Document:

EX-10.1

 

TRUST AGREEMENT

BETWEEN

ABERCROMBIE & FITCH CO.

AND

WILMINGTON TRUST COMPANY

OCTOBER 16, 2006

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	I.
	 	TRUST FUND	 	 	1	 
	 
	 	 	 	 	 	 
	II.
	 	PAYMENTS TO TRUST BENEFICIARIES	 	 	2	 
	 
	 	 	 	 	 	 
	III.
	 	THE TRUSTEE’S RESPONSIBILITY REGARDING PAYMENTS TO A TRUST BENEFICIARY WHEN AN EMPLOYER COMPANY IS INSOLVENT	 	 	3	 
	 
	 	 	 	 	 	 
	IV.
	 	PAYMENTS TO COMPANY	 	 	4	 
	 
	 	 	 	 	 	 
	V.
	 	INVESTMENT OF TRUST FUND	 	 	5	 
	 
	 	 	 	 	 	 
	VI.
	 	INCOME OF THE TRUST	 	 	6	 
	 
	 	 	 	 	 	 
	VII.
	 	ACCOUNTING BY TRUSTEE	 	 	6	 
	 
	 	 	 	 	 	 
	VIII.
	 	RESPONSIBILITY AND INDEMNIFICATION OF TRUSTEE	 	 	6	 
	 
	 	 	 	 	 	 
	IX.
	 	AMENDMENTS, ETC., TO PLAN	 	 	9	 
	 
	 	 	 	 	 	 
	X.
	 	REPLACEMENT OF TRUSTEE	 	 	9	 
	 
	 	 	 	 	 	 
	XI.
	 	AMENDMENT OR TERMINATION OF AGREEMENT	 	 	10	 
	 
	 	 	 	 	 	 
	XII.
	 	SPECIAL DISTRIBUTIONS	 	 	10	 
	 
	 	 	 	 	 	 
	XIII.
	 	GENERAL PROVISIONS	 	 	11	 
	 
	 	 	 	 	 	 
	XIV.
	 	NOTICES	 	 	13	 

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TRUST AGREEMENT

     This Trust Agreement (this “Agreement”) for the Abercrombie & Fitch Nonqualified Savings and
Supplemental Retirement Plan, the Supplemental Executive Retirement Plan for Michael S. Jeffries
and each and every other plan set forth on Exhibit A (each a “Plan” and collectively the “Plans”)
made as of the 16th day of October, 2006 by and between Abercrombie & Fitch Co., a Delaware
corporation (the “Company”), and Wilmington Trust Company (the “Trustee”).

WITNESSETH:

     WHEREAS, certain individuals (“Participants”) who provide services to the Company, or an
affiliate of the Company (“Affiliate”), may become entitled to benefits under the provisions of the
Plans, as the same have been or in the future may be amended or restated by the Company without
amendment or restatement to this Agreement, or any successor thereto (hereinafter the entity for
which a Participant provided services, including the Company, shall be referred to as the “Employer
Company”);

     WHEREAS, the Plans provide for certain income deferral and other benefits, and the Company
wishes to assure the payment to the Participants and their beneficiaries (the Participants and
their respective beneficiaries are collectively referred to as the “Trust Beneficiaries”) of
amounts due thereunder (the amounts so payable are collectively referred to as the “Benefits”);

     WHEREAS, the Company wishes to establish a trust (the “Trust”) and to transfer to the Trust
certain assets which shall be held subject to the claims of the creditors of each Employer Company
to the extent set forth in Article III until (i) paid in full to all Trust Beneficiaries as
Benefits in such manner and as specified in this Agreement unless a respective Employer Company is
Insolvent (as that term is defined below) at the time that such Benefits become payable or (ii)
otherwise disposed of pursuant to the terms of this Agreement; and

     WHEREAS, an Employer Company shall be considered “Insolvent” for purposes of this Agreement at
such time as the Employer Company (i) is subject to a pending proceeding as a debtor under the
United States Bankruptcy Code, as amended from time to time, or (ii) is unable to pay its debts as
they become due.

     NOW, THEREFORE, the parties establish the Trust and agree that the Trust shall be comprised,
held and disposed of as follows:

I. TRUST FUND

     1.1 Subject to the claims of creditors to the extent set forth in Article III, the Company
shall from time to time and pursuant to the terms of each of the Plans deposit with the Trustee, in
trust, cash or other property acceptable to the Trustee, which shall become the principal of this
Trust, to be held, administered and disposed of by the Trustee as provided in this Agreement.

     1.2 This Trust shall be irrevocable.

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     1.3 The principal of the Trust and any earnings thereon shall be held in trust separate and
apart from other funds of the Company and shall be used exclusively for the uses and purposes set
forth in this Agreement. No Trust Beneficiary shall have any preferred claim on, or any beneficial
ownership interest in, any assets of the Trust prior to the time that such assets are paid to a
Trust Beneficiary as Benefits as provided herein. Any rights created under this Agreement shall be
merely unsecured contractual rights of Trust Beneficiaries with respect to the respective Employer
Company. The obligation of the Employer Companies to pay Benefits pursuant to this Agreement
constitutes merely an unfunded and unsecured promise to pay such Benefits.

     1.4 The Company may at any time and from time to time make additional deposits of cash or
other property in the Trust to augment the principal to be held, administered and disposed of by
the Trustee as herein provided, but no payment of all or any portion of the principal of the Trust
or earnings thereon shall be made to the Company or other person or entity on behalf of the Company
except as herein expressly provided. The Trustee shall have no duty to enforce any funding
obligations of the Company.

     1.5 The Trust is intended to be a grantor trust, within the meaning of section 671 of the
Internal Revenue Code of 1986, as amended (the “Code”), or any successor provision, and shall be
construed accordingly. The purpose of the Trust is to assure that the obligations to the
Participants pursuant to the Plan are fulfilled. The Trust is neither intended nor designed to
qualify under section 401(a) of the Code or to be subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”).

II. PAYMENTS TO TRUST BENEFICIARIES

     2.1 Provided that the respective Employer Company is not Insolvent, the Trustee shall from
time to time, upon the direction of the Company make payments of Benefits to each Trust Beneficiary
from the assets of the Trust in accordance with the direction received from the Company.

     2.2 The Trustee shall continue to pay Benefits to the Trust Beneficiaries in accordance with
Section 2.1 until the assets of the Trust are depleted, subject to Section 11.2. If any current
payment by the Trustee under the terms of this Agreement would deplete the assets of the Trust
below the amount necessary to provide adequately for Benefits to be payable in the future pursuant
to the terms of the related Plan, the Trustee shall nevertheless make the current payment when due.
If, after application of the preceding sentence, amounts in the Trust are not sufficient to
provide for full payment of the Benefits to which any Trust Beneficiary is entitled as provided in
this Agreement, the Company shall make the balance of each such payment directly to the Trust
Beneficiary as it becomes due.

     2.3 The Employer Company or an Affiliate may make payments of Benefits directly to each or any
Trust Beneficiary. The Employer Company or Affiliate shall notify the Trustee in writing of its
decision to pay Benefits directly at least 10 days prior to the time amounts are due to be paid to
a Trust Beneficiary and may be reimbursed from the Trust upon submission of documentation
satisfactory to the Trustee to evidence that the payments were properly made.

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     2.4 Nothing in this Agreement shall in any way diminish any rights of any Trust Beneficiary to
pursue such Trust Beneficiary’s rights as a general creditor of the respective Employer Company
with respect to Benefits or otherwise, and the rights of each Trust Beneficiary under the
respective Plan shall in no way be affected or diminished by any provision of this Agreement or
action taken pursuant to this Agreement, except that any payment actually received by any Trust
Beneficiary shall reduce dollar per dollar amounts otherwise due to such Trust Beneficiary pursuant
to such Plan.

     2.5 The Company shall have the sole responsibility for all tax withholding filings and
reports. The Trustee shall withhold such amounts from distributions as the Company directs and
shall follow the instructions of the Company with respect to remission of such withheld amounts to
the appropriate governmental authorities.

III. THE TRUSTEE’S RESPONSIBILITY REGARDING PAYMENTS TO

A TRUST BENEFICIARY WHEN AN EMPLOYER COMPANY IS INSOLVENT

     3.1 At all times during the continuance of this Trust, the principal and income of the Trust
shall be subject to claims of creditors of the respective Employer Companies to the extent set
forth in this Section 3.1. The Board and the CEO of each Employer Company shall have the duty to
inform the Trustee in writing if either the Board or the CEO of the Employer Company believes that
the Employer Company is Insolvent. If the Trustee receives a notice in writing from the Board or
the CEO of the Employer Company stating that the Employer Company is Insolvent or if a person
claiming to be a creditor of the Employer Company alleges in writing to the Trustee that the
Employer Company has become Insolvent, the Trustee shall independently determine within 30 days
after receipt of such notice whether the Employer Company is Insolvent. In making this
determination, the Trustee may engage the outside accountants of the Employer Company to render an
opinion as to the solvency of the Employer Company and shall be fully protected under Section 8.6
in relying upon the advice of such accountants. In addition, the Employer Company shall provide
the Trustee or its agents, including the outside accountants of the Employer Company, with any
information reasonably requested, and otherwise cooperate with the Trustee or its agents in making
the determination. Pending such determination, or if the Trustee has actual knowledge or has
determined that the Employer Company is Insolvent, the Trustee shall discontinue or refrain from
making payments to any Trust Beneficiary of such Employer Company and hold those Trust assets,
including undistributed principal and income of the Trust, attributable to the Trust Beneficiaries
of such Employer Company for the benefit of the general creditors of such Employer Company.

     3.2 The Trustee shall pay the Trust assets so designated to the extent necessary to satisfy
the claims of the creditors of the Employer Company as a court of competent jurisdiction may
direct. If the Trustee has discontinued or refrained from making payments to any Trust Beneficiary
pursuant to this Section 3.1, the Trustee shall pay or resume payments to such Trust Beneficiary in
accordance with this Agreement if the Trustee has determined that the Employer Company is not
Insolvent, or is no longer Insolvent (if the Trustee initially determined the Employer Company to
be Insolvent), or pursuant to the order of a court of competent jurisdiction. Unless the Trustee
has actual knowledge of Insolvency, or has received notice from the Board of the Employer Company,
the CEO of the Employer Company, or a person claiming to be a creditor of the Employer Company
alleging that the Employer Company is Insolvent, the Trustee shall have no duty to inquire as to
whether the Employer Company is Insolvent and may
rely on information concerning the Insolvency of the Employer Company that has been furnished to
the Trustee by any creditor of the Employer Company or by any person (other than an employee or
director of the Employer Company) acting with apparent or actual authority with respect to the
Employer Company.

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     3.3 If the Trustee is precluded from paying Benefits from the Trust assets pursuant to Section
3.1 and such prohibition is subsequently removed, the Trustee shall pay the aggregate amount of all
Benefits that would have been paid to the Trust Beneficiaries in accordance with this Agreement
during the period of such prohibition, less the aggregate amount of Benefits otherwise paid to any
Trust Beneficiary by the Company or an Affiliate during any such period, together with interest on
the delayed amount determined at a rate equal to the rate actually earned (including, without
limitation, market appreciation or depreciation, plus receipt of interest and dividends) during
such period with respect to the assets of the Trust corresponding to such net amount delayed. The
Company shall instruct the Trustee as to such amounts.

IV. PAYMENTS TO COMPANY

     4.1 Except to the extent expressly contemplated by Section 2.3 and this Article IV, the
Company shall have no right or power to direct the Trustee to return any of the Trust assets to the
Company before all payments of Benefits have been made to all Trust Beneficiaries as provided in
this Agreement. Trustee shall be entitled to rely conclusively upon the Company’s written
certification that all such payments have been made.

     4.2 From time to time, the Company may determine for purposes of this Section 4.2 the maximum
present value of Benefits (regardless of vesting) that could become payable under each of the Plans
(the “Fully Funded Amount”) with respect to all Trust Beneficiaries and the fair market value of
the Trust assets. For purposes of calculating the Fully Funded Amount, (a) with respect to a Plan
that is an account balance plan, the maximum present value of Benefits payable to each Trust
Beneficiary is the value of the account balances (including contributions and earnings through the
last completed calendar quarter) of the Trust Beneficiaries under the Plan and (b), with respect to
a Plan, other than an account balance plan, the maximum present value of Benefits payable to each
Trust Beneficiary shall be the present value (determined as of the last day of the last completed
calendar quarter) of all future Benefits payable under the Plan based on reasonable actuarial
assumptions established by the Company. The Company shall pay the fees of any appraiser engaged to
value any property held in Trust. Thereafter, upon the direction of the Company, the Trustee shall
pay to the Company the excess, if any, of the fair market value of the Trust assets over 110% of
the Fully Funded Amount plus sufficient assets to pay (a) all premiums due and to become due on
any life insurance policies held in the Trust and (b) Trustee fees and expenses, for a period of
the next twenty-four months, provided, however, that such request must be accompanied by a
statement from the Company that sets forth the basis for the determination of such excess and
identifies the professional advisor used to calculate the excess.

     4.3 The Company shall have the right at anytime, and from time to time in its sole discretion,
to substitute assets of equal fair market value for any assets held by the Trust. This right is
exercisable by the Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity. The Trustee shall have no responsibility for
determining whether such right has been properly exercised or for any investment losses that may
result from its exercise.

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V. INVESTMENT OF TRUST FUND

     5.1 The Company shall have sole investment discretion and responsibility for the assets of the
Trust, and the Trustee shall invest and reinvest, and act with respect to, the assets of the Trust
only as directed by the Company in writing from time to time and shall have no investment review
responsibility therefor, and shall not render investment advice to any person in connection with
any investment options.

     5.2 Subject to such written investment guidelines issued by the Company, the Trustee shall
have investment discretion and responsibility for those assets of the Trust for which it accepts
such responsibility in writing to the Company; provided, however, that the Trustee shall not have
investment discretion for any Company stock or insurance policies or contracts, investment
discretion and responsibility for which shall be retained by the Company as provided in Section
5.1.

     5.3 The Trustee shall have the power to invest the assets of the Trust, in accordance with the
provisions of Sections 5.1, 5.2, 5.5 and 5.6. The Trustee shall not be liable for any failure to
maximize income on such portion of the Trust assets as may be from time to time invested or
reinvested as set forth in Sections 5.1, 5.2, 5.5, and 5.6, nor for any loss of principal or income
due to the liquidation of any investment that the Company directs as necessary to make payments or
to reimburse expenses under the terms of this Agreement.

     5.4 The Trustee shall have all rights conferred upon trustees under Delaware law with respect
to the investment of the trust assets.

     5.5 Unless directed otherwise by Company, the Trustee is specifically authorized to invest
idle, or otherwise uninvested cash in the service class shares of the Wilmington Prime Money Market
Portfolio (the “Prime MM Portfolio”), a money market mutual fund managed by an affiliate of the
Trustee. Company acknowledges that the Prime MM Portfolio is an entity separate from Wilmington
Trust Company; and that shares in the Prime MM Portfolio are not obligations of Wilmington Trust
Company, are not deposits and are not insured by the FDIC, the Federal Reserve or any other
governmental agency. Wilmington Trust Company or its affiliates are compensated by the Prime MM
Portfolio for investment advisory, custodian, shareholder servicing and other services, and such
compensation is described in detail in the prospectus for the Prime MM Portfolio and is in addition
to the compensation paid to Trustee hereunder with respect to that portion of the Trust fund, if
any, invested in the Prime MM Portfolio.

     5.6 Trustee may hold that portion of the Trust fund as is appropriate for the disbursement of
funds in cash, without liability for interest, notwithstanding Trustee’s receipt of “float” from
such uninvested cash, by depositing the same in any bank (including deposits which bear a
reasonable rate of interest in a bank or similar financial institution supervised by the United
States or a State, even where a bank or financial institution is the Trustee, or is otherwise a
fiduciary of the Plan), subject to the rules and regulations
governing such deposits, and without regard to the amount of such deposit.

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In addition, Trustee is specifically authorized to
invest idle or otherwise uninvested cash in a money market mutual fund selected by Trustee in its
sole discretion, including any money market fund associated with Trustee as described in Section
5.5 above. Notwithstanding anything contained in Sections 5.5 or 5.6, the Trustee shall not make
any investment with respect to idle funds to the extent such investment would not permit the
Trustee to carry out within 5 business days any investment direction of the Company with respect to
such funds.

VI. INCOME OF THE TRUST

     During the continuance of this Trust, all net income of the Trust shall be retained in the
Trust.

VII. ACCOUNTING BY TRUSTEE

     The Trustee shall maintain such books, records and accounts as may be necessary for the proper
administration of the Trust assets, including such specific records as shall be agreed upon in
writing by the Company and the Trustee. On or before the first Friday that follows the last Friday
of each of the Company’s fiscal months (with the Company to periodically provide to the Trustee a
copy of its fiscal calendar), the Trustee shall furnish to the Company such information regarding
the Trust as the Company and the Trustee shall agree upon in writing. Within 60 days following the
removal or resignation of the Trustee, the Trustee shall render to the Company an accounting with
respect to the Trust assets as of the date of such termination, removal or resignation, as the case
may be. Upon the written request of the Company, the Trustee shall deliver to the Company a
written report setting forth the amount held in the Trust and a record of the deposits made to the
Trust by the Company.

     Upon the expiration of 180 days from the date of Trustee’s annual, quarterly, monthly or any
other accounting, the Trustee shall be forever released and discharged from all liability and
further accountability to Company or any other person with respect to the accuracy of such
accounting and all acts and failures to act of Trustee reflected in such accounting, except to the
extent that Company shall, within such 180-day period, file with Trustee specific written
objections to the accounting. Neither Company, any participant nor any other person shall be
entitled to any additional or different accounting by Trustee and Trustee shall not be compelled to
file in any court any additional or different accounting. For purposes of regulations promulgated
by the FDIC, Trustee’s account statements shall be sufficient information concerning securities
transactions effected for the Trust, provided that Company, upon written request, shall have the
right to receive at no additional cost written confirmations of such securities transactions, which
shall be mailed or otherwise furnished by the Trustee within the timeframe required by applicable
regulations.

VIII. RESPONSIBILITY AND INDEMNIFICATION OF TRUSTEE 

     8.1 The duties and responsibilities of the Trustee shall be governed solely by and limited to
those expressly set forth in this Agreement without reference to the terms of the Plan, and no
implied covenants or obligations shall be read into this Agreement against the Trustee. By way of
example, but without limiting the matters subject to the foregoing
sentence, Trustee shall have no responsibility with respect to the administration or interpretation of the Plan,
payment of Plan benefits other than from the assets of the Trust, the calculation of tax to be
withheld, reported and/or paid to taxing authorities and (if applicable pursuant to the fee
schedule) withholding, remitting, or reporting to taxing authorities of taxes other than from
payments made with Trust assets to Plan participants and other than as directed by Company, or
maintaining participant records with respect to the Plan.

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     8.2 If all or any part of the Trust assets are at any time attached, garnished, or levied upon
by any court order, or in case the payment, assignment, transfer, conveyance or delivery of any
such property shall be stayed or enjoined by any court order, or in case any order, judgment or
decree shall be made or entered by a court affecting such property or any part of such property,
then and in any of such events the Trustee shall be authorized to rely upon and comply with any
such order, judgment or decree, and it shall not be liable to the Company or any Trust Beneficiary
by reason of such compliance even though such order, judgment or decree subsequently may be
reversed, modified, annulled, set aside or vacated.

     8.3 The Trustee shall act with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like aims; provided, however, that
the Trustee shall incur no liability to anyone for any action taken or not taken pursuant to the
terms of this Agreement. Each of the Company and the Trustee shall discharge its responsibility
for the investment, management and control of the Trust assets, as applicable, solely in the
interest of the Trust Beneficiaries, for the administration of this Trust, and for the exclusive
purpose of assuring that, to the extent of available Trust assets, and in accordance with the terms
of this Agreement, all payments of Benefits are made when due to the Trust Beneficiaries and all
fees and expenses of the Trust are paid.

     8.4 The Trustee may consult with legal counsel (who shall not be counsel for the Company) to
be selected by it.

     8.5 The Trustee shall be reimbursed by the Company for its reasonable expenses incurred in
connection with the performance of its duties (including, but not limited to, the fees and expenses
of counsel, accountants and others incurred pursuant to Sections 3.1, 8.4 or 8.10 for which the
Company has received prior written notice from the Trustee, provided that such notice shall only be
provided with respect to fees and expenses of an individual professional which Trustee reasonably
expects to exceed $5,000), and shall be paid fees as agreed to in writing by the Company on the one
hand and the Trustee on the other hand, from time to time for the performance of such duties in the
manner provided by Section 8.6.

     8.6 The Company agrees to indemnify and hold harmless the Trustee from and against any and all
liabilities, suits, damages, losses, claims or expenses incurred of whatsoever kind and nature
(including, but not limited to, expenses of investigation and fees and disbursements of legal
counsel to the Trustee, and further including any taxes imposed on the Trust assets or income of
the Trust) arising out of or in connection with the performance by the Trustee of its duties, other
than such damages, losses, claims or expenses arising out of the Trustee’s gross negligence (except
that with respect to the safekeeping of assets or the settlement of trading activity, the standard
shall be negligence) or willful misconduct.

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 The
Trustee shall not be required to undertake or to defend any litigation arising in connection with this Trust
Agreement unless it be first indemnified by the Company against its prospective costs, expenses and
liabilities (including, without limitation, attorneys’ fees and expenses), and the Company agrees
to indemnify the Trustee and be primarily liable for such costs, expenses and liabilities. Any
amount payable to the Trustee under Section 8.5 or this Section 8.6 shall be paid by the Company
promptly upon demand by the Trustee, and in the event that the Company fails to make such payment
within 30 days of such demand, then it shall be paid from the Trust assets. In the event that
payment is made to the Trustee from the Trust assets, the Trustee shall promptly notify the Company
in writing of the amount of such payment. The Company agrees that, upon receipt of such notice, it
will deliver to the Trustee to be held in the Trust an amount in cash equal to any payments made
from the Trust assets to the Trustee pursuant to Section 8.5 or this Section 8.6. The failure of
the Company to transfer any such amount shall not in any way impair the Trustee’s right to
indemnification, reimbursement and payment pursuant to Section 8.5 or this Section 8.6. The
provisions of this Section 8.6 shall survive termination of this Agreement.

     8.7 At the direction of the Company, the Trustee may vote any stock or other securities and
exercise any right appurtenant to any stock, other securities or other property it holds, either in
person or by general or limited proxy, power of attorney or other instrument.

     8.8 The Trustee may hold securities in bearer form and may register securities and other
property held in the Trust fund in its own name or in the name of a nominee, combine certificates
representing securities with certificates of the same issue held by the Trustee in other fiduciary
capacities, and deposit, or arrange for deposit of, property with any depository; provided that the
books and records of the Trustee shall at all times show that all such securities are part of the
assets of the Trust.

     8.9 All rights associated with assets of the Trust shall be exercised by the Trustee or the
person designated by the Trustee, and shall in no event be exercisable by or rest with the
Participants.

     8.10 The Trustee may hire agents, accountants, actuaries, investment advisors, financial
consultants or other professionals, who may be agents, accountants, actuaries, investment advisors,
financial consultants, or otherwise act in a professional capacity, as the case may be, for the
Company or with respect to the Plans, to assist the Trustee in performing any of its duties.
Subject to the requirements of Section 8.5, all expenses in connection with this Section shall be
allowed as authorized expenses of the Trust, and if the Trust assets are not sufficient to cover
such expenses, shall be payable by the Company.

     8.11 (a) As directed by the Company, the Trustee shall take all actions in order to collect
any life insurance, annuity, or other benefits or payments of which the Trust is the designated
beneficiary. The Company shall pay directly all premiums and other charges due thereon in a timely
manner, or direct the Trustee to pay all such premiums and charges that are not so paid by the
Company. To the extent the Trustee has cash or its equivalent readily available for such purpose
or policy loans and/or dividends are available, the Trustee shall pay premiums due with such cash
or its equivalent or policy loans and/or dividends, as directed by the Company. If the Trustee
does not have sufficient cash or its equivalent readily available and
policy loans and dividends are not available, then the Company shall direct the Trustee
to liquidate other assets held in the Trust to generate the necessary cash.

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          (b) The Trust shall be named sole owner and beneficiary of each life insurance policy held in
the Trust and shall have full authority and power to exercise all rights of ownership relating to
the policy, except (i) the Trustee shall have no power, other than in accordance with Articles IV
and XI hereof, to name a beneficiary of the policy other than the Trust, to assign the policy (as
distinct from conversion of the policy to a different form) other than to a successor Trustee, to
lend to any person the proceeds of any borrowing against such policy or to surrender any policy or
allow any policy to lapse at any time when there are other assets in the Trust that can be disposed
of or otherwise used to generate any cash necessary to maintain the policy, and (ii) to the extent
necessary to give effect to the provisions of any split-dollar life insurance arrangement policy,
and the Trustee shall act with respect to any such policy only as directed by the Company.

          (c) The Trustee shall have the power, at the direction of the Company, to exchange that
portion, if any, of the life insurance coverage on any Participant that is in excess of the amount
of such coverage necessary to provide sufficient proceeds to pay the corresponding amount of
Benefits, for additional life insurance coverage on other Participants. At the direction of the
Company, the Trustee shall also have the power to acquire additional life insurance coverage on
Participants through application for new life insurance.

     8.12 Trustee shall have no responsibility or liability with respect to: (a) the truth or
accuracy of any representation or warranty made in any application or related document provided to
the insurer in connection with the issuance or renewal of any insurance policies or insurance
contracts, including any representation that the person on whose life an application is being made
is eligible to have a contract issued on his or her life; (b) the selection or monitoring (ongoing
or periodic) of any insurance policies or insurance contracts held in the Trust or the insurers
issuing such policies or contracts; (c) the payment of premiums with respect to such policies or
contracts (other than out of assets in the Trust in accordance with Section 8.11(a)); or (d) the
exercise of any rights relating to any such policies or contracts except as directed in writing by
Company.

IX. AMENDMENTS, ETC., TO PLAN

     Any amendment, restatement, successor or other change in a Plan or the addition of a new Plan
that would materially increase the responsibilities or liabilities of the Trustee or materially
change its duties shall also require the consent of the Trustee.

X. REPLACEMENT OF TRUSTEE

     The Trustee may resign and be discharged from its duties after providing not less than 90
days’ notice in writing to the Company. The Trustee may be removed at any time upon notice in
writing by the Company. No such removal or resignation shall become effective until the
effectiveness of the acceptance of the Trust by a successor trustee designated in accordance with
this Article X. If no successor trustee is appointed within a
reasonable period of time, the Trustee shall petition a court of competent jurisdiction to appoint a successor trustee.

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Any
successor trustee shall be (or be under common control of) a national banking association with
market capitalization exceeding $500,000,000. Upon the acceptance of the Trust by a successor
trustee, the Trustee shall release all of the moneys and other property (net of a reserve for such
amount as may be necessary for the payment of the Trustee’s fees and expenses incurred prior to
resignation or removal) in the Trust to its successor, who after such time shall for all purposes
of this Agreement be considered to be the “Trustee.” In the event of its removal or resignation,
the Trustee shall duly file with the Company a written statement or statements of accounts and
proceedings as provided in Section 7.1 for the period since the last previous accounting of the
Trust.

XI. AMENDMENT OR TERMINATION OF AGREEMENT

     11.1 This Agreement may be amended at any time and to any extent by a written instrument
executed by the Trustee and the Company; and provided, however, that no amendment shall have the
effect of (a) making the Trust revocable (b) altering Section 8.11(b) or 11.2 hereof or (c)
depriving any Trust Beneficiary of any Benefits already vested under a Plan.

     11.2 The Trust shall terminate at such time as the Trust no longer contains any assets, or
contains assets that, in the sole judgment of the Trustee, are insubstantial in relation to the
actual and potential liabilities of the Trustee to pay Benefits under the terms of this Agreement
and any other amounts to be paid from the assets of the Trust, including, without limitation, the
fees and expenses of the Trustee and counsel. Notwithstanding the previous sentence, if payments
under a Plan with respect to any Trust Beneficiary are the subject of litigation or arbitration,
the Trust shall not terminate and the funds held in the Trust with respect to such Trust
Beneficiary shall continue to be held by the Trustee until the final resolution of such litigation
or arbitration. The Trustee may assume that no Plan is the subject of such litigation or
arbitration unless the Trustee receives written notice from a Trust Beneficiary or the Company with
respect to such litigation or arbitration. The Trustee may rely upon written notice from a Trust
Beneficiary as to the final resolution of such litigation or arbitration.

     11.3 Upon a termination of the Trust as provided in Section 11.2, any assets remaining in the
Trust, less all payments, expenses, taxes and other charges under this Agreement as of such date of
termination, shall be returned to the Company.

XII. SPECIAL DISTRIBUTIONS

     12.1 It is intended that (a) the creation of, transfer of assets to, and irrevocability of,
the Trust will not cause the Plan to be other than “unfunded” for purposes of Title I of ERISA; (b)
transfers of assets to the Trust will not be transfers of property for purposes of Section 83 of
the Code, or any successor provision thereto, nor will such transfers or irrevocability cause a
currently taxable benefit to be realized by a Trust Beneficiary pursuant to the “economic benefit”
doctrine; and (c) pursuant to Section 451 and Section 409A of the Code, or any successor provision
thereto, amounts will be includable as compensation in the gross income of a Trust Beneficiary in
the taxable year or years in which such amounts are actually distributed or made available to such
Trust Beneficiary by the Trustee.

-10-

 

     12.2 Notwithstanding anything to the contrary contained in the Plan, if the Company obtains
an opinion of tax counsel selected by the Company to the effect that based upon any of the
following occurring after the date of this Agreement: (a) change in the federal tax or revenue
laws, (b) a decision in a controlling case, (c) a published ruling or similar announcement issued
by the Internal Revenue Service, (d) a regulation issued by the Secretary of the Treasury, (e) a
decision by a court of competent jurisdiction involving a Trust Beneficiary, or (f) a closing
agreement made under Section 7121 of the Code, or any successor provision thereto, that is approved
by the Internal Revenue Service and involves a Trust Beneficiary, it is more likely than not that
an amount is includible in the gross income of a Trust Beneficiary in a taxable year that is prior
to the taxable year or years in which such amount would, but for this Section 12.2, otherwise
actually be distributed or made available to such Trust Beneficiary by the Trustee, then, to the
extent permitted under Section 409A of the Code and any regulations or other guidance issued
thereunder, the Company shall direct the Trustee to distribute to each affected Trust Beneficiary
an amount equal to the amount determined to be includible in gross income in such prior taxable
year.

     12.3 Notwithstanding anything to the contrary contained in the Plan, if a Trust Beneficiary
provides evidence satisfactory to the Company demonstrating that, as a result of an assertion by
the Internal Revenue Service, a final nonappealable binding determination has been made with
respect to a taxable year of such Trust Beneficiary that an amount is includible in the gross
income of such Trust Beneficiary in a taxable year that is prior to the taxable year in which such
amount would, but for this Section 12.3, otherwise actually be distributed or made available to
such Trust Beneficiary by the Trustee, then, to the extent permitted under Section 409A of the Code
and any regulations or other guidance issued thereunder, the Company shall direct the Trustee to
distribute to such Trust Beneficiary an amount equal to such amount determined by the Internal
Revenue Service to be includible in gross income in such prior taxable year.

XIII. GENERAL PROVISIONS

     13.1 The Company shall, at any time and from time to time, upon the reasonable request of the
Trustee, provide information, execute and deliver such further instruments and do such further acts
as may be necessary or proper to effectuate the purposes of this Trust. Any action required to be
taken by the Company shall be by (i) resolution of its board of directors or (ii) by the written
direction of one or more of its president, any vice president or treasurer or assistant treasurer,
or (iii) by such other person or persons as shall be authorized by one or more of its president,
any vice president or treasurer or assistant treasurer or by resolution of its board of directors,
which resolution shall be filed with the Trustee. The Trustee may take or omit to take any action
in accordance with written direction purporting to be signed by such an officer of the Company or
other authorized person, or in reliance upon a certified copy of a resolution of the board of
directors which the Trustee believes to be genuine. The Trustee shall have no responsibility or
liability for any action taken by the Trustee in accordance with any such resolution or direction.

     13.2 Each Exhibit referred to in this Agreement shall become a part of this Agreement and is
expressly incorporated by reference upon delivery to and receipt by the Trustee.

-11-

 

     13.3 This Agreement sets forth the entire understanding of the parties with respect to its
subject matter and supersedes any and all prior agreements, arrangements and understandings between
the parties. This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and legal representatives.

     13.4 This Agreement shall be governed by and construed in accordance with the laws of
Delaware, without giving effect to the principles of conflict of laws thereof.

     13.5 If any provision of this Agreement or the application of any provision hereof to any
person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this
Agreement and the application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal.

     13.6 (a) The preamble to this Agreement shall be considered a part of the agreement of the
parties as if set forth in a section of this Agreement.

             (b) The headings and table of contents contained in this Agreement are solely for the purpose
of reference, are not part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.

     13.7 The right of any Trust Beneficiary to any benefit or to any payment may not be
anticipated, assigned (either at law or in equity), alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as required by law. Any
attempt by any Trust Beneficiary to anticipate, alienate, assign, sell, transfer, pledge, encumber
or charge the same shall be void. The Trust assets shall not in any manner be subject to the
debts, contracts, liabilities, engagements or torts of any Trust Beneficiary.

     13.8 Each Participant (and, where applicable, each successor) is an intended beneficiary under
this Trust, and as an intended beneficiary shall be entitled to enforce all terms and provisions
with the same force and effect as if such person had been a party to the Agreement.

     13.9 Notwithstanding any other provision, the parties’ respective rights and obligations under
Section 13.8 shall survive any termination or expiration of this Agreement.

     13.10 In no event will Trustee have any obligation to provide, and in no event will Trustee
provide, any legal, tax, accounting, audit or other advice to Company with respect to the Plan or
this Trust. Company acknowledges that it will rely exclusively on the advice of its accountants
and/or attorneys with respect to all legal, tax, accounting, audit and other advice required or
desired by Company with respect to the Plan or this Trust. Company acknowledges that Trustee has
not made any representations of any kind, and will not make any representations of any kind,
concerning the legal, tax, accounting, audit or other treatment of the Plan or this Trust.

     13.11 Company acknowledges that Trustee is not an advisor concerning or a promoter with
respect to the Plan or the Trust, but merely is a service provider offering the Trust services
expressly set forth in this Agreement. In particular, Company
acknowledges that Trustee is not a member of a joint venture or otherwise a partner with Company’s accountants, auditors,
consultants or with any other party, with respect to the Plan or this Trust.

-12-

 

     13.12 Company represents and warrants that the Plan and the administration thereof and the
establishment of this Trust comply with applicable law and the Company shall take reasonable action
to maintain compliance therewith.

     13.13 Trustee shall have no liability for any losses arising out of delays in performing the
services which it renders under this Trust Agreement which result from events beyond its control,
including without limitation, interruption of the business of Trustee due to acts of God, acts of
governmental authority, acts of war, riots, civil commotions, insurrections, labor difficulties
(including, but not limited to, strikes and other work slippages due to slow-downs), any action of
any courier or utility, mechanical or other malfunction, and electronic interruption.

XIV. NOTICES

     For all purposes of this Agreement, any communication, including without limitation, any
notice, consent, report, demand or waiver required or permitted to be given shall be in writing and
shall be effective upon receipt of such notice and may be delivered (i) personally, (ii) by
facsimile, or (iii) by mail and addressed as follows:

	 	 	 	 
	 	If to the Company, to:

	 	Abercrombie & Fitch Co.

6301 Fitch Path

New Albany, Ohio 43054

Attention: Assistant Treasurer
	 	 
	 	 
	 	If to the Trustee, to:

	 	Wilmington Trust Company

Rodney Square North

1100 North Market Street

Wilmington, DE 19890-0001

Attention: Corporate Retirement Services
	 	 
	 	 
	 	If to a Participant, to:

	 	the address of such Participant most
recently listed in the Company’s records,

provided, however, that if any party or such party’s successors shall have designated a different
address by notice to the other parties, then to the last address so designated.

-13-

 

     IN WITNESS WHEREOF, the Company and the Trustee caused this Agreement to be executed on its
behalf as of the date first above written.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	WILMINGTON TRUST COMPANY	 	 	 	ABERCROMBIE & FITCH CO.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Jennifer Matz
	 	 	 	By:
	 	/s/ Peter A. Hutt	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Vice President
	 	 	 	 	 	Peter A. Hutt, VP/Treasurer	 	 	 	 	 	 

-14-

 

EXHIBIT A

PLAN

This page
intentionally left blank

A-1EX-10.1

 

Exhibit 10.1

	 	 	 
	THIS AGREEMENT is made on

	 	2006

BETWEEN

	(1)	 	The persons whose names and addresses are set out in Schedule 1 (“the Sellers”);
	 
	(2)	 	DAY INTERNATIONAL (UK) HOLDINGS (registered number 02956635) whose registered office is at
Varn House, Northbank Industrial Estate, Irlam, Manchester M44 5DL (“the Buyer”); and
	 
	(3)	 	DAY INTERNATIONAL INC (a company incorporated in Delaware) whose principal office is at 130
West Second Street, Suite 1700, Dayton, Ohio 45402 (the “Guarantor”).

OPERATIVE CLAUSES

	1.	 	INTERPRETATION
	 
	 	 	In this Agreement:
	 
	1.1	 	the following expressions have the following meanings unless inconsistent with the context:

	 	 	 	 	 	 	 
	 	 	“Accounting Date”	 	31 December 2005
	 
	 	 	 	 	 	 
	 	 	“Accounting Standards”	 	the statements of standard accounting practice referred to in
section 256 CA 1985 issued by the Accounting Standards Board or such other body as
may be prescribed by the Secretary of State from time to time, including the
statements of standard accounting practice formerly issued by the Accounting
Standards Committee and since adopted by the Accounting Standards Board, the
Abstracts issued by the Urgent Issues Task Force and any financial reporting
standards issued by the Accounting Standards Board or such other body referred to
above and, where applicable, will include the International Financial Reporting
Standards as issued by the International Accounting Standards Board and adopted by EU
regulation
	 
	 	 	 	 	 	 
	 	 	“Accounts”	 	the accounts of each Group Member, including in the case of the Company its
consolidated accounts for the financial year which ended on the Accounting Date,
comprising in each case a balance sheet, a profit and loss account, notes, directors’
reports and a cash flow statement in the agreed terms

1

 

	 	 	 	 	 	 	 
	 	 	“Actual Net Debt”	 	the actual Debt less Cash as at the close of business on the date of
Completion as stated in the Actual Net Debt Statement
	 
	 	 	 	 	 	 
	 	 	“Actual Net Debt Statement”	 	the written statement in the agreed terms setting out the
Actual Net Debt as agreed or determined in accordance with Schedule 8
	 
	 	 	 	 	 	 
	 	 	“Bank Debt”	 	all borrowings of the Group from a bank or other financial
institution including term loans, overdrafts and other similar lending facilities
	 
	 	 	 	 	 	 
	 	 	“Business Day”	 	any day (other than a Saturday or Sunday) on which banks are open in London
for normal banking business
	 
	 	 	 	 	 	 
	 	 	“Buyer’s Accountants”	 	Ernst & Young of Barbirolli Square, Manchester (or such other firm
as the Buyer may notify to the Sellers)
	 
	 	 	 	 	 	 
	 	 	“Buyer’s Group”	 	any of the following from time to time: the Buyer, its subsidiaries and
subsidiary undertakings (including each member of the Group) and any holding company
or parent undertaking of the Buyer and all other subsidiaries and subsidiary
undertakings of any holding company or parent undertaking of the Buyer and “member of
the Buyer’s Group” will be construed accordingly
	 
	 	 	 	 	 	 
	 	 	“Buyer’s Funders”	 	those entities providing funding to the Buyer’s Group pursuant to (i) a
Credit & Guarantee Agreement dated 5 December 2005 relating to the provision of
Senior Secured First Lien Credit Facilities and (ii) a Credit & Guarantee Agreement
dated 5 December 2005 relating to the provision of Secured Second Lien Credit
Facilities
	 
	 	 	 	 	 	 
	 	 	“Buyer’s Solicitors”	 	Eversheds LLP of Eversheds House, 70 Great Bridgewater Street,
Manchester, M1 5ES
	 
	 	 	 	 	 	 
	 	 	“CA 1985”	 	the Companies Act 1985
	 
	 	 	 	 	 	 
	 	 	“Capitalisation Ordinary Shares”	 	the ordinary shares of 1p each in the capital of the
Company to be issued in accordance with Part A of Schedule 5
	 
	 	 	 	 	 	 
	 	 	“Cash”	 	all cash (whether in hand, at the bank or in transit) or cash equivalents held by
or for the Group and balances of the Group with banks or other financial institutions
	 
	 	 	 	 	 	 
	 	 	“CC”	 	means the UK Competition Commission

2

 

	 	 	 	 	 	 	 
	 	 	“Company”	 	Duco Holdings Limited (details of which are set out in Schedule 2)
	 
	 	 	 	 	 	 
	 	 	“Completion”	 	completion of the sale and purchase in accordance with clause 4
	 
	 	 	 	 	 	 
	 	 	“Completion Statements”	 	the statements prepared in accordance with paragraph 1 of Schedule 8
	 
	 	 	 	 	 	 
	 	 	“Computer Systems”	 	all computer hardware, Software, microprocessors and any other items
that connect with any of them which in each case are used in any Group Member’s
business or are in the possession of any Group Member and are material in the context
of the Group’s business taken as a whole
	 
	 	 	 	 	 	 
	 	 	“Confidential Information”	 	all information not publicly known, used in or otherwise
relating to any Group Member’s business, customers, or financial or other affairs,
including information relating to
	 
	 	 	 	 	 	 
	 

	 	 	 	(a)
	 	trade secrets, know-how, ideas, computer
systems and computer software;
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	future projects, business development or
planning, commercial relationships and
negotiations; and
	 
	 	 	 	 	 	 
	 

	 	 	 	(c)
	 	the marketing of goods or services
including customer names and lists, sales
targets and statistics
	 
	 	 	 	 	 	 
	 	 	“Consultancy Termination

Agreement”	 	an agreement in the agreed terms
terminating the agreement by which Martin Rees acts as a consultant to the
Company
	 
	 	 	 	 	 	 
	 	 	“Contract”	 	any agreement or commitment whether conditional or unconditional and whether by
deed, under hand, oral or otherwise, and any arrangement or understanding, in each
case whether legally binding or not
	 
	 	 	 	 	 	 
	 	 	“Debt”	 	the indebtedness of the Group to third parties in relation to any finance lease or
hire purchase agreement (other than indebtedness in respect of fixed assets purchased
by a Group Member between the date of this Agreement and Completion in compliance
with Schedule 7) and the Bank Debt, including the amount of any penalty, fee or other
payment required to be paid by any Group Member to any such third party upon
repayment of such Bank Debt but for

3

 

	 	 	 	 	 	 	 
	 	 	 	 	avoidance of doubt excluding the Loan Note Debt
	 
	 	 	 	 	 	 
	 	 	“Disclosed”	 	facts, matters or other information fairly disclosed by or in any of the
Disclosure Documents in such a manner and with such accuracy and detail so as to
enable the Buyer to make an informed assessment of the fact,
matter or information concerned, its nature and
effect
	 
	 	 	 	 	 	 
	 	 	“Disclosure Documents”	 	the Disclosure Letter and the contents of the documents listed in
Schedule 1 to the Disclosure Letter
	 
	 	 	 	 	 	 
	 	 	“Disclosure Letter”	 	the letter having the same date as this Agreement from the Management
Sellers to the Buyer qualifying the Warranties, the receipt of which has been
acknowledged by the Buyer or on its behalf by the Buyer’s Solicitors
	 
	 	 	 	 	 	 
	 	 	“EC Treaty”	 	the treaty establishing the European Union 1992
	 
	 	 	 	 	 	 
	 	 	“EHS Law”	 	all applicable law (whether criminal, civil or administrative), common
law, judgment, court order, statute, statutory instrument, regulation, directive,
European Union decision (insofar as legally binding), by-law, treaty, government
circular, code of practice (having the force of law), or instruction or decision of
any competent regulatory body in force from time to time relating to EHS Matters
	 
	 	 	 	 	 	 
	 	 	“EHS Matters”	 	all or any matters relating to the pollution or protection of the
Environment or harm to or the protection of human health and safety or the health of
animals and plants
	 
	 	 	 	 	 	 
	 	 	“EHS Permits”	 	all or any permits, consents, licences, approvals, certificates
and other authorisations required by EHS Law for the operation of the business of the
relevant Group Member or the condition or use of the Property as the same is carried
on or used (as applicable) as at the date of this Agreement
	 
	 	 	 	 	 	 
	 	 	“Encumbrance”	 	any mortgage, charge, pledge, lien, assignment, option, restriction, claim,
right of pre-emption, right of first refusal, third party right or interest, other
encumbrance or security interest of any kind, or other type of preferential
arrangement (including a title transfer or retention arrangement) having similar
effect

4

 

	 	 	 	 	 	 	 
	 	 	“Environment”	 	any air (including air within natural or man-made structures above or below
ground), water (including territorial, coastal and inland waters, ground water and
water in drains and sewers), and land (including surface land, sub-surface land,
seabed and river bed under water)
	 
	 	 	 	 	 	 
	 	 	“Environmental Policy

Deductible Letter”	 	a letter in the agreed terms by which the
Institutional Sellers agree to bear the cost of certain deductibles in
respect of an environmental insurance policy
	 
	 	 	 	 	 	 
	 	 	“Estimated Net Debt”	 	the estimated Debt less Cash as at the close of business on the date
of Completion as stated in the Estimated Net Debt Statement
	 
	 	 	 	 	 	 
	 	 	“Estimated Net Debt Statement”	 	the written statement in the agreed terms to be delivered
by the Management Sellers to the Buyer on Completion in accordance with the
provisions of Schedule 5, setting out details of the Estimated Net Debt and the
Estimated Loan Note Consideration
	 
	 	 	 	 	 	 
	 	 	“Estimated Loan Note

Consideration”	 	the estimate of the Loan Note Consideration
to be incorporated into the Estimated Net
Debt Statement
	 
	 	 	 	 	 	 
	 	 	“Euro”	 	the European single currency
	 
	 	 	 	 	 	 
	 	 	“Event”	 	means any act, omission, occurrence, transaction or circumstance (including

Completion)
	 
	 	 	 	 	 	 
	 	 	“FCO”	 	means the German Federal Cartel Office
	 
	 	 	 	 	 	 
	 	 	“Graphite”	 	shall have the meaning given thereto in Schedule 1, Part II
	 
	 	 	 	 	 	 
	 	 	“Graphite Loan Note Interest”	 	means the accrued but unpaid interest in respect of the Loan
Notes held by Graphite immediately prior to Completion
	 
	 	 	 	 	 	 
	 	 	“Group”	 	the Company and each of its subsidiaries (as defined at sections 736 and 736A CA
1985)
	 
	 	 	 	 	 	 
	 	 	“Group Member”	 	any company which is a member of the Group at the date of this Agreement
	 
	 	 	 	 	 	 
	 	 	“GWB”	 	means the Gesetz gegen Wettbewerbsbeschränkungen (German Act against
Restraints of Competition)
	 
	 	 	 	 	 	 
	 	 	“Hazardous Substance”	 	any matter, whether alone or in combination with any other matter,
capable of causing

5

 

	 	 	 	 	 	 	 
	 	 	 	 	harm to man or any other living organism or damaging to the
Environment or public health or welfare, including radioactive matter, ozone
depleting substances, and genetically modified organisms
	 
	 	 	 	 	 	 
	 	 	“ICTA”	 	Income and Corporation Taxes Act 1988
	 
	 	 	 	 	 	 
	 	 	“Initial Loan Note

Consideration”	 	a sum equal to the Estimated
Loan Note Consideration less £600,000
(being the Retention Fund)
	 
	 	 	 	 	 	 
	 	 	“Insider”	 	any person who is a Seller or who is or was at any time in the 4 years preceding
the date of this Agreement a director of any Group Member, or who is or was at any
time in the 4 years preceding the date of this Agreement connected (as defined in
section 839 ICTA) with any Seller or any such director
	 
	 	 	 	 	 	 
	 	 	“Institutional Sellers”	 	those Sellers listed in Part II of Schedule 1
	 
	 	 	 	 	 	 
	 	 	“Insurance Costs”	 	the following costs incurred (or to be incurred at Completion) by the
Buyer’s Group:-
	 
	 	 	 	 	 	 
	 

	 	 	 	(a)
	 	an insurance premium plus 5% insurance
premium tax relating to a warranty and
indemnity insurance policy to be issued by
New Hampshire Insurance Company in respect
of the Warranties and the tax covenant in
Schedule 4;
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	an insurance premium plus 5% insurance
premium tax relating to a premises pollution
liability policy to be issued by ACE
European Group Limited in respect of the
Property;
	 
	 	 	 	 	 	 
	 

	 	 	 	(c)
	 	a fee of £20,000 payable to the Buyer’s
insurance brokers, Marsh, in relation to the
effecting of the above insurances.
	 
	 	 	 	 	 	 
	 	 	“Intellectual Property Rights”	 	all patents, utility models, trade marks, trade or business
names, logos or straplines, domain names, copyright, moral rights, rights to prevent
passing off or unfair competition, database rights, rights in designs, know how and
all other intellectual or industrial property rights, in each case whether registered
or unregistered and including applications or rights to apply for them and together
with all extensions and renewals of them, and in each and every case all rights or
forms of

6

 

	 	 	 	 	 	 	 
	 	 	 	 	protection having equivalent or similar effect anywhere in the world
	 
	 	 	 	 	 	 
	 	 	“LDC”	 	shall have the meaning given thereto in Schedule 1, Part II
	 
	 	 	 	 	 	 
	 	 	“Loan Notes”	 	the £9,297,000 unsecured loan notes issued by the Company on 25
August 1999
	 
	 	 	 	 	 	 
	 	 	“Loan Note Consideration “	 	the consideration payable by the Buyer for the Loan
Notes as determined in accordance with Schedule 8
	 
	 	 	 	 	 	 
	 	 	“Loan Note Debt”	 	the principal amount together with accrued interest owed by the
Company in respect of the Loan Notes (save to the extent capitalised pursuant to Part
A of Schedule 5)
	 
	 	 	 	 	 	 
	 	 	“Management Sellers”	 	those Sellers listed in Part I of Schedule 1
	 
	 	 	 	 	 	 
	 	 	“March Balance Sheet”	 	the balance sheet of the Group as at 31 March 2006 in the agreed
terms
	 
	 	 	 	 	 	 
	 	 	“OFT”	 	means the UK Office of Fair Trading
	 
	 	 	 	 	 	 
	 	 	“Ordinary Shares”	 	the ordinary shares of 1p each in the capital of the Company (less the
shares the subject of the Pickering Sale Agreement)
	 
	 	 	 	 	 	 
	 	 	“Pension Schemes”	 	The Duco Group Personal Pension Scheme (F46969) and the Duco Group
Stakeholder Scheme (F49565)
	 
	 	 	 	 	 	 
	 	 	“Pickering Sale Agreement”	 	a conditional sale and purchase agreement dated the date of
this Agreement executed by the Buyer and Mr John Pickering in respect of the sale of
his shares in the capital of the Company
	 
	 	 	 	 	 	 
	 	 	“Preferred Ordinary Shares”	 	the preferred ordinary shares of 1p each in the capital of the
Company in issue at Completion
	 
	 	 	 	 	 	 
	 	 	“Property”	 	the property specified in Schedule 6 and each part of such property
	 
	 	 	 	 	 	 
	 	 	“Relevant Claim”	 	any claim for breach of any of the Warranties
	 
	 	 	 	 	 	 
	 	 	“Retention Account”	 	the account described in Schedule 10
	 
	 	 	 	 	 	 
	 	 	“Retention Fund”	 	sum equal to £600,000
	 
	 	 	 	 	 	 
	 	 	“Retention Fund Instruction

Letter”	 	the letter in the agreed terms from the
Institutional Sellers and the Buyer to the Sellers’ Solicitors and the Buyer’s
Solicitors relating to the Retention Fund

7

 

	 	 	 	 	 	 	 
	 	 	“Sellers’ Accountants”	 	Ernst & Young LLP of Apex Plaza, Reading, Berkshire RG1 1YE (or
such other firm as the Sellers may notify to the Buyer)
	 
	 	 	 	 	 	 
	 	 	“Sellers’ Representative”	 	the representative of the Management Sellers appointed pursuant
to clause 11
	 
	 	 	 	 	 	 
	 	 	“Sellers’ Solicitors”	 	CMS Cameron McKenna of 160 Aldersgate Street, London, EC1A 4DD (Ref:
DCD/JPG)
	 
	 	 	 	 	 	 
	 	 	“Share Consideration”	 	the consideration for the Shares as specified in clause 2.3
	 
	 	 	 	 	 	 
	 	 	“Shares”	 	all the issued shares in the capital of the Company at Completion being the
Ordinary Shares, the Preferred Ordinary Shares and the Capitalisation Ordinary Shares
	 
	 	 	 	 	 	 
	 	 	“Software”	 	any form of computer program, including applications software and operating
systems, whether in source or object code form
	 
	 	 	 	 	 	 
	 	 	“Stock”	 	Stocks (as defined in Statement of Standard Accounting Practice No 9 adopted by
the Accounting Standards Board) of each Group Member including raw materials,
components, work in progress, finished goods and consumables
	 
	 	 	 	 	 	 
	 	 	“Taxation” or “Tax” means:	 	as defined in Part 1 of Schedule 4
	 
	 	 	 	 	 	 
	 	 	“Taxation Warranties”	 	the warranties set out in Part 3 of Schedule 4;
	 
	 	 	 	 	 	 
	 	 	“Warranties”	 	the warranties set out or referred to in clause 5, Schedule 3 and Part 3 of
Schedule 4;
	 
	 	 	 	 	 	 
	 	 	“Working Capital”	 	the aggregate value of the current assets of the Group (excluding Cash
and any intangible assets) less the aggregate value of the current liabilities of the
Group (excluding Debt) all as shown in the Working Capital Statement
	 
	 	 	 	 	 	 
	 	 	“Working Capital Statement”	 	the statement of Working Capital to be prepared in accordance
with Paragraph 1 of Schedule 8

	1.2	 	references to any statute or statutory provision include, unless the context otherwise
requires, a reference to the statute or statutory provision as modified, replaced or
re-enacted and in force from time to time prior to Completion and any subordinate legislation
made under the relevant statute or statutory provision (as so modified, replaced or
re-enacted) in force prior to Completion;

8

 

	1.3	 	references to a person includes a reference to any individual, firm, company, corporation or
other body corporate, government, state or agency of a state or any unincorporated
association, joint venture or partnership (whether or not having a separate legal
personality);
	 
	1.4	 	references to a document being “in the agreed terms” are to that document in the form agreed
and for the purposes of identification initialled by or on behalf of the Sellers and the
Buyer;
	 
	1.5	 	references to a person includes a reference to that person’s legal personal representatives;
	 
	1.6	 	the masculine, feminine or neuter gender respectively includes the other genders and
reference to the singular includes the plural (and vice versa);
	 
	1.7	 	unless expressly stated otherwise, all obligations, representations and warranties on the
part of two or more persons are entered into, given or made by such persons severally;
	 
	1.8	 	references to clauses and Schedules are to clauses of and Schedules to this Agreement, and
references to paragraphs are to paragraphs in the Schedule in which such references appear;
	 
	1.9	 	the Schedules form part of this Agreement and will have the same force and effect as if
expressly set out in the body of this Agreement;
	 
	1.10	 	the headings in this Agreement will not affect its interpretation; and
	 
	1.11	 	any phrase introduced by the term “include”, “including”, “in particular” or any similar
expression will be construed as illustrative and will not limit the sense of the words
preceding that term.
	 
	2.	 	SALE AND PURCHASE
	 
	2.1	 	Each of the Sellers will sell with full title guarantee, and the Buyer will buy, the number
of Shares and Loan Notes specified opposite that Seller’s name in Schedule 1. The Shares and
Loan Notes will be sold free of any Encumbrance and with all rights attached or accruing to
them at or after the date of this Agreement (including, in the case of the Loan Notes, any
interest accrued but unpaid at Completion).
	 
	2.2	 	Each of the Sellers severally waives any rights of pre-emption or other right or option
conferred on them under the articles of association of the Company or otherwise in respect of
any of the Shares or the Loan Notes and any of the shares the subject of the Pickering Sale
Agreement.
	 
	2.3	 	The consideration for the sale of the Shares is £1 in aggregate. The Loan Note Consideration
shall be as set out in Schedule 8.
	 
	2.4	 	Each of the Sellers hereby severally, irrevocably and unconditionally appoints the Buyer and
any director of the Buyer for the time being acting severally as his lawful attorney (and to
the complete exclusion of any rights that he may have in such regard) for the purpose of
exercising any and all voting and other rights and receiving any and all benefits and
entitlements which may now or at any time after Completion attach to or arise in respect of
any of the Shares and receiving notices of and attending and voting at all meetings of the
members of the Company (or any

9

 

	 	 	class thereof) and generally executing or approving such deeds
or documents (including, without limitation, any shareholder written resolution) and doing any
such acts or things in relation to any of the Shares as the attorney may think fit in each
case from Completion to the earlier of (i) day on which the Buyer is entered in the register
of members as the holders of the Share; and (ii) the date falling 90 days after agreement or
determination of the Completion Statements in accordance with Schedule 8. In addition, each
of the Sellers hereby authorises and instructs the Company to send all notices in respect of
the Shares to the Buyer during such period.
	 
	3.	 	CONDITIONS
	 
	3.1	 	Completion is conditional on the following conditions being satisfied or waived:

	 	3.1.1	 	the Buyer having notified the Agreement to the FCO and (in so far as the
Agreement must be notified in accordance with ss35 to 39 GWB):

	 	(a)	 	the one month time limit as laid down in s40 paragraph 1
GWB having expired without the FCO having made a Relevant Request and
either:
	 
	 	(b)	 	the FCO having confirmed in writing within that period
that the conditions for a prohibition in s36 paragraph 1 GWB are not
fulfilled; or
	 
	 	(c)	 	if no such confirmation is received after submission of a
complete notification of this Agreement, neither the Buyer nor the Seller
having been notified by the FCO within that period that it has entered into
a detailed examination of the Agreement pursuant to s40 paragraph 2 of the
GWB; or
	 
	 	(d)	 	the four month time limit as laid down in s40 paragraph 2
of the GWB, or any extended time period consented to by the Buyer and the
Sellers under s40 paragraph 2 sentence 3 point 1 of the GWB, having expired
and s40 paragraph 2 sentence 3 of the GWB not otherwise applying and either:

	 	(i)	 	the FCO having issued a formal
clearance decision pursuant to s40 paragraph 2 GWB; or
	 
	 	(ii)	 	if no such confirmation is received
after submission of a complete notification of this Agreement, the
FCO not having issued an order prohibiting the Agreement pursuant
to s40 paragraph 2 GWB; or
	 
	 	(iii)	 	the FCO having waived the requirement
to suspend Completion pursuant to s41 paragraph 2 GWB; and

	 	3.1.2	 	the OFT having indicated in terms satisfactory to the Buyer (acting
reasonably) that it is not its intention to refer the acquisition of the Shares
pursuant to this Agreement to the CC; and
	 
	 	3.1.3	 	approval by the Buyer’s Funders of the terms of this Agreement and the
transaction contemplated hereby for the purpose of the provision of finance to the
Buyer (including, without limitation, the guarantee undertaking by the Guarantor
under clause 16).

10

 

	3.2	 	If, prior to the Conditions in clause 3.1 being satisfied, the FCO and/or the OFT has made a
request to the European Commission pursuant to Article 22(3) ECMR, Completion will then be
conditional on the following conditions being satisfied:

	 	3.2.1	 	the European Commission having issued a decision pursuant to Article
6(1)(b) (or being deemed to have done so pursuant to Article 10(6)) ECMR in respect
of those parts of the Agreement which were the subject of the request; or
	 
	 	3.2.2	 	(if the European Commission issues a decision pursuant to Article 6(1)(c)
ECMR to initiate proceedings in respect of those parts of the Agreement which were
the subject of a request) the European Commission having subsequently issued a
decision under Article 8(2) ECMR; or

	 	3.2.3	 	the European Commission having granted a derogation from the requirement
to suspend Completion pursuant to Article 7(4) ECMR.

	3.3	 	The Buyer and the Management Sellers will use all reasonable endeavours to procure that the
conditions set out in clauses 3.1.1 and 3.1.2 and (if relevant) 3.2 and (in the case of the
Buyer only) 3.1.3 are satisfied as soon as practicable.
	 
	3.4	 	The Buyer shall:

	 	3.4.1	 	forthwith following confirmation from the Buyer’s Funders of the approval
referred to in the condition set out in clause 3.1.3 provide to the Institutional
Sellers and the Sellers’ Representative written notification of the fulfilment of
such condition, whereupon such condition shall be deemed to be irrevocably satisfied;
and
	 
	 	3.4.2	 	within 10 Business Days following the date of this Agreement, submit the
clearance applications to the relevant authorities referred to in the conditions set
out in clauses 3.1.1 and 3.1.2, duly completed and signed, together with all
requisite supporting information.

	3.5	 	The Buyer and the Institutional Sellers may, acting together, waive the conditions set out in
clause 3.1 (and, if relevant, clause 3.2) either in whole or in part.
	 
	3.6	 	If the conditions set out in clauses 3.1.1 or 3.1.2 have not been waived or satisfied within
80 Business Days of the date of this Agreement (or such later date as may be agreed in writing
between the Buyer and the Institutional Sellers), this Agreement will automatically terminate.
	 
	3.7	 	If the condition set out in clause 3.1.3 has not been waived or satisfied on or before the
date falling 10 Business Days from the date of this Agreement (or such later date as may be
agreed in writing between the Buyer and the Institutional Sellers), this Agreement will
automatically terminate.
	 
	3.8	 	Upon termination of the Agreement pursuant to clauses 3.5, 3.6, 3.7 or 6 the following
provisions will apply:

	 	3.8.1	 	the Buyer will destroy or return to the Sellers all information (and all
copies of such information) which has been supplied to the Buyer or its advisers by
the Sellers or their advisers before such date, together with all documents and
information prepared by or on behalf of the Buyer and derived from such information;

11

 

	 	3.8.2	 	each of the parties’ further rights and obligations cease immediately on
termination, but termination does not (subject to clause 3.8.3 below) affect the
parties’ accrued rights and obligations on the date of termination (and clauses 1,
this clause 3, clauses 8.1, 8.2 and 10 to 20 (inclusive) (the “Surviving Clauses”)
shall survive termination without limit in time); and
	 
	 	3.8.3	 	the Management Sellers shall have no liability in respect of the
Warranties, save in the case of deliberate concealment or deliberate
misrepresentation.

	3.9	 	Pending Completion the Management Sellers will procure that each Group Member complies with
the requirements set out in Schedule 7 (save with the prior written consent of the Buyer, not
to be unreasonably withheld or delayed).
	 
	3.10	 	In the period between the date of this Agreement and Completion, the Management Sellers
undertake to procure that a relevant Group Member takes reasonable steps to seek to procure
the registration or transfer of the trademark “Cow” in India in the name of or to such
relevant Group Member in full consultation with the Buyer.
	 
	4.	 	COMPLETION
	 
	4.1	 	Completion will take place at the offices of the Buyer’s Solicitors on the third Business Day
after the date on which the conditions set out in clause 3.1 have all been achieved or waived
or on such earlier date or such other location as may be agreed between the Sellers and the
Buyer.
	 
	4.2	 	At Completion, the Sellers and the Buyer will comply with the provisions of Schedule 5.
	 
	4.3	 	The Sellers’ Solicitors are authorised to receive the Share Consideration and the Loan Note
Consideration on behalf of each Seller and payment to them will be a good and sufficient
discharge to the Buyer and the Buyer will not be further concerned as to the application of
the moneys so paid.
	 
	4.4	 	Neither the Buyer nor the Sellers are obliged to complete this Agreement unless:

	 	4.4.1	 	the Sellers comply with all their obligations under Schedule 5 and the
Buyer complies with its obligations under paragraph 4 of Part B of Schedule 5; and
	 
	 	4.4.2	 	the purchase of all the Shares is completed simultaneously.

	4.5	 	If the Sellers or the Buyer fail or are unable to perform any obligation required to be
performed by them (“the Defaulting Party”) under Schedule 5 by the date for Completion as
fixed pursuant to clause 4.1 the Sellers or the Buyer as applicable (the “Non Defaulting
Party”) may, in its absolute discretion, by notice to the Defaulting Party:

	 	4.5.1	 	elect to proceed to Completion to the extent reasonably practicable
without prejudice to the Non Defaulting Parties’ rights under this Agreement and
specify a later date on which the Defaulting Parties will be obliged to complete the
outstanding obligations of the Defaulting Parties;
	 
	 	4.5.2	 	elect to postpone Completion to date not more than 20 Business Days after
the date for Completion as agreed pursuant to clause 4.1; or

12

 

	 	4.5.3	 	terminate this Agreement with immediate effect without liability on the
part of the Non Defaulting Parties;

	 	 	save that where no notice is provided within two Business Days after the date for
Completion as determined pursuant to clause 4.1 then the Agreement will be deemed
terminated on close of business on that second Business Day and the provisions of clause
4.7 will apply in respect of the right and obligations of the parties.
	 
	4.6	 	If the Non Defaulting Parties postpone Completion to another date in accordance with clause
4.5.2, the provisions of this Agreement apply as if that other date is the date as agreed
pursuant to clause 4.1.
	 
	4.7	 	If the Non Defaulting Parties terminate this Agreement pursuant to clause 4.5.3, each of the
parties’ further rights and obligations cease immediately on termination and the provisions of
clause 3.8 shall apply.
	 
	5.	 	WARRANTIES
	 
	5.1	 	The Management Sellers jointly and severally warrant to the Buyer in the terms of the
Warranties as at the date of this Agreement.
	 
	5.2	 	The Warranties are qualified by all facts, matters and information Disclosed. Save as set
out in Schedule 9 no other information of which the Buyer has knowledge (actual, imputed or
constructive) will prejudice or reduce any Relevant Claim.
	 
	5.3	 	Save in the case of fraud or wilful non disclosure, the Management Sellers waive and may not
enforce any right which the Management Sellers may have against any Group Member, or any
director or employee of any Group Member, on which or on whom any of them may have relied in
agreeing to any term of this Agreement or any statement in the Disclosure Letter, save that
this waiver will not preclude any Management Seller from claiming against any other Management
Seller under any right of contribution or indemnity to which such Management Seller may be
entitled.
	 
	5.4	 	Each Warranty is to be construed independently and is not limited or restricted by any other
Warranty or any other term of this Agreement.
	 
	5.5	 	Unless otherwise specified, where any Warranty refers to the knowledge, information, belief
or awareness of the Management Sellers (or similar expression), each Management Seller will be
deemed to have such knowledge, information, belief or awareness as such Management Seller
would have obtained had such Management Seller made reasonable enquiries into the subject
matter of that Warranty and the knowledge, information, belief and awareness of any one of the
Management Sellers will be imputed to all the Management Sellers.
	 
	5.6	 	For the purposes only of quantifying the losses of the Buyer in respect of any Relevant
Claim, the amount of the Consideration paid for the Shares held by the Management Sellers
shall be deemed to be £5,500,000.
	 
	5.7	 	The liability of the Management Sellers in respect of any Relevant Claims shall be limited as
provided in Schedule 9.
	 
	5.8	 	The Management Sellers acknowledge that, in addition to agreeing to purchase the Shares on
the terms hereof, the Buyer has agreed to pay the Share Consideration and has agreed to
purchase the Loan Note Debt and to pay the Loan Note

13

 

	 	 	Consideration therefor and further the
Buyer has agreed to procure the repayment of the Bank Debt as provided in paragraph 5 of Part
B of Schedule 5. For the avoidance of doubt, the Management Sellers further acknowledge that
in the event of a breach of a Warranty, the loss that the Buyer may suffer and be entitled to
recover would not be restricted to the amount of the excess of the Share Consideration above
zero and should be calculated taking into account the full amount of the value provided by the
Buyer through the payment obligations described above.
	 
	5.9	 	If any Management Seller is liable to the Buyer under the terms of this Agreement including
under the Warranties or Schedule 4 then such Management Seller shall be entitled (at his sole
discretion) to either:

	 	5.9.1	 	pay the amount of such liability to the Buyer (or a part thereof); or
	 
	 	5.9.2	 	subscribe for a non-voting, non-participating share (“Non-Participating
Share”) of £1.00 par value in the capital of the Company paying such amount for such
subscription as equals the amount of such liability less any payment made under
clause 5.9.1 above (with £1 of the same paying up the nominal value of such share
and the balance being premium).

	5.10	 	The Buyer shall procure that Company and its directors from time to time take all necessary
steps to increase the Company’s share capital and to issue and allot Non-Participating Shares
to give effect to any subscriptions to be made by the Management Sellers (or any of them) in
accordance with clause 5.9.2.
	 
	5.11	 	Following any issue of a Non-Participating Share to any Management Seller pursuant to clause
5.9.2:

	 	5.11.1	 	the Management Seller shall have an irrevocable option to require the Buyer to
purchase such Non-Participating Share at the price of £1 per share; and
	 
	 	5.11.2	 	the Buyer shall have an irrevocable option to purchase such Non-Participating Share
from the Management Seller at the price of £1 per share,

	 	 	each such option to be exercised by written notice to the other party with the relevant
sale and purchase of the Non-Participating Share to be completed within 5 Business Days
following receipt of such notice.
	 
	6.	 	TERMINATION RIGHTS
	 
	6.1	 	The Buyer may by notice in writing to the Sellers at any time prior to Completion elect to
terminate this Agreement without liability on the part of the Buyer if any fact, matter or
event (whether existing or occurring on or before the date of this Agreement or arising or
occurring afterwards) comes to the notice of the Buyer at any time prior to Completion which:

	 	6.1.1	 	constitutes a material breach by the Management Sellers of any provision
of Schedule 7; or
	 
	 	6.1.2	 	constitutes a material breach of any Warranty or would constitute a
material breach of any Warranty if such Warranties were repeated on or at any time
before Completion by reference to the facts and circumstances then existing and on
the basis that any reference to “date of this

14

 

	 	 	 	Agreement” or equivalent term within a
Warranty will be construed as a reference to the time of repetition; or
	 
	 	6.1.3	 	affects or is likely to affect materially and adversely the financial
position of the Company or any other Group Member (not being an event affecting or
likely to affect to a similar extent generally all companies carrying on similar
businesses in the United Kingdom)

	 	 	and for the purpose of this clause 6.1 a matter, fact or event or breach shall be
“material” if such matter, fact, event or breach either:-

	 	(a)	 	is reasonably likely to result in a reduction in earnings (before interest
and tax) of the Group over the 12 month period commencing on the date of this
Agreement in excess of £350,000; or
	 
	 	(b)	 	is reasonably likely to give rise to a liability of the Group in excess of
£1,700,000.

	6.2	 	The Buyer’s termination rights under this clause 6 are without prejudice to any other rights
or remedies the Buyer may have under this Agreement or generally at law.
	 
	7.	 	CONFIDENTIALITY; USE OF NAME
	 
	7.1	 	Except so far as required by law or any governmental or regulatory organisation and in those
circumstances only after prior consultation with the Buyer (to the extent reasonably
practicable and lawful) and subject to clause 7.2, each of the Sellers severally undertakes to
the Buyer and each Group Member that such Seller will not at any time after Completion:

	 	7.1.1	 	disclose any Confidential Information to any person except to those
authorised by the relevant Group Member to know;
	 
	 	7.1.2	 	use any Confidential Information for the Sellers’ own purposes or for any
purposes other than those of the relevant Group Member; or
	 
	 	7.1.3	 	cause or permit any unauthorised disclosure of any Confidential
Information.

	7.2	 	The provisions of clauses 7.1 and 8.1 below shall not apply to any announcement or disclosure
by the Institutional Sellers as part of their reports to their investors.
	 
	7.3	 	Each of the Management Sellers undertakes to the Buyer and each Group Member that the
respective Management Seller will not (whether alone or in conjunction with, or on behalf of,
another person and whether directly or indirectly), without the prior written consent of the
Buyer, without prejudice to any rights relating to passing off or trade mark infringement (or
similar rights in any territory), at any time following Completion use in connection with any
business which is competitive with the business of any Group Member any name (in whatever
form) which includes the name of any Group Member or any trading style or get up which is
confusingly similar to that used by any Group member as at Completion.
	 
	8.	 	ANNOUNCEMENTS; RIGHTS OF ACCESS
	 
	8.1	 	Subject to clause 8.2 no party will make or send any press or other public announcement,
communication or circular (whether to shareholders, employees,

15

 

	 	 	customers, suppliers or
otherwise) concerning the transactions contemplated by this Agreement or any matter ancillary
to it unless it has first obtained the prior written approval of the Buyer (in the case of the
Sellers) or the prior written approval of LDC, Graphite and the Sellers’ Representative (in
the case of the Buyer or the Guarantor), in each case such approval in each case not to be
unreasonably withheld or delayed.
	 
	8.2	 	Clause 8.1 does not apply to any announcement, communication or circular:

	 	8.2.1	 	made or sent by the Buyer after Completion to a customer, client or
supplier of any Group Member informing it solely of the Buyer’s purchase of the
Shares; or
	 
	 	8.2.2	 	required by the law of any relevant jurisdiction, or any governmental or
regulatory organisation provided, if reasonably practicable, that the party required
to make it has first consulted and taken into account the
reasonable requirements of the other party as to its timing, content and manner
of making or despatch; or
	 
	 	8.2.3	 	where the information disclosed therein was in the public domain before it
was furnished to the relevant Party or, after it was furnished to that party, entered
the public domain otherwise than as a result of (i) a breach by that party of this
clause or (ii) a breach of a confidentiality obligation by the discloser, where the
breach was known to that party.

	8.3	 	From the date of fulfilment of the condition set out in clause 3.1.3 until Completion, the
Management Sellers undertake to consult with the Buyer on any new material matters or
decisions affecting the business of the Group and, upon request, to provide all material
information to the Buyer in connection with such matters or decisions.
	 
	9.	 	COSTS
	 
	 	 	Except where expressly stated otherwise, each party to this Agreement will bear such
party’s own costs and expenses relating to the negotiation, preparation and implementation
of this Agreement. No Group Member will bear any part of such costs and expenses.
	 
	10.	 	NOTICES
	 
	10.1	 	Any notice or other communication given in connection with this Agreement will be in writing
and will be delivered personally or sent by pre-paid first class post (or air mail if
overseas) or by fax to the recipient’s address set out (in the case of the Buyer and the
Guarantor) at clause 10.3 and (in the case of the Sellers) at Schedule 1 or to any other
address which the recipient has notified in writing to the sender received not less than 7
Business Days before the notice was despatched.
	 
	10.2	 	A notice or other communication is deemed given:

	 	10.2.1	 	if delivered personally, upon delivery at the address provided for in this clause; or
	 
	 	10.2.2	 	if sent by pre-paid first class post, on the second Business Day after posting it; or

16

 

	 	10.2.3	 	if sent by air mail, on the sixth Business Day after posting it; or
	 
	 	10.2.4	 	if sent by fax, when confirmation on completion of its transmission has been
recorded by the sender’s fax machine

	 	 	provided that, if it is delivered personally or sent by fax on a day which is not a
Business Day or after 4 pm on a Business Day, it will instead be deemed to have been given
or made on the next Business Day.
	 
	10.3	 	The Buyer’s address referred to in clause 10.1 is:

	 	 	 	 	 
	 

	 	To:
	 	Day International (UK) Limited
	 
	 	 	 	 
	 

	 	Address:
	 	Balgary Street, Dundee DD3 8HN
	 
	 	 	 	 
	 

	 	For the attention of:
	 	Dermot Healy
	 
	 	 	 	 
	 

	 	Fax:
	 	01382 832 310
	 
	 	 	 	 
	 

	 	With copies to:-	 	 
	 
	 	 	 	 
	 

	 	Day International Inc	 	 
	 	 	130, West Second Street, Suite 1700, Dayton, Ohio 45402
	 

	 	FAO Thomas J Koenig	 	 
	 

	 	Fax 001 937 226 0052	 	 
	 
	 	 	 	 
	 

	 	Eversheds LLP	 	 
	 	 	Eversheds House, 70 Great Bridgewater Street, Manchester M1 5ES
	 

	 	FAO Christopher Tinsley	 	 
	 

	 	Fax 0161 831 8888	 	 

	 	 	The Guarantor’s address referred to at clause 10.1 is as above.
	 
	10.4	 	Any notice or other communication served on the Sellers’ Representative will be treated as
validly given to all the Management Sellers.
	 
	10.5	 	Any notice or other communication addressed to a deceased Seller or to a deceased Seller’s
personal representatives, notwithstanding that no grant of representation has yet been made in
respect of such Seller’s estate, at the Seller’s address in accordance with the foregoing
provisions of this clause or at such other address as may have been notified by the personal
representatives in writing to the sender as being their address for service, and otherwise
served in accordance with the foregoing provisions, will be deemed valid service to that
Seller.
	 
	10.6	 	The provisions of this clause will not apply, in the case of service of court documents, to
the extent that such provisions are inconsistent with the Civil Procedure Rules.
	 
	11.	 	SELLERS’ REPRESENTATIVE
	 
	 	 	The Management Sellers hereby appoint Jon Sherry as their representative who may authorise
the making of any consent, approval or request expressed to be made on behalf of the
Management Sellers to the Buyer pursuant to the terms of this Agreement. The Management
Sellers may by unanimous decision appoint a replacement Sellers’ Representative provided
that the Buyer has been given 7 Business Days’ prior written notice of such appointment.

17

 

	12.	 	ASSIGNMENT
	 
	12.1	 	The Buyer may assign (in whole or in part) the benefit of this Agreement to any other member
of the Buyer’s Group provided that, if such assignee ceases to be a member of the Buyer’s
Group, the Buyer will procure that all the benefits relating to this Agreement that have been
assigned to such assignee are re-assigned to the Buyer immediately before such cessation.
	 
	12.2	 	None of the Sellers may assign the benefit of, or any of their rights under, this Agreement.
	 
	12.3	 	This Agreement will be binding and enure for the benefit of the personal representatives,
successors in title and permitted assigns of each of the parties and references to the parties
will be construed accordingly.
	 
	13.	 	FURTHER ASSURANCE
	 
	 	 	Each party will do, or procure the doing of, at the cost of the requesting party all acts
and things and execute, or procure the execution of, all documents as any other party
reasonably considers necessary to give full effect to the terms of this Agreement.
	 
	14.	 	RIGHTS OF THIRD PARTIES
	 
	 	 	Each Group Member has the right to enforce only clauses 7 and 8 and Mr John Pickering has
the right to enforce only clause 16 (insofar as the Obligations relate to the Pickering
Sale Agreement) and in accordance with the provisions of the Contracts (Rights of Third
Parties) Act 1999. Except as stated in this clause, the parties to this Agreement do not
intend that any of its terms will be enforceable by virtue of the Contracts (Rights of
Third Parties) Act 1999 by any person not a party to it.
	 
	15.	 	ENTIRE AGREEMENT
	 
	 	 	This Agreement and the documents referred to in it constitute the entire agreement between
the parties and supercedes any previous agreement, understanding, undertaking or
arrangement of any nature whatsoever between the parties relating to the subject matter of
this Agreement.
	 
	16.	 	GUARANTEE
	 
	16.1	 	The Guarantor (as primary obligor and not as surety only) irrevocably and unconditionally:

	 	16.1.1	 	guarantees to the Sellers and to Mr John Pickering the due and punctual payment by
the Buyer to the Sellers of the Share Consideration and the Loan Note Consideration
in accordance with the terms of this Agreement, and (in the case of Mr John
Pickering) the consideration payable under the Pickering Sale Agreement (the
“Obligations”); and
	 
	 	16.1.2	 	undertakes that if any amount guaranteed by this clause is not recoverable on the
basis of a guarantee for any reason it will (as a separate and independent
stipulation) pay the Sellers on demand whatever amount or amounts shall equal what it
would have been liable to pay but for such irrecoverability and shall indemnify the
Sellers against all losses and 

18

 

	 	 	 	
claims, expenses, actions and liabilities suffered or
incurred by the Sellers in connection with such irrecoverability.

	16.2	 	This is a continuing guarantee and the Guarantor’s undertakings under this Agreement shall
remain in full force and effect until final performance in full of its obligations under this
Agreement notwithstanding any intermediate payment or performance or the invalidity or
unenforceability in whole or in part of any of the Obligations or any other event.
	 
	16.3	 	The guarantee and undertakings contained in this clause shall be discharged by the full
performance by the Guarantor of its obligations under this Agreement, but otherwise shall not
be discharged or affected by any act, omission, matter or thing which, but for this provision,
might operate to release or otherwise exonerate the Guarantor from those obligations in whole
or in part including:

	 	16.3.1	 	the granting of time, or any waiver or other indulgence (including any extension,
renewal, acceptance, forbearance or release in respect of any of the Obligations);
	 
	 	16.3.2	 	the taking, variation, compromise, renewal or release of or refusal or neglect to
perform or enforce any rights, remedies or securities against the Buyer or any other
person;
	 
	 	16.3.3	 	any modification, variation or addition to the terms of any of the Obligations or
of any other document or security;
	 
	 	16.3.4	 	any irregularity, defect or informality in the terms of any of the Obligations or
any other document or security or any legal limitation, disability, incapacity or
want of authority of any person;
	 
	 	16.3.5	 	any transfer or assignment of any rights or obligations by any Party, whether or
not they relate to the Obligations;
	 
	 	16.3.6	 	any corporate reorganisation, reconstruction, amalgamation, dissolution,
liquidation, merger, acquisition of or by or other alteration in the corporate
existence or structure of any Party, or the non-existence of any of the Buyer; or

any composition or similar arrangement by any Party or any other person

	16.4	 	Where any discharge (whether in respect of any of the Obligations or any security for the
Obligations or otherwise) is made in whole or in part or any arrangement is made on the faith
of any payment, security or other disposition which is avoided or must be restored for any
reason, the liability of the Guarantor under this Agreement shall continue as if the discharge
or arrangement had not been made.
	 
	16.5	 	This guarantee and indemnity is in addition to and is not in any way prejudiced by any other
security now or in future held by or on behalf of the Sellers.
	 
	16.6	 	For the avoidance of doubt, the provisions of this clause 16 shall only take effect following
satisfaction of the condition set out in clause 3.1.3.
	 
	17.	 	GENERAL
	 
	17.1	 	Unless otherwise provided, any outstanding obligation contained in this Agreement will remain
in force notwithstanding Completion.

19

 

	17.2	 	Failure or delay by any party in exercising any right or remedy under this Agreement will not
in any circumstances operate as a waiver of it, nor will any
single or partial exercise of any right or remedy in any circumstances preclude any other
or further exercise of it or the exercise of any other right or remedy.
	 
	17.3	 	Any waiver of any breach of, or any default under, any of the terms of this Agreement will
not be deemed a waiver of any subsequent breach or default and will in no way affect the other
terms of this Agreement.
	 
	17.4	 	The Buyer may release or compromise the liability of, or grant time or any other indulgence
to, any person who is a party to this Agreement without in any way prejudicing or affecting
the liability (whether joint and several or otherwise) of any other person who is a party to
this Agreement.
	 
	17.5	 	In the event of any claim being made against the Management Sellers under the Warranties or
Part 2 of Schedule 4, the Management Sellers will not plead against such claim the Limitation
Act 1980 or any other statute (present or future) directly or indirectly consolidating,
extending, replacing or re-enacting the same, or any other rule of law relating to limitation
of time in which an action can be brought or claim made; provided that this clause 17.5 is
without prejudice to any express provision of this Agreement regarding time limits for
notifying or making claims or bringing proceedings.
	 
	17.6	 	Except as required by law, all payments by the Management Sellers under this Agreement will
be made free and clear of all deductions and withholdings in respect of Taxation.
	 
	17.7	 	Subject to clause 17.8, if any deduction or withholding is required by law to be made from
any payment by the Management Sellers under this Agreement or if (ignoring any available
Relief (as defined in Schedule 4)) the Buyer is subject to Taxation in respect of any payment
by the Management Sellers under this Agreement, the Management Sellers covenant with the Buyer
to pay to the Buyer such additional amount as is necessary to ensure that the net amount
received and retained by the Buyer (after taking account of such deduction or withholding or
Taxation) is equal to the amount which it would have received and retained had the payment in
question not been subject to the deduction or withholding or Taxation. PROVIDED THAT, to the
extent that any additional amount paid under this clause 17.7 results in the Buyer obtaining a
Relief, the Buyer shall pay to the Management Sellers, within 5 Business Days of obtaining the
benefit of the Relief, an amount equal to the lesser of the value of the Relief obtained and
the additional sum paid under this clause 17.7.
	 
	17.8	 	If the Buyer assigns the benefit of this Agreement to any other party under clause 12 or if
the Buyer is not tax resident in the United Kingdom, clause 17.7 shall only apply to the
extent that it would have applied had the benefit not been so assigned or had the Buyer been
tax resident in the United Kingdom.
	 
	17.9	 	The rights and remedies expressly provided for by this Agreement will not exclude any rights
or remedies provided by law.
	 
	17.10	 	No amendment or variation to the terms of this Agreement will be valid unless it is in
writing and signed by or on behalf of each party to this Agreement but no variation will
require the consent of any Group Member.
	 
	17.11	 	Save as expressly provided to the contrary herein, if any party to this Agreement (“the
Paying Party”) becomes liable to pay to any other party or the Company any

20

 

	 	 	sum pursuant to this Agreement whether a liquidated sum or by way of damages or otherwise, the Paying Party
will be liable to pay interest on such sum from the due date for payment at the annual rate of
2 per cent. above the base lending rate from
time to time of Lloyds TSB Bank plc accruing on a daily basis until payment is made,
whether before or after any judgment.
	 
	18.	 	GOVERNING LAW AND JURISDICTION
	 
	18.1	 	The formation, existence, construction, performance, validity and all aspects whatsoever of
this Agreement or of any term of this Agreement will be governed by the law of England and
Wales.
	 
	18.2	 	The courts of England and Wales will have exclusive jurisdiction to settle any dispute which
arises out of or in connection with this Agreement. The parties irrevocably agree to submit
to that jurisdiction.
	 
	19.	 	COUNTERPARTS
	 
	 	 	This Agreement may be executed in any number of counterparts and by the parties to it on
separate counterparts, each of which when executed and delivered will be an original.
	 
	20.	 	EXECUTION
	 
	 	 	The parties have shown their acceptance of the terms of this Agreement by executing it at
the end of the Schedules.

21

 

SCHEDULE 1

The Sellers

Part I : Management Sellers

	 	 	 	 	 	 	 
	Name and address of	 	 	 	 
	registered and beneficial	 	Number and class of	 	 
	owner	 	Shares to be sold	 	Maximum Liability (£)
	(1)	 	(2)	 	(3)
	Jonathan Steven Sherry

3 Clumber Close

Ashbourne

Derbyshire

DE6 1JZ

	 	91,170 ordinary shares of 1p
	 	 	21,500	 
	 
	 	 	 	 	 	 
	Martin Gareth Rees

The Lodge

4A Calverley Park Gardens

Tunbridge Wells

Kent

TN1 2JN

	 	52,500 ordinary shares of 1p
	 	 	12,400	 
	 
	 	 	 	 	 	 
	Michael Elwine

8 Carisbrooke Road

West Park

Hartlepool

Cleveland

TS26 0AB

	 	52,500 ordinary shares of 1p
	 	 	12,400	 
	 
	 	 	 	 	 	 
	Tracy Carline

24 Tangley Drive

Wokingham

Berkshire

RG11 2NY

	 	10,000 ordinary shares of 1p
	 	 	2,350	 
	 
	 	 	 	 	 	 
	Robert Nabet

14 Rue de Thann

68700 Uffholtz

France

	 	5,734 ordinary shares of 1p
	 	 	1350	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	50,000	 
	 

	 	 	 	 	 	 

22

 

Part II Institutional Shareholders

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Amount of Loan
	 	 	 	 	Number and Class of	 	Notes to be sold
	 	 	Name and Address	 	Shares to be sold	 	(£)
	1.

	 	Lloyds TSB Ventures Nominees

Limited

45 Old Bond Street

London W15 4QT
	 	11,830 preferred
ordinary shares of
1p
	 	Nil

	 
	 	 	 	 	 	 	 	 
	2.

	 	Lloyds TSB Development Capital

Limited

45 Old Bond Street

London W15 4QT
	 	224,768 preferred
ordinary shares of
1p
	 	 	4,863,402	 
	 

	 	(parties 1 and 2 together
being “LDC”)	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	3

	 	Graphite Enterprise Trust PLC

4th Floor

Berkeley Square House

Berkeley Square

London W1X 5PA
	 	51,217 preferred
ordinary shares of
1p
	 	 	1,052,783	 
	 
	 	 	 	 	 	 	 	 
	4

	 	Graphite Enterprise Trust

Limited Partnership

4th Floor

Berkeley Square House

Berkeley Square

London W1X 5PA
	 	12,804 preferred
ordinary shares of
1p
	 	 	263,196	 
	 
	 	 	 	 	 	 	 	 
	5

	 	Graphite Capital Partners V ‘A’

4th Floor

Berkeley Square House

Berkeley Square

London W1X 5PA
	 	31,792 preferred
ordinary shares of
1p
	 	 	653,501	 
	 
	 	 	 	 	 	 	 	 
	6

	 	Graphite Capital Partners V ‘B’

4th Floor

Berkeley Square House

Berkeley Square

London W1X 5PA
	 	30,944 preferred
ordinary shares of
1p
	 	 	636,075	 
	 
	 	 	 	 	 	 	 	 
	7

	 	Graphite Capital Partners V ‘C’

4th Floor

Berkeley Square House

Berkeley Square

London W1X 5PA
	 	30,406 preferred
ordinary shares of
1p
	 	 	625,016	 
	 
	 	 	 	 	 	 	 	 
	8

	 	Graphite Capital Partners V ‘D’

4th Floor

Berkeley Square House

Berkeley Square

London W1X 5PA
	 	12,831 preferred
ordinary shares of
1p
	 	 	263,746	 

23

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Amount of Loan
	 	 	 	 	Number and Class of	 	Notes to be sold
	 	 	Name and Address	 	Shares to be sold	 	(£)
	9

	 	Graphite Capital Partners V ‘E’

4th Floor

Berkeley Square House

Berkeley Square

London W1X 5PA
	 	18,814 preferred
ordinary shares of
1p
	 	 	386,739	 
	 
	 	 	 	 	 	 	 	 
	10

	 	Graphite Capital Partners V ‘F’

4th Floor

Berkeley Square House

Berkeley Square

London W1X 5PA
	 	13,573 preferred
ordinary shares of
1p
	 	 	278,995	 
	 
	 	 	 	 	 	 	 	 
	11

	 	Graphite Capital Partners V ‘G’

4th Floor

Berkeley Square House

Berkeley Square

London W1X 5PA
	 	11,021 preferred
ordinary shares of
1p
	 	 	226,547	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	9,250,000	 

 

			
	 	 	(parties 3 to 11 (inclusive) together being “Graphite”)
	 
	*	 	together with such number of Capitalisation Ordinary Shares as may be issued to the relevant
Graphite entity as contemplated by Part A of Schedule 5

24

 

SCHEDULE 2

Details of the Company

	 	 	 	 	 
	Name of Company

	 	:
	 	DUCO HOLDINGS LIMITED
	 
	 	 	 	 
	Company Number

	 	:
	 	3810478
	 
	 	 	 	 
	Registered Office

	 	:
	 	Eastbourne Road, Slough, Berkshire, SL1 4SF
	 
	 	 	 	 
	Place of Incorporation

	 	 	 	England
	 
	 	 	 	 
	Incorporation Date

	 	:
	 	20 July 1999
	 
	 	 	 	 
	Previous Names

	 	 	 	Intercede 1457 Limited
	 
	 	 	 	 
	Directors

	 	:
	 	Jonathan Steven Sherry
	 

	 	 	 	Kevan Leggatt
	 

	 	 	 	Martin Gareth Rees
	 
	 	 	 	 
	Secretary

	 	:
	 	Martin Gareth Rees
	 
	 	 	 	 
	Accounting Reference Date

	 	:
	 	31 December
	 
	 	 	 	 
	Authorised Share Capital

	 	 	 	£6,993.01 divided into 222,028 ordinary
shares of 1p each, 450,000 preferred
ordinary shares of 1p each and 27,273 “B”
preferred ordinary shares of 1p each
	 
	 	 	 	 
	Issued Share Capital

	 	 	 	£6,679.04 divided into 217,904 ordinary
shares of 1p each and 450,000 preferred
ordinary shares of 1p each
	 
	 	 	 	 
	Registered and Beneficial Shareholders

	 	 	 	As set out in Schedule 1
	 
	 	 	 	 
	Mortgages/Charges over Shares or 

Company’s Assets

	 	:
	 	Composite Guarantee and Debenture dated 25
August 1999 in favour of the Governor and
Company of the Bank of Scotland
	 
	 	 	 	 
	 

	 	 	 	Assignment of Keyman Life Assurance Policy
dated 29 September 1999 in favour of the
Governor and Company of the Bank of
Scotland
	 
	 	 	 	 
	Auditors

	 	 	 	Ernst & Young

25

 

Details of other Group Members

	 	 	 	 	 
	Name of Company

	 	:
	 	DUCO INTERNATIONAL LIMITED
	 
	 	 	 	 
	Company Number

	 	:
	 	3471699
	 
	 	 	 	 
	Registered Office

	 	:
	 	Eastbourne Road, Slough, Berkshire, SL1 4SF
	 
	 	 	 	 
	Place of Incorporation

	 	 	 	England
	 
	 	 	 	 
	Incorporation Date

	 	:
	 	26 November 1997
	 
	 	 	 	 
	Previous Names

	 	 	 	Graphic Products Limited
	 
	 	 	 	 
	Directors

	 	:
	 	Jonathan Steven Sherry, Michael Elwine, Martin

Gareth Rees
	 
	 	 	 	 
	Secretary

	 	:
	 	Martin Gareth Rees
	 
	 	 	 	 
	Accounting Reference Date

	 	:
	 	31 December
	 
	 	 	 	 
	Authorised Share Capital

	 	 	 	£1,400 divided into 1,400 ordinary shares of £1 each
	 
	 	 	 	 
	Issued Share Capital

	 	 	 	£1,400 divided into 1,400 ordinary shares of £1 each
	 
	 	 	 	 
	Mortgages/Charges over Shares or
Company’s Assets Status

	 	:
	 	Composite Guarantee and Debenture dated 25 August
1999 in favour of The Governor and Company of the
Bank of Scotland
	 
	 	 	 	 
	 

	 	 	 	Deed of Assignment of Life Policy dated 24 April
2003 in favour of the Governor and Company of the
Bank of Scotland (Policy X74579609)
	 
	 	 	 	 
	 

	 	 	 	Deed of Assignment of Life Policy dated 24 April
2003 in favour of The Governor and Company of the
Bank of Scotland (Policy X74580344)
	 
	 	 	 	 
	Status

	 	:
	 	Trading
	 
	 	 	 	 
	Registered and Beneficial Shareholders

	 	 	 	Duco Holdings Limited — 1,400 ordinary shares of £1
	 
	 	 	 	 
	Auditors

	 	 	 	Ernst & Young

26

 

SCHEDULE 3

Non-Taxation Warranties

	1.	 	Schedules 1 & 2; Capital
	 
	1.1	 	The information contained in Schedules 1 and 2 is true and accurate in all material respects
and the relevant information is set out for each Group Member.
	 
	1.2	 	The Shares and the issued shares of each other Group Member are fully paid and are
beneficially owned and registered as set out in Schedules 1 and 2 free from any Encumbrance or
any claim to, or Contract to grant, any Encumbrance.
	 
	1.3	 	No Group Member has allotted or issued any share capital other than the shares shown in
Schedules 1 and 2 as being issued.
	 
	1.4	 	No Contract has been entered into which requires or may require any Group Member to allot or
issue any share or loan capital and no Group Member has allotted or issued any securities
which are convertible into share or loan capital.
	 
	1.5	 	No Group Member has any interest, or has at any time during the period of 6 years ending on
the date of this Agreement had any interest, in the share capital of any body corporate save
as specified in Schedule 2.
	 
	2.	 	Subsidiaries
	 
	 	 	Other than as specified in Schedule 2, no Group Member has, or ever has had, any
subsidiary undertakings.

SELLERS

	3.	 	Capacity
	 
	 	 	Each Seller has full power to enter into and perform this Agreement and this Agreement
constitutes obligations binding on each Seller in accordance with its terms.
	 
	4.	 	Insiders’ interests
	 
	4.1	 	There is not outstanding and there has not at any time during the period of 3 years ending on
the date of this Agreement been outstanding any Contract to which any Group Member is or was a
party and in which any Insider is or was interested in any way whatsoever (excluding any
Contract of employment between any Group Member and any of its directors as Disclosed).
	 
	4.2	 	No Insider has any interest, direct or indirect, in any trade or business which competes or
is likely to compete with any Group Member’s business.

ACCOUNTS AND RECORDS

	5.	 	The Accounts
	 
	5.1	 	The Accounts (a copy of which is enclosed in the Disclosure Documents):

27

 

	 	5.1.1	 	show a true and fair view of the assets, liabilities and state of affairs
of each Group Member and the Group as at the Accounting Date and of the
profits (or losses) of each Group Member and the Group for the financial year
ending on that date;
	 
	 	5.1.2	 	have been prepared and audited in accordance with the historical cost
convention, with all applicable law and Accounting Standards and (to the extent that
no Accounting Standard is applicable) with generally accepted accounting principles
and practices of the United Kingdom then in force; and
	 
	 	5.1.3	 	have been prepared on bases and principles which are consistent with those
used in the preparation of the audited statutory accounts of each Group Member for
the 2 financial years immediately preceding that which ended on the Accounting Date.

	5.2	 	Without prejudice to the generality of paragraph 5.1, the Accounts are not affected (except
as disclosed in the Accounts) by any extraordinary or exceptional event, circumstance or item
to any material extent.
	 
	6.	 	Profits or losses
	 
	 	 	The profits or losses of each Group member for the 3 consecutive financial years ended on
the Accounting Date as shown by the Accounts (and by the previous audited accounts of each
Group Member delivered to the Buyer) have not (except as disclosed in those accounts) been
affected to any material extent by the inclusion of non recurring items of income or
expenditure, by transactions entered into otherwise than on normal commercial terms or by
any other factors rendering such profits or losses for any of such periods exceptionally
high or low.
	 
	7.	 	Records
	 
	 	 	Each Group Member’s accounting records are up to date and contain complete and accurate
details of all transactions of that Group Member and comply with the provisions of
sections 221 and 222 CA 1985. Each Group Member’s records and information are exclusively
owned by it and under its direct control.
	 
	8.	 	Management accounts
	 
	8.1	 	The management accounts of each Group Member for the 5 month period from the Accounting Date
to 31 May 2006, copies of which are enclosed in the Disclosure Documents have been prepared in
accordance with accounting principles and bases consistent with those applied in the
preparation of the Accounts.
	 
	8.2	 	Such management accounts:

	 	8.2.1	 	are not misleading in any material respect;
	 
	 	8.2.2	 	give a fair reflection of the value of the assets and liabilities and the
profits or losses of the Group for the period to which they relate.

CHANGES SINCE THE ACCOUNTING DATE

	9.	 	General
	 
	 	 	Since the Accounting Date:

28

 

	 	9.1	 	the business of each Group Member has been carried on in the ordinary and
usual course and in the same manner (including nature and scope) as in the 12 months
preceding the Accounting Date;
	 
	 	9.2	 	there has been no material adverse change in the financial or trading
position of any Group Member including any material adverse change in respect of
turnover, profits or margins of profitability of the relevant Group Member.

	10.	 	Specific
	 
	 	 	Since the Accounting Date:

	 	10.1	 	no Group Member has acquired, or agreed to acquire, any single asset having
a value in excess of £10,000 or assets having an aggregate value in excess of
£50,000;
	 
	 	10.2	 	no Group Member has disposed of, or agreed to dispose of, any asset
(excluding Stock disposed of in the ordinary course of business) having a value
reflected in the Accounts in excess of £10,000 or acquired since the Accounting Date;
	 
	 	10.3	 	no loan made by any Group Member which remains outstanding has become due
and payable in whole or in part to the relevant Group Member;
	 
	 	10.4	 	no Group Member has borrowed or raised any money (other than normal trade
credit) or taken up any financial facilities and no Group Member has repaid any
borrowing or indebtedness in advance of its stated maturity;
	 
	 	10.5	 	no Group Member has sold or agreed to sell a debt and no debt has been
released, deferred, subordinated or written off in full by any Group Member;
	 
	 	10.6	 	no dividend or other payment which is, or could be treated as, a
distribution for the purposes of Part VI ICTA or section 418 ICTA has been declared,
paid or made by any Group Member;
	 
	 	10.7	 	no resolution of the shareholders of any Group Member has been passed;
	 
	 	10.8	 	no Group Member has changed its accounting reference date;
	 
	 	10.9	 	no Group Member has assumed or incurred, or agreed to assume or incur, any
capital expenditure (actual or contingent) for a value in excess of £10,000;
	 
	 	10.10	 	no management or similar charge has become payable or been paid by any
Group Member;
	 
	 	10.11	 	no share or loan capital has been allotted, issued, repaid or redeemed or
agreed to be allotted, issued, repaid or redeemed by any Group Member; and
	 
	 	10.12	 	no payment has been made by any Group Member to, or benefit conferred
(directly or indirectly) by any Group Member on, any of the Sellers, any past or
present director of any Group Member or any person who is or was at the relevant time
connected (as defined in section 839 ICTA) with any

29

 

	 	 	 	Seller or any such director
(other than emoluments paid in the course of
employment in accordance with the terms of employment contracts which have been
Disclosed).

ASSETS

	11.	 	Unencumbered title; possession
	 
	11.1	 	Except insofar as this Warranty is inconsistent with paragraph 17 (Property), each asset
included in the Accounts or acquired by a Group Member since the Accounting Date (save for
Stock disposed of in the ordinary course of business) and each asset used by any Group Member
is legally and beneficially owned by the relevant Group Member free from any Encumbrance or
any claim to, or Contract to grant, any Encumbrance.
	 
	11.2	 	In the reasonable opinion of the Management Sellers each Group Member owns each material
asset necessary for the carrying on of its business in the manner in which it is currently
carried on.
	 
	11.3	 	No registrable Encumbrance in favour of a Group Member is void or voidable for want of
registration.
	 
	12.	 	Debtors
	 
	12.1	 	No Group Member has lent any money to any person other than trade debts incurred in the
ordinary course of business.
	 
	12.2	 	No Group Member is entitled to the benefit of any debt otherwise than as the original
creditor.
	 
	13.	 	Plant etc
	 
	 	 	The plant and machinery, vehicles, fixtures and fittings, furniture, tools and other
equipment used in connection with the business of each Group Member are in satisfactory
working order and have been regularly maintained and are materially in accordance with any
safety regulations usually observed in relation to them.
	 
	14.	 	Intellectual Property Rights
	 
	14.1	 	All Intellectual Property Rights used in, or held in relation to, any Group Member’s business
(save for Intellectual Property Rights licensed to any Group Member under any Contract) are
legally and beneficially owned by the relevant Group Member free from any Encumbrance.
	 
	14.2	 	All material Intellectual Property Rights used in, or held in relation to, any Group Member’s
business which are registered or the subject of applications for registration or which are
unregistered trade marks are listed in the Disclosure Documents.
	 
	14.3	 	In respect of registered Intellectual Property Rights, all renewal fees have been duly paid
and so far as the Sellers are aware, there are no grounds on which any person is able to seek
cancellation, rectification or any other modification of any registration.
	 
	14.4	 	There are, and have been, no proceedings, actions or claims and none are pending or, so far
as the Management Sellers are aware, threatened, impugning the title,

30

 

	 	 	validity or
enforceability of any Group Member’s Intellectual Property Rights or claiming any right or
interest in such Intellectual Property Rights.
	 
	14.5	 	So far as the Management Sellers are aware, there is, and has been, no infringement of any
Group Member’s Intellectual Property Rights and, so far as the Management Sellers are aware,
none is pending or threatened.
	 
	14.6	 	So far as the Management Sellers are aware, the activities of each Group Member (including
the processes, methods, Software, goods and services used or dealt in by it, and the products
or services manufactured or supplied by it)

	 	14.6.1	 	do not infringe any Intellectual Property Rights of any third party; and
	 
	 	14.6.2	 	have not resulted in a claim in respect of Intellectual Property Rights against the
relevant Group Member including any liability to any compensation under sections 40
and 41 of the Patents Act 1977.

	14.7	 	The Group Members have taken all reasonable steps to prevent unauthorised disclosure of their
confidential know how to any third party, other than those of any Group Member’s officers or
employees who are bound by obligations of confidence. No Group Member is restricted in their
ability to use, or to disclose to any third party, any information or know how of any Group
Member.
	 
	14.8	 	So far as the Management Sellers are aware, there are no circumstances which would render any
current application for registration of any Group Member’s Intellectual Property Rights
unacceptable to the relevant registry or other authority or which would prevent any such
application from proceeding to grant and registration.
	 
	14.9	 	Complete copies of all licences, sub-licences and other agreements whereby each Group Member
is licensed or otherwise authorised to use the Intellectual Property Rights of a third party
or whereby any Group Member licenses or otherwise authorises a third party to use Intellectual
Property Rights and in each case which are material in the context of the business of the
Group, are enclosed in the Disclosure Documents. So far as the Management Sellers are aware
all of them are in full force and effect, no notice having been given to terminate them, and
the obligations of all parties in respect of them have been fully complied with and no
disputes have arisen in respect of them.
	 
	14.10	 	The Disclosure Letter contains a full list of domain names which are held by, registered on
behalf of or are or have been used in respect of each Group Member. A Member of the Group is
the registered owner of each such domain name.
	 
	15.	 	Computer Systems
	 
	15.1	 	All material details of all Software used or held by each Group Member in which the
Intellectual Property Rights are owned by a third party are, to the extent they are material
in the context of the business of the Group, set out in the Disclosure Documents. So far as
the Management Sellers are aware, the licences of such Software are complied with in all
material respects.
	 
	15.2	 	Complete and accurate copies of all support and maintenance agreements in place in respect of
the Computer Systems are enclosed in the Disclosure Documents. So far as the Management
Sellers are aware the maintenance providers concerned have always fulfilled their obligations
under those agreements in accordance with their terms.

31

 

	15.3	 	All the Computer Systems are legally and beneficially owned by the relevant Group Member free
from any Encumbrance.
	 
	15.4	 	Each Group Member has a disaster recovery plan in respect of the Computer Systems, details of
which have been Disclosed.
	 
	15.5	 	Each Group Member has reasonable procedures in place to ensure the security of the Computer
Systems and data stored on them.
	 
	15.6	 	No part of the Computer Systems have materially failed to function at any time during the 2
years prior to the date of this Agreement.

PROPERTY

	16.	 	Details of the Property
	 
	16.1	 	The particulars of the Property shown in Schedule 6 (including in the case of registered land
the class of title and title number) are true, complete and accurate.
	 
	16.2	 	Each Group Member specified in Schedule 6 as title holder has title to the Property for the
estate or interest stated in Schedule 6 and, where appropriate, registered at the Land
Registry.
	 
	16.3	 	There is not, and so far as the Management Sellers are aware has not been, in force any
policy relating to defective title or restrictive covenant indemnity.
	 
	16.4	 	The title deeds to the Property disclosed in the Disclosure Documents are in the relevant
Group Member’s possession free from any Encumbrance.
	 
	16.5	 	No Group Member owns, is in occupation of or is entitled to any estate or interest in any
freehold or leasehold property other than the Property.
	 
	16.6	 	Except in relation to the Property, no Group Member has any liability (whether actual or
contingent) in relation to any freehold or leasehold property and in particular no Group
Member has ever assumed any liability under a lease (whether as landlord, tenant, guarantor or
otherwise) other than any leases disclosed in accordance with paragraph 25.
	 
	17.	 	Occupation and use of the Property
	 
	17.1	 	Except for any leases, tenancies or other rights of occupation to which the Property is
subject, as Disclosed the relevant Group Member is in occupation of the whole of the Property
and no other person has any right (actual or contingent) to possession or occupation of the
Property, or any interest in it.
	 
	17.2	 	The use of the Property is for the purpose stated in Schedule 6 and is not used for any other
purpose.
	 
	18.	 	Matters affecting the Property
	 
	18.1	 	So far as the Management Sellers are aware the Property is not affected by any of the
following matters:

	 	18.1.1	 	any material outstanding breach or alleged breach of covenant or of any other
restriction or condition, or any dispute or complaint within the three years prior to
the date of this Agreement, whether actual or threatened,

32

 

	 	 	 	with any neighbour, tenant,
landlord or other person relating to the extent, use, boundaries, enjoyment or
occupation of the Property or with regard to any actual or alleged agreement,
easement, right, covenant, liability or other matter affecting or relating to the
Property;
	 
	 	18.1.2	 	any receipt of compensation as a result of any refusal of any application for
planning permission;

	18.2	 	All development charges, monetary claims and liabilities under the Planning Acts (as defined
in the Town and Country Planning Act 1990) have been discharged and no liability, contingent
or otherwise, is outstanding in respect thereof.
	 
	18.3	 	There is not outstanding any material unobserved or unperformed obligation with respect to
the Property necessary to comply in any material respect with the requirements (whether formal
or informal) of any competent authority exercising statutory or delegated powers.
	 
	18.4	 	There are no disputes with any adjoining or neighbouring owners with respect to boundary
walls and fences or with respect to any easement, right or means of access to the Property.
	 
	19.	 	Condition of the Property
	 
	19.1	 	There are no uncompleted works of any description at the Property.
	 
	20.	 	Compliance with statutes and planning obligations
	 
	20.1	 	So far as the Management Sellers are aware, the use of the Property (and the use of plant and
machinery in connection with it) and the construction and layout of the Property (including
any alteration carried out to it) are the permitted user under and comply in all material
respects with the provisions of all relevant legislation from time to time (including the
Offices Shops and Railway Premises Act 1963, the Town and Country Planning Act 1990, the
Public Health Acts 1936 to 1961, the Fire Precautions Act 1971, the Health and Safety at Work
etc Act 1974, the Control of Pollution Act 1974, the Water Act 1989, the Environmental
Protection Act 1990, the Planning (Listed Buildings and Conservation Areas) Act 1990, the
Planning (Hazardous Substances) Act 1990, the Planning (Consequential Provisions) Act 1990,
the Planning and Compensation Act 1991 and the Party Wall Act 1996) and regulations made under
such legislation and so far as the Management Sellers are aware are materially in accordance
with the requirements of the local planning, environmental health, building control, fire and
all other competent authorities and all restrictions, conditions and covenants imposed by or
pursuant to such legislation have been observed and performed in all material respects.
	 
	21.	 	Leases affecting the Property
	 
	21.1	 	Details of any lease, tenancy or other right of occupation in respect of the Property have
been Disclosed, whether granted by or to any Group Member (or any Group Member’s predecessor
in title), and any Contract in respect of, and all relevant terms, provisions and other
matters relating to, any such lease, tenancy or other right, including:

	 	21.1.1	 	all rents, insurance premiums, service charges and other amounts due and payable or
(as the case may be) receivable by any Group Member, all of which are fully paid up
to date, and any agreement or arrangement

33

 

	 	 	 	relating to any review or variation of any
such amount or to the timing of any payment of any such amount;
	 
	 	21.1.2	 	any rent deposit arrangements and any charges over such deposits;
	 
	 	21.1.3	 	(other than as set out in the relevant leases contained in the Disclosure
Documents) all provisions relating to use, alterations, repairs,
decoration, sharing of facilities, assignment, underletting, parting with or sharing
possession, and termination;
	 
	 	21.1.4	 	(other than as set out in the relevant leases contained in the Disclosure
Documents) any provision requiring the lessee to trade or continue to trade or carry
on its business at the Property;
	 
	 	21.1.5	 	details of any notices served or actions taken by any party pursuant to Part II of
the Landlord and Tenant Act 1954;
	 
	 	21.1.6	 	details of any compensation payable to the lessee on quitting pursuant to the
Landlord and Tenant Act 1927 or the Landlord and Tenant Act 1954;
	 
	 	21.1.7	 	details of any sub-lease or other right of occupation granted by any tenant of any
Group Member or other occupant of the Property;
	 
	 	21.1.8	 	confirmation of the registration or otherwise of such lease with the Land Registry.

	21.2	 	The relevant Group Member has paid the rent and so far as the Management Sellers are aware,
observed and performed in all material respects the covenants on the part of the tenant and
the conditions contained in the leases and the last demand (or receipt for rent if issued) was
unqualified.
	 
	21.3	 	So far as the Management Sellers are aware, all licences, consents and approvals required
from the landlords and any superior landlords under the leases have been obtained and so far
as the Management Sellers are aware, the covenants on the part of the tenant contained in the
licences, consents and approvals have been duly performed and observed in all material
respects.
	 
	21.4	 	There are no rent reviews under the leases currently in progress.
	 
	21.5	 	There is not outstanding and unobserved or unperformed any obligation necessary to comply
with any notice or other requirement given by the landlords in writing under any of the
leases.

ENVIRONMENTAL/HEALTH AND SAFETY (EHS)

	22.	 	EHS Permits
	 
	22.1	 	Each Group Member has lawfully obtained all EHS Permits. So far as the Management Sellers are
aware each EHS Permit is in full force and effect and the relevant Group Member complies and
has complied at all times with all material conditions of each EHS Permit.
	 
	22.2	 	Copies of all EHS Permits obtained by each Group Member (including any variation notices
applicable thereto) are included in the Disclosure Documents.

34

 

	22.3	 	So far as the Management Sellers are aware no works or costs are necessary to obtain or
secure compliance with or maintain any EHS Permit.
	 
	22.4	 	No Group Member has received any communication in any form in respect of any EHS Permit
varying, modifying, revoking, suspending or cancelling the same or notifying an intention or
threatening so to do and there are no facts or circumstances known to the Management Sellers
which are likely to result in any EHS Permit being varied, modified, revoked or suspended or
which are likely to prejudice its renewal.
	 
	23.	 	Compliance with EHS Law
	 
	23.1	 	No Group Member has in the four years preceding the date of this agreement, received any
communication in any form from any relevant authority from which it appears that it may be or
is alleged to be in breach of EHS Law, or where failure to comply with such communication is
likely to constitute a breach of EHS Law or where compliance with such communication could be
secured by further proceedings by such relevant authority.
	 
	24.	 	Liability
	 
	24.1	 	No Group Member has received any notice of any complaint or claim from any person in respect
of EHS Matters.
	 
	24.2	 	No Group Member is, nor has any Group Member been, engaged in any action, litigation,
arbitration or dispute resolution proceedings or subject to any investigation under EHS Law or
otherwise in relation to EHS Matters and the Management Sellers are not aware of any such
matters pending or being threatened or of any circumstances or facts likely to give rise to
any such matters.
	 
	25.	 	Information
	 
	25.1	 	Each Group Member has at all times properly supplied to the competent authorities all
information required by EHS Law to be supplied, all such information given (whether under a
legal obligation or otherwise) was correct in all material respects at the time the
information was supplied.
	 
	25.2	 	Full details of any remedial work in relation to EHS matters involving expenditure in excess
of £10,000 carried out by any Group Member in the 4 years preceding the date of this agreement
at any sites now or formerly owned or occupied by any Group Member and of any environmental
assessment, audit, review or investigation conducted by or on behalf of any Group Member or
otherwise in relation to any such sites are set out in the Disclosure Documents.

EMPLOYEES

	26.	 	Remuneration and employees
	 
	26.1	 	Details of the department, grade, dates of commencement of employment (or appointment to
office), terms and conditions of employment and remuneration, benefits and emoluments
(including any loan arrangement, bonus, commission, profit sharing, share and other incentive
schemes, and collective or workforce agreements) of all the employees, workers and officers
of each Group Member are fully and accurately (in all material respects) set out in the
Disclosure Documents and copies of all their written service agreements or contracts of
employment or particulars of employment statements (and all manuals, handbooks, rules,

35

 

	 	 	regulations and statements of terms, conditions, policies, procedures and practices) are
included in the Disclosure Documents.
	 
	26.2	 	There are no amounts owing to any present or former officers, workers or employees of any
Group Member, other than emoluments accrued (but not yet due for payment) in respect of the
calendar month in which this Agreement is executed or for reimbursement of business expenses
incurred during such month, and none of them is entitled to accrued but unpaid holiday pay or
accrued but untaken holiday leave in respect of the relevant Group Member’s current holiday
year.
	 
	26.3	 	All Contracts of employment between each Group Member and its directors and employees are
terminable by the relevant Group Member by giving not more than 3 months notice and no Group
Member is contractually obliged to make any payment as a consequence of the termination of any
such Contract.
	 
	26.4	 	No Group Member has:

	 	26.4.1	 	employed or engaged or made any offers to employ or engage any person with a basic
salary in excess of £25,000 per annum:

	 	26.4.1.1	 	since the Accounting Date; or
	 
	 	26.4.1.2	 	where such employment or engagement will take effect after the date of
this Agreement;

	 	26.4.2	 	given or received notice to terminate the employment or engagement of any person
and no such person with a basic salary in excess of £25,000 has ceased to be employed
or engaged by any Group Member:

	 	26.4.2.1	 	since the Accounting Date; or
	 
	 	26.4.2.2	 	where such notice has not yet expired; or

	 	26.4.3	 	made, agreed or proposed or is party to any contractual arrangement to make any
general change of terms and conditions of employment or engagement of the employees,
workers and officers of any Group Member:

	 	26.4.3.1	 	since the Accounting Date; or
	 
	 	26.4.3.2	 	where such change of terms and conditions has not yet taken effect.

	26.5	 	There is no person previously employed or engaged by any Group Member who now has or may have
a statutory or contractual right to return to work or to be re-instated or re-engaged by the
relevant Group Member.
	 
	27.	 	Details of all employees who have been absent from work for more than four weeks (whether on
maternity leave, unpaid leave, long-term sickness, secondment, authorised annual leave or
otherwise) in the 12 month period ending on the date of this Agreement are contained in the
Disclosure Letter.
	 
	27.1	 	No Group Member has recognised, or done any act which might be construed as recognition of, a
trade union and no Group Member is party to any agreement or understanding with any trade
union or organisation of employees or workers nor, as far as the Management Sellers are aware,
are any steps being taken by employees, workers or other representatives to ensure trade union
recognition.

36

 

	27.2	 	No Group Member is involved, or has during the 12 months prior to the date of this Agreement
been involved, in any strike, lock-out, industrial or trade dispute or any negotiations with
any trade union or body of employees or workers.
	 
	27.3	 	There are no homeworking, part-time, job share, flexitime or flexible working arrangements or
early retirement schemes applicable to any employees of any Group Member. There are no
schemes or programmes for the employment or training or inward or outward secondment of
workers by any Group Member other than under its full control.
	 
	27.4	 	No Group Member operates, intends to operate or has operated any short time working scheme or
arrangement or any redundancy or redeployment scheme or arrangement, whether formal or
informal, contractual or non-contractual, which provides for payments greater than those
required by statute or for notice periods greater than those set out in contracts of
employment or engagement.
	 
	27.5	 	No Group Member uses the services of outworkers, agency or other self-employed persons,
contracted labour or agents.
	 
	27.6	 	Each Group Member has, in relation to all present and former employees and workers, complied
in all material respects with all statutes, regulations, orders and codes of conduct relating
to employment and relations with employees and trade unions and has maintained adequate and
suitable records, whether or not required to do so by law, regarding the service of each of
its employees and so far as the Management Sellers are aware, has complied in all material
respects with all agreements for the time being having effect as regards such relations or the
conditions of service of its employees (whether collectively or individually).
	 
	27.7	 	No employee of any Group Member is subject to any disciplinary action likely to give rise to
suspension or termination of employment or is engaged in any grievance procedure and so far as
the Management Sellers are aware, there is no matter or fact which can be reasonably foreseen
as likely to give rise to the same.
	 
	28.	 	Pensions
	 
	28.1	 	For the purpose of these warranties:

	 	 	 	 	 
	 

	 	“Pension Schemes”
	 	means the Group Stakeholder Pension Plan with Friends Provident (Scheme
number F49565) and the Group Personal Pension Plan with Friends Provident (Scheme
number F46969.

	28.2	 	The Pension Schemes are the only arrangements to which any Group Member has any liability for
the purpose of providing benefits on retirement or death.
	 
	28.3	 	The Management Sellers have supplied to the Buyer documents containing all material details
of the Pension Schemes and of each Group Member’s and their respective employees’ obligations
and liabilities under them.
	 
	28.4	 	So far as the Management Sellers are aware, the Pension Schemes are registered pension
schemes (within the meaning of Chapter 2 of Part 4 of the Finance Act 2004), and there is no
reason why this registered status could be withdrawn.

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	29.	 	So far as the Management Sellers are aware, each Group Member and the Pension Schemes comply
and have at all times complied in all material respects with all legal and regulatory
requirements (including equal treatment and data protection requirements), relevant to the
Pension Schemes and each Group Member’s participation in the Pension Schemes. Each Group
Member complies and has at all time complied in all material respects with any duty to
facilitate access to a stakeholder pension scheme (under section 3 of the Welfare Reform and
Pensions Act 1999) and with any equal treatment or other anti-discrimination requirements
relevant to the provision of retirement or death benefits.
	 
	29.1	 	So far as the Management Sellers are aware, no claim, dispute, complaint or investigation has
arisen which relates to the Pension Schemes or to the provision of retirement or death
benefits in respect of each Group Member’s current and former
employees and the Management Sellers know of no reason why any such claim, dispute, complaint or
investigation could arise.
	 
	29.2	 	All amounts payable by, to and in respect of the Pension Schemes have been paid.
	 
	29.3	 	All death in service benefits are fully insured.
	 
	29.4	 	All benefits under the Pension Schemes (other than those which are fully insured) are
calculated on a money purchase basis only and there is no obligation on any Group Member or
under the Pension Schemes (other than in the case of those benefits which are fully insured)
to provide any specified level of benefits.

CONTRACTS

	30.	 	Insurance
	 
	30.1	 	All premiums due in relation to each Group Member’s policies of insurance have been paid, and
so far as the Management Sellers are aware nothing has been done or omitted to be done which
would make any policy of insurance of any Group Member void or voidable or which might lead to
any liability under such insurance being avoided by the insurers.
	 
	30.2	 	No insurance claim is pending or outstanding and so far as the Management Sellers are aware,
there are no circumstances which might result in any such claim.
	 
	30.3	 	All material details of each Group Member’s insurances and of all claims made against those
insurances in the last 3 years are set out in the Disclosure Documents.
	 
	31.	 	Financing and working capital
	 
	31.1	 	No Group Member has procured or engaged (directly or indirectly) in any borrowing or
financing not required to be reflected in its statutory accounts.
	 
	31.2	 	All material details of all overdrafts, loans or other financial facilities outstanding or
available to each Group Member are set out in the Disclosure Documents and copies of all
documents relating to those facilities are included in the Disclosure Documents.
	 
	31.3	 	No person has given any guarantee of or security for any overdraft, loan, other financial
facility granted to any Group Member or other liability of any Group Member.

38

 

	31.4	 	No Group Member has applied for or received any grant, subsidy or financial assistance from
any government department or other body.
	 
	32.	 	Material contracts
	 
	 	 	No Group Member is, or has been since the Accounting Date, a party to, liable under or
subject to any Contract which:

	 	32.1	 	involves agency, distributorship, franchising, marketing rights or
manufacturing rights;
	 
	 	32.2	 	involves partnership, joint venture, consortium, joint development or
shareholders arrangements;
	 
	 	32.3	 	involves hire purchase, conditional sale, credit sale, leasing, hiring or
similar arrangements;
	 
	 	32.4	 	involves any capital expenditure by the relevant Group Member or involves
an aggregate expenditure or receipt in excess of £50,000 by the relevant Group
Member;
	 
	 	32.5	 	is incapable of termination by the Relevant Group Member or expiry in
accordance with its terms within 6 months after the date on which it was entered
into;
	 
	 	32.6	 	involves the forward purchase or sale of any currency, commodity, precious
metal or other asset;
	 
	 	32.7	 	is for the supply of goods by or to the relevant Group Member on a sale or
return basis or on a consignment stock basis other than in the ordinary and usual
course of business;
	 
	 	32.8	 	is for the supply of goods or services by or to the relevant Group Member
on terms under which retrospective discounts, price reductions or other financial
incentives are given;
	 
	 	32.9	 	involves delegation of any power under a power of attorney or authorisation
of any person (as agent or otherwise but excluding employees and officers) to bind or
commit the relevant Group Member to any obligation;
	 
	 	32.10	 	restricts the freedom of the relevant Group Member to carry on its
business in any part of the world or to use or exploit any of its assets, in each
case in such manner as it may think fit;
	 
	 	32.11	 	involves conditions, warranties, indemnities or representations given in
connection with a sale of shares or an undertaking or fixed assets;
	 
	 	32.12	 	is a guarantee, indemnity, surety or form of comfort in respect of the
obligations of a third party, under which any liability or contingent liability is
outstanding;
	 
	 	32.13	 	is not on arm’s length terms or is in any way otherwise than in the
ordinary course of the relevant Group Member’s business; or

39

 

	 	32.14	 	involves or is likely to involve the supply of goods by or to a Group
Member the aggregate sales value of which will represent in excess of 5% of the sales
or purchases (as the case may be) of the Group for the year ended on the Accounting
Date.

	33.	 	Other business matters
	 
	33.1	 	So far as the Management Sellers are aware, during the 12 months ending on the date of this
Agreement there has been no substantial change in the basis or terms on which any substantial
customer or supplier of any Group Member (providing 5% or more of a Group Member’s supplies or
turnover in any accounting year) is prepared to do business with any Group Member (apart from
normal price changes), and no such substantial customer or supplier of any Group Member has
notified the Group Member that it has ceased or substantially reduced its business with any
Group Member, and no notification has been received by any Group
Member or any of the Sellers that there will or may be any such change, cessation or
reduction.
	 
	33.2	 	No Group Member carries on business under any name other than its own corporate name or any
other name specified in the Disclosure Documents.
	 
	33.3	 	No Group Member is a party to any agreement to which the Commercial Agents (Council
Directive) Regulations 1993 would apply on termination of such agreement.

COMPLIANCE, DISPUTES

	34.	 	Company law matters
	 
	34.1	 	Compliance has been made with all legal requirements in connection with the formation of each
Group Member and all issues and grants of shares, debentures, notes, mortgages or other
securities of each Group Member.
	 
	34.2	 	The copy of the memorandum and articles of association of each Group Member included in the
Disclosure Documents is true and complete. Each Group Member has at all times carried on its
business and affairs in all material respects in accordance with its memorandum and articles
of association and all such resolutions and agreements.
	 
	34.3	 	All returns, particulars, resolutions and other documents required to be filed with or
delivered to the Registrar of Companies by each Group Member or any of its officers have been
properly filed and delivered, and no such returns, particulars, resolutions or other documents
have been so filed or delivered during the period of 14 days ending on the date of this
Agreement.
	 
	34.4	 	The statutory books (including all registers and minute books) of each Group Member have been
properly kept and contain a materially accurate record of the matters which should be dealt
with in those books and no notice or allegation that any of them is materially incorrect or
should be rectified has been received.
	 
	35.	 	General legal compliance
	 
	35.1	 	Each Group Member has obtained all necessary licences, consents, permits, authorities and
permissions (public and private) to enable it to carry on its business in the places and in
the manner in which such business is now carried on. All such licences, consents, permits and
authorities are valid and subsisting and

40

 

	 	 	have been complied with in all material respects and
so far as the Management Sellers are aware, there is no reason why any of them should be
suspended, cancelled or revoked.
	 
	35.2	 	So far as the Management Sellers are aware, there is not pending, or in existence, any
investigation or enquiry by, or on behalf of, any governmental or other body in respect of the
affairs of any Group Member.
	 
	36.	 	Fair trading
	 
	36.1	 	No agreement, transaction, practice or arrangement carried on by any Group Member (or by any
person for whose acts or defaults any Group Member may be contractually or vicariously
liable), whether unilaterally or with others, or to which any Group Member (or any such
person) is a party, and no state of affairs applicable to any Group Member (or any such
person):

	 	36.1.1	 	is or ought to have been registered in accordance with the provisions of the
Restrictive Trade Practices Acts 1976 and 1977 or is or has been the subject of any
enquiry, investigation or proceeding under the Restrictive Trade Practices Acts 1976
and 1977 or the Resale Prices Act 1976;
	 
	 	36.1.2	 	is or has been the subject of an enquiry, investigation, reference or report under
the Enterprise Act 2002, the Competition Act 1998 or any other legislation relating
to monopolies or mergers or markets including the Fair Trading Act 1973;
	 
	 	36.1.3	 	infringes or falls within the scope of the offence created by Section 188 of the
Enterprise Act 2002;
	 
	 	36.1.4	 	infringes or falls within the scope of Chapter I of the Competition Act 1998, or
constitutes an abuse of dominant position contrary to Chapter II of such Act or is or
has been the subject of any enquiry, request for information, investigation or
proceedings in respect of either of these Chapters;
	 
	 	36.1.5	 	infringes or falls within the scope of Article 81 of the EC Treaty, or constitutes
an abuse of dominant position contrary to Article 82 of the EC Treaty, or infringes
or falls within the scope of any regulation or other enactment made under Article 83
of the EC Treaty, or is or has been the subject of any enquiry, request for
information, investigation or proceeding in respect of any of those Articles;
	 
	 	36.1.6	 	infringes or falls within the scope of any other competition, anti-restrictive
trade practice, anti-trust or consumer protection law applicable in the United
Kingdom or elsewhere and not specifically mentioned in this paragraph or is or has
been subject to any investigation, request for information, notice or other
communication by any court, governmental or regulatory authority in respect of any
such legislation; or
	 
	 	36.1.7	 	contravenes the provisions of the Trade Descriptions Acts 1968 and 1972.

	 	 	and there are no circumstances known to the Management Sellers likely to give rise to any
such enquiry, investigation, proceeding, reference or report being made.
	 
	36.2	 	No Group Member has made or threatened to make any complaint against any other person to any
relevant authority under any law or legislation referred to in this paragraph.

41

 

	36.3	 	No Group Member has given any assurance or undertaking to the Restrictive Practices Court,
the Office of Fair Trading, the Secretary of State for Trade and Industry, the Competition
Commission, the Commission or Court of First Instance or Court of Justice of the European
Union, or any other court and no Group Member is subject to any act, decision, regulation,
order or other instrument (statutory or otherwise) made by any of them relating to any matter
referred to in this paragraph.
	 
	36.4	 	No Group Member is in material default or in material contravention of any article, act,
decision, regulation, order or other instrument or of any assurance or undertaking relating to
any matter referred to in this paragraph.
	 
	37.	 	Litigation
	 
	37.1	 	No Group Member and so far as the Management Sellers are aware, no person for whose acts or
defaults any Group Member may be contractually or vicariously liable
is involved (whether as claimant, defendant or otherwise) in any civil, criminal,
tribunal, arbitration, administrative or other proceedings.
	 
	37.2	 	No civil, criminal, tribunal, arbitration, administrative or other proceedings are pending or
so far as the Management Sellers are aware, threatened by or against or concern any Group
Member and there are no facts or circumstances known to the Management Sellers likely to
result in any such proceedings.
	 
	37.3	 	There is no outstanding or unsatisfied judgement, decree, order, award or decision of a
court, tribunal, arbitrator or governmental agency against any Group Member and no Group
Member is party to any undertaking or assurance given to a court, tribunal or any other person
in connection with the determination or settlement of any claim or proceedings.
	 
	38.	 	Default
	 
	38.1	 	So far as the Management Sellers are aware, no Group Member is in material breach of any
Contract to which it is a party, and no other party to any such Contract is in material breach
of it. All agreements, rights, commitments and obligations to which any Group Member is a
party are so far as the Management Sellers are aware valid and enforceable. The Management
Sellers are not aware of any grounds for the termination, rescission, avoidance or repudiation
of any Contract by the relevant Group Member or any other party to any such Contract.
	 
	39.	 	Insolvency
	 
	39.1	 	No meeting has been convened at which a resolution will be proposed, no petition has been
presented, no order has been made and no resolution has been passed for the winding-up of any
Group Member or for the appointment of any provisional liquidator. No Group Member has called
any formal or informal meeting of all or any of its creditors.
	 
	39.2	 	No administrative receiver, receiver or receiver and manager has been appointed of the whole
or any part of the property, assets or undertaking of any Group Member.
	 
	39.3	 	No administrator has been appointed in respect of any Group Member and no steps or actions
have been taken in connection with the appointment of an administrator in respect of any Group
Member.

42

 

	39.4	 	No voluntary arrangement has been proposed or approved under Part I Insolvency Act 1986 and
no compromise or arrangement has been proposed, agreed to or sanctioned under section 425 CA
1985 in respect of any Group Member.
	 
	39.5	 	No distress, execution or other process has been levied on or applied for in respect of any
asset of any Group Member.
	 
	39.6	 	No Group Member has stopped or suspended the payment of its debts or received a written
demand pursuant to section 123(1)(a) Insolvency Act 1986 and no Group Member is insolvent or
unable to pay its debts within the meaning of section 123 Insolvency Act 1986.
	 
	39.7	 	No disqualification order has been made pursuant to the provisions of the Company Directors
Disqualification Act 1986 or so far as the Management Sellers are aware, proceedings
threatened against any former or current officer of any Group Member.
	 
	39.8	 	No Group Member and none of the directors of any Group Member has consulted a person
qualified to act as an insolvency practitioner under Part XIII of the Insolvency Act 1986 with
a view to minimising the potential loss to the relevant Group Member’s creditors or otherwise
in relation to any financial difficulty of such Group Member.
	 
	39.9	 	No Group Member has been a party to any transaction at an undervalue as defined in section
238 of the Insolvency Act 1986 nor has any Group Member given or received any preference as
defined in section 239 of the Insolvency Act 1986, in either case within the period of 2 years
ending on the date of this Agreement.
	 
	39.10	 	So far as the Management Sellers are aware, there are no facts in existence which are likely
to lead to any of the events or circumstances referred to in this paragraph.
	 
	40.	 	Data Protection
	 
	40.1	 	Each Group Member has at all times complied in all material respects with the Data Protection
Acts 1984 and 1998 and the Privacy and Electronic Communications (EC Directive) Regulations
2003 (together the “Data Protection Legislation”).
	 
	40.2	 	No Group Member has received a notice, complaint or allegation from either the Information
Commissioner or a data subject alleging non-compliance with the Data Protection Legislation,
prohibiting the transfer of data to a place outside the United Kingdom or requesting
rectification or erasure of Personal Data, and so far as the Management Sellers are aware,
there are no circumstances which may give rise to such a notice, complaint or allegation.
	 
	41.	 	Effects of the Agreement
	 
	41.1	 	So far as the Management Sellers are aware the execution of this Agreement and the observance
and performance of its provisions will not and is not likely to:

	 	41.1.1	 	result in a breach of any material Contract, law, regulation, order, judgement,
injunction, undertaking, decree or similar imposition to or by which any Group Member
is party or bound, or entitle any person to terminate or avoid any material Contract
to which any Group Member is party;

43

 

	 	41.1.2	 	result in the loss or impairment of or any default under any licence, authorisation
or consent required by any Group Member for the purposes of its business;
	 
	 	41.1.3	 	result in the creation, imposition, crystallisation or enforcement of any
Encumbrance whatsoever on any of the assets of any Group Member;
	 
	 	41.1.4	 	result in any present or future indebtedness of any Group Member becoming due and
payable, or capable of being declared due and payable, prior to its stated maturity
date.

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SCHEDULE 4

Taxation

PART 1 — INTERPRETATION

	 	 	 	 	 	 	 
	1.

	 	Interpretation	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	In this Schedule 4:
	 
	 	 	 	 	 	 
	1.1	 	the following expressions have the following meanings unless inconsistent with the context:
	 
	 	 	 	 	 	 
	 	 	“ACT”	 	advance corporation tax
	 
	 	 	 	 	 	 
	 

	 	“Accounts Relief”
	 	(a)
	 	any Relief which was treated as an asset of
the relevant Group Member in the Completion
Statements to the extent it increases the amount
of Working Capital; and
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	any Relief which was taken into account in
computing (and so reducing or eliminating) any
provision for deferred tax which appears in the
Completion Statements or which would have appeared
in the Completion Statements but for the presumed
availability of such Relief in each instance to
the extent it increases the amount of Working
Capital
	 
	 	 	 	 	 	 
	 	 	“the Auditors”	 	the auditors for the time being of the Group
	 
	 	 	 	 	 	 
	 	 	“the Balance Sheet”	 	the audited balance sheet of the relevant Group
Member, as at the Accounting Date
	 
	 	 	 	 	 	 
	 

	 	“Buyer’s Associate”
	 	(a)
	 	the Buyer;
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	(after Completion) a Group Member; and
	 
	 	 	 	 	 	 
	 

	 	 	 	(c)
	 	any company or person (other than a Group
Member) that may be treated for the purposes of
any Taxation as being at any time after Completion
either a member of the same group of companies as
the Buyer or

45

 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Group Member
	 
	 	 	 	 	 	 
	 	 	“CAA”	 	Capital Allowances Act 2001
	 
	 	 	 	 	 	 
	 	 	“Dispute”	 	any dispute, appeal, negotiations or other proceedings in connection with a Tax Claim
	 
	 	 	 	 	 	 
	 	 	“Event”	 	any event, fact or circumstance whatsoever including but not limited to:
	 
	 	 	 	 	 	 
	 

	 	 	 	(a)
	 	any transaction, action or omission (whether
or not any Group Member is party to it);
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	the earning, receipt or accrual for any
Taxation purpose of any income, profits or gains;
	 
	 	 	 	 	 	 
	 

	 	 	 	(c)
	 	the incurring for any Taxation purpose of any
loss or expenditure;
	 
	 	 	 	 	 	 
	 

	 	 	 	(d)
	 	the declaration, payment or making of any
dividend or other distribution;
	 
	 	 	 	 	 	 
	 

	 	 	 	(e)
	 	the sale and purchase of the Shares pursuant
to this Agreement; and
	 
	 	 	 	 	 	 
	 

	 	 	 	(f)
	 	Completion
	 
	 	 	 	 	 	 
	 	 	“FA”	 	Finance Act
	 
	 	 	 	 	 	 
	 	 	“Future Relief”	 	any Relief which arises after Completion as a
result of any Event which has occurred or occurs
after Completion to the extent it was not
available before Completion
	 
	 	 	 	 	 	 
	 

	 	“Group Relief”
	 	(a)
	 	any Relief surrendered or claimed pursuant to
Chapter IV of Part X ICTA;
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	any ACT surrendered or claimed pursuant to
section 240 ICTA;
	 
	 	 	 	 	 	 
	 

	 	 	 	(c)
	 	any refund of Taxation surrendered or claimed
pursuant to section 102 FA 1989; and
	 
	 	 	 	 	 	 
	 

	 	 	 	(d)
	 	any Relief obtained as a result of an election
made jointly with another company pursuant to
section 171A or 179A TCGA or

46

 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	pursuant to paragraph
66 Schedule 29 FA 2002
	 
	 	 	 	 	 	 
	 	 	“HMRC”	 	Her Majesty’s Revenue & Customs or either of
Inland Revenue or Her Majesty’s Customs & Excise
as appropriate
	 
	 	 	 	 	 	 
	 	 	“IHTA”	 	Inheritance Tax Act 1984
	 
	 	 	 	 	 	 
	 	 	“ITEPA”	 	Income Tax (Earnings and Pensions) Act 2003
	 
	 	 	 	 	 	 
	 

	 	“Liability to
Taxation”
	 	(a)
	 	any liability of any Group Member to make an
actual payment of Taxation (whether or not any
Group Member is primarily so liable and whether or
not the relevant Group Member has any right of
recovery against any other person); and
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	the use by any Group Member (in whole or in
part) of any Future Relief (including a Future
Relief surrendered to the Group Member by another
company) or Accounts Relief to reduce or eliminate
any liability of any Group Member to make an
actual payment of Taxation (whether or not any
Group Member is primarily so liable and whether or
not any Group Member has any right of recovery
against any other person) in respect of which the
Sellers would otherwise have been liable under
paragraph 2;
	 
	 	 	 	 	 	 
	 

	 	 	 	(c)
	 	the loss by any Group Member (in whole or in
part) of any Accounts Relief (including an
Accounts Relief surrendered to the Group Member by
another company which was treated as an asset of
the Relevant Group Member in the Completion
Statements and to the extent it increases the
amount of Working Capital)
	 
	 	 	 	 	 	 
	 	 	“PAYE”	 	the Pay As You Earn system

47

 

	 	 	 	 	 	 	 
	 

	 	“Relief”
	 	(a)
	 	any relief, allowance, exemption, set-off,
deduction or credit available from, against or in
relation to Taxation or in the computation for any
Taxation purpose of income, profits or gains; and
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	any right to a repayment of Taxation
	 
	 	 	 	 	 	 
	 

	 	“Sellers’ Associate”
	 	(a)
	 	a Management Seller;
	 
	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	 any company or person (other than a Group
Member after Completion) that may be treated for
the purposes of any Taxation at any time (whether
before, on or after Completion) as being either a
member of the same group of companies as the
Management Sellers (or any of them) or otherwise
associated with the Management Sellers (or any of
them); and
	 
	 	 	 	 	 	 
	 

	 	 	 	(c)
	 	any company or person (other than a Group
Member) that may be treated for the purposes of
any Taxation as being at any time prior to
Completion either a member of the same group of
companies as a Group Member or otherwise
associated with a Group Member;
	 
	 	 	 	 	 	 
	 

	 	“Taxation”
	 	(a)
	 	any tax, duty, impost or levy, past or
present, of the United Kingdom or elsewhere,
whether governmental, state, provincial or
municipal, including income tax (including income
tax required to be deducted or withheld from or
accounted for in respect of any payment under Part
11 ITEPA or otherwise), corporation tax, ACT,
capital gains tax, inheritance tax, VAT, customs
and other import or export duties, rates, stamp
duty, stamp duty land tax, stamp duty reserve tax,
national insurance and social security
contributions (but not including local authority
rates); and

48

 

	 	 	 	 	 	 	 
	 

	 	 	 	(b)
	 	any fine, penalty, surcharge, interest or
other imposition relating to any tax, duty, impost
or levy mentioned in paragraph (a) of this
definition (including any interest or penalty in
respect of the underpayment of instalments under
the Corporation Tax (Instalment Payments)
Regulations 1998) or to any account, record,
form, return or computation required to be kept,
preserved, maintained or submitted to any person
for the purposes of any such tax, duty, impost or
levy
	 
	 	 	 	 	 	 
	 	 	“Taxation Authority”	 	any authority, whether of the United Kingdom or
elsewhere, competent to impose, assess or collect
Taxation, including but not limited to HMRC
	 
	 	 	 	 	 	 
	 	 	“Taxation Statute”	 	any statute (and all regulations and other
documents having the force of law under such
statute) published, enacted, issued or coming into
force on or before the date of this Agreement
relating to Taxation
	 
	 	 	 	 	 	 
	 	 	“Tax Claim”	 	any notice, demand, assessment, self-assessment,
letter or other document issued, or action taken,
by or on behalf of any Taxation Authority and the
preparation or submission of any Taxation form,
return or computation or other document or any
other matter or circumstances from which, in
either case, it appears to the Buyer that any
Group Member is or may be or may become subject to
a Liability to Taxation or other liability in
respect of which the Management Sellers are or may
be liable under this Schedule 4 and for this
purpose the limitations in paragraph 4 shall be
disregarded
	 
	 	 	 	 	 	 
	 	 	“Tax Dispute”	 	any Tax Claim where conduct is delegated to the
Management Sellers pursuant to paragraph 7.2 of
the Schedule 4
	 
	 	 	 	 	 	 
	 	 	“TCGA”	 	Taxation of Chargeable Gains Act 1992
	 
	 	 	 	 	 	 
	 	 	“TMA”	 	Taxes Management Act 1970

49

 

	 	 	 	 	 	 	 
	 	 	“VAT”	 	value added tax
	 
	 	 	 	 	 	 
	 	 	“VATA”	 	Value Added Tax Act 1994
	 
	 	 	 	 	 	 
	 	 	“VAT Group”	 	any group of companies for the purposes of section
43 VATA of which any Group Member is or has been a
member on or before Completion

	1.2	 	references to Events include Events which are deemed to have occurred for any Taxation
purpose and references to income, profits or gains earned, received or accrued for any
Taxation purpose include income, profits or gains which are deemed to have been earned,
received or accrued for any Taxation purpose;

	1.3	 	references to the loss of a Relief include the disallowance of a Relief and the failure to
obtain a Relief (whether as a result of the surrender of the Relief to another company or
otherwise); and

	1.4	 	any stamp duty which is charged on any document, or in the case of a document which is
outside the United Kingdom any stamp duty which would be charged on the document if it were
brought into the United Kingdom, which is necessary to establish the title of any Group Member
to any asset or in the enforcement or production of which any Group Member is interested, and
any interest, fine or penalty relating to such stamp duty, will be deemed to be a liability of
the relevant Group Member to make an actual payment of Taxation.

50

 

PART 2 — TAX COVENANT

	2.	 	Covenant
	 
	 	 	Subject to the provisions of this Part 2 of this Schedule 4, the Management Sellers
jointly and severally covenant with the Buyer to pay to the Buyer an amount equal to the
amount of:
	 
	2.1	 	any Liability to Taxation which has arisen or arises as a result of or in connection with any
Event which occurred on or before Completion, whether or not such Liability to Taxation has
been discharged on or before Completion; and
	 
	2.2	 	any Liability to Taxation which arises as a result of any person (other than a Group Member)
failing at any time to discharge Taxation for which such person is primarily liable, where
such person has at any time on or before Completion been a member of the same group of
companies as any Seller Associate for any Taxation purpose and/or been connected or associated
with any Seller Associate for any Taxation purpose;
	 
	2.3	 	any Liability to Taxation which arises as a result of any Event which occurs after Completion
pursuant to a legally binding obligation (whether or not conditional) entered into by the
relevant Group Member on or before Completion otherwise than in the ordinary course of
business of the relevant Group Member;
	 
	2.4	 	any liability of the Group Member to make a payment in respect of Taxation to any person
other than another Group Member under any agreement or arrangement relating to the surrender
of Group Relief entered into by the relevant Group Member on or before Completion; and
	 
	2.5	 	any reasonable third party costs, fees or expenses properly incurred by any Group Member or
the Buyer in connection with:

	 	2.5.1	 	any Liability to Taxation or other liability in respect of which the
Management Sellers are liable under any of paragraphs 2.1 to 2.4; or
	 
	 	2.5.2	 	any Tax Claim or any Dispute; or
	 
	 	2.5.3	 	in successfully taking or defending any action (including but not limited
to legal proceedings) under this Part 2 of this Schedule 4.

	3.	 	Quantification
	 
	 	 	For the purposes of paragraph 2 the amount of a Liability to Taxation will be determined
as follows:
	 
	3.1	 	the amount of a Liability to Taxation falling within paragraph (a) of the definition of that
expression in paragraph 1.1 will be the amount of the actual payment of Taxation which the
relevant Group Member is liable to make;
	 
	3.2	 	the amount of a Liability to Taxation falling within paragraph (b) of the definition of that
expression in paragraph 1.1 will be the amount of Taxation saved by the relevant Group Member
as a result of the use of the Future Relief or Accounts Relief; and
	 
	3.3	 	the amount of a Liability to Taxation falling within paragraph (c) of the definition of that
expression in paragraph 1.1 will be:

51

 

	 	3.3.1	 	the amount of Taxation which would have been saved by the relevant Group
Member but for the loss of the Accounts Relief on the basis of the rates of Taxation
current at Completion assuming for this purpose that the Group Member had sufficient
profits or was otherwise in a position actually to use the Accounts Relief; or
	 
	 	3.3.2	 	if the Accounts Relief lost was a right to a repayment of Taxation, the
amount of the repayment of Taxation so lost.

	4.	 	Exclusions
	 
	4.1	 	The Management Sellers will not be liable under paragraph 2 in respect of a Liability to
Taxation of any Group Member to the extent to which:

	 	4.1.1	 	such Liability to Taxation was discharged on or before Completion and the
discharge of such Liability to Taxation was reflected in the Completion
Statements; or
	 
	 	4.1.2	 	provision or reserve for such Liability to Taxation (other than by way of a
provision or reserve for deferred taxation) was made in the Completion Statements
or to the extent that such liability is taken into account in increasing or
reducing the amount of any such provision or reserve; or
	 
	 	4.1.3	 	payment has already been made in respect of such Liability to Taxation under this
Agreement; or
	 
	 	4.1.4	 	such Liability to Taxation would not have arisen or is increased as a result of
any increase in the rates in Taxation, variation in the method of applying or
calculating the rate of Taxation, any change in the legislation, rule, regulation
or published practice of any Taxation Authority, any change of interpretation on
the basis of case law or any withdrawal of any extra-statutory concession by a
Taxation Authority first enacted or announced after Completion; or
	 
	 	4.1.5	 	such Liability to Taxation would not have arisen but for a voluntary act,
transaction or omission of any Group Member or Buyer’s Associate after
Completion:

	 	4.1.5.1	 	otherwise than pursuant to a legally binding obligation entered into
by the Group Member on or before Completion or imposed on the Group
Member by any legislation coming into force before Completion; and
	 
	 	4.1.5.2	 	which the relevant Buyer’s Associate was aware or ought reasonably to
have been aware would give rise to the Liability to Taxation or other
liability in question; and
	 
	 	4.1.5.3	 	otherwise than in the ordinary course of business of the relevant
Group Member; and
	 
	 	4.1.5.4	 	otherwise than at the written request of the Management Sellers
whether pursuant to this Agreement or otherwise; or

	 	4.1.6	 	such Liability to Taxation was not provided for or reserved in the
Completion Statements but has arisen in circumstances where a Group Member has
already collected, invoiced or deducted an amount on account

52

 

	 	 	 	of such Taxation (and this amount was not reflected as an asset of the Group
Member in the Completion Statements) from some person other than the Management
Sellers and is holding that amount in preparation for making a payment to the
relevant Taxation Authority on the due date (for example Taxation deducted under
the PAYE system or VAT); or
	 
	 	4.1.7	 	such Liability to Taxation arises as a result of a change after Completion
in any accounting practice or principles, accounting policy or any Taxation reporting
practice of any Buyer Associate save where such change is needed to comply with UK
GAAP as at Completion; or
	 
	 	4.1.8	 	such Liability to Taxation would not have arisen but for:

	 	4.1.8.1	 	the change of the date to which a Group Member makes up its accounts; or
	 
	 	4.1.8.2	 	the cessation of, or any change in the nature or conduct of, any business
carried on by a Group Member occurring after Completion; or

	 	4.1.9	 	such Liability to Taxation arises as a consequence of the Company ceasing
to be entitled to the small companies’ rate of corporation tax whether by virtue of
an increase in the level of profits of the Company for the accounting period during
which Completion takes place that are attributable to the period following Completion
or as a result of becoming associated with the Buyer at or following Completion; or
	 
	 	4.1.10	 	such Liability to Taxation would not have arisen or would have been
reduced but for a failure or omission by or on behalf of any Buyer Associate or any
of its directors, employees or agents after Completion to make any election, claim,
surrender or disclaimer, or give any notice or consent or do any other thing, in
relation to Taxation, the anticipated making giving or doing of which is taken into
account in computing any provision or reserve for Taxation in preparing the
Completion Statements or was otherwise requested by the Management Sellers provided
that the need to make, give or do such thing was disclosed in writing by the
Management Sellers to the Buyer with express reference to this paragraph 4.1.10 at
least 15 Business Days before such thing needed to be made, given or done; or
	 
	 	4.1.11	 	such Liability for Taxation arises by virtue of any claim, election,
surrender, or disclaimer made or notice or consent given or by virtue of any other
thing done after Completion by or on behalf of any Buyer’s Associate (including the
disclaimer of the whole or part of any Relief) other than where the making, giving or
doing of such a thing is taken into account in the preparation of the Completion
Statements or made, given or done at the written request of the Management Sellers;
or
	 
	 	4.1.12	 	to the extent that such Liability to Taxation would not have arisen but
for an act, omission or transaction of the Management Sellers or a Group Member prior
to Completion which occurred at the written request of the Buyer with the express
acknowledgement the act, omission or transaction would give rise to such a Liability
to Taxation; or
	 
	 	4.1.13	 	to the extent such Liability to Taxation has been made good by insurers
without cost to the Buyer or a Group Member; or

53

 

	 	4.1.14	 	to the extent that such Liability to Taxation is in respect of stamp duty
or stamp duty reserve tax payable on the transfer or agreement to transfer the Shares
pursuant to this Agreement; or
	 
	 	4.1.15	 	to the extent that any income, profits or gains to which such Liability to Taxation
is attributable are actually received by a Group Member after Completion but are not
reflected in the Completion Statements; or
	 
	 	4.1.16	 	such Liability to Taxation arises or is increased as a consequence of any failure
by the Buyer or (after Completion) by a Group Member to comply with its obligations
under paragraph 6.1 of Schedule 4 of this Agreement; or
	 
	 	4.1.17	 	such Liability to Taxation is extinguished or reduced by the use of any Relief
(other than an Accounts Relief or Future Relief) which is available to the Group
Member in question (or that is made available to the Group Member at no consideration
by any Seller Associate) and provided that (i) for this purpose any Relief arising in
respect of an accounting period falling partly before and partly after Completion
shall be apportioned on a time basis, unless some other basis is more reasonable and
(ii) a Group Member shall be obliged to utilise any Relief that is so available
unless to do so is likely to lead to an overall increase in any Buyer’s Associate’s
Liability to Taxation or is otherwise likely to have a material adverse commercial or
financial consequences for a Buyer’s Associate; or
	 
	 	4.1.18	 	such Liability to Taxation would not have arisen but for any failure or delay by
the Buyer or the Relevant Group Member in paying over to any Taxation Authority any
payment previously made by the Management Sellers under this Schedule 4; or
	 
	 	4.1.19	 	such liability or other events giving rise to such liability have been Disclosed;
	 
	 	 	 	and for the purposes of this sub-clause 4.1 only “Liability to Taxation” shall be
deemed to include a liability or loss falling within paragraph 2.4 above.

	4.2	 	The exclusions set out in sub-clause 4.1 shall also operate in respect of claims for breach
of warranties in Part 3 of this Schedule 4.
	 
	5.	 	Due date for payment
	 
	5.1	 	The due date for the making of a payment by the Management Sellers under this Part 2 of this
Schedule 4 will be:

	 	5.1.1	 	the date falling 5 Business Days after the Buyer has served notice on the
Management Sellers demanding such payment; or
	 
	 	5.1.2	 	in any case involving a liability of any Group Member to make an actual
payment (whether or not a payment of Taxation), the later of the date mentioned in
paragraph 5.1.1 and the date falling 5 clear Business Days before the last date upon
which the payment is required to be made to the person entitled to the payment; or
	 
	 	5.1.3	 	in any case involving the loss of an Accounts Relief other than the right
to repayment of Taxation, the later of the date mentioned in paragraph 5.1.1 and the
date falling 5 clear Business Days before the last date upon

54

 

	 	 	 	which the payment of Taxation is or would be required to be made as a result of
the loss of the Accounts Relief; or
	 
	 	5.1.4	 	in any case involving the loss of any right to repayment of Taxation the
later of the date mentioned in paragraph 5.1.1 and the date upon which the repayment
was due from the relevant Taxation Authority; or
	 
	 	5.1.5	 	in the case involving the use of a Future Relief, the later of the date
mentioned in paragraph 5.1.1 and the date upon which the Taxation saved by the use of
the Future Relief would have been required to be paid.

	5.2	 	If any payment required to be made by the Management Sellers under this Part 2 of this
Schedule 4 is not made by the due date, ascertained in accordance with paragraph 5.1, then
such payment will bear interest in accordance with the terms of clause 17.11 of this
Agreement.
	 
	6.	 	Claims procedure
	 
	6.1	 	If the Buyer or any Group Member becomes aware of any matter which may give rise to a Tax
Claim it will as soon as reasonably practicable (and in the case where the period of response
is time limited no later than 10 Business Days prior to the expiry of such limit) give written
notice thereof to the Management Sellers. Such notice shall specify the date by which the
Management Sellers must respond to a Tax Claim and the consequences under sub-paragraph 6.6 of
failure to respond by such date together with such details of the Tax Claim as are available
to the Buyer or the Group Member. The giving of such notice will not be a condition precedent
to the liability of the Management Sellers under paragraph 2.
	 
	6.2	 	If the Management Sellers so request in writing, the conduct of a Tax Claim shall be
delegated to the Management Sellers upon such terms as may be agreed from time to time between
the Buyer and the Management Sellers PROVIDED THAT, unless the Buyer and the Management
Sellers specifically agree otherwise in writing, the following terms shall be deemed to be
incorporated into any such agreement:

	 	6.2.1	 	the appointment of solicitors or other professional advisers shall be
subject to the approval of the Buyer, such approval not to be unreasonably withheld
or delayed;
	 
	 	6.2.2	 	all communications (written or otherwise) pertaining to the Tax Dispute
which are to be transmitted to the relevant Taxation Authority shall first be
submitted to the Buyer for approval and shall only be finally transmitted to the
relevant Tax Authority if such approval is given, such approval not to be
unreasonably withheld or delayed;
	 
	 	6.2.3	 	the Management Sellers shall take account of all reasonable comments made
by the Buyer in relation to the conduct of the Tax Dispute;
	 
	 	6.2.4	 	reasonable advance notice of any meeting that is to take place with a
representative or representatives of any Taxation Authority together with an outline
of the issues that it is anticipated will be addressed shall be given to the Buyer
and the Buyer shall be entitled to nominate a person or persons to attend any such
meeting;
	 
	 	6.2.5	 	the Management Sellers shall keep the Buyer fully and promptly informed of
the progress of any Tax Dispute and the Buyer shall be promptly sent

55

 

	 	 	 	copies of all correspondence and notes or other written records of telephone
conversations or meetings and, in the event that there is no written record,
shall be given an immediate report of any material telephone conversation with
any Taxation Authority to the extent that it relates to a Tax Dispute;
	 
	 	6.2.6	 	the Management Sellers shall take all reasonable steps and use their
reasonable endeavours to agree any Tax Dispute with the applicable Taxation Authority
within a reasonable time;
	 
	 	6.2.7	 	the Management Sellers shall make no settlement or compromise of the Tax
Dispute or agree any matter in the conduct of the Tax Dispute which is likely to
materially prejudice the amount thereof, the future Liability to Taxation or the
business or Taxation affairs of any Buyer’s Associate without the prior written
approval of a Group Member or the Buyer (not to be unreasonably withheld or delayed);
and
	 
	 	6.2.8	 	the Management Sellers shall not take any action which involves contesting
a Tax Claim beyond the first appellate body (excluding the Taxation Authority which
has made the Tax Claim) in the jurisdiction concerned unless the Management Sellers
obtain (at the Management Sellers’ cost and expense) the opinion of tax counsel of at
least five years’ call that it is reasonable in all circumstances to make such an
appeal and without the prior written approval of the Buyer (not to be unreasonably
withheld).

	6.3	 	Where such conduct of a Tax Claim is not delegated to the Management Sellers pursuant to
paragraph 6.2, subject to paragraph 6.4 and provided that the Management Sellers indemnify the
relevant Group Member, the Buyer and all other members of the same group of companies as the
Buyer to the reasonable satisfaction of the Buyer against all liabilities, costs, damages and
reasonable expenses (including interest or surcharge on overdue Taxation) which may be
incurred thereby, the Buyer will procure that the relevant Group Member, at the Management
Sellers’ cost and expense, takes such action and gives such information and assistance in
connection with its Taxation affairs as the Management Sellers may reasonably and promptly
request to dispute, appeal against, settle or compromise any Tax Claim, including applying to
postpone (so far as legally possible) the payment of any Taxation.
	 
	6.4	 	Subject to paragraphs 6.5 and 6.6 and to compliance by the Management Sellers with paragraph
6.3 in relation to any Dispute, the Buyer will not, and will procure that the relevant Group
Member will not, without the prior written consent of the Sellers’ Representative, such
consent not to be unreasonably withheld or delayed:

	 	6.4.1	 	transmit any material communication (whether written or otherwise) to any
Taxation Authority;
	 
	 	6.4.2	 	settle or compromise the relevant Tax Claim; or
	 
	 	6.4.3	 	agree any matter which is likely to affect the amount of the relevant Tax
Claim or any future Liability to Taxation.

	6.5	 	The Buyer will not be required to take or procure that the Group Member will take any action
mentioned in paragraph 6.3:

56

 

	 	6.5.1	 	which it reasonably considers to be materially prejudicial to the business
or Taxation affairs of any Group Member, the Buyer or any other member of the same
group of companies as the Buyer; or
	 
	 	6.5.2	 	which involves contesting a Tax Claim beyond the first appellate body
(excluding the Taxation Authority which has made the Tax Claim) in the jurisdiction
concerned unless the Management Sellers obtain (at the Management Sellers’ cost and
expense) the opinion of tax counsel of at least five years’ call that it is
reasonable in all circumstances to make such an appeal.

	6.6	 	The Management Sellers rights under this paragraph 6 shall cease if the Management Sellers
fail (and in any event within 15 Business Days of the Buyer giving notice requiring the
Management Sellers to do so) to inform the Buyer of any action which the Management Sellers
wish to take under paragraph 6.2 or wish the Buyer to procure a Group Member to take under
paragraph 6.3 and the Buyer will be entitled to procure that the Group Member settles or
compromises any Tax Claim on such terms as it determines in its absolute discretion.
	 
	7.	 	Time limit
	 
	7.1	 	The Management Sellers will not be liable under paragraph 2 in respect of a Liability to
Taxation or other liability of any Group Member unless within seven years after Completion the
Buyer has given notice to the Management Sellers of any Tax Claim whatsoever relating to such
Liability to Taxation or other liability, or of any Event which may give rise to such a Tax
Claim and any such claim which may be made shall (if it has not previously been satisfied,
settled or withdrawn) be deemed to be withdrawn and shall become fully barred and
unenforceable (and the Management Sellers’ liability in respect of such claim shall absolutely
terminate) on the expiry of the period of 12 months after the notice of such claim was given
to the Management Sellers (or any of them) in accordance with paragraph 6.1 of this Schedule
unless legal proceedings in respect thereof have been commenced against the Management Sellers
(or any of them) (and for this purpose proceedings shall not be deemed to have been commenced
unless they shall have been issued and validly served upon the Management Sellers) (or any of
them).
	 
	7.2	 	The time limit in paragraph 7.1 will not apply in any case involving fraudulent or negligent
conduct on the part of the Management Sellers, any company which has at any time been a member
of the same group (as defined for any Taxation purpose) as any Group Member, any of the
Management Sellers or any person acting on behalf of any of the foregoing.
	 
	8.	 	Overprovision, Repayment and Savings
	 
	8.1	 	If the auditors of a Group Member for the time being (the “Auditors”) (at the Management
Sellers’ request and expense) determine in writing:

	 	8.1.1	 	that any provision for Taxation in the Completion Statements (including a
provision for deferred Taxation) is an overprovision (an “Overprovision”); or
	 
	 	8.1.2	 	that any refund, credit or repayment of Taxation (other than an Accounts Relief
or refund, credit or repayment of Taxation which has arisen due to the use of a
Future Relief) has arisen or will arise in respect of any gross receipts, income,
profits or gains earned, accrued or received by a Group Member before Completion
save to the extent that such gross receipts,

57

 

	 	 	 	income, profits or gains earned, accrued or received would fall within
sub-paragraph 4.1.15 of this Schedule 4 or such refund, credit or repayment of
Taxation are an Accounts Relief (a “Refund”); or
	 
	 	8.1.3	 	that any Liability to Taxation or other liability which has resulted in a payment
being made or becoming due from the Management Sellers under this Schedule 4 has
given or will give rise to a Relief or Tax saving for the Buyer or a Group Member
(or would have given rise to a Relief or Tax saving but for it being set-off
against another Liability to Taxation) and that the Relief or Tax saving is
attributable to the aforementioned Liability to Taxation or other liability and
which would not otherwise have arisen (a “Saving”)

	 	 	then the Overprovision, Refund or Saving will be dealt with in accordance with this
paragraph 8.
	 
	8.2	 	If the Buyer or a Group Member discovers that there has been an Overprovision, Refund or
Saving, the Buyer shall as soon as reasonably practicable give written notice thereof to the
Management Sellers such notice to include reasonably sufficient details of such Overprovision,
Refund or Saving and the Buyer will use its reasonable endeavours to procure that the Auditors
deal expeditiously with a request for a determination as to whether an Overprovision, Refund
or Saving has arisen or will arise and will procure that a Group Member provides all
assistance, documents and other information as may be reasonably required by the Auditors for
that purpose.
	 
	8.3	 	The amount of the Overprovision, Refund or Saving (as determined by the Auditors) less any
reasonable third party costs properly incurred by a Group Member or the Buyer in obtaining the
Overprovision, Refund or Saving:

	 	8.3.1	 	shall first be set-off against any payment then due from Management Sellers under
this Schedule 4; and
	 
	 	8.3.2	 	to the extent that there is an excess, shall be promptly (and in any event within
10 Business Days) refunded up to the amount of any previous payment or payments
made by the Management Sellers under this Schedule 4 (and not previously refunded
under this sub-paragraph); and
	 
	 	8.3.3	 	to the extent that there is an excess, be carried forward and set-off against
any future payment or payments that become due from the Management Sellers under
this Schedule 4.

	8.4	 	The relevant Group Member will be entitled to use in priority to any Relief which gives rise
to a Saving or any other Relief available to it (including by way of surrender by another
company to it) to reduce or eliminate any liability to make an actual payment of corporation
tax.

	8.5	 	No Group Member will obtain a Saving until the last date upon which it would have been
obliged to make the actual payment of corporation tax which has been reduced or eliminated in
order to avoid incurring interest thereon.

	8.6	 	In determining whether a Group Member has obtained an Overprovision, Refund or Saving, the
Auditors will act as experts and not as arbitrators and their determination will (in the
absence of manifest error) be conclusive and binding on the parties.

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	8.7	 	A Saving shall not be taken into account for the purposes of this paragraph 8 to the extent
that is has already been taken into account in calculating (and so reducing) the quantum of
damages relating to any breach of any of the Tax Warranties in respect of which the Management
Sellers have made, or are liable to make, payment.

	8.8	 	An Overprovision shall not be taken into account for the purposes of this paragraph 8:

	 	8.8.1	 	to the extent that it has already been taken into account in calculating
(and so reducing) the quantum of damages relating to any breach of any of the
Warranties in respect of which the Management Sellers have made, or are liable to
make, payment to the Buyer; or
	 
	 	8.8.2	 	to the extent to which it arises in consequence of the utilisation of any
Future Relief; or
	 
	 	8.8.3	 	to the extent to which it would not have arisen but for a change in
legislation (including but not limited to an increase in rates of Taxation) or in the
published practice of any Taxation Authority first enacted and announced after
Completion; or
	 
	 	8.8.4	 	to the extent to which it arises as a result of any voluntary act of the
Buyer or the Company carried out after Completion that would fall within
sub-paragraph 4.1.5 above.

	8.9	 	A Refund shall not be taken into account for the purposes of this paragraph 8:

	 	8.9.1	 	to the extent that it has already been taken into account in calculating
(and so reducing) the quantum of damages relating to any breach of any of the
Warranties in respect of which the Management Sellers have made, or are liable to
make, payment to the Buyer; or
	 
	 	8.9.2	 	to the extent to which it arises in consequence of the utilisation of any
Future Relief; or
	 
	 	8.9.3	 	to the extent to which it would not have arisen but for a change in
legislation (including but not limited to an increase in rates of Taxation) or in the
published practice of any Taxation Authority first enacted and announced after
Completion;
	 
	 	8.9.4	 	to the extent to which it arises as a result of any voluntary act of the
Buyer or the Company carried out after Completion that would fall within
sub-paragraph 4.1.5 above.

	9.	 	Recovery from other persons
	 
	9.1	 	If a Group Member recovers from any other person (including any Taxation Authority but
excluding any Buyer’s Associate, any other member of the same group of companies as the Buyer)
any amount which is referable to a Liability to Taxation or other liability of the Group
Member which has resulted in or may result in a payment being made by the Management Sellers
under paragraph 2 or the Taxation Warranties, the Buyer will repay to the Management Sellers
within 15 Business Days the lesser of:

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	 	9.1.1	 	the amount so recovered (including any related interest or related
repayment supplement) (less any reasonable costs, damages and reasonable expenses
incurred by the relevant Group Member, the Buyer or any other member of the same
group of companies as the Buyer as a result of the recovery of that amount); and
	 
	 	9.1.2	 	the amount paid by the Management Sellers under paragraph 2 in respect of
the Liability to Taxation or other liability in question less any part of such amount
previously repaid to the Management Sellers under any provision of this Agreement or
otherwise.

	9.2	 	If the Buyer becomes aware that any Group Member is entitled to recover any amount mentioned
in paragraph 9.1, the Buyer will as soon as reasonably practicable (and in any event within 20
Business Days) give notice of that fact to the Management Sellers and provided that the
Management Sellers indemnify the relevant Group Member, the Buyer and all other members of the
same group of companies as the Buyer to the reasonable satisfaction of the Buyer against all
reasonable costs, damages and reasonable expenses which may be incurred thereby, the Buyer
will procure that the relevant Group Member, at the Management Sellers’ cost and expense,
takes such action as the Management Sellers may reasonably and promptly request to effect such
recovery.

	9.3	 	The action which the Management Sellers may request a Group Member to take under paragraph
9.2 does not include:

	 	9.3.1	 	any action which the Buyer reasonably considers to be materially
prejudicial to the business or Taxation affairs of any Group Member, the Buyer or any
other member of the same group of companies as the Buyer; or
	 
	 	9.3.2	 	allowing the Management Sellers to undertake the conduct of any action
necessary to effect recovery of the amount in question.

	9.4	 	Any recovery or right to make a recovery from another person shall not be taken into
account for the purposes of this paragraph 9 to the extent that it has already been taken
into account in calculating (and so reducing) the quantum of damages relating to any
breach of any Taxation Warranties in respect of which the Management Sellers have made, or
are liable to make, payment to the Buyer.
	 
	10.	 	Corporation Tax Returns
	 
	10.1	 	Subject to this paragraph 10, the Management Sellers will, at the relevant Group Member’s
cost and expense (to the extent such costs and expense have been properly incurred by the
Management Sellers and were provided for in the Completion Statements), prepare and submit the
tax returns and the computations of each Group Member for all accounting periods ending on or
before Completion (the “Pre Completion Returns”) and shall prepare and submit all related
documentation and correspondence and shall have conduct of the negotiation and agreement of
the Pre Completion Returns.
	 
	10.2	 	The Management Sellers shall, or shall procure that their duly authorise agents shall:

	 	10.2.1	 	submit any Pre Completion Returns (which have not been submitted to the
applicable Tax Authority before Completion) to the Buyer at least 21 days before
the date upon which such Pre Completion Returns are required to be

60

 

	 	 	 	filed with the applicable Taxation Authority without incurring interest and
penalties and such Pre Completion Returns shall only be submitted to the
applicable Tax Authority once the Buyer gives such approval which is not to be
unreasonably withheld or delayed;
	 
	 	10.2.2	 	take account of all reasonable comments made by the Buyer in relation to the Pre
Completion Returns;
	 
	 	10.2.3	 	keep the Buyer properly informed of the progress of any negotiations with any
Taxation Authority including the sending of copies of all material
correspondence, notes or other written records of material telephone
conversations or material meetings to the Buyer (and which the Buyer does not
already have copies of);
	 
	 	10.2.4	 	take all reasonable steps to ensure that the Pre Completion Returns are prepared
and agreed with the applicable Taxation Authority without unreasonable delay; and
	 
	 	10.2.5	 	the Management Sellers shall make no agreements with the applicable Taxation
Authority or agree any matter which is likely to materially prejudice the
business or Taxation affairs of any Buyer’s Associate without the prior written
consent of the Buyer (not to be unreasonably withheld or delayed).

	10.3	 	The Buyer shall procure that:

	 	10.3.1	 	the Pre Completion Returns and other documentation mentioned in sub-paragraph
10.1, to the extent not authorised, signed and submitted before Completion, be
authorised, signed and submitted to the applicable Taxation Authority without
amendment or with such amendments as the Seller agrees, provided that the Buyer
shall not be obliged to procure the signing or submission of any Pre Completion
Return that is not full, true and accurate in all material respects;
	 
	 	10.3.2	 	each Group Member and its agents or employees shall give (without charge) the
Management Sellers or their agents such assistance as may be reasonably required
to agree the Pre Completion Returns with the applicable Taxation Authority or to
facilitate the settlement or management of the relevant Group Member’s own
Taxation affairs, including (without limitation) providing access to the
personnel, books, accounts and records of the Company and providing copies of
relevant documentation; and
	 
	 	10.3.3	 	the Management Sellers are promptly (and in any event within 10 Business Days)
sent a copy of any communication from any Taxation Authority insofar as it
relates to the Pre Completion Returns or related Taxation affairs of a Group
Member.

	10.4	 	Subject to paragraph 10.5, the Buyer will have exclusive conduct of all Taxation affairs of
each Group Member in relation to a tax period ending after Completion.
	 
	10.5	 	The Buyer will procure that each Group Member keeps the Management Sellers properly informed
of its Taxation affairs in respect of the accounting period ending after Completion but
beginning on or prior to Completion (the “Straddle Returns”) to the extent such matters may
give rise to liability to the Management Sellers under this Schedule 4. The Buyer or its duly
authorised agents shall submit the Straddle Returns together with any replies to enquiries
from a Taxation Authority,

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	 	 	in relation to such matters, in draft form to the Sellers for comment at least 21 days
prior to the date upon which the Straddle Returns are required to be filed with the
applicable Taxation Authority without incurring interest and penalties and shall take
account of all reasonable comments made by the Sellers.
	 
	10.6	 	The Buyer will procure that each Group Member does not amend or withdraw any return or
computation or any claim, election, surrender or consent made by the respective Group Member
in respect of its accounting periods ended on or before Completion without the prior written
consent of the Sellers’ Representative (such consent not to be unreasonably withheld or
delayed).
	 
	11.	 	Buyer’s Covenant
	 
	11.1	 	Save to the extent that the Buyer could claim payment of such amount under this part 2 of
Schedule 4 or the Taxation Warranties but no actual payment has been made by the Management
Sellers or to the extent that an amount in respect of Taxation has been recovered by the
Management Sellers or any Seller Associate under any relevant Taxation Statute (and the
Management Sellers shall procure that no such recovery is sought to the extent that payment is
made hereunder) or to the extent such Liability to Taxation has been made good by insurers
without cost to the Management Sellers, the Buyer hereby covenants to pay to the Management
Sellers (once the Management Sellers have notified the Buyer in writing of such a claim) an
amount equal to:

	 	11.1.1	 	any liability or increased liability to Taxation of any Seller Associate as the
result of a failure by a Group Member to discharge any Taxation (including any VAT
attributable to supplies made by a Group Member) of the Company;
	 
	 	11.1.2	 	any reasonable third party costs and expenses incurred by a Seller Associate in
connection with a liability under this paragraph 11.

	11.2	 	The provisions of paragraph 5 (Due Date for Payment) and paragraph 6 (Claims Procedure)
shall apply to the covenant contained in this paragraph 11 as they apply to the covenant
in paragraph 2 with references to the Management Sellers being replaced with references to
the Buyer and vice versa and with any other necessary modifications.
	 
	11.3	 	The Buyer is entitled to set-off against any amount which it is liable to pay to the
Seller under paragraph 11.1 any amount which the Management Sellers are liable to pay the
Buyer under Part 2 of Schedule 4 in connection with the same Event.
	 
	12.	 	General
	 
	 	 	All payments by the Management Sellers under this Part 2 of this Schedule 4 will be
treated as repayments by the Management Sellers of the Consideration paid for the Shares
pursuant to this Agreement, provided that this paragraph 12 will not operate in any way to
limit the liability of the Management Sellers under this Part 2 of this Schedule 4.

PART 3 — TAX WARRANTIES

	13.	 	Returns, records, disputes and clearances
	 
	13.1	 	Within the period of three years ending on the date of this Agreement all notices, returns,
computations, registrations, information and payments which should have

62

 

	 	 	been made or supplied by any Group Member for any Taxation purpose have been made within the requisite
periods and are up-to-date, materially correct and on a proper basis and none of them is, or
so far as the Management Sellers are aware is likely to be, the subject of any dispute with
any Taxation Authority.
	 
	13.2	 	Within the period of three years ending on the date of this Agreement no Group Member has
been involved in any dispute with any Taxation Authority or has been the subject of any
investigation or enquiry by any Taxation Authority (other than
routine questions), no Taxation Authority has indicated to the Management Sellers that it
intends to investigate the Taxation affairs of any Group Member and so far as the
Management Sellers are aware there are no circumstances which are likely to give rise to
any such investigation.
	 
	13.3	 	All consents and clearances obtained within the period of three years ending on the date of
this Agreement by any Group Member from any Taxation Authority remain valid and effective and
any transaction for which any such consent or clearance has been obtained has been carried
into effect (if at all) only in accordance with the terms of the relevant consent or
clearance, including the terms of the application for the relevant consent or clearance.
	 
	13.4	 	So far as the Management Sellers are aware no Taxation Authority has operated or agreed to
operate any Special Arrangement (being an arrangement which is not based on relevant
legislation or published practice of the Taxation Authority) in relation to a Group Member’s
affairs.
	 
	14.	 	Penalties and interest
	 
	 	 	No Group Member has within the period of three years ending on the date of this Agreement
paid, or, so far as the Management Sellers are aware, is liable to pay, any fine, penalty,
charge, surcharge or interest charged by virtue of any of the provisions of any Taxation
Statute.
	 
	15.	 	Taxation claims, liabilities and relief
	 
	15.1	 	Each Group Member has sufficient records to materially fulfil its obligations under all
Taxation Statutes and to enable it to make and complete returns for Taxation purposes and to
calculate the liability to Taxation or relief arising:

	 	15.1.1	 	in respect of or by reference to any Event on or before Completion; or
	 
	 	15.1.2	 	on the disposal of any asset owned by it at Completion.

	15.2	 	No Group Member is liable to pay, or make reimbursement or indemnity in respect of, any
Taxation (or amounts corresponding to any Taxation) payable by or chargeable on or
attributable to any other person other than a Group Member, whether in consequence of the
failure by that person to discharge that Taxation within any specified period or otherwise,
where such Taxation relates to a profit, income or gain, transaction, event, omission or
circumstance arising, occurring or deemed to arise or occur (whether wholly or partly) on or
prior to Completion.
	 
	16.	 	Distributions and payments
	 
	16.1	 	Each Group Member within the period of three years ending on the date of this Agreement has
deducted and properly accounted to the appropriate Taxation Authority for all amounts which it
has been obliged to deduct in respect of Taxation (whether PAYE or otherwise), has complied
with all reporting requirements relating

63

 

	 	 	to all such amounts and has (where required by the applicable Taxation Statute) duly
provided certificates of deduction of tax to the recipients of payments from which
deductions have been made.

	16.2	 	Within the period of three years ending on the date of this Agreement no Group Member has
made or received any exempt distribution within the meaning of section 213 ICTA, or has at any
time been a relevant company in relation to an
exempt distribution for the purposes of that section or concerned in an exempt
distribution for the purposes of section 214 ICTA.
	 
	17.	 	Employee benefits
	 
	17.1	 	Within the period of three years ending on the date of this Agreement each Group Member has
properly operated PAYE, by making deductions, as required by the applicable Taxation Statute,
from all payments made (including notional payments), or treated as made, to its directors,
employees or officers or former directors, employees or officers or any persons required to be
treated as such, and accounting to HMRC for all Taxation so deducted and for all Taxation
chargeable on the relevant Group Member on benefits provided for its directors, employees or
officers, or former directors, employees or officers.
	 
	17.2	 	No liability to national insurance contributions or obligation to account for income tax
under PAYE could fall on any Group Member as a result of a chargeable event (within the
meaning of Chapter 2 Part 7 ITEPA) before, at or after Completion in respect of securities and
interests in securities made available or securities options granted to an employee or
director prior to Completion.
	 
	17.3	 	The Disclosure Letter contains details of all share incentive schemes and profit sharing
schemes and employee benefit trusts established by each Group Member. whether approved by HMRC
or not.
	 
	18.	 	Close companies
	 
	 	 	No Group Member is, or has ever been, a close company as defined in section 414 ICTA.
	 
	19.	 	Group transactions
	 
	19.1	 	Details of all claims for or surrenders of Group Relief pursuant to sections 402 and 413
ICTA, elections pursuant to sections 171A and 179A TCGA and elections pursuant to paragraph 66
of Schedule 29 FA 2002 to which any Group Member has been a party in the three years ending on
Completion, including details of payments made or to be made and payments received or to be
received are set out in the Disclosure Letter.
	 
	19.2	 	No Group Member has been a party to any such reconstruction as is described in section 343
ICTA in the six years prior to Completion;
	 
	19.3	 	So far as the Management Sellers are aware no Group Member owns an asset which, as a result
of the sale of the Shares pursuant to this Agreement, will give rise to a charge under section
179 TCGA (de-grouping)
	 
	20.	 	Tax avoidance
	 
	 	 	Within the period of three years ending on the date of this Agreement no Group Member has
entered into or been a party to any scheme, arrangement or 

64

 

	 	 	transaction designed wholly or
mainly or containing steps or stages having no
commercial purpose and designed wholly or mainly for the purpose of avoiding or deferring
Taxation or reducing a liability to Taxation or amounts to be accounted for under PAYE.

	21.	 	Base values and acquisition costs
	 
	21.1	 	If all of the capital assets of each Group Member owned at the Accounting Date were disposed
of for a consideration equal to their book value, or value adopted for the purpose of, the
Balance Sheet, or in the case of assets acquired since the Accounting Date, equal to the
consideration given on acquisition, no liability to corporation tax on chargeable gains or
balancing charge under the CAA would arise (and for this purpose there will be disregarded any
relief or allowance available to the relevant Group Member other than amounts falling to be
deducted from the consideration receivable under section 38 TCGA).
	 
	22.	 	Capital gains
	 
	 	 	No Group Member has within the period of three years ending on the date of this Agreement:
	 
	22.1	 	made a claim under sections 152 to 158 (inclusive) or 175 or 247 TCGA which affects the
amount of the chargeable gain or allowable loss which would, but for such claim, arise or have
arisen upon a disposal of any asset or acquired any asset or any interest in any asset in
circumstances in which another company has made a claim under section 175 TCGA which affects
for the purposes of the TCGA the amount or value of the consideration given for such asset or
interest;
	 
	22.2	 	been a party to, involved in, or connected with any disposal of assets within the meaning of
section 29 TCGA (value shifting) or any scheme or arrangement such as are mentioned in section
30 TCGA (tax-free benefits);
	 
	22.3	 	been a party to, involved in, or connected with any exchange of securities whether or not (by
virtue of section 135 TCGA) section 127 TCGA applied to the exchange;
	 
	22.4	 	carried out or been involved in or connected with any reorganisation or scheme of
reconstruction or amalgamation whether or not (by virtue of section 126 or 136 TCGA) section
127 TCGA applied to such reorganisation or scheme of reconstruction or amalgamation;
	 
	22.5	 	been a party to, involved in, or connected with, any depreciatory transaction to which
section 176 TCGA applied (including any transaction to which that section applied by virtue of
section 177 TCGA (dividend stripping));
	 
	22.6	 	realised a loss to which section 18(3) TCGA (transactions between connected persons) applied;
	 
	23.	 	Intangible assets
	 
	 	 	No Group Member owns or has owned any chargeable intangible assets as defined in Schedule
29 FA 2002.
	 
	24.	 	Capital allowances
	 
	24.1	 	All capital expenditure incurred by each Group Member since the Accounting Date and all
capital expenditure which may be incurred by each Group Member under 

65

 

	 	 	any existing contract has
qualified or, so far as the Management Sellers are aware, will be capable of qualifying for
capital allowances.

	25.	 	VAT: general
	 
	25.1	 	Each Group Member:

	 	25.1.1	 	is registered in the United Kingdom for VAT purposes and such registration is not
subject to any conditions set down by HMRC and is not registered or required to be
registered for VAT or any similar tax in any other jurisdiction;
	 
	 	25.1.2	 	maintains materially complete, materially correct and up-to-date records for the
purposes of all legislation relating to VAT and is not subject to HMRC conditions in
this regard and is not in arrears with any payment or return under that legislation
or in respect of Intrastats or excise or customs duties, or liable to any abnormal or
non-routine payment of VAT, or any forfeiture or penalty, or to the operation of any
penal provision;

	25.2	 	No Group Member:

	 	25.2.1	 	has been required by HMRC to give security for any reason or has failed to comply
in all respects with all statutory requirements, orders, provisions, directions or
conditions relating to VAT;
	 
	 	25.2.2	 	has within the two years ending on the date of this Agreement been served with any
penalty liability notice under section 64 VATA or any surcharge liability notice
under section 59 VATA or been issued with any written warning under section 76(2)
VATA (failure to comply with a regulatory provision);
	 
	 	25.2.3	 	has been treated as, or applied for treatment as a member of a group for VAT
purposes under section 43 VATA and no transaction has been effected in consequence of
which any Group Member is or may be held liable for any VAT arising from supplies
made by another company and no Group Member has been a party to any transaction or
arrangement as a result of which a direction has been or may be given under Schedule
9A VATA (anti-avoidance provisions for groups of companies);
	 
	 	25.2.4	 	is or has agreed to become, an agent, manager or factor for the purposes of section
47 VATA of any person who is not resident in the United Kingdom.

	25.3	 	All supplies of goods and services made by each Group Member are taxable supplies for the
purposes of VATA, each Group Member is able to obtain credit as deductible input tax (as
defined in section 24 VATA) for all the VAT which it has incurred and no input tax has been
claimed on the basis of anticipated taxable supplies which have not yet been made.
	 
	25.4	 	All supplies of goods made by each Group Member to overseas customers are zero rated taxable
supplies for the purposes of VATA and each Group Member has issued invoices in respect of each
such supply which comply with all legislation relating to VAT (and specifically comply with
Regulation 14 of the Value Added Tax Regulations 1995) and which enable the relevant Group
Member to obtain credit as deductible input tax (as defined in section 24 VATA) for all the
VAT which it has incurred.

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	25.5	 	So far as the Management Sellers are aware in connection with any property owned by a Group
Member that is a capital item for the purposes of Part XV Value Added Tax Regulations 1995
(“Part XV”), the relevant Group Member has sufficient
information to enable the Buyer to make any adjustment for the purposes of the capital
goods scheme pursuant to the provisions of Part XV.
	 
	26.	 	Stamp duty and stamp duty reserve tax
	 
	26.1	 	All documents which are liable to stamp duty and which confer any right upon any Group Member
and on which any Group Member may need to rely have been duly stamped or stamped with a
particular stamp denoting no stamp duty is chargeable and, so far as the Management Sellers
are aware, no document which confers any right upon any Group Member or on which any Group
Member may need to rely and which is outside the United Kingdom would attract stamp duty if it
were brought into the United Kingdom.
	 
	26.2	 	No claim for relief or exemption from stamp duty pursuant to section 42, Finance Act 1930,
section 11, Finance Act (Northern Ireland) 1954 or section 151, Finance Act 1995 has been made
after 23rd April 2002 by any Group Member and for which the Group Member is or so far as the
Management Sellers are aware is likely to become liable to pay stamp duty by virtue of section
111, Finance Act 2002 and/or paragraph 8 of schedule 34 to that Act.
	 
	26.3	 	No claim for relief or exemption from stamp duty pursuant to section 76, Finance Act 1986 has
been made after 23rd April 2002 by any Group Member and for which the Group Company is or so
far as the Management Sellers are aware is likely to become liable to pay stamp duty by virtue
of section 113, Finance Act 2002 and/or paragraph 9 of schedule 35 to that Act.
	 
	27.	 	Stamp duty land tax
	 
	27.1	 	Stamp duty land tax has been paid in full in respect of all land transactions to which stamp
duty land tax applies and in respect of which any Group Member is the purchaser within the
meaning of section 43(4) FA 2003 and, so far as the Management Sellers are aware, no Group
Member has any liability or obligation (contingent or otherwise) to submit a further land
transaction return.
	 
	27.2	 	So far as the Management Sellers are aware, no liability to Stamp duty land tax will arise to
any Group Member (under the provisions of Schedule 7 Finance Act 2003 as a result of group
relief and/or reconstruction and acquisition reliefs claimed by that Group Member being
withdrawn before or on Completion).
	 
	28.	 	Residence and offshore interests
	 
	 	 	Each Group Member is and has at all times been resident in the United Kingdom for the
purposes of all Taxation Statutes and has not at any time been resident outside the United
Kingdom or had a permanent establishment outside the United Kingdom for the purposes of
any Taxation Statute or any double taxation arrangements.
	 
	29.	 	Shares and securities
	 
	29.1	 	No Group Member has at any time:

	 	29.1.1	 	purchased or agreed to purchase, repaid or agreed to repay or redeemed or agreed to
redeem any shares of any class of its share capital or any amount paid up on any of
its shares;

67

 

	 	29.1.2	 	capitalised or agreed to capitalise in the form of redeemable shares or debentures
any profits or reserves of any class or description or passed or agreed to pass any
resolution to do so;

	30.	 	Quarterly instalment payments
	 
	 	 	No Group Member is obliged to pay corporation tax in quarterly instalments under the
provisions of Corporation Tax (Instalment Payments) Regulations 1998 (SI 1998 No 3175) and
section 59E TMA nor in the absence of Group Relief would any Group Member have been so
liable.
	 
	31.	 	Group payment arrangements
	 
	 	 	No Group Member has entered into any group payment arrangements under the provisions of
section 36 FA 1998.
	 
	32.	 	Transfer pricing/Thin capitalisation
	 
	32.1	 	Within the period of two years ending on the date of this Agreement no Group Member has
undertaken, or has agreed to undertake, any transaction or made any provision whatsoever
(whether of services, goods, intangible rights, finance or otherwise) which is otherwise than
on arm’s length terms for which any Taxation Authority can make or require to be made any
adjustment for Taxation purposes to the terms on which such transaction is treated as taking
place.
	 
	33.	 	Balance Sheet and subsequent events
	 
	33.1	 	The Balance Sheet fully provides or reserves, in accordance with the accounting policies set
out in the notes included in the Accounts, for all Taxation (including deferred tax for which
the relevant Group Member is or may be liable, or for which it may be accountable, as at the
Accounting Date.

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SCHEDULE 5

Pre-Completion and Completion Arrangements

Part A: Pre-Completion

The Graphite Loan Note Interest (in whole, or at Graphite’s sole discretion, any part thereof)
shall, pursuant to the documents in the agreed terms be capitalised by the issue at £1 of
Capitalisation Ordinary Shares to the relevant Graphite holders of the Loan Notes.

Part B: Completion

At Completion the following will take place:

	1.	 	Items for Delivery
	 
	 	 	The following items will be produced and delivered or made available by the Sellers:
	 
	 	 	Share Transfers
	 
	1.1	 	Executed transfers of the Shares in favour of the Buyer (or its nominee(s)) together with the
share certificates for the Shares (or in the case of any lost certificate an indemnity in the
agreed terms in relation to it).
	 
	1.2	 	Transfers of all shares in any Group Member not held in the name of the Company or another
Group Member duly executed in favour of the Buyer (or its nominee(s)) together with share
certificates in respect of all the issued shares of each Group Member other than the Company
(or in the case of any lost certificate an indemnity in the agreed terms in relation to it).
	 
	1.3	 	To the extent not delivered at exchange, the Pickering Sale Agreement, duly executed by John
Pickering, together with the documents to be delivered by Mr Pickering thereunder (subject to
the Buyer paying the consideration pursuant to the Pickering Sale Agreement).
	 
	1.4	 	Executed transfers of the Loan Notes in favour of the Buyer (or its nominee(s)) together with
the certificates for the Loan Notes (or in the case of any lost certificates an indemnity in
the agreed terms in relation to it).
	 
	 	 	Authorisations
	 
	1.5	 	Power of attorney in the agreed terms in respect of any Seller unable to attend in person at
Completion.
	 
	 	 	Resignations and Appointments
	 
	1.6	 	A letter of resignation in the agreed terms from each director of each Group Member other
than Jonathan Sherry.
	 
	1.7	 	A letter of resignation in the agreed terms from the secretary of each Group Member.

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	 	 	Company Documentation
	 
	1.8	 	The certificate of incorporation, any certificate(s) of incorporation on change of name, the
common seal (if any) and the statutory books and registers (which will be written up to but
not including Completion) of each Group Member.
	 
	1.9	 	The deeds and documents relating to the title of any Group Member to the Properties to the
extent listed in the appendix to the Disclosure Letter.
	 
	1.10	 	All cheque books in current use of each Group Member.
	 
	1.11	 	All books and records of the Group, keys and credit cards of each Group Member which are in
the possession or under the control of the Sellers or any other person who resigns as an
officer of any Group Member in accordance with this Schedule.
	 
	 	 	Financial
	 
	1.12	 	A copy of the bank mandate of each Group Member and copies of bank statements in respect of
each account of each Group Member as at the close of business on the last Business Day prior
to Completion, together in each case with a reconciliation statement prepared by the Sellers
to show the position at Completion (listing unpresented cheques drawn or received by the
relevant Group Member and standing orders payable since the date of such bank statements).
	 
	1.13	 	The Estimated Net Debt Statement (a draft of which will be supplied to the Buyer two Business
Days prior to Completion).
	 
	 	 	Miscellaneous
	 
	1.14	 	A deed in the agreed terms from each Seller acknowledging that neither that Seller nor, in
the case of any Management Seller any company of which such Management Seller has control (as
defined in section 840 ICTA) has any claim against any Group Member and that there is no
agreement or arrangement under which any Group Member has any actual, contingent or
prospective obligation to any such person.
	 
	1.15	 	The Institutional Sellers and the Buyer will execute the Retention Fund Instruction Letter
and deliver it to its addressees.
	 
	1.16	 	The Institutional Sellers will execute and deliver to the Buyer the Environmental Policy
Deductible Letter.
	 
	1.17	 	The Consultancy Termination Agreement duly executed by Martin Rees and the Company.
	 
	2.	 	Convening of Meetings
	 
	2.1	 	The Sellers will procure that duly convened board meetings of each relevant Group Member are
held at which:

	 	2.1.1	 	the transfers referred to in paragraphs 1.1, 1.3 and 1.4 (subject to
stamping if not previously effected) are approved for registration in the books of
the relevant Group Members;
	 
	 	2.1.2	 	the address of the registered office of each Group Member is changed to
Varn House, Northbank Industrial Estate, Irlam, Manchester M44 5DL;

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	 	2.1.3	 	the resignations of directors and secretaries referred to in each of
paragraphs 1.6 and 1.7 are accepted with effect from the end of the relevant board
meeting;
	 
	 	2.1.4	 	such persons as are nominated by the Buyer as directors and secretary of
each Group Member are appointed with effect from the end of the relevant board
meeting; and
	 
	 	2.1.5	 	all existing instructions to the bankers of each Group Member are revoked
and new instructions given to such bankers as the Buyer may nominate, in such form as
the Buyer directs.

	3.	 	Repayment of Monies Owed
	 
	 	 	Each Management Seller will repay, and will procure that any company of which such
Management Seller has control (as defined in section 840 ICTA) will repay, all amounts
owed by such Management Seller or company to the relevant Group Member whether due for
payment or not.
	 
	4.	 	Payment of Consideration and other Buyer Obligations
	 
	 	 	The Buyer will:

	 	4.1	 	pay by way of electronic transfer to the Sellers’ Solicitors:-

	 	4.1.1	 	the Share Consideration; and
	 
	 	4.1.2	 	the Initial Loan Note Consideration (on account of the Loan Note Consideration);

	 	4.2	 	pay the Retention Fund into the Retention Account whereupon it shall be
dealt with in accordance with Schedule 10;
	 
	 	4.3	 	complete the Pickering Sale Agreement in accordance with its terms;
	 
	 	4.4	 	procure that the Group repays the Bank Debt;
	 
	 	4.5	 	procure that the Company makes the payment due to Martin Rees under the
Consultancy Termination Agreement;
	 
	 	4.6	 	deliver to the Management Sellers evidence that directors and officers
run-off insurance cover has been put in place for those persons ceasing to be
directors of any Group Member at Completion.

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SCHEDULE 6

The Property

Leases

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Description of	 	 	 	 	 	 
	Unit	 	Parties	 	Date	 	property	 	Term	 	Rent	 	Use
	5, 6 & 7 Hawksworth 

Industrial Estate, 

Swindon, Wiltshire

	 	Wyndham Investments
Limited (1) BTR
Property Holdings
Limited (2) and BTR
Property Holdings
Limited (3)
(assigned to Duco
International
Limited on 28 May
1999)
	 	20 June 1980
	 	All that piece or
parcel of land with
the premises
erected thereon
situate at and
known as 5, 6, 7
Hawkesworth
Industrial Estate,
Swindon, Wiltshire
	 	25 years from 1
January 1980
	 	£78,855
	 	Purposes within
Classes III and X
of the Town and
Country Planning
(Use Classes) Order
1972
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	8 Hawkesworth 

Industrial Estate, 

Swindon, Wiltshire

	 	Saville Gordon
Properties Limited
(1) and Duco
International
Limited (2)
	 	3 March 2000
	 	All that piece or
parcel of land and
the premises
erected thereon
known as Unit 8
Hawksworth
Industrial Estate,
Swindon, Wiltshire
	 	10 years from 1
January 2000
	 	£71,500
	 	Distribution and
Storage within
Class B8 and/or
industrial purposes
within Class B1(b)
and (c) of the Town
and Country
Planning (Use
Classes) Order 1987
	4 Buckingham 

Avenue, Slough, 

Berkshire

	 	Slough Trading
Estate Ltd (1) and
Duco International
Limited (2)
	 	21 August 2000
	 	The land and
buildings known as
Building 4,
Buckingham Avenue
Trading Estate,
Slough, Berkshire
	 	10 years
from 8 February 2005
	 	£355,000
	 	Use for polymer
processing together
with ancillary
offices or such
other purpose
within Class B1 B2
or B8 of the
Schedule to the
Town and Country
Planning (Use
Classes) Order 1987

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SCHEDULE 7

Obligations Pending Completion

The Management Sellers will procure that each Group Member will:

	1.	 	carry on its business in the ordinary course so as to maintain that business as a going
concern;
	 
	2.	 	use reasonable endeavours to preserve its goodwill and customer and supplier relationships;
	 
	3.	 	not incur expenditure on capital account on any single item in excess of £10,000 or items
having an aggregate capital expenditure in excess of £25,000 and in either case not enter into
any commitment to do so;
	 
	4.	 	not dispose of any part of its assets except Stock in the ordinary course of trading;
	 
	5.	 	not enter into any guarantee or indemnity or other agreement to secure, or incur financial or
other obligations with respect to, another person’s obligations;
	 
	6.	 	not enter into any long term Contract (which is incapable of complete performance within 6
months from the date of the Contract);
	 
	7.	 	not grant any lease, licence or third party right or terminate, or give notice to terminate,
a lease, licence or third party right in respect of any part of the Property;
	 
	8.	 	not change the existing use or assign or otherwise dispose of any part of the Property;
	 
	9.	 	not declare, make or pay any dividend or other distribution;
	 
	10.	 	not create an Encumbrance over the Property or another asset of a Group Member (save for
liens arising in the ordinary course of business);
	 
	11.	 	not appoint any additional director;
	 
	12.	 	not take on any new employee with a basic salary in excess of £25,000 per annum, officer or
director or terminate or give notice to terminate the employment or engagement of any
employee, officer or director make or propose to make any general change in the terms or
conditions of employment or engagement or pension benefits of any employee, officer or
director;
	 
	13.	 	continue to pay all renewal fees for any insurance policy;
	 
	14.	 	(save pursuant to Part A of Schedule 5) not create, allot, issue, grant or agree to grant any
option over, acquire, repay or redeem any class of share or loan capital and not vary or agree
to vary the rights of, any class of share or loan capital; and
	 
	15.	 	not make any change in its business structure or organisation.

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SCHEDULE 8

Loan Note Consideration

	1.	 	Completion Statements
	 
	1.1	 	The Sellers and the Buyer will procure that after Completion, Completion Statements for the
Group will be prepared and reported on in accordance with the provisions of this Schedule 8
consisting of an Actual Net Debt Statement and Working Capital Statement.
	 
	1.2	 	The Completion Statements will be prepared (subject as otherwise provided) in the following
order of priority:

	 	1.2.1	 	adopting the accounting bases principles, policies, treatments and
categorisations applied for the purposes of March Balance Sheet;
	 
	 	1.2.2	 	to the extent there is no conflict with paragraph 1.2.1 adopting the
accounting bases, principles, policies, treatments and categorisations applied for
the purposes of the Accounts; and
	 
	 	1.2.3	 	to the extent there is no conflict with paragraph 1.2.1 and paragraph
1.2.2 in accordance with the historical cost convention and with accounting
principles generally accepted in the United Kingdom (including Accounting Standards);

	 	 	For the avoidance of doubt, in the preparation of the Completion Statements the terms of
paragraph 1.2.1 shall take precedence over the terms of paragraphs 1.2.2 and 1.2.3 and the
provisions of paragraph 1.2.2 shall take precedence over paragraph 1.2.3. There shall be
included within the Completion Statement specific provisions for the following items:

	 	(a)	 	the cost of directors and officers run-off insurance
cover (not exceeding £10,000);
	 
	 	(b)	 	£61,000 in respect of interest having been incorrectly
treated as tax deductible for the three years ended on the Accounting Date;
	 
	 	(c)	 	£25,000 in respect of a failure to account correctly for
VAT on acquisitions and disposals of cars;
	 
	 	(d)	 	all sums payable by the Company under the Consultancy
Termination Agreement.

	 	 	and no further provision shall be made or liability otherwise taken into account in respect
of those items.
	 
	2.	 	Procedure
	 
	2.1	 	Forthwith after Completion the Sellers will provide the Buyer and, where requested, the
Buyer’s Accountants with access to those assets, documents and records within their possession
or control relating to the Group which the Buyer or the Buyer’s Accountants may reasonably
require or request for the purpose of preparing and agreeing the draft Completion Statements.

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	2.2	 	Within 45 Business Days after the date of Completion the Buyer will prepare and deliver to
the Sellers a final draft of the Completion Statements.
	 
	2.3	 	The Sellers will review the draft Completion Statements as delivered by the Buyer under this
Schedule, such review to be completed within 20 Business Days of such delivery. The Sellers
will notify the Buyer by one written notice within such period whether or not they accept them
as complying with paragraph 1 of this Schedule. The Buyer will ensure that the Sellers and,
where requested, the Sellers’ Accountants are given access as soon as reasonably practicable
to all additional information they may reasonably require to enable the Sellers to make their
decision. If the Sellers do not so notify the Buyer within 20 Business Days of delivery of
the draft Completion Statements then the Sellers will be deemed to have accepted the draft
Completion Statements as complying with paragraph 1.
	 
	2.4	 	If the Sellers notify the Buyer of any objection pursuant to paragraph 2.3 then the Sellers
will procure that the Sellers’ Accountants set out in reasonable detail their reasons for such
non-acceptance and specify the adjustments (including for the avoidance of doubt, the quantum
of the same) that in their opinion should be made to the draft Completion Statements in order
to comply with paragraph 1.
	 
	2.5	 	If the Sellers’ Accountants and the Buyer’s Accountants do not reach agreement within 14 days
after service of the Sellers’ Accountants’ notice of non-acceptance under paragraph 2.3 then
any party may refer the matters in dispute to a partner of at least ten year’s relevant
qualified experience at an independent firm of chartered accountants agreed by the parties. If
the parties are unable to agree on the appointment of an independent firm of chartered
accountants after a further 21 days, an independent firm of chartered accountants will be
appointed on the application of either party by the President or other senior officer for the
time being of the Institute of Chartered Accountants in England and Wales (the “Expert”).
	 
	2.6	 	The Expert will act on the following basis:

	 	2.6.1	 	the Expert will act as an expert and not as a arbitrator;
	 
	 	2.6.2	 	the Expert’s terms of reference will be to determine the remaining matters
in dispute between the parties;
	 
	 	2.6.3	 	the parties will each provide the Expert with all information relating to
the matter which the Expert reasonably requires and the Expert will entitled (to the
extent he considers appropriate) to base his determination on such information and on
the accounting and other records of the Company;
	 
	 	2.6.4	 	the decision of the Expert is, in the absence of fraud or manifest error,
final and binding on the parties;
	 
	 	2.6.5	 	the parties will each pay one half of the Expert’s costs or as the Expert
may determine;
	 
	 	2.6.6	 	except to the extent that the parties agree otherwise or otherwise as set
out in this paragraph 2.6, the Expert will determine its own procedure and will
determine only:

	 	2.6.6.1	 	whether any of the arguments for the adjustments to be made to the draft
Completion Statements put forward in the Sellers’ non-acceptance notice are
correct in whole or in part; and

75

 

	 	2.6.6.2	 	if so, what alterations should be made to the Completion Statements in
order to correct the relevant inaccuracy in them;

	 	2.6.7	 	the Expert will apply the accounting principles as set out in paragraphs
1.2;
	 
	 	2.6.8	 	the procedure of the Expert will:

	 	2.6.8.1	 	give the parties a reasonable opportunity to make written representations
to it; and
	 
	 	2.6.8.2	 	require that each party supply the other with a copy of any written
representations at the same time as they are made to the Expert;

	 
	 	2.6.9	 	determination of the Expert will be in writing and made available for
collection by each of the parties at the offices of the Expert at such time as it
will determine.

	2.7	 	If the Sellers’ Accountants and the Buyer’s Accountants reach agreement on (or pursuant to
paragraph 2.3 the Sellers are deemed to have accepted) the Completion Statements, or if the
Completion Statements are finally determined at any stage in the procedure set out in this
paragraph 2, the Completion Statements as so agreed or determined will be the Completion
Statements for the purposes of this Agreement and shall be final and binding on the Buyer and
the Sellers.
	 
	2.8	 	The Sellers and the Buyer will pay their own costs and expenses in connection with the
preparation and agreement of the Completion Statements including, where applicable, any costs
associated with presentation of their case to the Independent Accountant.
	 
	2.9	 	For the avoidance of doubt where the Sellers are required pursuant to this paragraph to
provide notice in writing to the Buyer, such notice must be signed by or on behalf of each of
the Institutional Sellers in order to constitute valid notice upon the Buyer.
	 
	3.	 	Quantification of Loan Note Consideration
	 
	3.1	 	The amount of the Loan Note Consideration shall be a sum equal to £17,100,000 less the
Insurance Costs (not exceeding £388,000) less the Share Consideration and the consideration
payable under the Pickering Sale Agreement less the amount of the Actual Net Debt but subject
to the following adjustments:

	 	3.1.1	 	there will be added the amount, if any, by which the Working Capital is
more than £3,457,237;
	 
	 	3.1.2	 	there will be deducted the amount, if any, by which the Working Capital is
less than £3,457,237.

	3.2	 	Within 10 Business Days after the Completion Statements have become final and binding:

	 	3.2.1	 	to the extent that the Loan Note Consideration (as adjusted) exceeds the
amount of the Estimated Loan Note Consideration (the amount of such excess shall be
referred to as “the Excess”) there shall be paid to Lloyds TSB Development Capital
Limited and Graphite from the Retention Account

76

 

	 	 	 	the Retention Fund together with a sum equal to the Excess (from the Buyer);
	 
	 	3.2.2	 	to the extent that the Loan Note Consideration is equal to or less than
the Estimated Loan Note Consideration but more than the Initial Loan Note
Consideration there shall be paid to Lloyds TSB Development Capital Limited and
Graphite from the Retention Account the amount by which the Loan Note Consideration
is in excess of the Initial Loan Note Consideration and the balance of the Retention
Fund shall be repaid from the Retention Account to the Buyer;
	 
	 	3.2.3	 	to the extent that the Loan Note Consideration is less than the Initial
Loan Note Consideration (such amount shall be referred to as “the Deficit”), the
Retention Fund shall be repaid to the Buyer from the Retention Account and Lloyds TSB
Development Capital Limited and Graphite shall repay to the Buyer an amount equal to
the Deficit.

	3.3	 	All amounts due from or to Lloyds TSB Development Capital Limited and Graphite under
paragraph 3.2 shall be in the proportions that each such entity’s holding of Preferred
Ordinary Shares bears to the aggregate amount of Preferred Ordinary Shares in issue at
Completion (and for these purposes the Preferred Ordinary Shares held by Lloyds TSB Ventures
Nominees Limited shall be deemed to be held by Lloyds TSB Development Capital Limited).
	 
	3.4	 	All payments to the Institutional Sellers under paragraph 3.2 above shall be made to the
Sellers’ Solicitors in settlement of the Loan Note Consideration by electronic transfer and
clause 4.3 shall apply.

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SCHEDULE 9

Limitation of Management Sellers’ liability

	1.	 	General
	 
	1.1	 	The provisions of this Schedule shall operate to limit the liability of the Management
Sellers under and in respect of the provisions of the Warranties.
	 
	2.	 	Minimum and Maximum Claims
	 
	2.1	 	The Management Sellers shall not be liable in respect of any individual Relevant Claim unless
(and then only to the extent that) the amount that would otherwise be recoverable from the
Management Sellers in respect of such Relevant Claim exceeds £2,500. For the purposes of this
paragraph, where a Relevant Claim relates to more than one Event which would separately
constitute a Relevant Claim, it shall be treated as a separate Relevant Claim in respect of
each such Event.
	 
	2.2	 	The Management Sellers shall not be liable in respect of any Relevant Claim or Relevant
Claims unless and until (and then only to the extent that) the aggregate amount that would
otherwise be recoverable from the Management Sellers in respect of all such Relevant Claims
(after giving due effect to paragraph 2.1 above in relation to each Relevant Claim) exceeds
£175,000 (in which event the Management Sellers shall be liable for the whole amount and not
merely the excess over £175,000).
	 
	2.3	 	The total aggregate liability of each of the Management Sellers in respect of all and any
Relevant Claims and any claims under or in respect of Schedule 4 of this Agreement (inclusive
of costs and interest) shall not exceed the amount set out opposite each Management Seller’s
name in column 3 of Schedule 1.
	 
	2.4	 	Any amounts paid in respect of a Relevant Claim and/or any claims under or in respect of
Schedule 4 of this Agreement and subsequently refunded and/or set off under paragraph 7 of
Schedule 9 or paragraph 8 of Schedule 4 shall be disregarded to the extent of the refund
and/or set off for the purposes of paragraph 2.3 of Schedule 9 in the event of any further
Relevant Claim and/or any claims under or in respect of Schedule 4 of this Agreement.
	 
	3.	 	Time Limits
	 
	3.1	 	Specific written notice of any Relevant Claim, setting out so far as reasonably practicable
the Buyer’s calculation of the amount and details thereof shall be given by the Buyer to the
Management Sellers:

	 	3.1.1	 	in the case of any Relevant Claim the subject matter of which relates to
Taxation under the Taxation Warranties on or before the seventh anniversary of the
date of this Agreement; and
	 
	 	3.1.2	 	in the case of any other Relevant Claim, on or before the date following
24 months from the date of this Agreement;

	 	 	(such date being referred to in this schedule as the “Expiry Date”) and the Management
Sellers shall cease to be under any liability to the Buyer or otherwise in respect of all
and any Relevant Claims not so notified to the Management Sellers.

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	3.2	 	Any Relevant Claim (other than any such claim under the Taxation Warranties) made before the
Expiry Date shall, if it has not been previously satisfied, settled or withdrawn, be deemed to
have been withdrawn and shall become fully barred and unenforceable (and the Management
Sellers’ liability in respect of such Relevant Claim shall absolutely terminate) on the expiry
of the period of 9 months after notice of such Relevant Claim was given to the Management
Sellers (or any of them) in accordance with paragraph 3.1 of this Schedule, unless proceedings
in respect thereof shall have been commenced against the Management Sellers (or any of them)
(and for this purpose proceedings shall not be deemed to have been commenced unless they shall
have been issued and validly served upon the Management Sellers) (or any of them).
	 
	4.	 	Reliance
	 
	 	 	The Buyer acknowledges and declares that in entering into this Agreement it has not relied
and is not relying on any warranties, representations, covenants, undertakings,
indemnities, promises, forecasts or other statements whatsoever whether written or oral
(and whether implied or otherwise) (collectively “Representations”), other than those
expressly set out in this Agreement, and the Buyer hereby irrevocably and unconditionally
waives any right it may have to claim damages for, or to rescind this Agreement by reason
of, any Representation not expressly set out in this Agreement unless such Representation
was made fraudulently. The Buyer further declares that, at the time of entering into this
Agreement none of Dermot Healy, Thomas Koenig and John Connell is actually aware (having
read all due diligence reports commissioned by or on behalf of the Buyer in respect of the
acquisition of the Shares) of any facts or, matters which any of them knows will or is
likely to give rise to any liability on the part of the Management Sellers under the
Warranties or Schedule 4 and the Buyer hereby waives any such claims or potential claims
of which such persons are so aware.
	 
	5.	 	Rescission
	 
	 	 	Save as expressly stated in this Agreement the sole remedy against the Management Sellers
for any breach of any of the Warranties, any other breach of this Agreement by the
Management Sellers shall be an action for damages. Save in the event of fraudulent
misrepresentation, no right of rescission shall be available after Completion to the Buyer
by reason of any breach of the Warranties or any other provision of this Agreement.
	 
	6.	 	Specific Limitations
	 
	6.1	 	The Management Sellers shall have no liability in respect of any Relevant Claim if and to the
extent that such Relevant Claim (or the subject matter thereof):

	 	6.1.1	 	occurs or arises or is increased as a result of any legislation not in
force at the date hereof or any change of law, regulation, directive, requirement or
published administrative practice (including by HMRC or any other taxing authority)
or any change in the rates of Taxation which in each case is not in force at the date
hereof;
	 
	 	6.1.2	 	occurs or arises or, such Relevant Claim otherwise having arisen, is
increased as a result of any change made after the date hereof in any accounting or
taxation policies of any Group Member save for changes necessary for compliance with
Accounting Standards in force as at Completion;

79

 

	 	6.1.3	 	would not have arisen or occurred but for (or is increased as a result
of):

	 	(a)	 	any voluntary act, event, omission, transaction or
arrangement after Completion by the Buyer or any Group Member (or on their
respective behalves) otherwise than, in the case of any Group Member, in the
ordinary course of its business as now carried on and otherwise than
pursuant to a legally binding commitment created on or before Completion; or
	 
	 	(b)	 	any failure or omission by the Company to make any claim,
election, surrender or disclaimer, or give any notice, or consent or do any
other thing, in connection with the provisions of any enactment or
regulation relating to Taxation after Completion, the anticipated making,
giving or doing of which was taken into account in computing the provision
for Taxation in the Accounts;

	 	6.1.4	 	arises from an act, event, omission, transaction or arrangement of the
Management Sellers or any Group Member prior to Completion occurring at the written
request or with the written consent of the Buyer;
	 
	 	6.1.5	 	is recovered by the Buyer or any Group Member under the terms of any
insurance policy;
	 
	 	6.1.6	 	is a liability for Taxation which arises directly or indirectly as a
result of:

	 	(a)	 	the payment of any unusual or abnormal dividend by any
Group Member after Completion; or
	 
	 	(b)	 	the change of the date to which any Group Member makes up
its accounts; or
	 
	 	(c)	 	the cessation of any business carried on by any Group
Member occurring after Completion.

	6.2	 	The Management Sellers shall have no liability in respect of any Relevant Claim to the extent
that specific allowance, provision or reserve has been made in the Completion Statements in
respect of the matter to which such liability relates (or the relevant liability is otherwise
taken into account in the Completion Statements)
	 
	6.3	 	For the avoidance of doubt, in determining the amount of any Relevant Claim for the purposes
of the limits set out in paragraphs 3.1 and 3.2 above, the amount of such Claim shall be the
net amount after giving effect to the provisions of paragraphs 6.1 and 6.2 above.
	 
	7.	 	Recovery
	 
	7.1	 	Where the Buyer or any Group Member is or may be entitled to recover from some other person
any sum in respect of any matter or event which could give rise to a Relevant Claim (other
than any claim under the Taxation Warranty), the person so entitled shall use all reasonable
endeavours to recover that sum (keeping the Management Sellers promptly informed of the
conduct of such recovery), and any sum recovered will reduce the amount of the Relevant Claim.
	 
	7.2	 	Without prejudice to the provisions of paragraph 7.1 if the Management Sellers (or any of
them) pay(s) to the Buyer an amount in respect of any Relevant Claim (other than any claim
under the Taxation Warranties), and the Buyer or any Group

80

 

	 	 	Member subsequently recovers (whether by payment, credit, discount, relief or
otherwise) from a third party an amount which is referable to the matter giving rise
to such Relevant Claim, then the Buyer shall repay to the Management Sellers the
lesser of:-

	 	7.2.1	 	the amount paid by the Management Sellers to the Buyer; and
	 
	 	7.2.2	 	the Sum Recovered;

	 	 	less (in each case) (a) any amount of the Relevant Claim which was not settled by the
Management Sellers specifically by reason of the expected recovery of the Sum Recovered by
the Buyer or any Group Member and (b) the reasonable costs of recovery from such other
person.
	 
	 	 	For the purposes of this paragraph, the expression “Sum Recovered” means an amount equal
to the amount recovered from the third party (and for this purpose, in addition to any
cash payment, any payment in kind or discount, credit or like benefit obtained shall
constitute an amount recovered).
	 
	8.	 	Contingent Liabilities
	 
	 	 	If any Relevant Claim arises by reason of a liability of any Group Member which is a
contingent liability when the Relevant Claim in respect thereof is notified to the
Management Sellers, then the Management Sellers shall not be obliged to make any payment
to the Buyer until such time as the contingent liability ceases to be contingent and
becomes an actual liability and is due and payable. So long as any Relevant Claim arising
by reason of a contingent liability shall have been notified to the Management Sellers in
accordance with paragraph 3.1 above, then paragraph 3.2 shall be amended in relation to
such Relevant Claim so as to require that proceedings be commenced within 9 months from
the date on which the said liability ceases to be contingent.
	 
	9.	 	Notice of Claims
	 
	9.1	 	If the Buyer becomes aware of any third party claim or potential claim, matter or event which
may result in a Relevant Claim (other than a claim under the Taxation Warranties) (a “Third
Party Claim”) the Buyer shall, and shall procure that each relevant Group Member shall:

	 	9.1.1	 	within 14 days of becoming so aware give notice of such Third Party Claim
to the Management Sellers and consult with the Management Sellers in respect of such
claim;
	 
	 	9.1.2	 	if so requested by the Management Sellers, take all reasonable steps or
proceedings as the Management Sellers may reasonably consider necessary in order to
mitigate, avoid, resist, appeal, dispute, contest, remedy, compromise or defend any
such Third Party Claim and any adjudication in respect thereof or enforce against any
person (other than the Management Sellers) the rights of the relevant Group Member
and the Buyer in relation to the matter the subject of the Third Party Claim subject
to the Buyer or relevant Group Member (as appropriate) being indemnified by the
Management Sellers against all reasonable costs and expenses incurred in connection
therewith;
	 
	 	9.1.3	 	at all reasonable times and on reasonable notice during normal office
hours allow the Management Sellers and its agents access to and to inspect and

81

 

	 	 	 	take copies of all necessary books, correspondence and records of the relevant
Group Member;
	 
	 	9.1.4	 	save with a majority of the Management Sellers’ prior written consent, not
admit liability in respect of or compromise, or settle any such claims as aforesaid
other than in circumstances where a failure to admit liability, compromise or settle
would, in the opinion of the Buyer, acting reasonably, result in a material detriment
to the business or goodwill of the Group.

	10.	 	Mitigation
	 
	10.1	 	In assessing any damages or other amounts recoverable under this Agreement, there shall be
taken into account any benefit accruing to the Buyer or the relevant Group Member in
consequence of the event or breach giving rise thereto.
	 
	10.2	 	Nothing in this Schedule shall in any way restrict or limit the general obligation of the
Buyer to mitigate any loss or damage which it may suffer in consequence of any breach by the
Management Sellers of the terms of this Agreement or in consequence of any matter giving rise
to a claim against the Management Sellers under this Agreement.
	 
	11.	 	Specific Warranties
	 
	 	 	The Management Sellers shall have no liability under this Agreement in respect of or in
connection with:

	 	11.1	 	EHS matters save pursuant to paragraphs 22 to 25 of Schedule 3; or
	 
	 	11.2	 	matters relating to pension arrangements or the provision of retirement or
death benefit in respect of former and current employees of the Group, save pursuant
to paragraphs 28 and 29 of Schedule 3.

82

 

SCHEDULE 10

Provisions regarding Retention Fund

The Retention Fund will be paid on Completion by the Buyer into a joint on-demand interest bearing
deposit account with Barclays Bank Plc in the name of the Buyer’s Solicitors and the Sellers’
Solicitors (the “Retention Fund Holders”) who will hold the Retention Fund as stakeholders upon
trust for the Buyer and the Institutional Sellers on the following terms:

	1.	 	The Retention Fund Holders will make payments from the Retention Fund only in the manner
provided in paragraph 3.2 of Schedule 8.
	 
	2.	 	Where any payment is made to the Buyer out of the Retention Fund as provided in Schedule 8,
the Buyer will at the same time be entitled to a corresponding proportion of the interest
accrued on the Retention Fund. Otherwise all interest accrued on the Retention Fund will be
payable to the Institutional Sellers at the time of payment to them out of the Retention Fund
in accordance with Schedule 8. All payments of interest to the Buyer or the Institutional
Sellers will be made to the Sellers’ Solicitors and will be less any tax on such interest for
which the Retention Fund Holders may be accountable.
	 
	3.	 	The Institutional Sellers and the Buyer will upon Completion execute the Retention Fund
Instruction Letter and deliver it to its addressees, and will take all such steps and give all
such other written instructions, as are necessary or desirable to give effect to the
provisions of this Schedule.

83

 

	 	 	 	 	 	 	 
	SIGNED as a deed by

	 	 	)	 	 	 
	JONATHAN SHERRY

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by

	 	 	)	 	 	 
	MARTIN REES

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by

	 	 	)	 	 	 
	MICHAEL ELWINE

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by

	 	 	)	 	 	 
	TRACEY CARLINE

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by

	 	 	)	 	 	 
	ROBERT NABET

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 

84

 

	 	 	 	 	 	 	 
	SIGNED as a deed by

	 	 	)	 	 	 
	as attorney for and on behalf of

	 	 	)	 	 	 
	LLOYDS TSB DEVELOPMENT

	 	 	)	 	 	 
	CAPITAL LIMITED in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by

	 	 	)	 	 	 
	as attorney for and on behalf of

	 	 	)	 	 	 
	LLOYDS TSB VENTURES

	 	 	)	 	 	 
	NOMINEES LIMITED in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by Graphite Capital

	 	 	)	 	 	 
	Management LLP in its capacity as manager

	 	 	)	 	 	 
	of GRAPHITE ENTERPRISE TRUST PLC

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by Graphite Capital

	 	 	)	 	 	 
	Management LLP in its capacity as manager

	 	 	)	 	 	 
	of GRAPHITE ENTERPRISE TRUST

	 	 	)	 	 	 
	LIMITED PARTNERSHIP

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by Graphite Capital

	 	 	)	 	 	 
	Management LLP in its capacity as manager

	 	 	)	 	 	 
	of GRAPHITE CAPITAL PARTNERS V ‘A’

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 

85

 

	 	 	 	 	 	 	 
	SIGNED as a deed by Graphite Capital

	 	 	)	 	 	 
	Management LLP in its capacity as manager

	 	 	)	 	 	 
	of GRAPHITE CAPITAL PARTNERS V ‘B’

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by Graphite Capital

	 	 	)	 	 	 
	Management LLP in its capacity as manager

	 	 	)	 	 	 
	of GRAPHITE CAPITAL PARTNERS V ‘C’

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by Graphite Capital

	 	 	)	 	 	 
	Management LLP in its capacity as manager

	 	 	)	 	 	 
	of GRAPHITE CAPITAL PARTNERS V ‘D’

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by Graphite Capital

	 	 	)	 	 	 
	Management LLP in its capacity as manager

	 	 	)	 	 	 
	of GRAPHITE CAPITAL PARTNERS V ‘E’

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by Graphite Capital

	 	 	)	 	 	 
	Management LLP in its capacity as manager

	 	 	)	 	 	 
	of GRAPHITE CAPITAL PARTNERS V ‘F’

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 

86

 

	 	 	 	 	 	 	 
	SIGNED as a deed by Graphite Capital

	 	)	 	 	 	 
	Management LLP in its capacity as manager

	 	)	 	 	 	 
	of GRAPHITE CAPITAL PARTNERS V ‘G’

		)	 	 	 	 
	in the presence of:

	 	)	 	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by

	 	)
	 	 
	DAY INTERNATIONAL (UK) HOLDINGS

	 	)
	 	 
	acting by its undermentioned officers:
	 	 	 	 	 	 
	 

	 	 

Director

	 	 
	 
	 	 	 	 	 	 
	 

	 	 

Director/Secretary

	 	 
	 
	 	 	 	 	 	 
	SIGNED as a deed by

	 	)
	 	 
	DAY INTERNATIONAL INC

	 	)
	 	 
	acting by Tom Koenig in the presence of:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Witness signature:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Witness Name:
	 	 	 	 	 	 

87

 

      

			
	Dated
	 	2006

	 	 	 
	 
	(1)	 	JONATHAN STEVEN SHERRY AND OTHERS
	 
	(2)	 	DAY INTERNATIONAL (UK) HOLDINGS
	 
	(3)	 	DAY INTERNATIONAL INC

AGREEMENT

for the sale and purchase of certain of the issued share capital of Duco Holdings Limited

 

 

Table of Contents

	 	 	 	 	 	 	 
	1.
	 	INTERPRETATION	 	 	1	 
	2.
	 	SALE AND PURCHASE	 	 	9	 
	3.
	 	CONDITIONS	 	 	10	 
	4.
	 	COMPLETION	 	 	12	 
	5.
	 	WARRANTIES	 	 	13	 
	6.
	 	TERMINATION RIGHTS	 	 	14	 
	7.
	 	CONFIDENTIALITY	 	 	15	 
	8.
	 	ANNOUNCEMENTS; RIGHTS OF ACCESS	 	 	15	 
	9.
	 	COSTS	 	 	16	 
	10.
	 	NOTICES	 	 	16	 
	11.
	 	SELLERS’ REPRESENTATIVE	 	 	17	 
	12.
	 	ASSIGNMENT	 	 	18	 
	13.
	 	FURTHER ASSURANCE	 	 	18	 
	14.
	 	RIGHTS OF THIRD PARTIES	 	 	18	 
	15.
	 	ENTIRE AGREEMENT	 	 	18	 
	16.
	 	GUARANTEE	 	 	18	 
	17.
	 	GENERAL	 	 	19	 
	18.
	 	GOVERNING LAW AND JURISDICTION	 	 	21	 
	19.
	 	COUNTERPARTS	 	 	21	 
	20.
	 	EXECUTION	 	 	21	 
	 
	 	 	 	 	 	 
	SCHEDULE 1	 	 	22	 
	 
	 	 	 	 	 	 
	 
	 	The Sellers	 	 	22	 
	 
	 	Part I : Management Sellers	 	 	22	 
	 
	 	Part II Institutional Shareholders	 	 	23	 
	 
	 	 	 	 	 	 
	SCHEDULE 2	 	 	25	 
	 
	 	 	 	 	 	 
	 
	 	Details of the Company	 	 	25	 
	 
	 	 	 	 	 	 
	SCHEDULE 3	 	 	27	 
	 
	 	 	 	 	 	 
	 
	 	Non-Taxation Warranties	 	 	27	 
	 
	 	 	 	 	 	 
	SCHEDULE 4	 	 	69	 
	 
	 	 	 	 	 	 
	 
	 	Taxation	 	 	69	 
	 
	 	 	 	 	 	 
	SCHEDULE 5	 	 	69	 
	 
	 	 	 	 	 	 
	 
	 	Pre-Completion and Completion Arrangements	 	 	69	 

 

 

	 	 	 	 	 	 	 
	SCHEDULE 6	 	 	72	 
	 
	 	 	 	 	 	 
	 
	 	The Property	 	 	72	 
	 
	 	 	 	 	 	 
	SCHEDULE 7	 	 	73	 
	 
	 	 	 	 	 	 
	 
	 	Obligations Pending Completion	 	 	73	 
	 
	 	 	 	 	 	 
	SCHEDULE 8	 	 	74	 
	 
	 	 	 	 	 	 
	 
	 	Loan Note Consideration	 	 	74	 
	 
	 	 	 	 	 	 
	SCHEDULE 9	 	 	78	 
	 
	 	 	 	 	 	 
	 
	 	Limitation of Management Sellers’ liability	 	 	78	 
	 
	 	 	 	 	 	 
	SCHEDULE 10	 	 	83	 
	 
	 	 	 	 	 	 
	 
	 	Provisions regarding Retention Fund	 	 	83

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}]]