Dated 2001
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▇▇▇.▇▇▇ Inc
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JLP Victoria Limited
Contents
Clause Page No
1. Interpretation 1
2. Sale and purchase of Shares 5
3. Consideration 5
4. Completion 7
5. Warranties 8
6. Limitation on claims 9
7. EC Investigation Indemnity 13
8. Confidentiality and announcements 13
9. Further assurance 14
10. Interest 14
11. Continuing obligations and assignment 14
12. Costs 15
13. Notices 15
14. Severability 16
15. Entire agreement and variation 16
16. General provisions 16
17. Governing law and jurisdiction 17
18. No Rights under Contracts (Rights of Third Parties) Act 1999 18
Schedule 1 19
The Company 19
Schedule 2 20
The Completion Accounts 20
Schedule 3 23
General Warranties 23
Schedule 4 31
Form of deed of covenant 31
Schedule 5 37
Tax Covenant and Tax Warranties 37
Schedule 6 55
Form of Licence 55
Schedule 7 56
Balance Sheet of the Company 56
Schedule 8 57
Form of Service Agreement 57
This Agreement is made the 7th day of March 2001
Between:
(1) ▇▇▇.▇▇▇ Inc a Delaware corporation whose registered office is at ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.▇. (the "Seller"); and
(2) JLP Victoria Limited a company registered in England and Wales under number
3996267 whose registered office is at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
(the "Purchaser").
Recitals:
(A) ▇▇▇.▇▇▇ Limited is a company registered in England and Wales under number
3709785 whose registered office is at ▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ (the
"Company"). Further particulars of the Company are set out in Schedule I.
(B) Prior to Completion, the Seller will be the beneficial owner of all the
Shares.
(C) The Seller has agreed to sell and the Purchaser has agreed to purchase all
the Shares on and subject to the terms of this Agreement.
It is agreed:
1. Interpretation
1.1 In this Agreement (including its Recitals and Schedules), the following
words and expressions have the meanings respectively set opposite them.
"Adjusted Price Statement" has the meaning given in paragraph 3 of Schedule
2;
"Bridge Finance" means the bridge finance provided by the Purchaser to the
Company as set out in separate letters of agreement between the Purchaser
and the Seller;
"Business Day" means any day (except any Saturday or Sunday) on which banks
in the City of London are open for business;
"▇▇▇.▇▇▇ Marks" has the meaning given to it in the Licence;
"Change of Control" means the acquisition of any interest in the shares of
the Seller to any person or group (whether in one transaction or series of
transactions) resulting in that person or group alone or together with
persons acting in concert with such person or group (as defined by the City
Code on Takeovers and Mergers) holding the right to exercise 50% or more of
the voting rights at any general meeting of the Seller.
"Company" has the meaning given in Recital (A);
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"Competitor" means:
(a) the Retailers or successors thereof; or
(b) any company or joint venture in which the Retailers have a controlling
interest; or
(c) any other retailer with annual sales in the United Kingdom which
exceed either the Physical Threshold or Virtual Threshold or any
successor thereof;
"Completion" means completion of the sale and purchase of the Shares
pursuant to this Agreement in accordance with its terms;
"Completion Accounts" has the meaning given in paragraph 1 of Schedule 2;
"Completion Date" means the date of this Agreement;
"Completion Net Liabilities" has the meaning given in clause 3.2;
"Deed of Covenant" means a deed in the form set out in Schedule 4;
"Disclosure Files" means the files of disclosure information accompanying
the Disclosure Letter;
"Disclosure Letter" means the letter of the same date as this Agreement
from the Seller to the Purchaser referred to in clause 5.2;
"General Warranties" means the Warranties set out in Schedule 3;
"ICTA 1988" means the Income and Corporation Taxes Act 1988;
"Information Technology" means all computer and data processing systems
including equipment, hardware, software, communication systems, databases
and third party software and hardware owned and/or used by the Company in
its business other than the Licensed Technology;
"Intellectual Property" means patents, trade marks, service marks, utility
models, design rights, topography rights, copyrights, database rights,
inventions, trade secrets and other confidential information, know-how,
business or trade names, get-up, and all other intellectual property rights
(whether or not the same are registered or capable of registration) and all
applications and rights to apply for or for the protection of any of the
foregoing other than in respect of the ▇▇▇.▇▇▇ Marks and Intellectual
Property related to the Licensed Technology;
"Intellectual Property Rights" means the Intellectual Property including in
the Information Technology which or the subject matter of which is owned or
used by the Company or as to which the Company otherwise has any rights or
which otherwise relates to the business of
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the Company other than in respect of the ▇▇▇.▇▇▇ Marks and Intellectual
Property related to the Licensed Technology;
"Key Suppliers" means ClientLogic, Kingfield Heath Limited and ▇▇▇▇▇▇ Micro
(UK) Limited;
"Licence" means the technology and trademark licence agreement dated the
same date as this Agreement between the Seller and the Company in the form
set out in Schedule 6;
"Licensed Technology" means the technology which is the subject of the
Licence used or intended to be used by the Company in its business;
"Physical Threshold" means annual sales in the United Kingdom in excess of
(Pounds)100,000,000 through physical retail outlets.
"Purchaser Group" means any subsidiary or holding company of the Purchaser
("subsidiary" and "holding company" having the meaning given to them by
s736 Companies Act 1985).
"Purchaser's Auditors" means PricewaterhouseCoopers of ▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇;
"Purchaser's Solicitors" means Lovells of ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ (Ref: A4/FLeG);
"Retailers" means Tesco; J Sainsbury; Safeway; ASDA/Walmart; ▇▇▇▇▇▇▇▇▇▇;
Iceland; Alldays; Kingfisher; House of Fraser; Debenhams; Arcadia; ▇▇▇▇▇ &
▇▇▇▇▇▇▇; Next; Boots; MFI; DFS; ▇▇▇▇▇▇; Selfridges; Matalan; ▇▇▇; ▇ ▇▇▇▇▇;
Dixons Stores Group; Otto Versand; Littlewoods; Findel; Redcats; Staples
and Viking;
"Seller's Auditors" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇;
"Seller's Solicitors" means Freshfields Bruckhaus ▇▇▇▇▇▇▇▇ of ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ (Ref: NVR);
"Service Agreement" means the service agreement dated the same date as this
Agreement between the Seller and the Company in the form set out in
Schedule 8;
"Shares" means the entire issued share capital of the Company, being 10
Ordinary Shares of (Pounds)1 each;
"Stock Exchange" means London Stock Exchange Limited;
"Tax Covenant" means the tax covenant in the form set out in Schedule 5;
"TCGA" means the Taxation of Chargeable Gains Act 1992;
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"Virtual Threshold" means annual sales in the United Kingdom in excess of
(Pounds)5,000,000 through on-line or mail order retail media or through
physical fulfilment infrastructure owned (or contracted) in the United
Kingdom; and
"Warranties" means the General Warranties set out in Schedule 3 and the
warranties in part B of Schedule 5;
1.2 In this Agreement, unless the context otherwise requires:
(a) references to this Agreement or any other document include this
Agreement or such other document as varied, modified or supplemented
in any manner from time to time;
(b) references to any party shall, where relevant, be deemed to be
references to or to include, as appropriate, their respective
permitted successors, assigns or transferees;
(c) references to recitals, clauses and schedules and sub-divisions of
them are references to the recitals and clauses of, and schedules to,
this Agreement and sub-divisions of them respectively;
(d) references to any enactment include references to such enactment as
re-enacted, amended or extended on or before the date of this
Agreement and any subordinate legislation made from time to time under
it;
(e) references to a "person" include any individual, company, corporation,
firm, partnership, joint venture, association, organisation,
institution, trust or agency, whether or not having a separate legal
personality;
(f) references to the one gender include all genders, and references to
the singular include the plural and vice versa;
(g) headings are inserted for convenience only and shall be ignored in
construing this Agreement;
(h) the words "company", "subsidiary", "subsidiary undertaking" and
"holding company" have the meanings given to them by the Companies Act
1985 as amended by the Companies Act 1989; and
(i) references to "control" (other than in relation to change of control)
shall have the meaning given to it by section 840 of the Income and
Corporation Taxes Act 1988.
1.3 The Recitals and Schedules to this Agreement form part of it.
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1.4 Any reference in this Agreement to a document being "in the agreed terms"
is to a document in the terms agreed between the parties and for
identification purposes only signed or initialled by them or on their
behalf on or before the date of this Agreement.
2. Sale and purchase of Shares
2.1 On and subject to the terms of this Agreement, the Seller shall sell with
full title guarantee the Shares and transfer and the Purchaser shall
purchase all the Shares on and with effect from Completion, free from all
charges, liens, equities, encumbrances, claims or other third party rights
of any nature whatsoever and together with all rights which are now, or at
any time hereafter may become, attached to them (including without
limitation the right to receive all dividends and distributions declared,
made or paid on or after Completion).
2.2 The Purchaser shall not be obliged to complete the purchase of any of the
Shares unless the sale to it of all the Shares is completed simultaneously.
3. Consideration
3.1 Subject to clauses 3.3 and 3.4, the total consideration payable by the
Purchaser to the Seller shall be the sum of US$4,000,000 which shall be
paid in cash on Completion by telegraphic transfer into the following
accounts of or as otherwise directed by the Seller:
(a) Bank name: HSBC; Branch: Cathedral Square, Peterborough; Sort code:
40-36-15; Account name: eVentures Limited; Account number: ▇▇▇▇▇▇▇▇;
Amount: US$3,750,000;
(b) Bank name: ▇▇▇▇▇ Fargo Bank; Branch: Irvine CA; Account name: ▇▇▇.▇▇▇;
Account number: 4047098827; ABA routing number: ▇▇▇▇▇▇▇▇▇; Amount:
US$250,000.
3.2 Receipt in the accounts stated in clause 3.1(a) and 3.1(b) of the amounts
stated therein shall be an absolute discharge to the Purchaser, who shall
not be concerned with any agreement between the Seller and eVentures
Limited.
3.3 The provisions of Schedule 2 shall be applied by the Seller in drawing up
the Completion Accounts and the Adjusted Price Statement which sets out the
amount of the Completion Net Liabilities. For the purposes of this
Agreement "Completion Net Liabilities" means the amount of the total
liabilities (including the Bridge Finance) less the total assets of the
Company as shown by the Completion Accounts once final and binding between
the parties. For the avoidance of doubt the Seller shall not be liable for
excess Completion Net Liabilities where they arise as
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(a) a result of the Purchaser's failure to pay operating expenses between
4 January 2001 and Completion or to apply the Bridge Finance; or
(b) as a result of any excess in actual operating expenses above the
estimated operating expenses between 4 January 2001 and Completion.
3.4 Provided that the operating expenses of the Company between 4 January 2001
and Completion (as shown in the Completion Accounts) are equal to or less
than the amount owing to the Purchaser in respect of the Bridge Finance at
Completion, then to the extent that the Completion Net Liabilities are
greater than (Pounds)5,450,000:
(a) the amount of the consideration shall be reduced by an amount equal to
the excess of the Completion Net Liabilities above (Pounds)5,200,000;
and
(b) the Seller shall pay to the Purchaser by way of a reduction of the
Consideration for the Shares an amount equal to such excess in cash.
3.5 To the extent that the Seller fails to make any payment due under clause
3.4(b) to the Purchaser, the Purchaser may, at its option (and to the
extent that any sums which are not so reimbursed exceed in aggregate
(Pounds)100,000) set off such sums against the revenue rental due to the
Seller under the Licence.
3.6 The payments to be made pursuant to clause 3.4 shall be made within 5
Business Days of the Completion Net Liabilities being determined in
accordance with Schedule 2 and shall be satisfied in cash in sterling by
telegraphic transfer to a bank account notified by the Purchaser to the
Seller.
3.7 The Purchaser undertakes to procure (by the provision of sufficient funding
to the Company or by a payment on the Company's behalf) that the Company
pays at Completion:
(a) News International plc the sum of (Pounds)3,452,000, being the amount
owed by the Company to News International plc;
(b) eVentures the sum of (Pounds)471,584, being the amount owed by the
Company to eVentures; and
(c) the Seller the sum of (Pounds)544,000, being the amount owed by the
Company to the Seller;
and the Seller shall, upon fulfilment of the payment obligations under
paragraphs (a), (b) and (c) of this sub-clause, deliver (or procure the
delivery of) deeds of release executed by each of the Seller, News
International plc and eVentures to the Company.
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4. Completion
4.1 Completion shall take place immediately after the signing of this Agreement
at the offices of the Purchaser's Solicitors or at such other place and/or
on such other date as may be agreed between the parties.
4.2 On Completion the Seller shall cause to be delivered to the Purchaser:
(a) duly executed transfers of all the Shares by the registered holder
thereof in favour of the Purchaser (or as it may direct) together with
the share certificates relating to such shares;
(b) such other documents (including any power of attorney under which any
document required to be delivered under this clause has been executed
and any waivers or consents) as the Purchaser may require to enable
the Purchaser or its nominees to be registered as holders of the
Shares;
(c) the Common Seal (if any), Certificate of Incorporation, Certificates
of Incorporation on Change of Name and Statutory Books of the Company;
(d) the Deed of Covenant duly executed by the Seller;
(e) written assurances in the agreed form from the Key Suppliers relating
to the continued supply to the Company after Completion;
(f) written resignations (with effect from the end of the relevant board
meeting referred to in clause 4.3) of the directors and the secretary
of the Company, resigning from their respective offices and employment
with the Company, each executed as a deed in the agreed terms;
(g) an unqualified letter of resignation from the auditors of the Company
complying in all respects with the requirements of sections 392 and
394 Companies Act 1985, accompanied by a written confirmation that
such auditors have no claims for unpaid fees or expenses;
(h) service agreements in the agreed terms duly executed by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇;
(i) the Licence and the Service Agreement duly executed by the Seller; and
(j) the deeds of release referred to in clause 3.7.
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4.3 On Completion the Seller shall cause a Board Meeting of the Company to be
duly convened and held at which:
(a) the said transfers of the Shares shall be approved for registration
(subject only to the transfers being duly stamped at the cost of the
Purchaser);
(b) the Deed of Covenant, and the service agreements referred to in clause
4.2(h) shall be approved and executed by the Company;
(c) all existing instructions to the Company's bankers, bank mandate forms
and authorities shall be revoked and shall be replaced with
alternative instructions, bank mandates forms and authorities in such
form as the Purchaser may require;
(d) the registered office of the Company shall be changed to ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇;
(e) the accounting reference date of the Company shall be changed to 31
January;
(f) Messrs PricewaterhouseCoopers shall be appointed auditors to the
Company.
4.4 On Completion the Purchaser shall, following compliance by the Seller with
clause 4.2:
(a) pay the sum of US$4,000,000 into the designated accounts in
satisfaction of the consideration payable to the Seller for the
Shares;
(b) deliver to the Seller's Solicitors a counterpart of the Deed of
Covenant duly executed by the Purchaser;
(c) pay (or procure the payment of) the amounts referred to in clause 3.7.
4.5 On Completion, the provisions of the Tax Covenant shall take effect.
5. Warranties
5.1 The Seller hereby warrants to the Purchaser in the terms of the Warranties.
5.2 The Warranties are given subject to the matters fairly disclosed in the
Disclosure Letter, the Disclosure Files and in the documents annexed
thereto.
5.3 Each of the Warranties set out in Schedule 3 shall be separate and
independent and save as expressly provided to the contrary shall not be
limited by reference to or inference from any other warranty.
5.4 Where any statement set out in Schedule 3 is qualified by reference to the
Seller's awareness or as qualified in some other manner having
substantially the same effect, such statement
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shall be deemed to be qualified by the additional statement that the Seller
has made reasonable enquiries prior to the date hereof in respect of the
subject matter of the relevant statement but shall include no other express
or implied statement representation or Warranty as to the state of the
Seller's knowledge or awareness.
5.5 The Purchaser has entered into this Agreement in reliance upon the
Warranties. Liability under any Warranty shall not be confined to breaches
discovered before Completion nor in any way be modified or discharged by
Completion.
5.6 The Seller agrees with the Purchaser for itself and as trustee for the
Company and their respective officers and employees to assign to the
Purchaser all the rights, remedies or claims which it has or may have in
respect of any misrepresentations in or omissions from any information or
advice supplied or given by the Company or its respective officers,
employees or agents and on which the Seller has relied in giving the
Warranties, preparing the Disclosure Letter and/or entering into this
Agreement and/or the documents referred to herein.
5.7 The Seller shall not be liable for any breach of a General Warranty to the
extent that it relates to tax unless the claim is brought under the Tax
Warranties.
6. Limitation on claims
6.1 The Seller shall have no liability in respect of any breach or non-
fulfilment:
(a) of any of the General Warranties, unless the Purchaser has served on
the Seller a written notice on or before 1 May 2002; or
(b) of any of the Tax Warranties, unless the Purchaser has served on the
Seller a written notice on or before the seventh anniversary of the
date of Completion in each case giving such details of the claim as
the Purchaser then has including the Purchaser's then best estimate of
the amount of the Seller's liability in respect thereof.
6.2 No claim shall be made in respect of any breach of any of the Warranties (a
"Warranty Claim") unless the aggregate amount of all such claims exceeds
(Pounds)75,000 PROVIDED that if such aggregate amount does exceed
(Pounds)75,000, the Seller's liability shall not be limited to the excess
and the whole amount shall be recoverable in full.
6.3 The Seller shall not be liable for any individual Warranty Claim unless the
liability of the Seller in the respect of such claim exceeds
(Pounds)25,000.
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6.4 The total amount of the Seller's liability in respect of all Warranty
Claims shall be limited to and in no event exceed US$1,750,000.
6.5 The limitations on the liability of the Seller set out in this clause 6
shall not apply to any Warranty Claim if the claim involves any fraud on
the part of the Seller.
6.6 No Warranty Claim shall be made by the Purchaser if and to the extent that
the matter giving rise to the Warranty Claim has been fairly disclosed:
(a) in this Agreement; or
(b) by the Disclosure Letter; or
(c) in the information contained in the Disclosure Files.
6.7 The Seller shall not be liable in respect of any Warranty Claim or claim
under the Tax Covenant if and to the extent that the loss occasioned
thereby has been recovered under an earlier Warranty Claim or claim under
the Tax Covenant.
6.8 The Seller shall not be liable in respect of any Warranty Claim or claim
under the Tax Covenant in respect of any matter resulting from a change of
accounting policy or practice of the Purchaser or the Company introduced
after Completion.
6.9 The Seller shall not be liable in respect of any Warranty Claim or claim
under the Tax Covenant to the extent that any such claim arises or is
increased as a result of:
(a) any increase in rates of tax; or
(b) any change in legislation; or
(c) any change in practice of the Inland Revenue, HM Customs and Excise
or any other relevant taxation or excise authorities
in each case occurring after Completion.
6.10 The Seller shall not be liable in respect of any Warranty Claim or claim
under the Tax Covenant to the extent that the matter giving rise to such
claim was provided for or taken into account in the Completion Accounts.
6.11 Any amount paid by the Seller in respect of any Warranty Claim or claim
under the Tax Covenant shall be deemed to reduce the amount of the
consideration paid by the Purchaser for the Shares.
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6.12 Nothing contained in this clause 6 shall limit the Purchaser's or the
Company's obligations to mitigate any loss or damage arising out of any
circumstances giving rise to a Warranty Claim or which it may incur in
consequence of any breach of Warranty.
6.13 The sole remedy of the Purchaser for any breach of any of the Warranties
or any other breach of this Agreement by the Seller shall be an action for
damages. The Purchaser shall not be entitled to rescind or terminate this
Agreement in any circumstances whatsoever, other than in exercise of any
such rights in respect of fraudulent misrepresentation.
6.14 The Seller shall not be liable for any Warranty Claim which would not have
arisen but for an act, omission or transaction carried out after the
Completion Date by the Purchaser or its respective directors, employees or
agents or successors in title otherwise than in the ordinary course of
business.
6.15 If the Seller pays to the Purchaser or the Company an amount in discharge
of a Warranty Claim for breach of Warranty or in respect of a claim under
the Tax Covenant and the Purchaser or the Company subsequently recovers
whether by payment, discount, credit or relief or otherwise from a third
party (including any insurer or tax authority) a sum which is referable to
the matter giving rise to the Warranty Claim or obtains a relief (as
defined in the Tax Covenant) which is so referable, the Purchaser or the
Company shall within 5 Business Days of receiving any such sum repay to
the Seller:
(a) an amount equal to the sum recovered from the third party less any
reasonable costs and expenses incurred by the Purchaser or the Company
in recovering the same and any tax suffered on the receipt; or
(b) if the figure resulting under paragraph (a) above is greater than the
amount paid by the Seller to the Purchaser or the Company in respect
of the relevant Warranty Claim such lesser amount as shall have been
so paid by the Seller.
6.16 The Purchaser agrees for itself and on behalf of the Company with the
Seller that each of them shall not be entitled to recover damages or
obtain payment, reimbursement, restitution or indemnity more than once in
respect of any one shortfall, damage, deficiency, breach or other set of
circumstances which give rise to one or more Warranty Claims, and for this
purpose recovery by the Purchaser or the Company shall be deemed to be
recovery by each of them.
6.17 If the Purchaser becomes aware of any third party claim, potential claim,
matter or event (a "third party claim") which might lead to a Warranty
Claim for breach of Warranty being made, subject to being fully
indemnified to its reasonable satisfaction by the Seller against all
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reasonable out-of-pocket costs and expenses incurred by the Purchaser in
relation to the Claim but not including the Claim itself, the Purchaser:
(a) shall procure that notice of such third party claim is promptly given
to the Seller;
(b) shall not make (or, as appropriate, shall co-operate to procure that
the Company shall not make) any admission of liability, agreement or
compromise with any person, body or authority in relation to any such
third party claim without prior consultation and with the prior
agreement of the Seller which shall not be unreasonably withheld or
delayed;
(c) shall take (or, as appropriate, shall co-operate to procure that the
Company shall take) such action as the Seller may reasonably request
to avoid, dispute, resist, appeal, compromise or defend such third
party claim or any adjudication in respect of that third party claim;
and
(d) if so required by the Seller in writing, shall ensure (or, as
appropriate, shall co-operate to procure that the Company shall
ensure), at the request in writing of the Seller, that the Seller is
placed in a position to take on or take over the conduct of all
proceedings and/or negotiations of whatsoever nature arising in
connection with the third party claim in question and provide (or, as
appropriate, co-operate to procure that the Company provides) such
information and assistance as the Seller may reasonably require in
connection with the preparation for and conduct of such proceedings
and/or negotiations.
6.18 The Purchaser shall indemnify the Seller from and against any liabilities
which arise from the employment by the Purchaser of the Company's
employees on or after the Completion Date and against any liabilities
which are attributable to any breach or default by the Purchaser in
relation to any of the Employees.
6.19 Where, prior to the Completion Accounts being agreed in accordance with
the provisions of Schedule 2 the Purchaser notifies the Seller of a Claim,
the subject matter of which could also be included in the Completion
Accounts, the Purchaser agrees that the subject matter of the Claim shall
be dealt with under the Completion Accounts mechanism rather than as a
Claim.
6.20 Where the Purchaser is able to bring a claim for breach of Warranty
against the Seller (a "Warranty Right") and arising out of the same set of
circumstances the Company or the Purchaser's holding company has rights
under the Licence to indemnification (a "Licence Right"), the Purchaser
may, at its option exercise either its Warranty Right or its Licence Right
but in exercising one such right shall be estopped from exercising the
other.
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7. EC Investigation Indemnity
7.1 Subject to clauses 7.2 to 7.5 below, the Seller will indemnify the
Purchaser forthwith upon the Company or the Purchaser being found finally
liable to pay, against all or any loss resulting from any decision or
judgment that prior to Completion the Company has infringed Article 81
and/or Article 82 of the EC Treaty. Such loss shall include (but not be
limited to) any fines or penalties imposed by a competent authority, any
damages awarded by a competent court or tribunal, and reasonable legal and
other advisers' costs incurred in handling any investigations or
proceedings leading to such a decision or judgment.
7.2 For the avoidance of doubt, no sums shall be payable by the Seller under
this clause 7 in respect of any loss attributable to any infringement of
Article 81 and/or 82 of the EC Treaty occurring after Completion or, in the
case of any infringement originally occurring before Completion, in respect
of any loss attributable to the continuation of such infringement after
Completion.
7.3 The Seller undertakes to use its best endeavours promptly to provide any
information or assistance reasonably required by the Purchaser in handling
any such investigations or proceedings.
7.4 Following Completion, the Purchaser undertakes to use its best endeavours
to fully co-operate, and procure that the Company fully co-operates, with
any competent authority in respect of any such investigations or
proceedings.
8. Confidentiality and announcements
8.1 For the purpose of assuring the full benefit of the business and goodwill
of the Company and in consideration of the Purchaser agreeing to buy the
Shares on the terms of this Agreement, the Seller agrees with the Purchaser
as a separate and independent agreement that (save as may be required by
law, and then only to the extent so required) it will not at any time
hereafter divulge (other than in accordance with clause 8.3) confidential
information in relation to the affairs or businesses of the Company which
is not in the public domain and that it will not do anything to harm the
goodwill of the Company.
8.2 In consideration of the Seller agreeing to sell the Shares on the terms of
this Agreement, the Purchaser agrees with the Seller as a separate and
independent agreement that, save as may be required by law, and then only
to the extent so required it will not at any time hereafter divulge (other
than in accordance with clause 8.3) confidential information in relation to
the affairs or business of the Seller which is not in the public domain.
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8.3 No announcement or statement about this Agreement or the subject matter of,
or any matter referred to in, this Agreement shall be made or issued
before, on or after Completion by or on behalf of any of the parties
without the prior written approval of the other parties (such approval not
to be unreasonably withheld or delayed) PROVIDED that nothing shall
restrict the making by the Seller or the Purchaser (even in the absence of
agreement by the other parties) of any statement which may be required by
law or called for by the requirements of the Stock Exchange, or any
applicable exchange or regulatory body but then only to the extent so
required.
9. Further assurance
The Seller shall execute and deliver all such instruments and other
documents and take all such actions as the Purchaser may from time to time
reasonably require in order to give full effect to the provisions of this
Agreement.
10. Interest
If any amount required to be paid under this Agreement is not paid when it
is due, such amount shall bear interest at the rate of 2 per cent per annum
over the base lending rate of Barclays Bank PLC from time to time,
calculated on a daily basis for the period from the relevant due date for
payment up to and including the date of actual payment, as well after as
before any judgment.
11. Continuing obligations and assignment
11.1 Subject to clause 11.2, each of the obligations, Warranties, indemnities
and undertakings accepted or given by the Seller or the Purchaser under
this Agreement or any document referred to herein (the "Obligations")
shall continue in full force and effect notwithstanding Completion taking
place and shall be binding on their respective successors.
11.2 The Purchaser shall not assign or purport to assign any of the rights
under this Agreement unless such assignment is to a member of the
Purchaser's Group. Upon the assignee ceasing to be a member of the
Purchaser's Group or a resolution being passed to wind up the assignee or
upon the assignee receiving a final notice of dissolution (each an
"Event"), all such assigned rights shall immediately be re-assigned to
another member of the Purchaser's Group and those assigned rights shall
lapse unless such re-assignment takes place within five Business Days of
the Event occurring.
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12. Costs
12.1 Each party shall pay its own costs and expenses in relation to the
negotiation, preparation, and implementation of this Agreement (and the
documents referred to herein), including the fees and disbursements of
their respective legal, accountancy and other advisers.
12.2 The Purchaser shall bear all United Kingdom stamp, documentary or transfer
taxes on the acquisition of the Shares.
13. Notices
13.1 Any notice or other communication to be given under this Agreement shall be
in writing, shall be deemed to have been duly served on, given to or made
in relation to a party if it is left at the authorised address of that
party, posted by pre-paid airmail / first class / registered post addressed
to that party at such address, or sent by facsimile transmission to a
machine situated at such address and shall if:
(a) personally delivered, be deemed to have been received at the time of
delivery;
(b) posted to an inland address in the United Kingdom, be deemed to have
been received on the second Business Day after the date of posting
and if posted to an overseas address, be deemed to have been received
on the fifth Business Day after the date of posting; or
(c) sent by facsimile transmission, be deemed to have been received upon
receipt by the sender of a facsimile transmission report (or other
appropriate evidence) that the facsimile has been transmitted to the
addressee;
PROVIDED that where, in the case of delivery by hand or facsimile
transmission, delivery or transmission occurs after 6.00 pm on a Business
Day or on a day which is not a Business Day, receipt shall be deemed to
occur at 9.00 am on the next following Business Day.
13.2 For the purposes of this clause the authorised address of each party shall
be the address set out at the heading of this Agreement or such other
address as that party may notify to the others in writing from time to
time in accordance with the requirements of this clause.
13.3 For the purposes of this clause, any notice or communication should be
marked for the attention of ▇▇▇▇▇ ▇▇▇▇▇▇ on behalf of the Seller or the
Company Secretary, on behalf of the Purchaser.
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14. Severability
If any provision of this Agreement (or of any document referred to herein)
is held to be illegal, invalid or unenforceable in whole or in part in any
relevant jurisdiction the legality, validity and enforceability of the
remaining provisions of this Agreement (or such document) shall not in any
way be affected or impaired thereby.
15. Entire agreement and variation
15.1 This Agreement (together with any documents referred to herein) contains
the entire agreement and understanding of the parties and supersedes all
prior agreements, understandings or arrangements (both oral and written)
relating to the subject matter of this Agreement.
15.2 Each of the parties acknowledges and agrees that:
(a) it does not enter into this Agreement and the documents referred to
herein on the basis of and does not rely, and has not relied, upon any
statement or representation (whether negligent or innocent) or
warranty or other provision (in any case whether oral, written,
express or implied) made, given or agreed to by any person (whether a
party to this Agreement or not) except those expressly set out or
referred to in this Agreement and the documents referred to herein and
the only remedy or remedies available in respect of any
misrepresentation or untrue statement made to it shall be a claim for
breach of contract under this Agreement; and
(b) this clause 15.2 shall not exclude any liability for, or remedy in
respect of, fraudulent misrepresentation by either party.
15.3 No variation, supplement, deletion or replacement of or from this
Agreement or any of its terms shall be effective unless made in writing and
signed by or on behalf of each party.
16. General provisions
16.1 Any waiver of a breach of any of the terms of this Agreement or of any
default hereunder shall not be deemed to be a waiver of any subsequent
breach or default and shall in no way affect the other terms of this
Agreement.
16.2 No failure to exercise and no delay on the part of any party in exercising
any right, remedy, power or privilege of that party under this Agreement
and no course of dealing between the parties shall be construed or operate
as a waiver thereof, nor shall any single or partial exercise of any right,
remedy, power or privilege preclude any other or further exercise
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thereof or the exercise of any other right, remedy, power or privilege. The
rights and remedies provided by this Agreement are cumulative and are not
exclusive of any rights or remedies provided by law.
16.3 Each of the obligations, warranties, representations, indemnities and
undertakings accepted or given by the Seller or the Purchaser under this
Agreement or any document referred to herein shall continue in full force
and effect notwithstanding Completion taking place and shall be binding on
any successor of the Seller.
16.4 This Agreement may be executed in any number of counterparts and by the
parties to it on separate counterparts, each of which shall be original but
all of which together shall constitute one and the same agreement.
17. Governing law and jurisdiction
17.1 This Agreement (together with all documents to be entered into pursuant to
it which are not expressed to be governed by another law) shall be governed
by, construed and take effect in accordance with English law.
17.2 The courts of England shall have exclusive jurisdiction to settle any
claim, dispute or matter of difference which may arise out of or in
connection with this Agreement (including without limitation claims for
set-off or counterclaim) or the legal relationships established by this
Agreement.
17.3 Each of the parties hereto agrees that in the event of any action between
any of the parties hereto being commenced in respect of this Agreement or
any matters arising under it, the process by which it is commenced, (where
consistent with the applicable court rules) may be served on them in
accordance with clause 13.
17.4 The Seller shall at all times maintain an agent for service of process in
England and Wales and hereby appoints Law Debenture Corporate Services
Limited of Fifth Floor, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ as such agent. Any
writ, judgment or other notice of legal process shall be sufficiently
served on the Seller if delivered to such agent at the address shown above
or such other address notified by them in writing to the Purchaser. The
Seller hereby undertakes not to revoke the authority of such agent and if
for any reason such agent no longer serves as agent for the Seller, the
Seller shall promptly appoint another person as its agent with an address
for service within the jurisdiction of the English Courts and shall notify
the Purchaser thereof.
17.5 If any dispute arises out of this agreement the parties will attempt to
settle it by mediation in accordance with the Centre for Dispute Resolution
(CEDR) Model Mediation Procedure.
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18. No Rights under Contracts (Rights of Third Parties) Act 1999
18.1 A person who is not a party to this Agreement shall have no right under the
Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.
AS WITNESS the hands of the parties or their duly authorised representatives the
day and year first above written.
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Schedule 1
The Company
A. ▇▇▇.▇▇▇ Limited
1. Registered number 3709785
2. Registered office ▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
3. Date of incorporation 8 February 1999
4. Class of company Private, limited by shares
5. Authorised share capital (Pounds)100
6. Issued share capital 10 Ordinary Shares of (Pounds)1 each
7. Directors'/Shareholders' Loans None
8. Directors ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
9. Secretary ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
10. Accounting reference date 31 December
11. Auditors ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
12. Registered Members ▇▇▇.▇▇▇ Inc.
eVentures Partnership
eVentures Limited
13. Mortgages and Charges None
14. Subsidiary Undertakings None
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Schedule 2
The Completion Accounts
1. The Seller and the Purchaser, insofar as it lies within their respective
powers, shall procure that as soon as reasonably practicable after
Completion and in any event within 40 Business Days of the Completion Date
the accounts of the Company as at the Completion Date are prepared by the
Company in order to determine net liabilities (the "Completion Accounts")
and the Seller's Auditors will review and report to the Company thereon.
2. The Seller shall use reasonable endeavours to procure that the Seller's
Auditors will report to the Seller whether in their opinion the Completion
Accounts have been prepared in accordance with generally accepted UK
accounting principles and policies, consistent with the statutory audited
accounts of the Company which have been drawn up to show a true and fair
view of the Company's financial position at 31 December 2000. For the
avoidance of doubt the Completion Accounts shall not reflect any deferred
tax asset in respect of corporation tax losses arising on or prior to
Completion.
3. For information, the estimated balance sheet of the Company as at the date
of this Agreement is attached hereto as Schedule 7.
4. The Seller will prepare a statement of the adjusted price payable to confirm
the Completion Net Liabilities under clauses 3.3 and 3.4 (the "Adjusted
Price Statement").
5. The Purchaser and the Purchaser's Auditors shall have the right to receive
information from the Seller in relation to the preparation of the Completion
Accounts. Such parties shall also have access to the Seller's Auditors and
their working papers prepared in connection with the audit of the Completion
Accounts, subject to hold harmless arrangements.
6. Upon completion of the preparation and audit of the Completion Accounts the
Seller shall submit copies thereof to the Purchaser for their approval and
use reasonable endeavours to provide responses (containing a reasonable
level of detail) to any reasonable question or comments that the Purchaser
and their professional advisers may have in respect thereof.
7. The Seller and the Purchaser shall endeavour to agree and approve in writing
the Completion Accounts and the Adjusted Price Statement within 20 Business
Days of the submission to the Purchaser of the Completion Accounts (with
such adjustment thereto, if any, as may be agreed in writing between the
Seller and the Purchaser).
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8. If the Sellers and the Purchaser cannot agree and approve the Completion
Accounts and Adjusted Price Statement within 20 Business Days of the
Purchasers receiving the draft Completion Accounts (inclusive of the day of
receipt) the matter shall be referred to an Umpire, who shall act as an
expert and not as an arbitrator, and the decision of the Umpire as to any
matter so in dispute and as to the proper contents of the Completion
Accounts and of the Adjusted Price Statement shall be final and binding
between the parties. The provisions of paragraphs 8 and 9 of this Schedule
shall apply in relation to any reference to such Umpire.
9. The Umpire shall be a Chartered Accountant or firm of Chartered Accountants
agreed on by the Sellers and the Purchaser or, if they cannot agree on such
within seven days of any party giving notice in writing to the others that
it desires an Umpire to be appointed, such Chartered Accountant or firm of
Chartered Accountants as may be nominated on the application of any of them
by the President or other senior officer for the time being of the Institute
of Chartered Accountants in England and Wales.
10. The parties hereby agree and undertake that if any disagreement or dispute
under Schedule 2 to this Agreement is referred to the Umpire:
(a) the parties will each use all reasonable endeavours to co-operate with
the Umpire in resolving such disagreement or dispute, and for that
purpose will provide to him all such information and documentation as
he may reasonably require;
(b) the Umpire shall have the right to seek such professional assistance
and advice as he may require in fulfilling his duties; and
(c) the fees of the Umpire (and any professional fees incurred by him)
shall be borne as to half by the Purchaser and as to half by the
Sellers provided that if either party fails to pay its share of any
such fee within seven days of the relative invoice being rendered to
the parties or either of them the other party shall be entitled to pay
the full amount of the fee and thereupon to recover one half thereof
from the first-mentioned party as a debt due and payable on demand.
11. Upon the resolution of any dispute concerning the contents of the draft
Completion Accounts or the draft Adjusted Price Statement (howsoever
resolved) the draft Completion Accounts and the draft Adjusted Price
Statement shall be amended to accord with the resolution of any such dispute
and such Completion Accounts and such Adjusted Price Statement so amended
shall be final and binding between the parties.
12. The Purchaser may by written notice served on the Seller at any time within
40 Business Days of the Completion Date elect that the Completion Net
Liabilities for the purposes of
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Clause 3.3 of the Agreement, shall be deemed to be (Pounds)5,200,000 and it
shall thereupon be deemed that the Completion Accounts and the Adjusted
Price Statement showing the Completion Net Assets to be (Pounds)5,200,000
were each prepared and became final and binding between the parties on such
date.
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Schedule 3
General Warranties
The Warranties in this Schedule are the General Warranties.
In this Schedule:
(a) "connected" has the meaning attributed to it by section 839 ICTA 1988; and
(b) "Encumbrance" includes any charge, debenture, mortgage, pledge, lien,
assignment, hypothecation, security interest, title retention or other
security agreement or arrangement.
A. Preliminary
The information set out in the Recitals and in Schedule 1 is true and
accurate in all material respects and (so far as the Seller is aware) there
is no matter which renders any of such information untrue, inaccurate,
incomplete or misleading.
B. The Accounts
B.1 The audited accounts at 31 December 2000 show a true and fair view of the
Company's results for the year and financial position at that date.
C. Business since 31 December 2000
C.1 Since 31 December 2000:
(a) the Company has carried on its business in the ordinary and usual
course and so as to maintain the same as a going concern;
(b) the Company has not acquired or disposed of or agreed to acquire or
dispose of any assets or assumed or incurred or agreed to assume or
incur any liabilities (including contingent liabilities) otherwise
than in the ordinary course of its business and which in either case
are material to the business of the Company;
(c) no resolution of the Company's members has been passed, save for those
representing the ordinary business of an annual general meeting, and
no dividend or other distribution has been declared, made or paid by
the Company;
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D. Share Capital and constitution of the Company
D.1 The Register of Members of the Company contains complete and accurate
records of its members from time to time and all issues and transfers of
shares in the capital of the Company have been registered in accordance
with the Articles of Association of the Company from time to time in force,
all such transfers being duly stamped prior to registration.
D.2 The Company has not exercised or purported to exercise any lien over any of
its issued share capital.
D.3 There is no option, right of pre-emption, right or obligation to acquire,
redeem or convert or Encumbrance on, over or affecting the share capital
(whether issued or unissued and whether or not authorised capital) of the
Company and neither has the Seller or the Company agreed to give or create
any of the foregoing and, so far as the Seller is aware, no person has
claimed to be entitled to any of the foregoing.
D.4 The copy of the Memorandum and Articles of Association annexed to the
Disclosure Letter is up to date, true and complete and has annexed thereto
a copy of every resolution, agreement or other document required to be
annexed thereto pursuant to section 380 Companies Act 1985. The Company is
in possession of all necessary books, records and papers relating to its
material assets and business and all such records have been properly and
accurately kept and completed.
E. Subsidiary Undertakings and related operations
E.1 The Company is not the holder or beneficial owner of any shares or
securities of any other person (whether incorporated in the United Kingdom
or elsewhere) and has not agreed to acquire any such shares or securities.
E.2 The Company is not and has not agreed to become a member of any
partnership, joint venture, consortium or other incorporated or
unincorporated association and has no branch, agency, place of business or
establishment outside the United Kingdom.
F. The Seller
F.1 So far as the Seller is aware, no liability has been incurred, directly or
indirectly, by the Company to the Seller or (save in respect of
remuneration in the ordinary course) to any director of the Company (or any
person connected with any of them) or by the Seller (or other such person)
to the Company except for the amount owed by the Company to the Seller
which is to be repaid in accordance with clause 3.6.
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F.2 So far as the Seller is aware, there is not outstanding, and there has not
at any time during the last two years been outstanding, any arrangement to
which the Company is a party and in which the Seller or any director or any
person connected with any of them (other than Softbank or Newscorp) is or
has been interested, whether directly or indirectly, except for the Service
Agreement and the Licence.
F.3 So far as the Seller is aware, the Seller has not had any interest,
directly or indirectly, in any business, firm or company which has a close
trading relationship with or is in competition with the Company.
G. Assets
G.1 So far as the Seller is aware and unless otherwise stated in this Agreement
or the Disclosure Letter, the Company is the absolute owner of and is in
actual possession of all the assets used in the course of its business with
full right and power to sell the same in each case with full title
guarantee. No person has the right to call for any payment in respect of
any of those assets and the Company has not created or agreed to create any
Encumbrance over any part of its undertaking or assets.
G.2 So far as the Seller is aware and unless otherwise stated in this Agreement
or the Disclosure Letter, no material asset used in the course of the
Company's business and hired, leased or rented by or obtained on hire-
purchase by the Company has been or is liable to be retaken into possession
by the owner thereof following a default by the Company.
G.3 So far as the Seller is aware, the fixed assets owned by the Company or
used by it in the course of its business are in all material respects
suitable for the conduct of such business, are in a reasonable state of
repair, having regard to their age and written-down values in the Company's
books of accounts and comply and have complied in all material respects
with all statutes and regulations applicable thereto.
H. Insurance
H.1 All insurance policies relating to the assets and business of the Company
have been disclosed to the Purchaser.
H.2 So far as the Seller is aware, there are no circumstances which could lead
to any liability under such insurance being avoided by the insurers or the
premiums being increased and there is no claim outstanding under any such
policy and (so far as the Seller is aware) there are no circumstances
likely to give rise to such a claim.
-26-
I. Commercial agreements and arrangements.
I.1 The Seller has disclosed to the Purchaser all material contracts,
agreements or arrangements to which the Company is party and all contracts,
agreements or arrangements which any party who is connected to the Seller
(other than Softbank or Newscorp) is also a party.
I.2 So far as the Seller is aware, there are no outstanding liabilities or
commitments on the Company arising from any arrangements for the disposal
of any material shares, property or other assets (other than in the
ordinary course of business) previously owned by the Company.
I.3 The Company has not given any covenants limiting or excluding its right to
do business and/or compete in any area or field (whether limited by
reference to a geographical area or type of business) with any other
person.
I.4 So far as the Seller is aware, neither the Company nor any other party to
any agreement or arrangement with the Company is in default to any material
extent thereunder. So far as the Seller is aware, there are no
circumstances likely to give rise to such a default.
I.5 There are in force no powers of attorney given by the Company and no person
is entitled or authorised (whether as agent or otherwise) to bind or commit
the Company to any obligations outside the ordinary course of the Company's
business.
J. Intellectual Property Rights and Information Technology
General
J.1 So far as the Seller is aware, the Company is the sole and absolute legal
and beneficial owner of the material Intellectual Property Rights and
Information Technology and Intellectual Property in the Licensed Technology
or has the benefit of a valid licence or lease to use the same.
J.2 So far as the Seller is aware, the subject matter of the material
Intellectual Property Rights which has been created by its employees, has
been made or otherwise generated solely by employees of the Company and in
the course of carrying out their normal duties or duties specifically
assigned to them. So far as the Seller is aware, no employee of the
Company has claimed any payment in respect of any of the Intellectual
Property Rights.
J.3 So far as the Seller is aware, all the material Intellectual Property
Rights are valid, subsisting and enforceable and no claims have been made
or intimated challenging their use or such validity, subsistence or
enforceability.
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J.4 So far as the Seller is aware, no claims of the type referred to in
paragraph J.3 have been considered by the Company or the Seller in respect
of any Intellectual Property or information technology of third parties
which is relevant to the Company's business.
J.5 So far as the Seller is aware, there is and has been no infringement or
threatened infringement of any of the Intellectual Property Rights or of
the Intellectual Property in the Licensed Technology by any third party.
J.6 So far as the Seller is aware there has been no infringement of any third
party Intellectual Property and there has been no claim or claims from any
third party or parties that the Intellectual Property Rights and/or
Intellectual Property in the Licensed Technology infringe the Intellectual
Property of any third party.
Licences, etc
J.7 So far as the Seller is aware, save as specifically disclosed in the
Disclosure Letter and other than the Licence, there are no subsisting or
proposed licences or other material arrangements from or with third parties
("Third Party Arrangements") nor are any material Third Party Arrangements
required for the exercise of any of the material Intellectual Property
Rights or use of the material Information Technology or for the use or
disclosure of any of the subject matter thereof or otherwise in connection
with the business of the Company nor are there any pending applications for
licences of right or compulsory licences in any jurisdiction.
J.8 So far as the Seller is aware, the Company has at all times complied with
the terms of material Third Party Arrangements including Third Party
Arrangements relating to use or otherwise of the Licensed Technology.
Know-How
J.9 So far as the Seller is aware, all the material know-how comprised in the
material Intellectual Property Rights is adequately documented and of a
confidential nature ("Confidential Know-How"). No part of the Confidential
Know-How has been or will be disclosed to any third party without an
appropriate confidentiality undertaking being obtained from the recipient
and there is no agreement or other arrangement or circumstance under which
any third party can require any such disclosure.
J.10 So far as the Seller is aware, the Company is not in breach of any
material signed confidentiality undertakings.
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K. Compliance and litigation
K.1 The Company has conducted its business in all material respects in
accordance with all applicable laws and regulations of the United Kingdom
and there is no order, decree or judgment of any Court or any governmental
agency of the United Kingdom, any foreign country or any supra-national
authority (including the European Commission) outstanding against the
Company which may have a material adverse effect upon the assets or
business of the Company.
K.2 Save as claimant in proceedings for the collection of debts (not exceeding
(Pounds)10,000 in the aggregate) arising in the ordinary course of its
business, the Company is not now engaged in any litigation or arbitration
proceedings and so far as the Seller is aware there are no litigation or
arbitration proceedings pending or threatened by or against the Company, no
injunction has been granted against the Company, the Company has given no
undertaking to any court or to any third party arising out of any legal
proceedings and so far as the Seller is aware there is no matter or fact in
existence which might give rise to the same or form the basis of any
criminal prosecution against the Company.
K.3 No order has been made or petition presented or resolution passed for the
appointment of an administrator or receiver in relation to the Company, or
for its winding-up, nor has any distress, execution or other process been
levied against the Company.
K.4 Apart from the investigations referred to in clause 7 of this Agreement and
save as specifically disclosed in the Disclosure Letter, neither the
Company nor any agreement, arrangement or practice to which it is a party,
has been the subject of any investigation or inquiry by any governmental,
administrative or regulatory body and so far as the Seller is aware there
are not any circumstances which might give rise to the same.
L. Employees
L.1 The basis of the contractual remuneration payable to employees of the
Company at the date hereof under a contract of service is the same as that
in force at 2 March 2001 and the Company is under no contractual obligation
to increase the rates of remuneration of or make any bonus or incentive or
other payments which are referenced to performance of targets to any of its
employees at any future date. There are no amounts owing to any employee
other than remuneration and annual leave accrued due or reimbursement of
business expenses.
L.2 The particulars of the terms of the contracts of service of all employees
of the Company in or annexed to the Disclosure Letter are accurate in all
material respects.
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L.3 Complete particulars of the total numbers of full time and part time
employees as at 2 March 2001 are specifically disclosed in the Disclosure
Letter and there has been no material change in such numbers since 2 March
2001.
L.4 At the date of this Agreement, the Company is not liable to make any actual
or proposed payment to any employee or former employee by way of damages
(whether for breach of contract or otherwise) or compensation for loss of
office or employment or for redundancy, protective awards, wrongful
dismissal or unfair dismissal or for failure to comply with any order for
the reinstatement or re-engagement of any employee or for any other
liability accruing from the termination of any contract of service (other
than the Company's statutory obligations). The Seller is not aware of any
circumstances which may give rise to a liability to make such a payment.
L.5 There are no employees of the Company employed under contracts of service
which cannot be terminated on six months' notice or less without payment of
compensation (other than a statutory redundancy payment or statutory
compensation for unfair dismissal).
M. Finance
M.1 The total amount borrowed by the Company does not exceed the limits
applicable to its facilities or any other limitation on its borrowing
powers.
M.2 Full and accurate details of all overdrafts, loans or other financial
facilities outstanding or available to the Company are specifically
disclosed in the Disclosure Letter (including details of whether any are
dependent on any guarantee or security provided by any third party) and
true and complete copies of all documents relating thereto are annexed to
the Disclosure Letter.
M.3 The Company has not created or agreed to create any Encumbrance or entered
into or agreed to give or enter into any guarantee, suretyship, indemnity
or similar commitment or agreement for the postponement or subordination of
debt.
M.5 The Company has not repaid or become liable to repay any loan or
indebtedness in advance of its stated maturity; the Company has received no
demand or notice (whether formal or informal) from any lenders of money to
the Company, requiring repayment thereof prior to the due date or
indicating the intention of any such lender to enforce any security which
it may hold over any assets of the Company, and there are no circumstances
likely to give rise to any such demand or notice.
M.6 No overdrafts or other financial facilities of the Company are dependent
upon any guarantee or security provided by any third party.
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N. Consequences of this Agreement
N.1 No one is entitled to receive from the Company any finder's fee, brokerage,
or other commission in connection with the purchase by the Purchaser of the
Shares.
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Schedule 4
Form of deed of covenant
This Deed of Covenant is made the 7th day of March 2001
Between:
(1) ▇▇▇.▇▇▇ Inc a Delaware corporation whose registered office is at ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.▇., (the "Covenantor");
(2) ▇▇▇.▇▇▇ Limited a company registered in England and Wales under number
3709785 whose registered office is at ▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇ (the
"Company");
(3) JLP Victoria Limited a company registered in England and Wales under number
3996267 whose registered office is at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇ (the "Purchaser").
Whereas:
Pursuant to the provisions of an Agreement date today between the Covenantor and
the Purchaser, (the "Sale Agreement") the Purchaser has agreed to acquire the
entire issued share capital of the Company and the Covenantor has agreed to
enter into this Deed.
Operative terms:
1. Interpretation
1.1 In this Deed unless the context or subject matter otherwise requires,
expressions defined in the Sale Agreement shall have the same meanings and
in addition the following expressions shall have the following meanings:
"Marks" means the ▇▇▇.▇▇▇ Marks as defined in the Licence;
"Restricted Activity" means the use in any form or way whatsoever of the
Technology and Marks;
"Restricted Area" means the United Kingdom and Republic of Ireland;
"Restricted Period" means, subject to clause 2.2, a period of four years
from the Completion Date; and
"Technology" means the Licensed Technology;
1.2 The provisions of clauses 1.2 to 1.4 (inclusive) of the Sale Agreement
shall apply in this Deed (with the necessary modifications) as if repeated
in this Deed and set out in full herein.
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2. Covenants
2.1 Subject to clause 2.2 and 2.5, the Covenantor hereby undertakes to each of
the Purchaser and the Company that it will not either alone or jointly with
others, whether as principal, agent, manager, shareholder, independent
contractor or in any other capacity, directly or indirectly through any
other person, for his own benefit or that of others:
(a) at any time during the Restricted Period engage in or carry on or be
concerned or interested in any Restricted Activity within the
Restricted Area in competition with the Company (other than as a
holder for investment of no more than 10 per cent of any class of
shares or securities dealt in on a recognised stock exchange); or
(b) at any time during the Restricted Period knowingly canvass or solicit
orders for the supply of any goods or services the same or
substantially similar to or otherwise competing with those supplied in
the normal course of the Restricted Activity from any person who has
been a customer of the Company during the 12 months preceding the
Completion Date, or induce or seek to induce any such person to cease
being a customer of the Company; or
(c) at any time during the Restricted Period do anything knowingly to
assist any Competitor in any material way in carrying on or developing
any Restricted Activity in the Restricted Area; or
(d) within 6 months after Completion solicit or entice away or knowingly
encourage any employee (an "Employee") of the Company and/or the
Purchaser to leave the employment of the Company and/or the Purchaser
(as the case may be), whether or not such Employee would by reason of
so leaving commit a breach of his contract of employment; or
(e) at any time after Completion make use of or disclose to any third
party any confidential information relating to the Purchaser or the
Company or to its or their businesses or affairs or any trade secrets
which is not in the public domain, except if and to the extent that
such disclosure is required by law, but then only to the extent so
required; or
(f) at any time after Completion represent itself or permit itself to be
held out as being in any way connected with or interested in the
business of the Company (other than the ongoing relationship pursuant
to the Licence Agreement and a service agreement between the parties
hereto of even date herewith);
PROVIDED that none of the foregoing restrictions shall prohibit the
Covenantor entering into co-development arrangements with third parties to
co-develop various generic sub-
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component parts to an e-commerce technology solution if such generic sub-
component parts are not used in such a way that they can be aggregated
together.
2.2 In the event that the Covenantor is subject to a Change of Control before
the expiry of a period of 4 years from the Completion Date:
(a) by a Competitor the definition of "Restricted Period" shall mean (i) a
period of 2 years from the Completion Date or (ii) the period from the
Completion Date until the date of Change of Control, whichever is
longer; or
(b) by any person other than a Competitor the definition of "Restricted
Period" shall mean (i) a period of 12 months from the Completion Date
or (ii) the period from the Completion Date until the date of Change
of Control, whichever is longer.
2.3 The Purchaser and the Company hereby undertake to the Seller that they will
not within 6 months after Completion either alone or jointly with others,
whether as principal, agent, manager, shareholder, independent contractor
or in any other capacity, directly or indirectly through any other person,
for their own benefit or that of others solicit or entice away or knowingly
encourage an Employee of the Seller to leave the employment or the Seller,
whether or not such Employee would by reason or so leaving commit a breach
of his contract of employment;
2.4 Each of the covenants contained in clause 2 is entirely separate and
severable and enforceable accordingly. Each of such covenants is considered
fair and reasonable in all the circumstances by the parties but in the
event that any such restriction shall be found to be void or ineffective
but would be valid and effective if some part thereof were deleted or the
duration or area of application reduced such restriction shall apply with
such modification as may be necessary to make it valid and effective.
2.5 The Parties hereto acknowledge that it is not possible to limit all
Internet based inquiries and promotion from or to a geographical territory.
Accordingly, the Covenantor's incidental promotion of its business through
the Internet and/or incidental conduct of its respective business with
third parties located inside the Restricted Area will not constitute a
breach of any of this Deed. Incidental conduct shall include, but not be
limited to general purpose advertising that the Covenantor targets to
person's located outside the Restricted Area, but that reaches a de minimus
percentage of persons located inside the Restricted Area. The parties
intend that, notwithstanding any variance in the application of laws
between different territories, the foregoing will be construed to allow
incidental promotion and business conduct within the Restricted Area to the
same or an equivalent extent as the Covenantor is permitted to engage in
the promotion and conduct of its business outside of the Restricted Area.
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3. General provisions
The following provisions of the Sale Agreement shall apply to this Deed as
if the same had been set out herein in full save that references therein to
the Seller, its address and the Agreement respectively shall be construed as
references to the Covenantor, its address specified in this Deed and this
Deed:
(a) clause 11 Continuing Obligations and Assignment
(b) clause 13 Notices
(c) clause 15.3 Variation
(d) clause 16.1 and 16.2 Waiver
(e) clause 17 Governing law.
4. Claims under Covenant
If any allegation, claim, dispute or matter of difference arises in respect
of this Deed ("Covenant Claim") and the Purchaser and/or the Company has
commenced proceedings to enforce or in respect of a breach or alleged
breach of the Licence arising from the same facts or circumstances which
give rise to the Covenant Claim then the Purchaser and/or the Company, by
bringing proceedings in relation to the Licence, shall be deemed to have
waived their rights in respect of any such Covenant Claim and agree that
they shall not bring any proceedings to enforce or in respect of a breach
of this Deed in relation to such Covenant Claim.
The parties hereto acknowledge that the Covenantor, the Company and the
Purchaser's holding company have entered into a similar agreement under the
Licence pursuant to which if any allegation, claim, dispute or matter of
difference arises in respect of the Licence ("Licence Claim") and the
Covenantor, the Company or the Purchaser's holding company has commenced
proceedings to enforce or in respect of a breach or alleged breach of the
Covenant arising from the same facts and circumstances which give rise the
Licence Claim then the Covenantor, the Company and the Purchaser's holding
company have agreed that they shall be deemed to have waived their rights
in respect of any such Licence Claim and agree that they shall not bring
any proceedings to enforce or in respect of a breach of the Licence in
relation to such Licence Claim.
5. Termination of Licence
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If the Licence is terminated in accordance with its terms, the provisions
of this Deed shall cease to have effect.
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In witness whereof this Deed has been entered into the day and year first before
written.
Executed as a deed for )
and on behalf )
of ▇▇▇.▇▇▇ Inc )
in the presence of: )
Executed as a deed for )
and on behalf )
of JLP Victoria Limited )
in the presence of: )
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SCHEDULE 5
Tax Covenant and Tax Warranties
The Warranties in Part B of this Schedule are the Tax Warranties
Part A - Definitions and Tax Covenant
1. DEFINITIONS
1.1 In this Schedule:
"Accounts Relief" means any Relief taken into account in computing and so
reducing or eliminating any provision for Tax (including deferred Tax)
which appears in the balance sheet in the Completion Accounts or which was
taken into account in the Completion Accounts as an asset;
"ACT" means advance corporation tax within the meaning of section 14 of the
ICTA 1988;
"CAA" means the Capital Allowances Act 1990;
"Demand" means any document issued or any claim made or action taken
whether before or after the date hereof by or on behalf of any person,
authority or body whatsoever (whether of the United Kingdom or elsewhere in
the world) from which it appears to the Purchaser or the Company that the
Company has or may have a Tax Liability;
"Event" means any transaction, act, event or omission of whatever nature;
"FA" means Finance Act;
"Group Relief" means:
(a) relief the subject of a surrender or claim pursuant to Chapter IV of
Part X of the ICTA 1988;
(b) advance corporation tax the subject of a surrender or claim pursuant
to section 240 of the ICTA 1988; and
(c) any tax refund the subject of a surrender or claim pursuant to section
102 of the FA 1989;
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"Instalment Regulations" means the Corporation Tax (Instalment Payments)
Regulations 1998;
"Post-Completion Relief" means any Relief which arises to the Purchaser or
to the Company as a consequence of any Event occurring or from income,
profits or gains arising after Completion;
"Regulations" means the Value Added Tax Regulations 1995;
"Relief" means any relief, allowance, deduction in computing profits,
credit or right to repayment of Tax (including repayment supplement or
interest thereon) granted by or pursuant to any legislation or otherwise
for Tax purposes whether of the United Kingdom or elsewhere in the world;
"Tax" means any and all forms of taxes, levies, imposts, contributions,
duties and charges in the nature of taxation and all withholdings or
deductions in respect thereof of whatever nature whenever imposed whether
of the United Kingdom or elsewhere (including, for the avoidance of doubt,
National Insurance contribution liabilities in the United Kingdom and
corresponding obligations elsewhere) and whether directly or primarily
chargeable against, recoverable from or attributable to the Company or any
other person including all fines, penalties, charges and interest relating
to the same;
"VAT" means value added tax;
"VATA" means the Value Added Tax Act 1994.
1.2 References to income or profits or gains shall include any other measure by
reference to which Tax is computed.
1.3 References to income or profits or gains earned, accrued, arising or
received by any person shall include income or profits or gains which are
for the purposes of any Tax treated as earned, accrued, arising to or
received by such person.
1.4 References to income or profits or gains earned, accrued, arising or
received on or before a particular date (including, without limitation,
Completion) or in respect of a particular period shall include income or
profits or gains which are for the purposes of any Tax treated as earned or
accrued, arising or received on or before that date or in respect of that
period.
1.5 References to the occurrence of Events on or before a particular date
(including, without limitation, Completion) or in respect of a particular
period shall include Events which are for the purposes of any Tax treated
as having occurred or existed at or before that date or in respect of that
period.
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1.6 References to the occurrence of any Event on or before Completion shall
include the combined result of two or more Events the first of which shall
have occurred (or pursuant to this paragraph shall be treated as having
occurred) on or before Completion outside the ordinary course of the normal
business of the Company and the second or subsequent one or more of which
occurs after Completion (i) in the ordinary course of the normal business
of the Company as that business is carried on immediately before Completion
or (ii) pursuant to a legally binding obligation of the Company incurred
prior to Completion or (iii) pursuant to an obligation imposed by any law
or (iv) with the agreement or at the request of the Seller or any member of
the Seller's group.
1.7 References to any Tax liability of the Company shall include:
(a) liabilities of the Company to make payments of or in respect of Tax;
(b) the denial, loss, use or set off in whole or in part of any Accounts
Relief which would, but for such denial, loss, use or set off, have
been available to the Company after Completion;
(c) the use or setting off in whole or in part against income, profits or
gains earned, accrued, arising or received on or before Completion, or
Tax thereon, of any Post-Completion Relief;
1.8 References to the "Claimant" are references to whichever of the Purchaser
or its successors in title or assigns is making a claim or receiving a
payment pursuant to this schedule.
1.9 References in this schedule to paragraphs are to paragraphs in Part A of
this schedule unless otherwise stated.
2. COVENANT
2.1 Subject as hereinafter expressly provided, the Seller hereby covenants with
effect from Completion, to pay by way of reduction, to the extent possible,
of the purchase price hereunder, to the Purchaser an amount equal to:
(a) any Tax liability of the Company arising in respect of or as a
consequence of any Event or Events occurring on or before Completion
or in respect of or by reference to any income, profits or gains
earned, accrued, arising or received on or before Completion;
(b) any inheritance tax which:
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(i) is at Completion a charge on any of the shares or assets of the
Company or gives rise to a power to sell, mortgage or charge any
of the shares or assets of the Company; or
(ii) after Completion becomes a charge on or gives rise to a power to
sell, mortgage or charge any of the shares or assets of the
Company, being a liability in respect of additional inheritance
tax payable on the death of any person within seven years after a
transfer of value effected before completion,
and in determining for the purposes of this paragraph 2.1(c) whether a
charge on or power to sell, mortgage or charge any of the shares or
assets of the Company exists at any time, the fact that the
inheritance tax is not yet payable, or may be paid by instalments,
shall be disregarded, and such Tax shall be treated as becoming due,
and a charge or power to sell, mortgage or charge as arising, on the
date of the transfer of value or other date or event on or in respect
of which it becomes payable or arises, and the provisions of section
213 of the Inheritance Tax Act 1984 shall not apply thereto;
(c) any liability to pay for Group Relief or to repay, in whole or in
part, any payment previously made for Group Relief pursuant to any
arrangement or agreement entered into prior to Completion;
(d) the loss of the right to receive any payment for Group Relief to the
extent that such right to payment is provided for as an asset in the
Completion Accounts;
(e) any Tax liability of the Company in respect of Tax for which the
Company is not primarily chargeable, which arises in consequence of
the failure to discharge such liability on the part of any company
which has at any time (whether before or after Completion) been a
member of a group (as defined from time to time for any Tax purposes)
of which the Company has at any time prior to Completion been a member
and, including, without limitation, any Tax liability arising to the
Company pursuant to section 767A or 767AA of the ICTA, section 190 of
the TCGA or section 132 of the Finance Act 1988; and
(f) all costs and expenses properly incurred by the Purchaser and/or the
Company in connection with any such Tax liability of the Company, or
Demand from which it appears to the Purchaser or the Company that any
such Tax liability may arise or has arisen, or in taking or defending
any action under this covenant such costs and expenses to include
reasonable compensation for time spent in connection with such matters
as aforesaid by employees of the Purchaser and/or the Company.
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2.2 For the purposes of this covenant the amount of a Tax liability of the
Company falling within paragraph 1.7(b) or 1.7(c) of this schedule shall be
taken to be as follows:
(a) in the case of a Tax liability within paragraph 1.7(b):
(i) where such Accounts Relief is a right to repayment of Tax, the
amount of the Relief so denied, lost, used or set off;
(ii) where such Accounts Relief is a deduction from or set off
against income, profits or gains, or Tax thereon, the Tax that
would otherwise have been saved for the accounting period in
which the Accounts Relief arose but for such denial, loss, use
or set off; or
(iii) if in such accounting period no Tax would otherwise have been
saved because of an insufficiency of income, profits or gains,
or Tax thereon, against which such Accounts Relief could have
been offset, the Tax that would otherwise have been saved for
the accounting period or periods in which income, profits or
gains, or Tax thereon, arises or arose, against which such
Accounts Relief could have been offset but for such denial,
loss, use or set off,
and in either case 2.2(a)(ii) or 2.2(a)(iii), on the assumption that
the Accounts Relief in question would have been offset in priority to
any other Relief available in such period or periods; and
(b) in the case of a Tax liability within paragraph 1.7(c), the amount of
Tax for which the Company would, but for such use or setting-off, have
been liable and in respect of which a claim could have been made
against the Seller under this covenant.
3. LIMITATIONS AND EXCLUSIONS
3.1 Without prejudice to the limitations contained in clause 6 of this
Agreement which apply to this Tax Covenant, the Seller shall not be liable
under the covenants contained in paragraph 2.1(a) in respect of any Tax
liability of the Company (or in respect of any costs and expenses arising
therefrom under paragraph 2.1(f)):
(a) (subject to paragraph 3.3) unless the Purchaser has served on the
Seller a written notice on or before the seventh anniversary of the
Completion Date giving such details of the claim as the Purchaser then
has;
(b) to the extent that it would not have arisen but for a voluntary act of
the Purchaser (or person deriving title from it) or the Company after
Completion (which, for the
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avoidance of doubt, shall not include the presentation for stamp duty
purposes of any document executed before Completion) which the
Purchaser knew would give rise to the Tax liability and which could
reasonably have been avoided, unless such act was carried out:
(i) pursuant to an obligation of the Company incurred prior to the
Completion Date; or
(ii) in compliance with any law, regulation or request of any
competent authority for Tax purposes; or
(iii) with the agreement or at the request of the Seller; or
(iv) in the ordinary course of business of the Company or the
Purchaser.
(c) to the extent that provision or reserve in respect of that Tax
liability has been made in the Completion Accounts, or the Tax
liability was taken into account in the preparation of the Completion
Accounts; or
(d) to the extent that the Tax liability was paid or discharged before
Completion, or such payment or discharge was taken into account in the
preparation of the Completion Accounts; or
(e) to the extent that the Tax liability comprises interest or penalties
arising by virtue of an underpayment of Tax prior to Completion,
insofar as such underpayment would not have been an underpayment but
for a bona fide estimate made prior to Completion of the amount of
income, profits or gains to be earned, accrued or received after
Completion proving to be incorrect; or
(f) to the extent that the Tax liability arises as a result of a change
after Completion in any accounting policy, any Tax reporting practice,
or the length of any accounting period for Tax purposes, of the
Company, other than a change which is necessary in order to comply
with the law or generally accepted accounting principles applicable to
the Company at Completion; or
(g) to the extent that such Tax liability arises as a result of the
Company's failing to submit the returns and computations required to
be made by it or not submitting such returns and computations
otherwise than on a proper basis, in each case after Completion.
3.2 The limitations set out in paragraph 3.1(a) on the liability of the Seller
in relation to claims under this covenant shall not apply to any claim
which involves substantiated allegations, made by any competent authority
for Tax purposes, of any fraudulent act or omission or of
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any wilful default or negligent conduct on the part of the Company or the
Seller prior to Completion.
4. MANNER OF MAKING AND CONDUCT OF CLAIMS
4.1 If the Purchaser or the Company shall become aware of any Demand which
appears to the Purchaser to be relevant for the purposes of this covenant
or the Tax Warranties the Purchaser shall as soon as reasonably practicable
give notice thereof to the Seller setting out reasonable details of the
Demand.
4.2 If the Seller shall, within 14 days of the date of any notice given to it
under paragraph 4.1 of any such Demand, indemnify and secure the Purchaser
and the Company to the Purchaser's satisfaction against all losses, costs,
interest, damages and expenses and any further liability to Tax which may
be incurred thereby, then the Purchaser shall procure that the Company will
(except in a case where fraudulent wilful or negligent conduct is alleged
by any Tax authority) take such action as the Seller may reasonably and
promptly by written notice request to avoid, dispute, resist, appeal or
compromise any Demand; provided that where the Tax liability which is the
subject of the Demand has to be paid before an appeal can be made or before
any other action requested by the Seller can be taken, the Purchaser shall
not be obliged to procure the Company to take any such action until the
Seller shall have paid to the Purchaser an amount equal to the said
liability, and in connection with any action so requested by the Seller:
(a) the appointment of solicitors and other professional advisers to the
Company shall be subject to the prior written approval of the
Purchaser, such approval not to be unreasonably withheld or delayed;
(b) the Seller shall ensure that no correspondence, pleading or other
document is sent, transmitted, issued, entered into or in any way
published in connection with the relevant Demand by the Seller or its
advisers without the prior approval of the Purchaser, such approval
not to be unreasonably withheld or delayed;
(c) the Seller shall submit no computations or returns, nor make any
settlement or compromise of the subject matter of the Demand, nor
agree any matter in the conduct of any dispute in relation thereto
which is likely to affect the amount of the Demand, or the future
liability of the Company to Tax, without the prior written approval of
the Purchaser, such approval not to be unreasonably withheld or
delayed;
(d) if any dispute arises between the Purchaser and the Seller as to
whether any Demand should at any time be settled in full, or contested
in whole or in part, such dispute shall be referred for determination
to a Barrister, of at least 10 years call at
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the English Bar with relevant experience, appointed by agreement
between the Purchaser and the Seller or (if they do not agree) upon
the application by either party to the President for the time being of
The Law Society, whose determination shall be final. The Barrister so
appointed shall be asked to advise whether, in his opinion, (acting as
an expert and not as an arbitrator), an appeal against the Demand
would have a reasonable prospect of success and shall be instructed,
if the dispute relates to a Demand issued by a Tax authority outside
the United Kingdom, to obtain such advice from professional advisers
of the relevant jurisdiction as he thinks necessary in order to arrive
at his opinion, and also to determine how the costs of obtaining his
opinion should be allocated between the parties hereto. If, but only
if, such opinion is in the affirmative shall an appeal be made and
that Demand not then settled. Any further dispute arising between the
parties as to whether any further appeal should be pursued following
determination of an earlier appeal (whether or not in favour of the
Company) shall be resolved in a similar manner; and
(e) save as otherwise expressly provided herein, the Purchaser shall
procure that the Company shall give the Seller all reasonable co-
operation and assistance for the purposes of taking such action as
aforesaid.
4.3 If the Seller does not request the Purchaser to take any action within 14
days as aforesaid, or the Purchaser and the Company shall not be
indemnified at any time and secured as provided in paragraph 4.2 or Counsel
shall advise that an appeal against the relevant Demand does not have a
reasonable prospect of success, or the Seller otherwise fails to fulfil its
obligations hereunder, the Purchaser and the Company shall be free to take
such action in relation to the Demand as it or they may in its or their
absolute discretion think fit.
5. PAYMENT OF CLAIMS
5.1 Payments by the Seller pursuant to the covenants in paragraph 2 shall be
made on the days specified in paragraph 5.2 below.
5.2 The days referred to in paragraph 5.1 are as follows:
(a) if the Tax liability giving rise to a claim under this covenant
involves an actual payment of Tax by the Company, the day which is the
later of five Business Days after demand is made therefor by or on
behalf of the Claimant, and three Business Days before the date on
which that Tax becomes due and payable to the relevant Tax authority;
(b) if the Tax liability giving rise to a claim under this covenant does
not involve an actual payment of Tax:
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(i) if involving the denial, loss, use or setting off in whole or in
part of an Accounts Relief which is a right to repayment of Tax,
the day which is the later of five Business Days after demand is
made therefor by or on behalf of the Claimant, and the day on
which such Tax would otherwise have been repaid;
(ii) if involving the denial, loss, use or setting off of any other
Accounts Relief within paragraph 2.2(a), the day which is the
later of five Business Days after demand is made therefor by or
on behalf of the Claimant, and the day on which the Tax that
would otherwise have been saved becomes due and payable to the
relevant Tax authority;
(iii) if involving the use or setting-off of any Post-Completion
Relief within paragraph 2.2(b) the day which is the later of
five Business Days after demand is made therefor by or on behalf
of the Claimant, and the day on which the Tax saved thereby
would otherwise have become due and payable to the relevant Tax
authority;
(c) if involving a payment for, or repayment of a payment for, Group
Relief, the day which is the later of five Business Days after demand
is made therefor by or on behalf of the Claimant, and three Business
Days before that payment or repayment is due and payable;
(d) in any other case, three Business Days after the date on which demand
is made therefor by or on behalf of the Claimant.
5.3 For the purposes of this paragraph 5, the date on which an amount of
corporation tax (the "Corporation Tax") does or would become due and
payable by a company, being the Company or the Purchaser (the "Relevant
Company"), shall be determined to be:
(a) in any accounting period of the Relevant Company ending on or after 1
July 1999 in which the Relevant Company is a "large company" within
the meaning of the Instalment Regulations, the date or dates upon
which the Corporation Tax would be provided to be due and payable by
Regulations 4 and 5 of the Instalment Regulations on the assumption
that the Corporation Tax payable by the Relevant Company is the "total
liability" of the Relevant Company for that period within the meaning
of the said Regulations 4 and 5; or
(b) in any other accounting period of the Relevant Company, the date which
is nine months following the end of the accounting period.
5.4 For the purposes of this paragraph 5, references to the day on which an
amount of Tax which is not UK corporation tax becomes due and payable to
the relevant Tax authority shall be the
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first day on which such Tax is required by law to be paid without incurring
any penalty or liability for interest in respect thereof.
6. TAX RETURNS AND COMPUTATIONS
Without prejudice to paragraph 4, the Purchaser or its duly authorised
agents shall be responsible for, and have the conduct of preparing,
submitting to and agreeing with the relevant Tax authorities all VAT,
corporation Tax and PAYE returns and computations of the Company, including
(without limitation) claims and/or surrenders by way of Group Relief, for
all VAT prescribed accounting periods, Tax accounting periods or income Tax
years (as the case may be) of the Company which began prior to Completion
and which ended or end prior to, on or after Completion but the date for
submission of which pursuant to the applicable law or regulation falls
after Completion and in connection therewith:
(a) all returns, computations, documents and substantive correspondence
relating thereto shall be submitted in draft form by the Purchaser to
the Seller or its duly authorised agents for comment;
(b) the Seller or its duly authorised agent shall comment within 7 days of
such submission but if the Purchaser has not received any comments
within 7 days, the Seller and its duly authorised agents shall be
deemed to have approved such draft documents;
(c) the Purchaser shall take into account all reasonable comments and
suggestions made by the Seller or its duly authorised agents.
7. NO WITHHOLDINGS, ETC
7.1 All sums payable by the Seller hereunder shall be paid free of and without
any rights of counterclaim or set off, and without deduction or withholding
on any ground whatsoever, save only as may be required by law. If any such
deduction or withholding is required by law the Seller shall be obliged to
pay to the Purchaser such amount as will ensure that, after any such
deduction or withholding has been made, the Purchaser shall have received a
sum equal to the amount that the Purchaser would otherwise have received in
the absence of any such deduction or withholding, as reduced by any credit
to which the Purchaser may be entitled on account of such deduction or
withholding.
7.2 If any competent authority for Tax purposes charges to Tax any sum paid
(the "original payment") to the Purchaser hereunder the Seller shall be
obliged to pay to the Purchaser such additional amount (the "additional
payment") as will ensure that, after the payment of
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the Tax so charged on the original payment and any Tax chargeable on the
additional payment, there shall remain a net sum equal to the amount of the
original payment, such additional payment to be paid three Business Days
after the Purchaser has served notice that Tax on the original payment has
become due and payable, or would have become due and payable but for the
availability of a Relief.
8. CORRESPONDING SAVINGS AND REFUNDS
8.1 The Seller may require the auditors for the time being of the Company to
certify, at its request and expense, the amount of any saving of Tax by the
Company (a "Relevant Saving") for a period falling after Completion by
virtue of any Relief arising in respect of an event occurring or period
ending before Completion (other than an Accounts Relief) and the Purchaser
shall provide, or procure that the Company provides, any information or
assistance required for that purpose by the auditors. For the purposes of
this paragraph 8.1:
(a) a Relief arising before Completion shall be deemed to be utilised in
priority to a Relief arising on or after Completion; and
(b) the amount of any Relevant Saving shall be determined as though an
accounting period of the Company ended at Completion in accordance
with section 12 of the ICTA 1988.
8.2 Subject to paragraph 8.4 below:
(a) any Relevant Saving shall first be set against any payment then due
from the Seller under this Schedule or for breach of any Tax Warranty;
(b) to the extent there is an excess, a refund shall be made to the Seller
by the Purchaser of any previous payment or payments made by the
Seller under this Schedule or for breach of any Tax Warranty (and not
previously refunded under this Schedule) up to the amount of the
excess; and
(c) to the extent that the excess referred to in sub-paragraph (b) is not
exhausted under that sub-paragraph, the remainder of that excess shall
be carried forward and set against any future payment or payments
which become due from the Seller under this Schedule or for breach of
any Tax Warranty.
8.3 Either the Seller or the Purchaser may, at its expense, require any
certificate produced in accordance with paragraph 8.1 above (whether or not
previously amended under this paragraph 8.3) to be reviewed by the auditors
for the time being of the Company if there are relevant circumstances or
facts of which it was not aware, and which were not taken into
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account, at the time when such certificate was produced, and to certify
whether the certificate remains correct or whether it should be amended.
8.4 If following a request under paragraph 8.3 the certificate is amended, the
revised amount of Relevant Saving shall be substituted for the purposes of
paragraph 8.2, and any adjusting payment that is required shall be made
forthwith.
8.5 If any Tax liability which has resulted in a payment having been made by
the Seller under this covenant or for breach of any of the Tax Warranties
has given rise to a Relief (other than an Accounts Relief) for the Company
or the Purchaser which would not otherwise have arisen, then:
(a) the Purchaser shall procure that full details of such Relief are given
to the Seller as soon as reasonably practicable; and
(b) to the extent that the liability of the Purchaser or the Company to
make an actual payment of or in respect of Tax is reduced by reason of
such Relief from the amount that such liability would have been but
for the availability of such Relief, the Purchaser, if so requested by
the Seller, shall, on the later of:
(i) the date when the Purchaser or the Company would have been under
an obligation to pay the Tax liability so reduced; and
(ii) the date when such reduction is agreed by the relevant Tax
authority,
make a repayment to the Seller of an amount equal to the lower of the
amount by which such liability is so reduced and the amount of the
payment referred to at the beginning of this paragraph 8.5 made by the
Seller.
8.6 If the Seller at any time pays to the Purchaser an amount pursuant to a
claim under this covenant or under the Tax Warranties and the Purchaser or
the Company is or becomes entitled to recover from some other person (other
than the Company or the Purchaser, but including any Tax authority) any sum
in respect of the matter giving rise to such claim (other than by reason of
any Accounts Relief or Post-Completion Relief), the Purchaser, if so
required by the Seller, will (and will procure that the Company will), at
the cost of the Seller and upon the Seller providing security to the
reasonable satisfaction of the Purchaser against all costs which may
thereby be incurred, take all reasonable steps to enforce such recovery
(provided that the Company and the Purchaser shall not be obliged to take
any action which they reasonably consider to be prejudicial to their
material interests), and the Purchaser shall promptly following such
recovery repay to the Seller the lesser of:
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(a) the sum so recovered by the Purchaser or the Company from such other
person (including sums recovered in respect of costs and any interest
or repayment supplement received in respect of the sum recovered, but
less any costs of recovery not previously reimbursed and less any Tax
chargeable on the sum recovered); and
(b) the amount referred to above paid by the Seller to the Purchaser.
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Part B - Tax Warranties
1. Accounts
All liabilities for Tax, whether actual, contingent, deferred, quantified,
disputed or otherwise, of the Company measured by reference to income,
profits or gains earned, accrued or received on or before 31 December 2000,
or arising in respect of an Event occurring on or before that date, are
fully provided for or, as appropriate, disclosed in the Accounts.
2. Position since 31 December 2000
Since 31 December 2000:
(a) the Company has not engaged in any transaction, and no Event has
occurred, which has given rise or will give rise to a liability to Tax
(or which, but for the availability of any Relief, would have given or
would give rise to such a liability) other than Tax in respect of the
normal income or receipts of the Company arising from transactions
entered into by it in the ordinary course of business;
(b) the Company has not made, or incurred any liability to make, any
payment which will not be deductible for the purposes of corporation
tax;
(c) no Event has occurred in relation to the Company:
(i) which will or may give rise to a liability to corporation tax on
chargeable gains; or
(ii) to which the provisions of section 17 of the TCGA (non arm's
length transactions) apply; or
(iii) which has or may have the effect of crystallising a liability to
Tax which, had such Event been planned or predicted at 31
December 2000, should have been reflected in the provisions
for deferred tax contained in the Accounts; and
(d) no accounting period (as defined in section 12 of the ICTA 1988) of
the Company has ended.
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3. Compliance
(a) All necessary information, notices, returns, particulars, declarations,
entries, claims for Reliefs, and computations have been properly and
duly submitted on time by the Company to the relevant Tax authority and
such submissions are true and accurate in all material respects, have
been prepared on a proper basis, and are not the subject of any
question or dispute nor are likely to become the subject of any
question or dispute regarding liability or potential liability of the
Company to any Tax or regarding the availability to the Company of any
Relief;
(b) Since incorporation, the Company has not been the subject of any
investigation, audit or disclosure by or involving any investigation
unit of any Tax authority, and has not paid or become liable to pay any
penalty, surcharge, fine or interest in respect of Tax, and there are
no circumstances which make it likely that the Company will, in the
foreseeable future, be so subject, or will incur any such liability.
4. The Disclosure Letter contains full details of all claims, withdrawals of
claims, notifications, disclaimers or elections assumed to have been made
for the purposes of the provisions or reserves for Tax included in the
Accounts that have not actually been made at the date hereof, and of any
current agreements or arrangements between the Company and any Tax authority
for its taxation on any concessionary basis (other than pursuant to
published extra-statutory concession or practices).
5. All Tax for which the Company is liable (in so far as such Tax ought to have
been paid) has been paid, the Company has duly deducted all amounts from any
payments from which Tax falls to be deducted at source, and has duly paid or
accounted for such amounts to the relevant Tax authority.
6. Residence/overseas activities
The Company is and has always been resident in the United Kingdom for the
purposes of taxation and is not and has never been resident in any other
jurisdiction, or traded through a branch, agency or permanent establishment
situated outside the United Kingdom.
7. Secondary liabilities
The Company is not, and so far as the Seller is aware will not become,
liable to pay any Tax or to be deprived of any Relief otherwise available to
it, or to make reimbursement or
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indemnity in respect of any Tax, for which some other company or person is
or was primarily liable.
8. Distributions, etc
The Company has not:
(a) made any distribution or deemed distribution within the meanings of
sections 209, 210 or 418 of the ICTA 1988 except as provided for in
the Accounts;
(b) repaid, redeemed or purchased or agreed to repay, redeem or purchase
any of its share capital; or
(c) capitalised or agreed to capitalise in the form of shares or
debentures any profits or reserves of any class or description, or
otherwise issued or agreed to issue share capital otherwise than
wholly for new consideration (as defined in section 254 of the ICTA
1988).
9. Capital allowances
The aggregate book value of each of the assets of the Company, exclusive of
any value attributable to an asset in excess of its cost, on which an
entitlement to Industrial Building Allowances or other allowances in
respect of capital expenditure has arisen under the CAA, in or adopted for
the purposes of the Accounts, does not exceed the aggregate residue of
expenditure or written down value attributable to such assets for the
purposes of that Act, and the aggregate book value (exclusive of any value
attributable to an asset in excess of its cost) of plant and machinery
allocated to a pool of plant and machinery on which an entitlement to
capital allowances has arisen under Part II of the CAA does not exceed the
written-down value of the qualifying expenditure in respect of each such
pool under that Act.
10. Chargeable gains
The book value in or adopted for the purposes of the Accounts as the value
of each of the assets of the Company on the disposal of which a chargeable
gain or allowable loss could arise does not exceed the amount deductible
under section 38 of the TCGA plus an indexation allowance computed as
though each asset were disposed of on the date of signing of this
Agreement.
11. Close Company
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The Company is not, nor has it been since its incorporation a close company
within section 414 of the ICTA 1988.
12. Group Relief, etc
(a) The Disclosure Letter contains full details of all surrenders,
transfers, claims and agreements for surrenders, transfers or claims
for any amounts by way of Group Relief including any assessment or
adjustment of assessment as may be necessary in accordance with
section 411A of the ICTA 1988 together with details of all payments
for Group Relief made or received since incorporation of the Company.
(b) To the extent that the provision for Tax, including deferred tax, in
the Accounts assumes that the Company will benefit from any such
surrender, transfer or claim, it has the legally enforceable right to
the relevant benefit, without any obligation to make any payment not
provided for in the Accounts. To the extent that the Accounts assume
that the Company will receive payment for any such surrender, transfer
or claim, it has the legally enforceable right to receive that
payment, without any obligation to make any surrender, transfer or
claim, the effect of which is not reflected in the Accounts.
13. Consequences of leaving a group
No charge to Tax under section 179 of the TCGA or otherwise, and no
contingent liability pursuant to section 179(6) of the TCGA, will arise in
the Company as a result of entering into and Completion of this Agreement.
14. VAT
The Company is separately registered for VAT purposes and has never been
treated as a member of a group under section 43 of the VATA.
The Company:
(a) makes no supplies other than taxable supplies or supplies outside the
scope of VAT with the right to recover input tax for the purposes of
VAT;
(b) obtains credit for all input tax paid or suffered by it;
(c) is not the grantor or grantee of any interest in land in respect of
which an election has been made to waive exemption from VAT; and
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(d) has no interest in any capital items to which Regulation 113 of the
Regulations applies or could apply.
15. Stamp duty
All documents which establish or are necessary to establish the title of
the Company to any asset, or to enforce any rights, and which attract stamp
duty or any similar foreign tax or duty, have been properly stamped, and
the Company has duly paid all stamp duty and similar taxes or duties in
other countries to which it is, has been, or may be made, liable.
16. PAYE, National Insurance
The Company has paid all National Insurance contributions and sums payable
to the Inland Revenue under the PAYE system, and all amounts of a
corresponding nature payable to any foreign tax authority, which are due
and payable up to the date hereof, and has made all deductions and
retentions and retained all records which it is required to make and retain
under the laws and regulations relating to National Insurance, PAYE, and
corresponding obligations outside the United Kingdom.
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Schedule 6
Form of Licence
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Schedule 7
Balance Sheet of the Company
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Schedule 8
Form of Service Agreement
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Signed by )
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for and on behalf of )
▇▇▇.▇▇▇ Inc )
Signed by )
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for and on behalf of )
JLP Victoria Limited )