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 successor in interest to Dispatch Management Services LLC by
merger (the "Company"), AFS Courier Systems, Inc., a Virginia corporation (the
"Corporation"), and Xxxxx X. Xxxxxxx, (the "Shareholder"). Unless defined
herein, all capitalized terms used in this Agreement shall have the meaning
given them in the Operating Agreement of Dispatch Management Services LLC dated
December 1, 1996 by and between the Members of Dispatch Management Services LLC,
as amended (the "Operating Agreement").
W I T N E S S E T H
WHEREAS, the Shareholder owns all of the issued and outstanding shares of
capital stock of the Corporation (the "Stock");
WHEREAS, subject to the conduct of the due diligence examination to begin
following the execution of this Agreement, and further subject to the terms and
conditions set forth herein, the Shareholder desire to sell all of their
respective right, title and interest in the Stock to the Company, and the
Company desires to purchase the Stock;
WHEREAS, upon the satisfactory completion of the due diligence
examination, the delivery of the financial statements, schedules, disclosure
documents, questionnaires and other information required by this Agreement, and
approval of the same by the Company, the parties hereto will close in escrow
pursuant to the terms and conditions set forth herein;
WHEREAS, upon satisfaction of the conditions set forth herein, the escrow
will be terminated, and the sale of the Stock will be consummated;
WHEREAS, the parties intend that, immediately following the execution of
this Agreement, the Company will enter into non-competition agreements with the
Shareholder and certain employees of the Corporation in the form attached hereto
as Exhibit A (such non-competition agreements, together with all other
agreements which are entered into by the parties hereto pursuant to this
Agreement or in connection with any of the transactions contemplated hereby, the
"Related Agreements"); and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the representations,
warranties, covenants and agreements herein contained, and for the sum of $10.00
paid by the Company to the Shareholder, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Closing in Escrow
1.1. Overview. Upon execution of this Agreement, the Shareholder and
the Corporation shall be obliged to deliver to the Company, within thirty (30)
days after execution of this Agreement: (i) the audited and unaudited financial
statements required pursuant to Section 1.3 below; and (ii) the agreements
required pursuant to Section 3.1 below.
After approval of the same by the Company, and prior to filing the
registration statement with the Securities and Exchange Commission relating to
the initial public offering of the common stock, par value $.01 per share, of
the Company (the "Initial Public Offering"), the Company will deliver to the
Shareholder a disclosure document, together with a notice (the "Notice")
specifying the date by which the Shareholder must execute and deliver a
satisfactory shareholder representation letter in order to consummate the sale
of the Stock pursuant to the terms of this Agreement. At the Company's option,
the Notice shall include a requirement that the Shareholder purchase certain
assets of the Corporation (at then current book value), assume certain
liabilities of the Corporation, and cause certain employees of the Corporation
to be terminated from employment by the Corporation. If, prior to the Closing
Date (as defined in Section 1.4 below): (i) the Shareholder does not purchase
the (unwanted) assets specified by the Company in the Notice, then such assets
will be acquired by the Company without any adjustment to the Purchase Price (as
defined in Section 1.3 below); (ii) the Shareholder does not assume the
(unwanted) liabilities specified by the Company in the Notice, then the Company
will reduce the cash portion of the purchase price by the dollar amount of any
such liabilities (including early repayment costs, if any) of the Corporation
existing as at the Closing Date; and (iii) the Corporation has not terminated
the employment of the (unwanted) employees specified by the Company in the
Notice, then the Company will make a reasonable estimate of the costs and
expenses to be incurred in connection with such terminations of employment, and
the
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Company will reduce the cash portion of the purchase price by the amount of such
reasonable estimate.
Upon timely delivery from the Shareholder of a shareholder representation
letter satisfactory to the Company, the parties will close in escrow (the
"Closing in Escrow") pursuant to the terms and conditions of this Agreement.
Such Closing in Escrow shall take place at the offices of Akin, Gump, Strauss,
Xxxxx & Xxxx, L.L.P., 0000 Xxx Xxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000
(or such other place as is mutually agreed upon by the parties) within thirty
(30) days (or such shorter period as is specified in the Notice) after timely
delivery of a satisfactory shareholder representation letter from the
Shareholder.
In the event that the Shareholder does not timely deliver a
satisfactory shareholder representation letter (as determined in the sole
discretion of the Company), this Agreement will be of no further force or
effect, except for any and all obligations under Sections 3.2 (confidentiality),
1.3 (reimbursement of audit expenses) and 8.2 (effect of termination under
Section 8.1), which obligations will survive termination of this Agreement.
1.2 Closing in Escrow Deliveries and Other Actions.
(a) Shareholder's and Corporation's Deliveries at Closing in
Escrow. At the Closing in Escrow, the Shareholder shall deliver the following to
the law firm of Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P, as escrow agent: (i)
certificates representing all of the Stock with duly executed stock powers
conveying the Stock represented thereby to the Company, free and clear of all
liens, security interests and claims, encumbrances or other rights of third
parties of any nature whatsoever, and granting unrestricted title to and
possession of the Stock to the Company; (ii) the Corporation's corporate minute
book, including the Stock Certificate Book and all of the original share
certificates representing shares of the Corporation's capital stock at one time
issued (but no longer issued and outstanding) to former shareholders of the
Corporation; (iii) all consents, waivers, and authorizations necessary or
appropriate for the consummation of the transactions contemplated by this
Agreement; (iv) agreements assigning to the Corporation all of the Shareholder's
and/or third parties' right, title and interest in and to all Intellectual
Property (as defined in Section 2.14(d) hereinbelow) owned by any of the
Shareholder and/or third parties and heretofore licensed to or used by the
Corporation; (v)
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Certificates of Good Standing for the Corporation as issued by the Secretaries
of State of Maryland, the District of Columbia, and Virginia; (vi) the
certificates, dated the Closing in Escrow Date, required pursuant to Sections
7.2(a) and 7.2(b) hereinbelow; and (vii) the opinion of counsel to the
Shareholder and the Corporation as to such matters as counsel to the Company may
reasonably require, including but not limited to such counsel's opinion that:
(A) the Corporation is in good standing; (B) the Corporation is authorized to
conduct its business in each jurisdiction in which it is doing business; (C) the
Shareholder and the Corporation have the full power to enter into and perform
their respective obligations under this Agreement; (D) this Agreement
constitutes the legal, valid and binding obligations of the Corporation and the
Shareholder, and the Related Agreements to which the Shareholder are a party,
constitute the legal, valid and binding obligations of the Shareholder, each
enforceable in accordance with their respective terms (except as enforcement may
be limited by bankruptcy, insolvency and other similar laws affecting the
enforcement of creditor's rights, and principles of equity); and (E) neither the
Corporation nor the Shareholder are threatened with or affected by any actions,
proceedings or investigations wherein an unfavorable decision, ruling or finding
could have a material adverse effect on the financial condition or operation of
the Corporation, or could prevent, enjoin or otherwise affect the transactions
contemplated by this Agreement or the Related Agreements.
(b) Further Actions. On or after the Closing in Escrow, the
parties hereto shall enter into, execute and deliver such other and further
agreements, documents and instruments, as any of them may reasonably request,
for the purpose of effectuating the transactions contemplated by this Agreement.
(c) Consummation of Sale. Upon Closing in Escrow, subject to
the terms and conditions of this Agreement, the Company will be obligated to
purchase the Stock, and the Shareholder will be obliged to sell the Stock, at
the purchase price specified in Section 1.3 below, on the Closing Date specified
in Section 1.4 below.
1.3. Purchase Price. The purchase price for the Stock (the "Purchase
Price") shall be equal to two-thirds (2/3) of the Corporation's net revenue
during the twelve calendar months ending June 30, 1997, subject to adjustment
(if any) as provided in Section 1.1 above,
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and subject to further adjustment (if any) as a result of a reduction in the
Maximum Earn-Out (as defined in this Section 1.3 below).
Unless the Company gives the Shareholder written notice to the
contrary, the Shareholder shall deliver to the Company, within thirty (30) days
after execution of this Agreement: (i) audited financial statements of the
Corporation, including balance sheets dated as of December 31, 1994, 1995 and
1996, and income statements and cash flow statements for each of the three
twelve month periods ended on such dates; (ii) unaudited financial statements of
the Corporation, including a balance sheet dated as of June 30, 1996, and an
income statement and cash flow statement for the twelve month period ended on
June 30, 1996: and (iii) unaudited, reviewed financial statements of the
Corporation, including a balance sheet dated as of June 30, 1997 and an income
statement and a cash flow statement for the six month period ended June 30,
1997. The intent of providing the audited financial statements referred to in
the foregoing sentence is to resolve any auditing issues prior to calculation of
the Purchase Price, so that the Purchase Price may be quickly and efficiently
calculated. In the event that the closing of the Initial Public Offering has not
occurred on or before November 12, 1997, but does occur on or before December
12, 1997, then in that event, in lieu of the unaudited, reviewed financial
statements of the Corporation for the six month period ended June 30, 1997, the
Shareholder shall deliver to the Company, within thirty days after written
request from the Company: (i) an updated set of audited financial statements of
the Corporation, including a balance sheet dated as of June 30, 1997, and income
statements and cash flow statements for the six month period ended June 30,
1997; (ii) unaudited financial statements for the Corporation, including a
balance sheet dated as of September 30, 1996, and an income statement and cash
flow statement for the twelve month period ended on September 30, 1996; and
(iii) unaudited, reviewed financial statements of the Corporation, including a
balance sheet dated as of September 30, 1997 and income statements and cash flow
statements for the three month period ended September 30, 1997. In the event
that the closing of the Initial Public Offering has not occurred on or before
December 12, 1997, then upon written request from the Company given on or before
March 1, 1998, the Shareholder shall deliver to the Company, within thirty days
after written request from the Company, such additional audited and/or
unaudited, reviewed financial statements of the
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Corporation as the Company may reasonably request.
All of the financial statements referred to in this Section 1.3
shall be prepared (or reviewed, as the case may be) by Price Waterhouse LLP. The
cost of providing all of the financial statements required by this Section 1.3,
within the prescribed time limits, shall be the sole responsibility of the
Shareholder, provided that the Company will, upon the request of the
Shareholder, advance such costs on behalf of the Shareholder. In the event that
the Shareholder does not timely deliver a satisfactory shareholder
representation letter and complete the Closing in Escrow, the Shareholder shall
immediately refund to the Company any such advanced costs; in the event that
such shareholder representation letter is satisfactory and is timely received,
and the Closing in Escrow is completed, the Shareholder shall be relieved of
his/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 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
Shareholder acknowledges that the sale of the Company Stock will be restricted
for a period of time by virtue of a "lock-up" agreement which may be imposed by
the Company, and the Shareholder shall execute such a "lock-up" agreement, as
may be required by the Company, by which the sale of the Company Stock is
restricted (perhaps prohibited) for a period of two (2) years from the date of
the closing of the Initial Public Offering.
The Maximum Earn-Out shall be earned by the Shareholder ratably over
the 8 quarter annual periods beginning January 1, 1998 and ending December 31,
1999 provided that the Corporation achieves the targeted performance standards
set forth in Exhibit B attached hereto. In the event that the Corporation fails
to achieve the margin requirement set forth in Exhibit B during any calendar
quarter, then for each calendar quarter in which the Corporation fails to
achieve such margin requirement, the cash portion of the Purchase Price shall be
reduced
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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 B, 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 B, and the denominator of which is the revenue
required during such calendar quarter as set forth in Exhibit B. 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 Shareholder 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 Shareholder). The Earn-Out shall be paid to the
Shareholder promptly following calculation of the Corporation's performance for
the quarter ending December 31, 1999. The Company covenants and agrees to
maintain sufficient cash, or availability of cash (e.g., by way of a line of
credit) in order to fund the Earn-Out.
At the request of the Shareholder made to the Company in writing not later
than the Closing in Escrow, the Company shall (immediately after Closing) make a
loan to the Shareholder in an amount equal to up to 30% of the Purchase Price.
Said loan by the Company to the Shareholder (the "Shareholder Loan") shall bear
interest at a rate of seven percent (7%) per annum, and shall be secured by all
of the Company Stock paid as part of the Purchase Price at Closing. The
collateral security agreement evidencing the collateralization of the
Shareholder Loan with the Company Stock and the Earn-Out shall be on such terms
as are reasonably acceptable to the Company, which terms shall include, but
shall not be limited to, the retention of all of the Company Stock by the
Company until full repayment of the Shareholder Loan (including accrued
interest). The Shareholder shall have the right to prepay the Shareholder Loan
(plus accrued interest) at any time without penalty and shall have the right to
direct the Company to offset the balance due under the Shareholder Loan (plus
accrued interest) against the Earn-Out as earned each quarter. The Shareholder
Loan shall mature as of the date that the Earn-
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Out is payable. In the event that the Shareholder Loan (including accrued
interest) is not repaid in full upon maturity, the Company shall enjoy all
rights of a secured party under the Uniform Commercial Code then in effect in
the State of New York, provided that the Company's only recourse shall be first
against the remaining Earn-Out and then against the Company Stock it holds as
collateral, and there shall not be any recourse against the Shareholder
individually.
1.4. Time and Place of Closing. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 8.1., and subject to the satisfaction or waiver of
the conditions set forth in Section 7, the purchase and sale of the Stock
pursuant to this Agreement (the "Closing") shall take place at the offices of
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P., 0000 Xxx Xxxxxxxxx Xxxxxx, X.X.,
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) Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P shall
deliver to the Company the certificates, minute book, documents, and other
materials theretofore held in escrow from the Closing in Escrow; (ii) the
Shareholder shall deliver to the Company updated consents, waivers and
authorizations as referred to in Section 1.2(a)(iii) above, updated Certificates
of Good Standing as referred to in Section 1.2(a)(v) above, updated
certificates, dated the Closing Date, required pursuant to Sections 7.2(a) and
7.2(b) below, and an updated opinion of counsel as referred to in Section
1.2(a)(vii) above; and (iii) the Company shall deliver the Purchase Price to the
Shareholder (less the Maximum Earn-Out, which shall be payable to the
Shareholder pursuant to the terms of Section 1.3 above, and with the Company
Stock collateralized against the Shareholder Loan being delivered to the Company
as appropriate).
2. Representations, Warranties and Covenants of the Corporation and the
Shareholder.
The Corporation and the Shareholder hereby jointly and severally
represent,
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warrant and covenant to the Company as follows:
2.1. Organization, Standing and Power. The Corporation is an "S"
Corporation duly organized, validly existing and in good standing under the laws
of the State of Virginia, and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The Corporation is duly qualified and in good standing to conduct
business in each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification
necessary.
2.2. Authority and Enforceability. The Shareholder and the
Corporation have all requisite legal right, power and authority to enter into
this Agreement and each of the Related Agreements to which they are a party and
to agree to the transactions contemplated hereby and thereby and to perform all
of their respective obligations hereunder and thereunder. This Agreement
constitutes the legal, valid and binding obligations of the Shareholder and the
Corporation, and each of the Related Agreements to which the Shareholder is a
party constitute the legal, valid and binding obligations of the Shareholder,
each enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and remedies
generally and subject, as to enforceability, to general principles of equity.
2.3. Capital Structure, Due Authorization and Issuance. The capital
structure of the Corporation consists solely of 10,000 shares of $10.00 par
value capital stock of which 10,000 shares are and will be as of the Closing in
Escrow Date and the Closing Date issued and outstanding. All issued and
outstanding shares of the capital stock of the Corporation have been duly
authorized and validly issued, are fully paid and non-assessable, and were
issued in compliance with all federal and applicable state securities laws.
2.4 Title to Stock. The Shareholder owns all of the issued and
outstanding shares of the capital stock of the Corporation, free and clear of
any and all claims, liens, restrictions, pledges, charges, options, security
interests, encumbrances or other rights of third parties, including any imposed
by law. There are no other shares of capital stock or other equity or debt
securities of the Corporation, of any kind or class whatsoever, authorized,
issued or
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outstanding, or any warrants, options, subscription rights, or any other rights,
agreements, or commitments of any nature relating to the issuance of, or
granting of, rights to acquire any shares of capital stock or such securities of
the Corporation.
2.5 Title to and Condition of the Corporation's Assets. The
Corporation has good, insurable and marketable title to all of the assets set
forth in the Financial Statements (as defined in Section 2.11 hereinbelow).
Except as disclosed on Exhibit C, none of the Corporation's assets is subject to
any restriction, mortgage, pledge, lien, security interest, lease, charge,
encumbrance, objection or joint ownership, other than liens for current real or
personal property taxes not yet due and payable. The Corporation's assets are in
good operating condition and repair, ordinary wear and tear excepted.
2.6. Sufficiency of Assets. The assets set forth in the Financial
Statements (as defined in Section 2.11 hereinbelow) include all the assets and
properties used or employed in the business presently conducted by the
Corporation. Immediately after the consummation of the transactions contemplated
by this Agreement to be effected at the Closing, the Corporation will (i) have
all right, title, and interest in and to, or will have a valid right to use,
without liability to third party(ies), such assets and properties; and (ii) have
all assets, rights, employees, subcontractors and other persons and items which
are reasonably necessary to carry on the business and operations of the
Corporation after the Closing Date in substantially the same manner as presently
conducted by the Corporation.
2.7. No Violations Resulting From Transactions. The execution and
delivery of this Agreement by the Shareholder and the Corporation, and each of
the Related Agreements to which they are a party, and the consummation of the
transactions contemplated hereby and thereby by the Shareholder and the
Corporation will not (a) conflict with or violate any provision of the articles
or certificate of incorporation or by-laws of the Corporation, (b) except as set
forth in Exhibit D, require any consent, waiver, approval, authorization,
permission, or filing with or notification to, any third party, (c) result in or
constitute a default, or require any consent or approval of or notice to any
person or entity, or result in the creation of an encumbrance, under or pursuant
to (i) any of the contracts to which the Corporation is a party (including but
not limited to contracts of insurance and leases as applicable), or (ii) any
other material agreements
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to which the Shareholder is a party, or (d) violate any law applicable to the
Shareholder or the Corporation.
2.8. Compliance with Laws.
(a) The Corporation is, and at all times during the past three
years has been, in material compliance with all applicable laws; and
(b) The Corporation has not received, and does not know of the
issuance or threatened issuance by any governmental entity of, any notices of
violation or alleged violation of any applicable law. The Company has been
provided with true and complete copies of (i) all injunctions, judgments, orders
or consent or similar decrees or agreements of any governmental entity to which
the Corporation is currently subject (or which the Corporation was subject to
during the previous three years), and (ii) all correspondence through the date
hereof with respect to any of the matters referred to in clause (b) or clause
(i) of this Section 2.8. None of the Shareholder nor the Corporation is aware of
any proposed legislation or law which is reasonably expected to be enacted and
which, if so enacted, could reasonably be expected to have a material adverse
effect on the Corporation.
2.9. Litigation. There is no action, suit, claim, investigation or
proceeding, whether at law or in equity (each, a "Legal Proceeding"), pending
or, to the knowledge of the Shareholder and/or the Corporation, threatened, that
questions the validity of this Agreement or the Related Agreements or any action
taken or to be taken by the Shareholder or the Corporation in connection with
the consummation of the transactions contemplated hereby or thereby or which
seeks to prohibit, enjoin or otherwise challenge any of the transactions
contemplated hereby or thereby. Exhibit E sets forth an accurate and complete
list, and a brief description (setting forth the names of the parties involved,
the court or other governmental or mediating entity involved, the relief sought
and the substantive allegations and the status thereof), of each Legal
Proceeding pending or, to the knowledge of the Corporation and/or the
Shareholder, threatened against or affecting the Corporation. To the knowledge
of the Corporation and/or the Shareholder, no event has occurred and no
circumstance, matter or set of facts exist which would constitute a valid basis
for the assertion by any third party of any claim or Legal Proceeding, other
than those listed on Exhibit E. Except as set forth in Exhibit E, there is no
outstanding or,
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to the knowledge of the Corporation and/or the Shareholder, threatened,
judgment, injunction, order or consent or similar decree or agreement
(including, without limitation, any consent or similar decree or agreement with
any governmental entity) against, affecting or naming the Corporation.
2.10. Financial Advisors.
(a) Except as set forth on Exhibit F attached hereto, no
person or entity has acted directly or indirectly as a broker, finder or
financial advisor for or to the Shareholder and/or the Corporation in connection
with the negotiations relating to or the transactions contemplated by this
Agreement or the Related Agreements; and
(b) Except as set forth on Exhibit F attached hereto, no
person or entity is entitled to any fee or commission or like payment, or
expense reimbursement, in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of the Corporation and/or
the Shareholder hereunder or thereunder. The Shareholder hereby agrees that all
such fees, commissions or like payments, or expense reimbursement as shall
appear on Exhibit F attached hereto shall be for the sole joint and several
account of the Shareholder and shall be paid in full by him/her at the Closing
in Escrow.
2.11. Financial Statements; Receivables. Attached hereto as Exhibit
G are true, correct and complete copies of the Corporation's most recent
unaudited financial statements which, together with the financial statements
(including the notes and exhibits thereto) to be delivered pursuant to Section
1.3 herein (the "Financial Statements") were and will be prepared in accordance
with the books and records of the Corporation, are and will be complete and
correct in all material respects, have and will have been prepared in accordance
with U.S. generally accepted accounting principles ("GAAP"), applied
consistently with the past practices of the Corporation, except where otherwise
specifically noted therein, and present and will present fairly in all material
respects the financial position, results of operations and changes in financial
position or cash flows, whichever is applicable, of the Corporation as at the
dates and for the periods indicated (subject, in the case of the unaudited
financial statements, to normal year-end audit adjustments). Without limiting
the foregoing, no undisclosed liabilities or obligations of any nature (whether
known or unknown, or absolute, accrued, contingent or
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otherwise) shall exist as at Closing in Escrow or the Closing not reflected in
the most recently dated balance sheet supplied to the Company. The Corporation
has paid all federal, state and local income, profits, franchises, sales, use,
occupation, property, excise and payroll taxes, and all license fees and other
charges imposed upon it, and has timely filed all tax returns and related
documents required to be filed with any governmental authority. There are no
outstanding or proposed statements of deficiency in tax payments to any federal,
state, local or foreign government with respect to the Corporation for any tax
period. As of the dates such Financial Statements were and will be prepared, all
accounts receivable reflected on the Financial Statements (i) have and will have
arisen from bona fide transactions in the ordinary course of the Corporation's
business, consistent with its past practices, and (ii) are good and collectible
at the aggregate recorded amounts thereof, net of any applicable reserves for
returns or doubtful accounts which are reflected in such Financial Statements
(such reserves, the "Reserves"); such Reserves are adequate and reasonable and
were established in accordance with GAAP.
2.12. Default. The Corporation is not in material default of any of
its obligations, contracts, or commitments in any respect, or in breach of any
negative or affirmative covenants placed on it by its creditors, and the
Shareholder has not been notified of any such defaults or breaches.
2.13. Absence of Certain Developments.
(a) There has been no event, condition or state of facts of
any character that has had or is reasonably likely to have a material adverse
effect on the Corporation. (b) The Corporation has not entered into any
transaction or contract, or conducted its business, other than in the ordinary
course consistent with past practice.
2.14. Intellectual Property.
(a) List of Intellectual Property; Sufficiency. Exhibit H sets
forth a list of all Intellectual Property (as defined in Section 2.14.(d)
hereinbelow) which is owned by the Shareholder and/or the Corporation, licensed
by the Shareholder and/or the Corporation, licensed to the Shareholder and/or
the Corporation, or otherwise used or able to be used in the business conducted
by the Corporation (other than commonly-used computer software which is
generally available to the public and the use rights to which were legally
acquired by the Corporation either
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for free or through established retail facilities) and indicates, with respect
to each item of Intellectual Property listed thereon, the owner thereof and, if
applicable, the name of the licensor and licensee thereof and the terms of such
license or other contract relating thereto. The Corporation owns or has the
lawful right to use all of the Intellectual Property as currently used or as
necessary for the conduct of its business as now conducted. After Closing, the
Corporation will have the right to use all of the Intellectual Property as
currently used or as necessary for the conduct of the Corporation's business as
now conducted.
(b) Title; Validity; Pending Applications; Infringements, Etc.
(i) Except for Intellectual Property licensed to the
Shareholder and/or the Corporation, the Corporation has full legal and
beneficial ownership (free and clear of any and all encumbrances) of all of the
Intellectual Property, and neither the Corporation nor the Shareholder has
received any notice or claim (whether written, oral or otherwise) challenging
the Corporation's ownership or rights in such Intellectual Property or
suggesting that any other entity has any claim of legal or beneficial ownership
with respect thereto. Neither the Shareholder nor the Corporation are in default
under any license agreements pertaining to the Intellectual Property used in the
Corporation's business and licensed to the Shareholder and/or the Corporation;
all such license agreements are valid and in full force and effect, and shall
continue in full force and effect as to the Corporation after Closing.
(ii) All of the Intellectual Property is legally valid
and enforceable without any qualification, limitation or restriction on its use,
and neither the Corporation nor the Shareholder has received any notice or claim
(whether written, oral or otherwise) challenging the validity or enforceability
of any such Intellectual Property;
(iii) Neither the use of any of the Intellectual
Property nor any other Intellectual Property used by the Corporation will
conflict with, infringe upon, violate or interfere with, or constitute an
appropriation of, any right, title or interest held by any other person or
entity, and there have been no claims made with respect thereto;
(iv) No other person or entity is infringing in any
respect on any part of the Intellectual Property. The Corporation has not
conducted its business, and has not used or enforced (or failed to use or
enforce) any Intellectual Property, in a manner that would
14
result in the abandonment, cancellation or unenforceability of any item of
Intellectual Property, and the Corporation has not taken or failed to take any
action that would result in the forfeiture or relinquishment of any Intellectual
Property used in the conduct of its business as now conducted;
(v) Except as set forth in Exhibit H, the Corporation
has no liability or obligations to any third parties incident to the
Intellectual Property used or able to be used by the Corporation in the conduct
of its business as heretofore conducted; and
(vi) The Corporation has timely met all of its
obligations to any third parties incident to the Intellectual Property used or
able to be used by the Corporation in the conduct of its business as heretofore
conducted, and such obligations have been and will be correctly and adequately
disclosed in the Financial Statements.
(c) Protection and Maintenance of Intellectual Property.
(i) The Corporation has taken all reasonable steps to
(x) protect its rights to the Intellectual Property, and (y) to prevent the
unauthorized use by any other person or entity; and
(ii) The Corporation shall use all reasonable efforts to
maintain, or cause to be maintained, the Intellectual Property in full force and
effect through the Closing and, without limitation, has renewed or has made, and
will make within any applicable renewal period ending on or prior to the Closing
Date, application to renew all of the Intellectual Property subject to
expiration on or prior to the Closing Date. Neither the Corporation or the
Shareholder has granted to any other Person or entity any rights or permissions
to use any of the Intellectual Property.
(d) Definition of Intellectual Property. For purposes of this
Agreement, the term "Intellectual Property" means any patent, copyright,
trademark, trade name, service xxxx, service name, brand xxxx, brand name, logo,
corporate name, Internet domain name or industrial design, any registrations
thereof and pending applications therefor (to the extent applicable), any other
intellectual property right (including, without limitation, any know-how, trade
secret, trade right, formula, conditional or proprietary report or information,
customer or membership list, any marketing data, and any computer program,
software, database or data right), and license or other contract (including
without limitation license(s) to use specific
15
telephone numbers and/or radio channels/frequencies) relating to any of the
foregoing, and any goodwill associated with any business owning, holding or
using any of the foregoing.
2.15. Insurance. The Corporation currently maintains, and as of the
Closing in Escrow and the Closing Date will maintain, valid insurance policies,
which polices provide adequate coverage, within terms of scope and amount of
coverage, for its assets, properties and operations. There are no pending
material insurance claims by the Corporation as to which the applicable insurers
have denied coverage. In addition, there exist no material claims under such
insurance that have not been properly filed by the Corporation. During the past
two years, the Corporation has not been refused any insurance coverage by any
insurer from which the Corporation has sought coverage.
2.16. Leases. Except as set forth on Exhibit I, the Corporation is
not a lessee or tenant of any real or personal property.
2.17. Labor Agreements. The Corporation is not a party to any
collective bargaining agreement. Except as set forth in Exhibit J, the
Corporation is not bound by any severance pay requirements or agreements, or any
other agreement, handbook, manual, or benefit book referring to, relating to, or
involving its employees.
2.18. Employee Benefit Plans. Except as set forth on Exhibit K
hereto, the Corporation does not maintain or contribute to, and it has no
liability or obligation with respect to any formal or informal stock option,
profit sharing, pension, retirement, bonus, stock bonus, thrift-savings,
incentive, benefit, welfare, cafeteria, medical insurance, dental insurance,
life insurance, accidental death and dismemberment insurance, disability
insurance or other similar plan, policy or arrangement (collectively referred to
herein as the "Plans"). The Corporation is not in default under the terms of any
of the Plans. The Corporation has made all contributions to each of the Plans
required by the terms of the respective Plans, as well as all contributions
required to be made in order to satisfy all requirements of law. Each of the
Plans has sufficient assets to satisfy (under reasonable and permitted actuarial
assumptions) its obligations on a termination basis, and the level of
contributions required pursuant to the terms of each Plan is sufficient to
satisfy (under reasonable and permitted actuarial assumptions) the obligations
of such Plan on a continuing basis for benefits accrued to date.
16
2.19. Compliance With ERISA. The Corporation's Plans are currently
in compliance in all respects with the Employee Retirement Income Security Act
of 1974 and the regulations promulgated thereunder (collectively, "ERISA").
Except as set forth on Exhibit L hereto, no employee benefit plan and no trust
created thereunder has ever been terminated by the Corporation. No liability to
the Pension Benefit Guaranty Corporation ("PBGC") has been or is expected to be
incurred by the Corporation with respect to the Plans. Neither the Corporation
nor any of the Plans has ever experienced an accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Internal Revenue Code of
1986, as amended (the "Code")), whether or not waived, with respect to any
employee benefit plan and no such accumulated funding deficiency currently
exists. Except as set forth on Exhibit L hereto, the Corporation is not
required, and has not been required in the past, to make any payments or
contributions under the terms of any "multi-employer plan" (as defined in
Section 3(37) of ERISA and Section 414(f) of the Code) or by any collective
bargaining agreement with respect to any employee benefit plan. Neither the
Corporation nor any of the Plans has ever incurred any withdrawal liability
(including any contingent or secondary withdrawal liability) within the meaning
of Section 4201 and Section 4204 of ERISA with respect to any multi-employer
plan. The Corporation and the trustees or the administrators of the Plans have
provided continuation of coverage notices to employees and their dependents as
required by the Consolidated Omnibus Budget Reconciliation Act of 1986, as
amended ("COBRA"), and has complied with all such continuation of coverage
requirements. The execution and delivery of this Agreement will not involve a
prohibited transaction within the meaning of ERISA or Section 4975 of the Code.
2.20. Employee Relations. The Corporation is in substantial
compliance with all applicable federal, state and local laws, statutes,
regulations, orders, codes, ordinances, guidelines, executive orders, contractor
requirements, judicial and administrative judgments and determinations to which
the Corporation is or was a party, and any other authority governing the
Corporation with respect to its employees and workplaces (hereinafter
collectively referred to as the "Applicable Employment Standards"), including,
but not limited to, employment, employment practices, fringe benefits, terms and
conditions of employment, termination of employment, severance or separation
pay, workers' compensation, disability, entitlements,
17
unemployment insurance, employment screening, wage-hour, employment
discrimination on any basis, equal employment opportunity, individual employee
rights, affirmative action, occupational health and safety, and immigration and
right to work requirements. Such compliance by the Corporation includes, but is
not limited to, Title VII of the Civil Rights Act of 1964, as amended, including
the Civil Rights Act of 1991; the National Labor Relations Act of 1935, as
amended; the Fair Labor Standards Act of 1938, as amended; the Occupational
Safety and Health Act of 1970, as amended; the Equal Pay Act of 1963, as
amended; the Age Discrimination in Employment Act of 1967, as amended; the
Americans with Disabilities Act of 1990; the Family Medical Leave Act of 1993;
the Immigration Reform and Control Act of 1986 (together with the regulations
promulgated thereunder, hereinafter collectively referred to as "IRCA"); the
Worker Adjustment and Retraining Notification Act; the Employee Polygraph
Protection Act; the Drug-Free Workplace Act of 1988; the Health Insurance
Portability and Accountability Act of 1996; the Code; the regulations
promulgated under each such act; and any and all other federal, state and local
laws, regulations and requirements of any nature applicable to the Corporation.
The Corporation further represents that it is not in arrears in the payment of
wages to any employee (except to the extent of its normal payroll practices),
and there are no claims, liabilities, demands or causes of action, realized or
unrealized, actual, potential or contingent, pursuant to statutory rights or in
tort, contract or otherwise, against the Corporation arising out of or in
connection with any event, fact, circumstance or occasion relating to any
applicant for employment, the employment of any employee or the separation from
employment of any employee.
2.21. Licenses. The Corporation and its employees and agents have
all licenses, permits, orders, approvals and authorizations necessary for the
conduct of its business as presently conducted. The Corporation and its
employees and agents have all licenses, permits, orders, approvals and
authorizations necessary for the operation of the real and personal property
presently leased to, owned or operated by the Corporation. None of the permits
issued to the Corporation will be adversely affected by the consummation of the
transactions contemplated by this Agreement. No suspension or cancellation of
any such licenses, permits, orders, approvals or authorizations is pending or,
to the best of the Corporation's and/or the Shareholder's
18
knowledge, threatened.
2.22. Criminal Practices. The Corporation is not engaged and has not
been engaged in any criminal practices, including, but not limited to, payoffs,
kickbacks or illegal gifts.
2.23. Contracts. Each of the contracts to which the Corporation is a
party (the "Contracts") (i) is valid and enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity; (ii) no Default (as
defined below) exists under any Contract either by the Corporation or by any
other party thereto; (iii) neither the Corporation nor the Shareholder is aware
of the assertion by any third party of any claim of Default or breach under any
of the Contracts; and (iv) neither the Corporation nor the Shareholder is aware
of any present intention on the part of any significant customer or supplier or
other business partner of the Corporation to either (x) terminate or
significantly change its existing business relationship with the Corporation
either now or in the foreseeable future, or (y) fail to renew or extend its
existing business relationship with the Corporation at the end of the term of
any existing contractual arrangement such entity may have with the Corporation.
For purposes of this Agreement, the term "Default" means, with respect to any
Contract, (x) any material breach of, or material default under, such Contract,
(y) any event, other than the normal passage of time, which would (either with
or without notice or lapse of time or both) give rise to any right of
termination, cancellation or acceleration of, or any obligation to repay, with
respect to such Contract, or (z) any event, other than the normal passage of
time, which would result in either a significant increase in the obligations or
liabilities of, or a loss of any significant benefit of, the party in question
under such Contract.
Copies of all written contracts, and a description of all oral contracts,
to which the Corporation is a party, are attached hereto as Exhibit M.
2.24. Misrepresentation. Neither this Agreement (including the
Exhibits hereto) or any Related Agreement or any information supplied to the
Company by or on behalf of the Corporation and/or the Shareholder in connection
with this Agreement, the Related Agreements or the transactions contemplated
hereby or thereby contains or will contain any untrue statement
19
of a material fact or omits or will omit to state a material fact necessary to
make the statement contained herein or therein, in light of the circumstances
under which they were made, not misleading.
3. Additional Representations, Warranties and Covenants of the
Shareholder.
3.1. Non-Competition and Other Covenants of the Shareholder and
Certain Employees of the Corporation. Each of the Shareholder and the certain
employees of the Corporation noted on Exhibit A attached hereto shall have at
the Closing in Escrow entered into agreements, the form of which is attached to
this Agreement as Exhibit A.
3.2. Confidentiality. The Shareholder shall abide by the terms of
the Confidentiality Agreement between the Corporation and the Company (or the
Company's predecessor, Dispatch Management Services LLC) executed on March 21,
1997. The Shareholder and the Corporation both acknowledge and agree that the
Company shall have the right to disclose certain information concerning the
Corporation to third parties (which third parties will in turn be bound by an
agreement similar to the Confidentiality Agreement), for such general corporate
purposes as includes but is not limited to obtaining financing and/or
underwriting, and for general marketing purposes.
4. Representations and Warranties of the Company
The Company represents and warrants to the Shareholder 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
20
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company. This Agreement
and each of the Related Agreements to which it is a party have been duly
executed and delivered by the Company, and constitute the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
4.3. No Violations Resulting From Transactions. The execution and
delivery by the Company of this Agreement and each of the Related Agreements to
which it is a party and the consummation of the transactions contemplated hereby
and thereby by the Company, will not (a) conflict with or violate any provision
of the Certificate of Incorporation or By-laws of the Company, (b) except as set
forth on Exhibit D, require any consent, waiver, approval, authorization or
permission of, or filing with or notification to, any third party, (c) result in
or constitute a default, or require any consent or approval of or notice to any
person or entity under or pursuant to any of the contracts to which the Company
is a party; or (d) violate any applicable laws.
4.4. Compliance with Laws.
(a) The Company is, and at all times since its inception has
been, in material compliance with all applicable laws; and
(b) The Company has not received, and does not know of the
issuance or threatened issuance by any governmental entity of, any notices of
violation or alleged violation of any applicable law. The Shareholder has been
provided with true and complete copies of (i) all injunctions, judgments, orders
or consent or similar decrees or agreements of any governmental entity to which
the Company is currently subject (or to which the Company was subject since its
inception), and (ii) all correspondence through the date hereof with respect to
any of the matters referred to in clause (b) or clause (i) of this Section 4.4.
4.5. Litigation. There is no Legal Proceeding pending or, to the
knowledge of the Company, threatened that questions the validity of this
Agreement or the Related Agreements
21
or any action taken or to be taken by the Company in connection with the
consummation of the transactions contemplated hereby or thereby or which seeks
to prohibit, enjoin or otherwise challenge any of the transactions contemplated
hereby or thereby. Exhibit E sets forth an accurate and complete list, and a
brief description (setting forth the names of the parties involved, the court or
other governmental or mediating entity involved, the relief sought and the
substantive allegations and the status thereof), of each Legal Proceeding
pending or, to the knowledge of the Company, threatened against or affecting the
Company. To the knowledge of the Company, no event has occurred and no
circumstance, matter or set of facts exist which would constitute a valid basis
for the assertion by any third party of any claim or Legal Proceeding, other
than those listed on Exhibit E. Except as set forth in Exhibit E, there is no
outstanding or, to the knowledge of the Company, threatened, judgment,
injunction, order or consent or similar decree or agreement (including, without
limitation, any consent or similar decree or agreement with any governmental
entity) against, affecting or naming the Company.
4.6. Default. The Company is not in material default of any of its
obligations, contracts, or commitments in any respect, or in breach of any
negative or affirmative covenants placed on it by its creditors, and the Company
has not been notified of any such defaults or breaches.
4.7. Misrepresentation. Neither this Agreement (including the
Exhibits hereto) or any Related Agreement or any information supplied to the
Shareholder by or on behalf of the Company in connection with this Agreement,
the Related Agreements or the transactions contemplated hereby or thereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statement contained
herein or therein, in light of the circumstances under which they were made, not
misleading.
5. Covenants Relating to Conduct of Business
During the period from the date of this Agreement and continuing
until the Closing Date, the Shareholder and the Corporation, jointly and
severally, covenant and agree that (except as expressly contemplated or
permitted by this Agreement, or to the extent that the Company shall otherwise
consent in writing):
22
5.1. Conduct of the Business Pending the Closing Date. The
Corporation shall:
(a) conduct its business only in the ordinary course,
consistent with past practice;
(b) use its best efforts to (i) preserve the present business
operations, organization (including, without limitation, management and the
sales force) and goodwill of its business and (ii) preserve the present
relationship of the Corporation with Persons having business dealings with the
Corporation;
(c) comply with all laws and with all contractual and other
obligations applicable to it;
(d) not change its Articles of Incorporation or By-laws;
(e) not issue or contract to issue any stock, securities,
options, or debt which is convertible to stock or securities;
(f) not declare or agree to declare or otherwise make any
dividend or other distribution or payment in respect of the Stock;
(g) not sell, transfer, assign, pledge, encumber or otherwise
dispose of any of its assets, except in the ordinary course of business
consistent with past practice;
(h) not acquire any material properties or assets and not
sell, assign, transfer, convey, lease or otherwise dispose of any of its
material properties;
(i) maintain its present fire and extended coverage insurance
or equivalent coverage on all of its assets and on all real and personal
property leased to it;
(j) promptly notify the Company of (i) the occurrence of any
matter which may have a material adverse effect on its business or its assets,
and (ii) any Legal Proceeding commenced by or against it or any Legal Proceeding
commenced or threatened relating to the transactions contemplated by this
Agreement;
(k) not agree to anything prohibited by this Agreement or
anything which would make any of the representations and warranties of the
Shareholder or the Corporation in this Agreement or the Related Agreements
untrue or incorrect in any material respect.
23
6. Additional Agreements and Representations.
6.1. Access to Information. The Shareholder and the Corporation
agree that, prior to the Closing Date, the Company shall be entitled (at its
sole expense), through its officers, employees and representatives (including,
without limitation, its legal advisors and accountants), to make such
investigation of the properties, businesses and operations and financial
condition of the Corporation and examination of its books and records as the
Company may reasonably request, and to make extracts and copies of such books
and records. Any such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances, and the Shareholder
and the Corporation shall cooperate fully therein. In order that the Company may
have full opportunity to make such physical, business, accounting and legal
review, examination or investigation as it may reasonably request of the affairs
of the Corporation, the Corporation and the Shareholder shall use their
respective best efforts to cause the Corporation's officers, employees,
consultants, agents, accountants, attorneys and other representatives to
cooperate fully with such Company representatives in connection with such review
and examination.
6.2. Non-solicitation Pending Closing. After execution of this
Agreement, and through the Closing Date, neither the Corporation nor the
Shareholder shall pursue, initiate, encourage or engage in any negotiations or
discussions with any third parties concerning the sale of the Corporation, its
assets, or any part thereof or concerning the terms and conditions of this
Agreement.
6.3. Additional Agreements. Each of the parties hereto agrees to use
their respective best efforts to (i) take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement and the Related Agreements, (ii)
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental entities, third parties and parties to
contracts with the Corporation as are necessary for consummation of the
transactions contemplated by this Agreement and the Related Agreements, and
(iii) fulfill all conditions precedent applicable to such party pursuant to this
Agreement and the Related Agreements. In case at any time after the
24
Closing Date any further action is necessary or desirable to carry out the
purposes of this Agreement or the Related Agreements, each party hereto shall
use their respective best efforts to take or cause to be taken all such
necessary action.
6.4. Notification of Certain Matters. The Corporation and the
Shareholder shall give prompt notice to the Company of (a) any notice of, or
other communication relating to, a default under any contract material to the
financial condition, properties, business operations, or results of operations
of the Corporation to which it is a party or is subject, (b) any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement or any of the Related Agreements, or (c) any material adverse change
in the properties, business operations, results of operations, financial
condition or prospects of the Corporation, other than changes resulting from
general economic conditions. In addition, the Corporation and the Shareholder
shall be required to update the schedules and other information supplied
pursuant to this Agreement at such time as the information contained therein
changes in any material respect.
6.5 Working Capital as of the Closing Date. The Shareholder shall
ensure that the Corporation has at least $12,551.00 working capital (defined as
the excess of current (liquid) assets over current liabilities) as of the
Closing Date. For purposes of determining whether the Corporation had the
required working capital as of the Closing Date, the Company will cause to be
prepared, promptly following the Closing, a balance sheet (the "Closing Balance
Sheet") of the Corporation as of the Closing Date. The Closing Balance Sheet
shall be prepared in accordance with GAAP, and shall include full accrual of all
assets and liabilities of the Corporation as of the Closing Date (including, but
not limited to, accrued tax liabilities as if the tax year ended on the Closing
Date). In the event that the Corporation has less than the prescribed $12,551.00
working capital as of the Closing Date, as determined by the Closing Balance
Sheet, the Shareholder shall forthwith pay the Company an amount equal to the
difference between the actual working capital as of the Closing Date and
$12,551.00 working capital (the "Shortfall"). If the Shareholder does not pay
the Shortfall to the Company within five (5) days after demand, then, in
addition to all other remedies which the Company may have, the Company may
deduct the amount of the Shortfall from any of the obligations of the
25
Company to the Shareholder (including, but not limited to, the Earn-Out to which
the Shareholder may be entitled thereafter).
In the event that the Shareholder shall notify the Company in writing
within five days after demand is made by the Company for payment of the
Shortfall of their decision to dispute the amount of the Shortfall, the Company
shall forthwith instruct Price Waterhouse LLP to audit the Closing Balance Sheet
of the Corporation, and to calculate the working capital therein in accordance
with GAAP. Price Waterhouse LLP shall then determine the amount of the Shortfall
as set out in this paragraph 6.5, whose decision shall be final and binding on
the parties hereto. The Shareholder shall forthwith pay to the Company the
amount of such Shortfall, together with fifty percent (50%) of the cost of the
audit conducted by Price Waterhouse LLP. In the event Price Waterhouse LLP
determines the Shortfall to have been zero, the entire cost of such audit shall
be borne by the Company.
In the event that the Corporation has more than the prescribed $12,551.00
working capital as of the Closing Date, as determined by the Closing Balance
Sheet, the Company shall forthwith pay the Shareholder an amount equal to the
difference between the actual working capital as of the Closing Date and
$12,551.00 working capital.
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
26
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 Corporation and the Shareholder set forth in this Agreement
(without regard to any supplements or updates thereto) shall be true and correct
in all respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of a specified, earlier date) as of the
Closing in Escrow Date and the Closing Date as though made on and as of the
Closing in Escrow Date and the Closing Date, respectively, except as otherwise
contemplated by this Agreement, and the Company shall have received a
certificate from the Shareholder and the Corporation (signed by the Shareholder
and a senior executive officer of the Corporation) certifying to such effect.
(b) Performance of Obligations. The Corporation and the
Shareholder shall each have performed all obligations required to be performed
by each such party under this Agreement at or prior to the Closing in Escrow
Date and the Closing Date, respectively, and the Company shall have received a
certificate from the Shareholder and the Corporation (signed by the Shareholder
and a senior executive officer of the Corporation) certifying to such effect.
(c) No Material Adverse Change. Since the date of this
Agreement, there shall have been no change, occurrence or circumstance resulting
in, or which could reasonably likely result in, individually or in the
aggregate, a material adverse effect on the Corporation, its assets or its
business.
(d) Contractual Consents. The Corporation and/or the
Shareholder shall have given all notices to, and obtained all consents,
approvals or authorizations of or from, any individual, corporation or other
party which may be necessary to permit the consummation of the transactions
contemplated hereby (including, without limitation, any consents required under
the Contracts).
(e) Related Agreements. Each of the Related Agreements to
which the
27
Shareholder is a party shall have been duly executed and delivered by such
party. In addition, the Related Agreements shall have been entered into by the
respective parties thereto.
7.3. Conditions to Obligations of the Corporation and the
Shareholder. The obligations of the Corporation and the Shareholder to effect
the transactions contemplated by this Agreement are subject to the satisfaction
of the following conditions (which are for the exclusive benefit of the
Corporation and the Shareholder, any or all of which may be waived in whole or
in part by the Corporation or the Shareholder).
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of a specified, earlier date) as of the
Closing in Escrow Date and the Closing Date as though made on and as of the
Closing in Escrow Date and the Closing Date, respectively, except as otherwise
contemplated by this Agreement.
(b) Performance of Obligations. The Company shall have
performed all obligations required to be performed by it under this Agreement at
or prior to the Closing in Escrow Date and the Closing Date, respectively.
(c) Related Agreements. Each of the Related Agreements shall
have been duly executed and delivered by the parties thereto.
8. Termination.
8.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of the Company and the
Shareholder;
(b) by either the Company or the Shareholder, if the closing
of the Initial Public Offering does not occur by March 31, 1998;
(c) by the Company in the event that the Anti-Dilution Rights
set forth in Section 10(a) of the Plan and Agreement of Merger of Dispatch
Management Services LLC, Kiwi Express Software, L.L.C., and Dispatch Management
Services Corp., dated as of September 8, 1997, are not preserved; or
(d) by the Company in the event that the Shareholder does not
timely
28
deliver a shareholder representation letter satisfactory to the Company.
8.2. Effect of Termination Under Section 8.1. In the event of
termination of this Agreement by either the Company or the Shareholder as
provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto or any of
its respective Affiliates, officers, directors or shareholders except (i) for
the obligation of the Shareholder to refund to the Company the audit expenses as
set forth in Section 1.3 of this Agreement; (ii) for any and all obligations
under the confidentiality provisions contained in Section 3.2 of this Agreement;
and (iii) to the extent that such termination results from the willful breach by
a party hereto of any of its representations or warranties, or of any of its
covenants or agreements, as set forth in this Agreement. In the event that
termination results from the willful breach by a party hereto of any of its
representations or warranties, or of any of its covenants or agreements, as set
forth in this Agreement, the breaching party shall be liable to the
non-breaching party for all direct damages (but not indirect or consequential
damages) incurred as a result of such willful breach.
9. Indemnification.
9.1. Indemnification.
(a) Indemnification by the Corporation and the Shareholder.
The Corporation and the Shareholder each hereby agree to jointly and severally
indemnify, defend and hold harmless the Company and its respective officers,
directors, employees and agents (collectively, the "Indemnitee") from and
against and in respect of any and all Losses (as defined below) to the extent
resulting from, arising out of, relating to, imposed upon or incurred by the
Indemnitee by reason of: (i) the conduct of business by the Corporation prior to
the Closing Date (but only to the extent that the amount of such Loss was not a
stated liability on the Corporation's most recently dated balance sheet
delivered to the Company); and (ii) any inaccuracy in or breach of any of the
Corporation's or the Shareholder's representations, warranties, covenants or
agreements contained in this Agreement, the Related Agreements or in any other
agreement or document entered into or delivered on or after the date hereof in
connection with this Agreement or any of the transactions contemplated hereby
and/or thereby. Provided, however, the indemnification by the Corporation and
the Shareholder under this Section 9.1.(a) shall include
29
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 Shareholder from and against and in
respect of any and all Losses resulting from, arising out of, relating to,
imposed upon or incurred by the Shareholder by reason of any inaccuracy in or
breach of any of the Company's representations, warranties, covenants or
agreements contained in this Agreement or in any other agreement or document
entered into or delivered by the Company on or after the date hereof in
connection with this Agreement or any of the transactions contemplated hereby
and/or thereby. 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
30
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.
00 Xxxx 00xx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx, Chief Executive Officer
(b) if to the Corporation or the Shareholder, to:
Xxxxx X. Xxxxxxx
00000 Xxxxxxxxxx Xxxxx
Xxxxxxx, XX 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
31
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 New York, without giving effect to
the principles of conflicts of law thereof.
10.6. Severability. If any term or other provision of this Agreement
is invalid, illegal or unenforceable, all other provisions of this Agreement
shall remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner materially
averse to any party. In the event that the enforceability of any non-competition
or similar covenants contained herein or in any Related Agreement is called into
question as the result of time, geographical or other applicable limitations
specified in such covenants, such time, geographical or other applicable
limitations shall be deemed modified to the minimum extent necessary to render
the applicable provisions of such covenants enforceable.
10.7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
10.8. Specific Performance. The parties hereto acknowledge that
irreparable damage would result if any of the covenants of this Agreement were
not specifically enforced, and they therefore consent that the rights and
obligations of the parties under this Agreement may be enforced by a decree of
specific performance issued by a court of competent jurisdiction. Such remedy
shall, however, not be exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise. Without limiting the
foregoing, the Corporation and the Shareholder acknowledge that the failure to
comply with any of the provisions of Sections 3.1, 3.2. and 6.2 hereof will
result in irreparable harm for which there is no adequate remedy at law and that
the Company and/or the Corporation shall be entitled, without the necessity of
proving actual damages, to injunctive relief in addition to damages and all
other remedies which may otherwise be available to the Company and/or the
Corporation.
32
10.9. Fees and Expenses. All costs and expenses, including but not
limited to all fees and expenses of attorneys, lenders, financial advisers and
accountants, in connection with the negotiation, execution and delivery of this
Agreement, the Related Agreements and the consummation of the transactions
contemplated hereby and thereby, shall be paid by the party incurring such costs
and expenses.
10.10. Arbitration. Other than the Company's right to institute
legal action for a breach of the confidentiality, non-competition and
non-solicitation covenants set forth in Sections 3.1, 3.2 and 6.2 hereinabove,
any issue, controversy, dispute or claim arising out of or relating to this
Agreement or its alleged breach that cannot be resolved by mutual agreement
shall be resolved exclusively by arbitration by a single arbitrator in either
the District of Columbia or New York City, at the option of the Company, in
accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA") and judgment on the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof. It is acknowledged by the
Corporation and the Shareholder that money damages are inadequate to compensate
the Company and/or the Corporation for a breach of the terms of this Agreement,
and that the Company and/or the Corporation shall be entitled to specific
performance of the terms of this Agreement. The arbitrator may enter a default
decision against any party who fails to participate in the proceeding. The
decision of the arbitrator shall be final, conclusive, binding and
non-appealable. The losing party shall pay all costs and expenses of
arbitration.
The arbitrator shall be selected by consent of the parties, if possible.
If the parties fail to reach agreement upon appointment of the arbitrator within
ten days after a demand for arbitration is made, the arbitrator shall be
selected from a list of proposed arbitrators submitted by AAA. The selection
process shall be that which is set forth in the AAA commercial arbitration rules
then prevailing, except that (1) the number of preemptory strikes shall not be
limited, and (2) if the parties fail to select the arbitrator from three lists,
AAA shall have the power to make an appointment. If an arbitrator should die,
withdraw, or otherwise become incapable of serving, a replacement shall be
selected and appointed in a like manner.
10.11 Disclosure to Third Parties. The Company shall have the right
to disclose to third parties, in whatever manner the Company may determine, the
fact that this Agreement
33
has been executed, the names of the parties to this Agreement and the terms
hereof.
34
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
or on behalf of each of the parties hereto as of the date first above written.
"COMPANY"
DISPATCH MANAGEMENT SERVICES CORP.
By: /s/ Xxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
Attest: "CORPORATION"
AFS COURIER SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------- --------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
Witness: "SHAREHOLDER"
/s/ Xxxxx X. Xxxxxxx
-------------------------------- --------------------------------------
Xxxxx X. Xxxxxxx
35
