UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
February 16, 1999
Date of Report (Date of earliest event reported)
CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-26954 22-3350958
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
380 Allwood Road, Clifton, New Jersey 07012
(Address of principalexecutive offices) (Zip Code)
(Registrant's telephone number, including area code) (973) 471-1005
NOT APPLICABLE
(Former name or former address, if changed since last report.)
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ITEM 2. Acquisition or Disposition of Assets
On February 16, 1999, Consolidated Delivery & Logistics, Inc. ("CDL")
entered into and consummated an asset and stock purchase agreement (the
"Purchase Agreement") with its subsidiary, Sureway Air Traffic Corporation
("Sureway") and Victory Messenger Service, Inc., Richard Gold, Darobin Freight
Forwarding Co., Inc.,("Darobin") and The Trust Created Under Paragraph Third of
the Last Will and Testament of Charles Gold (the "Trust"), (collectively
"Goldwings") , whereby Sureway purchased all of the outstanding shares of the
capital stock of Darobin and certain of the assets and liabilities of the other
sellers.
The purchase price was comprised of approximately $3.0 million in cash
including estimated direct acquisition costs, $1.65 million in a 7% subordinated
note (the "Note") and 200,000 shares of CDL's common stock. The Note is due
April 16, 2001 with interest payable quarterly commencing April 1, 1999. The
Note is subordinate to all existing or future senior debt of CDL. In addition, a
contingent earn out in the aggregate amount of up to $520,000 is payable based
on the achievement of certain financial goals during the two year period
following the closing. The earn out is payable 55% in cash and 45% in CDL common
stock. CDL financed the acquisition using proceeds from its revolving credit
facility with First Union Commercial Corporation.
The description above of the Purchase Agreement and the Note is a
summary and does not purport to be complete. Reference should be made to the
copies of such documents filed as exhibits to this report for a complete
description of their terms.
ITEM 7. Financial Statements and Exhibits
a. Financial Statement of Business Acquired.
It is impracticable to provide the required financial statements for
Goldwings at this time. The statements will be filed as an amendment to this
report on Form 8-K as soon as they are prepared and not later than 60 days after
the deadline for filing this Form 8-K.
b. Pro Forma Financial Information
It is impracticable to provide the required pro forma financial
statements for Goldwings at this time. The statements will be filed as an
amendment to this report on Form 8-K as soon as they are prepared and not later
than 60 days after the deadline for filing this Form 8-K.
c. Exhibits
10.1 Purchase Agreement dated February 16, 1999 by and among
Consolidated Delivery & Logistics, Inc., Sureway, Darobin,
Richard Gold and the Trust.
10.2 7% Subordinated Note Due April 16, 2001.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: February 25, 1999 CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Registrant)
By: /s/ Albert W. Van Ness, Jr.
Albert W. Van Ness, Jr.
Chairman of the Board, Chief Executive
Officer and Chief Financial Officer
ASSET AND STOCK PURCHASE AGREEMENT
ASSET AND STOCK PURCHASE AGREEMENT ("Agreement"), dated as of February
16, 1999, by and among CONSOLIDATED DELIVERY & LOGISTICS, INC., a Delaware
corporation ("CDL"), SUREWAY AIR TRAFFIC CORPORATION, a New York corporation
(the "Purchaser"), VICTORY MESSENGER SERVICE, INC. a California corporation
("Victory"), THE TRUST CREATED UNDER PARAGRAPH THIRD OF THE LAST WILL AND
TESTAMENT OF CHARLES GOLD, a New York trust (the "Trust", and together with
Victory, the "Seller") and Richard Gold (the "Shareholder").
W I T N E S S E T H:
WHEREAS, the Shareholder is a shareholder of Victory, the co-trustee
and sole remainder beneficiary of the Trust and the record and beneficial owner
of all of the issued and outstanding capital stock of DAROBIN FREIGHT FORWARDING
CO., INC., a New York corporation ("Darobin, and together with the Seller, the
"Companies");
WHEREAS, the Purchaser is a wholly owned subsidiary of CDL; and
WHEREAS, prior to the date hereof, the Companies have engaged in the
small package express delivery business and related operations (the "Business");
and
WHEREAS, the Seller desires to sell and transfer to the Purchaser, and
the Purchaser desires to purchase and assume from the Seller, certain of the
assets and certain liabilities relating to the Business, all as more
specifically provided herein; and
WHEREAS, in addition to the foregoing, the Shareholder desires to sell
to the Purchaser, and the Purchaser desires to purchase from the Shareholder,
all of the outstanding shares of capital stock of Darobin, all as more
specifically provided herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties and covenants contained herein, and
intending to be legally bound, the parties hereto hereby agree as follows:
ARTICLE I
Certain Definitions
Section 1.1. Certain Definitions. As used in this Agreement, the
following terms have the respective meanings set forth below.
"Accounts Receivable" means all accounts receivable and notes
receivable, deposits, advances and manufacturer and supplier rebates.
"Affiliate" means, with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlled" and "controlling" have meanings correlative thereto.
"Agreement" means this Asset and Stock Purchase Agreement.
"Asset Purchase Transaction" has the meaning ascribed thereto in
Section 2.1.
"Assumed Contracts" has the meaning ascribed to such term in Section
3.19.
"Assumed Liabilities" means only the following liabilities: (a)
payables and accrued expenses of the Seller as of November 30, 1998 originating
in the ordinary course of business which remain outstanding at the Closing Date
and are listed on Schedule 1.1AL, (b) liabilities incurred by the Business in
the ordinary course of business from and after November 30, 1998 to and
including the Closing Date and (c) the obligations of the Seller arising after
the Closing Date under the Assumed Contracts which Purchaser assumes in writing
at the Closing. No other liabilities are to be assumed by the Purchaser.
"Authorizations" has the meaning ascribed to such term in Section
3.12.
"Business" has the meaning ascribed to such term in the third recital
to this Agreement.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks in New Jersey and New York are open for the general transaction
of business.
"CDL Common Stock" means the Common Stock, par value $.001 per share,
of CDL to be issued to the Selling Parties as part of the purchase price,
whether at the Closing Date or pursuant to the contingent earn-out provisions.
"Closing" has the meaning ascribed to such term in Section 2.7.
"Closing Date" has the meaning ascribed to such term in Section 2.7.
"Code" means the Internal Revenue Code of 1986, as amended.
"Customer List" has the meaning ascribed to such term in Section 3.19.
"Damages" has the meaning ascribed to such term in Section 7.2.
"Darobin Common Stock" has the meaning ascribed to such term in
Section 2.1.
"Disposition" has the meaning ascribed to such term in Section 5.11.
"Encumbrances" has the meaning ascribed to such term in Section 3.3.
"Environmental Laws" means any federal, state and local law, statute,
ordinance, rule, regulation, license, permit, authorization, approval, consent,
court order, judgment, decree, injunction, code, requirement or agreement with
any Governmental Authority, (x) relating to pollution (or the investigation or
cleanup thereof or the filing of information with respect thereto), human health
or the protection of air, surface water, ground water, drinking water supply,
land (including land surface or subsurface), plant and animal life or any other
natural resource, or (y) concerning exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production or disposal of Regulated Substances, in each case as amended and as
now or hereafter in effect. The term Environmental Law includes, without
limitation, (i) the Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Water Pollution Control Act, the Clean Air Act, the
Clean Water Act, the Solid Waste Disposal Act (including the Resource
Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984), the Toxic Substances Control Act, the Insecticide,
Fungicide and Rodenticide Act, the Occupational Safety and Health Act of 1970,
each as amended and as now or hereafter in effect, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to or threatened as
a result of the presence of, exposure to, or ingestion of, any Regulated
Substance.
"Excluded Liabilities" means any and all liabilities or obligations of
the Seller or of the Affiliates of the Seller, of any kind or nature, whether or
not relating to the Business or the Purchased Assets, and whether known or
unknown, absolute, accrued, contingent or otherwise, or whether due or to become
due, other than Assumed Liabilities. Without limiting the generality of the
foregoing, specifically included as Excluded Liabilities are all liabilities
relating to the Hubert Street Property, all amounts due to the Shareholder or
any related or Affiliated party (except for salary and expense reimbursement due
to the Shareholder for the current pay period) and all expenses of this
transaction, except for the fees of Arthur Andersen L.L.P expressly referenced
in Section 5.6 below. For purposes of the indemnification provisions of this
Agreement, Excluded Liabilities shall also include any and all liabilities or
obligations of Darobin not described in Section 3.14. Further, a liability or
obligation of any Selling Party that is disclosed, but disclosed for an amount
less than the actual liability, shall be deemed for purposes of the
indemnification provisions of this Agreement to be an Excluded Liability to the
extent of the undisclosed excess portion.
"Fair Market Value" with respect to any shares of CDL Common Stock to
be issued pursuant to Section 2.4 means the average of the closing prices of
such CDL Common Stock as reported on its principal stock exchange or on Nasdaq
for the twenty (20) trading days ending on the last day of the respective
earn-out period (First or Second Twelve Month Period).
"First Twelve Month Period" means the period from February 1, 1999 to
January 31, 2000.
"Financial Statements" has the meaning ascribed to such term in
Section 3.10.
"GAAP" means generally accepted accounting principles as in effect in
the United States on the date of this Agreement.
"Governmental Authority" means any national, federal, state,
provincial, county, municipal or local government, foreign or domestic, or the
government of any political subdivision of any of the foregoing, or any entity,
authority, agency, ministry or other similar body exercising executive,
legislative, judicial, regulatory or administrative authority or functions of or
pertaining to government, including any authority or other quasi-governmental
entity established to perform any of such functions.
"Hubert Street Property" means real property located at 11-13 Hubert
Street, New York, New York and the improvements thereon.
"Indemnified Party" has the meaning ascribed to such term in Section
7.2.
"Indemnifying Party" has the meaning ascribed to such term in Section
7.2.
"Inventory" means all raw material inventories, warehouse stock,
parts, inventories, material and supplies, including without limitation,
packaging and shipping materials.
"Lease" has the meaning ascribed to such term in Section 5.9.
"Listed Accounts" means Smith Barney, Chase Manhattan, First Chicago,
First Union Bank, Fleet Delivery Services, Citibank, Bankers Trust, Merrill
Lynch and BankAmerica (or any successor by merger, acquisition or similar
transaction of any of the Listed Accounts if the Purchaser (or its affiliates)
continues doing business with the successor).
"Material Adverse Change" means a material adverse change in the
Business of the Seller, or in the financial condition, results of operations or
prospects (financial and other) of the Seller's Business or the Purchased
Assets. Without limiting the generality of the foregoing, any change or series
of related changes involving more than $250,000 shall automatically be deemed
material, but changes with lesser financial impact may also be material.
"Note" means the promissory note of CDL in the principal amount of One
Million Six Hundred Fifty Thousand Dollars ($1,650,000), bearing interest at the
rate of 7% per annum, all on the terms set forth in the form of note attached
hereto as Exhibit A.
"Person" means an individual, partnership, corporation, joint stock
company, unincorporated organization or association, trust or joint venture, or
a governmental agency or political subdivision thereof.
"Proprietary Rights" means patents, patent registrations, patent
applications, trademarks, service marks, trademark and service mark
registrations and applications therefor, copyrights, copyright registrations,
copyright applications, trade names, technology, inventions, computer software,
data and documentation (including electronic media), product drawings, trade
secrets, know-how, customer lists, processes, other intellectual property and
proprietary information or rights related to or used in the conduct of the
Business; and permits, licenses or other agreements to or from third parties
regarding the foregoing.
"Purchase Price" has the meaning ascribed to such term in Section 2.2.
"Purchased Assets" means all of the right, title and interest in and
to all assets used in the conduct of the Business, wherever located, whether
tangible or intangible (including, without limitation, goodwill). The Purchased
Assets include, without limitation, the following:
(a) all Accounts Receivable;
(b) the Customer List;
(c) all rights of the Seller to transact business with such current,
former or future customers on the Customer List, all rights under any executory
contract, agreement or purchase order form, or contract with, any customer on
the Customer List or supplier, related to the Business to which the Seller or
any of its Affiliates is a party that is designated on Schedule 3.19 including
an assignment of any contracts listed on Schedule 3.19 between a customer on the
Customer List or supplier, and the Seller;
(d) the machinery and equipment (including spare parts) and business
machines, automobiles, trucks, trailers, fork-lift trucks, and other vehicles,
furniture, fixtures, supplies, capital improvements in process, tools and all
other tangible personal property employed in the conduct of the Business or
owned by the Seller, including those assets listed on Schedule 1.1PA;
(e) all Inventory;
(f) all authorizations, consents, approvals, licenses, orders,
permits, exemptions of, filings or registrations with, any Governmental
Authority which are necessary or desirable to service the customers on the
Customer List or conduct the Business, if transferable;
(g) all Proprietary Rights;
(h) use of the corporate name and logo for Victory Messenger Services
and all rights to use the name and logo for Gold Wings;
(i) all telephone and facsimile numbers, and all email addresses and
domain names, in the name of the Seller or used in the Business;
(j) all prepaid rentals, deposits (including security deposits),
advances and other prepaid expenses; and
(k) all other assets used in the conduct of the Business, whether or
not reflected on the books and records of the Seller, including without
limitation, the Business as a going concern, its goodwill and franchises, its
rights to insurance proceeds with respect to its assets, its restrictive
covenants and obligations of present and former employees, agents,
representatives, independent contractors and others, all books, records, files
and papers relating to, or necessary to the conduct of, the Business, including
without limitation, operating and training manuals, computer programs, manuals
and data, catalogs, quotations, bids, sales and promotional materials,
correspondence, trade association memberships (to the extent transferable),
research and development records, prototypes and models, lists of present and
former suppliers, customer credit information, customers' pricing information,
business plans, studies and analyses, whether prepared by the Seller or a third
party, relating to the Business, books of account, accounting records and other
records relating to the Business; provided, however, that the Purchaser shall
provide the Seller with access to such books and records after the Closing, on
reasonable notice during normal business hours, as reasonably necessary for
preparation and audit of its tax returns for applicable statutory tax periods or
any other valid business reason (i.e. a lawsuit to be defended by the Seller).
Notwithstanding anything to the contrary that may be contained herein,
the Purchased Assets shall not include (a) the Hubert Street Property, (b)
subject to the terms of the Lease, any assets directly related to the Hubert
Street Property, such as any insurance proceeds, deposits or prepaid expenses
and (c) certain vehicles and assets listed on Schedule 1.1C hereto.
"Regulated Substances" means pollutants, contaminants, hazardous or
toxic substances, compounds or related materials or chemicals, hazardous
materials, hazardous waste, flammable explosives (including, but not limited to
radon, radioactive materials, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls), medical waste or by-products, petroleum and
petroleum products (including, but not limited to, waste petroleum and petroleum
products) as regulated under applicable Environmental Laws.
"SEC" means the Securities and Exchange Commission.
"Second Twelve Month Period" means the period from February 1, 2000 to
January 31, 2001.
"Selling Parties" means the Shareholder, the Seller and Darobin.
"Stock Purchase Transaction" has the meaning ascribed to such term in
Section 2.1.
"Survival Period" has the meaning ascribed to such term in Section 7.1
"Third Party Claim" has the meaning ascribed to such term in Section
7.3.
"Transferred Assets" has the meaning ascribed to such term in Article
III.
"Transferred Businesses" has the meaning ascribed to such term in
Article III.
"Trust Agreement" has the meaning ascribed to such term in Section
3.1.
"Working Capital" means current assets less current liabilities, as
determined in accordance with GAAP.
Section 1.2. Interpretation. Unless otherwise indicated to the
contrary herein by the context or use thereof: (i) the words, "herein,"
"hereto," "hereof" and words of similar import refer to this Agreement as a
whole and not to any particular Section or paragraph hereof; (ii) words
importing the masculine gender shall also include the feminine and neutral
genders, and vice versa; (iii) words importing the singular shall also include
the plural, and vice versa; (iv) the word "Seller" shall include each of Victory
and the Trust individually as well as collectively, (v) the word "Selling
Parties" shall include each of Victory, the Trust, Darobin and the Shareholder
individually as well as collectively and (vi) the word "Companies" shall include
each of Victory, the Trust and Darobin individually as well as collectively.
ARTICLE II
Purchase and Sale of Assets and Shares; Assumption of Liabilities;
Additional Covenants
Section 2.1. Purchase and Sale of Assets and Shares.
(a) Upon the terms and subject to the conditions of this Agreement and
on the basis of the representations, warranties and agreements contained herein,
at the Closing (as defined in Section 2.6), the Seller shall sell, assign,
transfer, convey and deliver to the Purchaser all of the Seller's right, title
and interest in and to the Purchased Assets and the Purchaser shall purchase
such Purchased Assets from the Seller and assume the Assumed Liabilities (the
"Asset Purchase Transaction"). EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT WITH RESPECT TO THE ASSUMED LIABILITIES, THE PURCHASER IS NOT
ASSUMING, NOR SHALL IT IN ANY MANNER BECOME LIABLE FOR, ANY LIABILITIES OR
OBLIGATIONS OF ANY KIND OR NATURE WHATSOEVER OF THE SELLER OR ITS AFFILIATES,
INCLUDING BUT NOT LIMITED TO THE EXCLUDED LIABILITIES.
(b) Upon the terms and subject to the conditions of this Agreement and
on the basis of the representations, warranties and agreements contained herein,
at the Closing (as defined in Section 2.6), the Shareholder shall sell, assign,
transfer, convey and deliver to the Purchaser an aggregate of 100 shares (the
"Darobin Shares") of the common stock, par value $.001 per share, of Darobin
(the "Darobin Common Stock"), constituting all of the issued and outstanding
shares of Darobin's capital stock, and the Purchaser shall purchase the Darobin
Shares from the Shareholder (the "Stock Purchase Transaction").
Section 2.2. Purchase Price.
(a) The aggregate purchase price (the "Purchase Price") to be paid by
the Purchaser for the Purchased Assets and the Darobin Shares shall be (i) Four
Million Six Hundred Fifty Thousand Dollars ($4,650,000), (ii) an aggregate of
Two Hundred Thousand (200,000) shares of the common stock, $0.001 par value per
share, of CDL and (iii) the contingent earn-out payments described in Section
2.4 below.
(b) The Selling Parties represent and warrant that (i) all assets on
their balance sheets at July 31, 1998 remain as assets at the Closing Date
except for sales in the ordinary course and distributions of cash or assets
described on Schedule 2.2, and (ii) their Working Capital at the Closing Date is
not less than their Working Capital at July 31, 1998.
Section 2.3. Payment of the Purchase Price. At the Closing, the
Purchaser shall deliver the Purchase Price to the Shareholder and the Seller as
follows:
(a) The Purchaser shall deliver to Victory a check or wire transfer in
the sum of Fifty Thousand Dollars ($50,000);
(b) The Purchaser shall deliver to the Trust (i) a copy of
instructions to CDL's transfer agent to issue 200,000 shares of the CDL Common
Stock to the Trust (with such certificate to be delivered promptly after the
Closing Date); (ii) the Note in the principal amount of One Million Six Hundred
Fifty Thousand Dollars ($1,650,000); and the (iii) the rights to the contingent
earn-out set forth in Section 2.4.
(c) The Purchaser shall deliver to the Shareholder for the Darobin
Common Stock a certified or bank check or wire transfer in the sum of Two
Million Nine Hundred Fifty Thousand Dollars ($2,950,000).
Section 2.4 Contingent Earn-Out.
(a) Earn-Out Definitions. For purposes of this Agreement, "Gross
Profit" shall mean gross profit, as determined in the manner set forth on
Schedule 2.4 hereof arising from its courier/ freight forwarding business
performed during the First Twelve Month Period or the Second Twelve Month Period
for the Listed Accounts as to which the customer makes payment in full within,
or not later than 75 days after the end of, the First or Second Twelve Month
Period, respectively. No collections on accounts receivable for services
performed before the beginning of the First Twelve Month Period shall be
included in computing Gross Profit. "First Twelve Month Excess" shall mean the
excess of (i) the Gross Profit of the Purchaser from Listed Accounts for the
First Twelve Month Period over (ii) the 100% Mark.
(b) Earn-Out-Payments. Additional purchase price shall be paid to
reflect actual Gross Profit from the Listed Accounts for services rendered
during the First and Second Twelve Month Periods, as follows:
(i) If the Gross Profit for the First Twelve Month Period from
the Listed Accounts is less than $1,886,150 (the "85% Mark"), then no additional
purchase price or earn-out amount shall be paid hereunder for the First Twelve
Month Period. If the Gross Profit from the Listed Accounts for the First Twelve
Month Period equals or exceeds $2,219,000 (the "100% Mark"), then the Purchaser
shall pay to the Trust $260,000 as additional purchase price. If the Gross
Profit from the Listed Accounts for the First Twelve Month Period is greater
than the 85% Mark but less than the 100% Mark, then the Purchaser shall pay to
the Trust an amount equal to the product of (a) the quotient of (i) (A) the
Gross Profit for the First Twelve Month Period divided by the 100% Mark,
expressed as a percentage minus (B) 85%, divided by (ii) 15, multiplied by (b)
$260,000.
(ii) If the sum of (A) the Gross Profit from the Listed Accounts
for the Second Twelve Month Period plus (B) the First Twelve Month Excess (the
"Second Year Sum") is less than the 85% Mark, then no earn-out amount shall be
due for the Second Twelve Month Period. If the Second Year Sum equals or exceeds
the 100% Mark, then the Purchaser shall pay to the Trust $260,000 as additional
purchase price. If the Second Year Sum is greater than the 85% Mark but less
than the 100% Mark, then the Purchaser shall pay to the Trust an amount equal to
the product of (a) the quotient of (i) (A) the Second Year Sum divided by the
100% Mark, expressed as a percentage minus (B) 85%, divided by (ii) 15,
multiplied by (b) $260,000.
(iii) Example: Assume Gross Profit from Listed Accounts is
$2,000,000 in the Second Twelve Month Period and $2,400,000 in First Twelve
Month Period. The Trust would have received $260,000 for the First Twelve Month
Period. The earn-out payment for the Second Twelve Month Period would be
computed as follows:
Second Twelve Month Period Gross Profit $2,000,000
First Twelve Month Excess 181,000
Second Year Sum $2,181,000
Second Year Sum as a Percentage of 100% Mark 98%
Second Twelve Month Period Earn-Out $ 254,800
(payable 55% in cash and 45% in CDL Stock)
(c) Payment of each earn-out payment shall be divided between the
payment of 55% of the earn-out amount in cash and the payment of 45% of the
earn-out amount in shares of CDL Common Stock, valued at Fair Market Value for
the relevant earn-out period. Notwithstanding the foregoing, CDL shall not be
required to issue fractional shares in connection with the calculation of the
stock portion of the earn-out payment. By way of example, if the full $260,000
were earned for a Twelve Month Period, and Fair Market Value were $4 per share,
the Trust would be paid $143,000 in cash and would receive 29,250 shares of CDL
Common Stock.
(d) Determination of Adjustments. (i) Not later than 90 days after the
end of each of the First and Second Twelve Month Periods, the Purchaser shall
deliver to the Trust a review report from the Chief Financial Officer of CDL
(the "CFO's Report") detailing the Purchaser's Gross Profit for the relevant
Twelve Month Period from the Listed Accounts. The amount of the earn-out payment
will then be determined as set forth in Section 2.4(b) above.
(ii) If the Trust should object to the CFO's Report, it may give
notice of its objection to the Purchaser within fifteen (15) business days
after its receipt of the CFO's Report. If no such assertion is made within
such fifteen (15) day period, or if the Purchaser and the Trust agree upon
all matters in dispute, the CFO's Report, as adjusted to reflect any such
agreements, and shall be final and binding on all parties hereto for the
purpose of determining the earn-out for the relevant Twelve Month Period.
(iii) If the parties are unable to resolve all items in dispute
within 30 days after the delivery of the CFO's Report, those items shall be
submitted for resolution to a firm of independent certified public
accountants jointly selected by the Trust and the Purchaser. The
determination of such accounting firm shall be final and binding upon all
parties hereto. Both parties will use their best efforts to resolve these
matters as rapidly as practical. The fees of any firm employed pursuant to
the provisions of this paragraph shall be borne one-half by the Purchaser
and one-half by the Trust.
(iv) Once the CFO's Report is deemed final and the earn-out
amount agreed upon, the Purchaser shall make payment of the earn-out amount
to the Trust within five (5) business days of such agreement.
Section 2.5. Allocation of the Purchase Price. The Purchase Price to
be paid to the Seller shall be allocated as set forth in Exhibit B hereto. Each
of the parties hereto shall use such allocation in filing their respective
Internal Revenue Service Form 8594s, as applicable, and any other tax filings,
and none of the parties hereto shall take any position inconsistent with such
allocation.
Section 2.6. Additional Payment.
(a) Notwithstanding anything to the contrary that may be contained
herein, the Assumed Liabilities shall include an amount payable to Gail Gold
which is equal to (i) the lesser of (A) Gail Gold's personal federal, state and
local income tax rate for 1998 (i.e., the percentage of Gail Gold's taxable
income which she actually pays as income taxes for 1998) and (B) 40% times (ii)
the taxable income of the Trust for 1998 attributable to the operation of the
Business, including depreciation on the building used in the Business and
calculated in all other respects in a manner consistent with prior years tax
returns (the "98 Trust Business Income"), which 98 Trust Business Income the
Trust estimates is approximately $400,000, plus (iii) $175,000 (such total being
the "GG Amount") minus (iv) all distributions made by the Trust to or on behalf
of Gail Gold from January 1, 1998 through the Closing Date, which the Trust
represents is approximately $356,000 and is further set forth in detail on
Schedule 2.2 hereof (the "Distributions").
(b) On April 15, 1999, (a) if the GG Amount exceeds the Distributions,
then the excess shall be paid to Gail Gold or (b) if the Distributions exceed
the GG Amount, then the Trust or the Shareholder shall pay such excess to the
Purchaser.
(c) If the parties are unable to agree on the 98 Trust Business Income
or the amount of the Distributions, such disagreement shall be submitted for
resolution to a firm of independent certified public accountants jointly
selected by the Trust and the Purchaser. The determination of such accounting
firm shall be final and binding upon all parties hereto. Both parties will use
their best efforts to resolve these matters as rapidly as practical. The fees of
any firm employed pursuant to the provisions of this paragraph shall be borne
one-half by the Purchaser and one-half by the Trust.
Section 2.7. Closing. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of CDL at 380 Allwood
Road, Clifton New Jersey 07012 on February 12, 1999 at 11:00 a.m., effective as
of the close of business on that date, or at such other time and date thereafter
as the parties hereto may mutually agree, which date shall be referred to as the
"Closing Date".
ARTICLE III
Representations and Warranties of the Selling Parties
For purposes of this Agreement, all references to (i) the "Transferred
Businesses", unless specifically indicated otherwise, shall mean the Business,
as defined above, and (ii) the "Transferred Assets", unless specifically
indicated otherwise, shall mean the Purchased Assets, as defined above, and/or
the assets of Darobin as applicable. Victory, the Trust and the Shareholder,
jointly and severally, represent and warrant to the Purchaser and CDL as
follows:
Section 3.1. Organization and Qualification of the Seller and Darobin.
(a) Each of Victory and Darobin is a corporation duly organized,
validly existing and in good standing under the laws of its respective state of
incorporation, with full power and authority, corporate and other, to own or
lease its respective property and assets and to carry on the Transferred
Businesses as presently conducted, and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which it is
currently conducting the Transferred Businesses or where the failure to be so
qualified and in good standing would not reasonably be expected to result in a
Material Adverse Change. Each jurisdiction in which either Victory or Darobin is
required to be so qualified is listed on Schedule 3.1. Neither Victory nor
Darobin has any subsidiary corporations.
(b) The Trust remains in full force and effect. The Trust has the full
power and authority, trust and other, to own or lease its respective property
and assets and to carry on the Transferred Businesses as presently conducted.
Section 3.2. Authorization.
(a) Victory has full power and authority, corporate and other, to
execute and deliver this Agreement, the instruments of transfer and other
documents and to perform its obligations hereunder and thereunder, all of which
have been duly authorized by all requisite corporate action. The Shareholder, in
his capacity as the trustee under the Trust, has full power and authority under
the Trust Agreement to execute and deliver this Agreement and to perform his
obligations hereunder, all of which have been duly authorized by all requisite
action under the Trust Agreement or otherwise. Each of this Agreement and each
such instrument of transfer has been or, at the time of delivery will be, duly
authorized, executed and delivered by the Selling Parties, as applicable, and
constitutes or, at the time of delivery will constitute, a valid and binding
agreement of such Selling Party enforceable against such Selling Party in
accordance with its terms.
(b) The Shareholder, both in his individual capacity and as trustee of
the Trust, and/or Gail Gold, as trustee of the Trust, each individually have the
capacity to execute and deliver this Agreement, the instruments of transfer and
the other documents to be delivered by him and/or the Trust pursuant to this
Agreement and to perform his and the Trust's obligations hereunder and
thereunder. Neither the Shareholder, both in his individual capacity and as
trustee of the Trust, nor Gail Gold, as trustee of the Trust, is under any
impairment or other disability, legal, physical, mental or otherwise, whether or
not arising out of the Trust Agreement, that would preclude or limit the ability
of the Shareholder or the Trust to perform his or its obligations hereunder or
thereunder. This Agreement and each instrument of transfer to be delivered in
connection herewith constitutes or, at the time of delivery will constitute, a
valid and binding agreement of the Shareholder and the Trust enforceable against
the Shareholder and the Trust in accordance with its terms.
(c) The Shareholder is (i) the owner of 25% of the capital stock of
Victory, (ii) the sole shareholder of Darobin and (iii) the co-trustee and sole
remainder beneficiary of the Trust. Gail Gold is the owner of 75% of the capital
stock of Victory and the co-trustee and sole income beneficiary of the Trust.
Section 3.3. Non-contravention. Except as otherwise set forth in
Schedule 3.3, neither the execution and delivery of this Agreement or the
instruments of transfer nor the performance by the Selling Parties of their
respective obligations hereunder and thereunder will (i) contravene (1) any
provision contained in Victory's Certificate of Incorporation or By-laws, (2)
the Trust Agreement, or (3) any provision contained in Darobin's Certificate of
Incorporation or By-laws, (ii)violate or result in a breach (with or without the
lapse of time, the giving of notice or both) of or constitute a material default
under (A) any contract, agreement, commitment, indenture, mortgage, lease,
pledge, note, license, permit or other instrument or obligation of any Selling
Party or (B) any judgment, order, decree, law, rule or regulation or other
restriction of any Governmental Authority, in each case to which any Selling
Party is a party or by which any Selling Party is bound or to which any of their
respective assets or properties are subject, (iii) result in the creation or
imposition of any lien, claim, charge, mortgage, pledge, security interest,
equity, restriction or other encumbrance (collectively, "Encumbrances") on any
of the Transferred Assets or (iv) result in the acceleration of, or permit any
Person to accelerate or declare due and payable prior to its stated maturity,
any Assumed Liability or any liability of Darobin.
Section 3.4. No Consents. Except as set forth in Schedule 3.4, no
notice to, filing with, or authorization, registration, consent or approval of
any Governmental Authority or other Person is necessary for (i) the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby by any Selling Party or (ii) the assignment of
any of the Assumed Contracts or (iii) the prevention of the acceleration or
termination of any agreement to which Darobin is a party.
Section 3.5. The Transferred Assets. Except for the Hubert Street
Property, the Transferred Assets constitute all of the rights, properties and
assets which are necessary for the conduct of the Transferred Businesses. No
third party (including any Affiliate) owns or has any interest by lease, license
or otherwise in any of the Transferred Assets. The documents of transfer to be
executed and delivered by the Seller and the Shareholder at the Closing will be
sufficient to convey good and marketable title to the Purchased Assets and the
Darobin Share to the Purchaser, free and clear of all Encumbrances, except for
the lien of taxes not yet due and payable and encumbrances created by the
Purchaser or CDL.
Section 3.5A. Capitalization; Ownership of Shares.
(a) Darobin's authorized capital stock consists solely of 200
authorized shares of Common Stock of which 100 shares of Common Stock are issued
and outstanding. Darobin does not have any shares of Common Stock reserved for
issuance, and Darobin does not have any outstanding option, warrant, right, call
or commitment relating to its capital stock or any outstanding securities or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire from it, any shares of its capital stock. There are
no pre-emptive or other subscription rights with respect to any shares of
Darobin's capital stock and all of the issued and outstanding shares of capital
stock of Darobin have been duly authorized, validly issued, are fully paid and
are nonassessable.
(b) The Shareholder owns all of the Darobin Shares beneficially and of
record, free and clear of any Encumbrances. There are no voting trust
arrangements, shareholder agreements or other agreements (i) granting any
option, warrant or right of first refusal with respect to the Darobin Shares to
any Person, (ii) restricting the right of the Shareholder to sell the Darobin
Shares to the Purchaser, or (iii) restricting any other right of the Shareholder
with respect to the Darobin Shares. The Shareholder has the absolute and
unrestricted right, power and capacity to sell, assign and transfer the Darobin
Shares to the Purchaser free and clear of any Encumbrances (except for
restrictions imposed generally by applicable securities laws). Upon delivery to
the Purchaser of the certificates representing the Darobin Shares at Closing in
exchange for the consideration to be paid by the Purchaser at the Closing, the
Purchaser will acquire good, valid and marketable title to the Darobin Shares,
free and clear of any Encumbrances (except for Encumbrances created by the
Purchaser and restrictions imposed generally by applicable securities laws).
Section 3.6. Personal Property. Except as otherwise set forth in
Schedule 3.6, each of the Companies has good and marketable title to (or valid
leasehold or contractual interests in) all personal property comprising the
Transferred Assets, free and clear of any Encumbrances, except for the lien of
taxes not yet due and payable. All machinery, equipment, furniture, fixtures and
other personal property used in the Transferred Businesses and included in the
Transferred Assets is in good operating condition and fit for operation in the
ordinary course of business (subject to normal wear and tear).
Section 3.7. Real Property. Other than the Hubert Street Property,
none of the Companies own any real property. All operations of the Companies are
conducted out of the Hubert Street Property except for the Companies' offices in
Chicago and California listed on Schedule 3.7. All leases are oral
month-to-month leases which can be terminated at any time by tenant on no more
than one month's notice without penalty or cost. The Purchaser shall not be
responsible for any obligations of the Seller with respect to the Hubert Street
Property nor for any other lease obligation or obligation with respect to any
real property except with respect to obligations arising after the Closing Date
under (1) the Lease or (2) any other month-to-month lease expressly assumed by
the Purchaser. With respect to the Hubert Street Property and all other
properties leased by the Companies which are to be assumed by the Purchaser,
such plants, structures and buildings are in good operating condition and fit
for operation in the ordinary course of business (subject to normal wear and
tear) with no structural or other defects that could interfere with the conduct
of normal operations of such facilities and are suitable for the purposes for
which they are currently being used. Neither the Seller nor Darobin is in
violation of any building, zoning, anti-pollution, health, occupational safety
or other law, ordinance or regulation regarding its plants, structures and
equipment or their operations.
Section 3.8. Predecessor Status. Set forth in Schedule 3.8 is a
listing of all names of all predecessor companies of each of the Companies,
including the names of any entities from whom within the last five years any of
the Companies previously acquired significant assets. None of the Companies have
been a subsidiary or division of another corporation or a part of any
acquisition which was later rescinded. Set forth on Schedule 3.8 is a listing of
each business name used by any of the Companies and their respective
predecessors and by any companies acquired by or merged into either of them, and
each state and county in which any such trade name is registered, if any.
Section 3.9. Employment Matters; No Collective Bargaining Agreement.
(a) Except as set forth on Schedule 3.9(a), none of the Companies have
any employee benefit plans of any kind or nature (including but not limited to
plans under ERISA). The Purchaser and CDL shall have no obligation under or
related to any such plan to any employee of the Seller hired by the Purchaser.
There are no written employment or compensation agreements with any employees of
any of the Companies. All employees of each of the Companies are
employees-at-will. All accrued vacation pay and employee benefits due to the
employees of the Companies have been paid in full or accrued on the balance
sheet for the eleven months ended November 30, 1998 included as part of the
Financial Statements (as defined in Section 3.10 below).
(b) No employees of the Companies have been, or are currently
represented by, any labor union or covered by any collective bargaining
agreement nor, to the best knowledge of the Selling Parties and except as set
forth on Schedule 3.9(b) is any organization campaign to establish such
representation in progress. Except as set forth on Schedule 3.9(b), there is no
pending or, to the Selling Parties' knowledge, threatened labor dispute
involving any of the Companies. Except as set forth on Schedule 3.9(b), none of
the Companies have experienced any labor interruption, strike, slowdown,
picketing, work stoppage or other labor dispute over the past three years, nor
has any application or complaint about any of the Companies filed by an employee
or any union with the National Labor Relations Board or any comparable state or
local agency in the past five (5) years. Each of the Companies considers its
respective relationship with its employees to be good. None of the Companies are
bound by nor subject to (and none of their respective assets or properties are
bound by or subject to) any arrangement with any labor union.
(c) Schedule 3.9(c) contains a true and complete list of the employees
currently employed by each of the Companies, indicating the title or position of
each and a description of any agreements concerning such employees and the
current compensation payable by the Companies, as applicable, to each employee.
Section 3.10. Financial Statements. (a) The Selling Parties have
previously delivered to the Purchaser: (i) a true and complete copy of the
combined audited balance sheet as of December 31, 1997 of Victory, the Trust and
Darobin and the related audited statements of income and cash flows for the
fiscal year then ended, with notes thereto, (ii) a true and complete copy of the
audited balance sheet as of July 31, 1998 of Victory, the Trust and Darobin and
the related audited statements of income and cash flows for the seven (7) months
then ended, and (iii) a true and complete copy of the unaudited balance sheet as
of November 30, 1998 of Victory, the Trust and Darobin and the related
statements of income and cash flows for the eleven (11) months then ended,
certified by the Seller's chief financial officer (collectively, the "Financial
Statements"), all of which are set forth on Schedule 3.10. The Financial
Statements have been prepared in conformity with GAAP, applied on a consistent
basis throughout the respective periods and present fairly in all material
respects the financial condition and results of operations of the respective
entity covered thereby as of and for the periods included therein.
(b) The Selling Parties have also delivered to the Purchaser a pro
forma balance sheet of the Companies as of November 30, 1998 adjusted to show
the effect on the balance sheet of this transaction as if it has occurred on
such date (i.e. deleting the Excluded Liabilities and the Retained Assets). Such
pro forma balance sheet accurately presents the assets and liabilities of the
Companies that would have been acquired or assumed by the Purchaser if this
transaction had occurred on such date.
Section 3.11. Absence of Certain Developments. Except as set forth in
Schedule 3.11, since July 31, 1998, there has not been any Material Adverse
Change, or any other development specific to the Companies (i.e., developments
other than changes in the economy) which could reasonably be expected to result
in a prospective Material Adverse Change. Except as set forth in Schedule 3.11,
since July 31, 1998, the Seller and Darobin have conducted the Transferred
Businesses in the ordinary and usual course consistent with past practices and
neither has (i) sold, leased, transferred or otherwise disposed of any of the
assets of the Transferred Businesses to any Person, including, without
limitation, any shareholder any of the Companies (other than dispositions in the
ordinary course of business consistent with past practices), (ii) breached,
terminated or amended in any material respect any contract or lease to which any
of the Companies is a party or to which it is bound or to which their respective
properties are subject, (iii) suffered any material loss, damage or destruction
to their respective properties whether or not covered by insurance, (iv) made
any change in the accounting methods or practices it follows, whether for
general financial or tax purposes, (v) incurred any liabilities other than in
the ordinary course of business, (vi) incurred, created or suffered to exist any
Encumbrances on the Transferred Assets or the Darobin Shares, (vii) made any
plan, agreement or arrangement granting any preferential rights to purchase or
acquire any of the Transferred Assets or the Darobin Shares or requiring consent
of any party to the transfer of the Transferred Assets or the Darobin Shares or
assignment of the accounts to be assumed by the Purchaser (as detailed on
Schedule 3.19), (viii) breached or violated any law, statute, rule or regulation
applicable to any of the Companies or the Transferred Businesses in any material
respect, (ix) declared or paid any dividend or distribution on its capital
stock, or repurchased or otherwise acquired any shares of its capital stock or
any option, warrant, right, call or commitment relating to its capital stock or
any outstanding securities or obligations convertible into or exchangeable for
any shares of its capital stock, (x) except in the ordinary course of business
consistent with past practices, increased the compensation payable or to become
payable to any of its officers or employees or increased any bonus, severance,
accrued vacation, insurance, pension or other employee benefit plan, payment or
arrangement made by it for or with any such officers or employees, (xi) suffered
any labor dispute, strike or other work stoppage, (xii) made or obligated itself
to make any capital expenditures in excess of $10,000 individually or in the
aggregate, (xiii) entered into any contract or other agreement requiring it to
make payments in excess of $10,000 per annum, individually or in the aggregate,
other than in the ordinary course of business consistent with past practices,
(xv) amended its respective Certificate of Incorporation, by-laws or Trust
Agreement, as applicable, or taken any action in contemplation of any such
amendment or in contemplation of such entity's liquidation or dissolution and,
to the Selling Parties' best knowledge, no such action has been taken by the
shareholders, directors, officers or trustees of such entities, (xv) declared,
set aside for payment or paid any dividend or distribution on any shares of the
capital stock of Victory or Darobin or for the beneficiaries of the Trust, (xvi)
repurchased or otherwise acquired any shares of the capital stock of Victory or
Darobin or any option, warrant, right, call or commitment relating to the
capital stock of Victory or Darobin or any outstanding securities or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire from it, any such shares or (xiv) entered into any
agreement to do any of the foregoing.
Section 3.12. Governmental Authorizations; Licenses. The Transferred
Businesses have been operated in compliance with all material applicable laws,
rules, regulations, codes, ordinances and orders of all Governmental
Authorities, including but not limited to, those related to: pricing, sales or
distribution of products, antitrust, trade regulation, trade practices,
sanitation, land use and similar laws. Each of the Companies has all permits,
licenses, approvals, certificates, titles, fuel permits, franchises, operating
authorities (including any necessary FAA or ICC operating authorities), state
operating licenses or registrations and other interstate or intrastate
regulatory licenses and other authorizations, and has made all notifications,
registrations, certifications and filings with all Governmental Authorities,
necessary for the operation of the Transferred Businesses as currently conducted
by any of the Companies, as applicable, except for those which, individually or
in the aggregate could not reasonably be expected to result in a Material
Adverse Change. There is no action, case or proceeding pending or, to the
Selling Parties' best knowledge after due investigation, threatened by any
Governmental Authority with respect to (i) any alleged violation by any of the
Companies or their respective Affiliates of any law, rule, regulation, code,
ordinance, order, policy or guideline of any Governmental Authority, or (ii) any
alleged failure by any of the Companies or their respective Affiliates to have
any permit, license, approval, certification or other authorization required in
connection with the operation of the Transferred Businesses. No notice of any
violation of such laws has been received by any Selling Party. Schedule 3.12
sets forth a true and complete list of all of the permits, licenses, approvals,
certificates, registrations and other authorizations of either the Seller or
Darobin relating to the Transferred Businesses (the "Authorizations"). Such
Authorizations are in full force and effect and no Selling Party has received
notification of the suspension or cancellation of, or the intent to cancel,
terminate or not renew, any thereof.
Section 3.13. Litigation. Except as otherwise set forth in Schedule
3.13, there are no lawsuits, actions, proceedings, claims, orders or
investigations by or before any Governmental Authority pending or, to the
Selling Parties knowledge after due investigation, threatened against any
Selling Party relating to the Transferred Businesses, the Transferred Assets, or
seeking to enjoin the transactions contemplated hereby or which could have a
material adverse effect on such transactions or on the Purchaser. The litigation
listed on Schedule 3.13 is fully covered by insurance. Notwithstanding any
listing on Schedule 3.13, the Purchaser is not assuming any litigation or
judgments of the Seller, and the Selling Parties will indemnify, defend and hold
the Purchaser harmless with respect to all such matters.
Section 3.14. Undisclosed Liabilities. The obligations and liabilities
of Darobin consist solely of the following: (i) trade payables and accrued
expenses as of November 30, 1998 originating in the ordinary course of business
and listed on Schedule 3.14, (ii) liabilities incurred by Darobin in the
ordinary course of its business from and after November 30, 1998 to and
including the Closing Date and (iii) obligations of Darobin arising after the
Closing Date to perform continuing services required after the Closing Date
under executory contracts detailed on Schedule 3.19. Darobin has no other
liabilities.
Section 3.15. Taxes. All federal, state, county, local and foreign tax
returns and reports of each of the Companies or any of their respective
Affiliates required to be filed which relate to or affect the Transferred
Businesses or the Transferred Assets have been duly filed. There are no
examinations in progress or claims against any of the Companies for federal,
state, local and other taxes (including penalties and interest) for any period
or periods and no notice of any claim for taxes, whether pending or threatened
has been received. All federal, state, county, local, foreign and any other
taxes (including all income, withholding and employment taxes), assessments
(including interest and penalties), fees and other governmental charges with
respect to the employees, properties, assets, income or franchises of any of the
Companies or any of their respective Affiliates relating to or affecting the
Transferred Businesses or the Transferred Assets have been paid or duly provided
for in the Financial Statement, or are being contested in good faith by
appropriate proceedings as disclosed on Schedule 3.15 and adequate reserves
therefor have been established pursuant to GAAP, or have arisen after November
30, 1998 in the ordinary course of business. There are no tax liens on any of
the Transferred Assets except for the lien of taxes not yet due and payable.
Section 3.16. Insurance. At all times prior to the execution of this
Agreement, each of the Companies has maintained appropriate and adequate
insurance policies covering the Transferred Assets and all aspects of the
Transferred Businesses. Such insurance policies are currently in full force and
have remained in full force and effect through the Closing. Schedule 3.16 lists
all insurance policies in effect with respect to any of the Companies or the
Transferred Businesses during the past three (3) years, showing, as to each
policy or binder, the carrier, policy number, coverage limits, expiration dates,
annual premiums, deductibles or retention levels and a general description of
the type of coverage provided.
Section 3.17. Environmental Matters. Except as set forth on Schedule
3.17, (i) the Transferred Businesses are being and have been conducted in
compliance with all Environmental Laws, (ii) the Transferred Businesses have,
and at all times have had, all permits, licenses and other approvals and
authorizations required under applicable Environmental Laws for the operation of
the Transferred Businesses, (iii) no Selling Party has received any notice from
any Governmental Authority that any of the Companies or any of their respective
Affiliates may be a potentially responsible party in connection with any waste
disposal site or facility used, directly or indirectly, by or otherwise related
to the Transferred Businesses, (iv) no reports have been filed, or have been
required to be filed, by any Selling Party, concerning the release of any
Regulated Substance or the violation of any Environmental Law, on or at the
properties used in the Transferred Businesses; (v) there have been no
environmental investigations, studies, audits, tests, reviews, or other analyses
conducted by or which are in the possession of the Seller or Darobin or any
their respective Affiliates relating to the Transferred Businesses, true and
complete copies of which have not been delivered to the Purchaser and CDL prior
to the date hereof, (vi) no Regulated Substance has been disposed of,
transferred, released or transported from any of the Companies' business
premises, other than as permitted under applicable Environmental Law pursuant to
appropriate regulations, permits or authorizations, and (vii) there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or other proceedings pending or threatened against the
Transferred Businesses or the Seller, Darobin or any of their respective
Affiliates with respect to the Transferred Businesses or the Transferred Assets
relating to any violations, or alleged violations, of any Environmental Law, and
none of the Companies nor any of their respective Affiliates nor the Shareholder
have received any notices, demand letters or requests for information, arising
out of, in connection with, or resulting from, a violation, or alleged
violation, of any Environmental Law, and none of the Companies nor any of their
respective Affiliates or the Shareholder have been notified by any Governmental
Authority or any other Person that the Transferred Businesses or the Transferred
Assets have, or may have, any liability pursuant to any Environmental Law.
Section 3.18. Proprietary Rights. (a) All of the Seller's and
Darobin's Proprietary Rights are listed in Schedule 3.18. Except as disclosed in
Schedule 3.18, the Seller or Darobin, as applicable, own and possess all right,
title and interest in the Proprietary Rights. Upon consummation of the
transactions contemplated hereby, the Purchaser will own all right, title and
interest in, the Proprietary Rights of the Seller. The Seller and Darobin each
have taken all necessary or desirable action to protect their respective
Proprietary Rights. The transactions contemplated by this Agreement will have no
material adverse effect on the Seller's or Darobin's right, title and interest
in the Proprietary Rights.
(b) No claim by any third party contesting the validity,
enforceability, use or ownership of any Proprietary Rights of any of the
Companies has been made, is currently pending or, to the Companies' knowledge
after due investigation, is threatened. None of the Companies have received any
notice of, nor is either aware of any fact which indicates a likelihood of, any
infringement or misappropriation by, or conflict with, any third party with
respect to any of such Proprietary Rights. None of the Companies have infringed,
misappropriated or otherwise conflicted with any rights of any third parties,
nor is it aware of any infringement, misappropriation or conflict which will
occur as a result of the continued operation of the Transferred Businesses as
now conducted.
Section 3.19. Material Customers, Contracts and Commitments.
(a) Schedule 3.19 sets forth a list (the "Customer List") of all
customers (including names, addresses, contact persons, and telephone and
facsimile numbers) with whom any of the Companies (i) currently does business,
(ii) is currently actively pursuing as a prospective customer, or (iii) has done
business with since January 1, 1996.
(b) True and complete copies of all material written contracts,
including any amendments thereto, have been delivered by the Selling Parties to
the Purchaser and such documents constitute the legal, valid and binding
obligation of each of the Companies, as applicable, and, to the Selling Parties'
knowledge, each other party purportedly obligated thereunder. Schedule 3.19
lists all such material contracts of each of the Companies. Those contracts of
the Selling Parties set forth on Schedule 3.19 followed by an asterisk are to be
assumed by the Purchaser (either expressly as to the Seller's contracts or by
operation of law as to Darobin's contracts) (the "Assumed Contracts"), and all
other listed Contracts are not being assigned or assumed. Except as set forth on
Schedule 3.19, all of the Assumed Contracts are assignable to the Purchaser
without the consent of any party thereto (or, with respect to Assumed Contracts
as to which Darobin is a party, if any, the change of control of Darobin is not
prohibited by or a breach of the Assumed Contract). Except for the Assumed
Contracts, the Purchaser is not assuming any obligations or liabilities under
any of the Seller's contracts or agreements with customers or suppliers or
otherwise.
(c) Schedule 3.19 lists the ten (10) largest customers (in terms of
sales) of the Companies for the fiscal year ended December 31, 1997 and the
first eleven months of 1998 and the revenues received from each such customer
during fiscal 1997 and the first eleven months of 1998. Except to the extent
noted in Schedule 3.19, no one customer or group of related customers of the
Companies accounted for more than 5% of the revenues of the Companies for either
(x) the year ended December 31, 1997 or (y) the eleven (11) months ended
November 30, 1998. Except to the extent set forth on Schedule 3.19, (i) none of
the Companies' customers listed on Schedule 3.19 have canceled or substantially
reduced or, to the knowledge of the Selling Parties are currently attempting or
making serious threats to cancel or substantially reduce the amount of business
done with any of the Companies and (ii) the Seller and Darobin each have
complied with all material commitments and obligations to each customer
pertaining to them, neither is in material default to any customer and no notice
of default has been received.
(d) Except as disclosed in Schedule 3.19, none of the Companies are
in, nor have any of the Companies given or received notice of any material
default or claimed, purported or alleged material default, that, with notice or
lapse of time, or both, would constitute a material default by any of the
Companies (or give rise to a termination right) in the performance of any of
their obligations to be performed under any of their respective contracts with
its customers.
Section 3.20. Accounts Receivable. Schedule 3.20 sets forth a true and
complete listing of all Accounts Receivable as of November 30, 1998 of the
Companies and an aging schedule reflecting the aggregate amount of all such
Accounts Receivable outstanding (i) 30 days or less, (ii) more than 30 days but
less than or equal to 60 days, (iii) more than 60 days but less than or equal to
90 days and, (iv) more than 90 days. All of such Accounts Receivable as of
November 30 and as of the Closing Date have arisen in the ordinary and regular
course of business, represent bona fide transactions with third parties and are
not subject to any material counterclaims or material offsets (except for those
for which adequate reserves have been established in accordance with GAAP), have
been billed in the ordinary course of business consistent with past practices.
Section 3.21. Books and Records. The books and records of each of the
Companies, including financial records and books of account, are complete and
accurate and have been maintained in accordance with GAAP, to the extent
applicable, and sound business practices.
Section 3.22. Brokers. No Person is or will be entitled to a broker's,
finder's, investment banker's, financial adviser's or similar fee from the
Selling Parties in connection with this Agreement or any of the transactions
contemplated hereby. The Selling Parties have not employed any broker or agent
in connection with the transactions contemplated by this Agreement.
Section 3.23. Net Worth of the Companies. As of November 30, 1998 and
the date hereof, each of Victory, the Trust and Darobin have positive net worths
and none of them is subject to any bankruptcy or insolvency proceedings. Victory
and the Trust each will be able to satisfy all of its debts in full as they come
due, notwithstanding the division of the Purchase Price among the Selling
Parties. Each Selling Party agrees to remain responsible to the creditors of the
others to the extent of Purchase Price received.
Section 3.24. Year 2000. The Selling Parties have provided to the
Purchaser all information available to them with respect to whether the
performance or the functionality of computer systems or software used by the
Companies will be materially affected by dates in, into and between the 20th and
21st centuries.
Section 3.25. Affiliates. No Selling Party has any interest in, nor
affiliation with, any entity or person in the air or ground messenger or
delivery business or any related business except as set forth in Schedule 3.25
(other than a passive interest of not more than three (3%) percent of the
capital stock of a company whose stock is traded on a national securities
exchange or over-the-counter).
Section 3.26. Full Disclosure. No representation or warranty made by
any Selling Party in this Agreement, any Schedule, any Exhibit or any
certificate delivered, or to be delivered, by or on behalf of any Selling Party
pursuant hereto 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 statements
contained herein or therein not misleading.
ARTICLE IV
Representations and Warranties of the Purchaser and CDL
The Purchaser and CDL represent and warrant to the Selling Parties as
follows:
Section 4.1. Organization. The Purchaser and CDL are each corporations
duly organized, validly existing and in good standing under the laws of the
States of New Jersey and Delaware, respectively and have full power and
authority, corporate and other, to own their respective property and assets and
to carry on their respective businesses as presently conducted except where the
failure to be so qualified would not have a material adverse effect on their
respective businesses.
Section 4.2. Authorization. The Purchaser and CDL have full power and
authority, corporate and other, to execute and deliver this Agreement and to
perform their respective obligations hereunder, all of which have been duly
authorized by all requisite corporate action. This Agreement, has been or, at
the time of delivery will be, duly authorized, executed and delivered by the
Purchaser and CDL and constitute or, at the time of delivery will constitute, a
valid and binding agreement of the Purchaser and CDL, enforceable against the
Purchaser and CDL in accordance with its terms.
Section 4.3. Non-contravention. Neither the Purchaser nor CDL is
subject to any provision of their respective Certificates of Incorporation or
By-laws or any agreement, instrument, law, rule, regulation, order, decree or
judgment of any Governmental Authority or other restriction that would prevent
the consummation of the transactions contemplated by this Agreement.
Section 4.4. No Consents. No notice to, filing with, or authorization,
registration, consent or approval of any Governmental Authority or other Person
is necessary for the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby by the Purchaser and CDL.
Section 4.5. Brokers. No person is or will be entitled to a broke's,
finder's, investment banker's, financial adviser's or similar fee from the
Purchaser or CDL in connection with this Agreement or any of the transactions
contemplated hereby.
Section 4.6. SEC Filings. CDL has delivered to the Selling Parties (i)
its Annual Reports on Form 10-K for year of the years ended December 31, 1997
and 1996, (ii) its Quarterly Reports on Form 10-Q for the nine month period
ended September 30, 1998 and (iii) its Current Report on Forms 8-K, filed on
October 19, December 11 and December 22, 1998 (the "SEC Filings"). The SEC
Filings are true, complete and correct in all material respects except that the
Selling Parties acknowledge that they are aware of CDL's recent mezzanine
financing and have received adequate information with respect thereto. To Be
Added if 8-K is not filed prior to Closing. The financial statements contained
in the SEC Filings are true, complete and correct in all material respects and
fairly represent in all material respects the consolidated financial position of
CDL as of the respective dates thereof and the results of operations for the
periods then ended and have been prepared in accordance with GAAP consistently
applied on a basis consistent with prior periods.
[Open re: 8-K on mezzanine financing].
4.7 Legal Proceedings. There are no claims, actions, suits,
proceedings, arbitrations or investigations, either administrative or judicial,
pending or, to the actual knowledge of CDL, threatened by or against CDL or any
of its subsidiaries and their employees, environmental matters or matters
specifically relating to the transactions contemplated by this Agreement, at law
or in equity, or other before any court, government agency or body, domestic or
foreign on or before any arbitrator of any kind, including, without limitation,
any which arose after September 30, 1998 which would be required to be disclosed
in filings required to be made with the SEC and are not so disclosed in the SEC
Filings.
4.8. CDL Common Stock. The CDL Common Stock to be issued hereunder
shall be duly authorized, fully paid and non-assessable. No Encumbrances or
restrictions exist on the CDL Common Stock, except restrictions on transfer
pursuant to state and federal securities laws and pursuant to Section 5.11
below.
ARTICLE V
Covenants and Agreements
Section 5.1. Closing Documents. The Selling Parties shall, prior to or
on the Closing Date, execute and deliver, or cause to be executed and delivered
to the Purchaser and CDL, the documents or instruments described in Section 6.2.
The Purchaser and CDL shall, prior to or on the Closing Date, execute and
deliver, or cause to be executed and delivered, to the Selling Parties, the
documents or instruments described in Section 6.3.
Section 5.2. Transfer and Property Taxes. (a) The Selling Parties
shall pay any stamp, transfer, sales, purchase, use or similar tax under the
laws of any Governmental Authority arising out of or resulting from the purchase
of the Purchased Assets or the Shares ,except that the Purchaser shall pay 50%
of any sales or use tax due on the Purchased Assets. Purchaser may escrow from
the cash portion of the Purchase Price payable to Victory a sum equal to its
reasonable estimate of the 50% sales or use tax to be paid by the Selling
Parties and thereafter use such escrow for such payments. The Selling Parties
and the Purchaser shall co-operate in preparing and filing the required tax
returns and other required documents with respect to the taxes and fees required
to be paid pursuant to the preceding sentence and shall promptly provide each
other with evidence of the payment of such taxes and fees.
(b) The Selling Parties shall (i) prepare and file all tax returns
reporting (1) the income of the Seller attributable to the Purchased Assets or
the operation of the Business for all periods ending prior to or on the Closing
Date, (2) the income of the Shareholder arising on the Closing Date from the
sale to the Purchaser of the Darobin Shares and (iii) the income of the Seller
arising on the Closing Date from the sale to the Purchaser of the Purchased
Assets, (ii) be responsible for the conduct of all tax examinations relating to
the tax returns referred to in (i) above, and (iii) pay all taxes (1)
attributable to the Purchased Assets or the operation of the Business due with
respect to the tax returns referred to in (i) and (ii) above and (2) owing with
respect to the tax returns referred to in (i) above. The Purchaser and/or CDL
shall prepare and file all tax returns reporting the income attributable to the
ownership of the Purchased Assets and the operation of the Business for all
periods beginning after the Closing and shall be liable for and pay all taxes
due in respect of such tax returns.
Section 5.3. Non-Competition and Confidentiality Agreement.
(a) For a period of five (5) years after the Closing Date (or, with
respect to the Shareholder, such longer period of time as may be indicated in
any employment, consulting or other agreement with the Purchaser or CDL), no
Selling Party will directly or indirectly:
(i) engage in the small package delivery business in competition
with the Purchaser or CDL or any of the subsidiaries of either thereof, in
any of the States of New York, New Jersey or Connecticut (the "Territory");
(ii) call upon any person who is, at that time, an employee of
Darobin, the Purchaser or CDL (including the subsidiaries of either
thereof) in a managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of Darobin, the
Purchaser or CDL;
(iii) call upon any person or entity (x) which is, at that time,
or which has been, within one (1) year prior to that time, a customer of
Darobin, the Purchaser or CDL (including the subsidiaries of either
thereof) or (y) which was a customer of any of the Companies in the 18
month period preceding the Closing, for the purpose of soliciting or
selling products or services in direct competition with Darobin, the
Purchaser or CDL anywhere in the United States; or
(iv) use for its own benefit or divulge or convey to any third
party, any Confidential Information (as hereinafter defined) relating to
the Transferred Business. For purposes of this Agreement, Confidential
Information consists of all information, knowledge or data relating to the
Transferred Business including, without limitation, customer and supplier
lists, formulae, trade know-how, processes, secrets, consultant contracts,
pricing information, marketing plans, product development plans, business
acquisition plans and all other information relating to the operation of
the Transferred Business not in the public domain or otherwise publicly
available. Information which enters the public domain or is publicly
available loses its confidential status hereunder so long as no Selling
Party directly or indirectly causes such information to enter the public
domain.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit the Shareholder from acquiring, as an investment, not more than
three percent (3%) of the capital stock of a competing business whose stock is
traded on a national securities exchange or over-the-counter.
(b) The Selling Parties acknowledge that the restrictions contained in
this Section 5.3 are reasonable and necessary to protect the legitimate
interests of the Purchaser and CDL and that any breach by any of the Selling
Parties of any provision hereof will result in irreparable injury to the
Purchaser and CDL. The Selling Parties acknowledge that, in addition to all
remedies available at law, the Purchaser and CDL shall be entitled to equitable
relief, including injunctive relief, and an equitable accounting of all
earnings, profits or other benefits arising from such breach and shall be
entitled to receive such other damages, direct or consequential, as may be
appropriate. Neither the Purchaser nor CDL shall be required to post any bond or
other security in connection with any proceeding to enforce this Section 5.3.
(c) It is specifically agreed that the five (5) year period stated at
the beginning of this Section 5.3, during which the agreements and covenants of
the Selling Parties shall be effective, shall be computed by excluding from such
period any time during which any Selling Party is in violation of any provision
of this Section 5.3.
(d) All of the covenants on this Section 5.3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim of any Selling Party against Purchaser or CDL shall not
constitute a defense to the enforcement of such covenants; provided, however,
that failure to pay material amounts finally determined to be due under the Note
or the earn-out provisions of Section 2.4 shall constitute a defense.
Section 5.4. Best Efforts; Further Assurances. (a) Subject to the
terms and conditions herein provided, the Selling Parties shall use their best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement. Each of the Selling Parties will use their respective best
efforts to obtain consents of all Governmental Authorities and third parties
necessary to the consummation of the transactions contemplated by this
Agreement. In the event that at any time after Closing any further action is
necessary to carry out the purposes of this Agreement, the Selling Parties shall
take all such action without any further consideration therefor.
(b) The Selling Parties also shall take such actions and deliver such
documents as the Purchaser may reasonably request from time to time to perfect
the Purchaser's title to the Purchased Assets and the Darobin Shares and to
assist in the assignment of any Assumed Contracts and obtaining any necessary or
desirable consents.
Section 5.5. Employment Matters regarding the Seller. (a) CDL and the
Purchaser shall have the right but not the obligation to hire any employees of
the Seller. The Seller shall remain solely responsible for all amounts due to
such employees through the Closing Date unless such liabilities are set forth on
Schedule 1.1AL and shall indemnify, defend and hold harmless the Purchaser and
CDL for such liabilities.
(b) On the Closing Date, the Purchaser and the Shareholder shall enter
into a consulting agreement in the form attached hereto as Exhibit C.
Section 5.6. Audited Financial Statements of the Seller and Darobin.
All fees and expenses of Arthur Andersen LLP incurred in connection with any
audits of the financial statements of the Seller and Darobin, including without
limitation the audited financial statements of the Seller for the fiscal year
ended December 31, 1997 and the seven months ended July 31, 1998, shall be the
sole responsibility of the Purchaser.
Section 5.7. Access and Information. No investigation by the Purchaser
and CDL heretofore or hereafter made shall modify or otherwise affect any
representations and warranties of the Selling Parties, which shall survive any
such investigation, or the conditions to the respective obligations of the
Purchaser and CDL to consummate the transactions contemplated hereby.
Section 5.8 Restrictions on Transfer. (a) The Trust acknowledges that
it has been advised that he might be considered to be an "affiliate" of the
Companies for purposes of Rule 145 ("Rule 145") of the General Rules and
Regulations (the "Rules and Regulations") of the SEC under the Securities Act.
The Trust represents and warrants to, and agrees with, the Purchaser and CDL
that:
(i) The Trust shall not make any sale, transfer or other
disposition of CDL Common Stock in violation of the Securities Act or the
Rules and Regulations promulgated thereunder.
(ii) The Trust has been advised that the offering, sale and
delivery of the CDL Common Stock to him pursuant hereto has been registered
under the Securities Act on a Registration Statement on Form S-4. The
Shareholder has also been advised, however, that since he may be deemed to
be an "affiliate" of the Companies as of the date hereof, any public
offering or sale by him of any of the CDL Common Stock will, under current
law, require either (i) the further registration under the Securities Act
of the CDL Common Stock to be offered and sold, (ii) compliance with Rule
145, or (iii) the availability of another exemption from such registration
under the Securities Act.
(iii) The Trustees of the Trust have read the provisions of this
Agreement, including the provisions of this Section 5.8, and has discussed
their requirements and other applicable limitations upon his ability to
sell, transfer or otherwise dispose of the CDL Common Stock, to the extent
the Shareholder felt necessary, with his counsel.
(iv) The Trust has been informed by the Purchaser and CDL that
the CDL Common Stock has not been registered under the Securities Act for
distribution by the Shareholder and that the CDL Common Stock must be held
by the Trust for at least one year unless (i) such shares of CDL Common
Stock have been registered for distribution under the Securities Act, (ii)
a sale of the shares of CDL Common Stock is made in conformity with the
volume and other limitations of Rule 145, or (iii) in the opinion of
counsel acceptable to the Purchaser and CDL, some other exemption from
registration under the Securities Act is available with respect to any such
proposed sale, transfer or other disposition of the shares of CDL Common
Stock.
(v) The Trust understands that stop transfer instructions will be
given to CDL's transfer agent with respect to the shares of the CDL Common
Stock and that there will be placed on the certificates for the shares of
the CDL Common Stock, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act
of 1933, as amended (the "Act"), applies, and may be sold or otherwise
transferred only in compliance with the limitations of such Rule
145, or upon receipt by the Company of an opinion of counsel acceptable
to it that some other exemption from registration under the Act
is available, or pursuant to a registration statement under the Act.
(vi) The Trust hereby agrees that, for a period of one (1) year
following the Closing Date, the Trust will obtain an agreement similar to
this from each transferee of the CDL Common Stock sold or otherwise
transferred by the Trust, but only if such transaction is effected other
than in a transaction involving a registered public offering or as a sale
pursuant to Rule 145.
(b) CDL agrees that the restrictions set forth in Section 5.8(a) shall
terminate and be of no further force and effect, the legend set forth in Section
5.8(a)(v) above shall be removed by delivery of substitute certificates without
such legend and the related stop transfer restrictions shall be lifted forthwith
if (i) any such shares of CDL Common Stock shall have been registered under the
Securities Act for sale, transfer or other disposition by the Trust or on the
Trust's behalf or (ii) any such shares of CDL Common Stock are sold in
accordance with the provisions of paragraphs (c), (e), (f) and (g) of Rule 144
promulgated under the Securities Act or (iii) the Trust is not at the time an
"affiliate" of CDL and has held the CDL Common Stock for at least one (1) year
(or such other period as may be prescribed by the Securities Act and the Rules
and Regulations promulgated thereunder) and CDL has filed with the SEC all of
the reports it is required to file under the Securities Exchange Act of 1934, as
amended, during the preceding twelve (12) months or (iv) the Trust is not and
has not been for at least three months an "affiliate" of CDL and has held the
CDL Common Stock for at least two (2) years (or such other period as may be
prescribed by the Securities Act and the Rules and Regulations promulgated
thereunder) or (v) CDL shall have received a letter from the staff of the SEC,
or an opinion of counsel acceptable to CDL, to the effect that the stock
transfer restrictions and the legend are not required.
Section 5.9. Lease of Premises. The Purchaser and the Trust shall
enter into a six month lease (the "Lease") covering the Hubert Street Property,
which Lease shall be in the same form as attached Exhibit D.
Section 5.10. Delivery of Shares. At the Closing, (i) the Shareholder
shall deliver to Darobin for cancellation the certificates representing the
Shares, (ii) Darobin shall have canceled such certificates, and (iii) Darobin
shall issue to the Purchaser new certificates representing the Shares registered
in the name of the Purchaser or as otherwise directed by it.
Section 5.11. Lock-Up of CDL Common Stock. The Trust shall not offer
to sell, contract to sell or otherwise sell, dispose of, loan, pledge or grant
any rights with respect to (collectively, a "Disposition") the shares of CDL
Common Stock other than as follows: (i) an aggregate of 66,667 shares of the CDL
Common Stock may be transferred immediately following the Closing, (ii) an
additional 66,667 shares of the CDL Common Stock may be transferred ninety (90)
days after the Closing and (iii) the remaining 66,666 shares of CDL Common Stock
issued on the Closing Date may be transferred one hundred eighty days (180)
after the Closing. The foregoing restriction (i) shall be applicable to all of
the Selling Parties as a group, without regard to the allocation of the CDL
Common Stock among such persons and (ii) is expressly intended to preclude each
of the Selling Parties from engaging in any hedging or other transaction which
is designed to or reasonably expected to lead or result in a Disposition of the
CDL Common Stock during the periods indicated in the first sentence of this
Section 5.11 even if such CDL Common Stock would be disposed of by someone other
than a Selling Party. Each of the Selling Parties consents to the entry of stop
transfer instructions with the transfer agent for CDL against the transfer of
the CDL Common Stock held by such Selling Party except in compliance with this
Section 5.11.
Section 5.12 Notice to Independent Contractors. The Companies have
historically engaged numerous independent contractors in the Business. The
Companies and the Purchaser will co-operate and co-ordinate notices to such
independent contractors so that the Purchaser may utilize the services of such
independent contractors as it desires post-Closing, it being understood that the
Selling Parties and not the Purchaser will remain liable for all obligations
incurred to such independent contractors prior to the Closing.
ARTICLE VI
Deliveries at Closing
Section 6.1. Deliveries by the Selling Parties. Simultaneously with
the execution of this Agreement, the Selling Parties, as applicable, shall have
delivered to the Purchaser and CDL all instruments of assignment, transfer and
conveyance identified herein and such other closing documents as shall be
reasonably requested by the Purchaser and CDL in form and substance acceptable
to the Purchaser's counsel, including the following:
(a) such instruments of sale, transfer, assignment, conveyance and
delivery (including all vehicle titles), in form and substance reasonably
satisfactory to counsel for the Purchaser (including without limitation a Bill
of Sale and an Assignment and Assumption Agreement), as are required in order to
transfer to the Purchaser good and marketable title to the Purchased Assets,
free and clear of all Encumbrances;
(b) a joint certificate of the Chairman, President or a Vice President
of each of Victory and Darobin and the trustee of the Trust, dated the Closing
Date, to the effect that (1) the Person signing such certificate is familiar
with this Agreement and (2) the following conditions have been satisfied:
(i) All representations and warranties made by the Selling
Parties in this Agreement and the Schedules hereto shall be true, correct
and complete as of the Closing Date;
(ii) There has been no (A) Material Adverse Change, or any other
development specific to the Companies (i.e. development other than changes
in the economy) which could reasonably be expected to result in a
prospective Material Adverse Change, or (B) material damage, destruction or
loss to the Transferred Assets or the Business regardless of insurance
coverage.
(iii) (A) All authorizations, consents, waivers, approvals or
other actions required in connection with the execution, delivery and
performance of this Agreement by the Selling Parties and the consummation
by the Selling Parties of the transactions contemplated hereby have been
obtained and are in full force and effect; and (B) the Selling Parties have
obtained any authorizations, consents, waivers, approvals or other actions
required to prevent a material breach or default by the Selling Parties, as
applicable, under any contract to which it is a party or for the
continuation of any agreement to which any of the Companies is a party or
which relates and is material to the Transferred Assets or the Business and
is being assumed or otherwise acquired by the Purchaser.
(c) a certificate of the Shareholder, dated the Closing Date, to the
effect that the conditions indicated in Section 6.1(b) have been satisfied:
(d) a certificate of the Secretary or Assistant Secretary of Victory,
dated the Closing Date, as to the incumbency of any officer of the Seller
executing this Agreement or any document related thereto and covering such other
matters as the Purchaser and CDL may reasonably request;
(e) a certified copy of (i) the Certificate of Incorporation and
By-laws of Victory and all amendments thereto, (ii) a certificate, dated as of
no later than 10 days prior to the Closing Date, duly issued by the Secretary of
State of the State of California showing Victory is in good standing and
authorized to do business in such jurisdiction, and (iii) the resolutions of
Victory's Board of Directors authorizing the execution, delivery and
consummation of this Agreement, the instruments of transfer and the transactions
contemplated hereby;
(f) a certified copy of (i) the Certificate of Incorporation and
By-laws of Darobin and all amendments thereto, and (ii) a certificate, dated as
of no later than 10 days prior to the Closing Date, duly issued by the Secretary
of State of the State of New York showing Darobin is in good standing and
authorized to do business in such jurisdiction;
(g) an opinion of Morse, Zelnick, Rose & Lander, LLP, counsel to the
Selling Parties, dated the Closing Date, in form and substance reasonably
satisfactory to counsel for the Purchaser and CDL;
(h) a copy of the Lease, duly executed by the Trust;
(i) a copy of the Consulting Agreement, duly executed by the
Shareholder;
(j) the new certificate representing the Darobin Shares registered in
the name of the Purchaser;
(k) resignations of all officers and directors of Darobin;
(l) employment agreements executed by two key employees of the Trust;
and
(m) such other documents or instruments as the Purchaser and CDL
reasonably request to effect the transactions contemplated hereby.
Section 6.2. Deliveries by the Purchaser and CDL. Simultaneously with
the execution of this Agreement, the Purchaser and CDL shall have delivered to
the Selling Parties such closing documents as shall be reasonably requested by
the Selling Parties in form and substance reasonably acceptable to the Selling
Parties' counsel, including the following:
(a) the Assignment and Assumption Agreement executed by the Purchaser
and dated the Closing Date;
(b) certificates of the President or a Vice President of the Purchaser
and of CDL respectively, dated the Closing Date, to the effect that (1) the
Person signing such certificate is familiar with this Agreement and (2) the
following conditions have been satisfied:
(i) All representations and warranties made by the Purchaser and
CDL in this Agreement are true and correct in all material respects as of
the Closing Date, and the Purchaser and CDL have duly performed or complied
in all material respects with all of the covenants, obligations and
conditions to be performed or complied with by them under the terms of this
Agreement prior to or at Closing;
(ii) There has been no material adverse change in the business or
financial condition of CDL; and
(iii) All authorizations or approvals required in connection with
the execution, delivery and performance of this Agreement, by the Purchaser
and CDL and the consummation by the Purchaser and CDL of the transactions
contemplated hereby have been obtained and are in full force and effect.
(c) certificates of the Secretary or Assistant Secretary of the
Purchaser and CDL, respectively dated the Closing Date, as to the incumbency of
any officer of the Purchaser and CDL executing this Agreement, or any document
related thereto and covering such other matters as the Selling Parties may
reasonably request;
(d) a certified copy of (1) the Certificate of Incorporation and
By-laws of the Purchaser and all amendments thereto and (2) the resolutions of
the Purchaser's Board of Directors and CDL's Board of Directors authorizing the
execution, delivery and consummation of this Agreement and the transactions
contemplated hereby;
(e) payment of the Purchase Price as set forth in Section 2.2;
(f) an opinion of Lowenstein Sandler PC, counsel to the Purchaser and
CDL, dated the Closing Date, in form and substance reasonably satisfactory to
counsel for the Selling Parties;
(g) a copy of the Consulting Agreement duly executed by the Purchaser;
(h) a copy of Employment Agreements for two former employees of the
Trust; and
(i) a copy of the Lease, duly executed by the Purchaser.
ARTICLE VII
Survival of Representations and Warranties; Indemnification
Section 7.1. Survival of Representations and Warranties. Except as set
forth below, the representations and warranties provided for in this Agreement
shall survive the Closing for two (2) years from the Closing Date for the
benefit of the parties hereto and their successors and assigns. The
representations and warranties provided for in Sections 3.13, 3.15 and 3.17
shall survive the Closing and remain in full force and effect for six (6) years.
The survival period of each representation or warranty as provided in this
Section 7.1 is hereinafter referred to as the "Survival Period."
Section 7.2. Indemnification. (a) The Selling Parties jointly and
severally shall indemnify, defend and hold harmless the Purchaser and CDL or any
of their respective Affiliates, officers, directors, employees, agents and
representatives, and any Person claiming by or through any of them, against and
in respect of any and all claims, costs, expenses, damages, liabilities, losses
or deficiencies (including, without limitation, counsel's fees and other costs
and expenses incident to any suit, action or proceeding) (the "Damages") arising
out of, resulting from or incurred in connection with (i) any inaccuracy in any
representation or the breach of any warranty made by any Selling Party in this
Agreement for the applicable Survival Period, (ii) the breach by any Selling
Party of any covenant or agreement to be performed by them hereunder, or (iii)
any Excluded Liability.
(b) The Purchaser and CDL shall indemnify, defend and hold harmless
the Selling Parties or any of their respective affiliates, officer, directors,
employees, agents and representatives and any Person claiming by or through
either of them, against and in respect of any and all damages arising out of,
resulting from or incurred in connection with (i) any inaccuracy in any
representation or the breach of any warranty made by the Purchaser and CDL in
this Agreement for the applicable Survival Period, (ii) the breach by the
Purchaser or CDL of any covenant or agreement to be performed by them hereunder,
or (iii) any Assumed Liability.
(c) Any Person providing indemnification pursuant to the provisions of
this Section 7.2 is hereinafter referred to as an "Indemnifying Party" and any
Person entitled to be indemnified pursuant to the provisions of this Section 7.2
is hereinafter referred to as an "Indemnified Party."
(d) The indemnification obligations contained in Sections 7.2(a) and
7.2(b) above, respectively, shall not apply to any claim for Damages until the
aggregate of all such claims suffered by an Indemnified Party total Twenty Five
Thousand Dollars ($25,000), and then shall apply only to the excess. The
Indemnified Party shall notify the Indemnifying Party in writing promptly (i)
upon suffering any Damages to be included in calculating such $25,000 and (ii)
upon suffering any Damages in the aggregate amount of $25,000 or more. All such
claims made during the relevant Survival Period shall be counted in determining
whether the thresholds specified above have been achieved. No claim for
indemnification may be made hereunder in an amount in excess of the Purchase
Price (inclusive of the amount of the contingent earn-out payment actually
earned). The amount of the indemnified Damages shall be computed net of (i)
payments that the Indemnified Party receives under any insurance policies with
respect to such Damage and (ii) the amount of any recovery from any unrelated
party with respect to such Damage.
(e) The remedies set forth herein shall be exclusive remedies of the
parties with respect to any breaches of this Agreement except (i) the parties
may pursue additional remedies in the event of fraud or intentional or reckless
misconduct and (ii) nothing herein shall restrict any rights of the parties to
pursue any equitable remedies they may have.
Section 7.3. Procedures for Third Party Claims. In the case of any
claim for indemnification arising from a claim of a third party (a "Third Party
Claim"), an Indemnified Party shall give prompt written notice to the
Indemnifying Party of any claim or demand which such Indemnified Party has
knowledge and as to which it may request indemnification hereunder. The
Indemnifying Party shall have the right to defend and to direct the defense
against any such Third Party Claim, in its name or in the name of the
Indemnified Party, as the case may be, at the expense of the Indemnifying Party,
and with counsel selected by the Indemnifying Party unless (i) such Third Party
Claim seeks an order, injunction or other equitable relief against the
Indemnified Party, or (ii) the Indemnified Party shall have reasonably concluded
(and shall have advised the Indemnifying Party in writing of the basis for its
conclusion) that (x) there is a conflict of interest between the Indemnified
Party and the Indemnifying Party in the conduct of the defense of such Third
Party Claim or (y) the Indemnified Party has one or more defenses not available
to the Indemnifying Party. Notwithstanding anything in this Agreement to the
contrary, the Indemnified Party shall, at the expense of the Indemnifying Party,
cooperate with the Indemnifying Party, and keep the Indemnifying Party fully
informed, in the defense of such Third Party Claim. The Indemnified Party shall
have the right to participate in the defense of any Third Party Claim with
counsel employed at its own expense; provided, however, that, in the case of any
Third Party Claim or demand described in clause (i) or (ii) of the second
preceding sentence or as to which the Indemnifying Party shall not in fact have
employed counsel to assume the defense of such Third Party Claim, the reasonable
fees and disbursements of such counsel shall be at the expense of the
Indemnifying Party. The Indemnifying Party shall have no indemnification
obligations with respect to any such Third Party Claim or demand which shall be
settled by the Indemnified Party without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
The Indemnifying Party shall be subrogated to the rights of the Indemnified
Party with respect to any matter as to which the Indemnifying Party has fully
indemnified the Indemnified Party.
Section 7.4. Procedures for Inter-Party Claims. In the event that an
Indemnified Party determines that it has a claim for Damages against an
Indemnifying Party hereunder (other than as a result of a Third Party Claim),
the Indemnified Party shall give prompt written notice thereof to the
Indemnifying Party, specifying the amount of such claim and any relevant facts
and circumstances relating thereto. The Indemnified Party shall provide the
Indemnifying Party with reasonable access to its books and records for the
purpose of allowing the Indemnifying Party a reasonable opportunity to verify
any such claim for Damages. The Indemnified Party and the Indemnifying Party
shall negotiate in good faith regarding the resolution of any disputed claims
for Damages. Promptly following the final determination of the amount of any
Damages claimed by the Indemnified Party, the Indemnifying Party shall pay such
Damages to the Indemnified Party by wire transfer or check made payable to the
order of the Indemnified Party, without interest. In the event that the
Indemnified Party is required to institute legal proceedings in order to recover
Damages hereunder, the prevailing party shall be entitled to recover its cost of
such proceedings (including costs of investigation and reasonable attorneys'
fees and disbursements).
Section 7.5. Right of Set-Off. The Purchaser and CDL shall have the
right to set-off, against any amount which may be owed by the Purchaser or CDL
to any Selling Party with respect to either the sale of any of the Purchased
Assets or the Darobin Stock, including but not limited to the Note and any
amounts due pursuant to the earn-out of Section 2.4, whether due or unpaid at
the time of such set-off, any amount owed to the Purchaser and CDL by any
Selling Party pursuant to this Agreement or otherwise. By way of example, if the
Shareholder is obligated to Darobin for indemnification, then the amount of the
Note may be reduced even though CDL is the maker of the Note and the Trust is
the holder. The exercise of such right of set-off by the Purchaser and CDL shall
not constitute a breach by the Purchaser or CDL of this Agreement or the
agreement underlying such obligation.
ARTICLE VIII
Miscellaneous
Section 8.1. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, by
facsimile or sent by certified, registered or express air mail, postage prepaid,
and shall be deemed given when so delivered personally, or by facsimile, or if
mailed, five days after the date of mailing, as follows:
If to the Purchaser or CDL: 380 Allwood Road
Clifton, New Jersey 07012
Telephone: (973) 471-1005
Facsimile: (973) 471-5519
Attention: Mark Carlesimo, Esq.,
General Counsel
With a copy to: Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Telephone: (973) 597-2500
Facsimile: (973) 597-2400
Attention: Alan Wovsaniker, Esq.
If to any Selling Party: 11-13 Hubert Street
New York, New York
Telephone:
Facsimile:
Attention: Mr. Richard Gold
With a copy to: Morse, Zelnick, Rose & Lander, LLP
450 Park Avenue
New York, New York 10022
Telephone: 212-838-1177
Facsimile: 212-838-9190
Attention: George Lander, Esq.
Section 8.2. Expenses. Regardless of whether the transactions provided
for in this Agreement are consummated, except as otherwise provided herein, each
party hereto shall pay its own expenses incident to this Agreement and the
transactions contemplated herein.
Section 8.3. Governing Law; Consent to Jurisdiction This Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of New Jersey, without reference to the choice of law principles thereof.
Each of the parties hereto irrevocably submits to the non-exclusive jurisdiction
of the courts of the State of New Jersey and the United States District Court
for the District of New Jersey, located in Passaic or Essex County, State of New
Jersey, for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby,
except as provided for resolution of disputes in computing the earn-out under
Section 2.4 or computing the 98 Trust Business Income or the Distributions under
Section 2.6. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Agreement. Each of
the parties hereto irrevocably consents to the jurisdiction of any such court in
any such suit, action or proceeding and to the laying of venue in such court.
Each party hereto irrevocably waives any objection to the laying of venue of any
such suit, action or proceeding brought in such courts and irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
Section 8.4. Assignment; Successors and Assigns; No Third Party
Rights. Except as otherwise provided herein, this Agreement may not be assigned
by operation of law or otherwise, and any attempted assignment shall be null and
void. The Purchaser and CDL may assign all of their rights under this Agreement
to any Affiliate; provided such Affiliate assumes all of the obligations of the
Purchaser and CDL remains liable hereunder. No such assignment shall relieve
Purchaser or CDL of their obligations hereunder. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives. This Agreement shall be for the
sole benefit of the parties to this Agreement and their respective successors,
assigns and legal representatives and is not intended, nor shall be construed,
to give any Person, other than the parties hereto and their respective
successors, assigns and legal representatives, any legal or equitable right,
remedy or claim hereunder.
Section 8.5. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument.
Section 8.6. Titles and Headings. The headings and table of contents
in this Agreement are for reference purposes only, and shall not in any way
affect the meaning or interpretation of this Agreement.
Section 8.7. Entire Agreement. This Agreement, including the Schedules
and Exhibits attached thereto, constitutes the entire agreement among the
parties with respect to the matters covered hereby and supersedes all previous
written, oral or implied understandings among them with respect to such matters.
Section 8.8. Amendment and Modification. This Agreement may only be
amended or modified in writing signed by the party against whom enforcement of
such amendment or modification is sought.
Section 8.9. Public Announcement. Except as may be required by law, no
Selling Party, on the one hand, or the Purchaser or CDL, on the other hand,
shall issue any press release or otherwise publicly disclose this Agreement or
the transactions contemplated hereby or any dealings between or among the
parties in connection with the subject matter hereof without the prior approval
of the other. In the event that any such press release or other public
disclosure shall be required, the party required to issue such release or other
disclosure shall consult in good faith with the other party hereto with respect
to the form and substance of such release or other disclosure prior to the
public dissemination thereof.
Section 8.10. Waiver. Any of the terms or conditions of this Agreement
may be waived at any time by the party or parties entitled to the benefit
thereof, but only by a writing signed by the party or parties waiving such terms
or conditions.
Section 8.11. Severability. The invalidity of any portion hereof shall
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its fullest extent, such restriction shall be enforced to
the maximum extent permitted by law.
Section 8.12. No Strict Construction. Each of parties hereto
acknowledge that this Agreement has been prepared jointly by them, and shall not
be strictly construed against any party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
CONSOLIDATED DELIVERY &
LOGISTICS, INC.
By:______________________________
Name:
Title:
SUREWAY AIR TRAFFIC CORPORATION
By:______________________________
Name:
Title:
VICTORY MESSENGER SERVICE, INC.
By:______________________________
Name:
Title:
THE TRUST CREATED UNDER PARAGRAPH THIRD
OF THE LAST WILL AND TESTAMENT OF CHARLES GOLD
By:______________________________
Name: Richard Gold
Title: Trustee
By:______________________________
Name: Gail Gold
Title: Trustee
________________________________
Richard Gold
<PAGE>
Asset Purchase Agreement
Dated
As of FEBRUARY 16, 1999
By and among
CONSOLIDATED DELIVERY & LOGISTICS, INC.,
SUREWAY AIR TRAFFIC CORPORATION
VICTORY MESSENGER SERVICE, INC.
GOLD WINGS TRUST
AND
RICHARD GOLD
<PAGE>
TABLE OF CONTENTS
ARTICLE I - Certain Definitions................................................1
Section 1.1. Certain Definitions..........................................1
Section 1.2. Interpretation...............................................7
ARTICLE II - Purchase and Sale of Assets and Shares; Assumption of Liabilities;
Additional Covenants...........................................................7
Section 2.1. Purchase and Sale of Assets and Shares.......................7
Section 2.2. Purchase Price...............................................8
Section 2.3. Payment of the Purchase Price................................8
Section 2.4 Contingent Earn-Out Payment..................................8
Section 2.5. Allocation of the Purchase Price............................10
Section 2.6 Additional Payment..........................................10
Section 2.7. Closing.....................................................11
ARTICLE III - Representations and Warranties of the Selling Parties...........11
Section 3.1. Organization and Qualification of the Seller and Darobin....11
Section 3.2. Authorization...............................................12
Section 3.3. Non-contravention...........................................12
Section 3.4. No Consents.................................................13
Section 3.5. The Transferred Assets......................................13
Section 3.5A Capitalization; Ownership of Shares.........................13
Section 3.6. Personal Property...........................................14
Section 3.7. Real Property...............................................14
Section 3.8. Predecessor Status..........................................14
Section 3.9. Employment Matters; No Collective Bargaining Agreement......14
Section 3.10. Financial Statements........................................15
Section 3.11. Absence of Certain Developments.............................16
Section 3.12. Governmental Authorizations; Licenses.......................17
Section 3.13. Litigation..................................................17
Section 3.14. Undisclosed Liabilities.....................................17
Section 3.15. Taxes.......................................................18
Section 3.16. Insurance...................................................18
Section 3.17. Environmental Matters.......................................18
Section 3.18. Proprietary Rights..........................................19
Section 3. 19. Material Customers, Contracts and Commitments...............19
Section 3.20. Accounts Receivable.........................................20
Section 3.21. Books and Records...........................................20
Section 3.22. Brokers.....................................................20
Section 3.23. Net Worth of the Companies..................................21
Section 3.24. Year 2000...................................................21
Section 3.25 Affiliates..................................................21
Section 3.26. Full Disclosure.............................................21
ARTICLE IV - Representations and Warranties of the Purchaser and CDL..........21
Section 4.1. Organization................................................21
Section 4.2. Authorization...............................................21
Section 4.3. Non-contravention...........................................22
Section 4.4. No Consents.................................................22
Section 4.5. Brokers.....................................................22
Section 4.6 SEC Filings.................................................22
Section 4.7 Legal Proceedings...........................................22
Section 4.8 CDL Common Stock............................................22
ARTICLE V - Covenants and Agreements..........................................23
Section 5.1. Closing Documents...........................................23
Section 5.2. Transfer and Property Taxes.................................23
Section 5.3. Non-Competition and Confidentiality Agreement...............23
Section 5.4. Best Efforts; Further Assurances............................25
Section 5.5. Employment Matters regarding the Seller.....................25
Section 5.6. Audited Financial Statements of the Seller and Darobin......25
Section 5.7. Access and Information......................................25
Section 5.8 Restrictions on Transfer....................................25
Section 5.9 Lease of Premises...........................................27
Section 5.10 Delivery of Shares..........................................27
Section 5.11 Lock-Up of CDL Common Stock................................27
Section 5.12 Notice to Independent Contractors...........................28
ARTICLE VI - Conditions to Closing............................................28
Section 6.1. Deliveries by the Selling Parties ..........................28
Section 6.2. Deliveries by the Purchaser and CDL. .......................30
ARTICLE VII - Survival of Representations and Warranties; Indemnification.....31
Section 7.1. Survival of Representations and Warranties..................31
Section 7.2. Indemnification.............................................31
Section 7.3. Procedures for Third Party Claims...........................32
Section 7.4. Procedures for Inter-Party Claims...........................33
Section 7.5. Right of Set-Off............................................33
ARTICLE VIII - Miscellaneous..................................................33
Section 8.1. Notices. ...................................................33
Section 8.2. Expenses. ..................................................34
Section 8.3. Governing Law; Consent to Jurisdiction. ....................34
Section 8.4. Assignment; Successors and Assigns; No Third Party Rights...34
Section 8.5. Counterparts. ..............................................35
Section 8.6. Titles and Headings. .......................................35
Section 8.7. Entire Agreement. ..........................................35
Section 8.8. Amendment and Modification. ................................35
Section 8.9. Public Announcement. .......................................35
Section 8.10. Waiver. ....................................................35
Section 8.11. Severability................................................35
Section 8.12. No Strict Construction. ....................................36
Schedules
Schedule 1.1AL Assumed Liabilities
Schedule 1.1PA Purchased Assets
Schedule 1.1RA Retained Assets
Schedule 2.2 Distributions since July 31, 1998
Schedule 2.4 Gross Profit Computation
Schedule 3.1 Foreign Qualification
Schedule 3.3 Contravention of Agreements
Schedule 3.4 Consents
Schedule 3.6 Encumbrances
Schedule 3.7 Offices Leased
Schedule 3.8 Predecessor Names
Schedule 3.9 Employee List and other Employment Matters
Schedule 3.10 Financial Statements
Schedule 3.11 Certain Developments
Schedule 3.12 Authorizations
Schedule 3.13 Litigation
Schedule 3.14 Darobin Liabilities
Schedule 3.15 Tax Contests
Schedule 3.16 Insurance Policies
Schedule 3.17 Environmental Matters
Schedule 3.18 Proprietary Rights
Schedule 3.19 Material Customers, Contracts and Commitments
Schedule 3.20 Accounts Receivable
Schedule 3.25 Affiliates
Exhibits
Exhibit A Form of Note
Exhibit B Allocation of Purchase Price
Exhibit C Form of Consulting Agreement
Exhibit D Description of Leased Property
Exhibit E Form of Lease
THE MAKER HAS CERTAIN SETOFF RIGHTS PURSUANT TO AN ASSET AND STOCK PURCHASE
AGREEMENT DATED THIS DATE AMONG THE MAKER, SUReway Air Traffic Corporation,
A SUBSIDIARY OF THE MAKER, VICTORY messenger serviceS, Inc., GOLD WINGS
TRUST, DAROBIN FREIGHT AGENCY, INC. AND RICHARD GOLD, THE HOLDER.
This Note has been acquired for investment and not with a view to, or for
sale in connection with, any distribution thereof within the meaning of the
Securities Act of 1933, as amended (the "Act"). This Note has not been
registered under the Act, or any state securities law, and may be offered
and sold only if registered pursuant to the provisions of the Act or those
laws or if an exemption from registration is available.
7% SUBORDINATED NOTE DUE 2001
OF CONSOLIDATED DELIVERY & LOGISTICS, INC.
Registered Holder: The Trustee created under Paragraph Third
of the Last Will and Testament of
Charles Gold February 16, 1999
Address: 81 Belvedere Drive No. GW-1
Yonkers, NY 10705
Principal Amount: $1,650,000 Clifton, New Jersey
Due: April 16, 2001
FOR VALUE RECEIVED, CONSOLIDATED DELIVERY & LOGISTICS, INC., a
Delaware corporation (the "Company"), hereby promises to pay to the holder above
named (the "Holder"), or its order or its registered assign(s), the principal
sum above stated in the following increments: (i) $50,000 on August 16, 1999,
(ii) $100,000 on February 16, 2000, (iii) $50,000 on August 16, 2000 and (iv)
the remainder on April 16, 2001, and to pay interest at the rate of seven
percent (7%) per annum from the date hereof. Interest shall be computed on the
balance of principal outstanding from time to time and shall be payable
quarterly beginning on the date hereof; provided however that the final interest
payment shall be made simultaneously with the final payment of principal due on
April 16, 2001 and shall include all interest thereon accrued through such date.
Both principal hereof and interest thereon are payable in lawful money
of the United States of America at the Holder's address above or such other
address as the Holder shall designate in writing delivered to the Company from
time to time. Prior to any sale or other disposition of this Note, the Holder
will endorse hereon the amount of principal paid hereon and the last date to
which interest has been paid hereon. The Company may prepay this debt, in whole
or in part, without premium or penalty at any time.
ARTICLE ONE
SUBORDINATION
(a) Subordination of Liabilities. Holder by its acceptance of this
Subordinated Note covenants and agrees that the payment of the principal of,
interest on, and all other amounts owing in respect of, this Subordinated Note
(the "Subordinated Indebtedness") is hereby expressly subordinated, to the
extent and in the manner hereinafter set forth, to the prior payment in full in
cash of all Senior Indebtedness. The provisions of this Article One shall
constitute a continuing offer to all persons who, in reliance upon such
provisions, become holders of, or continue or hold, Senior Indebtedness, and
such provisions are made for the benefit of the holders of Senior Indebtedness,
and such holders are hereby made obligees hereunder the same as if their names
were written herein as such, and they and/or each of them may proceed to enforce
such provisions.
(b) Company Not to Make Payments with Respect to Subordinated
Indebtedness in Certain Circumstances.
(i) Upon the maturity of any Senior Indebtedness (including
interest thereon or fees or any other amounts owing in respect thereof),
whether at stated maturity, by acceleration or otherwise, all Obligations
owing in respect thereof, in each case to the extent due and owing, shall
first be paid in cash, before any payment (whether in cash, property
securities or otherwise) is made on account of the Subordinated
Indebtedness.
(ii) The Company may not, directly or indirectly, make any
payment with respect to any Subordinated Indebtedness and may not acquire
any Subordinated Indebtedness for cash or property while there exists any
default or event of default under the Credit Agreement or any other issue
of Senior Indebtedness that is then in existence.
(iii) In the event the Holder receives written notice that an
event of default exists with respect to any Senior Indebtedness (a "Notice
of Event of Default"), the Holder agrees not to accelerate the payment of
the obligations of the Company hereunder or bring any action with respect
thereto, until the earlier of (a) receipt by the Holder of written notice
that such Event of Default has been cured, or (b) six (6) months following
the date of the Notice of Event of Default.
(iv) In the event that notwithstanding the provisions of the
preceding clauses (i) and (ii) of this Article One, the Company shall make
any payment on account of the Subordinated Indebtedness at a time when
payment is not permitted by said clause (i) or (ii), such payment shall be
held by the holder of this Subordinated Note, in trust for the benefit of,
and shall be paid forthwith over and delivered to, the holders of Senior
Indebtedness or their representative or the trustee under the indenture or
other agreement pursuant to which any instruments evidencing any Senior
Indebtedness may have been issued, as their respective interests may
appear, for application pro rata to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in
full in accordance with the terms of such Senior Indebtedness, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness. Without in any way modifying the provisions of this
Article One or affecting the subordination effected hereby if the hereafter
referenced notice is not given, the Company shall give the holder of this
Subordinated Note prompt written notice of any event which would prevent
payments under clause (i) or (ii) of this Section (b).
(c) Subordination to Prior Payment of All Senior Indebtedness on
Dissolution, Liquidation or Reorganization of Company. Upon any distribution of
assets of the Company upon dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or otherwise):
(i) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full in cash of all Senior Indebtedness
(including, without limitation, post-petition interest at the rate provided
in the documentation with respect to the Senior Indebtedness, whether or
not such post-petition interest is an allowed claim against the debtor in
any bankruptcy or similar proceeding) before the holder of this
Subordinated Note is entitled to receive any payment of any kind or
character on account of the Subordinated Indebtedness;
(ii) any payment or distributions of assets of the Company of any
kind or character, whether in cash, property or securities to which the
holder of this Subordinated Note would be entitled except for the
provisions of this Article One, shall be paid by the liquidating trustee or
agent or other person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or other trustee
or agent, directing to the holders of Senior Indebtedness or their
representative or representatives, or the trustee or trustees under any
indenture under which any instruments evidencing any such Senior
Indebtedness may have been issued, to the extent necessary to make payment
in full in cash of all Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness; and
(iii) in the event that, notwithstanding the foregoing provision
of this Section (c), any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, shall be
received by the holder of this Subordinated Note on account of Subordinated
Indebtedness before all Senior Indebtedness is paid in full in cash, such
payment or distribution shall be received and held in trust for and shall
be paid over to the holders of the Senior Indebtedness remaining unpaid or
unprovided for or their representative or representatives, or to the
trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued, for
application to the payment of such Senior Indebtedness until all such
Senior Indebtedness shall have been paid in full in cash, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
Without in any way modifying the provisions of this Article One or
affecting the subordination effected hereby if the hereafter referenced notice
is not given, the Company shall give prompt written notice to the holder of this
Subordinated Note of any dissolution, winding up, liquidation or reorganization
of the Company (whether in bankruptcy, insolvency or receivership proceedings or
upon assignment for the benefit of creditors or otherwise).
(d) Subrogation. Subject to the prior payment in full in cash of all
Senior Indebtedness, the holder of this Subordinated Note shall be subrogated to
the rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on this Subordinated Note shall be paid in full, and for
the purpose of such subrogation no payments or distributions to the holders of
the Senior Indebtedness by or on behalf of the Company or on behalf of the
holder of this Subordinated Note shall, as between the Company, its creditors
other than the holders of Senior Indebtedness, and the holder of this
Subordinated Note, be deemed to be payment by the Company to or on account of
the Senior Indebtedness, it being understood that the provisions of this Article
One are and are intended solely for the purpose of defining the relative rights
to the holder of this Subordinated Note, on the one hand, and the holders of the
Senior Indebtedness, on the other hand.
(e) Obligation of the Company Unconditional. Nothing contained in this
Article One or otherwise in this Subordinated Note is intended to or shall
impair, as between the Company and the holder of this Subordinated Note, the
obligation of the Company, which is absolute and unconditional, to pay to the
holder of this Subordinated Note the principal of and interest on this
Subordinated Note as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the holder of this Subordinated Note and creditors of the Company
other than the holders of the Senior Indebtedness, nor shall anything herein or
therein prevent the holder of this Subordinated Note from exercising all
remedies otherwise permitted by applicable law upon an event of default under
this Subordinated Note, subject to the limitations, if any, under this Article
One or the rights of Holders to exercise rights and remedies, and subject to the
rights, if any, under Article One of the holders of Senior Indebtedness in
respect of cash, property, or securities of the Company received upon the
exercise of any such remedy. Upon any distribution of assets of the Company
referred to in this Article One, the holder of this Subordinated Note shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the holder of this
Subordinated Note, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article One.
(f) Subordination Rights Not Impaired by Acts or Omission of Company
or Holders of Senior Indebtedness. No right of any present and future holders of
any Senior Indebtedness to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act in good faith by any such
holders, or by any noncompliance by the Company with the terms and provisions of
this Subordinated Note, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with. The holders of the Senior
Indebtedness may, without in any way affecting the obligations of the holder of
this Subordinated Note with respect hereto, at any time or from time to time and
in their absolute discretion, change the manner, place or terms of payment of,
change or extend the time of payment of, or renew or alter, any Senior
Indebtedness or amend, modify or supplement any agreement or instrument
governing or evidencing such Senior Indebtedness or any other document referred
to therein, or exercise or refrain from exercising any other of their rights
under the Senior Indebtedness including, without limitation, the waiver of
default thereunder and the release of any collateral securing such Senior
Indebtedness, all without notice to or assent from the holder of this
Subordinated Note.
(g) Definitions. For purposes of Article One of this Subordinated
Note, the following capitalized terms have the following meanings:
"Credit Agreement" means the Loan and Security Agreement (as amended,
modified, supplemented, extended, restated, refinanced, replaced or refunded
from time to time), originally dated as of June 14, 1997, by and between the
Company and its subsidiaries and First Union Commercial Corporation or its
affiliates and all other indebtedness due to First Union Commercial Corporation
or its affiliates, or any other bank or similar financial institution.
"Mezzanine Agreement" means the Senior Subordinated Loan Agreement (as
amended, modified, supplemented, extended, restated, refinanced, replaced or
refunded from time to time), dated as of January 28, 1999, by and between the
Company, Paribas Capital Funding LLC, Exeter Venture Lenders, L.P., Exeter
Capital Partners IV, L.P. and the other Lenders from time to time party thereto.
"Obligations" means any principal, interest, premium, penalties, fees,
expenses, indemnities and other liabilities and obligations (including any
guaranties of the foregoing liabilities and obligations) payable under the
documentation governing any Senior Indebtedness (including interest accruing
after the commencement of any bankruptcy, insolvency, receivership or similar
proceeding, whether or not such interest is an allowed claim against the debtor
in any such proceeding).
"Senior Indebtedness" means all Obligations (i) of the Company under,
or in respect of, the Credit Agreement and any guaranty thereunder, (ii) of the
Company under, or, in respect of, the Mezzanine Agreement and any guaranty
thereof and (iii) of the Company with respect to indebtedness for borrowed money
and any guaranty thereof which is due to a bank or other institutional or which
is outstanding as a result of any public offering or private placement of debt
securities arranged by a bank or financial institution. This Note shall be pari
passu with other subordinated notes issued in connection with business
acquisitions by the Company.
(h) In furtherance of this Subordination the Holder agrees to execute
and deliver any and all documents requested by the Company for delivery to
holders of its Senior Indebtedness (in the form as requested by such creditors)
in order to verify this Subordination.
ARTICLE TWO
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur, the Holder hereof, at its option, may declare all sums of
principal and accrued interest then remaining unpaid hereon and all other
amounts payable hereunder immediately due and payable.
2.01 Events of Default
For purposes of this instrument, an Event of Default will be deemed to
have occurred if:
(a) the Company shall fail to pay any installment of principal or
interest on this Note and such non-payment shall continue for a period of ten
(10) days after written notice of non-payment has been received by the Company;
or
(b) a receiver, liquidator or trustee of the Company or of any
property of the Company, shall be appointed by court order; or the Company shall
be adjudged bankrupt or insolvent; or any of the property of the Company shall
be sequestered by court order; or a petition to reorganize the Company under any
bankruptcy, reorganization or insolvency law shall be filed against the Company
and shall not be dismissed within 60 days after such filing; or
(c) the Company shall file a petition in voluntary bankruptcy or
requesting reorganization under any provision of any bankruptcy, reorganization
or insolvency law or shall consent to the filing of any petition against it
under any such law; or
(d) the Company shall make a formal or informal assignment for the
benefit of its creditors or admit in writing its inability to pay its debts
generally when they become due or shall consent to the appointment of a
receiver, trustee or liquidator of the Company or of all or any part of the
property of the Company.
2.02 Remedies on Default
If an Event of Default shall have occurred, in addition to its rights
and remedies under this Note, and any other instruments, the Holder may at its
option by written notice to the Company declare all indebtedness to Holder
hereunder to be due and payable, whereupon the same shall forthwith mature and
become due and payable together with interest accrued thereon, without any
further notice to and without presentment, demand, protest or notice of protest,
all of which are hereby waived.
Subject to the provisions of Article One hereof, the Holder may
proceed to protect and enforce its rights by suit in equity, action at law or
other appropriate proceedings, including, without limitation, action for the
specific performance of any agreement contained herein or in any other
instrument, or for an injunction against a violation of any of the terms hereof
or thereof, or in aid of the exercise of any right, power or remedy granted
hereby or by law, equity or otherwise.
ARTICLE THREE
MISCELLANEOUS
3.01 Failure or Delay Not Waiver. No failure or delay on the part of
the Holder hereof in the exercise of any power, right, or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
3.02 Notices. Any notice herein required or permitted to be given
shall be given by federal express or similar overnight courier or by same day
courier service or by certified mail, return receipt requested, if to the
Holder, at the address set forth on the first page hereof, or,
If to the Company:
Consolidated Delivery & Logistics, Inc., 380 Allwood Road, Clifton, New Jersey
07012, Attn: General Counsel.
3.03 Amendments. The term "Note" or "this Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed or, if later amended or supplemented, then, as so amended or
supplemented.
3.04 Incorporation of Asset and Stock Purchase Agreement. This is the
Note issued pursuant to the Asset and Stock Purchase Agreement, dated the date
hereof, among the Company, the Holder and others, and is subject to set off and
to the other terms and conditions of such Asset and Stock Purchase Agreement,
which is incorporated herein by reference.
3.05 Assignability. This Note shall be binding upon the Company, its
successors and assigns, and shall inure to the benefit of Holder, its successors
and assigns. This Note may not be transferred or assigned.
3.06 Governing Law; Consent to Jurisdiction. This Note has been
executed in and shall be governed by the laws of the State of New Jersey,
without reference to the choice of law principles thereof. Each of the Holder
and the Company irrevocably submits to the non-exclusive jurisdiction of the
courts of the State of New Jersey and the United States District Court for the
District of New Jersey, located in Passaic or Essex County, State of Jersey, for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Note and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each of the
Holder and the Company anywhere in the world by the same methods as are
specified for the giving of notices under this Note. Each of the Holder and the
Company irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each of the
Holder and the Company irrevocably waives any objection to the laying of venue
of any such suit, action or proceeding brought in such courts and irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
3.07 No Personal Liability. No officer, director, shareholder,
employee, consultant or agent of the Company shall be personally liable for
repayment of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its duly authorized officer and its corporate seal to be affixed
hereto.
CONSOLIDATED DELIVERY & LOGISTICS, INC.
By:_________________________________________
Name:
Title:
