Exhibit 2.64
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"), A-Courier, 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 providing
time critical delivery 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 enter into employment
agreements with Xxxxxx Xxxxxxxx (the "Back-Office Employee"), in the form
attached hereto as Exhibit A, as well as 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 employment agreements and 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
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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.
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 & Xxxx, L.L.P., 0000 Xxx Xxxx Xxxxxx, X.X., 0xx
Xxxxx, Xxxxxxxxxx, X.X. 00000 (or such other place as is mutually agreed upon by
the parties) 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 "A-Courier", 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
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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 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 & Taff, 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
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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 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.
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1.4. Purchase Price. The purchase price for the Assets (the
"Purchase Price"), shall be equal to $3,131,953, 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).
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
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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 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
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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 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 $5 million, and the second of which shall be equal to the actual revenue
realized during calendar year 1999 divided by $5 million. 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.
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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 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.
In addition to the Earn-Out, the Company agrees to pay the Business
Contribution Member: (i) 29.586% of the revenue recognized by the Specific
Company Subsidiary in excess of $10 million during calendar years 1998 and 1999
(the "Earn-Up"); less (ii) 1/24 of such revenue in excess of $10 million (1/24
of such excess revenue being referred to herein as the Earn-Up Working Capital
Adjustment), provided that such additional payment (after deduction of the
Earn-Up Working Capital Adjustment) shall not exceed $213,521. For purposes of
calculating the Earn-Up, the revenue recognized during calendar year 1998 shall
be the annualized revenue from the date of closing under this Agreement through
December 31, 1998. The Company shall pay 60% of the Earn-Up, less the Earn-Up
Working Capital Adjustment, in cash, and 40% of the Earn-Up in Company
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Stock. The number of shares of Company Stock to be issued in partial payment of
the Earn-Up shall be equal to the aggregate dollar value of the stock component
of the Earn-Up divided by the latest publicly quoted closing price for the
Company Stock as appears in the most recent copy of The Wall Street Journal on
the date payment is due. The Earn-Up shall be paid by the Company to the
Business Contribution Member promptly following calculation of the Specific
Company Subsidiary's revenue for calendar year 1999.
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 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.
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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 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).
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(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).
(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.
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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 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
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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 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
14
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).
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
15
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 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
16
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 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.
17
(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 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
18
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 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
19
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.
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
20
authority to own, lease and operate its properties and to carry
on its business as now being conducted. The Company is duly
qualified and in good standing to conduct business in each
jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such
qualification necessary.
4.2. Authority and Enforceability. The Company has all
requisite power and authority to execute and deliver this
Agreement and each of the Related Agreements to which it is a
party and to perform fully its obligations hereunder and
thereunder. The execution and delivery of this Agreement and
each of the Related Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of
the Company. This Agreement and each of the Related Agreements
to which it is a party have been duly executed and delivered by
the Company, and constitute the legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights and remedies
generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
4.3. No Violations Resulting From Transactions. The
execution and delivery by the Company of this Agreement and each
of the Related Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby
by the Company, will not (a) conflict with or violate any
provision of the Certificate of Incorporation or By-laws of the
Company, 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
21
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
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.
22
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;
(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.
23
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 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
24
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 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
$416,667 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 $416,667 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 $416,667. In the event that more than the
prescribed $416,667 working capital is estimated to exist as of
the Closing Date, the cash
25
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 $416,667.
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 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
26
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 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.
27
(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).
(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
28
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
(c) by the Company in the event that the Business
Contribution Member and/or any of the Shareholders do not timely
deliver representation letters satisfactory to the Company.
8.2. Effect of Termination Under Section 8.1. In the
event of termination of this Agreement by either the Company or
the 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,
29
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, which shall
include any ultimate liability for tax payments incident to the
pending tax dispute previously disclosed to the Company (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 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
30
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 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:
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(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.
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
32
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 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
33
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
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.
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"
Attest: DISPATCH MANAGEMENT SERVICES CORP.
------------------- By: /s/ Xxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
"BUSINESS CONTRIBUTION MEMBER"
Attest: A-COURIER, 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
"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
