<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
STONEPATH GROUP, INC.
A DELAWARE CORPORATION
(STONEPATH)
AND
STONEPATH LOGISTICS INTERNATIONAL SERVICES, INC.
A DELAWARE CORPORATION
(SELLER)
AND
JTM ACQUISITION CORP.
A DELAWARE CORPORATION
(PURCHASER)
AUGUST 31, 2006
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TABLE OF CONTENTS
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ARTICLE I SALE AND TRANSFER OF
SHARES...................................... 1
1.1 Sale and Purchase of the
Shares................................... 1
1.2 Purchase
Price....................................................
2
1.3 Purchase Price
Adjustment......................................... 3
1.4 Objections; Dispute
Resolution.................................... 4
ARTICLE II
CLOSING.........................................................
5
2.1 Closing
Date......................................................
5
2.2 Closing
Transactions..............................................
5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF STONEPATH AND
SELLER......... 8
3.1 Organization, Qualification
and Status............................ 9
3.2 Corporate Instruments and
Records................................. 9
3.3
Capitalization....................................................
9
3.4 Ownership of
Shares............................................... 10
3.5 No
Subsidiary.....................................................
10
3.6 Authority of
Stonepath............................................ 10
3.7 No
Violation......................................................
11
3.8 Financial
Statements..............................................
11
3.9 Absence of Undisclosed and
Contingent Liabilities................. 12
3.10
No Adverse
Changes................................................
12
3.11
Guarantees........................................................
14
3.12
Tax
Matters.......................................................
14
3.13
Litigation........................................................
16
3.14
Real
Property.....................................................
17
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3.15
Owned Tangible
Personal Property.................................. 17
3.16
Condition of Buildings
and Tangible Personal Property............. 17
3.17
Accounts and Notes
Receivable..................................... 18
3.18
Material
Contracts................................................
18
3.19
Inventories.......................................................
20
3.20
Relationship With
Related Persons................................. 20
3.21
Banking
Matters...................................................
20
3.22
Labor and Employment
Matters...................................... 20
3.23
Termination of
Business Relationships............................. 21
3.24
Customers.........................................................
22
3.25
Product and Service
Warranties.................................... 22
3.26
Insurance.........................................................
22
3.27
Stonepath SEC
Documents........................................... 22
3.28
Compliance with
Laws.............................................. 23
3.29
Licenses and
Permits.............................................. 23
3.30
Environmental
Matters............................................. 23
3.31
Intellectual Property
Matters..................................... 24
3.32
Absence of Certain
Business Practices............................. 24
3.33
Brokers or
Finders................................................
25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
PURCHASER..................... 25
4.1 Organization and
Qualification.................................... 25
4.2 Corporate Instruments and
Records................................. 25
4.3 Authorization; Valid and
Binding Obligation....................... 25
4.4 Litigation;
Orders................................................ 26
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4.5 No
Violations.....................................................
26
4.6 Investment
Intent.................................................
27
4.7 Brokers or
Finders................................................
27
4.8 Available
Funds...................................................
27
ARTICLE V COVENANTS OF THE PARTIES PENDING
CLOSING......................... 27
5.1 Access to
Information.............................................
27
5.2 Interim
Operations................................................
28
5.3 Documents at
Closing.............................................. 30
5.4 Notification of Certain
Matters................................... 30
5.5
Filings...........................................................
30
5.6 Satisfaction of Conditions;
Cooperation; Further Assurances....... 30
5.7 Further Mutual
Covenants.......................................... 31
5.8 Employees and
Benefits............................................ 31
5.9 Delivery of Financial
Statements.................................. 32
ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
PURCHASER............ 32
6.1 Accuracy of Representations
and Warranties; Company and Stonepath
Performance....................................................
32
6.2 No Adverse
Change.................................................
32
6.3 No Injunction;
Consents........................................... 32
6.4 Deliveries by Seller and
Stonepath................................ 32
6.5 Uniform Commercial Code
Searches.................................. 33
6.6 Completion of Purchaser's
Financing............................... 33
6.7 Bank
Indebtedness.................................................
33
6.8 Release of GTS
Obligation......................................... 33
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6.9 Board and Stockholder
Authorizations.............................. 33
6.10
Release by
Laurus.................................................
33
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF SELLER AND
STONEPATH.......... 33
7.1 Accuracy of Representations
and Warranties; Purchaser
Performance....................................................
33
7.2 No Injunction;
Consents........................................... 34
7.3 Deliveries by
Purchaser........................................... 34
7.4 Consents and
Proceedings.......................................... 34
7.5 Fairness
Opinion..................................................
34
7.6 Consent of
Laurus.................................................
34
7.7 Release of GTS
Obligation......................................... 34
ARTICLE VIII
TERMINATION...................................................
35
8.1 Termination
Events................................................ 35
8.2 Automatic
Termination.............................................
35
8.3 Effect of
Termination.............................................
35
8.4 Extension;
Waiver.................................................
36
ARTICLE IX INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND
CERTAIN
COVENANTS.......................................................
36
9.1 Indemnification by
Stonepath...................................... 36
9.2 Indemnification by
Purchaser...................................... 37
9.3 Expiration of
Representations, Warranties and Covenants........... 37
9.4 No Implied
Representations........................................
38
9.5 Indemnification
Claims............................................ 38
9.6 Defense of Third Party
Actions.................................... 38
9.7 No Right of Contribution or
Claim; Subrogation.................... 39
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9.8
Exclusivity.......................................................
40
ARTICLE X ADDITIONAL AGREEMENTS OF THE
PARTIES............................. 40
10.1 Prohibition on Trading in
Stonepath Stock......................... 40
10.2
Non Solicitation of
Other Offers.................................. 40
10.3
Confidentiality...................................................
41
10.4
Injunctive
Relief.................................................
42
10.5
Further Acts and
Assurances....................................... 43
10.6
Public
Announcements..............................................
43
10.7
Tax
Matters.......................................................
44
ARTICLE XI
MISCELLANEOUS...................................................
46
11.1
Definitions.......................................................
46
11.2
Cumulative Remedies;
Waiver....................................... 54
11.3
Notices...........................................................
54
11.4
Entire Agreement;
Assignment...................................... 55
11.5
Binding Effect;
Benefit........................................... 56
11.6
Headings..........................................................
56
11.7
Counterparts......................................................
56
11.8
Governing
Law.....................................................
56
11.9
Severability......................................................
56
11.10
Expenses..........................................................
56
11.11 Amendment
and Modification........................................
57
11.12 Release
and Discharge.............................................
57
11.13
Supplementation of Schedules......................................
57
11.14 Time of
Essence...................................................
57
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11.15
Construction......................................................
58
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<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), made and entered
into
this 31st day of August, 2006, by and among Stonepath Logistics
International
Services, Inc., a Delaware corporation, ("Seller"), a wholly owned
subsidiary of
Stonepath Group, Inc., a Delaware corporation ("Stonepath"), and
JTM Acquisition
Corp., a Delaware corporation (the "Purchaser"). Defined terms used
herein shall
have the meanings set forth in Section 11.1 of this Agreement.
Purchaser, Seller
and Stonepath are each referred to individually herein as a
"Party," and
collectively as the "Parties."
WITNESSETH:
WHEREAS, Stonepath owns beneficially and of record 100% of the
issued
and outstanding capital stock of Seller and Seller owns
beneficially and of
record 100% of the issued and outstanding capital stock of
Stonepath Logistics
International Services, Inc., a Washington corporation ("Company"),
consisting
of 143,250 shares of common stock, no par value (the "Shares");
WHEREAS, Stonepath and Seller desire Seller to sell, and
Purchaser
desires to purchase, all of the Shares for the consideration and on
the terms
set forth herein; and
NOW,
THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements set forth in this Agreement and
other good and
valuable consideration, the receipt and sufficiency of which are
hereby
acknowledged, and intending to be legally bound hereby, the Parties
hereto agree
as follows:
ARTICLE I
SALE AND TRANSFER OF SHARES
1.1 SALE AND PURCHASE
OF THE SHARES.
In reliance upon the representations, warranties and covenants
contained in this Agreement as of the date hereof and on the date
of the closing
of the transactions described in this Agreement (the "Closing"),
the Purchaser
agrees to purchase the Shares from Seller, and Seller agrees to
sell, transfer,
convey, assign and deliver the Shares to the Purchaser, subject to
and on the
terms and conditions set forth in this Agreement, such sale,
transfer,
conveyance, assignment and delivery of the Shares causing the
entire right,
title and interest in and to the Shares to be transferred
beneficially and of
record to Purchaser, free and clear of any Encumbrances or Rights
of any kind or
nature whatsoever except as set forth in this Agreement; and at
such time the
Shares will be fully paid and non-assessable. At the Closing,
Stonepath will
deliver to the Purchaser certificates evidencing the Shares duly
endorsed in
blank or with stock powers duly executed by Seller. In
consideration thereof,
Purchaser shall pay and deliver to Seller the purchase price for
the Shares set
forth in and in accordance with Section 1.2.
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1.2 PURCHASE
PRICE.
(a) The purchase price for the Shares shall be Seventeen Million
Eight
Hundred Fifty Thousand Dollars ($17,850,000) in purchase
consideration, all
payable in accordance with and subject to adjustment pursuant to
the further
provisions of this Section 1.2 and Sections 1.3 and 1.4 (the
"Purchase Price").
(b) Purchaser shall pay the Purchase Price to Seller as
follows:
(1) Twelve Million, Two Hundred Thirty-Seven Thousand, Six
Hundred Seventy-Seven Dollars ($12,237,677) (the "Cash Payment
Amount")
shall be paid in immediately available funds to Seller at the
Closing;
(2) Four Million, One Hundred Six Thousand, Three Hundred
Seventy
Dollars ($4,106,370), representing the entire present and
future
liabilities due from Stonepath and Seller to the former
shareholders of
Global Transportation Services, Inc. ("Global") for all
earn-out
obligations from calendar year 2005 through 2007, pursuant to that
certain
Stock Purchase Agreement by and among Stonepath, Seller, Global and
Jason
Totah as Shareholders' Agent, dated March 5, 2002 (the "GTS
Obligation")
shall be credited
toward the Purchase Price, which GTS Obligation will be
assumed and paid by Company following Closing;
(3) One Million, One Hundred Sixty-Five Thousand, Nine Hundred
Eleven Dollars ($1,165,911), representing (i) the entire present
liability
due
to the former shareholders of Quantum Logistics, Inc. ("Quantum"),
plus
(ii)
the entire liability of the Company due to the former shareholders
of
Quantum from January 1, 2006 through the Closing Date calculated on
a
prorata basis, plus (iii) the entire potential contingent liability
to the
former shareholders of Quantum for calendar years 2007, 2008 and
2009, all
pursuant to that certain Asset Purchase Agreement by and between
Company
and
Quantum, dated as of June 15, 2004 (the "Quantum Obligation") shall
be
credited toward the Purchase Price, which Quantum Obligation shall
be
settled by Company following Closing; and
(4) Three Hundred Forty Thousand, Forty-Two Dollars ($340,042)
(the
"Lease Holdback Amount"), representing the aggregate monthly
payments
for
period from the Closing Date through December 31, 2007 under the
Lease
Agreement between Port of Seattle and the Company dated May 26,
2005 (the
"Port of Seattle Lease"), will be deposited by Purchaser with
an
independent escrow agent agreeable to the Purchaser and Stonepath
(the
"Escrow Agent"), and the Escrow Agent will pay directly to the Port
of
Seattle the monthly amount, if not otherwise paid when due for the
duration
of
such period. At such point that no further rent payments are due
from
the
Company to the Port of Seattle, and the Company is irrevocably
released
from
all obligations under the Port of Seattle Lease, the Escrow Agent
will
pay
any remaining balance of the Lease Holdback Amount to
Stonepath.
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1.3 PURCHASE PRICE
ADJUSTMENT.
(a) Promptly following the Closing Date (but in any event within
forty
five (45) days after the Closing Date), Stonepath shall prepare and
deliver to
Purchaser a certification (the "Closing Certificate"). The Closing
Certificate
shall include:
(1) A balance sheet of the Company as of September 30, 2006
(the
"Closing Date Balance Sheet");
(2) An identification of the Working Capital set forth in the
Closing Date Balance Sheet.
(3) Copies of all supplementary documents, work papers and
other
data
relating to the Closing Certificate; and
(4) Such other supplementary evidence as Purchaser may
reasonably
request either before or after the delivery of the Closing
Certificate.
(b) In the event that the Company's Working Capital on the
Closing
Date Balance Sheet, calculated in a manner consistent with the
calculations set
forth on SCHEDULE 1.3(B) hereto, is less than $7,615,502, which is
the agreed
working capital amount of the Company as of May 31, 2006, as
reflected on
SCHEDULE 1.3(B) (the "Minimum Working Capital Amount"), Stonepath
will pay or
may cause Seller to pay to Purchaser dollar-for-dollar in
immediately available
funds the amount of such deficit to Purchaser within five (5)
business days
after the end of the Response Period or, in the event Purchaser has
delivered to
Stonepath a timely Objection Notice under Section 1.4, within five
(5) business
days after the final determination of the Independent Accountants
pursuant to
Section 1.4(c).
(c) In the event that the Company's Working Capital on the
Closing
Date Balance Sheet is greater than the Minimum Working Capital
Amount, the
Purchaser shall pay to Seller dollar-for-dollar in immediately
available funds
the amount of such surplus within five (5) business days after the
end of the
Response Period or, in the event Purchaser has delivered to
Stonepath a timely
Objection Notice under Section 1.4, within five (5) business days
after the
final determination of the Independent Accountants pursuant to
Section 1.4(c).
(d) To the extent determinable, all non-trade intercompany
transactions between the Company and the Seller shall be settled
prior to or at
the Closing. After the Closing Date, any trade transactions between
the Company
and Seller and their Affiliates shall be settled in the Ordinary
Course of
Business as routine receivables and payables. If the intercompany
indebtedness
is not settled within 90 days after the Closing Date, each of the
Company, on
the one hand, and Seller, on the other hand, agrees to an offset
and net
reconciliation of amounts owed from one to the other (including
amounts owed to
or by each Affiliate of each of them). The parties agree post
Closing there will
be no oral or other intercompany transactions or debts between them
except those
specified in written agreements executed at or after Closing.
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1.4 OBJECTIONS;
DISPUTE RESOLUTION.
(a) If Purchaser, acting reasonably and in good faith, concludes
that
any matter reported in the Closing Certificate is not accurate,
Purchaser shall,
within forty-five (45) days after its receipt of the Closing
Certificate (the
"Response Period"), deliver to Stonepath a written statement (the
"Objection
Notice"): (i) stating the specific reason(s) for its objection(s)
to each of any
discrepancies believed to exist, and (ii) the alternate
calculations offered by
the Purchaser along with supporting data. If no Objection Notice is
given within
the Response Period, then the calculations set forth in the Closing
Certificate
shall be controlling for all purposes of this Agreement and
Stonepath shall pay
the Purchaser the amount, if any, which it is obligated to pay in
accordance
with Section 1.3(b) of this Agreement and the Purchaser shall pay
Stonepath the
amount, if any, which it is obligated to pay in accordance with
Section 1.3(c)
of this Agreement.
(b) The Purchaser and Stonepath shall use good faith efforts to
jointly resolve any properly noticed objections and discrepancies
within fifteen
(15) days of the receipt by Stonepath of an Objection Notice, which
resolution,
if achieved, shall be fully and completely binding upon all Parties
to this
Agreement and not subject to further review, appeal, or
dispute.
(c) If Purchaser and Stonepath are unable to resolve the
objections
and discrepancies to their mutual satisfaction within such fifteen
(15) day
period, then the matter shall be submitted to an accounting firm
mutually
acceptable to Purchaser and Stonepath (the "Independent
Accountants"). If
Purchaser and Stonepath cannot agree on such an accounting firm
within 10 days
following the end of the fifteen day resolution period, the
Independent
Accountants shall be a nationally recognized certified public
accounting firm,
to be selected by the presiding judge of the King County Superior
Court, by
motion of either Purchaser or Stonepath. In submitting a dispute to
the
Independent Accountants, the Purchaser and Stonepath shall
concurrently furnish,
at their own expense, to the Independent Accountants and the other
Party such
documents and information as the Independent Accountants may
request that are in
their possession or control or in the possession or control of
their Affiliates
and their accountants. Each Party may also furnish to the
Independent
Accountants such other information and documents as it deems
relevant, with
copies of such submission and all such documents and information
being
concurrently given to the other Party. Neither Party shall have or
conduct any
communication, either written or oral, with the Independent
Accountants without
the other Party either being present or receiving a concurrent copy
of any
written communication. The Independent Accountants may conduct a
conference
concerning the objections and disagreements between the Purchaser
and Stonepath,
at which conference each Party shall have the right to (i) present
its
documents, materials and other evidence (previously provided to the
Independent
Accountants and the other Party), and (ii) have present its or
their advisors,
accountants and/or counsel. The Independent Accountants shall
promptly (but not
to exceed thirty (30) days from the date of engagement of the
Independent
Accountants) render a decision on the issues presented, and such
decision shall
be final and binding on all of the Parties to this Agreement.
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(d) The fees, costs and expenses of the Independent Accountants
in
performing their duties with respect to an engagement under Section
1.4(c) shall
be borne equally by the Purchaser and Stonepath.
(e) In connection with the preparation and review of the Closing
Date
Balance Sheet and all other matters arising under the Closing
Certificate, each
Party shall afford the other Party, its accountants and their
representatives
complete access to the books, records, personnel and facilities of
or pertaining
to the Company in its possession.
ARTICLE II
CLOSING
2.1 CLOSING DATE.
The Closing of the purchase and sale of the Shares shall take place
at
the offices of Stonepath's counsel at 3600 One Union Square, 600
University
Street, Seattle, Washington, as soon as practicable after the
conditions to the
Closing set forth in Articles VI and VII have been satisfied. The
date of the
Closing is hereinafter referred to as the "Closing Date." Subject
to the
provisions of Article VIII, failure to consummate the purchase and
sale provided
for in this Agreement on the date and time and at the place
determined pursuant
to this Section 2.1 will not result in the termination of this
Agreement and
will not relieve any Party of any obligation under this
Agreement.
2.2 CLOSING
TRANSACTIONS.
At the Closing, the following transactions shall occur, all of
such
transactions being deemed to occur simultaneously:
(a) Stonepath and Seller shall deliver to the Purchaser the
following:
(1) A certificate or certificates representing all of the
Shares
duly
endorsed by Seller in blank or accompanied by assignments
separate
from
the certificate duly endorsed in blank;
(2) A certificate of Stonepath to the effect that: (i) all
representations and warranties made by Stonepath under this
Agreement are
true
and correct in all material respects as of the Closing Date, as
though
originally given to Purchaser on the Closing Date; (ii) the Seller
and
Stonepath have performed all obligations required to be performed
by them
under this Agreement prior to the Closing Date; and (iii) the
conditions
precedent identified in Article VI have been satisfied or waived
in
writing;
(3) A certificate of good standing of the Secretary of State of
Washington, dated within fifteen (15) days of the Closing Date, to
the
effect that the Company is in good standing under the laws of such
state;
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(4) An incumbency certificate signed by all of the officers of
the
Company dated at or about the Closing Date; (5) A resignation
letter
from
Jeannie Sargent to Stonepath (countersigned and agreed to by
Stonepath) pursuant to which her employment agreement with
Stonepath is
terminated, including all confidentiality, non-compete and
other
obligations that may inhibit or otherwise interfere with her
employment
with
the Company, with such letter to be in a form and substance
satisfactory to Purchaser;
(6) An opinion of Stonepath's counsel in form and substance
satisfactory to the Purchaser, acting reasonably;
(7) Evidence satisfactory to the Purchaser that the Company has
been
released from liability for all Bank Indebtedness;
(8) A non-foreign person affidavit as required by Section 1445
of
the
Code from Seller;
(9) A transition services agreement to be executed by Stonepath
and
the Company;
(10) A non-exclusive agency agreement to be executed by
Stonepath
and
the Company;
(11) Assumption of all indebtedness/liability by Stonepath and
indemnity of Company of any claims arising from the Company's
purchase of
Customs Services International, Inc. ("CSI");
(12) Consent to the transactions contemplated hereby of Laurus
Master Fund, Ltd. ("Laurus") and release by Laurus of the Company
of all
liabilities, guarantees or any other obligations and release of
any
security interests against or in assets of the Company;
(13) Such other documents, agreements, consents, and approvals
as
are
required under this Agreement or as may be reasonably requested
by
Purchaser.
(14) Lease
Assignment, Assumption and Landlord Consents for each
of
the four real property leases listed on Schedule 3.6.
(15) Assignment or Power of Attorney transferring to Purchaser
the
trademarks and tradenames "Global Transportation Services" and
"Global
Container Line."
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(16) An agreement for the Purchaser to purchase or lease from
Stonepath such hardware and software necessary to implement and run
the
Cargowise system at net book value or on current lease terms,
as
applicable, at Purchaser's option.
(17) Release of the Company from the GTS Obligation executed by
the
GTS Obligation Holders, delivered at or prior to Closing.
(18) Release by the Port of Seattle of the Company of any
liability for rent or other obligations under the Port of Seattle
Lease
after December 31, 2007.
(19) Consent of the Board of Directors of Seller to the
transactions contemplated hereby.
(b) Purchaser will deliver to Seller and Stonepath the
following:
(1) Purchaser shall deliver or shall cause to be delivered to
Seller the Cash Payment Amount by wire transfer of immediately
available
funds to the bank account designated in writing by Stonepath at
least three
(3)
days prior to Closing;
(2) Certificates of the Purchaser's Chief Executive Officer to
the
effect that: (i) all representations and warranties of the
Purchaser
under this Agreement are true and correct in all material respects
as of
the
Closing Date, as though originally given to Stonepath on the
Closing
Date; (ii) the Purchaser has performed all obligations required to
be
performed by it under this Agreement prior the Closing Date; and
(iii) the
conditions precedent identified in Article VII have been satisfied
or
waived;
(3) Certificate of existence/authorization of the Secretary of
the State of
Washington, dated within fifteen (15) days of the Closing
Date, that the Purchaser is in existence and is duly authorized
under the
laws
of said state;
(4) Certified resolutions of the Purchaser's board of
directors,
dated at or about the Closing Date, authorizing the
transactions
contemplated under this Agreement;
(5) Incumbency certificates signed by all of the officers of
the
Purchaser dated at or about the Closing Date;
(6)
Opinion of the Purchaser's counsel in form and substance
satisfactory to Stonepath, acting reasonably;
(7) A transition services agreement to be executed by Stonepath
and
the Company;
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(8) A non-exclusive agency agreement to be executed by
Stonepath
and
the Company;
(9) An agreement for the Purchaser to purchase or lease from
Stonepath such hardware and software necessary to implement and run
the
Cargowise system at net book value or on current lease terms,
as
applicable, at Purchaser's option;
(10) General releases of Stonepath and Seller from liability
executed by certain management of Stonepath listed on Annex
2.2.;
(11) Releases of Stonepath and Seller from the GTS Obligation
and
Quantum Obligation executed by the GTS Obligation Holders and the
Quantum
Obligation Holders in a form satisfactory to Stonepath;
(12) Certification by
Company Branch Managers and Certification
and
indemnities by Jason Totah, and Sarah Dorscht in favor of
Stonepath
that
the representations, warranties of Stonepath in this Agreement
and
Stonepath Schedules are true, correct and complete in a form
acceptable to
Stonepath;
(13) Waiver by Jeannie Sargent addressed to Stonepath of all
rights to severance payments under her employment agreement with
Stonepath,
including, without limitation, pursuant to Section 6.1(d) thereof,
with
such
waiver to be in a form acceptable to Stonepath;
(14) Consent of the Board of Directors of Purchaser to the
transactions contemplated hereby.
(15) Such additional documents, agreements, consents, and
approvals as are required under this Agreement or as may be
reasonably
requested by Stonepath.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STONEPATH AND SELLER
As a
material inducement to Purchaser to execute this Agreement and
the Ancillary Agreements and consummate the transactions
contemplated hereby and
thereby, Stonepath and Seller severally, but not jointly, hereby
represent to
the Purchaser that each of the following representations and
warranties are true
and correct as of the date of this Agreement and will be true and
correct as of
the Closing Date, except as otherwise set forth in written
disclosure schedules
(the "Stonepath's Schedules") delivered to Purchaser pursuant to
this Article
III, a copy of which is attached to this Agreement as Exhibit B;
provided, that
except where another specific date is specified in this Article
III, the
following representations and warranties only speak to matters
occurring after
March 5, 2002, and neither Seller nor Stonepath will have liability
hereunder
for any matters that occurred prior
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<PAGE>
to such date. Stonepath's Schedules are numbered to correspond to
the various
sections of this Article III setting forth certain exceptions to
the
representations and warranties contained in this Article III and
certain other
information required by this Agreement; provided, however, that any
information
disclosed in any section of Stonepath's Schedules shall be deemed
to be
disclosed and incorporated in any other part of Stonepath's
Schedules, and shall
modify and except the representations and warranties applicable
thereto, where
such incorporation is reasonable under the circumstances. Stonepath
and Seller
will assign to Purchaser any and all representations and warranties
and rights
of action of Stonepath concerning the Company against the former
shareholders of
Global Transportation Services, Inc. for matters prior to March 5,
2002.
3.1 ORGANIZATION,
QUALIFICATION AND STATUS.
(a) The Company is a corporation duly incorporated and
organized,
validly existing and authorized under the laws of the State of
Washington. The
Company has full corporate power and authority to own, lease and
use its
properties and to carry on its business as presently conducted. The
Company is
duly qualified or licensed to do business and is in good standing
as a foreign
corporation in each of the jurisdictions in which the nature of its
business or
the character of the properties and assets which it owns or leases
makes such
qualification or licensing necessary. Each jurisdiction in which
the Company is
qualified or licensed to do business as a foreign corporation is
set forth in
Section 3.1(a) of Stonepath's Schedules.
(b) The Company has not, since March 5, 2002, changed its name,
been
the surviving entity of a merger, consolidation or other
reorganization, or
acquired all or substantially all of the assets of any person or
entity. Section
3.1(b) of Stonepath's Schedules sets forth all fictitious names
under which the
Company or such predecessors have conducted business.
3.2 CORPORATE
INSTRUMENTS AND RECORDS.
The copies of the articles of incorporation and bylaws of the
Company
each certified by the Secretary of the Company and heretofore
furnished to
Purchaser, are true, correct and complete and each include all
amendments to the
date hereof. The corporate resolutions of the Company as provided
to Purchaser
contain a true, complete and correct record of all corporate action
taken by the
Company's board of directors or shareholders between March 2, 2002
and the date
hereof. The stock certificate books and ledgers of the Company, as
made
available to Purchaser for inspection, are true, correct and
complete, and
accurately reflect, at the date hereof, the ownership of the
outstanding capital
stock of the Company by Seller.
3.3
CAPITALIZATION.
The authorized capital stock of the Company consists of 250,000
shares
of common stock, no par value, of which 143,250 shares are issued
and
outstanding and
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constitute the Shares. All of the Shares are held beneficially and
of record by
Seller, and no shares are held in the treasury of the Company. All
of the Shares
are validly issued, fully paid and non-assessable and entitled to
vote at
shareholder meetings, and none of the Shares has been issued in
violation of any
preemptive rights of shareholders or transferred in violation of
any transfer
restrictions relating thereto. None of the Shares are subject to
any preemptive
right created by statute, the Company's amended and restated
articles of
incorporation or amended and restated bylaws, or by contract. There
are no
outstanding options, warrants, convertible securities, subscription
rights,
puts, calls, unsatisfied preemptive rights or other rights of any
nature to
purchase or otherwise receive, or to require the Company to
purchase, redeem or
acquire, any shares of the capital stock or other securities of the
Company and
the Company has not issued security of any kind convertible into
such capital
stock. None of the shares of capital stock or other securities of
the Company
was issued in violation of the Securities Act, state securities
laws, or any
other legal requirement.
3.4 OWNERSHIP OF
SHARES.
Seller owns and holds, beneficially and of record, the entire
right,
title, and interest in and to the Shares, free and clear of all
Rights and
Encumbrances. Seller has full power and authority to vote the
Shares owned by it
and to approve the transactions contemplated by this Agreement.
Except as set
forth in Stonepath's Schedules, Seller has the full power and
authority to vote,
transfer and dispose of the Shares owned by it, free and clear of
any Right or
Encumbrance of any kind or nature whatsoever other than
restrictions under the
Securities Act and applicable state securities laws. At the
Closing, the
Purchaser will acquire good title to the Shares, free and clear of
all Rights
and Encumbrances. Other than the transactions contemplated by this
Agreement,
there is no outstanding vote, plan, pending proposal, or other
right of any
Person to acquire, or to cause the redemption of, the Shares or to
effect the
merger or consolidation of the Company with or into any other
Person.
3.5 NO SUBSIDIARY.
Except as set forth in Stonepath's Schedules, the Company has
not
created any Subsidiary or any ownership interest in any other
entity and has no
right or obligation to acquire any securities of or ownership
interests in any
other person or entity.
3.6 AUTHORITY OF
STONEPATH.
Stonepath and Seller have the full capacity, power and authority
to
enter into this Agreement and the Ancillary Agreements to which
they are parties
and to consummate the transactions contemplated hereby and thereby
and to comply
with the terms, conditions and provisions hereof and thereof. This
Agreement and
the Ancillary Agreements to which Stonepath and Seller are parties
have been
duly authorized, executed and delivered by Stonepath and Seller and
are the
legal, valid and binding obligations of Stonepath and Seller,
enforceable
against Stonepath and Seller in accordance with their terms. Except
as set forth
in Stonepath's Schedules, no notices to, declaration, filing or
registration
with, approvals or
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<PAGE>
consents of, or assignments by, any Persons (including Governmental
Authorities
are necessary to be made or obtained by the Company, Seller or
Stonepath in
connection with the execution, delivery or performance by the
Company, Stonepath
and Seller of this Agreement.
3.7 NO VIOLATION.
The Company is not in default under or in violation of any
provision
of its articles of incorporation or bylaws. Except as set forth on
Stonepath's
Schedules, the Company is not in Material default or Material
breach of any
agreement, understanding, arrangement, indenture, contract, lease,
sublease,
license, sublicense, franchise, loan agreement, note, restriction,
obligation or
liability to which it is a party or by which it is bound or to
which it or its
assets are subject (individually, an "Instrument" and collectively,
the
"Instruments"). Except as set forth in Stonepath's Schedules,
neither the
execution and delivery of this Agreement or the Ancillary
Agreements by Seller
and Stonepath, nor the consummation of the transactions
contemplated hereby or
thereby, nor compliance with the terms hereof or thereof, will: (i)
conflict
with or result in a Material breach of any of the terms, conditions
or
provisions of the amended and restated articles of incorporation or
amended and
restated bylaws of the Company; (ii) violate, conflict with or
result in a
Material breach of or Material default under any of the terms,
conditions or
provisions of any Instrument; (iii) accelerate or give to others
any interests
or rights, including rights of acceleration, termination,
modification or
cancellation, under any Instrument; (iv) result in the creation of
any
Encumbrance on the assets, capital stock or properties of the
Company; (v)
conflict with, violate or result in a Material breach of or
constitute a
Material default under, any Applicable Law to which the Company or
any of its
assets or properties is subject; (vi) require the Company to give
notice to, or
obtain an authorization, approval, order, license, franchise,
declaration or
consent of, or make a filing with, any Governmental Authority or
any other
Person; or (vii) affect the validity, enforceability or
effectiveness of any
Material Permit.
3.8 FINANCIAL
STATEMENTS.
(a) Annex 3.8(a) to Stonepath's Schedules contains internal
summary
income statements and balance sheets that have been prepared in
accordance with
GAAP and present fairly, in all material respects the financial
position and
results of operations of the Company as of and for the years ended
December 31,
2005 and 2004 and as of and for the six month period ended June 30,
2006, with
the exception of certain transactions with Stonepath which are
either omitted or
are eliminated in consolidation (collectively, the Financial
Statements). The
Material transactions omitted are federal, state and local income
taxes; cash
transfers between Stonepath and the Company under Stonepath's cash
clearing
policies; goodwill, intangible assets and earn-out accruals related
to the
acquisition by Stonepath of the Company; certain technology fixed
assets,
software licenses and insurance polices relating to the Company.
Transactions
for corporate services allocated from Stonepath and recorded by the
Company from
Stonepath and eliminated upon Stonepath's consolidation include a
corporate
technology fee and corporate management fee. The books
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<PAGE>
and records of the Company from which the Financial Statements were
prepared
provide reasonable assurance that the transactions and activities
are properly
recorded.
(b) Stonepath and Seller maintain a system of internal
accounting
controls sufficient to provide reasonable assurance that Company
transactions
are recorded as necessary to permit preparation of Stonepath's
publicly filed
financial statements in accordance with GAAP.
(c) The Company has not engaged in any Material transaction,
maintained any bank account, or used any corporate funds except for
the
transactions, bank accounts or funds which have been and are
reflected in the
Company's books and records.
3.9 ABSENCE OF
UNDISCLOSED AND CONTINGENT LIABILITIES.
(a) Except as set forth in Stonepath's Schedules, the Company has
no
Material Liabilities except (i) Liabilities which are reflected in
the Financial
Statements or the publicly filed financial statements of Stonepath,
(ii)
Liabilities incurred in the Ordinary Course of Business since
December 31, 2005,
and (iii) Liabilities arising under the Material Contracts made
available to
Purchaser or which are not required to be disclosed on Stonepath's
Schedules or
financial statements and which have arisen in the Ordinary Course
of Business.
(b) Except as set forth in Stonepath's Schedules, none of the
Liabilities described in this Section 3.9(a) relates to any
Material breach of
contract, Material breach of warranty, Material tort, Material
infringement or
violation of law, or arose out of any action, order, writ,
injunction, judgment,
or decree outstanding or claim, suit, litigation, proceeding,
investigation or
dispute.
(c) The reserves for Liabilities set forth on the balance
sheets
included in the Financial Statements are reasonable.
3.10 NO ADVERSE CHANGES.
Since May 31, 2006, except as set forth in Stonepath's Schedules,
the
Company has operated in the Ordinary Course of Business and has
not:
(a) Sold, leased, assigned or otherwise transferred any
Material
properties or assets, or disposed of or permitted to lapse any
Material rights
in any Permit or Intellectual Property owned or used by the
Company, other than
in the Ordinary Course of Business, or organized any new business
entity or
acquired any equity securities, assets, properties, or business of
any Person or
any equity or ownership interest in any business or merged with or
into or
consolidated with any other Person;
(b) Suffered, sustained or incurred any loss or waived or released
any
Material right or claim, except in the Ordinary Course of
Business;
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<PAGE>
(c) Suffered, sustained or incurred any material damage,
destruction
or casualty loss to any material properties or assets, whether or
not covered by
insurance;
(d) Engaged in any transaction not in the Ordinary Course of
Business;
(e) Made any capital expenditure in excess of $25,000 individually
or
$100,000 in the aggregate;
(f) Subjected any of its properties or assets to any Material
Encumbrance, whether or not in the Ordinary Course of Business;
(g) Issued any note, bond or other debt security or created,
incurred
or assumed any indebtedness for borrowed money or capitalized lease
obligation,
or otherwise incurred any Material Liability, except current
Liabilities
incurred in the Ordinary Course of Business;
(h) Discharged or satisfied any Encumbrances in excess of $25,000
or
paid any Material Liability, other than current Liabilities shown
on the most
recent balance sheet included in the Financial Statements, and
current
Liabilities incurred in the Ordinary Course of Business since May
31, 2006;
(i) Directly or indirectly redeemed, purchased or otherwise
acquired
any shares of any class or series of the Company's capital
stock;
(j) Increased the salary, wage or other compensation or level
of
benefits payable or to become payable by the Company to any of its
employees,
officers, or directors, including, without limitation, granting,
paying or
accruing any bonus, incentive compensation, service award, or other
similar
benefit, other than any wage increases or raises to non-officer or
non-director
employees in the Ordinary Course of Business;
(k) Loaned money to any Person or guaranteed any loan to or
Liability
of any Person, whether or not in the Ordinary Course of
Business;
(l) Amended or terminated any Material Contract, except in the
Ordinary Course of Business;
(m) Committed a Material default under any Material Contract,
(n) Made a Material change in accounting methods or practices
(including, without limitation, any change in depreciation,
amortization or cost
accounting policies or rates) or reevaluated any of the Company's
assets;
(o) Suffered, sustained or incurred any Material Adverse
Change;
(p) Incurred any termination of any Material Customer account
("Material Customer" for this section meaning a customer who paid
the Company
more than $400,000
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<PAGE>
since January 1, 2005) or received notice from any Material
Customer that such
Material Customer intended to terminate its account or that
otherwise gave the
Company actual reason to believe that such Material Customer was
terminating;
(q) Delayed, postponed, or failed to pay any Material Liability
outside of the Ordinary Course of Business;
(r) Entered into any written employment contract or collective
bargaining agreement, written or oral, or modified the terms of any
such
existing contract or agreement or adopted, amended, modified or
terminated any
benefit plan for the benefit of any of the Companies' directors,
officers or
employees;
(s) Made any change or amendment in its amended and restated
articles
of incorporation, amended and restated bylaws, or other governing
instruments;
(t) Issued or sold any securities; acquired, directly or
indirectly,
by redemption or otherwise, any securities; reclassified, split-up
or otherwise
changed any such equity security; or granted or entered into any
options,
warrants, calls or commitments of any kind with respect
thereto;
(u) Incurred any Material Liability other than in the Ordinary
Course
of Business;
(v) Disposed of, or permitted to lapse, any Intellectual
Property
rights or disclosed any trade secret, process or know-how to any
Person not an
employee other than in the Ordinary Course of Business; and/or
(w) Entered into any contract to do any of the foregoing.
3.11 GUARANTEES.
Except as set forth in Stonepath's Schedules (a) the Company has
not
guaranteed, become surety or contingent obligor for or assumed any
obligation,
debt or dividend of any other Person and (b) No assets of the
Company are or
have been pledged, hypothecated, delivered for safekeeping,
subjected to a
security interest or otherwise provided in any way as security for
payment or
performance of any obligation of a Person other than the
Company.
3.12 TAX MATTERS.
(a) Section 3.12(a) of Stonepath's Schedules sets forth the
following
information with respect to the Company and the Affiliated Group: a
list of (A)
the federal and state income, franchise, business and occupation
and similar Tax
Returns filed by or on behalf of the Company for any taxable
periods ended on or
after December 31, 2002, (B) those federal and state income,
franchise, business
and occupation and similar Tax Returns that have been audited, and
(C) those
federal and state income, franchise, business and occupation
and
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<PAGE>
similar Tax Returns that currently are the subject of an audit. The
Company has
made available to the Purchaser true, correct and complete copies
of all such
Tax Returns and related examination reports, and related statements
of
deficiencies assessed against or agreed to by the Company since
December 31,
2002. Furthermore, the Company will provide to the Purchaser all
other Tax
Returns specifically requested by the Purchaser.
(b) Except as set forth on Section 3.12(b) of Stonepath's
Schedules:
(1) The Company (A) has timely and properly filed or caused to
be
filed all Tax Returns which it is or has been required to file on
or prior
to
the date hereof all such Tax Returns being true and correct and
complete
in
all Material respects (B) has timely paid or caused to be paid in
full
all
Material Taxes (whether or not shown on any Tax Return) which are
or
have
become due and payable, (C) has made or caused to be made all
withholdings of Taxes required to be made by it, and such
withholdings have
either been paid to the appropriate governmental agency or set
aside in
appropriate accounts for such purpose, and (D) has otherwise
satisfied, in
all
Material respects, all applicable laws and agreements with respect
to
the
filing of Tax Returns and the payment of Taxes.
(2) The unpaid Taxes of the Company (A) did not, as of June 30,
2006, exceed by a Material amount the reserve for Tax liability
(rather
than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of
the most
recent balance sheet (rather than in any notes thereto) and (B) do
not
exceed that reserve as adjusted for the passage of time through the
Closing
Date
in accordance with past custom and practice of the Company in
filing
its
Tax Returns.
(3) There is no dispute or claim concerning any Tax Liability
of
the
Company either (A) claimed or raised by any Governmental authority
in
writing or (B) as to which any of the Seller and the directors and
officers
(and
employees responsible for Tax matters) of the Company has
Knowledge
based upon personal contact with any agent of such Governmental
Authority.
No
claim has ever been made in writing by any Governmental Authority
in a
jurisdiction where the Company does not file Tax Returns that it is
or may
be
subject to taxation by that jurisdiction.
(4) The Company is not a party to, is not bound by, and does
not
have
any obligation under any tax sharing, tax indemnity, or similar
agreement.
(5) The Company has not made and will not make a change in
method
of
accounting for a taxable year beginning on or before the Closing
Date,
which would require it to include any adjustment under Section 481
(a) of
the
Internal Revenue Code in taxable income for any taxable year
beginning
on
or
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<PAGE>
after the Closing Date. The Company has not and will not adopt
any
accounting method that has the effect of shifting income from a
pre-Closing
tax
period to a post-Closing tax period.
(6) The Company does not have any Liability for any Taxes of
any
Person other than the Company (A) under Treasury Regulation
Section
1.1502-6 (or any
similar provision of state, local or foreign law), (B) as
a
transferee or successor, (C) by contract, or (D) otherwise.
(7) The Company has not given or been requested in writing to
give
waivers or extensions of any statute of limitations relating to
the
payment of Taxes. There are no Security Interests on any of the
assets of
the
Company that arose in connection with any failure (or alleged
failure)
to
pay any Tax.
(8) The Company has not filed a consent under Section 341(g) of
the
Code concerning collapsible corporations. The Company is not a
party to
any
agreement, contract, arrangement or plan that has resulted or
would
result, separately or in the aggregate, in the payment of (A) any
"excess
parachute payment" within the meaning of Section 280G of the Code
(or any
corresponding provision of state, local or foreign Tax law) or (B)
any
amount that will not be fully deductible as a result of Section
162(m) of
the
Code (or any corresponding provision of state, local or foreign
Tax
law).
(9) The Company has not distributed the stock of another
Person,
or
has had its stock distributed by another Person, in a transaction
that
was purported or
intended to be governed in whole or in part by Section 355
or
Section 361 of the Code.
3.13 LITIGATION.
Except as set forth in Stonepath's Schedules, there are no
actions,
suits or proceedings at law or in equity, or arbitration
proceedings, or claims,
demands or investigations, pending or, to Stonepath's Knowledge,
Threatened (i)
against or involving the Company or any of its officers or
directors (in their
capacity as such), (ii) which seek to enjoin or obtain damages in
respect of the
transactions contemplated by this Agreement, or (iii) which would
prevent the
Company from consummating the transactions contemplated by this
Agreement. To
Stonepath and Seller's Knowledge, there are no state of facts
existing which is
reasonably likely to give rise to any such action, suit,
proceeding, claim,
demand or investigation. To Stonepath's and Seller's Knowledge,
there are no
proceedings pending or Threatened against or involving the Company
by or before
any Governmental Authority or state of facts existing which is
reasonably likely
to give rise to any such proceedings. The Company is not in
violation of any
Injunction.
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<PAGE>
3.14 REAL PROPERTY.
(a) The Company has the right to use all real property necessary
for
the conduct of its business as presently conducted. Schedule 3.14
hereto
identifies all such real property leases (the "Leases"). Except as
set forth in
Schedule 3.14, the Company is not a party to any leases of real
property. True,
correct and complete copies of said Leases and any amendments,
extensions and
renewals thereof have heretofore been delivered by the Company to
Purchaser. The
Company enjoys quiet and undisturbed possession under each of said
leases. The
Company's interest in each of such Leases is free and clear of any
Encumbrances,
is not subject to any deeds of trust, assignments, subleases or
rights of any
third parties created by the Company, other than the lessor
thereof. To
Stonepath's Knowledge, the leased real estate is free and clear of
any zoning or
use or building restriction or any pending, proposed or Threatened
zoning or use
or building restriction which would Materially interfere with the
present or any
intended use by the Company of any of such leased real estate. Said
leases are
valid and binding and in full force and effect, and are not in
Material default
as to the payment of rent or otherwise. The consummation of the
transactions
contemplated by this Agreement will not constitute an event of
default under any
of said leases and the continuation, validity and effectiveness of
such leases
will not be adversely affected by the transactions contemplated by
this
Agreement.
(b) The Company does not own any real property.
3.15 OWNED TANGIBLE PERSONAL PROPERTY.
The Company owns or has the right to use all personal property
necessary for the conduct of its business as presently conducted.
Stonepath's
Schedules set forth a list of the items of tangible personal
property owned by
the Company where the cost of each item individually exceeds
$100,000 (the
"Tangible Personal Property"). Except as set forth on Schedule 3.15
hereto and
except for property disposed of in the Ordinary Course of Business
of the
Company, the Company has all right, title and interest in, and good
title to,
the Tangible Personal Property owned by it is free and clear of any
Encumbrance
of any kind or nature whatsoever. With respect to each item of
Tangible Personal
Property, (i) there are no leases, subleases, licenses, options,
rights, or
concessions or other agreements, written or oral, granting to any
party or
parties the right of use of any portion of such item of Tangible
Personal
Property, (ii) there are no outstanding options or rights of first
refusal in
favor of any other party to purchase any such item of Tangible
Personal Property
or portion thereof or interest therein, and (iii) there are no
parties other
than the Company which are in possession of or are using such
Tangible Personal
Property. Copies of all leases and licenses relating to the
Tangible Personal
Property have heretofore been delivered by the Company to
Purchaser.
3.16 CONDITION OF BUILDINGS AND TANGIBLE PERSONAL PROPERTY.
All of the premises occupied and the items of Tangible Personal
Property are in such operating condition and repair as are
necessary for the
conduct of the Business, subject to normal wear and tear, and
comply in all
Material respects with Applicable Laws,
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including but not limited to zoning, building and fire codes. Each
item of
Tangible Personal Property is adequately covered by one of the
insurance
policies described in Section 3.26 hereto; provided, that such
Tangible Personal
Property will not be covered by such insurance policies following
the Closing
Date.
3.17 ACCOUNTS AND NOTES RECEIVABLE.
To Stonepath's and Seller's Knowledge, each of the accounts
receivable
of the Company included within the Financial Statements constitutes
a valid
claim in the full amount thereof against the debtor charged
therewith on the
books of the Company and has been acquired in the Ordinary Course
of Business.
Except for the receivables set forth in Section 3.17 of Stonepath's
Schedules,
neither Stonepath nor Seller is aware that any account receivable
is not fully
collectible to the extent of the face value thereof (provided,
however, that no
claim may be made for breach of this representation until the
amount of such
undisclosed accounts exceeds the amount of the allowance for the
doubtful
accounts reflected on the most recent balance sheet included in the
Financial
Statements) within the normal collection cycle of the relevant
customer, which
is often beyond the invoice due date. No account debtor has any
valid setoff,
deduction or defense with respect thereto, and no account debtor
has asserted
any such setoff, deduction or defense.
3.18 MATERIAL CONTRACTS.
(a) Section 3.18(a) of Stonepath's Schedules contains a list of all
of
the Material contracts of the Company which shall consist of all
written
agreements, leases, licenses, contracts together with all
amendments,
supplements, assignments or other modifications thereto to which
the Company is
a party, under which the Company is subject to any obligation or
liability, or
by which the Company or any of its assets are bound (collectively,
the "Material
Contracts") including, but not limited to the following (provided,
that
notwithstanding the foregoing, "Material Contracts" do not include
contracts or
agreements (i) that provide for payments of less than $50,000 per
year or (ii)
that are capable of being performed within 30 days):
(1) each arrangement, agreement, contract or understanding that
involves performance of services or delivery of goods or materials
by the
Company after Closing for an annual amount in excess of
$50,000.
(2) each current arrangement, agreement, contract or
understanding that was not entered into in the Ordinary Course of
Business;
(3) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other
arrangement,
agreement, contract or understanding affecting the ownership of,
leasing
of,
title to, use of, or any leasehold or other interest in, any, real
or
personal property (except personal property leases and installment
and
conditional sales agreements having a value per item or aggregate
payments
of
less than $10,000 and with terms of less than
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<PAGE>
one
year) that obligate the Company to pay more than $50,000 per
year
following the Closing;
(4) each collective bargaining agreement or other arrangement,
agreement, contract or understanding with any labor union or other
employee
representative of a group of employees;
(5) each Material joint venture, partnership, and other
arrangement, agreement, contract or understanding (however named)
involving
a
sharing of profits, losses, costs, or liabilities by the Company
with any
other Person except for distribution, commission sales agreements
and the
like
entered into in the Ordinary Course of Business;
(6) each power of attorney that is currently effective and
outstanding, other than those granted in connection with the
Company's
customs matters;
(7) each arrangement, agreement, contract or understanding for
capital expenditures in excess of $50,000 per year after
Closing;
(8) each employment contract, consulting contract, or severance
agreement, (A) to employ or terminate officers and other contracts
with
present or former officers or directors of the Company or (B) that
will
result in the payment by, or the creation of, any Material
Liability of the
Company, Stonepath, or the Purchaser to pay any severance,
termination,
"golden parachute," or other similar payments to any present or
former
personnel following termination of employment or otherwise as a
result of
the
consummation of the transactions contemplated by this Agreement;
and
(9) each current arrangement, agreement, contract or
understanding with a Related Person.
(b) Accurate and complete copies of each Material Contract listed
in
Section 3.18(a) of Stonepath's Schedules have been delivered to
Purchaser, at
Purchaser's request, prior, to the date hereof. All of the Material
Contracts
are valid, binding and enforceable against the respective parties
thereto in
accordance with their respective terms. Neither the Company nor, to
the
Knowledge of Stonepath, any other party is in default or in arrears
under the
terms of any Material Contract, and no condition exists or event
has occurred
which, with the giving of notice or lapse of time or both, would
constitute a
default thereunder. The Company has fulfilled, or taken action to
fulfill when
due, all of its material obligations under each of the Material
Contracts.
Neither the Company nor Stonepath has any reason to believe that
the products or
services called for by any executory Material Contract cannot be
supplied in
accordance with the terms of such Material Contract. The Company
has not
committed any act, and there has been no omission, which may result
in, and
there has been no occurrence which may give rise to, Liability for
breach of
warranty
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<PAGE>
(whether or not covered by insurance) on the part of the Company
with respect to
services rendered or products sold by the Company.
3.19 INVENTORIES.
The Company has no Material inventory.
3.20 RELATIONSHIP WITH RELATED PERSONS.
Except as set forth in Section 3.20 of Stonepath's Schedules,
directors, officers, and employees of the Company, and their
Related Persons do
not have any interest in any of the properties or assets of or used
by the
Company and do not own, of record or as a beneficial owner, an
equity interest
or any other financial or profit interest in any Person that (i)
has had
business dealings or a Material financial interest in any
transaction with the
Company, or (ii) has engaged or is engaged in competition with the
Company with
respect to any line of products or services of the Company in any
market
presently served by the Company (a "Competing Business") (except
for the
ownership of less than three percent (3%) of the outstanding
capital stock of
any Competing Business that is publicly traded on any recognized
exchange or in
the over-the-counter market). Except as set forth in Stonepath's
Schedules,
Stonepath, and no director or officer of the Company and none of
their Related
Persons is a party to any Material Contract with, or has any claim
against, the
Company. All money owed by the Company to Stonepath or its
directors or
officers, or their Related Persons, (other than for salary and
bonuses) are for
bona fide debts and are set forth in Stonepath's Schedules.
3.21 BANKING MATTERS.
Section 3.21 of Stonepath's Schedules contains a true, complete
and
correct list of the names of all banks and other financial
institutions (with
account numbers) in which the Company has a Material account or
safe deposit
box, and of all brokerage firms and other entities and persons
holding Material
funds or investments of the Company, and the names of all persons
authorized to
draw thereon or make withdrawals therefrom.
3.22 LABOR AND EMPLOYMENT MATTERS.
(a) Stonepath's Schedules contain a complete list of all
written
employment arrangements, pension, retirement, profit sharing and
bonus plans,
and deferred compensation, health, welfare, severance management,
and other
similar plans for the benefit of any employees of the Company
("Employee Benefit
Plans"), including employee plans subject to the Employee
Retirement Income
Security Act of 1974, as amended ("ERISA"). The Company at present
is not, and
since March 5, 2002 has not been, a sponsor of, party to or
obligated to
contribute to any employee benefit plan (as defined in Section 3(3)
of ERISA)
except as listed on Stonepath's Schedules. The Company at present
is not, and
since March 5, 2002, has not been, a party to any collective
bargaining
agreement. The Company has never maintained a defined benefit
pension plan or
contributed to a multiemployer plan as defined in Section 3(37) of
ERISA except
as set forth on Stonepath's Schedules. True,
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<PAGE>
correct and complete copies of each Employee Benefit Plan have
heretofore been
delivered by the Company to Purchaser.
(b) With respect to each Employee Benefit Plan:
(1) there is no litigation, disputed claim (other than routine
claims for benefits), governmental proceeding, inquiry or
investigation
pending or Threatened with respect to each such Plan, its related
trust, or
any
fiduciary, administrator or sponsor of such Plan; and
(2) each such Plan has been established, maintained, funded and
administered in all material respects in accordance with its
governing
documents, and any applicable provisions of ERISA, the Code and
other
Applicable Laws.
(c) All directors, officers, and employees of the Company,
together
with the current salaries, title, and locations of such directors,
officers and
employees are set forth in Stonepath's Schedules.
(d) Except as set forth in Stonepath's Schedules and as required
under
COBRA, the Company is not obligated to and does not (directly or
indirectly)
provide death benefits or health care coverage to any former
employees or
retirees.
(e) Except as set forth in Stonepath's Schedules, the Company
has
complied in all Material respects with all Applicable Laws
respecting employment
practices, terms and conditions of employment, wages and hours,
equal employment
opportunity, and the payment of social security and similar taxes.
The Company
is not engaged in any unfair labor practice and has complied in all
Material
respects with all applicable provisions of the Immigration Reform
and Control
Act o
