EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
K. J. TRANSPORTATION, INC.
DATED: JUNE 16, 1998
iv
TABLE OF CONTENTS
1. DEFINITIONS....................................................1
2. PLAN OF REORGANIZATION.........................................4
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2.1 THE MERGER............................................4
2.2 FRACTIONAL SHARES.....................................5
2.3 EFFECTS OF THE MERGER.................................5
2.4 TAX-FREE REORGANIZATION...............................5
2.5 PURCHASE ACCOUNTING TREATMENT.........................6
2.6 WAIVER OF DISSENTERS RIGHTS...........................6
2.7 CLOSING...............................................6
2.8 CLOSING OBLIGATIONS...................................6
2.9 XXXXXXXXX TRUCKING....................................7
2.10 SIMULTANEOUS ACQUISITION..............................7
3. REPRESENTATIONS AND WARRANTIES OF SELLERS......................7
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3.1 ORGANIZATION AND GOOD STANDING........................7
3.2 AUTHORITY; NO CONFLICT................................7
3.3 CAPITALIZATION........................................8
3.4 FINANCIAL STATEMENTS..................................9
3.5 BOOKS AND RECORDS.....................................9
3.6 TITLE TO PROPERTIES; ENCUMBRANCES.....................9
3.7 CONDITION AND SUFFICIENCY OF ASSETS...................10
3.8 ACCOUNTS RECEIVABLE...................................10
3.9 NO UNDISCLOSED LIABILITIES............................10
3.10 TAXES.................................................10
3.11 NO MATERIAL ADVERSE CHANGE............................11
3.12 EMPLOYEE BENEFITS.....................................11
3.13 COMPLIANCE............................................11
3.14 LITIGATION............................................12
3.15 ABSENCE OF CHANGES....................................12
3.16 CONTRACTS; NO DEFAULTS................................13
3.17 INSURANCE.............................................14
3.18 ENVIRONMENTAL MATTERS.................................14
3.19 EMPLOYEES; INDEPENDENT CONTRACTORS....................15
3.20 LABOR RELATIONS; COMPLIANCE...........................15
3.21 INTELLECTUAL PROPERTY.................................16
3.22 RELATIONSHIPS WITH RELATED PERSONS....................16
3.23 BROKERS OR FINDERS....................................17
3.24 DISCLOSURE............................................17
3.25 INVESTMENT REPRESENTATION.............................17
4. REPRESENTATIONS AND WARRANTIES OF TGI..........................17
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4.1 ORGANIZATION AND GOOD STANDING........................17
4.2 AUTHORITY; NO CONFLICT................................17
4.3 CERTAIN PROCEEDINGS...................................18
5. COVENANTS......................................................18
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5.1 ACCESS AND INVESTIGATION..............................18
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY............18
5.3 NEGATIVE COVENANT.....................................18
5.4 NOTIFICATION..........................................19
5.5 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS............19
5.6 NO NEGOTIATION........................................19
5.7 BEST EFFORTS..........................................19
5.8 LEASE AGREEMENTS......................................19
5.9 RELEASE OF GUARANTEES.................................20
6. CONDITIONS PRECEDENT TO TGI'S OBLIGATION TO CLOSE..............20
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6.1 ACCURACY OF REPRESENTATIONS...........................20
6.2 SELLERS' PERFORMANCE..................................20
6.3 CONSENTS..............................................20
6.4 ADDITIONAL DOCUMENTS..................................20
6.5 NO PROCEEDINGS........................................20
6.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS...21
6.7 SATISFACTORY DUE DILIGENCE............................21
6.8 FINANCING.............................................21
7. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE..........21
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7.1 ACCURACY OF REPRESENTATIONS...........................21
7.2 TGI'S PERFORMANCE.....................................21
7.3 NO PROCEEDINGS........................................21
8. TERMINATION....................................................21
8.1 TERMINATION EVENTS....................................21
8.2 EFFECT OF TERMINATION.................................22
9. INDEMNIFICATION; REMEDIES......................................22
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9.1 SURVIVAL;RIGHT TO INDEMN. NOT AFFECTED BY KNOWLEDGE...22
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY PRINCIPALS..22
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY TGI.........23
9.4 TIME LIMITATIONS......................................23
9.5 ESCROW................................................23
9.6 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.....24
9.7 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS...........25
10. GENERAL PROVISIONS.............................................25
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10.1 EXPENSES..............................................25
10.2 PUBLIC ANNOUNCEMENTS..................................25
10.3 CONFIDENTIALITY.......................................25
10.4 NOTICES...............................................26
10.5 FURTHER ASSURANCES....................................26
10.6 WAIVER................................................27
10.7 ENTIRE AGREEMENT AND MODIFICATION.....................27
10.8 DISCLOSURE LETTER.....................................27
10.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS....27
10.10 SEVERABILITY..........................................27
10.11 SECTION HEADINGS, CONSTRUCTION........................28
10.12 TIME OF ESSENCE.......................................28
10.13 GOVERNING LAW.........................................28
10.14 COUNTERPARTS..........................................28
Exhibits and Schedules
Exhibit "A" - Certificate of Merger
Exhibit "B" - Employment Agreements
Exhibit "C" - Noncompetition Agreement
Exhibit "D" - Escrow Agreement
Exhibit "E" - Subscription Agreement
Schedule 2.1 - Allocation of Merger Consideration
Schedule 5.9 - List of Seller Guarantees
Agreement and Plan of Reorganization
This Agreement and Plan of Reorganization ("Agreement") is made as of
June 16, 1998, by and between Transit Group, Inc., a Florida corporation
("TGI"), K. J. Transportation, Inc., a New York corporation (the "Company"),
Xxxx X. Xxxxxxx and Xxxxxxxx X. Xxxxxxx (collectively, the "Principals"), and
the other individuals listed as Sellers on the signature page hereto, each a
resident of the State of New York (individually a "Seller" and, collectively,
the "Sellers"). TGI, the Company and the Sellers are sometimes referred to
herein individually as a "Party," and collectively as the "Parties".
RECITALS
A. The Parties intend that, subject to the terms and conditions set
forth herein, K. J. Acquisition Corp. will be organized in New York as a wholly
owned subsidiary of Transit Group, Inc. ("KJAC") will merge with the Company in
a forward triangular merger (the "Merger"), with KJAC to be the surviving
corporation of the Merger, all pursuant to the terms and conditions of this
Agreement, the Certificate of Merger substantially in the form of Exhibit "A"
hereto (the "Certificate of Merger") and the applicable provisions of the laws
of New York.
B. Upon the effectiveness of the Merger, all the outstanding capital
stock of the Company will be converted into capital stock of TGI, in the manner
and on the basis determined herein and as provided in the Certificate of
Merger.
C. The Merger is intended to be treated as a "purchase" for accounting
purposes and a tax-free reorganization pursuant to the provisions of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), by
virtue of the provisions of Section 368(a)(2)(E) of the Code.
X. Xxxxxxx are the sole shareholders of the Company.
AGREEMENT
For and in consideration of the above premises and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Agreement" --this Agreement and Plan of Reorganization together with
all Schedules and Exhibits hereto.
"Balance Sheet"--as defined in Section 3.4.
"Closing"--as defined in Section 2.7.
"Closing Date"--the date and time as of which the Closing actually
takes place.
"Company"--collectively the Company identified in the Recitals to this
Agreement together with each Subsidiary.
"Company's Disclosure Letter"--the disclosure letter delivered by
Sellers to TGI concurrently with the execution and delivery of this Agreement.
"Contemplated Transactions"--all of the transactions contemplated by
this Agreement, including:
(a) the Merger of KJAC and the Company;
(b) the execution, delivery, and performance of the Employment
Agreements, the Noncompetition Agreements, the Subscription Agreements and the
Escrow Agreement; and
(c) the performance by TGI, the Company and Sellers of their
respective covenants and obligations under this Agreement.
"Damages"--as defined in Section 9.2.
"Earn-Out Amount" --as defined in Section 2.1.3.
"Effective Time" --the effective time of the Merger as defined in
Section 2.1.
"Employment Agreements"--as defined in Section 2.8(a)(iii).
"Environmental Law"--any law or regulation that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the environment;
(c) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(d) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(e) making responsible parties pay private parties, or groups of them,
for damages done to their health or the environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974, as
amended, and regulations and rules issued pursuant to that act or any successor
law.
"Escrow Agreement" --as defined in Section 2.8(a)(v).
"GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4 were prepared.
"Hazardous Materials"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"Merger"--as defined in the Recitals hereto.
"Noncompetition Agreements"--as defined in Section 2.8(a)(iv).
"Occupational Safety and Health Law"--any law or regulation designed
to provide safe and healthy working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working
conditions.
"Securities Act"--the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that act or any
successor law.
"Sellers"--as defined in the first paragraph of this Agreement.
"Subsidiary" or "Subsidiaries"--means any company, entity, partnership
or joint venture in which the Company owns an equity or other interest.
"TGI Disclosure Letter"--the disclosure letter delivered by TGI to
Sellers concurrently with the execution and delivery of this Agreement.
2. PLAN OF REORGANIZATION.
2.1 THE MERGER.Subject to the terms and conditions of this Agreement,
prior to the Closing Date, TGI will incorporate and organize KJAC and will
cause the Board of Directors and shareholders of KJAC to approve the Merger and
perform all of the duties of KJAC set forth in this Agreement. Subject to the
terms and conditions of this Agreement, the Certificate of Merger will be filed
with the Secretary of State of the State of New York on the Closing Date. The
date and time that the Certificate of Merger are filed with the New York
Secretary of State and the Merger thereby becomes effective will be referred to
in this Agreement as the "Effective Time." Subject to the terms and conditions
of this Agreement and the Certificate of Merger, the Company will be merged
with and into KJAC in a statutory merger pursuant to the Certificate of Merger
and in accordance with applicable provisions of New York law as follows:
2.1.1 Conversion of Company Common Stock. Each share of common stock
of the Company, no par value (the "Company Common Stock"), that is issued and
outstanding immediately prior to the Effective Time, will, by virtue of the
Merger and at the Effective Time and without further action on the part of any
holder thereof, be converted into (i) a number of shares of fully paid and
nonassessable common stock of TGI, $.01 par value per share ("TGI Common
Stock") equal to Six Million Seven Hundred Thousand Dollars ($6,700,000)
divided by $7.625, which is the last reported sales price per share of TGI
Common Stock as reported by NASDAQ on the date immediately prior to the
execution of this Agreement divided by 290 (the number of shares of Company
stock outstanding); and (ii) cash consideration in the amount of $10,344.828
per share; and (iii) the right to receive a pro rata share of the Earn-Out
Consideration if the conditions set forth in Section 2.1.3 are satisfied. The
cash consideration shall be paid to the Sellers in cash at Closing by wire
transfer or certified check. The total number of shares of TGI Common Stock and
cash consideration into which each Seller's shares of Company Common Stock will
be converted is set forth on Schedule 2.1 hereto. In lieu of receiving all of
the cash consideration set forth above, the Sellers hereby direct TGI to reduce
the amount paid to the Sellers and to pay a portion of the consideration in an
amount equal to $600,000 directly to Xxxxxx, Xxxxx & Co. in satisfaction of the
fee owed to such company by the Sellers in connection with the Merger.
2.1.2 Conversion of KJAC Shares. Each share of KJAC Common Stock, par
value $0.01 ("KJAC Common Stock"), that is issued and outstanding immediately
prior to the Effective Time, will, by virtue of the Merger and without further
action on the part of the sole shareholder of KJAC, be converted into and
become one share of common stock of KJAC, as the surviving corporation, that is
to be issued and outstanding immediately after the Effective Time, which shall
be the only share of KJAC Common Stock that is issued and outstanding
immediately after the Effective Time.
2.1.3 Earn-Out Consideration. The Sellers will have the potential to
receive an additional number of shares of TGI Common Stock equal in value to
six (6) times the amount, if any, by which the Company's pre-tax net profits
exceed One Million Seven Hundred Thousand Dollars ($1,700,000) for the period
of July 1, 1998 through June 30, 1999 (the "Earn-Out Amount"). For purposes
hereof, pre-tax net profits shall be calculated using GAAP, consistently
applied based on the Company's historical method of operations and excluding
(i) any benefits attributable to or resulting from synergies relating to the
Merger or otherwise contributed by TGI, such as cost savings, decreased
interest charges and purchasing improvements; and (ii) any increased expenses
or charges attributable to changes in the post-closing operations of the
Company by TGI which are outside of the ordinary course of business for the
Company, and any TGI administrative fees or overhead assessments shall be
deferred until July 1, 1999, for purposes hereof. The number of shares to be
issued to the Sellers hereunder shall be determined by dividing the Earn-Out
Amount by the per share price of $7.625. The Earn-Out Consideration will be
allocated among the Sellers based on their pro rata ownership in the Company
immediately prior to the Merger. For example, if the Company's pre-tax net
profits for the period described above is equal to $2 million, the Earn-Out
Consideration shall be equal to 6 x $300,000 or $1.8 million.
2.2 FRACTIONAL SHARES. No fractional shares of TGI Common Stock
will be issued in connection with the Merger.
2.3 EFFECTS OF THE MERGER. At the Effective Time:(a) the separate
existence of the Company will cease and the Company will be merged with and
into KJAC and KJAC will be the surviving corporation pursuant to the terms of
the Certificate of Merger; (b) the Articles of Incorporation and Bylaws of KJAC
will be the Articles of Incorporation and Bylaws of the surviving corporation;
(c) each share of KJAC Common Stock outstanding immediately prior to the
Effective Time will be converted as provided in Section 2.1.2 above; (d) the
directors of KJAC in effect at the Effective Time will be the directors of KJAC
as the surviving corporation, and the officers of KJAC will be the officers of
KJAC as the surviving corporation; (e) each share of Company Common Stock
outstanding immediately prior to the Effective Time will be converted as
provided in Section 2.1.1; and (f) the Merger will, at and after the Effective
Time, have all of the effects provided by applicable law.
2.4 TAX-FREE REORGANIZATION. The Parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code. The Parties
believe that the value of the TGI Common Stock and the cash consideration to be
received by the Sellers in the Merger is equal to the value of the Company
Common Stock to be surrendered in exchange therefor. The TGI Common Stock
issued in the Merger will be issued solely in exchange for the Company Common
Stock, and no other transaction other than the Merger represents, provides for
or is intended to be an adjustment to, the consideration paid for the Company
Common Stock. TGI represents now, and as of the Closing, that it presently
intends to continue the Company's historic business or use a significant
portion of the Company's business assets in a business. Sellers represent that
they have no plan or intention to sell, exchange or otherwise dispose of a
number of shares of TGI Common Stock received in the Merger that would reduce
the value of the Sellers' TGI Common Stock in the aggregate to less than fifty
percent (50%) of the value of the stock on the Closing Date. Sellers
acknowledge that they have received their own independent tax advice and
counsel with respect to the Merger and the transactions contemplated herein and
are not relying on representations made by TGI or its counsel, accountants or
advisors with respect thereto.
2.5 PURCHASE ACCOUNTING TREATMENT. The Parties intend that the
Merger be treated as a "purchase" for accounting purposes.
2.6 WAIVER OF DISSENTERS RIGHTS. Each of the Sellers hereby waives any and
all rights such shareholder has to dissent from the Merger under New York law.
2.7 CLOSING. The consummation of the Merger provided for in this
Agreement (the "Closing") will take place at the offices of Xxxxxx Xxxxxxx
Xxxxxxxxx & Xxxx, PLLC, Suite 700, 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx
00000, at 10:00 a.m. (local time) on June 16, 1998, or at such time and place
as the Parties may agree.
2.8 CLOSING OBLIGATIONS. At the Closing:
(a) Sellers will deliver to TGI:
(i) certificates representing their shares of
Company Common Stock, duly endorsed for transfer (or
accompanied by duly executed stock powers), with signatures
guaranteed by a commercial bank;
(ii) releases and resignations from the officers and
directors of the Company and each Subsidiary duly executed by
such parties;
(iii)an employment agreement in the form of
Exhibit "B," executed by Xxxx X. Xxxxxxx ("Employment Agreement");
(iv) noncompetition agreements in the form of
Exhibit "C," executed by each of the Sellers (collectively, the
"Noncompetition Agreements");
(v) an escrow agreement in the form of Exhibit
"D," executed by the Principals (the "Escrow Agreement");
(vi) a subscription agreement executed by each of
the Sellers for the shares of TGI Common Stock to be received
by the Sellers in the Merger in the form attached hereto as
Exhibit "E"; and
(vii) a certificate executed by Sellers certifying
to TGI that each of Sellers' representations and warranties
in this Agreement was accurate in all respects as of the date
of this Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date.
(b) TGI will deliver to Sellers:
(i) share certificates representing the TGI Common
Stock, issued in the name of the Sellers in the amounts
indicated in Section 2.1.1;
(ii)the cash consideration referred to in Section
2.1.1 hereof; and
(iii) a certificate executed by TGI to the effect
that, except as otherwise stated in such certificate, each of
TGI's representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and
is accurate in all respects as of the Closing Date as if made
on the Closing Date.
2.9 XXXXXXXXX TRUCKING. TGI acknowledges that Xxxxxxxxx Trucking Co.,
of which Xx. Xxxx X. Xxxxxxx is a shareholder, and the assets thereof
(including approximately twenty trucks) are not a part of the Merger
contemplated hereby.
2.10 SIMULTANEOUS ACQUISITION. Simultaneously with the Merger, TGI
will acquire all of the issued and outstanding stock of J & L Truck Leasing of
Farmington, Inc. for a purchase price of $500,000 payable in cash at Closing.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant
to TGI as follows:
3.1 ORGANIZATION AND GOOD STANDING.
(a) Part 3.1 of the Company's Disclosure Letter contains a statement
of the Company's and each Subsidiary's jurisdiction of incorporation, a list of
all other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each stockholder and the number of
shares held by each). The Company and each Subsidiary is duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under its contracts.
The Company and each Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.
(b) Sellers have delivered to TGI copies of the Articles of
Incorporation and Bylaws of the Company and each Subsidiary, as currently in
effect.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and the Company enforceable against them in accordance
with its terms. Upon the execution and delivery by Sellers of the Employment
Agreements, the Escrow Agreement, the Subscription Agreements and the
Noncompetition Agreements (collectively, the "Sellers' Closing Documents"), the
Sellers' Closing Documents will constitute the legal, valid, and binding
obligations of Sellers and the Company, enforceable against them in accordance
with their respective terms. Each of the Sellers and the Company has the
absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement and the Sellers' Closing Documents and to perform their
respective obligations under this Agreement and the Sellers' Closing Documents.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Articles of Incorporation or Bylaws of the
Company or any Subsidiary; or (B) any resolution adopted by the board
of directors or the stockholders of the Company or any Subsidiary; or
(C) any of the terms or requirements of, or give any governmental body
the right to revoke, withdraw, suspend, cancel, terminate, or modify,
any permit or authorization that is held by the Company or any
Subsidiary or that otherwise relates to the business of, or any of the
assets owned or used by, the Company or any Subsidiary; or (D) any
provision of, or give any person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify any contract to
which the Company or any Subsidiary is bound; or
(ii) result in the imposition or creation of any lien, claim
or encumbrance upon or with respect to any of the assets owned or used
by the Company or any Subsidiary.
(c) Except as set forth in Part 3.2 of the Company's Disclosure
Letter, neither Sellers, the Company nor any Subsidiary is or will be required
to give any notice to or obtain any consent from any person in connection with
the execution and delivery of this Agreement or the consummation or performance
of any of the Contemplated Transactions.
3.3 CAPITALIZATION.
(a) The authorized equity securities of the Company consist of 500
shares of common stock, no par value per share, of which 290 shares are issued
and outstanding (the "Shares"). Sellers are and will be on the Closing Date the
record and beneficial owners and holders of the Shares, free and clear of all
liens, claims or encumbrances. The shares are owned of record as shown on Part
3.3 of the Company's Disclosure Letter. With the exception of the Shares (which
are owned by Sellers), there are no other outstanding equity securities or
other securities of the Company. No legend or other reference to any purported
encumbrance appears upon any certificate representing equity securities of the
Company. All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are
no contracts relating to the issuance, sale or transfer of any equity
securities or other securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in violation of the
Securities Act or any other law or regulation. The Company does not own, nor
does it have any contract to acquire, any equity securities or other securities
of any person (other than the Company) or any direct or indirect equity or
ownership interest in any other business.
(b) The authorized equity securities of each Subsidiary and the number
of shares of such Subsidiary that are outstanding are set forth on Part 3.3 of
the Company's Disclosure Letter. The Company is and will be on the Closing Date
the record and beneficial owner and holder of all of the issued and outstanding
stock of each Subsidiary, free and clear of all liens, claims or encumbrances.
With the exception of the shares owned by the Company, there are no other
outstanding equity securities or other securities of any Subsidiary. No legend
or other reference to any purported encumbrance appears upon any certificate
representing equity securities of a Subsidiary. All of the outstanding equity
securities of each Subsidiary have been duly authorized and validly issued and
are fully paid and nonassessable. There are no contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of any
Subsidiary. None of the outstanding equity securities or other securities of
any Subsidiary was issued in violation of the Securities Act or any other law
or regulation. No Subsidiary owns, nor does it have any contract to acquire,
any equity securities or other securities of any person or any direct or
indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS. Sellers have delivered to TGI:(a)audited
balance sheets of the Company as at its fiscal year end in each of the years
1992 through 1997, and the related audited statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended,
and (b) a balance sheet of the Company as at March 31, 1998 (the "Balance
Sheet"). Such financial statements and the notes thereto fairly present the
financial condition and the results of operations, changes in stockholders'
equity and cash flow of the Company as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP,
consistently applied throughout the periods involved.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock
record books and other records of the Company and each Subsidiary, all of which
have been made available to TGI, are complete and correct and have been
maintained in accordance with applicable law. The minute books of the Company
and each Subsidiary contain accurate and complete records of all meetings of,
and corporate actions taken by, the stockholders, the Boards of Directors and
committees of the Boards of Directors of the Company and each Subsidiary, and
no meeting of any such stockholders, Board of Directors or committee has been
held for which minutes have not been prepared and are not contained in such
minute books.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. Part 3.6 of the Company's
Disclosure Letter contains a complete and accurate list of all real property
and material items of personal property owned by the Company and each
Subsidiary. The Company and each Subsidiary owns good and marketable title to
the properties and assets located in the facilities owned or operated by the
Company or any Subsidiary or reflected as owned in the books and records of the
Company or any Subsidiary, including all of the properties and assets reflected
in the Balance Sheet, and all of the properties and assets purchased or
otherwise acquired by the Company or any Subsidiary since the date of the
Balance Sheet. All material properties and assets reflected in the Balance
Sheet are free and clear of all liens, claims or encumbrances and are not, in
the case of real property, subject to any use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with respect to
all such properties and assets, (a) mortgages or security interests shown on
the Balance Sheet as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, and (b) zoning laws and other land
use restrictions that do not impair the present or anticipated use of the
property subject thereto. All buildings, plants, and structures owned by the
Company or any Subsidiary lie wholly within the boundaries of the real property
owned by the Company or any Subsidiary and do not encroach upon the property
of, or otherwise conflict with the property rights of, any other person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings, plants,
structures, and equipment owned or leased by the Company and each Subsidiary
are structurally sound, are in good operating condition and repair and are
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or repairs except
for ordinary, routine maintenance and repairs that are not material in nature
or cost. The building, plants, structures, and equipment owned or leased by the
Company and each Subsidiary are sufficient for the continued conduct of the
Company's and each Subsidiary's businesses after the Closing in substantially
the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Company and
each Subsidiary as of the Closing Date represent or will represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business. Unless paid prior to the Closing Date, the
accounts receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Balance Sheet. There is
no contest, claim, or right of set-off relating to the amount or validity of
such accounts receivable, except immaterial amounts arising in the ordinary
course of business.
3.9 NO UNDISCLOSED LIABILITIES. Neither the Company nor any Subsidiary
has any liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet and nonmaterial
current liabilities incurred in the ordinary course of business since the dates
thereof.
3.10 TAXES.
(a) The Company and each Subsidiary has filed or caused to be filed on
a timely basis all tax returns that are or were required to be filed by or with
respect to it. The Company and each Subsidiary has paid, or made provision for
the payment of, all taxes that have or may have become due for all periods
prior to Closing. All tax returns filed by the Company any each Subsidiary are
true, correct and complete.
(b) No United States, federal or state income tax returns of the
Company or any Subsidiary have been audited by the IRS or relevant state tax
authorities during the past seven years. Neither Sellers, the Company, nor any
Subsidiary has given or been requested to give waivers or extensions (or is or
would be subject to a waiver or extension given by any other person) of any
statute of limitations relating to the payment of taxes of the Company.
(c) The charges, accruals, and reserves with respect to taxes on the
books of the Company are adequate (determined in accordance with GAAP) and are
at least equal to the Company's liability for taxes (including any Subsidiary's
liability). There exists no proposed tax assessment against the Company or any
Subsidiary except as disclosed in the Balance Sheet. All taxes that the Company
or any Subsidiary is or was required to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
governmental body or other person.
3.11 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company or any Subsidiary,
and no event has occurred or circumstance exists that may result in such a
material adverse change.
3.12 EMPLOYEE BENEFITS. Part 3.12 of the Company's Disclosure Letter
contains a list of all pension, retirement, disability, medical, dental or
other health plans, life insurance or other death benefit plans, profit
sharing, deferred compensation agreements, stock, option, bonus or other
incentive plans, vacation, sick, holiday or other paid leave plans, severance
plans or other similar employee benefit plans maintained by the Company or any
Subsidiary (the "Plans"), including, without limitation, all "employee benefit
plans" as defined in Section 3(3) of ERISA. All contributions due from the
Company or any Subsidiary with respect to any of the Plans have been made or
accrued on the Company's financial statements, and no further contributions
will be due or will have accrued thereunder as of the Closing. Each of the
Plans, and its operation and administration, is, in all material respects, in
compliance with all applicable, federal, state, local and other governmental
laws and ordinances, orders, rules and regulations, including the requirements
of ERISA and the Internal Revenue Code. All such Plans that are "employee
pension benefit plans" (as defined in Section 3(2) of ERISA) which are intended
to qualify under I.R.C. Section 401(a)(8) have received favorable determination
letters that such plans satisfy all qualification requirements. In addition,
the Company has not been a participant in any "prohibited transaction," within
the meaning of Section 406 of ERISA, with respect to any employee pension
benefit plan (as defined in Section 3(2) of ERISA) which the Company or any
Subsidiary sponsors as employer or in which the Company or any Subsidiary
participates as an employer, which was not otherwise exempt pursuant to Section
408 of ERISA (including any individual exemption granted under Section 408(a)
of ERISA), or which could result in an excise tax.
3.13 COMPLIANCE.
(a) The Company and each Subsidiary is and at all times has conducted
its business and the ownership and use of its assets in full compliance with
all applicable laws.
(b) Part 3.13 of the Company's Disclosure Letter contains a complete
and accurate list of each permit or governmental consent or authorization that
is held by the Company and each Subsidiary or that otherwise relates to the
business of, or to any of the assets owned or used by, the Company or any
Subsidiary. Each such permit or governmental consent or authorization is valid
and in full force and effect and constitutes all of the governmental
authorizations necessary to permit the Company and each Subsidiary to lawfully
conduct and operate its business in the manner currently conducted.
3.14 LITIGATION.
(a) Except as set forth in Part 3.14 of the Company's Disclosure
Letter, there is no pending or to the knowledge of the Sellers, threatened
action, arbitration, audit, hearing, investigation, litigation or suit (whether
civil, criminal, administrative, investigative, or informal) commenced,
brought, conducted, or heard by or before, or otherwise involving, any
governmental body or arbitrator (i) that has been commenced by or against the
Company or any Subsidiary or that otherwise relates to or may affect the
business of, or any of the assets owned or used by, the Company or any
Subsidiary; or (ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or enjoining, any of the Contemplated Transactions.
(b) Except as set forth on Part 3.14 of the Company's Disclosure
Letter, there is no order or court decision to which the Company, any
Subsidiary, the Sellers, any director or officer of the Company, or any of the
assets owned or used by the Company, is subject.
3.15 ABSENCE OF CHANGES. Except as set forth in Part 3.15 of the
Company's Disclosure Letter, since December 31, 1996, the Company and each
Subsidiary has conducted its business only in the ordinary course and there has
not been any:
(a) change in its authorized or issued capital stock; grant of any
stock option or right to purchase shares of capital stock of the Company or any
Subsidiary; issuance of any security convertible into such capital stock; grant
of any purchase, redemption or stock retirement rights, or any acquisition by
the Company or any Subsidiary of any shares of its capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Articles of Incorporation or Bylaws of the
Company or any Subsidiary;
(c) payment or increase by the Company or any Subsidiary of any
bonuses, salaries or other compensation to any stockholder, director, officer
or employee (except normal raises in the ordinary course of business consistent
with past practices), or entry into any employment, severance, or similar
contract with any director, officer or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees of the
Company or any Subsidiary;
(e) damage to or destruction or loss of any material asset or property
of the Company or any Subsidiary, whether or not covered by insurance;
(f) entry into, termination of, or receipt of notice of termination of
any material contract or any contract or transaction involving a total
remaining commitment by or to the Company or any Subsidiary of at least
$50,000;
(g) sale, lease, or other disposition of any material asset or
property of the Company or any Subsidiary, or mortgage, pledge, or imposition
of any lien or other encumbrance on any material asset or property of the
Company or any Subsidiary;
(h) material change in the accounting methods used by the Company; or
(i) agreement, whether oral or written, by the Company or any
Subsidiary to do any of the foregoing.
3.16 CONTRACTS; NO DEFAULTS.
(a) Part 3.16 of the Company's Disclosure Letter contains a complete
and accurate list, and Sellers have delivered to TGI true and complete copies,
of:
(i) each contract that involves performance of services or
delivery of goods or materials by or to the Company or any Subsidiary
of an amount or value in excess of $50,000 in the aggregate;
(ii) each lease, license, installment and conditional sale
agreement, and other contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any real or
personal property;
(iii) each collective bargaining agreement and other contract
to or with any labor union or other employee representative or a group
of employees;
(iv) each joint venture, partnership, and other contract
involving a sharing of profits, losses, costs, or liabilities by the
Company or any Subsidiary with any other person;
(v) each contract containing covenants that in any way
purport to restrict the business activity of the Company or any Subsidiary;
(vi) each power of attorney that is currently effective
and outstanding; and
(vii) each written warranty, guaranty, and or other similar
undertaking by the Company or any Subsidiary.
(b) Each contract identified or required to be identified in Part 3.16
of the Company's Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms and is transferable to KJAC as the
surviving company in the Merger. The Company and each Subsidiary is, and at all
times has been, in full compliance with all applicable terms and requirements
of each contract. Each third party to any contract with the Company or any
Subsidiary is, and at all times has been, in full compliance with all
applicable terms and requirements of such contract. Neither the Company nor any
Subsidiary has given nor received notice from any other person regarding any
actual, alleged, possible, or potential violation or breach of, or default
under, any contract, and no default or event of default has occurred
thereunder.
3.17 INSURANCE.
(a) Sellers have delivered to TGI true and complete copies of all
insurance policies to which the Company or any Subsidiary is a party or under
which the Company or any Subsidiary is or has been covered at any time within
the three (3) years preceding the date of this Agreement, and true and complete
copies of all pending applications for policies of insurance.
(b) All policies to which the Company or any Subsidiary is a party or
that provide coverage to either Seller, the Company, any Subsidiary or any
director or officer of the Company or any Subsidiary (i) are valid,
outstanding, and enforceable; (ii) are issued by an insurer that is financially
sound and reputable; (iii) provide adequate insurance coverage for the assets
and the operations of the Company and the Subsidiaries for all risks normally
insured against in the Company's industry; (iv) will continue in full force and
effect following the consummation of the Contemplated Transactions; and (v)
except as set forth in Part 3.17 of the Company's Disclosure Letter, do not
provide for any retrospective premium adjustment or other experienced-based
liability on the part of the Company or any Subsidiary.
(c) Neither Seller, the Company nor any Subsidiary has received (i)
any refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (ii) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect or
will not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(d) The Company and each Subsidiary has paid all premiums due, and has
otherwise performed all of its obligations, under each policy to which it is a
party or that provides coverage to it. The Company and each Subsidiary has
given notice to the insurer of all claims that may be insured thereby.
3.18 ENVIRONMENTAL MATTERS.
(a) The Company and each Subsidiary is, and at all times has been, in
full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Sellers have no basis to expect, nor have Sellers
or the Company or any Subsidiary received, any actual or threatened order,
notice, or other communication from (i) any governmental body or private
citizen, or (ii) the current or prior owner or operator of any facilities owned
or leased by the Company or any Subsidiary, of any actual or potential
violation or failure to comply with any Environmental Law.
(b) There are no above or underground storage tanks, landfills, land
deposits, or dumps present on or at the facilities owned or leased by the
Company or any Subsidiary or, to the knowledge of the Sellers, at any adjoining
property, or incorporated into any structure therein or thereon. Except as set
forth on Part 3.18(b) of the Disclosure Letter, neither the Company nor any
Subsidiary has transported Hazardous Materials in the operation of its
business.
(c) Sellers have delivered to TGI true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or initiated
by Sellers, the Company or any Subsidiary pertaining to Hazardous Materials in,
on, or under the facilities owned or leased by the Company or any Subsidiary.
3.19 EMPLOYEES; INDEPENDENT CONTRACTORS.
(a) Part 3.19 of the Company's Disclosure Letter contains a complete
and accurate list of (i) each employee or director of the Company and each
Subsidiary, including each employee on leave of absence or layoff status, his
or her job title, and current compensation; and (ii) each independent
contractor of the Company and each Subsidiary, the type of services he or she
provides and his current compensation.
(b) No employee or, to the knowledge of the Sellers, no independent
contractor of the Company or any Subsidiary is a party to, or is otherwise
bound by, any agreement or arrangement, including any confidentiality,
noncompetition or proprietary rights agreement, between such employee and any
other person that in any way adversely affects or will affect (i) the
performance of his duties to the Company or any Subsidiary, or (ii) the ability
of the Company or any Subsidiary to conduct its business.
(c) All persons rendering services to the Company or any Subsidiary
have been properly characterized and treated as either employees or independent
contractors, and neither the Company nor any Subsidiary has received notice of,
nor do Sellers have any reason to believe that, such treatment will be
challenged by the IRS or otherwise.
3.20 LABOR RELATIONS; COMPLIANCE.
(a) Neither the Company nor any Subsidiary has been nor is it now a
party to any collective bargaining or other labor contract. There is not
presently pending or existing, and there is not threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
proceeding against or affecting the Company or any Subsidiary relating to the
alleged violation of any applicable law pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable governmental body, organizational activity, or
other labor or employment dispute against or affecting the Company, or (c) any
application for certification of a collective bargaining agent. There is no
lockout of any employees by the Company or any Subsidiary, and no such action
is contemplated by the Company or any Subsidiary. The Company and each
Subsidiary has complied in all respects with all legal requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant closing.
(b) The Company and each Subsidiary is, and at all times has been, in
full compliance with, and has not been and is not in violation of or liable
under, any Occupational Safety and Health Law. Seller has no basis to expect,
nor has Seller, the Company or any Subsidiary received, any actual or
threatened order, notice, or other communication from any person of any actual
or potential violation or failure to comply with any Occupational Safety and
Health Law.
3.21 INTELLECTUAL PROPERTY.
(a) Intellectual Property Assets. The term "Intellectual Property
Assets" includes:
(i) the Company's and each Subsidiary's name, all fictional
business names, trade names, registered and unregistered trademarks,
service marks, and applications;
(ii) all patents, patent applications, inventions and
discoveries that may be patentable;
(iii)all copyrights in both published works and unpublished
works; and
(iv) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings and blue prints owned, used, or licensed
by the Company or any Subsidiary.
(b) The Intellectual Property Assets are listed on Part 3.21 of the
Disclosure Letter. The Company (directly or indirectly through its
Subsidiaries) owns all right, title and interest in and to each of the
Intellectual Property Assets, free and clear of all liens, security interests,
charges, encumbrances, equities and other adverse claims, and has the right to
use without payment to a third party all of the Intellectual Property Assets.
(c) It is agreed that if, after review and testing of the Company's
proprietary software program used for accounting and general ledger functions,
TGI determines that it does not intend to use such program in the future, TGI
will so notify Xxxx X. Xxxxxxx and the ownership of such software will be
transferred to his affiliate, K & P Associates, Inc. at no charge. The Company
owns good and valid right and title to such software, warrants that such
software was internally developed and does not misappropriate the trade secrets
or infringe upon the proprietary rights of any third party.
3.22 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth on Part
3.22 of the Company's Disclosure Letter, no Seller or any related person or
affiliate of Sellers or of the Company has, or has had, any interest in any
property used in the Company's or any Subsidiary's business. No Seller or any
related person or affiliate of Sellers or of the Company is, or has owned,
directly or indirectly, an equity interest or any other financial or profit
interest in, an entity that has (i) had business dealings or a material
financial interest in any transaction with the Company or any Subsidiary; or
(ii) engaged in competition with the Company or any Subsidiary with respect to
any line of the products or services of the Company or any Subsidiary. No
Seller or any related person or affiliate of Sellers or of the Company is a
party to any contract with the Company or any Subsidiary.
3.23 BROKERS OR FINDERS. Neither the Company, Sellers or their
respective agents have incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
3.24 DISCLOSURE. No representation or warranty of Sellers in this
Agreement and no statement in the Company's Disclosure Letter omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading. There is no fact
known to Sellers that has specific application to any Seller, the Company or
any Subsidiary (other than general economic or industry conditions) and that
materially adversely affects or, as far as either Seller can reasonably
foresee, materially threatens, the assets, business, prospects, financial
condition, or results of operations of the Company or any Subsidiary that has
not been set forth in this Agreement or the Disclosure Letter.
3.25 INVESTMENT REPRESENTATION. Each of the Sellers is acquiring the
shares of the TGI Common Stock for their own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
Each Seller understands that such shares are "restricted stock" and agrees not
to sell, pledge, transfer, assign or otherwise dispose of such shares for a
minimum period of one (1) year following the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF TGI
TGI has delivered to Sellers, simultaneously herewith, the TGI
Disclosure Letter. TGI represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING. TGI is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Florida.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid and binding obligation
of TGI, enforceable against TGI in accordance with its terms. TGI has the
absolute and unrestricted right, power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and thereunder.
(b) Neither the execution and delivery of this Agreement by TGI nor
the consummation or performance of any of the Contemplated Transactions by TGI
will give any person the right to prevent, delay or otherwise interfere with
any of the Contemplated Transactions pursuant to:
(i) any provision of TGI's Articles of Incorporation or
Bylaws;
(ii) any resolution adopted by the board of directors or the
stockholders of TGI;
(iii)any legal requirement or order to which TGI may be
subject; or
(iv) any contract to which TGI is a party or by which TGI
may be bound.
(c) TGI is not and will not be required to obtain any consent from any
person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions, other than
the consent of AmSouth Bank, N.A.
4.3 CERTAIN PROCEEDINGS. There is no pending proceeding that has been
commenced against TGI and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise enjoining, any of the
Contemplated Transactions.
5. COVENANTS
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause the Company and its
representatives to, (a) afford TGI and its representatives and prospective
lenders and their representatives (collectively, "TGI's Advisors") full and
free access to the Company's personnel, properties, contracts, books and
records, and other documents and data, (b) furnish TGI and TGI's Advisors with
copies of all such contracts, books and records, and other existing documents
and data as TGI may reasonably request, and (c) furnish TGI and TGI's Advisors
with such additional financial, operating, and other data and information as
TGI may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY. Between the date of
this Agreement and the Closing Date, Sellers will, and will cause the Company
to: (a) conduct its business (including the business of its Subsidiaries) only
in the ordinary course; and (b) use its best efforts to preserve intact the
current business organization of the Company and its Subsidiaries, keep
available the services of their current officers, employees, and agents, and
maintain the relations and good will with their suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company or any Subsidiary.
5.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers
will not, and will cause the Company and each Subsidiary not to, without the
prior consent of TGI, take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of which any of the
changes or events listed in Section 3.15 is likely to occur.
5.4 NOTIFICATION.
(a) Between the date of this Agreement and the Closing Date, each
Seller will promptly notify TGI in writing if such Seller or the Company
becomes aware of any fact or condition that causes or constitutes a breach of
any of Sellers' representations and warranties as of the date of this
Agreement, or if such Seller or the Company becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would cause or
constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition.
(b) Between the date of this Agreement and the Closing Date, TGI will
promptly notify the Company in writing if TGI becomes aware of any fact or
condition that causes or constitutes a breach of any of TGI's representations
and warranties as of the date of this Agreement, or if TGI becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
cause or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition.
5.5 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers will cause all indebtedness owed to the
Company by any Seller or any related person of any Seller to be paid in full
prior to Closing.
5.6 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 8, Sellers will not, and will cause the Company
and each of its representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any person (other than TGI) relating
to any transaction involving the sale of the business or assets of the Company,
or any of the capital stock of the Company, or any merger, consolidation,
business combination, or similar transaction involving the Company.
5.7 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Sellers will use their best efforts to cause the conditions in Section 6
to be satisfied.
5.8 LEASE AGREEMENTS. At Closing, the Company will enter into lease
agreements with K & P Associates, Ltd. for the facilities currently occupied by
the Company in Farmington, New York, Winterhaven, Florida, and Mechanicsburg,
Pennsylvania, and the Parties agree to negotiate the terms of such leases in
good faith on the following terms:
Facility Term of Lease Monthly Rental
-------- ------------- --------------
Farmington, NY 7 Years $18,000
Mechanicsburg, PA 5 Years $12,000
Winterhaven, FL 3 Years $ 2,000
5.9 RELEASE OF GUARANTEES. TGI will obtain, within sixty (60) days
after the Closing Date, the release of each of the Sellers from the personal
guarantees of indebtedness of the Company owed to the lenders and in the
amounts set forth on Schedule 5.9 hereto or will refinance such indebtedness
within said time frame.
6. CONDITIONS PRECEDENT TO TGI'S OBLIGATION TO CLOSE
TGI's obligation to consummate the Merger and to take the other
actions required to be taken by TGI at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by TGI, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations and
warranties in this Agreement must have been accurate in all respects as of the
date of this Agreement, and must be accurate in all respects as of the Closing
Date as if made on the Closing Date, without giving effect to any supplement to
the Company's Disclosure Letter.
6.2 SELLERS' PERFORMANCE. All of the covenants and obligations that
the Company and the Sellers are required to perform or to comply with pursuant
to this Agreement at or prior to the Closing must have been duly performed and
complied with in all respects.
6.3 CONSENTS. Each of the consents identified in Part 3.2 of the
Company's Disclosure Letter must have been obtained and must be in full force
and effect.
6.4 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to TGI:
(a) an opinion of counsel to the Company and the Sellers, dated the
Closing Date, in form acceptable to TGI; and
(b) such other documents as TGI may reasonably request (i) evidencing
the accuracy of any of Sellers' representations and warranties; (ii) evidencing
the performance by either Seller of, or the compliance by either Seller with,
any covenant or obligation required to be performed or complied with by such
Seller; (iii) evidencing the satisfaction of any condition referred to in this
Section 6; or (iv) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions.
6.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against TGI or Seller or the Company, or
against any person affiliated with TGI or Seller or the Company, any proceeding
(a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying or making illegal, any of the Contemplated
Transactions.
6.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must
not have been made or threatened by any person any claim asserting that such
person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, the Company or any Subsidiary, or (b)
is entitled to all or any portion of the merger consideration.
6.7 SATISFACTORY DUE DILIGENCE. TGI shall have completed its
investigation of the Company's assets, business and financial condition and
shall be satisfied with the results thereof in its sole discretion.
6.8 FINANCING. TGI shall have obtained financing for the cash
consideration to be paid in the Merger on terms satisfactory to TGI in its sole
discretion.
7. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
The Company's obligation to consummate the Merger and to take the
other actions required to be taken by the Company or the Sellers at the Closing
is subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by the Company, in whole or in
part):
7.1 ACCURACY OF REPRESENTATIONS. All of TGI's representations and
warranties in this Agreement must have been accurate in all respects as of the
date of this Agreement and must be accurate in all respects as of the Closing
Date as if made on the Closing Date.
7.2 TGI'S PERFORMANCE. All of the covenants and obligations that TGI
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing must have been performed and complied with in all respects.
7.3 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against TGI or Seller or the Company, or
against any person affiliated with TGI or Seller or the Company, any proceeding
(a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, or making illegal, any of the Contemplated
Transactions.
8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either TGI or the Company 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) (i) by TGI if any of the conditions in Section 6 has 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 TGI to comply with its
obligations under this Agreement) and TGI has not waived such condition on or
before the Closing Date; or (ii) by Sellers, if any of the conditions in
Section 7 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Sellers
to comply with their obligations under this Agreement) and Sellers have not
waived such condition on or before the Closing Date;
(c) by mutual consent of TGI and Sellers; or
(d) by either TGI or Sellers 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 June 30,
1998, or such later date as the Parties may agree upon.
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. 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 10.1 and 10.3 will survive.
9. INDEMNIFICATION; REMEDIES
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement, the
Company's Disclosure Letter, the certificates delivered pursuant to Section
2.8(a)(vii), 2.8(b)(iii) and any other certificate or document delivered
pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of Damages (as defined below) or other remedy based on
such representations, warranties, covenants, and obligations 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.
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY PRINCIPALS. The
Principals, jointly and severally, will indemnify and hold harmless TGI, the
Company, and their respective representatives, employees, directors and
officers (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by Sellers in
this Agreement, the Company's Disclosure Letter or any other certificate or
document delivered by Sellers or the Company pursuant to this Agreement;
(b) any breach by Sellers or the Company of any covenant or obligation
in this Agreement;
(c) any product shipped or any services provided by the Company or any
Subsidiary prior to the Closing Date;
(d) any matter disclosed in Part 3.14 of the Company's Disclosure
Letter; or
(e) any claim by any person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such person with either Seller or the Company
(or any person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 9.2 will not be exclusive of or
limit any other remedies that may be available to TGI or the other Indemnified
Persons.
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY TGI. TGI will indemnify
and hold harmless Sellers, and will pay to Sellers the amount of any Damages
(as defined in 9.2 above) arising, directly or indirectly, from or in
connection with (a) any breach of any representation or warranty made by TGI in
this Agreement or in any certificate delivered by TGI pursuant to this
Agreement, (b) any breach by TGI of any covenant or obligation of TGI in this
Agreement, or (c) any claim by any person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such person with TGI (or any person acting on its
behalf) in connection with any of the Contemplated Transactions.
9.4 TIME LIMITATIONS. If the Closing occurs, Sellers will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty other than those in Sections 3.3, 3.10, 3.12, 3.18 and 3.19, unless
on or before the second (2nd) anniversary of the Closing Date TGI notifies
Sellers of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by TGI. A claim with respect to Section 3.3, or
a claim for indemnification or reimbursement based upon any covenant or
obligation to be performed and complied with prior to the Closing Date, may be
made at any time. A claim with respect to Sections 3.10, 3.12, 3.18 or 3.19 may
be made at any time prior to the expiration of the applicable statute of
limitations for the cause of action giving rise to such Damages. If the Closing
occurs, TGI will have no liability (for indemnification or otherwise) with
respect to any representation or warranty, unless on or before the second (2nd)
anniversary of the Closing Date Sellers notify TGI of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Sellers.
9.5 ESCROW. At the Closing, the Principals will deposit 131,147 shares
of TGI's Common Stock that are issued to the Sellers in the Merger (the "Escrow
Shares") with a bank or trust company located within the State of Georgia which
will act as an escrow agent (the "Escrow Agent"), who will hold the Escrow
Shares in escrow as collateral for the indemnification obligations of the
Principals under this Agreement and of the Principals as "Guarantors" under
that certain Stock Purchase Agreement of even date herewith whereby TGI has
acquired all of the outstanding stock of J & L Truck Leasing of Farmington,
Inc. The Escrow Shares will be released to the Principals on the expiration of
one (1) year following the date hereof, if no indemnification claims are then
outstanding and will serve as security for the Principals' indemnity
obligations as set forth in the Escrow Agreement.
9.6 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an Indemnified Person of notice of the
commencement of any proceeding against it, such Indemnified Person will, if a
claim is to be made against an indemnifying party under such Section, give
notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any Indemnified Person, except to
the extent that the indemnifying party demonstrates that the defense of such
action is prejudiced by the Indemnified Person's failure to give such notice.
(b) If any proceeding referred to in Section 9.6(a) is brought against
an Indemnified Person, the Indemnified Person will promptly give notice to the
indemnifying party of the commencement of such proceeding, the indemnifying
party will, unless the claim involves taxes, be entitled to participate in such
proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such proceeding and the Indemnified Person determines in
good faith that joint representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to the Indemnified
Person of its financial capacity to defend such proceeding and provide
indemnification with respect to such proceeding), to assume the defense of such
proceeding with counsel satisfactory to the Indemnified Person and, after
notice from the indemnifying party to the Indemnified Person of its election to
assume the defense of such proceeding, the indemnifying party will not, as long
as it diligently conducts such defense, be liable to the Indemnified Person
under this Section 9 for any fees of other counsel or any other expenses with
respect to the defense of such proceeding, in each case subsequently incurred
by the Indemnified Person in connection with the defense of such proceeding,
other than reasonable costs of investigation. The indemnifying party will have
a period of ten (10) days after notice of the commencement of a proceeding to
elect to assume the defense thereof. If the indemnifying party assumes the
defense of a proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in that proceeding are within the scope
of and subject to indemnification; (ii) no compromise or settlement of such
claims may be effected by the indemnifying party without the Indemnified
Person's consent unless (A) there is no finding or admission of any violation
of applicable laws or any violation of the rights of any person and no effect
on any other claims that may be made against the Indemnified Person, and (B)
the sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the Indemnified Person will have no liability
with respect to any compromise or settlement of such claims effected without
its consent. If notice is given to an indemnifying party of the commencement of
any proceeding and the indemnifying party does not, within ten (10) days after
such notice is given, give notice to the Indemnified Person of its election to
assume the defense of such proceeding, the indemnifying party will be bound by
any determination made in such proceeding or any compromise or settlement
effected by the Indemnified Person. Notwithstanding the foregoing, the filing
of an answer by the indemnifying party in order to preserve the rights of the
Indemnified Party due to a filing deadline shall not in itself constitute its
election to assume the defense of a claim hereunder.
(c) Notwithstanding the foregoing, if an Indemnified Person determines
in good faith that there is a reasonable probability that a proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the Indemnified Person may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such proceeding, but the
indemnifying party will not be bound by any determination of a proceeding so
defended or any compromise or settlement effected without its consent (which
may not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any
court in which a proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such proceeding or the matters alleged therein, and agree that
process may be served on Sellers with respect to such a claim anywhere in the
world.
9.7 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
10. GENERAL PROVISIONS
10.1 EXPENSES. Each Party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution, and
performance of this Agreement and the Contemplated Transactions, including all
fees and expenses of agents, representatives, counsel, and accountants.
10.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued at such time and in such manner as mutually agreed, except TGI may
make such disclosures as it deems necessary to comply with applicable
securities laws. Unless consented to by TGI in advance or required by
applicable law, prior to the Closing Sellers shall, and shall cause the Company
to, keep this Agreement strictly confidential and may not make any disclosure
of this Agreement to any person. Sellers and TGI will mutually agree upon the
means by which the Company's employees, customers, and suppliers and others
having dealings with the Company will be informed of the Contemplated
Transactions, and TGI will have the right to be present for any such
communication.
10.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, TGI and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of TGI and the Company to
maintain in confidence, any written information stamped "confidential" when
originally furnished by another party in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
or necessary or appropriate in connection with legal proceedings. If the
Contemplated Transactions are not consummated, each party will return as much
of such written information as the other party may reasonably request.
10.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers: c/o Xxxx X. Xxxxxxx
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Facsimile No.: __________________
with a copy to:..... Xxxxx X. Xxxxxx, Esq.
Xxxxxx and Xxxxxx
000 Xx. Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
TGI: .....Transit Group, Inc.
Overlook III, Suite 1740
0000 Xxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx,
President
Facsimile No.: (000) 000-0000
with a copy to: Xxxxxx X. XxXxxxxx, Esq.
Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx, PLLC
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
10.5 FURTHER ASSURANCES. The Parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each
other such other documents, and (c) to do such other acts and things, all as
the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
10.6 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
Party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in 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 Parties; (b) no waiver
that may be given by a Party will be applicable except in the specific instance
for which it is given; and (c) 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.
10.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the Party to be charged with the amendment.
10.8 DISCLOSURE LETTER. The disclosures in the Company's Disclosure
Letter, and those in any supplement thereto, relate only to the representations
and warranties in the Section of the Agreement to which they expressly refer.
In the event of any inconsistency between the statements in the body of this
Agreement and those in the Company's Disclosure Letter (other than an exception
expressly set forth as such in the Company's Disclosure Letter with respect to
a specifically identified representation or warranty), the statements in the
body of this Agreement will control.
10.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No Party may
assign any of its rights under this Agreement without the prior consent of the
other Parties. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the Parties. Nothing expressed or referred to in this
Agreement will be construed to give any person other than the Parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
Parties to this Agreement and their successors and assigns.
10.10 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
10.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
10.12 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
10.13 GOVERNING LAW. This Agreement will be governed by the laws of
the State of New York without regard to conflicts of laws principles.
10.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
"TGI":
TRANSIT GROUP, INC.
f/k/a General Parcel Service, Inc.
BY: /s/Xxxxxx X. Xxxxxx
XXXXXX X. XXXXXX, President
THE "COMPANY":
K. J. TRANSPORTATION, INC.
BY: /s/Xxxx X. Xxxxxxx
XXXX X. XXXXXXX, President
SELLERS:
/s/Xxxx X. Xxxxxxx
XXXX X. XXXXXXX ("Principal")
/s/Xxxxxxxx X.Xxxxxxx
XXXXXXXX X. XXXXXXX ("Principal")
/s/Xxxxxxx X. Xxxxxxx
XXXXXXX X. XXXXXXX
/s/Xxxxx X. Xxxxxxx
XXXXX X. XXXXXXX
SELLERS (continued):
/s/ Xxxx X.Xxxxxxx
XXXX X. XXXXXXX
/s/ Xxxxxxxx X. Xxxxxx
XXXXXXXX X. XXXXXX
/s/ Xxxxx X. Lake
XXXXX X. LAKE
/s/ Xxxxxxx X. Xxxxxx
XXXXXXX X. XXXXXX
/s/ Xxxx X. Xxxxxxxxxxx
XXXX X. XXXXXXXXXXX
/s/ Xxxxx X. Xxxxxxx
XXXXX X. XXXXXXX
Rev. June 25, 1998
