SCHEDULE A

REPRESENTATIONS AND WARRANTIES

Although the model form is intended to be a simplified “short form”, this Schedule A has been drafted with the purpose reaching a sufficient degree of completeness. Some clauses may seem unnecessary or too detailed for a smaller deal, but it has been thought that it was better to give an extensive view of all (or most) problems the parties may have to face, also considering that clauses which are not needed can be easily deleted.

All warranties and representations are subject to the exceptions and qualifications set forth in Schedule B. Such Schedule will follow the same numbering (e.g.an exception to warranty A.3.2 regarding accounting principles and practices will be under B.3.2).

Considering the strict link between the two schedules, it has been preferred to work out a system where all exceptions and limitations to the warranties would be put as far as possible in Schedule B.

The ICC Task Force has tried to avoid wordings like “So far as the Seller is aware” or “To the best knowledge of the Seller”. If the Seller feels that he must limit his responsibility with respect to matters which are not totally under his control or with respect to which he has no precise information, he can better do so by putting limitations and exceptions in the corresponding clause of Schedule B. This will oblige the parties to define more precisely the extent of their respective rights and duties.

SCHEDULE B

EXCEPTIONS AND QUALIFICATIONS TO THE REPRESENTATIONS AND WARRANTIES

This Schedule has to be filled in case by case according to the situations of every specific deal.

The explanations and examples given here- after are of course non-exhaustive, but have only the purpose of helping the user to focus on the main issues.

In Schedule B the Task Force has tried to give some explanations which may help the parties to better understand the various warranties and the matters to check in order to correctly draft possible exceptions or qualifications restricting the corresponding warranty.

Since the list hereunder covers all warranties under Schedule A, parties should delete the paragraphs that are not needed and/or insert other items that have not been set out in the list hereunder.

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SCHEDULE A (continued)

REPRESENTATIONS AND WARRANTIES

A.1 The Company

A.1.1

The facts stated in Annex 1 (Company Information) are correct.

A.1.2

The Company is validly existing and incorporated under the laws of [ ]. The Company is not insolvent and is capable of paying its debts and no action has been brought or threatened so as to have the Company declared insolvent or subjected to any insolvency, moratorium or other procedure involving a collective treatment of creditors, nor are there any circumstances which exist which may cause the Company to become insolvent or incapable of paying its debts.

A.1.3

The Seller has set out in B.1.3 true and accurate copies of the constitutional documents of the Company incorporating all amendments made up to and including the date hereof.

A.1.4

The register of shareholders of the Company contains a true and accurate record of the current shareholders and all former shareholders of the Company and their holdings of shares in the capital of the Company.

A.1.5

All Encumbrances by or in favour of the Company have been registered in accordance with the provisions of the relevant legislation.

A.1.6

All returns, particulars, resolutions and other documents required by the applicable laws to be filed with or delivered to any official body by the Company have been properly prepared and so filed or delivered in all material respect.

A.1.7

All the accounts, books, ledgers and financial and other records of the Company are held or stored in means which are under the exclusive ownership and control of the Company and have at all times been properly and accurately kept and completed in all material respects, record all matters required to be entered therein by law, do not contain or reflect any material inaccuracies or discrepancies and give and reflect a true and fair view of the financial, contractual and trading position of the Company.

SCHEDULE B (continued)

EXCEPTIONS AND QUALIFICATIONS TO THE REPRESENTATIONS AND WARRANTIES

B.1.1

Verify that all Company Information contained in Annex1 is correct and updated and conforms to the information contained in public registers.

B.1.2

Verify that the Company is not de facto under liquidation due to circumstances as capital impairment, government prohibitions to exercise its activity, etc.

B.1.3

Attach list made according to A.23.1

B.1.4

Verify compliance with A.1.4 1

B.1.5

Verify compliance with A.1.5 and list possible exceptions.

B.1.6

Verify compliance with A.1.6 and list possible exceptions.

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A.2 The Shares

A.2.1

The Shares constitute the whole of the issued and outstanding share capital of the Company and are fully paid.

A.2.2

No person is entitled or has claimed to be entitled to require the Company to issue any share or loan capital either now or at any future date whether contingently or not.

A.2.3

There is no option, right of pre-emption, requirement for prior shareholder consent 2, right to acquire, mortgage, charge, pledge, lien or other form of security or encumbrance on, over or affecting any of the Shares, nor is there any commitment to give or create any of the foregoing, and no person has claimed to be entitled to any of the foregoing.

A.2.4

The Seller is the full legal and beneficial owner of the shares and is entitled to sell and procure the transfer of the full legal and beneficial ownership in the Shares to the Buyer on the terms set out in this agreement.

A.2.5

The Company has not at any time:

  1. repaid, redeemed or purchased any shares of any class of its share capital or otherwise reduced its issued share capital; or
  2. directly or indirectly provided any illegal financial assistance for the purpose of the acquisition of shares of the Company or any holding company of the Company or for the purpose of reducing or discharging any liability incurred in any such acquisition.

B.2.1

Verify that the share capital has been fully paid in. Verify the structure of the share capital under the relevant jurisdiction. There is jurisdiction where there is no difference between issued and authorised share capital.

B.2.2

Verify that the Company has issued no bonds or other instruments. Verify there are no share warrants or bearer shares in existence.

B.2.3

Check the bylaws of the Company, agreements of the shareholder or the Company with third parties or specific provisions of law (succession rights, mandatory pre– emption rights, etc.).

B.2.4

In addition to the circumstances described above, verify the share certificates, their endorsements, the share register, the entries with the public registers, the adoption of possible resolutions from either the shareholders’ meeting or the board of directors, voting rights.

B.2.5

Verify compliance with A.2.5

A.3 The Seller

A.3.1

The Seller has full power and capacity to enter into and perform this Agreement.

A.3.2

This Agreement does not constitute a breach on the part of the Seller in relation to any agreement or commitment with a third party.

No consent, approval or filing with any governmental or other authority relating exclusively to the Seller is required to authorise this Agreement or to permit the transactions contemplated herein.

B.3.1

Verify that no personal or family circumstances may affect the right to sell of the Seller (e.g. marital status).

B.3.2

Ensure that the signature of this Agreement may not give rise to a claim by a third party against the buyer for having caused the seller to breach previous commitments.

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A.4 Accounts

A.4.1

The Accounts comply in all material respects with all applicable laws and regulations.

A.4.2

The Accounts comply with and have at all times been prepared in accordance with the generally accepted accounting principles and practices in the country where the Company is incorporated.

A.4.3

The accounting principles and practices (including methods of valuation) adopted for the Accounts and all items therein are the same as those adopted in preparing the audited accounts of the Company for its three preceding accounting reference periods.

A.4.4

The Accounts give a true and fair view of the assets and liabilities as at the Accounts Date, and of the profits and losses throughout the financial period to which the Accounts relate 3.

B.4.2

Verify compliance with A.4.2. Verify whether the accounting principles adopted by the Company may be considered as “generally accepted accounting principles and practices”. Verify that the accounts comply with such principles.

B.4.4

Verify compliance with A.4.4.

A.5 Position since the Accounts Date 4

A.5.1

Since the Accounts Date:

  1. the Company has conducted its business in a normal and proper manner;
  2. the Company has not entered into any unusual contract or commitment or otherwise departed from its normal course of trading;
  3. there has been no material deterioration in the order intake the order backlog, cash position including working capital, or work in progress;
  4. the Company has paid its creditors within the times agreed with them and in particular, without limiting the foregoing, no debt owed by the Company has been outstanding for more than [ ] days from the date of invoice;
  5. save in the ordinary course of business, the Company has not given any Guarantee or indemnity or entered into a contract or suretyship or agreement for the postponement of debt (or security therefore) or for lien or set-off; and
  6. the Company is not in default under the terms of any borrowing made by it.

B.5.1

Verify compliance with A.5.1. Particular attention must be paid to possible new businesses undertaken, and to agreements having a lower profitability entered into to maintain the level of turnover or to gather new customers or to keep trading positions.

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A.5.2

Since the Accounts Date, the Company has not:

  1. agreed to acquire or sell any business; or
  2. disposed of any of its assets except in the ordinary and normal course of business; or
  3. incurred any capital commitment in excess of […………]

A.5.3

All payments, receipts and invoices of the Company since the Accounts Date have been accurately recorded in the books of the Company in all material respects.

A.5.4

The Company since the Accounts Date has not declared, made or paid any dividends or other distribution except as provided in the Accounts 5.

B.5.3

Verify compliance with A.5.3.

A.6 Receivables

A.6.1

All receivables have arisen from ordinary transactions and will be collected at their relevant payment terms in the ordinary course of collection.

A.6.2

The Company has not factored or discounted any of its receivables.

A.6.3

The company is not owed any individual sum of money in excess of […………..] other than in the ordinary course of business.

B.6.1

Verify the status of collection of receivables also with reference to the adequacy of the provisions for bad and doubtful debts included in the Accounts.

B.6.2

Verify compliance with A.6.2.

B.6.3

Verify compliance with A.6.3.

A.7 Taxes

A.7.1

All taxation of any nature whatsoever for which the Company has been liable or for which the Company has been liable to account has been duly paid (insofar as such taxation ought to have been paid) and/or adequate provisions and accruals have been accounted for. Without prejudice to the generality of the foregoing, the Company has made all such deductions, withholdings and retentions as it was obliged or entitled to make and all such payments as should have been made.

All necessary information, notices, accounts, statements, reports, computations, assessments and returns which ought to have been made or given have been properly and duly submitted by the Company to the competent authorities and all information, notices, computations, assessments and returns submitted by the Company have been and are true and accurate in all material respects and are not the subject of any material dispute, nor are likely to become the subject of any material dispute with such authorities.

B.7.1

Verify compliance with A.7.1.

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A.7.2

The Company has not within the past 24 months received any notice of enquiry or suffered any enquiry, investigation, audit or visit by the relevant tax authorities, and neither the Seller nor the Company is aware of any such enquiry, investigation, audit or visit planned for the next 12 months.

A.7.3

The provision or reserve for tax in the Accounts is sufficient to cover all liabilities of the Company for tax as at the Accounts Date and all tax for which the Company may after the Accounts Date become or have become liable in respect of or by reference to:

  1. any income profits or gains for any period which ended on or before the Accounts Date; or
  2. any distributions made on or before the Accounts Date or provided for in the Accounts; or
  3. any event occurring on or before the Accounts Date.

A.7.4

Full potential provision has been made and shown (or disclosed by way of note) in the Accounts for deferred taxation.

A.7.5

The Company has not in the period of three years ending on the date of this Agreement been party to any non- arm’s length transaction.

B.7.2

Verify compliance with A.7.2.

B.7.3

Verify compliance with A.7.3.

B.7.4

Verify compliance with A.7.4.

B.7.5

Verify compliance with A.7.5.

A.8 Subsidiaries

A.8.1

The Company:

  1. has never had any subsidiary;
  2. has not since its incorporation been a subsidiary of any company; and
  3. holds no shares in the capital of any other company.

B.8.1

Verify compliance with B.8.1 and list possible exceptions.

A.9 Real Estates

A.9.1

The Company legitimately owns or uses the Real Estates, which are listed hereunder [fill in as appropriate], is the legal and beneficial owner or occupier in possession of each of the Real Estates and is in exclusive occupation of any of them. There are no circumstances that may prevent the Company, upon Closing, from owning and using the Real Estates as they currently are. All Real Estates that are owned by the Company are free of any Encumbrances.

B.9.1

Verify the title of each Real Estate, the absence of third parties’ rights, whether or not resulting from public registries. Verify that there are no encumbrances, also with reference to possible rights claimed by the tax authorities (e.g. due to succession). Verify that there are no limitations to the possibility for a company owned by a foreign entity to maintain property on lands and buildings.

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A.9.2

The Company has not received any notice or order affecting any Real Estates or their relevant use nor is it aware of any circumstance which might form the basis for any such notice or order. There are no proposals on the part of any authority which would adversely affect any Real Estates including, without limitation, those relating to compulsory purchase or public utility works.

A.9.3

All Real Estates which are leased or licensed by the Company are held on the basis of validly and existing agreements and there are no circumstances under which any such agreements may be terminated before their term or declared null and void. The Company has always timely made all payments due under the relevant agreements.

A.9.4

The Company has obtained all necessary permits, licenses and authorisations to use the Real Estates 6 as they currently are. The Real Estates fully comply with all zoning or planning rules and regulations.

A.9.5

The Company does not use or occupy or have any interest in any land and/or buildings other than the Real Estates.

B.9.2

Verify compliance with A.9.2.

B.9.3

Verify compliance with A.9.3. In particular, verify that the lease agreements do not provide for termination clauses in case of change in control of the Company.

B.9.4

Verify compliance with A.9.4.

B.9.5

Verify compliance with A.9.5.

A.10 Environmental Matters

A.10.1

The Company:

  1. complies and has at all relevant times complied with all Environmental Laws and Environmental Licences 7;
  2. has obtained and maintained in full force and effect all Environmental Licences, and there are no conditions, facts or circumstances which could endanger the continuance or renewal of such Environmental License.

A.10.2

No claim in relation to environmental matters has been made in writing or so far as the Seller is aware threatened against the Company or any occupier of any property at any time owned or leased by the Company.

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A.10.3

There are attached details (including, where appropriate copies of relevant reports or other documents) of any investigations, or analyses in relation to environmental matters relating to the Company or any property now or previously owned, leased or occupied by the Company which are in the possession or come to the notice of the Seller.

A.10.4

The company has complied with all its obligations with mandatory to required inspections, studies, audits, tests, reviews, etc.

A.10.5

There are attached in B.10.5, a list of all Environmental Licences, orders, notices and reports and any other materials, written communications relating to or in connection with any Environmental Licence.

A10.6

None of the Real Estates have been contaminated by any hazardous substance in breach of applicable Environmental Law.

B.10.1

Verify compliance with A.10.1. Due to the possible difficulties in attributing the responsibility for actions having an impact on these warranties, the parties will have to determine who will bear the risk of events whose causes may not be clearly assessed. The parties may for example fix a special threshold for the liability of the seller. They may also appoint an independent expert for analysing the environmental conditions and determining the remedy costs: closing could then be conditional on the remedy cost not exceeding a certain amount or on the Seller’s obligation to bear the difference.

B.10.2

Verify compliance with A.10.2.

B.10.3

Verify compliance with A.10.3. This clause has of course a considerable impact on the actions that the parties may take within the framework of B.10.1.

B.10.4

Verify compliance with A.10.4.

B.10.5

Verify compliance with A.10.5.

B.10.6

Verify compliance with A.10.6.

A.11 Assets

A.11.1

The Company owns all the assets reflected in the Accounts, free and clear from any Encumbrance or right of any third party.

A.11.2

All tangible assets used in connection with the business of the Company belong to or are legitimately used by the Company and are in the possession and under the control of the Company.

A.11.3

All tangible assets used in connection with the business of the Company are free from any option, lease, hire or hire purchase agreement, agreement for payment on deferred terms or Encumbrances whatsoever and there are no agreements or arrangements restricting the freedom of the Company to use or dispose of the same as it thinks fit.

A.11.4

All tangible assets with a book value in excess of [(amount) ] of the Company are in reasonable condition given fair wear and tear 8. They comply with all environmental, safety, health and any other applicable rules and regulations concerning their use and maintenance.

A.11.5

The assets, whether tangible or intangible, owned and lawfully used by the Company comprise all the assets necessary to continue to operate the business of the Company in the same manner and to the same extent as the operation of the business of the Company immediately prior to Closing.

B.11.1

Fill in as appropriate. Verify compliance with A.11.1.

B.11.2

Verify that no assets of the Company are at third parties’ premises, in which event the regular keeping of appropriate ledgers should be verified.

B.11.3

Verify compliance with A.11.3 and provide a list of all the assets that are used by the Company under lease agreements or other agreements. In addition verify that no securities have been granted on the assets owned or used by the Company.

B.11.4

Verify compliance with A.11.4. This clause is connected with other warranties in relation to environmental matters, health and safety at work and labour matters. The parties should therefore check the consistency between the different warranties.

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B.11.5

Verify compliance with A.11.5.

A.12 Insurance

A.12.1

All the assets and undertaking of the Company of an insurable nature are and have at all times been insured in amounts representing their full replacement or reinstatement value against risks normally insured against by persons carrying on the same classes of business as those carried on by the Company, and the Company is now and has at all times been adequately covered against accident, damage, injury, third-party loss, product liability, warranty claims, loss of profits and other risks normally covered by insurance by persons carrying on the same classes of business as those carried on by the Company.

A.12.2

Summary particulars of all insurances maintained by the Company and details of all insurance claims outstanding and which have been made within 12 months prior to Closing are set out in B.12.1.

A.12.3

All insurances maintained by the Company are and have at all relevant times been in force and no claims have been made by the Company against its insurers or are contemplated or outstanding.

A.12.4

All insurance premiums in respect of all insurances maintained by the Company are fully paid and up-to- date.

B.12.1

Verify compliance with A.12.1. In particular the seller must consider on the basis of the activity carried output by the Company, and the risks that are of an insurable nature, and check whether these have been adequately covered.

B.12.2

Attach list made according to A.12.2.

B.12.3

Verify compliance with A.12.3 and list all possible claims made on the insurers or other relevant matters regarding A.12.3.

A.13 Bank Accounts

A.13.1

The Seller has set out in B.13.1 full details of all of the Company’s investment, deposit and bank accounts and details of the banks and other financial institutions at which they are kept.

A.13.2

Seller has set out in B.13.2 full details of all overdraft,loan and other financial facilities available to the Company and no person who provides any of those facilities has given any indication that they are considering withdrawing or altering any of such facilities.

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A.13.3

Neither the Seller nor the Company has done or omitted to do anything whereby the continuance of the facilities referred to in B.13.2 above may be prejudiced or affected.

A.13.4

The Seller has set out in B.13.4 full details of all out- standing borrowings and other indebtedness of the Company other than amounts owed to trade creditors.

A.13.5

There are no unpresented cheques drawn by the Company otherwise than in the normal course of dealing.

A.13.6

The financial position of the Company as at three days preceding the date of this Agreement reflects the existence of immediately disposable cash and items disposable at short term as follows:

  1. Credit balance with banks: […]
  2. Term deposit: […]
  3. Cash accounts: […]
  4. Short-term receivables: […]

Such amounts of cash or disposable items have not been modified other than as required in the ordinary course of business since that date.

A.13.7

The Company, its directors, employees and agents have at all times complied with all material terms and conducted business in accordance with all material requirements laid down by the banks and any other sources of finance used by the Company (see A.14.2).

B.13.1

Attach list made according to A.13.1.

B.13.2

Attach list made according to A.13.2 and list possible exceptions.

B.13.3

Verify compliance with A.13.3 and list all possible claims made on the insurers or other relevant matters regarding A.13.3.

B.13.4

Attach list made according to A.13.4 and list possible exceptions.

B.13.5

Verify compliance with A.13.5.

B.13.6

Verify compliance with A.13.6.

B.13.7

Verify compliance with A.13.7.

A.14 Conduct of Business, Commercial Contracts and Joint Ventures

A.14.1

The Company is not a party to:

  1. any agreements or arrangements (whether executed or executory) entered into by the Company otherwise than by way of bargain at arm’s length or otherwise than in the ordinary course of business; or
  2. any contracts or transactions which involve obligations of an unusual, onerous or long-term nature.

A.14.2

The Seller has set out under B.14.2 full details of all powers of attorney given by the Company or any other authority (express or implied) by which any person may enter into any contract or commitment on behalf of the Company. There are no powers of attorney other than those listed thereunder.

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A.14.3

The Company has never been and is not party to any joint venture, consortium or partnership agreement or a member of any unincorporated association.

A.14.4

The Company is not in material breach of any arrangement or contract to which it is a party. No event or omission has occurred which would entitle any third party to terminate prematurely any contract to which the Company is a party or call in any money before the date on which payment thereof would normally be due.

A.14.5

There is no claim against and there are no circumstances which may lead to a claim against the Company for defective products, services, or breach of representation, warranty, condition, or for delays in delivery, or completion of contracts, or for deficiencies of design or performance relating to liability for products or services sold or supplied by the Company.

A.14.6

After Closing whether by reason of an existing agreement or arrangement or as a result of the acquisition of the Shares by the Buyer or otherwise:

  1. no material supplier of the Company will cease or be entitled to cease supplying the Company or substantially to reduce its supplies to the Company;
  2. no material customer, supplier or other third party with whom the Company deals will cease or be entitled to cease to deal with the Company or substantially to reduce its existing level of business with the Company;
  3. no other contracts where the Company is a party to may be terminated by the other party.

A.14.7

Not more than 20 per cent in value of purchases by the Company are placed in any year with any one supplier and not more than 20 per cent in value of sales by the Company are made in any year to any one customer10.

A.14.8

The Company’s stock and stock-in-trade is currently at a normal level, and is capable of being sold by the Company in the ordinary course of its business. Slow- moving or obsolete items have been adequately devaluated.

A.14.9

The Company has sufficient working capital for the purposes of continuing to carry on its business in its present form and at its present level of turnover for the foreseeable future and for the purposes of executing, carrying out and fulfilling in accordance with their terms all orders, projects and contractual obligations which have been placed with or undertaken by it.

A.14.10

The Company has obtained all licences, permits and permissions required for the carrying on of its business and such licences and permissions are in full force and effect and there are no conditions, facts or circumstances which could endanger the continuance or renewal of such licences or permissions.

A.14.11

The Company has no branch, place of business or substantial assets outside the Company’s country of registration or any permanent establishment in any foreign country that may give rise to taxation of income or property of the Company in such foreign country or subject to regulatory supervision.

A.14.12

The Company has not given any gifts, bribes or inducements to any person during the period of one year prior to the date hereof.

A.14.13

All material details and copies of contracts for all sources of current revenue of the Company in excess of [ ] per annum are attached at B.14.13.

B.14.1

Verify compliance with A.14.1 and indicate possible exceptions.

B.14.2

Attach list made according to A.14.2.

B.14.3

Verify compliance with A.14.3 and indicate possible exceptions 9.

B.14.4

Verify compliance with A.14.4.

B.14.5

Verify compliance with A.14.5.

B.14.6

Verify compliance with A.14.7. Check in particular contracts with major suppliers and customers and other contracts, for instance, agency, distributorship, licenses, etc.

B.14.7

Verify compliance with A.14.7.

B.14.8

Verify compliance with A.14.8 and check whether the Company has adopted consistent criteria in view of depreciating slow-moving or obsolete items. The parties should agree on the accounting treatment of slow- moving and obsolete stock.

B.14.9

Verify compliance with A.14.9.

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B.14.10

Verify compliance with A.14.10 and indicate possible exceptions.

B.14.11

Verify compliance with A.14.11.

B.14.12

Verify compliance with A.14.12.

B.14.13

Verify compliance with A.14.10 and indicate possible exceptions.

A.15 Agency and Distribution Agreements

A.15.1

The Seller has set out in B.15.1 full details (including the relevant contracts, if made in writing) of all commercial agency, distributorship, occasional intermediaries and other similar contracts.

A.15.2

The Company has complied in all material respects at all times with all obligations arising out of the above agreements and any relevant provisions of the applicable law.

B.15.1

Attach list made according to A.15.1 with annexed the relevant contracts.

In this context parties should decide if the above contracts should continue or if they should be terminated by the Company (e.g. if the buyer has an existing distribution network) and, in the latter case, who should bear the respective costs. In this case, the parties should also check if the agreements contain post-contractual non-competition obligations for the agent/distributor.

B.15.2

Verify compliance with A.15.2.

A.16 Personnel

A.16.1

The Company has in relation to each of its employees, managers and directors (and, so far as relevant, to each of its former employees, managers and directors) complied with:[Page49:]

  1. obligations imposed on it by all statutes, regulations, codes of conduct and practice relevant to the relations between it and its employees, managers and directors (including without limitation any obligation concerning social security, data protection, health and safety) or any trade union or employee representatives;
  2. all collective agreements, recognition agreements, customs and practices for the time being dealing with such relations or the conditions of service of its employees; and
  3. all relevant orders and awards made under any relevant statute, regulation or code of conduct and practice affecting the conditions of service of its employees, managers and directors.

A.16.2

Full and accurate particulars11 of the terms and conditions of employment of the employees, managers and directors (including the relevant contracts, if made in writing) including without limitation contractual terms of notice of the Company and a full list of all the employees of the Company including names, dates of commencement of employment, dates of birth, annual holiday entitlement and gender are set out by the Seller in B.16.2, and since the Accounts Date no change has been made nor agreed to be made in such terms and conditions of employment by the Company of any person and in particular since the Accounts Date no employee, manager or director of the Company has received or is entitled to receive from the Company any sum or any benefit greater than that received by him (or which he was entitled to receive) in respect of the accounting period ended on the Accounts Date.

A.16.3

The Company has not offered, promised or agreed for the future any variation in the contract of employment or contract for services of its employees, managers and directors (including but not limited to any increase in remuneration or benefits) or collective agreement, recognition agreement and customs and practices.

A.16.4

There are not in existence:

  1. any service agreements or other contracts with employees, managers and directors of the Company which cannot be terminated by six months’ notice or less without giving rise to any claim for damages or compensation; or
  2. any other contracts or arrangements of whatsoever kind (whether legally enforceable or not) between the Company and existing or former employees, managers and directors of the Company for the benefit of any existing or former employees, managers and directors; or
  3. any consultancy agreements between the Company and any other person, firm or company; or
  4. any arrangements by which any person has the use of any credit or charge card or account for which the Company is responsible.

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A.16.5

There are no arrangements to which the Company is a party involving share options, profit sharing or bonus, incentive or other similar payments for employees, managers and directors.

A.16.6

There is no actual or threatened dispute between the Company and any of its current or former employees, managers and directors, nor any circumstances likely to give rise to any such dispute; there have been no strikes or industrial action (official or unofficial) by any of the Company’s employees, managers and directors during the period of six years immediately preceding the Accounts Date.

A.16.7

There is no outstanding claim against the Company on the part of any person who has been or is its employee, manager or director or any actual or known liability to make any payment to reinstate, reengage or take or refrain from any action in relation to any person including under all the applicable laws.

A.16.8

Within a period of three years preceding the date hereof the Company has not:

  1. given notice of any redundancies to the competent authorities or started consultations with any trade union or unions or employee representation under any applicable laws; or
  2. failed to comply with any duty to inform and consult any trade unions or employee, manager and director representatives.

A.16.9

The Company has not made any loan or advance to any of its employees, managers and directors, which remains outstanding.

A.16.10

There are no arrangements, whether contractual or otherwise, entitling any of the employees, managers and directors of the Company to any payments by the Company or other benefits from the Company arising from the sale or disposal of the Sale Shares.

A.16.11

The Seller has set out in B.16.11 full particulars of any outstanding offer of employment made to any person by the Company, and there is no person who has accepted such an offer in writing but whose employment has not yet started.

A.16.12

No employee, manager or director has been given notice to terminate, or is under notice of termination of, his contract of employment nor are there any grounds to believe that any employee, manager or director may give, or may be given, notice to terminate his contract of employment with the Company.

A.16.13

The Company has no maternity, paternity or training schemes (whether legally enforceable or not) that vary the rights granted to an employee by law.

A.16.14

No employee, manager or director has within 12 months of the date of this Agreement received an increase or change in remuneration of more than 5 per cent.

A.16.15

The Seller has set out in B.16.15 a list of key employees, managers and directors together with their relevant obligations not to leave the company for a period of [ ] years and not to render their services in favour of an entity competing with the Company for a period of [ ] years after their legitimate leave.

A.16.16

All payments, bonuses and other forms of remuneration due to the employees and directors of the Company have been paid and are up-to-date.

A.16.17

All part-time, temporary and fixed-term employees of the Company enjoy the same benefits as full-time employees of the Company.

B.16.1

Verify compliance with B.16.1.

B.16.2

Attach list made according to A.16.1 with annexed the relevant contracts and indicate possible exceptions. In case of standard contracts one copy will be sufficient.

B.16.3

Verify compliance with A.16.3.

B.16.4

Verify compliance with A.16.4 and indicate possible exceptions.

As to the possibility of terminating the contracts, check if 16.4 (a) is consistent which the applicable labour and company law (in certain countries termination without compensation is not permitted).

B.16.5

Verify compliance with A.16.5.

B.16.6

Verify compliance with A.16.6 and indicate possible exceptions.

B.16.7

Verify compliance with A.16.7 and indicate possible exceptions.

B.16.8

Verify compliance with A.16.8 and indicate possible exceptions.

B.16.9

Verify compliance with A.16.9 and indicate possible exceptions.

B.16.10

Verify compliance with A.16.10 and indicate possible exceptions.

B.16.11

Attach list made according to A.16.11 with annexed the relevant offers (if made in writing).

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B.16.12

Verify compliance with A.16.12 and indicate possible exceptions.

B.16.13

Verify compliance with A.16.13.

B.16.14

Verify compliance with A.16.14.

B.16.15

The parties should assess whether there is any key personnel and in such event check whether the commitments mentioned under A.16.5 are possible under the applicable law. A possible alternative is to provide that the Seller prior to closing procures any such commitments.

A.17 Pensions

A.17.1

There are no agreements, customs or practices (whether legally enforceable or not) in operation at the date hereof for the payment of or contribution towards any pensions, pension plans, allowances, or other benefits on retirement or on death or during periods of sickness or disablement for the benefit of any of the Company’s employees, managers or directors, or former employees, managers or directors nor has any proposal to establish any such agreement been announced 12.

B.17.1

Verify compliance with A.17.1. In particular verify the nature and structure of contributions made by the Company during the period of the employment agreements (e.g. payments to social security, differed compensations, etc.), it being understood that this type of payments should be excluded.

In the event that pension plans are in force, specific and appropriate provisions should deal with the matter.

A.18 Intellectual Property Rights

A.18.1

The Seller has set out in B.18.1 full particulars of all Intellectual Property Rights owned by or licensed to it.

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A.18.2

The Company owns or is validly licensed to use all Intellectual Property Rights relating to products manufactured by it or on its behalf or used by it in connection with its business free from all liens, charges or other securities or Encumbrances whatsoever.

A.18.3

All the Intellectual Property Rights are valid and in full force and effect, and all relevant renewal or other fees have been paid on their respective due dates.

A.18.4

There are no existing contracts under which the Company grants to any third party any rights in or over the Intellectual Property Rights nor has the Company disclosed, save in the ordinary course of business, any know-how or confidential information comprised in the Intellectual Property Rights.

A.18.5

The Company has not infringed and no person for whose acts or omission the Company is liable has infringed the Intellectual Property Rights of any other person, firm or company, nor has any other party claimed that any such infringement by the Company or any such person has occurred.

A.18.6

Neither the Seller nor the Company are party to any non- disclosure agreements and similar agreements other than those disclosed as B.18.6 for the purposes of this Agreement which may restrict the use or disclosure of the Intellectual or Industrial Property rights, confidential information or the Company’s products.

B.18.1

Attach list made according to A.18.1 with annexed all certificates and agreements which exist in writing.

B.18.2

Verify compliance with A.18.2 and indicate possible exceptions.

B.18.3

Verify compliance with A.18.3 and indicate possible exceptions.

B.18.4

Verify compliance with A.18.4 and indicate possible exceptions.

B.18.5

Verify compliance with A.18.5.

B.18.6

Verify compliance with A.18.6 and indicate possible exceptions 13.

A.19 Litigation

A.19.1

The Company is not engaged in any litigation (whether criminal, civil, administrative or tax), arbitration, alternative dispute resolution process and there are no facts or circumstances likely to give rise to such litigation, arbitration, or any alternative dispute resolution process nor is there any litigation, arbitration or dispute resolution process threatened against the Company. No injunction has been served against the Company and the Company has given no undertaking to any Court or to any third party arising out of any legal proceedings.

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A.19.2

The Company has not received notification that it has violated any requirement of any applicable laws, any ruling penalty or sanction which could adversely affect the business or financial condition of the Company and in particular, no violation of any law or regulation relating to Tax, health and safety, consumer protection, employment, industrial or labour relations, competition or the Environment.

A.19.3

No person for whose acts and defaults the Company may be vicariously liable is at present engaged whether as claimant, defendant or otherwise in any legal action, proceeding or arbitration which is either in progress, threatened or pending and relevant to the Company.

A.19.4

There is no outstanding enforceable arbitral award, judgment or Court Order in favour of or against the Company.

B.19.1

Verify compliance with A.19.1 and indicate possible exceptions. It may be appropriate to exclude from A.19.1 certain small claims (like routine debt collection), provided that their aggregate amount is not material considering the size of the business.

B.19.2

Verify compliance with A.19.2.

B.19.3

For example, if an employee runs someone over in a Company vehicle the driver could be personally liable and the Company could be vicariously liable.

B.19.4

Verify compliance with A.19.4 and indicate possible exceptions.

A.20 Grants

A.20.1

The Seller has set out in B.20.1 full particulars of all grants, subsidies, subsidised loans and other similar facilities.

A.20.2

The Company has not done or omitted to do anything as a result of which any of such grants, subsidies, subsidy loans and other similar facilities, as well as any payment (whether made on a provisional or final basis and whether partial or in full) made or to be made to the Company, plans or other undertakings on the part of the relevant entity may be terminated, cancelled or revoked, whether in full or in part, nor there are any circumstances under which the Company may be obliged to reimburse, in whole or in part, any sums or other facilities received.

B.20.1

Attach list made according to A.20.1 with annexed all relevant agreements and indicate possible exceptions.

B.20.2

Verify compliance with A.20.2.

A.21 Special Contracts and Arrangements

A.21.1

The Seller has set out in B.21.1 full particulars of all agreements, practices and arrangements to which the Company is a party, which are registerable with any relevant authority. All these agreements have been correctly registered and there are no further agreements that require a registration or any other kind of filing with any authority or third party.

B.21.1

Attach list made according to A.21.1 with annexed all relevant agreements.

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A.22 Transactions with Shareholders or Directors

A.22.1

No transactions or contracts (with the exception of directors’ service agreements and employment con- tracts) have been entered into during the three years prior to the date of this Agreement to which the Company is a party in which a shareholder in or director of the Company or any person connected with a shareholder in or director of the Company has been interested whether directly or indirectly.

A.22.2

No monies are owed by the Company to any director of the Company or to the Seller or to any person connected with any such director or the Seller or to any company or partnership in which any of such directors or the Seller (or their spouses) are directly or indirectly interested other than as holders of listed securities.

A.22.3

The Company has no debts owed to any of its directors or the Seller (or a person connected with any such director or the Seller) or by any company in which the directors of the Company or the Seller (or any person connected with any of them) are directly or indirectly interested (other than as holders of listed securities); nor do the Seller or any of the Company’s directors (or any person connected with any of them) or any such company as aforesaid have any claims against the Company including claims for compensation for loss of office or for unfair dismissal or redundancy payment.

B.22.1

Verify compliance with A.22.1. In particular, verify matters which may give rise to a conflict of interest (e.g. agreements with companies where the directors or their relatives or spouses are shareholders or have different kind of interests, are employees, consultants, directors, etc.).

B.22.2

Verify compliance with B.22.2. In particular, verify payments due under the agreements mentioned under B.22.1 above, or outstanding amounts which are due to the directors with reference to their respective offices and activities.

B.22.3

Verify compliance with A.22.3.

A.23 Competition Matters

A.23.1

The Company has not received notification by any competent antitrust or competition authority that it is, or has been party to, or concerned in any agreement, arrangement, understanding or concerted practice, which:

  1. infringes any competition rule including, without prejudice to the generality of the foregoing, any rule relating to state aid, public procurement, or anti- dumping; or
  2. constitutes a breach of any term or condition of any licence, authorisation, appointment, code or similar instrument applicable to the Company and business.

A.23.2

The Company is not subject to any publication, order, condition, undertaking or similar measure or obligation imposed by or under any of the laws referred to in A.23.1.

A.23.3

The Company has not received notification that it is, nor has been, subject to any investigation, request for information, notice or other communication by any court, governmental or regulatory authority pursuant to any of the laws referred to in A.23.1.

A.23.4

The Company has no reason to believe that any such action as is mentioned in A.23.1 will be taken against it in relation to any of its current activities.

A.23.5

The Company is not a party to, nor has it entered into any kind of commitment or agreement which may in any manner limit its activity.

B.23.1

Verify compliance with B.23.1 and list possible exceptions.

B.23.2

Verify compliance with B.23.2 and list possible exceptions.

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B.23.3

Verify compliance with B.23.3 and list possible exceptions.

B.23.4

Verify compliance with B.23.4 and list possible exceptions.

A.23.5

Verify compliance with A.23.5 and list possible exceptions. In particular, verify possible provisions under license, agency and distribution agreements, agreements with reference to grants or any other kind of financial facilities, etc.

A.24 Information Technology Systems

A.24.1

The Seller has set out in B.24.1 copies of all the agreements required to use, support, maintain and/or develop all components of the computer systems (including all Licenses, development agreements, software maintenance and support agreements, hardware maintenance agreements, source code escrow agreements and disaster recovery agreements).

A.24.2

The Company has not breached any of its obligations under any of the agreements referred to in B.24.1; those agreements all remain in full force and effect as at Closing and no notice has been served by any party to terminate any of those agreements.

A.24.3

Save as stated in the agreements referred to in A.24.1, the Company is not restricted in any way in using the computer systems (whether by way of a technical device or otherwise).

A.24.4

The use of the computer systems by the Company does not, and the continued use of the computer systems by the Buyer after Closing will not, infringe the Intellectual Property rights of any third party.

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A.24.5

The Company has exclusive control of the operation of the computer systems and of the storage, processing and retrieval of all data stored on the computer systems, and solely the Company owns any Intellectual Property rights in such data.

A.24.6

All Intellectual Property Rights in the developed software are owned by the Company and the Company has in its possession an up-to-date, useable and complete copy of the source code for all developed software together with copies of all programmers’ commentaries and technical documentation required to allow the continuing maintenance and development of that software by the Buyer.

A.24.7

The computer systems have adequate functionality, capability and capacity for the present requirements of the Company, and each part of the computer systems is compatible with each other part14.

A.24.8

The computer systems have not been used to hold or process data in any manner that contravenes the applicable laws.

B.24.1

Attach list made according to B.45.1. It could be advisable to agree on a materiality threshold (e.g. by matter or system), to avoid attaching irrelevant documents.

B.24.2

Verify compliance with B.24.2 and list possible exceptions.

B.24.3

Verify compliance with A.24.2 and list possible exceptions. For instance, should the Company be a manufacturer where the core business (or a significant part thereof) is represented by activities covered under license agreements, the Seller should verify whether the relevant License agreements or other relevant agreements set forth restrictions to the ability of the Company to use possible parts of the computer systems in connection with the change in control of the Company.

B.24.4

Verify compliance with B.24.4 and list possible exceptions.

B.24.5

Verify compliance with B.24.5 and list possible exceptions.

B.24.6

Verify compliance with B.24.6 and list possible exceptions.

B.24.7

Verify compliance with B.24.7 and list possible exceptions.

B.24.8

Verify compliance with B.24.8 and list possible exceptions.

A.25 Effect of this Agreement

A.25.1

Compliance with the terms of this Agreement does not and will not:

  1. conflict with or result in a breach of or constitute a default under any of the terms, conditions or pro- visions of any agreement or instrument to which the Company is a party or any provision of the Memorandum or Articles of Association of the Company or any lease, contract, order, judgement, award, injunction, regulation, encumbrance, restriction or obligation of any kind or character by which or to which any asset of the Company is bound or subject; or
  2. relieve any person from any obligation to the Company (whether contractual or otherwise) or enable any person to determine any such obligation or any right or benefit enjoyed by the Company or to exercise any right, whether under an agreement with or otherwise in respect of the Company; or
  3. result in the creation, crystallisation or enforcement of any encumbrance whatsoever on any of the assets of the Company; or
  4. result in any present indebtedness of the Company becoming due or capable of being declared due and payable prior to its stated maturity.

B.25.1

Verify compliance with B.25.1 and list possible exceptions.

NOTE: Change of control clauses in existing contracts will need to be disclosed.

1
A seller may be reluctant to give this warranty in respect of all “former members” especially if it bought the company from someone else.

2
Verify whether or not the corporate documents provide for a prior shareholder consent

3
Consider a similar warranty in relation to previous audited accounts of the Company

4
If a significant period of time has elapsed since the date of the last audited account, then consider an appropriate warranty in relation to the management account or financial statements since that date

5
If the Company being sold holds a lot of stocks, it could be worth putting in a warranty that stock has not materially changed.

6
The parties should consider whether it would be appropriate to include specific warranties related to the physical conditions of the Real Estates

7
This Warranty may be appropriate in some circumstances. However, the parties may agree to delete this warranty and to rely on an environmental survey commissioned by the Buyer or Seller, especially if there are “dirty” sites involved.

8
It may be sensible to delete the first sentence of A.11.4, for example if the business carried on by the Company is manufacturing it could be industry practice to run certain equipment down to the ground.

9
All clubs and trade associations need to be disclosed..

10
The percentages in this Warranty will depend on the type of business.

11
Consider altering Warranty so that just material particulars of employment terms need to be disclosed. Some employees may have unique or unusual conditions.

12
If there are pension schemes then specialist advice should be sought.

13
Potentially by disclosing such matters contractual obligations in confidential agreements will be breached. Consider this when advising on the disclosure of such items as it is illegal under English law to encourage someone to break a contractual obligation/commit an illegal act. If such acts are disclosed they should be disclosed at the last minute.

14
This Warranty may not be appropriate as it quickly becomes out of date