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
December 1, 1998
(Date of earliest event reported)
The American Education Corporation
(Exact name of registrant as specified in its charter)
Colorado
(State or other jurisdiction of incorporation)
0-11078
Commission File Number
84-0838184
IRS Employer Identification No.
7506 North Broadway Extension, Suite 505, Oklahoma City,
Oklahoma
(Address of principal executive office)
73116
(Zip Code)
(405) 840-6031
Registrant's telephone number, including area code
Item 1. Changes in Control of Registrant
Not Applicable
Item 2. Acquisition or Disposition of Assets
On December 1, 1998, The American Education Corporation, a
Colorado corporation, (the "Company"), issued the press release
attached hereto as Exhibit 99.1 announcing that it had acquired
the business of Learning Pathways, Limited ("LP"), an entity
organized under the laws of the United Kingdom, pursuant to the
terms of an Agreement and (the " Agreement"), dated as of
November 25, 1998 between the Company and Geoffrey and Teresa
Glossop ( the "Sellers" ).
Pursuant to the Agreement the Company paid the Sellers 510,030
shares of common stock, par value $0.025 per share, of the
Company, and cash of U.S.$165,760. The Agreement further
provides that if LP meets or exceeds certain financial goals set
forth in the Agreement, then the Company will pay the Sellers
additional shares of the Company's common stock. In connection
with the Agreement, the Company also granted the Sellers piggy-
back registration rights for the shares of the Company stock
issued to them.
The funds used to pay the cash portion of the purchase price
were obtained from cash on hand. The purchase price was
determined based upon an evaluation of the business of LP and
the results of arm's length negotiations between representatives
of the Company and LP. The Company expects to continue to
operate LP's business in the United Kingdom. The business of LP
principally is to distribute the World Book Encyclopedia print
and multimedia product line in the United Kingdom.
The information set forth above is qualified in its entirety by
reference to the Agreement, a copy of which is attached hereto
as an Exhibit and is incorporated herein by reference.
Item 3. Bankruptcy or Receivership
Not Applicable
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable
Item 5. Other Events
Not Applicable
Item 6. Resignations of Registrant's Directors
Not Applicable
Item 7. Exhibits
(a) The Financial Statements required by Item 7 are not included
in this Current Report, but will be filed not later than sixty
(60) days after the date of this Current Report.
(b) Exhibits
2.1 Agreement
99.1 Press Release
Item 8. Change in Fiscal Year
Not Applicable
Item 9. Sales of Equity Securities Pursuant to Regulation S.
See Item 2 above.
Signatures
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
The American Education Corporation
Date: December 15, 1998,
By: /s/Jeffrey E. Butler, Sr.
Chairman of the Board of Directors
President and Chief Executive Officer
Exhibit 2.1 Agreement
DATED NOVEMBER 25, 1998
(1) AMERICAN EDUCATION CORPORATION
(2) GEOFFREY GLOSSOP
(3) TERESA GLOSSOP
and
(4) Field House No.1 Trust
(5) Field House No. 2 Trust
AGREEMENT
for the sale and purchase of
the entire issued share capital of
Learning Pathways Limited
25 November 1998
INDEX
Clause Heading
1 Interpretation
2 Sale and Purchase
3 Consideration
4 Completion
5 Warranties
6 Restrictive Covenants
7 General
8 Notices
Schedule 1 The Company
Schedule 2 The Sellers
Schedule 3 Warranties
THIS AGREEMENT is made the 25th of November, 1998
BETWEEN:
(1) THE PERSONS whose names and addresses are set out in
Schedule 2 ("the Sellers")
(2) THE AMERICAN EDUCATION CORPORATION, a Colorado corporation
having its principal place of business at 7506 North Broadway,
Oklahoma City, OK 73116-9018, USA ("the Buyer")
(3) GEOFFREY GLOSSOP of Field House, 6 Hayley Croft, Duffield,
Derbyshire DE56 4HJ
IT IS AGREED:
1. Interpretation
1.1 In this Agreement unless the context otherwise requires:-
"the Accounts" - means the audited balance sheet of the
Company as at the Last Accounts Date, the audited profit and
loss account of the Company for the financial period ended on
the Last Accounts Date, and the auditor's and the
directors' reports and notes thereon
"the Accounts Date" - means 31 December 1997
"Associate" - means any person, firm or company which is a
connected person (as defined in Section 839 ICTA) of a
Seller
"the Buyer's Group" - means the Buyer and any subsidiary, fellow
subsidiary, holding company or Associate of the Buyer
"the Buyer's Solicitors" - means Clyde & Co of 51 Eastcheap,
London EC3M 1JP
"CA 1985" - means the Companies Act 1985
"the Company" - means Learning Pathways Limited, brief
details of which are set out in Schedule 1
"Completion" - means completion of the sale and purchase of
the Shares in accordance with clause 4
"the Consideration" - means the consideration set out in clause
3
"Consideration Stock" - means 510,030 fully paid shares of the
restricted common stock of the Buyer
"Covenantors" - means Geoffrey Glossop and Teresa Glossop
"Directors" - means the directors of the Company
immediately before the execution of this Agreement
"the Disclosure Letter" - means the letter of today's date from
the Sellers' to the Buyer's
"the Employees" - means the employees of the Company
identified by the Disclosure Letter
"Environmental Laws" - means all regulations, directions and
other environmental protection, occupational, health
and safety or similar laws, regulations, restrictions,
licences, rules, and European Community directives as in force
in the United Kingdom, including but not limited to the
Environmental Protection Act 1990, the Water Act 1989, the
Control of Substances Hazardous to Health Regulations, the
Control of Pollution Act 1974 and the Radioactive
Substances Act 1960
"Event" - includes (without limitation) the death of any
person, any change in the residence of any person for the
purposes of Taxation, any payment, transaction, action,
omission or occurrence of whatever nature and a failure to
make sufficient dividend payments to avoid a shortfall
apportionment or deemed distribution of income, and
references to an Event occurring on or before Completion
shall include the combined result of two or more
Events the first of which shall have taken place (or shall
be deemed to have taken place) or the commencement of which
shall have occurred (or shall be deemed to have occurred)
on or before Completion, and shall also include Completion
"FA" - means Finance Act
"Holding Company" - means a holding company as defined in
Section 736 CA 1985
"ICTA" - means the Income and Corporation Taxes Act
1988
"Intellectual Property" - means patents, trade marks, service
marks, designs, applications and rights to apply for
any of the foregoing, copyright (including all copyright
in any drawings, plans, specifications, manuals, designs, and
computer software) inventions, trade secrets, financial
information, know how and other confidential information, and
business names and any similar rights, whether registerable or
registered or not, in any part of the world, in each case
owned by the Company for the
purpose of its business
"Liabilities" - means as at any relevant date, all actual or
contingent liabilities, whether liquidated, quantified or
unliquidated, arising out of any Event occurring before,
or from circumstances subsisting, at that date
"Management Accounts" - means the profit and loss account the
period from the Accounts Date to 30 September 1998 and the
balance sheet as at 30 September 1998
"the 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 and the
Planning (Consequential Provisions) Act 1990
"restricted common stock" - means the shares of common stock of
The American Education Corporation to be issued to Glossop in
connection with this transaction, which shares of common stock
shall contain restrictions of transfer as determined by The
American Education Corporation to be necessary to comply with
applicable securities Laws.
"the Sellers' Solicitors" - means Gadsby Coxon and Copestake
of Sterne House, Lodge Lane, Derby, Derbyshire, DE1 3WD
"the Shares" - means the whole of the issued share capital of
the Company
"SSAP" - means either a Statement of Standard Accounting
Practice published by the Institute of Chartered Accountants
in England and Wales or a Financial Reporting Standard as
issued by the Accounting Standards Board
"Subsidiary" - means a subsidiary as defined in Section 736
CA 1985
"Supplemental Agreement" - means any deed or document to be
entered into pursuant to this Agreement
"TCGA" - means the Taxation of Chargeable Gains Act 1992
"Tax Covenant" - means a deed relating to Taxation in the
agreed form
"Taxation" - means any and all forms of taxes, levies,
imposts, contributions, duties and changes (including any
relevant fine, penalty, surcharge or interest) in all cases
in the nature of tax on corresponding to tax and all
withholdings or deductions in respect thereof; of whatever
nature and whenever imposed, (but excluding all forms of
water, business and local government rates) imposed or levied
by any Tax Authority acting as such whether directly or
primarily chargeable against, recoverable from as
attributable to the Company for which the Company may have a
liability.
"Taxation Statutes" - means statutes (and all regulations and
arrangements whatsoever made thereunder) whether of the
United Kingdom or elsewhere, and whether enacted before or
after the date of this Agreement, providing for or imposing any
Taxation
"the Warranties" - means the warranties representations and
undertakings set out in Schedule 3.
"the Warrantors" - means the Sellers and Geoffrey Glossop
1.2 The Schedules form part of this Agreement and take effect
as if set out in this Agreement and references to this
Agreement include the Schedules.
1.3 References to a statute or statutory provision include all
subordinate legislation made pursuant to it, each in force on
the date of this Agreement.
1.4 Unless the context otherwise requires, references to the
singular include the plural and vice versa, references to any
gender include all genders, and references to "person"
include a body corporate, a natural person, a firm, an
unincorporated association, a business, and a partnership.
1.5 Clause headings are for information only and shall not
affect the construction of this Agreement.
1.6 References to "in the agreed form" mean in the form agreed
in writing between the Sellers and the Buyer and for the purpose
of identification initialled by the Sellers' Solicitors and the
Buyer's Solicitors or the parties.
2. Sale and Purchase
2.1 With effect from October 1, 1998, each of the Sellers shall
sell with full title guarantee and the Buyer shall buy the
Shares free from all claims, liens, charges and encumbrances,
and together with all benefits and rights attaching to the
Shares, including all dividends declared, and distributions made
or paid, on or after the date of this Agreement.
2.2 Each of the Sellers hereby waives any pre-emption rights he
may have in relation to any of the Shares under the Articles of
Association of the Company or otherwise.
3. Consideration
3.1 The consideration for the Shares shall be the sum of
US$828,799 which shall be satisfied by the issue to the Sellers
of the Consideration Stock together with payment of US$
165,760; the Consideration shall be apportioned between the
Sellers as is set out in column (4) of Schedule 2.
3.2 If the Company meets or exceeds the financial goals set out
below then the Buyer shall issue to the Sellers additional
restricted common stock of the Buyer as set out below.
Year To
31st December 1999
Financial Target
Sales $ 1,600,000
Pre-tax income $224,000 or 14% of sales
Additional Shares
63,754 shares if 100% of target is met.
If pre-tax is 10%, 50% of shares awarded.
If pre-tax is 11%, 62.5% of shares awarded.
If pre-tax is 12%, 75% of shares awarded.
If pre-tax is 13%, 87.5% of shares awarded.
31st December 2000
Sales $ 2,500,000
Pre-tax income $500,000 or 20% of sales
Additional Shares
63,754 shares if 100% of target is met.
If pre-tax is 10%, 50% of shares awarded.
If pre-tax is 12%, 60% of shares awarded.
If pre-tax is 14%, 70% of shares awarded.
If pre-tax is 16%, 80% of shares awarded.
If pre-tax is 18%, 90% of shares awarded.
Compliance with the targets set out above shall be determined by
reference to the annual accounts of the Company for the relevant
year. If in either of the years set out above the financial
target is met, then the Buyer shall issue fully paid the
relevant number of shares to the Sellers pro rata to their
respective shareholdings in the Company at the date of this
Agreement, one month after the date on which the relevant
audited accounts of the Company are filed at Companies House.
4. Completion
4.1 Completion shall take place at the offices of the Buyer's
Solicitors immediately after the signing of this Agreement when
the matters set out in sub-clauses 4.2 to 4.6 shall be
carried out.
4.2 The Sellers will deliver to the Buyer's Solicitors:-
(a) duly executed transfers of the Shares in favour of the
Buyer or as it directs;
(b) the certificates for the Shares;
(c) the Tax Covenant duly executed by the Sellers and the
Company;
(d) the resignation from office of each Director and secretary
of the Company (except those whom the Buyer has notified to the
Sellers in writing prior to the date of this Agreement that it
wishes to continue in office) with a written acknowledgement
under seal from each of them, in agreed form, that he has no
outstanding claim against the Company for loss of office;
(e) the resignation of the Company's auditors confirming that
they have no outstanding claims of any kind against the Company
and containing a statement complying with Section 394(1) CA
1985; and
(f) service agreements in the agreed form between the Company
and Mr. Glossop duly executed by Mr. Glossop.
4.3 The Sellers will procure delivery of the following to the
Buyer or as it may direct:-
(a) the certificate of incorporation, statutory books (duly
made up to Completion) of the Company;
(b) the title deeds relating to the Property;
(c) all books of account and documents of record and all other
documents in the possession or control of the Sellers in
connection with the Company, all complete and up to date;
(d) bank statements of all bank accounts of the Company to a
date not more than two days before Completion, and
reconciliation statements in respect of each such account up
to Completion; and
(e) releases in the form required by the Buyer of all mortgages
or charges affecting the Company, except as agreed in writing
before execution of this Agreement.
4.4 Each of the Sellers will and will procure that his
Associates will, repay all monies owing by them to the Company.
4.5 The Sellers will hold a Board Meeting of the Company at
which the Directors will:-
(a) register the transfers of the Shares to the Buyer (subject
to stamping);
(b) approve and authorise for execution service agreements in
the agreed form relating to the individuals referred to in sub-
clause 4.2(f);
(c) replace all current mandates to bankers with new mandates
required by the Buyer;
(d) appoint such persons as the Buyer shall nominate as
directors and/or secretary; and
(e) accept the resignations referred to in sub-clause 4.2(d).
4.6 The Buyer will:-
(a) deliver to the Sellers' Solicitors by way of telegraphic
transfer the sum of US$82,880
(b) deliver to the Sellers a counterpart of the Tax Covenant
duly executed by the Buyer;
(c) deliver to Mr. Glossop counterparts of the service
agreements duly executed by the Company; and
(d) request that the stock transfer agent issue the relevant
number of shares of Consideration Stock.
4.7 The Buyer will not be obliged to complete the purchase of
any of the Shares unless the Sellers comply with all their
obligations under sub-clauses 4.2 to 4.5.
4.8 If the Sellers do not comply with any of their obligations
under sub-clauses 4.2 to 4.5 on the date agreed for Completion,
or any subsequent date to which the Buyer agrees to defer
Completion, the Buyer may rescind this Agreement and shall
thereupon procure the immediate reversal of matters undertaken
in sub-clause 4.5 , and the Sellers will reimburse to the Buyer
on demand all costs and expenses incurred by the Buyer in the
negotiation of this Agreement and in any investigation of the
Company before this Agreement was signed.
4.9 The Sellers undertake (for themselves and any nominees)
from Completion that so long as they remain the registered
holder of any of the Shares they will:-
(a) not represent themselves as the beneficial owners of any of
the Shares;
(b) exercise all powers, rights and privileges vested in the
registered holder of the Shares only in accordance with the
written directions of the Buyer; and
(c) hold the Shares and any dividends or other distributions of
profits or assets in respect thereof in trust for the Buyer.
4.10 Subject to Completion having taken place, the Buyer shall
pay the sum of US$82,880 on 28 February 1999.
5. Warranties
5.1 The Warrantors, jointly and severally, to the extent and
subject as set out in this clause 5, warrant, represent and
undertake to the Buyer that the Warranties are true and accurate
in all respects.
5.2 Each of the Warranties is given subject to the matters
disclosed in the Disclosure Letter.
5.3 Each of the Warranties is a separate and independent
Warranty and no Warranty or clause in this Agreement restricts
or limits the extent or application of any other Warranty or
other clause.
5.4 The Buyer's rights and remedies in respect of any breach of
the Warranties or under any other provision in this Agreement
shall not be regarded as modified or varied by Completion, by
any investigation made by or on behalf of the Buyer into the
affairs of the Company, by the Buyer's rescinding or failing to
rescind this Agreement, or by its failure to exercise or delay
in exercising any right or remedy available to it.
5.5 The Warrantors undertake to the Buyer (for itself and as
trustee for the Company) to indemnify first the Company against
any diminution in the value of its assets, or any increase in
its liabilities, and/or any payment necessarily made or required
to be made by it as a result of or in any breach of any of the
Warranties, or required to put it in the position in which it
would have been had there been no such breach of the Warranties,
and if after such indemnification there should still be any
diminution in the value of the Shares in the hands of the Buyer,
then secondly the Buyer in that respect and thirdly in both
cases to the extent not already taken into account, the Buyer
and the Company against all reasonable costs and expenses (other
than VAT thereon to the extent not recoverable) incurred in
connection therewith. This indemnity shall be without prejudice
to any other rights and remedies of the Buyer in relation to the
breach.
5.6 The Warrantors warrant and represent in relation to any
Warranty which refers to the knowledge, information, belief
and/or awareness of the Warrantors or any similar expression
that the Warrantors have made due and careful enquiry into the
subject matter of that Warranty.
5.7 Notwithstanding anything to the contrary contained in
clause 5 the Warranties shall be qualified by the following
provisions and in the event of any inconsistency between such
and the rest of the provisions of clause 5 the following
provisions shall prevail.
5.8 The Warrantors shall not be liable in respect of any claim
under the Warranties to the extent that the matter or matters
giving rise to such claim are within the actual knowledge of the
Buyer its agents or advisers.
5.9 The liability of the Warrantors in respect of any breach of
the Warranties shall be limited as follows:
(a) The maximum liability of the Warrantors in respect of all
and any claims under the Warranties shall in no event exceed the
amount of the Consideration due and payable to him as set out in
Schedule 2.
(b) The Warrantors shall not be liable in respect of any claim
under the Warranties where the amount of such claim does not
exceed pound sterling 2,500.
(c) The Warrantors shall not be liable in respect of all and
any claims made by the Buyer under the Warranties unless and
until the aggregate cumulative liability of the Warrantors in
respect of all and any such claims (ignoring for these purposes
all and any claims in respect of which the Warrantors do not
have any liability pursuant to the provisions of 5.9(b)) exceeds
pound sterling10,000 in which event the Warrantors shall be liable for such
liability.
5.10 The Warrantors shall not be liable in respect of any claim
under the Warranties unless it shall have been made on or before
31 March 2000.
5.11 No claim under the Warranties shall be deemed to have been
made unless notice of such claim was made in writing to the
Warrantors specifying in reasonable detail the event of
default to which the claim relates and the nature of the breach
and the amount claimed.
5.12 Any claim in respect of which notice shall have been given
in accordance with clause 5.11 above shall be deemed to have
been irrevocably withdrawn and lapsed (not having been
previously satisfied settled or withdrawn) if proceedings in
respect of such claim have not been issued and served on the
Warrantors not later than the expiry of the period of 12 months
after the date of such notice.
5.13 Where the Buyer's Group is or is likely to be entitled to
recover from some other person any sum in respect of any matter
giving rise to a claim for breach of the Warranties then the
Buyer shall procure that reasonable steps are taken to enforce
such recovery and if any sum is so recovered then either the
amount payable by the Warrantors in respect of that claim shall
be reduced by an amount equal to the sum so recovered (less the
reasonable costs and expenses of recovering it and any taxation
payable by the Buyer's Group as a result of its receipt) or (if
an amount shall already have been paid by any of the Warrantors
in respect of that claim) there shall be repaid to the
Warrantors an amount equal to the amount so recovered (less the
reasonable costs and expenses of its recovery and any taxation
payable by the Buyer's Group as a result of its receipt) or (if
less) the amount of such payment.
5.14 Without prejudice to the generality of clause 5.13 above
the provisions of that clause shall apply where any of the
Buyer's Group is entitled to recover from its insurers (in
respect of insurance effected on or before the Completion Date)
any sum in respect of any matter giving rise to a claim under
the Warranties.
5.15 The Warrantors shall have no liability (or such liability
shall be reduced) in respect of any claim for breach of any of
the Warranties:
(a) if and to the extent that provision or reserve for or in
respect of the liability or other matter giving rise to such
claim has been made in the Accounts or Management Accounts;
(b) if and to the extent that such claim is attributable to any
voluntary act or omission of or transaction or arrangement
carried out by any of the Buyer's Group after Completion
otherwise than in the ordinary course of business;
(c) if and to the extent that such claim would not have arisen
or would have been reduced or eliminated but for the failure or
omission on the part of any of the Buyer's Group to make any
claim election surrender or disclaimer or give notice or consent
to do any other thing under the provisions of any enactment or
regulation relating to Taxation after Completion the making
giving or doing of which was taken into account in computing the
provision for Taxation in the Accounts;
(d) if and to the extent that such claim relates to a liability
for Taxation which would not have arisen but for any winding up
or cessation after the Completion Date of any trade or business
carried on by any of the Buyer's Group;
(e) if and to the extent such claim would not have arisen but
for a change of accounting policy or practice of any of the
Buyer's Group after the Completion.
5.16 The amount of any claim for breach of Warranties shall
take into account the amount of any relief from Taxation arising
by virtue of the loss or damage in respect of which the claim
was made.
5.17 Nothing in this clause shall derogate from the Buyer's
obligation to mitigate any loss which it suffers in consequence
of a breach of the Warranties.
5.18 If in respect of any claim under the Warranties the
liability of the Warrantors or any of the Buyer's Group is
contingent only then the Warrantors shall not be under any
obligation to make any payment to the Buyer (or the Company)
until such time as the contingent liability ceases to be
contingent and becomes actual provided that the provisions of
clause 5.12 shall not apply to such claim whilst such liability
remains contingent.
5.19 Any amount payable by the Warrantor in satisfaction of any
claim made under the Warranties shall be treated as a reduction
by that amount of the Consideration.
5.20 The Buyer shall upon it or any of the Buyer's Group
becoming aware of any matter or event ("the Matter") which might
give rise to a claim under the Warranties immediately give
notice in writing to the Warrantors of the Matter.
5.21 The Buyer shall provide and shall procure that each of the
Buyer's Group will provide to the Warrantors and the Warrantors'
professional advisers reasonable access to premises and
personnel and to any relevant assets documents and records
within their power possession or control for the purpose of
investigating the Matter and shall allow the Warrantors and its
advisers to take copies of any relevant documents or records.
5.22 The Buyer shall not and shall procure that none of the
Buyer's Group will admit liability in respect of or compromise
or settle the Matter without the prior written consent of the
Warrantors (such consent not to be unreasonably withheld or
delayed).
5.23 The Warranties are given on the basis of the Company
continuing to carry on business after the Completion Date as a
going concern.
5.24 In the event of any claim for breach of the Warranties
being established, the Warrantors shall be entitled to set off
against the claim the amount by which (after adjustment where
appropriate for Taxation in respect of revenue items):
(a) the asset values used in the Management Accounts are
understated;
(b) the liabilities taken into account in the Management
Accounts are overstated.
5.25 The Buyer warrants to and undertakes with the Warrantors
that:
(a) it has the requisite power and authority to enter into and
perform this agreement;
(b) the execution and delivery of and the performance by it of
its obligations under this agreement will not:
(i) result in a breach of any provision of its memorandum or
articles of association
(ii) result in a breach of or constitute a default under any
agreement or instrument of which it is a party or by which it is
bound
(iii) result in a breach of any applicable order judgement or
decree of any court or governmental authority.
6. Restrictive Covenants
6.1 In this clause 6:-
(a) "the Business" - means the distribution of educational
software products
(b) "the Prohibited Area" - means (i) England, Wales, Scotland,
Northern Ireland, Eire, Channel Isles and the Isle of Man, and
(ii) any other country in the world in which the Company has
supplied goods or services within the two years preceding
Completion
6.2 In further consideration of the sale and purchase effected
by this Agreement and in order to protect the goodwill of the
Company, each of the Covenantors hereby undertakes with
the Buyer as follows:-
(a) he shall not at any time hereafter divulge or communicate
to any person for his own or any other person's benefit or to
the detriment or possible detriment of the Company or the Buyer,
any of the trade secrets or other confidential information
of the Company or the Business, or of any client, customer or
supplier, which has or may come to his knowledge provided that
the whole of this restriction shall not apply to information
which either has become public knowledge (other than through the
Buyer and Covenantor or this sub-clause) or to the extent
required by law;
(b) if he has obtained trade secrets or other confidential
information belonging to any third party under an agreement
which contained restrictions on disclosure he will not at any
time infringe such restrictions;
(c) he will not either directly or indirectly as a director,
employee, partner or shareholder within one year after
Completion carry on, or be engaged, concerned or interested in
carrying on the Business within the Prohibited Area in
competition with the Company;
(d) in connection with any business competing or likely to
compete with the Business, he will not use any business name,
trade mark or logo owned by the Company within the two years
preceding Completion, or any confusingly similar business name,
trade mark or logo;
(e) he will not within one year after Completion, provide any
advice, technical or otherwise, to any person carrying on
business in the Prohibited Area in competition with, the Current
Business or the Company;
(f) he will not within one year after Completion solicit the
customers of, interfere with, or endeavour to entice away from the
Company, any person who at any time during the two years
immediately preceding Completion was a customer of the
Company in relation to goods sold to that person by the Company;
(g) he will not within one year after Completion employ, seek
to employ, interfere with, or endeavor to entice away from the
Company, any person employed by the Company at any time during
the last two years immediately preceding Completion; and
(h) he will not do any of the above-mentioned things directly
or indirectly, with or for or on behalf of any other person.
6.3 Nothing in this clause shall preclude a Covenantor from
owning (for investment purposes only) not more than 5% of the
equity share capital of any company listed on The Stock Exchange
or a recognised investment exchange (as that term is defined in
Section 209 Financial Services Act 1986).
6.4 The parties confirm that they consider the restrictions
contained in this clause 6 to be reasonable in all respects, but
if any such restriction is held to be invalid or ineffective,
but would not be so held if some part of it were deleted, or
some modification were made to its terms, the parties agree that
such restriction shall apply with such deletion or
modification as may be necessary to make it valid and effective.
6.5 The provisions of sub-clauses 6.2(a) to (h) are separate
and several undertakings and shall be enforceable accordingly.
7. General
7.1 This Agreement shall enure for the benefit of the
successors in title and assigns of each party: but no party may
transfer its obligations hereunder. The Buyer may assign all or
any of its rights under this Agreement or any Supplemental
Agreement to any other member for the time being of the Buyer's
Group.
7.2 The Warrantors undertake that they and any necessary third
party shall execute and perform all such further acts, deeds or
assurances as may be required to vest the Shares in the Buyer
and otherwise to fulfil the provisions of this Agreement.
7.3 Insofar as any provisions of this Agreement are not
performed at Completion they will remain in full force and
effect notwithstanding Completion.
7.4 The Buyer may release or compromise the liability of, or
grant any time, forbearance or indulgence to, any Warrantor
under this Agreement and any Supplemental Agreement without
modifying, affecting or prejudicing its rights against any other
Warrantor.
7.5 The Buyer's exercise of or failure to exercise, any right
or remedy will not constitute a waiver of that or any others any
other right or remedy.
7.6 If any term or provision of this Agreement or any
Supplemental Agreement is held to be wholly or partly illegal or
unenforceable at law, that term or provision shall to that
extent be deemed not to form part of this Agreement or that
Supplemental Agreement but the enforceability of the remainder
of this Agreement or that Supplemental Agreement shall not be
affected.
7.7 None of the Sellers will make any announcement in
connection with this Agreement without the Buyer's written
approval, unless required by law or the Stock Exchange, or
any other recognised investment exchange (as that term is
defined in Section 209 Financial Services Act 1986) or other
relevant regulatory authority and then only after prior
consultation with the Buyer.
7.8 If any provision of this Agreement (or of any agreement or
arrangement of which this Agreement forms part) renders this
Agreement, or the said agreement or arrangement, liable to
registration under the Restrictive Trade Practices Act 1976,
that provision will not take effect until the day after
particulars of this Agreement, or the said agreement or
arrangement, have been duly furnished to the Director General of
Fair Trading pursuant to Section 24 of the said Act.
7.9 Each party will bear all professional or other fees and
expenses incurred by it in connection with the negotiation and
completion of this Agreement, and all acts and Events
contemplated by it, save as provided in sub-clause 4.8.
7.10 Time shall be of the essence of this agreement, both as
regards the dates and periods specifically mentioned, and as to
any substituted dates and periods agreed in writing by the
parties.
7.11 This Agreement and all Supplemental Agreements together
constitute the entire agreement between the parties relating to
the sale and purchase of the Shares and no variation of its or
their terms will have effect unless it is in writing and signed
by each party.
7.12 This Agreement shall be governed by and construed in
accordance with English Law and the parties submit to the
jurisdiction of the English Courts.
8. Notices
8.1 Any notice to be given under this Agreement or any
Supplemental Agreements shall be in writing, and may be
delivered by hand, or sent by airmail post or facsimile letter,
addressed to the party to be served (in the case of an
individual) at the address herein stated and (in the case of a
company) at its principal place of business for the time being
or (in either case) to such other address as the addressee may
from time to time have notified for the purpose of this clause.
8.2 Notices delivered by hand shall be deemed to have been
served at the time of actual delivery. Notices sent by post
shall be deemed to have been served at the expiry of
forty-eight hours after posting. Notices sent by telex or by
facsimile shall be deemed to have been served three hours after
transmission if transmitted before 2 p.m. on a business day, and
otherwise by 11 a.m. on the next business day.
8.3 In proving service by post it shall be sufficient to prove
that the envelope containing the notice was properly addressed,
and posted.
AS WITNESS the hands of the parties or their duly authorised
representatives the day and year first before written.
Signed by /s/GEOFFREY GLOSSOP
Signed by /s/TERESA GLOSSOP
Signed by /s/GEOFFREY GLOSSOP
On behalf of FIELD HOUSE No. 1 TRUST
Signed by /s/GEOFFREY GLOSSOP
On behalf of FIELD HOUSE No. 2 TRUST
Signed by /s/JEFFREY BUTLER
for and on behalf of
the AMERICAN EDUCATION
CORPORATION
SCHEDULE 1
Details of the Company and the Subsidiaries
Part 1: The Company
Company Number: 3300194
Date and Place of incorporation: 9th January 1997
Share Capital:
Authorised Issued and Allotted
pound sterling 500,000 pound sterling 50,000
Issued Shares held by:
Number and
Shareholder Class of Shares Beneficial Owner
Teresa Glossop 625 Ordinary pound sterling 1
Field House No. 1 Trust 9,375 Ordinary
Field House No. 2 Trust 40,000 Ordinary pound sterling 1
Registered Office:
16 Queen Street, Ilkeston, Derbyshire, DE7 5GT
Directors:
Geoffrey Glossop
Teresa Glossop
Secretary:
Guy Richard Glossop
Accounting Reference Date: 31st December
Auditors:
Gregory Priestly & Stewart
SCHEDULE 2
The Sellers
(1) (2) (3) (4)
Full Name Registered Number of Consideration
Address Ordinary Shares stock and
to be sold Cash
(1)Teresa Glossop Field House 625 US$10,360
6 Hayley Croft
Duffield
Derbyshire
DE56 4HJ
(2)Field House Field House 9,375 US$155,400
No 1 Trust 6 Hayley Croft
Duffield
Derbyshire
DE56 4HJ
(3)Field House Field House 40,000 510,030
No 2 Trust 6 Hayley Croft shares
Duffield AEC Common
Derbyshire Stock
DE56 4HJ (Value
$663,039)
SCHEDULE 3
Warranties by the Warrantors
1. The Shares
1.1 The Warrantors are the beneficial owners and registered
holders of all the Shares and have full power and authority to
sell and transfer the same to the Buyer on the terms of this
Agreement without the consent of any third party.
1.2 The Shares are fully paid or are credited as fully paid and
constitute the whole of the issued and allotted share capital of
the Company.
1.3 There is in force no agreement or arrangement which
provides (conditionally or otherwise) for the issue, allotment
or transfer of any share or loan capital of the Company
(including any option or right of pre-emption or conversion).
1.4 None of the Shares was, or represents assets which were the
subject of a transfer at an undervalue (within the meaning of
the Insolvency Act 1986 Section 238 or Section 239) within the
past five years.
1.5 None of the Shares has been the subject of a transfer:
(a) for the purpose of putting assets beyond the reach of any
person who may at some time make a claim against the transferor;
or
(b) for the purpose of otherwise prejudicing the interests of
such a person in relation to any claim he might make.
2. The Warrantors' Capacity
2.1 The Warrantors have full power and authority to enter into
and perform this Agreement and the documents to be delivered by
them at Completion, without the consent of any third party, and
the obligations herein do, and in such documents shall,
constitute binding obligations, enforceable on them in
accordance with their terms.
2.2 There is no charge, pledge, lien, or other encumbrance on,
over or affecting the Shares or arrangement to give or create
any such charge, pledge, lien or encumbrance.
3. Accounts
3.1 The Accounts were prepared in accordance with the
historical cost convention.
3.2 The Accounts:-
(a) give a true and fair view of the assets and liabilities of
the Company at the Accounts Date and its profits for the
financial period ended on that date;
(b) comply with the requirements of the Companies Acts and
other relevant statutes;
(c) comply with all current SSAPs applicable to a United
Kingdom company;
(d) are not affected by any extraordinary, exceptional or non-
recurring item;
(e) properly reflect the financial position of the Company as
at the Accounts Date;
(f) fully disclose all the assets of the Company as at the
Accounts Date; and
(g) make full provision or full reserve for all liabilities and
capital commitments of the Company outstanding at the Accounts
Date, including those contingent, unquantified or disputed,
liabilities of which the Warrantors are aware.
3.3 No amount included in the Accounts in respect of any asset,
whether fixed or current, exceeds its purchase price or
production cost (within the meaning of Schedule 4 CA 1985) or
(in the case of current assets) its net realisable value on the
Accounts Date.
3.4 (a) In the Accounts the stock-in-trade and work in
progress of the Company have been treated in accordance with
SSAP 9.
(b) In the Accounts all redundant, obsolete and slow-moving
stock-in-trade has been fully written off.
3.5 In the Accounts the fixed assets of the Company have been
depreciated in accordance with SSAP 12.
3.6 Where provision for deferred taxation is not made in the
Accounts, full details of the amounts of such deferred taxation
have been disclosed in the Disclosure Letter.
3.7 (a) No part of the amounts included in the Accounts, or
subsequently recorded in the books of the Company, as owing by
any debtor, is overdue by more than twelve weeks, or has been
released on terms that any debtor pays less than the full book
value of his debt, or has been written off, or has proved to any
extent to be irrecoverable or is now regarded by the Company as
irrecoverable in whole or in part.
(b) The amounts due from debtors as at Completion (less the
amount of any relevant provision or reserve in the Accounts or
disclosed in the Disclosure Letter) will be recoverable in full
in the ordinary course of business and none of those debts is
subject to any counter-claim or set off, except to the extent of
any such provision or reserve.
3.8 The Company has not at any time had an accounting reference
date for the purposes of Section 224 CA 1985 other than the date
specified in Schedule 2.
3.9 All the accounts, books, ledgers, financial and other
records, of whatsoever kind of the Company:
(a) are in its possession;
(b) have been properly and reasonably accurately kept and
completed;
(c) so far as the Warrantors are aware do not contain any
material inaccuracies or discrepancies; and
(d) give a proper reflection of its trading transactions, and
its financial, contractual and trading position.
3.10 The Management Accounts:-
(a) give a fairly stated view of the profits, assets and
liabilities of the Company for the periods to which they relate;
(b) were prepared in accordance with the historical cost
convention and generally accepted accounting principles in the
United Kingdom, consistently applied throughout;
(c) properly reflect the financial position of the Company as
at their date; and
(d) contain or make direct reference to all information and
factors necessary to accurately determine the gross profit
margin (as that term is commonly understood) on sale of products
and supply of services by the Company.
4. Corporate Matters
4.1 (a) The only directors of the Company are the persons
whose names are listed in relation to the Company in Schedule 2.
(b) No person is a shadow director (within the meaning of
Section 741 CA 1985) of the Company but is not treated as one of
its directors for all the purposes of CA 1985.
4.2 The Company:-
(a) is not the holder or beneficial owner of, nor has agreed to
acquire, any share or loan capital of any company (whether
incorporated in the United Kingdom or elsewhere); and
(b) has no branch, agency or place of business, or any
permanent establishment (as the expression is defined in the
relevant double taxation relief order current at the date of
this Agreement) outside the United Kingdom.
4.3 Since the Accounts Date the Company has not issued or
allotted, or agreed to issue or allot, any share or loan
capital.
4.4 No one is entitled to receive from the Company any finder's
fee, brokerage or other commission in connection with the sale
and purchase of the Shares under this Agreement.
4.5 (a) The copy of the Memorandum and Articles of Association
of the Company which is attached to the Disclosure Letter is
accurate and complete in all respects and has embodied in it or
annexed to it a copy of every such resolution as is referred to
in Section 380 CA 1985.
(b) The register of members and other statutory books of the
Company have been properly kept and contain an accurate and
complete record of the matters with which they should deal.
(c) No notice or allegation that any of the foregoing is
incorrect or should be rectified has been received by the
Warrantors or the Company.
(d) Since the Accounts Date no resolution of any kind of the
shareholders of the Company has been passed (other than
resolutions relating to business at Annual General Meetings
which was not special business).
4.6 (a) All returns, particulars, resolutions and documents
required by the CA 1985 or any other legislation to be filed
with the Registrar of Companies, or any other authority, in
respect of the Company have been duly filed and were correct;
(b) due compliance has been made with all the provisions of the
CA 1985 in connection with the formation of the Company, the
allotment or issue of shares, debentures and other securities,
the payment of dividends and the conduct of its business.
(c) All charges in favour of the Company have (if appropriate)
been registered in accordance with the provisions of Sections
395, 409, 410 and 424 CA 1985.
4.7 The Company has in its possession all title documents
relating to its assets, an executed copy of all agreements to
which it is a party, and the original copies of all other
documents which it owns or which ought to be in its possession.
4.8 There are not pending, or in existence, any investigations
or enquiries by, or on behalf of, any governmental or other body
in respect of the affairs of the Company.
5. Information Given to Buyer
5.1 There are no material facts or circumstances in relation to
the assets, business or financial condition of the Company,
which have not been fully and fairly disclosed in writing to the
Buyer or the Buyer's Solicitors, and which, if disclosed, might
reasonably have been expected to affect the decision of the
Buyer to enter into this Agreement.
6. Taxation
6.1 Administration
(a) The Accounts reserve or provide in full for all Taxation of
any nature whatsoever or other sums imposed, charged, assessed,
levied or payable under the Taxation Statutes for which the
Company was at the Accounts Date liable or able to be made
liable, and so far as the Warrantors are aware the Accounts
reserve in full for any contingent or deferred liability to
Taxation.
(b) The Company has duly paid all tax which it has become
liable to pay and is under no liability (and has not within the
6 years prior to the date hereof been liable) to pay any penalty
or interest in connection with any claim for tax.
(c) So far as the Sellers are aware all payments by the Company
to any person which ought to have been made under deduction of
tax have been so made and the Company has if required by law to
do so, accounted to the Inland Revenue for the tax so deducted.
(d) The Company has operated the Pay As You Earn system
accurately and correctly and has complied with all its reporting
obligations to the Inland Revenue in connection with benefits
provided for employees of the Company.
(e) All returns which should have been made by the Company for
any Taxation purpose in respect of any accounting period up to
and including the accounting period ending on the Accounts Date
have been made, are correct and on a proper basis and not the
subject of any dispute with the Inland Revenue, and the
computations have been agreed with the Inland Revenue and the
Company has made all returns and provided all information
required to be provided under the Taxes Management Act 1970 or
pursuant to any notice served thereunder.
(f) The Company is not involved in any dispute with any
Taxation authority whether within the United Kingdom or
overseas.
(g) Without prejudice to the generality of sub-clauses (b) and
(d) above, the Company will on Completion have duly paid to the
Inland Revenue or other appropriate authority:
(i) all amounts of value added tax then due by the Company in
respect of goods or services supplied prior to Completion;
(ii) all amounts of import duty and other taxes or charges
payable upon the importation of goods and all excise duties
payable in respect of any assets (including trading stock)
imported or owned by the Company;
(iii) all income tax deductible prior to Completion by virtue
of the PAYE regulations from time to time in force;
(iv) all advance corporation tax due in respect of franked
payments under Section 14 ICTA and Schedule 13 thereof; and
(v) all National Insurance contributions (due from both the
employer and the employee) in respect of the employees of the
Company.
(h) The Company has not participated in any payroll deduction
scheme as defined in Section 202 ICTA.
(i) All statements and disclosures made to any authority in
connection with any provision of the Taxation Statutes were when
made, and remain, complete and accurate in all material
respects.
6.2 (a) The Company is and has always been resident in the
United Kingdom for Taxation purposes.
(b) The Company is not and has at no time been an investment
company nor an investment trust for the purposes of the Taxation
Statutes.
(c) The Company is a close company for the purposes of the
Taxation Statutes.
(d) The Company has no and has at no time had any associated
company for the purposes of the Taxation Statutes.
(e) The Company is not a member of a European Economic Interest
Grouping or any other kind of partnership, consortium or joint
venture.
(f) All tax clearances obtained (if any) have been disclosed.
(g) All tax warranties and indemnities given to or received
from third parties (if any) have been disclosed.
6.3 Capital Gains
(a) If each of the capital assets of the Company were disposed
of otherwise than to an Associate for a cash consideration equal
to the book value of the asset in, or adopted for the purpose of
the Accounts no chargeable gain would accrue for the purposes
of TCGA.
(b) Save as provided for in the Accounts, the Company has not
made any claim and is not entitled to make any claim under
Section 279 TCGA (relief in respect of delayed remittances of
gains) or Section 585 ICTA (relief from tax on delayed
remittances).
(c) No claims for rollover relief under Section 23 or 247 TCGA
have been made by the Company.
(d) There are no capital losses carried forward by the Company.
(e) The Company has not acquired any assets subject to a claim
for holdover relief under Sections 165 or 260 TCGA or Section 79
FA 1980.
(f) There has not accrued any gain in respect of which the
Company may be liable to corporation tax by virtue of the
provisions of Section 13 TCGA (non-resident Company).
(g) No claim for rollover relief under Sections 152 to 158 TCGA
made or provided for in the Company's accounts will or may be
withdrawn when the Company leaves its existing group.
(h) The Company has not made any claim under Sections 152, 153
and 154 TCGA (replacement of business assets) with regard to the
consideration for the disposal of or of its interest in any
assets which are defined in the said Section 152(1) as "the old
assets", and no assets owned by the Company and "the new assets"
(as so defined) in relation to any claim made by any other
company.
(i) The Company has not received any asset by way of gift as
mentioned in Section 282 TCGA and will not receive any such
asset before Completion.
(j) Since the Accounts Date there has not been any transaction
in respect of which the Company is or may become liable to
Taxation under the corporation tax provisions relating to
capital gains and the Company will not before Completion
enter into any such transaction without the prior written
consent of the Buyer.
(k) The Company has not been a party to, or involved in any
scheme or arrangements whereby the value of any asset has been
materially reduced so that on a disposal of the asset by the
Company, Sections 30 to 34 inclusive TCGA (capital gains: value
shifting) may be applicable.
(l) No gain chargeable to corporation tax will accrue to the
Company on the disposal or satisfaction of a debt by reason of
Section 251 TCGA (debts).
(m) No part of the consideration given by the Company for a new
holding of shares (within the meaning of Section 126 TCGA) will
be disregarded by virtue of Section 128(2) TCGA.
(n) The Company has not been a party to, or involved in any
share for share exchange nor any scheme of reconstruction or
amalgamation such as are mentioned in Sections 135 and 136 TCGA
or Section 139 TCGA under which shares or debentures have been
issued or any transfer of assets effected.
(o) The Company has not effected any demerger such as is
mentioned in Section 213 ICTA.
(p) The Company has not made any election under paragraph 4 of
Schedule 2 to the TCGA.
(q) The Company has not made any election for all the Company's
assets then held (subject to paragraph 7 of Schedule 3 to the
TCGA) to have a 31 March 1982 base value pursuant to Section
35(5) TCGA.
(r) The Company has not disposed of or acquired any asset in
circumstances falling within Section 17 TCGA and is not entitled
to any capital loss to which Section 18(3) TCGA will apply.
(s) The Company is not liable to be assessed to any taxation
under the provisions of Section 189 or Section 190 TCGA.
(t) No loss which has arisen or may arise on the disposal by
the Company of shares in, or securities of any company is liable
to be disallowed in whole or in part by virtue of Section 176 or
Section 177 TCGA.
(u) The Company has not ceased to be a member of a group of
companies for the purposes of Section 178 and 179 TCGA, (deemed
disposal of a chargeable asset) otherwise than as part of a
merger to which Section 181 Taxes Act 1970 applies.
(v) The Company does not own any asset which was acquired from
another company which was at the time a member of a group of
Companies for the purposes of Section 170 TCGA.
(w) The execution or completion of this Agreement will not
result in any profit or gain being deemed to accrue to the
Company for Taxation purposes.
6.4 Profits and Losses
(a) The Company has not paid remuneration or compensation for
loss of office nor made any gratuitous payment to any of its
present or former directors or employees which will not be
deductible in computing the taxable profits of the Company.
(b) No provision has been made in the Accounts which will not
be allowable for Taxation purposes.
(c) No change of ownership of the Company has taken place in
circumstances such that Section 768 ICTA (change in ownership of
company: disallowance of trading losses) has or may be applied
to deny relief for a loss or losses incurred by the Company and
within the period of three years ending with the date of this
Agreement, there has been no major change in the nature or
conduct of any trade or business carried on by the Company, nor
has the scale of the activities in any trade or business carried
on by the Company at any time become small or negligible for the
purposes of the section.
(d) No change in ownership of the Company nor any major change
in the nature or conduct of any trade or business carried on by
the Company has occurred in circumstances such that Section 245
ICTA (calculation of advance corporation tax on change of
ownership) has been or may be applied.
(e) All Taxation losses of the Company are trading losses and
are available to be carried forward and set-off against income
from the same trade in succeeding periods and are agreed with
the Inland Revenue.
(f) The Company has not made and is under no obligation under
which it is, or at any time may become, liable to make any
payment of interest, an annuity or other annual payment such as
may be disallowed as a deduction, as a set-off or as a charge on
income or otherwise be unrelieved for corporation tax purposes
whether by virtue of Section 787 ICTA (restriction of Relief for
Payments of Interest) or Section 125 ICTA (annual payments for
non-taxable consideration) or otherwise.
(g) The Company has not since 22 June 1971 entered into any
such transaction as is mentioned in Section 780 ICTA (sale and
leaseback: taxation of consideration received).
(h) The Company has not effected or entered into any act,
transaction or arrangement of any nature whereby it has
incurred, or may hereafter incur, any liability under, or by
virtue of any of Sections 770, 781, 782 and 783 ICTA.
(i) The Company has not surrendered nor agreed to surrender any
amount by way of group relief under the provisions of Chapter IV
of Part X of ICTA (group relief).
(j) The Company is not, and has not at any time been, party to
any arrangements falling within Section 410 ICTA (arrangements
for transfer of company to another group or consortium).
(k) The Company is not, and will not become, liable to make any
payment for an amount surrendered by any other company under, or
in connection with the provisions of Sections 240 and 402 ICTA.
(l) Since the Accounts Date the Company has not surrendered or
claimed any advance corporation tax under the provisions of
Section 240 ICTA (set-off of Company's surplus advance
corporation tax against subsidiary's liability to corporation
tax).
(m) The Disclosure Letter contains:
(i) particulars of all elections made by the Company under
Section 247 ICTA which are now in force;
(ii) particulars of all arrangements and agreements relating to
group relief as defined in Section 402 ICTA to which the Company
is or has been a party; and
(iii) particulars of all agreements or arrangements to which
the Company is or has been a party relating to the surrender of
advance corporation tax (whether made or received by the
Company) under Section 240 ICTA.
(n) All capital allowances made or to be made to the Company in
respect of capital expenditure incurred prior to the date of
this Agreement, or to be incurred under any subsisting
commitment, have been made, or will be made in taxing its trade.
(o) No allowances have been claimed by the Company which are
liable to be reduced or withdrawn by virtue of Sections 1(6),
24, 46 and 47 Capital Allowances Act 1990.
(p) The Company has neither made any claim for, nor received
any payment by way of, grant under the Industrial Development
Act 1982, such that a charge to tax under Case 1 or Case VI of
Schedule D might be made under Section 93 ICTA.
(q) Since the Accounts Date and pending Completion, the
Company has not and will not have made or received any surrender
relating to group relief or advance corporation tax.
6.5 Inheritance Tax
(a) The Company has not entered into any transaction which has
or may give rise to a direct or indirect charge to inheritance
tax.
(b) The Company is not liable to be assessed to inheritance tax
by virtue of Part VII of the Inheritance Tax Act 1984.
(c) There is no unsatisfied liability to inheritance tax
attached or attributable to the Shares or any asset of the
Company, and in consequence, no person has the power to raise
the amount of such tax by sale or mortgage of or by a terminable
charge on any of the Shares or assets of the Company as
mentioned in Section 212 Inheritance Tax Act 1984 and none of
the Shares or assets of the Company are subject to an Inland
Revenue charge within Section 237 Inheritance Tax Act 1984.
(d) The Company is not entitled to an interest in possession in
settled property.
6.6 Value Added Tax
(a) The Company is duly registered for Value Added Tax purposes
and has complied in all respects with the Value Added Tax Act
1994, all orders, provisions, directions or conditions made or
imposed thereunder and all provisions relating to Value Added
Tax contained in the Taxation Statutes and has made and obtained
full complete correct and up-to-date records invoices and other
documents appropriate or requisite for the purposes of such
legislation and is not liable to any forfeiture or penalty or to
the operation of any penal provisions and has not been required
by the Commissioners of Customs and Excise to give security and
the Company is not registered for Value Added Tax as a member of
a group of companies.
(b) The Disclosure Letter contains full details of any assets
of the Company to which the provisions of Part VA Value Added
Tax (General) Regulations 1985 (the Capital Goods Scheme) apply
and in particular the identity (including in the case of
leasehold property the terms of years), date of acquisition and
cost of the asset and the proportion of input tax for which
credit has been claimed (either provisionally or finally in a
tax year and stating which).
(c) All supplies made by the Company are taxable supplies and
the Company is not and will not be denied credit for any input
tax by reason of the operations of Section 15 Value Added Tax
Act 1983 and regulations made thereunder.
(d) No supplies have been made to the Company to which the
provisions of Section 7 Value Added Tax Act 1983 might apply.
(e) The Disclosure Letter contains details and copies of all
elections, together with the relevant notification, made by the
Company pursuant to paragraph 2 Schedule 6A Value Added Tax Act
1983.
(f) The Company is not and has not since 1 August 1989 been in
relation to any land, building or civil engineering work a
developer within the meaning of paragraph 5(5) Schedule 6A Value
Added Tax Act 1983.
(g) The Disclosure Letter contains copies of all certificates
issued by the Company pursuant to paragraph 13(4)(f) Schedule 3
Finance Act 1989.
(h) Full details of any claim for bad debt relief under Section
11(9) FA 1990 made by any member of the Group has been disclosed
in writing to the Buyer.
6.7 Stamp Duty, Stamp Duty Reserve Tax and Capital Duty
(a) The Company has duly paid all capital duty and all loan
capital duty for which it has at any time been liable.
(b) Within the 7 years ending on the date of this Agreement,
the Company has not made any claim for relief or exemption under
Section 55 FA 1927, or Section 42 FA 1930, or Part III Schedule
19 FA 1973, or Section 78 FA 1985 or Sections 75, 76 and 77 FA
1986.
(c) All instruments (other than those which have ceased to have
any legal effect) to which the Company is a party have been duly
stamped.
(d) The Company has duly paid all stamp duty reserve tax for
which it has at any time been liable.
6.8 Anti Avoidance
(a) The Company has not entered into or been a party to any
schemes or arrangements designed partly or wholly for the
purpose of avoiding or deferring Taxation.
(b) No gain of a capital nature as defined in Section 776 ICTA
(transactions in land: taxation of capital gains) has been
realised from the disposal of land in respect of which the
Company could be assessed to Tax under the provisions of that
section.
(c) The Company has not obtained any tax advantage in
consequence of any transaction in securities to which the
provisions of Section 703 ICTA (cancellation of tax advantage)
apply.
6.9 Overseas Elements
(a) The Company does not carry on any trading activities
outside the United Kingdom.
(b) The Company has made all appropriate claims for relief
under Double Taxation Relief Conventions, orders or other
arrangements current at the date of this Agreement and has
obtained full double tax relief for all income from outside the
United Kingdom.
(c) The Company has not transferred a trade carried on by it
outside the United Kingdom in circumstances such that a
chargeable gain may be deemed to arise ata date after such
transfer under Section 140 TCGA (postponement of charge on
transfer of assets to non-resident company).
(d) The Company has not been a party to any election made under
Section 187(1)(b) TCGA.
(e) The Company does not have an overseas subsidiary.
(f) The Company is not a member of an overseas partnership.
(g) The Company has not entered into any unlawful transaction
under Sections 765 and 766 ICTA (migration of companies). There
are attached to the Disclosure Letter copies of all notices
required pursuant to The Movements of Capital (Required
Information) Regulations 1990.
(h) The Company has not received foreign loan interest on which
double taxation relief will or may be restricted under Section
798 ICTA (Interest on Certain Overseas Loans).
(i) No notice of the making of a direction under Section 747
ICTA (imputation of chargeable profit and creditable tax of
controlled foreign companies) has been received by the Company
and no circumstances exist which would entitle the Inland
Revenue to make such a direction and to apportion any profit of
a controlled foreign company to the Company pursuant to Section
752 ICTA (apportionment of chargeable profit and creditable
tax).
(j) The Company has not and has at no time had for the purposes
of Chapter V of Part XVII ICTA an interest in an offshore fund
which is or has at any time been a non-qualifying offshore fund.
(k) The Company will not at Completion have any liability for
any Taxation outside the United Kingdom.
(l) The Disclosure Letter contains full particulars of all
notices given to the Company under the Double Tax Relief (Taxes
on Income) (General) Regulations 1970 and the Double Tax Relief
(Taxes on Income) (General) (Dividend) Regulations 1973.
6.10 Close Companies
(a) The Company has received apportionment clearances under
paragraph 16 Schedule 19 ICTA for all periods up to and
including the last accounting period beginning before 1 April
1989 and the information and particulars supplied to the
Inspector of Taxes made full and accurate disclosure of all
material facts and considerations.
(b) The Company has not made any such transfer as is referred
to in Section 125 TCGA (transfer of assets at an undervalue).
(c) The Company has at all times up to the Accounts Date, been
a trading company or a member of a trading group as defined in
paragraph 7 Schedule 19 ICTA.
(d) No distributions within Section 418 ICTA (additional
matters to be treated as distributions) have been made by the
Company.
(e) No loan or advance within Section 419 ICTA (loans to
participators etc) has been made or agreed to by the Company and
the Company has not since the Accounts Date released or written
off the whole or part of the debt in respect of any such loan or
advance.
6.1 Taxation Generally
(a) The Company has not issued any share capital to which the
provisions of Section 249 ICTA (Stock Dividends) could apply nor
does it own any such share capital.
(b) Since the Accounts Date, the Company has not made any
purchase of its own shares such as is mentioned in Section 219
ICTA or otherwise in respect of which no Inland Revenue
clearance has been obtained.
(c) No security issued by the Company and remaining in issue at
the date of this Agreement was issued in such circumstances that
the interest payable thereon falls to be treated as a
distribution under Section 209 ICTA (meaning of distribution).
(d) The Company has not issued or acquired any deep discount
securities as defined in Schedule 4 ICTA or any deep gains
securities as defined in Schedule 11 FA 1989.
(e) The Company has not at any time:
(i) repaid or redeemed or agreed to repay or redeem any shares
of any class of its share capital, or otherwise reduced or
agreed to reduce its share capital or any class thereof; or
(ii) capitalised or agreed to capitalise in the form of shares,
debentures or other securities or in paying up any amounts
unpaid on any shares, debentures or other securities, any
profits or reserves of any class or description or passed or
agreed to pass any resolution to do so.
(f) Neither the Company nor any of its employees are affected
by any of the following kinds of employee benefit schemes
(whether approved by the Inland Revenue or not):
(i) profit sharing scheme;
(ii) savings related share option scheme;
(iii) executive share option scheme;
(iv) employee share ownership plan;
(v) qualifying share ownership trust;
(vi) profit related pay scheme;
(vii) single company or corporation personal equity plan.
(g) Since the Accounts Date and pending Completion, the
Company has not carried out or entered into any transactions and
no other Event has occurred in consequence of which (whether
alone or together with any one or more transactions or Events
occurring on or after the date of this Agreement) any liability
to Taxation of the Company has arisen or will or any arise (or
would have arisen or would or might arise but for the
availability of any relief allowance deduction or credit) other
than corporation tax on actual income (and not chargeable gains
or deemed income) of the Company arising from transactions
entered into in the ordinary course of business.
7. Finance
7.1 Capital Commitments
There were no commitments on capital account outstanding at the
Accounts Date which were not provided for in the Accounts and
since the Accounts Date the Company has not made or agreed to
make any material capital expenditure, or incurred or agreed to
incur any capital commitments, nor has it disposed of or
realised any capital assets or any interest therein.
7.2 Dividends and Distributions
(a) Since the Accounts Date no dividend or other distribution
(as defined in ICTA Chapter II of Part VI as extended by Section
418 ICTA) has been, or is treated as having been, declared, made
or paid by the Company.
(b) All dividends or distributions declared, made or paid by
the Company have been declared, made or paid in accordance with
its Articles of Association and the applicable provisions of CA
1985.
7.3 Bank and Other Borrowings
(a) Full details of the Company's bank facilities are set out
in the Disclosure Letter.
(b) The total amount borrowed by the Company from each of its
bankers does not exceed its respective overdraft facilities.
(c) The total amount borrowed by the Company (as determined in
accordance with the provisions of the relevant instruments) does
not exceed any limitations on its borrowing powers contained in
its Articles of Association or in any debenture or other deed or
document binding upon it.
(d) The Company has not outstanding, nor has it agreed to
create or issue, any loan capital; the Company has not factored
any of its debts or engaged in financing of a type which would
not require to be shown or reflected in the Accounts, or
borrowed any money which it has not repaid, save for borrowings
not exceeding the amounts shown in the Accounts and usual trade
credit.
(e) The Company has not since the Accounts Date repaid or
become liable to repay any loan or indebtedness in advance of
its stated maturity.
(f) The Company has not received notice (whether formal or
informal) from any lenders of money to it, requiring repayment
or intimating the enforcement of any security the lender may
hold over any of its assets; and there are no circumstances
likely to give rise to any such notice.
7.4 Loans by and Debts due to the Company
The Company has not lent any money which has not been repaid to
it, nor does the Company own the benefit of any debt (whether or
not due for payment) other than debts which have arisen in the
ordinary course of its business and the Company has not made
any loan or quasi-loan contrary to CA 1985.
7.5 Liabilities
(a) So far as the Warrantors are aware the Company has no
outstanding liabilities (including contingent liabilities but
excluding Taxation) except as disclosed in the Accounts or
incurred in the ordinary course of trading since the Accounts or
the Management Accounts Date.
(b) There has been no exercise, purported exercise or claim in
respect of any charge, lien, encumbrance or equity over any of
the fixed assets of the Company and there is no dispute directly
or indirectly relating to any of its fixed assets.
(c) The Company has not been the tenant of, or a guarantor in
respect of, any leasehold property other than the Property.
7.6 Continuation of Facilities
In relation to all debentures, acceptance credits, overdrafts,
loans and other financial facilities outstanding or available to
the Company other than related to trade credit in the ordinary
course of business (referred to in this paragraph as
"facilities"):-
(d) the Disclosure Letter sets out full details, and there are
attached to it accurate copies of all documents relating to the
facilities;
(e) the Company has complied with all the provisions of those
documents;
(f) no steps for the early repayment of any indebtedness have
been taken or threatened;
(g) there are no circumstances whereby the continuation of any
of the facilities might be prejudiced, or which might give rise
to any alteration in the terms and conditions of any of the
facilities;
(h) none of the facilities is dependent on the guarantee or
indemnity of or any security provided by a third party; and
(i) none of the facilities is liable to be terminated, or any
loan repaid, as a result of the acquisition of the Shares by the
Buyer or any other thing contemplated in this Agreement.
7.7 Government Grants
(a) The Disclosure Letter contains full details of all grants,
subsidies or financial assistance applied for or received by the
Company from any governmental department or agency or any local
or other authority.
(b) The Company has not done or omitted to do any act or thing
which could result in all or any part of any investment grant,
employment subsidy or other similar payment made, or due to be
made to it becoming repayable or being forfeited or withheld in
whole or in part.
8. Trading
8.1 Changes since Accounts Date
(a) Since the Accounts Date:
(i) the business of the Company has been continued in the
ordinary and normal course;
(ii) there has been no deterioration in the turnover or the
financial or trading position or prospects of the Company;
(iii) the Company has not by doing or omitting to do anything
prejudiced its goodwill;
(iv) no part of the business of the Company has been affected
by any abnormal factor not affecting similar businesses to a
like extent; and
(v) the Company has paid its creditors in accordance with their
respective credit terms and there are no amounts owing by the
Company which have been due for more than six weeks.
(b) The value of the realisable assets of the Company is not
now less than at the Accounts Date.
(c) The cash balances of the Company are not now less than they
were as disclosed in the Accounts.
8.2 Warrantors' Other Interests and Liabilities to the Company
(a) Neither the Warrantors has any rights or interests,
directly or indirectly, in any business other than that now
carried on by the Company, any of which are, or are likely to be
or become, competitive with the business of the Company.
(b) There is no outstanding indebtedness of the Warrantors or
their Associates to the Company.
8.3 Effect of Sale of Shares
(a) As a result of the purchase of the Shares by the Buyer:
(i) no supplier to the Company will cease or be entitled to
cease supplying it or may substantially reduce its supplies to
it;
(ii) no customer of the Company will cease or be entitled to
cease to deal with it or may substantially reduce its existing
level of business with it;
(iii) the Company will not lose the benefit of any right or
privilege which it enjoys; and
(iv) no officer or senior employee of the Company will leave,
or be entitled to terminate his employment.
(b) Compliance with the terms of this Agreement does not and
will not:
(i) conflict with, or result in the breach of, or constitute a
default under any of the terms, conditions or provisions of any
agreement or instrument to which the Company is a party, or any
provision of the Memorandum or Articles of Association of the
Company, or any order, judgement, award, injunction, regulation
or other restriction or obligation of any kind by which the
Company is bound or to which any of the Company's assets is
subject;
(ii) relieve any person from any obligation to the Company, or
enable any person to terminate any right or benefit enjoyed by
the Company, or exercise any right in respect of the Company;
(iii) cause any encumbrance on any of the assets of the Company
to crystallise or become enforceable; or
(iv) cause any present or future indebtedness of the Company to
become due and payable prior to its stated maturity.
8.4 Conduct of Business in accordance with Memorandum and
Articles of Association
(a) The Company has at all times carried on business and
conducted its affairs in all respects in accordance with its
Memorandum and Articles of Association for the time being in
force.
(b) The Company is empowered and duly qualified to carry on
business in all jurisdictions in which it now carries on
business.
8.5 Joint Venture and Partnership
The Company is not, and has not agreed to become, a member of
any joint venture, consortium, partnership or other
unincorporated association and it is not, and has not agreed to
become, a party to any agreement or arrangement for sharing
commissions or other income.
8.6 Marketing Agreements
(a) The Company is not a party to any agency, distributorship,
marketing, purchasing, manufacturing or licensing agreement or
arrangement, or to any trading or other agreement or
arrangement, which in any way restricts its freedom to carry on
the whole or any part of its business in any part of the world
in such manner as it thinks fit.
(b) The Company is not bound by any undertaking or assurance
given to any court or governmental agency.
8.7 Unfair Trading and Restrictive Practices
(a) The Company has not done or omitted to do any act or thing
which directly or indirectly:
(i) contravenes any provision of the Trade Descriptions Acts
1968 and 1972;
(ii) would or might result in a reference of a consumer trade
practice, within the meaning of Section 13 of the Fair Trading
Act 1973, or be liable to reference to the Consumer Protection
Advisory Committee under Part II of the said Act;
(iii) contravenes the provisions of the Consumer Credit Act
1974;
(iv) contravenes or is invalidated (in whole or in part) by, or
is subject to registration under, the Restrictive Trade
Practices Acts 1976 and 1977;
(v) contravenes any provision of the Treaty of Rome; or
(vi) contravenes any other anti-trust, anti-monopoly or anti-
cartel legislation or regulations.
(b) The Company has not engaged in any anti-competitive
practice as defined in the Competition Act 1980.
8.8 Litigation etc
(a) The Company is not a party to, or involved in, any
litigation, arbitration, prosecution or other legal proceedings,
and has not been engaged in any such proceedings during the
three year period ending on the date of this Agreement.
There are no claims or actions (whether criminal or civil)
threatened, or so far as the Warrantors are aware pending, or
anticipated against the Company or any of its directors or
employees in relation to the Company, or in respect of which the
Company is liable to indemnify any party concerned, or for which
the Company may be vicariously liable. To the best of the
knowledge and belief of the Warrantors, there are no facts which
are likely to give rise to any such proceedings, actions or
claims.
(b) There is no dispute with any revenue or other official
department in the United Kingdom or elsewhere, in relation to
the affairs of the Company, and there are no facts which may
give rise to any dispute.
(c) So far as the Warrantors are aware (but without having made
any enquiry) there are no claims pending or threatened or
capable of arising against the Company by an employee or workman
or third party, in respect of any accident or injury, which are
not fully covered by insurance.
8.9 Winding-up etc
(a) No order has been made or petition presented or resolution
passed for the winding up of the Company; no distress, execution
or other process has been levied in respect of the Company which
remains undischarged; there is no unfulfilled or unsatisfied
judgment or court order outstanding against the Company; no
receiver or administrative receiver has been appointed over all
or any part of the Company's assets or business.
(b) No director, officer or employee of the Company has had a
bankruptcy petition presented against him or has been convicted
of, or charged with, and not acquitted of a criminal offence
(other than a traffic offence the subject of a fixed penalty
fine); no person who is or has at any time within the last
three years been a director or officer of the Company is or was,
when a director or officer of the Company, subject to any
disqualification order under CA 1985, the Insolvency Act 1985 or
the Company Directors Disqualification Act 1986.
8.10 Compliance with Statutes
(a) In the course of their duties to the Company, none of its
officers, agents and employees has done or failed to do any act
or thing, in contravention of any act, order, regulation or the
like (whether of the United Kingdom or elsewhere) giving rise to
any fine, penalty, default proceedings or other liability on its
part.
(b) The Company has received no notice that it has not
conducted and is conducting its business in all material
respects in accordance with all applicable laws and regulations
whether of the United Kingdom or elsewhere.
(c) The Company does not carry on and has never carried on
investment business in the United Kingdom within the meaning of
the Section 1 of the Financial Services Act 1986.
8.11 Data Protection
(a) The Company has complied with all relevant requirements of
the Data Protection Act 1984.
(b) The Company has not received a notice or allegation from
either the Data Protection Registrar or a data subject (as
defined in that Act) alleging non-compliance with the data
protection principles or prohibiting the transfer of data
to a place outside the United Kingdom.
(c) No individual has claimed, or will have the right to claim,
compensation from the Company under that Act for loss or
unauthorised disclosure of data.
8.12 Documents Stamped
All documents which in any way affect the right, title or
interest of the Company in or to any of its property,
undertaking or assets, or to which the Company is a party, and
which attract stamp duty, have been duly stamped within the
requisite period for stamping.
8.13 Business Names
The Company does not use for any purpose a name other than its
full corporate name.
8.14 Transactions involving Directors
The Company has not been a party to any transaction to which
any of the provisions of Section 320 CA 1985 or Section 330 CA
1985 may apply.
8.15 Powers of Attorney and Authority
(a) No power of attorney given by the Company is in force.
(b) There is not outstanding any authority (express or implied)
under which any person may enter into any contract or commitment
binding upon the Company.
8.16 Licences and Consents
(a) The Company has obtained all licences and consents from any
person, authority or body required for the conduct of its
business copies of all such licences and consent are annexed to
the Disclosure Letter and all are valid and in force.
(b) The Company is not in breach of any of the terms or
conditions of any of the licences or consents and there are no
factors which might in any way prejudice the continuation or
renewal of any of them.
8.17 Subsisting Contracts
(a) The Company is not a party to any contract, transaction,
arrangement or liability which:-
(i) is of an unusual or abnormal nature or outside the ordinary
course of its business;
(ii) is for a fixed term of more than six months;
(iii) is unlikely to have been fully performed, in accordance
with its terms, more than six months after the date on which it
was entered into or undertaken;
(iv) is incapable of termination by it in accordance with its
terms on sixty days' notice or less;
(v) is likely to result in a financial loss based on current
costs and priority to it on completion of performance;
(vi) involves payment by it of amounts determined by reference
to fluctuations in the index of retail prices or any other
index, or in the rate of exchange for any currency;
(vii) involves an aggregate outstanding expenditure by it of
more than pound sterling 5,000 other than supply arrangements in the ordinary
course of business;
(viii) involves or is likely to involve the supply of goods,
the aggregate sales value of which will represent in excess of
10 per cent of its turnover for the preceding financial year;
(ix) is a contract for hire or rent, hire purchase or purchase
by way of credit sale or periodical payment.
8.18 Default under Agreements
(a) The Company is not:
(i) in default under any agreement or covenant to which it is a
party or in respect of any other contractual obligations or
restrictions binding upon it;
(ii) in default under any obligations existing by reason of
membership of any association or body; or
(iii) liable in respect of any representation or warranty
(whether express or implied) or any matter giving rise to a duty
of care on its part.
(b) No party to any agreement with the Company is in default
under it, to a degree which is or would be material in the
context of the Company's financial or trading position and so
far as the Warrantors are aware there are no circumstances
likely to give rise to such a default.
8.19 Outstanding Offers
Save those in the ordinary course of business no offer, tender
or the like is outstanding which is capable of being converted
into an obligation of the Company by acceptance or other act of
some other person.
8.20 Defective Products
The Company has not sold or supplied products or services which
were or are in any material respect faulty or defective, or
which do not comply in any material respect with all warranties
or representations, express or implied, made in relation to them
by the Company, or with all applicable regulations, standards
and requirements.
8.21 Service Liabilities
The Company is not liable (save as may be implied by law) to
service, repair, maintain, take back or otherwise do, or not do,
anything in respect of any goods that have been, or are after
the date of this Agreement, delivered by it.
8.22 Major Suppliers and Customers
The Company does not buy more than 10 per cent in value of its
total purchases from the same supplier, or sell more than 10 per
cent in value of its total sales to the same customer.
8.23 Guarantees and Indemnities
There is not now outstanding in respect of the Company any
guarantee, indemnity or agreement for suretyship, given by it or
for its accommodation.
8.24 Management Reports
There have been no reports concerning the Company by financial
or management consultants within the period of three years
ending on the date of this Agreement.
9. Employment
9.1 Employees and Terms of Employment
(a) The Disclosure Letter contains full particulars of the
names, dates of commencement of employment, and the terms and
conditions of employment of all employees and officers of the
Company, including (without limitation) remuneration, pension
contributions and profit sharing, commission or discretionary
bonus arrangements.
(b) There are no agreements or other arrangements (whether or
not legally binding) between the Company and any trade union or
other body representing employees.
(c) The Company is not a party to any contract to which
Section 319 CA 1985 applies.
9.2 Bonus Schemes
(a) The Company operates no scheme or arrangement under which
any person is entitled to a commission or remuneration
calculated by reference to the turnover, profits or sales of the
Company.
(b) The Company has not registered a profit-related pay scheme
under the provision of Part V Chapter III ICTA.
9.3 Changes in Remuneration
(a) Since the Accounts Date:
(i) no change has been made in the rate of remuneration, or the
emoluments or pension benefits of any officer, ex-officer or
senior executive of the Company (that is, a person receiving
remuneration exceeding pound sterling 15,000 per annum); and
(ii) no change has been made in any other terms of employment
of any officer or senior executive.
(b) The Company is not liable for nor accustomed to pay any
moneys to or for the benefit of any officer or employee of the
Company other than remuneration or emoluments of employment or
pension contributions.
9.4 Termination of Contracts of Employment
(a) All subsisting contracts of service to which the Company is
a party are terminable at any time on three months' notice or
less, without compensation (other than compensation in
accordance with the Employment Rights Act 1996).
(b) No employee of the Company, who receives remuneration
exceeding pound sterling 15,000 per annum, and no officer of the Company, has
given or received notice terminating his employment.
9.5 Industrial Disputes and Negotiations
Neither the Company nor its employees is involved in any
industrial dispute, and there are no facts known, or which would
on reasonable enquiry be known, to the Company or to the
Warrantors or to any of their respective directors which might
suggest that there may be an industrial dispute involving the
Company or that any of the provisions of this Agreement may lead
to an industrial dispute.
9.6 Industrial Agreements
The Company has not entered into any recognition agreement with
a trade union nor has it done any act which might be construed
as recognition.
9.7 Pensions
Neither the Company nor any Subsidiary is under any legal or
moral liability or obligation, or a party to any ex gratia
arrangement or promise, to pay pensions, gratuities,
superannuation allowances or the like, or otherwise to provide
"relevant benefits" within the meaning of Section 612(1) ICTA to
or for any of its past or present officers or employees or their
dependants; and there are no retirement benefit, or pension
or death benefit, or similar schemes or arrangements in relation
to or binding on any of the Group Companies or to which any of
them contributes.
10. Assets
10.1 Ownership
The Company owned at the Accounts Date and still owns, and had
and still has a good and marketable title to, all assets
included in the Accounts or acquired since that date, except
current assets since sold or realised in the ordinary course of
business.
10.2 Assets sufficient for the Business
The assets owned by the Company, together with the assets held
under the hire purchase, leasing or rental agreements listed in
the Disclosure Letter, comprise all assets necessary for the
current conduct of the business of the Company.
10.3 Stocks and Work in Progress
(a) Save as written down in the Accounts or Management Accounts
the stock now held by the Company is not excessive and is
adequate in relation to the current trading requirements of the
Company's business; none of the stock is obsolete, slow moving,
unusable, unmarketable or inappropriate or of limited value in
relation to the Company's current business and no contracts are
outstanding which are likely to change this.
(b) Save as written down in the Accounts or Management Accounts
the stock-in-trade of the Company is in good condition and is
capable of being sold by the Company in the ordinary course of
its business in accordance with its current price list without
rebate or allowance to a purchaser.
10.4 Retention of Title
Apart from in the ordinary course of business the Company has
not purchased any stock, goods or materials from any of its
suppliers on terms that property in it does not pass until full
payment is made or all indebtedness discharged.
10.5 Leased Assets
So far as the Warrantors are aware and subject to disclosed
terms no circumstance has arisen or is likely to arise in
relation to any asset held by the Company under a lease or
similar agreement whereby the rental payable has been or is
likely to be increased; and all such assets have at all relevant
times been used for a qualifying purpose within the meaning of
Section 64 FA 1980 and Section 70 FA 1982.
11. Insurance
11.1 All the assets and undertaking of the Company of an
insurable nature are, and have at all material times been,
insured in amounts representing their full replacement or
reinstatement value, against fire and other risks normally
insured against by persons carrying on the same business as that
carried on by the Company.
11.2 Full particulars of all the policies of insurance effected
by the Company are set out in the Disclosure Letter. Such
policies are currently in full force and effect, and nothing has
been done or omitted to be done which could make any such policy
void or voidable or which is likely to result in an increase in
premium.
11.3 None of the said policies are subject to any special or
unusual terms or restrictions or to the payment of any premium
in excess of the normal rate.
11.4 No claim is outstanding under any of the said policies and
so far as the Warrantors are aware no circumstances exist which
are likely to give rise to such a claim.
12. Environment
12.1 Compliance with Environmental Laws
(a) The business and operations of the Company are in full
compliance with all Environmental Laws and no condition exists
or Event has occurred which with or without notice or passage of
time, or both, would constitute a violation by the Company of
any Environmental Law.
(b) The Warrantors and the Company have complied with and are
aware of no previous breach by the Company of any Environmental
Laws relating to the conduct of its business. The use of the
Properties is not causing any breach of any Environmental Laws
designed to protect third parties and will not give rise
to any claims from a third party in nuisance.
12.2 Legislation and Illegal Acts
The Company and (in relation to the business and assets of the
Company) its directors, officers and employees have complied in
all material aspects at all times with all applicable laws,
regulations and codes of practice whether of the United Kingdom
or elsewhere and neither the Company nor, in relation to the
business and assets of the Company, any of its directors,
officers or employees has committed any tortious act or is
or has been party to any agreement or arrangement or activity
which is or might be in breach of, registerable under, the
subject of a reference or investigation or inquiry, or
require the giving of notice under, Environmental Laws or any
other law or regulation (including without limitation the
Treaties establishing the European Communities).
13. Intellectual Property
13.1 Ownership
(a) The Company is the sole beneficial owner of all the
Intellectual Property. All registered Intellectual Property is
registered in the sole name of the Company and all applications
for registration have been applied for in the sole name of the
Company.
(b) All the Intellectual Property is valid and subsisting and
enforceable.
(c) All renewal fees therefor have been paid, and, in the case
of applications, all steps necessary for their prosecution have been
taken to date. Nothing has been done or omitted to be done whereby
any person will be able to seek the cancellation, rectification,
expungement or any other modification of, or of the registration
of, any of the Intellectual Property.
(d) The subject matter of the Intellectual Property has been
devised, made, created or otherwise generated by employees of
the Company in the normal course of their employment.
13.2 Infringement and Legal Proceedings
(a) So far as the Warrantors are aware there is and has been no
infringement or threatened infringement of any of the
Intellectual Property by any other person, and the Company has
not made any claim, threat or intimation of proceedings or
considered proceedings against any other person in respect of
any Intellectual Property.
(b) There are and have been no proceedings actions or claims
and the Company has not received any notice of any claim
impugning the title, validity or enforceability of any of the
Intellectual Property or claiming any right or interest
in it, or any threat or intimation of any such proceedings.
(c) So far as the Warrantors are aware the conduct of its
business by the Company does not, and the use by the Company of
the Intellectual Property, does not and will not, infringe the
rights of any other person, and there are no grounds on
which any other person is likely to bring any proceedings
relating to infringement of any of such other person's rights.
13.3 Licences
(a) The Company has not granted, nor is there subsisting, any
licence, permission, consent, charge or assignment of or in
respect of any of the Intellectual Property in whole or in part
in favour of any other person, and there are no circumstances
which could entitle any other person to call for such a licence,
permission, consent, charge or assignment.
(b) Save in the ordinary course of business there are no
licences, consents or permissions from, or arrangements or
settlements with, any other person, or payments due to any other
person, for use of or working in accordance with any of the
Intellectual Property.
13.4 Patents
There are no patents and applications for patents included in
the Intellectual Property.
13.5 Trade Marks
Apart from its corporate name and web site the Company
has no trade marks, registered, unregistered, or for which
application for registration has been made, included in the
Intellectual Property.
13.6 Know-how, etc
(a) All formulae, processes and other information ("technical
information") owned or used by the Company in the course of its
business are adequately documented, and to the extent that the
same are confidential, no part thereof has been or will be
disclosed to any other person, nor is there any agreement or
other arrangement under which any other person can require such
disclosure.
(b) All confidential technical information forming part of the
Intellectual Property which has been disclosed or to which
access has been permitted to any other person other than the
employees of the Company has been made available under
a written confidentiality undertaking, a copy of which is
annexed to the Disclosure Letter.
13.7 General
All advertising and marketing materials used by the Company in
connection with its business comply with all legal requirements
in all countries in which these materials are used or have been
specifically designed to be used. Such materials are not
defamatory and so far as the Warrantors are aware there are no
grounds under which such materials could be challenged for
defamation, trade libel or any analogous law.
15. Property
15.1 The Company does not own or occupy any land and buildings
other than the Property.
15.2 The Company has a good and marketable title to the
Property.
15.3 No person other than the Company is in occupation of or in
receipt of any rents or profits from the Property.
15.4 The Property is free from any mortgage, debenture, charge,
rent-charge, lien or other encumbrance.
15.5 The Property is not subject to any restrictive covenants,
stipulations, easements or other rights vested in third parties.
15.6 The Company's use of the Property is that which is
permitted under the Planning Acts.
15.7 The Company has complied with all applicable statutory and
bye law requirements and all requirements of any competent
authority and all provisions of the Planning Acts in respect of
the Property.
15.8 The Company has paid the rent and observed and performed
all the covenants under the terms of any lease or licence under
which the Company holds or occupies the Property and no rent
reviews are currently in progress affecting the Property.
15.9 The Company has not at any time received notice from any
person alleging breach by the Company of any Environmental Laws.
Signed by /s/GEOFFREY GLOSSOP
Signed by /s/TERESA GLOSSOP
Signed by /s/GEOFFREY GLOSSOP
On behalf of FIELD HOUSE No. 1 TRUST
Signed by /s/GEOFFREY GLOSSOP
On behalf of FIELD HOUSE No. 2 TRUST
Signed by /s/JEFFREY BUTLER
for and on behalf of
the AMERICAN EDUCATION
CORPORATION
Exhibit 99.1 Press Release
PRESS RELEASE
For further information contact:
Jeffrey E. Butler
The American Education Corporation
800-34APLUS or 800-222-2811
E-mail: [email protected]
URL: www.amered.com
or
Geralyn DeBusk
Halliburton Investor Relations
972-458-8000
For Immediate Release
The American Education Corporation Completes
the Acquisition of Learning Pathways, Ltd.,
a U.K. Distributor of Educational Software Products
Oklahoma City, December 1, 1998: The American Education
Corporation (AEC) (OTC/BB: AEDU ) today announced that it has
completed the purchase of the outstanding stock of Learning
Pathways, Ltd. (LPL) of Derby, U.K. The total purchase price
for the outstanding shares of LPL was $829,000 in cash and
common stock of the Company. Founded in 1997, LPL is a rapidly
growing educational products distribution firm with 1998
revenues that will reach approximately $1,300,000. LPL
principally distributes the highly regarded World Book
Encyclopedia print and multimedia encyclopedia product line.
LPL was founded by its current chief executive officer and
principal shareholder, Geoffrey Glossop, a highly
experienced and well-known executive in the educational
technology industry in the United Kingdom. Mr. Glossop will
remain the CEO of LPL and has been appointed to the AEC board of
directors. LPL will be operated as a division of the Company
and will continue to represent World Book, Inc. print and
multimedia reference and other publications as its exclusive
U.K. distributor to schools.
AEC's chief executive officer, Jeffrey Butler, stated: "This is
an exciting development for the Company since LPL should be a
contributor to our 1998 fourth quarter financial performance and
promises to contribute substantially to the Company's fiscal
1999 results. Longer term, the U.K. market is now one of
the fastest-growing world markets for educational technology as
a result of the British government's funding for the National
Grid For Learning (NGL) program. To date the NGL program has
received government funding commitments in excess of pound sterling 1 billion,
or approximately $1.7 billion dollars, to be directed towards
the nation's schools for hardware, software, teacher training,
and Internet infrastructure. This funding will be made
available to U.K. schools through the year 2002."
"Since AEC's announcement in August 1998 of its intent to
acquire LPL, the Company and LPL have been working to conform
the Company's A+dvanced Learning System registered trademark educational
software family to meet the British curriculum standards. This includes
modifications to both the content and software interfaces to
publish a product that will fully meet the needs of U.K.
educators and students. Initial release of titles of
this extensive product family to U.K. schools will commence
early in 1999 with most of the product modifications expected to
be completed in about twelve months. This change over can be
accomplished this quickly because of the authoring functions
designed into the A+dvanced Learning System software
engines."
The American Education Corporation is a developer and marketer
of educational software for grades 1-12 under its A+dvanced
Learning System product family brand that is specifically
designed for the needs of school-based educators. The Company
publishes 93 separate software titles in English and Spanish
language versions that provide comprehensive coverage of core
curriculum for the areas of Reading, Language Arts, Mathematics,
Science, Social Studies, and Writing. Since the introduction of
this product family in mid-1994, it has been installed in over
4,500 U.S. and Puerto Rican schools. The Company has
reported significant gains in revenue and earnings for the past
seven consecutive fiscal quarters. Most recently, the Company
reported a 41% gain in revenues and a 127% increase in pretax
earnings for the nine-month period ended September 30, 1998.
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