Exhibit 2.58
AGREEMENT
This Agreement (the "Agreement") is entered into as of the 31st day of
October, 1997, by and among Dispatch Management Services Corp., a Delaware
corporation and successor in interest to Dispatch Management Services LLC by
merger (the "Company"), Pacific Freight Systems, Inc., a New York corporation
(the "Corporation"), and Xxxxxx X. Xxxxxxx and Xxxxx Xxxxxxxxxx, the
shareholders of the Corporation (collectively, the "Shareholders"). Unless
defined herein, all capitalized terms used in this Agreement shall have the
meaning given them in the Operating Agreement of Dispatch Management Services
LLC dated December 1, 1996 by and between the Members of Dispatch Management
Services LLC, as amended (the "Operating Agreement").
W I T N E S S E T H
WHEREAS, the Shareholders own all of the issued and outstanding shares of
capital stock of the Corporation (the "Stock");
WHEREAS, subject to the conduct of the due diligence examination to begin
following the execution of this Agreement, and further subject to the terms and
conditions set forth herein, the Shareholders desire to sell all of their
respective right, title and interest in the Stock to the Company, and the
Company desires to purchase the Stock;
WHEREAS, upon the satisfactory completion of the due diligence examination,
the delivery of the financial statements, schedules, disclosure documents,
questionnaires and other information required by this Agreement, and approval of
the same by the Company, the parties hereto will close in escrow pursuant to the
terms and conditions set forth herein;
WHEREAS, upon satisfaction of the conditions set forth herein, the escrow
will be terminated, and the sale of the Stock will be consummated;
WHEREAS, the parties intend that, immediately following the execution of
this Agreement, the Company will enter into non-competition agreements with the
Shareholders and non-competition agreements with certain employees of the
Corporation in the form attached hereto as Exhibit A (such non-competition
agreements, together with all other agreements which are entered into by the
parties hereto pursuant to this Agreement or in connection with any of the
transactions contemplated hereby, the "Related Agreements"); and
WHEREAS, simultaneously with the execution of this Agreement, the Company
and the Shareholders intend to enter into agreements (the "Atlantic and
Westchester Acquisition Agreements") pursuant to which the Company will acquire
from the Shareholders all of the outstanding shares of capital stock of Atlantic
Freight Systems, Inc. ("Atlantic") and Westchester Freight Systems, Inc.
("Westchester"); and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the representations,
warranties, covenants and agreements herein contained, and for the sum of $10.00
paid by the Company to the Shareholders, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Closing in Escrow
1.1. Overview. Upon execution of this Agreement, the Shareholders and
the Corporation shall be obliged to deliver to the Company, within thirty (30)
days after execution of this Agreement: (i) the audited and unaudited financial
statements required pursuant to Section 1.3 below and (ii) the agreements
required pursuant to Section 3.1 below.
After approval of the same by the Company, and prior to filing the
registration statement with the Securities and Exchange Commission relating to
the initial public offering of the common stock, par value $.01 per share, of
the Company (the "Initial Public Offering"), the Company will deliver to the
Shareholders a disclosure document, together with a notice (the "Notice")
specifying the date (which shall be at least five days after receipt of the
Notice) by which the Shareholders must execute and deliver satisfactory
shareholder representation letters in order to consummate the sale of the Stock
pursuant to the terms of this Agreement. The Shareholders shall (i) purchase
the assets of the Corporation (at then current book value) listed in Exhibit A-1
hereto and (ii) assume the liabilities of the Corporation listed on Exhibit A-1
immediately as of prior to the Closing Date. If, prior to the Closing Date, the
Shareholders do not pay cash to the Corporation for the aggregate book value of
such assets then the amount of the Purchase Price (as defined below) shall be
reduced by such aggregate book value. Prior to the Closing, the Shareholders
shall cause certain employees of the Corporation to be terminated from
employment by the Corporation. If,
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prior to the Closing Date (as defined in Section 1.4 below): (i) the
Shareholders do not purchase the (unwanted) assets specified by the Company in
Exhibit A-1, then such assets will be acquired by the Company without any
adjustment to the Purchase Price (as defined in Section 1.3 below); (ii) the
Shareholders do not assume the (unwanted) liabilities specified by the Company
in Exhibit A-1, then the Company will reduce the cash portion of the purchase
price by the dollar amount of any such liabilities (including early repayment
costs, if any) of the Corporation existing as at the Closing Date; (iii) the
Corporation has not terminated the employment of the (unwanted) employees
specified by the Company in the Notice, then the Company will make a reasonable
estimate of the costs and expenses to be incurred in connection with such
terminations of employment, and the Company will reduce the cash portion of the
purchase price by the amount of such reasonable estimate; and (iv) in the event
that prior to the Closing Date the Corporation terminates its cross dock
business, the lessors of property leased by the Corporation for use in such
business under leases listed in Exhibit A-2 have not consented in writing to
such action as the Company agrees in writing shall relieve the Corporation and
its successors of all liability under such leases after the Closing Date, the
Company shall reduce the cash portion of the Purchase Price by the amount of all
liability of the Corporation and its successors under such leases after the
Closing Date.
Upon timely delivery from all of the Shareholders of shareholder
representation letters relating to this Agreement and the Atlantic and
Westchester Acquisition Agreements satisfactory to the Company, the parties will
close in escrow (the "Closing in Escrow") pursuant to the terms and conditions
of this Agreement. Such Closing in Escrow shall take place at the offices of
Silver, Xxxxxxxx & Taff, L.L.P., 0000 Xxx Xxxx Xxxxxx, X.X., 0xx Xxxxx,
Xxxxxxxxxx, X.X. 00000 (or such other place as is mutually agreed upon by the
parties) within thirty (30) days (or such shorter period as is specified in the
Notice) after timely delivery of such satisfactory shareholder representation
letters from the Shareholders.
In the event that one or more of the Shareholders do not timely
deliver such satisfactory shareholder representation letters (as determined in
the sole discretion of the Company), this Agreement will be of no further force
or effect, except for any and all obligations under Sections 3.2
(confidentiality), 1.3 (reimbursement of audit expenses) and 8.2 (effect of
termination under Section 8.1), which obligations will survive termination of
this Agreement.
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1.2 Closing in Escrow Deliveries and Other Actions.
(a) Shareholders' and Corporation's Deliveries at Closing in
Escrow. At the Closing in Escrow, the Shareholders shall deliver the following
to the law firm of Silver, Xxxxxxxx & Xxxx, L.L.P., as escrow agent: (i)
certificates representing all of the Stock with duly executed stock powers
conveying the Stock represented thereby to the Company, free and clear of all
liens, security interests and claims, encumbrances or other rights of third
parties of any nature whatsoever, and granting unrestricted title to and
possession of the Stock to the Company; (ii) the Corporation's corporate minute
book, including the Stock Certificate Book and all of the original share
certificates representing shares of the Corporation's capital stock at one time
issued (but no longer issued and outstanding) to former Shareholders of the
Corporation; (iii) all consents, waivers, and authorizations necessary or
appropriate for the consummation of the transactions contemplated by this
Agreement; (iv) agreements assigning to the Corporation all of the Shareholders'
and/or third parties' right, title and interest in and to all Intellectual
Property (as defined in Section 2.14(d) hereinbelow) owned by the Shareholders
and/or third parties and heretofore licensed to or used by the Corporation; (v)
Certificate of Good Standing for the Corporation as issued by the Secretary of
State of New York; (vi) the certificates, dated the Closing in Escrow Date,
required pursuant to Sections 7.2(a) and 7.2(b) hereinbelow; and (vii) the
opinion of counsel to the Shareholders and the Corporation as to such matters as
counsel to the Company and the Corporation may reasonably require, including but
not limited to such counsel's opinion that: (A) the Corporation is in good
standing; (B) the Corporation is authorized to conduct its business in each
jurisdiction in which it is doing business; (C) the Shareholders and the
Corporation have the full power to enter into and perform their respective
obligations under this Agreement; (D) this Agreement constitutes the legal,
valid and binding obligations of the Corporation and the Shareholders, and the
Related Agreements to which the Shareholders are a party, constitute the legal,
valid and binding obligations of the Shareholders, each enforceable in
accordance with their respective terms (except as enforcement may be limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditor's rights, and principles of equity); and (E) neither the Corporation
nor the Shareholders are threatened with or affected by any actions, proceedings
or investigations wherein an unfavorable decision, ruling or finding could have
a material adverse effect on the financial condition or operation of the
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Corporation, or could prevent, enjoin or otherwise affect the transactions
contemplated by this Agreement or the Related Agreements.
(b) Further Actions. On or after the Closing in Escrow, the
parties hereto shall enter into, execute and deliver such other and further
agreements, documents and instruments, as any of them may reasonably request,
for the purpose of effectuating the transactions contemplated by this Agreement.
(c) Consummation of Sale. Upon Closing in Escrow, subject to
the terms and conditions of this Agreement, the Company will be obligated to
purchase the Stock, and the Shareholders will be obliged to sell the Stock, at
the purchase price specified in Section 1.3 below, on the Closing Date specified
in Section 1.4 below.
1.3. Purchase Price. The purchase price for the Stock (the
"Purchase Price") shall be One Million Dollars ($1,000,000), subject to
adjustment (if any) as provided in Section 1.1 above, and subject to further
adjustment (if any) as a result of a reduction in the Maximum Earn-Out (as
defined in this Section 1.3 below).
Unless the Company gives the Shareholders written notice to the
contrary, the Shareholders shall deliver to the Company, within thirty (30)
days after execution of this Agreement: (i) audited financial statements of the
Corporation, including balance sheets dated as of December 31, 1994, 1995 and
1996, and income statements and cash flow statements for each of the three
twelve month periods ended on such dates; (ii) unaudited financial statements of
the Corporation, including a balance sheet dated as of June 30, 1996, and an
income statement and cash flow statement for the twelve month period ended on
June 30, 1996: and (iii) unaudited, reviewed financial statements of the
Corporation, including a balance sheet dated as of June 30, 1997 and an income
statement and a cash flow statement for the six month period ended June 30,
1997. The intent of providing the audited financial statements referred to in
the foregoing sentence is to resolve any auditing issues prior to calculation of
the Purchase Price, so that the Purchase Price may be quickly and efficiently
calculated. In the event that the closing of the Initial Public Offering has
not occurred on or before November 12, 1997, but does occur on or before
December 12, 1997, then in that event, in lieu of the unaudited, reviewed
financial statements of the Corporation for the six month period ended June 30,
1997, the Shareholders shall deliver to the Company, within thirty days
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after written request from the Company: (i) an updated set of audited financial
statements of the Corporation, including a balance sheet dated as of June 30,
1997, and income statements and cash flow statements for the six month period
ended June 30, 1997; (ii) unaudited financial statements for the Corporation,
including a balance sheet dated as of September 30, 1996, and an income
statement and cash flow statement for the twelve month period ended on September
30, 1996; and (iii) unaudited, reviewed financial statements of the Corporation,
including a balance sheet dated as of September 30, 1997 and income statements
and cash flow statements for the three month period ended September 30, 1997.
In the event that the closing of the Initial Public Offering has not occurred on
or before December 12, 1997, then upon written request from the Company given on
or before March 1, 1998, the Shareholders shall deliver to the Company, within
thirty days after written request from the Company, such additional audited
and/or unaudited, reviewed financial statements of the Corporation as the
Company may reasonably request.
All of the financial statements referred to in this Section 1.3 shall
be prepared (or reviewed, as the case may be) by Price Waterhouse LLP. At the
request of the Company, such statements shall reflect the financial results of
the Corporation as if the Corporation, Atlantic and Westchester were one
corporation. The cost of providing all of the financial statements required by
this Section 1.3, within the prescribed time limits, shall be the sole
responsibility of the Shareholders, provided that the Company will, upon the
request of the Shareholders, advance such costs on behalf of the Shareholders.
In the event that all of the Shareholders do not timely deliver satisfactory
shareholder representation letters and complete the Closing in Escrow, the
Shareholders shall immediately refund to the Company any such advanced costs; in
the event that all such shareholder representation letters are satisfactory and
are timely received, and the Closing in Escrow is completed, the Shareholders
shall be relieved of their obligation to refund to the Company any such
advanced costs.
The Company shall pay thirty percent (30%) of the Purchase Price in
cash (the "Maximum Earn-Out"), which is subject to reduction in accordance with
the terms of the next paragraph, and seventy percent (70%) of the Purchase
Price in (restricted) stock of the Company (the "Company Stock"), at the
Closing. The number of shares of Company Stock to be issued as partial payment
of the Purchase Price shall be equal to the aggregate dollar value of the stock
component
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of the Purchase Price divided by the Initial Public Offering price per share as
set forth on the cover page of the prospectus relating to the Initial Public
Offering, provided that no fractional shares shall be issued and the value of
any fractional shares shall be paid in cash at the per share value of the Common
Stock in the Initial Public Offering. The Shareholders acknowledge that the
sale of the Company Stock will be restricted for a period of time by virtue of a
"lock-up" agreement which may be imposed by the Company, and the Shareholders
shall execute such a "lock-up" agreement, as may be required by the Company, by
which the sale of the Company Stock is restricted (perhaps prohibited) for a
period of two (2) years from the date of the closing of the Initial Public
Offering. The Purchase Price payable to the Shareholders shall be allocated
between them in accordance with written direction to the Company signed by each
of the Shareholders.
The Maximum Earn-Out shall be earned by the Shareholders ratably over
the 8 quarter annual periods beginning January 1, 1998 and ending December 31,
1999 provided that the Corporation achieves the targeted performance standards,
i.e., the Revenue Maintenance requirement (the "Revenue Requirement") and the
Brand Contribution Percentage Maintenance requirement (the "Margin Requirement")
set forth in Exhibit B attached hereto. In the event that the Corporation fails
to achieve either the Margin Requirement or the Revenue Requirement set forth in
Exhibit B during any calendar quarter, then for each calendar quarter in which
the Corporation fails to achieve such Margin Requirement or Revenue Requirement,
the cash portion of the Purchase Price shall be reduced by one-eighth (1/8) of
the Maximum Earn-Out. The Maximum Earn-Out, less any reductions as set forth in
this paragraph, is hereinafter referred to as the "Earn-Out". The Earn-Out
shall bear interest at the rate of 7% per annum commencing as of the Closing
Date (i.e., once the Earn-Out is determined, the Shareholders will be due such
amount plus interest at the rate of 7% per annum on such amount, accrued from
the Closing Date until the date of payment of the Earn-Out to the Shareholders).
The Earn-Out shall be paid to the Shareholders promptly following calculation of
the Corporation's performance for the quarter ending December 31, 1999. The
Company covenants and agrees to maintain sufficient cash, or availability of
cash (e.g., by way of a line of credit) in order to fund the Earn-Out.
It is understood by the parties that the Company intends to merge the
Corporation, Atlantic and Westchester into a wholly owned subsidiary of the
Company. For purposes of determining
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whether the Corporation has achieved the Revenue Requirement and the Margin
Requirement prior to such merger, the Corporation's performance shall be
determined as if the Corporation, Atlantic and Westchester were one corporation.
At the request of the Shareholders made to the Company in writing not later
than the Closing in Escrow, the Company shall (immediately after Closing) make a
loan to the Shareholders, collectively, in an amount equal to up to and
including 30% of the Purchase Price. Said loan by the Company to the
Shareholders (the "Shareholder Loan") shall bear interest at a rate of seven
percent (7%) per annum, and shall be secured by all of the Company Stock paid as
part of the Purchase Price at Closing. The collateral security agreement
evidencing the collateralization of the Shareholder Loan with the Company Stock
and the Earn-Out shall be on such terms as are reasonably acceptable to the
Company, which terms shall include, but shall not be limited to, the retention
of all of the Company Stock by the Company until full repayment of the
Shareholder Loan (including accrued interest). The Shareholders shall have the
right to prepay the Shareholder Loan (plus accrued interest) at any time without
penalty and shall have the right to direct the Company to offset the balance due
under the Shareholder Loan (plus accrued interest) against the Earn-Out as
earned each quarter. The Shareholder Loan shall mature as of the date that the
Earn-Out is payable. In the event that the Shareholder Loan (including accrued
interest) is not repaid in full upon maturity, the Company shall enjoy all
rights of a secured party under the Uniform Commercial Code then in effect in
the State of Maryland, provided that the Company's only recourse shall be first
against the remaining Earn-Out and then against the Company Stock it holds as
collateral, and there shall not be any recourse against the Shareholders
individually.
1.4. Time and Place of Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.1., and subject to the satisfaction or waiver of the
conditions set forth in Section 7, the purchase and sale of the Stock pursuant
to this Agreement (the "Closing") shall take place at the offices of Silver,
Xxxxxxxx & Xxxx, L.L.P., 0000 Xxx Xxxx Xxxxxx, X.X., Xxxxx 000X, Xxxxxxxxxx,
X.X. 00000, contemporaneously with the closing of the Initial Public Offering
unless the Initial Public Offering does not occur by March 31, 1998, in which
case this Agreement shall be rendered null and void,
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or unless another date, time or place is agreed to in writing by the parties
hereto (the day on which the Closing takes place being the "Closing Date").
At the Closing: (i) Silver, Xxxxxxxx and Taff, L.L.P. shall deliver
to the Company the certificates, minute book, documents, and other materials
theretofore held in escrow from the Closing in Escrow; (ii) the Shareholders
shall deliver to the Company updated consents, waivers and authorizations as
referred to in Section 1.2(a)(iii) above, updated Certificates of Good Standing
as referred to in Section 1.2(a)(v) above, updated certificates, dated the
Closing Date, required pursuant to Sections 7.2(a) and 7.2(b) below, and an
updated opinion of counsel as referred to in Section 1.2(a)(vii) above; and
(iii) the Company shall deliver the Purchase Price to the Shareholders (less the
Maximum Earn-Out, which shall be payable to the Shareholders pursuant to the
terms of Section 1.3 above, and with the Company Stock collateralized against
the Shareholder Loan being delivered to the Company as appropriate).
2. Representations, Warranties and Covenants of the Corporation and the
Shareholders.
The Corporation and the Shareholders hereby jointly and severally
represent, warrant and covenant to the Company as follows:
2.1. Organization, Standing and Power. The Corporation is a "C"
Corporation duly organized, validly existing and in good standing under the laws
of the State of New York, and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The Corporation is duly qualified and in good standing to conduct
business in each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification
necessary.
2.2. Authority and Enforceability. The Shareholders and the
Corporation have all requisite legal right, power and authority to enter into
this Agreement and each of the Related Agreements to which they are a party and
to agree to the transactions contemplated hereby and thereby and to perform all
of their respective obligations hereunder and thereunder. This Agreement
constitutes the legal, valid and binding obligations of the Shareholders and the
Corporation, and each of the Related Agreements to which the Shareholders are a
party constitute the legal, valid and binding obligations of the Shareholders,
each enforceable in accordance with their respective terms,
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subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity.
2.3. Capital Structure, Due Authorization and Issuance. The capital
structure of the Corporation consists solely of 200 shares of no par value
capital stock of which 20 shares are and will be as of the Closing in Escrow
Date and the Closing Date issued and outstanding. All issued and outstanding
shares of the capital stock of the Corporation have been duly authorized and
validly issued, are fully paid and non-assessable, and were issued in compliance
with all federal and applicable state securities laws.
2.4 Title to Stock. The Shareholders owns all of the issued and
outstanding shares of the capital stock of the Corporation, free and clear of
any and all claims, liens, restrictions, pledges, charges, options, security
interests, encumbrances or other rights of third parties, including any imposed
by law. There are no other shares of capital stock or other equity or debt
securities of the Corporation, of any kind or class whatsoever, authorized,
issued or outstanding, or any warrants, options, subscription rights, or any
other rights, agreements, or commitments of any nature relating to the issuance
of, or granting of, rights to acquire any shares of capital stock or such
securities of the Corporation.
2.5 Title to and Condition of the Corporation's Assets. The
Corporation has good, insurable and marketable title to all of the assets set
forth in the Financial Statements (as defined in Section 2.11 hereinbelow),
except that this representation and covenant does not apply (i) as of the
Closing Date to those assets purchased by the Shareholders pursuant to Section
1.1, and (ii) in the event that prior to the Closing Date the Corporation
terminates its cross dock business to such assets related to such business which
the Corporation sells. Except as disclosed on Exhibit C, none of the
Corporation's assets is subject to any restriction, mortgage, pledge, lien,
security interest, lease, charge, encumbrance, objection or joint ownership,
other than liens for current real or personal property taxes not yet due and
payable. The Corporation's assets are in good operating condition and repair,
ordinary wear and tear excepted.
2.6. Sufficiency of Assets. The assets set forth in the Financial
Statements (as defined in Section 2.11 hereinbelow) include all the assets and
properties used or employed in the
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business presently conducted by the Corporation, excluding, in the event that
the Corporation terminates its cross dock business, such assets and properties
and properties related to such business which the Corporation sells.
Immediately after the consummation of the transactions contemplated by this
Agreement to be effected at the Closing, the Corporation will (i) have all
right, title, and interest in and to, or will have a valid right to use, without
liability to third party(ies), such assets and properties; and (ii) have all
assets, rights, employees, subcontractors and other persons and items which are
reasonably necessary to carry on the business and operations of the Corporation
after the Closing Date in substantially the same manner as presently conducted
by the Corporation other than the Corporation's cross dock business and
operations in the event that the Corporation terminates such business and
operations. Provided, that as of the Closing Date, this Section 2.6 does not
apply to those assets purchased by the Shareholders pursuant to Section 1.1
hereof.
2.7. No Violations Resulting From Transactions. The execution and
delivery of this Agreement by the Shareholders and the Corporation, and each of
the Related Agreements to which they are a party, and the consummation of the
transactions contemplated hereby and thereby by the Shareholders and the
Corporation will not (a) conflict with or violate any provision of the articles
or certificate of incorporation or by-laws of the Corporation, (b) except as set
forth in Exhibit D, require any consent, waiver, approval, authorization,
permission, or filing with or notification to, any third party, (c) result in or
constitute a default, or require any consent or approval of or notice to any
person or entity, or result in the creation of an encumbrance, under or pursuant
to (i) any of the contracts to which the Corporation is a party (including but
not limited to contracts of insurance and leases as applicable), or (ii) any
other material agreements to which any of the Shareholders is a party, or (d)
violate any law applicable to the Shareholders or the Corporation.
2.8. Compliance with Laws.
(a) The Corporation is, and at all times during the past three
years has been, in material compliance with all applicable laws; and
(b) The Corporation has not received, and does not know of the
issuance or threatened issuance by any governmental entity of, any notices of
violation or alleged violation of any applicable law. The Company has been
provided with true and complete copies of (i) all
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injunctions, judgments, orders or consent or similar decrees or agreements of
any governmental entity to which the Corporation is currently subject (or which
the Corporation was subject to during the previous three years), and (ii) all
correspondence through the date hereof with respect to any of the matters
referred to in clause (b) or clause (i) of this Section 2.8. None of the
Shareholders nor the Corporation is aware of any proposed legislation or law
which is reasonably expected to be enacted and which, if so enacted, could
reasonably be expected to have a material adverse effect on the Corporation.
2.9. Litigation. There is no action, suit, claim, investigation or
proceeding, whether at law or in equity (each, a "Legal Proceeding"), pending
or, to the knowledge of the Shareholders and/or the Corporation, threatened,
that questions the validity of this Agreement or the Related Agreements or any
action taken or to be taken by the Shareholders or the Corporation in connection
with the consummation of the transactions contemplated hereby or thereby or
which seeks to prohibit, enjoin or otherwise challenge any of the transactions
contemplated hereby or thereby. Exhibit E sets forth an accurate and complete
list, and a brief description (setting forth the names of the parties involved,
the court or other governmental or mediating entity involved, the relief sought
and the substantive allegations and the status thereof), of each Legal
Proceeding pending or, to the knowledge of the Corporation and/or the
Shareholders, threatened against or affecting the Corporation. To the knowledge
of the Corporation and/or the Shareholders, no event has occurred and no
circumstance, matter or set of facts exist which would constitute a valid basis
for the assertion by any third party of any claim or Legal Proceeding, other
than those listed on Exhibit E. Except as set forth in Exhibit E, there is no
outstanding or, to the knowledge of the Corporation and/or the Shareholders,
threatened, judgment, injunction, order or consent or similar decree or
agreement (including, without limitation, any consent or similar decree or
agreement with any governmental entity) against, affecting or naming the
Corporation.
2.10. Financial Advisors.
(a) Except as set forth on Exhibit F attached hereto, no person
or entity has acted directly or indirectly as a broker, finder or financial
advisor for or to the Shareholders
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and/or the Corporation in connection with the negotiations relating to or the
transactions contemplated by this Agreement or the Related Agreements; and
(b) Except as set forth on Exhibit F attached hereto, no person
or entity is entitled to any fee or commission or like payment, or expense
reimbursement, in respect thereof based in any way on agreements, arrangements
or understandings made by or on behalf of the Corporation and/or the
Shareholders hereunder or thereunder. The Shareholders hereby agree that all
such fees, commissions or like payments, or expense reimbursement as shall
appear on Exhibit F attached hereto shall be for the sole joint and several
account of the Shareholders and shall be paid in full by them at the Closing in
Escrow.
2.11. Financial Statements; Receivables. Attached hereto as
Exhibit G are true, correct and complete copies of the Corporation's most recent
unaudited financial statements which, together with the financial statements
(including the notes and exhibits thereto) to be delivered pursuant to Section
1.3 herein (the "Financial Statements") were and will be prepared in accordance
with the books and records of the Corporation, are and will be complete and
correct in all material respects, have and will have been prepared in accordance
with U.S. generally accepted accounting principles ("GAAP"), applied
consistently with the past practices of the Corporation, except where otherwise
specifically noted therein, and present and will present fairly in all material
respects the financial position, results of operations and changes in financial
position or cash flows, whichever is applicable, of the Corporation as at the
dates and for the periods indicated (subject, in the case of the unaudited
financial statements, to normal year-end audit adjustments). Without limiting
the foregoing, no undisclosed liabilities or obligations of any nature (whether
known or unknown, or absolute, accrued, contingent or otherwise) shall exist as
at Closing in Escrow or the Closing not reflected in the most recently dated
balance sheet supplied to the Company. The Corporation has paid all federal,
state and local income, profits, franchises, sales, use, occupation, property,
excise and payroll taxes, and all license fees and other charges imposed upon
it, and has timely filed all tax returns and related documents required to be
filed with any governmental authority. There are no outstanding or proposed
statements of deficiency in tax payments to any federal, state, local or foreign
government with respect to the Corporation for any tax period. As of the dates
such Financial Statements were and will be prepared, all accounts receivable
reflected on the Financial
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Statements (i) have and will have arisen from bona fide transactions in the
ordinary course of the Corporation's business, consistent with its past
practices and (ii) are good and collectible at the aggregate recorded amounts
thereof, net of any applicable reserves for returns or doubtful accounts which
are reflected in such Financial Statements (such reserves, the "Reserves"); such
Reserves are adequate and reasonable and were established in accordance with
GAAP.
2.12. Default. The Corporation is not in material default of any
of its obligations, contracts, or commitments in any respect, or in breach of
any negative or affirmative covenants placed on it by its creditors, and none of
the Corporation or the Shareholders have been notified of any such defaults or
breaches.
2.13. Absence of Certain Developments.
(a) There has been no event, condition or state of facts of any
character that has had or is reasonably likely to have a material adverse effect
on the Corporation.
(b) The Corporation has not entered into any transaction or
contract, or conducted its business, other than in the ordinary course
consistent with past practice, except with respect to termination of the
Corporation's cross dock business.
2.14. Intellectual Property.
(a) List of Intellectual Property; Sufficiency. Exhibit H sets
forth a list of all Intellectual Property (as defined in Section 2.14.(d)
hereinbelow) which is owned by the Shareholders and/or the Corporation, licensed
by the Shareholders and/or the Corporation, licensed to the Shareholders and/or
the Corporation, or otherwise used or able to be used in the business conducted
by the Corporation (other than commonly-used computer software which is
generally available to the public and the use rights to which were legally
acquired by the Corporation either for free or through established retail
facilities) and indicates, with respect to each item of Intellectual Property
listed thereon, the owner thereof and, if applicable, the name of the licensor
and licensee thereof and the terms of such license or other contract relating
thereto. Except as disclosed on Exhibit H, the Corporation owns or has the
lawful right to use all of the Intellectual Property as currently used or as
necessary for the conduct of its business as now conducted. After Closing, the
Corporation will have the right to use all of the Intellectual Property as
currently used or as necessary for the conduct of the Corporation's business as
now conducted.
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(b) Title; Validity; Pending Applications; Infringements, Etc.
(i) Except for Intellectual Property licensed to the
Shareholders and/or the Corporation and except as disclosed on Exhibit H, the
Corporation has full legal and beneficial ownership (free and clear of any and
all encumbrances) of all of the Intellectual Property, and neither the
Corporation nor any of the Shareholders has received any notice or claim
(whether written, oral or otherwise) challenging the Corporation's ownership or
rights in such Intellectual Property or suggesting that any other entity has any
claim of legal or beneficial ownership with respect thereto. Neither the
Shareholders nor the Corporation are in default under any license agreements
pertaining to the Intellectual Property used in the Corporation's business and
licensed to the Shareholders and/or the Corporation; all such license agreements
are valid and in full force and effect, and shall continue in full force and
effect as to the Corporation after Closing.
(ii) All of the Intellectual Property is legally valid and
enforceable without any qualification, limitation or restriction on its use
except as disclosed in Exhibit H, and neither the Corporation nor any of the
Shareholders has received any notice or claim (whether written, oral or
otherwise) challenging the validity or enforceability of any such Intellectual
Property;
(iii) Neither the use of any of the Intellectual
Property nor any other Intellectual Property used by the Corporation will
conflict with, infringe upon, violate or interfere with, or constitute an
appropriation of, any right, title or interest held by any other person or
entity, and there have been no claims made with respect thereto;
(iv) No other person or entity is infringing in any respect
on any part of the Intellectual Property. The Corporation has not conducted its
business, and has not used or enforced (or failed to use or enforce) any
Intellectual Property, in a manner that would result in the abandonment,
cancellation or unenforceability of any item of Intellectual Property, and the
Corporation has not taken or failed to take any action that would result in the
forfeiture or relinquishment of any Intellectual Property used in the conduct of
its business as now conducted;
(v) Except as set forth in Exhibit H, the Corporation has
no liability or obligations to any third parties incident to the Intellectual
Property used or able to be used by the Corporation in the conduct of its
business as heretofore conducted; and
15
(vi) The Corporation has timely met all of its obligations
to any third parties incident to the Intellectual Property used or able to be
used by the Corporation in the conduct of its business as heretofore conducted,
and such obligations have been and will be correctly and adequately disclosed in
the Financial Statements.
(c) Protection and Maintenance of Intellectual Property.
(i) The Corporation has taken all reasonable steps to (x)
protect its rights to the Intellectual Property, and (y) to prevent the
unauthorized use by any other person or entity; and
(ii) The Corporation shall use all reasonable efforts to
maintain, or cause to be maintained, the Intellectual Property in full force and
effect through the Closing and, without limitation, has renewed or has made, and
will make within any applicable renewal period ending on or prior to the Closing
Date, application to renew all of the Intellectual Property subject to
expiration on or prior to the Closing Date. Neither the Corporation or any of
the Shareholders has granted to any other Person or entity any rights or
permissions to use any of the Intellectual Property.
(d) Definition of Intellectual Property. For purposes of this
Agreement, the term "Intellectual Property" means any patent, copyright,
trademark, trade name, service xxxx, service name, brand xxxx, brand name, logo,
corporate name, Internet domain name or industrial design, any registrations
thereof and pending applications therefor (to the extent applicable), any other
intellectual property right (including, without limitation, any know-how, trade
secret, trade right, formula, conditional or proprietary report or information,
customer or membership list, any marketing data, and any computer program,
software, database or data right), and license or other contract (including
without limitation license(s) to use specific telephone numbers and/or radio
channels/frequencies) relating to any of the foregoing, and any goodwill
associated with any business owning, holding or using any of the foregoing.
2.15. Insurance. The Corporation currently maintains, and as of
the Closing in Escrow and the Closing Date will maintain, valid insurance
policies, which polices provide adequate coverage, within terms of scope and
amount of coverage, for its assets, properties and operations. There are no
pending material insurance claims by the Corporation as to which the applicable
16
insurers have denied coverage. In addition, there exist no material claims
under such insurance that have not been properly filed by the Corporation.
During the past two years, the Corporation has not been refused any insurance
coverage by any insurer from which the Corporation has sought coverage.
2.16. Leases. Except as set forth on Exhibit I, the Corporation
is not a lessee or tenant of any real or personal property.
2.17. Labor Agreements. The Corporation is not a party to any
collective bargaining agreement. Except as set forth in Exhibit J, the
Corporation is not bound by any severance pay requirements or agreements, or any
other agreement, handbook, manual, or benefit book referring to, relating to, or
involving its employees.
2.18. Employee Benefit Plans. Except as set forth on Exhibit K
hereto, the Corporation does not maintain or contribute to, and it has no
liability or obligation with respect to any formal or informal stock option,
profit sharing, pension, retirement, bonus, stock bonus, thrift-savings,
incentive, benefit, welfare, cafeteria, medical insurance, dental insurance,
life insurance, accidental death and dismemberment insurance, disability
insurance or other similar plan, policy or arrangement (collectively referred to
herein as the "Plans"). The Corporation is not in default under the terms of
any of the Plans. The Corporation has made all contributions to each of the
Plans required by the terms of the respective Plans, as well as all
contributions required to be made in order to satisfy all requirements of law.
Each of the Plans has sufficient assets to satisfy (under reasonable and
permitted actuarial assumptions) its obligations on a termination basis, and the
level of contributions required pursuant to the terms of each Plan is sufficient
to satisfy (under reasonable and permitted actuarial assumptions) the
obligations of such Plan on a continuing basis for benefits accrued to date.
2.19. Compliance With ERISA. The Corporation's Plans are
currently in compliance in all respects with the Employee Retirement Income
Security Act of 1974 and the regulations promulgated thereunder (collectively,
"ERISA"). Except as set forth on Exhibit L hereto, no employee benefit plan and
no trust created thereunder has ever been terminated by the Corporation. No
liability to the Pension Benefit Guaranty Corporation ("PBGC") has been or is
expected to be incurred by the Corporation with respect to the Plans. Neither
the Corporation nor any of the Plans has ever experienced an accumulated funding
deficiency (as defined in Section 302
17
of ERISA and Section 412 of the Internal Revenue Code of 1986, as amended (the
"Code")), whether or not waived, with respect to any employee benefit plan and
no such accumulated funding deficiency currently exists. Except as set forth on
Exhibit L hereto, the Corporation is not required, and has not been required in
the past, to make any payments or contributions under the terms of any
"multi-employer plan" (as defined in Section 3(37) of ERISA and Section 414(f)
of the Code) or by any collective bargaining agreement with respect to any
employee benefit plan. Neither the Corporation nor any of the Plans has ever
incurred any withdrawal liability (including any contingent or secondary
withdrawal liability) within the meaning of Section 4201 and Section 4204 of
ERISA with respect to any multi-employer plan. The Corporation and the trustees
or the administrators of the Plans have provided continuation of coverage
notices to employees and their dependents as required by the Consolidated
Omnibus Budget Reconciliation Act of 1986, as amended ("COBRA"), and has
complied with all such continuation of coverage requirements. The execution and
delivery of this Agreement will not involve a prohibited transaction within the
meaning of ERISA or Section 4975 of the Code.
2.20. Employee Relations. The Corporation is in substantial
compliance with all applicable federal, state and local laws, statutes,
regulations, orders, codes, ordinances, guidelines, executive orders, contractor
requirements, judicial and administrative judgments and determinations to which
the Corporation is or was a party, and any other authority governing the
Corporation with respect to its employees and workplaces (hereinafter
collectively referred to as the "Applicable Employment Standards"), including,
but not limited to, employment, employment practices, fringe benefits, terms and
conditions of employment, termination of employment, severance or separation
pay, workers' compensation, disability, entitlements, unemployment insurance,
employment screening, wage-hour, employment discrimination on any basis, equal
employment opportunity, individual employee rights, affirmative action,
occupational health and safety, and immigration and right to work requirements.
Such compliance by the Corporation includes, but is not limited to, Title VII of
the Civil Rights Act of 1964, as amended, including the Civil Rights Act of
1991; the National Labor Relations Act of 1935, as amended; the Fair Labor
Standards Act of 1938, as amended; the Occupational Safety and Health Act of
1970, as amended; the Equal Pay Act of 1963, as amended; the Age Discrimination
in Employment Act of 1967, as amended; the Americans with
18
Disabilities Act of 1990; the Family Medical Leave Act of 1993; the Immigration
Reform and Control Act of 1986 (together with the regulations promulgated
thereunder, hereinafter collectively referred to as "IRCA"); the Worker
Adjustment and Retraining Notification Act; the Employee Polygraph Protection
Act; the Drug-Free Workplace Act of 1988; the Health Insurance Portability and
Accountability Act of 1996; the Code; the regulations promulgated under each
such act; and any and all other federal, state and local laws, regulations and
requirements of any nature applicable to the Corporation. The Corporation
further represents that it is not in arrears in the payment of wages to any
employee (except to the extent of its normal payroll practices), and there are
no claims, liabilities, demands or causes of action, realized or unrealized,
actual, potential or contingent, pursuant to statutory rights or in tort,
contract or otherwise, against the Corporation arising out of or in connection
with any event, fact, circumstance or occasion relating to any applicant for
employment, the employment of any employee or the separation from employment of
any employee.
2.21. Licenses. The Corporation and its employees and agents have
all licenses, permits, orders, approvals and authorizations necessary for the
conduct of its business as presently conducted. The Corporation and its
employees and agents have all licenses, permits, orders, approvals and
authorizations necessary for the operation of the real and personal property
presently leased to, owned or operated by the Corporation. None of the permits
issued to the Corporation will be adversely affected by the consummation of the
transactions contemplated by this Agreement. No suspension or cancellation of
any such licenses, permits, orders, approvals or authorizations is pending or,
to the best of the Corporation's and/or the Shareholders' knowledge, threatened.
2.22. Criminal Practices. The Corporation is not engaged and has
not been engaged in any criminal practices, including, but not limited to,
payoffs, kickbacks or illegal gifts.
2.23. Contracts. Each of the contracts to which the Corporation
is a party (the "Contracts") (i) is valid and enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity; (ii) no Default (as
defined below) exists under any Contract either by the Corporation or by any
other party thereto; (iii) neither the Corporation nor the Shareholders is aware
of the assertion by any third party of any claim of Default or breach under any
of the Contracts; and (iv) neither the Corporation nor the
19
Shareholders is aware of any present intention on the part of any significant
customer or supplier or other business partner of the Corporation to either (x)
terminate or significantly change its existing business relationship with the
Corporation either now or in the foreseeable future, or (y) fail to renew or
extend its existing business relationship with the Corporation at the end of the
term of any existing contractual arrangement such entity may have with the
Corporation. For purposes of this Agreement, the term "Default" means, with
respect to any Contract, (x) any material breach of, or material default under,
such Contract, (y) any event, other than the normal passage of time, which would
(either with or without notice or lapse of time or both) give rise to any right
of termination, cancellation or acceleration of, or any obligation to repay,
with respect to such Contract, or (z) any event, other than the normal passage
of time, which would result in either a significant increase in the obligations
or liabilities of, or a loss of any significant benefit of, the party in
question under such Contract.
Copies of all written contracts, and a description of all oral contracts,
to which the Corporation is a party, are attached hereto as Exhibit M.
2.24. Misrepresentation. Neither this Agreement (including the
Exhibits hereto) or any Related Agreement or any information supplied to the
Company by or on behalf of the Corporation and/or the Shareholders in connection
with this Agreement, the Related Agreements or the transactions contemplated
hereby or thereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statement contained herein or therein, in light of the circumstances under which
they were made, not misleading.
3. Additional Representations, Warranties and Covenants of the
Shareholders.
3.1. Non-Competition and Other Covenants of the Shareholders and
Certain Employees of the Corporation. Each of the Shareholders and the certain
employees of Atlantic noted on Exhibit A attached hereto shall have at the
Closing in Escrow entered into agreements, the form of which is attached to this
Agreement as Exhibit A.
3.2. Confidentiality. The Shareholders shall abide by the terms of
the Confidentiality Agreement between the Corporation and the Company (or the
Company's predecessor, Dispatch Management Services LLC) executed on July 18,
1997 as if such agreement had been entered into by the Corporation in place of
Atlantic. The Shareholders and the Corporation
20
both acknowledge and agree that the Company shall have the right to disclose
certain information concerning the Corporation to third parties (which third
parties will in turn be bound by an agreement similar to the Confidentiality
Agreement), for such general corporate purposes as includes but is not limited
to obtaining financing and/or underwriting, and for general marketing purposes.
3.3. Assets Related to Cross Dock Business. In the event that prior
to the Closing Date the Corporation terminates its cross dock business, any
assets related to such business sold by the Corporation shall be sold for not
less than the fair market value of such assets and the proceeds of such sales
shall be retained by the Corporation.
3.4. Leases Related to the Cross Dock Business. In the event that
prior to the Closing Date, the Corporation terminates its cross dock business,
the Shareholders shall use their best efforts to cause the lessors of properties
leased by the Corporation for use in such business under leases listed in
Exhibit A-2 to consent in writing to such action as the Company agrees in
writing shall relieve the Corporation and its successors of all liability under
such leases after the Closing Date.
4. Representations and Warranties of the Company
The Company represents and warrants to the Shareholders as follows:
4.1. Organization, Standing and Power. The Company is duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company is
duly qualified and in good standing to conduct business in each jurisdiction in
which the business it is conducting, or the operation, ownership or leasing of
its properties, makes such qualification necessary.
4.2. Authority and Enforceability. The Company has all requisite
power and authority to execute and deliver this Agreement and each of the
Related Agreements to which it is a party and to perform fully its obligations
hereunder and thereunder. The execution and delivery of this Agreement and each
of the Related Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary
21
action on the part of the Company. This Agreement and each of the Related
Agreements to which it is a party have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and remedies
generally and subject, as to enforceability, to general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
4.3. No Violations Resulting From Transactions. The execution and
delivery by the Company of this Agreement and each of the Related Agreements to
which it is a party and the consummation of the transactions contemplated hereby
and thereby by the Company, will not (a) conflict with or violate any provision
of the Certificate of Incorporation or By-laws of the Company, (b) except as
set forth on Exhibit D, require any consent, waiver, approval, authorization or
permission of, or filing with or notification to, any third party, (c) result in
or constitute a default, or require any consent or approval of or notice to any
person or entity under or pursuant to any of the contracts to which the Company
is a party; or (d) violate any applicable laws.
4.4. Compliance with Laws.
(a) The Company is, and at all times since its inception has
been, in material compliance with all applicable laws; and
(b) The Company has not received, and does not know of the
issuance or threatened issuance by any governmental entity of, any notices of
violation or alleged violation of any applicable law. The Shareholders have
been provided with true and complete copies of (i) all injunctions, judgments,
orders or consent or similar decrees or agreements of any governmental entity to
which the Company is currently subject (or to which the Company was subject
since its inception), and (ii) all correspondence through the date hereof with
respect to any of the matters referred to in clause (b) or clause (i) of this
Section 4.4.
4.5. Litigation. There is no Legal Proceeding pending or, to the
knowledge of the Company, threatened that questions the validity of this
Agreement or the Related Agreements or any action taken or to be taken by the
Company in connection with the consummation of the transactions contemplated
hereby or thereby or which seeks to prohibit, enjoin or otherwise challenge any
of the
22
transactions contemplated hereby or thereby. Exhibit E sets forth an accurate
and complete list, and a brief description (setting forth the names of the
parties involved, the court or other governmental or mediating entity involved,
the relief sought and the substantive allegations and the status thereof), of
each Legal Proceeding pending or, to the knowledge of the Company, threatened
against or affecting the Company. To the knowledge of the Company, no event has
occurred and no circumstance, matter or set of facts exist which would
constitute a valid basis for the assertion by any third party of any claim or
Legal Proceeding, other than those listed on Exhibit E. Except as set forth in
Exhibit E, there is no outstanding or, to the knowledge of the Company,
threatened, judgment, injunction, order or consent or similar decree or
agreement (including, without limitation, any consent or similar decree or
agreement with any governmental entity) against, affecting or naming the
Company.
4.6. Default. The Company is not in material default of any of its
obligations, contracts, or commitments in any respect, or in breach of any
negative or affirmative covenants placed on it by its creditors, and the Company
has not been notified of any such defaults or breaches.
4.7. Misrepresentation. Neither this Agreement (including the
Exhibits hereto) or any Related Agreement or any information supplied to the
Shareholders by or on behalf of the Company in connection with this Agreement,
the Related Agreements or the transactions contemplated hereby or thereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statement contained
herein or therein, in light of the circumstances under which they were made, not
misleading.
5. Covenants Relating to Conduct of Business
During the period from the date of this Agreement and continuing until
the Closing Date, the Shareholders and the Corporation, jointly and severally,
covenant and agree that (except as expressly contemplated or permitted by this
Agreement, or to the extent that the Company shall otherwise consent in
writing):
5.1. Conduct of the Business Pending the Closing Date. The
Corporation shall:
23
(a) except with respect to termination of its cross dock
business, conduct its business only in the ordinary course, consistent with
past practice;
(b) except with respect to termination of its cross dock
business, use its best efforts to (i) preserve the present business
operations, organization (including, without limitation, management and the
sales force) and goodwill of its business and (ii) preserve the present
relationship of the Corporation with Persons having business dealings with
the Corporation;
(c) comply with all laws and with all contractual and other
obligations applicable to it;
(d) not change its Articles of Incorporation or By-laws;
(e) not issue or contract to issue any stock, securities,
options, or debt which is convertible to stock or securities;
(f) not declare or agree to declare or otherwise make any
dividend or other distribution or payment in respect of the Stock;
(g) except with respect to termination of its cross dock
business, other than in the ordinary course of business consistent with past
practice, not sell, transfer, assign, pledge, encumber or otherwise dispose
of any of its assets;
(h) not acquire any material properties or assets and not
sell, assign, transfer, convey, lease or otherwise dispose of any of its
material properties, excluding, in the event that the Corporation terminates
its cross dock business, material properties related to such business;
(i) maintain its present fire and extended coverage insurance
or equivalent coverage on all of its assets and on all real and personal
property leased to it;
(j) promptly notify the Company of (i) the occurrence of any
matter which may have a material adverse effect on its business or its
assets, and (ii) any Legal Proceeding commenced by or against it or any Legal
Proceeding commenced or threatened relating to the transactions contemplated
by this Agreement;
(k) not agree to anything prohibited by this Agreement or
anything which would make any of the representations and warranties of the
Shareholders or the Corporation in this Agreement or the Related Agreements
untrue or incorrect in any material respect.
24
6. Additional Agreements and Representations.
6.1. Access to Information. The Shareholders and the Corporation
agree that, prior to the Closing Date, the Company shall be entitled (at its
sole expense), through its officers, employees and representatives
(including, without limitation, its legal advisors and accountants), to make
such investigation of the properties, businesses and operations and financial
condition of the Corporation and examination of its books and records as the
Company may reasonably request, and to make extracts and copies of such books
and records. Any such investigation and examination shall be conducted
during regular business hours and under reasonable circumstances, and the
Shareholders and the Corporation shall cooperate fully therein. In order
that the Company may have full opportunity to make such physical, business,
accounting and legal review, examination or investigation as it may
reasonably request of the affairs of the Corporation, the Corporation and the
Shareholders shall use their respective best efforts to cause the
Corporation's officers, employees, consultants, agents, accountants,
attorneys and other representatives to cooperate fully with such Company
representatives in connection with such review and examination.
6.2. Non-solicitation Pending Closing. After execution of this
Agreement, and through the Closing Date, neither the Corporation nor the
Shareholders shall pursue, initiate, encourage or engage in any negotiations
or discussions with any third parties concerning the sale of the Corporation,
its assets, or any part thereof or concerning the terms and conditions of
this Agreement.
6.3. Additional Agreements. Each of the parties hereto agrees to
use their respective best efforts to (i) take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement and the
Related Agreements, (ii) obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental entities, third
parties and parties to contracts with the Corporation as are necessary for
consummation of the transactions contemplated by this Agreement and the
Related Agreements, and (iii) fulfill all conditions precedent applicable to
such party pursuant to this Agreement and the Related Agreements. In case at
any time after the Closing Date any further action
25
is necessary or desirable to carry out the purposes of this Agreement or the
Related Agreements, each party hereto shall use their respective best efforts
to take or cause to be taken all such necessary action.
6.4. Notification of Certain Matters. The Corporation and the
Shareholders shall give prompt notice to the Company of (a) any notice of, or
other communication relating to, a default under any contract material to the
financial condition, properties, business operations, or results of
operations of the Corporation to which it is a party or is subject, (b) any
notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Agreement or any of the Related Agreements, or (c) any
material adverse change in the properties, business operations, results of
operations, financial condition or prospects of the Corporation, other than
changes resulting from general economic conditions. In addition, the
Corporation and the Shareholders shall be required to update the schedules
and other information supplied pursuant to this Agreement at such time as the
information contained therein changes in any material respect.
6.5 Working Capital as of the Closing Date. The Shareholders shall
ensure that the aggregate working capital (defined as the excess of current
(liquid) assets over current liabilities) of the Corporation, Atlantic and
Westchester as of the Closing Date is at least equal to Seven Hundred Fifty
Thousand Dollars ($750,000) (the "Prescribed Working Capital"). For purposes
of determining whether the aggregate working capital of the Corporation,
Atlantic and Westchester is at least equal to the Prescribed Working Capital
as of the Closing Date, the Company will cause to be prepared, promptly
following the Closing, balance sheets of the Corporation, Atlantic and
Westchester as of the Closing Date. Such balance sheets shall be prepared in
accordance with GAAP, and shall include full accrual of all assets and
liabilities as of the Closing Date (including, but not limited to, accrued
tax liabilities as if the tax year ended on the Closing Date). In the event
that the Corporation, Atlantic and Westchester have in the aggregate less
than the Prescribed Working Capital as of the Closing Date, as determined by
such balance sheets, the Shareholders shall forthwith pay the Company an
amount equal to the difference between the actual working capital as of the
Closing Date and the Prescribed Working Capital (the "Shortfall"). If the
Shareholders do not pay the Shortfall to the Company within five (5) days
after demand, then, in addition to all other
26
remedies which the Company may have, the Company may deduct the amount of the
Shortfall from any of the obligations of the Company to the Shareholders
(including, but not limited to, the Earn-Out to which the Shareholders may be
entitled thereafter). To the extent that the Shareholders satisfy their
obligation with respect to the Shortfall under this Agreement, they shall
have no such obligation under the Atlantic and Westchester Acquisition
Agreements.
In the event that the Shareholders shall notify the Company in writing
within five days after demand is made by the Company for payment of the
Shortfall of their decision to dispute the amount of the Shortfall, the
Company shall forthwith instruct Price Waterhouse LLP to audit the balance
sheets of the Corporation, Atlantic and Pacific Westchester as of the Closing
Date, and to calculate the working capital therein in accordance with GAAP.
Price Waterhouse LLP shall then determine the amount of the Shortfall as set
out in this paragraph 6.5, whose decision shall be final and binding on the
parties hereto. The Shareholders shall forthwith pay to the Company the
amount of such Shortfall, together with fifty percent (50%) of the cost of
the audit conducted by Price Waterhouse LLP. In the event Price Waterhouse
LLP determines the Shortfall to have been zero, the entire cost of such audit
shall be borne by the Company.
7. Conditions Precedent.
7.1. Conditions to Obligations of All Parties. The respective
obligations of each party under this Agreement shall be subject to the
satisfaction prior to the Closing in Escrow Date and the Closing Date of the
following conditions:
(a) Governmental Approvals. All authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any governmental entity, requisite to the
transactions contemplated hereby, shall have been filed, occurred or have
been obtained, as the case may be.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the transactions contemplated by this Agreement shall be
in effect; provided that prior to invoking this condition, each party shall
use their best efforts to have any such order, injunction, legal restraint or
prohibition vacated.
27
7.2. Conditions to Obligations of the Company. The obligations of
the Company to effect the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions (which are for the
exclusive benefit of the Company, any or all of which may be waived in whole
or in part by the Company):
(a) Representations and Warranties. The representations and
warranties of the Corporation and the Shareholders set forth in this
Agreement and the Atlantic and Westchester Acquisition Agreements (without
regard to any supplements or updates thereto) shall be true and correct in
all respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of a specified, earlier date) as of
the Closing in Escrow Date and the Closing Date as though made on and as of
the Closing in Escrow Date and the Closing Date, respectively, except as
otherwise contemplated by such agreements, and the Company shall have
received a certificate from the Shareholders and the Corporation (signed by
each of the Shareholders and a senior executive officer of the Corporation)
certifying to such effect.
(b) Performance of Obligations. The Corporation and the
Shareholders shall each have performed all obligations required to be
performed by each such party under this Agreement and under the Atlantic and
Westchester Acquisition Agreements at or prior to the Closing in Escrow Date
and the Closing Date, respectively, and the Company shall have received a
certificate from the Shareholders and the Corporation (signed by each of the
Shareholders and a senior executive officer of the Corporation) certifying to
such effect.
(c) No Material Adverse Change. Since the date of this
Agreement, there shall have been no change, occurrence or circumstance
resulting in, or which could reasonably likely result in, individually or in
the aggregate, a material adverse effect on the Corporation, its assets or
its business.
(d) Contractual Consents. The Corporation and/or the
Shareholders shall have given all notices to, and obtained all consents,
approvals or authorizations of or from, any individual, corporation or other
party which may be necessary to permit the consummation of the transactions
contemplated hereby (including, without limitation, any consents required
under the Contracts).
28
(e) Related Agreements. Each of the Related Agreements to
which the Shareholders are a party shall have been duly executed and
delivered by such party. In addition, the Related Agreements shall have been
entered into by the respective parties thereto.
(f) No Long Term Debt. At the Closing Date, the Corporation
shall have no long term debt (excluding lease obligations).
7.3. Conditions to Obligations of the Corporation and the
Shareholders. The obligations of the Corporation and the Shareholders to
effect the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions (which are for the exclusive benefit
of the Corporation and the Shareholders, any or all of which may be waived in
whole or in part by the Corporation or the Shareholders).
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct in all respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of a specified, earlier
date) as of the Closing in Escrow Date and the Closing Date as though made on
and as of the Closing in Escrow Date and the Closing Date, respectively,
except as otherwise contemplated by this Agreement.
(b) Performance of Obligations. The Company shall have
performed all obligations required to be performed by it under this Agreement
and under the Atlantic and Westchester Acquisition Agreements at or prior to
the Closing in Escrow Date and the Closing Date, respectively.
(c) Related Agreements. Each of the Related Agreements shall
have been duly executed and delivered by the parties thereto.
8. Termination.
8.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent of the Company and the
Shareholders;
(b) by either the Company or the Shareholders, if the closing
of the Initial Public Offering does not occur by March 31, 1998;
29
(c) by the Company in the event that the Anti-Dilution Rights
(as defined in the Operating Agreement) are not preserved; or
(d) by the Company in the event that one or more of the
Shareholders do not timely deliver shareholder representation letters
satisfactory to the Company relating to this Agreement and the Atlantic and
Westchester Acquisition Agreements.
8.2. Effect of Termination Under Section 8.1. In the event of
termination of this Agreement or termination of either of the Atlantic and
Westchester Acquisition Agreements by either the Company or the Shareholders
as provided in Section 8.1 of this Agreement or Section 8.1 of either of the
Atlantic and Westchester Acquisition Agreements, this Agreement shall
forthwith become void and there shall be no liability or obligation on the
part of any party hereto or any of its respective Affiliates, officers,
directors or shareholders except (i) for the obligation of the Shareholders
to refund to the Company the audit expenses as set forth in Section 1.3 of
this Agreement; (ii) for any and all obligations under the confidentiality
provisions contained in Section 3.2 of this Agreement; and (iii) to the
extent that such termination results from the willful breach by a party
hereto of any of its representations or warranties, or of any of its
covenants or agreements, as set forth in this Agreement. A Shareholder's
election not to deliver a shareholder representation letter shall not be
deemed a willful breach of this Agreement by the Shareholders. In the event
that termination results from the willful breach by a party hereto of any of
its representations or warranties, or of any of its covenants or agreements,
as set forth in this Agreement, the breaching party shall be liable to the
non-breaching party for all direct damages (but not indirect or
consequential damages) incurred as a result of such willful breach.
9. Indemnification.
9.1. Indemnification.
(a) Indemnification by the Corporation and the Shareholders.
The Corporation and the Shareholders each hereby agree to jointly and
severally indemnify, defend and hold harmless the Company and its respective
officers, directors, employees and agents (collectively, the "Indemnitee")
from and against and in respect of any and all Losses (as defined below) to
the extent resulting from, arising out of, relating to, imposed upon or
incurred by the Indemnitee by
30
reason of: (i) the conduct of business by the Corporation prior to the
Closing Date (but only to the extent that the amount of such Loss was not a
stated liability on the Corporation's most recently dated balance sheet
delivered to the Company); and (ii) any inaccuracy in or breach of any of the
Corporation's or the Shareholders' representations, warranties, covenants or
agreements contained in this Agreement, the Related Agreements or in any
other agreement or document entered into or delivered on or after the date
hereof in connection with this Agreement or any of the transactions
contemplated hereby and/or thereby. Provided, however, the indemnification
by the Corporation and the Shareholders under this Section 9.1.(a) shall
include direct damages only (and not indirect or consequential damages). For
purposes of this Agreement, the term "Losses" means any and all deficiencies,
judgments, settlements, demands, claims, actions or causes of action,
assessments, liabilities, losses, damages (whether direct, indirect or
consequential), interest, fines, penalties, costs and expenses (including,
without limitation, reasonable legal, accounting and other costs and expenses
incurred in connection with investigating, defending, settling or satisfying
any and all demands, claims actions, causes of action, suits, proceedings,
assessments, judgments or appeals, and in seeking indemnification therefor).
The term "Losses" shall also include any costs of preparing tax returns or
amended tax returns for the Corporation for periods prior to the Closing Date
and payment of taxes and interest and penalties thereon as a consequence of
errors and omissions in tax returns filed, or failure to file tax returns, by
the Corporation prior to the Closing Date; and, in the event that prior to
the Closing Date the Corporation terminates its cross dock business, shall
include any and all liability of the Corporation under the leases listed in
Exhibit A-2 after the Closing Date except to the extent of (i) any reduction
to the cash portion of the Purchase Price under Section 1.1 attributable to
such liability and (ii) any payments actually made by subtenants under such
leases.
(b) Indemnification by the Company. The Company hereby agrees
to indemnify, defend and hold harmless the Shareholders from and against and
in respect of any and all Losses resulting from, arising out of, relating to,
imposed upon or incurred by the Shareholders by reason of any inaccuracy in
or breach of any of the Company's representations, warranties, covenants or
agreements contained in this Agreement or in any other agreement or document
entered into or delivered by the Company on or after the date hereof in
connection with this Agreement or any of the transactions contemplated hereby
and/or thereby. Provided, however, the indemnification
31
by the Company under this Section 9.1.(b) shall include direct damages only
(and not indirect or consequential damages) and shall be limited in the
aggregate to the Purchase Price.
9.2. Notice. If any claims in respect of Losses shall be asserted
against any party hereto or any of their respective successors in respect of
which such entity proposes to demand indemnification from any of the other
parties hereto under Section 9.1 hereof, the party seeking such
indemnification shall notify the other such parties in a reasonably prompt
manner; provided that failure to give such reasonably prompt notice shall not
release, waive or otherwise affect any party's obligations with respect
thereto except to the extent such party can demonstrate it was actually and
materially prejudiced as a result thereof.
10. General Provisions.
10.1. Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall
survive the Closing.
10.2. Notices. Any notice or communication required or
permitted hereunder shall be in writing and either delivered personally or
telecopied or sent by overnight courier, or by certified or registered mail,
postage prepaid, and shall be deemed to be given, dated and received when so
delivered personally or by courier or telecopied, or, if mailed, five
business days after the date of mailing to the following address or telecopy
number, or to such other address or addresses as such Person may subsequently
designate by written notice given hereunder:
(a) if to Company, to:
Dispatch Management Services Corp.
00000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx, Chief Executive Officer
(b) if to the Corporation or the Shareholders, to:
Xxxxxx X. Xxxxxxx
0 Xxxxxxxx Xxxxx
00
Xxxxxxxxxxx, XX 00000
Xxxxx Xxxxxxxxxx
0 Xxx Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
Xxxxxx X. Xxxxxxx
Xxxxxx & Vishnick
0000 Xxxxxx Xxxxxx
Xxxx Xxxxxxx, XX 00000
10.3. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original and all of
which shall be considered one and the same agreement and shall become
effective when two or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
10.4. Entire Agreement; No Third Party Beneficiaries. This
Agreement (together with the Related Agreements and any other documents and
instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereto and is not
intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder. Subject to applicable law, this Agreement may be
amended, modified or supplemented only by written agreement of all parties
hereto with respect to any of the terms contained herein, and each party
hereto agrees to be bound by any such amendment, modification or supplement.
10.5. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Maryland, without
giving effect to the principles of conflicts of law thereof.
10.6. Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect
33
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially averse to any party. In the
event that the enforceability of any non-competition or similar covenants
contained herein or in any Related Agreement is called into question as the
result of time, geographical or other applicable limitations specified in
such covenants, such time, geographical or other applicable limitations shall
be deemed modified to the minimum extent necessary to render the applicable
provisions of such covenants enforceable.
10.7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
10.8. Specific Performance. The parties hereto acknowledge that
irreparable damage would result if any of the covenants of this Agreement
were not specifically enforced, and they therefore consent that the rights
and obligations of the parties under this Agreement may be enforced by a
decree of specific performance issued by a court of competent jurisdiction.
Such remedy shall, however, not be exclusive and shall be in addition to any
other remedies which any party may have under this Agreement or otherwise.
Without limiting the foregoing, the Corporation and the Shareholders
acknowledge that the failure to comply with any of the provisions of Sections
3.1, 3.2. and 6.2 hereof will result in irreparable harm for which there is
no adequate remedy at law and that the Company and/or the Corporation shall
be entitled, without the necessity of proving actual damages, to injunctive
relief in addition to damages and all other remedies which may otherwise be
available to the Company and/or the Corporation.
10.9. Fees and Expenses. All costs and expenses, including but
not limited to all fees and expenses of attorneys, lenders, financial
advisers and accountants, in connection with the negotiation, execution and
delivery of this Agreement, the Related Agreements and the consummation of
the transactions contemplated hereby and thereby, shall be paid by the party
incurring such costs and expenses.
10.10. Arbitration. Other than the Company's right to institute
legal action for a breach of the confidentiality, non-competition and
non-solicitation covenants set forth in Sections 3.1, 3.2 and 6.2
hereinabove, any issue, controversy, dispute or claim arising out of or
relating to this Agreement or its alleged breach that cannot be resolved by
mutual agreement shall be resolved
34
exclusively by arbitration by a single arbitrator in either the District of
Columbia or New York City, at the option of the Company, in accordance with
the commercial arbitration rules of the American Arbitration Association
("AAA") and judgment on the award rendered by the arbitrator may be entered
by any court having jurisdiction thereof. It is acknowledged by the
Corporation and the Shareholders that money damages are inadequate to
compensate the Company and/or the Corporation for a breach of the terms of
this Agreement, and that the Company and/or the Corporation shall be entitled
to specific performance of the terms of this Agreement. The arbitrator may
enter a default decision against any party who fails to participate in the
proceeding. The decision of the arbitrator shall be final, conclusive,
binding and non-appealable. The losing party shall pay all costs and
expenses of arbitration.
The arbitrator shall be selected by consent of the parties, if possible.
If the parties fail to reach agreement upon appointment of the arbitrator
within ten days after a demand for arbitration is made, the arbitrator shall
be selected from a list of proposed arbitrators submitted by AAA. The
selection process shall be that which is set forth in the AAA commercial
arbitration rules then prevailing, except that (1) the number of preemptory
strikes shall not be limited, and (2) if the parties fail to select the
arbitrator from three lists, AAA shall have the power to make an appointment.
If
35
an arbitrator should die, withdraw, or otherwise become incapable of serving,
a replacement shall be selected and appointed in a like manner.
10.11 Disclosure to Third Parties. The Company shall have the
right to disclose to third parties, in whatever manner the Company may
determine, the fact that this Agreement has been executed, the names of the
parties to this Agreement and the terms hereof.
36
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by or
on behalf of each of the parties hereto as of the date first above written.
"COMPANY"
DISPATCH MANAGEMENT SERVICES CORP.
By: /s/Xxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
"CORPORATION"
Attest: PACIFIC FREIGHT SYSTEMS, INC.
By: /s/Xxxxxx X. Xxxxxx
------------------------ ------------------------------------
Name:
Title:
Witness: "SHAREHOLDERS"
/s/Xxxxxx X. Xxxxxxx
------------------------ ----------------------------------------
Xxxxxx X. Xxxxxxx
Witness:
/s/Xxxxx Xxxxxxxxxx
------------------------ -----------------------------------------
Xxxxx Xxxxxxxxxx
37
