<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 3, 1996
GT BICYCLES, INC.
-----------------
(Exact name of the registrant as specified in its charter)
Delaware 0-26742 04-3210830
-------- ------- ----------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
3100 West Segerstrom Avenue, Santa Ana, California 92704
--------------------------------------------------------
(Address of principal executive offices)
(714) 513-7100
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name or former address, if changed since last report)
Page 1 of 63 Pages
Exhibit Index Begins on Page 4
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On July 3, 1996, GT Bicycles, Inc. (the "Company") purchased all share capital
of Caratti Sport Limited ("Caratti"), pursuant to an Agreement for the sale and
purchase of the whole of the issued share capital of Caratti Sport Limited and
in consideration of (Pound Symbol)8,300,000 (approximately U.S.$12,968,750).
In addition, the Company agreed to pay a contingent amount of up to an
additional aggregate amount of (Pound Symbol)700,000 (approximately
U.S.$1,093,750) based on after tax profits, average gross profit margins and
inventory levels from Caratti's October 31, 1996 year end financial statements.
Caratti is involved in the business of distributing wholesale and retail
bicycles, parts and accessories. The purchase price was determined pursuant to
arms-length negotiations between the parties. The purchase of Caratti by the
Company was funded through a $14,000,000 overadvance credit added to the
Company's existing line of credit. The overadvance credit will expire on
August 2, 1996 at which time the Company expects to roll the borrowings over
into a term loan with the Company's primary lender. The Company intends to
continue substantially the same use of the assets acquired from Caratti.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The historical audited financial statements of Caratti required to
be filed under this Item are not currently available and,
accordingly, are not included herein. By an amendment to this
Report to be filed as soon as practicable, the Company plans to
submit such financial statements.
(B) PRO FORMA FINANCIAL INFORMATION
The pro forma financial information required to be filed under this
Item is not currently available and, accordingly is not included
herein. By an amendment to the Report to be filed as soon as
practicable, the Company plans to submit such pro forma information.
(C) EXHIBITS
Exhibit Number
--------------
2.1 Agreement for the sale
and purchase of the whole of
the issued share capital of
Caratti Sport Limited, dated
July 3, 1996, between the
Company and Mark Brinley Aldo
Edwards, Sarah Edwards and
Philip Brinley Antonio
Edwards.
2
<PAGE> 3
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GT BICYCLES, INC.
Date: July 15, 1996 By: /s/ Michael C. Haynes
-----------------------
Michael C. Haynes
Chief Financial Officer
(Principal Financial and
Accounting Officer and
Duly Authorized Officer)
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially Numbered
Exhibit Number Page
-------------- ----
<S> <C> <C>
2.1 Agreement for the sale and purchase of the whole of
the issued share capital of Caratti Sport Limited,
dated July 3, 1996, between the Company and Mark
Brinley Aldo Edwards, Sarah Edwards and Philip
Brinley Antonio Edwards.
5
</TABLE>
4
<PAGE> 1
CONFORMED COPY
DATED 3RD JULY 1996 EXHIBIT 2.1
1. THE PERSONS LISTED IN SCHEDULE 1
2. G.T. BICYCLES, INC.
-----------------------------------
AGREEMENT
FOR THE SALE AND PURCHASE OF THE
WHOLE OF THE ISSUED SHARE CAPITAL OF
CARATTI SPORT LIMITED
-----------------------------------
OSBORNE CLARKE
6-9 MIDDLE STREET
LONDON EC1A 7JA
0171 600 0155
<PAGE> 2
CONFORMED COPY
<TABLE>
<CAPTION>
CONTENTS
<C> <C>
1. Definitions and interpretation............................................................. 3
2. Sale and purchase.......................................................................... 10
3. Consideration.............................................................................. 11
4. Completion................................................................................. 11
5. Warranties................................................................................. 14
6. Covenant for Taxation...................................................................... 14
7. Purchaser's remedies....................................................................... 15
8. Limitations on liability................................................................... 17
9. Conduct of claims.......................................................................... 18
10. Specific Indemnities....................................................................... 18
11. Non-completion Covenants................................................................... 19
12. Physical Stocktake......................................................................... 20
13. Assignment of the Lease.................................................................... 20
14. General.................................................................................... 22
15. Announcements.............................................................................. 24
16. Costs and Expenses......................................................................... 24
17. Notices.................................................................................... 24
18. Governing law and jurisdiction ............................................................ 25
Schedule 1 (The Vendors)........................................................................... 27
Schedule 2 (Information concerning the Company).................................................... 28
Schedule 3 (Warranties)............................................................................ 30
Schedule 4 (Particulars of the Properties)......................................................... 60
Schedule 5 (Contingent Consideration) ............................................................. 61
</TABLE>
<PAGE> 3
CONFORMED COPY
THIS AGREEMENT is made the Third day of July 1996
BETWEEN:
(1) THE PERSONS whose names and addresses are set out in Schedule 1
("the Vendors"); and
(2) G.T. BICYCLES INC. whose principal place of business is at 3100 W.
Segerstorm Avenue, Santa Ana, California 91704, USA ("the
Purchaser")
BACKGROUND:
The Vendors have agreed to sell and the Purchaser has agreed to purchase the
Shares (as defined below) on the terms of this Agreement.
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, the
following expressions shall have the following meanings:
"THE ACCOUNTS" the audited balance sheet as at the
Accounts Date and the audited
profit and loss account for the
year ended on the Accounts Date of
the Company, including all
documents required by law to be
annexed to them;
"THE ACCOUNTS DATE" 31st October 1995;
"THIS AGREEMENT" this Agreement (including any
schedule or annexure to it and any
document in agreed form) as varied
from time to time pursuant to its
terms;
"BUSINESS DAY" any weekday, save for
Saturdays and bank holidays, on
which United Kingdom clearing banks
are generally open for business in
the city of London;
"THE BOARD" the board of directors of the
Company;
"CLAIM" a claim by the Purchaser against
all or any of the Vendors under the
Covenant for Taxation or that any
Warranty is untrue or inaccurate in
any respect or is misleading;
"CLAIM FOR TAXATION" any notice, demand,
assessment, letter or other
document issued or action taken by
any Tax Authority indicating that
the Company is or may be placed or
sought to be placed under a
Liability to Taxation;
<PAGE> 4
CONFORMED COPY
"THE COMPANY" Caratti Sport Limited, details of
which are set out in Schedule 2;
"COMPLETION" the Completion of the sale and
purchase of the Shares under this
Agreement;
"COMPLETION DATE" the date hereof;
"THE CONTINGENT the amount (if any) of up to a
CONSIDERATION" maximum of Pounds Sterling 700,000
payable by the Purchaser to the
Vendors for the Shares under
Clause 3.2 calculated in
accordance with Schedule 5;
"CONTINGENT CONSIDERATION an interest bearing account in the
ACCOUNT" name of the Vendors' Solicitors
and the Purchaser's Solicitors at
National Westminster Bank plc;
"THE COVENANT FOR the covenant given by the Vendors
TAXATION" under Clause 6;
"DANGEROUS any natural or artificial substance
SUBSTANCES" (whether in the form of a solid,
liquid, gas or vapour) the
generation, transportation,
storage, treatment, use or disposal
of which (whether alone or in
combination with any other
substance) gives rise to a risk of
causing harm to human health,
comfort or safety or harm to any
other living organism or causing
damage to the Environment;
"THE DISCLOSURE the letter of the same date as this
LETTER" Agreement in the agreed form from
the Vendors or their solicitors to
the Purchaser or its solicitors,
together with any attachments,
disclosing matters that are
exceptions to the Warranties;
"THE ENVIRONMENT" the environment as defined in
Section 1(2), Environmental
Protection Act 1990;
"ENVIRONMENTAL any consent, approval,
CONSENT" authorisation, permit, exemption,
filing requirement, licence or
registration from time to time
necessary or desirable under
Environmental Law;
"ENVIRONMENTAL LAW" any common or statutory law,
regulation, directive, treaty, code
of practice, circular, guidance
note and the like, in each case of
any jurisdiction, in force or
enacted relating or pertaining to
the Environment, any Dangerous
Substance, human health, comfort,
safety or the welfare of any other
living organism;
"EXECUTIVE PENSION the Caratti Sport Executive
SCHEME" Pension Scheme created by
Definitive Trust Deed dated 28th
October 1987;
4
<PAGE> 5
CONFORMED COPY
"GRANT THORNTON" Grant Thornton of 43 Queens Square,
Bristol, BS1 4QR;
"ICTA" the Income and Corporation Taxes
Act 1988;
"INTELLECTUAL patents, trade marks or names
PROPERTY" whether or not registered or
capable of registration,
registered designs, design
rights, copyrights, the
right to apply for and applications
for any of the preceding items,
together with the rights in
inventions, processes, software,
know-how, trade or business
secrets, confidential information
or any process or other similar
right or asset capable of
protection enjoyed, owned, used or
licensed by the Company;
"THE INITIAL CONSIDERATION" the sum of Pounds Sterling
8,300,000 payable by the
Purchaser to the Vendors for the
Shares under sub-clause 3.1;
"KPMG" KPMG of Richmond Park House, 15
Pembroke Road, Clifton, Bristol BS8
3BG;
"THE LEASES" the leases under which the Property
is held, particulars of which are
set out in Schedule 4 and "Lease"
means any one of them;
"Liability to Taxation" (a) any liability of the Company to
make actual payments of Taxation
regardless of whether such Taxation
is chargeable or attributable
directly or primarily to the
Company or to any other persons;
(b) the loss of any Relief which
would (were it not for the
loss) have been available to
the Company and which has been
treated as an asset in
preparing the Accounts or
taken into account in
computing (and so reducing)
any provision for Taxation
(including deferred taxation)
which appears in the Accounts
(or which, but for the
availability or presumed
availability of such Relief
prior to its loss would have
appeared in the Accounts); and
(c) the setting off against any
liability to Taxation or
against Profits earned,
accrued or received on or
before Completion of any
Relief which arises in respect
of any Transaction effected on
or after Completion in
circumstances where, but for
the setting off, the Company
would have had an actual
liability to Taxation in
respect of which the Purchaser
would have been able to make a
claim against the Vendors
under the Covenant for
Taxation;
"MANAGEMENT ACCOUNTS" the unaudited balance
sheet and profit and loss account
of the Company in the agreed form
as at and for the period from the
Accounts Date to the Management
Accounts Date;
5
<PAGE> 6
CONFORMED COPY
"MANAGEMENT ACCOUNTS 30th April 1996;
DATE"
"THE PENSION SCHEME" the Company's Pension scheme
governed by a definitive trust
deed dated 7th July 1994;
"PLANNING ACTS" the Town and Country Planning
Act 1990, the Planning (Listed
Buildings and Conservation Areas)
Act 1990, the Planning (Hazardous
Substances) Act 1990, the Planning
(Consequential Provisions) Act 1991
and all other statutes containing
provisions relating to town and
country planning;
"THE POLICIES" all insurance policies in relation
to which the Company has any
interest and "POLICY" means any of
them;
"PROFITS" income, profits and gains, the
value of any supply and any other
consideration, value or receipt
used or charged for Taxation
purposes and references to "PROFITS
EARNED, ACCRUED OR RECEIVED"
include Profits deemed to have been
earned, accrued or received for
Taxation Purposes;
"THE PROPERTIES" the leasehold properties
particulars of which are set out in
Schedule 4 and "Property" means any
one of them;
"PURCHASER'S SOLICITORS" Osborne Clarke of 6-9 Middle
Street, London EC1A 7JA;
"RELEVANT CLAIM OR any claim or surrender to or by the
SURRENDER" Company of:
(a) group relief under Chapter IV,
Part X, ICTA;
(b) advance corporation tax under
Section 240, ICTA; or
(c) a tax refund under Section
102, Finance Act 1989;
"RELIEF" any loss, relief, allowance,
exemption, set-off, deduction,
credit or right to repayment of
Taxation and references to the
"LOSS OF ANY RELIEF" include the
loss, reduction, counteraction,
disallowance, setting-off against
Profits, crediting against a
liability to make an actual payment
of Taxation or failure to obtain a
Relief and "LOSE" and "LOST" shall
be construed accordingly;
"THE SHARES" all the issued shares of the
Company at Completion, as set out
in part 1 of Schedule 2 and all
rights and interests in such
shares;
6
<PAGE> 7
CONFORMED COPY
"TAXATION" all forms of taxation and
statutory, governmental, supra-
governmental, state, provincial,
local governmental or municipal
impositions, duties, contributions
and levies (including withholdings
and deductions), whether domestic
or foreign, whenever imposed and
all penalties, fines, charges,
costs and interest relating to any
such matters and "TAX" shall be
construed accordingly;
"TAX AUTHORITY" any taxing or other authority, body
or official competent to
administer, impose or collect any
liability to Taxation;
"TCGA" the Taxation of Chargeable Gains
Act 1992;
"THE TENANCIES" any tenancies or other occupational
arrangements under which the
Property is held by third parties,
particulars of which are set out in
Schedule 4;
"TOTAL CONSIDERATION" the aggregate of the Initial
Consideration and the Contingent
Consideration;
"TRADE MARK ASSIGNMENTS" the trade mark assignments in the
agreed form;
"TRANSACTION" any transaction, deed, act, event,
omission, payment or receipt of
whatever nature and whether actual
or deemed for Tax purposes and
references to "ANY TRANSACTION
EFFECTED ON OR BEFORE COMPLETION"
include the combined result of two
or more Transactions, the first of
which shall have taken place or
commenced (or be deemed to have
taken place or commenced) on or
before Completion;
"THE TRUST" The Discretionary Trust dated 4
June 1996 made between Mark Brinley
Aldo Edwards ("the Settlor") and
the Trustees.
"THE TRUSTEES" Mark Brinley Edwards and his wife,
Sarah Edwards.
"USA" OR "US" United States of America;
"VAT" Value Added Tax;
"VATA" the Value Added Tax Act 1994 and
all other statutes, statutory
instruments, regulations and
notices containing provisions
relating to VAT;
"VENDOR ASSOCIATE" each of the Vendors and any persons
connected with any of them within
Section 839, ICTA; and
"VENDORS' SOLICITORS" Trump & Partners of 34 Saint
Nicholas Street, Bristol BS1 1TS;
7
<PAGE> 8
CONFORMED COPY
"WARRANTIES" the representations referred to in
clause 6 and set out in Schedule 3,
and "WARRANTY" means any one of
them.
1.2 In this Agreement, unless the context otherwise requires:
(a) references to:
(i) a "PERSON" shall be construed to include any
individual, firm, body corporate, government or
state, association or partnership (whether or not
having a separate legal personality);
(ii) any documents being "IN THE AGREED FORM" shall
mean in a form which has been agreed by the
parties to this Agreement and for identification
purposes signed on their behalf by their
solicitors;
(iii) "INDEMNIFY" and "INDEMNIFYING" any person against
any circumstance include indemnifying and keeping
him harmless from all actions, claims and
proceedings from time to time made against that
person and all loss or damage and all payments,
costs or expenses made or incurred by that person
as a consequence of or which would not have arisen
but for that circumstance;
(iv) any statutes, statutory provisions, regulations,
directives or treaties or any particular statute,
statutory provision, regulation, directive or
treaty shall include any amendment, modification,
consolidation or re-enactment in force from time
to time and any statutory instrument or
regulations made under it; and
(v) clauses and schedules are to clauses and schedules
of this Agreement and references to sub-clauses
and paragraphs are references to sub-clauses and
paragraphs of the clause or schedule in which they
appear;
(b) except as set out in sub-clause 1.1, words and
expressions defined in the Companies Act 1985 and ICTA
shall have the same meanings attributed to them by those
Acts;
(c) "STERLING" and the sign "(POUND)" mean pounds sterling
in the currency of the United Kingdom;
(d) "DOLLARS" and the sign "US $" mean dollars in the
currency of the United States of America;
(e) the index and headings are for convenience only and
shall not affect the construction of this Agreement;
(f) general words shall not be given a restrictive meaning:
(i) if they are introduced by the word "OTHER" by
reason of the fact that they are preceded by words
indicating a particular class of act, matter or
thing; or
(ii) by reason of the fact that they are followed by
particular examples intended to be embraced by
those general words;
8
<PAGE> 9
CONFORMED COPY
(g) where any statement is qualified by the expression "SO
FAR AS THE VENDORS ARE AWARE" or "TO THE BEST OF THE
VENDORS' KNOWLEDGE AND BELIEF" or any similar expression
it shall be deemed to include an additional statement
that it has been made after due and careful enquiry; and
(h) all obligations of more than one party are joint and
several.
2. SALE AND PURCHASE
2.1 Subject to the terms of this Agreement, the Vendors shall sell and
the Purchaser shall purchase, with effect from Completion, the
Shares with:
(a) full title guarantee (but free from all charges and
encumbrances (whether monetary or not) and all other
rights exercisable by third parties which the Vendors do
not, and could not reasonably be expected to, know
about); and
(b) all rights attaching to or accruing to them at
Completion (including all dividends and distributions
declared, paid or made on or after that date).
2.2 Each of the Vendors waives all rights of pre-emption over any of the
Shares conferred on him by the Articles of Association of the
Company or in any other way.
2.3 The Purchaser shall not be obliged to complete the purchase unless
the sale and purchase of all the Shares is completed simultaneously.
3. CONSIDERATION
3.1 The Initial Consideration shall be paid in cash by the Purchaser to
the Vendors and will be attributed as set out in part 1 of Schedule
1. Payment of the Initial Consideration shall be made by telegraphic
transfer or in such other form as the Vendors may approve to the
Vendors' Solicitors who are hereby authorised to receive the same on
behalf of the Vendors and whose receipt shall be an absolute
discharge to the Purchaser who shall not be obliged to have regard
to the allocation thereof amongst the Vendors.
3.2 The Contingent Consideration (if any) payable shall be calculated
and paid in accordance with the provisions of Schedule 5
4. COMPLETION
4.1 Completion shall take place at 10am on the Completion Date at the
offices of the Purchasers' Solicitors in Bristol or at such other
time and place as may be agreed.
4.2 At Completion the Purchaser shall procure that the Company:
(a) repays all outstanding loans from directors and/or
shareholders and the loan from the Executive Pension
Scheme including accrued interest in respect of the
Executive Pension Scheme loan in an aggregate sum
totalling Pounds Sterling 518,185.24 (including accrued
interest);
(b) enters into a written agreement in the agreed form with
Comar, S.A.; and
9
<PAGE> 10
CONFORMED COPY
(c) to the extent that the rules of the Executive Pension
Scheme allow, pay an amount of Pounds Sterling 130,000
by way of contribution to the Executive Pension Scheme
4.3 On Completion:
(a) the Vendors shall deliver to the Purchaser:
(i) stock transfer forms, duly completed and executed
by the registered holders, in favour of the
Purchaser (or as it may direct) in respect of the
Shares together with the relevant share
certificates and any waivers, consents or other
documents which may be necessary to enable the
Purchaser or its nominees to be registered as the
holders of the Shares;
(ii) letters of non-crystallisation dated not earlier
than the second Business Day immediately
preceding the Completion Date from the holders
of all outstanding floating charges given by the
Company;
(iii) irrevocable powers of attorney in favour of the
Purchaser in the agreed form executed by each of
the registered holders of the Shares to enable
the Purchaser (pending registration of transfers
of the Shares) to exercise all voting and other
rights attaching to the shares and to appoint
proxies for this purpose;
(iv) the certificate of incorporation, any
certificate of incorporation on change of name or
re-registration, the statutory books written up
to date, share certificate books, minute books,
and the common seal of the Company;
(v) all title deeds relating to the Properties in the
possession of the Company
(vi) all credit and charge cards held by Philip
Edwards;
(vii) all other papers and documents relating to the
Company which are in the possession of or under
the control of any of the Vendors;
(viii) letters of resignation in the agreed form from
each of the directors and the company secretary
of the Company other than Mark Edwards
(ix) a letter of resignation from the auditors of the
Company containing the statement specified in
Section 394(1), Companies Act 1985;
(x) a statement of all overdraft and credit balances
from the Company's bankers and other lenders as
at the close of business on the Business Day
preceding the Completion Date;
(xi) the Disclosure Letter;
(xii) the Trade Mark Assignments duly executed;
(xiii) receipts and acknowledgements of full and final
satisfaction from the directors in respect of the
loan repayments referred to in clause 4.2(a); and
10
<PAGE> 11
CONFORMED COPY
(xiv) either, an undertaking from Trump & Partners in
the agreed form to procure that upon payment of
Pounds Sterling 454,542.69 to the trustees of the
Executive Pension Scheme, such trustees will
forthwith endorse Memoranda of Satisfaction on
their charges over the Company's assets or duly
endorsed memoranda of satisfaction from such
trustees.
(b) The Vendors shall repay all monies then owing by them to
the Company whether due and payable or not.
(c) The Vendors shall procure that Mark Edwards enters into
a service agreement and Philip Edwards a consultancy
agreement in each case with the Company in the agreed
form.
(d) Mark Edwards shall purchase and the Company shall sell
the Shogun motor (Reg. No. J300 JAK) free of hire
purchase at a price equal to the redemption value of the
hire purchase agreement ;
(e) The Vendors shall procure that a board meeting of the
Company is held at which:
(i) the stock transfer forms referred to in sub-clause
4.3(a)(i) are approved and (subject to them being
appropriately stamped) registered in the Company's
books;
(ii) the persons nominated by the Purchaser are
appointed as directors and secretary of the
Company;
(iii) Philip Edwards and the secretary of the Company
cease to be officers of the Company with immediate
effect;
(iv) Grant Thornton resign from their office as
auditors to the Company and KPMG are appointed in
their place;
(v) the registered office of the Company is changed to
6/9 Middle Street, London EC1;
(vi) the mandates given by the Company to its bankers
are revoked or revised as the Purchaser may
require; and
(vii) the execution and completion of the other
documents to be entered into by the Company under
this Agreement is approved.
(f) At Completion Mark and Philip Edwards (two of the
Vendors) will sell to the Purchaser with full title
guarantee the entire issued and paid up share capital of
Caratti International Ltd. and Biketech Ltd for the sum
of Pound Sterling 1.
(g) When the Vendors have complied with the provisions of
sub-clauses 4.3(a)-(f) inclusive, the Purchaser shall:
(i) pay the Initial Consideration to the Vendors in
the proportions set out in Schedule 1 by
telegraphic transfer to the client account of the
Vendors' Solicitors at TSB Bank plc, account
number 94102468, sort code 77-73-01. The Vendors'
Solicitors
11
<PAGE> 12
CONFORMED COPY
are hereby authorised to receive the same on
behalf of the Vendors and their receipt shall be
an absolute discharge to the Purchaser who shall
not be obliged to have regard to the allocation
thereof amongst the Vendors;
(ii) pay Pounds Sterling 700,000 to the Vendors'
Solicitors and the Purchaser's Solicitors for
crediting to the Contingent Consideration Account
in accordance with the provisions of Schedule 5,
payment to be made by telegraphic transfer or in
such other form as the Vendors may approve.
4.5 The Vendors undertake to indemnify the Company against any and all claims
which may be made against it by any person who resigns at Completion as a
director under sub-clause 4.3(e)(iii) whose claim arises out of his
resignation or the termination of his employment and against all costs,
charges and expenses incurred by the Company which are incidental to any
such claim.
5. WARRANTIES
5.1 The Vendors jointly and severally represent to the Purchaser that each of
the Warranties is true and accurate in all respects and not misleading at
the date of this Agreement.
5.2 The Vendors acknowledge that they give the Warranties with the intention of
inducing the Purchaser to enter into this Agreement and that the Purchaser
does so in reliance on the Warranties.
5.3 Each of the Warranties is a separate and independent Warranty and shall not
be limited by reference to any other Warranty or anything in this
Agreement.
6. COVENANT FOR TAXATION
6.1 The liability of the Vendors under this clause shall be joint and several.
6.2 Save to the extent that a provision or reserve in respect of such Liability
to Taxation was made in the Accounts or such Liability to Taxation arises
in respect of any Transaction in the ordinary course of business since the
Accounts Date, the Vendors shall pay to the Purchaser an amount equal to
any Liability to Taxation of the Company or any settlement of any Claim for
Taxation:
(a) arising directly or indirectly from any Transaction effected on or
before Completion; or
(b) in respect of, or by reference to, any Profits earned, accrued or
received on or before Completion; or
(c) arising from the failure by a Vendor Associate to discharge a Liability
to Taxation which falls upon such Vendor Associate:
(i) arising directly or indirectly from any Transaction effected
or deemed to have been effected at any time; or
(ii) in respect of any Profits earned, accrued or received at any
time
12
<PAGE> 13
CONFORMED COPY
together with all costs and expenses incurred by the
Purchaser or the Company in connection with any such
Liability to Taxation or Claim for Taxation.
6.3 In a case of a loss of any Relief, the amount that is to be treated for the
purposes of sub-clause 6.2 as a Liability to Taxation shall:
(a) be the amount of that Relief, if the Relief that was the subject of the
loss was either a deduction from or offset against Taxation or a right
to a repayment of Taxation;
(b) be the amount of Taxation which has been saved in consequence of the
setting off where the Relief that was the subject of the loss was a
deduction from or offset against gross Profits, and the Relief was the
subject of a setting off; and
(c) in any other case where the Relief that was the subject of the loss was
a deduction from or offset against gross Profits, be the amount of
Taxation which would, on the basis of the rates of Taxation current at
the date of the loss, have been saved but for the loss.
6.4 Where the Vendors become liable to make any payment under the Covenant for
Taxation, the due date for the making of that payment shall be:
(a) in a case that involves an actual payment of Taxation by the Company,
the date that is the last date on which the Company is liable to pay to
the appropriate Tax Authority the Taxation in question in order to
avoid incurring a liability to interest or a penalty or, if later, five
days following a written demand from the Purchaser; or
(b) in the case of a loss of any Relief, the date falling five days
following the date when the Vendors have been notified by the Purchaser
that the auditors for the time being of the Company have certified, at
the request of the Purchaser, that the Vendors have a liability for a
determinable amount in respect of the loss of such Relief under the
Covenant for Taxation.
7. PURCHASER'S REMEDIES
7.1 Each of the Vendors undertake to disclose in writing to the Purchaser
anything which is or may constitute a Claim or be inconsistent with the
contents of the Disclosure Letter directly it comes to the notice of
any of them at any time before or after Completion.
7.2 The rights and remedies of the Purchaser in respect of any breach of
the Warranties or the Covenant for Taxation shall not be affected by
Completion or by any investigation made, or which could have been made,
by it or on its behalf into the affairs of the Company.
7.3 If, in respect of or in connection with any Claim, any amount payable
to the Purchaser by the Vendors is subject to Taxation, the amount to
be paid to the Purchaser by the Vendors shall be such so as to ensure
that the net amount retained by the Purchaser after such Taxation has
been taken into account is equal to the full amount which would be
payable to the Purchaser had the amount not been subject to Taxation.
13
<PAGE> 14
CONFORMED COPY
7.4 If any Claim is made, no Vendor shall make any claim against the
Company or any director or employee of the Company on whom he may have
relied before agreeing to any terms of this Agreement or authorising
any statement in the Disclosure Letter. This sub-clause shall not
preclude any Vendor from claiming against any other Vendor under any
right of contribution or indemnity to which he may be entitled.
7.5 In the event of a Claim, without prejudice to the right of the
Purchaser to claim damages on any basis available to it or to any other
right or remedy available to it, the Vendors agree to pay on demand in
cash to the Purchaser a sum by way of damages as agreed between the
Vendors and the Purchaser or, in default of such agreement, as
determined by order of a court of competent jurisdiction either:
(a) an amount sufficient to put the Company into the position which
would have existed if the Warranties had been true and accurate or
not misleading when given or repeated; or
(b) an amount equal to the resulting diminution in value of the
Shares,
PROVIDED THAT at the time of issuing proceedings the
Purchaser shall specify whether it is claiming damages by
reference to (a) or (b) above.
7.6 The Vendors shall indemnify the Purchaser against all costs (including
legal costs on an indemnity basis as defined in Order 62 of the Rules
of the Supreme Court), expenses or other liabilities which the
Purchaser may reasonably incur either before or after the commencement
of any action in connection with:
(a) the settlement of any Claim;
(b) any legal proceedings in respect of any Claim in which judgment is
given for the Purchaser; or
(c) the enforcement of any such settlement or judgment.
7.7 Any amount paid by the Vendors to the Purchaser in respect of any of
the provisions of this Agreement shall be treated as paid to the
Purchaser by way of pro rata reduction in the Total Consideration.
7.8 If any Claim may be made under both the Warranties and the Covenant for
Taxation, that Claim shall first be made under the Covenant for
Taxation.
7.9 Any liability of the Vendors under the warranties or covenant for
Taxation shall be reduced by an amount equal to:
(a) the amount of or by which any Taxation for which the Company is
accountable is extinguished or reduced as a result of the claim
giving rise to the liability; and
(b) the amount by which any provision for Taxation contained in the
Accounts proves after Completion to have been excessive.
8. LIMITATIONS ON LIABILITY
14
<PAGE> 15
CONFORMED COPY
8.1 The liability of the Vendors under the Covenant for Taxation shall be
reduced if and to the extent that the loss shall have been recovered
under the Warranties (and vice versa).
8.2 In the absence of fraud or dishonesty on the part of any of the
Vendors, their agents or advisors:
(a) the Purchaser shall not have any claim under the Warranties in
respect of any matter if, and to the extent that, it is fully and
fairly disclosed in the Disclosure Letter;
(b) the Vendors shall not be liable for any Claim unless:
(i) they have received written notice from the Purchaser giving
reasonable details of the Claim and, if practicable, the
Purchaser's estimate of the amount involved on or before the
expiration of 3 years from Completion or, in the case of any
Claim relating to Taxation, not later than 6 years from the
end of the Company's current accounting period;
(ii) the amount of the Claim, when aggregated with all other
Claims made on the same occasion or previously, is equal to
or exceeds Pounds Sterling 50,000 (in which case the
Vendors shall be liable for the excess);
(c) The aggregate liability of the Vendors in respect of the
Warranties shall not exceed the amount of the Total Consideration.
8.3 If the Vendors make any payment to the Purchaser or the Company in
relation to any Claim and the Purchaser or the Company subsequently
receives from a third party any amount referable to, or any benefit
which would not have been received but for the circumstances giving
rise to, the subject matter of that Claim, the Purchaser shall, once it
or the Company has received such amount or benefit, immediately repay
or procure the repayment to the Vendors of either:
(a) the amount of such receipt (after deducting an amount equal to the
reasonable costs of the Purchaser or the Company incurred in
recovering such receipt and any Taxation payable on it); or if
lesser
(b) the amount paid by the Vendors
together with any interest or repayment supplement paid to the
Purchaser or the Company in respect of it.
9. CONDUCT OF CLAIMS
9.1 The Purchaser shall notify the Vendors without undue delay in writing
of:
(a) any claim made against it by a third party which may give rise to
a Claim;
(b) any claim the Company is entitled to bring against a third party
which claim is based on circumstances which may give rise to a
Claim; and
15
<PAGE> 16
CONFORMED COPY
(c) any Claim for Taxation which comes to the Purchaser's notice under
which the Vendors are or may become liable under the Covenant of
Taxation.
9.2 The Purchaser shall procure that the conduct, negotiation, settlement
or litigation of the claim by or against such third party is, so far as
is reasonably practicable, carried out in accordance with the wishes of
the Vendors and at their cost subject to their giving timely
instructions to the Purchaser and providing reasonable security for any
costs and expenses which might be incurred by the Purchaser or the
Company.
9.3 The Purchaser shall procure (insofar as it lies within its control as a
shareholder of the Company) that the Company provides to the Vendors
and the Vendors' professional advisers reasonable access to premises
and personnel and to any relevant assets, documents and records within
their power, possession or control for the purpose of investigating any
Claim and enabling the Vendors to take the action referred to in
sub-clause 9.2 and shall allow the Vendors and their advisers to take
copies of any relevant documents or records at their expense.
10. SPECIFIC INDEMNITIES
10.1 Philip Edwards (one of the Vendors) will procure that the balance of
938,497,948 Italian Lira and US Dollars 72,159 owing from Comar Italia
SRL ("Comar") to the Company will be paid in full without set off or
deduction no later than 12 working days from the date hereof.
10.2 Without prejudice to its other remedies the Purchaser shall be entitled
to set off from the Contingent Consideration Account any sums due to
Philip Edwards against any sums due to the Company at Completion from
Comar.
10.3 Philip Edwards covenants to indemnify the Purchaser and the Company
against any loss suffered by either of them as a result of any failure
by Comar to pay 938,497,948 Italian Lira and US Dollars 72,159 to the
Company no later than 12 working days from the date hereof in
settlement of its debt.
10.4 The Vendors shall indemnify and keep indemnified the Company against
any loss, claim, demand, cost, expense, liability, action or proceeding
suffered or incurred by or brought against the Company directly or
indirectly as a result of or in connection with any action or omission
by the Company in its capacity as principal employer of the Caratti
Sport Executive Pension Scheme.
11. NON-COMPETITION COVENANTS
11.1 In order to assure to the Purchaser the full benefit of the business
and goodwill of the Company, each Vendor undertakes that he shall not,
either alone or in conjunction with or on behalf of any other person,
do any of the following things:
(a) within 5 years after Completion either directly or indirectly
carry on or be engaged, concerned or interested in (except as the
holder of shares in a listed company which confer not more than
three per cent. of the votes which could normally be cast at a
general meeting of that company) any business (whether as
principal, partner,
16
<PAGE> 17
CONFORMED COPY
shareholder, creditor, director, manager, consultant, agent or
employee or in any other capacity whatsoever) within the United
Kingdom which competes with any part of the business of the
Company;
(b) except in the circumstances referred to in sub-clause 14.10(b)
(Confidentiality), disclose to any other person any information
which is secret or confidential to the business or affairs of the
Company or use any such information to the detriment of the
business of the Company for so long as that information remains
secret or confidential;
(c) in relation to a business which is competitive or likely to be
competitive with the business of the Company as carried on at
Completion, use any trade or business name or distinctive mark,
style or logo used by or in the business of the Company at any
time during the 2 years before Completion or anything intended or
likely to be confused with it;
(d) neither before nor within 5 years after Completion accept orders
from any person to whom the Company has sold its goods or services
in the 2 years before Completion in respect of similar goods or
services;
(e) neither before nor within 5 years of Completion do any act or
thing likely to have the effect of causing any supplier of or
other person in the habit of dealing with the Company (either now
or at Completion) to be unable or unwilling to deal with the
Company either at all or in part or on the terms on which it had
previously dealt with the Company or likely to have the effect of
causing any person having a contract or arrangement with the
Company (either at the date hereof or at Completion) to breach,
terminate or modify that contract or arrangement or to exercise
any right under it; or
(f) neither before nor within 5 years after Completion solicit or seek
to entice away any employee from the employment of the Company nor
do any act or thing likely to have the effect of causing any such
employee to terminate his employment with the Company whether or
not such employee would thereby breach his contract of employment.
11.2 The Vendors acknowledge that they consider the undertakings contained
in sub-clause 11.1 reasonable for the proper protection of the
Company's business and further acknowledge that damages would not be an
adequate remedy for breach of those undertakings.
11.3 Each undertaking contained in sub-clause 11.1 shall be construed as a
separate and independent undertaking. In the event that any of such
undertakings is found to be void but would be valid if some part of it
were deleted or if the period or extent of it were reduced such
undertaking shall apply with such modification as may be necessary to
make it valid and effective.
12. PHYSICAL STOCKTAKE
12.1 KPMG or such other firm of Chartered Accountants as may be nominated by
the Purchaser shall carry out a physical stocktake of the inventory of
the Company as at 31 October 1996. Such stocktake shall be used as the
basis for valuation of stock in the calculation of Excess Inventory (as
such term is defined in Schedule 5).
17
<PAGE> 18
CONFORMED COPY
13. ASSIGNMENT OF LEASE
13.1 No later than 1st November 1996 the Vendors shall procure that the
Company shall assign the Lease of the premises at 49 Waverley Road,
Yate ("the Yate Lease") to Three Shires Pet Supplies Ltd ("the
Assignee") on the terms of the agreement annexed to the Disclosure
Letter.
13.2 After Completion the Vendors shall be solely responsible for any
liability which may be suffered by the Company under the Yate Lease to
the Landlord and/or the Assignee (save for the sum of Pounds Sterling
5,000 for repairs provided in the Management Accounts and the reverse
premium of Pounds Sterling 29,330 plus VAT payable to the Assignee)
including, without limitation, any payments the Company is required to
make under the Yate Lease because of its having been a tenant of the
Property under such Lease and any costs or expenses incurred by the
Company in relation to the Yate Lease notwithstanding the assignment
referred to in sub-clause 13.1. The Vendors shall jointly and severally
indemnify the Company and the Purchaser in respect of any residual
contingent liabilities of the Company under the Yate Lease
notwithstanding any assignment referred to in sub-clause 13.1.
13.3 With effect from Completion the Purchaser shall procure that the
Company shall accept responsibility for any liability which may be
suffered by Mark Edwards and Philip Edwards ("ME" and "PE") and Tandem
Holdings Ltd under the following guarantees: -
<TABLE>
<CAPTION>
DEBTOR GUARANTOR BANK DATE
<S> <C> <C> <C> <C>
Caratti Sport Ltd M B A Edwards Barclays Bank PLC 4/7/94
Caratti Sport Ltd P B A Edwards Barclays Bank PLC 27/7/94
Caratti Sport Ltd P B A Edwards Barclays Discounting 30/11/88
& M B A Edwards
Carratti Sport Ltd Tandem Holdings Ltd Barclays Bank PLC 23/5/94
</TABLE>
("the Guarantees")
and the Purchaser shall indemnify and shall procure that the Company shall
indemnify ME and PE and Tandem Holdings Ltd and each of them in respect of any
such liability.
14. GENERAL
14.1 This Agreement sets out the entire agreement and understanding between
the parties in respect of the subject matter of this Agreement.
18
<PAGE> 19
CONFORMED COPY
14.2
(a) This Agreement shall be binding upon and ensure for the benefit of
the successors of the parties but, except as set out in sub-clause
14.2(b), shall not be assignable by any party without the prior
written consent of the other;
(b) The Purchaser may assign the benefit of this Agreement (including,
without limitation, the Warranties) to any successor in title or
any subsequent purchaser of the Shares or to a subsidiary of the
Purchaser SAVE THAT if the benefit of the Warranties is assigned
the liability of the Vendors shall be no greater than it would
have been if the Purchaser had remained the owner of the Shares
and had retained the benefit of the Warranties.
14.3 No purported variation of this Agreement shall be effective unless it
is in writing and signed by or on behalf of each of the parties.
14.4 Except to the extent already performed, all the provisions of this
Agreement shall, so far as they are capable of being performed or
observed, continue in full force and effect notwithstanding Completion.
14.5 If any part of this Agreement is found by any court or competent
authority to be invalid, unlawful or unenforceable in any jurisdiction,
then that part shall be deemed not to be a part of this Agreement, and
neither shall the enforceability of the remainder of this Agreement be
affected, nor shall it affect the validity, lawfulness or
enforceability of that provision in any jurisdiction.
14.6
(a) Any liability to the Purchaser under this Agreement may in whole
or in part be released, compounded, compromised or postponed by
the Purchaser in its absolute discretion without in any way
prejudicing or affecting any rights in respect of that or any
liability not so waived, released, compounded or compromised;
(b) No single or partial exercise of, or failure or delay in
exercising any right, power or remedy by the Purchaser shall
constitute a waiver by the Purchaser of, or impair or preclude any
further exercise of, any right, power or remedy arising under this
Agreement or otherwise.
14.7 After Completion, the Vendors shall execute such documents and take
such steps as the Purchaser may reasonably require to vest the full
title to the Shares in the Purchaser and to give the Purchaser the full
benefit of this Agreement.
14.8
(a) This Agreement may be executed in any number of counterparts and
by the parties on separate counterparts, but shall not be
effective until each party has executed at least one counterpart;
19
<PAGE> 20
CONFORMED COPY
(b) Each counterpart, when executed, shall be an original of this
Agreement and all counterparts shall together constitute one and
the same instrument.
14.9 No provision of this Agreement, or of any agreement or arrangement of
which it forms part, which causes this Agreement or such agreement or
arrangement to be subject to registration under the Restrictive Trade
Practices Act 1976 shall take effect until the day after particulars of
this Agreement and any agreement or arrangement, of which it forms
part, have been supplied to the Director-General of Fair Trading under
Section 24, Restrictive Trade Practices Act 1976 and the parties agree
to furnish such particulars within three months of the date of this
Agreement.
14.10
(a) Each party shall treat as strictly confidential all information
received or obtained as a result of entering into or performing
this Agreement which relates to the provisions or subject matter
of this Agreement, to any other party to this Agreement or the
negotiations relating to this Agreement.
(b) Any party may disclose information which would otherwise be
confidential if and to the extent:
(i) it is required to do so by law or any securities exchange or
regulatory or governmental body to which it is subject
wherever situated;
(ii) it considers it necessary to disclose the information to its
professional advisers, auditors and bankers provided that it
does so on a confidential basis; or
(iii) the information has come into the public domain through no
fault of that party.
14.11 If any party defaults in the payment when due of any sum payable under
this Agreement (whether payable by agreement or by an order of a court
or otherwise), the liability of that party shall be increased to
include interest on that sum from the date when such payment was due
until the date of actual payment at a rate per annum of 4 per cent. per
annum above the base rate from time to time of National Westminster
Bank PLC. Such interest shall accrue from day to day and shall be
compounded annually.
15. ANNOUNCEMENTS
15.1 Subject to sub-clause 15.2, no announcement concerning the terms of
this Agreement shall be made by or on behalf of any of the parties
without the prior written consent of the others, such consent not to be
unreasonably withheld or delayed.
15.2 After Completion the Purchaser may make such announcements as it deems
appropriate concerning the Company.
16. COSTS AND EXPENSES
20
<PAGE> 21
CONFORMED COPY
16.1 Each party shall bear its own costs and expenses incurred in the
preparation, execution and implementation of this Agreement.
16.2 The Purchaser shall pay all U K stamp duty relating to the transfer to
it of the Shares.
17. NOTICES
17.1 Any notice to a party under this Agreement shall be in writing signed
by or on behalf of the party giving it and shall, unless delivered to a
party personally, be left at, or sent by prepaid first class post,
prepaid recorded delivery, telex or facsimile to the address of the
party as set out in this Agreement or as otherwise notified from time
to time.
17.2 A notice shall be deemed to have been served:
(a) at the time of delivery if delivered personally;
(b) except as referred to in sub-clause 17.3:
(i) 48 hours after posting in the case of an address in the
United Kingdom and 96 hours after posting for any other
address;
(ii) 2 hours after transmission if served by facsimile or telex.
If such deemed time of service is not during normal business hours in
the country of receipt, the notice shall be deemed served at the
opening of business on the next business day of that country.
17.3 The deemed service provisions set out in sub-clause 17.2 do not
apply to:
(a) a notice served by post, if there is a national or local
suspension, curtailment or disruption of postal services which
affects the collection of the notice or is such that the notice
cannot reasonably be expected to be delivered within 48 hours
after posting; and
(b) a notice served by telex or facsimile, if, before the time at
which the notice would otherwise be deemed to have been served,
the receiving party informs the sending party that the notice has
been received in a form which is unclear in any material respect,
and, if it informs the sending party by telephone, it also
despatches a confirmatory telex or facsimile within two hours.
17.4 In proving service it will be sufficient to prove:
(a) in the case of personal service, that it was handed to the party
or delivered to or left at its address;
(b) in the case of a letter sent by post, that the letter was properly
addressed, stamped and posted;
(c) in the case of telex, that the appropriate answerback was
received;
21
<PAGE> 22
CONFORMED COPY
(d) in the case of facsimile, that it was properly addressed and
despatched to the number of the party.
17.5 A party shall not attempt to prevent or delay the service on it of a
notice connected with this Agreement.
17.6 In this clause "notice" includes any notice, demand, consent or other
communication.
18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement shall be governed by and construed in accordance with
English Law.
18.2 Each of the parties irrevocably submits for all purposes in connection
with this Agreement to the exclusive jurisdiction of the courts of
England.
IN WITNESS whereof this Agreement has been entered into and delivered as a deed
the day and year appearing at the head of page 1.
22
<PAGE> 23
CONFORMED COPY
<TABLE>
<CAPTION>
SCHEDULE 1
(THE VENDORS)
NAME ADDRESS NO. OF SHARES INITIAL CONSIDERATION % CONTINGENT
CONSIDERATION (%)
<S> <C> <C> <C> <C>
Mark Brinley Woodlands
Aldo Edwards Stinchcombe Hill 15,000 'A' Ord 0.25% 0.25%
Sarah Edwards (the Glos GL11
Trustees) United Kingdom 60,000 'A' Pref Ord 49.75% 49.75%
Philip Brinley Residences Du Monte
Antonio Edwards Carlo Sun, Sun Park 15,000 'B' Ord 50% 50%
74 Boulevard d' Italie
Appart, Blocco D N.51
Monaco
TOTAL 90,000 100% 100%
</TABLE>
23
<PAGE> 24
CONFORMED COPY
<TABLE>
<CAPTION>
SCHEDULE 2
(INFORMATION CONCERNING THE COMPANY)
<S> <C> <C>
1. Registered Number 1702392
2. Date of Incorporation 24 February 1983
3. Place of Incorporation England and Wales
4. Address of registered office 49 Waverley Road
Beaches Industrial Estate
5. Class of Company private limited
6. Authorised share capital Pounds Sterling 90,000
divided into 30,000 A and B
ordinary shares of Pound
Sterling 1 each and 60,000
A Preferred Ordinary shares
of Pound Sterling 1 each
7. Issued share capital Pounds Sterling 90,000
divided into 30,000 A and B
Ordinary Shares of Pound
Sterling 1 each and 60,000 A
Preferred Ordinary Shares
of Pound Sterling 1 each
</TABLE>
24
<PAGE> 25
CONFORMED COPY
<TABLE>
<CAPTION>
<S> <C> <C> <C>
8. Directors
Full Name Usual residential address Nationality
Mark Brinley Woodlands British
Aldo Edwards Stinchcombe Hill
Glos GL11
United Kingdom
Philip Brinley Residences du Monte British
Antonio Edwards Carlo Sun, Sun Park
74 Boulevard d'Italie
Appart, Blocco D N.51
Monaco
9. Secretary
Full Name Usual residential address
Maria Tersilla Edwards 68 Rossal Avenue
Little Stoke
Bristol BS12 6JX
United Kingdom
10. Accounting reference date
31 October
11. Auditors
Grant Thornton
12. Tax residence
United Kingdom
</TABLE>
25
<PAGE> 26
CONFORMED COPY
SCHEDULE 3
(WARRANTIES)
THE VENDORS
1. CAPACITY
1.1 Each Vendor has the requisite power and authority to enter into and
perform this Agreement.
1.2 No Vendor is bankrupt, has proposed a voluntary arrangement or has made
or proposed any arrangement or composition with his creditors or any
class of his creditors.
1.3 This Agreement constitutes and imposes valid legal and binding
obligations on each Vendor fully enforceable in accordance with its
terms.
2. ARRANGEMENTS BETWEEN THE COMPANY AND VENDOR ASSOCIATES
2.1 There are no contracts, arrangements or liabilities, actual or
contingent, outstanding or remaining in whole or in part to be
performed between the Company or any Vendor Associate.
3. OTHER INTERESTS OF ANY VENDOR ASSOCIATE
No Vendor has or intends to acquire any interest, direct or indirect,
in any business which has a close trading relationship with or which
competes or is likely to compete with any business now carried on by
the Company and, so far as the Vendors are aware, no Vendor Associate
has or intends to do so.
SHARE CAPITAL
4. COMPANY
4.1 The Shares constitute the entire issued and allotted share capital of
the Company and are fully paid or credited as fully paid. The Vendors
own the Shares with full title guarantee.
4.2 Apart from this Agreement, there is no agreement, option, warrant,
convertible security, arrangement or commitment outstanding which calls
for the allotment, issue or transfer of, or accords to any person the
right to call for the allotment, issue or transfer of, any share or
loan capital of the Company.
4.3 No person has any right of pre-emption, right of first refusal or
similar right in respect of any issued or unissued share capital of the
Company.
4.4 None of the Shares was, or represents assets which were, the subject of
a transfer at an undervalue, within the meaning of Sections 238 or 339,
Insolvency Act 1986, within the past five years.
4.5 The Company has not at any time:
(a) reduced its share capital;
26
<PAGE> 27
CONFORMED COPY
(b) redeemed any share capital;
(c) purchased any of its shares; or
(d) forfeited any of its shares.
5. SUBSIDIARIES
5.1 The Company does not have, nor has it agreed to acquire, any interest
in any undertaking or in the share capital of any body corporate.
5.2 The Company does not hold nor is it liable on any share or relevant
security which is not fully paid up or which carries any liability.
5.3 The Company does not have any branch, agency, place of business or
establishment outside the United Kingdom.
CORPORATE MATTERS
6. INSOLVENCY OF THE COMPANY
6.1 No order has been made, no resolution has been passed, no petition
presented, no meeting convened for the winding up of the Company or for
a provisional liquidator to be appointed in respect of the Company and
the Company has not been a party to any transaction which could be
avoided in a winding up.
6.2 No administration order has been made and no petition for one has been
presented in respect of the Company.
6.3 No receiver or administrative receiver has been appointed in respect of
the Company or any of its assets.
6.4 The Company is not insolvent, has failed or is or unable to pay, or has
no reasonable prospect of being able to pay, any of its debts as they
fall due, as those expressions are defined in Section 268, Insolvency
Act 1986.
6.5 No voluntary arrangement has been proposed under Section 1, Insolvency
Act 1986 in respect of the Company and the Company has not made or
proposed any arrangement or composition with its creditors or any class
of them.
6.6 No distress, execution or other process has been levied on the
Company's assets or action taken to repossess goods in the possession
of the Company.
6.7 No unsatisfied judgment is outstanding against the Company and no
demand has been served on the Company under Section 123(1)(a),
Insolvency Act 1986.
6.8 No event analogous to any referred to in sub-paragraphs 6.1 to 6.7 has
occurred anywhere in the world.
7. STATUTORY BOOKS AND DOCUMENTS FILED
27
<PAGE> 28
CONFORMED COPY
7.1 The statutory books, including all registers and minute books, of the
Company have been properly kept and contain an accurate and complete
record of the matters with which those books should deal.
7.2 All documents which should have been delivered by the Company to the
Registrar of Companies are complete and accurate and have been properly
so delivered.
7.3 The copy of the Memorandum and Articles of Association of the Company
contained in the Disclosure Letter has embodied in it or annexed to it
a copy of each resolution as referred to in Section 380, Companies Act
1985, and is accurate and complete in all respects.
7.4 Since the Accounts Date no resolution of the members of the Company in
general meeting, or of any class of them, has been passed other than
resolutions relating to the ordinary business of annual general
meetings.
INFORMATION
8. ACCURACY AND ADEQUACY OF INFORMATION
8.1 The information contained in schedules 1,2 and 4 to this Agreement is
accurate and complete.
8.2 The information contained in the Disclosure Letter is complete and
accurate and is not misleading because of any omission or ambiguity or
for any other reason and where the information is expressed as an
opinion, it is truly and honestly held and not given casually,
recklessly or without due regard for its accuracy.
8.3
8.4 So far as the Vendors are aware, there is no material fact or
circumstance relating to the business and affairs of the Company which,
if disclosed to the Purchaser or any of its advisers, might reasonably
be expected to influence the decision of the Purchaser to purchase the
Shares on the terms contained in this Agreement and which has not been
so disclosed.
ACCOUNTS
9. PREPARATION AND CONTENTS OF THE ACCOUNTS
9.1 The Accounts were prepared in accordance with the requirements of all
relevant statutes and generally accepted accounting practices
including, without limitation, all applicable Financial Reporting
Standards issued by the Accounting Standards Board, Statements of
Standard Accounting Practice issued by the Institute of Chartered
Accountants of England and Wales and Statements from the Urgent Issues
Task Force current at the Accounts Date and, where the accounting
practice used to prepare the Accounts differs from those applicable in
previous financial periods, the effect of any such difference is
disclosed in the Disclosure Letter.
9.2 Without prejudice to the generality of sub-paragraph 9.1:
(a) the Accounts:
(i) give a true and fair view of the state of affairs of the
Company at the Accounts Date and the profits or losses of the
Company for the financial period ending on that date;
28
<PAGE> 29
CONFORMED COPY
(ii) contain full provision or reserve for all liabilities
and for all capital and revenue commitments of the
Company as at the Accounts Date;
(iii) disclose all the assets of the Company as at the
Accounts Date and none of the values placed in the
Accounts on any of those assets was in excess of its
market value at the Accounts Date;
(iv) make full provision for bad and doubtful debts;
(v) include an adequate provision for all warranty
liability on products;
(vi) do not include any figure which is referable to the
value of an intangible asset; and
(vii) make full provision for depreciation of the fixed
assets of the Company having regard to their original
cost and life.
(b) in the Accounts:
(i) in valuing work-in-progress no value was attributed
in respect of eventual profits and adequate provision
was made for such losses as were at the time of
signature of the Accounts by directors of the Company
reasonably foreseeable as arising or likely to arise;
and
(ii) slow-moving stock was written down appropriately,
redundant, obsolete, obsolescent or defective stock
was wholly written off and the value attributed to
any other stock did not exceed the lower of cost (on
a first in first out basis) and net realisable value
(or replacement value) at the Accounts Date.
9.3 The profits and losses of the Company shown in the Accounts were not,
save as disclosed in the Accounts or in any note accompanying them, to
any material extent affected by any extraordinary, exceptional, unusual
or non-recurring income, capital gain or expenditure or by any other
factor known to the Vendors rendering any such profit or loss for such
period exceptionally high or low.
9.4 The audited profit and loss accounts and audited balance sheets of the
Company contained in the Accounts were prepared on a consistent basis
with each other.
10. ACCOUNTING RECORDS
10.1 The accounting records of the Company comply with the requirements of
Sections 221 and 222, Companies Act 1985, do not contain or reflect any
material inaccuracy or discrepancy and present and reflect in
accordance with generally accepted accounting principles and standards
the financial position of and all transactions entered into by the
Company or to which it has been a party.
10.2 All relevant financial books and records of the Company are in its
possession or otherwise under its direct control.
29
<PAGE> 30
CONFORMED COPY
10.3 Where any of the records of the Company is kept on computer, that it:
(a) is the owner of all hardware and all software necessary to
enable it to use the records as they have been used in its
business to the date of this Agreement and to Completion;
(b) does not share any hardware or software relating to the
records with any person; and
(c) maintains adequate back up records and support in the event of
any fault or failure of such computer hardware and software.
11. MANAGEMENT ACCOUNTS
The Management Accounts fairly reflect the trading position of the
Company as at the Management Accounts Date and for the period to which
they relate and are not affected by any extraordinary, exceptional,
unusual or non-recurring income, capital gain or expenditure or by any
other factor known by the Vendors rendering profits or losses for the
period covered exceptionally high or low.
12. EVENTS SINCE THE ACCOUNTS DATE
12.1 Since the Accounts Date there has been no material change in the value
or state of assets or amount or nature of liabilities as compared with
the position disclosed in the Accounts.
12.2 The Company has since the Accounts Date carried on its business in the
ordinary course and without interruption, so as to maintain it as a
going concern and paid its creditors in the ordinary course and within
the credit periods agreed with such creditors.
12.3 Since the Accounts Date no supplier of the Company has ceased or
restricted supplies or threatened so to do, there has been no loss or
material curtailment of the business transacted by the Company with any
customer which at any time in the preceding financial year represented
not less than 10 per cent., of the turnover of the Company and the
Vendors are not aware of any circumstances likely to give rise to any
of the above.
12.4 Since the Accounts Date the Company has not:
(a) incurred or committed to incur:
(i) material capital expenditure; or
(ii) any liability whether actual or contingent except for
full value or in the ordinary course of business;
(b) acquired or agreed to acquire:
(i) any asset for a consideration higher than its market
value at the time of acquisition or otherwise than in
the ordinary course of business; or
(ii) any business or substantial part of it or any share
or shares in a body corporate;
(c) disposed of or agreed to dispose of, any of its assets except
in the ordinary course of business and for full value;
30
<PAGE> 31
CONFORMED COPY
(d) repaid wholly or in part any loan except upon the due date or
dates for repayment;
(e) issued or allotted share or loan capital, increased its
authorised share capital, purchased or redeemed any shares,
reduced or re-organised its share capital or agreed to do so;
or
(f) declared or paid any distribution of profit.
12.5
(a) None of the debts included in the Accounts or any of the debts
subsequently arising have been the subject of factoring by the
Company.
(b) The Vendors are not aware of any circumstances which could
result in any presently outstanding debt in excess of
Pounds Sterling 1,000 not being paid in full save for the
schedule of provisions attached to the Disclosure Letter.
FINANCIAL
13. FINANCIAL COMMITMENTS AND BORROWINGS
13.1 Complete and accurate details of all overdraft, loan and other
financial facilities available to the Company and the amounts
outstanding under them at the close of business on the day preceding
the date of this Agreement are set out in the Disclosure Letter and no
Vendor nor the Company has done anything, or omitted to do anything, as
a result of which the continuance of any of those facilities might be
affected or prejudiced.
13.2 The Company is not a party to, or has agreed to enter into, any
lending, or purported lending, agreement or arrangement (other than
agreements to give credit in the ordinary course of its business).
13.3 The Company is not exceeding any borrowing limit imposed upon it by its
bankers, other lenders, its articles of association or otherwise nor
has the Company entered into any commitment or arrangement which might
lead it so to do.
13.4 No overdraft or other financial facilities available to the Company are
dependent upon the guarantee of or security provided by any other
person.
13.5 No event has occurred or been alleged which is or, with the passing of
any time or the giving of any notice, certificate, declaration or
demand, would become an event of default under, or breach of, any of
the terms of any loan capital, borrowing, debenture or financial
facility of the Company or which would entitle any person to call for
repayment prior to normal maturity.
13.6 The Company is not, nor has it agreed to become, bound by any
guarantee, indemnity, surety or similar commitment.
13.7 The Company does not have any credit cards in issue in its own name or
that of any officer or employee of the Company or any person connected
with any officer or employee.
31
<PAGE> 32
CONFORMED COPY
13.8 The Company has not received any grants, allowances, loans or financial
aid of any kind from any government departmental or other board, body,
agency or authority which may become liable to be refunded or repaid in
whole or in part.
13.9 The Company has not engaged in financing of a type which is not
required, or has not been, shown or reflected in the Accounts.
14. WORKING CAPITAL
Having regard to existing bank and other facilities available to it,
the Company has sufficient working capital for the purposes of
continuing to carry on its business, in its present form and at its
present level of turnover, for the period of twelve months after
Completion.
15. INSURANCES
15.1 The Company maintains, and at all material times has maintained,
adequate insurance cover against all risks normally insured against by
companies carrying on a similar business, for the full replacement or
reinstatement value of its business and assets, and in particular has
maintained all insurance required by statute, product liability and
professional indemnity insurance, and insured against loss of profits
for a period of not less than six (6) months and for loss of rent for a
period of not less than three (3) years.
15.2 The Policies are valid and enforceable and all premiums due have been
paid. There are no outstanding claims or circumstances likely to give
rise to a claim under the Policies or which would be required to be
notified to the insurers and nothing has been done or omitted to be
done which has made or could make any Policy void or voidable or as a
result of which the renewal of any Policy might be refused or the
premiums due in respect of them may be liable to be increased.
15.3 There are no claims outstanding or threatened, or so far as the Vendors
are aware, pending, against the Company which are not fully covered by
insurance.
15.4 Copies of full Policies are annexed to the Disclosure Letter.
TRADING AND CONTRACTS
16. CONTRACTS AND COMMITMENTS
16.1 The Company is not a party to any agreement, arrangement or commitment
which:
(a) (save in the ordinary course of business) has or is expected
to have material consequences in terms of expenditure or
revenue;
(b) relates to matters outside its ordinary business or was not
entered into on arms' length terms;
(c) (save in the ordinary course of business) constitutes a
commercial transaction or arrangement which deviates from the
usual pattern for it;
32
<PAGE> 33
CONFORMED COPY
(d) can be terminated in the event of any change in the underlying
ownership or control of it or would be materially affected by
such change;
(e) cannot readily be fulfilled or performed by it on time; or
(f) cannot be terminated, without giving rise to any liabilities
on it, by it giving 3 months' notice or less.
16.2 The Company has not:
(a) outstanding any bid, tender, sale or service proposal which is
material in relation to its business or which, if accepted,
would be likely to result in a loss;
(b) has granted any power of attorney or other such authority
(whether express or implied) which is still outstanding.
16.3 Neither the Company nor any Vendor is aware of any actual, potential or
alleged breach, invalidity, grounds for termination, grounds for
rescission, grounds for avoidance or grounds for repudiation of, any
contract to which any Company is a party.
17. TERMS OF TRADE
The Company has not given any guarantee or warranty (other than any
implied by law) or made any representation in respect of any product or
services sold or supplied by it nor has it accepted any liability to
service, maintain, repair or otherwise do or refrain from doing
anything in relation to such goods or services after they have been
sold or supplied by it except for those contained in its standard
conditions of trading, complete and accurate copies of which are
contained in the Disclosure Letter.
18. PRODUCT LIABILITY
The Company has not manufactured, sold or provided any product or
service which does not in every respect comply with all applicable
laws, regulations or standards or which is defective or dangerous or
not in accordance with any representation or warranty, express or
implied, given in respect of it.
19. LICENCES AND CONSENTS
19.1 Complete and accurate details of all licences, consents, permissions,
authorisations and approvals required by the Company for the carrying
on of its business are contained in the Disclosure Letter and all of
them have been obtained by it and are in full force and effect.
19.2 All reports, returns and information required by law or as a condition
of any licence, consent, permission, authorisation or approval to be
made or given to any person or authority in connection with the
business of the Company have been made or given to the appropriate
person or authority and there are no circumstances which indicate that
any licence, consent, permission, authorisation or approval might not
be renewed in whole or in part or is likely to be revoked, suspended or
cancelled or which may confer a right of revocation, suspension or
cancellation.
33
<PAGE> 34
CONFORMED COPY
20. TRADING PARTNERS
20.1 The Company does not act or carry on business in partnership with any
other person nor is a member of any corporate or unincorporated body,
undertaking or association.
20.2 The Company is not a party to any joint venture agreement or
arrangement or any agreement or arrangement under which it is to
participate with any other person in any business.
20.3 The Company is not a party to any agency, distributorship, licence or
management agreement or is a party to any contract or arrangement which
restricts its freedom to carry on its business in such manner as it may
think fit in any part of the world.
20.4 The Company does not have any branch, agency, place of business or
establishment outside the United Kingdom.
21. COMPETITION AND TRADE REGULATION LAW
21.1 The Company is not nor has it been a party to, or is or has been
concerned in any agreement or arrangement, or is conducting or has
conducted itself, whether by omission or otherwise, in a manner which:
(a) contravenes, is invalidated in whole or in part or has been,
or should have been, registered under the Restrictive Trade
Practices Acts 1976 and 1977;
(b) contravenes the provisions of the Resale Prices Act 1976, the
Trade Description Acts 1968 and 1972, the Fair Trading Act
1973 or any secondary legislation made under either of those
Acts;
(c) infringes Article 85 or 86 of the Treaty of Rome or any
regulation or directive made under it or any other anti-trust
or similar legislation in any jurisdiction in which the
Company has assets or carries on or intends to carry on
business or where its activities may have any effect.
21.2 The Company has not:
(a) given an undertaking to, or is subject to, any order of or
investigation by, or has received any request for information
from;
(b) received, nor so far as the Vendors are aware, is it likely to
receive any process, notice or communication, formal or
informal by or on behalf of;
(c) been or is a party to, or is or has been concerned in, any
agreement or arrangement in respect of which an application
for negative clearance and/or exemption has been made to
the Office of Fair Trading, the Monopolies and Mergers Commission, the
Secretary of State, the European Commission or any other governmental
or other authority, department, board, body or agency of any country
having jurisdiction in anti-trust or similar matters in relation to any
business of the Company.
34
<PAGE> 35
CONFORMED COPY
22. COMPLIANCE WITH LAW
22.1 The Company has not committed nor is it liable for, and no claim has
been or, so far as the Vendors are aware, will be made that it has
committed or is liable for, any criminal, illegal, unlawful or
unauthorised act or breach of any obligation or duty whether imposed by
or pursuant to statute, contract or otherwise.
22.2 The Company has not received notification that any investigation or
inquiry is being, or has been, conducted by, or received any request
for information from any governmental or other authority, department,
board, body or agency in respect its affairs and, so far as the Vendors
are aware, there are no circumstances which would give rise to such
investigation, inquiry or request.
22.3 None of the activities, contracts or rights of the Company is ultra
vires, unauthorised, invalid or unenforceable or in breach of any
contract or covenant and all documents in the enforcement of which it
may be interested are valid.
23. LITIGATION AND DISPUTES
23.1 Except for actions to recover any debt incurred in the ordinary course
of the business owed to the Company where each individual debt and its
costs outstanding amounts to less than Pounds Sterling 1,000:
(a) neither the Company nor any person for whose acts the Company
may be liable is engaged in any litigation, arbitration,
administrative or criminal proceedings, whether as plaintiff,
defendant or otherwise;
(b) no litigation, arbitration, administrative or criminal
proceedings by or against the Company or any person for whose
acts it may be liable are threatened or expected and, as far
as the Vendors are aware, none are pending;
(c) there are no facts or circumstances likely to give rise to any
litigation, arbitration, administrative or criminal
proceedings against the Company or any person for whose acts
it may be liable.
23.2 The Company is not subject to any order or judgment given by any court
or governmental or other authority, department, board, body or agency
or has not been a party to any undertaking or assurance given to any
court or governmental or other authority, department, board, body or
agency which is still in force, nor so far as the Vendors are aware are
there any facts or circumstances likely to give rise to it becoming
subject to such an order or judgment or to be a party to any such
undertaking or assurance.
ASSETS
24. OWNERSHIP AND CONDITION OF ASSETS
24.1 Each of the assets included in the Accounts or acquired by the Company
since the Accounts Date (other than the Properties and current assets
subsequently disposed of or realised in the
35
<PAGE> 36
CONFORMED COPY
ordinary course of business) is owned both legally and beneficially by
the Company free from any third party rights and, if capable of
possession, is in its possession.
24.2 Each item of plant and machinery, vehicle and office equipment used by
the Company is:
(a) in good repair and condition, regularly maintained and
certified safe and without risk to health when used;
(b) capable and will remain capable of doing the work for which it
was designed or purchased until the time when (on the basis of
depreciation adopted in the Accounts) it will have been
written down to a nil value;
(c) not surplus to requirements; and
(d) not expected to require replacement or additions within 6
months of Completion.
24.3 The Company has not acquired, or agreed to acquire, any asset on terms
that title to that asset does not pass until full payment is made or
all indebtedness incurred in connection with the acquisition is
discharged.
24.4 The assets owned by the Company, together with all assets held under
hire purchase, lease or rental agreements which are contained in the
Disclosure Letter, comprise all assets necessary for the continuation
of the business of the Company as it is currently carried on.
25. STOCK
The value of the stocks of materials of the Company which is
redundant, obsolete, obsolescent or defective is not greater than the
provisions in the Accounts.
26. CHARGES AND ENCUMBRANCES OVER ASSETS
26.1 No option, right to acquire, mortgage, charge, pledge, lien (other than
a lien arising by operation of law in the ordinary course of trading)
or other form of security or encumbrance or equity on, over or
affecting the shares or the whole or any part of the undertaking or
assets of the Company, including any investment in any other Company,
is outstanding and, apart from this Agreement, there is no agreement or
commitment to give or create any of them and no claim has been made by
any person to be entitled to any of them.
26.2 No floating charge created by the Company has crystallised and there
are no circumstances likely to cause such a floating charge to
crystallise.
26.3 The Company has not received notice from any person intimating that it
will enforce any security which it may hold over the asset of the
Company, and there are no circumstances likely to give rise to such a
notice.
26.4 All charges in favour of the Company have, if required, been registered
in accordance with the provisions of the Companies Act 1985, Part XII.
27. INTELLECTUAL PROPERTY
27.1 Complete and accurate details of all Intellectual Property and copies
of all licences and other agreements relating to it are contained in
the Disclosure Letter.
36
<PAGE> 37
CONFORMED COPY
27.2 All Intellectual Property is either:
(a) in the sole legal and beneficial ownership of the Company free
from all licences, charges or other encumbrances; or
(b) the subject of binding and enforceable licences from third
parties in favour of the Company:
(i) of which no notice to terminate has been received;
(ii) all parties to which have fully complied with all
obligations in those licences; and
(iii) in relation to which no disputes have arisen or are
foreseeable;
and nothing has been done or omitted to be done whether by the Company
or as far as the Vendors are aware by any person which would jeopardise
the validity, enforceability or subsistence of any Intellectual
Property or any such licences.
27.3 Any Intellectual Property which is capable of registration has been
registered or is the subject of an application for registration, and is
or will when duly registered be valid, binding and enforceable and:
(a) in the case of registrations, all renewal fees have been paid
by their due date and all such action necessary to preserve
the registration has been taken; and
(b) in the case of pending applications, the Vendors are aware of
no reason why any such applications should not proceed to
grant.
27.4 No licences, registered user or other rights have been granted or
agreed to be granted by the Company to any person in respect of any
Intellectual Property.
27.5 So far as the Vendors are aware, at no time during the past six years
has there been any unauthorised use or infringement by any person of
any Intellectual Property.
27.6 None of the processes employed, or products or services dealt in, by
the Company infringes any rights of any third party relating to
intellectual property nor makes the Company liable to pay a fee or
royalty and no claims have been made, threatened or so far as the
Vendors are aware are pending, in relation to any intellectual property
against the Company.
27.7 Except in the ordinary course of business and on a confidential basis,
no disclosure has been made of any of the confidential information,
know how, technical processes, financial or trade secrets or customer
or supplier lists of the Company.
27.8 Any names used by the Company other than its corporate name are
contained in the Disclosure Letter and do not infringe the rights of
any person.
EMPLOYMENT
28. DIRECTORS AND EMPLOYEES
37
<PAGE> 38
CONFORMED COPY
28.1 Complete and accurate details of the terms and conditions of employment
of all employees of the Company, including age, salary, notice period,
holiday entitlement and the date of commencement of their continuous
period of employment and any arrangements or assurances (whether or not
legally binding) in relation to their employment are contained in the
Disclosure Letter.
28.2 The Company has maintained up-to-date, adequate and suitable records
regarding the service and terms and conditions of employment of each of
its employees.
28.3 The Company is not a party to any consultancy agreement, any agreement
for management services or any contract of services with any director.
28.4 Since the Accounts Date there has been:
(a) no material alteration in the terms of employment or any
material change in the number of employees employed by the
Company; or
(b) any material increase in any fees, remuneration or benefits
paid or payable to any officer or employee of the Company, nor
are any negotiations for any such increase current or likely
to take place in the next 6 months.
28.5 No officer or employee of the Company is remunerated on a
profit-sharing, bonus or commission basis.
28.6 No amount is owing to any present or former officer or employee of the
Company.
28.7 There is no share option or share incentive scheme in operation by or
in relation to the Company for any of its officers or employees nor is
the introduction of such a scheme been proposed.
28.8 The Company has at all relevant times complied with all its obligations
under statute and otherwise concerning the health and safety at work of
its employees and there are no claims capable of arising or pending or
threatened by any employee or third party in respect of any accident or
injury which are not fully covered by insurance.
28.9 Save as provided for or taken into account in the Accounts:
(a) no claim or liability to make any payment of any kind to any
person who is or has been an officer or employee has been
received or incurred by the Company whether under the
Employment Protection Act 1975, the Employment Protection
(Consolidation) Act 1978, the Employment Acts 1980 or 1982 or
otherwise; and
(b) no gratuitous payment of a material amount has been made or
promised by the Company in connection with the actual or
proposed termination or suspension of employment or variation
of any contract of employment of any present or former officer
or employee.
38
<PAGE> 39
CONFORMED COPY
28.10 No officer or employee of the Company has given notice or is under
notice of dismissal nor are there any service contracts between the
Company and its officers or employees which cannot be terminated by the
Company by 12 weeks notice or less without giving rise to a claim for
damages or compensation (other than a statutory redundancy payment).
28.11 The Company has not, in contravention of the Companies Act 1985:
(a) entered into any arrangement involving the acquisition of
non-cash assets from or disposal to;
(b) granted any loan or quasi-loan to or entered into any
guarantee or credit transaction with; or
(c) provided any security in connection with any loan, quasi-loan
or credit transaction to or with
any director or person connected with a director within the meaning of
the Companies Act 1985.
28.12 No officer or employee of the Company will be entitled to treat their
employment as being at an end as a result of the sale of the Shares by
the Vendors to the Purchaser or be entitled to an additional payment
solely as a result of the change of control.
29. INDUSTRIAL RELATIONS
29.1 The Company is not a party to any contract, agreement or arrangement
with any trade union or other body or organisation representing any of
its employees.
29.2 The Company has in relation to its employees and former employees
complied with all conditions of service, customs and practices and,
where relevant, all collective agreements and recognition agreements
for the time being.
29.3 Within the last twelve months, the Company has not:
(a) given notice of any redundancies to the Secretary of State,
started consultations with any independent trade union or
unions or failed to comply with any obligation under the
provisions of Part IV of the Employment Protection Act 1975;
or
(b) been a party to any relevant transfer as defined in the
Transfer of Undertakings (Protection of Employment)
Regulations 1981 or has failed to comply with any duty to
inform and consult any independent trade union under the
Regulations.
29.4 No dispute has arisen between the Company and a material number or
category of its employees nor are there any present circumstances known
to the Vendors which are likely to give rise to any such dispute.
29.5 No training schemes, arrangements or proposals exist nor have there
been any such schemes, arrangements or proposals in the past in respect
of which a levy may become payable by the Company under the Industrial
Training Act 1982.
30. PENSIONS
39
<PAGE> 40
CONFORMED COPY
30.1 Save as disclosed in the Disclosure Letter, the Company has no plans,
schemes or arrangements in relation to death, disability or retirement
of any of its employees. Neither the Vendors nor the Company are under
any legal liability, nor have they promised or volunteered to pay to or
in respect of any Employee any relevant benefits (as defined in section
612(1) ICTA 1988 save that the exception to that provision shall be
excluded) or to contribute to any scheme, plan or arrangement providing
such benefits (including any personal pension scheme approved under
Chapter IV of Part XIV ICTA 1988). Neither the Vendors nor the Company
have agreed or announced any intention to pay such benefits or to
establish or contribute to any such scheme, plan or arrangement.
30.2 In relation to each plan, scheme or arrangement disclosed under
paragraph 30.1 in the Disclosure Letter:
(a) complete and accurate details:
(i) of it (including, where appropriate, copies of all
trust deeds and rules together with copies of all
amending deeds and resolutions and the latest
actuarial reports);
(ii) of the basis on which the Company makes, or is liable
to make, contributions to it; and
(iii) of all discretionary practices (including, without
limitation, all discretionary practices in relation
to eligibility, the payment of contributions and
optional benefits).
are contained in the Disclosure Letter.
(b) all contributions which are payable by the Company in respect
of it, all amounts due to any insurance company in respect of
it and all contributions due from the employees of the Company
as members of it have been duly made in full and the Company
has fulfilled all its obligations under it;
(c) it has been administered in accordance with the requirements
of the Pension Schemes Act 1993 in respect of preservation
(Chapter I of Part IV), revaluation of pensions (Chapter II of
Part IV), transfer values (Chapter IV of Part IV),
registration (section 6), disclosure of information (section
113), equal access (section 118) and contracting-out (Part
III), in so far as it is in force at Completion with the
Pensions Act 1995 and in accordance with the trusts, powers
and provisions of such plans, schemes or arrangements;
(d) no undertakings or assurances have been given to any employee
of the Company as to the continuance, introduction, increase
or improvement of any pension rights or entitlements which the
Company and/or the Purchaser would be required to implement in
accordance with good industrial relations' practice and
whether or not there is any legal obligation so to do;
(e) no power to augment benefits has been exercised;
(f) no discretion has been exercised to admit to membership a
present or former director or employee who would not otherwise
be eligible for admission to membership;
40
<PAGE> 41
CONFORMED COPY
(g) no discretion has been exercised to provide in respect of a
member a benefit which would not otherwise be provided;
(h) all benefits (other than a refund of contributions with
interest where appropriate) payable on the death of a member
while in service to which it relates, or during a period of
sickness or disability of a member, are fully insured under a
policy effected with an insurance company to which the
Insurance Companies Act 1982 applies and the Vendors are not
aware of any circumstances in which such insurance would be
invalidated; such insurance company has been supplied with all
information requested and such information was complete and
accurate; cover under such policy is provided at the insurance
company's normal rates and on its normal terms for persons in
good health; all premiums due under such policy have been paid
or will have been paid in full by Completion; and there are no
grounds on which any such policies may be avoided.
(i) all liabilities or benefits accrued in respect of service
completed at Completion are secured on an ongoing basis taking
account of future increases in salary to normal retirement
date and increases in pensions on the basis of realistic
actuarial and financial assumptions and the obligations
imposed on it as a result of Barber -v- Guardian Royal
Exchange; and
(j) it is an exempt approved scheme and/or retirement annuity
approved, or capable of being approved, under the Taxes Act,
is treated as a small self-administered scheme by the Inland
Revenue and the Vendors are not aware of any reasons why any
such approval could be withdrawn or which would prejudice that
treatment;
(k) it is a contracting out scheme within the meaning of section
7(3) of the Pension Schemes Act 1993 and the Vendors are not
aware of any reasons why any contracting out certificate in
respect of it could be withdrawn;
(l) none of its assets or resources are invested in any loan, any
arrangement with any beneficiary or any employer related
investment (as defined in section 112 of the Pension Schemes
Act 1993) or subject to any lien, charge or encumbrance; no
payment out of its assets or resources has been made to the
Company or to the Vendors;
30.3 No death, disability or retirement gratuity is currently being paid or
has been promised nor will pending Completion be paid or promised by
the Company to or in respect of any officer or employee of the Company.
PROPERTY
31. TITLE
31.1 The Property comprises all the properties presently owned, occupied,
held, controlled or otherwise used by the Company and the Company is in
actual and exclusive occupation and is the legal and beneficial owner
of the Property.
31.2 The Company's title to the Property is good and marketable.
31.3 The Property is occupied or otherwise used by the Company by right of
ownership or under the Lease, the terms of which permit its occupation
or use as tenant and not under any provision allowing the parting of or
sharing of possession with group or associated companies
41
<PAGE> 42
CONFORMED COPY
and there are no outstanding circumstances which would restrict the
continued possession and enjoyment of the Property or any part of it.
31.4 All deeds and documents necessary to prove title to the Property are in
the possession and control of the Company and consist of original deeds
and documents or properly examined abstracts.
31.5 No person is in adverse possession of the Property or has acquired or
is acquiring any rights or overriding interests (as defined by Section
70, Land Registration Act 1925) adversely affecting the Property.
31.6 The Company has not had occasion to make any claim or complaint in
relation to any neighbouring property or its use or occupation and
there are no disputes, claims, actions, demands or complaints in
respect of the Property which are ongoing nor are any disputes, claims,
actions, demands or complaints anticipated and no notices materially
affecting the Property have been given or received and not complied
with.
32. ENCUMBRANCES
32.1 The Property is not subject to any outgoings other than business rates,
water rates and insurance premiums, rent, insurance rent and service
charges.
32.2 The Property is not subject to any restrictive covenant, reservation,
stipulation, easement, profits a prendre, wayleave, licence, grant,
restriction, overriding interest, agreement for sale, estate contract,
option, right of pre-emption or other similar agreement or right vested
in third parties.
32.3 No matter exists which is registered or is properly capable of
registration against the Property as a Land Charge, Local Land Charge,
caution, inhibition, notice or restriction.
32.4 Where sub-paragraphs 32.1 to 32.3 inclusive have been disclosed against
in the Disclosure Letter, the obligations and liabilities imposed and
arising under the disclosed matter have been fully observed and
performed and any payments in respect of it which are due and payable
have been duly paid.
33. PLANNING MATTERS
33.1 The use of the Property is a lawful and permitted use for the purposes
of the Planning Acts.
33.2 Planning permission has been obtained, or is deemed to have been
granted for the purposes of the Planning Acts, for the Property, no
permission is the subject of a temporary or personal consent; has been
modified or revoked; no application for planning permission is awaiting
decision; no planning permission has been granted within the last three
months and the validity of no planning permission is currently or may
be challenged.
33.3 Building regulation consents have been obtained with respect to all
development, alterations and improvements to the Property.
33.4 In respect of the Property, the Company has complied, and is continuing
to comply, in all respects with:
42
<PAGE> 43
CONFORMED COPY
(a) planning permissions, orders and regulations issued under the
Planning Acts and building regulation consents and by-laws for
the time being in force;
(b) all agreements under Section 52, Town and Country Planning Act
1971 and planning obligations under Section 106, Town and
Country Planning Act 1990;
(c) all agreements made under Sections 38 and 278, Highways Act
1980, Section 33, Local Government (Miscellaneous Provisions)
Act 1982, Section 18, Public Health Act 1936 and Section 104,
Water Industry Act 1991.
33.5 The Property is not listed as being of special historic or
architectural importance or located in a conservation or other area, or
subject to an order, designation or affected by a planning proposal
which may regulate or affect its use in the future.
33.6 All claims and liabilities in respect of the Property under the
Planning Acts or any other legislation have been discharged and no
claim or liability, actual or contingent, is outstanding.
34. STATUTORY OBLIGATIONS
34.1 The Company has complied with and is continuing to comply with all
applicable statutory and by-law requirements with respect to the
Property, and in particular with the requirements as to fire
precautions under the Fire Precautions Act 1971 and under the Public
Health Acts, the Offices, Shops and Railway Premises Act 1963, the
Health and Safety at Work Act 1974, the Factories Act 1961 and the
Shops Acts 1950 to 1956.
35. ADVERSE ORDERS
35.1 There are no compulsory purchase notices, orders or resolutions
affecting any of the Property and there are no circumstances likely to
lead to any being made.
35.2 There are no closing, demolition or clearance orders, enforcement
notices or stop notices affecting the Property and there are no
circumstances likely to lead to any being made.
36. CONDITION OF THE PROPERTY
36.1 The buildings and other structures on the Property are in good and
substantial repair and fit for the purposes for which they are used and
no building or other structure on the Property has been affected by
structural damage, electrical defects, timber infestation or disease.
36.2 The principal means of access to the Property is over roads which has
been adopted by the local or other highway authority and which are
maintainable at the public expense and no means of access to any of the
Property is shared with any other person nor subject to rights of
determination by any other person.
36.3 The Property enjoys the mains services of water, drainage, electricity
and gas.
36.4 The Property is located in an area or subject to circumstances which
makes it susceptible to subsidence or flooding.
43
<PAGE> 44
CONFORMED COPY
37. LEASEHOLD PROPERTIES
37.1 The Lease is valid and in full force and there are no circumstances
which would entitle any landlord or other person to exercise any power
of entry or take possession of the Property.
37.2 The Company has paid the rent and observed and performed the covenants
on the part of the tenant and the conditions contained in the Lease to
which it is a party, and the last demands (or receipts for rent if
issued) were unqualified.
37.3 All licences, consents and approvals required from the landlords and
any superior landlords for the grant of the Lease and during the
continuance of the Lease have been obtained and any covenants on the
part of the tenant contained in those licences, consents and approvals
have been duly performed and observed.
37.4 There are no rent reviews outstanding or in progress under the Lease.
37.5 Any alteration or improvement carried out on the Property is to be
disregarded for rent review purposes.
37.6 There is no obligation to reinstate the Property by removing or
dismantling any alteration made to it by the Company or any of its
predecessors in title and the Company has not incurred or is likely to
incur any liability for dilapidation.
37.7 In the case of a lease granted for more than 21 years, the lease is
registered at HM Land Registry with absolute title.
37.8 The Company has not in the past been the tenant of or guarantor of any
leasehold premises not listed in Schedule 4 in respect of which any
obligations or liabilities could still accrue to the Company.
37.9 The sale of the Shares will not constitute an assignment or other
dealing in respect of the Property under the terms of the Lease.
38. TENANCIES
38.1 The Property is not held subject to, and with the benefit of, any
tenancy other than the Tenancies.
38.2 Complete and accurate details of:
(a) the rent and any rent reviews and, with respect to rent
reviews, the date for giving notice of exercise of the reviews
and the operative review date;
(b) the term and any rights to break or renew the term;
(c) the obligations of the landlord and tenant in respect of
outgoings, repairs, user, insurance services and service
charge;
(d) any options, pre-emption or first refusal rights;
(e) the user required or permitted under the terms of the
Tenancies;
44
<PAGE> 45
CONFORMED COPY
(f) any entitlement of a tenant of the whole or any part of the
Property to compensation on quitting the premises let to him
in respect of disturbance and improvements or otherwise; and
(g) any unusual provisions
in relation to each Tenancy are contained in the Disclosure Letter.
38.3 The Vendors are not aware of any material or persistent breaches of
covenant or agreement by a tenant of any of the Property.
39. CONTAMINATION
39.1 The Property is not likely to be entered in any register introduced
under the Environment Act 1995 or otherwise as land which may be
contaminated or which may have been put to a contaminative use.
39.2 There is not on, in or under the Property or any adjoining property any
substance which could give rise to harm to human health or safety or
damage to the Environment.
39.3 Each property formerly owned or occupied by the Company was free of
such substances at the time it ceased to be owned or occupied by the
Company.
ENVIRONMENT
40. ENVIRONMENTAL MATTERS
40.1 In relation to its business, the Company holds and has since its
incorporation always held all Environmental Consents.
40.2 Complete and accurate details of all Environmental Consents held by the
Company are contained in the Disclosure Letter and are valid and
subsisting.
40.3 The Company has not received any notification that any Environmental
Consent it holds is or is likely to be modified, restricted or
withdrawn and no works or other upgrading or investment are or will be
necessary to secure compliance with or to maintain any such
Environmental Consent.
40.4 The Company has not breached the terms, conditions or provisions of any
Environmental Consent.
40.5 The Company has not received any notification or informal indication
that further Environmental Consents will be required under
Environmental Law in order for it to continue its present business.
40.6 The Company (and each of its officers, employees and agents in the
course of its business) has complied with all applicable Environmental
Laws and has never received any notification under Environmental Law
requiring it to take or omit to take any action.
40.7 The Company has not been threatened with any investigation or enquiry
by any organisation, or received any complaint, in connection with the
Environment.
45
<PAGE> 46
CONFORMED COPY
TAXATION
41. EVENTS SINCE THE ACCOUNTS DATE
Since the Accounts Date:
(a) there has been no disposal by the Company of any asset or
supply of any service or business facility of any kind,
including a loan of money or the letting, hiring or licensing
of any property whether tangible or intangible, in
circumstances where the consideration actually received or
receivable for such disposal or supply was less than the
consideration which could be deemed to have been received for
Tax purposes;
(b) no event has occurred which will give rise to a Liability to
Taxation on the Company, calculated by reference to deemed, as
opposed to actual Profits or which will result in the Company
becoming liable to pay or bear a Liability to Taxation
directly or primarily chargeable against or attributable to
another person, firm or company;
(c) no disposal has taken place or other event occurred which
will, or may have, the effect of crystallising a Liability to
Taxation which would have been included in the provision for
deferred Taxation contained in the Accounts if such disposal
or other event had been planned or predicted at the Accounts
Date;
(d) the Company has not made any payment, nor incurred any
obligation to make a payment, which will not be deductible in
computing trading profits for the purposes of Tax, or be
deductible as a management expense of an investment company;
(e) the Company has not been a party to any transaction for which
any Tax clearance provided for by statute has been, or could
have been, obtained;
(f) the Company has not paid, nor become liable to pay, any
interest or penalty in connection with any Tax, has not
otherwise paid any Tax after its due date for payment, nor
owes any Tax the due date for payment of which has passed or
will arise in the next 30 days after the date of this
Agreement; and
(g) no accounting period of the Company has ended (within the
meaning of Section 12, ICTA).
(h) The salary paid to Philip Edwards and the pension
contributions paid by the Company will be properly deductible
for Tax purposes and the Company has properly paid such salary
gross of Tax without deducting PAYE.
42. LIABILITY
42.1 Other than Taxation provided for in the Accounts or on profits
attributable to transactions in the ordinary course of trading since
the Accounts Date, the Company is not accountable or liable for any
form of Taxation.
42.2 All documents which are required to be stamped or on which any form of
Taxation is due and which are in the possession of the Company, or by
virtue of which the Company has any right, have been duly and
sufficiently stamped or the Taxation on such documents has been paid.
43. RECORDS AND COMPLIANCE
46
<PAGE> 47
CONFORMED COPY
43.1 The Company has duly complied with all requirements imposed on it by
any statute, law, regulation or similar provision, providing for,
imposing or relating to Taxation and in particular:
(a) the Company has punctually paid all Taxation for which it is
liable and made all withholdings and deductions in respect, or
on account, of any Taxation from any payments made by it which
it is obliged or entitled to make and has accounted punctually
and in full to the appropriate Tax Authority for all amounts
so withheld or deducted;
(b) the Company has properly prepared and punctually submitted all
notices and returns required for Tax purposes and provided
complete and accurate information to any Tax Authority and all
such returns and information remain complete and accurate;
(c) the Company has kept and maintained complete and accurate
accounting records, invoices and other documents appropriate
or requisite for Tax purposes and has sufficient records
relating to past events to calculate its liability to Taxation
or the relief from Taxation which would arise on any disposal
or on the realisation of any assets owned at Completion;
(d) there are no disputes, unsettled or outstanding assessments or
appeals in respect of Taxation and the Company has not within
the last six years been subject to any back duty enquiry or
other dispute with any Tax Authority and there are no
circumstances which may give rise to such an enquiry or
dispute;
(e) the Company has not within the last six years been liable or
will become liable to pay any interest, penalty, fine or sum
of a similar nature in respect of Taxation nor, in relation to
value added tax, has received any penalty liability notice,
surcharge liability notice or other written notice or warning
under the VATA;
(f) the Company has duly submitted all claims and disclaimers
which have been assumed to have been made for the purposes of
the Accounts.
43.2 The Company has not within the last six years received any audit, visit
or inspection from any Tax Authority and no such audit, visit or
inspection is imminent or has been requested.
43.3 The amount of Tax chargeable on the Company or subject to withholding
or deduction by it during any accounting period ending on or within the
last six years has not to any material extent depended on any
concession, agreement, dispensation or other formal or informal
arrangement with any Tax Authority.
43.4 The Company is not liable to be assessed to Tax as agent for, or on
account of, or otherwise on behalf of, any other person.
43.5 The Company has not made any claim or application to pay any Tax by
instalments or to defer the payment of any Tax.
47
<PAGE> 48
CONFORMED COPY
44. VAT
44.1 The Company:
(a) is registered for the purpose of, and has complied in all
respects with, the VATA and is not subject to any conditions
imposed or agreed with H M Customs & Excise; and
(b) is not, and has not within the last six years been a member of
a group for value added tax purposes under Section 43, VATA.
44.2 The Company is not subject to The Value Added Tax (Payments on Account)
Order 1992.
44.3 The Company is not, nor has it within the last six years been, an agent
or representative for, or otherwise liable to account for, value added
tax for or on account of any other person pursuant to Sections 47 or
48, VATA.
44.4 All supplies made by the Company are taxable supplies, and all input
tax for which the Company has claimed credit has been paid by it, in
respect of supplies made to it relating to goods or services used or to
be used for the purpose of its business.
44.5 The Company has not been required to give security under paragraph 4,
Schedule 11, VATA.
44.6 The Company has not made, nor will prior to completion make, any
election to waive exemption under paragraph 2, Schedule 10, VATA.
44.7 The Company has not acquired any assets to which the provisions of Part
VA, Value Added Tax (General) Regulations 1985 (the Capital Goods
Scheme) may apply.
44.8 The Company has paid all duties to Customs & Excise for which it is or
has been liabile, including (without limitation) all import and other
duties payable on the transport or removal of goods into the United
Kingdom and all Taxation (of whatever jurisdiction) relating to the
transport, import or export of goods or services.
45. BALANCE SHEET VALUES
No Liability to Taxation will arise or be incurred on a disposal by the
Company of any of its assets for:
(a) in the case of each asset owned at the Accounts Date, a
consideration equal to the value attributed to that asset in
preparing the Accounts; or
(b) in the case of each asset acquired since the Accounts Date, a
consideration equal to the consideration given for the
acquisition.
46. CLOSE COMPANY
46.1 The Company is not, nor has it at any time within the last six years
been, either a close company within the meaning of Section 414, ICTA or
a close investment holding company for the purposes of Section 13A,
ICTA.
46.2 The Company has not at any time:
48
<PAGE> 49
CONFORMED COPY
(a) made any loan or advance or payment or given any consideration
or effected any transaction falling within Sections 419 to 422
(inclusive), ICTA;
(b) made a transfer of value which is or may be liable to Tax
under the provisions of Section 94, Inheritance Tax Act 1984,
or
(c) made a transfer falling within the provisions of Section 125,
TCGA.
47. GROUP TRANSACTIONS
Within the last six years the Company has not been a member of a group
of companies.
48. CAPITAL GAINS
The Company has not at any time:
(a) made any claim under Sections 152 to 158 (inclusive), TCGA; or
(b) acquired or disposed of any asset, or entered into any
transaction whatsoever otherwise than by way of bargain at
arm's length.
49. DEDUCTIBLE EXPENSES
The Company is not under any obligation to make any payment which, or
to provide a benefit the cost of which, will be prevented from being
deductible for Tax purposes, whether as a deduction in computing the
profits of a trade or as an expense of management or as a charge on
income.
50. DIVIDENDS AND DISTRIBUTIONS
50.1 The Company has not at any time made any distribution within the
meaning of Sections 209 to 211 (inclusive) and Section 418, ICTA except
in respect of any dividends disclosed in its audited accounts.
50.2 Save as provided in the Accounts, the Company is not liable to make any
payment of advance corporation tax or an amount equivalent to advance
corporation tax.
50.3 The Company has never purchased, repaid or redeemed or agreed to
purchase, repay or redeem its share capital, or capitalised or agreed
to capitalise in the form of redeemable shares or debentures any
profits or reserves, or otherwise issued any share capital or other
security as paid up otherwise than by the receipt of new consideration
within the meaning of Section 254, ICTA.
50.4 The Company has not at any time been a party to or otherwise involved
in any transaction to which Sections 213 to 218 (inclusive), ICTA
applied.
51. INHERITANCE TAX AND GIFTS
51.1 No circumstances exist under which any power within Section 212,
Inheritance Tax Act 1984 could be exercised in relation to, and there
is no Inland Revenue charge (within the meaning of Section 237,
Inheritance Tax Act 1984) attaching to, any shares or securities in or
over any assets of the Company.
49
<PAGE> 50
CONFORMED COPY
51.2 The Company is not liable and there are no circumstances in existence
as a result of which it may become liable to be assessed to Tax as
donor or done of any gift or transfer or transferee of value.
52. ANTI-AVOIDANCE
The Company has not entered into, nor has it been party to, any scheme
or arrangement designed partly or wholly for the purpose of avoiding or
deferring Taxation, such that a Liability to Taxation may arise after
Completion as a result of or in consequence of such a scheme or
arrangement.
53. OVERSEAS MATTERS
53.1 The Company has at all times been resident for Tax purposes in the
United Kingdom, which is the only country whose Tax Authorities seek to
charge tax on the worldwide income, profits or gains of such company
and the Company has during the past six years paid Tax and is not
liable to pay Tax on its income, profits or gains to any Tax Authority
in any other country.
53.2 The Company has not at any time carried out any transaction which is or
was unlawful under Section 765, ICTA.
54. BREACH OF COVENANT
There is no Liability of Taxation in respect of which a claim could be
made under the Covenant for Taxation and there are no circumstances
likely to give rise to any such Liability.
55. PROJECTIONS
55.1 For the purposes of this warranty "FINANCIAL PROJECTIONS" means the
projections of financial performance of the Company for the Financial
years to 31st October 1996 and 1997 and the underlying assumptions to
such projections included in the Management Accounts annexed to the
Disclosure Letter.
55.2 All information of a factual nature contained in the Financial
Projections was given and is at the date hereof true and accurate in
all respects.
55.3 The Financial Projections have been carefully and diligently prepared
in good faith and assumptions and forecasts as to the future prospects
of the business and affairs of the Company and its business as are
contained therein have been carefully considered by the Vendors and are
reasonable in all material respects;
and insofar as such information and the Financial Projections
relate to opinions or beliefs, such statements of opinion or
belief were when given and are at the date hereof honestly and
reasonably held.
50
<PAGE> 51
CONFORMED COPY
SCHEDULE 4
(PARTICULARS OF THE PROPERTY)
A. PARTICULARS OF THE LEASE
<TABLE>
<CAPTION>
Address Date and Parties Term Authorised User Current Rental Rent Reviews
<S> <C> <C> <C> <C> <C>
Beeches Industrial 17 June 1987 25 years from the Warehouse and Pounds Sterling 5 year intervals
Estate Slough Properties 25th December 1995 ancillary offices for 52,500 calculated from
49 Waverley Road Ltd (1) the storage of December 1986
Yate Caratti Sport (2) bicycles and sports
Bristol BS17 5QZ equipment and
sports clothing
12/14 Park Street 28 July 1986 10 years from the Retail Shop with Pounds Sterling One review at the
Bristol 1 Rugby Investments 25th March 1986 ancillary office and 18,350 end of the fifth
Ltd (1) (holding over) storage year
Caratti Sport Ltd
(2)
27 Pittville Street 6 July 1979 20 years from the Retail shop with Pounds Sterling at 5 year intervals
Cheltenham Hampshire Real 21st June 1979 ancillary offices and 30,000 calculated from
Gloucestershire Estate Ltd (1) storage for the sale June 1979
Leicester Office of bicycles,
Equipment Ltd (2) sportswear and
sports equipment
</TABLE>
51
<PAGE> 52
CONFORMED COPY
SCHEDULE 5
PART 1: DEFINITIONS
1. In this Schedule the following words and expressions shall have the
following meanings:
"PAT 96" means the audited profit on ordinary activities of the Company for the
financial period of the Company commencing on 1 November 1995 and ending on 31
October 1996 (and certified in accordance with the provisions of paragraphs 5 to
8 (inclusive) of this Schedule prepared in accordance with United Kingdom
generally accepted accounting principles consistently applied on an historical
cost basis and subject to the following adjustments (if necessary):
(a) in calculating operating profit of the Company the effects of
any exceptional and/or extraordinary items and prior year
adjustments shall be disregarded
(b) there shall not be included any income or debits representing
profits or losses from the revaluation of any capital assets
or the sale or termination of any operation or the disposal of
any premises or any income representing the proceeds of any
policy of life insurance (other than repairs to Waverley Road,
Yate in connection with the assignment of the Yate Lease) or
representing any receipt or expenditure representing profits
or losses in respect of any item which would in accordance
with current United Kingdom generally accepted accounting
principles be classified within the Company's accounts as an
item falling outside operating results under Financial
Reporting Standard 3;
(c) there shall not be included as a deduction the amount of any
fee paid to Grant Thornton pursuant to the provisions of
paragraph 5 of this Schedule;
(d) provision shall not be materially greater nor lower than a
reasonable estimate of the liability for which provision is
made;
(e) there shall be included as a deduction from gross operating
profits contributions made by the Company to the Pension
Scheme in respect of the Vendors during the Company's
financial period ending on 31 October 1996;
(f) there shall be disregarded the effect on operating profit of
any action taken by G.T. Bicycles, Inc. which is not
consistent with the established course of its dealings with
the Company in relation to bicycles, parts and accessories or
which is in breach of any existing agreement relating to the
supply by it of bicycles, parts and accessories to the
Company;
(g) there shall not be included any costs arising in consequence
of any change in the Company's Accounting Reference Date;
(h) including the effect of foreign exchange movements, settlement
discounts, trade discounts, internal provisions/write offs and
a prudent general provision for debtors; and
<PAGE> 53
CONFORMED COPY
(i) after all the above adjustments have been made if there shall
still be a profit then a further deduction from such profit
shall be made of a percentage of such profits equal to the
percentage rate of corporation tax chargeable on such profits
at the rate prevailing in respect of the financial year of the
Company ending on 31 October 1996 but ignoring any smaller
company's rate or other deviation from the general corporation
tax rate provided for in ICTA and disregarding the benefit of
any tax losses available in respect of previous or subsequent
periods;
"AVERAGE GROSS PERCENTAGE PROFIT MARGIN" means the average gross percentage
profit margin of all of the products sold by the Company during the financial
year ending on 31 October 1996 as certified in accordance with the provisions of
paragraphs 5 to 8 (inclusive) of this Schedule and prepared in accordance with
United Kingdom generally accepted accounting principles consistently applied
provided that in calculating gross percentage profit margin there shall be
disregarded the effect on margin of any action taken by G.T. Bicyles, Inc. which
is not in the ordinary course of its dealings with its European distributors (as
evidenced by its dealings with other European distributors). In calculating
gross margin, there shall be included the effects of foreign exchange movements,
settlement discounts, trade discounts and internal provisions/write offs;
"EXCESS INVENTORY" means the amount by which the value of inventory calculated
at cost on a "First In First Out" basis in stock as at 31 October 1996 in each
of the product categories listed below (individually a "product category")
exceeds the cost of sales for the six month period immediately prior to 31
October 1996 in each such product category:
PRODUCT CATEGORY DESCRIPTION
202 Giordana S/S Jerseys
210 Caratti Shorts
212 Giordana Shorts
220 ATB/Road Mitts
223 Crochet Mitts
226 Vetta Gloves
300 Vetta Computers
305 Tri-pro Computers
312 Vetta VHR 50
405 Caratti Bags
430 Vetta Header Card
460 Vetta Crash Hats
500 Vetta Accessories
508 Kryptonite U-Locks
604 Caratti Shoes
610 Lake Shoes
<PAGE> 54
702 Tioga Parts
725 Xerama Pedals
840 Vetta Tyres
850 Tioga Tyres
852 Onza Tyres
- -
<PAGE> 55
CONFORMED COPY
PART 2: CALCULATION AND PAYMENT
2. The sum of Pounds Sterling 700,000 (being the maximum amount of
Contingent Consideration payable pursuant to this Agreement) shall be
paid on Completion by the Purchaser into the Contingent Consideration
Account. Such sum will be held by the Purchaser's Solicitors and the
Vendor's Solicitors (for the purpose of this Schedule 5 "the
Solicitors") as stakeholder upon trust for the Vendors and the
Purchaser and shall retain the same in the Contingent Consideration
Account and, subject to the provisions of part 3 of this Schedule, when
the amounts of Contingent Consideration referred to in paragraph 4 (a),
(b) and (c) below have been determined in accordance with the
provisions of this part of this Schedule shall release monies from the
Contingent Consideration Account in accordance with the provisions of
paragraph 9 of this Schedule. Interest accrued on the Contingent
Consideration Account to the date of the releases under paragraph 9 of
this Schedule shall be apportioned (as the case may be) in the
proportions in which the sum of Pounds Sterling 700,000 is released to
the Purchaser's Solicitors and Vendor's Solicitors. The Solicitors
shall be entitled to withdraw from the Contingent Consideration Account
any sum required to pay the Inland Revenue such amount as may be due in
relation to interest on such account and on payment to the Purchaser or
the Vendors of any such interest will furnish to such party any
appropriate certificate of deduction of tax.
3. Any cost of the Purchaser's Solicitors and the Vendors' Solicitors
relating to the operation of the Contingent Consideration account shall
be borne as to one half by the Purchaser and one half by the Vendors.
4. The Contingent Consideration shall be a sum equal to the aggregate of:
(a) an amount equal to 2.8 times the amount by which PAT 96
exceeds Pounds Sterling 1,075,000. The amount of Contingent
Consideration payable under this sub-paragraph shall not
exceed a maximum of Pounds Sterling 350,000; and
(b) in the event that the Average Gross Percentage Profit Margin
is equal to or greater than 27 per cent. an amount equal to
Pounds Sterling 35,000 + (Pounds Sterling 46,667 x A).
Where A equals the amount (expressed as a number) that the
Average Gross Percentage Profit Margin exceeds 27 per cent. In
the event that the Average Gross Percentage Profit Margin does
not exceed 27 per cent. no payment of Contingent Consideration
will be made under this sub-paragraph. The amount of
Contingent Consideration under this sub-paragraph shall not
exceed an aggregate maximum amount of Pounds Sterling
175,000; and
(c) in the event that (i) there are not more than 10 or more
product categories that contain Excess Inventory and (ii) the
total of the Excess Inventory for all 21 product categories
does not exceed Pounds Sterling 500,000, the sum of Pounds
Sterling 175,000.
5. The PAT 96, Average Gross Percentage Profit Margin, Excess Inventory
and amount of Contingent Consideration payable shall (following the
signing of the audited accounts of the Company for the financial year
ending 31 October 1996) be determined and certified by KPMG (or such
other firm of chartered accountants nominated by the Purchaser) on or
before 31 January 1997 who shall act as experts and not as arbitrators
and the Company shall upon receipt deliver a copy of KPMG's certificate
to the Vendors and the Purchaser. The Vendors
<PAGE> 56
CONFORMED COPY
shall be entitled by notice in writing to the Purchaser (made within 28
days from the receipt of the certificate by the Vendors) to obtain a
separate certificate of PAT 96, Average Gross Percentage Profit Margin,
Excess Inventory and the amount of Contingent Consideration payable
from Grant Thornton (or such other firm of chartered accountants
nominated by the Vendors) likewise acting as experts and not as
arbitrators. The Purchaser shall procure that Grant Thornton (or such
other firm of chartered accountants nominated by the Vendors) shall
have access to the Company's financial records for the purposes of
preparing such second certificate. A copy of Grant Thornton's
certificate shall be delivered to the Purchaser and the Company
forthwith on its being provided to the Vendors. The Purchaser will pay
Grant Thornton's reasonable fees in this regard up to a maximum of
Pounds Sterling 15,000 plus VAT.
6. In the event that the Vendors do not request a second certificate
within 28 days from their receipt of KPMG's certificate or to the
extent that Grant Thornton's certificate does not propose adjustments
to KPMG's certificate, KPMG's certificate shall be deemed to have been
agreed. Any adjustments proposed by Grant Thornton's certificate shall
be quantified and properly documented. The Purchaser and KPMG shall be
afforded access to Grant Thornton's working papers for the purpose of
considering any adjustments proposed by Grant Thornton's certificate.
7. If the Purchaser does not agree to the adjustments proposed by Grant
Thornton's certificate, KPMG and Grant Thornton shall within 30 days of
the delivery to the Purchaser and the Company of Grant Thornton's
certificate attempt to resolve the points of disagreement or, to the
extent that they cannot be resolved, to prepare a joint statement of
the adjustments proposed by Grant Thornton's certificate which are not
agreed and the reasons for the disagreement.
8. The adjustments (if any) proposed by Grant Thornton's certificate which
are not agreed or omitted by agreement at the end of the 30 day period
referred to in paragraph 5 of this Schedule shall within 28 days of the
end of such 30 day period be referred for certification to an
independent chartered accountant (acting as expert and not as
arbitrator) agreed upon by the Purchaser and the Vendors or failing
such agreement within 14 days of the expiry of the 30 day period
referred to in paragraph 5 of this Schedule appointed at the request of
the Purchaser by the President (or in his absence the Vice President)
for the time being of the Institute of Chartered Accountants of England
and Wales. The certificate of such independent accountant shall (in the
absence of manifest error) be conclusive and binding on the Purchaser
and the Vendors. The cost of the independent chartered accountant shall
be borne as he directs.
9. Subject to part 3 of this Schedule the Contingent Consideration payable
shall be released to the Vendors' Solicitors (who are hereby authorised
by the Vendors to receive such amounts) by the Solicitors from the
Contingent Consideration Account as follows:
(a) the portions of the Contingent Consideration calculated by
reference to PAT 96 and Average Gross Percentage Profit Margin
as set in sub-paragraphs 4(a) and 4(b) of this Schedule shall
be released within 30 days of the final determination of the
Contingent Consideration payable in respect of PAT 96 and
Average Gross Percentage Profit Margin pursuant to paragraphs
5 to 8 (inclusive) of this Schedule; and
<PAGE> 57
CONFORMED COPY
(b) the portion of the Contingent Consideration calculated with
reference to Excess Inventory shall be released forthwith upon
the final determination of the Excess Inventory pursuant to
sub-paragraphs 5 to 8 (inclusive) of this Schedule.
10. If after all amounts of Contingent Consideration due to the Vendors
have been released from the Contingent Consideration Account there is a
balance standing to the credit of such account, such balance shall be
released to the Purchaser's Solicitors (who are hereby authorised to
receive such amount) by the Solicitors.
11. The release of the Contingent Consideration due to the Vendors from the
Contingent Consideration account by the Solicitors to the Vendors'
Solicitors shall be an absolute discharge to the Purchaser who shall
not be obliged to have regard to the allocation thereof amongst the
Vendors.
12. The Purchaser and the Vendors shall give their respective solicitors
all such instructions as shall be necessary to give effect to the
provisions of this Schedule.
PART 3: CLAIMS
13. In the event that at any time prior to the due date for payment of any
of the Contingent Consideration the Purchaser has made a claim against
the Vendors or any of them under clause 5 or 6 of this Agreement which
has not being settled in full or withdrawn the Purchaser shall be
entitled to withhold from the Contingent Consideration payable to the
Vendors an amount equal to the amount claimed by the Purchaser from the
Vendors (provided that if the amount claimed by the Purchaser is not
quantified this amount shall be the Purchaser's reasonable estimate of
the maximum amount payable by the Vendors in respect of the claim).
14. The amount withheld the Contingent Consideration in respect of any such
claim shall be retained by the Solicitors in the Contingent
Consideration Account until the earlier of:
(a) authorisation to make any payment by written instructions
signed by Mark Edwards on behalf of the Vendors and by an
officer of the Purchaser; and
(b) determination by a Court of competent jurisdiction in relation
to the claim.
15. All interest accruing on the amount of Contingent Consideration
withheld in respect of any such claims shall follow the principal
amount to which it relates.
PART 4: DEFAULT
17. In the event that KPMG (or such other firm of chartered accountants
nominated by the Purchaser) does not deliver the first certificate
referred to in Clause 5 to the Vendors and the Purchaser on or before
31 January 1997 then, unless such default shall be attributable
directly or indirectly to a default by the Vendors or by reason of the
records of the Company being inaccurate or incomplete, the Purchaser
shall pay default interest on the amount of contingent consideration
actually certified as being payable to the Vendors at the rate of 4%
above the
<PAGE> 58
CONFORMED COPY
base rate of National Westminster Bank PLC from time to time calculated
from 31 January 1997 to the date of actual payment in addition to any
interest accruing to the Vendors pursuant to clause 15 above.
<PAGE> 59
CONFORMED COPY
SIGNED and delivered as his deed by Mark Brinley )
Aldo Edwards in the ) M. EDWARDS
presence of N. MOSS )
Solicitor
Bristol
SIGNED and delivered as his deed by Philip Brinley )
Antonio Edwards in the ) P. EDWARDS
presence of N. MOSS )
Solicitor
Bristol
SIGNED and delivered as her deed by Sarah Edwards )
in the presence of N. MOSS )
Solicitor ) SARAH EDWARDS
Bristol
SIGNED and delivered as a deed by R. Long and ) R. LONG
M. Haynes for )
and on behalf of G.T. Bicycles, Inc. ) M. HAYNES
