UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
December 8, 1998
Date of Report (Date of earliest event reported)
CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-26954 22-3350958
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
380 Allwood Road, Clifton, New Jersey 07012
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (973) 471-1005
NOT APPLICABLE
(Former name or former address, if changed since last report.)
ITEM 2. Acquisition or Disposition of Assets
On December 8, 1998, Consolidated Delivery & Logistics, Inc. ("CDL")
entered into and consummated an agreement (the "Stock Purchase
Agreement") with its subsidiary, National Express Company, Inc.
("National") and First Choice Courier and Distribution Systems, Inc.
("First Choice"), Regional Express II, Inc. ("RE II"), Regional Express
III, Inc. ("RE III") and Manteca Enterprises, Inc. ("Manteca") and
Terry Bozzay, Randy Cooper and Charles Walch, the shareholders of First
Choice, RE II, RE III and Manteca, whereby National purchased all of
the outstanding shares of the capital stock of First Choice, RE II,
RE III and Manteca.
The purchase price was comprised of approximately $2.9 million in cash
including estimated direct acquisition costs, $1.4 million in 7%
subordinated convertible notes (the "Notes") and 206,185 shares of
CDL's common stock. The Notes are due December 8, 2001 with interest
payable quarterly commencing February 28, 1999. At the option of either
the holder or CDL, under certain circumstances fifty percent of the
principal amount of the Notes are convertible into fully paid shares of
CDL's stock at a conversion price of $7 per share. The Notes are
subordinate to all existing or future senior debt of CDL. In addition,
a contingent earn out in the aggregate amount of up to $800,000 is
payable based on the achievement of certain financial goals by the
newly formed division during the three year period following the
closing. CDL financed the acquisition using proceeds from its revolving
credit facility with First Union Commercial Corporation.
The description above of the Stock Purchase Agreement and the Notes is
a summary and does not purport to be complete. Reference should be made
to the copies of such documents filed as exhibits to this report for a
complete description of their terms.
ITEM 7. Financial Statements and Exhibits
a. Financial Statement of Business Acquired.
It is impracticable to provide the required financial statements
for First Choice, RE II, RE III and Manteca at this time. The
statements will be filed as an amendment to this report on Form
8-K as soon as they are prepared and not later than 60 days
after the deadline for filing this Form 8-K.
b. Pro Forma Financial Information
It is impracticable to provide the required pro forma financial
statements for First Choice, RE II, RE III and Manteca at this
time. The statements will be filed as an amendment to this
report on Form 8-K as soon as they are prepared and not later
than 60 days after the deadline for filing this Form 8-K.
c. Exhibits
10.1 Stock Purchase Agreement dated December 8, 1998 by and among
Consolidated Delivery & Logistics, Inc., National, First Choice,
RE II, RE III, Manteca, Terry Bozzay, Randy Cooper and Charles
Walch.
10.2 7% Subordinated Convertible Notes Due 2001 of Consolidated
Delivery & Logistics, Inc.
99.1 Press Release issued December 9, 1998 regarding acquisition of
First Choice, RE II, RE III, and Manteca.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: December 22, 1998 CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Registrant)
By: /s/ Albert W. Van Ness, Jr.
Albert W. Van Ness, Jr.
Chairman of the Board, Chief
Executive Officer and Chief
Financial Officer
Exhibit 10.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated as of December 8, 1998,
by and among CONSOLIDATED DELIVERY & LOGISTICS, INC., a Delaware corporation
("CDL"), NATIONAL EXPRESS COMPANY, INC., a Missouri corporation ("National"),
FIRST CHOICE COURIER AND DISTRIBUTION SYSTEMS, INC., a Missouri corporation
("First Choice"), REGIONAL EXPRESS II, INC., a Missouri corporation ("RE II"),
REGIONAL EXPRESS III, INC., a Missouri corporation ("RE III"), and MANTECA
ENTERPRISES, INC., a Missouri corporation ("Manteca"), and TERRY BOZZAY
("Bozzay"), RANDY COOPER ("Cooper"), and CHARLES WALCH ("Walch", and
collectively with Bozzay and Cooper the "Shareholders").
W I T N E S S E T H:
WHEREAS, National is duly organized and existing under the laws of the
State of Missouri and is a wholly-owned subsidiary of CDL, a corporation
organized and existing under the laws of the State of Delaware; and
WHEREAS, each of First Choice, RE II, RE III and Manteca is a
corporation organized and existing under the laws of the State of Missouri (all
of which corporations are hereinafter collectively referred to as the
"Company"); and
WHEREAS, the Shareholders are all of the shareholders of First Choice;
and
WHEREAS, Terry Bozzay is the sole shareholder of each of RE II, RE III
and Manteca (all of the capital stock of each of which, along with that of First
Choice, is hereinafter collectively referred to as the "Company's Stock"); and
WHEREAS, the Shareholders desire to sell and transfer to National, and
National desires to purchase from the Shareholders, all of the issued and
outstanding shares of the Company's Stock, all as more specifically provided
herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties and covenants contained herein, and
intending to be legally bound, the parties hereto hereby agree as follows:
ARTICLE I
The Merger
Section 1.1 Delivery and Filing of Articles of Merger. The respective
Boards of Directors of National and RE II (which corporations are hereinafter
collectively referred to as "Constituent Corporations") have determined that it
is in the best interests of the Constituent Corporations and their respective
shareholders that RE II merge with and into National pursuant to this Agreement
and the applicable provisions of the laws of the State of Missouri, such
transaction sometimes being herein called the "Merger." The Merger is subject to
the terms and conditions of this Agreement and to the representations,
warranties and agreements contained herein. The Constituent Corporations will
cause Articles of Merger with respect to the Merger (the "Articles of Merger")
to be signed, acknowledged and filed with the Secretary of State of the State of
Missouri. The Constituent Corporations will also make all other filings to be
made with any relevant authority in the jurisdiction in which the Company is
organized, on or before the "Consummation Date" as defined in Article 4.
Section 1.2 Effective Time of the Merger. The "Effective Time of the
Merger" shall be the time when the Articles of Merger are duly filed with the
Secretary of State of the state first set forth in Section 1.1 above. National,
the party surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation".
Section 1.3 Articles of Incorporation, By-laws and Board of Directors
of Surviving Corporation. At the Effective Time of the Merger:
(a) the Articles of Incorporation of National shall become the Articles
of Incorporation of the Surviving Corporation; and subsequent to the Effective
Time of the Merger, such Articles of Incorporation shall be the Articles of
Incorporation of the Surviving Corporation until changed as provided by law;
(b) the By-laws of National shall become the By-laws of the Surviving
Corporation; and subsequent to the Effective Time of the Merger, such By-laws
shall be the By-laws of the Surviving Corporation until they shall thereafter be
duly amended;
(c) the directors of National shall serve as the members of the Board
of Directors of the Surviving Corporation. The Board of Directors of the
Surviving Corporation shall hold office subject to the provisions of the laws of
the State of Missouri and of the Articles of Incorporation and the By-laws of
the Surviving Corporation; and
(d) the persons who shall serve as the officers of the Surviving
Corporation are the current officers of National in their current capacity. Each
officer shall hold office and serve, subject to the provisions of the Articles
of Incorporation and the By-Laws of the Surviving Corporation, until his or her
successor is elected and qualified. The Board of Directors of the Surviving
Corporation shall designate such additional officers as it deems necessary in
its discretion.
Section 1.4 Certain Information With Respect to the Capital Stock of
the Company and National. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of RE II and
National as of the date of this Agreement are as follows:
(a) the authorized capital stock of RE II consists of 30,000
shares of common stock, $1.00 par value of which 1,000 shares are issued and
outstanding,
(b) the authorized capital stock of National consists of 55 shares of
common stock, no par value, of which 55 shares are issued and outstanding
("National Stock").
Section 1.5 Effect of Merger. Except as herein specifically set forth,
the identity, existence, purposes, powers, objects, franchises, privileges,
rights and immunities of RE II shall continue unaffected and unimpaired by the
Merger and the corporate franchises, existence and rights of RE II shall be
merged into National, and National, as the Surviving Corporation, shall be fully
vested therewith. At the Effective Time of the Merger, the separate existence of
RE II shall cease and, in accordance with the terms of this Agreement, the
Surviving Corporation shall possess all the rights, privileges, immunities and
franchises, of a public as well as of a private nature; and all property, real,
personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all other choices in action, and all and every
other interest of or belonging to or due to RE II and to National shall be taken
and deemed to be transferred to, and vested in, the Surviving Corporation
without further act or deed; and all property, rights and privileges, powers and
franchises and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of RE II and National.
The Surviving Corporation shall thenceforth be responsible and liable for all
the liabilities and obligations of RE II and National and any claim existing, or
action or proceeding pending, by or against RE II or National may be prosecuted
as if the Merger had not taken place, or the Surviving Corporation may be
substituted in its place. Neither the rights of creditors nor any liens upon the
property of RE II or of National shall be impaired by the Merger, and all debts,
liabilities and duties of RE II and of National shall attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
Section 1.6 Manner of Conversion. The manner of converting the shares
of RE II Stock issued and outstanding immediately prior to the Effective Time of
the Merger into restricted shares of common stock of CDL, $.001 par value ("CDL
Stock"), shall be as follows:
As of the Effective Time of the Merger, subject to the terms and
conditions of this Agreement, by virtue of the Merger and without any action on
the part of any Constituent Corporation or of their respective shareholders:
(i)......all of the shares of the RE II Stock issued and
outstanding immediately prior to the Effective Time of the Merger shall, by
virtue of the Merger and without any action on the part of the holder thereof or
any Constituent Corporation, automatically be converted in the aggregate into a
number of restricted voting shares of common stock of CDL, $.001 par value ("CDL
Stock"), with a value equal to Fair Value of $600,000, which shall be delivered
to Bozzay, as the sole shareholder of RE II at the Closing. For purposes of this
Section, the term "Fair Value" shall mean $2.91, the average of the closing
prices of the common stock of CDL as reported on the NASDAQ National Market
System for the five (5) trading days ending on the second (2nd) trading day
prior to October 30, 1998; and
(ii).....each share of National Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall, by virtue of the
Merger and without any action on the part of the holder thereof or any
Constituent Corporation, remain issued and outstanding and shall constitute all
of the issued and outstanding shares of the Surviving Corporation immediately
after the Effective Time of the Merger.
ARTICLE II
Purchase and Sale of Stock;
Additional Covenants
Section 2.1. Purchase and Sale of Stock. Upon the terms and subject to
the conditions of this Agreement and on the basis of the representations,
warranties and agreements contained herein, at the Closing (as defined in
Article IV), the Shareholders shall sell, assign, transfer, convey and deliver
to National all of the issued and outstanding shares of the Stock of First
Choice, RE III and Manteca, and National shall purchase such shares from the
Shareholders.
Section 2.2. Purchase Price. The aggregate purchase price of the Stock
of First Choice, RE III and Manteca shall be allocated among the issued and
outstanding shares of First Choice, RE III and Manteca as follows:
(a) The following aggregate consideration for the issued and
outstanding shares of First Choice shall be allocated among the Shareholders as
set forth in Exhibit A and payable in three parts as follows:
(i)......$1,330,122 shall be paid at the Closing in cash by
wire transfer to an account or accounts of the Shareholders specified in
writing by the Shareholders or by one or more certified or bank cashier's
checks payable to the order of the Shareholders;
(ii).....$1,400,000 shall be paid at the Closing by delivery
of subordinated unsecured convertible balloon notes of CDL with a three (3) year
term payable to the Shareholders substantially in the form of Exhibit B hereto
(the "Notes"); and
(iii)....78.9634 percent of the contingent earn out payments
described in Section 2.2(c) below shall be paid to the Shareholders, in the
proportions set forth in Exhibit A, subject to the conditions and at the times
provided therein.
(b) The following aggregate consideration for the issued and
outstanding shares of RE III and Manteca shall be payable in two parts as
follows:
(i)......$1,476,843 shall be paid at the Closing in cash by
wire transfer to an account or accounts of Bozzay specified in writing by Bozzay
or by one or more certified or bank cashier's checks payable to the order of
Bozzay; and
(ii).....21.0366 percent of the contingent earn out payments
described in Section 2.2(c) below shall be paid to Bozzay subject to the
conditions and at the times provided therein.
(c) For purposes of this Section, any contingent earn out payments
shall be determined and paid in accordance with the following provisions:
(i) First Period Earn Out. On or before the date ninety (90)
days after the end of the First Measurement Period, CDL shall determine the EBIT
of the Division for the First Measurement Period. If such EBIT exceeds $640,000,
CDL shall pay to the Shareholders in the aggregate not later than 5 days after
such date an earn out payment equal to $1,500.00 for each $1,000 by which the
EBIT exceeds such $640,000; provided, however that such earn out payment for the
First Measurement Period shall in no event exceed $240,000.
(ii) Second Period Earn Out. On or before the date ninety (90)
days after the end of the Second Measurement Period, CDL shall determine the
EBIT of the Division for the Second Measurement Period. If such EBIT exceeds
$850,000, CDL shall pay to the Shareholders in the aggregate not later than 5
days after such date an earn out payment equal to $1,866.67 for each $1,000 by
which the EBIT exceeds such $850,000; provided, however that such earn out
payment for the Second Measurement Period shall in no event exceed $280,000.
(iii) Third Period Earn Out. On or before the date ninety (90)
days after the end of the Third Measurement Period, CDL shall determine the EBIT
of the Division for the Third Measurement Period. If such EBIT exceeds
$1,050,000, CDL shall pay to the Shareholders in the aggregate not later than 5
days after such date an earn out payment equal to $1,866.67 for each $1,000 by
which the EBIT exceeds such $1,050,000; provided, however that such earn out
payment for the Third Measurement Period shall in no event exceed $280,000.
(iv) General Earn Out Provisions.
(A) CDL shall cause the books and records of the Division to
be maintained as a separate profit center during each earn out Measurement
Period, so that any amounts due as earn out payments pursuant to this Section
can be determined. The EBIT for each Measurement Period shall be determined in
accordance with GAAP consistently applied and consistent with CDL's regular
audited financial reports required to be provided with its SEC filings. The
determination for EBIT for each Measurement Period shall initially be made by
CDL. At the same time as payment of the earn out payment for any Measurement
Period is made (or if no earn out payment is made for a Measurement Period, then
at the same time such earn out payment would have been due for such Measurement
Period if one was made), CDL shall deliver statements, in reasonable detail,
detailing the calculation of the EBIT for such period and the calculation of the
earn out payment, if any, for such period, all certified by the Chief Financial
Officer of CDL. Each Shareholder shall have 15 days to object to such
calculation. If no objection is made, CDL's calculation shall be deemed correct.
If objection is made, CDL will make all work papers, personnel and applicable
books and records available to the objecting Shareholders and their accountants
for review at reasonable times and on reasonable notice. If the Shareholders
believe that CDL's calculation was incorrect, to the extent possible, they shall
state in a non-binding writing the amount of the earn out they believe they were
entitled to, and the basis for such belief in reasonable detail. CDL and the
Shareholders then shall negotiate in good faith for a period of at least 30 days
from the receipt of both the objection notice and the claimed correct
calculation from Shareholders, in an attempt to agree on an earn out payment for
such period. If the parties cannot reach such agreement, they shall choose a
"Big 5" independent accounting firm (the "Determining Firm") to determine the
earn out amount. The Determining Firm shall determine the earn out amount as
expeditiously as possible, and such determination shall be final and binding
upon the parties. The parties shall bear their own costs and expenses except for
the fees of the Determining Firm. The fees and expenses of the Determining Firm
shall be paid as follows: (x) if the final earn out payment is equal to or less
than the earn out payment initially calculated by CDL, then the fees and
expenses of the Determining Firm shall be paid by the Shareholders, (y) if the
final earn out payment is equal to or more than the earn out payment initially
claimed by the Shareholders, then CDL shall pay all of the fees and expenses of
the Determining Firm and (z) if the final earn out payment is between CDL's
initial calculation and the Shareholders' initial calculation, CDL shall pay 50%
of the fees of the Determining Firm and the Shareholders shall pay 50%. Any fees
and expenses paid by the Shareholders shall be payable only by those
Shareholders actually challenging the CDL earn out calculation, and then payable
by the percentage of the earn out payments to all of the challenging
Shareholders that each such challenging Shareholder receives.
(B) In the event that the earn out payment for any Measurement
Period is limited by the maximum payment allowed for that Measurement Period
(i.e., $240,000 for the First Measurement Period), the excess EBIT (i.e., EBIT
above the EBIT needed to earn the maximum earn out payment for the period) may
be credited to the immediately prior or subsequent Measurement Period to the
extent that the earn out payments for such other Measurement Period or Periods
shall not have exceeded the respective maximum payments allowable in such other
Measurement Period or Periods.
(C) Any earn out payments shall be allocated pursuant to
Sections 2.2(a)(iii) and 2.2(c)(ii), and, to the extent allocated to the
Shareholders, among the Shareholders in accordance with Exhibit A.
(D) If the maximum of earn out payments are achieved for a
Measurement Period, then non-qualified stock options shall be granted to the
Shareholders and certain other persons to the extent provided in their
respective employment agreements with National referred to in Section 10.2.
ARTICLE III
Requirements of Delivery
The Shareholders shall deliver to CDL, at the Closing, the certificates
representing the Company's Stock, with transmittal letters in form approved by
CDL duly executed by the Shareholders, and with all necessary transfer tax and
other revenue stamps, acquired at the Shareholders' expense, affixed and
canceled. The Shareholders agree promptly to cure any deficiencies with respect
to the documents of conveyance with respect to the Company's Stock.
ARTICLE IV
Closing
The closing of the transactions contemplated by this Agreement (herein
referred to as the "Closing") shall take place by exchange of facsimile
signature pages or at the offices of CDL at 380 Allwood Road, Clifton, New
Jersey 07012 on December 8, 1998 at 11:00 a.m. or at such other time and date as
National, CDL, the Company and the Shareholders, may mutually agree, which date
shall be referred to as the "Closing Date".
ARTICLE V
Certain Definitions
Section 5.1.......Certain Definitions. As used in this Agreement,
the following terms have the respective meanings set forth below.
"Accounts Receivable" has the meaning ascribed to such term in
Section 6.19.
"Affiliate" means, with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlled" and "controlling" have meanings correlative thereto.
"Agreement" means this Stock Purchase Agreement.
"Authorizations" has the meaning ascribed to such term in Section 6.10.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks in New Jersey are open for the general transaction of business.
"CDL Stock" has the meaning ascribed to such term in Section 2.2.
"Closing" has the meaning ascribed to such term in Article IV.
"Closing Date" has the meaning ascribed to such term in Article IV.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company's Accountants" means Larson, Allen and Weishar.
"Company's Stock" has the meaning ascribed to such term in the recitals
to this Agreement.
"Contracts" has the meaning ascribed to such term in Section 6.20.
"Corporate Overhead" means any cost, liability or expense incurred by
CDL to own, control, govern, administer, finance, assist or otherwise oversee
its and its subsidiaries operating businesses that is not attributable to the
day to day operations of the Division. Corporate Overhead includes without
limitation any inter company allocation formula, fee for services or similar
arrangement whereby the Division incurs an expense or charge for overhead
incurred or services or other consideration provided by CDL that is not a cost
of operating the Division. It does not include compensation paid to the
Shareholders and other employees with responsibility for managing the day to day
operations of the Division.
"Damages" has the meaning ascribed to such term in Section 11.2.
"Division" means the former business of the Company and the St. Louis
operation of National, as collectively operated by National after the Closing as
a separate profit center.
"EBIT" means earnings before interest and taxes, computed in accordance
with Section 2.2(c)(iv)(A); provided, however, that any post-Closing goodwill
amortization as a result of the transactions contemplated by this Agreement
shall be excluded. Any pre-Closing goodwill and other amortization and
depreciation shall be included in such computation. Corporate Overhead shall not
be expensed or otherwise deducted from earnings in the EBIT calculation. Any
amortization and depreciation on assets held by the Company immediately prior to
the Closing based on historic cost shall be treated as an expense in such
calculation. If CDL or National acquires any entity (or the assets thereof) (the
"Target"), and if the Target is not to be operated as a separate profit center,
but rather, with the mutual consent of the parties, is to have its operations
integrated into the Division and managed by Bozzay, then the thresholds for
reaching each Earn-Out Payment shall be increased by the EBIT projections for
such Target (with such projections being those used by CDL or National in
determining the purchase price for the Target) and the EBIT of such Target will
be included in the EBIT calculation for the Division. If on the other hand, the
Target is to be operated as a separate profit center, but is to be managed by
the Division and by Bozzay, then EBIT arising from such Target will not be
included in the EBIT calculation for the Division, but the expenses of the
Division in operation the Target shall be allocated to the Target pursuant to
CDL's customary accounting practices and such expenses shall not be included in
the EBIT calculation of the Division.
"Employee Benefit Plan" has the meaning ascribed to such term in
Section 6.17.
"Encumbrances" has the meaning ascribed to such term in Section 6.3.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, license, permit, authorization, approval, consent,
court order, judgment, decree, injunction, code, requirement or agreement with
any Governmental Authority, (x) relating to pollution (or the cleanup thereof or
the filing of information with respect thereto), human health or the protection
of air, surface water, ground water, drinking water supply, land (including land
surface or subsurface), plant and animal life or any other natural resource, or
(y) concerning exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production or
disposal of Regulated Substances, in each case as amended and as now or
hereafter in effect. The term Environmental Law includes, without limitation,
(i) the Comprehensive Environmental Response Compensation and Liability Act of
1980, the Water Pollution Control Act, the Clean Air Act, the Clean Water Act,
the Solid Waste Disposal Act (including the Resource Conservation and Recovery
Act of 1976 and the Hazardous and Solid Waste Amendments of 1984), the Toxic
Substances Control Act, the Insecticide, Fungicide and Rodenticide Act, the
Occupational Safety and Health Act of 1970, each as amended and as now or
hereafter in effect, and (ii) any common law or equitable doctrine (including,
without limitation, injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose liability or
obligations for injuries or damages due to or threatened as a result of the
presence of, exposure to, or ingestion of, any Regulated Substance.
"Financial Statements" has the meaning ascribed to such term in
Section 6.8.
"First Measurement Period" shall mean the period of twelve (12)
consecutive calendar months beginning on the first day of the first calendar
month following the Closing Date.
"GAAP" means generally accepted accounting principles as in effect in
the United States on the date of this Agreement.
"Governmental Authority" means any national, federal, state,
provincial, county, municipal or local government, foreign or domestic, or the
government of any political subdivision of any of the foregoing, or any entity,
authority, agency, ministry or other similar body exercising executive,
legislative, judicial, regulatory or administrative authority or functions of or
pertaining to government, including any authority or other quasi-governmental
entity established to perform any of such functions.
"Indemnified Party" has the meaning ascribed to such term in
Section 11.2.
"Indemnifying Party" has the meaning ascribed to such term in
Section 11.2
"Leased Real Property" has the meaning ascribed to such term in
Section 6.7.
"Material Adverse Change" means a material adverse change in the
business, financial condition, results of operations or prospects (financial and
other) of the entity.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition or results of operations of the entity. Any matter
or matters which in the aggregate involve $25,000 or more shall presumptively be
deemed to be material.
"Person" means an individual, partnership, corporation, joint stock
company, unincorporated organization or association, trust or joint venture, or
a governmental agency or political subdivision thereof.
"Proprietary Rights" means all patents, patent registrations, patent
applications, trademarks, service marks, trademark and service mark
registrations and applications therefor, copyrights, copyright registrations,
copyright applications, technology, inventions, computer software, data and
documentation (including electronic media) (other than shrink-wrap or
off-the-shelf software and accompanying data and documents), trade secrets,
know-how, customer lists, processes, other intellectual property and proprietary
information or rights related to or used in the conduct of the Company's
business; and permits, licenses or other agreements to or from third parties
regarding the foregoing.
"Regulated Substances" means pollutants, contaminants, hazardous or
toxic substances, compounds or related materials or chemicals, hazardous
materials, hazardous waste, flammable explosives (including, but not limited to
radon, radioactive materials, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls), medical waste or by-products, petroleum and
petroleum products (including, but not limited to, waste petroleum and petroleum
products) as regulated under applicable Environmental Laws.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning ascribed to such term in Section 9.7.
"Second Measurement Period" shall mean the period of twelve (12)
consecutive calendar months beginning on the first day of the first calendar
month following the first anniversary of the Closing Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Survival Period" has the meaning ascribed to such term in
Section 11.1.
"Third Measurement Period" shall mean the period of twelve (12)
consecutive calendar months beginning on the first day of the first calendar
month following the second anniversary of the Closing Date.
"Third Party Claim" has the meaning ascribed to such term in
Section 11.3.
Section 5.2.......Interpretation. Unless otherwise indicated to the
contrary herein by the context or use thereof: (i) the words, "herein,"
"hereto," "hereof" and words of similar import refer to this Agreement as a
whole and not to any particular Section or paragraph hereof; (ii) words
importing the masculine gender shall also include the feminine and neutral
genders, and vice versa; (iii) words importing the singular shall also include
the plural, and vice versa; (iv) the word "Company" shall include each of First
Choice, RE II, RE III and Manteca individually as well as collectively; and (v)
the word "Shareholders" shall include each of Bozzay, Cooper and Walch
individually as well as collectively.
ARTICLE VI
Representations and Warranties Regarding the Company
Each Company and its Shareholders, jointly and severally, represent and
warrant (it being expressly understood that the representations and warranties
of Cooper and Walch herein shall pertain solely to First Choice, the term
"knowledge of the Shareholders" is limited in the case of Cooper and Walch to
their knowledge of First Choice, and the representations and warranties of First
Choice pertain only to itself, and no other Company) to National and CDL as
follows:
Section 6.1.......Organization and Qualification of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Missouri, with full corporate power and authority
to own or lease its properties and assets and to carry on its business as
presently conducted, and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction listed in Schedule 6.1,
which constitute all of the jurisdictions in which the Company is currently
conducting its business. The Company has previously provided to National and CDL
true and complete copies of (i) its Articles of Incorporation and all amendments
thereto, and (ii) its by-laws and all amendments thereto. Other than as
indicated on Schedule 6.1 the business of the Company is conducted solely
through the Company and the Company does not own, directly or indirectly, any
subsidiaries.
Section 6.2.......Authorization. The Company has full power and
authority, corporate and other, to execute and deliver this Agreement and to
perform its obligations hereunder, all of which have been duly authorized by all
requisite corporate action. This Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms.
Section 6.3.......Non-contravention. Except as set forth in Schedule
6.3, neither the execution and delivery of this Agreement nor the performance by
the Company of its obligations hereunder will (i) contravene any provision
contained in its Articles of Incorporation or by-laws, (ii) violate or result in
a breach (with or without the lapse of time, the giving of notice or both) of or
constitute a default under (A) any contract, agreement, commitment, indenture,
mortgage, lease, pledge, note, license, permit or other instrument or obligation
or (B) any judgment, order, decree, law, rule or regulation or other restriction
of any Governmental Authority, in each case to which the Company is a party or
by which it is bound or to which any of its assets or properties are subject,
(iii) result in the creation or imposition of any lien, claim, charge, mortgage,
pledge, security interest, equity, restriction or other encumbrance
(collectively, "Encumbrances") on any of the assets or properties of the Company
if such Encumbrance would have a Material Adverse Effect, or (iv) result in the
acceleration of, or permit any Person to accelerate or declare due and payable
prior to its stated maturity, any liability.
Section 6.4.......No Consents. Except as set forth in Schedule 6.4, no
notice to, filing with, or authorization, registration, consent or approval of
any Governmental Authority or other Person is necessary for the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby by the Company.
Section 6.5.......Capitalization. The respective designations and
numbers of authorized and issued and outstanding shares and voting rights of
each class of outstanding capital stock of the Company are as follows:
(a) the authorized capital stock of First Choice
consists of 30,000 shares of common stock, $1.00 par value of
which 10,000 shares are issued and outstanding,
(b) the authorized capital stock of RE II consists of
30,000 shares of common stock, $1.00 par value of which 1,000
shares are issued and outstanding,
(c) the authorized capital stock of RE III consists
of 30,000 shares of common stock, $1.00 par value of which 100
shares are issued and outstanding, and
(d) the authorized capital stock of Manteca consists
of 30,000 shares of common stock, $1.00 par value of which 100
shares are issued and outstanding.
The Company does not have any shares of its capital stock reserved for issuance
and the Company does not have any outstanding options, warrants, rights, calls
or commitments relating to its capital stock or any outstanding securities or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire from it, any shares of its capital stock. There are
no pre-emptive or other subscription rights with respect to any shares of the
capital stock of the Company and all of the issued and outstanding shares of the
capital stock of the Company have been duly authorized, validly issued, are
fully paid and are nonassessable.
Section 6.6.......Personal Property. Except as set forth in Schedule
6.6, as disclosed in detail in the Financial Statements, or liens for taxes not
yet due, the Company has good and marketable title to (or valid leasehold or
contractual interests in) all personal property used in its business, free and
clear of any Encumbrances. To the Shareholders' knowledge, all machinery,
equipment, furniture, fixtures and other personal property of the Company is in
good operating condition and fit for operation in the ordinary course of
business (subject to normal wear and tear).
Section 6.7.......Real Property. The Company does not own any real
property or real estate. Except as set forth in Schedule 6.7, the Company has
valid leasehold title to all real estate and real property used in its business
(the "Leased Real Property"), free and clear of all Encumbrances. All plants,
structures and buildings leased by of the Company are in good operating
condition and fit for operation in the ordinary course of business (subject to
normal wear and tear). The Company has delivered to National and CDL true and
complete copies of any leases for the Leased Real Property. The Company is in
compliance with all material terms and conditions of such leases and is subject
to no past due obligations or contingent liabilities in respect of such leased
premises. To the best knowledge of the Company and the Shareholders, the
landlords under such leases also are in compliance with the terms and conditions
of such leases. The Company is not in violation of any building, zoning,
anti-pollution, health, occupational safety or other law, ordinance or
regulation regarding its plants, structures and equipment or their operations.
To the extent that the Company is a tenant under a month-to-month or oral lease
with respect to the Spencer Place property identified on Schedule 6.7, Bozzay
will assure (a) that the Company will be permitted to remain in such premises
after Closing for a reasonable period of time not to exceed 90 days, (b) that
the rental for such properties will at no time exceed a fair market rental and
(c) that the Company will have no liability to the landlord upon a termination
of such lease or for any other costs associated with the premises except for any
damages actual caused by the Purchaser between the Closing Date and the date
that the Purchaser vacates the property.
Section 6.8. Financial Statements. (a) Each Company has previously
delivered to National and CDL (i) a true and complete copy of each Company's
audited balance sheet and the related audited statements of earnings and cash
flows for the fiscal years then ended, with notes thereto, audited by the
Company's Accountants, as listed on Schedule 6.8 (collectively, the "Financial
Statements"). The Financial Statements have been prepared in conformity with
GAAP, applied on a consistent basis throughout the respective periods and
present fairly the financial condition and results of operations of the Company
as of and for the periods included therein.
(b) Within fifteen (15) days of the date hereof, the Company shall
deliver to CDL and National a true and complete copy of each Company's unaudited
balance sheet as of the Closing Date and the related unaudited statements of
earnings and cash flows for the eleven (11) months and 8 days then ended,
certified by the Company's chief financial officer
Section 6.9.......Absence of Certain Developments. Except as set forth
in Schedule 6.9, since the date of the most recent audited Financial Statements
of each Company, there has not been any Material Adverse Change, or any
development which could reasonably be expected to result in a prospective
Material Adverse Change. Except as set forth in Schedule 6.9, since the date of
the most recent audited Financial Statements of each Company, each Company has
conducted its businesses in the ordinary and usual course consistent with past
practices and has not (i) sold, leased, transferred or otherwise disposed of any
of its assets (other than dispositions in the ordinary course of business
consistent with past practices), (ii) breached, terminated or amended in any
material respect any contract or lease to which it is a party or to which it is
bound or to which its properties are subject, (iii) amended its Articles of
Incorporation or by-laws or taken any action in contemplation of an amendment to
such Articles of Incorporation or by-laws or in contemplation of its liquidation
or dissolution and, to its best knowledge after due investigation, no such
action has been taken by its shareholders, directors or officers, (iv) declared
or paid any dividend or distribution on its capital stock or repurchased or
otherwise acquired any shares of its capital stock or any option, warrant,
right, call or commitment relating to its capital stock or any outstanding
securities or obligations convertible into or exchangeable for, or giving any
Person any right to subscribe for or acquire from it, any shares of its capital
stock, (v) suffered any material loss, damage or destruction whether or not
covered by insurance, (vi) made any change in the accounting methods or
practices it follows, whether for general financial or tax purposes, (vii)
incurred any liabilities (other than in the ordinary course of business) none of
which, individually or in the aggregate, are material, (viii) incurred, created
or suffered to exist any Encumbrances on its assets, except those created in the
ordinary course of business, none of which, individually or in the aggregate,
are material, (ix) increased the compensation payable or to become payable to
any of its officers or employees or increased any bonus, severance, accrued
vacation, insurance, pension or other Employee Benefit Plan, payment or
arrangement made by it for or with any such officers or employees, (x) suffered
any labor dispute, strike or other work stoppage, (xi) made or obligated itself
to make any capital expenditures in excess of $10,000 individually or in the
aggregate, (xii) entered into any contract or other agreement requiring it to
make payments in excess of $10,000 per annum, individually or in the aggregate,
other than in the ordinary course of business consistent with past practices,
(xiii) made any payments to or entered into any transactions with any
Shareholder or family member of any Shareholder except for salaries paid to the
Shareholders consistent with their historic salaries and the budgets previously
delivered to CDL, (xiv) breached or violated any law, statute, rule or
regulation applicable to the Company or its business in any material respect,
(xv) suffered any Material Adverse Changes in its financial position or results
of operations, or (xvi) entered into any agreement to do any of the foregoing.
Section 6.10. Governmental Authorizations; Licenses. The
business of the Company has been operated in material compliance with all
applicable laws, rules, regulations, codes, ordinances, orders, policies and
guidelines of all Governmental Authorities, including but not limited to, those
related to: pricing, sales or distribution of products, antitrust, trade
regulation, trade practices, sanitation, land use and similar laws. The Company
has all permits, licenses, approvals, certificates, titles, fuel permits,
franchises, operating authorities (including any necessary FAA or ICC operating
authorities), state operating licenses or registrations and other interstate or
intrastate regulatory licenses and other authorizations, and has made all
notifications, registrations, certifications and filings with all Governmental
Authorities, necessary or advisable for the operation of the business as
currently conducted by the Company, except for those which, individually or in
the aggregate could not reasonably be expected to result in a Material Adverse
Effect. There is no action, case or proceeding pending or, to the Shareholders'
or the Company's knowledge, threatened by any Governmental Authority with
respect to (i) any alleged violation by the Company of any law, rule,
regulation, code, ordinance, order, policy or guideline of any Governmental
Authority, or (ii) any alleged failure by the Company to have any permit,
license, approval, certification or other authorization required in connection
with the operation of the business. No notice of any violation of such laws has
been received by the Company or the Shareholders. Schedule 6.10 sets forth a
true and complete list of all of the Company's permits, licenses, approvals,
certificates, registrations and other authorizations relating to the business
(the "Authorizations"). Such Authorizations are in full force and effect and
neither the Company nor the Shareholders have received notification of the
suspension or cancellation of, or the intent to cancel, terminate or not renew,
any thereof.
Section 6.11......Litigation. Except as set forth in Schedule 6.11,
there are no lawsuits, actions, proceedings, claims, orders or investigations by
or before any Governmental Authority pending or, to the knowledge of the Company
or the Shareholders, threatened against the Company or its Affiliates relating
to such Company, its business or any product or service which has been sold by
such Company or seeking to enjoin the transactions contemplated hereby.
Section 6.12......Undisclosed Liabilities. Other than those reflected
in the Financial Statements or Schedule 6.12 to this Agreement, there are no
liabilities of the Company of any kind or nature whatsoever, whether known or
unknown, absolute, accrued, contingent or otherwise, or whether due or to become
due, other than liabilities incurred in the ordinary course of business and
consistent with past practices since the date of the Financial Statements, and
there exists no facts or circumstances (other than general economic conditions)
that could reasonably be expected to result in any such liability.
Section 6.13......Taxes. All federal, state, county, local and foreign
tax returns and reports of the Company required to be filed have been duly and
timely filed. There are no examinations in progress or claims against the
Company for federal, state, local and other taxes (including penalties and
interest) for any period or periods and no notice of any claim for taxes,
whether pending or threatened has been received. All federal, state, county,
local, foreign and any other taxes (including all income, withholding and
employment taxes), assessments (including interest and penalties), fees,
interest, penalties and other governmental charges with respect to the
employees, properties, assets, income or franchises of the Company which are due
and payable have been paid or duly provided for, or are being contested in good
faith by appropriate proceedings as disclosed on Schedule 6.13 and adequate
reserves therefor have been established pursuant to GAAP, or have arisen after
the date hereof in the ordinary course of business. There are no tax liens on
any of the assets of the Company, except for liens for taxes not yet due and
payable.
Section 6.14. Insurance. Schedule 6.14 lists all insurance policies in
effect with respect to the Company or its business during the past three (3)
years, showing, as to each policy or binder, the carrier, policy number,
coverage limits, expiration dates, annual premiums, deductibles or retention
levels and a general description of the type of coverage provided. Such
insurance policies are currently in full force and have remained in full force
and effect through the Closing.
Section 6.15. Environmental Matters. Except as set forth on Schedule
6.15, (i)the business of the Company is being and has been conducted in
compliance with all Environmental Laws, (ii) the business has, and at all times
has had, all permits, licenses and other approvals and authorizations required
under applicable Environmental Laws for the operation of the business, (iii)
neither the Company nor the Shareholders have received any notice from any
Governmental Authority that the Company may be a potentially responsible party
in connection with any waste disposal site or facility used, directly or
indirectly, by or otherwise related to the business, (iv) no reports have been
filed, or have been required to be filed, by the Company or the Shareholders,
concerning the release of any Regulated Substance or the violation of any
Environmental Law, on or at the properties used in the business; (v) there have
been no environmental investigations, studies, audits, tests, reviews, or other
analyses conducted by or which are in the possession of the Company relating to
the business, true and complete copies of which have not been delivered to
National and CDL prior to the date hereof, (vi) no Regulated Substance has been
disposed of, transferred, released, discharged or transported by or for the
Company from the Company's business premises, other than as permitted under
applicable Environmental Law pursuant to appropriate regulations, permits or
authorizations, and (vii) there are no civil, criminal or administrative
actions, suits, demands, claims, hearings, investigations or other proceedings
pending or, to the Company's knowledge, threatened against the business or the
Company with respect to its business or assets relating to any violations, or
alleged violations, of any Environmental Law, and neither the Company nor the
Shareholders have received any notices, demand letters or requests for
information, arising out of, in connection with, or resulting from, a violation,
or alleged violation, of any Environmental Law, and neither the Company nor the
Shareholders have been notified by any Governmental Authority or any other
Person that the Company's business or assets have, or may have, any liability
pursuant to any Environmental Law.
Section 6.16......Employee Matters.
(a) Schedule 6.16 contains a true and complete list of the employees
currently employed by the Company, indicating the title of and a description of
any agreements concerning such employees and a listing of the rate or range of
rates of all current compensation payable by the Company to each employee.
(b) Except as set forth on Schedule 6.16, (i) the Company has not
entered into any collective bargaining agreements regarding its employees, (ii)
there are no written personnel policies applicable to such employees generally,
other than employee manuals, true and complete copies of which have previously
been provided to National and CDL, (iii) there is no labor strike, dispute,
slowdown or work stoppage or lockout pending or, to the best knowledge of the
Company, threatened against or affecting the Company and during the past three
years there has been no such action, (iv) to the best knowledge of the Company,
no union organization campaign is in progress with respect to any of the
employees, and no question concerning representation exists respecting such
employees, (v) there is no unfair labor practice, charge or complaint pending
or, to the best knowledge of the Company, threatened against the Company, and
(vi) the Company has not entered into any agreement, arrangement or
understanding restricting its ability to terminate the employment of any or all
of its employees at any time, for any lawful or no reason, without penalty or
liability.
Section 6.17......Employee Benefit Plans. Schedule 6.17 lists all
bonus, deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted stock
and stock option plans, all employment or severance contracts, health and
medical insurance plans, life insurance and disability insurance plans, other
material employee benefit plans, contracts or arrangements which cover employees
or former employees of the Company including, but not limited to, "employee
benefit plans" within the meaning of Section 3(3) of ERISA (the "Employee
Benefit Plans"). The Employee Benefit Plans which are described in Section 3(3)
of ERISA (the "ERISA Plans") are in compliance in all material respects with the
applicable provisions of ERISA and, if intended to be tax qualified, Sections
401(a) and 501(a) of the Code. All ERISA Plans which are intended to qualify
under Section 401(a) of the Code have been submitted to and approved under
Section 401(a) of the Code by the Internal Revenue Service or, alternatively,
the applicable remedial amendment period with respect to any such ERISA Plan
will not have ended prior to the Closing Date. No liability under Subtitle C or
D of Title IV of ERISA has been or is expected to be incurred by the Company or
any of its Affiliates with respect to any ongoing, frozen or terminated
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the single-employer plan of
any entity which is considered one employer with the Company under Section 4001
of ERISA or Section 414 of the Code (an "ERISA Affiliate"). Except as set forth
on Schedule 6.17, neither the Company nor any of its Affiliates have incurred or
expect to incur any withdrawal liability with respect to a multi-employer plan
under Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate).
Section 6.18. Proprietary Rights. (a) All of the Company's Proprietary
Rights are listed in Schedule 6.18. Except as disclosed in Schedule 6.18, the
Company owns and possesses all right, title and interest in the Proprietary
Rights. The transactions contemplated by this Agreement will have no material
adverse effect on the Company's right, title and interest in the Proprietary
Rights.
(b) No claim by any third party contesting the validity,
enforceability, use or ownership of any Proprietary Rights has been made, is
currently pending or, to the Company's or the Shareholders' knowledge, is
threatened. The Company has not received any notice of, nor is it aware of any
fact which indicates a likelihood of, any infringement or misappropriation by,
or conflict with, any third party with respect to any of the Proprietary Rights.
The Company has not infringed, misappropriated or otherwise conflicted with any
rights of any third parties, nor is it aware of any infringement,
misappropriation or conflict which will occur as a result of the continued
operation of the Company's business as now conducted.
Section 6.19......Accounts Receivable. Schedule 6.19 sets forth a true
and complete listing of all accounts and notes receivable and all reserves
related thereto, deposits, advances and manufacturer and supplier rebates (the
"Accounts Receivable") and an aging schedule reflecting the aggregate amount of
all Accounts Receivable outstanding (i) 30 days or less, (ii) more than 30 days
but less than or equal to 60 days, (iii) more than 60 days but less than or
equal to 90 days, and (iv) more than 90 days. All of the Accounts Receivable
have arisen in the ordinary and regular course of business, represent bona fide
transactions with third parties and are not subject to any counterclaims or
offsets (except for those for which adequate reserves have been established in
accordance with GAAP) and have been billed and, to the Company's knowledge, are
collectible in the ordinary course.
Section 6.20......Contracts.
(a) Schedule 6.20 describes all contracts (except for usual and
ordinary purchase orders executed in the normal course of business), agreements,
leases, commitments, instruments, plans, permits or licenses, whether written or
oral, to which the Company is a party or is otherwise bound, of the type
described below (the "Contracts"):
(i) all agreements with or commitments to customers
for the sale by the Company of products or services;
(ii) all agreements or commitments for the purchase by the
Company of services, raw materials, products, machinery, equipment or
other personal property other than those that are for amounts not to
exceed $20,000;
(iii) all capitalized leases, pledges, conditional sale or
title retention agreements;
(iv) all employment agreements and commitments, all consulting
or severance agreements or arrangements and all agreements between the
Company and the Shareholders, any Affiliate of the Shareholders or any
other officer, director or employee of the Company (other than
employee-at-will relationships);
(v) all agreements relating to the consignment or lease of
personal property (whether the Company is lessee, sublessee, lessor or
sublessor), other than such agreements that provide for annual payments
of less than $20,000;
(vi) all license, royalty or other agreements relating to
the Proprietary Rights;
(vii) all agreements prohibiting the Company from freely
engaging in the business presently conducted by the Company in any
geographic area;
(viii) all agreements to provide rebates to customers
of the Company, to the extent not reflected as a liability on the
Financial Statements; and
(ix) any agreement other than those covered by clauses (i)
through (viii) above involving payment or receipt of more than $40,000
in the aggregate.
(b) To the knowledge of the Company, none of the other parties
to any such Contracts intends to terminate or materially alter the material
provisions of such material Contracts either as a result of transactions
contemplated hereby or otherwise, except as disclosed in Schedule 6.20.
(c) Except as disclosed in Schedule 6.20, the Company is not
in, nor has given or received notice of, any default or claimed, purported or
alleged default, or facts that, with notice or lapse of time, or both, would
constitute a default (or give rise to a termination right) on the part of any
party in the performance of any obligation to be performed under any of the
Contracts, other than those which will not result in a Material Adverse Effect
on the Company.
(d) True and complete copies of all written Contracts,
including any amendments thereto, have been delivered to National or CDL and
such documents constitute the legal, valid and binding obligation of the Company
and, to the best knowledge of the Company, each other party purportedly
obligated thereunder.
Section 6.21......Customers and Suppliers.
(a) Schedule 6.21. sets forth a list of all customers
(including names, addresses, contact persons, and telephone and facsimile
numbers) with whom the Company (i) currently does business, (ii) is currently
actively pursuing as a prospective customer, or (iii) has done business with
since January 1, 1996.
(b) Except to the extent set forth in Schedule 6.21, no one
customer or group of related customers of the Company account for more than 5%
of all of the revenues, in the aggregate, of the Company. Except to the extent
set forth on Schedule 6.21, (i) none of the customers of the Company with
revenues greater than 5% of the total revenues have canceled or substantially
reduced or, to the knowledge of the Shareholders or the Company are currently
attempting or threatening to cancel or substantially reduce service and (ii) the
Company has complied with all material commitments and obligations pertaining to
them and is not in default under any such contracts and agreements and no notice
of default has been received. Schedule 6.21 lists the ten (10) largest customers
(in terms of sales) of the Company, in the aggregate, for the fiscal year ended
December 31, 1997 and the first eight months of 1998 and the revenues received
from each such customer during fiscal 1997 and the first eight months of 1998.
(c)......Schedule 6.21 sets forth a list of the ten (10)
largest suppliers of the Company, in the aggregate, in terms of purchases during
the year ended December 31, 1997 and the first eight months of 1998. Except as
set forth on Schedule 6.21, no supplier listed on Schedule 6.21 has notified or
otherwise indicated to the Company that it will stop, or decrease the rate of,
or, other than publicly announced generally applicable price increases,
materially increase the cost of, its supply of materials, products or services
used by the Company, and no supplier listed on Schedule 6.21 has, during the
current fiscal year, ceased, materially decreased the rate of or materially
raised the cost of, any such materials, products or services.
Section 6.22. Predecessor Status. Set forth in Schedule 6.22 is a
listing of all names of all predecessor companies of the Company, including the
names of any entities from whom within the last five years the Company
previously acquired significant assets. The Company has never been a subsidiary
or division of another corporation or a part of any acquisition which was later
rescinded. Set forth on Schedule 6.22 is a listing of each business name used by
the Company and its predecessors and by any companies acquired by or merged into
it, and each state and county in which any such trade name is registered, if
any.
Section 6.23......Books and Records. The stock records of the Company
accurately reflect the record ownership of all of the outstanding shares of its
capital stock. The other books and records of the Company, including financial
records and books of account, are complete and accurate and have been maintained
in accordance with GAAP, to the extent applicable, and sound business practices.
The minute books of the Company contain complete and accurate records of all
meetings of, or actions taken without a meeting by, the shareholders, the Board
of Directors or any committee of the Company. No meetings of the shareholders or
of the Board of Directors of the Company or any of its committees have been held
for which minutes have not been prepared and are not contained in its minute
books and no action taken by it without a meeting is not accurately recorded in
its minute books.
Section 6.24......Brokers. No Person is or will be entitled to a
broker's, finder's, investment banker's, financial adviser's or similar fee from
the Company in connection with this Agreement or any of the transactions
contemplated hereby. The Company has not employed any broker or agent in
connection with the transactions contemplated by this Agreement.
Section 6.25......Full Disclosure. No representation or warranty made
by the Shareholders or the Company in this Agreement, any Schedule, any Exhibit
or any certificate delivered by or on behalf of the Company pursuant hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading.
ARTICLE VII
Representations and Warranties Regarding the Shareholders
Each Shareholder represents and warrants to National and CDL, with
respect to himself only, as follows:
Section 7.1.......Authorization. The Shareholder has the capacity to
execute and deliver this Agreement and to perform his obligations hereunder. The
Shareholder is not under any impairment or other disability, legal, physical,
mental or otherwise, that would preclude or limit his ability to perform his
obligations hereunder. This Agreement constitutes a binding and valid obligation
of the Shareholder, enforceable against him in accordance with its terms.
Section 7.2.......Non-contravention. Neither the execution and delivery
of this Agreement nor the performance by the Shareholder of obligations
hereunder will (i) violate or result in a breach (with or without the lapse of
time, the giving of notice or both) of or constitute a default under (A) any
contract, agreement, commitment, indenture, mortgage, lease, pledge, note,
license, permit or other instrument or obligation or (B) any judgment, order,
decree, law, rule or regulation or other restriction of any Governmental
Authority, in each case to which any of the Shareholder is a party or by which
the Shareholder is bound or to which any of his assets or properties or the
assets or properties of the Company are subject, (ii) result in the creation or
imposition of any Encumbrances on any of the assets or properties of the
Shareholder or the Company, or (iii) result in the acceleration of, or permit
any Person to accelerate or declare due and payable prior to its stated
maturity, any obligation of the Shareholder.
Section 7.3.......No Consents. No notice to, filing with, or
authorization, registration, consent or approval of any Governmental Authority
or other Person is necessary for the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby by the
Shareholder.
Section 7.4.......Ownership of the Company's Stock. The Shareholder
owns all of the Company's Stock held by him beneficially and of record, free and
clear of any Encumbrances. Exhibit A sets forth the individual ownership of the
Company's Stock by the Shareholder next to his name.
Section 7.5.......Brokers. No Person is or will be entitled to a
broker's, finder's, investment banker's, financial adviser's or similar fee from
the Shareholder in connection with this Agreement or any of the transactions
contemplated hereby. The Shareholder has not employed any broker or agent in
connection with the transactions contemplated by this Agreement.
Section 7.6. Affiliates. The Shareholder has no interest in,
nor affiliation with, any entity or person in the air or ground messenger or
delivery business or any related business except for the Company or as set
forth in Schedule 7.6.
Section 7.7.......Full Disclosure. No representation or warranty made
by the Shareholders in this Agreement, any Schedule, any Exhibit or any
certificate delivered, or to be delivered, by or on behalf of the Shareholders
pursuant hereto contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE VIII
Representations and Warranties Regarding National and CDL
National and CDL, jointly and severally, represent and warrant to the
Shareholders and the Company as follows:
Section 8.1. Organization. National and CDL are each corporations duly
organized, validly existing and in good standing under the laws of the States of
Missouri and Delaware, respectively and have full power and authority, corporate
and other, to own their respective property and assets and to carry on their
respective businesses as presently conducted except where the failure to be so
qualified would not have a material adverse effect on their respective
businesses.
Section 8.2. Authorization. National and CDL have full power and
authority, corporate and other, to execute and deliver this Agreement and to
perform their respective obligations hereunder, all of which have been duly
authorized by all requisite corporate action. This Agreement, has been or, at
the time of delivery will be, duly authorized, executed and delivered by
National and CDL and constitute or, at the time of delivery will constitute, a
valid and binding agreement of National and CDL, enforceable against National
and CDL in accordance with its terms.
Section 8.3.......Non-contravention. Neither National nor CDL is
subject to any provision of its respective Certificate of Incorporation or
by-laws or any agreement, instrument, law, rule, regulation, order, decree or
judgment of any Governmental Authority or other restriction that would prevent
the consummation of the transactions contemplated by this Agreement.
Section 8.4.......No Consents. No notice to, filing with, or
authorization, registration, consent or approval of any Governmental Authority
or other Person is necessary for the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby by
National and CDL.
Section 8.5.......Brokers. No Person is or will be entitled to a
broker's, finder's, investment banker's, financial adviser's or similar fee from
either National or CDL in connection with this Agreement or any of the
transactions contemplated hereby.
Section 8.6.......SEC Documents. The SEC Documents adequately and
correctly describe the business of CDL as at their respective dates. The SEC
Documents do not contain any untrue statement of a material fact nor omit to
state a material fact necessary to make the statements contained therein not
misleading.
Section 8.7.......CDL Stock. The CDL Stock to be issued hereunder will
be duly authorized, validly issued, fully paid and nonassessable. No
Encumbrances or restrictions exist on the CDL Stock, except restrictions on
transfer pursuant to state and federal securities laws.
ARTICLE IX
Covenants and Agreements
Section 9.1.......Access and Information. No investigation by National
and CDL heretofore or hereafter made shall modify or otherwise affect any
representations and warranties of the Company or the Shareholders, which shall
survive any such investigation, or the conditions to the respective obligations
of National and CDL to consummate the transactions contemplated hereby.
Section 9.2.......Closing Documents. The Company and the Shareholders
shall, prior to or on the Closing Date, execute and deliver, or cause to be
executed and delivered to National and CDL, the documents or instruments
described in Section 10.2. National and CDL shall, prior to or on the Closing
Date, execute and deliver, or cause to be executed and delivered, to the
Shareholders, the documents or instruments described in Section 10.3.
Section 9.3.......Taxes. The following provisions shall govern the
allocation of responsibility as between CDL and National on the one hand and the
Company on the other hand for certain tax matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. CDL shall prepare
or cause to be prepared and file or cause to be filed all tax returns for the
Company for all periods ending on or prior to the Closing Date which have not
been filed and which were not required to be filed prior to the Closing Date.
CDL shall permit the Shareholders to review and comment on each such tax return
described in the preceding sentence prior to filing. The Shareholders shall
reimburse CDL for taxes, interest and penalties of the Company with respect to
such periods within fifteen (15) days after payment by CDL or any of its
affiliates of such taxes to the extent such taxes are not reflected in the
reserve for taxes shown on the face of the Balance Sheet for the period ended
the Closing Date.
(b) Tax Periods Beginning Before and Ending After the Closing Date. CDL
shall prepare or cause to be prepared, pay and file or cause to be filed any tax
returns of the Company for tax periods which begin before the Closing Date and
end after the Closing Date. The shareholders of the individual Company owing the
taxes shall pay to CDL within fifteen (15) days after the date on which taxes
are paid with respect to such periods an amount equal to the portion of such
taxes, interest and penalties which relates to the portion of such taxable
period ending on the closing date to the extent such taxes are not reflected in
the reserves for taxes, interest and penalties shown on Schedule 9.3(b) and as
reflected on the face of the Balance Sheet for the period ended the Closing
Date.
(c) Cooperation on Tax Matters. CDL, National and the Shareholders
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of tax returns pursuant to this Section and
any audit, litigation or other proceeding with respect to taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. If the Shareholders wish to contest any audit,
litigation inquiry or other proceeding with respect to taxes for periods prior
to the Closing Date for which they are liable, they may do so with counsel.
accountants and/or other professionals of their choosing, so long as prior to
assuming such role, they deposit with CDL and National an amount of funds to be
held in escrow by CDL which will cover and indemnify and hold harmless CDL for
all taxes, interest and penalties which may be imposed upon CDL, National or the
Companies by reason of such proceeding and all amounts needed to provide for
defense costs in such proceeding.
(d) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by the
Shareholders when due, and the Shareholders will, at their own expense, file all
necessary tax returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other taxes and fees, and, if
required by applicable law, CDL will, and will cause its affiliates to, join in
the execution of any such tax returns and other documentation.
Section 9.4. Non-Competition and Confidentiality Agreement.
For a period of five (5) years after the Closing Date, or, as to any Shareholder
who becomes an employee of National or CDL, during such employment and for a
period of two (2) years following termination of such relationship as an
employee (whichever period is longer), the Shareholders will not directly or
indirectly:
(i) engage in the small package delivery
business or the provision of ground or air transportation
services in or within 250 miles of any of Kansas City, Kansas,
St. Louis, Missouri, or Indianapolis, Indiana (the
"Territory");
(ii) call upon any person who is, at that
time, an employee of National or CDL (including the
subsidiaries of either thereof) in a managerial or sales
capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of National or CDL;
(iii) call upon any person or entity (x)
which is, at that time, or which has been, within one (1) year
prior to that time, a customer of National or CDL (including
the subsidiaries of either thereof) or (y) which was a
customer of the Company in the 18 month period preceding the
Closing, for the purpose of soliciting or selling products or
services in direct competition with National or CDL anywhere
in the United States; or
(iv) use for his own benefit or divulge or
convey to any third party, any Confidential Information (as
hereinafter defined) relating to the Company or its business.
For purposes of this Agreement, Confidential Information
consists of all information, knowledge or data relating to the
Company or its business including, without limitation,
customer and supplier lists, formulae, trade know-how,
processes, secrets, consultant contracts, pricing information,
marketing plans, product development plans, business
acquisition plans and all other information relating to the
operation of the Company or its business not in the public
domain or otherwise publicly available. Information which
enters the public domain or is publicly available loses its
confidential status hereunder so long as the Shareholders do
not directly or indirectly cause such information to enter the
public domain.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit the Shareholders from acquiring, as an investment, not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange or over-the-counter.
The Shareholders acknowledge that the restrictions contained
in this Section 9.4 are reasonable and necessary to protect the legitimate
interests of National and CDL and that any breach by the Shareholders of any
provision hereof will result in irreparable injury to National and CDL. The
Shareholders acknowledge that, in addition to all remedies available at law,
National and CDL shall be entitled to equitable relief, including injunctive
relief, and an equitable accounting of all earnings, profits or other benefits
arising from such breach and shall be entitled to receive such other damages,
direct or consequential, as may be appropriate. Neither National nor CDL shall
be required to post any bond or other security in connection with any proceeding
to enforce this Section 9.4.
It is specifically agreed that the five (5) year period stated
at the beginning of this Section 9.4, during which the agreements and covenants
of the Shareholders shall be effective, shall be computed by excluding from such
period any time during which the Shareholders are in violation of any provision
of this Section 9.4. It is also agreed that the restrictions contained in this
Section 9.4 and in the Employment Agreements shall terminate in the event that
CDL, after all allowable grace periods, fails to make any payment when due under
the Notes; provided, however, that such restrictions shall not terminate if the
nonpayment is due to an exercise of the right of set-off under Section 11.5
hereof.
All of the covenants in this Section 9.4 shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim of the Shareholders against National or CDL shall not
constitute a defense to the enforcement of such covenants.
The foregoing notwithstanding, the covenants set forth in this
Section 9.4 (and the similar confidentiality and noncompetition provisions in
any Shareholder's employment agreement) shall terminate and be of no further
effect if CDL fails to make any payment to the Shareholders under the Note or
the Earn-Out Payment after all allowable grace periods and resolution of all
disputes relating thereto.
Section 9.5.......Audited Financial Statements of the Company. All
fees and expenses incurred in connection with any audits of the financial
statements of the Company shall be the sole responsibility of the
Shareholders.
Section 9.6.......Best Efforts; Further Assurances. Subject to the
terms and conditions herein provided, each of the parties hereto shall use its
best efforts to take, or cause to be taken, all action, and to do, or cause to
be done, all things reasonably necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement. Each of the Company, the Shareholders, National
and CDL will use their respective best efforts to obtain consents of all
Governmental Authorities and third parties necessary to the consummation of the
transactions contemplated by this Agreement. The Company and the Shareholders
shall use their respective reasonable best efforts to assist National and CDL in
connection with the fulfillment of any SEC disclosure, reporting or other
governmental compliance obligation of National and CDL, including without
limitation providing National and CDL with any financial and other information
requested by National and CDL. In the event that at any time after Closing any
further action is necessary to carry out the purposes of this Agreement, the
Company and the Shareholders shall take all such reasonable action without any
further consideration therefor.
Section 9.7. Compliance with the Securities Act.
(a) The Shareholders acknowledge that the CDL Stock to be delivered to
the Shareholders pursuant to this Agreement (including upon conversion of any
part of the Notes) (the "Restricted Stock") has not been and will not be
registered under the Securities Act and therefore may not be resold without
compliance with the Securities Act. The Restricted Stock is being acquired by
the Shareholders solely for their own accounts, for investment purposes only,
and with no present intention of distributing, selling or otherwise disposing of
it in connection with the distribution of such shares. The Shareholders
covenant, warrant and represent that the Restricted Stock will not be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act and the rules and regulations of the SEC. The certificates
representing the Restricted Stock shall bear the following legend:
The securities represented hereby were not issued in a
transaction registered under the Securities Act of 1933, as
amended ("Securities Act"), or any applicable state securities
laws and may not be sold, pledged, hypothecated, or otherwise
transferred unless such sale or transfer is covered by an
effective registration statement under the Securities Act and
applicable state securities laws or, in the opinion of counsel
for the holder and the issuer, is exempt from the registration
requirements of the Securities Act and such laws.
The foregoing legend notwithstanding, CDL will not require any opinion of
counsel if the Restricted Stock may be transferred pursuant to Rule 144 of the
Act.
(b) Each Shareholder represents that he is able to bear the economic
risk of an investment in the Restricted Stock, can afford to sustain a total
loss of such investment and has such knowledge and experience in financial and
business matters including investments in unregistered securities, that he is
capable of evaluating the merits and risks of the proposed investment and/or has
employed a purchaser representative who is qualified by training and experience
in business and financial matters to evaluate the merits and risks of an
investment in CDL and therefore has the capacity to protect his own interests in
connection with his acquisition of the Restricted Stock.
(c) Each Shareholder represents that he, or such Shareholder's
purchaser representative, has read and reviewed the information provided
pursuant to this Agreement and the other documentation and information furnished
by National or CDL (including CDL's Form 10-K for the year ended December 31,
1997, its Forms 10-Q for the quarters ended March 31, June 30 and September 30,
1998, its Forms 8-K filed July 16, August 5, 18 and 19, September 15 and 28 and
October 19, 1998, its Registration Statement on Form S-4, and its proxy
statement for its annual meeting held on June 17, 1998 (the "SEC Documents"))
and has had an adequate opportunity to ask questions and receive answers from
the officers of CDL concerning, among other matters, CDL, its management, and
its plans for the operation of its business. National and CDL have provided to
the Shareholders an opportunity to ask questions and receive answers from the
officers of CDL and to obtain any and all additional information necessary for
them to verify the accuracy of the information provided herein or delivered
pursuant hereto.
(d) Until all of the shares of CDL Stock issued hereunder are sold or
eligible for sale pursuant to Rule 144(k) of the Securities Act, CDL shall
remain current in filing all reports with the SEC necessary to allow transfer of
the shares of CDL Stock pursuant to Rule 144 if otherwise eligible for
unrestricted sale under Rule 144.
Section 9.8. Covenants of CDL and National. During the
Measurement Period, without the prior consent of Bozzay, CDL and National agree
to:
(a) Continue to elect Bozzay to the Board of Directors of
National: and
(b) Keep the Division maintained as a separate profit center
wholly-owned by CDL.
Section 9.9. Personal Guarantees. Attached hereto as Schedule
9.9 is a list of all debt of the Company which is personally guaranteed by the
Shareholders. CDL will use reasonable efforts after the Closing Date to cause
each beneficiary of a guarantee listed on Schedule 9.9 to accept a National
guarantee in place of the Shareholder guarantee it currently holds.
ARTICLE X
Closing Deliveries
Section 10.1. Mutual Conditions. The respective obligations of each
party to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to Closing of the condition that (A) no
Governmental Authority of competent jurisdiction shall have (i) enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order which is in effect; or (ii) commenced or
threatened any action or proceeding, which in either case would prohibit
consummation of the transactions contemplated by this Agreement, and (B) no
action or proceeding before a court or any other governmental agency or body
shall have been instituted or threatened to restrain or prohibit the
transactions, contemplated by this Agreement.
Section 10.2......Deliveries by the Company and the Shareholders. The
obligations of National and CDL to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment prior to or at Closing of
each of the following conditions:
(a) All representations and warranties made by each of the Company and
the Shareholders in this Agreement and the Schedules hereto shall be true,
correct and complete on the date hereof and as of the Closing Date as though
such representations and warranties were made as of the Closing Date, and the
Company and the Shareholders shall have duly performed or complied with all of
the covenants, obligations and conditions to be performed or complied with by
them under the terms of this Agreement on or prior to or at Closing.
(b) There shall have been no (i) Material Adverse Change, or any
development which could reasonably be expected to result in a prospective
Material Adverse Change, or (ii) material damage, destruction or loss to, or any
other material and adverse change in, the assets or the business of the Company,
regardless of insurance coverage.
(c) (i) All authorizations, consents, waivers, approvals or other
actions required in connection with the execution, delivery and performance of
this Agreement by the Company and the Shareholders and the consummation by the
Company and the Shareholders of the transactions contemplated hereby shall have
been obtained and shall be in full force and effect; (ii) the Company shall have
obtained any authorizations, consents, waivers, approvals or other actions
required to prevent a material breach or default by the Company under any
contract to which the Company is party or for the continuation of any agreement
to which the Company is a party; and (iii) all authorizations, consents,
waivers, approvals or other actions necessary to permit National to own the
Company's Stock shall have been obtained and shall be in full force and effect.
(d) All promissory notes issued to any of the Shareholders (all of
which are listed and described in Schedule 10.2) shall continue to be payable by
National or CDL after the Closing Date over the same specified time period and
at the same interest rate without acceleration unless National or CDL chooses to
repay the notes without penalty prior to note maturity.
(e) The Shareholders shall have delivered to CDL the certificates
representing the Company's Stock along with the other items referred to in
Article III.
(f) Prior to or at the Closing, the Shareholders and the Company shall
have delivered such other closing documents as shall be requested by National
and CDL in form and substance reasonably acceptable to counsel for National and
CDL, including the following:
(i) a certificate of the President or a Vice President of the
Company and a similar certificate from the Shareholders, dated the
Closing Date, to the effect that (1) the Person or Persons signing such
certificate is familiar with this Agreement and (2) the conditions
specified in Section 10.2(a), (b) and (c), with respect to the person
or Company signing the certificate, have been satisfied;
(ii) a certificate of the Secretary or Assistant Secretary of
the Company, dated the Closing Date, as to the incumbency of any
officer of the Company executing this Agreement or any document related
thereto and covering such other matters as National and CDL may
reasonably request;
(iii) a certified copy of (1) the Articles of Incorporation
and by-laws of the Company and all amendments thereto, and (2) the
resolutions of the Board of Directors of the Company authorizing the
execution, delivery and consummation of this Agreement and the
transactions contemplated hereby;
(iv) the Shareholders and certain other persons shall enter
into employment agreements (the "Employment Agreements") with National
in the respective forms attached hereto as Exhibit C and shall release
CDL , National and the Companies from any liabilities arising from
existing employment agreements, which shall be deemed terminated
immediately prior to the Closing Date;
(v) an opinion of Thompson Coburn, counsel to the
Company and the Shareholders, dated the Closing Date, and
substantially in the form attached as Exhibit D;
(vi) a Certificate of Merger (pre-filed in Missouri with a
delayed effective date) with a Plan of Merger for National and RE II as
provided in Section 1.1; and
(vii) such other documents or instruments as National and CDL
reasonably requests to effect the transactions contemplated hereby.
Section 10.3......Deliveries by CDL and National. The obligations of
the Shareholders and the Company to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment at or prior to the Closing of
each of the following conditions:
(a) All representations and warranties made by National and CDL,
respectively, in this Agreement shall be true, correct and complete on the date
hereof and as of the Closing Date as though such representations and warranties
were made as of the Closing Date, and National and CDL shall have duly performed
or complied with all of their respective covenants, obligations and conditions
to be performed or complied with by them, respectively, under the terms of this
Agreement on or prior to or at the Closing.
(b) All authorizations or approvals or other action required in
connection with the execution, delivery and performance of this Agreement by
National and CDL and the consummation by such party of the transactions
contemplated hereby and thereby shall have been obtained and shall be in full
force and effect.
(c) Prior to or at the Closing, National and CDL shall have delivered
to the Shareholders such closing documents as shall be reasonably requested by
the Shareholders in form and substance reasonably acceptable to his counsel,
including the following:
(i) a certificate of the President or a Vice President of each
of National and CDL, dated the Closing Date, to the effect that (1) the
Person signing such certificate is familiar with this Agreement and (2)
the conditions specified in Section 10.3(a) and (b) have been
satisfied;
(ii) a certificate of the Secretary or Assistant Secretary of
each of National and CDL, dated the Closing Date, as to the incumbency
of any officer thereof executing this Agreement or any document related
thereto and covering such other matters as the Shareholders may
reasonably request;
(iii) a certified copy of the resolutions of the Board of
Directors of National and CDL, respectively, authorizing the execution,
delivery and consummation of this Agreement and the transactions
contemplated hereby and thereby;
(iv) the shares of CDL Stock, Notes and cash payments
to be delivered at the Closing as provided in Section 2.2 hereof;
and
(v) National shall enter into the Employment Agreements
with the Shareholders and certain other persons.
ARTICLE XI
Survival of Representations and Warranties; Indemnification
Section 11.1......Survival of Representations and Warranties. Except as
set forth below, the representations and warranties provided for in this
Agreement shall survive the Closing for two (2) years from the Closing Date for
the benefit of the parties hereto and their successors and assigns. The
representations and warranties provided for in Sections 6.11, 6.13 and 6.15
shall survive the Closing and remain in full force and effect for six (6) years.
The survival period of each representation or warranty as provided in this
Section 11.1 is hereinafter referred to as the "Survival Period."
Section 11.2......Indemnification.
(a) Each Shareholder shall indemnify and hold harmless National, CDL,
their respective Affiliates, officers, directors, employees, agents and
representatives, and any Person claiming by or through any of them, against and
in respect of any and all claims, costs, expenses, damages, liabilities, losses
or deficiencies (including, without limitation, counsel's fees and other costs
and expenses incident to any suit, action or proceeding) (the "Damages") arising
out of, resulting from or incurred in connection with (i) any inaccuracy in any
representation or the breach of any warranty made by such Shareholder or the
Company in which such Shareholder is a shareholder in this Agreement for the
applicable Survival Period, or (ii) the breach by such Shareholder of any
covenant or agreement to be performed by him hereunder, or (iii) any costs,
damages, fines, penalties or liability relating to or arising from the tank
removal disclosed on Schedule 6.15 or to the leakage or discharge of any
materials therefrom.
(b) National and CDL, jointly and severally, shall indemnify and hold
harmless the Shareholders, their Affiliates, agents and representatives, and any
Person claiming by or through any of them, against and in respect of any and all
Damages arising out of, resulting from or incurred in connection with (i) any
inaccuracy in any representation or the breach of any warranty made by National
or CDL in this Agreement for the applicable Survival Period, or (ii) the breach
by National or CDL of any covenant or agreement to be performed by it hereunder.
(c) Any Person providing indemnification pursuant to the provisions of
this Section 11.2 is hereinafter referred to as an "Indemnifying Party" and any
Person entitled to be indemnified pursuant to the provisions of this Section
11.2 is hereinafter referred to as an "Indemnified Party."
Section 11.3......Procedures for Third Party Claims. In the case of any
claim for indemnification arising from a claim of a third party (a "Third Party
Claim"), an Indemnified Party shall give prompt written notice to the
Indemnifying Party of any claim or demand which such Indemnified Party has
knowledge and as to which it may request indemnification hereunder. The
Indemnifying Party shall have the right to defend and to direct the defense
against any such Third Party Claim, in its name or in the name of the
Indemnified Party, as the case may be, at the expense of the Indemnifying Party,
and with counsel selected by the Indemnifying Party unless (i) such Third Party
Claim seeks an order, injunction or other equitable relief against the
Indemnified Party and it is reasonably necessary for the Indemnified Party to
utilize its own counsel either due to time demands or the mature of the relief
sought, or (ii) the Indemnified Party shall have reasonably concluded that there
is an actual conflict of interest arising from the counsel chosen by the
Indemnified Party representing the Indemnifying Party in the conduct of the
defense of such Third Party Claim. Notwithstanding anything in this Agreement to
the contrary, the Indemnified Party shall, at the expense of the Indemnifying
Party, cooperate with the Indemnifying Party, and keep the Indemnifying Party
fully informed, in the defense of such Third Party Claim. The Indemnified Party
shall have the right to participate in the defense of any Third Party Claim with
counsel employed at its own expense; provided, however, that, in the case of any
Third Party Claim described in clause (i) or (ii) of the second preceding
sentence or as to which the Indemnifying Party shall not in fact have employed
counsel to assume the defense of such Third Party Claim, the reasonable fees and
disbursements of such counsel shall be at the expense of the Indemnifying Party.
The Indemnifying Party shall have no indemnification obligations with respect to
any Third Party Claim which shall be settled by the Indemnified Party without
the prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed.
Section 11.4......Procedures for Inter-Party Claims. In the event that
an Indemnified Party determines that it has a claim for Damages against an
Indemnifying Party hereunder (other than as a result of a Third Party Claim),
the Indemnified Party shall give prompt written notice thereof to the
Indemnifying Party, specifying the amount of such claim and any relevant facts
and circumstances relating thereto. The Indemnified Party shall provide the
Indemnifying Party with reasonable access to its books and records for the
purpose of allowing the Indemnifying Party a reasonable opportunity to verify
any such claim for Damages. The Indemnified Party and the Indemnifying Party
shall negotiate in good faith regarding the resolution of any disputed claims
for Damages. Promptly following the final determination of the amount of any
Damages claimed by the Indemnified Party, the Indemnifying Party shall pay such
Damages to the Indemnified Party by wire transfer or check made payable to the
order of the Indemnified Party, without interest.
Section 11.5......Right of Set-Off. The Shareholders hereby agree that
National and CDL shall have the right to set-off, against any amount which may
be owed by National or CDL to the Shareholders pursuant to this Agreement,
including but not limited to the Notes and any earn out payments, whether
payable in cash or securities (but excluding salary due to the Shareholders as
employees), whether due or unpaid at the time of such set-off, any amount owed
to National and CDL by the Shareholders pursuant to this Agreement or otherwise.
The exercise of such right of set-off by National and CDL shall not constitute a
breach by National or CDL of this Agreement or the agreement underlying such
obligation. National and CDL, on the one hand, and the Shareholders, on the
other, shall negotiate in good faith with respect to the propriety of any
set-off by National or CDL.
Section 11.6......Offset to Indemnification. All amounts of Damages for
which a party claims indemnity shall be offset by any insurance or other
monetary benefit received by the Indemnified Party as a result of the event
giving rise to an indemnity claim, so that there is no double recovery by the
Indemnified Party.
Section 11.7......Limits on Indemnification. The Shareholders shall not
have any liability under the indemnification provisions of this Article 11
unless and until the gross aggregate amount of claims against the Shareholders
exceeds $25,000. National and CDL shall not have any liability to the
Shareholders under the indemnification provisions of this Article 11 unless and
until the gross aggregate amount of claims against National and CDL exceeds
$25,000. All amounts of Damages for which a Shareholder may be obligated to pay
to CDL or National, whether pursuant to a claim under this Article 11 or
otherwise (except fraud), shall not exceed the amount which the Shareholder
received as Purchase Price hereunder with respect to the Company as to which the
claim for indemnification relates. No party shall be liable to any other under
this Agreement, at law or in equity, (other than an action for fraud), with
respect to any matter not initiated within the time limits specified in this
Article 11 or, if no time period is specified or if the claim is asserted other
than under this Article 11, within three (3) years of the Closing Date.
Section 11.8......Form of Payment. The Shareholders may satisfy any
indemnification obligations by delivery of stock of CDL held by them, valued at
Fair Value or by a reduction of the principal amount of any Note. For purposes
of this Section, "Fair Value" shall mean the average of the closing prices of
the common stock of CDL as reported on the NASDAQ National Market System for the
five (5) trading days ending on the second (2nd) trading day prior to receipt of
the shares by CDL.
ARTICLE XII
Miscellaneous
Section 12.1......Notices. All notices or other communications required
or permitted hereunder shall be in writing and shall be delivered personally, by
facsimile or sent by certified, registered or express air mail, postage prepaid,
and shall be deemed given when so delivered personally, or by facsimile, or if
mailed, five days after the date of mailing, as follows:
If to National or CDL: 380 Allwood Road
Clifton, New Jersey 07012
Telephone: (973) 471-1005
Facsimile: (973) 471-5519
Attention: Mark Carlesimo, Esq., General Counsel
With a copy to: Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Telephone: (973) 597-2500
Facsimile: (973) 597-2400
Attention: Alan Wovsaniker, Esq.
If to the Shareholders: Terry Bozzay
13253 Romamy Way Ct.
St. Louis, MO 63131
Charles Walch
312 Planthurst Road
St. Louis, MO 63119
Randy Cooper
540 Coachway
Hazelwood, MO 63042
With a copy to: Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Telephone: 314-552-6000
Facsimile: 314-552-7000
Attention: Thomas E. Proost, Esq.
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
Section 12.2. Expenses. Regardless of whether the transactions provided
for in this Agreement are consummated, except as otherwise provided herein, the
Company and CDL shall each pay its own expenses incident to this Agreement and
the transactions contemplated herein. Notwithstanding the foregoing, the
Shareholders and not the Company shall pay the Company's expenses to the extent
such expenses are not reflected on the Company's Closing Date balance sheet.
Section 12.3. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of New Jersey, without reference to the choice of law principles thereof.
Each of the parties hereto irrevocably submits to the non-exclusive jurisdiction
of the courts of the State of New Jersey and the United States District Court
for the District of New Jersey, located in Passaic or Essex County, State of
Jersey, for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.
Section 12.4. Assignment; Successors and Assigns; No Third Party
Rights. Except as otherwise provided herein, this Agreement may not be assigned
by operation of law or otherwise, and any attempted assignment shall be null and
void. National and CDL may assign all of their rights under this Agreement to
any Affiliate; provided such Affiliate assumes all of the obligations of
National and CDL remains liable hereunder. No such assignment shall relieve
National or CDL of their obligations hereunder. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives. This Agreement shall be for the
sole benefit of the parties to this Agreement and their respective successors,
assigns and legal representatives and is not intended, nor shall be construed,
to give any Person, other than the parties hereto and their respective
successors, assigns and legal representatives, any legal or equitable right,
remedy or claim hereunder.
Section 12.5. Counterparts; Facsimile. This Agreement may be
executed in counterparts, each of which shall be deemed an original
agreement, but all of which together shall constitute one and the same
instrument. This agreement may be executed by facsimile signature.
Section 12.6. Titles and Headings. The headings and table of
contents in this Agreement are for reference purposes only, and shall not in
any way affect the meaning or interpretation of this Agreement.
Section 12.7. Entire Agreement. This Agreement, including the Schedules
and Exhibits attached thereto, constitutes the entire agreement among the
parties with respect to the matters covered hereby and supersedes all previous
written, oral or implied understandings among them with respect to such matters.
Section 12.8. Amendment and Modification. This Agreement may
only be amended or modified in writing signed by the party against whom
enforcement of such amendment or modification is sought.
Section 12.9. Public Announcement. Except as may be required by law,
neither the Company or the Shareholders, on the one hand, or National or CDL, on
the other hand, shall issue any press release or otherwise publicly disclose
this Agreement or the transactions contemplated hereby or any dealings between
or among the parties in connection with the subject matter hereof without the
prior approval of the other. In the event that any such press release or other
public disclosure shall be required, the party required to issue such release or
other disclosure shall consult in good faith with the other party hereto with
respect to the form and substance of such release or other disclosure prior to
the public dissemination thereof.
Section 12.10. Waiver. Any of the terms or conditions of this Agreement
may be waived at any time by the party or parties entitled to the benefit
thereof, but only by a writing signed by the party or parties waiving such terms
or conditions.
Section 12.11. Severability. The invalidity of any portion hereof shall
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its fullest extent, such restriction shall be enforced to
the maximum extent permitted by law.
Section 12.12. No Strict Construction. Each of the parties to this
Agreement acknowledge that this Agreement has been prepared jointly by the
parties hereto, and shall not be strictly construed against any party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
FIRST CHOICE COURIER AND
DISTRIBUTION SYSTEMS, INC.
By: /s/ Charles Walch
Name: Charles Walch
Title:
REGIONAL EXPRESS II, INC.
By: /s/ Terry Bozzay
Name: Terry Bozzay
Title:
REGIONAL EXPRESS III, INC.
By: /s/ Terry Bozzay
Name: Terry Bozzay
Title:
MANTECA ENTERPRISES, INC.
By: /s/ Terry Bozzay
Name: Terry Bozzay
Title:
/s/ Terry Bozzay
TERRY BOZZAY
/s/ Randy Cooper
RANDY COOPER
/s/ Charles Walch
CHARLES WALCH
NATIONAL EXPRESS COMPANY, INC.
By: /s/ Mark Carlesimo
Name: Mark Carlesimo
Title: Vice president
CONSOLIDATED DELIVERY & LOGISTICS, INC.
By: /s/ Albert W. Van Ness
Name: Albert W. Van Ness, Jr.
Title: Chairman and CEO
-iv-
TABLE OF CONTENTS
Article I - The Merger
Section 1.1. Delivery and Filing of Articles of Merger...................
Section 1.2. Effective Time of the Merger................................
Section 1.3. Articles of Incorporation...................................
Section 1.4. Certain Information With Respect to the Capital Stock of the
Company and National .......................................
Section 1.5. Effect of Merger............................................
Section 1.6. Manner of Conversion........................................
Article II - Purchase and Sale of Stock;
Additional Covenants
Section 2.1. Purchase and Sale of Stock..................................
Section 2.2. Purchase Price..............................................
Article III - Requirements of Delivery
Article IV - Closing
Article V - Certain Definitions
Section 5.1. Certain Definitions.........................................
Section 5.2. Interpretation..............................................
Article VI - Representations and Warranties Regarding the
Company
Section 6.1. Organization and Qualification of the Company...............
Section 6.2. Authorization...............................................
Section 6.3. Non-contravention...........................................
Section 6.4. No Consents.................................................
Section 6.5. Capitalization..............................................
Section 6.6. Personal Property...........................................
Section 6.7. Real Property...............................................
Section 6.8. Financial Statements........................................
Section 6.9. Absence of Certain Developments.............................
Section 6.10. Governmental Authorizations; Licenses.......................
Section 6.11. Litigation..................................................
Section 6.12. Undisclosed Liabilities....................................
Section 6.13. Taxes......................................................
Section 6.14. Insurance..................................................
Section 6.15. Environmental Matters.......................................
Section 6.16. Employee Matters............................................
Section 6.17. Employee Benefit Plans......................................
Section 6.18. Proprietary Rights..........................................
Section 6.19. Accounts Receivable ........................................
Section 6.20. Contracts...................................................
Section 6.21 Customers and Suppliers.....................................
Section 6.22. Predecessor Status..........................................
Section 6.23. Books and Records...........................................
Section 6.24. Brokers.....................................................
Section 6.25. Full Disclosure.............................................
Article VII - Representations and Warranties Regarding the
Shareholders
Section 7.1. Authorization...............................................
Section 7.2. Non-contravention...........................................
Section 7.3. No Consents.................................................
Section 7.4. Ownership of the Company's Stock............................
Section 7.5. Brokers.....................................................
Section 7.6. Affiliates..................................................
Section 7.7. Full Disclosure.............................................
Article VIII - Representations and Warranties Regarding
National and CDL
Section 8.1. Organization................................................
Section 8.2. Authorization...............................................
Section 8.3. Non-contravention...........................................
Section 8.4. No Consents.................................................
Section 8.5. Brokers.....................................................
Section 8.6 SEC Documents...............................................
Section 8.7 CDL Stock...................................................
Article IX - Covenants and Agreements
Section 9.1. Access and Information......................................
Section 9.2. Closing Documents...........................................
Section 9.3. Taxes.......................................................
Section 9.4. Non-Competition and Confidentiality Agreement...............
Section 9.5. Audited Financial Statements of the Company.................
Section 9.6. Best Efforts; Further Assurances............................
Section 9.7. Compliance with the Securities Act..........................
Section 9.8. Covenants of CDL and National...............................
Section 9.9. Personal Guarantees.........................................
Article X - Closing Deliveries
Section 10.1. Mutual Conditions...........................................
Section 10.2. Deliveries by the Company and the Shareholders..............
Section 10.3. Deliveries by CDL and National..............................
Article XI - Survival of Representations and Warranties;
Indemnification
Section 11.1. Survival of Representations and Warranties..................
Section 11.2. Indemnification.............................................
Section 11.3. Procedures for Third Party Claims...........................
Section 11.4. Procedures for Inter-Party Claims...........................
Section 11.5. Right of Set-Off............................................
Section 11.6. Offset to Indemnification...................................
Section 11.7. Limits on Indemnification...................................
Section 11.8. Form of Payment.............................................
Article XII - Miscellaneous
Section 12.1. Notices.....................................................
Section 12.2. Expenses....................................................
Section 12.3. Governing Law; Consent to Jurisdiction......................
Section 12.4. Assignment; Successors and Assigns; No Third Party Rights...
Section 12.5. Counterparts; Facsimile.....................................
Section 12.6. Titles and Headings.........................................
Section 12.7. Entire Agreement............................................
Section 12.8. Amendment and Modification..................................
Section 12.9. Public Announcement.........................................
Section 12.10. Waiver......................................................
Section 12.11. Severability................................................
Section 12.12. No Strict Construction......................................
Schedules
Schedule 6.1 Foreign Qualifications of the Company
Schedule 6.3 Contravention of Agreements
Schedule 6.4 Consents
Schedule 6.6 Encumbrances
Schedule 6.7 Leased Real Property
Schedule 6.8 Financial Statements
Schedule 6.9 Certain Developments
Schedule 6.10 Authorizations
Schedule 6.11 Litigation
Schedule 6.12 Disclosed Liabilities
Schedule 6.13 Tax Contests
Schedule 6.14 Insurance
Schedule 6.15 Environmental Matters
Schedule 6.16 Employee Matters
Schedule 6.17 Employee Benefit Plans
Schedule 6.18 Proprietary Rights
Schedule 6.19 Accounts Receivable
Schedule 6.20 Contracts
Schedule 6.21 Customers and Suppliers
Schedule 6.22 Predecessor Names
Schedule 7.6 Affiliates
Schedule 9.9 Debt Guaranteed by Shareholders
Schedule 10.2 Promissory Notes
Exhibits
Exhibit A Allocation of Consideration to be Paid to Shareholders and
Ownership of Company's Stock
Exhibit B Form of the Notes
Exhibit C Forms of Employment Agreements
Exhibit D Form of Opinion of Counsel to the Company and the
Shareholders
Exhibit 10.2
This Note has been, and any shares issued upon conversion
pursuant to the terms hereof ("Underlying Shares") will be,
acquired for investment and not with a view to, or for sale in
connection with, any distribution thereof within the meaning
of the Securities Act of 1933, as amended ("Act"). This Note,
and any securities issued upon conversion pursuant to this
Note, have not been registered under the Securities Act of
1933, or any state securities law, and may be offered and sold
only if registered pursuant to the provisions of that Act or
those laws or if an exemption from registration is available.
Notwithstanding any other provisions contained herein, no
transfer of this security, the Underlying Shares, or of any
interest in either thereof shall be made unless the conditions
specified in Article Four hereof have been fulfilled.
7% SUBORDINATED CONVERTIBLE NOTE DUE 2001
OF CONSOLIDATED DELIVERY & LOGISTICS, INC.
Registered Holder: Terry Bozzay
December 8, 1998
Address: 6400 Spencer Place No. MN-3
St. Louis, MO 63133
Principal Amount: $718,293 Clifton, New Jersey
Due: December 8, 2001
FOR VALUE RECEIVED, CONSOLIDATED DELIVERY & LOGISTICS, INC., a
Delaware corporation (hereinafter called the "Company"), hereby promises to pay
to the holder above named (herein called the "Holder"), the principal sum above
stated on December 8, 2001 and to pay interest thereon at the rate of seven
percent (7%) per annum from the date hereof. Interest shall be computed on the
balance of principal outstanding from time to time, and payable quarterly
beginning on February 28, 1999.
Both principal hereof and interest thereon are payable in
lawful money of the United States of America at the Holder's address above or
such other address as the Holder shall designate in writing delivered to the
Company from time to time. Prior to any sale or other disposition of this Note,
the Holder will endorse hereon the amount of principal paid hereon and the last
date to which interest has been paid hereon.
PREPAYMENT
The Company may prepay this debt, in whole or in part, without
premium or penalty at any time on and after the "Trigger Date" (as defined
below) and from time to time thereafter in its discretion; provided that it
gives the Holder ten (10) days advance written notice of its intent to prepay;
during which period the Holder may exercise his then existing conversion rights,
if any.
ARTICLE ONE
SUBORDINATION
Anything contained herein to the contrary notwithstanding, the
indebtedness evidenced by this Note shall be fully subordinate and junior in
right of payment, to the extent and in the manner hereinafter set forth, to all
Senior Debt of the Company, including, without limitation, all indebtedness due
to First Union Commercial Corporation or its affiliates, or any other bank or
similar financial institution (hereinafter a "bank"), direct or indirect,
absolute or contingent, due or to become due, whether now outstanding or
hereafter created, and any and all renewals or replacements of the foregoing by
contract, operation of law or otherwise. Such indebtedness of the Company to
which the indebtedness evidenced by this Note and the interest thereon is
subordinate and junior being sometimes hereinafter referred to as "Senior Debt"
and also includes without limitation all debt or financing from time to time
arranged by First Union Commercial Corporation or its affiliates or any other
bank or institutional debt, including but not limited to, any mezzanine
financing of the Company for working capital, acquisitions, or similar purposes
to be provided by Paribas Capital Funding LLC and/or others.
(i) In the event of any insolvency or
bankruptcy proceedings, and any receivership, liquidation,
reorganization or other similar proceedings in connection
therewith, relative to the Company or to its creditors, as
such, or to its property, and in the event of any proceedings
for voluntary liquidation, dissolution or other winding up of
the Company, whether or not involving insolvency or
bankruptcy, and in the event of any execution sale, then the
holders of Senior Debt shall be entitled to receive payment in
full of all principal of, and premium on and interest on all
Senior Debt (including any such interest which may accrue
after the commencement of any such proceedings) before the
Holder of this Note is entitled to receive any further payment
on account of principal of or premium, if any, on this Note,
and to that end the holders of Senior Debt shall be entitled
to receive for application in payment thereof any payment or
distribution of any kind or character, whether in cash or
property or securities, which may be payable or deliverable in
any such proceedings in respect to this Note except with
respect to interest payments.
(ii) The Company shall not be required to
make, directly or indirectly, and the Holder shall not be
entitled to accept, receive (directly or indirectly) or, if
improperly accepted or received, retain, any payment or
prepayment of principal or premium hereunder if and so long as
a payment default under the terms of any Senior Debt shall
have occurred and shall be continuing.
(iii) In the event that this Note is
declared due and payable before its expressed maturity because
of the occurrence of a default hereunder (under circumstances
when the provisions of clause (i) above shall not be
applicable), and within 90 days of such declaration, the
holders of the Senior Debt accelerate the indebtedness
evidenced by such Senior Debt, the holders of all Senior Debt
shall be entitled to receive payment in full of all principal
and interest on all Senior Debt (including any such interest
which may accrue after the commencement of any proceedings
referred to in clause (i) above) before the Holder of this
Note shall receive any further payment on account of the
principal of or premium, if any, on this Note.
Unless an event described in (i), (ii) or (iii) above shall
occur, principal of and accrued interest on this Note shall be payable as
provided on the first page; and in the event the payment is suspended as
provided in (i), (ii) or (iii) above, any amount previously received by the
Holder hereof prior to the effective date of such event and payable to the
Holder in accordance with the terms hereof shall be and remain the property of
the Holder, the subordination provisions being intended only to affect payments
due after an event described in (i), (ii) or (iii).
In case cash, securities or other property otherwise payable
or deliverable to the Holder of this Note shall have been applied pursuant to
the provisions of this Note to the payment of Senior Debt in full, then and in
each such case, the holder or holders of the Senior Debt at the time any
payments or distributions are received by such holder(s) of Senior Debt in
excess of the amount sufficient to pay all Senior Debt in full, (a) shall pay
over such excess to the Holder of this Note and (b) the Holder of this Note
shall be subrogated to any rights of any holder(s) of Senior Debt to receive any
further payments or distributions applicable to the Senior Debt, until this Note
shall have been paid in full. Senior Debt shall not be considered to be paid in
full unless and until all of the obligations which constitute a part of Senior
Debt have been paid in full.
In furtherance of such subordination, the Holder of this Note
hereby grants to the holder(s) of the Senior Debt irrevocable authority, after
any default in the payment of any amounts due on the Senior Debt or in any event
specified in clauses (i), (ii) or (iii) above, to demand, collect, file proofs
of claim with respect to, receive and take any and all proceedings for the
recovery of any and all monies due or to become due on account of this Note.
No present or future holder of Senior Debt shall be prejudiced
in his right to enforce subordination of this Note by any act or failure to act
on the part of the Company. The subordination provisions of this Note are solely
for the purpose of defining the relative rights of the holder(s) of Senior Debt
on the one hand and the Holder of this Note on the other hand, and nothing
herein shall impair as between the Company and the Holder of this Note, the
obligation of the Company, which is unconditional and absolute, to pay to the
Holder hereof the principal hereof and premium, if any, and interest hereon in
accordance with its terms, nor shall anything herein prevent the Holder of this
Note from declaring the Note to be due and payable before its expressed maturity
because of the occurrence of a default hereunder or, in connection therewith,
from exercising all remedies otherwise permitted by applicable law or hereunder
upon default hereunder, subject to the rights of holders of Senior Debt to cash,
securities or other property otherwise payable or deliverable to the Holder of
this Note.
In furtherance of this subordination the Holder agrees to
execute and deliver any and all documents requested by the Company for delivery
to its creditors (in the form as requested by such creditors) in order to
implement or verify this subordination.
ARTICLE TWO
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur, the Holder hereof, at his option, may declare all sums of
principal and accrued interest then remaining unpaid hereon and all other
amounts payable hereunder immediately due and payable.
2.01 Events of Default
For purposes of this instrument, an Event of Default will
be deemed to have occurred if:
(a) the Company shall fail to pay any
installment of principal or interest on this Note and such
non-payment shall continue for a period of fifteen (15) days
from the date due; or
(b) a receiver, liquidator or trustee of the
Company or of any property of the Company, shall be appointed
by court order; or the Company shall be adjudged bankrupt or
insolvent; or any of the property of the Company shall be
sequestered by court order; or a petition to reorganize the
Company under any bankruptcy, reorganization or insolvency law
shall be filed against the Company and shall not be dismissed
within 60 days after such filing; or
(c) the Company shall file a petition in
voluntary bankruptcy or requesting reorganization under any
provision of any bankruptcy, reorganization or insolvency law
or shall consent to the filing of any petition against it
under any such law; or
(d) the Company shall make a formal or
informal assignment for the benefit of its creditors or admit
in writing its inability to pay its debts generally when they
become due or shall consent to the appointment of a receiver,
trustee or liquidator of the Company or of all or any part of
the property of the Company.
2.02 Remedies on Default
If an Event of Default shall have occurred, in addition to his
rights and remedies under this Note, and any other instruments, the Holder may
at his option by written notice to the Company declare all indebtedness to
Holder hereunder to be due and payable, whereupon the same shall forthwith
mature and become due and payable together with interest accrued thereon,
without any further notice to and without presentment, demand, protest or notice
of protest, all of which are hereby waived. In addition, after an Event of
Default, interest shall be payable hereunder at the rate of nine percent (9%)
per annum.
Subject to the rights of holders of Senior Debt, the Holder
may proceed to protect and enforce his rights by suit in equity, action at law
or other appropriate proceedings, including, without limitation, action for the
specific performance of any agreement contained herein or in any other
instrument, or for an injunction against a violation of any of the terms hereof
or thereof, or in aid of the exercise of any right, power or remedy granted
hereby or by law, equity or otherwise.
ARTICLE THREE
CONVERSION PRIVILEGE/OBLIGATION
The Company hereby grants to the Holder of this Convertible
Note the right to convert fifty percent (50%) of the principal amount of this
Note into fully paid and non-assessable shares of the Company's Common Stock,
$.001 par value (the "Common Stock"), at the "Conversion Price" per share. The
"Conversion Price" is defined as Seven and 00/100 Dollars ($7.00). The right to
convert may be exercised by either party at any time within 30 days after a
Trigger Date provided that the closing price of the Common Stock is greater than
the Conversion Price at the end of business on the day prior to the date of the
notice of exercise, provided, however, that if required by the Company pursuant
to an existing indemnification claim under Article 11 of the Stock Purchase
Agreement, the Holder must pledge such shares to the Company with a value equal
to the claim net of any applicable setoffs to secure all indemnification and
other obligations of the Holder or its principals to the Company or its
affiliates pursuant to a pledge agreement in form and substance acceptable to
the Company. The number of shares of Common Stock into which fifty percent (50%)
of the principal amount of this Note may be converted shall be determined by
taking (a) fifty percent (50%) of the sum of (1) the full principal amount of
this Note, namely $718,293, and (2) any interest due and unpaid thereon from the
date of issue to the date of conversion, and dividing such amount by (b) the
Conversion Price, which Conversion Price is subject to adjustment as provided in
Section 3.06 below. The right to convert may only be exercised with respect to
the entire fifty percent (50%) of the amount due on the Note at the exercise
date. The amount and kind of securities purchasable pursuant to the rights
granted hereby and the purchase price for such securities are subject to
adjustment as provided hereunder.
The exercise by the Holder of his conversion privilege shall
extinguish the Company's conversion privilege, and the exercise by the Company
of its conversion privilege shall extinguish the Holder's conversion privilege.
For purposes of this Note, the "Trigger Date" shall mean the
first business day after the date hereof on which both the closing sale price on
said business day and the average closing sales price as reported by the
National Association of Securities Dealers during the 30 calendar day period
preceding said business day equals or exceeds the Conversion Price.
3.01 Whole Shares. Upon conversion, only whole shares shall
be issued. Any remainder due hereunder which is insufficient to purchase a
whole share of Common Stock shall be paid by the Company in cash.
3.02 Exercise Procedure.
(a) The conversion privilege shall be deemed to have been
exercised (the "Exercise Time") when either (x) the Company shall have received
from the Holder all of the following:
(i) a properly completed Exercise
Agreement in form annexed hereto executed by the person
exercising such conversion privilege; and
(ii) this Note; and
(iii) if the payee of this Note is not the
person exercising such conversion privilege, an assignment or
assignments as described in Section 3.04 hereof evidencing an
assignment of such Note to the person exercising the same, in
which case the Holder shall comply with Article Four hereof
and submit proof, including opinions of Holder's counsel, that
the assignment and exercise comply with all federal and state
securities laws.
or (y) the Company shall have delivered to the Holder its notice of exercise in
writing. Upon receipt of such notice, the Holder shall immediately deliver this
Note to the Company. Exercise of the Company's conversion privilege shall be
effective notwithstanding any failure or delay of the Holder on delivering the
Note to the Company, and no interest shall accrue hereunder with respect to
fifty percent (50%) of the principal amount of this Note after the Company sends
Holder its notice of exercise of the conversion privilege.
(b) Certificates for the underlying shares acquired, together
with a new Note for such remaining principal balance with the same terms as this
Note except for the conversion rights/obligations, shall be delivered to the
Holder within 20 days after the Exercise Time (or the date of delivery of the
Note to the Company, if later).
3.03 Exercise Agreement. The Exercise Agreement shall be in
the form set forth at the end of this Note. If the Conversion Shares are not to
be issued in the name of the payee on the Note, such Agreement shall also state
the name of the persons to whom the certificates for the Conversion Shares are
to be issued. Such Exercise Agreement shall be dated the actual date of
execution thereof.
3.04 Assignment. The Assignment shall be in the form set forth
at the end of this Note and shall provide that the person executing the same
thereby sells, assigns and transfers to the person(s) named therein the rights
evidenced by this Note to purchase the number of the Underlying Shares stated
therein. Such Assignment shall be dated the actual date of execution thereof.
The Assignee shall be required to provide the Company with proof of compliance
with all applicable federal and state securities laws.
3.05 Authorization and Issuance of Conversion Shares.
The Company covenants and agrees that:
(a) The Underlying Shares issuable upon any exercise of the
conversion privilege shall be deemed to have been issued to the person
exercising such privilege at the Exercise Time, and the person exercising such
privilege shall be deemed for all purposes to have become the record holder of
such Underlying Shares at the Exercise Time.
(b) All Underlying Shares which may be issued upon any
exercise will, upon issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof.
(c) The Company will take all such action as may be necessary
and reasonably within its powers to assure that all underlying shares issuable
upon exercise may be issued without violation of any applicable law or
regulation. The Company will not take any action which would result in any
adjustment of the Conversion Price if the total number of Common Shares issuable
after such action upon exercise of the conversion privilege in full, together
with all Common Shares then outstanding and all Common Shares then issuable upon
the exercise of all outstanding options, warrants, conversion and other rights,
would exceed the total number of Common Shares then authorized by the Company's
Certificate of Incorporation.
(d) The issuance of certificates for the Underlying Shares
upon exercise of the conversion privilege shall be made without charge to the
Holder for any issuance tax in respect thereof or other costs incurred by the
Company in connection with the exercise and the related issuance of the
underlying shares.
3.06 Anti-dilution. The Conversion Price shall be adjusted, to
the nearest cent, from time to time, only to the following extent:
(a) Whenever after the date hereof the Company shall (i)
declare and pay a dividend to the holders of its shares of common stock in
shares of its common stock, or in other securities immediately convertible into
shares of common stock, (ii) split the outstanding shares of its common stock
into a greater number of outstanding shares of common stock, or (iii) combine
the outstanding shares of its common stock into a smaller number of outstanding
shares of common stock, the maximum number of shares that the Holder shall be
entitled to convert and/or purchase shall be adjusted so that the Holder of this
Note shall thereafter be entitled to receive upon conversion of the entire fifty
percent (50%) of the initial indebtedness represented hereby that number of
shares of common stock which he would have held had the entire fifty percent
(50%) of the initial indebtedness of this Note been converted immediately prior
to the effective date of such action and had that action been effectuated with
respect to those converted shares. In any such event the Conversion Price will
be altered accordingly so that any conversion taking place after any event
described in (i), (ii), and/or (iii) above may be accomplished at the same cost
that would have obtained had the shares been converted immediately prior to such
action. For purposes of this subparagraph (a), the effective date for any stock
dividend, split or combination referred to in clause (i) above shall be deemed
to be the record date fixed for the determination of the holders of common stock
entitled to receive such dividend.
(b) In the case after the date hereof of any capital
reorganization or any reclassification of the capital stock of the Company or in
case of the consolidation of the Company with or merger of the Company into
another corporation or the conveyance of all or substantially all of the
properties and assets of the Company to another corporation, adequate provision
shall be made whereby this Note shall thereafter be convertible into the number
of shares of stock or other securities or property to which a holder of the
number of shares of common stock of the Company deliverable upon conversion of
this Note immediately prior to such reorganization, reclassification,
consolidation, merger or conveyance would have been entitled upon consummation
of such reorganization, reclassification, consolidation, merger or conveyance;
and, in any such case, appropriate adjustment (as determined by the board of
directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interests of the holder of this Note to the end
that such provisions (including, without limitation, the provisions with respect
to changes in and other adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, to the shares of stock or other
securities or property thereafter deliverable upon the conversion of this Note.
ARTICLE FOUR
RESTRICTIONS ON TRANSFER
The Holder, by acceptance hereof, acknowledges that he
understands that the Company will rely upon the representations set forth herein
in issuing the Note and the Underlying Shares, if any, without registration
under the Act, the New Jersey Uniform Securities Law, or any other state
securities law.
Accordingly, the Holder, by acceptance of the Note, represents
and warrants that this offering is being made pursuant to the exemption from
registration with the Securities and Exchange Commission ("SEC") afforded by
Sections 3(b) and/or 4(2) of the Act relating to transactions by an issuer not
involving any public offering. The Holder understands that the Company has no
present intention, and is under no obligation to, register the Note or the
Underlying Shares under the Act, or any applicable state law.
The Holder understands that due to lack of registration, the
Note and the Underlying Shares will be restricted securities, that the holder
must bear the economic risk of the investment for an indefinite period, that the
Note and the Underlying Shares may not be sold, pledged or otherwise disposed of
unless they are registered under the Act and any applicable state securities
law, or an exemption from such laws is available and the Company is supplied
with an opinion of counsel to the Holder, satisfactory to the Company, that
registration is not required under any of such laws, and in the opinion of
counsel for the Company, such sale, transfer, or pledge will not cause the
Company to fail to be in compliance with the exemption provisions under which
the Note or the Underlying Shares were issued.
The Holder has such knowledge and experience in financial and
business affairs that he is capable of evaluating the merits and risks of the
prospective investment.
The Holder is able to bear the economic risk of this
investment. An investment in the Note and the Underlying Shares is suitable for
the Holder in light of his financial position and investment objectives, with
full knowledge that this investment could result in a complete loss. The Holder
recognizes that the Note represents a HIGH-RISK, SPECULATIVE INVESTMENT and that
there is no assurance that any return will be received thereon. The Holder can
afford a total loss of this investment.
The Note is being, and the Underlying Shares will be,
purchased for the Holder's own account for investment purposes and not with a
view to the resale or distribution thereof by the Holder.
Prior to the date hereof, the Holder has had ample opportunity
to ask questions of and receive answers from the officers and directors of the
Company, concerning the Company, the Note, and the Company's business and to
obtain any additional information which was considered necessary to verify the
information supplied by those individuals.
The Holder understands that a restrictive legend in
substantially the following form shall be placed on the certificate(s)
representing the Underlying Shares:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended
("Act"). Such shares have been acquired for investment and may
not be publicly offered or sold in the absence of (1) an
effective registration statement for such shares under the
Act; (2) opinions of counsel to the Company and to the holder
hereof and presented to the Company prior to any proposed
transfer to the effect that registration is not required under
the Act; or (3) a letter presented to the Company, prior to
any proposed transfer, from the staff of the Securities and
Exchange Commission, to the effect that it will not take any
enforcement action if the proposed transfer is made without
registration under the Act."
Notwithstanding the foregoing legend, the Company will not
require an opinion of counsel if the Underlying Shares may be sold pursuant to
the exemption from registration pursuant to Rule 144 of the Act. Except as set
forth in the documents which the Holder has reviewed, no representations or
warranties have been made to the Holder by the Company. In entering into this
transaction, the Holder is not relying upon any information, other than the
results of his own independent investigation.
ARTICLE FIVE
MISCELLANEOUS
5.01 Failure or Delay Not Waiver. No failure or delay on the
part of the Holder hereof in the exercise of any power, right, or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
5.02 Notices. Any notice herein required or permitted to be
given shall be given by Federal Express or similar overnight courier or by same
day courier service or by certified mail, return receipt requested, if to the
Payee, at the address set forth on the first page hereof. If to a Holder other
than the Payee, then to the Payee at the address stated in a copy of an executed
assignment of this Note delivered to the Company.
If to the Company:
Consolidated Delivery & Logistics, Inc., 380 Allwood Road, Clifton,
New Jersey 07012, Attn: General Counsel.
5.03 Amendments. The term "Note" or "this Note" and all
reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed or, if later amended or supplemented, then, as
so amended or supplemented.
5.04 Incorporation of Agreement. This is one of the Notes
issued pursuant to a Stock Purchase Agreement dated this date among the Company,
the Holder and others and is subject to set off and to the other terms and
conditions of such Agreement.
5.05 Assignability. This Note shall be binding upon the
Company, its successors and assigns, and shall inure to the benefit of Holder,
his successors and assigns.
5.06 Governing Law; Consent to Jurisdiction. This Note shall
be governed by, and construed in accordance with, the internal laws of the State
of New Jersey, without reference to the choice of law principles thereof. Each
of the Holder and the Company irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of New Jersey and the United States
District Court for the District of New Jersey, located in Passaic or Essex
County, State of Jersey, for the purpose of any suit, action, proceeding or
judgment relating to or arising out of this Note and the transactions
contemplated hereby. Service of process in connection with any such suit, action
or proceeding may be served on each of the Holder and the Company anywhere in
the world by the same methods as are specified for the giving of notices under
this Note. Each of the Holder and the Company irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each of the Holder and the Company irrevocably
waives any objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
5.07 No Personal Liability. No officer, director,
shareholder, employee, consultant or agent of the Company shall be personally
liable for repayment of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed in its name by its duly authorized officer and its corporate seal to be
affixed hereto.
CONSOLIDATED DELIVERY & LOGISTICS, INC.
[Seal] By:__/s/ William T. Brannan
Name: William T. Brannan
Title: President and COO
ASSIGNMENT
FOR VALUE RECEIVED ______________________________________
- ----------------------------------------------------------------------
hereby sells, assigns and transfers all of the rights of the undersigned under
the within Note, with respect to the conversion thereof into a number of shares
of the Common Stock covered thereby set forth hereinbelow unto:
Name of Assignee Address No. of Shares
Date:__________
Signature:
Witness:
EXERCISE AGREEMENT
Date:__________
The undersigned, pursuant to the provisions set forth in the
within Note, hereby irrevocably elects to subscribe for and purchase the maximum
number of shares of the Company's Common Stock as provided in the Note, and
makes payment in full therefore by conversion and application to the extent
necessary to pay the Conversion Price for such shares of such part of the
principal amount of the Note and interest due thereon as shall be necessary as
provided in the Note. The undersigned hereby represents and warrants that the
shares of Common Stock to be acquired upon exercise are being acquired for his
own account, without any present intention of reoffering, reselling or
distributing such Common Stock, except to the extent permitted under the
Securities Act of 1933, as amended.
Signature
Address
This Note has been, and any shares issued upon conversion
pursuant to the terms hereof ("Underlying Shares") will be,
acquired for investment and not with a view to, or for sale in
connection with, any distribution thereof within the meaning
of the Securities Act of 1933, as amended ("Act"). This Note,
and any securities issued upon conversion pursuant to this
Note, have not been registered under the Securities Act of
1933, or any state securities law, and may be offered and sold
only if registered pursuant to the provisions of that Act or
those laws or if an exemption from registration is available.
Notwithstanding any other provisions contained herein, no
transfer of this security, the Underlying Shares, or of any
interest in either thereof shall be made unless the conditions
specified in Article Four hereof have been fulfilled.
7% SUBORDINATED CONVERTIBLE NOTE DUE 2001
OF CONSOLIDATED DELIVERY & LOGISTICS, INC.
Registered Holder: Randy Cooper
December 8, 1998
Address: 6400 Spencer Place No. MN-1
St. Louis, MO 63133
Principal Amount: $122,707 Clifton, New Jersey
Due: December 8, 2001
FOR VALUE RECEIVED, CONSOLIDATED DELIVERY & LOGISTICS, INC., a
Delaware corporation (hereinafter called the "Company"), hereby promises to pay
to the holder above named (herein called the "Holder"), the principal sum above
stated on December 8, 2001 and to pay interest thereon at the rate of seven
percent (7%) per annum from the date hereof. Interest shall be computed on the
balance of principal outstanding from time to time, and payable quarterly
beginning on February 28, 1999.
Both principal hereof and interest thereon are payable in
lawful money of the United States of America at the Holder's address above or
such other address as the Holder shall designate in writing delivered to the
Company from time to time. Prior to any sale or other disposition of this Note,
the Holder will endorse hereon the amount of principal paid hereon and the last
date to which interest has been paid hereon.
PREPAYMENT
The Company may prepay this debt, in whole or in part, without
premium or penalty at any time on and after the "Trigger Date" (as defined
below) and from time to time thereafter in its discretion; provided that it
gives the Holder ten (10) days advance written notice of its intent to prepay;
during which period the Holder may exercise his then existing conversion rights,
if any.
ARTICLE ONE
SUBORDINATION
Anything contained herein to the contrary notwithstanding, the
indebtedness evidenced by this Note shall be fully subordinate and junior in
right of payment, to the extent and in the manner hereinafter set forth, to all
Senior Debt of the Company, including, without limitation, all indebtedness due
to First Union Commercial Corporation or its affiliates, or any other bank or
similar financial institution (hereinafter a "bank"), direct or indirect,
absolute or contingent, due or to become due, whether now outstanding or
hereafter created, and any and all renewals or replacements of the foregoing by
contract, operation of law or otherwise. Such indebtedness of the Company to
which the indebtedness evidenced by this Note and the interest thereon is
subordinate and junior being sometimes hereinafter referred to as "Senior Debt"
and also includes without limitation all debt or financing from time to time
arranged by First Union Commercial Corporation or its affiliates or any other
bank or institutional debt, including but not limited to, any mezzanine
financing of the Company for working capital, acquisitions, or similar purposes
to be provided by Paribas Capital Funding LLC and/or others.
(i) In the event of any insolvency or
bankruptcy proceedings, and any receivership, liquidation,
reorganization or other similar proceedings in connection
therewith, relative to the Company or to its creditors, as
such, or to its property, and in the event of any proceedings
for voluntary liquidation, dissolution or other winding up of
the Company, whether or not involving insolvency or
bankruptcy, and in the event of any execution sale, then the
holders of Senior Debt shall be entitled to receive payment in
full of all principal of, and premium on and interest on all
Senior Debt (including any such interest which may accrue
after the commencement of any such proceedings) before the
Holder of this Note is entitled to receive any further payment
on account of principal of or premium, if any, on this Note,
and to that end the holders of Senior Debt shall be entitled
to receive for application in payment thereof any payment or
distribution of any kind or character, whether in cash or
property or securities, which may be payable or deliverable in
any such proceedings in respect to this Note except with
respect to interest payments.
(ii) The Company shall not be required to
make, directly or indirectly, and the Holder shall not be
entitled to accept, receive (directly or indirectly) or, if
improperly accepted or received, retain, any payment or
prepayment of principal or premium hereunder if and so long as
a payment default under the terms of any Senior Debt shall
have occurred and shall be continuing.
(iii) In the event that this Note is
declared due and payable before its expressed maturity because
of the occurrence of a default hereunder (under circumstances
when the provisions of clause (i) above shall not be
applicable), and within 90 days of such declaration, the
holders of the Senior Debt accelerate the indebtedness
evidenced by such Senior Debt, the holders of all Senior Debt
shall be entitled to receive payment in full of all principal
and interest on all Senior Debt (including any such interest
which may accrue after the commencement of any proceedings
referred to in clause (i) above) before the Holder of this
Note shall receive any further payment on account of the
principal of or premium, if any, on this Note.
Unless an event described in (i), (ii) or (iii) above shall
occur, principal of and accrued interest on this Note shall be payable as
provided on the first page; and in the event the payment is suspended as
provided in (i), (ii) or (iii) above, any amount previously received by the
Holder hereof prior to the effective date of such event and payable to the
Holder in accordance with the terms hereof shall be and remain the property of
the Holder, the subordination provisions being intended only to affect payments
due after an event described in (i), (ii) or (iii).
In case cash, securities or other property otherwise payable
or deliverable to the Holder of this Note shall have been applied pursuant to
the provisions of this Note to the payment of Senior Debt in full, then and in
each such case, the holder or holders of the Senior Debt at the time any
payments or distributions are received by such holder(s) of Senior Debt in
excess of the amount sufficient to pay all Senior Debt in full, (a) shall pay
over such excess to the Holder of this Note and (b) the Holder of this Note
shall be subrogated to any rights of any holder(s) of Senior Debt to receive any
further payments or distributions applicable to the Senior Debt, until this Note
shall have been paid in full. Senior Debt shall not be considered to be paid in
full unless and until all of the obligations which constitute a part of Senior
Debt have been paid in full.
In furtherance of such subordination, the Holder of this Note
hereby grants to the holder(s) of the Senior Debt irrevocable authority, after
any default in the payment of any amounts due on the Senior Debt or in any event
specified in clauses (i), (ii) or (iii) above, to demand, collect, file proofs
of claim with respect to, receive and take any and all proceedings for the
recovery of any and all monies due or to become due on account of this Note.
No present or future holder of Senior Debt shall be prejudiced
in his right to enforce subordination of this Note by any act or failure to act
on the part of the Company. The subordination provisions of this Note are solely
for the purpose of defining the relative rights of the holder(s) of Senior Debt
on the one hand and the Holder of this Note on the other hand, and nothing
herein shall impair as between the Company and the Holder of this Note, the
obligation of the Company, which is unconditional and absolute, to pay to the
Holder hereof the principal hereof and premium, if any, and interest hereon in
accordance with its terms, nor shall anything herein prevent the Holder of this
Note from declaring the Note to be due and payable before its expressed maturity
because of the occurrence of a default hereunder or, in connection therewith,
from exercising all remedies otherwise permitted by applicable law or hereunder
upon default hereunder, subject to the rights of holders of Senior Debt to cash,
securities or other property otherwise payable or deliverable to the Holder of
this Note.
In furtherance of this subordination the Holder agrees to
execute and deliver any and all documents requested by the Company for delivery
to its creditors (in the form as requested by such creditors) in order to
implement or verify this subordination.
ARTICLE TWO
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur, the Holder hereof, at his option, may declare all sums of
principal and accrued interest then remaining unpaid hereon and all other
amounts payable hereunder immediately due and payable.
2.01 Events of Default
For purposes of this instrument, an Event of Default will
be deemed to have occurred if:
(a) the Company shall fail to pay any
installment of principal or interest on this Note and such
non-payment shall continue for a period of fifteen (15) days
from the date due; or
(b) a receiver, liquidator or trustee of the
Company or of any property of the Company, shall be appointed
by court order; or the Company shall be adjudged bankrupt or
insolvent; or any of the property of the Company shall be
sequestered by court order; or a petition to reorganize the
Company under any bankruptcy, reorganization or insolvency law
shall be filed against the Company and shall not be dismissed
within 60 days after such filing; or
(c) the Company shall file a petition in
voluntary bankruptcy or requesting reorganization under any
provision of any bankruptcy, reorganization or insolvency law
or shall consent to the filing of any petition against it
under any such law; or
(d) the Company shall make a formal or
informal assignment for the benefit of its creditors or admit
in writing its inability to pay its debts generally when they
become due or shall consent to the appointment of a receiver,
trustee or liquidator of the Company or of all or any part of
the property of the Company.
2.02 Remedies on Default
If an Event of Default shall have occurred, in addition to his
rights and remedies under this Note, and any other instruments, the Holder may
at his option by written notice to the Company declare all indebtedness to
Holder hereunder to be due and payable, whereupon the same shall forthwith
mature and become due and payable together with interest accrued thereon,
without any further notice to and without presentment, demand, protest or notice
of protest, all of which are hereby waived. In addition, after an Event of
Default, interest shall be payable hereunder at the rate of nine percent (9%)
per annum.
Subject to the rights of holders of Senior Debt, the Holder
may proceed to protect and enforce his rights by suit in equity, action at law
or other appropriate proceedings, including, without limitation, action for the
specific performance of any agreement contained herein or in any other
instrument, or for an injunction against a violation of any of the terms hereof
or thereof, or in aid of the exercise of any right, power or remedy granted
hereby or by law, equity or otherwise.
ARTICLE THREE
CONVERSION PRIVILEGE/OBLIGATION
The Company hereby grants to the Holder of this Convertible
Note the right to convert fifty percent (50%) of the principal amount of this
Note into fully paid and non-assessable shares of the Company's Common Stock,
$.001 par value (the "Common Stock"), at the "Conversion Price" per share. The
"Conversion Price" is defined as Seven and 00/100 Dollars ($7.00). The right to
convert may be exercised by either party at any time within 30 days after a
Trigger Date provided that the closing price of the Common Stock is greater than
the Conversion Price at the end of business on the day prior to the date of the
notice of exercise, provided, however, that if required by the Company pursuant
to an existing indemnification claim under Article 11 of the Stock Purchase
Agreement, the Holder must pledge such shares to the Company with a value equal
to the claim net of any applicable setoffs to secure all indemnification and
other obligations of the Holder or its principals to the Company or its
affiliates pursuant to a pledge agreement in form and substance acceptable to
the Company. The number of shares of Common Stock into which fifty percent (50%)
of the principal amount of this Note may be converted shall be determined by
taking (a) fifty percent (50%) of the sum of (1) the full principal amount of
this Note, namely $122,707, and (2) any interest due and unpaid thereon from the
date of issue to the date of conversion, and dividing such amount by (b) the
Conversion Price, which Conversion Price is subject to adjustment as provided in
Section 3.06 below. The right to convert may only be exercised with respect to
the entire fifty percent (50%) of the amount due on the Note at the exercise
date. The amount and kind of securities purchasable pursuant to the rights
granted hereby and the purchase price for such securities are subject to
adjustment as provided hereunder.
The exercise by the Holder of his conversion privilege shall
extinguish the Company's conversion privilege, and the exercise by the Company
of its conversion privilege shall extinguish the Holder's conversion privilege.
For purposes of this Note, the "Trigger Date" shall mean the
first business day after the date hereof on which both the closing sale price on
said business day and the average closing sales price as reported by the
National Association of Securities Dealers during the 30 calendar day period
preceding said business day equals or exceeds the Conversion Price.
3.01 Whole Shares. Upon conversion, only whole shares shall
be issued. Any remainder due hereunder which is insufficient to purchase a
whole share of Common Stock shall be paid by the Company in cash.
3.02 Exercise Procedure.
(a) The conversion privilege shall be deemed to have been
exercised (the "Exercise Time") when either (x) the Company shall have received
from the Holder all of the following:
(i) a properly completed Exercise
Agreement in form annexed hereto executed by the person
exercising such conversion privilege; and
(ii) this Note; and
(iii) if the payee of this Note is not the
person exercising such conversion privilege, an assignment or
assignments as described in Section 3.04 hereof evidencing an
assignment of such Note to the person exercising the same, in
which case the Holder shall comply with Article Four hereof
and submit proof, including opinions of Holder's counsel, that
the assignment and exercise comply with all federal and state
securities laws.
or (y) the Company shall have delivered to the Holder its notice of exercise in
writing. Upon receipt of such notice, the Holder shall immediately deliver this
Note to the Company. Exercise of the Company's conversion privilege shall be
effective notwithstanding any failure or delay of the Holder on delivering the
Note to the Company, and no interest shall accrue hereunder with respect to
fifty percent (50%) of the principal amount of this Note after the Company sends
Holder its notice of exercise of the conversion privilege.
(b) Certificates for the underlying shares acquired, together
with a new Note for such remaining principal balance with the same terms as this
Note except for the conversion rights/obligations, shall be delivered to the
Holder within 20 days after the Exercise Time (or the date of delivery of the
Note to the Company, if later).
3.03 Exercise Agreement. The Exercise Agreement shall be in
the form set forth at the end of this Note. If the Conversion Shares are not to
be issued in the name of the payee on the Note, such Agreement shall also state
the name of the persons to whom the certificates for the Conversion Shares are
to be issued. Such Exercise Agreement shall be dated the actual date of
execution thereof.
3.04 Assignment. The Assignment shall be in the form set forth
at the end of this Note and shall provide that the person executing the same
thereby sells, assigns and transfers to the person(s) named therein the rights
evidenced by this Note to purchase the number of the Underlying Shares stated
therein. Such Assignment shall be dated the actual date of execution thereof.
The Assignee shall be required to provide the Company with proof of compliance
with all applicable federal and state securities laws.
3.05 Authorization and Issuance of Conversion Shares.
The Company covenants and agrees that:
(a) The Underlying Shares issuable upon any exercise of the
conversion privilege shall be deemed to have been issued to the person
exercising such privilege at the Exercise Time, and the person exercising such
privilege shall be deemed for all purposes to have become the record holder of
such Underlying Shares at the Exercise Time.
(b) All Underlying Shares which may be issued upon any
exercise will, upon issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof.
(c) The Company will take all such action as may be necessary
and reasonably within its powers to assure that all underlying shares issuable
upon exercise may be issued without violation of any applicable law or
regulation. The Company will not take any action which would result in any
adjustment of the Conversion Price if the total number of Common Shares issuable
after such action upon exercise of the conversion privilege in full, together
with all Common Shares then outstanding and all Common Shares then issuable upon
the exercise of all outstanding options, warrants, conversion and other rights,
would exceed the total number of Common Shares then authorized by the Company's
Certificate of Incorporation.
(d) The issuance of certificates for the Underlying Shares
upon exercise of the conversion privilege shall be made without charge to the
Holder for any issuance tax in respect thereof or other costs incurred by the
Company in connection with the exercise and the related issuance of the
underlying shares.
3.06 Anti-dilution. The Conversion Price shall be adjusted, to
the nearest cent, from time to time, only to the following extent:
(a) Whenever after the date hereof the Company shall (i)
declare and pay a dividend to the holders of its shares of common stock in
shares of its common stock, or in other securities immediately convertible into
shares of common stock, (ii) split the outstanding shares of its common stock
into a greater number of outstanding shares of common stock, or (iii) combine
the outstanding shares of its common stock into a smaller number of outstanding
shares of common stock, the maximum number of shares that the Holder shall be
entitled to convert and/or purchase shall be adjusted so that the Holder of this
Note shall thereafter be entitled to receive upon conversion of the entire fifty
percent (50%) of the initial indebtedness represented hereby that number of
shares of common stock which he would have held had the entire fifty percent
(50%) of the initial indebtedness of this Note been converted immediately prior
to the effective date of such action and had that action been effectuated with
respect to those converted shares. In any such event the Conversion Price will
be altered accordingly so that any conversion taking place after any event
described in (i), (ii), and/or (iii) above may be accomplished at the same cost
that would have obtained had the shares been converted immediately prior to such
action. For purposes of this subparagraph (a), the effective date for any stock
dividend, split or combination referred to in clause (i) above shall be deemed
to be the record date fixed for the determination of the holders of common stock
entitled to receive such dividend.
(b) In the case after the date hereof of any capital
reorganization or any reclassification of the capital stock of the Company or in
case of the consolidation of the Company with or merger of the Company into
another corporation or the conveyance of all or substantially all of the
properties and assets of the Company to another corporation, adequate provision
shall be made whereby this Note shall thereafter be convertible into the number
of shares of stock or other securities or property to which a holder of the
number of shares of common stock of the Company deliverable upon conversion of
this Note immediately prior to such reorganization, reclassification,
consolidation, merger or conveyance would have been entitled upon consummation
of such reorganization, reclassification, consolidation, merger or conveyance;
and, in any such case, appropriate adjustment (as determined by the board of
directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interests of the holder of this Note to the end
that such provisions (including, without limitation, the provisions with respect
to changes in and other adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, to the shares of stock or other
securities or property thereafter deliverable upon the conversion of this Note.
ARTICLE FOUR
RESTRICTIONS ON TRANSFER
The Holder, by acceptance hereof, acknowledges that he
understands that the Company will rely upon the representations set forth herein
in issuing the Note and the Underlying Shares, if any, without registration
under the Act, the New Jersey Uniform Securities Law, or any other state
securities law.
Accordingly, the Holder, by acceptance of the Note, represents
and warrants that this offering is being made pursuant to the exemption from
registration with the Securities and Exchange Commission ("SEC") afforded by
Sections 3(b) and/or 4(2) of the Act relating to transactions by an issuer not
involving any public offering. The Holder understands that the Company has no
present intention, and is under no obligation to, register the Note or the
Underlying Shares under the Act, or any applicable state law.
The Holder understands that due to lack of registration, the
Note and the Underlying Shares will be restricted securities, that the holder
must bear the economic risk of the investment for an indefinite period, that the
Note and the Underlying Shares may not be sold, pledged or otherwise disposed of
unless they are registered under the Act and any applicable state securities
law, or an exemption from such laws is available and the Company is supplied
with an opinion of counsel to the Holder, satisfactory to the Company, that
registration is not required under any of such laws, and in the opinion of
counsel for the Company, such sale, transfer, or pledge will not cause the
Company to fail to be in compliance with the exemption provisions under which
the Note or the Underlying Shares were issued.
The Holder has such knowledge and experience in financial and
business affairs that he is capable of evaluating the merits and risks of the
prospective investment.
The Holder is able to bear the economic risk of this
investment. An investment in the Note and the Underlying Shares is suitable for
the Holder in light of his financial position and investment objectives, with
full knowledge that this investment could result in a complete loss. The Holder
recognizes that the Note represents a HIGH-RISK, SPECULATIVE INVESTMENT and that
there is no assurance that any return will be received thereon. The Holder can
afford a total loss of this investment.
The Note is being, and the Underlying Shares will be,
purchased for the Holder's own account for investment purposes and not with a
view to the resale or distribution thereof by the Holder.
Prior to the date hereof, the Holder has had ample opportunity
to ask questions of and receive answers from the officers and directors of the
Company, concerning the Company, the Note, and the Company's business and to
obtain any additional information which was considered necessary to verify the
information supplied by those individuals.
The Holder understands that a restrictive legend in
substantially the following form shall be placed on the certificate(s)
representing the Underlying Shares:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended
("Act"). Such shares have been acquired for investment and may
not be publicly offered or sold in the absence of (1) an
effective registration statement for such shares under the
Act; (2) opinions of counsel to the Company and to the holder
hereof and presented to the Company prior to any proposed
transfer to the effect that registration is not required under
the Act; or (3) a letter presented to the Company, prior to
any proposed transfer, from the staff of the Securities and
Exchange Commission, to the effect that it will not take any
enforcement action if the proposed transfer is made without
registration under the Act."
Notwithstanding the foregoing legend, the Company will not
require an opinion of counsel if the Underlying Shares may be sold pursuant to
the exemption from registration pursuant to Rule 144 of the Act. Except as set
forth in the documents which the Holder has reviewed, no representations or
warranties have been made to the Holder by the Company. In entering into this
transaction, the Holder is not relying upon any information, other than the
results of his own independent investigation.
ARTICLE FIVE
MISCELLANEOUS
5.01 Failure or Delay Not Waiver. No failure or delay on the
part of the Holder hereof in the exercise of any power, right, or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
5.02 Notices. Any notice herein required or permitted to be
given shall be given by Federal Express or similar overnight courier or by same
day courier service or by certified mail, return receipt requested, if to the
Payee, at the address set forth on the first page hereof. If to a Holder other
than the Payee, then to the Payee at the address stated in a copy of an executed
assignment of this Note delivered to the Company.
If to the Company:
Consolidated Delivery & Logistics, Inc., 380 Allwood Road, Clifton,
New Jersey 07012, Attn: General Counsel.
5.03 Amendments. The term "Note" or "this Note" and all
reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed or, if later amended or supplemented, then, as
so amended or supplemented.
5.04 Incorporation of Agreement. This is one of the Notes
issued pursuant to a Stock Purchase Agreement dated this date among the Company,
the Holder and others and is subject to set off and to the other terms and
conditions of such Agreement.
5.05 Assignability. This Note shall be binding upon the
Company, its successors and assigns, and shall inure to the benefit of Holder,
his successors and assigns.
5.06 Governing Law; Consent to Jurisdiction. This Note shall
be governed by, and construed in accordance with, the internal laws of the State
of New Jersey, without reference to the choice of law principles thereof. Each
of the Holder and the Company irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of New Jersey and the United States
District Court for the District of New Jersey, located in Passaic or Essex
County, State of Jersey, for the purpose of any suit, action, proceeding or
judgment relating to or arising out of this Note and the transactions
contemplated hereby. Service of process in connection with any such suit, action
or proceeding may be served on each of the Holder and the Company anywhere in
the world by the same methods as are specified for the giving of notices under
this Note. Each of the Holder and the Company irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each of the Holder and the Company irrevocably
waives any objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
5.07 No Personal Liability. No officer, director,
shareholder, employee, consultant or agent of the Company shall be personally
liable for repayment of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed in its name by its duly authorized officer and its corporate seal to be
affixed hereto.
CONSOLIDATED DELIVERY & LOGISTICS, INC.
[Seal] By: /s/ William T. Brannan
Name: William T. Brannan
Title: President and COO
ASSIGNMENT
FOR VALUE RECEIVED ______________________________________
- ----------------------------------------------------------------------
hereby sells, assigns and transfers all of the rights of the undersigned under
the within Note, with respect to the conversion thereof into a number of shares
of the Common Stock covered thereby set forth hereinbelow unto:
Name of Assignee Address No. of Shares
Date:__________
Signature:
Witness:
EXERCISE AGREEMENT
Date:__________
The undersigned, pursuant to the provisions set forth in the
within Note, hereby irrevocably elects to subscribe for and purchase the maximum
number of shares of the Company's Common Stock as provided in the Note, and
makes payment in full therefore by conversion and application to the extent
necessary to pay the Conversion Price for such shares of such part of the
principal amount of the Note and interest due thereon as shall be necessary as
provided in the Note. The undersigned hereby represents and warrants that the
shares of Common Stock to be acquired upon exercise are being acquired for his
own account, without any present intention of reoffering, reselling or
distributing such Common Stock, except to the extent permitted under the
Securities Act of 1933, as amended.
Signature
Address
This Note has been, and any shares issued upon conversion
pursuant to the terms hereof ("Underlying Shares") will be,
acquired for investment and not with a view to, or for sale in
connection with, any distribution thereof within the meaning
of the Securities Act of 1933, as amended ("Act"). This Note,
and any securities issued upon conversion pursuant to this
Note, have not been registered under the Securities Act of
1933, or any state securities law, and may be offered and sold
only if registered pursuant to the provisions of that Act or
those laws or if an exemption from registration is available.
Notwithstanding any other provisions contained herein, no
transfer of this security, the Underlying Shares, or of any
interest in either thereof shall be made unless the conditions
specified in Article Four hereof have been fulfilled.
7% SUBORDINATED CONVERTIBLE NOTE DUE 2001
OF CONSOLIDATED DELIVERY & LOGISTICS, INC.
Registered Holder: Charles Walch
December 8, 1998
Address: 6400 Spencer Place No. MN-2
St. Louis, MO 63133
Principal Amount: $559,000 Clifton, New Jersey
Due: December 8, 2001
FOR VALUE RECEIVED, CONSOLIDATED DELIVERY & LOGISTICS, INC., a
Delaware corporation (hereinafter called the "Company"), hereby promises to pay
to the holder above named (herein called the "Holder"), the principal sum above
stated on December 8, 2001 and to pay interest thereon at the rate of seven
percent (7%) per annum from the date hereof. Interest shall be computed on the
balance of principal outstanding from time to time, and payable quarterly
beginning on February 28, 1999.
Both principal hereof and interest thereon are payable in
lawful money of the United States of America at the Holder's address above or
such other address as the Holder shall designate in writing delivered to the
Company from time to time. Prior to any sale or other disposition of this Note,
the Holder will endorse hereon the amount of principal paid hereon and the last
date to which interest has been paid hereon.
PREPAYMENT
The Company may prepay this debt, in whole or in part, without
premium or penalty at any time on and after the "Trigger Date" (as defined
below) and from time to time thereafter in its discretion; provided that it
gives the Holder ten (10) days advance written notice of its intent to prepay;
during which period the Holder may exercise his then existing conversion rights,
if any.
ARTICLE ONE
SUBORDINATION
Anything contained herein to the contrary notwithstanding, the
indebtedness evidenced by this Note shall be fully subordinate and junior in
right of payment, to the extent and in the manner hereinafter set forth, to all
Senior Debt of the Company, including, without limitation, all indebtedness due
to First Union Commercial Corporation or its affiliates, or any other bank or
similar financial institution (hereinafter a "bank"), direct or indirect,
absolute or contingent, due or to become due, whether now outstanding or
hereafter created, and any and all renewals or replacements of the foregoing by
contract, operation of law or otherwise. Such indebtedness of the Company to
which the indebtedness evidenced by this Note and the interest thereon is
subordinate and junior being sometimes hereinafter referred to as "Senior Debt"
and also includes without limitation all debt or financing from time to time
arranged by First Union Commercial Corporation or its affiliates or any other
bank or institutional debt, including but not limited to, any mezzanine
financing of the Company for working capital, acquisitions, or similar purposes
to be provided by Paribas Capital Funding LLC and/or others.
(i) In the event of any insolvency or
bankruptcy proceedings, and any receivership, liquidation,
reorganization or other similar proceedings in connection
therewith, relative to the Company or to its creditors, as
such, or to its property, and in the event of any proceedings
for voluntary liquidation, dissolution or other winding up of
the Company, whether or not involving insolvency or
bankruptcy, and in the event of any execution sale, then the
holders of Senior Debt shall be entitled to receive payment in
full of all principal of, and premium on and interest on all
Senior Debt (including any such interest which may accrue
after the commencement of any such proceedings) before the
Holder of this Note is entitled to receive any further payment
on account of principal of or premium, if any, on this Note,
and to that end the holders of Senior Debt shall be entitled
to receive for application in payment thereof any payment or
distribution of any kind or character, whether in cash or
property or securities, which may be payable or deliverable in
any such proceedings in respect to this Note except with
respect to interest payments.
(ii) The Company shall not be required to
make, directly or indirectly, and the Holder shall not be
entitled to accept, receive (directly or indirectly) or, if
improperly accepted or received, retain, any payment or
prepayment of principal or premium hereunder if and so long as
a payment default under the terms of any Senior Debt shall
have occurred and shall be continuing.
(iii) In the event that this Note is
declared due and payable before its expressed maturity because
of the occurrence of a default hereunder (under circumstances
when the provisions of clause (i) above shall not be
applicable), and within 90 days of such declaration, the
holders of the Senior Debt accelerate the indebtedness
evidenced by such Senior Debt, the holders of all Senior Debt
shall be entitled to receive payment in full of all principal
and interest on all Senior Debt (including any such interest
which may accrue after the commencement of any proceedings
referred to in clause (i) above) before the Holder of this
Note shall receive any further payment on account of the
principal of or premium, if any, on this Note.
Unless an event described in (i), (ii) or (iii) above shall
occur, principal of and accrued interest on this Note shall be payable as
provided on the first page; and in the event the payment is suspended as
provided in (i), (ii) or (iii) above, any amount previously received by the
Holder hereof prior to the effective date of such event and payable to the
Holder in accordance with the terms hereof shall be and remain the property of
the Holder, the subordination provisions being intended only to affect payments
due after an event described in (i), (ii) or (iii).
In case cash, securities or other property otherwise payable
or deliverable to the Holder of this Note shall have been applied pursuant to
the provisions of this Note to the payment of Senior Debt in full, then and in
each such case, the holder or holders of the Senior Debt at the time any
payments or distributions are received by such holder(s) of Senior Debt in
excess of the amount sufficient to pay all Senior Debt in full, (a) shall pay
over such excess to the Holder of this Note and (b) the Holder of this Note
shall be subrogated to any rights of any holder(s) of Senior Debt to receive any
further payments or distributions applicable to the Senior Debt, until this Note
shall have been paid in full. Senior Debt shall not be considered to be paid in
full unless and until all of the obligations which constitute a part of Senior
Debt have been paid in full.
In furtherance of such subordination, the Holder of this Note
hereby grants to the holder(s) of the Senior Debt irrevocable authority, after
any default in the payment of any amounts due on the Senior Debt or in any event
specified in clauses (i), (ii) or (iii) above, to demand, collect, file proofs
of claim with respect to, receive and take any and all proceedings for the
recovery of any and all monies due or to become due on account of this Note.
No present or future holder of Senior Debt shall be prejudiced
in his right to enforce subordination of this Note by any act or failure to act
on the part of the Company. The subordination provisions of this Note are solely
for the purpose of defining the relative rights of the holder(s) of Senior Debt
on the one hand and the Holder of this Note on the other hand, and nothing
herein shall impair as between the Company and the Holder of this Note, the
obligation of the Company, which is unconditional and absolute, to pay to the
Holder hereof the principal hereof and premium, if any, and interest hereon in
accordance with its terms, nor shall anything herein prevent the Holder of this
Note from declaring the Note to be due and payable before its expressed maturity
because of the occurrence of a default hereunder or, in connection therewith,
from exercising all remedies otherwise permitted by applicable law or hereunder
upon default hereunder, subject to the rights of holders of Senior Debt to cash,
securities or other property otherwise payable or deliverable to the Holder of
this Note.
In furtherance of this subordination the Holder agrees to
execute and deliver any and all documents requested by the Company for delivery
to its creditors (in the form as requested by such creditors) in order to
implement or verify this subordination.
ARTICLE TWO
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur, the Holder hereof, at his option, may declare all sums of
principal and accrued interest then remaining unpaid hereon and all other
amounts payable hereunder immediately due and payable.
2.01 Events of Default
For purposes of this instrument, an Event of Default will
be deemed to have occurred if:
(a) the Company shall fail to pay any
installment of principal or interest on this Note and such
non-payment shall continue for a period of fifteen (15) days
from the date due; or
(b) a receiver, liquidator or trustee of the
Company or of any property of the Company, shall be appointed
by court order; or the Company shall be adjudged bankrupt or
insolvent; or any of the property of the Company shall be
sequestered by court order; or a petition to reorganize the
Company under any bankruptcy, reorganization or insolvency law
shall be filed against the Company and shall not be dismissed
within 60 days after such filing; or
(c) the Company shall file a petition in
voluntary bankruptcy or requesting reorganization under any
provision of any bankruptcy, reorganization or insolvency law
or shall consent to the filing of any petition against it
under any such law; or
(d) the Company shall make a formal or
informal assignment for the benefit of its creditors or admit
in writing its inability to pay its debts generally when they
become due or shall consent to the appointment of a receiver,
trustee or liquidator of the Company or of all or any part of
the property of the Company.
2.02 Remedies on Default
If an Event of Default shall have occurred, in addition to his
rights and remedies under this Note, and any other instruments, the Holder may
at his option by written notice to the Company declare all indebtedness to
Holder hereunder to be due and payable, whereupon the same shall forthwith
mature and become due and payable together with interest accrued thereon,
without any further notice to and without presentment, demand, protest or notice
of protest, all of which are hereby waived. In addition, after an Event of
Default, interest shall be payable hereunder at the rate of nine percent (9%)
per annum.
Subject to the rights of holders of Senior Debt, the Holder
may proceed to protect and enforce his rights by suit in equity, action at law
or other appropriate proceedings, including, without limitation, action for the
specific performance of any agreement contained herein or in any other
instrument, or for an injunction against a violation of any of the terms hereof
or thereof, or in aid of the exercise of any right, power or remedy granted
hereby or by law, equity or otherwise.
ARTICLE THREE
CONVERSION PRIVILEGE/OBLIGATION
The Company hereby grants to the Holder of this Convertible
Note the right to convert fifty percent (50%) of the principal amount of this
Note into fully paid and non-assessable shares of the Company's Common Stock,
$.001 par value (the "Common Stock"), at the "Conversion Price" per share. The
"Conversion Price" is defined as Seven and 00/100 Dollars ($7.00). The right to
convert may be exercised by either party at any time within 30 days after a
Trigger Date provided that the closing price of the Common Stock is greater than
the Conversion Price at the end of business on the day prior to the date of the
notice of exercise, provided, however, that if required by the Company pursuant
to an existing indemnification claim under Article 11 of the Stock Purchase
Agreement, the Holder must pledge such shares to the Company with a value equal
to the claim net of any applicable setoffs to secure all indemnification and
other obligations of the Holder or its principals to the Company or its
affiliates pursuant to a pledge agreement in form and substance acceptable to
the Company. The number of shares of Common Stock into which fifty percent (50%)
of the principal amount of this Note may be converted shall be determined by
taking (a) fifty percent (50%) of the sum of (1) the full principal amount of
this Note, namely $559,000, and (2) any interest due and unpaid thereon from the
date of issue to the date of conversion, and dividing such amount by (b) the
Conversion Price, which Conversion Price is subject to adjustment as provided in
Section 3.06 below. The right to convert may only be exercised with respect to
the entire fifty percent (50%) of the amount due on the Note at the exercise
date. The amount and kind of securities purchasable pursuant to the rights
granted hereby and the purchase price for such securities are subject to
adjustment as provided hereunder.
The exercise by the Holder of his conversion privilege shall
extinguish the Company's conversion privilege, and the exercise by the Company
of its conversion privilege shall extinguish the Holder's conversion privilege.
For purposes of this Note, the "Trigger Date" shall mean the
first business day after the date hereof on which both the closing sale price on
said business day and the average closing sales price as reported by the
National Association of Securities Dealers during the 30 calendar day period
preceding said business day equals or exceeds the Conversion Price.
3.01 Whole Shares. Upon conversion, only whole shares shall
be issued. Any remainder due hereunder which is insufficient to purchase a
whole share of Common Stock shall be paid by the Company in cash.
3.02 Exercise Procedure.
(a) The conversion privilege shall be deemed to have been
exercised (the "Exercise Time") when either (x) the Company shall have received
from the Holder all of the following:
(i) a properly completed Exercise
Agreement in form annexed hereto executed by the person
exercising such conversion privilege; and
(ii) this Note; and
(iii) if the payee of this Note is not the
person exercising such conversion privilege, an assignment or
assignments as described in Section 3.04 hereof evidencing an
assignment of such Note to the person exercising the same, in
which case the Holder shall comply with Article Four hereof
and submit proof, including opinions of Holder's counsel, that
the assignment and exercise comply with all federal and state
securities laws.
or (y) the Company shall have delivered to the Holder its notice of exercise in
writing. Upon receipt of such notice, the Holder shall immediately deliver this
Note to the Company. Exercise of the Company's conversion privilege shall be
effective notwithstanding any failure or delay of the Holder on delivering the
Note to the Company, and no interest shall accrue hereunder with respect to
fifty percent (50%) of the principal amount of this Note after the Company sends
Holder its notice of exercise of the conversion privilege.
(b) Certificates for the underlying shares acquired, together
with a new Note for such remaining principal balance with the same terms as this
Note except for the conversion rights/obligations, shall be delivered to the
Holder within 20 days after the Exercise Time (or the date of delivery of the
Note to the Company, if later).
3.03 Exercise Agreement. The Exercise Agreement shall be in
the form set forth at the end of this Note. If the Conversion Shares are not to
be issued in the name of the payee on the Note, such Agreement shall also state
the name of the persons to whom the certificates for the Conversion Shares are
to be issued. Such Exercise Agreement shall be dated the actual date of
execution thereof.
3.04 Assignment. The Assignment shall be in the form set forth
at the end of this Note and shall provide that the person executing the same
thereby sells, assigns and transfers to the person(s) named therein the rights
evidenced by this Note to purchase the number of the Underlying Shares stated
therein. Such Assignment shall be dated the actual date of execution thereof.
The Assignee shall be required to provide the Company with proof of compliance
with all applicable federal and state securities laws.
3.05 Authorization and Issuance of Conversion Shares.
The Company covenants and agrees that:
(a) The Underlying Shares issuable upon any exercise of the
conversion privilege shall be deemed to have been issued to the person
exercising such privilege at the Exercise Time, and the person exercising such
privilege shall be deemed for all purposes to have become the record holder of
such Underlying Shares at the Exercise Time.
(b) All Underlying Shares which may be issued upon any
exercise will, upon issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof.
(c) The Company will take all such action as may be necessary
and reasonably within its powers to assure that all underlying shares issuable
upon exercise may be issued without violation of any applicable law or
regulation. The Company will not take any action which would result in any
adjustment of the Conversion Price if the total number of Common Shares issuable
after such action upon exercise of the conversion privilege in full, together
with all Common Shares then outstanding and all Common Shares then issuable upon
the exercise of all outstanding options, warrants, conversion and other rights,
would exceed the total number of Common Shares then authorized by the Company's
Certificate of Incorporation.
(d) The issuance of certificates for the Underlying Shares
upon exercise of the conversion privilege shall be made without charge to the
Holder for any issuance tax in respect thereof or other costs incurred by the
Company in connection with the exercise and the related issuance of the
underlying shares.
3.06 Anti-dilution. The Conversion Price shall be adjusted, to
the nearest cent, from time to time, only to the following extent:
(a) Whenever after the date hereof the Company shall (i)
declare and pay a dividend to the holders of its shares of common stock in
shares of its common stock, or in other securities immediately convertible into
shares of common stock, (ii) split the outstanding shares of its common stock
into a greater number of outstanding shares of common stock, or (iii) combine
the outstanding shares of its common stock into a smaller number of outstanding
shares of common stock, the maximum number of shares that the Holder shall be
entitled to convert and/or purchase shall be adjusted so that the Holder of this
Note shall thereafter be entitled to receive upon conversion of the entire fifty
percent (50%) of the initial indebtedness represented hereby that number of
shares of common stock which he would have held had the entire fifty percent
(50%) of the initial indebtedness of this Note been converted immediately prior
to the effective date of such action and had that action been effectuated with
respect to those converted shares. In any such event the Conversion Price will
be altered accordingly so that any conversion taking place after any event
described in (i), (ii), and/or (iii) above may be accomplished at the same cost
that would have obtained had the shares been converted immediately prior to such
action. For purposes of this subparagraph (a), the effective date for any stock
dividend, split or combination referred to in clause (i) above shall be deemed
to be the record date fixed for the determination of the holders of common stock
entitled to receive such dividend.
(b) In the case after the date hereof of any capital
reorganization or any reclassification of the capital stock of the Company or in
case of the consolidation of the Company with or merger of the Company into
another corporation or the conveyance of all or substantially all of the
properties and assets of the Company to another corporation, adequate provision
shall be made whereby this Note shall thereafter be convertible into the number
of shares of stock or other securities or property to which a holder of the
number of shares of common stock of the Company deliverable upon conversion of
this Note immediately prior to such reorganization, reclassification,
consolidation, merger or conveyance would have been entitled upon consummation
of such reorganization, reclassification, consolidation, merger or conveyance;
and, in any such case, appropriate adjustment (as determined by the board of
directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interests of the holder of this Note to the end
that such provisions (including, without limitation, the provisions with respect
to changes in and other adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, to the shares of stock or other
securities or property thereafter deliverable upon the conversion of this Note.
ARTICLE FOUR
RESTRICTIONS ON TRANSFER
The Holder, by acceptance hereof, acknowledges that he
understands that the Company will rely upon the representations set forth herein
in issuing the Note and the Underlying Shares, if any, without registration
under the Act, the New Jersey Uniform Securities Law, or any other state
securities law.
Accordingly, the Holder, by acceptance of the Note, represents
and warrants that this offering is being made pursuant to the exemption from
registration with the Securities and Exchange Commission ("SEC") afforded by
Sections 3(b) and/or 4(2) of the Act relating to transactions by an issuer not
involving any public offering. The Holder understands that the Company has no
present intention, and is under no obligation to, register the Note or the
Underlying Shares under the Act, or any applicable state law.
The Holder understands that due to lack of registration, the
Note and the Underlying Shares will be restricted securities, that the holder
must bear the economic risk of the investment for an indefinite period, that the
Note and the Underlying Shares may not be sold, pledged or otherwise disposed of
unless they are registered under the Act and any applicable state securities
law, or an exemption from such laws is available and the Company is supplied
with an opinion of counsel to the Holder, satisfactory to the Company, that
registration is not required under any of such laws, and in the opinion of
counsel for the Company, such sale, transfer, or pledge will not cause the
Company to fail to be in compliance with the exemption provisions under which
the Note or the Underlying Shares were issued.
The Holder has such knowledge and experience in financial and
business affairs that he is capable of evaluating the merits and risks of the
prospective investment.
The Holder is able to bear the economic risk of this
investment. An investment in the Note and the Underlying Shares is suitable for
the Holder in light of his financial position and investment objectives, with
full knowledge that this investment could result in a complete loss. The Holder
recognizes that the Note represents a HIGH-RISK, SPECULATIVE INVESTMENT and that
there is no assurance that any return will be received thereon. The Holder can
afford a total loss of this investment.
The Note is being, and the Underlying Shares will be,
purchased for the Holder's own account for investment purposes and not with a
view to the resale or distribution thereof by the Holder.
Prior to the date hereof, the Holder has had ample opportunity
to ask questions of and receive answers from the officers and directors of the
Company, concerning the Company, the Note, and the Company's business and to
obtain any additional information which was considered necessary to verify the
information supplied by those individuals.
The Holder understands that a restrictive legend in
substantially the following form shall be placed on the certificate(s)
representing the Underlying Shares:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended
("Act"). Such shares have been acquired for investment and may
not be publicly offered or sold in the absence of (1) an
effective registration statement for such shares under the
Act; (2) opinions of counsel to the Company and to the holder
hereof and presented to the Company prior to any proposed
transfer to the effect that registration is not required under
the Act; or (3) a letter presented to the Company, prior to
any proposed transfer, from the staff of the Securities and
Exchange Commission, to the effect that it will not take any
enforcement action if the proposed transfer is made without
registration under the Act."
Notwithstanding the foregoing legend, the Company will not
require an opinion of counsel if the Underlying Shares may be sold pursuant to
the exemption from registration pursuant to Rule 144 of the Act. Except as set
forth in the documents which the Holder has reviewed, no representations or
warranties have been made to the Holder by the Company. In entering into this
transaction, the Holder is not relying upon any information, other than the
results of his own independent investigation.
ARTICLE FIVE
MISCELLANEOUS
5.01 Failure or Delay Not Waiver. No failure or delay on the
part of the Holder hereof in the exercise of any power, right, or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
5.02 Notices. Any notice herein required or permitted to be
given shall be given by Federal Express or similar overnight courier or by same
day courier service or by certified mail, return receipt requested, if to the
Payee, at the address set forth on the first page hereof. If to a Holder other
than the Payee, then to the Payee at the address stated in a copy of an executed
assignment of this Note delivered to the Company.
If to the Company:
Consolidated Delivery & Logistics, Inc., 380 Allwood Road, Clifton,
New Jersey 07012, Attn: General Counsel.
5.03 Amendments. The term "Note" or "this Note" and all
reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed or, if later amended or supplemented, then, as
so amended or supplemented.
5.04 Incorporation of Agreement. This is one of the Notes
issued pursuant to a Stock Purchase Agreement dated this date among the Company,
the Holder and others and is subject to set off and to the other terms and
conditions of such Agreement.
5.05 Assignability. This Note shall be binding upon the
Company, its successors and assigns, and shall inure to the benefit of Holder,
his successors and assigns.
5.06 Governing Law; Consent to Jurisdiction. This Note shall
be governed by, and construed in accordance with, the internal laws of the State
of New Jersey, without reference to the choice of law principles thereof. Each
of the Holder and the Company irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of New Jersey and the United States
District Court for the District of New Jersey, located in Passaic or Essex
County, State of Jersey, for the purpose of any suit, action, proceeding or
judgment relating to or arising out of this Note and the transactions
contemplated hereby. Service of process in connection with any such suit, action
or proceeding may be served on each of the Holder and the Company anywhere in
the world by the same methods as are specified for the giving of notices under
this Note. Each of the Holder and the Company irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each of the Holder and the Company irrevocably
waives any objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
5.07 No Personal Liability. No officer, director,
shareholder, employee, consultant or agent of the Company shall be personally
liable for repayment of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed in its name by its duly authorized officer and its corporate seal to be
affixed hereto.
CONSOLIDATED DELIVERY & LOGISTICS, INC.
[Seal] By: /s/ William T. Brannan
Name: William T. Brannan
Title: President and COO
ASSIGNMENT
FOR VALUE RECEIVED ______________________________________
- ----------------------------------------------------------------------
hereby sells, assigns and transfers all of the rights of the undersigned under
the within Note, with respect to the conversion thereof into a number of shares
of the Common Stock covered thereby set forth hereinbelow unto:
Name of Assignee Address No. of Shares
Date:__________
Signature:
Witness:
EXERCISE AGREEMENT
Date:__________
The undersigned, pursuant to the provisions set forth in the
within Note, hereby irrevocably elects to subscribe for and purchase the maximum
number of shares of the Company's Common Stock as provided in the Note, and
makes payment in full therefore by conversion and application to the extent
necessary to pay the Conversion Price for such shares of such part of the
principal amount of the Note and interest due thereon as shall be necessary as
provided in the Note. The undersigned hereby represents and warrants that the
shares of Common Stock to be acquired upon exercise are being acquired for his
own account, without any present intention of reoffering, reselling or
distributing such Common Stock, except to the extent permitted under the
Securities Act of 1933, as amended.
Signature
Address
Exhibit 99.1
FOR IMMEDIATE RELEASE
Drew Kronick, Vice President
Consolidated Delivery & Logistics, Inc.
(973) 471-1005
Lee Laino or Ken DiPaola
The Dilenschneider Group
(212) 922-0900
CONSOLIDATED DELIVERY & LOGISTICS, INC. ACQUIRES
FIRST CHOICE COURIER AND BOZZAY DELIVERY
St. Louis Based Courier With Operations in Kansas City & Indianapolis
Strengthens CD&L's Midwest Presence
Clifton, NJ December 9, 1998 - Consolidated Delivery & Logistics, Inc.
(NASDAQ: CDLI) announced today that it has acquired privately held First Choice
Courier and Bozzay Delivery. Based in St. Louis and with major hubs in
Indianapolis and Kansas City, Mo., the combined companies had revenues of $8.3
million in 1997. Terms of the acquisition were not disclosed.
CD&L's Chairman and Chief Executive Officer, Albert W. Van Ness, Jr.,
commented, "The acquisition of First Choice and Bozzay was as much about gaining
a mature and aggressive management team as it was about acquiring proven and
consistently strong margins. CDL's present St. Louis operation will be merged
with First Choice creating a significant presence in this important market."
Bill Brannan, President and COO, added "CD&L's strategy of
consolidating regional courier companies has proven to be highly successful.
Since 1996, we have acquired and integrated nine strategically located companies
into our operations and have reported seven consecutive quarters of improving
revenue and profit."
Mr. Brannan added, "It is a pleasure to welcome Terry Bozzay, who
founded the original company 22 years ago, to CD&L. Mr. Bozzay will be named the
Midwest Regional Manager responsible for CD&L's ground courier operation from
Chicago/Minneapolis to Texas and from the Mississippi to the Rocky Mountains.
Mr. Randy Cooper and Mr. Charles Pearson, currently with the Bozzay group, will
become the Regional Operations Manager and Regional Controller, respectively.
Mr. Charlie Walch, a current owner of First Choice, will head up the merged
CDL/First Choice St. Louis operation. Ms. Sue Spracjar, currently head of CD&L's
St. Louis operation, will head up the Midwest Regional Sales function and report
to Mr. Bozzay. As important, the majority of the current staff of Bozzay, Kansas
City, headed up by Bryan Ohrman, Bozzay Indianapolis, headed up by Ken Berryhill
and the newly formed St. Louis CDL/First Choice business will remain with CD&L
as will the approximate 250 delivery contractors and employee couriers currently
working in the various CDL, First Choice and Bozzay locations.
Consolidated Delivery & Logistics, Inc. headquartered in Clifton, New
Jersey is a full service, same day ground and air delivery and logistics company
with 70 offices in 24 states and the District of Columbia. The Company has
nearly 4,000 employees and utilizes contractors to provide time sensitive
delivery services to thousands of businesses.
This press release contains certain forward-looking statements
regarding future events or the future financial performance of the Company.
These forward-looking statements include comments on the Company's future
business development. These forward-looking statements involve certain risks and
uncertainties that may cause the actual events or results to differ materially
from those indicated by such forward-looking statements. Potential risks and
uncertainties include without limitation the risk that the revenues and profits
of the acquired companies will decrease or fail to improve over historical
results, or that the new management group will be unable to effectively and
profitably integrate the two businesses or manage the future business of the
region or the risk that the Company will lack satisfactory merger or acquisition
candidates and/or have an inability to conclude acquisitions or mergers on
satisfactory terms, will be unable to obtain acquisition financing on
satisfactory terms, or achieve cost savings or additional profits contemplated
by the Company's business management strategy or other risks specified in the
Company's SEC filing.