AGREEMENT
This Agreement (the "Agreement") is entered into as of the 12th day of
September, 1997, by and among Dispatch Management Services Corp., a Delaware
corporation and the successor-in-interest to Dispatch Management Services LLC by
merger (the "Company"), Xxxxxxxxxxx Xxxx (the "Business Contribution Member")
and DMS Corp. Subsidiary Number ___ a Delaware corporation to-be-formed (the
"Specific Company Subsidiary"). Unless defined herein, all capitalized terms
used in this Agreement shall have the meaning given them in the Operating
Agreement of Dispatch Management Services LLC dated December 1, 1996 by and
between the Members of Dispatch Management Services LLC, as amended (the
"Operating Agreement").
W I T N E S S E T H
WHEREAS, the Business Contribution Member owns the business trading as Zap
Courier, which is in the business of providing time-critical, on demand,
point-to-point delivery services (such business, and any other lines of business
related thereto, the "Business");
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 certain employees of the Business Contribution Member and the
Specific Company Subsidiary (the "Back-Office Employees"), identified in Exhibit
A hereto, as well as non-competition agreements with 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, as of Closing, the Business Contribution
Member will have taken all steps necessary for the Specific Company Subsidiary
to trade under the trade name previously used for the Business (which trade name
is specifically acquired by the Company 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, 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 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 approval of the same by the Company, and prior to filing the
registration statement with the Securities and Exchange Commission relating to
the initial public offering of the
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common stock, par value $.01 per share, of the Company (the "Initial Public
Offering"), the Company will deliver to the Business Contribution Member a
disclosure document, together with a notice (the "Notice") specifying the date
by which the Business Contribution Member must execute and deliver a
satisfactory representation letter 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 of a
representation letter satisfactory to the Company, the parties will close in
escrow (the "Closing in Escrow") pursuant to the terms and conditions of this
Agreement. Such Closing in Escrow shall take place at the offices of Silver,
Xxxxxxxx & Taff, L.L.P., 0000 Xxx Xxxx Xxxxxx, X.X., 0xx Xxxxx, Xxxxxxxxxx, X.X.
00000 (or such other place as is mutually agreed upon by the parties) within
thirty (30) days (or such shorter period as is specified in the Notice) after
timely delivery of a satisfactory representation letter from the Business
Contribution Member.
In the event that the Business Contribution Member does 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 and brand names "Zap
Courier" and "Crosstown Messenger", 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 (including, but not limited to, leases) (the "Contracts"), as set
forth on Exhibit D attached hereto.
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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 parties
hereto 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 shall, as appropriate, enter into, execute and deliver to
the law firm of Silver, Xxxxxxxx & Xxxx, L.L.P., 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 shall convey, assign, transfer and deliver to
the Company all right, title and interest in, to and
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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
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 authorized to conduct its business in each jurisdiction in which it is doing
business; the Business Contribution Member has full power to enter into and
perform his or her respective obligations under this Agreement, as well the
Related Agreements to which he or she is a party; this Agreement, and the
Related Agreements to which the Business Contribution Member is a party,
constitutes a legal, valid and binding obligation of the Business Contribution
Member 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
the Business Contribution Member is not 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 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, net of the
downward adjustment for the full amount of the Assumed Liabilities as listed on
Exhibit F attached hereto (the
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"Purchase Price"), shall be equal to $675,080, and 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 hereby agree to allocate the Purchase Price among
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 any 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 Business Contribution Member written
notice to the contrary, 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 Business Contribution Member shall deliver to the Company, within
thirty days after written request from the Company: (i) an updated set of
audited financial
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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 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
does not timely deliver a satisfactory representation letter and complete the
Closing in Escrow, the Business Contribution Member shall be 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 shall be
relieved of his or her obligation to refund to the Company any such advanced
costs.
The Company shall pay thirty percent (30%) 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 seventy percent (70%) of the Purchase Price
in (restricted) stock of the Company (the "Company Stock"), at the Closing. The
number of shares of Company Stock to be issued as partial payment of the
Purchase Price shall be equal to the aggregate dollar value of the stock
component of the Purchase Price divided by the Initial Public Offering price per
share as set forth on the cover page of the prospectus relating to the Initial
Public Offering. The Business Contribution
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Member acknowledges that the sale of the Company Stock will be restricted for a
period of time by virtue of a "lock-up" agreement which may be imposed by the
Company, and the Business Contribution Member 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 the 8 quarter annual periods beginning January 1, 1998 and
ending December 31, 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 such calendar quarter, then for
each calendar quarter in which the Specific Company Subsidiary fails to achieve
such standards 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
Corporation achieves the margin requirement during the relevant calendar
quarter, but fails to achieve the revenue requirement set forth in Exhibit G,
then for each such calendar quarter, the cash portion of the Purchase Price
shall be reduced by: (i) one eighth (1/8) of the Maximum Earn-Out, multiplied
by: (ii) a fraction, the numerator of which is the difference between the actual
revenue achieved during such calendar quarter and the revenue requirement for
such calendar quarter as set forth in Exhibit G, and the denominator of which is
the revenue required during such calendar quarter as set forth in Exhibit G. 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
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the Business Contribution Member in an amount equal to up to 30% 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 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 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 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
9
Member 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, the Company, Business Contribution
Member 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.
The Business Contribution Member represents, warrants and covenants
to the Company as follows:
2.1. Power. The Business Contribution Member has all requisite 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 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.
Matters Relating to the Business Contribution Member. The
Business Contribution Member 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, the Related Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Business Contribution
Member. This Agreement and each of the
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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).
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, Back-Office
Employees, 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 of this Agreement and each of the
Related Agreements to which
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he or she is a party, and the consummation of the transactions contemplated
hereby and thereby by the Business Contribution Member will not (a) 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, (b) 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 is a party, or (c) violate any law applicable to
the Business Contribution Member 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, to the best of the Business Contribution
Member's knowledge after due inquiry, 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. The
Business Contribution Member is not aware of any proposed legislation or law
which is reasonably expected to be enacted and which, if so enacted, could
reasonably be expected to have a material adverse effect on the Business.
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, threatened that
questions the validity of this Agreement or the Related
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Agreements or any action taken or to be taken by the Business Contribution
Member 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, threatened against or affecting the Business Contribution
Member, the Business or any of the Assets. To the knowledge of the Business
Contribution Member, 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, 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 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. 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 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,
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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 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
14
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 the Business Contribution Member has not 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 the Business Contribution Member has not 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
15
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.
(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. The
Business Contribution Member
16
has not 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,
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 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, to the best of the
Business Contribution Member's knowledge after due inquiry, valid and
enforceable in accordance with its
17
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) to the best of
the Business Contribution Member's knowledge after due inquiry, no Default (as
defined below) exists under any Contract either by the Business Contribution
Member or by any other party thereto; (iii) the Business Contribution Member is
not aware of the assertion by any third party of any claim of Default or breach
under any of the Contracts; and (iv) the Business Contribution Member is not
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 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. The Business Contribution Member knows of no 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.
18
3.1. Non-Competition and Other Covenants of the Business
Contribution Member, and Certain Employees of the Business
Contribution Member
The Business Contribution Member, and certain employees of the
Business Contribution Member and the Specific Company Subsidiary 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 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 March 19, 1997. The Business Contribution Member 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 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
19
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 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
20
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.
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 covenants and agrees
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:
21
(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 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 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
22
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, the Business Contribution Member
shall use his or her respective best efforts to cause the Business Contribution
Member's 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, the Business Contribution Member shall
not 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 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
23
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 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 Business
Contribution Member shall ensure that the Assets, less the Assumed Liabilities,
includes at least $84,385 working capital (defined as the excess of current
(liquid) assets over current liabilities) as of the Closing Date.
For purposes of determining 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 prescribed $84,385 working capital existed
as of the Closing Date, as determined by such balance sheet, the Business
Contribution Member shall forthwith pay the Company an amount equal to the
difference between the actual working capital as of the Closing Date and $84,385
working capital (the "Shortfall"). If the Business Contribution Member does not
pay the Shortfall to the Company within five (5) days after demand, then, in
addition to all other remedies which the Company may have, the Company may
deduct the amount of the Shortfall from any of the obligations of the Company to
the 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 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
24
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.
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 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
25
the Company shall have received a certificate from the Business Contribution
Member certifying to such effect.
(b) Performance of Obligations. The Business Contribution
Member shall have performed all obligations required to be performed under this
Agreement at or prior to the Closing in Escrow Date and the Closing Date, and
the Company shall have received a certificate from 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
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 is a party shall have been duly executed
and delivered. 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.
The obligations of the Business Contribution Member 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), any or all of which may be waived in whole or in part by the Business
Contribution Member.
(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.
26
(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;
(c) by the Company in the event that the Anti-Dilution Rights
(as defined in the Operating Agreement) are not preserved; or
(d) by the Company in the event that the Business Contribution
Member does not timely deliver a representation letter satisfactory to the
Company.
8.2. Effect of Termination Under Section 8.1. In the event of
termination of this Agreement by either the Company or the 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 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-
27
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. The
Business Contribution Member hereby agrees to 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' most recently dated balance sheet delivered to the
Company; (ii) any inaccuracy in or breach of any of the Business Contribution
Member's representations, warranties, covenants or agreements contained in this
Agreement, the Related Agreements or in any other agreement or document entered
into or delivered on or after the date hereof in connection with this Agreement
or any of the transactions contemplated hereby and thereby, (iii) any liability
or obligation of the Business Contribution Member other than an Assumed
Liability, and (iv) any non-compliance with any notice requirement, if any,
which may be contained in the Uniform Commercial Code as adopted by the State of
California relating to bulk sales. Provided, however, the indemnification by the
Business Contribution Member 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 from and
against and in respect of any and all Losses resulting from, arising out of,
relating to, imposed upon or incurred by
28
the Business Contribution Member 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:
(a) if to Company, to:
Dispatch Management Services Corp.
00000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx, Chief Executive Officer
29
(b) if to the Business Contribution Member, to:
Xxxxxxxxxxx Xxxx
Zap Courier
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
10.3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original and all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
10.4. Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Related Agreements and any other documents and instruments
referred to herein) constitutes the entire agreement and supersedes all prior
agreements and understandings (including but not limited to that certain Class C
Asset Transfer Agreement between the Business Contribution Member and Dispatch
Management Services LLC dated July 16, 1997, which Agreement will be of no
further force or effect upon execution of this Agreement), 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
30
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 acknowledges 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
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
31
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 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.
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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:
/s/ Xxxxxxxxxxx Xxxx
------------------------- --------------------------------------
Name: Xxxxxxxxxxx Xxxx
"SPECIFIC COMPANY SUBSIDIARY"
Attest: DMS CORP. SUBSIDIARY NO. __
By: /s/ Xxxxx Xxxxxxxxx
------------------------- ----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
33
