AGREEMENT
This Agreement (the "Agreement") is entered into as of the 18th day of
September , 1997, by and among Dispatch Management Services Corp, a Delaware
corporation and successor to Dispatch Management Services LLC by merger (the
"Company"), Deadline Acquisition Corp., an Illinois corporation (the
"Corporation"), and Xxxxxx X. Xxxxxxxxx, Xx., Xxxxx Xxxx Xxxx and Xxxxx X.
Xxxxxxxxxx (collectively, the "Shareholders"). Unless defined herein, all
capitalized terms used in this Agreement shall have the meanings given them in
the Operating Agreement of Dispatch Management Services LLC, dated December 1,
1996, by and among 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") and the Shareholders and the
Corporation intend that prior to the Closing in Escrow Date (as defined below),
the Corporation shall acquire substantially all of the assets of R.J.K.
Enterprises, Inc., an Illinois corporation doing business as "Deadline Express"
("Deadline Express"), such transaction being referred to hereafter as the
acquisition of Deadline Express;
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 each
of the Shareholders and 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, 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 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. At the Company's option,
the Notice shall include a requirement that the Shareholders purchase certain
assets of the Corporation (at then current book value) (the "Unwanted Assets"),
assume certain liabilities of the Corporation (the "Unwanted Liabilities"), and
cause certain employees of the Corporation to be terminated from employment by
the Corporation (the "Unwanted Employees"). If, 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 the Notice, 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 the
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Notice, then the Company will reduce the cash portion of the purchase price by
the dollar amount of any such Unwanted Liabilities (including early repayment
costs, if any) of the Corporation existing as at the Closing Date; and (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 Shareholder will pay the amount of such to
the Company in cash within 5 days after demand by the Company.
Upon timely delivery from all of the Shareholders of shareholder
representation letters 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 satisfactory shareholder representation letters from all of
the Shareholders.
In the event that one or more of the Shareholders do not timely deliver
satisfactory shareholder representation letters or the Shareholders do not close
in escrow, (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.
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
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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 any of 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
Illinois; (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 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 (except the non-compete agreements in Exhibit A),
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 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,
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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 equal to eighty percent (80%) of the product of:
(i) a fraction equal to the Net Market Capitalization of the
Company (as defined below) divided by the aggregate revenues of the
Company's subsidiaries for the Relevant Period (as defined below),
as shown in the prospectus for the Initial Public Offering,
multiplied by
(ii) the Corporation's net revenues for the Relevant Period,
determined from financial statements of the Corporation delivered to
the Company by the Shareholders pursuant to this Section 1.3 which
have been prepared or reviewed by Price Waterhouse LLP ("Price
Waterhouse"), provided that in the case of financial statements
reviewed by Price Waterhouse, Price Waterhouse shall concur that the
net revenues stated therein are accurate based upon the information
available to Price Waterhouse.
The term "Net Market Capitalization" shall mean the amount of market
capitalization of the Company resulting from the Initial Public Offering reduced
by the Company's expenses incurred in the Initial Public Offering.
The term "Relevant Period" shall mean the twelve month period ended June
30, 1997 in the event that the closing of the Initial Public Offering occurs on
or before November 12, 1997; the twelve month period ended September 30, 1997 in
the event that the closing of the Initial Public Offering occurs after November
12, 1997 and on or before December 12, 1997; and such later twelve month period
for which the Company has most recently requested financial statements of the
Corporation pursuant to this Section 1.3 in the event that the closing of the
Initial Public Offering occurs after December 12, 1997.
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
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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 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 audited and unaudited financial statements of the Company to be
delivered to the Company by the Shareholders pursuant to this Agreement shall
reflect the Company's acquisition of Deadline Express.
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. 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
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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 by the deadline specified in the Notice 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 one hundred percent
(100%) of the Purchase Price in shares of (restricted) stock of the Company (the
"Company Stock"), at the Closing, the number of such shares to be determined by
dividing the Purchase Price by the price per share of the Company Stock as set
forth in the prospectus for the Initial Public Offering (the "IPO Price"),
provided that the value of any fractional shares shall be paid in cash at the
IPO Price. The Purchase Price payable to the Shareholders shall be allocated
among them in accordance with written direction to the Company signed by all of
the Shareholders. The Shareholders acknowledge that the sale of their shares of
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 if
requested by the Company execute such a "lock-up" agreement, as may be required
by the Company, by which the sale of their Shares of Company Stock is restricted
(perhaps prohibited) for a period of up to and including two (2) years from the
date of the closing of the Initial Public Offering.
At the request of the Corporation delivered in writing to the Company
within 15 days after execution of this Agreement, the Company's purchase of the
Stock contemplated by this Agreement will be restructured as a reverse
subsidiary merger pursuant to which a newly formed first tier subsidiary of the
Company shall be merged with and into the Corporation and the Shareholders shall
receive as the merger consideration solely the shares of the Company Stock (and
cash for any fractional shares) to be paid to them pursuant to this Section 1.3.
Promptly following such request, and the Shareholders and the Corporation shall
execute and deliver to the Company all documents that are usual and customary in
such a merger.
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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 closing of 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").
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 as
provided in Section 1.3 above.
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 Illinois, 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 (and, prior to the Corporation's acquisition of
Deadline Express, Deadline Express was) duly qualified and in good standing to
conduct business in each jurisdiction in which the business it is (or was, in
the case of Deadline Express prior to the Corporation's acquisition of Deadline
Express) conducting, or the operation, ownership or leasing of its properties,
makes (or made, in the case of Deadline Express prior to the Corporation's
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acquisition of Deadline Express) such qualification necessary.
2.2. Authority and Enforceability. Each of 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, 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 15,000 shares of $.01 par value
capital stock of which 9,100 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 own 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, except as set forth in the Buy-Sell Agreement (as
defined below).
2.5 Title to and Condition of the Corporation's Assets. The
Corporation has (and, prior to the Corporation's acquisition of Deadline
Express, Deadline Express had) 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
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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 conducted by the Corporation and the
business conducted by Deadline Express prior to the Corporation's acquisition of
Deadline Express). 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
conducted by Deadline Express prior to the Corporation's acquisition of Deadline
Express.
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 since its formation
has been, in material compliance with all applicable laws, and prior the
Corporation's acquisition of Deadline Express, Deadline Express at all times
since its formation and, to the knowledge of the Shareholders, any predecessor
of Deadline Express during the past three years, has been in material compliance
with
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all applicable laws; and
(b) The Corporation and the Shareholders have not received,
and do not know of the issuance or threatened issuance by any governmental
entity of, any notices of violation or alleged violation of any applicable law
by the Corporation or by Deadline Express. 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 or Deadline Express is currently subject (or which the Corporation
or Deadline Express 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 or
Deadline Express (prior to its acquisition by 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 the
acquisition of Deadline Express by the Corporation 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 (or Deadline Express, prior to the Corporation's
acquisition of Deadline Express). 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
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or agreement with any governmental entity) against, affecting or naming the
Corporation (or Deadline Express, prior to the Corporation's acquisition of
Deadline Express).
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 (not including attorneys and accountants providing legal and
accounting services and not acting as a broker or finder) for or to any of the
Shareholders and/or the Corporation or (to the knowledge of the Shareholders)
Deadline Express in connection with the negotiations relating to or the
transactions contemplated by this Agreement or the Related Agreements or the
Corporation's acquisition of Deadline Express; and
(b) Except as set forth on Exhibit F attached hereto, no
person or entity (other than attorneys and accountants excluded from Section
2.10(a) above) 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 or Deadline Express
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 most recent unaudited financial
statements which, together with the financial statements (including the notes
and exhibits thereto) of the Corporation (and, prior to the Corporation's
acquisition of Deadline Express, of Deadline Express) 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 (and, prior to the
Corporation's acquisition of Deadline Express, the books and records of Deadline
Express), 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 (and, prior to the Corporation's acquisition of Deadline
Express, the past practices of Deadline Express), 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,
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whichever is applicable, of the Corporation (and, prior to the Corporation's
acquisition of Deadline Express, of Deadline Express) 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 (and, prior to the
Corporation's acquisition of Deadline Express, Deadline Express) 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 (and, prior to the
Corporation's acquisition of Deadline Express, with respect to Deadline Express)
for any tax period. Except as set forth on Exhibit G-1, 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 and Deadline
Express's business (or, prior to the Corporation's acquisition of Deadline
Express, Deadline Express'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 (and, prior to the Corporation's
acquisition of Deadline Express, Deadline Express) 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 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 (or Deadline Express prior to the Corporation's
acquisition of Deadline Express).
(b) The Corporation and, prior to its acquisition by the
Corporation,
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Deadline Express has not entered into any transaction or contract, or conducted
its business, other than in the ordinary course consistent with past practice
and the Corporation has not entered into any transaction or contract, or
conducted its business, other than in the ordinary course consistent with past
practice of Deadline Express.
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 (and,
prior to the Corporation's acquisition of Deadline Express, by Deadline
Express's shareholders and/or Deadline Express), licensed by the Shareholders
and/or the Corporation, licensed to the Shareholders and/or the Corporation
(and, prior to the Corporation's acquisition of Deadline Express, by Deadline
Express's shareholders and/or Deadline Express), or otherwise used or able to be
used in the business conducted by the Corporation, and, prior to the
Corporation's acquisition of Deadline Express, by Deadline Express (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 or Deadline
Express 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
and, prior to the Corporation's acquisition of Deadline Express, Deadline
Express 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
and for the conduct of Deadline Express's business as conducted prior to the
acquisition of Deadline Express by the Corporation, and after Closing, the
Corporation will have the right to use all such Intellectual Property.
(b) Title; Validity; Pending Applications; Infringements, Etc.
(i) Except for Intellectual Property licensed to the
Shareholders and/or the Corporation (and, prior to the Corporation's acquisition
of Deadline Express, to the shareholders of Deadline Express and/or Deadline
Express), the Corporation (and, prior to the Corporation's acquisition of
Deadline Express, Deadline Express) has full legal and beneficial ownership
(free and clear of any and all encumbrances) of all of the Intellectual
Property, and neither
14
the Corporation (nor, prior to the Corporation's acquisition of Deadline
Express, Deadline Express) nor any of the Shareholders has received any notice
or claim (whether written, oral or otherwise) challenging the Corporation's
ownership or rights (nor, prior to the Corporation's acquisition of Deadline
Express, Deadline Express'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
(nor, prior to the Corporation's acquisition of Deadline Express, Deadline
Express) are in default under any license agreements pertaining to the
Intellectual Property used in the Corporation's business (and, prior to the
Corporation's acquisition of Deadline Express, Deadline Express's business) and
licensed to the Shareholders and/or the Corporation (and, prior to the
Corporation's acquisition of Deadline Express, to the shareholders of Deadline
Express or Deadline Express); 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, prior to the Corporation's acquisition of Deadline
Express, Deadline Express) 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 (nor, prior to the
Corporation's acquisition of Deadline Express, by Deadline Express) 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 (and, prior to the
Corporation's acquisition of Deadline Express, Deadline Express) 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 (and, prior to the Corporation's acquisition of
Deadline Express, Deadline Express) has not taken or failed to take any action
that would result in the forfeiture or relinquishment of any Intellectual
Property used
15
in the conduct of its business as now conducted;
(v) Except as set forth in Exhibit H, the Corporation (and,
prior to the Corporation's acquisition of Deadline Express, Deadline Express)
has no liability or obligations to any third parties incident to the
Intellectual Property used or able to be used by the Corporation (and, prior to
the Corporation's acquisition of Deadline Express, Deadline Express) in the
conduct of its business or Deadline Express's as heretofore conducted; and
(vi) The Corporation (and, prior to the Corporation's
acquisition of Deadline Express, Deadline Express) has timely met all of its
obligations to any third parties incident to the Intellectual Property used or
able to be used by it in the conduct of its business and Deadline Express's
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 (and, prior to the Corporation's
acquisition of Deadline Express, Deadline Express) 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 (nor, prior
to the Corporation's acquisition of Deadline Express, Deadline Express) nor 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
16
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. Each of Deadline Express and the Corporation
currently maintains (and, prior to the Corporation's acquisition of Deadline
Express, Deadline Express maintained) and the Corporation 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 (and, prior to the Corporation's acquisition
of Deadline Express, by Deadline Express) 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 (and, prior to the Corporation's acquisition of
Deadline Express, Deadline Express) 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
(and, prior to the Corporation's acquisition of Deadline Express, Deadline
Express) is not a lessee or tenant of any real or personal property.
2.17. Labor Agreements. The Corporation (and, prior to the
Corporation's acquisition of Deadline Express, Deadline Express) is not a party
to any collective bargaining agreement. Except as set forth in Exhibit J, the
Corporation (and, prior to the Corporation's acquisition of Deadline Express,
Deadline Express) 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. Exhibit J shall include a copy of any employment
agreement between the Corporation and an employee of the Corporation.
2.18. Employee Benefit Plans. Except as set forth on Exhibit K
hereto, the Corporation (and, prior to the Corporation's acquisition of Deadline
Express, Deadline Express) 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
17
death and dismemberment insurance, disability insurance or other similar plan,
policy or arrangement (collectively referred to herein as the "Plans"). The
Corporation (and, prior to the Corporation's acquisition of Deadline Express,
Deadline Express) is not in default under the terms of any of the Plans. The
Corporation (and, prior to the Corporation's acquisition of Deadline Express,
Deadline Express) 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 (and, prior to
the Corporation's acquisition of Deadline Express, Deadline Express's Plans), if
any, 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 (or, prior to the Corporation's acquisition of Deadline Express, by
Deadline Express). No liability to the Pension Benefit Guaranty Corporation
("PBGC") has been or is expected to be incurred by the Corporation (or, prior to
the Corporation's acquisition of Deadline Express, by Deadline Express) with
respect to the Plans. Neither the Corporation (nor, prior to the Corporation's
acquisition of Deadline Express, Deadline Express) 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. Neither the Corporation (nor, prior to the Corporation's
acquisition of Deadline Express, Deadline Express) 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, prior to the
Corporation's acquisition of Deadline Express, Deadline Express) nor any of the
Plans has ever incurred any withdrawal liability
18
(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, prior to the Corporation's acquisition of Deadline
Express, Deadline Express) 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 (and, prior to the
Corporation's acquisition of Deadline Express, Deadline Express) 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 (or, prior to the Corporation's acquisition
of Deadline Express, Deadline Express) 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 (and, prior to
the Corporation's acquisition of Deadline Express, by Deadline Express)
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
19
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 (and, prior to the Corporation's acquisition of
Deadline Express, to Deadline Express). The Corporation further represents that
it is (and, prior to the Corporation's acquisition of Deadline Express, Deadline
Express was) 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. Each of Deadline Express and the Corporation (and,
prior to the Corporation's acquisition of Deadline Express, Deadline Express)
and its employees and agents have all licenses, permits, orders, approvals and
authorizations necessary for the conduct of its business, except as disclosed on
Exhibit L-1. The Corporation and its employees and agents have (and, prior to
the Corporation's acquisition of Deadline Express, Deadline Express and its
employees and agents had) all licenses, permits, orders, approvals and
authorizations necessary for the operation of the real and personal property
leased to, owned or operated by the Corporation presently (or, prior to the
Corporation's acquisition of Deadline Express, by Deadline Express), except as
disclosed on Exhibit L-1. 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 knowledge of the
Corporation (and, prior to the Corporation's acquisition of Deadline Express, of
Deadline Express) and/or the Shareholders, threatened.
2.22. Criminal Practices. The Corporation (and, prior to the
Corporation's acquisition of Deadline Express, Deadline Express) 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
(and, as of the
20
date of the Corporation's acquisition of Deadline Express, Deadline Express 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 by Deadline
Express or by any other party thereto; (iii) neither the Corporation nor any of
the Shareholders is aware of the assertion by any third party of any claim of
Default or breach under any of the Contracts by either the Corporation or
Deadline Express; and (iv) neither the Corporation nor any of the Shareholders
is aware of any present intention on the part of any significant customer or
supplier or other business partner of the Corporation (or, prior to the
Corporation's acquisition of Deadline Express, of Deadline Express) to either
(x) terminate or significantly change its existing business relationship with
the Corporation (or, prior to the Corporation's acquisition of Deadline Express,
with Deadline Express) either now or in the foreseeable future, or (y) fail to
renew or extend its existing business relationship with the Corporation (or,
prior to the Corporation's acquisition of Deadline Express, with Deadline
Express) at the end of the term of any existing contractual arrangement such
entity may have with the Corporation (or, with Deadline Express). 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 material 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
21
herein or therein, in light of the circumstances under which they were made, not
misleading.
2.25 Delivery of Certain Exhibits. Not later than three business
days after the date of execution of this Agreement, the Corporation shall
deliver to the Company Exhibits C through N of this Agreement.
2.26 Certain Representations As If Made by Deadline Express. To the
knowledge of the Shareholders and the Corporation, each of the representations
made with respect to the Corporation above in Sections 2.1, 2.5, 2.6, 2.7, 2.8,
2.9, 2.10, 2.11, 2.12, 2.13, 2.14, 2.15, 2.16, 2.17, 2.18, 2.19, 2.20, 2.21,
2.22, 2.23, and 2.24 of this Agreement, if made by Deadline Express as of the
date of execution of this Agreement and as a party to this Agreement, with
respect to itself, prior to its acquisition by the Corporation, would be true
and correct.
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. Simultaneously with the execution of this
Agreement, each of the Shareholders shall have entered into a non-competition
agreement, the form of which is attached to this Agreement in Exhibit A.
3.2. Confidentiality. The Corporation and each of the Shareholders
shall abide by the terms of the Confidentiality Agreement between the
Corporation or the Shareholders (or some of them) and the Company (or the
Company's predecessor, Dispatch Management Services LLC) executed on August 30,
1997. The Shareholders and the Corporation 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.
22
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 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.
23
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 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.
24
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:
(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 except as set forth
in Exhibit N hereto;
(f) not declare or agree to declare or otherwise make any
dividend or other distribution or payment in respect of the Stock except as set
forth in the buy-sell agreement among the Shareholders a copy of which is
included in Exhibit N hereto (the "Buy-Sell Agreement");
(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;
25
(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
Shareholders or the Corporation in this Agreement or the Related Agreements
untrue or incorrect in any material respect.
(l) not agree, in the Buy-Sell Agreement or otherwise, to any
agreement which would prevent the fulfillment of the obligations of the
Shareholders and/or the Corporation (i) with respect to the Closing in Escrow or
the Closing and sale of the Stock as contemplated by this Agreement.
(m) not be a party to or enter into any employment agreement
with any employee of Deadline Express or the Corporation except an agreement
which by its terms terminates upon the Closing in a manner which will not
obligate the Corporation in any respect to such employee after the Closing.
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 and the Shareholders and the Corporation shall cause the Company to
be able to make the same investigation and examination of Deadline express prior
to the Corporation's acquisition of Deadline Express. Any such investigation and
26
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 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
27
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 Corporation has at least One Hundred Eighteen Thousand Nine
Hundred Seventeen Dollars ($118,917) working capital (defined as the excess of
current (liquid) assets over current liabilities) as of the Closing Date (the
"Required Working Capital"). 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). In the event that the Corporation has less than the Required Working
Capital as of the Closing Date, as determined by such balance sheet, 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 Required
Working Capital (the "Shortfall"). The Shareholders shall pay the Shortfall to
the Company within five (5) days after demand, either in cash or, at the option
of the Shareholders, by releasing to the Corporation the number of shares of
Company Stock previously issued to them which is equal to the Shortfall divided
by the per share market value of the Company Stock determined as follows (the
"Market Value"). The term "Market Value" shall mean the closing price of the
Company Stock as reported in the Wall Street Journal for the last business day
prior to the date of such demand. Provided, that the Market Value of any
fractional share shall be paid to the Company by the Shareholders in cash.
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 to audit the balance sheet of the
Corporation as of the Closing Date, and to calculate the working capital therein
in accordance
28
with GAAP. Price Waterhouse 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. In the event Price Waterhouse 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 except as provided above:
(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 or
challenging the consummation of the transactions contemplated by this Agreement
(including but not limited to the Corporation's acquisition of Deadline Express)
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.
(c) Acquisition of Deadline Express. Prior to the date of the
Closing in Escrow, the Corporation shall have acquired either (i) all of the
outstanding shares of Deadline Express 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; or (ii)
substantially all of the assets and goodwill of Deadline Express; and the
Corporation shall have changed its name to "Deadline Express, Inc."
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
29
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
(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 this Agreement, 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 and to the effect that the condition set forth in Section 7.1(c) has
been met.
(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 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, or Deadline Express or
their respective assets or 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).
(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.
30
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 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;
(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.
8.2. Effect of Termination Under Section 8.1. In the event of
termination of this Agreement by either the Company or the Shareholders as
provided in Section 8.1, this Agreement
31
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. 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 reason of: (i) the conduct of business by the Corporation (or by
Deadline Express) 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 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,
32
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).
(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 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
33
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. Xxxxxxxxx, Xx.
0000 Xxxxx Xxxxxx, Xxx. 00X
Xxx Xxxx, Xxx Xxxx 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.
34
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 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
35
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 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 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
Attest: "CORPORATION"
DEADLINE ACQUISITION CORP.
---------------------------- By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
Xxxxxx X. Xxxxxxxxx, President
"SHAREHOLDERS"
/s/ Xxxxxx X. Xxxxxxxxx
---------------------------- --------------------------------------------
Witness Xxxxxx X. Xxxxxxxxx, Xx.
/s/ Xxxxx Xxxx Xxxx
---------------------------- --------------------------------------------
Witness Xxxxx Xxxx Xxxx
/s/ Xxxxx X. Xxxxxxxxxx
---------------------------- --------------------------------------------
Witness Xxxxx X. Xxxxxxxxxx
