trading at any time in relation to
the Company's business of First Party Cheque Cashing;
2.7.6 details of all infringements of the Consumer Credit Act 1974 committed
by the Company in relation to its business of First Party Cheque
Cashing which have at any time been alleged by or on behalf of the
Office of Fair Trading, any customer of the Company or any other
person; and
2.7.7 details of all prosecutions or notices of intended prosecutions of the
Company which have occurred or been issued at any time in relation to
any real or alleged infringement of the Consumer Credit Act 1974 which
may have been committed by the Company in relation to its business of
First Party Cheque Cashing.
2.8 Cheque Cashing
--------------
The Disclosure Letter contains an accurate and detailed explanation of
the procedures which the Company instructs its employees to follow in
relation to Third Party Cheque Cashing, together with:-
<PAGE>
2.8.1 an explanation of the manner in which the Company carries on the
business of Third Party Cheque Cashing;
2.8.2 details of any advice (professional or otherwise) received on the
drafting of the Company's standard terms of business in relation to
Third Party Cheque Cashing together with an explanation of the reasons
for the changes made from time to time;
2.8.3 details of any refusals by the Company's bankers to collect Third
Party Cheques encashed by the Company, together with an explanation in
each case of why the refusal was made and the ultimate resolution or
outcome of the matter;
2.8.4 details of any challenge to the Company's ability to collect payment
on Third Party Cheques, by any person, including the drawer of the
cheque, the payee, the paying bank and the collecting bank (other than
an inability to collect by reason of lack of funds in the relevant
account);
2.8.5 details of all legal proceedings in which the Company has ever been
involved in relation to the encashment of Third Party Cheques; and
2.8.6 details of the Company's policies applied to determine whether it will
encash a Third Party Cheque including the credit worthiness and
suitability of a prospective customer and/or enquiries made of the
drawer of the cheque and others.
2.9 Consumer Credit Act 1974
------------------------
The Company has complied with all requirements of the Consumer Credit
Act 1974 and in particular:-
2.9.1 has a valid and subsisting licence under that Act for all purposes for
which a licence is required in relation to any business carried on by
the Company whether in relation to First Party Cheque Cashing Third
Party Cheque Cashing, pawnbroking or otherwise;
2.9.2 has complied with the terms of such licence(s); and
2.9.3 all agreements made by the Company and all procedures followed by the
Company in the course of any business which it carries on and which
are in any way regulated by that Act, strictly comply with all the
relevant requirements of that Act; and
<PAGE>
2.9.4 the Company has never received any notice, letter or complaint
alleging a breach by it of the provisions of that Act and has no
reason to believe that circumstances exist which is likely to give
rise to such notice letter or complaint.
2.10 Statutory and other regulations
-------------------------------
2.10.1 The Company has at all times carried on business and conducted its
affairs in all respects in accordance with its Memorandum and Articles
of Association for the time being in force.
2.10.2 All licences, authorisations, orders, grants, consents, permissions
and approvals necessary to the proper carrying on of the business of
the Company have been obtained and:-
2.10.2.1 the Company is not in breach of any of their terms or conditions; and
2.10.2.2 so far as the Warrantors are aware there are no circumstances which
indicate that any of them is likely to be revoked or not renewed, in
whole or in part, whether or not in the ordinary course of events.
2.10.3 Neither the Company nor any of its officers is in breach of or has
failed to comply in full with any statutory or municipal rules,
regulations and provisions applying to or affecting the business or
activities of the Company which has had a material adverse effect on
the Company.
2.10.4 All documents required by the Companies Act or any other legislation
to be filed with the Registrar of Companies in respect of the Company
have been duly filed and were correct and due compliance has been made
with all other legal requirements in connection with the formation of
the Company and all issues and allotments of shares, debentures and
other securities.
2.10.5 So far as the Warrantors are aware there are no investigations or
enquiries (pending, threatened or in existence) by or on behalf of any
governmental or other body in respect of the affairs of the Company or
the Warrantors.
2.11 Data Protection Act
-------------------
The Company has complied with all requirements of the Data Protection
Act 1984 and in particular:-
2.11.1 has registered as a data user under that Act for all purposes for
which registration is required by the business as carried on by the
Company;
<PAGE>
2.11.2 has complied with the data protection principles; and
2.11.3 the Company has not received any notice letter or complaint alleging a
breach by it of the provisions of that Act and has no reason to
believe that circumstances exist which may give rise to such a notice
letter or complaint.
2.12 Statutory books and Memoranda and Articles of Association
---------------------------------------------------------
2.12.1 The Register of Members and other books required by the Companies Act
to be kept by the Company contain an accurate and complete record of
the matters with which they should deal and there has been no notice
of any proceedings to correct or rectify any such books.
2.12.2 The copy of the Memorandum and Articles of Association of the Company
attached to the Disclosure Letter is complete and accurate in all
respects and has embodied in it or annexed to it a copy of every such
resolution and agreement as is referred to in section 380 of the
Companies Act.
2.13 Resolutions
-----------
No resolutions of any kind of the Company or any class of its members
(other than those relating to business at an Annual General Meeting
which is not special business) have ever been passed.
2.14 Insolvency
----------
2.14.1 The Company has never been a party to any transaction to which the
provisions of sections 238 to 246 (inclusive) of the Insolvency Act
1986 may be applicable.
2.14.2 No order has been made or petition presented or resolution passed for
the winding up or administration of the Company, no receiver or
administrator or administrative receiver has been appointed or could
lawfully be appointed by any person of the Company's business or
assets or any part thereof, the Company is not insolvent and has not
stopped payment and is not unable to pay its debts (within the meaning
of section 123 of the Insolvency Act 1986) and the Company is capable
of meeting its liabilities as and when they fall due and for the
foreseeable future.
<PAGE>
2.15 Purchase of shares
------------------
2.15.1 No person is entitled to receive from the Company any fees, brokerages
or other commissions in connection with the purchase or sale of shares
in the Company.
2.15.2 The Company has not at any time acted in breach of section 151 of the
Companies Act and nor has it ever given financial assistance in
connection with the acquisition of its own or any holding company's
shares in accordance with the provisions of section 155 of the
Companies Act.
2.15.3 The Company has never reduced, purchased or redeemed its share capital
or agreed to do so.
2.16 Registration of charges
-----------------------
All charges in favour of the Company have (if appropriate) been
registered in accordance with the Companies Act.
2.17 Possession of documents
-----------------------
All title deeds relating to the assets of the Company and an executed
copy of all agreements to which Company is a party and the original
copies of all other documents which are owned by, or which ought to be
in the possession of, the Company are in its possession.
2.18 Seal
----
The Company has a common seal.
2.19 Financial Services Act
----------------------
The Company does not carry on or purport to carry on in the United
Kingdom any investment business within the meaning of the Financial
Services Act 1986.
2.20 Money Laundering
----------------
The Company has since 1 April 1994 complied with all of the provisions
of the Money Laundering Regulations 1993.
<PAGE>
Part 3
- ------
THE ACCOUNTS
- ------------
3.1 The Accounts
------------
The Accounts:-
3.1.1 have been prepared in accordance with the historical cost convention;
3.1.2 comply with the requirements of the Companies Act, all other relevant
statutes relating to audited accounts, and all applicable current
accounting standards and other generally accepted accounting and
auditing principles or practices applicable to a United Kingdom
company;
3.1.3 have been prepared on the same bases and policies of accounting as the
published statutory accounts of the Company for the preceding three
accounting reference periods (and in particular there has been no
change in any practice or policy or in any methods or bases of
valuation or any accountancy treatment relating to the keeping of any
such accounts);
3.1.4 give a true and fair view of the state of affairs of the Company at
the Balance Sheet Date;
3.1.5 properly disclose all the assets of the Company as at the Balance
Sheet Date;
3.1.6 contain appropriate provision or reserves or appropriate notes in
respect of all liabilities (whether actual or contingent, quantified
or disputed) of the Company as at the Balance Sheet Date;
3.1.7 contain full provision or reserves for Taxation assessed or liable to
be assessed on the Company or for which it is or may become liable up
to the Balance Sheet Date and any liability to pay Taxation which has
been deferred for any reason;
3.1.8 contain proper provision for depreciation and for any obsolescence of
assets (all rates of depreciation being consistent over the three
financial years preceding the Balance Sheet Date) and the policy of
depreciation has been applied in accordance with SSAP 12;
3.1.9 properly and fairly disclose all capital and leasing commitments of
the Company in excess of (Pounds)1,000 per annum; and
3.1.10 are not affected by any extraordinary, exceptional or non-recurring
items.
<PAGE>
3.2 Past accounts
-------------
The published statutory accounts of the Company for the three
accounting reference periods preceding the period to which the
Accounts relate give a true and fair view of the affairs of the
Company as at the dates to which they are drawn.
3.3 Book Debts shown in the Accounts
--------------------------------
The debts (excluding amounts due on cheques encashed) shown in the
Accounts (less the amount of any provision or reserve calculated on
the same basis as that applied in the published statutory accounts of
the Company for the preceding three accounting reference periods) were
good and collectable in full in the ordinary and normal course of
business and have realised the net amount thereof and none of those
debts:-
3.3.1 was at the Balance Sheet Date subject to any counter-claim or set off
(except to the extent of any such provision or reserve) or overdue by
more than eight weeks; or
3.3.2 has subsequently been released on terms that any debtor pays less than
the full book value of his debt or has been written off or has proved
to any extent irrecoverable or is now regarded as irrecoverable (in
whole or in part).
3.4 Accounting records
------------------
All accounts, books, ledgers, financial and other accounting and
financial records of whatsoever kind of the Company are in the
possession of the Company have been kept and completed in accordance
with statutory requirements, show and explain all transactions entered
into by the Company and disclose with reasonable accuracy the current
financial and contractual position of the Company and contain a record
of its assets and liabilities.
3.5 Management Accounts
-------------------
The Management Accounts of the Company, copies of which are annexed as
appendix B to this agreement have been prepared by the Company with
due care and attention in accordance with the same accounting policies
as the Accounts, and show a reasonably fair view of the state of
affairs and profit or loss of the Company as at and for the period in
respect of which they have been prepared and are not affected by any
extraordinary, exceptional or
<PAGE>
non-recurring item but it is hereby acknowledged that they are not
prepared on a statutory basis have not been audited and do not address
taxation in any form nor do they address disposals of a capital
nature.
Part 4
- ------
THE PROPERTIES
- --------------
4.1 General Matters
---------------
4.1.1 The Properties comprise all the freehold and leasehold land premises
owned occupied or otherwise used by the Company.
4.1.2 All the rights and easements contained in the title deeds to the
Properties attached to the replies to the acquisition questionnaire
received from the Purchaser's Solicitors ("the Deeds") vested in the
-----------
Company relating to any of the Properties at the date of this
agreement remain valid and exercisable by the Company on the basis set
out in the Deeds.
4.1.3 The Company has not held premises whether under an agreement licence
or lease (as tenant as licensee) or given any form of guarantee or
indemnity in relation to such premises (other than the Properties)
which gives rise to a contingent liability or where a claim is
currently pending or being pursued whether in relation to rent repairs
dilapidations or otherwise.
4.2 Title
-----
4.2.1 The originals of the Deeds shall if required be produced to the
Purchasers' Solicitors for inspection and all such documents are in
the possession or under the control of the Company.
4.2.2 The Properties and the Deeds are free and clear of all claims charges
(including floating charges) mortgages, liens, encumbrances and other
such security interests and third party rights and there is no
agreement to create any such security interests or third party rights.
4.2.3 No outstanding complaint alleging breach or non-observance has been
received in respect of the Properties.
4.2.4 Save for any which may affect the freehold title the Properties are
not subject to any unusual or onerous exceptions reservations rights
easements quasi easements provisions obligations or overriding
interests.
<PAGE>
4.2.5 There are no disputes concerning boundaries easements covenants or
other matters relating to the Properties or their use and occupation
so far as the Warrantors are actually aware or would be aware if they
had made proper enquiries of the shop managers at the respective
Properties and (so far as aforesaid) there is no pending or
anticipated disputes, actions, claims or demands in respect of the
Properties.
4.3 Occupation
----------
The Company has exclusive possession use and occupation of the
Properties.
4.4 Local Authority and Planning Matters
------------------------------------
4.4.1 There is no local land charge, land charge caution restriction
inhibition or notice registered in respect of the Properties and so
far as the Warrantors are actually aware or would be aware if they had
made proper enquiries of the shop managers at the respective
Properties no matter exists which is capable of such registration
whether registered or not and the Warrantors are not aware of any
proposal for any such matter.
4.4.2 There are no outgoings affecting the Properties which are of an
unusual or onerous nature.
4.4.3 No notice of any breach of the Planning Acts (in this agreement the
expression "the Planning Acts" mean the Town & Country Planning Act
1990 the Planning (Listed Buildings and Conservation Areas) Act 1990
the Planning (Hazardous Substances) Act 1990 the Planning
(Consequential Provisions) Act 1990 and all statutes referred to
therein to the extent that they remain in force and all statutes
regulations and orders included by clause 1.2.2 of this agreement) in
respect of the Properties has been received by the Company.
4.4.4 No application for planning permission or for any consent approval or
determination under the Planning Acts in respect of the Properties is
awaiting determination.
4.4.5 In the case of all buildings on the Properties which are subject to
any enactment regulation or order relating to protection against or
means of escape from fire the Company has not received notice that it
has not complied with any requirements of any such enactment
regulation or order and of any notices served under them to the
satisfaction of the Fire Officer District Surveyor or
<PAGE>
other appropriate officer and so far as the Warrantors are actually
aware or would be aware if they had made proper enquiries of the shop
managers at the respective Properties no order prohibiting any
occupation or use of any of the Properties has been made or proposed.
4.4.6 So far as the Warrantors are actually aware or would be aware if they
had made proper enquiries of the shop managers at the respective
Properties the Properties (and where appropriate all access to or
egress from the Properties) are not affected by any outstanding
notices orders or publicly advertised proposals given or issued by or
to any local or other authority and are not currently affect by
(i) any closing demolition or clearance order
(ii) any enforcement or stock or listed building or preservation or
dangerous structure notice
(iii) any proposal for compulsory acquisition or requisition
4.4.7 Access to the Properties for pedestrians is directly from a public
highway adopted by the relevant local authority and maintained by it
at the public expense.
4.4.8 The Warrantors have not received any independent charge for the
maintenance of the drains and sewers serving the Properties save as
may be covered by the relevant service charge and save as may be
included in any water rates or drainage rates charge.
4.4.9 There is no anticipated expenditure by the Company in relation to the
Properties which would be required in order that the Properties should
comply with statute or any order or direction of a statutory or local
authority.
4.4.10 The Warrantors are not actually aware (nor would they be aware if they
had made proper enquiries of the shop managers) that compliance is not
being made or has not at all times been made with all applicable
statutory and bye-law requirements and with all notices served under
them with respect to the Properties or their use and in particular
(but without limitation) with all applicable requirements as to fire
precautions and the means of escape in the case of fire and with the
Public Health Acts the Housing Acts the Highways Acts and the Office
Shops & Railways Premises Acts 1963 the Factories Acts
<PAGE>
the London Building Acts the Health & Safety at Work etc. Act the
Control of Pollution Act 1971 and the Environmental Protection Act
1990.
4.5 Lease Matters
-------------
4.5.1 The Properties are not subject to any options or rights of pre-emption
and where there are break clauses in the leases they have not been
exercised by either party.
4.5.2 There are no arrears of rent rates service charge insurance premiums
interest or other payments relating to the Properties.
4.5.3 There are no circumstances which would entitle or require the landlord
or any other person to exercise any power of entry upon or of taking
possession of the whole or any part of the Properties or which would
otherwise terminate the continued possession or occupation of the
Properties.
4.6 Enquiries
---------
So far as the Warrantors are actually aware or would be aware if they
had made proper enquiries of the shop managers at the respective
Properties the replies given to the preliminary enquiries raised by
the Purchasers Solicitors of the Vendors Solicitors are accurate and
are not misleading.
4.7 State of the Properties
-----------------------
4.7.1 The Properties are connected to mains electricity and water supplies
and are served by drains and sewers and the Warrantors believe that
those services are connected into the adopted services and maintained
by the relevant authority or where any of the Properties are part only
of a building that building is so directly connected and the
Warrantors know of no problems with regard to those services.
4.7.2 The Properties are in good repair and condition (fair wear and tear
excepted).
4.8 Insurance
---------
So far as the Warrantors are actually aware or would be aware if they
had made proper enquiries of the shop managers at the respective
Properties no circumstances have arisen which would make any insurance
policies relating to the Properties void or voidable or which might
result in an increased rate of premium.
<PAGE>
Part 5
- ------
FIXED AND CURRENT ASSETS
- ------------------------
5.1 Ownership of assets
-------------------
The Company is the sole owner with good and marketable title free from
all liens, charges, encumbrances, options or adverse claims (including
any hiring, licensing or rental agreements or reservations of title)
of all the assets included in the Accounts or acquired after the
Balance Sheet Date which it owns or reputedly owns (subject to sales
of current assets in the ordinary and normal course of its trading) or
which are now in its possession or under its control or which it uses
in its business and the Company has not agreed to create or grant any
lien, charge, option or other encumbrance over such assets.
5.2 Assets used in the business
---------------------------
The assets owned by the Company together with any assets held under
any hire or hire purchase rental or leasing agreement (the material
details of which are contained in the Disclosure Letter) comprise all
the assets necessary for the continuation of the Company's business as
now carried on.
5.3 Equipment
---------
5.3.1 The equipment and vehicles owned by or used in connection with the
business of the Company ("Equipment") (assuming the business of the
-----------
Company continues to be carried on as it is carried on at
Completion):-
5.3.1.1 are all in a good and safe state of repair and condition and none of
it is in need of renewal or replacement other than on the basis set
out in the Disclosure Letter;
5.3.1.2 are not to any extent surplus to requirements;
5.3.1.3 are in the possession and (save for those items the subject of the
hire, hire purchase, rental or leasing agreements listed in the
Disclosure Letter) control of the Company; and
5.3.1.4 are all capable, and so far as the Warrantors are actually aware
without making enquiry (subject to normal wear and tear) will remain
capable, throughout the respective periods of time during which they
are each written down to a nil
<PAGE>
value in the accounts of the Company (in accordance with the normal
recognised accountancy principles consistently applied prior to the
date hereof) of doing the work for which they were designed or
purchased.
5.3.3.1 Maintenance contracts are in full force and effect in respect of all
Equipment which is of a kind which is normal or prudent to have
maintained by independent or specialist contractors.
5.3.3.2 The Equipment has been regularly maintained to a good technical
standard including compliance with all appropriate safety regulations
and manufacturers instructions.
5.3.3.3 The Company did not suffer any material failures or breakdowns in the
Equipment during the year preceding the date of this agreement.
5.4 Computer equipment and software
-------------------------------
5.4.1 The Company has in force maintenance contracts for all items of
computer hardware (including operating systems) and software support
contracts for all items of software which it uses and there is no
reason to believe that these maintenance and support contracts will
not be renewed by the other contracting party upon their expiry (if so
required by the Company) upon substantially similar terms to those now
applicable.
5.4.2 The Company did not suffer any failures or breakdowns of or bugs in
the computer hardware or software which it now uses during the year
preceding the date of this agreement.
5.4.3 The Company has operated and used all items of computer hardware used
by it in accordance with the manufacturers recommendations including
(without limitation) any recommendations as to environmental
conditions and power supply.
5.4.4 The computer software (including programs and data held on silicon
chips disks and any other media, manuals and operator guides) known as
"Sheriff" and all Intellectual Property Rights in such software is
owned by the Company.
<PAGE>
5.4.5 All other computer software (including programs and data held on
silicon chips disks and any other media, manuals and operator guides)
used by the Company is either owned by the Company or held by it on
licence the terms of which have been disclosed in the Disclosure
Letter.
5.4.6 So far as the Warrantors are aware the Company owns and has access to
all documents and information (including source codes and all working
papers relating to such source codes) which might be reasonably
required to enable the Company to adapt modify or improve all computer
software used by the Company economically and has the right to make
such adaptations modifications or improvements without the consent of
any third party.
5.5 Integrity of computer systems
-----------------------------
5.5.1 The Company has taken proper precautions to preserve the availability
confidentiality and integrity of its computer systems and has had such
systems reviewed on a regular basis by independent experts in the
field.
5.5.2 All computer software (including all programs and data in such
software) used by the Company is reliable and readable. All media on
which such software is stored are in good readable condition and
contain no programs or data which are either intended to or which may
have the effect of modifying, deleting or otherwise impairing such
software (or any of the programs or data in such software) or any
other programs or data which are either intended to or which may have
the effect of impairing any computer hardware.
5.5.3 The Warrantors are not aware of any case where unauthorised access to
the Company's computer systems has taken place, or where any of the
software or data in those computer systems has been modified without
the Company's express authority or where fraud has been committed
against the Company by use or abuse of its computer systems whether
alone or in conjunction with any third party.
5.5.4 The Company's computer systems are fully "millennium compliant" and
will not cease to be so prior to, during or after the year 2000. For
the purposes of this warranty, "millennium compliant" means that
neither performance nor functionality is or will be affected by dates
prior to, during or after the year 2000 in particular (but without
limitation):-
<PAGE>
5.5.4.1 no value for current date causes or will cause any interruption in
operation;
5.5.4.2 date-based functionality behaves and will behave consistently for
dates prior to, during and after the year 2000;
5.5.4.3 in all interfaces and data storage, the century in any date is and
will be specified either explicitly or by unambiguous algorithms or
inferencing rules; and
5.5.4.4 the year 2000 is and will be recognised as a leap year.
5.6 Leased Assets
-------------
No circumstance has arisen or is likely to arise in relation to any
asset held by the Company, under a lease or similar agreement, whereby
the rental payable has been, or is likely to be, increased and, in
particular, all such assets have at all relevant times been used for a
qualifying purpose for the purposes of sections 39, 40 and 42 Capital
Allowances Act 1990.
5.8 Book debts
----------
5.8.1 None of the debts which are due to the Company at the date of this
agreement and which shall have arisen after the Balance Sheet Date are
now or have at any time been overdue by more than 8 weeks nor have any
of those debts been written off or proved to be irrecoverable to any
extent.
5.8.2 Save for amounts due in respect of First Party Cheques or Third Party
Cheques which have been encashed by the Company the full amount of all
debts which shall be owing to the Company at Completion (whenever
arising) will be recovered in full free of any counter-claim or set
off (less the amount of any provision or reserve which has been
calculated on the same basis as that applied in the Accounts or
disclosed in the Disclosure Letter) in the ordinary and normal course
of business and in any event not later than 12 weeks after Completion.
5.8.3 Since the Balance Sheet Date no other obligations due to the Company
have been written off or written down or have proved to be
irrecoverable in whole or in part or are now regarded as irrecoverable
nor has there been any agreement for the release of any person under
any liability to the Company.
<PAGE>
Part 6
- ------
INTELLECTUAL PROPERTY
- ---------------------
6.1 Definition
----------
In this Part 6 "Intellectual Property Rights" includes patents, trade
------------------------------
marks, service marks, registered designs, design rights, copyrights,
business names, know-how, confidential information, and any other
similar protected rights in any country together with pending
applications for the registration or recording of such right
6.2 Intellectual Property Rights
----------------------------
The Company does not own or otherwise have any interest in or licence
of any Intellectual Property Rights which is material to the business
of the Company (other than the computer software referred to in
warranty 5.4.4).
6.3 No Infringements
----------------
The business of the Company as now carried on does not (and so far as
the Warrantors are aware is not likely to) infringe any Intellectual
Property Rights of any person.
6.4 No requirements
---------------
The Company does not need to use any Intellectual Property Rights of
any other person in order to carry on its business in its present
form.
6.5 Trademark Application
---------------------
The Company has not received notice or correspondence from any third
party opposing, rejecting or challenging in any way the Company's
application to register "the Money Shop" as a trade mark under class
36.
Part 7
- ------
FINANCIAL POSITION AND PROSPECTS
- --------------------------------
7.1 Events since the Balance Sheet Date
-----------------------------------
Since the Balance Sheet Date:-
7.1.1 there has been no adverse change in the financial or trading position
of the Company;
7.1.2 the business of the Company has been carried on in the ordinary and
normal course, without any interruption and without any alteration in
its nature, conduct, scale, scope or manner and no unusual or abnormal
contract differing
<PAGE>
from the ordinary contracts necessitated by the nature of its business
has been entered into by the Company;
7.1.3 save as disclosed in the Disclosure Letter no asset with a value in
excess of (Pounds)5,000 or assets of whatever individual value having
an aggregate value in excess of (Pounds)25,000 has been acquired or
disposed of or has been agreed to be acquired or disposed of (save for
assets acquired or disposed of in the ordinary and normal course of
business on arm's length terms) and no contract involving expenditure
with a value in excess of (Pounds)5,000 or contracts of whatever
individual value having an aggregate value in excess of (Pounds)25,000
by it on capital account has been entered into by the Company;
7.1.4 the Company has not paid or become liable to pay any management,
service or other such charges to the Warrantors or to any of their
Associates) other than in respect of goods and services supplied in
the ordinary and normal course of business on commercial terms;
7.1.5 the Company has neither disbursed nor received any cash except in the
ordinary and normal course of its business and all amounts received by
or on behalf of the Company have been deposited with its bankers and
appear in the appropriate books of account;
7.1.6 the Company has not declared, paid or made any dividends or other
distributions within the meaning of the Taxes Act save for the Pre-
Sale Dividend;
7.1.7 the Company has not made any loans or incurred any borrowings except
in either case in the ordinary and normal course of its business; and
7.1.8 the accounting reference period of the Company has not ended or been
extended.
7.2 Net assets and turnover
-----------------------
An audited balance sheet of the Company as at Completion and an
audited profit and loss account of the Company for the period from the
Balance Sheet Date up to Completion prepared on the same basis as the
Accounts would show that the net tangible assets of the Company (after
taking account of the profit or loss for the period since the Balance
Sheet Date and making an appropriate adjustment for the Pre-Sale
Dividend) would not be less than the
<PAGE>
net tangible assets shown in the Accounts and that the respective
levels of turnover (both by value and by volume) and the gross and net
profit margins were not less than 95% of those margins during the
corresponding period in the preceding year.
7.3 Amounts due to creditors
------------------------
The amounts now due by the Company to its creditors do not exceed
(Pounds)1,360,000.
7.4 Bank and other borrowings
-------------------------
7.4.1 Full details of all limits on the Company's bank overdraft and other
borrowing facilities together with true, complete and accurate copies
of all letters of credit, guarantees and other financial instruments
issued on behalf of or for the benefit of the Company and which remain
in force are contained in the Disclosure Letter.
7.4.2 The total amount borrowed by the Company does not exceed any
limitation on its borrowing contained in its Memorandum or Articles of
Association or in any other document which it is a party and the
amount borrowed from its bankers does not exceed its overdraft
facilities (if any).
7.4.3 No overdraft or other financial facilities of the Company are
dependent upon a guarantee of, or a security provided by, the Vendors
or any third party.
7.4.4 The Company does not have outstanding and has not agreed to create or
issue any loan capital; nor has it factored or discounted any of its
debts (or agreed to do so), or been engaged in financing of a type
which would not require to be shown or reflected in the Accounts; or
borrowed any money which it has not repaid (save for borrowings not
exceeding the amounts shown in the Accounts).
7.4.5 The Company has not since the Balance Sheet Date, repaid, or become
liable to repay, any loan or indebtedness in advance of its stated
maturity.
7.4.6 No event has occurred which would entitle any third party (with or
without the giving of notice) to call for the repayment of any
indebtedness of the Company prior to its normal maturity date.
<PAGE>
7.5 The market value of the assets distributed to Rachel Djadi-Hallam by
way of a dividend in specie immediately prior to this agreement did
not exceed the amount of the dividend, namely (Pounds)750,000.
Part 8
- ------
TAXATION
- --------
8.1 Definitions
-----------
In this Part 8:
"ACT" means advance corporation tax;
-----
"CAA" means the Capital Allowances Act 1990;
-----
"IHTA" means the Inheritance Tax Act 1984;
------
"TCGA" means the Taxation of Chargeable Gains Act 1992;
------
"TMA" means the Taxes Management Act 1970;
-----
"VAT" means value added tax;
-----
"VATA" means the Value Added Tax Act 1994.
------
8.2 General
-------
8.2.1 All returns, amended returns, computations and payments which should
be or should have been made by the Company for any fiscal purpose have
been prepared on a proper basis and submitted within the prescribed
time limits and are up to date and are correct in all material
respects and none of them is now the subject or so far as the
Warrantors are aware likely to be the subject of any dispute with the
Inland Revenue or HM Customs and Excise or other authority concerned
and so far as the Warrantors are aware will not give rise to any
disallowance of relief, forfeiture, loss of allowance or credit,
assessment, adjustment or set off (including any claim for interest on
unpaid Taxation) by the Revenue.
8.2.2 All particulars furnished to the Revenue in connection with the
application for any consent or clearance on behalf of the Company
accurately disclosed all facts and circumstances material to the
decision of the Revenue, any such consent or clearance is valid and
effective and any such transaction for which
<PAGE>
such consent or clearance has previously been obtained has been
carried into effect only in accordance with the terms of the relevant
application and consent for clearance.
8.2.3 The Company is not the subject of a back duty investigation or in-
depth enquiry by any fiscal authority and the Warrantors are not aware
of any facts which may give rise to the same.
8.2.4 All income tax under the PAYE system and payments due in respect of
employees' contributions to national insurance and graduated state
pension have been properly deducted by the Company and (together with
any employer's contribution) have been fully and correctly paid to the
appropriate authority and proper records thereof have been maintained
to the extent required by the relevant Taxation legislation.
8.2.5 All Taxation required to be deducted from any payments made by the
Company which it is obliged or entitled to make has been deducted and
accounted in full to the appropriate authority.
8.2.6 The Company has never been requested to furnish information pursuant
to notices served under section 778 Taxes Act.
8.2.7 The Company is not and has at no time been an investment company, a
close investment company or an investment trust company for Taxation
purposes.
8.2.8 The Company has not since the Balance Sheet Date taken any action
which has had, or might have, the result of altering or prejudicing
any written agreement which it has previously negotiated with the
Revenue.
8.2.9 The Taxation computations for all accounting periods of the Company
ended on or before 31st July 1997 have been agreed with the Revenue.
8.2.10 The Company is and has always been resident only in the United Kingdom
for Taxation purposes and has never carried on any trade, business or
other activities outside the United Kingdom.
8.3 Taxable profits
---------------
8.3.1 The Company has not directly or indirectly paid any remuneration,
emoluments or compensation for loss of office or made any gratuitous
payment or transferred any assets to any of its present or former
directors or employees, the cost of which will not be deductible for
Taxation purposes.
<PAGE>
8.3.2 The Company has not made and is under no obligation pursuant to which
it is or will become liable to make any payment of interest, annuity
or other annual payment such as may be disallowed as a deduction as a
set-off or as a charge on income or otherwise be unrelieved for
corporation tax purposes whether by virtue of section 125 or section
787 Taxes Act or otherwise.
8.3.3 Within the period of three years ending with the date hereof there
have been no events or circumstances such that sections 343 or 768
Taxes Act have been or could be applied.
8.4 Capital Assets
--------------
8.4.1 Save as provided for in the Accounts the values attributed to each of
the assets of the Company as at the Balance Sheet Date is such that on
any disposal of any of those assets which is treated for Taxation
purposes as being for a consideration equal to such value (ignoring
any reliefs and allowances available to the Company other than amounts
falling to be deducted under section 38 TCGA) no chargeable gain or
allowable loss would arise.
8.4.2 Since the Balance Sheet Date no asset has been acquired otherwise than
by way of a bargain made at arm's length and for a consideration equal
to its market value.
8.4.3 The Company has not been a party to or involved in any transaction
within section 29 TCGA.
8.4.4 Since the Balance Sheet Date the Company has not been a party to a
transaction falling within section 17 TCGA.
8.4.5 The Company will not be subject to corporation tax on the disposal of
any debt owing to the Company other than debts arising in the course
of the Company's trade which consists of and includes the lending of
money and provision of credit.
8.4.6 The Company does not own and has not owned and has never issued any
relevant discounted securities or qualifying corporate bonds (as
defined in Schedule 13 Finance Act 1996 or section 117 TCGA
respectively).
8.4.7 The Company has sufficient information contained in its records to
calculate any chargeable gain or allowable loss which may arise as the
result of the disposal of assets owned by the Company at the Balance
Sheet Date.
<PAGE>
8.5 Capital Allowances
------------------
8.5.1 The book value of each of the assets of the Company in or adopted for
the purposes of the Accounts on which capital allowances are
calculated separately does not exceed the written down value of such
asset for the purposes of the CAA and the aggregate book value of
plant and machinery for which capital allowances have been claimed
under Part II of that Act does not exceed the written down value of
the qualifying expenditure under that Act at the Balance Sheet Date.
8.5.2 No capital expenditure has been incurred which is subject to the
provisions of section 75 CAA.
8.5.3 No elections have been made by the Company pursuant to section 59B or
59C CAA.
8.6 Group arrangements
------------------
The Company has never been a member of any group of companies for any
Taxation purpose.
8.7 Distributions and Advance Corporation Tax
-----------------------------------------
8.7.1 The Company has not since the Balance Sheet Date done anything which
could be treated as a distribution for the purposes of sections 209 or
210 Taxes Act other than declaring and paying dividends in the
ordinary course of business, details of which are set out in the
Disclosure Letter.
8.7.2 Within the last 3 years of the date hereof, no event or series of
events has occurred which might cause the disallowance of the carry
forward of losses or excess charges or such that any of sections 245
or 245A or 245B Taxes Act have applied or could apply.
8.7.3 The Company has not issued any share capital to which the provisions
of section 249 Taxes Act or section 142 TCGA could apply nor does it
own any such share capital nor granted options or rights to any person
which entitles that person to require the issue of any share capital.
8.7.4 The Company will be entitled in respect of any qualifying distribution
made by it to a full set off of its corresponding payment of ACT under
section 239(1) Taxes Act or in so far as there is no set off under
section 239(1) or in so far as any set off is restricted under section
239(3).
<PAGE>
8.7.5 The Company has not received a capital distribution to which the
provisions of section 189 TCGA could apply.
8.7.6 The Company has not made or received any distribution which is an
exempt distribution within sections 213 to 218(1) (inclusive) Taxes
Act.
8.8 Stamp Duty
----------
8.8.1 All instruments (other than those which have ceased to have a legal
effect) executed by the Company (and which are or were subject to
stamp duty) have been duly stamped.
8.8.2 The Company has no liability to stamp duty reserve tax.
8.9 Anti-Avoidance
--------------
8.9.1 The Company has not entered into or been a party to any pre-ordained
series of transactions, composite transactions or any other schemes or
arrangements into which steps were inserted which served no purpose
other than the saving of Taxation.
8.9.2 The Company has not been party to any other transaction or arrangement
of any nature which has, or so far as the Warrantors are aware, could
give rise to a charge to Taxation under Part XVII Taxes Act.
8.10 Close Company
-------------
8.10.1 The Company is a close company for Taxation purposes.
8.10.2 The Company has no loan outstanding to which the provisions of
sections 419 and 420 Taxes Act would apply.
8.10.3 The Company has not held and does not hold shares in a company not
being another member of a group of companies (including the Company)
as defined in section 170 TCGA which has made any such transfer as was
referred to in section 125 TCGA.
8.10.4 The Company is not liable to be assessed to inheritance tax by virtue
of section 202 IHTA.
8.10.5 There is no unsatisfied liability to inheritance tax attached or
attributable to the shares in or to any assets of the Company such
that they are subject to an Inland Revenue charge as mentioned in
section 237 and 238 IHTA.
8.10.6 The Company is not entitled to any interest in possession in settled
property.
<PAGE>
8.10.7 No person has or may acquire the power to raise an amount of
inheritance tax by sale or mortgage of or by a terminal charge on any
of the shares of the Company as mentioned in section 212 IHTA.
8.10.8 The Company has not made any transfers of value within section 94
IHTA.
8.11 Events since the Balance Sheet Date
-----------------------------------
Since the Balance Sheet Date:-
8.11.1 the Company has not disposed of any asset or made any supply of any
service or business facility of any kind (including a loan of money or
the letting, hiring or licensing of any property whether tangible or
intangible) in circumstances where the consideration actually received
or receivable for such disposal or supply is less than the
consideration which could be deemed to have been received for the
purposes of Taxation;
8.11.2 no event has occurred which gives rise to a liability to Taxation to
the Company on deemed (as opposed to actual) income, profits or gains
or which results in the Company becoming liable to pay or bear a
liability to Taxation directly or primarily chargeable against or
attributable to another person, firm or company;
8.11.3 the Company has not surrendered or claimed any ACT under Chapter V
Taxes Act or any losses by way of group relief under the Taxes Act;
8.11.4 the Company has not paid any remuneration (including emoluments as
defined by section 131 and sections 153-168 Taxes Act) to any officer,
director or employee or to any member of his family or household in
excess of such amount as will be deductible in computing the taxable
profits of the Company;
8.11.5 no payment of an income or revenue nature in excess of (Pounds)5,000
has been made by the Company which will not be deductible for the
purposes of corporation tax (or any corresponding tax on profits in
any relevant foreign jurisdiction), either in computing the profits of
the Company or in computing the corporation tax or corresponding tax
chargeable on it; and
8.11.6 no accounting period (as defined in section 12 Taxes Act) of the
Company has ended as referred to in section 12(3) of that Act.
<PAGE>
8.12 Value Added Tax
---------------
The Company is not and has never been registered for VAT nor has it
ever been required to be so registered.
8.13 Employee share schemes
----------------------
8.13.1 The Company does not operate any share schemes (including those
approved by the Inland Revenue and unapproved schemes, whether under
Chapter II Part III Finance Act 1988 or otherwise) for the benefit of
its employees.
8.13.2 The Company does not operate any profit related pay scheme.
8.14 Secondary liability
-------------------
So far as the Warrantors are aware no transaction or event has
occurred in consequence of which the Company is or may be held liable
for any Taxation or deprived of reliefs or allowances otherwise
available to it or may be otherwise held liable for any Taxation for
which some other company or person was primarily liable.
8.15 Payments equivalent to tax
--------------------------
8.15.1 The Company has not in the previous six years entered into any
indemnity, guarantee or covenant under which the Company has agreed or
can be procured to meet or pay a sum equivalent to or by reference to
another person's liability to Taxation.
8.15.2 The Company is not liable to make a payment to any person as a result
of the discharge by that person of any liability of the Company to
Taxation incurred on or before Completion.
8.16 Loan Relationships
------------------
All interest, discounts or premiums payable by the Company in respect
of its loan relationships within the meaning of Chapter II of Part IV
of the Finance Act 1996 are capable of being brought into account as a
debit for the purposes of that Chapter as and to the extent that they
are from time to time recognised in the Company's accounts (assuming
that the accounting policies and methods adopted for the purpose of
the Accounts continue to be so adopted).
8.17 Withdrawal of Reliefs
---------------------
The Warrantors are not aware of any circumstances whereby any relief
which has been treated as an asset in preparing the Accounts could or
might
<PAGE>
effectively be withdrawn, postponed, restricted or otherwise lost as a
result of the sale and purchase under this Agreement or any other
event or circumstance occurring or arising at any time after the
Balance Sheet Date but before Completion.
8.18 Tax Administration
------------------
The Disclosure Letter gives details of any determinations made under
section 41A TMA in respect of the Company.
Part 9
- ------
CONTRACTS AND COMMITMENTS
- -------------------------
9.1 Capital commitments
-------------------
The Company had no capital commitments in excess of (Pounds)10,000 at
the Balance Sheet Date and since then the Company has not made any
capital expenditure or incurred any capital commitments in excess of
(Pounds)10,000.
9.2 Subsisting contracts
--------------------
The Disclosure Letter contains true, complete and accurate copies or
details (incorporating all the terms which currently apply) of every
contract, covenant, commitment or arrangement to which the Company is
a party and in respect of which any party to them has or may have any
outstanding liability in excess of (Pounds)1,000 and which cannot be
terminated on less than one month's notice without compensation save
that in the case of customer contracts specimens only of such
contracts are attached to the Disclosure Letter.
9.3 Mortgages and guarantees etc
----------------------------
9.3.1 The Company has not created nor has it agreed to create any loan
capital or any mortgage, debenture, lien, charge or other similar
encumbrance or security interest over all or any of its property,
assets, undertaking, goodwill, reserves or share capital.
9.3.2 There are no guarantees, suretyships, indemnities or similar
commitments (whether secured or unsecured) given by the Company in
respect of which obligations or liabilities (whether actual or
contingent) are still outstanding.
<PAGE>
9.4 No loans
--------
The Company has not made any loans or advanced any monies or credit to
any person, firm or company (other than encashment of cheques and
credit given on normal commercial terms in the ordinary and normal
course of business).
9.5 Bank indemnities
----------------
The Disclosure Letter contains true, complete and accurate copies
(incorporating all the terms which currently apply) of all agreements
and indemnities and memoranda of all arrangements, practices and
understandings between the Company and its bankers, pursuant to which
the Company's bankers agree to collect on the Company's behalf third
party cheques encashed by the Company and/or pursuant to which the
Company agrees to indemnify its bankers for any liability which they
may incur to anyone in the course of doing so.
9.6 No partnership etc
------------------
The Company is not a member of any partnership, joint venture, trade
association, society or other group, whether formal or informal and
whether or not having a separate legal identity, nor is any such body
relevant to nor does any such body have any material influence over
the business of the Company as now carried on.
9.7 Standard terms of business
--------------------------
The Disclosure Letter contains:-
9.7.1 copies of the Company's standard terms of business; and
9.7.2 full details of the fees, charges and other costs levied (by whatever
name called) by the Company on its customers in connection with First
Party Cheque Cashing and Third Party Cheque Cashing arrangements
offered by the Company.
9.8 Non-arms length contracts
-------------------------
9.8.1 None of the Warrantors nor any of their Associates nor any person in
which any of them has or had any interest (direct or indirect, either
solely or jointly with any other party and whether as shareholder,
employee, director, consultant or otherwise) has (or has ever had) a
trading relationship with the Company nor have any of them ever
entered into any other type of transaction
<PAGE>
or arrangement with the Company (other than in the capacity as a
shareholder or employee of the Company); and none of them provides (or
has in the past provided) goods or services in competition with the
Company.
9.8.2 The Company is not a party to, nor have its profits or financial
position during the three years prior to the date hereof been affected
by, any contract or arrangement which is not of an entirely arms-
length nature made on open market terms.
9.9 Defaults, etc
-------------
9.9.1 None of the obligations owed by any third party to the Company is
unenforceable and no event has occurred as regards the Company which
would entitle any third party to terminate any contract or benefit
enjoyed by the Company or call in any money before the normal due date
therefor.
9.9.2 Neither the Company nor any other party to any agreement, commitment,
transaction or arrangement with the Company is in default to any
material extent thereunder and so far as the Warrantors are aware
there are no circumstances likely to give rise to such a default.
9.10 Liabilities
-----------
9.10.1 There are no known liabilities (including contingent liabilities)
which are outstanding on the part of the Company other than those
liabilities disclosed or provided for in the Accounts or incurred, in
the ordinary and normal course of trading, since the Balance Sheet
Date.
9.10.2 There is no indebtedness or liability due, owing or incurred by the
Company to the Warrantors or any of their Associates whether actually
or contingently, whether solely or jointly with any other person and
whether as principal or surety and there is no such indebtedness or
liability due, owing or incurred to the Company by the Warrantors or
--
any of their Associates.
9.10.3 There are no outstanding liabilities or commitments on the Company
arising from any arrangements for the disposal of any shares, property
or other assets (other than in the ordinary and normal course of
business) previously owned by the Company.
<PAGE>
9.11 Payments to creditors
---------------------
The Company has at all times paid its creditors within the times
agreed with such creditors and there are no debts owing by the Company
which are overdue for payment.
9.12 No restrictions on Company
--------------------------
The Company is not a party to any secrecy or confidentiality agreement
or arrangement which may restrict the use or disclosure of information
nor has it given any covenants limiting or excluding its right to do
business and/or compete in any area or field with any other person.
Part 10
- -------
PENSIONS
- --------
10.1 No pension arrangements
-----------------------
The Company is not under any legal liability or obligation to provide
any relevant benefits (as defined in section 612(1) of the Taxes Act)
or any death or disability benefits not within that definition for any
past or present officer or employee or their dependants or to pay
contributions to any Personal Pension Scheme (as defined in section
630 of the Taxes Act) in respect of such persons.
10.2 No pension arrangements to be introduced
----------------------------------------
The Company has not given any undertakings or assurances to its
officers, employees or consultants regarding the introduction of any
provision for retirement, death or disability benefits (whether or not
there is any obligation to do so) or the payment of contributions to
Personal Pension Schemes (whether or not there is any obligation to do
so).
10.3 No ex-gratia arrangements
-------------------------
The Company has not granted any ex gratia pension or other like
payment to any of its past or present officers, employees, consultants
or their dependants.
Part 11
- -------
OFFICERS AND EMPLOYEES
- ----------------------
11.1 Details
-------
The Disclosure Letter contains an accurate and complete list of all
officers and employees of the Company as at 5 February 1999, showing
all remuneration
<PAGE>
payable and other benefits provided or which the
Company is bound to provide either now or in the future together with
copies of all contracts of employment with the directors and the
secretary of the Company and with all employees.
11.2 Statutory notices
-----------------
All appropriate notices have been properly issued under the Employment
Protection (Consolidation) Act 1978 to all employees (including
directors) of the Company.
11.3 No other service and consultancy arrangements
---------------------------------------------
There are no service or consultancy agreements or arrangements
outstanding between the Company and any other person apart from those
disclosed in the Disclosure Letter.
11.4 No bonus or commission arrangements
-----------------------------------
The Company is not bound or accustomed to make periodical or other
payments (other than normal fixed salaries and wages) to employees,
ex-employees, officers, consultants or others and no employee, officer
or consultant has remuneration on a profit sharing or commission basis
or by reference to the turnover, profits, sales or assets of the
Company.
11.5 No share option scheme
----------------------
The Company does not have and never has had any share option, share
incentive, profit sharing or any other similar scheme.
11.6 Increases since Balance Sheet Date
----------------------------------
Since the Balance Sheet Date:-
11.6.1 no remuneration or benefit has been paid or given or agreed to be paid
or given to any officer, employee or consultant of the Company except
at the rates in force on that date;
11.6.2 no general increase in the wages of the employees of the Company or
any section or class of such employees has been made or agreed to be
made (whether legally binding or not) either with the employees or
their representatives nor has any negotiation or demand for such
increase been entered into by or made to the Company; and
11.6.3 the Company has not received or been notified of any wage claim.
<PAGE>
11.7 Termination of employment
-------------------------
11.7.1 All contracts of employment between the Company and its officers or
employees are lawfully determinable by the Company without
compensation by notice (not exceeding the relevant statutory minimum
period of notice).
11.7.2 No director or executive of the Company, who is in receipt of
remuneration in excess of (Pounds)20,000 per annum has given or
received notice terminating his employment, except as expressly
contemplated in this agreement, and no such executive will be entitled
to give such notice as a result of the sale of the Shares to the
Purchaser.
11.7.3 So far as the Warrantors are aware the Company has no reason to
dismiss (nor does it wish to dismiss) any of its employees who is
entitled to remuneration of at least (Pounds)10,000 per annum.
11.8 Claims by or against employees
------------------------------
11.8.1 The Company is not now, nor so far as the Warrantors are aware is it
likely to be and has not since the Balance Sheet Date been, engaged in
any legal proceedings or arbitration whether as plaintiff or defendant
with any trade union or any person who is or has at any time been a
director or an employee of the Company.
11.8.2 No person who is or was a director or employee of the Company has any
right or made any claim (which has not yet been settled) to any
compensation or other payment by reason of the termination of his
employment (whether such termination constitutes unfair or wrongful
dismissal redundancy or otherwise) or any breach by the Company of his
terms of engagement or employment; so far as the Warrantors are aware
there are no circumstances likely to lead to any such claims being
made; and no gratuitous payment has been made or promised by the
Company in connection with the termination or proposed termination of
employment of any past or present director or employee.
11.8.3 No order has been or may be made for the reinstatement or re-
engagement of any employee of the Company.
11.9 Industrial relations
--------------------
There is not and never has been any strike, picket, lock-out, go-slow,
work-to rule or any other form of industrial dispute taken or
threatened against the
<PAGE>
Company and to the best of knowledge, information and belief of the
Warrantors there are no facts or circumstances which is likely to
lead to any such industrial dispute.
11.10 Trade union recognition
-----------------------
No claim has been made by any trade union for recognition or for any
improvement or amendment to the terms or conditions of employment of
any employees of the Company and no claim for recognition has been
referred to the Advisory Conciliation and Arbitration Service or to
the Central Arbitration Committee nor is any trade union recognised
by the Company in respect of any class of employees for any purpose
whatsoever.
11.11 Working Time Regulations
------------------------
11.1.1 The Company has complied in full with its obligations under the
Working Time Regulations 1998 (the "1998 Regulations") and, in
particular and without limitation, with its record keeping
obligations under Regulations 5(4) and 9 of the 1998 Regulations and
the requirements under Regulations 4, 6, 7 and 8 of the 1998
Regulations.
11.1.2 The Disclosure Letter contains complete and accurate copies of:-
11.11.2.1 all relevant agreements entered into pursuant to the 1998 Regulations
(or, if in standard form, a copy of the standard form) and a list of
all workers covered by any such agreement; and
11.11.2.2 a list of all workers whom the Company regards as falling within the
terms of Regulation 20 or 21 of the 1998 Regulations.
Part 12
- -------
INSURANCE
- ---------
12.1 Full cover
----------
The Company is and has been at all material times fully covered by
valid insurance against the normal risks for the type of business
carried on and assets and stock-in-trade owned or used by it
(including adequate insurance for the full reinstatement value of
such business, assets and stock-in-trade and against loss of profit)
and so far as the Warrantors are aware nothing has been done or
omitted to be done which could make any policy of insurance void or
voidable.
<PAGE>
12.2 Details of insurance cover
--------------------------
Save for policies of insurance effected by the landlords in respect
of the Properties the Disclosure Letter contains copies of all
policies of insurance maintained by the Company (or which is
maintained by a third party but in which the Company has an interest)
and includes all information which the Purchaser shall reasonably
require in order to assess the liability to pay premiums and the
cover afforded under such policies (including details of current
premiums, excess levels, any unusual terms or conditions contained in
such policies, a history of claims made by the Company at any time
under any insurance policies and circumstances which have arisen and
may give rise to a claim under such policies).
12.3 Premiums paid
-------------
All premiums payable in respect of any insurance policy in which the
Company has an interest have been duly paid.
12.4 No outstanding claims
---------------------
There are no claims outstanding by the Company under any insurance
policy nor, so far as the Warrantors are aware, are there any
circumstances likely to give rise to any such claim or which would or
might be required under any insurance policy to be notified to the
insurers or which is likely to lead to any liability under such
insurance policies being avoided by the insurers or the premiums
being increased.
12.5 Effect of this agreement
------------------------
No cover afforded by any policy of insurance which is maintained by
the Company or which is maintained by a third party but in which the
Company has an interest will terminate or be terminable at the option
of the insurer or any third party by reason of the implementation of
this agreement.
<PAGE>
Part 13
- -------
LITIGATION AND LEGAL PROCEEDINGS
- --------------------------------
13.1 Defaults by the Company
-----------------------
The Company is not and since the Balance Sheet Date has not been:-
13.1.1 in default under any agreement, deed, instrument, arrangement or
covenant to which it is a party or in respect of any other obligations
or restrictions binding upon it;
13.1.2 liable in respect of any representations or warranties (whether
express or implied) or other matters giving rise to a duty of care on
the part of the Company; or
13.1.3 liable to any fine or penalty as a result of committing or omitting to
do any act or thing which is likely to give rise to such a liability;
or
13.1.4 subject to any order or judgment given by any Court or government
agency and has not been party to any undertaking or assurance given to
any Court or governmental agency which is still in force;
13.2 Legal Proceedings
-----------------
The Company is not and has not since the Balance Sheet Date been
engaged and so far as the Warrantors are aware there are no
circumstances likely to lead to the Company becoming engaged in any
legal proceedings (civil or criminal) or arbitration as plaintiff,
defendant or otherwise howsoever except as plaintiff in normal debt
collection and in respect of which the aggregate amount of debts due
to the Company does not exceed (Pounds)500.
13.3 Disputes with Government departments
------------------------------------
There is no dispute with any revenue or other government, local
authority, administrative, official department entity or agency in the
United Kingdom or elsewhere, in relation to the affairs of the Company
and so far as the Warrantors are aware there are no facts which may
give rise to any such dispute.
13.4 Personal injury claims
----------------------
There are no claims pending or threatened, or capable of arising
against the Company by an employee or third party in respect of any
accident or injury which are not fully covered by insurance.
<PAGE>
13.5 Demands to pay
--------------
No demand has been served upon the Company under section 123 of the
Insolvency Act 1986 and the Company has not received notice (whether
formal or informal) from any lenders of money to the Company requiring
repayment or intimating the enforcement by such lenders of any
security which they may hold over any assets of the Company and there
are no circumstances likely to give rise to any such notice being
given.
13.6 Advertising materials
---------------------
All advertising and marketing materials used in connection with the
Company's business comply with all legal requirements in all countries
in which these materials are used or proposed to be used. Such
materials are not defamatory and there are no grounds under which such
materials are likely to be challenged for any reason whatsoever
including, without limitation, defamation, trade libel or any
analogous law.
<PAGE>
FIFTH SCHEDULE
- --------------
TAX DEED
- --------
THIS DEED is made on February 1999
- ---------
BETWEEN:-
- ---------
(1) The persons whose names and addresses are set out in the schedule
hereto ("Covenantors"); and
-------------
(2) DFG ACQUISITION LIMITED a company registered in England under number
-----------------------
3701758 whose registered office is at c/o Ernst & Young, Rolls House,
7 Rolls Building, Fetter Lane, London EC4A 1NH ("Purchaser").
-----------
1 INTRODUCTION
------------
1.1 By an agreement ("Agreement") dated today and made between (1) the
-----------
Covenantors (2) the Purchaser and (3) Dollar (US) Canada, the
Purchaser agreed to purchase the Shares (as defined in the Agreement).
1.2 Clause 4.2.11 of the Agreement provides that the Covenantors will
deliver today a duly executed deed in this form.
2 DEFINITIONS AND INTERPRETATION
------------------------------
2.1 In this deed expressions defined in the Agreement shall bear the same
meanings unless the context otherwise requires or unless they are
expressly given different meanings.
2.2 In this deed unless the context otherwise requires:-
"Accounts" means the audited balance sheet as at the Balance Sheet
----------
Date and the audited profit and loss account for the period ended on
the Balance Sheet Date of the Company together with the notes and
directors' reports and other documents annexed to them (and for the
purposes of identification only copies of the Accounts have been
signed by or on behalf of the parties to the Agreement and are annexed
thereto as appendix "A");
"Balance Sheet Date" means 31 July 1998;
--------------------
"Claim" means any notice, demand, assessment, letter or other document
-------
issued, or action taken, by or on behalf of the Revenue or any other
governmental or statutory authority, body or official, whether of the
United
<PAGE>
Kingdom or elsewhere, whereby the Company is or may be placed under a
liability to Taxation;
"Company" means Instant Cash Loans Limited (registered number
---------
2685515);
"Event" includes any act, omission, transaction or circumstance,
-------
including (without limitation) any change in the residence of, or the
death of, any person, the execution of the Agreement and Completion;
"Purchaser's Group" means the Purchaser and DFG World Inc.;
-------------------
"Relief" includes any loss, allowance, exemption, set-off, credit or
--------
deduction relevant to the computation of any Taxation or any right to
repayment of Taxation;
"Taxation" includes all forms of taxation, duties (including stamp
----------
duty), levies, imposts, charges, withholdings, national insurance and
other contributions and PAYE liabilities (including, in all cases, any
penalty, fine, interest or surcharge in respect of the same) whenever
created or imposed and whether of the United Kingdom or elsewhere.
2.3 A "Liability to Taxation" means:
2.3.1 any liability of the Company to make a payment of or in respect of
Taxation; and
2.3.2 the loss, reduction, or non-availability of any Relief which was
treated as an asset of the Company in the Accounts or which was taken
into account in computing a provision for deferred Taxation in the
Accounts or preventing the need for such a provision to be made, or
the set-off of any Relief available to the Company which arises as a
result of an Event after Completion in circumstances where but for
such set-off there would have been a liability to Taxation in respect
of which the Purchaser would have had a claim against the Covenantors
under this deed and for the purposes of this clause 2.3.2 such
Liability to Taxation shall be deemed to be equal to the amount (as
appropriate) of:
2.3.2.1 Taxation which use of the relevant Relief would have otherwise saved
(assuming Taxation to be otherwise payable); or
2.3.2.2 the repayment of Taxation to which the Company would otherwise have
been entitled;
<PAGE>
in each case on the basis of rates of Taxation current at the date of
such loss, reduction, non-availability or set-off.
2.4 The covenants contained in this deed apply where the liability in
question arises as a result of one or more Events or the combined
effect of more than one Event where one such Event occurred on or
before Completion or, where one such Event occurred after Completion,
where one Event occurred outside the ordinary course of business of
the Company on or before and another such Event occurred after
Completion in the ordinary course of business of the Company (as
carried on at the date of Completion) and for the purpose of this
clause 2.4 the Events specified in clause 5.1.3 shall not be regarded
as Events occurring in the ordinary course of business.
2.5 The covenants contained in this deed shall be construed as separate
and independent and none of them shall be affected or restricted by
any other except to the extent that any payment made by the
Covenantors and received by the Purchaser in respect of one covenant
shall discharge the same liability under the other covenants which
shall arise out of the same subject matter.
3 COVENANTS
---------
3.1 The Covenantors jointly and severally covenant with the Purchaser to
pay to the Purchaser an amount equal to:-
3.1.1 any Liability to Taxation in respect of, by reference to or in
consequence of any income, profits or gains earned, accrued or
received or deemed to have been earned, accrued or received on or
before Completion;
3.1.2 any Liability to Taxation in respect of, by reference to or in
consequence of any Event which occurred or is deemed to have occurred
on or before Completion;
3.1.3 any Liability to Taxation for which it is not primarily liable in
respect of, by reference to or in consequence of any Event which
occurred or is deemed to have occurred on or before Completion;
3.1.4 any Liability to Taxation arising under clause 2.3.2 hereof;
3.1.5 any Taxation arising in respect of or in connection with any amounts
paid or payable pursuant to or otherwise in connection with this deed
provided that this clause shall not apply to the extent that such
Taxation arises as the result
<PAGE>
of an assignment by the Purchaser of the benefit of this deed and/or
the Agreement; and
3.1.6 subject to clause 7.2 all costs and expenses reasonably incurred by
the Purchaser in enforcing the provisions of this deed.
3.2.1 All sums payable by the Covenantors under the covenants contained in
this deed shall be paid free and clear of all deductions or
withholdings or rights of counterclaim or set-off unless the deduction
or withholding is required by law.
3.2.2 If the Covenantors are required by law to make any deduction or
withholding from any payment under this deed, the sum due from the
Covenantors in respect of such payment shall be increased to the
extent necessary to ensure that after the making of such deduction or
withholding the Purchaser receives and retains a net sum equal to the
sum it would have received had no deduction or withholding been
required to be made provided that if the Purchaser subsequently
receives a credit (other than a credit against any Taxation on the sum
in respect of which the withholding or deduction was made or against
any Taxation in respect of which the Purchaser is indemnified under
this deed in circumstances where the credit has been taken into
account in calculating and so reducing the liability in respect of
which the Purchaser is indemnified) for such deduction or withholding,
then such credit shall be repaid to the Covenantors in cleared funds
within 5 business days of receiving the same.
4. FURTHER COVENANTS
-----------------
The Covenantors jointly and severally covenant with the Purchaser to
pay to the Purchaser an amount equal to any corporation tax arising as
a consequence of and by reference to the Company making or being
deemed to have made a chargeable gain on the disposal of the benefit
of the Pawn Broking Agreements pursuant to the dividend in specie
declared on the date of this deed and any VAT chargeable in connection
with any supply or deemed supply made pursuant to such Pawn Broking
Agreements (together "the Dividend Liability") and for the purpose of
this clause 4 the full amount of the Dividend Liability shall be borne
jointly and severally by Rachel Hallam and Henry Hallam (and for the
avoidance of doubt Martin Joyce and
<PAGE>
Christopher Gillam shall have no liability for the Dividend Liability
under the terms of this deed).
5 EXCLUSIONS
----------
5.1 The covenants in clause 3.1 shall not apply to any Liability to
Taxation to the extent that:-
5.1.1 a specific provision or reserve in respect of it was made in the
Accounts;
5.1.2 it arises or is increased as a consequence of any retrospective change
in the law enacted after Completion;
5.1.3 such Liability to Taxation results from actual profits or gains
arising as a result of acts done or in consequence of transactions
entered into in the ordinary course of the business of the Company
between the Balance Sheet Date and Completion and for these purposes
any Liability to Taxation arising as a consequence of:
5.1.3.1 any distribution or deemed distribution for Taxation purposes;
5.1.3.2 the disposal (which shall include any deemed disposal or deemed
appropriation for Taxation purposes) of any asset or the supply of any
service or business facility of any kind where the consideration (if
any) received for such a disposal or supply is less than the
consideration deemed to have been received for Taxation purposes to
the extent of that difference;
5.1.3.3 any act done or transaction entered into which gives rise to a
Liability to Taxation on deemed (rather than actual) income profits or
gains;
5.1.3.4 any Event which results in a Liability to Taxation where such
liability is chargeable on or attributable primarily to a person other
than the Company (including any liability under Part VIII of the Taxes
Management Act 1970);
5.1.3.5 an Event giving rise to a liability pursuant to any provision
contained in Part XVII ICTA; or
5.1.3.6 a failure by the Company duly to deduct or account for Taxation shall
not be regarded as arising as a result of acts done or transactions
entered into in the ordinary course of business of the Company.
<PAGE>
5.1.4 such Liability to Taxation would not have arisen but for any voluntary
transaction, act or omission which was carried out or effected by the
Purchaser or the Purchaser's Group at any time after Completion
otherwise than in the ordinary course of business of the Company
(unless such transaction or act was carried out or effected with the
prior written approval of all of the Covenantors following receipt by
all of them of all material details of the proposed transaction or act
or pursuant to an obligation incurred prior to the date of this deed)
and which the Purchaser, the Company or the relevant member of the
Purchaser's Group, was, or ought reasonably to have been aware could
give rise to a Liability to Taxation;
5.1.5 such Liability to Taxation arises or is increased as a result of:
5.1.5.1 a change after Completion in the accounting basis on which the Company
values its assets, or a change in the accounting policy or practice of
the Company;
5.1.5.2 the change after Completion of the date to which the Company makes up
its accounts;
5.1.5.3 any change in published tax authority practice or any withdrawal of
any published extra-statutory concession announced after Completion
with retrospective effect;
5.1.5.4 the cessation or major change in nature after Completion of any trade
or business carried on by the Company at Completion;
5.1.5.5 any failure by the Purchaser to comply with the time limits stated in
clause 8 (Conduct of Claims);
5.1.6 it was paid or discharged on or before Completion and such payment or
discharge is reflected in the Accounts;
5.1.7 payment has already been made to the Purchaser in respect of such
Liability to Taxation by the Covenantors under this deed or by the
Warrantors under the Agreement;
5.1.8 such Liability to Taxation would not have arisen but for the failure
or omission by the Company after Completion to make any claim,
election, surrender, revocation or disclaimer or give any notice or
consent to do any other thing the making, giving or doing of which was
taken into account in computing any
<PAGE>
provision or reserve for Taxation in the Accounts and which was
specifically referred to in the Disclosure Letter (by reference to
this clause);
5.1.9 it relates to any fine penalty or surcharge or interest arising by
reason of any failure or delay on the part of the Company in paying to
the relevant Taxation Authority any payment made pursuant to this deed
by the Covenantors in full satisfaction of a claim by the Purchaser;
or
5.1.10 it is advance corporation tax (or any other Liability to Taxation
which may arise in respect of such advance corporation tax) arising in
respect of the dividend in specie referred to in clause 4 unless the
amount which is so assessable to advance corporation tax exceeds
(Pounds)750,000 in which case the Covenantors shall be liable for all
advance corporation tax on (and any other Taxation in connection with)
such excess.
5.2 The Covenantors' liability under this deed is also limited to the
extent that the provisions in Schedule 7 of the Agreement expressly
provide for their liability to be so limited.
6 WAIVER
------
No delay or omission of the Purchaser in exercising any rights under
this deed shall prejudice such rights or be construed as a waiver or
partial waiver of such rights, nor shall it exclude the further
exercise of such rights.
7 PAYMENT
-------
7.1 The Covenantors shall pay any amounts due under this deed in sterling
in cleared funds within five business days of receiving a written
demand in respect of a Liability to Taxation for which the Covenantors
are liable under this deed or, if later:
7.1.1 where the Company is required to make payment in respect of a
Liability to Taxation within the meaning of clause 2.3.1 of this deed,
not less than five business days prior to the date on which the
Company must make actual payment of the Taxation in question to the
relevant Taxation authority in order to avoid incurring a liability to
interest or a charge fine or penalty in respect of such Liability to
Taxation; or
<PAGE>
7.1.2 where a Liability to Taxation relates to the loss reduction or non-
availability of a right to a repayment of Taxation, not less than five
business days prior to the date when the Company would have been
entitled to receive the full amount of that repayment of Taxation were
it not for its loss reduction or non-availability; or
7.1.3 in respect of any Liability to Taxation within clause 2.3.2 of this
deed (other than a right to repayment of Taxation), no later than five
business days prior to the date any Taxation is payable (but would not
have been payable had the Relief in question been otherwise available
or not been lost or reduced), or would have been otherwise payable (in
the case of a set-off of a Relief), to the relevant Taxation authority
in order to avoid incurring a liability to interest or a charge, fine
or penalty in respect of such Liability to Taxation.
7.2 The Purchaser shall pay to the Covenantors any amounts due by it under
this deed in sterling in cleared funds by the due date for payment
specified in the relevant clause.
7.3 Any sums not paid by the Covenantors or the Purchaser on the due date
for payment as specified in this clause shall bear interest (which
shall accrue from day to day after as well as before any judgment for
the same) at the annual rate of 2 percentage points above the base
rate of National Westminster Bank plc from time to time from the due
date up to and including the day of actual payment of such sums, such
interest to be compounded quarterly and paid on demand to the party
demanding it.
7.4 The Covenantors may at their own expense require the amount of any
payments required to be made under this clause 7 to be certified by
the auditors for the time being of the Company (acting as experts and
not as arbitrators) and the amount so certified shall (save for
manifest error) be conclusive and binding on the Covenantors.
8 CONDUCT OF CLAIMS
-----------------
8.1 The Purchaser shall or shall procure that the Company shall give
notice to the Covenantors as soon as reasonably practicable after it
shall become aware of any Claim in respect of which a claim may be
made pursuant to this deed and where there is a time limit for
appealing the Claim, within ten business days of
<PAGE>
the Company receiving written notice of the Claim, together with such
relevant information and documentation concerning such Claim in the
possession of the Purchaser or the Company or any agents of the same
(as the case may be) at that time.
8.2 Subject to the provisions of clause 8.3, following the receipt of
written notice from all of the Covenantors stating that the
Covenantors wish to have conduct of the Claim, the Purchaser shall and
shall procure that the Company shall provide such assistance and take
such action as the Covenantors may reasonably request to enable the
Company to avoid, dispute, resist, compromise or defend any Claim and
adjudication in respect thereof ("dispute") subject to the Purchaser
---------
and the Company indemnified and secured to the Purchaser's reasonable
satisfaction by the Covenantors against all reasonable costs and
expenses and all damages, interest, penalties and surcharges thereby
incurred.
8.3 Subject to the provisions of this clause 8 any dispute shall be
conducted by the Covenantors and:
8.3.1 the Covenantors shall keep the Purchaser fully informed of all
relevant matters and shall promptly forward or procure to be forwarded
to the Purchaser copies of all relevant correspondence and other
relevant information and documentation received by them in connection
with the dispute;
8.3.2 the Covenantors shall not and the Company shall not be required by the
Covenantors to transmit to a Taxation authority any communications
written or otherwise relating to the dispute which shall not first
have been approved by the Purchaser such approval not to be
unreasonably withheld or delayed;
8.3.3 the Covenantors shall not and the Company shall not be required by the
Covenantors to make any settlement or compromise of the dispute nor
agree any matter in the conduct of such dispute which is likely to
materially increase the amount being the subject thereof or adversely
affect the future liability of the Purchaser or the Company to
Taxation to a material extent without the prior approval of the
Purchaser such approval not to be unreasonably withheld or delayed.
<PAGE>
8.4 The Purchaser or the Company may without reference to any of the
Covenantors admit, settle, discharge, compromise or otherwise deal
with any outstanding or future Claim (without prejudice to their
rights under this deed) if:
8.4.1 the Covenantors serve a notice on the Company or the Purchaser to the
effect that in relation to any such dispute the Covenantors do not
wish to take up or continue the conduct thereof;
8.4.2 a period of 20 business days has expired following the service of
notice by the Purchaser or, as the case may be, the Company on the
Covenantors pursuant to clause 8.1 where either the Covenantors have
not made a request to the Purchaser in accordance with clause 8.2 or
the Covenantors have made such a request but have failed to provide a
duly executed indemnity and security in a manner which may reasonably
be required by the Purchaser within the said period;
8.4.3 a period of 20 business days has expired following the service of
notice (other than a notice under clause 8.1) by the Purchaser or the
Company on the Covenantors to the effect that the Covenantors are not
using their reasonable efforts to conduct the dispute, if by the
expiry of that period the Covenantors have not made reasonable efforts
so to conduct the dispute; or
8.4.4 in the reasonable opinion of the Purchaser, the Covenantors or the
Company have committed any acts or omissions prior to Completion which
constitute fraud or wilful default.
8.5 The Covenantors shall be bound to accept for the purposes of the
covenants contained in this deed any admission, settlement, discharge
or compromise of any Claim and the outcome of any proceedings relating
thereto made or arrived at in accordance with the procedures set out
in clause 8.4.
8.6 If the Covenantors do not exercise their right to request the
Purchaser to take action pursuant to clause 8.2, they shall give such
reasonable co-operation as the Company or the Purchaser may reasonably
request for the purpose of admitting, settling, discharging,
compromising or otherwise dealing with the Claim in question.
<PAGE>
9. RELIEFS
-------
If the Purchaser becomes aware of a Relief which in its reasonable
opinion has arisen in the circumstances referred to in this clause 9
the Purchaser shall notify the Covenantors forthwith. If the auditors
for the time being of the Company shall certify (at the request and
expense of the Covenantors) that any Liability to Taxation which has
resulted in a payment having been made or becoming due from the
Covenantors under the terms of this deed will give rise to a Relief
for the Company or the Purchaser which would not otherwise (but for
the Liability to Taxation) have arisen then as and when the liability
of the Company or the Purchaser to make an actual payment of or in
respect of Taxation is reduced by reason of that Relief ("the Relevant
Date") the amount by which that liability is so reduced shall:
9.1 first be set off against any payment then due from the Covenantors
under this deed;
9.2 to the extent that there is an excess, a refund shall be made within 5
business days of the Relevant Date to the Covenantors of any previous
payment or payments made by the Covenantors under this deed and not
previously refunded under this clause, up to the amount of such
excess; and
9.3 to the extent that the excess referred to in sub-clause 9.2 of this
clause is not exhausted under that clause the remainder of that excess
shall be carried forward and set off against any future payment or
payments which become due from the Covenantors under this deed.
10. PAYMENTS RECEIVED
-----------------
10.1 If any payment is made by the Covenantors in full or partial discharge
of a liability which has arisen under this deed in respect of a
Liability to Taxation then:
10.1.1 if the Company or the Purchaser or any member of the Purchaser's Group
(as the case may be) subsequently receives from any person (other than
the Company or the Purchaser or any member of the Purchaser's Group or
any person connected with any of them within the meaning of section
839 Taxes Act) payment or a right of set-off against a liability of
the Company or the Purchaser or a member of the Purchaser's Group (as
the case may be) other
<PAGE>
than a Liability to Taxation in respect of which the Purchaser is
indemnified under this deed which is owed to that person (which for
the purposes of this clause only shall be termed a "Right of Set-off")
in either case in respect of the Taxation in question the payment or
Right of Set-off shall be dealt with in accordance with clause 10.2;
or
10.1.2 if the Company or the Purchaser or any member of the Purchaser's Group
(as the case may be) is entitled to payment or a Right of Set-off in
respect of the Taxation in question from any person (other than the
Company or the Purchaser or any members of the Purchaser's Group or
any person connected with any of them within the meaning of section
839 Taxes Act) then the Purchaser shall as soon as reasonably
practicable notify the Covenantors of that entitlement and, provided
that the Covenantors agree to indemnify the Company and the Purchaser
and the relevant member of the Purchaser's Group (as the case may be)
against all costs and expenses reasonably incurred by the Company or
Purchaser or member of the Purchaser's Group (as the case may be) the
Purchaser shall and shall procure that the Company and any relevant
member of the Purchaser's Group shall take such action as the
Covenantors shall reasonably request to enforce such Right of Set-off
or recovery of such payment and any payment or Right of Set-off
received shall be dealt with in accordance with clause 10.2;
10.2 Where it is provided under clause 10.1 that the payment or Right of
Set-off is to be dealt with in accordance with this clause:
10.2.1 in the case of a payment, the Purchaser shall or shall procure that
the Company or the relevant member of the Purchaser's Group shall
within five business days of receipt by the relevant company pay to
the Covenantors the amount of the payment received (less any Taxation
payable or costs and expenses of recovery incurred by the recipient in
respect thereof other than any costs and expenses previously paid by
the Covenantors pursuant to the indemnity in clause 10.1.2) together
with so much of any interest or repayment supplement (or equivalent
thereof) paid to the recipient of the payment in
<PAGE>
respect thereof (less any Taxation payable by the recipient in respect
thereof) subject to a maximum of the payment made by the Covenantors
referred to in clause 10.1;
10.2.2 in the case of a Right of Set-off, the Purchaser shall or shall
procure that the Company or the relevant member of the Purchaser's
Group shall within five business days of the date on which the
liability in question would have been payable by the Company, the
Purchaser or the relevant member of the Purchaser's Group (as the case
may be) but for the exercise of the Right of Set-off, pay to the
Covenantors an amount equal to the amount of Taxation which would have
been otherwise recoverable by the Company, the Purchaser or the
relevant member of the Purchaser's Group subject to a maximum of the
payment made by the Covenantors referred to in clause 10.1.
11. OVERPROVISION
-------------
11.1 If at the request and expense of the Covenantors the Auditors for the
time being of the Company shall certify that any provision of Taxation
(excluding deferred taxation) in the Accounts is an overprovision then
the amount of such overprovision shall be dealt with in accordance
with clause 11.2
11.2 Where it is provided under this clause 11 that any amount
("Overprovided Amount") is to be dealt with in accordance with this
clause:
11.2.1 the Overprovided Amount shall first be set off against any payment
then due from the Covenantors under this deed;
11.2.2 to the extent the Overprovided Amount exceeds the sum set off under
clause 11.2.1 a refund shall be made to the Covenantors of any
previous payment or payments made by the Covenantors under this deed
and not previously refunded under this deed up to the amount of such
excess within five business days of the Overprovided Amount being
certified; and
11.2.3 to the extent that the Overprovided Amount exceeds the sums set off
and repayable under sub-clauses 11.2.1 and 11.2.2 the remainder of
that excess shall be carried forward and set off against any future
payment or payments which become due from the Covenantors under this
deed.
<PAGE>
12. TAX RETURNS
-----------
12.1 The Covenantors or their duly authorised agents shall be responsible
for and have the conduct of preparing, submitting to and agreeing with
the relevant Taxation Authority at the cost of the Covenantors all tax
returns and computations of the Company for all accounting periods
ended on or prior to Completion ("Relevant Returns").
12.2 The Covenantors shall keep the Purchaser fully informed of its conduct
of the Company's tax affairs in respect of the Relevant Returns and
all material written communications relating thereto shall be
submitted to the Purchaser or (at the Purchaser's direction) to its
duly authorised agents in draft for its or their comments and the
Covenantors shall incorporate any reasonable comments made by the
Purchaser relating thereto.
12.3 The Purchaser shall procure that the Company or their duly authorised
agents afford such access to its books, accounts and records and
provide all such assistance as the Covenantors or its duly authorised
agents may reasonably request in order to carry out their obligations
under this clause.
12.4 The Purchaser or its duly authorised agents shall be responsible for
and have the conduct of preparing, submitting to and agreeing with the
relevant Taxation Authority the tax return and computation of the
Company in respect of the accounting period current at Completion.
12.5 The Purchaser shall keep the Covenantors reasonably informed upon
request of the Covenantors of its conduct of the Company's tax affairs
in respect of the tax return and computations for the current
accounting period of the Company as at the date of Completion ("the
Current Return") and shall submit the Current Return and any
corporation tax computations relating thereto to the Covenantors for
comment prior to submission to the relevant Taxation authority.
13. PURCHASER'S COVENANT
--------------------
13.1 The Purchaser covenants with the Covenantors and each of them to hold
the Covenantors fully indemnified against any liability of the
Covenantors to make a payment to the Inland Revenue pursuant to the
provisions of section 767A or section 767AA ICTA which would not have
arisen but for the failure
<PAGE>
by the Company or, in the case of a Liability to Taxation arising
pursuant to section 767AA ICTA, an associate of the Company (as
defined in section 767AA(8) ICTA, to discharge a liability to Taxation
which
13.1.1 in the case of a liability under section 767A ICTA relates to an
accounting period beginning prior to Completion; and
13.1.2 in the case of liability under section 767AA ICTA, relates to an
accounting period ending on or after Completion.
13.2 The Purchaser covenants with the Covenantors and each of them to hold
the Covenantors fully indemnified against any interest penalties costs
and expenses reasonably incurred by the Covenantors in connection with
any liability referred to in clause 13.1.
13.3 The Purchaser shall have no liability pursuant to this clause 13 to
the extent that the corporation tax liability in question would give
rise to a liability of the Covenantors to the Purchaser pursuant to
clause 3.1 of this deed.
13.4 The Covenantors shall give notice to the Purchaser and the Company as
soon as reasonably practicable after any one of them shall become
aware of a liability to Taxation in respect of which the Covenantors
could make a claim under the provisions of this clause 13.
13.5 The Purchaser shall make payment to the Covenantors pursuant to the
terms of the indemnity in this clause 13 not less than 5 business days
prior to the date on which the Covenantors must make payment to the
Inland Revenue pursuant to the provisions of section 767A or section
767AA ICTA or if later, within 5 business days of receiving notice
pursuant to clause 13.4.
14 REDUCTION OF PURCHASE PRICE
---------------------------
Any amounts payable pursuant to this deed shall be deemed to
constitute a reduction in the Consideration.
15. ASSIGNMENT
----------
The provisions of clauses 10.4.1 and 10.4.2 of the Agreement shall
apply equally to this deed.
16. NOTICES
-------
The provisions of clause 13 of the Agreement shall apply equally to
this deed.
<PAGE>
17. LAW
---
The provisions of clause 14 of the Agreement shall apply equally to
this deed.
<PAGE>
SCHEDULE
--------
("the Covenantors")
Rachel Hallam
Nuthall Lodge
29 Nottingham Road
Nottingham
NG16 1DH
Christopher Gillam
Whitewell Hall
Whitewell on the Hill
York
Y06 7JJ
Martin Joyce
Low Hall
Curly Hill
Middleton
Ilkley
LS29 0AQ
Henry Hallam
Nuthall Lodge
29 Nottingham Road
Nottingham
NG16 1DH
<PAGE>
SIGNED AS A DEED by )
RACHEL HALLAM )
in the presence of:- )
SIGNED AS A DEED by )
CHRISTOPHER GILLAM )
in the presence of:- )
SIGNED AS A DEED by )
MARTIN JOYCE )
in the presence of:- )
SIGNED AS A DEED by )
HENRY HALLAM )
in the presence of:- )
EXECUTED AS A DEED by )
DFG ACQUISITION LIMITED )
acting by )
)
and )
)
Director:
Director/Secretary:
<PAGE>
SIXTH SCHEDULE
- --------------
PAYMENT OF THE SUBSEQUENT CONSIDERATION
- ---------------------------------------
1. Definitions
-----------
For the purposes of this schedule, unless the context otherwise
requires:
"Business" shall mean the Company's business of First Party Cheque
----------
Cashing and Third Party Cheque Cashing as carried on from the Existing
Properties at the date of this agreement; and no business (whether of
the same or a different kind) which shall be carried on by the Company
at another location during the Earn Out Period shall form part of "the
Business" for the purpose of this schedule;
"Earn Out Period" means the period from Completion to 31 July 2000
-----------------
inclusive;
"Independent Accountants" means such firm of Chartered Accountants as
-------------------------
the Vendors and the Purchaser may appoint to act as the "Independent
Accountants" in accordance with this schedule or, (if the parties fail
to so agree within 14 days after either party shall have nominated a
particular firm in accordance with paragraph 3), such firm as may be
appointed (at the request of either party) by the President for the
time being of the Institute of Chartered Accountants in England and
Wales;
"Instalment" means either the Second Instalment or the Third
------------
Instalment;
"Existing Properties" means the premises briefly described in the
---------------------
Property Schedule excluding the Head Office at Players Street,
Nottingham;
"Purchaser's Group" means the Purchaser and any undertaking which
-------------------
shall be its parent undertaking and any undertaking which shall be a
subsidiary undertaking of the Purchaser or any such parent undertaking
for the time being and any of them other than the Company;
"Relevant Accounts" means the profit and loss accounts for each of the
-------------------
two periods of twelve months ending on 31 July 1999 and 31 July 2000
of the Company in relation to the Business as carried on from the
Properties (but not from any other properties from which the Company
may trade during the relevant period) which shall be prepared by the
Purchaser pursuant to paragraph 3 of this schedule in accordance with
generally accepted UK
<PAGE>
accounting practices and principles, including Statements of Standard
Accounting Practice and Financial Reporting Standards and subject
thereto on a basis consistent with and using the accounting
principles, policies and practices adopted in the Accounts; and the
Relevant Accounts for any particular period (eg "the Relevant Accounts
for 1999") shall be the Relevant Accounts for the twelve months ending
on 31 July in that year (eg the Relevant Accounts for the 12 months
ending on 31 July 1999);
"Relevant Profits" shall mean and be computed in accordance with
------------------
paragraph 2 of this schedule; and the Relevant Profits for any
particular period (e.g. "the Relevant Profits for 1999") shall be the
Relevant Profits calculated by reference to the Relevant Accounts for
the twelve month period ending on 31 July in that year (eg the
Relevant Profits for the 12 months ending 31 July 1999);
"Relevant Statement" means a statement showing the adjustments, if
--------------------
any, which are required to be made to the Relevant Accounts in order
to arrive at the Relevant Profits together with a statement of an
amount of an Instalment to be issued pursuant to paragraph 3 of this
schedule;
"the Reporting Accountants" means Ernst & Young of 14 King Street,
---------------------------
Leeds LS1 2JN acting on behalf of the Purchaser;
"Reviewing Accountants" means a firm of chartered accountants
-----------------------
nominated by the Vendors;
"Second Instalment" means an amount calculated in accordance with the
-------------------
following formula:
if the Relevant Profits for 1999 shall
be less than (Pounds)1,500,000: the Second Instalment shall be
(Pounds)500,000 in any event even if
the Company makes loss during that
period.
if the Relevant Profits for 1999 shall be
(Pounds)1,500,000 or more:
the Second Instalment shall be
(Pounds)500,000 plus (Pound)1 for
each (Pound)1 (if any)
<PAGE>
by which the Relevant Profits for
1999 shall exceed (Pounds)1,500,000
up to a maximum of (Pounds)2,000,000
(so that the Second Instalment shall
not exceed (Pounds)1,000,000 in any
circumstances whatsoever);
"Second Instalment Statement" means the Relevant Statement to be
-----------------------------
issued in relation to the Second Instalment pursuant to paragraph 3.10
of this schedule; and "Third Instalment Statement" means the Relevant
----------------------------
Statement to be issued in relation to the Third Instalment pursuant to
paragraph 3.10 of this schedule.
"Third Instalment" means an amount calculated in accordance with the
------------------
following formula:-
if the Relevant Profits for 2000 shall
be less than (Pounds)2,040,000: the Third Instalment shall be nil
if the 2000 Relevant Profits shall
be (Pounds)2,040,000 or more: the Third Instalment shall be: (a)
(Pounds)333,333 plus (Pounds)1.852
for each (Pound)1 (if any) by
which the Relevant Profits for
2000 shall exceed
(Pounds)2,040,000 up to a maximum
of (Pounds)2,400,000 (so that
under this paragraph (a) the Third
Instalment shall not exceed
(Pounds)1,000,000); plus (b) if,
and to the extent that, the
Relevant Profits for 1999 shall be
less than (Pounds)2,000,000 ("the
1999 Shortfall") (Pound)1 for
every (Pound)1 (if any) by which
the Relevant Profits for 2000
shall exceed (Pounds)2,400,000 by
the amount of the 1999 Shortfall;
<PAGE>
provided that under this paragraph
(b) the Third Instalment shall not
exceed the amount of the 1999
Shortfall.
2. Relevant Profits
----------------
For the purposes of this schedule "Relevant Profits" shall mean the
------------------
net trading profit before Taxation on the ordinary activities of the
Business of the Company from the Existing Properties (but not any
other properties from which the Company may trade during the Earn Out
Period) as shown in the Relevant Accounts (after making any
adjustments considered by Reporting Accountants and the Reviewing
Accountants to be necessary so that the Relevant Accounts comply with
the provisions of this schedule), but to the extent if any not already
taken into account;
2.1 after charging or providing for all losses, costs, charges and
expenses borne or incurred by the Company in relation to the Business
but not forming part of central overheads and properly chargeable
against revenue in the period to which the Relevant Accounts relate
(save as provided for in paragraph 2.3) including (without prejudice
to the generality of the foregoing):
2.1.1 commissions and bonuses paid to employees of the Company not forming
part of central overheads;
2.1.2 all other reasonable expenses of management including staff costs
(including contributions to pension schemes) and operating, financial
and administrative expenses relating to the Business and not included
in central overheads;
2.1.3 bad and doubtful debts;
2.1.4 expenditure in connection with leasing or hiring commitments incurred
directly for the purposes of the Company's Business not forming part
of central overheads;
2.1.5 all rental and other costs in relation to the occupation by the
Company of the Properties not forming part of central overheads;
2.1.6 a contribution (equal to 14% of the income of the Business by
reference to which the Relevant Profits shall be calculated) towards
the costs of the central
<PAGE>
overheads of the Company provided that the aggregate amount of this
contribution shall not in any event exceed the aggregate amount of the
actual central overheads of the Company for the relevant period;
2.1.7 profit on the encashment of cheques shall be recognised when the
cheque is encashed by the Company;
2.1.8 before charging any compensation for loss of office payable to Mr
Hallam; and
2.2 after making appropriate adjustments in respect of any prior year
items which ought (in accordance with the accounting policies
previously adopted by the Company) to be dealt with in the profit and
loss account of the period in which they are recognised (rather than
being adjusted against the opening balance of retained profits or
reserves); and
2.3 before crediting to, charging against, including or making provision
in those accounts for any of the following:-
2.3.1 any items of an extraordinary, exceptional or non-recurring nature;
for the avoidance of doubt the costs of opening any of the Properties
since the Balance Sheet Date - including initial advertising - are
exceptional items);
2.3.2 any profits or losses of a capital nature save in relation to First
Party Cheque Cashing or for the avoidance of doubt Third Party Cheque
Cashing;
2.3.3 any interest payable or receivable by the Company;
2.3.4 corporation tax and any other form of Taxation levied upon or measured
by profits or gains;
2.3.5 depreciation and amortisation;
2.3.6 any appropriation to or from reserves of a capital or revenue nature;
and
2.3.7 any dividends paid or proposed to be paid by the Company;
2.3.8 any management charges for goods or services reasonably required by
the Company or of the Purchaser's group (save for goods and services
which shall be supplied on arm's length terms);
2.3.9 any costs or liabilities arising from the giving of any guarantee or
agreement for indemnity or surety for any obligation of any person;
2.3.10 any costs or liabilities arising from a failure by the Purchaser or
the Company in complying with the obligations set out in paragraphs
5.4 and 5.5 below;
<PAGE>
2.3.11 any facts or circumstances occurring prior to 31 July 1998 which (but
for the provisions of the seventh schedule) give rise to a claim on
the part of the Warrantors under this Agreement or the Tax Deed;
2.4 after crediting (Pounds)50,000 to the Relevant Profits for the 12
months ending 31 July 1999 and (Pounds)100,000 to the Relevant Profits
for the 12 months ending 31 July 2000 to reflect the fact that the
Company will cease to carry on its pawnbroking business from its
Nottingham store during the Earn Out Period; and
2.5 after crediting:-
2.5.1 an appropriate amount for profits that would have been earned but for
breaches of paragraphs 5.4 and 5.5 of this sixth schedule;
2.5.2 the profits of any new shop from which the business of cheque cashing
shall be carried on and which shall be opened by the Company during
the Earn Out Period within a 5 mile radius of one of the Properties,
if and to then extent that such new shop shall have a detrimental
effect on the profits of that Property; and
2.5.3 (if the Company's existing shop in Birmingham shall be closed during
the Earn Out Period) the profits of any new shop from which the
business of cheque cashing shall be carried and which shall be opened
by the Company during the Earn Out Period within a 5 mile radius of
the Company's existing shop in Birmingham, determined in the manner
set out in this paragraph 2.
3. Preparation and agreement of Relevant Accounts
----------------------------------------------
3.1 The Purchaser shall procure that draft Relevant Accounts shall be
prepared with all reasonable speed following the end of the relevant
period to which they are to relate (and in any event within 3 months
of the end of the relevant period) with a view to the Reporting
Accountants reporting that in their opinion the Relevant Accounts have
been prepared in accordance with this schedule.
3.2 As soon as practicable after the draft of the Relevant Accounts
becomes available the Purchaser shall instruct the Reporting
Accountants to prepare their report (if necessary after making any
changes to the draft of the Relevant Accounts which the Reporting
Accountants shall consider to be necessary so
<PAGE>
that the Relevant Accounts comply with this schedule) together with a
draft of the Relevant Statement.
3.3 The Reporting Accountants shall have access to all the Company's
books, documents and records, directors and staff which/whom it shall
be reasonably necessary for them to investigate or interview in
relation to their report on the Relevant Accounts and the preparation
of the Relevant Statement.
3.4 As soon as they shall have completed their report, the Reporting
Accountants shall submit the draft of the Relevant Accounts
(incorporating any amendments which the Reporting Accountants shall
consider to be necessary so that they comply with this schedule) with
a draft of the Relevant Statement to the Vendors, the Purchaser and
the Reviewing Accountants.
3.5 The Reviewing Accountants shall notify the Reporting Accountants in
writing whether or not they agree that the draft Relevant Accounts and
the draft of the Relevant Statement as submitted to them have been
prepared in accordance with this schedule within 45 business days
after they shall have received them; and if they do not agree the
Reviewing Accountants shall give particulars and explanations of the
adjustments which they consider should be made. For these purposes, if
no such notification and (where appropriate) particulars and
explanations) shall be given by the Reviewing Accountants within such
period they shall be deemed to have agreed that the draft Relevant
Accounts and the draft of the Relevant Statement have been prepared in
accordance with the relevant provisions of this schedule.
3.6 If (within 30 days after the Reviewing Accountants shall have notified
the Reporting Accountants in accordance with paragraph 3.5) the
Reporting Accountants and the Reviewing Accountants shall be unable to
agree what adjustments (if any) should be made so that the draft
Relevant Accounts and the draft Relevant Statement are prepared in
accordance with this schedule then the matters outstanding or in
----
dispute shall, on the application of either the Vendors or the
Purchaser, immediately be referred to the Independent Accountants who
shall be instructed to report whether or not the draft Relevant
Accounts and/or the draft of the Relevant Statement do comply with
this schedule and if not to make such adjustments thereto as they
shall consider
<PAGE>
necessary to ensure that they do.
3.7 The Vendors and Purchaser will procure (so far as they are each able
to do so) that the Company and the Reporting Accountants will make
available to the Reviewing Accountants and (if appointed) the
Independent Accountants such of the Company's books, documents,
records, directors and staff together with access to such premises and
the use of facilities as may be reasonably required in relation to the
tasks which this agreement contemplates they will carry out.
3.8 The Independent Accountants, if appointed, shall act as experts and
not as arbitrators and their decisions on the matters which shall be
referred to them shall be final and binding on the parties (save in
the case of manifest error).
3.9 The costs of the Independent Accountants in connection with the
matters which shall be referred to them shall be borne as the
Independent Accountants shall direct or in default of such direction
as to one half by the Vendors and as to the other half by the
Purchaser.
3.10 The Relevant Accounts and the Relevant Statement shall be re-issued to
the Vendors and the Purchaser by the Reporting Accountants within 3
business days after and in the form (the "Final Form") in which the
------------
Relevant Accounts and the Relevant Statement shall have been agreed
between the Reporting and Reviewing Accountants or determined by the
Independent Accountants in accordance with the provisions of this
schedule.
3.11 The issue of the Relevant Accounts and the Relevant Statement in the
Final Form pursuant to paragraph 3.10 of this schedule shall be final
and binding on the parties hereto (save in the event of manifest
error).
3.12 The provisions of this paragraph shall apply in the same way to each
of the Relevant Accounts for 1999 and 2000 and the Second and Third
Instalment Statements.
4. Payment of the Subsequent Consideration
---------------------------------------
4.1 The Subsequent Consideration shall be paid as follows:-
4.1.1 the Second and Third Instalments (if any) shall be satisfied by the
issue of Subsequent Loan Notes to the Vendors;
4.1.2 any amounts shown to be due to the Vendors in accordance with the
draft Relevant Statements which shall be prepared by the Reporting
Accountants
<PAGE>
pursuant to clause 3.2 shall be satisfied within 7 days of
such draft statement being issued provided that (Pounds)500,000 shall
be satisfied on 31st October 1999 in any event; and
4.1.3 any additional amounts which may be due to the Vendors in accordance
with the Relevant Settlement in the Final Form, (or, to the extent
that any initial amounts which shall be satisfied pursuant to
paragraph 4.1.2 shall exceed the amounts due to the Vendors pursuant
to the Relevant Statement in the Final Form, such overpayment) shall
be satisfied (or repaid) to the relevant party within 7 days of such
Relevant Statements in Final Form being issued together with Interest
from the date on which the relevant amount shall have been satisfied
pursuant to clause 4.1.2 above.
4.2 The Second and Third Instalments shall be paid to the Vendors in the
proportions specified in column 4 of the First Schedule.
4.3 Any payments in cash shall be made by cheque posted (at their risk) to
the Vendors at their address for service of which in accordance with
this agreement.
5. Provisions which apply during Earn Out Period
---------------------------------------------
5.1 The Purchaser shall be entitled to require the Company during the Earn
Out Period to:
5.1.1 comply with the budgeting, forecasting and reporting procedures and
requirements of the Purchaser and comply with and participate in the
Purchaser's Group's banking and treasury arrangements from time to
time in force;
5.1.2 comply with all such regulations and requirements which are necessary
having regard to the fact that the Company is a member of a group of
companies securities in which the ultimate holding company are listed,
dealt in or traded on a recognised stock exchange;
5.1.3 fully consult with the Purchaser in respect of all matters concerning
strategic development and not make any acquisition of any business or
company or enter into any joint venture or partnership with any third
party without the consent of the Purchaser; and
5.1.4 to cease carrying on any pawnbroking business.
<PAGE>
5.2 Neither the Vendors nor Mr Hallam shall be entitled to require during
the Earn Out Period that the Company shall:-
5.2.1 change the nature, scope or manner of conducting any of its businesses
from those carried on by the Company at the date of this agreement or
subsequently approved by the Purchaser;
5.2.2 pay any salary or other remuneration to directors of the Company or
other senior executives in excess of that provided for in their
respective service agreements or otherwise amend the service
agreements of any such persons or pay any bonus to employees of the
Company save where otherwise agreed in budgets already approved by the
Purchaser or engage or dismiss any such persons without the approval
of the Purchaser;
5.2.3 commence or threaten any material litigation or arbitration
proceedings;
5.2.4 enter into any material contract or arrangement outside the ordinary
course of business or of a long term nature or enter into any
guarantee or indemnity for the obligations of any third party; and
5.2.5 make any acquisition or disposal, (including the leasing, mortgaging,
charging or pledging of any assets of the Company) except where
provided for in budgets already approved by the Purchaser.
5.3 The Purchaser shall be entitled to use its powers in relation to any
shares in the Company which it owns or controls to procure in so far
as it is able the obligations under paragraphs 5.1 and 5.2 are
complied with.
5.4 During the Earn Out Period:-
5.4.1 this agreement shall be personal to the parties to it and may not be
assigned by them save that the benefit (but not the burden) of any of
its provisions may be assigned by the Purchaser to:-
5.4.1.1 any company (an "associated company") which shall be a wholly owned
--------------------
subsidiary of the Purchaser or which shall be a holding company of
100% of the shares of the Purchaser or a wholly owned subsidiary of
such holding company but only for so long as such company remains an
associated company of the Purchaser; or
5.4.1.2 the Purchaser's bankers and/or insurers for the time being; and
5.4.2 the Company is to be operated as a separate subsidiary of the
Purchaser to
<PAGE>
protect the integrity of the provisions of the sixth schedule and
avoid its artificial manipulation.
5.5 The Purchaser shall and shall procure that each member of the
Purchaser's group (including where the context so admits the Company)
shall, during the Earn Out Period:-
5.5.1 not treat the Company on terms which are less favourable than if the
Purchaser and the Company were operating on an arm's length basis;
5.5.2 not intentionally take or omit to take any action which is designed
solely to affect adversely any payments to the Vendors in accordance
with sixth schedule, provided that at all times the Purchaser can
manage the Company in any way it thinks fit;
5.5.3 not petition for a members' voluntary winding up of the Company or
permit or procure the passing of a resolution to wind up the Company,
save that the Purchaser shall at all times be able to wind up the
Company if the Company is unable to pay its debts as and when they
fall due, or the winding up is part of a bona fide reorganisation,
amalgamation or reconstruction.
5.6 The management accounts of the Company shall continue to be produced
in substantially the form in which the Management Accounts were
produced.
6. Applicability of Warranties and Tax Deed
----------------------------------------
6.1 The approval of any Relevant Accounts or Statement by or on behalf of
the Purchaser (and all matters and things consequent to such approval)
shall not operate or be deemed to operate as a waiver of any of the
Purchaser's rights powers or privileges or of any of the other terms
and conditions of this agreement.
6.2 If it shall be found before the payment of the Subsequent
Consideration that any matter which is the subject of a Warranty is
not as so warranted or represented or any claim under the Tax Deed is
threatened or pending then subject to the seventh schedule the
Purchaser shall be entitled to withhold out of such balance the amount
reasonably estimated by the Purchaser that would be payable by the
Warrantors pursuant to the agreement as a result, but shall pay/issue
Loan Notes in respect of any amounts not disputed.
<PAGE>
SEVENTH SCHEDULE
- ----------------
WARRANTOR LIMITATIONS
- ---------------------
In this schedule "claim" means any claim which would be capable of being
made against the Warrantors in respect of any liability under the
Warranties (or where the context admits under the Tax Deed) and references
to the Purchaser shall include references to the Guarantor.
Notwithstanding anything contained in this agreement, the liability of the
Warrantors under the Warranties (and where expressly stated, the liability
of the Covenantors under the Tax Deed) shall be limited as follows:-
1. Aggregate de minimis
--------------------
No liability under the Warranties or the Tax Deed shall arise unless the
total amount of the net liability in respect of all claims which the
Purchaser is entitled to make exceeds in aggregate (Pounds)100,000 in which
case the Warrantors shall (subject to the other provisions of this seventh
schedule) be liable for the whole amount of the claim and not simply the
excess. For the purposes of this paragraph "net liability" shall mean the
actual net amount for which the Warrantors would be liable.
2. Maximum liability clauses
-------------------------
The maximum aggregate liability of each Warrantor in respect of all claims,
together with their liability under clauses 7.4 and 7.5 and the Tax Deed,
shall not in any event exceed that part of the Consideration received or
receivable by him or her (save that Mr Hallam and Rachel Djadi-Hallam's
liability shall be limited to the amount of the Consideration received or
receivable by Rachel Djadi-Hallam pursuant to this agreement).
3. Time for claims
---------------
3.1 Subject to paragraph 3.2 all liability of the Warrantors under the
Warranties, save which relate to Taxation, shall terminate on the second
anniversary of the date of this agreement; and
3.2 all liability of the Warrantors under Warranties relating to Taxation and
all liability of the Covenantors under the Tax Deed shall terminate on the
seventh anniversary of the date of this agreement unless notice in writing
of the claim (giving reasonable details of the nature, extent and value of
such claim) shall have been given to the Warrantors
<PAGE>
prior to such date.
4. Procedure for claims
--------------------
4.1 Any amount payable under the Tax Deed to the Purchaser shall be reduced to
the extent of the amount payable under the Warranties in respect of the
same matter and vice versa.
4.2 The provisions of clause 5 of the Tax Deed shall apply to any claims made
under Part 8 of the fourth schedule hereto as if the claim under such Part
8 were made under the Tax Deed and in the case of conflict between the
provisions of this seventh schedule and the provisions of clause 5 of the
Tax Deed, the provisions of clause 5 of the Tax Deed shall prevail.
4.3 Upon the directors of the Purchaser appreciating that matters have arisen
which will or are likely to give rise to a claim, the Purchaser will as
soon as practicably possible notify the Warrantors in writing of the
potential claim and of the matters which will or are likely to give rise to
such a claim. Any failure on behalf of the Purchaser to comply with this
provision shall not preclude it from making a claim at a later date. The
sole consequence, if the Purchaser delays in notifying the Warrantors of a
claim, shall be that the Purchaser's claim for damages shall be reduced by
an amount to reflect the extent (if any) the position of the claim is
worsened as a result of the delay.
5. Defence to claims and rights of recovery
----------------------------------------
Where the Warrantors have settled in full a claim for breach of Warranty
and the Purchaser or the Company or their respective successors or assigns
(as the case may be) is entitled to recover any sum ("the Recoverable Sum")
---------------------
from some other person firm or company (including for the avoidance of
doubt the Revenue) in respect of the matter giving rise to that claim, the
Purchaser shall procure that it or the Company (as the case may be) at the
Warrantors' cost and subject to being indemnified and secured by the
Warrantors to the reasonable satisfaction of the Purchaser against all
losses, liabilities, costs and expenses thereby incurred, shall pursue a
claim for the Recoverable Sum, provided that in the reasonable opinion of
the Purchaser no such claim shall harm the goodwill or profitability of the
Company, the Purchaser, or any company which shall be a subsidiary or a
holding company of either the Purchaser or the Company. The Purchaser shall
account to the Warrantors for any amount so
<PAGE>
recovered and after having deducted any costs or expenses incurred by the
Purchaser (and not exceeding any amount paid by the Warrantors under the
relevant Warranty but including any expenses borne by the Warrantors).
6. Further limitations
-------------------
The Warrantors shall not be liable under the Warranties to the extent
that:-
6.1 such liability arises or is increased as a result of the passing of or any
change in law or regulation or in its interpretation or administration by
the English courts, by the Revenue or by any other monetary fiscal or
regulatory authority or by the withdrawal after Completion of any published
concession previously made by any Taxation authority;
6.2 such liability would not have arisen but for the failure to make or omit to
make any claim, election, surrender or disclaimer by the Company or the
Purchaser where notice of the need to make or omit to make the same was
given by the Warrantors in the Disclosure Letter;
6.3 the subject matter giving rise to the claim is specifically provided or
reserved in the Accounts;
6.4 the liability arises as a result of any change in the accounting reference
date or in the accounting principles, practices, or bases of the Company
introduced after Completion;
6.5 the subject matter of the claim is taken into account in the accounts
prepared pursuant to the sixth schedule.
7. Price reduction
---------------
The amount or amounts of any successful claim or claims against the
Warrantors under or in respect of the Warranties shall be deemed to
constitute a reduction in the purchase price.
8. Entire agreement
----------------
This agreement sets out the entire agreement and understanding between
the parties in respect of the subject matter of this agreement and in
respect of any other documents referred to in this agreement and the
Purchaser:-
8.1 irrevocably and unconditionally waives any right it may have to rescind
this agreement and/or claim damages for any breach of warranty or untrue
representation, undertaking or statement of fact or opinion made to him
prior to the date hereof in
<PAGE>
connection with the subject matter of this agreement or the Company which
is not contained in this agreement; and
8.2 agrees that the Purchaser has not been induced to enter into this
agreement by any representation, warranty or assurance other than those
contained in this agreement; and
8.3 provided always that this paragraph shall not seek to exclude or restrict
the liability of the Warrantors for fraudulent misrepresentation.
9. Mitigation
----------
Nothing herein shall in any way diminish the Purchaser common law duty to
mitigate its loss, save in respect of the Tax Deed and clause 7.4 of the
agreement.
10. General provisions
------------------
10.1 The provisions of this schedule apply notwithstanding any rescission or
termination by the Purchaser of any provisions of this agreement.
10.2 The Purchaser shall not be entitled to reimbursement more than once in
respect of any one claim.
10.3 None of the provisions contained in this schedule shall exclude or limit
liability on the part of the Warrantors arising as a result of any fraud
or dishonesty on the part of the Warrantors.
10.4 The Purchaser shall have no right to rescind or terminate this agreement
after the date of this agreement for breach of any of the Warranties or
under the provisions of the Misrepresentation Act 1967, or for any other
reason other than for fraudulent misrepresentation.
11. Debts
-----
If there is a breach of any of the Warranties by reason of any cheque
which the Company shall have encashed being returned unpaid, the
Purchaser shall only be entitled to bring a claim under clauses 7.4 and
7.5 of this agreement and shall not be entitled to bring a claim for
breach of Warranty or otherwise.
12. Claims
------
The first (Pounds)500,000 of the aggregate liability which shall arise
pursuant to all the claims (that is, all the claims taken together, but
not the first (Pounds)500,000 of each and every claim) ("the First
-----------
(Pounds)500,000 Liability") which shall be made under clauses 7.4, 7.5,
---------------------------
the Warranties and/or the Tax Deed shall be borne only by Rachel and
Henry
<PAGE>
Hallam jointly and severally; and for the purpose of this paragraph
"claims" includes claims under clauses 7.4 and 7.5 of the Warranties and
the Tax Deed.
13. Earn Out
--------
In respect of any claim pursuant to this agreement or under the Tax Deed
which is agreed or adjudicated, to the extent that it when aggregated to
any other such claims shall exceed the First (Pounds)500,000 Liability as
defined in paragraph 12 of this schedule, each of the Warrantors or
Covenantors in the case of a claim under the Tax Deed shall be entitled to
elect (and such an election shall be binding on all the other Warrantors or
Covenantors as the case maybe) for the amount owing in respect of such a
claim to be set off against the Second or Third Instalment whichever shall
first occur after the date on which the claim shall first be made, provided
that if and to the extent that the Warrantors shall not settle such claim
by paying cash to the Purchaser within 7 days after the Warrantors have
received notice in writing of such a claim pursuant to clauses 6, 7.4 and
7.5 of the agreement, Interest shall accrue on such a claim from the date
of receiving notice such a claim until the claim is paid.
<PAGE>
EXHIBIT 10.25
-------------------------------------------
BETWEEN:
NATIONAL MONEY MART COMPANY
OF THE FIRST PART
- and -
KING MORTGAGE LTD.
OF THE SECOND PART
- and -
DENIS WILLNER
OF THE THIRD PART
-------------------------------------------
PURCHASE AGREEMENT
-------------------------------------------
BISHOP & McKENZIE
Barristers and Solicitors
#2500, 10104 - 103 Avenue
Edmonton, Alberta
T5J 1V3
File No. 31,707-256 (NJKB)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I - INTERPRETATION............................................................. 2
1.1 Defined Terms..................................................................... 2
1.2 Schedules and Exhibits............................................................ 12
1.3 Table of Contents and Headings.................................................... 14
ARTICLE II - DISSOLUTION OF PARTNERSHIP AND SALE AND PURCHASE OF ASSETS................ 14
2.1 Dissolution....................................................................... 14
2.2 Distribution...................................................................... 14
2.3 Sale and Purchase of Assets....................................................... 14
2.4 Assets............................................................................ 15
2.5 Liabilities....................................................................... 17
2.6 Excluded Liabilities.............................................................. 18
2.7 Expenses.......................................................................... 18
2.8 Services of Willner............................................................... 18
ARTICLE III - PURCHASE AND PAYMENT..................................................... 19
3.1 Amount of Purchase Price.......................................................... 19
3.2 Allocation of Purchase Price...................................................... 19
3.3 Payment of Purchase Price......................................................... 19
3.4 Post Closing Chargebacks.......................................................... 19
3.5 Adjustments....................................................................... 20
3.6 Financial Services................................................................ 20
ARTICLE IV - CLOSING AND TERMINATION................................................... 20
4.1 Closing Date...................................................................... 20
4.2 Termination of Agreement.......................................................... 21
4.3 Procedure Upon Termination........................................................ 21
4.4 Effect of Termination............................................................. 21
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE VENDOR AND DENIS..................... 22
5.1 Organization and Good Standing.................................................... 22
5.2 Authorization of Agreement........................................................ 22
5.3 Subsidiaries and Other Interests.................................................. 22
5.4 Conflicts; Consents of Third Parties.............................................. 23
5.5 Ownership and Transfer of Vendor's Share of Assets................................ 23
5.6 Financial Statements.............................................................. 24
5.7 No Undisclosed Liabilities........................................................ 25
5.8 Absence of Certain Developments................................................... 25
5.9 Residency......................................................................... 27
</TABLE>
<PAGE>
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<TABLE>
<S> <C>
5.10 Leased Property.................................................................. 27
5.11 Tangible Personal Property....................................................... 30
5.12 Intangible Property.............................................................. 31
5.13 Material Contracts............................................................... 32
5.14 Employee Benefits................................................................ 33
5.15 Labour........................................................................... 33
5.16 Employment Matters............................................................... 34
5.17 Litigation....................................................................... 36
5.18 Compliance with Laws............................................................. 36
5.19 Environmental Matters............................................................ 37
5.20 Insurance........................................................................ 38
5.21 Payables......................................................................... 39
5.22 Related Party Transactions....................................................... 39
5.23 Financial Advisors............................................................... 39
5.24 Licensed Operations.............................................................. 39
5.25 Name............................................................................. 40
5.26 Third Party Discussion........................................................... 40
5.27 No Bankruptcy.................................................................... 40
5.28 No Misrepresentation............................................................. 40
5.29 Partnerships..................................................................... 40
5.30 Withholdings..................................................................... 40
5.31 The Partnership.................................................................. 41
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF PURCHASER............................... 41
6.1 Organization and Good Standing................................................... 41
6.2 Authorization of Agreement....................................................... 41
6.3 Conflicts; Consents of Third Parties............................................. 42
6.4 Litigation....................................................................... 43
6.5 Financial Advisors............................................................... 43
6.6 Bankruptcy....................................................................... 43
6.7 Approvals........................................................................ 43
ARTICLE VII - COVENANTS................................................................ 43
7.1 Access to Information............................................................ 43
7.2 Conduct of the Business Pending the Closing...................................... 44
7.3 Consents......................................................................... 47
7.4 Consents to Real Property Leases................................................. 48
7.5 No Solicitation.................................................................. 48
7.6 Intentionally Deleted............................................................ 48
7.7 Publicity........................................................................ 48
7.8 Use of Name...................................................................... 49
7.9 Preservation of Records.......................................................... 49
7.10 Non-Competition Agreements....................................................... 49
</TABLE>
<PAGE>
-3-
<TABLE>
<S> <C>
7.11 Employer Health Tax.............................................................. 49
7.12 Employees........................................................................ 49
ARTICLE VIII - CONDITIONS TO CLOSING................................................... 51
8.1 Conditions Precedent to Obligations of Purchaser................................. 51
8.2 Conditions Precedent to Obligations of the Vendor................................ 52
8.3 Failure of Vendor to Satisfy Conditions Precedent................................ 53
8.4 Failure of Purchaser to Satisfy Conditions Precedent............................. 54
ARTICLE IX - DOCUMENTS TO BE DELIVERED................................................. 55
9.1 Documents to be Delivered by the Vendor and Denis................................ 55
9.2 Documents to be Delivered by the Purchaser....................................... 56
9.3 Minimum Lease Assignments........................................................ 57
ARTICLE X - INDEMNIFICATION............................................................ 58
10.1 Survival......................................................................... 58
10.2 General Indemnification.......................................................... 58
10.3 Limitations on Indemnification for Breaches of
Representations and Warranties................................................... 59
10.4 Indemnification Procedures....................................................... 60
10.5 Treatment of Payment............................................................. 61
10.6 Limitation of Indemnity.......................................................... 62
ARTICLE XI - GENERAL................................................................... 62
11.1 Specific Performance............................................................. 62
11.2 Further Assurances............................................................... 62
11.3 Submission to Jurisdiction; Consent to Service of
Process.......................................................................... 63
11.4 Entire Agreement; Amendments and Waivers
Confidentiality.................................................................. 63
11.5 Severability..................................................................... 64
11.6 Binding Effect; Assignment....................................................... 64
11.7 Counterparts..................................................................... 64
11.8 Notices.......................................................................... 65
11.9 Governing Law.................................................................... 66
</TABLE>
<PAGE>
THIS PURCHASE AGREEMENT made as of the 4th day of February, 1999 (the
"Agreement"),
BY AND AMONG
NATIONAL MONEY MART COMPANY, an unlimited liability
Corporation duly registered under the laws of the
Province of Nova Scotia ("Purchaser")
OF THE FIRST PART
- and -
KING MORTGAGE LTD., a company incorporated in and
under the laws of the Province of Alberta ("Vendor")
OF THE SECOND PART
- and -
DENIS WILLNER of the City of Calgary, of the
Province of Alberta ("Denis")
OF THE THIRD PART
WITNESSETH:
WHEREAS as of the date hereof the Vendor and the Purchaser carry on
business in partnership under the name "Calgary Money Marts" (the
"Partnership");
WHEREAS the Purchaser owns a thirteen and one half (13.5%) percent
interest in the Partnership and the Vendor owns an eighty-six and one half
(86.5%) percent interest in the Partnership.
WHEREAS Denis is the sole director and officer and the majority
shareholder of the Vendor;
WHEREAS the Vendor has leased premises from which it operates on
behalf of the Partnership Six (6) cheque cashing and financial service stores
(the "Stores") at various locations in Calgary, Alberta as set out in Schedule
2.4(a);
WHEREAS the Purchaser and Vendor desire to dissolve the Partnership
and the Purchaser desires to purchase from the Vendor and the Vendor desires to
sell to Purchaser, the Vendor's interest in the Stores and related assets as
hereinafter defined and upon the terms and conditions hereinafter set forth;
WHEREAS, certain terms used in this Agreement are defined in Section
1.1;
<PAGE>
-2-
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained, the parties hereby agree as follows:
ARTICLE I - INTERPRETATION
1.1 Defined Terms
For purposes of this Agreement, the following terms shall have the
meanings specified in this Section 1.1:
(a) "Accounts Payable" means the aggregate dollar amount of
accounts payable, including all current liabilities of the
Partnership.
(b) "Accounts Receivables" shall have the meaning ascribed to such
term in Section 2.4(c).
(c) "Acquisition Transaction" shall have the meaning set forth in
Section 7.5 hereof.
(d) "Adjustment Items" means those items set forth on Exhibit "B"
and referred to in Section 3.5(a) hereof which will adjust the
Purchase Price.
(e) "Affiliate" means, with respect to any Person, any relative or
any other Person directly or indirectly controlling,
controlled by or under common control with such Person. For
the purpose of this definition, "control" of a Person shall
mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies,
whether through the ownership of voting securities, by
contract or otherwise.
(f) "Agreement" means this agreement and all schedules, exhibits
and attachments hereto.
(g) "Assets" shall have the meaning ascribed to such term in
Section 2.4 hereof.
(h) "Assumed Contracts" shall have the meaning ascribed to such
term in Section 5.13 hereof.
<PAGE>
-3-
(i) "Balance Sheet" shall have the meaning ascribed to such term
in Section 5.6(b).
(j) "Balance Sheet Date" shall mean December 31, 1998.
(k) "Business" shall have the meaning ascribed to such term in
Section 2.4(b) hereof.
(l) "Business Day" means any day of the year on which national
banking institutions in Edmonton are open to the public for
conducting business and are not required or authorized to
close.
(m) "Canadian Currency" and the "C$" sign each means the lawful
--
money of Canada.
(n) "Capital Expenditures" means, for any Person for any period,
the aggregate of all expenditures by such Person, except
interest capitalized during construction, during such period
for property, plant or equipment, including, without
limitation, renewals, improvements, replacements and
capitalized repairs, that would be reflected as additions to
property, plant or equipment on a consolidated balance sheet
of such Person prepared in conformity with GAAP. For the
purpose of this definition, the purchase price of equipment
which is acquired simultaneously with the trade-in of existing
equipment owned by such Person or with insurance proceeds
shall be included in Capital Expenditures only to the extent
of the gross amount of such purchase price less the credit
granted by the seller of such equipment being traded in at
such time or the amount of such proceeds, as the case may be.
(o) "Cash on Hand" means the sum of all cash (Canadian Currency
and U.S. Currency) of the Partnership.
(p) "Claim" shall have the meaning ascribed to such term in
Section 10.4(a) hereof.
(q) "Closing" shall have the meaning ascribed to such term in
Section 4.1 hereof.
<PAGE>
-4-
(r) "Closing Date" shall have the meaning ascribed to such term in
Section 4.1 hereof.
(s) "Closing Date Accounts Receivable" means the aggregate dollar
amount of accounts receivable of the Partnership at the time
of Closing.
(t) "Company Property" shall have the meaning ascribed to such
term in Section 5.10(a) hereof.
(u) "Consent Documents" shall have the meaning ascribed to such
term in Section 9.3(a) hereof.
(v) "Contract" means any contract, agreement, indenture, note,
bond, loan, instrument, lease, commitment or other arrangement
or agreement.
(w) "Contract Liabilities" shall have the meaning ascribed to such
term in Section 2.5 hereof.
(x) "Dissolution Agreement" shall mean the form of agreement set
out in Exhibit "E".
(y) "Effective Time" shall have the meaning ascribed to such term
in Section 4.1 hereof.
(z) "Employees" shall have the meaning ascribed to said term in
Section 5.16 hereof.
(aa) "Employee Benefit Plans" shall have the meaning ascribed to
such term in Section 5.14(a) hereof.
(bb) "Environmental Claim" means any accusation, allegation, notice
of violation, action, claim, lien, demand, abatement or other
order or directive (conditional or otherwise) by any
Governmental Body or any other Person against the Vendor or
Partnership for personal injury (including sickness, disease
or death), tangible or intangible property damage, damage to
the environment, nuisance, pollution, contamination or other
adverse effects on the environment, or for fines, penalties or
restrictions resulting from or based upon (i) the
<PAGE>
-5-
existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden
accidental or non-accidental Releases) of, or exposure to, any
Hazardous Material, odor or audible noise in, into or onto the
environment (including, without limitation, the air, soil,
surface water or ground water) at, in, by or from any property
operated or leased by the Corporation or any activities or
operations thereof; (ii) the transportation, storage,
treatment or disposal of Hazardous Materials in connection
with any property operated or leased by the Partnership or any
operations or facilities thereof; or (iii) the violation, or
alleged violation, of any Environmental Law of or from any
Governmental Body relating to environmental matters connected
with any property owned, operated or leased by the
Partnership.
(cc) "Environmental Costs and Liabilities" means any and all
losses, liabilities, obligations, damages, fines, penalties,
judgments, actions, claims, costs and expenses (including,
without limitation, fees, disbursements and expenses of legal
counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and Remedial Action)
arising from or under any Environmental Claim.
(dd) "Environmental Law" means any federal, provincial or local
law, statute, regulation, code, ordinance, rule of common law
or other requirement in any way relating to the protection of
human health and safety or the environment as now or hereafter
in effect including, without limitation, the Canadian
Environmental Protection Act and the Environmental Protection
and Enhancement Act (Alberta), as such laws have been amended
or supplemented, and the regulations promulgated pursuant
thereto, and all analogous federal, provincial or local laws.
(ee) "Environmental Permits" shall have the meaning ascribed to
such term in Section 5.19(a).
(ff) "Escrow Agreement" shall mean the Escrow Agreement attached
hereto as Exhibit "D".
<PAGE>
-6-
(gg) "Excise Tax Act" means the Excise Tax Act, R.S.C., 1985, c.E-
15, together with the regulations promulgated thereunder, as
amended or supplemented from time to time.
(hh) "Excluded Liabilities" means any and all liabilities or
obligations of the Partnership, or Vendor of any kind, nature
and description, absolute or contingent, known or unknown,
existing prior to the Closing Date or thereafter coming into
being or arising by reason of any state of facts existing, or
any transaction entered into, prior to the Closing Date
(including, without limitation, any such liabilities arising
under any Environmental Laws and any such liabilities relating
to Taxes), other than Contract Liabilities referred to in
Section 2.5 hereof.
(ii) "Financial Statements" shall have the meaning ascribed to such
term in Section 5.6(a) hereof.
(jj) "GAAP" means Canadian generally accepted accounting principles
as of the date hereof.
(kk) "Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof,
whether federal, provincial or local minister, governor or
lieutenant governor-in-council, board, tribunal or any agency,
instrumentality or authority thereof, or any court or
arbitrator (public or private).
(ll) "GST" shall refer to the Goods and Services Tax levied under
Part IX of the Excise Tax Act.
(mm) "Hazardous Material" means any substance, material or waste
which is regulated by Canada, or any provincial or local
Governmental Body including, without limitation, petroleum and
its by-products, asbestos, and any material or substance which
is defined as a "hazardous waste," "hazardous substance,"
"hazardous material," "restricted hazardous waste,"
"industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or "toxic substance" under any provision of
Environmental Law.
<PAGE>
-7-
(nn) "Indemnitor" shall have the meaning ascribed to such term in
Section 10.4(a) hereof.
(oo) "Interim Period" shall mean the period between the date of
execution of this Agreement and the earlier of Closing and the
release of each party's obligations under Article IV or
Article VIII.
(pp) "Law" means any federal, provincial or local law (including
common law), statute, code, ordinance, rule, regulation or
other requirement.
(qq) "Legal Proceeding" means any judicial, administrative or
arbitral actions, suits, proceedings (public or private),
claims or governmental proceedings.
(rr) "Licenses" shall have the meaning ascribed to such term in
Section 2.4(b) hereof.
(ss) "Lien" means any lien, pledge, mortgage, hypothecate, deed of
trust, security interest, claim, prior claim, lease, charge,
option, right of first refusal, easement, servitude, transfer
restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
(tt) "Listed Employees" shall have the meaning ascribed to such
term in Section 7.12(a) hereof.
(uu) "Losses" means any and all losses, liabilities (accrued,
absolute, contingent or otherwise), suits, proceedings,
judgments, awards, demands, settlements, fines, assessments,
re-assessments, damages, interest and penalties, and costs and
expenses (including without limitation reasonable legal fees
and litigation expenses) on a solicitor and his own client
basis.
(vv) "Material Adverse Change" shall mean:
(i) an event whereby the gross revenues of the Stores for the
period from occurrence until the Closing are 5% less than
for the same period of the previous year; or
<PAGE>
-8-
(ii) an event that causes or will cause the closure of a Store
or the ability of the Purchaser to operate the Business
from a Store; or
(iii) 20% or more of the Listed Employees resigned or
indicate their intention to resign during the Interim
Period.
(ww) "Material Contracts" shall have the meaning ascribed to such
term in Section 5.13 hereof.
(xx) "Minimum Lease Condition" shall have the meaning ascribed to
such term in Section 9.3 hereof.
(yy) "Non-Assumable Claim" shall have the meaning ascribed to such
term in Section 10.4(c) hereof.
(zz) "Non-Competition Agreement" shall have the meaning ascribed to
such term in Section 7.10 hereof.
(aaa) "Non-Material Contract" means any Contract, other than Real
Property Leases or Material Contracts, which was entered into
in the ordinary course of the Business consistent with past
practice in an arm's length transaction.
(bbb) "Order" means any order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award.
(ccc) "Partner" or "Partners" shall mean the Vendor and the Purchaser
individually and collectively;
(ddd) "Partnership" shall have the meaning ascribed to such term in
the first preamble paragraph.
(eee) "Partnership Agreements" shall mean a Partnership Agreement
between Calgary Money Mart Inc. and the Vendor dated June 1,
1990, Trade Mark License Agreement between the Partnership and
Purchaser dated June 1, 1990, Management Agreement between
306166 Alberta Ltd., the Vendor, Sebe Investments Ltd. and
Denis dated July 1, 1984 and Management Amendment Agreement
between the Partnership and Denis dated June 1, 1990;
<PAGE>
-9-
(fff) "Permitted Exceptions" means (i) statutory liens for current
taxes, assessments or other governmental charges not yet
delinquent or the amount or validity of which is being
contested in good faith by appropriate proceedings, provided
an appropriate reserve is established therefor; (ii)
mechanics', carriers', workers', repairers' and similar Liens
arising or incurred in the ordinary course of business
provided that they are not greater than $1000.00 in the
aggregate; (iii) zoning, entitlement and other land use and
environmental regulations by any Governmental Body, provided
that such regulations have not been violated; (iv) such other
imperfections in title, charges, easements, restrictions and
encumbrances which do not materially detract from the value of
or materially interfere with the present use of any Company
Property subject thereto or affected thereby and including
leasehold improvements owned by Landlord; and (v) exceptions
for which the Purchaser has provided its consent in writing or
as otherwise provided for in this Agreement.
(ggg) "Permits" means any approvals, authorizations, consents,
Licenses, permits or certificates.
(hhh) "Person" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other
entity.
(iii) "Personal Property Lease" shall have the meaning ascribed to
such term in Section 5.11(a) hereof.
(jjj) "Prepaids" means, without duplication, the aggregate dollar
amount of all prepaid assets, prepaid expenses, prepaid rent,
security deposits, all as determined in accordance with GAAP,
consistently applied, of the Partnership related to the
Business at the Effective Time, as summarized in the attached
Schedule 1.1.
(kkk) "Property Contracts" shall have the meaning ascribed to such
term in Section 5.10(a) hereof.
(lll) "Purchase Price" shall have the meaning ascribed to such term
in Section 3.1 hereof.
<PAGE>
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(mmm) "Purchaser" shall have the meaning ascribed to such term in the
introductory paragraph hereto.
(nnn) "Purchaser Documents" shall have the meaning ascribed to such
term in Section 6.2 hereof.
(ooo) "Purchaser Indemnified Parties" shall have the meaning ascribed
to such term in Section 10.2(a) hereof.
(ppp) "Purchaser's Solicitors" shall mean Messrs. Bishop & McKenzie,
Barristers and Solicitors, 2500, 10104 - 103 Avenue, Edmonton,
Alberta, T5J 1V3.
(qqq) "Real Property Lease" shall have the meaning ascribed to such
term in Section 5.10(a) hereof.
(rrr) "Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor
environment, or into or out of any property.
(sss) "Remedial Action" means all actions, including, without
limitation, any Capital Expenditures required, to (i) clean
up, remove, treat or in any other way address any Hazardous
Material; (ii) prevent the Release or threat of Release of any
Hazardous Material so it does not endanger or threaten to
endanger public health or welfare or the indoor or outdoor
environment; (iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care; or (iv)
bring any facility owned, operated or leased by the
Partnership and the operations thereon into compliance with
Environmental Laws.
(ttt) "Representatives" shall have the meaning ascribed to such term
in Section 7.5 hereof.
(uuu) "Stores" shall have the meaning ascribed to such term in the
recitals hereto.
(vvv) "Tax", "Taxes" or "Taxes" means all taxes, charges, fees,
levies, imposts, duties, and other assessments, including but
not limited to any income, alternative minimum or add-on tax,
estimated, gross
<PAGE>
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income, gross receipts, sales, goods and services, business,
use, transfer, gains, transactions, intangibles, ad valorem,
value-added, franchise, registration, title, license, capital,
paid-up capital, profits, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, recording, real
property, personal property, health, education, highway use,
commercial rent, environmental, windfall profit tax, customs,
import duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any
interest, penalties, or additions to tax, and any interest or
penalties imposed with respect to the filing, obligation to
file or failure to file any Tax Return.
(www) "Tax Act" shall refer to the Income Tax Act, R.S.C., 1985 (5th
Suppl.) c. 1, together with the regulations promulgated
thereunder, as amended or supplemented from time to time,
including any proposed amendment to such legislation announced
by way of notice of ways and means motion or press release
from time to time by the Minister of Finance of Canada or
other Minister charged with the administration of the Tax Act,
which announcement confirms that such proposed amendment,
when enacted, shall have retroactive effect to a date prior to
the date of its enactment.
(xxx) "Tax Return" means any return, election, declaration, report,
claim for refund, information return, statement, or other
similar document including any schedule or attachment thereto,
and including any amendment thereof required to be filed under
the provisions of any legislation in relation to Taxes and any
tax forms required to be filed, whether in connection with a
tax return or not, under any provisions of any applicable
legislation in relation to Taxes.
(yyy) "Time of Closing" shall mean 10:00 a.m. Edmonton time.
(zzz) "Transaction Documents" shall have the meaning ascribed to such
term in Section 5.2 hereof.
(aaaa) "Unaudited Statement" shall have the meaning ascribed to such
term in Section 5.6(a) hereof.
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(bbbb) "Vendor Indemnified Parties" shall have the meaning ascribed
to such term in Section 10.2(b) hereof.
(cccc) "Vendor" shall have the meaning ascribed to such term in the
preamble hereof.
(dddd) "Vendor's Share" shall have the same meaning ascribed to such
term in Section 2.3 hereof.
(eeee) "Vendor's Solicitors" means Cleall Pahl Barristers and
Solicitors 2500, 10155 - 102 Street, Edmonton, AB T5J 4G8
Attention: Mr. Kenneth F. Cleall, Q.C.
1.2 Schedules and Exhibits
The Schedules and Exhibits to this Agreement hereinafter referred to
are incorporated herein by reference and are deemed to be part of this
Agreement. The Exhibits to this Agreement are as follows:
(a) Exhibit "A" - Form of Non-Competition Agreement
(b) Exhibit "B" - Estimated Adjustment Items
(c) Exhibit "C" - Form of Consent and Estoppel Certificate of
Landlord
(d) Exhibit "D" - Form of Escrow Agreement
(e) Exhibit "E" - Form of Partnership Dissolution Agreement
The Schedules to this Agreement are as follows:
Schedule 1.1 - Summary of Prepaids
Schedule 2.4(a) - Stores
Schedule 2.4(d) - Personal Property
Schedule 5.4 - Conflicts, Consents of Third parties
Schedule 5.6(a) - Financial Statements
Schedule 5.7 - Undisclosed Liabilities
<PAGE>
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Schedule 5.8 - Developments since Balance Sheet Date
Schedule 5.10(a) - Real Property Leases
Schedule 5.11 - Personal Property Leases
Schedule 5.12 - Intangible Property
Schedule 5.13 - Material Contracts
Schedule 5.16 - Employees
Schedule 5.17 - Litigation
Schedule 5.18 - Compliance with Laws
Schedule 5.19 - Environmental Matters
Schedule 5.22 - Related Party Transactions
Schedule 5.26 - Third Party Discussions
Schedule 6.3 - Conflicts, Consents of Third Parties
Schedule 7.2 - Increases to Compensation
1.3 Table of Contents and Headings
The table of contents and section headings of this Agreement are for
reference purposes only and are to be given no effect in the construction or
interpretations of this Agreement.
ARTICLE II - DISSOLUTION OF PARTNERSHIP AND SALE AND PURCHASE OF ASSETS
2.1 Dissolution
The Vendor and Purchaser shall surrender the Partnership Agreements
and dissolve the Partnership on the day prior to the Closing Date effective as
of 12:01 a.m. The parties shall effective as at Closing enter into the
Partnership Dissolution Agreement attached hereto as Exhibit "E".
2.2 Distribution
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Immediately prior to dissolution, Denis on behalf of the Partnership
shall pay all of the liabilities of the Partnership and shall thereafter
distribute the Cash on Hand and each Partner's share of the Assets to the
respective Partners.
2.3 Sale and Purchase of Assets
Upon the terms and subject to the conditions contained herein, on the
Closing Date at the Effective Time the Vendor shall sell, assign, transfer,
convey and deliver to the Purchaser good and marketable title, free and clear of
all Liens, and the Purchaser shall purchase from the Vendor all of the Vendor's
interest in the Assets being eighty-six and one half (86.5%) percent ("Vendor's
Share") of the Assets.
In addition, from and after the Closing, the Vendor agrees to provide,
or cause to be provided, to Purchaser, access to all documents and/or
information as may be reasonably necessary to enable the Purchaser to see to the
efficient and proper conduct and administration of the Assets owned by the
Partnership as hereinafter defined including, without limitation, all historical
files, copies of Tax Returns, records and personnel data of the Partnership or
the Vendor related to the Business.
2.4 Assets
Without limiting the foregoing, the Vendor agrees that the following
are the assets of the Partnership ("Assets") and, immediately prior to the
Effective Time the Assets shall be owned by the Partnership free and clear of
all Liens except for the Permitted Exceptions:
(a) Stores Leasehold interest in the Stores.
------
(b) Licenses and Authorizations All authorizations, approvals,
---------------------------
orders, licenses, franchises, certificates and permits
(collectively, "Licenses") of and from all Governmental Bodies
necessary to own or lease the properties and assets used or
usable in the ownership and/or operation of the Stores, and to
otherwise conduct the business of the operation of cheque
cashing and other financial services from the Stores that was
conducted by the Partnership prior to the date hereof (the
"Business") together with any renewals, extensions or
modifications thereof and additions thereto and other pending
applications or applications to be filed with any Governmental
Body between the date of this Agreement and the Closing Date.
<PAGE>
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(c) Accounts Receivable Closing Date Accounts Receivable
-------------------
including without restriction all cheques returned unpaid,
post-dated cheques, accounts receivable, notes receivable and
similar items in the process of collection owned or otherwise
held by the Partnership on the Closing Date ("Accounts
Receivable").
(d) Other Personal Property, etc. All tangible and intangible
-----------------------------
personal or moveable property, equipment, machinery,
furniture, fixtures, tools, computer hardware, supplies and
other assets, wherever located, used or usable in the
ownership and/or operation of the Stores and the Business as
set out in Schedule 2.4(d) including security systems and all
security codes thereto, together with such additions,
modifications and replacements thereto, and subject to
deletions therefrom in connection with any such replacements,
as may be made in accordance with the terms of this Agreement
and in the ordinary course of business between the date of
this Agreement and the Closing Date.
(e) Leasehold Property All leased real or immovable property,
------------------
buildings and structures, leasehold improvements, fixtures and
appurtenances used or usable in the operation of the
Partnership and the Business and their interests and rights
arising under all agreements, rights and appurtenances
relating thereto (including all Real Property Leases), any
renewals, extensions, amendments or modifications thereof, and
any additional agreements and leases made or entered into in
accordance with the terms of this Agreement and in the
ordinary course of business between the date of this Agreement
and the Closing Date.
(f) Leases and Agreements All contracts and agreements used or
---------------------
usable in the ownership and/or operation of the Stores and the
Business, including any renewals, extensions, amendments or
modifications thereof, and any additional agreements, leases,
commitments and orders made or entered into in accordance with
the terms of this Agreement between the date of this Agreement
and the Closing Date.
<PAGE>
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(g) Intellectual Property, etc. All licenses of patents, patent
---------------------------
licenses, franchises, copyrights, trademarks, trade names,
service marks, trade secret rights, computer programs and
software to the extent such computer programs are currently
licensed and are transferable, permits, licenses or other
similar rights used or usable in the ownership and/or
operation of the Stores and the Business, including,
specifically, the trade names enumerated on Schedule 5.12
hereof, together with any additions or modifications thereto
and subject to any deletions therefrom made in accordance with
the terms of this Agreement between the date of this Agreement
and the Closing Date.
(h) Books and Records All books, records and files pertaining to
-----------------
the Stores and the Business for all periods ending on or
before the Closing Date.
(i) Prepaid Expenses All security deposits and other prepaid
----------------
expenses relating to the operation and/or ownership of the
Stores and the Business, including, but not limited to, any
prepaid rent, licenses, postage and any other prepaid assets
or deposits relating to the operation and/or ownership of the
Stores existing as of the Closing Date.
(j) Customer Lists All goodwill of the Business as a going
--------------
concern together with customer lists, vendor lists, telephone
numbers and other intangible assets relating to the operation
and/or ownership of the Stores and the Business, together with
any additions or modifications thereto and subject to any
deletions therefrom made in accordance with the terms of this
Agreement between the date of this Agreement and the Closing
Date.
(k) Inventories All inventories of or relating to the Business at
-----------
the Stores as of the Closing Date including all packaged
materials, manufactured supplies and finished goods, excluding
cash or cash equivalent.
(l) Insurance Benefits Any benefits payable under all insurance
------------------
policies relating to the Assets or the Business at the Stores
in respect of any claims based on occurrences prior to the
Closing Date.
<PAGE>
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(m) Supply Contracts The full benefit of all contracts providing
----------------
for the supply of goods and services to the Business.
(n) Warranty Rights and Maintenance Contracts Full benefit of all
-----------------------------------------
warranties and warranty rights against manufacturers or
sellers which apply to any of the Assets and all maintenance
contracts on machinery equipment and the other Assets subject
to the Purchaser's review and acceptance of such contracts and
agreements prior to the Closing Date.
2.5 Liabilities
Purchaser shall, following Closing, perform and discharge its
obligations under the Assumed Contracts to the extent such obligations arise and
accrue after the Effective Time (the "Contract Liabilities") and for all goods
ordered prior to but delivered after Closing in the ordinary course of business
and shall not assume and discharge or be liable for those obligations that
either arise out of or would have been satisfied prior to the Closing. The
Vendor and Purchaser agree that in the normal course following Closing the
Partnership shall satisfy and discharge all of its obligations and liabilities
for amounts due or to become due for services rendered or goods delivered to the
Partnership with respect to the Business prior to Closing.
2.6 Excluded Liabilities
With the exception of Assumed Contracts, it is understood and agreed
that the Purchaser is not assuming and shall not be liable or responsible for
any liabilities of the Partnership, Vendor or Business ("Excluded Liabilities").
The Vendor shall indemnify and save harmless the Purchaser and their officers,
directors, employees, agents and shareholders from and against the Vendor's
Share of all costs, expenses, losses, claims or liabilities including legal fees
on a solicitor and client basis suffered or incurred by the Purchaser or any of
its Affiliates arising out of any of the Excluded Liabilities.
2.7 Expenses
Except as otherwise provided in this Agreement, the Vendor and the
Purchaser shall each bear their own expenses incurred in connection with the
negotiation and execution of this Agreement and each other agreement, document
and instrument contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby. Immediately prior to Closing the
Vendor shall at the expense of the Partnership cause their
<PAGE>
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accountants to prepare an internal financial statement of the Partnership for
the fiscal period ending immediately prior to Closing and shall provide a copy
to the Purchaser and Vendor. All other expenses related to accounting advice to
the Vendor shall be borne by the Vendor.
2.8 Services of Willner
For a period of sixty (60) days following Closing Willner shall,
without further compensation, make his services available as a courtesy as
reasonably requested by the Purchaser to assist in the orderly take-over and
operation of the Business.
ARTICLE III - PURCHASE AND PAYMENT
3.1 Amount of Purchase Price
The purchase price for the Vendor's Share of the Assets (the "Purchase
Price") shall be Seven Million Eight Hundred Fifty Thousand (C$7,850,000.00)
Dollars. The Purchase Price is subject to adjustment as provided in this
Agreement.
3.2 Allocation of Purchase Price
The Vendor and the Purchaser covenant and agree that the Purchase
Price for the Vendor's Share of the Assets shall be allocated among the Vendor's
Share of the Assets in the manner as follows:
(a) As to depreciable assets and equipment an amount equal to the
aggregate respective book value thereof as at the Closing
Date.
(b) As to the inventories, an amount equal to the wholesale cost
to the Partnership of the inventories;
(c) As to the Accounts Receivable, the sum of One ($1.00) Dollar;
(d) As to goodwill the balance of the Purchase Price;
The Vendor and the Purchaser agree to co-operate in the filing of elections
under the Income Tax Act, R.S.C., as amended and other taxation statutes as may
be necessary or desirable to give effect to the allocation for tax purposes.
3.3 Payment of Purchase Price
<PAGE>
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On the Closing Date and subject to the terms and conditions of this
Agreement, the Purchaser or the Purchaser's Solicitors shall pay the Purchase
Price to the account of the Vendor by wire transfer to the trust account of the
Vendor's' Solicitors.
3.4 Post Closing Chargebacks
(a) The Vendor shall indemnify and save harmless the Purchaser for
any amounts charged back on the bank accounts of the Purchaser
from and after Closing with respect to postdated cheques
delivered by the Vendor to the Purchaser and deposited to the
bank accounts of the Purchaser after Closing that are
dishonoured and remain uncollected for thirty (30) days. The
Purchaser shall notify the Vendor thirty (30) days following
becoming aware of each chargeback, shall provide to the Vendor
all documentation and information related to the chargeback
and shall assign its rights with respect to collection of the
said chargeback to the Vendor whereupon the Vendor shall
reimburse the Purchaser for the amount of each said
chargeback.
(b) It is understood that the Vendor shall not indemnify the
Purchaser for cheques returned unpaid that were delivered to
the Purchaser by the Vendor at Closing and remain uncollected
thereafter.
3.5 Adjustments
(a) The Purchase Price shall be increased or decreased by the
amount set out in the statement of estimated adjustment items
("Adjustment Items") attached hereto as Exhibit "B". As soon
as reasonably possible following the Closing Date the Vendor
and Purchaser shall prepare a statement of actual Adjustment
Items;
(b) To the extent the adjusted amount results in an amount owing
by the Purchaser to the Vendor the Purchaser shall promptly
pay such amount to the Vendor. To the extent that the
adjusted amount results in an amount owing by the Vendor to
the Purchaser, the Vendor shall promptly pay such amount to
the Purchaser.
3.6 Financial Services
<PAGE>
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The Vendor and Purchaser acknowledge that the Business is exclusively
financial services and as such there is no Goods and Services Tax applicable
thereto and no requirement to file an election under the Excise Tax Act.
ARTICLE IV - CLOSING AND TERMINATION
4.1 Closing Date
Subject to the satisfaction of the conditions set forth in Sections
8.1 and 8.2 hereof (or the waiver thereof by the party entitled to waive that
condition), the closing of the sale and purchase of the Vendor's Share of Assets
provided for in Section 2.3 hereof (the "Closing") shall take place at the Time
of Closing at the offices of the Purchaser's Solicitors on February 18, 1999,
with an effective time (the "Effective Time") of 12:02 a.m. or on such other
date and at such other place as the Vendor and the Purchaser may jointly
designate in writing. The date on which the Closing shall be held is referred
to in this Agreement as the "Closing Date."
4.2 Termination of Agreement
This Agreement may be terminated prior to the Closing as follows:
(a) by mutual written consent of the Vendor and the Purchaser; or
(b) by the Vendor or the Purchaser by written notice to the other
if there shall be in effect a final non-appealable Order of a
Governmental Body of competent jurisdiction restraining,
enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby.
4.3 Procedure Upon Termination
In the event of termination of this Agreement pursuant to Section 4.2
hereof, this Agreement shall, subject to Section 4.4, terminate, and the
purchase of the Assets hereunder shall be abandoned, without further action by
the Purchaser or the Vendor. If this Agreement is terminated as provided
herein, each party shall redeliver all documents, work papers and other material
of any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same.
In the event that the Partnership Dissolution Agreement is executed prior to
termination the same shall be surrendered and deemed to be void.
4.4 Effect of Termination
<PAGE>
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In the event that this Agreement is validly terminated as provided
herein, then the parties shall be relieved of their duties and obligations
arising under this Agreement after the date of such termination and such
termination shall be without liability to the Vendor, or the Purchaser; however,
-------
nothing in this Section 4.4 shall relieve any party hereto of any liability for
a breach of this Agreement.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE VENDOR AND DENIS
The Vendor and Denis hereby jointly and severally represent and
warrant to Purchaser as follows:
5.1 Organization and Good Standing
The Vendor is a corporation duly organized, validly existing and in
good standing under the laws of the Province of Alberta and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on the Business as one of the partners of the Partnership. The Vendor is
a "private company" within the meaning of the Securities Act (Alberta). The
Vendor is duly qualified or authorized to do business and is in good standing
under the laws of the Province of Alberta.
5.2 Authorization of Agreement
<PAGE>
-22-
The Vendor has all requisite power and authority to execute and
deliver this Agreement, and each other agreement, document, instrument or
certificate contemplated by this Agreement to be executed herein in connection
with the consummation of the transactions contemplated by this Agreement
(together with this Agreement, the Escrow Agreement, assignments of lease, the
Partnership Dissolution Agreement and the Non-Competition Agreements, the
"Transaction Documents"), and to consummate the transactions contemplated hereby
and thereby. This Agreement has been, and each of the Transaction Documents
will be at or prior to the Closing, duly and validly executed and delivered by
the Vendor and (assuming the due authorization, execution and delivery by
Purchaser if a party thereto) this Agreement constitutes, and each of the
Transaction Documents when so executed and delivered will constitute, the legal,
valid and binding obligations of the Vendor, enforceable against the Vendor in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
5.3 Subsidiaries and Other Interests
Registered and beneficial title to all of the Assets is held in the
name of the Partnership and/or the Vendor on behalf of the Partnership and at
the Effective Time the registered and beneficial title to the Vendor's Share of
the Assets will be held in the name of the Vendor.
5.4 Conflicts; Consents of Third Parties
(a) Except in respect of the Real Property Leases as set forth in
Schedule 5.10(a), the Partnership Agreements, and as set forth on
Schedule 5.4 none of the execution and delivery by the Vendor of
this Agreement and the Transaction Documents, the consummation by
the Vendor of the transactions contemplated hereby and thereby, or
compliance by the Vendor with any of the provisions hereof or
thereof will (i) conflict with, or result in the breach of, any
provision of the certificate of incorporation, memorandum,
articles, shareholders agreement, trust agreements or other
organizational documents of the Vendor; (ii) conflict with,
violate, result in the breach or termination of, constitute a
default under, or give rise to any right of acceleration under, any
note, bond, mortgage, deed of
<PAGE>
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trust, indenture, license, lease, agreement or other instrument or
obligation to which the Vendor is a party or by which any the
Vendor or any of Assets is bound; (iii) violate any statute, rule,
regulation, judgment or Order of any Governmental Body by which the
Vendor is bound; or (iv) result in the creation of any Lien upon
the Assets.
(b) Except as set forth in Schedule 5.4 no consent, waiver, approval,
Order, Permit or authorization of, or declaration or filing with,
or notification to, any Person or Governmental Body is required on
the part of the Vendor in connection with the execution and
delivery of this Agreement or the Transaction Documents, or the
compliance by the Vendor with any of the provisions hereof or
thereof.
5.5 Ownership and Transfer of Vendor's Share of Assets
The Vendor shall be at the Effective Time the registered and beneficial
owner of the Vendor's Share of Assets free and clear of any and all Liens. The
Vendor has and will have at the Effective Time the power and authority to sell,
transfer, assign and deliver the Vendor's Share of the Assets, free and clear of
any and all Liens, as provided in this Agreement, and such delivery will convey
to the Purchaser good and marketable title to Vendor's Share of the Assets.
5.6 Financial Statements
(a) Attached hereto as Schedule 5.6(a) are: (i) the unaudited balance
sheets of the Partnership as at June 30, 1996, 1997 and 1998 and
the related unaudited statements of income, retained earning and of
changes in financial position of the Partnership for the years then
ended (collectively called the "Unaudited Statements"); and (ii)
the draft unaudited balance sheet of the Partnership as at December
31, 1998 and the related statement of income of the Partnership
(the "Interim Statements") for the period then ended (such
Unaudited and Interim Statements, including the related notes and
schedules thereto, are referred to herein as the "Financial
Statements"). Each of the Unaudited Statements is complete and
correct in all material respects, has been prepared in accordance
with GAAP (subject to normal year-end adjustments in the case of
the unaudited statements) and in conformity with the practices
consistently applied by the
<PAGE>
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Partnership without modification of the accounting principles used
in the preparation thereof, and presents fairly the financial
position, results of operations and changes in financial position
of the Partnership as at the dates and for the periods indicated.
(b) The Interim Statements have been prepared in all material respects
on a basis consistent with the Unaudited Statements, are true,
correct and complete in all material respects and present fairly
the financial condition of the Partnership as of December 31, 1998
the assets and liabilities of the Partnership as of December 31,
1998 and the revenues, expenses and results of the operations of
the Partnership for the six (6) month period ended on December 31,
1998.
(c) The financial condition of the Partnership is not now materially
different from the financial condition reflected in the Unaudited
Statements save and except for the dissolution of the Partnership
and any changes to the Unaudited Statements agreed to by the
parties.
(d) For the purposes of this Article V, the unaudited balance sheet of
the Partnership as at December 31, 1998 is referred to as the
Partnership's "Balance Sheet" and December 31, 1998, is referred to
as the "Balance Sheet Date".
5.7 No Undisclosed Liabilities
Except as set forth on Schedule 5.7, the Partnership has no indebtedness,
obligations or liabilities of any kind (whether absolute, contingent or
otherwise, and whether due or to become due) which are not reflected on its
Balance Sheet other than such indebtedness, obligations or liabilities (i) as
were incurred in the ordinary and usual course of business consistent with its
past practices since the Balance Sheet Date, (ii) existing pursuant to any
contract or agreement disclosed on Schedules 5.10(a), 5.11, 5.12, 5.13 or 5.16
or any contract or agreement not required to be disclosed thereon because such
contract or agreement was not of the type required to be disclosed thereon by
such Sections.
5.8 Absence of Certain Developments
Except as expressly required by this Agreement or as set forth on Schedule
5.8, since the Balance Sheet Date:
<PAGE>
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(a) there has not been any Material Adverse Change in the
Partnership nor has there occurred any event which is
reasonably likely to result in a Material Adverse Change in
the Partnership;
(b) the Partnership has not made any material change with respect
to any method of management, operation or accounting in
respect of the Business;
(c) there has not been any damage, destruction or loss, whether or
not covered by insurance, with respect to the property and
assets of the Partnership having a replacement cost of more
than C$10,000 for any single loss or C$25,000 for all such
losses;
(d) the Partnership has not (i) awarded or paid any bonuses to
employees of the Partnership and the employee benefit plan
with respect to the fiscal year ended June 30, 1998, or (ii)
entered into, or increased or agreed to increase the
compensation payable or to become payable by it or the
coverage or benefits available under, any written or oral
employment agreement or arrangement, deferred compensation
agreement, severance pay, termination pay, vacation pay,
company awards, salary continuation for disability, sick
leave, deferred compensation, bonus or other incentive
compensation, insurance, pension or other employee benefit
plan, payment or arrangement made to, for or with the
Partnership's or the Vendor's directors, officers, employees,
agents or representatives (other than normal increases in the
ordinary course of business consistent with past practice) and
that in the aggregate have not resulted in a material increase
in the benefits or compensation expense of the Partnership
taken as a whole;
(e) there has not been any change by the Partnership in accounting
or Tax reporting principles, methods or policies;
(f) the Partnership has not entered into any transaction or
Contract or conducted the Business other than in the ordinary
course consistent with past practice;
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(g) the Partnership has not failed to promptly pay and discharge
current liabilities except where disputed in good faith by
appropriate proceedings;
(h) the Partnership has not made any loans, advances or capital
contributions to, or investments in, any Person or paid any
fees or expenses to the Vendor and any Affiliate of the
Vendor;
(i) the Partnership has not mortgaged, pledged or subjected to any
Lien any of its assets, or acquired any assets or sold,
assigned, transferred, conveyed, leased or otherwise disposed
of any assets, except for assets acquired or sold, assigned,
transferred, conveyed, leased or otherwise disposed of in the
ordinary course of business consistent with past practice;
(j) the Partnership has not discharged or satisfied any Lien, or
paid any obligation or liability (fixed or contingent), except
in the ordinary course of business consistent with past
practice;
(k) the Partnership has not canceled or compromised any debt or
claim or amended, canceled, terminated, relinquished, waived
or released any Contract or right except in the ordinary
course of business consistent with past practice and which, in
the aggregate, would not be material to the Partnership taken
as a whole;
(l) the Partnership has not engaged in any business in which it
had not been engaged prior to the Balance Sheet Date;
(m) the Partnership has not made any Capital Expenditure or
capital additions or betterments in excess of C$25,000
individually or C$100,000 in the aggregate or committed to
make but not made or completed any Capital Expenditure or
capital additions or betterments of any amount;
(n) the Partnership has not instituted or settled any material
Legal Proceeding; and
(o) none of the Vendor, Denis or the Partnership has agreed to do
anything set forth in this Section 5.8.
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5.9 Residency
(a) The Vendor is not a non-resident for the purposes of the
Income Tax Act (Canada);
5.10 Leased Property
(a) Schedule 5.10(a) sets forth a complete list of all real or
immovable property and interests in real or immovable property
leased by the Vendor on behalf of the Partnership as lessee in
which a Store is located (individually, a "Real Property
Lease") and the real or immovable properties specified in such
leases, (therein individually referred to as "Company
Property" and collectively referred to as "Company
Properties") together with the expiry date of each Real
Property Lease and renewal term available. The Real Property
Leases constitute all interests in real or immovable property
currently used or currently held for use in connection with
the
<PAGE>
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ownership and/or operation of the Stores. Except as disclosed
in Schedule 5.10(a) the Partnership, at Time of Closing, will
have a valid and enforceable leasehold interest under each of
the Real Property Leases, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding
at law or in equity) and will have obtained the consent of the
landlord of each Real Property Lease to assign the Real
Property Lease from the Vendor or the Partnership to the
Purchaser. The Partnership has not received any written
notice of any outstanding default and to the knowledge of the
Vendor and Denis none of the landlords in respect of the Real
Property Leases has caused an event of default that with
notice or lapse of time, or both, would constitute a default
by any one of such landlords under any of the Real Property
Leases. Each of the Company Properties, fixtures and
improvements thereon is in operating condition and repair
(subject to normal wear and tear). Except as disclosed on
Schedule 5.10(a) the Partnership is not in default of any
material terms of the Real Property Leases. With respect to
each Company Property and excepting any contracts with the
Purchaser, there is no equipment lease, service contract or
other contract or agreement to which the Partnership or the
Vendor is a party affecting such Company Property
(collectively, "Property Contracts") which (i) was not made in
the ordinary course of business, (ii) is not terminable upon
30 days' prior notice by the Partnership without payment of a
premium or penalty or (iii) requires payments in excess of an
amount that, if added to the monthly payment obligations of
all other Property Contracts in respect of such Company
Property, would cause the aggregate amount of all monthly
payment obligations in respect of all Property Contracts for
such Company Property to exceed C$1,000. The Vendor has
delivered to the Purchaser true, correct and complete copies
of the Real Property Leases, together with all amendments,
modifications or supplements, if any, thereto. The
Partnership presently owns and operates cheque cashing and
financial services
<PAGE>
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stores at the locations set forth next to each Company
Property on Schedule 5.10(a).
(b) To the best knowledge of the Vendor and Denis without due
diligence, the Partnership has obtained all material Permits
of any Governmental Body necessary for the current use and
operation of each Company Property, and the Partnership has
fully complied with all material conditions of the Permits
applicable to them. No material default or violation, or
event that with the lapse of time or giving of notice or both
would become a default or violation, has occurred in the due
observance of any Permit.
(c) There does not exist any actual or, to the best knowledge of
the Vendor and Denis, threatened or contemplated condemnation
or eminent domain proceedings that affect any Company Property
or any part thereof, and none of the Vendor, Denis and the
Partnership has received any notice, oral or written, of the
intention of any Governmental Body or other Person to take or
use all or any part thereof.
(d) None of the Vendor, Denis or the Partnership has received any
written notice from any insurance company municipality or of
the governmental authority requiring performance of any
structural or other repairs or alterations to such Company
Property.
(e) The Partnership has sent notice of intention to renew to each
lessor for a Real Property Lease that is due to receive
notification of renewal of Lease in accordance with the terms
thereof.
(f) To the best knowledge of the Vendor and Denis without due
diligence, the Company Property and the current uses thereof
and the conduct of the Business comply with all zoning
regulations and bylaws and to the knowledge of the Vendor and
Denis without due inquiry, all other regulations, statutes,
enactments, laws and by-laws including, without limitation,
those dealing with parking, access, loading facilities,
landscaped areas, building construction, fire and public
health and safety and Environmental Laws.
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(g) the Company Property (including all improvements and fixtures)
is fit for its present use, and to the best of knowledge of
the Vendor, Denis and the Partnership there are no material or
structural repairs to, or replacements of, the roof or the
mechanical, electrical, heating, ventilating, air-conditioning
plumbing or drainage equipment or systems that are currently
necessary for the continued operation of the Business and the
Company Property is not currently undergoing any alteration or
renovation nor is any such alteration or renovation
contemplated.
5.11 Tangible Personal Property
(a) Schedule 5.11 sets forth all written leases of personal or
moveable property ("Personal Property Leases") relating to
personal property used or usable in the operation of the
Stores or the Business. The Vendor has delivered or otherwise
made available to the Purchaser true, correct and complete
copies of the Personal Property Leases, together with all
amendments, modifications or supplements thereto.
(b) The Partnership has a valid leasehold interest under each of
the Personal Property Leases under which it is a lessee,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity),
and there is no default under any Personal Property Lease by
the Partnership or, to the best knowledge of the Vendor and
Denis, by any other party thereto, and no event has occurred
that with the lapse of time or the giving of notice or both
would constitute a default thereunder. Each of the items of
tangible personal property used by the Partnership under the
Personal Property Leases is in operating condition and repair
(ordinary wear and tear excepted) and is suitable for the
purposes used.
(c) The Partnership has and at the Time of Closing will have good
and marketable title to all of the items of tangible personal
or moveable property reflected in the Balance Sheet (except as
sold or disposed of subsequent to the date thereof in the
ordinary course of business
<PAGE>
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consistent with past practice), free and clear of any and all
Liens other than the Permitted Exceptions and except as set
out in Schedule 5.11. All such items of tangible personal or
moveable property which, individually or in the aggregate, are
material to the operation of the Stores and the Business are
in good condition and in a state of good maintenance and
repair (ordinary wear and tear excepted) and are suitable for
the purposes used.
(d) The Partnership owns (or leases from unaffiliated Persons) all
tangible personal property used to conduct the Business.
5.12 Intangible Property
Schedule 5.12 under the heading "software" contains a complete and
correct list of each software computer program used by the Partnership or the
Vendor on behalf of the Partnership and to the knowledge of Denis and the Vendor
without due inquiry, the license agreement for each computer software program is
in good standing assuming the installer has correctly licensed and documented
the software being installed. Schedule 5.12 contains a complete and correct
list of each software computer program owned by the Partnership or Vendor on
behalf of the Partnership free and clear of all Liens and is in good standing
subject to any rights and restrictions of any retail "off the shelf" software
programs or any license agreement with the Purchaser for Money P.O.S. software.
The Partnership does not own any patent or patent license. There have been no
claims made and none of the Vendor or Denis has received any notice or otherwise
knows or has reason to believe that any of the foregoing is invalid or conflicts
with the asserted rights of others. The Partnership possesses through ownership
or license all trade names, trademarks, trade secret rights, computer programs,
software, service marks, brand marks, brand names, copyrights, know-how,
formulae and other proprietary and trade rights for the conduct of the Business
as now conducted, and without any known conflict with the rights of others and
the Partnership has not forfeited or otherwise relinquished any such patent,
patent license, trade name, trademark, trade secret right, computer program,
software, service mark, brand mark, brand name, copyright, know-how, formulae or
other proprietary right currently used for the conduct of its business as
conducted on the date hereof. The Partnership is not under any obligation to
pay any royalties or similar payments in connection with any license to the
Vendor, Denis or any Affiliate thereof or any other Person other than as set out
in Schedule 5.12.
<PAGE>
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5.13 Material Contracts
Schedule 5.13 sets forth all of the following Contracts to which the
Partnership is a party or by which it is bound (collectively, the "Material
Contracts"): (i) Contracts with the Vendor or any direct or indirect
shareholder, partner or equity holder of the Vendor (or any Affiliates of any of
the foregoing) or any current or former officer or director of the Partnership
or Vendor; (ii) Contracts with any labor union or association representing any
employee of the Partnership; (iii) Contracts for the sale of any of the assets
of the Partnership other than in the ordinary course of business or for the
grant to any Person of any preferential rights to purchase any of its assets;
(iv) partnership, or joint venture agreements; (v) Contracts containing
covenants of the Partnership, Vendor or Affiliates not to compete in any line of
business or with any Person in any geographical area or covenants of any other
Person not to compete with the Partnership in any line of business or in any
geographical area; (vi) Contracts relating to the acquisition by the Partnership
of any operating business or the capital stock of any other Person; (vii)
Contracts of the Partnership relating to the borrowing of money; (viii)
Contracts relating to the distribution of money orders or similar instruments;
(ix) Contracts relating to money transfers; (x) Contracts relating to the
payment of utility or other bills for third parties; (xi) any other Contracts,
other than Real Property Leases, which were not entered into in the ordinary
course consistent with past practice, or which involve the expenditure of more
than C$25,000 in the aggregate or require performance by any party more than one
year from the date hereof; (xii) Contracts involving an obligation to make a
Capital Expenditure; and (xiii) franchise or licensing Contracts pursuant to
which the Partnership is a franchisor, franchisee, licensor or licensee. There
have been made available to the Purchaser true and complete copies of each of
the Material Contracts. Except as set forth on Schedule 5.13, each of the
Material Contracts and other agreements is in full force and effect and is the
legal, valid and binding obligation of each party thereto, enforceable against
such party in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Except as set forth on Schedule 5.13, the
Partnership is not in default in any material respect under any Material
Contracts nor, to the knowledge of the Vendor and Denis, is any other party to
any Material Contract in default thereunder in any material respect. For
purposes hereof, "Assumed Contracts" shall consist of (i) the Material Contracts
listed on Schedule 5.13 (ii) the Non-Material Contracts, (iii) Personal Property
Leases and (iv) all Real Property Leases.
5.14 Employee Benefits
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(a) All of the employees working on a full-time basis in the
Stores or the Business are and at all times during such
employment have been employees of the Partnership and not the
Vendor or a third party. The Partnership has no pension,
profit sharing, retirement, death benefit, welfare, company
awards, salary continuation for disability, sick leave,
deferred compensation, bonus or other incentive compensation,
stock purchase arrangements or policies, life insurance,
scholarship or other employee benefit plan, program, policy or
arrangement maintained by the Partnership or to which the
Partnership has any liability (contingent or otherwise) with
respect to employees, officers, directors or shareholders of
the Partnership ("Employee Benefit Plans") and the Financial
Statements reflect in the aggregate an accrual of all amounts
accrued but unpaid to or for the benefit of all employees as
of the dates thereof. The Partnership does not have any
commitment, whether formal or informal, and whether legally
binding or not, to create any such Employee Benefit Plan. All
accrued and unpaid vacation pay of employees owing to the
employees for the period up to and including the day prior to
the Closing Date shall be paid to the employees by the Vendor
on behalf of the Partnership on or prior to the Closing Date.
5.15 Labour
(a) Except as set forth on Schedule 5.15(a), the Partnership is
not a party to any labor or collective bargaining agreement
and there are no labor or collective bargaining agreements
which pertain to employees of the Partnership. The Vendor and
Denis have delivered or otherwise made available to the
Purchaser true, correct and complete copies of the labor or
collective bargaining agreements listed on Schedule 5.15(a),
together with all amendments, modifications or supplements
thereto.
(b) Except as set forth on Schedule 5.15(b), no employees of the
Partnership are represented by any labor organization with
respect to their employment with the Partnership. No labor
organization or group of employees of the Partnership have
made a pending demand for recognition, and there are no
representation proceedings or petitions seeking a
representation proceeding presently pending or,
<PAGE>
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to the best knowledge of the Vendor and Denis, threatened to
be brought or filed, with any federal or provincial agency
responsible for labor or employment laws or other labor
relations tribunal. There is no organizing activity involving
the Partnership pending or, to the best knowledge of the
Vendor and Denis threatened by any labor organization or group
of employees of the Partnership.
(c) There are no (i) strikes, work stoppages, slowdowns, lockouts
or arbitrations or (ii) material grievances or other labor
disputes pending or, to the best of the knowledge of the
Vendor and Denis, threatened against or involving the
Partnership. There are no unfair labor practice charges,
grievances or complaints pending or, to the best of the
knowledge of the Vendor and Denis threatened by or on behalf
of any employee or group of employees of the Partnership.
5.16 Employment Matters
Schedule 5.16 annexed hereto is a complete and accurate list of
(a) The job categories, number of employees in each category and
salary or wage range for each category with respect to
employees of the Partnership who earn total annual
compensation of less than C$25,000, and
(b) With respect to all other employees, officers and directors of
the Partnership, such employee's name and a brief job
description for each such employee (the employees in 5.16(a)
and (b) being collectively, the "Employees") and, for each
such person, his or her current rate of compensation
(including salary, bonus and all other forms of compensation),
the date of hire and the date and amount of the most recent
increase in compensation, whether any commitment, promise or
undertaking has been made by the Partnership or any of its
officers with respect to any increase in the compensation
payable to any such employee or any portion thereof the extent
of such employee's participation in any Employee Benefit Plans
and any accrued rights under such Employee Benefit Plans that
will lapse or terminate by reason of the consummation of the
transactions contemplated by this Agreement. The Partnership
does not have any employment, consulting or severance
contract, arrangement or
<PAGE>
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understanding (either written or oral) with any person
whomsoever except such contracts as are listed on Schedule
5.16. Payments made to, employees of the Partnership have not
been in violation of any applicable laws, rules or regulations
dealing with such matters and all severance payments due to
any employee have been paid or accrued as a liability on the
books of the Partnership.
(c) No notice has been received by the Partnership of any
outstanding complaint filed by any of the employees against
the Partnership claiming the Partnership has violated any
provincial act or legislation applicable to employees or human
rights (or similar legislation in the other jurisdictions in
which the Business is conducted or the Partnership operates)
or of any complaints or proceedings of any kind involving the
Partnership or, to the knowledge of Denis or the Vendor,
without due inquiry, any of the employees of the Partnership
before any labour relations board save and except as set out
in Schedule 5.16(c).
(d) There are no outstanding orders or charges against the
Partnership or Vendor with respect to the Business under any
applicable health and safety legislation in the Province of
Alberta.
(e) Neither the Vendor nor Willner is aware of any non-compliance
by the Partnership of any obligations under the Human Rights
Act (Alberta).No "pay equity" plans have been filed by or on
behalf of the Partnership with any governmental or regulatory
authority or delivered to its employees.
(f) The Partnership is an excluded employer under the workers'
compensation legislation and has no obligation to remit any
assessments pursuant to workers' compensation legislation
levied by any governmental authorities and, to the best of the
knowledge of the Vendor and Denis, the Partnership has no
liability for and there is no pending any state of facts which
may result in the levying of an assessment or a penalty charge
of any nature with respect to the period prior to the Closing.
The Partnership is not required to file payroll statements
pursuant to any workers' compensation legislation. The
Partnership is not liable to indemnify any of its
<PAGE>
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employees or any governmental body in respect of compensation
and/or healthcare payable to its employees pursuant to
applicable workers' compensation legislation.
5.17 Litigation
Except as set forth in Schedule 5.17, there is no suit, action,
proceeding, investigation, claim or order pending or, to the knowledge of the
Vendor or Denis overtly threatened against the Partnership or the Vendor pending
or threatened, against any of the officers, directors or key employees of the
Partnership or the Vendor with respect to their business activities on behalf of
the Partnership), or to which the Vendor or the Partnership are otherwise a
party, before any court, or before any governmental department, commission,
board, agency, or instrumentality; nor is the Vendor or Denis aware of any facts
that would give rise to any such action, proceeding, or investigation. The
Partnership and the Vendor are not subject to any judgment, Order or decree of
any court or Governmental Body and the Partnership is not engaged in any legal
action to recover monies due it or for damages sustained by it.
5.18 Compliance with Laws
To the best knowledge of the Vendor and Denis without due inquiry the
Partnership possesses all material Licenses of and from all Governmental Bodies,
and has made all material filings with all Governmental Bodies, necessary to own
or lease its properties and assets and to conduct the Business. Except as set
forth on Schedule 5.18, no proceeding has been served or, to the knowledge of
the Vendor and Denis, threatened or commenced which seeks to, or could
reasonably be anticipated to, cause the suspension, modification, revocation or
withdrawal of any License. The Partnership is currently, and at all times has
been, in material compliance with all Laws applicable to the Partnership and/or
the Business at any time or on prior to the Balance Sheet Date, including,
without limitation, all applicable credit, banking and consumer protection
Laws, regulating check cashing, debt collection, plain language Laws and
Laws proscribing unfair and/or deceptive acts or practices and
franchise disclosure laws. Neither the Partnership, the Vendor nor any of its
directors, officers, employees or representatives has offered, proposed,
promised or made any illegal payment of a material amount of money or material
value to officers, employees or representatives of any Governmental Body, or
engaged in any illegal reciprocal practices or made any illegal payment or given
any other illegal consideration of a material amount of money or material value
to any third party.
5.19 Environmental Matters
<PAGE>
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Except as set forth on Schedule 5.19 hereto with respect to Company
Properties:
(a) The operations of the Partnership have been and are in
material compliance with all applicable Environmental Laws and
all Licenses issued pursuant to Environmental Laws
("Environmental Permits");
(b) The Partnership is not required to obtain any Environmental
Permits to operate, sell or assign the Business;
(c) The Partnership is not the subject of any outstanding written
order, agreement or Contract with any governmental authority
or person respecting (i) Environmental Laws, (ii) Remedial
Action, (iii) any Release or threatened Release of a Hazardous
Material or (iv) any Environmental Claim;
(d) The Partnership nor the Vendor has not received any written
communication alleging that the Partnership or the operations
thereof may be in violation of any Environmental Law or any
Environmental Permit, or may have any liability under any
Environmental Law;
(e) The Partnership has no known liability in connection with any
Release of any Hazardous Materials into the indoor or outdoor
environment (whether on-site or off-site) and no facts or
circumstances exist which could reasonably be expected to give
rise to such liability under Environmental Laws;
(f) There are no legal or administrative proceedings pending or,
to the knowledge of the Vendor and Denis threatened against
the Partnership alleging the violation of or seeking to impose
liability pursuant to Environmental Laws;
(g) The Partnership has not received notice of any investigations
of the business, operations, or currently or previously owned,
operated or leased property of the Partnership in connection
with the Business nor, to the knowledge of any of the Vendor
and Denis, are there any such pending or threatened
investigations which could lead to the imposition of any
liability pursuant to Environmental Law;
<PAGE>
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(h) The Partnership has not, to the knowledge of Vendor or Denis,
transported, incorporated or otherwise deposited or installed
any (i) underground storage tanks, (ii) asbestos - containing
material or (iii) equipment containing polychlorinated
biphenyls at any of the properties leased under the Real
Property Leases;
(i) Neither the Vendor nor Denis has obtained or is aware of the
existence of any environmentally related audits, studies,
reports, analyses, and results of investigations that have
been performed with respect to the Company Properties; and
(j) The Partnership has not had prepared any environmentally
related audits, studies, reports, analyses, or results of
investigation that have been performed with respect to the
Company Properties.
5.20 Insurance
All insurance policies of any kind or nature covering the Partnership
or any of its respective employees, properties or assets, including, without
limitation, policies of life, disability, fire, theft, workers compensation,
employee fidelity and other casualty and liability insurance are in full force
and effect and the Partnership is not in default of any material provision
thereof. To the best of the knowledge of the Vendor and Denis there are no
circumstances under which the Partnership would be required to or in order to
maintain its coverage should give any notice to insurers under any such
insurance policies related to the Assets or Company Properties which has not
been given. Neither the Partnership nor the Vendor has received any notice from
any of the insurers regarding cancellation of such insurance policies. The
Partnership nor the Vendor has not failed to give any notice of or present any
claim under such insurance policy in due and timely fashion. The Partnership
has not received notice from any insurers denying any outstanding claims.
5.21 Payables
All accounts payable of the Partnership reflected in its Balance Sheet
or arising after the date thereof are the result of bona fide transactions
entered into in the ordinary course of business and have been paid or are not
yet due and payable.
5.22 Related Party Transactions
Except as set forth on Schedule 5.22, as at the Balance Sheet Date
none of the Partnership, the Vendor and Denis and any Affiliate of the
Partnership, Vendor or Denis has
<PAGE>
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borrowed any monies from or has outstanding any indebtedness or other similar
obligations to the Partnership. Except as set forth in Schedule 5.22, none of
the family members of the Vendor or Denis, any Affiliate of the Vendor or Denis
or any officer, director or employee of either of them (i) owns any direct or
indirect interest of any kind in, or controls or is a director, officer,
employee or partner of, or consultant to, or lender to or borrower from or has
the right to participate in the profits of, any Person which is (A) a
competitor, supplier, customer, landlord, tenant, creditor or debtor of the
Denis, (B) engaged in a business related to the business of the Partnership, or
(C) a participant in any transaction to which the Partnership is a party or (ii)
is a party to any Contract or transaction with the Partnership.
5.23 Financial Advisors
No Person has acted, directly or indirectly, as a broker, finder or
financial advisor excepting legal or accounting advisers for the Vendor or Denis
in connection with the transactions contemplated by this Agreement and no Person
excepting legal and accounting advisors is entitled to any fee or commission or
like payment in respect thereof.
5.24 Licensed Operations
Each of the Stores set out in Schedule 2.4(a) are operated by the
Partnership pursuant to a trademark license agreement with the Purchaser. The
Partnership and the Vendor are not a party to any franchise agreements.
5.25 Name
"Money Mart" and "Calgary Money Mart" are the only business names used
by the Partnership in the operation of the Stores and the Business.
5.26 Third Party Discussion
Schedule 5.26 sets forth a list of all current and proposed plans or
discussions by the Partnership, the Vendor or Denis with third parties related
to potential acquisitions of equity interest in cheque cashing, currency
exchange, tax rebate programs, tax preparation or retail financial service
outlets.
5.27 No Bankruptcy
There has not been filed any petition or application, or any
proceeding commenced which has not been discharged, by or against the
Partnership, the Vendor or Denis, or any Affiliate of any of them with respect
to any Assets of any of them under any
<PAGE>
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law, domestic or foreign, relating to bankruptcy, re-organization, insolvency,
re-adjustment of debt or creditors rights and no assignment has been made by any
of them for the benefit of their respective creditors.
5.28 No Misrepresentation
Neither the Vendor nor Denis has omitted to state a material fact or
make a statement which would make any of the representations or warranties
contained herein misleading or inaccurate.
5.29 Partnerships
Since 1991 the Business has always been operated in and the Assets
owned by or on behalf of the Partnership.
5.30 Withholdings
The Partnership has withheld and will continue until the Closing Date
to withhold from each payment made to the Employees the amount of all taxes,
including but not limited to income tax, premium contributions, remittance and
assessments or re-assessments for unemployment insurance employer health tax,
Canada Pension Plan, income tax, workers' compensation and any other employment
related legislation, accrued wages, Taxes, salaries, commission and employee
benefit plan payments, and other amounts required to be withheld therefrom, and
will have paid the same to the proper tax or other receiving authorities within
the time required under any applicable legislation. The amount of tax withheld
but not remitted will be retained in the Partnership's account and will be
remitted by the Partnership on the earlier of the date same is due or the
Closing Date.
5.31 The Partnership
The Partnership has not and will not during the Interim Period carry
on, be engaged or involved in any business or activity whatsoever, including an
adventure in the nature of trade, have any employees, have any assets or
liabilities or enter into contracts or agreements excepting the Business and
this Agreement. At the time of dissolution of the Partnership the Business
operated from the Outlets was exclusively financial services and without
restricting the generality of the foregoing did not include services of sale of
photo identification cards, mail box rentals, fax and copy services, sale of
phone cards or sale of transit passes.
<PAGE>
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ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Vendor that:
6.1 Organization and Good Standing
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the Province of Alberta.
6.2 Authorization of Agreement
The Purchaser has full corporate power and authority to execute and
deliver this Agreement and each other agreement, document, instrument or
certificate contemplated by this Agreement or to be executed by the Purchaser in
connection with the consummation of the transactions contemplated hereby and
thereby (the "Purchaser Documents"), and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by the
Purchaser of this Agreement and each Purchaser Document have been duly
authorized by all necessary corporate action on behalf of the Purchaser. This
Agreement has been, and each Purchaser Document will be at or prior to the
Closing, duly executed and delivered by the Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each Purchaser Document when so executed and
delivered will constitute, legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
6.3 Conflicts; Consents of Third Parties
(a) Except as set forth on Schedule 6.3 hereto, none of the
execution and delivery by the Purchaser of this Agreement and
of the Purchaser Documents, the consummation by the Purchaser
of the transactions contemplated hereby and thereby which will
affect the Purchaser's ability to close, or compliance by the
Purchaser with any of the provisions hereof or thereof will
(i) conflict with, or result in the breach of, any provision
of the order of amalgamation or articles of the Purchaser,
(ii) conflict with, violate, result in the breach or
termination of, constitute a default under, or give rise to
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any right of acceleration under, any note, bond, mortgage,
indenture, license, agreement or other instrument or
obligation to which the Purchaser is a party or by which the
Purchaser or its properties or assets is bound or (iii)
violate any statute, rule, regulation, judgment or Order of
any Governmental Body by which the Purchaser is bound.
(b) Except as set forth on Schedule 6.3, no consent, waiver,
approval, Order, Permit or authorization of, or declaration or
filing with, or notification to, any Person or Governmental
Body not previously obtained is required on the part of the
Purchaser in connection with the execution and delivery of
this Agreement or the Purchaser Documents or the compliance by
Purchaser with any of the provisions hereof or thereof.
6.4 Litigation
There are no Legal Proceedings pending or, to the best knowledge of
the Purchaser, threatened that are reasonably likely to prohibit or restrain the
ability of the Purchaser to enter into this Agreement or consummate the
transactions contemplated hereby.
6.5 Financial Advisors
No Person has acted, directly or indirectly, as a broker, finder or
financial advisor for the Purchaser in connection with the transactions
contemplated by this Agreement and no Person is entitled to any fee or
commission or like payment in respect thereof.
6.6 Bankruptcy
The Purchaser is not insolvent, nor has it committed an act of
bankruptcy, proposed a compromise or arrangement to its creditors generally, had
any petition or receiving order in bankruptcy filed against it, taken any
proceedings with respect to a compromise or arrangement, taken any proceedings
to have itself declared bankrupt or wound-up, taken any proceedings to have a
receiver appointed over any material part of its assets, had any encumbrancer
take possession of any of its property, or had any execution or distress become
enforceable or become levied upon any of its properties or assets.
6.7 Approvals
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The Purchaser does not have to obtain any federal, provincial,
municipal or other governmental approvals and consents in order to permit the
purchase of Vendor's Share of Assets contemplated herein.
ARTICLE VII - COVENANTS
7.1 Access to Information
During the Interim Period the Vendor agrees that the Purchaser shall
be entitled, through its officers, employees and representatives (including,
without limitation, its legal advisors and accountants), to make such
investigation of the properties, businesses and operations of and the
Partnership and such examination of the books, records and financial condition
of the Partnership as it reasonably requests and to make extracts and copies of
such books and records. Any such investigation and examination shall be
conducted during regular business hours and under reasonable circumstances, and
the Vendor shall cooperate, fully therein. No investigation by the Purchaser
prior to or after the date of this Agreement shall diminish or obviate any of
the representations, warranties, covenants or agreements of the Vendor and Denis
contained in this Agreement or the Transaction Documents unless waived by the
Purchaser in writing prior to Closing. In order that the Purchaser may have
full opportunity to make such physical, business, accounting and legal review,
examination or investigation as it may reasonably request of the affairs of the
Partnership, the Vendor shall cause the officers, employees, consultants,
agents, accountants, lawyers and other representatives of the Partnership and
Vendor to cooperate fully with such representatives in connection with such
review and examination. Notwithstanding the above until the Vendor discloses
the sale of the Assets to its employees the Purchaser, its officers, employees
and representatives shall maintain utmost secrecy in conducting its
investigation and shall not speak to employees of the Partnership with respect
to the transactions contemplated herein or enter any of the Stores without the
prior written consent of Denis.
7.2 Conduct of the Business Pending the Closing
(a) Except as otherwise expressly contemplated by this Agreement
or with the prior written consent of the Purchaser, the
Partnership and the Vendor during the Interim Period shall:
(i) conduct the business of the Partnership only in the
ordinary course consistent with past practice;
(ii) use its best efforts to (A) preserve its present business
operations, organization (including, without limitation,
management and the staff) and goodwill of the Partnership
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and (B) preserve its present relationship with Persons
having business dealings with the Partnership;
(iii) maintain (A) all of the assets and properties of the
Partnership in their current condition, ordinary wear and
tear excepted and (B) insurance upon all of the Assets in
such amounts and of such kinds comparable to that in
effect on the date of this Agreement;
(iv) maintain
(A) the books, accounts and records of the Partnership
in the ordinary course of business consistent with
past practices,
(B) continue to collect accounts receivable and pay
accounts payable utilizing normal procedures and
without discounting or accelerating payment of such
accounts, and
(C) comply with all contractual and other obligations
applicable to the operation of the Partnership;
(v) promptly pay and discharge all liabilities (including
liabilities for services rendered or goods delivered to
the Partnership) that are due and payable by it prior to
the Closing Date except where such liabilities are being
disputed in good faith by appropriate proceedings; and
(vi) comply in all material respects with applicable Laws.
(b) Except as otherwise expressly contemplated by this Agreement
or with the prior written consent of the Purchaser, the
Partnership and the Vendor during the Interim Period shall
not:
(i) transfer, issue, sell or dispose of any partnership
interests or other securities of the Partnership or grant
options, warrants, calls or other rights to purchase or
otherwise acquire shares of the capital stock,
partnership interests or other securities of the
Partnership;
(ii) except as set forth on Schedule 7.2, (A) increase the
annual level of compensation of any employee of the
Partnership whose annual compensation exceeds C$25,000,
other than any such increases of less than 5% in the
aggregate granted in the ordinary course of business
consistent with past practice, (B) increase the annual
level of compensation
<PAGE>
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payable or to become payable by the Partnership to any of
their respective executive officers, (C) grant any bonus,
benefit or other direct or indirect compensation to any
employee, director or consultant whose annual
compensation exceeds C$25,000, other than in the ordinary
course consistent with past practice and in such amounts
as are fully reserved against in the Financial
Statements, (D) increase the coverage or benefits
available under any (or create any new) severance pay,
termination pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation,
insurance, pension or other employee benefit plan or
arrangement made to, for, or with any of the directors,
officers, employees, agents or representatives of the
Partnership or otherwise modify or amend or terminate any
such plan or arrangement or (E) enter into any
employment, deferred compensation, severance, consulting,
non-competition or similar agreement (or amend any such
agreement) to which the Partnership is a party or
involving a representative or employee of the Partnership
in his or her capacity as a representative or employee of
the Partnership;
(iii) except for trade payables and for indebtedness for
borrowed money incurred in the ordinary course of
business and consistent with past practice, borrow monies
for any reason or draw down on any line of credit or debt
obligation, or become the guarantor, surety, endorser or
otherwise liable for any debt, obligation or liability
(contingent or otherwise) of any other Person;
(iv) subject any of the Assets to any Lien, ;
(v) acquire any material properties or assets or sell,
assign, transfer, convey, lease or otherwise dispose of
any of the Assets, except (other than with respect to the
Stores or the Business) for fair consideration in the
ordinary course of business consistent with past practice
of the Partnership;
(vi) cancel or compromise any debt or claim or waive or
release any material right related to the Business or the
Assets of the Partnership except in the ordinary course
of business consistent with past practice;
(vii) enter into any commitment for Capital Expenditures out
of the ordinary cause of business and in excess of Five
Thousand ($5,000.00) Dollars in the aggregate;
<PAGE>
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(viii) enter into, modify or terminate any labor or
collective bargaining agreement of the Partnership or,
through negotiation or otherwise, make any commitment or
incur any liability to any labor organization with
respect to the Partnership or;
(ix) introduce any material change with respect to the
operation of the Partnership, including any material
change in the types, nature, composition or quality of
its products or services or, other than in the ordinary
course of business, make any change in specifications for
product or services of the Business or prices or terms of
granting credit and other distribution of such product or
services;
(x) enter into any transaction or to make or enter into any
Contract which by reason of its size or otherwise is not
in the ordinary course of business consistent with past
practice of the Partnership or the Business;
(xi) become obligated to develop any new locations;
(xii) enter into or agree to enter into any merger or
consolidation with any Person or engage in any new
business or invest in, make a loan, advance or capital
contribution to, or otherwise acquire the securities of,
any other Person;
(xiii) except for transfers of cash pursuant to normal cash
management practices, make any investments in or loans
to, or pay any fees or expenses to, or enter into or
modify any Contract with any of the Vendor, Denis or a
partner or Affiliate of the Vendor and Denis other than
in accordance with past practices;
(xiv) restructure, change, modify or renegotiate the terms of
any obligation of the Partnership to another Person which
restructuring, change, modification or renegotiation has
the effect of extending, delaying or deferring the time
for payment or performance of any such obligation, other
than in the ordinary course of business consistent with
past practice; or
(xv) agree to do anything prohibited by this Section 7.2 or
take or omit to take any action which would make any of
the representations and warranties of the Vendor and
Denis in this Agreement or the Transaction Documents
untrue or incorrect in any material respect during the
Interim Period.
7.3 Consents
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During the Interim Period the Vendor shall use their commercially
reasonably best efforts, and the Purchaser shall cooperate with them to obtain
at the earliest practicable date all consents, waivers, approvals, Orders,
Permits and authorizations of any Person or Governmental Body required to
consummate the transactions contemplated by this Agreement, including, without
limitation, the consents, waivers, approvals, estoppels, Orders, Permits and
authorizations of any Person or Governmental Body referred to in Section 5.4(b)
hereof. If requested by the Vendor the Purchaser shall assist the Vendor by
providing reasonable information to necessary third parties.
7.4 Consents to Real Property Leases
The Vendor shall use their commercially reasonable best efforts and
the Purchaser shall cooperate with the Vendor to obtain all consents and
estoppels from landlords which are required to be obtained under Section 9.3
hereof to transfer the Real Property Leases to the Buyer and consummate all
other transactions contemplated by this Agreement pursuant to the terms of any
of the Real Property Leases.
7.5 No Solicitation
During the Interim Period the Vendor will not, nor will the Vendor
cause or permit any of its directors, officers, employees, representatives or
agents (collectively, the "Representatives") to, directly or indirectly, (i)
discuss, negotiate, undertake, authorize, recommend, propose or enter into,
either as the proposed surviving, merged, acquiring or acquired corporation, any
transaction involving a merger, consolidation, business combination, purchase or
disposition of any capital stock or other equity interest in, or material assets
of, or the Partnership other than the transactions set forth in this Agreement
(an "Acquisition Transaction"), (ii) facilitate, encourage, solicit or initiate
discussions, negotiations or submissions of proposals or offers in respect of an
Acquisition Transaction, (iii) furnish or cause to be furnished, to any Person,
any information concerning the business, operations, properties or assets of the
Partnership in connection with an Acquisition Transaction, or (iv) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the foregoing.
The Vendor will inform the Buyer in writing immediately following the receipt by
the Vendor of any proposal or inquiry in respect of any Acquisition Transaction.
7.6 Intentionally Deleted
7.7 Publicity
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None of the Partnership, the Vendor, and Denis and the Purchaser shall
issue any press release or public announcement concerning this Agreement or the
transactions contemplated hereby without obtaining the prior written approval of
the other parties hereto, which approval will not be unreasonably withheld or
delayed, unless, in the sole judgment of the Purchaser, disclosure is otherwise
required by applicable Law, provided that, to the extent required by applicable
law, the party intending to make such release shall use its best efforts
consistent with such applicable law to consult with the other party with respect
to the text thereof.
7.8 Use of Name
The Vendor hereby agrees that upon the consummation of the
transactions contemplated hereby, the Vendor shall have no right to the use of
the name "Money Mart" in connection with the Stores or otherwise.
7.9 Preservation of Records
The Purchaser shall preserve and keep the books and records delivered
to it by the Vendor for a period of four years from the Closing Date and shall
make such records available to the Vendor as may be reasonably required in
connection with, among other things, preparation of financial records and tax
returns, audits, legal proceedings, government investigations and insurance
claims by or against the Vendor. In the event that the Vendor wishes to take
possession of the records following expiry of the four year period it shall
provide notice to the Purchaser within ninety (90) days following expiry of the
four year period of such fact and shall arrange for pick-up of such records at a
mutually convenient time.
7.10 Non-Competition Agreements
Each of the Vendor and Denis hereby agree that, on or prior to the
Closing Date, each of them shall execute and deliver and shall cause Claire
Willner to execute and deliver to the Purchaser a Non-Competition Agreement,
substantially in the form of Exhibit A hereto ("Non-Competition Agreement").
7.11 Employer Health Tax
The Partnership has no responsibility and liability for Workers'
Compensation Board payments in respect of all remuneration paid to employees of
the Partnership in the Business in respect of services provided during the
period prior to the Closing Date.
7.12 Employees
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(a) The Vendor agrees to provide the Purchaser with an up-to-date
list of the names of the employees of the Business at least
two Business Days and not more than four Business Days prior
to the Closing Date (the "Listed Employees").
(b) The Partnership shall employ all of the employees set out in
Schedule 5.16 until Closing Date, except for any employees who
prior to the Closing Date:
(i) are terminated for cause;
(ii) are terminated with the Purchaser's consent, which
consent shall not be unreasonably withheld;
(iii) voluntarily resign; or
(iv) retire.
(c) The Purchaser shall, with effect from and after said Closing
offer employment to all Listed Employees of the Partnership on
the same terms and conditions under which the Listed Employees
are presently employed. In the event that the Purchaser
shall, subsequent to the time when any Listed Employee becomes
employed by the Purchaser terminate or constructively
terminate the employment of such Listed Employees in
circumstances where the Listed Employees shall make or have a
claim or entitlement in respect of wrongful dismissal,
severance pay or the receipt of reasonable prior notice, the
Purchaser shall be responsible and shall indemnify the Vendor
and Denis for all payments to be made and all expenses and
costs arising out of or in connection with such termination.
The Vendor and Denis shall not attempt in any way to
discourage any of the Listed Employees from accepting work
with the Purchaser. The Vendor and Denis shall not solicit
the services of any of the Employees during the five (5) year
period following the Closing Date without the consent in
writing of the Purchaser.
<PAGE>
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ARTICLE VIII - CONDITIONS TO CLOSING
8.1 Conditions Precedent to Obligations of Purchaser
The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement is subject to the fulfillment, on or prior to the
Closing Date, of each of the following conditions (any or all of which may be
waived by the Purchaser in whole or in part):
(a) Deleted.
(b) All representations and warranties of the Vendor and Denis
contained herein not qualified as to materiality shall be true
and correct, and the representations and warranties of the
Vendor contained herein qualified as to materiality shall be
true and correct in all material respects, at and as of the
Closing Date with the same effect as though those
representations and warranties had been made again at and as
of that time;
(c) The Vendor and Denis shall have performed and complied in all
material respects with all obligations and covenants required
by this Agreement to be performed or complied with by them on
or prior to the Closing Date;
(d) The Purchaser shall have obtained all consents and waivers
referred to in Section 6.3 hereof with respect to the
transactions contemplated by this Agreement and the Purchaser
Documents;
(e) There shall not have been or occurred any Material Adverse
Change in the Partnership or the Business since the Balance
Sheet Date;
(f) The Vendor shall have obtained all consents and waivers
referred to in Section 5.4 hereof, in a form reasonably
satisfactory to the Purchaser, with respect to the
transactions contemplated by this Agreement or the Transaction
Documents.
(g) No Legal Proceedings shall have been instituted or threatened
or claim or demand made against any of the Partnership, the
Vendor, Denis or the Purchaser or any of its Affiliates
seeking to restrain or prohibit or to obtain substantial
damages with respect to the consummation of the transactions
contemplated hereby, and there
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shall not be in effect any Order by a Governmental Body of
competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated
hereby;
(h) Estoppels, assignments and any necessary consents from the
landlords and lessors under each Real Property Lease shall
have been obtained in form and substance satisfactory to
Purchaser in accordance with Section 9.3;
(i) The Vendor shall have presented a form of opinion of the
Vendor's Solicitors in a form and substance satisfactory to
the Purchaser acting reasonably;
(j) The Purchaser shall have received duly executed copies of each
of the documents enumerated in Section 9.1;
(k) The Vendor shall have amended such Real Property Leases
necessary to cure the defaults set out in Schedule 5.10(a).
8.2 Conditions Precedent to Obligations of the Vendor
The obligations of the Vendor to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or on
the Closing Date, of each of the following conditions (any or all of which may
be waived by the Vendor in whole or in part to the extent permitted by
applicable law):
(a) Deleted.
(b) all representations and warranties of the Purchaser contained
herein not qualified as to materiality shall be true and
correct, and all representations and warranties of the
Purchaser contained herein qualified as to materiality shall
be true and correct in all material respects, at and as of the
Closing Date with the same effect as though those
representations and warranties had been made again at and as
of that date;
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(c) the Purchaser shall have performed and complied in all
material respects with all obligations and covenants required
by this Agreement to be performed or complied with by
Purchaser on or prior to the Closing Date;
(d) The Vendor shall have obtained all consents and waivers
referred to in Section 5.4 hereof with respect to the
transactions contemplated by this Agreement and the
Transaction Documents.
(e) No Legal Proceedings shall have been instituted or threatened
or claim or demand made against any of the Partnership, the
Vendor, Denis or the Purchaser or any of its Affiliates
seeking to restrain or prohibit or to obtain substantial
damages with respect to the consummation of the transactions
contemplated hereby, and there shall not be in effect any
Order by a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby;
(f) the Purchaser shall have obtained all consents and waivers
referred to in Section 6.3 hereof, in a form reasonably
satisfactory to the Vendor, with respect to the transactions
contemplated by this Agreement or the Transaction Documents;
(g) The Purchaser shall have presented a form of opinion of the
Purchaser's Solicitors in a form and substance satisfactory to
the Vendor acting reasonably;
(h) the Vendor shall have received duly executed copies of each of
the documents enumerated in Section 9.2; and
(i) The Vendor shall have amended such Real Property Leases
necessary to cure the defaults set out in Schedule 5.10(a) and
to satisfy the stated requirements of the Purchaser with
respect to the leases for 2213 Centre Street, Calgary and 3454
- 17th Avenue S.E., Calgary.
8.3 Failure of Vendor to Satisfy Conditions Precedent
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If any of the foregoing conditions contained in Section 8.1 are not
satisfied at the Time of Closing, the Purchaser may:
(a) refuse to complete the transaction contemplated in this
Agreement by notice in writing to the Vendor and, in such
event, the Purchaser shall be released from all of its
obligations under this Agreement and this Agreement shall
thereupon be deemed to be null and void and of no force or
effect whatsoever. Vendor and Denis shall not be released from
their obligations hereunder unless the ability to satisfy the
unsatisfied condition was beyond reasonable the control of the
Vendor and Denis; or
(b) complete the transactions contemplated in this Agreement, it
being expressly understood and agreed that following such
completion the Purchaser may rely upon the warranties,
representations or covenants relating to any unsatisfied
condition unless the ability to satisfy the unsatisfied
condition was beyond the reasonable control of the Vendor and
Denis.
provided that any of the said conditions may be waived in whole or in part by
the Purchaser without prejudice to its rights of rescission in the event of non-
fulfillment and/or non-performance of any other condition or conditions, any
such waiver prior to the Time of Closing to be binding on the Purchaser only if
same is in writing.
8.4 Failure of Purchaser to Satisfy Conditions Precedent
If any of the conditions contained in Section 8.2 are not satisfied at
the Time of Closing, the Vendor and Denis may:
(a) refuse to complete the transactions contemplated in this
Agreement by notice in writing to the Purchaser and, in such
event, the Vendor and Denis hereto shall be released from all
of their respective obligations under this Agreement and this
Agreement shall be thereupon be deemed to be null and void and
of no force or effect whatsoever. Purchaser shall not be
released from its obligations hereunder unless the ability to
satisfy the unsatisfied condition was beyond the reasonable
control of the Purchaser; or
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(b) complete the transactions contemplated in this Agreement, it
being expressly understood and agreed that following such
completion, the Vendor and Denis may rely upon the warranties,
representations or covenants relating to any unsatisfied
condition unless the ability to satisfy the unsatisfied
condition was beyond the reasonable control of the Purchaser.
provided that any of the said conditions may be waived in whole or in part by
the Vendor without prejudice to their rights of rescission in the event of non-
fulfillment and/or non-performance of any other condition or conditions, any
such waiver prior to the Time of Closing to be binding on the Vendor only if
same is in writing.
ARTICLE IX - DOCUMENTS TO BE DELIVERED
9.1 Documents to be Delivered by the Vendor and Denis
At the Closing, the Vendor and Denis shall deliver, or cause to be
delivered, to the Purchaser the following:
(a) the opinion of the Vendor's Solicitors, in a form acceptable
to the Purchaser acting reasonably;
(b) copies of all consents and waivers referred to in Section
8.1(f) hereof;
(c) Non-Competition Agreement, substantially in the form of
Exhibit A hereto, duly executed by each of the Vendor, Denis
and Clair Willner;
(d) certificate of good standing with respect to the Vendor by the
Registrar of Corporations (Alberta);
(e) Certificate of Incumbency of the Vendor;
(f) necessary Consents and or assignments from all lessors to all
material Personal Property Leases and other parties to the
Material Contracts from the Partnership to the Purchaser;
(g) Estoppel certificates by all landlords of the Real Property
Leases substantially in the form of Exhibit "C" hereto or as
agreed in writing by the Purchaser;
<PAGE>
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(h) assignments of the Real Property Leases from the Partnership
to the Purchaser consented to by the landlords;
(i) Certified Copy of Resolution of the sole director of the
Vendor approving the transactions contemplated by this
Agreement;
(j) Bill of Sale transferring the Vendor's Share of the Personal
Property to the Purchaser;
(k) Statement of Adjustments;
(l) Partnership Dissolution Agreement;
(m) Declaration of Dissolution of Partnership;
(n) Escrow Agreement duly executed by the Vendor and the
Partnership if necessary;
(o) Evidence of payment of Purchaser's Share of Cash on Hand;
(p) Form T2060; and
(q) such other documents as the Purchaser shall reasonably
request.
9.2 Documents to be Delivered by the Purchaser
At the Closing, the Purchaser shall deliver to the Vendor the
following:
(a) evidence of the payment of the Purchase Price required to be
made pursuant to Section 3.3 hereof;
(b) evidence of payment of the Adjustments required to be made
pursuant to Section 3.5 hereof.
(c) the opinion of the Purchaser's Solicitors in a form acceptable
to the Vendor acting reasonably;
(d) copies of consents and waivers referred to in Section 8.2(d)
hereof;
(e) Certificate of good standing with respect to the Purchaser by
the Registrar of Corporations (Alberta) and Nova Scotia;
(f) Certificate of Incumbency of the Purchaser;
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(g) Certified Copy of Resolution of the Directors of the Purchaser
approving the transaction contemplated by this Agreement;
(h) Partnership Dissolution Agreement;
(i) Declaration of Dissolution;
(j) Declaration of Dissolution of Partnership;
(k) Escrow Agreement duly executed by the Purchaser if necessary;
(l) Form T2060; and
(m) such other documents as the Vendor reasonably request.
9.3 Minimum Lease Assignments
(a) The Vendor is required under Section 8.1(h) to obtain all of
the estoppel certificates, and consents to assignment of the
landlord/lessors ("Consent Documents") under the Real Property
Leases for assignment from the Vendor on behalf of the
Partnership to the Purchaser hereunder. If the Vendor obtains
the Consent Documents of five (5) of the Real Property Leases
(the "Minimum Lease Condition" for purposes of Article IX)
then the condition precedent set forth in Section 8.1(h) shall
at the option of the Purchaser be deemed to be met. Assuming
the satisfaction of the Minimum Lease Condition, if Purchaser,
shall give the written notice to the Vendor as provided in
Section 11.8, then for each Real Property Lease for which the
Vendor has not obtained Consent Documents the amount of
C$100,000 of the Purchase Price shall be paid into escrow in
accordance with the terms of the Escrow Agreement pending
receipt and delivery of such consent.
ARTICLE X - INDEMNIFICATION
10.1 Survival
The representations and warranties of the applicable Vendor, Denis and
the Purchaser shall remain operative and in full force and effect for a period
of thirty-six (36) months after the Closing Date, regardless of any
investigation or statement as to the results thereof made by or on behalf of any
party hereto. Notwithstanding anything to the contrary
<PAGE>
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herein, any representation or warranty which is the subject of a specific claim
or dispute which is asserted in writing prior to the expiration of the
applicable period set forth above shall survive with respect to such claim or
dispute until the final resolution and satisfaction thereof.
10.2 General Indemnification
(a) The Vendor and Denis hereby jointly and severally agree to
indemnify and hold harmless the Purchaser and its Affiliates
(including their respective directors, officers, employees,
agents, successors and assigns (collectively, the "Purchaser
Indemnified Parties")) from and against and in respect of the
Vendor's Share of any and all Losses resulting from, arising
out of, based on or relating to:
(i) the failure of any representation or warranty of the
Vendor or Denis set forth in this Agreement, any
Transaction Document or any certificate or instrument
delivered by or on behalf of the Vendor or Denis
pursuant to this Agreement, to be true and correct in
all respects both as of the date of this Agreement and
on the Closing Date;
(ii) the breach of any covenant or other agreement on the
part of the Vendor or Denis under this Agreement or any
Transaction Document;
(iii) any Excluded Liability;
(iv) (A) any Release of Hazardous Materials by or held on
behalf of (i) the Partnership or (ii) any Person for
whose actions the Partnership is responsible in law in,
on, at, or from the Company Properties which occurred,
or resulted from operations occurring, prior to the
Closing; (B) any tort liability to third parties as a
result of any Releases or from exposure to Hazardous
Materials arising from any Releases prior to the
Closing; (C) notification or designation under any
Environmental Law as a potentially responsible party for
onsite or offsite disposal of Hazardous Materials, which
disposal occurred prior to the Closing; or (D) any other
Environmental Costs and Liabilities and any other
Environmental Claim or Remedial Action resulting from or
based upon anything related to the property currently or
previously owned, leased or operated by the Partnership
or any of its previously amalgamated companies thereof
conducted prior to Closing.
<PAGE>
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(b) The Purchaser hereby agrees to indemnify and hold harmless the
Vendor and Denis and their respective successors and assigns
(collectively, the "Vendor Indemnified Parties") from and
against and in respect of any and all Losses resulting from,
arising out of, based on or relating to:
(i) the failure of any representation or warranty of the
Purchaser set forth in this Agreement or any Purchaser
Document or any certificate and instrument delivered by
or on behalf of the Purchaser pursuant to this
Agreement, to be true and correct in all respects both
as of the date of this Agreement and on the Closing
Date;
(ii) the breach of any covenant or other agreement on the
part of the Purchaser or National under this Agreement
or any Purchaser Document;
(iii) any Contract Liabilities or breaches of the Assumed
Contracts.
10.3 Limitations on Indemnification for Breaches of Representations
and Warranties
The Vendor or Denis shall not have any liability under Section
10.2(a), unless and until the aggregate amount of losses subject to
indemnification thereunder exceeds C$5,000.00 and in such event, the Vendor or
Denis shall be required to pay the entire amount of such Losses in excess of
C$5,000.00. The Purchaser shall not have any liability under Section 10.2(b),
unless and until the aggregate amount of Losses subject to indemnification
thereunder exceeds C$5,000.00 and, in such event, the Purchaser shall be
requested to pay the entire amount of such Losses in excess of C$5,000.00.
10.4 Indemnification Procedures
For the purposes of administering the indemnification provisions of
Sections 10.2 and 10.3, the following procedures shall apply:
(a) If an indemnified party shall receive notice of any action or
proceeding by a third party with respect to which the
indemnified party asserts is indemnifiable under Section 10.2
(a "Claim"), the indemnified party shall notify the
indemnifying party (the "Indemnitor") of such Claim in writing
promptly following the receipt of notice of the commencement
of such Claim. The failure
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to give notice as required by this Section 10.4 in a timely
fashion shall not result in a waiver of any right to
indemnification hereunder except to the extent that the
Indemnitor is actually prejudiced thereby.
(b) Except as provided below, the Indemnitor shall be entitled to
assume the defense or settlement of any Claim of the type
referred to in clause (a) hereof (with counsel reasonably
satisfactory to the indemnified parties) if the Indemnitor
shall provide the indemnified parties a written acknowledgment
of its liability to indemnify such indemnified parties against
all Losses resulting from, relating to or arising out of such
Claim. If the Indemnitor assumes any such defense or
settlement, it shall pursue such defense or settlement in good
faith. If the Indemnitor fails to elect in writing to assume
the defense of any Claim or to provide the written
acknowledgment provided for above within 10 days after the
notification referred to above, the indemnified party may
engage counsel to defend, settle or otherwise dispose of such
Claim, which counsel shall be reasonably satisfactory to the
Indemnitor; provided, however, that the indemnified party
-------- -------
shall not settle or compromise any such Claim without the
consent of the Indemnitor (which consent will not be
unreasonably withheld or delayed).
(c) Notwithstanding anything to the contrary contained herein, the
Purchaser shall have the sole right, with counsel reasonably
satisfactory to the Indemnitor, to defend and settle in its
sole discretion any Claim which constitutes a Non-Assumable
Claim and no other party hereto shall be entitled to assume
the defense thereof or settle such claim. A "Non-Assumable
Claim" means any claim, action or proceeding (i) arising out
of or in connection with, or relating to, any violation or
asserted violation of any Law, Order, judgment or decree, (ii)
involving any Government Body other than in respect to Taxes,
or (iii) seeking injunctive relief.
(d) In cases where the Indemnitor has elected to assume the
defence or settlement with respect to a Claim as provided
above, the Indemnitor shall be entitled to assume such defense
or settlement provided that: (i) the indemnified party (and
--------
its counsel) shall be entitled to
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continue to participate at its own cost in any such action or
proceeding or in any negotiations or proceedings to settle or
otherwise eliminate any claim for which indemnification is
being sought; (ii) the Indemnitor shall not be entitled to
settle or compromise any such claim without the consent or
agreement of the indemnified party (such consent not to be
unreasonably withheld or delayed); and (iii) after written
notice by the Indemnitor to the indemnified party of its
election to assume control of the defense of any Claim, the
Indemnitor shall not be liable to such indemnified party
hereunder for any legal fees and disbursements subsequently
incurred by such indemnified party in connection therewith.
10.5 Treatment of Payment
The Vendor and Purchaser agree to treat any indemnity payment made
pursuant to Sections 10.2 of this Agreement as an adjustment to the Purchase
Price for federal, provincial, local and foreign income tax purposes.
10.6 Limitation of Indemnity
The amount of any loss or damage which may be claimed by a party
pursuant to the provisions of this Article X shall be calculated after giving
effect to:
(a) any insurance proceeds received by the Vendor in the case of a
claim by the Purchaser, in relation to the matter which is the
subject of the claim; and
(b) the value of any tax benefits realized or which will be
realized relating thereto, less any tax imposed as a result of
the receipt of the indemnification hereunder, as determined by
KPMG in the case of a claim by the Purchaser or determined by
Woods & Co. in the case of a claim by the Vendor, in relation
to the matter which is the subject of the claim.
ARTICLE XI - GENERAL
11.1 Specific Performance
The Vendor acknowledges and agrees that the breach of this Agreement
would cause irreparable damage to the Purchaser and that the Purchaser will not
have an adequate
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remedy at law. Therefore, the obligations of the Vendor under this Agreement,
including, without limitation, the obligation of the Vendor to sell the Assets
to the Purchaser, shall be enforceable by a decree of specific performance
issued by any court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection therewith. Such remedies shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which any party may have under this Agreement or otherwise.
11.2 Further Assurances
The Vendor and the Purchaser agree to execute and deliver such other
documents or agreements and to take such other action as may be reasonably
necessary or desirable for the implementation of this Agreement and the
consummation of the transactions contemplated hereby.
11.3 Submission to Jurisdiction; Consent to Service of Process
(a) The parties hereto hereby irrevocably submit to the
jurisdiction of any federal or other court located within the
Province of Alberta over any dispute arising out of or
relating to this Agreement or any of the transactions
contemplated hereby and each party hereby irrevocably agrees
that all claims in respect of such dispute or any suit, action
proceeding related thereto may be heard and determined by such
court. The parties hereby irrevocably waive, to the fullest
extent permitted by applicable law, any objection which they
may now or hereafter have to the laying of venue of any such
dispute brought in such court or any defense of inconvenient
forum for the maintenance of such dispute. Each of the
parties hereto agrees that a judgment in any such dispute may
be enforced in other jurisdictions by action on the judgment
by or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or
proceeding by the mailing of a copy thereof in accordance with
the provisions of Section 11.8.
11.4 Entire Agreement; Amendments and Waivers Confidentiality
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This Agreement and the Transaction Documents represent the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of any
such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. Except as set out in this Agreement, no failure on the part of any
party to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of such right, power or remedy by such party preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
unless and to the extent that such failure, delay or partial exercise prejudices
the Indemnitor. All remedies hereunder are cumulative and are not exclusive of
any other remedies provided by law. The parties acknowledge that they each
participated in drafting this Agreement, and there shall be no presumption
against any party on the ground that such party was responsible for preparing
this Agreement or any part thereof.
11.5 Severability
If any provision of this Agreement is invalid or unenforceable, the
balance of this Agreement shall remain in effect.
11.6 Binding Effect; Assignment
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns. Nothing in this
Agreement shall create or be deemed to create any third party beneficiary rights
in any person or entity not a party to this Agreement except as provided below.
No assignment of this Agreement or of any rights or obligations hereunder may be
made by any party hereto without the prior written consent of the other parties
hereto and any attempted assignment without the required consents shall be void;
provided, however, that the Purchaser may assign this Agreement and any or all
- -------- -------
rights hereunder (including, without limitation, the Purchaser's rights to
purchase the Assets and the Purchaser's rights to seek indemnification
hereunder) to (a) any Affiliate of the Purchaser (provided that the Purchaser
shall remain liable for all of its obligations under this Agreement) or (b)
after the Closing, to any purchaser or transferee of any of the Assets upon the
purchaser
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assignee agreeing to be bound by such covenant and obligation of the Purchaser
and further provided that the Purchaser is not released from its obligations set
out herein. Upon any such permitted assignment, the references in this Agreement
to the Purchaser shall also apply to any such assignee unless the context
otherwise requires.
11.7 Counterparts
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a number of copies hereof each signed by less
than all, but together signed by all of the parties hereto.
11.8 Notices
All notices and other communications under this Agreement shall be in
writing and shall be deemed given when delivered personally or mailed by
registered mail, return receipt requested, to the parties (and shall also be
transmitted by facsimile to the Persons receiving copies thereof) at the
following addresses (or to such other address as a party may have specified by
notice given to the other party pursuant to this provision):
If to Purchaser
c/o National Money Mart Company
3rd Floor, 1640 Oak Bay Avenue
Victoria, British Columbia V8R 1B2
Attention: Syd Franchuk, President
Telephone No.: (250) 595-5211
Telecopy No.: (250) 595-0410
With a copy to:
Bishop & McKenzie
2500, 10104 - 103 Avenue
Edmonton, Alberta
T5J 1V3
Attention: Norman J.K. Bishop
Telephone No.: (780) 426-5550
Telecopy No.: (780) 426-1305
If to the Vendor and Denis:
King Mortgage Ltd.
Box 10, Site 38, R.R. 12
Calgary, Alberta
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T3E 6W3
Attention: Denis Willner
Telephone No.: (403) 246-5372
Telecopy No.: (403) 246-7659
With a Copy to:
Cleall Pahl
Barristers and Solicitors
2500, 10155 - 102 Street
Edmonton, AB
T5J 4G8
Attention: Mr. Kenneth F. Cleall, Q.C.
Telephone No.: (780) 425-2500
Telecopy No.: (780) 425-1222
Any notice given in accordance with this paragraph shall be deemed received on
the date of personal delivery or three (3) days after posting by registered
mail. Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed.
11.9 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Alberta without giving effect to principles of
conflicts of law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.
NATIONAL MONEY MART COMPANY
Per:
---------------------------------
KING MORTGAGE LTD.
Per:
---------------------------------
- ------------------------------- --------------------------------------
Witness DENIS WILLNER
