AGREEMENT
This Agreement (the "Agreement") is entered into as of the 26th day of
September, 1997, by and among Dispatch Management Services Corp., a Delaware
corporation and successor in interest to Dispatch Management Services LLC by
merger (the "Company"), MLQ Express, Inc., a corporation incorporated under the
laws of the State of Georgia (the "Corporation") and Xxxx X. Xxxxxx, Xx. (the
"Shareholder"). 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 Shareholder owns all of the issued and outstanding shares of
capital stock of the Corporation (the "Stock");
WHEREAS, subject to the terms and conditions set forth herein, the
Shareholder desires to sell all of his right, title and interest in the Stock to
the Company, and the Company desires to purchase the Stock;
WHEREAS, upon the delivery of the disclosure documents and other
information required by this Agreement, and 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, together with the execution of this
Agreement, the Company will enter into a non-competition agreement with the
Shareholder and certain employees of the Corporation specified in Exhibit A in
the forms 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, 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 Shareholder, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Closing in Escrow
1.1. Overview. The Shareholder and the Corporation have delivered to
the Company, either with or prior to the execution of this Agreement: (i) the
audited and unaudited financial statements required to date pursuant to Section
1.3 below and (ii) the agreements required pursuant to Section 3.1 below.
After approval of the audited and unaudited financial statements
requested by the Company after the date of execution of this Agreement pursuant
to Section 1.3, if any, 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 Shareholder a
disclosure document, together with a notice (the "Notice") specifying the date
on which the Closing in Escrow (as defined below) will occur. The Shareholder
shall purchase from the Corporation, at then current book value, his personal
office furniture and pictures and the cash value on all life insurance policies
on his life (collectively, the "Personal Assets"); provided that (i) the amount
paid by the Shareholder for the cash value on all life insurance policies on his
life will not be less than One Hundred Thousand Dollars ($100,000), and (ii) in
the event that the Shareholder's personal office furniture and pictures are not
reflected on the books of the Corporation as assets of the Corporation, he shall
be entitled to receive them on or prior to the Closing Date without payment. The
Company acknowledges that the Corporation has no interest in the real property
located at 00 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx (the "North Carolina Real
Estate") and any personal property located thereon. Also without limiting the
foregoing, the Shareholder shall be responsible for all Loans Due (or payable)
to Officers and loans due to any other person or entity by the Corporation,
either long or short term, in excess of Three Hundred Thousand Dollars
($300,000) as of the Closing Date (collectively the "Excess
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Loans"). If, prior to the Closing Date (as defined in Section 1.4 below): (i)
the Shareholder does not purchase the Personal Assets, then such assets will be
acquired by the Company without any adjustment to the Purchase Price (as defined
in Section 1.3 below); and (ii) the Shareholder does not pay the Excess Loans,
then the Company will reduce the cash portion of the purchase price by the
dollar amount of any such Excess Loans (including early repayment costs, if any)
of the Corporation existing as at the Closing Date. To the extent that the
Corporation has Loans Due (or payable to) Officers that are not Excess Loans on
its books immediately prior to the Closing Date and such loans are due and
payable to the Shareholder at such time, the Company will pay the amount of such
loans to the Shareholder at the Closing in addition to the Purchase Price (as
defined below).
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 & Xxxx, 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) on the date specified in the Notice.
In the event that the Shareholder does not timely fulfill his
obligations with respect to the Closing in Escrow, this Agreement will be of no
further force or effect, except for any and all obligations under Sections 3.2
(confidentiality), 1.3(d) (reimbursement of audit expenses) and 8.2 (effect of
termination under Section 8.1), which obligations will survive termination of
this Agreement.
1.2 Closing in Escrow Deliveries and Other Actions.
(a) Shareholder's and Corporation's Deliveries at Closing in
Escrow. At the Closing in Escrow, the Shareholder shall deliver the following to
the law firm of Silver, Xxxxxxxx & Taff, 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 Shareholder's
right, title and interest in and to all Intellectual Property (as defined in
Section 2.14(d) hereinbelow) owned by the Shareholder and/or
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third parties and heretofore licensed to or used by the Corporation; (v) a
Certificate of Good Standing for the Corporation as issued by the Secretary of
State of Georgia; (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 Shareholder and the Corporation (which counsel may be
the Shareholder himself) as to such matters as counsel to the Company 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
Shareholder 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
Shareholder, and the Related Agreements to which the Shareholder is a party,
constitute the legal, valid and binding obligations of the Shareholder, 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 Shareholder 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 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 Shareholder 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.
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(a) The purchase price for the Stock (the "Purchase Price")
shall be equal to Six Million, Three Hundred Thousand Dollars ($6,300,000) cash,
payable (i) Four Million, Six Hundred Thousand Dollars ($4,600,000) at Closing,
subject to reduction pursuant to the provisions of Section 1.1 regarding Excess
Loans not paid by the Shareholder; (ii) Eight Hundred Fifty Thousand ($850,000)
on the one-year anniversary of Closing (the "First Installment"); and (iii)
Eight Hundred Fifty Thousand Dollars ($850,000) on the second anniversary of
Closing (the "Second Installment"). The amounts of the First Installment and the
Second Installment shall be subject to adjustment as provided below in this
Agreement. The First Installment and the Second Installment shall bear interest
at the "Prime Rate" as from time to time published and set by NationsBank, N.A.,
Charlotte, North Carolina, plus 1-1/2% and interest thereon shall be payable by
the Company to the Shareholder monthly, as provided in the Notes. The Company
will provide the Shareholder with an irrevocable letter of credit, issued by a
bank with assets greater than Five Billion Dollars ($5,000,000,000), upon terms
reasonably satisfactory to the Shareholder, in an amount and of a term
sufficient to cover the timely payment of the deferred portion of the Purchase
Price plus accrued interest thereon. The Corporation's obligations to pay the
First Installment and the Second Installment shall be set forth in two
promissory notes the forms of which are attached as Exhibit B to this Agreement.
(b) Within a reasonable time after February 28, 1998, the
Company shall determine the Corporation's Daily Average Rate, which shall be an
amount equal to (i) the total actual amounts billed or to be billed to customers
of the Corporation for services rendered during the month of February, 1998
reduced by such amounts for services rendered on February 16, 1998 and on
Excluded Days (as defined below), divided by (ii) a number of days equal to 19
reduced by the number of Excluded Days.
If the Corporation's Daily Average Rate is less than the Target Daily
Rate, then (i) the First Installment shall be reduced by one-half (1/2) of the
excess of the Target Annual Rate over the product of 252 times the Corporation's
Daily Average Rate and (ii) the First Installment shall be further reduced by
the amount of interest previously paid by the Company with respect to the amount
of the reduction pursuant to clause (i) of this sentence.
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If the Corporation's Daily Average Rate is greater than the Target Daily
Rate, then, at the Company's sole election, either (i) the Company shall pay to
the Shareholder in cash the sum of one-half (1/2) of the excess of the product
of 252 times the Corporation's Daily Average Rate over the Target Annual Rate
and the amount of interest that would have been payable previously with respect
to one-half (1/2) of such excess if the First Installment had been so increased
at the Closing Date; or (ii) the amount of the First Installment shall be
increased by the sum of one-half (1/2) of such excess and the amount of interest
described in clause (i) of this sentence.
Excluded Day shall mean each day, if any, during the month of February,
1998 as to which the actual amount billed or to be billed to customers of the
Corporation for services rendered on such day is less than Twenty-Thousand
Dollars ($20,000) due to (a) weather, (b) loss of utilities at the Corporation's
principal office, (c) malfunctions of the Corporation's computer software or
hardware, or (d) an act of God or force majeure, beyond the Shareholder's
control.
Target Daily Rate shall mean Twenty-Five Thousand Five Hundred Dollars
($25,500) or, if the Xxxxxx Reduction (as defined below) occurs, Twenty-Four
Thousand Dollars ($24,000).
Target Annual Rate shall mean Six Million Four Hundred Twenty-Six Thousand
Dollars ($6,426,000), or, if the Xxxxxx Reduction occurs, Six Million
Forty-Eight Thousand Dollars ($6,048,000).
Xxxxxx Reduction shall mean the event that, during the period from the
date of this Agreement through February 28, 1998, the number of Corporation
employees and independent contractors assigned to service Xxxxxx Broadcasting
System Purchasing and Logistics MLQ Account No. 3492 from Xxxxxx Broadcasting
System's site is reduced by four or more from the number of such employees and
independent contractors on the date of this Agreement.
Notwithstanding the foregoing provisions of this Section 1.3(b), if after
the Closing Date and prior to March 1, 1998, the Company causes the Corporation
to discontinue providing services to customers by means of the MIS software
system known as "Dispatch Express" for any reason other than operational
difficulties with "Dispatch Express" that have a material negative effect on the
Corporation's ability to offer services, then no decrease in the amount of the
First Installment shall be made pursuant to this Section 1.3(b).
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The Company shall provide to the Shareholder copies of the balance sheets
and income statements for the Corporation as of the month end prior to the
Closing Date and as of each subsequent month end through and including the month
ended February 28, 1998. The Company shall provide such balance sheets and
income statements promptly after each becomes available.
(c) To the extent, if any, that the Corporation makes a
contribution to its employee profit-sharing plan and a portion of such
contribution is allocated to Xxxx Xxxxxx under the plan in his capacity as an
employee of the Corporation, the amount of the First Installment, or the Second
Installment if the First Installment has already been paid, shall be reduced as
of the end of the calendar month in which such contribution is made by the
amount of such portion.
(d) Unless the Company gives the Shareholder written notice to
the contrary, the Shareholder 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 February 28, 1995, 1996 and
1997, 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 May 31, 1996, and an
income statement and cash flow statement for the twelve month period ended on
May 31, 1996: and (iii) unaudited, reviewed financial statements of the
Corporation, including a balance sheet dated as of May 31, 1997 and an income
statement and a cash flow statement for the three month period ended May 31,
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 three month period ended May 31, 1997, the
Shareholder shall deliver to the Company, within thirty days after written
request from the Company when prepared by Price Waterhouse LLP: (i) an updated
set of audited financial statements of the Corporation, including a balance
sheet dated as of May 31, 1997, and income statements and cash flow statements
for the three month period ended May 31, 1997; (ii) unaudited financial
statements for the Corporation, including a balance sheet dated as of August 31,
1996, and an income statement and cash flow statement for the twelve month
period
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ended on August 31, 1996; and (iii) unaudited, reviewed financial statements of
the Corporation, including a balance sheet dated as of August 31, 1997 and
income statements and cash flow statements for the six month period ended August
31, 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 Shareholder shall deliver to the
Company, promptly after written request from the Company when prepared by Price
Waterhouse LLP, 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(d) shall
be prepared (or reviewed pursuant to the preceding paragraph) by Price
Waterhouse LLP. The cost of providing all of the financial statements required
by this Section 1.3(d), within the prescribed time limits, shall be the sole
responsibility of the Shareholder, provided that the Company will, upon the
request of the Shareholder, advance such costs on behalf of the Shareholder. In
the event that the Shareholder does not timely fulfill his obligations with
respect to the Closing in Escrow, the Shareholder shall immediately refund to
the Company any such advanced costs; in the event that the Shareholder does
timely fulfill his obligations with respect to the Closing in Escrow, the
Shareholder shall be relieved of his obligation to refund to the Company any
such advanced costs, provided that the Shareholder shall have no obligation to
refund any advanced costs to the Company in the event that he delivers at the
Closing in Escrow any certificate required under Section 7.2(a) or Section
7.2(b) in which he discloses an exception based upon the occurrence of an event
beyond his control.
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, 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").
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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
Shareholder 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 $4,600,000 (except to the
extent reduced as provided in Section 1.3 above), the amount, if any, of Loans
Due (or payable to) Officers that are not Excess Loans which the Company is
obligated to pay to the Shareholder pursuant to Section 1.1 above, and the
promissory notes and letter of credit described in Section 1.3 above.
2. Representations, Warranties and Covenants of the Corporation and the
Shareholder.
The Corporation and the Shareholder 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 Georgia, 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 Shareholder 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 Shareholder and the
Corporation, and each of the Related Agreements to which the Shareholder is a
party constitute the legal, valid and binding obligations of the Shareholder,
each enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or
9
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 100,000 shares of $1.00 par
value capital stock of which 150 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 Shareholder 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 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 business presently conducted by the
Corporation. 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
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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.
2.7. No Violations Resulting From Transactions. The execution and
delivery of this Agreement by the Shareholder 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 Shareholder 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 the Shareholder is a party, or (d) violate
any law applicable to the Shareholder 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 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. Neither the Shareholder 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. Except as noted in Section 2.20 below, there is no
action, suit, claim, investigation or proceeding, whether at law or in equity
(each, a "Legal Proceeding"), pending
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or, to the knowledge of the Shareholder 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 Shareholder 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
Shareholder, threatened against or affecting the Corporation. To the knowledge
of the Corporation and/or the Shareholder, 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 Shareholder,
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 Shareholder 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 Shareholder hereunder or thereunder. The Shareholder hereby agrees that all
such fees, commissions or like payments, or expense reimbursement as shall
appear on Exhibit F attached hereto shall be for the sole account of the
Shareholder and shall be paid in full by him 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
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(including the notes and exhibits thereto, if any). The financial statements
copies of which are included in Exhibit G and all financial statements
(including the notes and exhibits thereto) which are delivered by the
Corporation or the Shareholder to Price Waterhouse LLP (collectively, the
"Financial Statements") shall have been prepared in accordance with the books
and records of the Corporation consistently with the past practices of the
Corporation (but are not prepared in certain respects in accordance with U.S.
generally accepted accounting principles ("GAAP")), 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 unaudited financial statements, to normal year-end audit adjustments). The
warranty and covenant in the preceding sentence shall not apply to financial
statements prepared by Price Waterhouse LLP pursuant to Section 1.3 hereof.
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 unless such liabilities or
obligations are not required by GAAP to be disclosed therein or arise subsequent
to the date of such balance sheet. 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 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 the financial statements described
in Section 1.3 above prepared by Price Waterhouse LLP (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
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placed on it by its creditors, and the Shareholder has not been notified of any
such defaults or breaches.
2.13. Absence of Certain Developments.
(a) During the past three years, there has been no event,
condition or state of facts of any character relating specifically to the
Corporation 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.
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 Shareholder and/or the Corporation, licensed
by the Shareholder and/or the Corporation, licensed to the Shareholder 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. 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.
(b) Title; Validity; Pending Applications; Infringements, Etc.
(i) Except for Intellectual Property licensed to the
Shareholder and/or the Corporation, 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 the Shareholder 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 Shareholder nor the
14
Corporation are in default under any license agreements pertaining to the
Intellectual Property used in the Corporation's business and licensed to the
Shareholder 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,
and neither the Corporation nor any of the Shareholder 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
(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
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(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 nor the
Shareholder 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 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.
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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 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
17
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 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,
18
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, except for claims,
liabilities, demands or causes of action that may arise from the circumstances
relating to the resignation by Xxxxxxx Xxxxxx from employment by the Corporation
on or about June 16, 1997 and the related letter from Xx. Xxxxxx to the
Corporation charging sexual harassment (the "Xxxxxx Claim"), which matter has
been reported by the Corporation to its insurance carrier and has been assigned
to a claim representative by the insurance carrier.
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 Shareholder's 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 material 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 Shareholder 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 Shareholder 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
19
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 Shareholder 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.
2.25 North Carolina Real Estate. The Shareholder hereby represents
and warrants that he has sole title to the North Carolina Real Estate and that
the Corporation has no interest therein.
3. Additional Representations, Warranties and Covenants of the
Shareholder.
3.1. Non-Competition and Other Covenants of the Shareholder and
Certain Employees of the Corporation. Each of the Shareholder and the certain
employees of the Corporation 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 Shareholder and the Company 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 in August, 1997. The Shareholder and the Corporation both acknowledge
and agree that the Company shall have the right to disclose certain
20
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.
4. Representations and Warranties of the Company
The Company represents and warrants to the Shareholder 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 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 Articles of Organization or Operating Agreement of the
21
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 Shareholder has 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 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.
22
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
Shareholder 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 Shareholder 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:
(a) conduct its business only in the ordinary course,
consistent with past practice;
(b) 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;
23
(g) not sell, transfer, assign, pledge, encumber or otherwise
dispose of any of its assets, except in the ordinary course of business
consistent with past practice;
(h) not acquire any material properties or assets and not
sell, assign, transfer, convey, lease or otherwise dispose of any of its
material properties;
(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
Shareholder or the Corporation in this Agreement or the Related Agreements
untrue or incorrect in any material respect.
6. Additional Agreements and Representations.
6.1. Access to Information. The Shareholder 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; provided, however, that the Corporation shall not be required prior
to the Closing to disclose its customers generally to the Company, but this
proviso shall not bar discussions by the Company and the Corporation concerning
major customers of the Corporation. Any such investigation and examination shall
be conducted during regular business hours and under reasonable circumstances,
and the Shareholder 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 Shareholder
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.
24
6.2. Non-solicitation Pending Closing. After execution of this
Agreement, and through the Closing Date, neither the Corporation nor the
Shareholder 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 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
Shareholder 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 Shareholder
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.
25
6.5 Working Capital as of the Closing Date. The Shareholder shall
ensure that the Corporation has at least $500,000 working capital (defined as
the excess of current assets (liquid assets in accordance with GAAP) plus
prepaid expenses over current liabilities) as of the Closing Date. For the
purposes of this Section 6.5, Loans Due (or payable) to Officers and Employee
Profit Sharing Contribution Payable shall not be included in current
liabilities. For purposes of determining whether the Corporation had the
required working capital as of the Closing Date, the Company will cause to be
prepared, promptly following the Closing, a balance sheet of the Corporation as
of the Closing Date. Such balance sheet shall be prepared in accordance with
GAAP, and shall include full accrual of all assets and liabilities of the
Corporation as of the Closing Date (including, but not limited to, accrued tax
liabilities as if the tax year ended on the Closing Date), except that the
amount of income tax accrual on such balance sheet will be calculated consistent
with the past practices of Xxxxxxx Xxxx, C.P.A. with respect to income tax
accruals of the Corporation. In the event that the Corporation has less than the
prescribed $500,000 working capital as of the Closing Date, as determined by
such balance sheet, the Shareholder shall forthwith pay the Company an amount
equal to the difference between the actual working capital as of the Closing
Date and $500,000 working capital (the "Shortfall"). If the Shareholder does not
pay the Shortfall to the Company within five (5) days after demand, then, in
addition to all other 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 Shareholder.
In the event that the Shareholder shall notify the Company in writing
within five days after demand is made by the Company for payment of the
Shortfall of his decision to dispute the amount of the Shortfall, the Company
shall forthwith instruct Price Waterhouse LLP to audit the balance sheet of the
Corporation 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 Shareholder 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.
26
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.
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 Shareholder set forth in this Agreement
(without regard to any supplements or updates thereto) shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of a specified, earlier
date) as of the Closing 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, and the Company shall have received
a certificate from the Shareholder and the Corporation (signed by the
Shareholder and a senior executive officer of the Corporation) certifying to
such effect.
(b) Performance of Obligations. The Corporation and the
Shareholder shall each have performed all obligations required to be performed
by each such party under this Agreement at or prior to the Closing in Escrow
Date and the Closing Date, respectively, and the
27
Company shall have received a certificate from the Shareholder and the
Corporation (signed by the Shareholder 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
Shareholder 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).
(e) Related Agreements. Each of the Related Agreements to
which the Shareholder is 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.
7.3. Conditions to Obligations of the Corporation and the
Shareholder. The obligations of the Corporation and the Shareholder 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 Shareholder, any or all of which may be waived in whole or
in part by the Corporation or the Shareholder).
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of a specified, earlier
date) as of the Closing 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 at
or prior to the Closing in Escrow Date and the Closing Date, respectively.
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(c) Related Agreements. Each of the Related Agreements to
which the Company is a party shall have been duly executed and delivered by the
Company.
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
Shareholder;
(b) by either the Company or the Shareholder, if the closing
of the Initial Public Offering does not occur by March 31, 1998;
(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 the Shareholder does not
timely deliver a shareholder representation letter satisfactory to the Company.
8.2. Effect of Termination Under Section 8.1. In the event of
termination of this Agreement by either the Company or the Shareholder as
provided in Section 8.1, 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 Shareholder 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;
(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; and (iv) that if the
Company terminates this agreement pursuant to Section 8.1(b) or Section 8.1(c),
the Company shall pay to the Shareholder the amount of reasonable attorney's
fees and expenses incurred by him in connection with this Agreement, provided
that such amount shall not exceed Fifteen Thousand Dollars ($15,000). 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.
29
9. Indemnification.
9.1. Indemnification.
(a) Indemnification by the Shareholder. The Shareholder hereby
agrees to 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 reason of: (i) the conduct of business by the Corporation
prior to the Closing Date (but only to the extent that any such Loss was not a
stated liability on the Corporation's most recently dated balance sheet
delivered to the Company); or (ii) any inaccuracy in or breach of any of the
Corporation's or the Shareholder's 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, that the indemnification by the Corporation
and the Shareholder under this Section 9.1 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); and the term "Losses" shall not include liabilities
incurred in the ordinary course of business consistent with the Corporation's
past practices to the extent not reflected on the Corporation's most recently
dated balance sheet, which shall be dated not earlier than the last month end
prior to the Closing Date. The Shareholder's obligation under this Section
9.1(a) to the Indemnitee shall not become effective until the Losses to the
Indemnitee exceed Ten Thousand Dollars, and the total cost to the Shareholder of
his obligation to the Indemnitee under this Section 9.1(a) shall not exceed One
Million Three Hundred Thirty Thousand Dollars ($1,330,000).
(b) Third Party Claims. If a Loss or an event that may give
rise to a Loss occurs for which the Shareholder may be liable to the Indemnitee
under Section 9.1(a) above based
30
on a claim or proceeding by a third party (a "Third Party Claim"), the
Indemnitee shall promptly give the Shareholder written notice describing such
Third Party Claim and the amount or a reasonable estimate of the amount of
liability to the Shareholder that may arise therefrom; provided that failure to
provide such notice promptly shall not excuse the Shareholder's obligation under
Section 9.1(a) above except to the extent of prejudice to the Indemnitee
resulting from such failure. The Shareholder will be entitled to participate in
any proceeding involving a Third Party Claim (a "Proceeding") and, to the extent
that he wishes (unless (i) the Shareholder is also a party to such Proceeding
and the Indemnitee determines in good faith that joint representation would be
inappropriate, or (ii) the Shareholder fails to provide reasonable assurance to
the Indemnitee of his financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense of such
Proceeding with counsel chosen by the Shareholder subject to the Indemnitee's
reasonable approval of such counsel, and, after notice from the Shareholder to
the Indemnitee of its election to assume the defense of such Proceeding, the
Shareholder will not, as long as he diligently conducts such defense, be liable
to the Indemnitee under this Section 9.1 (i) for any fees of other counsel or
any other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the Indemnitee in connection with the defense of such
Proceeding; or (ii) subject to the remaining provisions of this Section 9.1(b),
for any settlement agreed to by the Indemnitee, without the prior written
approval of the Shareholder, which shall not be unreasonably delayed or
withheld. If the Shareholder assumes the defense of a Proceeding, no compromise
or settlement of any Third Party Claims subject to the Proceeding may be
effected by the Shareholder without the Indemnitee's consent, which shall not be
unreasonably delayed or withheld. If notice is given to the Shareholder of the
commencement of any Proceeding and the Shareholder does not, within twenty (20)
days after Indemnitee's notice is given, give notice to the Indemnitee of his
election to assume the defense of such Proceeding, the Shareholder will be bound
by any determination made in such Proceeding or any compromise or settlement
effected by the Indemnitee. Notwithstanding the foregoing, if the Indemnitee
determines in good faith that there is a reasonable probability that a
Proceeding may adversely and materially affect it other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement,
31
the Indemnitee may, by notice to the Shareholder, assume the exclusive right to
defend, compromise or settle such Proceeding.
(c) Indemnification by the Company. The Company hereby agrees
to indemnify, defend and hold harmless the Shareholder from and against and in
respect of any and all Losses resulting from, arising out of, relating to,
imposed upon or incurred by the Shareholder 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 by the Company under this
Section 9.1.(c) 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. Notwithstanding any of the foregoing provisions of this Section
9, (i) the Company shall have no liability to the Shareholder under Section
9.1(c) above with respect to any claim for a Loss as to which the Shareholder
does not deliver to the Company prior to the second anniversary of the Closing
Date written notice of the circumstances that give rise to such claim; and (ii)
the Shareholder shall have no liability to the Indemnitee under Section 9.1(a)
and/or Section 9.1(b) above with respect to any claim for a Loss as to which the
Company does not deliver to the Shareholder prior to the second anniversary of
the Closing Date written notice of the circumstances that give rise to such
claim.
32
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 Shareholder, to:
Xxxx X. Xxxxxx, Xx.
MLQ Express, Inc.
0000 Xxxxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 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.
33
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 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 Shareholder acknowledge that the failure to
comply with any of the provisions of Sections
34
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 exclusively by arbitration by a single arbitrator in either
the District of Columbia or New York City, at the option of the party seeking
arbitration, 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 Shareholder 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 Shareholder and the Company and/or the Corporation shall
each pay his or its respective costs and expenses of arbitration and the cost of
the arbitrator shall be paid 50% by the Shareholder and 50% by the Company
and/or the Corporation.
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
35
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 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. The Company shall not initiate any direct
contact with any of the Corporation's employees, vendors (including, without
limitation, independent contractors) or customers prior to the Closing.
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
Attest: "CORPORATION"
MLQ EXPRESS, INC.
By: /s/ Xxxx X. Xxxxxx, Xx.
-------------------------- -------------------------------------
Name: Xxxx X. Xxxxxx, Xx.
Title: Chief Executive Officer
Witness: "SHAREHOLDER"
By: /s/ Xxxx X. Xxxxxx, Xx.
-------------------------- -------------------------------------
Xxxx X. Xxxxxx, Xx.
37
