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
Date of report (Date of Earliest Event Reported): August 15, 1997
TRANSIT GROUP, INC.
(Exact name of Registrant as specified in its charter)
Florida 33-30123-A 59-2576629
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
8423 Western Way
Jacksonville, Florida 32256
(Address of principal executive offices, including zip code)
(904) 363-0089
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 15, 1997, Transit Group, Inc. ("Transit Group"),
formerly known as "General Parcel Service, Inc." consummated the
acquisition of Service Express, Inc., an Alabama corporation
("Service Express"). Pursuant to the Agreement and Plan of
Reorganization executed at closing, a wholly-owned Alabama
subsidiary of Transit Group was merged with and into Service
Express in a reverse triangular merger, with Service Express
remaining as the surviving corporation of the merger. Upon
consummation of the merger, all of the outstanding common stock
of Service Express was converted into 903,226 shares of Transit
Group common stock.
In addition, on August 15, 1997, Transit Group consummated the
acquisition of Capitol Warehouse, Inc., a Kentucky corporation
("Capitol Warehouse"). Pursuant to the Agreement and Plan of
Reorganization executed at closing, a wholly-owned Kentucky
subsidiary of Transit Group was merged with and into Capitol
Warehouse in a reverse triangular merger, with Capitol Warehouse
remaining as the surviving corporation of the merger. Upon
consummation of the merger, all of the outstanding common stock
of Capitol Warehouse was converted into 641,283 shares of
Transit Group common stock.
Based in Atlanta, Georgia, Transit Group is a Florida
corporation currently in the parcel delivery business.
Service Express and Capitol Warehouse are privately held
truckload carriers based in Tuscaloosa, Alabama and Louisville,
Kentucky, respectively.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
At the present time, it is impractical to provide the required
financial statements for Service Express and Capitol Warehouse
relative to their respective acquisitions as required by Article
11 of Regulation S-X and this Item 7 of Form 8-K. Transit Group
will file such pro forma financial information under cover of a
Form 8-K/A as soon as practicable, but not later than October
30, 1997 (60 days after this Report is required to be filed).
(b) Pro Forma Financial Information
At the present time, it is impractical to provide the pro forma
financial information relative to the Service Express and
Capitol Warehouse acquisitions as required by Article 11 of
Regulation S-X and this Item 7 of Form 8-K. Transit Group will
file such pro forma financial information under cover of a Form
8-K/A as soon as practicable, but not later than October 30,
1997 (60 days after this Report is required to be filed).
(c) Exhibits
2.1 Agreement and Plan of Reorganization dated August 15, 1997,
by and among Transit Group, Service Express, Tuscaloosa
Warehouse, Inc. and Richard Davis.
2.2 Agreement and Plan of Reorganization dated August 15, 1997,
by and among Transit Group, Capitol Warehouse and Jerry
Pennington.
99 Press Release.
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 hereunto duly authorized.
TRANSIT GROUP, INC.
Date: August 27, 1997
/s/ Philip A. Belyew
- ----------------------
Philip A. Belyew
President and Chief Executive Officer
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
DATED: AUGUST 15, 1997
TABLE OF CONTENTS
Exhibits and Schedules
Exhibit "A"-- Articles of Merger
Exhibit "B"-- Employment Agreement
Exhibit "C"-- Non-Competition Agreements
Exhibit "D"-- Escrow Agreement
Exhibit "E"-- Subscription Agreement
Exhibit "F"-- Guaranty Agreement
Schedule 1-- List of Shareholders/Stock Allocation
Schedule 2-- Shares Subject to Redemption
Schedule 4.2-- TGI Consents
Schedule 4.4-- TGI Brokers<PAGE>
Agreement and Plan of Reorganization
This Agreement and Plan of Reorganization ("Agreement") is made
as of August 15, 1997, by Transit Group, Inc., f/k/a General
Parcel Service, Inc., a Florida corporation ("TGI"), Service
Express, Inc., an Alabama corporation (the "Company"),
Tuscaloosa Warehouse, Inc., an Alabama corporation, and Richard
Davis, an individual resident in Alabama (individually, a
"Seller" and, collectively, the "Sellers"). TGI, the Company
and the Sellers are sometimes referred to herein individually as
a "Party" and collectively as the "Parties".
RECITALS
A. The Parties intend that, subject to the terms and conditions
set forth herein, a new corporation known as Transit Group Sub.,
Inc. will be organized in Alabama as a wholly owned subsidiary
of TGI ("Newco") will merge with and into the Company in a
reverse triangular merger (the "Merger"), with the Company to be
the surviving corporation of the Merger, all pursuant to the
terms and conditions of this Agreement, the Articles of Merger
substantially in the form of Exhibit "A" hereto (the "Articles
of Merger") and the applicable provisions of the laws of Alabama.
B. Upon the effectiveness of the Merger, all the outstanding
capital stock of the Company will be converted into capital
stock of TGI, in the manner and on the basis determined herein
and as provided in the Articles of Merger.
C. The Merger is intended to be treated as a "purchase" for
accounting purposes and a tax-free reorganization pursuant to
the provisions of Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended (the "Code"), by virtue of the
provisions of Section 368(a)(2)(D) of the Code.
D. Sellers are the sole shareholders of the Company.
AGREEMENT
For and in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"Agreement" --this Agreement and Plan of Reorganization
together with all Schedules and Exhibits hereto.
"Balance Sheet"--as defined in Section 3.4.
"Closing"--as defined in Section 2.7.
"Closing Date"--the date and time as of which the Closing
actually takes place.
"Company"--collectively the Company identified in the Recitals
to this Agreement together with each subsidiary of same.
"Company's Disclosure Letter"--the disclosure letter delivered
by Sellers to TGI concurrently with the execution and delivery
of this Agreement.
"Contemplated Transactions"--all of the transactions
contemplated by this Agreement, including:
(a) the Merger of Newco and the Company;
(b) the execution, delivery, and performance of the Employment
Agreement, Non-Competition Agreements and the Escrow Agreement.
(c) the performance by TGI, the Company and Sellers of their
respective covenants and obligations under this Agreement.
"Damages"--as defined in Section 9.2.
"Disclosure Letter"--the disclosure letter delivered by Sellers
to TGI concurrently with the execution and delivery of this
Agreement.
"Effective Time" --the effective time of the Merger as defined
in Section 2.1.
"Employment Agreements"--as defined in Section 2.8(a)(iii).
"Environmental Law"--any law or regulation that requires or
relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or
other prohibitions and of the commencements of activities, such
as resource extraction or construction, that could have
significant impact on the environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the
environment;
(c) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or
other potentially harmful substances;
(d) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or
prevention; or
(e) making responsible parties pay private parties, or groups
of them, for damages done to their health or the environment, or
permitting self-appointed representatives of the public interest
to recover for injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974,
as amended, and regulations and rules issued pursuant to that
act or any successor law.
"Escrow Agreement" --as defined in Section 9.5.
"GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the
Balance Sheet and the other financial statements referred to in
Section 3.4 were prepared.
"Hazardous Materials"--any waste or other substance that is
listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, or toxic or a
pollutant or a contaminant under or pursuant to any
Environmental Law, including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or
asbestos-containing materials.
"Merger"--as defined in the Recitals hereto.
"Non-Competition Agreements"--as defined in Section 2.8(a)(iv).
"Occupational Safety and Health Law"--any law or regulation
designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or
sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions.
"Redemption Period" --as defined in Section 2.9.
"Redemption Request" --as defined in Section 2.9.
"Securities Act"--the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that act or
any successor law.
"Sellers"--as defined in the first paragraph of this Agreement.
"TGI"--as defined in the first paragraph of this Agreement.
"TGI Disclosure Letter"--the disclosure letter delivered by TGI
to Sellers concurrently with the execution and delivery of this
Agreement.
2. PLAN OF REORGANIZATION
2.1 THE MERGER
Subject to the terms and conditions of this Agreement, prior
to the Closing Date, TGI will incorporate and organize Newco and
will cause the Board of Directors and shareholders of Newco to
approve the Merger and perform all of the duties of Newco set
forth in this Agreement. Subject to the terms and conditions of
this Agreement, the Articles of Merger will be filed with the
Secretary of State of the State of Alabama on the Closing Date.
The date and time that the Articles of Merger is filed with the
Alabama Secretary of State and the Merger thereby becomes
effective will be referred to in this Agreement as the
"Effective Time." Subject to the terms and conditions of this
Agreement and the Articles of Merger, Newco will be merged with
and into the Company in a statutory merger pursuant to the
Articles of Merger and in accordance with applicable provisions
of Alabama law as follows:
2.1.1 Conversion of Company Common Stock. Each share of
common stock of the Company, $100.00 par value (the "Company
Common Stock"), that is issued and outstanding immediately prior
to the Effective Time, will, by virtue of the Merger and at the
Effective Time and without further action on the part of any
holder thereof, be converted into the right to receive
12,043.011 shares of fully paid and nonassessable common stock
of TGI, $.01 par value per share ("TGI Common Stock"). The
total number of shares of TGI Common Stock into which each
Seller's shares of Company Common Stock will be converted is set
forth on Schedule 1 hereto.
2.1.2 Conversion of Newco Shares. Each share of Newco Common
Stock, par value $0.01 ("Newco Common Stock"), that is issued
and outstanding immediately prior to the Effective Time, will,
by virtue of the Merger and without further action on the part
of the sole shareholder of Newco, be converted into and become
one share of common stock of the Company, as the surviving
corporation that is to be issued and outstanding immediately
after the Effective Time, which shall be the only share of
Company Common Stock that is issued and outstanding immediately
after the Effective Time.
2.2 FRACTIONAL SHARES
No fractional shares of TGI Common Stock will be issued in
connection with the Merger.
2.3 EFFECTS OF THE MERGER
At the Effective Time: (a) the separate existence of Newco
will cease and Newco will be merged with and into the Company
and the Company will be the surviving corporation pursuant to
the terms of the Articles of Merger; (b) the Articles of
Incorporation and Bylaws of Newco will be the Articles of
Incorporation and Bylaws of the surviving corporation; (c) each
share of Newco Common Stock outstanding immediately prior to the
Effective Time will be converted as provided in Section 2.1.2
above; (d) the directors of Newco in effect at the Effective
Time will be the directors of the Company as the surviving
corporation, and the officers of Newco will be the officers of
the Company as the surviving corporation; (e) each share of
Company Common Stock outstanding immediately prior to the
Effective Time will be converted as provided in Section 2.1.1;
and (f) the Merger will, at and after the Effective Time, have
all of the effects provided by applicable law.
2.4 TAX-FREE REORGANIZATION
The Parties intend to adopt this Agreement as a tax-free plan
of reorganization and to consummate the Merger in accordance
with the provisions of Section 368(a)(1)(A) of the Code. The
Parties believe that the value of the TGI Common Stock to be
received in the Merger is equal to the value of the Company
Common Stock to be surrendered in exchange therefor. The TGI
Common Stock issued in the Merger will be issued solely in
exchange for the Company Common Stock, and no other transaction
other than the Merger represents, provides for or is intended to
be an adjustment to, the consideration paid for the Company
Common Stock. TGI represents now, and as of the Closing, that
it presently intends to continue the Company's historic business
or use a significant portion of the Company's business assets in
a business. The provisions and representations contained or
referred to in this Section 2.4 shall survive until the
expiration of the applicable statute of limitations. Sellers
acknowledge that they have received their own independent tax
advice and counsel with respect to the Merger and the
transactions contemplated herein and are not relying on
representations made by TGI or its counsel, accountants or
advisors with respect thereto.
2.5 PURCHASE ACCOUNTING TREATMENT
The Parties intend that the Merger be treated as a "purchase"
for accounting purposes.
2.6 WAIVER OF DISSENTERS RIGHTS
Each of the Sellers hereby waives any and all rights such
shareholder has to dissent from the Merger under Alabama law.
2.7 CLOSING.
The consummation of the merger provided for in this Agreement
(the "Closing") will take place at the offices of Seller's
Counsel, Espy, Nettles, Scogin and Brantley, P.C., located at
2728 Eighth Street, Tuscaloosa, Alabama 35403, at 5:00 p.m.
(local time) on August 15, 1997, or at such time and place as
the parties may agree.
2.8 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to TGI:
(i) certificates representing their shares of Company Common
Stock, duly endorsed for transfer to TGI (or accompanied by duly
executed stock powers), with signatures guaranteed by a
commercial bank;
(ii) releases and resignations from the officers and directors
of the Company duly executed by such parties;
(iii) employment agreement in the form of Exhibit "B," executed
by a Seller (the "Employment Agreement");
(iv) non-competition agreements in the forms of Exhibit "C,"
executed by Sellers (collectively, the "Non-Competition
Agreements");
(v) an escrow agreement in the form of Exhibit "D," executed
by Sellers;
(vi) a subscription agreements for the shares of TGI Common
Stock to be received by the Sellers in the Merger in the form
attached hereto as Exhibit "E,"; and
(vii) a certificate executed by Sellers certifying to TGI that
each of Sellers' representations and warranties in this
Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date
as if made on the Closing Date.
(b) TGI will deliver to Sellers:
(i) share certificates representing the TGI Common Stock,
issued in the name of the Sellers in the amounts shown on
Schedule 1;
(ii) a certificate executed by TGI to the effect that, except
as otherwise stated in such certificate, each of TGI's
representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing
Date;
(iii) the Employment Agreement; and
(iv) the Guaranty Agreement referred to in Section 2.10.
2.9 MANDATORY STOCK REDEMPTION
During the one (1) year period following the Closing Date
(the "Redemption Period"), each Seller shall have the right to
require TGI to redeem all or any part of his pro rata share of
an aggregate of 464,516 shares of TGI Common Stock for a
purchase price of $3.875 per share (for a total purchase price
of $1,799.999.50), if such Seller notifies TGI in writing of his
election to have such shares redeemed (a "Redemption Request").
The number of shares which each Seller may require TGI to redeem
is set forth in Schedule 2 hereto. The Sellers may only request
a redemption of an aggregate of 464,516 shares of TGI Common
Stock during the period beginning on the sixtieth (60th) day
after Closing and ending on the first (1st) anniversary of the
Closing Date (the "Redemption Period"), with each Seller limited
to his pro rata portion thereof. Within sixty (60) days after
receipt of a Redemption Request, to the extent TGI has lawful
funds available to do so, TGI shall redeem such shares by paying
in cash the purchase price therefor. Any Seller whose shares
are being redeemed shall surrender the certificate representing
such shares to TGI, properly endorsed for transfer and
cancellation. If less than all of the shares represented
thereby are being redeemed by TGI, TGI shall cause a new
certificate to be issued to such Seller, representing the
balance of the shares not redeemed. The rights granted to the
Sellers hereunder shall expire, whether or not exercised in
whole or in part, on the first (1st) anniversary of the Closing
Date.
The Parties acknowledge that the foregoing redemption right is
based on the desire of the Sellers to receive a minimum cash
amount for a certain number of shares of TGI Common Stock.
Therefore, notwithstanding the foregoing or anything to the
contrary herein, the number of shares which any Seller may
require TGI to redeem shall be reduced by the dollar amount of
the gross proceeds resulting from any sale by such Seller of
shares of TGI Common Stock during the Redemption Period. For
example, in the event a particular Seller owns twenty percent
(20%) of the stock of the Company, such Seller may require TGI
to redeem an aggregate of up to $359,999.00 in value (92,903
shares of TGI Common Stock) during the Redemption Period. In
the event that such Seller sells 10,000 shares of TGI Common
Stock for a purchase price of $4.60 per share, resulting in
gross proceeds of $46,000, then the total dollar amount to be
received by such Seller in connection with this right of
redemption hereunder shall be reduced to $313,999.00, and the
number of shares to be redeemed shall be correspondingly reduced
to 81,032.
2.10 REDEMPTION GUARANTY
TGI agrees that it will obtain and deliver to the Sellers at
Closing the Guaranty and Stock Purchase Agreement in the form
attached hereto as Exhibit "F", pursuant to which T. Wayne
Davis, the majority shareholder of TGI, will agree that in the
event and to the extent TGI does not have sufficient funds to
lawfully redeem the TGI Common Stock of the Sellers at the time
of receipt of a Redemption Request, Mr. Davis will purchase such
shares directly from the Seller, on the same terms and
conditions as set forth in Section 2.9 above. Further, in order
to reduce the number of shares subject to redemption by TGI, TGI
agrees to use its reasonable efforts to accommodate a request by
a Seller to sell shares to an independent third party purchaser,
to the extent such sale would comply with applicable securities
laws and regulations.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to TGI as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Company's Disclosure Letter contains a
statement of the Company's jurisdiction of incorporation, a list
of all other jurisdictions in which it is authorized to do
business, and its capitalization (including the identity of each
stockholder and the number of shares held by each). The Company
is duly organized, validly existing, and in good standing under
the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is
now being conducted, to own or use the properties and assets
that it purports to own or use, and to perform all its
obligations under its contracts. The Company is duly qualified
to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by
it, or the nature of the activities conducted by it, requires
such qualification.
(b) Sellers have delivered to TGI copies of the Articles of
Incorporation and Bylaws of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and the Company, enforceable against them
in accordance with its terms. Upon the execution and delivery
by Sellers of the Employment Agreement, the Escrow Agreement,
the Subscription Agreements and the Non-Competition Agreements
(collectively, the "Sellers' Closing Documents"), the Sellers'
Closing Documents will constitute the legal, valid, and binding
obligations of Sellers and the Company, enforceable against them
in accordance with their respective terms. Each of the Sellers
and the Company has the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement
and the Sellers' Closing Documents and to perform their
obligations under this Agreement and the Sellers' Closing
Documents.
(b) Neither the execution and delivery of this Agreement nor
the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Articles of Incorporation or Bylaws of the
Company; or (B) any resolution adopted by the board of directors
or the stockholders of the Company; or (C) any of the terms or
requirements of, or give any governmental body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any
permit or authorization that is held by the Company or that
otherwise relates to the business of, or any of the assets owned
or used by, the Company; or (D) any provision of, or give any
person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any contract to which the Company
is bound; or
(ii) result in the imposition or creation of any lien, claim
or encumbrance upon or with respect to any of the assets owned
or used by the Company.
(c) Except as set forth in Part 3.2 of the Company's Disclosure
Letter, neither Sellers nor the Company is or will be required
to give any notice to or obtain any consent from any person in
connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated
Transactions.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of
100 shares of common stock, par value $100.00 per share, of
which 75 shares are issued and outstanding (the "Shares").
Sellers are and will be on the Closing Date the record and
beneficial owners and holders of the Shares, free and clear of
all liens, claims or encumbrances. The shares are owned of
record as shown on Part 3.3 of the Company's Disclosure Letter.
With the exception of the Shares (which are owned by Sellers),
there are no other outstanding equity securities or other
securities of the Company. Except as set forth in Part 3.3 of
the Company's Disclosure Letter, no legend or other reference to
any purported encumbrance appears upon any certificate
representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and
nonassessable. There are no contracts relating to the issuance,
sale, or transfer of any equity securities or other securities
of the Company. None of the outstanding equity securities or
other securities of the Company was issued in violation of the
Securities Act or any other law or regulation. The Company does
not own, nor does it have any contract to acquire, any equity
securities or other securities of any person (other than the
Company) or any direct or indirect equity or ownership interest
in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to TGI: (a) unaudited balance sheets
of the Company as at December 31 in each of the years 1994
through 1996, and the related unaudited statements of income,
changes in stockholders' equity, and cash flow for each of the
fiscal years then ended, and (b) a balance sheet of the Company
as at May 31, 1997 (the "Balance Sheet"). Such financial
statements and the notes thereto fairly present the financial
condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP, consistently
applied throughout the periods involved.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and
other records of the Company, all of which have been made
available to TGI, are complete and correct and have been
maintained in accordance with applicable law. The minute books
of the Company contain accurate and complete records of all
meetings of, and corporate actions taken by, the stockholders,
the Boards of Directors, and committees of the Boards of
Directors of the Company, and no meeting of any such
stockholders, Board of Directors, or committee has been held for
which minutes have not been prepared and are not contained in
such minute books.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Company's Disclosure Letter contains a
complete and accurate list of all real property and material
items of personal property owned by the Company. The Company
owns good and marketable title to the properties and assets
located in the facilities owned or operated by the Company or
reflected as owned in the books and records of the Company,
including all of the properties and assets reflected in the
Balance Sheet, and all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Balance
Sheet. All material properties and assets reflected in the
Balance Sheet are free and clear of all liens, claims or
encumbrances and are not, in the case of real property, subject
to any use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such
properties and assets, (a) mortgages or security interests shown
on the Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a
default) exists, and (b) zoning laws and other land use
restrictions that do not impair the present or anticipated use
of the property subject thereto. All buildings, plants, and
structures owned by the Company lie wholly within the boundaries
of the real property owned by the Company and do not encroach
upon the property of, or otherwise conflict with the property
rights of, any other person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment owned or
leased by the Company are structurally sound, are in good
operating condition and repair, and are adequate for the uses to
which they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are
not material in nature or cost. The building, plants,
structures, and equipment owned or leased by the Company are
sufficient for the continued conduct of the Company's businesses
after the Closing in substantially the same manner as conducted
prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company as of the Closing Date
represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary
course of business. Unless paid prior to the Closing Date, the
accounts receivable are or will be as of the Closing Date
current and collectible net of the respective reserves shown on
the Balance Sheet. There is no contest, claim, or right of
set-off relating to the amount or validity of such accounts
receivable.
3.9 NO UNDISCLOSED LIABILITIES
The Company has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued,
contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Balance Sheet and current
liabilities incurred in the ordinary course of business since
the dates thereof.
3.10 TAXES
(a) The Company has filed or caused to be filed on a timely
basis all tax returns that are or were required to be filed by
or with respect to it. The Company has paid, or made provision
for the payment of, all taxes that have or may have become due
for all periods prior to Closing.
(b) No United States, federal or state income tax returns of
the Company have been audited by the IRS or relevant state tax
authorities. Neither Sellers nor the Company has given or been
requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other person) of
any statute of limitations relating to the payment of taxes of
the Company.
(c) The charges, accruals, and reserves with respect to taxes
on the books of the Company are adequate (determined in
accordance with GAAP) and are at least equal to the Company's
liability for taxes. There exists no proposed tax assessment
against the Company except as disclosed in the Balance Sheet.
All taxes that the Company is or was required to withhold or
collect have been duly withheld or collected and, to the extent
required, have been paid to the proper governmental body or
other person.
(d) All tax returns filed by the Company are true, correct,
and complete. The Company is not, and within the five-year
period preceding the Closing Date has not been, an "S"
corporation.
3.11 NO MATERIAL ADVERSE CHANGE.
Since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties,
prospects, assets, or condition of the Company, and no event has
occurred or circumstance exists that may result in such a
material adverse change.
3.12 EMPLOYEE BENEFITS
Part 3.12 of the Company's Disclosure Letter contains a list
of all pension, retirement, disability, medical, dental or other
health plans, life insurance or other death benefit plans,
profit sharing, deferred compensation agreements, stock, option,
bonus or other incentive plans, vacation, sick, holiday or other
paid leave plans, severance plans or other similar employee
benefit plans maintained by the Company (the "Plans"),
including, without limitation, all "employee benefit plans" as
defined in Section 3(3) of ERISA. All contributions due from
the Company with respect to any of the Plans have been made or
accrued on the Company's financial statements, and no further
contributions will be due or will have accrued thereunder as of
the Closing. Each of the Plans, and its operation and
administration, is, in all material respects, in compliance with
all applicable, federal, state, local and other governmental
laws and ordinances, orders, rules and regulations, including
the requirements of ERISA and the Internal Revenue Code. All
such Plans that are "employee pension benefit plans" (as defined
in Section 3(2) of ERISA) which are intended to qualify under
I.R.C. Section 401(a)(8) have received favorable determination
letters that such plans satisfy all qualification requirements.
In addition, the Company has not been a participant in any
"prohibited transaction," within the meaning of Section 406 of
ERISA, with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA) which the Company sponsors as
employer or in which the Company participates as an employer,
which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a)
of ERISA), or which could result in an excise tax.
3.13 COMPLIANCE
(a) The Company is and at all times has conducted its business
and the ownership and use of its assets in full compliance with
all applicable laws.
(b) Part 3.13 of the Company's Disclosure Letter contains a
complete and accurate list of each permit or governmental
consent or authorization that is held by the Company or that
otherwise relates to the business of, or to any of the assets
owned or used by, the Company. Each such permit or governmental
consent or authorization is valid and in full force and effect
and constitutes all of the governmental authorizations necessary
to permit the Company to lawfully conduct and operate its
business in the manner currently conducted.
3.14 LITIGATION
(a) Except as set forth in Part 3.14 of the Company's
Disclosure Letter, there is no pending or to the knowledge of
the Sellers, threatened action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
governmental body or arbitrator (i) that has been commenced by
or against the Company or that otherwise relates to or may
affect the business of, or any of the assets owned or used by,
the Company; or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
(b) There is no order or court decision to which the Company,
the Sellers, any director or officer of the Company, or any of
the assets owned or used by the Company, is subject.
3.15 ABSENCE OF CHANGES
Except as set forth in Part 3.15 of the Company's Disclosure
Letter, since the date of the Balance Sheet, the Company has
conducted its business only in the ordinary course and there has
not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of
capital stock of the Company; issuance of any security
convertible into such capital stock; grant of any purchase,
redemption or stock retirement rights, or any acquisition by the
Company of any shares of its capital stock; or declaration or
payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Articles of Incorporation or Bylaws of
the Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director,
officer, or employee (except normal raises in the ordinary
course of business consistent with past practices), or entry
into any employment, severance, or similar contract with any
director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee
benefit plan for or with any employees of the Company;
(e) damage to or destruction or loss of any material asset or
property of the Company, whether or not covered by insurance;
(f) entry into, termination of, or receipt of notice of
termination of any material contract or any contract or
transaction involving a total remaining commitment by or to the
Company of at least $50,000;
(g) sale, lease, or other disposition of any material asset or
property of the Company or mortgage, pledge, or imposition of
any lien or other encumbrance on any material asset or property
of the Company;
(h) material change in the accounting methods used by the
Company; or
(i) agreement, whether oral or written, by the Company to do
any of the foregoing.
3.16 CONTRACTS; NO DEFAULTS
(a) Part 3.16 of the Company's Disclosure Letter contains a
complete and accurate list, and Sellers have delivered to TGI
true and complete copies, of:
(i) each contract that involves performance of services or
delivery of goods or materials by or to the Company of an amount
or value in excess of $50,000;
(ii) each lease, license, installment and conditional sale
agreement, and other contract affecting the ownership of,
leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property;
(iii) each collective bargaining agreement and other contract
to or with any labor union or other employee representative or a
group of employees;
(iv) each joint venture, partnership, and other contract
involving a sharing of profits, losses, costs, or liabilities by
the Company with any other person;
(v) each contract containing covenants that in any way purport
to restrict the business activity of the Company;
(vi) each power of attorney that is currently effective and
outstanding; and
(vii) each written warranty, guaranty, and or other similar
undertaking by the Company.
(b) Each contract identified or required to be identified in
Part 3.16 of the Company's Disclosure Letter is in full force
and effect and is valid and enforceable in accordance with its
terms. The Company is, and at all times has been, in full
compliance with all applicable terms and requirements of each
contract. Each third party to any contract with the Company is,
and at all times has been, in full compliance with all
applicable terms and requirements of such contract. The Company
has not given nor received notice from any other person
regarding any actual, alleged, possible, or potential violation
or breach of, or default under, any contract, and no default or
event of default has occurred thereunder.
3.17 INSURANCE
(a) Sellers have delivered to TGI true and complete copies of
all insurance policies to which the Company is a party or under
which the Company is or has been covered at any time within the
five (5) years preceding the date of this Agreement, and true
and complete copies of all pending applications for policies of
insurance.
(b) All policies to which the Company is a party or that
provide coverage to either Seller, the Company, or any director
or officer of the Company (i) are valid, outstanding, and
enforceable; (ii) are issued by an insurer that is financially
sound and reputable; (iii) provide adequate insurance coverage
for the assets and the operations of the Company for all risks
normally insured against in the Company's industry; (iv) will
continue in full force and effect following the consummation of
the Contemplated Transactions; and (v) do not provide for any
retrospective premium adjustment or other experienced-based
liability on the part of the Company.
(c) Neither Seller nor the Company has received (i) any refusal
of coverage or any notice that a defense will be afforded with
reservation of rights, or (ii) any notice of cancellation or any
other indication that any insurance policy is no longer in full
force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations
thereunder.
(d) The Company has paid all premiums due, and have otherwise
performed all of its obligations, under each policy to which the
Company is a party or that provides coverage to the Company.
The Company has given notice to the insurer of all claims that
may be insured thereby.
3.18 ENVIRONMENTAL MATTERS
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or
liable under, any Environmental Law. Seller has no basis to
expect, nor has Seller or the Company received, any actual or
threatened order, notice, or other communication from (i) any
governmental body or private citizen, or (ii) the current or
prior owner or operator of any facilities owned or leased by the
Company, of any actual or potential violation or failure to
comply with any Environmental Law.
(b) Except as set forth in Part 3.18 of the Company's
Disclosure Letter, there are no Hazardous Materials present on
or at the facilities owned or leased by the Company or, to the
knowledge of the Sellers, at any adjoining property, including
any Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps or
equipment, or incorporated into any structure therein or thereon.
(c) Sellers have delivered to TGI true and complete copies and
results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Sellers or the Company pertaining to
Hazardous Materials in, on, or under the facilities owned or
leased by the Company.
3.19 EMPLOYEES; INDEPENDENT CONTRACTORS
(a) Part 3.19 of the Company's Disclosure Letter contains a
complete and accurate list of (i) each employee or director of
the Company, including each employee on leave of absence or
layoff status, his or her job title, and current compensation;
and (ii) each independent contractor of the Company, the type of
services he or she provides to the Company and their current
compensation.
(b) No employee or, to the knowledge of the Sellers, no
independent contractor of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any
confidentiality, Non-Competition, or proprietary rights
agreement, between such employee and any other person
("Proprietary Rights Agreement") that in any way adversely
affects or will affect (i) the performance of his duties to the
Company, or (ii) the ability of the Company to conduct its
business.
(c) All persons rendering services to the Company have been
properly characterized and treated as either employees or
independent contractors, and the Company has not received notice
of, nor do Sellers have any reason to believe that, such
treatment will be challenged by the IRS or otherwise.
3.20 LABOR RELATIONS; COMPLIANCE
(a) The Company has not been nor is it now a party to any
collective bargaining or other labor contract. There is not
presently pending or existing, and there is not threatened, (a)
any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any proceeding against or affecting the
Company relating to the alleged violation of any applicable law
pertaining to labor relations or employment matters, including
any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable governmental body, organizational
activity, or other labor or employment dispute against or
affecting the Company, or (c) any application for certification
of a collective bargaining agent. There is no lockout of any
employees by the Company, and no such action is contemplated by
the Company. The Company has complied in all respects with all
legal requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant
closing.
(b) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or
liable under, any Occupational Safety and Health Law. Seller
has no basis to expect, nor has Seller or the Company received,
any actual or threatened order, notice, or other communication
from any person of any actual or potential violation or failure
to comply with any Occupational Safety and Health Law.
3.21 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual
Property Assets" includes:
(i) the Company name, all fictional business names, trade
names, registered and unregistered trademarks, service marks,
and applications;
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable;
(iii) all copyrights in both published works and unpublished
works; and
(iv) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints, owned, used, or
licensed by the Company.
(b) The Intellectual Property Assets are listed on Part 3.21
of the Company's Disclosure Letter. The Company owns all
right, title, and interest in and to each of the Intellectual
Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse
claims, and has the right to use without payment to a third
party all of the Intellectual Property Assets.
3.22 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.22 of the Company's
Disclosure Letter, no Seller or any related person or affiliate
of Sellers or of the Company has, or has had, any interest in
any property used in the Company's business. No Seller or any
related person or affiliate of Sellers or of the Company is, or
has owned, directly or indirectly, an equity interest or any
other financial or profit interest in, an entity that has (i)
had business dealings or a material financial interest in any
transaction with the Company; or (ii) engaged in competition
with the Company with respect to any line of the products or
services of the Company. No Seller or any related person or
affiliate of Sellers or of the Company is a party to any
contract with the Company.
3.23 BROKERS OR FINDERS
Neither the Company, Sellers or their respective agents have
incurred any obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
3.24 DISCLOSURE
No representation or warranty of Sellers in this Agreement
and no statement in the Company's Disclosure Letter omits to
state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made,
not misleading. There is no fact known to Sellers that has
specific application to either Seller or the Company (other than
general economic or industry conditions) and that materially
adversely affects or, as far as either Seller can reasonably
foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of the Company
that has not been set forth in this Agreement or the Company's
Disclosure Letter.
3.25 INVESTMENT REPRESENTATION
Each of the Sellers is acquiring the shares of the TGI for
their own account and not with a view to their distribution
within the meaning of Section 2(11) of the Securities Act. Each
Seller understands that such shares are "restricted stock" and
agrees not to sell, pledge, transfer, assign or otherwise
dispose of such shares (except as provided in Section 2.9
hereof) for a one (1) year period following the Closing Date.
3.26 401(k) PLAN
Sellers represent and warrant that after the Closing, the
employees of the Company will be allowed to maintain their
401(k) accounts under the current Tuscaloosa Warehouse, Inc.
401(k) Plan; it being the intent that such accounts will be
frozen as of the Closing Date and maintained under said Plan
until TGI implements its own 401(k) Plan in which the employees
of the Company may participate.
4. REPRESENTATIONS AND WARRANTIES OF TGI
TGI has delivered to Sellers, simultaneously herewith, the TGI
Disclosure Letter. TGI represents and warrants to Sellers as
follows:
4.1 ORGANIZATION AND GOOD STANDING
TGI is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Florida.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of TGI, enforceable against TGI in accordance with
its terms. TGI has the absolute and unrestricted right, power,
and authority to execute and deliver this Agreement and to
perform its obligations hereunder.
(b) Neither the execution and delivery of this Agreement by
TGI nor the consummation or performance of any of the
Contemplated Transactions by TGI will give any person the right
to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of TGI's Articles of Incorporation or Bylaws;
(ii) any resolution adopted by the board of directors or the
stockholders of TGI;
(iii) any legal requirement or order to which TGI may be
subject; or
(iv) any contract to which TGI is a party or by which TGI may
be bound.
(c) Except as set forth in Schedule 4.2 hereto, TGI is not and
will not be required to obtain any consent from any person in
connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated
Transactions.
4.3 CERTAIN PROCEEDINGS
There is no pending proceeding that has been commenced
against TGI and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions.
4.4 BROKERS OR FINDERS
Except as set forth in Schedule 4.4, TGI and its officers and
agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date,
Sellers will, and will cause the Company and its representatives
to, (a) afford TGI and its representatives and prospective
lenders and their representatives (collectively, "TGI's
Advisors") full and free access to the Company's personnel,
properties, contracts, books and records, and other documents
and data, (b) furnish TGI and TGI's Advisors with copies of all
such contracts, books and records, and other existing documents
and data as TGI may reasonably request, and (c) furnish TGI and
TGI's Advisors with such additional financial, operating, and
other data and information as TGI may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY
Between the date of this Agreement and the Closing Date,
Sellers will, and will cause the Company to: (a) conduct its
business only in the ordinary course; and (b) use its best
efforts to preserve intact the current business organization of
the Company, keep available the services of its current
officers, employees, and agents, and maintain the relations and
good will with its suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with
the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the Closing Date, Sellers
will not, and will cause the Company not to, without the prior
consent of TGI, take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of
which any of the changes or events listed in Section 3.15 is
likely to occur.
5.4 NOTIFICATION
Between the date of this Agreement and the Closing Date, each
Seller will promptly notify TGI in writing if such Seller or the
Company becomes aware of any fact or condition that causes or
constitutes a breach of any of Sellers' representations and
warranties as of the date of this Agreement, or if such Seller
or the Company becomes aware of the occurrence after the date of
this Agreement of any fact or condition that would cause or
constitute a breach of any such representation or warranty had
such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition.
5.5 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Sellers will
cause all indebtedness owed to the Company by either Seller or
any related person of either Seller to be paid in full prior to
Closing.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated
pursuant to Section 8, Sellers will not, and will cause the
Company and each of its representatives not to, directly or
indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any person (other than
TGI) relating to any transaction involving the sale of the
business or assets of the Company, or any of the capital stock
of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing Date,
Sellers will use their best efforts to cause the conditions in
Section 6 to be satisfied.
6. CONDITIONS PRECEDENT TO TGI'S OBLIGATION TO CLOSE
TGI's obligation to purchase the Shares and to take the other
actions required to be taken by TGI at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by TGI, in
whole or in part):
6.1 ACCURACY OF REPRESENTATIONS
All of Sellers' representations and warranties in this
Agreement must have been accurate in all respects as of the date
of this Agreement, and must be accurate in all respects as of
the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Company's Disclosure Letter.
6.2 SELLERS' PERFORMANCE
All of the covenants and obligations that Sellers are
required to perform or to comply with pursuant to this Agreement
at or prior to the Closing must have been duly performed and
complied with in all respects.
6.3 CONSENTS
Each of the consents identified in Part 3.2 of the Company's
Disclosure Letter, and each consent identified in Schedule 4.2,
must have been obtained and must be in full force and effect.
6.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to
TGI:
(a) an opinion of counsel to the Company and the Sellers,
dated the Closing Date, in form acceptable to TGI; and
(b) such other documents as TGI may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion
referred to in Section 7.4(a); (ii) evidencing the accuracy of
any of Sellers' representations and warranties; (iii) evidencing
the performance by either Seller of, or the compliance by either
Seller with, any covenant or obligation required to be performed
or complied with by such Seller; (iv) evidencing the
satisfaction of any condition referred to in this Section 6; or
(v) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions.
6.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced or threatened against TGI or Seller or the Company, or
against any person affiliated with TGI or Seller or the Company,
any proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with any of the Contemplated Transactions.
6.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or threatened by any person any
claim asserting that such person (a) is the holder or the
beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any stock of, or any other voting,
equity, or ownership interest in, the Company, or (b) is
entitled to all or any portion of the Merger consideration.
6.7 TGI FINANCING
TGI shall have obtained financing for the purchase of the
Shares on terms and conditions acceptable to TGI's Board of
Directors.
7. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other
actions required to be taken by Sellers at the Closing is
subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by
Sellers, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of TGI's representations and warranties in this Agreement
must have been accurate in all respects as of the date of this
Agreement and must be accurate in all respects as of the Closing
Date as if made on the Closing Date.
7.2 TGI'S PERFORMANCE
All of the covenants and obligations that TGI is required to
perform or to comply with pursuant to this Agreement at or prior
to the Closing must have been performed and complied with in all
respects.
7.3 CONSENTS
Each of the consents identified in Part 3.2 of the TGI
Disclosure Letter must have been obtained and must be in full
force and effect.
7.4 ADDITIONAL DOCUMENTS
TGI must have caused such other documents as Sellers may
reasonably request for the purpose of (i) enabling their counsel
to provide the opinion referred to in Section 6.4(a); (ii)
evidencing the accuracy of any representation or warranty of
TGI; (iii) evidencing the performance by TGI of, or the
compliance by TGI with, any covenant or obligation required to
be performed or complied with by TGI; (iv) evidencing the
satisfaction of any condition referred to in this Section 7; or
(v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced or threatened against TGI or Seller or the Company, or
against any person affiliated with TGI or Seller or the Company,
any proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with any of the Contemplated Transactions.
8. TERMINATION
8.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the
Closing, be terminated:
(a) by either TGI or Sellers if a material breach of any
provision of this Agreement has been committed by the other
party and such breach has not been waived;
(b) (i) by TGI if any of the conditions in Section 6 has not
been satisfied as of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the
failure of TGI to comply with its obligations under this
Agreement) and TGI has not waived such condition on or before
the Closing Date; or (ii) by Sellers, if any of the conditions
in Section 7 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other
than through the failure of Sellers to comply with their
obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
(c) by mutual consent of TGI and Sellers; or
(d) by either TGI or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations
under this Agreement) on or before September 30, 1997, or such
later date as the parties may agree upon.
8.2 EFFECT OF TERMINATION
Each party's right of termination under Section 8.1 is in
addition to any other rights it may have under this Agreement or
otherwise. If this Agreement is terminated pursuant to Section
8.1, all further obligations of the parties under this Agreement
will terminate, except that the obligations in Sections 10.1 and
10.3 will survive.
9. INDEMNIFICATION; REMEDIES
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations
in this Agreement, the Company's Disclosure Letter, the
supplements to the Company's Disclosure Letter, the certificate
delivered pursuant to Section 2.4(a)(v), 2.4(b)(iii) and any
other certificate or document delivered pursuant to this
Agreement will survive the Closing. The right to
indemnification, payment of Damages (as defined below) or other
remedy based on such representations, warranties, covenants, and
obligations will not be affected by any investigation conducted
with respect to, or any knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver
of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on
such representations, warranties, covenants, and obligations.
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers, jointly and severally, will indemnify and hold
harmless TGI, the Company, and their respective representatives,
stockholders, controlling persons, and affiliates (collectively,
the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Sellers in this Agreement, the Company's Disclosure Letter, the
supplements to the Company's Disclosure Letter, or any other
certificate or document delivered by Sellers pursuant to this
Agreement;
(b) any breach by Sellers of any covenant or obligation in
this Agreement;
(c) any product shipped or manufactured by, or any services
provided by, the Company prior to the Closing Date;
(d) any claim by any person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such person with
either Seller or the Company (or any person acting on their
behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 9.2 will not be exclusive
of or limit any other remedies that may be available to TGI or
the other Indemnified Persons.
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY TGI
TGI will indemnify and hold harmless Sellers, and will pay to
Sellers the amount of any Damages arising, directly or
indirectly, from or in connection with (a) any breach of any
representation or warranty made by TGI in this Agreement or in
any certificate delivered by TGI pursuant to this Agreement, (b)
any breach by TGI of any covenant or obligation of TGI in this
Agreement, or (c) any claim by any person for brokerage or
finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such
person with TGI (or any person acting on its behalf) in
connection with any of the Contemplated Transactions.
9.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation
or warranty other than those in Sections 3.3, 3.10, 3.12, 3.18
and 3.19, unless on or before the fifth (5th) anniversary of the
Closing Date TGI notifies Sellers of a claim specifying the
factual basis of that claim in reasonable detail to the extent
then known by TGI. A claim with respect to Sections 3.3, 3.10,
3.12, 3.18 or 3.19, or a claim for indemnification or
reimbursement not based upon any representation or warranty or
any covenant or obligation to be performed and complied with
prior to the Closing Date, may be made at any time. If the
Closing occurs, TGI will have no liability (for indemnification
or otherwise) with respect to any representation or warranty,
unless on or before the fifth (5th) anniversary of the Closing
Date Sellers notify TGI of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by
Sellers.
9.5 ESCROW
At the Closing, the Sellers will deposit 50,000 shares of
TGI's Common Stock that are issued to the Sellers in the Merger
(the "Escrow Shares") with a bank or trust company located
within the State of Georgia which will act as an escrow agent
(the "Escrow Agent"), who will hold the Escrow Shares in escrow
as collateral for the indemnification obligations of the Sellers
under this Agreement. The Escrow Shares will be released to the
Sellers on the first (1st) anniversary of the date hereof, if no
indemnification claims are then outstanding and will serve as
security for the Sellers' indemnity obligations as set forth in
the Escrow Agreement.
9.6 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an Indemnified Person of notice
of the commencement of any proceeding against it, such
Indemnified Person will, if a claim is to be made against an
indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any
Indemnified Person, except to the extent that the indemnifying
party demonstrates that the defense of such action is prejudiced
by the Indemnified Person's failure to give such notice.
(b) If any proceeding referred to in Section 9.6(a) is brought
against an Indemnified Person and it gives notice to the
indemnifying party of the commencement of such proceeding, the
indemnifying party will, unless the claim involves taxes, be
entitled to participate in such proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a
party to such proceeding and the Indemnified Person determines
in good faith that joint representation would be inappropriate,
or (ii) the indemnifying party fails to provide reasonable
assurance to the Indemnified Person of its financial capacity to
defend such proceeding and provide indemnification with respect
to such proceeding), to assume the defense of such proceeding
with counsel satisfactory to the Indemnified Person and, after
notice from the indemnifying party to the Indemnified Person of
its election to assume the defense of such proceeding, the
indemnifying party will not, as long as it diligently conducts
such defense, be liable to the Indemnified Person under this
Section 9 for any fees of other counsel or any other expenses
with respect to the defense of such proceeding, in each case
subsequently incurred by the Indemnified Person in connection
with the defense of such proceeding, other than reasonable costs
of investigation. If the indemnifying party assumes the defense
of a proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that
proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims
may be effected by the indemnifying party without the
Indemnified Person's consent unless (A) there is no finding or
admission of any violation of applicable laws or any violation
of the rights of any person and no effect on any other claims
that may be made against the Indemnified Person, and (B) the
sole relief provided is monetary damages that are paid in full
by the indemnifying party; and (iii) the Indemnified Person will
have no liability with respect to any compromise or settlement
of such claims effected without its consent. If notice is given
to an indemnifying party of the commencement of any proceeding
and the indemnifying party does not, within ten (10) days after
such notice is given, give notice to the Indemnified Person of
its election to assume the defense of such proceeding, the
indemnifying party will be bound by any determination made in
such proceeding or any compromise or settlement effected by the
Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability
that a proceeding may adversely affect it or its affiliates
other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such
proceeding, but the indemnifying party will not be bound by any
determination of a proceeding so defended or any compromise or
settlement effected without its consent (which may not be
unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction
of any court in which a proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified
Person may have under this Agreement with respect to such
proceeding or the matters alleged therein, and agree that
process may be served on Sellers with respect to such a claim
anywhere in the world.
9.7 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a
third-party claim may be asserted by notice to the party from
whom indemnification is sought.
10. GENERAL PROVISIONS
10.1 EXPENSES
Each party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution,
and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
10.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to
this Agreement or the Contemplated Transactions will be issued
at such time and in such manner as TGI determines. Unless
consented to by TGI in advance or required by applicable law,
prior to the Closing Sellers shall, and shall cause the Company
to, keep this Agreement strictly confidential and may not make
any disclosure of this Agreement to any person. Sellers and TGI
will consult with each other concerning the means by which the
Company's employees, customers, and suppliers and others having
dealings with the Company will be informed of the Contemplated
Transactions, and TGI will have the right to be present for any
such communication.
10.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, TGI
and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of TGI and
the Company to maintain in confidence, any written information
stamped "confidential" when originally furnished by another
party in connection with this Agreement or the Contemplated
Transactions, unless (a) such information is already known to
such party or to others not bound by a duty of confidentiality
or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or
approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information
is required by or necessary or appropriate in connection with
legal proceedings. If the Contemplated Transactions are not
consummated, each party will return or destroy as much of such
written information as the other party may reasonably request.
10.4 NOTICES
All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by telecopier (with written
confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received
by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or
to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Sellers: Tuscaloosa Warehouse, Inc.
P.O. Box 2177
Tuscaloosa, Alabama 35403
Attention: P. Fred Hahn, President
Facsimile No.: (205) 750-0076
Mr. Richard Davis
P.O. Box 2177
Tuscaloosa, Alabama 35403
Facsimile No.: (205) 345-6900
with a copy to: Thomas A. Nettles, IV, Esq.
Espy, Nettles, Scogin and Brantley, P.C.
P. O. Box 2786
Tuscaloosa, Alabama 35403
Facsimile No.: (205) 758-2801
TGI: Transit Group, Inc.
3350 Cumberland Circle, Suite 1900
Atlanta, Georgia 30339
Attention: Philip A. Belyew, President
Facsimile No.: (770) 984-5401
with a copy to: G. Donald Johnson, Esq.
Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
Facsimile No.: (404) 888-7490
10.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be
brought against any of the parties in the courts of the State of
Georgia, County of Cobb, or, if it has or can acquire
jurisdiction, in the United States District Court for the
Northern District of Georgia, and each of the parties consents
to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives
any objection to venue laid therein. Process in any action or
proceeding referred to in the preceding sentence may be served
on any party anywhere in the world.
10.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each
other such other documents, and (c) to do such other acts and
things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
10.7 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power, or privilege
under this Agreement or the documents referred to in this
Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by
the other party; (b) no waiver that may be given by a party will
be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further
action without notice or demand as provided in this Agreement or
the documents referred to in this Agreement.
10.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter (including the Letter
of Intent between TGI and Sellers dated April 25, 1997, as
extended) and constitutes (along with the documents referred to
in this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the
amendment.
10.9 DISCLOSURE LETTER
The disclosures in the Company's Disclosure Letter, and those
in any supplement thereto, relate only to the representations
and warranties in the Section of the Agreement to which they
expressly refer. In the event of any inconsistency between the
statements in the body of this Agreement and those in the
Company's Disclosure Letter (other than an exception expressly
set forth as such in the Company's Disclosure Letter with
respect to a specifically identified representation or
warranty), the statements in the body of this Agreement will
control.
10.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties.
Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to
give any person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and
their successors and assigns.
10.11 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and
effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
10.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All
words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the
preceding words or terms.
10.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
10.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Georgia without regard to conflicts of laws principles.
10.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed
to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
TGI:
TRANSIT GROUP, INC.
f/k/a General Parcel Service, Inc.
BY: (Signed)
_______________________________________
PHILIP A. BELYEW, President
COMPANY:
SERVICE EXPRESS, INC.
BY: (Signed)
_______________________________________
P. FRED HAHN, President
SELLERS:
TUSCALOOSA WAREHOUSE, INC.
BY: (Signed)
________________________________________
P. FRED HAHN, President
(Signed)
__________________________________________
RICHARD DAVIS
SCHEDULE 1 TO
AGREEMENT AND PLAN OF REORGANIZATION
ALLOCATION OF STOCK
Number of Shares
Name of TGI Common Stock
- ------------------------------ ---------------------
Tuscaloosa Warehouse, Inc. 722,581
Richard Davis 180,645
-------
903,226
=======
SCHEDULE 2 TO
AGREEMENT AND PLAN OF REORGANIZATION
SHARES SUBJECT TO REDEMPTION
Dollar Value of Number of
Name Redeemable Shares Shares Redeemable
- -------------------------- ----------------- -----------------
Tuscaloosa Warehouse, Inc. $1,440,000.40 371,613
Richard Davis 359,999.10 92,903
------------ -------
$1,799,999.50 464,516
============ =======
SCHEDULE 4.2 TO
AGREEMENT AND PLAN OF REORGANIZATION
TGI CONSENTS
The consent of Mr. T. Wayne Davis is contained that certain
Guaranty and Stock Purchase Agreement dated of even date
herewith by and between Mr. Davis and TGI.
SCHEDULE 4.4 TO
AGREEMENT AND PLAN OF REORGANIZATION
TGI BROKERS
Mr. Al Zimmerman
Equitable Business and Financial Services
101 Main Street, Suite D
Safety Harbor, Florida 34625
EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
DATED: August 15, 1997
TABLE OF CONTENTS
Agreement and Plan of Reorganization
This Agreement and Plan of Reorganization ("Agreement") is made
as of August 15, 1997, by Transit Group, Inc., f/k/a General
Parcel Service, Inc., a Florida corporation ("TGI"), Capitol
Warehouse, Inc., a Kentucky corporation (the "Company"), and
Jerry Pennington, an individual resident in Kentucky ("Seller").
RECITALS
A. The parties intend that, subject to the terms and conditions
set forth herein, a new corporation that will be organized in
Kentucky as a wholly owned subsidiary of TGI ("Newco") will
merge with and into the Company in a reverse triangular merger
(the "Merger"), with the Company to be the surviving corporation
of the Merger, all pursuant to the terms and conditions of this
Agreement, the Articles of Merger substantially in the form of
Exhibit A hereto (the "Articles of Merger") and the applicable
provisions of the laws of Kentucky.
B. Upon the effectiveness of the Merger, all the outstanding
capital stock of the Company will be converted into capital
stock of TGI, in the manner and on the basis determined herein
and as provided in the Articles of Merger.
C. The Merger is intended to be treated as a "purchase" for
accounting purposes and a tax-free reorganization pursuant to
the provisions of Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended (the "Code"), by virtue of the
provisions of Section 368(a)(2)(D) of the Code.
AGREEMENT
For and in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"Agreement" --this Agreement and Plan of Reorganization
together with all Schedules and Exhibits hereto.
"Balance Sheet"--as defined in Section 3.4.
"Closing"--as defined in Section 2.3.
"Closing Date"--the date and time as of which the Closing
actually takes place.
"Company"--collectively the Company identified in the Recitals
to this Agreement together with each subsidiary of same.
"Company Disclosure Letter"--the disclosure letter delivered by
Seller to TGI concurrently with the execution and delivery of
this Agreement.
"Contemplated Transactions"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of Newco and the Company;
(b) the execution, delivery, and performance of the
Employment Agreement, Noncompetition Agreement, Subscription
Agreement and the Escrow Agreement; and
(c) the performance by TGI, the Company and Seller of their
respective covenants and obligations under this Agreement.
"Damages"--as defined in Section 9.2.
"Effective Time" --the effective time of the Merger as defined
in Section 2.1.
"Employment Agreement" --as defined in Section 2.8(a)(v).
"Environmental Law"--any law or regulation that requires or
relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or
other prohibitions and of the commencements of activities, such
as resource extraction or construction, that could have
significant impact on the environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the
environment;
(c) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or
other potentially harmful substances;
(d) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or
prevention; or
(e) making responsible parties pay private parties, or groups
of them, for damages done to their health or the environment, or
permitting self-appointed representatives of the public interest
to recover for injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974,
as amended, and regulations and rules issued pursuant to that
act or any successor law.
"Escrow Agreement" --as defined in Section 9.5.
"GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the
Balance Sheet and the other financial statements referred to in
Section 3.4 were prepared.
"Hazardous Materials"--any waste or other substance that is
listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, or toxic or a
pollutant or a contaminant under or pursuant to any
Environmental Law, including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or
asbestos-containing materials.
"Merger"--as defined in the Recitals hereto.
"Noncompetition Agreements"--as defined in Section 2.8(a)(iii).
"Occupational Safety and Health Law"--any law or regulation
designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or
sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions.
"Redemption Period" --as defined in Section 2.9.
"Redemption Request" --as defined in Section 2.9.
"Securities Act"--the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that act or
any successor law.
"TGI"--as defined in the first paragraph of this Agreement.
2. PLAN OF REORGANIZATION
2.1 THE MERGER
Subject to the terms and conditions of this Agreement, prior
to the Closing Date, TGI will incorporate and organize Newco and
will cause the Board of Directors and shareholders of Newco to
approve the Merger and perform all of the duties of Newco set
forth in this Agreement. Subject to the terms and conditions of
this Agreement, the Articles of Merger will be filed with the
Secretary of State of the State of Kentucky on the Closing Date.
The date and time that the Articles of Merger is filed with the
Kentucky Secretary of State and the Merger thereby becomes
effective will be referred to in this Agreement as the
"Effective Time." Subject to the terms and conditions of this
Agreement and the Articles of Merger, Newco will be merged with
and into the Company in a statutory merger pursuant to the
Articles of Merger and in accordance with applicable provisions
of Kentucky law as follows:
2.1.1 Conversion of Company Common Stock. The shares of
common stock of the Company, no par value (the "Company Common
Stock"), that are issued and outstanding immediately prior to
the Effective Time, will, by virtue of the Merger and at the
Effective Time and without further action on the part of any
holder thereof, be converted into the right to receive that
number of shares of fully paid and nonassessable common stock of
TGI, $.01 par value per share ("TGI Common Stock"), determined
by dividing US Four Million Dollars ($4,000,000) by the Market
Value of a share of TGI Common Stock as defined below. Market
Value shall be defined as the average of the high and low sales
price for such shares for each of the ten (10) trading days
ending three (3) days prior to the Closing Date as reported in
the Wall Street Journal, which the parties acknowledge as of the
date hereof to be $6.2375, which results in the issuance of an
aggregate of 641,283 shares to Seller at Closing.
2.1.2 Conversion of Newco Shares. Each share of Newco Common
Stock, par value $0.01 ("Newco Common Stock"), that is issued
and outstanding immediately prior to the Effective Time, will,
by virtue of the Merger and without further action on the part
of the sole shareholder of Newco, be converted into and become
one share of common stock of the Company, as the surviving
corporation, that is to be issued and outstanding immediately
after the Effective Time, which shall be the only share of
Company Common Stock that is issued and outstanding immediately
after the Effective Time.
2.2 FRACTIONAL SHARES
No fractional shares of TGI Common Stock will be issued in
connection with the Merger.
2.3 EFFECTS OF THE MERGER
At the Effective Time: (a) the separate existence of Newco
will cease and Newco will be merged with and into the Company
and the Company will be the surviving corporation pursuant to
the terms of the Articles of Merger; (b) the Articles of
Incorporation and Bylaws of Newco will be the Articles of
Incorporation and Bylaws of the surviving corporation; (c) each
share of Newco Common Stock outstanding immediately prior to the
Effective Time will be converted as provided in Section 2.1.2
above; (d) the directors of Newco in effect at the Effective
Time will be the directors of the Company as the surviving
corporation, and the officers of Newco will be the officers of
the Company as the surviving corporation; (e) each share of
Company Common Stock outstanding immediately prior to the
Effective Time will be converted as provided in Section 2.1.1;
and (f) the Merger will, at and after the Effective Time, have
all of the effects provided by applicable law.
2.4 TAX-FREE REORGANIZATION
The parties intend to adopt this Agreement as a tax-free plan
of reorganization and to consummate the Merger in accordance
with the provisions of Section 368(a)(1)(A) of the Code. The
parties believe that the value of the TGI Common Stock to be
received in the Merger is equal to the value of the Company
Common Stock to be surrendered in exchange therefor. The TGI
Common Stock issued in the Merger will be issued solely in
exchange for the Company Common Stock, and no other transaction
other than the Merger represents, provides for or is intended to
be an adjustment to, the consideration paid for the Company
Common Stock. TGI represents now, and as of the Closing, that
it presently intends to continue the Company's historic business
or use a significant portion of the Company's business assets in
a business. The provisions and representations contained or
referred to in this Section 2.4 shall survive until the
expiration of the applicable statute of limitations. Seller
acknowledges that he has received his own independent tax advice
and counsel with respect to the Merger and the transactions
contemplated herein and is not relying on representations made
by TGI or its counsel, accountants or advisors with respect to
such tax matters.
2.5 PURCHASE ACCOUNTING TREATMENT
The Parties intend that the Merger be treated as a "purchase"
for accounting purposes.
2.6 WAIVER OF DISSENTERS RIGHTS
Seller hereby waives any and all rights he has to dissent
from the Merger under Kentucky law.
2.7 CLOSING.
The consummation of the purchase and sale provided for in this
Agreement (the "Closing") will take place at the offices of
TGI's counsel, Womble Carlyle Sandridge & Rice, PLLC, located at
Suite 700, 1275 Peachtree Street, N.E., Atlanta, Georgia 30309,
at 10:00 a.m. (local time) on August 15, 1997, or at such time
and place as the parties may agree.
2.8 CLOSING OBLIGATIONS
At the Closing:
(a) Seller will deliver to TGI:
(i) certificates representing his shares of Company Common
Stock, duly endorsed for transfer to TGI (or accompanied by duly
executed stock powers), with signatures guaranteed by a
commercial bank;
(ii) releases and resignations from the officers and directors
of the Company duly executed by such parties;
(iii) a noncompetition agreement in the form of Exhibit "B,"
executed by Seller (the "Noncompetition Agreement");
(iv) an escrow agreement in the form of Exhibit "C," executed
by Seller;
(v) an employment agreement in the form of Exhibit "D,"
executed by Seller (the "Employment Agreement"); and
(vi) a subscription agreement for the shares of TGI Common
Stock to be issued in the Merger in the form of Exhibit "E."
(b) TGI will deliver to Seller:
(i) a share certificate representing the TGI Common Stock
issued in the Merger in the name of the Seller; and
(ii) the Employment Agreement.
2.9 MANDATORY STOCK REDEMPTION
During the ten (10) month period beginning October 15, 1997
(the "Redemption Period"), Seller shall have the right to
require TGI to redeem all or any part of a number of shares of
TGI Common Stock determined by dividing US $300,000 by the
Market Value per share at Closing (determined as set forth in
Section 2.1.1 hereof), for a purchase price per share equal to
the Market Value, if Seller notifies TGI in writing of his
election to have such shares redeemed (a "Redemption Request").
Within sixty (60) days after receipt of a Redemption Request, to
the extent TGI has lawful funds available to do so, TGI shall
redeem such shares by paying in cash the purchase price
therefor. Seller shall surrender the certificate representing
such shares to TGI, properly endorsed for transfer and
cancellation. If less than all of the shares represented
thereby are being redeemed by TGI, TGI shall cause a new
certificate to be issued to Seller, representing the balance of
the shares not redeemed. The rights granted to the Sellers
hereunder shall expire, whether or not exercised in whole or in
part, on the first (1st) anniversary of the Closing Date.
The parties acknowledge that the foregoing redemption right is
based on the desire of the Seller to receive a minimum cash
amount for a certain number of shares of TGI Common Stock.
Therefore, notwithstanding the foregoing or anything to the
contrary herein, the number of shares which Seller may require
TGI to redeem shall be reduced by the dollar amount of the gross
proceeds resulting from any sale by such Seller of shares of TGI
Common Stock during the Redemption Period. For example, in the
event Seller sells shares of TGI Common Stock for gross proceeds
of $200,000, then the number of shares subject to redemption
hereunder shall be reduced thereby to a total of $100,000
divided by the Market Value per share.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to TGI as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Company Disclosure Letter contains a
statement of the Company's jurisdiction of incorporation, a list
of all other jurisdictions in which it is authorized to do
business, and its capitalization (including the identity of each
stockholder and the number of shares held by each). The Company
is duly organized, validly existing, and in good standing under
the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is
now being conducted, to own or use the properties and assets
that it purports to own or use, and to perform all its
obligations under its contracts. The Company is duly qualified
to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by
it, or the nature of the activities conducted by it, requires
such qualification.
(b) Seller has delivered to TGI copies of the Articles of
Incorporation and Bylaws of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against him in accordance with
its terms. Upon the execution and delivery by Seller of the
Escrow Agreement, the Noncompetition Agreement, the Employment
Agreement and the Subscription Agreement (collectively, the
"Seller's Closing Documents"), the Seller's Closing Documents
will constitute the legal, valid, and binding obligations of
Seller, enforceable against him in accordance with their
respective terms. Seller has the absolute and unrestricted
right, power, authority, and capacity to execute and deliver
this Agreement and the Seller's Closing Documents and to perform
his obligations under this Agreement and the Seller's Closing
Documents.
(b) Neither the execution and delivery of this Agreement nor
the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Articles of Incorporation or Bylaws of the
Company; or (B) any resolution adopted by the board of directors
or the stockholders of the Company; or (C) any of the terms or
requirements of, or give any governmental body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any
permit or authorization that is held by the Company or that
otherwise relates to the business of, or any of the assets owned
or used by, the Company; or (D) any provision of, or give any
person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any contract to which the Company
is bound; or
(ii) result in the imposition or creation of any lien, claim
or encumbrance upon or with respect to any of the assets owned
or used by the Company.
(c) Except as set forth in Part 3.2 of the Company Disclosure
Letter, neither Seller nor the Company is or will be required to
give any notice to or obtain any consent from any person in
connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated
Transactions.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of
2,000 shares of common stock, no value per share, of which 101
shares are issued and outstanding and constitute the Shares.
Seller is and will be on the Closing Date the record and
beneficial owner and holder of the Shares, free and clear of all
liens, claims or encumbrances. With the exception of the Shares
(which are owned by Seller), there are no other outstanding
equity securities or other securities of the Company. Other
than standard legends with respect to securities matters, no
legend or other reference to any purported encumbrance appears
upon any certificate representing equity securities of the
Company. All of the outstanding equity securities of the
Company have been duly authorized and validly issued and are
fully paid and nonassessable. There are no contracts relating
to the issuance, sale, or transfer of any equity securities or
other securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in
violation of the Securities Act or any other law or regulation.
The Company does not own, nor does it have any contract to
acquire, any equity securities or other securities of any person
(other than the Company) or any direct or indirect equity or
ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Seller has delivered to TGI: (a) unaudited balance sheets of
the Company as at February 28 in each of the years 1991 through
1996, and the related unaudited statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years
then ended, and (b) a balance sheet of the Company as at June 30
(the "Balance Sheet"). Such financial statements and the notes
thereto fairly present the financial condition and the results
of operations, changes in stockholders' equity, and cash flow of
the Company as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with
financial principles, consistently applied throughout the
periods involved.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and
other records of the Company, all of which have been made
available to TGI, are complete and correct and have been
maintained in accordance with applicable law. The minute books
of the Company contain accurate and complete records of all
meetings of, and corporate actions taken by, the stockholders,
the Boards of Directors, and committees of the Boards of
Directors of the Company, and no meeting of any such
stockholders, Board of Directors, or committee has been held for
which minutes have not been prepared and are not contained in
such minute books.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
The Company owns good and marketable title to the properties
and assets located in the facilities owned or operated by the
Company or reflected as owned in the books and records of the
Company, including all of the properties and assets reflected in
the Balance Sheet, and all of the properties and assets
purchased or otherwise acquired by the Company since the date of
the Balance Sheet. All material properties and assets reflected
in the Balance Sheet are free and clear of all liens, claims or
encumbrances and are not, in the case of real property, subject
to any use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such
properties and assets, (a) mortgages or security interests shown
on the Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a
default) exists, and (b) zoning laws and other land use
restrictions that do not impair the present or anticipated use
of the property subject thereto. All buildings, plants, and
structures owned by the Company lie wholly within the boundaries
of the real property owned by the Company and do not encroach
upon the property of, or otherwise conflict with the property
rights of, any other person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
Except as set forth on Part 3.7 of the Company Disclosure
Letter, the buildings, plants, structures, and equipment owned
or leased by the Company are structurally sound, are not in need
of extraordinary repair, and are adequate for the uses to which
they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are
not material in nature or cost. The building, plants,
structures, and equipment owned or leased by the Company are
sufficient for the continued conduct of the Company's businesses
after the Closing in substantially the same manner as conducted
prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
Except as set forth on Part 3.8 of the Company Disclosure
Letter, all accounts receivable of the Company as of the Closing
Date represent or will represent valid obligations arising from
sales actually made or services actually performed in the
ordinary course of business. Unless paid prior to the Closing
Date, the accounts receivable are or will be as of the Closing
Date current and collectible net of the respective reserves
shown on the Balance Sheet. There is no contest, claim, or
right of set-off relating to the amount or validity of such
accounts receivable.
3.9 NO UNDISCLOSED LIABILITIES
The Company has no material liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued,
contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Balance Sheet and current
liabilities incurred in the ordinary course of business since
the dates thereof.
3.10 TAXES
(a) The Company has filed or caused to be filed on a timely
basis all tax returns that are or were required to be filed by
or with respect to it. The Company has paid, or made provision
for the payment of, all taxes that have or may have become due
for all periods prior to Closing.
(b) Except as set forth on Part 3.10 of the Company Disclosure
Letter, no United States, federal or state income tax returns of
the Company have been audited by the IRS or relevant state tax
authorities. Neither Seller nor the Company has given or been
requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other person) of
any statute of limitations relating to the payment of taxes of
the Company.
(c) The charges, accruals, and reserves with respect to taxes
on the books of the Company are adequate and are at least equal
to the Company's liability for taxes. There exists no proposed
tax assessment against the Company except as disclosed in the
Balance Sheet. All taxes that the Company is or was required to
withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper governmental
body or other person.
(d) All tax returns filed by the Company are true, correct,
and complete. The Company is not, and within the five-year
period preceding the Closing Date has not been, an "S"
corporation.
3.11 NO MATERIAL ADVERSE CHANGE.
Except as set forth on Part 3.11 of the Disclosure Letter,
since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties,
prospects, assets, or condition of the Company, and no event has
occurred or circumstance exists that may result in such a
material adverse change.
3.12 EMPLOYEE BENEFITS
Part 3.12 of the Company Disclosure Letter contains a list of
all pension, retirement, disability, medical, dental or other
health plans, life insurance or other death benefit plans,
profit sharing, deferred compensation agreements, stock, option,
bonus or other incentive plans, vacation, sick, holiday or other
paid leave plans, severance plans or other similar employee
benefit plans maintained by the Company (the "Plans"),
including, without limitation, all "employee benefit plans" as
defined in Section 3(3) of ERISA. All contributions due from
the Company with respect to any of the Plans have been made or
accrued on the Company's financial statements, and no further
contributions will be due or will have accrued thereunder as of
the Closing. Each of the Plans, and its operation and
administration, is, in all material respects, in compliance with
all applicable, federal, state, local and other governmental
laws and ordinances, orders, rules and regulations, including
the requirements of ERISA and the Internal Revenue Code. All
such Plans that are "employee pension benefit plans" (as defined
in Section 3(2) of ERISA) which are intended to qualify under
I.R.C. Section 401(a)(8) have received favorable determination
letters that such plans satisfy all qualification requirements.
In addition, the Company has not been a participant in any
"prohibited transaction," within the meaning of Section 406 of
ERISA, with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA) which the Company sponsors as
employer or in which the Company participates as an employer,
which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a)
of ERISA), or which could result in an excise tax.
3.13 COMPLIANCE
(a) The Company is and at all times has conducted its business
and the ownership and use of its assets in substantial
compliance with all applicable laws.
(b) Part 3.13 of the Company Disclosure Letter contains a
complete and accurate list of each permit or governmental
consent or authorization that is held by the Company or that
otherwise relates to the business of, or to any of the assets
owned or used by, the Company. Each such permit or governmental
consent or authorization is valid and in full force and effect
and constitutes all of the governmental authorizations necessary
to permit the Company to lawfully conduct and operate its
business in the manner currently conducted.
3.14 LITIGATION
(a) Except as set forth in Part 3.14 of the Company Disclosure
Letter, there is no pending or to the knowledge of the Seller,
threatened action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any governmental
body or arbitrator (i) that has been commenced by or against the
Company or that otherwise relates to or may affect the business
of, or any of the assets owned or used by, the Company; or (ii)
that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions.
(b) There is no order or court decision to which the Company,
the Seller, any director or officer of the Company, or any of
the assets owned or used by the Company, is subject.
3.15 ABSENCE OF CHANGES
Since the date of the Balance Sheet, the Company has
conducted its business only in the ordinary course and there has
not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of
capital stock of the Company; issuance of any security
convertible into such capital stock; grant of any purchase,
redemption or stock retirement rights, or any acquisition by the
Company of any shares of its capital stock; or declaration or
payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Articles of Incorporation or Bylaws of
the Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director,
officer, or employee (except normal payments and increases in
the ordinary course of business consistent with past practices),
or entry into any employment, severance, or similar contract
with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee
benefit plan for or with any employees of the Company;
(e) damage to or destruction or loss of any material asset or
property of the Company, whether or not covered by insurance;
(f) entry into, termination of, or receipt of notice of
termination of any material contract or any contract or
transaction involving a total remaining commitment by or to the
Company of at least $50,000;
(g) sale, lease, or other disposition of any material asset or
property of the Company or mortgage, pledge, or imposition of
any lien or other encumbrance on any material asset or property
of the Company;
(h) material change in the accounting methods used by the
Company; or
(i) agreement, whether oral or written, by the Company to do
any of the foregoing.
3.16 CONTRACTS; NO DEFAULTS
(a) Part 3.16 of the Company Disclosure Letter contains a
complete and accurate list (except the items referenced in
Section 3.16(a)(i) below need not be included in such list), and
Seller has delivered to TGI true and complete copies, of:
(i) each contract that involves performance of services or
delivery of goods or materials by or to the Company of an amount
or value in excess of $50,000;
(ii) each lease, license, installment and conditional sale
agreement, and other contract affecting the ownership of,
leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property;
(iii) each collective bargaining agreement and other contract
to or with any labor union or other employee representative or a
group of employees;
(iv) each joint venture, partnership, and other contract
involving a sharing of profits, losses, costs, or liabilities by
the Company with any other person;
(v) each contract containing covenants that in any way purport
to restrict the business activity of the Company;
(vi) each power of attorney that is currently effective and
outstanding; and
(vii) each written warranty, guaranty, and or other similar
undertaking by the Company.
(b) Each contract identified or required to be identified in
Part 3.16 of the Company Disclosure Letter is in full force and
effect and is valid and enforceable in accordance with its
terms. The Company is, and at all times has been, in compliance
with all material applicable terms and requirements of each
contract. To the best of Seller's knowledge, each third party
to any contract with the Company is, and at all times has been,
in compliance with all material applicable terms and
requirements of such contract. The Company has not given nor
received notice from any other person regarding any actual,
alleged, possible, or potential violation or breach of, or
default under, any contract, and no material default or event of
default has occurred thereunder.
3.17 INSURANCE
(a) Seller has delivered to TGI true and complete copies of
all insurance policies to which the Company is a party or under
which the Company is or has been covered at any time within the
five (5) years preceding the date of this Agreement, and true
and complete copies of all pending applications for policies of
insurance.
(b) Except as set forth on Part 3.17 of the Company Disclosure
Letter, all policies to which the Company is a party or that
provide coverage to either Seller, the Company, or any director
or officer of the Company (i) are valid, outstanding, and
enforceable; (ii) in the Seller's judgment, are issued by an
insurer that is financially sound and reputable; (iii) provide
adequate insurance coverage, in the Seller's judgment, for the
assets and the operations of the Company for all risks normally
insured against in the Company's industry; (iv) will continue in
full force and effect following the consummation of the
Contemplated Transactions; and (v) do not provide for any
retrospective premium adjustment or other experienced-based
liability on the part of the Company.
(c) Except as set forth on Part 3.17 of the Company's
Disclosure Letter, neither Seller nor the Company has received
(i) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (ii) any notice of
cancellation or any other indication that any insurance policy
is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to perform
its obligations thereunder.
(d) The Company has paid all premiums due, and have otherwise
performed all of its obligations, under each policy to which the
Company is a party or that provides coverage to the Company.
The Company has given notice to the insurer of all claims that
may be insured thereby.
3.18 ENVIRONMENTAL MATTERS
(a) Except as set forth on Part 3.18 of the Company Disclosure
Letter, the Company is, and at all times has been, in
substantial compliance with, and has not been and is not in
violation of or liable under, any Environmental Law. Seller has
no basis to expect, nor has Seller or the Company received, any
actual or threatened order, notice, or other communication from
(i) any governmental body or private citizen, or (ii) the
current or prior owner or operator of any facilities owned or
leased by the Company, of any actual or potential violation or
failure to comply with any Environmental Law.
(b) Except as set forth on Part 3.18 of the Company Disclosure
Letter, there are no Hazardous Materials present on or at the
facilities owned or leased by the Company or, to the knowledge
of the Seller, at any adjoining property, including any
Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps or equipment, or
incorporated into any structure therein or thereon.
(c) Seller has delivered to TGI true and complete copies and
results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Seller or the Company pertaining to
Hazardous Materials in, on, or under the facilities owned or
leased by the Company.
3.19 EMPLOYEES; INDEPENDENT CONTRACTORS
(a) To the knowledge of the Seller, no employee or independent
contractor of the Company is a party to, or is otherwise bound
by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such
employee and any other person ("Proprietary Rights Agreement")
that in any way adversely affects or will affect (i) the
performance of his duties to the Company, or (ii) the ability of
the Company to conduct its business.
(b) All persons rendering services to the Company have been
properly characterized and treated as either employees or
independent contractors, and the Company has not received notice
of, nor does Seller have any reason to believe that, such
treatment will be challenged by the IRS or otherwise.
3.20 LABOR RELATIONS; COMPLIANCE
(a) The Company has not been nor is it now a party to any
collective bargaining or other labor contract. There is not
presently pending or existing, and there is not, to the Seller's
knowledge, threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any proceeding
against or affecting the Company relating to the alleged
violation of any applicable law pertaining to labor relations or
employment matters, including any charge or complaint filed by
an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable
governmental body, organizational activity, or other labor or
employment dispute against or affecting the Company, or (c) any
application for certification of a collective bargaining agent.
There is no lockout of any employees by the Company, and no such
action is contemplated by the Company. The Company has
substantially complied in all respects with the legal
requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant
closing.
(b) The Company is, and at all times has been, in substantial
compliance with, and has not been and is not in violation of or
liable under, any Occupational Safety and Health Law. Seller
has no basis to expect, nor has Seller or the Company received,
any actual or threatened order, notice, or other communication
from any person of any actual or potential violation or failure
to comply with any Occupational Safety and Health Law.
3.21 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual
Property Assets" includes:
(i) the Company name, all fictional business names, trade
names, registered and unregistered trademarks, service marks,
and applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished
works (collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively,
"Trade Secrets"), owned, used, or licensed by the Company.
(b) The Company owns all right, title, and interest in and to
each of the Intellectual Property Assets, free and clear of all
liens, security interests, charges, encumbrances, equities, and
other adverse claims, and has the right to use without payment
to a third party all of the Intellectual Property Assets.
3.22 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth on Part 3.22 of the Disclosure Letter, no
Seller or any related person or affiliate of Seller or of the
Company has, or has had, any interest in any property used in
the Company's business. Seller nor any related person or
affiliate of Seller or of the Company is, or has owned, directly
or indirectly, an equity interest or any other financial or
profit interest in, an entity that has (i) had business dealings
or a material financial interest in any transaction with the
Company; or (ii) engaged in competition with the Company with
respect to any line of the products or services of the Company.
Seller nor any related person or affiliate of Seller or of the
Company is a party to any contract with the Company.
3.23 BROKERS OR FINDERS
Neither the Company, Seller or their respective agents have
incurred any obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
3.24 DISCLOSURE
No representation or warranty of Seller in this Agreement and
no statement in the Company Disclosure Letter omits to state a
material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made,
not misleading. There is no fact known to Seller that has
specific application to Seller or the Company (other than
general economic or industry conditions) and that materially
adversely affects or, as far as Seller can reasonably foresee,
materially threatens, the assets, business, prospects, financial
condition, or results of operations of the Company that has not
been set forth in this Agreement or the Company Disclosure
Letter.
3.25 SUBSIDIARIES
The Company has no subsidiaries other than Capitol Brokerage,
Inc., incorporated on June 30, 1993, in the State of Kentucky
(the "Subsidiary"). The Subsidiary (i) was duly incorporated,
is validly existing and in good standing; (ii) has no assets
other than the ICC Authority No. MC-265932 (the "Permit"); (iii)
has conducted no operations other than trucking brokerage
services and has no outstanding liabilities or obligations
whatsoever. It is acknowledged that the insurance bond required
to maintain the Permit has been provided at the Seller's expense
and must be reimbursed to Seller by the Company after Closing.
4. REPRESENTATIONS AND WARRANTIES OF TGI
TGI has delivered to the Seller herewith TGI's Disclosure
Letter. TGI represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING
TGI is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Florida.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of TGI, enforceable against TGI in accordance with
its terms. Upon the execution and delivery by TGI of the
Employment Agreement, the Employment Agreement will constitute
the legal, valid and binding obligation of TGI, enforceable in
accordance with its terms. TGI has the absolute and
unrestricted right, power, and authority to execute and deliver
this Agreement and to perform its obligations hereunder.
(b) Neither the execution and delivery of this Agreement by
TGI nor the consummation or performance of any of the
Contemplated Transactions by TGI will contravene, conflict with,
result in a violation of or give any person the right to
prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of TGI's Articles of Incorporation or Bylaws;
(ii) any resolution adopted by the board of directors or the
stockholders of TGI;
(iii) any legal requirement or order to which TGI may be
subject; or
(iv) any contract to which TGI is a party or by which TGI may
be bound.
(c) TGI is not and will not be required to give any notice to
or obtain any consent from any person in connection with the
execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.3 INVESTMENT INTENT
TGI is acquiring the Shares for its own account and not with
a view to their distribution within the meaning of Section 2(11)
of the Securities Act.
4.4 CERTAIN PROCEEDINGS
There is no pending proceeding that has been commenced
against TGI and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions.
4.5 BROKERS OR FINDERS
Except as set forth in Schedule 4.5, TGI and its officers and
agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
4.6 SEC FILINGS
TGI has filed all reports required to be filed prior to the
date hereof under the Securities Exchange Act of 1934, as
amended. All such filings complied in all material respects
with applicable law, and no such filing contained a material
misstatement or omission on the date of such filing.
4.7 TGI STOCK
Upon consummation of the Merger and fulfillment of the
conditions set forth herein, the shares of TGI Common Stock to
be issued to Seller in connection with the Merger will be fully
paid, duly authorized, validly issued and non-assessable.
4.8 DISCLOSURE
No representation or warranty of TGI in this Agreement or in
the TGI Disclosure Letter contains a material misstatement or
omits a material fact necessary to make the statements herein or
therein not misleading.
5. COVENANTS OF SELLER AND TGI
5.1 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Seller will
cause all indebtedness owed to the Company by Seller or any
related person of Seller to be paid in full prior to Closing.
5.2 INDEMNIFICATION
Concurrently with the execution hereof, TGI will deliver to
Seller an Assumption and Indemnification Agreement executed by
T. Wayne Davis, the majority shareholder of TGI. In addition,
TGI agrees to use its best efforts to obtain the release of
Seller from any guarantee of any debt or obligation of the
Company given by Seller.
5.3 COMPANY DEBT
TGI agrees to cause the Company to repay to Seller sixty (60)
days after the Closing Date, the indebtedness owed to Seller by
the Company in the approximate amount of $120,000.
5.4 LEASES
Concurrently with the execution hereof, the Company is
entering into facility and warehouse leases with Seller on terms
mutually agreeable to TGI, the Company and Seller.
5.5 SEC REPORTING
TGI agrees to file all reports required under the Securities
Exchange Act of 1934, as amended, to allow Seller to avail
himself of the resale provisions of Rule 144.
5.6 ASSIGNMENT OF INSURANCE
The parties acknowledge and agree that the key man life
insurance policy with New York Life Insurance Company currently
maintained by the Company with the Seller as named insured will
be assigned to the Seller after the Closing for no additional
consideration.
6. CONDITIONS PRECEDENT TO TGI'S OBLIGATION TO CLOSE
TGI's obligation to purchase the Shares and to take the other
actions required to be taken by TGI at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by TGI, in
whole or in part):
6.1 ACCURACY OF REPRESENTATIONS
All of Seller's representations and warranties in this
agreement must have been accurate in all respects as of the date
of this Agreement, and must be accurate in all respects as of
the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Company Disclosure Letter.
6.2 SELLER'S PERFORMANCE
All of the covenants and obligations that Seller is required
to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been duly performed and complied
with in all respects.
6.3 CONSENTS
Each of the consents identified in Part 3.2 of the Company
Disclosure Letter, and each consent identified in Schedule 4.2,
must have been obtained and must be in full force and effect.
6.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to
TGI:
(a) an opinion of counsel to the Company and the Seller, dated
the Closing Date, in form acceptable to TGI; and
(b) such other documents as TGI may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion
referred to in Section 7.4(a); (ii) evidencing the accuracy of
any of Seller's representations and warranties; (iii) evidencing
the performance by Seller of, or the compliance by Seller with,
any covenant or obligation required to be performed or complied
with by Seller; (iv) evidencing the satisfaction of any
condition referred to in this Section 6; or (v) otherwise
facilitating the consummation or performance of any of the
Contemplated Transactions.
6.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced or threatened against TGI or Seller or the Company, or
against any person affiliated with TGI or Seller or the Company,
any proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with any of the Contemplated Transactions.
6.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or threatened by any person any
claim asserting that such person (a) is the holder or the
beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any stock of, or any other voting,
equity, or ownership interest in, the Company, or (b) is
entitled to all or any portion of the Purchase Price payable for
the Shares.
7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Shares and to take the other
actions required to be taken by Seller at the Closing is subject
to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Seller, in
whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of TGI's representations and warranties in this Agreement
must have been accurate in all respects as of the date of this
Agreement and must be accurate in all respects as of the Closing
Date as if made on the Closing Date.
7.2 TGI'S PERFORMANCE
All of the covenants and obligations that TGI is required to
perform or to comply with pursuant to this Agreement at or prior
to the Closing must have been performed and complied with in all
respects.
7.3 CONSENTS
Each of the consents identified in Part 3.2 of the Company
Disclosure Letter must have been obtained and must be in full
force and effect.
7.4 ADDITIONAL DOCUMENTS
TGI must have caused the following documents to be delivered
to Seller:
(a) an opinion of Womble Carlyle Sandridge & Rice, PLLC, dated
the Closing Date, in form acceptable to Seller; and
(b) such other documents as Seller may reasonably request for
the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 6.4(a); (ii) evidencing the accuracy of
any representation or warranty of TGI; (iii) evidencing the
performance by TGI of, or the compliance by TGI with, any
covenant or obligation required to be performed or complied with
by TGI; (iv) evidencing the satisfaction of any condition
referred to in this Section 7; or (v) otherwise facilitating the
consummation of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced or threatened against TGI or Seller or the Company, or
against any person affiliated with TGI or Seller or the Company,
any proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with any of the Contemplated Transactions.
8. TERMINATION
8.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the
Closing, be terminated:
(a) by either TGI or Seller if a material breach of any
provision of this Agreement has been committed by the other
party and such breach has not been waived;
(b) (i) by TGI if any of the conditions in Section 6 has not
been satisfied as of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the
failure of TGI to comply with its obligations under this
Agreement) and TGI has not waived such condition on or before
the Closing Date; or (ii) by Seller, if any of the conditions in
Section 7 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other
than through the failure of Seller to comply with their
obligations under this Agreement) and Seller has not waived such
condition on or before the Closing Date;
(c) by mutual consent of TGI and Seller; or
(d) by either TGI or Seller if the Closing has not occurred
(other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations
under this Agreement) on or before August 31, 1997, or such
later date as the parties may agree upon.
8.2 EFFECT OF TERMINATION
Each party's right of termination under Section 8.1 is in
addition to any other rights it may have under this Agreement or
otherwise. If this Agreement is terminated pursuant to Section
8.1, all further obligations of the parties under this Agreement
will terminate, except that the obligations in Sections 10.1 and
10.3 will survive.
9. INDEMNIFICATION; REMEDIES
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations
in this Agreement, the Company Disclosure Letter, the
supplements to the Company Disclosure Letter, and any other
certificate or document delivered pursuant to this Agreement
will survive the Closing. The right to indemnification, payment
of Damages (as defined below) or other remedy based on such
representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, or
any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this
Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation.
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
Seller will indemnify and hold harmless TGI, the Company, and
their respective representatives, stockholders, controlling
persons, and affiliates (collectively, the "Indemnified
Persons") for, and will pay to the Indemnified Persons the
amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs
of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Seller in this Agreement, the Company Disclosure Letter, the
supplements to the Company Disclosure Letter, or any other
certificate or document delivered by Seller pursuant to this
Agreement;
(b) any breach by Seller of any covenant or obligation of
Seller or the Company in this Agreement;
(c) any product shipped or manufactured by, or any services
provided by, the Company prior to the Closing Date; or
(d) any claim by any person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such person with
Seller or the Company (or any person acting on their behalf) in
connection with any of the Contemplated Transactions.
The remedies provided in this Section 9.2 will not be exclusive
of or limit any other remedies that may be available to TGI or
the other Indemnified persons.
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY TGI
TGI will indemnify and hold harmless Seller, and will pay to
Seller the amount of any Damages arising, directly or
indirectly, from or in connection with (a) any breach of any
representation or warranty made by TGI in this Agreement, the
TGI Disclosure Letter, any supplement to the TGI Disclosure
Letter, any Schedule to this Agreement or in any certificate or
document delivered by TGI pursuant to this Agreement, (b) any
breach by TGI of any covenant or obligation of TGI in this
Agreement, or (c) any claim by any person for brokerage or
finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such
person with TGI (or any person acting on its behalf) in
connection with any of the Contemplated Transactions.
9.4 TIME LIMITATIONS
If the Closing occurs, Seller will have no liability (for
indemnification or otherwise) with respect to any representation
or warranty other than those in Sections 3.3, 3.10, 3.12, 3.18
and 3.19, unless on or before the third (3rd) anniversary of the
Closing Date TGI notifies Seller of a claim specifying the
factual basis of that claim in reasonable detail to the extent
then known by TGI. A claim with respect to Sections 3.3, 3.10,
3.12, 3.18 or 3.19, or a claim for indemnification or
reimbursement not based upon any representation or warranty or
any covenant or obligation to be performed and complied with
prior to the Closing Date, may be made at any time. If the
Closing occurs, TGI will have no liability (for indemnification
or otherwise) with respect to any representation or warranty,
unless on or before the third (3rd) anniversary of the Closing
Date Seller notifies TGI of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by
Seller.
9.5 ESCROW
At the Closing, the Seller will deposit 64,128 shares of
TGI's common stock that are issued to the Seller pursuant to
Section 2.2 hereof (the "Escrow Shares") with a bank or trust
company located within the State of Georgia which will act as an
escrow agent (the "Escrow Agent"), who will hold the Escrow
Shares in escrow as collateral for the indemnification
obligations of the Seller under this Agreement. The Escrow
Shares will be released to the Seller on the first (1st)
anniversary of the date hereof, if no indemnification claims are
then outstanding and will serve as security for the Seller's
indemnity obligations as set forth in the Escrow Agreement.
9.6 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an Indemnified Person (which
term shall include Seller for purposes of this Section 9.6) of
notice of the commencement of any proceeding against it, such
Indemnified Person will, if a claim is to be made against an
indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any
Indemnified Person, except to the extent that the indemnifying
party demonstrates that the defense of such action is prejudiced
by the Indemnified Person's failure to give such notice.
(b) If any proceeding referred to in Section 9.6(a) is brought
against an Indemnified Person and it gives notice to the
indemnifying party of the commencement of such proceeding, the
indemnifying party will, unless the claim involves taxes, be
entitled to participate in such proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a
party to such proceeding and the Indemnified Person determines
in good faith that joint representation would be inappropriate,
or (ii) the indemnifying party fails to provide reasonable
assurance to the Indemnified Person of its financial capacity to
defend such proceeding and provide indemnification with respect
to such proceeding), to assume the defense of such proceeding
with counsel satisfactory to the Indemnified Person and, after
notice from the indemnifying party to the Indemnified Person of
its election to assume the defense of such proceeding, the
indemnifying party will not, as long as it diligently conducts
such defense, be liable to the Indemnified Person under this
Section 9 for any fees of other counsel or any other expenses
with respect to the defense of such proceeding, in each case
subsequently incurred by the Indemnified Person in connection
with the defense of such proceeding, other than reasonable costs
of investigation. If the indemnifying party assumes the defense
of a proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that
proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims
may be effected by the indemnifying party without the
Indemnified Person's consent unless (A) there is no finding or
admission of any violation of applicable laws or any violation
of the rights of any person and no effect on any other claims
that may be made against the Indemnified Person, and (B) the
sole relief provided is monetary damages that are paid in full
by the indemnifying party; and (iii) the Indemnified Person will
have no liability with respect to any compromise or settlement
of such claims effected without its consent. If notice is given
to an indemnifying party of the commencement of any proceeding
and the indemnifying party does not, within ten (10) days after
such notice is given, give notice to the Indemnified Person of
its election to assume the defense of such proceeding, the
indemnifying party will be bound by any determination made in
such proceeding or any compromise or settlement effected by the
Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability
that a proceeding may adversely affect it or its affiliates
other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such
proceeding, but the indemnifying party will not be bound by any
determination of a proceeding so defended or any compromise or
settlement effected without its consent (which may not be
unreasonably withheld).
9.7 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a
third-party claim may be asserted by notice to the party from
whom indemnification is sought.
10. GENERAL PROVISIONS
10.1 EXPENSES
Each party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution,
and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
10.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to
this Agreement or the Contemplated Transactions will be issued
at such time and in such manner as TGI determines. Unless
consented to by TGI in advance or required by applicable law,
prior to the Closing Seller shall, and shall cause the Company
to, keep this Agreement strictly confidential and may not make
any disclosure of this Agreement to any person. Seller and TGI
will consult with each other concerning the means by which the
Company's employees, customers, and suppliers and others having
dealings with the Company will be informed of the Contemplated
Transactions, and TGI will have the right to be present for any
such communication.
10.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, TGI
and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of TGI and
the Company to maintain in confidence, any written information
stamped "confidential" when originally furnished by another
party in connection with this Agreement or the Contemplated
Transactions, unless (a) such information is already known to
such party or to others not bound by a duty of confidentiality
or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or
approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information
is required by or necessary or appropriate in connection with
legal proceedings. If the Contemplated Transactions are not
consummated, each party will return or destroy as much of such
written information as the other party may reasonably request.
10.4 NOTICES
All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by telecopier (with written
confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received
by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or
to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Seller: Mr. Jerry Pennington
Capitol Warehouse, Inc.
2101 South Ninth Street
Louisville, Kentucky 40208
Facsimile No.: (502) 634-5821
with a copy to: Herb Liebman, Esq.
Liebman & Liebman
403 West Main Street
Frankfort, Kentucky 40601
Facsimile No.: (502) 266-2001
TGI: Transit Group, Inc.
3350 Cumberland Circle, Suite 1900
Atlanta, Georgia 30339
Attention: Philip A. Belyew, President
Facsimile No.: (770) 984-5401
with a copy to: G. Donald Johnson, Esq.
Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
Facsimile No.: (404) 888-7490
10.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be
brought against any of the parties in the courts of the State of
Georgia, County of Cobb, or, if it has or can acquire
jurisdiction, in the United States District Court for the
Northern District of Georgia, and each of the parties consents
to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives
any objection to venue laid therein.
10.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each
other such other documents, and (c) to do such other acts and
things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
10.7 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power, or privilege
under this Agreement or the documents referred to in this
Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other
right, power, or privilege.
10.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter (including the Letter
of Intent between TGI and Seller) and constitutes (along with
the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may
not be amended except by a written agreement executed by the
party to be charged with the amendment.
10.9 COMPANY DISCLOSURE LETTER
The disclosures in the Company Disclosure Letter, and those
in any supplement thereto, relate only to the representations
and warranties in the Section of the Agreement to which they
expressly refer. In the event of any inconsistency between the
statements in the body of this Agreement and those in the
Company Disclosure Letter (other than an exception expressly set
forth as such in the Company Disclosure Letter with respect to a
specifically identified representation or warranty), the
statements in the body of this Agreement will control.
10.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties.
Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to
give any person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and
their successors and assigns.
10.11 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and
effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
10.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All
words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the
preceding words or terms.
10.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
10.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Kentucky without regard to conflicts of laws principles.
10.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed
to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
TGI:
TRANSIT GROUP, INC.
f/k/a General Parcel Service, Inc.
BY: (Signed)
____________________________________
PHILIP A. BELYEW, President
SELLER:
(Signed)
__________________________________________
JERRY PENNINGTON
THE "COMPANY":
CAPITOL WAREHOUSE, INC.
BY: (Signed)
____________________________________
JERRY PENNINGTON, President
TRANSIT GROUP COMPLETES TWO ACQUISITIONS AND SIGNS AGREEMENT IN
THIRD TRANSACTION; COMPANY REPORTS SECOND QUARTER RESULTS
August 18, 1997 9:04 AM EDT
ATLANTA--(BUSINESS WIRE)--Aug. 18,1997--Transit Group, Inc.
(Nasdaq Small Cap: TRGP), formerly General Parcel Service, Inc.
(former Nasdaq symbol GPSX), today announced that it has
completed acquisitions involving two privately held southeastern
U.S.-based truckload carriers and has signed a definitive
agreement relating to the acquisition of a third trucking
company. Letters of intent for these all-stock acquisitions
were previously announced in May 1997. A fourth acquisition
announced in May, involving Carolina Pacific Distributors, Inc.,
was completed last month.
Effective Aug. 15, 1997, Transit Group has acquired Capitol
Warehouse, Inc., based in Louisville, Kentucky, and Service
Express, Inc., based in Tuscaloosa, Alabama. Capitol Warehouse,
the largest private truckload carrier in Kentucky, serves
customers nationwide and has annual revenues of approximately
$16 million. Service Express, which operates primarily in the
southeastern United States, has annual revenues of approximately
$5 million. Under the terms of the acquisitions, Transit Group
has issued a total of approximately 1.54 million new shares of
common stock valued at approximately $9.85 million.
Separately, the Company said it has executed a definitive
agreement to acquire privately held Carroll Fulmer Group, Inc.,
headquartered in Groveland, Florida. A family business tracing
its origin to the purchase of two trucks in 1961, Carroll Fulmer
now has a fleet of 200 company-owned and 600 owner/operated dry
van and refrigerated units that haul freight from coast to
coast, generating annual revenues of approximately $70 million.
In this transaction, which is expected to be completed by Sept.
1, 1997, Transit Group expects to issue 4,166,000 shares of
common stock. Closing of the transaction is subject to final
due diligence, third-party approvals and finalization of related
agreements.
Commenting on the announcement, Philip A. Belyew, President and
Chief Executive Officer of the Company, said, "We are pleased to
announce ongoing success in acquiring profitable, well-run
trucking companies, which is central to our strategy to build a
significant presence in the truckload carrier industry. Now
with the completion of three acquisitions, we have added
approximately $35 million in annual revenues to our base of
business, and assuming the Carroll Fulmer acquisition is
finalized in a few weeks, Transit Group will surpass the $100
million mark in annual revenues. Importantly, all the companies
we have added as a part of our new strategic direction are
currently profitable and we believe are well-positioned for
continued growth. With these additions, and assuming the
planned divestiture of our unprofitable parcel delivery and
courier operations is completed, we believe the Company is
positioned for profitable operations during the second half of
the year, and we hope to add to that momentum with additional
acquisitions during the remainder of 1997."
Belyew noted that the addition of Carroll Fulmer to the
Company's operations will provide important infrastructure
support for Transit Group's expansion plans. With sophisticated
marketing, safety, logistics, tracking, and control systems,
along with one of the most successful driver recruitment
programs in the industry, Carroll Fulmer will serve as a
pedestal for Transit Group's continued growth.
Upon completion of the acquisition, Mr. Carroll Fulmer (age 63),
Chairman of Carroll Fulmer Group, will join Transit Group's
Board of Directors, filling a vacancy on the Board and
increasing its number to four. Fulmer, who is a Past Chairman
of the Board of the National Agricultural Transportation League,
will remain active in the strategic operations of Carroll
Fulmer, as will his wife, Barbara (who serves as Treasurer of
the company), daughter, Cynthia (who is a regional manager in
the company's Huntsville, Alabama office), and sons, Philip (in
charge of all administrative areas of the company), Tony (head
of marketing and sales) and Timothy (over sales and dispatching
for the company's 30 field locations).
Commenting on the proposed acquisition, Fulmer said, "By joining
forces with Transit Group, I believe we gain several advantages
for the company, our family, and our customers. Not only does
this transaction establish liquidity and value for our business,
it allows us to become a part of a larger company with the
financial resources that are so important for a company like
ours to grow, extend its reach to new markets, and leverage the
technological advances that are reshaping the trucking industry.
As one of the 200 largest in the industry, I believe Carroll
Fulmer will provide important momentum to Transit Group's
efforts to consolidate additional trucking companies and achieve
greater scale economies and synergies in the trucking industry."
In connection with Transit Group's new strategic direction, the
Company has announced that it intends to dispose of its parcel
delivery and courier businesses, with such divestitures expected
to be completed during the third quarter of 1997 subject to the
completion of due diligence, execution of definitive agreements,
and other customary conditions. Accordingly, all of its
revenues and expenses for the second quarter and six-month
periods ended June 30, 1997, as well as those for prior year
periods, have been aggregated and reported as discontinued
operations. For the second quarter of 1997, the loss from
continuing operations attributable to common shareholders,
representing essentially corporate overhead expenses and
preferred dividend requirements, totaled $367,158 or $.06 per
share versus a loss of $124,829 or $.03 per share in the same
period last year. Losses from discontinued operations,
including an estimated loss on disposal totaling $7,455,966 or
$1.23 per share, increased the net loss for the period to
$11,502,110 or $1.90 per share compared with a net loss of
$792,429 or $.21 per share in the second quarter of 1996. The
Company's net losses for the six-month periods ended June 30,
1997 and 1996, inclusive of losses from discontinued operations,
totaled $14,223,440 million or $2.90 per share and $1,475,603
million or $.39 per share, respectively.
Comments in this news release regarding the Company's business
which are not historical facts are forward looking statements
that involve risks and uncertainties. Among these risks are
that the Company is in a highly competitive business, has
history of operating losses, and is pursuing a growth strategy
that relies in part on the completion of acquisitions of
companies in the trucking industry. There can be no assurance
that in its highly competitive business environment, the Company
will successfully improve its operating profitability or
consummate such acquisitions.
Transit Group, headquartered in Atlanta, Georgia, is a holding
company formed to acquire and consolidate short and long-haul
trucking companies, particularly truckload carriers based in the
southeastern United States. Trucking companies that operate as
parts of Transit Group are located in Alabama, Kentucky and
North Carolina, and comprise a fleet of more than 400 trucks and
1,000 trailers, serving customers nationwide.
<TABLE>
<CAPTION>
Transit Group, Inc. Unaudited Financial Results
Three Months Ended June 30 Six Months Ended June 30
-------------------------------------- ------------------------------------
1997 1996 1997 1996
----------------- ------------------- --------------- -------------------
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
Loss from continuing operations (174,658) (59,205) (268,066) (233,863)
Discontinued operations:
Loss from discontinued
operations (3,678,986) (667,600) (6,114,408) (1,082,711)
Estimated loss on disposal (7,455,966) -- (7,455,966) --
--------------- ---------------- --------------- ----------------
Net loss (11,309,610) (726,805) (13,838,440) (1,316,574)
Preferred stock dividend
requirement (192,500) (65,624) (385,000) (159,029)
--------------- ---------------- --------------- ----------------
Loss to common shareholders $ (11,502,110) $ (792,429) $ (14,223,440) $ (1,475,603)
=============== ================ =============== ================
Net loss per share:
Continuing operations $ (0.06) $ (0.03) $ (0.13) $ (0.10)
Discontinued operations (0.61) (0.18) (1.25) (0.29)
Estimated loss on disposal (1.23) -- (1.52) --
--------------- ---------------- --------------- ----------------
Net loss $ (1.90) $ (0.21) $ (2.90) $ (0.39)
=============== ================ =============== ================
Weighted average number of
shares outstanding 6,047,738 3,758,671 4,909,528 3,758,671
=============== ================ =============== ================
</TABLE>
Note: Transit Group's continuing operations consist of
transportation services provided by the Company's subsidiary
trucking companies. The Company's first trucking company
acquisition was completed subsequent to the end of the second
quarter, hence there were no revenues from continuing operations
prior to June 30, 1997.
