# HEADS OF TERMS
## Status and important explanation
Date: 14 February 2028
These heads of terms record the basis on which the parties intend to negotiate a share purchase agreement. They are a fictional worked example for a private transaction in England and Wales and are not a substitute for legal, tax, financial, employment, competition, intellectual-property or regulatory advice. Except for clauses 2, 3, 4, 12, 13 and 14, which are expressly binding, these heads are not intended to be a contract to sell or buy shares. Neither Northmere nor either Seller is obliged to complete unless and until a definitive share purchase agreement is signed and exchanged by authorised signatories. Quayside Logic Limited joins these heads only for the binding obligations expressly stated to apply to it. A court will determine legal effect from the wording and circumstances, not from this heading alone.
## 1. Parties and transaction
Northmere Systems Limited, company number 11840276, registered office at 8 Deansgate Quay, Manchester M3 4EN, email legal@northmere.example.test, is the proposed buyer, called Northmere. Its managing director is Clara Eleanor Shaw. The proposed sellers are Aidan Robert Mercer of 19 Lynton Avenue, Didsbury, Manchester M20 3HQ, email aidan.mercer@example.test, and Priya Nisha Kapoor of 4 Alder Street, Salford M5 2TR, email priya.kapoor@example.test, together called the Sellers. Each Seller owns 50 per cent of the issued ordinary shares in Quayside Logic Limited, company number 09277164, registered office at 21 Whitworth Street, Manchester M1 3BE, email board@quaysidelogic.example.test, called the Company. The Company joins as a party to clauses 2, 3, 4, 12, 13 and 14 only, acting through its authorised director, Daniel Edward Walsh.
Northmere proposes to acquire all 10,000 issued ordinary shares in the Company, fully paid and free from any mortgage, charge, lien, option, encumbrance or third-party right. The Sellers will sell 5,000 shares each. The transaction is a share acquisition, not an acquisition of selected assets. The Company will remain the employer, contracting party and owner of its assets after completion.
For these heads, Business Day means a day other than a Saturday, Sunday or bank holiday in England and Wales on which banks in London are open for business.
## 2. Binding confidentiality and permitted disclosure
Each recipient must keep these heads, the negotiations and all non-public information about the other party and the Company confidential. Information may be disclosed only to a professional adviser, lender, insurer, employee or director who needs it for this transaction and is bound by confidentiality, or where disclosure is required by law, a stock-exchange rule, a court or a regulator. A recipient remains responsible for a permitted recipient's breach. Confidentiality does not apply to information already lawfully known without restriction, independently developed, public other than through breach, or lawfully received from a third party.
The duty begins on the date of signature and lasts for three years. A party may seek an injunction or other equitable remedy for threatened or actual misuse, in addition to any damages. The Sellers may continue ordinary Company operations and Northmere may review information solely to evaluate, finance and implement this acquisition. Neither party may announce the transaction without the other's written consent, except where a mandatory disclosure applies.
## 3. Binding exclusivity
From the date of the last signature of these heads until 5.00 pm on 30 April 2028, the Sellers and the Company must not solicit, encourage, negotiate or provide information for a competing sale, investment, merger or material disposal involving the Company's shares or business. The last signature date is the date on which the final one of Northmere, the Sellers and the Company signs these heads. They must promptly refer an unsolicited approach to Northmere and disclose its identity and the material terms received. They may reject an approach without revealing Northmere's confidential information.
The Sellers must ensure that no adviser, employee or agent knowingly circumvents this restriction. Northmere may end exclusivity by written notice at any time. If a definitive agreement is signed before 30 April, the restriction ends on completion or termination of that agreement. The parties acknowledge that exclusivity is a standalone binding promise and not an obligation for Northmere to buy.
## 4. Binding costs and access
Each party pays its own legal, accounting, tax, financing and other transaction costs. The Company pays only costs approved by its board in the ordinary course. No party may commit another party to a fee. The parties will provide reasonable access for diligence, subject to customer confidentiality, data protection, information-security controls, privilege and a written request identifying the records sought.
## 5. Principal price and allocation
The indicative enterprise value is £2,400,000 on a cash-free, debt-free basis, assuming normalised working capital of £300,000 at completion. The indicative equity price is the enterprise value of £2,400,000 plus completion cash, less financial debt and debt-like items, plus or minus the difference between actual and target working capital. For example, if completion cash is £180,000, debt-like items are £420,000 and working capital is £330,000, the illustrative equity price is £2,400,000 + £180,000 - £420,000 + £30,000 = £2,190,000. That calculation is an illustration and is not a fixed price.
The definitive agreement will contain an agreed completion statement and a post-completion dispute process. The base price will be paid in pounds sterling by same-day cleared funds at completion, 90 per cent to the Sellers in equal shares and 10 per cent, being £240,000 of the indicative enterprise value before any adjustment, placed in an escrow account for 18 months to secure warranty claims. The final escrow amount and release mechanics will be set out in the definitive agreement and will not reduce any amount required by law to be paid to a creditor.
## 6. Earn-out
Subject to the definitive agreement, Northmere will pay an earn-out of up to £400,000 for the 12-month period beginning on the day after completion and ending on the first anniversary of completion. If completion occurs on the target date of 3 May 2028, the earn-out period is 4 May 2028 to 3 May 2029, inclusive. If completion occurs on another date, those two dates move with it so that the period is exactly 12 months post-completion. The earn-out is measured by the Company's recurring annual revenue at the end of that period, meaning the annualised value of contracted, active customer subscription and support revenue expected to recur for at least the following 12 months, excluding one-off projects, implementation fees, hardware, VAT, refunds, intercompany sales and cancelled or delinquent contracts. It will be £200,000 if recurring annual revenue is £3,000,000 and £400,000 if it is £3,600,000 or more, with straight-line interpolation between those thresholds. Thus recurring annual revenue of £3,300,000 produces £300,000: £200,000 + one-half of £200,000. No earn-out is payable below £3,000,000. The calculation must use the Company's consistently applied accounting policies and be supported by customer contracts, invoices and bank receipts.
Northmere will operate the Company in good faith but may make reasonable commercial decisions, including investment, pricing and product changes. It must not deliberately divert an existing Company customer solely to suppress earn-out revenue. A certificate with the calculation and supporting management accounts will be delivered within 45 days after the last day of the applicable 12-month earn-out period. The Sellers have 20 Business Days to challenge it with reasons. An unresolved challenge will be referred to an independent chartered accountant, acting as expert, whose decision is final except for manifest error. The final agreement will state payment timing, tax treatment, leaver rules and treatment of a sale before the earn-out period.
## 7. Diligence programme
The Sellers will provide a secure data room by 21 February 2028. Diligence will cover the Company's articles and registers, accounts for years ended 31 March 2025, 2026 and 2027, management accounts to 31 January 2028, bank statements, debt, tax, customer and supplier contracts, licences, open-source notices, patents, trade marks, source-code ownership, information security, insurance, employees, pensions, claims, property, data processing and compliance. The Company's principal product is the Quayside Fleet Console, licensed by 186 business customers.
The Sellers must identify any material exception fairly and promptly. Northmere may withdraw before signing if diligence reveals a material undisclosed liability, an unassignable key contract, defective intellectual-property title, a serious cyber incident, tax arrears exceeding £50,000 or a change that makes the proposed transaction commercially unacceptable. Withdrawal is not a breach of the non-binding price or timetable provisions.
## 8. Definitive agreement and conditions
The definitive share purchase agreement is expected to include title and capacity warranties, business warranties, tax covenant, limitations, indemnities for identified matters, restrictive covenants, completion accounts, escrow, transition assistance and disclosure letter. Completion is conditional on satisfactory diligence, agreed financing, board approval, any required customer or regulatory consent, no material adverse change agreed in the definitive contract, and delivery of share certificates and stock transfer forms.
The target signing date is 10 April 2028 and the target completion date is 3 May 2028, in each case subject to agreement and satisfaction of conditions. These dates are estimates only. The Sellers will continue the business in the ordinary course, preserve staff and customer relationships, maintain insurance and not issue shares, incur unusual debt or dispose of material assets without Northmere's prior written consent, except for ordinary-course transactions below £25,000.
## 9. Management and employment
Aidan will provide six months of handover services at no additional salary beyond his existing remuneration. Priya will provide twelve months of product and customer-transition services on terms to be agreed. The definitive agreement will deal with any consultancy, restrictive covenants and payment for work. Existing employees remain employed by the Company; this transaction is intended to be a share sale, so the parties will obtain advice on whether the Transfer of Undertakings (Protection of Employment) Regulations 2006, commonly called TUPE, are engaged by any connected change in service provision. No term promises a particular redundancy or immigration outcome.
## 10. Tax and insurance
The Sellers bear their own capital gains, income and other personal tax. The Company bears its corporation tax and operating liabilities. The parties will obtain independent tax advice on stamp taxes, deferred consideration, earn-out treatment, employment-related securities and VAT. The Company will maintain cyber, professional indemnity, employer's liability and public liability insurance at current levels until completion and the definitive agreement will specify run-off arrangements.
## 11. No partnership or agency
The negotiations do not create a partnership, joint venture, agency, fiduciary relationship or authority for either party to bind another. Each party may stop negotiations before signing without liability for the non-binding provisions, subject to the binding confidentiality, exclusivity, access and costs obligations and any liability that cannot lawfully be excluded.
## 12. Binding notices
A notice under any binding provision, including a dispute notice under clause 13, must be in writing and sent by hand, pre-paid recorded post or email to the relevant party's address or email stated in clause 1, with a copy to its solicitor only if that solicitor has been notified in writing. A hand-delivered notice is received when left at the stated address between 9.00 am and 5.00 pm on a Business Day. A recorded-post notice is received at 9.00 am on the second Business Day after posting unless actually received earlier. An email is received when sent, provided the sender receives no delivery-failure message and sends it before 5.00 pm on a Business Day; an email sent after that time is received at 9.00 am on the next Business Day. These deemed-receipt rules apply because the parties agree that email is an accepted service method, not merely a courtesy copy.
## 13. Governing law and jurisdiction
The binding provisions are governed by the law of England and Wales. The courts of England and Wales have exclusive jurisdiction over them, subject to a party seeking urgent injunctive relief in any court with power to grant it. Any dispute notice under this clause 13 must be served under clause 12. The parties will first meet by video conference within five Business Days after that validly served dispute notice and will consider mediation, but no delay is required where limitation or urgent relief is at risk.
## 14. Signatures and authority
The signatories confirm authority to sign the binding provisions and understand the distinction between those provisions and the non-binding commercial intentions. Electronic signatures and counterparts are permitted.
Signed for Northmere Systems Limited by Clara Eleanor Shaw, Managing Director:
Signature: __________________________
Date: 14 February 2028
Witness signature: __________________________
Witness name: George Martin Ellis
Witness address: 12 Brookfield Close, Sale, Cheshire M33 4QS
Witness occupation: Chartered accountant
Signed by Aidan Robert Mercer:
Signature: __________________________
Date: 14 February 2028
Witness signature: __________________________
Witness name: Louise Hannah Price
Witness address: 7 Park View, Didsbury, Manchester M20 2WL
Witness occupation: Solicitor
Signed for and on behalf of Quayside Logic Limited by Daniel Edward Walsh, Director, for the binding provisions identified in clause 1:
Signature: __________________________
Date: 14 February 2028
Witness signature: __________________________
Witness name: Harriet Louise Green
Witness address: 15 Elm Grove, Wilmslow, Cheshire SK9 2JL
Witness occupation: Company secretary
Signed by Priya Nisha Kapoor:
Signature: __________________________
Date: 14 February 2028
Witness signature: __________________________
Witness name: Louise Hannah Price
Witness address: 7 Park View, Didsbury, Manchester M20 2WL
Witness occupation: Solicitor