SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 19, 1998
FIRST SIERRA FINANCIAL, INC.
(Exact name of Registrant as specified in its charter)
{PRIVATE 0-22525 76-0438432
}Delaware (Commission File (IRS Employer
(State or Other number) Identification
Jurisdiction of No.)
Incorporation)
Chase Tower, Suite 7050, 600 Travis Street, Houston, Texas77002
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 221-8822
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ITEM 9. OF EQUITY SECURITIES PURSUANT TO REGULATION S
On August 19, 1998, First Sierra Financial, Inc. (the "Company")
acquired all of the outstanding shares of capital stock of Booker Montague
Leasing Limited, a company incorporated in England and Wales, in exchange for
$2,000,000 cash and 80,200 shares of common stock, par value $.01 per share,
of the Company. The value of the Company's shares for the purpose of the
exchange was $24.9375 per share. The offering and issuance of the Company's
shares was effected pursuant to Regulation S promulgated under the Securities
Act of 1933, as amended. The stock purchase agreement entered into among the
parties to the transaction was executed and the closing of the transaction
occurred in England. The former shareholders of Booker Montague Leasing
Limited are restricted from transferring the Company's shares received in the
transaction into the U.S. for one year and the certificates representing such
shares bear a legend to that effect.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on this 3rd day of September, 1998.
FIRST SIERRA FINANCIAL, INC.
By: /s/ Sandy B. Ho
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Name: Sandy B. Ho
Executive Vice President and
Chief Financial Officer
INDEX TO EXHIBITS
10.1 Stock Purchase Agreement, dated as of August 19, 1998, by and among
First Sierra Financial, Inc., John D. Baird and Philip I. Lewis.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made this 19th day
of August, 1998 by and among First Sierra Financial, Inc., a Delaware
corporation (1) ("Buyer"), and John D Baird of No. 4 Virginia Chase, Cheadle
Hulme, Cheadle, Cheshire, SK8 6JN and Philip I Lewis of Swn-Y-Nant, Rowen,
Nr. Conway, North Wales LL32 8YD (2) (each individually a "Shareholder" and
collectively, the "Shareholders"). The Company and the Shareholders are
sometimes together referred to as the "Seller Group". The Seller Group and
Buyer are collectively referred to herein as the "Parties".
BACKGROUND
WHEREAS, Booker Montague Leasing Limited (a private company limited by
shares incorporated in England and Wales under company number 2695818) (the
"Company") is engaged in the business of developing and maintaining asset
leasing business (the "Business");
WHEREAS, Buyer desires to acquire the whole of the issued share capital
of the Company by means of a transaction exempt from registration pursuant
to Regulation S promulgated under the U.S. Securities Act of 1933, as
amended ("Regulation S"); and
WHEREAS, the Shareholders are the legal and beneficial owners of the
Shares (as defined below) and desire to sell their Shares to Buyer pursuant
to the terms hereof.
NOW, THEREFORE, in consideration of the premises and promises made
herein, the Parties agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
"Adjustment Proposal" has the meaning set forth in Clause 2.8(b)
below.
"Affiliate" shall mean:
(a) any corporation, partnership, trust or other entity (i) in
which the Company or any person listed in (b) or (c) below has,
directly or indirectly, a five percent (5%) or greater interest or (ii)
which controls, is controlled by, or is under common control with the
Company, by any person listed in (b) or (c) below, any of the entities
described in the preceding clause (i) or any combination thereof;
(b) the Shareholders; and
(c) any descendant, ancestor, spouse, brother, sister or other
relation of any person described in (b) above.
"Agreed Bundle" means the bundle of documents in the agreed form which
is annexed to the Disclosure Letter.
"agreed form" means in the form agreed in writing between the
Shareholders' Solicitors and the Buyer's Solicitors.
"Business" has the meaning set forth in the preface above.
"Business Day" means a day (excluding Saturday) on which banks
generally are open in London for the transaction of normal banking
business.
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"Buyer's Group" means the Subsidiaries of the Buyer, any Holding
Company of the Buyer and the Subsidiaries of that Holding Company.
"Buyer's Solicitors" means Hammond Suddards of 7 Devonshire Square,
Cutlers Gardens, London, EC2 4YH.
"Cash Consideration" has the meaning set forth in Clause 2.5.
"Closing" has the meaning set forth in Clause 2.1 below.
"Claim" means any claim brought by the Buyer against all or any of the
Shareholders for breach of any of the Representations or under the Tax
Deed.
"Closing Date" has the meaning set forth in Clause 2.1 below.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and all rules and regulations promulgated thereunder.
"Consideration Shares" has the meaning set forth in Clause 2.5.
"Companies Act" means the Companies Act 1985, as amended.
"Disclosure Letter" means a letter from the Shareholders to the Buyer
in the agreed form disclosing exceptions to the Representations.
"Dispute Notice" has the meaning set forth in Clause 2.8(b).
"Employment Contracts" means the employment contracts in the agreed
form to be entered into by John Baird on or prior to Closing.
"Held Back Shares" has the meaning set forth in Clause 2.7.
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"Holding Company" means a holding company as defined in section 736 of
the Companies Act 1985.
"ICTA" means Income and Corporation Taxes Act 1988.
"Independent Auditor" has the meaning set forth in Clause 2.8(c).
"knowledge" means knowledge of the Company which shall include
knowledge of any of the Shareholders, having made due and careful
inquiry of the Company's directors, officers and employees.
"Last Accounts" means the audited accounts of the Company for the
financial period ended 31 March 1998.
"Last Accounts Date" means 31 March 1998.
"Laws" means all laws, statutes, codes, rules, regulations, ordinances
or other requirements applicable to the Company or the Business.
"Material Contract" has the meaning set forth in Clause 3.24.
"Material Adverse Effect" means an adverse effect which is material to
the business, the assets, financial condition or prospects of the
Company.
"Net Worth" means the total amount of the Company's called-up share
capital and accumulated reserves (and, in the case of the Net Worth as
at the Last Accounts Date, means the amount referred to in the Last
Accounts as "Shareholders Funds (Equity)"):
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
"Property" means part of 32 Church Road, Cheadle Hulme, Greater
Manchester.
"Purchase Consideration" has the meaning set forth in Clause 2.5 below.
"Purchase Consideration Adjustment" has the meaning set forth in Clause
2.8.
"Representations" means the warranties and representations contained in
Article III of this Agreement.
"Tax Deed" means the deed between the Buyer and the Shareholders which
relates to tax matters in the agreed form.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, claim, charge or lien of any kind or character, direct or
indirect, whether accrued, absolute, contingent or otherwise.
"Seller Group" has the meaning set forth in the preface above.
"Shareholders' Solicitors" means Bermans of 7 Ralli Courts, West
Riverside, New Bailey Street, Manchester M3 5FT.
"Shares" means 75,000 fully paid "A" ordinary shares of #1 each, 75,000
fully paid "B" ordinary shares of #1 each and 4,500,000 "C" ordinary
shares of 1p each registered in the name of Mr Baird and 75,000 fully
paid "A" ordinary shares of #1 each, 75,000 fully paid "B" ordinary
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shares of #1 each and 4,500,000 "C" ordinary shares of 1p each
registered in the name of Mr Lewis.
"Stock Price" means the closing price per share of common stock of the
Buyer on the trading day five (5) business days prior to the Closing
Date.
"Subsidiary" means a subsidiary as defined in section 736 of the
Companies Act 1985 as amended.
ARTICLE II
PURCHASE AND SALE
2.1 The Closing. The closing of
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the transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of the Buyer's Solicitors in London, England on the
date of this Agreement (the "Closing Date").
2.2 Delivery of the Shares. Each of the Shareholders agrees to
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sell, convey, transfer, assign and deliver to Buyer at the Closing, on
the terms and subject to the conditions set forth in this Agreement, as legal
and beneficial owner with full title guarantee, all his Shares in the Company
free and clear of any and all Security Interests, together with accrued
benefits and rights attached thereto and all dividends declared after the
Closing.
2.3 Actions at the Closing. At the Closing, (a) the Shareholders
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shall deliver, and shall cause the Company to deliver, to Buyer the various
certificates, instruments and documents referred to in Clause 5.1 below and
<PAGE>
(b) the Shareholders shall ensure that at Closing the Company's directors
hold a meeting of the board of directors of the Company at which the
directors:
(i) vote in favour of the registration of the Buyer (or its nominees)
as a member of the Company in respect of the Shares (subject to the
production of properly stamped transfers);
(ii) appoint Michael Sabel and Tom Depping as directors of the Company
with effect from the end of the meeting; and
(iii) appoint John Baird as the company secretary of the Company with
effect from the end of the meeting;
(iv) revoke the existing bank mandates relating to all bank accounts
of the Company and to adopt new bank mandates.
2.4 The Buyer is not obliged to complete this Agreement unless:
(i) the Shareholders have complied with all their obligations under
Clause 2 and all other conditions specified in Clause 5.1 have been either
satisfied or waived in writing by the Buyer; and
(ii) the purchase of all the Shares is completed simultaneously.
2.5 Purchase of Shares. The aggregate
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consideration for the Shares is four million dollars (US$4,000,000)
("Purchase Consideration") payable to the Shareholders in equal proportions
as set forth below:
<PAGE>
(a) Two million dollars (US$2,000,000) by wire transfer of immediately
available funds to the accounts designated by the Shareholders (the "Cash
Consideration") out of which:
(i) in the case of Mr Baird, the Buyer shall pay the sum of
$43,857 to the Company in settlement of his director's loan account and
the balance of $956,142 to the Shareholders' Solicitors on his behalf;
and
(ii) in the case of Mr Lewis, the Buyer shall pay the sum of
$115,524 to the Company in settlement of his director's loan account
and the balance of $884,475 to the Shareholders' Solicitors on his
behalf.
(b) Subject to Clause 2.7, a number of shares of Buyer's common stock
equal to two million dollars (US$2,000,000) divided by the Stock Price (the
"Consideration Shares") provided that no fractional shares shall be issued.
The number of Consideration Shares to be issued shall be rounded downwards
to the nearest whole number of shares and the value of any fractional
shares, valued at the Stock Price shall be payable in cash. The Buyer
undertakes to the Shareholders to deliver the stock certificates relating to
the Consideration Shares to them within 21 days of Closing.
(c) The Buyer will on Closing apply to NASDAQ for admission of those
Consideration Shares and procure their registration.
2.6 Closing of Transfer Records. After the execution of this
Agreement and prior to the
close of business on the Closing Date, no transfers of shares in the Company
shall be registered other than as contemplated by this Agreement.
2.7 Retention - stock.
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(a) Subject to the provisions of this Clause 2.7, the Buyer as
escrow agent shall hold and retain 50% of Consideration Shares (rounded
upwards to the nearest whole number of Consideration Shares) ("Held Back
Shares"), with executed stock transfer forms to hold and dispose of the Held
Back Shares in escrow for Buyer and the Shareholders until the Held Back
Shares are released pursuant to the terms of this Clause 2.7. The Held Back
Shares deposited by the Shareholders pursuant hereto shall, until released
to Buyer or the Shareholders pursuant to the terms hereof, remain registered
in the name of the Shareholders, and the Shareholders shall not be entitled
to sell, transfer or otherwise dispose of any of the Held Back Shares or any
interest therein but shall be entitled to exercise all the voting rights
attached to such Held Back Shares and Buyer will take all reasonable steps
to allow and facilitate the exercise of such rights. Except for tax-free
dividends paid in stock declared with respect to the Held Back Shares
pursuant to Section 305(a) of the Code, the Shareholders shall be entitled
to receive any cash dividends, dividends payable in securities or
distributions of any kind made in respect of the Held Back Shares. In the
event of any meeting of stockholders of Buyer during the period in which the
Held Back Shares are held by Buyer pursuant hereto, Buyer shall send to the
Shareholders promptly copies of any notices, proxies and proxy material in
connection with any such meeting.
(b) If no Claim has been notified in writing to the Shareholders
by the Buyer on or before the first anniversary of the Closing ("First
Anniversary"), all Held Back Shares shall be deemed to have been released
from escrow by the Buyer to the Shareholders on the next Business Day after
the First Anniversary.
(c) If at any time on or before to the First Anniversary, any
Claim shall have been settled by written agreement of the Parties or
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adjudged due by a court of competent jurisdiction from which there is no
right of appeal or in respect of which such right of appeal is either time
barred or has been waived by the Shareholders, then forthwith upon such
agreement or adjudication, the Shareholders shall be deemed to have
surrendered to the Buyer such number of Held Back Shares (rounded upwards to
the nearest whole number of Held Back Shares) having an aggregate value
equal to the amount of the Claim as so agreed or adjudicated (calculated on
the basis of the amount of such Claim divided by the closing price of a
share of common stock of the Buyer as at the Business Day preceding the date
of such agreement or adjudication). Any Held Back Shares not required to
be surrendered under this clause shall, subject to Clause 2.7 (d), be deemed
to have been released from escrow by the Buyer to the Shareholders on the
next Business Day after the First Anniversary.
(d) If any Claim is notified to the Shareholders by the Buyer on
or before the First Anniversary and such Claim has by the First Anniversary
not been settled by written agreement of the Parties or adjudged due by a
court of competent juridisction from which there is no right of appeal, the
Buyer, as the escrow agent shall have the right to withhold and retain in
escrow, such number of Held Back Shares as are considered by the Buyer to
have an aggregate value equivalent to the amount of such Claim and any legal
and other associated costs (the "Relevant Amount") (calculated on the basis
of the Relevant Amount divided by the closing price of a share of common
stock of the Buyer as at the Business Day preceding the date of such
notification) until such Claim is settled by written agreement of the
Parties or adjudged due by a court of competent jurisdiction from which
there is no right of appeal in which event, all such Held Back Shares so
retained shall thereupon be deemed to have been surrendered to the Buyer.
Any Held Back Shares which do not relate to the disputed amount shall be
released to the Shareholders on the next Business Day after the First
Anniversary. In no event shall any Held Back Shares be released from escrow
by Buyer in settlement of any disputed Claim alleged to be due unless and
<PAGE>
until such dispute is settled by written agreement of the Parties or
adjudged due by a court of competent jurisdiction from which there is no
right of appeal.
2.8 Closing Net Worth
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(a) Adjustment to Purchase Consideration. The Purchase
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Consideration is based upon the Net Worth of the Company being at least
#1,132,505 as at the Last Accounts Date. In the event that the Buyer
delivers an Adjustment Proposal to the Shareholders under Clause 2.8(b)
below on or before the First Anniversary and the Shareholders are adjudged
to be accountable to the Buyer for a shortfall (the "Shortfall") in the Net
Worth as at the Closing Date below #1,132,505, the Shareholders shall be
deemed to have surrendered to the Buyer such number of Held Back Shares
(rounded upwards to the nearest whole number of Held Back Shares) having an
aggregate value equal to the amount of the Shortfall (calculated on the
basis of the amount of the Shortfall divided by the closing price of a share
of common stock of the Buyer as at the Business Day preceding the date of
such determination , provided that such determination of the Shortfall is
made prior to the First Anniversary. If such Shortfall is determined on a
date after the First Anniversary (provided the Adjustment Proposal is served
prior to the First Anniversary), the Shareholders shall pay the amount of
the Shortfall to the Buyer in cash within 30 Business Days of such
determination.
(b) Calculation of Net Worth. On the Closing Date, the
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Shareholders shall deliver to the Buyer a preliminary statement (the
"Preliminary Settlement Statement") setting forth their good faith estimate
of the amount of Net Worth as of such date, which shall be the basis for any
<PAGE>
payment under Section 2.5(a). If at any time thereafter (but not later than
one year following the Closing), Buyer believes that the Preliminary
Settlement Statement did not represent the actual Net Worth on the Closing
Date, then Buyer may deliver to the Shareholders a statement (the
"Adjustment Proposal") setting forth in detail its proposed adjustments to
the Preliminary Settlement Statement. Buyer shall provide the Shareholders
and their representatives with full access to all assets, records and work
papers necessary to compute and verify the accuracy of the Adjustment
Proposal. This Adjustment Proposal as delivered to the Shareholders shall
be final and binding for purposes of this Agreement unless, within thirty
(30) days after delivery to the Shareholders, they shall deliver to Buyer a
notice setting forth in detail their disagreement with the Adjustment
Proposal ("Dispute Notice"). After delivery of a Dispute Notice, Buyer and
the Shareholders shall promptly negotiate in good faith with respect to the
subject of the Dispute Notice, and if they are unable to reach an agreement
within thirty (30) days after receipt by Buyer of the Dispute Notice, the
dispute (but only such disputed items) may be submitted by any of the
Parties within 10 days thereafter to the Independent Auditor (as defined
below). The Independent Auditor shall not have authority to redetermine any
matter except those which are in dispute. The Independent Auditor shall be
directed to issue a final and binding decision within sixty (60) days of
submission of the Dispute Notice, as to the issues of disagreement referred
to in the Dispute Notice and not resolved by the parties. The Adjustment
Proposal, as so adjusted by agreement or by the Independent Auditor (if
required), shall be final and binding on the parties.
(c) Preliminary Settlement Statement, Adjustment Proposal and
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Related Procedures. The Preliminary Settlement Statement, Net Worth on the
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Closing Date and Adjustment Proposal shall be prepared in accordance with UK
generally accepted accounting principles consistent with those historically
<PAGE>
employed by the Company in preparation of its own financial statements.
More specifically the Net Worth on the Closing Date should be calculated by
taking the Net Worth at the Last Accounts Date and adjusting it for (a) the
profit or loss shown by the Company's profit and loss accounts for the
period from the Last Accounts Date to the Closing Date and (b) any movements
to the Company's share capital in the period from the Last Accounts Date to
the Closing Date.
The "Independent Auditor" shall mean one of the "Big Five" UK
public accounting firms with no material relationship to either of the
parties chosen by agreement of the parties, or if they are unable to agree,
shall mean one of the "Big Five" firms with no such material relationship
chosen by lot. The fees and expenses of the Independent Auditor shall be
equitably allocated by the Independent Auditor based upon his decision. The
Independent Auditor shall act as an expert and not as an arbitrator. The
decision of the Independent Auditor with respect to the Adjustment Proposal
shall in the absence of fraud or manifest error be final and binding on the
parties. The full force and effect of the representations and warranties
shall in no way be diminished by the Preliminary Settlement Statement, the
Adjustment Proposal or the determination of the Independent Auditor.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND THE COMPANY
The Shareholders jointly and severally, represent and warrant to Buyer
that each of the statements contained in this Article III is accurate,
correct and complete as at the date of this Agreement. Immediately before
the time of Closing, each Shareholder shall be deemed to represent and
warrant to the Buyer that each of the statements contained in this Article
III is accurate, correct and complete as at the date of Closing by reference
to the facts and circumstances then existing. For this purpose only, where
in any statement contained in this Article III there is an express or
implied reference to the "date of this Agreement", that reference is to be
construed as a reference to Closing.
3.1 Authority and No Conflict. Each member of the Seller Group has
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full right, power and authority, without the consent of or filing with any
other person (including any governmental authority), to execute and deliver
this Agreement and the agreements contemplated hereby and to carry out the
transactions contemplated hereby and thereby. All corporate and other acts
required to be taken by any member of the Seller Group to authorize the
execution, delivery and performance of this Agreement and all agreements and
transactions contemplated hereby have been properly taken. Such execution,
delivery and performance will not create any encumbrance nor terminate nor
accelerate any obligation of the Business and will not violate or conflict
with any provision of (i) the Articles of Association and Memorandum of
Association of the Company, (ii) any contract, permit, license or other
instrument to which any member of the Seller Group is a party or is bound,
(iii) any injunction, decree or judgment of any court or governmental
agency, or (iv) any Law applicable to any member of the Seller Group or the
Business.
<PAGE>
3.2 Validity. This Agreement has been, and the agreements and other
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documents to be delivered at Closing will be, duly executed and delivered
and constitute the valid and legally binding obligations of each member of
the Seller Group who are parties thereto, enforceable in accordance with
their respective terms. No approval, registration, filing or other action
by or with any person, including any governmental authority, is required for
any member of the Seller Group to execute and consummate this Agreement.
3.3 Due Organization. The Company is a private company limited by
----------------
shares, duly incorporated in England and Wales under the Companies Act 1985
(as amended). The copies of the Memorandum and Articles of Association of
the Company which have been delivered to Buyer are complete and accurate in
all respects, have attached to them copies of all resolutions and other
documents required by law to be so attached and fully set out the rights and
restrictions attaching to the share capital of the Company and the Company
is not in default or breach in relation to any provision contained therein.
The statutory books (including all registers and minute books) of the
Company have been properly kept and contain an accurate and complete record
of the matters which should be dealt with in those books and no notice or
allegation that any of them is incorrect or should be rectified has been
received. All documents which should have been delivered by the Company to
the registrar of companies in relation to companies incorporated in England
have been properly so delivered. The Company has full power and authority
and all requisite licenses and rights to carry on the Business.
3.4 Capitalization. The authorized share capital of the Company is
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#1,000,000 divided into 150,000 "A" ordinary shares of #1 each, 150,000 "B"
ordinary shares of #1 each, 9,000,000 "C" ordinary shares of 1p each and
<PAGE>
610,000 ordinary shares of #1 each. The 150,000 "A" ordinary shares of #1
each, the 150,000 "B" ordinary shares of #1 each and 9,000,000 "C" ordinary
shares of 1p each which are in issue have been properly allotted and issued,
are fully paid up, and are held by the Shareholders in equal proportions.
Each of the Shareholders is the sole legal and beneficial owner of his
Shares and has the absolute right to sell, transfer and assign the same to
Buyer, free and clear of any and all Security Interests and adverse claims
of any nature whatsoever without the consent of any third party, and the
Shares constitute the entire issued share capital of the Company. All
issues of shares in the Company have been duly authorized and validly made,
including in compliance with all applicable laws. Other than this
Agreement, there is no option, right to acquire, mortgage, charge, pledge,
lien or other form of security or encumbrance or equity on, over or
affecting the unissued or issued shares in the Company and there is no
agreement or commitment to give or create any and no claim has been made by
any person to be entitled to any. No share warrants to bearer have been
issued with respect to any shares in the Company. There are no voting
trusts or other agreements, arrangements or understandings between all or
any of the Shareholders or any other person applicable to the exercise of
voting or any other rights with respect to the unissued or issued shares in
the Company or with respect to the rights to the management of the Company.
3.5 Subsidiaries. The Company has not
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had and has no subsidiaries within the meaning of section 736 of the
Companies Act 1985 as amended.
3.6 Directors and Officers. The only directors of
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the Company are Mr Baird and Mr Lewis. Mr Lewis is the secretary of the
Company.
<PAGE>
3.7 Transactions with Affiliates. No Shareholder
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or any Affiliate:
(a) owns, directly or indirectly, any interest in any entity
which is a competitor, lessor, lessee, customer, licensor or supplier
of the Company;
(b) has any cause of action or other claim against or owes any
amount to, or is owed any amount by, the Company or any licensor or
supplier of the Company;
(c) has any interest in or owns any assets, property, or rights
used in the conduct of the Business; or
commitment used in the Business.
(e) is or has been a party to any contract or arrangement
with the Company.
(f) has or owes any debt, liability or obligation to the
Company.
(g) the Company does not have or owe any debt, liability or
obligation to any Shareholder or any Affiliate
3.8 Insolvency (the Company). In respect of the
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Company: (i) no order has been made and no resolution has been passed for
its winding up or for a provisional liquidator to be appointed; (ii) no
petition has been presented and no meeting has been convened for the purpose
<PAGE>
of its winding up; (iii) no administration order has been made and no
petition for such an order has been presented; (iv) no receiver (which term
shall include an administrative receiver) has been appointed or in respect
of all or any of its assets; (v) it is not insolvent, nor unable to pay its
debts within the meaning of section 123 Insolvency Act 1986, nor has stopped
paying its debts as they fall due; and (vi) no voluntary arrangement has
been proposed under section 1 Insolvency Act 1986. No event analogous to
any of the foregoing has occurred in or outside England. No unsatisfied
judgment is outstanding against the Company, and no guarantee, loan capital,
borrowed money or interest is overdue for payment, and no other obligation
or indebtedness is outstanding which is substantially overdue for
performance or payment.
3.9 Bankruptcy (Shareholders). In respect of
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each of the Shareholders: (i) no bankruptcy order has been made or a
petition for such an order presented; (ii) no application has been made for
an interim order under section 253 Insolvency Act 1986; (iii) no Shareholder
is unable to pay or has no reasonable prospect of being able to pay any
debt, as those expressions are defined in section 268 Insolvency Act 1986;
(iv) no person has been appointed by the court to prepare a report under
section 273 Insolvency Act 1986; and (v) no interim receiver has been
appointed of any Shareholder's property under section 286 Insolvency Act
1986.
3.10 Banking Relationships and Investments. The
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Disclosure Letter sets out an accurate, correct and complete list of all
banks and financial institutions in which the Company has an account,
deposit, safe-deposit box or borrowing relationship, factoring arrangement
or other loan facility or relationship, including the names of all persons
authorized to draw on those accounts or deposits, or to borrow under loan
<PAGE>
facilities, or to obtain access to such boxes. The Disclosure Letter sets
out an accurate, correct and complete list of all certificates of deposit,
debt or equity securities and other investments owned, beneficially or of
record by the Company (the "Investments"). The Company and has good and
legal title to all of its Investments.
3.11 Insurance. The Disclosure Letter sets out
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an accurate, correct and complete list and summary description (including
the name of the insurer, coverage, premium and expiration date) of all
binders, policies of insurance or fidelity bonds ("Insurance") maintained by
the Company or in which the Company is a beneficiary or a named insured.
All Insurance has been issued under valid and enforceable policies or
binders for the benefit of the Company and all such policies or binders are
in such types and full force and effect and are in amounts and for risks,
casualties and contingencies customarily insured against by enterprises in
operations similar to the Business. There are no pending or asserted claims
against any Insurance as to which any insurer has denied liability, and
there are no claims under any Insurance that have been disallowed or
improperly filed. The Disclosure Letter sets forth the Company's complete
claims experience (both insured and self-insured) for the past two years.
No notice of cancellation or nonrenewal with respect to any Insurance has
been received by the Company. The Company has no knowledge of any facts or
the occurrence of any event which could materially increase the insurance
premiums payable under any Insurance.
3.12 Motor Vehicles. The Disclosure Letter sets
---------------
out an accurate, correct and complete list of all motor vehicles used by the
Company or any Subsidiary, whether owned or leased. All such vehicles are
(a) properly licensed and registered in accordance with applicable law; and
(b) insured.
<PAGE>
3.13 Property (a) The Property is the only
--------
property, occupied or otherwise used in connection with the business of the
Company. The particulars of the Property shown in Document Number 19 of the
Agreed Bundle are true and correct.
(b) The Property which is occupied or otherwise used by the
Company in connection with its business are so occupied or used or under
licence.
(c) The Company's interest in the Property is free from any
mortgage, debenture, charge, rent charge, lien or other encumbrance securing
the repayment of monies or other obligation or liability of the Company/or
any other person.
(d) The Company pays no other outgoings save for a licence fee.
Statutory Obligations
---------------------
To the best of the Shareholders' knowledge and belief:
(aa) Compliance has been made with all applicable statutory and
bye-law requirements with respect to the Property and in particular (but
without limitation) with the requirements as to fire precautions and under
the Office, Shops and Railway Premises Act 1963, the Public Health Acts 1936
to 1961, the Factories Act 1961, the Building (Inner London) Regulations
1985, the Food Premises (Registration) Regulations 1981 and the Food Safety
Act 1990.
<PAGE>
(bb) There is no outstanding and unobserved or unperformed
obligation with respect to the Property necessary to comply with the
requirements (whether formal or informal) of any competent authority
exercising statutory or delegated powers.
(cc) There are not in force or required to be in force any
licences whether which apply to the Property or the present use of the
Property for the purpose of the business of the Company.
(dd) The Vendor has received no notice of any compulsory purchase
notices, orders or resolutions or blight notices affecting the Property nor
are there any circumstances likely to lead to any being made.
(ee) There are no closing, demolition or clearance orders,
enforcement notices or stop notices affecting the Properties nor are there
any circumstances likely to lead to any being made.
(ff) The principal means of access to the Property is over roads
which have been taken over by the local or other highway authority and which
are maintainable at the public expense.
(gg) The Property enjoys full and unrestricted mains services of
water foul and surface water drainage, electricity and gas which are
adequate for the purposes for which the Property is presently used. The
pipes, wires, cables, sewers, drains and other services which serve the
Property either do not pass through land in the ownership of another person
or company before connecting to the mains or the Property has the benefit of
the necessary easements in respect of the same perpetuity and at no or only
a nominal charge.
<PAGE>
(hh) The Property is not situated in an area of past or present
mining activities, and the Properties are not located in an area which is,
nor are they for any other reason, particularly susceptible to flooding.
(ii) The Property is insured against all normally insurable risks
(including terrorism) in their respective full reinstatement values (with no
unusual exclusions) and for not less than three years' loss of rent and
against third party and public liabilities to an adequate extent.
(jj) All premiums payable in respect of insurance policies with
respect to the Property which have become due have been duly paid and no
circumstances have arisen which would vitiate or permit the insurers to
avoid such policies.
(kk) The information in the Disclosure Letter with respect to the
insurance policies to the best of the Shareholders knowledge and belief is
up to date and true and accurate in all respects.
Leasehold Property
------------------
(ll) The Company has paid the rent and observed and performed the
covenants on the part of the tenant and the conditions contained in the
Licence under which the Property is held and the last demand (or receipts
for rent if issued) were unqualified, and the Licence is valid and in full
force.
(mm) All licences, consents and approvals required from the
landlords and any superior landlord under the Leases have been obtained and
the covenants on the part of the tenant contained in such licences, consents
and approvals have been duly performed and observed.
<PAGE>
(nn) There is no rent review under the Licence currently in
progress.
(oo) There is not outstanding or unobserved or unperformed any
obligation necessary to comply with any notice or other requirement given by
the landlord under the Licence.
(pp) There is no obligation to reinstate the Property by removing
or dismantling any alteration made to it by the Company or any predecessor
in title to the Company.
(qq) There are no circumstances which would entitle the landlord
to exercise any powers of entry or to take possession, whether by way of
forceable re-entry or proceedings, or which would otherwise restrict the
continued possession and enjoyment of the Property.
(rr) There are no side letters, collateral assurances,
undertakings or concessions which have been made by any party to the
Licence.
(ss) The Company has no continuing obligations, whether as an
original covenantor, guarantor or otherwise in respect of any properties.
3.14 The Last Accounts
-----------------
(a) The Last Accounts were prepared in accordance with the
historical cost convention and the bases and policies of accounting adopted
for the purposes of preparing the Last Accounts are the same as those
adopted in preparing the audited accounts of the Company in respect of the
last three preceding accounting periods.
<PAGE>
(b) The Last Accounts:
(i) give a true and fair view of the state of affairs and
assets and liabilities of the Company as at the Last Accounts Date
and of its profits for the financial period ended on that date;
(ii) comply with the requirements of the Companies Act;
(iii) comply with all generally accepted United Kingdom
accounting principles applicable to a United Kingdom company;
(iv) are not affected by any extraordinary, exceptional item
(as defined by a statement of Standard Accountancy Practice and
generally accepted accounting principles);
(v) fully disclose all the assets of the Company;
(vi) make full provisions or full reserve for all known
liabilities and capital commitments of the Company outstanding at
the Last Accounts Date, and make full provisions or note in
accordance with good accounting practice for known contingent,
unquantified or disputed liabilities.
(c) No amount included in the Last Accounts in respect of any
assets, whether fixed or current, exceeds its purchase price or production
cost (within the meaning of Schedule 4 of the Companies Act 1985) or (in the
case of current assets) its net realisable value on the Last Accounts Date.
3.15 Interim Change. Since the Last Accounts Date, the Company has
--------------
<PAGE>
operated the Business in the ordinary course of business, consistent with
past practice, and there has not been any of the following in connection
with the Business:
(a) any event resulting in, or that could result in, a Material
Adverse Effect;
(b) any material change in personnel or relationships with third
parties, including suppliers, customers and others;
(c) any material increase in the compensation, or benefits
payable or to become payable to or on account of any director or
employee of the Company or third parties;
(d) any work stoppage or labor dispute;
(e) any damage to, destruction of or claim against a material
asset, or any disposition of assets, other than sales in the ordinary
course of business on terms consistent with past practice;
(f) any material change in credit or any change in accounting
practices;
(g) any change in status of any Material Contract;
(h) the Company has not declared, made or paid any distribution
within the meaning of ICTA;
(i) no accounting period of the Company has ended;
(j) no event has occurred which will give rise to a tax liability
on the Company calculated by reference to deemed (as opposed to actual)
<PAGE>
income, profits or gains or which will result in the Company becoming
liable to pay or bear a tax liability directly or primarily chargeable
against or attributable to another person, firm or company;
(k) no disposal has taken place or other event occurred which
will or may have the effect of crystallizing a liability to taxation
which should have been included in the provision for deferred taxation
contained in the Financial Statements if such disposal or other event
had been planned or predicted at the date of Financial Statements;
(l) the Company has not made any payment or incurred any
obligation to make a payment which will not be deductible in computing
trading profits for the purposes of corporation tax;
(m) the Company has not been a party to any transaction for which
any tax clearance provided for by statute has been or could have been
obtained; or
(n) any agreement to take any of the foregoing actions.
3.16 Title to Assets. The Company is the sole and exclusive legal and
---------------
beneficial owner of all right, title and interest in and to all of the
assets used in the Business or shown on the Last Accounts (or acquired since
the date of the most recent Last Accounts) (the "Assets"), free and clear of
the interests and rights of any other party, including any lease, license,
right, Security Interest, mortgage, lien, encumbrance, restriction or
royalty arrangement of any kind or character, direct or indirect, whether
accrued, absolute, contingent or otherwise, and no person other than the
Company has any interest in any assets employed in the Business. The Assets
are in good repair, order and condition (reasonable wear and tear excepted)
and are suitable for the purposes for which they are presently being used,
<PAGE>
and are adequate to meet all present requirements of the Business. The
Assets constitute all assets used in the Business, are sufficient to permit
the Company to carry on the Business, and will continue to be available and
will furnish Buyer with all of the rights to operate the Business in the
same manner as presently carried on and historically operated by the
Company.
3.17 Intellectual Property. The Disclosure Letter sets out a complete
---------------------
list and summary description of all patents, trademarks, trade names,
service marks, copyrights and applications for any of the foregoing,
inventions and trade secrets owned by the Company or used in the Business
(the "Intellectual Property"). There are no licenses or other agreements
relating to any Intellectual Property. None of the Intellectual Property is
subject to any extensions, renewals, taxes or fees due within 90 days after
Closing. With respect to the Intellectual Property, (a) the Company has the
sole and exclusive right to use the Intellectual Property free of rights or
claims of others; (b) no action, suit, proceeding or investigation is
pending or, to the Company's knowledge, threatened; (c) none of the
Intellectual Property interferes with, infringes upon, conflicts with or
otherwise violates the rights of others, or is being interfered with or
infringed upon by others, and none is subject to any outstanding order,
decree, judgment, stipulation or charge; (d) there are no royalty,
commission or similar arrangements, and no licenses, sublicenses or
agreements, pertaining to any of the Intellectual Property; (e) none of the
Intellectual Property, the use thereof by the Company, or the activities of
the Business infringe upon or violate any rights of others; and (f) the
Company has agreed to indemnify any person for or against any infringement
of or by the Intellectual Property.
3.18 Software and Information Systems.Error! Bookmark not defined.
---------------------------------
<PAGE>
(a) All of the Company's Software is Year 2000 Compliant;
(b) The Software does not violate or infringe any trade secret rights,
work rights, mask copyrights, patents or other rights of others and no
assertion to the contrary has been made by any third party; and
(c) The Company has not copied or used any of the Software in
violation of the applicable license or otherwise violated any of its
agreements or the rights of others with respect thereto.
The term "Software" means all computer software programs, program
specifications, charts, procedures, source codes (including annotations),
object codes, input data, diagnostic and other routines, data bases and
report layouts and formats, record file layouts, diagrams, functional
specifications and narrative descriptions and flow charts owned or used by
the Company or employed in the Business. The term "Year 2000 Compliant"
means, with respect to the Company's Software such Software is designed to
be used prior to, during, and after the calendar Year 2000 A.D., and the
Software used during each such time period will accurately receive, provide
and process date/time data (including, but not limited to, calculating,
comparing and sequencing) from, into and between the twentieth and twenty-
first centuries, including the years 1999 and 2000, and leap year
calculations and will not malfunction, cease to function, or provide invalid
or incorrect results as a result of date/time data, to the extent that other
information technology, used in combination with the Software being
acquired, properly exchanges date/time data with it.
3.19 Customers and Suppliers. The Seller Group has to the best of its
-----------------------
<PAGE>
knowledge and belief no knowledge of nor has it received any notice of any
fact, condition or event (i) which would cause Buyer's relationship with any
customer or supplier to be materially and adversely different than the
current relationship of such customer or supplier with respect to the
Business, or (ii) which would materially and adversely affect any customer
or supplier's ability to supply, purchase or lease products or services to
or from Buyer.
3.20 Employees; Independent Contractors. The Disclosure Letter
----------------------------------
contains an accurate, correct and complete schedule containing:
(a) a list of all employees (including name, title and position)
employed by the Company;
(b) the employee's length of service and date of hire and the
notice period;
(c) a list of all agreements, arrangements or understandings,
written or oral, with each employee, regarding services to be rendered,
terms and conditions of employment and confidentiality;
(d) the compensation (including date and amount of last salary
increase, terms of payment, bonuses, commissions and deferred
compensation, as well as any benefits) of each employee; and
(e) a summary of all current and other arrangements with
independent contractors.
The contract of employment of each director and employee may be terminated
by the Company on 3 months' notice or less without giving rise to any claim
for damages or compensation. With respect to the employees of the Company,
<PAGE>
(i) there are and have been no actual or alleged violations of any Laws
respecting the employment of any employees; no employees are represented by
any union or covered by any collective bargaining agreement and there has
been no question concerning representation raised or threatened; (ii) all
employment-related books and records have been prepared in the ordinary
course of business; (iii) the Company is in compliance with all contracts of
employment; (iv) there is no employment handbook, personnel policy manual,
similar document or action that creates prospective employment rights or
obligations; (v) no workers' compensation claims shall arise after Closing
resulting from events, circumstances, exposures, conditions or occurrences
occurring prior to the Closing Date (vi) there exists no discrimination or
harassment claims by any employees against the Company or their respective
officers or employees, or the Shareholders, and there are no circumstances
which could give rise to any claim or allegation in regard thereto. No
persons treated as independent contractors by the Company should under
applicable law have been treated as employees.
3.21 Employee Benefit Plans.
----------------------
(a) The Disclosure Letter contains a complete list of all employee
pension benefit schemes, private medical plans, bonus, profit sharing,
deferred compensation, incentive or other compensation plans or
arrangements, and other employee fringe benefit plans whether funded or
unfunded (all the foregoing being herein called "Benefit Plans") maintained
or contributed to for the benefit of any of the employees of the Company.
(b) The Company is under no obligation or commitment nor is party to
any custom or practice to pay, provide or contribute towards the provision
of any "relevant benefits" within the meaning of section 612 of ICTA or any
other death, retirement, contributed towards any scheme or arrangement which
<PAGE>
as its purpose or one of its purposes the provision of any such benefit
(other than schemes which have been fully wound up).
3.22 Administration. The Benefit Plans have been administered to date
--------------
in compliance with all requirements of law and in accordance with their
terms. All reports, returns and similar documents for the Benefit Plans
required to be filed with any government agency or distributed to any
participant have been duly and timely filed or distributed. There are no
investigations, proceedings or other claims (except claims for benefits
payable in the normal operation of either plan), against or involving any
Benefit Plan that could give rise to any material liability to such plan,
nor, are there any facts that could give rise to any material liability to
any plan.
3.23 Licenses and Permits. The Disclosure Letter contains a complete
--------------------
list and summary description of all permits, licenses, approvals,
registrations and authorizations used or required for the operation of the
Business (the "Licenses and Permits"). The Company holds all the Licenses
and Permits in its name. The Licenses and Permits are valid and in full
force and effect, no violations exist in respect thereof and there are not
pending or threatened any proceedings or circumstances which could result in
the termination, revocation, limitation or impairment of any License or
Permit. There is no reason why any of the Licenses or Permits should be
suspended, threatened or revoked to be invalid as a result of the
consummation of the sale of the Shares to Buyer and no person is entitled to
suspend, threaten or revoke any of the Licenses or Permits.
3.24 Material Contracts. The Disclosure Letter sets out a complete
-------------------
<PAGE>
list of all, written and oral contracts, instruments, commitments,
agreements, arrangements and understandings, including all amendments and
supplements thereto to which the Company is a party or otherwise related to
the Business (i) which are material to the operations (as historically
conducted or presently conducted), assets, liabilities, condition (financial
or otherwise), operations or prospects of the Business or (ii) which
otherwise involve any of the following types of contracts (the items in (i)
and (ii) being collectively referred to herein as the "Material Contracts"):
(a) all purchase orders or contracts for the purchase of any
materials or services involving an amount in excess of #5,000 or which
were not entered into in the ordinary course of business;
(b) any sales or service agreements;
(c) any design, engineering, consulting, or distribution
agreement;
(d) all real property leases;
(e) all contracts providing the Company or any Subsidiary with
the right to reproduce or in any way deal with the works of others;
(f) any agreement not to compete or otherwise restricting
activities;
(g) any contract relating to leasing/hire purchase held by the
Company in respect of the Business having an aggregate value of
39,000 British Pounds; and
(h) other than contracts relating to leasing/hire purchase held
by the Company in respect of the Business any contract, commitment,
<PAGE>
agreement, arrangement or understanding which provides for payment or
performance by any party thereto having an aggregate value of #5,000 or
more.
Accurate, correct and complete copies of each Material Contract (of the form
of each such contract) have been delivered to Buyer. Each Material Contract
is in full force and effect and is valid, binding and enforceable in
accordance with its terms. Each party has complied with all material
commitments and obligations on its part to be performed or observed under
each Material Contract. No event has occurred which is or, after the giving
of notice or passage of time, or both, would constitute a default under or a
breach of any Material Contract by the Company, or, to the knowledge of the
Seller Group, by any other party. The consummation of the transactions
contemplated hereby, without notice to or consent or approval of any party,
will not constitute a default under or a breach of any provision of any
Material Contract nor entitle the other party thereto to terminate such
Material Contract.
3.25 Grants and Allowances. The Company has not applied for or
---------------------
received any grant, allowance, aid or subsidy from any supranational,
national or local authority or government agency.
3.26 Legal Proceedings. No member of the Seller Group is engaged in
-----------------
or a party to or, has been threatened with any dispute, action, arbitration,
suit or other proceeding, including any relating to the Business or its
assets and no circumstances exist which could give rise to any such
proceeding. No member of the Seller Group has no knowledge of any
investigation threatened or contemplated by any governmental or regulatory
authority. None of the Company, the Shareholders, the Business or its
<PAGE>
assets is subject to any judgment, order, writ, injunction, stipulation or
decree of any court or any governmental agency or any arbitrator.
3.27 Compliance with Law. The Company, and the Business conform in
-------------------
all material respects to all applicable Laws and restrictive covenants
applicable thereto, and each member of the Seller Group has complied with
all Laws with respect to the Business, and restrictive covenants applicable
thereto, and there is not and will not be any liability to Buyer arising
from or related to any prior violations thereof. No member of the Seller
Group has (a) made any unlawful political contributions, (b) had any
transactions or payments which are not recorded in its accounting books and
records or disclosed in its financial statements in a manner reflecting
their true nature, (c) made any payment to officials in their individual
capacities for the purpose of affecting their action or the action of the
body they represent or to obtain special concessions, or (d) made payments
to individuals or taken similar actions to obtain or retain business, other
than customary business gifts or entertainment.
3.28 Brokers. The Seller Group has not retained any broker, finder or
-------
agent or incurred any liability or obligation for any brokerage fees,
commissions or finders fees with respect to this Agreement or the
transactions contemplated hereby and as to which Buyer will incur any
liability.
3.29 Disclosure. The representations and warranties of the Seller
----------
Group contained in this Agreement, the Disclosure Letter and each agreement,
attachment, schedule, certificate or other written statement delivered
pursuant to this Agreement or in connection with the transactions
<PAGE>
contemplated hereby do not omit to state any fact necessary in order to make
the statements and information contained herein or therein not misleading.
3.30 Taxation.
--------
(a) Administration
--------------
(i) The Last Accounts reserve or provide in full for all Taxation
(whether actual or contingent) of any nature whatsoever or other sums
imposed, charged, assessed, levied or payable under the Taxation
Statutes for which the Company was at the Last Accounts Date liable or
able to be made liable
(ii) The amount of the provision for deferred Taxation in respect
of the Company contained in the Last Accounts was, at the Last Account
Date adequate and fully in accordance with accountancy practices
generally accepted in the United Kingdom and commonly adopted by
companies carrying on businesses similar to those carried on by the
Company and, in particular, was in accordance with Statement of
Standard Accounting Practice 15.
(ii) If all facts and circumstances which are now known to the
Company or any of the Shareholders had been known at the time the Last
Accounts were drawn up, the provision for deferred Taxation that would
be contained in the Last Accounts would be no greater than the
provision which was so contained.
(iv) The Company has duly and punctually paid all Taxation which
it has become liable to pay or for which it has become liable to
account and is under no liability (and has not within the 6 years prior
to the date hereof been liable) to pay any penalty, fine, surcharge or
interest in connection with any Taxation.
<PAGE>
(v) All payments by the Company to any person which ought to have
been made under deduction of Taxation have been so made and the Company
has if required by law to do so accounted to the relevant Taxation
Authority for the Taxation so deducted and the Company has not received
any notice from any Taxation Authority which will or may require the
Company to withhold Taxation from any payment made since the Last
Accounts Date or which may be made after the date of this Agreement.
(vi) The Company has operated the Pay As You Earn system
accurately and correctly and has complied with all its reporting
obligations to the Inland Revenue and the Contributions Agency in
connection with benefits provided for employees and former employees of
the Company.
(vii) No payment of, or on account of, income of a director,
other officer or employee of the Company has been made by an
Intermediary. No agreement or arrangement has been entered into under
which a payment of this kind will or might be made by an Intermediary
in respect of which the Company may be liable under the Pay As You Earn
system or any other system of payroll deduction of tax. In this
paragraph, "Intermediary" means:
(a) a person acting on the Company's behalf and either at
the expense of the Company or a person connected with the Company; or
(b) a trustee holding property for persons who include, or a
class of persons which includes, a director, other officer or employee
of the Company,
and for the purpose of paragraph (i) of this definition,
"connected" has the meaning given by section 839 of ICTA.
(viii) All returns which should have been made by the Company
for any Taxation purpose have been made, were and remain correct and
complete in all material respects, were made on a proper basis and the
computations and returns have been agreed with or are the subject of a
determination by the relevant Taxation Authority and the Company has
<PAGE>
provided all information required to be provided under the Taxation
Statutes or pursuant to any notice served thereunder.
(ix) There is no dispute or disagreement outstanding nor is any
contemplated at the date of this agreement with any Taxation Authority
regarding liability or potential liability to any tax or duty
(including in each case penalties or interest) recoverable from the
Company or regarding the availability of any relief from tax or duty to
the Company and there are no circumstances which make it likely that
any such dispute or disagreement will arise.
(x) The Company has duly submitted all claims and disclaimers
which have been assumed to have been made for the purposes of the Last
Accounts. The Company has sufficient records relating to past events,
including any elections made, to calculate the tax liability or relief
which would arise on any disposal or on the realisation of any asset
owned at the Last Accounts Date by the Company or acquired by the
Company since that date but before Closing.
(xi) No Taxation Authority has agreed to operate any special
arrangement (being an arrangement which is not based on a strict
application of the relevant legislation) in relation to the Company's
affairs, whether in respect of benefits provided by the Company to its
officers or employees, or in relation to the valuation of stocks or
depreciation of assets or in respect of any administrative or other
matter whatsoever.
(xii) The Company has not participated in or operated any payroll
deduction scheme as defined in Section 202 ICTA or any scheme approved,
or for which approval has been or is to be sought, under Chapter III of
Part V ICTA (profit related pay).
(xiii) All statements and disclosures made to any authority in
connection with any provision of the Taxation Statutes whatsoever were
when made and remain complete and accurate in all material respects.
(xiv) The Disclosure Letter contains full and accurate particulars
of all transactions effected otherwise than in the ordinary course of
<PAGE>
business since the Last Accounts Date in respect of which the Company
is required to make a specific return or provide information to the
relevant Taxation Authority and in respect of which the time for making
such return or providing such information will expire on or after
Completion.
(xv) No transaction has been effected since the Last Accounts Date
by the Company in respect of which any consent or clearance from a
Taxation Authority was required or was or could have been sought
(a) without such consent or clearance having been validly
obtained before the transaction was effected, and
(b) otherwise than in accordance with the terms of and so as
to satisfy any conditions attached to such consent or clearance, and
(c) otherwise than at a time when and in circumstances and
in which such consent or clearance was valid and effective.
(xvi) The Company has not since the Last Accounts Date taken
any action which has had, or will have, the result of altering,
prejudicing or any way disturbing any arrangement or agreement which it
has previously had with the Inland Revenue or Customs & Excise or other
Taxation Authority.
(b) Status of the Company
---------------------
(i) The United Kingdom is the only country whose tax authorities
seek to charge Taxation on the worldwide profits or gains of the
Company and the Company has never paid nor has it ever been liable to
pay tax on income profits or gains to any Taxation Authority in any
country except the United Kingdom in respect of it.
(ii) The Company is not and has at no time been an investment
company nor an investment trust company for the purposes of the
Taxation Statutes.
(iii) The Company is not nor at any time has had an associated
company for the purposes of the Taxation Statutes.
<PAGE>
(c) Tax events since the Last Accounts Date
---------------------------------------
Since the Last Accounts Date:
(i) The Company has not declared, made or paid any distribution
within the meaning of ICTA 1988.
(ii) No accounting period of the Company has ended.
(iii) There has been no disposal of any asset (including
trading stock) or 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 was less than the consideration which could be deemed to have
been received for any Taxation purposes.
(iv) No event has occurred which will give rise to Taxation
payable by the Company calculated by reference to deemed (as opposed to
actual) income, profits or gains or which will result in the Company
becoming liable to pay or bear any Taxation directly or primarily
chargeable against or attributable to another person, firm or company.
(v) The Company has not made any payment or incurred any
obligation to make a payment which will not be deductible in computing
trading profits for the purposes of corporation tax, or be deductible
as a management expense of an investment company.
(d) Taxation Claims, Liabilities and Reliefs
----------------------------------------
(i) There are set out in the Disclosure Letter with express
reference to this paragraph, particulars of all matters relating to
Taxation in respect of which the Company (either alone or jointly with
any other person) has, or at Closing will have, an outstanding
entitlement:
(a) to make any claim, including a supplementary claim, for
relief under ICTA or any other statutory provision relating to
Taxation;
<PAGE>
(b) to make any election, including an election for one type
of relief, or one basis, system or method of Taxation, as opposed to
another;
(c) to make any appeal (including a further appeal) against
an assessment to Taxation;
(d) to make any application for the postponement of, or
payment by instalments of, Taxation; or
(e) to disclaim or require the postponement of any allowance
or relief;
such particulars being sufficient to enable the Buyer to
procure that any time limit to such entitlement expiring within six
months after Completion can be met.
(ii) The Company is not, nor may become liable to pay, or make
reimbursement or indemnity in respect of, any Taxation (or amounts
corresponding thereto) in consequence of the failure by any other
person to discharge that Taxation within any specified period or
otherwise, where such Taxation relates to a profit, income or gain,
transaction, event, omission or circumstances arising, occurring or
deemed to arise or occur (whether wholly or partly) prior to Closing.
(iii) No relief (whether by way of deduction, reduction, set
off, exemption, postponement, rollover, holdover, repayment or
allowance, or otherwise) from, against or in respect of any Taxation
has been claimed and/or given to the Company which could or might be
effectively withdrawn, postponed, restricted, clawed back or otherwise
lost as a result of any act, omission, event or circumstance arising or
occurring at any time after Closing.
(e) Capital Gains
-------------
(i) On a disposal of all its assets by the Company for:
<PAGE>
(a) In the case of each asset owned by the Company at the
Last Accounts Date, a consideration equal to the value attributed to
that asset in preparing the Last Accounts; or
(b) In the case of each asset acquired since the Last
Accounts Date, a consideration equal to the consideration given for the
acquisition
then either:
(A) In respect of any asset falling within (a) above,
the liability to tax (if any) which would be incurred by the Company in
respect of that asset would not exceed the amount taken into account in
respect of that asset in computing the potential liability to deferred
Taxation as stated but not provided in the Last Accounts; or
(B) In respect of any asset within (b) above, no tax
liability would be incurred by the Company in respect of that asset.
(ii) Save as provided for in the Last Accounts the Company has not
made any claim and is not entitled to make any claim under Section 279
TCGA (Relief in respect of delayed remittances of gains) or Section 585
ICTA (Relief from tax on delayed remittances).
(iii) There has not accrued any gain in respect of which the
Company may be liable to corporation tax by virtue of the provisions of
Section 13 TCGA (Non-resident company).
(iv) Full particulars of each claim made under sections 152 or 153
of the TCGA 1992 made prior to the date of this agreement to which
section 154 TCGA 1992 applies and which affects any asset which was
owned by the Company on or after the Last Accounts Date (except where
the heldover gain is treated as having accrued prior to the Last
Accounts Date) have been disclosed in writing to the Purchaser
<PAGE>
(v) The Company has not received any asset by way of gift or by
way of bargain not at arm's length to which Section 282 TCGA has
applied or could apply and will not receive any such asset before
Closing.
(vi) Since the Last Accounts Date there has not been any
transaction in respect of which the Company is or may become liable to
Taxation under the corporation tax provisions relating to capital gains
and the Company will not before Closing enter into any such transaction
without the prior written consent of the Purchaser.
(vii) The Company has not effected or been concerned in any
demerger such as is mentioned in Section 213 ICTA.
(viii) The Company has not made any election under Section
35(5) TCGA or paragraph 4 Schedule 2 TCGA.
(ix) The Company has not disposed of or acquired any asset in
circumstances falling within Section 17 TCGA.
(x) No loss which has arisen or may arise on the disposal by the
Company of shares in or securities of any company is liable to be
disallowed in whole or in part by virtue of Section 176 or Section 177
TCGA.
(xi) The Company has not acquired any asset from any other company
which was, at the time of the acquisition, a member of the same group
of companies as the Company for the purposes of any tax within the last
six years.
(f) Tax Losses
----------
(i) No change of ownership of the Company has taken place in
circumstances such that section 768 ICTA (change in ownership of
Company: disallowance of trading losses) has been or may be applied to
deny relief for a loss or losses or excess charge or charges incurred
by the Company and, within the period of three years ending with the
date of this Agreement, there has been no major change in the nature or
conduct of any trade or business carried on by the Company, nor has the
<PAGE>
scale of the activities in any trade or business carried on by the
Company at any time become small or negligible for the purposes of the
section.
(ii) No change of ownership of the Company nor any major change in
the nature or conduct of any trade or business carried on by the
Company has occurred in circumstances such that section 245 ICTA
(calculation of ACT on change of ownership) has been or may be applied.
(iii) All Taxation losses of the Company are trading losses
and are available to be carried forward and set off against income from
the same trade in succeeding periods and are agreed with the Inland
Revenue.
(g) Inheritance Tax
---------------
(i) The Company has not entered into any transaction which has or
may give rise to a direct or indirect charge to inheritance tax.
(ii) The Company is not liable to be assessed to inheritance tax
by virtue of Part VII Inheritance Tax Act 1984.
(iii) No circumstances exist whereby any person could have the
power to raise an amount of inheritance tax by sale or mortgage of or
by a terminable charge on any of the Shares or assets of the Company as
specified in Section 212 Inheritance Tax Act 1984.
(iv) None of the Shares or assets of the Company is subject to an
Inland Revenue charge within Section 237 Inheritance Tax Act 1984.
(v) The Company is not entitled to an interest in possession in
settled property.
(h) Stamp Duty and Stamp Duty Reserve Tax
-------------------------------------
(i) All instruments (other than those which have ceased to have
any legal effect) to which the Company is a party or in the enforcement
of which the Company is interested and which, whether in the United
Kingdom or elsewhere, attract either stamp duty or require to be
stamped with a particular stamp denoting that no duty is chargeable or
<PAGE>
that the document has been produced to the appropriate authority, have
been properly stamped; and no such documents which are outside the
United Kingdom would attract stamp duty if they were brought into the
United Kingdom.
(ii) Since the Last Accounts Date the Company has not incurred any
liability to stamp duty reserve tax.
(i) Anti Avoidance
--------------
(i) The Company has not entered into or been a party to any
schemes or arrangements designed partly or wholly for the purpose of
avoiding or deferring Taxation.
(ii) No gain of a capital nature as defined in Section 776 ICTA
(Transactions in land: taxation of capital gains) has been realised
from the disposal of land in respect of which the Company could be
assessed to Taxation under the provisions of that Section.
(iii) The Company has not obtained any tax advantage in
consequence of any transaction in securities to which the provisions of
Section 703 ICTA (Cancellation of tax advantage) apply.
(j) Close Companies
---------------
(i) No distributions within Section 418 ICTA (Additional matters
to be treated as distributions) have been made by the Company.
(ii) No loan or advance within Section 419 ICTA (Loans to
participators etc) has been made or agreed to by the Company and the
Company has not since the Last Accounts Date released or written off
the whole or part of the debt in respect of any such loan or advance.
(k) Value Added Tax
---------------
(i) The Company is registered for the purposes of VATA 1994 and
has made, given, obtained and kept full, complete, correct and up-to-
date records, invoices and other documents appropriate or required for
those purposes and is not in arrears with any payments or returns due
<PAGE>
and has not been required by the Commissioners of Customs & Excise to
give security under paragraph 4 of Schedule 11 VATA 1994.
(ii) All VAT due and payable to the Commissioners of Customs &
Excise has been declared and paid in full.
(iii) The Company has never been treated as a member of a
group under section 43 VATA 1994 and no application has ever been made
for the Company [any member of the Group] so to be treated.
(iv) The Company has not within 12 months ending on the Last
Accounts Date been in default in respect of any prescribed accounting
period as mentioned in section 59(1) VATA 1994.
(v) Full details of any claim for bad debt relief under section
36 VATA 1994 or under section 11 Finance Act 1990 made by the Company
has been disclosed in writing to the Purchaser.
(vi) The Company has not made an election to waive exemption in
relation to any land in accordance with paragraph 2 to Schedule 10 VATA
1994.
(vii) The Disclosure Letter contains full details of any
assets of the Company to which the provisions of Part XV Value Added
Tax Regulations 1995 (the Capital Goods Scheme) apply and in
particular:
(viii) the identity (including in the case of leasehold
property, the terms of years), date of acquisition and cost of the
asset; and
<PAGE>
(ix) the proportion and amount of input tax for which credit has
been claimed (either provisionally or finally in a tax year and stating
which).
(x) The Company has not within 12 months ending on the Last
Accounts Date made supplies which are exempt from VAT of such
proportion that it is unable to claim credit for all input tax paid or
suffered by it.
(xi) The Company is not nor has it agreed to become an agent for
any person for the purposes of Section 47 VATA 1994 neither is it nor
has it agreed to become a VAT representative for any person for the
purposes of Section 48 VATA 1994.
(l) Duties
------
All value added tax, import duty and other taxes or charges
payable upon the importation of goods and all excise duties payable to
Customs & Excise payable in respect of any assets (including trading
stock) imported, owned or used by the Company [any member of the Group]
have been paid in full.
(m) General
-------
(i) The Company has not issued any share capital to which the
provisions of Section 249 ICTA (Stock dividends treated as income)
could apply nor does it own any such share capital.
(ii) No security issued by the Company and remaining in issue at
the date of this Agreement was issued in such circumstances that the
interest payable thereon falls to be treated as a distribution under
Section 209 ICTA (Meaning of distribution).
<PAGE>
(iii) (a) Since 6 April 1965, the Company has not made any
repayment of share capital to which section 210(1) ICTA 1988 applies or
issued any share capital or other security as paid up otherwise than by
the receipt of new consideration within the meaning of Part VI ICTA
1988
(b) No part of the amount payable on redemption of any share
capital or security will be a distribution (as defined in ICTA 1988).
(iv) The Company is not a party to any transaction or arrangement
or series of transactions or series of arrangements made otherwise than
on arm's length terms or under which it may be required to pay for an
asset or any services or facilities of any kind an amount which is in
excess of the market value of that asset or services or facilities or
will receive any payment for an asset or any services or facilities of
any kind that it has supplied or provided or is liable to supply or
provide which is less than the market value of that asset or services.
(v) The Company has not entered into any such transaction as is
mentioned in sections 779 and 780 ICTA (Sale and Leaseback).
(vi) The Company has not entered into any unlawful transaction
under Section 765 ICTA or failed to give notice and any required
information to the Board of the Inland Revenue under Section 765A
within the time limit provided for by that section.
(n) Overseas Matters
----------------
(i) The Company has not transferred a trade carried on outside
the United Kingdom in circumstances such that a chargeable gain may be
deemed to arise at a date after such transfer under section 140 TCGA
(postponement of charge on transfer of assets to non-resident company).
(ii) The Company has not been a party to any transaction to which
sections 140A to 140D TCGA apply.
<PAGE>
3.31 Limitations on Claims
---------------------
(a) The Shareholders shall not be liable for any Claim whatsoever and
howsoever arising unless they receive from the Buyer written notice
containing details of the Claim including the Buyer's estimate (on a without
prejudice basis) of the amount of such Claim;
(i) on or before the second anniversary of Closing in the case of a
Claim other than Claims relating to Tax
(ii) on or before the sixth anniversary of the end of the accounting
reference period of the Company in which Closing occurs in the case
of a Claim for breach of any of the Representations in relation to
tax or the indemnities contained in the Tax Deed.
(b) The Buyer shall have no right to recover in respect of any breach
of any of the Representations unless and until the aggregate liability of
the Shareholders in respect of breach of Representations exceeds #100,000
but if such aggregate liability should exceed that sum, the Shareholders
shall be liable for only the excess over that amount.
(c) The aggregate amount of liability of the Shareholders for all
Claims shall not exceed US$4,000,000.
(d) The Shareholders shall not be liable for any breach of any of the
Representations if and to the extent that the fact matter event or
circumstances giving rise to such breach was fully and fairly disclosed in
the Disclosure Letter.
(e) No Claim shall lie against the Shareholder in respect of any
matter arising as a result of any change in the law or of any change in the
rates or principles of taxation subsequent to Closing.
(f) The Shareholder shall not be liable for any Claim in respect of
any fact matter event or circumstances to the extent that specific allowance
provision or reserve has been made for such specific fact matter event or
circumstances in the Last Accounts.
(g) The Shareholders shall not be liable in respect of any Claim to
the extent that the Claim would not have arisen but for any act matter or
<PAGE>
thing done or omitted to be done after the date hereof by the Buyer or any
member of the Buyer's Group otherwise than in the Ordinary Course of
Business in the Company as carried on at Closing.
(h) A breach of this Agreement which is capable of remedy shall not
entitle the Buyer to compensation except and to the extent that the
Shareholder is given written notice of such breach and following such notice
such breach remains unremedied at the expiry of 50 days following the date
upon which such notice is served.
(i) If the Shareholder pays the Buyer any amount or releases Common
Stock in the Buyer to it in discharge of any Claim and if the Buyer or any
member of the Buyer's Group subsequently recovers from a third party
(including any tax authority) a sum which is directly referable to the
subject matter of the Claim the Buyer shall repay to the Shareholders:
(i) an amount equal to the sum recovered from the third party less
any reasonable costs of recovery incurred by the Buyer or the member
of the Buyer's Group as a direct result of recovering same and any
tax suffered on the receipt or;
(ii) if the figure resulting under paragraph (i) above is greater
than the amount paid by the Shareholder to the Buyer or the relevant
member of the Buyer's Group in respect of the relevant Claim such
lesser amount as shall have been so paid by the Shareholder.
(j) The Buyer agrees that it shall not be entitled to recover damages
or obtain payment reimbursement restitution or indemnity to the extent that
it has already recovered such sum pursuant to any other provision of this
Agreement.
(k) If the Buyer becomes aware of any third party Claim potential
Claim matter or event (hereinafter a "Third Party Claim") which might lead
to a Claim being made the Buyer:
(i) shall procure that notice thereof is given to the
Shareholders;
(ii) shall not make (or as appropriate shall procure that no
member of the Buyer's Group shall make) any admission liability
<PAGE>
agreement or compromise with any person body or authority in
relation to any such Third Party Claim without prior consultation
with the Shareholders;
(iii) shall take (or as appropriate shall procure that any relevant
member of the Buyer's Group shall take) such action as the
Shareholders may reasonable request to avoid, dispute, resist,
appeal, compromise or defend such Third Party Claim, potential
Claim, matter or event or any adjudication in respect thereof
provided that such action does not prejudice the goodwill or conduct
of the business of the Company or any Group Company.
(l) Nothing in this Clause 3.31 shall in any way restrict or limit the
general obligation in law on the Buyer to mitigate any loss or damage which
it may suffer in consequence of any breach by the Shareholders of the terms
of this Agreement.
(m) The limitations contained in this Clause 3.31 shall not apply to
representations and warranties contained in Clauses 3.1 (Authority and No
Conflict), 3.2 (Validity), 3.3 (Due Organisation) and 3.4 (Capitalization).
(n) The Buyer shall not be entitled to recover under the Tax Deed in
respect of any actual liability up to #90,000 incurred by the Company as a
result of the circumstances referred to under the disclosure against Clause
3.30(a)(ix) in the Disclosure Letter occurring.
3.32 Notwithstanding any other provision in the Agreement, the Tax Deed
or any agreement entered into pursuant to this Agreement, none of the
limitations contained in Clause 3.31 shall apply to any claim for breach of
any of the Representations or under the Tax Deed where a fact, matter or
circumstance giving rise to a claim arises as a result of fraud, negligence,
misrepresentation, willful concealment or non-disclosure on the part of any
member of the Seller Group or any Affiliate of any member of the Seller
Group.
<PAGE>
ARTICLE IV
COVENANTS
4.1 Restrictions on the Shareholders post-Closing
---------------------------------------------
In this Clause:
"Confidential means all or any
Business information relating to:
Information"
(i) the business
methods, corporate
plans, management
systems, finances,
new business
opportunities or
development
projects of the
Company;
(ii) the marketing or
sales of any past
or present or
future product or
service of the
Company; or
(iii) any trade secrets
or other
information
relating to the
<PAGE>
provision of any
product or service
of the Company to
which the Company
attaches
confidentiality or
in respect of which
it holds an
obligation of
confidentiality to
any third party;
"Customer" means any person, firm or
company who or which shall
at the Closing Date be in
negotiation with the
Company for the provision
of Restricted Services or
to whom the Company has
provided Restricted
Services during the period
of one year prior to
Closing;
"Intermediary" means any person, firm or
company who introduces
business to the Company in
respect of Restricted
Services as at the Closing
Date or who has introduced
business to the Company in
respect of Restricted
<PAGE>
Services during the period
of one year prior to
Closing;
"Material means:
Interest" (a) the holding of any
position as
director, officer,
employee,
consultant,
partner, principal
or agent;
(b) the direct or
indirect control or
ownership (whether
jointly or alone)
of any shares or
debentures or any
voting rights
attached to them;
or
(c) the direct or
indirect provision
of any financial
assistance.
"Restricted means the United Kingdom;
Area"
"Restricted means the business of
Services" originating and acquiring
<PAGE>
financial receivables
including without
limitation, the leasing of
computer and other
equipment;
Without prejudice to any provisions operating to similar effect which
may be contained in any service contract or contract of employment
entered into now, or in the future between any of the Shareholders
and the Company or any members of the Buyer Group, each of the
Shareholders hereby covenants with the Buyer that without the prior
written consent of the Buyer:
(a) he will not for a period of 2 years after Closing hold
any Material Interest in any business (other than the
Buyer or the Company or any company which may acquire
the Buyer or the Company) which provides Restricted
Services in competition with the Business in the
Restricted Area;
(b) he will not at any time after Closing disclose or permit
there to be disclosed (save as authorised by the Buyer
or required by law, any Confidential Business
Information, nor will he at any time after Closing
otherwise make use of any Confidential Business
Information for his own benefit, or for the benefit of
others, or in any way to the detriment of the Company;
(e) he will not for a period of 12 months after Closing
solicit or entice away or seek to entice away any person
who is, and was at the Closing Date, a senior employee
of the Company or any Intermediary;
<PAGE>
(f) he will not for a period of 18 months after the Closing
Date within the Restricted Area and in respect of
Restricted Services directly or indirectly solicit the
custom of, or orders from, any Customer;
(g) he will not for a period of 12 months, after the Closing
Date within the Restricted Area and in respect of
Restricted Services accept orders from any Customer;
(h) that he will not for a period of 12 months after the
Closing Date interfere with or seek to interfere with
the continuance of supplies to the Company (or the terms
relating to such supplies) from any suppliers who have
been supplying equipment or services to the Company at
any time during the 12 months immediately preceding
Closing; or
(i) that if he shall have obtained trade secrets or other
confidential information belonging to any third party
under an agreement which contained restrictions or
disclosure, he will not without the previous written
consent of the Buyer at any time infringe such
restrictions.
The Parties agree that the restrictions contained in this
Clause 4.1 shall not apply if and to the extent that the
Confidential Business Information concerned has ceased to be
confidential or come into the public domain (other than as a
result of breach of any obligation of confidence by the
Shareholders).
<PAGE>
Each Shareholder shall procure that all companies and
businesses directly or indirectly owned or controlled by him
shall be bound by and observe the provisions of this Clause as
if they were parties covenanting with the Buyer.
Each Shareholder acknowledges that the Buyer is accepting the
benefit of the covenants contained in this Clause both on its
own behalf and on behalf of its Subsidiaries with the intention
that the Buyer may claim against any or all of the Shareholder
on behalf of any such Subsidiary for loss sustained by that
Subsidiary as a result of any breach of the covenants contained
in this Clause.
Nothing in this Clause 4.1 shall preclude any Shareholder from
being the owner for investment purposes only of not more than
3% of the equity share capital of any company listed on the
Official List or the Alternative Investment Market of The
London Stock Exchange.
The restrictions contained in this Clause 4.1 are considered
reasonable by the Shareholders in all respects but if any of
those restrictions shall be held to be void in the
circumstances where it would be valid if some part were deleted
the parties agree that such restrictions shall apply with such
deletion as may be necessary to make it valid and effective.
The provisions contained in Clause 4.1 are separate and
severable and shall be enforceable accordingly.
ARTICLE V
CONDITIONS TO OBLIGATION TO CLOSE
<PAGE>
5.1 Conditions to Obligation of Buyer. The obligation of Buyer to
----------------------------------
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) the Company and the Shareholders shall have procured all of
the third party consents necessary to consummate this transaction for
the sale of the Shares;
(b) the Parties shall have received all required authorizations,
consents and approvals of governments and governmental agencies;
(c) John Baird shall have entered into an Employment Agreement
with the Company in the agreed form;
(d) the Parties shall have entered into the Tax Deed in the
agreed form;
(e) Buyer shall have received audited accounts of the Company and
its Subsidiaries for the period ended 31 March 1998 which shall be
reasonably satisfactory in form and substance to Buyer and its counsel;
(f) all actions to be taken by the Company or the Shareholders in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments and other documents
required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to Buyer;
(g) any necessary waivers or consents having been obtained so as
to enable the Buyer to be registered as the holder of the Shares;
<PAGE>
(h) Buyer shall have received duly executed stock transfer forms
in its favour from each of the Shareholders in respect of the Shares
being sold by each of them together with the share certificates
relating to the Shares;
(i) Buyer shall have received all land certificates, charge
certificates and leases, title deeds and other documents relating to
the Properties (save to the extent that the same are in possession of
mortgagees); and
(j) Buyer shall have received the common seals, certificates of
incorporation and the statutory books for the Company properly
completed up to Closing.
(k) The Shareholders shall have obtained a letter from National
Westminster Bank plc dated as of Closing in favour of the Company
consenting to the change of control of the Company in respect of the
outstanding loan facilities.
(l) The Company shall have filed Companies Forms 403A in respect
of the debentures dated 4 March 1996 and 17 December 1994 in favour of
Lloyds Bank Plc.
(m) Mrs Baird shall have resigned from her position as an
employee of the Company in the agreed form and shall have surrendered
all items including without limitation credit cards and mobile phones
issued or given to her by the Company in connection with her employment
with the Company.
(n) Mr Philip Lewis shall have resigned from his position as an
employee, a director and the secretary of the Company in the agreed
form and shall have surrendered all items including without limitation
<PAGE>
credit cards and mobile phones issued or given to him by the Company in
connection with his employment with the Company.
(o) Mrs Janet Lewis shall have surrendered her company credit
card to the Company and shall have paid the balance outstanding in
respect of all payments made by her using the Company credit card.
(p) The Shareholders shall have obtained a letter of non-
crystallization from National Westminster Bank plc dated as of Closing
in favour of the Company in respect of the existing mortgage debenture
given to National Westminister Bank plc.
(q) Mr Paul Baird's car shall have ceased to be insured through
the Company insurance policy.
(r) The Shareholders shall have each signed a power of attorney
in the agreed form enabling the Buyer to vote on the Shares pending
their registration in the Buyer's name in the Company's register of
members.
Buyer may waive in writing any condition specified in this Clause 5.1.
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
6.1 Survival. All representations, warranties,
---------
<PAGE>
covenants and agreements contained in this Agreement or in any document
delivered pursuant hereto shall be deemed to be material and to have been
relied upon by the Parties hereto. All covenants and agreements shall
survive the Closing and shall be fully effective and enforceable until the
covenant or agreement has been fully performed. All representations and
warranties shall survive the Closing for a period of two years save for
those representations and warranties relating to tax and the indemnities
contained in the Tax Deed which shall survive until the sixth anniversary of
the end of the accounting reference period of the Company in which Closing
occurs; provided, however, that any representations and warranties contained
in Clauses 3.1 (Authority and No Conflict), 3.2 (Validity), 3.3 (Due
Organization) and 3.4 (Capitalization) shall survive indefinitely.
Notwithstanding anything to the contrary contained herein, the
representations and warranties contained in this Agreement shall not be
affected by any investigation, verification or examination by any Party or
by anyone on behalf of any such Party.
6.2 Indemnification and Undertaking by the Shareholders.
----------------------------------------------------
(a) The Shareholders hereby agree to fully indemnify and keep
fully indemnified the Buyer against all costs, losses, liabilities,
damages, fees or expenses (including reasonable legal fees) suffered or
incurred by the Buyer or any Group Company in connection with the
Business or the operation thereof (whether before or after the Closing
Date) not complying or not having complied with any provision of the
Consumer Credit Act 1974 as amended, replaced or re-enacted from time
to time together with any subordinate legislation made thereunder.
<PAGE>
(b) The Shareholders hereby agree to fully indemnify and keep
fully indemnified the Buyer against all costs, losses and liabilities,
damages, fees or expenses suffered or incurred by the Buyer or any
Group Company in relation to the statutory books of the Company not
having been kept in accordance with the Companies Act.
(c) Each of the Shareholders hereby undertakes to the Buyer to
repay to the Company the balance of the director's loan (including
interest) outstanding against him in full at Closing and authorises the
Buyer to deduct such amounts from the Cash Consideration and to pay
such amounts to the Company in settlement of such loan.
(d) Mr Baird hereby undertakes to the Buyer to notify the Office
of Fair Trading regarding the change of control of the Company for the
purpose of the Consumer Credit Act licences issued to the Company
within 21 days of Closing.
ARTICLE VII
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after Closing Date of Consideration Shares:
7.1 Disposition of Shares. The Shareholders agree that they will not
---------------------
directly or indirectly sell, transfer or otherwise dispose of any
Consideration Shares issued to them, into the United States prior to one
year after the date of receipt of the Consideration Shares, it being
acknowledged that this covenant is made to assure compliance with Regulation
S.
<PAGE>
7.2 Legends. The certificates representing
-------
representing Consideration Shares shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). IN ADDITION,
SHAREHOLDERS ACKNOWLEDGE THAT THE SHARES BEING ACQUIRED BY THEM HAVE BEEN
ISSUED UNDER APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER REGULATION S AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER IN THE
UNITED STATES PRIOR TO ONE YEAR AFTER THE DATE OF RECEIPT OF SUCH SHARES, IT
BEING ACKNOWLEDGED THAT THIS COVENANT IS MADE TO ASSURE COMPLIANCE WITH
REGULATION S.
Buyer may place stop transfer orders with its transfer agents with respect
to such certificates in accordance with U.S. federal securities laws.
ARTICLE VIII
MISCELLANEOUS
8.1 Press Releases and Announcements. No Party shall issue any press
--------------------------------
release, public announcement or public disclosure relating to the subject
matter of this Agreement without the prior written approval of the other
Parties; provided, however, that the foregoing shall not prohibit disclosure
to a Party's attorneys, accountants, lenders or financial advisors (who
shall be bound by this provision), nor shall the foregoing prohibit Buyer
from making any public disclosure it believes in good faith is required by
law (in which case Buyer will advise the Shareholders prior to making the
disclosure, which must be approved in content by the Shareholders, which
approval cannot be unreasonably withheld or delayed). After Closing, Buyer
shall be entitled to make the first public disclosure regarding the subject
<PAGE>
matter of this Agreement and Buyer's prior written consent shall be required
prior to any public disclosures made by the Seller Group.
8.2 No Third-Party Beneficiaries. This Agreement shall not confer any
-----------------------------
rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
8.3 Entire Agreement. This Agreement (including the
----------------
documents referred to herein) constitutes the entire agreement among the
Parties and supersedes any prior understandings, agreements or
representations by or among the Parties, written or oral, that may have
related in any way to the subject matter hereof, including but not limited
to the letter of intent dated 20 July 1998.
8.4 Variations. A variation of this Agreement, the Tax Deed or any
----------
agreement or document entered into pursuant to this Agreement is valid only
if it is in writing and signed by or on behalf of each Party.
8.5 Succession and Assignment. This Agreement shall be binding upon
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and inure to the benefit of the Parties named herein and their respective
heirs, successors and permitted assigns. The Parties may not assign either
this Agreement or any of its rights, interests or obligations hereunder
without the prior written approval of the other Parties save for assignments
of the Agreement or any of the rights, interests or obligations within the
Buyer's Group.
8.6 Counterparts. This Agreement may be executed in one or more
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<PAGE>
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. Any reference herein
to an agreement or contract shall be deemed to refer also to the other (such
terms being interchangeable) and shall include commitments and
understandings, whether written or oral, including all amendments thereto.
8.7 Headings; Meaning. The section headings contained in this
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Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement. The term "including" shall
be interpreted to mean "including without limitation." Any statement made
based upon the knowledge of a Party shall be deemed to be made based upon
the best available knowledge of such Party and its advisors after due
inquiry.
8.8 Notices. All notices, requests, demands and other communications
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hereunder shall be in writing and shall be delivered in person or sent by
registered or certified mail, postage prepaid or commercial overnight
courier addressed as follows with written verification of receipt or by ii.
A notice hall be deemed given: (a) when delivered by personal delivery (as
evidenced by the receipt); (b) five (5) days after deposit in the mail if
sent by registered or certified mail; (c) one (1) business day after having
been sent by commercial overnight courier as evidenced by the written
verification of receipt; or (d) on the date of confirmation if telecopied.
If to the Company or the Shareholders:
John Baird
No 4 Virginia Chase
Cheadle Hulme
<PAGE>
Cheshire
SK8 6JN
Copy to:
D B Gledhill
Bermans
7 Ralli Court
West Riverside
New Balley Street
Manchester
M3 5FT
If to Buyer:
First Sierra Financial
600 Travis Street, Suite 7050
Houston, Texas 77002
Fax: 001 713 237 0452
Attn: Michael Sabel
Copy to:
Neal J. White, P.C.
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
Fax No.: (312) 984-3669
Bruce Gardner
Hammond Suddards
7 Devonshire Square
<PAGE>
Cutlers Gardens
London EC2M 4YH
Fax No: 0171 655 1001
Any Party may change its address by giving the other Parties notice in the
manner herein set forth.
8.9 Governing Law. This Agreement shall be governed by
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and construed in accordance with the laws of England and Wales, save for
matters set out in Clauses 2.7 and 7 which shall be governed by the internal
laws (and not the laws of conflict) of the state of Illinois. For the
avoidance of doubt, Illinois law shall apply to the provisions of Clause 2.7
only with regard to the operation of the escrow arrangement over the Held-
Back Shares. Save for Clauses 2.7 and 7 Illinois law shall have no bearing
on any other provisions of this Agreement.
8.10 Consent to Jurisdiction. Each party hereby irrevocably and
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unconditionally consents and submits to the non-exclusive jurisdiction of
the English courts over all matters relating to this Agreement. Each party
agrees that service of process in any action or proceeding hereunder may be
made upon such party by certified mail, return receipt requested to the
address for notice set forth herein. Each party irrevocably waives any
objection it may have to the venue of any action, suit or proceeding brought
in such courts or to the convenience of the forum and each party irrevocably
waives the right to proceed in any other jurisdiction. Final judgment in
any such action, suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment, a certified or true copy of
which shall be conclusive evidence of the fact and the amount of any
indebtedness or liability of any party therein described.
<PAGE>
8.11 Severability. Any term or provision of this Agreement
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that is invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the Parties agree that the
court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as
so modified.
8.12 Expenses. Each party will bear its own costs and expenses
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(including legal fees and expenses) incurred in connection with the
investigation, negotiation and consummation of this Agreement and the
transactions contemplated hereby.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
Signed by Michael Sabel )
for and on behalf of FIRST SIERRA FINANCIAL, Inc )
in the presence of: )
<PAGE>
Signed by )
JOHN BAIRD )
in the presence of: )
Signed by )
PHILIP LEWIS )
in the presence of: )
