EXHIBIT 2.62
AGREEMENT
This Agreement (the "Agreement") is entered into as of the 20th day of
November, 1997, by and among Dispatch Management Services Corp., a Delaware
corporation and successor in interest to Dispatch Management Services LLC by
merger (the "Company"), Express Air Management, Inc., a Georgia corporation
which has elected S Corporation treatment for federal income tax purposes (the
"Business Contribution Member"), Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx and
Xxxxxxxx X. Xxxxxxxxx, (collectively, the "Shareholders") and DMS Subsidiary
Number ___, a Delaware corporation to be formed (the "Specific Company
Subsidiary").
W I T N E S S E T H
WHEREAS, the Business Contribution Member is in the business of re-selling
Airborne Express services (such business, and any other lines of business
related thereto, the "Business");
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of the Business Contribution Member;
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 Business Contribution Member desires to sell to
the Company all the Business Contribution Member's right, title and interest in
and to the Assets (as defined in Section 1.2(a) below, and have the Company
assume the Assumed Liabilities (as defined in Section 1.2(b) below) for the
Purchase Price (as defined in Section 1.4 below);
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 Assets and assumption of the Assumed
Liabilities will be consummated;
WHEREAS, at Closing (as hereinafter defined) under this Agreement, the
Company will contribute to the Specific Company Subsidiary all of the Company's
right, title and interest in and
to the Assets and have the Specific Company Subsidiary assume the Assumed
Liabilities, in exchange for 100% of the equity ownership in the Specific
Company Subsidiary;
WHEREAS, the Specific Company Subsidiary intends to obtain non-competition
agreements with each of the Shareholders of the Business Contribution Member and
certain employees of the Business Contribution Member and the Specific Company
Subsidiary in the form attached hereto as Exhibit B (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");
WHEREAS, the parties intend that at the Closing the Business Contribution
Member will change its corporate name and/or trade name, as necessary, so that
the Specific Company Subsidiary may trade under the trade name previously used
for the Business (which trade name is specifically acquired by the Specific
Company Subsidiary hereunder);
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 Business Contribution Member and each 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 Shareholders and
the Business Contribution Member shall be obliged to deliver to the Company,
within thirty (30) days after execution of this Agreement: (i) the audited
financial statements required pursuant to Section 1.4 below; and (ii) the
agreements required pursuant to Section 3.1 below.
After execution of the this Agreement, the Company will deliver to the
Business Contribution Member and the Shareholders a disclosure document,
together with a notice (the "Notice") specifying the date by which the Business
Contribution Member and the Shareholders must execute and deliver satisfactory
representation letters in order to consummate the sale of the Assets and
assumption of the Assumed Liabilities pursuant to the terms of this Agreement.
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Upon timely delivery from the Business Contribution Member and all of
the Shareholders of 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 representation letters from
the Business Contribution Member and the Shareholders.
In the event that the Business Contribution Member and/or one or more
of the Shareholders do not timely deliver satisfactory representation letters
(as determined in the sole discretion of the Company), this Agreement will be of
no further force or effect, except for any and all obligations under Sections
3.2 (confidentiality), 1.4 (reimbursement of audit expenses) and 8.2 (effect of
termination under Section 8.1), which obligations will survive termination of
this Agreement.
1.2 DEFINITIONS.
(a) DEFINITION OF ASSETS. For purposes of this Agreement, the
term "Assets" shall mean and include the following assets of the Business
Contribution Member:
(i) Those agreed upon assets (including radio channels)
set forth on Exhibit C attached hereto;
(ii) All rights to the trade name "Express Air", logos,
and other Intellectual Property as defined in Section 2.11.(d) hereinbelow,
customer lists, goodwill and other intangible assets; and
(iii) All rights, claims, and interests of the Business
Contribution Member, as of the Closing Date, under and with respect to agreed
upon contracts (the "Contracts"), as set forth on Exhibit D attached hereto.
To the extent that the assignment of the rights, claims and interests of
the Business Contribution Member under any of the Contracts requires the consent
of a third party (as set forth in Exhibit E hereto), and such third party's
consent to assignment is not secured prior to Closing hereunder, the Business
Contribution Member and the Shareholders shall use their best efforts to
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place the Specific Company Subsidiary in a position to receive the benefits of
the Business Contribution Member's rights, claims and interest in such Contracts
during the term of such Contracts. The parties' efforts to this end shall be
made in a lawful and commercially reasonable manner.
(b) DEFINITION OF ASSUMED LIABILITIES. For purposes of this
Agreement, the term "Assumed Liabilities" shall mean and include:
(i) Those outstanding liabilities and obligations of the
Business Contribution Member, and only those liabilities and obligations, which
are set forth on Exhibit F attached hereto; and
(ii) Those liabilities and obligations of the Business
Contribution Member arising after the Closing Date under the express provisions
of the Contracts. For purposes of clarification, the Business Contribution
Member will be responsible for all taxes relating to the Business and/or the
Assets and/or the Assumed Liabilities payable or accrued for all periods up to
and including the Closing Date (whether or not such taxes were assessed before
or after the Closing Date).
1.3. CLOSING IN ESCROW DELIVERIES AND OTHER ACTIONS.
(a) DELIVERIES AT CLOSING IN ESCROW. In addition to the
execution and delivery of documents as and when otherwise required by the terms
of this Agreement, at the Closing in Escrow the Company and the Business
Contribution Member and/or the Shareholders shall, as appropriate, enter into,
execute and deliver to the law firm of Silver, Xxxxxxxx & Xxxx, LLP, as escrow
agent: (i) a xxxx of sale, (ii) an instrument of assignment and assumption (the
form and substance of which shall be reasonably acceptable to the Company), and
(iii) any other instruments of conveyance or transfer which may be necessary in
the sole discretion of the Company, including, without limitation, any
instruments of assignment in connection with the Intellectual Property and the
Contracts, each in form and substance reasonably acceptable to the Company,
pursuant to which the Business Contribution Member and/or the Shareholders shall
convey, assign, transfer and deliver to the Company all right, title and
interest in, to and under the Assets, free and clear of any and all Encumbrances
(as defined in Section 2.3(a) below), and the Company shall assume the Assumed
Liabilities from the Business Contribution Member. At the Closing in Escrow,
the Business
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Contribution Member shall also cause to be delivered the opinion of its counsel
as to such matters as counsel to the Company may reasonably require, including
but not limited to such counsel's opinion that: the Business Contribution Member
is in good standing; the Business Contribution Member is authorized to conduct
its business in each jurisdiction in which it is doing business; the Business
Contribution Member and the Shareholders have full power to enter into and
perform their respective obligations under this Agreement, as well the Related
Agreements to which they are a party; this Agreement, and the Related Agreements
to which the Business Contribution Member and/or the Shareholders are a party,
constitute legal, valid and binding obligations of the Business Contribution
Member and the Shareholders, respectively, 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 neither the Business Contribution Member nor any of
the Shareholders is threatened with or affected by any actions, proceedings or
investigations wherein an unfavorable decision, ruling or finding could have a
materially adverse effect on the financial condition or operation of the
Business and/or the Assets, or could prevent, enjoin or otherwise affect the
transactions contemplated by this Agreement.
(b) FURTHER ACTIONS. On and 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.
Without limiting the foregoing, the Business Contribution Member and/or the
Shareholders shall take whatever steps are necessary (such as filings with the
United States Patent and Trademark Office) to transfer the Intellectual Property
to the Specific Company Subsidiary.
(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 Assets, and assume the Assumed Liabilities, and the Business
Contribution Member will be obliged to sell the Assets, subject to the Assumed
Liabilities, at the purchase price specified in Section 1.4 below, on the
Closing Date specified in Section 1.5 below.
1.4. PURCHASE PRICE. The purchase price for the Assets (the
"Purchase Price"), shall be equal to $300,000, subject to further adjustment (if
any) as a result of a reduction in the Maximum Earn-Out (as defined in this
Section 1.4 below).
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The parties hereto agree to allocate the Purchase Price to the Assets
in accordance with the manner set forth on Schedule 1.4 attached hereto and in
accordance with the applicable provisions of Section 1060 of the Code (the
"Price Allocation"). Accordingly, each party to this Agreement shall adopt and
utilize such Price Allocation for purposes of all tax returns filed by them and
shall not voluntarily take any position inconsistent therewith in connection
with any examination of any tax return, any refund claim, any litigation
proceeding or otherwise. Each of the Company and the Business Contribution
Member shall file on a timely basis a Form 8594 in accordance with the
requirements of Section 1060 of the Code and the provisions of this Section 1.4.
In the event that the Price Allocation is disputed by an taxing authority, the
party receiving notice of the dispute shall promptly notify the other parties
hereto of such dispute and the parties hereto shall consult with each other
concerning resolution of the dispute.
Unless the Company gives the Shareholders and the Business
Contribution Member written notice to the contrary, the Shareholders and the
Business Contribution Member shall deliver to the Company, within thirty (30)
days after execution of this Agreement: (i) audited financial statements of the
Business, 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
Business, 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 Business,
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
Business for the six month period ended June 30, 1997, the Shareholders and the
Business Contribution Member shall deliver to the Company, within thirty days
after written request from the Company: (i) an updated set of audited financial
statements of the Business, including a balance sheet dated as of June 30, 1997,
and income statements and cash flow statements for the six
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month period ended June 30, 1997; (ii) unaudited financial statements for the
Business, 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
Business, 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 and the Business
Contribution Member 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 Business as the Company may reasonably
request.
All of the financial statements referred to in this Section 1.4 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 1.4,
within the prescribed time limits, shall be the sole responsibility of the
Business Contribution Member, provided that the Company will, upon the request
of the Business Contribution Member, advance such costs on behalf of the
Business Contribution Member. In the event that the Business Contribution
Member and/or one or more of the Shareholders do not timely deliver satisfactory
shareholder representation letters and complete the Closing in Escrow, the
Business Contribution Member and the Shareholders shall be jointly and severally
responsible for immediately refunding to the Company any such advanced costs; in
the event that all such representation letters are satisfactory and are timely
received, and the Closing in Escrow is completed, the Business Contribution
Member and the Shareholders shall be relieved of their obligation to refund to
the Company any such advanced costs.
The Company shall pay sixty percent (60%) of the Purchase Price in
cash (the "Maximum Earn-Out"), which is subject to reduction in accordance with
the terms of the next paragraph, and forty percent (40%) 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 in partial payment of the
Purchase Price shall equal 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. The Business Contribution Member and the
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Shareholders acknowledge that the sale of the Company Stock will be restricted
for a period of time by virtue of a "lock-up" agreement which may be imposed by
the Company, and the Business Contribution Member and the Shareholders shall
execute such a "lock-up" agreement, as may be required by the Company, by which
the sale of the Company Stock is restricted (perhaps prohibited) for a period of
two (2) years from the date of the closing of the Initial Public Offering.
The Maximum Earn-Out shall be earned by the Business Contribution
Member ratably over calendar years 1998 and 1999 provided that the Specific
Company Subsidiary achieves the targeted performance standards set forth in
Exhibit G attached hereto. In the event that the Specific Company Subsidiary
fails to achieve the margin requirement set forth in Exhibit G during any
calendar quarter, then for each calendar quarter in which the Specific Company
Subsidiary fails to achieve such margin requirement, the cash portion of the
Purchase Price shall be reduced by one-eighth (1/8) of the Maximum Earn-Out. In
the event that the Specific Company Subsidiary fails to achieve the revenue
requirement set forth in Exhibit G, then the cash portion of the Purchase Price
(as reduced, if at all, in accordance with the preceding sentence) shall be
further reduced by multiplying the same by two fractions, the first of which
shall be equal to the actual revenue realized during calendar year 1998 divided
by $800,000, and the second of which shall be equal to the actual revenue
realized during calendar year 1999 divided by $800,000. Neither of the two
foregoing fractions shall exceed one. The Maximum Earn-Out, less any reductions
as set forth in this paragraph, is hereinafter referred to as the "Earn-Out".
The Earn-Out shall bear interest at the rate of 7% per annum commencing as of
the Closing Date (i.e., once the Earn-Out is determined, the Shareholders will
be due such amount plus interest at the rate of 7% per annum on such amount,
accrued from the Closing Date until the date of payment of the Earn-Out to the
Shareholders). The Earn-Out shall be paid to the Business Contribution Member
promptly following calculation of the Specific Company Subsidiary'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 Business Contribution Member made to the Company
in writing not later than the Closing in Escrow, the Company shall (immediately
after Closing) make a loan to the Business Contribution Member in an amount
equal to up to 60% of the Purchase Price. Said loan
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by the Company to the Business Contribution Member (the "Business Contribution
Member Loan") shall bear interest at a rate of seven percent (7%) per annum, and
shall be secured by: (i) the Earn-Out; and (ii) all of the Company Stock paid as
part of the Purchase Price at Closing. The collateral security agreement
evidencing the collateralization of the Business Contribution Member Loan with
the Company Stock and the Earn-Out shall be on such terms as are reasonably
acceptable to the Company, which terms shall include, but shall not be limited
to, the retention of all of the Company Stock by the Company until full
repayment of the Business Contribution Loan. The Business Contribution Member
shall have the right to prepay the Business Contribution Member 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 Business Contribution Member
Loan (plus accrued interest) against the Earn-Out as earned each quarter. The
Business Contribution Member Loan shall mature as of the date that the Earn-Out
is payable. In the event that the Business Contribution Member Loan 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 Business Contribution Member or the
Shareholders individually.
1.5. 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 Assets, subject
to the Assumed Liabilities, 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 Reorganization Event unless the Initial Public Offering unless
the Initial Public Offering does not occur by March 31, 1998, in which case this
Agreement shall be rendered null and void, or unless another date, time or place
is agreed to in writing by the parties hereto (the day on which the Closing
takes place being the "Closing Date").
At the Closing: (i) Silver, Xxxxxxxx and Taff, L.L.P. shall deliver
to the Company the xxxx of sale, instruments of assignment and assumption,
transfer documents, and other documents
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and materials theretofore held in escrow from the Closing in Escrow; (ii) the
Business Contribution Member and the Shareholders shall deliver to the Company
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 1.3(a) above; and (iii) the Company shall deliver the Purchase Price to
the Business Contribution Member (less the Maximum Earn-Out, which shall be
payable to the Business Contribution Member pursuant to the terms of Section 1.4
above, and with the Company Stock collateralized against the Business
Contribution Member Loan being delivered to the Company as appropriate). At
Closing, Company, Business Contribution Member, Shareholders and Specific
Company Subsidiary shall also take all additional steps as may be necessary or
appropriate to deliver the Assets to the Specific Company Subsidiary, have the
Specific Company Subsidiary assume the Assumed Liabilities, and put the Specific
Company Subsidiary in physical possession and operating control of the Business
and all of the Assets.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUSINESS CONTRIBUTION
MEMBER AND THE SHAREHOLDERS.
The Business Contribution Member and the Shareholders hereby jointly
and severally represent, warrant and covenant to the Company as follows:
2.1. ORGANIZATION, STANDING AND POWER. The Business Contribution
Member is an "S" Corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia, and has all requisite corporate
power and authority to own, lease and operate its properties (including, without
limitation, the Assets) and to carry on its business as now being conducted
(including, without limitation, the Business). The Business Contribution Member
is duly qualified and in good standing to conduct business in each jurisdiction
in which the business it is conducting (including, without limitation, the
Business), or the operation, ownership or leasing of its properties (including,
without limitation, the Assets), makes such qualification necessary.
2.2. AUTHORITY AND ENFORCEABILITY.
(a) MATTERS RELATING TO THE BUSINESS CONTRIBUTION MEMBER. The
Business Contribution Member has all requisite corporate 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, the Related
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Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Business Contribution Member. This Agreement and each of the Related
Agreements to which the Business Contribution Member is a party has been duly
executed and delivered by the Business Contribution Member, and this Agreement
and each of the Related Agreements to which the Business Contribution Member is
a party constitute the legal, valid and binding obligations of the Business
Contribution Member, enforceable against the Business Contribution Member 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 (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(b) MATTERS RELATING TO THE SHAREHOLDERS. The Shareholders 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 and each of the
Related Agreements to which any of the Shareholders are a party constitute the
legal, valid and binding obligations of the Shareholders, enforceable against
the Shareholders 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
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
2.3. TITLE TO ASSETS; CONDITION.
(a) The Business Contribution Member owns beneficially and of
record, and has good and marketable title to, the Assets, free and clear of any
Encumbrances. For purposes of this Agreement, the term "Encumbrances" shall
mean restrictions, conditions, covenants, liens, easements, charges,
encroachments or any other matter affecting fee simple title (other than the
Assumed Liabilities).
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(b) Upon consummation of the transactions contemplated at the
Closing, the Company will acquire good and marketable title to the Assets, free
and clear of any Encumbrances. All tangible assets conveyed hereunder are in
good working condition and repair, except for reasonable wear and tear.
2.4. SUFFICIENCY OF ASSETS. The Assets include substantially all the
assets and properties used or employed by the Business Contribution Member in
the Business as presently conducted. Immediately after giving effect to the
transfer of the Assets at Closing by the Business Contribution Member, and the
consummation of the other transactions contemplated pursuant to this Agreement
to be effected at the Closing, the Company 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), the Assets; and (ii) have all assets, rights, the Back-Office
Employee, subcontractors and other persons and items which are reasonably
necessary to carry on the business and operations of the Business after the
Closing Date in substantially the same manner as presently conducted by the
Business Contribution Member.
2.5. NO VIOLATIONS RESULTING FROM TRANSACTIONS. The execution and
delivery by the Business Contribution Member and the Shareholders of this
Agreement and each of the Related Agreements to which they are, respectively, a
party, and the consummation of the transactions contemplated hereby and thereby
by each of the Business Contribution Member and the Shareholders will not (a)
conflict with or violate any provision of the articles or certificate of
incorporation or by-laws of the Business Contribution Member, (b) except as set
forth in Exhibit E, require any consent, waiver, approval, authorization or
permit 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, or result in the creation of an Encumbrance, under or pursuant
to (i) any of the Contracts, or (ii) any other material agreements to which the
Business Contribution Member and/or any of the Shareholders are a party, or (d)
violate any law applicable to the Business Contribution Member or any of the
Shareholders or by which any of the Assets is bound.
2.6. COMPLIANCE WITH LAWS.
(a) The Business Contribution Member is, and at all times during
the past three years has been, in material compliance with all laws applicable
to the Business Contribution Member or to the conduct of the business or
operations of the Business Contribution Member or the
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Business or the use of its properties (including any leased properties) and
assets (including, without limitation, the Assets); and
(b) The Business Contribution Member 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 law applicable to the
Business Contribution Member or the Business. The Business Contribution Member
has provided the Company 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 Business Contribution Member or the Business is
currently subject (or which the Business Contribution Member or the Business was
subject to during the previous three years) or which are otherwise applicable to
the Business Contribution Member or the Assets or to the conduct of the
Business, and (ii) all correspondence from the date hereof with respect to any
of the matters referred to in clause (b) or clause (i) of this Section 2.6.
Neither the Business Contribution Member nor any of the Shareholders 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 either the Business or the Business Contribution Member.
2.7. 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 Business Contribution Member and/or any of the
Shareholders, threatened that questions the validity of this Agreement or the
Related Agreements or any action taken or to be taken by the Business
Contribution Member or any of the Shareholders 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 H 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 Business Contribution Member and/or any of
the Shareholders, threatened against or affecting the Business Contribution
Member, the Business or any of the Assets. To the knowledge of the Business
Contribution Member and/or any of 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
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of any claim or Legal Proceeding, other than those listed on Exhibit H. Except
as set forth in Exhibit H, there is no outstanding or, to the knowledge of the
Business Contribution Member and/or any of the Shareholders, threatened
judgment, injunction, order or consent or similar decree or agreement
(including, without limitation, any consent or similar decree or agreement with
any governmental entity) against, affecting or naming the Business Contribution
Member, the Business or any of the Assets.
2.8. FINANCIAL ADVISORS.
(a) Except as set forth on Exhibit I attached hereto, no person
or entity has acted directly or indirectly as a broker, finder or financial
advisor for or to the Business Contribution Member and/or any of the
Shareholders in connection with the negotiations relating to or the transactions
contemplated by this Agreement or the Related Agreements; and
(b) Except as set forth on Exhibit I 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 Business Contribution Member
and/or any of the Shareholders. Such fees, commissions, like payments or
expense reimbursements as are described on Exhibit I attached hereto shall
remain liabilities and expenses of the Business Contribution Member and/or the
Shareholders exclusively, and are specifically excluded from the Assumed
Liabilities contemplated by this Agreement.
2.9. FINANCIAL STATEMENTS; RECEIVABLES. Attached hereto as Exhibit J
are true, correct and complete copies of the most recent unaudited financial
statements for the Business which, together with the financial statements
(including the notes and exhibits thereto), to be delivered to the Company
pursuant to Section 1.4 herein (the "Financial Statements") were and will be
prepared in accordance with the books and records of the Business, 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 Business, 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
Business as at the dates and for the periods indicated (subject, in the case of
the unaudited financial statements, to normal year-end audit adjustments).
14
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
Business's most recently dated balance sheet supplied to the Company. The
Business Contribution Member 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
Business Contribution Member 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 Business Contribution Member'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.
2.10. 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 Assets or the Business.
(b) The Business Contribution Member has not entered into any
transaction or contract, or conducted its business, other than in the ordinary
course consistent with past practice.
2.11. INTELLECTUAL PROPERTY.
(a) LIST OF INTELLECTUAL PROPERTY; SUFFICIENCY. Exhibit K sets
forth a list of all Intellectual Property (as defined in Section 2.11.(d)
hereinbelow) which is owned by the Business Contribution Member, licensed by the
Business Contribution Member, licensed to the Business Contribution Member, or
otherwise used or able to be used in the Business (other than commonly-used
computer software which is generally available to the public and the use rights
to which were legally acquired by the Business Contribution Member either for
free or through established retail facilities) and indicates, with respect to
each item of Intellectual Property listed
15
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 Business Contribution Member owns or has the lawful right to use
all Intellectual Property as currently used or as necessary for the conduct of
the Business as now conducted. After Closing, the Specific Company Subsidiary
will have the right to use all of the Intellectual Property as currently used or
as necessary for the conduct of the Business as now conducted.
(b) TITLE; VALIDITY; PENDING APPLICATIONS; INFRINGEMENTS, ETC.
(i) Except for Intellectual Property licensed to the
Business Contribution Member, the Business Contribution Member has full legal
and beneficial ownership (free and clear of any and all Encumbrances) of all of
the Intellectual Property , and neither the Business Contribution Member nor any
of the Shareholders have received any notice or claim (whether written, oral or
otherwise) challenging the Business Contribution Member'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; the Business Contribution
Member has all legal and other rights required to transfer the ownership of the
Intellectual Property to the Company at the Closing as contemplated hereby;
(ii) All of the Intellectual Property is legally valid
and enforceable without any qualification, limitation or restriction on its use,
and neither the Business Contribution Member 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 Business Contribution Member
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 Business Contribution
Member has not conducted its business (including, without limitation, the
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
Business Contribution Member has
16
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 (including, without limitation, the Business);
(v) Except as set forth in Exhibit K, the Business
Contribution Member has no liability or obligations to any third parties
incident to the Intellectual Property used or able to be used by the Business
Contribution Member in the conduct of its business (including, without
limitation, the Business) as heretofore conducted; and
(vi) The Business Contribution Member has timely met all
of its obligations to any third parties incident to the Intellectual Property
used or able to be used by the Business Contribution Member in the conduct of
its business (including, without limitation, the 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 Business Contribution Member has taken all
reasonable steps to (x) protect the Business Contribution Member's rights to the
Intellectual Property, and (y) to prevent the unauthorized use by any other
person or entity; and
(ii) The Business Contribution Member 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 Business Contribution Member 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
17
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.
2.12. INSURANCE. The Business Contribution Member 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 the Assets and the operations conducted by
the Business. From and after Closing, the Specific Company Subsidiary will be
solely responsible for the insurance set forth in Exhibit L. In the event that
such insurance-related Assumed Liabilities as appear on Exhibit L hereto are
unable to be assumed by the Specific Company Subsidiary directly from and after
Closing, the Business Contribution Member hereby agrees to keep such insurance
policy(ies) as are reflected by such Assumed Liabilities in full force and
effect for 60 days after Closing, at the Specific Company Subsidiary's expense,
to allow the Specific Company Subsidiary to arrange its own such insurance
policy(ies). There are no pending material claims against such insurance by the
Business Contribution Member 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 Business Contribution Member. During the
past two years, the Business Contribution Member has not been refused any
insurance coverage by any insurer from which the Business Contribution Member
has sought coverage.
2.13. CONTRACTS. Each of 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 (regardless of whether enforcement is sought in a
proceeding at law or in equity); (ii) no Default (as defined below) exists under
any Contract either by the Business Contribution Member or by any other party
thereto; (iii) neither the Business Contribution Member 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; and (iv) neither the Business
Contribution Member 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 Business Contribution Member to either (x) terminate or
significantly change its
18
existing business relationship with the Business Contribution Member either now
or in the foreseeable future, or (y) fail to renew or extend its existing
business relationship with the Business Contribution Member at the end of the
term of any existing contractual arrangement such entity may have with the
Business Contribution Member. For purposes of this Agreement, the term
"Default" means, with respect to any Contract, (x) any breach of or 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 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.
2.14. 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 Business Contribution Member or any of the
Shareholders in connection with this Agreement, the Related Agreements or the
transactions contemplated hereby or thereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statement contained herein or therein, in light of the
circumstances under which they were made, not misleading. Neither the Business
Contribution Member nor any of the Shareholders knows of any facts which are
reasonably likely to cause a material adverse effect on the Assets or the
Business.
3. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUSINESS
CONTRIBUTION MEMBER.
3.1. NON-COMPETITION AND OTHER COVENANTS OF THE BUSINESS CONTRIBUTION
MEMBER, THE SHAREHOLDERS, AND CERTAIN EMPLOYEES OF THE BUSINESS
CONTRIBUTION MEMBER
Each of the Shareholders, the Business Contribution Member, and
certain employees of the Business Contribution Member noted on Exhibit B
attached hereto, shall have, at the Closing in Escrow, entered into agreements,
the form of which is attached to this Agreement as Exhibit B.
19
3.2. CONFIDENTIALITY. The Business Contribution Member and the
Shareholders shall abide by the terms of the Confidentiality Agreement between
the Business Contribution Member and the Company (or the Company's predecessor,
Dispatch Management Services LLC) executed on ____________. The Business
Contribution Member, the Shareholders, and the Specific Company Subsidiary each
acknowledge and agree that the Company shall have the right to disclose certain
information concerning the Specific Company Subsidiary, the Assets and/or the
Business to third parties (which third parties will in turn be bound by an
agreement similar to the Confidentiality Agreement), for such general corporate
purposes as includes but is not limited to obtaining financing and/or
underwriting, and for general marketing purposes.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Business Contribution
Member and 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
20
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, or (b) except as
set forth on Exhibit E, 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 Business Contribution
Member 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 H 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
21
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 H. Except as set forth in Exhibit H, there is no
outstanding or, to the knowledge of the Company, threatened, judgment,
injunction, order or consent or similar decree or agreement (including, without
limitation, any consent or similar decree or agreement with any governmental
entity) against, affecting or naming the Company.
4.6. DEFAULT. The Company is not in material default of any of its
obligations, contracts, or commitments in any respect, or in breach of any
negative or affirmative covenants placed on it by its creditors, and the Company
has not been notified of any such defaults or breaches.
4.7. MISREPRESENTATION. Neither this Agreement (including the
Exhibits hereto) or any Related Agreement or any information supplied to the
Business Contribution Member 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 Business Contribution Member and the Shareholders, 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 UNTIL THE CLOSING DATE. The Business
Contribution Member shall be obligated to:
(a) conduct the 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 the Business and (ii) preserve the present
relationship of the Business Contribution Member with Persons having business
dealings with the Business Contribution Member;
22
(c) comply with all laws and with all contractual and other
obligations applicable to the Business Contribution Member;
(d) not subject any of the Assets to any Encumbrance;
(e) not acquire any material properties or assets and not sell,
assign, transfer, convey, lease or otherwise dispose of any of the material
properties of the Business (including but not limited to the Assets);
(f) promptly notify the Company of (i) the occurrence of any
matter which may have a material adverse effect on the Business or the Assets,
and (ii) any Legal Proceeding commenced by or against the Business Contribution
Member or any Legal Proceeding commenced or threatened relating to the
transactions contemplated by this Agreement.
(g) not agree to do anything prohibited by this Agreement or
anything which would make any of the representations and warranties of the
Business Contribution Member or the Shareholders in this Agreement or the
Related Agreements untrue or incorrect in any material respect.
6. ADDITIONAL AGREEMENTS AND REPRESENTATIONS.
6.1. CHANGE OF NAME. At the Closing, the Business Contribution Member
shall take all steps necessary to change its corporate name and/or trade name to
a name not confusingly similar to the trade name being conveyed hereunder and to
be utilized post-Closing by the Specific Company Subsidiary.
6.2. ACCESS TO INFORMATION. The Business Contribution Member agrees
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 Business and the Business Contribution Member 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 Business Contribution Member 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 Business
23
and the Business Contribution Member, each of the Business Contribution Member
and the Shareholders shall use their respective best efforts to cause the
Business Contribution Member's officers, employees, consultants, agents,
accountants, attorneys and other representatives to cooperate fully with such
Company representatives in connection with such review and examination.
6.3. NON-SOLICITATION PENDING CLOSING. After execution of this
Agreement, and through the Closing Date, neither the Business Contribution
Member nor any of the Shareholders shall pursue, initiate, encourage or engage
in any negotiations or discussions with any third parties concerning the sale of
the Business, the Assets, or any part thereof or concerning the terms and
conditions of this Agreement.
6.4. 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 Business Contribution Member 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.
6.5. NOTIFICATION OF CERTAIN MATTERS. The Business Contribution
Member 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 Business and/or the Business Contribution Member 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
(including but not limited to the Assets), business operations, results of
24
operations, financial condition or prospects of the Business, other than changes
resulting from general economic conditions. In addition, the Business
Contribution Member 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.
6.6 WORKING CAPITAL AS OF THE CLOSING DATE. The Shareholders and the
Business Contribution Member shall ensure that the Assets, less the Assumed
Liabilities, includes at least $66,666 working capital (defined as the excess
of current (liquid) assets over current liabilities) as of the Closing Date.
Using the most recent information available prior to the Closing Date, the
Shareholders and the Business Contribution Member shall estimate the working
capital as of the Closing Date. In the event that less than the prescribed
$66,666 working capital is estimated to exist as of the Closing Date, the cash
portion of the Purchase Price shall be reduced by an amount equal to the
difference between the estimated working capital as of the Closing Date and
$66,666. In the event that more than the prescribed $66,666 working capital is
estimated to exist as of the Closing Date, the cash portion of the Purchase
Price shall be increased by an amount equal to the difference between the
estimated working capital as of the Closing Date and $66,666.
For a final determination as to whether the required working capital
existed as of the Closing Date, the Company will cause to be prepared, promptly
following the Closing, a balance sheet setting forth the Assets and Assumed
Liabilities as of the Closing Date. Such balance sheet shall be prepared in
accordance with GAAP, consistent with past practices of the Business
Contribution Member, and shall include full accrual of all tax liabilities of
the Business Contribution Member 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 less than the estimated working capital existed as of
the Closing Date, as determined by such balance sheet, the Shareholders and/or
the Business Contribution Member shall forthwith pay the Company (in cash) an
amount equal to the difference between the actual working capital as of the
Closing Date and the estimated working capital (the "Shortfall"). If the
Shareholders and/or the Business Contribution Member do 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
25
obligations of the Company to the Shareholders or the Business Contribution
Member (including, but not limited to, the Earn-Out to which the Business
Contribution Member may be entitled thereafter). In the event that more than
the estimated working capital existed as of the Closing Date, as determined by
such balance sheet, the Company shall forthwith pay the Business Contribution
Member (in cash) an amount equal to the difference between the estimated working
capital and the actual working capital as of the Closing Date.
In the event that the Business Contribution Member shall notify
the Company in writing within five days after demand is made by the Company for
payment of the Shortfall of its decision to dispute the amount of the Shortfall,
the Company shall forthwith instruct Price Waterhouse LLP to audit the balance
sheet of the Business 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 6.6, whose
decision shall be final and binding on the parties hereto. The Business
Contribution Member 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.
26
7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to effect the transactions contemplated by this Agreement are subject to
the satisfaction of the following conditions (which are for the exclusive
benefit of the Company, any or all of which may be waived in whole or in part by
the Company):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Business Contribution Member and the Shareholders set forth in
this Agreement (with 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 Business Contribution Member (signed
by a senior executive officer of the Business Contribution Member) certifying to
such effect.
(b) PERFORMANCE OF OBLIGATIONS. The Business Contribution
Member 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 Business Contribution
Member (signed by a senior executive officer of the Business Contribution
Member) 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 Assets or the Business.
(d) CONTRACTUAL CONSENTS. The Business Contribution Member
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, or which may be required to permit the change of
ownership of any of the Assets).
27
(e) RELATED AGREEMENTS. Each of the Related Agreements to which
the Business Contribution Member and/or 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.
7.3. CONDITIONS TO OBLIGATIONS OF THE BUSINESS CONTRIBUTION MEMBER AND
THE SHAREHOLDERS. The obligations of the Business Contribution Member 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 Business Contribution Member and the Shareholders), any
or all of which may be waived in whole or in part by the Business Contribution
Member 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 Business
Contribution Member;
(b) by either the Company or the Business Contribution Member,
if the closing of the Initial Public Offering does not occur by March 31, 1998
for any reason whatsoever; or
28
(c) by the Company in the event that: (i) the Business
Contribution Member and/or any of the Shareholders do not timely deliver
representation letters satisfactory to the Company; or (ii) the Business
Contribution Member fails to secure, on or before the Closing Date, the consent
of Airborne Express to the assignment (to the Specific Company Subsidiary) of
the current contract between the Business Contribution Member and Airborne
Express.
8.2 EFFECT OF TERMINATION UNDER SECTION 8.1. In the event of
termination of this Agreement by either the Company or the Business Contribution
Member 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 Business Contribution Member and the Shareholders to
refund to the Company the audit expenses as set forth in Section 1.4 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 BUSINESS CONTRIBUTION MEMBER AND THE
SHAREHOLDERS. The Business Contribution Member and the Shareholders each hereby
agrees to jointly and severally indemnify, defend and hold harmless the
Company, the Specific Company Subsidiary, and their 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 the Business prior to the Closing
Date (but only to the extent that the amount of such Loss was not a stated
liability on the Business Contribution Member's most recently dated balance
sheet delivered to the Company, (ii) any inaccuracy in or breach of any of the
Business
29
Contribution Member's and/or any of 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 thereby, (ii) any liability or obligation
of the Business Contribution Member and/or any of the Shareholders other than an
Assumed Liability, and (iii) any non-compliance with any notice requirement, if
any, which may be contained in the Uniform Commercial Code as adopted by the
State of Georgia relating to bulk sales. Provided, however, the indemnification
by the Business Contribution Member and/or the Shareholders under this Section
9.1.(a) shall include direct damages only (and not indirect or consequential
damages). For purposes of this Agreement, the term "Losses" means any and all
deficiencies, judgments, settlements, demands, claims, actions or causes of
action, assessments, liabilities, losses, damages (whether direct, indirect or
consequential), interest, fines, penalties, costs and expenses (including,
without limitation, reasonable legal, accounting and other costs and expenses
incurred in connection with investigating, defending, settling or satisfying any
and all demands, claims actions, causes of action, suits, proceedings,
assessments, judgments or appeals, and in seeking indemnification therefor).
(b) INDEMNIFICATION BY THE COMPANY. The Company hereby agrees
to indemnify, defend and hold harmless the Business Contribution Member and/or
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 Business
Contribution Member and/or the Shareholders by reason of (i) 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; or (ii) any failure to discharge the Assumed Liabilities as
required by their terms. 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
30
indemnification shall notify the other such parties in a reasonably prompt
manner; provided that failure to give such reasonably prompt notice shall not
release, waive or otherwise affect any party's obligations with respect thereto
except to the extent such party can demonstrate it was actually and materially
prejudiced as a result thereof.
10. GENERAL PROVISIONS.
10.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements in this Agreement shall survive the
Closing.
10.2. NOTICES. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally or telecopied or
sent by overnight courier, or by certified or registered mail, postage prepaid,
and shall be deemed to be given, dated and received when so delivered personally
or by courier or telecopied, or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such Person may subsequently designate by written notice given
hereunder:
(a) if to Company, to:
Dispatch Management Services Corp.
00000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx, Chief Executive
Officer
(b) if to the Business Contribution Member or the
Shareholders, to:
Xxxxxxxx X. Xxxxxxxxx
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
10.3. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original and all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
31
10.4. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement (together with the Related Agreements and any other documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereto and is not intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
Subject to applicable law, this Agreement may be amended, modified or
supplemented only by written agreement of all parties hereto with respect to any
of the terms contained herein, and each party hereto agrees to be bound by any
such amendment, modification or supplement.
10.5. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Maryland, without giving
effect to the principles of conflicts of law thereof.
10.6. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially averse to any party. In the event that the enforceability of any
non-competition or similar covenants contained herein or in any Related
Agreement is called into question as the result of time, geographical or other
applicable limitations specified in such covenants, such time, geographical or
other applicable limitations shall be deemed modified to the minimum extent
necessary to render the applicable provisions of such covenants enforceable.
10.7. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
10.8. SPECIFIC PERFORMANCE. The parties hereto acknowledge that
irreparable damage would result if any of the covenants of this Agreement were
not specifically enforced, and they therefore consent that the rights and
obligations of the parties under this Agreement may be enforced by a decree of
specific performance issued by a court of competent jurisdiction. Such remedy
shall, however, not be exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise. Without limiting
the foregoing, the Business Contribution Member and the Shareholders acknowledge
that the failure to comply with any of the
32
provisions of Sections 3.1, 3.2. and 6.3 hereof will result in irreparable harm
for which there is no adequate remedy at law and that the Company and/or the
Specific Company Subsidiary 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 Specific
Company Subsidiary.
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 6.3 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
Business Contribution Member and the Shareholders that money damages are
inadequate to compensate the Company and/or the Specific Company Subsidiary for
a breach of the terms of this Agreement, and that the Company and/or the
Specific Company Subsidiary 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
33
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.
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"
Attest: DISPATCH MANAGEMENT SERVICES CORP.
By: /s/ Xxxxx Xxxxxxxxx
------------------------- ---------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
"BUSINESS CONTRIBUTION MEMBER"
Attest: EXPRESS AIR MANAGEMENT, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------- ---------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
"SPECIFIC COMPANY SUBSIDIARY"
Attest: DMS SUBSIDIARY NUMBER _______
By: /s/ Xxxxx Xxxxxxxxx
------------------------- ---------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
34
"SHAREHOLDERS"
/s/ Xxxxxx X. Xxxxxxxx
------------------------- ---------------------------
Witness Xxxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxxx
------------------------- ---------------------------
Witness Xxxxxx X. Xxxxxx
/s/ Xxxxxxxx X. Xxxxxxxxx
------------------------- ---------------------------
Witness Xxxxxxxx X. Xxxxxxxxx
35
