FIRST AMENDMENT
TO
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT ("Amendment") is made
and entered into as of this first day of October, 2001, by and among STONEPATH
LOGISTICS, INC., a Delaware corporation (the "Purchaser"), STONEPATH GROUP,
INC., a Delaware corporation and the parent corporation of the Purchaser
("Stonepath"), M.G.R., INC., a Minnesota corporation, d/b/a AIR PLUS LIMITED
("MGR"), DISTRIBUTION SERVICES, INC., a Minnesota corporation ("DSI"), CONTRACT
AIR, INC., a Minnesota corporation ("Contract Air") and the shareholders of MGR
as set forth on Exhibit A to the Stock Purchase Agreement (defined below) (the
"MGR Shareholders"), the sole shareholder of DSI as set forth on Exhibit A to
the Stock Purchase Agreement (defined below) (the "DSI Shareholder"), the
shareholders of Contract Air as set forth on Exhibit A to the Stock Purchase
Agreement (defined below) (the "Contract Air Shareholders"), and XXXX X. XXXX,
an individual and resident of the State of Minnesota (the "Shareholders'
Agent").
For purposes of this Amendment, (x) MGR, DSI and Contract Air may be
collectively referred to herein as the "Companies," or individually, as a
"Company," (y) the MGR Shareholders, the DSI Shareholder and the Contract Air
Shareholders may be collectively referred to herein as the "Shareholders," or
individually as a "Shareholder," and (z) each of the Purchaser, Stonepath, the
Shareholders, the Companies and the Shareholders' Agent may be collectively
referred to herein as the "Parties" and referred to individually as a "Party."
For the further purposes of this Amendment, (x) MGR, DSI and Contract
Air join as Parties to this Amendment for the sole purpose of (A) making the
covenants for the Pre-Closing Period set forth in Article 5 hereof, and (B)
indemnification of the Purchaser with respect to all matters under this
Amendment and the Ancillary Documents pending the Closing which arise prior to
or on the Closing Date, and (y) Stonepath joins as a Party to this Amendment for
the sole purposes of guaranteeing each and all of the obligations of the
Purchaser under this Amendment and the Ancillary Documents pursuant to the
guaranty set forth as Exhibit B to the Stock Purchase Agreement (defined below)
(the "Guaranty") and, in furtherance of the foregoing, making certain
representations and covenants as set forth herein.
RECITALS
--------
A. On August 30, 2001 the Purchaser, Stonepath, the Companies, the
Shareholders and the Shareholders' Agent entered into that certain Stock
Purchase Agreement of even date for the purchase of the Shareholders' shares in
the Companies (the "Stock Purchase Agreement").
B. The Parties to the Stock Purchase Agreement desire to amend the
Stock Purchase Agreement in the manner set forth hereinafter in conformity with
Section 13.8 of the Stock Purchase Agreement.
AGREEMENT
---------
In consideration of the foregoing Recitals and the mutual promises
contained in this Amendment, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
1. Section 2.2(a)(i), Amendment of Earn-Out Provision.
Section 2.2(a)(i) of the Stock Purchase Agreement shall be amended to add the
following at the end of the paragraph in Section 2.2(a)(i) as follows:
"Notwithstanding any contrary provision of this Agreement,
the Parties acknowledge and agree that the Purchaser and Stonepath
have requested that the Companies not request consents that might be
required to transfer certain lease rights set forth in Schedule 3.4 to
this Agreement in connection with the Closing of the Stock Purchase
Agreement; in the event that there are any adverse financial
consequences arising from, in connection with or incident to not
obtaining such consents (e.g., any adverse financial effect which
causes the Companies to incur increased costs and expenses, including
depreciation and amortization costs arising from capital investment),
such additional costs and expenses shall be added back to combined net
income before Taxes of the Companies for purposes of computing the
Earn-Out."
2. Section 2.2(a)(vi), Xxxx X. Xxxx Employment Agreement.
Section 2.2(a)(vi) of the Stock Purchase Agreement shall be and is hereby
deleted in its entirety and the following shall be added in its place:
"(vi) Xxxx X. Xxxx ("Xxxx") is anticipated to be employed by
MGR after the Closing pursuant to the executive employment agreement
described in Section 5.28 and set forth as Exhibit G of this
Agreement."
3. Section 2.4(b)(ii), Escrow. Section 2.4(b)(ii) of the Stock
Purchase Agreement shall be and is hereby samended to read as follows:
"(ii) deposit the estimated amount of the Loss or Losses
asserted by the Purchaser to be subject to offset and/or recoupment
with the Escrow Agent under the escrow agreement substantially in the
form attached hereto as Exhibit I (which may be revised for comments
of the Escrow Agent) to this Agreement (the "Escrow Agreement")."
4. Section 2.6(b), Documents to be Delivered by the
Shareholders. Section 2.6(b) of the Stock Purchase Agreement shall be and hereby
is amended as follows:
(a) Section 2.6(b)(viii) shall be and hereby is deleted
in its entirety.
(b) Section 2.6(b)(ix) shall be and hereby is deleted in
its entirety.
5. Section 5.10, Consents. The last clause of Section 5.10 of
the Stock Purchase Agreement shall be deleted in its entirety and the following
shall be added in its place:
", except for the consents and approvals listed on Schedule
3.4 hereto."
6. Section 5.21, Landlord/Lessor Estoppel Certificates. Section
5.21 of the Stock Purchase Agreement shall be and hereby is deleted in its
entirety.
7. Section 5.31, Year 2000 and Prior Years S Corporation
Distributions. Section 5.31 of the Stock Purchase Agreement shall be and hereby
is deleted, and inserted in its place shall be the following:
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"5.31 Year 2000 and Prior Years S Corporation Distributions.
Stonepath and the Purchaser consent to and agree, notwithstanding any
contrary provision of this Agreement or any Ancillary Document, that
during the period commencing January 1, 2001 through the Closing Date,
the Companies may declare dividends and authorize the payment of and
pay (by cash, note or other consideration) dividend distributions (or
cause such action) from the Companies for any calendar year prior to
the calendar year 2001, in an aggregate amount not to exceed
$998,769."
8. Section 6.2, Consents and Approvals. A new clause shall be
added to the second clause of Section 6.2 of the Stock Purchase Agreement
immediately following the words "(including each and every Governmental Body)"
as follows:
", except those set forth in Schedule 3.4 of this Agreement,"
9. Exhibit G, Executive Employment Agreement. Exhibit G to the
Stock Purchase Agreement is hereby amended at Section 7.16 to delete the
existing provision and to insert in its place:
"7.16 Earn-Out. Nothing in this Agreement shall affect
Executive's right to Earn-Out payments under the Stock Purchase
Agreement."
10. Section 11.10, Management Incentive Program. Section 11.10 of
the Stock Purchase Agreement shall be and hereby is deleted in its entirety, and
the following shall be added in its place:
"11.10. Management Incentive Program. Stonepath shall work
with Shareholders' Agent to establish or shall cause the Companies to
establish, by no later than April 1, 2002, a management incentive
program (the "Management Incentive Program") in a form to be mutually
agreed upon by Stonepath and Shareholders' Agent providing, among other
things, incentive compensation for those individuals mutually
identified by Stonepath and Shareholders' Agent as key employees. The
Management Incentive Program shall be management-by-objective based
with an opportunity to earn up to fifty percent (50%) of such
employee's salary (the "Incentive") based on the following increments
and conditions: (i) thirty-three percent (33%) of the Incentive in the
event that the Companies in the aggregate achieve the annual financial
performance criteria established within mutually agreeable annual
business plans, (ii) thirty-three percent (33%) of the Incentive in the
event specific business units achieve mutually agreeable annual
financial performance criteria to be established within the annual
business plans, and (iii) thirty-four percent (34%) of the Incentive in
the event that individual annual objectives established by a
participant's immediate supervisor (and approved by Xxxx) are achieved.
Any amounts accrued or paid to participants pursuant to the Management
Incentive Program (or any similar plan established on or after the
Closing Date, other than bonuses paid to employees consistent with past
practices of the Companies prior to the Closing Date), other than
participants who are Shareholders, shall not be chargeable against the
earnings of the Companies for purposes of the calculation of the
Earn-Out. Following the Earn-Out Period, the Management Incentive
Program may be modified or terminated by Stonepath without the consent
or concurrence of Shareholders' Agent."
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11. Section 2.6(c)(xii), Documents to be delivered by the
Purchaser. Section 2.6(c)(xii) of the Stock Purchase Agreement shall be and
hereby is deleted in its entirety.
12. Section 8.7, Management Incentive Program. Section 8.7 of the
Stock Purchase Agreement shall be and hereby is deleted in its entirety.
13. Article 1, Definition of GAAP. A new clause shall be added at
the end of the definition of "GAAP" contained within Article I of the Stock
Purchase Agreement:
"; provided that for purposes of preparing the Audited
Financial Statements, the Closing Balance Sheet and the Earn-Out
Financial Statements, the GAAP to be applied shall be that used in
preparing the audited financial statements of the Companies for the
year ended December 31, 2000."
14. Section 2.5(c), Closing Balance Sheet. Section 2.5(c) of the
Stock Purchase Agreement shall be amended by deleting from the first sentence
thereof following parenthetical clause:
"(including any change in accounting methods or principles
disclosed in any Schedule or Supplement)".
15. Section 5.25, Audited Financial Statements. Section 5.25 of
the Stock Purchase Agreement shall be and hereby is amended by deleting the
fourth sentence thereof in its entirety.
16. Supplemental Schedules. The Parties hereby acknowledge that
additional information and documentation has been received by the Companies and
provided to the Purchaser and Stonepath regarding the matter referred to in Item
3.13(o) of the Schedules, including a copy of that certain letter received by
the Companies from Kmart Corporation dated September 28, 2001 (the "Kmart
Disclosure"). The Parties hereby acknowledge and agree that the Kmart Disclosure
shall, for all purposes, be deemed to be and shall be a Supplement to and shall
be fully incorporated by this reference in the Supplemental Schedules delivered
by the Companies to the Purchaser and Stonepath on September 28, 2001. Stonepath
and the Purchaser hereby waive any claim they may have that the Kmart Disclosure
was not properly delivered in accordance with the procedures set forth in
Section 13.21 of the Stock Purchase Agreement, including any claim that the
Kmart Disclosure was not delivered in writing at least five (5) business days
prior to the Closing Date in accordance with Section 13.21(a) and Section 13.5.
17. Effect on Stock Purchase Agreement. The foregoing amending
provisions are the sole and exclusive amendments to the Stock Purchase Agreement
by the Parties pursuant to this Amendment. No other provisions of the Stock
Purchase Agreement shall be affected, unless the other such provision is
dependent upon or assumes the existence of the deleted or amended provisions of
this Amendment. Other than the foregoing, all other provisions of the Stock
Purchase Agreement shall remain unchanged.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be
executed by duly authorized representations as of the day, month and year first
above written.
SHAREHOLDERS: PURCHASER:
STONEPATH LOGISTICS, INC.
_____________________________________
Xxxx X. Xxxx, Trustee of Xxxx X. Xxxx
Revocable Trust dated August 11, 1997 By_________________________
Its:_________________
_____________________________________
Xxxxxx X. Xxxxxxx STONEPATH:
STONEPATH GROUP, INC.
_____________________________________
Xxxx Xxxxxx
By_________________________
Its:_________________
_____________________________________
X. X. Xxxxx
COMPANIES:
_____________________________________ M.G.R., INC.
Xxxxx X. Xxxx
By_________________________
_____________________________________ Its:_________________
Xxxxx Such
DISTRIBUTION SERVICES, INC.
SHAREHOLDERS' AGENT:
By_________________________
Its:_________________
_____________________________________
Xxxx X. Xxxx
CONTRACT AIR, INC.
By_________________________
Its:_________________
[SIGNATURE PAGE TO FIRST AMENDMENT
TO STOCK PURCHASE AGREEMENT]
