AGREEMENT
This Agreement (the "Agreement") is entered into as of the 15th 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"), Aero Special Delivery Service, Inc., a corporation incorporated
under the laws of the State of California (the "Corporation"), and Xxxxxx Xxxxxx
(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 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 Shareholder desires to sell all of her 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 a non-competition agreement with the
Shareholder 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
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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. Upon execution of this Agreement, the Shareholder 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; (ii) the schedules required
pursuant to Section 2 below; and (iii) 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
Shareholder a disclosure document, together with a notice (the "Notice")
specifying the date by which the Shareholder must execute and deliver a
satisfactory shareholder representation letter 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 Shareholder purchase certain
assets of the Corporation (at then current book value), assume certain
liabilities of the Corporation, and cause certain employees of the Corporation
to be terminated from employment by the Corporation. If, prior to the Closing
Date (as defined in Section 1.4 below): (i) the Shareholder does 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 Shareholder does not assume the
(unwanted) liabilities specified by the Company in the Notice, then the Company
will reduce the cash portion of the purchase price by the dollar amount of any
such liabilities (including early repayment costs, if any) of the Corporation
existing as at the Closing Date; 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
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estimate of the costs and expenses to be incurred in connection with such
terminations of employment, and the Company will reduce the cash portion of the
purchase price by the amount of such reasonable estimate.
Upon timely delivery from the Shareholder of a shareholder representation
letter 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 a satisfactory shareholder representation letter from the
Shareholder.
In the event that the Shareholder does not timely deliver a
satisfactory shareholder representation letter (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) 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 & Xxxx, L.L.P., as escrow agent: (i)
certificates representing all of the Stock with duly executed stock powers
conveying the Stock represented thereby to the Company, free and clear of all
liens, security interests and claims, encumbrances or other rights of third
parties of any nature whatsoever, and granting unrestricted title to and
possession of the Stock to the Company; (ii) the Corporation's corporate minute
book, including the Stock Certificate Book and all of the original share
certificates representing shares of the Corporation's capital stock at one time
issued (but no longer issued and outstanding) to former shareholders of the
Corporation; (iii) all consents, waivers, and authorizations necessary or
appropriate for the consummation of the transactions contemplated by this
Agreement; (iv) agreements assigning to the Corporation all of the Shareholder's
and/or third parties' right, title and interest in and to all Intellectual
Property (as defined in Section 2.14(d) hereinbelow) owned by the Shareholder
and/or third parties and heretofore licensed to or used by the Corporation; (v)
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Certificates of Good Standing for the Corporation as issued by the Secretaries
of States of California and Nevada; (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 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. The purchase price for the Stock (the "Purchase
Price") shall be equal to Seven Million, Four Hundred Sixty Thousand, Eight
Hundred Eighty-Four Dollars ($7,460,884), subject to adjustment (if any): (i) as
provided in Section 1.1 above;
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(ii) as a result of a reduction in the Maximum Earn-Out (as defined in this
Section 1.3 below); and (iii) as a result of settlement of the IRS claim against
the Corporation, as discussed below in this Section 1.3.
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 December 31, 1994, 1995 and
1996, and income statements and cash flow statements for each of the three
twelve month periods ended on such dates; (ii) unaudited financial statements of
the Corporation, including a balance sheet dated as of June 30, 1996, and an
income statement and cash flow statement for the twelve month period ended on
June 30, 1996: and (iii) unaudited, reviewed financial statements of the
Corporation, including a balance sheet dated as of June 30, 1997 and an income
statement and a cash flow statement for the six month period ended June 30,
1997. The intent of providing the audited financial statements referred to in
the foregoing sentence is to resolve any auditing issues prior to calculation of
the Purchase Price, so that the Purchase Price may be quickly and efficiently
calculated. In the event that the closing of the Initial Public Offering has not
occurred on or before November 12, 1997, but does occur on or before December
12, 1997, then in that event, in lieu of the unaudited, reviewed financial
statements of the Corporation for the six month period ended June 30, 1997, the
Shareholder 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 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, within
thirty days after written request from the Company, such additional audited
and/or unaudited, reviewed financial statements of the Corporation
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as the Company may reasonably request.
All of the financial statements referred to in this Section 1.3
shall be prepared (or reviewed, as the case may be) by Price Waterhouse LLP. 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
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 deliver a satisfactory shareholder
representation letter and complete the Closing in Escrow, the Shareholder shall
immediately refund to the Company any such advanced costs; in the event that
such shareholder representation letter is satisfactory and is timely received,
and the Closing in Escrow is completed, the Shareholder shall be relieved of her
obligation to refund to the Company any such advanced costs.
The Company shall pay fifty percent (50%) of the Purchase Price in
cash, which is subject to reduction in accordance with the terms of the next
paragraph, and fifty percent (50%) of the Purchase Price in (restricted) stock
of the Company (the "Company Stock"), at the Closing. The number of shares of
Company Stock to be issued as partial payment of the Purchase Price shall be
equal to the aggregate dollar value of the stock component of the Purchase Price
divided by the Initial Public Offering price per share as set forth on the cover
page of the prospectus relating to the Initial Public Offering, provided that no
fractional shares shall be issued and the value of any fractional share shall be
paid in cash at such price per share. The Shareholder acknowledges that the sale
of the Company Stock will be restricted for a period of time by virtue of a
"lock-up" agreement which may be imposed by the Company, and the Shareholder
shall execute such a "lock-up" agreement, as may be required by the Company, by
which the sale of the Company Stock is restricted (perhaps prohibited) for a
period of two (2) years from the date of the closing of the Initial Public
Offering. The "lock-up" agreement shall provide that unless the Shareholder is
in default, she shall be entitled to vote the shares subject to the "lock-up"
agreement and to dividends, if any, on such shares.
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Two Million, Two Hundred Thirty-Eight Thousand, Two Hundred
Sixty-Five Dollars ($2,238,265) of the Purchase Price (the "Maximum Earn-Out")
shall be earned by the Shareholder ratably over the 8 calendar quarter periods
beginning January 1, 1998 and ending December 31, 1999 provided that the
Corporation achieves gross revenue of at least $2,797,831 (the "Revenue Goal")
each such calendar quarter. In the event that the Corporation fails to achieve
such Revenue Goal during any such calendar quarter, then for each calendar
quarter in which the Corporation fails to achieve such Revenue Goal, the cash
portion of the Purchase Price shall be reduced by one-eighth (1/8) of the
Maximum Earn-Out, multiplied by a fraction with a numerator equal to the excess
of the Revenue Goal over the Corporation's actual gross revenue for such quarter
and a denominator equal to the Revenue Goal. The Maximum Earn-Out, less any such
reductions is referred to hereinafter as the "Earn-Out." The Earn-Out shall bear
interest at the rate of seven percent (7%) per annum on such amount from the
Closing Date until the date of payment of the Earn-Out to the Shareholder. The
Earn-Out shall be paid to the Shareholder promptly following calculation of the
Corporation's performance for the quarter ending December 31, 1999. The Company
covenants and agrees to maintain sufficient cash, or availability of cash (e.g.,
by way of a line of credit) in order to fund the Earn-Out.
At the request of the Shareholder made to the Company in writing not later
than the Closing in Escrow, the Company shall (immediately after Closing) make a
loan to the Shareholder, collectively, in an amount equal to up to $2,238,265.
Said loan by the Company to the Shareholder (the "Shareholder Loan") shall bear
interest at a rate of seven percent (7%) per annum, and shall be secured by
sixty percent (60%) of the Company Stock paid as part of the Purchase Price at
Closing. The collateral security agreement evidencing the collateralization of
the Shareholder Loan with the Company Stock and the Earn-Out shall be on such
terms as are reasonably acceptable to the Company, which terms shall include,
but shall not be limited to, the retention of all of the Company Stock (i.e.,
sixty percent of the Company Stock paid as part of the Purchase Price) by the
Company until full repayment of the Shareholder Loan (including accrued
interest). The Shareholder shall have the right to prepay the Shareholder Loan
(plus accrued interest) at any time without penalty and shall have the right to
direct the Company to offset the balance due under the Shareholder Loan (plus
accrued interest) against the Earn-Out as earned each quarter. The Shareholder
Loan shall mature
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as of the date that the Earn-Out is payable. In the event that the Shareholder
Loan (including accrued interest) is not repaid in full upon maturity, the
Company shall enjoy all rights of a secured party under the Uniform Commercial
Code then in effect in the State of Maryland, provided that the Company's only
recourse shall be first against the remaining Earn-Out and then against the
Company Stock it holds as collateral, and there shall not be any recourse
against the Shareholder individually.
The parties hereby acknowledge that there is a pending claim by the
Internal Revenue Service (the "IRS Claim") against the Corporation in the
approximate amount of One Million Two Hundred Eighty-one Thousand Sixty-nine
Dollars ($1,281,069) including interest through June 30, 1997. In the event that
the IRS Claim is settled with the Internal Revenue Service on terms calling for
a Cost of Settlement (as defined below) less than One Million Five Hundred
Thousand Dollars ($1,500,000) (the "Agreed Value"), then in addition to the
Purchase Price payable in accordance with the terms of this Section 1.3 above,
the Shareholder shall receive an additional amount equal to one-half (1/2) of
the difference between the Agreed Value and the Cost of Settlement. It is
understood and agreed that, by virtue of the stock acquisition contemplated by
this Agreement, the Company will pay the amount of the ultimate tax liability to
the Internal Revenue Service as a result of the IRS Claim and the Third Party
Costs (as defined below), provided that in the event that the sum of the
ultimate tax liability with respect to the IRS Claim and the Third Party Costs
exceeds the Agreed Value, the Shareholder shall be solely responsible for such
excess.
The term "Cost of Settlement" shall mean the sum of the amount paid to the
Internal Revenue Service to settle such pending claim and the aggregate cost to
the Corporation for fees and expenses of third parties (e.g., attorneys and
accountants) incurred in connection with such pending claim and the settlement
thereof except to the extent that such fees and expenses were reflected as
liabilities on the audited balance sheet of the Corporation most recently
provided to the Company prior to execution of this Agreement (the "Third Party
Costs"). The Company shall cause the Corporation after the Closing Date to
exercise its best efforts to defend against such claim and any amount to be paid
to the Internal Revenue Service to settle such claim shall be subject to the
Shareholder's prior approval, which shall not be unreasonably delayed or
withheld.
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
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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 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 the Purchase Price to the Shareholder (less the
Maximum Earn-Out, which shall be payable to the Shareholder pursuant to the
terms of Section 1.3 above, and with the Company Stock collateralized against
the Shareholder Loan being delivered to the Company as appropriate).
2. Representations, Warranties and Covenants of the Corporation and the
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 California, 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.
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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 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 20,000 shares of $10.00 par
value capital stock of which 20,000 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, except as disclosed in Exhibit C. 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
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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 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, except as disclosed in
Exhibit C. The Company has been provided with true and complete copies of (i)
all injunctions, judgments, orders or consent or similar decrees or agreements
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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 of 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 disclosed in Exhibit C, 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 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
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(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 joint and several
account of the Shareholder and shall be paid in full by her at the Closing in
Escrow.
2.11. Financial Statements; Receivables. Attached hereto as Exhibit
G are true, correct and complete copies of the Corporation's most recent
unaudited financial statements which, together with the financial statements
(including the notes and exhibits thereto) to be delivered pursuant to Section
1.3 herein (the "Financial Statements") were and will be prepared in accordance
with the books and records of the Corporation, are and will be complete and
correct in all material respects, have and will have been prepared in accordance
with U.S. generally accepted accounting principles ("GAAP"), applied
consistently with the past practices of the Corporation, except where otherwise
specifically noted therein, and present and will present fairly in all material
respects the financial position, results of operations and changes in financial
position or cash flows, whichever is applicable, of the Corporation as at the
dates and for the periods indicated (subject, in the case of the unaudited
financial statements, to normal year-end audit adjustments). Without limiting
the foregoing, no undisclosed liabilities or obligations of any nature (whether
known or unknown, or absolute, accrued, contingent or otherwise) shall exist as
at Closing in Escrow or the Closing not reflected in the most recently dated
balance sheet supplied to the Company. Except as disclosed in Exhibit C, 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,
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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. Except as disclosed in Exhibit E, the Corporation is
not in material default of any of its obligations, contracts, or commitments in
any respect, or in breach of any negative or affirmative covenants placed on it
by its creditors, and the Shareholder has not been notified of any such defaults
or breaches.
2.13. Absence of Certain Developments.
(a) There has been no event, condition or state of facts of
any character that has had or is reasonably likely to have a material adverse
effect on the Corporation.
(b) The Corporation has not entered into any transaction or
contract, or conducted its business, other than in the ordinary course
consistent with past practice.
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.
14
(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 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 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) To the best knowledge of the Corporation and the
Shareholder, no other person or entity is infringing in any respect on any part
of the Intellectual Property. The Corporation has not conducted its business,
and has not used or enforced (or failed to use or enforce) any Intellectual
Property, in a manner that would result in the abandonment, cancellation or
unenforceability of any item of Intellectual Property, and the Corporation has
not taken or failed to take any action that would result in the forfeiture or
relinquishment of any Intellectual Property used in the conduct of its business
as now conducted;
(v) Except as set forth in Exhibit H, the Corporation
has no liability or obligations to any third parties incident to the
Intellectual Property used or able to be used by the Corporation in the conduct
of its business as heretofore conducted; and
15
(vi) The Corporation has timely met all of its
obligations to any third parties incident to the Intellectual Property used or
able to be used by the Corporation in the conduct of its business as heretofore
conducted, and such obligations have been and will be correctly and adequately
disclosed in the Financial Statements.
(c) Protection and Maintenance of Intellectual Property.
(i) The Corporation has taken all reasonable steps to
(x) protect its rights to the Intellectual Property, and (y) to prevent the
unauthorized use by any other person or entity; and
(ii) The Corporation shall use all reasonable efforts to
maintain, or cause to be maintained, the Intellectual Property in full force and
effect through the Closing and, without limitation, has renewed or has made, and
will make within any applicable renewal period ending on or prior to the Closing
Date, application to renew all of the Intellectual Property subject to
expiration on or prior to the Closing Date. Neither the Corporation 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
16
been properly filed by the Corporation. During the past two years, the
Corporation has not been refused any insurance coverage by any insurer from
which the Corporation has sought coverage.
2.16. Leases. Except as set forth on Exhibit I, the Corporation is
not a lessee or tenant of any real or personal property.
2.17. Labor Agreements. The Corporation is not a party to any
collective bargaining agreement. Except as set forth in Exhibit J, the
Corporation is not bound by any severance pay requirements or agreements, or any
other agreement, handbook, manual, or benefit book referring to, relating to, or
involving its employees.
2.18. Employee Benefit Plans. Except as set forth on Exhibit K
hereto, the Corporation does not maintain or contribute to, and it has no
liability or obligation with respect to any formal or informal stock option,
profit sharing, pension, retirement, bonus, stock bonus, thrift-savings,
incentive, benefit, welfare, cafeteria, medical insurance, dental insurance,
life insurance, accidental death and dismemberment insurance, disability
insurance or other similar plan, policy or arrangement (collectively referred to
herein as the "Plans"). The Corporation is not in default under the terms of any
of the Plans. The Corporation has made all contributions to each of the Plans
required by the terms of the respective Plans, as well as all contributions
required to be made in order to satisfy all requirements of law. Each of the
Plans has sufficient assets to satisfy (under reasonable and permitted actuarial
assumptions) its obligations on a termination basis, and the level of
contributions required pursuant to the terms of each Plan is sufficient to
satisfy (under reasonable and permitted actuarial assumptions) the obligations
of such Plan on a continuing basis for benefits accrued to date.
2.19. Compliance With ERISA. The Corporation's Plans are currently
in compliance in all respects with the Employee Retirement Income Security Act
of 1974 and the regulations promulgated thereunder (collectively, "ERISA").
Except as set forth on Exhibit L hereto, no employee benefit plan and no trust
created thereunder has ever been terminated by the Corporation. No liability to
the Pension Benefit Guaranty Corporation ("PBGC") has been or is expected to be
incurred by the Corporation with respect to the Plans. Neither the Corporation
nor any of the Plans has ever experienced an accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Internal Revenue Code of
1986, as amended (the "Code")), whether or not
17
waived, with respect to any employee benefit plan and no such accumulated
funding deficiency currently exists. Except as set forth on Exhibit L hereto,
the Corporation is not required, and has not been required in the past, to make
any payments or contributions under the terms of any "multi-employer plan" (as
defined in Section 3(37) of ERISA and Section 414(f) of the Code) or by any
collective bargaining agreement with respect to any employee benefit plan.
Neither the Corporation nor any of the Plans has ever incurred any withdrawal
liability (including any contingent or secondary withdrawal liability) within
the meaning of Section 4201 and Section 4204 of ERISA with respect to any
multi-employer plan. The Corporation and the trustees or the administrators of
the Plans have provided continuation of coverage notices to employees and their
dependents as required by the Consolidated Omnibus Budget Reconciliation Act of
1986, as amended ("COBRA"), and has complied with all such continuation of
coverage requirements. The execution and delivery of this Agreement will not
involve a prohibited transaction within the meaning of ERISA or Section 4975 of
the Code.
2.20. Employee Relations. The Corporation is in substantial
compliance with all applicable federal, state and local laws, statutes,
regulations, orders, codes, ordinances, guidelines, executive orders, contractor
requirements, judicial and administrative judgments and determinations to which
the Corporation is or was a party, and any other authority governing the
Corporation with respect to its employees and workplaces (hereinafter
collectively referred to as the "Applicable Employment Standards"), including,
but not limited to, employment, employment practices, fringe benefits, terms and
conditions of employment, termination of employment, severance or separation
pay, workers' compensation, disability, entitlements, unemployment insurance,
employment screening, wage-hour, employment discrimination on any basis, equal
employment opportunity, individual employee rights, affirmative action,
occupational health and safety, and immigration and right to work requirements.
Such compliance by the Corporation includes, but is not limited to, Title VII of
the Civil Rights Act of 1964, as amended, including the Civil Rights Act of
1991; the National Labor Relations Act of 1935, as amended; the Fair Labor
Standards Act of 1938, as amended; the Occupational Safety and Health Act of
1970, as amended; the Equal Pay Act of 1963, as amended; the Age Discrimination
in Employment Act of 1967, as amended; the Americans with Disabilities Act of
1990; the Family Medical Leave Act of 1993; the Immigration Reform and Control
Act of 1986
18
(together with the regulations promulgated thereunder, hereinafter collectively
referred to as "IRCA"); the Worker Adjustment and Retraining Notification Act;
the Employee Polygraph Protection Act; the Drug-Free Workplace Act of 1988; the
Health Insurance Portability and Accountability Act of 1996; the Code; the
regulations promulgated under each such act; and any and all other federal,
state and local laws, regulations and requirements of any nature applicable to
the Corporation. The Corporation further represents that it is not in arrears in
the payment of wages to any employee (except to the extent of its normal payroll
practices), and there are no claims, liabilities, demands or causes of action,
realized or unrealized, actual, potential or contingent, pursuant to statutory
rights or in tort, contract or otherwise, against the Corporation arising out of
or in connection with any event, fact, circumstance or occasion relating to any
applicant for employment, the employment of any employee or the separation from
employment of any employee.
2.21. Licenses. The Corporation and its employees and agents have
all licenses, permits, orders, approvals and authorizations necessary for the
conduct of its business as presently conducted. The Corporation and its
employees and agents have all licenses, permits, orders, approvals and
authorizations necessary for the operation of the real and personal property
presently leased to, owned or operated by the Corporation. None of the permits
issued to the Corporation will be adversely affected by the consummation of the
transactions contemplated by this Agreement. No suspension or cancellation of
any such licenses, permits, orders, approvals or authorizations is pending or,
to the best of the Corporation's and/or the 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 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
19
other business partner of the Corporation to either (x) terminate or
significantly change its existing business relationship with the Corporation
either now or in the foreseeable future, or (y) fail to renew or extend its
existing business relationship with the Corporation at the end of the term of
any existing contractual arrangement such entity may have with the Corporation.
For purposes of this Agreement, the term "Default" means, with respect to any
Contract, (x) any material breach of, or material default under, such Contract,
(y) any event, other than the normal passage of time, which would (either with
or without notice or lapse of time or both) give rise to any right of
termination, cancellation or acceleration of, or any obligation to repay, with
respect to such Contract, or (z) any event, other than the normal passage of
time, which would result in either a significant increase in the obligations or
liabilities of, or a loss of any significant benefit of, the party in question
under such Contract.
Copies of all written contracts, and a description of all oral contracts,
to which the Corporation is a party, are attached hereto as Exhibit M.
2.24. Misrepresentation. Neither this Agreement (including the
Exhibits hereto) or any Related Agreement or any information supplied to the
Company by or on behalf of the Corporation and/or the 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.
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. 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 shall abide by the terms of
the Confidentiality Agreement between the Corporation and the Company's
predecessor, Dispatch Management Services LLC, executed on May 12, 1997. The
Shareholder and the Corporation both acknowledge and agree that the Company
shall have the right to disclose certain information concerning the Corporation
to
20
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, and until
the Closing Date to the Corporation, 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 Operating Agreement of
21
Dispatch Management Services LLC, (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
22
the Company.
4.6. Default. The Company is not in material default of any of its
obligations, contracts, or commitments in any respect, or in breach of any
negative or affirmative covenants placed on it by its creditors, and the Company
has not been notified of any such defaults or breaches.
4.7. Misrepresentation. Neither this Agreement (including the
Exhibits hereto) or any Related Agreement or any information supplied to the
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.
4.8. Brokers and Finders.
(a) No person or entity has acted directly or indirectly as a
broker or finder for or to the Company in connection with the negotiations
relating to or the transactions contemplated by this Agreement or the Related
Agreements; and
(b) 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 Company hereby
agrees to hold the Shareholder, and prior to the Closing the Corporation,
harmless from any such fees or commission claimed on the basis of broker or
finder services provided to the Company.
4.9. Confidentiality. The Company shall abide by the terms of the
Confidentiality Agreement between the Corporation and the Company's predecessor,
Dispatch Management Services LLC, executed on May 12, 1997.
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):
23
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;
(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.
24
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. 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.
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
25
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.
6.5 Working Capital as of the Closing Date. The Shareholder shall
ensure that the Corporation has a positive working capital (defined as the
excess of current (liquid) assets over current liabilities) as of the Closing
Date. For purposes of determining whether the Corporation had a positive 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 a
negative working capital as of the Closing Date, as determined by such balance
sheet, the Shareholder shall forthwith pay the Company an amount equal to such
negative 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
(including, but not limited to, the Earn-Out to which the Shareholder may be
entitled thereafter).
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 her decision to dispute the amount
26
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.
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 writing
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 respects as of the date of this
27
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 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 writing in
whole or in part by the Corporation or the Shareholder).
28
(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
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;
and (iii) to the extent that such termination results from the willful breach by
29
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 Shareholder.
The Corporation and the Shareholder 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 of the Corporation prior to
the Closing Date (but only to the extent that the amount of such Loss was not a
stated liability on the Corporation's most recently dated balance sheet
delivered to the Company); and (ii) any inaccuracy in or breach of any of the
Corporation's or the 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, the indemnification by the Corporation and
the Shareholder under this Section 9.1.(a) shall include direct damages only
(and not indirect or consequential damages). For purposes of this Agreement, the
term "Losses" means any and all deficiencies, judgments, settlements, demands,
claims, actions or causes of action, assessments, liabilities, losses, damages
(whether direct, indirect or consequential), interest, fines, penalties, costs
and expenses (including, without limitation, reasonable legal, accounting and
other costs and expenses incurred in connection with investigating, defending,
settling or satisfying any and all demands, claims actions, causes of action,
suits, proceedings, assessments, judgments or appeals, and in seeking
indemnification therefor). With respect to the Shareholder, the term "Losses"
also includes the Shareholder's liability, if any, to the Company under Section
1.3 for the IRS Claim and related Third Party
30
Costs.
(b) Indemnification by the Company. The Company hereby agrees
to indemnify, defend and hold harmless the Shareholder, and prior to the Closing
Date the Corporation, 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.
9.2. Notice. If any claims in respect of Losses shall be asserted
against any party hereto or any of their respective successors in respect of
which such entity proposes to demand indemnification from any of the other
parties hereto under Section 9.1 hereof, the party seeking such indemnification
shall notify the other such parties in a reasonably prompt manner; provided that
failure to give such reasonably prompt notice shall not release, waive or
otherwise affect any party's obligations with respect thereto except to the
extent such party can demonstrate it was actually and materially prejudiced as a
result thereof.
10. General Provisions.
10.1. Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall survive the
Closing.
10.2. Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally or telecopied or
sent by overnight courier, or by certified or registered mail, postage prepaid,
and shall be deemed to be given, dated and received when so delivered personally
or by courier or telecopied, or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such Person may subsequently designate by written notice given
hereunder:
31
(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 Xxxxxx
0000 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
10.3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original and all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
10.4. Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Related Agreements and any other documents and instruments
referred to herein) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereto and is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder. Subject
to applicable law, this Agreement may be amended, modified or supplemented only
by written agreement of all parties hereto with respect to any of the terms
contained herein, and each party hereto agrees to be bound by any such
amendment, modification or supplement.
10.5. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Maryland, without giving effect to
the principles of conflicts of law thereof.
10.6. Severability. If any term or other provision of this Agreement
is invalid, illegal or unenforceable, all other provisions of this Agreement
shall remain in full force and effect so long
32
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 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
33
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
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 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 connection with the closing of the Initial
Public Offering, the fact that this Agreement has been executed, the names of
the parties to this Agreement and the terms hereof.
34
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"
AERO SPECIAL DELIVERY SERVICE, INC.
By: /s/ Xxxx Xxxxxx
------------------------- ----------------------------------
Xxxx Xxxxxx, President
Witness: "SHAREHOLDER"
/s/ Xxxxxx Xxxxxx
-------------------------- --------------------------------------
Xxxxxx Xxxxxx
35
