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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): February 19, 1998
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BRIDGESTREET ACCOMMODATIONS, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 000-22843 04-3327773
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
30670 BAINBRIDGE ROAD, SOLON, OH 44139
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (440) 248-3005
N.A.
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS:
On February 19, 1998, BridgeStreet Accommodations, Inc. (the "Company")
completed the acquisition of all of the issued and outstanding capital stock of
London Life Apartments Limited ("London Life"), a privately held corporation
that provides corporate lodging services in London, U.K. The transaction
consisted of the issuance of approximately 195,000 shares of the Company's
common stock, $0.01 par value per share (the "Common Stock") and the payment of
$5.4 million in cash.
The cash portion of the purchase price was funded from the proceeds of the
Company's September 1997 initial public offering of Common Stock. The purchase
price paid by the Company in connection with the acquisition was determined as
the result of negotiations between the Company and London Life.
London Life was founded in 1988 and provides both short and long term living
accommodations primarily to large corporations. London Life currently leases and
manages approximately 200 apartment units throughout Central London.
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ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial Statements:
In accordance with Item 7(a)(4) of Form 8-K, financial statements will
be filed by amendment to this Form 8-K no later than 60 days after
March 4, 1998.
(b) Pro Forma Financial Information:
In accordance with Item 7(b) of Form 8-K, the required pro forma
financial statements will be filed by amendment to this Form 8-K no
later than 60 days after March 4, 1998.
(c) Exhibits:
(2) - Purchase Agreement, dated February 19, 1998 among BridgeStreet
Accommodations, Inc. and London Life Apartments Limited.
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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:
BRIDGESTREET ACCOMMODATIONS, INC.
By: /s/ Mark D. Gagne, C.P.A
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Mark D. Gagne, C.P.A.
Chief Financial Officer
Date: March 4, 1998
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Exhibit 2
DATED 1998
CRYSTALSEA LIMITED
SUNNYGATE LIMITED
JAMES KOE
SAMANTHA LUFF
BRIDGESTREET ACCOMMODATIONS INC
AGREEMENT
for the sales and purchases of the
share capitals of
LONDON LIFE APARTMENTS LIMITED
AND
LORYT (1) LIMITED
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DATED 1998
PARTIES
1 Crystalsea Crystalsea Limited (company no 259797) incorporated in
accordance with the laws of the British Virgin Islands
and whose registered address is at Mill Mall, Suite 6,
Wickhams Cay 1, PO Box 3085, Road Town, Tortola, British
Virgin Islands;
2 Sunnygate Sunnygate Limited (company no 259796) incorporated in
accordance with the laws of the British Virgin Islands
and whose registered address is at Mill Mall, Suite 6,
Wickhams Cay 1, PO Box 3085, Road Town, Tortola, British
Virgin Islands;
3 JK James Koe of 7 Cheval Place, Knightsbridge, London SW7
1EW;
4 SL Samantha Luff of 7 Cheval Place, Knightsbridge, London
SW7 1EW; and
5 Buyer BridgeStreet Accommodations, Inc. incorporated in
accordance with the laws of the United States of America
and whose registered office is at 30670 Bainbridge Road,
Solon, Ohio 44139, United States of America.
OPERATIVE PROVISIONS
1 DEFINITIONS AND INTERPRETATION
1.1 Unless the contrary intention appears, the following definitions apply:
Agreed Form a form agreed between the parties, a copy of
which has been initialled for the purpose of
identification by their respective solicitors;
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Assets those assets listed in Schedule 4;
Associate (a) (in relation to an individual):
(i) a relative, that is the
individual's issue, spouse,
brother, sister or parent;
(ii) a company which is, or may be,
directly or indirectly controlled
(within the meaning given in s840
ICTA) by the individual or a
relative, or by two or more of
them, and for this purpose a
company is controlled by one or
more persons if he or they can
exercise more than 50% of the
voting rights in it; and
(b) (in relation to a company) a Subsidiary or
holding company of the company, and another
Subsidiary of any holding company of the
company, "holding company" having the same
meaning as in s736 CA;
BridgeStreet Business the business of providing lodging
related services including, without
limitation, providing temporary or
permanent lodging accommodations, acting as
a lodging reservation agent, property
management services, real estate brokerage
and other various services related to the
lodging industry, or any part of it carried
on by the Buyer as at the Effective Date;
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Business the business of providing lodging related
services including, without limitation,
providing temporary or permanent lodging
accommodations, acting as a lodging
reservation agent, property lettings,
property management services, real estate
brokerage and other various services
related to the lodging industry, carried on
by the Partnership which was transferred to
the Company on 16 January 1998 and which
has, since that date, been carried on by
the Company;
Buyer's Accountants Arthur Andersen, 1 Surrey Street, London
WC2R 2PS;
Buyer's Solicitors Berwin Leighton, Adelaide House, London
Bridge, London EC4R 9HA;
CA the Companies Act 1985;
CAA the Capital Allowances Act 1990;
Cash Consideration that part of theConsideration which is
specified in clause 3.1.1;
Companies Acts CA, the former Companies Acts (within
the meaning of s735(1) CA) and the
Companies Act 1989;
Company London Life Apartments Limited (formerly
Tyrolese (398) Limited), further details of
which are set out in Schedule 1 Part 1;
Company Shares the 100 issued ordinary shares of(pound)1
each of the Company;
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Completion completion of the purchase of the Shares in
accordance with clause 8;
Completion Accounts the pro forma unaudited balance
sheet of the Company as at 31 January 1998
in Agreed Form, and the unaudited profit
and loss account of the Business for the 10
month period to 31 January 1998, annexed as
Schedule 6;
Confidential Information any trade secrets, customer lists, trading
details, technology, know-how, techniques
or other information of a confidential
nature held or stored in whatever form
relating to the Company or the Partnership
(including without limitation details of
activities, Business, BridgeStreet Business
or finances of the Company or the
Partnership);
Consideration the purchase consideration as referred to
in clause 3.1;
Consideration Shares the common stock of $0.01 each of the Buyer
to be allotted to the Sellers in accordance
with clause 3.1.2 and including, where
appropriate, securities derived from them
otherwise than in lieu of dividend;
Contracts those Contracts listed in Schedule 5;
Deed of Covenant either of the two deeds of covenant in the
Agreed Form;
Deed of Gift the deed of gift entered into by (1) JK and
SL and (2) the Company on 16 January 1998;
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Disclosure Letter the disclosure letter, of today's date,
from the Sellers to the Buyer;
EBIT earnings before interest and taxes,
calculated pursuant to clause 4;
Effective Date 31 January 1998;
FA the Finance Act;
FRS a financial reporting standard issued or
adopted by The Accounting Standards Board
Limited;
GAAP United States of America generally accepted
accounting principles;
ICTA the Income and Corporation Taxes Act 1988;
IHTA the Inheritance Tax Act 1984;
Information (a) any inventions, discoveries, ideas,
research, engineering methods, practices,
processes, systems (including, without
limitation reservation systems), formulae,
designs, products, projects, improvements
and developments which (i) are not publicly
available; and (ii) relate to the Buyer or
any Associate of it from time to time and
have been disclosed to the Company; and
(iii) are made, conceived or reduced to
practice by the Company, JK or SL
subsequent to the date of Completion, or by
any employee or consultant of the Buyer (or
any Associate of it) or in whole or in part
at the expense of the Buyer or any
Associate of it or on the premises of the
Buyer or
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any Associate of it or with the
assistance of any of their employees or
consultants with the Buyer's or
any of its Associate's equipment or
supplies or those of their employees or
consultants and have been disclosed to the
Company; and
(b) all trade secrets, reservation systems,
marketing plans, forecasts, unpublished
financial statements, budgets, licences,
prices, and employee, lessor, customer and
supplier lists of the Buyer, the Company or
any of their Associates;
Intellectual Property a patent, patent application, know-how,
Rights trade or service mark (whether registered
or unregistered), trade or service mark
application, trade name or logo, registered
design, design right, copyright or other
similar intellectual, industrial or
commercial right;
Issue Price the issue price as calculated in
clause 3.3;
Loryt Loryt (1) Limited (formerly London Life
Apartments Limited) further details of
which are set out in Schedule 1 Part 2;
Loryt Shares the 100 issued ordinary shares
of(pound)1 each of Loryt;
Material Interest (a) the holding of any senior position as
director, officer, employee, consultant or
partner;
(b) the direct or indirect control,
ownership (whether jointly or alone) of any
shares (or any
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voting rights attached to them) or
debentures except for the ownership for
investment purposes only of not more than
3% of the issued ordinary shares of a
company whose shares are listed on any
Recognised Investment Exchange (as defined
in Section 207 of the Financial Services
Act 1986); or
(c) the direct or indirect provision of any
financial assistance, including, without
limitation, by way of loans, debentures or
guarantees;
Nasdaq Nasdaq National Market;
NL the net liabilities of the Company as at 1
February 1998, as prepared from the audited
accounts referred to in clause 5.1;
Partnership the partnership between JK and SL carried
on prior to 16 January 1998 under the name
London Life Apartments from 7 Cheval Place,
Knightsbridge, London SW7 1EW;
Partnership's Accountants Rickaby & Co of 26 Lower King's Road,
Berkhamstead, Hertfordshire HP4 2AS;
Planning Acts as defined in section 336 of the Town and
Country Planning Act 1990;
Properties the properties listed in Schedule 3;
Related Persons the Sellers, the Company, Loryt, their
respective officers and each of those
companies' and officers' respective
Associates, and JK and SL
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and their respective Associates;
Restricted Post Employment the period of 3 years from the date on
Period which, in respect of each of JK and SL,
his/her employment by the Company
terminates, howsoever occurring;
Restricted Period the period of 5 years from the date of
Completion;
Sellers Crystalsea and Sunnygate;
Sellers' Accountants Coopers & Lybrand, of 1 Embankment Place,
London WC2N 6NN;
Sellers' Solicitors Farrer & Co, 66 Lincoln's Inn Fields,
London WC2A 3LH;
Senior Executive a person who is engaged or employed as an
employee, director or consultant of the
Partnership, the Company, the Buyer or any
of their Associates in a capacity in which
his earnings exceed (pound)40,000 (or its
foreign currency equivalent) per annum;
Shares the Company Shares and the Loryt Shares;
Start Date (i) the date of Completion; or
(ii) in the event that the Restricted
Employment Period ends at a date later than
the end of the Restricted Period, the date
of termination of the relevant Partner's
employment;
Subsidiary a subsidiary as defined in s736 CA;
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Taxation taxation, duties, charges, withholdings and
levies of any kind imposed by governmental
or other authority, whether of the United
Kingdom or elsewhere and whether primarily
or otherwise chargeable, including:
(a) income tax, corporation tax,
capital gains tax, inheritance
tax, stamp duty, rates, value
added tax, customs and other
import duties and national
insurance contributions and a
payment which the Company may be
or become bound to make to
another person as a result of an
enactment relating to taxation;
(b) taxes, duties or levies
corresponding to, supplementing
or replacing any of the above;
and
(c) costs, charges, interest, fines,
penalties and expenses incidental
or relating to any of the above;
Taxation Warranties any of the Warranties set out in
Part 3 of Schedule 2;
TCGA the Taxation of Chargeable Gains Act 1992;
TMA the Taxes Management Act 1970;
VATA the Value Added Tax Act 1994;
Warranties the agreements, obligations, warranties,
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representations and undertakings of the
Sellers and JK and SL contained in this
agreement including the warranties set out
in Schedule 2; and
Warranty Claim a claim made by the Buyer for breach
of a Warranty or a claim made by the Buyer
under a Deed of Covenant.
1.2 Unless it is inconsistent with the context a reference to a statutory
provision includes a reference to:
1.2.1 a statutory amendment, modification, consolidation or re-enactment of
that provision (whether before or after the date of this agreement);
1.2.2 statutory instruments or subordinate legislation or orders made under
the statutory provision;
1.2.3 statutory provisions of which the statutory provision is an amendment,
modification, consolidation or re-enactment;
but does not include a substituted provision.
1.3 A reference to the Sellers includes, where appropriate, their
successors in title.
1.4 A reference to an SSAP is a reference to a statement of standard
accounting practice adopted by The Accounting Standards Board Limited.
1.5 Words denoting the singular include the plural and vice versa; words
denoting one gender include all genders; words denoting persons include
corporations and vice versa.
1.6 Unless otherwise stated, a reference to a clause, sub-clause or
schedule is a reference to a clause or sub-clause of, or schedule to,
this agreement.
1.7 Clause headings in this agreement and in the schedules are for ease of
reference only and do not affect the construction of any provision.
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2 AGREEMENT FOR SALE
2.1 Subject to the terms of this agreement, the Sellers, JK and SL shall
sell with full title guarantee and the Buyer shall purchase the Shares
free from liens, charges and encumbrances, with all rights attaching to
them, with effect from today's date.
2.2 The Sellers, JK and SL waive any pre-emption rights in relation to any
of the Shares, whether under the articles of association of the
Company, Loryt or otherwise.
3 CONSIDERATION
3.1 The purchase consideration for the Shares shall (subject to adjustment
in accordance with the provisions of clauses 4 and 5) be the sum of
(pound)4,410,000, being (pound)100 for the shares in Loryt and
(pound)4,409,900 for the Shares in the Company, which shall be paid or
satisfied:
3.1.1 as to the sum of (pound)3,285,000 (which includes the (pound)100 for
the Loryt Shares), in cash at Completion; and
3.1.2 by the allotment at Completion of such number of common stock,
excluding fractions, of the Buyer, credited as fully paid, as at the
Issue Price have a value nearest to but not more than (pound)1,125,000,
in accordance with clauses 3.3 to 3.7.
3.2 The Sellers and JK and SL are entitled to receive their part of the
Cash Consideration and the Consideration Shares in proportion to their
allocation of the Consideration to their holdings of the Shares.
3.3 The Issue Price is the average of the closing prices of the common
stock of the Buyer on Nasdaq, as calculated from the daily official
list, from 23 January 1998 up to and including the last dealing day
prior to Completion, and converted from dollars into pounds sterling at
the closing exchange rate as quoted in the Wall Street Journal
published for the last dealing day prior to Completion.
3.4 The Consideration Shares shall be issued on terms that they rank pari
passu with the common stock of the Buyer in issue at the date of
allotment, except for dividends declared or paid prior to Completion.
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3.5 The certificates representing the Consideration Shares shall be issued
with legends in Agreed Form requiring compliance with the applicable
legislation in the United States of America, and in particular with the
requirements of Regulations under, and any other requirements of, the
Securities Act of 1933, as amended, in connection with any re-sale of
the Consideration Shares.
3.6 The Buyer shall, following Completion, subject to the escrow provisions
in clause 5.A of this agreement, deliver certificates in respect of the
Consideration Shares to the Sellers' Solicitors in respect of:
3.6.1 50% of the Consideration Shares on or before 1 August 1998; and
3.6.2 50% of the Consideration Shares on or before 31 January 1999, or the
first anniversary of the date of Completion, whichever is the later.
3.7 Dividends declared and arising in respect of the Consideration Shares
after Completion shall be paid to the Sellers.
4 ADDITIONAL CONSIDERATION
4.1 The Sellers shall be entitled to receive, in the same proportions as
those in which they received the Consideration, additional
consideration in the event that EBIT of the Business for the twelve
months commencing on 1 August 1998 and ending 31 July 1999 (as
determined in accordance with GAAP consistently applied) exceeds
(pound)1 million, such additional consideration being (pound)2.00 for
every (pound)1.00 by which EBIT for that period is in excess of
(pound)1 million.
4.2 For the purposes of calculating EBIT, the following shall apply,
notwithstanding any GAAP provision to the contrary:
4.2.1 the Buyer agrees to operate the Business in good faith, and neither the
Buyer nor the Sellers will make any material change in the operation of
the Business as it exists on the date of Completion that would have a
material adverse effect on the amount to be paid to the Sellers
pursuant to clause 4.1, unless such change(s) are agreed to by both the
Buyer and the Sellers;
4.2.2 the books and records of the Company and the Business will be kept
separate and distinct from those of subsidiaries and divisions of the
Buyer. If the Company is
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hereafter merged or otherwise combined in any way into or with any
other business, or is added to or consolidated with any other business,
subsidiary or division of the Buyer, EBIT shall be calculated as if
such merger, combination, addition or consolidation had not been
effected;
4.2.3 all reasonable charges by the Buyer for services provided or expenses
incurred directly on behalf or at the request of the Company,
including, without limitation, credit checking, legal and accounting
services, advertising and other general administrative expenses, shall
be deducted from EBIT;
4.2.4 all interest income, all capital gains, all capital losses and all
gains or losses arising from sales or exchanges of the Company's Assets
other than income or expenses arising out of operations in the ordinary
course of business of the Company shall be deducted from (or added to
in the case of losses) EBIT;
4.2.5 all gains from insurance proceeds relating to the Assets will be
deducted from EBIT, except that proceeds of insurance against physical
damage to property will be included to the extent, if any, that such
proceeds do not exceed the deduction taken in the period on account of
the property damaged;
4.2.6 appropriate adjustments will be made to ensure that there is no
material or substantial upward or downward adjustment of income during
any period due to the acceleration or deferral of sales or other income
into a period other than that in which these would normally accrue or
occur, or due to the acceleration or deferral of any losses, costs or
expenses into any period other than that in which they would normally
accrue or occur. In this regard it is agreed that the accounting
principles used in the Completion Accounts shall be used in calculating
the adjustments set out above. A summary of significant accounting
policies is annexed hereto as Schedule 7;
4.2.7 a reasonable reserve shall be set up, if appropriate, and deducted from
EBIT to cover the amount of any contingent liability, together with a
reasonable estimate of the cost of pursuing litigation over that
contingent liability;
4.2.8 interest (which shall not exceed 8% per annum) and other financing
payments made to the Buyer for funds requested by the Company (directly
or indirectly on
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behalf of the Business) and advanced by the Buyer in its sole
discretion will be deducted from EBIT to the extent of the Buyer's
costs of borrowing;
4.2.9 all gains or losses generated by the Company that are not related to
the operation of the Business, shall be deducted from (or added, in the
case of losses) EBIT, including travel related expenses incurred by J K
for new market Development;
4.2.10 only 50% of James Koe's base salary will be taken into account in
calculating EBIT; and
4.2.11 Amortisation expense arising from goodwill shall be excluded from the
EBIT calculation.
4.3 No payment under clause 4.1 will be made:
4.3.1 to JK:
4.3.1.1 if JK terminates his employment on or before 31 July 1999; or
4.3.1.2 if JK's employment is terminated for "cause" on or before 31
July 1999, as determined in the employment agreement entered
into by JK pursuant to clause 8.5;
4.3.2 to SL:
4.3.2.1 if SL terminates her employment on or before 31 July 1999; or
4.3.2.2 if SL's employment is terminated for "cause" on or before 31
July 1999, as determined in the employment agreement entered
into by SL pursuant to clause 8.5.
4.4 The Buyer shall provide that, as soon as possible and in any event not
after 30 September 1999, a provisional statement is produced
calculating the value of EBIT and delivered to the Sellers and the
Sellers' Accountants. In the event of a dispute with respect to the
determination of the value of EBIT as per the provisional statement,
the dispute shall be referred for final settlement to a firm of
chartered accountants nominated jointly by the Sellers and the Buyer
or, failing nomination within 14 days after request by either the
Sellers or the Buyer, nominated at the request of either of them by the
president for the time being of the Institute of
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Chartered Accountants in England and Wales, who shall, in resolving the
dispute, comply with the principles set out in clause 4 of this
agreement. In making their determination the accountants shall act as
experts and not as arbitrators, their decision shall (in the absence of
manifest error) be final and binding on the parties, and their fees
shall be borne and paid by the Sellers and the Buyer in such
proportions as they determine.
4.5 Payment of the additional consideration, if any, shall be made in cash
as soon as possible after EBIT has been calculated and, subject to the
escrow provisions in clause 5.A of this agreement by no later than 31
October 1999.
5 NET LIABILITIES
5.1 A pro forma statement of assets and liabilities shall be included in
Schedule 6. On finalisation of the audited accounts of the Company to
31 January 1998, an adjusting payment to the Consideration shall be
made, calculated pursuant to the pro forma balance sheet of the audited
accounts, including only the assets and liabilities transferred to the
Buyer, within 14 days of such finalisation, subject to the escrow
provisions in clause 5.A of this agreement as follows:
5.1.1 where the NL are less than (pound)100,000, the Buyer shall pay to the
Sellers the amount of the difference between (pound)100,000 and the NL.
For the avoidance of doubt, if the assets exceed the liabilities then
the Buyer shall pay to the Sellers (pound)100,000 plus the amount by
which the assets exceed the liabilities.
5.1.2 where the NL are greater than (pound)100,000 the Sellers shall pay to
the Buyer an amount equal to the difference between NL and
(pound)100,000.
5.2 In the event that there is a dispute as to the amount of the adjusting
payment, the dispute shall be referred for final settlement to a firm
of chartered accountants agreed upon by the parties, or failing
agreement, by a firm nominated by the president for the time being of
the Institute of Chartered Accountants in England and Wales. In making
this determination the accountants shall act as experts and not as
arbitrators, their decision shall (in the absence of manifest error) be
final and binding on the parties, and their fees shall be borne and
paid by the Sellers and the Buyer in such proportions as they
determine.
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5A ESCROW
Reference in this clause to each of the Buyer, the Company, SL and JK
shall include their agents as appropriate.
5A.1 The Buyer shall procure that the Company shall undertake each of the
obligations and have each of the rights in this clause as if
expressly a party hereto. JK and SL agree to abide by this clause in
turn, as if the Company was expressly a party hereto.
5A.2 When SL and JK request the Buyer in writing, (a) the Company and SL
and the (b) Company and JK shall respectively make a claim for relief
under Section 165 TCGA (for the purpose of this clause the "Claims")
in relation to the transfers by SL and JK of the goodwill of the
Business to the Company pursuant to the Deed of Gift in accordance
with this clause.
5A.3 Each party may take such advice and appoint such agents as it thinks
fit in relation to the Claims. All costs and expenses incurred by any
party shall be for the account of the party who incurred them.
5A.4 The reasonable comments and suggestions of the Company shall be
incorporated into the Claim, and JK and SL shall liaise and keep each
other and the Company fully informed in relation to the Claim and
give the other access to all documentation relating thereto at all
reasonable times.
5A.5 JK and SL shall sign the Claim and submit the same to the Inland
Revenue in accordance with clause 5.A.6 below (together with all
documentation and information relevant to and necessary in order for
the Inland Revenue to make a full and proper assessment of the
Claim).
5A.6 The Claims, the tax returns and any amendments thereto of JK and SL
for the year 6 April 1997 to 5 April 1998 shall be submitted to the
Inland Revenue no later than 5 August 1998.
5A.7 Each party shall use all reasonable endeavours to ensure that the
Claim is dealt with and agreed to by the Inland Revenue as early and
as promptly as possible.
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5A.8 In the event that all or any part of a Claim is disallowed by the
Inland Revenue or is ineffective for any reason (whether statutory or
otherwise), JK and SL will, on or before the due date for payment,
pay to the Inland Revenue in full any capital gains tax arising as a
result of the transfers contemplated by the Deed of Gift and in
respect of which their respective Claims were made (together in the
case of late payment, with any interest, fines and penalties thereon)
and will provide the Company with evidence thereof and a copy of the
acknowledgement of receipt of payment of the Inland Revenue.
5A.9 The conduct of any Claim with the Inland Revenue shall be by SL and
JK (as appropriate) or their agents, if they so request the Company
in writing, provided always that the Company shall be kept fully
informed, copied in on all correspondence and entitled to attend all
meetings in relation to the Claim and that in conducting the Claim no
action will be taken which could prejudice the relationship of the
Company with any Taxation Authority or which would be in breach of
any law or regulation. All reasonable comments and suggestions of the
Company shall be taken into account in the conduct of the Claim.
5A.10 The Company and its advisers will from time to time be entitled to
see all documentation and correspondence relating to the Claim in
order to satisfy itself that the Inland Revenue is fully apprised of
all relevant facts.
5A.11 Pending their release in accordance with the provisions of this
clause, the following items of the Consideration shall be held in
escrow as set out below:
(a) the Consideration Shares issued pursuant to clause
3.1.2;
(b) the additional consideration, if any, referred to in
clause 4.1,
collectively referred to as (the "Escrow Assets").
If the Seller demonstrates to the reasonable satisfaction of the
Buyer that the amount of the cash component of the Escrow Assets
(being the additional consideration and the proceeds of any sale of
the Consideration Shares made in accordance with Clause 5.A.12.1) is
in excess of the amount which is reasonably required to satisfy any
actual or potential liability under Section 282(1) TCGA in respect of
the transactions effected by the Deed of Gift, the amount of such
excess shall be paid to the Sellers forthwith on establishing the
amount of the excess.
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5A.12 The Escrow Assets shall be held as follows:
5A.12.1 the certificates representing the Consideration Shares shall be held
by the Sellers' Solicitors, who shall irrevocably undertake to hold
the Consideration Shares in accordance with this agreement and shall
only release them to either the Sellers or the Buyer, as appropriate,
on the happening of the specified events as set out in clauses 5.A.14
to 5.A.16 inclusive below provided that the Sellers shall have the
right to require the release of the Consideration Shares or any part
thereof for the sole purpose of delivery to a buyer of such shares on
arms' length terms and on condition that the full amount of all cash
and all other consideration paid or payable for such shares is
deposited in escrow with the Sellers' Solicitors in substitution for
such released shares on the basis of this clause 5.A; and
5A.12.2 the cash component of the Escrow Assets, if any, shall be held in
escrow by the Sellers' Solicitors, and released to either the Sellers
or the Buyer on the happening of the specified events as set out in
clauses 5.A.14 to 5.A.16 inclusive below.
5A.13 If on or prior to 2 March 2001 the Inland Revenue raises an
assessment or informs the Company by any enquiry under section 9A(1)
of the TMA, notice, claim, other document or in any other way, that
it is or may be liable for Taxation as a result of any transaction
under or contemplated by the Deed of Gift (whether under S.282 TCGA
or otherwise in respect of capital gains tax or tax on chargeable
gains), the Escrow Assets shall continue to be retained in escrow
pending resolution of the issue.
5A.14 If Coopers and Lybrand (or SL and JK's respective tax agents at the
relevant time) (at the Seller's expense) and SL and JK each certify
in writing to the Company and the Buyer that neither SL or JK (not
their respective tax agents) has on or prior to 29 February 2000
received any assessment for capital gains tax or any enquiry pursuant
to Section 9A(1) of the Taxes Management Act 1970 ("TMA") in relation
to the Claims (or either of them) or otherwise in relation to any
potential liability to capital gains tax for JK and SL in respect of
which the Company may be liable pursuant to or as a consequence of
the Deed of Gift, and provided that clause 5.A.6 has been complied
with, the Escrow Assets at that date will be released to the Sellers
in the proportions in which the Consideration is payable to the
Sellers under this agreement.
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5A.15 If the Company is liable for any capital gains tax or tax on
chargeable gains as a result of the Deed of Gift or as a result of
the Claims failing or not being fully effective for any reason
(whether primarily, under Section 282 TCGA, contract, statute or
otherwise) then, without prejudice to its other remedies under the
Deeds of Covenant or the agreement (but so that the Buyer shall not
be paid an amount more than once in respect of the same matter), an
amount (either in cash, or Consideration Shares (valued according to
the closing price of the common stock of the Buyer on Nasdaq, as
calculated from the daily official list, for the seven days up to and
including the last dealing day prior to the date on which their
release is permitted pursuant to this clause, and converted from
dollars into pounds sterling at the closing exchange rate as quoted
in the Wall Street Journal published for such last dealing day), or
both) equal to that liability to Taxation (plus any interest, fines
or penalties chargeable by the Inland Revenue thereon) shall be
released from escrow to the Buyer or such person as the Buyer directs
and the Buyer shall have no further liability to the Sellers for
payment of that amount to the Sellers under this agreement or
otherwise. In the event of any balance of Escrow Assets remaining
after payment of the Taxation in terms of this clause, such balance
shall be released to the Sellers.
5A.16 If at any time the Company receives written confirmation from the
Inland Revenue which is satisfactory to the Company and the Buyer (in
their reasonable opinion) (the "Confirmation") (which they shall be
entitled to request from time to time) that either:
5A.16.1 the Claims are fully valid and effective; or
5A.16.2 all Taxation payable by SL and/or JK pursuant to the transfers
contemplated or effected by the Deed of Gift (together with interest
fines and penalties) has been paid in full; and that
5A.16.3 the Company is not and will not become liable under Section 282 TCGA
for any Taxation as a result or in consequence of the transactions
contemplated or effected by the Deed of Gift,
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the Escrow Assets will (but subject to any other provisions of this
agreement) within 30 days of that receipt be released to the Sellers
(in the proportions in which the Consideration is payable to the
Sellers under this agreement).
5A.17 Save as expressly provided in this clause, any rights of the Company
under this clause are without prejudice to its general rights under
this agreement and the Deeds of Covenant.
5A.18 The payment of a sum to the Company in accordance with clause 5.A.14
in or towards satisfaction of a Claim shall not prejudice or affect
the other rights and remedies of the Company or the Buyer for the
purpose of recovering amounts due from the Sellers and not satisfied
by payments made out of the Escrow Assets.
5A.19 The interest accrued on the cash component of the Escrow Assets shall
belong to, and may be paid out to, the Sellers.
5A.20 All dividends declared and paid in respect the Consideration Shares
shall belong to, and shall be paid to, the Sellers.
6 CONDITIONS AND RESCISSION
6.1 This agreement shall cease to have effect and neither party shall
have any claim under it against the other, except in respect of a
prior breach, if:
6.1.1. by Completion the Buyer notifies the Sellers, or the Sellers'
Solicitors, that it is not satisfied with the results of an
inspection and investigation carried out as to the title of the
Company and/or Loryt to its assets;
6.1.2 by Completion a resolution has not been passed by the Board of the
Buyer approving the purchase of the Shares and creating and giving
authority for the issue of the Consideration Shares; or
6.1.3 by Completion the Buyer shall not have satisfied itself of the
projected fulfilment by the Business of the following financial
requirements:
6.1.3.1 the minimum pro forma EBIT for the twelve months ending 31
January 1999 will be (pound)1 million; and
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6.1.3.2 the minimum projected revenues for the twelve months
ending 31 January 1999 will be (pound)7 million.
6.2 The parties shall use their best endeavours to satisfy, or procure
satisfaction of, the conditions specified in clauses 6.1.2 and 6.1.3.
6.3 The Buyer may rescind this agreement by notice to the Sellers or the
Sellers' Solicitors if, prior to Completion:
6.3.1 a government or a governmental or supranational agency institutes or
threatens proceedings, or a court order or application is made to
restrain, prohibit or otherwise challenge this agreement or to take
action as a result of its implementation; or
6.3.2 it appears that any of the Warranties is not, or was not, correct, or
an act or event occurs which, had it occurred on or before today's
date, would have constituted a breach of the Warranties, or if there
is a material breach or non-fulfilment of the Warranties which (being
capable of remedy) is not remedied prior to Completion.
6.4 Buyer may, in its absolute discretion, waive any condition contained
in this clause which has been included for its benefit, or may waive
any condition on condition that both or either of the Sellers give,
on Completion, a written undertaking to the Buyer in such form and
substance as it requires. The Sellers shall duly and punctually
comply with the undertaking.
7 CONDUCT OF BUSINESS PENDING COMPLETION
Pending Completion, unless otherwise agreed with the Buyer, the
ellers and JK and SL shall:
7.1 procure that the Business is carried on in the same manner as prior
to today's date;
7.2 use their best endeavours to procure that the employees and customers
of the Company continue to be employed by and have dealings with the
Company; and
7.3 procure that the Company and Loryt do not:
7.3.1 create or issue share or loan capital or grants an option in respect
of their share or loan capital;
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7.3.2 create, extend, grant or issue any mortgage, charge, debenture or
other security;
7.3.3 declare, make or pay a dividend or other distribution;
7.3.4 enter into a long-term (being longer than 12 months) or abnormal
contract, other than leases for properties to be let or licensed in
the ordinary course of business;
7.3.5 enter into a contract involving capital expenditure or a capital
commitment in excess of (pound)1,000 in any one case or (pound)5,000
in aggregate (Company only);
7.3.6 enter into any contract (Loryt only);
7.3.7 depart from the usual course of its business or make a material
change in the nature of, or cease carrying on, its business;
7.3.8 pass a resolution of their members in general meeting or make an
alteration to their memorandum or articles of association;
7.3.9 pay any of their directors, officers or employees increased
remuneration or other or additional emoluments or benefits;
7.3.10 acquire assets on hire purchase or deferred sale terms, otherwise
than in the ordinary course of business;
7.3.11 dispose of fixed assets;
7.3.12 permit liens to arise on any of their assets, otherwise than in the
ordinary course of business;
7.3.13 write off or release any debts;
7.3.14 knowingly permit any of their normal insurances to lapse or do
anything to make a policy of insurance void or voidable;
7.3.15 do, procure or allow anything which may cause or constitute a breach
of the Warranties; or
7.3.16 agree to do any of the above.
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8 COMPLETION
8.1 Completion shall take place at the offices of the Sellers' Solicitors
on or before 28 February 1998 when, subject to clause 8.9, all the
transactions mentioned in clauses 8.2 to 8.6 shall take place.
8.2 The Sellers (and JK and SL, where appropriate) shall deliver to the
Buyer:
8.2.1 completed and signed transfers in favour of the Buyer, or as it may
direct, of the Shares, together with the relative share certificates;
8.2.2 the Deeds of Covenant executed RESPECTIVELY by the Sellers and JK and
SL;
8.2.3 the resignations of the directors and the secretaries from their
respective offices in the Company and Loryt with a written
acknowledgement from each of them, executed as a deed in such form as
the Buyer requires, that he has no claim against the Company and/or
Loryt in respect of breach of contract, compensation for loss of
office, redundancy or unfair dismissal or on any other ground;
8.2.4 the resignations of the auditors of the Company and Loryt, if any,
confirming that they have no outstanding claims and containing a
statement under s394 (1) CA that there are no such circumstances as
are mentioned in that section;
8.2.5 if the Buyer so requires, a waiver executed as a deed by each of the
members of the Company and Loryt of any pre-emption or other rights
which he has, under the articles of association of the Company and/or
Loryt or otherwise, in relation to the transfer of the Shares to the
Buyer; and
8.2.6 if the Buyer so requires, a power of attorney executed by each of the
Sellers, and JK and SL, in favour of the Buyer empowering the Buyer
to exercise the Sellers' rights as shareholders of the Company and/or
JK and SL's rights as shareholders of Loryt pending the stamping and
registration of the transfers referred to in clause 8.2.1.
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8.3 There shall be delivered or made available to the Buyer:
8.3.1 the statutory books, books of account, business records (including
records relating to VAT) and documents of record of the Company and
Loryt, complete and up to date, and their certificates of
incorporation and common seals;
8.3.2 the lease documents of the Properties;
8.3.3 the current cheque books of the Company and Loryt, together with
current statements of all their bank accounts with a reconciliation
to Completion, and the appropriate forms to amend, in such manner as
the Buyer requires, the mandates given to the relevant bank; and
8.3.4 written confirmation from the Sellers and, in the case of Loryt, JK
and SL, that there are no obligations or liabilities (whether actual,
contingent or prospective) given or owned by the Company or Loryt as
appropriate in favour of any Related Person, and that, after
compliance with clause 8.4, none of the Related Persons will be
indebted to the Company or Loryt as appropriate and the Company or
Loryt as appropriate will not be indebted to them.
8.4 The Sellers (in respect of the Company) and JK and SL (in respect of
Loryt) shall repay, or procure to be repaid:
8.4.1 all amounts owing at Completion to the Company or by Loryt, as the
case may be, from Related Persons, whether due for payment or not;
and
8.4.2 all amounts owing at Completion by the Company or by Loryt, as the
case may be, to Related Persons, whether due for payment or not.
8.5 JK and SL shall enter into employment contracts with the Company in
the Agreed Forms.
8.6 Board meetings of the Company and Loryt shall be held at which:
8.6.1 William Hullett and Mark Gagne are appointed additional directors;
8.6.2 the transfers referred to in clause 8.2.1 are approved (subject to
stamping); and
8.6.3 the resignations referred to in clauses 8.2.3 and 8.2.4 are submitted
and accepted.
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8.7 Upon completion of the matters referred to in clauses 8.2 to 8.6:
8.7.1 the Buyer shall deliver to the Sellers' Solicitors by telegraphic
transfer the sum of (pound)3,285,000 in respect of the Cash
Consideration; and
8.7.2 an additional copy of this agreement shall be executed for
registration under the Restrictive Trade Practices Act 1976.
8.8 The Buyer shall not be obliged to complete the purchase of any of the
Shares unless the purchase of all the Shares is completed in
accordance with this agreement.
8.9 The Buyer may, in its absolute discretion, waive any requirement
contained in clauses 8.2 to 8.6, or may waive any requirement on
condition that all or any of the Sellers give, on Completion, a
written undertaking to the Buyer in such form and substance as it
requires. The Sellers shall duly and punctually comply with the
undertaking.
8.10 If any of the transactions set out in clauses 8.2 to 8.6 does not
take place as provided, the Buyer may rescind this agreement without
prejudice to its other remedies.
9 WARRANTIES AND INDEMNITY BY THE SELLERS
9.1 Each of the Sellers jointly and severally warrant to the Buyer that:
9.1.1 each Seller has full power and authority to enter into and perform
this agreement and the Deed of Covenant which constitute, or when
executed will constitute, binding obligations on it in accordance
with their respective terms;
9.1.2 the Company Shares constitute the whole of the issued and allotted
share capital of the Company;
9.1.3 there is no pledge, lien or other encumbrance on, over or affecting
the Company Shares and there is no agreement or arrangement to give
or create any such encumbrance and no claim has been made by any
person to be entitled to any of the foregoing; and
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9.1.4 the Sellers will be entitled to transfer the full, legal and
beneficial ownership of the Company Shares to the Buyer on the terms
of this agreement without the consent of a third party.
9.2 JK and SL jointly and severally warrant to the Buyer that:
9.2.1 they have full power and authority to enter into and perform this
agreement which constitute, or when executed will constitute, binding
obligations on them in accordance with their respective terms;
9.2.2 the Loryt Shares constitute the whole of the issued and allotted
share capital of Loryt;
9.2.3 there is no pledge, lien or other encumbrance on, over or affecting
the Loryt Shares and there is no agreement or arrangement to give or
create any such encumbrance and no claim has been made by any person
to be entitled to any of the foregoing; and
9.2.4 JK and SL will be entitled to transfer the full, legal and beneficial
ownership of the Loryt Shares to the Buyer on the terms of this
agreement without the consent of a third party.
9.3 Each of the Sellers, James Koe and Samantha Luff (the "Warrantors")
jointly and severally warrant to the Buyer that:
9.3.1 the Company has no liabilities or obligations (whether actual,
contingent, prospective or otherwise) other than those which are
expressly specified in the Disclosure Letter and reflected in the
Completion Accounts;
9.3.2 except as fully and fairly set out in the Disclosure Letter, the
Warranties are true and accurate in all respects and will continue to
be so on each day up to and including the day of Completion with
reference to the facts and circumstances from time to time applying;
9.3.3 the contents of the Disclosure Letter, and the accompanying
documents, are accurate and fully and clearly disclose everything to
which they relate; and
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9.3.4 Loryt is dormant and has no liabilities or obligations (whether
actual, contingent, prospective or otherwise) other than those which
are expressly specified in the Disclosure Letter; and
9.3.5 the contents of Schedule 1 are true and accurate in all respects.
9.4 The Warrantors shall promptly disclose in writing to the Buyer
anything which arises, or becomes known to him, prior to Completion
and is inconsistent with the Warranties or the contents of the
Disclosure Letter, or which would result in the Warranties not being
accurate at Completion with reference to the facts or circumstances
then applying, or which might be material to be known by a Buyer for
value of the Shares.
9.5 Each of the Warranties is without prejudice to any other Warranty
and, except where expressly stated otherwise, no clause governs or
limits the extent or application of any other clause.
9.6 None of the information supplied by the Company or Loryt or their
professional advisers to the Sellers or JK or SL, or their agents,
representatives or advisers, in connection with the Warranties and
the contents of the Disclosure Letter, or otherwise in relation to
the business or affairs of the Company or Loryt, shall be deemed a
representation as to its accuracy by the Company or Loryt to the
Sellers or JK or SL, and the Sellers and JK and SL waive the claims
against the Company and Loryt which they might otherwise have in
respect of it.
9.7 The Warrantors jointly and severally undertake to the Buyer (for
itself and as trustee for Loryt) to indemnify it and Loryt against
diminution in the value of the assets of, and payments necessarily
made or required to be made by, Loryt or the Buyer as a result of or
in connection with a breach of the Warranties, or required to put
Loryt in the position in which it would have been had there been no
breach of the Warranties, and against any resulting costs and
expenses reasonably incurred by it. This indemnity is without
prejudice to other rights and remedies of the Buyer in relation to
the breach.
9.8 The Warrantors warrant, in relation to any Warranty which refers to
the knowledge, information or belief of the Warrantors, that they
have made full enquiry into the
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subject matter of the Warranty and that they do not have the
knowledge, information or belief in question.
9.9 Without prejudice to the Deed of Covenant the Warrantors undertake to
the Buyer (for itself and as trustee for the Company) to indemnify it
and the Company forthwith on demand in respect of any loss, expense,
reduction in value of any asset or other damage or liability, save as
permitted in clause 7 or reflected in the Completion Accounts,
assessed in each case on a party and party basis which it or the
Company may incur or suffer as a result of or in connection with:
9.9.1 any transaction effected by the Company or the Partnership or act or
omission of the Company or the Partnership prior to Completion;
9.9.2 the gift of the Business from the Partnership to the Company or any
transaction to which Related Persons are a party being challenged
(whether the challenge relates to a sale constituting a transaction
at an undervalue or otherwise);
9.9.3 any payment being made by the Company to or in respect of creditors
of the Business as at Completion which is not included as a liability
in the Completion Accounts;
9.9.4 any pension contribution made or agreed to be made by a Related
Person at or before Completion being unlawful or in excess of any
amount permitted by the Inland Revenue; and
9.9.5 any allotment, issue, redesignation, transfer, capitalisation or
other dealing in or of any share or other securities or purchase of
own shares or other securities by or of the Company or any Related
Person (or any alteration of the share capital of any of them
effected in each case at or before Completion).
9.9.6 any claim made by any employee of the Company or the Partnership
arising out of any acts of omissions of the Sellers, the Partnership
or the Company.
9.10 Each of the Warranties shall continue in full force notwithstanding
Completion.
9.11 A failure by the Buyer to exercise, and/or a delay in exercising, a
right or remedy in respect of a Warranty shall not operate as a
waiver of the right or remedy or the Warranty. A single or partial
exercise of a right or remedy shall not preclude other or
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further exercise of the right or remedy, or the exercise of another
right or remedy.
9.12 The rights and remedies of the Buyer in respect of a breach of the
Warranties shall not be affected by Completion, by any investigation
made by or on behalf of the Buyer into the affairs of the Company or
Partnership except in respect of specific circumstances revealed by
such investigation which the Buyer or its advisors knows constitute a
breach of a Warranty by any failure to exercise or delay in
exercising a right or remedy or by any event or matter, except a
specific and duly authorised written waiver or release, and no single
or partial exercise of a right or remedy shall preclude a further or
other exercise.
9.13 Notwithstanding any rule of law or equity to the contrary, a release,
waiver or compromise or other arrangement which the Buyer agrees to
or effects in relation to one of the Warrantors in connection with
this agreement, and in particular the Warranties, shall not affect
the rights and remedies of the Buyer as regards any other of the
Warrantors.
9.14 Notwithstanding anything in this Agreement to the contrary the
Warrantors shall not be liable for any claim or claims under this
Agreement (other than in relation to the Taxation Warranties, where
the limitations in clause 3 of the Deed of Covenant alone shall
apply), unless:
9.14.1 written particulars thereof giving such details as are then available
to the Buyer of the specific matters in respect of which such claim
is made shall have been given to the Warrantors within a period of
three years after the date hereof in respect of the claims;
9.14.2 proceedings are issued and served on the Warrantors within 12 months
of the particulars referred to in Clause 9.14.1 being given to the
Warrantors; and
9.14.3 the amount of the claim exceeds (pound)5,000 and of all claims
brought in accordance with the foregoing shall exceed (pound)30,000
in aggregate in which event all of such amount shall be subject to
such claims, and not just the excess thereof.
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9.15 The maximum aggregate liability of the Warrantors in respect of all
claims whether under this Agreement or the Deeds of Covenant shall
not exceed a sum equal to the total Consideration:
9.15.1 the maximum aggregate liability of Sunnygate and JK in respect of all
claims whether under this agreement or under the Deed(s) of Covenant
shall not exceed a sum equal to 55% of the total Consideration;
9.15.2 maximum aggregate liability of Crystalsea and SL in respect of all
claims whether under this agreement under the Deed(s) of Covenant
shall not exceed a sum equal to 45% of the total Consideration.
9.16 Any payments made by the Warrantors in satisfaction of any claim for
breach of this Agreement or a claim made under the Deed of Covenant
shall be deemed to be paid as a reduction in the Consideration.
9.17 The Warrantors shall not be liable for any claim in respect of a
breach of this Agreement:
9.17.1 where the claim would not have arisen but for a voluntary act or
omission which could have been avoided or made by the Buyer or any of
its Associates or the Company after Completion otherwise than in the
ordinary course of business and which the Buyer ought reasonably to
have been aware could give rise to a claim; or
9.17.2 where an amount payable in respect of a claim is increased by reason
of the Buyer or the Company failing after due warning to act in
accordance with the written instructions or request of the Warrantors
to the extent of such increase.
9.18 If the Buyer shall make a claim under this Agreement or a claim shall
be made under a Deed of Covenant in respect of the same liability the
Warrantors shall not be liable for more than the full amount of such
liability.
9.19 Notification of claims by the Buyer shall be made to the Warrantors
as soon as reasonably practicable after the facts giving rise to any
such claim come within the knowledge of the Buyer.
9.20 Where the Buyer or the Company has any claim against any third party
in relation to any matter in respect of which there shall have been a
breach or alleged breach
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of this Agreement or a Deed of Covenant or where the Buyer or the
Company receives any claim from a third party which may result in the
Buyer having a claim against the Warrantors in respect of this
Agreement or a Deed of Covenant the Sellers shall be entitled to take
any action and require the Buyer and the Company to take any action
they may reasonably request to prosecute or resist such claim as the
case may be in the name of the Buyer or the Company (as appropriate),
provided that the Sellers indemnify the Buyer or the Company or Loryt
to their satisfaction for any damages or losses incurred in following
the request of the Sellers and provided that such action is at the
expense of the Sellers. The Sellers shall further be entitled at
their own expense to conduct any appeal, dispute, application for
deferment and other forms of objection, compromise or defence thereof
and of any incidental negotiations and the Buyer shall and shall
procure that the Company shall give the Sellers all co-operation,
access and assistance for the purpose of considering prosecuting or
resisting (as the case may be) such claim as they may reasonably
require.
9.21 The amount of any liability of the Warrantors shall be reduced by the
amount actually recovered from the said third party in respect of the
claim against it and by the amount of any relief from Taxation
directly attributable thereto.
9.22 The Buyer undertakes to retain or to procure the retention by the
Company of all such books, records, accounts, correspondence and
other papers of the Company as are likely to be material in the
context of the liability of the Warrantors under this Agreement or
the Deed of Covenant during the subsistence of the liability of the
Warrantors.
10 ASSIGNMENT AND SUCCESSIONS
10.1 If any of the Shares are transferred, the benefit of the Warranties
may be assigned to the transferee provided that it is an Associate of
the Buyer who shall accordingly be entitled, for so long as it
continues to be an Associate of the Buyer, to enforce them against
the Sellers as if he were named in this agreement as the Buyer.
10.2 The Sellers may transfer any of their rights under this agreement
provided that no such transfer shall effect any liability they may
have in respect of any obligation
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under this agreement, including the obligation to make any payment
pursuant to clause 9 or Schedule 2 of this agreement or under the
Deed(s) of Covenant.
10.3 This agreement binds each party's successors and assigns and personal
representatives (as the case may be).
10.4 Except as expressly provided above in clause 10.1, none of the rights
of the parties under this agreement or the Warranties may be
transferred.
11 RESTRICTIVE AGREEMENT
11.1 To assure to the Buyer the full benefit of the Business and goodwill
of the Company and Loryt, each of JK and SL undertakes by way of
further consideration for the obligations of the Buyer under this
Agreement as a separate and independent agreement that he will not,
directly or indirectly:
11.1.1 disclose to another person, or himself use for any purpose, and shall
use all reasonable endeavours to prevent the publication or
disclosure of, any Confidential Information of which he has knowledge
by reason of or in connection with this agreement or his employment
by the Company;
11.1.2 at any time during the Restricted Period or, if ending on a date
later than the end of the Restricted Period, during the Restricted
Post Employment Period:
11.1.2.1 hold a Material Interest in any business the same as or in
competition with the Business and/or BridgeStreet Business
in any country in which the BridgeStreet Business shall
operate as at the Start Date;
11.1.2.2 hold a Material Interest in any business the same as or in
competition with the Business and/or BridgeStreet Business
in any town or city in which the Company, the Buyer or any
Associate of either of them has formulated plans to
commence operations, directly or indirectly, within 12
months of the Start Date;
11.1.2.3 in relation to any business the same as or in competition
with the Business and/or BridgeStreet Business perform or
supply any services or supply goods to any person, firm or
company who shall have been a client or customer of the
Company as at the Start Date or
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at any time during the 12 month period immediately prior
to the Start Date;
11.1.2.4 in relation to any business the same as or in competition
with the Business and/or BridgeStreet Business canvass,
solicit or approach or cause to be canvassed, solicited or
approached for the purpose of obtaining business, orders,
or custom any person, firm or company who shall have been
a client or customer of the Company or the Partnership as
at the Start Date or at any time during the 12 month
period immediately prior to the Start Date; or
11.1.2.5 in relation to any business the same as or in competition
with the Business and/or BridgeStreet Business offer
employment to or employ or offer or conclude any contract
for services with any Senior Executive with whom the
relevant Partner had had contact or dealings within the 12
months prior to the Start Date or facilitate the making of
such an offer by any person, firm or company;
For the purposes of this clause 11.1.2 "customers" shall include
prospective customers to whom the Company has either made a specific
proposal for that prospective customer which is capable of acceptance
or has given them an unconditional offer and from whom it has not
received acceptance of that offer.
11.2 The Partners agree that the covenants and undertakings contained in
clause 11.1 are reasonable and are entered into for the purpose of
protecting the goodwill of the Business of the Company and that
accordingly, the benefit of the covenants and undertakings may be
assigned by the Buyer and its successors in title without the consent
of the Partners to any transferee of the Shares.
11.3 Each covenant and undertaking contained in clause 11.1 shall be
construed as a separate covenant or undertaking. If one or more of
them is held to be against the public interest or unlawful or an
unreasonable restraint of trade, the remaining covenants and
undertakings shall continue to bind the Partners.
11.4 If a covenant or undertaking contained in clause 11.1 is void but
would be valid if the period of application were reduced or if some
part of it were deleted, the
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covenant or undertaking in question shall apply with such
modification as is necessary to make it valid.
12 ANNOUNCEMENTS
12.1 No announcement shall be made by the Sellers in relation to this
agreement, except as specifically agreed between the parties. The
Buyer shall be entitled to make, at its sole discretion, such
announcements as it deems fit.
12.2 If this agreement ceases to have effect, the Buyer shall release and
return to the Company all documents (including information in
electronic form) concerning it provided to the Buyer or its advisers
in connection with this agreement and will not use or make available
to another person information which it or its advisers have been
given in respect of the Company and which is not in the public
domain.
13 INFORMATION
The Sellers shall procure that, prior to Completion, the Buyer, its
agents, representatives, accountants and solicitors are given
promptly on written request all such facilities and information
regarding the business, assets, liabilities, contracts and affairs of
the Company, and of the documents of title and other evidence of
ownership of their assets, as the Buyer reasonably requires in
writing.
14 COSTS
Expenses incurred by or on behalf of the parties, including the fees
of agents, representatives, solicitors, accountants and actuaries
employed by any of them in connection with the negotiation,
preparation or execution of this agreement, shall be borne by the
party who incurred the liability, and the Company shall not have any
liability for them, either prior to or post Completion.
15 TIME OF THE ESSENCE
Time is of the essence of this agreement, both as regards the dates
and periods specifically mentioned and as to any dates and periods
which, by agreement in writing between or on behalf of the Sellers
and the Buyer, are substituted for them.
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16 COMMUNICATIONS
16.1 All communications between the parties with respect to this
agreement shall:
16.1.1 be delivered by hand, or sent by airmail post to, the address of the
addressee as set out in this agreement or to such other address as
the addressee notifies for the purpose of this clause; or
16.1.2 be sent by fax to the fax number stated below or as notified for the
purpose of this clause.
16.2 Communications shall be deemed to have been received as follows:
16.2.1 (if sent by airmail post) five business days after posting;
16.2.2 (if delivered by hand) on the day of delivery, if delivered at least
two hours before the close of business hours on a business day, and
otherwise on the next business day;
16.2.3 (if sent by fax) at the time of transmission, if received at least
two hours before the close of business hours on a business day, and
otherwise on the next business day.
For this purpose, "business day" means a day on which the clearing
banks in the City of London are open for business and "business
hours" means between the hours of 09.00 and 18.00 inclusive, local
time.
16.3 Communications to the Sellers which are delivered or sent in
accordance with clause 16.1 to the Seller who is first named in this
agreement shall be deemed to have been sent to both Sellers, and
shall also be copied to Mr R Foster, Farrer & Co, 66 Lincoln's Inn
Fields, London WC2A 3LH.
16.4 Communications addressed to the Buyer shall be marked for the
attention of Mark Gagne, copied to Mr N Eisenberg, Berwin Leighton,
Adelaide House, London Bridge, London EC4R 9HA.
16.5 The fax numbers referred to in clause 16.1 are:
for the Sellers: 01624 689601
for the Buyer: 00 1 440 542 0317.
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17 INVALIDITY
If a term in or provision of this agreement is held to be illegal or
unenforceable, in whole or in part, under an enactment or rule of
law, it shall to that extent be deemed not to form part of this
agreement and the enforceability of the remainder of this agreement
shall not be affected.
18 RESTRICTIVE TRADE PRACTICES ACT
If this agreement is registrable under the Restrictive Trade
Practices Act 1976 ("the Act") no provision contained or implied in
this agreement which constitutes a relevant restriction for the
purposes of the Act shall come into effect until the day after
particulars of this agreement have been furnished to the Director
General of Fair Trading in accordance with the Act. In this clause,
"this agreement" includes any deed, agreement or arrangement which
together with this document constitutes a single agreement for the
purposes of the Act.
19 COUNTERPARTS
This agreement may be executed in any number of separate
counterparts, each of which when executed and delivered shall be an
original, but all the counterparts shall together constitute one and
the same instrument.
20 PROPER LAW
The construction, validity and performance of this agreement are
governed by the laws of England and the parties submit to the
non-exclusive jurisdiction of the English courts.
Signed and delivered as an agreement on the date of this document by
the parties, or their duly authorised representatives on the date of
this agreement.
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SCHEDULE 1
PART 1
DETAILS OF THE COMPANY
COMPANY NUMBER: 3418582
DATE OF INCORPORATION: 13 August 1997
<TABLE>
<CAPTION>
SHARE CAPITAL: AUTHORISED ISSUED
<S> <C> <C>
100 ordinary shares of (pound)1 each 100 ordinary shares of (pound)1 each
REGISTERED OFFICE: 7 Cheval Place
Knightsbridge
London SW7 1EW
DIRECTORS: James Koe
Samantha Luff
SECRETARY: Samantha Luff
SHAREHOLDERS Crystalsea Ltd 45 ordinary shares of (pound)1 each
Sunnygate Ltd 55 ordinary shares of (pound)1 each
</TABLE>
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<PAGE> 39
SCHEDULE 1
PART 2
DETAILS OF LORYT
COMPANY NUMBER: 2267730
DATE OF INCORPORATION: 15 June 1988
<TABLE>
<CAPTION>
SHARE CAPITAL: AUTHORISED ISSUED
<S> <C> <C>
10,000 ordinary shares of (pound)1 each 100 ordinary shares of (pound)1 each
REGISTERED OFFICE: 7 Cheval Place, Knightsbridge,
London SW7 1EW
DIRECTORS: James Koe
Samantha Luff
Michael Koe
SECRETARY: Samantha Luff
SHAREHOLDERS: James Koe 55 ordinary shares of (pound)1 each
Samantha Luff 45 ordinary shares of (pound)1 each
</TABLE>
38
<PAGE> 40
SCHEDULE 2
WARRANTIES
PART 1
ACCOUNTS
1 ACCOUNTING REFERENCE DATE
The accounting reference date of the Company for the purposes of s224
CA is and has always been 30 April.
2 BOOK DEBTS
The Company has no book debts, save as set out in Schedule 6, which
is to be adjusted upon finalisation of audit.
3 BOOKS AND RECORDS
The accounts, books, ledgers, financial and other records of the
Company and Loryt and the Business:
3.1 are in its possession or held to its order;
3.2 have been fully and accurately kept;
3.3 do not contain material inaccuracies; and
3.4 show a true and fair view of its trading transactions and its
financial, contractual and trading position.
PART 2
CORPORATE MATTERS
1 DIRECTORS AND SHADOW DIRECTORS
1.1 only directors of the Company and Loryt (including shadow directors
(within the meaning of s741 CA)) are the persons whose names are
listed in relation to the Company and Loryt in schedule 1.
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<PAGE> 41
2 SUBSIDIARIES, ASSOCIATIONS AND BRANCHES
2.1 Neither the Company nor Loryt:
2.1.1 is the holder or beneficial owner of or has agreed to acquire share
or loan capital of a body corporate; or
2.1.2 has outside the United Kingdom a branch, agency or place of business,
or a permanent establishment (as that expression is defined in the
relevant double taxation relief order).
2.2 There are no Subsidiaries of the Company or Loryt.
3 OPTIONS OVER THE COMPANY'S OR LORYT'S CAPITAL
Except as required by this agreement, there are no agreements or
arrangements in force which provide for the issue, allotment or
transfer of, or grant to any person the right (whether conditional or
otherwise) to call for the issue, allotment or transfer of, share or
loan capital of the Company or Loryt (including an option or right of
pre-emption or conversion).
4 ISSUES OF CAPITAL
4.1 None of the Shares was issued at a discount.
4.2 Save for the Shares, no share or loan capital has been issued or
allotted, or agreed to be issued or allotted, by the Company or Loryt
since 31 December 1996.
5 TRANSFERS OF SHARES
None of the Shares was, or represents assets which were, the subject
of a transfer at an undervalue (within the meaning of sections 238 or
339 of the Insolvency Act 1986).
6 SINGLE MEMBER COMPANIES
Neither the Company nor Loryt has ever had only one member.
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7. COMMISSIONS
No one is entitled to receive from the Company or Loryt a finder's
fee, brokerage or other commission in connection with the sale and
purchase of the Shares under this agreement.
8 MEMORANDUM AND ARTICLES OF ASSOCIATION, STATUTORY BOOKS AND
RESOLUTIONS
8.1 The copy of the memorandum and articles of association of the Company
and Loryt attached to the Disclosure Letter is accurate and complete
and has embodied in it, or annexed to it, a copy of every resolution
which is referred to in s380 CA.
8.2 The register of members and other statutory books of the Company and
Loryt have been properly kept and contain an accurate and complete
record of the matters with which they should deal.
8.3 No notice or allegation has been received that the statutory books of
the Company or Loryt are incorrect or should be rectified.
8.4 Since incorporation no alteration has been made to the memorandum or
articles of association of the Company and Loryt and no resolution of
the shareholders of the Company or Loryt has been passed (other than
resolutions relating to routine business at annual general meetings).
8.5 Neither the Company nor Loryt has passed an elective resolution,
under s379A CA, which remains in force.
8.6 Notice of any written resolution passed or to be passed by the
Company or Loryt on or after 1 April 1990 was duly given to its
auditors in accordance with s381 CA and no notice of objection was
given by the auditors.
9 DOCUMENTS FILED
9.1 All returns, particulars, resolutions and documents required by the
Companies Acts or any other legislation to be filed with the
Registrar of Companies, or other authority, in respect of the Company
or Loryt have been duly filed and were correct.
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9.2 Both the Company and Loryt have complied with the Companies Acts, and
other legal requirements, in connection with its formation, the
allotment or issue of shares, debentures and other securities, the
payment of dividends and the conduct of its business.
9.3 All charges in favour of the Company or Loryt have (if appropriate)
been registered in accordance with ss395, 409, 410 and 424 CA.
10 POSSESSION OF DOCUMENTS
All title deeds and other documents indicating title relating to the
Assets, and an executed copy of all agreements to which the Company
or Loryt is a party, and the original copies of all other documents
which are owned by, or which ought to be in the possession of, the
Company or Loryt are in its possession or held to its order.
11 INVESTIGATIONS
No investigations or enquiries by, or on behalf of, a governmental or
other body in respect of the affairs of the Company or Loryt are
taking place or pending.
12 INFORMATION DISCLOSED TO BUYER CORRECT
12.1 All information given by any of the Sellers, JK, SL, the Sellers'
Solicitors or Accountants or the auditors of the Company to the
Buyer, the Buyer's Solicitors or the Buyer's Accountants relating to
the business, activities, affairs, or assets or liabilities of the
Business, the Company and Loryt, as listed in the Disclosure Letter,
was, when given, and remains accurate and complete.
12.2 There is nothing material in relation to the assets, business or
financial condition of the Company or Loryt, of which the Warrantors
are aware, which has not been fully and fairly disclosed in writing
to the Buyer, the Buyer's Solicitors or the Buyer's Accountants and
which, if disclosed, might reasonably have been expected to affect
the decision of the Buyer to enter into this agreement.
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PART 3
TAXATION
In this Part 3 references to the Company mean each of London Life Apartments
Limited and Loryt (1) Limited save where expressly stated to the contrary.
1 ADMINISTRATION
1.1 All returns, notifications, computations and payments which should
have been made or given by the Company for Taxation purposes were
made or given within the requisite periods and are up to date,
correct and on a proper basis; and none of them is, or is likely to
be, the subject of a dispute with a Taxation authority.
1.2 All particulars furnished to the Taxation authorities, in connection
with the application for a consent or clearance on behalf of the
Company, or affecting the Company, fully and accurately disclosed all
everything material; the consent or clearance is valid and effective;
and the transaction for which consent or clearance was obtained has
been carried into effect (if at all) only in accordance with the
terms of the relative application and consent or clearance.
1.3 The Company has not:
1.3.1 been the subject of an investigation, discovery or access order by or
involving a Taxation authority and there are no circumstances which
make it likely that an investigation, discovery or order will be
made;
1.3.2 paid or, since incorporation, become liable to pay a penalty or
interest charged under a Taxation statute.
1.4 The Company has properly operated the PAYE system, by duly deducting
tax and national insurance contributions from all payments made, or
treated as made, to its employees or former employees, and accounting
to the Inland Revenue for the tax and national insurance
contributions deducted and for tax chargeable on benefits provided
for its employees or former employees.
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<PAGE> 45
1.5 The Company has sufficient records relating to past events to
calculate the liability to Taxation or relief from Taxation which
would arise on a disposal or realisation of assets or a discharge of
liabilities.
1.6 The Company has complied with the following sections, and the
regulations made under them, and has made and accounted for the
deductions and retentions which they specify or require:
1.6.1 s78 TMA (method of charging non-residents) and s79 (profits from
branch or agency);
1.6.2 s43 ICTA (non-residents);
1.6.3 s349 ICTA (payments not out of profits or gains brought into charge
to income tax and annual interest);
1.7 No elections are in force in relation to the Company under s247 ICTA
(dividends etc paid by one member of a group to another).
1.8 The Company has not received a notice under s23 ICTA (collection from
lessees and agents) which is outstanding.
1.9 All Taxation which ought to have been paid has been paid.
1.10 The Company is and has always only been resident for Taxation
purposes in the United Kingdom and has not been and is not subject or
liable to Taxation in any other jurisdiction.
1.11 The Company does not and has never held any shares in any other
company.
1.12 The Company was incorporated on 13 August 1997. Since that date the
only transactions to which it was a party were:
1.12.1 the transactions pursuant to the Deed of Gift; and
1.12.2 carrying on the normal Business as acquired pursuant to the Deed of
Gift.
1.13 The Disclosure Letter sets out details of all arrangements between
the Company and any Taxation authority.
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<PAGE> 46
1.14 There are no circumstances whereby the Company is or may become
liable for a Taxation liability of any other person.
1.15 The deferred tax liability of the Company is not more than
(pound)1,500,000.
1.16 The tax computations of the Business for the last three years are set
out in the Disclosure Letter.
1.17 Loryt (1) Limited is a dormant company and has no liability to income
or corporation tax or in respect of supplies for VAT purposes.
2 TAXATION CLAIMS, LIABILITIES AND RELIEFS
2.1 The Disclosure Letter contains full and accurate details of all
matters relating to Taxation in respect of which the Company (either
alone or jointly with another person) is, or at Completion will be,
entitled:
2.1.1 to make a claim (including a supplementary claim) for, disclaimer of
or election for relief under a Taxation statute;
2.1.2 to elect to treat machinery or plant as a short-life asset within s37
CAA (election for certain machinery or plant to be treated as
short-life assets).
2.2 The Company has not, nor will become liable to pay, or to reimburse
or indemnify any person in respect of Taxation in consequence of the
failure by another person to discharge that Taxation, where the
Taxation relates to a profit, income or gain arising or deemed to
have arisen or anything occurring or deemed to have occurred (whether
wholly or partly) prior to Completion.
2.3 No relief from Taxation has been claimed or given to the Company,
which could be withdrawn, postponed or restricted as a result of
anything arising or occurring at or after Completion.
3 DISTRIBUTIONS AND DEDUCTIBILITY OF PAYMENTS
3.1 The Company has not since incorporation paid any dividend or made any
distribution.
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<PAGE> 47
3.2 The Company has not repaid, or agreed to repay, or redeemed, or
agreed to redeem, shares, or capitalised or agreed to capitalise
profits or reserves in the form of redeemable shares or debentures.
3.3 No rents, interest, annual payments or other sums of an income nature
paid, or payable, since incorporation by the Company, or which the
Company is under an obligation to pay are or may be wholly or
partially disallowable as deductions in computing profits or as
charges against profits for the purposes of corporation tax by reason
of:
3.3.1 s74 ICTA (general rules as to deductions not allowable);
3.3.2 s338 ICTA (allowance of charges on income and capital);
3.3.3 s770 ICTA (sales etc at an undervalue or overvalue);
3.3.4 ss779 to 785 ICTA (leased assets);
3.3.5 s787 ICTA (restriction of relief for payments of interest);
or otherwise.
3.4 The Company has not received a capital distribution to which s189
TCGA (capital distribution of chargeable gains: recovery of tax from
shareholder) could apply.
3.5 The Company has not incurred expenditure which was not or will not be
wholly deductible in computing, or against, profits as a trading
expense or expense of management, or as a charge on income, or in
computing income for the purposes of schedule A, except for
expenditure on the acquisition of an asset to be held otherwise than
as stock-in-trade, details of which are set out in the Disclosure
Letter.
4 CARRY-FORWARD OF LOSSES AND ACT
4.1 There has not been in the past three years a major change in the
nature or conduct of the trade or business of the Company such as
might prevent the carry forward or back of advance corporation tax,
trading losses or excess management expenses.
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<PAGE> 48
5 LOAN RELATIONSHIPS
5.1 Where the Company which is a party to a loan relationship (within the
meaning of, s81 FA 1996 (meaning of "loan relationship" etc)), it
uses as respects the loan relationship in its statutory accounts a
basis of accounting which is or equates to an authorised accounting
method under s85 FA1996 (authorised accounting methods).
5.2 The Company has not, in respect of a loan relationship within the
meaning of s81 FA 1996 (meaning of "loan relationship" etc), applied:
5.2.1 an authorised accounting method inconsistently or otherwise in a
materially different way in successive accounting periods; or
5.2.2 used a different authorised accounting method for the same or
successive accounting periods;
as provided by s89 FA 1996 (inconsistent application of accounting
methods).
5.3 The Company is not required to use an authorised accruals basis of
accounting as respects a creditor relationship by virtue of s87 FA
1996, (accounting method where parties have a connection).
5.4 The Company has not received a payment of interest on which it bore
income tax by deduction and in relation to which interest a credit
has been brought into account for the purchasers of Ch II FA 1996
(loan relationships) for an accounting period ending more than two
years before the date of the receipt.
5.5 The Company is not subject to a restriction as to the amount of the
loss that it may bring into account in respect of a loan relationship
by virtue of Schedule 9, para 10 FA 1996 (imported losses etc).
5.6 The Company has not acquired or disposed of rights or liabilities in
respect of a loan relationship where the company from which it made
the acquisition or to which it made the disposal was a member of the
same group companies within the meaning of Schedule 9 para 12 FA 1996
(continuity of treatment: groups etc).
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5.7 The Company has not been a party to a loan relationship which had an
unallowable purpose within the meaning of Schedule 9 para 13 FA 1996
(loan relationships for unallowable purposes).
6 CLOSE COMPANIES
6.1 The Company has not, since incorporation, made a distribution within
s418 ICTA (`distribution' to include certain expenses of close
companies).
6.2 The Company has not made or agreed to make a loan or advance within
Pt XI, Ch II ICTA (charges to tax in connection with loans) or, since
incorporation, released or written off the whole or part of the debt
in respect of such a loan or advance.
7 CAPITAL ALLOWANCES
7.1 All expenditure which the Company has incurred or may incur under a
subsisting commitment on the provision of machinery or plant has
qualified or will qualify (if not deductible as a trading expense of
a trade carried on by the relevant Company) for writing-down
allowances under s24 CAA (writing-down allowances and balancing
adjustments).
7.2 All capital allowances made or to be made to the Company in respect
of capital expenditure incurred, or to be incurred under a subsisting
commitment, have been made, or will be made, in taxing its trade.
7.3 Since incorporation:
7.3.1 the Company has not done, omitted to do, agreed to do or permitted to
be done anything as a result of which a disposal value may be brought
into account under s24 CAA (writing-down allowances and balancing
adjustments), or there may be any recovery of excess relief under s46
CAA (recovery of excess relief: new expenditure);
7.4 The Company is not, nor may be in dispute with another person as to
the entitlement to capital allowances under s51 CAA (application and
interpretation of Chapter VI: fixtures).
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<PAGE> 50
7.5 The Company has not made an election under s53 CAA (expenditure
incurred by equipment lessor) or s55 (expenditure incurred by
incoming lessee: transfer of allowances) in relation to fixtures.
7.6 No election has been made by the Company or agreed to have been made
under Section 59 B Capital Allowances Act 1990 or by any other person
on or after 24 July 1996.
8 TRANSACTIONS NOT AT ARM'S LENGTH
8.1 The Company has not carried out, nor been engaged in, a transaction
or arrangement to which s770 ICTA (sale etc. at an undervalue or
overvalue) has been or may be applied.
8.2 The Company does not own, nor has agreed to acquire, an asset, nor
has received or agreed to receive services or facilities (including
the benefit of licences or agreements), the consideration for the
acquisition or provision of which was or will be in excess of its
market value or determined otherwise than on an arm's-length basis.
8.3 The Company has not disposed of or acquired an asset in such
circumstances that s17 TCGA (disposals and acquisitions treated as
made at market value) could apply.
9 BASE VALUES AND ACQUISITION COSTS
9.1 If each of the capital assets of the Company was disposed of at
Completion for a consideration equal to its book value, no liability
to corporation tax on chargeable gains or balancing charge under CAA
(if each asset was treated as if used for the purpose of a separate
trade) would arise; and, for the purpose of determining the liability
to corporation tax on chargeable gains, there shall be disregarded
reliefs and allowances available to the Company other than amounts
falling to be deducted under s38 TCGA (acquisition and disposal costs
etc).
9.2 The Company has not, since incorporation, other than pursuant to the
Deed of Gift, engaged in a transaction in respect of which there may
be substituted, for Taxation purposes, a consideration which is
different from the actual consideration given or received by it.
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10 TAX AVOIDANCE
10.1 The Company has not, since incorporation, engaged in or been a party
to a scheme or arrangement of which the main purpose, or one of the
main purposes, was the avoidance of, or a reduction in liability to,
Taxation; and, in particular, the Company has not been a party to, or
otherwise involved in, a transaction to which any of the following
provisions has been or could be applied:
10.1.1 s116 ICTA (partnerships involving companies: arrangements for
transferring relief) or s395 ICTA (leasing contracts and company
reconstructions);
10.1.2 s779 ICTA (sale and lease-back: limitation on tax reliefs);
10.1.3 s75 CAA (further restrictions on allowances);
10.1.4 s29 TCGA (value shifting: general provisions); or
10.2 The Company has not, since incorporation, been a party to a
transaction to which any of the following provisions has been or
could be applied other than transactions in respect of which all
necessary consents or clearances were obtained:
10.2.1 ss703 to 709 ICTA (cancellation of tax advantages from certain
transactions in securities);
10.2.2 s765 ICTA (migration etc of companies); 10.2.3 s776 ICTA
(transactions in land: taxation of capital gains);
10.2.4 ss135 to 138 TCGA (company reconstructions and amalgamations); or
10.2.5 s139 TCGA (reconstruction or amalgamation involving transfer of
business).
11 SALE AND LEASEBACK OF LAND
The Company has not, since incorporation, entered into a transaction
to which s780 ICTA (sale and lease-back: taxation of consideration
received) has been or could be applied.
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12 FOREIGN COMPANIES
12.1 The Company shall not be deemed to have made a disposal of its assets
since incorporation under s185 TCGA (deemed disposal of assets on
company ceasing to be resident in UK).
12.2 The Company shall not be liable under s187 TCGA (postponement of
charge on deemed disposal under section 185) for the payment of the
tax arising on a company which is not the Company ceasing to be
resident in the United Kingdom.
13 CHARGEABLE GAINS
13.1 No asset owned or agreed to be acquired by the Company (other than
plant and machinery in respect of which it is entitled to capital
allowances) is a wasting asset within the meaning of s44 TCGA
(meaning of "wasting asset").
13.2 The Company is not owed a debt (not being a debt on a security), upon
the disposal or satisfaction of which a liability to corporation tax
on chargeable gains will arise by reason of s251 TCGA (debts: general
provisions).
13.3 The Company has claimed or is entitled to claim under s253 TCGA
(relief for loans to traders) or s254 TCGA (relief for debts on
qualifying corporate bonds) that an allowable loss has accrued in
respect of a loan made by it.
13.4 The base cost of any assets of the Company for the purposes of
corporation tax on chargeable gains is nil save for the assets
acquired since 16 January 1998 in respect of which the base cost will
be the acquisition cost of such assets. 13.5
13.5 No charge under Sections 179, 185 or 189 TCGA or Section 132 Finance
Act 1988 (Company ceasing to be a member of a group or becoming non
resident) will arise on the Company by reason of execution or
Completion or any of the other transactions contemplated by this
agreement.
14 LOSSES
14.1 The Company has not incurred a capital loss to which s18(3) TCGA
(transactions between connected persons) is applicable.
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14.2 The Company is not treated as a limited partner under s118 ICTA
(restriction on relief: companies).
14.3 The Company had not immediately prior to the execution of this
agreement an allowable loss which was a pre-entry loss within the
meaning of schedule 7A TCGA (restriction on set-off of pre-entry
losses).
15 REPLACEMENT OF BUSINESS ASSETS
The Company has not made a claim under:
15.1 s23 TCGA (receipt of compensation and insurance money not treated as
a disposal);
15.2 s152 TCGA (replacement of business assets: roll-over relief);
15.3 s153 TCGA (assets only partly replaced);
15.4 s154 TCGA (new assets which are depreciating assets);
15.5 s247 TCGA (roll-over relief on compulsory acquisition);
which would affect the amount of the chargeable gain or allowable
loss which would, but for the claim, have arisen on a disposal of any
of its assets.
16 VALUE ADDED TAX
16.1 The Company:
16.1.1 has duly registered and is a taxable person for the purposes of value
added tax, and is not and never has been a member of a group for VAT
purposes;
16.1.2 has complied in all material respects with the statutory
requirements, orders, provisions, directions and conditions relating
to value added tax; and
16.1.3 maintains complete, correct and up-to-date records for the purposes
of the relevant legislation.
16.2 The Company:
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16.2.1 is not in arrears with a payment or return, or liable to an abnormal
or non-routine payment, or a forfeiture or penalty, or to the
operation of a penal provision;
16.2.2 has not been required by the Commissioners of Customs and Excise to
give security;
16.2.3 is not, nor has agreed to become, an agent (for the purposes of s47
VATA (agents, etc.)) for the supply of goods for a person who is not
a taxable person.
16.3 No direction has been given, and there are no grounds under which one
may be given, by Customs and Excise under Schedule 9A VATA
(anti-avoidance provisions: Groups) as a result of which the Company
would be treated for the purposes of value added tax as a member of a
group which includes a company which is not the Company or as not
being a member of the group with the other Group Companies.
16.4 The Disclosure Letter contains full and accurate particulars of
claims for bad debt relief made, or which may be made, by the Company
under s36 VATA (bad debts).
16.5 No document has left the possession of the Company which, if
improperly used by a third party, would lead to a liability on its
part to pay an amount of value added tax under Schedule 11 para 5
VATA (recovery of vat, etc) which, but for the use, would not have
been payable by it.
16.6 The Company:
16.6.1 has not within the past twelve months received a surcharge liability
notice under s59 VATA (the default surcharge);
16.6.2 will not be liable to a penalty under s63 VATA (penalty for
misdeclaration or neglect resulting in VAT loss for one accounting
period equalling or exceeding certain amounts); or
16.6.3 has not received a penalty liability notice under s64 VATA (repeated
misdeclarations) or has made a return which contains a material
inaccuracy within the meaning of that section.
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16.7 The Company has not given a certificate for value added tax purposes
falling within s62 VATA (incorrect certificates as to zero rating
etc).
16.8 The Company has not made a claim for repayment of value added tax
under s80 VATA (recovery of overpaid VAT) which has not been
satisfied and in respect of which the Commissioners of Customs and
Excise have raised or could raise the defence of unjust enrichment.
16.9 The Company or other body corporate which, in relation to the
Company, is or has been a relevant associate (as defined in Schedule
10 para 3 VATA (election to waive exemption)):
16.9.1 has not made an election to waive exemption under Schedule 10 para 2
VATA (election to waive exemption); or
16.9.2 does not own (nor has agreed to acquire, whether conditionally or
otherwise, or granted an option to another person to require it to
acquire) an interest in, right over or licence to occupy a building
or land which has been or will be granted to the Company by another
person who has made or, so far as the Company is aware, will make in
relation to all or any part of the building or land an election to
waive exemption under para 2.
16.10 The Company is not a developer (within the meaning of Schedule 10
para 5 VATA (developers of certain non-residential buildings etc)) in
relation to a building or civil engineering work (but excluding a
building or work construction of which was commenced before 1 August
1989 or a building or work in which the fee simple was granted before
the date of this agreement where that grant was a taxable supply
(other than a zero-rated supply)) for value added tax purposes,
otherwise than by reason of an election under Schedule 10 para 2 VATA
(election to waive exemption).
16.11 The Company has not acquired or brought into use on or after 1 April
1990 a computer or item of computer equipment costing (pound)50,000
or more or land or buildings (or parts of buildings) costing
(pound)250,000 or more.
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16.12 The net total of all errors required by law to be corrected in value
added tax returns submitted by the Company (adding up all
under-declarations and subtracting all over-declarations) does not
exceed (pound)500.
16.13 The Disclosure Letter sets out the percentage of taxable and exempt
supplies by the Company for VAT purposes since incorporation,
together with details of each of the types of supplies and VAT
treatment for all periods since incorporation.
16.14 The Company has all the VAT records of the Business and no request
was made or will be made for the VAT records of the Business to be
kept by the [Warrantors or the Partnership] pursuant to S 49 Of the
VATA.
17 INHERITANCE TAX
17.1 The Company has not made a transfer of value (as defined in s3 ITA
(transfers of value)).
17.2 No Inland Revenue charge for unpaid inheritance tax (as provided by
ss237 and 238 ITA (Inland Revenue charge for unpaid tax)) is
outstanding over an asset of the Company or in relation to shares in
the capital of the Company.
17.3 No circumstances exist whereby a power mentioned in s212 ITA (powers
to raise tax) could be exercised in relation to shares, securities or
other assets of the Company or could be exercised but for s264(6) ITA
(limitation of liability).
18 STAMP DUTY
18.1 Since incorporation the Company has not made a claim for relief or
exemption under s42 FA 1930 (relief from transfer stamp duty in case
of transfer of property as between associated companies).
18.2 All documents which affect the right, title or interest of the
Company to or in its properties, undertaking or assets, or to which
the Company is a party, and which attract stamp duty have been duly
stamped regardless or not of whether within the requisite period for
stamping, without interest or penalty, has expired.
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18.3 The Company is not a party to a document held outside the United
Kingdom which, if brought into the United Kingdom, would be liable to
stamp duty under section 14(4) of the Stamp Act 1891 (terms upon
which instruments not duly stamped may be received in evidence).
19 INSURANCE PREMIUM TAX
19.1 The Company:
19.1.1 is not nor has been registered or liable to be registered for the
purposes of insurance premium tax under s53 FA 1994 (registration of
insurers);
19.1.2 has not given nor is liable to give a notification to the
Commissioners of Customs and Excise under s53(2) FA 1994;
19.1.3 has not been nor is or has agreed to become an insurer's tax
representative within s57 FA 1994 (tax representatives);
19.1.4 is not nor has been treated as a member of a group for the purposes
of insurance premium tax within s63 FA 1994 (groups of companies); or
19.1.5 has not received nor could receive a liability notice within s65 FA
1994 (liability of insured in certain cases).
20 ACQUISITION OF THE BUSINESS
20.1 The transfer of the Business to the Company by the Partnership was
effected as a transfer of a business as a going concern for value
added tax purposes pursuant to Section 49 VATA and Article 5 Value
Added Tax (Special Provisions) Order 1995, to the effect that no VAT
was or will be payable by the Company thereon.
20.2 No stamp duty liability arose or will arise in the Company by reason
of the transfer of the Business to the Company. The appropriate
certificate for exemption under item L of Stamp Duty (Exempt
Instruments) 1987 was included in the Deed of Gift.
20.3 The transfers by Samantha Luff and James Koe to the Company pursuant
to the Deed of Gift are and will be eligible for relief under section
165 TCGA and there are no circumstances whereby:
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(a) the relief could be denied by reason of section 167
TCGA applying by reason of London Life Apartments
Limited being or having been or becoming a Company
within section 167(2) TCGA, or;
(b) the Company could become liable for any tax (whether
primarily or secondarily) under section 282 TCGA
pursuant to the transactions contemplated in the Deed
of Gift
whether primarily, secondarily or under section 282 TCGA.
20.4 No tax liability has arisen or will arise in the Company as a result
of the transactions contemplated by or effected pursuant to the Deed
of Gift.
20.5 No claim has been made by the Company under section 165 TCGA.
PART 4
FINANCE
1 CAPITAL COMMITMENTS
No commitments on capital account are outstanding and, since
incorporation, neither the Company nor Loryt has made or agreed to
make capital expenditure, incurred or agreed to incur capital
commitments or disposed of or agreed to dispose of capital assets.
2 DIVIDENDS AND DISTRIBUTIONS
2.1 Since incorporation no dividend or other distribution (as defined in
Part VI Chapter II ICTA as extended by s418 ICTA) has been, or is
treated as having been, declared, made or paid by the Company or
Loryt.
3 LOANS BY AND DEBTS DUE TO THE COMPANY
3.1 Neither the Company nor Loryt has lent money which has not been
repaid to it or is the creditor in respect of a debt (whether or not
due for payment) which has arisen otherwise than in the ordinary
course of its business.
3.2 Neither the Company nor Loryt has made a loan or quasi-loan contrary
to the Companies Acts.
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3.3 Neither the Company nor Loryt has made a loan, which remains
outstanding, on terms entitling it to receive either a rate of
interest varying with, or a share of, the profits of a business.
4 LIABILITIES
4.1 There are no liabilities (including contingent liabilities) of the
Company or Loryt, except as incurred in the normal course of its
business, since incorporation.
4.2 There has been no exercise, purported exercise or claim for a charge,
lien, encumbrance or equity over the Assets.
4.3 There is no dispute directly or indirectly relating to the Assets.
4.4 Neither the Company nor Loryt has an exposure in relation to interest
or exchange rate fluctuations.
5 BANK ACCOUNTS
5.1 Accurate and complete statements of the bank accounts of the Company
and Loryt, as at the Effective Date, are annexed to the Disclosure
Letter.
5.2 Since the date of each statement, there have been no payments out of
the account to which the statement relates, except for payments in
the normal course of business; and the balances on current accounts
are not substantially different from the balances shown in the
statements.
6 CONTINUATION OF FACILITIES
6.1 The Disclosure Letter sets out accurate and complete details
(together with accurate copies of all relevant documentation) of the
debentures, acceptance credits, overdrafts, loans or other financial
facilities outstanding or available to the Company or Loryt (referred
to in this clause as "facilities") and:
6.1 there has been no contravention of, or non-compliance with, the terms
of the facilities;
6.1.2 no steps for the early repayment of indebtedness under the facilities
have been taken or threatened;
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6.1.3 there have not been, nor are there, circumstances known to the
Sellers (or in the case of Loryt, JK and SL) whereby the continuation
of any of the facilities might be prejudiced or its terms altered;
6.1.4 none of the facilities is dependent on the guarantee or indemnity of,
or security provided by, a person other than the Company or Loryt;
and
6.1.5 none of the Sellers has any knowledge, information or belief that, as
a result of the acquisition of the Shares by the Buyer or any other
thing contemplated in this agreement, any of the facilities might be
terminated or mature prior to its stated maturity.
7 CREDITORS
There is no significant amount owing by the Company or Loryt which
has been due for more than six weeks.
8 GOVERNMENT GRANTS
The Company has not applied for or received a grant or subsidy or
financial assistance from a government department or agency or a
local or other authority.
PART 5
TRADING
1 CHANGES PRIOR TO THE EFFECTIVE DATE
1.1 In the last two years since the Effective Date:
1.1.1 the Business has been continued in the normal course;
1.1.2 there has been no deterioration in the turnover, or in the financial
or trading position or prospects, of the Business;
1.1.3 the Business has not, by doing or omitting to do anything, prejudiced
its goodwill;
1.1.4 no part of the Business has been adversely affected by abnormal
factors not affecting similar businesses to a like extent; and
1.1.5 the Business has paid its creditors in accordance with their
respective credit terms.
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1.2 The trading prospects of the Business have not, as far as the
Warrantors are aware, been adversely affected as a result of events
or circumstances arising since incorporation.
2 SELLERS' OTHER INTERESTS AND LIABILITIES TO THE COMPANY
2.1 Sellers, JK, SL and their Associates, are not, directly or
indirectly, interested in businesses other than those carried on by
the Company and/or Loryt, which are or are likely to be, or become,
competitive with the Business.
2.2 None of the Sellers, JK, SL or their Associates, is indebted to the
Company or Loryt.
3 EFFECT OF SALE OF SHARES
3.1 Sellers have no knowledge, information or belief that after the
Effective Date (whether by reason of an existing agreement or
arrangement or otherwise) as a result of the acquisition of the
Company and Loryt by the Buyer:
3.1.1 a customer of the Business will cease, or be entitled to cease, to
deal with it or substantially reduce its existing level of business
with it; or
3.1.2 the Company or Loryt will lose the benefit of a right or benefit
which it enjoys.
3.2 Compliance with the terms of this agreement does not and will not:
3.2.1 conflict with, or result in the breach of, or constitute a default
under an agreement or arrangement to which either the Company or
Loryt is a party, or a provision of the memorandum or articles of
association of the Company or Loryt or a restriction or obligation by
which or to which an asset of the Company or Loryt is bound or
subject;
3.2.2 relieve another person from an obligation to the Company or Loryt
(whether contractual or otherwise), or enable another person to
determine such an obligation, or a right or benefit enjoyed by the
Company or Loryt, or to exercise a right, whether under an agreement
with, or otherwise in respect of, the Company or Loryt;
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3.2.3 result in the creation, imposition, crystallisation or enforcement of
an encumbrance on the Assets; or
3.2.4 result in indebtedness of the Company or Loryt becoming due and
payable, or capable of being declared due and payable, prior to its
stated maturity.
4 CONDUCT OF BUSINESS IN ACCORDANCE WITH MEMORANDUM AND ARTICLES OF
ASSOCIATION
4.1 Both the Company and Loryt have carried on business and conducted
their affairs in accordance with this memorandum and articles of
association and all other documents to which they are or have been a
party.
4.2 Both the Company and Loryt have the power and are qualified to carry
on business in the jurisdictions in which it carries on business.
5 JOINT VENTURES AND PARTNERSHIP
5.1 Neither the Company nor Loryt is or has agreed to become, a
participant in or member of a joint venture, consortium, partnership
or other unincorporated association.
5.2 Neither the Company nor Loryt is, or has agreed to become, a party to
an agreement or arrangement for sharing commissions or other income.
6 AGREEMENTS RELATING TO THE MANAGEMENT AND BUSINESS
There are no agreements or arrangements between the Company and/or
Loryt and a person who is a shareholder, or the beneficial owner of
an interest, in it, or in a company in which the Company and/or Loryt
is interested, or an Associate of such a person, relating to:
6.1 the management of the Business;
6.2 the appointment or removal of directors of the Company;
6.3 the ownership, transfer of ownership or letting of the Assets or
Properties; or
6.4 the provision, supply or purchase of finance, goods, services or
other facilities to, by or from the Company and/or Loryt;
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or in any other respect relating to its affairs.
7 AGENCY AGREEMENTS AND AGREEMENTS RESTRICTING BUSINESS
7.1 Neither the Company nor Loryt is a party to an agency,
distributorship, marketing, purchasing, manufacturing or licensing
agreement or arrangement, or a restrictive agreement or arrangement
pursuant to which its business is carried on, or which restricts its
freedom to carry on its business as it thinks fit.
7.2 Neither the Company nor Loryt is not bound by an undertaking or
assurances given to a court or governmental agency.
8 UNFAIR TRADE AND RESTRICTIVE PRACTICES
8.1 None of the Company, the Partnership nor Loryt have committed, or
omitted to do, anything which could give rise to a fine or penalty
with respect to any unfair trade and restrictive practices
legislation. 8.2 None of the Company, the Partnership nor Loryt is a
party to an agreement, practice or arrangement which:
8.2.1 contravenes the Trade Descriptions Act 1968;
8.2.2 contravenes Part XI of the Fair Trading Act 1973;
8.2.3 would, or might, result in a reference of a "consumer trade
practice", within the meaning of section 13 of the Fair Trading Act
1973, or be liable to reference to the Consumer Protection Advisory
Committee under Part II of that Act;
8.2.4 contravenes the Consumer Credit Act 1974;
8.2.5 contravenes, or is invalidated (in whole or in part) by, or is
subject to registration under, the Restrictive Trade Practices Acts
1976 and 1977.
8.3 The Company or Partnership has not engaged in an anti-competitive
practice as defined in the Competition Act 1980.
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9 LITIGATION, DISPUTES AND WINDING UP
9.1 None of the Company, the Partnership nor Loryt is engaged in
litigation or arbitration proceedings as plaintiff or defendant;
there are no proceedings pending or threatened, either by or against
the Company, Partnership or Loryt; and there is nothing which, as far
as the Warrantors are aware, is likely to give rise to litigation or
arbitration.
9.2 There is no dispute with a Taxation or other official department in
relation to the affairs of the Company or Loryt and there is nothing
which, as far as the Warrantors are aware, may give rise to a
dispute.
9.3 There are no claims pending or threatened, or capable of arising,
against the Company, Loryt or the Partnership, by an employee or
third party in respect of an accident or injury, which are not fully
covered by insurance.
9.4 No order has been made, petition presented or resolution passed for
the winding-up of the Company or Loryt; no distress, execution or
other process has been levied in respect of the Company or Loryt
which remains undischarged; and there is no unfulfilled or
unsatisfied judgment or court order outstanding against the Company
or Loryt.
9.5 Neither the Company nor Loryt has stopped payment and is not
insolvent or unable to pay its debts within the meaning of section
123 of the Insolvency Act 1986 (but omitting any requirement to prove
anything to the satisfaction of the court).
10 COMPLIANCE WITH STATUTES
10.1 None of the Company, the Partnership and/or Loryt, or any of its
officers, agents or employees (during the course of their duties in
relation to it), has committed or omitted to do anything, the
commission or omission of which is in material contravention of an
act, order, regulation or the like giving rise to a penalty, default
proceedings or other liability on its part.
10.2 The Company, the Partnership and Loryt have conducted and are
conducting their business in accordance with all applicable laws and
regulations.
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10.3 Neither the Company nor Loryt carries on (nor has, when not an
authorised person under Chapter III of the Financial Services Act
1986, carried on) investment business in the United Kingdom within
the meaning of that act.
11 DATA PROTECTION
11.1 The Company and Loryt have complied with all relevant requirements of
the Data Protection Act 1984 including:
11.1.1 the data protection principles established in the Act;
11.1.2 requests from data subjects for access to data held by it; and
11.1.3 the requirements relating to the registration of data users.
11.2 None of the Company, Loryt or the Partnership has received a notice
or allegation either from the data protection registrar or from a
data subject alleging non-compliance with the data protection
principles or prohibiting the transfer of data to a place outside the
United Kingdom.
11.3 No individual has claimed, or will have the right to claim,
compensation from the Company, Loryt or the Partnership under the act
for loss, or unauthorised disclosure, of data.
12 BUSINESS NAMES
Neither the Company nor Loryt uses a name for any purpose other than
its full corporate name.
13 TRANSACTIONS INVOLVING DIRECTORS
Neither the Company nor Loryt has been a party to a transaction to
which s320 or s330 CA may apply.
14 POWERS OF ATTORNEY AND AUTHORITY
14.1 No power of attorney given by the Company or Loryt is in force.
14.2 No authorities (express or implied) by which a person may enter into
a contract or commitment on behalf of the Company or Loryt are
outstanding.
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15 LICENCES AND CONSENTS
Neither the Company nor Loryt requires any licences or consents in
order to carry on the Business.
16 SUBSISTING CONTRACTS
16.1 The Contracts comprise all the material contracts, agreements and
arrangements which are binding and which have, since their
incorporation, been binding on the Company and Loryt, whether written
or oral.
17 DEFAULTS UNDER AGREEMENTS BY THE COMPANY
17.1 Neither the Company nor Loryt is in default under an agreement or
arrangement, or in respect of another obligation or restriction by
which it is bound;
17.1.1 in default under an obligation existing by reason of membership of an
association or body; or
17.1.2 liable in respect of a representation or warranty (whether express or
implied), or a matter giving rise to a duty of care on its part. 17.2
No threat or claim of default has been made and is outstanding
against the Company or Loryt; and there is nothing by which a right
or benefit may be prematurely terminated by another party, or by
which the terms may be worsened.
18 OTHER PARTY'S DEFAULTS
No party to an agreement or arrangement with the Company or Loryt is
in default under it, being a default which is material in the context
of the Company's or Loryt's financial or trading position; and there
is nothing as far as the Warrantors are aware, likely to give rise to
a default.
19 OUTSTANDING OFFERS
No offer, tender or the like is outstanding which may be converted
into an obligation of the Company or Loryt by acceptance by, or other
act of, another person.
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20 GUARANTEES AND INDEMNITIES
There is no subsisting guarantee or agreement for indemnity or for
suretyship given by the Company or Loryt or for their accommodation.
21 INSIDER CONTRACTS
21.1 No agreement or arrangement to which the Company, the Partnership or
Loryt is or was a party and which a Related Person is or has been
interested, whether directly or indirectly, is outstanding or existed
during the past three years.
21.2 Neither the Company nor Loryt is a party to, and the profits or
financial position of it and/or the Partnership during the past three
years have not been affected by, an agreement or arrangement which
was or is not at arm's length.
22 CONSULTANT REPORTS
Save as contained in the Disclosure Letter, there have been no
reports concerning the Business by financial or management
consultants during the past three years.
23 ENVIRONMENTAL MATTERS
23.1 The Business has complied, and has adequate facilities to continue to
comply, with all legislation (both primary and secondary) relating to
the protection of the environment.
23.2 Neither the Company nor Loryt has not caused or knowingly permitted:
23.2.1 poisonous, noxious or polluting matter or solid waste matter to enter
controlled waters;
23.2.2 trade or sewage effluent to be discharged from a building; or
23.2.3 matter to enter inland freshwaters so as to tend to impede the proper
flow of the waters in a manner leading or likely to lead to
pollution;
in each case within the meaning of section 85 of the Water Resources
Act 1991.
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23.3 Neither the Company nor Loryt has not been required, and there is
nothing whereby the Company may be required, to reimburse the
expenses incurred by the National Rivers Authority under section 161
of the Water Resources Act 1991.
23.4 Neither the Company nor Loryt has not been nor will be required to
incur expenditure as a result of pollution or contamination of any
land or buildings.
23.5 Neither the Company nor Loryt:
23.5.1 has done or not done anything as a result of which it has been or may
be subject to a liability or penalty as a result of pollution or
contamination; or
23.5.2 has received or could receive a remediation notice under section 78E
Environmental Protection Act 1990.
PART 6
EMPLOYMENT
1 EMPLOYEES AND TERMS OF EMPLOYMENT
1.1 The Disclosure Letter contains complete and accurate particulars of
the identities, dates of commencement of employment or appointment to
office and terms of employment or appointment of the employees and
officers of the Company, including profit sharing, commission and
discretionary bonus arrangements.
1.2 No past employee of the Business has a right to return to work or has
or may have a right to be reinstated or re-engaged under the
Employment Rights Act 1996.
1.3 There are no agreements or arrangements between the Company and a
trade union or other body representing employees.
1.4 No contract of service exists between the Company and a director or
employee in relation to which s319 CA applies.
1.5 Loryt does not employ any employees.
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2 BONUS SCHEMES
2.1 There are no schemes in operation entitling an employee of the
Company to a commission or remuneration calculated by reference to
the turnover or profits of the Company or part of its business.
2.2 The Company has not registered a profit-related pay scheme under Part
V Chapter III ICTA.
3 CHANGES IN REMUNERATION
3.1 Since incorporation or (in the event employment or holding of office
began after incorporation) since the start of the employment or
holding of office:
3.1.1 no change has been made in the rate of remuneration, emoluments or
pension benefits of an officer, ex-officer or senior executive of the
Company; and
3.1.2 no change has been made in the other terms of employment of an
officer or senior executive;
a senior executive being a person in receipt of remuneration in
excess of (pound)40,000 per annum.
3.2 The Company is not obliged or accustomed to pay anything, other than
in respect of remuneration or pension benefits, to or for the benefit
of an officer or employee of the Company, or its Associate.
3.3 There are no negotiations for an increase in the remuneration or
benefits of an officer or employee of the Company are current.
4 TERMINATION OF CONTRACTS OF EMPLOYMENT
4.1 The contracts of service to which the Partnership or Company is a
party are determinable at any time on three months' notice or less
without compensation (other than compensation in accordance with the
Employment Rights Act 1996).
4.2 No executive of the Company, who is in receipt of remuneration in
excess of (pound)40,000 per annum, and no officer of the Company:
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4.2.1 has given or received notice terminating his employment, except as
expressly contemplated in this agreement; or
4.2.2 is entitled to leave his employment or office prematurely as a result
of the sale of the Shares.
5 INDUSTRIAL DISPUTES AND NEGOTIATIONS
Neither the Company nor its employees is involved in an industrial
dispute, and there is nothing which is known, or which would on
reasonable enquiry be known, to the Company or its directors or to
the Sellers which might suggest that there may be an industrial
dispute involving the Company or that this agreement may lead to an
industrial dispute.
6 INDUSTRIAL AGREEMENTS
The Company has not agreed to recognise a trade union or done
anything which might properly be construed as recognition.
7 REDUNDANCIES
No employee will become redundant and be entitled to a redundancy
payment as a result of this agreement.
8 PENSIONS
8.1 The Partnership or Company is not under a legal or moral obligation,
nor is a party to an ex-gratia arrangement, to pay pensions,
gratuities, superannuation allowances or the like, or otherwise to
provide "relevant benefits" within the meaning of s612(1) ICTA, to or
for any of its past or present officers or employees or their
dependants; and there are no retirement benefit, or pension or death
benefit, or similar schemes or arrangements in relation to, or
binding on, the Company or to which the Company contributes.
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PART 7
ASSETS
1 OWNERSHIP OF ASSETS
1.1 The Partnership owned, and passed good and marketable title to, all
the assets included in Schedule 4 to the Company and (except for
current assets subsequently sold or realised in the ordinary course
of business) the Company still owns and has good and marketable title
to them.
1.2 The Company has not created, or granted, or agreed to create or
grant, a security interest or other encumbrance in respect of the
Assets, otherwise than in the normal course of its business.
1.3 None of the Assets, undertaking, goodwill or uncalled capital of the
Company is subject to, and the Company has not agreed to grant, an
option, charge, lien or encumbrance, or right of pre-emption.
2 ASSETS SUFFICIENT FOR THE BUSINESS
The Assets comprise all assets necessary for the continuation of its
business as now carried on.
3 RETENTION OF TITLE
The Company does not hold goods which it purchased on terms that
property does not pass until full payment is made or all indebtedness
discharged.
4 INSURANCE
4.1 All the Assets and undertakings of the Business of an insurable
nature are, and have at all material times been, insured in amounts
representing their full replacement or reinstatement value against
fire and other risks normally insured against by persons carrying on
the same kind of business as that carried on by it.
4.2 The Company is, and has at all material times been, adequately
covered against accident, damage, injury, third party loss (including
product liability), loss of
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profits and other risks normally insured against by persons carrying
on the same kind of business.
4.3 All insurance is in full force, and nothing has been done or omitted
to be done which could make any policy of insurance void or voidable,
or which is likely to result in an increase in premium.
4.4 None of the policies is subject to special or unusual terms or
restrictions or to the payment of any premium in excess of the normal
rate.
4.5 No claim is outstanding, or may as far as the Warrantors are aware,
be made, under any of the policies and there is nothing which is
likely to give rise to a claim.
5 LEASED ASSETS
Nothing has occurred in relation to an asset held by the Company
under a lease or similar agreement as a result of which the rental
payable has been, or is likely to be, increased and, in particular,
all the assets have at all relevant times been used for a qualifying
purpose within the meaning of s39 CAA.
6 ASSETS IN WORKING ORDER
6.1 The Assets:
6.1.1 are in a reasonable state of repair and condition and in satisfactory
working order;
6.1.2 are in the possession and control of the Company and are its absolute
property, except as listed in the Disclosure Letter;
6.1.3 are not expected to require replacements or additions at a cost in
excess of (pound)10,000 within the next six months; and
6.1.4 are all capable, and (subject to normal wear and tear) will remain
capable, throughout the period of time during which they are each
written down to a nil value in the accounts of the Company (in
accordance with GAAP), of doing the work for which they were designed
or purchased.
6.2 Maintenance contracts are in full force in respect of all assets of
the Company which it is normal or prudent to have maintained under
contract by independent or
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specialist contractors, and in respect of all assets which the
Company is obliged to maintain or repair under a leasing or similar
agreement; and all those assets have been regularly maintained to a
reasonable technical standard, and in accordance with safety
regulations usually observed in relation to assets of that
description, and in accordance with the terms and conditions of any
applicable leasing or similar agreement.
7 INTELLECTUAL PROPERTY RIGHTS AND TRADE SECRETS
7.1 Particularsof all Intellectual Property Rights owned by the Company,
and particularly in respect to the computer software called "Rentman"
are listed in the Disclosure Letter; where registration is possible,
the Company is registered as proprietor; each of the Rights is valid
and enforceable; and none of them is being used, otherwise than under
a licence of which details are set out in the Disclosure Letter,
claimed, opposed or attacked by another person.
7.2 The Business (and of any licensee under a licence granted by the
Company) does not, and is, as far as the Warrantors are aware, not
likely to, infringe an Intellectual Property Right of another person.
7.3 Particulars of any licences granted to the Company in relation to
Intellectual Property Rights are set out in the Disclosure Letter and
the Company has not committed a breach of the licences.
7.4 The Company has no liability to pay compensation under sections 40
and 41 of the Patents Act 1977.
7.5 The Company has not (otherwise than in the normal course of business)
disclosed, or permitted to be disclosed, nor undertaken or arranged
to disclose, to a person other than the Buyer any of its know-how,
technical information, trade secrets, confidential information, price
lists or lists of customers or suppliers.
7.6 The Company is not a party to a secrecy agreement or agreement which
may restrict the use or disclosure of information.
7.7 Nothing has been done or omitted by the Company which would enable a
licensee under a licence granted by the Company to terminate it or
which constitutes a breach of its terms.
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PART 8
PROPERTIES
(with references to the leases or leasehold properties this will include
where applicable tenancies, licences or other interests giving rise
to rights of occupation)
1 TITLE
1.1 The Properties comprise all the properties leased by the Company or
Loryt in connection with its business.
1.2 The Properties which are occupied by the Company of Loryt in
connection with its business are occupied or used by right of
ownership or under lease or licence, the terms of which permit the
occupation or use.
1.3 The information contained in the Disclosure Letter as to the tenure
of the Properties, the principal terms of the leases or licences held
by the Company or Loryt and the principal terms of the tenancies and
licence subject to and with the benefit of which the Properties are
held is complete and accurate.
2 ENCUMBRANCES
2.1 The Properties and all furniture and fittings are free from
mortgages, debentures, charges, rent-charges, hire purchase charge,
liens or other encumbrances, except for television sets and video
cassette recorders which are subject to a hire charge.
2.2 The Properties are not subject to outgoings, other than business
rates (where applicable), water rates, insurance premiums, rent,
utilities and service charges.
2.3 The Properties are free of restrictive covenants, stipulations,
easements, wayleaves, licences, grants, restrictions, overriding
interests or other similar rights vested in third parties.
2.4 Where any of the matters referred to in paragraphs 2.1, 2.2 and 2.3
have been disclosed in the Disclosure Letter, the obligations and
liabilities imposed and arising under them have been performed and
any payments owing with respect to them will be accrued in Completion
Accounts.
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2.5 The Properties are not subject to options or rights of pre-emption.
3 PLANNING MATTERS
3.1 The use of the Properties is the permitted use for the purposes of
the Planning Acts.
3.2 The Company and Loryt have complied and are complying with planning
permissions, orders, regulations, consents, bye-laws and conditions
applicable to the Properties.
3.3 None of the Properties is listed as being of special historic or
architectural importance or located in a conservation area.
3.4 All claims and liabilities under the Planning Acts or other
legislation have been discharged, and no claim or liability,
contingent or otherwise, is outstanding.
4 STATUTORY OBLIGATIONS
4.1 The Company and Loryt has complied and is complying with applicable
statutory and bylaw requirements with respect to the Properties, and
in particular with the requirements as to fire precautions and under
the Public Health Acts, the Housing Acts, the Highway Acts, Offices,
Shops and Railway Premises Act 1963, the Factory Acts and the London
Building Acts.
4.2 There is no unperformed obligation with respect to the Properties,
performance of which is necessary to comply with the requirements
(whether formal or informal) of a competent authority exercising
statutory or delegated powers.
4.3 No licences are required in relation to the Properties.
4.4 No Value Added Tax is incurred as a result of the Properties. VAT is
charged to corporate customers.
5 ADVERSE ORDERS
5.1 There are no compulsory purchase notices, orders or resolutions
affecting the Properties and there is nothing likely to lead to any
being made.
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5.2 There are no closing, demolition or clearance orders, enforcement
notices or stop notices affecting the Properties and there is nothing
likely to lead to any being made.
6 CONDITION OF THE PROPERTIES AND FURNITURE AND FITTINGS
6.1 The buildings and other structures on or comprising the Properties
and furniture and fittings are in good and substantial repair and fit
for the purposes for which they are used.
6.2 The Company has no liability to repair or pay for the repair of the
buildings or structures on the Properties:
6.2.1 if they are affected by structural damage or electrical defects or by
timber infestation or disease; or
6.2.2 contain in their fabric high alumina cement, blue asbestos, calcium
chloride accelerator, wood wool slabs used as permanent shuttering or
other deleterious material.
6.3 The Properties are not located in areas or subject to circumstances
particularly susceptible to flooding or affected by mining activity.
6.4 There are no disputes with neighbouring owners with respect to
boundary or party walls and fences, or with respect to easements or
rights over or means of access to the Properties.
6.5 The principal means of access to the Properties is over a road which
have been taken over by the local or other highway authority and
which is maintainable at the public expense and no means of access to
the Properties are shared with another person or subject to rights of
determination by another person.
6.6 The Properties are not subject to rights of common.
6.7 The Properties enjoy the main services of water, drainage,
electricity and gas.
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7 INSURANCE
7.1 The Properties are not insured in their full reinstatement values,
for not less than two years' loss of rent and against third-party and
public liabilities to an adequate extent.
7.2 Premiums payable on insurance policies with respect to the Properties
have been duly paid and there is nothing which would vitiate or
permit the insurers to avoid the policies.
7.3 The information in the Disclosure Letter with respect to insurance
policies is complete and accurate.
8 LEASEHOLD PROPERTIES
8.1 The Company and/or Loryt has paid the rent and observed and performed
the covenants on the part of the tenant and the conditions contained
in the lease under which the Properties are held, and the last demand
for rent (or receipt, if issued) was unqualified, and the lease is in
full force, except as disclosed in the Disclosure Letter.
8.2 The licences, consents and approvals required from the landlords and
any superior landlords under the leases of the Properties have been
obtained, and the covenants on the part of the tenant contained in
the licences, consents and approvals have been duly performed, except
as disclosed in the Disclosure Letter.
8.3 There are lease renewals and rent reviews in progress under the
leases of the Properties held by the Company or Loryt, in particular
under the office lease at 7 Cheval Place, Knightsbridge.
8.4 No obligation necessary to comply with a notice given by or other
requirement of the landlord under a lease of the Properties is
outstanding and unperformed.
8.5 There are no obligations for repair are on an internal repairing
basis, with the exception of the office lease at 7 Cheval Place,
Knightsbridge, and there is no obligation to reinstate any of the
Properties by removing or dismantling an alteration made to it by the
Company, Loryt or a predecessor in title.
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8.6 The Company or Loryt has not entered into an guarantee agreement in
respect of the properties.
8.7 There are no proceedings against the Company and/or Loryt, or brought
by it nor is the Company or Loryt aware of any identifiable
circumstances in which proceedings against it by its landlord or by
its tenants or by it against its landlord or its tenants may be
brought or threatened, except as disclosed in the Disclosure Letter.
8.8 There are no employees of the Company and/or Loryt who are required
to work full time or substantially full time at the Properties.
8.9 There are no rent deposits or other monies lodged with the landlords
or their agents in respect of any of the Properties, except as per
the schedule in the Completion Accounts.
9 TENANCIES
9.1 The Properties are held subject to and with the benefit of the
tenancies (which expression in this paragraph 9 includes
subtenancies) as set out in the Disclosure Letter (or provided
through copies of leases) and there are no others.
9.2 With respect to each of the leases or the tenancies, there have been
disclosed in the Disclosure Letter particulars of:
9.2.1 the rent and rent reviews and, with respect to rent reviews, the date
for giving notice of exercise of the reviews and the operative review
date;
9.2.2 the term and rights to break or renew the term;
9.2.3 the obligations of the landlord and tenant in respect of outgoings,
repairs, insurance services and service charge;
9.2.4 options or rights of pre-emption;
9.2.5 the user required or permitted under the terms of the tenancies;
9.2.6 entitlements of tenants of the Property to compensation on quitting
the premises let to them in respect of disturbance and improvements
or otherwise;
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9.2.7 any unusual provisions; and
9.2.8 short particulars of subtenancies derived out of the tenancies.
9.3 The Warrantors are not aware of material or persistent breaches of
covenant by a tenant of the Properties, including the covenants to
pay rent, except as disclosed in the Disclosure Letter.
9.4 The Warrantors are not aware of damage caused to the Properties or
the Fixtures and Fittings.
9.5 The Warrantors are not aware of any disputes generally with a
landlord of the Properties in respect of the terms of their tenancy
or of any notices served or received or where litigation has been
commenced by either party or is anticipated.
The Warrantors are not holding for its or its agents or jointly any monies
including rent deposits as security for performance by the customers of any of
their obligations under the leases or tenancies, except as disclosed in the
Disclosure Letter.
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Executed for and on behalf of: )
CRYSTALSEA LIMITED by: )
)
Director
Secretary
Executed for and on behalf of )
SUNNYGATE LIMITED by: )
)
Director
Secretary
Signed by JAMES KOE )
)
Signed by SAMANTHA LUFF )
)
:
Executed for and on behalf of )
BRIDGESTREET )
ACCOMMODATIONS, INC. )
President
