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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 7, 1998
DISPATCH MANAGEMENT SERVICES CORP.
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(Exact name of registrant as specified in charter)
Delaware 000-23349 13-3967426
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(State or other (Commission) (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation
65 West 36th Street, New York, New York 10018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (212) 268-2910
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(Former name or former address, if changed since last report)
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<PAGE>
Item 2. Acquisition or Disposition of Assets
On April 7, 1998, Dispatch Management Services Corp. (the "Registrant") acquired
all of the outstanding capital stock (the "Acquisition" of Delta Air & Road
Transport PLC ("Delta") from its sole shareholders (the "Shareholders"). Delta,
headquartered in London, has over forty offices located throughout the United
Kingdom. It is engaged primarily in on-demand and scheduled delivery services,
and reported 1997 revenues of approximately $33 million. The business of Delta
will continue to be operated by the Registrant. The Acquisition was consummated
in accordance with the terms of an agreement dated April 7, 1998 among the
Registrant, Delta and the Shareholders.
The consideration paid by the Registrant in connection with the Acquisition was
$21.7 million in cash. An additional $3 million may be paid contingent upon
certain performance criteria being met. The consideration paid in connection
with the Acquisition was determined through arms-length negotiations between the
representatives of each of the Registrant and Delta.
Other than as described herein, neither the Registrant nor any of its Affiliates
had, nor to the knowledge of the Registrant, did any director or officer or any
associate of any such director or officer of the Registrant have, any material
relationship with Delta prior to the Acquisition. The Registrant financed the
Acquisition from cash reserves.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a) The required financial statements are not now available. They will be
filed by the Registrant under cover of Form 8K/A as soon as practicable,
but not later than June 20, 1998.
c) Exhibits:
Exhibit 2. Form of Agreement between the Registrant and the Shareholders.
Exhibit 99.1. Unaudited Pro Forma Combined Financial Statements of
Dispatch Management Services Corp. as of September 30, 1997 and for the year
ended December 31, 1996 and for the nine months ended September 30, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DISPATCH MANAGEMENT SERVICES CORP.
/s/ Marko Bogoievski
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By: Marko Bogoievski
Chief Financial Officer
Dated: April 21, 1998
Exhibit 2
DATED 1998
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The Persons named in Schedule 1
- and -
DISPATCH MANAGEMENT SERVICES CORP.
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AGREEMENT
for the sale and purchase
of the entire issued share capital
- of -
DELTA AIR & ROAD TRANSPORT PLC
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INDEX
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Page
PARTIES.................................................................... 1
RECITALS................................................................... 1
1. INTERPRETATION....................................................... 1
2. SALE AND PURCHASE OF SHARES.......................................... 6
3. TITLE AND CAPACITY................................................... 7
4. CONSIDERATION........................................................ 7
5. WARRANTIES........................................................... 8
6. INDEMNITIES.......................................................... 9
7. COMPLETION........................................................... 10
8. RELEASE OF GUARANTEES AND INDEMNITIES................................ 10
9. COMPLETION ACCOUNTS BOOK DEBTS....................................... 11
10. NON-COMPETITION...................................................... 12
11. COSTS................................................................ 15
12. FURTHER ASSURANCE.................................................... 15
13. NOTICES.............................................................. 16
14. GOVERNING LAW AND JURISDICTION....................................... 17
15. PUBLICITY............................................................ 17
16. GENERAL.............................................................. 17
17. TIME OF THE ESSENCE.................................................. 18
18. COMPETITION LAW...................................................... 18
SCHEDULE 1................................................................. 20
(v)
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DETAILS OF VENDORS' SHARES AND CONSIDERATION......................... 20
SCHEDULE 2................................................................. 21
BRIEF DETAILS OF THE COMPANY......................................... 21
SCHEDULE 3................................................................. 22
BRIEF DETAILS OF DORMANT SUBSIDIARY.................................. 22
SCHEDULE 4................................................................. 23
BRIEF DETAILS OF THE PROPERTIES...................................... 23
SCHEDULE 5................................................................. 32
TAX DEED............................................................. 32
SCHEDULE 6................................................................. 46
WARRANTIES........................................................... 46
SCHEDULE 7................................................................. 81
LIMITATIONS ON CLAIMS................................................ 81
SCHEDULE 8................................................................. 87
INDEMNITIES.......................................................... 87
SCHEDULE 9................................................................. 89
ITEMS FOR DELIVERY BY THE VENDORS AT COMPLETION...................... 89
SCHEDULE 10................................................................ 91
COMPLETION ACCOUNTS.................................................. 91
SCHEDULE 11................................................................ 94
ADDITIONAL CONSIDERATION............................................. 94
SCHEDULE 12................................................................ 98
THE RE-ORGANISATION.................................................. 98
(vi)
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THIS AGREEMENT is made 1998
PARTIES:-
1. THE PERSONS WHOSE NAMES AND ADDRESSES APPEAR IN THE COLUMNS (1) AND (2) OF
SCHEDULE 1 (together the "Vendors");
2. DISPATCH MANAGEMENT SERVICES CORP. a corporation incorporated in Delaware,
USA and whose office is situate at 65 West 36th Street, New York, New York
10018 (the "Purchaser" which expression shall, where the context so
admits, include its successors and permitted assigns)
RECITALS
(A) The Vendors are legally and beneficially entitled to the Shares in the
numbers set out in column (3) of Schedule 1 and have the right to sell the
same free from all liens, charges and encumbrances.
(B) The Vendors have agreed with the Purchaser to sell to it the Shares on the
terms of this Agreement.
OPERATIVE PROVISIONS
1. INTERPRETATION
1.1 In this Agreement and in its Schedules (unless the context otherwise
requires) the following words and expressions shall have the following
meanings:-
Definition Meaning
the "Accounting Date" 31 March 1997
"Agreed Form" in relation to any document, the draft of
that document which has been initialled by
the Vendors' Solicitors and the Purchaser's
Solicitors by way of identification
"A Shares" A Ordinary Shares of 10p each in the Company
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the "Audited Accounts" the consolidated audited accounts of the
Target Group for the accounting reference
period ended on the Accounting Date (a copy
of which has been included in the Disclosure
Bundle) comprising, inter alia, a
consolidated balance sheet, profit and loss
account, notes, auditors' and directors'
reports and a cash flow statement
"Business Day" a day, not being a Saturday or Sunday, on
which banks are generally open for business
in the City of London
"B Shares" B Ordinary Shares of 10p each in the Company
"CAA 1990" The Capital Allowances Act 1990
the "Companies Acts" the Companies Acts 1985 and 1989, the
Companies Consolidation (Consequential
Provisions) Act 1985, the Financial Services
Act 1986 and Part V of the Criminal Justice
Act 1993
the "Company" Delta Air & Road Transport PLC brief details
of which appear in Schedule 2
the "Completion Accounts" the consolidated balance sheet of the Target
Group as at the Completion Date prepared in
accordance with the provisions of Schedule 10
the "Completion Date" the date of actual completion of the matters
provided for in sub-clause 7.1 and Schedule 9
and "Completion" shall be construed
accordingly
"Consideration" the purchase price for the Shares as detailed
in clause 4
"C Shares" C Ordinary Shares of 1p each in the Company
the "Disclosure Letter" the letter (including the Disclosure
Schedule) dated with today's date delivered
immediately before the execution of this
Agreement and addressed by the Vendors to the
Purchaser disclosing various matters relating
to the Warranties
the "Disclosure Bundle" the bundle of documents annexed to the
Disclosure Letter
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"Divisional Directors" Roy Harris, David Reid and Tim Clarke all
being employees of the Company
"Divisional Director the aggregate sum of (pound)1,488,300 (one
Payments" million four hundred and eighty eight
thousand three hundred pounds) consisting of
bonus payments to the Divisional Directors in
the aggregate sum of (pound)1,353,000 (one
million three hundred and fifty three
thousand pounds) and National Insurance
Contributions in the aggregate sum of
(pound)135,300 (one hundred and thirty five
thousand three hundred pounds) in respect of
such remuneration
the "DMS Group" the Purchaser and its subsidiaries and "DMS
Group Company" shall mean any of them
the "Dormant Subsidiary" Leondos Investments Limited being the dormant
subsidiary of the Company brief details of
each of which appear in Schedule 3
"Encumbrance" any mortgage, charge (whether fixed or
floating), pledge, lien, option, right of
pre-emption, right of retention of title or
negative pledge, or any other form of
security interest third party right or
encumbrance (whether monetary or not) or any
obligation (including any conditional
obligation) to create any of the same except
for the liens arising by operation of law in
the ordinary course of business
"EPA 1990" the Environmental Protection Act 1990
"Environmental Legislation" all national or local statutes, codes, or
other laws or legislation related to
pollution or protection of the environment in
force at the date of this Agreement
"ICTA 1988" The Income and Corporation Taxes Act 1988
"IHTA 1984" The Inheritance Tax Act 1984
the "Indemnities" the indemnities in clause 6 and Schedule 8
"Intellectual Property all, trade marks and service marks used by
Rights" the Company in its business
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the "Leases" the leases, licences and rights of occupation
of the Company whether by agreement for
lease, licence or otherwise relating to the
Properties
the "Legal Opinion" the legal opinion in Agreed Form relating to
the Purchaser
"Management Accounts" the unaudited management accounts of the
Target Group for the nine months ended 31
December 1997 a copy of which has been
included in the Disclosure Bundle
"Material Properties" those Properties indicated as such with an
asterisk in Schedule 4 and "Material
Property" shall mean any of them
"Net Assets" the consolidated total assets less total
liabilities of the Target Group determined on
the basis set out in the Completion Accounts
the "Properties" the leasehold properties licences and/or
rights of occupation by agreement for lease
licence (written or unwritten) or otherwise
(but excluding any licences relating purely
to aerials or base stations in or on the
properties of third parties) brief details of
which appear in Schedule 4 and "Property"
shall mean any of them or any part or parts
thereof where the context so admits
the "Purchaser's Price Waterhouse of 1 London Bridge, London
Accountants" SE1
the "Purchaser's Paisner & Co of Bouverie House, 154 Fleet
Solicitors" Street, London EC4A 2DQ
the "Re-organisation" the matters and events detailed in Schedule
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the "Revenue" all fiscal authorities (national, municipal
or local) whether of the United Kingdom or
elsewhere
the "Shares" 390,871 A Shares and 386,899 B Shares and
773,798 C Shares being the entire issued
share capital of the Company details of which
appear in column (3) of Schedule 1
the "Second Tranche" as defined in Schedule 11
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the "Third Tranche" as defined in Schedule 11
the "Target Group" the Company and the Dormant Subsidiary
"Taxation" or "Tax" any form of taxation, duty, stamp duty, levy,
impost, charge, national insurance or other
similar contribution, or rates, whether
created or imposed by any governmental,
country, state, federal, local, municipal or
other body, and whether in the United Kingdom
or elsewhere (including, without limitation,
any payment which the Company may be or
become bound to make or obliged to account
for to any person in respect of Taxation) and
also including any related penalty, interest,
fine or surcharge
the "Tax Deed" the Tax deed of covenant set out in Schedule
5
"TCGA 1992" The Taxation of Chargeable Gains Act 1992
"VAT" Value Added Tax
"VATA 1994" The Value Added Tax Act 1994
the "Vendors' Accountants" Blick Rothenberg of 12 York Gate, London NW1
4QS
the "Vendors' Solicitors" Pritchard Englefield of 14 New Street London
EC2M 4TR
the "Warranties" the warranties given by the Vendors in clause
5.1 and Schedule 6
the "Working Capital" current assets less all liabilities (in each
case calculated on the same basis as that in
the Audited Accounts) determined on the basis
set out in the Completion Accounts.
1.2 References to "Parties" means the parties to this Agreement and "Party"
means any one of them and shall include that person's permitted assigns,
transferees or successors in title.
1.3 Reference to any payment being made on "an after - Tax basis" means that
the amount so payable shall be grossed up by such amount as will ensure
that after deduction of any
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Taxation there shall be left in the hands of the relevant payee a sum
equal to the amount which would otherwise have been payable.
1.4 References in the Warranties to a person's knowledge, information, belief
or awareness or similar expression are deemed to refer only to the actual
knowledge information, belief or awareness of such person.
1.5 All obligations expressed to be given or entered into by the Vendors or
resulting from the execution of, or breach of the provisions of, this
Agreement (including without limitation any of the Warranties proving to
be untrue or misleading or being breached) shall be deemed to be and shall
be construed as being given, undertaken or entered into by them severally
(limited to their due proportions of the Consideration) and not jointly
and severally.
1.6 The phrase "as disclosed in the Disclosure Letter" or similar expression
shall apply to the extent that disclosure of the relevant matter is fairly
and accurately made in the Disclosure Letter or fairly made in the
Disclosure Bundle.
1.7 References to recitals, clauses and schedules are references to recitals
and clauses of and schedules to this Agreement.
1.8 The headings and/or bold typeface used in this Agreement are inserted for
convenience only and shall not affect its construction or interpretation.
1.9 The Schedules form part of this Agreement.
1.10 Expressions in the singular shall include the plural and in the masculine
shall include the feminine and vice versa and references to persons shall
include corporations and vice versa.
1.11 References to any statute or statutory provision or of any rule made by a
local authority and having the effect of law shall be construed as
references to such statute or statutory provision or rule as respectively
amended or re-enacted or as their operation is modified by any other
statute or statutory provision or rule (whether before or after the date
of this Agreement) and shall include any provisions of which they are
re-enactments (whether with or without modification) and shall include
subordinate legislation made under the relevant statute Provided always
that any change made after the date of this Agreement shall not increase
the liability of the Vendors.
1.12 Expressions defined in ICTA 1988, TCGA 1992 or in the Companies Acts
shall, wherever used in this Agreement, have the meanings given to them in
the relevant statute (unless the context otherwise requires) and in the
case of any inconsistency the defined terms used in the Companies Acts
shall prevail.
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1.13 The Disclosure Letter has such effect as is expressly provided for in this
Agreement but does not form part of this Agreement.
2. SALE AND PURCHASE OF SHARES
2.1 Subject to the terms of this Agreement, each of the Vendors shall with
full title guarantee sell or procure the sale of and the Purchaser
(relying on the Warranties and Indemnities in this Agreement) shall
purchase those of the Shares registered in his name detailed in Schedule 1
free from all Encumbrances and third party rights or claims and with all
attached or accrued rights as at the Completion Date for the Consideration
appearing in clause 4.
2.2 Each of the Vendors:-
2.2.1 waives any rights of pre-emption conferred on him by the Articles of
Association of the Company, by agreement, by statute or otherwise
over those of the Shares agreed to be sold by the other Vendors;
2.2.2 hereby discharges and releases with immediate effect all rights and
obligations under any shareholders or similar agreement relating to
the holding of shares in or, control of, the Company.
2.3 The Purchaser shall not be obliged to complete the purchase of any of the
Shares unless the purchase of all of the Shares is completed
simultaneously.
3. TITLE AND CAPACITY
Each of the Vendors agrees that:-
3.1 the Shares constitute the whole of the issued and allotted share capital
of the Company and his holding of Shares is legally and beneficially owned
by him free of all Encumbrances or interests in favour of, or claims made
by, or which could be made by, any other person;
3.2 he is entitled to sell or procure the sale of his full legal and
beneficial interest in the Shares to the Purchaser on the terms set out in
this Agreement;
3.3 he has taken all actions necessary to enable him personally to enter into
and perform this Agreement.
3.4 neither the execution or delivery of this Agreement by him is prohibited
by, or violates any provision of and will not result in a breach of any
applicable law, rule, regulation, judgment, decree, order or other
requirements of any government, quasi-government, statutory,
administrative or regulatory body, court or agency; and
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3.5 this Agreement constitutes and imposes valid, legal and binding
obligations of such Vendor fully enforceable in accordance with their
terms.
4. CONSIDERATION
4.1 The purchase price (the "Consideration") payable for the A Shares, the B
Shares and the C Shares will be apportioned amongst the Vendors and paid
as detailed in Schedule 1 of which (pound)11,973,073 (eleven million nine
hundred and seventy three thousand and seventy three pounds) will be paid
at Completion (the "First Tranche").
4.2 The Second Tranche and the Third Tranche being in aggregate the
"Additional Consideration" will be paid in accordance with the provisions
of Schedule 11.
4.3 Each of the Vendors and the Purchaser will give effect to the provisions
of Schedule 11.
4.4 The Vendors agree amongst themselves that the apportionment of the
Consideration will be in accordance with the terms of this Agreement and
as detailed in Schedule 1 and, accordingly, waive any other rights they
may have under the Articles or Association or otherwise in respect
thereof.
4.5 The Vendors hereby covenant to the Purchaser that:-
4.5.1 the Net Assets as at the date of this Agreement will not be less
than (pound)2,000,000 (two million pounds) before deducting the
Divisional Director Payments; and
4.5.2 the aggregate amount of the Working Capital as at the date of this
Agreement will not be less than (pound)1,500,000 (one million five
hundred thousand pounds) before deducting the Divisional Director
Payments.
4.6 If the Net Assets as at the date of this Agreement (determined in
accordance with Schedule 10) are less than (pound)2,000,000 (two million
pounds) before deducting the Divisional Director Payments then the
Purchase Price shall be reduced by an amount (the "Deficit") equal to the
amount (in pounds) of the shortfall.
4.7 If the Working Capital as at the date of this Agreement is less than
(pound)1,500,000 before deducting the Divisional Director Payments (the
"Working Capital Deficit") then the Vendors shall within 14 days of the
End Date (as defined in Schedule 10) pay to the Purchaser's Solicitors by
way of bankers draft or by telegraphic transfer for the account of the
Purchaser (whose receipt shall be a good discharge) a sum equal to the
amount of the Working Capital Deficit, which payment shall take effect by
way of a reduction in the Purchase Price.
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4.8 There shall be no "double counting" between clause 4.6 and 4.7 so that the
Vendors shall not be required to make a payment more than once in respect
of the same matter.
5. WARRANTIES
5.1 Subject to clause 5.2 the Vendors warrant to the Purchaser in relation to
the Company that, except for and to the extent of those disclosures fairly
and accurately made in the Disclosure Letter and fairly made in the
Disclosure Bundle, each of the statements, set out in Schedule 6 is true
and accurate and not misleading.
5.2 The provisions of Schedule 7 shall operate to limit or reduce the
liability of the Vendors under the Warranties and, where expressed to do
so, also under the Tax Deed.
5.3 Each statement in the Warranties shall be separate and independent and
save as expressly provided shall not be limited by reference to any other
sub-clause or anything in this Agreement or its Schedules. The
interpretation of any such statement shall not be restricted by reference
to or inference from any other such statement or by any other provision of
this Agreement, the Disclosure Letter or the Tax Deed.
5.4 None of the information supplied by the Company or their professional
advisers prior to the date of this Agreement to the Vendors or their
officers, employees, agents, representatives or advisers in connection
with the Warranties and the contents of the Disclosure Letter, or
otherwise in relation to the business or affairs of the Company or the
Dormant Subsidiary shall be deemed, a representation, warranty or
guarantee of its accuracy by the Company or the Dormant Subsidiary to the
Vendors and the Vendors waive any claims against the Company, the Dormant
Subsidiary and their officers, employees, agents, representatives or
advisers which they might otherwise have in respect of the same.
5.5 The rights and remedies of the Purchaser in respect of the Warranties
shall not be affected by:-
5.5.1 Completion;
5.5.2 any investigation made by it or on its behalf into the affairs of
the Company;
5.5.3 its knowledge of any information the Purchaser may have received or
been given or have actual, implied or constructive notice of prior
to the signing of this Agreement (other than that fairly and
accurately disclosed in the Disclosure Letter and fairly disclosed
in the Disclosure Bundle); or
5.5.4 any event or matter whatsoever except a specific and duly authorised
written waiver or release.
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5.6 Any payment made by the Vendors in respect of the Warranties or under the
Tax Deed shall operate to reduce pro tanto the Consideration to the extent
of such payment.
6. INDEMNITIES
6.1 The Vendors shall indemnify the Purchaser and the Company in accordance
with the provisions of Schedule 8.
6.2 The Purchaser shall fully and promptly indemnify the Vendors and each of
them against any liability for Taxation arising under Section 767A and/or
767B of ICTA 1988 assessed on the Vendors as the result of any omission or
delay after Completion on the part of the Purchaser or the Company to pay
Taxation (other than Taxation in respect of which the Purchaser is
entitled to make or shall already have made a valid claim under the Tax
Deed) and all costs damages and expenses reasonably and properly incurred
by the Vendors in connection therewith arising wholly or partly in
consequence of any such omission or delay; PROVIDED that the Vendors shall
take such steps (if any) as the Purchaser may reasonably request to resist
such liability, subject to the Purchaser first indemnifying the Vendors as
aforesaid and providing to the reasonable satisfaction of the Vendors
security or indemnities or both agreeing to indemnify the Vendors in
respect of all the reasonable costs and expenses incurred of the steps
concerned; Further PROVIDED that the Vendors shall not dispute, settle,
agree or otherwise deal with such liability without the written approval
of the Purchaser (such approval not to be unreasonably withheld or
delayed).
7. COMPLETION
7.1 Completion of the sale and purchase of the Shares shall take place
immediately after exchange of this Agreement at the offices of the
Purchaser's Solicitors when the Vendors will:-
7.1.1 deliver to the Purchaser those items set out in Schedule 9;
7.1.2 procure that a board meeting of the Company and of the Dormant
Subsidiary shall be held at which:-
(a) such persons as the Purchaser may nominate shall be appointed
as Directors and the Secretary of the Company and of the
Dormant Subsidiary;
(b) there shall be submitted and accepted the resignation in
Agreed Form of Mr L W Green as director;
(c) the service agreements for Mr M A Winton and Mr J D Price will
be terminated without compensation;
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(d) the transfers of the Shares, shall be approved for
registration, subject to stamping.
7.2 Following compliance in full with the provisions of sub-clause 7.1 and
Schedule 9 the Purchaser shall:-
7.2.1 send to the Vendors' Solicitors (whose receipt shall be full
discharge for the Purchaser) by telegraphic transfer in the sum of
(pound)11,973,073 (eleven million nine hundred and seventy three
thousand and seventy three pounds) in payment of the First Tranche;
7.2.2 deliver to the Vendors' Solicitors a counterpart of the Tax Deed
duly executed by the Purchaser; and
7.2.3 deliver to the Vendors' Solicitors the Legal Opinion.
8. RELEASE OF GUARANTEES AND INDEMNITIES
8.1 The Vendors will procure the release at or by Completion of the Company
from all guarantees, indemnities, undertakings and obligations given in
respect of any obligation or liability of the Vendors or any person
connected with any of the Vendors and the Vendors will on an after-Tax
basis indemnify and hold harmless the Company and the Purchaser from and
against all and any actual or contingent liabilities which the Company or
the Purchaser may at any time incur in relation to any such guarantee,
indemnity, undertaking or other obligation.
8.2 The Purchaser shall use its best endeavours to secure the release of each
of the Vendors from all guarantees, indemnities, undertakings, obligations
and securities granted by them to third parties in relation to the Company
as detailed as such in the Disclosure Letter (the "Disclosed Guarantees")
and in the meantime shall indemnify them and keep them fully and
effectually indemnified against any liability on an after-Tax basis
(including, without limitation, all costs, damages and expenses) or which
may be incurred in relation to the Disclosed Guarantees.
9. COMPLETION ACCOUNTS BOOK DEBTS
The receivables included as book debts in the Completion Accounts (the
"Completion Accounts Book Debts") will take no account of any bad or
doubtful debt reserve and will be treated as follows:-
9.1 The Vendors agree that 95% of the Completion Accounts Book Debts will
realise their nominal value within 120 days of the Completion Date (the
"First Benchmark Date").
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9.2 If and to the extent that 95% of the Completion Accounts Book Debts do not
realise their nominal value by the First Benchmark Date then the amount of
the shortfall (the "First Benchmark Shortfall") will be paid to the
Purchaser by the Vendors within 30 days of the First Benchmark Date.
9.3 The Vendors agree that 99.5% of the Completion Accounts Book Debts will be
paid within 12 months of the Completion Date (the "Second Benchmark
Date").
9.4 If and to the extent that the Completion Accounts Book Debts do not
realise 99.5% of their value by the Second Benchmark Date the Vendors will
pay to the Purchaser within 30 days of the Second Benchmark Date the
amount of such shortfall (the "Second Benchmark Shortfall") less the
following amounts:-
(a) any amounts already paid in respect of the First Benchmark
Shortfall;
(b) VAT bad debt relief on the Second Benchmark Shortfall;
(c) any savings in corporation tax arising by reason of the Completion
Accounts Book Debts comprised in the Second Benchmark Shortfall
being written off;
9.5 If there is no Second Benchmark Shortfall or to the extent that such
Second Benchmark Shortfall, after making the deductions referred to in
clauses 9.4(b) and (c), is less than the First Benchmark Shortfall then
the Purchaser will repay to the Vendors within 30 days of the Second
Benchmark Date the proportionate amount of the First Benchmark Shortfall
as has been paid by the Vendors to the Purchaser.
9.6 All or any payments made by the Vendors in respect of the First Benchmark
Shortfall and the Second Benchmark Shortfall (net of any repayment by the
Purchaser under clause 9.5) will operate to reduce pro tanto the
Consideration to the extent of such payment.
9.7 The Purchaser and the Vendors (to the extent that they are able to do so)
will procure that the Company collects the Completion Accounts Book Debts
in the ordinary course of business.
9.8 Paragraph 11 of Schedule 7 shall apply to this clause 9 mutatis mutandis.
10. NON-COMPETITION
10.1 To ensure that the Purchaser receives the full benefit of the goodwill of
the business of the Company each of the Vendors covenants irrevocably and
unconditionally with the Purchaser that except as otherwise specifically
agreed in writing with the Purchaser:-
10.1.1 he will not:-
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(a) during the Period of Restraint; or
(b) while he is a consultant, director or employee of any DMS
Group Company or the Purchaser; or
(c) during the period of 2 years from the date he ceases to be a
consultant, director or employee of any DMS Group Company or
the Purchaser;
which ever be the later; directly or indirectly in any capacity
whatsoever (whether solely or jointly with or as agent, consultant,
director, employee, manager, partner, proprietor, or shareholder of
any other person whether corporate or unincorporate or otherwise
howsoever and whether for payment or not) carry on or be engaged in
or concerned in or interested in (directly or indirectly whether for
payment or not) in the carrying on of the Restricted Business within
a radius of 50 miles of any of the Properties or within the radius
of the M25 Motorway. For these purposes the term "carrying on" shall
mean both the central management and control of Restricted Business
and the actual conduct of Restricted Business;
10.1.2 he will not directly or indirectly in any capacity whatsoever
(whether as an agent, consultant, director, employee, partner,
proprietor, shareholder or otherwise howsoever and whether for
payment or not) during the Period of Restraint:-
(a) canvass, entice away or solicit; or
(b) accept business from, deal with or perform services for;
any client, customer or any Prospective Client of the Company in
relation to any Restricted Business;
10.1.3 he will not:-
(a) while he is a consultant, director or employee of the Company
or the Purchaser or any member of the DMS Group; or
(b) for a period of 2 years from the date he ceases to be a
consultant, director or employee of the Company or the
Purchaser or any member of the DMS Group (either on his own
account or as the agent, consultant, director, employee,
manager, proprietor or shareholder of any other person);
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in connection with the Restricted Business accept business
from, deal with or perform services for or canvass, entice
away, or solicit any person who is or was within a period of
12 months prior to the date he ceases to be a consultant,
director or employee of the Company or the Purchaser or any
member of the DMS Group a customer, client or Prospective
Client;
10.1.4 he will keep confidential and not disclose or make use of any
financial or other confidential information or other
confidential know-how in relation to the Company including,
but not limited, to any such information about current or
future affairs or plans or about customers/clients or
Prospective Clients save as required by law or in relation to
such information or know-how which is or comes into the public
domain other than due to the default of the Vendors;
10.1.5 while he is a consultant, director or employee of any DMS
Group Company or the Purchaser and for a period of 2 years
after his ceasing to be engaged as such he will not (and will
procure that no person connected with him shall) induce or
seek to induce away from the Company or any member of the DMS
Group with a view to engaging them in any competing business
any director or senior employee engaged by the Company or any
member of the DMS Group at the date he ceases to be such
consultant, director or employee and with whom he has had
direct personal dealings;
10.1.6 while he is a consultant, director or employee of any DMS
Group Company or the Purchaser he will not (and will procure
that no person connected with him shall) own beneficially or
otherwise or be interested in the share capital of any company
engaged in the Restricted Business;
10.1.7 he will not use during the Period of Restraint or while he is
a consultant, director or employee of any DMS Group Company
and for a period of 2 years after his ceasing to be so engaged
and he will procure that any other person connected with him
will not directly or indirectly during the same period use the
name "Delta" or any name likely to be confused with such name
in the minds of members of the public for the purposes of the
Restricted Business as at the Completion Date whether by using
such name as part of a corporate name or otherwise;
10.1.8 he will not at any time knowingly do or say anything harmful
to the reputation of any DMS Group Company which leads any
person, firm or company to cease to do business with any DMS
Group Company
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on substantially equivalent terms to those previously offered
or not to engage in business with the Company or any DMS Group
Company;
Provided that nothing contained in this clause shall prevent the Vendors
from at any time holding for investment purposes only any class of
securities for the time being listed or dealt in on any recognised
investment exchange (as defined in the Financial Services Act 1986) where
such Vendor does not directly or indirectly have an interest in more than
1% of such class of securities and where his interest when aggregated with
the interests of all of the Vendors does not exceed 5% of all the issued
securities of that class.
10.2 The covenants contained in sub-clause 10.1 shall be deemed to be in
respect of each part entire, separate, severable and separately
enforceable so that each covenant shall be deemed to be a separate
covenant notwithstanding the fact that it appears in the same clause,
sub-clause or sentence or any other covenant or is imposed by the
introduction of a word or phrase conjunctively with or disjunctively from
or alternatively to other words or phrases.
10.3 Each of the relevant Vendors acknowledges that:-
10.3.1 the restrictions have been negotiated and agreed on an arm's length
basis and are reasonable when taken together as well as
individually; and
10.3.2 the duration, extent and application of each restriction is no
greater than is necessary for the protection of the goodwill of the
business of the Company; and
10.3.3 the consideration paid by the Purchaser for the Shares takes into
account and provides adequate compensation for the restraints and
restrictions imposed.
10.4 If the business of the Company is transferred to another company which is
a subsidiary of the Purchaser (the "Transferee Company"), each of the
restrictions contained in sub-clause 10.1 shall continue to apply, mutatis
mutandis, in relation to the business transferred as carried on from time
to time by the Transferee Company as if the name of the Transferee Company
were substituted for the word "Company".
10.5 "Period of Restraint" means the period of 2 years from the date of this
Agreement;
"Prospective Client" means any association, company, firm, or person with
whom or with which there are negotiations ongoing with a view to that
association, company, firm, or person becoming a client or customer of any
DMS Group Company; and
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"Restricted Business" means any type of minicab, motor-cycle, messenger,
car-hire, van, pedal cycle, courier (whether domestic or international)
and other transport or despatch business or activity of the same kind as
that carried on by the Company at the date of this Agreement.
11. COSTS
All costs and expenses incurred by or on behalf of the Parties including
all fees of accountants, representatives and solicitors employed by any of
the Parties in connection with the negotiation, preparation and execution
of this Agreement shall be borne solely by the Party who shall have
incurred the same and the other Parties shall have no liability in respect
of such costs and expenses.
12. FURTHER ASSURANCE
12.1 Each of the Vendors by way of security irrevocably and unconditionally
appoints the Purchaser as his attorney with full powers of substitution in
his name and on his behalf (and to the complete exclusion of any rights he
may have in such regard) lawfully to exercise all voting and other rights
and receive all benefits and entitlements which may now or at any time
after the date of this Agreement attach to the Shares and to transfer and
deal with the Shares and such rights, benefits and entitlements and
execute such documents under hand or under seal and do such acts and
things in connection with the foregoing as the Purchaser shall from time
to time reasonably think fit in all respects as if the Purchaser were the
absolute legal and beneficial owner of such Shares.
12.2 Each of the Vendors undertakes to the Purchaser to ratify everything that
the Purchaser shall lawfully do or purport to do pursuant to sub-clause
12.1.
12.3 Without limitation to any obligations implied by law all of the Parties
will (so far as he or it is able to do so) after as well as before and
upon the Completion Date do all acts and things and sign and execute all
documents and deeds requisite for the purpose of implementing the terms of
this Agreement.
22
<PAGE>
13. NOTICES
13.1 Any notice to be given for the purposes of this Agreement shall either be
delivered personally or sent by first class recorded delivery post,
Datapost or facsimile transmission.
13.2 Provided the appropriate notice is clearly referenced "DSG", the address
for service of the Vendors shall be the address (or principal address if
more than one) of the Vendors' Solicitors or such other firm in England
and Wales:-
13.2.1 with which it may merge or which a majority of its partners may
join; or
13.2.2 as the Vendors who own the majority in number of Shares may notify
in writing to the Purchaser.
If at any time it shall not be evident which firm of Solicitors are
appointed for the purposes of this sub-clause the Purchaser must serve
notice on all of the Vendors at their addresses in this Agreement.
13.3 The address for service of the Purchaser shall be the address (or
principal address if more than one) of the Purchaser's Solicitors or such
other firm in England and Wales:-
13.3.1 with which it may merge or which a majority of its partners may
join; or
13.3.2 as the Purchaser may notify in writing to the Vendors.
If at any time it shall not be evident which firm of Solicitors are
appointed for the purposes of this sub-clause the Vendors must serve
notice on the Purchaser at its address in this Agreement.
13.4 The address for service of the Purchaser shall be its principal place of
business for the time being.
13.5 A notice shall be deemed to have been served as follows:-
13.5.1 if personally delivered, at the time of delivery;
13.5.2 if sent by first class recorded delivery post, at the expiration of
48 hours after the same was delivered into the custody of the
postal authorities;
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<PAGE>
13.5.3 if sent by Datapost, at the expiration of 24 hours after the same
was delivered into the custody of the postal authorities; and
13.5.4 if sent by facsimile transmission at the expiration of 12 hours
after despatch.
13.6 In proving such service it shall be sufficient to prove that personal
delivery was made, or that the envelope containing such notice was
properly addressed and delivered into the custody of the postal
authorities as a pre-paid recorded delivery letter or Datapost letter, or
that the facsimile transmission was properly addressed and despatched to
the appropriate number.
14. GOVERNING LAW AND JURISDICTION
14.1 This Agreement shall be governed by and construed in all respects in
accordance with English law and the parties irrevocably agree that the
Courts of England and Wales shall have exclusive jurisdiction in respect
of any dispute, suit, action, arbitration or proceedings (in this clause
together referred to as "Proceedings") which may arise out of or in
connection with this Agreement.
14.2 The Vendors expressly and specifically agree and accept that the terms of
this clause 14 are fair and reasonable and appoint the Vendors' Solicitors
or such other firm as is mentioned in sub-clause 13.2 for the time being
to accept service on their behalf of any Proceedings which may be
commenced in England and Wales.
14.3 The Purchaser expressly and specifically agrees and accepts that the terms
of this clause 14 are fair and reasonable and appoints the Purchaser's
Solicitors or such other firm as is mentioned in sub-clause 13.3 for the
time being to accept service on its behalf of any Proceedings which may be
commenced in England and Wales.
15. PUBLICITY
15.1 No announcement or other disclosure concerning the sale and purchase of
the Shares to the Purchaser or any ancillary matter shall be made before
or after Completion by the any Party (whether to the press employees
customers or suppliers) save in a form agreed in writing between the
Parties or otherwise as required by law or any regulatory authority.
15.2 The Purchaser acknowledges that it has requested M A Winton and J D Price
to deal with an appropriate public relations company for the purposes of
the Purchaser making an announcement of the sale of the Company once
completed but no announcement or other action will be taken without
compliance with clause 15.1.
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<PAGE>
16. GENERAL
16.1 This Agreement contains the whole agreement between the Parties relating
to the transactions provided for in this Agreement and supersedes all
previous agreements (if any) between such Parties in respect of such
matters and each of the Parties acknowledges that in agreeing to enter
into this Agreement it has not relied on any representations or warranties
except for those contained in this Agreement.
16.2 This Agreement shall (except for any obligation fully performed prior to
or at the Completion Date) continue in full force and effect after the
Completion Date notwithstanding Completion.
16.3 Notwithstanding any rule of law or equity to the contrary any release,
waiver or compromise or any other arrangement of any kind whatsoever which
the Purchaser may agree to or effect in relation to one Vendor in
connection with this Agreement and in particular the Warranties shall not
affect the rights and remedies of the Purchaser as regards any other
Vendor.
16.4 The sole remedy against the Vendors for any breach of any of the
Warranties or Indemnities by the Vendors shall be an action for damages
and the Purchaser shall not be entitled to rescind this Agreement but
subject to the foregoing any remedy or right conferred upon the Purchaser
for breach of this Agreement shall be in addition to and without prejudice
to all other rights and remedies available to it.
16.5 No failure or delay by any Party in exercising any claim, remedy, right,
power or privilege under this Agreement shall operate as a waiver nor
shall any single or partial exercise of any claim, remedy, right, power or
privilege preclude any further exercise of any of them or exercise of any
other claim, right, power or privilege.
16.6 This Agreement may be executed in any number of counterparts by the
different parties on separate counterparts, each of which shall when
executed and delivered constitute an original, but all of which shall
together constitute one and the same instrument.
16.7 The Vendors will not be entitled to assign any interest in this Agreement.
The Purchaser will not be entitled to assign any interest in this
Agreement except to any other member of the DMS Group whilst such Company
remains a member of the DMS Group (a "Permitted Transferee"). If the
Shares shall at any time be sold or transferred to a Permitted Transferee
the benefit of each of the obligations, undertakings, indemnities or
warranties undertaken or given by the Vendors under or pursuant to this
Agreement shall be assignable to the Permitted Transferee and such
Permitted Transferee shall be entitled to enforce the same against the
Vendors as if it were named in this Agreement as the Purchaser.
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<PAGE>
17. TIME OF THE ESSENCE
Time shall be of the essence of this Agreement, both as regards the dates
and periods specifically mentioned and as to any dates and periods which
may by agreement in writing between or on behalf of the Vendors and the
Purchaser be substituted for them.
18. COMPETITION LAW
If there is any provision of this Agreement or of any other agreement or
arrangement of which this Agreement forms part which causes or would cause
this Agreement or that agreement or arrangement to be subject to
registration pursuant to the Restrictive Trade Practices Act 1976, then
that provision shall not take effect until the day after particulars of
this Agreement or of that agreement or arrangement (as the case may be)
have been furnished to the Director General of Fair Trading pursuant to
Section 24 of that Act.
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<PAGE>
SCHEDULE 1
DETAILS OF VENDORS' SHARES AND CONSIDERATION
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6)
Vendor's Name Vendor's Address Number and Class Consideration Percentage of Percentage
of Shares in respect payable for Consideration of Additional
of which the Vendor is Shares at Completion payable at Completion Consideration
the registered holder and
beneficially entitled
(pound) % %
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John Patrick Jennings Port de Salles 390,871 A Shares 6,017,468 50.255% 50.255%
86150 Le Vigeant
France
Mark Adam Winton 9 Aylwards Rise 201,230 B Shares 147,513 1.232% 1.232%
Stanmore 402,460 C Shares 2,950,264 24.641% 24.641%
Middlesex --------- ------- -------
HA7 3EH 3,097,777 25.873% 25.873%
John David Price 11 Pycombe Corner 185,669 B Shares 136,106 1.137% 1.137%
Finchley 371,338 C Shares 2,722,122 22.735% 22.735%
London N12 7AJ --------- ------- -------
2,858,223 23.872% 23.872%
</TABLE>
27
<PAGE>
SCHEDULE 2
BRIEF DETAILS OF THE COMPANY
Name: Delta Air & Road Transport Plc
Date of Incorporation: 27 April 1972
Country of Incorporation: England and Wales
Registered Number: 1051811
Registered Office: Wesley House
Wesley Avenue
Park Royal, London NW10 7BZ
Directors: M A Winton
J D Price
L W Green
Secretary: M A Winton
Accounting Reference Date: 31 March
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<PAGE>
Auditors: Blick Rothenberg
Authorised Share Capital: (pound)85,514.98
Issued Share Capital: 390,871 A Shares 386,899 B Shares and 773,798 C
Shares all such shares being fully paid up
Mortgages/Charges: Mortgage Debenture dated 17 October 1985 in favour
of National Westminster Bank Plc
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<PAGE>
SCHEDULE 3
BRIEF DETAILS OF DORMANT SUBSIDIARY
Name: Leondos Investments Limited
Date of Incorporation: 10 March 1982
Country of Incorporation: England and Wales
Registered Number: 1621106
Registered Office: Wesley House, 1-7 Wesley Avenue, Park Royal,
London NW10 7BZ
Director: J D Price
Secretary: M A Winton
Accounting Reference Date: 31 March
Auditors: Blick Rothenberg
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<PAGE>
Authorised Share Capital: (pound)100
Issued Share Capital: 100 Ordinary Shares of (pound)1 all such shares
being fully paid up
Mortgages/Charges: None
Status: dormant for no less than 5 years
31
<PAGE>
SCHEDULE 4
BRIEF DETAILS OF THE PROPERTIES
32
<PAGE>
SCHEDULE 5
TAX DEED
THIS TAX DEED OF COVENANT is made the day of 1998
BETWEEN
(1) THE PERSONS whose names and addresses are set out in Part I of the
Schedule (the "Covenantors"); and
(2) DISPATCH MANAGEMENT SERVICES CORP. a corporation incorporated in Delaware
whose office is situate at 65 West 36th Street, New York, New York 10018,
U.S.A. (the "Purchaser" which expression shall where the context so admits
include its successors and permitted assigns).
WHEREAS pursuant to an agreement (the "Agreement") of today's date the Purchaser
has today completed the purchase from the Covenantors of the whole of the issued
share capital of Delta Air & Road Transport PLC in reliance, inter alia, upon
the provisions of this Deed.
NOW IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
1.1 In this Deed unless the context otherwise requires the following
expressions shall have the following meanings:-
Definition Meaning
"Claim" any claim, notice, demand, assessment, letter,
direction or order, or other document issued
or action taken by or on behalf of any fiscal,
revenue or other authority or official
anywhere in the world whereby the Company is
liable or is sought to be made liable to make
any payment to the authority or official or
other person (whether the same is primarily
payable by the Company and whether or not the
Company shall or may have any right of
reimbursement against any other person) or is
denied or sought to be denied any Relief
the "Company" any or both of the Company and the Dormant
Subsidiary
33
<PAGE>
"Event" any event, act, transaction, omission or
occurrence of whatever nature, including
(without limitation) Completion, the receipt
or accrual of any income or any distribution,
failure to distribute, acquisition, disposal,
transfer, payment, loan or advance, the death
of any person and the change in residence of
any person
"Relief" any relief, loss, allowance, credit,
deduction, exemption or set-off claimed or
available in relation to Taxation pursuant to
any legislation or otherwise
"Taxation" any form of taxation, duty, levy, impost,
charge, national insurance or other similar
contribution, whether created or imposed by
any governmental, state, federal, local,
municipal or other body, and whether in the
United Kingdom or elsewhere (whether the same
is primarily payable by the Company and
whether or not the Company shall or may have
any right of reimbursement against any other
person) including any payment which the
Company may be or become bound to make or
obliged to account for to any person in
respect of Taxation and also including any
related penalty, interest, fine or surcharge;
Provided that United Kingdom stamp duty and
any interest and penalties in respect thereof
shall not constitute "Taxation" for the
purposes of this Deed.
1.2 Other expressions used in this Deed shall, where the context so admits,
have the meanings ascribed to them in the Agreement.
1.3 Reference to the result of any Event on or prior to a particular date
shall include the combined result of two or more Events, the first of
which shall have taken place on or before such date, and shall also
include any Event which is deemed for Taxation purposes to have occurred
prior to such date.
1.4 Any reference to a statute or statutory provision shall be construed as a
reference to such provision (including any subordinate legislation made
thereunder) as modified or re-enacted from time to time.
1.5 References to income, gains or profits shall include any such income,
gains or profits as are deemed to be or treated as earned, accrued or
received for Taxation purposes.
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<PAGE>
1.6 Headings in this Tax Deed are for ease of reference only and shall not
affect its construction.
2. THE COVENANT
2.1 Subject to clause 3 the Covenantors hereby severally (limited to the due
proportions received by the individual Covenantor in respect of the sale
of the Shares to the Purchaser) agree with the Purchaser to pay to the
Purchaser an amount equal to:-
2.1.1 any liability to Taxation of the Company arising:-
(a) as a result of or by reference to any Event on or before
Completion;
(b) by reference to any profit earned, accrued or received on or
before Completion;
2.1.2 any liability to Taxation of the Company which would have been saved
but for the loss, reduction, modification, setting-off or
cancellation of some Relief taken into account in preparing the
Completion Accounts or, prior to finalisation of the Completion
Accounts, the Audited Accounts in consequence of an Event occurring
on or before Completion;
2.1.3 any liability to Taxation of the Company which arises in consequence
of an Event occurring on or before Completion and which would have
been payable but for the utilisation or set-off of some Relief or
right to repayment where the Relief or right to repayment arises in
respect of an Event occurring after Completion;
2.1.4 any depletion in or reduction in value of the assets or increase in
the liabilities of the Purchaser and the Company as a result of any
inheritance tax which:-
(a) is at Completion a charge on or gives rise to a power to sell,
mortgage or charge any of the shares or assets of the Company;
or
(b) after Completion becomes a charge on or gives rise to a power
to sell, mortgage or charge any of the shares or assets of the
Company, which is a liability in respect of inheritance tax
payable as a consequence of the death of any person (whenever
occurring) within seven years after a transfer of value,
occurring on or before Completion;
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<PAGE>
(c) arises as a consequence of a transfer of value occurring on or
before Completion (whether or not in conjunction with the
death of any person whenever occurring) made by or to the
Company.
2.2 For the avoidance of doubt, any payment made by the Company or the
Purchaser to discharge or remove any power to sell, mortgage or charge
shall give rise to a liability and notwithstanding any provision of this
Tax Deed the Company or the Purchaser may disregard any right to pay any
Taxation in instalments in discharging or removing a charge or power.
2.3 Section 213 Inheritance Act 1984 (Refund by Instalments) shall not apply
in relation to any payments to be made by the Covenantors under this Tax
Deed.
2.4 There shall be treated as an amount of Taxation which would for the
purposes of clause 2.1.2 have been saved but for the loss, reduction,
modification, setting-off or cancellation of some Relief, the amount of
Taxation which would have been saved by the Relief lost, reduced,
modified, set-off or cancelled applying the relevant rates of Taxation in
force or (where the rate has at the relevant time not been fixed) at the
last known rate, in the earliest period in respect of which Taxation
becomes payable which would not have been payable if the Relief had not
been lost, reduced, modified, set-off or cancelled.
2.5 The Covenantors hereby severally covenant (limited to the due proportions
received by the individual Covenantor in respect of the sale of the Shares
to the Purchaser) to pay to the Purchaser an amount equal to all costs or
expenses properly and reasonably incurred or payable by the Company or the
Purchaser in connection with any matter in respect of which a claim is
made by the Purchaser under this Deed.
2.6 Any amount paid under clause 2.1 or clause 2.5 shall be treated as an
adjustment to the consideration paid by the Purchaser for the Shares under
the terms of the Agreement.
3. EXCLUSIONS
The Covenantors shall not be liable under clause 2 to the extent that:-
3.1 a specific provision in respect of such liability has been made in the
Completion Accounts or, prior to the finalisation of the Completion
Accounts, in the Audited Accounts;
3.2 such a provision is insufficient by reason only of an increase in the
rates of Taxation announced after Completion but with retrospective
effect;
3.3 the liability arises in consequence of an Event which has occurred since
the Accounting Date in the ordinary course of the trading activities of
the Company (and for this
36
<PAGE>
purpose any liability for Advance Corporation Tax on the dividends
detailed in the Disclosure Letter will be deemed to have arisen in the
ordinary course of the trading activities of the Company); Provided that
none of the following shall be regarded as arising out in the ordinary
course of the trading activities of the Company:-
3.3.1 any Taxation arising from a disposal of any capital asset;
3.3.2 any Taxation arising under Part XVII ICTA 1988 (Tax Avoidance) or
Part VIII Taxes Management Act 1970 (charges on non-residents);
3.3.3 any Taxation arising in respect of the acquisition, disposal or
supply or deemed acquisition, disposal or supply of any assets,
goods, service or business facility of any kind (including the
making of a loan) for a consideration deemed for Taxation purposes
to be different from that actually received, but only insofar as
such Taxation is attributable to the difference between the
consideration (if any) actually received and the consideration
deemed for Taxation purposes to have been received;
3.3.4 any Taxation primarily payable by another person;
3.3.5 any Taxation arising as a result of a failure by the Company or any
subsidiary duly to deduct, charge, recover or account for, Taxation
(but not to the extent that such failure continues after the date
hereof); or
3.3.6 any amount payable to the Commissioners of Customs and Excise under
Part XV of the Value Added Tax Regulations 1995.
3.4 No Covenantor shall be liable in respect of a claim under this Deed to the
extent that the provisions of Schedule 7 of the Agreement apply.
3.5 The Purchaser shall and shall procure that the Company shall preserve all
documents, records, correspondence, accounts and other written information
of a material nature (together the "Documents") in the possession of the
Company at Completion or which come into existence thereafter and which
might reasonably be considered relevant or likely to be relevant to a
liability of the Covenantors to make a payment under the terms of this
Deed and shall so preserve such Documents until such time as the
Covenantors shall have satisfied any such liability or shall cease to have
any liability (actual or contingent) under this Deed in respect of the
matter to which the Documents in question relate.
3.6 The Covenantors shall not be liable for any fines, interest or penalties
in respect of any liability to Taxation in respect of which provision is
made in the Completion Accounts to the extent that such fines interest and
penalties arise after Completion as a result of
37
<PAGE>
a failure by the Company to pay such Taxation on the due date for payment
but only to the extent that such fines, interest or penalties arise as a
result of the delay or default of the Purchaser or the Company after
Completion and otherwise than as a result of acts and omissions occurring
at the request or by reason of the acts or omissions of the Covenantors
under the provisions of clause 4 of this Deed.
3.7 The Covenantors shall not be liable under clause 2 of this Deed in respect
of any liability to Taxation to the extent that such liability arises as a
result of:-
3.7.1 the Company disclaiming (without the written consent of the
Covenantors) any capital allowances arising to the Company before
Completion; or
3.7.2 the Company failing to make any claim, election, surrender,
disclaimer or take such other action as is required to give effect
to any Relief taken into account or assumed in computing the
provision for Taxation in the Completion Accounts
Provided that this clause 3.7 shall only apply to limit the liability of
the Covenantors to the extent that the Covenantors shall have notified the
Purchaser in writing of the capital allowances relevant to clause 3.7.1
and those Reliefs and the action required for the purpose of clause 3.7.2.
4. CONDUCT OF CLAIMS AND APPEALS
4.1 In the event of the Company or the Purchaser becoming aware of any Claim
which could give rise to a liability hereunder the Purchaser shall or
shall procure that the Company shall promptly give written notice of the
Claim to the Covenantors, provided that such notice shall not be a
condition precedent to the liability of the Covenantors.
4.2 Subject to:-
4.2.1 the Covenantors first having secured and agreed to indemnify the
Purchaser and any relevant Company to the Purchaser's reasonable
satisfaction against all losses (including additional Taxation)
costs, (including the reasonable cost to the Purchaser or the
Company of executives assisting the Covenantors) damages and
expenses which are likely to be incurred in connection with, the
Claim;
4.2.2 the following provisions of this clause
the Purchaser shall and shall procure that the Company shall take any such
action as the Covenantors may reasonably request to avoid, dispute,
resist, appeal, compromise or defend the Claim.
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<PAGE>
4.3 The appointment by the Covenantors of solicitors or other professional
advisers in relation to the Claim shall be subject to the approval of the
Purchaser (such approval not to be unreasonably withheld or delayed).
4.4 Any communication, written or otherwise, relating to the Claim received by
the Covenantors shall be promptly copied (if in writing) or otherwise
communicated to the Purchaser.
4.5 The Covenantors shall effect no settlement or compromise of the Claim or
agree any matter in the conduct of the dispute without the approval of the
Purchaser (such approval not to be unreasonably withheld or delayed) and
in any event no action shall be required by the Purchaser or the Company
in relation to the Claim which is reasonably considered likely by the
Purchaser to prejudice the conduct of the business or the future liability
in respect of Taxation of the Company or the Purchaser.
4.6 Without prejudice to the foregoing provisions of this clause, neither the
Company nor the Purchaser shall be obliged to contest a Claim beyond the
first appellate body (including the Special or General Commissioners, or a
VAT tribunal or equivalent body) in the jurisdiction concerned.
4.7 If, in the reasonable opinion of the Purchaser having taken proper legal
advice:-
4.7.1 the Covenantors or the Company have committed any acts or omissions
which did constitute fraud or wilful default; or
4.7.2 there is any unreasonable delay on the part of the Covenantors in
complying with clause 4.2.1; or
4.7.3 the resistance of a Claim is at any time not being properly and
effectively conducted
the Purchaser (provided in the case of a matter within sub-clause 4.7.2 or
4.7.3 that the Covenantors have been given notice in writing of the matter
and have not within 15 Business Days of such notice rectified the position
to the reasonable satisfaction of the Purchaser) may or may procure that
the Company shall without further reference to the Covenantors admit,
compromise, settle, discharge or otherwise deal with any outstanding or
future Claims.
4.8 Without prejudice to the preceding provisions of this clause 4 the
Purchaser shall procure that the text of any return to be made by the
Company to the Inland Revenue (whether under s.250 ICTA 1988 or otherwise)
of the stock dividend transactions carried out on 6 April 1998 or
otherwise in respect of the Reorganisation is sent to the Vendors for
approval (such approval not to be unreasonably withheld or delayed) prior
to submission to the Revenue and that the Vendors are kept fully informed
about and consulted on any negotiations with the Inland Revenue in
relation to any such return.
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5. TAXES
5.1 Subject to clause 5.2 all sums payable by the Covenantors under this Deed
shall be paid free and clear of all deductions or withholdings unless the
deduction or withholding is required by law.
5.2 If any such deduction or withholding is required by law to be made from
any such sum (other than in respect of interest payable to the Purchaser)
the Covenantors shall pay such additional amount as shall be required to
ensure that the net amount received by the Purchaser or the Company will
equal the full amount which would have been received by it or them had no
such deduction or withholding been made.
5.3 If any payment by the Covenantors under this Deed has or in the reasonable
opinion of the Purchaser will be chargeable to Taxation (other than a
reduction in the base cost to the Purchaser of the shares of the Company)
then the amount so payable shall be grossed up by such amount as will
ensure that after deduction of the Taxation so chargeable there shall be
left in the hands of the Company or the Purchaser a sum equal to the
amount that would otherwise have been payable.
6. DATE FOR PAYMENT AND INTEREST
6.1 The Covenantors shall pay to the Purchaser any amount required to be paid
by them pursuant to clause 2.1 in cleared funds on or before:-
6.1.1 if the Claim involves an actual payment of Taxation which has not
been made at the date of the notice under clause 4.1, the second
Business Day prior to the date on which such Taxation may be paid to
the authority, official or person demanding the same without
incurring a liability to interest or a charge or penalty in respect
of such Taxation;
6.1.2 to the extent the claim under this Deed involves the denial or loss
or set-off in whole or in part of any right to repayment of
Taxation, the date which is or would have been the "material date"
for the purposes of sections 825 and 826 ICTA 1988 or, in the case
where those sections do not apply to the repayment in question, the
date on which such Taxation would otherwise have been repaid;
6.1.3 to the extent the claim under this Deed involves the denial, loss,
reduction, cancellation, modification or set-off in whole or in part
of any Relief the second Business Day prior to the date on which the
Taxation, which would have been saved but for such denial, loss,
reduction, modification, cancellation or set-off, becomes due and
payable; and
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6.1.4 in the case of a liability under clause 2.1.3 the date which would
have been the due date in clause 6.1.1 but for the availability of
the Relief.
6.2 The Covenantors shall pay to the Company or the Purchaser as the case may
be any amount required to be paid by them pursuant to clause 2.5 on the
date on which the Company or the Purchaser incurs or suffers such costs or
expenses.
6.3 Notice of the amount of the payment required to be made by the Covenantors
under clause 2 and the due date for payment shall be given in writing by
the Company or the Purchaser and shall (save for manifest error) be
conclusive and binding on the Covenantors.
6.4 Any sum not paid by the Covenantors on the due date for payment shall bear
interest (which shall accrue from day to day after as well as before any
judgment for the same) at the annual rate of 2% over the base rate for the
time being of Barclays Bank plc (or if such a rate cannot be ascertained
for any reason at such similar rate as the Purchaser shall reasonably
select) to and including the day of actual payment (or the next Business
Day if the date of actual payment is not a Business Day) of such sums
compounded on the usual quarter days.
OVERPROVISIONS AND CORRESPONDING SAVINGS
7.1 If:
7.1.1 any provision for Taxation in the Completion Accounts has proved to
be an overprovision; or
7.1.2 any Tax liability in respect of which the Covenantors are liable to
make a payment under clause 2 of this Deed applies gives rise to a
Relief for the Company which reduces or eliminates a liability of
the Company to make an actual payment of Tax which arises in respect
of Events occurring after the Completion; or
7.1.3 the Company becomes entitled to any repayment of Tax overpaid by the
Company (other than a repayment which has been shown as an asset in
the Audited Accounts and/or the Completion Accounts) and/or any
interest and/or any repayment supplement in respect of any period
before Completion
an amount equal to :
(a) such overprovision;
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(b) the amount of the liability which is eliminated or the amount
by which it is reduced;
(c) the amount of the repayment of Tax and/or interest and/or
repayment supplement.
shall be dealt with in accordance with clause 7.2
7.2 Where it is provided under clause 7.1 that any amount (the "Relevant
Amount") is to be dealt with in accordance with this clause:
7.2.1 the Relevant Amount shall first be set off against any payment then
due from a Covenantor under this Deed or under the Agreement for
breach of the Tax Warranties in Section Q of Schedule 6 (the "Tax
Warranties") of the Agreement;
7.2.2 to the extent that there is an excess, a refund shall be made of any
previous payment made by a Covenantor under this Deed or under the
Agreement for breach of the Tax Warranties and not previously
refunded under this clause up to the amount of such excess; and
7.2.3 to the extent that the excess referred to in clause 7.2.2 is not
exhausted under that clause, the remainder of that excess shall be
carried forward and set off against any future payment or payments
which become due under this Deed or under the Agreement for breach
of the Tax Warranties.
7.3 This clause 7 shall not apply to any amount for which and to the extent
that the Covenantors have already received a benefit whether under the
terms of the Agreement, this Deed or otherwise.
8. STAMP DUTY
The Covenantors hereby severally warrant (limited to the due proportions
received by the individual Covenantor in respect of the sale of the Shares
to the Purchaser) to the Purchaser that all documents forming part of the
title to any asset of a Company or which a Company may wish to enforce or
produce in evidence are duly stamped and have where appropriate been
adjudicated. The Covenantors hereby severally agree (limited to the due
proportions received by the individual Covenantor in respect of the sale
of the Shares to the Purchaser) that in the event of a breach of this
warranty they shall pay to the Purchaser by way of liquidated damages an
amount equal to any unpaid stamp duty and any interest or penalties
payable in respect thereof.
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9. WAIVER
No delay or omission of the Purchaser in exercising any right, power or
privilege under this Tax Deed shall impair the right, power or privilege
or be construed as a waiver of the right, power or privilege, and any
single or partial exercise of any right, power or privilege under this Tax
Deed shall not preclude the further exercise of any right, power or
privilege. The rights and remedies of the Purchaser provided in this Tax
Deed are cumulative and not exclusive of any rights and remedies provided
by law.
10. ASSIGNMENT
The benefit of this Tax Deed may be assigned in whole or in part by the
Purchaser on the same terms as those in the Agreement.
11. NOTICES
The provisions of clause 13 (Notices) of the Agreement shall apply to this
Deed as though the same were expressly set out herein.
12. GOVERNING LAW AND JURISDICTION
12.1 This Agreement shall be governed by and construed in all respects in
accordance with English law and the parties irrevocably agree that the
Courts of England and Wales shall have exclusive jurisdiction in respect
of any dispute, suit, action, arbitration or proceedings (in this clause
together referred to as "Proceedings") which may arise out of or in
connection with this Deed.
12.2 The Covenantors expressly and specifically agree and accept that the terms
of this clause 12 are fair and reasonable and appoint the Vendors'
Solicitors or such other firm as is mentioned in clause 13 (Notices) of
the Agreement for the time being to accept service on their behalf of any
Proceedings which may be commenced in England and Wales.
13. COUNTERPARTS
This Deed may be executed in any number of counterparts by the different
parties on separate counterparts, each of which shall when executed and
delivered constitute an original, but all of which shall together
constitute one and the same instrument.
IN WITNESS whereof this document has been duly executed as a Deed the day and
year first before written.
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EXECUTION
EXECUTED AND DELIVERED )
AS A DEED by )
JOHN PATRICK JENNINGS ) ...............................................
in the presence of:- )
Signature
--------------------------------------
Name
--------------------------------------
Address
--------------------------------------
Occupation
--------------------------------------
EXECUTED AND DELIVERED )
AS A DEED by )
MARK ADAM WINTON ) ...............................................
in the presence of:- )
Signature
--------------------------------------
Name
--------------------------------------
Address
--------------------------------------
Occupation
--------------------------------------
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EXECUTED AND DELIVERED )
AS A DEED by )
JOHN DAVID PRICE ) ...............................................
in the presence of:- )
Signature
--------------------------------------
Name
--------------------------------------
Address
--------------------------------------
Occupation
--------------------------------------
SIGNED by )
) ...............................................
for and on behalf of )
DISPATCH MANAGEMENT )
SERVICES CORP. )
in the presence of:-
Signature
--------------------------------------
Name
--------------------------------------
Address
--------------------------------------
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Occupation
--------------------------------------
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THE SCHEDULE
Part I
(The Covenantors)
Name Address
John Patrick Jennings Port De Salles
86150 Le Vigeant
France
Mark Adam Winton 9 Aylwards Rise
Stanmore
Middlesex
HA7 3EH
John David Price 11 Pycombe Corner
Finchley
London N12 7AJ
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SCHEDULE 6
WARRANTIES
The Vendors warrant that the following statements are true, accurate and are not
misleading:-
(A) INFORMATION
Details of shareholdings
The information contained in Schedule 1 is true and accurate.
(B) CORPORATE MATTERS
Corporate details
1. The information contained in Schedules 2 and 3 is true and accurate.
General compliance with Companies Acts
2. The Company has complied in all material respects with all applicable
provisions of:-
2.1 the Companies Acts; and
2.2 the Companies Acts 1929 to 1981 and the European Communities Act 1972.
Register of members
3.1 The Register of Members and all other statutory books and Minute Books, of
the Company:-
3.1.1 have been properly kept;
3.1.2 are up to date; and
3.1.3 contain true and accurate records of all matters required to
be dealt with by the Companies Acts.
Memorandum and Articles of Association
4.1 The Purchaser has been supplied with a copy of the Memorandum and Articles
of Association of the Company having attached copies of all resolutions as
are by law required to be attached together with copies of all resolutions
setting out the rights attached to or the conditions of issue of any of
the share capital of the Company. Those copies are true, complete and up
to date and set out in full the rights and restrictions attaching to the
share capital of the Company.
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4.2 The Company has at all times carried on business and conducted its affairs
in all material respects in accordance with its Memorandum and Articles of
Association for the time being in force and any other documents to which
it is or has been a party.
Returns and resolutions
5. The Company has made and filed all material returns, particulars,
resolutions and documents required by the Companies Acts or any other
legislation to be filed with the Registrar of Companies, or any other
governmental or local authority, and all such filings were and are correct
in all material respects. In particular, all charges created by, or in
favour of, the Company have (if appropriate) been registered in accordance
with the provisions of the Companies Acts.
6. Since the Accounting Date no resolutions in general meeting have been
passed by the Company.
Financial assistance
7. The Company has not at any time given financial assistance (as defined in
Section 152(1)(a) of the Companies Act 1985) in connection with the
subscription, purchase or acquisition of any shares in the Company or its
holding company.
The Dormant Subsidiary
8. The Dormant Subsidiary:-
8.1 is not currently trading;
8.2 except for (pound)91,299 due from the Company, does not own or hold
(whether or not in a nominee capacity) any assets (other than cash in
respect of amounts contributed by way of paid up share capital); and
8.3 does not have any liabilities of any nature whatsoever whether actual or
contingent or otherwise and including any of a Taxation nature.
(C) THE SHARES AND SHARE CAPITAL
Allotment and issue of shares
1. No issue or allotment or transfer of share capital in the Company has been
made or registered in contravention of the provisions of the Company's
Articles of Association or the Companies Acts.
2. There are no agreements or other arrangements in force which:-
2.1 provide for the present or future issue, allotment or transfer of; or
2.2 accord to any person the right (absolute or conditional) to call for the
issue, allotment or transfer of;
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any share or loan capital of the Company (including any option or right of
pre-emption or conversion).
Changes in capital
3. Since the Accounting Date:-
3.1 no share or loan capital of the Company has been issued or allotted or
agreed to be issued or allotted whether conditionally or absolutely; and
3.2 the Company has not undergone any capital reorganisation or change in its
capital structure.
Securities held by the Company
4. The Company is not the holder or beneficial owner of and has not agreed to
acquire any class of any shares or other securities of any other
corporation (whether incorporated in England and Wales or elsewhere) nor
has it agreed to invest capital in a partnership or in any organisation
similar to a company or a partnership.
4.1 The Company does not have and never has had any subsidiary undertaking
except the Dormant Subsidiary.
4.2 The allotted and issued shares in the capital of the Dormant Subsidiary
are legally and beneficially/absolutely owned by the Company alone, has
been properly allotted and issued in accordance with the law and are fully
paid or credited as fully paid with no contribution obligation.
4.3 There is no Encumbrance, and there is no agreement, arrangement or
obligation to create an Encumbrance, in relation to a share or unissued
share in the capital of any subsidiary and no person has claimed to be
entitled to any Encumbrance in relation to any such share capital.
Distributions
5.1 All dividends or other distributions of profits declared, made or paid
since the date of incorporation of the Company have been declared, made
and paid in accordance with law and its Articles of Association.
5.2 No dividends or other distributions of profits have been declared, made or
paid by the Company since the Accounting Date.
(D) ACCOUNTS
General
1. The Purchaser has been supplied with a true and complete copy of the
Audited Accounts.
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2. The Audited Accounts:-
2.1 comply with the requirements of the Companies Acts and all relevant
statutory instruments;
2.2 have been prepared in accordance with generally accepted accounting
principles and practices and comply with all current SSAPs and Financial
Reporting Standards applicable to a UK company;
2.3 are accurate in all material respects and show a true, and fair view of
the state of affairs, financial position, assets and liabilities of the
Company and of its results for the financial period ending on the
Accounting Date;
2.4 as at the Accounting Date are not affected by any extraordinary,
exceptional unusual or non-recurring items save as disclosed in the
Audited Accounts;
2.5 make adequate provision for depreciation of the fixed assets of the
Company having regard to their original cost and estimated life;
2.6 make adequate provision for any bad or doubtful debts;
2.7 adequately disclose all assets of the Company as at the Accounting Date ;
and
2.8 adequately disclose all or any change in the accounting policies adopted
by the Company.
3. No event has occurred during the period covered by the Audited Accounts
which has resulted in the profits of the Company in respect of such period
being abnormally high or low.
Liabilities and debts
4. All liabilities (actual, contingent or otherwise) or outstanding financial
commitments of the Company as at the Accounting Date have been included in
the Audited Accounts by way of:-
4.1 adequate provision or reserve; or
4.2 (in the case of such a liability as was contingent, unquantified or
disputed) by way of note stating the maximum amount which has been
deferred or could be claimed and the best estimate of the Directors (after
taking all relevant professional advice) of the likelihood of such a claim
materialising or being successful.
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5. Each of the book debts shown in the Audited Accounts have realised their
nominal value less the value attributed to any reserve for bad or doubtful
debts included in the Audited Accounts and none of such book debts is
subject to any counter-claim or set-off.
6. The Company has no liability in respect of:-
6.1 any agreement under which the Company acquired:-
6.1.1 the shares of any other company: or
6.1.2 any business and its related assets or liabilities;
including, but without limitation, any deferred consideration of any kind
required to be paid at any time in respect of any such acquisition except
for any such acquisition fully disclosed in the Disclosure Letter;
6.2 any agreement under which the Company disposed of:-
6.2.1 the shares of any other company; or
6.2.2 disposed of any business and its related assets or
liabilities;
including, but without limitation, any liabilities in respect of
warranties or indemnities given in connection with such disposal except
for any such acquisition fully disclosed in the Disclosure Letter;
6.3 obligations actual or contingent as:-
6.3.1 original contracting party to; or
6.3.2 as guarantor of any party to;
any lease or leasehold property (or licence connected with such real
property) not forming part of the Properties;
Management Accounts
7. The Management Accounts:-
7.1 save as disclosed in the Disclosure Letter have been prepared on a basis
consistent with that warranted as adopted in the preparation of the
Audited Accounts;
7.2 have been prepared in good faith and to the best of the knowledge,
information and belief of the Vendors are not misleading.
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Accounting records
8. The accounting and other books, ledgers, financial and other records of
the Company:-
8.1 are in its possession;
8.2 are now properly written up;
8.3 accurately present and reflect in accordance with generally accepted
accounting principles and standards and the Companies Acts all of the
transactions entered into by the Company or the transactions to which the
Company has been a party and its financial, contractual and trading
position;
8.4 have been held for the periods required by the Companies Acts and any
other relevant legislation; and
8.5 to the extent (if any) that they are kept on computer are freely
accessible and the Company is the owner of all hardware and all software
necessary to enable it to use the records as they have been used in its
business and the Company does not share any hardware or software relating
to such records with any person.
9. There has been no change in the treatment of items recorded in the books
of the Company since the Accounting Date.
(E) TRADING POSITION
Material adverse change since Accounting Date
1. Since the Accounting Date:-
1.1 there has been no material adverse change in the financial or trading
position of the Company or in the value or state of the assets or amount
or nature of the liabilities of the Company as compared with the position
disclosed in the Audited Accounts;
1.2 the Company has not disposed of any material assets or assumed or incurred
any material outstanding capital commitment or any material liabilities
(whether actual or contingent) otherwise than in the ordinary course of
carrying on its business (and for this purpose disposals of fixed assets,
fixed and loose plant and machinery, fixtures and fittings, vehicle and
office equipment shall be deemed to be not in the ordinary course of
business);
1.3 except as disclosed in the Disclosure Letter the Company has paid its
creditors in the ordinary course of business and within the normal terms
of business of those creditors; and
1.4 the business of the Company has been carried on in the ordinary and usual
course of business without interruption and so as to maintain the same as
a going concern.
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Turnover
2. The turnover of the Company's business since the Accounting Date is not
materially less than it was for the corresponding period in the financial
year ending on the Accounting Date and to the extent that the business of
the Company is seasonal the patterns of trading of the Company are not
materially different to the pattern of trading observed during each of the
three years ending on the Accounting Date.
Overheads and expenses
3. The overheads and expenses of the Company since the Accounting Date are
not materially greater as a proportion of turnover than the proportion in
the corresponding period in the financial year ending on the Accounting
Date.
Ongoing business
4. So far as the Vendors are aware the value of orders and enquiries received
by the Company in respect of which work has not yet commenced or a
contractual obligation to perform has not yet been entered into are not
materially less those values for the corresponding time in the financial
year ending on the Accounting Date (treating those values as increased by
the same proportion as the prices charged by the Company have increased
since that corresponding time).
Third parties
5.1 Since the Accounting Date the Company's business has not been materially
and adversely affected by the loss of any Important Customer and no
Important Customer, has substantially reduced its dealings with the
Company since the Accounting Date. For these purposes "Important Customer"
means a Customer, account or source of supply the annual turnover of which
is 5% or more of the turnover of the Company as set out in the audited
accounts for the Company for the period ended 31 March 1998.
5.2 The Vendors have no knowledge information or belief that the transactions
contemplated by this Agreement will result in loss of business with any of
the Company's present customers.
5.3 So far as the Vendors are aware the Company is not a party to any
significant material contract or other arrangement under which the rights
of any person are likely to be affected as a result of any of the
transactions contemplated by this Agreement.
6. The Company is entitled to carry on the business now carried on by it and
carried on by it during the three years prior to the date of this
Agreement without any conflict with any valid right of any other person,
firm or company.
7. No substantial part of the business of the Company is carried on or is
required to be carried on with the agreement or consent of a third party
nor is there any agreement which significantly restricts the field in
which the Company carries on business.
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(F) ASSETS
Ownership
1. Except for assets disposed of by the Company in the ordinary course of
trading, the Company is the owner of all assets included in the Audited
Accounts (excluding the Properties) and all assets acquired since the
Accounting Date and not subsequently disposed of and all such assets are
in the Company's possession or under its control.
2. The assets owned by the Company (together with assets held under the hire
purchase, lease or rental agreements listed in the Disclosure Letter)
comprise all the material assets reasonably necessary for the continuation
of the business of the Company as presently carried on.
3. There is no Encumbrance or agreement to create an Encumbrance over the
whole or any material part of the undertaking, property, assets, goodwill
or uncalled capital of the Company.
4. Save as disclosed in the Disclosure Letter all assets used in connection
with the business of the Company are owned by it absolutely and are held
free from any lease, hire, hire purchase or conditional sale agreement,
bill of sale or other agreement for payment on deferred terms.
Motor vehicles
5. The Company owns or has on lease or hire purchase the motor vehicles the
make, model and registration number of which appear opposite its name in
the Schedule annexed to the Disclosure Letter.
Status of assets
6. All material fixed and loose plant and machinery, fixtures and fittings,
vehicles and office equipment used in connection with the business of the
Company is in reasonably good repair and condition normal wear and tear
excepted.
Retention of title
7. The Company has not agreed to acquire any material asset on terms that the
property in such asset does not pass until full payment is made or all
indebtedness incurred in connection with that acquisition discharged.
Equipment Leases
8. So far as the Vendors are aware no circumstance has arisen or is likely to
arise in relation to any material asset currently (other than the
Properties) held by the Company under a lease or hire purchase or similar
agreement under which the rental payable has been or so far as the Vendors
are aware, is likely to be increased.
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Maintenance
9. Maintenance contracts are in full force and effect in respect of all
material assets of the Company which it is normal or prudent to have
maintained by independent or specialist contractors.
(G) BORROWINGS AND LENDING
Borrowings
1. Accurate details of all overdrafts, loans or other financial facilities
outstanding or available to the Company (together the "Facilities") are
contained in the Disclosure Letter together with true and complete copies
of all documents relating to the Facilities.
2. The Company has no bank or deposit accounts (whether in credit or
overdrawn) except for those detailed in the Disclosure Letter.
3. The Company is not nor will it at any time prior to Completion be in
default under the terms of any borrowing made by it.
4. The total amounts borrowed by the Company under the Facilities do not
exceed:-
4.1 the limits as set out in the Facilities; or
4.2 any limitation on borrowing powers contained in its Articles of
Association or in any debenture or other agreement binding on it.
Encumbrances
5. Accurate details of any Encumbrance or guarantee on the part of the
Company are contained on the Disclosure Letter.
6. In relation to such Encumbrances and relation to the Facilities:-
6.1 the Vendors have included in the Disclosure Letter true and correct copies
of all relevant documents;
6.2 there has not been any alteration in the terms and conditions of any of
the Facilities, all of which are in full force and effect;
6.3 so far as the Vendors are aware there has been no contravention of or
non-compliance with any provision of any such document; and
6.4 none of the arrangements is dependent on the guarantee of or on any
security provided by a third party.
7. The Company has not:-
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7.1 factored any of its debts;
7.2 engaged in financing or borrowing of a type which is not required to be
shown or reflected in its statutory accounts;
7.3 since the Accounting Date repaid or become liable to repay or prepaid any
loan or loan capital or the Facilities (or any part of them) or any other
indebtedness in advance of its date of maturity; or
7.4 received notice from any lenders of money to it requiring repayment or
intimating enforcement of any Encumbrance, and so far as the Vendors are
aware there are no circumstances likely to give rise to any such notice.
8. The statements of the Company's bank accounts and of their credit or debit
balances to be delivered at Completion and any such statements delivered
prior to such date are and will be correct at close of business on Friday
3rd April 1998.
Lending
9. The Company:-
9.1 has not lent any money which has not been repaid to it; and
9.2 does not own the benefit of any debt (whether present or future) or the
right to receive any monies other than (in each case) debts accrued to it
in the ordinary course of its business.
(H) INSURANCES
1. Details of the material insurances of the Company are annexed to the
Disclosure Letter.
Status of cover
2. So far as the Vendors are aware nothing has been done or has been omitted
to be done which could result in any of the Company's insurance policies:-
2.1 being or becoming void or voidable; or
2.2 not renewable on normal terms; or
2.3 there are no circumstances giving rise to or likely to give rise to any
claim under any of the Company's insurance policies.
3. All premiums due in respect of the Company's insurance policies have been
paid in full.
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4.1 Any claims outstanding, pending, threatened or capable of arising against
the Company of which the Vendors are aware in respect of any tort, damage,
loss, accident or injury are detailed in the Disclosure Letter and are
fully covered by insurance.
4.2 So far as the Vendors are aware there are no circumstances giving rise to
or likely to give rise to any claim under any of the Company's insurance
policies.
Claims handling
5. The Company has notified its insurers promptly of any claim that may or
might be made under any policies of insurance of which it is the
beneficiary.
Available cover
6. No application or proposal made by the Company for a policy of insurance
of any kind whatsoever has been refused or rejected by any insurance
company in whole or in part nor has the level of insurance cover provided
by any policy of insurance in favour of the Company been reduced or in any
way altered at the instance of the insurance company issuing such policy
of insurance.
(I) DISPUTES/LITIGATION
General
1. The Company is not engaged whether as Plaintiff or Defendant or otherwise
in any litigation, criminal or arbitration proceedings before any Court,
tribunal, statutory or Governmental body, department, board or agency and
so far as the Vendors are aware no litigation, criminal or arbitration
proceedings are pending or threatened by or against the Company and so far
as the Vendors are aware there are no facts which are likely to give rise
to the same or which are likely to give rise to proceedings in respect of
which the Company would be liable to indemnify any person concerned.
Orders or judgments
2. The Company is not subject to any order or judgment given by any court or
governmental agency and has not been a party to any undertaking or
assurance given to any court or governmental agency which is still in
force nor (so far as the Vendors are aware) are there any facts or
circumstances which (with or without the giving of notice or lapse of
time) would be likely to result in the Company becoming subject to such an
order or judgment or being required to be a party to any such undertaking
or assurance.
Enquiries
3. None of the Vendors, nor (so far as the Vendors are aware) the directors
of the Company or any of its employees is the subject of any
investigation, enquiry, process or request for information in respect of
any aspect of the activities of the Company by any Governmental or
European Communities body, department, board or agency or by any
organisation charged with the supervision of any activities from time to
time engaged in by the Company and so far as the Vendors are aware no such
procedures are
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pending or threatened and so far as the Vendors are aware facts which are
likely to give rise to any such procedure.
Accident or injury
4. So far as the Vendors are aware there are no claims pending or threatened
or capable of arising against the Company by any employee or workman or
third party in respect of any accident or injury, which are not fully
covered by insurance.
(J) GENERAL COMPLIANCE WITH STATUTES AND LICENCES
General
1.1 The Company has obtained all material licences, consents, approvals,
permissions, permits, test and other certificates and authorities (public
or private) (together "Licences") necessary for the carrying on of its
business in the places and in the manner in which such business is now
carried on.
1.2 All Licences are accurately listed in the Disclosure Letter and are valid
and subsisting.
1.3 The Vendors know of no reason or of any facts or circumstances which (with
or without the giving of notice or lapse of time) would be likely to give
rise to any reason why any of the Licences should be suspended, cancelled,
revoked or not renewed.
2. The Company has conducted and is conducting its business in all material
respects in accordance with all material applicable laws, rules,
regulations, judgments, decisions, decrees, orders, or other requirements
of any government, quasi government, statutory, administrative or
regulatory body, court or agency (whether of the U.K. or elsewhere).
Health and Safety at Work, etc. Act 1974
3. The Company has established procedures under and has complied in all
material respects with all requirements from time to time in force under
the Health and Safety at Work, etc. Act 1974 and all regulations made
under that Act.
Consumer Credit Act 1974
4. No consumer credit agreement or consumer hire agreement made by the
Company as creditor or owner or in respect of which it is the supplier
under a debtor-creditor-supplier agreement or linked transaction has been
made in breach of the Consumer Credit Act 1974 or the regulations made
under that Act.
Data Protection
5.1 The Company has complied in all material respects with the provisions of
the Data Protection Act 1984 and all regulations made under that Act (to
the extent that it and they apply to the Company) and has established
procedures to ensure continued compliance with all such legislation.
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5.2 The Company has registered with the Registrar under the Data Protection
Act 1984 in respect of all personal data which it owns and/or controls and
for all purposes and the Company has complied with the Data Protection
principles in relation to all such personal data and no requests have been
made for subject access to any of such personal data.
5.3 The Company has not received any notice from either the Data Protection
Registrar or a data-subject alleging non-compliance with the data
protection principles or prohibiting the transfer of data, nor so far as
the Vendors are aware has any individual claimed or will have the right to
claim compensation from the Company under the Data Protection Act 1984 for
loss or unauthorised disclosure of data.
Competition
6.1 The Company:-
6.1.1 has not committed or omitted to do any act or thing; and
6.1.2 has not been and is not party to any agreement, practice or
arrangement
which in whole or in part:-
(a) is subject to registration under the Restrictive Trade
Practices Act 1976 and 1977;
(b) contravenes or is invalidated (in whole or in part) by any
provision of the Treaty of Rome, or any regulation or other
enactment made under that Treaty;
(c) contravenes or is invalidated (in whole or in part) by any
other applicable competition, anti-trust, anti-monopoly or
anti-cartel legislation or regulatory requirement;
(d) contravenes the provisions of the Trade Descriptions Acts 1968
and 1972 or the Consumer Protection Act 1987; and/or
(e) would or might result in a reference of a Consumer Trade
Practice (within the meaning of the Fair Trading Act 1973), or
be liable to reference to the Consumer Protection Advisory
Committee under Part II of that Act, or which is the subject
matter of a report to or of an order by the Secretary of State
under that Act
in each case so as to have a material adverse effect on the business of
the Company.
6.2 So far as the Vendors are aware the Company has not:-
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6.2.1 engaged in any course of conduct which amounts to an
anti-competitive practice within the meaning of the
Competition Act 1980; and/or
6.2.2 done any act or thing which is prohibited by the Resale Prices
Act 1976
Unlawful payments
7. The Company has not and no person for whose acts or defaults the Company
may be vicariously liable has:-
7.1 induced a person to enter into an agreement or arrangement with a DMS
Group Company by means of an unlawful or immoral payment, contribution,
gift, or other inducement;
7.2 offered or made an unlawful or immoral payment, contribution, gift or
other inducement to a government official or employee; or
7.3 directly or indirectly made an unlawful contribution to a political
activity.
Places of business
8. Save as disclosed in the Disclosure Letter the Company does not carry on
or have a place of business or any branch or agency or other permanent
establishment or (whether in the U.K. or elsewhere) other than at and from
the Properties.
(K) CONTRACTS AND ARRANGEMENTS
Standard terms
1. A copy of all standard terms and conditions on which the Company carries
on business in included in the Disclosure Letter.
Contractual relationships
2. There are not now outstanding with respect to the Company or to which the
Company is a party:-
2.1 any material long term unusual or onerous contract or any contract not
made in the ordinary course of business and there are no contracts or
obligations practices arrangements or agreements outstanding of a nature
or magnitude calling for special attention;
2.2 any joint venture, consortium or other partnership arrangement or
agreement;
2.3 so far as the Vendors are aware any arrangements contractual or otherwise
between the Company and any third party which will or may in accordance
with its terms be
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terminated as a result of any change in the central management or
shareholders of the Company or of the sale and purchase provided for in
this Agreement or of compliance with any other provision of this
Agreement;
2.4 any guarantee, warranty, undertaking or contract for indemnity or for
suretyship under which the Company is under a prospective or contingent
liability;
2.5 any agreement or arrangement entered into by the Company otherwise than by
way of bargain at arms length or on arms length terms and in the ordinary
course of the Company's business;
2.6 any contracts or arrangements of whatsoever nature binding on the Company
which cannot be terminated without giving rise to any liabilities
whatsoever on the part of the Company by the Company giving 3 months
notice or less otherwise than in the ordinary course of business;
2.7 (so far as the Vendors are aware) any agreement or arrangement which
cannot readily be fulfilled or performed by the Company in accordance with
its terms and without undue or unusual expenditure or effort or without
making a loss;
2.8 any agreement containing covenants limiting or excluding its right to do
business and/or compete in any area or any field or with any person, firm
or company;
2.9 so far as the Vendors are aware any agreement or arrangement which is or
may be invalid or in respect of which there are grounds for its
determination, rescission, avoidance or repudiation (whether by the
Company or any other party);
Tenders
3. No offer, tender or the like, given or made by the Company on or before
the date of this Agreement and still outstanding is capable of giving rise
to a contract merely by a unilateral act of a third party other than in
the ordinary course of business as previously carried on and provided that
the scale of such matters is comparable with the existing business of the
Company.
Documents
4. All deeds or agreements or documents to which the Company is a party which
ought to be in the possession of the Company are in the possession of the
Company or its professional advisers.
5. The material contracts (the "Material Contracts") which are significant to
the trading of the Company are detailed as such in the Disclosure Letter.
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(L) INTELLECTUAL PROPERTY RIGHTS
General
1.1 The Disclosure Letter lists all Intellectual Property Rights in respect of
which the Company has been registered as proprietor or in respect of which
application for registration in the name of the Company has been made. So
far as the Vendors are aware none of such registrations or applications is
the subject of any opposition, cancellation or other claim or attack.
2. So far as the Vendors are aware all Intellectual Property Rights purported
to be used or required by the Company are owned by and vested in the
Company.
3. So far as the Vendors are aware all renewal fees in respect of any
registrations of the Intellectual Property Rights have been paid on time.
4. The Company does not use any name or logos in carrying on its business
other than its corporate name.
5. No disclosure has been made to any person other than the Purchaser of any
of the know-how or financial or trade secrets of the Company except
properly and in the ordinary course of business or on the footing that
such disclosure is to be treated as being of a confidential nature.
Software/Hardware
6. To the extent that the Company does not own any of the software which it
uses or purports to use, it is licensed to use such software on terms
which are perpetual and royalty free and which do not contain any unusual
or onerous conditions and none of such licences will be subject to
termination or variation by reason of the proposed acquisition of the
Company by the Purchaser.
7. So far as the Vendors are aware all software and hardware used or
purported to be used by the Company is covered by a fully enforceable
maintenance agreement and the terms of all such maintenance agreements are
contained in the Disclosure Letter.
8. All facilities and communications networks necessary for the continued use
and operation of the hardware and the software which is used and/or
purported to be used by the Company is owned by or licensed or leased to
the Company free of encumbrances and so far as the Vendors are aware any
such licences or leases are not capable of termination or variation by
reason of the proposed acquisition of the Company by the Purchaser.
9. So far as the Vendors are aware neither the hardware nor the software
owned and/or used by the Company has been affected by any defects or
faults which have caused any material interruption to the Company's
business at any time during the 5 years prior to the date of this
Agreement.
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10. The software and hardware presently used by the Company in the carrying
out of its business permits it to do so in a reasonably proper and
efficient manner, is functional and so far as the Vendors are aware there
is no reason why such software and hardware should require modification,
replacement or enhancement to permit the Company to carry out its business
in a proper and efficient manner over the next 12 months.
11. The Company does not have any of its records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise wholly or
partly dependent on or held by any means which are not under the exclusive
ownership or direction of the Company including all means of access.
(M) EMPLOYEE DETAILS
1. Details of the names and addresses, dates of birth, dates of commencement
of employment or appointment to office, salaries and terms and conditions
of employment of all of the employees and officers of the Company
including all remuneration payable (including accrued holiday pay),
participation in benefit schemes such as BUPA, Pension, Company car etc.,
any profit sharing, commission, incentive or discretionary bonus
arrangements to which the Company is a party (whether legally binding on
the Company or not) and all other benefits provided which the Company is
bound to provide (whether now or in the future) to each officer and
employee of the Company are set out fully and accurately in the Disclosure
Letter.
Contracts of Employment
2. There are not now outstanding:-
2.1 any service agreements or contracts between the Company and any of its
directors, officers, executives or employees which cannot be terminated by
the Company by 12 weeks notice or less without giving rise to a claim for
damages or compensation (other than a statutory redundancy payment);
2.2 any recognition or other agreement or arrangement (whether or not legally
binding) between the Company and any trade union or other body
representing its employees;
2.3 any liabilities of the Company for industrial training levy or for any
other statutory or Governmental levy or charge; or
2.4 training schemes, or similar arrangements or proposals.
Claims and liabilities
3.1 There are no outstanding claims against the Company by any person who is
now or has been an officer or employee of or consultant to the Company and
no disputes have during the preceding three years arisen between the
Company and any material
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employees or with any consultant and so far as the Vendors are aware there
are no present circumstances which are likely to give rise to any such
dispute.
3.2 The Company has at all times complied in all material respects as regards
all its employees with the Employment Rights Act 1996 as amended; the
Company is not under any present future or contingent liability to pay
compensation for loss of office or employment to any ex-officer or
ex-employee and no payments are now due by the Company under the
Employment Rights Act 1996.
4. Since the Accounting Date:-
4.1 no liability to pay compensation of any kind or any payment of any kind to
any person who is or has been a director or other employee has been or so
far as the Vendors are aware will pending Completion be incurred by the
Company, whether under the Employment Right Act 1996, or otherwise
howsoever; and
4.2 no gratuitous payment has been made or promised by the Company in
connection with the actual or proposed termination or suspension of
employment or variation of any contract of employment of any present or
former director or employee nor will any such payment be made or promised
prior to Completion.
5. There are no employees of the Company whose continuous period of
employment for the purposes of redundancy payments or compensation for
unfair dismissal would include any employment by any other person, firm or
company prior to the commencement of their employment with the Company.
6. There is no consultancy agreement with the Company or any agreement for
management services nor except as disclosed in the Disclosure Letter any
contract of service with any director of the Company.
Remuneration
7. Save as disclosed in the Disclosure Letter no director or employee of the
Company is remunerated on a profit-sharing or bonus or commission basis of
any nature whatsoever.
8. There is no amount owing to any present or former director or employee of
the Company other than for remuneration accrued due or for reimbursement
of business expenses.
Compliance
9. The Company has in relation to each of its employees and former employees
complied with:-
9.1 all material obligations imposed on it by all statutes, regulations and
codes of conduct and practice relating to or affecting the employment of
its employees or in relation to
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any trade union and has maintained current, adequate and suitable records
regarding the service and terms and conditions of employment of each of
its employees;
9.2 all collective agreements, recognition agreements and customs and
practices for the time being dealing with such relations or the conditions
of service of its employees; and
9.3 all relevant orders, awards and recommendations of a material nature made
under any relevant statute, regulation or code of conduct and practice
affecting the conditions of service or otherwise in relation to its
employees or former employees.
Redundancies
10. Within the period of one year ending on the Completion Date the Company
has not:-
10.1 given notice of any redundancies to the Secretary of State or started
consultations with any independent trade union, or unions, under the
provisions of Chapter 2 of Part IV of the Trade Union and Labour Relations
(Consolidation) Act 1992 or failed to comply with any obligation under the
said Chapter 2; or
10.2 been a party to any relevant transfer as defined in the Transfer of
Undertakings (Protection of Employment) Regulations 1981.
11. Since the Accounting Date no change has been made in the rate of
remuneration or the endowment or pension benefits of any Director or
employee or consultant or in the terms of employment of any officer or
senior executive. Save as set out in the Disclosure Letter no negotiations
for any increase in the remuneration or benefits of any officer or
employee of the Company are current or likely to take place within six
months after Completion.
Share option schemes, etc.
12. None of the following are in existence and there are no proposals for any
of the following:-
- profit sharing schemes;
- share option schemes;
- "phantom" share option schemes;
- profit related pay schemes;
- Employee share ownership trusts under the Finance Act 1989; or
- Employee Benefit trusts.
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13. The Service Agreements for each of the following Divisional Directors of
the Company are in identical terms (other than as to rates of remuneration
and commencement dates disclosed in the Disclosure Letter) as that for Mr
Roy Harris included in the Disclosure Bundle:-
13.1 David Reid;
13.2 Tim Clarke; and
13.3 Elaine Whatthey.
(N) PENSIONS
In this section (N) the following words and expressions shall have the following
meanings:-
"Defined Contribution Scheme" means a scheme under which the amount of the
benefits payable to or in respect of a member of
the scheme is calculated by reference to the
contributions made to the scheme by and in respect
of the member;
"Personal Pension Scheme" means any personal pension scheme approved or
provisionally approved for the purposes of Chapter
IV of Part XIV of the ICTA 1988 to which
contributions have been made or are intended to be
made pursuant to any agreement, arrangement,
custom or practice;
"Scheme 1" means the Delta Air & Road Transport Limited
Pension Plan established with effect from 1
November 1986 by a Declaration of Trust dated 29
October 1986 insured with Allied Dunbar;
"Scheme 2" means the Delta Air & Road Transport Plc Executive
Pension Plan established for the benefit of Mark
Adam Winton insured with Legal & General under
Policy Number U814769;
"Scheme 3" means the small self administered scheme known as
The Delta Retirement Benefits Scheme established
with effect from 31 March 1998 by a Trust Deed
insured with Sun Life subject to approval by the
Inland Revenue;
"Scheme 4" means the group personal pension schemes
established with Allied Dunbar under Policy Number
S14108/033 and S10085/947;
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"Scheme 5" means the group personal pension scheme
established with Scottish Mutual;
"Schemes" means collectively Scheme 1, Scheme 2, Scheme 3,
Scheme 4 and Scheme 5;
"1993 Act" means the Pension Schemes Act 1993;
"1995 Act" means the Pensions Act 1995.
1. Particulars of all obligations of and promises made by the Company
(whether legally enforceable or not) to provide relevant benefits (as
defined in Section 612(1) of the ICTA 1988) or to pay any gratuity or to
provide retirement, death, disability, sickness, or other like benefit or
to contribute to or participate in any scheme or any arrangement providing
any such benefits for or in respect of any employee of the Company have
been disclosed to the Purchaser in the Disclosure Letter.
2. In relation to the Schemes all relevant material details are contained in
the Disclosure Letter.
3. Apart from the establishment of Scheme 3 there are no proposed amendments
to Scheme 1 or Scheme 2.
4. A list of the active members of each of the Schemes is attached to the
Disclosure Letter.
5. A copy of any agreement with any person providing services of any nature
in connection with Scheme 4 and Scheme 5 including, without limitation,
investment management or advisory services is also attached to the
Disclosure Letter.
6. Details of the regular monthly contributions payable in respect of active
members are attached to the Disclosure Letter.
7. Scheme 1 and Scheme 2 are approved as an exempt approved scheme within the
meaning of Chapter I of Part XIV of ICTA 1988 and Scheme 4 and Scheme 5
are exempt approved under Chapter IV of Part XIV of ICTA 1988 and each
employee of the Company who has been admitted to or promised admission to
membership of the Vendor's Pension Scheme has been admitted or promised
admission on terms which are consistent with such continued approval. The
Vendor is not aware of any reason why such approval should be withdrawn
nor why Scheme 3 should not be similarly approved as an exempt approved
scheme within the meaning of Chapter 1 of Part XIV of the ICTA 1988.
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8. No payment or repayment of any of the assets of Scheme 1, Scheme 2 or
Scheme 3 has been made to the Company or to any employee of those schemes
since the date of the most recent scheme accounts annexed to the
Disclosure Letter.
9. The trustees of Scheme 1, Scheme 2 and Scheme 3 have legal title to all
the assets of those schemes and there are no encumbrances over any such
assets.
10. At the date of this Agreement there is no contribution due but unpaid nor
any amount to be transferred into the schemes which remains outstanding.
11. Scheme 1, Scheme 2 and Scheme 3 are Defined Contribution Schemes. No
assurance, promise or guarantee (whether oral or written) has been made or
given to any member of Scheme 1, Scheme 2 and Scheme 3 of any particular
level or amount of benefits to be provided for or in respect of him under
those schemes on retirement, death or leaving service.
12. The Company may terminate any obligation it may have to contribute to the
Scheme 1 and Scheme 2 without incurring any liability to any member of
those schemes under any agreement or arrangement with the member. As to
Scheme 3 the Company has agreed to pay (pound)300.00 per month plus
indexation in respect of each member, subject thereto the rules of the
Scheme permit such termination.
13. There do not exist any loans from Scheme 1, Scheme 2 or Scheme 3 to the
Vendors, the Company or to any member or beneficiary of those schemes, or
to any third party and there are no employer related investments (as
defined in Section 112 of the 1993 Act).
14. Scheme 1, Scheme 2 and Scheme 3 are not and never have been a
contracted-out scheme for the purposes of the Pension Schemes Act 1993 and
at all times have complied fully with all applicable legislation.
15. All consulting, actuarial, trusteeship and other fees, charges and
expenses of whatever nature with respect to the Schemes have been paid and
no services have been rendered for which an account or invoice has not
been delivered to and paid by the Company. All costs, charges and expenses
are met by the Company.
16. There are no current disputes concerning benefits nor are there any other
claims or other proceedings or dispute in respect of Scheme 1, Scheme 2
and Scheme 3 by or against the Trustees or administrators of Scheme 1,
Scheme 2 and Scheme 3 or the Company in respect of the Schemes and none is
pending or threatened.
17. No part-time employee has been excluded from membership of the Schemes.
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18. The Company and the trustees of Scheme 1, Scheme 2 and Scheme 3 have not
incurred any penalties, fines or other sanctions under the 1995 Act and
there are no circumstances which may give rise to any such penalties,
fines or sanctions.
19. The Company is the only employer for the time being participating in the
Schemes.
20. There is set out in or annexed to the Disclosure Letter a statement of the
basis on which the Company has undertaken to contribute to Scheme 4 and
Scheme 5 which are Personal Pension Schemes and the rate and the amount of
the contributions in respect of each member of those schemes payable on
the date of this Agreement.
21. No assurance, promise or guarantee (whether oral or written) has been made
or given to any member of Scheme 4 and Scheme 5 of any particular level or
amount of benefits to be provided for in respect of him under those
schemes on retirement, death or leaving service. The Company may terminate
any obligation it may have to contribute to Scheme 4 and Scheme 5 without
incurring any liability to any member of these Schemes under any agreement
or arrangement with the member.
(O) THE PROPERTIES
Ownership
1.1 The information contained in Schedule 4 is true and accurate in all
material respects.
1.2 Other than as contained in the Disclosure Bundle there are no other deeds
documents or agreements which govern the Company's right to use and occupy
the Properties
2. The Company is the legal and beneficial owner of the Properties.
3.1 The Company has exclusive possession of each of the Properties.
3.2 So far as the Vendors are aware the principal point of access to the
Material Properties is directly from a highway maintainable at the public
expense or over land in respect of which the Company has a right of way
which is unrestricted as to hours of use or otherwise (other than as
restricted by the Leases or planning requirements) and is held for the
same interest or estate as the Company's interest in such Material
Property.
3.3 So far as the Vendors are aware all material easements and rights
necessary for the current use of the Material Properties are enjoyed by
the Company are held for a term co-terminous with the lease under which
such Material Property is held and are unrestricted as to hours of use or
otherwise.
4. The Properties are leasehold or occupied under licence (written or
unwritten) and comprise all the Properties owned by the Company or
occupied by it under licence or in which the Company has any other
interest.
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Third party rights
5. Each of the Properties and their title deeds are free from any
Encumbrance, rent charge or in the case of the Material Properties other
third party right whether in the nature of security or otherwise.
6.1 There is no material encumbrance, agreement for sale, lease, agreement for
lease to any third party, condition, restrictive covenant or any other
encumbrance in respect of the Material Properties or any part of them
6.2 The Properties are not subject to the payment of any outgoings (except the
usual rents, rates and taxes and payment, under the Leases) nor are there
any persons in unlawful possession or occupation of or who have or claim
any rights or easements of any kind in respect of the Material Properties
or any part of them materially adverse to the estate, interest, right or
title of the Company.
7. The Company:-
7.1 has paid all rent, insurance, service charges, and other material
outgoings that may be payable in respect of the Properties and no rent
payable in respect of any Property is currently the subject of review; and
7.2 has, so far as the Vendors are aware, performed and observed all material
covenants agreements, bye-laws, conditions, orders, planning consents and
regulations affecting the Properties and requiring observance or
performance by it in all material respects and no written notice of any
breach of any such matters has been received.
Compliance
8. So far as the Vendors are aware the Company has at all times complied with
the Factories Act 1961, the Public Health Acts 1875 to 1961, the Offices
Shops and Railway Premises Act 1963 and the Health and Safety at Work etc.
Act 1974 in all material respects.
9. There are not in respect of the Properties or any part of any of them:-
9.1 outstanding notices or orders issued by, or any agreement with, any local
or other authority which have been served on the Company;
9.2 proceedings which have been served on the Company in respect of any
infringement of the building bye-laws or any monetary claim or liability
(contingent or otherwise) under Town & Country Planning legislation or
regulations;
9.3 enforcement or stop notice under the Town and Country Planning legislation
or relevant regulations which have been served on the Company; or
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9.4 order or resolution for the compulsory acquisition of the Properties or
any part of them by any authority or any notice for closing, demolition,
clearance or requisition nor are the Properties or any part of them in a
Comprehensive Development Area or the subject of a Declaratory Order which
in each case have been served on the Company;
AND, so far as the Vendors are aware, no written notice has been served on
the Company of proposals in relation to any of the matters referred to in
this clause.
10. So far as the Vendors are aware the Properties have been constructed for
purposes permitted under the provisions of the Town and Country Planning
legislation, orders and regulations applicable to them and in accordance
with the requirements of the relevant local or other authorities and the
use or intended use of each of the Properties complies in all material
respects with such legislation, orders and regulations and is not likely
to be adversely affected by planning proposals
General
11. The Company has not at any time assigned or otherwise disposed of any real
property in respect of which it has any actual or contingent liability
under any covenant or obligation relating to such real property.
(P) ENVIRONMENTAL MATTERS
Additional Definitions
For the purposes of these following warranties:-
"Hazardous Materials" means chemicals, pollutants, contaminants, wastes,
petroleum products, dangerous, hazardous or toxic substances and any
materials capable of causing harm (as defined in Section 1(4) of the EPA
1990) including in particular but without limitation the substances
prescribed in Schedules 4, 5 and 6 of the Environmental Protection
(Prescribed Processes and Substances) Regulations 1991;
"Controlled Waste" means waste, the disposal, storage, deposit, treatment,
transfer, transportation or recycling of which is subject to Environmental
Legislation.
1. The Company has not committed (by act or omission) or permitted any
material breach, violation or infringement of any Environmental
Legislation and there are no circumstances that may give rise to any such
breach and so far as the Vendors are aware there are no current
investigations or pending prosecutions involving the Company or any of its
directors, officers or employees relating to or brought under
Environmental Legislation.
2. The Company has not disposed of any material in such a way as to be in
material breach of Environmental Legislation or in material breach of any
licence, consent or authority.
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3. So far as the Vendors are aware there has not been any act or omission of
the Company prior to Completion or any other matter or circumstance which
would materially affect or inhibit the ability of the Company to continue
to use the Properties or to carry on its business after Completion in the
same manner and for the same purposes as the Company used and carried on
the same before Completion.
4. The Company has received no written notice of proceeding or other action
of whatever nature is pending, or is threatened or under consideration to
impose any penalty applicable under any Environmental Authorisation or
related legislation.
5. The Company is not involved and has not been involved in any prosecution,
litigation or regulatory proceedings relating to Environmental Legislation
and has not received any notice of such prosecution litigation or
regulatory proceedings are pending or threatened by or against the
Company.
6. Neither the Company or Properties whilst in the ownership or occupation of
the Company have been the subject of any environmental audit, evaluation
or assessment so are as the Vendors are aware.
7. The Company has not been refused a policy of insurance relating to its
environmental liability or otherwise or been granted insurance subject to
exclusions or excesses.
(Q) TAXATION
1. General
1.1 All returns, computations, notices and information which are or have been
required to be made or given by the Company for any Taxation purpose have
been made or given within the period required by law and have been
prepared on a proper basis and are up to date and correct; none of them is
now the subject or so far as the Vendors are aware likely to be the
subject of any dispute with the Revenue, and so far as the Vendors are
aware none was nor will give rise to any disallowance of relief,
allowance, deduction or credit, or any assessment (including any claim by
the Revenue for any penalty, interest, surcharge or fine).
1.2 No Taxation authority has investigated in the last 6 years or indicated
that it intends to investigate the Tax affairs of the Company or carried
out any audit in relation to the Tax affairs of the Company other than
routine queries in relation to corporation tax returns PAYE, NI and VAT.
1.3 The Company has paid all Taxation which it has become liable to pay and is
not, and has not in the six years ending on the date of this Agreement
been liable to pay a penalty, surcharge, fine or interest in connection
with Taxation or the submission or failure to submit any returns.
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1.4 The Company has, where required by law, given notice within the time
limits prescribed by law to the Revenue that it is chargeable to Taxation
and the Company has not become liable or been assessed to any penalty or
interest in respect of any returns filed or submitted outside the
statutory time limits or omitted to be so filed or submitted.
1.5 All Taxation liabilities of the Company including contingent and deferred
liabilities as at the Accounting Date are adequately provided for or
reserved in the Audited Accounts.
1.6 The books and records of the Company are up-to-date and contain sufficient
detail in appropriate form to enable the Taxation liability of the Company
to be established, and to determine the Tax consequences which would arise
on any disposal or realisation of any asset owned at the Accounting Date
or acquired since that date but before Completion.
1.7 No Event has occurred as a result of which the Company has or may become
liable to pay or to bear any Taxation which is primarily or directly
chargeable against or attributable to any person, firm or company other
than the Company.
1.8 The execution or completion of this Agreement will not result in any
profit or gain being deemed to accrue to the Company for Taxation
purposes.
1.9 Since the Accounting Date the Company has not been involved in any
transaction which has given or may give rise to a liability to Taxation on
the Company (or would have given or might give rise to such a liability
but for the availability of any relief, allowance, deduction or credit)
other than corporation tax on normal trading income of the Company
(excluding chargeable gains or deemed income) arising from transactions
entered into in the ordinary course of business.
1.10 Since the date of the end of the last accounting period for which the
corporation tax position has been agreed with the Inland Revenue the
Company has not been engaged in any transaction or arrangement in respect
of which there may be substituted for the consideration given or received
by the Company a different consideration for Taxation purposes.
1.11 No notice has been given or enquiry made nor are there grounds for any
such notice or enquiry to be made in the future pursuant to section 770
ICTA 1988.
1.12 There are no liens or charges in respect of Taxation upon any property or
assets of the Company.
1.13 The Disclosure Letter contains full and accurate particulars of any
transaction in respect of which the Company is required to make a return
or provide information to a Taxation authority, where such return or
information will not have been provided at Completion.
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1.14 No action has been taken by the Company in the last six years in respect
of which any consent or clearance from the Revenue was required or
available under statute save in the circumstances where (i) such consent
or clearance was validly obtained (all facts and circumstances material to
the matter having been fully and accurately disclosed) before the action
was taken, and (ii) any conditions attaching thereto were, at the time the
action, if any, was taken and will, immediately following Completion,
continue to be, met; and no event has happened or circumstance arisen by
virtue of which the consent or clearance may become invalid or be
withdrawn.
1.15 The Disclosure Letter sets out particulars of any special agreement or
arrangement between the Company and the Revenue as a result of which the
Company is permitted not to comply with its statutory obligations and the
Company has not taken any action which has or may have the effect that any
such agreement or arrangement may not apply or may be withdrawn.
1.16 There are set out in the Disclosure Letter particulars of all matters in
respect of which the Company may make a claim, election, appeal,
application for postponement or disclaimer where the time limit to such
entitlement will expire within six months of Completion.
2. Reliefs and Deductions
2.1 All rents, interest, annual payments and other sums of an income nature
paid during, or in respect of, the six years ending on the Accounting Date
or payable by the Company or which the Company is under an obligation to
pay in the future are wholly allowable as deductions or charges on income
in computing profits for the purposes of corporation tax.
2.2 The Company has not made any payment to or provided any benefit for any
officer or employee during the six years ended on the Accounting Date
which is not or was not allowable as a deduction in calculating the
profits of the Company for Taxation purposes in the accounting period in
which it was paid.
2.3 There has been no cessation or discontinuance of any trade or trading
activity carried on by the Company nor has the scale of any activities in
any trade carried on by the Company within three years hereof become small
or negligible.
2.4 The Company has not during the three years ending on the Accounting Date
made any claim under:-
(a) Section 242 ICTA 1988; or
(b) Section 584 ICTA 1988.
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3. PAYE National Insurance and other Withholding Tax
3.1 All income tax under the Pay As You Earn system and payments due in
respect of employees' National Insurance contributions have been deducted
from all payments made or treated as made by the Company and have been
duly paid by the Company to the Revenue in the appropriate manner, and the
Company has in all material respects complied with all its reporting
obligations in connection with all payments to and benefits provided for
employees and directors of the Company.
3.2 No PAYE audit has been made in respect of the Company by the Revenue nor
has the Company been notified that any such audit will be made.
3.3 The Company has accounted to the Revenue, as required by law, for all
secondary Class 1 and Class 1A National Insurance Contributions which it
is required by law to make.
3.4 All payments by the Company which ought to have been made under deduction
of Tax have been so made and the Company has (if required by law to do so)
accounted to the Revenue for the Tax so deducted, including in particular
any under the tax deduction scheme contained in Chapter IV of Part XIII
ICTA 1988 (Sub-Contractors in the construction industry).
4. Financing
4.1 The Company has not at any time after 5 April 1965 repaid or agreed to
repay or redeemed or agreed to redeem or purchased or agreed to purchase
any shares, of any class, of its issued share capital.
4.2 The Company has not at any time after 5 April 1965 capitalised or agreed
to capitalise in the form of shares or debentures any profits or reserves
of any class or description or passed or agreed to pass any resolution to
do so.
4.3 No securities (within the meaning of Section 254(1) ICTA 1988) issued by
the Company and remaining in issue at the date hereof were issued in
circumstances such that the interest payable thereon falls to be treated
as a distribution under Section 209(2)(d) or (da) or (e) ICTA 1988.
4.4 The Company has not made or received any distribution which is an exempt
distribution within Section 213 to 218 ICTA 1988 (Demergers) nor has it
made or received a chargeable payment as defined therein.
4.5 The Company has not received any capital distribution to which the
provisions of Section 189 TCGA 1992 (capital distribution of chargeable
gains: recovery of tax from Shareholders) could apply.
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4.6 The Company has not issued any shares under the provisions of Sections 249
to 251 ICTA 1988 (Scrip Dividends) nor does the Company own any such share
capital as described in Section 249(1) ICTA 1988.
4.7 The Company has not, since the Accounting Date, made any payment which is,
or will be treated as, a distribution for Taxation purposes.
4.8 The Company has not made any election under section 246A ICTA 1988 that
any dividend should be treated as a foreign income dividend.
4.9 The Company is not a party to any loan relationship within the meaning of
Section 81 Finance Act 1996 with a person with which it is connected so
that Section 87 Finance Act 1996 applies.
4.10 The Company uses an accruals basis as its authorised accounting method for
the purpose of Chapter II Part IV Finance Act 1996.
4.11 No loan relationship entered into by the Company has an unallowable
purpose within paragraph 13 Schedule 9 Finance Act 1996.
5. Groups
The Company has never been part of a group for any Taxation purpose other
than the group comprising the Company and the Dormant Subsidiary.
6. Close Company Provisions
6.1 The Company has been in respect of each accounting period ended within the
six years prior to the Accounting Date, a close company within Section 414
ICTA 1988.
6.2 The Company has at all times in its current accounting period complied
with section 13A(2) ICTA 1988.
6.3 No distribution falling within Section 418 ICTA 1988 has been made by the
Company.
6.4 No loan or advance within Section 419 ICTA 1988 has ever been made by the
Company.
6.5 The Company does not have any interest whether direct or indirect in any
company on the disposal of the assets of which a liability could arise
under Section 13 TCGA 1992.
7. Capital Gains Tax
7.1 If each of the capital assets of the Company were disposed of for a
consideration equal to the book value of that asset in, or adopted for the
purpose of, the Audited Accounts,
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no liability to corporation tax on chargeable gains would arise by reason
of any such disposal and for the purpose of determining whether any such
taxation would arise there shall be disregarded any relief or allowance
available to the Company other than amounts falling to be deducted in
calculating the amount liable to Taxation.
7.2 The Company has not taken part in any transaction in respect of which
section 176 TCGA 1992 could apply to reduce any allowable loss.
7.3 No charge to Tax will arise under ss 178-181 (inclusive) TCGA 1992
(company ceasing to be member of a group) on the sale of the Company
pursuant to this Agreement or on the sale of the Company at any time in
the six years following the date of this Agreement.
7.4 The Company does not own any shares or securities acquired as a "new
holding" under the provisions of Sections 126 to 130 (inclusive) as
extended by Sections 132, 135, and 136 TCGA 1992.
7.5 The Company has not made any such election as is referred to in Section
35(5) TCGA 1992 (31 March 1982 rebasing) nor has it been treated by
paragraph 8 Schedule 3 TCGA 1992 as having made an election that all
disposals shall fall outside section 35 TCGA 1992.
7.6 The Company has not engaged in any transactions which may hereafter result
in an adjustment being made, under Sections 29, 30, 31, 32, 33 or 34 TCGA
1992 of the consideration received on any future disposal (value
shifting).
7.7 The Company has not made a claim or election under any of the following:-
(a) Section 279 (foreign assets:delayed remittance), Section 23 (capital
sums:compensation and insurance money), Section 24 (assets lost or
destroyed or whose value becomes negligible) or Section 48
(consideration due after time of disposal) TCGA 1992; or
(b) Section 242 (small part disposals), Section 243 (disposal of
authority with compulsory purchase powers), Section 244 (part
disposal:consideration exceeding allowable expenditure), Section 247
(roll-over on compulsory acquisition), Section 152 or Section 153
(roll-over on replacement of business assets) or Section 161(3)
(appropriation to trading stock) TCGA 1992; nor has any claim under
those sections been made by any other company so as to affect the
base cost of any of the Company's assets for the purpose of
calculating chargeable gains.
7.8 The Company is not entitled to any capital loss to which Section 18(3)
TCGA 1992 applies (transactions between connected persons).
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7.9 No gain chargeable to corporation tax will accrue to the Company on the
disposal of any debt owing to the Company.
7.10 The Company has not appropriated any of its assets to or from trading
stock since the Accounting Date.
7.11 The Company has not disposed of or acquired any asset in circumstances
such that section 17 TCGA 1992 did or could apply to determine the
consideration deemed to be given on such disposal or acquisition.
8. Capital Allowances
8.1 All necessary conditions for all capital allowances (as defined in section
832(1) ICTA 1988 claimed by the Company were at all material times
satisfied and (to the extent allowances on such assets are still being
claimed) remain satisfied.
8.2 None of the assets, expenditure on which has qualified for a capital
allowance under Chapters I or II of Part I CAA 1990 (industrial
buildings), has at any time since such expenditure was incurred been used
otherwise than as an industrial building or structure as defined in
Section 18 CAA 1990.
8.3 The Company is not and has not been the lessee under any leases of plant
or machinery save for the leases specified in the Disclosure Letter
(references to the "Leases" and a "Lease" shall be construed accordingly).
8.4 The machinery and plant subject to the Leases has in the period which is
the requisite period (as defined by section 40 CAA 1990) in respect of any
expenditure incurred by an owner or lessor been used and only been used
for a qualifying purpose (as defined in section 39 CAA 1990).
8.5 No asset subject to a Lease has at any time been leased by the Company or
its lessees to a person who is not resident in the UK and who does not use
the machinery or plant for the purposes of a trade carried on there.
8.6 The Vendors are not aware of any Revenue investigation, Revenue enquiry or
other circumstance which indicates that any person who is or was a lessor
or owner of equipment subject to any of the Leases will or may be denied
the first year allowances, writing down allowances or other Tax treatment
by reference to which the rent under that Lease was calculated.
8.7 The Company has not taken or granted a lease of any assets in respect of
which an election has at any time been made under section 53 or 55 CAA
1990.
9. VAT
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9.1 For the purposes of this warranty 9 the "VAT legislation" means VATA 1994
and all regulations made or imposed thereunder (or under any earlier
enactment of which VATA 1994 is a consolidation) and any other statutes or
other provisions relating to value added tax including EC Directives and
regulations.
9.2 The Company is a registered taxable person for the purposes of the VAT
legislation (and has been so registered at all times that it has been
required to be so registered by the VAT legislation).
9.3 The Company has complied in all respects with the VAT legislation and has
made and maintained at the date hereof full complete correct and up to
date records invoices and other documents appropriate or requisite for the
purposes of such legislation and has at all times punctually paid and made
all payments and returns required under the VAT legislation and has
complied with the terms of any agreement reached with HM Customs and
Excise.
9.4 The Company is not in arrears with any payment or returns due under the
VAT legislation, and has not in the past six years been in default in
respect of any accounting period, as the terms "default" and "accounting
period" are used in Section 59 VATA 1994 (the default surcharge), nor has
it received any warning within Section 76(2) VATA 1994 in the last 6
years.
9.5 The Company is not liable to any abnormal or non-routine payment of VAT or
to any forfeiture or penalty or to the operation of any penal provision
and has not been required by the Commissioners of Customs & Excise to give
security.
9.6 The Company is not and has never been treated as a member of a group of
companies for VAT purposes.
9.7 The Company is not and will not become liable for VAT by virtue of Section
47 VATA 1994 (agent manager or factor of any person who is not resident in
the United Kingdom).
9.8 The Company has not been partially exempt for any VAT accounting period at
any time in the six years prior to Completion and will not in respect of
supplies invoiced to it prior to Completion be denied credit for any input
tax.
9.9 Neither the Company nor any company of which the Company is a relevant
associate within the meaning of paragraph 3(7) Schedule 10 VATA 1994
(election to waive exemption) has elected to waive exemption under
paragraph 2 of the said Schedule in relation to any land, except as
disclosed in the Disclosure Letter, and any elections so disclosed are
valid and have effect and have not been revoked.
9.10 There are no circumstances as a result of which an election to waive
exemption may be ineffective by reason of Section 37 Finance Act 1997.
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9.11 No notice has been received by the Company and the Company is not aware of
anything which indicates that the grant to the Company of any interest in
or right over land or of any licence to occupy land is and will continue
to be other than an exempt supply for VAT purposes.
9.12 The Company owns no assets which are treated as capital items the input
tax on which may be subject to adjustment in accordance with the VAT
Capital Goods Scheme as set out in Part XV of the Value Added Tax
Regulations 1995 (SI1995/2518).
9.13 The Company has not during the last ten years acquired any assets in the
circumstances described in section 44 VATA 1994 (transfer of going concern
to member of partially exempt VAT group).
10. Stamp Duty
10.1 All documents which form part of the title of the Company to any asset or
in the enforcement of which the Company is or may be interested have been
duly stamped and (where appropriate) adjudicated.
10.2 The Company has not been a party to any transactions whereby the Company
was or is or could become liable to stamp duty reserve tax.
11. Anti-avoidance
11.1 All particulars furnished to the Revenue and the Revenue's response in
connection with any application for any consent or clearance on behalf of
the Company under any of the following provisions:-
o Section 139 TCGA 1992 (company reconstruction: transfer of assets);
o Section 138 TCGA 1992 (company reconstructions);
o Section 707 ICTA 1988 (transactions in securities); and
o Section 776 ICTA 1988 (transactions in land);
(a) is included in the Disclosure Letter;
(b) fully and accurately disclosed all facts and circumstances material
to the decision of the Revenue and:-
o any such consent or clearance as was given is valid and
effective; and
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o any transaction for which such consent or clearance was
obtained has been carried into effect (if at all) only in
accordance with the terms of the relevant application and
consent or clearance.
11.2 The Company has not in the six years preceding the date of this Agreement
been a party to any transaction in respect of which the Company, its
directors or advisers considered that there was a material risk that the
Company could be liable to Taxation:-
(a) under the provisions of Part XVII ICTA 1988 (Anti-Avoidance); or
(b) as a result of the principles enunciated by the House of Lords in
the line of cases including Furniss v Dawson, Craven v White and
McGuckian V IRC
and concluded that such a risk was too remote to make provision
therefor in the relevant accounts of the Company.
11.3 The Company does not have and never has had any interest in a controlled
foreign company as defined in Section 747 ICTA 1988.
12. Inheritance Tax
12.1 The Company has made no transfer of value within Sections 94 or 99 IHTA
1984.
12.2 No person has the power under Section 212 IHTA 1984 to raise any capital
transfer tax or inheritance tax by the sale of or charge over any of the
Company's assets.
12.3 There is no unsatisfied liability to capital transfer tax or inheritance
tax attached or attributable to the assets of the Company or the shares of
the Company, and neither the assets nor the Shares are subject to any
Inland Revenue charge as is mentioned in Section 237 IHTA 1984.
13. Residence
13.1 The Company has been resident in the United Kingdom for Taxation purposes
at all times since its incorporation and will be so resident at
Completion.
13.2 No election has been made by the Company as the principal company (as
defined in section 187 TCGA 1992) (postponement of charge on deemed
disposal of assets by company ceasing to be resident in the United
Kingdom) nor has any company over which the Company had control or which
was a member of the same group of companies as the Company ceased to be
resident in the United Kingdom otherwise than in compliance with section
185 TCGA 1992.
13.3 The Company is not nor at any time has been:-
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(a) a dual resident company within section 188 TCGA 1992;
(b) a company to which section 11 ICTA 1988 applies or is likely to
apply;
(c) a dual resident investing company within section 404 ICTA 1988.
13.4 The Company has not made and is not entitled to make any claims under Part
XVIII ICTA 1988.
13.5 The Company is not liable to be assessed to Tax as the branch or agent of
a non-resident person, whether under section 78 Taxes Management Act 1970,
Sections 126 to 129 Finance Act 1995 or otherwise.
(R) VENDORS' AND DIRECTORS INTERESTS
Conflict of interest
1. No Vendor and no person connected with any Vendor has any interest (direct
or indirect) in any other company or business which competes or has
competed with or has a close trading relationship with any business now
carried on by the Company or so far as the Vendors are aware intends to
acquire any such interest.
2. There is not now outstanding:-
2.1 and there has not at any time during the past 5 years been outstanding any
contract or arrangement; or
2.2 any indebtedness actual or contingent;
to which the Company is a party and in which any Vendor or any Director of
the Company or any person connected with any Vendor or Director of the
Company is or has been interested, whether directly or indirectly.
3. The Company has not at any time entered into any arrangements of a type
covered by Sections 320 or 330 of the Companies Act 1985.
4. The Company has not in contravention of the provisions of the Companies
Acts or any equivalent legislation in relation to any of its Directors or
any person connected with such Director:-
4.1 granted any loan or quasi-loan or entered into any guarantee or credit
transaction; or
4.2 provided any security in connection with any such loan, quasi-loan,
guarantee or credit transaction.
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Finders' fees
5. No person is entitled to receive from the Company any finder's fee,
brokerage or other commission in respect of or in connection with this
Agreement or anything contained in it or the transactions contemplated by
this Agreement the sale and purchase of the shares.
Non-arm's length transactions
6. The Company is not a party to, nor has its profits or financial position
during the past three years been affected by, any contract or arrangement
which was not of an entirely arm's length nature.
(S) GOOD STANDING
Insolvency procedures
1. No receiver, administrative receiver, judicially appointed manager or
administrator has been appointed, nor, so far as the Vendors are aware,
any notice given, petition presented or order made for the appointment of
any such person, over the whole or any part of the assets or undertaking
of the Company.
2. No petition has been presented, no order has been made and no resolution
has been passed for the winding up of the Company or for the appointment
of a liquidator or provisional liquidator of the Company.
Compromise with creditors
3.1 No voluntary arrangement has been proposed or is in force under Section 1
of the Insolvency Act 1986 in respect of the Company.
3.2 No compromise or arrangement has been proposed, agreed to or sanctioned in
respect of the Company.
Solvency
4. The Company has not stopped payment of its creditors generally nor is it
insolvent or unable to pay its debts as and when they fall due.
Third party action
5. No unsatisfied judgment is outstanding against the Company and no demand
has been served on the Company under Section 123(1)(a) of the Insolvency
Act 1986.
6. No distress, execution or other process has been levied in respect of the
Company which remains undischarged; nor so far as the Vendors are aware is
there any unfulfilled or unsatisfied judgment or court order outstanding
against the Company.
7. So far as the Vendors are aware no action is being taken by the Registrar
of Companies to strike the Company off the register.
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Investigations
8. So far as the Vendors are aware there are not pending, or in existence,
any investigations or enquiries by or on behalf of any governmental or
other body in respect of the affairs of the Company.
(T) INFORMATION
Those documents contained in the Disclosure Bundle:-
(1) were provided in good faith and after due and careful consideration
of their contents in the reasonable belief that they accurately
reflected the state of affairs of their subject matter; and
(2) were when provided true in all material respects and so far as the
Vendors are aware after due and careful consideration of their
contents the documents in the Disclosure Bundle remain true in all
material respects.
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SCHEDULE 7
LIMITATIONS ON CLAIMS
1. The provisions of this Schedule shall operate to limit or reduce the
liability of the Vendors in respect of claims under the Warranties and,
where expressly so stated, the Tax Deed.
2. The Vendors shall not be liable for any Relevant Claim (for the purposes
of this Schedule, "Relevant Claim" means any claim in respect of any
breach of Warranty or under the Tax Deed and "Relevant Warranty Claim"
means any claim relating to a breach of Warranty (but not under the Tax
Deed) unless each of the Vendors shall have received from the Purchaser
written notice containing reasonable details of the Relevant Claim,
including, where practicable, the Purchaser's estimate at that time of its
approximate amount (Provided that such estimate will not operate to
prejudice or limit the amount of the Relevant Claim):-
2.1 in the case of a Relevant Claim in respect of any of the Warranties (other
than the Warranties relating to Tax ("Tax Warranties")) on or before the
date falling 24 months after the Completion Date;
2.2 in the case of a Relevant Claim pursuant to the Tax Warranties or the Tax
Deed, on or before the date which is seven years after the Completion
Date.
3. Any Relevant Warranty Claim (except for a Relevant Warranty Claim to which
paragraph 11 of this Schedule applies) shall (if it has not been
previously satisfied, settled or withdrawn) be deemed to have been
withdrawn unless legal proceedings in respect of it have been commenced by
both being issued and served within 6 months of notification to the
Vendors pursuant to paragraph 2 of this Schedule, Provided that this
period will not commence to run until after the End Date (as defined in
Schedule 10) arises in relation to the Completion Accounts.
4.1 If the Purchaser becomes aware of any Relevant Warranty Claim, the
Purchaser shall procure that notice of such Relevant Warranty Claim is
given within 30 days to the Vendors, Provided that this period will not
commence to run until after the End Date (as defined in Schedule 10)
arises in relation to the Completion Accounts. As regards any such
Relevant Warranty Claim, the Purchaser shall, to the extent that it is
reasonably practicable to do so, not make any admission of liability,
agreement or compromise with any person, body or authority without prior
consultation with the Vendors and shall take (or, as appropriate, procure
that the Company shall take) such action as the Vendors may reasonably
request to avoid, dispute, resist, appeal, compromise or defend the
subject matter of such Relevant Warranty Claim, but subject to the
following provisions of this paragraph the Purchaser being indemnified to
its reasonable satisfaction by the Vendors against all reasonable costs
and expenses
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including the reasonable and proper costs of professional advisers
incurred by the Purchaser or the Company consequently arising (such
indemnity being referred to as the "Vendors' Indemnity"). The action which
the Vendors may reasonably request under this paragraph 4 shall include
(without limitation):
4.1.1 the Purchaser allowing, or, as appropriate, co-operating to
procure that the Company allows, the Vendors to take on or
take over (at their own cost and expense and subject to the
giving of the Vendors' Indemnity) the conduct of all
proceedings and/or negotiations of whatsoever nature arising
in connection with the Relevant Warranty Claim, matter or
event in question; or, at the Vendors discretion,
4.1.2 the Purchaser assigning or procuring the assignment to the
Vendors (or as the Vendors may direct) of any rights of action
which the Purchaser, the Company or any other member of the
DMS Group may have against any third party in respect of the
Relevant Warranty Claim, matter or event in question.
4.2 If the Vendors take on or take over the conduct of proceedings and/or
negotiations:
(a) the Purchaser shall, after the Vendors' Indemnity is given; provide
(or, as appropriate, procure that the Company provides) such
information and assistance as the Vendors may reasonably require in
connection with the preparation for and conduct of such proceedings
and/or negotiations;
(b) the Vendors shall keep the Purchaser informed of proposed meetings
with any relevant third party and advise the Purchaser of the
outcome of such relevant meetings and discussions.
If the Vendors fail to give the Vendors' Indemnity within 14 days of a
written request the Purchaser will be released from its obligations under
this paragraph 4.
4.3 The appointment by the Vendors of solicitors or other professional
advisers in relation to the Relevant Warranty Claim shall be subject to
the approval of the Purchaser (such approval not to be unreasonably
withheld or delayed).
4.3.1 Any communication, written or otherwise, relating to the
Relevant Warranty Claim received by the Vendors shall be
promptly copied (if in writing) or otherwise communicated to
the Purchaser.
4.3.2 The Vendors shall effect no settlement or compromise of the
Relevant Warranty Claim or agree any matter in the conduct of
the dispute without the approval of the Purchaser (such
approval not to be unreasonably withheld or delayed) and in
any event no action shall be required by the Purchaser or any
Company in relation to the Relevant
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Warranty Claim which is reasonably considered likely by the
Purchaser to prejudice the goodwill or conduct of the business
or the liabilities or prospects of the Company or the
Purchaser.
4.3.3 Without prejudice to the foregoing provisions of this clause,
neither the Company nor the Purchaser shall be obliged to
contest a Relevant Warranty Claim beyond the first appellate
body in the jurisdiction concerned.
5. If any of the Vendors become aware of any Relevant Warranty Claim he will
procure that notice of such Relevant Warranty Claim is given within 30
days to the Purchaser but any claim arising from a breach of this
paragraph 5 shall itself be subject to all the limitations on Relevant
Warranty Claims contained in this Schedule 7, Provided that this period
will not commence to run until after the End Date (as defined in Schedule
10) arises in relation to the Completion Accounts.
6. Subject to the provisions of paragraph 7 the Vendors shall have no
liability in respect of any Relevant Claim unless such claim exceeds
(pound)7,000 (each such claim being a "Disregarded Claim"). If a Relevant
Claim exceeds (pound)7,000 the Purchaser will be entitled to make such
claim immediately.
7. Except in the case of fraud, deceit or wilful concealment no liability
shall attach to the Vendors in respect of Relevant Claims unless the
aggregate amount of the liability of the Vendors to the Purchaser in
respect of all Relevant Claims including for these purposes all or any
Disregarded Claims shall:-
7.1 in relation to Relevant Claims for Tax exceed(pound)10,000 (ten thousand
pounds); and
7.2 in relation to Relevant Claims for matters which do not relate to Tax
exceed(pound)50,000 (fifty thousand pounds);
in which case the Vendors will only be liable for the excess over
(pound)10,000 or (pound)50,000 as the case may be.
8. Except in the case of fraud, deceit or wilful concealment the total
aggregate liability of the Vendors in respect of all Relevant Claims shall
not exceed (pound)7,000,000 and the liability of each Vendor shall in any
event not exceed the amount of the Consideration received by him under
this Agreement i.e. (pound)1,811,110 in the case of M A Winton,
(pound)1,671,040 in the case of J D Price and (pound)3,517,850 in the case
of J P Jennings.
9. The Vendors shall not be liable for any Relevant Claim in respect of any
matter to the extent that:-
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(a) specific provision has been made for such matter in the Completion
Accounts or prior to the finalisation of the Completion Accounts in
the Audited Accounts;
(b) such Relevant Claim arises or, such Relevant Claim otherwise having
arisen, is increased as a result of any change made after Completion
in any accounting or taxation policies or practice of the Company
except to the extent requested to comply with any FRS or UITF
Abstract as published on or before today's date;
(c) the Working Capital (after taking account of the impact of the
subject matter of the Relevant Claim) exceeds (pound)1,500,000 at
Completion (one million five hundred thousand pounds) before
deducting the Divisional Director Payments under clause 4.7 of this
Agreement.
10. Where the Company or the Purchaser is entitled (whether by reason of
insurance or payment discount or otherwise) to recover from some other
person any sum in respect of Taxation or any other liability, loss or
damage the subject of a Relevant Claim against the Vendors or for which a
Relevant Claim could be made (and whether before or after the Vendors have
made payment to the Purchaser or Company), the Purchaser shall, on
becoming aware of the same:-
10.1 promptly notify the Vendors and provide such information as the Vendors
may reasonably require relating to such liability or dispute; and
10.2 promptly notify the Vendors of the steps taken by the Purchaser or the
Company in connection with it; and
10.3 if so required by the Vendors and at the Vendors' cost and expense and on
the Vendors giving to the Purchaser a Vendors' Indemnity the Purchaser
shall, and shall procure that the Company shall, take all reasonable steps
(whether by way of a claim against its insurers or otherwise) including,
but without limitation, such proceedings as the Vendors may reasonably
require, to enforce such recovery and shall keep the Vendors informed of
the progress of any action taken and any claim against the Vendors shall
be limited (in addition to the limitations on the liability of the Vendors
referred to in the Schedule) to the amount by which the loss or damage
suffered by the Purchaser as a result of such breach shall exceed the
amount so recovered net of all costs and expenses incurred in relation to
such recovery and all Tax paid on such recovery.
11. If the Vendors pay to the Purchaser an amount in discharge of a Relevant
Claim and the Purchaser or the Company subsequently recovers (whether by
payment, discount, credit, relief or otherwise) from a third party
(including any Taxation authority) a sum which is referable to the
Relevant Claim, the Purchaser shall (or, as appropriate, shall procure
that the Company shall) forthwith repay to the Vendors:-
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11.1 an amount equal to the sum recovered from the third party less all costs
and expenses incurred by the Purchaser or the Company in recovering the
same and all Tax paid on such recovery; or
11.2 if the net amount recovered under paragraph 11.1 above is greater than the
amount paid by the Vendors to the Purchaser or the Company in respect of
the such Relevant Claim, such lesser amount as shall have been so paid by
the Vendors;
so as to leave the Purchaser (taking into account the net amounts received
from the third party and from the Vendors and those payable to the Vendors
under this paragraph) in no better or worse position that they would have
been in (subject always to the other provisions of this paragraph 11) had
the Relevant Claim not arisen in the first place.
12. If any Relevant Claim shall arise by reason of some liability which at the
time that the Relevant Claim is notified to the Vendors is contingent
only, then without prejudice to their liability, the Vendors shall not be
under any obligation to make any payment for it to the Purchaser until
such time as contingent liability ceases to be so contingent.
13. To the extent that any Relevant Claim would not have arisen but for a
voluntary act or omission performed or allowed to occur by the Purchaser
or the Company after Completion otherwise than in the ordinary and proper
course of business and in respect of which each of (a) and (b) below are
satisfied; namely that in respect of such act or omission:-
(a) it has not arisen pursuant to a legally binding obligation entered
into prior to the Completion Date; and
(b) it could reasonably have been avoided without material cost or
liability on the part of the Purchaser or the Company.
14. The Vendors shall not be liable in respect of any Relevant Claim to the
extent that such Relevant Claim is attributable to, or such Relevant Claim
otherwise having arisen, is increased as a result of:-
14.1 any legislation not in force as at the Completion Date; or
14.2 any change of law or administrative practice (including but not limited to
extra-statutory concessions of the Inland Revenue, but excluding any of
the amendments referred to in the definition of Environmental Legislation)
which takes effect retroactively; or
14.3 any increase in the rates of Taxation in force at the Completion Date; or
14.4 the Purchaser or the Company disclaiming any part of the benefit of
capital allowances against Taxation claimed or proposed to be claimed on
or before the Completion Date.
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15. The Purchaser will not commence proceedings for a breach of the Warranties
which is capable of remedy unless the Vendors are given written notice of
such breach and such breach is not remedied within 30 days after the date
on which such notice is served on the Vendors.
16. The Purchaser hereby agrees for itself and on behalf of the Company with
the Vendors that in respect of any Relevant Claim where the Vendors may be
liable to the Purchaser under the Warranties and which may also give rise
to a liability under the Tax Deed the Vendors shall not be obliged to meet
any such liability more than once by paying the same sum more than once in
respect of the same liability and any recovery by the Purchaser in respect
of any such Relevant Claim under the Warranties shall be deemed to be a
recovery by all the relevant parties under the Tax Deed and any recovery
by any party under the Tax Deed shall be deemed to be a recovery by the
Purchaser under this Agreement for breach of the Warranties (as the case
may be) and a recovery by the Purchaser or the Company shall be deemed to
be a recovery by each of them.
17. If any liability is specifically provided for in the Completion Accounts
no Relevant Claim can be made in respect of it either under the Warranties
or the Tax Deed or both or vice versa.
18. On the basis of the information received pursuant to the Disclosure Letter
and the Disclosure Bundle, the Purchaser confirms that none of its
executives dealing with this Agreement on a day to day basis has actual
knowledge of any material claim under the Warranties or the Tax Deed.
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SCHEDULE 8
INDEMNITIES
1. The Vendors agree at the election of the Purchaser to indemnify and keep
indemnified and hold harmless on an after-Tax basis the Purchaser and the
Company on demand from and against and to reimburse on a full indemnity
basis all claims, demands, liabilities, losses and damages whatsoever
(including all legal and other costs, charges and expenses properly
incurred together with any applicable Value Added Tax or similar tax)
raised against or incurred by the Purchaser or the Company arising from or
in connection with:-
1.1 any Tax in respect of the Re-organisation or any part of the
Re-organisation;
1.2 the Divisional Director Payments not being fully deductible for the
purposes of Tax and the impact that such treatment would have had on the
Completion Accounts.
2.1 If the Company or the Purchaser make a Claim (the "Claim") under paragraph
1 above the Purchaser shall or shall procure that the Company shall
promptly give written notice of the Claim to all the Vendors provided that
such notice shall not be a condition precedent to the liability of the
Vendors.
2.2 Subject to:-
2.2.1 the Vendors first having secured and agreed to indemnify the
Purchaser and the Company to the Purchaser's reasonable
satisfaction against all losses (including additional
Taxation) costs, (including the reasonable cost to the
Purchaser or the Company of executives assisting the Vendors)
damages and expenses which are likely to be incurred in
connection with, the Claim;
2.2.2 the following provisions of this clause
the Purchaser shall and shall procure that the Company shall take any such
action as the Vendors may reasonably request to avoid, dispute, resist,
appeal, compromise or defend the Claim.
2.3 The appointment by the Vendors of solicitors or other professional
advisers in relation to the Claim shall be subject to the approval of the
Purchaser (such approval not to be unreasonably withheld or delayed).
2.4 Any communication, written or otherwise, relating to the Claim received by
the Vendors shall be promptly copied (if in writing) or otherwise
communicated to the Purchaser.
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2.5 The Vendors shall effect no settlement or compromise of the Claim or agree
any matter in the conduct of the dispute without the approval of the
Purchaser (such approval not to be unreasonably withheld or delayed) and
in any event no action shall be required by the Purchaser or the Company
in relation to the Claim which is reasonably considered likely by the
Purchaser to prejudice the conduct of the business or the future liability
in respect of Taxation of the Company or the Purchaser.
2.6 Without prejudice to the foregoing provisions of this clause, neither the
Company nor the Purchaser shall be obliged to contest a Claim beyond the
first appellate body (including Special or General Commissioners, or a VAT
tribunal or equivalent body) in the jurisdiction concerned.
2.7 If, in the reasonable opinion of the Purchaser having taken proper legal
advice:-
2.7.1 the Vendors or the Company have committed any acts or
omissions which did constitute fraud or wilful default; or
2.7.2 there is any unreasonable delay on the part of the Vendors in
complying with clause 2.2.1; or
2.7.3 the resistance of a Claim is at any time not being properly
and effectively conducted
the Purchaser (provided in the case of a matter within sub-clause 2.7.2 or
2.7.3 that the Vendors have been given notice in writing of the matter and
have not within 15 Business Days of such notice rectified the position to
the reasonable satisfaction of the Purchaser) may or may procure that the
Company shall without further reference to the Vendors admit, compromise,
settle, discharge or otherwise deal with any outstanding or future Claims.
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SCHEDULE 9
ITEMS FOR DELIVERY BY THE VENDORS AT COMPLETION
The Vendors will deliver to the Purchaser the following:-
1. transfers of the Shares duly executed by the registered holders in favour
of the Purchaser (or as it in writing directs) accompanied by the
respective share certificates;
2. such waivers, consents or other documents as may be required to give a
good title to the Shares and to enable the Purchaser or its nominees to
become the registered holders;
3. certificates in respect of all issued shares of the Dormant Subsidiary;
4. the certificates of incorporation, statutory books (including minute
books), common seal of the Company and the Dormant Subsidiary complete and
(where appropriate) written up to date;
5. except as set out in the Disclosure Letter the title deeds to the
Properties and all ancillary documents;
6. the resignation in the Agreed Form of Mr L Green as Director of the
Company including a written acknowledgement from him that he has no claim
whatsoever against the Company whether in respect of compensation for loss
of office, damages, pensions, loans or otherwise and without the right to
claim any payment under the Employment Rights Act 1996;
7. a written acknowledgement to the Company in the Agreed Form from each of
the existing Directors of the Company and of the Dormant Subsidiary who is
to continue as a Director after the date of Completion that he has no
claim whatsoever against the Company or the Dormant Subsidiary except for
unpaid remuneration, expenses holiday pay and accrued rights to be a
member of any relevant pension scheme and of which he is a member at
today's date;
8. the Tax Deed duly executed by the Vendors;
9. certificates from the Company's bankers certifying the current and deposit
account balances of the Company at the close of business on Friday 3rd
April 1998;
10. written confirmation in the Agreed Form from the Vendors that there are no
subsisting guarantees given by the Company in their favour and that the
Vendors will not be indebted to the Company or vice versa except for
unpaid remuneration, expenses, holiday pay and accrued rights to be a
member of any relevant pension scheme and of which he is a member at
today's date;
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11. appropriate certified minutes of each of the Company and the Dormant
Subsidiary;
12. certificates of any registered trademarks;
13. the Disclosure Letter and the Disclosure Bundle;
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SCHEDULE 10
COMPLETION ACCOUNTS
1.1 Immediately after Completion the Parties shall instruct the Company to
prepare the Completion Accounts and to submit the Completion Accounts in
draft (such documents being referred to as the "Draft Completion
Accounts") to the Parties within 60 days of Completion (the date of
submission being the "Preparation Date").
1.2 The Company shall be instructed to prepare the Draft Completion Accounts
on the following bases:-
1.2.1 subject to paragraph 1.2.2 below on a basis identical to that
adopted in preparation of the Audited Accounts;
1.2.2 so as to comply with the relevant requirements of the
Companies Acts and in accordance with all Current SSAPs FRSs,
and generally accepted accounting principles.
1.3 As soon as reasonably practicable after the Preparation Date but no later
than 15 Business Days after the Preparation Date the Vendors (or their
representatives) and the Purchaser (or its representatives) shall meet
with a view to agreeing the final form of the Completion Accounts;
if agreed the Purchaser and the Vendors (or their authorised
representatives) shall sign the form so agreed (such signed Completion
Accounts being the "Agreed Figures" and the "Completion Accounts"). If the
Vendors and Purchaser are unable to agree the Agreed Figures within 20
Business Days of the Preparation Date then (unless otherwise agreed in
writing by all the Vendors and the Purchaser) the relevant provisions of
paragraphs 1.4 to 1.10 of this Schedule 10 (inclusive) shall be
implemented
1.4 The Parties shall use all reasonable endeavours to procure that the
Vendors' Accountants and Purchaser's Accountants shall have access to all
the books and records of the Company and all other information necessary
for the purposes of enabling the Draft Completion Accounts to be
finalised.
1.5 Within 28 Business Days of the Preparation Date (the date of delivery
being the "Delivery Date") the Draft Completion Accounts shall be
delivered by the Company to the Vendors' Accountants
1.5.1 The Vendors' Accountants shall then prepare:-
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(a) a draft statement of adjustments proposed by them to the
draft Completion Accounts (the "Statement of
Adjustments");
(b) an Opinion (the "Opinion") confirming that the Draft
Completion Accounts have been prepared in accordance
with paragraph 1.2 above and confirming the amount of
the Working Capital shown in the Draft Completion
Accounts (the "Working Capital Opinion").
1.5.2 The Vendors shall procure that:-
(a) the draft Statement of Adjustments and
(b) the Opinion and Working Capital Opinion
shall be delivered by the Vendors' Accountants to the
Purchaser's Accountants for their review (which shall include,
without limitation, discussions with the Vendor's Accountants
and review of their working papers) within 15 Business Days of
the Delivery Date. If this is not undertaken within such
period then the provisions of paragraph 1.7 will apply.
1.5.3 The Purchaser shall procure that the Purchaser's Accountants
shall communicate their decision as to whether or not they
accept the Completion Accounts subject to any Statement of
Adjustments, the Opinion and Working Capital Opinion to the
Vendors and the Purchaser within a period of 15 Business Days
of the delivery of those documents to the Purchaser's
Accountants (the "Acceptance Period").
1.6 If the Purchaser's Accountants shall not accept the Draft Completion
Accounts subject to any Statement of Adjustments, the Opinion and the
Working Capital Opinion within the Acceptance Period the Vendors and the
Purchaser shall use their best endeavours to procure that the Vendors'
Accountants and the Purchaser's Accountants shall meet together promptly
and in any case within a period of 7 Business Days of the end of the
Acceptance Period to resolve any dispute that has arisen between them with
regard to the Completion Accounts subject to any Statements of
Adjustments, the Opinion and the Working Capital Opinion. In such
circumstances the Purchaser shall procure that the Purchaser's Accountants
shall make available their working papers for review by the Vendors'
Accountants.
1.7 If any dispute relating to the Draft Completion Accounts subject to any
Statement of Adjustments, or the Opinion or the Working Capital Opinion is
not resolved within a period of 7 Business Days of the end of the
Acceptance Period then (unless all the
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Vendors and Purchaser otherwise agree in writing) the dispute shall be
referred (at the instance of either the Vendors or the Purchaser) to an
independent expert accountant chosen by the President for the time being
of the Institute of Chartered Accountants in England and Wales or his
nominee (the "Referee").
1.8 The Referee shall act as an expert and not as an arbitrator and his
decision (in the absence of manifest error) shall be final and binding
upon the Vendors and the Purchaser and his costs and expenses shall be
borne as to 50% (fifty per cent.) by the Vendors and 50% (fifty per cent.)
by the Purchaser (unless he shall otherwise direct).
1.9 If there shall be no Agreed Figures then upon:-
1.9.1 the acceptance by the Purchaser's Accountants of the draft
Completion Accounts subject to any Statement of Adjustments,
the Opinion and the Working Capital Opinion; or
1.9.2 the resolution of any dispute arising between the Vendors'
Accountants and the Purchaser's Accountants in respect of the
draft Completion Accounts (subject to any Statement of
Adjustments), the Opinion and the Working Capital Opinion; or
1.9.3 the decision of the Referee
the Vendors and the Purchaser shall as soon as reasonably practicable sign
the Draft Completion Accounts, in the form so accepted, resolved or
decided upon by the Referee and following such signature (or in the case
of default a Court holding that such signature is not required) the Draft
Completion Accounts as signed will in addition to the Agreed Figures be
the "Completion Accounts" which shall in the absence of manifest error be
final and binding on the Vendors and the Purchaser.
1.10 The Vendors and Purchaser shall give effect to the provisions of clause
4.8 of the Agreement immediately upon:-
(a) agreement by them of the Agreed Figures; or
(b) the date on which the Completion Accounts become binding for the
purposes of paragraph 1.9 above;
such date being for the purposes of this Agreement the "End Date".
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SCHEDULE 11
ADDITIONAL CONSIDERATION
The Additional Consideration shall be a maximum amount of (pound)900,000 (Nine
hundred thousand pounds) for the Second Tranche and (pound)900,000 (Nine hundred
thousand pounds) for the Third Tranche computed on the basis detailed below:-
Second Tranche:-
The sum of (pound)900,000 (Nine hundred thousand pounds) will be payable if the
Delta Turnover for the period from 1 April 1998 to 31 December 1998 (inclusive)
is (pound)15,000,000 or greater. If the Delta Turnover is less than
(pound)15,000,000 the Second Tranche will not be payable.
Third Tranche:-
(1) The sum of (pound)900,000 (Nine hundred thousand pounds) will be payable
if the following criteria are achieved:-
Turnover of Delta in the period from 1 January 1999 to 31 December 1999 is
(pound)50,000,000 (Fifty million pounds) or greater and the Profit in
relation to such Turnover is 12% or greater; or
(2) The sum of (pound)450,000 (Four hundred and fifty thousand pounds) will be
payable if the criteria in paragraph (1) above are not satisfied but the
following criteria are achieved, either:-
(A) Turnover in the period from 1 January 1999 to 31 December 1999 is no
less than (pound)45,000,000 (Forty five million pounds) and the
Profit in relation to such Turnover is 12% or greater;
or
(B) Turnover in the period from 1 January 1999 to 31 December 1999 is no
less than (pound)50,000,000 (Fifty million pounds) and the Profit in
relation to such Turnover is 11% or greater.
(3) The sum of (pound)225,000 (Two hundred and twenty five thousand pounds)
will be payable if the criteria in paragraph (2) above are not satisfied
but the following criteria are achieved:-
Turnover in the period from 1 January 1999 to 31 December 1999 is no less
than (pound)45,000,000 (forty-five million pounds) and the Profit in
relation to such Turnover is 11% or greater.
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Where:-
"Delta Turnover" means the turnover of the Company (or, should there be a
reorganisation whereby the business of the Company is transferred to
another entity, the turnover from the customer lists of the Company)
exclusive of VAT and bad debts and doubtful debts, shown in the relevant
accounts for the period starting on 1 April 1998 and ending 31 December
1998 as derived from management accounts (the "December 1998 Management
Accounts") prepared on the same basis as the Management Accounts.
"Profit" means in respect of the period from 1 January 1999 to 31 December
1999 the profit before tax relating to courier operations (but excluding
research distribution or other activities) inclusive of depreciation but
excluding interest relating to indebtedness incurred in respect of
acquisitions as derived from the audited accounts of Delta for the
relevant period ("Relevant Accounts")
"Turnover" means the turnover of Delta in the period 1 January 1999 to 31
December 1999 as shown in the Relevant Accounts.
1. Second Tranche
Payment of the Second Tranche to be within 30 days of 31 December 1998. In
the event of a dispute as to the Delta Turnover included in the 1998
Management Accounts the dispute resolution mechanism in paragraphs 2.1 to
2.14 of this Schedule 11 shall apply to the extent appropriate mutatis
mutandis as if the subject matter for resolution related solely to the
Delta Turnover in the Management Accounts provided that the date by which
the December 1998 Management Accounts are to be prepared shall be no later
than 30 January 1999.
2. Third Tranche
2.1 The Purchaser shall use its best endeavours to procure that a draft of the
Relevant Accounts are prepared by the Company within 90 days of 31
December 1999 (the date of preparation being the "Preparation Date")
3. The Purchaser will deliver to the Vendors a draft of the Relevant Accounts
and the Purchaser and the Vendors will negotiate together in good faith
for a period of 14 days (the "Finalisation Period") to finalise the amount
of the Third Tranche.
4. If the amount of the Third Tranche is not agreed at the end of the
Finalisation Period the Purchaser shall procure that the draft Relevant
Accounts are delivered to the Purchasers' Accountants and that the Profit
as disclosed by the draft Relevant Accounts shall be reported upon by the
Purchaser's Accountants and that they shall prepare a draft report as to
the amount of the Profit, and the amount of the Third Tranche (the "Draft
Report") within 30 days of the delivery to them of the draft Relevant
Accounts.
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5. The Purchaser shall procure that:-
(a) the draft Relevant Accounts; and
(b) the Draft Report
shall be delivered by the Purchaser's Accountants to the Vendors'
Accountants for their review which shall include, without limitation,
discussions with the Purchaser's Accountants and a review of their working
papers.
6. The Vendors shall procure that the Vendors' Accountants shall communicate
their decision as to whether or not they accept the draft Relevant
Accounts and the Draft Report to the Vendors and the Purchaser within a
period of 21 days of the delivery of those documents to the Vendors'
Accountants (the "Acceptance Period")
7. If the Vendors' Accountants shall not accept the draft Relevant Accounts
and the Draft Report within the Acceptance Period the Vendors and the
Purchaser shall use their best endeavours to procure that the Vendors'
Accountants and the Purchaser's Accountants shall meet together promptly
and in any case within a period of 7 Business Days of the end of the
Acceptance Period to resolve any dispute that has arisen between them with
regard to the draft Relevant Accounts and the Draft Report
8. If any dispute relating to the draft Relevant Accounts or the Draft Report
is not resolved within a period of 7 Business Days of the end of the
Acceptance Period then (unless all the Vendors and the Purchaser otherwise
agree in writing) the dispute shall be referred (at the instance of either
the Vendors or the Purchaser) to an independent expert accountant chosen
by the President for the time being of the Institute of Chartered
Accountants in England and Wales or his nominee (the "Referee")
9. The Referee shall act as an expert and not as an arbitrator and his
decision (in the absence of manifest error) shall be final and binding
upon the Vendors and the Purchaser and his costs and expenses shall be
borne as to 50% (fifty per cent.) by the Vendors and 50% (fifty per cent.)
by the Purchaser unless he shall otherwise direct
10. Upon:-
10.1 the acceptance by the Vendors' Accountants of the draft Relevant Accounts
and the Draft Report; or
10.2 the resolution of any dispute arising between the Vendors' Accountants and
the Purchaser's Accountants in respect of the draft Relevant Accounts and
the Draft Report; or
10.3 the decision of the Referee
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the Vendors and the Purchaser shall use their best endeavours to procure
that the Purchaser's Accountants issue forthwith the Relevant Accounts and
the Report signed by the Purchaser's Accountants in the form so approved,
resolved or decided upon which shall in the absence of manifest error be
final and binding on the Vendors and the Purchaser. If the Purchaser's
Accountants fail to comply with the foregoing then the decision of the
Referee (the "Referee's Decision") will be deemed to be binding upon the
Purchaser and the Vendors.
11. The Third Tranche (if any) due to the Vendors based on the Relevant
Accounts shall be payable on and shall be paid on the day which is 5
Business Days after the Relevant Accounts and the Report (failing which
the Referee's Decision) have been issued in accordance with paragraph 10
above.
12. If the Relevant Accounts and Report have not been issued in accordance
with paragraph 10 above within 6 months of the Preparation Date the
Purchaser will pay the full amount of any bona fide claim for the Third
Tranche by the Vendors into an escrow account in the joint names of the
Vendors' Solicitors and the Purchaser's Solicitors pending the resolution
of the amount of the Claim.
13. In order to ensure that the Vendors are enabled, so far as is reasonable,
to achieve the maximum amount of consideration in respect of the Second
Tranche and Third Tranche as shall be consistent with the short and medium
term business interests of the Company and the preservation of the
Purchaser's interest in the goodwill and business of the Company, the
Purchaser shall not take any steps that would have the effect of
artificially or unfairly diminishing the Profit.
14. Any cost of the Company incurred in the preparation of the Relevant
Accounts for the purposes of this Schedule shall not be deducted from the
Profit for the purposes of calculating whether the Third Tranche is
payable.
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SCHEDULE 12
THE RE-ORGANISATION
1. On 24 March 1998, the Shareholders passed:-
(a) Resolutions re-designating and converting all the A Shares held at
that date in the names of J D Price (Share Numbers 390,872 to
445,436) and M A Winton (Share Numbers 445,437 to 500,000) into B
Shares on a one-for-one basis to rank pari passu in all respects
with the existing B Shares; and
(b) Special Resolutions (inter alia) increasing the authorised share
capital of the Company from (pound)77,777 to (pound)85,514.98 by the
creation of 773,798 "C" Ordinary Shares of (pound)0.01 each ("C
Shares").
2. On 6 April 1998, such C Shares were allotted to M A Winton (402,460 C
Shares) and J D Price (371,338 C Shares), those individuals electing to
receive those shares fully paid in lieu of a dividend declared by the
Company on 24 March 1998.
103
<PAGE>
EXECUTION
EXECUTED AND DELIVERED )
AS A DEED by )
JOHN PATRICK JENNINGS ) ----------------------------------------
in the presence of:- )
Signature --------------------------------------
Name --------------------------------------
Address --------------------------------------
Occupation --------------------------------------
EXECUTED AND DELIVERED )
AS A DEED by )
MARK ADAM WINTON ) ----------------------------------------
in the presence of:- )
Signature --------------------------------------
Name --------------------------------------
Address --------------------------------------
Occupation --------------------------------------
104
<PAGE>
EXECUTED AND DELIVERED )
AS A DEED by )
JOHN DAVID PRICE ) ----------------------------------------
in the presence of:- )
Signature --------------------------------------
Name --------------------------------------
Address --------------------------------------
Occupation --------------------------------------
SIGNED by )
) ----------------------------------------
for and on behalf of )
DISPATCH MANAGEMENT )
SERVICES CORP. )
in the presence of:-
Signature --------------------------------------
Name --------------------------------------
Address --------------------------------------
Occupation --------------------------------------
105
DISPATCH MANAGEMENT SERVICES CORP.
INTRODUCTION TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give
effect to the acquisitions by Dispatch Management Services Corp. (the "Company")
of the outstanding capital stock of the Founding Companies. The Company
acquired, in separate combination transactions (the "Combinations") in exchange
for cash and shares of Common Stock, certain courier firms simultaneously with
and as a condition to the closing of the Company's initial public offering (the
"Offering") during February 1998. The acquisitions were accounted for using the
purchase method of accounting. The Company was identified as the accounting
acquiror. The unaudited pro forma combined financial statements also give effect
to the acquistion of Delta Air & Road Transport (Delta) which was consummated on
April 7, 1998 and was accounted for using the purchase method of accounting.
The unaudited pro forma combined balance sheet gives effect to the
Combinations, the Offering, and the acquisition of Delta as if they had occurred
on September 30, 1997. The unaudited pro forma combined statements of operations
give effect to these transactions as if they had occurred on January 1, 1996.
The purchase price has been allocated to the historical assets and liabilities
based on their respective carrying values, with the exception of acquired in
process research and development (R&D) activities and acquired internally
developed technology, as the carrying values are deemed to represent the fair
value of these assets and liabilities. The fair market value of the in process
R&D and internally developed technology was determined based on a detailed
analysis prepared by the Company. The allocation of the purchase price is
considered preliminary until such time as the closing of the Offering and
consummation of the Combinations. The Company does not anticipate that the final
allocation of purchase price will differ significantly from that presented in
the pro forma combined financial statements.
The Company has preliminarily analyzed the savings that it expects to
realize from reductions in salaries and certain benefits to the stockholders of
the Founding Companies and Delta. To the extent the stockholders and management
of the Founding Companies and Delta have agreed prospectively to reductions in
salary, bonuses, and benefits, these net reductions have been reflected in the
pro forma combined statement of operations. With respect to other potential cost
savings, the Company has not and cannot quantify these savings. It is
anticipated that these savings will be partially offset by the costs of being a
publicly held company and the incremental increase in costs related to the
Company's new management. However, these costs, like the savings that they
offset, cannot be quantified accurately. Neither the anticipated savings nor the
anticipated costs have been included in the pro forma combined financial
statements of the Company.
The pro forma adjustments are based on estimates, available information
and certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what the
Company's financial position or results of operations would actually have been
if such transactions in fact had occurred on those dates and are not necessarily
representative of the Company's financial position or results of operations for
any future period. Since the Founding Companies and Delta were not under common
control or management, historical combined results may not be comparable to, or
indicative of, future performance. The unaudited pro forma combined financial
statements should be read in conjunction with the other financial statements and
notes thereto included elsewhere in this Prospectus. See "Risk Factors" included
elsewhere herein.
<PAGE>
Dispatch Management Services Corp.
Pro Forma Combined Balance Sheet
September 30, 1997
(Unaudited)
(000's)
<TABLE>
<CAPTION>
ASSETS DMS West One Aero
---------------------------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents 820 1,064 109
Accounts receivable, net 24 5,256 1,349
Prepaid and other current assets 3,153 272
---------------------------------
Total current assets 3,997 6,320 1,730
Property and equipment, net 32 3,169 407
Other assets 339 120
Goodwill, net 276
---------------------------------
Total assets 4,644 9,609 2,137
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt 857 108
Accounts payable 4,392 400
Accrued expenses 2,534 461
Other current liabilities 55 2,884
Payable to shareholders of founding co.
---------------------------------
Total current liabilities 3,446 4,392 3,853
Long-term debt, less current maturities 2,265
Other long term liabilities 675
---------------------------------
Total liabilities 3,446 6,657 4,528
Stockholders' equity
Preferred Stock 2
Common Stock 9 120 200
Treasury stock
Additional paid-in capital 1,402
Retained earnings (215) 2,832 (2,591)
---------------------------------
Total stockholders' equity 1,198 2,952 (2,391)
---------------------------------
Total liabilities and stockholders' equity 4,644 9,609 2,137
=================================
<CAPTION>
Security American Eagle Atlantic Washington
ASSETS EarlyBird Bullit Despatch Endeavors Freight Express
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 3 71 95 7 85
Accounts receivable, net 3,002 878 3,134 736 924 800
Prepaid and other current assets 1,456 21 71 103 159
---------------------------------------------------------------------------
Total current assets 4,461 970 3,134 902 1,034 1,044
Property and equipment, net 127 95 166 238 688 458
Other assets 112 13 0 31 183 36
Goodwill, net
---------------------------------------------------------------------------
Total assets 4,700 1,078 3,300 1,171 1,905 1,538
===========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt 1,539 188 350 260 658
Accounts payable 675 181 1,998 413 696 241
Accrued expenses 1,009 89 96 68
Other current liabilities 254 24 173 275 332
Payable to shareholders of founding co.
---------------------------------------------------------------------------
Total current liabilities 3,477 482 1,998 1,032 1,299 1,231
Long-term debt, less current maturities 1,617 253 40 297 83
Other long term liabilities 258 122 241
---------------------------------------------------------------------------
Total liabilities 5,094 735 1,998 1,330 1,718 1,555
Stockholders' equity
Preferred Stock
Common Stock 5 25 1,989 1 15 249
Treasury stock (1,331) (148) (262)
Additional paid-in capital 69 2,459 5 74
Retained earnings 863 466 (3,146) (165) 360 (266)
---------------------------------------------------------------------------
Total stockholders' equity (394) 343 1,302 (159) 187 (17)
---------------------------------------------------------------------------
Total liabilities and stockholders' equity 4,700 1,078 3,300 1,171 1,905 1,538
===========================================================================
<CAPTION>
Nat'l 1 800 Battery
ASSETS MLQ Express Kangaroo Messenger Fleetfoot Fleetway Denver Point
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 36 5 77 40 47 4
Accounts receivable, net 817 381 435 295 218 151 143
Prepaid and other current assets 68 15 8 3 6 5
---------------------------------------------------------------------------------
Total current assets 921 401 520 338 218 204 152
Property and equipment, net 171 138 70 103 66 74 5
Other assets 100 9 61 456 41 42
Goodwill, net
---------------------------------------------------------------------------------
Total assets 1,192 548 590 502 740 319 199
=================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt 56 182 160 32
Accounts payable 44 28 12 490 29 5
Accrued expenses 202 127 57
Other current liabilities 429 82 129 24 23
Payable to shareholders of founding co.
---------------------------------------------------------------------------------
Total current liabilities 675 166 129 321 490 270 60
Long-term debt, less current maturities 73 383 149 23 30
Other long term liabilities 391 22
---------------------------------------------------------------------------------
Total liabilities 675 630 512 492 513 300 60
Stockholders' equity
Preferred Stock
Common Stock 2 50 320 125
Treasury stock (126)
Additional paid-in capital 18 109 33
Retained earnings 499 (191) 76 53 (93) (106) 139
---------------------------------------------------------------------------------
Total stockholders' equity 517 (82) 78 10 227 19 139
---------------------------------------------------------------------------------
Total liabilities and stockholders' equity 1,192 548 590 502 740 319 199
=================================================================================
<CAPTION>
Express Profall 1 800
ASSETS Messenger 1-800-CourLA Boston A&W Courier Deadline Zoom A Courier
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 42 3 133 16 88
Accounts receivable, net 165 176 104 217 145 1,377 902
Prepaid and other current assets 12 2 12 46 19 40 114
----------------------------------------------------------------------------------
Total current assets 177 220 119 396 164 1,433 1,104
Property and equipment, net 54 70 74 59 8 47 222
Other assets 99 78 2 4 415 63
Goodwill, net
----------------------------------------------------------------------------------
Total assets 330 290 271 457 176 1,895 1,389
==================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt 39 73 900 161
Accounts payable 44 24 85 86 71 498 82
Accrued expenses 59 70 23 43 157 180
Other current liabilities 39 561 228 67 186 0
Payable to shareholders of founding co.
----------------------------------------------------------------------------------
Total current liabilities 181 655 181 314 181 1,741 423
Long-term debt, less current maturities 33 2 26
Other long term liabilities 9 0
----------------------------------------------------------------------------------
Total liabilities 223 655 181 314 181 1,743 449
Stockholders' equity
Preferred Stock
Common Stock 1 10 1 3 1 19 2
Treasury stock
Additional paid-in capital 106 65 89 58
Retained earnings (440) 82 (6) 133 938
----------------------------------------------------------------------------------
Total stockholders' equity 107 (365) 90 143 (5) 152 940
----------------------------------------------------------------------------------
Total liabilities and stockholders' equity 330 290 271 457 176 1,895 1,389
==================================================================================
<CAPTION>
Other
S-Car-Go Delta Air & Road Founding
ASSETS Studebaker Zap Courier Transport Companies
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 1 12 102 18 295
Accounts receivable, net 79 154 254 6,441 1,047
Prepaid and other current assets 9 334 21
-------------------------------------------------------------
Total current assets 80 175 356 6,793 1,363
Property and equipment, net 28 43 30 1,082 330
Other assets 2 108 15 54
Goodwill, net
-------------------------------------------------------------
Total assets 110 326 401 7,875 1,747
=============================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt 14 13 73 322
Accounts payable 3 6 32 2,355 127
Accrued expenses 8 24 62 1,885 158
Other current liabilities 73 73 119 55
Payable to shareholders of founding co.
-------------------------------------------------------------
Total current liabilities 25 116 240 4,359 662
Long-term debt, less current maturities 52 123
Other long term liabilities 108 35
-------------------------------------------------------------
Total liabilities 25 168 240 4,467 820
Stockholders' equity
Preferred Stock
Common Stock 1 130 34
Treasury stock 0
Additional paid-in capital 162 161
Retained earnings 85 158 160 3,116 732
-------------------------------------------------------------
Total stockholders' equity 85 158 161 3,408 927
-------------------------------------------------------------
Total liabilities and stockholders' equity 110 326 401 7,875 1,747
=============================================================
<CAPTION>
Pro Forma
Merger Pro Forma Offering
ASSETS Adjustments Combined Adjustments As adjusted
----------------------------------------------
<S> <C> <C> <C> <C>
Current assets:
----------------------
Cash and cash equivalents (21,700) (18,527) 19,122 595
----------------------
Accounts receivable, net 29,604 29,604
----------------------
Prepaid and other current assets 5,949 (3,113) 2,836
----------------------------------------------
Total current assets (21,700) 17,026 16,009 33,035
-----------
-----------
Property and equipment, net 273 8,327 8,327
----------------------
Other assets 2,383 14,664 17,047
----------------------
Goodwill, net 89,569 89,845 89,845
-----------
----------------------------------------------
Total assets 68,142 117,581 30,673 148,254
==============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
----------------------
Short term debt 5,985 (1,050) 4,935
----------------------
Accounts payable 13,017 13,017
----------------------
Accrued expenses 7,312 (2,534) 4,778
-----------
Other current liabilities 300 6,385 6,385
-----------
Payable to shareholders of founding co. 45,168 45,168 (45,168) 0
----------------------------------------------
Total current liabilities 45,468 77,867 (48,752) 29,115
----------------------
Long-term debt, less current maturities (1,669) 3,780 0 3,780
----------------------
Other long term liabilities 0 1,861 1,861
----------------------
----------------------------------------------
-----------
Total liabilities 43,799 83,508 (48,752) 34,756
-----------
Stockholders' equity
-----------
Preferred Stock 2 (2)
-----------
Common Stock (3,270) 42 73 115
-----------
Treasury stock 1,867
----------------------
Additional paid-in capital 30,134 34,944 79,354 114,298
----------------------
Retained earnings (4,388) (915) (915)
----------------------------------------------
Total stockholders' equity 24,343 34,073 79,425 113,498
----------------------------------------------
Total liabilities and stockholders' equity 68,142 117,581 30,673 148,254
==============================================
</TABLE>
<PAGE>
Dispatch Management Services Corp.
Combining Statement Of Operations
For the Nine Months Ended September 30, 1997
(Unaudited)
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
DMS West One Aero
------------------------------------------
<S> <C> <C> <C>
Revenues 220 20,491 9,318
Cost of revenues 13,466 5,624
------------------------------------------
Gross profit 220 7,025 3,694
Operating expenses:
Sales and marketing 0 82 714
General and administrative expenses 324 1,664 1,416
Other operating expenses 0 3,523 1,824
Depreciation and amortization 4 333 131
------------------------------------------
Operating income (loss) (108) 1,423 (391)
Other (income) expense:
Interest expense (income) 4 291 46
Other, net 0 61 (4)
------------------------------------------
Income (loss) before provision for income taxes (112) 1,071 (433)
Provision for income taxes 322
------------------------------------------
Net income (loss) (112) 749 (433)
==========================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
<CAPTION>
Security American Eagle
EarlyBird Bullit Despatch Endeavors Atlantic Frt
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 10,995 6,612 7,366 5,222 6,760
Cost of revenues 6,264 3,851 4,350 3,447 4,791
-----------------------------------------------------------------------
Gross profit 4,731 2,761 3,016 1,775 1,969
Operating expenses:
Sales and marketing 280 274 128 1,008 108
General and administrative expenses 102 432 352 1,081 282
Other operating expenses 2,255 1,710 1,526 1,557
Depreciation and amortization 96 5 61 130 219
-----------------------------------------------------------------------
Operating income (loss) 1,998 340 949 (444) (197)
Other (income) expense:
Interest expense (income) 355 76 29 51 50
Other, net (78) (48)
-----------------------------------------------------------------------
Income (loss) before provision for income taxes 1,643 264 920 (417) (199)
Provision for income taxes 70 99 266 (167) (149)
-----------------------------------------------------------------------
Net income (loss) 1,573 165 654 (250) (50)
=======================================================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
<CAPTION>
Washington Exp MLQ Express Kangaroo Nat'l Messenger Fleetfoot
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 4,341 4,617 2,140 2,082 1,842
Cost of revenues 2,302 2,752 1,520 1,203 1,177
-----------------------------------------------------------------------
Gross profit 2,039 1,865 620 879 665
Operating expenses:
Sales and marketing 386 190 15 82 17
General and administrative expenses 316 1,396 231 353 224
Other operating expenses 1,216 350 123 287
Depreciation and amortization 83 54 39 15 44
-----------------------------------------------------------------------
Operating income (loss) 38 225 (15) 306 93
Other (income) expense:
Interest expense (income) 70 (36) 6 39
Other, net (16) (4) (31)
-----------------------------------------------------------------------
Income (loss) before provision for income taxes (16) 261 (17) 306 85
Provision for income taxes (7) 5 35
-----------------------------------------------------------------------
Net income (loss) (9) 261 (17) 301 50
=======================================================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
<CAPTION>
Express Profall
Fleetway 1800Denver Battery Point Messenger 1-800-CourLA
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 922 904 657 1,447 1,235
Cost of revenues 418 546 334 867 606
-----------------------------------------------------------------------
Gross profit 504 358 323 580 629
Operating expenses:
Sales and marketing 29 45 19 4
General and administrative expenses 96 49 22 276 416
Other operating expenses 249 359 100 217 208
Depreciation and amortization 72 31 11 19 20
-----------------------------------------------------------------------
Operating income (loss) 58 (126) 171 64 (15)
Other (income) expense:
Interest expense (income) 16 16 2 12 19
Other, net (3) (17) (40)
-----------------------------------------------------------------------
Income (loss) before provision for income taxes 45 (125) 169 52 6
Provision for income taxes
-----------------------------------------------------------------------
Net income (loss) 45 (125) 169 52 6
=======================================================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
<CAPTION>
A&W
1 800 Boston Couriers Deadline Zoom A Courier
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 1,071 1,270 962 6,524 5,367
Cost of revenues 666 770 663 4,964 3,091
-----------------------------------------------------------------------
Gross profit 405 500 299 1,560 2,276
Operating expenses:
Sales and marketing 27 72 121 194 531
General and administrative expenses 84 198 121 592 422
Other operating expenses 178 184 133 951 1,016
Depreciation and amortization 35 11 142 48
-----------------------------------------------------------------------
Operating income (loss) 81 35 (76) (319) 259
Other (income) expense:
Interest expense (income) 7 (3) 73 11
Other, net 1 (72) (17) 11
---------------------------
-----------------------------------------------------------------------
Income (loss) before provision for income taxes 73 38 (4) (375) 237
Provision for income taxes 8 90
-----------------------------------------------------------------------
Net income (loss) 73 30 (4) (375) 147
=======================================================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
<CAPTION>
Other
S-Car-Go Delta Air & Road Founding
Studebaker Zap Courier Transport Companies
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 309 593 1,251 24,736 7,282
Cost of revenues 179 299 710 15,322 4,457
-----------------------------------------------------------------------
Gross profit 130 294 541 9,414 2,825
Operating expenses:
Sales and marketing 15 55 95 252 183
General and administrative expenses 32 31 185 2,620 781
Other operating expenses 30 84 126 4,726 1,284
Depreciation and amortization 9 10 11 244 117
-----------------------------------------------------------------------
Operating income (loss) 44 114 124 1,572 460
Other (income) expense:
Interest expense (income) 1 5 5 51
Other, net (2) (2) 106
-----------------------------------------------------------------------
Income (loss) before provision for income taxes 43 111 119 1,574 303
Provision for income taxes 52 479 11
-----------------------------------------------------------------------
Net income (loss) 43 111 67 1,095 292
=======================================================================
Net income per share
Shares used in computing pro forma net income per share (See Note 5)
</TABLE>
Pro Forma Pro Forma
Adjustments Combined
---------------------------
Revenues 136,536
Cost of revenues 84,639
---------------------------
Gross profit 51,897
Operating expenses:
Sales and marketing 4,926
General and administrative expenses (1,496) 12,602
Other operating expenses 24,216
Depreciation and amortization 1,900 3,894
---------------------------
Operating income (loss) (404) 6,259
Other (income) expense:
Interest expense (income) 1,196
Other, net (155)
---------------------------
Income (loss) before provision for income taxes (404) 5,218
Provision for income taxes 1,464 2,578
------------- ------------
Net income (loss) (1,868) 2,640
===========================
Net income per share $ 0.23
============
Shares used in computing pro forma net income
per share (See Note 5) 11,462,526
============
<PAGE>
Dispatch Management Services Corp.
Combining Statement of Operations
For the Year Ended December 31, 1996
(Unaudited)
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
West Security
One Aero Early Bird Bullit Despatch
-----------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 24,148 10,998 22,894 7,696 9,440
Cost of Revenues 16,029 6,333 15,860 4,639 7,146
-----------------------------------------
Gross profit 8,119 4,665 7,034 3,057 2,294
Operating expenses:
Sales and marketing 1,119 900 1,072 358
General and administrative expenses 2,112 902 670 642 998
Other operating expenses 2,838 2,853 5,436 2,116
Depreciation and amortization 298 119 195 6
-----------------------------------------
Operating income (loss) 1,752 (109) (339) (65) 1,296
Other (income) expense:
Interest expense 369 56 219 107 21
Other, net (2) 34 85 (56)
-----------------------------------------
Income (loss) before provision for income taxes 1,385 (199) (643) (116) 1,275
Provision for income taxes 360 0 2 (33) 382
-----------------------------------------
Net income (loss) 1,025 (199) (645) (83) 893
=========================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
American
Eagle Atlantic Washington MLQ Nat'l 1 800
Endeavors Freight Express Express Kangaroo Messenger Fleetfoot Fleetway Denver
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues 8,536 8,728 5,800 5,310 2,650 2,413 2,172 1,048 1,247
Cost of Revenues 5,293 5,941 3,164 3,296 1,878 1,446 1,332 558 764
--------------------------------------------------------------------------------------
Gross profit 3,243 2,787 2,636 2,014 772 967 840 490 483
Operating expenses:
Sales and marketing 1,535 105 483 233 27 86 368 58
General and administrative expenses 940 693 390 991 265 454 24 572 58
Other operating expenses 2,232 1,532 579 405 154 250 298
Depreciation and amortization 174 270 91 94 50 13 66 36
--------------------------------------------------------------------------------------
Operating income (loss) 594 (513) 140 117 25 260 132 (82) 33
Other (income) expense:
Interest expense 62 83 70 43 10 57 22 19
Other, net 33 36 (18) (38) (2) (34) 4
--------------------------------------------------------------------------------------
Income (loss) before provision for income taxes 499 (632) 88 112 17 260 109 (104) 10
Provision for income taxes 200 (123) 38 32 5 (54)
--------------------------------------------------------------------------------------
Net income (loss) 299 (509) 50 80 17 255 163 (104) 10
======================================================================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
Battery Express Profall 800 A&W
Point Messenger 1-800-CourLA1 Boston Couriers Deadline Zoom A Courier
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues 732 1,612 1,212 1,343 1,560 1,177 8,404 6,020
Cost of Revenues 397 986 687 897 940 753 6,314 3,447
------------------------------------------------------------------------------
Gross profit 335 626 525 446 620 424 2,090 2,573
Operating expenses:
Sales and marketing 24 16 27 102 143 173 530
General and administrative expenses 31 277 298 169 289 144 747 430
Other operating expenses 113 246 271 231 228 143 1,317 1,093
Depreciation and amortization 10 47 23 44 10 191 74
------------------------------------------------------------------------------
Operating income (loss) 157 40 (67) (25) (9) (6) (338) 446
Other (income) expense:
Interest expense 16 25 16 2 63 13
Other, net 3 (64) 22 (4) (5) (30) (27)
------------------------------------------------------------------------------
Income (loss) before provision for income taxes 154 24 (28) (63) (7) (1) (371) 460
Provision for income taxes 4 174
------------------------------------------------------------------------------
Net income (loss) 154 24 (28) (63) (11) (1) (371) 286
==============================================================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
Delta Air Other
S-Car-Go & Road Founding Pro Forma Pro Forma
Studebaker Zap Courier Transport Companies Adjustments Combined
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 342 941 1,263 29,021 8,719 (9,705) 165,721
Cost of Revenues 202 653 801 18,079 5,213 (8,448) 104,600
-------------------------------------------------------------------------
Gross profit 140 288 462 10,942 3,506 (1,257) 61,121
Operating expenses:
Sales and marketing 13 63 87 451 240 (769) 7,444
General and administrative expenses 13 39 206 2,944 1,406 (1,982) 14,722
Other operating expenses 31 42 140 5,468 1,472 (2,251) 27,237
Depreciation and amortization 14 3 15 367 173 2,473 4,856
-------------------------------------------------------------------------
Operating income (loss) 69 141 14 1,712 215 1,272 6,862
Other (income) expense:
Interest expense 1 3 2 38 52 1,369
Other, net (7) 92 22
-------------------------------------------------------------------------
Income (loss) before provision for income taxes 68 138 12 1,681 71 1,272 5,471
Provision for income taxes 7 543 0 1,356 2,893
-------------------------------------------------------------------------
Net income (loss) 68 138 5 1,138 71 (84) 2,578
=========================================================================
Net income per share $ 0.22
============
Shares used in computing pro forma net income
per share (See Note 5) 11,462,526
============
</TABLE>
<PAGE>
Dispatch Management Services Corp.
Combining Statement of Operations
For the Nine Months Ended September 30, 1996
(Unaudited)
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
West One Aero EarlyBird
-----------------------------------
<S> <C> <C> <C>
Revenues 18,838 8,245 16,724
Cost of revenues 12,579 4,730 11,565
-----------------------------------
Gross profit 6,259 3,515 5,159
Operating expenses:
Sales and marketing 78 676 703
General and administrative expenses 1,734 1,129 388
Other operating expenses 2,853 1,681 4,017
Depreciation and amortization 222 80 176
-----------------------------------
Operating income (loss) 1,372 (51) (125)
Other (income) expense:
Interest expense 262 41 208
Other, net 18 24 64
-----------------------------------
Income (loss) before provision for income taxes 1,092 (116) (397)
Provision for income taxes 282 2
-----------------------------------
Net income (loss) 810 (116) (399)
===================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
American
Security Eagle Atlantic Washington MLQ
Bullit Despatch Endeavors Freight Express Exprsss Kangaroo
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 5,879 6,776 6,476 6,192 4,372 3,621 2,001
Cost of revenues 3,466 3,856 4,058 4,465 2,368 2,201 1,398
----------------------------------------------------------------------------------
Gross profit 2,413 2,920 2,418 1,727 2,004 1,420 603
Operating expenses:
Sales and marketing 230 152 1,149 73 359 152 21
General and administrative expenses 401 370 600 393 300 1,171 192
Other operating expenses 1,613 1,341 1,379 1,160 296
Depreciation and amortization 5 62 130 201 53 65 26
----------------------------------------------------------------------------------
Operating income (loss) 164 995 539 (319) 132 32 68
Other (income) expense:
Interest expense 72 27 49 29 44 (14) 7
Other, net 8 16 (13) (2)
----------------------------------------------------------------------------------
Income (loss) before provision for income taxes 92 968 482 (364) 101 46 63
Provision for income taxes 47 274 197 (57) 43
----------------------------------------------------------------------------------
Net income (loss) 45 694 285 (307) 58 46 63
==================================================================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
Nat'l Battery Express Profall
Messenger Fleetfoot Fleetway 1-800Denver Point Messenger 1-800-CourLA
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 1,801 1,565 867 969 532 1,222 850
Cost of revenues 1,116 852 360 567 279 729 489
-----------------------------------------------------------------------------------
Gross profit 685 713 507 402 253 493 361
Operating expenses:
Sales and marketing 68 17 34 42 10 17
General and administrative expenses 329 192 59 41 17 216 232
Other operating expenses 124 354 277 202 81 182 166
Depreciation and amortization 10 48 69 28 7 35 16
-----------------------------------------------------------------------------------
Operating income (loss) 154 102 68 89 138 43 (53)
Other (income) expense:
Interest expense 44 6 15 2 12 19
Other, net (18) 3 (51)
-----------------------------------------------------------------------------------
Income (loss) before provision for income taxes 154 76 62 71 136 31 (21)
Provision for income taxes 3 (61)
-----------------------------------------------------------------------------------
Net income (loss) 151 137 62 71 136 31 (21)
===================================================================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
A&W
1 800 Boston Couriers Deadline Zoom A Courier Studebaker Zap
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 1,023 1,171 824 6,318 4,380 244 448
Cost of revenues 678 683 536 4,954 2,481 140 243
----------------------------------------------------------------------------------
Gross profit 345 488 288 1,364 1,899 104 205
Operating expenses:
Sales and marketing 6 76 103 70 305 10 49
General and administrative expenses 109 222 103 563 292 18 20
Other operating expenses 202 172 103 798 776 25 64
Depreciation and amortization 36 8 178 52 6 3
----------------------------------------------------------------------------------
Operating income (loss) (8) 10 (21) (245) 474 45 69
Other (income) expense:
Interest expense 13 (3) 34 8 1 3
Other, net 1 (3) (28) (20)
----------------------------------------------------------------------------------
Income (loss) before provision for income taxes (22) 13 (18) (251) 486 44 66
Provision for income taxes 2 185
----------------------------------------------------------------------------------
Net income (loss) (22) 11 (18) (251) 301 44 66
==================================================================================
Net income per share
Shares used in computing pro forma net income
per share (See Note 5)
<CAPTION>
Delta Air Other
S-Car-Go & Road Founding Pro Forma Pro Forma
Courier Transport Companies Adjustments Combined
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 921 21,972 6,535 (6,879) 123,887
Cost of revenues 536 13,653 3,915 (5,941) 76,956
--------------------------------------------------------------
Gross profit 385 8,319 2,620 (938) 46,931
Operating expenses:
Sales and marketing 75 484 129 (480) 4,608
General and administrative expenses 158 2,152 625 (792) 11,234
Other operating expenses 102 3,996 1,250 (1,789) 21,425
Depreciation and amortization 11 275 134 1,828 3,764
--------------------------------------------------------------
Operating income (loss) 39 1,412 482 295 5,900
Other (income) expense:
Interest expense 1 26 906
Other, net (5) 142 136
--------------------------------------------------------------
Income (loss) before provision for income taxes 38 1,417 314 295 4,858
Provision for income taxes 18 449 13 1,055 2,452
--------------------------------------------------------------
Net income (loss) 20 968 301 (760) 2,406
===============================================================
Net income per share $ 0.21
============
Shares used in computing pro forma net income
per share (See Note 5) 11,462,526
============
</TABLE>
<PAGE>
DISPATCH MANAGEMENT SERVICES CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Note 1--General
Dispatch Management Services Corp. (the "Company") was recently formed to
create one of the largest providers of urgent, on-demand, point-to-point
delivery services in the world. The Company has conducted no operations other
than in connection with the Offering, and the Combinations and acquired the
Founding Companies concurrently with and as a condition to the closing of the
Offering.
The historical financial statements reflect the financial position and
results of operations of the Company, the Founding Companies and Delta and were
derived from the respective Founding Companies' and Delta's financial statements
where indicated. Information presented for the year ended December 31, 1996
reflects the operating results of the Founding Companies and Delta for such
period except that Bullit Courier Services, West One, Security Despatch, MLQ
Express, Washington Express, National Messenger , Fleetway and Delta operating
results are for the years ended February 28, 1997, September 30, 1996, March 31,
1997, February 28, 1997, September 30, 1996, November 30, 1996, March 31, 1997
and March 31, 1997, respectively. Information presented for the nine months
ended September 30, 1996 and 1997 reflects the operating results of the Founding
Companies and Delta for such period except that West One and Washington Express
operating results are for the nine months ended June 30, 1996 and 1997,
Fleetfoot operating results are for the nine months ended August 31, 1996 and
1997, and Delta operating results are for the nine months ended December 31,
1996 and 1997, respectively. The audited historical financial statements
included elsewhere herein have been included in accordance with Securities and
Exchange Commission Staff Accounting Bulletin No. 80.
Note 2--Acquistion of Founding Companies and Delta
Concurrently and as a condition with the closing of the Offering, the
Company acquired the Founding Companies in separate transactions, in exchange
for cash or shares of its Common Stock or a combination of both. The
acquisitions were accounted for using the purchase method of accounting with the
Company being identified as the accounting acquiror. The Company acquired the
outstanding stock of Delta on April 7, 1998, which was accounted for using the
purchase method of accounting.
The following table sets forth the consideration paid (the "Purchase
Consideration") in cash and in shares of Common Stock to the common stockholders
of each of the Founding Companies and Delta, the allocation of the consideration
to net assets acquired and the resulting goodwill. For purposes of computing the
estimated purchase price for accounting purposes, the value of shares is
determined using an estimated fair value of $9.94 per share, which represents a
discount of 25 percent from the assumed initial public offering price of $13.25
per share due to restrictions on the sale and transferability of the shares
issued. The total purchase consideration does not reflect contingent
consideration related to certain earn out provisions included in the definitive
agreements. These arrangements provide for the Company to pay additional
consideration, based on revenues and operating income targets, of up to $14.7
million in cash, over the eight quarters immediately following the closing of
the Offering. When these amounts are earned they will be recorded as additional
costs of the acquired companies resulting in additional goodwill.
The purchase price has been allocated to the Company's historical assets
and liabilities based on their respective carrying values, with the exception of
acquired in process research and development (R&D) activities and acquired
internally developed technology, as these carrying values are deemed to
represent the fair market value of these assets and liabilities. The fair market
value of the in process R&D and internally developed technology was determined
based on a detailed analysis prepared by the Company. The Company has not
allocated any of the purchase price to other identified intangible assets such
as non-compete agreements and customer lists, as these assets are deemed to have
nominal value and are not considered material. With respect to the customer
lists, the Company has determined that virtually all of the Founding Companies
and Delta operate on an "at will" basis with their customers, and consequently
no value has been allocated to this asset. Additionally, the Company has entered
into non-compete agreements, with Founding Company shareholders, who have also
entered into employment or Brand Manager agreements, as such, management
believes the non-compete agreements have nominal value. Accordingly, the Company
has not allocated a portion of the purchase price to the non-compete agreements.
<PAGE>
Dispatch Management Services Corp.
Notes to the Unaudited Pro Forma Financial Statements (Continued)
(In Thousands, Except Share Amounts)
NOTE 2--Acquisition of Founding Companies and Delta (Continued)
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
---------------------------------
FAIR MARKET
VALUE OF ADJUSTED ALLOCATION OF
FOUNDING COMPANY SHARES STOCK CASH TOTAL NET ASSETS PURCHASE PRICE GOODWILL
- -------------------------- ---------- ----------- --------- --------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
West One.................. 183,481 $ 1,858 $ 16,672 $ 18,530 $ 2,952 $ 15,578
Aero Special Delivery
Service, Inc............ 270,000 2,734 942 3,676 (2,391) 6,067
Earlybird Courier Service,
LLC..................... 344,370 3,487 9,373 12,860 984 11,876
Bullit Services Inc....... 222,222 2,250 3,722 5,972 343 5,629
Security Despatch
Limited................. 6,918 6,918 1,302 5,616
American Eagle Endeavors,
Inc..................... 315,852 3,198 3,198 (159) 3,357
Atlantic Freight Systems,
Inc..................... 311,111 3,150 3,150 187 2,963
Washington Express
Services, Inc........... 206,815 2,094 2,094 (17) 2,111
MLQ Express, Inc.......... 4,652 4,652 517 4,135
Kangaroo Express.......... 79,926 809 809 (82) 891
National Messenger,
Inc..................... 89,652 908 245 1,153 78 1,075
Fleetfoot Max, Inc........ 94,756 959 959 10 949
Fleetway.................. 149,333 1,512 842 2,354 227 $ 700(a) 687
740(b)
1-800Denver............... 57,333 581 581 19 562
Battery Point............. 31,681 321 321 92 229
Detroit Express........... 55,556 563 563 107 456
1-800Courier LAX.......... 33,333 338 129 467 (365) 832
Expressit Couriers,
Inc..................... 47,111 477 477 90 387
A&W Couriers, Inc......... 55,896 566 566 143 423
Deadline Courier.......... 68,370 692 692 (5) 697
Zoom Courier.............. 148,148 1,500 1,500 152 1,348
A Courier................. 142,222 1,440 1,237 2,677 940 1,737
Michael Studebaker, Sole
Prop.................... 13,326 135 23 158 55 103
Chris Neil, Sole Prop
Zap..................... 35,000 354 354 59 295
S-Car-Go Courier, Inc..... 47,289 479 2 481 161 320
Other Founding
Companies............... 313,291 3,170 411 3,581 927 2,654
Delta 21,700 21,700 3,408 18,292
---------- ----------- --------- --------- ----------- ------ ---------
3,316,074 $ 33,575 $ 66,868 $ 100,443 $ 9,734 $ 1,440 $ 89,269
---------- ----------- --------- --------- ----------- ------ ---------
---------- ----------- --------- --------- ----------- ------ ---------
</TABLE>
a) Represents amount allocated to in process research and development
activities.
(b) Represents amount allocated to acquired internally developed technology.
<PAGE>
Dispatch Management Services Corp.
Notes to Unaudited Pro Forma Combined Financial Statements (Continued)
(In Thousands, Except Share Amounts)
Note 3--Unaudited Pro Forma Combined Balance Sheet Adjustements
The following table summarizes unaudited pro forma combined balance sheet
adjustments:
<TABLE>
<CAPTION>
Merger Offering Post
Adjust Pro Forma Adjust Merger
ments Adjust ments Adjust
ASSETS ( A ) ( B ) ( C ) ( D ) ments ( E ) ( F ) ( G ) ments
------ ------ ----- ----- --------- -------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents (21,700) (21,700) 80,004 (59,832) (1,050) 19,122
Accounts receivable, net --
Prepaid and other current assets -- (3,113) (3,113)
------ ------ --- --- ------ ------ ------ ----- ------
Total current assets (21,700) (21,700) 76,891 (59,832) (1,050) 16,009
Property and equipment, net 273 273
Other assets 700 (700) -- 14,664 14,664
Goodwill, net 89,269 300 89,569
------ ------ --- --- ------ ------ ------ ----- ------
Total assets 68,542 (700) 300 68,142 76,891 (45,168) (1,050) 30,673
====== ====== === === ====== ====== ====== ===== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt -- (1,050) (1,050)
Accounts payable --
Accrued expenses -- (2,534) (2,534)
Other current liabilities 300 300
Payable to shareholders of founding co. 45,168 45,168 (45,168) (45,168)
------ ------ --- --- ------ ------ ------ ----- ------
Total current liabilities 45,168 -- 300 45,468 (2,534) (45,168) (1,050) (48,752)
Long-term debt, less current maturities (1,669) (1,669) --
Other long term liabilities -- --
------ ------ --- --- ------ ------ ------ ----- ------
Total liabilities 45,168 (1,669) 300 43,799 (2,534) (45,168) (1,050) (48,752)
Stockholders' equity
Preferred Stock -- -- (2) (2)
Common Stock (3,270) (3,270) 73 73
Treasury stock 1,867 1,867
Additional paid-in capital (45,168) 75,302 30,134 79,354 79,354
Retained earnings (3,688) (700) (4,388) --
------ ------ --- --- ------ ------ ------ ----- ------
Total stockholders' equity (45,168) 70,211 (700) -- 24,343 79,425 -- -- 79,425
Total liabilities and
stockholders' equity 68,542 (700) 300 68,142 76,891 (45,168) (1,050) 30,673
====== ====== === === ====== ====== ====== ===== ======
</TABLE>
<PAGE>
Dispatch Management Services Corp.
Notes to Unaudited Pro Forma Combined Financial Statements (Continued)
(In Thousands, Except Share Amounts)
Note 3--Unaudited Pro Forma Combined Balance Sheet Adjustements (Continued)
(A) Records the liability for the cash portion of the consideration to be paid
to the stockholders of the Founding Companies in connection with the
Combinations.
(B) Records the purchase of the Founding Companies and Delta, consisting of
$66,868 (net of $14,664 of earnout) in cash and 3,316,074 shares of common stock
valued at $9.94 per share (or $33,575), for a total purchase price of $100,443.
Adjustment also reflects $467 of certain assets which will not be acquired and
$1,669 of certain liabilities which will not be assumed in the Combinations and
the allocation of $700 of the purchase price to acquired research and
development activities (in-process research and development) and $740 of
acquired internally developed software at a Founding Company. The excess
purchase price over the fair value of the net assets acquired is $89,269.
(C) Records the write-off of the acquired in-process research and development
from a Founding Company.
(D) Records the net deferred income tax liability attributable to the temporary
differences between the financial reporting and tax basis of assets and
liabilities held in S Corporations of $300 at certain Founding Companies.
(E) Records the cash proceeds from the issuance of shares of DMS Common Stock
net of estimated offering costs (based on assumed initial public offering of
$13.25 per share) including the underwriters exercise of the overallotment
option during March 1998. Offering costs primarily consist of underwriting
discounts and commissions, accounting fees, legal fees and printing expenses.
(F) Records the cash portion of the consideration paid to the stockholders of
the Founding Companies and Delta in connection with the Combinations ($81,532)
to be paid from proceeds of the Offering and the loan receivable of $14,664
related to earnout.
(G) Records the use of a portion of the proceeds from the Offering to
repaycertain indebtedness of the Company.
Note 4--Unaudied Pro Forma Combined Statements of Operations Adjustements
The following table summarizes unaudited pro forma combined statements of
operations adjustments:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
For the year ended December 31, 1996:
- ---------------------------------------------------------------------------------------------------
Total
Pro Forma
( A ) ( B ) ( C ) ( D ) ( E ) Adjustments
<S> <C> <C> <C> <C> <C> <C>
Revenues (9,705) (9,705)
Cost of Revenues (8,448) (8,448)
----- --- ----- ----- ----- -----
Gross profits (1,257) (1,257)
Operating expenses:
Sales and marketing (769) (769)
General and administrative expenses (1,783) (319) 120 (1,982)
Other operating expenses (2,251) (2,251)
Depreciation and amortization 2,531 (58) 2,473
----- --- ----- ----- ----- -----
Operating income (loss) 1,783 319 (2,531) 1,701 1,272
Other (income) expense:
Interest expense
Other, net
Income (loss) before provision for
----- --- ----- ----- ----- -----
income taxes 1,783 319 (2,531) 1,701 1,272
Provision for income taxes -- 1,356 1,356
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
----- --- ----- ----- ----- -----
Net income (loss) 1,783 319 (2,531) 1,701 (1,356) (84)
===== === ===== ===== ===== =====
<CAPTION>
For the nine months ended September 30, 1997:
Total
Pro Forma
( A ) ( B ) ( C ) ( D ) ( E ) Adjustments
<S> <C> <C> <C> <C> <C> <C>
Revenues
Cost of revenues
Gross profit
Operating expenses:
Sales and marketing
General and administrative expenses (875) (621) (1,496)
Other operating expenses
Depreciation and amortization 1,900 1,900
----- --- ----- ----- ----- -----
Operating income (loss) 875 621 (1,900) (404)
Other (income) expense:
Interest expense
Other, net
Income (loss) before provision for
----- --- ----- ----- ----- -----
income taxes 875 621 (1,900) (404)
Provision for income taxes 1,464 1,464
----- --- ----- ----- ----- -----
Net income (loss) 875 621 (1,900) (1,464) (1,868)
===== === ===== ===== ===== =====
<CAPTION>
For the nine months ended September 30, 1996:
Total
Pro Forma
( A ) ( B ) ( C ) ( D ) ( E ) Adjustments
<S> <C> <C> <C> <C> <C> <C>
Revenues (6,879) (6,879)
Cost of revenues (5,941) (5,941)
----- --- ----- ----- ----- -----
Gross profit (938) (938)
Operating expenses:
Sales and marketing (480) (480)
General and administrative expenses (600) (67) (125) (792)
Other operating expenses (1,789) (1,789)
Depreciation and amortization 1,900 (72) 1,828
----- --- ----- ----- ----- -----
Operating income (loss) 600 67 (1,900) 1,528 295
Other (income) expense:
Interest expense
Other, net
Income (loss) before provision for
----- --- ----- ----- ----- -----
income taxes 600 67 (1,900) 1,528 295
Provision for income taxes 1,037 1,037
----- --- ----- ----- ----- -----
Net income (loss) 600 67 (1,900) 1,528 (1,037) (742)
===== === ===== ===== ===== =====
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(A) Reflects the reductions in salaries, bonuses and benefits to the owners of
the Founding Companies to which they have agreed prospectively.
(B) Reflects the reduction in royalty payments made by certain Founding
Companies in accordance with franchise agreements which will be terminated as a
result of the Combinations.
(C) Reflects the amortization of goodwill to be recorded as a result of the
Combinations and the acquisition of Delta over 5 to 40-year estimated lives. The
average amortization period is 33.9 years. The estimated lives were determined
based on an analysis of the individual Founding Companies and Delta, which
included the following factors (a) the length of time the company has been in
business (b) comparable companies within the same industry and (c) the
technology of the company.
(D) Reflects the disposal of a segment of a business at one Founding Company.
Approximately 80% of the segment was disposed of on September 30, 1997 and
management has a formal plan to dispose of the remaining portion of the segment
prior to the close of the Combinations.
(E) Reflects the incremental provision for federal and state income taxes
assuming all entities were subject to federal and state income tax and relating
to the other statements of operations' adjustments assuming a corporate income
tax rate of 38% and that a majority of the goodwill is non-deductible.
Note 5--Unaudited Pro Froma Combined Statements of Operations Adjustements
(Continued)
Includes (i) 1,246,452 shares issued to existing shareholders of the
Company, (ii) 3,316,074 shares issued to the owners of the Founding Companies,
and (iii) 6,900,000 shares sold in the Offering.
