Schedule 1

Schedule 1 - Guarantor n urn

IEnhancement i
Part I - General Provisions
1 Guarantee
Subject to the following provisions of this Schedule, in consideration of the Council entering
into this Agreement the Guarantor:
1.1 guarantees to and covenants with the Council irrevocably and unconditionally as a continuing
security that the Buyer will discharge the financial obligations of the Buyer to the Council in
relation to the Outstanding Liabilities in the event that the Buyer fails to discharge such
obligations;
1.2 agrees, save in respect of express provision for deduction, set of or adjustments in this
Agreement, that any sum payable to the Council pursuant to paragraph 1.1 of this Schedule
must be paid without any deduction set-off or counterclaim;
1.3 acknowledges that the Guarantor is:
1.3.1 a principal debtor or guarantor for the financial obligations of the Buyer to the Council in
relation to the Outstanding Liabilities as between the Council and the Guarantor;
1.3.2 not released and this guarantee is not prejudiced by:
(a) any time or indulgence given to the Buyer;
(b) any variation or arrangement or alteration of terms being made or agreed with the
Buyer;
(c) any lack of or limitation on the powers of the Buyer;
(d) the absence of authority of any person purporting to represent or act on behalf of the
Buyer;
(e) any act omission or thing whatsoever whereby the Guarantor might be released or as
a result of which the Buyers Obligations may not be enforceable against the Buyer;
or
(f) the liquidation administration or other insolvency of or any change in the constitution
of the Buyer or the Guarantor.
1.A
The Guarantor confirms that it is in its own commercial interest to enter into this Agreement
as Guarantor and that it is not aware that by doing so it is prejudicing any of its creditors.
2 The Guaranteed Amount, Release, Substitution or Provision of Additional
Security
2.1 The liability of the Guarantor shall be limited to the Guaranteed Amount. The Guaranteed
Amount shall be subject to adjustment in accordance with the following provisions of this
paragraph 2.
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2.2 Subject to the provisions of this Schedule the Buyer shall provide the following items to the
Council in respect of any Accounting Date that shall fall within the Security Monitoring Period
PROVIDED THAT the Buyer shall not be obliged to provide any NAV Report in respect of any
Accounting period expiring before 30 April 2013:
2.2.1 within 4 months following any Interim Accounting Date an Interim NAV Report prepared to the
relevant Interim NAV Certification Date
2.2.2 within 4 months following any Annual Accounting Date (or such later date as the Council shall
have requested in order to enable such Annual NAV Report to have regard to audited
accounts) an Annual NAV Report prepared to the Annual NAV Certification Date;
2.2.3 provided that in the event that having used reasonable endeavours to do so the Buyer is
unable to procure an Interim NAV Report or an Annual NAV Report in accordance with the
provisions of this paragraph the Buyer shall notify the Council to this effect and the Council
shall be entitled to request and the Buyer shall use reasonable endeavours to provide such
information as the Council shall reasonably require in order to ascertain the Total NAV and
the parties shall use reasonable endeavours to agree such Total NAV provided that where
they are unable to do so within one month of notification by the Buyer that such reports are
not available either party may refer the determination of such Total NAV to the Expert in
accordance with the provisions of clause 40 and both parties shall provide such relevant
information for such purpose as the Expert reasonably requires and is within their respective
control.
2.3
The Buyer shall serve a Material Adverse Change Notice on the Council if it becomes aware
of a Material Adverse Change.
2.4
If the Council receives a Material Adverse Change Notice or the Council reasonably considers
that a Material Adverse Change has occurred the Council may (subject to paragraph 2.4.2) by
written notice served on the Buyer require the Buyer to provide a MAC NAV Report provided
that:
2.4.1 where a Material Adverse Change Notice is served such request is made by the Council by
written notice served on the Buyer within 10 Working Days of the service of the Material
Adverse Change Notice;
2.4.2 the Council cannot request a MAC NAV Report and any such request or related MAC NAV
Report shall have no effect if (a) a Material Adverse Change is attributable in whole or
predominantly to fluctuations in market conditions or (b) (subject to paragraph 2.4.3) if the
next Accounting Date of the Relevant Entity is less than four months from the date of any
such request;
2.4.3
In the event that the Council is not entitled to request a MAC NAV Report by virtue of
paragraph 2.4.2(b) but the Council reasonably considers that a Material Adverse Change has
occurred the Council may request the Buyer to procure confirmation from the Auditor as to
whether a Material Adverse Change has taken place since the date of the immediately
preceding NAV Report subject to paragraph 2.4.4;
2.4.4
In providing such confirmation the Auditor shall only be required to base its opinion on the
Auditors enquiries of the directors of the Relevant Entity and it shall not be required to carry
out enquiries or due diligence other than enquiries of the bank as provided by paragraph
2.7.3;
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2.4.5 such confirmation shall be provided within one month of the Councils request in accordance
with paragraph 2.4.3;
2.4.6 in the event that the Auditor confirms that a Material Adverse Change has occurred pursuant
to paragraph 2.4.3 the Council may by written notice served on the Buyer within 10 Working
Days of the said Auditors confirmation require the Buyer to provide a MAC NAV Report; and
2.4.7 any MAC NAV Report shall be prepared to the relevant MAC Certification Date.
2.5 Any MAC NAV Report to be provided pursuant to paragraph 2.4 shall be provided to the
Council within 2 months of such request PROVIDED THAT it shall be permissible for such
MAC NAV Report to be provided by a suitably qualified officer or employee of the Buyer or
the Relevant Entity in lieu of the Auditor and if such MAC NAV Report is provided by such
officer or employee as aforesaid then such MAC NAV Report shall include or be accompanied
by a declaration by the Buyer or the Relevant Entity to the effect that the relevant MAC NAV
Report shall have been prepared with the same reasonable care and skill as could have been
expected from an independent suitably qualified accountant.
2.6 In valuing assets for the purposes of the NAV Test the following shall apply:
2.6.1 Where (a) the assets of the Relevant Entity include Farm Lane (whether or not included in the
SAP at the relevant time) or (b) Farm Lane is held by an entity that is not a Relevant Entity
and is included in the SAP or otherwise is subject to security for the performance of the
Outstanding Obligations the value of such asset shall be deemed for the purposes of the NAV
Test to be not less than 5.7m but if it shall have a higher value then such higher value shall
be used. Such value shall be determined on the basis that the property is free from any rights
of the Council under this Agreement or the Farm Lane Mortgage.
2.6.2 Where (a) the assets of the Relevant Entity include Gibbs Green School (whether or not
included in the SAP at the relevant time) or (b) Gibbs Green School (or the right thereto) is
held by an entity that is not a Relevant Entity and is included in the SAP or otherwise is
subject to security for the performance of the Outstanding Obligations (i) the value of such
asset shall be deemed for the purposes of the NAV Test to be not less than 9.3m but if it
shall have a higher value then such higher value shall be used and (ii) such asset shall be
valued on the basis that the Relevant Entity or other entity as aforesaid shall be the legal
owner free of any rights of the Council under this Agreement with the benefit of the rights to
be granted by the Gibbs Green School Transfer and on the basis that the Relevant Entity is
actually registered at HM Land Registry with title absolute free of any rights of the Council
under this Agreement or the GGS Charge or the GGS Legal Mortgage.
2.6.3 Where the assets of the Relevant Entity include any Existing Home or other property acquired
from a third party (a) the value of such asset shall be deemed for the purposes of the NAV
Test to be not less than purchase price paid for the property (unless acquired pursuant to a
Voluntary Advance Purchase Contract in which event the value of such asset shall be its
market value) but if it shall have a higher value then such higher value shall be used and (b)
such asset shall be valued on the basis that it is free of any rights of the Council under this
Agreement or any charge or other security for the benefit of the Council.
2.6.4 Where the assets of the Relevant Entity include any Existing Home acquired from the Council
then such asset shall be valued at not less than its market value on the basis that Relevant
Entity is the legal and beneficial owner of the property free from any rights of the Council
under this Agreement and that the Relevant Entity is registered at HM Land Registry with title
absolute free of any rights of the Council under this Agreement.
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2.6.5
The foregoing provisions of this clause 2.6 shall apply to the valuation of assets held by
Relevant Entities whether or not such assets are also included within the SAP and whether or
not such assets comprise Existing Homes that are subject to security in favour of the Council
under clause 9.18.
2.6.6 Where any other asset is not held by a Relevant Entity but is included within the SAP then the
Secured Amount applicable to such asset shall be included as part of the gross asset value in
the calculation of the Total NAy.
2.6.7 Where an Existing Home is not held by a Relevant Entity but is subject to security in favour of
the Council under clause 9.18 then the amount so secured shall be included as part of the
gross asset value in the calculation of the Total NAV (and for the avoidance of doubt the
Outstanding Liability shall include the sum so secured).
2.6.8 Where the Council has been granted all the Replacement Home Accommodation Leases in
respect of a Relevant Phase then whether or not the Relevant Phase Completion has
occurred the Buyer shall be deemed to be the owner of the Relevant Demolition Phase with
vacant possession free of any rights of the Council or any third party and the value of the
Relevant Demolition Phase for calculating the Total NAV shall be higher of the value of the
Relevant Demolition Phase calculated on such basis or the aggregate of sums paid to acquire
the Existing Homes on the Relevant Demolition Phase.
2.7
In relation to any Relevant NAV Report:
2.7.1
To the extent that it is possible to do so having used reasonable endeavours the Buyer shall
procure that the Auditor certifying the Total NAV shall provide the Council with an
acknowledgement that the Auditor owes a duty of care to the Council with regard to the
Relevant NAV Report ("NAy Duty of Care")
subject to paragraph 2.7.2 and Provided That
where it is unable to do so having used such reasonable endeavours the proviso to paragraph
2.2.3 shall apply.
2.7.2 The NAV Duty of Care shall be on such terms and conditions as may reasonably be required
by the Council having regard to the purposes for which NAV Reports are required and the
potential losses to the Council should it rely on a NAV Report that has not been prepared with
the required reasonable care and skill to the extent that such terms and conditions can
reasonably be obtained in the relevant market at the time (PROVIDED THAT where the Buyer
alleges that such terms and conditions cannot reasonably be obtained by reason of the cost
thereof this shall only be a ground for failure to obtain such NAV Duty of Care where such
terms can only be obtained at a prohibitive cost being unreasonable and disproportionate to
the nature of the task and responsibility undertaken).
2.7.3
In preparing NAV Reports the Auditor shall be entitled to rely on asset valuations (prepared
by a suitably qualified independent valuer in accordance with the requirements of the relevant
exchange where the Relevant Entity is listed or otherwise to market value pursuant to any
applicable RICS valuation guidance from time to time and such valuations being not more
than 6 months old at the relevant NAV Certification Date) and the other information provided
by an appropriate officer of the Relevant Entity to which the relevant NAV Report relates or
(where applicable) the owner of the relevant asset where such owner is not a Relevant Entity
and no further verification of such matters shall be required other than (in the case of an
Interim NAV Report or a MAC NAV Report only) obtaining any relevant bank confirmation in
relation to the cash balances of such Relevant Entities and liabilities owed by such Relevant
Entities to such bank or banks (it being noted that in the case of Annual NAV Reports such
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cash balances and liabilities shall be determined by reference to the published audited
accounts as provided in paragraph 2.7.5).
2.7.4 If there are contingent liabilities of the Relevant Entity subsisting at the date to which the
Relevant NAV Report is prepared and which would be required by the Accounting Standards
to be noted in any published accounts of the Relevant Entity if the same were to be published
in respect of the period to which the Relevant NAV Report was prepared such liabilities shall
also be noted in the Relevant NAV Report but for the avoidance of doubt shall not be
Liabilities for the purposes of the NAV Test (save to the extent they would have to be
discharged on insolvency).
2.7.5 In the case of any Interim NAV Report the information provided to the Auditor may include
unaudited management accounts but in the case of any Annual NAV Report the Auditor shall
in the case of assessing the NAV of the assets of any Relevant Entity have due regard to the
information in the published audited accounts of any Relevant Entity.
2.7.6 The Buyer shall use reasonable endeavours to procure that any Interim NAV Report shall be
to substantially the same effect as the Outline Interim NAV Report.
2.7.7 The Buyer shall use reasonable endeavours to procure that any MAC NAV Report shall be to
substantially the same effect as the Outline Interim NAy Report but with such changes as
may be necessary to refer to the MAC Certification Date in lieu of the Interim NAV
Certification Date.
2.7.8 The Buyer shall use reasonable endeavours to procure that any Annual NAV Report shall be
to substantially the same effect as the Outline Annual NAV Report.
2.7.9 Each Relevant NAV Report shall be prepared to the NAV Certification Date and confirm the
Total NAV as at that date subject to the qualifications and conditions in this Schedule
2.7.10 Each Relevant NAV Report shall (save in the case of manifest error) be conclusive and final
and binding on the Parties as to the Net Asset Value of the Relevant Entity.
2.7.11 The Buyer may request that the Council confirms whether or not either and/or both of the
requirements in paragraphs 2.7.1 and 2.7.2 have been complied with (or in the case of 2.7.2
will be so complied with should the NAV Duty of Care be in the terms prorosed by the Buyer)
and if such confirmation is not provided within 10 Working Days the matter may be referred to
an Expert pursuant to clause 40.4 for determination.
2.8 Following provision of a Relevant NAV Report the Parties shall endeavour to agree the
amount of the Outstanding Liabilities as at the relevant Assessment Date
("Relevant
Assessment Date") and in default of agreement such Outstanding Liabilities shall be
determined by an Expert appointed pursuant to clause 40.
2.9 As from the date of this Agreement until the first Relevant Assessment Date and thereafter as
from each respective Relevant Assessment Date the Guaranteed Amount shall be the lower
of:
2.9.1 the Initial Guaranteed Amount; and
2.9.2 such amount as shall be equal to 120% of the Outstanding Liabilities of the Buyer at the
Relevant Assessment Date less the Net Asset Value of the Buyer or any permitted Buyers
Novatee (subject to the provisions of Schedule 16) as confirmed as at the Relevant NAV
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Certification Date by a Relevant NAV Report (or as agreed or determined by an Expert
pursuant to clause 40 as provided in paragraph 2.2 of this Schedule).
2.10 The "NAV Test"
shall be deemed to be satisfied where the Total NAV as confirmed as at the
Relevant NAV Certification Date by a Relevant NAV Report (or as agreed or determined by
an Expert pursuant to clause 40 as provided in paragraph 2.2 of this Schedule) equals or
exceeds the lower of (i) the Initial Guaranteed Amount and (ii) such amount as shall be equal
to 120% of the Outstanding Liabilities of the Buyer at the Relevant Assessment Date (or the
Buyers Novatee if the Buyer shall have been substituted by another entity in accordance with
this Agreement as at the Relevant NAV Certification Date).
2.11
A Relevant Entity or the Relevant Entities are:
2.11 i the Buyer (or the Buyers Novatee if the Buyer shall have been substituted by another entity in
accordance with this Agreement as at the Relevant Assessment Date); and
2.11.2 the Guarantor (or any substituted guarantor that may have been provided for the Guarantor in
accordance with this Agreement and which is liable in respect of the Guarantors obligations
under this Agreement as at the Relevant Assessment Date); and
2.11.3 any other entity that may have provided a guarantee or otherwise have a direct liability to the
Council with regard to the Outstanding Liabilities (other than to the extent of only having
provided assets as security for the discharge of such Outstanding Liabilities whether in the
SAP or otherwise) as at the Relevant Assessment Date to the extent such guarantee or direct
liability shall be subsisting as at such date;
2.12
If at any Relevant Assessment Date (a) the Net Asset Value of the Buyer (or the Buyers
Novatee if the Buyer shall have been substituted by another entity in accordance with this
Agreement as at the Relevant Assessment Date) as specified in the Relevant NAV Report
shall alone be sufficient to satisfy the NAV Test then the Guarantor (and any other Relevant
Entity apart from the Buyer or the Buyers Novatee (as the case may be) shall be released
from all liability and no further guarantee or other security shall be required save as provided
in paragraph 2.13 of this Schedule or (b) the NAV Test would be satisfied notwithstanding the
release of any other Relevent Entity nominated by the Buyer then such other Relevent Entity
shall be released from all liability but without prejudice to paragraph 2.13 of this Schedule.
2.13
Notwithstanding that the Guarantor (and any other Relevant Entities) may have been
released from liability pursuant to paragraph 2.12 of this Schedule:
2.13.1 Annual NAV Reports and Interim NAV Reports where required shall continue to be provided
in relation to the Buyer (or the Buyers Novatee (as the case may be);
2.13.2 the Outstanding Liabilities shall continue to be determined; and
2.13.3 the Guaranteed Amount shall continue to be ascertained in accordance with this Schedule,
throughout the Security Monitoring Period.
2.14
If on any Relevant Assessment Date following any release pursuant to paragraph 2.12 the
NAV Test is not satisfied then the Buyer shall if so required by the Council by written notice
procure ("Remedial Action Notice")
that one or more of the actions listed in paragraph 2.17
as decided upon by the Buyer ("Remedial Actions") of this Schedule is taken so that if the
NAV Test were applied on completion of such actions the NAV Test would be satisfied (the
"Remediation Objective")
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2.15
Immediately upon the release of any Relevant Entity from its liability in relation to the liabilities
of the Buyer or any Buyers novatee (as the case may be) the Council shall provide a Liability
Release Certificate to the Relevant Entity confirming such release in such form as may
reasonably be required and the same shall be conclusive (but not necessary) evidence of
such release.
216 If in relation to any Relevant Assessment Date the Relevant NAV Reports show that the NAV
Test shall not be satisfied then the Buyer or the Guarantor shall if so required by the Council
by written notice (Remedial Action Notice") procure that one or more of the Remedial
Actions listed in paragraph 2.17 as decided upon by the Buyer and/or the Guarantor
("Remedial Actions")
is taken so that if the NAV Test were applied on completion of such
actions the NAV Test would be satisfied (the "Remediation Objective")
2.17 The Remedial Actions comprise the following:
2.17.1 the acquisition of additional assets by the Buyer and/or any other Relevant Entities;
2.1 7.2 the reduction of the Liabilities of the Buyer and/or any other Relevant Entities;
2,1 7.3 the substitution of any of the Relevant Entities;
2.17.4 the provision of additional guarantors on similar terms to those applicable in relation to the
Guarantor (which such variations as may be approved by the Council acting reasonably);
2.17.5 the provision of bonds cash deposits or other suitable security in amounts and on terms
acceptable to the Council (acting reasonably) ("Additional Security Arrangements).
2.18
Any dispute as to whether the Council shall be acting reasonably in connection the matters in
paragraph 2.17.4 and 2.17.5 shall be determined by an Expert in accordance with clause 40 if
the Buyer so requires.
2.19 If such Remedial Actions as are required to achieve the Remediation Objective have not been
completed within 6 months of the relevant Remedial Action Notice (as extended by such
period as may be required to settle any dispute under paragraph 2.18) then the Council shall
until such time as such action may in fact be completed have the right to Terminate this
Agreement in accordance with and subject to the provisions of Schedule 16
3 Collateral Security
3.1 Subject to and in accordance with the provisions of this paragraph 3 the Buyer will procure
that specified assets ("the Secured Assets") are subject to security arrangements (the
"Applicable Security Arrangements") as security for the discharge of a proportion of the
Guaranteed Amount such proportion being hereinafter defined in paragraph 3.9 as the
"Minimum Security Cover".
3.2 Each Secured Asset shall be charged with such amount of the Minimum Security Cover as
the Buyer may specify in writing to the Council from time to time subject to the provisions of
this paragraph (the "Secured Amount").
3.3 The Secured Assets may comprise such property, cash deposits, escrow arrangements or
other assets as may be approved by the Council (such approval not to be unreasonably
withheld or delayed).
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3.4
The Secured Assets that shall be subject to the Applicable Security Arrangements from time
to time shall be referred to as the "Security Asset Pool" or "SAP".
3.5
The Buyer may vary the Secured Amount in relation to any Secured Asset and may change
the Secured Assets in the SAP in accordance with the provisions of this Schedule.
3.6 The "Total Security Requirement is that:
3.6.1 the Recognised Value of each Secured Asset in the SAP shall not be less than the Secured
Amount relating to such Secured Asset; and
3.6.2
the aggregate of the Secured Amounts relating to Secured Assets in the SAP shall not be
less than the Minimum Security Cover; and
3.6.3 The aggregate of the Recognised Values of the Secured Assets in the SAP shall not be less
than the Minimum Security Cover.
3.7 The "Recognised Value"
of a Secured Asset is as provided in this paragraph 3.7,
3.7.1
the Recognised Value of a Secured Asset is its value in sterling at the Relevant Asset
Valuation Date as agreed or determined in accordance with the following provisions of this
Schedule.
3.7.2 the Recognised Values of the Initial Assets shall not be less than the values specified in
paragraph 3.25
3.7.3 the Recognised Values of any Buyers Estate Assets shall not in any event be less than the
amount paid for them provided that in the case of an acquisition pursuant to a Voluntary
Advance Purchase Contact the value cannot exceed its market value.
3.8 The "Relevant Asset Valuation Date"
is (a) where the Secured Asset is an asset not already
within the SAP the date on which the relevant asset is included in a "New Secured Asset
Notice" pursuant to paragraph 3.17 and (b) where the Buyer serves notice under paragraph
3.15 requiring the Recognised Value of any Secured Asset in the SAP to be increased and
the current Recognised Value is less than the proposed new Secured Amount the Relevant
Asset Valuation Date shall be the date of such notice
3.9 The "Minimum Security Cover"
is as provided in this paragraph
3.9.1
from the date of this Agreement to the date on which the first Advance Payment is made the
amount of 30m;
3.9.2 from the date on which the first Advance Payment is made to the date on which the second
Advance Payment is made the sum of 1 Sm; and
3.9.3 as from the date on which the second Advance Payment is made the amount shall be zero.
3.10
Forthwith on the earlier of (a) the Minimum Security Cover reaching zero and (b) the payment
of any outstanding sums in relation to Outstanding Liabilities due to the Council on the Expiry
or earlier Termination of this Agreement and (c) when the Buyer (here meaning the entity at
the relevant time liable as principal obligor to perform the obligations of the Buyer under this
Agreement) shall have been released from such liabilities as a result of a novation the Council
shall (i) release all security in relation to all Secured Assets in the SAP and shall execute all
such documents and do all such other things as may be necessary to effect such release and
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(ii) procure that all registrations or notices in relation to such security at the Land Registry
Land Charges Registry or Companies House or otherwise are cancelled
3.11 The Secured Assets may be owned or controlled by any entity and need not be owned or
controlled by Buyer or the Guarantor or any other entity with obligations in connection with
this Agreement.
3.12 For the purposes of assessing whether the Total Security Requirement has been satisfied the
full amount of the Recognised Value of the Secured Assets in the SAP will be taken into
account even if the actual value of any relevant Secured Asset may have fallen since the
Relevant Asset Valuation Date subject and without prejudice to the following provisions of this
Schedule.
3.13 The Secured Amount in relation to any Secured Asset shall be as specified by the Buyer to
the Council from time to time subject to this provisions of this Schedule.
3.14 The Secured Amount may be less than the Recognised Value of the Secured Asset but it may
not be more.
3.15 Subject to clauses 3.15.3 and 3. 15.4
3.15.1 the Buyer may at any time serve notice on the Council requiring that the Secured Amount in
relation to a Secured Asset shall be increased ("Secured Amount Increase Notice") to such
amount as may be specified in the Secured Amount Increase Notice together with a valuation
from a suitably qualified independent valuer that is not less than 6 months old at the date of
the Secured Amount Increase Notice in respect of which the valuer shall owe a duty of care to
the Council (whether by way of the report being addressed to the Council or some other
acknowledgement being provided by the valuer to the Council) on such terms as the Council
may approve acting reasonably having regard to the purposes for which the report is to be
provided and having regard to market practice at the relevant time and provided that any
dispute as to the terms or proposed of the duty of care may be referred by either party to an
Expert for determination under clause 40.
3.15.2 if the Buyer shall do so then
(0
the value specified in such valuation shall be conclusive
evidence of such value and it shall be the Recognised Value and (ii) the Secured Amount
shall be the increased to the Secured Amount specified in the Secured Amount Increase
Notice provided that this is not more than the revised Recognised Value
3.15.3 the Buyer may not increase the Recognised Value of any asset in the SAP relating to that
asset more than once in any period of 12 months but shall be free to adjust the Secured
Amount on the basis of the relevant applicable Recognised Value subject to the other
provision of this Schedule
3.15.4 where the valuation shows an increase in the value of the relevant asset of less than 10% of
its existing Recognised Value then its Recognised Value shall remain at its existing
Recognised Value but without prejudice to the Buyers right to require it to be increased at a
subsequent date in accordance with the forgoing provisions subject to clause 3.15.3 and
provided that where such increase is more than 10% for the whole of such increase shall be
taken into account and not just the amount in excess of 10%
3.16 The Buyer may remove Secured Assets from the SAP in accordance with the following
provisions.
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3.16.1 The effect of such removal shall be that the Secured Amount applicable in relation to the
relevant Secured Asset shall cease to be taken into account when assessing whether the
Total Security requirement shall be satisfied.
3.16.2 The Buyer may only remove a Secured Asset from the SAP if immediately following such
removal the Total Security Requirement shall remain satisfied.
3.16.3 The Buyer may nominate Secured Assets for removal ("Removed Assets") by serving written
notice providing details thereof to the Council ("Removal Notice").
3.16.4 If within 10 Working Days of the service of a Removal Notice the Council shall serve written
notice on the Buyer objecting to such removal on the grounds that the Total Asset
Requirement shall not continue to be satisfied if the relevant Secured Asset is removed from
the SAP (an "Objection Notice")
then in default of agreement as to whether or not this is the
case the matter shall be referred to an Expert for determination pursuant to clause 40 and if
the Council shall fail to serve an Objection Notice within such period the Total Asset
Requirement shall be deemed to continue to be satisfied notwithstanding the removal of the
Removed Assets
3.16.5 Where it is agreed or determined or deemed that the Total Asset Requirement shall continue
to be satisfied notwithstanding the removal of the Removed Assets then (a) the security in
relation thereto shall forthwith cease to have effect and (b) the Council shall as soon as
possible (i) execute all such documents and do all such other things as may be necessary to
effect such release and (ii) procure that all registrations or notices in relation to such security
at the Land Registry Land Charges Registry or Companies House or otherwise are cancelled
3.17 The Buyer may place additional or alternative Secured Assets ("New Secured Assets") in
the SAP in accordance with the following provisions.
3.17.1 The Buyer may serve written notice on the Council (a "New Secured Asset Notice")
specifying (a) the New Secured Assets (b) the proposed Recognised Value of the New
Secured Assets and (c) the proposed Applicable Security Arrangements in relation to each of
the New Secured Assets and (d) the proposed Secured Amount in respect of each of the New
Secured Assets.
3A 7 2 The Recognised Value of the New Secured Assets shall be established in accordance with
the following provisions this Schedule.
3.17.3 The Applicable Security Arrangements in relation to the New Secured Assets shall be
established in accordance with the provisions of paragraphs 3.20 below.
3.17.4 Once the Recognised Values of the New Secured Assets and the Applicable Security
Arrangements in relation thereto have been so established the Buyer shall confirm to the
Council in writing (a "Confirmation Notice")
whether or not the Buyer wishes to include the
New Secured Assets in the SAP and if the Buyer confirms in such notice that the Buyer does
wish to include the New Secured Assets in the SAP then Parties shall execute such
documents and do all such other things as may be necessary to bring such Applicable
Security Arrangements into effect as soon as possible.
3.17.5 Once the Applicable Security Arrangement have been brought into effect (a) the New
Secured Assets shall form part of the SAP (b) the Secured Amounts specified in relation to
the New Secured Assets shall be taken into account in determining whether the Total Security
Requirement shall be satisfied and (c) the Recognised Values of the New Secured Assets
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established under paragraphs 3.18 and 3.19 shall be the Recognised Values of the New
Secured Assets for the purposes of this Agreement.
3.18 Subject to paragraph 3.19 and 3.25 the Recognised Value of any assets in sterling (other
than sterling itself) shall be the value of the asset at the Relevant Asset Valuation Date as
agreed between the Parties or in default of agreement such value as shall be determined by
an Expert in accordance with clause 40 on the application of either party.
3.19 In the case of any applicable property the Buyer may provide to the Council with (a) a
valuation from a suitably qualified independent valuer that is not less than 6 months old at the
Relevant Asset Valuation Date and (b) a duty of care undertaking from the valuer to the
Council and if the Buyer shall do so then the value specified in such valuation shall be
conclusive evidence of such value and shall be the Recognised Value.
3.20 In relation to any Secured Assets the Applicable Security Arrangement shall be as approved
by the Council (such approval not to be unreasonably withheld or delayed) provided that:
3.20.1 in relation to real property a fixed legal charge for the relevant Secured Amount in similar
terms to the Standard Property Mortgage shall be deemed to be approved.
3.20.2 Any dispute in relation to any such approval shall be determined by an Expert pursuant to
clause 40.
3.21 On the date of this Agreement the SAP shall comprise:
3.21.1 Gibbs Green School subject to the GGS Charge
3.21 .2 Farm Lane as subject to the Farm Lane Mortgage
3.21 .3 The Northern Access Road subject to the NAR Mortgage
("the Initial Assets")
3.22 The Secured Amounts in respect of the Initial Assets shall be as follows:
Farm Lane - 5.7m
Gibbs Green School - 9.3m
Northern Access Road - 15m
3.23 The Farm Lane Mortgage shall be completed immediately following the transfer of Farm Lane
to the Buyer pursuant to this Agreement.
3.24 The NAR Mortgage and the GGS Charge shall be completed immediately following exchange
of this Agreement.
3.25 The Council confirms that for the purposes of the SAP the Recognised Values of the Initial
Assets as at the date hereof is not less than the following:
Farm Lane - 5.7m
Gibbs Green School - 9.3m
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Northern Access Road f 18m
3.26 The Council further confirms that the Initial Assets and the relevant Applicable Security
Arrangements referred to in this Schedule in relation to the Initial Assets and the respective
titles thereto are accepted by the Council and that the Council shall have no right or claim with
regard to any such matters.
3.27 For the avoidance of doubt
3.27.1 The provisions of paragraph 3.15 shall apply to the Initial Assets so that their Recognised
Values may be increased but their Recognised Values shall be deemed always to be not less
than their Initial Recognised Values specified in paragraph 3.25.
3.27.2 The bases of valuation specified in paragraph 2.6 shall also apply to the valuation of the
relevant assets for the purposes of the SAP
3.28 The following provisions apply in relation to Gibbs Green School:
3.28.1 The GGS Charge creates a charge over the Buyers beneficial interest in Gibbs Green School
created by this Agreement.
3.28.2 If the GGS Charge shall still be subsisting at the date of the transfer of Gibbs Green School to
the Buyer or its nominee pursuant to this Agreement completion of the transfer of Gibbs
Green School to the Buyer or its nominee pursuant to this Agreement the GGS Charge will be
released on such completion and the Council shall as soon as possible (i) execute all such
documents and do all such other things as may be necessary to effect such release and (ii)
procure that all registrations or notices in relation to such security at the Land Registry Land
Charges Registry or Companies House or otherwise are cancelled
3.28.3 The Buyer may by written notice served on the Council on or before such completion elect
that Gibbs Green School shall continue to be included in the SAP and if the Buyer makes
such an election then the Buyer (or the nominee as the case may be) and the Council shall
enter into the GGS Legal Mortgage immediately following completion of the transfer of Gibbs
Green School as aforesaid
3.28.4 The property shall be deemed to have remained in the SAP at its Recognised Value
immediately prior to the release of the GGS Charge and completion of the GGS Legal
Mortgage and the provisions of this Schedule shall apply as if the property had been included
in the SAP subject to such new charge as from the date hereof in lieu of the property as
subject to the GGC Charge
3.28.5 For the avoidance of doubt the provisions of this paragraph 3.28 shall be without prejudice to
the requirement that the Buyer maintains the Minimum Security Cover in accordance with the
provisions of this Schedule
4 Substitution of Security
Without prejudice to any other provision of this Schedule:
4.1 Another guarantor or guarantors may be substituted at any time for any entity guaranteeing
the obligations of the Buyer with the prior consent of the Council (such consent not be
unreasonably withheld or delayed) provided that consent shall be deemed granted if the
provisions of paragraph 4.3 are complied with.
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4.2 A substitute guarantor or guarantors may be provided as follows:
4.2.1 The Buyer may apply to the Council for consent to substitute any guarantor as aforesaid
together with (a) NAV Reports for the Relevant Entities who are not to be substituted and also
for the Buyer and/or (b) draft documentation by which any such substitution is to be effected
("Guarantor Substitution Documents)
4.2.2 in this case the Relevant Assessment Date for assessing the Outstanding Liabilities of the
Buyer and determining whether the NAV Test shall be satisfied shall be 5 Working Days after
the provision of the said NAV Reports.
4.2.3 The Parties shall endeavour to agree whether the NAV Test so applied shall be satisfied and
default of agreement the matter shall be determined by an Expert in accordance with clause
40.
4.2.4 if it shall be agreed or determined that the NAV Test so applied shall be satisfied then the
consent of the Council shall be deemed to have been given subject to settlement of the
Guarantor Substitution Documents.
4.2.5 The parties shall endeavour to agree the Guarantor Substitution Documents as soon as
possible and in default of agreement the same shall be determined by an Expert in
accordance with clause 40.
4.2.6 Following agreement or determination of the terms of the Guarantor Substitution Documents
as aforesaid the Council shall complete such Guarantor Substitution Documentation within 10
Working Days of the provision of engrossments to the Council.
4.3 An alternative security package to that provided for in this Schedule (including without
limitation the Collateral Security arrangements under paragraph 3 of this Schedule as well as
any guarantees or other security) or that may otherwise subsisting from time to time pursuant
to the provisions of this paragraph such as one comprising performance bonds, cash deposits
or other security (with or without a guarantee or guarantees in addition) (together the
"New
Security Package") may be provided to replace the existing security package with the prior
consent of the Council (such consent not be unreasonably withheld or delayed) provided that
the Coundil will not withhold its consent if it is satisfied (acting reasonably) that the New
Security Package (together with the Net Asset Value of the Buyer) provides sufficient
covenant strength or adequate security to meet or exceed the Guaranteed Amount as at the
date of the proposed substitution.
4.4 The Buyer may apply for consent under paragraph 4.3 together with (a) such financial and
other information and/or (b) draft documentation whereby the New Security Package is to be
brought into effect in substitution for the relevant existing arrangements ("New Security
Documentation") as may reasonably be required for the Council to determine whether or not
to grant such consent ("New Security Package Consent Application")
4.5 in default of agreement as to whether the Council can reasonably withhold consent to the
adoption of the New Security Package and/or the terms of the New Security Documentation
the matter shall at the request of the Buyer be referred to an Expert for determination
pursuant to clause 40.
4.6 if so required by the Buyer following agreement or determination of the form of any New
Security Documentation the Council shall enter into such documentation and do all such other
things as may reasonably be required by the Buyer to give effect thereto as soon as possible.
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4.7
Where consent is required from the Council pursuant to paragraph 4.1 or 4.3 it is a condition
of consent that the Buyer reimburse or procure the reimbursement of the Councils
reasonable and proper costs which are reasonably and properly incurred in relation to the
application for such consent but without prejudice to any award of costs by the Expert in the
event of a referral to the Expert.
Part II
Outline Form of Interim NAV Report
We refer to the Conditional Land Sale Agreement dated # between The Mayor and
Burgesses of the London Borough of Hammersmith and Fulham (1) EC Properties LP (2)
and Earls Court Limited (3) ("CLSA")
2.
This in an Interim NAV Report required pursuant to the CLSA.
3.
The "Relevant Entities" for the purposes of this report are #
4.
The Interim Accounting Date for the purposes of this report is #
5.
We have reviewed:
5.1
financial information provided to us by the Relevant Entities which has not been audited
5.2
a list of the properties (if any) comprised in the Secured Asset Pool (SAP") referred to in the
CLSA as at the Interim Accounting Date which are not held by any Relevant Entity and the
Secured Amounts relating to each of the same and which we have been required to take
into account.
5.3
a list of the properties (if any) comprised in the SAP which are held by any Relevant Entity
as at the Interim Accounting Date and the Secured Amounts with regard to each of these) in
respect of which we have been required to take into account the Secured Amounts relating
to the same in lieu of their actual value.
5.4
a list of properties owned by any Relevant Entity charged to the Council under clause 9.17
of the CLSA as at the Interim Accounting Date and the amount secured on such properties
where we have been required to take into account such sums in lieu of the actual value of
such properties.
5.5
a list of properties not owned by any Relevant Entity charged to the Council under clause
9.17 of the CLSA as at the Interim Accounting Date and the amount secured on such
properties.
5.6
a list of the properties (if any) held by any Relevant Entity in respect of which we have been
required to take into account their actual value (as opposed to any other amount) as
evidenced by valuations provided to us that are not more than 6 months old as at the Interim
Accounting Date.
5.7
valuations provided to us which were less than 6 months old at the Interim Accounting Date
in respect of properties referred to in clause 5.6.
5.8
information provided by or on behalf of [ ] confirming the value of any other security
available to the Council for the discharge of the Outstanding Liabilities as defined in the
CLSA
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6. We confirm that
6.1 the total of the Secured Amounts under clause 5.2 is #
6.2 the total of the Secured Amounts under clause 5.3 is L#
6.3 the total required to be taken into account under clause 5.4 is L#
6.4 the total required to be taken into account under clause 5.5 is L#
6.5 the total required to be taken into account under clause 5.6 (as supported by the valuations
required under clause 5.7) is L#
6.6 the total required to be taken into account under clause 5.8 is L#
7 Based on the above information and directions we confirm
7.1 (a) the total value of the assets of each of the Relevant Entities calculated as required above
and (b) the Liabilities of the Relevant Entities (as such "Liabilities" are defined in the CLSA)
and (c) the NAV of the Relevant Entities (being (a) - (b) ) is as follows:
Relevant Entity Total Value of Liabilities NAV
Assets
7.2 The "Total NAV" for the purposes of the CLSA as at the Interim Accounting Date is
Lx this
being the aggregate of
(a) the aggregate NAV of the Relevant Entities as calculated under clause 7.1; and
(b) any Secured Amounts in relation to properties not held by any Relevant Entity under
clause 5.2; and
(c) the amount secured under clause 9.17 of the CLSA on properties not held by any
Relevant Entity; and
(d) the value of any other security falling within clause 5.8
8. In relation to contingent liabilities of any Relevant Entity where (in accordance with the
CLSA) these have not been included as Liabilities" and deducted from the gross value of
the assets of the Relevant Entity under clause 7.1 we confirm based on the information
provided to us that with regard to those contingent liabilities that would be required by the
accounting standards adopted by the Relevant Entity to be noted on any published accounts
of the Relevant Entity that the amount of such liabilities is as set out in the table below:
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Relevant Entity
Amount of Contingent Liabilities Required
to be Noted

9.
Where details of bank accounts of any Relevant Entity have been provided to us and such
enquiries have been authorised by the Relevant Entity we have made our own enquiries of
the relevant banks and have confirmed (a) the amount of any bank balances held for the
Relevant Entity and (b) the liability of the Relevant Entity to the relevant bank. The amount
of such cash balances has been taken in to account in calculating the gross assets of the
relevant Entity (notwithstanding a different amount may have been shown in any financial
information provided by the Relevant Entity) and in so far as the liabilities to the bank fall to
be deducted from the gross asset value as "Liabilities" as defined in the CLSA the amount of
such liabilities as verified has been deducted (notwithstanding a different amount may have
been shown in any financial in formation provided by the relevant Entity)
Outline Form of Annual NAV Report
We refer to the Conditional Land Sale Agreement dated # between The Mayor and
Burgesses of the London Borough of Hammersmith and Fulham (1) EC Properties LP (2)
and Earls Court Limited (3) ("CLSA")
This in an "Annual NAV Report" required pursuant to the CLSA.
The "Relevant Entities" for the purposes of this report are #
4.
The Annual Accounting Date for the purposes of this report is #
5.
We have reviewed:
5.1
audited accounts and other financial information provided to us by the Relevant Entities
5.2
a list of the properties (if any) comprised in the Secured Asset Pool ("SAP") referred to in the
CLSA as at the Annual Accounting Date which are not held by any Relevant Entity and the
Secured Amounts relating to each of the same and which we have been required to take
into account.
5.3
a list of the properties (if any) comprised in the SAP which are held by any Relevant Entity
as at the Annual Accounting Date and the Secured Amounts with regard to each of these) in
respect of which we have been required to take into account the Secured Amounts relating
to the same in lieu of their actual value
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5.4 a list of properties owned by any Relevant Entity charged to the Council under clause 9.17
of the CLSA as at the Annual Accounting Date and the amount secured on such properties
where we have been required to take into account such sums in lieu of the actual value of
such properties
5.5 a list of properties not owned by any Relevant Entity charged to the Council under clause
9.17 of the CLSA as at the Annual Accounting Date and the amount secured on such
properties
5.6
a list of the properties (if any) held by any Relevant Entity in respect of which we have been
required to take into account their actual value (as opposed to any other amount) as
evidenced by valuations provided to us that are not more than 6 months old as at the Annual
Accounting Date
5.7 valuations provided to us which were less than 6 months old at the Annual Accounting Date
in respect of properties referred to in clause 5.6
5.8 information provided by or on behalf of [ ] confirming the value of any other security
available to the Council for the discharge of the Outstanding Liabilities as defined in the
CLSA
6. We confirm that:
6.1 the total of the Secured Amounts under clause 5.2 is #
6.2 the total of the Secured Amounts under clause 5.3 is #
6.3 the total required to be taken into account under clause 5.4 is #
6.4 the total required to be taken into account under clause 5.5 is #
6.5 the total required to be taken into account under clause 5.6 (as supported by the valuations
required under clause 5.7) is #
6.6 the total required to be taken into account under clause 5.8 is #
7. Based on the above information and directions and having due regard to the audited
accounts we confirm:
7.1 (a) the total value of the assets of each of the Relevant Entities calculated as required above
and (b) the Liabilities of the Relevant Entities (as such Liabilities are defined in the CLSA)
and (c) the NAV of the Relevant Entities (being (a) - (b) ) is as follows:
Relevant Entity Total Value of Liabilities NAV
Assets
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7.2
The "Total NAV" for the purposes of the CLSA as at the Annual Accounting Date is Lx this
being the aggregate of
(a)
the aggregate NAV of the Relevant Entities as calculated under clause 7.1; and
(b)
any Secured Amounts in relation to properties not held by any Relevant Entity under
clause 5.2; and
(c)
the amount secured under clause 9.17 of the CLSA on properties not held by any
Relevant Entity; and
(d)
the value of any other security falling within clause 5.8

8.
In relation to contingent liabilities of any Relevant Entity where (in accordance with the
CLSA) these have not been included as Liabilities" and deducted from the gross value of
the assets of the Relevant Entity under clause 7.1 we confirm based on the information
provided to us that with regard to those contingent liabilities that would be required by the
accounting standards adopted by the Relevant Entity to be noted on any published accounts
of the Relevant Entity that the amount of such liabilities is as set out in the table below:
Relevant Entity
Amount of Contingent Liabilities Required
to be Noted
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