<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO 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) OCTOBER 31, 1996
- ------------------------------------------------------------------
KRUG INTERNATIONAL CORP.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 0-2901 31-0621189
- ---------------------------- ------------ -------------------
(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
1290 HERCULES DRIVE, SUITE 120, HOUSTON, TEXAS 77058
---------------------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (281) 212-1233
- ------------------------------------------------------------------
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 31, 1996, Beldray Limited ("Beldray"), a wholly-owned United
Kingdom-based subsidiary of KRUG International Corp. ( the "Corporation")
acquired all of the issued capital share of Hago Products Limited ("Hago"), an
United Kingdom manufacturer of child safety gates and fireguards from Bullough
plc, an United Kingdom company. The purchase price of Hago was approximately
$1.7 million. The acquisition was completed with internally available funds. A
Form 8-K reporting this event was filed November 15, 1996.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information:
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KRUG INTERNATIONAL CORP.
PRO FORMA STATEMENT OF EARNINGS
(All amounts in thousands, except per share amounts)
(unaudited)
The following pro forma statements of earnings reflect the acquisition of Hago
Products Limited by the Corporation as if such acquisition had occurred on
April 1, 1995. These statements should be read in conjunction with the pro forma
balance sheet and the note thereto, and the financial statements and notes
thereto contained in the Corporation's Annual Report on Form 10-K for the year
ended March 31, 1996 and Report on Form 10-Q for the quarterly period ended
September 30, 1996, which are incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1996
-----------------------------------------------------------------------
HAGO ADJUSTMENTS
AS REPORTED PRODUCTS (1) AS ADJUSTED
----------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 95,821 $ 8,976 $ $ 104,797
Cost of goods sold 83,701 9,539 93,240
Selling and administrative 9,151 1,508 10,659
Interest expense 1,126 157 1,283
Other income (net) (51) (51)
----------- ------------- ---------- ----------
Earnings before Income Taxes 1,894 (2,071) (157) (334)
Income Taxes 723 (683) (52) (12)
----------- ------------- ---------- ----------
Net Earnings $ 1,171 $ (1,388) $ (105) $ (322)
=========== ============= ========== ==========
Net Earnings per Share $ 0.23 $ (0.06)
=========== ==========
Average Common and Common
Equivalent Shares Outstanding 5,067 5,067
=========== ==========
</TABLE>
(1) Adjustment reflects interest expense effect of acquisition purchase price.
3
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KRUG INTERNATIONAL CORP.
PRO FORMA STATEMENT OF EARNINGS
(All amounts in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------------------
HAGO ADJUSTMENTS
AS REPORTED PRODUCTS (1) AS ADJUSTED
----------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Revenues $ 53,176 $ 4,872 $ $ 58,048
Cost of goods sold 45,692 4,483 50,175
Selling and administrative 4,566 485 5,051
Restructuring Charge 800 800
Interest expense 521 83 604
Other income (net) (71) (71)
------------ ----------- ------------ ------------
Earnings before Income Taxes 1,668 (96) (83) 1,489
Income Taxes 535 (32) (27) 476
------------ ----------- ------------ ------------
Net Earnings $ 1,133 $ (64) $ (56) $ 1,013
============ =========== ============ ============
Net Earnings per Share $ 0.22 $ 0.20
============ ============
Average Common and Common
Equivalent Shares Outstanding 5,192 5,192
============ ============
</TABLE>
(1) Adjustment reflects interest expense effect of acquisition purchase price.
4
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KRUG INTERNATIONAL CORP.
PROFORMA BALANCE SHEET
(All amounts in thousands)
(unaudited)
The following pro forma unaudited balance sheet reflects the acquisition by the
Corporation of Hago Products Limited if such acquisition had occurred on
September 30, 1996. These statement should be read in conjunction with the pro
forma statements of earnings and the notes relating to the pro forma financial
statements and the financial statements and notes thereto contained in the
Corporation's Annual Report on Form 10-K for the year ended March 31, 1996 and
Report on Form 10-Q for the quarterly period ended September 30, 1996, are
incorporated by reference herein.
<TABLE>
<CAPTION>
As of September 30, 1996
---------------------------------------------------------------------
HAGO ADJUSTMENTS
AS REPORTED PRODUCTS (1) AS ADJUSTED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
CASH $ 5,045 $ $ (1,742) $ 3,303
RECEIVABLES 17,488 1,765 19,253
INVENTORIES 7,340 1,261 8,601
PREPAID EXPENSES 959 959
-------- -------- --------- ---------
TOTAL CURRENT ASSETS 30,832 3,026 (1,742) 32,116
PROPERTY, PLANT AND
EQUIPMENT, NET 9,299 717 10,016
OTHER LONG TERM ASSETS 4,720 4,720
-------- -------- --------- ---------
TOTAL ASSETS $ 44,851 $ 3,743 $ (1,742) $ 46,852
======== ======== ========= =========
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 9,253 $ 1,616 $ $ 10,869
OTHER CURRENT LIABILITIES 7,736 142 243 8,121
-------- -------- --------- ---------
TOTAL CURRENT LIABILITIES 16,989 1,758 243 18,990
-------- -------- --------- ---------
LONG-TERM DEBT 11,620 673 (673) 11,620
SHAREHOLDERS' EQUITY:
COMMON SHARES 2,576 177 (177) 2,576
ADDITIONAL PAID-IN CAPITAL 4,399 4,399
RETAINED EARNINGS 9,003 1,135 (1,135) 9,003
FOREIGN CURRENCY
TRANSLATION ADJUSTMENT 264 264
-------- -------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 16,242 1,312 (1,312) 16,242
-------- -------- --------- ---------
TOTAL LIABILITIES AND EQUITY $ 44,851 $ 3,743 $ (1,742) $ 46,852
======== ======== ========= =========
</TABLE>
(1) Adjustment reflects purchase price paid for acquisition and accrual of
liabilities related to expenses of the acquisition.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (continued)
(c) Exhibits
10.1 - Share Transfer Agreement between Bullough PLC and Beldray
Limited relating to Hago Products Limited
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KRUG International Corp.
Date: January 14, 1997
By: /s/ Robert M. Ellis
----------------------------
Robert M. Ellis
Principal Accounting Officer
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INDEX TO EXHIBITS
Exhibit Description
- -------- -----------
10.1 Share Transfer Agreement between Bullough PLC and Beldray
Limited relating to Hago Products Limited
<PAGE> 1
EXHIBIT 10.1
DATED 31 OCTOBER 1996
(1) BULLOUGH PLC
(2) BELDRAY LIMITED
SHARE TRANSFER AGREEMENT
- RELATING TO -
HAGO PRODUCTS LIMITED
Martineau Johnson
Birmingham
--------------------
Tel: 0121-200-3300
Fax: 0121-200-3330
<PAGE> 2
I N D E X
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
1. Interpretation 1
2. Agreement for sale and purchase 5
3. Consideration 6
4. Warranties and Tax Covenants 7
5. Completion 8
6. Restrictive undertakings 11
7. Guarantees 14
8. Tax Elections 14
9. General 16
10. Notices 18
SCHEDULE
1. Particulars of the Company 20
2. The Property 21
3. The Tax Covenants 22
4. The Warranties 30
5. Claims procedure and determination and Vendor's safeguards 70
6. Pensions 75
7. Calculation of Completion NAV 80
8. Completion NAV Certificate 88
AGREED TERMS DOCUMENTS
1. Completion board minutes of the Company (5.2.2(1)) 90
2. Resignation letters of directors and secretary (5.2.1(3)) 94
3. Announcements to employees, customers and suppliers (9.9.1) 98
4. Certificate of title. --
5. Actuary's letter. 101
</TABLE>
<PAGE> 3
This document constitutes an agreement made on 31 October 1996 between:
(1) BULLOUGH PLC, a company registered in England under number 539850,
whose registered office is at 21 The Crescent, Leatherhead, Surrey
KT22 8DY ("the Vendor"); and
(2) BELDRAY LIMITED, a company registered in England under number 67665,
whose registered office is at P.O. Box 20, Beldray Road, Bilston, West
Midlands WV14 7NF ("the Purchaser").
IT IS AGREED AS FOLLOWS:
1. INTERPRETATION
In this document:
1.1 The following words and expressions shall have the meanings
set out or referred to opposite each respectively:
"the Accounts" the audited Accounts of the
Company for the financial year
ended on the Accounts Date
together with the reports of the
directors and auditors and all
notes thereto;
"the Accounts Date" 31st October 1995;
"the Act" the Companies Act 1985;
"ACT" Advance Corporation Tax;
"Business Day" any day (other than Saturday) on
which clearing banks are open
for normal banking business in
sterling in the City of London;
"the Certificate of Title" the certificate of title in the
Agreed Terms;
"the Company" Hago Products Limited a company
registered in England under
number 439448 (of which
particulars are given in
schedule 1);
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"the Companies Acts" as defined in section 744 of the
Act;
"Completion" completion of the acquisition
and disposal of the Shares in
accordance with clause 5;
"Completion Accounts" the completion accounts prepared
in accordance with schedule 7;
"Completion Date" the date of this document;
"Completion NAV" as defined in part 1 of schedule
7;
"the Disclosure Letter" the letter having the same date
as this document from the
Vendor's Solicitors to the
Purchaser's Solicitors together
with the copy documents attached
to it;
"Encumbrance" any interest or equity
(including without limitation
any right to acquire, option or
right of pre-emption) and any
mortgage, charge, pledge, lien,
assignment, hypothecation,
security interest, title
retention or any other security
agreement or arrangement;
"ERA" Employment Rights Act 1996;
"FRS" a financial reporting standard
in force at any material time
as issued by the Accounting
Standards Board;
"ICTA" the Income and Corporation
Taxes Act 1988;
"Individual Accounts" in relation to the Company:
(a) the balance sheet dealing
with its state of affairs
as at the last day of the
relevant financial period;
and
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<PAGE> 5
(b) the profit and loss account
dealing with its profit or
loss for the relevant
financial period;
"the Management the unaudited accounts of the
Accounts" Company for the period from the
Accounts Date to 30th September
1996 copies of which are
attached to the Disclosure
Letter;
"Member of the any body corporate within the
Vendor's Group" Vendor's Group;
"the Pension Scheme" the pension scheme known as John
Pring & Son Limited Retirement
and Death Benefit Plan;
"the Property" the property briefly described
in schedule 2;
"the Purchaser's Eversheds of 10 Newhall Street,
Solicitors" Birmingham B3 3LX;
"Relevant Business" as defined in sub-clause 6.2.1;
"Restricted Area" as defined in sub-clause 6.2.2;
"the Shares" all the issued shares in the
capital of the Company;
"SSAP" a statement of standard
accounting practice referred to
in section 256 of the Act in
force at any material time as
issued by the Institute of
Chartered Accountants in England
and Wales;
"the Tax Covenants" the obligations on the part of
the Vendor set out in schedule
3;
"Taxation" as defined in paragraph 1.2 of
schedule 3;
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<PAGE> 6
"TCGA" the Taxation of Chargeable Gains
Act 1992;
"the Tax Warranties" the statements set out in
paragraph J of schedule 4;
"the Vendor's Group" together the Vendor and any body
corporate (including without
limitation for this purpose any
undertaking within the meaning
of section 259(1) of the Act),
but excluding the Company within
its group (within the meaning of
section 53(1) of the Companies
Act 1989);
"the Vendor's Martineau Johnson of St. Philips
Solicitors" House, St. Philips Place,
Birmingham B3 2PP;
"the Warranties" the statements set out in
schedule 4;
"Warranty" one of the Warranties.
1.2 Unless the context otherwise expressly requires, words and
expressions which are otherwise defined in the Act or in the
Companies Act 1989 shall have the same meaning when used in
this document.
1.3 References to any statute or statutory provisions will, unless
the context otherwise requires, be construed as including
references to any earlier statute or the corresponding
provisions of any earlier statute, whether repealed or not,
directly or indirectly amended, consolidated, extended or
replaced by such statute or provisions, or re-enacted in such
statute or provisions, and to any subsequent statute or the
corresponding provisions of any subsequent statute in force at
any time prior to Completion directly or indirectly amending,
consolidating, extending, replacing or re-enacting the same,
and will include any orders, regulations, instruments or other
subordinate legislation made under the relevant statute or
statutory provisions which are in force prior to Completion.
1.4 The schedules to this document are an integral part thereof.
1.5 A reference to any gender shall include every other gender.
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1.6 The singular shall include the plural and vice versa and a
reference to persons will include bodies corporate,
unincorporated associations and partnerships.
1.7 A document referred to as being in "the Agreed Terms" shall be
in the form of that document signed or initialled for
identification by or on behalf of the parties.
1.8 Any statement qualified by the expression "to the best of the
Vendor's knowledge and belief" or "so far as the Vendor is
aware" or any similar expression shall, unless otherwise
expressly stated, be deemed to include an additional statement
that it has been made after all due and careful enquiries by
the Vendor and the Vendor shall be deemed to be aware of any
knowledge of any of its directors, or of Mr. R. Bacon and Mr.
A. Ratcliffe (both directors of the Company), Mr. K.
Fitzpatrick and Mrs. J. Laney.
1.9 A person is connected with a company if:
1.9.1 he or it is a director or shadow director of the
company or an associate of such a director or shadow
director; or
1.9.2 he or it is an associate of the company;
and "associate" has the meaning given by section 435 of the
Insolvency Act 1986.
1.10 The headings and sub-headings are inserted for convenience
only and shall not affect the construction of this document.
2. AGREEMENT FOR SALE AND PURCHASE
SALE AND PURCHASE
Subject to the terms of this document on Completion the Vendor shall
dispose of and the Purchaser shall acquire the Shares free from any
Encumbrance and together with all rights now or hereafter attaching to
them to the intent that the transfer hereby agreed upon shall be made
with full title guarantee.
5
<PAGE> 8
3. CONSIDERATION
3.1 AMOUNT
The consideration for the Shares shall be the payment to the
Vendor of a sum equal to the Completion NAV as determined or
agreed in accordance with schedule 7 less the sum of
L.220,000.
3.2 PAYMENT
3.2.1 Pending determination of the Completion NAV the
Purchaser shall pay the sum of L.400,000 in cash on
Completion by way of a single banker's draft drawn on
a UK clearing bank in favour of the Vendor or by such
other method as may be agreed in writing between the
Vendor and the Purchaser.
3.2.2 On the Completion Date the Purchaser shall pay into a
deposit account in the joint names of the Vendor's
Solicitors and the Purchaser's Solicitors with Lloyds
Bank plc under a mandate in Agreed Terms ("the
Account") the sum of L.100,000 ("the Escrow Sum").
3.2.3 All interest on the Escrow Sum shall accrue and be
paid to the Vendor or the Purchaser in the same
proportions as they may respectively become entitled
to the Escrow Sum.
3.2.4 On the third Business Day after the date on which the
Completion NAV is agreed or determined:
(1) If the sum of L.400,000 is less than the
consideration for the Shares the Purchaser
shall pay to the Vendor a sum equal to such
shortfall; or
(2) If the sum of L.400,000 exceeds the
consideration for the Shares the Vendor shall
pay to the Purchaser a sum equal to such
excess.
3.2.5 The Vendor and the Purchaser shall procure that any
payment calculated to be due under sub- clause
3.2.4(1) shall be satisfied on the due date specified
by the payment of an equivalent sum from the Account
and the Vendor's Solicitors and the Purchaser's
Solicitors shall be instructed accordingly. In the
event that the Escrow Sum is insufficient the
Purchaser shall pay on demand the shortfall to the
Vendor by way of
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<PAGE> 9
cheque. If, after payment has been made to the
Vendor from the Account discharging the shortfall in
full, there is a balance in the Account that balance
shall be paid back to the Purchaser.
3.2.6 The Vendor's Solicitors' receipt of the consideration
for the Shares shall be a good and sufficient
discharge to the Purchaser, and the Purchaser shall
not be further concerned as to the application of the
monies so paid.
4. WARRANTIES AND TAX COVENANTS
4.1 The Vendor:
4.1.1 warrants represents and undertakes to the Purchaser
in the terms of the Warranties, provided however that
the Purchaser will not be entitled to claim that any
fact or combination of facts constitutes a breach of
any of the Warranties if and to the extent that such
fact or combination of facts has been fully and
fairly disclosed in the Disclosure Letter;
4.1.2 agrees that the Purchaser is entering into this
Agreement in reliance on each of the Warranties and
that save as provided in clause 4.1.1 no information
of which the Purchaser has knowledge (actual or
constructive) will prejudice any claim made by the
Purchaser in respect of the Warranties or will
operate to reduce any amount recoverable in respect
of any breach of any of the Warranties or will
operate to prevent any claim being made by the
Purchaser for any breach by the Vendor of the
covenants implied by the Law of Property
(Miscellaneous Provisions) Act 1994;
4.1.3 will indemnify the Purchaser against any costs or
expenses (including legal costs) which it may
reasonably incur, either before or after the
commencement of any action, directly or indirectly as
a result of any breach of any of the Warranties;
4.1.4 undertakes to disclose immediately to the Purchaser
anything which comes to the Vendor's notice which is
or may be a breach of any of the Warranties; and
4.1.5 undertakes that, in the event of any claim being made
against the Vendor whether under the Warranties or
otherwise in connection with the sale of the Shares
to the Purchaser, the Vendor will not make any claim
against the Company, or against any director or
employee of the Company on which or on whom the
Vendor may have relied before
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<PAGE> 10
agreeing to any term of this Agreement or the Tax
Covenants or authorising any statement in the
Disclosure Letter.
4.2 Without restricting the rights of the Purchaser or the ability
of the Purchaser to claim damages on any basis available to
it, the Vendor undertakes to the Purchaser that in the event
of a breach of paragraph D7.3 of schedule 4 the Vendor will,
forthwith on demand by the Purchaser, pay to the Purchaser or
the Company (as the Purchaser directs) in cash an amount equal
to the aggregate of the sums (if any) which remain outstanding
in respect of the debts which are the subject of the Warranty
in paragraph D7.3 of schedule 4 provided that, upon such
payment by the Vendor, the Purchaser will, if requested so to
do, procure the assignment of such debts (to the extent to
which sums remain outstanding in respect of them) to the
Vendor (the costs and expenses relating to such assignment
being borne by the Vendor).
4.3 Each of the Warranties will be construed as a separate
Warranty and will not be limited or restricted by reference
to, or inference from, the terms of any other Warranty or any
other term of this Agreement.
4.4 Schedule 5 shall apply in relation to the determination of the
rights and remedies of the Purchaser in respect of the
Warranties and the Tax Covenants.
5. COMPLETION
5.1 DATE OF COMPLETION
Completion shall take place on the Completion Date at the
offices of the Vendor's Solicitors immediately following
execution and delivery of this agreement.
5.2 VENDOR'S OBLIGATIONS
On Completion the Vendor shall:
5.2.1 Deliver to the Purchaser:
(1) A duly executed transfer of the Shares by the
registered holders in favour of the Purchaser
or its nominees together with the relevant
share certificates;
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<PAGE> 11
(2) All the statutory and other books (duly
written up to date) of the Company and common
seal;
(3) Letters of resignation in the Agreed Terms
executed under seal by the persons resigning
as directors and as secretary of the Company
pursuant to sub-clause 5.2.2(2);
(4) Any document required in satisfaction of the
Vendor's obligations under sub-clause 5.2.2;
(5) all deeds and documents relating to the title
of the Company to the Property together with
the Certificate of Title and a letter of
compliance from the Company as referred to in
clause 1.8 of the Certificate of Title.
5.2.2 Procure:
(1) The passing by the board of directors of the
Company of a resolution to register the
transfer referred to in sub-clause 5.2.1(1)
subject only to due stamping and,
additionally, the transaction of the other
business referred to in the completion board
minutes in the Agreed Terms;
(2) Such persons as the Purchaser may nominate to
be validly appointed as additional directors
of the Company and upon such appointment
forthwith cause the directors and secretary
of the Company to retire from their
respective offices and (other than J.K.Laney,
A. Ratcliffe and S. Hutchins) as employees;
(3) The release of the Company from all banking
arrangements of the Vendor's Group including
without limitation all bank accounts
involving joint or joint and several
liability with any Member of the Vendor's
Group, all guarantees and indemnities given
by the Company in respect of the obligations
of Members of the Vendor's Group and all
securities and authorities given by the
Company in respect thereof and in the
meantime will indemnify and keep indemnified
the Company against any liability (including
costs damages and expenses) which the Company
may suffer under or in relation to such
guarantees and indemnities;
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<PAGE> 12
(4) The release of all Encumbrances (if any)
given by the Company and of all guarantees
given by the Company in respect of the
obligations of any third party and in the
meantime will indemnify and keep indemnified
the Company against any liability (including
costs damages and expenses) which the Company
may suffer under or in relation to such
Encumbrances;
(5) delivery of copy bank statements in respect
of each account of the Company as at the
close of business on the last Business Day
prior to Completion, together in each case
with a reconciliation statement prepared by
the Vendor to show the position at Completion
(listing unpresented cheques drawn or
received by the Company and standing orders
payable since the date of such bank
statements);
(6) delivery to the Purchaser at the Company (or
within one Business Day of Completion) all
papers, books, records, keys, credit cards
and other property (if any) of the Company
which are in the possession or under the
control of the Vendor or any other person who
resigns as an officer of the Company in
accordance with this clause 5.
5.3 PURCHASER'S OBLIGATIONS
On Completion, and against compliance by the Vendor with its
obligations under sub-clause 5.2, the Purchaser shall:
5.3.1 make payment on account of the consideration for the
Shares in accordance with clause 3;
5.3.2 procure that the Company repays the sum of L.613,483
to the Vendor in full satisfaction of all monies due
by it to the Vendor.
5.4 BANK ACCOUNT
At Completion the Vendor will make such arrangements to alter
the mandate of the existing bank account of the Company as the
Purchaser shall reasonably request.
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<PAGE> 13
5.5 DECLARATION OF TRUST IN RELATION TO THE SHARES
The Vendor declares that, for so long as it remains the
registered holder of any of the Shares after the date of this
document it will:
5.5.1 Stand and be possessed of those of the Shares
concerned, and the dividends and other distributions
of profits or surplus or other assets in respect
thereof and all rights arising out of or in
connection therewith, in trust for the Purchaser and
its successors in title;
5.5.2 At all times thereafter deal with and dispose of
those of the Shares concerned and all such dividends,
distributions and rights as the Purchaser or any such
successor may direct;
5.5.3 At the request of the Purchaser or any such successor
vote at all meetings which it shall be entitled to
attend as the holder of those of the Shares concerned
in such manner as the Purchaser or any such successor
may direct; and
5.5.4 If so requested by the Purchaser or any such
successor, execute all instruments of proxy or other
documents which the Purchaser or any such successor
may reasonably require and which may be necessary or
expedient to enable the Purchaser or any such
successor to attend and vote at any such meeting.
6. RESTRICTIVE UNDERTAKINGS
6.1 CONFIDENTIAL INFORMATION AND USE OF NAMES
The Vendor shall not, and shall procure that each Member of
the Vendor's Group from time to time shall not, (except as may
be required by law and in such event only after prior
consultation with the Purchaser):
6.1.1 disclose to any person; or
6.1.2 use to the detriment of the Company;
any confidential information (including without limitation
customer lists or names and information of a technical, trade
or other character) concerning the Company or use in
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connection with any trade or business any name which is
confusingly similar to the name of the Company.
6.2 DEFINITIONS
For the purposes of the undertakings in sub-clause 6.3:
6.2.1 "Relevant Business" means any business which consists
of or includes to a material extent the following
business now carried on by the Company namely:
The manufacture and sale of wire and tube
child safety products, office wire trays,
office coat stands, wire fireguards and wire
shelves for refrigerators; and
6.2.2 "Restricted Area" means the geographical area at the
date of this document comprised within the United
Kingdom.
6.3 CUSTOMERS, SUPPLIERS AND EMPLOYEES
The Vendor undertakes with the Purchaser that it will not, and
will procure that each Member of the Vendor's Group from time
to time will not, at any time during the period of 24 months
after Completion (other than in respect of clause 6.3.5 where
there will be no such time limitations):
6.3.1 Canvass or solicit the custom of any person who is
both:
(1) at the time of such canvassing or
solicitation reasonably regarded by the
Purchaser as; and
(2) a person who it at any material time knows or
ought reasonably to know was at any time
during the period of twelve months before
Completion;
a customer of the Company for the supply of goods
and/or services which are both:
(3) Competitive with any of those supplied at the
time of Completion; and
(4) Goods and/or services which belong to the
same generic class as those supplied at any
time during the period of twelve months
before Completion;
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<PAGE> 15
6.3.2 Deal with such a customer for the supply of such
goods and/or services as are described in sub- clause
6.3.1; or
6.3.3 Solicit or entice away from the Company or employ or
offer employment to any employee of the Company
employed at the Completion Date (whether at any
material time he may be employed by the Company or by
the Purchaser or some other subsidiary of the
Purchaser) in skilled or managerial work; or
6.3.4 Except as the holder for investment of less than 5%
in nominal value of the issued share capital of a
company whose shares are listed on a recognised
investment exchange (within the meaning of the
Financial Services Act 1986) or as an employee or
officer or agent of the Purchaser or the Company be
engaged, concerned or interested, whether directly or
indirectly, within the Restricted Area in any
Relevant Business; or
6.3.5 Use in connection with any business any name which
includes the name of the Company or any colourable
imitation thereof; or
6.3.6 Interfere, or seek to interfere, with the continuance
of supplies to the Company from any supplier who has
been supplying goods and/or services to the Company
at any time during the 12 months immediately
preceding the date of Completion if such interference
causes or would cause that supplier to cease
supplying, or materially reduce its supply of, those
goods and/or services to the Company.
6.3.7 Do any of the acts referred to in sub-clauses 6.1 and
6.3 indirectly, including without limitation by
advertising in a medium which is primarily published
in and/or directed to any part of the Restricted
Area, or in conjunction with or on behalf of or by
way of assistance to any other person.
6.4 REASONABLENESS OF UNDERTAKINGS
Each of the undertakings in sub-clause 6.3 is:
6.4.1 considered by the parties to be reasonable though it
is agreed that if any of the undertakings by
themselves or taken together, shall be adjudged to go
beyond what is reasonable in all circumstances for
the protection of the legitimate interests of the
Purchaser and/or the Company but would be adjudged
reasonable if part or parts of the
13
<PAGE> 16
wording thereof were deleted or amended or qualified
or the periods thereof were reduced in scope, then
the relevant undertaking or undertakings shall apply
with such modification or modifications as may be
necessary to make it or them valid and effective;
6.4.2 enforceable by the Purchaser on behalf of itself and
the Company separately and independently of its right
to enforce any one or more of the other undertakings
in sub-clause 6.3 and if any one or more of such
undertakings or part of an undertaking is held to be
against the public interest or unlawful or in any way
an unreasonable restraint of trade, the remaining
undertakings, will continue in full force and effect
and will bind the Vendor; and
6.4.3 given for the purpose of assuring to the Purchaser
the full benefit of the business and goodwill of the
Company and in consideration of the agreement of the
Purchaser to acquire the Shares on the terms of this
document.
7. GUARANTEES
The Purchaser undertakes with the Vendor after Completion to use its
best endeavours to procure the release of the Vendor and any Member of
the Vendor's Group at the date of this document from liability under
any and all outstanding guarantees given by any of the Vendor or any
Member of the Vendor's Group at the date of this document in respect
of the Property and as disclosed in the Disclosure Letter in respect
of monies borrowed and obligations undertaken by the Company and
pending such release to indemnify each of the Vendor and any such
Member of the Vendor's Group against any such liability.
8. TAX ELECTIONS ETC.
8.1 8.1.1 The Purchaser shall further procure that the Company
shall sign and deliver to the Vendor all such
letters, claims, surrenders, applications and
elections and do all such other acts as the Vendor
may reasonably request for the purpose of enabling
the Vendor to minimise the liability to taxation for
the Vendor's Group in relation to the profits and
losses of the Company in the financial periods of the
Company up to and including that ended on 31st
October 1996 (without however increasing the
liability of the Company in that respect beyond the
amount taken into account by way of deduction or
provision in the Accounts or in arriving at the
Completion NAV) and provided that any tax losses
surrendered by the Company shall be paid for at the
tax benefit to the surrenderee (or such other payment
as may be agreed between the Vendor and the
Purchaser).
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<PAGE> 17
8.1.2 The Purchaser shall pay on demand to the Vendor a sum
equal to any payment made by the Vendor or any Member
of the Vendor's Group under clause 8.1.1 to the
extent such payment is not reflected in the
Completion NAV. Any such payment shall be by way of
increase in the consideration for the Shares. The
Vendor shall be entitled to set-off any sum payable
under clause 8.1.1 by it or any member of the
Vendor's Group against any sum payable by the
Purchaser under this clause 8.1.2.
8.1.3 The Vendor shall pay to the Company, on account of
any sums payable by it or any member of the Vendors
Group pursuant to clause 8.1.1, L.142,000 on
Completion.
8.2 8.2.1 Vendor or its duly authorised agent shall prepare in
draft the corporation tax returns of Company for all
chargeable accounting periods ended on or before the
date of Completion to the extent that the same shall
not have been prepared before Completion. For the
avoidance of doubt Completion shall be treated as the
end of a chargeable accounting period.
8.2.2 Vendor shall submit all such draft returns (in such
form as Vendor and its duly authorised agent
considers should be submitted to the Inland Revenue)
to the Purchaser for review not later than 30th April
1997 and the Purchaser shall propose to Vendor any
amendments the Purchaser wishes to make to such draft
returns within 28 days after receipt thereof.
8.2.3 The Purchaser shall procure that the Company causes
the finalised returns to be authorised, signed and
submitted to the Inland Revenue without amendment or
with such of the amendments proposed by the Purchaser
as Vendor shall agree (such agreement not to be
unreasonably withheld or delayed).
8.2.4 Vendor or its duly authorised agent shall
expeditiously prepare all documentation and deal with
all matters (including the conduct of correspondence
and giving directions to Company as to the making of
claims, elections and disclaimers and the giving of
notices or consents for the purposes with which the
Purchaser shall procure Company complies) relating to
the corporation tax returns of Company for all
accounting periods ended on or before date of
Completion. The Purchaser shall procure that the
Company shall not make amend or withdraw any such
claims elections or disclaimers or give any such
notice or consent for any accounting period ended on
or before the Completion Date without the consent of
the Vendor.
15
<PAGE> 18
8.2.5 Vendor shall promptly provide the Purchaser with
copies of all written communications received by it
or its duly authorised agent from the Inland Revenue
in relation to any period referred to in Clause 8.2
and no material written communication shall be sent
to the Inland Revenue by Vendor or its duly
authorised agent in relation to any such period
unless the Purchaser has been provided with a draft
of such communication and is given a period of 14
days therefrom to propose amendments to such draft.
Vendor shall submit such communication to the Inland
Revenue with such amendments as Vendor shall agree
(such agreement not to be unreasonably withheld or
delayed).
8.2.6 The Purchaser shall procure that Vendor and its duly
authorised agent is afforded all such assistance and
access to books, records and documents by the
Purchaser and Company as may reasonably be required
by Vendor for the purposes of this Clause 8.2
8.2.7 The Purchaser shall procure that the Company shall
bear the reasonable professional costs and expenses
of Coopers & Lybrand incurred after the date hereof
in connection with the preparation of such returns as
are mentioned in Clause 8.2, the negotiation and
agreement of the corresponding liability to Taxation
for all periods therein referred to and all other
action taken in relation thereto pursuant to this
Clause 8.1 to the extent provided in the Completion
Accounts and any excess shall be borne by the Vendor.
The parties agree that Coopers & Lybrand shall be
instructed to act as the duly authorised agent of
Vendor referred to in this clause if Vendor so
requests.
9. GENERAL
9.1 WHOLE AGREEMENT
This document (together with any documents to which it refers)
constitutes the whole agreement between the parties with
regard to the subject-matter thereof, and no variations shall
be effective unless made in writing.
9.2 WAIVER
Any release, waiver or compromise or any other arrangement of
any kind by any party shall not affect the rights and remedies
of the party concerned as regards any other party or its
rights and remedies against the party in whose favour the
release, waiver, compromise or other arrangement is granted or
made, except (in any event) to the express extent of the
release, waiver,
16
<PAGE> 19
compromise or other arrangement, and no such release, waiver,
compromise or other arrangement shall have effect unless
granted or made in writing.
9.3 PROVISIONS SURVIVING COMPLETION
In so far as the provisions of this document shall not have
been performed at Completion, they shall remain in full force
and effect notwithstanding Completion.
9.4 PROPER LAW AND JURISDICTION
This document shall be governed by and construed in accordance
with English law, and the parties irrevocably submit to the
non-exclusive jurisdiction of the English courts.
9.5 FURTHER ASSURANCE
The Vendor shall do such acts and execute such documents as
the Purchaser may at any time reasonably require for the
purpose of assuring to the Purchaser the full benefit of this
document.
9.6 COUNTERPARTS
This document may be executed in any number of counterparts
and by the parties on separate counterparts, each of which,
when so executed and delivered, shall be an original, but all
the counterparts shall together be deemed to constitute one
and the same document.
9.7 COSTS
Each party shall pay its own costs of and incidental to this
document and the transaction hereby agreed upon.
9.8 SEVERABILITY
The provisions of this document shall be severable and
distinct from one another, and, if at any time any of such
provisions is or becomes invalid, illegal or unenforceable,
the validity, legality or enforceability of the others shall
not in any way be affected or impaired thereby.
17
<PAGE> 20
9.9 PUBLICITY
9.9.1 The parties shall forthwith upon Completion make or
procure to be made a press announcement and
announcements to the employees of the Company and to
the customers and suppliers of the Company in the
Agreed Terms.
9.9.2 Each of the parties shall both before and after
Completion, but subject to sub-clause 9.9.1, keep the
contents of this document strictly private and
confidential and shall not without the prior written
consent of the Vendor and the Purchaser disclose any
or all of them to any person except to the extent
required by law or the Stock Exchange and except that
the Vendor and the Purchaser shall be entitled to
make references to the transactions hereby agreed
upon in its future annual reports and accounts.
9.10 REGISTRATION
Any restriction contained in this document (or in any
agreement or arrangement of which the agreement constituted by
this document may form part) by virtue of which it or any such
agreement or arrangement may be subject to registration under
the Restrictive Trade Practices Act 1976 shall be of no effect
until the day after particulars of this document (or of the
agreement or arrangement of which it may form part) shall have
been furnished to the Director General of Fair Trading.
9.11 PENSION SCHEME
The provisions of schedule 6 shall apply in relation to the
Pension Scheme.
10. NOTICES
10.1 Any notice, demand or other communication relating to this
document shall be in writing delivered personally or sent by
pre-paid first class post or facsimile transmission to the
address of the party to be served given herein provided that
in the case of facsimile transmission a confirmatory copy
shall be sent by first class post.
10.2 Any such notice, demand or other communication relating to
this document:
10.2.1 Shall, if sent by post as provided in this clause 10,
be deemed to have been served 24 hours after
despatch; and
18
<PAGE> 21
10.2.2 Shall, if sent by facsimile transmission as provided
in this clause 10, be deemed to have been served at
the time of transmission;
Provided that:
10.2.3 If, in the case of delivery by hand or facsimile
transmission, such delivery or transmission occurs
on; or
10.2.4 If, in the case of delivery by post a period of 24
hours after despatch would expire on;
a day which is not a Business Day or after 4.00 p.m. on a
Business Day, then service shall be deemed to occur at 9.00
a.m on the next following Business Day.
10.3 In proving service it shall be sufficient to prove, in the
case of a letter, that such letter was properly stamped,
addressed and placed in the post and, in the case of a
facsimile transmission, it shall be sufficient to produce a
transmission report showing that transmission was duly and
fully made to the correct number.
Executed by or on behalf of the parties on the date first set out in this
document.
19
<PAGE> 22
SCHEDULE 1
(SUB-CLAUSE 1.1 AND WARRANTY B1.1)
THE COMPANY
<TABLE>
<S> <C>
Name: Hago Products Limited
Registration no: 439448
Date of incorporation: 23rd July 1947
Authorised share capital: L.133,000 divided into 133,000
ordinary shares of L.1 each
Issued share capital: L.112,604 divided into 112,604
ordinary shares of L.1 each
Directors: R.J. Bacon
G. Bond
S.M. Hutchins
A. Ratcliffe
J. Laney
Secretary: Mrs. J. Laney
Auditors: Coopers & Lybrand
Registered office: South Bersted Industrial Estate,
Durban Road, Bognor Regis, West
Sussex PO22 9QT
Accounting reference date: 31st October
Debentures/mortgages/charges None
and other Encumbrances:
Registered Shareholders Bullough plc - 112,601 ordinary
shares
Bullough Electric Limited - 3
ordinary shares
</TABLE>
20
<PAGE> 23
SCHEDULE 2
THE PROPERTY
(SUB-CLAUSE 1.1)
<TABLE>
<CAPTION>
Description Tenure, Date and Term Landlord
- ----------- --------------------- --------
<S> <C> <C>
Units 12-13 Durban Road Leasehold expiring on 23rd Birkby plc
South Bersted Industrial June 1999
Estate Bognor Regis West
Sussex
Units 14-15 Durban Road Leasehold expiring on 23rd Birkby plc
aforesaid June 1999
Unit 16 Durban Road aforesaid Leasehold expiring on 23rd Birkby plc
June 1999
</TABLE>
21
<PAGE> 24
SCHEDULE 3
THE TAX COVENANTS
(SUB-CLAUSES 1.1 AND 4.1.2)
1. INTERPRETATION
In this schedule:
1.1 "RELEVANT TAXATION CLAIM"
The following provisions shall apply for the purposes of
determining what is a Relevant Taxation Claim:
1.1.1 A Relevant Taxation Claim is a claim for Taxation:
(1) whether made before or on or after the date
of this document; and
(2) whether or not the Taxation in question is
also chargeable against or attributable to or
the Company has any right of recovery against
any other person;
which in either case is made against the Company or
(in any case where after Completion a mortgage or
charge arises in respect of any of the Shares or
there arises a power to sell or mortgage or charge
any of the Shares as a result of any provision
relating to inheritance tax) against the Company
and/or the Purchaser.
1.1.2 Such a claim is a Relevant Taxation Claim only if and
to the extent to which it:
(1) Results from or by reference to any income,
profits or gains earned, accrued or received
on or before the Completion Date or in
respect of a period ended or deemed to have
ended on or before the Completion Date;
and/or
(2) Is the result of any one or more events,
acts, omissions, transactions or
distributions the first of which shall have
taken place on or before the Completion Date,
whether alone or in conjunction with other
circumstances, and in each case whether or
not the Company is a party thereto; and/or
22
<PAGE> 25
(3) Results from a payment or a right to receive
a payment under paragraph 2 and/or;
(4) Is assessed on the Company under section 767A
ICTA and represents corporation tax assessed
on:
(a) any person who at any time before
Completion was under the control
(within the meaning of section 767B
ICTA) of the Company; and/or
(b) any other company which at any time,
whether before or after Completion,
is under the control (within the
meaning of section 767B ICTA) of any
person referred to in sub-paragraph
(4)(a) of that section;
and which in either case remains unpaid at
any time after the relevant date (within the
meaning of section 767(A) ICTA).
1.1.3 A Relevant Taxation Claim includes any assessment,
notice, demand or other communication from or action
taken by any person, authority or body responsible
for the assessment, collection or recovery of
Taxation which claims:
(1) payment of an amount in respect of Taxation;
or
(2) to deprive the Company of any relief,
exemption, set-off, charge, deduction,
allowance or credit relating to Taxation; or
(3) to nullify or cancel any right to the
repayment of Taxation.
1.1.4 There shall be treated as the amount of the Relevant
Taxation Claim concerned:
(1) in any case where sub-paragraph 1.1.3(1)
applies, the amount of the payment claimed;
(2) In any case where sub-paragraph 1.1.3(2)
applies, the maximum amount of Taxation which
(assuming the Company had sufficient profits
against which such relief, exemption,
set-off, charge, deduction, allowance or
credit relating
23
<PAGE> 26
to Taxation may have been set or given and
disregarding any reduced rates of Taxation
applicable to profits, income or gains less
than a particular amount) would have been
relieved, allowed or credited by the relief,
exemption, set-off, charge, deduction,
allowance or credit of which it is claimed to
deprive the Company; and
(3) in any case where sub-paragraph 1.1.3(3)
applies, the amount of the repayment which it
is claimed to nullify or cancel.
1.1.5 A claim is not a Relevant Taxation Claim to the
extent that:
(1) provision or reserve in respect thereof is
made in the Accounts or the Completion
Accounts or to the extent that payment or
discharge of such claim has been taken into
account in the Accounts;
(2) any provision or reserve is made in the
Accounts or the Completion Accounts which is
insufficient by reason only of any increase
in rates of Taxation after the date of this
document having retrospective effect;
(3) it is a claim for Taxation assessed on or by
reference to income or profits or gains
actually (as opposed to deemed to have been
or treated or regarded as) earned or received
by the Company after the Accounts Date in the
ordinary course of its business; or
(4) it arises by reason of a voluntary act or
transaction carried out by the Purchaser (or
any person deriving title from it) or the
Company after Completion outside the ordinary
course of business and which the Purchaser
(or person concerned deriving title from it)
was actually aware would give rise to the
claim in question, but so that this exclusion
shall not extend to any voluntary act carried
out with the approval, concurrence or
assistance of the Vendor or any act carried
out under a legal obligation entered into by
the Company prior to Completion.
1.1.6 In calculating the amount of each Relevant Taxation
Claim, no account shall, be taken of the availability
of any relief, exemption, set-off, charge, deduction,
allowance, credit or right to repayment of Taxation
which may be available to the Purchaser or the
Company to set against or otherwise mitigate or
reduce the amount of a Relevant
24
<PAGE> 27
Taxation Claim whether it arose by reason of any
transaction, event or omission carried out or
occurring before or after Completion.
1.2 "TAXATION"
Taxation means all forms of taxation, whenever created or
imposed and whether of the United Kingdom or any other
jurisdiction, including without limitation corporation tax,
advance corporation tax, income tax, capital gains tax, value
added tax, customs and other import duties, capital transfer
tax, inheritance tax, stamp duty, stamp duty reserve tax,
capital duty, foreign taxation, vehicle duty, general or
business rates, water rates, national insurance, social
security or similar contributions, payments due under section
559 ICTA, and any sum payable to any person as a result of the
operation of any enactment relating to taxation, and all
penalties, charges and interest relating to any claim for
taxation or resulting from a failure to comply with the
provisions of any enactment relating to taxation.
1.3 INCOME, PROFITS AND GAINS
References to income or profits or gains earned, accrued or
received shall, save where otherwise expressly stated, include
a reference to income or profits or gains deemed to have been,
or treated as, or regarded as earned, accrued or received by
or for the purposes of any legislation.
2. TAXATION PAYMENTS
PAYMENTS
Subject to and in accordance with the terms of this schedule the
Vendor undertakes and covenants with the Purchaser to make payments to
the Purchaser equal to the aggregate of:
2.1 The amount of each Relevant Taxation Claim; and
2.2 The amount of any costs (including without limitation legal
costs on a full indemnity basis), expenses or other
liabilities which either or both of the Company and the
Purchaser may incur in relation to each Relevant Taxation
Claim (including without limitation costs, expenses and
liabilities arising from corresponding with or meeting any
person, authority or body responsible for the assessment,
collection or recovery of Taxation in any jurisdiction and
investigating, resisting, compromising, settling or taking
advice upon each Relevant Taxation Claim and the
25
<PAGE> 28
availability or otherwise of any relief, exemption, set-off,
charge, deduction, allowance or credit relating to Taxation
and taking or defending any action under this schedule).
3. CREDITS AND REDUCTIONS
3.1 If:
3.1.1 any Relevant Taxation Claim is disputed by the
Company or represents Taxation for which a credit is
or may become due to the Company at a later date;
then:
3.1.2 the amount of the Relevant Taxation Claim shall
nevertheless be payable in full by the Vendor on the
due date ascertained in accordance with paragraph 5;
but:
3.1.3 if subsequently any reduction is made in that
Relevant Taxation Claim or a credit or repayment in
respect thereof is received by the Company;
then:
3.1.4 the Purchaser shall promptly repay to the Vendor an
amount equal to such reduction, shortfall, credit or
repayment up to the amount previously paid by the
Vendor in respect of that Relevant Taxation Claim,
but without interest, save to the extent that
interest is included (or allowed) in such credit,
repayment, reduction or shortfall.
3.2 For the purpose of this paragraph 3, no credit shall be taken
to have been received by the Company unless and until it shall
have relieved the Company of a present obligation to pay
Taxation.
4. OVER-PROVISIONS
4.1 If:
4.1.1 at the request (made at any time within, but not
after, a period of six months after the amount of the
Taxation for which provision was made has become
finally determined)
26
<PAGE> 29
and at the cost of the Vendor the Company's auditors
shall certify that any provision for Taxation (not
being a provision for deferred taxation) contained in
the Accounts is an over- provision;
then:
4.1.2 the amount of such over-provision shall be set
against any liability of the Vendor under sub-
paragraph 2.1.1;
except:
4.1.3 insofar as such over-provision is attributable to the
effect of a change in rates of Taxation or Taxation
law made or having effect after the date of this
document, any relief arising after Completion or any
act of the Purchaser or the Company after Completion
except under a legal obligation entered into by the
Company prior to Completion;
but:
4.1.4 no deduction shall be made from any payment which the
Vendor shall be obliged to make hereunder unless such
certificate is in existence on the due date for that
payment.
4.2 If such a certificate is given after the Vendor has made a
payment under the provisions of this schedule 3, the Purchaser
shall refund to the Vendor (but without interest) any payments
made by the Vendor to the extent that such over-provision
could have been set against such payments if the certificate
had been in existence on the due date for those payments.
4.3 The Purchaser shall procure that the Company shall co-operate
in obtaining any such certificate if the Vendor shall so
request.
27
<PAGE> 30
5. DATE FOR PAYMENT
5.1 Insofar as a Relevant Taxation Claim represents Taxation
payable by the Company which has not yet become due, the
Vendor shall make payment in respect of that claim (or so much
thereof as represents that Taxation) on the date 5 Business
Days prior to the date on which that Taxation becomes due, and
for this purpose references to a date on which Taxation
becomes due include the date on which it would have become due
were it not for the availability of some relief, exemption,
set-off, charge, deduction, allowance or credit or right to
repayment of Taxation.
5.2 Insofar as a Relevant Taxation Claim consists of the
nullification or cancellation of a right to repayment of
Taxation, the Vendor shall make payment in respect of that
claim (or so much thereof as represents that nullification or
cancellation) on the date on which that repayment would
otherwise have become due.
5.3 In any other case, the Vendor shall make payment 5 Business
Days after the date on which a notice setting out details of
the Relevant Taxation Claim or, as the case may be, any claim
under sub- paragraph 2.1.2 is delivered to the Vendor.
5.4 Any payment which becomes due on a day which is not a Business
Day shall be paid on the Business Day which immediately
precedes the due date for payment, and any payment which is
made after noon on any day shall, for the purposes of
calculating interest, be deemed to have been paid on the next
following Business Day. No payment shall be treated as made
until cleared funds in respect thereof are available to the
Purchaser.
6. INTEREST
The Vendor shall make all payments under this schedule in immediately
available funds before noon on the due date for payment without
deduction or set-off on any account (save as expressly provided in
this schedule), and, if any amount is not paid when due, the Vendor
shall pay to the Purchaser interest on such amount calculated on a
daily basis from the due date until the date of actual payment (as
well after any judgment as before) at the rate of 4% per year above
the base rate from time to time in force of Royal Bank of Scotland
plc.
28
<PAGE> 31
7. CLAIMS
7.1 If the Purchaser shall become aware of any Relevant Taxation
Claim which is likely to give rise to a liability on the
Vendor hereunder, the Purchaser shall, by way of covenant but
not as a condition precedent to the liability of the Vendor
hereunder, give notice thereof or procure that notice thereof
is given as soon as reasonably practicable to the Vendor in
accordance with clause 9.
7.2 As regards any Relevant Taxation Claim, the Purchaser shall
take or shall procure that the Company shall take such action
as the Vendor may by written notice given to the Purchaser
reasonably request to cause the Relevant Taxation Claim to be
withdrawn or to dispute, resist, appeal against, compromise or
defend the Relevant Taxation Claim and any determination in
respect thereof or to apply to postpone (so far as legally
possible) the payment of any tax pending the determination of
any appeal but subject to the Purchaser and the Company being
indemnified to the reasonable satisfaction of the Purchaser by
the Vendor against all losses (including any additional
Taxation Liability), interest, costs, damages and expenses
which may be thereby incurred by the Purchaser or the Company,
and Provided that:
7.2.1 any request made by the Vendor pursuant to this
clause 7.2 shall be made within a reasonable time of
receipt by the Vendor of any notice given by the
Purchaser to the Vendor in accordance with clause 7.1
and if, on the expiry of a period of 14 days
commencing on the date of receipt by the Vendor of
such notice, the Vendor shall not have given to the
Purchaser notice of the Vendor's intentions in
respect of the Relevant Taxation Claim or shall not
have provided satisfactory indemnities in accordance
with this clause 7.2, the Purchaser and the Company
shall be entitled to satisfy or settle or deal with
the Relevant Taxation Claim on such terms as they
shall in their absolute discretion think fit but
without prejudice to their rights and remedies under
this Agreement; and
7.2.2 the Purchaser and the Company shall not be obliged to
comply with any request of the Vendor which involves
contesting any assessment for Taxation before any
court or any other appellate body unless they have
been advised in writing by leading tax counsel
instructed by agreement between the Purchaser and the
Vendor at the expense of the Vendor that an appeal
against the assessment for Taxation in question will,
on the balance of probabilities, be won by the
Purchaser or, as the case may be, the Company.
29
<PAGE> 32
SCHEDULE 4
THE WARRANTIES
(SUB-CLAUSES 1.1 AND 4.1.1)
A THE COMPANY AND THE VENDOR
A1 CAPACITY
The Vendor has full power to enter into and perform the provisions of
this document, which constitutes a binding agreement on the Vendor in
accordance with its terms.
A2 OWNERSHIP OF THE SHARES
The Vendor is the beneficial owner of the Shares and has the right to
dispose of them to the Purchaser or as it directs free from any
Encumbrance and together with all rights now or hereafter attaching to
them.
A3 TRANSFERS AT AN UNDERVALUE
None of the Shares have been the subject of a transfer at an
undervalue (within the meaning of section 238 or section 239 of the
Insolvency Act 1986) within the period of five years prior to the date
of this document.
A4 LIABILITIES OWING TO OR BY THE VENDOR
There is not outstanding any indebtedness or other liability (actual
or contingent):
A4.1 Owing by the Company to the Vendor or any Member of the
Vendor's Group, or any officer or former officer of the
Company (other than accrued salary).
A4.2 Owing to the Company by any such person.
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B THE COMPANY'S SCHEDULED PARTICULARS AND CONSTITUTIONAL AND
ADMINISTRATIVE AFFAIRS
B1 SCHEDULE 2
B1.1 The particulars of the Company set out in schedule 1 are true
and accurate and constitute a complete disclosure of the
matters there referred to; the Company has no director other
than the persons named as directors in schedule 2; and its
issued share capital is fully paid and beneficially owned and
registered free from any third party right.
B1.2 The Company:
B1.2.1 Has not during the six year period ending on the
Completion Date had any group undertaking; and
B1.2.2 Has not during the six year period ending on the
Completion Date been a subsidiary of any company
other than the Vendor.
B2 SHADOW DIRECTORS
No person is a shadow director (within the meaning of section 741 of
the Act) of the Company but is not treated as one of its directors for
all the purposes of the Act.
B3 MEMORANDUM AND ARTICLES
The copy of the memorandum and articles of association of the Company
attached to the Disclosure Letter is true and complete.
B4 COMPANY RESOLUTIONS
Neither the Company nor any class of its members has passed any
resolution (other than resolutions relating to routine business at
annual general meetings or elective resolutions).
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B5 OPTIONS
No person has the right (whether exercisable now or in the future and
whether or not contingent) to call for the allotment, issue or
transfer of any share or loan capital of the Company under any option
or other agreement (including without limitation conversion rights and
rights of pre-emption), and the Company does not have any share option
or profit sharing scheme.
B6 PURCHASE OF OWN SHARES
The Company has not at any time agreed to purchase or purchased or
redeemed or repaid any of its own shares.
B7 STATUTORY AND OTHER BOOKS AND RECORDS
B7.1 All registers, accounts, books, ledgers, financial and other
records of the Company:
B7.1.1 Have been fully, properly and accurately kept and
maintained, are in the possession of the Company and
contain true and accurate records of all matters
required by law to be entered therein;
B7.1.2 Do not contain or reflect any material inaccuracies
or discrepancies;
B7.1.3 Give and reflect a true and fair view of the matters
which ought to appear therein;
and no notice or allegation that any of them is incorrect or
should be rectified has been received by the Company or the
Vendor.
B7.2 The Company's accounting records comply with section 221 of
the Act and show and contain the information set out in such
section.
B8 FILING OF DOCUMENTS
All returns, particulars, resolutions and documents required by the
Act or any other legislation to be filed with the Registrar of
Companies, or with any other authority, in respect of the Company have
been duly filed and were when filed correct and none have been filed
within 14 days before the date of this Agreement.
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<PAGE> 35
B9 INSURANCES
B9.1 The Disclosure Letter sets out full details of all policies of
insurance maintained by or on behalf of the Company.
B9.2 The policies of insurance which are maintained by or on behalf
of the Company are in full force and effect.
B9.3 All premiums in respect of policies of insurance maintained by
or on behalf of the Company have been paid as and when due,
and there are no circumstances known to the Vendor which might
lead to any liability under such insurance being avoided by
the insurers or (being circumstances not affecting businesses
generally) the premiums being increased, and there is no claim
outstanding under any such policy, nor is the Vendor aware of
any circumstances likely to give rise to a claim thereunder.
B9.4 The Disclosure Letter sets out full details of all insurance
claims made by or on behalf of the Company within the period
of three years immediately prior to the date of this document,
including insurance claims pending or outstanding.
B10 POWERS OF ATTORNEY
There is in force no power of attorney given by the Company (other
than to the holder of an Encumbrance solely to facilitate its
enforcement). No person, as agent or otherwise, is entitled or
authorised to bind or commit the Company to any obligation not in the
ordinary course of the business of the Company.
B11 CORPORATE NAME
The Company does not use, nor has it at any time used, on any of its
letterheads or other stationery, books or vehicles or otherwise
carried on its business under any name other than its own present
corporate name.
C THE COMPANY AND THE LAW
C1 COMPLIANCE WITH LAWS
C1.1 The Company has conducted and is conducting its business in
accordance with all applicable laws and regulations of any
relevant jurisdiction.
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<PAGE> 36
C1.2 There is no order, decree or judgment of any court or any
governmental agency of any jurisdiction outstanding against
the Company or which may have any adverse effect upon the
assets or business of the Company; no such order, decree or
judgment is pending, and there are no circumstances known to
the Vendor likely to give rise to any such order, decree or
judgment.
C2 LICENCES
C2.1 The Company has obtained all licences, consents, permits and
authorities of a statutory or regulatory nature necessary to
enable it to carry on its business effectively in the places
and in the manner in which it is now carried on.
C2.2 All such licences, consents, permits and authorities are valid
and subsisting, and the Vendor knows of no reason why any of
them should be suspended, cancelled or revoked or renewed or
continued subject to any term or condition which does not
currently apply thereto.
C3 BREACH OF STATUTORY PROVISIONS
C3.1 Neither the Company nor any of its officers, nor to the best
of the Vendor's knowledge, information and belief any
employees (during the course of their duties in relation to
the Company) have committed, or omitted to do, any act or
thing in contravention of any act, order, regulation or the
like of any other jurisdiction capable of giving rise to any
fine, penalty, default proceedings or other liability on the
part of the Company.
C3.2 There is not, within the knowledge of the Vendor, any pending
or existing any investigation or enquiry by or on behalf of
any governmental or other body in respect of the affairs of
the Company.
C4 LITIGATION
C4.1 The Company is not engaged in any dispute with any customer or
supplier or in any civil or criminal litigation or arbitration
proceeding (whether as plaintiff, defendant or any other
party) except for the collection of debts not exceeding in
aggregate L.5,000 (Five thousand pounds).
C4.2 So far as the Vendor is aware:
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<PAGE> 37
C4.2.1 No litigation or arbitration proceedings are pending
or threatened by or against the Company;
C4.2.2 There are no circumstances likely to give rise to any
litigation or arbitration;
C4.2.3 The Company has not been a party to any undertaking
or assurance given to any court, tribunal or
governmental agency which is still in force; and
C4.2.4 There is no unsatisfied judgment or unfulfilled court
order outstanding against the Company.
References in sub-paragraphs C4.1 and C4.2 to the Company shall be
deemed to include also any person for whom or which the Company may be
or become vicariously liable.
C5 INSOLVENCY
C5.1 The Company is able to pay its debts as they fall due.
C5.2 The Company has not stopped the payment of its debts or
received any written demand pursuant to section 123(1)(a) of
the Insolvency Act 1986.
C5.3 No order has been made or petition presented or resolution
passed for the winding up of the Company; no proposal has been
made under part I of the Insolvency Act 1986 for a voluntary
arrangement; no person has appointed or applied to any court
of competent jurisdiction to appoint a receiver or an
administrative receiver or an administrator; and no distress,
execution or other process has been levied against the
Company.
C6 FAIR TRADING
C6.1 No agreement, practice or arrangement currently or previously
carried on by the Company or to which the Company is or has
been a party infringes any competition, anti-restrictive trade
practice, anti-trust or consumer protection law or legislation
applicable in any relevant jurisdiction.
C6.2 The Company has not given any undertaking to the Restrictive
Practices Court or the Director General of Fair Trading or the
Secretary of State for Trade and Industry or the Commission or
Court of Justice of the EC or to any other court, person or
body.
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<PAGE> 38
C6.3 The Company is not in default under or in contravention of any
article, act, decision, regulation or order or of any
undertaking relating to any matter referred to in this
sub-paragraph C6.3.
C7 PRODUCTS
The Company does not manufacture, sell or supply any product which
does not comply with any applicable regulation, standard or statutory
requirement.
C8 POLLUTION OF THE ENVIRONMENT
For the purposes of this paragraph C8 the words and expressions
"pollution of the environment" and "process" shall have the same
meanings as in section 1 of the Environmental Protection Act 1990.
C8.1 No hazardous substances (as defined in paragraph F.7) have
been used or stored or otherwise handled by the Company on the
Property.
C8.2 Neither the ownership in or occupation by the Company of the
Property nor the business of the Company has been the subject
of any environmental audit and the Company has not conducted
any such audit.
C8.3 There has been no pollution, of, nor release, discharge,
leakage, entry, deposit or emission of any substances into of
the environment by the Company, and the Company has no
responsibility or liability for any pollution of the
environment by any third party, and there has been no act or
omission by the Company which could give rise to any pollution
of the environment.
C8.4 The Company has complied and has adequate systems and
facilities to continue to comply with:
C8.4.1 All laws and regulations relating to pollution of the
environment;
C8.4.2 All laws and regulations relating to pollution of the
environment which apply to any person carrying on any
process carried on by the Company;
C8.4.3 All EC Directives relating to pollution of the
environment (whether or not they have been
implemented in any relevant jurisdiction).
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<PAGE> 39
C8.5 The Company has not received any claim alleging pollution of
the environment caused by noise.
C8.6 The Company has not applied for and, so far as the Vendor is
aware, does not require any environmental authorisations,
permits, licences, consents or other approvals:-
C8.6.1 to carry on its business activities and operations
presently carried on; or
C8.6.2 to use the Property or any part of it.
C8.7 No proceedings or other action, claim and investigation has
been notified to the Company or, so far as the Vendor is
aware, threatened against the Company arising from or relating
to or otherwise concerning environmental legislation.
D THE COMPANY'S FINANCIAL POSITION
D1 THE ACCOUNTS
The Accounts:
D1.1 Comply with the requirements of the Act and all other
applicable statutes and regulations;
D1.2 Have been prepared in accordance with all applicable SSAPs and
FRSs, and where none are applicable, with generally accepted
accounting principles and practices;
D1.3 Have been prepared on bases and principles and using methods
which are consistent with those used in the preparation of the
audited Individual Accounts of the Company for any accounting
period falling wholly or partly within the period of three
years ended on the Accounts Date;
D1.4 Are not affected by any extraordinary or exceptional item as
the same are defined in the appropriate SSAP; and
D1.4 Show a true and fair view of the state of affairs of the
Company as at the Accounts Date and of the profit or loss of
the Company for the accounting period ended on that date.
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<PAGE> 40
D2 PROVISIONS IN THE ACCOUNTS
The Accounts:
D2.1 In the reasonable opinion of the Vendor adequately provide for
all liabilities (other than contingent liabilities which are
not expected to crystallise) and fully disclose all contingent
liabilities which are not expected to crystallise and all
capital commitments of the Company in each case as at the
Accounts Date;
D2.2 In the reasonable opinion of the Vendor adequately provide for
all bad and doubtful debts as at the Accounts Date;
D2.3 Attribute a value to stock which does not exceed the lower of
direct cost and net realisable value as at the Accounts Date
after wholly writing off all redundant, obsolete, old,
unusable, unsaleable, slow- moving, deteriorated and excessive
stock;
D2.4 Apply a rate of depreciation in respect of each fixed asset
which has been consistently applied over the period of three
years ended on the Accounts Date and, if consistently applied
hereafter, is adequate to write down the value of each fixed
asset to its net realisable value at a time not later than the
expiry of its useful working life;
D2.5 Value work-in-progress in accordance with SSAP 9; and
D2.6 Are not affected (except as disclosed in the Accounts) by any
extraordinary or exceptional event, circumstance or item.
D3 RESERVES
None of the reserves appearing in the Accounts is an undistributable
reserve.
D4 LAYING AND DELIVERY OF THE ACCOUNTS
True and complete copies of the Accounts for each accounting period
preceding that which ended on the Accounts Date have been laid before
the Company in general meeting and delivered to the Registrar of
Companies in compliance with the provisions of sections 241 and 242 of
the Act.
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<PAGE> 41
D5 EVENTS SINCE THE ACCOUNTS DATE
Since the Accounts Date:
D5.1 The Company has carried on its business in the ordinary and
usual course and without any interruption or alteration in the
nature, scope or manner thereof;
D5.2 The Company has not entered into any transaction, assumed any
liability or made any payment which was not in the ordinary
course of its business except for any such provided for and
noted in the Accounts;
D5.3 The Company has not borrowed any money other than from its
bankers within the terms of its bank overdraft facilities;
D5.4 The Company has paid its creditors within the times agreed
with such creditors;
D5.5 The Company has not entered into, or agreed to enter into, any
capital commitment;
D5.6 The Company has not repaid or become liable to repay any loan
or indebtedness in advance of its stated maturity by reason of
its default;
D5.7 The Company has not received notice (whether formal or
informal) from any lender of money to the Company requiring
repayment or intimating the enforcement by it of any security
which it may hold over any assets of the Company, and there
are no circumstances known to the Vendor likely to give rise
to such notice;
D5.8 Save for any provisions made in the Accounts no part of the
amounts included in the Accounts, or subsequently recorded in
the books of the Company as owing by any debtors, has been
outstanding for more than 120 days or has been released on
terms that any debtor pays less than the full book value of
his or its debt or has been written off or has proved to any
extent to be irrecoverable or is now regarded by the Company
as, or as likely to become, irrecoverable in whole or in part
and none of such debts is subject to any counterclaim or
set-off;
D5.9 No loan made by the Company which remains outstanding has
become due and repayable in whole or in part to the Company
(whether or not prior to its stated maturity date);
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<PAGE> 42
D5.10 The Company has not factored or discounted any of its debts or
agreed to do so;
D5.11 The Company has not acquired, or agreed to acquire, any
tangible asset, Intellectual Property (as defined in paragraph
F5) or investment (other than stock in the normal course of
business);
D5.12 The Company has not disposed of, or agreed to dispose of any
tangible asset, Intellectual Property (as defined in paragraph
F5) or investment (other than stock in the normal course of
business);
D5.13 There has been no abnormal stocking-up or de-stocking of
stock;
D5.14 None of the stock reflected in the Accounts has realised an
amount less than the value placed on it reflected in the
Accounts; and
D5.15 No distribution of capital or income has been declared, made
or paid in respect of any share capital of the Company.
D6 GRANTS
The Company has not made any application for any financial assistance
from any supranational, national or local authority or governmental
agency which is still pending, or consequent upon which any such
assistance is still to be received, and has not received any such
assistance in respect of which the period during which any relevant
conditions have to be complied with or it may otherwise be withdrawn
has not expired.
D7 DEBTS
D7.1 There are no debts owing by or to the Company other than debts
which have arisen in the ordinary course of its business, nor
has the Company lent any money which has not been repaid;
D7.2 The Company has not factored or discounted any debt or agreed
to do so; and
D7.3 So far as the Vendor is aware (but without having made any
specific enquiry of the relevant debtor), all debts in the
Accounts and the Management Accounts (save as may be provided
for therein) shown as owing to the Company will realise their
full value in the normal course of collection.
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D8 OPTIONS
The Company is not a party to any option or pre-emption right.
D9 MANAGEMENT ACCOUNTS
The Management Accounts have been prepared in good faith and with due
diligence in accordance with the accounting policies adopted in the
preparation of the Accounts and on bases and principles consistent
with those used in the preparation of the management accounts of the
Company during the accounting period ended on the Accounts Date and
are not misleading to a material extent.
E THE COMPANY AND ITS FINANCIERS
E1 BORROWINGS
The total amount borrowed by the Company from its financiers does not
exceed its facilities, and the total amount borrowed by the Company
from whatsoever source does not exceed any limitation on borrowing
contained in its articles of association or in any debenture or loan
stock deed or other instrument.
E2 SURETIES
No person other than the Vendor has given any guarantee of or security
for any overdraft, loan or loan facility granted to or obligations
undertaken by the Company.
E3 GUARANTEES
The Company is not a party to any guarantee or suretyship or any other
obligation (whatever called) to provide funds (whether by the advance
of money, the purchase of or subscription for shares or other
securities, the purchase of assets or services or otherwise) for the
payment of, indemnity against the consequence of default in the
payment of, or otherwise to be responsible for, any indebtedness or
obligation of any other person.
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F THE ASSETS OF THE COMPANY
F1 ASSETS AND CHARGES
F1.1 The Company owns all assets included in the Accounts and all
assets acquired by the Company since the Accounts Date except
for current assets subsequently disposed of by the Company in
the ordinary course of its business, the Property and assets
which are the subject of hire-purchase, lease or contract hire
agreements or the subject of retention of title terms, liens,
or other similar third party rights contained in standard
terms of trading imposed by suppliers in the ordinary course
of their business.
F1.2 The Company has possession of all assets included in the
Accounts and of all assets acquired by it since the Accounts
Date.
F1.3 Except in respect of goods, if any, appropriated to and in
accordance with the terms of any contracts made in the
ordinary course of business between the Company and its
customers, none of such assets, nor any of the undertaking,
goodwill or uncalled capital of the Company is subject to any
Encumbrance or any agreement or commitment to give or create
any Encumbrance.
F1.4 Each asset reflected in the Accounts (save for current assets
disposed of in the ordinary course):-
F1.4.1 is in the useful and beneficial ownership of the
Company free from any third party right and any
contract to grant the same; and
F1.4.2 is situated at the Property.
F2 Deleted purposely
F3 ASSETS SUFFICIENT FOR THE BUSINESS
F3.1 The assets owned by the Company, together with assets held
under hire-purchase, leasing and rental agreements, comprise,
in the opinion of the Vendor, all assets necessary for the
continuation of its business as now carried on.
F3.2 No asset is shared by the Company with any Member of the
Vendor's Group at the date of this document, and the Company
does not depend for its business upon or make use of any
assets,
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<PAGE> 45
facilities or services owned or supplied by any Member of the
Vendor's Group at the date of this document.
F4 Deleted purposely
F5 INTELLECTUAL PROPERTY
In this document:
"Intellectual Property" means patents, trademarks,
service marks, registered
designs, copyright, applications
for any of the foregoing, trade
or business names, know-how,
confidential information, design
right, inventions, methods of
manufacture, specifications, or
formulae and all other
intellectual property rights of
whatever nature and any
applications for the same;
"Intellectual Property Agreements" means agreements or arrangements
relating (wholly or partly) to
Intellectual Property or to the
disclosure, use, assignment or
patenting of any invention,
discovery, improvement, process,
formulae or other know-how;
"Listed Intellectual Property" means the Intellectual Property
listed in the Disclosure Letter;
and
"Listed Intellectual Property means the Intellectual Property
Agreements" Agreements copies of which are
attached to the Disclosure
Letter.
F5.1 The Company:
F5.1.1 Has no interest in any registered Intellectual
Property save for the Listed Intellectual Property
and is the sole and beneficial owner of the Listed
Intellectual Property (which is valid and in full
force and effect);
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F5.1.2 Is (where it is capable of registration) the
registered proprietor of the Listed Intellectual
Property;
F5.1.3 Does not own or use, whether within the processes
employed and the products and services dealt with by
it or otherwise, any Intellectual Property other than
the Listed Intellectual Property or Intellectual
Property licensed or assigned to it in the Listed
Intellectual Property Agreements and other than
copyrights, design rights, technical know-how and
confidential information;
F5.1.4 Except as may appear from the Listed Intellectual
Property Agreements, has not authorised any person to
make any use of or to do anything which would or
might otherwise infringe any Intellectual Property
owned or used by the Company; nor has any right,
licence, permission or assignment dealing with any
interest in any Intellectual Property held by the
Company been granted in favour of any third party;
and
F5.1.5 Has not disclosed (except in the ordinary course of
its business or as set out in the Listed Intellectual
Property Agreements) any of its know-how, trade
secrets or customer details to any other person.
F5.2 Except as provided in the Listed Intellectual Property
Agreements, the Company owns the copyright or design right
(whether registered or unregistered) in the designs of all its
products and is the proprietor of any registrations or
applications to register any such designs.
F5.3 The Company is not aware and has not received any notification
and the Vendor is not aware:
5.3.1 that in carrying on its business the Company does any
action which or
5.3.2 that the Company's processes or products:-
(a) Infringe any Intellectual Property of any
other person; or
(b) Involve the unlicensed use of confidential
information or know-how disclosed to the
Company by any person in circumstances
entitling that person to make a claim against
the Company.
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F5.4 The Listed Intellectual Property Agreements are all the
Intellectual Property Agreements to which the Company is a
party, all of them are valid and binding on the parties
thereto, and the Company has not been notified of any breach
of the provisions of them. Nothing has been done or omitted
by the Company which would enable a licence of Intellectual
Property granted by or to the Company to be terminated or
which in any way constitutes a breach of the terms of any such
licence.
F5.5 The Company is not passing off any part of its business as and
for the business of any other person and so far as the Vendor
is aware, no person is passing off its business as and for
part of the Company's business.
F5.6 In respect of any Intellectual Property owned or used by the
Company or licensed for use by the Company:
F5.6.1 all applicable registration and renewal fees have
been fully paid by the due date; and
F5.6.2 nothing has been done or omitted to be done by the
Company and so far as the Vendor is aware nothing has
been done by any third party or omitted to be done
whereby any of such Intellectual Property might cease
to be valid and subsisting.
F5.7 None of the Intellectual Property owned or used by the Company
is being claimed, opposed or attacked by any third party.
F5.8 The Vendor is not aware that any third party is infringing any
of the Company's Intellectual Property.
F5.9 The Company does not trade under any name, style or make other
than its company name.
F5.10 No litigation or arbitration proceedings are pending or
threatened by or against the Company in respect of breach of
Intellectual Property rights.
F6 PLANT
The plant and machinery, including without limitation fixed plant and
machinery, and all vehicles and office and other equipment used in
connection with the business of the Company:
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<PAGE> 48
F6.1 Is in good repair and condition (subject to fair wear and
tear) and in satisfactory working order;
F6.2 Is capable, over the period of time during which it is to be
written down to a nil value in the accounts of the Company, of
doing the work for which it was designed or purchased; and
F6.3 Is in the possession and control of, and is the absolute
property free from any Encumbrance of, the Company.
F7 PROPERTY
For the purposes of this paragraph F7 the following words and
expressions shall have the following meanings:
"Hazardous Substances" all substances materials or matters
which are:
(a) regulated as poisonous,
noxious, offensive or
polluting or hazardous
materials or substances
hazardous to health, dangerous
substances or hazardous wastes
(including, without
limitation, noise and smoke
emissions) or trade or sewage
effluent under any national,
regional, provincial,
municipal, or local law in
each place in which the
Company or the business of the
Company is located; or
(b) within the scope of the EC
Directive on Hazardous
Substances (67/548/EC);
F7.1 The Company is the beneficial owner of the Property and the
Property comprises all the properties owned or occupied (at
any time) by the Company or in which the Company has any right
or interest. The information set out in schedule 2 is true
and complete and accurate at the date hereof. The Company has
in its possession or under its control all duly stamped deeds
and documents which are necessary to prove title to the
Property.
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<PAGE> 49
F7.2 The Property is free from any mortgage, charge, rent-charge,
lien, encumbrance or other third party right in the nature of
security.
F7.3 The Company has sole and exclusive possession or occupation of
the Property and there are no circumstances known to the
Vendor following reasonable and proper enquiry of all relevant
persons which would entitle or require any landlord or any
other person to exercise any powers of entry or right to
forfeiture or right to take possession or which would
otherwise restrict or terminate the continued sole and
exclusive possession or occupation of the Property by the
Company.
F7.4 The Property is not subject to the payment of any outgoings
other than general or water rates and the sums reserved by the
leases under which the Property is held.
F7.5 The Company has paid all rent or licence fees and all other
outgoings which have become due in respect of the Property.
So far as the Vendor is aware following reasonable and proper
enquiry of all relevant persons the Company has performed and
observed in all material respects all its obligations under
all covenants, conditions, agreements, statutory requirements,
planning consents, byelaws, orders and regulations affecting
the Property, its use and any business or the Company there
carried on. No notice of any breach of any such matter has
been received. So far as the Vendor is aware following
reasonable and proper enquiry of all relevant persons no use
of the Property contravenes any of such covenants, conditions,
agreements, statutory requirements, planning consents,
byelaws, orders or regulations.
F7.6 The Company and the Vendor have not received notice of nor is
the Vendor or the Company aware of any dispute relating to the
Property.
F7.7 In relation to the Property so far as the Vendor and the
Company are aware there is no claim or dispute pending or
expected either by or with the Company and there are no
disputes outstanding as to the settlement of the relevant
level of rent reserved by any lease which is subject to
review.
F7.8 No claim has been made against the Company in respect of any
leasehold property formerly held but it or in respect of which
it acted as a guarantor nor is any such claim anticipated.
F7.9 All Hazardous Substances which have been used, stored,
treated, manufactured, generated, disposed of, emitted or
otherwise handled by the Company and/or at the Property (as
the case may be) have been managed, and all steps have been
taken, in compliance with all laws and other requirements
having the force of law concerning health, safety and
environmental matters
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<PAGE> 50
which are applicable to the business of the Company and/or the
Existing Use, and no statutory nuisance (as defined by the
Public Health Acts) exists in respect of the Property or the
business of the Company.
F7.10 Neither the Company nor the Vendor has received any written
notice or any other written information from any governmental
authority or third party in relation to the business of the
Company indicating that the Company is or may be responsible
for all or some portion of the costs of investigating,
treating, containing or removing or otherwise responding to
any Hazardous Substances which have come to be present upon
the Property or any other site.
F7.11 There are no outstanding notices, complaints or claims against
the Company on the part of government authorities, employees
or other parties in respect of the handling or use of
Hazardous Substances, and no such notices, complaints or
claims are contemplated or threatened or foreseen, and there
are no facts or matters which might give rise to the same.
F7.12 In respect of any lease, tenancy or other right of occupation
in respect of the Property ("the Leases") all licences,
consents and approvals required from the Landlord and any
Superior Landlord under the leases have been obtained and the
covenants on the part of the Tenant contained in the licences,
consents and approvals have been duly performed and observed.
F7.13 The Certificate of Title is true, complete and accurate in all
respects and there are no obligations, disputes, notices,
covenants, easements or any other matters whatsoever which
adversely affect the Property.
F7.14 The Company occupies Unit 8 Durban Road South Bersted
Industrial Estate Bognor Regis Sussex under a tenancy at will
which expires on 31 October 1996. The rent payable is L.2,150
per calendar month plus VAT. Neither the Vendor nor the
Company is aware of any outstanding liability for this Unit if
the premises are vacted on 1 November 1996.
G THE CONTRACTS OF THE COMPANY
G1 DOCUMENTS
All title deeds and agreements to which the Company is a party and
other documents owned by or which ought to be in the possession of the
Company are in the possession of the Company and are free from
Encumbrance.
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<PAGE> 51
G2 MATERIAL CONTRACTS
The Company is not a party to or subject to any agreement,
transaction, obligation, commitment, understanding, arrangement or
liability which:
G2.1 Is incapable of complete performance in accordance with its
terms within six months after the date on which it was entered
into or undertaken;
G2.2 Is known by the Vendor or by the Company to be likely to
result in a loss to the Company on completion or performance;
G2.3 Cannot readily be fulfilled or performed by the Company on
time without undue or unusual expenditure of money and effort;
G2.4 Involves or is likely to involve obligations, restrictions,
expenditure or receipts of an unusual, onerous or exceptional
nature and not in the ordinary course of the business of the
Company;
G2.5 Is a lease or a contract for hire or rent, hire-purchase or
purchase by way of credit sale or periodical payment;
G2.6 Is with any trade union or body or organisation representing
its employees;
G2.7 Involves or is likely to involve the supply of goods by or to
the Company the aggregate sales value of which will represent
in excess of 20% of the turnover for the last accounting
period of the Company;
G2.8 Is a contract for services (other than contracts for the
supply of electricity or normal office services);
G2.9 Requires the Company (whether or not it has yet done so) to
pay any commission, finder's fee, royalty or the like;
G2.10 In any way restricts the freedom of the Company to carry on
the whole or any part of their business in any part of the
world in such manner as it may think fit;
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<PAGE> 52
G2.11 Is in any way otherwise than in the ordinary and proper course
of the business of the Company or on an arm's length basis; or
G2.12 Involves the Company in any actual or contingent liability in
respect of any land or premises previously occupied by the
Company or in which it had any interest including but not
limited to any liability in respect of any leasehold property
at any time assigned or otherwise disposed of by it.
G2.13 The Company is not contractually obliged to undertake a major
stock cleanse for B & Q which will cost the Company more than
L.20,000 in stock at cost.
G3 DEFAULTS
Neither the Company nor any other party to any agreement with the
Company is in default thereunder, being a default which would be
material in the context of the financial or trading position of the
Company nor (so far as the Vendor is aware) are there any
circumstances likely to give rise to any such default.
G4 CUSTOMERS/SUPPLIERS
G4.1 No customer or supplier of the Company whose purchases from or
sales to the Company represented, in the accounting period
ended on the Accounts Date, 20% or more of the Company's
purchases or sales in that period has since the Accounts Date
ceased to do business with the Company or has since such date
substantially reduced its purchases from or supplies to the
Company.
G4.2 Since the Accounts Date, no indication has been received by
the Company of any material change in the business or terms
upon which any customer or supplier is prepared to contract or
do business with the Company, and no notice has been received
by the Company that any supplier of the Company is likely to
increase the prices at which it supplies or otherwise change
the basis or terms upon which it is prepared to supply the
Company.
G4.3 The Vendor is not aware (but without having made any enquiry
of any such person) of any reason to indicate that any of the
existing customers of or suppliers to the Company are likely
materially to reduce the volume of their purchases from or
supplies to the Company in the future by comparison with the
value of their purchases from or supplies to the Company
during the period of twelve months prior to the date of this
document.
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<PAGE> 53
H THE COMPANY AND ITS EMPLOYEES
H1 DIRECTORS
The particulars of the Company's directors shown in schedule 1 are
true and accurate, and no other person is a director or a shadow
director of the Company.
H2 PARTICULARS OF EMPLOYEES
H2.1 The schedule of employees attached to the Disclosure Letter
lists all employees of the Company and shows their job title,
salary, notice period and basis hour and all remuneration and
other benefits which the Company is bound to pay or provide
(whether now or in the future) to or for the benefit of each
officer, ex-officer, employee or ex-employee of the Company.
H2.2 No officer or employee of the Company has given or received
notice terminating his employment except as expressly
contemplated under this document.
H2.3 No payment by way of commission or bonus has been made since
the Accounts Date to or for the benefit of any officer,
ex-officer, employee or ex-employee of the Company or any
other person connected or associated with any such person, nor
has the Company agreed to make any such payment.
H2.4 A copy of the Company's standard form of employment contract
is attached to the Disclosure Letter.
H2.5 There are no amounts owing to any present or former employee
of the Company other than remuneration accrued (but not yet
due for payment) and no employee is entitled to accrued
holiday pay.
H2.6 No employee in a managerial or supervisory role has been
engaged or ceased to be employed by the Company since the
Accounts Date.
H2.7 There is no person previously employed by the Company who now
has or may have a right to return to work or be reinstated or
re-engaged by the Company under the ERA.
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<PAGE> 54
H3 SERVICE CONTRACTS
There is not outstanding any contract of service between the Company
on the one hand and any of its officers or employees on the other hand
which is not terminable by the Company without compensation (other
than any compensation payable by statute) on three months' notice or
less given at any time.
H4 DISPUTES WITH EMPLOYEES
H4.1 There is no outstanding claim, and the Vendor is not aware of
any circumstances which could give rise to a claim, against
the Company either by any person who is now or has been an
officer or employee of the Company or by or on behalf of a
material number or any class of its employees or ex-employees
or any persons claiming through them, and no payments are due
by the Company under the provisions of the ERA.
H4.2 The Company is not, and has not during the 12 months prior to
the date of this Agreement, been involved in any strike,
lockout, industrial or trade dispute or any negotiations with
any trade union or body of employees.
H4.3 The Company has not recognised or done any act which might be
construed as recognition of a trade union and the Company is
not a party to any collective agreement with any trade union
or organisation of workers.
H4.4 The Company has in relation to all present and former
employees complied in all material respects with all statutes,
regulations, orders and codes of conduct in relation to
employment and relations with employees and trade unions and
has maintained adequate and suitable records regarding the
service of each employee.
I MATERIAL DISCLOSURE
I1 DISCLOSURE LETTER
All information contained in or referred to in the Disclosure letter
is, and all copies of documents attached thereto are, true and
accurate.
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<PAGE> 55
I2 COMMISSION
No person is entitled whether, actually or contingently, to receive
from the Company any finder's fee, brokerage, or other commission in
connection with the acquisition or disposal of shares in the Company.
I3 CONSEQUENCE OF SHARE ACQUISITION BY THE PURCHASER
Neither the acquisition of the Shares by the Purchaser nor compliance
with the terms of this document will by virtue of the terms of any
agreement or arrangement to which the Company is a party:
I3.1 Cause the Company to lose the benefit of any right or
privilege it presently enjoys or, so far as the Vendor is
aware, cause any person who normally does business with the
Company not to continue to do so on the same basis as
previously;
I3.2 Relieve any person of any obligation to the Company (whether
contractual or otherwise) or enable any person to determine
any such obligation or any right or benefit enjoyed by the
Company or to exercise any right whether under an agreement
with or otherwise in respect of the Company;
I3.3 Result in any present or future indebtedness of the Company
becoming due or capable of being declared due and payable
prior to its stated maturity; and
I3.4 Give rise to or cause to become exercisable any rights of
pre-emption;
And, to the best of the knowledge and belief of the Vendor (but
without having made any enquiry of any customer or supplier of the
Company), the Company's relationships with customers, suppliers and
employees are not liable to be adversely affected thereby.
J THE COMPANY AND THE REVENUE AUTHORITIES
J1 TAX PROVISIONS AS AT THE ACCOUNTS DATE
All liability of the Company for all Taxation for which it is liable
to be assessed or for which it is accountable in respect of:
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<PAGE> 56
J1.1 Profits, gains, income or earnings (in each case either actual
or deemed) earned, accrued or received (or deemed to have been
earned, accrued or received) on or before the Accounts Date;
and
J1.2 Any event on or before the Accounts Date (including without
limitation distributions declared, made or paid down to that
date or noted or anticipated in the Accounts);
Has been fully provided for in the Accounts, and proper provision has
been made in the Accounts for deferred taxation in accordance with
generally accepted accounting principles.
J2 SINCE THE ACCOUNTS DATE
Since the Accounts Date:
J2.1 The Company has not earned, accrued or received any profits,
gains, income or earnings save in the normal course of its
business;
J2.2 No event has occurred which has given rise or will or may give
rise to a liability to Taxation on the Company in respect of
deemed (as opposed to actual) income, profits or gains or
which has resulted or will result in the Company becoming
liable to Taxation directly or primarily chargeable against or
attributable to another person;
J2.3 The Company has not incurred and has not become liable to
incur expenditure which will not be wholly deductible or
allowable as a charge on income in computing its taxable
profits except for:
J2.3.1 Expenditure on the acquisition of an asset to be held
otherwise than as stock; and
J2.3.2 Expenditure for reasonable entertainment;
details of which are in each case set out in the Disclosure
Letter;
J3 RETURNS
The Company has properly computed and punctually made all returns and
provided all information required for Taxation purposes, and none of
such returns is disputed by any relevant Taxation authority, and the
Vendor is not aware that any dispute is likely or that any event has
occurred which would or might give rise to a payment under paragraph
2.1 of schedule 3.
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<PAGE> 57
J4 PAYMENT
The Company has duly and punctually paid all Taxation which it has
become liable to pay and is under no liability to pay any penalty,
fine or interest in connection with any claim for Taxation and there
are no circumstances known to the Vendor which are likely to cause the
Company to become liable to pay any such penalty, fine or interest.
J5 TAXATION RELIEFS
J5.1 No relief (whether by way of deduction, reduction, set-off,
exemption, repayment, allowance or otherwise) from, against or
in respect of any Taxation has been claimed by or given to the
Company, or taken into account in determining the provision
for Taxation in the Accounts, which is liable to be
effectively withdrawn, postponed, restricted or otherwise lost
as a result of any act, omission, event or circumstance
arising or occurring at any time after Completion.
J5.2 There are set out in the Disclosure Letter, with express
reference to this sub-paragraph J5.2, full details of all
matters relating to Taxation in respect of which the Company
(either alone or jointly with any other person) has any
outstanding entitlement:
J5.2.1 To make any claim (including without limitation a
supplementary claim) for relief under any Taxation
statute;
J5.2.2 To make any election for one type of relief, or one
basis, system or method of Taxation, as opposed to
another;
J5.2.3 To make any appeal (including without limitation a
further appeal) against an assessment to Taxation; or
J5.2.4 To make any application for the postponement of
Taxation.
J6 CLOSE COMPANIES
The Company is not, and during the six years preceding the Accounts
Date, has not been, a close company as defined in section 414 ICTA.
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<PAGE> 58
J7 GROUPS
J7.1 GROUP INCOME
The Disclosure Letter contains particulars of all elections
made by the Company under section 247 ICTA, and all such
elections are now in force, and the Company has not paid any
dividend without paying advance corporation tax or made any
payment without deduction of income tax in the circumstances
specified in sub-section (4) of that section.
J7.2 GROUP RELIEF
The Disclosure Letter contains particulars of all arrangements
and agreements relating to group relief (as defined by
sections 402 and 412 ICTA) to which the Company is or has been
a party, within the six year period preceding completion and:
J7.2.1 All claims by the Company for group relief were when
made and are now valid and have been or will be
allowed by way of relief from corporation tax;
J7.2.2 The Company has not made and is not liable to make
any payment under any such arrangement or agreement
save in consideration for the surrender of group
relief allowable to the Company by way of relief from
corporation tax and equivalent to the Taxation for
which the Company would have been liable had it not
been for the surrender; and
J7.2.3 The Company has received all payments due to it under
any such arrangement or agreement for surrender of
group relief made by it.
J7.3 SURRENDER OF ADVANCE CORPORATION TAX
The Disclosure Letter contains particulars of all arrangements
and agreements to which the Company is or has been a party
relating to the surrender of advance corporation tax made or
received by the Company under section 240 ICTA, and:
J7.3.1 The Company has not paid and is not liable to pay:
J7.3.1.1 Any amount in excess of the advance
corporation tax surrendered to it; or
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<PAGE> 59
J7.3.1.2 For the benefit of any advance
corporation tax which is or may become
incapable of set-off against the Company's
liability to corporation tax; and
J7.3.2 The Company has received all payments due to it under
any such arrangement or agreement for all surrenders
of advance corporation tax made by it.
J7.4 INTRA-GROUP TRANSFERS
The Company has not acquired any asset (past or present) from
any other company then belonging to the same group of
companies as the Company within the meaning of section 170
TCGA or from an associated company as defined in section
774(4) ICTA.
J7.5 TRANSACTIONS BETWEEN A DEALING COMPANY AND AN ASSOCIATED
COMPANY
The Company has not at any time entered into or been otherwise
involved in any transaction to which section 774 ICTA applies.
J7.6 EXEMPT DISTRIBUTIONS
The Company has not at any time engaged in or been a party to,
or concerned in, any transaction to which sections 213 to 218
(inclusive) ICTA apply.
J7.7 COMPANY RECONSTRUCTIONS WITHOUT A CHANGE OF OWNERSHIP
The Company has not at any time been a party to any such
arrangement as is described in section 343 ICTA.
J7.8 TRANSFERS WITHIN A GROUP: TRADING STOCK
The Company has not at any time:
J7.8.1 Acquired from or disposed of to a member of the same
group of companies (as defined in section 170 TCGA)
any asset which has been or could be deemed to be an
appropriation from trading stock within the meaning
of section 173 TCGA; or
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<PAGE> 60
J7.8.2 Acquired or disposed of any shares in any company
which was at any time after the acquisition or prior
to the disposal a member of the same group of
companies as defined in section 170 TCGA.
J7.9 TAXATION ON ONE MEMBER OF A GROUP RECOVERABLE FROM ANOTHER
MEMBER
The Company has not at any time been and is not liable to be
assessed or charged to corporation tax by virtue of the
provisions of section 190 TCGA and is not entitled to recover
or liable to have recovered from it any sum paid pursuant to
that section under the provisions of sub-section (3) of that
section.
J7.10 COMPANY CEASING TO BE A MEMBER OF A GROUP
The Company has not at any time ceased to be a member of a
group of companies (as defined in section 170 TCGA) in such
circumstances that a profit or gain was deemed to accrue to
the Company by virtue of section 178 TCGA or at a time when it
held an interest in land which could have been chargeable to
Taxation under section 21 of the Development Land Tax Act
1976, and neither the execution of this document nor
Completion will result in any profit or gain being deemed to
accrue to the Company for any Taxation purpose.
J8 CAPITAL GAINS
J8.1 BASE VALUES
If each of the capital assets of the Company were disposed of
for a consideration equal to its book value in or adopted for
the purpose of the Accounts, no liability to corporation tax
on chargeable gains and no balancing charge under the Capital
Allowances Act 1990 or the Finance Act 1971 or ICTA would
arise (and for this purpose there shall be disregarded all
reliefs and allowances available to the Company other than
amounts falling to be deducted from the consideration
receivable under section 38 TCGA).
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<PAGE> 61
J8.2 ROLL-OVER RELIEF
The Company has made no claim under sections 152 to 156 TCGA
(inclusive) or section 158 TCGA, and no such claim has been
made by any other company which affects or is liable to affect
the amount or value of the consideration for the acquisition
of any asset by the Company taken into account in calculating
any liability to corporation tax on chargeable gains on a
subsequent disposal.
J8.3 DEPRECIATORY TRANSACTIONS
No loss which might accrue on the disposal by the Company of
any share in or security of any company is liable to be
reduced by virtue of any depreciatory transaction within the
meaning of sections 176 and 177 TCGA, nor is any expenditure
on any share or security liable to be reduced under section
125 TCGA.
J8.4 STRAIGHTLINE GROWTH
No asset owned by the Company is subject to a deemed disposal
and reacquisition under any of paragraphs 16, 19 and 21
schedule 2 TCGA.
J8.5 CHARGEABLE DEBTS
No gain chargeable to corporation tax is liable to accrue to
the Company on the disposal of any debt owing to the Company
not being a debt on a security.
J8.6 CHARGEABLE POLICIES
The Company has not acquired benefits under any policy of
assurance otherwise than as original beneficial owner.
J8.7 CLAIMS AND ELECTIONS BY THE COMPANY
The Company has made no claim under section:
J8.7.1 279 TCGA (assets situated outside the United
Kingdom);
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<PAGE> 62
J8.7.2 24(2) TCGA (assets of negligible value);
J8.7.3 280 TCGA (tax on chargeable gains payable by
instalments);
J8.7.4 242 ICTA (surplus franked investment income); and
J8.7.5 584 ICTA (unremittable income arising outside the
United Kingdom);
and has made no election under section 35 TCGA.
J8.8 TRANSACTIONS NOT AT ARM'S LENGTH
The Company has not disposed of or acquired any asset in
circumstances such that the provisions of section 17 TCGA
could apply to such disposal or acquisition.
J8.9 GAINS ACCRUING TO NON-RESIDENT COMPANIES OR TRUSTS
There has not accrued any gain in respect of which the Company
may be liable to corporation tax on chargeable gains by virtue
of section 13 TCGA or of section 87 TCGA.
J9 MISCELLANEOUS
J9.1 PAYE
The Company has properly operated the PAYE system, deducting
tax as required by law from all payments to or treated as made
to employees and ex-employees of the Company, and accounted to
the Inland Revenue for all tax so deducted and all tax
chargeable on benefits provided for employees and ex-employees
of the Company.
J9.2 PAYMENTS UNDER DEDUCTION
All payments by the Company to any person which ought to have
been made under deduction of tax have been so made, and the
Company has (if required by law to do so) accounted to the
Inland Revenue for the tax so deducted.
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J9.3 SECTIONS 765 TO 767 ICTA (MIGRATION OF COMPANIES)
The Company has not without the prior consent of the Treasury
been a party to any of the transactions specified in sections
765 to 767 (inclusive) ICTA.
J9.4 STAMP DUTY
The Company has not obtained relief from stamp duty under
section 55 of the Finance Act 1927 (reconstructions and
amalgamations), section 42 of the Finance Act 1930
(intra-group transfers), section 78 or section 79 of the
Finance Act 1985 (takeovers and voluntary winding up) or any
of sections 75, 76 and 77 of the Finance Act 1986
(acquisitions).
J9.5 FIRST BUSINESS LOANS
The Company has not expended or applied any sum liable to be
regarded as income available for distribution pursuant to
paragraphs 8 and 9 schedule 19 ICTA and is not bound
(contingently or otherwise) to expend or apply any such sum.
J9.6 Purposely deleted.
J9.7 LOANS TO PARTICIPATORS
The Company has not made (and is not liable to be deemed to
have made) any loan or advance to a participator or an
associate of a participator so as to become liable to make any
payment under section 419 or section 420 ICTA.
J9.8 DISTRIBUTIONS AND PAYMENTS
J9.8.1 No distribution (within the meaning of sections 209
to 211 (inclusive) ICTA) has been made by the Company
since 5th April 1965 except dividends shown in its
audited accounts, nor is the Company bound to make
any such distribution; in particular but without
limitation no distribution has been declared or made
by the Company since the Accounts Date, and no
distribution declared prior to the Accounts Date
remains unpaid save for any distribution provided for
in the Accounts.
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J9.8.2 No securities (within the meaning of section 254(1)
ICTA) issued by the Company and remaining in issue at
the date hereof were issued in such circumstances
that the interest payable thereon falls to be treated
as a distribution under section 209(2)(e) ICTA.
J9.8.3 No rents, interest, annual payments or other sums of
an income nature paid or payable by the Company or
which the Company is under an obligation to pay in
the future are wholly or partially disallowable as
deductions or charges in computing profits for the
purposes of corporation tax by reason of the
provisions of any of sections 74, 125, 338, 339, 779,
784 and 787 ICTA.
J9.8.4 The Company has not made or received any distribution
which is an exempt distribution within sections 213
to 218 (inclusive) ICTA.
J9.8.5 The Company has not received any capital distribution
to which the provisions of section 189 TCGA could
apply.
J9.9 PURCHASE OF OWN SHARES
The Company has not purchased any of its own shares in
circumstances to which section 219 ICTA applies.
J9.10 BENEFITS FOR EMPLOYEES
J9.10.1 The Company has not made any payment to or provided
any benefit for any officer or employee or ex-officer
or ex-employee of the Company which is not allowable
as a deduction in calculating the profits of the
Company for Taxation purposes.
J9.10.2 The Company has not issued any shares in the
circumstances described in section 138(1) and (2)
ICTA and has complied with section 139(5) ICTA.
J9.11 QUOTED EUROBONDS
The Company has not at any time issued any quoted Eurobond as
defined in section 124(6) ICTA.
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<PAGE> 65
J9.12 DEEP DISCOUNT SECURITIES
The Company has not at any time held, owned or issued any
deep-discount security as defined in paragraph 1(1) schedule 4
ICTA.
J9.13 BOND WASHING
The Company has not since 28th February 1985 transferred any
securities with accrued interest as defined in section 711
ICTA.
J9.14 CONTROLLED FOREIGN COMPANIES
J9.14.1 No direction has been made by the Inland Revenue
under section 747 ICTA in respect of any controlled
foreign company under the control of the Company.
J9.14.2 Section 748 ICTA applies to all controlled foreign
companies controlled by the Company.
J9.15 OFFSHORE FUNDS
The Company does not own and has not at any time owned a
material interest in an offshore fund which is or has at any
material time been a non-qualifying offshore fund as defined
in section 760 ICTA.
J9.16 ANTI-AVOIDANCE
J9.16.1 The Company has not at any time entered into any
transaction or series of transactions containing or
consisting of steps inserted without any commercial
or business purpose apart from the obtaining of a tax
advantage.
J9.16.2 The Company has not at any time engaged in or been
party to any scheme or arrangement the purpose or
main purpose, or one of the main purposes, of which
was the avoidance of or a reduction in any liability
to Taxation.
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J9.17 NATIONAL INSURANCE
The Company has paid all national insurance and graduated
pension contributions for which it is liable and has kept
proper books and records relating to the same.
J9.18 VALUE ADDED TAX
J9.18.1 The Company has complied with all statutory
provisions and regulations relating to VAT and has
duly paid or provided for all amounts of VAT for
which it is liable.
J9.18.2 All supplies made by the Company are taxable
supplies.
J9.18.3 All input tax for which the Company has claimed
credit has been paid by the Company in respect of
supplies made to it relating to goods or services
used or to be used for the purpose of the Company's
business.
J9.18.4 The Company is not and has not been for VAT purposes
a member of any group of companies and no act or
transaction has been effected in consequence whereof
the Company is or may be held liable for any VAT
chargeable against some other company.
J9.18.5 No supplies have been made to the Company to which
the provisions of section 8 of the Value Added Tax
1994 might apply.
J9.18.6 The Company is not under a duty to pay, on account of
any tax it may become liable to pay in respect of a
prescribed accounting period, payments on account of
VAT pursuant to regulations 44 to 48 (inclusive) of
the Value Added Tax Regulations 1995.
J9.18.7 The Company has no interest in any asset to which
part XV of the Value Added Tax Regulations 1995
applies.
J9.18.8 The Company has not been served with a surcharge
liability notice pursuant to section 59 of the Value
Added Tax Act 1994 which currently remains in force.
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J9.19 GIFTS
J9.19.1 The Company is not liable to be assessed to
corporation tax on chargeable gains or to capital
transfer tax as donor or donee of any gift or as
transferor or transferee of value.
J9.19.2 The Company has not been a party to associated
operations in relation to a transfer of value within
the meaning of section 268 of the Inheritance Tax Act
1984.
J9.19.3 No Inland Revenue charge (as defined in section 237
of the Capital Transfer Tax Act 1984) is outstanding
over any asset of the Company or in relation to any
shares in the capital of the Company.
J9.19.4 No circumstance has occurred whereby section 212
Inheritance Tax Act 1984 could be exercised in
relation to any asset of the Company or to any of the
Shares or by virtue of which such power could be
exercised for the purposes of section 204(6) of that
Act.
J9.20 STAMP DUTY RESERVE TAX
The Company has made all returns and paid all stamp duty
reserve tax in respect of any transaction in securities to
which it has been a party.
J9.21 POWERS OF SALE FOR IHT AND CTT PURPOSES
There are not in existence any circumstances whereby any such
power as is mentioned in section 212 of the Inheritance Tax
Act 1984 could be exercised in relation to any shares in,
securities of, or assets of, the Company.
J9.22 UNIFORM BUSINESS RATE: TRANSITIONAL RELIEF
The acquisition of the Shares by the Purchaser is not liable
to result in any withdrawal of transitional relief for uniform
business rate purposes enjoyed by the Company or to which the
Company is entitled.
J9.23 INVESTIGATIONS
The taxation affairs of the Company have never been the
subject of any investigation or enquiry by any authority
(other than routine PAYE and VAT enquiries and questions), no
authority has
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indicated that it intends to investigate such affairs and
there are no circumstances known to the Vendor which are
likely to give rise to any such investigation.
J9.24 STAMP DUTY
All documents which are liable to stamp duty and which confer
any right upon the Company have been duly stamped and no
document which confers any right upon the Company and which is
outside the United Kingdom would attract stamp duty if it were
brought into the United Kingdom and there is no liability to
any penalty in respect of such duty or circumstances which may
give rise to such a penalty.
K PENSIONS
In this Warranty K the following definitions shall apply:
"the Employee Benefits Schemes" (1) Pension Fund and Life
Assurance Scheme for Hago
Products Limited established with
effect from 1 April 1961 and (2)
Life Assurance Scheme for Hago
Products Limited established
from 1 April 1978 and (3) Hago
Products Limited Pension and Life
Assurance Scheme established
from 1 December 1988 and (4) John
Pring and Son Ltd Retirement and
Death Benefit Plan and (5)
Bullough plc Group Life Assurance
Scheme and (6) Bullough Group plc
Long Term Disability Insurance
Scheme
"the Final Salary Scheme" the John Pring & Son Ltd
Retirement and Death Benefit
Plan
"the Money Purchase Scheme" Hago Products Limited Pension
and Life Assurance Scheme
K1 With the exception of the Employee Benefits Schemes there are no
agreements or arrangements for the provision of any pension, life
assurance or disability benefits to be given in connection with the
retirement, past service, or any change in the nature of the service
any employee or former employee of the Company (including death or
disability) or for any dependants of any such person and no
undertaking
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or assurance has been given as to the introduction or continuation or
increase or improvement of any pension death benefits or disability
which the Company would be required to implement in accordance with
good industrial relations practice whether or not there is any legal
obligation to do so.
K2 There are no liabilities which have been or are or may be imposed on
the Company as a debt due pursuant to Section 144 of the Pension
Schemes Act 1993 from the Company to the trustees of an occupational
pension scheme in which the Company participates or participated as an
employer (within the definition thereof in Section 144 of the Pension
Schemes Act 1993 as modified by the Occupational Pension Schemes
(Deficiency on Winding-up etc.) Regulations 1994.
K3 The Disclosure Letter and the documents annexed to it or referred to
in it contain all information necessary to define:-
K3.1 those employees of the Company entitled or prospectively
entitled to benefits under the Employee Benefits Schemes and
the benefits to which each of them is or may become entitled
and the conditions upon which the benefits are or may become
payable;
K3.2 the trustees, insurers or other persons who are or may become
liable for paying benefits on behalf of the employees;
K3.3 all contributions (if any) and other expenses (including all
actuarial, consultancy, legal and other expenses) which the
Company is committed to pay in respect of each of the Employee
Benefits Schemes.
K4 So far as the Vendor is aware there are no actions, suits or claims
(other than routine claims for benefits) outstanding, pending or
threatened against the Company in respect of any act, event, omission
or other matter arising in connection with the Employee Benefits
Schemes and the Vendor is not aware of any reason why any such action,
suit or claim may arise.
K5 Each of the Employee Benefits Schemes complies (and has at all times
complied) with and has been administered in all material respects in
accordance with all legislation, regulation and Inland Revenue and OPB
practice and requirements relating to exempt approved pension schemes
and subject thereto in all material respects in accordance with its
governing trusts powers and provisions.
K6 Each of the Money Purchase Scheme and Final Salary Scheme is an exempt
approved scheme within the meaning of section 592(1) of ICTA and there
is no reason why such approval could be withdrawn.
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K7 Each of the Money Purchase Scheme and the Final Salary Scheme is a
contracted out scheme within the meaning of the Pension Schemes Act
1993 and has been administered in all material respects in accordance
with the contracting-out requirements of the Pension Schemes Act 1993
and nothing has been done or omitted to be done which will or may
result in the contracting out certificate being cancelled surrendered
or varied.
K8 No employee or former employee of the Company, has been excluded or
prevented from participating (or been granted restricted
participation) in any of the Employee Benefit Schemes or any other
pension scheme or arrangement (including, without limitation, those
for the provision of death benefits) by the Company or by any former
employer (where liabilities have been transferred to the Company) on
the grounds of part-time employment, marital status or otherwise where
such exclusion, prevention or restriction constitutes (or could
reasonably be expected to constitute) discrimination in breach of the
European Treaty or any European Directive and each of the Employee
Benefits Schemes have been operated at all times from and including 17
May 1990 in accordance with the provisions of the European Treaty
relating to equal treatment and all Acts of Parliament Directives and
other relevant legislation.
K9 With the exception of the Final Salary Scheme all benefits (other than
refunds of contributions) which are or may become payable under the
Employee Benefits Schemes are either to be calculated on a money
purchase basis at a value no greater than the actual value of the
funds actually held by the trustees of the scheme concerned or are
limited to the actual proceeds of insurance policies with an insurance
company of good repute upon which all premiums have been fully paid up
and as at Completion there are no contributions due to any of the
Employee Benefit Schemes, payable either by the Company or by its
employees (and whether payable in accordance with the terms of the
Employee Benefits Schemes or the terms of any contractual commitment
entered into between the Company and the employee) which have fallen
due but are unpaid.
K10 In relation to the Final Salary Scheme:-
K10.1 the Company has been duly admitted to participation in it and
has fulfilled in all maternal respects its obligations
thereunder;
K10.2 all liabilities of the Company to pay or contribute towards
the provision of benefits under the Final Salary Scheme have
been disclosed to the Purchaser and since the date of the
report of the last actuarial valuation the Company and each of
its the employees who are obliged to do so have paid
contributions to the Final Salary Scheme at the rates assumed
by the actuary in the report and there are no such
contributions that have fallen due but are unpaid as at
Completion;
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K10.3 any transfer payments to be made by the Final Salary Scheme in
relation to pensionable service after 16th May 1990 will be
calculated on the basis that all benefits are fully equalised
for the purpose of Article 119 of the Treaty of Rome (save for
the part of the transfer which relates to guaranteed minimum
pension benefits).
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SCHEDULE 5
CLAIMS PROCEDURE AND DETERMINATION AND VENDOR'S SAFEGUARDS
(SUB-CLAUSE 4.2)
1. NOTICE OF CLAIMS AND TIME LIMITS
No claim:
1.1 In respect of any breach of sub-clause 4.1.1 in relation to
any of the Warranties (other than the Tax Warranties); or
1.2 Pursuant to the Tax Covenants or in respect of any breach of
sub-clause 4.1.1 in relation to any of the Tax Warranties;
Shall be made unless notice in writing of such claim (specifying in
reasonable detail the claim and the amount claimed) has been given by
or on behalf of the Purchaser to the Vendor before:
1.3 In the case of sub-paragraph 1.1, the expiry of the period of
two years following Completion, except in the case of the
Warranties specified in F5 when the period will be three years
following Completion; or
1.4 In the case of sub-paragraph 1.2, the expiry of the period of
six months following the end of the accounting reference
period of the Company in which the sixth anniversary of
Completion falls.
2. Any claim made by the Purchaser, whether for any breach of any of the
Warranties or under any of the Tax Warranties, shall (if not
previously satisfied or settled or withdrawn) be deemed to have been
withdrawn at the expiry of the period of twelve months following
notification as herein provided, as regards a claim for breach of any
of the Warranties other than the Tax Warranties, and at the expiry of
the period of twelve months following notification as herein provided,
as regards a claim for breach of any of the Tax Warranties, unless
proceedings in respect thereof have been issued and served on the
Vendor within the relevant period referred to.
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3. LIMITATION OF LIABILITY - MAXIMUM AND MINIMUM AMOUNTS
3.1 No claim shall be capable of being made by the Purchaser under
this document for breach of any of the Warranties or under any
of the Tax Covenants unless each individual claim amounts to
L.2,000 (two thousand pounds) or more and unless the aggregate
of all such claims (whether or not notified at one and the
same time) amounts to L.20,000 (twenty thousand pounds) or
more, but the aggregate amount of any such claim or claims
shall not be limited to the excess over L.20,000 (twenty
thousand pounds). Provided that separate claims relating to
the same cause of action and for the same type of Taxation
(other than Corporation Tax) arising under the Tax Covenants
shall if totalling L.2,000 or more be treated as a single
claim.
3.2 The maximum aggregate of amounts which may be claimed under
this document by the Purchaser shall be limited to the sum of
the consideration referred to in clause 3.1 plus L.600,000.
4. REDUCTION OF CONSIDERATION FOR CLAIMS
Any payment under this document by the Vendor to the Purchaser shall
take effect as a reduction pound for pound of the consideration
payable hereunder.
5. WHOLE AGREEMENT
No representations and, except as herein otherwise expressly provided,
no warranties are or have been made or given by or on behalf of the
Vendor in connection with the transaction hereby agreed upon, and the
only remedy of the Purchaser following Completion shall be to claim
damages as herein provided. The Purchaser irrevocably and
unconditionally waives any right it may have to claim damages for any
misrepresentation not contained in this document, or for breach of any
warranty not contained in this document, except where such
misrepresentation was made or warranty breached fraudulently.
6. NO LIABILITY FOR ACTS OR OMISSIONS OF PURCHASER
The Vendor shall have no liability in respect of any breach of any of
the Warranties, if and to the extent that such breach or claim arises
or occurs out of or as a result of the implementation of the
transaction hereby agreed upon and/or out of or as a result of any
act, omission or transaction of, or event or circumstance caused by,
the Company (following Completion) and/or the Purchaser (following the
entering into of this document) outside the ordinary course of
business which the Purchaser knew or ought to have known would lead to
a claim and except under a legally binding obligation.
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7. CONDUCT OF NEGOTIATIONS, ETC.
If at any time after the date of the Agreement, any claim is made by a
third party or any liability (actual or contingent) comes to the
notice of the Purchaser and/or the Company which causes or may cause
the Vendor to be liable under the Warranties or the Tax Covenants
then, without prejudice to the right of the Purchaser to bring a claim
under the Warranties and/or the Tax Covenants:-
7.1 The Purchaser shall at the request of the Vendor subject to
the Vendor providing an indemnity reasonably satisfactory to
the Purchaser in respect of costs which may be incurred by the
Purchaser and/or the Company as a result of the same, take or
procure that the Company shall take such action as the Vendor
may reasonably require having regard to the commercial
interests of the Purchaser and/or the Company to avoid,
contest, dispute, resist, appeal, compromise or defend the
third party claim;
7.2 The third party claim shall not be compromised or settled
without the consent of the Vendor (such consent not to be
unreasonably withheld or delayed);
7.3 The Purchaser shall in any event keep the Vendor fully
informed as to the steps which were being taken in connection
with the third party claims; and
7.4 The Purchaser shall allow the Vendor and its professional
advisers to have reasonable access at all times during normal
business hours to the books and records of the Company, and to
take copies thereof and extracts therefrom, and generally to
have all such information as may from time to time be
available to the Purchaser and/or the Company in connection
therewith.
8. PURCHASER NOT AWARE OF ANY CLAIM
The Purchaser acknowledges that at the date hereof there is no matter
within the actual knowledge of its Directors which it is aware would
give rise to a claim under the Warranties for which the Vendor would
be liable.
9. RETROSPECTIVE TAXATION
The Vendor shall have no liability in respect of any breach of any of
the Warranties, nor in respect of any claim under any of the Tax
Covenants, if and to the extent that any such breach or claim arises
or occurs as a result of any change in any legislation relating to
Taxation and/or in rates of Taxation and/or in the
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published practice of the revenue authorities made after the date of
this document and whether or not any such change may, in whole or in
part, have retrospective effect.
10. NO DOUBLE CLAIMS
The Purchaser shall not be entitled to recover damages, in respect of
the same matter, more than once under the Warranties and the Tax
Covenants (taking both together).
11. SET-OFF AGAINST INSURANCE POLICY
If any claim is established for breach of any of the Warranties
(except the Taxation Warranties) the Vendor shall be entitled to set
off against the amount thereof any amount recovered, or which may
reasonably be regarded as recoverable by, the Purchaser and/or the
Company under any policy of insurance (whether or not such policy or
any equivalent policy may have been in force at Completion) in respect
of the matter giving rise to the claim in question or might reasonably
have been so regarded had any policy of insurance in force at
Completion not been thereupon or subsequently reduced or cancelled or
vitiated.
12. RIGHTS AGAINST THIRD PARTIES
12.1 Where the Purchaser and/or the Company is/are at any time
entitled to recover from some other person (excluding any
employee of the Company at the date hereof) any sum by way of
compensation in respect of any matter giving rise to a claim
under the Warranties or the Tax Covenants and provided that
the Vendor indemnifies and secures the Purchaser and the
Company to the reasonable satisfaction of the Purchaser
against all losses, costs, damages and expenses which may have
been incurred thereby then (without prejudice to the rights of
the Purchaser to bring such a claim) the Purchaser shall and
shall procure that the Company shall undertake such steps as
are necessary but having regard to the commercial interests of
the Purchaser and/or the Company to enforce such recovery and
in the event that the Purchaser or the Company shall recover
any amount from such other person the amount of the claim
against the Vendor shall be reduced by the amount recovered
less all costs, charges and expenses incurred by the Purchaser
and/or the Company in recovering that sum from such other
person save to the extent that such costs, charges and
expenses are otherwise recovered from such other person.
12.2 If the Vendor pays at any time to the Purchaser or to the
Company an amount pursuant to a claim in respect of the
Warranties or the Tax Covenants (as the case may be) and the
Purchaser or the
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Company is entitled or subsequently becomes entitled to
recover from some other person any sum in respect of any
matter giving rise to such claim and provided that the Vendor
indemnifies and secures the Purchaser and the Company to the
reasonable satisfaction of the Purchaser against all losses,
costs, damages and expenses which may be incurred thereby then
the Purchaser shall and shall procure that the Company shall
take such steps as are necessary having regard to the
commercial interests of the Company to enforce such recovery
and shall forthwith repay to the Vendor so much of the amount
paid by it to the Purchaser or the Company as does not exceed
the sum recovered from such other person less all costs,
charges and expenses incurred by the Purchaser and/or the
Company in recovering that sum from such other person.
13. INSURANCE
In the event of any claim for breach of any of the Warranties the
Purchaser shall, before any recovery is made by the Purchaser in
respect thereof, use all reasonable endeavours to make recovery in
respect of the matter giving rise to the claim in question to the
fullest extent possible under any policy of insurance.
14. MITIGATION AND OTHER RULES OF LAW
Nothing in this agreement shall relieve the Purchaser from its common
law duty to mitigate any loss suffered by it as a result of any breach
of the Warranties.
15. COMPLETION ACCOUNTS
The Vendor shall have no liability in respect of any breach of any of
the Warranties, if and to the extent that the matter giving rise to
the claim in question was, whether directly or indirectly, taken into
account in the Completion Accounts.
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SCHEDULE 6
PENSIONS
(CLAUSE 9.11 AND WARRANTY H4 AND H5)
1. In this schedule the following expressions will have the following
meanings:-
"Company" means Hago Products Limited
"Vendor's Scheme" means John Pring & Son Limited
Retirement and Death Benefit
Plan ("the Retirement Benefit
Scheme")
"Purchaser's Scheme" means the Retirement Benefit
Scheme (or schemes) nominated
by the Purchaser
"Completion Date" means the date of this agreement
"Interest" means interest at the annual rate
of 4% above the base lending
rate from time to time of
Barclays Bank plc accuring on a
daily basis until payment is
made, whether before or after any
judgment
"Transfer Date" means the date on which those
of the Relevant Employees, who
indicated their intention in
writing to become members of
the Purchaser's Scheme, become
members of such Scheme
"Payment Date" means the actual date of payment
of the Transfer Amount in
accordance with the provisions of
this schedule
"Transfer Amount" means the amount as calculated
by reference to paragraphs 4(B)
and 4(C) of this schedule
"Transfer Liabilities" means the amount calculated by
the Vendor's Actuary and agreed
by the Purchaser's Actuary or
determined pursuant
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to paragraph 4(E) of this
schedule as would be sufficient
on the actuarial bases and
assumptions set out in Annexure 2
to fund as at the Completion Date
the benefit whether immediate
prospective or contingent under
the Vendor's Scheme to or in
respect of the Relevant Employees
and their dependants based on
pensionable service prior to the
Completion Date
"Relevant Employees" means those employees who are
members of the Vendor's Scheme
and in the employment of the
Company at the Completion Date
"Purchaser's Actuary" means an actuary or a company
or firm acting on the advice
of any actuary whom or which
the Purchaser undertakes to
appoint for the purposes hereof
"Vendor's Actuary" means, in respect of the
Retirement Benefit Scheme, the
actuary of the Standard
Life Assurance Company
responsible for the Vendor's
Scheme
2. The Vendor shall procure that:-
(1) The Relevant Employees will be permitted to remain members of
the Vendor's Scheme for up to six months after the Completion
Date provided agreement is obtained from the Commissioners of
the Inland Revenue which agreement the Vendor will endeavour
to obtain
(2) The Vendor's Scheme will be maintained in full force and
effect until the Transfer Date and, except with the consent of
the Purchaser, its provisions insofar as they apply to the
Relevant Employees will not be amended before the Transfer
Date nor will any power or discretion be exercised which may
affect materially the interests under the Vendor's Scheme of
any Relevant Employee or any spouse child or dependant of such
Employee; and
(3) The Vendor's Scheme will not before the Payment Date cease to
be an exempt approved scheme
3. The Purchaser undertakes that:-
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(A) Each Relevant Employee will be invited in writing as soon as
practicable after the Completion Date to join the Purchaser's
Scheme with effect from the Transfer Date
(B) The Purchaser's Scheme will accept a transfer from the
Vendor's Scheme in respect of the Relevant Employees (who
accept the offer in writing to join the Purchaser's Scheme)
and on receipt of the Transfer Amount (calculated in
accordance with paragraphs 4 and 5) shall grant rights in the
Purchaser's Scheme in respect of the Relevant Employees on the
basis that the assets representing their accured rights to
past service benefits under the Vendor's Scheme will be
transferred to the Purchaser's Scheme on a basis which, as
certified by the Purchaser's Actuary, equates overall with the
basis on which at the date of this Agreement benefits are
provided for them under the Vendor's Scheme.
(C) The Purchaser and such Relevant Employees who are members of
the Vendor's Scheme at the Completion Date and who participate
in the Vendor's Scheme after the Completion Date shall pay
their due contributions at the rates of contributions as
follows and shall comply with the provisions of the rules of
that Scheme:-
Member's Contributions - 5% of pensionable earnings
Employer Contributions - 10.9% of pensionable earnings
Pensionable earnings being as defined by the rules of the
Vendor's Scheme as relating to the Relevant Employees.
4. (A) The Vendor undertakes that it will use its best endeavours to
procure the Trustees of the Vendor's Scheme to pay from the
Vendor's Scheme to the Trustees of the Purchaser's Scheme,
within 28 days of the later of (1) the Transfer Amount being
determined and (2) the Purchaser giving the Vendor notice that
the Purchaser's Scheme is able and ready to receive the same,
the Transfer Amount as defined in 4(B) and adjusted as defined
in 4(C). If the Payment Date does not coincide with the
Transfer Date the Vendor shall use its best endeavours to
procure that on the Transfer Date an amount equal to not less
than three quarters of what the Transfer Amount is reasonably
estimated to be by the Vendor's Actuary is paid by the
Trustees of the Vendor's Scheme to the Trustees of the
Purchaser's Scheme on account of the Transfer Amount and after
receipt of such payment the adjustment as referred to under
clause 4(C) shall cease to accrue to the extent of such
payment
(B) The Transfer Amount means in respect of those of the Relevant
Employees as advised by the Purchaser to the Vendor who have
indicated their intention to become members of the
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Purchaser's Scheme and who have consented in writing to a
transfer payment from the Vendor's Scheme to the Purchaser's
Scheme the total of:-
(1) the Transfer Liabilities subject to a minimum of a
cash sum equal to the value of the accrued benefits
of the Relevant Employees in the Vendor's Scheme
based on pensionable service prior to the Completion
Date and Final Pensionable Salary at the Completion
Date and the revaluation requirements introduced by
the 1984 Health and Social Security Act and 1985
Social Security Act and subsequent legislation and
calculated by the Vendor's Actuary and agreed by the
Purchaser's Actuary or determined pursuant to
paragraph 4(E) of this schedule in accordance with
the actuarial assumptions as set out in Annexure 1
plus
(2) a sum equal to the contributions (if any) made to the
Vendor's Scheme between the Completion Date and
Transfer Date in respect of the aforesaid Relevant
Employees less an amount equivalent to the cost borne
by the Vendor's Scheme of insuring the
death-in-service benefits between the Completion Date
and Transfer Date of the aforesaid Relevant Employees
(C) The Transfer Amount shall be adjusted between the Completion
Date of (if appropriate) date of payment of further
contributions, and the Payment Date as if at the beginning of
that period the whole Transfer Amount had been invested in the
Managed (with property) Fund managed by Scottish Widows
Investment Management Limited
(D) The Vendor undertakes that it will use its best endeavours to
ensure that the Vendor's Actuary shall within three months of
the Completion Date or such other date as is agreed in writing
between the Vendor and the Purchaser submit his calculation of
the Transfer Amount to the Purchaser's Actuary for approval,
together with such information as the Purchaser's Actuary may
reasonably require in order to verify the amount of the
Transfer Amount
(E) If the Purchaser's Actuary and the Vendor's Actuary shall
agree the amount of the Transfer Amount they shall jointly
certify the same. In the event of disagreement the Vendor and
the Purchaser shall procure that the Purchaser's Actuary and
the Vendor's Actuary shall negotiate with a view to resolving
any differences but in default of agreement within 30 days
following the notification of the Purchaser's Actuary in
paragraph 4(D) above then, the same shall be referred to an
independent Actuary to be nominated jointly by the Vendor and
the Purchaser or, failing
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such nomination, to be nominated by the President for the time
being of the Institute of Actuaries at the instance of the
party first applying to him. The Actuary so appointed shall
act as an expert and not as an arbitrator; his decision shall
be final and binding and his costs shall be borne between the
Vendor and the Purchaser in such proportion as the said
Actuary deems to be fair and reasonable
5. If the Transfer Amount calculated and adjusted in accordance with
paragraph 4 is not paid in full by the Trustees of the Vendor's Scheme
within a period of 30 days after the due date for payment of the same,
the amount of the shortfall in cash shall forthwith be paid by the
Vendor to the Trustees of the Purchaser's Scheme with Interest from
the due date of payment until the actual date of payment
6. Any additional voluntary contributions paid to the Vendor's Scheme to
provide benefits for any Relevant Employee shall be disregarded in
calculating the Transfer Amount and the Vendor shall procure that on
the Payment Date such additional voluntary contributions and any
investment return thereon shall be paid over or assigned as the case
may be by the trustees of the Vendor's Scheme to the trustees of the
Purchaser's Scheme
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SCHEDULE 7
CALCULATION OF COMPLETION NAV
(SUB-CLAUSES 1.1 AND 3.1)
PART 1
INTERPRETATION
In this document the following words and expressions shall have the meanings
set out opposite each respectively:
"the Completion NAV" the net asset value of the
Company being the aggregate of:
(a) Fixed Assets
(b) Stocks
(c) Trade Debtors
(d) Other Debtors
less:
(e) Trade Creditors
(f) Other Creditors
as prepared by the Company, audited by
the Vendor's Accountants and agreed (or
deemed to be agreed) by the Purchaser's
Accountants or, as the case may be, as
determined by the Independent Accountant,
by reference to audited Individual
Accounts of the Company prepared in
accordance with this schedule for the
financial period ending at close of
business on the Completion Date;
"Independent Accountant" a chartered accountant agreed upon by
or on behalf of the
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Vendor and the Purchaser or, if they
fail to agree, nominated on the
application at any time of the Vendor or
of the Purchaser by the President for the
time being of the Institute of Chartered
Accountants in England and Wales (the
costs of such accountant, and, if
applicable, of such President, in
nominating such accountant to be borne as
he may direct);
"the Purchaser's Deloitte & Touche of Colmore Gate, 2
Accountants" Colmore Row, Birmingham;
"the Vendor's Coopers & Lybrand of 5 Town Quay,
Accountants" Southampton SO14 2HJ.
PART 2
CALCULATION
1. The parties shall procure the Company to prepare within 30 Business
Days after the Completion Date Individual Accounts for the financial
period from 1st November 1995 to the close of business on the
Completion Date and in accordance with the accounting principles,
methods and bases set out in part 3 of this schedule ("the Completion
Accounts").
2. The Vendor shall provide such information and assistance as the
Company may reasonably require for the preparation of the Completion
Accounts.
3. The Vendor shall procure the Vendor's Accountants to:
3.1 Audit the Completion Accounts;
3.2 Produce a dated statement of the Completion NAV ("the
Completion Statement"); and
3.3 Deliver the Completion Statement and provide access to all
working papers to the Purchaser's Accountants;
within 21 days following delivery to the Vendor's Accountants of the
Completion Accounts.
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4. If such queries and observations as the Purchaser's Accountants raise
within 20 Business Days following delivery to them of the Completion
Statement have not been dealt with to their satisfaction and reflected
in any amendments within fourteen days following delivery to the
Vendor's Accountants of such queries and observations, it shall be
open to the Vendor or the Purchaser to request an Independent
Accountant to determine the Completion NAV, and his determination
shall, in the absence of manifest error, be final binding on the
parties.
5. If the Purchaser's Accountants do not raise any queries or
observations in respect of the Completion Statement within 20 Business
Days following delivery thereof to them or if they agree the
Completion Statement, then the Completion Statement shall be final and
binding on the parties, and the Completion NAV shall be as set out in
the Completion Statement.
6. When the Purchaser's Accountants accept or the Purchaser is deemed to
accept that the said draft has been prepared in compliance with the
requirements of this schedule 7 or the Completion Accounts have
otherwise been agreed whether or not a reference has been made to the
Independent Accountant, the Purchaser's Accountants and the Vendor's
Accountants shall sign a report in the form set out in Schedule 8 to
the effect that the Completion Accounts have been so prepared and
stating the Completion NAV and any Completion Accounts so reported on
shall be the Completion Accounts for the purposes of this Agreement
and shall be final and binding on the parties.
7. In stating, agreeing or determining (as the case may be) the
Completion NAV, the Vendor's Accountants, the Purchaser's Accountants
and, if applicable, the Independent Accountant shall act as experts
and not as arbitrators.
8. The Vendor and the Purchaser shall promptly provide and render or
cause the provision or rendering to the Vendor's Accountants, the
Purchaser's Accountants and the Independent Accountant of such
information and assistance as they or any of them may reasonably
require to enable the Vendor's Accountants and the Purchaser's
Accountants to agree the Completion Statement (and to carry out the
audit referred to in paragraph 3) or to enable the Independent
Accountant to determine the Completion NAV.
9. The Vendor shall bear and pay all of the costs of the Vendor's
Accountants, and the Purchaser shall bear and pay all the costs of the
Purchaser's Accountants, incurred in each case in connection with the
matters referred to in this schedule.
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PART 3
ACCOUNTING PRINCIPLES, METHODS AND BASES
1. The Completion Accounts shall consist of a balance sheet of the
Company as at the close of business on the date of Completion and a
profit and loss account of the Company in respect of the period from
the Accounts Date to the date of Completion (both dates inclusive).
2. The Completion Accounts shall (subject as hereinafter provided):-
2.1 be prepared as if the period from the Accounts Date to the
date of Completion (if it is not a financial period) were a
financial period of the Company;
2.2 show a true and fair view of the assets and liabilities of the
Company at the date of Completion and the profits/losses of
the Company for the period ended on the date of Completion;
and
2.3 adopt generally accepted accounting principles subject
(without prejudice to paragraph 2.2) to:-
2.3.1 the principles, policies and practices used in the
preparation of the Accounts; and
2.3.2 the provisions of paragraphs 3, 4, 5, 6 and 7.
3. 3.1 Fixed assets shall include (without limitation):-
3.1.1 all leasehold property in occupation by the Company
(but no other property);
3.1.2 all intangible assets, including without limitation,
goodwill, licences, the benefit of contracts, names,
trademarks, capitalised professional fees, interest
and other costs which shall be valued at L.1;
3.1.3 all plant, machinery, fixtures, fittings, equipment,
motor vehicles and other tangible assets required for
trading, whether located at the Property or
otherwise. Plant with a net book value in excess of
L.5,000 and not used in the previous 12 months will be
valued at nil;
3.1.4 all refurbishment or similar capital expenditure
costs incurred on or prior to Completion;
83
<PAGE> 86
3.1.5 an amount equivalent to any provisions to be included
in the Completion Accounts in respect of
refurbishment or similar capital expenditure costs
committed, instructed or otherwise agreed by both
parties as being necessary but in each case not
incurred as at Completion;
3.1.6 all other assets recoverable after more than one
year; and
3.1.8 all assets shown as fixed assets in the Accounts.
3.2 Subject as provided in 3.1 fixed assets shall be included at
the value at which they were included in the fixed asset
register and on the bases adopted in the Accounts subject to
annual rates of depreciation in accordance with established
accounting policies as follows:
Short leaseholds and buildings over terms of the leases
Plant equipment fixtures and fittings 10 to 15%
Motor vehicles 25%
Computers 20%
3.3 If and to the extent that any asset is included in the
Accounts or the fixed asset register at a value in excess of
cost, its value for the purpose of the Completion Accounts
shall be cost less accumulated depreciation.
4. All current assets of the Company at the close of business on the
Completion Date, excluding any receivable after more than one year
shall be shown as current assets in the Completion Accounts and shall
include in particular (but without limitation):-
4.1 all trade and other debtors and pre-payments;
4.2 cash floats, safe floats, cash at bank and in hand (cash at
bank to represent the cash book balance following a
reconciliation to the bank statement balance); and
but subject to provision for:-
4.3 credit notes;
84
<PAGE> 87
4.4 rebates and agreed promotional support;
4.5 bad or doubtful debts; and
4.6 returns to manufacturer and costs associated with exchanging
stocks.
5. All liabilities of the Company at the close of business on the
Completion Date, including (without limitation) any falling due for
payment after more than one year and all provisions for liabilities
and charges shall be shown as liabilities in the Completion Accounts
and in particular (but without limitation) full provision shall be
made for:-
5.1 any amounts paid by the Company after the Completion Date to
discharge the borrowings or other indebtedness of the Company,
including any early repayment penalties, charges or additional
interest arising in connection with the repayment(s);
5.2 any borrowings or other indebtedness (including without
limitation a loan of L.613,483 owed to the Vendor which is
repaid at Completion but excluding any monies advanced by the
Purchaser to the Company or other indebtedness incurred by the
Company to permit repayment of such loan);
5.3 back rent reviews, resolved or unresolved;
5.4 all rates payable as currently demanded by the relevant Local
Authorities;
5.5 all amounts owing to the Vendor by the directors of the
Company or persons connected with them;
5.6 any professional fees incurred by or on behalf of the Company
in connection with (a) this agreement or (b) any other matters
arising up to the Completion Date;
5.7 accrued entitlements to holiday pay and to bonus and other
sums payable to employees of the Company, whether or not on a
discretionary basis (including, for the avoidance of doubt,
any sums due under the "annual hours" scheme);
5.8 any arrears or outstanding contributions to pension schemes;
85
<PAGE> 88
5.9 all amounts owing to directors and former directors of the
Company and any person connected therewith in respect of
termination payments and other termination arrangements
including without limitation Messrs Ratcliffe and Hutchins
even if the effective date of termination of their employment
occurs after Completion;
5.10 all trade and other creditors and accruals and deferred income;
5.11 all taxation and social security creditors including
provisions for PAYE, NIC, VAT and relating to Profit-related
Pay;
5.12 all refurbishment or similar capital expenditure costs
committed, instructed or otherwise agreed by both parties as
being necessary but in each case not incurred at Completion;
and
5.13 no provision shall be made for dilapidations in relation to
the Property.
6. STOCKS AND WORK-IN-PROGRESS
6.1 Stock and work-in-progress shall be included at the values
calculated in accordance with the stock-take and valuation
carried out on the Completion Date and attended by the
Vendor's Accountants and Purchaser's Accountants.
6.2 Stock and work-in-progress will be valued at the lower of cost
and net realisable value. Cost is actual cost calculated on a
first in first out basis and includes materials, direct labour
and, in the case of work-in-progress and finished goods,
attributable production overheads in accordance with Statement
of Accounting Practice No. 9.
6.3 Provision for obsolete and slow moving stock will be made for
any items of stock and work-in-progress on the following
basis:
Materials - 100% provision for stocks:
6.3.1 with no movement in the 6 months prior to Completion;
and
6.3.2 with a level in excess of usage in the 6 months prior
to Completion.
Finished Goods and WIP - 100% provision for stocks in excess
of 6 months past sales or, in the case of new products 6
months reasonable forecast sales.
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<PAGE> 89
7. TAXATION
7.1 There shall be taken into account in the Completion Accounts
and the Completion NAV:
7.1.1 any deferred tax asset arising from accelerated
capital allowances and short term timing differences;
and
7.1.2 any sum payable for the surrender by the Company to
the Vendor or any Member of the Vendor's Group of tax
losses for the year ended on 31st October 1996.
8. MISCELLANEOUS
8.1 Nothing in this Schedule shall require statutory accounts of
the Company to be signed by the directors of the Company or
the auditors of the Company prior to final determination of
the Completion NAV.
87
<PAGE> 90
SCHEDULE 8
COMPLETION NAV CERTIFICATE
To: Bullough plc and
Beldray Limited
[date]
Dear Sirs,
HAGO PRODUCTS LIMITED
We refer to the Agreement dated [ ] between (1) Bullough plc
and (2) Beldray Limited ("the Agreement"). The attached Completion Accounts
have been prepared in accordance with the Agreement.
In our opinion:-
(a) the Completion Accounts have been compiled in accordance with the
requirements of the Agreement;
(b) the Completion NAV derived from the Completion Accounts is L.[ ].
All expressions and definitions in this letter are as set out in the Agreement.
Yours faithfully,
Countersigned
Coopers & Lybrand Deloitte & Touche
88
<PAGE> 91
Signed by
for and on behalf of /S/ RICK BACON
BULLOUGH PLC ------------------------
in the presence of:
/S/ KEVIN FITZPATRICK
---------------------
Signed by
for and on behalf of /S/ MIKE DELL
BELDRAY PLC ---------------------------
in the presence of:
/S/ ANTHONY ELLIS
-------------------------
89
<PAGE> 92
HAGO PRODUCTS LIMITED
MINUTES of a meeting of the Directors held at Martineau Johnson, Birmingham on
31 October 1996 at 11:45 p.m.
- --------------------------------------------------------------------------------
PRESENT: MR. R J BACON (In the Chair up to minute 2)
M. DELL (In the Chair from minute 3)
A. P. ELLIS (From minute 3)
IN ATTENDANCE:
- --------------------------------------------------------------------------------
1. PRELIMINARIES
A quorum being present, the Chairman declared the meeting open. It was
noted that the meeting had been convened in accordance with the Articles
of Association of the Company. The Chairman noted Messrs. Bond, Hutchins
and Ratcliffe and Mrs. Laney had resigned as directors of the Company.
Their resignation was produced at the meeting.
2. CHANGE OF DIRECTORS
It was reported that Mr. W.E. Greenhalgh, Mr. M.H. Dell and Mr. A.P.
Ellis had consented to be appointed as directors of the Company and IT
WAS RESOLVED that they be appointed as additional directors of the
Company with immediate effect.
There was then produced to the meeting the resignation of R. Bacon as
director of the Company and IT WAS RESOLVED that such resignation be
accepted with immediate effect.
3. TRANSFER OF SHARES
There were tabled the following forms of transfer of Ordinary Shares of
L. 1 each in the capital of the Company:
90
<PAGE> 93
<TABLE>
<S> <C> <C>
TRANSFEROR TRANSFEREE NUMBER OF SHARES
- ---------- ---------- ----------------
Bullough plc Beldray Limited 112,601 Ordinary L. 1 shares
Bullough Electric Limited Beldray Limited 3 ordinary shares of L. 1 each
</TABLE>
91
<PAGE> 94
IT WAS RESOLVED that the transfer be approved and that subject to the
same having been duly stamped the name of the transferee be entered in
the register of members of the Company as the holder of the Ordinary
shares thereby transferred and that a share certificate be sealed and
issued accordingly.
4. CHANGE OF SECRETARY
It was reported that Mr. A.P. Ellis had consented to be appointed as
secretary of the Company and IT WAS RESOLVED that he be appointed as
secretary with immediate effect.
There was then produced to the meeting the resignation of J. Lancy as
secretary of the Company and IT WAS RESOLVED that such resignation be
accepted with immediate effect.
5. NOTIFICATION OF INTERESTS
There were produced to the meeting notifications by Mr. W.E.
Greenhalgh, Mr. M.H. Dell and Mr. A.P. Ellis of their shareholdings in
Beldray Limited which would become the Company's holding company
(following its entry in the register of members) in accordance with
section 324 of the Companies Act 1985 and IT WAS RESOLVED that the
information be duly entered in the Company's register of directors'
interests.
6. REGISTERED OFFICE
IT WAS RESOLVED that the address of the registered office of the
Company be changed to PO Box 20, Beldray Road, Bilston, West Midlands
WV14 7NF.
7. FILING AT COMPANIES REGISTRY
The Secretary was instructed to file the following documents with the
Registrar of Companies:-
7.1 Forms 288a and 288b; and
7.3 Form 287.
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<PAGE> 95
8. BANK MANDATES
IT WAS RESOLVED that all existing mandates relating to the bank accounts
of the Company be cancelled, and the resolutions for operation of such
accounts contained in the mandates produced to the meeting be adopted,
with effect from the conclusion of the meeting. IT WAS FURTHER RESOLVED
that the said mandates be completed and signed. The Secretary was
instructed to take such action as may be necessary to give effect to the
above resolutions.
9. CLOSE
There being no further business the meeting then terminated.
/s/ R.J. BACON
----------------
R.J. Bacon
Chairman
93
<PAGE> 96
BIRCORP: 26947/5
RESIGNATION OF DIRECTOR AND SECRETARY IN THE AGREED TERMS (CLAUSE 5.2.1(3))
31st October, 1996
To the Directors,
Hago Products Limited
South Bersted Industrial Estate
Durban Road
Bognor Regis
West Sussex
PO22 9QT
Dear Sirs,
HAGO PRODUCTS LIMITED ("THE COMPANY")
I hereby resign from my position as a Director and as Secretary of the Company
and acknowledge that without prejudice to any statutory and/or contractual
rights I have by reason of my employment with the Company:
a) I have no claim against the Company for compensation for loss of
office; and
b) I have no other claim or right of action against the Company
whatsoever; and
c) any such claim or right which may exist is irrevocably released and
waived.
SIGNED AND SEALED AS A DEED by )
JOANNE KATHARINE LANEY ) /s/ JOANNE K. LANEY
in the presence of:- )
Witness's signature: /s/ KEVIN FITZPATRICK
Name: Kevin Fitzpatrick
Address: 35B Granville Road
Finchley
London N12 OHP.
Occupation: Accountant
94
<PAGE> 97
BIRCORP: 26947
RESIGNATION OF DIRECTOR IN THE AGREED TERMS (CLAUSE 5.2.1(3))
31st October, 1996
To the Directors,
Hago Products Limited
South Bersted Industrial Estate
Durban Road
Bognor Regis
West Sussex
PO22 9QT
Dear Sirs,
HAGO PRODUCTS LIMITED ("THE COMPANY")
I hereby resign from my position as a Director of the Company and acknowledge
that without prejudice to any statutory and/or contractual rights I have by
reason of my employment with the Company:
a) I have no claim against the Company for compensation for loss of
office; and
b) I have no other claim or right of action against the Company
whatsoever; and
c) any such claim or right which may exist is irrevocably released and
waived.
SIGNED AND SEALED AS A DEED by )
ANDREW RATCLIFFE ) /s/ ANDREW RATCLIFFE
in the presence of:- )
Witness's signature: /s/ KEVIN FITZPATRICK
Name: Kevin Fitzpatrick
Address: 35B Granville Road
Finchley
London N12 OHP.
Occupation: Accountant
95
<PAGE> 98
BIRCORP: 26947/6
RESIGNATION OF DIRECTOR IN THE AGREED TERMS (CLAUSE 5.2.1(3))
31st October, 1996
To the Directors,
Hago Products Limited
South Bersted Industrial Estate
Durban Road
Bognor Regis
West Sussex
PO22 9QT
Dear Sirs,
HAGO PRODUCTS LIMITED ("THE COMPANY")
I hereby resign from my position as a Director of the Company and acknowledge
that without prejudice to any statutory and/or contractual rights I have by
reason of my employment with the Company:
a) I have no claim against the Company for compensation for loss of
office; and
b) I have no other claim or right of action against the Company
whatsoever; and
c) any such claim or right which may exist is irrevocably released and
waived.
SIGNED AND SEALED AS A DEED by )
SIMON MARK HUTCHINS ) /s/ SIMON MARK HUTCHINS
in the presence of:- )
Witness's signature: /s/ KEVIN FITZPATRICK
Name: Kevin Fitzpatrick
Address: 35B Granville Road
Finchley
London N12 OHP.
Occupation: Accountant
96
<PAGE> 99
BIRCORP: 26947/2
RESIGNATION OF DIRECTOR IN THE AGREED TERMS (CLAUSE 5.2.1(3))
31st October 1996
To the Directors,
Hago Products Limited
South Bersted Industrial Estate
Durban Road
Bognor Regis
West Sussex
PO22 9QT
Dear Sirs,
HAGO PRODUCTS LIMITED ("THE COMPANY")
I hereby resign from my position as a Director and employee of the Company
and acknowledge that:
a) I have no claim against the Company for payment in respect of
redundancy or unfair or wrongful dismissal or compensation for loss of
office; and
b) I have no other claim or right of action against the Company
whatsoever; and
c) any such claim or right which may exist is irrevocably released and
waived.
SIGNED AND SEALED AS A DEED by )
GORDON BOND ) /s/ GORDON BOND
in the presence of:- )
Witness's signature: /s/ J. LONGHURST
Name: J. Longhurst
Address: Broad Oak
Church Road
GH Bookham Surrey KT23 3JT
Occupation: Secretary
97
<PAGE> 100
[HAGO LETTERHEAD]
TO ALL EMPLOYEES
With effect from 1st November 1996, Beldray has acquired all of the shares in
Hago Products Limited from it's parent company, Bullough plc.
Beldray's product range includes ironing tables, step ladders and, more
recently, child safety gates. The acquisition of Hago will strengthen our
position in the nursery market and in addition broaden our product range into
office and industrial products.
Our short term objective for the next six months is to return Hago to
profitability. To put this task into perspective, three out of the last four
trading years have resulted in losses - the consolidated trading loss for the
four years is English Pound 1,400,000.
A significant reduction in costs at Hago must be achieved quickly to prevent
these losses continuing. Whilst we will be targeting all overheads in our
efforts to save costs, there will inevitably need to be a reduction in employee
numbers. Everyone affected by these changes will be spoken to individually
over the next five days.
Our long term plans are to grow Hago into a business which is profitable on a
regular basis. This will involve the introduction of new products and new
customers.
Any period of change is generally an unsettling time, caused mainly by
uncertainty. Speculation and rumor will be rife. We will be implementing
regular team briefing sessions to ensure you are all kept informed. However,
before we can organise this properly, there will clearly be a large number of
questions you want answered and I would appreciate you directing these to your
immediate supervisors.
M H Dell
Managing Director
98
<PAGE> 101
- --------------
PRESS RELEASE
- --------------
BELDRAY EXPANDS CHILD SAFETY PRODUCT RANGE.
Beldray has purchased Hago Products Ltd, the largest manufacturer of
Child Safety Gates and Fire Guards in the UK.
The transfer of Share Ownership was formally agreed on 31/10/96
between Beldray Ltd and Hago's former parent company Bullough PLC.
For further information please contact Philip Edwards on 01902
353500.
99
<PAGE> 102
- --------------
PRESS RELEASE
- --------------
BELDRAY EXPANDS CHILD SAFETY PRODUCT RANGE.
Beldray has purchased Hago Products Ltd, the largest manufacturer of
Child Safety Gates and Fire Guards in the UK.
The transfer of Share Ownership was formally agreed on 31/10/96
between Beldray Ltd and Hago's former parent company Bullough PLC.
Beldray has been actively involved in the Child Safety market for a
number of years. The inclusion of Hago within Beldray's comprehensive
product portfolio will widen the choices and services on offer to
existing and potential customers.
Hago's product range includes Child Safety Gates, Wire Fire Guards,
Office Storage Systems and Industrial Components.
Hago's excellent reputation has been achieved through good
distribution to large retailers such as Mothercare and Argos. Beldray
will ensure that this quality of service will continue and remain
flexible enough to accommodate a changing market environment.
The acquisition of Hago is one of a number of acquisitions over a 10
year period that has strengthened Beldray's position as a key supplier
to the multiple retail sector.
For further information please contact Philip Edwards on 01902 353500.
100
<PAGE> 103
[STANDARD LIFE LETTERHEAD]
Mr. C. Mclean
Hogg Robinson
Clarkson House
Canterbury 31 October, 1996
CT1 2UT
Dear Sir,
Hago Products Ltd.- Transfer of Business
Below is set out the basis for the calculation of the Transfer Liabilities as
defined in the Seventh Schedule of the Sale Agreement.
The benefits to be valued are the Relevant Employees' entitlement under the
rules of the Vendor's Scheme based on pensionable service to the completion
date and Pensionable Salary projected at the rate of salary growth to normal
retirement age or earlier cessation of pensionable service.
The actuarial assumptions are set out in the schedule below, for the avoidance
of doubt this is the basis uses used at the last formal valuation for the
Trustees. Where there is any doubt as to the detail of the actuarial methods,
the same approach should be used as that at the last valuation.
The calculations will assume that all retirement benefits will be taken as
pension.
1. Rate of interest 8.5% per year
2. Rate of salary growth 7.0% per year
3. Rate of dividend growth 4.0% per year
4. Rate of pension increases as per scheme rules
4A. Rate of increase to pensions linked to the 4.5% per year
RPI or 5% per year if less
5. Mortality Pre Retiral A67/70 less 1 years
6. Mortality Post Retiral PA (90) Ultimate less three
years
101
<PAGE> 104
7. Withdrawals from service each year (as AGE RETURN PAID UP
proportion of members present at start of OF PENSION
year) other than by retiral CONTS
16-18 15% -
19-25 6% 9%
26-29 4% 11%
30-39 2% 8%
40-49 - 5%
50+ - -
8A Revaluation of GMP after withdrawal statutory fixed rate in force
at completion or earlier
withdrawal
8B Revaluation of excess over GMP after 5% per year
withdrawal
9A Proportion of male members married at 97.5%
retiral
9B Proportion of female members married at 92.5%
retiral
10 Age of members less spouse's age male members: 4 years
female members: 0 years
11 Lump Sum Benefit on death before Return of members
retirement contributions
12 Spouse's pension on death before retirement GMP only
13 Assumptions relating to equalized benefits
Retirement ages have been equalized at 65. Women are entitled to
uplift full pensions at age 60 in respect of service prior to
1st November 1993, and this right is also extended to men in
respect of service between 17th May 1990 and 1st November 1993.
It will be assumed that all females will uplift their benefits at
age 60. It is further assumed that 50% of the males will uplift
their benefit at age 60 and 50% at age 65. Where part of the
benefit is not available in full until age 65, that part of the
benefits will be assumed to be reduced to a level of equivalent
actuarial value on the sale basis to those available at age 65.
102
<PAGE> 105
MARKET VALUE ADJUSTMENT
The value of accrued liabilities so calculated will be adjusted by dividing the
liabilities calculated by a Market Value Adjustments Factors (MVAF) to reflect
the Investment conditions at the completion. The MVAF will be calculated as:-
a) The gross yield on the FT All Share Index at the close of business on
the last working day prior to completion, divided by 4.33%.
Yours faithfully
/s/ JAMES BLACK
James Black FFA
Scheme Actuary
Acknowledged and agreed on behalf of the Purchaser
Signed /s/ JULIAN HOUGH Date 31/10/96
---------------------- --------------------
103
<PAGE> 106
[STANDARD LIFE LETTERHEAD]
Mr. C. Mclean
Hogg Robinson
Clarkson House
Canterbury 31 October, 1996
CT1 2UT
Dear Sir
Hago Products Ltd.- Transfer Value Basis
Below is set out the current scheme basis for calculating cash equivalents
as defined in 4(B) (1) (c) of the Seventh Schedule of the Sale Agreement.
The benefits to be valued are the preserved pension that would be available on
leaving service at the completion date (ignoring the possibility of a return of
contributions). They are to be revalued in deferment in accordance with the
rules of the scheme at the rates set out below. The indicator Yield to be used
is that in force at the completion date. For the avoidance of doubt this is the
GN11 cash equivalent basis that Standard Life recommends to all schemes. Where
the description is incomplete Standard Life's normal method and assumptions
should be used.
1. Rate of interest see (a) in Appendix
2. Rate of increase of pensions in as per scheme rules
payment
2A. Rate of increase of pensions linked to the 4.5% per year
RPI or 5% per year if less
3. Rate of revaluation in deferment 5% per year
of benefits in excess of GMP
4. Mortality Pre Retiral A49/52 less 1 year
5. Mortality Post Retiral a(55) Ultimate, with
allowance for mortality
improvement by multiplying
annuity value by (1+n/800),
where n= years to Normal
Pension Age (max 40)
6A. Proposition of male members married at 95%
Normal Pension Age
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<PAGE> 107
6B. Proportion of female members married 90%
at Normal Pension Age
7. Proportion of members married at see (b) in Appendix
death before Normal Pension Age
8. Age of member less spouse's age male members: 4 years
female members: 0 years
9. Remarriage Death After Retiral annuity
values for spouses are
loaded by a factor of 1.025
to allow for remarriage
10. Expenses nil
11. Allowance for equalized benefits see (c) in Appendix
Yours faithfully
/s/ JAMES BLACK
James Black FFA
Scheme Actuary
Acknowledged and agreed on behalf of the Purchaser
Signed /s/ JULIAN HOUGH Date 31/10/96
--------------------------- ---------------------
105
<PAGE> 108
APPENDIX
(a) interest rate
The interest rate is based on an Indicator Yield, IY, set by the
actuary, and assumes a reinvestment rate decreasing to about 6.75%
after 40 years. Provided the Indicator Yield is less than 10% the
formula is as follows:
interest rate = j, given by
(l + (j-0.0025))" = 1+ (IY X S(4))
where
1
K(4) = - sum of and t = 0.065 + 0.9' (IY -0.065) and
n
n = years to Normal Pension Age
(b) proportion of members married at death before Normal Pension Age
Age Ppn Age Ppn
Married Married
15 0.005 30 0.855
16 0.025 31 0.865
17 0.065 32 0.875
18 0.13 33 0.885
19 0.21 34 0.895
20 0.29 35 0.9
21 0.37 36 0.905*
22 0.45 37 0.91*
23 0.53 38 0.915*
24 0.61 39 0.92*
25 0.685 40 0.925*
26 0.745 41 0.935*
27 0.785 43 0.94*
28 0.815 44 0.945*
29 0.84 over 44 0.95*
* For females the proportion married has a maximum value of 0.90
106
<PAGE> 109
(c) allowance for equalised benefits
Retirement ages have been equalised at 65. Women are entitled to
uplift full pensions at age 60 in respect of service prior to 1
November 1993, and this right is extended to men in respect of service
between 17 May 1990 and 1 November 1993.
The transfer value is calculated assuming Normal Pension Age is 60,
based on accrued benefits revalued to 60. The transfer value is also
calculated assuming Normal Pension Age is 65, based on accrued
benefits revalued to 65. The equalised transfer value is then taken as
the weighted average of these two values, the weighting factors being
the lengths of service giving rise to benefits available in full at
the respective ages.
107
