EXHIBIT 10.6
AGREEMENT AND PLAN OF MERGER ADDENDUM
THIS AGREEMENT AND PLAN OF MERGER ADDENDUM (the "Addendum") is entered
into effective as of the 29th day of March, 2004, by and between XRG, Inc.
("XRG") and Express Freight Systems, Inc. ("EFS") and the other "Parties" to
said Agreement and Plan of Merger.
RECITALS:
WHEREAS, XRG and EFS are parties to an Agreement and Plan of Merger dated
January 31, 2004 (the "Agreement and Plan of Merger"); and
WHEREAS, the parties now desire to amend the Agreement and Plan of Merger
to reflect the parties' agreement to modify the purchase consideration and
certain other terms and conditions as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. Section 2(a) of the Agreement and Plan of Merger is revised to read
as follows:
XRG shall (i) pay to the Shareholders (in proportion to their
respective holdings of EFS Common Stock as listed on Exhibit ____) a
total of Two Million Dollars ($2,000,000) at Closing in cash or
other presently available funds, and shall pay to the Shareholders
(in proportion to their respective holdings of EFS Common Stock as
listed on Exhibit ____) the sum of One Million Dollars ($1,000,000)
plus accrued interest at the rate of 7.5% per annum (collectively
the "Deferred Cash Payment") upon the earlier of either (1) the
first exercise of any XRG warrants by Xxxxxx Partners LP, or (2)
upon the first anniversary date of the Closing Date, and (ii) issue
to or for the accounts of the Shareholders (in proportion to their
respective holdings of EFS Common Stock) at the Closing a total of
Three Million (3,000,000) shares of XRG Common Stock ("XRGC
Shares"). XRG covenants and agrees that until the Deferred Cash
Payment has been paid in full to the Shareholders in accordance with
this Agreement, XRG will not accept or receive private placement
investment funds (with Barrons or otherwise) without the prior
written approval of the Shareholders.
2. As consideration for signing this Addendum by March 29, 2004, XRG
and EFS hereby agree that XRG shall issue an additional Seven
Hundred Fifty Thousand (750,000) shares of XRG Common Stock to the
Shareholders at Closing (in proportion to their respective holdings
of EFS Common Stock).
3. Section 2(c) of the Agreement is hereby deleted in its entirety and
replaced with the following:
(c) Issuance of XRG Promissory Note. One (1) year after the
Closing Date, XRG will issue a 10% Promissory Note to Sellers in
accordance with the form attached as Exhibit ___ (the "Note"). The
Sellers shall each have a pro rata interest in the Note in
accordance with their pro rata ownership of the XRGC Shares issued
in the Merger. The face amount of this Note will be based on the
total new "agency business" gross revenue of EFS as hereafter
defined. As used herein, the term new "agency business" shall
include (i) all gross revenues generated by or for XRG or any
affiliate or subsidiary of XRG at any time prior to the Closing Date
and within twelve months thereafter as a result of the employment or
independent contracting efforts of either Xxx Xxxx and/or Xxxxx
Xxxxx, together with (ii) all new agency business gross revenues of
EFS during the first twelve months following the Closing Date. New
agency business will be separately accounted for by EFS, and if the
combined total new agency business gross revenue (as defined above)
equals $20,000,000 prior to the expiration of the first twelve
months following the Closing Date (as determined by the audited
financial statements of EFS and XRG), the Note will be in the face
amount of $3,000,000. If the combined total new agency business
gross revenue (as defined above) is greater or less than $20,000,000
at the end of the first twelve months following the Closing Date,
XRG will increase or decrease the face amount of this Note by
multiplying 3,000,000 times the result of dividing the actual new
agency business gross revenue in the first twelve months by
$20,000,000 (for example, if the actual new agency business gross
revenue is $15,000,000, the face amount of this Note issued to the
Sellers would be [15,000,000 / 20,000,000] X 3,000,000 = $2,250,000,
and by way of further example, if the actual new agency business
gross revenue is $25,000,000, the face amount of the Note issued to
the Sellers would be [25,000,000 / 20,000,000] X 3,000,000 =
$3,750,000). For purposes of this paragraph, the Parties agree that
"new agency gross revenues" shall also include an adjustment equal
to five times the revenue generated by EFS during the first twelve
months following the Closing Date from its warehousing operations
(i.e. warehouse storage, consolidation and distribution services).
The Note will be repayable together with accrued interest based upon
the following schedule:
1) 33% twelve months from issuance date;
2) 33% eighteen months from issuance date; and
3) 34% twenty-four months from issuance date.
4. The phrase "on or before March 31, 2004" in the third line of
Section 2(e) of the Agreement and Plan of Merger is hereby deleted
and the phrase "within 30 days after the Company's Audited Financial
Statements are
released, but in no event later than May 27, 2004" is hereby
substituted in lieu thereof.
6. The phrase "on or before February 29, 2004" in the seventh line of
Section 8(a)(iii) of the Agreement and Plan of Merger is hereby
deleted and the phrase "within 30 days after the Company's Audited
Financial Statements are released, or on or before May 27, 2004,
whichever is earlier" is hereby substituted in lieu thereof.
7. A new Section 10(o) is hereby added to the Agreement and Plan of
Merger as follows:
(o) Cross Default. Each of the Parties hereby acknowledges
and agrees that any default, breach or violation by XRG or Merger
Sub (or their respective successors or assigns) under any one or
more of the transaction documents and agreements entered into by the
Parties in connection with consummation of the transactions
contemplated in this Agreement, including without limitation, the
MELA, the Note, the Executive Employment Agreements (and related
stock option agreements), , XRG's unconditional guaranty agreement,
and the security agreement and the office lease agreement referenced
in Section 6(b) (all of the foregoing agreements, including this
Agreement being collectively referred to herein as the "Transaction
Agreements") shall be an event of default under this Agreement and
under each of the other Transaction Agreements. In the event of any
such default, the Shareholders and ELS shall have full power and
authority at any time and from time to time to exercise all or any
one or more of their/its remedies contained herein or in any one or
more of the other Transaction Agreements as they may deem
appropriate and shall have all the rights of a secured party under
the Uniform Commercial Code of Tennessee. No delay or failure on the
part of the Shareholders or ELS in the exercise of any power or
right under this Agreement or the other Transaction Agreements shall
be construed (i) as a waiver of such right or the right later to
insist upon strict compliance with the terms thereof, or (ii) to
prevent the exercise of such right granted under this Agreement, the
other Transaction Agreements, or by applicable law; and XRG and
Merger Sub hereby expressly waive the benefit of any statute or rule
of law or equity now provided, which may hereafter be provided,
which would produce a result contrary to or in conflict with the
above.
8. Except as expressly modified hereby, the Agreement and Plan of
Merger remains in full force and effect.
IN WITNESS WHEREOF, the parties have executed and delivered, and have
caused their duly authorized representatives to execute and deliver, this
Agreement and Plan of Merger Addendum on this the 29th day of March, 2004.
XRG, INC. EFS SHAREHOLDERS:
By:
___________________________________ ___________________________________
President
___________________________________
___________________________________
EXRESS FREIGHT SYSTEMS, INC. ___________________________________
By:
___________________________________
President
XRG ACUISITION SUB I, INC.
(a corporation to be formed)
By:___________________________
President
SECOND ADDENDUM TO AGREEMENT AND PLAN OF MERGER
This letter shall serve as the second addendum to the Agreement and Plan
of Merger ("2nd Addendum") effective as of April 21, 2004, by and between XRG,
Inc. ("XRG"), Express Freight Systems, Inc. ("EFS"), and the Shareholders of
EFS. The purpose of this letter is to modify in certain respects the Agreement
and Plan of Merger Addendum entered into effect as of April 29, 2004.
1. Section 3 of the Addendum regarding issuance of XRG's Promissory
Note is deleted. XRG will not be required to issue a Promissory Note. However,
the remaining language contained in Section 3 of the Addendum shall remain in
full force and effect as it relates to the additional payments due the EFS
Shareholders relating to the earnout for new "Agency Business". This payment
shall be referred to as the "Earnout Payment". XRG acknowledges that the Earnout
Payment is a contractual obligation, which is included as an obligation under
the XRG blanket guaranty.
2. Reference to the Security Agreement in Section 7 of the Addendum
amending Section 10(o) of the Agreement and Plan of Merger is deleted. XRG shall
not be required to issue a Security Agreement in connection with the Merger.
3. Except as expressly modified hereby, the Agreement and Plan of
Merger and the Addendum remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed and delivered and have
caused their duly authorized representatives to execute and deliver this 2nd
Addendum to Agreement and Plan of Merger effective as of April 21, 2004.
XRG, INC.
By:
____________________________________________
Print Name:
____________________________________
Title:
_________________________________________
XRG ACQUISITION SUB I, INC.
By:
____________________________________________
Print Name:
____________________________________
Title:
_________________________________________
EXPRESS SYSTEMS, INC.
By:
____________________________________________
Print Name:
____________________________________
Title:
_________________________________________
EXPRESS SYSTEMS, INC.
SHAREHOLDERS:
_______________________________________________
Print Name:
____________________________________
_______________________________________________
Print Name:
____________________________________
_______________________________________________
Print Name:
____________________________________
_______________________________________________
Print Name:
____________________________________
_______________________________________________
Print Name:
___________________________________
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