ASSET PURCHASE AGREEMENT
by and among
TRANSPORT SPECIALISTS, INC.
REGROUP EXPRESS L.L.C.
and
THE MEMBERS OF REGROUP EXPRESS L.L.C.
IDENTIFIED HEREIN
June 4, 2003
TABLE OF CONTENTS
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ARTICLE 1 CERTAIN DEFINITIONS..........................................................................1
ARTICLE 2 TRANSFER OF ASSETS...........................................................................1
2.1 Purchased Assets...................................................................................1
2.2 Excluded Assets....................................................................................2
ARTICLE 3 PURCHASE PRICE...............................................................................2
3.1 Purchase Price for Purchase Assets.................................................................2
3.2 Objections; Dispute Resolution.....................................................................6
3.3 Taxes 7
3.4 Prorations.........................................................................................7
3.5 Guaranty by Stonepath Group........................................................................7
ARTICLE 4 NO ASSUMPTION OF LIABILITIES.................................................................7
4.1 No Assumption of Liabilities.......................................................................7
ARTICLE 5 CLOSING......................................................................................8
5.1 Closing............................................................................................8
ARTICLE 5 CLOSING......................................................................................8
5.2 Deliveries by Seller...............................................................................8
5.3 Deliveries by Buyer................................................................................9
5.4 Contemporaneous Effectiveness.....................................................................10
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER AND THE MEMBERS....................................10
6.1 Organization, Good Standing and Power.............................................................10
6.2 Authorization of Agreement and Enforceability.....................................................10
6.3 No Violation; Consents............................................................................11
6.4 Membership Interests..............................................................................11
6.5 Taxes 11
6.6 Financial Statements..............................................................................12
6.7 Absence of Undisclosed and Contingent Liabilities.................................................12
6.8 Absence of Certain Changes or Events..............................................................13
6.9 Customers.........................................................................................13
6.10 Real Property.....................................................................................13
6.11 Tangible Personal Property........................................................................14
6.12 Condition of Buildings and Tangible Personal Property.............................................14
6.13 Material Contracts................................................................................14
6.14 Title to Purchased Assets; Absence of Encumbrances; Sufficiency...................................16
6.15 Intellectual Property Matters.....................................................................16
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6.10 Permits...........................................................................................17
6.17 Compliance with Laws..............................................................................17
6.18 Absence of Certain Business Practices.............................................................17
6.19 Legal Proceedings.................................................................................17
6.20 Labor Matters.....................................................................................18
6.21 Employment Related Matters........................................................................18
6.22 Effect of Transaction.............................................................................19
6.23 No Finder.........................................................................................19
6.24 No Fraudulent Conveyance..........................................................................19
6.25 Environmental Matters.............................................................................19
6.26 Certain Securities Law Representations............................................................19
6.27 Relationship With Related Persons.................................................................20
6.28 Completeness and Accuracy.........................................................................21
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF BUYER.....................................................21
7.1 Organization, Good Standing, Power................................................................21
7.2 Authorization of Agreement and Enforceability.....................................................21
7.3 No Violations; Consents...........................................................................22
7.4 No Finder.........................................................................................22
7.5 Completeness and Accuracy.........................................................................22
ARTICLE 8 COVENANTS...................................................................................22
8.1 Access and Cooperation............................................................................22
8.1 Continuance of Businesses.........................................................................22
8.3 Affirmative Covenants.............................................................................24
8.4 Notification of Certain Matters...................................................................24
8.5 HSR Act; Other Filings............................................................................24
8.6 Satisfaction of Conditions; Cooperation...........................................................24
8.7 Further Assurances................................................................................25
8.8 Confidentiality...................................................................................25
8.9 Non-Competition Agreement.........................................................................25
8.10 Change of Name....................................................................................25
8.11 Seller's Post-Closing Operation...................................................................25
8.12 Payment of Liabilities............................................................................25
8.13 Audited Financial Statements......................................................................26
8.14 Third Party Consents..............................................................................26
8.15 Non Solicitation of Other Offers....................................................................
8.16 Prohibition on Trading in Stonepath Stock.........................................................26
8.18 Termination of Seller's Employees.................................................................27
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER................................................28
9.1 Conditions to Closing.............................................................................28
9.7 Approval of Acquisition...........................................................................29
9.2 Expiration of Certain Conditions..................................................................29
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ARTICLE 10 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER...........................................29
10.1 Accuracy of Representations and Warranties........................................................30
10.2 Performance of Agreement..........................................................................30
10.3 Injunction........................................................................................30
10.4 Actions or Proceedings............................................................................30
10.5 Consents..........................................................................................30
ARTICLE 11 SURVIVAL; INDEMNIFICATION...................................................................30
11.1 Survival..........................................................................................30
11.2 Indemnification by Seller.........................................................................30
11.3 Indemnification by Buyer..........................................................................31
11.4 Third Party Claims................................................................................31
11.5 Limitations on Amount.............................................................................32
11.6 Other Remedies....................................................................................32
ARTICLE 12 TERMINATION.................................................................................32
12.1 Termination.......................................................................................32
12.2 Effect of Termination.............................................................................33
ARTICLE 13 GENERAL.....................................................................................33
13.1 Expenses..........................................................................................33
13.2 Publicity.........................................................................................33
13.3 Waivers...........................................................................................34
13.4 Binding Effect; Benefits..........................................................................34
13.5 Bulk Transfers Laws...............................................................................34
13.6 Notices...........................................................................................34
13.7 Entire Agreement..................................................................................35
13.8 Counterparts......................................................................................35
13.9 Headings..........................................................................................35
13.10 Construction......................................................................................36
13.11 Governing Law and Choice of Forum.................................................................36
13.12 Cooperation.......................................................................................36
13.13 Severability......................................................................................36
13.14 Assignment By Buyer...............................................................................36
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated June 4, 2003 by and between TRANSPORT
SPECIALISTS, INC., a Virginia corporation (the "Buyer"), an indirect wholly
owned subsidiary of Stonepath Group, Inc. ("Stonepath Group"), REGROUP EXPRESS
L.L.C., a Virginia limited liability company (the "Seller"), and XXX. X. XXXXXXX
and XXXXXXX X. XXXX, the sole members of the Seller (the "Members").
RECITALS
WHEREAS, Seller is in the business of providing freight forwarding and
transportation logistics services (the "Business"); and
WHEREAS, Buyer desires to acquire from Seller, and Seller desires to
transfer to Buyer, certain assets of Seller used in connection with the
Business, all upon the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained herein, and in reliance thereon, Buyer
and Seller, intending to be legally bound, hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used herein, the terms set forth in Exhibit A shall have the
meanings set forth therein.
ARTICLE 2
TRANSFER OF ASSETS
2.1 Purchased Assets. Upon the terms and subject to the conditions of
this Agreement, at the Closing, Seller shall sell and convey to Buyer, and Buyer
shall purchase and accept from Seller, all of Seller's right, title and interest
in, to, and under all of the business, properties, assets, goodwill and rights
of Seller of whatever kind and nature, real or personal, tangible or intangible,
that are owned, leased or licensed by Seller on the Closing Date, other than the
Excluded Assets (hereinafter collectively referred to as the "Purchased
Assets"), including, without limitation, the following:
(a) the Assumed Leases;
(b) the Equipment and the Leased Equipment;
(c) the Furnishings and Supplies;
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(d) the Intellectual Property;
(e) the Contracts;
(f) the Business Records;
(g) the Permits;
(h) the Leased Premises; and
(i) the Goodwill.
2.2 Excluded Assets. Notwithstanding the provisions of Section 2.1, it
is expressly acknowledged and agreed that the Purchased Assets shall not
include, and that the Seller shall not sell or convey to the Buyer, and the
Buyer shall not purchase or accept from the Seller, the following assets (the
"Excluded Assets"):
(a) Any cash, bank deposits, marketable securities or similar
cash equivalents;
(b) Any accounts receivable;
(c) The minute books and membership records of the Seller;
(d) Any claims or rights against Third Persons to the extent
they arise out of transactions prior to the Effective Time;
(e) Prepaid expenses; and
(f) All rights of Seller under this Agreement and the general
xxxx of sale and assignments delivered by Seller pursuant to this Agreement.
ARTICLE 3
PURCHASE PRICE
3.1 Purchase Price for Purchased Assets.
(a) The purchase price for the Purchased Assets shall be
Seventeen Million Two Hundred Thousand Dollars ($17,200,000), plus up to an
additional Ten Million Dollars ($10,000,000) in purchase consideration, all
payable in accordance with and subject to adjustment pursuant to the further
provisions of this Section 3.1 and Section 3.2 (the "Purchase Price").
(b) Buyer shall pay the Purchase Price to Seller as follows:
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(i) Three Million Seven Hundred Thousand Dollars
($3,700,000) (the " Initial Cash Payment Amount") shall be paid in immediately
available funds to the Seller at the Closing;
(ii) One Million Dollars ($1,000,000) shall be paid
by the delivery to Seller at the Closing of shares of Common Stock of Stonepath
Group (the "Stonepath Shares") registered in the name of the Seller having a
value of the One Million Dollars ($1,000,000) based upon the average closing
price of such stock on the Principal Exchange for the five (5) trading days
preceding the Closing Date;
(iii) Subject to the terms of this Section
3.1(b)(iii), an amount of up to Two Million Five Hundred Thousand Dollars
($2,500,000) (the "Additional Initial Payment") in the event that Buyer
generates Net Income Before Taxes of Three Million Five Hundred Thousand Dollars
($3,500,000) or more during the twelve month period commencing on the first day
of the first calendar month after the Closing Date (the "Additional Initial
Payment Measurement Period"). If the Buyer's Net Income Before Taxes for the
Additional Initial Payment Measurement Period is less than Three Million Five
Hundred Thousand Dollars ($3,500,000), then the Additional Initial Payment shall
be reduced by the amount of the shortfall (the "Additional Initial Payment
Shortfall Amount") on a dollar-for-dollar basis. On or before sixty (60) days
after the end of the Additional Initial Payment Measurement Period (the
"Additional Initial Amount Payment Date"), Buyer and Stonepath Group shall
prepare and deliver to Seller a certificate (the "Additional Initial Payment
Certificate") signed by the Chief Financial Officer of Stonepath Group setting
forth the amount and method of calculating Net Income Before Taxes for the
Additional Initial Payment Measurement Period and the calculation of the
Additional Initial Payment then due, if any. The Additional Initial Payment, if
any, shall be paid by Buyer to Seller on the Additional Initial Amount Payment
Date in the following manner:
(A) The first Five Hundred Thousand Dollars
($500,000) of the Additional Initial Payment shall be paid by the issuance to
Seller of additional Stonepath Shares having a value of the first Five Hundred
Thousand Dollars ($500,000) of the Additional Initial Payment based upon the
average closing price of such stock on the Principal Exchange for the five (5)
trading days preceding the Additional Initial Amount Payment Date; and
(B) The remainder of the Additional Initial
Payment shall be paid to Seller in immediately available funds.
(iv) Subject to the terms of Section 3.1(b)(v) below,
Ten Million Dollars ($10,000,000) (the "Base Earn-Out Amount") shall be paid to
the Seller in installments of Two Million Five Hundred Thousand Dollars
($2,500,000) per year (each a "Base Earn-Out Payment") covering the four-year
earn-out period commencing on January 1, 2004 (the " Base Earn-Out Period"). The
Base Earn-Out Payments will be based on the Net Income Before Taxes of the
Buyer, calculated in accordance with the provisions of this Agreement, during
each of the calendar years within the Base Earn-Out Period. The Base Earn-Out
Payments shall be made on April 1st of each of the years 2005 through 2008 (the
"Earn-Out Payment Dates"), following each calendar year in which Net Income
Before Taxes is determined.
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(v) Subject to the provisions of this Section
3.1(b)(v), payment of each Base Earn-Out Payment shall be contingent upon the
Buyer achieving Net Income Before Taxes for the calendar year preceding each
Earn-Out Payment Date in an amount no less than Three Million Five Hundred
Thousand Dollars (the "Targeted Amount"). On each Earn-Out Payment Date, Buyer
and Stonepath shall prepare and deliver to Seller a certificate (the "Annual
Earn-Out Certificate") signed by the Chief Financial Officer of Stonepath
setting forth the amount and method of calculating Net Income Before Taxes for
the prior calendar year and the calculation of the Base Earn-Out Payment then
due, if any. If Net Income Before Taxes of the Buyer for the calendar year
preceding an Earn-Out Payment Date is less than the Targeted Amount (such
deficiency, the "Earn-Out Shortfall Amount"), then the Base Earn-Out Payment for
such period shall be reduced on a dollar-for-dollar basis by the Earn-Out
Shortfall Amount.
(vi) Any Additional Initial Payment Shortfall Amount
or Earn-Out Shortfall Amount (each, a "Shortfall Amount") shall be recovered on
a dollar-for-dollar basis to the extent that in any calendar year during the
Base Earn-Out Period, the Net Income Before Taxes of the Buyer exceeds the
Targeted Amount (the amount of such excess hereinafter the "Excess Amount"). The
Excess Amount shall be applied on a dollar-for-dollar basis as directed by the
Seller to reduce any Shortfall Amount in any prior or subsequent calendar year
during the Base Earn-Out Period or in the Additional Initial Payment Measurement
Period and the corresponding Base Earn-Out Payments or the Additional Initial
Payment shall be adjusted accordingly; provided that any given dollar of the
Excess Amount shall only be available for application against a Shortfall Amount
once. Any Shortfall Amount not recovered on or before the final Earn-Out Payment
Date shall no longer be recoverable.
(vii) An additional payment (the "Additional Earn-Out
Payment") shall be paid to the Seller in immediately available funds in an
amount equal to the lesser of (1) Ten Million Dollars ($10,000,000), (2) fifty
percent (50%) of the amount by which the Buyer's cumulative Net Income Before
Taxes over the course of the sixty (60) month period commencing on January 1,
2004 (the "Additional Earn-Out Period")(taking into account losses as well as
income during any period within the Additional Earn-Out Period) exceeds
Seventeen Million Five Hundred Thousand Dollars ($17,500,000) (the "Additional
Earn-Out Threshold"), and (3) the cumulative amount of the Buyer's Net Income
Before Taxes Attributable to Government Business over the course of the
Additional Earn-Out Period from (1) customers to which Seller provided
transportation services prior to the Effective Time (an "Existing Seller
Customer") or (2) New Customers obtained solely as a result of the personal
marketing efforts of either Member or any employee or independent contractor
working for the Buyer while either Member has principal responsibility for
managing the Buyer's or its successor's sales force. The Additional Earn-Out
Payment shall be made to Seller within sixty (60) days after the end of the
Additional Earn-Out Period (the "Additional Earn-Out Payment Date"); however, in
the event that Buyer can demonstrate to Stonepath Group, that it generated
cumulative Net Income Before Taxes of at least Thirty Seven Million Five Hundred
Thousand ($37,500,000) during the Additional Earn-Out Period prior to the
Additional Earn-Out Payment Date, the Additional Earn-Out Payment Date shall be
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accelerated to the date sixty (60) days after Buyer demonstrates that it
generated that amount of cumulative Net Income Before Taxes. On the Additional
Earn-Out Payment Date (or earlier pursuant to the last clause in the preceding
sentence), Buyer and Stonepath Group shall prepare and deliver to Seller a
certificate (the "Additional Earn-Out Certificate") signed by the Chief
Financial Officer of Stonepath Group setting forth the amount and method of
calculating the Additional Earn-Out Payment then due, if any.
(c) For the purpose of computing Net Income Before Taxes and
the corresponding payments to be made pursuant to this Section 3.1,
(i) Net Income Before Taxes shall be determined based
upon separate financial statements of the Buyer derived from the audited
consolidated financial statements of Stonepath Group for each of the years in
the Base Earn-Out Period and the Additional Earn-Out Period;
(ii) Buyer shall continue to be accounted for as a
separate operating unit;
(iii) No Existing Seller Customer or New Customer
that is introduced to Stonepath Group, Buyer or any other Affiliate of Stonepath
Group by either Member or any employee or independent contractor working for the
Buyer while either Member has principal responsibility for managing the Buyer's
or its successor's sales force shall be serviced by an Affiliate of Stonepath
Group other than Buyer without adequate provision being made to appropriately
credit Buyer as if Buyer had performed the service;
(iv) Net Income Before Taxes shall be determined
without offset for any overhead or management charges imposed by Stonepath Group
or its Affiliates other than Buyer, including but not limited to: (x) charges
for management or information systems, (y) charges for extraordinary items
outside the scope of Buyer's operations, or (z) charges for the hiring of
additional operational management or employees (other than those covered in the
letter referenced in subsection (c)(vi) below) initiated by Stonepath Group;
except for: (A) direct costs that are incurred by Stonepath Group or its
Affiliates on behalf of Buyer and that are agreed to by the Members; (B) the
arms' length cost of shared administrative services provided to Buyer by
Stonepath Group or any of its Affiliates which specifically replace costs that
were historically incurred by Seller prior to the Closing Date and which are
agreed to by the Members; or (C) with respect to subsection (z) above,
management or other employees who are acceptable to the Members;
(v) Net Income Before Taxes shall be determined
without offset for any expense or accrual arising from a liability of Buyer that
existed prior to the Closing Date; and
(vi) The business of Buyer after the Closing shall be
managed in the manner set forth in the letter from Buyer to Seller dated the
date hereof.
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(d) The Purchase Price shall be allocated in accordance with
Schedule 3.1. After the Closing, the Parties shall make consistent use of the
allocation and fair market value specified in Schedule 3.1 for all Tax purposes
and in all filings, declarations, and reports with the Internal Revenue Service,
including reports required to be filed under Section 1060 of the Code. In any
proceeding related to the determination of any Tax, neither Buyer nor Seller
shall contend or represent that such allocation is not a correct allocation.
3.2 Objections; Dispute Resolution.
(a) If the Seller objects to any matter reported in the
Additional Initial Payment Certificate, an Annual Earn-Out Certificate, or the
Additional Earn-Out Certificate (collectively, the "Payment Certificates"), the
Seller shall, within thirty (30) days after its receipt of such Payment
Certificate (the "Response Period"), deliver to the Buyer a written statement
(the "Objection Notice"): (i) setting forth in reasonable detail the nature of
the objections to each of any discrepancies believed to exist, and (ii)
requesting all additional information required by the Seller to perform
calculations relating to matters contained in such certificate. If no Objection
Notice is given within the Response Period, then the calculations set forth in a
Payment Certificate shall be controlling for all purposes of this Agreement.
(b) If an objection notice is timely given within the Response
Period, Buyer shall provide Seller all requested information included in the
Objection Notice within fifteen (15) days; thereafter, Buyer and Seller shall
use good faith efforts to jointly resolve any properly noticed objections and
discrepancies within thirty (30) days of the receipt by Buyer of an Objection
Notice, which resolution, if achieved, shall be fully and completely binding
upon all Parties to this Agreement and not subject to further review, appeal, or
dispute.
(c) If Buyer and Seller are unable to resolve the objections
and discrepancies to their mutual satisfaction within such thirty (30) day
period, then the matter shall be submitted to an accounting firm of national
reputation mutually acceptable to Buyer and Seller (the "Independent
Accountants"). In submitting a dispute to the Independent Accountants, Buyer and
Seller shall concurrently furnish, at their own expense, to the Independent
Accountants and the other Party such documents and information as the
Independent Accountants may request. Each Party may also furnish to the
Independent Accountants such other information and documents as it deems
relevant, with copies of such submission and all such documents and information
being concurrently given to the other Party. Neither Party shall have or conduct
any communication, either written or oral, with the Independent Accountants
without the other Party either being present or receiving a concurrent copy of
any written communication. The Independent Accountants may conduct a conference
concerning the objections and disagreements between Buyer and Seller, at which
conference each Party shall have the right to (i) present its documents,
materials and other evidence (previously provided to the Independent Accountants
and the other Party), and (ii) have present its or their advisors, accountants
and/or counsel. The Independent Accountants shall promptly (but not to exceed
seventy-five (75) days from the date of engagement of the Independent
Accountants) render a decision on the issues presented, and such decision shall
be final and binding on all of the Parties to this Agreement. In the event the
Independent Accountants require a payment to be made by Buyer to Seller, such
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payment shall be due and payable within thirty (30) days from the date the
decision is rendered ("Independent Accountant Required Payment") Each of the
parties shall agree to indemnify and hold harmless the Independent Accountants,
and to execute whatever documents or agreements are necessary to effectuate the
foregoing.
(d) If the decision of the Independent Accountants indicates
that the amount of the payment set forth in a Payment Certificate is under
reported, then in that event, Buyer shall reimburse Seller for all fees, costs
and expenses associated with the challenge to the Payment Certificate in Section
3.2(b) and (c), and all fees, costs and expenses to engage the Independent
Accountants to perform the duties as set forth above. If the decision of the
Independent Accountants indicates that the amount of the payment set forth in
the Payment Certificate is not under reported then, in that event, Seller shall
pay all fees, costs and expenses to engage the Independent Accountants to
perform their duties as set forth above. All payments of fees, costs and
expenses pursuant to this Section shall be due and payable to the prevailing
party by the non-prevailing party within 30 days of presentment of the invoice
for such fees, costs and expenses, after which, the unpaid amounts shall bear
interest at the rate of 7% per annum.
(e) In connection with their review of the all matters arising
under a Payment Certificate, Buyer shall afford Seller and its representatives
complete access to the books, records, personnel and facilities of or pertaining
to Buyer.
3.3 Taxes. The Seller shall bear and be responsible for the payment of
all Taxes (excluding Taxes based on or measured by income ), if any, that are
imposed by any government or political subdivision thereof and that are payable
or arise as a result of the transfer of the Purchased Assets, notwithstanding
the Party upon which such Taxes are actually imposed. Buyer shall furnish to
Seller properly completed exemption, resale or similar certificates, to the
extent that such certificates are required by law, for any Taxes from which
Buyer claims to be exempt.
3.4 Prorations. At the Closing, fuel, tax, municipal assessments, rents
(other than rents related to the facility lease) and storage fees, and other
like matters associated with the Purchased Assets shall be prorated between
Buyer and Seller as of the Closing Date.
3.5 Guaranty by Stonepath Group. Stonepath Group has guaranteed the due
performance, execution, observance and payment by Buyer of all of Buyer's
obligations under this Agreement, all upon the terms and conditions set forth in
the Guaranty Agreement in the form attached as Exhibit C
ARTICLE 4
NO ASSUMPTION OF LIABILITIES
4.1 No Assumption of Liabilities. Seller shall transfer the Purchased
Assets to Buyer free and clear of all Encumbrances and Buyer shall not, by
virtue of its purchase of the Purchased Assets or otherwise, assume or become
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responsible for any Liabilities of Seller or any other Person, except for, and
only for, the Liabilities of Seller under the transferred Contracts to the
extent such Liabilities relate to the period from and after the Closing (such
Liabilities under the Assumed Leases and transferred Contracts that relate to
the period from and after the Closing, the "Assumed Liabilities").
ARTICLE 5
CLOSING
5.1 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 a.m., Eastern Standard Time,
at the offices of Buyer's counsel, Xxxxxxxx Xxxxxxxxx Professional Corporation,
0000 X Xxxxxx X.X., Xxxxxxxxxx, XX 00000, within five (5) Business Days after
the conditions set forth in Articles 9 and 10 have been satisfied or waived or
on such other place and time or on such other date as may be mutually agreed
upon by Buyer and Seller. The date upon which the Closing shall occur shall be
referred to in this Agreement as the "Closing Date." The conveyance of the
Purchased Assets and the assumption of the Assumed Liabilities shall be
effective as of 7:00 a.m., Eastern Standard Time, on the Closing Date (the
"Effective Time").
5.2 Deliveries by Seller. At the Closing, Seller shall execute and
deliver the following:
(a) An instrument of assignment, in form and substance
satisfactory to Buyer, assigning all trademarks and service marks which are
included in the Intellectual Property;
(b) A general xxxx of sale and assignment in form and
substance satisfactory to Buyer, transferring to Buyer all of Seller's right,
title, and interest in the Purchased Assets not covered by the assignments
referred to in subsection (a) of this Section 5.1;
(c) The Business Records;
(d) The Permits;
(e) An employment agreement between the Buyer and each Member
in the form of Exhibit B hereto (the "Employment Agreements") duly executed by
each Member;
(f) A certificate of the Seller and each Member to the effect
that: (i) all representations and warranties made by the Seller and the Members
under this Agreement are true and correct as of the Closing Date, as though
originally given to Buyer on the Closing Date; (ii) the Seller and the Members
have performed all obligations to be performed by the, under this Agreement
prior the Closing Date; and (iii) the conditions precedent identified in Article
9 have been satisfied;
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(g) A certificate of good standing of the Secretary of the
Commonwealth of Virginia, dated within fifteen (15) days of the Closing Date, to
the effect that the Seller is in good standing under the laws of such State;
(h) Copies of the Seller's certificate of formation and
operating agreement certified by the Members dated at or about the Closing Date;
(i) Copies of all resolutions adopted by the managers of the
Seller and the Members authorizing the transactions contemplated by this
Agreement;
(j) Clearance letters from each regulatory authority under any
statute that may create a lien for unpaid taxes or similar amounts;
(k) An opinion of Seller's counsel in form and substance
reasonably satisfactory to Buyer; and
(l) Such additional instruments of conveyance and transfer as
Buyer may reasonably request in order to more effectively vest in Buyer the
Purchased Assets.
5.3 Deliveries by Buyer. At the Closing, Buyer shall execute and/or
deliver the following:
(a) the Initial Cash Payment Amount;
(b) certificates for the Stonepath Shares required by Section
3.1(b)(ii), registered in the name of the Seller;
(c) the Employment Agreements duly executed by the Buyer;
(d) a Guaranty Agreement in the form of Exhibit C hereto shall
be executed by Stonepath Group;
(e) A certificate of the Buyer to the effect that: (i) all
representations and warranties made by the Buyer under this Agreement are true
and correct as of the Closing Date, as though originally given to Seller on the
Closing Date; (ii) the Buyer has performed all obligations to be performed by it
under this Agreement prior the Closing Date; and (iii) the conditions precedent
identified in Article 10 have been satisfied;
(f) A certificate of good standing of the Secretary of the
Commonwealth of Virginia dated within fifteen (15) days of the Closing Date, to
the effect that the Buyer is in good standing under the laws of such State;
(g) Copies of the Buyer's certificate of incorporation and
bylaws certified by the Secretary of the Buyer dated at or about the Closing
Date;
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(h) Copies of all resolutions adopted by the board of
directors of the Company and of Stonepath Group authorizing the transactions
contemplated by this Agreement; and
(i) An opinion of Buyer's counsel in form and substance
reasonably satisfactory to Seller.
5.4 Contemporaneous Effectiveness. All acts and deliveries required by
this Article 5, regardless of chronological sequence, will be deemed to occur
contemporaneously and simultaneously on the occurrence of the last act or
delivery, and none of such acts or deliveries will be effective until the last
of the same has occurred.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE MEMBERS
To induce Buyer to enter into this Agreement, Seller and the Members
hereby make the following representations and warranties to Buyer. The
disclosure schedules (the "Schedules") attached hereto are numbered to
correspond to the various sections of this Article 6 setting forth certain
exceptions to the corresponding representations and warranties contained in this
Article 6 and certain other information required by this Agreement. Unless
otherwise specified, no disclosure made in any particular Schedule shall be
deemed made in any other Schedule unless expressly made therein.
6.1 Organization, Good Standing and Power. Seller is a limited
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of formation, and has all requisite power and
authority to own the Purchased Assets and to execute and deliver this Agreement,
to consummate the transactions contemplated hereby and to perform all of the
obligations to be performed by it pursuant to this Agreement. Seller is duly
qualified or licensed to do business and in good standing as a foreign limited
liability company in each of the jurisdictions in which the nature of its
business or the character of the properties and assets which it owns or leases
makes such qualification or licensing necessary, except where the failure to be
so qualified, licensed, or in good standing would not have a material adverse
effect on the Business or the Purchased Assets. Each jurisdiction in which
Seller is qualified or licensed to do business is set forth in Schedule 6.1.
Seller has not, during the six (6) year period immediately preceding the date
hereof, changed its name, been the surviving entity of a merger, consolidation
or other reorganization, or acquired all or substantially all of the assets of
any person or entity. Schedule 6.1 sets forth all assumed names under which the
Seller or such predecessors have conducted business.
6.2 Authorization of Agreement and Enforceability. The Members and
Seller have the full capacity, power and authority to enter into this Agreement
and the Ancillary Agreements and to consummate the transactions contemplated
hereby and thereby and to comply with the terms, conditions and provisions
hereof and hereof. This Agreement and the Ancillary Agreements have been duly
authorized, executed and delivered by the Members and Seller and are legal,
10
valid and binding obligations of the Members and Seller, enforceable against
each of them in accordance with their terms. No notices to, declaration, filing
or registration with, approvals or consents of, or assignments by, any Persons
(including Governmental Authorities) are necessary to be made or obtained by the
Members or Seller in connection with the execution, delivery or performance by
the Members or Seller of this Agreement or the Ancillary Agreements. This
Agreement constitutes, and the Ancillary Agreements when executed will
constitute, legal, valid and binding obligations of Seller and the Members,
enforceable against them in accordance with their terms.
6.3 No Violation; Consents. Seller is not in default under or in
violation of any provision of (a) its certificate of formation or operating
agreement, or (b) any agreement, understanding, arrangement, indenture,
contract, lease, sublease, license, sublicense, franchise, loan agreement, note,
restriction, obligation or liability to which it is a party or by which it is
bound or to which it or its assets are subject (individually, an "Instrument"
and collectively, the "Instruments"). Except as set forth on Schedule 6.3,
neither the execution and delivery of this Agreement or the Ancillary Agreements
by the Members or Seller, nor the consummation of the transactions contemplated
hereby or thereby, nor compliance with the terms hereof or thereof, will (i)
conflict with or result in a breach of any of the terms, conditions or
provisions of the certificate of formation or operating agreement of Seller, nor
(ii) violate, conflict with or result in a breach of or default under any of the
terms, conditions or provisions of any Instrument, nor (iii) accelerate or give
to others any interests or rights, including rights of acceleration,
termination, modification or cancellation, under any Instrument, nor (iv) result
in the creation of any Encumbrance on the Purchased Assets, nor (v) conflict
with, violate or result in a breach of or constitute a default under, any
Applicable Law to which Seller or the Members or any of its or their assets or
properties is subject, nor (vi) require the Members or Seller to give notice to,
or obtain an authorization, approval, order, license, franchise, declaration or
consent of, or make a filing with, any Governmental Authority or any other
Person.
6.4 Membership Interests. The Members are all of the members of the
Seller. The membership interests held by the Members in Seller are the only
membership interests or other equity interests in Seller ever issued and
outstanding.
6.5 Taxes.
(a) Schedule 6.5 contains a list of the Tax Returns which the
Seller has filed for any taxable periods ended on or after December 31, 1999
("Tax Returns"). Seller has provided Buyer with true, correct, and complete
copies of all such Tax Returns.
(b) Except as set forth on Schedule 6.5 attached hereto:
(i) Seller (A) has timely and properly filed or
caused to be filed all Tax Returns which it is or has been required to file on
or prior to the date hereof, by any jurisdiction to which it is or has been
subject, all such tax returns being true and correct and complete in all
respects, (B) has timely paid or caused to be paid in full all Taxes which are
or have become due and payable to all taxing authorities with respect to such
returns and periods, (C) has made or caused to be made all withholdings of Taxes
required to be made by it, and such withholdings have either been paid to the
11
appropriate governmental agency or set aside in appropriate accounts for such
purpose, and (D) has otherwise satisfied, in all material respects, all
applicable laws and agreements with respect to the filing of Tax Returns and the
payment of Taxes.
(ii) There are no unassessed Tax deficiencies
proposed or threatened against Seller, nor are there any agreements, waivers, or
other arrangements providing for extension of time with respect to the
assessment or collection of any Tax against Seller or any actions, suits,
proceedings, investigations or claims now pending against the Seller with
respect to any Tax, or any matter under discussion with any governmental
authority relating to any Taxes.
(iii) Schedule 6.5 identifies all audits of Seller's
Tax Returns, if any, including a reasonably detailed description of the nature
and outcome of each audit.
(iv) Seller has withheld and paid all taxes required
to have been withheld and paid in connection with any amounts paid or owing to
any employee, member, or any other third party for which withholding obligations
are imposed.
6.6 Financial Statements.
(a) Schedule 6.6 hereto contains true and correct and complete
copies of the unaudited financial statements of Seller for its two most recently
completed fiscal years ended December 31, 2001, and December 31, 2002 (the
"Annual Financial Statements") and unaudited financial statements of Seller for
the three (3) month period ending March 31, 2003 (the "Interim Financial
Statements" and collectively with the Annual Financial Statements, the
"Financial Statements"). The Financial Statements have been prepared in
conformity with GAAP applied on a consistent basis, and present fairly the
financial position and results of operations and cash flows of Seller at the
dates and for the periods covered by such Financial Statements. All liabilities
and obligations of Seller outstanding as of the dates of the Financial
Statements required to be reflected as liabilities in accordance with GAAP have
been included in the Financial Statements. There have been no material changes
in the financial condition, assets, liabilities, or results of operations of
Seller from March 31, 2003 to the date hereof, except changes in the Ordinary
Course of Business, none of which, either singly or in the aggregate, has been
materially adverse. Since March 31, 2003, Seller has conducted its business in a
normal and customary manner. The books and records of the Seller from which the
Financial Statements were prepared properly and accurately record the
transactions and activities which they purport to record.
(b) Seller has not engaged in any transaction, maintained any
bank account, or used any corporate funds except for the transactions, bank
accounts or funds which have been and are reflected in Seller's books and
records.
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6.7 Absence of Undisclosed and Contingent Liabilities.
(a) Seller has no Liabilities except (i) Liabilities which are
reflected and properly reserved against in the Financial Statements, (ii)
Liabilities incurred in the Ordinary Course of Business since March 31, 2003,
and (iii) Liabilities arising under the Contracts set forth in the Schedules or
which are not required to be disclosed on such Schedules and which have arisen
in the Ordinary Course of Business.
(b) None of the Liabilities described in this Section 6.7
relates to any breach of contract, breach of warranty, tort, infringement or
violation of law, or arose out of any action, order, writ, injunction, judgment,
or decree outstanding or claim, suit, litigation, proceeding, investigation or
dispute.
(c) The reserves for Liabilities set forth on the balance
sheets included in the Financial Statements are reasonable.
6.8 Absence of Certain Changes or Events. Since March 31, 2003, Seller
has not:
(a) Amended in any material respect or terminated any Contract
that would require over the full term thereof payments by or to Seller of more
than $25,000, other than in the Ordinary Course of Business;
(b) Suffered the occurrence of a Material Adverse Change;
(c) Sold, transferred, replaced or leased any of the Purchased
Assets other than in the Ordinary Course of Business;
(d) Waived or released any material rights with respect to the
Purchased Assets or the Business;
(e) Transferred or granted any rights to any Intellectual
Property; or
(f) Entered into any transaction or made any commitments (for
capital expenditures or otherwise) other than in the Ordinary Course of
Business.
6.9 Customers. Schedule 6.9 contains a true, correct, and complete of
list of the customers of Seller. No material customer of Seller has canceled,
terminated or threatened to cancel or otherwise terminate or adversely change,
his, her, or its relationship with Seller.
6.10 Real Property.
(a) Leased Real Property. Seller has the right to use all real
property necessary for the conduct of its business as presently conducted.
Schedule 6.10 identifies all such real property. Schedule 6.10 identifies all
leases of real property under which Seller is the lessee. True, correct and
complete copies of said leases and any amendments, extensions and renewals
thereof have heretofore been delivered by Seller to Buyer. Seller enjoys quiet
and undisturbed possession under each of said leases. Seller's interest in each
13
of such leases is free and clear of any Encumbrances created by Seller or the
Members or any Encumbrances to which either Member has actual knowledge, is not
subject to any deeds of trust, assignments, subleases or rights of any third
parties created by Seller, other than the lessor thereof. Said leases are valid
and binding and in full force and effect, and are not in default as to the
payment of rent or otherwise. The consummation of the transactions contemplated
by this Agreement will not constitute an event of default under any of said
leases and the continuation, validity and effectiveness of such leases will not
be adversely affected by the transactions contemplated by this Agreement.
(b) Use of the Leased Property. Neither Seller nor either
Member has knowledge that the use of the leased property has violated or would
violate any zoning, use or building restriction.
(c) Owned Real Property. Seller does not own any real
property.
6.11 Tangible Personal Property.
Seller owns or has the right to use all personal property
presently utilized in its Business and included in the Purchased Assets.
Schedule 6.11 sets forth a list of the tangible personal property of Seller
included in the Purchased Assets (the "Tangible Personal Property"). Except as
set forth on Schedule 6.11 hereto and except for property disposed of in the
Ordinary Course of Business of Seller, Seller has all right, title and interest
in, and good title to, the Tangible Personal Property free and clear of any
Encumbrance of any kind or nature whatsoever. Except as set forth on Schedule
6.11, with respect to each item of Tangible Personal Property, (i) there are no
leases, subleases, licenses, options, rights, or concessions or other
agreements, written or oral, granting to any party or parties the right of use
of any portion of such item of Tangible Personal Property, (ii) there are no
outstanding options or rights of first refusal in favor of any other party to
purchase any such item of Tangible Personal Property or portion thereof or
interest therein, and (iii) there are no parties other than Seller which are in
possession of or are using such Tangible Personal Property. True, complete and
correct copies of all leases and licenses relating to the Tangible Personal
Property have heretofore been delivered by Seller to Buyer.
6.12 Condition of Buildings and Tangible Personal Property. All of the
premises occupied and the items of Tangible Personal Property are in good
working order (ordinary wear and tear excepted), are free from any material
defect to which Seller or either Member have actual knowledge, and have been
maintained in all material respects in accordance with the past practice of the
Business and generally accepted industry practice, and no repairs, replacements
or regularly scheduled maintenance relating to any such item has been deferred.
All leased personal property of the Business is in all material respects in the
condition required of such property by the terms of the lease applicable
thereto.
6.13 Material Contracts.
(a) Schedule 6.13 contains a true, correct, and complete list
of all of the material contracts of Seller which shall consist of all
agreements, leases, licenses, contracts, obligations, promises, commitments,
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arrangements, understandings, or undertakings, (whether oral or written or
express or implied) to which Seller is a party, under which the Seller may
become subject to any obligation or liability, or by which the Seller or any of
its assets may become bound (collectively, the "Material Contracts") that
satisfy any of the following:
(i) each arrangement, agreement, contract or
understanding that involves performance of services or delivery of goods or
materials by Seller in an amount or for a value in excess of $20,000;
(ii) each arrangement, agreement, contract or
understanding that was not entered into in the Ordinary Course of Business;
(iii) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other arrangement,
agreement, contract or understanding affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any real or personal
property (except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than $20,000
and with terms of less than one year);
(iv) each licensing agreement or other arrangement,
agreement, contract or understanding with respect to patents, trademarks,
copyrights, or other intellectual property (regardless of whether Seller is the
licensee or licensor thereunder), including agreements with current or former
employees, consultants, or contractors regarding the appropriation or the
nondisclosure of any intellectual property assets of Seller;
(v) each collective bargaining agreement or other
arrangement, agreement, contract or understanding with any labor union or other
employee representative of a group of employees;
(vi) each joint venture, partnership, and other
arrangement, agreement, contract or understanding (however named) involving a
sharing of profits, losses, costs, or liabilities by Seller with any other
Person;
(vii) each arrangement, agreement, contract or
understanding containing covenants that in any way purport to restrict the
business activity of Seller;
(viii) each arrangement, agreement, contract or
understanding providing for payments to or by any Person based on sales,
purchases, or profits, other than direct payments for goods;
(ix) each power of attorney that is currently
effective and outstanding;
(x) each arrangement, agreement, contract or
understanding for capital expenditures in excess of $20,000;
15
(xi) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance extended by Seller
other than in the Ordinary Course of Business;
(xii) each confidentiality and non-disclosure
agreement (whether Seller is the beneficiary or the obligated party thereunder);
(xiii) each employment contract, consulting contract,
or severance agreement, including contracts (A) to employ or terminate officers
or other personnel and other contracts with present or former officers or
directors of Seller or (B) that will result in the payment by, or the creation
of, any Liability of Seller, the Members, or Buyer to pay any severance,
termination, "golden parachute," or other similar payments to any present or
former personnel following termination of employment or otherwise as a result of
the consummation of the transactions contemplated by this Agreement;
(xiv) each arrangement, agreement, contract or
understanding with a Related Person;
(xv) any other arrangement, agreement, contract or
understanding under which the consequences of a default or termination would
reasonably be expected to have a Material Adverse Effect on the Business or
Seller; and
(xvi) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) True, correct and complete copies of each Material
Contract listed in Schedule 6.13 have been made available to Purchaser. Except
as otherwise set forth on Schedule 6.13; (i) all of the Material Contracts are
valid, binding and enforceable against the respective parties thereto in
accordance with their respective terms; (ii) neither Seller nor any other party
is in default or in arrears under the terms of any Material Contract, and no
condition exists or event has occurred to which the Seller or either Member has
actual knowledge which, with the giving of notice or lapse of time or both,
would constitute a default thereunder; (iii) Seller has fulfilled, or taken
action to fulfill when due, all of its material obligations under each of the
Material Contracts; neither Seller nor the Members have any reason to believe
that the products or services called for by any executory Material Contract
cannot be supplied in accordance with the terms of such Material Contract, and
there is no reason to believe that any unfinished Material Contract will, upon
performance by Seller, result in a loss by Seller; and (v) to the best of
Seller's and the Member's knowledge, Seller has not committed any act, and there
has been no omission, which may result in, and there has been no occurrence
which may give rise to, Liability for breach of warranty (whether or not covered
by insurance) on the part of Seller with respect to services rendered or
products sold by Seller.
6.14 Title to Purchased Assets; Absence of Encumbrances; Sufficiency.
Seller owns and will transfer to Buyer at the Closing good, marketable and
indefeasible title to all of the Purchased Assets, free and clear of all
Encumbrances. The Purchased Assets are all of the assets (other than the
Excluded Assets) that are used, necessary for use, held for use or intended to
16
be used in the operation or conduct of the Business as currently conducted or as
currently proposed to be conducted.
6.15 Intellectual Property Matters. The corporate name of Seller and
the trade names and service marks listed in Schedule 6.15 are the only names and
service marks which are used by the Seller in the operation of the Business.
Schedule 6.15 includes an identification of all Intellectual Property used in
the Business. Except as noted on Schedule 6.15, Seller owns, or has enforceable
rights to use all Intellectual Property presently in use by it and necessary for
the operation of the Business as now being conducted or as proposed to be
conducted; there are no outstanding licenses or consents granting third parties
the right to use the Intellectual Property of Seller; Seller has received no
notice of any adversely held patent, invention, trademark, copyright, service
xxxx or trade name, or trade secret of any Person, or any claims of any other
Person relating to any of the Intellectual Property; there is no presently known
threatened infringement of any such Intellectual Property; the manufacture, sale
or use of any products or services now or heretofore provided by Seller did not
and does not infringe (nor has any claim been made that any such action
infringes) the intellectual property rights of others.
6.16 Permits. All Permits included in the Purchased Assets are validly
held by Seller and Seller has complied in all material respects with all terms
and conditions thereof. During the past five years, Seller has not received
notice of any Proceedings relating to the revocation or modification of any such
Permit. None of such Permits will be subject to suspension, modification,
revocation or non-renewal as a result of the execution and delivery of this
Agreement or the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby.
6.17 Compliance with Laws.
(a) Seller is in compliance with all Applicable Laws,
including those relating to occupational health and safety or the environment.
Seller has not received any communication during the past five years from a
Governmental Authority that alleges that the Seller is not in compliance with
any Applicable Laws. Seller has not received any written notice that any
investigation or review by any Governmental Authority with respect to any
Purchased Asset or the Business is pending or that any such investigation or
review is contemplated. The current use by Seller of the plants, offices and
other facilities located on Leased Premises does not violate any local zoning or
similar land use or government regulations in any respect
(b) Seller has at all times conducted, and is presently
conducting, the Business so as to comply with all laws, ordinances and
regulations applicable to the ownership or use of the Purchased Assets.
6.18 Absence of Certain Business Practices. Except for customer or
prospective customer entertainment occurring in the Ordinary Course of Business,
neither Seller nor any Person authorized to act on its behalf, has within the
past six (6) years given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other Person who is or may be in a
position to help or hinder Seller or the Business (or assist Seller in
connection with any actual or proposed transaction) which (i) would subject
Seller to any damage or penalty in any civil, criminal or governmental
17
litigation or proceeding, (ii) if not given in the past, would have had a
material adverse effect on Seller or the Business, or (iii) if not continued in
the future, would adversely affect the financial condition, Business or
operations of the Buyer or its Affiliates, or (iv) might subject Seller to suit
or penalty in any Proceeding.
6.19 Legal Proceedings. There is no Proceeding pending before any
Governmental Authority or arbitrator or threatened against Seller or any of the
Purchased Assets, or relating to the transactions contemplated by this
Agreement, nor is there a basis for any such Proceeding. Seller is not a party
to or subject to the provisions of any judgment, order, writ, injunction, decree
or award of any Governmental Authority or arbitrator that relates to the
Purchased Assets or that might affect the transactions contemplated by this
Agreement.
6.20 Labor Matters.
(a) Seller is not a party to, or bound by, any labor agreement
or collective bargaining agreement or other similar arrangement with any labor
organization, group, union or association.
(b) No collective bargaining agreement is being negotiated by
Seller. There is no pending or threatened labor dispute, strike, work stoppage,
lock-out or other labor action against or affecting Seller. Seller has not
committed any unfair labor practice. There is no pending or threatened charge or
complaint against Seller by or before the National Labor Relations Board, the
Equal Employment Opportunity Commission or any comparable agency of any other
State of the United States.
(c) Seller is in compliance with the Immigration Reform and
Control Act of 1986, as amended, and has ready for transfer as part of the
assets of the Business any and all Employment Eligibility Verification Forms
(I-9) for Employees hired by Purchaser at or after Closing.
(d) There has not been in respect of the Business any plant
closing or mass layoff of employees as those terms are defined in the Worker
Adjustment Retraining and Notification ("WARN") Act of 1988, as amended, or any
similar state or local law or regulation within the one hundred twenty (120)
days prior to the execution of this Agreement.
6.21 Employment Related Matters.
(a) All directors, officers, and employees of Seller are set
forth on Schedule 6.21. The current salaries, job descriptions, and locations of
such officers and employees are also set forth in Schedule 6.21.
(b) Schedule 6.21 contains a complete list of all employment
arrangements, all pension, retirement, profit sharing and bonus plans, and all
deferred compensation, health, welfare, all severance management, and other
similar plans for the benefit of any employees of Seller ("Plans"), including
employee plans subject to the Employee Retirement Income Security Act of 1974,
18
as amended ("ERISA"). Seller at present is not, and during the five (5) year
period preceding the Closing Date will not have been, a party to any collective
bargaining agreement. Seller has never been a member of a "controlled group of
corporations" within the meaning of Section 414(b) or (c) of the Code and has
never maintained a defined benefit pension plan or contributed to a
multiemployer plan as defined in Section 3(37) of ERISA. True, correct and
complete copies of each Plan have heretofore been delivered by Seller to Buyer.
(c) With respect to each Plan:
(1) there is no litigation, disputed claim (other
than routine claims for benefits), governmental proceeding, inquiry or
investigation pending or threatened with respect to each such Plan, its related
trust, or any fiduciary, administrator or sponsor of such Plan; and
(2) each such Plan has been established, maintained,
funded and administered in all material respects in accordance with its
governing documents, and any applicable provisions of ERISA, the Code and other
applicable laws.
(d) Seller is not obligated to and does not (directly or
indirectly) provide death benefits or health care coverage to any former
employees or retirees.
(e) Seller has complied with all applicable laws respecting
employment practices, terms and conditions of employment, wages and hours, equal
employment opportunity, and the payment of social security and similar taxes.
Seller is not engaged in any unfair labor practice. Seller has complied with all
applicable provisions of the Immigration Reform and Control Act of 1986.
(f) Seller has not entered into any severance or similar
arrangement in respect of any present or former employee that will result in an
obligation (absolute or contingent) of Seller to make any payment to any present
or former employee following termination of employment or upon consummation of
the transactions contemplated by this Agreement.
6.22 Effect of Transaction. No creditor, employee, client, customer or
other Person having a material business relationship with Seller has informed
Seller that such Person intends to change such relationship because of the
purchase and sale of the Purchased Assets or the consummation of any other
transaction contemplated hereby.
6.23 No Finder. Seller has not taken any action that would give to any
Person a right to a finder's fee or any type of brokerage commission in relation
to, or in connection with, the transactions contemplated by this Agreement.
Seller shall be responsible for any such fee or commission.
6.24 No Fraudulent Conveyance. Seller is entering into this Agreement
and the transactions contemplated hereby without the intent to hinder, delay, or
defraud any creditor of Seller. This Agreement provides for the receipt by
Seller of reasonable value for the Purchased Assets. Seller is, after giving
effect to the transactions contemplated hereby, solvent, able to pay its debts
as they become due, has capital sufficient to carry on its business, now owns
19
property having a value both at fair valuation and at present fair saleable
value greater than the amount required to pay its debts, and will not be
rendered insolvent by the execution and delivery of this Agreement or by
completion of the transactions contemplated hereby.
6.25 Environmental Matters. The Seller has complied with all applicable
Environmental Laws, and has obtained all permits and other authorizations from,
and submitted all forms, fees, registrations, reports and similar filings to,
the appropriate Person or governmental authority needed, or required, to operate
its facilities in compliance with all Environmental Laws.
6.26 Certain Securities Law Representations. Seller:
(a) Has such knowledge and experience in financial business
matters that it is capable of evaluating the merits and risks of the investment
in the Stonepath Shares;
(b) Is receiving such shares for investment for its own
account and not with a view to, or for resale in connection with, the
distribution of other disposition thereof;
(c) Has been given the opportunity to obtain any information
or documents relating to and ask questions and receive answers about, Stonepath
Group and the business and prospects of Stonepath Group which it deems necessary
to evaluate the merits and risks related to its investment in such shares and to
verify the information received, and its knowledge and experience in financial
and business matters are such that he is capable of evaluating the merits and
risks of its receipt of the Stonepath Shares;
(d) Can afford to bear the economic risk of holding the shares
for an indefinite period of time and has adequate means for providing for its
current needs and contingencies and to suffer to complete loss of its investment
in such shares; and
(e) Has been advised that (i) the issuance of the Stonepath
Shares will not have been registered under the Securities Act, (ii) such shares
may need to be held indefinitely, and it must continue to bear the economic risk
of the investment in such shares unless they are subsequently registered under
the Securities Act or an exemption from such registration is available, (iii)
there may not be a public market for such shares, (iv) when and if such shares
may be disposed of without registration in reliance on Rule 144 promulgated
under the Securities Act, such disposition can be made only in limited amounts
in accordance with the terms and conditions of such Rule, (v) if the Rule 144
exemption is not available, public sale without registration will require
compliance with an exemption under the Securities Act and (vi) a restrictive
legend in the following form shall be placed on the certificates representing
such shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE "STATE
ACTS"), HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED,
20
HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND QUALIFICATION UNDER THE STATE
ACTS OR EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS
(INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE EXEMPTION AFFORDED
BY RULE 144). UNLESS WAIVED BY STONEPATH, STONEPATH SHALL BE FURNISHED
WITH AN OPINION OF COUNSEL OPINING AS TO THE AVAILABILITY OF EXEMPTIONS
FROM SUCH REGISTRATION AND QUALIFICATION AS A PRECONDITION TO ANY SUCH
TRANSFER.
6.27 Relationship With Related Persons. The Members, directors,
officers, and employees of Seller, and their Related Persons do not have any
interest in any of the properties or assets of or used by Seller and do not own,
of record or as a beneficial owner, an equity interest or any other financial or
profit interest in any Person that (i) has had business dealings or a material
financial interest in any transaction with Seller, or (ii) has engaged or is
engaged in competition with Seller with respect to any line of products or
services of Seller in any market presently served by the Seller (a "Competing
Business") (except for the ownership of less than three percent (3%) of the
outstanding capital stock of any Competing Business that is publicly traded on
any recognized exchange or in the over-the-counter market). Except as set forth
on Schedule 6.27, no Member, and no director, officer, or employee of the
Company and none of their Related Persons is a party to any contract with, or
has any claim against, Seller or the Purchased Assets. All money owed by seller
to its Members, directors or officers, or their Related Persons, (other than for
salary) are for bona fide debts and are set forth in Schedule 6.27.
6.28 Completeness and Accuracy. All information set forth on any
Schedule hereto provided by Seller is true, correct, and complete. No
representation or warranty of Seller contained in this Agreement contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary to make the statements made therein not
misleading. All contracts, Permits, and other documents and instruments
furnished or made available to Buyer by Seller are or will be true, complete,
and accurate copies of the originals and include all amendments, supplements,
waivers, and modifications thereto. There is no fact, development or threatened
development (excluding general economic factors affecting the Business in
general) that Seller has not disclosed to Buyer in writing that materially
adversely affects or, so far as Seller can foresee, may materially adversely
affect, the Business or the Purchased Assets.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYER
To induce Seller to enter into this Agreement, Buyer hereby makes, as
of the date hereof and as of the Closing Date, the following representations and
warranties to Seller. The disclosure Schedules attached hereto are numbered to
correspond to the various sections of this Article 7 setting forth certain
21
exceptions to the corresponding representations and warranties contained in this
Article 7 and certain other information required by this Agreement. Unless
otherwise specified, no disclosure made in any particular Schedule shall be
deemed made in any other Schedule unless expressly made therein.
7.1 Organization, Good Standing, Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own the Purchased Assets and to execute and deliver this Agreement,
to consummate the transactions contemplated hereby and to perform all the
obligations to be performed by it pursuant to this Agreement.
7.2 Authorization of Agreement and Enforceability. Buyer has taken all
necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements, the performance by it of all terms and
conditions hereof and thereof to be performed by it and the consummation of the
transactions contemplated hereby and thereby. This Agreement constitutes, and
the Ancillary Agreements will constitute, legal, valid and binding obligations
of Buyer, enforceable against it in accordance with their terms.
7.3 No Violations; Consents. The execution, delivery and performance by
Buyer of this Agreement and the consummation of the transactions contemplated
hereby will not (with or without the giving of notice or the lapse of time, or
both) (i) violate any provision of the certificate of incorporation or bylaws of
Buyer, (ii) violate or require any consent, authorization or approval of, or
exemption by, or filing under any provision of any law, statute, rule or
regulation to which Buyer is subject, (iii) violate any judgment, order, writ or
decree of any court applicable to Buyer, (iv) conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval under
any contract, agreement or instrument to which Buyer is a party or any of its
assets is bound or (v) result in the creation or imposition of any Encumbrance
upon its assets, other than upon the Purchase Assets.
7.4 No Finder. Buyer has not taken any action which would give to any
Person a right to a finder's fee or any type of brokerage commission in relation
to, or in connection with, the transactions contemplated by this Agreement.
7.5 Completeness and Accuracy. All information set forth on any
Schedule hereto provided by Buyer is true, correct, and complete. No
representation or warranty of Buyer contained in this Agreement contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary to make the statements made therein not misleading.
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ARTICLE 8
COVENANTS
8.1 Access and Cooperation. During the period from the date hereof
through the Closing, Seller will afford to the officers and authorized
representatives of Buyer, during reasonable business hours, access to all of its
sites, properties, books and records as they pertain to the Purchased Assets and
will furnish the Buyer with such additional information relating to the
Purchased Assets as the Buyer may from time to time reasonably request. Seller
will cooperate with the Buyer, and its representatives, engineers, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by any
governmental agency.
8.2 Continuance of Business. Except as otherwise expressly permitted by
the terms of this Agreement, from the date of this Agreement to the Closing
Date, Seller shall conduct its Business in the usual, regular or ordinary course
in substantially the same manner as previously conducted (including, without
limitation, with respect to advertising, promotions, capital expenditures and
inventory and working capital levels) and use all reasonable efforts to keep
intact the Business, keep available the services of its current employees and
preserve its relationships with customers, suppliers, licensers, licensees,
distributors and others with whom the Seller has dealings to the end that the
Business shall be unimpaired at the Closing. Prior to the Closing Date, Seller
shall not take any action that would, or that could reasonably be expected to,
result in any of the conditions set forth in Article 9 not being satisfied. In
addition (and without limiting the generality of the foregoing), except as
otherwise expressly permitted or required by the terms of this Agreement, Seller
shall not do any of the following in connection with the Business without the
prior written consent of Buyer:
(a) adopt or amend any Plan (or any plan that would be a Plan
if adopted) or enter into, adopt, extend (beyond the Closing Date), renew or
amend any collective bargaining agreement or other Contract with any labor
organization, union or association, except in each case as required by Law;
(b) grant to any executive officer or employee any increase in
compensation or benefits,
(c) incur or assume any liabilities, obligations or
indebtedness for borrowed money or guarantee any such liabilities, obligations
or indebtedness, other than in the Ordinary Course of Business; provided,
however, that in no event shall Seller incur or assume any long-term
indebtedness for borrowed money;
(d) permit or allow any Purchased Asset to become subjected to
any Encumbrance of any nature whatsoever;
(e) cancel any material indebtedness owing to the Seller
(individually or in the aggregate) or waive any claims or rights of substantial
value;
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(f) sell, transfer or lease any of its assets;
(g) make any change in any method of accounting or accounting
practice or policy;
(h) acquire by merging or consolidating with, or by purchasing
a substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire any assets;
(i) make or incur any capital expenditure that, individually,
is in excess of $25,000 or make or incur any such expenditures which, in the
aggregate, are in excess of $100,000;
(j) sell, lease, license or otherwise dispose of any of its
assets, except (A) inventory sold in the ordinary course of business and
consistent with past practice and (B) any Excluded Asset;
(k) enter into any lease of real property, except any renewals
of existing leases in the Ordinary Course of Business, with respect to which
Buyer shall have the right to participate;
(l) modify, amend, terminate or permit the lapse of any lease
of, or reciprocal easement agreement, operating agreement or other material
agreement relating to, real property or
(m) authorize any of, or commit or agree to take, whether in
writing or otherwise, to do any of, the foregoing actions.
8.3 Affirmative Covenants. Until the Closing, Seller shall:
(a) maintain the Purchased Assets in the ordinary course of
business in good operating order and condition, reasonable wear and tear
excepted; and
(b) upon any damage, destruction or loss to any Purchased
Asset, apply any and all insurance proceeds received with respect thereto to the
prompt repair, replacement and restoration thereof to the condition of such
Purchased Asset before such event or, if required, to such other (better)
condition as may be required by Law.
8.4 Notification of Certain Matters. Seller and the Members shall give
prompt notice to Buyer, and Buyer shall give prompt notice to Seller, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which would cause any of its or their representations or warranties in this
Agreement to be untrue or inaccurate in any material respect, and (b) any
failure to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it or them under this Agreement. The delivery of
any notice pursuant to this Section shall not limit or otherwise affect the
remedies available to the Party receiving such notice under this Agreement.
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8.5 HSR Act; Other Filings.
(a) If so required, the Parties shall file with the Federal
Trade Commission and the Antitrust Division of the Department of Justice
notification and report forms with respect to the transactions contemplated
hereby pursuant to the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and the rules promulgated thereunder. In the event that
the filing of a premerger notification form is required under the HSR Act, the
Seller and the Buyer shall each bear one-half (1/2) of the costs and expenses,
including filing fees, associated with preparation and defense of such filing.
(b) Buyer and Seller shall, as promptly as practicable after
the date of this Agreement, make any required filings, notifications and any
other required submissions, under any Applicable Law with respect to the
Agreement and the related transactions, including notifications to the Federal
Maritime Commission, International Air Transport Association and U.S. Department
of Treasury, and shall cooperate with each other with respect to the foregoing.
8.6 Satisfaction of Conditions; Cooperation. The Members and Seller
shall use all commercially reasonable efforts to cause the conditions set forth
in Article 9 to be satisfied. Buyer and Stonepath shall use all commercially
reasonable efforts to cause the conditions set forth in Article 10 to be
satisfied. Each Party to this Agreement agrees to cooperate fully with the other
Parties and their counsel, accountants and other representatives and to use all
commercially reasonable efforts to do, or cause to be done, all things
necessary, proper or advisable under Applicable Laws, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonably practicable, to facilitate Closing of the transactions contemplated
by this Agreement, and will refrain from a course of action inconsistent with
this Agreement.
8.7 Further Assurances. From and after the Closing Date, Seller shall,
at the request of Buyer, (i) execute, acknowledge and deliver to Buyer, without
further consideration, all such further assignments, conveyances, endorsements,
deeds, special powers of attorney, consents and other documents, as Buyer may
reasonably request to transfer to and vest in Buyer, and protect its rights,
title and interest in, all the Purchased Assets and otherwise to consummate the
transactions contemplated by this Agreement, and (ii) allow Buyer access to
facilities in which the Purchased Assets were or are located to verify that the
transfer of the Purchased Assets is taking place or has taken place as set forth
in this Agreement.
8.8 Confidentiality. On and after the Closing Date, Seller will not,
except as may be required by law, rule, regulation, or court order, reveal,
divulge or make known to any Person (other than Buyer and its agents and
Affiliates) any information relating to the Purchased Assets or use any such
information for any purpose other than complying with Seller's obligations under
this Agreement.
8.9 Non-Competition Agreement. In consideration for the benefits to be
received by the Members as a result of the transactions contemplated by this
Agreement, as well as in conjunction with the services to be rendered by the
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Members to the Buyer after the Closing, the Buyer and the Members shall enter
into the Employment Agreements, which contain certain covenants by the Members
prohibiting competition with the Buyer at certain times.
8.10 Change of Name. Promptly after a request made by Buyer after the
Closing, Seller will amend its certificate of formation to change its name to a
name which bears no relationship to the name Regroup Express, provided, however,
that Seller shall be entitled to retain the name for so long as it is necessary
in order for Seller to collect existing accounts receivable from the federal
government. Seller acknowledges that Buyer may change its name to "Stonepath
Logistics Services, Inc.," or some reasonable approximation of the same, prior
to the Closing.
8.11 Seller's Post-Closing Operation. Seller shall not after the
Closing, (a) make any distribution to its Members which would render it
insolvent or which would leave it with assets which are unreasonably small in
relation to any business it is engaged in or the Liabilities it has retained,
(b) engage in a business or transaction for which its assets are unreasonably
small in relation to such business or transaction, or (c) incur debts beyond its
ability to pay as they become due.
8.12 Payment of Liabilities. Seller shall after the Closing pay and
discharge, promptly and when due, all of its obligations and liabilities, other
than the Assumed Liabilities, which, if unpaid, would create a liability on the
part of Buyer or a lien on any of the Purchased Assets or render void or
voidable the transfer of any of the assets to Buyer, and, to the extent
necessary, shall apply the proceeds of the sale of the Assets to Buyer to such
payment and discharge. At Buyer's request, Seller shall provide to Buyer
evidence of such payment and discharge, in form and substance satisfactory to
Buyer. Seller shall file a final Virginia sales and use tax return within
fifteen (15) days after the Closing, and shall promptly thereafter provide Buyer
with evidence of such filing and the payment of all Taxes required thereby.
8.13 Audited Financial Statements.
(a) Seller and the Members shall cooperate with Stonepath
Group and the Buyer for the purpose of allowing a nationally recognized
independent public accounting firm selected by Buyer to audit the books and
records of the Seller for the such periods as are required for Stonepath Group
to comply with its reporting obligations under the Securities Exchange Act of
1934 (the "Audited Financial Statements"). Seller and the Members shall assist
in the audit and facilitate the production of the Audited Financial Statements,
including providing access to the books and records of seller in accordance with
Section 8.1 of this Agreement. In furtherance of the foregoing, Seller shall
execute and deliver such documents and instruments as may be required by such
accountants to complete the Audited Financial Statements.
(b) Buyer shall pay all fees, costs and expenses arising from,
incident to or in connection with the audit of the books and records of Seller
and the preparation of the Audited Financial Statements, including the fees,
costs and expenses of the Seller's independent accountants and legal advisors in
rendering services in connection with such audit and preparation and review of
the Audited Financial Statements.
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8.14 Third Party Consents. Nothing in this Agreement nor the
consummation of the transactions contemplated hereby shall be construed as an
attempt or agreement to assign any Purchased Asset, including any Contract,
Assumed Lease, Permit, certificate, approval, authorization or other right,
which by its terms or by Applicable Law is nonassignable without the consent of
a Third Party or a Governmental Authority or is cancelable by a Third Party or a
Governmental Authority in the event of an assignment ("Nonassignable Assets")
unless and until such consents shall be given. Seller agrees to use all
commercially reasonable efforts, with the cooperation of Buyer, where
appropriate, to obtain such consents prior to Closing. To the extent permitted
by Applicable Law, in the event consents to the assignment thereof cannot be
obtained, such Nonassignable Assets shall be held, as and from the Closing Date,
by Seller in trust for Buyer and the covenants and obligations thereunder shall
be performed by Buyer in Seller's name and all benefits and obligations existing
thereunder shall be for Buyer's account. Seller shall take at Seller's expense
such action in its name or otherwise as Buyer may reasonably request so as to
provide Buyer with the benefits of the Nonassignable Assets and to effect
collection of money or other consideration to become due and payable under the
Nonassignable Assets, and Seller shall promptly pay over to Buyer all money or
other consideration received by them with respect to all Nonassignable Assets.
8.15 Prohibition on Trading in Stonepath Group Stock. The Members and
Seller acknowledge that the United States securities laws prohibit any person
who has received material non-public information concerning the matters which
are the subject matter of this Agreement from purchasing or selling the
securities of Stonepath Group, or from communicating such information to any
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell securities of Stonepath Group. Accordingly,
the Members agree that they will not purchase or sell any securities of
Stonepath Group, or communicate such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell securities of Stonepath Group, until no earlier than 72
hours following the filing of a Current Report on Form 8-K with the Securities
and Exchange Commission announcing the Closing pursuant to this Agreement.
8.16 Agreement Not To Compete.
(a) Seller understands that Buyer shall be entitled to protect
and preserve the going concern value of the Business to the extent permitted by
law and that Buyer would not have entered into this Agreement absent the
provisions of this Section 8.16 and, therefore, for a period of seven years from
the Closing, Seller shall not, and shall cause each of its Affiliates not to,
directly or indirectly:
(i) engage in activities or businesses, or establish
any new businesses that are substantially in competition with Buyer
("Competitive Activities"), including (A) selling goods or services of the type
sold by Buyer, (B) soliciting any customer or prospective customer to purchase
any goods or services sold by Buyer from anyone other than Buyer and its
Affiliates, and (C) assisting any person in any way to do, or attempt to do,
anything prohibited by clause (A) or (B) above; or
27
(ii) perform any action, activity or course of
conduct that is substantially detrimental to the Buyer or its business
reputation, including (A) soliciting, recruiting or hiring any employees of the
Buyer or persons who have worked for the Buyer, (B) soliciting or encouraging
any employee of the Buyer to leave the employment of Buyer and (C) disclosing or
furnishing to anyone any confidential information relating to Buyer or otherwise
using such confidential information for its own benefit or the benefit of any
other Person;
(b) Section 8.16(a) shall be deemed not breached as a result
of the ownership by Seller or any of its Affiliates of: (i) less than an
aggregate of 2% of any class of a publicly-traded stock of a Person engaged,
directly or indirectly, in Competitive Activities. For the purposes of this
Section 8.16 only, the term "Affiliates" shall not include either of the
Members, whose noncompete responsibilities are set forth in their Employment
Agreements.
8.17 Termination of Seller's Employees. Seller shall terminate the
employment of all of its employees no later than the Closing Date. Seller shall
be solely responsible for any liabilities or obligations arising out of or in
connection with such termination, including severance payments and
post-employment benefits due to such terminated employees and any fees, charges,
fines or other expenses payable to any Governmental Authority with respect
thereto. Seller shall enforce, for the benefit of Buyer, any confidentiality,
noncompetition and non-solicitation covenants to which such terminated employees
are parties or are otherwise bound.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
9.1 Conditions to Closing. The obligations of Buyer to be performed at
the Closing are subject to the fulfillment at or prior to the Closing of each of
the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Seller and the Members contained in this
Agreement shall be true in all material respects on and as of the Closing Date.
(b) Performance of Agreement. Seller and the Members shall
have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants and conditions contained in
this Agreement to be performed or complied with by them at or prior to Closing.
(c) Injunction. On the Closing Date, there shall be no
injunction, writ, preliminary restraining order or any order of any nature in
effect issued by a court of competent jurisdiction directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided and no suit, action, investigation, inquiry or other legal or
28
administrative proceeding by any governmental body or other Person shall have
been instituted or threatened which questions the validity or legality of the
transactions contemplated hereby or which if successfully asserted might
otherwise have a material adverse effect on the Purchased Assets or impose any
additional material financial obligation on, or require the surrender of any
material right, by Buyer.
(d) Actions and Proceedings. All corporate actions,
proceedings, instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all other related legal
matters shall be reasonably satisfactory to counsel for Buyer, and such counsel
shall have been furnished with such certified copies of such corporate actions
and proceedings and such other instruments and documents as it shall have
reasonably requested.
(e) Consents. Any third-party and governmental consents,
approvals or authorizations necessary for the conveyance of the Purchased Assets
or the operation of the Business by Buyer or the valid consummation of the
transactions contemplated hereby shall have been obtained and the Stonepath
Shares to be issued at the Closing shall have been approved for listing by the
American Stock Exchange.
(f) Completion of Audited Financial Statements. The Audited
Financial Statements of Seller shall have been completed and delivered to Buyer
together with an audit report of the auditing firm that contains no material
qualifications and identifies no material exceptions to generally accepted
accounting principles. The Audited Financial Statements shall conform in all
material respects to the Annual Financial Statements.
(g) Approval of Acquisition. This transactions contemplated by
this Agreement shall have been approved by LaSalle Business Credit, Inc.,
Buyer's principal lender, and by the Board of Directors of Buyer and Stonepath
Group.
(h) Availability of Employees. The employees identified by the
Buyer as key personnel have accepted offers of employment from Buyer.
(i) Amendment of Existing Acquisition Agreements. The other
parties to the Stock Purchase Agreement dated September 17, 2002 by and among
Stonepath Logistics Domestic Services, Inc., the Buyer, and Xxxxx Northern, the
Employment Agreement dated as of October 1, 2002 between the Buyer and Xxxxx
Northern, the Asset Purchase Agreement dated January 31, 2003 by and among
M.G.R., Inc., Stonepath Group, Inc., and Transportation Rail Warehousing
Logistics, Inc, and the Employment Agreement dated January 31, 2003 by and
between M.G.R., Inc. and Xxxxxx Eagles shall have agreed to the amendments to
those agreements necessary to give effect to the provisions of Section
3.1(c)(vi) and the letter from Buyer to Seller dated the date hereof.
(j) Termination of Certain Agreements. Any agreement (other
than a transferred Contract) or relationship to which Seller is a party and
which relates to the transportation of materials or goods of Seller's customers
or which limits, or specifies, the manner in which Seller's business may be
29
conducted shall have terminated to Buyer's reasonable satisfaction without any
material adverse effect upon the Business.
(k) Continuation of Business. Seller shall have entered into
transportation agreements with F.A.O. Xxxxxxxx, Inc. and Arven Freight
Forwarding or secured other suitable arrangements, demonstrating to the
reasonable satisfaction of Buyer, that the Business undertaken by Seller with
its principal customers prior to the Closing will continue after the Closing
without any material disruption.
9.2 Expiration of Certain Conditions. Buyer shall prior to the Closing
notify Seller of the fulfillment or waiver of the conditions set forth in
Sections 9.1(e), (f), (g), (h), (i) and (k) with the understanding that Seller
shall take no action to satisfy the condition set forth in Section 9.1(j) until
after Seller has received such notice from Buyer. On and after the date Seller
receives such notice from Buyer, the conditions set forth in Sections 9.1(e),
(f), (g), (h), and (i) shall be deemed fulfilled or waived for the purposes of
this Article 9.
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller to be performed at the Closing are subject to
the fulfillment at or prior to the Closing of each of the following conditions:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement shall be true in all
material respects on and as of the Closing Date.
10.2 Performance of Agreement. Buyer shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to Closing.
10.3 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any governmental body or other Person shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated hereby
or which if successfully asserted might impose any additional material financial
obligation on, or require the surrender of any material right, by Seller.
10.4 Actions or Proceedings. All corporate actions, proceedings,
instruments and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters hall be
30
reasonably satisfactory to counsel for Buyer, and such counsel shall have been
furnished with such certified copies of such corporate actions and proceedings
and such other instruments and documents as it shall have reasonably requested.
10.5 Consents. Any third-party and governmental consents, approvals or
authorizations necessary for the conveyance of the Purchased Assets or the valid
consummation of the transactions contemplated hereby shall have been obtained.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
11.1 Survival. The representations and warranties of the Parties
contained in this Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith shall survive the Closing until the
second anniversary of the Closing Date; provided that the representations set
forth in Sections 6.1, 6.2, 6.4 and 6.14 shall survive the Closing Date
indefinitely. Notwithstanding the immediately preceding sentence, any
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time it would otherwise expire if written
notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the Party against whom such indemnity may be
sought prior to such time. All covenants and agreements of the Parties contained
in this Agreement shall survive the Closing in accordance with their terms.
11.2 Indemnification by Seller. Seller and each Member shall, jointly
and severally, indemnify, defend, and hold harmless Buyer and its Affiliates and
each of their officers, directors, employees, stockholders, members, partners
and agents, and the successors to the foregoing (and their respective Affiliates
officers, directors, employees, stockholders, members, partners, and agents)
(each a "Buyer Indemnified Party") against any and all liabilities, damages, and
losses, including, without limitation, diminution in the value of the Purchased
Assets, lost profits and other consequential damages, punitive damages, and all
costs and expenses, including, without limitation, attorneys' and consultants'
fees and expenses ("Damages") incurred or suffered as a result of or arising out
of (i) the inaccuracy of any representation or warranty made by Seller or the
Members in this Agreement or in any certificate or other writing delivered by
Seller or any Member pursuant hereto or in connection herewith, (ii) the breach
of any covenant or agreement made or to be performed by Seller or any Member
pursuant to this Agreement, (iii) any attempt (whether or not successful) by any
Person to cause or require any Buyer Indemnified Party to pay or perform, any
liability or obligation of, or any claim against, Seller of any kind other than
the Assumed Liabilities, or (iv) any claim relating to the transactions
contemplated by this Agreement asserted against a Buyer Indemnified Party by a
party to a contract or relationship with Seller (other than a transferred
Contract) prior to the Closing.
11.3 Indemnification by Buyer. Buyer shall indemnify, defend, and hold
harmless Seller and its Affiliates and each of their officers, directors,
employees, stockholders, members, partners and agents, and the successors to the
31
foregoing (and their respective Affiliates officers, directors, employees,
stockholders, members, partners, and agents) (each a "Seller Indemnified Party")
against Damages incurred or suffered as a result of or arising out of (i) the
inaccuracy of any representation or warranty made by Buyer in this Agreement or
in any certificate or other writing delivered by Buyer pursuant hereto or in
connection herewith, (ii) the breach of any covenant or agreement made or to be
performed by Buyer pursuant to this Agreement.
11.4 Third Party Claims. Promptly after an indemnified party has
received notice of or has knowledge of any claim by a person not a party to this
Agreement ("Third Person") or the commencement of any action or proceeding by a
Third Person, such indemnified party shall, as a condition precedent to a claim
with respect thereto being made against an indemnifying party, give the
indemnifying party written notice of such claim or the commencement of such
action or proceeding; provided, however, that the failure to give such notice
will not relieve such indemnifying party from liability under this Article with
respect to such claim, action or proceeding, except to the extent that the
indemnifying party has been actually prejudiced as a result of such failure. The
indemnifying party (at its own expense) shall have the right and shall be given
the opportunity to associate with the indemnified party in the defense of such
claim, suit or proceedings, provided that counsel for the indemnified party
shall act as lead counsel in all matters pertaining to the defense or settlement
of such claims, suit or proceedings. The indemnified party shall not, except at
its own cost, make any settlement with respect to any such claim, suit or
proceeding without the prior consent of the indemnifying party, which consent
shall not be unreasonably withheld or delayed. It is understood and agreed that
in situations where failure of the indemnifying party to settle a claim
expeditiously could have an adverse effect on the indemnified party, the failure
of the indemnifying party to act upon the indemnified party's request for
consent to such settlement within five (5) Business Days of the indemnifying
party's receipt of notice thereof from the indemnified party shall be deemed to
constitute consent by the indemnifying party of such settlement for purposes of
this Section 11.4.
11.5 Limitations on Amount. Seller and Members.
(a) Notwithstanding the provisions of this Article 11, an
Indemnitor shall not be required to indemnify an Indemnitee with respect to
Damages suffered or incurred as a result of or arising out of the inaccuracy of
any representation or warranty (other than Damages suffered or incurred as a
result of or arising out an inaccuracy in the representations and warranties
contained in Sections 6.14 (Title to Purchased Assets; Absence of Encumbrances;
Sufficiency), 6.23 (No Finder), and 6.24 (No Fraudulent Conveyance) until the
aggregate amount of such Damages shall exceed $50,000 (the "Indemnitor's
Threshold"); provided, however, that if the aggregate of such Damages exceeds
the Indemnitor's Threshold, all Damages, irrespective of the Indemnitor's
Threshold, are subject to indemnification.
(b) Notwithstanding the provisions of this Article 11, an
Indemnitor's liability under this Article 11 with respect to Damages suffered or
incurred by an Indemnitee as a result of or arising out of the inaccuracy of any
representation or warranty shall be limited to the Purchase Price paid or
payable to Seller; with the understanding, however, that if the Indemnitor's
32
liability exceeds the amount of the Purchase Price paid through that date, any
liability in excess thereof may only be recovered as a set-off against future
earn-out payments due to the Members.
11.6 Other Remedies. The indemnification rights of any indemnified
party under this Article 11 are independent of and in addition to such rights
and remedies as such indemnified party may have at law, in equity or otherwise
for any misrepresentation, breach of warranty or failure to fulfill any covenant
or agreement under or in connection with this Agreement on the part of any
Party, none of which rights or remedies shall be affected or diminished hereby.
Buyer shall have the right to set off against any payment due under this
Agreement any amount payable by Seller or a Member to Buyer under this
Agreement.
ARTICLE 12
TERMINATION
12.1 Termination. This Agreement may be terminated at any time prior to
Closing as follows:
(a) at the election of Buyer, if there is a material breach of
any of the representations and warranties of Seller contained in Article 6 and
such breach cannot be, or has not been, cured within the earlier of (i) ten (10)
days of its occurrence or (ii) the Closing Date;
(b) at the election of Seller, if there is a material breach
of any of the representations and warranties of Buyer contained in Article 7 and
such breach cannot be, or has not been, cured within the earlier of (i) ten
(10)days of its occurrence or (ii) the Closing Date;
(c) by Seller or Purchaser if the Closing has not taken place
on or before June 30, 2003; provided that no Party then in breach of any
obligations hereunder shall have the right to terminate; and
(d) by mutual consent of the Parties;
provided, however, that the party seeking termination pursuant to clause (a),
(b) or (c) is not then in breach of any of its representations, warranties,
covenants or agreements contained in this Agreement.
12.2 Effect of Termination. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in Section 12.1,
this Agreement shall become null and void and of no further force and effect,
except for the provisions of (i) Section 13.1 relating to certain expenses,
(iii) Section 12.1 and this Section 12.2 and (iv) Section 13.2 relating to
publicity. Nothing in this Section 12.2 shall be deemed to release any party
from any liability for any breach by such party of the terms and provisions of
this Agreement or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreements.
33
ARTICLE 13
GENERAL
13.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated, Buyer
and Seller shall pay their own fees, expenses and disbursements, including the
fees and expenses of their respective counsel, accountants and other experts, in
connection with the subject matter of this Agreement and all other costs and
expenses incurred in performing and complying with all conditions to be
performed under this Agreement.
13.2 Publicity.
(a) Neither the Members nor the Buyer, Stonepath or any
Affiliate, shall disclose to the public or to any third party the existence of
this Agreement or the transactions contemplated hereby or any other material
nonpublic information (as construed pursuant to Regulation FD under the
Securities Act) concerning or relating to any Party hereto, other than with the
express prior written consent of the Party regarding whom such disclosure would
be made; provided, however, that disclosure may be made (a) to the minimum
extent as may be required by Applicable Law or court order, or (b) to enforce
the rights of such disclosing Party under this Agreement; provided further,
however, that notwithstanding anything to the contrary contained in this
Agreement, any Party hereto may disclose this Agreement to any of its directors,
officers, employees, Members, affiliates, agents and representative who need to
know such information for the sole purpose of evaluating, or performing its
obligations or exercising its rights under this Agreement.
(b) Notwithstanding anything contained in this Section to the
contrary, in the event a Party is required by court order or subpoena to
disclose material nonpublic information of another Party, prior to such
disclosure, the disclosing Party shall: (i) promptly notify the non-disclosing
Party and, if having received a court order or subpoena, deliver a copy of the
same to the non-disclosing Party; (ii) cooperate with the non-disclosing Party
at the expense of the non-disclosing Party in obtaining a protective or similar
order with respect to such information; and (iii) provide only such of the
Confidential Information of the non-disclosing Party as the disclosing Party is
advised by its counsel is necessary to strictly comply with such court order or
subpoena.
(c) Stonepath Group shall have the right to make such public
disclosures of this Agreement and the transactions contemplated hereby as it
determines in good faith are required under applicable federal securities laws
or the rules of the Principal Exchange.
(d) The Parties anticipate issuing a mutually acceptable joint
press release announcing the consummation of the transactions provided for
herein.
13.3 Waivers. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
34
13.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of, and be binding upon, the Parties hereto and their respective
successors and permitted assigns. Except for the express provisions of Article
11, nothing in this Agreement, express or implied, is intended to confer on any
Person other than the Parties hereto, or their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
13.5 Bulk Transfers Laws. Buyer hereby waives compliance by Seller with
the provisions of any and all laws relating to bulk transfers in connection with
the sale of the Purchased Assets. Seller covenants and agrees to indemnify and
save harmless Buyer from and against any and all losses, liability, cost and
expense (including reasonable attorneys fees) arising out of noncompliance with
such bulk transfers laws.
13.6 Notices. All notices, requests, demands, elections and other
communications which either Party to this Agreement may desire or be required to
give hereunder shall be in writing and shall be deemed to have been duly given
if delivered personally, by a reputable courier service which requires a
signature upon delivery, by mailing the same by registered or certified first
class mail, postage prepaid, return receipt requested, or by telecopying with
receipt confirmation (followed by a first class mailing of the same) to the
Party to whom the same is so given or made. Such notice, request, demand,
waiver, election or other communication will be deemed to have been given as of
the date so delivered or electronically transmitted or seven days after mailing
thereof.
If to Seller or
the Members: Xxxxxxx X. Xxxx
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Xxx X. Xxxxxxx
0000 Xxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
with a copy to: Xxxx Xxxxxxx, Esquire
XxXxxxx Xxxxx, LLP
000 Xxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
(Ph) (757)640-3779
(Fax) (000)000-0000
If to Buyer, to: Transport Specialists, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
35
with a copy to: Xxxxx X. North, Esquire
Xxxxxxxx Xxxxxxxxx Professional Corporation
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
or to such other address as such Party shall have specified by notice to the
other Party hereto.
13.7 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) constitutes the entire agreement and understanding between the
Parties hereto as to the matters set forth herein and supersede and revokes all
prior agreements and understandings, oral and written, between the Parties
hereto or otherwise with respect to the subject matter hereof. No change,
amendment, termination or attempted waiver of any of the provisions hereof shall
be binding upon any Party unless set forth in an instrument in writing signed by
the Party to be bound or their respective successors in interest.
13.8 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument, and may be delivered
by facsimile transmission.
13.9 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
13.10 Construction. Within this Agreement, the singular shall include
the plural and the plural shall include the singular, and any gender shall
include all other genders, all as the meaning and the context of this Agreement
shall require.
13.11 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of the State of Delaware. All claims, disputes or
causes of action relating to or arising out of this Agreement may be brought,
heard and resolved by and in a federal court situated in the Eastern District of
Virginia. Each of the Parties hereto agrees to submit to the nonexclusive
jurisdiction of such courts which jurisdiction shall be proper for all purposes
of this Agreement.
13.12 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other and
their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
13.13 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
36
13.14 Permissable Assignment. Buyer shall have the right to assign this
Agreement to any direct or indirect wholly owned subsidiary of Stonepath Group.
Seller may assign all rights and obligations under this Agreement to the Members
following its liquidation and dissolution, if and when that occurs. Upon such
assignment, the Members shall, jointly and severally assume all of the
responsibilities and obligations hereunder.
[SIGNATURE PAGE FOLLOWS]
37
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date first written above.
REGROUP EXPRESS L.L.C.
By:___________________________________
Name:_________________________________
Title:________________________________
______________________________________
XXX X. XXXXXXX
______________________________________
XXXXXXX X. XXXX
TRANSPORT SPECIALISTS, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
38
EXHIBIT A
---------
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings:
"Additional Earn-Out Certificate" has the meaning given to such term in
Section 3.1(b)(vii).
"Additional Earn-Out Payment" has the meaning given to such term in
Section 3.1(b)(vii).
"Additional Earn-Out Payment Date" has the meaning given to such term
in Section 3.1(b)(vii).
"Additional Earn-Out Threshold" has the meaning given to such term in
Section 3.1(b)(vii).
"Additional Initial Payment Measurement Period" has the meaning given
to such term in Section 3.1(b)(iii).
"Additional Initial Amount Payment Date" has the meaning given to such
term in Section 3.1(b)(iii).
"Additional Initial Payment" has the meaning given to such term in
Section 3.1(b)(iii).
"Additional Initial Payment Certificate" has the meaning given to such
term in Section 3.1(b)(iii).
"Additional Initial Payment Measurement Period" has the meaning given
to such term in Section 3.1(b)(iii).
"Additional Initial Payment Shortfall Amount" has the meaning given to
such term in Section 3.1(b)(iii).
"Affiliate" means, with respect to any Person, any other Person who,
directly or indirectly, controls or is controlled by, or is under common control
with, such Person. For the purposes of the foregoing, (1) the ownership,
directly or indirectly, of more than fifty percent (50%) of the voting stock or
other equity interest of such Person or (2) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through ownership of voting securities, by
contract or otherwise, shall be deemed to constitute control.
"Agreement" means this Asset Purchase Agreement.
1
"Ancillary Agreements" shall mean the Employment Agreements and the
Guaranty Agreement.
"Annual Earn-Out Certificate" has the meaning given to such term in
Section 3.1(b)(v).
"Annual Financial Statements" has the meaning given to such term in
Section 6.6(a).
"Applicable Law" or "Applicable Laws" means any and all laws,
ordinances, constitutions, regulations, statutes, treaties, rules, codes,
licenses, certificates, franchises, permits, requirements and Injunctions
adopted, enacted, implemented, promulgated, issued, entered or deemed applicable
by or under the authority of any Governmental Authority having jurisdiction over
a specified Person or any of such Person's properties or assets.
"Assumed Leases" means the Leases identified in Schedule 2.1(a).
"Assumed Liabilities" has the meaning given to such term in Section
4.1.
"Audited Financial Statements" has the meaning given to such term in
Section 8.13(a).
"Base Earn-Out Amount" has the meaning given to such term in Section
3.1(b)(iv).
"Base Earn-Out Payment" has the meaning given to such term in Section
3.1(b)(iv).
"Base Earn-Out Period" has the meaning given to such term in Section
3.1(b)(iv).
"Books and Records" means all books, records, and documentation
relating to the Business and the Purchased Assets, whether maintained by Seller
in written or electronic form.
"Business" has the meaning given to such term in the preamble to this
Agreement.
"Business Day" means a calendar day other than Saturday, Sunday or any
day on which banks located in Philadelphia, Pennsylvania or Portland, Maine are
required or authorized to close.
"Business Records" means all books, records, ledgers, and files or
other similar information used in the conduct of the Business by Seller, in
written or electronic form, including, without limitation, price lists, customer
lists, vendor lists, mailing lists, warranty information, catalogs, sales
promotion literature, advertising materials, brochures, records of operations,
standard forms of documents, manuals of operations or business procedures,
research materials and product testing reports required by any federal, foreign,
state, provincial, local or other governmental, regulatory or administrative
agency, commission, department, board, governmental subdivision, court,
tribunal, arbitrating body or other authority.
"Buyer" has the meaning given to such term in the first paragraph of
this Agreement.
"Buyer Indemnified Party" has the meaning given to such term in Section
11.2.
2
"Closing" has the meaning given to such term in Section 5.1.
"Closing Date" has the meaning given to such term in Section 5.1.
"Code" means the Internal Revenue Code of 1986, as it may be amended
from time to time, and any successor thereto. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Competitive Activities" has the meaning given to such term in Section
8.16(a)(i).
"Contracts" means all the written or oral Third Party contracts,
agreements, instruments, leases and subleases, supply contracts, purchase
orders, sales orders and instruments which are identified in Schedule 2.1(e).
"Damages" has the meaning given to such term in Section 11.2.
"Effective Time" shall mean the Closing Date.
"Earn-Out Shortfall Amount" has the meaning given to such term in
Section 3.1(b)(v).
"Employment Agreement " has the meaning set forth in 5.2(e).
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, conditional sales agreement, encumbrance,
license or other right of third parties, whether voluntarily incurred or arising
by operation of law, and includes any agreement to give any of the foregoing in
the future, and any contingent sale or other title retention agreement or lease
in the nature thereof.
"Environmental Laws" means any and all laws, rules, and regulations (i)
regulating the use, treatment, generation, transportation, storage, control or
disposal of any Hazardous Material, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
ss. 9601 et seq.) ("CERCLA"), the Resource Conservation and Recovery Act (42
U.S.C. ss. 6901 et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
ss. 1801 et seq.), the Federal Water Pollution Control Act (33 U.S.C. ss. 1251
et seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act
(42 U.S.C. ss. 7401 et seq.), and the Toxic Substances Control Act (15 U.S.C.
ss. 2601 et seq.), and/or (ii) relating to the protection, preservation or
conservation of the environment and public or worker health and safety, all as
existing, defined or interpreted as of the Closing Date.
"Equipment" means Seller's plant, machinery and equipment (including
related spare parts, dies, molds, tools, and tooling), computers, servers,
trucks, automobiles, computing and telecommunications equipment and other items
of personal property and other similar items, but not including the Leased
Equipment or the Furnishings and Supplies. Equipment includes rights to the
warranties received from the manufacturers and distributors of the said items
and to any related claims, credits, rights or recovery and setoff with respect
to such items.
3
"ERISA" has the meaning given to such term in Section 6.21(b).
"Financial Statements" has the meaning given to such term in Section
6.6(a).
"Furnishings and Supplies" means all of Seller's furniture, furnishings
and other tangible personal property (other than the Equipment) including,
without limitation, desks, tables, chairs, file cabinets, and other storage
devices and office supplies.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the U.S. accounting profession, which are applicable to the facts and
circumstances on the date of determination.
"Goodwill" means all goodwill incident to the Business.
"Government Business" means transportation and transportation logistics
services provided to (1) any Federal or foreign governmental authority
(including any governmental agency, branch, board, commission, department,
instrumentality, or office of any Federal or foreign governmental authority),
(2) a Person which is purchasing transportation or transportation logistics
services pursuant to a contract with any governmental authority referred to in
clause (1), but only to the extent such services are purchased pursuant to such
contract, or (3) Persons which are funded primarily by Federal and/or foreign
governmental authorities referred to in clause (1).
"Governmental Authority" means any:
(i) nation, state, county, city, town, village, district or
other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign or other
government;
(iii) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, board, commission,
department, instrumentality, office or other entity, and any court or other
tribunal);
(iv) multi-national organization or body; and/or
(v) body exercising, or entitled or purporting to exercise,
any administrative, executive, judicial, legislative, police, regulatory or
taxing authority or power of any nature.
4
"Hazardous Material" means any and all (i) dangerous, toxic or
hazardous pollutants, contaminants, chemicals, wastes, materials or substances
listed or identified in, or directly or indirectly regulated by, any Applicable
Laws, including Environmental Laws, and (ii) any of the following, whether or
not included in the foregoing: polychlorinated biphenyls, asbestos in any form
or condition, urea-formaldehyde, petroleum, including crude oil or any fraction
thereof, natural gas, natural gas liquids, liquefied natural gas, synthetic gas
usable for fuel or mixtures thereof, nuclear fuels or materials, chemical
wastes, radioactive materials, explosives and known possible carcinogens.
"HSR Act" has the meaning given to such term in Section 8.5(a).
"Indemnitee" means a Person entitled to indemnification pursuant to
Article 11.
"Indemnitor" means a Person obligated to indemnify another Person
pursuant to Article 11.
"Indemnitor's Threshold" has the meaning given to such term in Section
11.5(a).
"Independent Accountants" has the meaning given to such term in Section
3.2(c).
"Independent Accountant Required Payment" has the meaning given to such
term in Section 3.2(c).
"Initial Cash Payment Amount" has the meaning given to such term in
Section 3.1(a).
"Instruments" has the meaning given to such term in Section 6.3.
"Intellectual Property" means all intellectual property rights of
Seller and its Affiliates relating to the Business, including (a) all
inventions, discoveries and ideas, whether patentable or not in any
jurisdiction, patents, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; (b)
trademarks, service marks, brand names, certification marks, trade dress,
assumed names, trade names and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification of or renewal of any such registration or application;
(c) computer software (including software, data, and related documentation); (d)
non-public information, trade secrets, know-how (including, without limitation,
research and development, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings and specifications)
and confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any Person; (e) writings or other works, whether
copyrightable or not in any jurisdiction, registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof; (f) any similar intellectual property rights, and (g) any claims or
causes of action arising our of or related to any infringement or
misappropriation of any of the foregoing.
"Interim Financial Statements" has the meaning given to such term in
Section 6.6(a).
5
"Knowledge" or "to the knowledge" of a Party (or similar phrases) means
to the extent of matters (i) which are actually known by such Party or (ii)
which, based on facts of which such Party is aware, would or should be known to
a reasonable Person in similar circumstances, and shall be deemed to include the
knowledge of each Party's executive officers.
"Lease" means the lease for any of the Leased Premises.
"Leased Equipment" means the computers, servers, machinery and
equipment and other similar items leased by Seller and used, held for use,
necessary for use or intended to be used primarily in the operation or conduct
of the Businesses as currently conducted or as currently proposed to be
conducted; however, only as to such Leased Equipment for which the Seller's
leasehold interest is being transferred.
"Leased Premises" means the real property identified on Schedule 6.10.
"Liabilities" means any and all debts, liabilities and/or obligations
of any type, nature or description (whether known or unknown, asserted or
unasserted, secured or unsecured, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due).
"Material Adverse Change" means a material adverse change (i) in the
business, assets, condition (financial or otherwise), working capital,
liabilities, results of operations or prospects of the Business, (ii) in the
ability of Seller and the Members to perform their obligations under this
Agreement and the Ancillary Agreements or (iii) in the ability of Seller to
consummate the sale of the Business and the other transactions contemplated by
this Agreement and the Ancillary Agreements.
"Material Contracts" has the meaning given to such term in Section
6.13.
"Members" has the meaning given to such term in the first paragraph of
this Agreement.
"Net Income Before Taxes" means the Buyer's net income before federal,
state and local income taxes, determined in accordance with the provisions of
Section 3.1(c) of this Agreement and GAAP.
"Net Income Before Taxes Attributable to Government Business" shall be
the average, for each calendar year during the Additional Earn-Out Period, of
the amount obtained by multiplying (a) the percentage obtained by dividing the
Buyer's Net Income Before Taxes for each calendar year in the Additional
Earn-Out Period by (b) the revenues of the Buyer during each such calendar year
directly attributable to Government Business.
"New Customer" means a customer of Buyer after the Closing Date which
(a) is not a customer of the Buyer, Transportation Rail Warehousing Logistics,
6
Inc., Xxxxx Northern or Xxxxxx Eagles prior to the Closing Date and (2) is not a
customer to which Seller provided transportation services prior to the Effective
Time.
"Nonassignable Assets" has the meaning given to such term in Section
8.14.
"Objection Notice" has the meaning given to such term in Section
3.2(a).
"Ordinary Course of Business" means an action taken by a Person if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person.
"Party" means Seller, the Members, or Buyer, individually, as the
context so requires, and the term "Parties" means Seller, the Members, and Buyer
together.
"Payment Certificates" has the meaning given to such term in Section
3.2(a).
"Permits" means all governmental permits, licenses, registrations,
orders and approvals relating to or necessary to own or use the Purchased
Assets.
"Person" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, Governmental Authority or any similar entity.
"Plans" has the meaning given to such term in Section 6.21(b).
"Principal Exchange" means (a) the American Stock Exchange or (b) if at
any time in the future the Common Stock of Stonepath Group is not listed on the
American Stock Exchange, then the NASDAQ SmallCap Market, the NASDAQ National
Market, or the New York Stock Exchange (each, a "Subsequent Market") or (c) if
the Common Stock of Stonepath Group is not then listed on the American Stock
Exchange or any Subsequent Market, then the OTCBB, as reported by the National
Quotation Bureau Incorporated.
"Proceeding" means any suit, litigation, arbitration, hearing, audit,
investigation or other action (whether civil, criminal, administrative or
investigative) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Authority or arbitrator.
"Purchase Price" has the meaning given to such term in Section 3.1.
"Purchased Assets" has the meaning given to such term in Section 2.1.
"Regulated Substance" means any substance the manufacturing,
processing, sale, generation, treatment, transportation, storage, disposal,
labeling or other management or use of which is regulated by applicable
Environmental Law.
7
"Related Person" or "Related Persons" means, with respect to a
particular individual:
(i) each other member of such individual's Family (as
hereafter defined); and
(ii) any Affiliate of one or more members of such individual's
family.
With respect to a specified Person other than an individual:
(i) any Affiliate of such specified Person; and
(ii) each Person that serves as a director, governor, officer,
manager, general partner, executor or trustee of such specified Person (or in a
similar capacity).
"Response Period" has the meaning given to such term in Section 3.2(a).
"Schedules" has the meaning given to such term in the first paragraph
of Article 6.
"Seller" has the meaning given to such term in the first paragraph of
this Agreement.
"Seller Indemnified Party" has the meaning given to such term in
Section 11.3.
"Stonepath Shares" has the meaning given to such term in Section
3.1(b)(ii).
"Targeted Amount" has the meaning given to such term in Section
3.1(b)(v).
"Taxes" means all taxes, duties, charges, fees, levies or other
assessments imposed by any taxing authority, including, without limitation,
income, gross receipts, value -added, excise, withholding, personal property,
real estate, sale, use, ad valorem, license, lease, service, severance, stamp,
transfer, payroll, employment, customs, duties, alternative, add-on, minimum,
estimated and franchise taxes (including any interest, penalties or additions
attributable to or imposed on or with respect to any such assessment).
"Third Person" has the meaning given to such term in Section 11.4.
8
