STOCK PURCHASE AGREEMENT
By and Between
STONEPATH LOGISTICS DOMESTIC SERVICES, INC.
a Delaware corporation
(Purchaser)
and
UNITED AMERICAN ACQUISITIONS AND MANAGEMENT, INC.
a Michigan corporation
(Company) (d/b/a United American Freight Services, Inc.)
and
▇▇▇▇▇▇▇ ▇▇▇▇▇
(Shareholder)
April 9, 2002
TABLE OF CONTENTS
Article Page
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ARTICLE I: SALE AND TRANSFER OF SHARES...........................................................................1
1.1 Sale and Purchase of the Shares.................................................................1
1.2 Purchase Price..................................................................................2
1.3 Objections; Dispute Resolution..................................................................4
ARTICLE II: CLOSING..............................................................................................6
2.1 Closing Date....................................................................................6
2.2 Closing Transactions............................................................................7
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER...................................9
3.1 Organization, Qualification and Status..........................................................9
3.2 Corporate Instruments and Records...............................................................9
3.3 Capitalization.................................................................................10
3.4 Ownership of Shares............................................................................10
3.5 No Subsidiary..................................................................................10
3.6 Authority of Shareholder.......................................................................10
3.7 No Violation...................................................................................11
3.8 Financial Statements...........................................................................11
3.9 Absence of Undisclosed and Contingent Liabilities..............................................12
3.10 No Adverse Changes.............................................................................12
3.11 Guarantees.....................................................................................14
3.12 Tax Matters....................................................................................14
3.13 Litigation.....................................................................................16
3.14 Real Property..................................................................................17
3.15 Owned Tangible Personal Property...............................................................17
3.16 Condition of Buildings and Tangible Personal Property..........................................18
3.17 Accounts and Notes Receivable..................................................................18
3.18 Material Contracts.............................................................................18
3.19 Inventories....................................................................................20
3.20 Relationship With Related Persons..............................................................20
3.21 Banking Matters................................................................................21
3.22 Labor and Employment Matters...................................................................21
3.23 Intentionally Omitted..........................................................................22
3.24 Customers......................................................................................22
3.25 Product and Service Warranties.................................................................22
3.26 Insurance......................................................................................22
3.27 Compliance with Laws...........................................................................23
3.28 Licenses and Permits...........................................................................23
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Article Page
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3.29 Environmental Matters..........................................................................23
3.30 Intellectual Property Matters..................................................................24
3.31 Intentionally Omitted..........................................................................24
3.32 Disclosure.....................................................................................24
3.33 Brokers or Finders.............................................................................24
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF PURCHASER.........................................................25
4.1 Organization and Qualification.................................................................25
4.2 Corporate Instruments and Records..............................................................25
4.3 Authorization; Valid and Binding Obligation....................................................25
4.4 Litigation.....................................................................................25
4.5 No Violations..................................................................................26
4.6 Investment Intent..............................................................................26
4.7 Disclosure.....................................................................................26
4.8 Brokers or Finders.............................................................................26
ARTICLE V: AGREEMENTS OF THE PARTIES............................................................................27
5.1 Access to Information..........................................................................27
5.2 Interim Operations.............................................................................27
5.3 Documents at Closing...........................................................................29
5.4 Audited Financial Statements...................................................................29
5.5 Employment Agreements..........................................................................29
5.6 Notification of Certain Matters................................................................30
5.7 Filings........................................................................................30
5.8 Satisfaction of Conditions; Cooperation; Further Assurances....................................30
5.9 Further Mutual Covenants.......................................................................30
5.10 Satisfaction of Guarantees.....................................................................31
ARTICLE VI: CONDITIONS TO THE OBLIGATIONS OF PURCHASER.........................................................31
6.1 Accuracy of Representations and Warranties; Company and Shareholder Performance................31
6.2 No Adverse Change..............................................................................32
6.3 No Injunction; Consents........................................................................32
6.4 Deliveries by the Shareholders.................................................................32
6.5 Uniform Commercial Code Searches...............................................................32
6.6 Completion of Audited Financial Statements.....................................................32
6.7 Non-foreign Person Affidavit...................................................................32
ARTICLE VII: CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDER...................................................33
7.1 Accuracy of Representations and Warranties; Purchaser Performance..............................33
7.2 No Injunction; Consents........................................................................33
7.3 Deliveries by Purchaser........................................................................33
7.4 Consents and Proceedings.......................................................................34
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Article Page
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ARTICLE VIII: TERMINATION.......................................................................................34
8.1 Termination Events.............................................................................34
8.2 Effect of Termination..........................................................................35
8.3 Extension; Waiver..............................................................................35
ARTICLE IX: INDEMNIFICATION/SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................................35
9.1 Indemnification................................................................................35
9.2 Survival.......................................................................................36
9.3 Methods of Asserting Claims for Indemnification................................................36
9.4 Limitations on Amount..........................................................................37
ARTICLE X: POST-CLOSING COVENANTS...............................................................................38
10.1 Prohibition on Trading in Stonepath Stock......................................................38
10.2 Non Solicitation of Other Offers...............................................................38
10.3 Non-Competition Agreement......................................................................39
10.4 Non-Solicitation Agreement.....................................................................39
10.5 Confidentiality................................................................................39
10.6 Reasonableness of Covenants....................................................................41
10.7 Injunctive Relief..............................................................................41
10.8 Blue Pencil Doctrine...........................................................................41
10.9 Further Acts and Assurances....................................................................42
10.10 Public Announcements...........................................................................42
10.11 Tax Matters....................................................................................42
10.12 Certain Corporate Matters......................................................................
ARTICLE XI: MISCELLANEOUS.......................................................................................44
11.1 Definitions....................................................................................44
11.2 Cumulative Remedies; Waiver....................................................................51
11.3 Notices........................................................................................51
11.4 Entire Agreement; Assignment...................................................................52
11.5 Binding Effect; Benefit........................................................................52
11.6 Headings.......................................................................................52
11.7 Counterparts...................................................................................52
11.8 Governing Law..................................................................................53
11.9 Arbitration....................................................................................53
11.10 Severability...................................................................................53
11.11 Expenses.......................................................................................53
11.12 Amendment and Modification.....................................................................53
11.13 RELEASE AND DISCHARGE..........................................................................54
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Exhibits
A - Form of Guaranty Agreement
B - Form of Employment Agreement
C - Shareholder Schedules
Schedules
o Shareholder Schedules (contained within Exhibit C)
o 1.2(b)(v) - Example of Earn-Out Computation
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), made this 9th day of
April, 2002, by and between Stonepath Logistics Domestic Services, Inc., a
Delaware Corporation, ("Purchaser"), a wholly-owned subsidiary of Stonepath
Group, Inc., a Delaware corporation ("Stonepath"), United American Acquisitions
and Management, Inc., a Michigan corporation, d/b/a "United American Freight
Services, Inc." (the "Company"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇, an individual residing in
the State of Michigan and the sole shareholder of the Company (the
"Shareholder").
WITNESSETH:
WHEREAS, the Shareholder owns beneficially and of record 100% of the issued
and outstanding capital stock of the Company, consisting of 7,500 shares of
common stock, $1.00 par value (the "Shares"); and
WHEREAS, the Shareholder desires to sell, and Purchaser desires to
purchase, all of the Shares for the consideration and on the terms set forth
herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements set forth in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
SALE AND TRANSFER OF SHARES
1.1 Sale and Purchase of the Shares.
In reliance upon the representations, warranties and covenants contained in
this Agreement as of the date hereof and on the date of the closing of the
transactions described in this Agreement (the "Closing"), the Purchaser agrees
to purchase the Shares from the Shareholder, and the Shareholder agrees to sell,
transfer, convey, assign and deliver the Shares to the Purchaser, on the terms
and conditions set forth in this Agreement, such sale, transfer, conveyance,
assignment and delivery of the Shares causing the entire right, title and
interest in and to the Shares to be transferred beneficially and of record to
Purchaser, free and clear of any Encumbrances or Rights of any kind or nature
whatsoever; and at such time the Shares will be fully paid and non-assessable.
At the Closing, the Shareholder will deliver to the Purchaser certificates
evidencing the Shares duly endorsed in blank or with stock powers duly executed
by the Shareholder. In consideration thereof, Purchaser shall pay and deliver to
the Shareholder the purchase price for the Shares set forth in Section 1.2 and
execute and deliver such other documents, agreements, consents and approvals as
provided herein
1.2 Purchase Price.
(a) The purchase price for the Shares (the "Purchase Price") shall be
Sixteen Million One Hundred Thousand Dollars ($16,100,000), subject to
adjustment pursuant to the further provisions of this Section 1.2 and Section
1.3.
(b) Purchaser shall pay the Purchase Price to the Shareholder as follows:
(i) Five Million One Hundred Thousand Dollars ($5,100,000) shall be
paid by wire transfer of immediately available funds to the Shareholder at the
Closing;
(ii) Subject to the terms of Section 1.2(b)(iii) below, Five Million
Dollars ($5,000,000) (the "Base Earn-Out Amount") shall be paid to the
Shareholder in installments of One Million Two Hundred and Fifty Thousand
Dollars ($1,250,000) per year (each a "Base Earn-Out Payment") covering the
four-year earn-out period commencing from January 1, 2002 through December 31,
2005 (the "Earn-Out Period"). The Base Earn-Out Payments will be based on the
Net Income Before Taxes of the Company, calculated in accordance with Sections
1.2(b)(iii) and 1.2(c) below, during each of the calendar years that fall within
the Earn-Out Period. The Base Earn-Out Payments shall be due and made on April
1st of each of the years 2003 through 2006 (the "Earn-Out Payment Dates"),
following each calendar year in which Net Income Before Taxes is determined.
(iii) Payment of each Base Earn-Out Payment shall be contingent upon,
and the Shareholder shall not be entitled to the full amount of the Base
Earn-Out Payment unless, the Company achieves Net Income Before Taxes for the
full calendar year preceding the Earn-Out Payment Date in an amount equal to Two
Million Two Hundred Thousand Dollars ($2,200,000) (the "Targeted Amount"). To
the extent the Company's Net Income Before Taxes for the full calendar year
preceding the Earn-Out Payment Date is less than the Targeted Amount, the Base
Earn-Out Payment shall be reduced on a dollar-for-dollar basis by the amount of
the shortfall (the "Shortfall Amount"); provided, that no Base Earn-Out Payment
shall be made in the event that the Company's Net Income Before Taxes for the
calendar year preceding the Earn-Out Payment Date is less than $500,000 In the
event that a Shortfall Amount occurs with respect to any year within the
Earn-Out Period, and if during any other year in the Earn-Out Period (whether
before or after the year in which the Shortfall Amount was incurred) the
Company's Net Income Before Taxes exceeds the Targeted Amount, the amount of
such excess over the Targeted Amount (the "Excess Amount") shall first be
applied to reduce the Shortfall Amount in the earliest order in which any
Shortfall Amounts were incurred (provided the Excess Amount may only be applied
in any year until consumed).
(A) To the extent that an Excess Amount recognized in a
subsequent year is applied against a Shortfall Amount recognized in a prior
year, the Earn-Out Payment for any year in which the Excess Amount was applied
shall be recomputed to include application of the Excess Amount, and the
difference between the Earn-Out Payment that was originally made for such year
and the Earn-Out Payment that is now recomputed for such year
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shall be paid to the Shareholder in conjunction with the Base Earn-Out Payment
for the current year. See Example 1 on Schedule 1.2(b)(v).
(B) To the extent that an Excess Amount recognized in a prior
year is applied against a Shortfall Amount recognized in a subsequent year, the
Base Earn-Out Payment for any year in which the Excess Amount was applied shall
be computed to include application of the Excess Amount. The Base Earn-Out
Payment shall, however, be reduced by 50% of the Excess Amount applied to the
extent that any Additional Earn-Out Payment (as defined in Section 1.2(b)(iv)
below) was previously paid to the Shareholder on the Excess Amount applied in
computing the Base Earn-Out Payment. In other words, the Base Earn-Out Payment
must be reduced by the benefit of any Additional Earn-Out Payment previously
paid to the Shareholder. See Example 2 on Schedule 1.2(b)(v).
(iv) An additional annual amount (an "Additional Earn-Out Payment" and
collectively with the Base Earn-Out Payment, the "Earn-Out Payments") shall be
paid to the Shareholder on each Earn-Out Payment Date in an amount equal to
one-half (1/2) of the Excess Amount (i.e., the amount by which the Company's Net
Income Before Taxes in the calendar year preceding the Earn-Out Payment Date)
exceeds the Targeted Amount; provided: (x) no Excess Amounts shall be applied
towards any Additional Earn-Out Payments until first applied to make up in full
any prior Shortfall Amounts; and (y) in no event shall the total cumulative
aggregate amount of the Additional Earn-Out Payments exceed Six Million Dollars
($6,000,000).
(v) Without limiting the foregoing provisions, the examples contained
within Schedule 1.2(b)(v) are offered to clarify the application of this Section
1.2(b).
(c) The following principles shall apply for the purpose of computing Net
Income Before Taxes of the Company and the corresponding Earn-Out Payments:
(i) The net income before taxes of the Company shall be determined
based upon separate financial statements of the Company derived from the audited
consolidated financial statements of Stonepath for each of the years in the
Earn-Out Period.
(ii) The Company shall continue to be accounted for as a separate
operating unit;
(iii) No business of a new, existing or prospective customer of the
Company (including customers or prospective customers of the Company that are
introduced to Stonepath, Purchaser or any Affiliate thereof by Shareholder or
the Company), shall, without the consent of the Shareholder, be serviced by an
Affiliate of Stonepath other than the Company, and if consent is provided and
such business is serviced by an Affiliate of Stonepath other than the Company,
then adequate provision shall be made in a manner reasonably acceptable to
Shareholder so as to appropriately credit the Company as if it had performed the
service; provided, that in determining the amount of any such credit, adequate
provision shall also be
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made to reduce the credit for any service provided by the Company for customers
generated by Stonepath or any Affiliate of Stonepath other than the Company; and
(iv) The net income before taxes of the Company shall be determined
without offset for:
(A) any overhead or management charges which may otherwise be
charged by the Purchaser or any corporate parent or affiliate of the Purchaser,
other than (x) direct costs of the Company which are otherwise paid or incurred
by the Purchaser or Stonepath on behalf of the Company, or (y) that portion of
Stonepath's shared administrative services provided by Stonepath for the benefit
of the Company which are either: (1) agreed to by the Shareholder; or (2)(a) for
services which generally replace services previously obtained directly by the
Company internally or from third parties, and (b) are provided at no greater
than market rates available from unaffiliated third party vendors;
(B) any amortization or depreciation of intangibles which are
either (x) created by the transactions occurring at the Closing or (y) were as a
result of transactions of the Company which occurred before the Closing and were
disclosed in the Financial Statements of the Company provided to Purchaser prior
to the Closing;
(C) any depreciation, amortization, interest or other direct or
indirect charges or expenses against net income associated with financings or
other debt obligations, or any payments or prepayments thereof, of the Purchaser
or Stonepath, whether currently existing or later incurred, other than the
actual cost of financings or other debt obligations incurred by the Company in
connection with operation of the Company's Business;
(D) costs associated with maintaining any Excess Employee Benefit
Plan Coverage for the employees of the Company; and
(E) costs associated with the preparation of the Audited
Financial Statements.
(d) Stonepath and Purchaser hereby guarantee the due performance,
execution, observance and payment by the Purchaser of all of the Purchaser's
obligations and duties arising under, in connection with or incident to this
Agreement and any Ancillary Documents executed in connection with the
transactions subject to this Agreement, all upon the terms and conditions set
forth in the Guaranty Agreement in the form attached as Exhibit A
1.3 Objections; Dispute Resolution.
(a) On each Earn-Out Payment Date, Purchaser and Stonepath shall prepare
and deliver to the Shareholder, along with the Earn-Out Payment, a certificate
(the "Annual Earn-Out Certificate") signed by the Chief Financial Officer of
Stonepath setting forth the
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amount and method of calculating Net Income Before Taxes for the prior calendar
year (or portion thereof) the calculation of the Earn-Out Payment then due, if
any, and the recovery of the Shortfall Amount, if any.
(b) If the Shareholder concludes that any matter reported in an Annual
Earn-Out Certificate is not accurate, the Shareholder shall, within thirty (30)
days after his receipt of the such Annual Earn-Out Certificate (the "Response
Period"), deliver to the Purchaser 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 Shareholder 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 an Annual Earn-Out
Certificate, shall be controlling for all purposes of this Agreement.
(c) If an objection notice is timely given within the Response Period, the
Purchaser shall provide Shareholder all requested information included in the
Objection Notice within fifteen (15) days; thereafter, the Purchaser and the
Shareholder shall use good faith efforts to jointly resolve any properly noticed
objections and discrepancies within thirty (30) days of the receipt by the
Purchaser 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.
(d) If Purchaser and the Shareholder 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 Purchaser and the Shareholder (the
"Independent Accountants"). In submitting a dispute to the Independent
Accountants, the Purchaser, the Company and the Shareholder 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 the Purchaser and the Shareholder, 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 Purchaser to Shareholder, such
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
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hold harmless the Independent Accountants, and to execute whatever documents or
agreements are necessary to effectuate the foregoing.
(e) If the decision of the Independent Accountants indicates that the
amount of the Earn-Out Payment set forth in the Annual Earn-Out Certificate is
under reported by 10% or more, then in that event, Purchaser and Stonepath shall
reimburse Shareholder for all fees, costs and expenses associated with the
challenge to the Annual Earn-Out Certificate in Section 1.3(b)(c) and (d), 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 Earn-Out Payment set forth in the Annual
Earn-Out Certificate is under reported by more than 5%, but less than 10%, then,
and in that event, Shareholder and Purchaser shall each pay 50% of all costs,
fees and expenses to engage the Independent Accountants. If the decision of the
Independent Accountants indicates that the amount of the Earn-Out Payment set
forth in the Annual Earn-Out Certificate is under reported by less than 5%,
then, in that event, Shareholder 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.
(f) In the event that Purchaser fails: (i) to make the Earn-Out Payment to
Shareholder by the dates set forth in Section 1.2, or (ii) fails to make the
Independent Accountant Required Payment, if any, within thirty (30) days of the
date that the Independent Accountants render the decision as provided in Section
1.3(d), then in either event, Purchaser and Stonepath agree that the amounts due
Shareholder for such Earn-Out Payments and Independent Accountants Required
Payments shall be increased by 30%, notwithstanding anything contained herein to
the contrary. Further, if the event Purchaser fails to make any Earn-Out
Payments by the due dates set forth in Section 1.2, or fails to make the
Independent Accountants Required Payments, if any, within thirty (30) days from
the date that the Independent Accountant renders the decision as provided in
Section 1.3(d), then Purchaser and Stonepath also agree to pay to Shareholder
interest on the unpaid amounts at the rate of 12% per annum, until such time as
all unpaid amounts, including all accrued interest has been paid in full to
Shareholder.
(g) In connection with their review of the all matters arising under the
Annual Earn-Out Certificate, the Purchaser shall afford the Shareholder and his
representatives complete access to the books, records, personnel and facilities
of or pertaining to the Company
ARTICLE II
CLOSING
2.1 Closing Date.
The Closing of the purchase and sale of the Shares shall take place at the
offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Mychalowych, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, as soon as practicable after the conditions to the
Closing set forth in Articles VI and
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VII have been satisfied, but in no event later than the Termination Date, unless
the parties mutually agree to extend the Termination Date. The date of the
Closing is hereinafter referred to as the "Closing Date." Subject to the
provisions of Article VIII, failure to consummate the purchase and sale provided
for in this Agreement on the date and time and at the place determined pursuant
to this Section 2.1 will not result in the termination of this Agreement and
will not relieve any party of any obligation under this Agreement.
2.2 Closing Transactions.
At the Closing, the following transactions shall occur, all of such
transactions being deemed to occur simultaneously:
(a) The Shareholder shall deliver to the Purchaser the following:
(1) A certificate or certificates representing all of the Shares duly
endorsed by the Shareholder in blank or accompanied by assignments separate from
certificate duly endorsed in blank;
(2) A certificate of the Shareholder to the effect that: (i) all
representations and warranties made by the Shareholder under this Agreement are
true and correct as of the Closing Date, as though originally given to Purchaser
on the Closing Date; (ii) the Company and the Shareholder have performed all
obligations to be performed by them under this Agreement prior the Closing Date;
and (iii) the conditions precedent identified in Article VII have been
satisfied;
(3) A certificate of good standing of the Secretary of State of
Michigan, dated within fifteen (15) days of the Closing Date, to the effect that
the Company is in good standing under the laws of such state;
(4) An incumbency certificate signed by all of the officers of the
Company dated at or about the Closing Date;
(5) Copies of the Company's certificate of incorporation and bylaws
certified by the Secretary of the Company dated at or about the Closing Date;
(6) An employment agreement in the form attached as Exhibit B to this
Agreement (the "Employment Agreement") executed by the Shareholder;
(7) The resignation of each officer and director of the Company in
form and substance satisfactory to Purchaser;
(8) An opinion of the Shareholder's counsel in form and substance
satisfactory to the Purchaser;
(9) A copy of the Audited Financial Statements;
-7-
(10) Either (i) evidence satisfactory to the Purchaser that all Bank
Indebtedness of the Company has been repaid in full or (ii) a request that the
Purchaser apply a portion of the purchase price to be paid at the Closing to the
repayment in full of all Bank Indebtedness;
(11) A non-foreign person affidavit as required by Section 1445 of the
Code; and
(12) Such other documents, agreements, consents, and approvals as are
required under this Agreement or as may be reasonably requested by the
Purchaser.
(b) Purchaser will deliver to the Shareholder the following:
(1) Purchaser shall deliver or shall cause to be delivered to the
Shareholder the portion of the Purchase Price required to be paid at the Closing
under Section 1.2(b)(i) by wire transfer of immediately available funds to the
bank account designated in writing by the Shareholder at least three (3) days
prior to Closing;
(2) A certificate of the Purchaser's Chief Executive Officer to the
effect that: (i) all representations and warranties of the Purchaser under this
Agreement are true and correct as of the Closing Date, as though originally
given to the Shareholder on the Closing Date; (ii) the Purchaser has performed
all obligations to be performed by it under this Agreement prior the Closing
Date; and (iii) the conditions precedent identified in Article VI have been
satisfied.
(3) A certificate of good standing of the Secretary of the State of
Delaware, dated within fifteen (15) days of the Closing Date, that the Purchaser
is in good standing under the laws of said state;
(4) Certified resolutions of the Purchaser's board of directors, dated
at or about the Closing Date, authorizing the transactions contemplated under
this Agreement;
(5) An incumbency certificate signed by all of the officers of the
Purchaser dated at or about the Closing Date;
(6) The Employment Agreement executed by the Purchaser;
(7) The Guaranty of Stonepath in the form attached as Exhibit A to
this Agreement;
(8) An opinion of the Purchaser's counsel in form and substance
satisfactory to the Shareholder; and
(9) Such additional documents, agreements, consents, and approvals as
are required under this Agreement or as may be reasonably requested by the
Shareholder.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER
As a material inducement to Purchaser to execute this Agreement and
consummate the transactions contemplated hereby, the Company and the
Shareholder, do hereby jointly and severally, represent to the Purchaser that
the following representations and warranties are true and correct, except as
otherwise set forth in written disclosure schedules (the "Shareholder's
Schedules") delivered to Purchaser pursuant to this Article III, a copy of which
is attached to this Agreement as Exhibit C. The Shareholder's Schedules are
numbered to correspond to the various sections of this Article III setting forth
certain exceptions to the representations and warranties contained in this
Article III and certain other information required by this Agreement. Unless
otherwise specified, no disclosure made in any particular Shareholder's Schedule
shall be deemed made in any other Shareholder's Schedule unless expressly made
therein.
3.1 Organization, Qualification and Status.
The Company is a corporation duly incorporated and organized, validly
existing and in good standing under the laws of the State of Michigan. The
Company has full corporate power and authority to own, lease and use its
properties and to carry on its business as presently conducted. Except as set
forth on Schedule 3.1, the Company is duly qualified or licensed to do business
and in good standing as a foreign corporation 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. Each
jurisdiction in which the Company is qualified or licensed to do business as a
foreign corporation is set forth in Schedule 3.1.
The Company 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 3.1 sets forth all assumed names
under which the Company or such predecessors have conducted business.
3.2 Corporate Instruments and Records.
The copies of the Company's certificate of incorporation and bylaws, each
certified by the Secretary of the Company and heretofore furnished to Purchaser,
are true, correct and complete and each include all amendments to the date
hereof. The Company's minute books, as made available to Purchaser, contain a
true, complete and correct record of all corporate action taken on or prior to
the date hereof at the meetings of its shareholders and directors and committees
thereof. The stock certificate books and ledgers of the Company, as made
available to Purchaser for inspection, are true, correct and complete, and
accurately reflect, at the date hereof, the ownership of the outstanding capital
stock of the Company by the Shareholders.
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3.3 Capitalization.
The authorized capital stock of the Company consists of 60,000 shares of
Common Stock, $1.00 par value per share, of which 7,500 shares are issued and
outstanding and constitute the Shares. All of the Shares are held beneficially
and of record by the Shareholder, and no shares are held in the treasury of the
Company. All of the Shares are validly issued, fully paid and non-assessable and
entitled to vote at shareholder meetings, and none of the Shares has been issued
in violation of any preemptive rights of shareholders or transferred in
violation of any transfer restrictions relating thereto. None of the Shares are
subject to any preemptive or other right created by statute, the Company's
certificate of incorporation or by laws, by contract, or otherwise. There are no
authorized or outstanding options, warrants, convertible securities,
subscription rights, puts, calls, unsatisfied pre-emptive rights or other rights
of any nature to purchase or otherwise receive, or to require the Company to
purchase, redeem or acquire, any shares of the capital stock or other securities
of the Company and there is no outstanding security of any kind convertible into
such capital stock. There are no existing Rights respecting any shares of the
capital stock of the Company. None of the shares of capital stock or other
securities of the Company were issued in violation of the Securities Act, state
securities laws, or any other legal requirement.
3.4 Ownership of Shares.
The Shareholder owns and holds, beneficially and of record, the entire
right, title and interest in and to the Shares, free and clear of Rights or
Encumbrances of any kind or nature whatsoever, and has full power and authority
to vote the Shares and to approve the transactions contemplated by this
Agreement, such Shares constituting, in the aggregate, all of the issued and
outstanding shares of capital stock of the Company. The Shareholder has the full
power and authority to vote, transfer and dispose of the Shares owned by him,
free and clear of any Right or Encumbrance of any kind or nature whatsoever
other than restrictions under the Securities Act, as and applicable state
securities laws. At the Closing, the Purchaser will acquire good title to the
Shares, free and clear of all Rights and Encumbrances. Other than the
transactions contemplated by this Agreement, there is no outstanding vote, plan,
pending proposal, or other right of any Person to acquire, or to cause the
redemption of, the Shares or to effect the merger or consolidation of the
Company with or into any other Person.
3.5 No Subsidiary.
The Company does not have any Subsidiary or any ownership interest in any
other entity and the Company is not a party to any joint venture arrangement and
does not have the right or obligation to acquire any securities of or ownership
interests in any other person or entity.
3.6 Authority of Shareholder.
The Shareholder has 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
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Agreement and the Ancillary Agreements have been duly authorized, executed and
delivered by the Shareholder and are legal, valid and binding obligations of the
Shareholder, enforceable against the Shareholder 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 Company or the Shareholder in connection
with the execution, delivery or performance by the Company or the Shareholder of
this Agreement or the Ancillary Agreements.
3.7 No Violation.
To the best of Company and Shareholder's knowledge, the Company is not in
default under or in violation of any provision of (a) its certificate of
incorporation or bylaws, 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"). To the best of Company and
Shareholder's knowledge, and except as set forth on Schedule 3.7, neither the
execution and delivery of this Agreement or the Ancillary Agreements by the
Shareholder, 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 incorporation or bylaws of the Company, 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 assets, capital stock or properties of the
Company, nor (v) conflict with, violate or result in a breach of or constitute a
default under, any Applicable Law to which the Company or any of its assets or
properties is subject, nor (vi) require the Company 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.
3.8 Financial Statements.
(a) Schedule 3.8 hereto contains true and correct and complete copies of
the unaudited financial statements of the Company for its three most recently
completed fiscal years ended December 31, 1999, December 31, 2000, and December
31, 2001(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 the
Company at the dates and for the periods covered by such Financial Statements.
All liabilities and obligations of the Company 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 the Company from December 31, 2001 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 December 31, 2001, the Company
has conducted
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its business in a normal and customary manner. The books and records of the
Company from which the Financial Statements were prepared properly and
accurately record the transactions and activities which they purport to record.
(b) The Company 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 the Company's books and records.
3.9 Absence of Undisclosed and Contingent Liabilities.
(a) To the best of Company and Shareholder's knowledge and except as set
forth on Schedule 3.9, the Company 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 December 31,
2001, and (iii) Liabilities arising under the Material Contracts set forth in
the Shareholder's Schedules or which are not required to be disclosed on such
Shareholders' Schedules and which have arisen in the Ordinary Course of
Business.
(b) Except as set forth in Schedule 3.9, none of the Liabilities described
in this Section 3.9 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.
3.10 No Adverse Changes.
Since December 31, 2001 and except as set forth on Schedule 3.10 or
otherwise set forth within the Shareholder's Schedules, the Company has operated
in the Ordinary Course of Business and has not:
(a) Sold, leased, assigned or otherwise transferred any material
properties or assets, or disposed of or permitted to lapse any rights
in any Permit or Intellectual Property owned or used by the Company,
other than in the Ordinary Course of Business, or organized any new
business entity or acquired any equity securities, assets, properties,
or business of any Person or any equity or ownership interest in any
business or merged with or into or consolidated with any other Person;
(b) Suffered, sustained or incurred any material loss or waived or
released any material right or claim, whether or not in the Ordinary
Course of Business;
(c) Suffered, sustained or incurred any material damage, destruction or
casualty loss to any material properties or assets, whether or not
covered by insurance;
(d) Engaged in any transaction not in the Ordinary Course of Business;
-12-
(e) Made any capital expenditure in excess of $25,000 individually or
$100,000 in the aggregate;
(f) Subjected any of its properties or assets to any Encumbrance, whether
or not in the Ordinary Course of Business;
(g) Issued any note, bond or other debt security; created, incurred or
assumed any indebtedness for borrowed money or capitalized lease
obligation or otherwise incurred any material Liability, except
current Liabilities incurred in the Ordinary Course of Business;
(h) Except as set forth on Schedule 3.10, discharged or satisfied any
Encumbrance, or paid any material Liability, other than current
Liabilities shown on the most recent balance sheet included in the
Financial Statements, and current Liabilities incurred in the Ordinary
Course of Business since December 31, 2001;
(i) Declared, set aside or paid a dividend or made any other distribution
with respect to any class or series of capital stock of the Company,
except for those S corporation distributions necessary to cover
applicable pass-through taxes on the Company's net income in 2002
prior to the Closing, or directly or indirectly redeemed, purchased or
otherwise acquired any shares of any class or series of the Company's
capital stock;
(j) Except as set forth on Schedule 3.10, increased the salary, wage or
other compensation or level of benefits payable or to become payable
by the Company to any of its employees, officers, or directors,
including, without limitation, granting or accruing any bonus,
incentive compensation, service award, or other similar benefit;
(k) Except as set forth on Schedule 3.10, loaned money to any Person or
guaranteed any loan to or Liability of any Person, whether or not in
the Ordinary Course of Business;
(l) Except as described in the Shareholder's Schedules, amended or
terminated any Material Contract, except in the Ordinary Course of
Business;
(m) Changed accounting methods or practices (including, without
limitation, any change in depreciation, amortization or cost
accounting policies or rates) or reevaluated any of the Company's
assets;
(n) Suffered, sustained or incurred any Material Adverse Change;
(o) Incurred any termination of any material customer account or group of
accounts or received notice from any customer, supplier, vendor,
Governmental Authority or any other Person which could give rise to or
result in a Material Adverse Effect on the Company;
-13-
(p) Delayed or postponed the payment of accounts payable or other
Liabilities outside of the Ordinary Course of Business;
(q) Entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement or adopted, amended, modified or terminated any
benefit plan for the benefit of any of the Companies' directors,
officers or employees;
(r) Made any change or amendment in its certificate of incorporation,
bylaws, or other governing instruments;
(s) Issued or sold any securities; acquired, directly or indirectly, by
redemption or otherwise, any securities; reclassified, split-up or
otherwise changed any such equity security; or granted or entered into
any options, warrants, calls or commitments of any kind with respect
thereto;
(t) Except as noted on Schedule 3.10, incurred any Liability other than in
the Ordinary Course of Business;
(u) Failed to pay any material Liability outside of the Ordinary Course of
Business;
(v) Disposed of, or permitted to lapse, any Intellectual Property rights
or disclosed any trade secret, process or know-how to any Person not
an employee;
(w) Entered into any contract other than in the Ordinary Course of
Business; and/or
(x) Entered into any contract to do any of the foregoing.
3.11 Guarantees.
(a) The Company has not guaranteed, become surety or contingent obligor for
or assumed any obligation, debt or dividend of any Person. No assets of the
Company are or have been pledged, hypothecated, delivered for safekeeping,
subjected to a security interest or otherwise provided in any way as security
for payment or performance of any obligation of a Person other than the Company.
(b) Schedule 3.11 identifies all obligations and liabilities of the Company
for which the Shareholder has provided or been caused to incur personal
guarantees thereof.
3.12 Tax Matters.
(a) Schedule 3.12 contains a list of the Tax Returns which the Company has
filed for any taxable periods ended on or after December 31, 1997 ("Company's
Tax Returns").
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The Shareholder has provided the Purchaser with true, correct, and complete
copies of all such Tax Returns.
(b) Except as set forth on Schedule 3.12 attached hereto:
(i) The Company (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 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) The Company has properly accrued and reflected in its Financial
Statements, and has thereafter to the date hereof properly accrued, and will
from the date hereof through the Closing Date properly accrue, all liabilities
for Taxes, all such accruals being in the aggregate sufficient for payment of
all such taxes and assessments.
(iii) There are no unassessed Tax deficiencies proposed or threatened
against the Company, 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 the Company or any actions, suits, proceedings,
investigations or claims now pending against the Company with respect to any
Tax, or any matter under discussion with any Governmental Authority relating to
any Taxes.
(iv) The Company is not and has never been a member of an affiliated
group of corporations (within the meaning of Section 1504 of the Code).
(v) The Company is not a party to, is not bound by, and does not have
any obligation under any tax sharing, tax indemnity, or similar agreement.
(vi) The Company has not made and will not make a change in method of
accounting for a taxable year beginning on or before the Closing Date, which
would require it to include any adjustment under Section 481(a) of the Internal
Revenue Code in taxable income for any taxable year beginning on or after the
Closing Date.
(vii) Shareholder is not a foreign person so that Section 897 and
6039C of the Internal Revenue Code are not applicable to the transactions
provided for hereunder.
(viii) The Company, since January 1, 1995, has been a validly electing
"S Corporation" as that term is defined in Sections 1361 and 1362 of the Code,
and has never revoked or terminated such election, nor has it taken any action
which would threaten, jeopardize
-15-
or disqualify the Company from its S Corporation status. In accordance with the
Section 338(h)(10) election, the Company's final "S Corporation" return shall
report any gain or loss from the deemed sale under Section 338.
(ix) The Company has no Subsidiary that is a "qualified subchapter S
subsidiary" within the meaning of Section 1361(b)(3)(B) of the Code.
(x) The Company has not in the past ten (10) years, (A) acquired
assets from another corporation in a transaction in which the Company's Tax
basis for the acquired assets was determined, in whole or in part, by reference
to the Tax basis of the acquired assets (or any other property) in the hands of
the transferor, or (B) acquired the stock of any corporation which is a
"qualified subchapter S subsidiary".
(xi) Schedule 3.12 identifies all audits of the Company's Tax Returns,
if any, including a reasonably detailed description of the nature and outcome of
each audit. The Company has not given or been requested to give waivers or
extensions of any statute of limitations relating to the payment of Taxes.
(xii) The Company has not filed a consent under Section 341(g) of the
Code concerning collapsible corporations. The Company is not a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of (A) any "excess parachute
payment" within the meaning of Section 280G of the Code (or any corresponding
provision of state, local or foreign Tax law) or (B) any amount that will not be
fully deductible as a result of Section 162(m) of the Code 162 (or any
corresponding provision of state, local or foreign Tax law. The Company has not
been a United states real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. The Company has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code.
(xiii) The Company has withheld and paid all taxes required to have
been withheld and paid in connection with any amounts paid or owing to any
employee stockholder, or any other third party for which withholding obligations
are imposed.
3.13 Litigation.
Except as set forth in Schedule 3.13, there are no actions, suits or
proceedings at law or in equity, or arbitration proceedings, or claims, demands
or investigations, pending or threatened (i) against or involving the Company or
any of its officers or directors (in their capacity as such), (ii) which seeks
to enjoin or obtain damages in respect of the transactions contemplated by this
Agreement, or (iii) which would prevent the Shareholder from consummating the
transactions contemplated by this Agreement. Except as set forth in Schedule
3.13, there are no proceedings pending or threatened against or involving the
Company by or before any Governmental Authority (including but not limited to
any Governmental Authority concerned with control of foreign exchange, energy,
environmental protection or pollution control, franchising or other
-16-
distribution arrangements, antitrust or trade regulation, civil rights, labor or
discrimination, wages and hours, safety or health, zoning or land use). The
Company is not in violation of any Injunction of any Governmental Authority.
3.14 Real Property.
(a) Leased Real Property. The Company has the right to use all real
property necessary for the conduct of its business as presently conducted.
Schedule 3.14 identifies all such real property. Except as set forth in Schedule
3.14, the Company is not a party to any leases of real property. The Company is
the lessee under the real estate leases described on Schedule 3.14 hereto. True,
correct and complete copies of said leases and any amendments, extensions and
renewals thereof have heretofore been delivered by the Company to Purchaser. The
Company enjoys quiet and undisturbed possession under each of said leases. The
Company's interest in each of such leases is free and clear of any Encumbrances,
is not subject to any deeds of trust, assignments, subleases or rights of any
third parties created by the Company, other than the lessor thereof. To the best
of the Company's and Shareholder's knowledge, the leased real estate is free and
clear of any zoning or use or building restriction or any pending, proposed or
threatened zoning or use or building restriction which would interfere with the
present or any intended use by the Company of any of such leased real estate.
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) Owned Real Property. The Company does not own any real property.
3.15 Tangible Personal Property.
The Company owns or has the right to use all personal property necessary
for the conduct of its business as presently conducted. Schedule 3.15 sets forth
a list of the tangible personal property of the Company (the "Tangible Personal
Property"). Except as set forth on Schedule 3.15 hereto and except for property
disposed of in the Ordinary Course of Business of the Company, the Company 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 3.15, 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 the Company 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 the Company to Purchaser.
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3.16 Condition of Buildings and Tangible Personal Property.
To the best of the Company's and Shareholder's knowledge, all of the
premises occupied and the items of Tangible Personal Property are in such
operating condition and repair as are necessary for the conduct of the Business,
comply in all respects with Applicable Laws, including but not limited to
zoning, building and fire codes and are suitable and sufficient for the conduct
of the Business. Each item of Tangible Personal Property is adequately covered
by one of the insurance policies described in Section 3.26 hereto.
3.17 Accounts and Notes Receivable.
To the best of Company and Shareholder's knowledge, each of the accounts
receivable of the Company included within the Financial Statements constitutes a
valid claim in the full amount thereof against the debtor charged therewith on
the books of the Company and has been acquired in the Ordinary Course of
Business. Neither the Company nor any Shareholder believes that there is a
justifiable reason that each account receivable is not fully collectible to the
extent of the face value thereof (less the amount of the allowance for the
doubtful accounts reflected on the most recent balance sheet included in the
Financial Statements). There are no accounts receivable which arise pursuant to
an agreement with the United States Government or any agency or instrumentality
thereof.
3.18 Material Contracts.
(a) To the best of Shareholder's knowledge, Schedule 3.18 contains a list
of all of the material contracts of the Company which shall consist of all
agreements, leases, licenses, contracts, obligations, promises, commitments,
arrangements, understandings, or undertakings, (whether oral or written or
express or implied) to which the Company is a party, under which the Company may
become subject to any obligation or liability, or by which the Company 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 the
Company in an amount or for a value in excess of $10,000;
(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 $10,000 and with terms of less than
one year);
-18-
(iv) each licensing agreement or other arrangement, agreement,
contract or understanding with respect to patents, trademarks, copyrights, or
other intellectual property (regardless of whether the Company 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 the Company;
(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 the Company with any other Person;
(vii) each arrangement, agreement, contract or understanding
containing covenants that in any way purport to restrict the business activity
of the Company;
(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 $10,000;
(xi) each written warranty, guaranty, and or other similar undertaking
with respect to contractual performance extended by the Company other than in
the Ordinary Course of Business;
(xii) each confidentiality and non-disclosure agreement (whether the
Company 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
the Company or (B) that will result in the payment by, or the creation of, any
Liability of the Company, the Shareholder, or the Purchaser 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;
-19-
(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 the Company; and
(xiii) 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 3.18 have been made available to Purchaser. To the best of Company and
Shareholder's knowledge, all of the Material Contracts are valid, binding and
enforceable against the respective parties thereto in accordance with their
respective terms. Neither the Company 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 which, with the giving of notice or lapse of time or both,
would constitute a default thereunder. The Company has fulfilled, or taken
action to fulfill when due, all of its material obligations under each of the
Material Contracts. To the best of Company and Shareholder's knowledge neither
the Company nor the Shareholder has 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 the
Company, result in a loss by the Company. To the best of Company and
Shareholder's knowledge, the Company 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 the Company with respect to services rendered or
products sold by the Company.
3.19 Inventories.
All of the Company's inventories are reflected in the Financial Statements
at cost or market, whichever is lower; are good and salable or usable in the
Ordinary Course of Business; are of sufficient quality for the normal operation
of the Company's Business; and do not contain, any obsolete items.
3.20 Relationship With Related Persons.
The Shareholder, directors, officers, and employees of the Company, and
their Related Persons do not have any interest in any of the properties or
assets of or used by the Company 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 the Company, or (ii) has engaged or is engaged in
competition with the Company with respect to any line of products or services of
the Company in any market presently served by the Company (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 3.20, the Shareholder, and no director or officer of the Company and
none of their Related Persons is a party to any contract with, or has any claim
against, the Company. All
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money owed by the Company to its shareholders, directors or officers, or their
Related Persons, (other than for salary) are for bona fide debts and are set
forth in Schedule 3.20.
3.21 Banking Matters.
Schedule 3.21 contains a true, complete and correct list of the names of
all banks and other financial institutions (with account numbers) in which the
Company has an account or safe deposit box, and of all brokerage firms and other
entities and persons holding funds or investments of the Company, and the names
of all persons authorized to draw thereon or have access thereto.
3.22 Labor and Employment Matters.
(a) Schedule 3.22 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 the Company ("Employee Benefit Plans"),
including employee plans subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). The Company 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. The Company 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 Employee Benefit Plan have heretofore been
delivered by the Company to Purchaser.
(b) With respect to each Employee Benefit 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) to the best of Company and Shareholder's knowledge, 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.
(c) All directors, officers, and employees of the Company are set forth on
Schedule 3.22. The current salaries, job descriptions, and locations of such
officers and employees are also set forth in Schedule 3.22.
(d) The Company is not obligated to and does not (directly or indirectly)
provide death benefits or health care coverage to any former employees or
retirees.
(e) To the best of the Company's and Shareholder's knowledge, the Company
has complied with all Applicable Laws respecting employment practices, terms and
conditions of
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employment, wages and hours, equal employment opportunity, and the payment of
social security and similar taxes. To the best of the Company's and
Shareholder's knowledge, the Company is not engaged in any unfair labor
practice. To the best of the Company's and Shareholder's knowledge, the Company
has complied with all applicable provisions of the Immigration Reform and
Control Act of 1986.
(f) The Company 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 the Company to make any payment to any
present or former employee following termination of employment or upon
consummation of the transactions contemplated by this Agreement.
3.23 Intentionally omitted.
3.24 Customers.
Set forth on Schedule 3.24 is a list of the five largest customers of the
Company based on the percentage of revenue represented by those customers for
calendar years 2000 and 2001. No material customer of the Company has since the
date of this Agreement canceled, terminated or threatened to cancel or otherwise
terminate, his, her, or its relationship with the Company, except that the mix
of the Company's customers changes from time to time in the Ordinary Course of
Business.
3.25 Product and Service Warranties.
Except as set forth on Schedule 3.25, there are no liabilities of or claims
against the Company or the Shareholder, and no liabilities or claims are
threatened against the Company or the Shareholder, with respect to any product
liability (or similar claim) or product or service warranty (or similar claim)
claim that relates to any product or service provided by the Company and
involves an amount in excess of $25,000 individually or $100,000 in the
aggregate with all other claims.
3.26 Insurance.
Schedule 3.26 identifies all of the Company's insurance policies. To the
best of Company and Shareholder's knowledge, all of such policies are in full
force and effect and all premiums payable have been paid in full and the Company
is in full compliance with the terms and conditions of such policies. The
Company has not received any notice from any issuer of such policies of its
intention to cancel or refusal to renew any policy issued by it or of its
intention to renew any such policy based on a material increase in premium rates
other than in the Ordinary Course of Business. None of such policies are subject
to cancellation by virtue of the Agreement or the consummation of the other
transactions contemplated herein. There is no claim by the Company pending under
any of such policies as to which coverage has been questioned or denied.
-22-
3.27 Compliance with Laws.
To the best of the Company's and Shareholder's knowledge, the Company has
complied in all material respects with all Applicable Laws applicable to it and
its business, assets, properties and operations. Except as set forth on Schedule
3,27, neither the Company nor the Shareholder has received any notice to the
effect that, or has been otherwise advised that, the Company is not in
compliance with any Applicable Laws. Each of the Company and the Shareholder is
not aware of any existing circumstances which are likely to result in any
material violation of any Applicable Law.
3.28 Licenses and Permits.
To the best of the Company's and Shareholder's knowledge, the Company has
secured all Permits necessary for the conduct of the Business, except for those
Permits, the absence of which, either alone or in the aggregate, would not have
a Material Adverse Effect upon the Business or the Company. With respect to each
Permit, (a) such Permit is in full force and effect, (b) the Company (or other
designated permittee or licensee thereunder) is in compliance with the terms,
provisions and conditions thereof, (c) there are no outstanding violations,
notices of noncompliance therewith, judgments, consent decrees, orders or
judicial or administrative action(s) or proceedings(s) affecting such Permit,
and (d) no condition exists and no event has occurred which (whether with or
without notice, lapse of time or the occurrence of any other event) would permit
the suspension or revocation of such Permit other than by expiration of the term
set forth therein. Consummation of the transactions contemplated by this
Agreement will not affect the validity, enforceability or effectiveness of any
Permit.
3.29 Environmental Matters.
To the best of the Company's and Shareholder's knowledge, except as set
forth on Schedule 3.29 hereto, (i) the Company is currently in compliance 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;
(ii) the Company has not violated any applicable Environmental Law; (iii) there
is no present requirement of any applicable Environmental Law which is due to be
imposed upon the Company which will increase its cost of complying with the
Environmental Laws; (iv) all past on-site generation, treatment, processing,
storage and disposal of Waste and Hazardous Materials by the Company and its
predecessors have been done in compliance with currently applicable
Environmental Laws; (v) all past off-site transportation, treatment, processing,
storage and disposal of Waste and Hazardous Materials generated by the Company
and its predecessors have been done in compliance with currently applicable
Environmental Laws; (vi) the Company and its predecessors have not released,
spilled, leaked or otherwise discharged into the environment any Regulated
Substance except as expressly authorized by Environmental Laws; and (vii) the
Company and its predecessors have not used or otherwise managed any Regulated
Substance except in strict compliance with all Environmental Laws.
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3.30 Intellectual Property Matters.
(a) The corporate name of the Company and the trade names and service marks
listed in Schedule 3.30 are the only names and service marks which are used by
the Company in the operation of the Business (the "Names and Service Marks").
Schedule 3.30 includes an identification of all Intellectual Property used in
the Business of the Company. Except as noted on Schedule 3.30, the Company 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; there
are no outstanding licenses or consents granting third parties the right to use
the Intellectual Property of the Company; the Company has received no notice of
any adversely held patent, invention, trademark, copyright, service ▇▇▇▇ 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 the Company did
not and does not infringe (nor has any claim been made that any such action
infringes) the intellectual property rights of others; and the Company's
ownership or right to use any of the Intellectual Property will not cease by
reason of the execution, delivery, or performance of this Agreement.
3.31 Absence of Certain Business Practices.
Intentionally Omitted.
3.32 Disclosure.
No representation or warranty of the Shareholder or the Company in this
Agreement contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the factual statements contained herein, in
light of the circumstances under which such statements are made, not misleading.
Neither this Agreement nor any other document, certificate, exhibit, statement
or schedule furnished or to be furnished by or on behalf of the Shareholder or
the Company to the Purchaser in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the factual
statements contained therein, in light of the circumstances under which made,
not misleading.
3.33 Brokers or Finders.
Except as set forth on Schedule 3.33, for which Shareholder shall be solely
responsible, neither the Company nor the Shareholder has incurred any obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents
commissions or similar payments in connection with this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to the Shareholder to execute this Agreement and
to consummate the transactions contemplated hereby, Purchaser represents to the
Shareholders that the following representations and warranties are true and
correct.
4.1 Organization and Qualification.
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Purchaser has the corporate
power and authority to carry on its business as presently conducted. Purchaser
is duly qualified or licensed to do business and in good standing as a foreign
corporation 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.
4.2 Corporate Instruments and Records.
The copies of the Purchaser's certificate of incorporation and bylaws, each
certified by the Secretary of the Purchaser and heretofore furnished to the
Shareholders, are true, correct and complete and each include all amendments to
the date hereof. The Purchaser's minute books, as made available to the
Shareholders, contain a true, complete and correct record of all corporate
action taken on or prior to the date hereof at the meetings of its shareholders
and directors and committees thereof.
4.3 Authorization; Valid and Binding Obligation.
Purchaser has full corporate power and authority to execute and deliver
this Agreement and the Ancillary Agreements and to perform its obligations
hereunder and thereunder. This Agreement and the Ancillary Agreements have been
duly executed and delivered by Purchaser and are legal, valid and binding
obligations of Purchaser, enforceable against it 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 Purchaser in connection with the
execution, delivery or performance by the Purchaser of this Agreement or the
Ancillary Agreements.
4.4 Litigation.
There are no actions, suits or proceedings at law or in equity, or
arbitration proceedings, or claims, demands or investigations, pending or
threatened against or involving the Purchaser, or state of facts existing which
could give rise to any such action, suit, proceeding, claim, demand or
investigation. There are no proceedings pending or threatened against or
involving the Purchaser by or before any Governmental Authority, department,
commission, bureau, instrumentality or agency (including but not limited to any
Governmental Authority concerned with control of foreign exchange, energy,
environmental protection or pollution control,
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franchising or other distribution arrangements, antitrust or trade regulation,
civil rights, labor or discrimination, wages and hours, safety or health, zoning
or land use), or state of facts existing which could give rise to any such
proceedings; and the Purchaser is not in violation of any Injunction of any
Governmental Authority.
4.5 No Violations.
The Purchaser is not in default under or in violation of any provision of
(a) its certificate of incorporation or bylaws, or (b) any Instrument to which
it is a party or by which its assets are subject. Neither the execution and
delivery of the Purchaser's Agreements by the Purchaser, nor the consummation of
the transactions contemplated thereby, nor compliance with the terms thereof,
will (i) conflict with or result in a breach of any of the terms, conditions or
provisions of the certificate of incorporation or bylaws of the Purchaser, 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 or in or with
respect to the business or assets of the Purchaser, nor (iv) result in the
creation of any Encumbrance on the assets, capital stock or properties of the
Purchaser, nor (v) conflict with, violate or result in a breach of or constitute
a default under any Applicable Law to which the Purchaser or any of its assets
or properties is subject, nor (vi) require the Purchaser 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 other Person.
4.6 Investment Intent.
Purchaser acknowledges that the Shares it is acquiring are not registered
under the Securities Act or under any State Securities law, and Purchaser is
acquiring the Shares for its own account and not with a view to the distribution
thereof within the meaning of Section 2(11) of the Securities Act.
4.7 Disclosure.
No representation or warranty of Purchaser in this Agreement contains any
untrue statement of a material fact, or omits to state a material fact necessary
to make the factual statements contained herein, in light of the circumstances
under which such statements are made, not misleading. Neither this Agreement nor
any other document, certificate, exhibit, statement or schedule furnished or to
be furnished by or on behalf of the Purchaser to the Shareholders in connection
with the transactions contemplated hereby contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the factual statements contained therein, in light of the
circumstances under which made, not misleading.
-26-
4.8 Brokers or Finders.
Purchaser and its officers and agents have incurred no obligations or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payments in connection with this Agreement.
ARTICLE V
COVENANTS OF THE PARTIES PENDING CLOSING
The parties to this Agreement covenant and agree that from the date of this
Agreement and until the earlier of the Closing Date or the termination of this
Agreement in accordance with Article VIII hereof:
5.1 Access to Information.
At all times prior to the Closing or earlier termination of this Agreement
in accordance with the provisions of Article VIII, and in each case subject to
Section 5.2 below, each of the Parties hereto shall provide to the other Parties
(and the other parties' authorized representatives) full access during normal
business hours and upon reasonable prior notice to the premises, properties,
books, records, assets, liabilities, operations, contracts, personnel, financial
information, customer information and other data and information of or relating
to such Party (including without limitation all written proprietary and trade
secret information and documents, and other written information and documents
relating to intellectual property rights and matters), and will cooperate with
the other party in conducting its due diligence investigation of such Party.
Each of the Parties shall also have the authority to interview, as reasonably
necessary and without undue disruption to each other's business, all employees,
customers, vendors, suppliers and other parties having relationships with either
of the Parties, and each such Party shall make such introductions as may be
requested; provided, however, that access to customers shall be done in a
commercially reasonably manner.
5.2 Interim Operations.
(a) The Company and the Shareholder agree (except as expressly
contemplated by this Agreement, including any Exhibits and Schedules hereto, or
to the extent that Purchaser shall otherwise consent in writing) that as to the
Company:
(1) The Company shall carry on the Business in the Ordinary
Course of Business and use all commercially reasonable efforts to preserve
intact its present business organization, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it;
(2) The Company shall not and shall not propose to: (a) declare,
set aside or pay any dividend, on, or make other distributions in respect of,
any of its capital stock, except for those S corporation distributions necessary
to cover applicable pass-through taxes on the Company's net income in 2002 prior
to the Closing, or purchase or redeem any shares of its
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capital stock; (b) split, combine or reclassify any of its capital stock or
issue, authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock; (c) redeem,
repurchase or otherwise acquire any shares of its capital stock; or (d)
otherwise change its capitalization;
(3) Except as contemplated by this Agreement, the Company shall
not sell, issue, pledge, authorize or propose the sale or issuance of, pledge or
purchase or propose the purchase of, any shares of its capital stock of any
class or securities convertible into, or rights, warrants or options to acquire,
any such shares or other convertible securities;
(4) The Company shall not amend its certificate of incorporation
or its bylaws;
(5) The Company shall not sell, lease, pledge, encumber or
otherwise dispose of or agree to sell, lease, pledge, encumber or otherwise
dispose of, any of its assets that are material or any other assets except in
the Ordinary Course of Business and in no event amounting in the aggregate to
more than $25,000;
(6) The Company shall not incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities of
the Company or guarantee any debt securities of others other than in the
ordinary course of business consistent with prior practice and in no event
amounting in the aggregate to more than $25,000;
(7) The Company shall not make any capital expenditures in excess
of $25,000 individually or $100,000 in the aggregate without the Purchaser's
prior written consent;
(8) The Company shall maintain the levels of inventory, materials
and supplies used in the business of the Company consistent with past practice;
(9) The Company shall not accelerate the collection of its
accounts receivable or delay the payment of its accounts payable or other
liabilities, in each case arising out of the operation of the business of the
Company in a manner which would be inconsistent with past practice;
(10) The Company shall not adopt or amend in any material respect
any collective bargaining agreement or Employee Benefit Plan;
(11) The Company shall not grant to any employees any increase in
compensation or in severance or termination pay, or enter into any employment
agreement with any employee;
(12) The Company shall not acquire (by merger, consolidation or
acquisition of stock or assets or otherwise) any corporation, partnership or
other business organization or subdivision thereof, or make any investment by
either purchase of stock or
-28-
securities, contributions to capital, property transfer or, except in the
Ordinary Course of Business, purchase of any property or assets, of any other
individual or entity;
(13) The Company shall not make any material Tax election or
settle or compromise any material Tax liability;
(14) The Company shall not waive, release, grant or transfer any
rights of material value or modify or change in any material respect any
Material Contract other than in the Ordinary Course of Business;
(15) The Company shall not take any action, or fail to take any
action, that is not in the Ordinary Course of Business or that is reasonably
likely to result in any of the representations and warranties of the Company and
the Shareholders set forth in this Agreement becoming untrue in any material
respect;
(16) The Company shall maintain in full force and effect all
insurance coverages for its properties and assets substantially comparable to
coverages existing on the date hereof;
(17) Within (i) forty five (45) days of the close of each month
after the execution of this Agreement, the Company shall make available to the
Purchaser a preliminary balance sheet and income statement for the Company
disclosing the financial position and results of operations of the Company for
the preceding month and year-to-date; and
(18) The Company shall not enter into, or modify, any contract
with a Related Party.
5.3 Documents at Closing.
Each party to this Agreement agrees to execute and deliver at the Closing
the documents identified in Section 2.2.
5.4 Audited Financial Statements.
The Company and the Shareholder shall cooperate with Stonepath and the
Purchaser for the purpose of allowing a nationally recognized firm of
independent certified public accountants to audit the books and records of the
Company for the calendar year ended December 31, 2001 (the "Audited Financial
Statements"). The Company and the Shareholder shall assist in the audit and to
facilitate the production of the Audited Financial Statements, including
providing access to the books and records of the Company in accordance with
Section 5.1 of this Agreement. In furtherance of the foregoing, the Company
shall execute and deliver such documents and instruments as may be reasonably
requested by such accountants to facilitate their completion of the Audited
Financial Statements. The Purchaser shall pay all fees, costs and expenses
arising from, incident to or in connection with the audit of the books and
records of the Company and the preparation of the Audited Financial Statements,
including the fees, costs and expenses of the
-29-
Company's independent accountants in rendering services in connection with such
audit and preparation and review of the Audited Financial Statements.
5.5 Employment Agreements.
At and upon the Closing, Purchaser shall enter into employment agreements
with certain members of management and key personnel of the Companies as set
forth in Schedule 5.5. The Shareholder shall be employed under an employment
agreement substantially in the form of Exhibit B.
5.6 Notification of Certain Matters.
The Shareholder shall give prompt notice to Purchaser, and Purchaser shall
give prompt notice to Shareholder, 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
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.
5.7 Filings.
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 ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ 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 Purchaser and the
Shareholder shall each bear one half of the filing fees paid by each party to
make such filing. Purchaser and the Shareholder shall also, as promptly as
practicable, make any required filing, and any other required submissions, under
any Applicable Law with respect to the Agreement and the related transactions
and shall cooperate with each other with respect to the foregoing.
5.8 Satisfaction of Conditions; Cooperation; Further Assurances.
The Shareholder and the Company shall use all commercially reasonable
efforts to cause the conditions set forth in Article VI to be satisfied. The
Purchaser shall use all commercially reasonable efforts to cause the conditions
set forth in Article VII to be satisfied. Each party to this Agreement agrees to
cooperate fully with the other parties hereto and their counsel and accountants
and other representatives 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. Each party shall, upon request of any
of the other parties hereto, at any time and from time to time execute,
acknowledge, deliver and perform all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and
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instruments of further assurances as may be necessary or appropriate to carry
out the provisions and intent of this Agreement, including using all
commercially reasonable efforts to obtain or cause to be obtained all consents
and approvals necessary to consummate the transactions contemplated hereby.
5.9 Further Mutual Covenants.
Purchaser and the Shareholder shall refrain from taking any action which
would render any representations or warranties contained in Articles III or IV
of this Agreement inaccurate as of the Closing Date and shall promptly notify
the other party upon the happening of any event or taking of any action which
renders any such representation or warranty inaccurate. Each party shall
promptly notify the other of any action, suit or proceeding that shall be
instituted or threatened against such party to restrain, prohibit, or otherwise
challenge the legality of any transaction contemplated by this Agreement.
5.10 Satisfaction of Guarantees.
Schedule 3.11 sets forth a list of guarantees made by the Shareholder to
third parties on behalf of and with respect to the Business of the Company (the
"Shareholder Guarantees"). The Purchaser shall use all commercially reasonable
efforts prior to the Closing to cause the Shareholder to be released from the
Shareholder Guarantees. In the event that the releases of the Shareholder
Guarantees have not been obtained at the Closing, the Purchaser shall make
continuous reasonable commercial efforts to have terminated, extinguished or
otherwise released any remaining Shareholder Guarantee(s) (and provide all
documents and instruments to evidence such termination, extinguishment or
release) and shall defend, indemnify and hold the Shareholder harmless from any
Shareholder Guarantees.
5.11 Employee Benefits.
Purchaser and Stonepath agree that all employees of the Company who
continue employment with Company, Purchaser or Stonepath after the Closing Date
(the "Continuing Employees") shall be eligible to continue to participate in the
Company's retirement (specifically, its 401(k) plan), health, vacation and other
non-equity based Employee Benefit Plans, as such plans are described in (a) the
Company's employee policy manual delivered to the Purchaser prior to the date of
this Agreement or (b) the policies listed under Section 3.22 of the
Shareholders' Schedules ("Employee Benefits"). Purchaser and Stonepath further
agree that they will not terminate any Employee Benefit after Closing, unless
the Continuing Employees are provided a replacement benefit to substantially the
same extent as the terminated benefit; The provisions of this Section shall
terminate at the end of the Earn-Out Period.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
The obligations of Purchaser to close the transactions in this Agreement
shall be subject to the following conditions, which shall be satisfied and/or
may be waived in writing by Purchaser on or before the Closing Date:
6.1 Accuracy of Representations and Warranties; Company and Shareholder
Performance.
Each of the representations and warranties of the Company and the
Shareholder in this Agreement shall be true and correct in all respects as of
the date of this Agreement and on and as of the Closing Date with the same
effect as though made on and as of such date and the Company and the Shareholder
shall have performed and complied in all respects with each of the agreements,
covenants, stipulations, terms and conditions contained herein and required to
be performed or complied with by them on or prior to the Closing Date.
6.2 No Adverse Change.
Since December 31, 2001, there shall have been no Material Adverse Change
with respect to the Company or the Business.
6.3 No Injunction; Consents.
No action, proceeding or investigation shall have been instituted or
threatened to set aside the transactions provided for herein or to enjoin or
prevent the consummation of the transactions contemplated hereby and all
required consents and approvals for the consummation of the transactions
contemplated hereby shall have been secured.
6.4 Deliveries by the Shareholder.
The Shareholder shall have executed and delivered to Purchaser at Closing
the documents identified in Section 2.2(a) hereof.
6.5 Uniform Commercial Code Searches.
Uniform Commercial Code searches (which searches shall be made or caused to
be made by and at the expense of Purchaser) of filings made pursuant to Article
9 thereof in all jurisdictions where any assets of the Company are located, in
form, scope and substance reasonably satisfactory to Purchaser and its counsel,
shall not disclose any Encumbrances against any of such assets disclosed thereby
except Encumbrances that are disclosed in Financial Statements, this Agreement,
or are otherwise released or terminated by the Company prior to or at the time
of Closing.
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6.6 Completion of Audited Financial Statements.
The Audited Financial Statements of the Company shall have been completed
and delivered to the Purchaser 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 be in form and substance sufficient to: (i) satisfy the
Purchaser's obligations under Form 8-K following the Closing; and (ii) comply
with Regulation S-X promulgated under the Securities Exchange Act of 1934. The
Audited Financial Statements shall conform in all material respects to the
Financial Statements (unaudited) for the year ended December 31, 2001 provided
to Purchaser under Section 3.8 of this Agreement, except to the extent any such
non-conformity does not represent a Material Adverse Effect.
6.7 Non-foreign Person Affidavit.
The Shareholder shall have furnished to the Purchaser on or before the
Closing Date a non-foreign person affidavit as required by Section 1445 of the
Code.
6.8 Due Diligence Review.
For a period of two (2) weeks following the date of this Agreement,
Purchaser shall have the opportunity to perform a due diligence review of the
Company and if the results of such review are unsatisfactory, in its sole
discretion, it may within such two (2) week period terminate this Agreement for
this reason.
6.9 Bank Indebtedness.
The Shareholders shall have either (i) furnished evidence satisfactory to
the Purchaser that all outstanding Bank Indebtedness of the Company has been
repaid in full or (ii) requested Purchaser apply that portion of the purchase
price to be paid at the Closing to the repayment in full of all outstanding Bank
Indebtedness.
6.10 Cash Balance.
The Company shall have a positive Working Capital and a cash balance of no
less than $50,000 immediately prior to the Closing.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDER
The obligations of the Shareholder to close the transactions in this
Agreement shall be subject to the following conditions, which shall be satisfied
and/or may be waived in writing by the Shareholder on or before the Closing
Date:
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7.1 Accuracy of Representations and Warranties; Purchaser Performance.
Each of the representations and warranties of Purchaser in this Agreement
shall be true and correct in all respects as of the date of this Agreement and
on and as of the Closing Date with the same effect as though made on and as of
such date and Purchaser shall have in all respects performed and complied with
each of the agreements, covenants, stipulations, terms and conditions contained
herein and required to be performed or complied with by Purchaser on or prior to
the Closing Date.
7.2 No Injunction; Consents.
No action, proceeding or investigation shall have been instituted or
threatened to set aside the transactions provided for herein or to enjoin or
prevent the consummation of the transactions contemplated hereby and all
required consents and approvals for the consummation of the transactions shall
have been secured.
7.3 Deliveries by Purchaser.
Purchaser shall have executed and delivered to the Shareholder the
documents and paid to the Shareholder the amount identified in Section 2.2(b)
hereof.
7.4 Consents and Proceedings.
The Purchaser shall have obtained all of the consents, authorizations,
orders or approvals required in order to execute and deliver this Agreement and
to perform its obligations hereunder and thereunder and all actions,
proceedings, instruments and documents deemed necessary or appropriate by
Shareholder and its counsel to effectuate this Agreement and the consummation of
the transactions contemplated hereby, or incidental thereto, shall have been
obtained and all other related legal matters shall have been approved by such
counsel.
7.5 Due Diligence Review.
For a period of two (2) weeks following the date of this Agreement, the
Company and Shareholder shall have the opportunity to perform a due diligence
review of the Purchaser and Stonepath and if the results of such review are
unsatisfactory, in their sole discretion, they may within such two (2) week
period terminate this Agreement for this reason.
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ARTICLE VIII
TERMINATION
8.1 Termination Events.
This Agreement may, by written notice given prior to or at the Closing, be
terminated:
(a) by either the Purchaser or the Shareholder if a material breach of
any provision of this Agreement has been committed by the other party and such
breach has not been waived;
(b) by the Purchaser if any of the conditions in Article VI have not
been satisfied as of the Closing Date or if satisfaction of such condition is or
becomes impossible (other than through the failure of Purchaser to comply with
its obligations under this Agreement), and the Purchaser has not waived such
condition on or before the Closing Date;
(c) by the Shareholder if any of the conditions in Article VII have
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of the Shareholders to
comply with their obligations under this Agreement), and the Shareholder not
waived such condition on or before the Closing Date;
(d) by mutual consent of the Purchaser and the Shareholder; or
(e) by either the Purchaser or the Shareholder if the Closing has not
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before the Termination Date, or such later date as the parties may agree upon.
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8.2 Effect of Termination
Each party's right of termination under Section 8.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 8.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 10.5
(Confidentiality), 10.10 (Public Announcements), and 11.11 (Expenses), will
survive; provided, however, that if this Agreement is terminated by a party
because of a material breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired. Without
limiting the general nature of the foregoing provisions of this Section 8.2, in
the event that Purchaser terminates this Agreement because a condition precedent
set forth at Sections 6.6, 6.8, 6.9 or 6.10 not been satisfied, the Shareholder
and Company shall have no further obligation to Purchaser resulting from the
failure of such condition precedent to be satisfied.
8.3 Extension; Waiver.
Any time prior to the Closing, the parties may (a) extend the time for the
performance of any of the obligations or other acts of any other party under or
relating to this Agreement; (b) waive any inaccuracies in the representations or
warranties by any other party or (c) waive compliance with any of the agreements
of any other party or with any conditions to its own obligations. Any agreement
on the part of any other party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE IX
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
9.1 Indemnification.
(a) The Shareholder shall defend and hold harmless Purchaser from and
against any and all demands, claims, actions or causes of action, judgments,
assessments, losses, liabilities, damages or penalties and reasonable attorneys'
fees and related disbursements (collectively, "Claims") incurred by Purchaser
which arise out of or result from a misrepresentation, breach of warranty, or
breach of any covenant or agreement of the Shareholder contained herein or in
the Schedules annexed hereto or in any deed, exhibit, closing certificate,
schedule or any ancillary certificates or other documents or instruments
furnished by the Shareholder pursuant hereto or in connection with the
transactions contemplated hereby or thereby.
(b) Purchaser shall indemnify, defend and hold harmless the
Shareholder from and against any and all Claims incurred by the Shareholder
which arise out of or result from a misrepresentation, breach of warranty or
breach of any covenant of Purchaser contained herein or in the Schedules annexed
hereto or in any deed, exhibit, closing certificate, schedule or any
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ancillary certificates or other documents or instruments furnished by Purchaser
pursuant hereto or in connection with the transactions contemplated hereby or
thereby.
(c) The right to indemnification, payment of damages or other remedy
based on any representations, warranties, covenants and obligations contained in
this Agreement will not be affected by any investigation conducted with respect
to, or any knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of damages, or other remedy based on such
representation, warranty, covenant or obligation.
9.2 Survival.
(a) All representations and warranties contained in or made pursuant
to this Agreement or in any agreement, certificate, document or statement
delivered pursuant hereto shall survive the Closing for a period of two (2)
years, unless otherwise specified in such agreement, certificate or document;
provided, that notwithstanding the foregoing, (i) the representations and
warranties set forth in Section 3.4 (Ownership of Shares), 3.12 (Tax Matters),
Section 3.32 (Environmental Matters), and Section 3.37 (Brokers or Finders)
shall survive the Closing for the period equal to the statute of limitations
applicable to Claims arising under such subject matters.
(b) On the Closing Date, all representations, warranties, and
covenants of the Company and the Shareholder shall expire as to the Company and
shall thereafter be deemed to have been made exclusively by the Shareholder.
(c) The termination of the representations and warranties provided
herein shall not affect the rights of a party with respect to any claim made by
such party in a writing received by the other party prior to the expiration of
the applicable survival period provided herein.
9.3 Methods of Asserting Claims for Indemnification.
All claims for indemnification under this Agreement shall be asserted as
follows:
(a) Third Party Claims. In the event that any Claim for which a party
(the "Indemnitee") would be entitled to indemnification under this Agreement is
asserted against or sought to be collected from the Indemnitee by a third party,
the Indemnitee shall promptly notify the other party (the "Indemnitor") of such
Claim, specifying the nature thereof, the applicable provision in this Agreement
or other instrument under which the Claim arises, and the amount or the
estimated amount thereof (the "Claim Notice"). The Indemnitor shall have thirty
(30) days (or, if shorter, a period to a date not less than ten (10) days prior
to when a responsive pleading or other document is required to be filed but in
no event less than ten (10) days from delivery or
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mailing of the Claim Notice) (the "Notice Period") to notify the Indemnitee (a)
whether or not it disputes the Claim and (b) if liability hereunder is not
disputed, whether or not it desires to defend the Indemnitee. If the Indemnitor
elects to defend by appropriate proceedings, such proceedings shall be promptly
settled or prosecuted to a final conclusion in such a manner as to avoid any
risk of damage to the Indemnitee; and all costs and expenses of such proceedings
and the amount of any judgment shall be paid by the Indemnitor.
The Indemnitee shall have the right to participate in, but not control,
any such defense or settlement, at its sole cost and expense. If the Indemnitor
has disputed the Claim, as provided above, and has not provided the Indemnitee
with timely notice of its election to defend the Indemnitee pursuant to this
Section 9.3(a), the Indemnitee shall have the right to control the defense or
settlement of such Claim, in its sole discretion, and shall be reimbursed by the
Indemnitor for its reasonable costs and expenses of such defense. Neither
Indemnitee nor Indemnitor shall be otherwise liable for any settlement of any
Claim without the prior written consent of the other party.
(b) Non-Third Party Claims. In the event that the Indemnitee has a
Claim for indemnification hereunder which does not involve a Claim being
asserted against it or sought to be collected by a third party, the Indemnitee
shall promptly send a Claim Notice with respect to such Claim to the Indemnitor.
If the Indemnitor does not satisfy the Claim within thirty (30) days of the date
of the Claim Notice, then such Claim shall be submitted to arbitration pursuant
to Section 11.9 hereof.
(c) Right of Set-Off. In the event a Claim arises pursuant to Section
9.1(a) and is either undisputed by the Shareholder or otherwise resolved
pursuant to relevant dispute resolution provisions in this Agreement, in
addition to any other rights Purchaser may have with respect to such Claim,
Purchaser shall have the right to apply the amount of the Claim against the
Earn-Out Payments required by Section 1.2(b).
9.4 Limitations on Amount.
(a) Notwithstanding the provisions of this Article IX, an Indemnitor
shall not be required to indemnify the Indemnitee with respect to Claims arising
from a misrepresentation or breach of warranty (other than any Claim relating to
a breach of the representations and warranties in Section 3.4 (Ownership of
Shares), 3.12 (Tax Matters), Section 3.32 (Environmental Matters), or Section
3.37 (Brokers or Finders) and all costs of defense for any such Claim), until
the aggregate amount of such Claims shall exceed $50,000 (the "Indemnitor's
Floor"); provided, however, if such Claims in the aggregate exceed the amount of
the Indemnitor's Floor, all Claims irrespective of the Indemnitor's Floor, are
subject to indemnification.
(b) Notwithstanding the provisions of this Article IX, the
Shareholder's liability with respect to Claims set forth in Section 9.1(a) shall
be limited to $5,000,000, except for Claims arising out of a breach of the
representations and warranties contained in Sections 3.1 to 3.6 inclusive, and
any and all fraudulent actions and statements or intentional
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misrepresentations, in which case the maximum liability of the Shareholder shall
be limited to the full amount of the Purchase Price paid or payable to
Shareholder. Notwithstanding the provisions of this Article IX, the Purchaser's
liability with respect to Claims set forth in Section 9.1(b) shall be limited to
$5,000,000, except for damages arising from any and all fraudulent actions and
statements or intentional misrepresentations, in which case the maximum
liability of the Purchaser shall not be limited.
ARTICLE X
ADDITIONAL AGREEMENTS OF THE PARTIES
10.1 Prohibition on Trading in Stonepath Stock.
The Shareholder acknowledges 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, 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. Accordingly, the
Shareholder agrees that he will not purchase or sell any securities of
Stonepath, 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, 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; provided
that the Form 8-K is required and timely filed.
10.2 Non Solicitation of Other Offers.
During the term of this Agreement, and for a period of ninety (90) days
following the date of this Agreement, the Shareholder and the Company will not,
and will not permit their respective representatives, investment bankers, agents
and affiliates to, directly or indirectly, (i) solicit or encourage submission
of or any inquiries, proposals or offers by, (ii) participate in any
negotiations with, (iii) afford any access to the properties, books or records
of the Company to, (iv) accept or approve, or (v) otherwise assist, facilitate
or encourage, or enter into any contracts, agreements, arrangements or
understandings with, any person or group (other than the Purchaser and its
affiliates, agents and representatives), in connection with any "Acquisition
Proposal" (as hereafter defined). In addition, the Shareholder and the Company
will not, and will not permit their respective representatives, investment
bankers, agents and affiliates to, directly or indirectly, make or authorize any
statement, recommendation or solicitation in support of any Acquisition Proposal
made by any Person or group (other than the Purchaser). In addition, the
Shareholder and the Company will immediately cease any and all existing
activities, discussions or negotiations with any parties with respect to any of
the foregoing. The Shareholder will promptly notify the Purchaser if any offer
is made, any discussions or negotiations are sought to be initiated, any
inquiry, proposal or contact is made or any information is requested with
respect to any Acquisition Proposal. For the purposes hereof, the term
"Acquisition Proposal" shall mean any proposal relating to the possible
acquisition of the Company, whether by way of merger, purchase of capital stock
of the Company representing fifty percent (50%) or more of the
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voting power or equity of the Company, or the purchase of all or substantially
all of the assets of the Company.
10.3 Non-Competition Agreement.
In consideration for the Purchase Price received and to be received under
this Agreement, as well as in conjunction with the services to be rendered by
Shareholder to the Company after the Closing, the Company and the Shareholder
shall enter into an Employment Agreement that contains certain covenants by the
Shareholder prohibiting competition with the Company at certain times during the
Earn-Out Period.
10.4 Non-Solicitation Agreement.
In consideration for the Purchase Price received and to be received under
this Agreement, as well as in conjunction with the services to be rendered by
Shareholder to the Company after the Closing, the Company and the Shareholder
shall enter into an Employment Agreement that contains certain covenants by the
Shareholder prohibiting solicitation of Company employees or customers at
certain times during the Earn-Out Period.
10.5 Confidentiality.
(a) With respect to Confidential Information concerning the Company
that is made available to Purchaser pursuant to the terms of this Agreement,
Purchaser agrees that it shall hold such information in strict confidence, shall
not use such information except for the sole purpose of evaluating, and
performing the Purchaser's obligations and exercising the Purchaser's rights
under, this Agreement and shall not disseminate or disclose any of such
information other than to Stonepath and to the directors, officers, employees,
shareholders, affiliates, agents and representatives of the Purchaser and
Stonepath who need to know such information for the sole purpose of evaluating,
and performing the Purchaser's obligations and exercising the Purchaser's rights
under, this Agreement (each of whom shall be informed by Purchaser of the
confidential nature of the Confidential Information and directed by Purchaser to
treat such information confidentially). If this Agreement is terminated pursuant
to the provisions of Article VIII, Purchaser shall immediately return all such
Confidential Information, all copies thereof and all information prepared by
Purchaser based upon the same; provided, however, that one copy of all such
material may be retained by Purchaser's outside legal counsel for purposes only
of resolving any disputes under this Agreement. The above limitations on use,
dissemination and disclosure shall not apply to Confidential Information that
(i) is learned by Purchaser from a third party under no obligation of
confidentiality; (ii) becomes known publicly other than through Purchaser or any
party who received the same through Purchaser, provided that Purchaser has no
knowledge that the disclosing party was subject to an obligation of
confidentiality; (iii) is required by law or court order to be disclosed by
Purchaser; (iv) is independently developed by Stonepath or any of its Affiliates
without the use of any Confidential Information received from the Company or the
Shareholder or (v) is disclosed with the express prior written consent thereto
of the Company or the Shareholder. Purchaser shall undertake all necessary steps
to ensure that the secrecy and confidentiality of such Confidential Information
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will be maintained in accordance with the provisions of this subsection (a).
Notwithstanding anything contained herein to the contrary, in the event a party
is required by court order or subpoena to disclose Confidential Information
which subject to the confidentiality obligations hereunder, 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.
(b) With respect to Confidential Information concerning Purchaser and
its Affiliates that is made available to the Shareholder pursuant to the
provisions of this Agreement, the Shareholder and the Company agree that they
shall hold such Confidential Information in strict confidence, shall not use
such Confidential Information except for the sole purpose of evaluating, and
performing the Shareholder's or the Company's obligations and exercising the
Shareholder's and the Company's rights under, this Agreement, and shall not
disseminate or disclose any of such Confidential Information other than to the
Company's directors, officers, employees, affiliates, agents and representatives
who need to know such information for the sole purpose of evaluating, or
performing the Company's obligations or exercising the Company's rights under,
this Agreement and the related transactions (each of whom shall be informed by
the Shareholder or the Company of the confidential nature of the Confidential
Information and directed by such party to treat the Confidential Information
confidentially). If this Agreement is terminated pursuant to the provisions of
Article VIII, the Shareholder agrees to return immediately all Confidential
Information, all copies thereof and all information prepared by either of the
Shareholder or the Company based upon the same; provided, however, that one copy
of all such material may be retained by the Shareholder's legal counsel for
purposes only of resolving any disputes under this Agreement. The above
limitations on use, dissemination and disclosure shall not apply to Confidential
Information that (i) is learned by the Shareholder or the Company from a third
party under no obligation of confidentiality; (ii) becomes known publicly other
than through the Shareholder or the Company or any party who received the same
through the Shareholder or the Company, provided that the Shareholder and the
Company have no knowledge that the disclosing party was subject to an obligation
of confidentiality; (iii) is required by law or court order to be disclosed by
the Shareholder or the Company; (iv) is independently developed by the Company
or the Shareholder without the use of any Confidential Information received from
the Purchaser or its Affiliates or (v) is disclosed with the express prior
written consent thereto of Purchaser. The Shareholder and the Company agree to
undertake all necessary steps to ensure that the secrecy and confidentiality of
the Confidential Information will be maintained in accordance with the
provisions of this subsection (b). Notwithstanding anything contained herein to
the contrary, in the event a party is required by court order or subpoena to
disclose Confidential Information which is subject to the confidentiality
obligations hereunder, 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-
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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) On and after the Closing, the Shareholder shall hold in strict
confidence all Confidential Information of the Company and the Business, shall
not disclose, publish or make use of such knowledge or information without the
consent of the Purchaser.
(d) Without limiting the general nature of Section 11.4, this Section
10.5 shall supercede the terms of a Non-Disclosure Agreement entered into prior
to the date hereof, by the Company and Stonepath.
10.6 Reasonableness of Covenants.
The Company and the Shareholder acknowledge and agree that the geographic
scope and period of duration of the restrictive covenants contained in Sections
10.3, 10.4, and 10.5 of this Agreement (and similar provisions in the Employment
Agreement) are both fair and reasonable and that the interests sought to be
protected by the Purchaser and the Shareholder are legitimate business interests
entitled to be protected. The Shareholder further acknowledges and agrees that
the Purchaser would not have purchased the Shareholder's Shares in the Company
pursuant to this Agreement unless the Shareholder agreed to the covenants
contained in such Sections.
10.7 Injunctive Relief.
The Shareholder and the Company agree that the remedy of damages at law for
the breach by any of them of any of the covenants contained in this Agreement,
including those in Sections 10.1, 10.2, 10.3, 10.4, or 10.5 (and similar
provisions, if applicable, in the Employment Agreement), is an inadequate
remedy. In recognition of the irreparable harm that a violation by the
Shareholder or the Company of such covenants would cause the Purchaser, the
Company and the Shareholder agree that in addition to any other remedies or
relief afforded by law, an injunction against an actual or threatened violation
or violations may be issued against it and/or them and every other Person
concerned thereby, it being the understanding of the parties that both damages
and injunction shall be proper modes of relief and are not to be considered
alternative remedies.
10.8 Blue Pencil Doctrine.
In the event that any restrictive covenant contained in this Article (or
similar provisions in the Employment Agreement) shall be found by a court of
competent jurisdiction to be unreasonable by reason of its extending for too
great a period of time or over too great a geographic area or by reason of its
being too extensive in any other respect, then such restrictive covenant shall
be deemed modified to the minimum extent necessary to make it reasonable and
enforceable under the circumstances.
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10.9 Further Acts and Assurances.
The parties agree that, at any time and from time to time, on and after the
Closing Date, upon the reasonable request of the other party, they will do or
cause to be done all such further acts and things and execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered any and all papers,
documents, instruments, agreements, assignments, transfers, assurances and
conveyances as may be necessary or desirable to carry out and give effect to the
provisions and intent of this Agreement. In addition, from and after the Closing
Date, the Purchaser will afford to the Shareholder and his attorneys,
accountants and other representatives access, during normal business hours, to
such personnel, books and records relating to the Companies as may reasonably be
required in connection with the preparation of financial information or the
filing of Tax Returns and will cooperate in all reasonable respects in
connection with claims and proceedings asserted by or against third parties,
relating to or arising from the transactions contemplated hereby.
10.10 Public Announcements.
Neither the Shareholder nor the Purchaser shall disclose to the public or
to any third party the existence of this Agreement or the transactions
contemplated hereby or any other material non-public information concerning or
relating to the other party hereto, other than with the express prior written
consent of the other party hereto, except as may be required by law or court
order, except to enforce the rights of such disclosing party under this
Agreement; and except that Stonepath shall have the right to make such public
disclosures of this Agreement and the transactions contemplated hereby as it
determines are appropriate under federal securities laws; in which event the
contents of any proposed disclosure shall be discussed with the other party
before release; provided, 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, shareholders, 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, and to any party whose consent is required in connection with this
Agreement. The parties anticipate issuing a mutually acceptable joint press
release announcing the execution of this Agreement and subsequently for the
consummation of the transactions provided for herein.
10.11 Tax Matters.
(a) The Shareholder will timely and properly file or cause to be filed
all tax returns of the Company which are due or which will become due for
periods ending through the Closing Date, all such tax returns to be true and
correct and complete in all material respects, and the Shareholder will pay or
cause to be paid in full when due all taxes, if any, which become due and
payable pursuant to such returns, or assessments received by the Shareholder or
the Company on or before the Closing Date; in that regard, the Company shall
provide Shareholder with such reasonable access to the books and records of the
Company as is necessary to complete and file such tax returns. Shareholder shall
present for Purchaser's review and Purchaser shall be
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entitled to review all final federal and state S-corporation returns which shall
include gains, if any, resulting from the Section 338(h)(10) election to be
filed by the parties hereto, thirty (30) days prior to the filing of any such
return. In addition, the Shareholder agrees that any and all costs of preparing
such return shall be borne exclusively by the Shareholder.
(b) The Shareholder and Purchaser shall jointly make an election on a
timely basis with respect to the Company under Section 338(h)(10) of the
Internal Revenue Code (the "Code") on Form 8023 or in such other manner as may
be required by rule or regulation of the Internal Revenue Service, and shall
jointly make an election in the manner required under any analogous provision of
state or local law as the Purchaser shall designate or as shall be required,
concerning the transactions contemplated by this Agreement. The Purchaser shall,
with the assistance and cooperation of the Shareholder, prepare all such Section
338(h)(10) forms required as attachments to Form 8023 (and all forms under
analogous provisions of state or local law) in accordance with applicable tax
laws and shall on such Form 8023 allocate the Purchase Price in a manner
consistent with Section 338 of the Code, and the Purchaser shall deliver such
forms and related documents to the Shareholder at least 60 days prior to the due
date of filing. The Shareholder shall deliver to the Purchaser at least 30 days
prior to the due date of filing such completed forms as are required to be filed
under Section 338(h)(10) of the Code (and analogous provisions of state or local
law). The Shareholder and Purchaser shall jointly execute any amended Form
8023's (and all forms under analogous provisions of state or local law) as may
become necessary after the initial filing to the extent post-closing adjustments
to Purchase Price arise under the provisions of this Agreement.
(c) The Company shall not be liable for any Tax under Section 1374 of
the Code in connection with the deemed sale of Company's assets (including the
assets of any qualified subchapter S subsidiary) caused by the Section
338(h)(10) Election, such liability to specifically be assumed by the
Shareholder.
(d) The Shareholder and the Purchaser agree that the Purchaser shall
perform or cause to be performed an initial valuation of assets and allocation
of purchase price of the Company, for purposes of Section 338 of the Code. The
Purchaser shall provide the Shareholder with drafts of such valuation of assets
and allocation of the "modified aggregate deemed sale price" (as that term is
defined in the applicable Treasury Regulations) within one hundred twenty (120)
days after the Closing Date. The Shareholder shall have forty-five (45) days to
provide the Purchaser with any objections to such drafts. If the Shareholder
shall object to the computation or allocation by the Purchaser of such amounts,
and the Purchaser and the Shareholder shall not reach agreement on the
computation or allocation within thirty (30) business days after notification by
the Shareholder of its objection, the Purchaser and the Shareholder shall submit
the issue to arbitration by a nationally recognized accounting firm as shall be
mutually acceptable to the Purchaser and the Shareholder for resolution of the
disagreement within ten (10) days, it being agreed that the Purchaser and the
Shareholder will jointly share the fees and expenses of such accounting firm.
The valuations and allocations determined pursuant to this Section 10.11 shall
be used for purposes of all relevant Tax Returns, reports and filings.
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(e) All transfer, documentary, stamp, registration, sales and use,
registration, stamp and similar Taxes and fees (including all penalties and
interest) imposed in connection with the sale of the Stock or any other
transaction that occurs pursuant to this Agreement shall be borne solely by the
Shareholder.
10.12 Certain Corporate Matters.
During the Earn-Out Period, the Shareholder will be invited to attend all
duly called and convened meetings of the Board of Directors of Purchaser at
which material matters affecting the Company are noticed, discussed and subject
to final resolution; however, the Shareholder will be expected to comply with
whatever reasonable policies are instituted to protect the confidentiality of
matters discussed at such meetings. In lieu of such invitation, the then
Chairman or Chief Executive Officer of the Purchaser may, where time permits and
otherwise in accordance with applicable policies and procedures of Purchaser,
discuss with Shareholder outside the context of a Board Meeting, the subject
matter of such Board Meeting as it relates or is related to the Company.
ARTICLE XI
MISCELLANEOUS
11.1 Definitions
For purposes of this Agreement, the following terms have the meanings
specified:
"Additional Earn-Out Payment" has the meaning set forth in Section
1.2(b)(iii) of this Agreement.
"Affiliate" of a Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning set forth in the introductory paragraphs of
this Agreement.
"Ancillary Agreements" means the documents, instruments and agreements to
be executed and/or delivered pursuant to this Agreement or any Ancillary
Agreement, including, but not limited to, a Guaranty Agreement, Employment
Agreement and Shareholder Schedules.
"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
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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.
"Audited Financial Statements" has the meaning set forth in Section 5.4 of
this Agreement.
"Bank Indebtedness" means all outstanding bank and other loans, notes,
lines of credit, debt instruments and other indebtedness, including the
Company's current line of credit to Bank One in the principal amount of
$1,750,000, excluding trade payables, capital leases and other current
liabilities.
"Base Earn-Out Amount" has the meaning set forth in Section 1.2(b)(ii) of
this Agreement.
"Base Earn-Out Payments" has the meaning set forth in Section 1.2(b)(ii) of
this Agreement.
"Business" as used in this Agreement means the business and operations of
the Company on the date of this Agreement.
"Claim Notice" has the meaning set forth in Section 9.3(a) of this
Agreement.
"Claims" has the meaning set forth in Section 9.1 of this Agreement.
"Closing" has the meaning set forth in Section 1.1 of this Agreement.
"Closing Date" has the meaning set forth in Section 2.1 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"Company" has the meaning set forth in the introductory paragraphs to this
Agreement.
"Competing Business" has the meaning set forth in Section 3.20 of this
Agreement.
"Confidential Information" means any information or compilation of
information not generally known to the public or the industry which (i) if
disclosed in a writing or in other tangible form, is clearly marked by the
disclosing Person as "Confidential Information" or "Proprietary," (ii) if
disclosed orally or visually, is stated by the disclosing Person to be
confidential at the time of disclosure and is within fifteen (15) days after
such disclosure reflected in a letter delivered by the disclosing Person to the
receiving Person indicating that such information is to be treated as
Confidential Information under this Agreement, or (iii) is commonly understood
to be of a confidential or proprietary nature.
"Earn-Out Payments" has the meaning set forth in Section 1.2(b)(iv) of this
Agreement.
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"Earn-Out Payment Dates" has the meaning set forth in Section 1.2(b)(ii) of
this Agreement.
"Earn-Out Period" has the meaning set forth in Section 1.2(b)(ii) of this
Agreement.
"Employee Benefit Plan" has the meaning set forth in Section 3.22 of this
Agreement.
"Encumbrance" means and includes:
(i) with respect to any personal property, any intangible property or
any property other than real property, any security or other property interest
or right, claim, lien, pledge, option, charge, security interest, contingent or
conditional sale, or other title claim or retention agreement or lease or use
agreement in the nature thereof, interest or other right or claim of third
parties, whether voluntarily incurred or arising by operation of law, and
including any agreement to grant or submit to any of the foregoing in the
future; and
(ii) with respect to any real property (whether and including owned
real estate or leased real estate), any mortgage, lien, easement, interest,
right-of-way, condemnation or eminent domain proceeding, encroachment, any
building, use or other form of restriction, encumbrance or other claim
(including adverse or prescriptive) or right of third parties (including
Governmental Authorities), any lease or sublease, boundary dispute, and
agreements with respect to any real property including: purchase, sale, right of
first refusal, option, construction, building or property service, maintenance,
property management, conditional or contingent sale, use or occupancy, franchise
or concession, whether voluntarily incurred or arising by operation of law, and
including any agreement to grant or submit to any of the foregoing in the
future.
"Environmental Laws" means any and all Applicable Laws (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 ▇.▇.▇.▇▇. 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.
"Excess Employee Benefit Plan Coverage" shall be only the costs associated
with securing Benefit Plan coverage for the employees of the Company after the
Closing in excess of the general per capita costs of such Benefit Employee Plan
coverage as of the Closing Date provided, it shall only include excess costs
that arise as a result of a voluntary Purchaser decision to provide levels and
amounts of coverage after the Closing that exceed the levels and amounts of
coverage prior to the Closing, and not as a result of, among other things: (i)
any Company decision to provide such levels of coverage initiated or agreed to
by the Shareholder; (ii) any price increase by benefits providers; (iii) the
replacement of any existing Plan or existing Plan
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benefits where the terms and scope of coverage of the existing Plan was no
longer being offered on the same general terms after the Closing, and could only
be replaced by a Plan that provided a lower or greater level and amount of
coverage.
"Financial Statements" has the meaning set forth in Section 3.8(a).
"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.
"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.
"Hazardous Materials" 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.
"Indemnitee" has the meaning set forth in Section 9.3 of this Agreement.
"Indemnitor" has the meaning set forth in Section 9.3 of this Agreement.
"Indemnitor's Floor" has the meaning set forth in Section 9.4(a) of this
Agreement.
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"Injunction" means any and all writs, rulings, awards, directives,
injunctions (whether temporary, preliminary or permanent), judgments, decrees or
orders (whether executive, judicial or otherwise) adopted, enacted, implemented,
promulgated, issued, entered or deemed applicable by or under the authority of
any Governmental Authority.
"Instruments" has the meaning set forth in Section 3.7 of this Agreement.
"Intellectual Property" means any and all (i) inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, continuations in
part, revisions, extensions and reexaminations thereof; (ii) trademarks, service
marks, trade dress, logos, trade names, assumed names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith; (iii) copyrightable works,
all copyrights and all applications, registrations and renewals in connection
therewith; (iv) mask works and all applications, registrations and renewals in
connection therewith; (v) trade secrets and confidential business information
(including ideas, research and development, know-how, technology, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals); (vi)
computer software (including data and related software program documentation in
computer-readable and hard-copy forms); (vii) other intellectual property and
proprietary rights of any kind, nature or description, including web sites, web
site domain names and other e-commerce assets and resources of any kind or
nature; and (viii) copies of tangible embodiments thereof (in whatever form or
medium).
"Liability" or "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 Effect" or "Material Adverse Change" means, in connection
with any Person, any event, change or effect that is materially adverse,
individually or in the aggregate, to the condition (financial or otherwise),
properties, assets, Liabilities, revenues, income, business, operations, results
of operations or prospects of such Person, taken as a whole. In the case of the
Company's Audited Financial Statements, a Material Adverse Change will be deemed
to have occurred if there is a decrease of more than fifteen percent (15%) in
net income or ten percent (10%) in net revenues from the (unaudited) Financial
Statements or if there is a decrease in the amount of tangible assets of more
than fifteen (15%) percent from the (unaudited) Financial Statements.
"Material Contracts" has the meaning set forth in Section 3.18 of this
Agreement.
"Net Income Before Taxes" has the meaning set forth in Section 1.2(c) of
this Agreement.
-49-
"Notice Period" has the meaning set forth in Section 9.3 of this Agreement.
"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.
"Permits" means any and all permits, licenses, filings, authorizations,
approvals, or indicia of authority (and any pending applications for approval or
renewal of a Permit), to own, construct, operate, sell, inventory, disburse or
maintain any asset or conduct any business as issued by any Governmental
Authority.
"Person" means any individual, corporation (including any non-profit
corporation), general, limited or limited liability partnership, limited
liability company, joint venture, estate, trust, association, organization, or
other entity or Governmental Authority.
"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 set forth in Section 1.2 of this
Agreement.
"Purchaser" has the meaning set forth in the introductory paragraphs of
this Agreement.
"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.
"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).
For purposes of this definition, the "Family" of an individual includes (A)
such individual, (B) the individual's spouse, (C) any lineal ancestor or lineal
descendant of the individual, or (D) a trust for the benefit of any of the
foregoing.
"Response Period" has the meaning set forth in Section 1.3(b) of this
Agreement.
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"Rights" means any and all outstanding subscriptions, warrants, options,
voting agreements, voting trusts, proxies, or other arrangements or commitments
obligating or which may obligate a Person to dispose of or vote any securities,
including, without limitation, the Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder" has the meaning set forth in the introductory paragraphs of
this Agreement.
"Shareholder's Guarantees" has the meaning set forth in Section 5.10 of
this Agreement.
"Shareholder's Schedules" has the meaning set forth in the introductory
paragraph to Article III.
"Shares" has the meaning set forth in the introductory paragraphs of this
Agreement.
"Shortfall Amount" has the meaning set forth in Section 1.2(b)(iii) of this
Agreement.
"Stonepath" has the meaning set forth in the introductory paragraphs of
this Agreement.
"Subsidiary" means, with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
When used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"Tangible Personal Property" has the meaning set forth in Section 3.15 of
this Agreement.
"Targeted Amount" has the meaning set forth in Section 1.2(b) (iii) of this
Agreement.
"Tax" or "Taxes" means any and all net income, gross income, gross revenue,
gross receipts, net receipts, ad valorem, franchise, profits, transfer, sales,
use, social security, Medicare, employment, unemployment, disability, license,
withholding, payroll, privilege, excise, value-added, severance, stamp,
occupation, property, customs, duties, real estate and/or other taxes,
assessments, levies, fees or charges of any kind whatsoever imposed by any
Governmental Authority, together with any interest or penalty relating thereto.
"Tax Return" or "Tax Returns" means any return, declaration, report, claim
for refund or information return or statement relating to Taxes, including,
without limitation, any schedule or attachment thereto, any amendment thereof,
and any estimated report or statement.
"Termination Date" means sixty days after the date of this Agreement.
-51-
"Threatened" means that a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made in writing, or any notice has been given in writing that would lead a
reasonably prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter will, with substantial certainty, be asserted,
commenced, taken or otherwise pursued in the future; provided, however, that the
foregoing shall not include customer billing disputes in the Ordinary Course of
Business.
"Waste" means any substance defined as such by any applicable Environmental
Law.
"Working Capital" means the excess of the Company's current assets over the
Company's current liabilities, determined in accordance with GAAP.
11.2 Cumulative Remedies; Waiver.
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure not any delay by any party in exercising
any right under this Agreement or the documents referred to in this Agreement
shall operate as a waiver of such right, and no single or partial exercise of
any such right will preclude any other or further exercise of such right or the
exercise of any other right. No claim or right arising under this Agreement can
be discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other party or parties. No
waiver that may be given by a party shall be applicable except in the specific
instance for which it is given. No notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
11.3 Notices.
All notices requests, demands, waivers and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given on the date if delivered personally, or upon the
second business day after it shall have been deposited by certified or
registered mail with postage prepaid, or sent by telex, telegram or telecopier,
as follows (or at such other address or facsimile number for a party as shall be
specified by like notice):
If to the Company: United American Acquisitions and Management, Inc.
d/b/a United American Freight Services, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
if to the Shareholder: Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Mychalowych
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to Purchaser, to it at:
Stonepath Logistics Domestic Services, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, General Counsel
Ph (▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇ North, Esquire
▇▇▇▇▇▇▇▇ Ingersoll Professional Corporation
Eleven ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.4 Entire Agreement; Assignment.
This Agreement, including all Exhibits and Schedules hereto, constitutes
the entire Agreement among the parties with respect to its subject matter and
supersedes all prior agreements and understandings, both written and oral, among
the parties or any of them with respect to such subject matter and shall not be
assigned by operation of law or otherwise.
11.5 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and assigns. Nothing in this Agreement
is intended to confer on any person other than the parties to this Agreement or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
11.6 Headings.
The descriptive headings of the sections of this Agreement are inserted for
convenience only, do not constitute a part of this Agreement and shall not
affect in any way the meaning or interpretation of this Agreement.
11.7 Counterparts.
This Agreement may be executed in two or more counterparts and delivered
via facsimile, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
11.8 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the laws that might otherwise
govern under principles of conflicts of laws applicable thereto.
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11.9 Arbitration.
If a dispute arises as to the interpretation of this Agreement, it shall be
decided finally in an arbitration proceeding conforming to the Rules of the
American Arbitration Association applicable to commercial arbitration then in
effect at the time of the dispute. The arbitration shall take place in
Philadelphia, Pennsylvania. The decision of the arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. The parties
shall share equally the costs of the arbitration.
11.10 Severability.
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
11.11 Expenses.
The Shareholder shall pay all fees and expenses incurred by him and the
Company in connection with the transactions provided for hereunder, including
the fees and expenses of Shareholder's counsel and accountants and any brokers
or finders noted on Schedule 3.33; and Purchaser shall pay all fees and expenses
incurred by it in connection with the transactions provided for hereunder,
including the fees and expenses of its counsel and accountants and the fees,
costs and expenses associated with the preparation of the Audited Financial
Statements in accordance with Section 5.4.
11.12 Amendment and Modification.
This Agreement may be amended, by written agreement of Purchaser and the
Shareholder. This Agreement may not be amended except by an instrument in
writing signed on behalf of Purchaser and the Shareholder.
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11.13 RELEASE AND DISCHARGE.
BY VIRTUE OF HIS EXECUTION AND DELIVERY OF THIS AGREEMENT, AS OF THE
CLOSING AND THEREAFTER, THE SHAREHOLDER HEREBY AGREES TO RELEASE, REMISE, AND
FOREVER DISCHARGE THE COMPANY FROM AND AGAINST ANY AND ALL DEBTS, OBLIGATIONS,
LIABILITIES, AND AMOUNTS OWING FROM THE COMPANY TO THE SHAREHOLDER PRIOR TO THE
DATE OF THIS AGREEMENT.
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IN WITNESS WHEREOF, each of the parties has executed or caused this
Agreement to be executed as of the date first above written.
ATTEST: STONEPATH LOGISTICS DOMESTIC
SERVICES, INC.:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------- -------------------------------
Secretary Authorized Executive Officer
ATTEST: UNITED AMERICAN ACQUISITIONS
AND MANAGEMENT, INC., D/B/A
"UNITED AMERICAN FREIGHT
SERVICES, INC."
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------- -------------------------------
Secretary Authorized Executive Officer
SHAREHOLDER:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
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Schedule 1.2(b)(v)
Example 1
Base Base Additional Additional
Actual Targeted (Shortfall) Earn-Out Excess Earn-Out Total
Yr NIBT Amount Excess Payment Amount Payment Payment
-- ---- ------ ------ ------- ------ ------- -------
1 1,800,000 2,200,000 (400,000) 850,000 -- -- 850,000
2 2,000,000 2,200,000 (200,000) 1,050,000 -- -- 1,050,000
3 2,700,000 2,200,000 500,000 1,750,000 -- -- 1,750,000 (x)
4 3,500,000 2,200,000 1,300,000 1,350,000 1,200,000 (y) 600,000 1,950,000 (z)
---------- --------- ---------- ---------
10,000,000 5,000,000 600,000 5,600,000
========== ========= ========== =========
(x) Comprised of $1,250,000 paid on the first $2,200,000 of Net Income Before
Taxes plus $500,000 attributable to the deemed addition of $400,000 of the
Base Shortfall Amount to the Net Income Before Taxes of Year 1 and $100,000
of the Base Shortfall Amount to the Net Income Before Taxes of Year 2.
(y) Equal to the Year 4 Base Excess Amount of $1,300,000 less $100,000 used to
recover $100,000 of the Base Shortfall Amount of Year 2.
(z) Comprised of $1,250,000 paid on the first $2,200,000 of Net Income Before
Taxes plus $100,000 attributable to the deemed addition of the remaining
$100,000 of the Base Shortfall Amount to the Net Income Before Taxes of
Year 2 plus 50% of the Additional Excess Amount of $1,200,000.
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Example 2
(a) (b) (c)
Base Base Additional Additional
Actual Targeted (Shortfall) Earn-Out Excess Earn-Out Total
Yr NIBT Amount Excess Payment Amount Payment Payment
-- ------ -------- ----------- -------- ---------- ---------- -------
3,500,000 2,200,000 1,300,000 1,250,000 1,300,000 650,000 1,900,000 (x)
2 2,700,000 2,200,000 500,000 1,250,000 500,000 250,000 1,500,000 (y)
3 2,000,000 2,200,000 (200,000) 1,050,000 -- -- 1,050,000 (z)
4 1,800,000 2,200,000 (400,000) 850,000 -- -- 850,000 (z)
---------- ---------- ---------- ----------
10,000,000 4,400,000 900,000 5,300,000
========== ========== ========== ==========
[RESTUBBED]
Example 2
(d) (a) + (d) (e) (f) * (g) ** (b) + (g)
Adjusted Benefit of Recomputed Recomputed
Excess Base Additional Base Total
Amount Recomputed Earn-Out Earn-Out Earn-Out Earn-Out
Yr Applied NIBT Payment Payment Payment Payment
-- ------- ----------- -------- ---------- ----------- -----------
-- -- 1,250,000 -- 1,250,000 1,900,000
2 -- -- 1,250,000 -- 1,250,000 1,500,000
3 200,000 2,200,000 1,250,000 100,000 1,150,000 1,150,000
4 400,000 2,200,000 1,250,000 200,000 1,050,000 1,050,000
---------- ----------
4,700,000 5,600,000
========== ==========
(x) Comprised of $1,250,000 paid on the first $2,200,000 of Net Income Before
Taxes * 50% of (d) plus 50% of the Additional Excess Amount of $1,300,000.
(y) Comprised of $1,250,000 paid on the first $2,200,000 of Net Income Before
Taxes ** (e) minus (f) plus 50% of the Additional Excess Amount of
$500,000.
(z) Equal to the Annual Base Earn-Out Payment of $1,250,000 less the Base
Shortfall Amount.
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