SHARE PURCHASE AGREEMENT
by and among
XXXXX XXXXXXX XXXXX; XXX XXXXX; TRUSTEES OF THE XXX XXXXX (LIFE INTEREST)
SETTLEMENT 1997; TRUSTEES OF THE XXXXX XXXXXXX XXXXX (DISCRETIONARY) SETTLEMENT
1997; XXXXXXX XXXXX; XXXXX XXXXX;
BROOKSIDE SYSTEMS AND PROGRAMMING LIMITED
and
DISPATCH MANAGEMENT SERVICES LLC
Sale of all of the Outstanding Stock of
Brookside Systems and Programming Limited t/a Fleetway Systems
20 August 1997
Table of Contents
Article and Section Page
------------------- ----
1. DEFINITIONS 1
1.01 Definitions 1
2. SALE AND PURCHASE OF SHARES 4
3. CLOSING; PAYMENTS 5
3.01 The Closing and the Closing Date 5
30.2 Loan 5
3.03 Payment of Purchase Price 5
3.04 Payment of Costs 5
3.05 Deliveries at the Closing 5
3.06 Additional Actions at Closing 6
4. TERMINATION 6
4.01 Termination 6
4.02 Effect of Termination 7
5. ADDITIONAL UNDERTAKINGS PRIOR TO CLOSING 7
5.01 Business in Ordinary Course 7
5.02 Delivery of Monthly Financial Statements and 9
Supplemental Disclosure Schedules
5.03 Breaches 10
5.04 Consummation of Agreement 10
5.05 Access to Information 10
5.06 Non-solicitation Pending Closing 11
5.07 Additional Agreements 11
5.08 Notification of Certain Matters 11
5.09 Initial Public Offering Documents 11
ii
Article and Section Page
------------------- ----
6. CONDITIONS PRECEDENT TO CLOSING 12
6.01 Conditions to Obligations of All Parties 12
6.02 Conditions to Obligations of Buyer 12
6.03 Conditions to Obligations of Seller 13
7. REPRESENTATIONS AND WARRANTIES OF SELLERS 13
AND THE COMPANY
7.01 Company Organization; Qualification and Shares 13
7.02 Seller Power and Authority; 15
Ownership
7.03 Subsidiaries 16
7.04 Financial Information 16
7.05 Absence of Material Changes 16
7.06 Licenses 17
7.07 Tax Matters 17
7.08 Compliance with Laws 18
7.09 Litigation 19
7.10 Properties; Contracts; Leases and Other 19
Agreements
7.11 Employee Matters; Benefit Plans 21
7.12 Title to and Condition of Properties; 22
Intellectual Property
7.13 Insurance 24
7.14 Environmental Matters 24
7.15 No Undisclosed Liabilities or Obligations 24
7.16 Product Warranties 25
7.17 Distributions 25
7.18 Related Party Transactions 25
7.19 Investment Purpose 25
7.20 Statements and Disclosures True and Correct 25
8. REPRESENTATIONS AND WARRANTIES OF BUYER 25
8.01 Organization 25
8.02 Authorization; No Violations of Laws or Agreements 25
8.03 Investment Purposes Only 26
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Article and Section Page
------------------- ----
9. ADDITIONAL UNDERTAKINGS SUBSEQUENT TO CLOSING 26
9.01 Assistance of Sellers 26
9.02 Tax Returns 26
10. INDEMNIFICATION 26
10.01 Seller's Indemnity 26
10.02 Limitation on Sellers' and Company's Liability 27
10.03 Other Limitations 28
10.04 Notice to Sellers; Access; Defense 30
11. RESTRICTIVE COVENANTS 30
11.01 Covenant Not to Compete 30
11.02 Xxx-Xxxxxxxxxx 00
11.03 Non-Solicitation 32
11.04 Injunctive Relief 32
11.05 Extension of Restrictive Period 33
11.06 Judicial Reformation 33
12. MISCELLANEOUS 33
12.01 Entire Agreement; No Third Party 33
Beneficiaries; Modification
12.02 Governing Law 33
12.03 Severability 34
12.04 Binding Agreement 34
12.05 Specific Performance 34
12.06 Fees and Expenses 34
12.07 Publicity 34
12.08 Sellers' Consents 35
12.09 Notices 35
12.10 Survival 35
12.11 Waivers 35
12.12 Risk of Loss 35
12.13 Interpretation 36
12.14 Assignment 36
12.15 Counterparts 36
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT ("Agreement"), is made as of the 20th day of
August, 1997, by and among XXXXX XXXXXXX XXXXX, XXX XXXXX, XXXXXXX XXXXX and
XXXXX XXXXX, adult individuals, TRUSTEES OF THE XXX XXXXX (LIFE INTEREST)
SETTLEMENT 1997, and TRUSTEES OF THE XXXXX XXXXXXX XXXXX (DISCRETIONARY)
SETTLEMENT 1997 (individually a "Seller" and collectively, "Sellers"); BROOKSIDE
SYSTEMS AND PROGRAMMING LIMITED, t/a Fleetway Systems, a limited company formed
under the laws of England and Wales (the "Company"), and DISPATCH MANAGEMENT
SERVICES LLC, a limited liability company formed under the laws of the State of
Nevada, United States of America ("Buyer").
Background
Buyer is in the business of providing time critical, on-demand,
point-to-point delivery services. The Company is in the business of developing
and marketing software to the courier industry. Sellers collectively own all of
the outstanding shares of the Company. Buyer and Sellers have agreed that Buyer
shall purchase all of the outstanding ordinary shares of the Company from
Sellers on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. Definitions.
1.01 Definitions. The following terms shall have the meanings set
forth below when capitalized herein:
(a) "Affiliate" shall mean, as to any Person, any other Person
controlled by, under the control of, or under common control with, such Person.
As used in this definition, "control" shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise), provided that, in any event, any Person
which owns or holds directly or indirectly 5% or more of the voting securities
or 5% or more of the partnership or other equity interests of any other Person
will be deemed to control such other Person.
(b) "Benefit Plans" shall mean any profit sharing, group insurance,
medical and/or hospitalization, stock option, pension, retirement, bonus,
deferred compensation, stock bonus or stock purchase plan, or collective
bargaining agreements, contracts or other arrangements under which pensions,
deferred compensation or other retirement benefits are being paid or may become
payable by the Company, or any other employee welfare or benefit agreements,
plans or arrangements, or any employee benefit plans or deferred compensation,
bonus, stock or incentive plans, or other employee benefit or fringe benefit
programs, established for the benefit of the Company's former or current
officers, directors or employees, including each trust or other agreement with
any custodian or any trustee for funds held under any such agreement, plan or
agreement.
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(c) "Books and Records" shall mean all books and records of the
Company for the period prior to the Closing Date, including customer lists,
reports, plans, projections and advertising and marketing materials and
financial and accounting books and records;
(d) "Business Day" shall mean any day other than a Saturday, Sunday or
a statutory or public holiday in England and Wales or the United State of
America.
(e) "Buyer Operating Agreement" means the Dispatch Management Services
LLC Operating Agreement dated December 1, 1996 and the attachments thereto.
(f) "Closing" shall mean the transfer by Sellers to Buyer of the
Shares in exchange for the Purchase Price pursuant to Article 3.
(g) "Closing Date" shall mean the date on which the Closing is
completed.
(h) "Company" shall mean Brookside Systems and Planning Limited, a
company incorporated in England and Wales (registered number 1484511) whose
registered office is at c/o Xxxxxx Xxxxx & Partners, 00 Xxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxxxx, Xxxxxxx XX00XX.
(i) "Company Confidential Information" shall mean all documentation,
know-how and information relating to the Company's past, present and future
business which is unique to the Company, and including without limitation (i)
proprietary computer software, (ii) business methods, (iii) practices, (iv)
marketing strategies and plans, (v) financial information, (vi) projections
(vii) operations manuals, (viii) bulletins, (ix) directories, (x) memoranda,
(xi) production processes, (xii) devices, (xiii) techniques, (xiv) data bases,
(xv) tables, (xvi) calculations, (xvii) letters, (xviii) internal specifications
and testing procedures, (xix) price and fee lists, pricing methodologies and
bidding procedures, (xx) suppliers and customers, including customer lists, and
materials relating to the Company's relationship with its suppliers and
customers, (xxi) information provided to the Company by its customers; (xxii)
billing and collection practices and procedures and (xxiii) any other
confidential information which is not generally known to the public, which if
misused or disclosed, could have a reasonable possibility of adversely affecting
the Company's business.
(j) "Disclosure Documents" shall mean all agreements and documents
referred to in any of the Disclosure Schedules, together with all other
agreements and documents disclosed by Sellers or the Company to Buyer during
Buyer's due diligence investigation conducted prior to the Closing Date.
(k) "Disclosure Schedules" shall mean the Disclosure Schedules
attached to this Agreement, as supplemented as provided herein.
(l) "Encumbrance" shall mean a mortgage, charge, pledge, lien, option,
restriction, right of first refusal, right of preemption, third party right or
interest other encumbrance or security interest of any kind or similar right or
any other matter affecting title.
(m) "Environmental Laws" shall mean all environmental, health and
safety laws and regulations in all jurisdictions in which the Company has done
business or owned, leased or operated property.
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(n) "Financial Statements" shall mean (i) the Company's audited
balance sheets made up as of 31st March 1997 and the audited profit and loss
account of the Company in respect of the financial year of the Company ending on
31st March 1997, including, in each case, the notes thereto and the Directors'
Report and Auditor's Report, and (ii) the Company's unaudited balance sheet and
profit and loss account as of 31st July 1997 and for the four (4) months then
ended.
(o) "GAAP" shall mean, at any particular time, generally accepted
accounting principles in the United Kingdom consistently applied on a going
concern basis, using consistent audit scope and materiality standards and, with
respect to interim financial statements, subject to normal year-end adjustments.
(p) "Initial Public Offering" shall mean an offering of equity
securities of the Resulting Entity following the Reorganization Event, which
offering is made pursuant to an effective registration statement under the
Securities Act of 1933 of the United States of America.
(q) "Intellectual Property" shall mean (i) any patent, copyright,
trademark, registered design, trade name, service xxxx, service name, brand
xxxx, brand name, logo, corporate name, Internet domain name or industrial
design, any registrations thereof and pending applications therefor (to the
extent applicable), (ii) any other intellectual property right (including,
without limitation, any know-how, trade secret, trade right, formula,
conditional or proprietary report or information, customer or membership list,
any marketing data, and any computer program, software, database or data right),
(iii) any rights under licenses, consents, orders, statutes or otherwise
(including without limitation license(s) to use specific telephone numbers)
relating to any of the foregoing, owned or used by the Company, and any goodwill
associated with any of the foregoing. Intellectual Property shall include
without limitation those items set forth on Disclosure Schedule 7.12(c).
(r) "Monthly Financial Statements" shall mean the Company's unaudited
profit and loss account as of and for the period ending with the end of each
calendar month, commencing April, 1997.
(s) "Person" shall mean an individual, corporation, partnership,
limited company, joint venture, trust or unincorporated organization, joint
stock company or other similar organization, government or any political
subdivision thereof, or any other legal entity.
(t) "Proprietary Information" shall mean, with respect to Buyer and
its Affiliates, all information with respect to such Person disclosed or
provided in connection with the transactions contemplated hereby or (in the
context of Sellers' obligations under Section 11.02(b) hereof) otherwise known
to Sellers, which is not generally known to the public or to competitors of
Buyer and its Affiliates.
(u) "Purchase Price" shall mean the sum of (pounds)1,800,000.
(v) "Receivables" shall mean the accounts receivable of the Company as
of the close of business on the Business Day prior to the Closing Date.
(w) "Related Agreements" shall mean (i) employment agreements to be
3
entered into between the Company and the Sellers and certain of the Company's
employees, as described in Section 3.06 below, (ii) the waivers of rights
described in Section 3.06 below, (iii) the Standstill Agreements, and (iv) all
other agreements called for by the terms hereof.
(x) "Reorganization Event" shall have the meaning ascribed to it in
the Buyer Operating Agreement.
(y) "Reserves" shall mean those reserves for bad debts, self-insured
risks, risk management and unspecified uninsured liabilities, established and
maintained by the Company and reflected in the Financial Statements and the
Monthly Financial Statements.
(z) "Resulting Entity" shall mean the corporation formed as the
successor to Buyer pursuant to the Reorganization Event.
(aa) "Securities" shall mean equity securities of the Resulting Entity
of the same class as the securities sold in the Initial Public Offering, which
equity securities shall be registered under the Securities Act of 1933 and shall
be the class of equity securities of the Resulting Company traded
over-the-counter, in a recognized securities exchange or on NASDAQ.
(ab) "Shares" shall mean all of the outstanding Capital Ordinary
Shares of (pounds)1 each of the Company described in Section 7.01(d) and on
Disclosure Schedule 7.01(d).
(ac) "Standstill Agreements" shall mean the agreements to be entered
into between each Seller and the Resulting Entity, in form substantially
identical to the agreements between the Resulting Entity and other holders of
Securities, pursuant to which each Seller agrees not to sell (except under
specific circumstances set forth therein) the Securities held by such Seller for
a period of two years.
(ad) "Subscription" shall mean the subscription by Buyer in cash for
200,000 Subscription Shares at a subscription price of (pounds)1 per share.
(ae) "Subscription Shares" shall mean Deferred Shares of 1p each in
the capital of the Company, having the rights set forth in the Articles of
Association of the Company (a copy of which is attached hereto as Exhibit
1.01(ae).
(af) "Taxes Act" shall mean the Income and Corporations Taxes Act 1988
(ag) "VATA" shall mean, in the United Kingdom, the Value Added Tax Xxx
0000 and, in a jurisdiction outside of the United Kingdom, any equivalent
legislation.
2. SALE AND PURCHASE OF SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall sell, assign and transfer to Buyer, and
Buyer will purchase from Seller, the Shares, free and clear of all liens, claims
and other encumbrances, in exchange for payment of the Purchase Price as
provided herein.
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3. CLOSING; PAYMENTS.
3.01 The Closing and the Closing Date. Subject to the termination
provisions below, the Closing shall take place at the offices of Bretherton
Price Elgood, 00 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxx XX0X 0XX on such date as the
parties may agree but in default of agreement thirty (30) days following closing
by the Resulting Entity on the Initial Public Offering, provided that if that
date is not a Business Day, Closing shall take place on the next Business Day.
3.02 Subscription. Upon execution of this Agreement, Buyer shall make
the Subscription in cash and the Company shall issue the Subscription Shares to
Buyer.
3.03 Payment of Purchase Price. The Purchase shall be paid to Sellers,
pro rata based on the number of Shares sold by each Seller: (i) (pounds)540,000
in immediately available funds at Closing, and (ii) the remainder by delivery to
Sellers of Securities having a Sterling value of (pounds) 1,260,000, based upon
the bona fide offering price to the public in the Initial Public Offering and a
conversion rate between US Dollars and (pounds)Sterling equal to the average of
the mid-market exchange rate between the (pounds)Sterling and the US Dollar for
each Business Day in the period commencing on the closing date on the Initial
Public Offering and ending on the Business Day three (3) Business Days prior to
the Closing Date. Prior to Closing, Sellers shall notify Buyer in writing as to
the amounts of cash and Securities to be distributed to each Seller.
3.04 Payment of Costs. Sellers and Buyer shall be responsible for
their respective fees, costs and expenses, legal or otherwise, incurred with
respect to the sale of the Shares and other transactions described herein.
3.05 Deliveries at the Closing.
(a) In addition to the Purchase Price, Buyer shall deliver to
Sellers at the Closing evidence reasonably satisfactory to Sellers of Buyer's
performance of its pre-Closing obligations hereunder.
(b) At the Closing, Sellers shall deliver to Buyer:
(i) Certificates evidencing the Shares, together with the
relative share certificates;
(ii) the written resignations of all officers and directors
of the Company other than Xxxxx Xxxxxxx Xxxxx and Xxx Xxxxx,
effective as of a date no later than the Closing Date;
(iii) the Company's certificate of incorporation and
articles of association, each certified by the Company's
Secretary as of the Closing Date, together with the common
seal (if any) of the Company and each register, minute book
and other book required to be kept by the Company under the
Companies Xxx 0000 made up to the day before Closing;
(v) A copy of resolutions of the directors of the Company,
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approving the execution of this Agreement and consummation
of the transactions contemplated hereby, certified by the
Company's Secretary as of the Closing Date;
(vi) the opinion of Sellers' counsel, in form satisfactory
to Buyer;
(vii) the Books and Records;
(viii) the Related Agreements, executed by the parties
thereto;
(ix) all other documents required under this Agreement; and
(x) evidence reasonably satisfactory to Buyer of Sellers'
and the Company's performance of their respective
pre-Closing obligations hereunder.
(c) The parties shall execute such additional documents, make
such additional deliveries and pay such additional amounts as shall be necessary
and appropriate to consummate the transactions described herein.
3.06 Additional Actions at Closing. (a) Each Seller shall, at the
Closing, enter into an employment agreement with the Company in substantially
the form of Exhibit 3.06 hereto, and shall execute and deliver at Closing
assignments of all rights to the Intellectual Property in form satisfactory to
the Company.
(b) Each Seller shall use his or her best efforts to ensure that,
at Closing, the Company's directors hold a meeting of the board of directors of
the Company at which the directors (i) vote in favor of the registration of
Buyer or its nominee as a member of the Company in respect of the Shares
(subject to the production of properly stamped transfers); (ii) appoint Persons
nominated by Buyer as directors of the Company, effective immediately; (iii)
approve and authorise the Company's execution and delivery of the Related
Agreements to which it is a party; (iv) and authorise that, subject to the
receipt of duly stamped transfers, Buyer or its nominee shall be entered in the
register of members of the Company as the holder of the entire issued share
capital of the Company.
(c) Each employee of the Company who has not previously assigned
to the Company all rights to Intellectual Property shall, at or prior to
Closing, execute and deliver to the Company an assignment of all rights to
Intellectual Property.
4. TERMINATION.
4.01 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of Buyer, Sellers and the Company
(b) by (i) either (A) Buyer, if there has been material breach of
any representation, warranty, covenant or agreement on the part of Sellers or
the Company, which
6
breach has not been cured following receipt by Sellers or the Company of notice
of such breach, or (B) Sellers and the Company, if there has been a material
breach of any representation, warranty, covenant or agreement on the part of
Buyer, which breach has not been cured following receipt by Buyer of notice of
such breach, or (ii) either Buyer or Sellers, if any permanent injunction or
other order of a court or other competent authority preventing the consummation
of the transactions contemplated by this Agreement shall have become final and
non-applicable;
(c) By Buyer in its sole discretion immediately upon written
notice to Sellers if Buyer reasonably determines on the basis of its
investigation of the Company and its business, or the contents of any document
provided to Buyer, that any representation or warranty of Sellers or the Company
set forth herein is untrue, and that as a result there has been or is likely to
be a materially adverse consequence having regard to the business and finances
of the Company; or
(d) by either Buyer or Sellers if Closing has not occurred as of
April 30, 1998 other than as a result of the failure of the party seeking to
terminate to fulfill its obligations hereunder.
4.02 Effect of Termination. In the event of termination of this
Agreement as provided in Section 4.01, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of any party
hereto or any of its respective Affiliates, officers, directors or shareholders
except (i) for any and all obligations under the confidentiality provisions
contained in this Agreement, and (ii) to the extent that such termination
results from the willful breach by a party hereto of any of its representations
or warranties, or of any of its covenants or agreements, as set forth in this
Agreement. In the event that termination results from the willful breach by a
party hereto of any of its representations or warranties, or of any of its
covenants or agreements, as set forth in this Agreement, the breaching party
shall be liable to the non- breaching party for all direct damages (but not
indirect or consequential damages) incurred as a result of such willful breach,
together with all reasonable costs of enforcing the provisions of this Section
4.02.
5. ADDITIONAL UNDERTAKINGS PRIOR TO CLOSING.
5.01 Business in Ordinary Course. From the date of execution of this
Agreement through the Closing Date or earlier termination of this Agreement, and
except as expressly authorized herein:
(a) The Company shall not declare or pay any dividend or make any
other distribution to shareholders, whether in cash, shares or other property.
(b) Except for the application by the Company of the proceeds of
the Subscription (which shall be applied by the Company as it in its entire
discretion shall determine), the Company shall continue to carry on the
Company's business, and discharge or incur obligations and liabilities, only in
the usual, regular and ordinary course of business, as heretofore conducted;
and, by way of amplification and not limitation, the Company will not, without
the prior written
7
consent of Buyer (which consent shall not be unreasonably withheld):
(1) issue any of its capital shares or any options, warrants
or other rights to subscribe for or purchase such capital shares or any
securities convertible into or exchangeable for any such capital shares;
(2) directly redeem, purchase or otherwise acquire any of
its common or other capital shares;
(3) effect a reclassification, recapitalization, split-up,
exchange of shares, readjustment or other similar change in or to any capital
shares or otherwise reorganize or recapitalize;
(4) grant any increase (other than ordinary and normal
increases consistent with past practices) in the compensation payable or to
become payable to officers or salaried employees, grant any stock options or,
except as required by law, adopt or make any change in any bonus, insurance,
pension or other Benefit Plan, agreement, payment or arrangement made to, for or
with any of such officers or employees;
(5) borrow or agree to borrow any amount of funds except in
the ordinary course of business, or directly or indirectly guarantee or agree to
guarantee obligations of others;
(6) enter into any agreement, contract or commitment having
a term in excess of three (3) months, except in the ordinary course of business;
(7) place on any of its assets or properties any mortgage,
pledge, charge or other encumbrance, except as otherwise authorized hereunder;
(8) cancel or accelerate any material indebtedness owing to
it or any claims which it may possess or waive any material rights of
substantial value;
(9) sell or otherwise dispose of any real property or any
material amount of any tangible or intangible personal property;
(10) commit any act or fail to do any act which will cause a
breach of an agreement, contract or commitment and which will have a material
adverse effect on the Company's business, financial condition or earnings;
(11) violate any law, statute, rule, governmental regulation
or order, which violation might have a material adverse effect on the Company's
business, financial condition or earnings;
(12) purchase any real or personal property or make any
other capital expenditure where the amount paid or committed thereof is in
excess of (pounds)5,000 per item or expenditure; or
(13) amend its certificate of incorporation or articles of
association or enter into any agreement to merge or consolidate with, or sell a
significant portion of its assets to, any other Person.
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(c) Sellers and the Company shall not, without the prior written
consent of Buyer, engage in any transaction or take any action that would render
untrue in any material respect any of the representations and warranties of
Sellers and the Company contained in this Agreement, as if such representations
and warranties were given as of the date of such transaction or action.
(d) Sellers and the Company shall promptly notify Buyer, in
writing, of the occurrence of any matter or event known to and directly
involving the Company that is materially adverse to the business, operations,
properties, assets or condition (financial or otherwise) of the Company.
(e) Neither Sellers nor the Company shall solicit or encourage,
or hold discussions or negotiations with or provide any information to, any
Person in connection with any proposal from any Person for the acquisition of
all or any portion of the business, Shares or other securities or a material
portion of the assets of the Company. Sellers and the Company shall promptly
advise Buyer of receipt of any such proposal or inquiry concerning any possible
such proposal, and the substance of such proposal or inquiry.
(f) No later than twenty (20) Business Days following the date
hereof, Sellers shall deliver to Buyer the Disclosure Schedules.
(g) Sellers shall provide to Buyer, not less than five (5) days
prior to the Closing, certified searches of applicable dockets and lien records
showing all Encumbrances affecting the Company or its assets, and any tax liens.
(h) Sellers shall provide to Buyer, not more than two (2)
Business Days prior to the Closing Date, wire instructions regarding the cash
portion of the Preliminary Base Purchase Price.
5.02 Delivery of Monthly Financial Statements and Supplemental
Disclosure Schedules. (a) Sellers shall cause the Company to prepare and deliver
the Monthly Financial Statements to Buyer within twenty-five (25) days following
the last day of each calendar month (commencing with 31st August 1997) ending
prior to the Closing Date.
(b) Sellers may deliver one or more supplements to the Disclosure
Schedules ("Supplemental Disclosure Schedules"), provided that no Supplemental
Disclosure Schedules may be delivered later than ten (10) days prior to the
Closing Date, and provided further that no representation or warranty of Sellers
and the Company shall be deemed modified by such Supplemental Disclosure
Schedules unless Buyer accepts such Supplemental Disclosure Schedules in
writing. Upon Closing, Buyer shall be deemed to have accepted all Supplemental
Disclosure Schedules provided to Buyer at least ten (10) days prior to the
Closing Date.
5.03 Breaches. Sellers and the Company shall, in the event any of them
has knowledge of the occurrence, or impending or threatened occurrence, of any
event or condition which would cause or constitute a breach (or would have
caused or constituted a breach had such event occurred or been known prior to
the date hereof) of any of their representations or agreements contained or
referred to herein, give prompt written notice thereof to Buyer, and use their
collective
9
best efforts to prevent or promptly remedy the same.
5.04 Consummation of Agreement. Sellers and the Company shall perform
and fulfill all conditions and obligations on their part to be performed or
fulfilled under this Agreement and to effect the transaction in accordance with
the terms and provisions hereof. Sellers and the Company shall furnish to Buyer
in a timely manner all information, data and documents in the possession of
Sellers and the Company requested by Buyer as may be required to obtain any
necessary regulatory or other approvals of the transaction and shall otherwise
cooperate fully with Buyer to carry out the purpose and intent of this
Agreement.
5.05 Access to Information. (a) Sellers and the Company agree that,
prior to the Closing Date, Buyer shall be entitled (at its sole expense),
through its officers, employees and representatives (including, without
limitation, its legal advisors and accountants), to make such investigation of
the properties, businesses and operations and financial condition of the Company
and examination of its books and records as Buyer may reasonably request, and to
make extracts and copies of such books and records. Any such investigation and
examination shall be conducted during regular business hours and under
reasonable circumstances, and Sellers and the Company shall cooperate fully
therein. In order that Buyer may have full opportunity to make such physical,
business, accounting and legal review, examination or investigation as it may
reasonably request of the affairs of the Company, Sellers and the Company shall
use their respective best efforts to cause the Company's officers, employees,
consultants, agents, accountants, attorneys and other representatives to
cooperate fully with such Buyer representatives in connection with such review
and examination; provided always that the provisions of this Subsection shall
not require Sellers or the Company to disclose the identity or location of any
customer of the Company and Sellers shall be entitled to edit, extract or
withhold any document which necessarily or by implication identifies a customer.
(b) Buyer agrees that, prior to the Closing Date, Sellers shall
be entitled (at their sole expense), themselves or through their representatives
(including, without limitation, legal advisors and accountants), to make such
investigation of the properties, businesses and operations and financial
condition of Buyer and examination of its books and records as they may
reasonably request, and to make extracts and copies of such books and records.
Any such investigation and examination shall be conducted during regular
business hours and under reasonable circumstances, and Buyer shall cooperate
fully therein. In order that Sellers may have full opportunity to make such
physical, business, accounting and legal review, examination or investigation as
they may reasonably request of the affairs of Buyer, Buyer shall use its best
efforts to cause its officers, employees, consultants, agents, accountants,
attorneys and other representatives to cooperate fully with Sellers in
connection with such review and examination.
5.06 (a) Non-solicitation Pending Closing. After execution of this
Agreement, and through the later of the Closing Date or 30 April 1998, neither
Sellers nor the Company shall pursue, initiate, encourage or engage in any
negotiations or discussions with any third parties concerning the sale of the
Shares or the assets of the Company. In the event that any
10
Person contacts Sellers or the Company concerning such a transaction, they shall
promptly notify Buyer in writing of such contact, specifying the identity of the
other Person and the circumstances of the contact.
(b) From and after execution of this Agreement and for a period
of two (2) years thereafter, Buyer shall not engage any employee of the Company
whether as an employee, consultant, director or in any other capacity, without
the consent of the Company, provided that this clause shall cease and be of no
further effect as and from Closing.
5.07 Additional Agreements. Each of the parties hereto agrees to use
their respective best efforts to (i) take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement and the Related Agreements, (ii)
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental entities, third parties and parties to
contracts with the Company as are necessary for consummation of the transactions
contemplated by this Agreement and the Related Agreements, and (iii) fulfill all
conditions precedent applicable to such party pursuant to this Agreement and the
Related Agreements. In case at any time after the Closing Date any further
action is necessary or desirable to carry out the purposes of this Agreement or
the Related Agreements, each party hereto shall use their respective best
efforts to take or cause to be taken all such necessary action.
5.08 Notification of Certain Matters. Sellers and the Company shall
give prompt notice to Buyer of (a) any notice of, or other communication
relating to, a default under any Contract material to the financial condition,
properties, business operations, or results of operations of the Company to
which it is a party or is subject, (b) any notice or other communication from
any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement or
any of the Related Agreements, or (c) any material adverse change in the
properties, business operations, results of operations, financial condition or
prospects of the Company, other than changes resulting from general economic
conditions.
5.09 Initial Public Offering Documents. As soon as practicable
following the filing thereof with the Unites States Securities and Exchange
Commission, Buyer shall provide to Sellers a copy of the registration statement
filed with respect to the Initial Public Offering, each pre-effective amendment
thereto and the effective registration statement (exclusive of exhibits). Within
five (5) days following Sellers written request, Buyer will provide to Sellers a
copy of any exhibit to such registration statement.
11
6. CONDITIONS PRECEDENT TO CLOSING.
6.01 Conditions to Obligations of All Parties. The respective
obligations of each party under this Agreement shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
governmental entity, requisite to the transactions contemplated hereby, shall
have been filed, occurred or have been obtained, as the case may be.
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect; provided that prior to
invoking this condition, each party shall use their best efforts to have any
such order, injunction, legal restraint or prohibition vacated.
6.02 Conditions to Obligations of Buyer. The obligations of Buyer to
effect the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions (which are for the exclusive benefit of
Buyer, any or all of which may be waived in whole or in part by Buyer):
(a) The representations and warranties of Sellers and the Company
set forth in this Agreement, as qualified by the Disclosure Schedules and those
Supplemental Disclosure Schedules which have been accepted in writing by Buyer,
shall be true and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of a specified, earlier date) as of the Closing Date as though made on and as of
the Closing Date, except as otherwise contemplated by this Agreement, and Buyer
shall have received a certificate from Sellers certifying to such effect. All
representations and warranties of Sellers and the Company shall be deemed
reaffirmed and made by each of them as of the Closing Date. Notwithstanding the
foregoing, if Buyer has actual knowledge at the Closing that any representation
or warranty of Sellers or the Company is not true and correct as of the Closing
Date, and Buyer elects to Close notwithstanding such knowledge, such
representation or warranty shall be deemed modified as of the Closing Date to
reflect such knowledge.
(b) Sellers and the Company shall each have performed all
obligations required to be performed by each such party under this Agreement at
or prior to the Closing Date, and Buyer shall have received a certificate of
Sellers certifying to such effect.
(c) Since the date of this Agreement, there shall have been no
change, occurrence or circumstance resulting in, or which could reasonably
likely result in, individually or in the aggregate, a material adverse effect on
the Company or its business.
(d) Sellers and the Company shall have given all notices to, and
obtained all consents, approvals or authorizations of or from, any individual,
corporation or other party which may be necessary to permit the consummation of
the transactions contemplated
12
hereby.
(e) Each of the Related Agreements shall have been duly executed
and delivered by the respective parties thereto.
6.03 Conditions to Obligations of Sellers. The obligations of Sellers
to effect the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions (which are for the exclusive benefit of
Sellers, any or all of which may be waived in whole or in part by Sellers):
(a) Except to the extent such representations and warranties
speak as of a specified date, the representations and warranties of Buyer set
forth in this Agreement shall be true and correct in all respects as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except as otherwise contemplated by this Agreement.
(b) Buyer shall have performed all obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
(c) The Securities shall be shares of common stock of the
Resulting Entity which are covered by an effective registration statement under
the Securities Act of 1933, of the same class as the securities sold in the
Initial Public Offering and of a class which is listed for trading on a
recognized stock exchange or the NASDAQ market. The Resulting Entity shall not
have issued a class of equity securities senior in rights to the class of which
the Securities are part.
7. REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY. Sellers and
the Company hereby jointly and severally represent and warrant to Buyer as
follows:
7.01 Company Organization; Qualification and Shares.
(a) The Company is a limited company duly incorporated under the
Companies Xxx 0000 and validly existing and in good standing continuously since
incorporation, and has the corporate power to own all of its property and
assets, to incur all of its liabilities and to carry on its business as now
being conducted.
(b) The Company is duly qualified and in good standing in each
jurisdiction in which the nature or conduct of the Company's business or the
character or location of its properties makes such qualification necessary. A
list of all such jurisdictions appear on Disclosure Schedule 7.01(b).
(c) The names of the directors and officers of the Company,
together with the offices they hold, are set forth on Disclosure Schedule
7.01(c). Attached to Disclosure Schedule 7.01(c) are true and correct copies of:
(1) the certificate of incorporation and memorandum of association of the
Company, together with all amendments thereto, certified by the
13
Company's Secretary within thirty (30) days of the Closing Date; and (2) the
articles of association of the Company, together with all amendments thereto,
certified by the Secretary of the Company.
(d) The authorized share capital of the Company is
(pounds)201,000, divided into (i) One Hundred Ninety Nine Thousand (199,000)
Ordinary Shares of (pounds)1 each, of which One Thousand (1,000) shares are duly
and validly issued and outstanding, are fully paid and non-assessable, are
wholly owned (legally and beneficially) by Sellers and to which Sellers have
good and marketable title, free and clear of all Encumbrances except as
disclosed in Disclosure Schedule 7.01(d), and (ii) Two Hundred Thousand
(200,000) Deferred Shares of 1p each, which upon issuance to Buyer pursuant to
the Subscription will be duly and validly issued and outstanding, fully paid and
non-assessable. There are no agreements, arrangements or understandings to
create any Encumbrance on the Shares or unissued shares in the capital of the
Company. Each Seller owns that number of Shares set forth in Disclosure Schedule
7.01(d).
(e) None of the outstanding Shares has been issued in violation
of any preemptive rights of the current or past shareholders of the Company.
With respect to the sale of the Shares to Buyer or Buyer's nominee, each Seller
hereby irrevocably and unconditionally waives and releases any and all rights of
pre-emption which each Seller may have over, or other rights to acquire, any of
the ordinary shares (including the Shares) in the Company, whether pursuant to
the Articles of Association of the Company or otherwise, and acknowledges that
Buyer and Buyer's nominee may rely upon such waiver and release.
(f) Except as may be disclosed in Disclosure Schedule 7.01(f),
each certificate representing Shares issued by the Company in replacement of any
certificate theretofore issued by it which was claimed by the record holder
thereof to have been lost, stolen or destroyed was issued by the Company only
upon receipt of an indemnity in respect of lost certificate to indemnify the
Company against any claim that may be made against it on account of the alleged
loss, theft or destruction of any such certificate or the issuance of such
replacement certificate.
(g) There are no issued or outstanding options, warrants, rights
to subscribe for, calls, or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares in the
capital of the Company, or contracts, commitments, understandings or
arrangements by which the Company is or may be obligated to issue additional
shares in its capital or options, warrants or rights to purchase or acquire any
additional shares in its capital Other than this Agreement, there is no
agreement, arrangement or obligation requiring the creation, allotment, issue,
transfer, redemption or repayment of, or the grant to any Person of the right
(conditional or not) to require the allotment, issue, transfer, redemption or
repayment of, a share in the capital of the Company.
(h) Except as set forth on Disclosure Schedule 7.01(h), the
Company has not conducted business under any name other than its own.
(i) The Company has all requisite power and authority to execute
and deliver this Agreement and each of the Related Agreements to which it is a
party and to perform fully its obligations hereunder and thereunder. The
execution and delivery of this Agreement, the Related Agreements and the
consummation of the transactions contemplated hereby and
14
thereby have been duly authorized by all necessary corporate action on the part
of the Company. This Agreement and each of the Related Agreements to which the
Company is a party has been duly executed and delivered by the Company, and this
Agreement and each of the Related Agreements to which the Company is a party
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and remedies
generally and subject, as to enforceability, to general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity). There is no claim, action, suit or proceeding (including, without
limitation, current investigations by governmental agencies) pending against the
Company seeking to enjoin the execution and delivery of this Agreement or
consummation of the transactions contemplated hereby.
7.02 Seller Power and Authority; Ownership. (a) Each Seller is an
adult individual with full power and authority to own his or her properties
(including without limitation Shares), to manage his or her fiscal affairs and
to enter into this Agreement and each of the Related Agreements to which they
are a party and to agree to the transactions contemplated hereby and thereby and
to perform all of their respective obligations hereunder and thereunder. No
Seller is subject to any legal disability which would prevent him or her from
performing under this Agreement, and no order has been entered appointing a
receiver for any Seller or his or her assets. There is no claim, action, suit or
proceeding (including, without limitation, current investigations by
governmental agencies) pending against any Seller seeking to enjoin the
execution and delivery of this Agreement or consummation of the transactions
contemplated hereby. This Agreement and each of the Related Agreements to which
Sellers are parties constitute the legal, valid and binding obligations of
Sellers, enforceable against Sellers in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
(b) Except as set forth in Disclosure Schedule 7.02(b), no
consent or approval is required from any third party for the sale of the Shares.
The consummation by Sellers of the transactions contemplated by this Agreement
shall not violate any statute, rule, regulation or ruling of any court or
governmental authority applicable to any Seller, the Company, the Shares or any
of the assets of the Company.
(c) The Company is not in default under, or in violation of any
provision of, its certificate of incorporation, articles of association, or any
promissory note, indenture or any evidence or indebtedness or security thereof,
lease, contract, purchase or other commitment or any other agreement which is
material to the Company.
7.03 Subsidiaries. Except as set forth on Disclosure Schedule 7.03,
the Company does not directly or indirectly own any shares of, or any other
interest in, any other company, partnership, joint venture or business entity.
15
7.04 Financial Information. (a) Attached hereto as Disclosure Schedule
7.04(a) are true and complete copies of the Financial Statements. The Financial
Statements have been prepared in accordance with the books and records of the
Company and GAAP (except as may be disclosed therein), and fairly present the
financial position and the results of operations, changes in shareholders'
equity and cash flows of the Company as of the dates and for the periods
indicated. To the best of the knowledge, information and belief of the Company
and Sellers, the Financial Statements provide adequately for all bad and
doubtful debts, material liabilities (actual, contingent, deferred or otherwise)
and material financial commitments existing as of the dates thereof. Except as
expressly reflected therein, the profit and loss statements included in the
Financial Statements have not been materially affected by any extraordinary,
exceptional or non-recurring item.
(b) To the best of the knowledge, information and belief of the
Company and Sellers, the Company has no material uninsured liability or
obligation required to be reflected or disclosed in the Financial Statements
under GAAP which is not so reflected or disclosed, and the Company has no
material liability or obligation as of the respective dates of the Financial
Statements not required to be reflected or disclosed in the Financial
Statements.
(c) As of the dates the Financial Statements were prepared, all
accounts receivable reflected on the Financial Statements (i) have arisen from
bona fide transactions in the ordinary course of the Company's business,
consistent with its past practices, (ii) to the best of the knowledge,
information and belief of the Company and Sellers, are good and collectible at
the aggregate recorded amounts thereof, net of any applicable Reserves, and are
owned by the Company free and clear of all Encumbrances.
(d) No change in accounting policies has been made in preparing
the accounts of the Company for each of the three (3) financial years ended 31st
March 1997 except as stated in the Financial Statements.
(d) Sellers and the Company shall be deemed to have made the
foregoing representations and warranties under this Section 7.04 with respect to
the Monthly Financial Statements upon their delivery to Buyer.
7.05 Absence of Material Changes. Since March 31, 1997, (i) there have
not been any material adverse changes in the aggregate, in the general affairs,
condition, business, properties, prospects, assets, financial position, results
of operations or net worth of the Company; (ii) the business affairs of the
Company have since such date been conducted in the usual and ordinary course of
business, (iii) after the close of business on such date, no transaction has
taken place or material contract entered into other than in the usual and
ordinary course of business as heretofore conducted, and (iv) to the best of the
knowledge, information and belief of the Company and Sellers, there has been no
action, course of conduct or occurrence which if it had taken place after
execution of this Agreement would constitute a breach of Section 5.01 hereof,
except as set forth on Disclosure Schedule 7.05.
7.06 Licenses. The Company has all licenses, permits and other
authorizations required for the operation of its businesses in all
jurisdictions. All such licenses,
16
permits and authorizations are set forth on Disclosure Schedule 7.06.
7.07 Tax Matters. (a) The Company is resident only in the United
Kingdom for tax purposes and has never been resident in any other jurisdiction
for tax purposes.
(b) The Company has filed with the appropriate governmental
agencies all income, franchise, excise, VATA, real and personal property and
other tax returns and reports required to be filed by or on behalf of the
Company. All such tax returns for the last three (3) years are listed on
Disclosure Schedule 7.07. To the best of the knowledge, information and belief
of the Company and Sellers, all such returns fairly reflect the information
required to be presented therein, and the Company has not paid any penalty,
surcharge, fine or interest in connection with any alleged underpayment of
taxes..
(c) To the best of the knowledge, information and belief of
Sellers and the Company, no return (or item in a return) is currently subject to
dispute or is yet to be determined by, or us subject to agreement with, any
taxing authority. The Company is not, and does not expect to be, involved in a
dispute in relation to any tax matters, and to the best of the knowledge,
information and belief of Sellers and the Company no taxing authority has
investigated or indicated that it intends to investigate the Company's tax
matters.
(d) The Company has paid all taxes that have become due and
payable to (or claimed to be due and payable by) any taxing authority. The
Company has made full provision or reserve in the Financial Statements for all
taxes for which the Company is or may be accountable with respect to income,
profits or gains earned, accrued or received on or before the dates thereof,
including distributions made on or before such dates or provided for in the
Financial Statements and full and proper provision has been made in the
Financial Statements for deferred tax in accordance with SSAP 15 and in the
aggregate do not materially fail to provide for potential tax liabilities. All
estimated tax payments which have become due and payable prior to the date of
this Agreement have been paid. The Company has properly operated the
Pay-As-You-Earn system and has complied with each reporting obligation in
connection with benefits provided for its directors, officers and employees. All
deductions and payments required to be made under statute in respect of National
Insurance and Social Security contributions (including employer's contributions)
have been duly made and proper acceptable records have been maintained in
respect of all such deductions and payments.
(e) Except as set forth in Disclosure Schedule 7.07(e), the
Company has not made a repayment of share capital to which ss.210 of the Taxes
Act applies or issued share capital as paid up other than by the receipt of new
consideration within the meaning of Part VI of the Taxes Act.
(f) To the best of Sellers' and the Company's knowledge,
information and belief, all documents by virtue of which the Company has any
right which are required to be stamped have been stamped and all duty, interest
and penalties on those documents have been paid, and the Company has no
unsatisfied liability to stamp duty reserve tax or interest or penalties on
stamp duty reserve tax.
17
(g) The Company is registered for purposes of the VATA, has made,
given, obtained and kept up-to-date, full and accurate records, invoices and
documents appropriate or required for VATA purposes, is not in arrears with
payment or returns due under the VATA and has not been required by any taxing
authority to give security under the VATA. During the past three (3) years, the
Company has not been in default with respect to any accounting period (as those
terms are used in ss.59(1) of the VATA. The Company has made no claim for bad
debt relief under ss.36 or ss.22 of the VATA. All value added tax payable on the
import of goods and all excise duties payable to a taxing authority in respect
of any asset imported or owned by the Company have been paid.
(h) The Company is and always has been a close company for the
purposes of the Taxes Act. Except as set forth in Disclosure Schedule 7.07(h),
the Company has not made any distribution as defined in ss.418 of the Taxes Act
or any loan or advance in accordance with ss.ss.419 and 420 of the Taxes Act and
has not written off or released or agreed to release or write off any part of
such loan or advance.
(i) To the best of the Sellers' and the Company's knowledge,
information and belief, no event, transaction, act or omission has occurred
which could result in the Company becoming liable for any tax which is primarily
or directly chargeable against or attributable to a Person other than the
Company or which is charged by reference to the income or gains of another
Person.
(j) The assets of the Company and the Shares are not, and will
not in consequence of an event occurring on or before the Closing Date (whether
or not in combination with an event occurring after the Closing Date) become,
subject to an Inland Revenue charge as mentioned in ss.237 of the Inheritance
Tax Xxx 0000. No Person has, or could in consequence of an event occurring on or
before the Closing Date (whether or not in combination with an event occurring
after the Closing Date) obtain, the power under ss.212 of the Inheritance Tax
Xxx 0000 to raise inheritance tax by the sale or mortgage of, or by a terminable
charge on, an asset of the Company.
(k) The Company has not entered into any transaction designed in
whole or in part for the avoidance of taxes.
7.08 Compliance with Laws. (a) To the best of the knowledge,
information and belief of the Company and Sellers, the Company is, and at all
times during the past twelve (12) months has been, in material compliance with
all laws applicable to the Company or to the conduct of the business or
operations of the Company or the use of its properties (including any leased
properties) and assets; and
(b) the Company has not received, and does not know of the
issuance or threatened issuance by any governmental entity, of any notices of
violation or alleged violation of any law applicable to the Company. The Company
will provide Buyer with true and complete copies of (i) all injunctions,
judgments, orders or consent or similar decrees or agreements of any
governmental entity to which the Company is currently subject (or which the
Company was subject to during the previous three years) or which are otherwise
applicable to the
18
Company, and (ii) all correspondence from the date hereof with respect to any of
such matters, all of which are set forth in Disclosure Schedule 7.08. Neither
the Company nor Sellers are aware of any proposed legislation or law which is
reasonably expected to be enacted and which, if so enacted, could reasonably be
expected to have a material adverse effect on the Company.
7.09 Litigation. There is no action, suit, claim, investigation or
proceeding, whether at law or in equity (each, a "Legal Proceeding"), pending
or, to the knowledge of the Company and/or Sellers, threatened that questions
the validity of this Agreement or the Related Agreements or any action taken or
to be taken by the Company or Sellers in connection with the consummation of the
transactions contemplated hereby or thereby or which seeks to prohibit, enjoin
or otherwise challenge any of the transactions contemplated hereby or thereby.
Disclosure Schedule 7.09 sets forth an accurate and complete list, and a brief
description (setting forth the names of the parties involved, the court or other
governmental or mediating entity involved, the relief sought and the substantive
allegations and the status thereof), of each Legal Proceeding pending or, to the
knowledge of the Company and/or Sellers, threatened against or affecting the
Company. To the knowledge of the Company and/or Sellers, no event has occurred
and no circumstance, matter or set of facts exist which would constitute a valid
basis for the assertion by any third party of any claim or Legal Proceeding,
other than those listed on Disclosure Schedule 7.09. Except as set forth in
Disclosure Schedule 7.09, there is no outstanding or, to the knowledge of the
Company and/or Sellers, threatened judgment, injunction, judgment, order or
consent or similar decree or agreement (including, without limitation, any
consent or similar decree or agreement with any governmental entity) against,
affecting or naming the Company.
7.10 Properties; Contracts; Leases and Other Agreements. (a) The
Company does not own any real estate except as set forth on Disclosure Schedule
7.10(a).
(b) All leasehold interests for real property and any material
personal property used by the Company are held pursuant to lease agreements
which are valid and enforceable in accordance with their terms, the agreements
for which are listed on Disclosure Schedule 7.10(b). To the knowledge of Sellers
and the Company, all such properties comply in all material respects with all
applicable private agreements, zoning requirements and other governmental laws
and regulations relating thereto and there are no condemnation proceedings
pending or, to the knowledge of Sellers or the Company, threatened with respect
to such properties. Any additional business offices maintained by the Company
during the past two (2) years are also listed by location on Disclosure Schedule
7.10(b).
(c) Except as set forth on Disclosure Schedule 7.10(c), and
excluding trade accounts payable incurred in the ordinary course of business and
payable to Persons other than Affiliates of the Company, the Company does not
have any liabilities for borrowed funds, extensions of credit or other advances
that are subject to repayment, whether pursuant to a written agreement, oral
understanding or course of conduct, and whether reflected on the Financial
Statements as indebtedness, accounts payable or otherwise, and any such
liability set forth on Disclosure Schedule 7.10(c) may be prepaid at any time
without premium or penalty.
(d) Except as set forth in Disclosure Schedule 7.10(d), the
Company is
19
not a party to any agreements, contracts or commitments relating to the
acquisition of the assets or capital shares of any other business enterprise.
(e) Except as set forth in Disclosure Schedule 7.10(f), the
Company is not a party to any agreement, loan, contract, lease or hire, hire
purchase, credit sale or conditional sale agreement, guaranty, letter of credit,
line of credit or commitment not referred to elsewhere in this Agreement which:
(1) involves payments by the Company of more than
(pounds)10,000;
(2) involves payments based on profits of the Company;
(3) relates to the future purchase of goods or services in
excess of the Company's requirements at current levels or for normal operating
purposes;
(4) was not made in the ordinary course of business; or
(5) materially affects the Company's business or financial
condition of the Company.
(f) The purchase of the Shares hereunder shall not result in
Buyer or any of its subsidiaries becoming obligated under any contractual
arrangements with anyone other than Sellers as described herein.
(g) All material contracts and agreements to which the Company is
a party ("Contracts") (i) are valid and enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity); (ii) to
the best of the knowledge, information and belief of the Company and Sellers, no
Default (as defined below) exists under any Contract either by the Company or by
any other party thereto; (iii) neither the Company nor any of Sellers is aware
of the assertion by any third party of any claim of Default or breach under any
of the Contracts; and (iv) neither the Company nor any of Sellers is aware of
any present intention on the part of any significant customer or supplier or
other business partner of the Company to either (x) terminate or significantly
change its existing business relationship with the Company either now or in the
foreseeable future, or (y) fail to renew or extend its existing business
relationship with the Company at the end of the term of any existing contractual
arrangement such entity may have with the Company. For purposes of this
Agreement, the term "Default" means, with respect to any Contract, (x) any
breach of or default under such Contract, (y) any event, other than the normal
passage of time, which would (either with or without notice or lapse of time or
both) give rise to any right of termination, cancellation or acceleration or any
obligation to repay with respect to such Contract, or (z) any event, other than
the normal passage of time, which would result in either a significant increase
in the obligations or liabilities of, or a loss of any significant benefit of,
the party in question under such Contract.
(h) Except as set forth in Disclosure Schedule 7.10(h), neither
the
20
Company, nor, to the best of the knowledge, information and belief of the
Company and Sellers, any other party, is in default, technical or otherwise, of
any real estate lease, equipment lease, loan or credit agreement, or any other
contract or agreement to which the Company is a party.
7.11 Employee Matters; Benefit Plans. (a) Except as may be disclosed
in Disclosure Schedule 7.11(a):
(1) To the best of the knowledge, information and belief of
the Company and Sellers, the Company is and has been in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation, any
such laws respecting employment discrimination and occupational safety and
health requirements, and the Company is not engaged in any unfair labor
practices;
(2) there is no material unfair labor practice complaint
against the Company pending or to the knowledge of the Company, threatened;
(3) there is no labor dispute, strike, slowdown or stoppage
actually pending, or to the knowledge of the Company, threatened against or
directly relating to the Company; and
(4) the Company has not experienced any material work
stoppage or other material labor difficulty during the past year.
(b) Except as described and attached to Disclosure Schedule
7.11(b), the Company is not a party to any agreement for the employment,
retention or engagement, or with respect to the severance, of any officer,
employee, agent or consultant.
(c) Except as set forth in Disclosure Schedule 7.11(c), the
Company does not maintain, contribute to or participate in any Benefit Plan,
whether as sponsor, adopting employer or otherwise.
(d) All Benefit Plans have in all material respects been
operated, administered and maintained in accordance with the terms thereof and
in compliance with the requirements of all applicable laws.
(e) All contributions to, and payments from, the Benefit Plans,
which may have been required to be made in accordance with the Benefit Plans
have been timely made. All such contributions to the Benefit Plans, and all
payments under the Benefit Plans, are properly accrued and reflected on the
respective Financial Statements.
(f) All reports, returns and similar documents with respect to
the Benefit Plans required to be filed with any governmental agency or
distributed to any Benefit Plan participant have been duly and timely filed or
distributed.
(g) Each of the Benefit Plans has been administered at all times,
and in all material respects, in accordance with its terms. There are no pending
investigations by any governmental agency involving the Benefit
21
Plans, no termination proceedings involving the Benefit Plans, and no threatened
or pending claims (except for claims for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings against any Benefit Plan
or asserting any rights or claims to benefits under any Benefit Plan which could
give rise to any liability, nor, to the best of the Sellers' or the Company's
knowledge, are there any facts which could give rise to any liability in the
event of any such investigation, claim, suit or proceeding.
7.12 Title to and Condition of Properties; Intellectual Property.
(a) Except as described in Disclosure Schedule 7.12(a), the
Company is the sole owner and has good, valid and marketable title to all of the
tangible assets used primarily in connection with the operation of the Company's
business, free and clear of all claims, liabilities, security interests,
mortgages, leases, restrictive covenants, licenses, liens, Encumbrances and
rights to possession of third parties, of every type and nature.
(b) Except as disclosed in Disclosure Schedule 7.12(b), each item
of equipment of the Company is in good and workable condition, reasonable wear
and tear excepted, of a quality and quantity usable in the ordinary course of
the Company's business.
(c) Disclosure Schedule 7.12(c) sets forth a list of all
Intellectual Property which is owned by the Company, licensed by the Company,
licensed to the Company, or otherwise used or able to be used in the Company's
business (other than commonly-used computer software which is generally
available to the public and the use rights to which were legally acquired by the
Company either for free or through established retail facilities) and indicates,
with respect to each item of Intellectual Property listed thereon, the owner
thereof and, if applicable, the name of the licensor and licensee thereof and
the terms of such license or other contract relating thereto. The Company owns
or has the lawful right to use all Intellectual Property as currently used or as
necessary for the conduct of the Company's business as now conducted. After
Closing, the Company will have the right to use all of the Intellectual Property
as currently used or as necessary for the conduct of the Company's business as
now conducted.
(d) (i) Except for Intellectual Property licensed to the Company,
and subject to the terms of licenses with its customers, the Company has
full legal and beneficial ownership (free and clear of any and all
Encumbrances) of all of the Intellectual Property , and neither the Company
nor Sellers have received any notice or claim (whether written, oral or
otherwise) challenging the Company's ownership or rights in such
Intellectual Property or suggesting that any other entity has any claim of
legal or beneficial ownership with respect thereto; the Company has all
legal and other rights required to transfer the ownership of the
Intellectual Property to the Company at the Closing as contemplated hereby;
(ii) To the best of the knowledge, information and belief of
Sellers and the Company, all of the Intellectual Property is legally valid
and enforceable without any qualification, limitation or restriction on its
use;
(iii) Neither the Company nor Sellers has received any notice or
claim (whether written oral or otherwise) challenging the validity or
enforceability of any such
22
Intellectual Property;
(iv) To the best of the knowledge, information and belief of
Sellers and the Company, neither the use of any of the Intellectual
Property nor any other Intellectual Property used by the Company will
conflict with, infringe upon, violate or interfere with or constitute an
appropriation of any right, title or interest held by any other Person or
entity, and there have been no claims made with respect thereto;
(v) To the best of the knowledge, information and belief of
Sellers and the Company, no other Person or entity is infringing in any
respect on any part of the Intellectual Property.
(vi) The Company has not conducted its business, and has not used
or enforced (or failed to use or enforce) any Intellectual Property, in a
manner that would result in the abandonment, cancellation or
unenforceability or any item of Intellectual property, and the Company has
not taken or failed to take any action that would result in the forfeiture
or relinquishment of any Intellectual Property used in the conduct of its
business as now conducted;
(vii) Except as set forth in Disclosure Schedule 7.12(d), the
Company has no liability or obligations to any third parties incident to
the Intellectual Property used or able to be used by the Company in the
conduct of its business as heretofore conducted; and
(viii) the Company has timely met all of its obligations to any
third parties incident to the Intellectual Property used or able to be used
by the Company in the conduct of its business as heretofore conducted, and
such obligations have been correctly and adequately disclosed in the
Financial Statements.
(e) The Company has taken all reasonable steps to (i) protect the
Company's rights to the Intellectual Property, and (ii) to prevent the
unauthorized use by any other Person or entity. The Company shall use all
reasonable efforts to maintain, or cause to be maintained, the Intellectual
Property in full force and effect through the Closing and, without limitation,
has renewed or has made, and will make within any applicable renewal period
ending on or prior to the Closing Date, application to renew all of the
Intellectual Property subject to expiration on or prior to the Closing Date.
Neither the Company nor any of Sellers has granted to any other Person or entity
any rights or permissions to use any of the Intellectual Property.
(f) Except as set forth in Disclosure Schedule 7.12(f), the
Company is not a party to any confidentiality or other agreement which
materially restricts its use or disclosure of information.
7.13 Insurance. All material insurable properties owned or held by the
Company, and all insurable risks related to its business, are adequately insured
by insurers which are to the best of Sellers' and the Company's knowledge
financially sound and reputable, in such amounts and against fire and other
risks insured against by extended coverage and public liability insurance,
fidelity bonds, professional liability insurance and errors and omissions
insurance, as is
23
customary in the home health care industry. Disclosure Schedule 7.13 lists all
policies of insurance, including but not limited to general comprehensive and
products liability coverage, owned or held by the Company. All current premiums
and any other obligations under such insurance have been paid and all such
policies are valid and enforceable and in full force and effect on the date
hereof. The Company has not received any notice of cancellation or of premium
increase under any such policies within the last ninety (90) days.
7.14 Environmental Matters. (a) Except as may be disclosed in
Disclosure Schedule 7.14(a), the Company has not received any notice from any
Person or entity that the Company or the operation or condition of any property
ever owned, leased or operated by it are or were in violation of any
Environmental Laws, or that the Company is responsible (or potentially
responsible) for remedying, or the cleanup of, any pollutants, contaminants or
hazardous or toxic wastes, substances or materials at, on or beneath any such
property.
(b) Except as may be disclosed in Disclosure Schedule 7.14(b),
the conduct or operation of the Company or any condition of any property
presently or previously owned, leased or operated by the Company does not
violate and has not violated Environmental Laws in any respect material to the
business of the Company; and no condition or event has occurred with respect to
any of them or any such property that, with notice or the passage of time, or
both, would constitute a violation material to the business of the Company under
Environmental Laws or obligate (or potentially obligate) the Company to remedy,
stabilize, neutralize or otherwise alter the environmental condition of any such
property where the aggregate cost of such actions would be material to the
Company.
7.15 No Undisclosed Liabilities or Obligations. The Company has no
material liability or obligation, known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and
due or to become due (and there is no past or present fact, situation,
circumstance, condition or other basis for any present or future action, suit or
proceeding, hearing, charge, complaint, claim or demand against the Company
giving rise to any such liability), except:
(a) for liabilities or obligations accrued for or reserved
against on the Final Balance Sheet;
(b) for liabilities or obligations of the same type incurred in
the ordinary course of business of the Company since the date of the most recent
balance sheet included in the Financial Statements which are specifically
accrued for or reserved against on the Final Balance Sheet; and
(c) as may be disclosed in Disclosure Schedule 7.15(c).
7.16 Product Warranties. Except for a condition or warranty implied by
law or as described in Disclosure Schedule 7.16, the Company does not give any
condition or warranty, or made a representation, with respect to goods or
services supplied or agreed to be supplied by it, which could result in a
material liability to the purchaser thereof., and no claims have been made
against the Company in the last three (3) years alleging any defect in products
or services provided
24
by the Company.
7.17 Distributions. Except as disclosed in Disclosure Schedule 7.16,
since March 31, 1997, the Company has not paid or declared any dividend or made
any other distributions to shareholders or taken any action which, if taken
after the date of this Agreement, would require the prior written consent of
Buyer pursuant to this Agreement.
7.18 Related Party Transactions. Except as set forth on Disclosure
Schedule 7.18 or on any other Disclosure Schedule, there have been no
transactions, or contractual relationships during the two (2) fiscal years ended
March 31, 1997 or between March 31, 1997 and the date hereof, and no agreement
or understanding to enter into or consummate any transactions or contractual
relationships, between the Company on the one hand and any Seller or the
Company's officers, directors, employees, representatives, or agents, or (b) any
family member (by blood or marriage) or Affiliate of any of the foregoing,
directly or indirectly, on the other hand.
7.19 Investment Purpose. (a) The Securities are being acquired
pursuant to the terms and subject to the conditions of this Agreement for
Sellers' own accounts for investment purposes only and not with a view to any
public resale, public distribution or public offering thereof within the meaning
of the securities laws of the United States of America or any state securities
or "blue sky" laws; and
(b) The Securities issued to Sellers will not be registered under
the securities laws of the United States of America or any state securities or
"blue sky" laws, or any similar laws of any other jurisdiction, and such
Securities may not be sold or otherwise disposed of except in compliance with
applicable law, or in reliance upon an exemption therefrom.
7.20 Statements and Disclosures True and Correct. The information
contained in this Agreement, including the representations and warranties of
Sellers and the Company, the Disclosure Schedules, and Disclosure Documents, are
true and correct in all material respects. All copies of Disclosure Documents
are true and correct copies of the originals.
8. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Sellers as follows:
8.01 Organization. Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Nevada, and has the power to purchase and own the capital shares of the Company
being purchased hereunder.
8.02 Authorization; No Violation of Laws or Agreements. Buyer has full
power and authority, and has taken all requisite action, to enter into and
perform under this Agreement and all other agreements and documents contemplated
by or related to this Agreement to which Buyer is a party. Nothing in the
certificate of organization or operating agreement of Buyer, as amended, or any
other agreement, instrument, decree, proceeding, law or regulation (except as
specifically referred to in or contemplated by this Agreement) by or to which
Buyer is bound or subject would prohibit or inhibit Buyer from consummating this
Agreement on the terms and conditions herein
25
contained. Upon execution and delivery, this Agreement and any agreement or
document to be executed by Buyer pursuant hereto shall constitute a legal, valid
and binding obligation of Buyer in accordance with its terms.
8.03 Investment Purposes Only. Buyer is purchasing the Shares for
investment purposes only and not with a view toward sale or distribution. Buyer
shall make no further sale or transfer of the Shares except in accordance with
applicable state and federal securities laws and regulations.
9. ADDITIONAL UNDERTAKINGS SUBSEQUENT TO CLOSING. The parties agree that
subsequent to the Closing:
9.01 Assistance of Sellers. (a) Sellers shall render all reasonable
assistance to Buyer to effect an orderly transition of ownership and control of
the Company as contemplated hereunder, and shall disclose to Buyer full
information about the Company's business, customers and suppliers of the
Company.
(b) Buyer and Sellers shall execute and deliver such other
agreements, documents and instruments as any of them may reasonably request for
the purpose of effectuating the transactions contemplated by this Agreement.
9.02 Tax Returns. Sellers shall cause to be promptly prepared the
Company's income tax returns for periods ending prior to the Closing Date, and
shall deliver same to Buyer, allowing adequate time for Buyer to review and file
such returns by their respective due dates.
10. INDEMNIFICATION.
10.01 Sellers' Indemnity. Subject to the provisions of Sections 10.02
and 10.03 below, Sellers and the Company shall jointly and severally indemnify,
defend, and hold harmless Buyer against and in respect of any and all claims,
demands, losses, costs, expenses, obligations, liabilities, damages, recoveries,
and deficiencies, including interest, penalties, and reasonable attorneys' fees,
(but not including any adjustments or credits expressly provided for in this
Agreement) that it shall incur or suffer which arise, result from, or relate to
any breach of, or failure by Sellers and the Company to perform, any of their
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit, or other instrument furnished or to be furnished
by Seller (collectively, the "Warranties").
26
10.02 Limitation on Sellers' Liability.
(a) Sellers shall be under no liability under the Warranties in
the event that Closing does not take place whether under the provisions of
Sections 4.01, 6.01, 6.02, or otherwise.
(b) Notwithstanding anything to the contrary in Article 7 of this
Agreement the liability of the Sellers in respect of any claim under the
Warranties (a "Relevant Claim") shall be limited by the following provisions of
this Section and in the event of any inconsistency between the following
provisions of this Section and the provisions of Article 7 the following
provisions of this Section shall prevail.
(c) Sellers shall not be liable in respect of any claim under the
Warranties to the extent that the matter or matters giving rise to such claim
are fully and fairly disclosed in the Disclosure Schedules.
(d) The liability of Sellers in respect of any Relevant Claim
shall be limited as follows:
(i) the aggregate maximum liability of Sellers in respect of all
and any Relevant Claims shall in no event exceed an amount equal to the
aggregate of the following:
(A) the Purchase Price payable for the Shares hereunder; and
(B) the aggregate amount of any costs charges and expenses
incurred by Buyer following the acquisition by Buyer of the
Shares in bringing or enforcing any claims in respect of breach
of the warranties or indemnities given by Sellers under this
Agreement.
(ii) Sellers shall not be liable in respect of any Relevant Claim
where the amount of such claim does not exceed (pounds)1000.00.
(iii) Sellers shall not be liable in respect of all and any
Relevant Claims unless and until the aggregate cumulative liability of
Sellers in respect of all and any such Relevant Claims (ignoring for these
purposes all and any relevant claims in respect of which Sellers do not
have any liability pursuant to the provisions of Section 10.04(b) exceeds
the Relevant Amount (as defined below) in which event the Seller shall be
liable for the entire amount of such liability.
(ii) The "Relevant Amount" referred to above shall mean
(pounds)200,000.
(v) No disclosure in the Disclosure Schedule and none of the
limitations and provisions contained in this Section shall apply in the
case where a Seller has been fraudulent or has willfully concealed material
information from Buyer in connection with any Warranties.
(vi) The Sellers shall not be liable in respect of any Relevant
Claim
27
unless it shall have been made no later than eighteen (18) months following
the Closing Date.
(vii) No Relevant Claim shall be deemed to have been properly
made unless notice of such claim was made in writing to Sellers specifying
in reasonable detail (to the extent only that such information is available
to the Buyer and that such information is necessary to enable Sellers to
identify the matter giving rise to the Claim) the nature of the Relevant
Claim.
(viii) Any Relevant Claim in respect of which notice shall have
been given in accordance with Subsection (vii) shall be deemed to have been
irrevocably withdrawn and lapsed (not having been previously satisfied
settled or withdrawn) if proceedings in respect of such claim have not been
issued and served on Sellers not later than the expiry of the period six
(6) months after the date of such notice.
(ix) Where Buyer and/or the Company is entitled (whether by right
of indemnity, reimbursement or any other means) to recover from any other
Person (not being any employee or officer of the Company but including its
or their insurers) any sum in respect of any matter giving rise to a
Relevant Claim then (subject first to being indemnified and secured to the
reasonable satisfaction of Buyer against all costs, expenses, tax or other
liabilities which may be thereby incurred) Buyer shall take and shall take
all reasonable steps to enforce such recovery (keeping Sellers fully
informed of the progress of any action taken) and account to Sellers for
any net amounts they recover (provided not exceeding the amount previously
paid by Sellers and after first taking account of any liability or loss of
Buyer or the Company in respect of which Seller in not liable by reason of
the provisions of Subsection (a) through (d) above).
10.03 Other Limitations. Sellers shall have no liability (or such
liability shall be reduced) in respect of any Relevant Claim:
(a) if and to the extent that a specific provision or Reserve for
or in respect of the liability or other matter giving rise to such claim has
been made in the Financial Statements or the Monthly Financial Statements;
(b) if and to the extent that such claim occurs or is increased
as a result of any change in legislation after the date of this Agreement (or
any legislation (not in force at the date of this agreement) which takes effect
retrospectively or the withdrawal after the date of this Agreement of any
published concession or published general practice as at the date hereof
previously made by the Inland Revenue or other taxing or revenue raising
authority;
(c) if and to the extent that such claim occurs or is increased
as a result of any increase in the rate of taxation in force at the date of this
Agreement, or variation in the method of applying or calculating the rate of
taxation;
(d) if and to the extent that such claim occurs or is increased
as a result of any increase in the rate of taxation in force at the date of this
Agreement, or any variation in the method of applying or calculating the rate of
taxation;
28
(e) if and to the extent that any breach of the Warranties occurs
as a result of or is otherwise attributable to Buyer or the Company (acting
otherwise than by or on the instructions of or with the consent of Sellers)
disclaiming any part of the benefit of capital or other allowances against
taxation claimed or proposed to be claimed;
(f) where the claim is attributable to the Company ceasing to be
entitled to the small companies' rate of corporation tax;
(g) where the claim is for stamp duty or stamp duty reserve tax
arising out of the Agreement or on Closing;
(h) if and to the extent that such claim is attributable to any
voluntary act or transaction carries out or effected after Closing by or on
behalf of Buyer or the Company (not being an act or transaction in the ordinary
course of its business or by or on the instructions or with the consent of
Sellers) (including, for the avoidance of doubt, a cessation of trade);
(i) if and to the extent that such claim would not have arisen or
would have been reduced or eliminated but for the failure or omission on the
part of Buyer or the Company to make any claim election surrender or disclaimer
or give notice or consent under the provision of any enactment or regulation
relating to taxation after Closing the making giving or doing of which was taken
into account in computing a specific provision for taxation in the Financial
Statements;
(j) if and to the extent that such claim results from or is
increased or extended by the change of the accounting reference date of the
Company on or after Closing or by any change in the accounting policies employed
by the Company in the preparation of its accounts (including the variation of
the accounting bases upon which Company the values its assets) after Closing;
(k) and to the extent that such claim has been or is compensated
by the amount of any other provision for bad or doubtful debts or any liability
for taxation made in the Financial statements;
(l) where the claim arises directly or indirectly as a result of
the payment of any unusual or abnormal dividend by the Company occurring after
Closing;
(m) if and to the extent that the claim could have been relieved
by the availability of any relief, allowance, repayment or credit in respect of
any tax or deduction in computing income, profits or gains for the purposes of
any tax ("the Relief") which existed at 31st March 1997 and which was not taken
into account in computing the provision or reserve for taxation (excluded
deferred tax) in the Financial Statements or (as the case may be) in determining
that no such provision should be made;
10.04 Notice to Sellers; Access; Defense. (a) The Buyer shall upon it
becoming aware of any matter or event ("the Matter") which it is aware might
give rise to a Relevant Claim as soon as reasonably practicable thereafter give
notice in writing to Sellers of the Matter;
29
(b) Buyer shall provide and shall procure that the Company will
provide to the Sellers and Sellers' professional advisers reasonable access to
premises and personnel and to any relevant assets documents and records within
their power possession or control for the purpose of investigating the Matter
and enable the Sellers to take such action as referred to in Section 5.12.3
below and shall allow the Sellers and its advisers to take copies of any
relevant documents or records;
(c) Subject as provided below, Buyer shall and shall use its best
endeavors to procure that the Company will allow Sellers (using professional
advisors nominated by Sellers and approved by Buyer such approval not to be
unreasonably withheld) to take such action and institute and conduct such
proceedings on behalf of Buyer or the Company as Sellers may reasonably request
to dispute resist appeal compromise defend remedy or mitigate the matter to
enforce against any third party the rights of the Company in relation to the
Matter; PROVIDED THAT Sellers first shall have irrevocably and unconditionally
satisfied in full any amounts due to Buyer or the Company in respect of such
matter and PROVIDED FURTHER THAT before being entitled to take or require any
action enforcement Sellers shall also fully indemnify and secure Buyer and the
Company against all costs, expenses, tax or other liabilities incurred as a
result of any action taken by the Seller pursuant to this Subsection;
(c) Buyer shall not and shall use all reasonable endeavors to
procure that the Company shall not through the direction of Buyer admit
liability in respect of or compromise or settle the Matter without the prior
written consent of Sellers (such consent not to be unreasonably withheld or
delayed) PROVIDED THAT if Sellers do not within twenty-one (21) days of first
being given notice thereof aforesaid request Buyer or the Company to take any
action aforesaid in connection with the claim concerned then Buyer and/or the
Company shall not be prevented from freeing or paying or settling such claim or
taking such other action in connection therewith as it may in its absolute
discretion decide by virtue only of Sellers failing to make such request.
11. RESTRICTIVE COVENANTS.
11.01 Covenant Not to Compete. (a) Each Seller hereby agrees that he,
she or it will not, for a period of three (3) years after the Closing Date,
within those jurisdictions listed on Disclosure Schedule 7.01(b), engage in any
business which competes with the Company's business, directly or indirectly, or
have an interest, whether as partner, stockholder, beneficiary of a trust or in
any other capacity or manner whatsoever, in any enterprise which shall so
engage.
(b) For purposes of this Section 11.01, a Person will be deemed
to be directly or indirectly engaged in such business or line of business if he,
she or it is engaged, or if he, she or it is actively negotiating or preparing
to engage, in an endeavor or enterprise as a proprietor, partner, manager,
member, joint venturer, stockholder, director, officer, creditor, agent, trustee
or trust beneficiary or employee, or otherwise controls such endeavor or
enterprise.
(c) Nothing in the foregoing shall prohibit a Person from
providing services to the Company, Buyer or its Affiliates or from investing in
the securities of any
30
corporation having securities listed on a recognized securities exchange,
provided that such investment does not exceed 5% of any class of securities of
any corporation, provided that such ownership represents a passive investment
and that neither such Person nor any group of Persons including him, her or it,
in any way, either directly or indirectly, manages or exercises control of any
such corporation, guarantees any of its financial obligations, otherwise takes
any part in its business, other than exercising his, her or its rights as a
shareholder, or seeks to do any of the foregoing.
(d) Each Seller represents (i) that his or her experience and
capabilities are such that the restrictions contained herein will not prevent
him or her from obtaining employment or otherwise earning a living at the same
general economic benefit as reasonably required by him or her and (ii) that he
or she has, prior to the execution of this Agreement, reviewed this Agreement
thoroughly with his or her legal counsel or has knowingly waived the opportunity
to do so.
11.02 Non-Disclosure. (a) The Company Confidential Information is the
property of the Company and the Proprietary Information is the property of
Buyer, and the disclosure to the other party does not result in the other party
obtaining any property rights therein. Buyer, on the one hand, and Sellers and
the Company, on the other hand, will use such Company Confidential Information
and Proprietary Information (collectively, the "Information") solely to perform
their respective obligations hereunder and for due diligence purposes and keep
the Information of the other party confidential at all times, and prior to
Closing will abide by the following:
(i) Information will be disclosed only to employees or consultants of each
party for the purposes set forth herein, and each party will be
responsible for any breach of this agreement by those persons to whom
such party provided Information.
(ii) In the event that a Closing does not occur, each party will promptly
return to the other party all Information of the other party which is
in tangible form, on computer disks, or on microfilm, and shall retain
no copies thereof. All such Information which is in computer memory
shall be erased, and the erasing party shall confirm such erasure in
writing. In addition, each party promptly will destroy all memoranda,
notes, and other writings it (and each of its employees, attorneys,
lenders and accountants) have prepared based upon the Information of
the other party and will provide written certification that this
material has been destroyed.
(iii) The requirement of confidentiality set forth above does not apply to
any Information which (A) at the time of disclosure is generally
available to and known by the public (other than as a result of a
disclosure made directly or indirectly by a party to this agreement or
any of its agents, servants, employees or advisors), (B) was made
available to a party hereto on a nonconfidential basis from a source
other than another party hereto or its advisors, provided that the
source is not and was not bound by a confidentiality agreement, or (C)
was
31
independently acquired or developed without violating any obligations
under this Section.
(b) Following Closing, Sellers and their respective
representatives agree to hold confidential and not disclose to any third party
all Proprietary Information concerning Buyer disclosed to Sellers during the
course of the negotiation and investigation pertaining to this Agreement, except
as may be necessary to enforce the rights of Sellers under this Agreement.
Sellers shall not use any Proprietary Information subject to the foregoing
restriction for any purpose whatsoever without the written consent of Buyer.
Each Seller agrees that the disclosure or use of Proprietary Information by an
Affiliate of such Seller, by the spouse or member of the immediate family of an
Individual Seller (whether or not residing with such Seller), or by any entity
of which such Seller or any such family member is a proprietor, equity owner,
creditor, Affiliate or otherwise significant participant, in a manner which
would have violated this Section if committed by such Seller, shall be deemed a
violation of this Agreement.
(c) If the Closing occurs, then for a period of three (3) years
following the Closing, Sellers shall not disclose to any third-party, or use
directly or indirectly for their own benefit or for the benefit of any
Affiliate, the Company Confidential Information.
11.03 Non-Solicitation. Sellers shall not, for a period of three (3)
years after the Closing, solicit, entice or induce any Person who is then or
during the prior twelve (12) months was an employee or agent of Buyer or any of
its Affiliates to become employed or retained by any other Person, firm or
corporation or to leave their employment or relationship with Buyer or any of
its Affiliates, or approach any such employee for such purpose or authorize or
knowingly approve the taking of such actions by any other Person, or do any
other act that may result in the impairment of the relationship between any such
employee or agent and Buyer, the Company or any of Buyer's Affiliates; provided
(for the avoidance of doubt) that Sellers and key employees of the Company shall
be entitled to be shareholders and/or directors of Fleetway
_____________("Fleetway") for the sole purpose of providing services to Buyer
and its Affiliates under the terms of the Conversion Assistance Agreement dated
20 August 1997 between Fleetway and Buyer.
11.04 Injunctive Relief. The parties hereto acknowledge that the
restrictions contained in this Article 11 are reasonable and necessary to
protect the legitimate business interests of the other parties and that each
party would not have entered into this Agreement in the absence of such
restrictions. By reason of the foregoing each party agrees that if he, she or it
violates any of the provisions of this Article 11, the non-breaching party would
sustain irreparable harm and, therefore, irrevocably and unconditionally agree
that in addition to any other remedies which the non-breaching party may have
under this Agreement or otherwise, all of which remedies shall be cumulative the
non-breaching party shall be entitled to apply to any court of competent
jurisdiction for preliminary and permanent injunctive relief and other equitable
relief. Each party also irrevocably and unconditionally consents to the service
of any process, pleadings, notices or other papers in a manner permitted by the
notice provisions hereof.
11.05 Extension of Restrictive Period. If a Seller violates any of the
above restrictive covenants and Buyer brings legal action for injunctive or
other relief, Buyer shall not, as
32
a result of the time involved in obtaining such relief, be deprived of the
benefit of the full period of the restrictive covenant as to such Seller.
Accordingly, the restrictive covenant shall be deemed to have the duration
specified above, computed from the date such relief is granted or the violation
ceases, but reduced by the time expired between the date the period of
restriction began to run and the date of the first violation of the covenant by
the offending party.
11.06 Judicial Reformation. If any court shall determine that the
scope, duration or geographical limits of any restriction contained herein is
unenforceable, it is the intention of the parties that the particular
restrictive covenant shall not thereby be terminated, but shall be deemed
amended to the extent required to render it valid and enforceable, such
amendment to apply only with respect to the operation of this section and in the
jurisdiction of the court which has made such adjudication.
12. MISCELLANEOUS.
12.01 Entire Agreement; No Third Party Beneficiaries; Modification.
This Agreement (together with the Related Agreements and any other documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereto and is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
Subject to applicable law, this Agreement may be amended, modified or
supplemented only by written agreement of all parties hereto with respect to any
of the terms contained herein, and each party hereto agrees to be bound by any
such amendment, modification or supplement.
12.02 Governing Law. All issues relating to this Agreement and its
formation, performance and enforcement shall be governed by and construed in
accordance with the substantive laws of the State of Delaware and the United
States of America without reference to their rules governing conflict of laws.
Each of the parties hereto irrevocably: (a) submits in any legal proceeding
relating to this Agreement to the in personam jurisdiction of any state or
United States court of competent jurisdiction sitting in the State of Delaware;
(b) waives any objection that it may now or hereafter have to the venue of such
proceeding in any such court or that such proceeding was brought in an
inconvenient court; (c) waives any rights it may have with respect to service or
process arising from the "Convention on the Service Abroad of Judicial and Extra
Judicial Documents in Civil or Commercial Matters," as amended, or any laws,
treaties or conventions of similar purpose; (d) agrees to service of process in
any legal proceeding by mailing of copies thereof by United States registered or
certified mail, postage prepaid, reliable overnight delivery service charged
prepaid, by telex or by facsimile transmission; and (e) agrees that nothing
herein shall affect any other party's right to effect service of process in any
other manner permitted by law, and that any party shall have the right to bring
any legal proceedings (including a proceeding for enforcement of a judgment
entered by any of the aforementioned courts) against any other party in any
other court or jurisdiction in accordance with applicable law. Each of the
parties hereto agrees that final judgment (with all right of appeal having
expired or been waived) against
33
any other party or parties in any such action, suit or proceeding shall be
conclusive and may be enforced in any jurisdiction by suit on the judgment, a
certified copy of which shall be conclusive evidence of the fact and amount of
the recovery arising from such judgment.
12.03 Severability. If any term or other provision of this Agreement
is invalid, illegal or unenforceable, all other provisions of this Agreement
shall remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner materially
averse to any party. In the event that the enforceability of any non-competition
or similar covenants contained herein or in any Related Agreement is called into
question as the result of time, geographical or other applicable limitations
specified in such covenants, such time, geographical or other applicable
limitations shall be deemed modified to the minimum extent necessary to render
the applicable provisions of such covenants enforceable.
12.04 Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, including any representative appointed to administer or liquidate their
respective estates in any way whatsoever.
12.05 Specific Performance. The parties hereto acknowledge that
irreparable damage would result if any of the covenants of this Agreement were
not specifically enforced, and they therefore consent that the rights and
obligations of the parties under this Agreement may be enforced by a decree of
specific performance issued by a court of competent jurisdiction. Such remedy
shall, however, not be exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
12.06 Fees and Expenses. All costs and expenses, including but not
limited to all fees and expenses of attorneys, lenders, financial advisers and
accountants, in connection with the negotiation, execution and delivery of this
Agreement , the Related Agreements and the consummation of the transactions
contemplated hereby and thereby, shall be paid by the party incurring such costs
and expenses.
12.07 Publicity. Buyer, Sellers and the Company shall cooperate with
each other in the development and distribution of all news releases and other
public disclosures concerning this Agreement. Prior to the Closing, neither
Sellers nor the Company shall issue any news releases or make any other public
disclosure without the prior consent of Buyer, and Buyer shall not issue any
news releases or other public disclosure without the prior consent of Sellers,
unless such is required by law (including without limitation any form, rule or
regulation of the United States Securities and Exchange Commission) upon the
written advice of counsel or is in response to published newspaper or other mass
media reports regarding the transaction contemplated hereby, in which such
latter event the parties shall consult with each other regarding such responsive
public disclosure.
12.08 Sellers' Consents. Wherever in this Agreement the consent or
approval of the Sellers is required, each Seller hereby expressly agrees that
the consent of Sellers who held a majority of the Shares prior to Closing shall
be sufficient and shall be legally binding on all Sellers, who shall be deemed
to have given such approval or consent.
34
12.09 Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given when delivered
by hand (which shall include delivery by a courier firm providing receipted
evidence of delivery, or three (3) days after when sent by United States
registered or certified mail, return receipt requested, postage prepaid,
addresses as follows:
If to the Company or Sellers:
X/x Xxxxxxxxxx Xxxxx Xxxxxxx
000 Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxx XX00 0XX
Attention: Xxxx Xxxxxxx
If to Buyer:
C/o Xxxxxxx, Xxxxx & Xxxxxxxxx, P.C.
0000 Xxxx X. Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
XXX
Attention: Xxxxxxxx X. Xxxxx
or to such other address as either party hereto may from time to time give
written notice of to the other.
12.10 Survival. All representations, warranties, indemnifications,
covenants and undertakings set forth herein shall survive the Closing and shall
remain binding on the parties hereto. Sellers acknowledge that their
representations and warranties in this Agreement shall not be affected or
mitigated by any due diligence investigation conducted by Buyer or its
representatives prior to the Closing, or any knowledge of Buyer obtained in any
fashion.
12.11 Waivers. The wa14iver by a party of a breach or violation of any
condition or provision of this Agreement shall not operate nor be construed as a
waiver by such party of any subsequent breach or violation.
12.12 Risk of Loss. The parties hereto agree and acknowledge that the
risk of loss with respect to the assets of the Company and the Company's
business remains with Sellers prior to completion of the Closing.
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12.13 Interpretation.
(a) The Article and Section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(b) When used herein, the masculine shall include the feminine
and neuter, the singular shall include the plural and vice versa.
(c) Any reference herein to the best of a party's knowledge,
information and belief shall include all knowledge, information belief or
awareness which that Person would have if that Person had made all usual and
reasonable inquiries.
12.14 Assignment. Buyer shall have the right, in its sole discretion,
to assign its interests and obligations in and under this Agreement to any
Affiliate of Buyer, upon notice to Seller, provided that Buyer shall remain
primarily liable hereunder; provided that Sellers shall receive Securities of
the Resulting Entity in partial payment of the Purchase Price notwithstanding
such assignment.
12.15 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original Agreement for all
purposes, and all of which when taken together shall constitute one Agreement
among each of the parties hereto on the dates respectively indicated in the
signatures of the parties, notwithstanding that all of the parties are not
signatories to the original or the same counterpart, such Agreement to be
effective as of the date hereof. Executed signature pages to any counterpart
instrument may be detached and affixed to a single counterpart, with such single
counterpart with multiple executed signature pages affixed thereto constituting
the original counterpart instrument. All of those counterpart pages shall be
read as though one, and they shall have the same force and effect as if all the
signers had executed a single signature page.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of
the day and year first above written.
WITNESS:
/s/ Xxxxx Xxxxxxx Xxxxx
------------------------ ------------------------------------
Xxxxx Xxxxxxx Xxxxx
/s/ Xxx Xxxxx
------------------------ ------------------------------------
Xxx Xxxxx
/s/ Xxxxxxx Xxxxx
------------------------ ------------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxx Xxxxx
------------------------ ------------------------------------
Xxxxx Xxxxx
36
TRUSTEES OF THE XXX XXXXX (LIFE INTEREST) SETTLEMENT 1997
/s/ Xxxxx Xxxxxxx Xxxxx
------------------------ ------------------------------------
Xxxxx Xxxxxxx Xxxxx
/s/ Xxx Xxxxx
------------------------ ------------------------------------
Xxx Xxxxx
/s/ Xxxx Xxxxxxx
------------------------ ------------------------------------
Xxxx Xxxxxxx
TRUSTEES OF THE XXXXX XXXXXXX XXXXX (DISCRETIONARY) SETTLEMENT 1997
/s/ Xxxxx Xxxxxxx Xxxxx
------------------------ ------------------------------------
Xxxxx Xxxxxxx Xxxxx
/s/ Xxx Xxxxx
------------------------ ------------------------------------
Xxx Xxxxx
/s/ Xxxx Xxxxxxx
------------------------ ------------------------------------
Xxxx Xxxxxxx
DISPATCH MANAGEMENT SERVICES LLC BROOKSIDE SYSTEMS AND
PROGRAMMING LIMITED
By:/s/ Xxxxx Xxxxxxxxx By:/s/ Xxxxx Xxxxxxx Xxxxx
------------------------- --------------------------------------
Xxxxx X. Xxxxxxxxx Xxxxx Xxxxxxx Xxxxx, Managing Director
Chief Executive Officer
37
