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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 15, 1997
Ugly Duckling Corporation
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(Exact name of registrant as specified in its charter)
Delaware 20841 86-0721358
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(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification Number)
2525 East Camelback Road, Suite 1150, Phoenix, AZ 85016
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(Address of principal executive offices)
Registrant's telephone number, including area code: (602) 852-6600
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NONE
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On January 15, 1997, Ugly Duckling Corporation (the "Company") acquired
substantially all of the assets of Seminole Finance Corporation, a Florida
corporation ("Seminole"), Second Chance Finance, Inc., a Florida corporation
("SCFI"), Second Chance Wholesale, Inc., a Florida corporation ("Wholesale"),
Krizmanich Holdings, L.C., a Florida limited liability company ("KHI"), and
Seminole Lakeland Properties, Inc., a Florida corporation ("SLP") relating to
the business described below. Seminole, SCFI, Wholesale, KHI, and SLP are
hereinafter referred to collectively as "Seller." Prior to the acquisition,
Seller was engaged in the business of selling and financing used motor vehicles
at dealerships located in the state of Florida (the "Business"). The acquired
assets consist primarily of a portfolio of installment sales contracts held by
Seller and secured by vehicles sold by Seller or other independent used car
dealers (the "purchased contracts"), the inventory of vehicles held for retail
sale by Seller, and furniture, leasehold improvements, fixtures, equipment,
supplies, intellectual property, and transferable licenses and permits relating
to the Business. Consumer loans originated by Seller and not related to
automobile sales (the "Consumer Paper"), other loans, and certain other assets
were excluded from the acquisition. In connection with the acquisition, the
Company also assumed selected liabilities of Seller consisting primarily of
equipment leases and service agreements. The purchase price for the assets
acquired was approximately $32.13 million in cash, consisting of an amount equal
to 80% of the outstanding principal balance of the purchased contracts that
constituted eligible contracts on the closing date under the Company's line of
credit with General Electric Capital Corporation (approximately $24.77 million),
$4 million for vehicle inventory, and approximately $3.36 million for other
assets. In connection with the acquisition, the Sellers and their principal
shareholders entered into a five-year covenant not to compete agreement. The
Company obtained the money to make the acquisition from working capital and
borrowings under its line of credit with General Electric Capital Corporation.
The Company intends to continue the Business using its own business practices
through a newly-formed, wholly-owned subsidiary (the "Subsidiary").
In connection with the acquisition, the Company also leased certain
facilities previously used by Seller in connection with the Business. Five
facilities owned by Sellers and utilized in the Business as car dealerships have
been leased by the Subsidiary at market rates for five-year terms with two
five-year extension options. A sixth facility leased by Wholesale from a third
party lessor and used in the Business as a reconditioning facility has been
subleased to the Subsidiary at market rates. The term of this lease expires
April 1, 1997, but notice of exercise of a two-year extension option has been
given. Finally, a facility owned by and previously used as offices by Sellers
has been leased to the Subsidiary for a one-year term with rentals at market
rates paid in advance, with no option to extend. This lease can be terminated by
Seller at any time after ninety days by giving ninety days notice.
In connection with the acquisition, the Company advanced to Seminole a
commercial loan (the "Commercial Loan") in the amount of $891,316 secured by the
Consumer Paper and personally guaranteed by the principal shareholders of
Seminole. The Commercial Loan accrues interest at prime plus 2% and matures on
January 15, 1999 (the "Maturity Date"). All payments collected by Seminole on
the Consumer Paper during the period prior to the Maturity Date will be applied
to pay off the Commercial Loan.
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In addition, as part of the acquisition, the Company intends to advance
to Krizmanich Manatee Holdings, Inc., a Florida corporation ("KMH"), a
commercial mortgage loan (the "KMH Loan") in the amount of $1.5 million, secured
by a second priority lien on certain real property located in the state of
Florida that is owned by KMH and not used in the operation of the Business. The
KMH Loan will also be guaranteed by the principal shareholders of KMH. It is
anticipated that the KMH Loan will accrue interest at prime plus 2% and will be
payable in monthly installments of interest only with the principal and all
accrued and unpaid interest thereon payable in full on the Maturity Date.
On January 21, 1997, a purported creditor of the Seller filed to enjoin
the sale as a fraudulent conveyance. Alternatively, the suit seeks to void any
transfer of the assets that has already occurred, to attach the assets that
have been transferred, or to appoint a receiver to take charge of the assets
transferred. The Company has not been named in this action, has received a
specific indemnity from the Seller relating to this action, and has been
advised by the Seller that, in its view, the claim is without merit.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired.
It is impractical to provide the required financial
information at the time of filing this report. The required financial
information will be filed by amendment to this Form 8-K not later than
March 31, 1997.
(b) Pro Forma Financial Information.
It is impractical to provide the required pro forma financial
information at the time of filing this report. The required pro forma
financial information will be filed by amendment to this Form 8-K not
later than March 31, 1997.
(c) Exhibits
Exhibit Number Description
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2.1 Agreement of Purchase and Sale of
Assets dated as of December 31, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UGLY DUCKLING CORPORATION
(Registrant)
Dated: January 28, 1997 By: Steven P. Johnson
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Steven P. Johnson
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EXHIBIT 2.1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
BY AND AMONG
UGLY DUCKLING CORPORATION
SEMINOLE FINANCE CORPORATION,
SECOND CHANCE FINANCE, INC.,
SECOND CHANCE WHOLESALE, INC.
AND
MICHAEL KRIZMANICH
DATED AS OF DECEMBER 31, 1996
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AGREEMENT OF PURCHASE AND SALE OF ASSETS
<TABLE>
<CAPTION>
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ARTICLE 1 PURCHASE AND SALE OF ASSETS...................................... 1
1.1 Purchase and Sale of the Assets.................................. 1
1.2 Assets Not Being Transferred..................................... 2
1.3 Assumed Liabilities.............................................. 3
1.4 Liabilities Not Being Assumed.................................... 3
1.5 Purchase Price................................................... 3
1.6 Allocation of Purchase Price; Preventative Treatment............. 4
1.7 Lease Agreements................................................. 4
1.8 Covenant Not to Compete.......................................... 5
1.9 Transfer Fees and Taxes.......................................... 5
1.10 Special Provisions relating to Contracts......................... 5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF PURCHASER...................... 6
2.1 Organization and Qualification................................... 6
2.2 Authority Relative to this Agreement............................. 7
2.3 No Conflicts..................................................... 7
2.4 No Consents...................................................... 7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND MK.................. 7
3.1 Organization and Qualification......................................... 7
3.2 Authority Relative to this Agreement............................. 7
3.3 No Conflicts..................................................... 8
3.4 No Consents...................................................... 8
3.5 Capitalization................................................... 8
3.6 Financial Statements............................................. 8
3.7 Subsidiaries..................................................... 8
3.8 Absence of Undisclosed Liabilities............................... 9
3.9 No Material Adverse Changes...................................... 9
3.10 Absence of Certain Developments.................................. 9
3.11 Real Estate..................................................... 10
3.12 Good Title to and Condition of Acquired Assets.................. 11
3.13 Title and Condition of Contracts................................ 11
3.14 Solvency; Bulk Sales............................................ 14
3.15 Tax Matters..................................................... 14
3.16 Contracts and Commitments....................................... 14
3.17 Restrictions on Business Activities............................. 15
3.18 Intellectual Property........................................... 15
3.19 Litigation...................................................... 15
3.20 Brokers' Fees................................................... 16
3.21 Employment Matters.............................................. 16
</TABLE>
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<TABLE>
<S> <C> <C>
3.22 Affiliate Transactions.......................................... 16
3.23 Compliance with Laws; Permits................................... 16
3.24 Warranties...................................................... 17
3.25 Disclosure...................................................... 17
ARTICLE 4 CONDUCT OF SELLER PENDING THE CLOSING........................... 17
4.1 Conduct of Business Pending the Closing......................... 17
4.2 Business Relationships.......................................... 19
4.3 Access to Information........................................... 19
4.4 Tax on Prior Sales.............................................. 19
4.5 Notification of Certain Matters................................. 19
4.6 Transfer of Permits............................................. 19
4.7 Closing......................................................... 20
ARTICLE 5 ADDITIONAL AGREEMENTS........................................... 20
5.1 Employment...................................................... 20
5.2 Expenses........................................................ 20
5.3 No Negotiations................................................. 20
5.4 Public Announcements............................................ 21
5.5 Purchaser Loans................................................. 21
5.6 Confidentiality................................................. 22
5.7 Books and Records............................................... 22
5.8 H-S-R Act....................................................... 22
5.9 Additional Agreements........................................... 23
ARTICLE 6 CONDITIONS...................................................... 23
6.1 Conditions to Obligations of Each Party......................... 23
6.2 Additional Conditions to Obligation of Seller................... 24
6.3 Additional Conditions to Obligation of Purchaser................ 24
ARTICLE 7 THE CLOSING..................................................... 26
7.1 Closing......................................................... 26
7.2 Seller's and MIC's Obligations.................................. 26
7.3 Purchaser's Obligations......................................... 28
ARTICLE 8 INDEMNITIES..................................................... 28
8.1 Survival of Representations and Warranties...................... 28
8.2 Nature of Statements............................................ 28
8.3 Indemnification of Purchaser by Seller and MK................... 29
8.4 Indemnification of Seller and MK by Purchaser................... 29
</TABLE>
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<TABLE>
<S> <C> <C>
8.5 Procedure for Indemnification................................... 30
8.6 Escrow.......................................................... 31
ARTICLE 9 TERMINATION..................................................... 31
9.1 Termination..................................................... 31
9.2 Effect of Termination........................................... 32
ARTICLE 10 GENERAL PROVISIONS.............................................. 32
10.1 Notices......................................................... 32
10.2 Counterparts.................................................... 33
10.3 Governing Law................................................... 33
10.4 Assignment...................................................... 33
10.5 Further Assurances.............................................. 33
10.6 Gender and Number............................................... 33
10.7 Schedules and Exhibits.......................................... 34
10.8 Waiver of Provisions............................................ 34
10.9 Litigation Costs................................................ 34
10.10 Section and Paragraph Headings.................................. 34
10.11 Amendment....................................................... 34
10.12 Transaction Expenses............................................ 34
10.13 Severability.................................................... 34
10.14 Extent of Obligations........................................... 34
10.15 Schedules....................................................... 34
</TABLE>
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INDEX OF SCHEDULES
Schedule 1.1(a) Contracts
Schedule 1.1(b) Inventory
Schedule 1.1(c) Facility Leases
Schedule 1.1(d) FFE
Schedule 1.1(e) Permits
Schedule 1.1(f) Intangible Assets
Schedule 1.2(a) Consumer Paper
Schedule 1.2(b) Charged Off Contracts
Schedule 1.3 Assumed Liabilities
Schedule 1.6 Allocation of Purchase Price
Schedule 4.1 Qualification to do Business
Schedule 4.3 Conflicts
Schedule 4.4 Required Consents
Schedule 4.6 Financial Statements
Schedule 4.7 Subsidiaries
Schedule 4.9 No Material Adverse Changes
Schedule 4.10 Certain Developments
Schedule 4.12 Title and Condition of Assets
Schedule 4.16 Contracts and Commitments
Schedule 4.18 Intellectual Property Rights
Schedule 4.19 Litigation
Schedule 4.21 Employment
Schedule 4.24 Affiliate Transactions
Schedule 4.25 Claims and Permits
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INDEX OF EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Consulting Agreement
Exhibit C MK Loan Agreement
Exhibit D Seminole Loan Agreement
Exhibit E Payment Guaranty
Exhibit F Opinion of Seller's Counsel
Exhibit G Bill of Sale and Assumption
Exhibit H Dispute Resolution Procedures
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AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS (the "Agreement") is made as
of December 31, 1996, by and among UGLY DUCKLING CORPORATION, a Delaware
corporation ("Purchaser"); SEMINOLE FINANCE CORPORATION, a Florida corporation
("Seminole"), SECOND CHANCE FINANCE, INC., a Florida corporation ("SCFI");
SECOND CHANCE WHOLESALE, INC., a Florida corporation ("Wholesale"); KRIZMANICH
HOLDINGS, L.C., a Florida limited liability company ("KHI"); SEMINOLE LAKELAND
PROPERTIES, INC., a Florida corporation ("SLP"); and MICHAEL KRIZMANICH ("MK").
Throughout this Agreement, Seminole, SCFI, Wholesale, KHI and SLP are referred
to both individually and collectively as "Seller."
RECITALS
A. Purchaser and Seller are parties to a letter agreement dated November
25, 1996, which contemplates the acquisition by Purchaser of selected assets of
each of Seller's respective businesses. As a group, Seller engages in the
business (collectively the "Business" or, with respect to a single Seller, its
"Business") of selling and financing used motor vehicles ("Vehicles") at
dealerships located at the properties described in Schedules 1.7(a) and 1.7(b)
hereto (the "Dealerships").
B. Upon the terms and subject to the conditions set forth herein, each
Seller desires to sell to Purchaser, and Purchaser desires to purchase from each
Seller, selected assets of such Seller related to its Business.
NOW, THEREFORE, in consideration of the covenants and mutual agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in reliance upon the
representations and warranties contained herein, the parties hereto do hereby
agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of the Assets. Upon the terms and subject to the
conditions set forth herein, and in reliance on the respective representations
and warranties of the parties, each Seller agrees to sell, transfer, assign, and
deliver to Purchaser, and Purchaser agrees to purchase from each Seller, all of
such Seller's right, title, and interest in and to those assets, rights, and
properties of the Seller relating to its Business, as specified below (the
"Acquired Assets"):
(a) The portfolio of installment sales contracts held by Seller and
secured by Vehicles sold by Seller or other independent licensed used car
dealers (the "Contracts"), as specified on Schedule 1.1(a) hereto;
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(b) The inventory of Vehicles held for retail sale by Seller (but
excluding repossessions) (the "Inventory"), as specified on Schedule
1.1(b) hereto;
(c) All furniture, leasehold improvements, fixtures, equipment,
supplies, tools for maintenance and repair, other goods, and all other
appurtenances in and to the premises utilized by Seller in the operation
of the Business ("FFE"), as specified on Schedule 1.1(c) hereto;
(d) All assignable title, claims, and rights under any government or
municipal licenses, certificates, permits, approvals, and registrations
(collectively, "Permits") issued to Seller;
(e) Any additional items of tangible or intangible property used or
owned by Seller related to the Business and Acquired Assets which are not
included above, including, without limitation, software, trademarks and
licenses thereto and goodwill, provided, however, that Seller may continue
to use software it has developed in its continuing business operations;
and
(f) All books of account, records, files, invoices, customer lists
and information, supplier lists and information, employee files, operating
manuals, catalogs, technical information sheets, pricing sheets,
advertising and display materials, and brochures and other materials and
data associated with, used, or employed by Seller in the operation of the
Business and ownership of the Acquired Assets.
1.2 Assets Not Being Transferred. Anything contained in Section 1.1 or
elsewhere herein to the contrary notwithstanding, there are expressly excluded
from the assets, properties, interests in properties and rights of the Seller to
be sold, transferred, assigned, and delivered to the Purchaser at the Closing
(as defined below) the following (the "Excluded Assets"):
(a) Any and all consumer loans originated directly by Seller and not
related to the sale of an automobile ("Consumer Paper"), as specified on
Schedule 1.2(a) hereto;
(b) The proceeds from Vehicle collateral (or insurance proceeds in
respect thereof) related to Contracts charged off by Seller during the
period between October 1, 1996 and the Closing Date (as defined below), as
specified on Schedule 1.2(b) hereto; repossession and disposition of such
Vehicles shall be in accordance with mutually acceptable procedures;
(c) All of Seller's right, title and interest under or related to
this Agreement, including, without limitation, the consideration delivered
to Seller pursuant to this Agreement;
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(d) The minute books, stock transfer books, seals, blank share
certificates, and other documents and things relating to organizational
matters and the existence of Seller as a corporation and the corporate tax
returns of Seller (the "Excluded Records");
(e) Cash, real estate loans, stockholder loans, and any other loans
not specifically purchased hereunder; and
(f) Seller's right, title, and interest relating to any assets,
rights, and properties of Seller, wherever located, whether tangible or
intangible, unrelated to the Business.
1.3 Assumed Liabilities. From and after the Closing Date, Purchaser shall
assume only those liabilities of Seller (the "Assumed Liabilities") as specified
in Schedule 1.3 hereto. It is expressly understood and agreed that Purchaser
shall not be liable for any of the obligations or liabilities of Seller of any
kind or nature other than those specifically assumed by Purchaser under this
Section 1.3.
1.4 Liabilities Not Being Assumed. Anything contained herein to the
contrary notwithstanding, the Purchaser is expressly not assuming any of the
following liabilities or obligations, whether fixed or contingent, known or
unknown, matured or unmatured, executory or non-executory, of Seller (the
"Excluded Liabilities"), which liabilities and obligations shall at and after
the Closing remain the exclusive responsibility of Seller:
(a) All liabilities and obligations of Seller under this Agreement
or with respect to or arising out of the consummation of the transactions
contemplated by this Agreement; and
(b) All liabilities and obligations of Seller for Seller's fees and
expenses and taxes incurred by Seller in connection with, relating to, or
arising out of the consummation of the transactions contemplated by this
Agreement.
Seller shall discharge all Excluded Liabilities, and, in connection therewith,
if the Seller shall liquidate, dissolve, or wind-up after the Closing, Seller
shall pay, post security for, or otherwise make provision for all Excluded
Liabilities prior thereto as provided under the law. Without limitation of the
foregoing, Seller shall pay off its lines of credit (the "GE Lines") with
General Electric Capital Corporation ("GE Capital") at Closing.
1.5 Purchase Price. The aggregate purchase price to be paid by Purchaser
to Seller for the Acquired Assets (the "Purchase Price") shall be (i)
$3,050,000, plus (ii) an amount equal to 80% of the outstanding principal
balance (excluding all interest, late fees and extension fees), calculated in
accordance with the simple interest method based upon the Contract rate of those
Contracts on the Closing Date that are defined as "Eligible Contracts" under
Purchaser's existing line of credit with GE Capital, plus (iii) an amount equal
to the book value of the Vehicles as
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determined in accordance with generally accepted accounting principles, up to
$4,000,000, and (iv) the Assumed Liabilities, and will be paid as provided
below:
(a) Deposit. Upon the execution of this Agreement, Purchaser shall
deliver an earnest money deposit (the "Deposit") in the amount of $900,000
($150,000 of which has already been paid to Seller and shall be
transferred by Seller to the escrow agent herein and $260,000 of which has
been delivered to GE Capital) to Kass Hodges, P.A., as escrow agent (the
"Escrow Agent"). The Deposit shall be held in a trust account, together
with any accrued interest earned thereon. The Deposit shall be refundable
to Purchaser until it has received and accepted Seller's Schedules. Upon
acceptance, the Deposit shall become non-refundable, other than as a
result of a termination of the Agreement by Purchaser pursuant to Section
9.1(c). All of the parties hereto acknowledge and agree that the Escrow
Agent shall have no liability in relation to the Deposit except arising
out of its own wilful misconduct or gross negligence.
(b) Closing Payment. Purchaser shall pay the Purchase Price less the
Deposit to Seller by wire transfer in immediately available funds to the
bank account designated by Seller; and
(c) Assumption of Liabilities. Purchaser shall assume the Assumed
Liabilities as of the Closing Date.
1.6 Allocation of Purchase Price; Accounting Treatment. The Purchase Price
shall be allocated among the Acquired Assets in the manner agreed to by
Purchaser's independent public accountants as promptly as reasonably practicable
following the Closing, and Seller and Purchaser hereby agree to report this
transaction for federal tax purposes in accordance with such allocation of the
Purchase Price. Such allocation shall be reported by Purchaser and Seller on
Internal Revenue Service Form 8594, Asset Acquisition Statement which will be
filed with Purchaser's and Seller's Federal Income Tax Return for the tax year
that includes the Closing Date. The parties further agree to coordinate their
accounting for the transaction.
1.7 Lease Agreements. Purchaser and Seller further agree that as of the
Closing Date Purchaser shall enter into leases for:
(a) Facilities owned by non-affiliates of Seller ("Independent
Facilities") upon terms and subject to conditions acceptable to Purchaser
in its sole discretion. The Independent Facilities are set forth on
Schedule 1.7(a).
(b) Facilities owned by Seller or affiliates of Seller ("Related
Facilities") at market rates (as determined by the parties or, if no such
determination can be made, by an independent appraiser mutually agreeable
to the parties) on a triple net basis for a period of five years,
including two five-year extension options, upon terms and subject to
conditions mutually acceptable to the parties; provided, however, that
such leases of
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Related Facilities shall provide that they are terminable at any time by
Purchaser upon Purchaser's payment of a termination fee equal to six
months rent. The Related Facilities are set forth as Schedule 1.7(b); and
(c) Seller's principal office facility (the "Principal Facility"),
located at 21649 US Highway 19 North, Clearwater, Florida 34625, at a
market rate (as determined by the parties or, if no such determination can
be made, by an independent appraiser mutually agreeable to the parties) on
a triple net basis for a term of one year, upon terms and subject to
conditions mutually agreeable to the parties and providing for the
following additional terms: (i) the rent shall be $276,000 and shall be
prepaid by Purchaser at Closing, and (ii) Seller may terminate such lease
upon 90 days written notice on or after 90 days from the date of Closing,
and upon the return of any unused prepaid rent.
1.8 Covenant Not to Compete. At Closing, Purchaser, Seller and MK shall
enter into a Covenant Not to Compete and Confidentiality Agreement (the
"Covenant Not to Compete") upon terms mutually agreed upon, which shall provide
for a cash payment to MK of $250,000 at Closing and which shall permit continued
ownership and operation of Your Auction Inc., a wholesale automobile auction
business.
1.9 Transfer Fees and Taxes. Seller shall pay any and all transfer and
assumption fees and expenses and sales and use taxes arising out of the transfer
of the Acquired Assets and shall pay its portion, prorated as of the Closing
Date, of state and local real and personal property taxes relating to the
Acquired Assets. Purchaser shall not be responsible for any payroll, excise,
income, business, occupation, withholding, or similar tax, or any taxes of any
kind related to any period prior to the Closing Date.
1.10 Special Provisions relating to Contracts.
(a) The term "Contracts" shall be deemed to include, and Seller
shall convey to Purchaser:
1. any and all monies and payments (including in kind
collections) received or due or to become due with respect to
the Contracts and all other rights and benefits thereunder due
as of the cutoff date agreed upon by the parties;
2. the security interests in the Vehicles granted by the
retail consumers "(Customers") pursuant to the Contracts and
any other interest of Seller in the Vehicles, including,
without limitation, the certificates of title with respect to
Vehicles, and in and to all other security, warranties,
guaranties and credit support with respect to the Contracts;
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3. except as set forth in Section 1.2(b), any proceeds from
claims on any physical damage, credit life and credit accident
and health insurance policies or other insurance (including
vendor's single interest insurance) or certificates relating
the Vehicles or the Customers;
4. all of Seller's rights of recourse against any dealers
under any dealer agreements relating to the Contracts or
otherwise;
5. refunds for the costs of extended service contracts with
respect to Vehicles, refunds of unearned premiums with respect
to credit life and credit accident and health insurance
policies or other insurance certificates covering any Customer
or Vehicle or the Customer's obligations with respect to a
Vehicle and any recourse to dealers for any of the forgoing;
6. all documents, records, instruments and files related to
each Contract; and
7. the proceeds of any and all of the foregoing.
(b) The parties intend that the transfer of the Contracts pursuant
to this Agreement be a true sale of the Contracts from the Seller to
Purchaser and not a financing secured by the Contracts, and the beneficial
interest in and title to the Contracts shall not be a part of any Seller's
estate in the event of the filing of a bankruptcy petition by or against
any Seller under any bankruptcy law. However, if under any bankruptcy law,
this transaction is deemed to be a financing arrangement, or it is
otherwise determined that any conveyance hereunder is for any reason not
considered a sale and that the beneficial interest in and title to the
Contracts remain part of any Seller's estate, the parties intend that with
respect to any such Contracts this Agreement shall constitute a security
agreement (as defined in the UCC as in effect in the State of Florida)
under the UCC, and Seller hereby grants to Purchaser a first priority
perfected security interest in and against all of the Seller's right,
title and interest in and to the Contracts.
(c) Within two days after the Closing Date, Seller and Purchaser
shall mail to the Customers written notice of the transfer of the
Contracts to Purchaser (the "Customer Notice"). The Customer Notice shall
provide the name, address and telephone number of Purchaser, shall
instruct Customers to make all payments to Purchaser and shall be in a
form mutually agreed upon.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As of the date hereof and as of the Closing Date, Purchaser hereby
represents and warrants to Seller each of the following:
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2.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authority to own and operate
its properties and to carry on its business as now conducted in every
jurisdiction where the failure to do so would have a material adverse effect on
its business, properties, or ability to conduct the business currently conducted
by it.
2.2 Authority Relative to this Agreement. Purchaser has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Purchaser
and the consummation by Purchaser of the transactions contemplated hereby have
been duly authorized by Purchaser, and no other corporate proceedings on the
part of Purchaser are necessary to authorize this Agreement and such
transactions. This Agreement has been duly executed and delivered by Purchaser
and constitutes a valid and binding obligation of Purchaser, enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
2.3 No Conflicts. Purchaser is not subject to, or obligated under, any
provision of (a) its Certificate of Incorporation or Bylaws, (b) any material
agreement, arrangement, or understanding, (c) any material license, franchise,
or permit, or (d) any law, regulation, order, judgment, or decree, which would
be breached or violated, or in respect of which a right of termination or
acceleration would arise, or pursuant to which any encumbrance on any of its or
any of its subsidiaries' material assets would be created, by its execution,
delivery, and performance of this Agreement and the consummation by it of the
transactions contemplated hereby.
2.4 No Consents. Except for such filings to be made pursuant to federal or
state securities or other laws and regulations or for Permits necessary to own
the Acquired Assets or operate the Business, no authorization, consent, or
approval of, or filing with, any public body, court, or authority is necessary
on the part of Purchaser for the consummation by Purchaser of the transactions
contemplated by this Agreement.
2.5 H-S-R Act. Neither Purchaser nor any "acquiring person" of which
Purchaser may be deemed to be a part has $100 million or more in assets or
annual net sales, all as determined in accordance with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "H-S-R Act"), as of Purchaser's latest reporting date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND MK
As of the date hereof and as of the Closing Date, each Seller as to itself
and its assets and MK hereby jointly and severally represent and warrant to
Purchaser each of the following:
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3.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Florida, and has the requisite corporate power and authority to own and operate
its properties and to carry on its business as now conducted. Seller is duly
qualified to do business and is in good standing in the State of Florida, the
only jurisdiction where the failure to be so qualified would have a material
adverse effect on its business, properties, or ability to conduct the business
currently conducted by it.
3.2 Authority Relative to this Agreement. Seller has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Seller
and the consummation by Seller of the transactions contemplated hereby has been
duly authorized by the Board of Directors of Seller and has been duly approved
by all of the shareholders of Seller, and no other corporate proceedings on the
part of Seller are necessary to authorize this Agreement and such transactions.
This Agreement has been duly executed and delivered by Seller and constitutes a
valid and binding obligation of Seller, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
3.3 No Conflicts. Except as set forth in Schedule 3.3 hereto, Seller is
not subject to, or obligated under, any provision of (a) its Articles of
Incorporation or Bylaws, (b) any agreement, arrangement, or understanding, (c)
any license, franchise, or permit or (d) any law, regulation, order, judgment,
or decree, which would be breached or violated, or in respect of which a right
of termination or acceleration would arise, or pursuant to which any encumbrance
on any of its assets would be created, by its execution, delivery, and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby.
3.4 No Consents. Except as set forth on Schedule 3.4 hereto, no
authorization, consent, or approval of, or filing with, any public body, court,
or authority is necessary on the part of Seller for the consummation by Seller
of the transactions contemplated by this Agreement.
3.5 Capitalization. All of the issued and outstanding shares of capital
stock of Seller are owned free and clear by the stockholders listed in Schedule
3.5 and there are no other shares of capital stock of Seller outstanding. There
are no outstanding subscriptions, options, rights, warrants, convertible
securities, or other agreements or commitments obligating Seller to issue or to
transfer from treasury any additional shares of its capital stock.
3.6 Financial Statements. The audited financial statements of Seller for
and as of the fiscal years ended December 31, 1994 and 1995 (the "Audited
Financial Statements") and Seller's unaudited balance sheets as of September 30,
1996 and the related unaudited statements of income and cash flow for the
nine-month period then ended (the "Current Financial Statements") have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved and fairly present the
financial position of Seller as of the dates thereof and the results of its
operations and cash flows for the periods then ended. The
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Audited Financial Statements and the Current Financial Statements are attached
hereto as Schedule 3.6.
3.7 Subsidiaries. Seller does not have, nor has it ever had, any
Subsidiaries and Seller does not own, and has never otherwise owned, any stock,
partnership interest, joint venture interest, or any other security issued by or
equity interest in any other corporation, organization, association, or entity.
For purposes of this Agreement, the term "Subsidiary" means any corporation of
which securities having a majority of the ordinary voting power in electing
directors are owned by Seller directly or through another Subsidiary.
3.8 Absence of Undisclosed Liabilities. Seller has no obligations or
liabilities (whether accrued, absolute, contingent, liquidated, unliquidated, or
otherwise, whether due or to become due and regardless of when asserted), except
(a) liabilities reflected on the unaudited balance sheet included in the Current
Financial Statements, (b) liabilities which have arisen in the ordinary course
of business after the date of the Current Financial Statements (none of which is
an uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim, or lawsuit), and (c) liabilities specifically disclosed in
any Schedule to this Agreement.
3.9 No Material Adverse Changes. Except as set forth in Schedule 3.9
hereto, since the date of the Current Financial Statements, there has not been
any material adverse change in the assets, financial condition, or operating
results, customer, employee, or supplier relations, business condition or
prospects, or financing arrangements of Seller.
3.10 Absence of Certain Developments. Except as set forth in Schedule 3.10
hereto or except as contemplated in this Agreement, since the date of the
Current Financial Statements, Seller has not:
(a) Changed its accounting methods or practices (including any
change in loan reserve or write off policies) or revalued any of its
assets;
(b) Borrowed any amount under existing lines of credit, including
the GE Lines, or otherwise incurred or become subject to any indebtedness,
except as is reasonably necessary for the ordinary operation of its
business and in a manner and in amounts that are in keeping with its
historical practice;
(c) Mortgaged, pledged, or subjected to any lien, charge, or other
encumbrance, any of its assets with an aggregate fair market value in
excess of $25,000, except liens for current property taxes not yet due and
payable and liens related to the GE Lines;
(d) Sold, assigned, or transferred (including, without limitation,
transfers to any Insiders) any assets, except in the ordinary course of
business;
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(e) Disclosed any proprietary or confidential information to any
person other than Purchaser;
(f) Modified, waived, canceled or written off any receivable, note,
right or claim, including any write-off or compromise of any Contract,
other than in the ordinary course of business and consistent with past
practice;
(g) Entered into any transaction with any Insider (as defined in
Section 3.22);
(h) Suffered any extraordinary financial or other loss or suffered
any material theft, damage, destruction, or loss of or to any property or
properties owned or used by it, whether or not covered by insurance;
(i) Increased the annualized level of compensation of or granted any
extraordinary bonuses, benefits, or other forms of direct or indirect
compensation to any employee, officer, director, or consultant, or
increased, terminated, or amended or otherwise modified any plans for the
benefit of employees, except in the ordinary course of business and
consistent with historical adjustments to such compensation and benefits;
(j) Made any capital expenditures or commitments therefor that
aggregate in excess of $25,000;
(k) Taken any other action or entered into any other transaction
other than in the ordinary course of business and in accordance with past
custom and practice or entered into any contract, written or oral, that
involves consideration or performance by it of a value exceeding $25,000
or a term exceeding six months;
(l) Made any loans or advances to, or guarantees for the benefit of,
any persons.
(m) Acquired (by merger, exchange, consolidation, acquisition of
stock or assets, or otherwise) any corporation, partnership, joint
venture, or other business organization or division or material assets
thereof;
3.11 Real Estate.
(a) Seller does not own any real estate.
(b) Schedule 3.11(b) sets forth a list of all leases of real
property and improvements relating to the Business ("Leases"), in each
case, setting forth (i) the lessor and lessee thereof and the date and
term of each of the Leases, (ii) the street address of each property
covered thereby, and (iii) a brief description (including size and
function) of the principal improvements and buildings thereon (the "Leased
Premises"). The Leases
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are in full force and effect and have not been amended, Seller has a valid
and existing leasehold interest under each such Facility Lease for the
term set forth therein, and neither Seller nor any other party thereto is
in material default or material breach under any such Facility Lease. No
event has occurred which, with the passage of time or the giving of notice
or both, would cause a breach of or default under any of such Leases,
except for breaches or defaults which in the aggregate could not
reasonably be expected to have a material adverse effect on Seller's
business, financial condition, or results of operations.
(c) The properties set forth on Schedules 1.7(a) and (b) and 3.11
(b) and described in Section 1.7(c) constitute all of the real estate used
or occupied by Seller in connection with the Business, and each such
property has access, sufficient for the conduct of the business conducted
thereon, to public roads and to all utilities, including electricity,
sanitary and storm sewer, potable water, natural gas and other utilities,
used in the operations of the Business.
(d) Seller and MK, as the case may be, are not in violation of any
applicable zoning ordinance or other law, regulation, or requirement
relating to the operation of any of the properties used in the Business,
including, without limitation, applicable environmental protection and
occupational health and safety laws and regulations, and Seller and MK, as
the case may be, have not received any notice of any such violation, or of
the existence of any condemnation proceeding with respect to any
properties owned or leased by it.
3.12 Good Title to and Condition of Inventory and Acquired Assets.
(a) The Inventory of Vehicles recorded on the balance sheet included
in the Current Financial Statements, and the Inventory purchased since the
date thereof, is saleable in the ordinary course of business, is not
slow-moving, obsolete, damaged or defective, and is carried at a value,
net of appropriate reserves, determined in accordance with generally
accepted accounting principles. Seller has good and marketable title to
the Vehicles, free and clear of liens, encumbrances and security interest,
except those in favor of GE pursuant to a $2,500,000 line of credit, which
shall be satisfied in full and as to which all related liens shall be
released as of the Closing.
(b) The other Acquired Assets that are tangible assets are in good
condition and repair, ordinary wear and tear excepted, and are usable in
the ordinary course of business. Seller has good and marketable title to
all machinery, equipment, and other tangible assets necessary for the
conduct of the Business (which it is conveying hereby), free and clear of
all liens, encumbrances and security interests, except as disclosed in
Section 3.12, all of which shall be released as of the Closing, or leases
such equipment under valid leases, all of which are listed on Schedule
3.12. Seller is not in default, and no circumstances exist which could
result in such default, under any of such equipment leases, nor is any
other party to any of such equipment leases in default.
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3.13 Title and Condition of Contracts. Seller is the exclusive owner of
the Contracts and has good and marketable title to the Contracts, free and clear
of all liens, claims and restrictions upon transfer of any kind, other than the
GE Lines, which shall be satisfied in full and as to which all related liens
shall be released as of the Closing Date. As to each Contract:
(a) Seller and the Dealerships has fully complied with all federal,
state and municipal laws, rules and regulations applicable to the
transaction creating the Contract, including the Federal Truth In Lending
Act, the Federal Equal Credit Opportunity Act and the Florida Motor
Vehicle Retail Sales Finance Act.
(b) The Dealerships have all required licenses, permits and
authority to sell used Vehicles, finance the sale of used Vehicles and to
assign the Contracts to Seller and Seller has all required licenses,
permits and authority to acquire, hold, collect and assign the Contracts
to Purchaser.
(c) The Dealerships have received the down payment amount stated in
each Contract in cash or its equivalent and no part of the down payment on
any Contract has been loaned directly or indirectly to the Customer by the
Dealerships other than "pick-up" payments disclosed in the Contracts.
(d) All Vehicles and any other goods and services sold by the
Dealerships pursuant to each Contract are free of all liens and claims of
any kind other than those in favor of Seller and the description of the
Vehicle in each Contract is true, complete and accurate.
(e) The Vehicle sold to the Customer pursuant to each Contract has
been delivered to the Customer named in the Contract and application to
the State of Florida Department of Highway Safety and Motor Vehicles has
been filed in accordance with applicable law for registration of the
Vehicle showing the Customer as the owner and Seller as the senior lien
holder.
(f) The Customer named in each Contract has full legal capacity to
make the Contract and the name of the Customer stated in the Contract is
the true and actual name of the Customer and said Customer named in the
Contracts has executed the Contract.
(g) No Customer of any Contract being sold to Purchaser has put
Seller on notice of any claim, offset, defense, dispute or claim of
rescission or cancellation of any type, including any claim or defense
relating to the Vehicle sold by the Dealerships, the performance or
non-performance by Seller of its obligations under any Contract, warranty
or guarantee, or arising from any act, error, omission, representation or
warranty of Seller or its officers, agents or employees. Seller has fully
and in good faith performed and discharged all of its obligations to the
Customer arising under each Contract or relating to the Contract accrued
as of the date of the assignment of the Contract to Purchaser.
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(h) If required by applicable law at the time of the origination of
the Contract, the Vehicle securing the Contract was insured for liability
of the Customer in accordance with applicable law at the time of the
origination of the Contract.
(i) All sales taxes assessed in connection with the sale of the
Vehicle to the Customer have been paid in full.
(j) The Contract has created a valid and enforceable first priority
perfected security interest in favor of Seller in the Vehicle, which
security interest has been validly assigned and transferred by Seller to
Purchaser on the Closing Date.
(k) The Contract is in the form attached hereto as an Exhibit and
does not include any amendments, modifications or supplements other than
in the form attached hereto.
(l) The Contract provides for level payments (not less frequently
than monthly, except for the first payment which is due within 45 days of
origination of the Contract) that fully amortize the amount financed
stated therein over the original term (except for the last payment, which
may be different from the level payment) and yield interest at the annual
percentage rate stated in the Contract.
(m) The Contract accurately reflects the actual terms and conditions
of the Customer's purchaser of the Vehicle and the financing thereof and
there are no terms and conditions not expressly stated in the Contract.
(n) No Vehicle shall have been repossessed or designated for
repossession and no investigation has been initiated by any Seller or the
Dealerships to determine the whereabouts of a Vehicle or Customer for the
purposes of the repossession of the Vehicle, except as disclosed to
Purchaser prior to the Closing Date.
(o) Except for the conveyances hereunder, each Seller will not sell,
pledge, assign or transfer to any other person, or grant, create, incur,
assume or suffer to exist any lien on any Contract, or Vehicle securing
the Contract, whether now existing or hereafter created, or any interest
therein; Seller will immediately notify Purchaser of the existence of any
lien on any Contract, or Vehicle and, in the event that the interests of
the Purchaser in such Contract may be or are materially and adversely
affected, Seller shall repurchase such Contract from Purchaser or its
assigns, as applicable.
(p) Seller shall defend the right, title and interest of Purchaser
in, to and under the Contracts, whether now existing or hereafter created,
against all claims of third parties claiming through or under any Seller
or the Dealerships and Seller and MK shall indemnify and hold harmless
Purchaser from and against any loss, liability, expense or damage suffered
or sustained by reason of third party claims which may be asserted
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against or incurred by Purchaser at any time as a result of the sale of
the Contracts by Seller to Purchaser.
(q) If any of the foregoing representations, warranties or covenants
of Seller as to the Contracts are materially false, breached or violated,
and Purchaser actually incurs a loss, as a result thereof then Purchaser
may demand and Seller shall immediately pay a refund in an amount equal to
the outstanding principal balance of the Contracts for which the
representation, warranties or covenants are materially false, breached or
violated and upon such refund Purchaser shall transfer said Contracts back
to Seller without recourse, representation, warranty or covenant, but free
of all liens and encumbrances.
3.14 Solvency; Bulk Sales. Seller is solvent and able to pay its
outstanding debts as they mature. Seller shall not be rendered insolvent by the
transfer of the Contracts pursuant to this Agreement, and the transfer of the
Contracts is not fraudulent to any creditor or equity interest holder of Seller.
There is no Florida bulk sales or bulk transfer law applicable to the sale of
the Acquired Assets hereunder.
3.15 Tax Matters. Seller and MK have filed all federal, foreign, state,
county, and local income, excise, property, sales, and other tax returns which
are required to be filed by it or MK, as the case may be, in respect of a
Seller, and all such returns are true and correct; all taxes due and payable by
Seller or by MK in respect of a Seller have been paid; Seller's respective
provisions for taxes on the balance sheet included in the Current Financial
Statements and the financial statements delivered hereunder are sufficient for
all accrued and unpaid taxes as of the dates of such balance sheets; Seller has
paid all taxes due and payable by it or which it is obligated to withhold from
amounts owing to any employee, creditor, or third party; Seller has not waived
any statute of limitations in respect of taxes or agreed to any extension of
time with respect to a tax assessment or deficiency; the assessment of any
additional taxes relating to for periods for which returns have been filed is
not expected; and Seller has not received notice of any unresolved questions or
claims concerning the tax liability of such entity. Seller has not filed any
consent agreement under or made an election under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"). Seller is not a party to a tax
sharing or allocation agreement nor does Seller owe any amount under such
agreement. Neither Seller nor the Acquired Assets are subject to any federal
sales tax upon sale or other disposition thereof.
3.16 Contracts and Commitments.
(a) Except as set forth in Schedule 3.16 hereto or any other
Schedule hereto, Seller is not a party to any: (i) collective bargaining
agreement or contract with any labor union; (ii) bonus, pension, profit
sharing, retirement, or other form of deferred compensation plan; (iii)
hospitalization insurance, or similar plan or practice, whether formal or
informal; (iv) contract for the employment of any officer, individual
employee, or other person on a full-time or consulting basis or relative
to severance pay or change-in-control benefits for any such person; (v)
agreement or indenture relating to the borrowing
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of money in excess of $25,000 relating to the Business or Acquired Assets
or to mortgaging, pledging, or otherwise placing a lien on any of the
Acquired Assets; (vi) guaranty of any obligation for borrowed money or
otherwise, other than endorsements made for collection; (vii) lease or
agreement under which it is lessor of, or permits any third party to hold
or operate, any Acquired Assets; (viii) other agreement material to the
Business or not entered into in the ordinary course of business. Schedule
3.16 sets forth the term of each such contract or commitment and
identifies each such contract or commitment which is not terminable at
will by Seller.
(b) Prior to the date of this Agreement, Seller has furnished
Purchaser with a true and correct copy of each written contract or
commitment, and a written description of each oral contract or commitment,
referred to in Schedule 3.16, together with all amendments, waivers, or
other changes thereto.
(c) Except as specifically disclosed in Schedule 3.16 hereto: (i)
since the date of the Current Financial Statements, no customer or
supplier has indicated that it will stop or decrease the rate of business
done with Seller, except for changes in the ordinary course of the
Business; (ii) Seller has performed in all material respects the
obligations required to be performed by it in connection with the
contracts or commitments and Seller has not been advised of or received
any claim of default under any contract or commitment required to be
disclosed hereunder; (iii) Seller has no present expectation or intention
of not fully performing any obligation pursuant to any contract or
commitment; and (iv) there has been no breach and there is no anticipated
breach by any other party to any contract or commitment.
3.17 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order, or decree to
which Seller is a party or otherwise binding on Seller which has or reasonably
could be expected to have the effect of prohibiting or impairing any business
practice of Seller, any acquisition of property (tangible or intangible) by
Seller, or the conduct of the Business.
3.18 Intellectual Property. Seller has the full legal, right, title, and
interest in and to all trademarks, service marks, trade names, copyrights,
know-how, patents, trade secrets, licenses (including licenses for the use of
computer software programs), and other intellectual property used in and
material to the conduct of the Business (the "Intellectual Property"). The
conduct of Seller's Business as presently conducted and the unrestricted conduct
and the unrestricted use and exploitation of the Intellectual Property does not
infringe or misappropriate any rights held or asserted by any person, and no
person is infringing on the Intellectual Property. No payments are required for
the continued use of the Intellectual Property. None of the Intellectual
Property has ever been declared invalid or unenforceable, or is the subject of
any pending or threatened action for opposition, cancellation, declaration,
infringement, invalidity, unenforceability, or misappropriation or like claim,
action, or proceeding. Schedule 3.18 sets forth a list of all
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material Intellectual Property owned by or licensed to Seller and lists all
trademark, trade name, and patent applications that are currently pending.
3.19 Litigation. Except as set forth on Schedule 3.19, there are no suits,
claims, actions, arbitrations, investigations, or proceedings entered against,
now pending, or threatened against Seller before any court, arbitration,
administrative or regulatory body, or any governmental agency which may result
in any judgment, order, award, decree, liability, or other determination which
will or could reasonably be expected to have any effect upon Seller, the
Acquired Assets, or the Business. Seller is not subject to any continuing court
or administrative order, writ, injunction, or decree applicable to it or the
Business, or to its property or employees, and Seller is not in default with
respect to any order, writ, injunction, or decree of any court or federal,
state, municipal, or other governmental department, commission, board, agency,
or instrumentality.
3.20 Brokers' Fees. Seller and MK have not dealt with any broker, finder,
or other person entitled to any brokerage commissions, finders' fees, or similar
compensation in connection with the transactions contemplated by this Agreement.
3.21 Employment Matters. Attached hereto as Schedule 3.21 is a list of
names, current annual rates of salary, bonus, employee benefits, accrued
vacation and sick time, sick pay, and other compensation and benefits and
perquisites, including the provision of company-owned automobiles, of all the
employees and agents of Seller whose work relates, directly or indirectly, to
the operation of the Business. No key employee of Seller, and no group of
Seller's other employees, has any plans to terminate his, her, or its
employment, Seller is not a party to any collective bargaining agreement, Seller
has no material labor relations problems pending, and Seller's labor relations
are satisfactory in all material respects. Seller has complied with all laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining, and the payment of
social security and other taxes. Seller may terminate any employee, with or
without cause, without liability or obligation other than for salary accrued
through the date of any such termination. None of Seller's employee benefit
plans will need to be assumed by Purchaser as a matter of law or otherwise.
3.22 Affiliate Transactions. Except as set forth on Schedule 3.22, no
officer, director, or shareholder of Seller or any member of the immediate
family of any such officer, director, or shareholder, or any entity in which any
of such persons owns any beneficial interest (other than a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any of such persons) (collectively "Insiders"), has any agreement with
Seller or any interest in any property (real, personal, or mixed, tangible or
intangible) used in or pertaining to the Business. For purposes of the preceding
sentence, the members of the immediate family of an officer, director, or,
shareholder shall consist of the spouse, parents, children, siblings, mothers-
and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law
of such officer, director, or shareholder.
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3.23 Compliance with Laws; Permits. Seller and its officers, directors,
agents, and employees have complied with all applicable laws and regulations of
foreign, federal, state, and local governments and all agencies thereof which
affect the Business or any Seller's assets and to which Seller may be subject,
and no claims have been filed against Seller alleging a violation of any such
law or regulation, except as set forth in Schedule 3.23 hereto. Without limiting
the generality of the foregoing, Seller has not violated, or received a notice
or charge asserting any violation of any state or federal acts (including rules
and regulations thereunder) regulating or otherwise affecting employee health
and safety, the discharge of pollutants or wastes, or employee benefit plans.
Neither Seller nor MK has given or agreed to give any money, gift, or similar
benefit (other than incidental gifts of articles of nominal value) to any actual
or potential customer, supplier, governmental employee, or any other person in a
position to assist or hinder Seller in connection with any actual or proposed
transaction. Seller holds all of Permits of foreign, federal, state, and local
governmental agencies required for the conduct of the Business, a list of which
(including the expiration dates thereof) is set forth in Schedule 3.23 hereto.
3.24 H-S-R Act. Neither Seller nor any "acquiring person" of which Seller
may be deemed to be a part has $100 million or more in assets or annual net
sales, all as determined in accordance with the H-S-R Act as of Seller's latest
reporting date.
3.25 Warranties. Seller is not responsible for any express warranties to
third parties with respect to any products sold or services performed by Seller.
Seller has no knowledge of any state of facts or the occurrence of any event
forming the basis of any present claim against Seller for liability due to any
express or implied warranty.
3.26 Disclosure. Neither this Agreement nor any of the Schedules or
Exhibits hereto or documents or agreements to be delivered hereunder contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading, and there is no fact
which has not been disclosed to Purchaser which materially adversely affects or
could reasonably be anticipated to materially adversely affect the assets,
including the Acquired Assets, financial condition or results of operations,
customer, employee or supplier relations, business condition, prospects, or
financing arrangements of Seller.
ARTICLE 4
CONDUCT OF SELLER PENDING THE CLOSING
Seller and MK hereby covenant and agree that from the date hereof to the
Closing Date, unless Purchaser shall otherwise agree in writing or except as
otherwise expressly contemplated or permitted by this Agreement:
4.1 Conduct of Business Pending the Closing. Except as specifically
contemplated in this Agreement, from the date hereof to the Closing Date, the
Business of Seller shall be conducted only in, and Seller shall take no action
except in, the ordinary course, on an arm's
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length basis, and in accordance with all applicable laws, rules, and regulations
and past custom and practice, including, without limitation, making any loans,
making any cash payments, or transferring any other assets or properties of
Seller to any employee, officer, shareholder, or director of Seller; and Seller
shall maintain its facilities in good operating condition, ordinary wear and
tear excepted; and Seller will not, directly or indirectly, do or permit to
occur any of the following except as may be disclosed on any Schedule hereto:
(a) Breach any material contract, agreement, commitment, or
undertaking, including this Agreement;
(b) Knowingly violate or fail to comply with any laws applicable to
it, the Acquired Assets or the Business;
(c) Commit any act or permit the occurrence of any event or the
existence of any condition of the type described in Section 3.10 hereof;
(d) Agree to do any of the actions described in the preceding
clauses (a) through (c).
4.2 Business Relationships. Seller and MK will preserve intact Seller's
business organizations and goodwill, keep available the services of its officers
and employees as a group, and maintain satisfactory relationships with
suppliers, distributors, customers, and others having business relationships
with it.
4.3 Access to Information. Purchaser and its counsel, accountants, and
other representatives shall have the opportunity to make a complete due
diligence review of the books, records, business, and affairs of Seller,
including, without limitation, the Acquired Assets, Leased Premises, Consumer
Paper and all other matters relating thereto. In the event Purchaser, in its
reasonable business discretion, determines that conditions, circumstances, or
facts of or affecting the state of the Business or other matters contemplated by
this Agreement are not satisfactory to Purchaser, Purchaser shall have no
further obligation to proceed with the transaction, and the parties shall have
no further liability to one another, except as expressly provided herein. To
facilitate the due diligence review, Seller shall provide to Purchaser and its
agents complete access to all of Seller's records and documents, shall provide
Purchaser with personal, bank, and professional references, and shall make
available for consultation customers, employees, suppliers, and distribution
channels.
4.4 Tax on Prior Sales. Seller agrees to furnish to Purchaser certificates
from the state taxing authorities and any related certificates that Purchaser
may reasonably request as evidence that all sales and use tax liabilities of
Seller accruing before the Closing Date have been fully satisfied or provided
for to the extent such certificates are prepared by the applicable state taxing
authority.
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4.5 Notification of Certain Matters. Seller and MK shall (i) confer on a
regular basis with representatives of Purchaser and report operational matters
and the general status of ongoing operations, (ii) notify Purchaser of any
material adverse change in the normal course of its business or in the operation
of its properties and of any governmental or third party complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated); (iii) not take any action which would render, or which reasonably
may be expected to render, any representation or warranty made by it in this
Agreement untrue at, or at any time prior to, the Closing; and (v) promptly
notify Purchaser if Seller or MK shall discover that any representation or
warranty made by it in this Agreement was when made, or has subsequently become,
untrue.
4.6 Transfer of Permits. Seller and MK will use their best efforts to
assist Purchaser to effect the assignment or other transfer of Permits from
Seller to Purchaser as of or as soon as practicable after the Closing Date.
4.7 Closing. Seller and MK shall use their best efforts to cause the
conditions specified in Section 6.3 hereof to be satisfied at or prior to the
Closing Date hereof.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Employment. All employees of Seller, including MK, will be terminated
by Seller on or before the Closing Date. Seller shall be responsible for any
severance and/or other payments, including, but not limited to, accrued vacation
and sick time, sick pay, and other compensation, benefits, and perquisites,
incurred in connection therewith and during the period prior to the Closing
Date. After the Closing Date, Purchaser will agree to hire such employees of
Seller on an "at will" basis as Purchaser determines in its sole discretion, and
Seller will cooperate with Purchaser to that end. Any statement in this Section
5.1 to the contrary notwithstanding, Seller makes no representations that all
(or any specific) employee or employees of Seller will, if requested, become
employed by Purchaser.
5.2 Expenses. Seller shall pay the costs and expenses of Seller and MK and
Purchaser shall pay the costs and expenses of Purchaser, incurred in connection
with this Agreement and the transactions contemplated hereby; provided, however,
that Purchaser will pay all expenses associated with the preparation of the
Audited Financial Statements for 1996. Notwithstanding the foregoing, in the
event any party breaches the terms of this Agreement prior to the Closing, and
the transactions contemplated hereby are not consummated, the breaching party
agrees to pay the nonbreaching party an amount equal to all of the expenses
incurred by the nonbreaching party in connection with this Agreement, and
otherwise related to the transactions contemplated hereby, including, but not
limited to, all fees and expenses incurred by the nonbreaching party to
accountants, attorneys, and finders, brokers or consultants. Nothing herein
shall be deemed to limit the right or remedy of a party in the event of a breach
of this Agreement by the other party.
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5.3 No Negotiations. Neither Seller nor MK shall, directly or indirectly,
through any officer, director, agent, or otherwise, solicit, initiate, or
encourage submission of any proposal or offer from any person or entity
(including any of its or their officers or employees) relating to any
liquidation, dissolution, recapitalization, merger, consolidation, or
acquisition or purchase of all or a material portion of the assets of, or any
equity interest in, Seller or other similar transaction or business combination
involving Seller, or participate in any negotiations regarding, or furnish to
any other person any information with respect to, or otherwise cooperate in any
way with, or assist, participate in, facilitate, or encourage, any effort or
attempt by any other person or entity to do or seek any of the foregoing. Seller
or MK shall promptly notify Purchaser if any such proposal or offer, or any
inquiry from or contact with any person with respect thereto, is made and shall
promptly provide Purchaser with such information regarding such proposal, offer,
inquiry, or contact as Purchaser may request.
5.4 Public Announcements. The parties hereto shall not issue any press
release or public announcement, including announcements by any party for general
reception by or dissemination to employees, agents, or customers, with respect
to this Agreement and the other transactions contemplated by this Agreement
without the prior written consent of the other parties hereto (which consent
shall not be withheld unreasonably); provided, however, that Purchaser may make
any disclosure or announcement that, in the opinion of its counsel, it is
obligated to make pursuant to applicable law or regulation of the Nasdaq Stock
Market, Inc. or any national securities exchange, as applicable, in which case
Purchaser shall reasonably consult with Seller prior to making such disclosure
or announcement; and provided further, that, upon execution of this Agreement,
Purchaser may make a public announcement of such occurrence in a press release
reviewed and reasonably approved by Seller prior to publication.
5.5 Purchaser Loans.
(a) On the Closing Date, and pursuant to the terms and conditions of
the loan agreement to be mutually agreed upon (the "Seminole Loan
Agreement"), Purchaser will cause to have advanced to Seminole a
commercial loan (the "Seminole Loan") in an amount equal to the lesser of
(i) the outstanding principal balance of the Consumer Paper, or (ii)
$1,000,000. The Seminole Loan shall be secured by the Consumer Paper and
will be personally guaranteed by MK pursuant to a payment guaranty in the
form to be mutually agreed upon (the "Payment Guaranty"). The Seminole
Loan will accrue interest at the Prime Rate, as published in The Wall
Street Journal from time to time, plus two percent, and will be payable in
full on the Maturity Date. If requested by Seminole, Purchaser will
service the Consumer Paper in accordance with its ordinary and customary
practices regarding the servicing of consumer installment contracts
utilizing a single employee approved by Seminole. During the period
between the Closing Date and the Maturity Date, all payments on the
Consumer Paper collected by Seminole (or by Purchaser if Purchaser
services the Consumer Paper) shall be applied to the Seminole Loan. Upon
payment of the Seminole Loan in full on the date which is two years
following the Closing Date (the "Maturity Date"), all Consumer Paper then
serviced by
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Purchaser will be returned to Seminole; provided, however, that, at
Seminole's request, Purchaser will continue to service the Consumer Paper
for and on behalf of Seminole and shall remit any payments received in
connection therewith to Seminole. Anything in this Section 5.5(a) to the
contrary notwithstanding, Purchaser does not make any representation or
warranty regarding the collectability of the Consumer Paper and shall have
no liability to Seminole in respect of its collection and servicing
efforts, absent bad faith or wilful misconduct.
(b) At Closing, Purchaser shall provide a commitment letter to
Krizmanich Manatee Holdings, Inc., a Florida corporation, agreeing to make
the following loan, subject to conditions mutually agreed upon. Purchaser
will cause to have advanced to KMH a commercial mortgage loan (the "KMH
Loan") in the amount of $1,500,000. The KMH Loan shall be secured by a
second priority lien (subject only to the existing first mortgage in favor
of the Federal Deposit Insurance Corporation, which has an approximate
balance of $1,000,000) on certain real property located in Florida that is
owned by KMH and is not used in the operations of the Business (the "KMH
Real Estate"). The KMH Real Estate securing the KMH Loan shall be in a
condition acceptable to Purchaser, in its sole discretion. The MK Loan
will accrue interest at the Prime Rate, as published in The Wall Street
Journal from time to time, plus two percent, and will be payable in
monthly installments of interest only with the principal and all accrued
and unpaid interest thereon payable in full on the Maturity Date. The KMH
Loan shall have provisions for partial release for individual parcels sold
during the term of the KMH Loan.
5.6 Confidentiality. Each party hereto, and its officers, directors,
agents, and affiliates, will hold in strict confidence, and will not divulge,
communicate, use to the detriment of any other party hereto or for the benefit
of any other person or persons, or misuse in any way, any financial information
or other data obtained in connection with this Agreement, including, without
limitation, any confidential information or trade secrets of such other party,
personnel information, secret processes, know how, customer lists, formulas, or
other technical data; and if the transactions contemplated by this Agreement are
not consummated, each party hereto, and its officers, directors, agents, and
affiliates, will return to each other party all such data and information as
such other party may reasonably request, including, without limitation, work
sheets, test reports, manuals, lists, memoranda, and other documents prepared by
or made available in connection with this transaction. The parties hereto may
disclose such information to their respective attorneys and accountants so long
as they agree to keep such information confidential.
5.7 Books and Records. Seller will make available to Purchaser, at
Purchaser's request and expense, from time to time, all books and records of
Seller relating, directly or indirectly, to the Business which are reasonably
necessary with respect to Purchaser's ongoing operations for inspection or
copying by Purchaser at any reasonable time for a six (6) year period after the
Closing Date, and to offer same to Purchaser, from time to time, at Purchaser's
expense, prior
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to the destruction of all or any part thereof. In addition, the parties shall
make reasonably available to one another any records or documents that they
maintain with respect to the Acquired Assets or the Business for purposes of
compliance with applicable tax laws or in defending any third party litigation
arising in respect of this Agreement.
5.8 H-S-R Act. To the extent required by law, Seller and MK on the one
hand and Purchaser on the other shall each file or cause to be filed with the
Federal Trade Commission (the "FTC") and the United States Department of Justice
(the "DOJ") any notifications required to be filed by their respective "ultimate
parent entities" under the H-S-R Act, with respect to the transactions
contemplated herein. Each party shall be responsible for all expenses incurred
in the preparation of their respective H-S-R Act filings and the filing fees to
be paid in connection with the H-S-R Act filings. The parties shall use their
reasonable best efforts to make such filings promptly, to respond to any
requests for additional information made by either the FTC or DOJ, to cause the
waiting periods under the H-S-R Act to terminate or expire at the earliest
possible date and to resist vigorously, at their respective cost and expense
(including, without limitation, the institution or defense of legal proceedings)
any assertion that the transactions contemplated herein constitute a violation
of the antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein.
5.9 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper, or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including obtaining all necessary
waivers, consents, and approvals and effecting all necessary registrations and
filings and submissions of information requested by governmental authorities.
ARTICLE 6
CONDITIONS
6.1 Conditions to Obligations of Each Party. The respective obligations of
each party to effect the transactions contemplated hereby shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) There shall not be threatened, instituted, or pending any action
or proceeding, before any court or governmental authority or agency,
domestic or foreign: (i) challenging or seeking to make illegal, or to
delay or otherwise directly or indirectly to restrain or prohibit, the
consummation of the transactions contemplated hereby, or seeking to obtain
damages in connection therewith; (ii) seeking to prohibit direct or
indirect ownership or operation by Purchaser or any of its subsidiaries of
all or a material portion of the Business or the Acquired Assets of
Seller, or to compel Purchaser or any of its subsidiaries to divest of or
to hold separately all or a material portion of the Business or the
Acquired Assets of Seller as a result of the transactions contemplated
hereby; (iii) seeking to impose or confirm limitations on the ability of
Purchaser effectively to exercise
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directly or indirectly full rights of ownership of any of the Acquired
Assets or properties of Seller; (iv) seeking or causing any material
diminution in the direct or indirect benefits expected to be derived by
Purchaser as a result of the transactions contemplated by this Agreement;
(v) invalidating or rendering unenforceable any material provision of this
Agreement (including without limitation any of the documents or agreements
to be delivered hereunder); or (vi) which otherwise might materially
adversely affect Purchaser or any of its subsidiaries or the Acquired
Assets or Business;
(b) There shall not be any action taken, or any statute, rule,
regulation, judgment, order, or injunction proposed, enacted, entered,
enforced, promulgated, issued, or deemed applicable to the transactions
contemplated hereby by any federal, state, or foreign court, government,
or governmental authority or agency, which may, directly or indirectly,
result in any of the consequences referred to in (a) above or otherwise
prohibit consummation of the transactions contemplated hereby;
(c) No party hereto shall have terminated this Agreement as
permitted herein; and
(d) There shall not have occurred any of the following events that
could have a material adverse effect on Purchaser or Seller: (i) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or any limitation by United States
authorities on the extension of credit by lending institutions; (ii) a
commencement of war, armed hostilities, or other international or national
calamity directly or indirectly involving the United States; or (iii) in
the case of any of the foregoing existing at the date hereof, a material
acceleration or worsening thereof.
6.2 Additional Conditions to Obligation of Seller. The obligation of
Seller to effect the transactions contemplated hereby is also subject to the
fulfillment at or prior to the Closing of the following conditions:
(a) The representations and warranties of Purchaser set forth in
Article 2 shall be true and correct as of the Closing Date as if made at
and as of the Closing Date, and Purchaser shall in all material respects
have performed each obligation and agreement and complied with each
covenant to be performed and complied with by it hereunder at or prior to
the Closing; and
(b) Purchaser shall have furnished to Seller: (i) a copy of the text
of the resolutions by which the corporate action on the part of Purchaser
necessary to approve this Agreement and the transaction contemplated
herein were taken; and (ii) a certificate executed on behalf of Purchaser
by its corporate secretary or one of its assistant corporate secretaries
certifying to Seller that such copy is a true, correct, and complete copy
of such resolutions and that such resolutions were duly adopted and have
not been amended or rescinded.
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6.3 Additional Conditions to Obligation of Purchaser. The obligations of
Purchaser to effect the transactions contemplated herein are also subject to the
fulfillment at or prior to the Closing of the following conditions:
(a) The representations and warranties of Seller and MK in this
Agreement and in any certificate or other instrument delivered pursuant to
the provisions hereof or in connection with the transactions contemplated
hereby shall be true and correct as of the Closing Date as if made at and
as of the Closing Date, and Seller shall in all material respects have
performed each obligation and agreement and complied with each covenant to
be performed and complied with by them hereunder at or prior to the
Closing;
(b) Seller and MK shall have furnished to Purchaser a certificate in
which it/he shall certify that the conditions set forth in Section 6.3(a)
have been fulfilled;
(c) Seller and MK shall have furnished to Purchaser: (i) copies of
the texts of the resolutions by which the corporate action on the part of
Seller and its shareholders necessary to approve this Agreement and the
transactions contemplated hereby were taken; and (ii) certificates
executed on behalf of Seller and its shareholders by the President of
Seller and MK certifying to Purchaser that such copies are true, correct,
and complete copies of such resolutions and that such resolutions were
duly adopted and have not been amended or rescinded;
(d) Purchaser shall have received from Seller and MK a letter, dated
the Closing Date, that on the basis of a review (not an audit) of the
latest available accounting records of Seller, consultations with other
responsible officers of Seller, and other pertinent inquiries that he may
deem necessary, he has no reason to believe that during the period from
the date of the Current Financial Statements to the Closing Date, except
as may otherwise be set forth on any Schedule hereto, there has been any
change in the financial condition or results of operations of the
Business, except changes incurred in the ordinary and usual course of
business during that period that in the aggregate are not materially
adverse, and other changes or transactions, if any, contemplated by this
Agreement;
(e) Purchaser shall have received a letter addressed to Purchaser
from counsel for Seller and MK, based on customary reliance and subject to
customary qualifications, in a form mutually agreed upon;
(f) Seller and MK shall have entered into the Covenant Not to
Compete Agreement;
(g) This Agreement and the transactions contemplated hereby shall
have been approved by Purchaser's Board of Directors;
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(h) Seller shall have obtained all necessary consents to this
Agreement and the transactions contemplated hereby and Purchaser shall
have obtained or assumed all permits or licenses necessary to ownership of
the Acquired Assets and operation of the Business, including, without
limitation, the following: (i) the consent of GE Capital to the sale
herein, to the release of any liens it may have on the Acquired Assets in
respect of Seller or MK and to an increase in the size of the line of
credit currently provided by GE Capital to Purchaser; (ii) the approval of
the transaction by all governmental authorities exercising jurisdiction
over the ownership of the Acquired Assets; (iii) the approval by all
governmental authorities with respect to the issuance to, or assumption
by, Purchaser of all Permits required to own the Acquired Assets and
operate the Business; and (iv) each other consent and approval necessary
in order that the transactions contemplated herein not constitute a breach
or violation of, or result in a right of termination or acceleration with
respect to, or result in any encumbrance on any of Seller's assets,
including the Acquired Assets, pursuant to the provisions of any
agreement, arrangement, or understanding or any license, franchise, or
Permit;
(i) Purchaser shall not have discovered any fact or circumstance
existing as of the date of this Agreement which has not been disclosed by
Seller or MK as of the date of this Agreement regarding the Business,
assets, including the Acquired Assets, properties, condition (financial or
otherwise), results of operations, or prospects of Seller which is or
could be, individually or in the aggregate with other such facts and
circumstances, materially adverse to Seller;
(j) Purchaser and Seller shall have agreed to the terms of leases
with respect to the Related Facilities and the Principal Facility, and
Purchaser shall have agreed to the terms relating to its assumption of
leases with respect to the Independent Facilities and Purchaser shall have
completed to its satisfaction any environmental assessment of such
facilities;
(k) There shall have been no damage, destruction, or loss of or to
any property or properties owned or used by Seller, whether or not covered
by insurance, which in the aggregate may have a material adverse effect on
the Business, financial condition, results of operations or prospects of
Seller;
(l) All Insider agreements shall have been terminated;
(m) Receipt and approval of the Schedules to be prepared by Seller
and MK, and preparation of and agreement as to all closing documents,
agreements and procedures required under this Agreement;
(n) Purchaser shall have received such non-disturbance,
subordination and other agreements from Seller's lenders and third party
lessors as Purchaser shall reasonably request;
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(o) Seller and MK shall have granted the security contemplated by
Section 8.6 hereof; and
(p) The form and substance of all certificates, instruments,
opinions, and other documents delivered to Purchaser under this Agreement
shall be satisfactory in all respects to Purchaser and its counsel.
ARTICLE 7
THE CLOSING
7.1 Closing. The closing (the "Closing") of the transactions contemplated
herein shall be held on January 20, 1996 (the "Closing Date"), at a time and
place as the parties shall mutually agree.
7.2 Seller's and MK's Obligations. In addition to any other documents
required to be delivered by Seller or MK at Closing, Seller or MK shall deliver
to Purchaser at Closing the following documents:
(a) An executed Bill of Sale and Assumption and other instruments of
transfer, with full warranties of title, dated as of the Closing Date,
conveying to Purchaser all of Seller's right, title, and interest in and
to the Acquired Assets, all in form and substance satisfactory to
Purchaser;
(b) Executed assignments of all Contracts (with consents if
required), the Contracts themselves, certificates of title to all
Vehicles, and a UCC-1 Financing Statement (in accordance with Section
1.10(b));
(c) Releases of all liens, encumbrances and security interests in
respect of the Acquired Assets and evidences of the GE payoff contemplated
by Sections 1.4, 3.10 and 3.13.
(d) The Leases contemplated by Section 1.7 and lease assignments
with respect to each item of personal property which is leased by Seller
and which is to be assumed by Purchaser hereunder, properly executed and
acknowledged by Seller, and accompanied by all consents of lessors
required by this Agreement and the leases being assigned, and such
subordination agreements, non-disturbance certificates and other documents
as Purchaser shall have reasonably requested;
(e) Executed assignments of all assignable Permits issued to Seller
by any governmental entity or vendor;
(f) All books, records, and other data relating to the Acquired
Assets and the Business (other than corporate records);
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(g) The certificate(s) as provided for in Section 6.3(b) hereof;
(h) The certificate of Seller's President as provided for in Section
6.3(d) hereof;
(i) Certified resolutions of the Board of Directors and shareholders
of Seller as provided for in Section 6.3(c) hereof;
(j) The consents as provided for in Section 6.3(h) hereof;
(k) The Covenant Not to Compete and security contemplated by Section
8.6;
(l) An executed opinion of Seller's and MK's counsel, as
contemplated by Section 6.3(e); and
(m) Such other documents as Purchaser or its counsel or any lender
or lessor of Purchaser may reasonably request in order to effectuate the
transactions contemplated under this Agreement.
Seller and MK, at any time before or after the Closing, will execute,
acknowledge, and deliver any further deeds, assignments, conveyances, and other
assurances, documents, and instruments of transfer reasonably requested by
Purchaser, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by Purchaser, for the purpose of
assigning, transferring, granting, conveying, and confirming to Purchaser, or
reducing to possession, any or all property to be conveyed and transferred by
this Agreement. If requested by Purchaser, Seller further agrees to prosecute or
otherwise enforce in its own name for the benefit of Purchaser, any claims,
rights, or benefits that are transferred to Purchaser by this Agreement and that
require prosecution or enforcement in Seller's name. Any prosecution or
enforcement of claims, rights, or benefits under this Section shall be solely at
Purchaser's expense, unless the prosecution or enforcement is made necessary by
a breach of this Agreement by Seller.
7.3 Purchaser's Obligations. Purchaser shall deliver to Seller and MK at
Closing the following documents:
(a) Wire transfer in the amount of the Purchase Price less the
Deposit, payable as provided in Section 1.5 hereof;
(b) Executed counterparts of such of the closing documents of Seller
as shall require acceptance by Purchaser;
(c) The loan documents and commitment letter contemplated by Section
5.5.
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(d) Certified resolutions of the Board of Directors of Purchaser as
provided for in Section 6.2(b) hereof.
ARTICLE 8
INDEMNITIES
8.1 Survival of Representations and Warranties. Regardless of any
investigation at any time made by or on behalf of any party hereto, or of any
information any party may have in respect thereof, all covenants, agreements,
representations, and warranties made hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall survive the Closing.
8.2 Nature of Statements. All statements contained herein, in any Schedule
or Exhibit hereto, or in any certificate or other written instrument delivered
by or on behalf of Seller, MK, or Purchaser pursuant to this Agreement, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by Seller, MK, or Purchaser, as the case may be.
8.3 Indemnification of Purchaser by Seller and MK. Seller and MK (for
purposes of this Section 8.3 only, the "Indemnifying Parties") each, jointly and
severally, shall indemnify, defend, and hold harmless Purchaser and its direct
and indirect parent companies, subsidiaries, and affiliates, and their
respective officers, directors, and shareholders, successors and assigns, from
and against any and all costs, expenses, losses, damages, fines, penalties, or
liabilities (including, without limitation, interest which may be imposed in
connection therewith, court costs, litigation expenses, and reasonable
attorneys' and accounting fees) ("Actual Loss") incurred by Purchaser, directly
or indirectly, with respect to, in connection with, arising from, or alleged to
result from, arise out of, or be in connection with:
(a) A breach by any of the Indemnifying Parties or any affiliate of
any representation or warranty made by such parties or affiliate and
contained in this Agreement or in any certificate or other document
delivered by said parties to Purchaser or any affiliate hereunder or
thereunder;
(b) A breach by any of the Indemnifying Parties or any affiliate of
any covenant, restriction, or agreement made by or applicable to such
parties or affiliate and contained in this Agreement or in any certificate
or other document delivered by said parties or affiliate to Purchaser or
any affiliate hereunder or thereunder (including without limitation, any
failure to timely repay Purchaser or affiliate pursuant to any loans made
to Seller, MK or any affiliate, the breach of any lease by Seller, MK or
any affiliate or the breach of the Covenant Not to Compete by Seller, MK
or any affiliate);
(c) Except for any Assumed Liabilities, any other liability,
obligation, claim, complaint, debt, suit, cause of action, investigation,
or proceeding of any kind whatsoever,
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including, without limitation, any liability for sales, use or other taxes
and any liability under any environmental, pollution control, health or
safety law, rule or regulation, including actions or proceedings in
respect thereof, against or relating to Seller, the Business, or the
Acquired Assets, whether instituted or commenced prior to or after the
Closing Date and which relates to or arises from the business or assets of
Seller on or before the Closing Date or, with respect to the continuing
business activities of Seller, after the Closing Date;
(d) Any scheduled contingency pertaining to Seller, MK or the
Acquired Assets, including the litigation and tax audit disclosed in the
Schedules; and
(e) The extent to which the aggregate Losses, as determined by
Purchaser in accordance with generally accepted accounting principles (a
"Loss"), taking into account recoveries within one year of a Contract's
writeoff on Contracts acquired under this Agreement and an agreement of
even date herewith entitled "Agreement for Purchase and Sale of Contracts"
exceed 20% of the principal balances thereof, up to $2,000,000.
8.4 Indemnification of Seller and MK by Purchaser. Purchaser shall
indemnify, defend, and hold Seller and MK (for purposes of this Section 8.4
only, the "Indemnified Parties") harmless from and against any Actual Losses
incurred by the Indemnified Parties with respect to, in connection with, arising
from, or alleged to result from, arise out of, or be in connection with:
(a) A breach by Purchaser of any representation or warranty made by
Purchaser and contained in this Agreement or in any certificate or other
document delivered by Purchaser to the Indemnified Parties hereunder or
thereunder;
(b) A breach by Purchaser of any covenant, restriction, or agreement
made by or applicable to Purchaser and contained in this Agreement or in any
certificate or other document delivered by Purchaser to the Indemnified Parties
hereunder or thereunder;
(c) All loss, expense, or damage suffered as the direct result of
Purchaser's failure to pay the Assumed Liabilities in accordance with the
terms of this Agreement; and
(d) Any other claim, suit, cause of action, investigation, or
proceeding of any kind whatsoever instituted or commenced after the
Closing Date which relates to or arises from Purchaser's operation of
Seller's business after the Closing Date, except for any claims arising
out of Seller's liabilities to Purchaser or obligations to Purchaser.
8.5 Procedure for Indemnification.
(a) The party which is entitled to be indemnified hereunder (the
"Indemnified Party") shall promptly give notice hereunder to the party
required to indemnify (the "Indemnifying Party") after obtaining written
notice of any claim as to which recovery
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may be sought against the indemnifying party because of the indemnity in
Section 8.3 and Section 8.4 hereof and, if such indemnity shall arise from
the claim of a third party, shall permit the Indemnifying Party to assume
the defense of any such claim and any litigation resulting from such
claim. Notwithstanding the foregoing, the right to indemnification
hereunder shall not be affected by any failure of an Indemnified Party to
give such notice, or delay by an Indemnified Party in giving such notice,
unless, and then only to the extent that, the rights and remedies of the
Indemnifying Party shall have been prejudiced as a result of the failure
to give, or delay in giving, such notice. Failure by an Indemnifying Party
to notify an Indemnified Party of its election to defend any such claim or
action by a third party within 15 days after notice thereof shall have
been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its right to defend such claim or action.
(b) If the Indemnifying Party assumes the defense of such claim or
litigation resulting therefrom, the obligations of the Indemnifying Party
hereunder as to such claim shall include taking all steps necessary in the
defense or settlement of such claim or litigation and holding the
Indemnified Party harmless from and against any and all damages caused by
or arising out of any settlement approved by the Indemnifying Party or any
judgment in connection with such claim or litigation. The Indemnifying
Party shall not, in the defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) except with the written consent of
the Indemnified Party, or enter into any settlement (except with the
written consent of the Indemnified Party) which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to
the Indemnified Party a release from all liability in respect of such
claim or litigation. Anything in this Section 8.5 to the contrary
notwithstanding, the Indemnified Party may, with counsel of its choice and
at its expense, participate in the defense of any such claim or
litigation.
(c) If the Indemnifying Party shall not assume the defense of any
such claim by a third party or litigation resulting therefrom after
receipt of notice from such Indemnified Party, the Indemnified Party may
defend against such claim or litigation in such manner as it deems
appropriate, and unless the Indemnifying Party shall deposit with the
Indemnified Party a sum equivalent to the total amount demanded in such
claim or litigation plus the Indemnified Party's estimate of the costs of
defending the same, the Indemnified Party may settle such claim or
litigation on such terms as it may deem appropriate and the Indemnifying
Party shall promptly reimburse the Indemnified Party for the amount of
such settlement and for all damages incurred by the Indemnified Party in
connection with the defense against or settlement of such claim or
litigation.
(d) The Indemnifying Party shall promptly reimburse the Indemnified
Party for the amount of any judgment rendered with respect to any claim by
a third party in such litigation and for all damage incurred by the
Indemnified Party in connection with the
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defense against such claim or litigation, whether or not resulting from,
arising out of, or incurred with respect to, the act of a third party.
8.6 Security. At Closing, the indemnities, representations, warranties,
covenants and agreements of Seller, MK and their affiliates herein or under
documents or agreements delivered hereunder shall be secured by a lien on two
commercial properties (including the property referenced in Section 1.7(c))
owned by Seller, MK or affiliates, in a form mutually agreed upon.
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) By mutual written consent of duly authorized officers of
Purchaser and Seller;
(b) By Purchaser if, pursuant to its due diligence review identified
in Section 4.3 hereof, Purchaser determines that conditions,
circumstances, or facts of or affecting the state of Seller's Business are
not satisfactory to it;
(c) By either Purchaser or Seller if the other party breaches any of
its material representations, warranties, or covenants contained herein
and, if such breach is curable, such breach is not cured within five (5)
business days after notice thereof;
(d) By either Purchaser or Seller if the transactions contemplated
herein shall not have been consummated on or before February 15, 1996 or
such later date as may be mutually agreed upon by the parties; provided,
however, that no party shall have the right to terminate this Agreement
unilaterally if the event giving rise to such right is primarily
attributable to such party or to any affiliated party.
9.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 9.1, this Agreement shall become void and there shall be
no liability or further obligation hereunder on the part of Purchaser or Seller
or their respective shareholders, officers, or directors, except as set forth in
Article 10 and Sections 1.5(a), 5.2 and 5.6 hereof, and except for liability
arising from a breach of this Agreement.
ARTICLE 10
GENERAL PROVISIONS
10.1 Notices. All notices, consents, and other communications hereunder
shall be in writing and deemed to have been duly given when (i) delivered by
hand, (ii) sent by telecopier (with receipt confirmed), provided that a copy is
mailed by registered mail, postage pre-paid return receipt requested, or (iii)
when received by the addressee, if sent by Express Mail, Federal
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Express, or other express delivery service (postage pre-paid return receipt
requested), in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate as to itself by notice to the other)::
If to Purchaser: Ugly Duckling Corporation
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
Phone: (602) 852-6600
FAX: (602) 852-6656
Attn: Steven P. Johnson, Esq.
With a copy to: Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Phone: (602) 382-6252
FAX: (602) 382-6070
Attn: Steven D. Pidgeon, Esq.
If to Seller or MK: Seminole Finance Corporation
Second Chance Finance, Inc.
Second Chance Wholesale, Inc.
21649 US Highway 19 North
Clearwater, Florida 34625
Phone:
FAX:
Attn: Mr. Michael Krizmanich
With a copy to: Kass Hodges, P.A.
Centre Square
1505 N. Florida Avenue
Tampa, Florida 33602
Phone: (813) 229-0900
FAX: (813) 229-3323
Attn: James M. Shuler
10.2 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute one and the same agreement.
10.3 Governing Law. The validity, construction, and enforceability of this
Agreement shall be governed in all respects by the laws of the State of Florida,
without regard to its conflict of laws rules.
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10.4 Assignment. This Agreement shall not be assigned by operation of law
or otherwise, except that Purchaser may assign all or any portion of its rights
under this Agreement to any wholly owned subsidiary, but no such assignment
shall relieve Purchaser of its obligations hereunder, and except that this
Agreement may be assigned by operation of law to any corporation or entity with
or into which Purchaser may be merged or consolidated or to which Purchaser
transfers all or substantially all of its assets, and such corporation or entity
assumes this Agreement and all obligations and undertakings of Purchaser
hereunder.
10.5 Further Assurances. At any time on or after the date hereof, the
parties hereto shall each perform such acts, execute and deliver such
instruments, assignments, endorsements and other documents and do all such other
things consistent with the terms of this Agreement as may be reasonably
necessary to accomplish the transaction contemplated in this Agreement or
otherwise carry out the purpose of this Agreement.
10.6 Gender and Number. The masculine, feminine, or neuter pronouns used
herein shall be interpreted without regard to gender, and the use of the
singular or plural shall be deemed to include the other whenever the context so
requires.
10.7 Schedules and Exhibits. The Schedules and Exhibits referred to herein
are incorporated herein by such reference as if fully set forth in the text
hereof. The parties acknowledge that the Schedules to be delivered by Seller and
MK have not been prepared as of the date of execution of this Agreement. Seller
and MK agree to deliver such Schedules as promptly and practicable, but not
later than January 8, 1997, for review and approval (which approval shall not be
unreasonably withheld) by Purchaser. All asset Schedules shall be updated as of
the Closing. All documents and agreements delivered to Purchaser in connection
with its investigation of Seller shall be complete and accurate and reflect all
amendments thereto.
10.8 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof shall, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
10.9 Litigation Costs. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees, accounting fees, and
other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.
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10.10 Section and Paragraph Headings. The Article and Section headings in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
10.11 Amendment. This Agreement may not be amended except by an instrument
in writing approved by the parties to this Agreement and signed on behalf of
each of the parties hereto.
10.12 Transaction Expenses. Except as otherwise expressly provided herein,
each party shall bear its own expenses incident to this Agreement and the
transactions contemplated hereby, including without limitation, all fees of
counsel, consultants, and accountants.
10.13 Severability. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated and the court shall modify this
Agreement or, in the absence thereof, the parties shall negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement.
10.14 Extent of Obligations. All covenants, representations, warranties,
indemnities, and agreements made by Seller and MK herein shall be deemed joint
and several as to each of them.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Purchaser, Seller, and MK have caused this Agreement
to be executed on the date first written above by their respective officers
thereunder duly authorized.
UGLY DUCKLING CORPORATION, a Delaware
corporation
By: /s/ Steven P. Johnson
--------------------------------
Name: Steven P. Johnson
-----------------------------
Title: Sr. Vice President
----------------------------
SEMINOLE FINANCE CORPORATION,
a Florida corporation
By: /s/ Michael Krizmanich
--------------------------------
Name: Michael Krizmanich
-----------------------------
Title: President
----------------------------
SECOND CHANCE FINANCE, INC.
a Florida corporation
By: /s/ Michael Krizmanich
--------------------------------
Name: Michael Krizmanich
-----------------------------
Title: President
----------------------------
SECOND CHANCE WHOLESALE, INC.
a Florida corporation
By: /s/ Michael Krizmanich
--------------------------------
Name: Michael Krizmanich
-----------------------------
Title: President
----------------------------
MICHAEL KRIZMANICH
/s/ Michael Krizmanich
-----------------------------------
Michael Krizmanich
As to Section 1.5(a) only:
Kass Hodges, P.A.
/s/ James M. Shuler
-----------------------------------
By: James M. Shuler
--------------------------------
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