CONFORMED COPY
DATED 10 OCTOBER 1999
Controls and Communications Limited (1)
The Racal Corporation (2)
Racal Electronics plc (3)
Global Crossing Ltd. (4)
_______________________________________________________________
SALE AGREEMENT
_______________________________________________________________
Lovell White Durrant
65 Holborn Viaduct
London EC1A 2DY
CONTENTS
Clause Page
1. INTERPRETATION 1
2. CONDITIONS 2
3. SALE AND PURCHASE OF SHARES 4
4. CONSIDERATION AND INTER-COMPANY DEBT 5
5. PRE-COMPLETION CONDUCT AND TERMINATION RIGHTS 6
6. NET ASSET ADJUSTMENT 7
7. COMPLETION 8
8. WARRANTIES 11
9. LIMITATION OF CLAIMS 13
10. INDEMNITIES 19
11. PENSIONS 20
12. NAME AND USE OF MARKS 20
13. PROPERTY REORGANISATION 21
14. NOT USED 24
15. PARENT GUARANTEE 24
16. GENERAL 25
17. CONFIDENTIAL INFORMATION 30
18. GOVERNING LAW AND JURISDICTION 31
SCHEDULE I 33
The Parties 33
SCHEDULE II 34
Definitions 34
SCHEDULE III 49
Transfer Conditions 49
SCHEDULE IV 51
Telecom Group 51
SCHEDULE V 52
Completion Balance Sheet 52
Part A 52
Part B 56
SCHEDULE VI 57
Covenants and Warranties 57
Part A 57
Part B 58
Part C 78
SCHEDULE VII 80
Pension Arrangements 80
PART A 80
PART B 81
PART C 101
SCHEDULE VIII 116
Telecom Group Guarantees of Racal Group Members 116
SCHEDULE IX 117
Tax Covenant and Warranties 117
Part A 117
Part B - Tax Covenant 122
SCHEDULE X 144
Conduct between exchange and completion 144
SCHEDULE XI 148
Property Reorganisation 148
Part A: leasehold properties to be assigned to RTL 148
Part B: leasehold properties to be assigned to RPL
and to be sublet to RTL 149
Part C: leasehold properties to be sublet to RTL 150
SCHEDULE XII 153
Outstanding Negotiations 153
Part A 153
Engrossments or Equivalent 153
Part B 156
Proposed Transactions 156
AGREED FORM DOCUMENTS Party Responsible
Base Line Balance Sheet (LWD)
Data Room Index (LWD)
Powers of Attorney (LWD)
Trade Mark Licence (LWD)
Transitional Services Agreement (LWD)
Letter of resignation for directors and secretary (LWD)
FIRPTA Notice to IRS pursuant to Treas.
Reg.Sec.1.897-2(h)(2) (LWD)
FIRPTA Statement of Racal USA to Global (LWD)
Reorganisation Documents (LWD)
Adjusting Principles (LWD)
Carve-Out Accounts (LWD)
CONFORMED COPY
SALE AGREEMENT
THIS AGREEMENT is made 10 October 1999.
BETWEEN:
(1) Controls and Communications Limited (registered number 314979) whose
details are set out in Schedule I;
(2) The Racal Corporation (registered number 59-1785-1646) whose details are
set out in Schedule I;
(3) Racal Electronics Plc (registered number 497098) whose details are set
out in Schedule I ("Racal"); and
(4) Global Crossing Ltd. a company registered in Bermuda whose details are
set out in Schedule I ("Global").
WHEREAS:
(A) The Sellers are the beneficial owners and the registered holders of
those numbers of the Shares set opposite their respective names in
Schedule IV.
(B) The Sellers have agreed to sell and Global has agreed to purchase all
the Shares on and subject to the terms of this Agreement.
(C) In consideration of Global entering into this Agreement at the request
of the Guarantor, the Guarantor has agreed to guarantee the obligations
of Controls and Communications Limited and The Racal Corporation under
this Agreement.
IT IS AGREED:
1. INTERPRETATION
1.1 In this Agreement (including the Schedules), except so far as the
context otherwise requires, words and expressions shall have the
meanings set out in Schedule II.
1.2 In this Agreement, unless otherwise specified:
(a) references to clauses, subclauses, paragraphs, subparagraphs
and schedules are to clauses, subclauses, paragraphs and
subparagraphs of, and schedules in, this Agreement;
(b) headings to clauses and schedules are for convenience only
and do not affect the interpretation of this Agreement;
(c) references to a "company" shall be construed so as to include
any company, corporation or other body corporate, wherever
and however incorporated or established;
(d) references to a "person" shall be construed so as to include
any individual, firm, company, government, state or agency of
a state, local or municipal authority or government body or
any joint venture, association or partnership (whether or not
having separate legal personality);
(e) a reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been amended,
modified or re-enacted;
(f) references to times of the day are to London time;
(g) references to the one gender include all genders, and references
to the singular include the plural and vice versa; and
(h) references to "material to the business of the Telecom Group"
shall be read as a reference to matters which are material to
the operation and conduct of the business of the Telecom Group
taken as a whole.
1.3 The Recitals and Schedules to this Agreement form part of it.
2. CONDITIONS
2.1 Completion is conditional on the satisfaction (or where
permissible, waiver) of the Transfer Conditions set out in Schedule
III and the provisions of this clause 2.
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2.2 In the event that this Agreement has been terminated in accordance
with either clause 2.10 or clause 2.11 this Agreement shall on the
date of termination be of no further force and effect except that
this clause and clauses 1, 16, 17 and 18 shall continue in force
and such termination of this Agreement shall not affect the rights
of any parties for prior breaches of this Agreement.
2.3 The Sellers shall use all reasonable endeavours to procure the
satisfaction of the Transfer Conditions set out in paragraphs 1, 2,
3 and 5 of Schedule III as soon as practicable and will on request
keep Global informed with respect to progress in that regard.
2.4 Global shall use all reasonable endeavours to procure the
satisfaction of the Transfer Conditions set out in paragraphs 4 and
5 of Schedule III as soon as practicable and will on request keep
the Sellers informed with respect to progress in that regard.
2.5 The parties shall as soon as reasonably practicable provide all
information and assistance reasonably requested by any of them in
respect of action which is required or desirable in respect of the
satisfaction of the Transfer Conditions and shall not take any
steps which might prejudice or might reasonably be expected to
prejudice the satisfaction of the Transfer Conditions. If Global
shall not within 10 Business Days of the date of this Agreement
make the filing which it must make to obtain the consents set out
as paragraphs 4 and 5 of the Transfer Conditions for any reason
other than Racal failing to provide Global with the information
necessary for it to make the necessary filing, such conditions
shall lapse and be treated as waived.
2.6 At any time Global may waive the Transfer Conditions set out in
paragraphs 2, 3, 4 and 5 of Schedule III by notice to the Sellers.
2.7 The rights and obligations of the parties set out in Clauses 2.3 to
2.6 shall:
(a) not oblige any of the relevant parties to waive any of the
Transfer Conditions; and
(b) (in relation to each party's obligations) be subject to the
directors of Racal not thereby being in breach of their
fiduciary duties which shall without limitation, be construed
as obliging the directors of Racal to make a recommendation or
not to withdraw their recommendation to their shareholders (or
any class of their shareholders) to vote in favour of the
Transaction (or any part of it) if, acting in good faith,
such directors resolve that such recommendation would not be
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in the best interests of Racal and/or its shareholders.
2.8 If the Transfer Condition set out in paragraph 4 of Schedule III is
the only Transfer Condition which has not been satisfied by the
Long Stop Date or has become incapable of satisfaction in
circumstances where the other Transfer Conditions have been
satisfied or waived, the parties shall complete the sale and
purchase of the Shares after taking such appropriate steps as they
shall reasonably agree are necessary with regard to the assets or
revenues which give rise to the need for the German Clearance such
that the Agreement can be completed without the need for German
Clearance. If the parties are unable to agree any other way of
dealing with the matter Racal shall retain the relevant assets or
revenues and operate them for the benefit of Global.
2.9 NOT USED
2.10 Subject to clause 2.8, if any of the Transfer Conditions becomes
incapable of satisfaction or has not been satisfied by the Long
Stop Date, Global may on that date or at any time thereafter by
notice to the Sellers terminate this Agreement, in which case the
provisions of clause 2.2 shall apply.
2.11 Subject to clause 2.8, if any of the Transfer Conditions becomes
incapable of satisfaction or has not been satisfied by the Long
Stop Date, Racal (acting on behalf of the Sellers) may on that date
or at any time thereafter by notice to Global terminate this
Agreement, in which case the provisions of clause 2.2 shall apply.
3. SALE AND PURCHASE OF SHARES
3.1 On and subject to the terms of this Agreement, the Sellers shall
sell with full title guarantee the Shares set opposite their
respective names in Schedule IV to Global and Global shall purchase
all the Shares on Completion, in each case free from all charges,
liens, equities, encumbrances, claims or restrictions whatsoever
and together with all rights which are now, or at any time
hereafter may become, attached to them (including without
limitation the right to receive all dividends and distributions
declared, made or paid on or after Completion).
3.2 Global covenants to procure that its wholly owned subsidiary Global
Crossing Holdings Ltd advances the monies it draws down under the
Goldman Sachs Facility to fund the acquisition of the Shares.
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3.3 Global shall not be obliged to complete the purchase of any of the
Shares unless the sale to it of all the Shares is completed
simultaneously and if such sale is not completed on the Completion
Date then Global shall be entitled to rescind this Agreement
without liability of any kind on its part, but without prejudice to
its rights in respect of any pre-existing breach of the terms
hereof, including any breach giving rise to such right to rescind.
3.4 The Sellers agree to waive any rights which may have been conferred
on them under the Articles of Association or other constitutional
documents of each Telecom Group member whose shares are to be sold
pursuant to clause 3.1 or otherwise or in any other way to have any
of the Shares offered to them for purchase at any time on or before
the transfer of the Shares pursuant to the provisions of this
Agreement.
4. CONSIDERATION AND INTER-COMPANY DEBT
4.1 Prior to Completion (and not less than three Business Days prior
thereto), Racal will notify Global of its estimate of the
Inter-Company Net Debt plus the Finance Lease Net Debt at
Completion.
4.2 At Completion the parties will co-operate to ensure the discharge
of all Inter-Company Net Debt and, in particular, Global will
advance to such members of the Telecom Group as Racal may require
such amounts as Racal may require (which in aggregate may not
exceed the estimate for Inter-Company Net Debt given under clause
4.1) to put such members in funds to permit such discharge.
4.3 On Completion, Global shall pay to the Sellers the amount of (Pound
Sterling)1,000,000,000 (less the amount of the Inter-Company Net
Debt and the Finance Lease Net Debt estimated under clause 4.1)
together with the sum of (Pound Sterling)2,100,000 in respect of
RTL of which (Pound Sterling)10,000,000 shall be payable to The
Racal Corporation in respect of the shares in Racal USA, and (Pound
Sterling)10,000,000 shall be payable to Controls and Communications
Limited in respect of the Shares in RISL the balance to be divided
among the Sellers in the following proportions:
(a) 60% to Racal in respect of the shares in RTL; and
(b) 40% to Racal in respect of shares in RTNL.
4.4 To the extent that at Completion any sum is paid by a company to
another company under clause 4.2 in excess of the amount due, the
excess shall be repaid. If as a result the amount advanced by
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Global under clause 4.2 is different from the amount necessary to
discharge all Inter-Company Net Debt, the difference shall be paid
by Global to (if it advanced insufficient sums), or to Global (if
it has advanced too much) by, the relevant member of the Telecom
Group. In addition, the purchase price under clause 4.3 shall be
adjusted upwards (if net sums are repaid to Global) or downwards
(if net sums are payable by Global) but so that the aggregate of
sums paid by Global under this clause 4 to the Sellers and by way
of settlement of the Inter-Company Net Debt by members of the
Telecom Group (as adjusted under clause 4.4) shall always be the
sum of (Pound Sterling)1,000,000,000 less the Finance Lease Net
Debt at Completion.
4.5 Any Inter-Company Trading Debt and Inter-Company Trading
Receivables shall be paid by or to members of the Telecom Group to
or from all other members of the Racal Group on the date that such
would have been paid in the ordinary course of business.
5. PRE-COMPLETION CONDUCT AND TERMINATION RIGHTS
5.1 Save as provided in this Agreement or otherwise with the express
prior consent of Global, the Sellers agree that between the date of
this Agreement and Completion, they shall procure that the Telecom
Group shall continue to conduct its business in the ordinary course
and shall comply with the provisions of Schedule X and shall notify
Global immediately if they become aware of a fact or circumstance
which constitutes a breach of Schedule X.
5.2 The Agreement may be terminated at any time prior to Completion by
notice:
(a) by Racal (acting on behalf of the Sellers) if Global is in
material breach of its obligations under this Agreement and
such breach has not been remedied within 10 Business Days of
notice of such breach having been given to Global; or
(b) by Global on notice to the Sellers:
(i) if the board of directors of Racal withdraws or
materially amends its recommendation of the Transaction;
or
(ii) if the Sellers are in material breach or breaches of
their obligations which taken together are material in
the context of this Agreement (other than their
obligations under clause 8 to which sub-clause (iii)
below applies) under this Agreement and such breach has
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not been remedied within 10 Business Days of notice of
such breach having been given to the Sellers; or
(iii)pursuant to clause 8.12.
5.3 If this Agreement is terminated prior to Completion in accordance
with clause 5.2 each party's further rights and obligations cease
immediately on termination, except that termination does not affect
a party's accrued rights and obligations at the date of termination
and the provisions of clauses 1, 16, 17 and 18 shall remain in full
force and effect.
5.4 No party shall have the right to terminate or rescind this
Agreement after Completion or save as provided in clauses 2.7, 2.8,
3.3, 7.9, 7.12, 8.12 or this clause 5.
5.5 On or before Completion, Racal may procure the payment of a
dividend by RTL to its shareholders (the "Pre Completion
Dividend") less than RTL's distributable reserves. Before the
declaration of the dividend Racal shall produce to Global accounts
of RTL which demonstrate to Racal's satisfaction that such dividend
is lawful.
5.6 No earlier than 5 Business Days prior to Completion, Racal may
shorten any existing financial period of all members of the Telecom
Group to the same date. Racal shall ensure that Global is given
prior notice of such closure and the date selected.
6. NET ASSET ADJUSTMENT
6.1 From Completion, the parties shall give effect to Schedule V to
agree or determine the amount of the Completion Net Assets and
Finance Lease Net Debt at Completion.
6.2 If the aggregate of the Completion Net Assets at Completion exceeds
(Pound Sterling)220,365,000, Global shall pay to the Sellers an
amount equal to the excess to be divided amongst the Sellers as
Racal and Global may agree (or failing agreement as Racal may
specify) as additional consideration for the shares sold by each
such Seller.
6.3 If the amount of the Completion Net Assets is less than (Pound
Sterling)220,365,000, the Sellers shall pay to Global an amount
equal to the amount by which the Completion Net Assets are less
than (Pound Sterling)220,365,000 as a reduction in the
consideration for the shares sold by each Seller to be apportioned
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amongst the Sellers as Racal and Global may agree (or failing
agreement as Racal may specify).
6.4 If the amount of estimated Finance Lease Net Debt pursuant to
clause 4.1 is less than the Finance Lease Net Debt at Completion as
determined in accordance with Schedule V, the Sellers shall
promptly pay to Global an amount equal to the amount by which the
Finance Lease Net Debt exceeds the estimated Finance Lease Net Debt
as a reduction in the consideration for the shares sold by each
Seller.
6.5 If the amount of estimated Finance Lease Net Debt pursuant to
clause 4.1 is greater than the Finance Lease Net Debt at Completion
as determined in accordance with Schedule V, Global shall promptly
pay to the Sellers an amount equal to the amount by which the
estimated Finance Lease Net Debt exceeds the Finance Lease Net Debt
as additional consideration for the shares sold by each Seller.
6.6 All payments hereunder shall be made within five Business Days
after the agreement or determination of the amount of the
Completion Net Assets.
6.7 Any amount to be paid under clause 6.3 shall bear interest at one
per cent over the base lending rate of Barclays Bank PLC from the
Completion Date.
7. COMPLETION
7.1 Completion shall take place at the offices of Racal's Solicitors
within 5 Business Days of satisfaction or, where permitted, waiver
of the Transfer Conditions or at such other place and/or on such
other date as may be agreed between the parties.
7.2 On Completion, the Sellers shall have delivered to Global a
certificate in Agreed Form duly executed certifying any facts that
would exempt the transactions contemplated hereby from withholding
pursuant to Section 1445 of the Internal Revenue Code of 1986.
7.3 On Completion the Sellers shall cause to be delivered to Global
duly executed transfers of the Shares in favour of Global (or as
it may direct) together with the share certificates relating to
such shares.
7.4 On Completion, the Sellers shall cause to be delivered to Global:
(a) the Common Seal and Statutory Books of each Telecom Group
member made up to the Completion Date and each certificate of
incorporation and certificate of incorporation on change of
name for each Telecom UK Group member;
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(b) (unless otherwise agreed by Global) an unqualified letter of
resignation from the auditors of each Telecom UK Group member
complying in all respects with the requirements of section 392
Companies Act 1985 and, if there are any such auditors, an
unqualified letter of resignation from the auditors of Racal
USA, in each case, accompanied by a written confirmation that
such auditors have no claims for unpaid fees or expenses;
(c) irrevocable powers of attorney in the Agreed Form executed by
Racal in respect of Racal Telecom UK Group Shares and the
Racal USA Shares in favour of Global appointing Global to be
its lawful attorney in respect of the Shares;
(d) resignations in the Agreed Form from each director and
secretary of each Telecom Group member expressed to take
effect from the end of the meeting held pursuant to
clause 7.5; and
(e) receipts for any sums advanced to or repaid by the Racal Group
under clause 4.2 which shall be sufficient evidence of the
discharge of such sums by the relevant Racal Group Company.
7.5 On Completion the Sellers shall cause a board meeting of each
Telecom Group member to be duly convened and held at which:
(a) the transfers of the Shares shall be approved for registration
(subject only to their being duly stamped by, and at the cost
of, Global);
(b) such persons as may be nominated by Global shall be appointed
directors and secretary of the Telecom Group members (within
the maximum number, if any, permitted under their respective
constitutional documents);
(c) all existing instructions to the Telecom Group's bankers, bank
mandate forms and authorities shall be revoked and shall be
replaced with alternative instructions, bank mandates forms
and authorities in such form as Global may require;
(d) the registered offices of each of the Telecom Group members
shall be changed to places nominated by Global;
(e) subject to the Companies Act, the accounting reference dates
of each of the Telecom Group members shall be changed to dates
nominated by Global; and
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(f) the resignations of each director and secretary of each of the
Telecom Group members shall be accepted so as to take effect
from the end of the meeting.
7.6 On Completion Racal shall deliver to Global the Trade Mark Licence
and the Transitional Services Agreement executed by it and the
Transitional Services Agreement executed by Racal Services
(Communications) Ltd and RTL.
7.7 On Completion Global shall deliver to Racal the Transitional
Services Agreement executed by it.
7.8 On Completion, Global shall also:
(a) deliver to Racal the Trade Mark Licence executed by it; and
(b) pay or procure the payment of the Consideration to the Sellers
in accordance with the instructions provided by the Sellers at
least 2 Business Days prior to Completion provided that Global
shall not be required to transfer funds to more than four
accounts in total in the United Kingdom.
7.9 (a) Neither Global nor the Sellers are obliged to complete this
Agreement unless the other complies with all its obligations
under clause 7; and
(b) Global shall not be obliged to complete this Agreement unless
the transfer of all the Shares is completed simultaneously.
7.10 If Completion does not take place on the date set for Completion
because the Sellers fail to comply with any of their obligations
under clauses 7.3, 7.4 or 7.5 or Racal fails to comply with its
obligations under clause 7.6 or if Global fails to comply with any
of its obligations under clauses 7.7 or 7.8 Global may, if the
Sellers have failed so to comply, or Racal (acting on behalf of the
Sellers) if Global has failed so to comply by notice to the other
parties:
(a) proceed to Completion to the greatest extent reasonably
possible without limiting its rights under this Agreement;
(b) postpone Completion to 2 Business Days after the date set for
Completion; or
(c) terminate this Agreement.
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7.11 If any party postpones Completion to another date in accordance
with clause 7.10 the provisions of this Agreement apply as if that
other date is the date set for Completion.
7.12 If Completion has not occurred by the fifth Business Day after the
Long Stop Date any party may on that date or at any time thereafter
by notice to the other terminate this Agreement, in which case it
shall on that date be of no further force and effect except that
clauses 1, 16, 17 and 18 shall continue in force and such
termination of this Agreement shall not affect the rights of any
parties/or prior breaches of this Agreement.
8. WARRANTIES
8.1 The Sellers hereby represent and warrant to Global in the terms of
the Warranties.
8.2 The Warranties are qualified to the extent but only to the extent
of the facts and circumstances fairly disclosed in the Disclosure
Letter.
8.3 The Sellers undertake not to make any claim against a Telecom Group
member or a director, officer or employee of a Telecom Group member
which it may have in respect of (or seek to mitigate damages
payable in respect of any claim made against the Sellers by Global
by reference to) a misrepresentation, inaccuracy or omission in or
from information or advice provided by the Telecom Group member or
a director, officer, agent, adviser or employee of a Telecom Group
member for the purpose of assisting the Sellers to make a
representation, give a Warranty, enter into this Agreement or
prepare the Disclosure Letter unless such representation,
inaccuracy or omission was wilful.
8.4 Each Warranty is to be construed independently and (except where
this Agreement provides otherwise) is not limited by a provision of
this Agreement, the Tax Covenant or another Warranty and Global
shall have a separate Claim and right of action in respect of every
breach of each such Warranty.
8.5 Global confirms that it has not entered into this Agreement or any
document entered into hereunder or referred to herein in reliance
upon any representation, warranty or undertaking other than those
expressly contained herein and acknowledges that it has not relied
on, and will make no claim in respect of any such representation,
warranty or undertaking made or supplied by or on behalf of the
Sellers, Racal or any other person whatsoever which is not
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contained herein. Without limiting the general nature of the
foregoing, Global confirms that it has not relied on and will make
no claim against the Sellers, Racal or any other person whatsoever
in respect of any budget, forecast or other projection of any
nature made or supplied by or on behalf of any person.
8.6 Racal and the Sellers acknowledge that Global has relied upon the
Warranties in entering into this Agreement.
8.7 Where any of the Warranties is expressed to be given or made to the
best of the Sellers' knowledge or is qualified by reference to the
Sellers' awareness or is qualified in some other manner having
substantially the same effect, such statement shall be deemed to be
qualified by the additional statement that the knowledge of the
Sellers shall be limited to the actual knowledge of the person
listed in Part C of Schedule VI in relation to the Warranties set
out in Schedule VI against such person, such person having made
reasonable diligent enquiry of other employees of the Racal Group
in relation to the subject matter of the warranty in question.
8.8 The provisions of Schedule VI, Part A shall have effect.
8.9 Between the date of this Agreement and Completion, the Sellers
shall notify Global in writing as soon as reasonably practicable
after they become aware of a fact or circumstance which constitutes
or which might constitute a breach of clause 8.1 or 8.13 together
with the Sellers' best estimate of the amount of the liability.
The Sellers shall ensure that notification of each fact or
circumstance which constitutes or might constitute a breach of
clause 8.1 or 8.13 shall be given not less than two Business Days
before Completion.
8.10 (a) Any provision of this Agreement and agreements, certificates or
other instruments delivered pursuant to this Agreement which is
capable of being performed after but which has not been performed
at or before Completion, and (b) all representations, warranties,
covenants, indemnities, agreements and other undertakings contained
in this Agreement, and in any agreements, certificates or other
instruments delivered pursuant to this Agreement, shall survive and
not be affected by Completion and shall remain in full force and
effect.
8.11 The Sellers shall ensure that (save if and insofar as may be
necessary to give effect to this Agreement) neither they nor any
member of the Telecom Group will cause or permit anything to be
done or omitted to be done either before or at Completion which
would constitute a material breach of any of the Warranties if
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given at any time up to Completion or which would make any of the
Warranties materially inaccurate or materially misleading if they
were so given.
8.12 If Global has or would have at Completion a claim or claims against
the Sellers in aggregate of more than (Pound Sterling)75 million
which have arisen at or prior to Completion, Global may terminate
this Agreement by notice to the Sellers given at or before
Completion but for the avoidance of doubt, in the event that Global
terminates this Agreement, Global shall have no right to claim
damages or any other remedy against any of the Sellers in respect
of all or any part of such claim or claims other than pursuant to
clause 16.12. If Global does not terminate this Agreement pursuant
to this clause 8.12, Global may, subject to clause 9, claim damages
against the Sellers and exercise any other right, power or remedy
arising under this Agreement in respect of a claim or claims which
have arisen at or before Completion including such claim or claims
arising from a breach of Warranty had such Warranty been repeated
at Completion.
8.13 The Warranties shall be deemed to be given at the date of this
Agreement and to be repeated (mutatis mutandis) at Completion (save
that references to any fact, matter or thing existing, occurring or
having occurred at or before the date of this Agreement shall be
construed as references to at or before Completion).
9. LIMITATION OF CLAIMS
9.1 Global shall, on becoming aware of any Claim, promptly notify
Racal and the Sellers thereof, but the failure to so notify shall
not relieve the Sellers of any liability they may have to Global to
the extent such failure does not materially prejudice any of the
Sellers.
9.2 The Sellers shall have no liability in respect of any Claim unless
Global has served on the Sellers notice on or before:
(a) in the case of a Claim under the Tax Warranties or a claim
under the Tax Covenant relating to Racal USA, the expiration
of the statute of limitation relating to the relevant Tax
liability of Racal USA;
(b) in the case of any Claim under the Tax Warranties or a claim
under the Tax Covenant other than as described in paragraph
(a) above, six years from the Completion Date;
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(c) in the case of any Claim other than a Claim under the Tax
Warranties or a claim under the Tax Covenant, the later of (i)
the second anniversary of the Completion Date and (ii) the end
of the fourth month following the end of the second audited
financial period for each member of the Telecom Group,
giving such reasonable details of the Claim as Global then has and,
if practicable, including Global's then best estimate of the amount
of the liability of the Sellers in respect thereof, has as soon as
reasonably practicable upon receipt of any further details relating
to the Claim disclosed such further details to Racal and has issued
and served proceedings in respect thereof within nine months of the
date of such written notice if such Claim has not previously been
satisfied, settled or withdrawn.
9.3 No claim shall be made against any of the Sellers in respect of any
Claim unless the Claim (or series of related Claims) individually
exceeds (Pound Sterling)250,000 and unless the aggregate amount of
all Claims (excluding individual Claims of (Pound Sterling)250,000
or less) exceeds (Pound Sterling)10,000,000 PROVIDED that if such
aggregate amount does exceed (Pound Sterling)10,000,000, the
Sellers shall be liable for the full amount of such Claim or Claims
and not solely the amounts thereof in excess of (Pound
Sterling)10,000,000. For the purpose of determining whether a
Claim exceeds the minimum individual threshold of (Pound
Sterling)250,000 set out in this clause 9.3, Claims which consist
of a breach of paragraph L.12 of Schedule VI and which arise from
the unlawful exclusion (prior to the Completion Date) on grounds of
sex of an employee or former employee of the Telecom UK Group from
eligibility for, and/or membership of, Racal's Schemes (as defined
in Part B of Schedule VII) ("Pensions Claims") shall be aggregated
and treated as a single Claim. Any recovery in respect of Pensions
Claims shall be on an indemnity basis on the excess over (Pound
Sterling)250,000. Nothing in the Disclosure Letter shall be deemed
to be disclosed for this purpose in respect of Pensions Claims
unless individual claimants are specifically identified.
9.4 The total amount of the liability of the Sellers in aggregate in
respect of:
(a) the aggregate amount of Claims arising from clause 3.1, Part A
of Schedule VI, clause 5.1, clause 6, clause 10.1 and (in so
far as it relates to any of the foregoing provisions) clause
15 and any claim arising from the Tax Covenant and any claim
referred to in clause 9.4(b) shall be limited to and in no
event exceed (Pound Sterling)1,000,000,000; and
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(b) the aggregate amount of Claims and claims under clauses 10.2,
10.3 and 10.5 shall be limited to and in no event exceed
(Pound Sterling)300 million,
PROVIDED THAT the total amount of liability of the Sellers in
aggregate in respect of the Claims whether arising under paragraph
(a) or paragraph (b) of this clause 9.4 shall not in any
circumstance exceed the Consideration.
9.5 The Sellers shall not be liable in respect of any Claim (including
any claim under the Tax Covenant) if and to the extent that the
loss occasioned thereby has been recovered under any other Claim
(including any claim under the Tax Covenant).
9.6 If the Sellers indemnify Global and/or the relevant Telecom Group
member in respect of any amount payable by Global and/or any
Telecom Group member by way of settlement, judgment or award in
respect of the matter giving rise to the Claim, then insofar as the
same would not have a detrimental effect on the business of any
member of the Global Group, the Sellers shall be afforded every
reasonable opportunity of resisting in the name of the relevant
Telecom Group member any claims against any Telecom Group member
which might constitute a breach of any of the Warranties (unless
the claims against any Telecom Group member which might constitute
a breach of any of the Warranties is by any member of the Racal
Group), and the Sellers shall subject as aforesaid (if they so
require) be allowed to have the conduct of any negotiations,
proceedings or appeals incidental thereto (keeping Global at all
reasonable times properly informed of the conduct) and to use
professional advisers approved by Global (such approval not to be
unreasonably withheld or delayed). If such legal advisers are
retained, the Sellers shall not be liable to Global for any legal
expenses of other legal advisers or any other expenses subsequently
incurred by Global in connection with the defence of the claim,
except that if the Sellers elect not to assume such defence or if
legal advisers for Global determine that there are issues which
raise conflicts of interest between Global and the Sellers, Global
and any Telecom Group member may retain legal advisers reasonably
satisfactory to them, and the Sellers shall pay any reasonable fees
and expenses of such legal advisers for Global and such members
promptly as statements therefor are received; PROVIDED THAT the
Sellers shall be obligated pursuant to this clause 9.6:(i) to pay
such amounts in the case of a conflict of interest only if the
Sellers reasonably agree that such conflict of interest existed
between Global and the Sellers, and (ii) to pay for only one firm
of legal advisers for Global and the Telecom Group members in any
jurisdiction unless Global and the Sellers agree that the use of
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one firm of legal advisers would present such legal advisers with a
conflict of interest.
9.7 If and so long as Racal exercises its rights under clause 9.6,
Global shall, and shall procure that the relevant Telecom Group
member shall:
(a) consult with the Sellers in respect of the circumstances
giving rise to such claim, and thereafter keep the Sellers as
informed as is reasonably practicable of all material
developments relating to such circumstances and Claim;
(b) if so requested by the Sellers, subject as aforesaid, take all
reasonable steps or proceedings as the Sellers may consider
necessary in order to mitigate or defend any such claim and
any adjudication in respect thereof or enforce against any
person (other than Racal or any other member of the Racal
Group) the rights of the relevant Telecom Group member and
Global in relation to the matter the subject of the claim and
shall procure that any Telecom Group member shall act in
accordance with any such requirements, and for this purpose
take all appropriate proceedings in the name of the relevant
Telecom Group member subject to being fully indemnified in
advance by the Sellers against all costs and expenses incurred
in connection therewith;
(c) at all reasonable times allow the Sellers and its agents
reasonable access on notice to personnel of the relevant
Telecom Group member and to inspect and take copies of all
necessary books, correspondence and records of the relevant
Telecom Group member which are relevant to such Claim and are
within the power, possession or control of Global or any
member of the Telecom Group to enable the Sellers to
investigate the Claim (subject always to keeping the same
confidential other than necessary disclosures in connection
with any such action or claim); and
(d) save with the Sellers' prior consent, and subject as
aforesaid, not admit liability in respect of or compromise, or
settle any such claims as aforesaid.
9.8 Any settlement agreed by the Sellers pursuant to clause 9.6 shall
not include any obligation on Global or a Telecom Group member to
take or omit to take any action.
9.9 The Sellers shall reimburse to Global or the relevant Telecom Group
member (as the case may be) all costs, charges, liabilities,
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damages and expenses incurred by them by Global's complying with
its obligations under paragraphs 9.6 and 9.7.
9.10 The Sellers shall not be liable in respect of a Claim to the
extent:
(a) that any amount has been included as a liability or a proper
provision has been made in respect thereof; or
(b) that the value of any asset has been reduced to take account
of the subject matter of such Claim,
in the Accounts of RTNL and RISL or the Completion Balance Sheet.
9.11 Where Global or any Telecom Group member is entitled to recover
from some other person any sum in respect of any matter or event
which has given rise to a Claim, Global shall and shall procure
that the relevant Telecom Group member shall use its or his
reasonable endeavours to recover that sum and any sum recovered
will reduce the amount of the relevant Claim provided that the
person so entitled shall not be obliged hereby to use such
reasonable endeavours if so to do would have a detrimental effect
on the business of any member of the Global Group but in such
circumstances the parties agree that the decision by Global not to
recover any such sum shall be relevant in considering whether its
obligations to mitigate have been satisfied.
9.12 Other than on the proof of fraud which is material in the context
of the Transaction, Global shall not be entitled to rescind or
repudiate this Agreement for any reason after Completion.
9.13 The Sellers shall not be liable in respect of any Claim arising
from any matters resulting from a change of accounting policy or
practice or the length of any accounting period of Global or any
Global Group member introduced after Completion.
9.14 If Racal pays to Global or any Telecom Group member an amount in
respect of any Claim and Global or any Telecom Group member (as the
case may be) subsequently actually recovers from a third party
(including any insurer) a sum which is directly referable to that
Claim, Global shall repay to Racal as soon as reasonably
practicable so much of the amount paid by Racal as does not exceed
the Sum Recovered from the third party. Global agrees to take all
reasonable steps to recover any such sum from a third party as soon
as reasonably practicable on the basis set out in clause 9.8. For
the purpose of this clause "Sum Recovered" means an amount equal to
the amount recovered from such third party minus (a) any increase
in liability to tax of a Telecom Group member and (b) the
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reasonable costs and expenses incurred by the Telecom Group member
in recovering such amount. Nothing herein shall preclude Global
from making a Claim for recovery of that portion of any increased
insurance premium that are fairly attributable to Claims previously
made hereunder whether or not such Claim is made within the period
specified in clause 9.2.
9.15 Nothing contained in this clause 9 shall limit Global's obligations
or the obligation of any Telecom Group member at common law to
mitigate any loss or damage resulting from or arising as a
consequence of any circumstances giving rise to any Claim.
9.16 Global acknowledges and confirms that at the time of entering into
this Agreement it is not aware of any Claim which would arise on
execution of this Agreement.
9.17 If Global makes any Claim or gives notice of any Claim to Racal
Global shall, and shall procure that any Telecom Group member shall
promptly, on a confidential basis solely for the purpose of
enabling Racal to assess the Claim or potential Claim:
(a) make available on reasonable notice to Racal and its
representatives or advisers such reasonable access to the
personnel of any relevant Telecom Group member and to any
relevant records and information as Racal may request in
connection with such Claim or potential Claim; and
(b) use all their endeavours to procure that the auditors (past
and present) of any relevant Telecom Group member make
available their audit working papers in respect of audits of
the relevant Telecom Group member's accounts for any relevant
accounting period in connection with such Claim or potential
Claim,
in all cases, subject always to keeping the same and any information
obtained herefrom confidential.
9.18 Notwithstanding any limitation in this clause 9 to the contrary, no
claim by Global which arises by reason of any fraudulent act,
fraudulent omission or fraudulent misrepresentation of or by any of
the Sellers which is material in the context of the Transaction
shall be subject to the limitations of this clause 9.
9.19 If the Sellers or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual,
corporation or other entity, then and in each such case, Racal or
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its successors or assigns (on the case may be) shall use all
reasonable endeavours to procure that the successors and assigns of
the surviving corporation shall assume all of its obligations
hereunder.
10. INDEMNITIES
10.1 The Sellers hereby undertake to procure that, as from Completion,
the Telecom Group members shall be released at Completion or as
soon as is reasonably practicable thereafter from all guarantees,
indemnities and other actual or contingent obligations and/or
comfort letters given or undertaken by them in respect of any and
all actual or contingent liabilities whatsoever of any Racal Group
member (including without limitation those specified in Schedule
VIII) and pending such release, the Sellers shall indemnify and
keep indemnified each Telecom Group member against any liability
whatsoever, including all costs, damages and expenses, suffered or
incurred by any of them in connection therewith.
10.2 The Sellers agree to indemnify Global against all liabilities,
losses, damages, costs and expenses (whether incurred before or
after Completion) arising from the failure of RISL to obtain or
maintain a registration under the Data Protection Act 1984.
10.3 Racal agrees to indemnify Global and RTL against any cost, loss,
claim, liability or expense arising primarily by reason of
Railtrack PLC being entitled or having the right to terminate any
of the Railtrack Agreements on the grounds that the Reorganisation
and/or this Agreement involves a breach of any provision of the
Railtrack Agreements prohibiting assignments if and only to the
extent that such costs, losses, claims, liabilities or expenses
exceed in the aggregate (Pound Sterling)10,000,000, provided that:
(a) Global shall be obliged to take all reasonable steps to
mitigate such costs, losses, claims, liabilities or expenses
and the extent of Racal's liability shall take account of
savings and reduced expenditure resulting as a consequence of
the termination of any of the Railtrack Agreements; and
(b) any claim hereunder must be made within two years of
Completion.
10.4 If Global becomes aware of any claim under clauses 10.2, 10.3 and
10.5 it shall notify Racal as soon as practicable and shall consult
with, and pay due regard to, Racal's views on all matters relating
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thereto, giving Racal all reasonable information about such claim
as Racal shall request.
10.5 Racal agrees to indemnify Global and RTL for any cost, loss, claim,
liability or expense (whether incurred before or after Completion)
arising from the termination of the agreement with Metromedia Fiber
Network Services Inc. referred to in B(d) of Schedule X.
10.6 If Railtrack plc terminates the Railtrack Agreements on the grounds
that the Reorganisation and/or this Agreement involves a breach of
any provision of the Railtrack Agreements prohibiting assignments
Racal agrees that BRTH or any other member of the Racal Group shall
have no claims for termination of the Reorganisation Documents by
RTL.
11. PENSIONS
The provisions of Schedule VII shall have effect in relation to the
retirement, pension and life assurance rights and benefits enjoyed by
the present and former employees of the Telecom Group.
12. NAME AND USE OF MARKS
12.1 Global agrees that the Telecom Group members will:
(a) (save as provided in the Trade Mark Licence) as soon as
reasonably practicable following Completion if any of the
Racal Marks are being used in their respective corporate names
or as part of a business or trading name or domain name,
change the same to a name which does not include any of the
Racal Marks (or any mark which is confusingly similar with any
of the Racal Marks); and
(b) as soon as reasonably practicable following the Completion
Date and in any event no later than six months after the
Completion Date, delete or remove the Racal Marks from all
stationery, advertising material, labels, manuals, packaging,
stocks of products and all other materials or documents in the
possession or under the control of the Telecom Group on which
the Racal Marks are incorporated and remove all fascia,
hoardings and the like bearing or referring to the Racal
Marks.
12.2 On and with effect from Completion Racal and Global shall enter
into the Trade Mark Licence.
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13. PROPERTY REORGANISATION
For the purposes of this clause 13, "Properties" shall mean the
properties used by members of the Telecom Group (including without
limitation wayleaves and easements but excluding the land over, through
or under which the wayleave or easement passes) brief particulars of
which are set out in the Data Room Index but in all cases excluding the
Telecommunications Apparatus as defined in the Telecommunications Act
1984.
13.1 Applications for Reversioner's Consent
(a) Subject to Racal obtaining the Consents Racal shall procure the
carrying out and implementation of the Property Reorganisation
and shall use all reasonable endeavours to obtain the Consents
before or as soon as practicable following Completion and for
that purpose Racal, RPL or RTL (as the case may be) shall
reasonably and promptly provide such information and assistance
and enter into and execute such documents as may be properly
required by the relevant Reversioner in relation to the grant
of its Consent (including where required under the terms of the
relevant lease an authorised guarantee agreement) and shall
keep Global fully informed of progress in relation to the
applications for Consent.
(b) Racal shall supply Global's Property Solicitors with a copy of
any draft Consent as soon as received from the relevant
Reversioner's Solicitors. Global's Property Solicitors shall
forthwith return it to Racal approved subject to any amendments
they may reasonably require.
(c) Racal shall forthwith return the amended draft Consent to the
relevant Reversioner's Solicitors and supply to Global's
Property Solicitors copies of any further correspondence or
further drafts of the Consent received from the Reversioner's
Solicitor and these provisions shall continue to apply until
all relevant parties have agreed the form and context of each
relevant Consent.
(d) The proposed assignee or proposed underlessee shall in each
case where properly required enter into direct covenants with
the relevant Reversioner as from the date of the assurance to
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pay the rents reserved by the relevant lease and perform and
observe the covenants on the part of the lessee therein
contained.
(e) The proposed assignee or proposed underlessee where applicable
and any guarantor shall promptly on being supplied with an
engrossment of the agreed form of Consent execute the same as
a deed and return it unconditionally to Racal.
(f) Racal shall continue to use all reasonable endeavours to obtain
the Consents including if necessary making application to a
court of competent jurisdiction for a declaration to the effect
that Consent is being unreasonably withheld in the event that
any application for Consent is refused or is not granted within
a reasonable period of time (unless counsel of at least five
years' call and suitably experienced in such matters advises
Racal in writing that such application has no reasonable
prospect of success and copy of such advice is given to Global's
Solicitors) and in such circumstances Global is to co-operate
with Racal and provide such information as may be required by
Racal in making such an application.
(g) Racal shall bear all costs and disbursements of all third party
lessors and their professional advisers in relation to the
obtaining of the Consents but not the stamp duty and Land
Registry fees in connection with the Property Reorganisation
which shall be borne by Global.
(h) Racal shall not be obliged under the above provisions to
guarantee as a condition of any of the Consents the performance
of the obligations of RPL or RTL.
13.2 Licence to Occupy
The proposed assignee or proposed underlessee shall between
Completion and completion of the relevant assignment sublease or
licence be entitled to occupy the relevant leasehold premises or part
thereof upon the terms and subject to the obligations and covenants
referred to and contained in Schedules XI and XII and otherwise upon
the terms of the existing lease.
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13.3 No variations or amendments to existing terms
Neither Racal, RPL or RTL shall vary or amend or agree or apply to
vary or amend any terms under which the Properties are held
(including any review of rent) except as may be necessary to obtain
the Consents (and with the prior consent of Global) or apply for any
consent or approval under the relevant lease (other than the
Consents) or serve any notices or counter notices or commence any
proceedings under the Landlord and Tenant Act 1954 without the prior
consent of Global such consent not to be unreasonably withheld or
delayed.
13.4 Outstanding Negotiations
Racal shall until Completion use all reasonable endeavours to
diligently pursue all Outstanding Negotiations at the request and
under the direction of Global and shall keep Global fully informed of
all progress and provide copies of all communications in respect of
the same but Racal shall not be obliged to conclude any of the
Outstanding Negotiations referred to in Schedule XII Part B unless
Global has confirmed in terms satisfactory to Racal that Global will
indemnify Racal in relation to such matters.
13.5 Enforcement of Covenants
Racal or RPL (as the case may be) shall at the request of Global but
at the cost of Racal enforce the covenants on the part of the
relevant Reversioner contained in any relevant lease so far as may be
necessary to obtain the Consents.
13.6 Refusal of Consents
If any of the Consents required in respect of the proposed
sublettings or licences referred to in Schedule XI Part A is not
obtained or if for any other reason RPL (or any company authorised by
RPL under the terms of this agreement to occupy the whole or part of
the relevant leasehold property) vacates any part of the leasehold
properties referred to in that Schedule then Racal shall pay to
Global and shall indemnify Global fully in respect of all rent and
other sums which would otherwise have been payable by RPL (or any
company authorised by RPL under the terms of this agreement to occupy
the whole or part of the relevant leasehold property) whether to
Global or to any third party had the said subletting or licence
continued upon the terms set out in that Schedule until the date on
which RPL (or any company so authorised) shall vacate the premises in
question.
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13.7 Arbitration
Any disputes in relation to the terms of any sublease or licence
required to implement the Property Reorganisation shall be referred
to the decision of a suitably qualified Chartered Surveyor who in
default of agreement shall be appointed by the President for the time
being of the Royal Institution of Chartered Surveyors on the
application of either party and such surveyor shall act as an
arbitrator in accordance with the Arbitration Act 1996.
14. NOT USED
15. PARENT GUARANTEE
15.1 In consideration of Global entering into this Agreement with the
Sellers at the request of Racal, Racal, as primary obligor, hereby
irrevocably and unconditionally guarantees to Global the full and
complete performance by the Sellers of all their obligations under
this Agreement or the Tax Covenant or both and the payment of all
sums when due and payable by the Sellers (or any of them) to Global
under or pursuant to this Agreement or the Tax Covenant or both and
agrees to indemnify and keep indemnified Global against all losses
and damages sustained by it flowing from any non-payment or default
of any kind by the Sellers under or pursuant to the Agreement or the
Tax Covenant or both.
15.2 Racal agrees that if and each time that any of the Sellers fails to
make any payment when it is due under or pursuant to this Agreement
or the Tax Covenant or both, Racal shall on demand (without requiring
Global first to take steps against the Sellers or any other person)
pay that amount to Global.
15.3 The guarantee contained in this clause 15 is a continuing guarantee
and shall remain in force until all the obligations of each of the
Sellers under this Agreement and the Tax Covenant have been fully
performed and all sums payable by each of the Sellers have been
fully paid.
15.4 All payments to be made by Racal shall be made in full without
set-off or counterclaim and free and clear of and without any
deduction whatsoever except to the extent required by law and if any
deduction or withholding must be made by law, Racal will pay that
additional amount which is necessary to ensure that Global receives
a net amount equal to the full amount which it would have received
-24-
if the payment had been made without the deduction or withholding.
15.5 Racal shall pay interest on any amount due under this clause from the
date of demand until the date of payment in full as well after as
before any judgment) calculated on a daily basis at the rate set
out in clause 6.5.
15.6 Racal's obligations under this clause shall not be affected by any
matter or thing which but for this provision might operate to affect
or prejudice those obligations including without limitation:
(a) any time or indulgence granted to, or composition with, the
Sellers or any of them or any other person;
(b) the taking, variation, renewal or release of, or neglect to
perfect or enforce this Agreement, or any right, guarantee,
remedy or security from or against the Sellers or any of them or
any other person; or
(c) any enforceability or invalidity of any obligation of the
Sellers, so that this clause shall be construed as if there were
no such unenforceability or invalidity.
16. GENERAL
Assignment
16.1 None of the rights or obligations under this Agreement may be
assigned or transferred without the prior written consent of all the
other parties save as provided in clause 16.2.
16.2 No party may assign or transfer a right or obligation under this
Agreement, save that Global may assign some or all of its rights
under this Agreement:
(a) to another member of the Global Group if (i) the assignee
enters into a commitment in a form reasonably satisfactory to
Racal to be bound by and to perform all outstanding obligations
under this Agreement expressed to be obligations of Global and
(ii) Global shall guarantee the obligations of the assignee in
-25-
the same terms as Racal has guaranteed the obligations of the
Seller under clause 15; and
(b) by way of security to the Security Trustee.
16.3 Entire agreement
(a) This Agreement and the Transaction Documents constitute the
whole and only agreement between the parties relating to the
matters contemplated hereby.
(b) This Agreement supersedes and extinguishes any prior agreements,
undertakings, representations, warranties and arrangements of
any nature whatsoever, whether or not in writing, relating
thereto.
(c) Each party acknowledges that in entering into this Agreement
and the Transaction Documents or the terms set out in this
Agreement it is not relying upon any agreement, undertaking,
representation, warranty, promise, assurance or arrangement made
or given by any other party or any other person, whether or not
in writing, at any time before the execution of this Agreement
which is not expressly set out herein or therein.
(d) None of the parties shall have any right of action against any
other party to this Agreement arising out of or in connection
with any agreement, undertaking, representation, warranty,
promise, assurance or arrangement referred to in clause 16.3(b)
or 16.3(c) above (except as provided in clause 16.3(b) or
16.3(c) above or in the case of fraud or dishonesty).
16.4 Notices
(a) Any notice, consent or other communication given or made under
this Agreement shall be in writing.
(b) Any such notice or other communication shall be addressed as
provided in clause 16.4(d) and, if so addressed, shall be deemed
to have been duly given or made as follows:
(i) if sent by personal delivery, upon delivery at the address
of the relevant party if delivered before 3.00 pm on any
-26-
Business Day and, in any other case, at 10.00 am on the
next Business Day;
(ii) if sent by first class post (or, if sent overseas, by
airmail), three clear Business Days (or, if sent overseas,
seven Business Days) after the date of posting; and
(iii) if sent by facsimile, at the expiration of two hours after
the time of despatch, if despatched before 3.00 pm on any
Business Day and, in any other case, at 10.00 am on the
Business Day following the date of despatch but only if a
confirmation of the receipt by the recipient of the
facsimile appears correctly at the end of the of the
sender's facsimile.
(c) Any notice or other communication to be given or made under
this Agreement, the Tax Covenant or the Transaction Documents
by Global to the Sellers shall be deemed to be given or made if
given to Racal for itself and on behalf of the Sellers.
(d) The relevant addressee, address and facsimile number of each
party for the purpose of this Agreement,subject to clause
16.4(c), are those set out in Schedule I.
(e) A party shall notify the other parties to this Agreement of a
change to its name, relevant addressee, address or facsimile
number for the purposes of clause 16.4(d) provided that such
notification shall only be of effect on:
(i) the date specified in the notification as the date on
which the change is to take place; or
(ii) if no date is specified or the date specified is less than
three clear Business Days after the date on which the
notice is given, the date falling three clear Business Days
after notice of any such change has been given.
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16.5 Remedies and waivers
(a) Subject always to the provision of clause 9, no delay or
omission on the part of any party to this Agreement in
exercising any right, power or remedy provided by law or
under this Agreement shall:
(i) impair such right, power or remedy; or
(ii) operate as a waiver thereof.
(b) The single or partial exercise of any right, power or remedy
provided by law or under this Agreement shall not preclude any
other or further exercise thereof or the exercise of any
other right, power or remedy.
(c) The single or partial exercise of any right, power or remedy
provided by law or under this Agreement shall not preclude any
other or further exercise thereof or the exercise of any other
right, power or remedy.
(d) The rights, powers and remedies provided in this Agreement are
cumulative and not exclusive of any rights, powers and remedies
provided by law.
(e) No variation of this Agreement shall be effective unless made in
writing, signed by or on behalf of the parties and expressed to
be such variation.
(f) No waiver by any party of any requirement of this Agreement or
of any remedy or right under this Agreement shall have effect
unless given by notice in writing signed by such party. No
waiver of any particular breach of the provisions of this
Agreement shall operate as a waiver of any repetition of such
breach.
(g) Any release, waiver or compromise or any other arrangement which
any party may give or enter into with any other party to this
Agreement in connection with this Agreement shall not affect
any right or remedy of such parties as regards any other party's
liabilities under or in relation to this Agreement and such other
party shall continue to be bound by this Agreement as if it
-28-
had been the sole contracting party.
16.6 Invalidity
If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, that shall not affect or impair:
(a) the legality, validity or enforceability in that jurisdiction of
any other provision of this Agreement; or
(b) the legality, validity or enforceability under the law of any
other jurisdiction of that or any other provision of this
Agreement.
16.7 NOT USED
16.8 No partnership
Nothing in this Agreement and no action taken by the parties pursuant
to this Agreement shall constitute, or be deemed to constitute, the
parties as a partnership, association, joint venture or other
corporate entity.
16.9 Further assurance
Each party shall after Completion from time to time on being
requested to do so by any other party, do or procure the doing of all
such acts and/or execute or procure the execution of all such
documents in a form reasonably satisfactory to the requesting party
and the requested party as is reasonably necessary for giving full
effect to this Agreement.
16.10 Announcements and confidentiality
Any party shall only make an announcement concerning the transactions
contemplated by this Agreement or any ancillary matter if and to the
extent required by:
(a) law; or
(b) any securities exchange or regulatory or governmental body to
which such party is subject, wherever situated, including
(without limitation) the London Stock Exchange, GNOSTIC,
the Securities and Exchange Commission or the Takeover Panel,
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whether or not the requirement has the force of law;
provided that any such announcement shall be made only after
consultation with the other parties and having taken into account
other reasonable covenants and the party has taken all reasonable
steps to avoid the disclosure of confidential information.
16.11 Costs and expenses
Each party shall pay its own costs and expenses in relation to the
negotiation, preparation and execution and carrying into effect of
this Agreement.
16.12 Break-Up Fee
Racal agrees that if this Agreement shall be terminated by Global
pursuant to clause 5.2(b)(i) or clause 8.12 or, because of the
failure to satisfy the Transfer Condition set out in paragraph 1 of
Schedule III, pursuant to Clause 2.7, then Racal shall promptly pay
to Global an amount equal to (Pound Sterling)10 million.
16.13 Counterparts
(a) This Agreement may be executed in any number of counterparts,
and by the parties on separate counterparts, but shall not be
effective until each party has executed at least one
counterpart.
(b) Each counterpart shall constitute an original of this Agreement,
but all the counterparts shall together constitute but one and
the same instrument.
16.14 Insurance
To the extent that, prior to Completion, any of the Telecom Group
members were reliant on Racal Group reinsurance policies, Racal
undertakes to ensure that, at the request of the relevant members of
the Telecom Group (the "Claimants"), it will pursue insurance claims
under such insurance policies which the Claimant notifies to Racal
(but at the Claimant's risk and expense) and shall account to the
Claimant for any net payment received under such insurance policies.
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17. CONFIDENTIAL INFORMATION
17.1 Subject to the remainder of this clause 17, Racal undertakes to
Global that from the date of this Agreement they shall not and shall
procure (or in the case of advisers and agents, use all reasonable
endeavours to procure) that no other member of the Racal Group or any
director, officer or employee or adviser or agent of the Racal Group
shall disclose to any person other than Global or its advisers any
Confidential Information.
17.2 Subject to the remainder of this clause 17, Global undertakes to
Racal that from the date of this Agreement it shall not and shall
procure (or in the case of advisers and agents, use all reasonable
endeavours to procure) that no other member of the Global Group or
any director, officer or employee or adviser or agent of the Global
Group shall disclose to any person any Confidential Information.
17.3 Clauses 17.1 and 17.2 do not apply to:
(a) disclosure of Confidential Information to, or at the request of,
a director, officer or employee of Global or Racal or another
member of the Global Group or Racal Group or to a director,
officer or employee of a Telecom Group member whose function
requires him to have the Confidential Information;
(b) disclosure of Confidential Information required to be disclosed
by law, regulation, any revenue authority, the London Stock
Exchange or any other relevant stock exchange or any other
regulatory authority;
(c) disclosure of Confidential Information to an adviser provided
that such adviser shall be made aware of the confidential
nature of the information and Racal's obligations under clause
17.1 or Global's obligations under clause 17.2; or
(d) Confidential Information which becomes publicly known except by
breach of clause 17.1 or 17.2.
17.4 The restrictions contained in this clause 17 shall apply without
limit in time.
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18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement is governed by, and shall be construed in
accordance with, the laws of England.
18.2 Each party submits to the jurisdiction of the English courts for
all purposes relating to this Agreement.
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SCHEDULE I
The Parties
Name Registered Registered Office Addressee/Fax
Number
Controls and 314979 Western Road, David Whittaker
Communications Bracknell, Fax no: 01251 815 887
Limited Berkshire RG12 1RG
The Racal 59-1785-1646 c/o David Whittaker
Corporation Fax no: 01251 815 887
Racal 497098 Western Road David Whittaker
Electronics Bracknell Fax No: 01251 815887
Plc Berkshire RG12 1RG
Global N/A Wessex House, James Gordon
Crossing Ltd. 45 Reid Street Fax No:
Hamilton, Bermuda (001) 310 385 3700
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SCHEDULE II
Definitions
"Accounts" the statutory accounts for the
year ended 31 March 1999 for RTL,
RTNL and RISL
"Agreed Form" in relation to any document, the
form of that document which has
been agreed by Racal and Global
(subject to such amendments as
Racal and Global may agree, such
agreement not to be unreasonably
withheld or delayed by either
party) and initialled for
identification by or on behalf of
Racal and Global
"Balance Sheet Date" 23 July 1999
"Base Line Balance Sheet" the balance sheet of the Telecom
Group in the Agreed Form at the
Balance Sheet Date
"Board" or "Directors" as the context requires, the board
of directors of Racal or the board
of directors of Global
"BRTH" Racal Communications (Services)
Limited formerly known as BRT
Holdings Limited a company
registered in England under No.
3132438
"Business Day" a day (other than a Saturday or
Sunday) on which banks are open
for business in London
"Carve-Out Accounts" has the meaning given in Schedule
VI Part B (warranty A7)
-34-
"Cash" at the relevant time, the
aggregate amount of cash held by,
and the positive balances standing
to the credit of the bank accounts
of each member of the Telecom
Group
"Claim" any claim arising under this
Agreement or any other document
entered into hereunder or referred
to herein but excluding (unless
otherwise stated) any claim
arising under (i) the Tax
Covenant, (ii) any breach of any
warranty or covenant set forth in
clause 6, clause 10.1, clause 15
(but only insofar as it relates to
any of the foregoing provisions),
(iii) the indemnities under
clauses 10.2, 10.3 and 10.5, (iv)
clause 3.1, (v) Part A of Schedule
VI
"Companies Act" the Companies Act 1985, as amended
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"Competing Transaction" any of the following (other than
the transactions contemplated by
this Agreement) involving any
Telecom Group Member:
(i) any merger, consolidation,
share exchange, exchange
offer, business
combination,
recapitalisation,
liquidation, dissolution
or other similar
transaction involving such
person;
(ii) any sale, lease, exchange,
mortgage, pledge, transfer
or other disposition of
all or substantially all
of the shares or assets of
such person;
(iii) any public announcement of
a proposal, plan or
intention to do any of the
foregoing or any agreement
to engage in any of the
foregoing
"Completion" completion of the Transaction
"Completion Balance Sheet" has the meaning given in Schedule
V
"Completion Date" the date on which Completion
occurs
"Completion Net Assets" the number in the Completion
Balance Sheet that corresponds to
"Net Assets (Excluding Net Debt)"
((Pound Sterling)220,365,000) as
at the Base Line Balance Sheet
"Confidential Information" all information not publicly
known, insofar as it is used in or
otherwise relates to the business,
customers or financial or other
-36-
affairs of any Telecom Group
member (for the purposes of
clauses 17.1 and 17.3) or any
member of the Racal Group (for the
purposes of clauses 17.2 and
17.3), including, without
limitation, information relating
to:
(a) the marketing of goods or
services including,
without limitation,
customer names and lists
and other details of
customers, sales targets,
sales statistics, market
share statistics, prices,
market research reports
and surveys, and
advertising or other
promotional materials; or
(b) future projects, business
development or planning,
commercial relationships
and negotiations
"Consents" any approval licence or consent
required from any Reversioner
necessary to effect the Property
Reorganisation and the expression
"Consent" shall include the
execution and completion of any
document required by the relevant
Reversioner for the purpose of or
in connection with the evidencing
of the grant of such approval
licence or consent (whether or not
incorporating other
provisions)
"Consideration" the aggregate amount referred to
in clause 4.3 as payable by Global
to the Sellers
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"Covenantor" Global and/or Racal
"Data Room" the data room containing
information relating to the
Telecom Group located at the
offices of the Racal Solicitors
"Data Room Index" the index of documents including
the supplemental index in the
Agreed Form relating to the
information in the Data Room
"Disclosure Letter" the letter of the same date as
this Agreement from Racal to
Global referred to in clause 8
"dollars" or "$" US dollars
"Encumbrance" includes any encumbrance, charge,
debenture, mortgage, pledge, lien,
assignment, hypothecation,
security interest, title
retention, option, claim, right to
acquire, right of possession,
right of pre-emption, restriction
or other security agreement or
arrangement
"Fieldforce" the division of Racal Services
(Communications) Ltd whose
principal business as at the date
of this Agreement is the
installation, repair and
maintenance of communications for
the railway's telecommunications
network and related technical
equipment
"Finance Lease Debt" at the relevant time, the
aggregate amount payable (whether
or not due and including all
principal, interest, charges, fees
and expenses but excluding
interest charges for future
periods) by RTL to Railtrack plc
under the Finance Lease dated 30
June 1994
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"Finance Lease Net Debt" at the relevant time, the Finance
Lease Debt less the Finance Lease
Receivables
"Finance Lease Receivables" at the relevant time, the
aggregate amount receivable
(whether or not due and including
all principal, interest, charges,
fees and expenses but excluding
interest charges for future
periods) by RTL from BRTH under
the Telecommunications Services
Agreement dated 23 July 1999 or
any other substitute document
envisaged by the Reorganisation
Documents when executed
"Global Auditors" Arthur Andersen
"Global Group" Global and its subsidiary
undertakings from time to time
"Global Property Solicitors" such solicitors as may be
appointed from time to time by
Global in relation to property
matters
"Global Solicitors" Simpson Thacher & Bartlett of 99
Bishopsgate, London
"Goldman Sachs Facility" the facility envisaged by a letter
dated 8 October 1999 from the
Security Trustee and another to
Global Crossing Holdings Limited
"Guarantor" Racal
"ICTA 1988" the Income and Corporation Taxes
Act 1988
"Intellectual Property" inventions, patents, trade marks,
service marks, designs (whether
registered or unregistered),
copyrights (including without
limitation, rights in software),
confidential information, know-
how, customer lists, database
-39-
rights, business or trade names,
trading goodwill and all rights
and forms of protection of a
similar nature or having similar
or equivalent effect to any of
these which may exist anywhere in
the world and all applications and
rights to apply for the protection
of, any of the foregoing
"Intellectual Property Rights" the Intellectual Property which is
owned by Telecom Group members and
which is material to the business
of the Telecom Group details of
which are disclosed in Sections 9,
10, 11 and 12 and Index II.9, 10,
11 and 12 in the Data Room Index
"Inter-Company Debt" at the relevant time, the
aggregate amount payable (whether
or not due and including all
principal, interest, charges, fees
and expenses) by members of the
Telecom Group to all other members
of the Racal Group (other than any
other members of the Telecom
Group) in respect of all
borrowings, overdrafts,
intercompany balances and
outstanding indebtedness but
excluding (i) all sums payable in
respect of Inter-Company Trading
Debt; (ii) any amounts payable
under the finance lease) dated 30
June 1994 between RTL and
Railtrack; and (iii) any amounts
payable by members of the Telecom
US Group to members of the Racal
Group
"Inter-Company Net Debt" at the relevant time, the amount
of the Inter-Company Debt less the
amount of the Inter-Company
Receivables (which may be a
positive or a negative amount)
"Inter-Company Trading Debt" at the relevant time, the
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aggregate amount payable (whether
or not due) in the ordinary course
of trading by members of the
Telecom Group to all other members
of the Racal Group (other than any
other members of the Telecom
Group)
"Inter-Company Receivables" at the relevant time, the
aggregate amount receivable
(whether or not due and including
all principal, interest, charges,
fees and expenses) by members of
the Telecom Group from all other
members of the Racal Group (other
than any other member of the
Telecom Group) in respect of all
borrowings, overdrafts,
intercompany balances and
outstanding indebtedness but
excluding all sums to be received
in respect of Inter-Company
Trading Receivables
"Inter-Company Trading at the relevant time, the
Receivables" aggregate amount to be received
(whether or not due) in the
ordinary course of trading by
members of the Telecom Group from
all other members of the Racal
Group (other than any other
members of the Telecom Group)
"ION" International Optical Network
L.L.C.
"July Management Accounts" the management accounts for the
Telecom UK Group to be prepared in
accordance with Schedule X as at
23 July 1999 which shall include a
profit and loss account for the
period commencing 1 April 1999 and
ending on that date and a balance
sheet as at that date
"London Stock Exchange" London Stock Exchange Limited
-41-
"Long Stop Date" 15 December 1999
"new PTO Licence" has the meaning given to it in
paragraph 2 of Schedule III
"non-Railtrack Properties" Properties which are not located
on land owned, leased or licenced
by Railtrack plc or any other
member of the Railtrack group
"Outstanding Negotiations" means the wayleaves, licences and
leases in the process of
negotiation as listed in Schedule
XII Parts A and B
"Pre-Completion Dividend" has the meaning given to it in
clause 5.5
"pounds" or "(Pound Sterling)" UK pounds sterling
"Properties" except as defined for clause 13,
the properties which are material
to the business of the Telecom
Group brief particulars of which
are set out in Section 7 and Index
II.7 of the Data Room Index
"Property Owner" in respect of each leasehold
property, the person designated as
the "Property Owner" in Schedule
XI
"Property Reorganisation" (a) the assignment to RTL of
the leasehold properties
listed in Schedule XI Part
A (where not already held
by RTL) and where
indicated in that part of
the Schedule the grant of
a sublease or licence of
part to RPL for occupation
by Field Force or
Translink on the terms set
out in that part of the
Schedule and otherwise
upon the terms of the
relevant lease;
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(b) the assignment to RPL of
the leasehold properties
listed in Schedule XI Part
B and the grant of a
sublease or licence of
part to RTL on the terms
set out in that part of
the Schedule;
(c) the grant of a licence of
part of the property
referred to in Schedule XI
Part C on the terms set
out in that part of the
Schedule;
(d) the assignment to RTL of
the leasehold properties
listed in Schedule XI Part
D; and
(e) the assignment to RPL of
the leasehold property
listed in Schedule XI Part
E on the terms set out in
the Schedule
the circular to be sent to
"Racal Circular" shareholders of Racal in relation
to the Transaction pursuant to the
Listing Rule of the London Stock
Exchange
"Railtrack Agreements" the Finance Lease Agreement dated
30 June 1994, the Grant of Use
date 30 June 1994, the two Deeds
of Grant dated 2 August 1995, the
Management Agreement dated 31
March 1995 and the National Radio
Network Agreement dated 30 June
1994 in each case entered into
between Railtrack plc and RTL and
all of the above are included at
Section 9.1.1B of the Data Room
-43-
Index as modified, amended or
supplemented from time to time
"Racal Auditors" Deloitte & Touche, Hill House, 1
Little New Street, London EC4A 3TR
"Racal EGM" the Extraordinary General Meeting
of Racal to be convened in
connection with the Transaction
and certain steps in relation
thereto, including any adjournment
thereof
"Racal Group" Racal and its subsidiary
undertakings from time to time
"Racal Marks" the word Racal and any other word
or mark incorporating Racal
"Racal Shareholders" holders of Racal Shares
"Racal Solicitors" Lovell White Durrant of 65 Holborn
Viaduct, London, EC1A 2DY
"Racal Telecom UK Group Shares" the shares in RTL, RISL and RTNL
referred to in Schedule IV
"Racal USA" Racal Telecommunications, Inc., a
company organised under the laws
of Delaware
"Racal USA Shares" 1000 shares of Racal USA, as
specified in Schedule IV
"Reorganisation" the reorganisation of the Racal
Group, its successors and assigns,
as effected or to be effected by
the Reorganisation Documents
"Reorganisation Documents" each of the reorganisation
agreements in the Agreed Form and
the Intra-Group Business Transfer
Agreement executed on
1 October 1999 between BRTH and
RTL in relation to Fieldforce and
the Intra-Group Business Transfer
Agreement executed on 1 October
-44-
1999 between BRTH and RTL in
relation to Translink
"Reversioner" means in respect of each leasehold
property any person entitled to an
interest in reversion (whether
mediate or immediate) whose
consent is necessary to the
assignment or subletting or
licence of any of the leasehold
properties and relevant
Reversioner shall be construed
accordingly
"RISL" Racal Internet Services Limited (a
company registered in England
under No 3231692)
"RPL" Racal Properties Limited
"RTL Racal Telecommunications Limited
(a company registered in England
under No 2089583)
"RTNL" Racal Telecommunications Networks
Limited, (a company registered in
England under No 2089583)
"RTPA" the Restrictive Trade Practice Act
1976
"Security Trustee" Goldman Sachs International
"Sellers" Racal, Controls and Communications
Limited and The Racal Corporation
"Shareholder Funds" at the relevant time, the sum of
the aggregate amount of issued and
paid up share capital of each
member of the Telecom Group and
all of the reserves (whether
or not distributable) standing
to the credit of each member of
the Telecom Group less debit
balances where relevant
"Shares" the shares in the Telecom Group
-45-
listed in Schedule IV
"subsidiary undertaking" a subsidiary undertaking as that
term is defined in section 258 of
the Companies Act
"Tax" has the meaning given in the Tax
Covenant
"Tax Covenant" the covenant to be given by Racal
to Global set out in Schedule IX
"Tax Warranties" means those warranties set out in
Part C of Schedule IX
"Telecom Group" or "Telecom RTL, RTNL, RISL and Racal USA or
Companies" any one of them as the context
requires and "Telecom Group
member" shall be construed
accordingly
"Telecom Group Shares" the Racal USA Shares and the
Telecom UK Group Shares
"Telecom UK Group" the Telecom Group (excluding Racal
USA) or any of such companies and
"Telecom UK Group member" shall be
construed accordingly
"Telecom UK Group Shares" the shares in the members of the
Telecom UK Group as set out in
Schedule IV
"Telecom US Group" Racal USA and ION or either of
them as the context requires
"TCGA" the Taxation of Chargeable Gains
Act 1992
"Trade Mark Licence" the licence to use the Racal Marks
in the Agreed Form to be granted
by Racal to Global
"Transaction" the transfers by members of the
Racal Group of their interest in
the Telecom Group to Global
-46-
"Transfer Conditions" the conditions as described in
Schedule III
"Transaction Documents" this Agreement, the Disclosure
Letter, the Trademark Licence and
the Transitional Services
Agreements
"Transitional Services Agreement" the agreement in Agreed Form
relating to the provision of
services after Completion
"Translink" the division of Racal Services
(Communications) Ltd whose
principal business as at the date
of this Agreement is the provision
of infrastructure services,
advanced information systems and
project support for the rail and