<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 5, 1996
MARSH & McLENNAN COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-5998 36-2668272
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1166 Avenue of the Americas, New York, N.Y. 10036
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (212) 345-5000
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On June 5, 1996, Marsh & McLennan Companies, Inc. (the
"Registrant"), through its wholly-owned subsidiary, The Bowring
Group Limited, completed the sale of all of the outstanding
capital stock of The Frizzell Group Limited ("Frizzell") and
certain subsidiaries of Frizzell to Liverpool Victoria Friendly
Society Limited ("Liverpool Victoria"). The price for the capital stock
was approximately (pounds)188 million in cash and was determined through
arm's length negotiations. The Registrant expects to utilize the
sale proceeds to enhance its overall capitalization, including
purchasing shares of its common stock and reducing the current
level of commercial paper borrowings.
Frizzell, headquartered in Bournemouth, England, provides
motor and household insurance, banking and independent financial
advice in the United Kingdom. Liverpool Victoria, based in
London, sells personal lines life insurance.
<PAGE>
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits
a. Financial statements of businesses acquired:
Not applicable.
b. Pro forma financial information:
1. Pro Forma Condensed Consolidated Statements of Income:
(a) Year Ended December 31, 1995.
(b) Three Months Ended March 31, 1996.
2. Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1996.
c. Exhibits:
1. Option Agreement, dated February 7, 1996, among Marsh &
McLennan Companies, Inc., The Bowring Group Limited,
Liverpool Victoria Friendly Society Limited and
Baltimore Limited, as amended by a Deed of Amendment
dated June 5, 1996.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated statements of income
for the year ended December 31, 1995 and the three months ended March 31, 1996
and the unaudited pro forma condensed consolidated balance sheet as of March 31,
1996 give the effect of Marsh & McLennan Companies, Inc.'s (the "Registrant")
disposition of The Frizzell Group Limited ("Frizzell") to Liverpool Victoria
Friendly Society Limited. The pro forma statements of income assume the
transaction occurred on January 1, 1995 and the pro forma balance sheet assumes
the disposition occurred on March 31, 1996. The after-tax gain on the sale of
Frizzell is included in the Registrant's pro forma condensed consolidated
balance sheet as of March 31, 1996. Such gain on sale has been excluded from the
accompanying pro forma condensed consolidated statements of income as it
represents a direct, nonrecurring effect of the transaction. The estimated gain
relating to the sale is not expected to be material to the Registrant's annual
consolidated results of operations.
The unaudited pro forma condensed consolidated financial statements have been
prepared by the Registrant based upon the assumptions disclosed in the notes to
the pro forma condensed consolidated financial statements. The unaudited pro
forma financial statements presented herein are shown for illustrative purposes
only and do not purport to be indicative of the results which would have been
reported if the disposition had occurred on the date or for the periods
indicated or which may occur in the future. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
historical consolidated financial statements and notes thereto included in the
Registrant's latest annual report on Form 10-K and latest quarterly report on
Form 10-Q.
<PAGE>
MARSH & McLENNAN COMPANIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
(In millions, except per share figures)
Marsh & Pro Forma
McLennan Adjustments
Companies, ----------------------
Inc. Frizzell (a) Other Pro forma
---------- ------------ --------- ----------
Revenue $3,770.3 $147.1 $3,623.2
Expense 3,075.4 121.9 2,953.5
---------- ------------ --------- ----------
Operating Income 694.9 25.2 669.7
Interest, net (45.1) 1.0 $5.6 (b) (40.5)
---------- ------------ --------- ----------
Income Before Income Taxes 649.8 26.2 5.6 629.2
Income Taxes 246.9 9.9 2.1 (c) 239.1
---------- ------------ --------- ----------
Net Income $402.9 $16.3 $3.5 $390.1
========== ============ ========= ==========
Net Income Per Share $5.53 $5.51
========== ==========
Average Number of Shares
Outstanding 72.9 (2.1)(d) 70.8
========== ========= ==========
See accompanying notes to pro forma condensed consolidated financial statements.
<PAGE>
MARSH & McLENNAN COMPANIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
(In millions, except per share figures)
Marsh & Pro Forma
McLennan Adjustments
Companies, ----------------------
Inc. Frizzell (a) Other Pro forma
---------- ------------ --------- ----------
Revenue $1,070.7 $31.8 $1,038.9
Expense 828.2 28.4 799.8
-------- ------ ----- --------
Operating Income 242.5 3.4 239.1
Interest, net (11.7) 0.4 $1.3 (b) (10.8)
-------- ------ ----- --------
Income Before Income Taxes 230.8 3.8 1.3 228.3
Income Taxes 87.7 1.4 0.5 (c) 86.8
-------- ------ ----- --------
Net Income $143.1 $2.4 $0.8 $141.5
======== ====== ===== ========
Net Income Per Share $1.96 $2.00
======== ====== ===== ========
Average Number of Shares
Outstanding 72.9 (2.1)(d) 70.8
======== ====== ===== ========
See accompanying notes to pro forma condensed consolidated financial statements.
<PAGE>
MARSH & McLENNAN COMPANIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996 (UNAUDITED)
(In millions of dollars)
<TABLE>
<CAPTION>
Marsh & Pro Forma
McLennan Adjustments
Companies, -----------------------
Inc. Frizzell (a) Other Pro forma
---------- ------------ ----- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $338.7 $31.7 $307.0
-------- ------ ------ --------
Receivables 1,158.4 141.5 ($0.5)(e) 1,016.4
Less-allowance for doubtful accounts (46.8) (4.9) (41.9)
-------- ------ ------ --------
Net receivables 1,111.6 136.6 (0.5) 974.5
-------- ------ ------ --------
Other current assets 228.5 3.5 4.0(f) 229.0
-------- ------ ------ --------
Total current assets 1,678.8 171.8 3.5 1,510.5
-------- ------ ------ --------
Consumer finance receivables, net 153.2 153.2 -
-------- ------ ------ --------
Long-term securities 449.8 - 449.8
-------- ------ ------ --------
Fixed assets, net 755.6 25.9 729.7
-------- ------ ------ --------
Intangible assets 715.4 142.2 573.2
-------- ------ ------ --------
Other assets 685.7 18.3 21.5(e,f) 688.9
-------- ------ ------ --------
$4,438.5 $511.4 $25.0 $3,952.1
======== ====== ====== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $655.7 $131.3 ($94.1)(e) $430.3
Accounts payable and accrued liabilities 675.1 64.5 11.3(f) 621.9
Accrued income taxes 207.8 6.8 24.6(f) 225.6
-------- ------ ----- --------
Total current liabilities 1,538.6 202.6 (58.2) 1,277.8
-------- ------ ----- --------
Fiduciary liabilities 1,893.0 21.9 1,871.1
Less - cash and investments held in
a fiduciary capacity (1,893.0) (21.9) (1,871.1)
-------- ------ ----- --------
- - -
Long-term debt 409.7 - 409.7
-------- ------ ----- --------
Other liabilities 714.6 93.7 41.6(e,f) 662.5
-------- ------ ----- --------
Commitments and contingencies - - - -
-------- ------ ----- --------
Stockholders' equity:
Preferred stock - - -
Common stock 76.8 9.4 9.4(e) 76.8
Other stockholders' equity 1,996.5 205.7 232.2(e) 2,023.0
-------- ------ ----- --------
2,073.3 215.1 241.6 2,099.8
Less - treasury shares (297.7) - (200.0)(e) (497.7)
-------- ------ ----- --------
Total stockholders' equity 1,775.6 215.1 41.6 1,602.1
-------- ------ ----- --------
$4,438.5 $511.4 $25.0 $3,952.1
======== ====== ===== ========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The statements of income shown for Frizzell have been translated into U.S.
dollars at the respective average exchange rates for the periods presented. The
Frizzell balance sheet as of March 31, 1996 has been translated into U.S.
dollars at the exchange rate on such date.
A description of the adjustments reflected in the pro forma condensed
consolidated financial statements follows:
(a) To eliminate Frizzell's income statement and balance sheet from the
historical financial statements of the Registrant.
(b) To reflect the reduction in interest expense resulting from the use of
$94.1 million in proceeds to repay commercial paper borrowings.
(c) To record the tax effect of the pro forma adjustments.
(d) To reflect the reduction in the average number of shares outstanding
from the use of $200.0 million in proceeds to repurchase the
Registrant's common shares at an assumed price of $95.
(e) To record the sale of Frizzell and the settlement of intercompany loan
balances for net proceeds of $294.1 million. It has been assumed that
the proceeds from the transaction were used to reduce commercial paper
borrowings ($94.1 million) and to repurchase the Registrant's common
stock ($200.0 million).
(f) To reflect transaction costs, liabilities retained by the Registrant and
the income tax assets and liabilities related to the disposition.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
MARSH & McLENNAN COMPANIES, INC.
By: /s/ Gregory Van Gundy
----------------------------------
Gregory Van Gundy
General Counsel and Secretary
Date: June 20, 1996
<PAGE>
EXHIBITS
1. Option Agreement, dated February 7, 1996,
among Marsh & McLennan Companies, Inc., The
Bowring Group Limited, Liverpool Victoria
Friendly Society Limited and Baltimore
Limited as amended by a Deed of Amendment
dated June 5, 1996.
<PAGE>
7 February 1996
MARSH & McLENNAN COMPANIES, INC.
THE BOWRING GROUP LIMITED
LIVERPOOL VICTORIA FRIENDLY SOCIETY LIMITED
BALTIMORE LIMITED
----------------------------------------
OPTION AGREEMENT
in respect of the entire share capital of The
Frizzell Group Limited together with other
Frizzell Companies
----------------------------------------
FRESHFIELDS
<PAGE>
CONTENTS
Clause Page
1. DEFINITIONS AND INTERPRETATION........................................2
2. THE OPTIONS..........................................................12
3. CONDITIONS PRECEDENT TO GROUP REORGANISATION.........................14
4. PRE COMPLETION UNDERTAKINGS..........................................18
5. COMPLETION...........................................................22
6. POST-COMPLETION UNDERTAKINGS.........................................25
7. RESTRICTIONS ON TBG..................................................26
8. RIGHTS...............................................................27
9. COST OF TERMINATION..................................................28
10. WARRANTIES...........................................................28
11. LIMITATION ON WARRANTY, UNDERTAKING AND INDEMNITY CLAIMS.............30
12. INDEMNITIES..........................................................34
13. INSURANCE............................................................37
14. GUARANTEE............................................................37
15. ENTIRE AGREEMENT.....................................................37
16. VARIATION............................................................38
17. ASSIGNMENT...........................................................38
18. ANNOUNCEMENTS........................................................38
19. COSTS................................................................38
20. INVALIDITY...........................................................39
21. COUNTERPARTS.........................................................39
22. TIME OF THE ESSENCE..................................................39
23. FURTHER ASSURANCE....................................................39
24. NOTICES..............................................................39
25. GOVERNING LAW AND JURISDICTION.......................................42
SCHEDULE 1................................................................43
The Company..........................................................43
Part A...............................................................43
Part B...............................................................45
Details of Subsidiaries..............................................46
Details of Subsidiaries..............................................47
Details of Subsidiaries..............................................48
Details of Subsidiaries..............................................49
Details of Subsidiaries..............................................50
Details of Subsidiaries..............................................51
Details of Subsidiaries..............................................52
Details of Subsidiaries..............................................53
Details of Subsidiaries..............................................55
Details of Subsidiaries..............................................56
Details of Subsidiaries..............................................57
SCHEDULE 2 A..............................................................58
SCHEDULE 2B...............................................................76
Tax Warranties.......................................................76
SCHEDULE 3................................................................88
Properties...........................................................88
Part I Freehold......................................................88
Part II Leasehold....................................................89
SCHEDULE 4................................................................97
Inter-Group Guarantees...............................................97
SCHEDULE 5................................................................98
Inter-Group Loans....................................................98
SCHEDULE 6...............................................................100
Repayment Schedule..................................................100
SCHEDULE 7*..............................................................101
Affinity Groups (excluding Commercial Schemes Affinity Groups)......101
SCHEDULE 8...............................................................102
Incentive Bonus.....................................................102
SCHEDULE 9...............................................................103
Commercial Schemes Affinity Groups..................................103
SCHEDULE 10..............................................................104
Corporate Deposits held by FB.......................................104
SCHEDULE 11..............................................................105
Tax Indemnity.......................................................105
SCHEDULE 12..............................................................143
List of Permitted Activities Under Friendly Societies Act 1992......143
SCHEDULE 13..............................................................144
Facilities..........................................................144
SCHEDULE 14..............................................................145
The Reorganisation Steps Schedule...................................145
SCHEDULE 15*.............................................................146
The Primary Customers...............................................146
<PAGE>
THIS OPTION AGREEMENT is made on 7 February 1996
BETWEEN:
MARSH & McLENNAN COMPANIES, INC. whose principal business office
is at 1166 Avenue of the Americas, New York, New York 10036 (MMC);
THE BOWRING GROUP LIMITED whose registered office is at The Bowring Building,
Tower Place, London EC3P 3BE (registered no. 3053550) (TBG);
LIVERPOOL VICTORIA FRIENDLY SOCIETY LIMITED (registered no. 61 Coll) whose
registered office is at Victoria House, Southampton Row, London WC1B 4DB (LVFS);
and
BALTIMORE LIMITED whose registered office is at 21 Holborn Viaduct, London EC1A
2DY (registered number 3137698) (Baltimore)
WHEREAS:-
(A) The Frizzell Group Limited (TFG) is a private company limited by shares
incorporated in England and Wales on 28 December 1923. At the date of this
Agreement the whole of the issued share capital of TFG is beneficially owned by
TBG. Further details of TFG are set out in Part A of Schedule 1.
(B) The companies whose names are set out in Part B of Schedule 1 are at the
date of this Agreement subsidiaries of TFG.
(C) It is a condition of this Agreement that TBG has effected a re-structuring
of TFG and its subsidiaries so that before the Put Options or the Call Options
can be exercised the entire share capital of those companies referred to in Part
B of Schedule 1 (with the exception of FFS, FBV, TB, TMAL and FPL) will be
beneficially owned by TBG.
(D) LVFS has agreed to grant to MMC an option to require LVFS to purchase the A
Option Shares and Baltimore has agreed to grant to MMC an option to require
Baltimore to purchase the B Option Shares on the terms and conditions of this
Agreement. MMC has agreed to grant an option to LVFS to require MMC to procure
the sale of the A Option Shares to LVFS and MMC has agreed to grant to Baltimore
an option to require MMC to procure the sale of the B Option Shares to Baltimore
on the terms and conditions of this Agreement.
(E) Upon exercise of the Put Options or the Call Options the parties shall be
bound to complete the sale and purchase of the Option Shares in accordance with
the terms and conditions of this Agreement.
IT IS AGREED as follows:-
DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, except so far as the context otherwise requires, the
following terms shall have the following meanings:-
Accounts means in relation to any Group Company: the audited balance sheet of
that company (and the audited consolidated balance sheet, if any, of that
company and its subsidiary undertakings) as at the Accounts Date and the audited
profit and loss account of that company (and the audited consolidated profit and
loss account, if any, of that company and its subsidiary undertakings) in
respect of the financial year ended on the Accounts Date together with all
notes, reports, statements and
<PAGE>
documents annexed thereto each as prepared in accordance with the Companies Act;
Accounts Date means 31 December 1995;
Affinity Groups means the affinity groups (excluding the Commercial Schemes
Affinity Groups) as referred to in Schedule 7;
Annexure means Annexure 1 and 2 to this Agreement;
Baltimore Confidentiality Agreement means the agreement dated 7 February 1996
entered into by Baltimore with TBG and MMC in respect of information made
available by TBG and its representatives;
Bank Comfort Letter means a comfort letter dated 8 December 1992 issued by MMC
to the Bank of England in support of the operations of FB;
Binding Authority means the motor policies binding authority agreement 840/1/96
and the household policies binding authority agreement 840/109/96;
Borrowers means the persons to whom Loans have been advanced by FB;
BMM means Bowring Marsh & McLennan Limited;
Budget means the TFG budget for 1996 a copy of which is annexed to the
Disclosure Letter;
business day means a day when banks are open for the transaction of normal
banking business in London (other than Saturdays);
CAA means the Capital Allowances Act 1990;
CGTA means the Capital Gains Tax Act 1979;
CR means Central Resources Limited;
Claim means a claim for a breach of a Warranty, any claim for breach of
undertaking under clause 4.2 or any claim under the Tax Indemnity;
Commercial Schemes Affinity Groups means the affinity groups as referred to
in Schedule 9
Commercial Schemes Business Transfer means the transfer on 1 November 1995 of
the commercial schemes business of FFS pursuant to an agreement between TFG, FFS
and BMM;
Commitments means all existing obligations of FB to make advances under the
offers or agreements in the Data Room Files;
Companies Act means, subject to clause 1.2(f), the Companies Act 1985;
Company means TFG;
Completion means completion of the sale and purchase of the Option Shares in
accordance with clause 5;
Conditions Precedent means the conditions specified in clause 3;
Confidentiality Agreement means the LVFS Confidentiality Agreement and the
Baltimore Confidentiality Agreement;
Continuous Credit Account means an unsecured current account with a guaranteed
overdraft limit made available by FB to a Customer and included in the Data Room
Files;
Continuous Credit Overdraft means an advance made by FB to a Borrower by way of
overdraft on a Continuous Credit Account and included in the Data Room Files or
made pursuant to a Commitment in respect of a Continuous Credit
Page 2
<PAGE>
Account included in the Data Room Files;
Corporate Deposits means the deposits held by FB as referred to in Schedule 10,
save in so far as they have matured prior to service of notice of exercise of
the Options under clause 2.4;
Costs means liabilities, losses, damages, costs (including legal costs) and
expenses, in each case, of any nature whatsoever;
Credit Agreement means an original agreement or instrument under or by which a
Loan, any part of the Related Security or a Commitment is outstanding or
evidenced;
Credit Card Debts means the balances owed by Borrowers in respect of purchases
or cash advances by means of credit cards issued by FB and included in the Data
Room Files or created pursuant to Commitments in the form of the maximum credit
limits on such cards included in the Data Room Files;
CTB means C.T. Bowring & Co. Ltd;
Customer means any person to whom FB has made a Loan which was outstanding on
the date of this Agreement, to whom FB has made a Commitment or from whom FB has
accepted a Deposit which was outstanding on the date of this Agreement;
Data Room Files means the files of documents displayed at the offices of TBG's
Solicitors and TBG's Accountants as at 26 January 1996 a list of which is set
out in Annexure 1 and a copy of which list is annexed to the Disclosure Letter;
Deposit means a deposit (as defined in section 5 of the Banking Act 1987) paid
to FB and outstanding at the date of this Agreement;
Directors means the executive directors of the Group;
Disclosure Letter means the letter of even date herewith, in the form of the
agreed draft, from TBG to LVFS and Baltimore;
Disputed Losses means management expenses of (pounds)5,433,913 referred to in
Note 1 to the schedule headed Frizzell Group Year ended 31 December 1992 Group
Relief Summary attached to Touche Ross' letter of 16 January 1996 to Paul Coyle
of LVFS' Accountants;
Earnings means earnings before deduction of income tax, extraordinary losses,
asset write downs in excess of depreciation not included in the Budget,
pre-payments which would impact earnings and exceptional provisions, and before
inclusion of extraordinary income;
Enterprise Loans means the secured and/or unsecured advances made by FB to
Borrowers to finance the acquisition of the goodwill of a professional
partnership or to finance the expansion of such a partnership and included in
the Data Room Files;
financial year shall be construed in accordance with section 223 of the
Companies Act;
FB means Frizzell Bank Limited;
FCS means Frizzell Credit Services Limited;
FFS means Frizzell Financial Services Limited;
FIG means FirstCity Insurance Group Limited;
Page 3
<PAGE>
FL & FP means Frizzell Life & Financial Planning Limited;
FPL means Frizzell Property Loans Limited;
FBV means Frizzell B.V;
FWD means Frizzell Westbourne Developments Limited;
Group means TFG, FFS, FB, FL & FP, FCS, FWD, CR, SS, SL, FBV, TB,
FPL and TMAL and Group Company means any of such companies;
Group Reorganisation means the reorganisation of the Group outlined in steps 17
to 31 of the Reorganisation Steps Schedule effected by the agreed form documents
all marked Annexure 2;
holding company shall be construed in accordance with sections 736 and 736A
of the Companies Act;
Hedging Agreements means the ISDA agreements and schedules entered into by FB
with various counterparties contained in the Data Room Files;
Home Loans means the fixed term variable interest advances made by FB to a
Borrower and secured by a Mortgage and other Related Security included in the
Data Room Files or made pursuant to Commitments included in the Data Room Files;
IBRC means the Insurance Brokers' Registration Council;
Impaired Loan means a Loan in respect of which:
(a) the relevant Borrower, in the case of Loans including Continuous Credit
Overdrafts, is 30 days or more in arrears in making payments of interest or
repayments of principal which have fallen due or has failed to pay
immediately on demand any amount demanded by FB and such amount is in whole
in part, outstanding on the Completion Date; or
(b) the Borrower (whether by express notice, conduct or otherwise) has
evidenced an intention not to make or to cease making, in whole or in part,
payment of interest or repayment of principal; or
(c) TBG or FB is aware of any breach of any material term of the Credit
Agreements; or
(d) legal action has been taken or threatened, or solicitors have been
instructed with a view to taking legal action to recover the Loan or to
enforce any Related Security;
Incentive Bonus means the incentive bonus which TFG has agreed to pay to the
following six directors on, and subject to, the terms of a letter from I H N
Mackay dated 7 February 1996 (a copy of which is included in the Disclosure
Letter): B Jenkins, R Matthews, G Partington, D Tomlinson, T Trinder and M Watt,
the amounts of which are set out in Schedule 8;
Individual Pension Arrangements means the retirement and death benefit which
were before 6 October 1995 paid directly by any Group Company in respect of the
following individuals: J G S Turner, Mrs P Dundas, Mrs M N Foster, Mrs M B
Offer, E P Skerman, Mrs M Steele;
Insurers means Omega Indemnity (Bermuda) Limited and Epsilon Insurance
Company Limited;
Intellectual Property Rights means patents, trade marks, service marks, trade
Page 4
<PAGE>
names, design rights and copyright including all rights in computer software and
databases, rights in know-how and other intellectual property rights (whether or
not the same are registered or capable of protection by registration) and
including applications for the grant of any such rights and all rights or forms
of protection having equivalent or similar effect anywhere in the world
pertaining solely to the activities of the Group;
Inter-Group Guarantees means all guarantees, indemnities, counter-indemnities
and letters of comfort of any nature whatsoever given to any third party by any
member of the TBG Group in respect of a liability of any Group Company details
of which appear in Schedule 4;
Inter-Group Loans means the loans, details of which appear in Schedule 5;
Inter-Group Trading Indebtedness means, as at any time referred to in this
Agreement, all debts outstanding as at that time between any Group Company and
any member of the TBG Group and in respect of inter-group trading activities;
Information Memorandum means the confidential information memorandum issued by
Morgan Stanley & Co Limited and Phoenix Securities Limited dated September 1995;
the KBIML Agreement means the agreement between FB and Kleinwort Benson
Investment Management Limited dated 9 May 1995;
Lending Procedures means the lending procedures adopted by FB details of which
are set out in the Data Room Files;
LIBOR means London Inter Bank Offer Rate;
Lloyd's means Lloyd's of London;
Lloyd's Levy means the levy of a contribution by Lloyd's which may be imposed
upon FFS, TFG and/or TBG (to the extent that such levy relates to the activities
of any Group Company) pursuant to paragraph 11 of Part E of the Reconstruction
and Renewal Byelaw (No 22 of 1995);
Lloyd's Comfort Letter means a comfort letter dated 31 December 1992 issued by
MMC to Lloyd's in support of the operations of FFS;
LVFS' Accountants means KPMG of 1-2 Dorset Rise, London EC4Y 8AE;
LVFS Confidentiality Agreement means the agreement dated 21 July 1995 entered
into by LVFS with TBG and MMC in respect of information made available by TBG
and its representatives for the purpose of LVFS's investigation into the affairs
of the Group;
LVFS' Solicitors means Lovell White Durrant, 65 Holborn Viaduct, London,
EC1A 2DY;
LVFS Group means LVFS and any subsidiary thereof from time to time;
Loans means the Personal Loans, the Home Loans, the Continuous Credit
Overdrafts, the Credit Card Debts, the Premium Finance Loans and the
Enterprise Loans;
Mortgage means a charge by way of legal mortgage on property in England and
Wales or a first or second ranking standard security over property in Scotland;
and, in relation to a Loan, the mortgage or standard security on which such Loan
is secured including, in each case, all principal sums, interest, costs,
charges, expenses
Page 5
<PAGE>
and other moneys secured or intended to be secured by that mortgage or standard
security;
Option Shares means the A Option Shares and the B Option Shares;
PIA means the Personal Investment Authority;
Pension Claims means any claims which may give rise to Pension Liabilities;
Pension Liabilities means all payments to policyholders and their dependants,
payments by way of statutory levies and payments to the Investors' Compensation
Scheme, the Policyholders Protection Board, SIB, PIA, any of their successors or
any third parties, which are required to be made by LVFS or any Group Company
and which arise from or in connection with:
(a) the transfer of a person's rights or entitlements under any pension
arrangement or any sums representing such rights or entitlements;
(b) the opting or contracting by a person into or out of any pension
arrangement; or
(c) a person not becoming a member of, or not accepting or participating in,
any pension arrangement;
to the extent that the same resulted from advice given prior to the Completion
Date by any Group Company or any of their respective representatives, employees
or agents, in breach or contravention of any applicable laws, regulations or
conduct of business rules or guidelines in force at the time when the relevant
advice was given;
Pension Schemes means The Frizzell Group Pension and Life Assurance Scheme
established by trust deed dated 30 December 1952 and The Frizzell Executive
Pension Scheme established by trust deed dated 5 June 1984;
Permanent Health Insurance Scheme means the permanent health insurance scheme
insured with Swiss Life (Policy No. 94/P01/0165) and as described in the
Frizzell Staff Handbook;
Personal Loans means the unsecured fixed term, fixed interest advances made by
FB to Borrowers and included in the Data Room Files or made pursuant to
Commitments included in the Data Room Files;
Planning Acts means the Town and Country Planning Act 1990, the Planning (Listed
Buildings and Conservation Areas) Act 1990, the Planning (Hazardous Substances)
Act 1990, the Planning (Consequential Provisions) Act 1990 and the Planning and
Compensation Act 1991;
Premium Finance Loans means the unsecured advances made by FB to customers of
FFS to finance the payment of insurance premiums and included in the Data Room
Files or made pursuant to Commitments included in the Data Room Files;
Private Medical Insurance Scheme means the scheme insured with Private Patient
Plan (Group No. 04911) and described in the Frizzell Staff Handbook;
Properties means any or all of the freehold and leasehold properties,
particulars of which are set out in Schedule 3;
Related Security means, in relation to a Loan, the Mortgage (if any) relating
thereto and any other standard security for such Loan including without
limitation, guarantees;
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Reorganisation Steps Schedule means Schedule 14;
SSAP means Statement of Standard Accounting Practice;
SL means Shawlands Leasing Limited;
SS means Shawlands Securities Limited;
Schedules means Schedules 1 to 15 to this Agreement and "Schedule" shall be
construed accordingly;
security interest means any security interest of any nature whatsoever
including, without limitation, any mortgage, charge, pledge, lien, assignment by
way of security, hypothecation or other encumbrance;
Standard Loan Documentation means the documents that have been used by FB from
time to time in connection with its activities as lender and on the terms of
which the Loans and their Related Security have been granted or are outstanding,
copies of which are set out in the Data Room Files;
subsidiary shall be construed in accordance with sections 736 and 736A of the
Companies Act;
subsidiary undertaking shall be construed in accordance with section 258 of the
Companies Act;
tax includes (without limitation) corporation tax, advance corporation tax,
income tax, capital gains tax, inheritance tax, value added tax, national
insurance contributions, capital duty, stamp duty, stamp duty reserve tax,
duties of customs and excise, all taxes, duties or charges replaced by or
replacing any of them, and all other taxes on gross or net income, profits or
gains, distributions, receipts, sales, franchise, value added, and all levies,
imposts, duties, charges or withholdings of any nature whatsoever chargeable by
any tax authority whether in the United Kingdom or elsewhere together with all
penalties, charges and interest relating to any of the foregoing or to any late
or incorrect return in respect of any of them save insofar as attributable to
the delay or default after Completion of a Group Company, LVFS or Baltimore;
Tax Indemnity means the deeds of indemnity set out in Schedule 11;
Tax Warranties means the warranties on the part of TBG set out in Schedule 2B;
Taxes Act means, subject to clause 1.2(f), the Income and Corporation Taxes Act
1988;
TB means Tower Brokers Limited;
TBG means The Bowring Group Limited;
TCGA means the Taxation of Chargeable Gains Act 1992;
TFG means The Frizzell Group Limited;
TMAL means Teachers Motoring Association Limited;
TBG's Accountants means Deloitte & Touche of Stonecutter Court, 1 Stonecutter
Street, London EC4A 4TR;
TBG Group means TBG, any holding company from time to time of TBG including MMC,
and any subsidiary from time to time of TBG or any such holding company, but
excluding each Group Company;
TBG's Solicitors means Freshfields, 65 Fleet Street, London EC4Y 1HS;
VATA means the Value Added Tax 1994;
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the A Call Option has the meaning set out in Clause 2.2.1;
the B Call Option has the meaning set out in Clause 2.2.2;
the Call Options means the rights granted pursuant to the A Call Option and the
B Call Option;
the A Put Option has the meaning set out in Clause 2.1.1;
the B Put Option has the meaning set out in Clause 2.1.2;
the Put Options means the rights granted pursuant to the A Put Option and the
B Put Option;
the Options mean the Put Options and the Call Options;
the Option Share Price means the aggregate of the A Option Share Price and
the B Option Share Price;
the A Option Shares means the entire issued share capital of FB, FL & FP, FCS,
FWD, CR, SS and SL beneficially owned by TBG and referred to more specifically
(as the case may be) in Schedule 1 Part B;
the A Option Share Price means (pounds)48,041,300, subject to any reduction for
dividends or distributions pursuant to clause 4.9 and any increase for
subscriptions of share capital pursuant to clause 4.12, escalated at a rate of
one half of one per cent per month compounded monthly from 31 January 1996 until
the date on which the Options are exercised pursuant to clause 2 of the
Agreement, subject to a maximum amount of (pounds)49,294,124;
the B Option Shares means the entire issued share capital of TFG (when TFG is
the shareholder in FFS, TMAL and FPL, but no other companies, pursuant to the
Group Reorganisation) beneficially owned by TBG and referred to more
specifically (as the case may be) in Schedule 1 Parts A and B;
the B Option Share Price means (pounds)139,958,700, subject to any reduction for
dividends or distributions pursuant to clause 4.9 and any increase for
subscriptions of share capital pursuant to clause 4.12, escalated at a rate of
one half of one per cent per month compounded monthly from 31 January 1996 until
the date on which the Options are exercised pursuant to clause 2 of the
Agreement, subject to a maximum amount of (pounds)143,608,553;
the Option Shares means the A Option Shares and the B Option Shares;
Warranties means the representations and warranties on the part of TBG set out
in Schedule 2.
1.2 In this Agreement, unless the context otherwise requires:-
(a) words denoting any gender shall include all genders;
(b) words denoting the singular shall include the plural and vice versa;
(c) references to persons or undertakings shall include individuals, bodies
corporate (wherever incorporated), unincorporated associations,
partnerships and other unincorporated bodies (in each case, wherever
resident and for whatever purpose);
(d) the headings are inserted for convenience only and shall not affect the
construction of this Agreement;
(e) references to recitals, clauses and schedules and sub-divisions thereof are
to the recitals and clauses of and schedules to this Agreement and
sub-divisions
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thereof respectively;
(f) any reference to an enactment is a reference to it as from time to time
amended, consolidated or re-enacted (with or without modification) and
includes all instruments or orders made thereunder, but only insofar as
such amendment, consolidation, re-enactment or secondary legislation does
not increase the liability of any party under this Agreement;
(g) any statement qualified by the expression "to the best knowledge of TBG" or
"so far as TBG is aware" or any similar expression is made on the basis of
information within the actual knowledge of TBG having made all reasonable
enquiries of the Directors and the following individuals: A. Harries, C.
Chalkly-Maber and K. Chatfield;
(h) any reference to a document "in the form of the agreed draft" or "in the
agreed form" is to the form of the relevant document agreed between the
parties and for the purpose of identification initialed by each of them or
on their behalf; and
(i) references to any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court, official or any
other legal concept shall, in respect of any jurisdiction other than
England, be deemed to include the legal concept which most nearly
approximates in that jurisdiction to the English legal term.
1.3 The recitals, Annexures and Schedules hereto form part of this Agreement and
shall have the same force and effect as if expressly set out in the body of this
Agreement. Accordingly, any reference to "this Agreement" shall include the
recitals, Appendices and Schedules hereto.
1.4 The Disclosure Letter has such contractual effect as is expressly provided
herein (or therein) but does not form part of this Agreement.
THE OPTIONS
2.1 Put Options
2.1.1 In consideration of the sum of one pound paid by MMC (receipt of which is
acknowledged by LVFS) LVFS grants to MMC an option, exercisable at any time
after Step 31 in the Reorganisation Steps Schedule is completed and on or before
5 July 1996, to require LVFS to purchase the A Option Shares from TBG (the A Put
Option) for the A Option Share Price upon the terms and subject to the
conditions of this Agreement; and
2.1.2 In consideration of the sum of one pound paid by MMC (receipt of which is
acknowledged by Baltimore) Baltimore grants to MMC an option, exercisable at any
time after Step 31 in the Reorganisation Steps Schedule is completed and on or
before 5 July 1996, to require Baltimore to purchase the B Option Shares from
TBG (the B Put Option) for the B Option Share Price upon the terms and subject
to the conditions of this Agreement.
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2.2 Call Options
2.2.1 In consideration of the sum of one pound paid by LVFS (receipt of which is
acknowledged by MMC) MMC grants to LVFS an option, exercisable at any time after
Step 31 in the Reorganisation Steps Schedule is completed and on or before 5
July 1996, to require MMC to procure the sale by TBG of the A Option Shares (the
A Call Option) for the A Option Share Price upon the terms and subject to the
conditions of this Agreement; and
2.2.2 In consideration of the sum of one pound paid by Baltimore (receipt of
which is acknowledged by MMC) MMC grants to Baltimore an option, exercisable at
any time after Step 31 in the Reorganisation Steps Schedule is completed and on
or before 5 July 1996, to require MMC to procure the sale by TBG of the B Option
Shares (the B Call Option) for the B Option Share Price upon the terms and
subject to the conditions of this Agreement.
2.3 Exercise of Options
2.3.1 Both the Put Options and the Call Options shall be exercisable only in
respect of all (but not some) of the Option Shares held by TBG;
2.3.2 Both Put Options shall be exercisable by MMC only in respect of both the A
Option Shares and the B Option Shares The Call Options shall be exercisable only
if notice is served by LVFS and Baltimore simultaneously in respect of both the
A Option Shares and the B Option Shares;
2.3.3 Upon the exercise of the Put Options or the Call Options (as the case may
be) TBG shall sell the Option Shares with full title guarantee free from all
liens, charges, encumbrances, claims, restrictions or third party rights of any
nature whatsoever and with all rights attached thereto at the date of exercise
of the relevant option;
2.3.4 Exercise of the Put Options and the Call Options in respect of the A
Option Shares and the B Option Shares shall be by written notice given in
accordance with clause 2.4 at the time specified in clauses 2.1 or 2.2 (as the
case may be);
2.3.5 If the Put Options are exercised by MMC before LVFS and Baltimore exercise
the Call Options then LVFS and Baltimore's right to exercise the Call Options
under this Agreement shall terminate;
2.3.6 If the Call Options are exercised by LVFS and Baltimore before MMC
exercises the Put Options then MMC's right to exercise the Put Options under
this Agreement shall terminate; and
2.3.7 Upon the exercise of the Put Options or the Call Options (as the case may
be) the parties shall be bound to complete the sale and purchase of the Option
Shares in accordance with the terms and conditions of this Agreement on the next
business day after the day of service of the notice of exercise of the relevant
option.
2.4 Notice of exercise of the Options
2.4.1 Any written notice given by MMC under the Put Options shall be addressed
to LVFS and Baltimore. Such written notice shall in the case of LVFS be
delivered personally to its office or sent by facsimile to its office on 0171
404 0390 marked for the attention of Colin Peters or delivered personally to him
and a copy
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shall be sent to LVFS' Solicitors for the attention of John Young. Such written
notice shall, in the case of Baltimore, be delivered personally to 65 Holborn
Viaduct, London E1A 2DY or sent by facsimile to such office on 0171 248 4212
marked for the attention of John Young or delivered personally to him and a copy
shall be sent to Macfarlanes at their address listed in clause 24.2; and
2.4.2 Any written notice given by LVFS or Baltimore under the Call Options shall
be addressed to TBG and shall be delivered personally to its office or sent by
facsimile to its office on 0171 929 2705 marked for the attention of Christopher
Pearson or delivered personally to him and a copy shall be sent to TBG's
Solicitors for the attention of Richard Harris.
2.5 Assignment
MMC shall have the right to assign the benefit of the A Put Option and the B Put
Option in whole to any member of the TBG Group without the consent of the other
parties to this Agreement after Step 27 in the Reorganisation Steps Schedule has
been completed.
CONDITIONS PRECEDENT TO GROUP REORGANISATION
3.1 It shall be a Condition Precedent of the Agreement that LVFS shall not have
delivered a written notice to TBG, on or before 14 February 1996 to the effect
that LVFS is not satisfied with its due diligence in respect of the Group's
business relationships. Delivery of such written notice on or before 14 February
1996 shall terminate this Agreement automatically.
3.2 The Group Reorganisation shall be conditional upon the following conditions
having been fulfilled to the satisfaction of TBG, LVFS and Baltimore (or waived
by each of them):
(a) there having been:
(i) made a notification to the PIA of TFG ceasing to be a controller of FL
& FP under PIA rule 6.2.4 and under Regulation 45(1) of the Investment
Services Regulations 1995;
(ii) received written approval from the PIA under PIA rule 6.1(3) in
response to a notice of the change of controller of FL & FP from TBG
to LVFS under PIA rule 6.1.1;
(iii) made a prior notification to the Bank of England by TFG of its
intention to cease to be controller of FB pursuant to section 37A of
the Banking Act 1987;
(iv) made a prior notification to the Bank of England by TBG and MMC of
their intention to cease to be controllers of FB pursuant to section
37A of the Banking Act 1987;
(v) received by TFG pursuant to section 4 of the Insurance Brokers
(Registration) Act 1977 confirmation of TFG's enrolment on the list of
registered insurance brokers kept by the IBRC thereunder;
(vi) received by TFG confirmation of the registration of TFG as a Lloyd's
broker pursuant to Regulation 6 of the Lloyd's Brokers Byelaw (No 5 of
1988) following the application for the registration of TFG as a
Lloyd's broker pursuant to Regulation 5 thereof;
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(vii) made a notification of the transfer of FFS' business to TFG, the
transfer of TFG to Baltimore and the transfer of TFG by Baltimore to
LVFS pursuant to Regulation 48 (2)(b) of the Lloyd's Brokers Byelaw;
(viii) made a notification to the PIA of TBG ceasing to be a controller of
FL & FP under PIA Rule 6.2.4 and under Regulation 45(1) of the
Investment Services Regulations 1995;
(ix) served on the PIA a notice pursuant to Regulation 41(1)(a) of the
Investment Services Regulations 1995 of the intention of LVFS' to
become a controller of FL&FP and either the PIA having notified LVFS'
that it has no objection to LVFS' so becoming or three months notice
having elapsed without the PIA serving notice on LVFS' pursuant to
Regulation 42 thereof;
(x) received confirmation in writing by TBG from the Office of Fair
Trading, in terms satisfactory to TBG and LVFS, that the United
Kingdom Secretary of State for Trade and Industry does not intend to
refer the transaction contemplated by this Agreement to the United
Kingdom Monopolies and Mergers Commission; and
(xi) no circumstances existing which would make it illegal to undertake any
step of the Group Reorganisation or the exercise of the Options.
(b) following the service by LVFS on the Bank of England of written notices of
its intention to become a controller of FB pursuant to Section 21 of the
Banking Act 1987, either:-
(i) the period of 3 months from the date of service of such notice on the
Bank of England having elapsed without the Bank of England having
served on LVFS, under section 22 or 23 of the Banking Act 1987, a
written notice of objection to its becoming such a controller; or
(ii) the Bank of England having notified LVFS in writing that it has no
objection to its becoming a controller of FB.
3.3.1 Subject to the fulfilment of the conditions in clause 3.2 the Group
Reorganisation shall be commenced and the exercise of the Options shall be
conditional upon completion of the Group Reorganisation and the fulfilment of
the conditions in clause 3.3.3, provided that the Group Reorganisation shall not
commence until 23 May 1996 without the written consent of MMC;
3.3.2 Prior to the commencement of any of the steps in the Group Reorganisation:
(a) TBG shall in writing seek LVFS' or LVFS' Solicitors written confirmation of
LVFS' agreement to the commencement of each step; and
(b) TBG or TBG's Accountants shall provide sufficient confirmation to LVFS that
the Group Companies have sufficient distributable reserves to complete the
Group Reorganisation.
3.3.3 Without prejudice to clause 3.3.1 the exercise of the Options shall be
conditional upon the following conditions having been fulfilled to the
satisfaction of TBG and LVFS:
(a) the assignment by FB to Baltimore of the Premium Finance Loans and such
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of the Enterprise Loans which are outstanding to bodies corporate;
(b) the termination by FB of the KBIML Agreement;
(c) the termination by FCS of its liabilities under all acceptance credit
facilities;
(d) the return of the Corporate Deposits by FB to each of the corporate bodies
holding monies on deposit with FB;
(e) receipt of the written consent of the underwriters who have subscribed to
the Binding Authority to the transfer of FFS' business to TFG and the
change of control of TFG from TBG to Baltimore and from Baltimore to LVFS;
(f) receipt of confirmation from the Bank of England that upon Completion MMC
will be released from the Bank Comfort Letter;
(g) Bank of England providing consent to the repayment by FB (or assignment to
LVFS) at Completion of the subordinated loans with CTB and TBG (details of
which are set out in paragraphs 1 and 4 of Schedule 5);
(h) the PIA providing consent to the repayment by FL&FP (or assignment to LVFS)
at Completion of the subordinated loan with TBG details of which are
included in paragraph 5 of Schedule 5;
(i) receipt of confirmation from Lloyd's that upon Completion MMC will be
released from the Lloyd's Comfort Letter;
(j) no regulatory or legal proceedings shall have commenced and be continuing
which challenge the legality of the proposed transaction and no regulatory
approvals or consents contemplated by the Conditions Precedent shall have
been withdrawn; and
(k) either (i) the termination of the Company Card Agreements dated 23 February
1993 between FB on the one hand and Britannia Rescue Services Limited and
The Civil Service Motoring Association Limited respectively on the other or
(ii) the amendment of those Agreements to make it clear that the loans
under those Agreements are made to the "Users" and not to the "Company"
thereunder.
3.4 LVFS, Baltimore (with respect to clause 3.3.3(a) only), MMC and TBG
undertake to use all reasonable endeavours to ensure that the Conditions
Precedent referred to in clause 3.2 and 3.3 are fulfilled as soon as reasonably
practicable and Baltimore shall co-operate, at no expense to Baltimore, to
ensure that the Conditions Precedent referred to in clauses 3.2 and 3.3 are
fulfilled as soon as reasonably practicable.
3.5 Subject to clause 8.1, if during the period 3 May to 5 July 1996 it becomes
reasonably evident that the Conditions Precedent in clause 3.2 cannot be
fulfilled by 15 June 1996 because any of the regulators, including without
limitation Lloyd's, the Bank of England, PIA or the IBRC, have refused to give
consent to any part of the Group Reorganisation or have indicated that consent
will not be given by 15 June 1996, then MMC shall have the right to terminate
this Agreement (other than clauses 12.5 and 18) and none of the parties shall
have any claim of any nature whatsoever against the other parties under this
Agreement (save in respect of their accrued rights arising from any prior breach
of this Agreement).
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3.6 Subject to clause 8.1 if during the period 3 June to 5 July 1996 it becomes
reasonably evident that the Conditions Precedent in clause 3.2 cannot be
fulfilled by 15 June 1996 because any of the regulators, including without
limitation Lloyd's, the Bank of England, PIA or the IBRC, have refused to give
consent to any part of the Group Reorganisation or have indicated that consent
will not be given by 15 June 1996, then LVFS or Baltimore shall have the right
to terminate this Agreement (other than clauses 12.5 and 18) and none of the
parties shall have any claim of any nature whatsoever against the other parties
under this Agreement (save in respect of their accrued rights arising from any
prior breach of this Agreement).
3.7 If prior to 3 May 1996 it becomes evident that any of the Conditions
Precedent in clause 3.2 cannot for any reason be fulfilled by 15 June 1996 or if
the Group Reorganisation cannot be completed for any reason including, without
limitation, the refusal by Lloyd's, the Bank of England, PIA or the IBRC to give
consent to any part of the Group Reorganisation, or any objection being raised
by the Friendly Societies Commission then the parties and their advisers will
co-operate to make alterations to the Group Reorganisation during a period of
thirty days after the date that the parties become aware that any of the
Conditions Precedent cannot be fulfilled and the Group Reorganisation cannot be
completed, provided that such period of thirty days shall not extend beyond 15
June 1996. If at the end of that period or 15 June (whichever is the earlier) no
alteration can be made (being an alteration acceptable to each of the parties to
this Agreement, such acceptance being in each party's sole discretion) so as to
ensure the completion of the Group Reorganisation (in its amended form) by 5
July 1996 then any of the parties shall have the right to terminate this
Agreement (other than clauses 12.5 and 18) and none of the parties shall have
any claim of any nature whatsoever against the other parties under this
Agreement (save in respect of their accrued rights arising under this
Agreement). It is understood and agreed that any such alteration shall require a
revised opinion from LVFS' Solicitors to MMC, a tax indemnity from LVFS to MMC
and TBG in a form no less favourable or more onerous than already agreed by MMC
and TBG and an indemnity from LVFS to TBG in respect of all costs charges and
expenses of such alteration (including the fees and expenses of TBG's Solicitors
and TBG's Accountants) subject to an appropriate limitation to be agreed upon by
the parties.
3.8 If the Conditions Precedent have not been satisfied (or waived) by 5 July
1996 then this Agreement shall terminate (other than clauses 12.5 and 18) and
none of the parties shall have any claim of any nature whatsoever against the
other parties under this Agreement (save in respect of their accrued rights
arising under this Agreement).
PRE COMPLETION UNDERTAKINGS
4.1 TBG hereby undertakes to procure that prior to Completion:
(a) the business of the Group is carried on in the ordinary and usual course as
contemplated in the Budget;
(b) the Group shall not take any steps which would be detrimental to its
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relationships with the Affinity Groups, other customers or its regulators,
or which would be harmful to any other material assets of the Group;
(c) subject to the terms of the Confidentiality Agreement, the representatives
of LVFS as specified in a list to be agreed upon by the parties shall be
allowed, upon reasonable notice and during normal business hours, access to
the statutory books, minute books and accounts of the Group (including,
without limitation, the monthly management accounts and related financial
information) and access to such officers and employees of the Group as
specified in a list to be agreed upon by the parties;
(d) the Group will co-operate with the representatives of LVFS and its
consultants in the development of plans for the operation of the Group
following Completion;
(e) FB shall take all reasonable steps required to terminate the KBIML
Agreement in consultation with LVFS;
(f) FB shall stop accepting any deposits from corporate bodies and shall use
its best endeavours to ensure the Corporate Deposits held by it from
corporate bodies are repaid;
(g) FCS shall cease issuing any further bills under acceptance credit
facilities;
(h) no Group Company shall make any significant decision concerning the Group's
marketing strategy;
(i) no Group Company shall dismiss any of its directors or employees of Grade 1
or of an alphabetic grade of any Group Company;
(j) no Group Company shall commence an activity which would not be a permitted
activity for a subsidiary of LVFS to carry out under the Friendly Societies
Act 1992 as specified in Schedule 12; and
(k) MMC shall regularly consult with LVFS as to the conduct of the business of
the Group.
provided that any action taken by the Group pursuant to the Reorganisation Steps
Schedule or any matters contemplated by this Agreement or with the prior consent
in writing of LVFS (such consent not to be unreasonably withheld, conditioned or
delayed) shall not constitute a breach of any of the undertakings in clause 4.1.
4.2 Without prejudice to clause 4.1, TBG undertakes to procure that none of the
following matters will be effected by the Group prior to Completion (save for
the Reorganisation Steps Schedule and other matters contemplated by this
Agreement) without the prior consent in writing of LVFS (such consent not to be
unreasonably withheld, conditioned or delayed):
(a) the modification of any of the rights attached to any shares in and the
creation or issue of any shares or the grant or agreement to grant any
option over any shares of uncalled capital of any Group Company or the
issue of any obligations convertible into shares;
(b) the capitalisation or repayment of any amount standing to the credit of any
reserve of any Group Company or the redemption or purchase of any shares or
any other reorganisation of the share capital of any Group Company;
(c) the admission of any person (other than a party to this Agreement) whether
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by subscription or transfer or transmission as a member of any Group
Company;
(d) the sale or disposal of, or the grant or termination of any rights in
respect of any of the assets of any Group Company of a book value exceeding
(pounds)50,000 except in the ordinary course of business of FB;
(e) any alteration to the Memorandum or Articles of Association of any Group
Company;
(f) the making of a capital commitment by any Group Company in excess of
(pounds)50,000 or the making of a marketing commitment in excess of
(pounds)100,000;
(g) the acquisition by any Group Company of any shares of any other company or
the participation by any Group Company in any partnership or joint venture;
(h) the renewal or replacement of any loan facilities by any Group Company on
terms materially different to the facility they replace;
(i) the issue of any loan stock by any Group Company;
(j) the creation or issue or allowing to come into being of any mortgage or
charge upon any part of the property or assets or uncalled capital of any
Group Company (other than normal trade liens) or the creation or issue of
any debenture or debenture stock or the obtaining of any advance or credit
in any form other than normal trade credit and the normal lending
activities of FB;
(k) the change in the remuneration or terms of employment of any director or
employee of Grade 1 or of an alphabetic grade of any Group Company;
(l) the entry into, termination, or amendment of any material contract,
commitment or arrangement having a value involving expenditure in excess of
(pounds)100,000 other than:
(i) as contemplated by the terms of this Agreement;
(ii) in the normal course of business activities of FB; and
(iii) the normal treasury operations of any Group Company;
(m) the changing of any terms of or otherwise increasing the liabilities under
the Pension Schemes;
(n) any expenditure on TV advertising unless previously committed;
(o) the amendment by any Group Company of any contract or arrangement with any
Affinity Group which is not consistent with current practices;
(p) any action taken by any Group Company which is not in compliance in all
material respects with all applicable laws or regulations;
(q) the appointment of any director or employee of Grade 1 or alphabetic grade
of any Group Company;
(r) any transaction outside the ordinary course of business; and
(s) the settlement of the dispute between TFG, FIG and FirstCity Insurance
Brokers Limited in relation to an agreement for underlease and
refurbishment of a property at Elder Street dated 17 December 1992.
4.3 MMC, TBG, and LVFS shall use all reasonable endeavours to procure that upon
Completion each member of the TBG Group shall be released from any Inter-
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Group Guarantees to which it is a party provided that if any such release shall
not be obtained upon Completion, MMC, TBG and LVFS shall use all reasonable
endeavours to procure such releases within 30 days after the Completion and,
pending such releases, LVFS shall indemnify the relevant member of the TBG Group
against all amounts paid by it to any third party pursuant to any such
Inter-Group Guarantee in respect of any liability of any Group Company (and all
Costs incurred in connection with such liability) whether arising before or
after Completion.
4.4 MMC and TBG shall use reasonable endeavours to assist LVFS to procure that
upon Completion the Facilities Agreements listed in Schedule 13 will continue to
be available to FB on substantially the same terms and for substantially the
same amounts as at 26 January 1996;
4.5 If the Lloyd's Levy is imposed prior to Completion, then, TBG shall procure
the payment of any proportion of the Lloyd's Levy, out of the assets of the
Group, which is payable prior to Completion and LVFS shall procure the payment
of any proportion of the Lloyd's Levy which is payable after Completion.
4.6 Prior to Completion TBG and LVFS shall agree to procure the repayment or
assignment (as the case may be) of the Inter Group Loans owed by:
(a) FB to CTB under paragraph 1 of Schedule 5;
(b) FB to CTB under paragraph 4 of Schedule 5; and
(c) FL&FP to TBG under paragraph 5 of Schedule 5.
4.7 Prior to Completion TBG shall procure the repayment by FB of the Inter Group
Loan to Bowring Bermuda Limited referred to under paragraph 2 of Schedule 5 in
accordance with the repayment schedule in Schedule 6.
4.8 Prior to Completion MMC shall repay the Inter-Group Loan to FFS referred to
in paragraph 3 of Schedule 5.
4.9 Prior to Completion any Group Company shall retain the right to declare or
pay any dividend or other distribution to TBG provided that if such a dividend
or distribution is declared the A Option Share Price and the B Option Share
Price shall be reduced by an amount equal to the dividend or distribution paid
to TBG in respect of the A Option Shares or the B Option Shares as the case may
be save for any dividend or distribution paid to TBG pursuant to the
Reorganisation Steps Schedule.
4.10 TBG shall not require the consent of LVFS to the appointment of any
director of TFG to a directorship of any other Group Company in consequence of
any change to the board of TFG pursuant to the Reorganisation Steps Schedule and
shall not be in breach of clause 4.2(q).
4.11 Baltimore shall execute and TBG shall procure that FB shall execute the
assignment of the Premium Finance Loans and such of the Enterprise Loans which
are outstanding to bodies corporate in the agreed form.
4.12 In order to effect the Group Reorganisation TBG may advance additional
subordinated loans to or subscribe for additional share capital in any Group
Company. Any such subordinated loans shall be either repaid by the relevant
Group Company or assigned to LVFS upon Completion, as TBG and LVFS shall
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agree. In the event that TBG shall subscribe for cash for additional fully paid
share capital in any Group Company, the A Option Share Price and the B Option
Share Price shall be increased by an amount equal to the amount paid by TBG to
the relevant Group Company in respect of the A Option Shares or the B Option
Shares as the case may be.
COMPLETION
5.1 In accordance with section 2.3.4 the sale and purchase of the Option Shares
shall be completed at the offices of TBG's Solicitors, or at such other venue as
may be agreed in writing between MMC and LVFS and Baltimore, on the business day
after the service of the notice of exercise of the Options or such other date to
be agreed in writing between MMC and LVFS and Baltimore following the service of
the notice of the exercise of the Options when the events set out in the
following provisions of this clause 5 shall take place.
5.2 TBG shall deliver or cause to be delivered to LVFS or Baltimore or to any
person whom LVFS or Baltimore may nominate:-
(a) duly executed transfers of the registered A Option Shares and deliver share
warrants to bearer in respect of the bearer A Option Shares (provided that
the bearer A Option Shares shall not include the shares in any Group
Company where the issue of bearer shares is prohibited by applicable law or
regulation) into the name of LVFS or its nominee in respect of all of the A
Option Shares, together with the relative share certificates (or an
indemnity in the form of the agreed draft in the case of any missing
certificate);
(b) duly executed share transfers of the registered B Option Shares and deliver
share warrants to bearer in respect of the bearer B Option Shares (unless
the issuance of such bearer shares is prohibited by applicable law or
regulation) into the name of Baltimore or its nominee in respect of all of
the B Option Shares, together with the relative share certificates (or an
indemnity in the form of the agreed draft in the case of any missing
certificates);
(c) the certificates of incorporation, common seal, share register and share
certificate book (with any unissued share certificates) and all minute
books of each Group Company;
(d) a letter of resignation, in the form of the agreed draft, duly executed as
a deed by Claude Mercier as a director of TFG and FFS, by Pierre Bognon and
Francis Borelli as directors of FB and by Francis Bonsignore as a trustee
of the Pension Scheme;
(e) evidence of the repayment of the Inter-Group Loans referred to in
paragraphs 1, 4 and 5 of Schedule 5 or any subordinated loans pursuant to
clause 4.12 or with respect to any of such Inter-Group Loans or
subordinated loans which are not repaid, an executed deed of assignment in
respect of such Inter-Group Loans or subordinated loans to LVFS;
(f) a power of attorney in the agreed form duly executed as a deed by each
registered holder of the Shares.
(g) an unqualified letter of resignation from the auditors to each Group
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Company in the agreed form and in the form prescribed by Section 394(1) of
the Companies Act 1985, accompanied by a written confirmation that such
auditors have no claims for unpaid fees or expenses;
(h) the title deeds to the Properties;
(i) a copy of the minutes (certified by a duly appointed officer as true and
correct) of the boards of directors of TBG and MMC authorising the
execution of, and the performance by them of their obligations under, this
Agreement and each of the documents in the form of the agreed draft to be
executed by them;
(j) a deed in the agreed form amending the agreement for the Commercial Schemes
Business Transfer; and
(k) a copy of the Tax Indemnity duly executed as a deed by TBG and MMC.
5.3 TBG shall procure that (where relevant) resolutions of the boards of each
Group Company are passed by which the following business is transacted:
(a) the registration (subject to their being duly stamped) of the transfers in
respect of the Option Shares referred to in clause 5.2(a) and (b) is
approved;
(b) the resignations referred to in clause 5.2(d) are accepted; and
(c) the registrations of the transfers of the nominee shares in each Group
Company are approved;
5.4.1 LVFS shall in satisfaction of its obligations under clause 2.1.1 or 2.2.1:
(a) cause the A Option Share Price to be paid by electronic funds transfer to
TBG's bank account at Barclays Bank plc, 54 Lombard Street, sort code
20-00-00, Account No:10092746; and
(b) deliver to TBG a copy of the minutes (certified by a duly appointed officer
as true and correct) of LVFS authorising the execution of, and performance
by LVFS of its obligations under this Agreement and each of the other
documents to be executed by LVFS.
5.4.2 Payment by LVFS made in accordance with clause 5.4.1(a) shall constitute a
good discharge for LVFS of its obligations under clause 2.1.1 or 2.2.1.
5.4.3 LVFS shall in consideration for the assignment to LVFS of any of the
Inter-Group Loans referred to in paragraphs 1, 4 and 5 of Schedule 5 and
subordinated loans pursuant to clause 4.12 cause the payment of the amount of
principal and accrued interest outstanding in respect of each such Inter-Group
Loan and subordinated loans on the date of Completion to be made by electronic
funds transfer to TBG's bank account at Barclays Bank plc, 54 Lombard Street,
sort code 20-00-00, Account No: 10092746.
5.4.4 Payment by LVFS made in accordance with clause 5.4.3 shall constitute a
good discharge for LVFS of its obligations (if any) under clause 4.6 and clause
4.12.
5.4.5 LVFS and Baltimore shall each deliver or cause to be delivered to TBG and
MMC a separate copy of the Tax Indemnity duly executed as a deed by each of LVFS
and Baltimore, each copy of which shall already have been duly executed as a
deed by each Group Company which is a party to each deed.
5.5.1 Baltimore shall in satisfaction of its obligations under clause 2.1.2 or
2.2.2:
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(a) cause the B Option Share Price to be paid by electronic funds transfer to
TBG's bank account at Barclays Bank plc, 54 Lombard Street, sort code
20-00-00, Account No:10092746; and
(b) deliver to TBG a copy of the minutes (certified by a duly appointed officer
as true and correct) of Baltimore authorising the execution and performance
by Baltimore of its obligations under this Agreement and each of the other
documents to be executed by Baltimore.
5.5.2 Payment by Baltimore made in accordance with clause 5.5.1(a) shall
constitute a good discharge for Baltimore of its obligations under clause 2.1.1
or 2.2.1.
POST-COMPLETION UNDERTAKINGS
6.1 Following Completion in accordance with clause 5, TBG undertakes to LVFS and
Baltimore:
(a) to procure the repayment in the ordinary and usual course of business and
in any event within 3 months after Completion by the TBG Group of all
Inter-Group Trading Indebtedness owed to each Group Company as at
Completion;
(b) without prejudice to the relevant provisions of the Commercial Schemes
Business Transfer, to procure that as soon as reasonably practicable after
Completion and in any event within 3 months afterwards, the TBG Group shall
cease in any manner whatsoever to use or display any trade or service
marks, trade or service names or logos used or held by any Group Company.
6.2 Following Completion, LVFS and Baltimore (with respect to clause 6.2(c)
only) undertake to TBG:
(a) to procure the repayment in the ordinary and usual course of business and
in any event within 3 months after Completion by each Group Company of all
Inter-Group Trading Indebtedness owed to the TBG Group as at Completion;
(b) to procure that, as soon as reasonably practicable after Completion and in
any event within 3 months afterwards, each Group Company shall cease in any
manner whatsoever to use or display any trade or service marks, trade or
service names or logos used or held by any member of the TBG Group; and
(c) to use all reasonable endeavours to administer the Premium Finance Loans in
a manner which preserves the goodwill of the business of BMM and, if
Baltimore shall appoint an agent to administer such loans, to appoint an
agent which is reasonably acceptable to BMM, provided that this clause will
not oblige Baltimore to incur any additional costs.
RESTRICTIONS ON TBG
7.1 Neither TBG nor any member of the TBG Group shall itself, either alone or
jointly with others, directly or indirectly:
(a) at any time during the period of five years from the date of this Agreement
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provide products or services to any of the Affinity Groups, the entities
specified in Schedule 15 (the Primary Customers) or any individuals on the
basis of their status as members or employees of any of the Affinity Groups
or Primary Customers (the Individuals).
(b) the TBG Group shall not be in breach of clause (a) to the extent that:
(i) it continues to provide to any Affinity Group, Primary Customer or
Individual any product or service that it currently provides to such
Affinity Group, Primary Customer or Individual;
(ii) it provides to any Affinity Group or Primary Customer (but not to any
Individual) products or services wholly unrelated to the products or
services provided by the Group or LVFS at the date of this Agreement
(e.g. business consulting, commercial insurance broking, actuarial and
other "business to business" services);
(iii)at any time following three years after the date of this Agreement,
it provides products or services to the Affinity Groups, Primary
Customers or Individuals which could not be reasonably considered to
compete with any products or services provided on the third
anniversary of this Agreement by any Group Company and/or LVFS, a
written list of which products and services shall be provided by LVFS
to TBG promptly thereafter;
(c) at any time during the period of three years after Completion employ any
person who was employed by any Group Company as at Completion at the level
of Grade 1 or of an alphabetic grade provided that nothing in this clause
(c) shall prevent TBG or any member of the TBG Group from offering
employment to or employing any person who was employed in the Group at
Completion at the level of Grade 1 or of an alphabetic grade but whose
employment has since been terminated by the relevant Group Company;
(d) at any time during the period of ten years after Completion make use of or
disclose to any third party any secret or confidential information relating
to any Group Company or to its business or affairs or any trade secrets
except if and insofar as such disclosure is required by law (and then only
after prior consultation with LVFS) or if such information comes into the
public domain through no fault of TBG or any member of the TBG Group;
(e) at any time after Completion represent itself or permit itself to be held
out as being in any way connected with or interested in the business of any
Group Company;
(f) without prejudice to the relevant provisions of the Commercial Schemes
Business Transfer at any time after Completion use the name Frizzell or any
name capable of confusion therewith whether by using such name as part of a
corporate name or otherwise;
7.2 The provisions of clause 7.1(c) only shall not apply to any consulting
arrangements entered into after 1 January 1997 between any member of the TBG
Group and Colin Frizzell or Hamish Mackay provided in each case that neither
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shall then be employed by LVFS or any Group Company and the provisions of clause
7.1(a) and (b) shall apply for the relevant periods in respect of any such
consulting arrangements.
7.3 TBG acknowledges and agrees that each of clauses 7.1(a), (c), (d), (e) and
(f) constitute entirely separate and independent restrictions and that the
duration, extent and application of each restriction are no greater than is
reasonable and necessary for the protection of the interests of LVFS and
Baltimore but that, if any such restriction shall be adjudged by any court or
authority of competent jurisdiction to be void or unenforceable but would be
valid if part of the wording thereof were to be deleted and/or the period
thereof were to be reduced and/or the area dealt with thereby were to be
reduced, the said restriction shall apply within the jurisdiction of that court
or competent authority with such modifications as are necessary to make it valid
and effective.
RIGHTS
8.1 Subject to the rights under clauses 3, 8.3 and 8.5, neither MMC, TBG, LVFS
nor Baltimore shall have the right to rescind or terminate this Agreement.
8.2 Without prejudice to clause 8.3 and subject to the provisions of clause 11
LVFS or Baltimore shall have a right to make a claim against TBG for any losses
arising from the breach of any of the undertakings under clause 4.2 of this
Agreement, which breach has not been remedied prior to Completion.
8.3 If, in respect of the undertakings given by TBG in clauses 4.1 and 4.2:
(a) there is a breach of such undertakings by TBG prior to commencement of the
Group Reorganisation such that the consequence of that breach had a
material adverse effect on the business of the Group; and
(b) the breach is not remedied within thirty days of TBG's receipt of written
notice of such breach by LVFS or Baltimore or, if earlier before
commencement of the Group Reorganisation; and
(c) the parties, acting in good faith, are unable to reach an agreement as to
an appropriate reduction to the Option Share Price in respect of such
breach,
then LVFS shall have the right prior to commencement of the Group Reorganisation
to terminate this Agreement (other than clauses 12.5 and 18) and none of the
parties shall have any claim of any nature whatsoever against the other parties
under this Agreement (save in respect of their accrued rights arising under this
Agreement).
8.4 LVFS and Baltimore agree that notwithstanding any breach of this Agreement
save in the case of a fraud, no rights of rescission or termination will be
available to any of the parties following Completion in respect of any claim
arising under or in connection with this Agreement and LVFS and Baltimore shall
not be entitled to treat TBG as having repudiated this Agreement.
8.5 Save in the case of fraud in no event shall LVFS or Baltimore have the right
to rescind or terminate this Agreement following commencement of the Group
Reorganisation.
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COST OF TERMINATION
9. If the Agreement is terminated by LVFS or Baltimore prior to Completion and
if, (i) the sum of (pounds)188,000,000 plus the amount of the Earnings of the
Group as derived from the Group's management accounts during the period 1
January 1996 until the date of termination is less than (ii) the Option Price
which would apply if the Options were exercised on the date of termination, then
LVFS will pay to TBG the difference between (i) and (ii).
WARRANTIES
10.1 TBG warrants to LVFS and Baltimore in the terms of the Warranties and
acknowledges that LVFS and Baltimore have entered into this Agreement in
reliance upon the Warranties.
10.2 The Warranties are subject to the matters expressly disclosed (or expressed
as treated to be disclosed) in the Disclosure Letter, the Information Memorandum
and the Data Room Files except where such information is not true and accurate
in all material respects.
10.3 Each of the Warranties is separate and independent and, subject as provided
in this Agreement, LVFS and Baltimore shall have a separate claim and right of
action in respect of every Warranty save that LVFS and Baltimore shall not be
entitled to recover in respect of any claim for breach of Warranty more than
once in respect of any such breach to the extent that to do so would constitute
double recovery.
10.4 Liability under any Warranty shall not be confined to breaches discovered
before Completion.
10.5 LVFS and Baltimore expressly agree and acknowledge that, except for the
Warranties, they have not entered into this Agreement in reliance upon any
representation, warranty or undertaking made to them or to their officers,
agents, advisers or representatives by TBG, MMC or their officers, agents,
advisers or representatives.
10.6 In the event of a breach of any Warranty, then subject to the provisions of
this Agreement and without restricting the rights of LVFS or Baltimore to claim
damages on any other basis available to it, TBG will, at the election of LVFS
either:
(a) pay to LVFS, or any Group Company an amount equal to any deficiency,
depletion of assets or increased liability of any Group Company which
arises from such breach of Warranty or which would not have existed if the
Warranty in question had not been breached; or
(b) pay to LVFS or Baltimore an amount equal to the amount by which the value
of the Option Shares is less than it would have been if such Warranty had
not been breached.
10.7 The benefit of the Warranties shall be assignable by Baltimore to LVFS in
whole or in part. The calculation of any amount due to LVFS or Baltimore in
respect of any breach of any of the Warranties shall wholly disregard any
subsequent sub-sale or re-sale of the Option Shares or any of them by LVFS or
Baltimore to any other person.
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10.8 Baltimore's obligations to MMC and TBG in clause 11 of this Agreement shall
only be of effect and be enforceable against Baltimore for such time as
Baltimore shall remain the beneficial owner of any shares in TFG acquired
pursuant to the exercise of the Options for the B Option Shares.
LIMITATION ON WARRANTY, UNDERTAKING AND INDEMNITY CLAIMS
11.1 TBG shall be under no liability in respect of any breach of any of the
Warranties (excluding the Tax Warranties) or breach of any of the undertakings
under clause 4.2 unless LVFS or Baltimore has served on TBG a written notice on
or before 30 June 1997 giving such details of the claim as LVFS or Baltimore
then has including LVFS' or Baltimore's then best estimate of the amount of the
liability of TBG in respect thereof.
11.2 TBG shall be under no liability in respect of any breach of the Tax
Warranties or in respect of any claim pursuant to the Tax Indemnity unless LVFS
or Baltimore has served on TBG a written notice on or before the seventh
anniversary of the date of Completion giving such details of the claim or the
liability of TBG in respect thereof.
11.3 No Claim shall be made unless:
(a) the amount of such Claim (except as otherwise provided in clause 2.1(b) of
the Tax Indemnity) exceeds(pounds)20,000 provided that if more than one
Claim arises from the same fact or circumstance giving rise to the breach
of Warranty or breach of undertaking under clause 4.2 and individually such
Claims are for sums of (pounds)20,000 or less, but when aggregated they
amount to a sum in excess of (pounds)20,000, then all such Claims shall be
capable of being made notwithstanding the provisions of this clause
11.3(a); and
(b) the aggregate amount of all such Claims (except as otherwise provided in
clause 2.1(b) of the Tax Indemnity) (other than breaches for which LVFS or
Baltimore may not claim by virtue of sub-paragraph (a) above), exceeds
(pounds)2,500,000, in which case TBG shall be liable only for the excess
and not the entire amount.
11.4 Subject to clause 11.3 the total amount of the liability of TBG in respect
of claims for breach of the Warranties or in respect of any claims for breach of
the undertaking under clause 4.2 or pursuant to the Tax Indemnity to LVFS and
Baltimore shall be limited to and shall in no event exceed (pounds)188,000,000.
11.5.1 Neither LVFS nor Baltimore is aware, at the date of entering into this
Agreement, of any Claim.
11.5.2 If any Claim (save for any claim under the Tax Indemnity) arises as a
result of a claim by or liability to a third party, or if LVFS, Baltimore, or
any Group Company is, or is likely to be entitled to recover from a third party
any sum in respect of any loss, damage or liability which has given rise, or is
likely to give rise, to such a Claim, then LVFS and/or Baltimore shall give
written notice of that fact to TBG. LVFS and/or Baltimore shall take such steps
as TBG shall reasonably require (but subject to the reasonable need of LVFS and
Baltimore to preserve the goodwill of the business of any Group Company) to
avoid, dispute, resist, appeal, compromise or contest such claim or liability
or, as the case may be,
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to enforce such recovery and LVFS and Baltimore will give and procure that each
Group Company give all such reasonable information and assistance (including
access to all relevant employees and to books, correspondence or other documents
or records and the right to copy the same and in respect of any Claim which has
been paid in full by TBG the assignment to TBG (to the extent legally
permissible) of the right of action against a third party in relation thereto)
for the purpose of avoiding mitigating, disputing, resisting, appealing,
compromising or contesting any such claim or liability or, as the case may be
enforcing such recovery provided that TBG shall indemnify LVFS, Baltimore and
each Group Company against all costs, charges, liabilities and out of pocket
expenses that LVFS and/or Baltimore and/or each Group Company may reasonably
incur as a result of LVFS and/or Baltimore taking such action as aforesaid. LVFS
and/or Baltimore shall keep TBG informed of all material steps taken by them as
promptly as reasonably practicable.
11.5.3 If LVFS, Baltimore or any Group Company becomes aware:
(a) of any such claim or liability to a third party as is referred to in clause
11.5.2; or
(b) that LVFS, Baltimore or each Group Company is, or is likely to be, entitled
to make any such recovery from a third party as is referred to in clause
11.5.2,
and LVFS and/or Baltimore has given notice to TBG in accordance with clause
11.5.2 then, if TBG does not request access to employees or books under clause
11.5.2 or direct LVFS and/or Baltimore to take any steps or proceedings in
respect of a Claim within 28 days after the date on which such notice is
received, LVFS and/or Baltimore shall be free to admit, settle or pay or
discharge such Claim on such terms and conditions as it considers appropriate.
11.5.4 TBG shall not be liable in respect of any Claim to the extent that such
Claim arises wholly or partly from, or to the extent that the amount of such
Claim is increased by:
(a) any voluntary act, omission or transaction which LVFS and/or Baltimore
knew, or ought reasonably to have known, would give rise to such a claim or
transaction of LVFS and/or Baltimore or its successors in title or any
Group Company after the date hereof, unless such act or transaction was
done or such omission occurred:
(i) pursuant to an obligation of any Group Company incurred prior to the
date of this Agreement; or
(ii) in compliance with any law, regulation or requirement of any competent
authority; or
(iii)with the agreement or at the request of any member of the TBG Group;
or
(iv) in the ordinary course of business of LVFS, Baltimore or any Group
Company;
(b) any act, matter or thing done or omitted to be done by or at the written
request of LVFS or Baltimore or its advisers; or
(c) any act, matter or thing done or omitted to be done as a result of the
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implementation of the steps pursuant to the Reorganisation Steps Schedule
or contemplated by this Agreement; or
(d) any legislation not in force at the date of this Agreement or any change of
law or published administrative practice of any competent authority
(including published extra-statutory concessions of the Inland Revenue) or
in the bases or rate of taxation which in all cases come into force after
the date of this Agreement which have retrospective effect; or
(e) changes in SSAPs or changes effected by any Group Company in accounting
bases or policies or accounting periods.
Provided that paragraphs (a) and (c) above do not apply to claims under the Tax
Indemnity.
11.5.5 No liability shall attach to TBG in respect of any Claim to the extent
that:
(a) recovery is made or is capable of being made by LVFS and/or Baltimore or
any Group Company under the terms of any insurance policy provided by any
insurer other than the Insurers or a company which is reinsured by either
of the Insurers; or
(b) a specific allowance, provision or reserve has been made in the Accounts in
respect of the matters to which such Claim relates; or
(c) a specific allowance, provision or reserve in the Accounts is no longer
required and has not been applied to any other Claim.
11.5.6. If TBG pays to LVFS or Baltimore an amount in respect of a Claim (except
for a claim under the Tax Indemnity) and the liability that has resulted in such
payment by TBG gives rise to a corresponding tax saving for LVFS, Baltimore or
any Group Company, the value of that corresponding saving shall be paid by the
relevant company to TBG to the extent and at the time such saving is actually
realised by LVFS, Baltimore or any Group Company.
11.5.7. If TBG pays to LVFS or Baltimore (as the case may be) the amount in
respect of a Claim (except for a claim under the Tax Indemnity) and LVFS,
Baltimore or any Group Company or any person(s) deriving title under LVFS or
Baltimore subsequently recovers from a third party a sum which is referable to
the Claim made by LVFS or Baltimore together with any costs recovered either
before or after taxation by the court, then (provided that such Claim has been
settled in full) LVFS or Baltimore (as the case may be) shall forthwith repay to
TBG so much of the amount paid by TBG as does not exceed the sum recovered from
the third party less all reasonable costs, charges and expenses reasonably
incurred by LVFS or Baltimore or any Group Company (as the case may be) in
obtaining that payment and in recovering that sum from the third party.
11.5.8. If any breach of or claim arising under the Warranties shall arise by
reason of some liability which at the time the breach is notified to TBG is
contingent only, then TBG shall not be under any obligation to make any payment
thereunder until such time that the contingent liability ceases to be
contingent. Provided that this clause shall not operate to prevent or avoid a
claim by LVFS or Baltimore which is notified within the time limits specified in
clauses 11.1 and
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11.2.
11.5.9. No claim shall be made in respect of the breach of the Warranties or
undertakings under clause 4.2 to the extent that the same is capable of remedy
unless LVFS or Baltimore shall first have afforded TBG a reasonable opportunity
to remedy the breach and TBG shall have failed to do so within 30 days of
receipt of notice from LVFS or Baltimore requiring such remedy and, for such
purpose, LVFS or Baltimore shall make available to TBG all documents and
information in the possession, custody or control of LVFS or Baltimore or any
Group Company as TBG may reasonably require.
11.5.10. For the avoidance of doubt if LVFS or Baltimore shall become aware of
any fact, matter or circumstance which is likely to give rise to a claim for a
breach of Warranty or a breach of undertaking under clause 4.1, LVFS or
Baltimore agrees to give written notice of that fact to TBG as soon as is
reasonably practicable and thereafter to keep TBG informed of developments as
promptly as reasonably practicable. LVFS or Baltimore shall (where appropriate,
subject to and in accordance with the provisions of clause 11.5.2) procure that
all reasonable steps are taken and all reasonable assistance is given to avoid
or mitigate any loss or liability which might give rise to such a Claim or a
breach of undertaking under clause 4.1.
11.5.11. The limitations set out in this clause 11 on the liability of TBG in
relation to claims for breach of any of the Warranties or undertakings under
clause 4.2 or pursuant to the Tax Indemnity shall not apply to any claim for
breach of any of the Warranties or pursuant to the Tax Indemnity when such claim
arises out of any fraudulent act on the part of TBG or MMC.
11.5.12. To the extent that the Disputed Losses are allowed by the Inland
Revenue and are utilised in a way that gives rise to a tax saving or repayment
of tax for any Group Company the amount of tax saved or repaid shall be offset
against any amount which would otherwise become payable by TBG in relation to
any claim for breach of the Tax Warranties or under the Tax Indemnity and if TBG
has satisfied a claim for breach of the Tax Warranties or under the Tax
Indemnity before the Disputed Losses are utilised the amount of tax saved or
repaid as a result of such utilisation shall be paid to TBG to the extent TBG
has satisfied such claim.
11.5.13. To the extent that the tax payable by Group Companies in respect of (a)
the receipt of dividends from TB and FBV after 31 December 1995 and before
Completion, and (b) the disposal of TB and FBV to a company which is not a Group
Company or companies which are not Group Companies is (on the assumption that
allowable losses accruing to TFG before the commencement of the Pre-Sale
Reorganisation are set against chargeable gains accruing on the disposal of TB
and/or FBV) less than the reserve of (pounds)813,000 in the accounts of TFG as
at 31 December 1995, the difference shall be made available by LVFS to offset
any amount which might become payable by TBG in relation to claims for breach of
any of the Tax Warranties or under the Tax Indemnity.
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INDEMNITIES
12.1 TBG will indemnify and keep indemnified LVFS (on an after tax basis) in
respect of any shortfall in the net asset value of NewFIB Ltd. that TFG shall
become liable to pay pursuant to the agreement between FIG and TFG dated 17
December 1992, together with any costs incurred by TFG thereunder for an amount
not exceeding (pounds)2,275,000, provided that LVFS shall not settle such
dispute between TFG and FIG without the prior written consent of TBG. Following
Completion LVFS shall (if relevant) at all times keep TBG reasonably informed of
the status of any ongoing dispute with FIG (including any holding company from
time to time of FIG and any subsidiary from time to time of FIG or any such
holding company) in respect of any shortfall in the net asset value of NewFIB
Ltd and/or in respect of the dispute between TFG, FIG and FirstCity Insurance
Brokers Limited in relation to an agreement for underlease and refurbishment of
a property at Elder Street, dated 17 December 1992.
12.2 TBG will indemnify and keep indemnified LVFS (on an after tax basis)
against the cost of the Incentive Bonus.
12.3.1 Subject to the provisions of this clause 12.3 TBG shall from time to time
indemnify and keep indemnified LVFS and any Group Company (on an after tax
basis) in respect of any Pension Liabilities.
12.3.2 LVFS and FL & FP shall at their own cost be responsible for the day to
day management of any Pensions Claims and LVFS shall and shall procure that FL &
FP shall:
(a) keep TBG properly informed as to the progress of Pensions Claims by
submitting a quarterly report summarising the position in respect of
Pensions Claims and shall respond in a timely manner to any reasonable
enquiries made by TBG in connection therewith;
(b) supply to TBG any information that TBG may reasonably require in connection
with any Pensions Claims, including information for TBG's semi-annual
reviews with the underwriters who are providing coverage in respect of the
Pension Liabilities;
(c) permit the involvement of the staff of the TBG Group (at no cost to LVFS)
to assist in the management of the Pensions Claims; and
(d) continue the engagement of Slaughter and May to advise the Group with
respect to the Pension Claims.
The procedures relating to the Pensions Claims shall be reviewed by TBG and LVFS
on a quarterly basis, commencing in 1996. Such review shall be conducted on the
basis that each party shall make representations which shall be considered fully
by the other party and responded to in a timely manner and on a reasoned basis.
12.3.3 If any amount becomes due from TBG to LVFS or any Group Company pursuant
to clause 12.3.1 LVFS shall give notice (a Liability Notice) to TBG of the
amount that has fallen due, together with such details as may be necessary for
TBG to verify the amount due. LVFS shall co-operate promptly and diligently in
providing all such information as TBG may reasonably require in order to verify
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the content of the Liability Notice and reasonableness of the amount of any
claim contained in such notice.
12.3.4 TBG shall pay the amount claimed within 60 days following receipt of a
Liability Notice unless it has previously given a Dispute Notice to LVFS.
12.3.5 If TBG disputes any amount due it shall give notice (a Dispute Notice) to
LVFS in writing of such fact within 60 days of the receipt of the relevant
Liability Notice. If the matter or matters in dispute are not resolved by the
parties within 28 days of LVFS receiving the Dispute Notice the matter in
dispute may be referred by either party for final determination to such
independent firm of chartered accountants as may be agreed by the parties or, in
the absence of such agreement within seven days of such firm of chartered
accountants being appointed (at the request of either party) by the President of
the Institute of Chartered Accountants in England and Wales (the Umpire). The
provisions of clause 12.3.7 shall apply to any reference to the Umpire.
12.3.6 If the amount due from TBG to LVFS or any Group Company is agreed between
the parties or determined by the Umpire as described in clause 12.3.5 above, to
be different from the amount actually paid, the amount of the difference due
shall be paid by TBG to LVFS or any Group Company or by LVFS or any Group
Company to TBG within seven days following the date of such agreement or
determination, together with interest calculated at the rate of one half of one
per cent above LIBOR from time to time from the 60 th day following the service
of the Liability Notice to the date of actual payment of the amount of the
difference (both dates inclusive).
12.3.7 If any disagreement or dispute under clause 12.3.5 and 12.3.3 is referred
to an Umpire:
(a) the parties shall co-operate with the Umpire in determining such
disagreement or dispute, and for that purpose shall provide to him all such
information and documentation that he may reasonably require;
(b) the Umpire shall have the right to seek such professional assistance and
advice as he may require in fulfilling his duties;
(c) the Umpire so appointed shall consider only the matters in dispute;
(d) the Umpire shall be entitled, in rendering his decision, to take into
account only such evidence and information as the parties shall have put to
him;
(e) the fees of the Umpire (and any professional fees incurred by him) shall be
borne as the Umpire shall direct or failing such direction as to half by
TBG and as to half by LVFS provided that if either party fails to pay its
share of any such fee within seven days of the Umpire's invoice being
rendered to the parties or either of them the other party shall be obliged
to pay the full amount of the fee and thereupon to recover the share of the
first mentioned party as a debt due and payable on demand; and
(f) the Umpire shall act as an expert and his decision shall be final and
binding upon the parties.
12.4 LVFS will indemnify and keep indemnified TBG on an after tax basis for any
losses, costs, liabilities or expenses arising from the termination by FB of the
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KBIML Agreement
12.5 LVFS shall indemnify TBG for up to (pounds)275,000 plus VAT in respect of
all costs, charges and expenses of the Group Reorganisation since 19 December
1995 including the fees and expenses of TBG's Accountants and TBG's Solicitors.
12.6 TBG will indemnify LVFS on an after tax basis for up to (pounds)350,000 of
premiums (as evidenced by valid invoices and receipts for such premiums) to
obtain insurance coverage for the Group for claims arising after Completion but
based on acts, errors or omissions taking place prior to Completion.
12.7 TBG shall indemnify LVFS against part of the cost of funding the payment of
Advance Corporation Tax arising as a result of the Reorganisation by paying to
LVFS on 14 July 1996 the sum of (pounds)135,000.
INSURANCE
13. LVFS and Baltimore acknowledge that the Group has entered or will prior to
Completion enter into an agreement with the Insurers on the terms that neither
claims nor circumstances of any Group Company which have been notified to the
Insurers prior to the date of Completion nor any further claims or circumstances
arising after the date of Completion will be met by the Insurers.
GUARANTEE
14.1 In consideration of MMC and TBG entering into and acting in accordance with
this Agreement, LVFS (as principal obligor and not merely as a surety)
unconditionally and irrevocably guarantees as a continuing obligation the proper
and punctual performance by Baltimore of all its obligations under or pursuant
to this Agreement (including any documents of transfer or otherwise entered into
pursuant to the terms of this Agreement).
14.2 LVFS's liability hereunder shall not be discharged or impaired by any
amendment to or variation of this Agreement, any release of, or granting of time
or other indulgence to, Baltimore or any third party, any liquidation,
administration, receivership or winding-up of Baltimore or by any other act or
omission or any other events or circumstances whatsoever (whether or not known
to Baltimore, MMC, TBG or LVFS) which would or might (but for this clause)
operate to impair or discharge LVFS's liability under this guarantee.
ENTIRE AGREEMENT
15. This Agreement, the Confidentiality Agreement, the Disclosure Letter and the
other documents in the agreed form together constitute the entire agreement and
understanding between the parties in connection with the sale and purchase of
the Option Shares. Upon Completion the Confidentiality Agreement shall cease to
have any further force or effect. It is agreed that:
(a) no party has entered into this Agreement in reliance upon any
representation, warranty or undertaking which is not expressly set out or
referred to in this Agreement;
(b) no party shall have any remedy in respect of misrepresentation or untrue
statement made by any other party unless and to the extent that a claim
lies for breach of Warranty under this Agreement;
(c) this clause shall not exclude any liability for fraudulent
misrepresentation.
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VARIATION
16. No variation of this Agreement (or any document entered into pursuant to
this Agreement) shall be valid unless it is in writing and signed by or on
behalf of all the parties to this Agreement.
ASSIGNMENT
17. Subject to clause 10.7, provided that no party incurs greater liabilities as
a result, the whole, but not part, of the benefit of any provision of this
Agreement may, without prior written consent of the other, be assigned after
Completion to:
(a) any member of LVFS's Group by LVFS but only so long as such company remains
a member of the LVFS Group and provided that such company is the registered
holder of the Option Shares and may be enforced by such assignee or the
beneficial owner for the time being of the Option Shares; and
(b) any member of the TBG Group but only so long as such company remains a
member of the TBG Group.
Subject as aforesaid, none of the parties to this Agreement may assign the
benefit or burden of any provision of this Agreement.
ANNOUNCEMENTS
18 Subject to the Confidentiality Agreement and save where an announcement is
required (on the advice of the legal advisers) or required by any regulatory
body and then, if possible, only after consulting with each other as to the form
and content of such announcement, no announcement or circular in connection with
the subject matter of this Agreement shall be made or issued by or on behalf of
any of the parties to this Agreement between the date of this Agreement and
Completion without the prior written approval of both MMC and LVFS, such
approval not to be unreasonably withheld conditioned or delayed.
COSTS
19. Without prejudice to clause 12.5, each of the parties hereto shall pay its
own Costs incurred in connection with the negotiation, preparation and
implementation of this Agreement and LVFS and Baltimore shall pay all stamp duty
and stamp duty reserve tax (if any) on the transfer to them of the Option
Shares.
INVALIDITY
20. If any term or provision of this Agreement shall be held to be illegal or
unenforceable, in whole or in part, under any enactment or rule of law, such
term or provision or part shall to that extent be deemed not to form part of
this Agreement but the enforceability of the remainder of this Agreement shall
not be affected. If the exercise of the A Put Option or the A Call Option
pursuant to clause 2 shall mean that the sale and purchase of shares in FB shall
be void or voidable or unenforceable under any enactment or rule of law for any
reason then such part of clause 2 shall to that extent be deemed not to form
part of this Agreement but the enforceability of the remainder of this Agreement
shall not be affected.
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COUNTERPARTS
21. This Agreement may be entered into in any number of counterparts and by the
parties to it on 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.
TIME OF THE ESSENCE
22. Time shall be of the essence of this Agreement, both as regards the times,
dates and periods mentioned herein and as to any times, dates and periods which
may, by agreement in writing between or on behalf of TBG and LVFS, be
substituted for them.
FURTHER ASSURANCE
23. Each of LVFS, Baltimore and TBG and MMC shall do or procure to be done all
such further acts and things and execute or procure the execution of all such
other documents as LVFS, Baltimore, TBG or MMC (as the case may be) may from
time to time reasonably require, whether before, on or after Completion, for the
purpose of giving to LVFS, Baltimore, TBG or MMC (as the case may be) the full
benefit of all of the provisions of this Agreement.
NOTICES
24.1 Any notice under this Agreement shall be in writing and signed by or on
behalf of the party giving it and may be served by leaving it at or sending it
by facsimile, prepaid recorded delivery or registered post to the address and
for the attention of the relevant party set out in clause 24.2 (or as otherwise
notified from time to time hereunder). Any notice so served by facsimile or post
shall be deemed to have been received:-
(a) in the case of facsimile, on the next business day after the date of
despatch; and
(b) in the case of recorded delivery or registered post, on the fourth business
day after the date of posting.
24.2 The addresses of the parties for the purpose of clause 24.1 are as
follows:-
MMC:
1166 Avenue of the Americas,
New York
New York
10036
USA
For the attention of: The General Counsel
Facsimile: 001 212 345 4647
with copies to TBG and Freshfields at their addresses as given
in this clause
TBG:
The Bowring Building
Tower Place
London EC3P 3BE
For the attention of: The Company Secretary
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Facsimile: 0171 929 2705
with copies to MMC and Freshfields at their addresses as given
in this clause
FRESHFIELDS:
65 Fleet Street
London EC4Y 1HS
For the attention of: Richard Harris
Facsimile: 0171 832 7001
with copies to TBG and MMC at
their addresses as given in this clause
BALTIMORE:
65 Holborn Viaduct
London
EC1A 2DY
For the attention of John Young
Facsimile 0171 248 2412
with copies to LVFS' and Lovell White Durrant and Macfarlanes
at their addresses as given in this clause
LVFS:
Victoria House
Southampton Row
London WC1B 4DB
For the attention of: C.A. Peters
Facsimile: 0171 404 0390
with copies to Baltimore and Lovell White Durrant at their
addresses as given in this clause
MACFARLANES:
10 Norwich Street
London EC4A 1BD
For the attention of: David Coleman
Facsimile: 0171 831 9607
LOVELL WHITE DURRANT
65 Holborn Viaduct
London
EC1A 2DY
For the attention of John Young
Facsimile: 0171 248 2412
Page 33
<PAGE>
RESTRICTIVE TRADE PRACTICES ACT
25. Notwithstanding any other provisions of this Agreement (or any other
agreement which, together with this Agreement, may form part of an agreement for
the purposes of the Restrictive Trade Practices Act 1976 (together the "RTPA
Agreement")) the parties hereto agree that they will not give effect, and will
procure that none of their subsidiaries shall give effect, to any restriction or
restrictions contained in the RTPA Agreement which cause the RTPA Agreement to
be registrable under the Restrictive Trade Practices Act 1976 until one day
after particulars of the RTPA Agreement shall have been furnished to the
Director General of Fair Trading. The parties shall use their best endeavours to
procure the furnishing of particulars as soon as possible after the signing of
this Agreement.
GOVERNING LAW AND JURISDICTION
26. This Agreement is governed by, and shall be construed in accordance with,
the laws of England. Each of the parties hereby irrevocably submits, for the
benefit of the other, to the non-exclusive jurisdiction of the courts of
England.
IN WITNESS WHEREOF this Agreement has been signed by and on behalf of the
parties the day and year first before written.
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SCHEDULE 1
The Company
Part A
Details of the Company
1. Name of Company: The Frizzell Group Limited
2. Registered Office: Frizzell House, County Gates, Bournemouth,
Dorset BH1 2NF
3. Date and Place 28 December 1923, England
of Incorporation:
4. Registered Number: 194727
5. Directors: Colin Frazer Frizzell, Ian Hamish Noel
Mackay, Bryan Peter Jenkins, Richard Arthur
Matthews, Claude Yves Mercier, Geoffrey
Partington, David Tomlinson, Terry William
Trinder, Melvyn William Watt and Ian
Faulkner
6. Secretary: Alan Francis Harries
7. Authorised Capital: (pounds)10,000,000 represented by 40,000,000
ordinary shares of 25p each
8. Issued Capital: (pounds)6,249,687.25 represented by 24,998,749
ordinary shares of 25p each
9. Registered The Bowring Group Limited
Shareholders: Mr Christopher Matthew Robertson Pearson
10. Accounting Reference 31 December
Date:
11. Auditors: Touche Ross & Co
12. Tax Residence: UK
13. Subsidiaries: FFS
FL&FP
FB
CR
FBV
FCS
FPL
FWD
TB
SS
SL
TMAL
14. Mortgages and Charges: None
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Part B
Details of the Subsidiaries
1. Name of Company: Frizzell Financial Services Limited
2. Date of Incorporation: 1 January 1970
3. Place of Incorporation: England and Wales
4. Class of Company: Private company limited by shares
5. Registered Number: 969371
6. Registered Office: Frizzell House, County Gates,
Bournemouth, Dorset BH1 2NF
7. Directors: Ian Hamish Noel Mackay, Richard Arthur
Matthews, Claude Yves Mercier, Geoffrey
Partington, Melvyn William Watt
8. Secretary: Alan Francis Harries
9. Authorised Capital: (pounds)50,000 represented by 50,000 ordinary
shares of (pounds)1 each
10. Issued Capital: (pounds)50,000 represented by 50,000 ordinary
shares of (pounds)1 each
11. Registered Shareholders: CF Frizzell & The Frizzell Group Limited.
The Frizzell Group Limited
12. Accounting Reference 31 December
Date:
13. Auditors: Touche Ross & Co
14. Tax Residence: UK
15. Subsidiaries: -
16. Mortgages and Charges: Trust Deed 28 February 1983 - The
Corporation of Lloyd's
Security - Trust Deed 31/10/89 - The
Corporation of Lloyd's
Page 36
<PAGE>
Details of Subsidiaries
1. Name: Frizzell Life and Financial Planning
Limited
2. Date of Incorporation: 11 December 1948
3. Place of Incorporation: England and Wales
4. Class of Company: Private company limited by shares
5. Registered Number: 462173
6. Registered Office: Frizzell House, County Gates,
Bournemouth, Dorset BH1 2NF
7. Directors: Richard Campbell, Stephen Leonard
Ingleledew, Ian Hamish Noel Mackay,
Geoffrey Partington, Melvyn William Watt
8. Secretary: Alan Francis Harries
9. Authorised Capital: (pounds)105,000 represented by 105,000 ordinary
shares of (pounds)1 each
10. Issued Capital: (pounds)105,000 represented by 105,000 ordinary
shares of (pounds)1 each
11. Registered Shareholders: CF Frizzell & The Frizzell Group Limited.
The Frizzell Group Limited
12. Accounting Reference 31 December
Date:
13. Auditors: Touche Ross & Co
14. Tax Residence: UK
15. Subsidiaries: -
16. Mortgages and Charges: None
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<PAGE>
Details of Subsidiaries
1. Name: Central Resources Limited
2. Date of Incorporation: 10 November 1924
3. Place of Incorporation: England and Wales
4. Class of Company: Private company limited by shares
5. Registered Number: 201591
6. Registered Office: Frizzell House, County Gates,
Bournemouth, Dorset BH1 2NF
7. Directors: Geoffrey Partington, Ian Hamish Noel
Mackay
8. Secretary: Alan Francis Harries
9. Authorised Capital: (pounds)30,000 represented by 30,000 ordinary
shares of (pounds)1 each
10. Issued Capital: (pounds)30,000 represented by 30,000 ordinary
shares of (pounds)1 each
11. Registered Shareholders: CF Frizzell and the Frizzell Group Limited.
The Frizzell Group Limited
12. Accounting Reference 31 December
Date:
13. Auditors: Touche Ross & Co
14. Tax Residence: UK
15. Subsidiaries: -
16. Mortgages and Charges: None
Page 38
<PAGE>
Details of Subsidiaries
1. Name: Frizzell Bank Limited
2. Date of Incorporation: 28 March 1947
3. Place of Incorporation: England and Wales
4. Class of Company: Private company limited by shares
5. Registered Number: 432080
6. Registered Office: Frizzell House, County Gates,
Bournemouth, Dorset BH1 2NF
7. Directors: Pierre Georges Desire Bognon, Desmond
Benjamin, Francis Joseph Borelli, Ian
Hamish Noel Mackay, Lawrence Nigel Guy
Olsen, Geoffrey Partington, Terry William
Trinder, Melvyn William Watt
8. Secretary: Alan Francis Harries
9. Authorised Capital: (pounds)30,065,000 represented by 30,065,000
ordinary (pounds)1 shares
10. Issued Capital: (pounds)17,565,000 represented by 17,565,000
ordinary shares of (pounds)1 each
11. Registered Shareholders: The Frizzell Group Limited
The Frizzell Group Limited & Colin Frazer
Frizzell
12. Accounting Reference 31 December
Date:
13. Auditors: Touche Ross & Co
14. Tax Residence: UK
15. Subsidiaries: Frizzell Credit Services Ltd.
Shawland Securities Ltd.
Shawland Leasing Ltd.
16. Mortgages and Charges: None
Page 39
<PAGE>
Details of Subsidiaries
1. Name: Frizzell Credit Services Limited
2. Date of Incorporation: 1 August 1922
3. Place of Incorporation: England and Wales
4. Class of Company: Private company limited by shares
5. Registered Number: 183500
6. Registered Office: Frizzell House, County Gates,
Bournemouth, Dorset BH1 2NF
7. Directors: Ian Hamish Noel Mackay, Geoffrey
Partington, Terry William Trinder
8. Secretary: Alan Francis Harries
9. Authorised Capital: (pounds)11,000 represented by 11,000 ordinary
shares of (pounds)1 each
10. Issued Capital: (pounds)10,500 represented by 10,500 ordinary
shares of (pounds)1 each
11. Registered Shareholders: CF Frizzell & Frizzell Bank Limited
Frizzell Bank Limited
12. Accounting Reference 31 December
Date:
13. Auditors: Touche Ross & Co
14. Tax Residence: UK
15. Subsidiaries: -
16. Mortgages and Charges: None
Page 40
<PAGE>
Details of Subsidiaries
1. Name: Frizzell Property Loans Ltd
2. Date of Incorporation: 6 November 1963
3. Place of Incorporation: England and Wales
4. Class of Company: Private company limited by shares
5. Registered Number: 780048
6. Registered Office: Frizzell House, County Gates,
Bournemouth, Dorset BH1 2NF
7. Directors: Ian Hamish Noel Mackay, Geoffrey
Partington
8. Secretary: Alan Francis Harries
9. Authorised Capital: (pounds)100,000 represented by 100,000 ordinary
shares of (pounds)1 each
10. Issued Capital: (pounds)64,600 represented by 64,600 ordinary
shares of (pounds)1 each
11. Registered Shareholders: CF Frizzell & The Frizzell Group Limited.
The Frizzell Group Limited
12. Accounting Reference 31 December
Date:
13. Auditors: Touche Ross & Co
14. Tax Residence: UK
15. Subsidiaries: -
16. Mortgages and Charges: Legal charge 1 December 1988 -
J Henry Schroder Wagg & Co Limited
Page 41
<PAGE>
Details of Subsidiaries
1. Name: Frizzell Westbourne Developments Limited
2. Date of Incorporation: 25 May 1988
3. Place of Incorporation: England and Wales
4. Class of Company: Private company limited by shares
5. Registered Number: 02261873
6. Registered Office: Frizzell House, County Gates,
Bournemouth, Dorset BH1 2NF
7. Directors: Ian Hamish Noel Mackay, Geoffrey
Partington
8. Secretary: Alan Francis Harries
9. Authorised Capital: (pounds)1,000 represented by 1,000 ordinary shares
of (pounds)1 each
10. Issued Capital: (pounds)100 represented by 100 ordinary shares of
(pounds)1 each
11. Registered Shareholders: CF Frizzell & The Frizzell Group Limited.
The Frizzell Group Limited.
12. Accounting Reference 31 December
Date:
13. Auditors: Touche Ross & Co
14. Tax Residence: UK
15. Subsidiaries: -
16. Mortgages and Charges: None
Page 42
<PAGE>
Details of Subsidiaries
1. Name of Company: Frizzell B.V.
(incorporated in the Netherlands)
2. Registered Office: Officia I, D Boelelaan 7,
1083 HJ Amsterdam,
The Netherlands
3. Date and Place of 18.6.75 Amsterdam
Incorporation:
4. Directors: Premier Trust, Colin Frazier Frizzell, G
Partington, I.H.N. Mackay
5. Secretary: Premier Trust
6. Auditors: None
7. Authorised Share Capital: N.G. 25,000,000
8. Issued Share Capital: N.G. 17,500,000
9. Charges: -
10. Shareholders: The Frizzell Group Limited
Page 43
<PAGE>
Details of Subsidiaries
1. Name of Company: Tower Brokers Limited
Holding Company: (incorporated in Guernsey, Channel Islands)
Frizzell BV.
2. Registered Office: Commerce House,
Les Banques,
St. Peter Port,
Guernsey,
Channel Islands
3. Date of Incorporation 15 August 1985
4. Place of Incorporation: Guernsey
5. Registered Number 14435
6. Directors: S.N. Birkett, J.P. Greenfield,
Ian Hamish Noel Mackay
G. Partington
D.J. Warr appointed 2/10/95
7. Secretary: CMS Ltd.
8. Authorised Share Capital: (pounds)250,000 represented by 250,000 ordinary
shares of (pounds)1 each
9. Issued Share Capital: (pounds)250,000 represented by 250,000 ordinary
shares of (pounds)1 each
10. Registered Shareholders: The Frizzell Group Limited
Spread Nominees Ltd
Spread Trustee Company Ltd
Spread International Management Ltd
Cosign Ltd
Cosign Nominees Ltd
Cosign Services Ltd
Spread Services Ltd
11. Accounting Reference 31 December
12. Auditors None
13. Tax Residence Guernsey
14. Subsidiaries -
15. Mortgages and Charges: None
Page 44
<PAGE>
Details of Subsidiaries
1. Name: Shawlands Leasing Limited
2. Date of Incorporation: 17 August 1971
3. Place of Incorporation: England and Wales
4. Class of Company: Private company limited by shares
5. Registered Number: 01021232
6. Registered Office: Frizzell House, County Gates,
Bournemouth, Dorset BH1 2NF
7. Directors: Geoffrey Partington, Terry William
Trinder
8. Secretary: Alan Francis Harries
9. Authorised Capital: (pounds)100 represented by 100 ordinary shares
of (pounds)1 each
10. Issued Capital: (pounds)100 represented by 100 ordinary shares
of (pounds)1 each
11. Registered Shareholders: Frizzell Bank Limited
12. Accounting Reference Date: 31 December
13. Auditors: Touche Ross
14. Tax Residence UK
15. Subsidiaries: -
16. Mortgage and Charges: None
Page 45
<PAGE>
Details of Subsidiaries
1. Name: Shawlands Securities Limited
2. Date of Incorporation: 17 November 1971
3. Place of Incorporation: England
4. Class of Company: Private company limited by shares
5. Registered Number: 1031484
6. Registered Office: Frizzell House, County Gates,
Bournemouth, Dorset BH1 2NF
7. Directors: Geoffrey Partington, Terry William
Trinder
8. Secretary: Alan Francis Harries
9. Authorised Capital: (pounds)100 represented by 100 ordinary shares
of (pounds)1 each
10. Issued Capital: (pounds)100 represented by 100 ordinary shares
of (pounds)1 each
11. Registered Shareholders: Frizzell Bank Limited
12. Accounting Reference Date: 31 December
13. Auditors: Touche Ross
14. Tax Residence UK
15. Subsidiaries: -
16. Mortgage and Charges: None
Page 46
<PAGE>
Details of Subsidiaries
1. Name: Teachers Motoring Association Limited
2. Date of Incorporation: 31 December 1932
3. Place of Incorporation: England
4. Class of Company: Private company limited by shares
5. Registered Number: 271745
6. Registered Office: Frizzell House, County Gates,
Bournemouth, Dorset BH1 2NF
7. Directors: Ian Hamish Noel Mackay
Colin Frazer Frizzell
8. Secretary: Alan Francis Harries
9. Authorised Capital: (pounds)2,000 represented by 2,000 ordinary
shares of (pounds)1 each
10. Issued Capital: (pounds)2,000 represented by 2,000 ordinary
shares of (pounds)1 each
11. Registered Shareholders: CF Frizzell & The Frizzell Group
Limited.
The Frizzell Group Limited
12. Accounting Reference Date: 31 December
13. Auditors: Touche Ross
14. Tax Residence UK
15. Subsidiaries: -
16. Mortgage and Charges: None
Page 47
<PAGE>
SCHEDULE 2 A
The Warranties are subject to the matters expressly disclosed (or expressed to
be treated as disclosed) in the Disclosure Letter, the Information Memorandum
and the Data Room Files except where such information is not true and accurate
in all material respects.
Warranties
The Warranties in this Schedule shall apply not only to TFG (the Company) but
also to FFS, FB, FL&FP, FCS, CR, SS, SL, FPL, TMAL and FWD as if expressly
repeated with respect to each company, naming it in place of the Company and,
with respect to Section B only, shall also apply to the Group.
A. Preliminary
All information purporting to record past or existing fact contained in the
recitals or Schedules 3, 4, 5, 7, 10 and 13 to the Agreement is true and
accurate in all material respects except where such information is corrected or
supplemented by information contained in the Data Room Files or the Disclosure
Letter.
B. Accounts
B.1 The Accounts:
(a) gave a true and fair view of the financial position and state of affairs of
the Company at the Accounts Date and of its profit for the period to which they
relate;
(b) comply, unless otherwise expressly stated therein, with the requirements of
the Companies Act 1985 and of all Statements of Standard Accounting Practice
and/or Financial Reporting Standards published by the Institute of Chartered
Accountants in England and Wales or published or adopted by the Accounting
Standards Board (as the case may be);
(c) have been prepared, unless otherwise expressly stated therein, on a basis
consistent with the basis applied in the corresponding accounts for the
preceding three financial years (apart from changes to conform to subsequent
standard accounting practices and reporting standards);
(d) contain proper and adequate provisions for all known liabilities or adequate
details of all material liabilities and capital commitments of the Company at
the Accounts Date, whether actual, contingent, qualified, disputed or otherwise
required by the Companies Act and any statements of standard accounting
practice; and
(e) are not adversely affected by any extraordinary or exceptional items unless
otherwise expressly stated therein, in accordance with standard accounting
practice.
B.2 All the fixed assets of the Company shown in the Accounts have been
depreciated in accordance with SSAP 12.
B.3 All the material assets of the Company are correctly reflected in the
Accounts , the values placed on such assets are not materially in excess of
current market values (on a going concern basis) as at the Accounts Date and
none was acquired other than at a price that would have been applicable had the
transaction been at arm's length.
B.4 The profits of the Company for the three years ended on the Accounts Date as
shown by the Accounts and by the audited accounts of the Company for such
periods have not (except as therein disclosed) been affected to a material
extent by
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inconsistencies of accounting practices or by the inclusion of extraordinary or
exceptional items of income or expenditure or by transactions entered into
otherwise than on normal commercial terms.
B.5 The Company is not, and has not been during the last three years, a party to
any agreement, arrangement or transaction pursuant to which the Company is or
was entitled to receive a financial advantage or is or was obliged to incur or
bear any costs, liabilities (whether contingent or otherwise), risks or other
expenditure of any nature which is not fully reflected in the Accounts or has
not been fully reflected in the Company's accounts for any relevant period.
C. Business since the Accounts Date
Since the Accounts Date:
(a) the Company has carried on its business in the ordinary and usual course and
so as to maintain the same as a going concern and without any material
interruption or alteration in the nature, scope or manner of such business;
(b) the Company has not acquired or disposed of or agreed to acquire or dispose
of any material assets or assumed or incurred or agreed to assume or incur any
material liabilities (including contingent liabilities) otherwise than in the
ordinary course of its business;
(c) of the assets (not being current assets) included in the Accounts or
subsequently acquired by the Company, no material asset has been sold or
disposed of at a figure materially lower than book value or an open market arm's
length value whichever is the higher;
(d) no dividend or other distribution has been declared, made or paid by the
Company;
(e) the Company has not made or agreed to make any loans to third parties
otherwise than in the ordinary course of FB's business;
(f) the Company has not entered into, or agreed to enter into, any commitment
involving capital expenditure exceeding (pounds)50,000;
(g) otherwise than in the ordinary course of business of FB the Company has not
borrowed any money and no share or loan capital has been issued or agreed to be
issued by the Company and no share or loan capital or other loans or
indebtedness of the Company has been repaid in whole or part or has become
liable to be repaid and no notice requiring repayment has been received;
(h) no resolution of the Company's members in general meeting has been passed;
and
(i) no event has occurred that would entitle any third party to require early
repayment of any loan or to vary or terminate any material contract.
D. Share capital and constitution of the Company and accuracy of records
D.1 (a) No shares in the capital of the Company have been issued and no transfer
of shares in the capital of the Company has been registered otherwise than in
accordance with the Articles of Association of the Company from time to time in
force, all such transfers being duly stamped.
(b) The Register of Members of the Company contains accurate records of its
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members from time to time.
(c) Since December 1992 the Company has not purchased or redeemed or agreed to
purchase or redeem any shares of any class of its share capital or otherwise
reduced or agreed to reduce its issued share capital or any class thereof.
(d) There is no mortgage, charge, pledge lien or other form of security or
encumbrance affecting the Option Shares or any unissued shares, debentures or
other securities of the Company and there is no agreement to give or create any
of the foregoing.
(e) Other than pursuant to the provisions of the Agreement no person has the
right (actual or contingent) at any time to call for the allotment, issue, sale
or transfer of any share or loan capital of the Company under any option or
other agreement or to convert any shares or security into share capital or share
capital of a different class.
D.2 The Company has complied in all material respects with the provisions of the
Companies Act 1985 and all returns, particulars, resolutions and other documents
required under any legislation to be delivered on behalf of the Company to the
Registrar of Companies have been properly made and delivered.
D.3 All the accounts, books, ledgers and financial records of the Company are in
all material respects up to date and have been accurately kept and completed and
contain true and accurate records of the matters to which they relate and are in
the possession or otherwise in the control of the Company.
D.4 The copy of the Memorandum and Articles of the Company contained in the Data
Room Files is true and complete.
E. Related operations
E.1 Save for the shares held in FFS, FCS, FB, FL&FP, FWD, FPL, TMAL, TB, FBV,
SS, SL and CR the Company is not the holder or beneficial owner of any shares or
securities of any other company or corporation (whether incorporated in the
United Kingdom or elsewhere) and has not agreed to acquire any such shares or
securities.
E.2 The Company is not and has not agreed to become a member of any partnership,
joint venture or consortium and has no branch, agency, place of business or
permanent establishment outside the United Kingdom.
F. TBG
F.1 There is no indebtedness or liability due, owing or incurred in whatsoever
manner by the Company to TBG or any person connected with TBG, whether actually
or contingently, whether solely or jointly with any other person and whether as
principal or surety and there is no such indebtedness or liability due, owing or
incurred to the Company by TBG or other such person.
F.2 The Company has not made any gifts of any kind to TBG or to any person
connected with TBG or sold any property at a price less than full market value
to TBG or to any persons connected with it.
F.3 There is not outstanding, and there has not at any time during the last year
been outstanding, any agreement or arrangement to which the Company is a party
and in which TBG or any director or any person connected with TBG is or has
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been interested, whether directly or indirectly.
G. Assets
Except for the Properties (to which the Warranties in Section H apply) and
assets disposed of by the Company in the ordinary course of its business, the
Company is the owner of and has good marketable title to all assets included in
the Accounts and all assets which have been acquired by the Company since the
Accounts Date, free of any encumbrance, mortgage, charge, pledge, lien or other
security or any agreement to give or create any of the foregoing or any hire
purchase agreement, leasing agreement or agreement for payment on deferred
terms.
H. Properties
H1 (a) The Properties comprise all of the land and premises owned, occupied
or otherwise used by the Company for the purposes of its business. The
Company does not own any other land and buildings.
(b) The Company has not entered into any agreement to acquire or dispose
of any land or premises or any interest therein which has not been
completed.
(c) The Company is the legal and beneficial owner of the Properties and is
in sole and undisputed occupation of them subject only to the
subleases, tenancies or other rights of occupation, brief details of
which are set out in Schedule 3.
H2 So far as TBG is aware, there are no outstanding claims or disputes
relating to the current use of any of the Properties and the current uses
of the Properties are as stated in Schedule 3.
H3 TBG is not aware of any outstanding notice alleging that the current use of
any of the properties is not the permitted use under the Town and Country
Planning legislation.
H4 (a) So far as TBG is aware, with respect to the subleases, tenancies or
rights of occupation to which the Properties are subject TBG has
provided LVFS with particulars of:
(i) any advance payment or communication or agreement to accept any
communication or advance payment of any rent or other payment under
the sublease, tenancy or right of occupation;
(ii) any material and persistent breaches of covenant by a tenant including
the covenant to pay rent;
(iii) any notices served or received under s 25 or 26 of the Landlord and
Tenant Act 1954, any counter notices to them and any application to
the Court for a new tenancy or for interim rent;
(iv) any rent review notice served by the Company, any counter-notice
served by the tenant and any application for a new rent to be
determined by a third party
(b) So far as TBG is aware with respect to the leases (which expression
includes underleases) under which the Properties are held:
(i) The Company has paid the rent up to 24 March 1996 and there is no
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outstanding notice alleging breach of any of the covenants on the part
of the tenant and the conditions contained in the leases and the last
demands (or receipts if issued) for rent were unqualified and the
leases are subsisting.
(ii) There is no outstanding notice requiring the observance or performance
of covenants on the part of the tenant contained in any written
licences, consents and approvals obtained from the landlord.
(iii)Except as stated in Schedule 3 the rent payable is not currently
being reviewed.
(iv) The Company has not served any notices in relation to the properties
under s 25 of the Landlord and Tenant Act 1954 nor has it received any
notice under s 25 of that Act in relation to the Properties and where
any such notices have been served or received all counter notices and
court applications have been made within the appropriate time limit in
order to preserve the Company's rights in respect of the relevant
Properties.
H5 The Company has no existing or contingent liability in respect of any
properties previously occupied by it or in relation to which it owned or
held any interest or in connection with which it acted as surety, including
(without limitation) and whether in the capacity of principal or surety,
any liabilities as original tenant, liabilities arising from any
obligations as transferee or assignee in respect of leasehold premises
assigned or otherwise disposed of, except for any existing or contingent
liabilities arising from the properties disclosed in the Data Room Files
and the Disclosure Letter.
H6 The written replies to enquiries before contract raised by LVFS' Solicitors
are, subject to the qualifications set out in those replies, accurate. A
copy of these enquiries is annexed to the Disclosure Letter.
H7 Everything that is material to the Company's title to the Properties
(including for the avoidance of doubt material encumbrances affecting title
to the Properties) or the Company's leasehold interest in the Properties is
in the Data Room Files.
I. Insurance
I.1 Details of all insurance policies relating to the assets and business of the
Company are disclosed in the Data Room Files or otherwise specifically disclosed
in the Disclosure Letter.
I.2 The insurance policies referred to in Warranty I.1 are currently in full
force and effect and all premiums payable in respect thereof have been duly
paid.
J. Lloyd's business
J.1 FFS is duly registered as a Lloyd's broker under the Lloyd's Brokers Byelaw
(No. 5 of 1988) (as amended) (the "Lloyd's Brokers Byelaw") and no conditions
have been imposed by the Council of Lloyd's in connection with such
registration. No grounds exist that will lead to the termination of such
registration or the imposition of any conditions to enable such registration to
continue.
J.2 The Data Room Files contain true and complete copies of:
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(a) the annual return of Financial Services to the Society of Lloyd's (as
required by paragraph 44 of the Lloyd's Brokers Byelaw) made up to 31 December
1994; and
(b) the statement of insurance connections of Financial Services (as required by
paragraph 37 of the Lloyd's Brokers Byelaw) and the auditors report thereon (as
required by paragraph 38 of the Lloyd's Brokers Byelaw) for the financial year
ended on 31 December 1994.
J.3 FFS has at all times complied in all material respects with the provisions
of the Lloyd's Acts 1871 to 1982; the byelaws and regulations made under those
Acts; any conditions and requirements imposed under such byelaws and
regulations; all codes of practice issued by or under the authority of the
Council or Committee of Lloyd's and all undertakings and guarantees given to or
at the request of the Council of Lloyd's from time to time.
J.4 Neither FFS nor any of its current directors, officers, managers, employees
or agents have at any time been the subject of any disciplinary proceedings
under the Misconduct, Penalties and Sanctions Byelaw (No 9 of 1993) and so far
as TBG is aware there are no grounds under which any such proceedings could be
brought.
J.5 There have been no material breaches by FFS of any binding authorities
registered by it under the Binding Authorities Byelaw (No. 9 of 1990) or any
regulations or registration schemes made thereunder and such binding authorities
remain in full force and effect.
J.6 FFS has not entered into any guarantee agreement or indemnity agreement
under the Insurance Intermediaries Byelaw (No 8 of 1990) (as amended) with any
managing agent in relation to the acceptance of personal lines business,
commercial life business or commercial motor business nor given any guarantee in
relation to the liabilities of any underwriting member.
J.7 No errors and omissions insurer has failed or refused to pay any claim made
by or on behalf of FFS during the six years prior to the date of this Agreement.
J.8 Full details of the constitution and account balances of all insurance
broking accounts of FFS at the Accounts Date including copies of all letters to
bankers under paragraph 22(3) of the Lloyd's Brokers Byelaw and the replies
thereto, are contained in the Data Room Files.
J.9 FFS is not a party to any registered umbrella arrangements (as defined in
the Umbrella Arrangements Byelaw (No 6 of 1988)).
J.10 FFS has not in the last 3 years been required to furnish any information to
the Society of Lloyd's under the Insurance Ombudsman Bureau Byelaw in respect of
complaints made against FFS pursuant to the Byelaw.
J.11 The Data Room Files contain full details of all binding authorities held by
FFS, there have been no breaches by FFS of such binding authorities and such
binding authorities remain in full force and effect.
J.12 The Data Room Files contain full details of all current Lloyd's Trust Deeds
entered into by FFS under the Lloyd's Brokers Byelaw.
J.13 The Data Room Files contain full details of all contracts and material
arrangements between Financial Services on the one hand and Syndicate 979,
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Services Managing Agency Limited, SMA Holdings Limited and Phoenix
Securities Investments Limited on the other.
J.14 The Data Room Files contain true and complete copies of:
(a) The accounts of FFS prepared and drawn up in accordance with Chapter 1(IV)
of Part E of the Lloyd's Brokers Byelaw (No 5 of 1988) and made up to 31
December 1994;
(b) the last annual financial return (including the accountant's report
thereon) of FFS completed and submitted in accordance with Lloyd's Broker's
Byelaw No 8 of 1988 in respect of the period to 31 December 1994.
K. Insurance Brokers (Registration) Act 1977 ("IBRA")
K.1 FFS is duly enrolled in the list of insurance brokers maintained by the
Insurers Brokers Registration Council ("the IBRC") under section 4 IBRA and no
grounds exist that will or may entitle the Disciplinary Committee of the Council
of the IBRC to direct that the name of FFS be removed from the list.
K.2 FFS has at all times complied in all material respects with the provisions
of the IBRA, all rules, notices, statements, orders and directions made under
that Act and all codes of conduct drawn up by the IBRC and in force from time to
time.
K.3 No notice of any disciplinary case (within the meaning of the IBRC
(Procedure of the Disciplinary Committee) Rules 1978 has been received by FFS,
and there are no grounds on which any charges under such rules may be brought
against them.
K.4 All policies of insurance issued, arranged, administered or broked by FFS
are fully underwritten.
L. Financial Services Act 1986
L.1 FL&FP has at all times complied in all material respects with the rules,
regulations and codes of practice of SIB, FIMBRA and PIA.
L.2 The Data Room Files contain copies of all non-routine correspondence during
the last three years between FL&FP on the one hand and FIMBRA or PIA, as
appropriate, on the other.
M. Banking
M.1 FB is authorised to carry on banking business under section 9 Banking Act
1987 and so far as TBG is aware no grounds exist that will or may lead to such
authorisation being terminated.
M.2 The Data Room Files contain a true and complete copy of the returns of
Banking to the Bank of England made up to 30 June 1995.
M.3 The Bank of England has not served any notice on Banking pursuant to
sections 11, 12, 13, 14 or 19 of the Banking Act 1987.
M.4 Full details of all complaints investigated by the Banking Ombudsman during
the last three years are set out in the Data Room Files.
M.5 FB has at all times complied in all material respects with the provisions of
the Banking Act 1987; the regulations made under that Act; any conditions and
requirements imposed under such regulations that are applicable to FB and all
requirements of the Bank of England from time to time (whether or not legally
enforceable).
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M.6 (a) FB does not have any interest in any loan or mortgage or standard
security other than the Loans and the Mortgages.
(b) Each Credit Agreement is a legal, valid and binding obligation of the
Borrower thereunder and, subject to any laws from time to time in effect
relating to bankruptcy or liquidation or any other laws or other legal
procedures affecting generally the enforcement of creditors' rights, is
enforceable in accordance with its terms.
(c) No Credit Agreement is an extortionate credit bargain within the meaning of
Sections 137 to 139 Consumer Credit Act 1974.
(d) The obligations of the Borrower under or in connection with each Credit
Agreement are not subject to any lien, right of rescission, counterclaim,
set-off, defence or right of retention or compensation against FB and the
performance of any of the terms of any Credit Agreement or the exercise of any
rights thereunder will not render such Credit Agreement unenforceable in whole
or in part or subject to any lien, right of rescission, set-off, counterclaim,
defence or right of retention or compensation and no such lien, right of
rescission, set-off, counterclaim, defence or right of retention or compensation
has been asserted in respect thereof.
(e) Each Loan was made by FB on its own account and no Loan was purchased by
Banking from any other person.
(f) Prior to and at the time of the making of any advance comprised in a Loan
the applicable Lending Procedures were followed in all material respects.
(g) No Loan other than those identified as such in the Data Room Files is an
Impaired Loan.
(h) Interest on each Loan is charged in accordance with the Standard Loan
Documentation.
(i) FB has no obligation to advance any further amounts to any person under any
of the Credit Agreements, other than pursuant to the Commitments.
(j) The Borrower(s) under each Credit Agreement is/are individuals other than
those to be assigned under clause 3.3.3(a) of the Agreement.
(k) Each Credit Agreement was entered into in all material respects on the terms
of one of the documents comprised in Standard Documentation, none of the
provisions of which was (at the time such Credit Agreement was entered into) or
has since been waived, altered or modified.
M.7 All depositors with FB are individuals other than those listed in Schedule
10.
M.8 Since December 1992 no Termination Event or Event of Default has occurred
under any of the Hedging Agreements (as such terms are defined therein).
N. Commercial agreements and arrangements
N.1 All existing contracts to which the Company is a party, involving the
payment of consideration of (pounds)100,000 or more or for a period of twelve
months or longer or containing terms other than those regularly used in the
course of the Company's business, are disclosed in the Data Room Files.
N.2 All standard form agreements used by the Company are disclosed in the Data
Room Files.
N.3 The terms of all agency agreements or agency arrangements to which the
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Company is a party are disclosed in the Data Room Files.
N.4 The Company is not a party to any material contract:
(a) which terminates or is terminable on a change of ownership of the Company;
or
(b) which cannot be terminated on three months' notice or less without payment
of compensation.
N.4A The Company is not a party to any contract which is outside the ordinary
course of the Company's business.
N.5 Full details of all agreements and details of all material arrangements
between the Company and the Affinity Groups are disclosed in the Data Room
Files. None of such agreements or arrangements have been terminated and no
notice of termination has been given.
N.6 Save in relation to the Properties (to which the Warranties in Section H
apply) and in relation to Intellectual Property Rights (to which the Warranties
in Section O apply), neither the Company nor so far as TBG is aware any other
party to any agreement, commitment, transaction or arrangement with the Company
is in default to any material extent thereunder and (as far as TBG is aware)
there are no circumstances likely to give rise to such a default.
N.7 Since the date of the Information Memorandum no agreements or arrangements
between the Company and Affinity Groups have been terminated and no notice of
termination has been given.
N.8 Save in relation to the Properties (to which the Warranties in Section H
apply), there are no outstanding liabilities or commitments on the Company
arising from any arrangements for the disposal of any shares, property or other
assets (other than in the ordinary course of business) previously owned by the
Company.
N.9 The Company has not given any covenants (which remain in effect) limiting or
excluding its right to do business and/or compete in any area or field with any
other person.
N.10 No person is entitled or authorised in any capacity to bind or commit the
Company to any obligations outside the ordinary course of its business.
N.11 The Company is not a party to any agreement or arrangement which is not
entirely on arm's length terms and its financial position has not been affected
by any such agreement or arrangement during the preceding three years.
N.12 No contract or arrangement involving the Company has ended during the
preceding three years in circumstances which could give rise to a claim pursuant
to the Commercial Agents Regulations 1993.
N.13 The Company does not have any unmatched open positions with respect to
forward purchases and or sales of any commodity, stock or foreign currency and
none of such open positions will involve the Company in a loss.
N.14 All agreements material to the business of the Company for the supply to
and use by the Company of computer hardware and software are disclosed in the
Data Room Files.
N.15 The Company has not entered into any commitments for ongoing advertising or
marketing expenditure in 1996.
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O. Intellectual Property Rights
O.1 So far as TBG is aware the activities (including the licensing of
Intellectual Property Rights by the Company to third parties) of the Company do
not infringe or have not in the preceding 3 years infringed the Intellectual
Property Rights of any third parties.
O.2 The Company is in compliance with the material terms of licences from third
parties of Intellectual Property Rights and so far as TBG is aware there are no
grounds on which any such licences can be terminated, suspended, varied or
revoked without the consent of the Company.
O.3 In relation to any Intellectual Property Rights in bespoke software and
accompanying documents whose entire creation has been commissioned from a third
party by the Company, the Company is the owner or exclusive licensee of all
Intellectual Property Rights existing in such software and accompanying
documents where the creation of the commissioned works is complete and has been
fully paid for.
O.4 The Company has not granted any licences, charges, assignments or other
agreements, other than to other Group Companies, to a third party under which
any third party would be entitled to acquire or to exercise any right or
interest in any Intellectual Property Rights owned by or registered in the name
of the Company.
O.5 All Intellectual Property Rights material to the business of the Company
which are capable of registration are registered or an application for
registration thereof has been made in the name of the Company as sole
proprietor.
P. Compliance and litigation
P.1 Save as plaintiff in proceedings for the collection of debts (as at the
Accounts Date, not exceeding (pounds)1,000 in any individual case or
(pounds)15,000 in the aggregate) arising in the ordinary course of its business
and in respect of purely formal litigation under Part 2 of the Landlord and
Tenant Act 1954, the Company is not a plaintiff in or/defendant in or otherwise
a party to any litigation or arbitration proceedings, and so far as TBG is aware
there are no litigation or arbitration proceedings pending or threatened by or
against the Company, no injunction has been granted against the Company, the
Company has given no undertaking to any court or to any third party arising out
of any legal proceedings and there is no matter or fact in existence which might
give rise to the same or might form the basis of any criminal prosecution
against the Company.
P.2 No order has been made or petition presented or resolution passed for the
appointment of an administrator or receiver in relation to the Company, or for
its winding-up, nor has any distress, execution or other process been levied
against the Company.
P.3 So far as TBG is aware the Company is not a party to any agreement,
arrangement or practice which:
(a) in respect of which any undertaking has been given pursuant to the
provisions of the Restrictive Trade Practices Acts 1976 and 1977; or
(b) is prohibited by the Fair Trading Act 1973; or
(c) infringes Article 85 of the Treaty of Rome or constitutes an abuse of a
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dominant position contrary to Article 86 of such Treaty or infringes any
regulation or other enactment made under Article 87 of such Treaty; or
(d) is a "consumer trade practice" within the meaning of section 13 of the Fair
Trading Act 1973; or
(e) is or has been the subject of any enquiry, investigation, reference, report,
order or proceeding pursuant to any such statutory or other provision; or
(f) is or has been the subject of any undertaking on the part of the Company to
the Restrictive Practices Court or the Director General of Fair Trading or the
Secretary of State for Trade and Industry or the Commission or Court of Justice
of the European Communities or to any other body of competent jurisdiction.
P.4 No investigation is proceeding or has previously taken place under the
Competition Act 1980.
P.5 None of the directors, officers or employees of the Company has been a party
to the use of any assets of the Company for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity or to
the making of any direct or indirect unlawful payment to government officials or
employees or any other third party; to the establishment or maintenance of any
unlawful or unrecorded fund of company monies or other assets; to the making or
any false of fictitious entries in the books or records of the Company.
P.6 Except in relation to the Properties (to which the Warranties in Section H
apply), the Company has all requisite and material licences, registrations,
consents, permits and authorities to carry on its business in the manner in
which such business is now carried on and all such licences, registrations,
consents, permits and authorities are valid and subsisting and (so far as TBG is
aware) there are no circumstances which can be reasonably foreseen as likely to
lead to any of them being suspended, cancelled or revoked.
P.7 The Company has conducted its business in all material respects in
accordance with all applicable laws and regulations of the United Kingdom and
any relevant foreign country and there is no order, decree or judgment of any
court or any governmental agency of the United Kingdom or any foreign country
outstanding against the Company or which may have a material adverse effect upon
the assets or business of the Company.
P.8 In respect of the Company's membership of all relevant institutions,
associations and bodies:-
(a) so far as TBG is aware there are no grounds which would or might lead to
such membership being terminated;
(b) there have been no investigations, enquiries or reviews conducted by the
relevant institutions, associations or bodies;
(c) the Company has filed all information and reports to be submitted to such
institutions, associations or bodies; and
(d) there are no disputes with any of the institutions, associations or bodies.
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Q. Employees, etc.
Q.1 The basis of the remuneration payable to officers, employees and consultants
(if any) of the Company at the date hereof is the same as that in force at the
Accounts Date and the Company is under no obligation to increase the rates of
remuneration of or to make any bonus or other similar payments, in all cases
whether contractual or otherwise, to any of its officers, employees or
consultants.
Q.2 In respect of all present and former officers and employees of the Company
the Employment Statutes and the provisions of the Transfer of Undertakings
(Protection of Employment) Regulations 1981 have been complied with.
Q.3 The Company is not liable to make any payments to any employee or former
employee by way of damages or compensation for loss of office or employment,
redundancy or unfair dismissal.
Q.4 The Company is not engaged or involved in any dispute arising out of or
relating to the provisions of the Employment Statutes, and there are no
circumstances known to TBG which could give rise to any such dispute.
Q.5 There are no employees of the Company employed under contracts of service
which cannot be terminated on three months' notice or less without payment of
compensation (other than the statutory rights to payments of compensation under
the Employment Statutes) other than those employees listed in the Data Room
Files.
Q.6 True and complete particulars of the terms of the contracts of service of
all officers and employees of the Company are referred to or contained in the
Data Room Files.
Q.7 True and complete particulars of the total number of full time and part time
employees as at the Accounts Date are specifically disclosed in the Data Room
Files and there has been no material change in such numbers since the Accounts
Date.
Q.8 Details of all share option or incentive schemes or bonus or profit-sharing
arrangements applicable to any of the Employees are contained in the Data Room
Files.
Q.9 The Company has not made any loan or quasi-loan (which is still outstanding)
to any director or former director of the Company.
R. Pensions
R.1 The Pension Schemes are the only arrangements under which the Company is
liable to provide relevant benefits (as defined in section 612(1) of the Taxes
Act) in respect of any past or present officer or employee. The Frizzell Pension
and Life Assurance Scheme is not being wound-up and no event has occurred which
would entitle any person (without the consent of any Group Company) to wind-up
that scheme. The Frizzell Group Pension and Life Assurance Scheme is not closed
to new members.
R.2 Neither the Company nor the trustees of the Pension Schemes have, in the
last three years, promised to augment or provide in respect of any past or
present officer or employee of the Company a benefit which would not otherwise
have been provided under the Pension Schemes in respect of such officer or
employee.
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R.3 The Pension Schemes are exempt approved within the meaning of Chapter I of
Part XIV of the Taxes Act and there is in force in respect of The Frizzell Group
Pension and Life Assurance Scheme a contracting-out certificate (within the
meaning of section 7 of the Pension Schemes Act 1993) and, so far as TBG is
aware, nothing has been done or omitted to be done which would result in the
Pension Schemes ceasing to be approved as exempt approved schemes or in any
contracting-out certificate being cancelled, surrendered or varied.
R.4 No amounts due to the trustees of the Pension Schemes are outstanding from
the Company or participating employee or officer other than contributions in
respect of the part month in which Completion takes place. There is no liability
to contribute to The Frizzell Executive Pension Scheme.
R.5 The lump sum death benefit (other than a refund of contributions with
interest where appropriate) payable under the Pension Schemes is fully insured
under a policy effected with an insurance company of good repute and each
beneficiary has been covered for such insurance by such insurance company at its
normal rates and on its normal terms for persons in good health; neither the
trustees of the Pension Schemes nor the Company has done or omitted to do
anything which has or might render any such policies of insurance void or
voidable.
R.6 The aggregate value of the assets of The Frizzell Group Pension and Life
Assurance Scheme is at the date of its last actuarial valuation (the
"Valuation") equal to or greater than the aggregate value of the liabilities on
an ongoing basis (making proper allowance, insofar as the provision of any
pension is concerned, for projected future increases in salary) calculated in
accordance with actuarial methods and assumptions used in the Valuation. So far
as TBG is aware no event has occurred since the Valuation that would have
materially adversely affected the funding position of The Frizzell Group Pension
and Life Assurance Scheme.
R.7 The Company and so far as TBG is aware the trustees of the Pension Schemes
have complied in all material respects with their obligations (including
statutory obligations and the requirements of Article 119 of the EC Treaty)
under the Pension Schemes in relation to past and present employees and officers
of the Company. So far as TBG is aware the Company has complied in all material
respects with its obligations under the Individual Pension Arrangements.
R.8 Save under the Commercial Schemes Business Transfer the Company has no
liability connected with the making of bulk transfer payments by the Pension
Schemes.
R.9 There are no actions, claims or suits (other than routine claims for
benefits) outstanding, pending or threatened against the trustees or the
administrators of the Pension Schemes or Individual Pension Arrangements or the
Company in respect of any act, event or omission or other matter arising out of
or in connection with the Pension Schemes and TBG is not aware of any
circumstances that may give rise to such action.
R.10 The Data Room Files contain complete and accurate copies of (a) the
documents governing the Pension Schemes (including the current booklet and
announcements for The Frizzell Group Pension and Life Assurance Scheme);
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(b) the Valuation and (c) the trustees' annual report for year ended 31 December
1994 for The Frizzell Group Pension and Life Assurance Scheme.
R.11 Watson Wyatt (acting for LVFS and Baltimore) has been provided by William M
Mercer Limited acting for MMC and TBG) with a true and complete copy of the data
used for the Valuation.
S. Finance
S.1 The total amount borrowed by the Company from its bankers does not exceed
the limits applicable to its facilities and the total amount borrowed by the
Company from whatsoever source does not exceed any limitation on its borrowing
powers contained in its Articles of Association, or in any debenture or loan
stock deed or other instrument binding on it.
S.2 The Company has not lent any money which has not been repaid to it and does
not own the benefit of any debt (whether present or future) other than debts
accrued to it in the ordinary course of its business. The Company has not
discounted or factored its debts.
S.3 The Company has not created or agreed to create any mortgage, charge or
debenture or given or entered into or agreed to give or enter into any
guarantee, suretyship, indemnity or similar commitment or agreement for the
postponement or subordination of debt or (except in the ordinary course of
business) created or agreed to create any lien or set-off.
S.4 No overdrafts or other financial facilities of the Company are dependent
upon any guarantee or security provided by any third party.
S.5 Full and accurate details of all overdrafts, loans or other financial
facilities outstanding or available to the Company as at the Accounts Date are
specifically disclosed in the Data Room Files or in the Disclosure Letter and
true and complete copies of all documents relating thereto are annexed to the
Data Room Files or in the Disclosure Letter.
T. UIA Insurance Ltd
There are no grounds on which UIA can make a valid claim against FFS arising
from the work carried out by FFS in relation to the selection, design and
implementation of the Creative Insurance System installed in 1992;
U. SMA Warranties
The Disclosure Letter contains true copies of:
(i) letter dated 1 February 1995 from William M. Mercer Limited (Mercer) to
Service Managing Agency Limited (SMAL) relating to the SMA Holdings Limited
Pension Scheme - Funding Shortfall;
(ii) Report dated December 1994 prepared by Mercer regarding the SMA Holdings
Pension Scheme;
(iii)the Interim Trust Deed dated 30 March 1994 governing the SMA Holdings
Pension Scheme and the draft proposed definitive trust deed as at 7
December 1995;
(iv) Pro forma announcement letters to employees regarding the SMA Holdings
Pension Scheme sent on 20 February 1995; and
(v) explanatory booklet relating to the SMA Holdings Pension Scheme dated
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April 1995 and forming Appendix 6 of the SMA Holdings Limited staff
handbook.
The Disclosure Letter contains, so far as TBG is aware, true and accurate
details of the employees of SMA Holdings Limited as at 1 February 1996 in
respect of their date of birth, continuity of employment, salary, pension
service date, normal retiring date and accrual rate for pension purposes.
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SCHEDULE 2B
Tax Warranties
The Warranties in this Schedule are the Tax Warranties.
A. General/compliance
Accounts
A.1.1 All liabilities, whether actual, deferred, contingent or disputed, of each
Company for tax measured by reference to income, profits or gains (including any
interest, fines, penalties or charges on or in relation to such income profits
or gains) earned, accrued, received, receivable or allocable to any period ended
on or before the Balance Sheet Date or deemed to be so earned, accrued, received
or receivable or allocable or arising or deemed to be arising in respect of an
event occurring or deemed to occur on or before the Balance Sheet Date are fully
provided for or (as appropriate) specifically disclosed in the Accounts. All
other warranties relating to specific tax matters set out in this Schedule are
made without prejudice to the generality of this paragraph.
A.1.2. The (pounds)813,000 reserve in respect of the receipt of dividends from
and subsequent winding-up or other disposal of TBL and FBV in the Accounts is
sufficient to meet the tax liabilities which will arise on such transactions
after taking account of allowable losses in TFG.
Position since the Balance Sheet Date
A.2 Since the Balance Sheet Date:
(a) apart from the Pre-Sale Reorganisation no Company has been involved in any
transaction which has given or may give rise to a liability to tax on any
Company other than tax in respect of normal trading income or receipts of the
company concerned arising from transactions entered into by it in the ordinary
course of business;
(b) no payment has been made by any Company, nor is any Company under an
obligation to make any payment which will not be deductible for the purposes of
corporation tax (or any corresponding tax on profits in any relevant foreign
jurisdiction), either in computing the profits of that Company or in computing
the corporation tax or corresponding tax chargeable on it except in the ordinary
course of business or in respect of the Pre-Sale Reorganisation;
(c) apart from the Pre-Sale Reorganisation, no disposal has taken place or other
event occurred which has or may have the effect of crystallising a liability to
tax which, if such disposal or event had been planned or predicted at the
Balance Sheet Date, should have been reflected in the provision for deferred tax
contained in the Accounts;
(d) no accounting period (as defined in section 12 of the Taxes Act) of any
Company has ended as referred to in section 12(3) of that Act; and
(e) except in respect of the Pre-Sale Reorganisation, no Company has made, paid
or declared any distribution within the meaning of the Taxes Act.
Returns etc.
A.3 Each Company has duly, and within the appropriate time limits, made all
returns, computations, claims for reliefs and allowances and given all notices
and
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supplied all other information required, to be supplied to any relevant tax
authority; all such information returns, computations, claims and notices were
and remain complete and accurate and were made and prepared on the proper basis
and in accordance with correct principles and are not the subject of any
question or dispute nor are likely to become the subject of any question or
dispute with any taxation authority and there is nothing in or omitted from that
information or those notices, returns, particulars, claims and computations or
any other matter likely to lead to any dispute with any taxation authority
regarding liability or potential liability to any tax, charge or duty (including
in each case fines, penalties or interest) recoverable from any Company or
regarding the availability to any Company of any reliefs or allowances.
Investigations
A.4 There has been no investigation, audit or discovery by or involving any
investigation unit of any taxation authority made in respect of any Company
within the last six years and there are no circumstances existing which make it
likely that any such investigation, audit or discovery will be made in the
foreseeable future.
Penalties, interest
A.5 During the last seven years, no Company nor any director nor officer of any
Company (in his capacity as such) has paid nor become liable to pay, and there
are no circumstances by reason of which it or they may become liable to pay to
any tax authority, any penalty, fine, surcharge or interest in respect of tax
(including in respect of any failure to make any return, give any notice or
supply any information to any relevant tax authority, or any failure to pay tax
on the due date for payment).
Consents, clearances
A.6 No transaction, act or payment in respect of which any consent or clearance
was required from any tax authority has been entered into or carried out by any
Company without such consent or clearance having first been properly obtained.
All information supplied to any tax authority or other appropriate authority in
connection with the application for any such consent or clearance fully and
accurately disclosed all facts and circumstances material to the giving of such
consent or clearance. Any such transaction, act or payment has been carried out
only in accordance with the terms of the relevant consent or clearance and the
application on which the consent or clearance was based and at a time when such
consent or clearance was valid and effective. No facts or circumstances have
arisen since any such consent or clearance was obtained which would cause the
consent or clearance to become invalid or ineffective.
Special arrangements
A.7 The Disclosure Letter contains full details of all current arrangements and
agreements between any Company and any taxation authority and the relevant
Company has complied with all the terms of such arrangements or agreements.
A.8 The amount of tax chargeable on any Company during any accounting period
ending on or within six years before the Balance Sheet Date has not, to any
material extent, depended on any unpublished concession, agreement or other
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formal or informal arrangement with any taxation authority.
Administration/Pay and File
A.9 In relation to each Company, the Disclosure Letter gives full details of:
(a) all determinations made under section 41A of the Taxes Management Act 1970
in respect of accounting periods from 1992 onwards;
(b) all directions reducing any amounts so determined, pursuant to section 41B
of the Taxes Management Act 1970;
(c) any determinations and directions as aforesaid, which are subject to appeal
or have otherwise not become final at the date hereof;
(d) all computations or assessments to tax made to or by any tax authority for
the last four accounting periods ending with the Balance Sheet Date, together
with correspondence for those and earlier accounting periods in relation to
issues that are not yet agreed;
(e) all payments of tax, and claims for repayment of tax, made in respect of any
period for which no assessment to tax has been issued or become final (and
whether made pursuant to section 10 of the Taxes Act or otherwise);
(f) all claims made to group relief in respect of accounting periods from 1992
onwards surrendered by any member of the Vendor's Group which have not been
agreed or otherwise determined, or where the losses or other amounts to which
the claim relates have not been determined;
(g) all consents to the surrender of group relief in respect of accounting
periods from 1992 onwards by or to any member of the Vendor's Group given or to
be given in circumstances where such surrender has not become final; and
(h) the Disclosure Letter contains full details of all claims, notifications,
disclaimers or elections assumed to have been made for the purposes of the
provisions or reserves for taxation included in the balance sheet of the
Accounts that have not actually been made at the date hereof.
Withholdings
A.10 Each Company has duly made all deductions and retentions of or on account
of tax as it was or is obliged or entitled to make and all such payments of or
on account of tax as should have been made to any tax authority in respect of
such deductions or retentions.
A.11 A direction has been received from the relevant tax authority including the
Inland Revenue in respect of all payments of interest and royalties which have
been made without deduction of tax at source by any Company to residents of
other countries.
A.12 The Company has not received any notice from any revenue authority,
including the Inland Revenue, which required or is likely to require the Company
to withhold tax from any payment made since the Balance Sheet Date or which will
or may be made after the date of this Agreement.
Payment of Tax
A.13 All taxation of any nature whatsoever whether of the United Kingdom or
elsewhere for which any Company is liable whether primarily or otherwise
(insofar as such taxation ought to have been paid) has been paid.
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A.14 Full up to date and complete records and/or invoices and/or other documents
as may be required by any primary or secondary taxation legislation are and have
been properly kept by the Company and are and have been so kept for such periods
of time as are required by such legislation and the Company has sufficient
records to determine the taxation consequences of any disposal or other
realisation of any of its assets
B. Employees/Pensions
B.1 Since the Balance Sheet Date, no payment has been made to any Company to
which section 601 of the Taxes Act applies (pension scheme surpluses: payments
to employers).
B.2 The Company has no Exempt Approved Scheme in respect of which there has been
or may be produced a valuation or a certificate under paragraph 2 of Schedule 22
to the Taxes Act which will show that the value of the Exempt Approved Scheme's
assets exceeds the value of its liabilities by a greater percentage than the
prescribed maximum referred to in paragraph 3 of that Schedule.
B.3 No Company operates or is part of :
(a) any scheme approved under section 202 of the Taxes Act (Charities:
Payroll Deduction Scheme);
(b) any scheme approved under Schedule 9 to the Taxes Act (Profit Sharing
Schemes, Savings-related Share Option Schemes, Executive Share Option Schemes)
in which the Company is a participating company;
(c) any employee share ownership trust for the purposes of sections 67 to
73 FA 1989; and
(d) any scheme under Chapter III of Part V of the Taxes Act (profit related
pay).
C. Close companies
C.1 No Company is nor has at any time been, a close company as defined in
section 414 of the Taxes Act.
D. Distributions payments etc.
General
D.1 No Company has since 6th April 1965:
(a) repaid, redeemed or purchased or agreed to repay, redeem or purchase any of
its share capital; or
(b) capitalised or agreed to capitalise in the form of shares or debentures any
profits or reserves of any class or description, or otherwise issued or agreed
to issue share capital otherwise than wholly for new consideration (as defined
in section 254 of the Taxes Act).
Demergers
D.2 No Company has at any time been concerned in any exempt distribution within
section 213 of the Taxes Act (demergers: exempt distributions).
Return on securities treated as distribution
D.3 No Company has issued any security (as defined in section 254(1) of the
Taxes Act) outstanding on Completion in circumstances such that any interest or
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other payment payable in respect of it may be treated as a distribution under
section 209 of the Taxes Act, and has not agreed to issue any such security.
E. Controlled foreign companies
No Company has, or has had at any time, an interest in a controlled foreign
company as defined in Chapter IV of Part XVIII of the Taxes Act except for an
interest which falls within sub-section 748(1) of the Taxes Act.
F. COMPANY RESIDENCE ETC.
Residence
F.1 Each Company is and has at all times been resident only in the United
Kingdom for tax purposes and not been, or been treated as, resident in any other
jurisdiction for any tax purposes (including any double taxation arrangement).
G. Value added tax
G.1 For the purposes of this paragraph H the expression VAT legislation shall
include the VATA and all other enactments in relation to value added tax and all
notices, provisions and conditions made or issued thereunder including the terms
of any agreement reached with H M Commissioners of Customs and Excise or any
concession referred to in the Data Room Files. This paragraph G shall apply,
with appropriate modifications, to any value added tax imposed by virtue of the
E C Sixth Directive or any equivalent sales or turnover tax in any jurisdiction
other than the UK to which any Company is subject.
G.2 Each Company:
(a) has been registered for the purposes of value added tax at all times that it
has been required to be registered by VAT legislation, and such registration is
not subject to any conditions imposed by or agreed with H M Customs and Excise
and full particulars of each registration is set out in the Disclosure Letter;
(b) has complied fully with and observed in all material respects the terms of
VAT legislation;
(c) has maintained and obtained at all times complete, correct and up-to-date
records, invoices and other documents (as the case may be) appropriate or
requisite for the purposes of VAT legislation and has preserved such records,
invoices and other documents in such form and for such periods as are required
by VAT legislation;
(d) is not required to make payments on account of value added tax for which it
may become liable in a prescribed accounting period (pursuant to The Value Added
Tax (Payments on Account) Regulations 1992); and
(e) is not and has not at any time in the last six accounting periods been
subject under VAT legislation to any penalty liability notice, written warning
of failure to comply, surcharge liability notice or requirement to give security
as a condition of making taxable supplies.
G.3 No Company is or has been required by the Commissioners of Customs & Excise
to give security for payment of VAT.
G.4 No agreement or arrangements have been made or are in place under which any
Company is or could become liable (except as provided for in the Accounts) to
make any payment to the Representative Member (or any other past or present
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member of the VAT Group) in respect of some or all of the Representative
Member's liability to account to H M Customs and Excise for VAT other than the
arrangements in existence between the Representative Member and the members of
the VAT Group.
G.5 The Company is not and has not agreed to become, an agent, manager or factor
for the purposes of Section 47 VATA.
G.6 The Disclosure Letter sets out full particulars of any special method agreed
between the Company and HM Customs & Excise and the Company has complied fully
with its terms.
G.7 No Company has made any claim for bad debt relief made in the last two years
or which may be made by any Group Company under Section 22 VATA or section 11 FA
1990 or Section 36 VATA.
G.8 (a) No Company owns the fee simple in any building or civil engineering work
which is uncompleted or which was completed (within the meaning of Note (2) to
Group 1 Schedule 9 VATA) less than three years before the date of signing this
Agreement.
(b) The Disclosure Letter contains full details of any election under paragraph
2 Schedule 10 VATA to waive exemption from VAT, in respect of the grant of any
interest in or right over land owned or occupied by any Company, made (i) by
that Company or any member or former member of a group of companies of which
that Company is or was registered as a member for VAT purposes; or (ii) by any
person making such a grant to that Company or any member or former member of a
group of companies of which that Company is or was registered as a member for
VAT purposes.
(c) No Company is nor has it been at any time during the period of ten years
prior to the date of signing this Agreement, a developer of any building or work
(including for the avoidance of doubt, any reconstructed, enlarged or extended
building or work) such that paragraph 6 Schedule 10 VATA has applied or might
apply to it.
(d) No Company has given or accepted any certificate as to zero-rating under the
provisions referred to in section 62 VATA.
(e) No Company has given or received, nor should it have given nor, so far as
the Vendor is aware, should it have received, any notification under paragraph
7(1) Schedule 10 VATA.
G.9 Full details of the impact of the Capital Goods Scheme (Part X of SI
1995/2518) have been set out in the Disclosure Letter.
G.10 TFG is registered for VAT but is not a member of a VAT group. FWD is also
registered for VAT but is not a member of a VAT group.
H. Stamp duty
H.1 All documents in the possession or under the control of any Company or to
the production of which any Company is entitled which establish or are necessary
to establish the title of any Company to any asset have been duly stamped and
any applicable stamp duties or charges in respect of such documents have been
duly accounted for and paid, and no such documents which are outside the United
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Kingdom would attract stamp duty if they were brought into the United Kingdom.
H.2 Each Company has paid all amounts of stamp duty reserve tax for which it has
become liable under Part IV FA 1986 and is not entitled to claim repayment of
any stamp duty reserve tax by virtue of section 92 FA 1986.
I. Capital allowances
I.1 The aggregate book value of each of the assets of any Company, exclusive of
any value attributable to an asset in excess of its cost on which an entitlement
to Industrial Building Allowances or other allowances in respect of capital
expenditure has arisen under the CAA, in or adopted for the purposes of the
Accounts does not exceed the aggregate residue of expenditure or written down
value attributable to such assets for the purposes of that Act and the aggregate
book value (exclusive of any value attributable to an asset in excess of its
cost) of plant and machinery allocated to a pool of plant and machinery on which
an entitlement to capital allowances has arisen under Part II CAA does not
exceed the written-down value of the qualifying expenditure in respect of each
such pool under that Act.
I.2 There are no circumstances applicable to any of the assets referred to in
paragraph I.1 above (other than the disposal of such assets in the ordinary
course of business since the Balance Sheet Date at a price equal to their full
market value) whereby any allowances referred to in that paragraph have been or
are likely to be recovered or have been or are likely to be refused or reduced.
I.3 No Company has made nor agreed to make any elections under Section 11, 37,
53 or 55 CAA in relation to any capital expenditure incurred since the Balance
Sheet Date.
J. Capital gains
J.1 The book value in or adopted for the purposes of the Accounts as the value
of each of the assets of any Company on the disposal of which a chargeable gain
or allowable loss could arise does not exceed the amount deductible under
section 38 TCGA (formerly Section 32 CGTA) plus an indexation allowance computed
as though each asset were disposed of on the date of signing of the Sale
Agreement.
J.2 The Disclosure Letter contains full details of any claim or election made by
any Company or which any Company is entitled to make under sections 24, 161(3),
35 or Schedule 4 TCGA (formerly sections 22 and 122(3) CGTA, section 96 and
Schedule 9 FA 1988) or section 573 of the Taxes Act.
J.3 No Company is entitled to the benefit of any debt on a security including
any qualifying loan for the purposes of section 254 TCGA (formerly section 136A
CGTA) nor is it entitled to the benefit of any other debt otherwise than as the
original creditor nor to any capital loss to which Section 18(3) TCGA (formerly
section 62(3) CGTA) will apply and, since the Balance Sheet Date, no Group
Company has recovered any part of an outstanding amount to which the provisions
of subsection 253(5) or (6) TCGA (formerly subsections 136(5) and (5A) CGTA)
apply.
J.4 No Company owns any shares or securities to which the provisions of sections
126 to 142 TCGA (formerly sections 77 to 91 CGTA) apply.
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J.5 Prior to their transfer, any Company to be transferred to TBG will be
treated by the transferor as held on capital account. Following the transfer,
each such Company will be treated by TBG as acquired on capital account or,
failing that, an election will be made under section 161(3) TCGA.
J.6 Sections 29 to 34 TCGA will not apply on the disposal of any Company which
is a dormant company.
J.7 No Company will pay dividends payable as part of the Pre-Sale Reorganisation
out of chargeable profits as defined in section 31 TCGA other than chargeable
profits arising in the course of the Pre-Sale Reorganisation.
K. Group of companies
K.1 No Company is nor has been in respect of any accounting period ended within
seven years prior to the date of signing of the Sale Agreement, either a member
of a consortium or a company owned by a consortium for the purposes of Section
247 and Chapter IV of Part X of the Taxes Act.
K.2 There are no circumstances or arrangements apart from the Pre-Sale
Reorganisation whereby the relationship between any Company and any other
company (including its present or future parent company) could be severed for
the purposes of group relief, the transfer of tax refund or the surrender of
advance corporation tax, nor is any Company or any other member of any group, of
which any Company is a member, a dual resident investing company within the
meaning of section 404 of the Taxes Act.
K.3 No Company has received any payments in respect of a surrender of group
relief or of surplus advance corporation tax or of a tax refund which could in
any circumstances be due to be repaid to any company other than a member of the
Group and particulars of any outstanding claims in respect of group relief,
surplus advance corporation tax and the transfer of tax refund are set out in
the Disclosure Letter.
K.4 Particulars of all elections made by any Company under section 247 of the
Taxes Act have been disclosed and all such elections are now and will up to
Completion remain in force and no Company has made and will not up to Completion
make any payment of any dividend without advance corporation tax or any other
payments without deduction of tax in the circumstances specified in section
247(6) of the Taxes Act.
K.5 Other than in relation to assets acquired pursuant to the Pre-Sale
Reorganisation no charge to tax under Section 178 or 179 (formerly Section 278
ICTA 1970) or otherwise and no contingent liability pursuant to Section 178(5)
or 179(6) TCGA (formerly section 278(3C) ICTA 1970) will arise in any Company as
a result of entering into and Completion of this Agreement.
K.6 No person is a loan creditor of any Company in respect of a loan which is
not a normal commercial loan as defined in Schedule 18 to the Taxes Act.
K.7 The United Kingdom incorporated Group Companies are members of a group for
the purposes of section 171 TCGA the principal company of which is TBG and prior
to Completion no steps have been or will be taken by MMC or TBG or any member of
the Group to break that group other than implementation
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and completion of the Pre-Sale Reorganisation, entry into this Agreement and
exercise of the Options.
L. Miscellaneous transactions
L.1 No Company has made (nor been a party to) any claim or election, the effect
of which has been, or will be, to defer, postpone, hold over or roll over, a
charge to tax or payment of tax until a time falling on or after the date of
Completion.
L.2 No Company has been concerned in any transactions by reason of which any
profit, gain, loss, relief or tax advantage of whatever description arising to
any Company could fall to be increased, reduced or restricted (as relevant) by
any tax authority and no circumstances exist whereby an advantage for taxation
purposes presently enjoyed is likely to be withdrawn.
L.3 No Company owns any interest in the following, namely an offshore fund as
defined in Chapters V of Part XVII of the Taxes Act, a deep gain security as
defined in Schedule 11 FA 1989, a qualifying convertible security as defined in
Schedule 10 FA 1990 or a qualifying corporate bond as defined in Section 117
TCGA (formerly section 64 FA 1984), or a deep discount security as defined in
Section 57 and Schedule 4 to the Taxes Act, and the Company has not issued any
such deep discount security or any such qualifying convertible security.
L.4 No Company has either transferred nor had transferred to it any security
within the provisions of sections 713 and 714 of the Taxes Act since the Balance
Sheet Date.
L.5 No circumstances exist whereby a person who is either not resident in the
United Kingdom and/or whose usual place of abode is outside the United Kingdom
is assessable and chargeable to tax in the name of any Company nor has any
Company ever acted as the branch or agent of any such person.
L.6 No Company has ever traded through a branch, agency or permanent
establishment situated outside the United Kingdom.
L.7 No Company is nor ever has been in partnership with any person.
L.8 No Company is and has not at any time been a contractor for the purposes of
section 559(1)(b) of the Taxes Act by virtue of section 560(2)(f) ICTA 1988
(expenditure on construction operations exceeding an average of (pounds)250,000
per annum).
L.9 No Company is a party to any transaction or arrangement under which it may
be required to pay for any asset or services or facilities of any kind, an
amount which is in excess of the market value of that asset or services or
facilities or under which it will receive any payment for an asset or any
services or facilities of any kind that it has supplied or provided or is liable
to supply or provide which is less than the market value of that asset or those
services.
L.10 No notice has been served on any Group Company under section 21 of the
Taxes Management Act 1970.
L.11 Other than resulting from the Pre-Sale Reorganisation or entry into this
Agreement or exercise of the Options, there has been and prior to Completion
there will be no change in the ownership of any Company nor any major change in
the
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nature or conduct of any trade or business carried by any Company for the
purposes of sections 245 to 245B or 768 to 768C ICTA 1988.
M. Banking
M.1 Banking has complied with all its obligations under sections 369 to 379 of
the Taxes Act and any regulations made thereunder.
M.2 Banking has been approved by the Inland Revenue as a bank carrying on a bona
fide banking business in the United Kingdom for the purpose of section 349 of
the Taxes Act.
M.3 Banking is an authorised deposit - taker as defined in section 481 of the
Taxes Act.
M.4 Banking has complied with all its obligation under section 123 and Part III
and Part IV of Schedule 3 to the Taxes Act.
N. Insurance premium tax
The Company has at no time since 1 October 1994 been an "insurer", a "tax
representative" or been in a group of companies as defined in sections 73, 57
and 63 respectively of FA 1994, such that it has been or may become primarily or
secondarily liable to pay any insurance premium tax.
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SCHEDULE 3
Properties
Part I Freehold
<TABLE>
<CAPTION>
Company Period of
Division Lease Lease expiry Rent Date of next Rent review
Description (years) date (per annum) rent review period Use
----------- -------- --------- ------------ ----------- ------------ ----------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Frazer House Frizzell 1 24/12/95 (pound)390,646 N/A N/A Offices
Poole Road Property Loans
Bournemouth Limited
(freeholder)
(Subject to a lease
to a Group Company) Frizzell
Financial
Services
Limited
(Tenant)
<PAGE>
Part II Leasehold
</TABLE>
<TABLE>
<CAPTION>
Company Period of
Division Lease Lease expiry Rent Date of next Rent review
Description (years) date (per annum) rent review period Use
----------- -------- --------- ------------ ----------- ------------ ----------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
2 Palace Yard Mews The Frizzell 25 26/5/2012 (pound)27,500 27/5/97 5 years Offices
Queen Square Group Limited
BATH
Frizzell House The Frizzell 99 29/9/2073 (pound)1,063,700 29/9/99 5 years Offices
County Gates Group Limited
BOURNEMOUTH
County Gates House The Frizzell 25 23/6/2011 (pound)435,000 24/6/96 5 years Offices
Poole Road Group Limited
BOURNEMOUTH
(electricity
sub-station
at site is
leased to
Southern
Electric Plc)
</TABLE>
Page 89
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
6th Floor The Frizzell 15 (Subject 28/9/2004 (pound)34,480 29/9/99 5 years Offices
Marler House Group Limited to
Prince of Wales Rd. termination
BOURNEMOUTH option on
24/6/99 by
12 months
notice)
3rd & 4th Floors The Frizzell 20 31/8/99 (pound)82,750 N/A N/A Offices
Heron House Group Limited
Christchurch Road
BOURNEMOUTH (subject to
short term
licence to
BMM)
8 High Street The Frizzell 5 7/11/99 (pound)5,370 N/A N/A Offices
Holywood Group Limited
BELFAST
19 St Vincent Place The Frizzell 24 14/5/2010 (pound)16,500 15/5/96 5 years Offices
GLASGOW Group Limited
</TABLE>
Page 90
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
7 Lower Grosvenor The Frizzell 45.75 from 29/9/97 (pound)300 N/A N/A Offices (except
Place Group Limited 25/12/51 3rd floor which
LONDON SW1 (Rent Act is used as
tenant in private
occupation) residential
accommodation)
3rd Floor The Frizzell 10 5/2/2002 (pound)18,250 6/2/97 5 years Offices
Paragon House Group Limited Option to
Old Trafford terminate
MANCHESTER after 5/2/97
by six months
notice
Unit 7 Newtown The Frizzell 2 years & 7 24/12/96 (pound)28,000 N/A N/A Storage
Business Park Group Limited months facilities
POOLE
Unit 10 Newtown The Frizzell 5 21/12/2000 (pound)45,000 N/A N/A Storage and
Business Park Group Limited printing
POOLE facilities
Frizzell House The Frizzell 25 5/9/2014 (pound)730,000 5/9/99 5 years Offices
Elder Street Group Limited
LONDON
</TABLE>
Page 91
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Bolton House The Frizzell 25 24/12/2005 (pound)260,000 25/12/95 5 years Offices
Parkstone Road Group Limited
POOLE
(Part 1st,
2nd & 3rd
Floors
sub-let to
Contingency &
Planning
Recovery
Services
Limited until
December 2005)
(Part 1st,
2nd & 3rd
Floors
sub-let to
Octavian
Group Limited
& Octavian
Computer
Services
Limited until
December 2005)
</TABLE>
Page 92
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Unit 22 The Frizzell 15 from 27/10/2007 (pound)11,000 3/4/97 5 years Offices
Riverside Studios Group Limited 27/10/92 (Option to
NEWCASTLE terminate
October 1997)
3rd Floor The Frizzell 5 30/11/97 (pound)23,162 N/A N/A Offices
Wade House Group Limited
LEEDS 3 years & 30/11/97 (pound)7,000 N/A N/A
(Held under two 11 months
sub-leases)
Suite 3 The Frizzell 10 24/6/2002 (pound)12,400 24/6/97 5 years Offices
Western House Group Limited option to
BIRMINGHAM terminate
June 1997
with 3 months
notice
Suite 4 The Frizzell 15 1/9/2007 (pound)13,500 31/8/97 5 years Offices
Western House Group Limited Option to
BIRMINGHAM terminate
August 1997
with six
months notice
Part 1st Floor, The Frizzell 25 8/8/2003 (pound)4,600 9/8/98 5 years Offices
West Centric House Group Limited
LONDON E1
</TABLE>
Page 93
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1st Floor, Keel House The Frizzell 25 28/9/2012 (pound)17,640 28/9/97 5 years Offices
244 High Street Group Limited
POOLE
2nd Floor, Keel House The Frizzell 25 28/9/2013 (pound)48,000 28/9/98 5 years Offices
244 High Street Group Limited
POOLE
</TABLE>
Page 94
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Skilfast House The Frizzell 25 23/6/2010 (pound)354,500 24/6/2000 5 years Offices
Folgate House Group Limited Option to
London terminate
23/6/2000
(basement area
is subject to
short term
licence to BMM)
(3-5 floors
sub-let to
James Hunt Dix
(Insurance)
Limited until
21.6.2000)
Car Park The Frizzell 9 months 25/3/96 (pound)3,500 N/A N/A Car Park
127 Princess Road Group Limited
Poole
Dorset
</TABLE>
Page 95
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Suite 3 Carr House The Frizzell 25 24/3/2010 (pound)5,600 25/3/2000 5 years Offices
Clifton Moorgate Group Limited
York.* (subject to
short term
licence to
BMM)
Suite 4 Carr House The Frizzell 25 23/6/2010 (pound)5,600 24/6/1995 5 years Offices
Clifton Moorgate Group Limited
York* (subject to
short term
licence to
BMM)
</TABLE>
- ---------------------
* These Properties will not be transferred at Completion
Page 96
<PAGE>
SCHEDULE 4
Inter-Group Guarantees
<TABLE>
<CAPTION>
Frizzell Bank Limited/MMC Comfort Letters
Bank Amount ((pound)) Exp. Date
<S> <C> <C>
NatWest 10,000,000 31 December 1997
BBL 42,000,000 1998
Bank of Scotland 3,000,000 8 April 1997
Schroder 6,000,000 11 March 1998
Bank Julius Baer 3,000,000 30 April 1996
Hambros 3,000,000 31 August 1996
Italian International 3,000,000 23 July 1998
BHF-Bank 5,000,000 20 July 1996
N.M. Rothschild 9,000,000 30 June 1998
Brown Shipley 4,000,000 30 June 1998
Morgan Grenfell 5,000,000 30 June 1997
Societe Generale 5,000,000 Not Committed
Royal Bank of Canada 5,000,000 30 June 1997
Scotiabank (UK) 3,000,000 16 October 1996
Swiss 5,000,000 31 July 1997
Lloyds 7,000,000 31 October 1997
Kredietbank NV 3,000,000 25 May 1997
Barclays 10,000,000 8 September 1997
British Linen Bank 5,000,000 30 September 1997
BNA 2,000,000 30 April 1996
Dresdner Bank 5,000,000 01 December 1996
Guinness Mahon 3,000,000 31 December 1997
Kleinwort Benson 5,000,000 25 September 1996
UBS 5,000,000 30 June 1997
Singer 3,000,000 30 September 1997
RBS 5,000,000 31 December 1997
</TABLE>
Page 97
<PAGE>
SCHEDULE 5
Inter-Group Loans
<TABLE>
<S>
<C>
1. Borrower: Frizzell Bank Limited (formerly Frizzell
Banking Services Ltd.)
Lender: C.T. Bowring & Company Ltd.
Purpose of Loan: Subordinated loan issued to meet Bank of
England capitalisation requirements
Amount of Loan Principal (pound)5,000,000
Outstanding:
Interest and Terms: LIBOR plus 0.75% payable quarterly. The
current rate is 7.25%.
Repayment Schedule of Principal: Notice of not less than 5 years and 1 month to
satisfy Bank of England requirements.
Final Payment Due: 5 years and 1 month after notice given by
either party, or otherwise with Bank of
England consent
2. Borrower: Frizzell Bank Limited (formerly Frizzell
Banking Services Ltd.)
Lender: Bowring Bermuda Limited
Purpose of Loan: To fund bank lending operation
Amount of Loan Principal (pound)1,800,000
Outstanding
Interest and Terms: LIBOR plus 0.25% p.a.
Repayment Schedule of Principal: To be repaid according to Schedule 6
Final Payment Due: 13 March 1996 pursuant to a letter agreement
between the lender and the borrower on
31 January 1996
3. Borrower: Marsh & McLennan Companies, Inc.
Lender: Frizzell Financial Services
Purpose of Loan: To expedite the repatriation of cash to MMC
</TABLE>
Page 98
<PAGE>
<TABLE>
<S>
<C>
Amount of Loan Principal (pound)7,993,678.24
Outstanding:
Interest and Terms: LIBOR plus 0.75% payable at March 1, 1996
Repayment Schedule of Principal: Can be prepaid in whole or in part together
with accrued interest thereon without penalty.
Final Payment Due: March 1, 1996
4. Borrower: Frizzell Bank Limited
Lender: C.T. Bowring & Co. Limited
Amount of Loan Principal (pound)4,460,000
Outstanding:
Interest and Terms: LIBOR plus 50 basis points payable quarterly
Repayment Schedule of Principal: Notice of not less than 5 years and 1 month to
satisfy Bank of England requirements.
Final Payment Due: 5 years and 1 month after notice given by
either party, or otherwise with Bank of
England consent
5. Borrower: Frizzell Life and Financial Planning Limited
Lender: The Bowring Group Limited
Amount of Loan Principal (pound)800,000
Outstanding:
Interest and Terms: LIBOR plus 50 basis points payable quarterly
Repayment Schedule of Principal Notice of either one year (if from Borrower)
or two years (if from Lender) or otherwise
with PIA consent
</TABLE>
Page 99
<PAGE>
SCHEDULE 6
Repayment Schedule
BOWRING (BERMUDA) LTD.
ACCOUNT PERIOD ENDED: 31 Dec 95
Maturity (pound)
date Amount
(000s)
26/02/96 250
11/03/96 250
13/03/96 1300
TOTAL (pound)1800
===========
Page 100
<PAGE>
SCHEDULE 7*
* This list is preliminary and is subject to further review and
discussion. A final list shall be agreed prior to Completion.
Affinity Groups (excluding Commercial Schemes Affinity Groups)
ATL
Association of University Teachers
Banking, Insurance and Finance Union
Caravan Club
Civil Service Motoring Association
Corporation of London Staff Association
The Educational Institute of Scotland
Iron & Steel Trades Confederation
Manufacturing, Scientific & Finance Union (formerly ASTMS)
National Association of Head Teachers
National Association of Teachers in Further & Higher Education (formerly ATTI)
National Union of Public Employees
National Union of Teachers
Professional, Administrative and Technical Officers
Recreation Managers' Association (Wessex region only).
Royal National Lifeboat
National Trust
Royal Society for Nature Conservation
UNISON
Page 101
<PAGE>
SCHEDULE 8
Incentive Bonus
STABILITY PREMIUM PAYMENTS - MARCH 1997
NAME TITLE PAY TOTAL 3/97
Jenkins MD, Personal Insurances (pound)100,000
Matthews Chairman, Commercial Schemes (pound)100,000
Partington Finance Director (pound)130,000
Tomlinson Personnel Director (pound) 80,000
Trinder MD, FB (pound) 90,000
Watt Marketing Director (pound) 90,000
--------------
(pound)590,000
Page 102
<PAGE>
SCHEDULE 9
Commercial Schemes Affinity Groups
Clubs & Institute Union
English Association of Snooker & Billiards
Country Landowners Association
Royal British Legion
Association of Conservative Clubs
Northern Ireland Federation of Clubs
Highland Finance & Bisco
Tenant Farmers Association
English Indoor Bowls Association
Horticultural Trade Association
Page 103
<PAGE>
SCHEDULE 10
Corporate Deposits held by FB
Name Maturity Amount
(pound)'000
South Western Vehicle Auctions 31.01.96 40
CSMA 11.07.96 500
South Western Vehicle Auctions 26.02.96 25
Britannia Road Rescue 12.02.96 500
Britannia Road Rescue 12.02.96 250
Britannia Road Rescue 12.02.96 250
-----------
1,565
Page 104
<PAGE>
SCHEDULE 11
Tax Indemnity
DEED OF TAX COVENANT
THIS DEED OF COVENANT is made the day of 1996
BETWEEN:
(1) The Bowring Group Limited (registered in England number 3053550) whose
registered office is at The Bowring Building, Tower Place, London E3P 3BE
(the "Covenantor");
(2) The Companies details of which are set out in Schedule I hereto (the
"Companies");
(3) Marsh & McLennan Companies, Inc whose principal place of business is
at 1166 Avenue of the Americas, New York, NY 10036 - 2774 (the "Guarantor");
and
(4 ) Baltimore Limited (registered number 3137698) whose registered office
is at 21 Holborn Viaduct, London EC1A 2DY (the "Purchaser").
WHEREAS:
The Covenantor has sold the Companies to the Purchaser on the date hereof.
OPERATIVE TERMS:
1. Definitions and interpretation
1.1 In this Deed:
(a) the definitions and rules of interpretation contained in clause 1 of an
agreement dated 7 February 1996 between the Guarantor (1) the Covenantor (2)
Liverpool Victoria Friendly Society Limited ("LVFS") (3) and the Purchaser (4)
in respect of the sale and purchase of, inter alia, the Companies (the "Option
Agreement") apply to this Deed as if same had been set out herein; and
(b) the following expressions shall have the following meanings:
"Demand" means any document issued or any claim made or action taken
whether before or after the date hereof by or on behalf of any person, authority
or body whatsoever (whether of the United Kingdom or elsewhere in the world)
from which it appears to the Purchaser or the Company that the Company has or
may have a Tax Liability;
"Event" includes any transaction, act, event or omission of whatever nature;
Page 105
<PAGE>
"Relief" includes any relief, allowance, deduction in computing profits, credit
or right to repayment of Tax granted by or pursuant to any legislation or
otherwise for Tax purposes whether of the United Kingdom or elsewhere in the
world; and
1.2 (a) References to income profits or gains shall include any other
measure by reference to which Tax is computed.
(b) References to income or profits or gains earned, accrued, arising or
received by any person shall include income or profits or gains which are for
the purposes of any Tax deemed to have been treated or regarded as earned
accrued, arising to or received by such person.
(c) References to income or profits or gains earned, accrued, arising or
received on or before a particular date (including, without limitation,
Completion) or in respect of a particular period shall include income or profits
or gains which are for the purposes of any Tax deemed to have been treated or
regarded as earned or accrued, arising or received on or before that date or in
respect of that period; and
(d) references to the occurrence of Events on or before a particular
date (including without limitation, Completion) or in respect of a particular
period shall include Events which are for the purposes of any Tax deemed to have
been or treated or regarded as having occurred or existed at or before that date
or in respect of that period.
1.3 References to the occurrence of any Event on or before Completion shall
include the combined result of two or more Events (not consisting of the
acquisition and disposal or part disposal of an asset) the first of which shall
have occurred or pursuant to clause 1.2 shall be deemed to have occurred on or
before Completion.
1.4 References to any Tax liability of the Company shall include :-
(a) payments of or in respect of Tax by the Company since the
Balance Sheet Date;
(b) liabilities of the Company to make payments of or in respect of
Tax;
(c) the denial or loss in whole or in part of any Relief, where the
Event giving rise to the claim for or grant of the Relief occurred on or before
Completion; and
(d) the setting off in whole or in part against income, profits or gains earned
accrued, arising or received on or before Completion or Tax thereon of any
Relief: Provided that this does not include the setting off of allowable losses
accruing before the commencement of the Pre-Sale Reorganisation against
chargeable gains accruing on the disposal of Tower Brokers Limited or Frizzell
B.V.
Page 106
<PAGE>
1.5 References to the "Claimant" are references to whichever of the Purchaser or
its successors in title or assigns is making a claim or receiving a payment
pursuant to this Deed.
1.6 References to the "Company" shall mean and include each of the
Companies separately as if each Company was referred to expressly.
2. Covenant
2.1 Subject as hereinafter expressly provided, the Covenantor hereby covenants
to pay to the Purchaser by way of adjustment to the consideration for the
Companies an amount equal to:
(a) any Tax liability of the Companies arising in respect of or as a consequence
of any Event or Events occurring on or before Completion or in respect of or by
reference to any income, profits or gains earned, accrued, arising or received
on or before Completion;
(b) without prejudice to the generality of Clause 2.1(a) and excluded from
any de minimis in Clause 3.1 :
(i) any unprovided for Tax liability which may arise or has arisen from
the non deductibility of any professional fees for which a tax deduction has
been claimed incurred in connection with the sale of various Frizzell businesses
to the Guarantor during the year ended 31 December 1992;
(ii) any Tax liability in excess of (pound)813,000 in respect of the
receipt of dividends from and subsequent winding up or other disposal of Tower
Brokers Limited and Frizzell B.V. after taking account of allowable losses in
The Frizzell Group Limited;
(c) all costs and expenses properly incurred by the Purchaser and/or the Company
in connection with any such Tax liability of the Company or Demand from which it
appears to the Purchaser or the Company that any such Tax liability may arise or
has arisen or in taking or defending any action under this Deed.
2.2 For the purposes of this Deed the amount of a Tax liability of the Company
falling within clause 1.4 (d) shall be taken to be the amount of Tax for which
the Company would but for such setting-off have been liable and in respect of
which a claim could have been made against the Covenantor under this Deed.
3. Limitations and exclusions
3.1 The Covenantor shall not be liable under the covenants contained in
clauses 2.1(a) or 2.1(b) in respect of any Tax liability of the Company:
(a) unless the Purchaser has served on the Covenantor a written notice on or
before the seventh anniversary of the Completion Date giving such details of the
claim as the Purchaser then has;
Page 107
<PAGE>
(b) unless the amount of the claim exceeds (pound)20,000 provided that if more
than one claim arises from the same fact or circumstance giving rise to the
claim under this Deed and individually such claims are for (pound)20,000 or less
but when aggregated they amount to a sum in excess of (pound)20,000, then all
such claims shall be capable of being made notwithstanding the provisions of
this paragraph (b);
(c) except where the Tax in question is directly or primarily chargeable
against, recoverable from, or attributable to a person other than the Company or
arises pursuant to the transactions referred to in clause 2.1(b) above, unless
the aggregate amount of all claims (under this Deed, the Tax Deed of Covenant of
today's date between, inter alia, the Covenantor and LVFS, for breach of
undertaking under clause 4.2 of the Option Agreement and under the Warranties)
exceeds (pound)2,500,000 PROVIDED that if such aggregate amount does exceed
(pound)2,500,000 the Covenantor's liability shall be limited to the excess and
not the entire amount;
(d) to the extent that specific provision or reserve was made in the Balance
Sheet in the Accounts in respect of such Tax liability or to the extent that
payment or discharge of such Tax liability was taken into account therein or to
the extent that such Tax liability was discharged prior to the Balance Sheet
Date;
(e) to the extent that such Tax liability arises or is increased by
reason of the imposition of or increase in the rates of Tax as a consequence of
any change in law occurring after Completion and having retrospective effect and
which was not announced before Completion;
(f) arising from the ordinary course of the normal business of the Company after
the Balance Sheet Date but on or before Completion and for the purposes of this
clause Tax liabilities that are not to be regarded as arising in the ordinary
course of the normal business of the Company shall include (but not be limited
to) such liabilities arising as a consequence of any of the following:
(i) any distribution or deemed distribution for Tax purposes;
(ii) the disposal (which shall include any deemed disposal or deemed
appropriation for Tax purposes) of any asset (including trading stock) or the
supply of any service or business facility of any kind where the consideration
(if any) received for such disposal or supply is less than the consideration
deemed to have been received for Tax purposes;
(iii) any event which gives rise to a Tax liability on deemed (rather than
actual) income, profits or gains;
(iv) any Event which results in a Tax liability arising in the Company where
such liability is chargeable on or attributable primarily to a person other than
the Company (including any liability under Part VIII of the Taxes Management Act
1970);
(v) the Company ceasing, for Tax purposes, to be a member of any group or
associated with any other company;
Page 108
<PAGE>
(vi) pursuant to any provision contained in Part XVII of the Taxes Act;
(g) to the extent it would not have arisen but for a voluntary act or default of
the Purchaser (or person deriving title from it) or the Company after Completion
(which, for the avoidance of doubt, shall not include the presentation for Stamp
Duty purposes of any document) which the Purchaser knew or ought reasonably to
have known would give rise to the Tax liability and which could reasonably have
been avoided, unless such act or default was carried out:
(i) pursuant to an obligation of the Company incurred (otherwise than
in the course of, or in consequence of, the Pre-Sale Reorganisation) prior
to Completion; or
(ii) in compliance with any law, regulation or request of any competent
authority for Tax purposes; or
(iii) with the agreement or at the request of the Covenantor (otherwise
than in the course of, or in consequence of, the Pre-Sale Reorganisation);
or
(iv) in the ordinary course of business of the Company or the Purchaser;
(h) to the extent that it arose under the Pre-Sale Reorganisation or would not
have arisen but for the Pre-Sale Reorganisation provided in either case that if
the Pre-Sale Reorganisation was not implemented in the agreed manner this
paragraph (h) shall only apply to the extent of the Tax liability that would
have arisen if the Pre-Sale Reorganisation had been implemented in the agreed
manner and provided further that the exclusion in this paragraph (h) shall not
apply to the extent that the Tax liability arises in respect of the winding up
or other disposal of Tower Brokers Limited and/or Frizzell B.V. and (on the
assumption that allowable losses accruing to TFG before the commencement of the
Pre-Sale Reorganisation are set against chargeable gains accruing on the
disposal of Tower Brokers Limited and/or Frizzell B.V.) exceeds the
(pound)813,000 reserve in respect of such potential liability in the accounts of
The Frizzell Group as at 31 December 1995; or
(i) to the extent that the Tax liability arises as a result of a change after
Completion in any accounting policy, any Tax reporting practice, or the length
of any accounting period for tax purposes, of the Company;
(j) to the extent that such Tax liability arises as a result of the Company's
failing to submit the returns and computations required to be made by it or not
submitting such returns and computations within the appropriate time limits or
submitting such returns and computations otherwise than on a proper basis, in
each case after Completion and otherwise than as a result of any default or
failure of the Covenantor in carrying out, or in failing to carry out, its
obligations under clause 6;
(k) to the extent that any relief arising in respect of an event occurring or
period ending on or prior to Completion is for no consideration made available
by the Covenantor or another subsidiary of the Guarantor, to the Company to set
against or otherwise mitigate the Tax liability (including but not limited to
any relief
Page 109
<PAGE>
available under any of sections 402 and 413, or section 240 of the Taxes Act or
section 102 of the Finance Act 1989) (and so that (a) for this purpose any
relief arising in respect of an accounting period falling partly before and
partly after Completion shall be apportioned on a time basis, unless some other
basis is more reasonable and (b) any relief that is so available in relation to
more than one Tax liability to which this Deed applies shall be deemed, so far
as possible, to be used in such a way as to reduce to the maximum extent
possible the Covenantor's total liability hereunder); or
(l) to the extent that an amount in respect of the Tax liability is
recovered from a person other than the Covenantor, any other subsidiary of
the Guarantor or the Purchaser; or
(m) to the extent that the Tax liability would not have arisen but for the
winding up of, or the cessation of any trade or business by, the Company after
Completion.
3.2 The total amount of the liability of the Covenantor in respect of any breach
or non-fulfilment of the Warranties or in respect of any claim pursuant to the
terms of this Deed or the Tax Deed of Covenant between, inter alia, the
Covenantor, the Guarantor and LVFS of today's date shall be limited to and in no
event exceed (pound)188,000,000.
3.3 The Covenantor shall not be liable in respect of any claim under this Deed
if and to the extent that recovery has been made in respect of the subject
matter thereof under the Warranties.
3.4 The limitations set out in this clause 3 (other than clause 3.1(g)) on the
liability of the Covenantor in relation to claims under this Deed shall not
apply to any claim under this Deed which arises from any fraudulent act or
omission on the part of the Covenantor or the Guarantor prior to Completion.
3.5 The limitation set out in clause 3.1(h) above shall not apply to any
liability which arises under section 179 TCGA 1992 in respect of assets acquired
by the Company otherwise than pursuant to the Pre-Sale Reorganisation.
4. Manner of making and conduct of claims
4.1 If the Purchaser or the Company shall become aware of any Demand which
appears to the Purchaser or the Company to be relevant for the purposes of this
Deed or the Tax Warranties the Purchaser shall as soon as reasonably practicable
give notice thereof to the Covenantor setting out reasonable details of the
Demand.
4.2 If the Covenantor shall, within 14 days of the date of any notice given to
it under clause 4.1 of any such Demand, indemnify and secure the Purchaser and
the Company to their satisfaction against all losses, costs, interest, damages
and expenses and any further liability to Tax which may be incurred thereby,
then the Company will (except in a case where fraudulent conduct is alleged by
any competent authority for Tax purposes) take such action as the Covenantor may
reasonably and promptly by written notice request to avoid, dispute, resist,
appeal or compromise
Page 110
<PAGE>
any Demand provided that where the Tax liability which is the subject of the
Demand has to be paid before an appeal can be made or before any other action
requested by the Covenantor can be taken, the Company shall not be obliged to
take any such action until the Covenantor shall have paid to the Purchaser or
the Company, for the purpose of discharging the Tax liability, an amount equal
to the said liability, and in connection with any action so requested by the
Covenantor:
(a) the appointment of solicitors or other professional advisers to the Company
shall be subject to the prior written approval of the Purchaser, such approval
not to be unreasonably withheld or delayed;
(b) the Covenantor shall ensure that no correspondence, pleading or other
document is sent, transmitted, issued, entered into or in any way published in
connection with the relevant Demand by the Covenantor or its advisers without
the prior approval of the Purchaser, such approval not to be unreasonably
withheld or delayed;
(c) the Covenantor shall submit no computations or returns, nor make any
settlement or compromise of the subject matter of the Demand, nor agree any
matter in the conduct of any dispute in relation thereto which is likely to
affect the amount of the Demand, or the future liability of the Company to Tax,
without the prior written approval of the Purchaser, such approval not to be
unreasonably withheld or delayed;
(d) if any dispute arises between the Purchaser and the Covenantor as to whether
any Demand should at any time be settled in full, or contested in whole or in
part, such dispute shall be referred for determination to a Barrister, of at
least ten years call at the English Bar with relevant experience, appointed by
agreement between the Purchaser and the Covenantor or (if they do not agree)
upon the application by either party to the President for the time being of The
Law Society, whose determination shall be final. The Barrister so appointed
shall be asked to advise whether, in his opinion (acting as an expert and not as
an arbitrator) an appeal against the Demand would have a reasonable chance of
success and shall be instructed, if the dispute relates to a Demand issued by a
person, body or authority outside of the United Kingdom, to obtain such advice
from professional advisers of the relevant jurisdiction as he thinks necessary
in order to arrive at his opinion, and also to determine how the costs of
obtaining his opinion should be allocated between the parties hereto. If, but
only if, such opinion is in the affirmative shall an appeal be made and that
Demand not then settled. Any further dispute arising between the parties as to
whether any further appeal should be pursued following determination of an
earlier appeal (whether or not in favour of the Company) shall be resolved in a
similar manner; and
(e) save as otherwise expressly provided herein, the Company shall give the
Covenantor all reasonable co-operation and assistance for the purposes of taking
such action as aforesaid.
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4.3 If the Covenantor does not request the Company to take any action within 14
days as aforesaid, or the Company or the Purchaser shall not be indemnified at
any time and secured as provided in clause 4.2 or Counsel shall advise that an
appeal against the relevant Demand would not have a reasonable chance of success
or the Covenantor otherwise fails to fulfil its obligations hereunder, the
Purchaser or the Company shall be free to take such action in relation to the
Demand as it or they may in its or their absolute discretion think fit.
5. Payment of claims
5.1 Payments by the Covenantor pursuant to the covenants in clause 2 shall
be made on the day or date specified in clause 5.2 below.
5.2 The days and dates referred to in clause 5.1 are as follows:
(a) if the Tax liability giving rise to claim under this Deed involves an actual
payment of Tax by the Company, one business day before the date on which that
Tax becomes due and payable to the relevant Tax authorities;
(b) if the Tax liability giving rise to a claim under this Deed does not involve
an actual payment of Tax:
(i) if involving the denial or loss or setting off in whole or in part of a
Relief which is a right to repayment of Tax, the date on which such Tax would
otherwise have been repaid;
(ii) in the case of a Tax liability within clause 1.4(c) involving the denial or
loss of a Relief which is a deduction from or set off against income, profits or
gains or Tax thereon, the date on which the Tax that would otherwise have been
saved becomes due and payable to the relevant Tax authorities;
(iii) if involving the setting-off of any other Relief within clause 2.2, the
date on which the Tax saved thereby would otherwise have become due and payable
to the relevant Tax authorities;
(c) in any other case, one business day after the date on which the
Claimant makes demand therefor.
5.3 If any amount is not paid as provided in clause 5.1 the Covenantor shall pay
to the Claimant interest on such amount calculated on a daily basis (compounded
quarterly until payment) at the rate of 1/2 of 1% above LIBOR from time to time
on the basis of actual days elapsed from the relevant date specified in clause
5.2 until and including the date of actual payment (after as well as before
judgment).
6. Management of Pre-Completion Affairs
6.1 In this clause 6:
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"accounting period" means any period by reference to which any profits or gains,
or any other amounts relevant for the purposes of Tax, are measured or
determined;
"pre-Completion Tax affairs" means the Tax affairs of the Company for which the
Covenantor is responsible under this clause 6;
"Tax documents" means the Tax returns, claims and other documents which are
required to be prepared on behalf of the Company under clause 6.2(a) and (b) and
6.4;
"Tax return" means any return required to be made to any Tax authority of
income, profits or gains or of any other amounts or of information relevant for
the purposes of Tax, including any related accounts or computations; and "time
limit" means the last date on which a Tax document can be delivered to a
relevant Tax authority without incurring a liability for interest or a penalty,
or to ensure that such Tax document is effective.
Rights and Obligations of the Covenantor
6.2 Subject to the approval of the Purchaser (such approval not to be
unreasonably withheld or delayed) and in accordance with the provisions of this
clause the Covenantor shall, in respect of all accounting periods ending on or
before Completion, and at its own cost, be responsible for:
(a) duly preparing and duly submitting the Tax returns of the Company to
the relevant Tax authority;
(b) duly preparing and duly submitting on behalf of the Company all
claims, elections, surrenders, disclaimers, notices and consents for the
purposes of Tax to the relevant Tax authority;
(c) (subject to clause 6.5) dealing with all matters relating to Tax
which concern or affect the Company including the conduct of all negotiations
and correspondence relating thereto or to any Tax documents reasonably
expeditiously; and
(d) where relevant notifying the Company in writing of the amount to be
paid to any Tax authority at least seven business days before such sum is due.
PROVIDED THAT
(i) the Covenantor shall at all times keep the Purchaser and the Company
fully informed as to the state of any negotiations referred to at clause 6.2
above;
(ii) on the Covenantor requiring the Company to sign any computation or
return or to make any claim or election, the Covenantor shall provide the
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Company and the Purchaser with such information as is reasonably necessary to
enable the Company and the Purchaser to review the same;
(iii) the Covenantor shall not be entitled to require the Company to
make any claim or election for a period ending before Completion, or period
including Completion which would result in any loss, relief, allowance,
deduction or repayment first arising in a period commencing after the period
including Completion, being used to reduce or eliminate Tax arising in respect
of periods ending prior to Completion;
(iv) for the avoidance of doubt any agreement, act, conduct or omission
of the Company or the Purchaser in accordance with this clause 6 shall not
constitute a voluntary act or omission of the Purchaser for the purposes of
clause 3.1(g) of this Deed.
6.3 The Covenantor or its duly authorised agent shall deliver all Tax documents
which are required to be signed by or on behalf of the Company and which have
been approved by the Purchaser (pursuant to 6.2 above) to the Purchaser or (as
the case may be) the Company for authorisation, signing and submission to the
relevant Tax authority. If a time limit applies in relation to any Tax document,
the Covenantor shall ensure that the Purchaser or the Company receives the
approved Tax document as soon as reasonably practicable and in any event no
later than ten Business Days before the expiry of the time limit.
6.4 The Purchaser shall procure that the Company, after consultation with the
Covenantor as provided herein, shall be responsible for, and have the conduct of
preparing, submitting to and agreeing with the relevant Tax authorities all Tax
documents for the accounting period in which Completion takes place. The
Purchaser shall procure that the Company submits all such Tax documents to the
Covenantor in draft form for comments as soon as reasonably practicable. The
Covenantor shall make its comments on the draft as soon as practicable following
receipt of the drafts but in any event no later than 14 business days
thereafter. If the Covenantor has any comments or suggestions, the Purchaser
shall consider them in good faith and shall not unreasonably refuse to adopt
such comments or suggestions so far as they relate to the period before or
including Completion.
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Obligations of the Purchaser
6.5 The Purchaser shall procure that:
(a) the Covenantor and its duly authorised agents are afforded such
access (including the taking of copies) to the books, accounts and records of
the Company and such other assistance as it or they reasonably require to enable
the Covenantor to discharge its obligations under clause 6.2 and 6.4;
(b) the Covenantor is as soon as reasonably practicable sent a copy of
any communication from any Tax authority insofar as it relates to the
pre-Completion Tax affairs;
(c) there is given to such person or persons as may be nominated by the
Covenantor and approved in writing by the Purchaser (such approval not to be
unreasonably withheld or delayed) authority (subject always to Clause 6.4) to
conduct the pre-Completion Tax affairs at the Covenantor's cost, and that such
authority is confirmed to any relevant Tax authority.
6.6 The Purchaser shall (subject to clause 6.7 below and 6.2, 6.3 and 6.4 above)
procure that the Company shall cause any Tax document delivered to it under
clause 6.3 to be authorised, signed and submitted to the appropriate Tax
authority without delay (and in any event within any relevant time limit), and
without amendment.
6.7 The Purchaser shall be under no obligation to procure the authorisation,
signing, or submission to a Tax authority of any Tax document delivered to it
under clause 6.3 which it considers in its reasonable opinion to be false,
misleading, incomplete or inaccurate in any respect.
7. VAT
The Covenantor shall not be liable under the covenant contained in clause 2.1(a)
in respect of any liability under section 43(1) of the Value Added Tax Act 1994
for value added tax due from Frizzell Life and Financial Planning Limited (as
representative member of the value added tax group registered under number
244993428) except insofar as:
(a) such liability for value added tax is attributable to supplies by the
Company; but
(b) no payment in respect of that liability has been made by the Company to
Frizzell Life and Financial Planning Limited.
8. No withholdings, etc.
8.1 All sums payable by the Covenantor hereunder shall be paid free of and
without any rights of counterclaim or set off and without deduction or
withholding on any ground whatsoever, save only as may be required by law. If
any such
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deduction or withholding is required by law (other than in respect of any
interest payable pursuant to clause 5.3), the Covenantor shall be obliged to
pay to the Claimant such amount as will ensure that after any such deduction or
withholding has been made the Claimant shall have received a sum equal to the
amount that the Claimant would otherwise have received in the absence of any
such deduction or withholding as reduced by any credit to which the Claimant
may be entitled on account of such deduction or withholding.
8.2 If any competent authority for Tax purposes seeks to charge to Tax any sum
paid (the "original payment") to the Claimant hereunder (other than any interest
payable pursuant to clause 5.3) the Covenantor shall be obliged to pay the
Claimant such additional amount (the "additional payment") as will ensure that
after the payment of the Tax so charged on the original payment and any
chargeable on the additional payment there shall remain a net sum equal to the
amount of the original payment, such additional payment to be paid 3 Business
Days after the Claimant has served notice that Tax on the original payment has
become due and payable or would have become due and payable but for the
availability of a Relief.
9. Set-off
9.1 If at any time the auditors for the time being of the Company shall
have certified (at the request and expense of the Covenantor) that:
(a) any specific provision for Tax contained in the Accounts is an over
provision; or
(b) the Tax liability that has resulted in a payment becoming due from the
Covenantor pursuant to the provisions of this Deed has given rise to a
corresponding Tax saving for the Company;
the amount of such over provision (except insofar as is attributable to the
effect of a retrospective change in rates of Tax or in the law occurring or
announced after Completion) or the value of that corresponding Tax saving (as
certified by the auditors for the time being of the Company at the request and
expense of the Covenantor, such certification to take into account the effect of
timing differences in calculating such value) shall be set off first against any
payment then due from the Covenantor under this Deed and secondly (to the extent
of any excess) against any payment previously made under this Deed (so that the
amount so set off shall forthwith be repaid to the Covenantor) and thirdly (to
the extent of any excess) against any such further payment or payments in
chronological order until that amount or value has been exhausted PROVIDED THAT
if it shall be found subsequently that any such over provision or corresponding
Tax saving either did not exist or arise or the certified value thereof was
excessive, any amount which has been set off against such part of the over
provision or corresponding Tax saving as is found not to exist or to be
excessive shall forthwith on demand be paid by the Covenantor to the Claimant.
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9.2 (a) If the Company recovers from a third party (including a competent
authority for Tax purposes) any sum in respect of a liability to Tax for which a
claim could or has been made against the Covenantor pursuant to this Deed, the
amount so recovered, together with any interest thereon paid by such third party
less any Tax chargeable on the Company in respect of such sum or interest and
less the costs reasonably incurred by the Company or the Claimant in effecting
such recovery shall:
(i) if the Covenantor has at the time of the recovery made payment pursuant to
this Deed in respect of that Tax liability, be paid forthwith to the Covenantor
to the extent not exceeding the amount so paid by the Covenantor;
(ii) if a claim has been made against the Covenantor pursuant to this Deed in
respect of that Tax liability but the Covenantor has not at the time of recovery
made payment in respect thereof, be set against and reduce pro tanto the claim
against the Covenantor in respect of such Tax liability;
(iii) if no claim has been made against the Covenantor in respect of that Tax
liability at the time of the recovery, be set against and reduce pro tanto any
claim that subsequently may be made against the Covenantor in respect of such
Tax liability.
(b) The Claimant shall have no liability to account to the Covenantor pursuant
to clause 10.2(a)(i) for any sum so recovered to the extent that at the time of
such recovery any other payment is due from the Covenantor under this Deed, the
Tax Deed of Covenant between, inter alia, the Covenantor, the Guarantor and LVFS
of today's date or the Warranties in which case the sum so recovered shall be
set against and discharge the then outstanding liabilities of the Covenantor and
the excess (if any) of the sum thereafter remaining shall, to the extent that it
does not exceed the amount paid by the Covenantor in respect of that Tax
liability, be paid forthwith to the Covenantor.
(c) References to sums recovered from a competent authority shall include a Tax
saving corresponding to a Tax liability to the extent and at the time such
saving is actually realised by the Company (treating the benefit of trading
losses and other amounts eligible for relief against profits or gains as
resulting in a Tax saving equal to the corporation tax which would otherwise
have been payable on the profits against which they had been set and the benefit
of advance corporation tax as equal to the amount set off against a corporation
tax liability of the Company).
9.3 The parties agree that, on or before the seventh anniversary of the
Completion Date, they will consult with a view to agreeing the liability of the
Company (if any) to make a payment to the Covenantor under this clause.
Quantification of the aforesaid liability shall be referred to the auditors for
the time being of the Company. Any payment made by the Company to the Covenantor
pursuant to this clause 9.3 shall be in full and final satisfaction of the
Company's liability under clause 10.
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10. Purchaser's Indemnity
The Purchaser hereby undertakes to the Covenantor that it will indemnify the
Covenantor and keep it indemnified against any liability arising pursuant to
Section 767A of the Taxes Act or clause 89 of the Finance Bill 1996 to the
extent that the corporation tax to which the liability relates :
(a) has been the subject of a claim by the Purchaser hereunder which
has been satisfied; or
(b) is one in respect of which the Covenantor has no liability by
reason of Clause 3.1(c) to (m) above.
11. Guarantee
11.1 In consideration of the Companies and the Purchaser entering into and
acting in accordance with this Deed, the Guarantor (as principal obligor and not
merely as surety) unconditionally and irrevocably guarantees as a continuing
obligation the proper and punctual performance by the Covenantor of all its
obligations under or pursuant to this Deed (including any documents entered into
pursuant to the terms of this Deed).
11.2 The Guarantor's liability hereunder shall not be discharged or impaired by
any amendment to or variation of this Deed, or release of, of granting of time
or other indulgence to, the Covenantor or any third party, any liquidation,
administration, receivership or winding-up of the Covenantor or by any other act
or omission or any other events or circumstances whatsoever (whether or not
known to the Covenantor, the Guarantor, the Companies or the Purchaser) which
would or might (but for this clause) operate to impair or discharge the
Guarantor's liability under this guarantee.
12. Assignment of benefit of Deed
The benefit of this Deed shall be assignable by the Purchaser to LVFS in whole
or in part. The calculation of any amount due to LVFS or the Purchaser in
respect of any liability under the covenants contained in this Deed shall wholly
disregard any subsequent sub-sale or re-sale of the Companies or any of them by
LVFS or the Purchaser to any other person.
13. General
13.1 The following provisions of the Option Agreement shall apply to this Deed
as if the same had been set out herein save that references therein to the
Vendor, its address and the Agreement respectively shall be construed as
references to the Covenantor, its address specified in this Deed.
clause 16 Variation
clause 17 Assignment
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clause 24 Notices
clause 26 Governing law
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Schedule I
The Companies
Name: Registered no. Registered office
1. The Frizzell Group Limited 194727 Frizzell House County
Gates Bournemouth
Dorset BH1 2NF
2. Frizzell Financial 969371 Ditto
Services Limited
3. Frizzell Property Loans 780048 Ditto
Limited
4. Teachers Motoring 271745 Ditto
Association Limited
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IN WITNESS WHEREOF this Deed has been entered into the day and year first before
written.
EXECUTED as a deed by
The Bowring Group Limited
acting by
Director
Director/Secretary
EXECUTED as a deed by
The Frizzell Group Limited
acting by
Director
Director/Secretary
EXECUTED as a deed by
Frizzell Financial Services Limited
acting by
Director
Director/Secretary
EXECUTED as a deed by
Frizzell Property Loans Limited
acting by
Director
Director/Secretary
EXECUTED as a deed on behalf of Teachers
Motoring Association Limited by its
liquidator acting on behalf of
the company
Liquidator
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EXECUTED as a deed by
Marsh & McLennan Companies, Inc
acting by
...........................................
Duly Authorised
EXECUTED as a deed by
Baltimore Limited
acting by
Director
Director/Secretary
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Dated 1996
THE BOWRING GROUP LIMITED (1)
- and -
THE COMPANIES (2)
MARSH & MCLENNAN COMPANIES, INC (3)
- and -
BALTIMORE LIMITED (4)
----------------------------------------
TAX DEED OF COVENANT
-----------------------------------------
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DEED OF TAX COVENANT
THIS DEED OF COVENANT is made the day of 1996
BETWEEN:
(1) The Bowring Group Limited (registered in England number 3053550) whose
registered office is at The Bowring Building, Tower Place, London E3P 3BE
(the "Covenantor");
(2) The Companies details of which are set out in Schedule I hereto (the
"Companies");
(3) Marsh & McLennan Companies, Inc whose principal place of business is
at 1166 Avenue of the Americas, New York, NY 10036 - 2774 (the "Guarantor");
and
(4) Liverpool Victoria Friendly Society Limited an incorporated friendly
society (registered number 61/COLL) whose registered office is at Victoria
House, Southampton Row, London WC1B 4DB (the "Purchaser").
WHEREAS:
The Covenantor has sold the Companies to the Purchaser on the date hereof.
OPERATIVE TERMS:
1. Definitions and interpretation
1.1 In this Deed:
(a) the definitions and rules of interpretation contained in clause 1 of an
agreement dated 7 February 1996 between the Guarantor (1) the Covenantor (2) the
Purchaser (3) and Baltimore Limited (4) in respect of, inter alia, the sale and
purchase of the Companies (the "Option Agreement") apply to this Deed as if same
had been set out herein; and
(b) the following expressions shall have the following meanings:
"Demand" means any document issued or any claim made or action taken
whether before or after the date hereof by or on behalf of any person, authority
or body whatsoever (whether of the United Kingdom or elsewhere in the world)
from which it appears to the Purchaser or the Company that the Company has or
may have a Tax Liability;
"Event" includes any transaction, act, event or omission of whatever nature;
"Relief" includes any relief, allowance, deduction in computing profits, credit
or right to repayment of Tax granted by or pursuant to any legislation or
otherwise for Tax purposes whether of the United Kingdom or elsewhere in the
world; and
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1.2 (a) References to income profits or gains shall include any other
measure by reference to which Tax is computed.
(b) References to income or profits or gains earned, accrued, arising or
received by any person shall include income or profits or gains which are for
the purposes of any Tax deemed to have been treated or regarded as earned
accrued, arising to or received by such person.
(c) References to income or profits or gains earned, accrued, arising or
received on or before a particular date (including, without limitation,
Completion) or in respect of a particular period shall include income or profits
or gains which are for the purposes of any Tax deemed to have been treated or
regarded as earned or accrued, arising or received on or before that date or in
respect of that period; and
(d) references to the occurrence of Events on or before a particular
date (including without limitation, Completion) or in respect of a particular
period shall include Events which are for the purposes of any Tax deemed to have
been or treated or regarded as having occurred or existed at or before that date
or in respect of that period.
1.3 References to the occurrence of any Event on or before Completion shall
include the combined result of two or more Events (not consisting of the
acquisition and disposal or part disposal of an asset) the first of which shall
have occurred or pursuant to clause 1.2 shall be deemed to have occurred on or
before Completion.
1.4 References to any Tax liability of the Company shall include :-
(a) payments of or in respect of Tax by the Company since the
Balance Sheet Date;
(b) liabilities of the Company to make payments of or in respect of
Tax;
(c) the denial or loss in whole or in part of any Relief, where the
Event giving rise to the claim for or grant of the Relief occurred on or before
Completion; and
(d) the setting off in whole or in part against income, profits or gains
earned accrued, arising or received on or before Completion or Tax thereon of
any Relief.
1.5 References to the "Claimant" are references to whichever of the Purchaser or
its successors in title or assigns is making a claim or receiving a payment
pursuant to this Deed.
1.6 References to the "Company" shall mean and include each of the Companies
separately as if each Company was referred to expressly.
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2. Covenant
2.1 Subject as hereinafter expressly provided, the Covenantor hereby covenants
to pay to the Purchaser by way of adjustment to the consideration for the
Companies an amount equal to:
(a) any Tax liability of the Companies arising in respect of or as a consequence
of any Event or Events occurring on or before Completion or in respect of or by
reference to any income, profits or gains earned, accrued, arising or received
on or before Completion;
(b) without prejudice to the generality of Clause 2.1(a) and excluded from any
de minimis in Clause 3.1 any unprovided for Tax liability which may arise or has
arisen from the non deductibility of any professional fees for which a tax
deduction has been claimed incurred in connection with the sale of various
Frizzell businesses to the Guarantor during the year ended 31 December 1992;
(c) all costs and expenses properly incurred by the Purchaser and/or the Company
in connection with any such Tax liability of the Company or Demand from which it
appears to the Purchaser or the Company that any such Tax liability may arise or
has arisen or in taking or defending any action under this Deed.
2.2 For the purposes of this Deed the amount of a Tax liability of the Company
falling within clause 1.4 (d) shall be taken to be the amount of Tax for which
the Company would but for such setting-off have been liable and in respect of
which a claim could have been made against the Covenantor under this Deed.
3. Limitations and exclusions
3.1 The Covenantor shall not be liable under the covenants contained in
clauses 2.1(a) or 2.1(b) in respect of any Tax liability of the Company:
(a) unless the Purchaser has served on the Covenantor a written notice on or
before the seventh anniversary of the Completion Date giving such details of the
claim as the Purchaser then has;
(b) unless the amount of the claim exceeds (pound)20,000 provided that if more
than one claim arises from the same fact or circumstance giving rise to the
claim under this Deed and individually such claims are for (pound)20,000 or less
but when aggregated they amount to a sum in excess of (pound)20,000, then all
such claims shall be capable of being made notwithstanding the provisions of
this paragraph (b);
(c) except where the Tax in question is directly or primarily chargeable
against, recoverable from, or attributable to a person other than the Company or
arises pursuant to the transactions referred to in clause 2.1(b) above, unless
the aggregate amount of all claims (under this Deed, the Tax Deed of Covenant of
today's date between, inter alia, the Covenantor and Baltimore Limited, for
breach of undertaking under clause 4.2 of the Option Agreement and under the
Warranties) exceeds (pound)2,500,000 PROVIDED that if such aggregate amount does
exceed
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(pound)2,500,000 the Covenantor's liability shall be limited to the excess and
not the entire amount;
(d) to the extent that specific provision or reserve was made in the
Balance Sheet in the Accounts in respect of such Tax liability or to the extent
that payment or discharge of such Tax liability was taken into account therein
or to the extent that such Tax liability was discharged prior to the Balance
Sheet Date;
(e) to the extent that such Tax liability arises or is increased by
reason of the imposition of or increase in the rates of Tax as a consequence of
any change in law occurring after Completion and having retrospective effect and
which was not announced before Completion;
(f) arising from the ordinary course of the normal business of the
Company after the Balance Sheet Date but on or before Completion and for the
purposes of this clause Tax liabilities that are not to be regarded as arising
in the ordinary course of the normal business of the Company shall include (but
not be limited to) such liabilities arising as a consequence of any of the
following:
(i) any distribution or deemed distribution for Tax purposes;
(ii) the disposal (which shall include any deemed disposal or deemed
appropriation for Tax purposes) of any asset (including trading stock) or the
supply of any service or business facility of any kind where the consideration
(if any) received for such disposal or supply is less than the consideration
deemed to have been received for Tax purposes;
(iii) any event which gives rise to a Tax liability on deemed (rather
than actual) income, profits or gains;
(iv) any Event which results in a Tax liability arising in the Company
where such liability is chargeable on or attributable primarily to a person
other than the Company (including any liability under Part VIII of the Taxes
Management Act 1970);
(v) the Company ceasing, for Tax purposes, to be a member of any
group or associated with any other company;
(vi) pursuant to any provision contained in Part XVII of the Taxes
Act;
(g) to the extent it would not have arisen but for a voluntary act or
default of the Purchaser (or person deriving title from it) or the Company after
Completion (which, for the avoidance of doubt, shall not include the
presentation for Stamp Duty purposes of any document) which the Purchaser knew
or ought reasonably to have known would give rise to the Tax liability and which
could reasonably have been avoided, unless such act or default was carried out:
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(i) pursuant to an obligation of the Company incurred (otherwise
than in the course of, or in consequence of, the Pre-Sale
Reorganisation) prior to Completion; or
(ii) in compliance with any law, regulation or request of any competent
authority for Tax purposes; or
(iii) with the agreement or at the request of the Covenantor (otherwise
than in the course of, or in consequence of, the Pre-Sale Reorganisation);
or
(iv) in the ordinary course of business of the Company or the Purchaser;
(h) to the extent that it arose under the Pre-Sale Reorganisation or
would not have arisen but for the Pre-Sale Reorganisation provided in either
case that if the Pre-Sale Reorganisation was not implemented in the agreed
manner this paragraph (h) shall only apply to the extent of the Tax liability
that would have arisen if the Pre-Sale Reorganisation had been implemented in
the agreed manner; or
(i) to the extent that the Tax liability arises as a result of a change
after Completion in any accounting policy, any Tax reporting practice, or the
length of any accounting period for tax purposes, of the Company;
(j) to the extent that such Tax liability arises as a result of the
Company's failing to submit the returns and computations required to be made by
it or not submitting such returns and computations within the appropriate time
limits or submitting such returns and computations otherwise than on a proper
basis, in each case after Completion and otherwise than as a result of any
default or failure of the Covenantor in carrying out, or in failing to carry
out, its obligations under clause 6;
(k) to the extent that any relief arising in respect of an event
occurring or period ending on or prior to Completion is for no consideration
made available by the Covenantor or another subsidiary of the Guarantor, to the
Company to set against or otherwise mitigate the Tax liability (including but
not limited to any relief available under any of sections 402 and 413, or
section 240 of the Taxes Act or section 102 of the Finance Act 1989) (and so
that (a) for this purpose any relief arising in respect of an accounting period
falling partly before and partly after Completion shall be apportioned on a time
basis, unless some other basis is more reasonable and (b) any relief that is so
available in relation to more than one Tax liability to which this Deed applies
shall be deemed, so far as possible, to be used in such a way as to reduce to
the maximum extent possible the Covenantor's total liability hereunder); or
(l) to the extent that an amount in respect of the Tax liability is
recovered from a person other than the Covenantor, any other subsidiary of the
Guarantor or the Purchaser; or
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(m) to the extent that the Tax liability would not have arisen but for
the winding up of, or the cessation of any trade or business by, the Company
after Completion.
3.2 The total amount of the liability of the Covenantor in respect of any breach
or non-fulfilment of the Warranties or in respect of any claim pursuant to the
terms of this Deed or the Tax Deed of Covenant between, inter alia, the
Covenantor, the Guarantor and Baltimore Limited of today's date shall be limited
to and in no event exceed (pound)188,000,000.
3.3 The Covenantor shall not be liable in respect of any claim under this Deed
if and to the extent that recovery has been made in respect of the subject
matter thereof under the Warranties.
3.4 The limitations set out in this clause 3 (other than clause 3.1(g)) on the
liability of the Covenantor in relation to claims under this Deed shall not
apply to any claim under this Deed which arises from any fraudulent act or
omission on the part of the Covenantor or the Guarantor prior to Completion.
3.5 The limitation set out in clause 3.1(h) above shall not apply to any
liability which arises under section 179 TCGA 1992 in respect of assets acquired
by the Company otherwise than pursuant to the Pre-Sale Reorganisation.
4. Manner of making and conduct of claims
4.1 If the Purchaser or the Company shall become aware of any Demand which
appears to the Purchaser or the Company to be relevant for the purposes of this
Deed or the Tax Warranties the Purchaser shall as soon as reasonably practicable
give notice thereof to the Covenantor setting out reasonable details of the
Demand.
4.2 If the Covenantor shall, within 14 days of the date of any notice given to
it under clause 4.1 of any such Demand, indemnify and secure the Purchaser and
the Company to their satisfaction against all losses, costs, interest, damages
and expenses and any further liability to Tax which may be incurred thereby,
then the Company will (except in a case where fraudulent conduct is alleged by
any competent authority for Tax purposes) take such action as the Covenantor may
reasonably and promptly by written notice request to avoid, dispute, resist,
appeal or compromise any Demand provided that where the Tax liability which is
the subject of the Demand has to be paid before an appeal can be made or before
any other action requested by the Covenantor can be taken, the Company shall not
be obliged to take any such action until the Covenantor shall have paid to the
Purchaser or the Company, for the purpose of discharging the Tax liability, an
amount equal to the said liability, and in connection with any action so
requested by the Covenantor:
(a) the appointment of solicitors or other professional advisers to the
Company shall be subject to the prior written approval of the Purchaser, such
approval not to be unreasonably withheld or delayed;
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(b) the Covenantor shall ensure that no correspondence, pleading or
other document is sent, transmitted, issued, entered into or in any way
published in connection with the relevant Demand by the Covenantor or its
advisers without the prior approval of the Purchaser, such approval not to be
unreasonably withheld or delayed;
(c) the Covenantor shall submit no computations or returns, nor make any
settlement or compromise of the subject matter of the Demand, nor agree any
matter in the conduct of any dispute in relation thereto which is likely to
affect the amount of the Demand, or the future liability of the Company to Tax,
without the prior written approval of the Purchaser, such approval not to be
unreasonably withheld or delayed;
(d) if any dispute arises between the Purchaser and the Covenantor as to
whether any Demand should at any time be settled in full, or contested in whole
or in part, such dispute shall be referred for determination to a Barrister, of
at least ten years call at the English Bar with relevant experience, appointed
by agreement between the Purchaser and the Covenantor or (if they do not agree)
upon the application by either party to the President for the time being of The
Law Society, whose determination shall be final. The Barrister so appointed
shall be asked to advise whether, in his opinion (acting as an expert and not as
an arbitrator) an appeal against the Demand would have a reasonable chance of
success and shall be instructed, if the dispute relates to a Demand issued by a
person, body or authority outside of the United Kingdom, to obtain such advice
from professional advisers of the relevant jurisdiction as he thinks necessary
in order to arrive at his opinion, and also to determine how the costs of
obtaining his opinion should be allocated between the parties hereto. If, but
only if, such opinion is in the affirmative shall an appeal be made and that
Demand not then settled. Any further dispute arising between the parties as to
whether any further appeal should be pursued following determination of an
earlier appeal (whether or not in favour of the Company) shall be resolved in a
similar manner; and
(e) save as otherwise expressly provided herein, the Company shall give
the Covenantor all reasonable co-operation and assistance for the purposes of
taking such action as aforesaid.
4.3 If the Covenantor does not request the Company to take any action
within 14 days as aforesaid, or the Company or the Purchaser shall not be
indemnified at any time and secured as provided in clause 4.2 or Counsel shall
advise that an appeal against the relevant Demand would not have a reasonable
chance of success or the Covenantor otherwise fails to fulfil its obligations
hereunder, the Purchaser or the Company shall be free to take such action in
relation to the Demand as it or they may in its or their absolute discretion
think fit.
5. Payment of claims
5.1 Payments by the Covenantor pursuant to the covenants in clause 2 shall
be made on the day or date specified in clause 5.2 below.
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5.2 The days and dates referred to in clause 5.1 are as follows:
(a) if the Tax liability giving rise to claim under this Deed involves
an actual payment of Tax by the Company, one business day before the date on
which that Tax becomes due and payable to the relevant Tax authorities;
(b) if the Tax liability giving rise to a claim under this Deed does not
involve an actual payment of Tax:
(i) if involving the denial or loss or setting off in whole or in part of a
Relief which is a right to repayment of Tax, the date on which such Tax would
otherwise have been repaid;
(ii) in the case of a Tax liability within clause 1.4(c) involving the denial or
loss of a Relief which is a deduction from or set off against income, profits or
gains or Tax thereon, the date on which the Tax that would otherwise have been
saved becomes due and payable to the relevant Tax authorities;
(iii) if involving the setting-off of any other Relief within clause 2.2, the
date on which the Tax saved thereby would otherwise have become due and payable
to the relevant Tax authorities;
(c) in any other case, one business day after the date on which the
Claimant makes demand therefor.
5.3 If any amount is not paid as provided in clause 5.1 the Covenantor shall pay
to the Claimant interest on such amount calculated on a daily basis (compounded
quarterly until payment) at the rate of 1/2 of 1% above LIBOR from time to time
on the basis of actual days elapsed from the relevant date specified in clause
5.2 until and including the date of actual payment (after as well as before
judgment).
6. Management of Pre-Completion Affairs
6.1 In this clause 6:
"accounting period" means any period by reference to which any profits or gains,
or any other amounts relevant for the purposes of Tax, are measured or
determined;
"pre-Completion Tax affairs" means the Tax affairs of the Company for which the
Covenantor is responsible under this clause 6;
"Tax documents" means the Tax returns, claims and other documents which are
required to be prepared on behalf of the Company under clause 6.2(a) and (b) and
6.4;
"Tax return" means any return required to be made to any Tax authority of
income, profits or gains or of any other amounts or of information relevant for
the purposes of Tax, including any related accounts or computations; and
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"time limit" means the last date on which a Tax document can be delivered to a
relevant Tax authority without incurring a liability for interest or a penalty,
or to ensure that such Tax document is effective.
Rights and Obligations of the Covenantor
6.2 Subject to the approval of the Purchaser (such approval not to be
unreasonably withheld or delayed) and in accordance with the provisions of this
clause the Covenantor shall, in respect of all accounting periods ending on or
before Completion, and at its own cost, be responsible for:
(a) duly preparing and duly submitting the Tax returns of the
Company to the relevant Tax authority;
(b) duly preparing and duly submitting on behalf of the Company all
claims, elections, surrenders, disclaimers, notices and consents for the
purposes of Tax to the relevant Tax authority;
(c) (subject to clause 6.5) dealing with all matters relating to Tax
which concern or affect the Company including the conduct of all negotiations
and correspondence relating thereto or to any Tax documents reasonably
expeditiously; and
(d) where relevant notifying the Company in writing of the amount to be
paid to any Tax authority at least seven business days before such sum is due.
PROVIDED THAT
(i) the Covenantor shall at all times keep the Purchaser and the Company
fully informed as to the state of any negotiations referred to at clause 6.2
above;
(ii) on the Covenantor requiring the Company to sign any computation or
return or to make any claim or election, the Covenantor shall provide the
Company and the Purchaser with such information as is reasonably necessary to
enable the Company and the Purchaser to review the same;
(iii) the Covenantor shall not be entitled to require the Company to
make any claim or election for a period ending before Completion, or period
including Completion which would result in any loss, relief, allowance,
deduction or repayment first arising in a period commencing after the period
including Completion, being used to reduce or eliminate Tax arising in respect
of periods ending prior to Completion;
(iv) for the avoidance of doubt any agreement, act, conduct or omission
of the Company or the Purchaser in accordance with this clause 6 shall not
constitute a voluntary act or omission of the Purchaser for the purposes of
clause 3.1(g) of this Deed.
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6.3 The Covenantor or its duly authorised agent shall deliver all Tax documents
which are required to be signed by or on behalf of the Company and which have
been approved by the Purchaser (pursuant to 6.2 above) to the Purchaser or (as
the case may be) the Company for authorisation, signing and submission to the
relevant Tax authority. If a time limit applies in relation to any Tax document,
the Covenantor shall ensure that the Purchaser or the Company receives the
approved Tax document as soon as reasonably practicable and in any event no
later than ten Business Days before the expiry of the time limit.
6.4 The Purchaser shall procure that the Company, after consultation with the
Covenantor as provided herein, shall be responsible for, and have the conduct of
preparing, submitting to and agreeing with the relevant Tax authorities all Tax
documents for the accounting period in which Completion takes place. The
Purchaser shall procure that the Company submits all such Tax documents to the
Covenantor in draft form for comments as soon as reasonably practicable. The
Covenantor shall make its comments on the draft as soon as practicable following
receipt of the drafts but in any event no later than 14 business days
thereafter. If the Covenantor has any comments or suggestions, the Purchaser
shall consider them in good faith and shall not unreasonably refuse to adopt
such comments or suggestions so far as they relate to the period before or
including Completion.
Obligations of the Purchaser
6.5 The Purchaser shall procure that:
(a) the Covenantor and its duly authorised agents are afforded such
access (including the taking of copies) to the books, accounts and records of
the Company and such other assistance as it or they reasonably require to enable
the Covenantor to discharge its obligations under clause 6.2 and 6.4;
(b) the Covenantor is as soon as reasonably practicable sent a copy of
any communication from any Tax authority insofar as it relates to the
pre-Completion Tax affairs;
(c) there is given to such person or persons as may be nominated by the
Covenantor and approved in writing by the Purchaser (such approval not to be
unreasonably withheld or delayed) authority (subject always to Clause 6.4) to
conduct the pre-Completion Tax affairs at the Covenantor's cost, and that such
authority is confirmed to any relevant Tax authority.
6.6 The Purchaser shall (subject to clause 6.7 below and 6.2, 6.3 and 6.4 above)
procure that the Company shall cause any Tax document delivered to it under
clause 6.3 to be authorised, signed and submitted to the appropriate Tax
authority without delay (and in any event within any relevant time limit), and
without amendment.
6.7 The Purchaser shall be under no obligation to procure the authorisation,
signing, or submission to a Tax authority of any Tax document delivered to it
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under clause 6.3 which it considers in its reasonable opinion to be false,
misleading, incomplete or inaccurate in any respect.
7. VAT
This indemnity does not extend to any liability for value added tax due from
Frizzell Life and Financial Planning Limited (as representative member of the
value added tax group registered under number 244993428) in respect of supplies
made by any member of that value added tax group which:
(a) is not a Company; and
(b) has made a payment in respect of that liability for value added tax
to Frizzell Life and Financial Planning Limited.
8. No withholdings, etc.
8.1 All sums payable by the Covenantor hereunder shall be paid free of and
without any rights of counterclaim or set off and without deduction or
withholding on any ground whatsoever, save only as may be required by law. If
any such deduction or withholding is required by law (other than in respect of
any interest payable pursuant to clause 5.3), the Covenantor shall be obliged to
pay to the Claimant such amount as will ensure that after any such deduction or
withholding has been made the Claimant shall have received a sum equal to the
amount that the Claimant would otherwise have received in the absence of any
such deduction or withholding as reduced by any credit to which the Claimant may
be entitled on account of such deduction or withholding.
8.2 If any competent authority for Tax purposes seeks to charge to Tax any sum
paid (the "original payment") to the Claimant hereunder (other than any interest
payable pursuant to clause 5.3) the Covenantor shall be obliged to pay the
Claimant such additional amount (the "additional payment") as will ensure that
after the payment of the Tax so charged on the original payment and any
chargeable on the additional payment there shall remain a net sum equal to the
amount of the original payment, such additional payment to be paid 3 Business
Days after the Claimant has served notice that Tax on the original payment has
become due and payable or would have become due and payable but for the
availability of a Relief.
9. Set-off
9.1 If at any time the auditors for the time being of the Company shall
have certified (at the request and expense of the Covenantor) that:
(a) any specific provision for Tax contained in the Accounts is an
over provision; or
(b) the Tax liability that has resulted in a payment becoming due from
the Covenantor pursuant to the provisions of this Deed has given rise to a
corresponding Tax saving for the Company;
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the amount of such over provision (except insofar as is attributable to the
effect of a retrospective change in rates of Tax or in the law occurring or
announced after Completion) or the value of that corresponding Tax saving (as
certified by the auditors for the time being of the Company at the request and
expense of the Covenantor, such certification to take into account the effect of
timing differences in calculating such value) shall be set off first against any
payment then due from the Covenantor under this Deed and secondly (to the extent
of any excess) against any payment previously made under this Deed (so that the
amount so set off shall forthwith be repaid to the Covenantor) and thirdly (to
the extent of any excess) against any such further payment or payments in
chronological order until that amount or value has been exhausted PROVIDED THAT
if it shall be found subsequently that any such over provision or corresponding
Tax saving either did not exist or arise or the certified value thereof was
excessive, any amount which has been set off against such part of the over
provision or corresponding Tax saving as is found not to exist or to be
excessive shall forthwith on demand be paid by the Covenantor to the Claimant.
9.2 (a) If the Company recovers from a third party (including a competent
authority for Tax purposes) any sum in respect of a liability to Tax for which a
claim could or has been made against the Covenantor pursuant to this Deed, the
amount so recovered, together with any interest thereon paid by such third party
less any Tax chargeable on the Company in respect of such sum or interest and
less the costs reasonably incurred by the Company or the Claimant in effecting
such recovery shall:
(i) if the Covenantor has at the time of the recovery made payment pursuant to
this Deed in respect of that Tax liability, be paid forthwith to the Covenantor
to the extent not exceeding the amount so paid by the Covenantor;
(ii) if a claim has been made against the Covenantor pursuant to this Deed in
respect of that Tax liability but the Covenantor has not at the time of recovery
made payment in respect thereof, be set against and reduce pro tanto the claim
against the Covenantor in respect of such Tax liability;
(iii) if no claim has been made against the Covenantor in respect of that Tax
liability at the time of the recovery, be set against and reduce pro tanto any
claim that subsequently may be made against the Covenantor in respect of such
Tax liability.
(b) The Claimant shall have no liability to account to the Covenantor
pursuant to clause 10.2(a)(i) for any sum so recovered to the extent that at the
time of such recovery any other payment is due from the Covenantor under this
Deed, the Tax Deed of Covenant between, inter alia, the Covenantor, the
Guarantor and Baltimore Limited of today's date or the Warranties in which case
the sum so recovered shall be set against and discharge the then outstanding
liabilities of the Covenantor and the excess (if any) of the sum thereafter
remaining shall, to the extent that it does not exceed the amount paid by the
Covenantor in respect of that Tax liability, be paid forthwith to the
Covenantor.
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(c) References to sums recovered from a competent authority shall
include a Tax saving corresponding to a Tax liability to the extent and at the
time such saving is actually realised by the Company (treating the benefit of
trading losses and other amounts eligible for relief against profits or gains as
resulting in a Tax saving equal to the corporation tax which would otherwise
have been payable on the profits against which they had been set and the benefit
of advance corporation tax as equal to the amount set off against a corporation
tax liability of the Company).
9.3 The parties agree that, on or before the seventh anniversary of the
Completion Date, they will consult with a view to agreeing the liability of the
Company (if any) to make a payment to the Covenantor under this clause.
Quantification of the aforesaid liability shall be referred to the auditors for
the time being of the Company. Any payment made by the Company to the Covenantor
pursuant to this clause 10.3 shall be in full and final satisfaction of the
Company's liability under clause 10.
10. Purchaser's Indemnity
The Purchaser hereby undertakes to the Covenantor that it will indemnify the
Covenantor and keep it indemnified against any liability arising pursuant to
Section 767A of The Taxes Act or clause 89 of the Finance Bill 1996 to the
extent that the corporation tax to which the liability relates :
(a) has been the subject of a claim by the Purchaser hereunder which
has been satisfied; or
(b) is one in respect of which the Covenantor has no liability by
reason of Clause 3.1(c) to (m) above.
11. Guarantee
11.1 In consideration of the Companies and the Purchaser entering into and
acting in accordance with this Deed, the Guarantor (as principal obligor and not
merely as surety) unconditionally and irrevocably guarantees as a continuing
obligation the proper and punctual performance by the Covenantor of all its
obligations under or pursuant to this Deed (including any documents entered into
pursuant to the terms of this Deed).
11.2 The Guarantor's liability hereunder shall not be discharged or impaired by
any amendment to or variation of this Deed, or release of, of granting of time
or other indulgence to, the Covenantor or any third party, any liquidation,
administration, receivership or winding-up of the Covenantor or by any other act
or omission or any other events or circumstances whatsoever (whether or not
known to the Covenantor, the Guarantor, the Companies or the Purchaser) which
would or might (but for this clause) operate to impair or discharge the
Guarantor's liability under this guarantee.
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12. General
12.1 The following provisions of the Option Agreement shall apply to this Deed
as if the same had been set out herein save that references therein to the
Vendor, its address and the Agreement respectively shall be construed as
references to the Covenantor, its address specified in this Deed.
clause 16 Variation
clause 17 Assignment
clause 24 Notices
clause 26 Governing law
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Schedule I
The Companies
Name: Registered no. Registered office
1. Frizzell Life and 462173 Frizzell House County
Financial Planning Limited Gates Bournemouth
Dorset BH1 2NF
2. Central Resources Limited 201591 Ditto
3. Frizzell Bank Limited 432080 Ditto
4. Frizzell Credit Services 183500 Ditto
Limited
5. Frizzell Westbourne 2261873 Ditto
Developments Limited
6. Shawlands Leasing Limited 1021232 Ditto
7. Shawlands Securities 1031484 Ditto
Limited
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<PAGE>
IN WITNESS WHEREOF this Deed has been entered into the day and year first before
written.
EXECUTED as a deed by )
THE BOWRING GROUP )
LIMITED acting by )
Director
Director/Secretary
EXECUTED as a deed by )
FRIZZELL LIFE AND )
FINANCIAL PLANNING LIMITED )
acting by )
Director
Director/Secretary
EXECUTED as a deed by )
FRIZZELL WESTBOURNE )
DEVELOPMENTS LIMITED )
acting by )
Director
Director/Secretary
EXECUTED as a deed by )
FRIZZELL BANK LIMITED )
acting by )
Director
Director/Secretary
Page 139
<PAGE>
EXECUTED as a deed by )
FRIZZELL CREDIT )
SERVICES LIMITED )
acting by )
Director
Director/Secretary
EXECUTED as a deed by )
SHAWLANDS SECURITIES )
LIMITED acting by )
Director
Director/Secretary
EXECUTED as a deed by )
SHAWLANDS LEASING LIMITED )
acting by )
Director
Director/Secretary
EXECUTED as a deed by )
CENTRAL RESOURCES )
LIMITED acting by )
Director
Director/Secretary
EXECUTED as a Deed by )
MARSH & MCLENNAN )
COMPANIES, INC acting by )
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<PAGE>
...........................................
Duly Authorised
EXECUTED as a Deed by )
LIVERPOOL VICTORIA )
FRIENDLY SOCIETY LIMITED )
acting by )
Director
Director/Secretary
Page 141
<PAGE>
Dated 1996
THE BOWRING GROUP LIMITED (1)
- and -
THE COMPANIES (2)
MARSH & MCLENNAN COMPANIES, INC (3)
- and -
LIVERPOOL VICTORIA FRIENDLY SOCIETY LIMITED (4)
----------------------------------------
TAX DEED OF COVENANT
-----------------------------------------
Page 142
<PAGE>
SCHEDULE 12
List of Permitted Activities
Under Friendly Societies Act 1992
Page 143
<PAGE>
SCHEDULE 13
Facilities
FB BANK FACILITIES @ 31 DECEMBER 1995
<TABLE>
<CAPTION>
Bank Amount Maturity Date Margin
(pound)'000
<S> <C> <C> <C>
A. Committed Facilities
Banca Nazionale dell Agricoltura 2,000 30/4/96 45
Banco Popolare di Novara 2,000 18 months - 1 day 50
Bank Julius Baer 3,000 30/4/96 55
Bank of Scotland 3,000 12/4/98 50
Barclays 10,000 8/9/97 45
BHF Bank 5,000 20/7/96 55
British Linen Bank 5,000 30/9/97 50
Brown Shipley 4,000 30/6/98 50
Dresdner Bank 5,000 1/12/96 50
Guinness Mahon 3,000 31/12/97 50
Hambros 3,000 31/8/98 50
Italian International 3,000 23/7/98 50
Kleinwort Benson 5,000 30/9/98 45
Kredietbank 3,000 25/5/98 47.5
Lloyds 7,000 31/10/97 45
Morgan Grenfell 5,000 30/6/98 50
National Westminster 10,000 31/12/97 45
Royal Bank of Canada 5,000 30/6/97 55
N M Rothschild 9,000 30/6/98 50
Royal Bank of Scotland 5,000 31/12/97 50
Schroders 6,000 11/3/98 45
Scotiabank 3,000 16/10/96 55
Singer & Friedlander 3,000 30/9/97 55
SocGen 5,000 6/12/96 30
Swiss Bank 5,000 31/7/98 45
Union Bank of Switzerland 5,000 30/6/98 50
-----------
124,000
</TABLE>
Page 144
<PAGE>
SCHEDULE 14
The Reorganisation Steps Schedule
Page 145
<PAGE>
THE REORGANISATION
Stamp duty considerations will not delay the timetable.
The Frizzell Foundation was dissolved on 30 April 1996.
Abbreviations and definitions
D D Day - signature of option agreements.
A A Day - day on which all regulatory approvals are received.
C 5 June 1996
FSA 1992 Friendly Societies Act 1992
LWD Lovell White Durrant
FF Freshfields
FSC Friendly Societies Commission
LVFS Liverpool Victoria Friendly Society Ltd.
BLTM Baltimore Ltd., an independent company set up to acquire companies
and assets in the TFG group which LVFS is not permitted to own
under FSA 1992. BLTM is not (and never has been) a subsidiary of
LVFS.
MM Marsh & McLennan Companies Inc.
TBG The Bowring Group Ltd. (current owner of shares in TFG, which were
previously owned by CTB).
CTB CT Bowring & Company Ltd.
TFG The Frizzell Group Ltd.
FL&FP Frizzell Life & Financial Planning Ltd.
FFS Frizzell Financial Services Ltd.
FPL Frizzell Property Loans Ltd.
FWD Frizzell Westbourne Developments Ltd.
FB Frizzell Bank Ltd.
1
<PAGE>
FCS Frizzell Credit Services Ltd.
TB Tower Brokers Ltd.
FBV Frizzell BV
TMAL Teachers Motoring Association Ltd.
CR Central Resources Ltd.
SS Shawlands Securities Ltd.
SL Shawlands Leasing Ltd.
2
<PAGE>
Step Timing Principal Payment of Pre-option Agreement
No Responsibility cash dividends
o FB notified Bank of England
of new subordinated loan and
share capital.
o FL&FP notified PIA of new
subordinated loan and share
capital.
o Dividends paid by cash were
paid through bank accounts
(i.e. not merely by book
entries).
o Journals implementing
dividends paid by
forgiveness of intercompany
debt were written up.
o Letters of comfort were
provided by TFG to FPL, FFS
and FL&FP confirming that
additional funds will be
made available if the
Company is unable to meet
its liabilities or
regulatory solvency
requirements.
o FCS received a comfort
letter from FB and paid a
dividend of (pounds)397,841
to FB on 31 January 1996.
3
<PAGE>
1 5 Feb TFG's UK resident subsidiaries
resolved to pay up virtually
all their distributable
reserves as dividends to TFG
under the group income
election.
1.1 Dividend by FB
1.1.1 TFG subscribed for
(pounds)3,435,000 of
shares in FB.
1.1.2 CTB lent
(pounds)4,460,000 to
FB on a subordinated
basis.
1.1.3 FB approved interim
accounts and declared
a dividend of
(pounds)7,879,201 in
cash to TFG, being:
o its total
distributable
reserves of
(pounds)7,497,060
o plus its dividend
from FCS of
(pounds)397,841
o less an amount of
(pounds)10,700
sufficient to
complete step 21
o less (pounds)5,000
sufficient to
complete step 25.
1.2 FPL adopted a "plan of
liquidation" for US purposes
and then declared a dividend
of (pounds)44,158 in cash to
TFG, being an amount equal
to substantially all its
distributable reserves less
an amount sufficient to
complete step 22.
1.3 FFS adopted a "plan of
liquidation" for US purposes
and then declared a dividend
in cash of (pounds)802,369
to TFG, being an amount
equal to substantially all
its distributable reserves
less an amount sufficient to
complete step 23.
4
<PAGE>
1.4 FL&FP dividend
1.4.1 TFG subscribed for
(pounds)145,000 of
shares in FL&FP
(145,000 new shares
issued at par).
1.4.2 TBG lent
(pounds)800,000 to
FL&FP on a
subordinated basis.
1.4.3 FL&FP declared a
dividend in cash of
(pounds)1,783,787 to
TFG, being
o its total
distributable
reserves of
(pounds)1,783,787.
See note 1
1.5 FWD declared a dividend of
(pounds)5,015 in cash to
TFG.
1.6 CR declared a dividend of
(pounds)24,199 to TFG (this
was set-off against existing
intercompany debt).
2 7 Feb LWD LVFS and MM received a
satisfactory opinion on vires of
LVFS in relation to all aspects
of the transaction.
Sign option agreement on D Day
(7 Feb)
3 D LVFS/MM 3.1 LVFS granted an option to MM
under which it can put the
following companies onto
LVFS:
5
<PAGE>
Price
allocation
FB (pounds)36,000,000
FL&FP (pounds)12,000,000
FCS (pounds)11,000
FWD (pounds)100
CR (pounds)30,000
SS (pounds)100
SL (pounds)100
(pounds)48,041,300
==================
o The consideration under the
option will be
(pounds)48,041,300 plus
escalation. This has been
allocated between the
companies to be acquired as
set out above.
o The option will be assignable
to TBG after step 25.
o LVFS was granted a
corresponding call option.
o The consideration for the
grant of each option was
(pounds)1.
6
<PAGE>
3.2 BLTM granted an option to MM
under which MM can put the
TFG sub-group comprising
TFG, FFS, TMAL and FPL onto
BTLM after step 25.
o The consideration under
the option will be
(pounds)139,958,700 plus
escalation and will be
guaranteed by LVFS.
o The option will be
assignable to TBG after
step 25.
o BTLM was granted a
corresponding call option.
o The consideration for the
grant of each option was
(pounds)1.
4 D LVFS/MM Public announcement of the
signing of the put and call
options. This took place at a
time which allowed simultaneous
announcements on the New York
and London Stock Exchanges.
5 After D TBG Discussions were commenced to
terminate/ renegotiate the KBIML
agreement.
LVFS, BLTM, TBG, TFG, FB, FFS
and FL&FP applied for all
regulatory approvals
6 9 Feb TFG Application was made for TFG
registration with IBRC,
including
o notification of transfer of
FFS' business to TFG.
Application was approved on 24
May 1996.
7 9 Feb TFG Application was made for TFG
registration with Lloyd's,
including
o notification of transfer of
FFS' business to TFG.
7
<PAGE>
Application was approved on 31
May 1996.
8 9 Feb TBG FL&FP
8.1 PIA was given notice of TFG
ceasing to be a controller.
9 Feb TBG 8.2 PIA was given notice of
change of control from TBG
to LVFS. Done concurrently
with the TFG/TBG notice.
9 Feb 8.3 Application was made by LVFS
to obtain PIA approval as
new controller.
Application was approved on
13 March 1996.
9 10 May TBG Application was made for
approval of assignment/repayment
of subordinated loan by LWD on
behalf of LVFS. Approval was
received on 31 May 1996.
10 19 Feb TFG TMAL was put into liquidation.
11 6 March TBG/LVFS Application was made for Bank of
England approval for a change in
controller of FB from TBG to
LVFS including:
o approval of
assignment/repayment of
subordinated loans.
Application regarding change of
controller was approved on 15
May 1996. Approval of assignment
of subordinated loan was given
on 3 June 1996.
12 25 March TFG Notified Bank of England of TFG,
MM and TBG's intention to cease
to be controllers of FB.
TFG's non UK resident
subsidiaries adopt a plan of
liquidation for US purposes and
pay up virtually all their
reserves to TFG
8
<PAGE>
13 26 March TFG FBV
13.1 FBV adopted a "plan of
liquidation" for US
purposes.
13.2 FBV paid a dividend of NLG
4,877,891 (this was set-off
against existing
intercompany debt).
27 March 13.3 FBV was put into
liquidation and its net
assets were transferred to
TFG by way of an advance
distribution against an
indemnity from TBG to the
liquidator.
14 TFG TB
24 April 14.1 TB adopted a "plan of
liquidation" for US
purposes.
24 April 14.2 TB paid a dividend
of (pounds)1,400,000 (this
was set-off against
existing intercompany
debt).
14.3 TB was put into liquidation
and its net assets were
transferred to TFG through
the cancellation of
remaining intercompany debt
against indemnity from TBG
to the liquidator.
15 14 May TB and FBV were transferred to
Marsh & McLennan Management
Services (Dublin) Ltd.
for(pounds)1 and(pounds)9,508
respectively.
15.1 As this transaction was
between companies in the EU
notification will be made
within six months to the
Treasury.
16 22 May LVFS Annual General Meeting approved
change of rules.
Regulatory approvals obtained by
A day
17 A All regulatory approvals
obtained.
9
<PAGE>
18 C-1 TBG Change objects clauses
(conditionally in the case of FB
and TFG) (so they comply with
FSA 1992) and articles of
association of all UK companies
(except TMAL) in the TFG group
other than objects clauses of
FFS and FPL.
19 C-1 TBG Effect name changes of TFG, FFS
and FPL (TFG is to be renamed
FFS; FFS and FPL are to be
renamed Baltimore Non-Trading
Company 2 Ltd. and Baltimore
Non-Trading Company 1 Ltd.
respectively).
Transfer of shares in and assets
of subsidiaries to be completed
as soon as possible after all
regulatory approvals are
obtained
If required, FB, FFS and FL&FP
will prepare interim accounts
and pay up sufficient dividends
to TFG to enable TFG to pay its
dividend to TBG.
20 C-1 TFG approves interim accounts
and declares and pays up a
dividend in general meeting of
(pounds)17,344,114 satisfied by
the transfer of the following
assets to TBG. TBG to provide a
deed of undertaking to TFG. Such
deed of undertaking will
terminate on the exercise of the
options when LVFS will provide a
deed of undertaking.
Amount of dividend
(pounds)
shares in FB book value
17,063,844
shares in FL&FP book value
250,000
shares in CR book value
30,000
shares in FWD book value
270
----------
(pounds)17,344,114
10
<PAGE>
21 C-1 FB FB approves interim accounts and
declares and pays up a final
dividend of (pounds)10,700
satisfied by the transfer of the
following assets to TBG. TBG to
provide a deed of undertaking to
FB. Such deed of undertaking
will terminate on the exercise
of the option when LVFS will
provide a deed of undertaking.
Amount of dividend
shares in FCS book value (pounds)10,500
shares in SS book value (pounds)100
shares in SL book value (pounds)100
------
(pounds)10,700
22 C-1 TBG FPL dividend
22.1 FPL approves interim
accounts and declares and
pays a dividend in general
meeting to TFG expressed as
a dividend of an amount
equal to the distributable
reserves to be determined
by accounts of the company
to be drawn up as at the
transfer date to be
satisfied by the transfer
of the business under the
business transfer agreement
produced to the general
meeting.
The business transfer
agreement will provide that
TFG assumes all liabilities
and that FPL retains an
amount equal to its share
capital and
non-distributable reserves.
22.2 The auditors will provide a
letter of comfort. The
directors of FPL will make
a declaration of solvency
and initiate the members'
voluntary liquidation.
Deloitte & Touche will act
as liquidator.
11
<PAGE>
23 C-1 TBG FFS dividend
23.1 FFS declares and pays a
dividend in general meeting
to TFG expressed as a
dividend of an amount equal
to the distributable
reserves to be determined
by accounts of the company
to be drawn up as at the
transfer date to be
satisfied by the transfer
of the business under the
business transfer agreement
produced to the general
meeting.
The business transfer
agreement will provide that
TFG assumes all liabilities
and that FFS retains an
amount equal to its share
capital and
non-distributable reserves.
23.2 The auditors will provide a
letter of comfort. The
directors of FFS will make
a declaration of solvency
and initiate the members'
voluntary liquidation.
Deloitte & Touche will act
as liquidator.
Following the above transfers,
TFG owns:
all the shares in
o FFS (in liquidation)
o FPL (in liquidation)
o TMAL (in liquidation)
the businesses of
o FFS
o FPL
12
<PAGE>
TBG has direct ownership of all
the shares in the following
companies:
o FB
o FL&FP
o FCS
o FWD
o CR
o SS
o SL
o TFG
24 C-1 TFG For convenience in carrying out
step 25, TFG issues 1,251
ordinary shares to increase its
issued ordinary share capital to
25,000,000.
25 C-1 TFG/FB 25.1 TFG issues 100 ordinary
bonus shares of US$1 each
(one US$1 share for every
250,000 existing ordinary
shares).
25.2 FB issues 100 ordinary
bonus shares of US$ each
(one US$1 share for every
210,000 existing ordinary
shares).
25.3 TFG and FB convert their
shares (other than their
dollar shares) into
deferred shares. Their
dollar shares are then
replaced by share warrants
to bearer under section 188
Companies Act 1985.
Exercise of put or call option
and completion of sale
26 C FB/LVFS FB repaid its last corporate
deposit on 11 March 1996.
27 C BTLM BLTM to purchase premium finance
loan portfolio from FB financed
by participating loan stock held
by LVFS.
28 C FCS FCS's last outstanding bills of
exchange matured on 31 May 1996.
29 C or FB Termination of Agreement with
before C Kleinwort Benson.
13
<PAGE>
30 C MM/TBG/ LVFS exercises its call option.
LVFS Completion takes place.
30.1 CTB and TBG assign to LVFS
the subordinated loans
arising at steps 1.1, 1.4
and the pre-existing
(pounds)5 million
subordinated loan from CTB.
30.2 TBG sells its shares in the
following companies to
LVFS.
o FB
o FL&FP
o FCS
o FWD
o CR
o SS
o SL
The companies retained by
Marsh & McLennan Management
Services (Dublin) Ltd. are:
o TB (in liquidation)
o FBV (in liquidation)
31 C MM/TBG/ BLTM exercises its call option.
BLTM Completion takes place.
31.1 TBG sells the shares in TFG
to BLTM.
The TFG sub-group
comprises:
o TFG
o FFS (in liquidation)
o FPL (in liquidation)
o TMAL (in liquidation)
32 C+1 LVFS Complete Companies House filing
requirements.
33 C+1 LVFS Notify Council of Lloyd's of
change in controller of TFG from
TBG to BLTM.
14
<PAGE>
34 C+1 FB Notify Bank of England that TBG
has ceased to be a controller.
35 [As soon D&T TMAL holds final shareholders
as meeting and files final
possible dissolution notice.
after C]
15
<PAGE>
Notes:
1. Should FL&FP need additional share capital to meet regulatory requirements,
this can be met by TFG subscribing for additional new ordinary shares (and
TBG advancing an additional subordinated loan up to four times the new
capital). TFG will secure sufficient additional distributable reserves to
enable it to dividend the new shares by procuring that FB and FFS pay
interim dividends out of 1996 earnings.
16
<PAGE>
SCHEDULE 15*
The Primary Customers
* This list is preliminary and is subject to further review and discussion
prior to Completion. A final list shall be agreed prior to Completion.
1. CIVIL SERVICE DEPTS/EXECUTIVE AGENCIES/ QUANGOS
ACAS
Agricultural Training Board (London)
Atomic Weapons Est. (Bournemouth)
BBSRC (Swindon) Bath
Belfast Educ. & Library Board
Benefits Agency (London/Leeds/B'mth/Manchester)
Biotech & Biological Rsch. Council (Bath)
Central Statistical Office (Bath)
Civil Service Motoring Assoc. (National)
Commonwealth Institute (London N)
Companies House (Bath)
Contributions Agency (Newcastle)
Crown Prosecution Service (London S)
Customs & Excise (London S/B'mth/Lon N)
Defence Research Agency (Bournemouth/Glasgow)
Dental Practice Board (London S)
Dept. of Employment (Bath, Manchester, Leeds)
Dept. of Environment (London S)
Dept. of Trade & Industry (London S)
Dept. of Transport (London S)
Dept. of Heath & Social Security (London S)
Page 146
<PAGE>
Driver & Vehicle Licensing Agency (Bath)
Driving Standards Agency (London N)
Employment Service Agency (Manchester/Birmingham/Bath)
Engineering & Phys. Sc. Resch. Council (Bath)
Foreign Office (London N)
Forestry Commission (Glasgow)
GCHQ (Bath)
Highways Agency (Leeds, London N)
HMSO (London S) (London N in Norwich)
HM Treasury (London S)
Home Office (London S)
House of Commons (London S)
Inland Revenue (National)
Institute of Prof. Managerial Staff (National)
Intervention Board (Bath)
Land Registry (National)
Lord Chancellor's Dept. (London S)
Magistrates Court (London S)
Major Highways Consortium (London N)
Meat & Livestock Agency (London N)
Medical Research Council (London N)
Met Office (Bournemouth)
Ministry of Agriculture (London/Leeds/Bath)
Ministry of Defence (Refer to SLI)
N. Ireland Housing Executive (Belfast)
Page 147
<PAGE>
Nat. Union of Civil & Public Servants (National)
National Physical Laboratory (London S)
National Radiological Prot. Board (London S)
National Rivers Authority (National)
National Resources Institute (London S)
NCM Credit Insurance (Bath)
Northern Edu. & Library Board (Newcastle)
Northern Ireland Civil Service (Manchester)
Office of Population Census & survey (London S)
Ordnance Survey (Bournemouth)
Patent Office (Bath)
Paymaster General's Office (London S)
Portland Naval Base (Bournemouth)
Property Services Agency (Leeds)
Public Records Office (London S)
Royal Mint (Bath)
Test & Evaluation Office (Bath)
Transport Research Labs. (Bournemouth)
Valuation Office Agency (National)
Vehicle Inspectorate (Bath)
Warren Springs Laboratory (London S)
Welsh Development Agency (Bath)
Welsh Office (Bath)
2. PUBLIC BODIES, PRIVATISED BODIES AND UTILITIES
British Nuclear Fuels Limited
British Telecommunications
Page 148
<PAGE>
Civil Aviation Authority
Post Office (inc. Royal Mail)
UK Atomic Energy Authority
3. REGIONAL UTILITIES
Manweb
Northern Electricity
North West Water
Southern Electric
Bristol Water
4. EDUCATION - SCHOOLS
Association of Head Teachers, Scotland
Association of Teachers & Lecturers (ATL)
Headteachers Association of Scotland (HAS)
NAHT
NAEIAC
NASUWT
National Union of Teachers (NUT)
Secondary Heads Association
5. EDUCATION - UNIONS/ASSOCIATIONS
Association of University Teachers (AUT)
National Association of Teachers in Further
and Higher Education (NATFHE)
6. NATIONAL ASSOCIATIONS
Caravan Club
First Division Association
Man. Science & National Finance Union
Page 149
<PAGE>
Musical Advisors Nat. Association
National Trust
National Trust for Scotland
7. PRIVATE SECTOR
Companies
Book Keeping S'tory Fin. Servs.
Booker Foods Group
British Shoe Corporation
Britvic
Portland International
Scottish & Newcastle Brewery
Texas Instruments
Vickers Engineering
Outplacement Consultants
Focus
Grosvenor Career Services
Sanders & Sidney
Page 150
<PAGE>
6 LOCAL AUTHORITIES (b)
City/Town Councils
Alyn & Deeside DC (Manchester)
Aylesbury District Council (Bournemouth)
Barnet District Council (London N)
Boston Borough Council (Birmingham)
Bradford City Council (Leeds)
Calderdale Council (Leeds)
Carrick DC (Bath)
Cheltenham Borough Council (Bath)
Cotswold DC (Bath)
Coventry Co-Op (Birmingham)
Dartford BC (London S)
Derby City Council (Birmingham)
Doncaster Met. BC (Leeds)
Dudley BC (Birmingham)
Eastbourne Council (London S)
Edinburgh District Council (Glasgow)
Ettrick-Lauderdale District Council (Glasgow)
Falkirk District Council (Glasgow)
Forest of Dean DC (Bath)
Glanford BC (London N)
Great Grimsby Council (Leeds)
Greenwich Council (London S)
Hull Council (Leeds)
Ipswich BC (London N)
Leeds City Council (Leeds)
Page 151
<PAGE>
6 LOCAL AUTHORITIES (a)
County/Regional Councils
Avon CC (Bath)
Borders Regional Council (Glasgow)
Charnwood BC (Birmingham)
Clwyd CC (Manchester)
Cornwall CC (Bath)
Derbyshire CC (Birmingham)
Devon CC (Bath)
Dumfries & Galloway RC (Glasgow)
Dyfed CC (Bath)
East Sussex CC (London S)
Essex CC (London N)
Gloucestershire CC (Bath)
Grampian Regional Council (Glasgow)
Hampshire CC (Bournemouth)
Hereford & Worcester (Birmingham)
Humberside CC (Leeds)
Leicester CC (Birmingham)
Lincs. CC (Leeds)
Lothian RC (Glasgow)
Mid Devon CC (Bath)
Mid Glamorgan CC (Bath)
North Devon CC (Bath)
Rotherham CC (Leeds)
Scunthorpe CC (Leeds)
Shropshire (Birmingham)
Somerset CC (Bath)
South Glamorgan CC (Bath)
Staffordshire CC (Birmingham)
Strathclyde RC (Glasgow)
Surrey CC (London S)
Torridge CC (Bath)
Page 152
<PAGE>
Warwickshire CC (Birmingham)
West Glamorgan CC (Bath)
West Sussex CC (London S)
Wiltshire CC (Bath)
London Borough Bromley (London S)
London Borough Croydon (London S)
Macclesfield Council (Manchester)
Mendip DC (Bath)
Midlothian District Council (Glasgow)
Newcastle City Council (Newcastle)
New Forest DC (Bournemouth)
Newcastle CC (Newcastle)
North Cornwall DC (Bath)
North Herts DC (London N)
North Wilts DC (Bath)
Ogwr DC (Bath)
Penwith DC (Bath)
Plymouth City Council (Bath)
Rotherham Council (Leeds)
Roxburgh District Council (Glasgow)
South Hams DC (Bath)
South Somerset DC (Bath)
Southwark Council (London S)
Thurrock BC (London N)
Tweeddale District Council (Glasgow)
Wakefield DC (Leeds)
Walsall MBC (Birmingham)
West Devon DC (Bath)
West Lothian District Council (Glasgow)
Wigtown District Council (Glasgow)
Page 153
<PAGE>
7 HEALTH
Airedale NHS (Leeds)
Bromley Health Authority (London S)
Dumfries - Galloway Health Board (Glasgow)
Dunston Hill Hospital
East Glamorgan NHS Trust (Bath)
Gran Clywd NHS Trust (Bath)
Grampian Health Trust (Glasgow)
Hampshire Hospital (Bournemouth)
Hereford County Hospital (Birmingham)
Huddersfield Health Authority (Leeds)
Hull Health Authority (Leeds)
Kidderminster Health Authority (Birmingham)
Merseyside Health Authority (Manchester)
Milton Keynes Health Authority (London N)
National Blood Authority
Newcastle City Health Trust (Newcastle)
Newcastle General Hospital (Newcastle)
Newcastle Health Authority (Newcastle)
NHS Cymru Wales (Bath)
Norfolk Community NHS Trust (London N)
North Durham Comm. Health (Newcastle)
North East Health Authority (Newcastle)
Northampton General Hospital (Birmingham)
Ogwr Health Trust (Bath)
Royal College of Midwives (National)
Royal College of Nursing (National)
St James & Seacroft University Hosp. Trust (Leeds)
S & E Wales Ambulance Trust (Birmingham)
Southampton Hospital (Bournemouth)
Sunderland City NHS Trust (Newcastle)
West Midlands Regional Health Authority (Birmingham)
Page 154
<PAGE>
8 SERVICES (Police/Fire/Prisons/Ambulance)
Avon & Somerset Police (Bath)
Dorset Police (Bournemouth)
Devon & Cornwall Police (Bath)
Dyfed Fire Brigade HQ (Bath)
Dyfed Police Authority (Bath)
Dyfed Powys Police (Bath)
Fire Service Training College (Bath)
Gwent Fire & Rescue Service (Bath)
London Fire Service (London S)
Maidstone Prison (London S)
Metropolitan Police (London S)
Mid Glamorgan Fire & Rescue (Bath)
N.Ireland Fire Authority (Belfast)
POA/Prison Officers Association (Refer to SLI)
Prison Service (Refer to SLI)
South Glamorgan Fire & Rescue (Bath)
Thames Valley Police (Bournemouth)
West Glamorgan Fire & Rescue (Bath)
Page 155
<PAGE>
SIGNED by )
for and on behalf of )
MARSH & McLENNAN )
COMPANIES, INC. )
in the presence of: )
SIGNED by )
for and on behalf of )
THE BOWRING GROUP )
LIMITED in the presence of: )
SIGNED by )
for and on behalf of )
LIVERPOOL VICTORIA )
FRIENDLY SOCIETY )
in the presence of: )
SIGNED by )
for and on behalf of )
BALTIMORE LIMITED )
in the presence of: )
Page 156
<PAGE>
_____ 1996
MARSH & McLENNAN COMPANIES, INC.
THE BOWRING GROUP LIMITED
LIVERPOOL VICTORIA FRIENDLY SOCIETY LIMITED
BALTIMORE LIMITED
================================================================================
DEED OF AMENDMENT
================================================================================
FRESHFIELDS
<PAGE>
THIS DEED dated __ June 1996
BETWEEN:
MARSH & McLENNAN COMPANIES, INC. whose principal business office
is at 1166 Avenue of the Americas, New York, New York 10036 (MMC);
THE BOWRING GROUP LIMITED whose registered office is at The Bowring Building,
Tower Place, London EC3P 3BE (registered no. 3053550) (TBG);
LIVERPOOL VICTORIA FRIENDLY SOCIETY LIMITED (registered no. 61 Coll) whose
registered office is at Victoria House, Southampton Row, London WC1B 4DB (LVFS);
and
BALTIMORE LIMITED whose registered office is at 21 Holborn Viaduct, London EC1A
2DY (registered number 3137698) (Baltimore)
WHEREAS:-
(A) By an Agreement dated 7 February 1996 (the Agreement) MMC, LVFS and
Baltimore granted various put and call options for the A Option Shares and the B
Option Shares (as defined in the Agreement).
(B) MMC, TBG, LVFS and Baltimore have agreed to confirm that Schedule 7 of the
Agreement is agreed in the form as drafted in the Agreement, to amend Schedule
15 of the Agreement and to delete Clause 5.2(g) of the Agreement.
NOW THIS DEED WITNESSES
1. Unless the context or subject matter otherwise requires expressions defined
in the Agreement shall have the same meanings in this Deed.
2. Clause 5.2 of the Agreement shall be amended as follows:
2.1 By the deletion in Clause 5.2(g) of the words:
"an unqualified letter of resignation from the auditors to each Group
Company in the agreed form and in the form prescribed by Section 394(1) of
the Companies Act 1985, accompanied by a written confirmation that such
auditors have no claims for unpaid fees or expenses;"
2.2 By the redesignation of paragraphs (h) to (k) inclusive of Clause 5.2 as
paragraphs (g) to (j).
3. In Clause 7 of the Agreement, the following amendments shall be made:
3.1 The following new Clause 7.1(b) (iv) shall be inserted:
"(iv) it seeks to join the panel of financial life and planning advisors
which offer products and services to the employees of British
Telecommunications Plc (the Panel) in the following circumstances:
(a) if FL&FP is removed from the Panel and neither LVFS nor any Group
Company, which is a bona fide financial life and planning advisor, are
allowed to seek appointment to the Panel in its place; or
(b) if FL&FP remains on the Panel but one or more other members of the
Panel are removed from the Panel and neither LVFS nor any Group
Company, which is a bona fide financial life and planning advisor, are
allowed to seek appointment in its or their place; or
(c) if all members of the Panel (including FL&FP) are removed from the
Panel and British Telecommunications Plc seeks a new panel in a
<PAGE>
process in which neither FL&FP, LVFS nor any Group Company, which is a
bona fide life and financial planning advisor, are allowed to
participate."
4. In Schedule 7 of the Agreement the list of Affinity Groups shall remain as
drafted in Schedule 7 of the Agreement.
5. In Schedule 15 of the Agreement the list of Primary Customers shall be
deleted and there shall be inserted in Schedule 15 the following revised list:
SCHEDULE 15
The Primary Customers
1. CIVIL SERVICE DEPTS/EXECUTIVE AGENCIES/ QUANGOS
Atomic Weapons Est.
Benefits Agency
Civil Service Motoring Assoc.
Contributions Agency
Customs & Excise
Dept. of Trade & Industry
Dept. of Health & Social Security
Driving Standards Agency
Employment Service Agency
Forestry Commission
GCHQ
Home Office
Inland Revenue
Land Registry
Lord Chancellor's Dept.
Met. Office
Ministry of Agriculture
Ministry of Defence (excluding servicemen and women)
Ordnance Survey
Valuation Office Agency
Welsh Office
2. PUBLIC BODIES, PRIVATISED BODIES AND UTILITIES
British Telecommunications (financial life and planning products/services
only)
Post Office (incl. Royal Mail)
UK Atomic Energy Authority (financial life and planning
products/services only)
3. REGIONAL UTILITIES
Northern Electricity
Bristol Water
4. EDUCATION - SCHOOLS
Association of Head Teachers, Scotland
Association of Teachers & Lecturers (ATL)
Page 2
<PAGE>
Headteachers Association of Scotland (HAS)
NAHT
NAEIAC
NASUWT
National Union of Teachers (NUT)
Secondary Heads Association (SHA)
5. EDUCATION - UNION/ASSOCIATION
Association of University Teachers (AUT)
National Association of Teachers in Further and Higher Education
(NATFHE)
6. NATIONAL ASSOCIATIONS
Caravan Club
National Trust
National Trust for Scotland (financial life and planning products/services
only)
UNISON
7. PRIVATE SECTOR
Vickers PLC (not including Vickers Shipbuilding and Engineering
Limited)
British Shoe Corporation
8. LOCAL AUTHORITIES (a)
County/Regional Councils
Derbyshire CC
Leicester CC
Lincs CC
Mid Glamorgan CC
Somerset CC
Surrey CC
Staffordshire CC
West Glamorgan CC
9. LOCAL AUTHORITIES (b)
City/Town Councils
Bradford City Council
Calderdale Council
6. Save as amended by this Deed, the provisions of the Agreement shall remain in
full force and effect.
Page 3
<PAGE>
IN WITNESS WHEREOF this Deed has been duly entered into the day and year first
before written.
EXECUTED as a DEED )
by MARSH & McLENNAN )
COMPANIES, INC. )
acting by: )
Director
Director/Secretary
EXECUTED as a DEED )
by THE BOWRING GROUP )
LIMITED acting by: )
Director
Director/Secretary
EXECUTED as a DEED )
by LIVERPOOL VICTORIA )
FRIENDLY SOCIETY LIMITED )
acting by: )
Director
Director/Secretary
EXECUTED as a DEED )
by BALTIMORE LIMITED )
acting by: )
Director
Director/Secretary
Page 4
