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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: February 21, 1997
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(Date of Earliest Event Reported)
ELCOM INTERNATIONAL, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-27376 04-3175156
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
10 Oceana Way, Norwood, Massachusetts 02062
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (617) 440-3333
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Page 1 of 4
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Item 2. Acquisition or Disposition of Assets.
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On February 21, 1997, Elcom International, Inc., a Delaware corporation
(the "Company"), acquired the entire share capital of Data Supplies Limited, a
corporation organized under the laws of England ("Data Supplies"). The
acquisition was accomplished pursuant to an Agreement for the Sale and Purchase
of Shares in the Capital of Data Supplies dated February 21, 1997 (the
"Agreement") by and among Elcom Group Limited, a United Kingdom indirect
subsidiary of the Company ("Buyer"), and the sole shareholder of Data Supplies
(the "Data Supplies Shareholder"). A copy of the Agreement is filed as an
Exhibit hereto.
As consideration for the acquisition of the entire share capital of Data
Supplies, Buyer paid total consideration consisting of (pound)1,000,000 (British
pounds) and a note in the amount of $752,000 (U.S. dollars) to the Data Supplies
Shareholder. The note bears interest at a rate of 5%. The Company has entered
into a short-term service agreement with the Data Supplies Shareholder to cover
his continued employment at the Company through March 31, 1997.
Data Supplies is a profitable, United Kingdom-based remarketer of personal
computer products with revenues for its fiscal year ended December 31, 1996 of
approximately $21 million, and is headquartered in Slough, Berkshire, United
Kingdom. Except as described above, there are no material relationships between
the Company and Data Supplies, the Data Supplies Shareholder or any of their
respective affiliates, directors or officers.
Page 2 of 4
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of Businesses Acquired. *
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(b) Pro Forma Financial Information. *
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(c) Exhibits:
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Exhibit Number
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2.1 Agreement for the sale and purchase of shares in the capital of
Data Supplies Limited dated February 21, 1997, by and among Elcom
Group Limited, the Vendor (as defined therein) and Mr. Savage.
23.1 Consent of Auditors**
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* The Company is analyzing whether the financial statements for Data Supplies
for the periods specified in Rule 3-05(b) of Regulation S-X, and the pro
forma information required pursuant to Article 11 of Regulation S-X will be
required. In any case, such data is not currently available and if required
will be filed by amendment as soon as practicable, but not later than 60
days after the date that this Report is due. The Company expects to file
its Annual Report on Form 10-K for calendar year 1996, prior to such date.
** To be filed by amendment, if required.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELCOM INTERNATIONAL, INC.
/s/ Laurence F. Mulhern
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Laurence F. Mulhern,
Chief Financial Officer and Treasurer
Date: March 6, 1997
Page 4 of 4
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Exhibit 2.1
DATED 21 February 1997
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(1) I.A.S. BLACK
(2) D. SAVAGE
(3) ELCOM GROUP LIMITED
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AGREEMENT
for sale and purchase of shares
in the capital of
Data Supplies Limited
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CME(1137)/686555
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CONTENTS
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PARTIES
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RECITALS
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CLAUSES
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1. Interpretation
2. Agreement to Sell and Purchase
3. Consideration
4. Completion
5. Warranties
6. Limitations on Liability
7. Covenants to protect Goodwill
8. Enforceability and Severability
9. Further Assurance
10. Survival of Agreement
11. Costs
12. Successors and Assigns
13. Announcements
14. Indemnities
15. Notices
16. General
SCHEDULES
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1. Particulars of Vendor
2. The Company
3. The Subsidiary
4. The Properties
5. Tax Deed
6. Warranties
7. The Guarantees
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2
AGREED FORM/ANCILLARY DOCUMENTS
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Accounts
Disclosure Letter
Loan Note Instrument
Power of Attorney
Confirmation of No Claim
Directors/Secretary Resignations
Auditors Resignations
Service Agreements
Cash Deposit Instruction Letter
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AGREEMENT
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DATED 21 February 1997
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PARTIES
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(1) "THE VENDOR" THE PERSON WHOSE NAME AND ADDRESS IS SET OUT IN
SCHEDULE 1
(2) "MR. SAVAGE" DAVID WILSON SAVAGE OF 28 AMERLAND ROAD LONDON SW18
(3) "THE PURCHASER" ELCOM GROUP LIMITED OF ELCOM HOUSE, LANGLEY BUSINESS
CENTRE, STATION ROAD, LANGLEY, BERKS. SL3 8YR
RECITALS
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(A) Data Supplies Limited ("THE COMPANY") is a private company limited by
shares incorporated in England brief particulars of which are set out in
Schedule 2
(B) The Vendor is able to sell or procure the sale to the Purchaser of the
share capital of the Company hereinafter mentioned and the Purchaser has
agreed to purchase such shares subject to and on the terms of this
Agreement.
(C) Mr. Savage has agreed to give warranties and covenants as set out in this
Agreement.
OPERATIVE PROVISIONS
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1. Interpretation
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1.1 In this Agreement and the Schedules hereto the following words and
expressions shall where the context so admits bear the following meanings:-
"THE ACCOUNTS" the individual audited accounts of the Company
and the Subsidiary and also the audited
consolidated balance sheet of the Group as at the
Accounting Date and the audited consolidated
profit and loss account of the Group for the
financial year ended on the Accounting Date and
the notes thereto and directors' and auditors'
reports thereon
"THE ACCOUNTING DATE" 31st December 1995
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"BUSINESS DAY" a day (not being a Saturday) on which banks
generally are open for business in London
"COMPANIES" together the Company and the Subsidiary
"COMPLETION" completion of this Agreement as provided in
Clause 4 below
"COMPLETION DATE" the date hereof or such other date as shall be
agreed between the parties for Completion
"THE CONSIDERATION" the consideration payable for the Shares pursuant
to the terms of this Agreement
"THE DISCLOSURE LETTER" the letter of even date from the Vendor's
Solicitors to the Purchaser's Solicitors
disclosing exceptions to the Warranties
"THE GROUP" the Company and the Subsidiary and (where the
context so permits) each of them
"THE GUARANTEES" the guarantees and indemnities given by Mr IAS
Black and Mrs CJ Black in favour of Alex Lawrie
Receivables Financing Limited for obligations of
the Company copies of which are set out in
Schedule 7
"THE LOAN NOTES" the US$752,000 five per cent Guaranteed Loan Notes
of the Purchaser to be constituted by instrument
in the Agreed Form
"THE DIVIDEND" the cash dividend of [pound] 24,965 (net of any
associated tax credits) paid in about February
1996 in respect of the Shares
"THE PROPERTIES" the properties referred to in Schedule 4 and
references to a "PROPERTY" shall be construed
accordingly
"THE PURCHASER'S GROUP" the Purchaser and any holding company of the
Purchaser and its/their respective subsidiaries
for the time being other than the Company and the
Subsidiary
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"THE PURCHASER'S
SOLICITORS" Gouldens, 22 Tudor Street, London, EC4Y 0JJ
"THE SHARES" the share capital of the Company in issue as
detailed in Schedule 2
"SUBSIDIARY" the company brief particulars of which are set out
in Schedule 3
"THE TAX DEED" a deed in the form set out in Schedule 5
"TAXATION" or "TAX" tax as defined in the Tax Deed
"THE VENDOR'S
SOLICITORS" Hepherd Winstanley & Pugh, 22 Kings Park Road,
Southampton, Hampshire, SO15 2UF
"THE WARRANTIES" the warranties representations and undertakings
set out in Clause 5 and Schedule 6
"WARRANTORS" the Vendor and Mr Savage
1.2 References in this Agreement to "THE COMPANIES" are references to the
Company and the Subsidiary and the expression "THE COMPANY" shall (save
where clearly inconsistent) also include the Subsidiary so that (without
limitation) each of the Warranties in Schedule 6 shall be deemed separately
given in respect of and in relation to each of the Companies.
1.3 References in this Agreement to "THE TAXES ACT", "THE TCGA" and "THE
COMPANIES ACT" are references to the Income and Corporation Taxes Act 1988,
the Taxation of Chargeable Gains Act 1992 and the Companies Act 1985
respectively and words and expressions defined in the Companies Act shall
(unless the context clearly does not so permit) bear the same meanings
where used in this Agreement.
1.4 The ejusdem generis rule of construction shall not apply to this Agreement
and accordingly general words shall not be given a restrictive meaning by
reason of their being preceded or followed by words indicating a particular
class or examples of acts matters or things.
1.5 Words importing the singular shall include the plural and vice versa and
words importing any gender shall include all other genders and references
to persons shall include corporations and unincorporated associations.
1.6 References in this Agreement to any "AGREED DRAFT" document or any document
in AGREED FORM are references to the document described in the form of the
draft agreed between the parties and initialled by them or by the Vendor's
Solicitors and
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Purchaser's Solicitors on their behalf for identification purposes.
1.7 References in this Agreement to statutory provisions shall be construed as
references to those provisions as respectively amended consolidated
extended or re-enacted from time to time and shall include the
corresponding provisions of any earlier legislation (whether repealed or
not) and any orders regulations instruments or other subordinate
legislation made from time to time under the statute concerned provided
that such amendment, consolidation, extension or reenactment shall not
increase the liability of a Vendor or Warrantor.
1.8 References to this Agreement shall include the Schedules hereto which shall
form part hereof and shall have the same force and effect as if expressly
set out in the body of this Agreement.
1.9 References in this Agreement to an "ASSOCIATE" or a "CONNECTED PERSON" in
relation to another, are references to a person who is an associate of or
connected with the other within the meaning of Section 417 or Section 839
of the Taxes Act, as appropriate.
1.10 The Clause headings in this Agreement are for convenience only and shall
not affect the interpretation hereof.
1.11 In this Agreement references to any time of day are to the time in London,
England.
2. AGREEMENT TO SELL AND PURCHASE
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2.1 The Vendor hereby agrees to sell the Shares to the Purchaser (a) free from
all liens charges encumbrances and other equities of any description
(whether known about or not) (b) together with the benefit of all rights
and profits attaching thereto including all rights to dividends and other
distributions declared made or payable thereon in respect of periods
commencing on or after 1st January 1996 (but excluding the Dividend) and
(c) otherwise with full title guarantee for the purposes of the Law of
Property (Miscellaneous Provisions) Act 1994 and the Purchaser hereby
agrees to purchase the same on and subject to the terms of this Agreement.
2.2 The Vendor hereby waives and undertakes to procure the waiver of all
pre-emption and similar rights over the Shares or any of them to which he
or any other person may be entitled under the Articles of Association of
the Company or otherwise in relation to the sale and purchase of the same
hereunder.
2.3 Nothing in this Agreement shall oblige the Purchaser to buy any of the
Shares or otherwise complete this Agreement unless the sale and purchase of
all of the Shares is completed simultaneously.
2.4 Notwithstanding that in accordance with the terms hereof the Consideration
may not be paid in full on Completion the full rights and title of the
Vendor to the Shares and the rights
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therein shall on Completion pass to the Purchaser absolutely free from
any lien.
3. CONSIDERATION
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The Consideration shall be the aggregate of:-
(A) the sum of (pound)1 million payable in cash; and
(B) the issue of the Loan Notes credited as fully paid up at par.
4. COMPLETION
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4.1 Unless otherwise agreed Completion shall take place at the offices of the
Purchaser's Solicitors on or before 2.00 p.m. on the Completion Date.
4.2 On Completion the Vendor shall:-
(A) deliver to the Purchaser:-
(i) duly executed transfers of the Shares in favour of the Purchaser
or the Purchaser's nominee(s) together with the share
certificates therefor or an indemnity in a form reasonably
required by the Purchaser in the case of any missing share
certificates;
(ii) to the extent not given in this Agreement, irrevocable powers of
attorney in the Agreed Form executed by each of the registered
holders of the Shares authorising the Purchaser or its nominees
to exercise all voting and other rights attaching to the Shares
until registration of the Purchaser or such nominees as the
holder(s) thereof;
(iii) share certificates in respect of all the issued shares in the
Subsidiary and duly executed transfers in blank in respect of all
of such shares not registered in the name of the Company;
(iv) the Certificate(s) of Incorporation the Common Seal Minute Book
Register of Members (duly written up to date) Share Certificate
book and all other statutory records of each of the Companies;
(v) the Tax Deed duly executed as a deed by each of the Covenantors
therein mentioned;
(vi) a confirmation in Agreed Form executed as a deed by each of the
Vendor and Mr. D. Savage to the effect that (except as expressly
therein mentioned) he has no claim whether as officer employee or
otherwise against any of the Companies and that none of the
Companies is in any way indebted to him;
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(vii) the written resignations of each of the Directors and the
Secretary of each of the Companies, each such resignation to be
executed as a deed and to confirm that the person resigning has
no claims against such Company for compensation for loss of
office or otherwise;
(viii) the written resignations of the auditors of each of the
Companies, each such resignation to be in the form required by
Section 394 of the Companies Act and to confirm that such
Auditors are of the opinion that there are no circumstances of
the nature referred to in Section 394(1) of the Companies Act
that need to be brought to the attention of the members or
creditors of such Company in connection with their resignation;
(ix) a statement showing the balances on all bank accounts of the
Group at the latest practicable date prior to Completion
together with a list of all sums received and cheques
drawn in excess of (pound)1,000 for any one item since the
date of the relevant statement;
(x) all cheque books and credit cards of the Group
and a letter to each of the bankers of the Group, signed by
sufficient duly authorised signatories, cancelling the
existing mandates of the Group and authorising the bankers to
deal with such authorised representatives as the Purchaser
shall nominate in relation to the terms of any replacement
mandates therefor;
(xi) the title deeds to the Properties (except to the extent in the
possession of mortgagees or other security holders as
specifically disclosed, with reference to this Clause, in the
Disclosure Letter).
(B) repay or procure the repayment in full of all amounts owing (even if
not due for repayment) to the Group by the Vendor or any of his
connected persons or associates and shall procure that all guarantees
or indemnities given by or binding on any of the Companies in respect
of any liabilities or obligations (actual or contingent) of the Vendor
or any of such connected persons or associates are fully and
effectively released without cost to any of the Companies.
(C) procure that each of the Vendor, Mr. Savage and Mr. D. Seddon shall
enter into a service agreement in Agreed Form with the Company.
(D) procure that a meeting of the Board of Directors of each of the
Companies shall be held at which:-
(i) the transfers of the Shares and, as the case may be, the
transfers in blank referred to in Clause 4.2(A), if completed by
the Purchaser, shall
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be approved for registration subject only to them being duly
stamped;
(ii) the said resignations shall be accepted with effect from the
conclusion of the meeting and such persons as the Purchaser shall
nominate shall be appointed Directors, the Secretary and
Auditors;
(iii) all existing bank mandates shall be cancelled and fresh
instructions shall be issued to bankers as the Purchaser shall
require.
4.3 Subject to conclusion of the matters referred to in Clause 4.2 above, the
Purchaser shall on Completion:-
(A) duly constitute the Loan Notes and allot the Loan Notes to the Vendor
in accordance with Clause 3 and cause such Loan Notes to be registered
in the name of the Vendor and deliver certificates in respect of the
same to the Vendor or the Vendor's Solicitors;
(B) deliver to the Vendor's Solicitors by telegraphic transfer payment of
(pound)1 million.
4.4 The Vendor and the Purchaser shall each execute and deliver the Cash
Deposit Instruction Letter to the Vendor's Solicitors and the Purchaser's
Solicitors.
4.5 If on the Completion Date either party shall fail to comply in any material
respect with their obligations under Clauses 4.2, 4.3 and 4.4 above the
innocent party may by notice in writing to the defaulting party:
(a) defer Completion to a date not more than 28 days following the
Completion Date (and the provisions of this Clause 4.5 shall apply to
Completion as so deferred); or
(b) proceed to Completion so far as practicable but without prejudice to
its rights hereunder; or
(c) rescind this Agreement.
4.6 If this Agreement is rescinded pursuant to this Clause, it shall have no
further force and effect and none of the parties shall have any liability
in respect thereof, except as regards any antecedent breach, and except
also that the provisions of Clauses 8 (Enforceability and Severability), 11
(Costs), 13 (Announcements), 15 (Notices) and 16 (General) shall continue
in full force and effect.
5. WARRANTIES
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5.1 The Warrantors hereby represent and warrant to the Purchaser in the terms
of the Warranties and acknowledge that the Purchaser is entering into this
Agreement in
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reliance on the Warranties. The Purchaser acknowledges that it has not
entered into this Agreement or any other deeds or documents in reliance on
any warranty, representation, undertaking or statement of fact or opinion
other than the warranties as modified by the Disclosure Letter.
5.2 Except as provided below, the Warranties are given subject only to those
matters fairly disclosed in or by virtue of the Disclosure Letter and no
other information of which the Purchaser has actual or constructive
knowledge shall prejudice any claim under the Warranties or operate to
reduce any amount recoverable thereunder.
5.3 Each of the Warranties is given independently from and (save as provided in
Clause 5.2 as regards the Disclosure Letter) shall not be limited by
reference to any of the others of them or anything else contained in this
Agreement or the Tax Deed or any other agreement or document referred to
herein.
5.4 The Vendor shall forthwith disclose to the Purchaser in writing any matter
or thing which may arise or become known to him after the date hereof which
is or could be a breach of any of the Warranties.
5.5 The Vendor acknowledges that to the extent that a breach of Warranty
affects, or if known would have affected and thereby reduced the profit
before tax of the Group for the year ended 31st December 1996 the
Purchaser's prima facie claim for Compensation is for (pound)5 for each
(pound)1 of such reduction if such profit, adopting consistent policies or
adopted in producing the Accounts, would be reduced below (pound)448,000.
The provisions of this clause are without prejudice to the right of the
Purchaser to claim damages on any other bases available to if for breach of
Warranty.
5.6 The Vendor hereby irrevocably waives all rights and claims which he may
have against each Company in respect of any misrepresentation inaccuracy or
omission in or from any information or advice given by it or any of its
officers or employees to such Vendor to enable him to give any of the
Warranties or to prepare the Disclosure Letter or to assume any of the
obligations assumed or to be assumed by him under or pursuant to this
Agreement.
5.7 The Purchaser warrants to the Warrantors (upon which warranty the
Warrantors are relying in entering into this Agreement) that the Purchaser
has formed no intention of bringing any claim for breach of Warranty at the
date of this Agreement.
6. LIMITATIONS ON LIABILITY
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6.1 Subject as provided below or in the Tax Deed, the liability of the
Warrantors under or in respect of the Warranties and/or the covenants on
their part contained in the Tax Deed ("THE INDEMNITIES") shall be limited
as follows:-
(A) no claim under the Warranties or the Indemnities ("a relevant claim")
may be made unless written notice of the claim concerned has been
given to the
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Warrantors before the seventh anniversary of Completion in the case of
the Indemnities and the Warranties relating to taxation ("THE TAX
WARRANTIES") and before 31st December 1998 in any other case;
(B) no claim under the Warranties may be made unless and until the
aggregate amount of all relevant claims exceeds (pound)50,000 although
(subject to paragraph (C) of this Clause) once such limit is exceeded
the full amount of all such claims and any other claims shall be
recoverable; and
(C) the maximum aggregate liability of all the Warrantors under the
Warranties and the Indemnities shall not exceed an amount equal to the
aggregate of the Consideration.
6.2 No relevant claim may be made:-
(A) if the claim has previously been satisfied in full pursuant to any
other provision of this Agreement or any agreement entered into
pursuant hereto; or
(B) in respect of any matter which would otherwise give rise to a
liability of (pound)1,000 or less and no such matter will count
towards the calculation of the amount stated in Clause 6.1(B). For
this purpose a series of related claims arising from the same
circumstances each claim being less than (pound)1,000 shall be treated
as an individual claim and be aggregated accordingly; or
(C) against Mr. Savage to the extent that his aggregate liability under
the Warranties and Indemnities would exceed 10% of the Consideration.
6.3 The amount of any relevant claim will be reduced:-
(A) to the extent that the Company concerned has previously received
indemnity against any loss or damage suffered by it arising out of the
breach or claim under the terms of any insurance policy of such
Company in force at the date hereof; or
(B) to the extent that specific provision for the liability to which it
relates was made in the Accounts.
6.4 The Purchaser shall notify the Warrantors in writing as soon as reasonably
practicable after the facts giving rise to a claim first become known to
the Purchaser, identifying the Warranties or Indemnities in respect of
which there is an alleged breach or claim, and giving such estimate of the
amount of the claim as shall be reasonably possible at that time and
indicating the basis on which such estimate is made. The Purchaser shall
keep the Warrantors reasonably informed of the circumstances giving rise to
the claim and shall consult with them and take into account their
reasonable representations as to the manner of dealing with the relevant
circumstances.
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6.5 No liability will arise for breach of any of the Warranties if and to the
extent that:-
(A) such breach or the claim in respect thereof arises or is increased as
a result of or is otherwise attributable to any legislation not in
force at the date hereof or any retrospective change in the law or any
increase in the rate of taxation in force on the date hereof or any
retrospective increase in the rate of taxation or change in methods of
computation of taxation or the practice of any taxation authority in
force at the date hereof; or
(B) the Purchaser had actual knowledge that the circumstances would give
rise to a claim and such breach or claim is attributable in whole or
in part to any voluntary act, omission, transaction or arrangement of
any or all of the Purchaser or the Companies after the date hereof
other than in the ordinary course of the business of the Purchaser or
the Company concerned and where a reasonable and commercial
alternative course of action is available at no additional cost; or
(C) the Purchaser or the relevant Company is entitled to recover under any
insurance policy against any loss or damage suffered as a result of
any breach or claim or, as the case may be, in respect of the subject
matter thereof or would have been entitled had the Company maintained
insurances similar to those in force prior to Completion (but any
increase in insurance premium for the following year suffered by the
Purchaser or the Company or Subsidiary shall be reimbursed by the
Warrantors); or
(D) such claim under the Warranties in relation to Taxation arises or is
increased:-
(i) by a failure of the Company or any Group Company to make any
claim, election, surrender or disclaimer or give any notice
or consent or to do any other thing after Completion, the
making, giving or doing of which was taken into account in
computing the provision for Taxation or deferred Taxation in
the Accounts; or
(ii) by virtue of any disclaimer by the Company after Completion
of capital or other allowances available to and claimed by
the Company or any of its Subsidiaries in respect of any
period ended on or before the date of the Accounts
in each such case where the need to make any such claim,
election, surrender or disclaimer or give such notice or consent
and the time limit for doing the same was disclosed in the
Disclosure Letter with reference to this Clause.
6.6 Without prejudice to the joint and several liability of the Warrantors
hereunder and under the Indemnities each of the Warrantors agrees with one
another that, as between
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themselves, any one person will only bear the appropriate part of any
liability arising under the Warranties or under the Indemnities, and for
this purpose appropriate part shall mean:-
6.6.1 in the case of any liability which is fairly attributable to, or
which arises by reason of, income or benefits received by, or
the act or default of, that person or persons connected with him
(not themselves being either of the Warrantors): the whole of such
liability; and
6.6.2 in any other case: 90% of such liability shall be borne by Mr. Black
and 10% by Mr. Savage.
Each of the Warrantors will notify the other upon making any payment or
transferring any asset (whether to the Purchaser or to the Company) in
settlement of any such liability and within seven days after such notice
the other will pay to the party giving the notice a sum equal to the
appropriate part of such liability; provided that nothing herein shall make
either of the Warrantors liable to contribute to any payment in settlement
of a claim unreasonably admitted, compromised or settled by either of them.
6.7 The Purchaser shall be entitled to claim both under the Warranties and
under the Indemnities by reference to the same subject matter, but any
payment in respect of a breach of Warranty shall to such extent satisfy and
discharge any claim made by the Purchaser under the Indemnities in respect
of the same subject matter and vice versa.
6.8 The provisions of Clauses 3 to 6 (inclusive) of the Tax Deed shall apply
mutatis mutandis to any claims under the Tax Warranties.
6.9 If the liability or loss or damage the subject of a claim under the
Warranties (other than the Tax Warranties as to which Clause 5 of the Tax
Deed shall apply) has previously been made good in full (including all
related costs and expenses including one year's increased insurance
premiums) and the Purchaser or Company subsequently recovers or receives
from a third party (not being the other of them or any other member of the
Purchaser's Group or a Vendor) a sum which is directly referable to the
subject matter of such claim, the Purchaser shall promptly after the
receipt of such sum pay to the Vendor's Solicitors on behalf of the
Warrantors originally satisfying the claim either the net amount received
from such third party after deducting any costs and expenses reasonably
incurred by the Purchaser or the Company in recovering such sum from the
third party (including any taxation payable by reason of the receipt
thereof) but not in any event exceeding the amount originally paid to it in
respect of the claim concerned or, if the claim was settled or determined
on the basis specified in clause 5.5, the amount paid by the Warrantors in
settlement or satisfaction of such claim but after deducting costs and
expenses as aforesaid.
6.10 Any amount paid by the Vendor to the Purchaser in satisfaction of any
relevant claim shall be treated as a reduction by that amount in the
Consideration for the Shares.
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6.11 Nothing contained in the Disclosure Letter shall limit and none of the
limitations contained in this Clause and/or in Clauses 3 to 6 (inclusive)
of the Tax Deed shall apply to any breach of any of the Warranties given in
paragraphs (75), (108), (109), (110), (111) and (119) of Schedule 6.
6.12 Nothing in this Agreement or the Tax Deed or otherwise shall limit the
liability of any Warrantor thereunder where such Warrantor has made a
fraudulent, reckless or deliberate misrepresentation .
6.13 The Purchaser shall procure that the Company and the Subsidiaries each use
all reasonable efforts to collect promptly their respective debts at the
date of this Agreement.
7. COVENANTS TO PROTECT GOODWILL
-----------------------------
7.1 For the purposes of protecting the goodwill of the Companies and the value
of the Shares the Warrantors hereby undertake to and covenant with the
Purchaser that (except as a shareholder in the Purchaser or in the proper
performance of his duties as an employee or officer of any Company or any
member of the Purchaser's Group) none of them will, whether for his own
account or jointly with or as manager agent officer employee consultant
shareholder or otherwise on behalf of any other person firm or corporation,
and whether directly or indirectly during the Relevant Period other than as
permitted in Clause 7.6:-
(A) be engaged concerned or interested in or associated with in the
Relevant Territory with any business which is the same as or similar
to or in direct or indirect competition with any Relevant Business;
and/or
(B) within the Relevant Territory carry on or be engaged concerned or
interested in the sale of goods or provision of services, of a kind
supplied by any Company in connection with its Relevant Business, to
any person firm or company which has at any time within the period of
twelve months preceding the date of this Agreement been a customer of
or in the habit of dealing with any Company for such goods or
services; and/or
(C) endeavour to procure the supply of goods or services from any person
firm or company which during the twelve months preceding Completion
has been a supplier of goods or services in connection with any
Relevant Business to any Company where such supply would be likely to
have an adverse effect on or cause loss to such Company; and/or
(D) solicit, interfere with or endeavour to entice away from any company
any person, firm or company who to his knowledge is now or has during
the twelve months preceding Completion been a client, customer or in
the habit of dealing with such Company nor enter into a partnership or
any association whether directly or indirectly with any such person;
and/or
<PAGE> 16
13
(E) solicit interfere with or endeavour to entice away from any Company or
save where such employee or consultant shall have had his or her
employment or consultancy terminated by the Company other than for
breach or default by such employee or consultant offer to employ or
engage under a contract for services or enter into partnership with
any person who on or during the twelve months preceding Completion is
or was an officer or employee of or full time consultant to any
Company; and/or
(F) knowingly do or say anything which is or is calculated to be
prejudicial to the interests of any Company or its business or which
results or may result in the discontinuance of any contract or
arrangement of benefit to any Company;
PROVIDED THAT nothing in this Clause 7.1 shall prohibit the Warrantors from
holding between them directly or indirectly (for investment purposes only)
not more than 5% of the shares of a public company listed or dealt in on a
recognised investment exchange or holding the Consideration Shares.
7.2 Each Warrantor hereby undertakes to and with the Purchaser that (save in
the proper performance of his duties as an employee or officer of any
Company or any member of the Purchaser's Group) he will not, whether for
his own account or jointly with or as manager agent officer employee
consultant shareholder or otherwise on behalf of any other person firm or
corporation, and whether directly or indirectly:-
(A) take away make use of or disclose to any person firm or corporation
(save insofar as necessary to comply with any statutory obligation or
order of any Court or statutory tribunal of competent jurisdiction)
any confidential information or trade secrets in his possession and
which in any way relate to the business or other affairs of any
Company or to any manufacturers suppliers customers clients agents or
any other person who has or who has had any dealings with any Company;
and/or
(B) make use of the names "Data Supplies", or "Datacare" "DataSource",
"InfraNet" or "DS" or any corporate or business name which is
identical or similar to or is likely to be confused with the corporate
name or any trade or business name of any of the Companies or which
might suggest a connection with the same.
7.3 The Vendor undertakes to execute and deliver and do such documents deeds
and things as the Purchaser may reasonably require after Completion to vest
in the Group, or such other member of the Purchaser's Group as the
Purchaser shall direct for no additional consideration, ownership and title
and all rights of such Vendor in respect of all inventions and intellectual
property owned by or vested in him and which relate to products of the
Group or any manufacturing process used or
<PAGE> 17
14
intended at Completion to be used by the Group in its business.
7.4 For the purposes of this Clause:-
(A) the expression "RELEVANT BUSINESS" means any business of the sale of
personal computers, software, network and communications products
including cabling and related value added services in both the end
user and distribution markets.
(B) the expression "THE RELEVANT PERIOD" means the period from Completion
to 31 December 1999;
(C) the expression "THE RELEVANT TERRITORY" means the United Kingdom.
7.5 Each of the undertakings and covenants contained in the separate paragraphs
of Clauses 8.1 and 8.2 is and shall be a separate undertaking and covenant
by the Vendor.
7.6 It is hereby agreed and declared that the benefit of the covenants and
undertakings given in this Clause shall be assignable by the Purchaser to
and become enforceable by any purchaser or assignee or other holder for the
time being of any of the Shares or of any shares of any of the Subsidiaries
or any purchaser or assignee of all or any part of any Relevant Business.
7.7 The restrictions set out in this Clause 7 shall not prevent Mr Black and
his connected persons from carrying on the business of recruitment
consultancy to the extent and in the manner carried on to date and trading
as "Peregrine".
8. ENFORCEABILITY AND SEVERABILITY
-------------------------------
8.1 Each of the agreements undertakings covenants warranties indemnities and
other obligations of the parties entered into pursuant hereto (including
without limitation under Clause 8) is considered reasonable by the parties
but in the event that any provision or part thereof shall be held void or
unenforceable or in conflict with the law of any state or jurisdiction any
provision or part so held void or unenforceable or in conflict as aforesaid
shall be severed from this Agreement or other document in which it is
contained or otherwise modified to become valid and enforceable insofar as
it relates to that state or jurisdiction only and the enforceability and
validity of any other parts or provisions of this Agreement and such
document shall not be affected by such severance or modification.
8.2 Insofar as the restrictions contained in this Agreement or any arrangement
of which it forms part are registerable under the Restrictive Trade
Practices Act 1976 ("THE RTPA") such restrictions shall to such extent not
come into force until the day following the day upon which such particulars
relating thereto as are required to be filed with the Office of Fair
Trading ("OFT") pursuant to the RTPA shall have been
<PAGE> 18
15
received by the OFT for filing.
8.3 Where any agreement undertaking covenant warranty or indemnity given
pursuant to this Agreement is stated to be for the benefit of Company or
other third party the same shall be directly enforceable by the Company or
third party concerned or by the Purchaser on its behalf as if it were named
as a party hereto and had duly executed this Agreement.
9. FURTHER ASSURANCE
-----------------
9.1 The Vendor hereby agrees for no additional consideration or payment to do
execute and deliver any such further acts documents and things as the
Purchaser may reasonably require to vest in the Purchaser (or as it shall
direct) the beneficial ownership of the Shares free from all charges liens
and other adverse interests .
9.2 The Vendor hereby irrevocably and unconditionally appoints the Purchaser
with effect on and from Completion (but subject to Completion taking place)
as his attorney with full powers of substitution in his name and for him
and on his behalf (and to the complete exclusion of any rights he may have
in such regard) lawfully to exercise all voting and other rights and
receive all the benefits and entitlements which may now or at any time
hereafter attach to his Shares or any of the Shares registered in his name
(whether alone or jointly with any other person) and to transfer and deal
with such shares, rights, benefits and entitlements and execute such
documents under hand or as a deed and do such acts and things in connection
with the foregoing (including without limitation the passing of any
resolutions required under Section 155 of the Companies Act to facilitate
Completion) as the Purchaser shall from time to time think fit in all
respects as if the Purchaser were the absolute legal and beneficial owner
thereof.
9.3 The powers of attorney granted in this Clause are given by way of security
for the due performance by the Vendor of his obligations thereby
contemplated.
9.4 The Vendor undertakes to provide the Purchaser at the Purchaser's cost such
assistance and documentation as the Purchaser may reasonably expect to
enable the Purchaser's holding company to comply with its United States
Securities Exchange Commission's filing obligations and in particular will
use all reasonable endeavours to procure BDO Stoy Hayward and any other
firm of auditors in relation to the Company in respect of the financial
periods commencing on or after 31 December 1993 to make available such of
their files and working papers and to otherwise co-operate in such fashion
as may be required for such purpose.
10. SURVIVAL OF AGREEMENT
---------------------
This Agreement (and in particular the warranties representations covenants
agreements and undertakings of the Vendor hereunder) shall insofar as the
terms thereof remain to be performed or are capable of subsisting remain in
full force and effect after and notwithstanding Completion.
<PAGE> 19
16
11. COSTS
-----
Save as expressly otherwise provided herein each party shall pay his own
costs and expenses in connection with the preparation and carrying into
effect of this Agreement.
12. SUCCESSORS AND ASSIGNS
----------------------
This Agreement shall not be assignable by the Vendor (save as expressly
permitted herein) but shall be binding upon and enure for the benefit of
each party's successors and on the Vendor's personal representatives.
13. ANNOUNCEMENTS
-------------
Save in respect of statutory returns or matters required to be disclosed by
law or to the United States Securities Exchange Commission or the
requirements of NASDAQ or other governmental or regulatory authority, none
of the parties hereto shall make any press statement or other public
announcement in connection with this Agreement without the prior written
approval of the text of such statement or announcement (in the case of the
Vendor) by the Purchaser or (in the case of the Purchaser) by the Vendor.
14. INDEMNITIES
-----------
14.1 The Purchaser shall use its reasonable endeavours to release Mr I A S Black
and Mrs C J Black (Mr Black acting as Mrs Black's agent in this respect)
from the Guarantees as soon as practicable after Completion and in any
event shall procure the release not later than 28th February 1997 and with
effect from Completion the Purchaser shall indemnify and at all times
thereafter hold Mr and Mrs Black and each of them fully and effectively
indemnified against any claim arising under the Guarantees. The obligations
of the Purchaser shall be free from all set-off or other cross claims so
that, for the avoidance of doubt, the Purchaser shall not be able to escape
liability hereunder in whole or in part on account of any claim which it
may have against Mr and/or Mrs Black under this Agreement or on any other
account.
14.2 The Vendor shall indemnify and at all times keep indemnified the Company
against any costs, claims, liabilities, loss, damages and expenses which
the Company may suffer or incur arising out of the claim made by Anglo
Leasing plc in respect of the alleged early termination of an agreement
relating to a franking machine to the extent such liability exceeds
(pound)768.26 and subject to the Company being indemnified and secured to
its reasonable satisfaction in respect thereof and against all such costs,
claims liabilities, loss, damage and expenses the Vendor shall have conduct
of any proceedings relating thereto and the Company shall act in connection
therewith in accordance with the reasonable instructions of the Vendor.
<PAGE> 20
17
14.3 The Vendor agrees with the Purchaser for itself and as agent and/or trustee
for each Company in the Group to indemnify and keep the Purchaser
indemnified at all times from and agents any liability, loss, damage,
claim, cost or expense which may be suffered or incurred by any Company in
the Group arising out of or in connection with the Data Supplies Limited
Retirement and Death Benefits Plan. Provided that the Vendor shall (subject
to the Purchaser being indemnified and secured to its reasonable
satisfaction in relation to all costs, liability and expenses it may
thereby incur) be entitled to have conduct of all matters in respect of
which the Purchaser has any claim for indemnity hereunder and the Purchaser
shall procure that the Company shall act in accordance with the reasonable
requirements of the Vendor in relation thereto.
15. NOTICES
-------
15.1 Without prejudice to any other method available for the giving of notice or
to any acknowledgement by any party that it has received the same, any
notice or other communication desired to be given or made hereunder
including service of any proceedings hereunder may be given or made by
personally delivering the same or by sending the same by first class
prepaid post (airmail if sent to or from abroad) or telex or facsimile
("FAX") and if sent by fax a copy shall be sent by first class prepaid post
(airmail if sent to or from abroad) in the case of the Purchaser to its
registered office for the time being and in the case of any other party to
his address shown herein or such other address in the United Kingdom as
shall be notified from time to time in accordance with the provisions of
this Clause and if sent by post as aforesaid shall be deemed to have been
received on the second business day after the posting of the same (or on
the third business day if sent to or from abroad) and if personally
delivered sent by telex or fax shall be deemed to have been received on
delivery or despatch if sent on a business day or (if not so delivered or
sent) on the first business day thereafter.
16. GENERAL
-------
16.1 Except otherwise expressly provided herein the obligations and liabilities
of the Warrantors assumed or undertaken under or pursuant to this Agreement
and Tax Deed shall be joint and several.
16.2 The obligations and liabilities of any party hereto shall not be prejudiced
released or affected by any time or forbearance or indulgence release or
compromise given or granted by any person to whom such obligations and
liabilities are owed or by any other person to such party or any other
party so obliged or liable nor by any other matter or circumstance which
(but for this provision) would operate to prejudice release or affect any
such obligations except an express written release by all the parties to
whom the relevant obligations and liabilities are owed or due.
16.3 This Agreement together with all documents in Agreed Form represents the
entire agreement between the parties and it may only be varied by written
document signed
<PAGE> 21
18
by all the parties.
16.4 Any party may take action for any breach or nonfulfillment of any
warranties undertakings agreements and representations on behalf of any
other party or parties before or after Completion notwithstanding that such
breach or nonfulfillment was known to or discoverable by such party before
Completion and notwithstanding that such party shall delay or otherwise
fail to exercise its rights hereunder or generally in such regard.
16.5 Except where expressly provided to the contrary, the rights and remedies
reserved to the parties or any of them under any provision of this
Agreement or in any document to be executed pursuant hereto shall be in
addition and without prejudice to any other rights or remedies available to
such parties whether under this Agreement or any such document by statute
common law or otherwise.
16.6 This Agreement shall be governed by and construed in accordance with
English Law and the parties hereby submit themselves to the non-exclusive
jurisdiction of the English Courts.
IN WITNESS whereof this Agreement has been executed as a deed of each of the
parties the day and year first before written.
<PAGE> 22
19
SCHEDULE 1
----------
<TABLE>
PARTICULARS OF THE VENDOR
<CAPTION>
- ---------------------------------------------------------------------------------------
1 2 3 4
Name and Address Sale Shares Cash Consideration Loan Notes US$
---------------- ----------- ------------------ --------------
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ian Alastair Sloan 43,107 (pound)1,000,000 US$752,000
Black
Honeysuckle Lodge
Andrew Hill Lane
Hedgerley
Slough
Buckinghamshire
SL2 3UL
- ---------------------------------------------------------------------------------------
------ ---------------- ----------
- ---------------------------------------------------------------------------------------
TOTALS 43,107 (pound)1,000,000 US$752,000
- ---------------------------------------------------------------------------------------
------ ---------------- ----------
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE> 23
20
SCHEDULE 2
----------
THE COMPANY
DATA SUPPLIES LIMITED
1. Date of Incorporation: 22 June 1982
2. Registered Number: 1645676
3. Authorised Share Capital: (pound)100,000 divided into 100,000
ordinary shares of (pound)1.00 each
4. Issued Share Capital: 43,107 ordinary shares of (pound)1.00
each all fully paid or credited as
fully paid
5. Directors: C.J. Black
I.A.S. Black
D.W. Savage
6. Secretary: C.J. Black
7. Registered Office: 16, Bell Street, Princes Risborough,
Bucks. HP27 0AD
8. Accounting Reference Date: 31 December
<PAGE> 24
21
SCHEDULE 3
----------
THE SUBSIDIARY
DS Datacare Limited
-------------------
1. Date of Incorporation: 13th June 1991
2. Registered Number: 2620004
3. Authorised Share Capital: (pound)1 divided into 1000 ordinary
shares of (pound)1 each
4. Issued Share Capital: 1000 ordinary shares all fully paid
or credited as fully paid
5. Shareholders: Data Supplies Limited 999 ordinary
shares
IAS Black 1 ordinary share
6. Directors: Ian Alistair Sloan Black
Catherine Joan Black
David Wilson Savage
David William Seddon
7. Secretary: Catherine Joan Black
8. Registered Office: 16 Bell Street, Princes Risborough
Bucks HP27 OAD
9. Accounting Reference Date: 31st December
<PAGE> 25
22
SCHEDULE 4
----------
THE PROPERTIES
PART I RELATING TO NO. 348 EDINBURGH AVENUE TRADING ESTATE SLOUGH
Building as described in Head Lease dated 4th July 1986 between Slough Trading
Estate Limited (1) and Xerox Computer Services Limited (2) for a term of 24
years from 29th December 1985 at yearly rents and service charge and other
payments stated in that Lease.
Assigned to Data Supplies Limited by Assignment dated 18th March 1993.
Subject to Underlease dated 20th March 1996 between Data Supplies Limited (1)
and Thomson Broadcast Limited (2) for a term commencing 25th December 1995 and
terminating on 21 December 2009 at yearly rents and service charge and other
payments stated in that Underlease.
PART II RELATING TO NO. 349 EDINBURGH AVENUE TRADING ESTATE SLOUGH
Building as described in Head Lease dated 6th January 1986 between Slough
Trading Estate Limited (1) and Portcare Freight Services Limited (2) for a term
of 25 years from 29th September 1985 at yearly rents and service charge and
other payments stated in that Lease.
Deed of Rectification and Variation dated 31st December 1986 of above Lease
dated 6th January 1986 between the same parties.
Assigned to Data Supplies Limited by Assignment dated 4th May 1988.
PART III RELATING TO USE OF 7 CAR PARKING SPACES AT 140 EDINBURGH AVENUE
TRADING ESTATE SLOUGH
Licence dated 23rd January 1996 between Flexible Hose Supplies Limited (1) and
D S Group of Companies (2) as varied by letter dated 25th January 1996.
<PAGE> 26
23
SCHEDULE 5
----------
TAX DEED
THIS TAX DEED is made on 21 February 1997
BETWEEN
(1) ELCOM GROUP LIMITED (Company number 2977666) of Elcom House, Langley
Business Centre, Station Road, Langley, Berks. SL3 8YR ("THE PURCHASER"
which expression shall include its successors in title and assigns)
(2) THOSE PERSONS whose names and addresses are set out in the Schedule hereto
(together "THE COVENANTORS" and "A COVENANTOR" shall be construed
accordingly)
WHEREAS this Deed is supplemental to an Agreement dated 21 February 1997 ("THE
AGREEMENT") made between the Covenantors and the Purchaser and under which the
Purchaser has today completed the acquisition of the shares in the capital of
Data Supplies Limited
NOW THIS DEED WITNESSES as follows:-
1. Interpretation
1.1 Words and expressions defined in the Agreement shall (unless specifically
defined in this Deed) have the same meanings when used herein and all
provisions of the Agreement concerning matters of construction or
interpretation shall apply to this Deed.
1.2 The following words and expressions shall have the following meanings:-
(A) "CLAIM" includes any assessment, notice, demand, letter or other
communication or document issued or action taken by or on behalf of
any Tax Authority from which it appears that a tax liability is to be,
or may come to be, imposed whether or not the same may be the primary
liability of the Company and whether or not it may be entitled to
claim reimbursement from any other person or persons;
(B) "THE COMPANY" means Data Supplies Limited and the Subsidiary and each
of them;
(C) "EVENT" includes every event, act, transaction (including without
limitation the entry into and completion of the Agreement or the
liquidation of the Company) and every occurrence, circumstance,
dealing, arrangement, default or omission of any kind whatsoever done
or omitted to be done by the Covenantors or the Company or in any way
concerning or affecting the
<PAGE> 27
24
Company whether or not done or omitted to be done by it or the
Covenantors and (without limitation) a failure to make sufficient
distributions to avoid any apportionment of income under Chapter III
of Part XI of the Taxes Act;
(D) "RELIEF" shall mean any relief, allowance or credit in respect of any
tax or any deduction in computing income, profits or gains for the
purposes of any tax;
(E) "TAX" means all forms of taxation, dues, duties, imposts, levies and
rates of the United Kingdom or any other jurisdiction whenever and
wheresoever charged, imposed or deducted, or otherwise payable as a
consequence of any direction or order of any Tax Authority, together
with all costs, charges, interest, penalties, fines and expenses
incidental or relating to or arising in connection with any and all
such taxes, dues, duties, imposts, levies and rates or any actual
claim in respect thereof including (without limitation) income tax,
PAYE, national insurance contributions, corporation tax, capital gains
tax, value added tax, customs and other import duties, stamp duty,
stamp duty reserve tax, withholding tax, capital transfer tax and
inheritance tax;
(F) "TAX ASSESSMENT" shall mean any assessment, demand or other similar
formal notice of a tax liability issued by or on behalf of any Tax
Authority by virtue of which the Company either is liable to make a
payment of tax or will, with the passing of time, become so liable (in
the absence of any successful application to postpone any such
payment); and
(G) "TAX AUTHORITY" shall mean any taxing or other authority (whether
within or outside the United Kingdom) competent to impose any tax
liability;
1.3 References to any "TAX LIABILITY" shall include both liabilities of the
Company to make actual payments of tax (or amounts in respect of tax) and
also:-
(A) the loss, or the setting off against income, profits or gains, of any
Relief which would (were it not for the said loss or setting off) have
been available to the Company and which has been taken into account in
computing (and so reducing) any provision for tax which appears in the
Accounts (or which, but for the presumed availability of such Relief,
would have appeared in the Accounts) or
(B) the loss of a right to repayment of tax which has been treated as an
asset of the Company in preparing the Accounts or the setting off of
any such right to repayment of tax against any actual tax liability
for which the Purchaser would, but for that setting off, have been
able to make a claim against the Covenantors under this Deed; and
(C) the setting off against income, profits or gains earned, accrued or
received on or before the Accounting Date of any Relief which arises
in respect of an event occurring after such date and not in respect of
any event occurring on or before such date in circumstances where, but
for such setting off, the Company would
<PAGE> 28
25
have had an actual tax liability in respect of which the Purchaser
would have been able to make a claim against the Covenantors under
this Deed.
1.4 In any case falling within Clause 1.3, the amount that is to be treated for
the purposes of this Deed as a tax liability of the Company (THE "DEEMED
TAX LIABILITY") shall be determined as follows:
(A) in a case which falls within paragraph (B) thereof, the Deemed Tax
Liability shall be the amount of the repayment that would have been
obtained but for the loss or setting off mentioned in that paragraph;
(B) in a case which falls within paragraph (A) or (C) thereof and where
the Relief that was the subject of the loss or setting off mentioned
in any such paragraph was a deduction from or offset against tax, the
Deemed Tax Liability shall be the amount of that Relief;
(C) in a case which falls within paragraph (A) or (C) and where the Relief
that was the subject of the loss or setting off mentioned in any such
paragraph was a deduction from or offset against income, profits or
gains, the Deemed Tax Liability shall be (i) the amount of tax which
would, on the basis of the rates of tax current at the date of the
loss, have been saved but for the loss, if the Relief was the subject
of such a loss or (ii) the amount of tax which has been or would have
been saved in consequence of the setting off, if the Relief was the
subject of such a setting off.
1.5 References to:
(A) income, profits or gains as being earned, accrued or received on or
before a particular date or in respect of a particular period shall
include income, profits or gains which are deemed to have been
earned, accrued or received on or before that date or in respect of
that period for the purposes of any tax;
(B) any payment or distribution as being made on or before a particular
date shall include (i) any payment or distribution which has fallen
due to be made on or before that date and (ii) any event which has
occurred on or before that date and is, or is deemed to be, a payment
or distribution for (in either such case) the purposes of any tax;
(C) the result of an event on or before a particular time shall include
the combined result of two or more events the first or some of which
shall have taken place on or before the relevant time and, in the
case of a combination of events where the second or last one occurs
after Completion, the first event occurs prior to Completion outside
the ordinary course of the Company's business and the second or last
event occurs after Completion inside the ordinary course of the
Company's business;
<PAGE> 29
26
1.6 Unless the context otherwise requires, references to any English legal term
for any action, remedy, method of judicial proceeding, legal document,
legal status, court, official or any legal concept or thing shall in
respect of any jurisdiction other than England be deemed to include what
most nearly approximates in that jurisdiction to the English legal term.
2. Indemnity
---------
2.1 The Covenantors HEREBY COVENANT with the Purchaser that subject only as
stated in Clause 3 they will at all times (so far as possible) by way of
repayment of Consideration pay to the Purchaser (or at the option of the
Purchaser to the Company) an amount equal to:
(A) any tax liability of the Company arising in respect of or in
connection with or in consequence of:-
(a) any income, profit or gain actually or deemed or treated as
having been earned, accrued or received on or before the
Accounting Date; and/or
(b) any event occurring or entered into or deemed to have occurred or
to have been entered into on or before the Accounting Date;
(B) any tax liability of the Company arising in respect of or in
connection with or in consequence of (i) any income, profit or gain
actually or deemed or treated as having been earned or accrued or
received on or after the Accounting Date and on or before Completion
and/or (ii) any event occurring or entered into or deemed to have
occurred or to have been entered into on or after the Accounting Date
but on or before Completion but so that the covenant in this Clause
2.1(B) shall not apply to tax payable solely as a result of
transactions carried by the Company out since the Accounting Date in
the ordinary course of its business PROVIDED THAT the following
(without limitation) shall be deemed to be transactions other than in
the ordinary course of its business:-
(a) the disposal or deemed disposal of any asset (including trading
stock) in circumstances where the consideration actually received
for such disposal is less than the consideration deemed to have
been received for tax purposes (but only to the extent of the
difference);
(b) the supply of any service or facility of any kind (including a
loan of money or the letting, hiring or licensing of any tangible
or intangible property) for a consideration which was less than
might reasonably have been regarded as the open market value of
such service or facility (but only to the extent of the
difference);
(c) any other transaction which gives rise to a tax liability or
deemed (as opposed to actual) income profits or gains or which
results in the
<PAGE> 30
27
Company becoming liable to pay or bear a tax liability directly
or primarily chargeable against or attributable to another
person, firm or company;
(d) a transaction giving rise to a liability under Part XVII of ICTA;
(e) any event in respect of which any taxation arises as a result of
the failure by the Company prior to Completion duly to recover,
deduct, charge or account for any taxation.
(C) any tax liability of the Company arising by reason of the failure of
any other person (not being a member of the Group) fully to pay and
discharge when due (even if after Completion) any liability to
taxation on its part where the Company is so liable by reason of
having been, for tax purposes on or at any time before Completion, a
member of the same group or consortium or otherwise connected or
associated with, or a settlor or beneficiary in relation to, such
person;
(D) any depletion or reduction in value of the assets of the Purchaser or
the Company or increase in the liabilities of either of them as a
result of any capital transfer tax or inheritance tax which:
(a) arises in consequence of any transfer of value received or
effected by the Company prior to Completion; or
(b) is at Completion a charge on any of the shares or assets of the
Company or which gives rise to a power to sell, mortgage or
charge any of the shares or assets of the Company; and
(c) after Completion becomes a charge on or gives rise to a power to
sell, mortgage or charge any of the shares or assets of the
Company being a liability in respect of additional capital
transfer tax or inheritance tax payable on or by reason of the
death of any person after a transfer of value occurring prior to
Completion;
(E) all reasonable costs, expenses and other liabilities incurred by the
Purchaser or the Company or either of them in connection with any such
tax liability as is mentioned in paragraph (A) or paragraph (B) or any
such depletion of assets as is mentioned in paragraph (C) or in
investigating, assessing, contesting or settling the same or in
connection with all proceedings in relation thereto including steps
taken to avoid such tax liability or depletion of assets; and
(F) any tax or other liability of the Purchaser or the Company to the
extent the same may arise or be increased by any action taken by the
Covenantors under the provisions of Clause 6 of this Deed.
2.2 In determining the liability of the Covenantors under this Deed no account
shall be
<PAGE> 31
28
taken of any Relief or other event which, in either case, arises wholly or
mainly by reason of events occurring after Completion and accordingly where
any tax liability in respect of which the Covenantors are liable to
indemnify the Purchaser and/or the Company under Clause 2.1 is, or can be,
reduced or prevented from arising by virtue of any such Relief or event the
Covenantors shall nevertheless be liable to indemnify the Purchaser in
respect of such tax liability as if an actual payment of tax had been made
and in any event without regard to such Relief or event.
3. Limitations
-----------
3.1 The indemnity given in Clause 2.1 of this Deed shall not cover any tax
liability of the Company:-
(A) to the extent that a provision or reserve in respect of it was made in
the Accounts;
(B) to the extent that such liability arises or is increased as a result
of or is otherwise attributable to any legislation not in force at the
date hereof or any retrospective change in the law or any increase in
the rate of taxation in force at the date hereof or any change in
methods of computation of taxation or the practice of any Tax
Authority in force at the date hereof;
(C) on actual or deemed income, profits or gains of the Company arising or
accruing, or deemed to arise or accrue, after the Completion Date;
(D) which is attributable to the Company ceasing to be entitled to the
small companies' rate of corporation tax as a result of the purchase
of the Shares by the Purchaser;
(E) to the extent that it would not have arisen but for the fact that the
treatment in future accounts of the Company of assets or liabilities,
or of the tax attributable to timing differences, is different from
the treatment in the Accounts other than where such change is made to
conform with generally accepted accounting principles in the United
Kingdom;
(F) to the extent it is advance corporation tax payable as a result of the
Dividend or the repurchase of the Company's shares referred to in
paragraph 26 of the Disclosure letter (the "Share Repurchase");
(G) which would not have arisen but for a voluntary act or omission of the
Company or the Purchaser carried out, or occurring, after the date of
this agreement, otherwise than in the ordinary course of business and
save for any act carried out pursuant to a binding obligation entered
into on or before the Completion Date.
(H) such tax liability arises or is increased:-
<PAGE> 32
29
(i) by a failure of the Company or the Subsidiary to make any claim,
election, surrender or disclaimer or give any notice or consent
or to do any other thing after Completion, the making, giving or
doing of which was taken into account in computing the provision
for Taxation or deferred Taxation in the Accounts; or
(ii) by virtue of any disclaimer by the Company after Completion of
capital or other allowances available to and claimed by the
Company or the Subsidiary in respect of any period ended on or
before the date of the Accounts
in each case where the need to make any such claim, election,
surrender or disclaimer or give such notice or consent and the time
limit for doing the same was disclosed in the Disclosure Letter with
reference to Clause 6.4 (D) of the Agreement.
(I) to the extent that it is Stamp Duty payable by the Company in respect
of:-
(i) the Share Repurchase; or
(ii) the grant of a lease dated 6 January 1986 relating to premises at
Unit 349 Edinburgh Avenue, Berks.
3.2 The provisions of Clause 6 of the Agreement (Limitations on Liability)
shall apply to this Deed as if incorporated herein insofar as they are
expressed to exclude or limit the liability of the Covenantors under Clause
2.1 hereof.
4. Over-provisions, Reliefs, etc.
-----------------------------
4.1 If the auditors for the time being of the Company shall report (at the
request and expense of the Covenantors) that any provision for tax in the
Accounts (excluding any provision for deferred tax) has proved to be an
over-provision, then the amount of such over-provision shall be dealt with
in accordance with Clause 4.3 below.
4.2 If the auditors for the time being of the Company shall report (at the
request and expense of the Covenantors) that any tax liability which has
resulted in a payment having been made or becoming due from the Covenantors
under this Deed will give rise to a Relief for the Company which would not
otherwise have arisen, then, as and when the liability of the Company to
make an actual payment of or in respect of tax is reduced by reason of that
Relief (and after taking account of the effect of all other Reliefs that
are or become available to the Company including any Relief derived from a
subsequent accounting period) the amount by which that liability is so
reduced shall be dealt with in accordance with Clause 4.3 below.
4.3 Where it is provided under Clause 4.1 or 4.2 hereof that any amount (THE
"RELEVANT
<PAGE> 33
30
AMOUNT") is to be dealt with in accordance with this Clause:-
(A) the Relevant Amount shall first be set off against any payment then
due from the Covenantors under this Deed; and
(B) to the extent there is an excess, a refund shall be made to the
Covenantors of any previous payment or payments made by the
Covenantors under this Deed and not previously refunded under this
Clause up to the amount of such excess; and
(C) to the extent that the excess referred to in paragraph (B) of this
Clause is not exhausted under that paragraph, the remainder of that
excess shall be carried forward and set off against any future payment
or payments which become due from the Covenantors under this Deed.
4.4 Where any such report as is mentioned in Clause 4.1 or 4.2 has been made,
the Covenantors or the Purchaser or the Company may request the auditors
for the time being of the Company (at the expense of the Covenantors) to
review such report in the light of all relevant circumstances, including
any facts which have become known only since such report, and to report
whether such report remains correct or whether, in the light of those
circumstances, the amount that was the subject of such report should be
amended.
4.5 If the auditors report under Clause 4.4 of this Clause that an amount
previously reported upon should be amended, that amended amount shall be
substituted for the purposes of Clause 4.3 as the Relevant Amount in
respect of the report in question in place of the amount originally
reported on, and such adjusting payment (if any) as may be required by
virtue of the above-mentioned substitution shall be made as soon as
practicable by the Covenantors or (as the case may be) to the Covenantors.
4.6 The Purchaser shall use its reasonable endeavours to procure that the
auditors of the Company cooperate with the Covenantors and that they shall
report to the Covenantors as required in Clause 4.1 and 4.2 if the relevant
circumstances exist.
5. Recovery from Other Persons
---------------------------
If after the Covenantors have irrevocably and unconditionally satisfied in
full any liability of the Covenantors under Clause 2.1 (and all further
liability or loss or damage the subject of the relevant claim (including
all related costs and expenses) has been made good to the Company and the
Purchaser) the Company is entitled to recover from some other person (not
being a member of the Purchaser's Group but including any Tax Authority)
any sum in respect of the tax liability that resulted in the relevant
liability of the Covenantors aforesaid, or subsequently becomes entitled to
make such a recovery, then the Company shall (in either of those cases) as
soon as reasonably practicable after becoming aware of such entitlement
notify the Covenantors of its entitlement and shall, if reasonably and
promptly so required by the Covenantors in writing and subject first to
being indemnified and secured to its
<PAGE> 34
31
reasonable satisfaction by the Covenantors in respect of all losses, costs,
damages and expenses it may thereby incur, take all reasonable steps to
enforce that recovery (keeping the Covenantors informed of the progress of
any action taken) and shall account to the Covenantors for whichever is the
lesser of:-
(A) any sum so recovered (including any interest or repayment supplement
paid by a Tax Authority relating to the period after receipt of the
relative payment from the Covenantors on or in respect thereof) less
any tax chargeable on the Company in respect of the sum so recovered;
and
(B) the amount paid by the Covenantors pursuant to Clause 2 in respect of
the tax liability in question.
6. Claims Procedure
----------------
6.1 If the Purchaser becomes aware that it has or may have a claim against the
Covenantors under Clause 2 of this Deed, the Purchaser shall give or
procure that notice of the claim concerned is given to the Covenantors in
the manner provided by the Agreement where a time limit for appeal applies
to the Claim as soon as is reasonably practicable after the date on which
the claim comes to the notice of the Company, or where no time limit
applies, within thirty days from the date the claim comes to the attention
of the Company (but so that failure so to do shall not of itself relieve
the Covenantors of liability in respect thereof) and the Covenantors shall
be entitled, subject to the following provisions of this Clause, to take
such action as the Purchaser may approve in writing (such approval not to
be unreasonably withheld or delayed) to resist, avoid, dispute, appeal
against, compromise or defend the claim for taxation concerned in the name
of the Company but at the sole expense of the Covenantors and to have the
conduct of any appeal or incidental negotiations.
6.2 The Purchaser shall procure that a claim to which Clause 6.1 applies is, so
far as practicable, dealt with separately from claims to which it does not
apply.
6.3 The Purchaser will insofar as it is able and will procure (insofar as it is
able) that the Company will give the Covenantors all reasonable
co-operation access and assistance technical or otherwise for the purpose
of resisting such a claim PROVIDED THAT:
(A) in the case where the Covenantors wish to resist the claim, the
Covenantors shall not be entitled to make or request any action under
Clause 6.1 unless they have been advised by a Covenantors' tax adviser
who shall previously have been approved by the Purchaser (such
approval not to be unreasonably withheld, and for these purposes the
Purchaser confirms its approval of Mr K Derbyshire, a partner of BDO
Stoy Hayward as the Covenantors' tax adviser), after disclosure to him
of all relevant information and documents, that it is reasonable to
resist the claim for taxation in the manner proposed by the
Covenantors;
<PAGE> 35
32
(B) in connection with the conduct of any dispute:-
(a) the Company and the Purchaser shall be kept fully and promptly
informed of all matters relating thereto and shall on request be
entitled to see copies of all correspondence and related
documentation;
(b) the appointments of solicitors, accountants, or other
professional advisers shall be subject to the approval of both
the Company and the Purchaser (such approval not to be
unreasonably withheld or delayed);
(c) any communication with any Tax Authority whether written or
otherwise shall be first submitted to the Purchaser for approval
and shall not be transmitted until such approval has been given
(such approval not to be unreasonably withheld or delayed);
(d) the Covenantors shall not settle or compromise any claim the
subject of a dispute nor agree any matter in the conduct of the
dispute which in the opinion of the Purchaser would adversely
affect the amount thereof or any taxation or other liability of
the Company or the Purchaser without the prior approval in
writing of the Purchaser which shall not be unreasonably withheld
or delayed; and
(C) the Covenantors shall not be entitled to take or request any action
under the foregoing provisions of this Clause unless the Covenantors
have first indemnified and secured each of the Purchaser and the
Company to its reasonable satisfaction against all losses (including
additional claims for taxation) charges, costs, damages and expenses
which may thereby be incurred.
6.3 If the Covenantors fail within 21 days of being given notice thereof under
Clause 6.1 to request the Purchaser or the Company to take any action
aforesaid in connection with the claim concerned then the Purchaser and/or
the Company shall (without prejudice to its rights under this Deed or the
Agreement) be free to pay or settle such claim or take such other action in
connection therewith as it may in its absolute discretion decide.
6.4 If in any respect with regard to a claim for taxation which the Covenantors
seek to dispute or resist as provided herein the Purchaser has reasonable
grounds for suspecting that the Covenantors or the Company whilst it was
under the control of the Covenantors or any of them have or has committed
acts or omissions which may constitute fraud wilful default or neglect or
wilful concealment then Clause 6.1 of this Clause shall not take effect and
the Purchaser and the Company shall (without prejudice to its rights under
this Deed or the Agreement) be free to pay or settle such claim or take
such other action in connection therewith as it may in its absolute
discretion decide.
<PAGE> 36
33
7. Due Date of Payment
-------------------
7.1 Where the Covenantors become liable to make any payment pursuant to Clause
2 the due date for the making of that payment shall be the date of written
demand by the Purchaser or (if later):
(A) subject as provided by paragraph (C) below, in a case that involves an
actual payment of tax by the Company (or would have done but for the
use of any Relief or right of repayment as referred to in Clause 2.2)
seven days prior to the date that is the last date on which the
Company or Purchaser would have had to have paid to the appropriate
Tax Authority the tax that has given rise to the Covenantors'
liability under this Deed in order to avoid incurring a liability to
interest or a charge or penalty in respect of that tax liability;
(B) in a case falling within Clause 1.3 the date on which any liability to
taxation would have fallen due but for any available Reliefs, rights
of repayment or claims of a similar nature; or
(C) in a case falling within Clause 2.1(C) a liability to capital transfer
tax or inheritance tax or a charge on or power to sell, mortgage or
charge any of the shares or assets of the Company shall be treated as
becoming due, and a charge or power to sell, mortgage or charge as
arising, on the date of the transfer of value or other date or event
on or in respect of which it becomes payable or arises and the
provisions of Section 213 of the Inheritance Tax Act 1984 shall not
apply.
7.2 Time shall be of the essence for the purposes of all sums to be paid by the
Covenantors under the Deed and/or the Agreement.
8. Interest
--------
8.1 If any payment due to be made by the Covenantors under this Deed or the
Agreement is not made on the due date for payment thereof the same shall
carry interest accruing and calculated on a daily basis from such due date
of payment until and including the day of actual payment at the rate (as
well after as before judgement) of (i) in a case involving an actual
payment of tax a rate equal to the rate applicable under Section 178 of the
Finance Act 1989 and (ii) in any other case a rate three per cent per annum
above the annual Base Rate from time to time of the Royal Bank of Scotland
PLC compounded quarterly. Any such interest shall be payable on demand by
the person entitled to receive the outstanding payment concerned.
9. No Withholding etc.
------------------
9.1 All sums payable by the Covenantors under this Deed and the Agreement shall
be paid free and clear of all deductions or withholdings whatsoever save
only as may be required by law. If any such deductions or withholdings are
required by law the
<PAGE> 37
34
Covenantors shall be obliged to pay such sum as will after such deduction
or withholding has been made leave the recipient with the same amount as it
would have been entitled to receive in the absence of any such requirement
to make a deduction or withholding.
9.2 If any sum payable by the Covenantors under this Deed or the Agreement
shall be subject to tax in the hands of the recipient, the same obligation
to make an increased payment shall apply in relation to such tax liability
as if it were a deduction or withholding required by law.
10. Obligations of Covenantors
--------------------------
10.1 Unless otherwise expressly stated herein or in the Agreement, all
obligations of the Covenantors under this Deed shall be joint and several.
10.2 The Purchaser or the Company may release, or compromise the liability of,
any Covenantor or grant time or other indulgence to any Covenantor without
releasing or reducing the liability of any other Covenantor and where a
liability of one or some but not all of the Covenantors under any
obligation which is both joint and several is released or compromised, the
remaining Covenantors shall continue to be severally and shall together be
jointly liable on that obligation.
10.3 No waiver or release of any liability or obligation on the part of a
Covenantor under this Deed shall be effective unless it is an express
written waiver or release executed by each party to whom such liability or
obligation is owed.
11. Governing law
-------------
This Deed shall be governed by and construed in accordance with English
Law and the parties hereto hereby irrevocably agree that the English
courts shall have non-exclusive jurisdiction to settle any claim or matter
arising under this Deed and each party hereby irrevocably agrees to submit
to the jurisdiction of the English Courts
12. Notices
-------
The provisions of Clauses 15 and 16 of the Agreement (Vendor's
Representative and Notices) shall apply for the purposes of this Deed and
shall be deemed incorporated herein.
IN WITNESS whereof this Deed has been executed by each of the parties as its or
his Deed the day and year first before written.
<PAGE> 38
35
SCHEDULE
(Particulars of the Covenantors)
Ian Alastair Sloan Black
Honeysuckle Lodge
Andrew Hill Lane
Hedgerley
Slough
Buckinghamshire
SL2 3UL
David Wilson Savage
28 Amerland Road
London
SW18
<PAGE> 39
36
SCHEDULE 6
----------
WARRANTIES
INTERPRETATION
(1) In this Agreement and in particular this Schedule where the context so
admits:-
(a) the expression "INDEBTEDNESS" shall mean any obligation for the
payment or repayment of money, whether as principal or as surety or
incurred in respect of (i) money borrowed or raised, (ii) any bond,
note, loan stock, debenture or similar instrument, (iii) acceptance or
documentary credit facilities, (iv) foreign exchange options, (v)
rental payments underleases and hire purchase agreements and
instalments under conditional sale agreements (in all cases whether in
respect of land, machinery, equipment or otherwise) entered into
primarily as a method of raising finance or of financing the
acquisition or use of the asset concerned (for the avoidance of doubt
excluding leases relating to the Properties) and (vi) guarantees,
indemnities, bonds, standby letters of credit or other instruments
issued in connection with the performance of contracts and or in
respect of the indebtedness of any other person;
(b) the expressions "INTELLECTUAL PROPERTY" and "INTELLECTUAL PROPERTY
RIGHTS" shall include patents, patent applications, trade marks,
service marks, designs, copyrights, moral rights, technical drawings,
business names, brand names, computer software programmes and systems,
know how, inventions, confidential information and other industrial or
commercial intellectual property rights whatsoever and wheresoever and
whether registered or capable of registration or not and all
applications for registration or protection of the foregoing;
(c) the expression "RELIEF" shall bear the same meaning as in the Tax
Deed.
(2) Where any of the following paragraphs of this Schedule or any provision or
disclosure made or referred to in the Disclosure Letter or any reply by the
Vendor's Solicitors to the property enquiries raised of them by the
Purchaser's Solicitors is qualified by the expression "TO THE BEST OF THE
KNOWLEDGE, INFORMATION AND BELIEF OF THE VENDOR" or "SO FAR AS THE VENDOR
IS AWARE" or any similar expression, then (unless clearly not admitted by
the context) that paragraph shall be deemed to include an additional
Statement that it has been made after due diligent and careful enquiry,
including without limitation of the auditors, tax advisers, solicitors,
property agents and other professional advisers of the Company.
DISCLOSURE
----------
(3) The :-
<PAGE> 40
37
(a) the Disclosure Letter; and
(b) the annexures to and the other documents referred to by way of
disclosure in the Disclosure Letter;
("THE RELEVANT DOCUMENTS") (together the "DISCLOSED INFORMATION") are true
complete and accurate in all material respects and not misleading in any
material respect.
(4) All expressions of opinion, intention and expectation contained in the
Relevant Documents or any of them relating to the Company and/or its
shareholders and/or officers and/or their connected persons and associates
(or any of them) and/or the business, finances, assets, liabilities,
contracts, suppliers and customers of the Company (including, without
limitation, as regards the profits, prospects and/or working capital of the
Company) are reasonable and (insofar as attributable to the Vendor and/or
officers of the Company or any of them) are fairly and honestly held and
have been made after due and careful enquiry as to the facts on which the
same are based and after due and careful consideration.
ACCOUNTS
--------
(5) The Accounts:-
(a) have been prepared under the historical cost convention and in
accordance with good accounting practice including all applicable
statements of standard accounting practice and financial reporting
standards and comply with the requirements of the Companies Act, (or,
as appropriate, any applicable former Companies Acts) or, in the case
of any Subsidiary incorporated otherwise than under the laws of
England or Scotland, the requirements of all legislation governing or
relating to the preparation of its accounts;
(b) show a true and fair view of the state of affairs of the Company as at
the Accounting Date and of its results for the accounting reference
period ended on that date.
(c) make proper provision for (or, if appropriate, disclose by way of
note) all assets and liabilities (whether actual, contingent,
quantified or disputed) and all capital and financial commitments of
the Company as at or on the Accounting Date; and
(d) make proper provision for depreciation in accordance with accepted
accounting practice having regard to the condition and age of the
fixed assets included in the same.
(6) The profits shown in the Accounts have not to a material extent been
affected (except
<PAGE> 41
38
as disclosed in those accounts) by any extraordinary or exceptional event
or circumstance or by any other factor rendering them unusually high or
low.
(7) All proper and necessary books of account, ledgers, minute books, registers
and records have been fully properly and accurately kept and completed by
the Company in compliance with Section 211 and 222 Companies Act and
accurately present and reflect in accordance with generally accepted
accounting principles and standards and as required by law the assets and
liabilities (actual and contingent) of the Company and all transactions to
which it is or has been a party.
(8) None of the books of account ledgers registers records systems controls
data or other information of the Company is recorded or stored maintained
operated or otherwise dependent upon or held by any means (whether
electronic mechanical computerised or otherwise) which (including all means
of access thereto) are not under the exclusive ownership and direct control
of the Company.
SINCE THE ACCOUNTING DATE
-------------------------
(9) Since the Accounting Date:-
(a) the business of the Company has been carried on in the ordinary course
and so as to maintain it as a going concern and there has been no
material adverse change in the financial position or trading or to the
Warrantors' knowledge, the prospects of the Company;
(b) there has been no material reduction in the aggregate value of the net
assets of the Company as shown in the Accounts ;
(c) the Company has not made or agreed to make any payment or entered into
any transaction or commitment or incurred any liability except in the
ordinary course of business and on arms length terms;
(d) the Company has not acquired or disposed of or agreed to acquire or
dispose of any business or any material asset other than trading stock
and plant and equipment in the ordinary course of business; and
(e) save for the Dividend no distribution of capital or income has been
declared made or paid by or in respect of any share capital or assets
of the Company.
(10) Since the Accounting Date the business of the Company has not so far as the
Warrantors are aware been materially and adversely affected by the loss of
any important customer(s) or source(s) of supply or any abnormal factor(s)
not affecting similar businesses to a similar extent, and the Warrantors
are not aware of any facts likely to give rise to any such effect whether
before or after Completion excluding the sale of the Shares to the
Purchaser.
TAXATION
--------
<PAGE> 42
39
(11) The Company has within the requisite time limits duly made all returns,
given all notices, and supplied all other information required to be
supplied to the Inland Revenue HM Commissioners of Customs and Excise
and/or any other competent fiscal authority in any part of the world and
all such information returns and notices were when given or supplied and
are now accurate in all material respects and made on a proper basis and
are not, so far as the Vendor is aware, likely to be the subject of any
dispute with any of the relevant authorities concerned.
(12) The Disclosure Letter gives full details of all matters relating to
taxation in respect of which the Company (either alone or jointly with any
other person) has or on the basis of law and practice presently operative
has an outstanding entitlement:-
(a) to make any claim (including a supplementary claim) for any Relief;
(b) to make any election for one type of Relief, or one basis, system or
method of taxation as opposed to another;
(c) to make any appeal (including a further appeal) against any assessment
to taxation; or
(d) to make any application for the postponement of taxation.
(13) The provisions or reserves for taxation appearing in the Accounts are
sufficient (on the basis of the rates of taxation current at the date
hereof) to cover all taxation for which the Company was at the Accounting
Date or may after that date become or have become liable on or in respect
of or by reference to any profits gains or income (whether deemed or
actual) for any period ended on or before the Accounting Date or in respect
of any distribution or transaction made or entered into or deemed made or
entered into on or before the Accounting Date.
(14) The Company has duly deducted withheld paid and accounted for all tax due
to have been deducted withheld paid or accounted for by it before the date
hereof and is not and has not at any time since the Accounting Date been
liable to pay interest on any unpaid taxation.
(15) Nothing has been done which (whether of itself or taken together with any
other event or circumstance occurring on before or after the date hereof)
might result in the Group being unable to use as a credit against its
mainstream corporation tax liability any unutilized trading losses or
advance corporation tax or other Reliefs (as defined in the Tax Deed)
available to the Group the availability of which for that purpose were
assumed in preparing the Accounts including, without limitation, all or any
of the following:-
(a) a cessation or discontinuance of any trade carried on by the Company;
<PAGE> 43
40
(b) a major change in the nature or conduct of any trade or business
carried on by the Company within the meaning of any of Sections 245,
245A, 245B, 768 or 768A of the Taxes Act; and
(c) a change of ownership of the Company within the meaning of any of
Sections 245, 245A, 245B, 768 or 768A of the Taxes Act.
(16) Since the Accounting Date the Company has not made and the Company is not
subject to any present or future liability to make or provide any payment
or consideration which could be disallowed as a deduction in computing the
profits of the Company or as a charge on the Company's income for taxation
purposes including (without limitation) under all or any of Sections 74,
125, 338 to 340 (inclusive) and Section 787 of the Taxes Act.
(17) The Company has made no borrowings in a foreign currency such that on
repayment a charge to corporation tax might arise on any profit or gain
accruing in relation or by reference to any such repayment.
(18) All expenditure which the Company has incurred (or which it may incur under
any subsisting commitment) on the provision of machinery or plant has
qualified or will qualify (if not deductible as a trading expense of a
trade carried on by the Company) for writing down allowances under Section
24 of the Capital Allowances Act 1990. In addition:-
(a) no event has occurred since the Accounting Date which may be treated
as a notional sale by the Company of any machinery or plant pursuant
to Section 26 of the Capital Allowances Act 1990;
(b) all capital allowances made or to be made to the Company in respect of
capital expenditure already incurred, or to be incurred under any
subsisting commitment, have been made, or will be made, in taxing its
trade;
(c) since the Accounting Date the Company has not done, or omitted to do,
or agreed to do, or permitted to be done, any act as a result of which
any disposal value may be brought into account under Section 24 of the
Capital Allowances Act 1990, or there may be any recovery of excess
relief under Section 46 of that Act; and
(d) the Company is not in dispute with any person as to any entitlement to
capital allowances under Section 51 of the Capital Allowances Act 1990
and, so far as the Vendor is aware there are no circumstances which
may result in such a dispute arising.
(19) The Company has not made any claim for, nor received any payment by way of,
grant such that a charge to tax under Case I or Case VI of Schedule D might
accrue to it under Section 93 of the Taxes Act.
<PAGE> 44
41
(20) The Company has not issued or acquired any deep discount securities as
defined by Schedule 4 paragraph 1(1) of the Taxes Act or qualifying
corporate bonds for the purposes of Section 117 TCGA.
(21) The book value of each of the capital assets of the Company in or adopted
for the purposes of the Accounts or (in the case of assets acquired after
the Accounting Date) in the accounting records of the Company does not
exceed the amount deductible under Section 38 TCGA and is such that on the
disposal or deemed disposal of such assets or any of the same at that value
no balancing charge under the Capital Allowances Act 1990 or chargeable
gain for the purposes of TCGA would arise accrue or crystallise. In
particular (but without limiting the foregoing):-
(a) the Company has not in respect of any of its assets made a claim under
the provisions of any of Sections 23, 24, 152, 153, 165, 175, 247 or
248 of the TCGA;
(b) the Company has not acquired any asset in circumstances such that
Section 17 or Section 171 or Section 125 or Section 282 of the TCGA
applied or might apply;
(c) no election under Section 35 of the TCGA has been made in relation to
the Company and the Accounts are prepared on the basis that no such
election will be made;
(d) the Company has not been party to or a member of a group of companies
which has undertaken any reorganisation or reduction of share capital
or share for share exchange or any scheme of amalgamation or
reconstruction or transfer of assets of the nature mentioned in
Chapter II of Part IV of the TCGA or Section 343 of the Taxes Act;
(e) none of the assets of the Company have been subject to upward
revaluation in the books of the Company; and
(f) no liability would arise on any Subsidiary by reason of Section 178 or
Section 179 TCGA were it to be disposed of by the Company on
Completion.
(22) No gain chargeable to corporation tax will accrue to the Company on the
disposal of any debt owing to the Company (not being a debt on a security)
and the Company has not acquired a benefit under any policy of insurance
other than as original beneficial owner.
(23) No allowance or loss which might accrue on the disposal by the Company of
any share in or security of any company is liable to be reduced by the
application of Sections 176 or 177 of the TCGA.
<PAGE> 45
42
(24) The Company has not made any disposal or otherwise been party to any
transaction which has required or would or might require any computation
under Section 42 of the TCGA or to which Section 770 of the Taxes Act or
Section 18 of the TCGA is or might be applicable.
(25) There are no circumstances which could give rise to the Company being
denied time apportionment in computing chargeable gains.
(26) The Company is a close company for tax purposes and has never made or been
deemed to have made any distribution for the purposes of Part XI of the
Taxes Act or for the purposes of any legislation relating to close
companies except for dividends shown in its audited accounts for the period
to the Accounting Date.
(27) The Company has never reduced its share capital or repurchased repaid or
redeemed any share capital nor capitalised any profits reserves or share
premium account in the form of or in paying up any amounts unpaid on any
shares debentures or other securities nor agreed or resolved to do any of
the foregoing.
(28) The Company is a registered and taxable person for the purposes of value
added tax and:-
(a) has complied with all the requirements of the Value Added Tax Act 1994
and all applicable regulations;
(b) is not in arrears with any payment or returns thereunder, is not
liable to any abnormal or non-routine payment for value added tax
purposes;
(c) has fully maintained complete correct and up to date records invoices
and other necessary documents;
(d) has not been required by HM Commissioners of Customs and Excise to
give any security;
(e) is not and has never been or agreed to be an agent or manager or
factor or representative for the purposes of Section 47 or 48 of the
Value Added Tax Act 1994; and
(f) has not been party to any transaction to which paragraph 1 of Schedule
5 of the Value Added Tax Act 1994 applies or may be applicable.
(29) The Disclosure Letter contains full particulars of all elections to waive
exemption made or agreed to be made under Schedule 10 to the Value Added
Tax Act 1994 by (i) the Company or (ii) any person in relation to which the
Company is a relevant associate as defined in paragraph 3(7) of that
Schedule and in respect of each election made:
<PAGE> 46
43
(a) all things necessary for the election to have effect have been done
and in particular any necessary notification and information has been
duly given under paragraph 3(6) of that Schedule and any necessary
permission under paragraph 3(9) of that Schedule has been properly
obtained;
(b) a copy of the notification and of any permission and of any other
correspondence with, and notes of conversations with, HM Customs and
Excise in connection with the election is annexed to the Disclosure
Letter; and
(c) the land in relation to which the election has effect is not greater
than that stated in the notification of the election,
and in no case has the Company charged Value Added Tax, whether on rents or
otherwise, which is not properly chargeable because the Company has not
made an election to waive exemption having effect in relation to the
relevant supply.
(30) The Company is not bound and has not agreed to become bound by any lease,
tenancy or licence in the case of which under its terms or by statute the
Company is or could become liable to pay an amount in respect of Value
Added Tax chargeable as a result of the making of an election to waive
exemption under Schedule 10 to the Value Added Tax Act 1994.
(31) Except by reason of being a member of the Group, the Company is not and has
never been a member of a group of companies or consortium or associated
with any company for taxation purposes (including without limitation for
the purposes of the Taxes Act, the TCGA or the Value Added Tax Act 1994)
and the Company is not under any liability to taxation, contingent or
otherwise, in respect of any other company which at any time has been a
member of the same group or consortium as the Company or an associated
company of the Company for taxation purposes.
(32) The Company is not under any present or future liability to make and has
not since the Accounting Date made or received or purported to make or
receive any surrender of any amount by way of group relief or of advance
corporation tax or any payment for such relevant surrender and (where any
such surrender or payment is disclosed in the Disclosure Letter or has been
made or agreed made prior to the Accounting Date):
(a) the Company has received all payments due to it under any arrangement
or agreement relating to such surrenders and no such payment exceeded
or could exceed the amount permitted by Section 402(6) of the Taxes
Act or (as appropriate) Section 240(8) of the Taxes Act;
(b) there were at the material time and there are now no arrangements
whereby any such surrender or payment is or may be disallowed or
become incapable of being used by the Company as a Relief for taxation
purposes;
(c) there were at the material time, and there are now, no circumstances
in which it was or will be just and reasonable to compute losses or
profits other than by
<PAGE> 47
44
reference to a time apportionment basis.
(33) The Company is not under any liability to taxation, contingent or
otherwise, in respect of: any loan or advance or payment or expense falling
within the provisions of Part XI of the Taxes Act; capital transfer tax or
inheritance tax; or the provisions of Chapter III Part XI and Schedule 19
of the Taxes Act.
(34) The Company has no unremittable overseas income for the purposes of Section
584 of the Taxes Act nor any gains to which Section 279 of the TCGA could
apply and has never claimed relief for any such income or gain under either
such Section or for delayed remittances under Section 585 of the Taxes Act.
(35) The Company has only ever been resident for tax purposes in the United
Kingdom and has never carried on any trade or had any sources of income or
profit outside the United Kingdom or transferred part or all of any trade
carried on outside the United Kingdom to a company not resident in the
United Kingdom or subscribed for shares in a company not so resident or
caused or permitted such a company to issue any debentures.
(36) The Company has not made and is not entitled to make any claim under Part
XVIII of the Taxes Act and where any such claims are disclosed in the
Disclosure Letter all necessary conditions and all foreign tax credits
claimed or to be claimed by the Company were at all material times and
remain satisfied and in particular (but without limitation) the Company
holds all tax deduction certification or other documentation necessary for
production to the Inland Revenue in respect of such foreign tax credit
claimed.
(37) The Company is not under any liability to pay stamp duty and/or stamp duty
reserve tax and:-
(a) all documents to which the Company is party and/or which relate to or
are necessary to prove the title of the Company to its assets
(including (without limitation) the Properties) and/or contain
material rights on the part of the Company have been properly stamped
and no such documents which are outside the United Kingdom would
attract stamp duty if they were brought into the United Kingdom; and
(b) the Company has never obtained relief from stamp duty under Section 42
of the Finance Act 1930 which has become liable to forfeiture or may
be forfeited in the future.
(38) The Company has not entered into or been a party to any scheme or
arrangement designed partly or wholly for the purposes of avoiding or
reducing or deferring taxation; and no scheme or transaction of any nature
has been carried out by or proposed in relation to the Company which has
given rise or could give rise to a charge to taxation under Part XVII of
the Taxes Act. Without limiting the foregoing,
<PAGE> 48
45
the Company:-
(a) is not and will not at any time in the future become liable to tax or
increased tax by reason of the provisions of any of Sections 776 or
777 or 779 or 780 of the Taxes Act in respect of any act or
transaction carried out prior to Completion;
(b) is not and has not been a party to any act, transaction or arrangement
whereby it is or may hereafter become liable for taxation under or by
virtue of any of Sections 34 to 37 (inclusive) of the Taxes Act;
(c) has not entered into any scheme to create an artificial deduction
under Section 37 of the Taxes Act related to a sale of property with a
right to a reconveyance;
(d) has not sustained a loss in a trade of dealing in commodity futures
carried on in partnership under Section 399(2) to (4) (inclusive) of
the Taxes Act;
(e) has not made a distribution which materially reduces the value of its
shares within the meaning of Section 736 of the Taxes Act;
(f) is not and has never been involved in any arrangement for transferring
relief for losses or charges on income, advance corporation tax set
off or benefits of first year allowances between partners of any
partnership of which it is or has at any time been a member;
(g) has not entered into any transactions in deposits to which Section 56
of the Taxes Act applies or may apply;
(h) has not entered into any transactions to which Section 786 of the
Taxes Act applies or may apply;
(i) has not been party to or otherwise involved in any transaction to
which any of Sections 29, 30, 31, 32, 33, 34 or 106 of the TCGA
applied or may apply; and
(j) has not become liable for taxation nor received nor will receive or be
the subject of nor be adversely affected by any claim for taxation
arising under or imposed by or resulting from the operation of any of
Sections 703 to 709 (inclusive) of the Taxes Act (whether alone or in
conjunction with any other provisions of any taxation statutes
whatsoever) and which wholly or partly results or arises from or is
computed by reference to circumstances existing or events occurring at
any time on or before the date hereof whether alone or in conjunction
with other circumstances arising before or after Completion.
(39) No event (as defined in the Tax Deed) has occurred which could give rise to
a claim under the Tax Deed if it were now in force.
<PAGE> 49
46
THE PROPERTY
------------
(40) The Company has good and marketable title to the Property and is the
beneficial and legal owner in exclusive possession of the estate or
interest in the Properties specified in Schedule 4 and subject as stated in
Schedule 4 free from any mortgage, charge, lien, debenture, lease,
underlease, tenancy, adverse right, condition, privilege, easement,
overriding claim, option, right of pre-emption, covenant, restriction,
exceptance, reservation or interest, claim and any matter or things
registered or capable of registration in any Registry and the Company is in
a position without incurring any liabilities thereby to sell the Property
as Beneficial Owner with a full title guarantee for the purposes of the Law
of Property (Miscellaneous Provisions) Act 1994.
(41) The particulars of the Property shown in Schedule 4 are true and correct
copies of all material documents relating to the Property have been
supplied to the Purchaser's Solicitors prior to the date hereof and the
written replies of the Vendor and/or the Vendor's Solicitors to the written
enquiries of the Purchaser's Solicitors relating to the Property are true
complete and accurate in all respects.
(42) The Company does not by its use or occupation of the Property contravene
any lease or other right under which it occupies the same and/or any
requirement or restriction having the force of law and:-
(a) the Company has complied with all covenants, conditions , statutory
and other requirements bye laws orders and regulations (including,
without limitation, any imposed by or pursuant to the Planning Acts as
defined in Section 336 of the Town and Country Planning Act 1990) or
any Building Acts or Regulations affecting the Property, none of which
is of an unusual or onerous nature or prejudicially affects the
Property or the Company's use or occupation or powers of disposal of
the same; and
(b) so far as the Vendor is aware, nothing had been done or occurred which
could prevent or restrict any development or use of the Property or
any part thereof for which planning permission has been obtained.
(43) No notices orders proposals applications requests or schedules of
dilapidations affecting or relating to the Property have been served or
made by any authority or other person or by the Company which the Company
has not complied with, and, so far as the Vendor is aware, there are no
circumstances which are likely to result in any being served or made.
(44) There exists no dispute between the Company and the landlord or the tenant
or occupier of the Property or any part thereof or the owner or occupier of
any other premises adjacent to the Property and the Vendor is not aware of
any circumstances which may give rise to any such dispute.
<PAGE> 50
47
(45) Neither the Company nor any person on its behalf has expressly or impliedly
waived any breach by any tenant or other person of any covenant agreement
restriction stipulation or obligation relating to the Property or any part
thereof or of which the Property or any part thereof has the benefit and
every lessee tenant licensee or occupier of the Property has in all
material respects observed and performed all covenants (including covenants
as to payment of rent or charges or fees) and all other agreements,
restrictions, stipulations or obligations aforesaid.
(46) The buildings and other structures on the Property are in the standard of
repair required by the Leases of the Property and fit for the purposes
which they are used and so far as the Vendor is aware there is no material
defect in the construction or condition of any of the Property and so far
as the Vendor is aware no dangerous or deleterious materials have been used
in the construction thereof.
(47) There is no outstanding monetary claim or liability contingent or otherwise
affecting the Property.
(48) All documents necessary to prove the title of the Company to the Property
or which relate to the Company's title to the same have been duly
registered where necessary and are now in the exclusive possession or under
the exclusive control of the Company free from any rights and interests of
any third parties.
(49) Save for the Property, the Company does not own occupy or otherwise use or
have any interest in any land or buildings of freehold leasehold or other
tenure, nor any rights or obligations to acquire any such interest, and the
Company has no liability (existing or contingent) in respect of any such
land or building previously owned occupied or otherwise used by it or in
which it had an interest.
ENVIRONMENTAL AND HEALTH MATTERS
--------------------------------
(50) (a) So far as the Vendor is aware, the Company has complied in all
material respects with its obligations under all statutes and/or
regulations and/or orders or other provisions of law and/or codes of
practice (including without limitation the laws of tort) which protect
or relate to the protection of the environment and/or the health and
well being of individuals and/or other living creatures. Without
limiting the foregoing so far as the Vendor is aware the Property is
not situate on, or adjoins contaminated or reclaimed or filled land
(and neither the Property nor anything present thereon nor the
business of the Company carried on thereat requires the Company to
obtain any licence under the Environmental Protection Act 1990 or
Environment Act 1995 and related legislation.
(b) Save as permitted by a valid Environmental Licence in force at the
time of such occurrence there has never been any discharge, spillage,
release or
<PAGE> 51
48
emission of any prescribed, hazardous, noxious or offensive substance
or any controlled waste into or from any of the Properties or any
other premises where they were owned, leased, occupied or controlled
by the Company or, to so far as the Vendor is aware onto or from the
Properties at any other time and the Company has not received any
claims or complaints relating to any such occurrence and is not aware
of any circumstances which could result in any such claim or complaint
being received;
(c) Except for temporary storage prior to collection no waste is or has
ever been stored or disposed of on any of the Properties, and no waste
is or has ever been stored or disposed of on any other premises while
owned, leased, occupied or controlled by the Company. So far as the
Vendor is aware there are no matters affecting the Properties which
may cause pollution of the environment or harm to human health within
the meaning given to those terms by Section 61 of the Environmental
Protection Act 1990.
ASSETS
------
(51) Save for trading stock and plant and equipment (including vehicles and
fixtures and fittings) disposed of in the ordinary course of business the
assets included in the Accounts or acquired by the Company since the
Accounting Date and all other assets used or employed by the Company are
the absolute property of the Company free from any mortgage charge lien
bill of sale retention of title arrangement or other encumbrance and are
not the subject of any leasing hiring or any hire purchase agreement or
agreement for payment on deferred terms or assignment or factoring or other
similar agreement; and all such assets are in the possession or under the
control of the Company other than retention of title imposed by suppliers
of goods to the Company and liens arising by operation of law.
(52) The trading stock records of the Company are up to date and accurate in all
material respects .
(53) The Company has up to date registers showing a complete and accurate record
of all plant machinery office equipment and vehicles owned or used by it
and the plant machinery office equipment vehicles and other moveable assets
used by the Company are in a reasonable state of repair, regularly
maintained and fully serviceable; comply in all material respects with all
applicable legal requirements or restrictions; are duly licensed where
necessary; and all of the same are suitable for the purposes for which they
are used.
(54) The Company is only owed money as original creditor and is not owed any
money other than trade debts incurred in the ordinary course of business
and cash at bank.
(55) The Vendor is not aware of any facts which indicate that all debts owing to
the
<PAGE> 52
49
Company will not realise their aggregate full face value within 90 days of
their due date.
INTELLECTUAL PROPERTY
---------------------
(56) (a) The Company owns no registered intellectual property.
(b) So far as the Vendor is aware all of the intellectual property rights
of the Company are valid and enforceable and so far as the Vendor is
aware none of them are and nothing has been done or omitted to be done
whereby any of them might be used claimed opposed or attacked by any
other person.
(57) The Company is not party to any agreement or arrangement for the licensing
or the use or provision or acquisition of any intellectual property or
which prohibits or restricts the ability of the Company to disclose or use
any such intellectual property.
(58) So far as the Vendor is aware the Company does not require any intellectual
property rights (other than those disclosed in the Disclosure Letter) or
any licence to use any intellectual property rights for any of the
operations of any of its businesses or for the use of any of its assets.
(59) The Company is entitled to carry on the businesses now carried on by it in
the manner in which each of them is now carried on and neither the manner
of such businesses nor the operations of the Company infringes or is likely
to infringe or conflict with any intellectual property rights of any other
person or will or may give rise to a liability on the Company to make
payment of any royalty or other compensation pursuant to any applicable
legislation or otherwise.
(60) The Company has not disclosed or permitted to be disclosed or undertaken or
arranged to disclose to any person any of its know how secrets confidential
information technical processes or lists of customers or suppliers.
COMMITMENTS AND CONTRACTS
-------------------------
(61) The Company is not party to nor liable in respect of and none of the assets
or property (other than the Properties) owned or used by the Company is
affected by:
(a) any contract covenant or commitment (i) of an onerous or unusual
nature or which is likely to be unprofitable or (ii) which is not
terminable by the Company without compensation by three months notice
or less or which is unlikely to be fully performed within three months
from the date hereof or (iii) made otherwise than in the ordinary and
usual course of the business of the Company as now carried on or (iv)
in respect of which any party thereto has not performed and complied
in all material respects with its obligations (taking into account any
applicable period of grace and credit periods habitually extended by
the parties);
<PAGE> 53
50
(b) any partnership joint venture consortium trade association or society
or any agreement relating thereto;
(c) any manufacturing licensing franchising agency distribution or other
similar agreement relating to the sale or supply of goods or services
by or to the Company;
(d) any contract covenant commitment which in any way restricts the
freedom of the Company to deal with or realise its assets or any of
them and/or carry on its business or any part thereof in any part of
the world in such a manner as it thinks fit;
(e) any contract covenant commitment which is terminable by another party
as a result of any change in the control management or shareholders of
the Company;
(f) any offer or tender or the like given or made by the Company outside
the ordinary course of business which is still outstanding and capable
of giving rise to a contract merely by the unilateral act of a third
party.
(62) Copies of the present standard conditions of trading of the Company are
attached to the Disclosure Letter and the Company has not given any
guarantee or warranty or made any representation in respect of any goods or
services sold or supplied by it save under any such standard conditions of
trading or as implied by law.
(63) So far as the Warrantors are aware none of the products manufactured or
promoted or sold or otherwise supplied by or through the Company have at
any time infringed any applicable statutes, regulations, orders or other
provisions of law or codes of practice or have given rise or could
reasonably be expected to give rise to any product liability on the part of
the Company whether under the Consumer Protection Act 1987 or otherwise.
(64) During the period covered by the Accounts not more than ten per cent of any
description of goods or services supplied to or by the Company were
supplied by or to any one person or group of connected persons.
(65) The Company is not party to any agreement practice or arrangement which
contravenes or is or could be subject to registration or the giving of
notice under any of the Restrictive Trade Practices Act 1976, the Resale
Prices Act 1976 or Articles 85 or 86 of the Treaty of Rome.
(66) So far as the Warrantors are aware none of the practices of the Company is
or has been the subject of or susceptible to or affected by any
investigation, reference, report or order made by and the Company has not
received any process notice or communication (formal or informal) from the
Office of Fair Trading, Consumer Protection Advisory Committee, Trading
Standards Authority, the Monopolies and
<PAGE> 54
51
Mergers Commission, the Secretary of State, European Commission or any
other authority of any country having jurisdiction in anti-trust matters or
in respect of international trade sanctions or anti-corruption laws or
practices, and no undertaking has been given by the Company to any such
body or authority
FINANCIAL COMMITMENTS AND BORROWINGS
------------------------------------
(67) The Disclosure Letter contains or there are annexed thereto:-
(a) a true and complete summary of all loan and revolving credit or
overdraft or factoring or invoice discounting or other like facilities
of the Company and copies of all material documents relating thereto;
(b) full particulars of all the bank accounts of the Company and of the
bank mandates applicable thereto;
(c) details of all Indebtedness of the Company in a currency other than
Sterling and also in any currency other than the currency in which the
majority of its turnover arises;
and without limiting the foregoing, no amounts (whether by way of premium,
interest or otherwise) are payable by the Company, in respect of any of its
Indebtedness, on a basis calculated by reference to the profitability or
turnover of the Company or any amounts realised or to be realised in
respect of any of its assets.
(68) There is no Indebtedness of the Group which is overdue for payment or
discharge (taking into account credit periods habitually extended to the
Company)
(69) The aggregate Indebtedness of the Group as at Completion does not
exceed (pound) 2,000,000.
(70) No event has occurred which has resulted or could result in any present or
future Indebtedness of the Company becoming due or capable of being
declared due and payable prior to its date of maturity and no event has
occurred which is or would with the giving of notice or the passing of time
or otherwise be an event upon which the Company's bank facilities or other
borrowings or any of them have or could become immediately repayable or any
security granted by or over any property or assets of the Company becoming
enforceable.
(71) The Company is not and has not agreed to become bound by any guarantee or
indemnity or suretyship or similar commitment and there is not now
outstanding any such guarantee indemnity suretyship or similar commitment
given for the accommodation of or in respect of any obligation or liability
of the Company.
(72) No amounts are presently owing to the Company as a result of any loan or
advance made by the Company prior to the date hereof (otherwise than as a
result of giving
<PAGE> 55
52
credit in the normal course of business) and the Company has not agreed to
make any such loan or advance.
(73) The Company has not created nor has it agreed to create and nor is there
subsisting any mortgage debenture lien charge or other similar encumbrance
or security interest over all or any of its property assets undertaking
goodwill reserves or share capital.
(74) The Company is not at the date hereof exceeding any borrowing limit imposed
upon it by its Bankers or other lenders or by its Articles of Association
or otherwise and has not entered into any commitment or arrangement which
might cause it to exceed any such borrowing limit.
(75) No order has been made or petition presented or resolution passed for the
winding up of the Company nor has any administrator or receiver been
appointed or any distress execution or other process been levied in respect
of the Company's undertaking or assets or any part thereof, and the Company
has not received any notice under nor is it or could it be deemed unable to
pay its debts for the purposes of Section 123 of the Insolvency Act 1986.
(76) Full particulars are disclosed in the Disclosure Letter of all investment
and other grants and allowances and of all loans and financial aid of any
kind applied for or received or receivable by the Company from any
Governmental department board body or agency authority and nothing has been
done or agreed as a result of which any such grant allowance loan or
financial aid is or may be liable to be refused refunded or clawed back in
whole or in part.
BUSINESS
--------
(77) All licences (including without limitation licences under the consumer
credit legislation) consents permissions and authorities necessary to
enable the Company to carry on its business and/or use its assets
effectively in the places and in the manner in which such business is now
carried on and/or assets are presently used have been obtained by the
Company; true and complete copies of each of the same are attached to the
Disclosure Letter; all such licences consents permissions and authorities
are in full force and effect and complied with by the Company in all
material respects; and the Vendor is not aware of any circumstances
indicating that any of the same is likely to be suspended cancelled revoked
or not renewed in the ordinary course.
(78) The Company does not have any branch outside England or any permanent
establishment outside the United Kingdom.
FINANCIAL SERVICES ACT
----------------------
(79) The Company does not carry on or purport to carry on in the United Kingdom
investment business within the meaning of the Financial Services Act 1986
("THE FSA") and in relation to all investment business within the meaning
of the FSA
<PAGE> 56
53
carried on by the Company in the United Kingdom as referred to in the
Disclosure Letter the Company is and at all mentioned times has been an
authorised person within the meaning of Chapter III of Part I of the FSA.
Further, neither the Company nor any of its directors agents
representatives or managers have at any time:-
(a) committed any breach of or any offence under any of the provisions of
the FSA;
(b) acted in contravention of any of the rules, regulations, conditions,
requirements and duties referred to in Section 62(1) or (2) of the
FSA;
(c) received formal notice or informal indication of any matter referred
to in this paragraph; and
and nor has the Secretary of State or any person acting on his behalf
exercised any of his or its powers under the FSA in relation to the
business or affairs of the Company (other than any such powers relating to
the conferral of authorised status upon the Company for the purpose of the
FSA) or given formal notice or informal indication that he or it is or may
be considering such action.
LITIGATION
----------
(80) Apart from routine debt collection by the Company as plaintiff for debts
owing in the ordinary course of business and not exceeding (pound)10,000 in
aggregate:-
(a) the Company is not engaged or proposing to engage in or the subject of
any litigation arbitration investigation prosecution or other tribunal
or legal proceedings or any claims or actions; and
(b) so far as the Vendor is aware no such litigation arbitration
investigation prosecution or other tribunal or legal proceedings or
claims or actions are in progress outstanding pending or threatened by
or against the Company, any of its assets or any person for whom it is
vicariously responsible, or in respect of which the Company is or
could be liable to indemnify or compensate any third party
and, so far as the Vendor is aware, there are no facts or other
circumstances which will or could reasonably be expected to give rise to or
result in such litigation arbitration investigation prosecution or other
tribunal or legal proceedings or claims or actions.
BREACHES
--------
(81) Neither the Company nor so far as the Vendor is aware any person for whom
it is vicariously responsible has committed any breach of or failed to
perform or observe any provision of its Memorandum or Articles of
Association or of any legislation in
<PAGE> 57
54
any part of the world or any covenant or agreement or the terms or
conditions of any consent or licence or any judgment or order of a Court or
other competent tribunal or authority by which the Company is bound or to
which it is a party or which affects in any material respect any of its
assets.
INSURANCE
---------
(82) The Company is and has at all material times been covered by valid
insurances (subject to reasonable excesses) against all normal risks having
regard to the type of business carried on and assets owned or used by it
including adequate insurance for the full replacement or reinstatement
value of such business and assets, against liability to third parties
(including product liability) and against loss of profits for a period of
not less than six months and full particulars of all insurances of the
Company are disclosed in and copies of all policies of insurance of the
Company are annexed to the Disclosure Letter.
(83) The policies of insurance to which the Company is a party are valid and
enforceable and all premiums due have been paid and so far as the Vendor is
aware there are no outstanding claims or circumstances likely to give rise
to a claim thereunder and nothing has been done or omitted to be done which
has made or could make any such policy void or voidable or whereby the
renewal of any such policy might be affected or the premiums due in respect
thereof are likely to be increased.
EMPLOYEES, CONSULTANTS AND AGENTS
---------------------------------
(84) A list detailing the names, ages, length of service, remuneration and other
benefits of all officers, employees consultants and agents of the Company
and copies of all service contracts and contracts of services and full
particulars of the terms of employment and engagement of all officers
employees consultants and agents of the Company are annexed to or clearly
and fully set out in the Disclosure Letter.
(85) No negotiations are in hand between the Company and any of its employees or
their representatives in regard to any alteration in the terms of their
employment or their rates of remuneration.
(86) No present officer employee consultant or agent of the Company has given or
received notice terminating his employment or engagement or is entitled
(without giving proper notice) to terminate his employment or engagement
with the Company.
(87) All contracts of employment or engagement between the Company and its
officers, employees consultants or agents are lawfully determinable by the
Company without compensation (in the case of employees) by notice not
exceeding the relevant statutory minimum period and (in any other case) by
twelve weeks notice or less.
(88) The Company is not party to any agreement or arrangement or practice
imposing a
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55
legal or moral obligation on it to increase the rates of remuneration of or
to make any bonus or incentive payments or any benefits in kind or any
payments under a profit sharing scheme to or on behalf of any of its former
present or future officers employees consultants or agents, whether now or
at any future date.
(89) There is not in existence any share incentive scheme share option scheme or
profit sharing scheme for all or any of the Company's directors or officers
or employees or consultants and no proposals for any such scheme or
arrangement are under consideration by the Company.
(90) The Company is not party to any collective agreement or any other agreement
or arrangement with any trade union or any other body representing
employees of the Company.
(91) The Company has never been involved in any strike lock out, go-slow,
work-to-rule or other form of industrial dispute and so far as the Vendor
is aware there are no facts or circumstances which might lead to any such
industrial dispute.
(92) The Company has complied in all material respects with all its statutory
obligations relating to employees including (without limitation) its
obligations under the Employment Rights Act 1996 Sex Discrimination Act
1975 Equal Pay Act 1970, the Race Relations Act 1976 and the Transfer of
Undertakings (Protection of Employment) Regulations 1981.
PENSIONS
--------
(93) Save for the retirement and death benefit schemes known as the Data
Supplies Limited Retirement and Death Benefits Plan, the Data Supplies
Retirement Plan and the Data Supplies Death Benefits Scheme respectively
("THE PENSION SCHEMES"), there is no arrangement to which the Company
contributes or may become liable to contribute under which benefits of any
kind are payable to or in respect of any employee or director of the
Company or any former employee or former director of the Company (or to any
spouse or dependant of any of them) on retirement, on death or in the event
of disability or sickness or in other similar circumstances (including
permanent health insurance and medical insurance).
(94) The Company is not under any legal obligation or liability to provide or
procure the provision of benefits of the nature of those referred to in
paragraph (93) above in respect of any present or former employee or
director of the Company (or to any spouse or dependant of any of them) save
in accordance with the present provisions of the Pension Scheme and will
not before Completion enter into any such obligation or agreement.
(95) The Company is neither making nor has regularly made nor will before
Completion make any ex gratia payments to any present or former employee or
director of the Company or to any spouse or dependant of any of them.
<PAGE> 59
56
(96) No legal proceedings or complaints to the Pensions Ombudsman in connection
with either Pension Scheme are pending, threatened or expected and so far
as the Warrantors are aware there is no fact or circumstance likely to
give rise to any such proceedings or complaints.
(97) Full and accurate details of each Pension Scheme have been disclosed in
the Disclosure Letter including (without limitation) copies of the trust
deeds and rules, booklets or announcements to members, details of the
assets, the Company and employee contribution rates and current members
of the Pension Scheme.
(98) No increase in the rate of any contribution to the Pension Schemes by the
Company or any present or former employee or director of the Company is
agreed or proposed or advised or envisaged.
(99) Each Pension Scheme is an exempt approved scheme within the meaning of
Chapter 1 Part XIV of the Taxes Act and there is no reason why such
approval may be withdrawn.
(100) None of the Pension Schemes are contracted-out within the meaning of the
Pension Schemes Act 1993.
(101) The Company may upon not more than one month's notice (without the consent
of any person or further payment) terminate any obligation it may have to
contribute to the Pension Schemes without incurring any liability to any
person under his contract of employment or under the terms of the Pension
Scheme.
(102) All benefits (other than a refund of members' contributions with interest
where appropriate) payable under either Pension Scheme on the death of a
member whilst in an employment to which the Pension Scheme relates or
during a period of sickness or disability of a member are fully insured
under a policy effected with a first class reputable insurance company and
each member has been covered thereunder at the normal rates and under the
normal terms of such insurance company for persons in good health.
(103) The Company has duly complied with all its obligations under the Pension
Schemes and has paid all amounts due to the trustees of the Pension
Schemes which have fallen due to be paid by it prior to the date hereof
and contributions are not paid in arrear. All contributions made by the
Company to the Pension Schemes have been made at the rate or rates
recommended by the actuaries or insurance company advising on the funding
of the Pension Schemes and there are not and will not at Completion be
any arrears of employer's or employees' contributions due from the
Company to the trustees of the Pension Schemes.
(104) The Pension Schemes comply and have at all times complied with all
applicable legislation relating to occupational pension schemes (including
European Community
<PAGE> 60
57
law) and have been operated in accordance with the requirements of the
Pension Schemes Office of the Inland Revenue..
(105) Save for the payment of employer contributions, the Company is not
required to bear any fees, charges or expenses in relation to the Pension
Schemes.
(106) No part-time employee has been excluded from membership of the Pension
Schemes.
(107) All pension benefits payable on the death or retirement of a member of
either Pension Scheme are related and dependent upon the investment of
contributions made by and in respect of the employee concerned and are not
guaranteed in relation to a proportion of remuneration.
ARRANGEMENTS WITH CONNECTED PERSONS
-----------------------------------
(108) None of the Vendor nor any director or shareholder of the Company nor any
connected person or associate of any of them has any interest, direct or
indirect, in any agreement or arrangement to which the Company is a party
or in any business which has a close trading relationship with that of the
Company or which is or is likely to become competitive with the business
of the Company.
(109) Save for remuneration and expenses properly due to its directors in the
ordinary course, there are no amounts owing by or to the Company to or by
any of the Vendor or any shareholder or director of the Company or any
connected person or associate of any of them respectively and the Company
is not under any liability (contingent or otherwise) in respect of any
guarantee suretyship indemnity or like obligation given by or binding on
the Company in respect of any liabilities or obligations of any of the
Vendor such shareholders directors or connected persons or associates.
THE COMPANY
-----------
(110) The Company is a private company limited by shares and the information set
out in Schedules 2 and 3 is correct.
(111) The Shares and the issued shares in the Subsidiary have been issued in
proper legal form and are fully paid or credited as fully paid and:-
(a) Mr. Black is the absolute legal and beneficial owner of the Shares and
has full power right and authority to sell and transfer all of the
Shares hereunder to the Purchaser, free from all claims liens
encumbrances and equities; and
(b) the issued shares of the Subsidiary are all beneficially owned by the
Company free from all claims liens encumbrances and equities.
(112) There is not now any debenture or loan capital or any agreement to create
or issue any debenture or loan or share capital of the Company or any
option to subscribe for or
<PAGE> 61
58
acquire or any agreement to put under option any debenture or loan or
share capital of the Company and no person has the right (whether
pursuant to conversion or otherwise) to call for the issue of any
debenture or share or loan capital of the Company under any agreement or
other arrangement presently in force.
(113) Save as disclosed in Schedule 3 the Company does not have and has never
been or had any subsidiary and nor is it the legal or beneficial owner of
any share or loan capital of any company.
(114) The register of members of the Company is correct and properly written up
to date and there has been no notice of any proceedings to correct or
rectify any such register.
(115) Neither the Company nor any class of its members has since the Accounting
Date passed any Resolution.
(116) A copy of the Memorandum and Articles of Association of the Company is
attached to the Disclosure Letter, is true and complete and has embodied
therein or annexed thereto a copy of every such Resolution or Agreement as
is referred to in Section 380(2) of the Companies Act.
(117) The Company has complied in all material respects with the provisions of
the Companies Act and all returns particulars Resolutions and other
documents required under any legislation to be delivered on behalf of the
Company to the Registrar of Companies or to any other authority whatsoever
have been properly made and delivered .
(118) No person is authorised to act as agent for the Company .
GENERAL
-------
(119) The Vendor has requisite powers to enter into and perform this Agreement
and the obligations to be assumed or performed by him pursuant thereto and
the execution and delivery and completion of this Agreement:-
(a) does not and will not cause the Company or the Vendor or any of them
to be in breach of any of the terms and provisions of any agreement or
arrangement or order or injunction of any Court or competent tribunal;
(b) does not and will not relieve any person of or entitle any person to
terminate any contractual or other obligation to the Company; and
(c) will not so far as the Warrantors are aware result in any customer or
supplier of the Company ceasing to deal or substantially reducing the
existing level of his dealings with the Company or terminate or result
in the termination of any present or future benefit or privilege
enjoyed by the Company.
<PAGE> 62
59
(120) No person is entitled to receive from the Company any finders fee
brokerage or commission in connection with the sale of Shares under this
Agreement and no representation has been made to any of the Vendor or any
other person in connection with this Agreement or the Disclosure Letter or
otherwise for which the Company might be liable.
MANAGEMENT ACCOUNTS
-------------------
(121) The management accounts for the year ended 31 December 1996 (a copy of
which is attached as document 2.2 of the Disclosure Bundle annexed to the
Disclosure Letter) ("the Management Accounts") have been properly prepared
on a consistent basis with the policies adopted in preparing the Accounts
and give a fair view of the state of trading and profit of the Group as at
the date to which they were prepared by reference to facts known or
circumstances prevalent at the date of their preparation. The Management
Accounts were prepared in good faith and the Vendor would not alter them
in any material respect if they were prepared as at today's date.
<PAGE> 63
60
EXECUTED and DELIVERED as a Deed )
by the said IAN ALASTAIR ) /s/ Ian Black
SLOAN BLACK in the presence of:- )
/s/ Simon Hewes
Solicitor
21 West Dean
Salisbury
EXECUTED and DELIVERED as a Deed )
by or for the said DAVID WILSON ) /s/ David Savage
SAVAGE In the presence of:- )
/s/ Simon Hewes
SIGNED by Kevin Thackrah ) /s/ Kevin Thackrah
Philip Garner ) /s/ Philip Garner
duly authorised for )
ELCOM GROUP LIMITED )
in the presence of:- )
/s/ C. Edeleanu
22 Tudor Street
London
