UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(g) of The Securities Exchange Act of 1934
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1-800-AUTOTOW, INC.
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(Name of Small Business Issuer as specified in its charter)
DELAWARE 65-0783268
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(State of incorporation) (I.R.S. Employer Identification No.)
1301 N. Congress Ave., Suite 330
Boynton Beach, FL 33426
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 733-2300
Securities to be registered pursuant to 12(b) of the Act:
None
Securities to be registered pursuant to 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
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PART I
The Company is filing this Form 10-SB on a voluntary basis to (1) provide
current, public information to the investment community; (2) to expand the
availability of secondary trading exemptions under the Blue Sky laws and thereby
expand the trading market in the Company's securities; and (3) to comply with
the continued listing requirements of the Company's securities on the
Over-The-Counter Bulletin Board. In the event the Company's obligations to file
periodic reports under the Exchange Act is suspended, the Company reserves the
right to re-evaluate whether to continue filing periodic reports on a voluntary
basis.
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
1-800-AutoTow, Inc. ("AutoTow or "Company") was incorporated on September 2,
1997 to consolidate the vehicle towing services industry regionally, then
nationally. Since June 25, 1998, the Company has been publicly traded on the
OTC:BB (trading symbol: AUTWE). On June 1, 1998 it acquired its first towing
operation, D&D Towing & Recovery, Inc. located in Tampa, Florida and on August
1, 1998 it acquired McGann & Chester, Inc. located in Pittsburgh, Pennsylvania.
These companies are currently acting as prototype operations by which the
Company is modeling its future acquisitions. In addition, on August 6, 1999,
AutoTow acquired eight additional towing companies simultaneously with the
consummation of two transactions which provided access to an aggregate of $7.7
million in additional capital. The acquired towing operations were in the
Tampa/St. Petersburg/Bradenton Florida area, Lady Lake/Orlando Florida Areas,
West Palm Beach, Florida and San Antonio, Texas. The funding transactions
consisted of $2.7 million in equity funding from GMA Capital Partners-AutoTow,
LLC ("GMA LLC") an institutional investor that is an affiliate of GMA Partners,
Inc. and an approximately $5 million credit facility with Finova Capital
Corporation ("Finova").
The Company believes that most of the nation's estimated 36,000 towing operators
are family owned businesses with a single location, undercapitalized, not
automated, and perform little or no marketing. The Company intends to capitalize
on a single, cohesive branded identity in this highly fragmented industry by
leveraging its "name is the number is the brand" concept and marketing of its
toll-free, easy-to-remember telephone number: 1-800-AutoTow (1-800-288-6869).
AutoTow's strategy is to acquire several towing companies located within a given
geographic cluster or Service Area and improve their profitability by
implementing its integration, automation and marketing plans. Most of the target
acquisitions will be "mom and pop" operations with revenue averaging
approximately $1 million that can be purchased at attractive adjusted historical
EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) multiples.
Upon acquisition, AutoTow's management intends to "unlock" profits by increasing
revenue through the introduction of various sales and marketing strategies not
currently being employed and reducing expenses by merging facilities,
eliminating redundant administrative expenses and taking advantage of economies
of scale. Simultaneously, it believes it can enhance service reliability, and
hence the Company's reputation, through automation, equipment standardization
and driver training. The Company's business strategy relies heavily upon
identifying and closing appropriate acquisition candidates and obtaining the
capital necessary to finance its growth.
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Through its size and branding, the Company believes it can leverage its name
recognition within a Service Area to attract retail customers, gain market
share, and obtain contracts with insurance companies and fleet-operated
businesses looking to increase efficiency through vendor consolidation for
local, regional and national towing, transportation and recovery services. In
addition, the Company believes it will realize additional economic efficiencies
through its purchasing power in the areas of equipment, financing, fuel,
insurance, parts, etc.
Industry and Market
Towing is a mature industry having been in existence since 1916. According to
Tow Times Magazine, there are an estimated 36,000 towing companies in the United
States that are believed to generate over $12 billion annually. Although
traditionally unsophisticated, the industry is currently undergoing dramatic
change through the use of new automation and communications technologies and
industry consolidation.
The Company believes a number of factors have contributed to recent industry
growth and increased demand, which in turn help to increase the overall number
of towing service calls as well as potential profitability. They include:
Emergence of Road Side Assistance (RSA) programs - Over the past five years,
there has been significant growth of manufacturer and dealer provided RSA
programs. Such programs have increased the number of calls to towing companies.
An aging vehicle fleet - According to AAA (the American Automobile Association),
Americans are keeping their cars longer; as a result, the average personal
vehicle age exceeds eight years. As vehicles age they tend to break down more
often and thus may require some type of road service or tow.
Increased road congestion - Tends to result in more accidents that require
towing services.
Increased towing vehicle capability - Tow trucks are more sophisticated, more
efficient and more versatile than ever before. In addition to traditional
towing, they are capable of performing multiple tasks such as hauling heavy
equipment and small crane service. The Company believes that this added
capability has increased the fleet utilization and profitability of the
industry.
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Revenue Centers and Customers
Towing is more than just helping stranded motorists and towing away improperly
parked vehicles. The Company generates sales from the following customer
groups/services.
Retail Customers - These customers call a towing company directly and do not
have Road Side Assistance nor are motor club members. These calls are more
profitable than motor club calls. The Company believes its "name is the number
is the brand" strategy and sales and marketing programs will enable it to be
very competitive for the retail customer segment in the markets it enters.
Motor Clubs - There are approximately ten major motor clubs that contract with
towing companies to handle the road service and towing needs of their members.
Notable motor clubs include AAA, the Signature Group, USAC (United States Auto
Club), ERS (Emergency Road Service) and Cross Country Motor Club.
Commercial Accounts for Towing Services - These businesses include auto repair
services, body shops, car dealerships and companies who maintain fleets of all
kinds (utility companies, phone and cable companies, shipping companies, courier
services, plumbers, etc.). Either their vehicles or those of their customers
become disabled, and they call a towing provider for service.
Commercial Accounts for Transport Services - These customers include car
dealerships, salvage yards, and automobile auctions that need vehicles
transported from one place to another on a local basis.
Police Calls - Vehicles that have been in accidents, broken down or have been
abandoned are often towed at the request of law enforcement officials. The
companies chosen to tow the vehicles are selected either from a "rotation list"
or by bidding for an exclusive contract with the city, county or state police
responsible for the particular segment of road where the incident occurred. The
police only provide the referral; the consumer or insurance company pays for the
tow.
Vehicle Recoveries - When a car, truck, 18-wheel tractor trailer or other
vehicle is involved in an accident and is disabled, the towing company first
performs a "recovery" of the vehicle (such as winching the vehicle out of a
ditch) and then tows it. The recovery essentially gets the disabled vehicle into
a position where it can be safely loaded onto a tow truck.
Non-consent Tows - These tows consist of a variety of illegally or improperly
parked vehicles where motorists do not have a say over who tows their car.
Non-consent tows include vehicles parked in "red zones" and unauthorized
vehicles parked in hotel parking lots, apartment complexes, and so on.
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Vehicle Storage - If the customer does not request that a vehicle be towed to a
specific location, it typically is taken to the towing company's storage yard
where daily charges up to $15 per day, per vehicle, are levied. For example,
abandoned vehicles or illegally parked vehicles often end up in a storage lot.
Vehicle Sales - In most states, a vehicle title can be transferred legally to a
towing company if the owner does not claim the vehicle after being stored for
more than 30 days. Most vehicles are then sold, auctioned or salvaged for
additional revenue.
Heavy Equipment Hauling - Heavy equipment hauling can include buses,
recreational vehicles, boats, hot tubs, construction equipment such as
bulldozers and forklifts, large air conditioner units, shipping containers, or
any other heavy equipment that needs to be transported. Many items can be
transported on a flat bed tow truck.
The Company's primary target customer group is businesses. The Company believes
that today's businesses are looking for reliable, responsive and consistent
towing, and will pay a competitive rate for these services.
Acquisition Strategy
After acquiring one or more companies within a particular Service Area, the
Company begins to institute its defined policies, procedures, automated
dispatching and other plans. The Company's "build-up" program utilizes a "hub
and spoke" strategy for expansion into and within its targeted Service Areas.
This strategy involves the acquisition of:
* An established, profitable, high-quality local company, or hub, with competent
and able management in place;
* Additional companies, or spokes, with owners who are actively looking to sell
or are motivated to become part of a nationwide towing service; and
* Smaller tuck-in companies. Their equipment will be moved and their operations
consolidated into a hub or spoke.
Due to the nature of the towing industry, companies often have built a niche in
their markets. A significant targeting criteria of each acquisition within any
particular Service Area is the current revenue mix of each company. A key to the
Company's revenue generating strategy is to acquire companies within an area
that have different primary revenue centers. For example, a hub company may
generate 60% of its revenues through motor clubs, a spoke company may generate
70% of its revenues from non-consent towing and another spoke company may
generate 50% of its revenues from commercial account work. The Company plans to
capitalize on these varied revenue concentrations by leveraging and
cross-pollinating each company's customer base. Aside from generating more
service calls, the Company believes that this approach will improve its truck
utilization and increase profitability through the now-possible shared use of
specialized equipment. Although every gap cannot be filled solely through
acquisition, the Company looks for a core group of businesses that meet its
criteria which when combined, will enable it to serve additional market needs
through accelerated internal growth.
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The Company's experience to date is that many towing company owners are very
open to selling their businesses. To date, the Company has generated hundreds of
qualified leads from interested towing companies. These leads have been
generated through the Company's presence at key industry trade shows, industry
articles written about the Company, advertising in industry publications and
through word of mouth.
Recent Acquisitions
On June 1, 1998, the Company, through a wholly owned subsidiary, acquired by
merger D&D Towing and Recovery, Inc., a Florida corporation ("D&D") located in
Tampa, Florida by which D&D Towing and Recovery, Inc. ("D&D") became a wholly
owned subsidiary of 1-800-AutoTow, Inc. Total consideration for this transaction
consisted of $623,071. The Company paid $20,000 cash, $328,673 in stock at
$.4715 per share (697,080 shares) and $274,398 in assumed debt.
In connection with the merger, Mr. Glenn Michael Dempsey, the principal of D&D,
entered into a three year employment agreement with D&D to serve as Service Area
Manager, which provides for annual compensation of $60,000. The agreement also
provides for the first year only, a minimum bonus of $6,000 with the maximum
bonus being 25 percent of his base salary. The employment agreement contains
customary confidentiality, non-compete and termination provisions related to
death and disability, as well as at D&D's option to terminate with cause. In the
event D&D should elect to terminate the agreement without cause, Mr. Dempsey
would be entitled to a severance payment equal to his annual base salary for a
period of 12 months, together with any accrued but unpaid bonus and accelerated
vesting of any stock options theretofore granted. Mr. Dempsey also has the right
to resign his position, and in such event would only be entitled to compensation
through the date of resignation. The Agreement also provides for the granting of
15,000 stock options at an exercise price of $2.50 per share, vesting equally
over a period of 4 years from the date of merger.
D&D entered into a 60 month lease agreement with the principal of the seller,
Mr. Dempsey for the real property at which D&D's operations are conducted. The
lease provides for a monthly rental payment of $3,450.
On August 1, 1998, the Company, through a wholly owned subsidiary, acquired by
merger McGann & Chester, Inc., a Pennsylvania corporation by which McGann &
Chester, Inc. ("M&C") became a wholly owned subsidiary of 1-800-AutoTow, Inc.
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which is located in Pittsburgh, Pennsylvania. At the time of the merger M&C had
annual revenue of approximately $1,430,000 and had approximately 23 trucks in
its fleet. Total consideration for the acquisition was $1,630,107 of which the
Company paid $210,000 in cash, $398,595 in assumed debt and $1,021,512 in Common
Stock at $2.00 per share subject to post closing adjustments including a
contingency that after one year, if the Company's stock price is not trading at
$2.00 per share, the price will be adjusted for the 20 trading days prior to
August 1, 1999. After all adjustments, a total of 1,047,839 shares were issued
for the $1,021,512 at a price of $0.974875 per share.
In connection with the merger with M&C, a principal of M&C, Robert M. McGann,
entered into a five year employment agreement with M&C. Mr. Robert M. McGann
holds the position of Service Area Manager, which provides for annual
compensation of $60,000. The employment agreement contains customary
confidentiality, non-compete and termination provisions related to death and
disability, as well as at M&C's option to terminate with cause. In the event M&C
should elect to terminate the agreement without cause, Mr. McGann would be
entitled to a severance payment equal to his annual base salary for the
remainder of the contract, together with any accrued but unpaid bonus and
accelerated vesting of any stock options theretofore granted. Mr. McGann also
has the right to resign his position, and in such event would only be entitled
to compensation through the date of resignation. The Agreement also provides for
the granting of 4,000 stock options at an exercise price of $2.00 per share,
vesting equally over a period of 4 years from the date of merger. On August 1,
1998, a principal of M&C, Mr. William Chester, III entered into a five year
employment agreement with 1-800-AutoTow, Inc. Mr. Chester holds the position of
Regional Vice President, which provides for annual compensation of $80,000. The
employment agreement contains customary confidentiality, non-compete and
termination provisions related to death and disability, as well as at the
Company's option to terminate with cause. In the event the Company should elect
to terminate the agreement without cause, Mr. Chester would be entitled to a
severance payment equal to his annual base salary for the remainder of the
contract, together with any accrued but unpaid bonus and accelerated vesting of
any stock options theretofore granted. Mr. Chester also has the right to resign
his position, and in such event would only be entitled to compensation through
the date of resignation. The Agreement also provides for the granting of 4,000
stock options at an exercise price of $2.00 per share, vesting equally over a
period of 4 years from the date of merger.
On August 1, 1998, M&C entered into a 60 month lease agreement with the
principals of the seller for the real property at which M&C's operations are
conducted. The property contains offices and a maintenance bay consisting of an
aggregate of approximately 10,000 square feet and sits on a lot of approximately
8 acres. The lease provides for a monthly rental payment of $8,125.
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On August 6, 1999, the Company and its subsidiaries, 1-800-AutoTow Gulf Coast
East, Inc. (1-800-AutoTow GCE"), 1-800-AutoTow Florida, Inc. ("1-800-AutoTow
FL") or 1-800-AutoTow Gulf Coast SW, Inc. ("1-800-AutoTow SW"), have completed
the acquisition of the assets of, or mergers with, eight businesses in the
vehicle towing industry, seven of which are located in Florida and one in Texas.
Following are brief descriptions of these transactions. The following
descriptions are meant to be summaries of the transactions, and investors are
encouraged to read the full documents related to such transactions that are
included elsewhere herein. See Part III, Item 1. Exhibits, of this Form 10-SB
for copies of the acquisition and merger documents. All of these transactions
closed simultaneously with the closing of the Finova/GMA LLC financing as
described elsewhere herein. Approximately $5,074,000 from the proceeds of the
Finova/GMA financing were used by the Company to consummate these acquisitions
excluding attorney's fees and miscellaneous expenses. It is the intention of the
Company to continue to operate these businesses as vehicle towing businesses.
The seller(s) (or their principal operators) of each of these businesses, with
the exception of Lyons AutoBody, Inc. and Lyons Towing, Inc. have entered into
employment or consulting agreements with the Company to ensure the smooth
transition of the ownership of each particular business, and the Company or its
subsidiaries has either leased or sub-leased, the existing facilities to
maintain continuity of service area. Finally, except as specifically set forth
below, the sellers' or their principals have entered into non-compete
agreements.
On August 6, 1999, the Company and 1-800-AutoTow GCE acquired substantially all
of the assets of Dixie Grande Towing and Robert's Towing (collectively "Dixie
Grande Towing") from Sandra K. Stewart and Jim Stewart for an aggregate purchase
price of $589,906.25. The purchase price was paid through a combination of
$165,890.75 in cash, of which a $25,000 refundable deposit had previously been
tendered, assumption of certain liabilities relating to the business of Dixie
Grande Towing totaling $136,109.25 and an aggregate of 575,812 shares of the
Company's Common Stock having been valued for the purposes of this transaction
at $287,906.25. The stock portion of the purchase price was tendered in
restricted securities, as that term is defined in the Securities Act of 1933, as
amended (the "Securities Act"). The purchased assets include all rights of the
sellers in the business of Dixie Grande Towing including the trade names,
permits and licenses, machinery and equipment, tools and tooling, inventory
including trucks, repair equipment and other related products, office and
communication equipment, rights in and to certain contracts and all records
relating to the operations of Dixie Grande Towing. The purchased assets
specifically excluded the cash and accounts receivable at the date of closing
and the purchasers assumed no liabilities of Dixie Grande Towing.
In connection with the acquisition of the Dixie Grande Towing assets, Ms.
Stewart entered into a five year non-compete agreement with the Company and Mr.
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Stewart entered into a two year employment agreement with 1-800-AutoTow GCE.
Under the terms of this employment agreement, Mr. Stewart will serve as the
Bradenton Service Area Manager for the former Dixie Grande Towing operations and
as such will receive an annual salary of $60,000. The employment agreement
contains termination provisions related to death and disability, as well as at
1-800-AutoTow GCE's option to terminate with cause. In the event 1-800-AutoTow
GCE should elect to terminate the agreement without cause, Mr. Stewart would be
entitled to a severance payment equal to 12 months base salary, together with
any accrued but unpaid bonus and accelerated vesting of any stock options
theretofore granted. Mr. Stewart also has the right to resign his position, and
in such event would only be entitled to compensation through the date of
resignation. Lastly, 1-800-AutoTow GCE entered into a sub-lease with Mr. Stewart
related to the facilities previously occupied by Dixie Grande Towing. The 36
month agreement provides for monthly rental payments of $1,550, due in advance,
and payment by 1-800-AutoTow GCE of all applicable sales taxes on the property.
On August 6, 1999 the Company and 1-800 AutoTow GCE purchased certain of the
assets of Town 'N Country Towing, Inc. ("Town 'N Country Towing") for an
aggregate purchase price of $975,000. The purchase price was tendered in a
combination of $825,000 in cash and 214,286 shares of the Company's restricted
Common Stock having a value attributed to it of $150,000. Included in the assets
purchased were all of the seller's rights in the goodwill, trade names, permits
and licenses, machinery and equipment, tools and tooling, inventory, including
trucks, repair equipment and other related products, office and communication
equipment, rights in and to certain contracts and all records relating to the
operations of Town 'N Country Towing. The purchased assets specifically excluded
the cash and accounts receivable at the date of closing, the real property owned
by the seller, and the business and assets of Town 'N Country Transport, a
collateral recovery business. The purchasers assumed no liabilities of the
seller.
In connection with the acquisition of the Town 'N Country Towing assets, Messrs.
Frank W. Rice, Brian J. Rice and Frank Scott Rice, and Ms. Leah Cory McElreath,
principals of Town 'N Country Towing, each entered into five year non-compete
agreements with 1-800-AutoTow GCE prohibiting the parties from any involvement
in the vehicle towing, transport, salvage or auction business within a 100 mile
radius of the Town 'N Country Towing location in Tampa, Florida. The
non-compete, however, does not prohibit these parties from engaging in the
collateral recovery business. 1-800-AutoTow GCE also entered into a consulting
agreement with Mr. Frank W. Rice, providing for payment of a monthly fee of
$5,000 for a minimum term of three months. The consulting agreement provides
termination in the event of the death or disability of Mr. Rice, or with cause
at the option of 1-800-AutoTow GCE, and contains customary confidentiality
provisions. Finally, 1-800-AutoTow GCE entered into a lease with Mr. Frank W.
Rice for the property from which Town 'N Country Towing's business is operated.
Mr. Rice is paid a monthly rental of $2,500 plus sales tax under the terms of
this month-to-month lease.
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On August 6, 1999, the Company and 1-800-AutoTow GCE acquired substantially all
of the assets of Denny's Towing Service for an aggregate purchase price of
$780,000. $580,000 of the purchase price was paid in cash, with the balance paid
through the delivery of a three year, unsecured promissory note in the ==
principal amount of $150,000, bearing interest at 8% per annum, and 71,429
shares of the Company's restricted common stock having a value attributed to it
of $50,000. The assets acquired included the leasehold interest in the real
property leased by Denny's Towing Service, goodwill, trade names, permits and
licenses, machinery and equipment, tools and tooling, inventory, including
trucks, repair equipment and other related products, office and communication
equipment, rights in and to certain contracts and all records relating to the
operations of Denny's Towing Service. The purchased assets specifically excluded
cash on hand, accounts receivable and the purchasers assumed no liabilities of
Denny's Towing Service.
In connection with the acquisition of the assets of Denny's Towing Service, Mr.
Dennis W. Meyer, the principal of Denny's Towing Service, entered into a five
year non-compete agreement with 1-800-AutoTow GCE prohibiting him from any
involvement in the vehicle towing, transport, salvage or auction business within
a 100 mile radius of the Denny's Towing Service location in St. Petersburg,
Florida. 1-800-AutoTow GCE also entered into a three month consulting agreement
with Mr. Meyer, providing for payment of a monthly fee of $3,000. The consulting
agreement provides termination in the event of the death or disability of Mr.
Meyer, or with cause at the option of 1-800-AutoTow GCE, contains customary
confidentiality provisions. Finally, 1-800-AutoTow GCE entered into a sub-lease
with the lessor of the property from which Denny's Towing Service's business is
operated. Under the terms of this sub-lease which terminates on January 31,
2001, 1-800-AutoTow GCE will pay monthly lease payments of $2,575 plus sales tax
with a 3% increase on February 26 of each year.
On August 6, 1999, the Company and 1-800-AutoTow FL acquired substantially all
of the assets of Lyons Autobody, Inc. for an aggregate purchase price of
$415,000. The purchase price was paid $240,000 in cash and an unsecured
promissory note in the principal amount of $175,000 and bearing interest at 8%
per annum. The terms of the promissory note provide for repayment in quarterly
payments of interest and principal. The first interest payment is due January 2,
2000 with the first principal payment due March 31, 2000. Interest and principal
payments are due quarterly thereafter with the last payment due July 31, 2001,
and the holder was granted the option to covert the principal due into shares of
the Company's common stock based upon a conversion price of $2.00 per share.
This indebtedness is subordinated in right of payment to the prior payment in
full of all indebtedness to Finova. The assets acquired included goodwill, trade
names, permits and licenses, machinery and equipment, tools and tooling,
inventory, including trucks, repair equipment and other related products, office
and communication equipment, rights in and to certain contracts and all records
relating to the operations of Lyon's Autobody, Inc. The purchased assets
specifically excluded cash and accounts receivable, and the purchasers assumed
no liabilities of Lyons Autobody, Inc.
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In connection with the acquisition of the assets, 1-800-AutoTow FL entered into
a one year lease, with a one year renewal option, with the former principals of
Lyons Autobody, Inc. for the real property located at 2178 Stafford Avenue in
West Palm Beach, Florida which its towing operations are conducted. The lease
provides for a monthly rental payment of $2,000 plus applicable sales tax, and
grants 1-800-AutoTow GCE a right of first refusal if the owners desire to sell
the property during the term of the lease.
On August 6, 1999, the Company and 1-800-AutoTow FL acquired substantially all
of the assets of Lyons Towing for an aggregate purchase price of $1,885,000. The
principals of Lyons Towing are the same as the principals of Lyons Autobody,
Inc. The purchase price was paid $1,260,000 in cash and an unsecured promissory
note in the principal amount of $625,000 and bearing interest at 8% per annum.
The terms of the promissory note provide for repayment in quarterly payments of
interest and principal. The first interest payment is due January 2, 2000 with
the first principal payment due March 31, 2000. Interest and principal payments
are due quarterly thereafter with the last payment due July 31, 2001, and the
holder was granted the option to covert the principal due into shares of the
Company's common stock based upon a conversion price of $2.00 per share. This
indebtedness is subordinated in right of payment to the prior payment in full of
all indebtedness to Finova. The assets acquired included goodwill, trade names,
permits and licenses, machinery and equipment, tools and tooling, inventory,
including trucks, repair equipment and other related products, office and
communication equipment, rights in and to certain contracts and all records
relating to the operations of Lyon's Towing. The purchased assets specifically
excluded cash and accounts receivable, and the purchasers assumed no liabilities
of Lyons Towing.
In connection with the acquisition of the assets, Don Lyons and Bobbye Gail
Lyons, the principals of Lyons, each entered into a five year non-compete
agreement with 1-800-AutoTow FL prohibiting these parties from any involvement
in the auto towing, auto transport or collateral recovery business within a 100
mile radius of the Lyons Towing location in Lake Park, Florida.
Also, in connection with the acquisition of the assets, 1-800-AutoTow FL entered
into a five year lease, with a five year renewal option, with the former
principals of Lyons Towing, Inc. for the real property located at 1107 Old Dixie
Highway, Lake Park, Florida which its towing operations are conducted. The lease
provides for a monthly rental payment of $5,000 plus applicable sales tax, and
grants 1-800-AutoTow FL a right of first refusal if the owners desire to sell
the property during the term of the lease.
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On August 6, 1999, the Company and 1-800 AutoTow SW purchased certain of the
assets of A-Ace Towing for an aggregate purchase price of $845,000. The purchase
price was tendered in a combination of (i) $362,000 in cash, (ii) an unsecured
promissory note in the principal amount of $200,000, and (iii) 404,286 shares of
the Company's restricted Common Stock having a value attributed to it of
$283,000. The principal and interest due under the promissory note is due in one
payment on April 1, 2000. Included in the assets purchased were all of the
seller's rights in the goodwill, trade names, permits and licenses, machinery
and equipment, tools and tooling, inventory, including trucks, repair equipment
and other related products, office and communication equipment, rights in and to
certain contracts and all records relating to the operations of A-Ace Towing.
The purchased assets specifically excluded the cash and accounts receivable at
the date of closing, and the purchasers assumed no liabilities of the seller.
In connection with the acquisition of the A-Ace Towing assets, Mrs. Kurshid A.
Choudary, a principal of A-Ace Towing, entered into five year non-compete
agreement with 1-800-AutoTow SW prohibiting her from any involvement in the
vehicle towing, transport, salvage or auction business within a 100 mile radius
of the A-Ace Towing location in San Antonio, Texas. Mr. Muhammad Choudary,
another principal of A-Ace Towing, entered into a three year employment
agreement with 1-800-AutoTow SW to serve as Service Area Manager, which provides
for annual compensation of $60,000. The employment agreement contains customary
confidentiality, non-compete and termination provisions related to death and
disability, as well as at 1-800-AutoTow SW's option to terminate with cause. In
the event 1-800-AutoTow SW should elect to terminate the agreement without
cause, Mr. Choudary would be entitled to a severance payment equal to the
remainder of the compensation due under the agreement, together with any accrued
but unpaid bonus and accelerated vesting of any stock options theretofore
granted. Mr. Choudary also has the right to resign his position, and in such
event would only be entitled to compensation through the date of resignation.
1-800-AutoTow SW entered into a 24 month lease agreement with one of the
principals of the seller for the real property at which A-Ace Towing's
operations were conducted. The lease provides for a monthly rental payment of
$2,747, and includes a 12 month renewal with a five percent increase in the
monthly payment.
On August 6, 1999, under a Merger Agreement and Plan of Reorganization, L&W
Collision Towing & Recovery, Inc. ("L&W"), a Florida corporation, was merged
into 1-800-AutoTow GCE, in a transaction designed to qualify as a tax-free
reorganization under Sections 354 and 356 of the Internal Revenue Code of 1986,
as amended. The aggregate transaction consideration paid to the shareholders of
L&W included $500,000 in cash, and an aggregate of 2,428,572 shares of the
Company's restricted common stock with an attributed value of $1,700,000. Of
such shares, Mr. Walter Terenik received 1,627,143 shares and his sister, Ms.
Zinna Terenik received 801,429 shares. Of such shares, 857,143 shares of Mr.
Walter Terenik's shares were granted piggy-back registration rights, for which
12
<PAGE>
the Company agreed to file a registration statement under the Securities Act
with the Securities and Exchange Commission no later than October 1999. In
addition, such holders are entitled to receive 10% annual interest from August
1, 1999 on $600,000 (the value attributable to such 857,143 shares at the time
of closing), with the first interest payment due November 1, 1999, and
subsequent interest payments due the first day of every month thereafter, until
such time as the stock is registered. In the event the registration statement
covering these shares is not effective by March 30, 2000, the Company shall pay
the holders $600,000 (representing principal) and any accrued but unpaid
interest in six equal monthly installments commencing April 1, 2000.
Following the closing of the merger, Mr. Walter Terenik, a shareholder of L&W,
entered into an employment agreement with the Company. Under the terms of this
two year agreement, Mr. Terenik will serve as Manager of Transportation and
shall receive an annual base salary of $60,000. The employment agreement, which
contains customary confidentiality and non-compete provisions, may be terminated
upon the death or disability of Mr. Terenik, or with cause. The Company may also
terminate the employment agreement without cause, in which event Mr. Terenik
would be entitled to receive severance benefits equal to 12 month base
compensation, plus accelerated vesting of any stock options which have been
granted but are unvested at the time of termination. Mr. Terenik also has the
right to resign his position, and in such event would only be entitled to
compensation through the date of resignation.
Ms. Zinna Terenik, the other shareholder of L&W, entered into a consulting
agreement for a minimum of six months with 1-800-AutoTow GCE which provides for
monthly compensation of $4,316. This consulting agreement also contains
customary confidentiality provisions, and may be terminated at the option of
1-800-AutoTow GCE for cause, or in the event of death or disability. Ms. Zinna
Terenik also entered into a five year non-compete agreement with 1-800-AutoTow
GCE whereby she is prohibited from engaging in the vehicle towing, transport,
salvage or auction business within 100 miles from 1-800-AutoTow GCE's locations
or those of any of its affiliates (including the Company).
Finally, 1-800-AutoTow GCE entered into a five year lease agreement with Mr.
Walter Terenik covering the real property from which L&W's business was
operated. The terms of this lease, which expires July 31, 2004, provides for a
monthly lease payment of $3,000 in advance each month.
On August 6, 1999, under a Merger Agreement and Plan of Reorganization, Arrow
Towing & Recovery, Inc. ("Arrow"), a Florida corporation, was merged into
1-800-AutoTow GCE, in a transaction designed to qualify as a tax-free
reorganization under Section 354 and 356 of the Internal Revenue Code of 1986,
13
<PAGE>
as amended. The aggregate transaction consideration paid to the shareholders of
Arrow included $158,467 in cash, and an aggregate of 285,715 shares of the
Company's restricted common stock with an attributed value of $175,000. On May
28, 1999 the Company issued an aggregate of 25,000 restricted shares of Common
Stock to the principals of Arrow Towing & Recovery, Inc. as part of a
non-refundable deposit in relation to an extension of the merger agreement and
was paid in keeping with a penalty clause. Since these shares were issued as
payment for the penalty, and were issued in addition to the 285,715 shares
issued in connection with the merger.
Following the closing of the merger, Ms. Helen Hohn and Mr. Robert T. Menniges,
the shareholders of Arrow, each entered into an employment agreement with
1-800-AutoTow GCE. Under the terms of the one year agreement, Ms. Hohn will
serve as Area Administrative Assistant and will receive an annual salary of
$28,000. Under the terms of a two year agreement, Mr. Menniges will serve as
Regional Marketing Manager and shall receive an annual base salary of $60,000.
The employment agreements, which contains customary confidentiality and
non-compete provisions, may be terminated upon the death or disability of the
employee, or with cause. 1-800-AutoTow GCE may also terminate the employment
agreement without cause, in which event the employee would be entitled to
receive severance benefits equal to two months base compensation in the case of
Ms. Hohn and 12 month base compensation in the case of Mr. Menniges, plus Mr.
Menniges would be entitled to accelerated vesting of any stock options which
have been granted but are unvested at the time of termination. Both Ms. Hohn and
Mr. Menniges have the right to resign their positions, and in such event would
only be entitled to compensation through the date of resignation.
In the merger, 1-800-AutoTow GCE assumed Arrow's lease with a monthly rental
amount of $1,450. The lease expires March 31, 2000. The real property is not
owned by any of Arrow's principals.
Financing Activities
In order to provide capital to consummate the aforementioned acquisitions, as
well as working capital for the Company, on August 6, 1999, the Company
consummated two transactions that provided access to an aggregate of $7.7
million in additional capital. Of this amount, approximately $5,074,000 was used
to close the acquisitions described above. The following descriptions are meant
to be summaries of the transactions, and investors are encouraged to read the
full documents related to such transactions that are included elsewhere herein.
See Part III, Item 1. Exhibits, of this Form 10-SB for copies of the stock
purchase agreement and loan and security agreement.
14
<PAGE>
Series B 8% Cumulative Convertible Preferred Stock
On August 6, 1999, the Company sold 363,723 shares of its Series B 8% Cumulative
Convertible Preferred Stock ("Series B Preferred Stock") and a common stock
purchase warrant (the "Warrant") to purchase an aggregate of 4,838,202 shares of
the Company's common stock to GMA Capital Partners-AutoTow, LLC, an
institutional investor, for an aggregate purchase price of $2,700,000 in a
private transaction exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act. The designations, rights and
preferences of the Series B Preferred Stock provides that such shares are
convertible into shares of the Company's Common Stock representing 59.4% of
AutoTow's Common Stock on a fully diluted basis after considering (i) the
currently outstanding stock of AutoTow, (ii) the conversion of the Convertible
Preferred Stock, (iii) any outstanding options and warrants, (iv) shares issued
in conjunction with this transaction, and (v) further adjusted, at closing or in
the future, for any stock issued to shareholders as a result of any ratchet
provisions related to previous acquisition. Therefore, the total number of
Common Shares the Series B Preferred Stock is convertible into is 24,191,012
shares which is 59.4% of 40,725,609 Common Shares, the total taking into account
the above considerations. The designations, rights and preferences of the Series
B Preferred Stock are described in Part I, Item 8, of this Form 10-SB.
GMA LLC has been granted registration rights on its Series B Preferred Stock.
Upon the written request of the Holders of a majority of the Registrable
Securities requesting that the Company effect the registration under the
Securities Act of all or part of the Registrable Securities and specifying the
intended method or methods of disposition thereof, the Company will use its best
efforts to effect the registration under the Securities Act. If at the date of
receipt of a registration request by Shareholder, the Company has previously
filed a registration statement pursuant to the Securities Act (other than on
Form S-8 or S-4 or any similar form for the registration of securities pursuant
to an employee benefit plan or business combination or reorganization), the
Company may defer the filing of any such requested registration statement to a
date no not later than (i) one hundred twenty (120) days after the effective
date of such prior registration statement, or (ii) ninety (90) days after the
filing of such prior registration statement, if such registration statement is
not declared effective within such 90-day period.
The Company shall declare a cumulative, annual cash dividend of eight percent
(8%) of the Stated Value of the Series B Preferred Stock, calculated at the
simple interest rate of 8% per annum from the Issue Date, for each share of the
Series B Preferred Stock held by each Record Holder, payable on or about the
15th day of July and the 15th day of January of each year commencing January
2000. Dividends at the rate prescribe above shall be deemed to accrue in arrears
and accumulate on each outstanding share of the Series B Preferred Stock from
month to month as of the 15th day of each month, until such dividends are
declared for payment by the Board and payment is accordingly made, in cash,
therefor. So long as any Series B Preferred Stock is outstanding, no dividend
shall be declared or paid or set aside for payment, nor shall any other
distribution be declared or made, upon the Common Stock or any other stock of
the Corporation ranking junior to or pari passu with the Series B Preferred
Stock as to dividends.
15
<PAGE>
In addition to the Series B Preferred Stock, Warrants were issued on the basis
of one warrant to purchase one share of the Company's Common Stock for each five
shares of Common Stock into which the Series B Preferred Stock is convertible
which totaled 4,838,202 Warrants. The total number of Warrants may be adjusted
at the aforementioned 1 for 5 ratio should the total number of shares of Common
Stock for which the Series B Preferred Stock is convertible into, changes. The
Warrants will have a strike price equal to $1.50 and be exercisable for six (6)
years from the date of issuance. The Warrants also have the same registration
rights as the Series B Preferred Stock.
The Company is obligated to issue additional shares of Series B Preferred Stock
and additional Warrants to the purchaser if the Company should issue additional
shares of its Common Stock to the former owners of any of its subsidiaries,
including those described above in relationship to acquisitions the Company has
closed on August 6, 1999, so as to maintain the purchasers ownership interest of
59.4% on a fully diluted basis as previously discussed. Under the terms of the
stock purchase agreement, the Company is required to (i) utilize the proceeds
from the sale of the securities to consummate the acquisitions heretofore
described, (ii) provide the purchaser audited financial statements for each one
of those acquisitions which meet the significant subsidiary test within 75 days
from the closing date of the stock purchase, and (iii) file a Form 10 with the
Securities and Exchange Commission within 45 days of the closing date.
Finova Capital Corporation
On August 6, 1999, the Company established a credit facility in the principal
amount of approximately $5,000,000 from Finova Capital Corporation ("Finova")
under the terms of a Loan and Security Agreement. As collateral under the credit
facility, the Company granted Finova a first position security interest in the
inventory, equipment, receivables, life insurance proceeds, trademarks,
copyrights, licenses, patents, the Company's rights (but not its obligations)
under the various agreements for the acquisitions of the eight businesses as
described above which also closed on August 6, 1999, and general intangibles,
including its bank deposit accounts. The Company also pledged as additional
collateral the capital stock it owns in each of its subsidiaries. The loan
documents also contain numerous covenants of the Company related to future
occurrences, including that the Company will not (i) purchase any real property
without the prior consent of Finova, (ii) increase the amounts payable to
officers, directors, employees or consultants, (iii) incur any additional debt
other than trade payables, (iv) distribute any cash or stock to an affiliate, or
purchase any stock, indebtedness or property of any affiliate, or (v)
16
<PAGE>
materially change the way the Company does business, among others. Finally, the
loan documents impose certain additional record keeping, reporting and
similar duties on the Company. As the foregoing is only a brief description of
certain of the material terms of the Finova loan, investors are encouraged to
read the Finova documents in their entirety. See Part III, Item 1. Exhibits.
Sales and Marketing
The Company will rely on a combination of both direct and indirect channels to
market its services. The Company's marketing efforts focus on four major areas:
* Commercial accounts (business-to-business);
* Motor clubs;
* Consumer marketing; and
* Municipal contracts.
These markets will be addressed through a direct sales force comprised of field
sales, direct marketing, and branding via marketing communications.
The Company plans to conduct a variety of programs to promote awareness of its
business and services, stimulate sales and establish the firm's image and brand.
Upon entering a new Service Area and establishing the desired level of service,
AutoTow will launch its marketing campaign.
Collateral material (such as brochures and other written items) for
business-to-business sales, print media, radio (tied into rush hour traffic
updates), billboards and targeted direct mail are planned for use in the
branding process. Over time, the Company believes that this strategy will enable
it to essentially reach the majority of its target market within each Service
Area.
Competition
Towing industry competition can be grouped into the following classes.
Individual independent operators. The individual towing company owner is a
"one-man show," and the Company believes these operators cannot handle larger
accounts, police rotation/contract work, nor cover a large area for motor club
work. Because the individual operator has only one truck, he or she is unable to
handle multiple calls within a short time period.
Service Stations, Repair Shops and Body Shops. A number of auto repair and body
shops operate one or more tow trucks to retrieve customer vehicles. Many of
these operations outsource the towing function to a reliable company.
17
<PAGE>
Small and Mid-size local towing companies. Companies operating in this space can
be unofficially grouped as those entities operating from two to 10 trucks and 11
to 24 trucks respectively. The Company believes this segment represents the
majority of its local marketplace competition.
Large independent towing companies. Any company that operates 25 or more trucks
in a Service Area could be a significant competitor to the Company within that
market. The Company believes that as consolidation advances within the industry,
towing companies of this size are likely to be acquired by a consolidator. Those
companies that are not acquired, may find competing with one or more
consolidators to be challenging, and possibly could see their market share
diminish.
Consolidators. Consolidation is in its infancy stage in the towing industry. In
addition to AutoTow, there are two publicly-traded consolidators, Miller
Industries, Inc. and United Road Services, Inc., and one other privately-held
company that recently began consolidation efforts, CenterLine Towing, Inc.
Miller Industries was founded by William G. Miller in 1990 when he consolidated
three ailing tow truck manufacturers and began regaining market share. In August
1994, Miller Industries (NYSE:MLR) began publicly trading. Today, Miller
Industries is the nation's largest manufacturer of towing and recovery
equipment. In late 1996, Miller Industries decided to begin to diversify and
vertically integrate into related businesses. The company formed Miller
Financial Services Group to provide financing and insurance to towing companies
and has also begun acquiring towing equipment distributors. Beginning in 1997,
Miller's RoadOne towing services subsidiary acquired its first group of towing
services companies and is now the largest towing services company in the
country. Currently, RoadOne has acquired approximately 104 towing services,
which represent in aggregate, over $180 million in gross annualized revenues.
Miller Industries recently announced its intention to spin-off RoadOne to
shareholders in a tax-free transaction.
On April 30, 1998, United Road Services, Inc. (NASDAQ:URSI) became a publicly
traded company through the simultaneous merger of seven towing companies upon
its initial public offering underwritten by Donaldson, Lufkin & Jenrette which
raised approximately $80 million. As of the date of this writing, they have
acquired more than 35 vehicle transport as well as towing companies with
aggregate annualized revenues in excess of $200 million.
Due to the extreme fragmentation within the towing industry, the Company
believes that the public and private consolidators have a combined market share
of approximately 3% thereby leaving the vast majority of the industry
unconsolidated. The Company believes this provides substantial growth
opportunities for itself and the other consolidators.
18
<PAGE>
AutoTow differentiates itself from other consolidators with its "name is the
number is the brand" marketing and branding approach, focus on efficiently and
successfully integrating acquired towing operations and technology-driven
philosophy. Additionally, AutoTow is the only publicly traded towing
consolidator that derives 100% of its revenues on towing and recovery related
services rather than manufacturing or long-haul vehicle transport.
The towing industry is highly competitive and certain of the Company's existing
major competitors have resources that are substantially greater than those of
the Company.
Principal suppliers. The principal suppliers of tow trucks and related towing
equipment include Miller Industries, Jerr-Dan, AATAC, Dynamic, Dual-Tech and
NoMar.
Trademark, Intellectual Property and Proprietary Rights. The Company possesses
the toll free telephone number 1-800-AutoTow (1-800-288-6869) as well as
1-877-AutoTow. The Company also possesses the Internet domain names
1800autotow.com, 1800autotow.net, 1-800-autotow.com, 1-800-autotow.net,
autotow.com and autotow.net. The Company has not been granted any trademarks or
patents by the USPTO (United States Patent and Trademark Office).
Need for government approval. Currently, there is no need for federal or state
approval, however this may change in the future. Licenses are required on city
and/or county levels to operate towing vehicles and the Company believes it has
obtained all necessary towing licenses and permits.
Seasonality. Seasonality has a noticeable effect on revenues as during times of
adverse or extreme weather conditions, there often is an increased need for
towing and recovery services. This may cause the Company's sales to fluctuate
from quarter to quarter. Mild winters and summers tend to minimize this
fluctuation.
Research and development. There has been no research and development to date.
Employees. The Company has 4 full time employees at its executive offices and
approximately 95 additional employees that operate out of the Company's field
locations in Florida, Texas and Pennsylvania.
19
<PAGE>
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
Plan of operation.
(i) The Company believes that it currently has enough cash on hand, access to
cash in its credit line pursuant to the Finova financing and cash flow from
acquired field operations, to enable it to operate for the next twelve months,
assuming that it does not undertake additional acquisitions. Previous to the
acquisitions made on August 6, 1999, the Company's field operations, although
profitable on their own, did not generate enough excess cash to sustain the
corporate office operations. The Company primarily financed its corporate
operations through various financings discussed throughout this document
(specifically, see section entitled - Recent Sales of Unregistered Securities).
It is the Company's business plan to continue to acquire strategically located
and well run towing businesses. To do this, the Company will require substantial
capital in order to advance its business plan. The Company believes that
additional capital and debt financing will allow it to acquire additional towing
operations. However, there can be no assurance that the Company will be able to
obtain additional equity or debt financing in the future, if at all. If the
Company is unable to raise additional capital in the future, it believes it will
continue to grow but at a considerably slower pace.
(ii) The Company is not currently involved in any product research or
development at this time.
(iii) The Company may from time to time, move towing equipment from one location
to another, in keeping with its goal to maximize the utilization of its assets.
Should the demand for its towing, local transport and recovery operations
increase in any particular Service Area to an extent that exceeds current
equipment availability, it will be necessary to add additional towing equipment
(primarily tow trucks).
(iv) The Company intends to acquire additional towing companies through future
anticipated financings. Should the Company be successful in these endeavors,
additional employees will be added primarily to the extent that they were
employed for the acquired operations. Through the consolidation of acquired
operations, it is anticipated that some of the employees of acquired businesses
will not be required by the Company.
The Year 2000
The concern known as the "Y2K" problem or "Year 2000" issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. Failure of a computer program to recognize a date using "00" as
2000 instead of 1900 could result in a system failure or miscalculations causing
disruptions of operations. To date, the Company is unaware of any situation of
non-compliance which would materially adversely affect its operations or
financial condition. There can be no assurance however, that the computer
systems of other companies with which the Company transacts business will be Y2K
compliant and the Company has made only limited inquiries to ascertain Y2K
compliance by such companies.
20
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY.
The Company currently leases approximately 4,300 square feet of office space
located at 1301 N. Congress Ave., Suite 330, Boynton Beach, Florida. The current
monthly rental amount is $5,943, including Florida sales tax. The lease on this
property commenced on April 1, 1998 and continues through June 30, 2001. The
rental amount is scheduled to increase to $6,226 including sales tax on June 30,
2000 and then decreases back to $5,943 including sales tax for the last three
months of the lease (April 1, 2001 to June 30, 2001).
As previously described under Item 1., Recent Acquisitions, the Company has
and/or certain of its Subsidiaries have entered into leases or sub-lease
agreements for real property occupied by businesses that were acquired, as set
forth below with the exception of its corporate office location.
<TABLE>
<CAPTION>
Square ft / Monthly Lease
Location Lot Acreage Rental Expiration
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bradenton, FL 2,000/2 $ 4,650(1) July 31, 2002
Tampa, FL 1,000/3 $ 2,500(1) Month-to-month
Tampa, FL (Arrow) 500/1.5 $ 1,450 March 31, 2000
St. Petersburg, FL 7,500/4 $ 2,575(1) January 31, 2002
Palm Beach Gardens, FL 500/1 $ 2,000(1) July 31, 2000
Lake Park, FL 6,000/3 $ 5,000(1) July 31, 2004
San Antonio, TX 750/0.5 $ 2,747(1)(2) July 31, 2001
Lady Lake, FL 6,000/1.5 $ 3,000(1) July 31, 2004
Tampa, FL (D&D) 2,532/1 $ 3,450(1) May 31, 2003
Pittsburgh, PA 10,000/8 $ 8,125(1) July 31, 2003
Boynton Beach, FL(3) 4,300 $ 5,607(2) June 31, 2001
</TABLE>
(1) Amount shown excludes state sales tax (typically 6% to 7%.
(2) Subject to periodic increases as detailed elsewhere in this document.
(3) The Boynton Beach location is the Company's corporate office.
21
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the Company's
Common Stock beneficially owned on August 10, 1999, for (i) each shareholder
known by the Company to be the beneficial owner of five (5%) percent or more of
the Company's outstanding Common Stock, (ii) each of the Company's executive
officers and directors, and (iii) all executive officers and directors as a
group. In general, a person is deemed to be a "beneficial owner" of a security
if that person has or shares the power to vote or direct the voting of such
security, or the power to dispose of or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities to
which the person has the right to acquire beneficial ownership within sixty (60)
days. As of August 10, 1999, there were 15,418,304 shares of the Company's
Common Stock issued and outstanding, 1,790,993 options vested or will vest
within 60 days of August 10, 1999 and 296,769 warrants that have vested or will
vest within 60 days of August 10, 1999. Therefore, a total 17,506,066 shares
were considered for use in the % of Beneficial Ownership calculations.
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
No. of Shares No of Shares % of beneficial
Of Common Stock Of Common Ownership incl.
Name and Address or Beneficially % of Beneficial Stock incl. Conversion of
Identity of Group (1) Owned Ownership (14) Series B Series B (15)
- --------------------- ----- -------------- -------- -------------
<S> <C> <C> <C> <C>
Joel B. Nagelmann (2), 1,846,242 10.55% 2,070,231 4.96%
President & CEO, Director
Eugene A. Iarocci (3) 1,705,974 9.75% 1,705,974 4.09%
COO, Sr. V.P., Director
Steven B. Teeters (4) 413,026 2.36% 413,026 0.99%
Vice President of Finance
Troy Taylor (5) 0 0 895,963 2.14%
Chairman of the Board
Jay Clark (6) 0 0 89,604 0.21%
Director
Julian Mohr (7) 125,000 0.71% 2,364,918 5.67%
Director
Joshua Konigsberg (8) 1,148,038 6.6% 1,148,038 2.75%
Former V.P. Marketing,
Former Director
Vince Gelormine (9) 1,114,627 6.37% 1,114,627 2.67%
Former Vice President
Former Director, Founder
Walter Terenik (10) 1,627,143 9.29% 1,627,143 3.9%
Manager of Transportation
GMA Capital Partners- 0 0% 24,191,012 58.0%
AutoTow, LLC. (11)
All Executive Officers (12) 4,090,242 23.36% 7,539,716 18.08%
And Directors as a Group
</TABLE>
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<PAGE>
- ---------------------
(1) Unless otherwise indicated, the address of each of the persons set forth
below is 1301 North Congress Avenue, Suite 330, Boynton Beach, Florida 33426.
(2) For the purposes of calculating the percentage in COLUMN B, the share number
in COLUMN A includes 720,313 options currently exercisable pursuant to Mr.
Nagelmann's employment agreement dated August 1, 1999. Also includes 1,000
options at $1.25 granted pursuant to a now-cancelled employment agreement that
have vested and another 1,000 at $1.25 options which will vest within 60 days.
The total in COLUMN C includes the shares in COLUMN A plus includes the
conversion of Mr. Nagelmann's 3,368 shares of the Company's Series B 8%
Cumulative Convertible Preferred stock, which are convertible into 223,989
shares of Common Stock which were received from Mr. Nagelmann's $25,000
investment in the GMA LLC equity investment vehicle. Mr. Nagelmann's investment
was at the same terms and conditions as all other GMA LLC investors.
The share totals in the table excludes 44,798 Warrants exercisable at $1.50 per
share received from Mr. Nagelmann's $25,000 investment in the GMA LLC equity
investment vehicle nor does it include 1,440,626 options granted but not yet
vested, pursuant to Mr. Nagelmann's employment agreement dated August 1, 1999.
Also not included are, 2,000 options at $1.25 granted pursuant to a
now-cancelled employment agreement that will vest at 1,000 options on
October 2, 2000 and 1,000 options on October 2, 2001.
(3) For the purposes of calculating the percentage in COLUMN B, the share number
in COLUMN A includes 720,313 options currently exercisable pursuant to Mr.
Iarocci's employment agreement dated August 1, 1999 and also includes 1,000
options granted pursuant to a now-cancelled employment agreement that have
vested and another 1,000 options that will vest within 60 days.
The share totals in the table excludes 1,440,626 options granted but not yet
vested, pursuant to Mr. Iarocci's employment agreement dated August 1, 1999 nor
are 2,000 options at $1.25 granted pursuant to a now-cancelled employment
agreement that will vest at 1,000 options on October 2, 2000 and 1,000 options
on October 2, 2001.
(4) For the purposes of calculating the percentage in COLUMN B, the share number
in COLUMN A includes 183,150 options at $.20 currently exercisable pursuant to
Mr. Teeters' employment agreement dated August 1, 1999 and also includes 12,500
options at $.20 granted pursuant to a now-cancelled employment agreement that
vested on May 1, 1999.
23
<PAGE>
The share totals in the table excludes 266,400 options granted but not yet
vested, pursuant to Mr. Teeter's employment agreement dated August 1, 1999 nor
are 37,500 options at $.20 granted pursuant to a now-cancelled employment
agreement that will vest at 33% on May 1 of the next three years.
(5) The share total in COLUMN C includes the conversion of Mr. Taylor's 13,471
shares of the Company's Series B 8% Cumulative Convertible Preferred Stock,
convertible into 895,963 shares of Common Stock.
The share totals in the table excludes 257,712 Warrants at $.01 per share and
386,567 Warrants at $.20 per share for Mr. Taylor's Chairman of the Board
participation, 146,047 Warrants at $.20 per share received from the GMA
Partners, Inc. Advisory Services agreement with the Company, 179,192 Warrants
exercisable at $1.50 per share received from Mr. Taylor's investment in the GMA
LLC equity investment vehicle.
(6) The share total in COLUMN C includes the conversion of Mr. Clark's 1,347
shares of the Company's Series B 8% Cumulative Convertible Preferred Stock,
convertible into 89,604 shares
of Common Stock.
The share totals in the table excludes 172,350 Warrants at $.01 per share and
356,192 Warrants at $.20 per share received from the GMA Partners, Inc. Advisory
Services agreement with the Company, and 17,921 Warrants exercisable at $1.50
per share received from Mr. Clark's investment in the GMA LLC equity investment
vehicle.
(7) The share total in COLUMN C includes the conversion of Mr. Mohr's 33,678
shares of the Company's Series B 8% Cumulative Convertible Preferred Stock,
convertible into 2,239,918
shares of Common Stock.
The share totals in the table excludes 447,984 Warrants exercisable at $1.50 per
share received from Mr. Mohr's investment in the GMA LLC equity investment
vehicle.
(8) For the purposes of calculating the percentage in COLUMN B, the share number
in COLUMN A includes 1,000 options currently exercisable pursuant to Mr.
Konigsberg's now cancelled
employment agreement.
The share totals in the table excludes 235,000 Warrants at $.01 per share as
severance for canceling said employment agreement and resigning as an officer,
director and employee of the Company. The Warrants are not exercisable until
after the date on which a Registration Statement is declared effective by the
Securities and Exchange Commission regarding the Common Stock underlying the
Warrants.
(9) For the purposes of calculating the percentage in COLUMN B, the share number
in COLUMN A includes 1,000 options currently exercisable pursuant to Mr.
Gelormine's now cancelled
employment agreement.
24
<PAGE>
The share totals in the table excludes 250,000 Warrants at $.01 per share as
severance for canceling said employment agreement and resigning as an officer,
director and employee of the Company. The Warrants are not exercisable until
after the date on which a Registration Statement is declared effective by the
Securities and Exchange Commission regarding the Common Stock underlying the
Warrants.
(10) Mr. Walter Terenik acquired said shares through the Company's acquisition
of L&W Collision, Towing and Recovery, Inc. on August 6, 1999 of which he was a
principal shareholder. A total of 857,143 of these shares were granted piggy
back registration rights by the Company who will incur all costs in registering
said shares.
(11) The GMA Capital Partners-AutoTow, LLC's 363,723 Preferred Shares are
convertible into 24,191,012 shares of the Company's Common Stock upon request.
The accompanying 4,838,202 Warrants vest at some point beyond 60 days from
August 10, 1999 in which a registration statement must be declared effective by
the Securities and Exchange Commission before they are exercisable and were
therefore excluded from the table. Note that Mr. Nagelmann, Mr. Taylor, Mr.
Clark and Mr. Mohr invested in the GMA LLC investment vehicle and own a portion
of the Shares and Warrants as described herein.
(12) The Officers and Directors as a group include Joel B. Nagelmann, Eugene A.
Iarocci, Steven B. Teeters, Troy Taylor, Jay Clark and Julian Mohr.
(13) For purposes of calculating the percentage in COLUMN B, a total of
17,506,066 shares were used, comprised of 15,418,304 shares of Common Stock,
1,790,993 options currently exercisable including options exercisable within 60
days from August 10, 1999 and 296,769 Warrants currently exercisable including
Warrants exercisable within 60 days from August 10, 1999.
(14) For purposes of calculating the percentage in COLUMN D, the conversion of
the Company's Series B Preferred Stock was assumed which adds 24,191,012 shares
to the COLUMN B total of 17,506,066 for a grand total of 41,697,078 Common
Shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following table sets forth the names, positions with the Company and ages of
the executive officers and directors of the Company. Directors will be elected
at the Company's annual meeting of shareholders and serve for one year or until
their successors are elected and qualify. Officers are elected by the Board and
their terms of office are, except to the extent governed by employment contract,
at the discretion of the Board.
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<PAGE>
<TABLE>
<CAPTION>
Executive Officers and Directors
Name Age Position
---- --- --------
<S> <C> <C>
Troy Taylor 41 Chairman of the Board
Joel Nagelmann 58 President & Chief Executive Officer and Director
Eugene Iarocci 53 Chief Operating Officer/Sr. Vice President and Director
Steven Teeters 53 Vice President of Finance, Treasurer
Jay Clark 36 Director
Julian Mohr 69 Director
</TABLE>
Unless otherwise noted, the address of each of the executive officers, directors
and significant employees is 1301 N. Congress Ave., Suite 330, Boynton Beach, FL
33426.
There are no family relationships among any of the executive officers or
directors.
Mr. Taylor has served as the Company's Chairman of the Board of Directors since
August 6, 1999. In November of 1998, Mr. Taylor joined GMA Partners, Inc. as
President of the firm. Previous to this, from February 1997 through October
1998, Mr. Taylor was a shareholder and Senior Vice President of Legacy
Securities Corp., a Southeast-based merchant and investment banking boutique,
providing advisory services to middle market clients. Additionally, Mr. Taylor
was a Senior Vice President and a founding member of Legacy Capital Partners,
LLC, an equity fund investing in emerging growth companies. From October 1996
through January 1997, he was President of Century Financial Partners, Inc. an
investment banking firm. From April 1994 through September 1996, Mr. Taylor was
a Managing Director of KPMG Peat Marwick LLP, where he was responsible for
KPMG's corporate finance activities in the Southeast. Prior to joining KPMG, Mr.
Taylor was Vice President of Morgan Keegan & Company, Inc. and was the Senior
Investment Banker for the Atlanta, Georgia Office. Mr. Taylor has a Masters of
Business Administration and a Bachelor of Science in Accounting (cum laude) from
the Wharton School of Business.
Joel Nagelmann has served as the Company's Chief Executive Officer and President
and Director since the Company's incorporation on September 2, 1997. From April
1995 to April 1997, Mr. Nagelmann was President of Sulcus Computer Corporation,
a $50 million public company (AMEX:SUL) that provides computer automation
solutions for the worldwide hospitality, tourism and legal/land title
industries. From March 1994 to March 1995, Mr. Nagelmann was V.P. General
Manager of the Enterprise Information Solutions Group for Amdahl Corporation.
Previous to this, for 5 years he was President of Xerox Computer Services, a
software division of Xerox Corporation. Between March 1985 and March 1988, Mr.
Nagelmann managed two other companies in the software/hardware industry,
primarily in a turnaround/divestiture mode. Previous to that, he had spent 21
years with IBM in a variety of senior management roles including sales, support,
marketing and development. Mr. Nagelmann holds a BA from the University of
California, Santa Barbara.
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<PAGE>
Eugene Iarocci has been employed by the Company as Senior Vice President since
its inception on September 2, 1997. Previous to joining the Company, Mr. Iarocci
served as President and CEO of Younger Brothers Inc., a $50 million nationwide
trucking company from June 1992 to January, 1997. Prior to 1992, Mr. Iarocci
held various management positions primarily related to transportation
activities, at Union Carbide, a company that manufactured industrial chemicals,
during a 24 year career there. Mr. Iarocci holds a Master of Business
Administration in Financial Management and a Bachelor of Business Administration
from Pace University in New York.
Steven Teeters has served as Vice President of Finance of the Company since May
of 1998. Between February 1997 and April 1998, Mr. Teeters was Chief Financial
Officer of Walpole, Inc., a $35 million trucking and transportation company.
From May 1993 through January 1997, Mr. Teeters was CFO of Younger Brothers, a
$50 million national trucking company. Mr. Teeters possesses a Bachelor's Degree
in Accounting from Anderson College in Anderson, Indiana.
Jay Clark has served as a Director of the Company since August 6, 1999. Since
November 1998, Mr. Clark has been a Managing Director at GMA Partners, Inc. Mr.
Clark has over 10 years of investment banking, merchant banking and corporate
banking experience, primarily advising middle market clients and entrepreneurs
regarding raising capital in both the debt and equity markets, mergers and
acquisitions, and merchant banking transactions. Prior to joining GMA, from
February 1997 through October 1998, Mr. Clark was a shareholder and Senior Vice
President of Legacy Securities Corp., a leading Southeast based merchant and
investment banking boutique, providing advisory services to middle market
clients. Additionally, Mr. Clark was a Vice President and a founding member of
Legacy Capital Partners, LLC, an equity fund investing in emerging growth
companies. Prior to this, from October 1996 through January 1997, he was
Managing Director at Century Financial Partners, Inc. an investment banking
firm. From September 1991 through September 1996 Mr. Clark was a Director of
KPMG Peat Marwick, where he was responsible for the firm's leveraged finance
activities in the Southeast. Mr. Clark received his Masters of Business
Administration from the Goizueta Business School of Emory University and a
Bachelor of Science in Finance (cum laude) from the University of Florida.
Julian Mohr has served as a Director for the Company since August 6, 1999. Since
1966, Mr. Mohr has been the Chief Executive Officer of Momar, Inc. an Atlanta
based industrial chemical company. Momar currently has operations in South
Africa, Malaysia, Australia, Canada and the U.S. Mr. Mohr serves as a member of
the Advisory Board for GMA Partners, Inc. Mr. Mohr received a B.A. from
Washington & Lee University.
27
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY EXECUTIVE COMPENSATION TABLE
Annual Compensation Long-Term
- -------------------------------------------------------- --------------------------------------
Name & Other Restricted Option
Principal Salary Bonus Annual Stock Awards SARs
Position Year ($) ($) Comp. ($) ($) (#)
- --------- ---- ----- ----- --------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Joel Nagelmann 1999 $160,000 - - - 2,160,939
President/CEO 1998 $150,000 - - - -
1997(1) $ 0 - - - 4,000
Eugene Iarocci 1999 $125,000 - - - 2,160,939
COO/Sr. VP 1998 $100,000 - - - -
1997(1) $ 0 - - - 4,000
Steven B. Teeters 1999 $ 90,000 - - - 399,600
VP of Finance 1998 $ 90,000 - - - 50,000
</TABLE>
- --------------------
(1) All Executive officers agreed to take no salaries for 1997.
Employment Agreements
Joel B. Nagelmann, Chief Executive Officer, President and Director. Pursuant to
a written employment agreement entered into on August 1, 1999, in consideration
for his services to the Company, Mr. Nagelmann receives an annual base salary of
$160,000. The term of the employment agreement is 3 years. As additional
compensation, the Company has also granted Mr. Nagelmann options to purchase up
to 2,160,939 shares shares of Common Stock of the Company at $0.20 per share
exercisable through October 2, 2007, of which 720,313 shares have vested. The
remaining unvested options will have a performance vesting schedule not yet
defined by the Board of Directors. In 1997, pursuant to a now cancelled
employment agreement, Mr. Nagelmann was granted 4,000 options at $1.25 per
share, vesting over a 4 year period, of which 1,000 have vested and another
1,000 will vest on October 2, 1999. The granting of all 4,000 options have
survived the aforementioned employment agreement.
Eugene A. Iarocci, Chief Operating Officer, Sr. Vice President and Director.
Pursuant to a written employment agreement entered into on August 1, 1999, in
consideration for his services to the Company, Mr. Iarocci receives an annual
base salary of $125,000. The term of the employment agreement is 3 years. As
additional compensation, the Company has also granted Mr. Iarocci options to
purchase up to 2,160,939 shares of Common Stock of the Company exercisable at
$.20 per share exercisable through October 2, 2007, of which 720,313 shares have
vested. The remaining unvested options will have a performance vesting schedule
not yet defined by the Board of Directors. In 1997, pursuant to a now cancelled
employment agreement, Mr. Iarocci was granted 4,000 options at $1.25 per share,
vesting over a 4 year period, of which 1,000 have vested and another 1,000 will
vest on October 2, 1999. The granting of all 4,000 options have survived the
aforementioned employment agreement.
28
<PAGE>
Steven B. Teeters, Vice President of Finance. Pursuant to a written employment
agreement entered into on August 1, 1999, in consideration for his services to
the Company, Mr. Teeters receives an annual base salary of $90,000. The term of
the employment agreement is 3 years. As additional compensation, the Company has
also granted Mr. Teeters options to purchase up to 399,600 shares of Common
Stock of the Company exercisable at $.20 per share which expire on May 1, 2008,
of which 133,200 shares have vested. The remaining unvested options will have a
performance vesting schedule not yet defined by the Board of Directors. In 1998,
pursuant to a now cancelled employment agreement, Mr. Teeters was granted 50,000
options at $.20 per share, vesting over a 4 year period, of which 12,500 have
vested and the rest vest equally on May 1 of the next three years. The granting
of all 50,000 options have survived the aforementioned employment agreement.
During the term of these employment agreements and for a period of one year
after leaving the employ of the Company, each executive agrees not to compete in
the towing, vehicle transportation and recovery business. The Agreements provide
for severance payments equal to the annual base compensation under each
agreement for a period of 12 months (6 months for Mr. Teeters), as well as all
granted options automatically vest in the event there is a "change in control"
of the Company, as defined in the agreement and employment is subsequently
terminated either voluntarily or involuntarily. Each agreement also provides for
the payment of health and life insurance premiums for each executive.
Incentive and Nonqualified Stock Option Plan
On October 2, 1997, the Board of Directors and a majority of the Company's
shareholders adopted the Company's 1997 Stock Option Plan (the "Plan"). On
December 22, 1997, the Plan was amended by the Board of Directors and a majority
of the Company's shareholders to increase the number of Plan Options, as
hereinafter defined, from 1,000,000 to 2,500,000. On July 26, 1999, the Plan was
amended again by the Board of Directors and Majority Shareholders to increase
the number of Plan Options from 2,500,000 to 7,500,000.
As of August 10, 1999, 5,274,494 Plan Options have been granted pursuant to the
Plan, with 1,792,993 options having vested at exercise prices between $0.20 and
$2.50.
29
<PAGE>
Director Compensation
For Mr. Troy Taylor's participation as the Company's Chairman of the Board, he
was granted 257,712 Warrants exercisable at $.01 per share and 386,567 Warrants
exercisable at $.20 per share. Mr. Jay Clark and Mr. Julian Mohr's compensation
for serving as a Director is yet to be determined.
A Director who is an employee of the Company receives no additional compensation
for services as director except reimbursement of out-of-pocket expenses. Other
than what has been discussed in this section, the Company has no other
arrangements regarding compensation for services as a director.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On August 13, 1998, Mr. Nagelmann, President, CEO and Director, loaned the
Company $5,000 which was evidenced by a written promissory note. The note
provided for payment of 8% annually in interest. In June of 1999, Mr.
Nagelmann's note had been paid in full by the Company. Over the period from July
31, 1998 through December 29, 1998, Mr. Gelormine, former Vice President of
Business Development, loaned the Company an aggregate of $50,700 that was
evidenced by five promissory notes. Each note provided for payment of 8%
annually in interest. On August 10, 1999 the notes were paid in full. Other than
the 8% interest, no other consideration was provided by the Company for the
aforementioned loans.
On February 3, 1999, Joel B. Nagelmann, President, CEO and Director, personally
guaranteed the lease on seven towing vehicles with RIT Auto Leasing Group, Inc.
of Floral Park, New York. The guaranty is for a period of six months after which
the Company will have full liability. Mr. Nagelmann was liable for approximately
$60,000 over the term of the guaranty, and as of August 10, 1999, approximately
$12,000 of personal liability remained. Mr. Nagelmann received no compensation
from the Company for providing this guaranty.
During the Company's initial start-up financing in December of 1997, Mr.
Nagelmann invested $25,000 in a convertible note. Mr. Nagelmann participated on
the same terms and conditions as other friends and family who participated. In
accordance with the note, Mr. Nagelmann received 10% interest on the principal
in quarterly cash payments. The note also provided Mr. Nagelmann the ability to
convert the principal balance into Common Stock at $1.00 per share. No other
consideration was provided by the Company for Mr. Nagelmann's participation. On
August 8, all of the "Seed Notes" hereinafter defined, were paid in full by the
Company of which the aforementioned note was a part.
On August 1, 1999 Mr. Nagelmann invested $25,000 into the GMA LLC investment
vehicle on the same terms and conditions as all other GMA LLC investors.
30
<PAGE>
The Company has entered into real property leases with certain of the principals
of acquired towing companies. The terms and details have been previously
discussed herein and the agreements are attached hereto as Exhibits.
GMA Partners, Inc. Advisory Services Agreement:
On March 11, 1999, the company signed a six-month agreement with GMA Partners,
Inc. to provide exclusive financial advisory services to the Company and assist
in arranging acquisition financing for the Company. This financing effort
included the possible sale of any of the Company's securities or any other
related transaction involving the issuance of any debt or equity securities.
Compensation for Services:
A retainer fee equal to 50,000 shares of the Company's restricted Common Stock
was issued upon execution of this agreement.
If the company closes a transaction during the term of this agreement or during
the 12 month period following the termination of this agreement with any debt or
equity investor introduced by GMA, then GMA shall be due a success fee. This
success fee shall be payable in cash at closing, equal to 4% of the total amount
of financing either funded or committed to the company, except for funded
amounts provided by shareholders of the company or an affiliated entity of GMA.
On August 9, 1999 the Company paid a success fee (and expenses to date, as per
the agreement) of $214,365.72
In addition, the company shall issue to GMA, common stock purchase warrants
exercisable for 6 years from the closing date of any transaction, to purchase
2.0% of the fully diluted common stock, post transaction, at a purchase price of
$.01 per share. The warrants will have piggyback registration rights as well as
standard anti-dilution provisions. On August 9, 1999 the Company issued 814,512
Warrants in keeping with the terms of the agreement.
GMA LLC equity investment:
GMA Partners, Inc. and the Company signed an agreement that, through an
affiliated entity (GMA LLC), they would fund $2.7 Million to the company to
complete the acquisition of up to 10 towing companies. The transaction was
closed on August 6th, 1999 with the acquisition of 8 towing companies.
The company issued Series B 8% Cumulative Convertible Preferred Stock in this
transaction. This Convertible Preferred Stock will be convertible into shares of
the Company's Common Stock representing 59.4% of AutoTow's Common Stock on a
fully diluted basis after considering (i) the currently outstanding stock of
AutoTow, (ii) the conversion of the Convertible Preferred Stock, (iii) any
31
<PAGE>
outstanding options and warrants, (iv) shares issued in conjunction with this
transaction, and (v) further adjusted, at closing or in the future, for any
stock issued to shareholders as a result of any ratchet provisions related to
previous acquisitions. The common shares issued pursuant to such a conversion
shall be unregistered until such time as the company has registered such shares
in a registration statement declared effective by the SEC.
In addition, GMA LLC, at the closing, is to receive one warrant to purchase one
share of AutoTow Common Stock, for each five shares of common shares GMA LLC
would receive in the event that they converted all their Convertible Preferred
Stock. The Warrants granted total 4,838,202 and have an exercise price equal to
$1.50 and are exercisable for six years from the date of issuance.
The agreement also calls for the company to establish a management option plan
allowing for the issuance of up to 12.5% of the outstanding shares of Common
Stock to management. This 12.5% is after considering any ratchet provisions and
the full conversion of the Convertible Preferred Stock, based upon performance
hurdles to be set up by the Board of Directors. The strike price of the each
option will be at $.20 per share.
Additionally, the Company has five members of the Board of Directors initially,
of which, three positions will be held by GMA designee's Troy T. Taylor
(Chairman of the Board), Jay Clark (Director) and Julian Mohr (Director).
Pursuant to the agreement, the company is to pay GMA LLC a semi-annual
administration fee of $12,500 and all out-of-pocket expenses related to the
investment including organizational, legal, travel, accounting and due
diligence.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 75,000,000 shares of Common Stock, par value
$.001 per Share, and 5,000,000 shares of Preferred Stock, $.001 per Share, of
which 100,000 shares have been designated as Series A Convertible Preferred
Stock and 500,000 shares have been designated as Series B 8% Cumulative
Convertible Preferred Stock ("Series B Preferred Stock"). As of the date hereof,
there were 15,418,304 shares of Common Stock issued and outstanding, 9,000
shares of Series A Convertible Preferred Stock outstanding and 363,723 shares of
Series B Preferred Stock outstanding.
Common Stock
As of August 10, 1999, there were 15,418,304 shares of Common Stock outstanding,
held of record by approximately 688 stockholders. In addition, as of August 10,
1999 there were 5,274,494 shares of Common Stock subject to outstanding options
and 8,662,769 shares of Common Stock subject to outstanding warrants.
32
<PAGE>
Voting Rights. The holders of Common Stock are entitled to one vote per share
for the selection of directors and all other purposes and do not have cumulative
voting rights.
Other Rights. Common Shares are not redeemable, have no conversion rights and
carry no preemptive or other rights to subscribe to or purchase additional
Common Shares in the event of a subsequent offering.
Liquidation Rights. Upon liquidation or dissolution, and after payment of the
Preferred Shareholders, each outstanding Common Share will be entitled to share
equally in the remaining assets of the Company legally available for
distribution to shareholders after the payment of all debts and other
liabilities.
Dividend Rights. The holders of Common Stock are entitled to receive dividends
when, as, and if declared by the Board of Directors, and in the event of the
liquidation by the Company, to receive pro-rata, all assets remaining after
payment of debts and expenses and liquidation of the Preferred Stock. Holders of
the Common Stock do not have any pre-emptive or other rights to subscribe for or
purchase additional shares of capital stock, no conversion rights, redemption,
or sinking-fund provisions. In the event of dissolution, whether voluntary or
involuntary, of the Company, each share of the Common Stock is entitled to share
ratably in the assets available for distribution to holders of the equity
securities after satisfaction of all liabilities. All the outstanding shares of
Common Stock are fully paid and non-assessable.
The transfer agent for the Company's Common Stock is American Securities
Transfer and Trust, Inc. 12039 W. Alameda Parkway, Suite Z-2, Lakewood, Colorado
80228.
Preferred Stock
The Board of Directors of the Company (without further action by the
shareholders), has the option to issue from time to time authorized un-issued
shares of Preferred Stock and designate series of Preferred Stock with such
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions providing for the creation and
issuance of such series of Preferred Stock as adopted by the Board of Directors
pursuant to the authority in this paragraph given. The Company has the authority
to issue up to 5,000,000 shares of Preferred Stock pursuant to action by its
Board of Directors. As of August 10, 1999, the Company has outstanding 9,000
shares of Series A Preferred Stock of which 100,000 are designated and 363,723
shares of Series B 8% Cumulative Convertible Preferred Stock of which 500,000
are designated.
33
<PAGE>
Series A Convertible Preferred Stock
Between July and August 1998, the Company sold 9,000 shares of Series A
Convertible Preferred Stock for an aggregate of $450,000 in an offering under
Rule 506 of the Securities Act.
Liquidation Preference. In the event of any liquidation, dissolution or winding
up of the Company, either voluntary or involuntary, the holders of the Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Company to the holders
of the Common Stock by reason of their ownership thereof, all accrued but unpaid
dividends on their respective shares of Series A Preferred Stock then held by
them and no more. If upon the occurrence of such event, the assets and funds
thus distributed among the holders of Series A Preferred Shares shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of the Company legally
available for distribution shall be distributed ratably among the holders of
Series A Preferred Shares in proportion to the number of shares held by them.
Dividend Rights. The holders of the Series A Convertible Preferred Stock are
entitled to receive a 7% dividend payable in cash or Common Stock, at the
Company's option, payable on a quarterly basis on January 21, April 21, July 21
and October 21 (the "Dividend Dates") of the first year. If the dividend is paid
in Common Stock, the price per share will be determined based on the average
closing price for the ten trading days immediately prior to the Dividend Date.
After July 21, 1999, the dividend will be 12% per annum for all unconverted
Series A Preferred Shares. To date, the Company has paid dividends on its Series
A Convertible Preferred Stock aggregating to 61,572 shares of its Common Stock
and no cash.
Conversion. The Series A Convertible Preferred Shares are convertible, at the
option of the holder thereof, into the Company's Common Stock during the period
commencing on the date on which a Registration Statement is declared effective
by the Securities and Exchange Commission regarding the Common Stock underlying
the Series A Convertible Preferred Stock until July 20, 2001 (the "Expiration
Date"). The number of Common Shares into which one share of Series A Preferred
Stock will be converted is sixteen and two thirds (16.667) to 1.
Voting Rights. The holders of the Series A Preferred Shares of the Company are
not entitled to vote unless they first convert their shares into Common Stock of
the Company, at which time they will have the same rights as any other Common
Stock holder.
34
<PAGE>
The Series A Preferred Stock has no sinking fund provisions or preemptive
rights.
Series B Cumulative Convertible Preferred Stock
On August 6, 1999 the Company sold 363,723 shares of its Series B Preferred
Stock to GMA Capital Parnters-AutoTow, LLC for $2,700,000. The Series B
Preferred Stock is convertible into a total of 24,191,102 of the Company's
Common Stock.
Liquidation Preference. In the event of any liquidation, dissolution or winding
up of the Company, either voluntary or involuntary, the holders of the Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Company to the holders
of the Common Stock by reason of their ownership thereof, all accrued but unpaid
dividends on their respective shares of Series A Preferred Stock then held by
them and no more. If upon the occurrence of such event, the assets and funds
thus distributed among the holders of Series A Preferred Shares shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of the Company legally
available for distribution shall be distributed ratably among the holders of
Series B Preferred Shares in proportion to the number of shares held by them.
Dividend Rights. The Company shall declare a cumulative, annual cash dividend of
eight percent (8%) of the Stated Value of the Series B Preferred Stock,
calculated at the simple interest rate of 8% per annum from the Issue Date, for
each share of the Series B Preferred Stock held by each Record Holder, payable
on or about the 15th day of July and the 15th day of January of each year,
commencing January 2000. Dividends at the rate prescribe above shall be deemed
to accrue in arrears and accumulate on each outstanding share of the Series B
Preferred Stock from month to month as of the 15th day of each month, until such
dividends are declared for payment by the Board and payment is accordingly made,
in cash, therefor. So long as any Series B Preferred Stock is outstanding, no
dividend shall be declared or paid or set aside for payment, nor shall any other
distribution be declared or made, upon the Common Stock or any other stock of
the Corporation ranking junior to or pari passu with the Series B Preferred
Stock as to dividends.
Conversion. The Series B Preferred Shares are convertible, at the option of the
holder thereof, into the Company's Common Stock during the period commencing on
the date on which a Registration Statement is declared effective by the
Securities and Exchange Commission regarding the Common Stock underlying the
Series B Convertible Preferred Stock. The number of Common Shares into which one
share of Series B Preferred Stock will be converted is approximately 66.5094 to
1.
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<PAGE>
Voting Rights. In addition to any voting rights provided in the Certificate of
Incorporation or By-laws, the Series B Preferred Stock shall vote together with
the Common Stock on all actions to be voted on by the stockholders of the
Corporation. Each share of Series B Preferred Stock shall entitle the Record
Holder thereof to such number of votes per share on each such action as shall
equal the number of shares of Common Stock (rounded up to the nearest whole
share of Common Stock) into which each share of Series B Preferred Stock is then
convertible. The Record Holders of Series B Preferred Stock shall be entitled to
notice of any stockholders' meeting in accordance with the By-Laws of the
Corporation.
In the future, the Board of Directors of the Company has the authority to issue
additional shares of Preferred Stock in series with rights, designations and
preferences as determined by the Board of Directors. When any shares of
Preferred Stock are issued, certain rights of the holders of Preferred Stock may
affect the rights of the holders of Common Stock.
Options
Currently, there are options to purchase up to 5,274,494 shares of Common Stock
of the Company ranging from $0.20 to $2.50 per share exercisable between October
2, 1998 and October 2, 2007. As of August 10, 1999, 1,790,993 options have
vested and are exercisable, and no options have been exercised. No options have
been granted registration rights.
Warrants
As of August 10, 1999, there are warrants outstanding to purchase a total of
8,662,769 shares of Common Stock at exercise prices ranging from $.01 per share
to $4.50 per share. As of August 10, 1999, 296,769 Warrants were exercisable.
The holders of 8,616,000 shares of these warrants are entitled to piggyback
registration rights under the Securities Act subject to limitations specified in
the agreement between the Company and the warrant holders. The Company will bear
all registration expenses other than underwriting discounts and commissions.
Shares Eligible for Future Sales
As of August 10, 1999, the Company has outstanding an aggregate of 15,418,304
shares of Common Stock. Of the total outstanding shares of Common Stock,
2,637,055 shares of Common Stock are freely tradable without restriction or
further registration under the Securities Act, 2,024,900 shares of Common Stock
will be eligible for resale after October 2, 1999 under Rule 144, and the
remaining 10,756,349 shares of Common Stock will be eligible for resale on
various dates thereafter. A total of 1,958,025 shares have been granted piggy
back registration rights.
36
<PAGE>
Certain Delaware Legislation
Certain Provisions of the Certificate of Incorporation and Bylaws
The Company's Certificate of Incorporation provides that no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director except as limited by
Delaware law. The Company's Bylaws provide that the Company shall indemnify to
the full extent authorized by law each of its directors and officers against
expenses incurred in connection with any proceeding arising by reason of the
fact that such person is or was an agent of the corporation. Insofar as
indemnification for liabilities may be invoked to disclaim liability for damages
arising under the Securities Act of 1933, as amended, or the Securities Act of
1934, (collectively, the "Acts") as amended, it is the position of the
Securities and Exchange Commission that such indemnification is against public
policy as expressed in the Acts and are therefore, unenforceable.
Delaware Anti-Takeover Law and Our Certificate of Incorporation and Bylaw
Provisions
Provisions of Delaware law and our Certificate of Incorporation and Bylaws could
make more difficult our acquisition by a third party and the removal of our
incumbent officers and directors. These provisions, summarized below, are
expected to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of the Company to first
negotiate with us. We believe that the benefits of increased protection of our
ability to negotiate with proponent of an unfriendly or unsolicited acquisition
proposal outweigh the disadvantages of discouraging such proposals because,
among other things, negotiation could result in an improvement of their terms.
The Company is subject to Section 203 of the Delaware General Corporation Law,
which regulates corporate acquisitions. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years following the date
the person became an interested stockholder, unless: - the Board of Directors
approved the transaction in which such stockholder became an interested
stockholder prior to the date the interested stockholder attained such status;
upon consummation of the transaction that resulted in the stockholder's becoming
an interested stockholder, he or she owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction commenced, excluding
shares owned by persons who are directors and also officers; or on or subsequent
to such date the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders. A "business
combination" generally includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested stockholder. In
general, an "interested stockholder" is a person who, together with affiliates
and associates, owns, or within three years prior to the determination of
interested stockholder status, did own, 15% or more of the corporation's voting
stock.
37
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS.
As of August 10, 1999, there were approximately 688 shareholders of record of
the Company's Common Stock. The Company's Common Stock is currently listed for
trading on the over-the-counter bulletin board under the symbol "AUTWE". The
following table sets forth, for the period since June 25, 1998, which is the
date the Company first began publicly trading, the high and low closing sales
prices for the Common Stock as reported on the OTC Bulletin Board.
Common Stock Sales Price (1)
----------------------------
High Low
---- ---
June 25, 1998 - June 30, 1998 3.125 0.75
July 1, 1998 - September 30, 1998 4.375 1.9375
October 1, 1998 - December 31, 1998 1.3125 0.375
January 1, 1999 - March 31, 1999 0.8125 0.17
April 1, 1999 - June 30, 1999 0.75 0.20
July 1, 1999 - August 10, 1999 1.5625 0.6875
(1) The Company's Common Stock began trading on June 25, 1998. There is no
trading market for the Company's warrants nor Preferred Stock.
The transfer agent for the Company's Common Stock is American Securities
Transfer and Trust, Inc. 12039 W. Alameda Parkway, Suite Z-2, Lakewood, Colorado
80228.
Absence of Dividends
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain future earnings, if any, to finance the expansion of
its business and does not anticipate that any cash dividends on its Common Stock
will be paid in the foreseeable future. The future Common Stock dividend policy
will depend on the Company's earnings, capital requirements, expansion plans,
financial condition and other relevant factors. The Company has paid dividends
on its Series A Convertible
38
<PAGE>
Preferred Stock and intends to pay dividends on its Series B Convertible
Preferred Stock. Between July and August of 1998 the Company sold 9,000 shares
of Series A Convertible Preferred Stock for an aggregate of $450,000 in an
offering under Rule 506 of the Securities Act. Pursuant to the offering, a 7%
dividend payable in cash or Common Stock, at the Company's option is payable on
a quarterly basis on January 21, April 21, July 21 and October 21 (the "Dividend
Dates") of the first year. If the dividend is paid in Common Stock, the price
per share shall be determined based on the average closing price for the ten
trading days immediately prior to the Dividend Date. After July 21, 1999, the
dividend shall be 12% per annum for all unconverted Series A Preferred Shares.
To date, the Company has paid dividends on its Series A Convertible Preferred
Stock aggregating to 61,572 shares of its Common Stock and no cash. The Company
shall declare a cumulative, annual cash dividend of eight percent (8%) of the
Stated Value of the Series B Preferred Stock, calculated at the simple interest
rate of 8% per annum from the Issue Date, for each share of the Series B
Preferred Stock held by each Record Holder, payable on or about the 15th day of
July and the 15th day of January of each year commencing January 2000. Dividends
at the rate prescribe above shall be deemed to accrue in arrears and accumulate
on each outstanding share of the Series B Preferred Stock from month to month as
of the 15th day of each month, until such dividends are declared for payment by
the Board and payment is accordingly made, in cash, therefor. So long as any
Series B Preferred Stock is outstanding, no dividend shall be declared or paid
or set aside for payment, nor shall any other distribution be declared or made,
upon the Common Stock or any other stock of the Corporation ranking junior to or
pari passu with the Series B Preferred Stock as to dividends.
Dilution
The Company will likely issue shares of its Common Stock and Preferred Stock in
private or public offerings to obtain financing, capital or to acquire other
towing businesses that can improve the performance and growth of the Company.
Issuance and or sales of substantial amounts of Common Stock could adversely
affect prevailing market prices in the Common Stock of the Company.
ITEM 2. LEGAL PROCEEDINGS.
The Company is currently in litigation involving a claim and counter-claim with
three former employees regarding the breach of their respective Employment
Agreements with the Company. The Company's claims and the Defendant's
counter-claims are for damages exceeding $15,000. The outcome of these actions
are not expected to materially affect the Company.
The Company is currently in litigation involving a claim brought by a company
against the Company seeking payment of a deposit of $200,000 allegedly owed the
claimant pursuant to a Binding Letter of Intent between the claimant and the
Company. The Company filed a counterclaim against the claimant for breach of
contract and fraud in the inducement.
39
<PAGE>
The two claims have been consolidated under arbitration proceedings before the
American Arbitration Association in Palm Beach County. The Company feels the
claim against them is without merit and will not have an adverse effect upon the
Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
On June 11, 1999 the Company's Board of Directors approved a motion to change
its accountant from PriceWaterhouseCoopers, LLP to Grant Thornton, LLP. The
Company had no disagreements with its past accountant.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In October of 1997, the founders and management of the Company received an
aggregate of 5,000,000 shares for capitalizing the Company and for services
rendered to the Company as part of its start up process.
For the period commencing on October 30, 1997 through March 18, 1998, the
Company issued an aggregate of $120,000 in promissory notes to nine investors
(the "Seed Notes") four of whom were accredited and five were non-accredited.
The Seed Notes yielded interest at 10% annually, paid quarterly. The Seed Notes
mature one year from execution with an additional one year extension solely at
the Company's option. The Company has extended the maturity date of these Seed
Notes. On August 8, 1999 the Company retired all outstanding Seed Notes.
For the period commencing on January 11, 1998 through April 15, 1998, the
Company issued an aggregate of 618,000 shares of its Common Stock at $1.25 per
share to 15 accredited or otherwise qualified investors based on their financial
resources and knowledge of investments in a 504 offering (the "504 Offering").
The Company received gross proceeds of $772,500.
For both the Seed Notes and the 504 Offering, each investor was provided with or
had access to financial and other information concerning the Company and its
operations. Accordingly, the issuance of these securities was exempt from the
registration requirements of the Securities Act pursuant to Section 3(b) of the
Securities Act.
On December 4, 1997, the Company approved the acquisition of Keey Corporation
("Keey"), a Delaware corporation. On March 30, 1998, the Company finalized the
Keey acquisition. The Company subsequently issued one share of its $.001 par
value Common Stock for 17.2 shares of Keey's $.001 par value Common Stock. All
of Keey's shares (19,608,590) were exchanged for 1,140,138 shares of
1-800-AutoTow Common Stock. There was no cash exchanged in the transaction.
On April 20, 1998, the Company issued 10,000 shares of its restricted Common
Stock to the TN Group for consulting services regarding tax issues related to
potential acquisitions.
40
<PAGE>
On June 1, 1998, the Company issued 129,600 shares of its restricted Common
Stock to Glenn Michael Dempsey, owner of D&D Towing and Recovery, Inc. in
relation to the Company's acquisition of Mr. Dempsey's towing company. On
November 17, 1998, an additional 1,870 shares of the Company's restricted Common
Stock were issued to Mr. Dempsey as part of the closing balance sheet for the
aforementioned acquisition. On June 29, 1999, an additional 565,610 shares of
the Company's restricted Common Stock were issued to Mr. Dempsey as part of the
terms of his acquisition agreement. As of July 12, 1999, a total of 697,080
shares of the Company's restricted Common Stock were issued to Mr. Dempsey.
According to the terms of his acquisition agreement, the Company has no further
liability to Mr. Dempsey.
On August 1, 1998, the Company issued an aggregate of 420,000 shares of its
restricted Common Stock to Robert M. McGann, Robert A. McGann and William
Chester, owners of McGann & Chester, Inc. in relation to the Company's
acquisition of their towing company. On March 15, 1999, an additional 90,756
shares of the Company's restricted Common Stock were issued as part of the
closing balance sheet for the aforementioned acquisition. On August 3, 1999 the
Company issued an aggregate of 537,083 shares of Common Stock to the
aforementioned principals as part of a contingency provision in their
acquisition agreement for the difference between $2.00 per share and the
Company's average closing stock price for the 20 trading days prior to August 1,
1999 should that price be less than $2.00 per share. The Company's average
closing stock price during that time was $0.974875 per share and thus, an
additional 537,083 shares were issued. In total 1,047,839 Common Shares were
issued in relation to the M&C acquisition. The Company has no further liability
with regard to said acquisition.
On July 28, 1998, the Company commenced a private offering of units ("Units")
with each Unit consisting of 1,000 shares of the Company's Series A 7%
Convertible Preferred Stock pursuant to Rule 506 of Regulation D (the "Series A
Offering") whereby the Company offered a minimum of 20 Units on a best efforts
basis. Nine Units were sold to eight accredited investors for an aggregate of
$450,000 in exchange for 9,000 shares. These shares are convertible into 150,005
shares of the Company's Common Stock. The offering price of each Unit was
$100,000 for an aggregate of $5,000,000 if the maximum offering was sold. Each
share of Series A Preferred Stock is convertible into sixteen and two thirds
(16.667) shares of the Company's Common Stock at a conversion price of $3.00 per
Share at any time commencing from the accepted date of the investment.
Additionally, each investor received Warrants at the rate of 1 Warrant for each
potentially convertible Common Share which have an exercise price of $4.50 per
share. These Warrants are callable by the Company at any time a registration
statement is effective for the shares underlying the Warrants and when the
Company's Common shares have traded at $6.00 per share or higher for 20
consecutive trading days. The Warrants are set to expire on July 20, 2001.
41
<PAGE>
On October 1, 1998, the Company issued 25,807 shares of unrestricted stock
pursuant to Rule 504 to Don Sinclair Lyons in relation to a penalty clause in an
acquisition agreement between the Company and Mr. Lyon's towing operation. On
February 3, 1999, the Company issued 42,373 shares of its restricted Common
Stock to Don Sinclair Lyons in relation to an extension of the agreement and
penalty clause. On August 6, 1999 the Company acquired substantially all of the
assets of Mr. Lyons' towing operations.
On October 21, 1998 the Company issued an aggregate of 7,472 shares of
restricted Common Stock to the holders of its Series A Preferred Stock as
payment for the previous quarter's dividend.
On October 23, 1998, the Company issued 50,000 shares of its restricted Common
Stock to Globe Media, Inc. in connection with consulting services.
Between October 29, 1998 and October 31, 1998, the Company completed an offering
of $100,000 of 12% Promissory Notes (the "October Notes") and 30,000 Warrants
exercisable at $.01 per share to a single accredited investor. The October Notes
matured in six months and were extended by mutual agreement another six months,
thereby being payable on October 30, 1999. The investor was provided with or had
access to financial and other information concerning the Company and its
operations. Accordingly, the issuance of these securities was exempt from the
registration requirements of the Act pursuant to Section 4(2) of the Act. On
August 9, 1999 the Company retired the October Notes and holds no further
liability to the note holder.
On January 21, 1999 the Company issued an aggregate of 16,202 shares of
restricted Common Stock to the holders of its Series A Preferred Stock as
payment for the previous quarter's dividend.
On January 27, 1999 the Company issued 50,000 restricted shares of Common Stock
to Banyan Investment Advisors, Inc. in lieu of a cash retainer for consulting
services.
On March 2, 1999, the Company issued 393,110 shares of unrestricted stock
pursuant to Rule 504 to Atlantik International Holdings, an accredited investor
in an offering which yielded $53,054.85 in cash proceeds to the Company.
On March 3, 1999, the Company issued 166,667 shares and 233,333 shares of
unrestricted stock pursuant to Rule 504 to Howard Talks and Thomas Westrick
respectively, both accredited investors. The Company received cash proceeds of
$71,666.60.
On March 11, 1999, the Company issued 50,000 shares of its restricted Common
Stock to GMA Partners, Inc. in lieu of a cash retainer for consulting services.
42
<PAGE>
On April 1, 1999, the Company issued 50,000 shares of its unrestricted Common
Stock pursuant to Rule 504 to At Large Limited, Inc. and 100,000 shares of its
restricted Common Stock in exchange for consulting services to the Company.
Between May 13, 1999 and May 28, 1999, the Company completed an offering of
$250,000 of 12% Promissory Notes (the "May 1999 Notes") and 250,000 Warrants
exercisable at $.10 per share to four accredited investors. The investors were
granted piggy back registration rights on the Warrants. The May 1999 Notes
mature in six months thereby being payable in November 1999 with six months
interest guaranteed, although the Company, at its option may pay the notes off
including the six months interest, prior to November 1999. On August 9, 1999 the
Company retired said notes. Each investor was provided with or had access to
financial and other information concerning the Company and its operations.
Accordingly, the issuance of these securities was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
On May 28, 1999 the Company issued an aggregate of 25,000 restricted shares of
Common Stock to the principals of Arrow Towing & Recovery, Inc. as part of a
non-refundable deposit in relation to an extension of the merger agreement and
was paid in keeping with a penalty clause. Since these shares were issued as
payment for the penalty, they were issued in addition to the previously
disclosed shares issued in connection with the merger.
On June 29, 1999, the Company issued 1,500 shares of restricted Common Stock to
Corporate Communications Corp. as part of a settlement for a previously
cancelled consulting contract.
On July 6, 1999, the Company agreed to issue shares of restricted Common Stock
to Charter Management Group ("Charter") as part of a settlement for a previously
canceled consulting contract. The settlement calls for the Company to pay
Charter $10,000 of Common Stock with the per-share price determined by the
average closing price for the 10 trading days subsequent to the Company closing
on its August 6, 1999 financing, less a 30% discount of the calculated average.
On July 21, 1999 the Company issued an aggregate of 37,898 restricted shares of
Common Stock to the holders of its Series A Preferred Stock as payment for the
previous two quarter's dividend.
On August 1, 1999, the Company issued to Julian Mohr, 125,000 restricted shares
of Common stock for services related to the GMA LLC transaction.
On August 6, 1999, the Company issued an aggregate of 508,785 restricted shares
of its Common Stock to the current and previous management of the Company, a
portion of each officer's deferred salary in the form of Common Shares at $.20
per share. The management of the Company had verbally agreed to work on a
deferred salary basis for much of 1999 and part of 1998 until the Company
43
<PAGE>
received funding. The number of shares issued to each current and previous
member of management are: 123,929 shares to Joel B. Nagelmann, President & CEO,
Director; 119,696 shares to Joshua Konigsberg, former Vice President of
Marketing and former Director, 123,626 shares to Vince Gelormine, former Vice
President of Business development and former Director; 76,161 shares to Eugene
Iarocci, Senior Vice President/COO and Director; and 67,376 shares to Steven B.
Teeters, Vice President of Finance.
On August 6, 1999 the Company issued an aggregate of 3,980,100 restricted shares
of its Common Stock in connection with the acquisition of the eight towing
companies. Each individual transaction was previously described herein.
On August 6, 1999 the Company issued 363,723 shares of its Series B Preferred
Stock to GMA LLC in connection with the GMA LLC funding previously described.
The 363,723 Series B Preferred Stock is convertible into 24,191,012 shares of
the Company's Common Stock.
On August 6, 1999 the Company agreed to issue 800,000 restricted shares of its
Common Stock to Finova Capital, in connection with the Finova funding previously
described.
On August 6, 1999, the Company issued to Ignite Capital, 240,000 restricted
Common Shares as payment owing due to a consulting agreement dated Feb. 12,
1999. This agreement and addendum dated February 24,1999 called for a fee of
2.75% of gross proceeds of debt financing resulting from an introduction by
Ignite Capital to lender. In addition, $55,000 was paid in cash as part of this
agreement settlement.
For all above enumerated transactions, the Company relied upon various
exemptions afforded by Section 42 and Section 3(b) of the Securities Act of
1933, as amended (the "Securities Act") as an exemption available from
registration requirements of Section 5 of the 33 Act per transaction by an
issuer not involved in a public offering. The Company has relied upon the Rule
504 offering exemption promulgated under Regulation D of the Securities Act
prior to the repeal of this rule in April, 1999. No advertising or general
solicitation was employed by the Company in the offering of any of its
securities.
Generally under Rule 144, a person holding restricted securities for a period of
one (1) year may, if there is adequate public information available concerning
the Company, sell every three months in ordinary brokerage transactions or
transactions with a market maker an amount equal to the greater of (a) 1% of the
Company's then outstanding stock; or (b) the average weekly volume of sales
during the four calendar weeks preceding the sale. Rule 144 does not limit the
amount of restricted securities, which a person who is not an affiliate of the
Company may sell after three years. Affiliate sales under Rule 144 are subject
to such volume limitations regardless of the length of the holding period. Sales
under Rule 144 may, in the future, have a depressive effect on the market price
of the Company's securities should a public market develop.
44
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Liability and Indemnification of Officers and Directors
Delaware General Corporation Law (the "DGCL") provides that "a corporation shall
have power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. With
respect to derivative actions, the DGCL provides in relevant part that a
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor(by
reason of his service in one of the capacities specified in the preceding
sentence) against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Circuit Court or the court in which such
action or suit was bought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Circuit Court or such other court shall deem proper. The Company's
Certificate of Incorporation provides for such indemnification to the fullest
extent provided for by the DGCL.
The Company's Certificate of Incorporation provides that no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director except as limited by
the DGCL.
The Company's Bylaws provide that the Company shall indemnify to the full extent
authorized by law each of its directors and officers against expenses incurred
in connection with any proceeding arising by reason of the fact that such person
is or was an agent of the corporation.
45
<PAGE>
Insofar as indemnification for liabilities may be invoked to disclaim liability
for damages arising under the Securities Act of 1933, as amended, or the
Securities Act of 1934, (collectively, the "Acts") as amended, it is the
position of the Securities and Exchange Commission that such indemnification is
against public policy as expressed in the Acts and are therefore, unenforceable.
PART F/S
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included herein.
46
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
1-800-AutoTow, Inc.
We have audited the accompanying consolidated balance sheet of 1-800-AutoTow,
Inc. and Subsidiaries (the "Company") as of March 31, 1999, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
1-800-AutoTow, Inc. and Subsidiaries as of March 31, 1999, and the consolidated
results of their operations and their consolidated cash flows for the year then
ended, in conformity with generally accepted accounting principles.
/s/ GRANT THORNTON LLP
Miami, Florida
July 23, 1999 (except for Note O, as to which the date is August 6, 1999)
F-1
<PAGE>
<TABLE>
<CAPTION>
1-800-AutoTow, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 31,
ASSETS
1999 1998
------------- -------------
<S> <C>
CURRENT ASSETS
Cash $ 49,699 $ 254,242
Cash in escrow - 198,071
Accounts receivable, less allowance for doubtful
accounts of $6,170 149,718 -
Inventories 26,733 -
Prepaid expenses 61,766 33,082
------------- -------------
Total current assets 287,916 485,395
PROPERTY AND EQUIPMENT, NET 1,149,485 17,896
OTHER ASSETS
Goodwill, net 773,077 -
Deposits and other assets 137,957 12,277
------------- -------------
$ 2,348,435 $ 515,568
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term obligations $ 425,766 $ 16,888
Notes payable to officers 48,200 -
Accounts payable 173,782 17,773
Accrued expenses 488,071 56,129
Other current liabilities 13,472 -
------------- --------------
Total current liabilities 1,149,291 90,790
LONG TERM OBLIGATIONS, less current portion 322,794 120,000
COMMITMENTS AND CONTINGENCIES - -
Stockholders' equity
Stock dividend to be distributed 7,940 -
Preferred stock, $.001 par value, 5,000,000 shares authorized,
9,000 issued and outstanding 9 -
Common stock,$.001 par value; 25,000,000 shares authorized,
8,429,126 shares issued and outstanding 8,429 6,679
Additional paid-in capital 4,165,003 2,040,865
Accumulated deficit (3,305,031) (1,742,766)
------------- --------------
Total stockholders' equity 876,350 304,778
------------- --------------
Total liabilities and stockholders' equity $ 2,348,435 $ 515,568
============= ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
1-800-AutoTow, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended March 31,
1999 1998
---------------- ---------------
<S> <C> <C>
Net revenue $ 1,487,296 $ -
Cost of revenue 703,034 -
---------------- ---------------
Gross profit 784,262 -
---------------- ---------------
Selling, general and administrative expenses 2,105,554 309,349
Depreciation and amortization 211,335 526
---------------- ---------------
Loss from operations (1,532,627) (309,875)
Other income (expense)
Interest expense (60,748) (2,918)
Other 44,889 -
---------------- ---------------
Loss before income taxes (1,548,486) (312,793)
Income tax expense - -
---------------- ---------------
Net loss $ (1,548,486) $ (312,793)
================ ===============
Per share amounts:
Basic loss $ (0.21) $ (0.34)
================ ================
Diluted loss $ (0.21) $ (0.34)
================ ================
Weighted average common shares outstanding 7,269,029 5,054,015
================ ===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
<TABLE>
<CAPTION>
1-800-AutoTow, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
March 31, 1999 and 1998
Common Stock Preferred Stock
--------------------------- -------------------------- Additional
Number of Number of Paid-In
Shares Amount Shares Amount Capital
------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C>
Balance at September 2, 1997 (inception) - $ - - $ - $ -
Initial common stock issuance at $.10 per
share 10,000 100 - - 900
Issuance of common stock of officers in
consideration for services performed
at $.10 per share 10,000 100 - - 900
250-to-1 stock split and reduction in par
value from $.01 per share to $.001 per
share 4,980,000 4,800 - - -
Issuance of common stock at $1.25 per
share, net of issuance costs of $57,500 538,457 539 - - 615,032
Shares issued in connection with the
merger at $1.25 per share (Note B) 1,140,138 1,140 - - 1,424,033
Net loss - - - - -
----------- ----------- ----------- ----------- -----------
Balance at March 31, 1998 6,678,595 6,679 - - 2,040,865
Issuance of stock 1,743,059 1,743 9,000 9 2,118,306
Stock dividends declared - - - - -
Issuance of stock dividends 7,472 7 - - 5,832
Net loss - - - - -
----------- ----------- ----------- ----------- -----------
Balance at March 31, 1999 8,429,126 $ 8,429 9,000 $ 9 $ 4,165,003
=========== =========== =========== =========== ===========
(restubbed table)
Total
Accumulated Stock Stockholders'
Deficit Dividends Equity
-------------- ------------ -----------------
Balance at September 2, 1997 (inception) $ - $ - $ -
Initial common stock issuance at $.10 per
share - - 1,000
Issuance of common stock of officers in
consideration for services performed
at $.10 per share - - 1,000
250-to-1 stock split and reduction in par
value from $.01 per share to $.001 per
share (4,800) - -
Issuance of common stock at $1.25 per
share, net of issuance costs of $57,500 - - 615,571
Shares issued in connection with the
merger at $1.25 per share (Note B) (1,425,173) - -
Net loss (312,793) - (312,793)
----------- ----------- -------------
Balance at March 31, 1998 (1,742,766) - 304,778
Issuance of stock - - 2,120,058
Stock dividends declared (13,779) 13,779 -
Issuance of stock dividends - (5,839) -
Net loss (1,548,486) - (1,548,486)
----------- ----------- -------------
Balance at March 31, 1999 $(3,305,031) $ 7,940 $ 876,350
=========== =========== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
1-800-AutoTow, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31,
1999 1998
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,548,486) $ (312,793)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 211,335 526
Common stock issued for services rendered 90,150 1,000
Common stock issued for penalty 50,000 -
Changes in operating assets and liabilities:
Accounts receivable, net (43,516) -
Inventory 36,867 -
Prepaid expenses (19,915) (33,082)
Deposits and other assets (124,459) (12,277)
Accounts payable 90,982 17,773
Accrued expenses 428,009 56,129
Other current liabilities (14,771) -
---------------- ---------------
Net cash used in operating activities (843,810) (282,724)
---------------- ---------------
Cash flows from investing activities
Purchase of property and equipment (40,806) (18,422)
Purchases of businesses (230,000) -
---------------- ---------------
Net cash used in investing activities (270,806) (18,422)
---------------- ---------------
Cash flows from financing activities:
Cash in escrow 198,071 (198,071)
Borrowings of notes payable to officers 55,700 -
Repayments of notes payable to officers (7,500) -
Borrowings of long-term obligations 305,520 152,048
Repayments of long-term obligations (271,434) (15,160)
Proceeds from the issuance of preferred stock, net 405,000 -
Proceeds from the issuance of common stock, net 224,710 616,571
---------------- ---------------
Net cash provided by financing activities 910,067 555,388
---------------- ---------------
Net increase (decrease) in cash (204,543) 254,242
Cash, beginning of year 254,242 -
---------------- ---------------
Cash, end of year $ 49,699 $ 254,242
================ ===============
(continued)
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years Ended March 31,
<TABLE>
<CAPTION>
1999 1998
---------------- ---------------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 13,459 $ 2,802
================ ===============
</TABLE>
Non-cash investing and financing activities:
On March 30, 1998, the Company acquired Keey Corporation by issuing
1,140,138 common shares at $1.25 per share having an aggregate fair value
of $1,425,173.
In December 1997, the Company issued 10,000 common shares at $.10 per share
to officers of the Company in consideration for services performed.
During Fiscal 1999, as consideration for the acquisition of two businesses,
the Company paid $230,000 in cash and issued 642,226 shares of common
stock having an aggregate fair value of $1,350,197.
During Fiscal 1999, the Company issued 160,000 common shares with an
aggregate fair value of $90,150 to consultants in consideration for
services performed.
During Fiscal 1999, the Company issued 68,180 common shares ranging from
$.59 to $.97 per share in relation to a penalty clause in an acquisition
agreement.
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE A - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
1-800-AutoTow, Inc. and Subsidiaries (the "Company") is a corporation
formed September 2, 1997, pursuant to the laws of the State of Delaware.
The Company's objective is to create a national "brand name" network of
towing service companies through the acquisition and integration of
privately-owned vehicle towing service companies in order to achieve
economies of scale through the standardization, consolidation and
automation of the operations and administration of the acquired towing
service companies.
Basis of Presentation
---------------------
The financial statements for the period from September 2, 1997 (date of
inception) through March 31, 1998, present the activities of management in
fund raising and identification of companies for potential acquisition, and
do not reflect the conduct of any operations.
The accompanying 1999 consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All material
intercompany transactions and balances are eliminated in consolidation.
Revenue Recognition
-------------------
The Company's revenue is derived from customers who require towing and
recovery service, and fees related to vehicles, such as impound and
storage. Towing and recovery revenue is recognized at the completion of
each engagement, and fees are recorded when the service is performed.
Expenses related to the generation of revenue are recognized as incurred.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Inventories
-----------
Inventories consist of spare parts used for repairs of towing equipment and
vehicles. Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
(continued)
F-7
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE A - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Continued
Property and Equipment
----------------------
Property and equipment are recorded at cost, or fair value as of date of
purchase under purchase accounting. Property and equipment under capital
leases are stated at the present value of minimum lease payments.
Expenditures for renewals and improvements that significantly extend the
useful life of an asset are capitalized. Routine repairs and maintenance
are expensed as costs are incurred. When assets are sold or retired, the
cost and related accumulated depreciation are eliminated from the
respective accounts and the resulting gain or loss is reflected in the
statement of operations.
Depreciation is determined using the straight-line method over the
remaining estimated useful lives of the individual assets. Property and
equipment held under capital leases are amortized straight-line over the
shorter of the remaining lease term or estimated useful life of the asset.
Goodwill
--------
Goodwill is being amortized on a straight-line basis over a period of 25
years. Accumulated amortization was $21,180 at March 31, 1999.
On an ongoing basis, management reviews the valuation and amortization of
goodwill. As part of this review, the Company estimates the value and
future benefits of the net cash flows generated by the related subsidiaries
to determine that no impairment has occurred.
Income Taxes
------------
The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
(continued)
F-8
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE A - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Continued
Comprehensive Income
--------------------
The Company does not presently have any elements of comprehensive income as
outlined in SFAS No. 130, and consequently, there is no difference between
net income (loss) and comprehensive income (loss).
Segment Information
-------------------
The Company has only one single reporting segment as outlined in Statement
of Financial Accounting Standards (FAS) No. 131. The Company's revenues are
derived from customers located in the United States and all of the
Company's long-lived assets are located in the United States.
Per Share Amounts
-----------------
The Company's earnings per share is computed in accordance with Statement
of Financial Accounting Standards (FAS) No. 128 "Earnings Per Share." FAS
128 requires the presentation of both basic and diluted EPS. Due to losses
from continuing operations, the effect of convertible securities, stock
options and warrants is anti-dilutive. Accordingly, the Company's
presentation of diluted earnings per share is the same as that of basic
earnings per share for all periods presented.
For the period ended March 31, 1998, loss per share is computed by dividing
net loss plus fair value of the shares issued to acquire Keey Corporation
by the weighted average number of common shares outstanding during the
period.
Stock Options
-------------
Options granted under the Company's Stock Option Plan are accounted for
under APB 25, "Accounting for Stock Issued to Employees," and related
interpretations. In October 1995, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (FAS) No. 123,
"Accounting for Stock-Based Compensation," which requires additional
pro-forma disclosures for companies that will continue to account for
employee stock options under the intrinsic value method specified in APB 25
(see Note K).
(continued)
F-9
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE A - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Continued
Fair Value of Financial Instruments
-----------------------------------
Financial instruments consist primarily of cash, accounts receivable,
accounts payable and notes payable. The Company estimates that the fair
value of its financial instruments approximates their carrying value at
March 31, 1999 and 1998.
New Accounting Pronouncements
-----------------------------
In June 1998, the FASB issued Statement of Financial Accounting Standards
(FAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities." FAS No. 133 established standards for accounting and reporting
for derivative instruments and conforms the requirements for treatment of
different types of hedging activities. This statement is effective for all
fiscal quarters of years beginning after June 1999. Management does not
expect this Statement to have a material impact on the Company's financial
statements.
In 1998, the AICPA issued Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." SOP
98-1 establishes standards for accounting for internal use software
projects. This Statement is effective for financial statements for fiscal
years beginning after December 15, 1998 for costs incurred in those fiscal
years for all projects, including projects in progress when the SOP was
adopted. Management does not expect this Statement to have a material
impact on the Company's financial statements.
In 1998, the AICPA issued Statement of Position (SOP) 98-5, "Reporting on
the Costs of Start-Up Activities." SOP 98-5 provides guidance on accounting
for start-up costs and organization costs, which must be expensed as
incurred. This Statement is effective for financial statements for fiscal
years beginning after December 15, 1998. Management does not expect this
Statement to have a material impact on the Company's financial statements.
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-10
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE B - ACQUISITIONS
On June 1, 1998, the Company acquired D&D Towing and Recovery, Inc.,
located in Tampa, Florida, for $348,675. Payment consisted of $20,000 cash
and shares of common stock valued at $328,675. The total shares issued in
consideration for the acquisitions are determined based on an initial fixed
number of shares, certain post-closing adjustments and guaranteed minimum
values per share as stated in the acquisition agreement. As of March 31,
1999, 131,470 of these shares have been issued. Subsequent to March 31,
1999 an additional 565,610 shares were issued pursuant to the share price
provisions of the agreement, which satisfies all outstanding indebtedness
of the Company pursuant to the agreement.
On August 1, 1998, the Company acquired McGann & Chester, Inc., located in
Pittsburgh, Pennsylvania, for $1,231,522. Payment consisted of $210,000
cash and shares of common stock valued at $1,021,522. The total shares
issued in consideration for the acquisitions are determined based on an
initial fixed number of shares, certain post-closing adjustments and
guaranteed minimum values per share as stated in the acquisition agreement.
As of March 31, 1999, 510,756 of these shares have been issued. Additional
shares may be issued once final adjustments are made pursuant to provisions
in the agreement that provide for the issuance of additional shares if the
Company's stock price is not trading at $2.00 per share, subject to certain
events.
The acquisitions have been accounted for using the purchase method of
accounting, and accordingly, the assets and liabilities of the Acquired
Companies have been recorded at their estimated fair values at the dates of
acquisition. The excess of the purchase price over the fair value of the
net assets acquired has been recorded as goodwill and is being amortized on
a straight-line basis over 25 years. The results of operations of the
Acquired Companies have been included in the Company's results of
operations from their respective acquisition dates.
(continued)
F-11
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE B - ACQUISITIONS - Continued
The following unaudited pro forma financial information presents the
combined results of operations as if all the acquisitions that have been
made by the Company through Mach 31, 1999, had occurred as of April 1,
1998, after giving effect to purchase accounting adjustments. This pro
forma financial information does not necessarily reflect the results of
operations that would have occurred had a single entity operated during
such period.
Pro Forma Year Ended March 31, 1999 (unaudited):
------------------------------------------------
Net revenue $ 2,055,383
===============
Net loss $ (1,513,960)
===============
Loss per share $ (.21)
===============
On March 30, 1998, the Company issued 1,140,138 shares of its common stock
at $1.25 per share to acquire all of the issued and outstanding common
stock of Keey Corporation, a public shell corporation having nominal
assets, no liabilities and no operations (the "Merger"). The shares issued
to Keey Corporation were treated as a deemed dividend for accounting
purposes, with the per share value being determined on the basis of shares
currently being sold in a private placement in process. Keey Corporation
had no net monetary assets at the date of the Merger.
NOTE C - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
The following is a summary of property and equipment:
Useful Lives 1999 1998
---------------- ------------- -------------
<S> <C> <C>
Vehicles 5 years $ 1,147,130 $ -
Machinery and other equipment 5 years 170,306 13,872
Furniture and fixtures 5 years 22,730 4,550
------------- -------------
1,340,166 18,422
Less accumulated depreciation
and amortization 190,681 526
------------- -------------
$ 1,149,485 $ 17,896
============= =============
</TABLE>
F-12
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE D - LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
Long-term obligations consist of the following at March 31:
1999 1998
------------- -------------
<S> <C> <C>
Subordinated Promissory Notes bearing interest at 10% interest per
annum and interest is payable quarterly, with principal due one year
from the date of the note. The Notes may be converted to the Company's
common stock, at $1.00 per share at any time after the first
anniversary of the notes before they are paid in full, contingent upon
the Company becoming publicly traded. The notes were extended for an
additional one-year period at the option of the Company with maturities
through March 2000. On March 31, 1999 and 1998, respectively, $25,000
of this amount, were due to a related party (see Note M). $ 120,000 $ 120,000
Unsecured Promissory Note bearing interest at 12% per annum with
quarterly interest payments. The initial maturity period of the Note
was six months from the date of the note and it has been extended for
an additional six months with a due date of October 30, 1999. The
holder also received 30,000 warrants with an exercise price of $0.01
per share of common, which expire on October 30, 2000 (see Note L). 100,000 -
Term loans, bearing interest ranging from 9% to 10.5%, payable in equal
monthly installments with maturities through December 2003. Loans are
secured by vehicles. 275,167 16,888
Capitalized leases, collateralized by fixed assets, bearing interest
ranging from 9% to 22%, with maturities through February 2004 241,728 -
(continued)
</TABLE>
F-13
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE D - LONG-TERM OBLIGATIONS - Continued
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Revolving credit line with a financial institution,
with a $62,500 credit limit, which bears
interest at 12.5%. $ 3,665 $ -
Total 748,560 136,888
Less current portion 425,766 16,888
------------- -------------
Total long-term obligations $ 322,794 $ 120,000
============= =============
</TABLE>
Scheduled maturities of long-term obligations are as follows:
Year Ending
March 31,
-----------
2000 $ 425,766
2001 137,659
2002 84,754
2003 73,394
2004 26,987
-------------
$ 748,560
=============
NOTE E - NOTES PAYABLE TO OFFICERS
During fiscal 1999, the Company issued $55,700 of unsecured Notes Payable
bearing interest at 8% per annum and due on demand, to officers of the
Company (see Note M). At March 31, 1999, the outstanding balance on these
notes was $48,200.
NOTE F - ACCRUED EXPENSES
<TABLE>
<CAPTION>
Accrued expenses consist of the following items at December 31:
1999 1998
-------------- -------------
<S> <C> <C>
Payroll and payroll related expenses $ 364,261 $ -
Professional fees 63,000 -
Other 60,810 56,129
-------------- -------------
$ 488,071 $ 56,129
============== =============
</TABLE>
F-14
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE G - INCOME TAXES
The Company has not provided any income tax expense (benefit) for the year
ended March 31, 1999 and the period ended March 31, 1998, as the Company
has incurred losses since inception.
Deferred income taxes and benefits are provided for significant income and
expense items recognized in different years for tax and financial reporting
purposes. Temporary differences, which give rise to significant deferred
tax assets or liabilities are shown as follows:
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
Start-up costs $ 182,221 $ 118,000
Accrued expenses 138,678 -
Other deferred assets (3,063) -
Net operating loss 373,663 -
-------------- -------------
691,499 118,000
Less valuation allowance 691,499 118,000
-------------- -------------
Net deferred tax $ - $ -
============== =============
</TABLE>
The Company has net operating loss carryforwards for tax purposes of
approximately $990,000, which will expire through 2019.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. At March
31, 1999 and 1998, the Company recorded a full valuation allowance for the
deferred tax assets.
From date of inception through May 31, 1998, the Company had devoted
substantially all of its efforts to fund raising and identification of
companies for potential acquisition. Accordingly, planned revenue
generating activities, which consist of the operations of acquired
companies, had not yet commenced. Consequently, for tax purposes all
expenditures that would otherwise have been deductible, were capitalized
and began to be amortized over a five-year period starting June 1, 1999 at
which time the Company acquired an operating company.
F-15
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE H - COMMITMENTS AND CONTINGENCIES
Leases
------
The Company leases certain facilities under non-cancelable operating
leases, which expire on various dates through February 1, 2004. Rental
expense under these leases for the year ended March 31, 1999 and 1998 was
approximately $153,000 and $8,000 respectively. Future minimum rental
payments required under these operating leases are as follows as of March
31, 1999:
Year Ending
March 31,
-----------
2000 $ 206,184
2001 209,388
2002 155,721
2003 98,275
Thereafter 6,900
---------------
$ 676,468
===============
Employment Contracts
--------------------
The Company has entered into employment agreements with some members of
senior management, as well as previous owners or key employees of the
companies acquired. Certain of these agreements contain change in control
provisions that would entitle the individual to receive his annual salary
plus certain benefits for the remaining term of the agreement. The terms of
these agreements range through July 2003.
Consulting Contracts
--------------------
The Company has entered into certain agreements with consultants for the
provision of services relating to capital raising and investor relations
activities. The terms of these agreements range through January 2000. At
March 31, 1999, the Company had future minimum commitments under these
agreements of approximately $62,000.
(continued)
F-16
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE H - COMMITMENTS AND CONTINGENCIES - Continued
Litigation
----------
In connection with a contemplated acquisition, the Company has sued three
individuals from the target Company (who became employees) for
misappropriation of trade secrets and breach of contract. The Company has
been sued by the employees for breach of contract relating to an allegedly
binding letter of intent, fraud in the inducement, negligent
misrepresentation, and breach of employment agreements. The plaintiffs are
seeking payment of a deposit of $200,000 under the letter of intent, and
are also seeking damages in excess of $15,000. The parties have agreed to
binding arbitration before the American Arbitration Association, which is
expected to take place in late 1999. The Company intends to vigorously
defend the claim.
NOTE I - STOCKHOLDERS' EQUITY
Through a private placement commencing on July 21, 1998, the Company issued
9,000 shares of Series A 7% Cumulative Convertible Preferred stock (the
"Preferred Stock") at $50 per share for $450,000 (less issuance costs of
$45,000) and 150,005 warrants to purchase stock at $4.50 per share. Each
share of the Preferred Stock is entitled to convert into Common Stock on a
16.667 to 1 basis. The Preferred Stock is convertible until, July 20, 2001,
subject to certain events. A 7% dividend on the Preferred Stock is payable
in cash or Common Stock, at the Company's option, on a quarterly basis on
predetermined dividend dates, during the first year. After July 21, 1999
the dividend shall be 12% for all unconverted Preferred Stock.
In October 1998 and January 1999, respectively, the Company declared
dividends of $5,839 and $7,940, payable in 7,472 and 16,879 shares of
common stock, respectively, to its Series A 7% Cumulative Convertible
Preferred Stock holders and had distributed 7,472 of these shares as
dividends as of March 31, 1999.
At various dates during fiscal 1999, as part of the financing of certain
acquisitions discussed in Note B, the Company issued 642,226 shares of
common stock.
During fiscal 1999, the Company issued 160,000 shares of its common stock,
with values ranging from $.27 to $.81 per share, in exchange for a variety
of services including investor relations, advertising and capital raising
activities.
(continued)
F-17
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE I - STOCKHOLDERS' EQUITY - Continued
In fiscal 1999, the Company issued 872,653 shares of common stock to
investors for $224,710 (net of issuance costs of $2,948).
In relation to a penalty clause in an acquisition agreement, the Company
issued 68,180 shares of common stock.
NOTE J - OPTIONS AND WARRANTS
In connection with the preferred stock offering, the Company has agreed to
issue 150,005 warrants exercisable at $4.50 per share, to preferred stock
holders. These warrants are immediately exercisable and expire on July 20,
2001 and are callable at the option of the Company.
In connection with a private placement, the Company has agreed to issue
12,000 warrants exercisable at $4.50 per share, to placement agents. These
warrants are exercisable immediately and expire on July 20, 2001 and are
callable at the option of the Company.
In connection with a Note Payable, the Company issued 30,000 warrants
exercisable at $0.01 per share which expire in October 2000.
During fiscal 1999, the Company issued 3,000 and 12,000 warrants to an
employee and director of the Company, exercisable at $1.25 and $2.50 per
share, respectively. These warrants are exercisable commencing on May 1,
1999 and July 27, 1999, respectively, and expire in 2003.
During 1998, the Company issued 31,769 warrants pursuant to consulting
agreements. The warrants are exercisable from April 17, 1998 through May
26, 1999 and expire through May 2003.
F-18
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE K - STOCK OPTION PLAN
On October 2, 1997 (amended December 22, 1997), the Company adopted the
1-800-AutoTow, Inc. 1997 Stock Option Plan (the "1997 Plan") under which
2,500,000 shares of the Company's common stock are reserved for issuance.
The 1997 Plan provides for the granting of either incentive stock options
("ISO's") to employees of the Company or non-qualified stock options
("NSO's"), to purchase shares of the Company's common stock to officers,
directors and employees of the Company and to non-employee consultants and
independent contractors.
The option price per share of ISO's granted is determined by the Stock
Option Committee, but may not be less than fair market value, or in the
case of a 10% or greater stockholder, at less than 110% of fair market
value. The option price of NSO's is also set by the Stock Option Committee
at a value not less than the par value of the Company's common stock ($.001
per share). Stock options vest pursuant to the individual stock option
agreements. In general, options expire 10 years from date of grant (5 years
for options granted to 10% stockholders).
The fair value of each option grant was estimated on the date of the grant
using a Black-Scholes option-pricing model. The assumptions used for the
computation for the period from September 2, 1997 (inception) through March
31, 1998 are: the risk free interest rate is 5.80 percent, expected market
price volatility factor of 0 percent; the expected life of the option is
the term of expiration; and the common stock will pay no dividends. The
assumptions used for the computation for the period from April 1, 1998
through March 31, 1999 are: the risk free interest rate ranges from 5.32%
to 6.22%, expected market price volatility factor ranging from 47.54% to
56.76%; the expected life of the option is approximately one-half of the
term; and the common stock will pay no dividends.
(continued)
F-19
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE K - STOCK OPTION PLAN - Continued
A summary of the activity of the Company's stock options during the year
ended March 31, 1999 and the period ended March 31, 1998 is presented
below:
<TABLE>
<CAPTION>
1999 1998
-------------------------------- ----------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Outstanding at the
beginning of year 50,500 $ 1.25 - $ -
Granted 290,292 1.38 54,500 1.25
Exercised - - - -
Forfeited (17,500) 1.42 (4,000) 1.25
------------- -------------
Outstanding at end
of year 323,292 1.36 50,500 1.25
============= =============
</TABLE>
<TABLE>
<CAPTION>
A summary of options outstanding under the Company's stock option plan is
presented below:
Weighted Average Weighted
Outstanding at Remaining Life Average Grant
March 31, Years Date Fair Value
-------------- ---------------- ---------------
<S> <C> <C> <C> <C>
1999 323,292 9.13 0.71
1998 50,500 9.71 0.37
</TABLE>
The range of exercise prices for options outstanding at March 31, 1999 was
$1.25 to $2.50. At March 31, 1999, 55,792 of these options were
exercisable.
(continued)
F-20
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE K - STOCK OPTION PLAN - Continued
The Company has adopted the disclosure-only provisions of SFAS No. 123
"Accounting for Stock Based Compensation." Accordingly, no compensation
cost has been recognized for the Plan. Had compensation cost for the Plan
been determined based on fair value at the grant dates for the awards
consistent with the provisions of SFAS No. 123, the Company's net loss
would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Period Ended Period Ended
March 31, March 31,
1999 1998
--------------- ---------------
<S> <C> <C>
Net loss:
As reported $ (1,548,486) $ (312,793)
=============== ===============
Pro forma $ (1,593,721) $ (312,939)
=============== ===============
Per share:
As reported $ (0.21) $ (0.34)
=============== ===============
Pro forma $ (0.22) $ (0.34)
=============== ===============
</TABLE>
NOTE L - CONCENTRATIONS
The Company had sales of approximately $447,000 to one customer, which
approximated 30% of total revenues for the year ended March 31, 1999. This
same customer's balance of approximately $64,000 due to the Company
represents approximately 43% of the Company's total accounts receivable
balance at March 31, 1999. Sales to this customer are pursuant to a
contractual agreement, which expires on December 31, 1999. Management
believes that its relationship with this customer is good, and has no
reason to believe that the agreement will not be renewed. No assurance can
be given, however, that the agreement will be renewed upon expiration.
NOTE M - RELATED PARTIES
The Company leases certain of its facilities from employees of the Company.
The terms of these leases expire through 2003. Future minimum commitments
under these leases are approximately $588,000.
The Company issued a $25,000 Subordinated Promissory Note (see Note D) to
an officer of the Company.
Notes Payable due on demand were issued to certain officers of the Company
(see Note E)
F-21
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE N - YEAR 2000
The Year 2000 issue related to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the Company and its business
partners will not be fully determinable until the Year 2000 and thereafter.
If the Year 2000 modifications are not properly completed either by the
Company or entities with which the Company conducts business, the Company's
revenues and financial conditions could be adversely impacted.
NOTE O - SUBSEQUENT EVENTS
Financings
----------
During May 1999, the Company issued $250,000 in Promissory Notes to various
investors. The Notes bear interest at a rate of 12% per annum and mature in
six months from the date of issuance. The investors in these notes also
received an aggregate of 250,000 warrants exercisable at $0.10 per share.
On August 6, 1999, the Company entered into a Loan and Security Agreement
with a financial institution for a term of five years with annual renewals
at the discretion of the lender. This agreement consists of a line of
credit with a limit up to $1,000,000, secured by the Company's eligible
receivables (as defined in the agreement), plus three term loans amounting
to $4,098,233, collateralized by the Company's machinery, equipment and/or
real estate. The line of credit and one of the term loans bear interest at
a rate of prime plus 1.5% per annum. Two of the term loans bear interest at
an annual rate of prime plus 3.0%.
In connection with the closing of the Loan and Security Agreement, 800,000
shares of Common Stock were issued to the lender. The value of those shares
will be accounted for as a financing cost.
Private Placements
------------------
On August 6, 1999, the Company sold 363,723 shares of Series B 8%
Cumulative Convertible Preferred Stock (the "Preferred Stock") with a
Stated Value of $10.00 per share, which resulted in proceeds of $2,418,034
to the Company (net of expenses of $281,966). Each share of the Preferred
Stock is entitled to convert, at the option of the holder, into the number
of shares of Common Stock obtained by dividing the Stated Value by the
Conversion Price in effect at the time of conversion. The initial
Conversion Price is $0.15 which is adjustable, subject to certain events.
An 8% dividend on the Preferred Stock is payable semi-annually on
predetermined dividend dates.
The investor group in Series B Preferred Stock also received 4,838,202
warrants exercisable at $1.50 per share. These warrants are exercisable
commencing on August 6, 1999 and expire in August 5, 2005.
(continued)
F-22
<PAGE>
1-800-AutoTow, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1999 and 1998
NOTE O - SUBSEQUENT EVENTS - Continued
Pursuant to the agreement, the Series B Preferred Stock investor group can
designate three members to the Board of Directors of the Company.
Acquisitions
------------
In connection with the debt and equity financing completed on August 6,
1999, the Company used some of the funds obtained to complete the purchase
of eight additional businesses (which had previously closed in escrow). The
aggregate purchase price was approximately $8,000,000, and it was composed
of approximately $4,100,000 in cash, $2,700,000 in stock, and $1,200,000 in
notes payable.
Issuance of Common Stock
------------------------
Subsequent to year end, the Company has issued 391,500 common shares to
various consultants in exchange for various services.
In August 1999, the Company issued 510,788 common shares to various members
current or previous management as compensation.
In August 1999, the Company issued 125,000 shares of common stock to a
director of the Company for expenses incurred related to the Series B
Preferred Stock financing.
In July 1999, the Company issued 37,898 shares of common stock as dividend
payment to Series A Preferred Stock investors.
At various dates subsequent to year end, as part of the financing of
certain acquisitions discussed in Note B and Note O, the Company issued
5,107,793 shares of common stock.
F-23
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
McGann & Chester, Inc.
We have audited the accompanying balance sheet of McGann & Chester, Inc. (the
"Company") as of December 31, 1997, and the related statement of operations,
statement of stockholders' equity, and statement of cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of McGann & Chester, Inc. as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
/s/ GRANT THORNTON LLP
Miami, Florida
July 30, 1999
F-24
<PAGE>
<TABLE>
<CAPTION>
McGann & Chester, Inc.
BALANCE SHEET
December 31, 1997
<S> <C>
ASSETS
Current assets
Cash $ 22,887
Accounts receivable 88,528
Prepaid expenses 12,787
Other current assets 2,069
---------------
Total current assets 126,271
Property and equipment, net 117,029
OTHER ASSETS
Due from related party 11,454
---------------
$ 254,754
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current portion of long-term obligations $ 149,083
Accounts payable 36,692
Accrued expenses and other liabilities 59,741
---------------
Total current liabilities 245,516
LONG-TERM OBLIGATIONS 164,961
Commitments (Note C) -
Stockholders' DEFICIT
Common stock $100 par value; 1,000 shares authorized,
50 shares issued and outstanding 5,000
Additional paid-in capital 26,710
Accumulated deficit (187,433)
---------------
Total stockholders' deficit (155,723)
---------------
$ 254,754
===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-25
<PAGE>
<TABLE>
<CAPTION>
McGann & Chester, Inc.
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C>
Net revenue $ 1,343,792
Cost of revenue 593,754
---------------
Gross profit 750,038
Selling, general and administrative expenses 788,828
Depreciation and amortization 92,030
---------------
Loss from operations (130,820)
---------------
Other income (expense)
Interest expense (29,741)
Other 83,431
---------------
Net loss $ (77,130)
===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-26
<PAGE>
<TABLE>
<CAPTION>
McGann & Chester, Inc.
STATEMENT OF STOCKHOLDERS' DEFICIT
Year Ended December 31, 1997
Common Stock
------------------------------- Additional Total
Number of Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Deficit
------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31,
1996 50 $ 5,000 $ 26,710 $ (110,303) $ (78,593)
Net loss - - - (77,130) (77,130)
------------- ------------- ------------- ------------- -------------
Balance at
December 31,
1997 50 $ 5,000 $ 26,710 $ (187,433) $ (155,723)
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of this statement.
F-27
<PAGE>
<TABLE>
<CAPTION>
McGann & Chester, Inc.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1997
<S> <C>
Cash flows from operating activities:
Net loss $ (77,130)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 89,265
Amortization 2,765
Gain on sale of assets (42,252)
Changes in operating assets and liabilities:
Accounts Receivable (5,673)
Prepaid expenses 4,723
Inventory 19,112
Other current assets 696
Due from related parties 43,959
Accounts payable 22,361
Accrued expenses and other current liabilities 40,796
---------------
Net cash provided by operating activities 98,622
---------------
Cash flows from investing activities:
Purchases of property and equipment (278,583)
Proceeds from the sale of fixed assets, net 121,037
---------------
Net cash used in investing activities (157,546)
---------------
Cash flows from financing activities:
Net borrowings under line of credit 69,630
---------------
Net cash provided by financing activities 69,630
---------------
Net increase in cash 10,706
Cash, beginning of year 12,181
---------------
Cash, end of year $ 22,887
===============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 29,741
===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-28
<PAGE>
McGann & Chester, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE A - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
McGann & Chester, Inc. (the "Company") is a corporation formed in 1988,
pursuant to the laws of the State of Pennsylvania. The Company is in the
business of towing and repairing vehicles and is located in Pittsburgh,
Pennsylvania.
Revenue Recognition
-------------------
The Company's revenue is derived from customers who require towing service,
and fees related to vehicles, such as impound, repair and storage fees.
Towing and recovery revenue is recognized at the completion of each
engagement, and fees are recorded when the service is performed. Expenses
related to the generation of revenue are recognized as incurred.
Property and Equipment
----------------------
Property and Equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
which range from five to seven years. Routine repairs and maintenance are
expensed as incurred.
Income Taxes
------------
As of August 1, 1988, the Company has elected to be taxed under provisions
of Subchapter S of the Internal Revenue Code. Under those provisions, the
shareholders are liable for individual federal and state income taxes on
their respective share of the Company's taxable income.
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accompanying notes are an integral part of this statement.
F-29
<PAGE>
McGann & Chester, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
NOTE B - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consisted of the following as of December 31, 1997:
<S> <C>
Towing equipment $ 498,833
Machinery and other equipment 191,805
Furniture and fixtures 6,163
Leasehold improvements 7,215
---------------
704,016
Less accumulated depreciation 586,987
---------------
$ 117,029
===============
</TABLE>
NOTE C - COMMITMENTS
<TABLE>
<CAPTION>
Leases
------
The Company leases certain facilities under a non-cancelable operating
lease, which expires on July 31, 2003 (see Note F). Rental expense under
this lease for the year ended December 31, 1997 was approximately $26,000.
Future minimum rental payments required under this operating lease is as
follows as of December 31, 1997:
Year Ending
December 31,
------------
<S> <C> <C>
1998 $ 55,794
1999 97,500
2000 97,500
2001 97,500
Thereafter 154,375
---------------
$ 502,669
===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-30
<PAGE>
McGann & Chester, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
NOTE D - LONG-TERM OBLIGATIONS
In October 15, 1997, the Company entered into an agreement with a financial
institution which provides for a line of credit of up to $75,000, bearing
interest at a fixed rate of 9.75% and which matures and was paid in full on
October 15, 1998. The line of credit is collateralized by all account
receivables and various property. The Company had borrowed $69,630 under
the line of credit at December 31, 1997.
<TABLE>
<CAPTION>
Long-term obligations is comprised of the following at December 31, 1997:
<S> <C> <C>
Line of credit, fixed interest of 9.75%, with maturity at October
15, 1998, collateralized by accounts receivable and property. $ 69,630
Term loans, bearing interest ranging from 10.25% to 10.5%, payable
in equal monthly installments with maturities through October
2002. Loans are collateralized by property. 239,650
Capital leases 4,764
----------------
Total 314,044
Less current portion 149,083
----------------
Total long-term obligations $ 164,961
================
</TABLE>
Minimum payment required on long-term obligations subsequent to December
31, 1997 are:
1998 $ 149,083
1999 82,814
2000 56,809
2001 19,690
Thereafter 5,648
----------------
$ 314,044
================
The accompanying notes are an integral part of this statement.
F-31
<PAGE>
McGann & Chester, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
NOTE E - CONCENTRATIONS
The Company had sales of approximately $672,000 to one customer, which
approximated 50% of total revenues for the year ended December 31, 1997.
This same customer's balance of approximately $51,000 due to the Company
represents approximately 58% of the Company's total accounts receivable
balance at December 31, 1997. The sales to this customer are pursuant to a
contractual agreement, which expires on December 31, 1999.
NOTE F - RELATED PARTIES
Lease
The facilities under a non-cancelable operating lease, as described in Note
C, are owned by the shareholders of the Company.
Due from Related Party
The due from related party consists of monies owed by McGann & Chester Auto
Sales, which is owned by the shareholders of the Company.
NOTE G - YEAR 2000
The Year 2000 issue related to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the Company and its business
partners will not be fully determinable until the Year 2000 and thereafter.
If the Year 2000 modifications are not properly completed either by the
Company or entities with which the Company conducts business, the Company's
revenues and financial conditions could be adversely impacted.
NOTE H - SUBSEQUENT EVENT
In August 1998, the Company was acquired by 1-800 AutoTow, Inc.
The accompanying notes are an integral part of this statement.
F-32
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
D&D Towing and Recovery, Inc.
We have audited the accompanying balance sheet of D&D Towing and Recovery, Inc.
(the "Company") as of December 31, 1997, and the related statements of
operations, changes in stockholder's equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of D&D Towing and Recovery, Inc.
as of December 31, 1997, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
/s/ GRANT THORNTON LLP
Miami, Florida
August 6, 1999
F-33
<PAGE>
<TABLE>
<CAPTION>
D&D Towing and Recovery, Inc.
BALANCE SHEET
December 31, 1997
<S> <C>
ASSETS
Current assets
Cash $ 12,171
Accounts receivable 6,626
Other current assets 412
---------------
Total current assets 19,209
Property and equipment, net 269,707
---------------
$ 288,916
===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Current portion of long-term obligations $ 44,226
Current portion of capital lease obligations 28,821
Accounts payable 22,601
Due to related party 42,100
Accrued expenses and other liabilities 4,364
---------------
Total current liabilities 142,112
LONG TERM OBLIGATIONS, less current portion 47,901
CAPITAL LEASE OBLIGATIONS, less current portion 96,905
Stockholder's equity
Common stock $1 par value; 500 shares authorized,
500 shares issued and outstanding 500
Additional paid-in capital 88,830
Accumulated Deficit (87,332)
---------------
Total stockholder's equity 1,998
---------------
$ 288,916
===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-34
<PAGE>
<TABLE>
<CAPTION>
D&D Towing and Recovery, Inc.
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C>
Net revenue $ 386,955
Cost of revenue 216,612
---------------
Gross profit 170,343
Selling, general and administrative expenses 201,153
Depreciation and amortization 54,656
---------------
Loss from operations (85,466)
---------------
Other income (expense)
Interest expense (19,355)
Other 2,103
---------------
Net loss $ (102,718)
===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-35
<PAGE>
<TABLE>
<CAPTION>
D&D Towing and Recovery, Inc.
STATEMENT OF STOCKHOLDER'S EQUITY
Year Ended December 31, 1997
Common Stock
------------------------------- Additional Total
Number of Paid-In Accumulated Stockholder's
Shares Amount Capital Deficit Equity
------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31,
1996 500 $ 500 $ 63,397 $ 15,386 $ 79,283
Contribution of
property - - 25,433 - 25,433
Net loss - - - (102,718) (102,718)
------------- ------------- ------------- ------------- -------------
Balance at
December 31,
1997 500 $ 500 $ 88,830 $ (87,332) $ 1,998
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of this statement.
F-36
<PAGE>
<TABLE>
<CAPTION>
D&D Towing and Recovery, Inc.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1997
<S> <C>
Cash flows from operating activities:
Net loss $ (102,718)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 51,656
Amortization 3,000
Gain on sale of assets (2,103)
Changes in operating assets and liabilities:
Accounts Receivable (4,068)
Other current assets 15,297
Accounts payable 16,949
Accrued expenses 4,636
Due to related party 42,100
---------------
Net cash provided by operating activities 24,749
---------------
Cash flows from investing activities
Purchases of property and equipment (49,273)
Proceeds from the sale of fixed assets 121,030
---------------
Net cash provided by investing activities 71,757
---------------
Cash flows from financing activities:
Net payments under lines of credit (9,849)
Payments of notes payable (74,486)
---------------
Net cash used in financing activities (84,335)
---------------
Net increase in cash 12,171
Cash, beginning of year -
---------------
Cash, end of year $ 12,171
===============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 13,294
===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-37
<PAGE>
D&D Towing and Recovery, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE A - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
D&D Towing and Recovery, Inc. (the "Company") is a corporation formed in
1988, pursuant to the laws of the State of Florida. The Company is in the
business of towing vehicles and is located in Tampa, Florida.
Revenue Recognition
-------------------
The Company's revenue is derived from customers who require towing service,
and fees related to vehicles, such as impound and storage. Towing and
recovery revenue is recognized at the completion of each engagement, and
fees are recorded when the service is performed. Expenses related to the
generation of revenue are recognized as incurred.
Property and Equipment
----------------------
Property and Equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
which range from five to seven years. Routine repairs and maintenance are
expensed as incurred.
Income Taxes
------------
As of December 8, 1993, the Company has elected to be taxed under
provisions of Subchapter S of the Internal Revenue Code. Under those
provisions, the shareholder is liable for individual Federal and state
income taxes on the Company's taxable income.
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accompanying notes are an integral part of this statement.
F-38
<PAGE>
D&D Towing and Recovery, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
NOTE B - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consist of the following as of December 31, 1997:
<S> <C>
Towing equipment $ 226,174
Vehicles 74,147
Machinery and other equipment 15,262
Furniture and fixtures 8,506
Leasehold improvements 19,443
-------------
343,532
Less accumulated depreciation 73,825
-------------
$ 269,707
=============
</TABLE>
During 1997, the Company sold vehicles, received proceeds of $121,030, and
recorded a gain on the sale of $2,103.
NOTE C - LONG-TERM OBLIGATIONS
The Company has an agreement with a financial institution which provides
for a line of credit of up to $25,000, bearing interest at the prime rate
plus 2% (10.5% at December 31, 1997). The line of credit is collateralized
by property. The Company had $13,573 outstanding on the line of credit at
December 31, 1997.
The Company has an agreement with a financial institution which provides
for a line of credit of up to $62,500, bearing interest at 12.5%. The line
of credit is unsecured. The Company had $6,091 outstanding on the line of
credit at December 31, 1997.
The accompanying notes are an integral part of this statement.
F-39
<PAGE>
D&D Towing and Recovery, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
NOTE C - LONG-TERM OBLIGATIONS - Continued
<TABLE>
<CAPTION>
Long-term obligations is comprised of the following at December 31, 1997:
<S> <C> <C>
Line of credit, interest at the prime rate plus 2% (10.5% at
December 31, 1997), collateralized by certain property. $ 13,573
Line of credit, interest at 12.5%, unsecured. 6,091
Term loans, bearing interest ranging from 8.99% to 9.95%,
payable in equal monthly installments with maturities through
February 26, 2000. Loans are collateralized by property. 72,463
-------------
Total 92,127
Less current portion 44,226
-------------
$ 47,901
=============
</TABLE>
Minimum payment required on long-term obligations subsequent to December
31, 1997 are:
1998 $ 44,226
1999 26,758
2000 18,903
2001 2,240
-------------
$ 92,127
=============
The accompanying notes are an integral part of this statement.
F-40
<PAGE>
D&D Towing and Recovery, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
NOTE D - CAPITAL LEASE OBLIGATIONS
The Company has acquired vehicles under the provisions of long-term leases.
These leases bear interest ranging from 9.95% to 17.35%, payable in equal
monthly installments with maturities through July 8, 2002. Leases are
collateralized by property. The future minimum lease payments under the
capital leases at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 $ 40,976
1999 40,976
2000 36,590
2001 28,136
2002 7,897
-------------
Total 154,575
Less: Imputed interest 28,849
-------------
Total minimum lease payments 125,726
Current maturities of capital leases 28,821
-------------
Long-term capital leases less current
maturities $ 96,905
=============
</TABLE>
NOTE E - RELATED PARTIES
Facilities
----------
The facilities used for the Company's operations are owned by the
shareholder of the Company. Rent expense was $41,400 for the year ended
December 31, 1997. This amount is included in the balance sheet caption
"Due to Related Party".
Credit Card
-----------
The shareholder of the Company used his own personal credit card for
business purposes. The balance of the card at December 31, 1997 of
approximately $700 is included in the balance sheet caption "Due to Related
Party".
The accompanying notes are an integral part of this statement.
F-41
<PAGE>
D&D Towing and Recovery, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
NOTE F - YEAR 2000
The Year 2000 issue related to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the Company and its business
partners will not be fully determinable until the Year 2000 and thereafter.
If the Year 2000 modifications are not properly completed either by the
Company or entities with which the Company conducts business, the Company's
revenues and financial conditions could be adversely impacted.
NOTE G - SUBSEQUENT EVENT
In June 1998, the Company was acquired by 1-800 AutoTow, Inc.
The accompanying notes are an integral part of this statement.
F-42
<PAGE>
THE DIRECTOR'S
D&D TOWING & RECOVERY INC.
TAMPA, FL 33611
AUGUST 10, 1999
I have compiled the accompanying Balance Sheet as at March 31, 1998 and the
related Statement of Operations, Cash Flows and Stockholder's equity for the
twelve months then ended, in accordance with statements on standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compi1ation is limited to presenting in the form of financial statements,
information that is the representation of management. I have not audited or
reviewed them and according1y do not express an opinion or any other form of
assurance on them.
Michael O. Reedy
Certified Public Accountant
D&D TOWING & RECOVERY
BALANCE SHEET AS AT 03/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ACCOUNTS RECEIVABLE 7,226
PREPAID EXPENSE 736
TOTAL CURRENT ASSETS 7,962
P.P.E 343,533
ACCUMULATED DEP'N 91,002
N.B.V. 252,531
DEPOSITS 412
TOTAL ASSETS 260,905
OVERDRAFT 1,339
ACCOUNTS PAXABLE 9,798
ACCRUED INTEREST 2,623
CURRENT INST. L'T DEBT 49,369
TOTAL CURRENT LIABILTTIES 63,129
LONG TERM DEBT 92,126
CAPITAL LEASES 120,025
TOTAL LIABILITIES 275,280
SHARE CAPITAL 500
ADDITIONAL CAPITAL 88,830
DISTRIBUTIONS -20,536
CURRENT EARNINGS 4,162
RETAINED EARNINGS -87,331
TOTAL STOCKHOLDERS EQUITY -14,375
TOTAL LIAB/STOCKH. EQUITY 260,905
</TABLE>
SEE ACCOUNTANT'S COMPILATION REPORT
F-43
<PAGE>
D&D TOWING & RECOVERY INC
STATEMENT OF OPERATIONS 03/31/98
NET REVENUE 118,944
DIRECT EXPENSE 66,010
GROSS MARGIN 52,934
ADMIN EXPENSES 48,772
OPERATING PROFIT 4,162
INCOME TAX EXPENSE 0
NET INCOME 4,162
SEE ACCOUNTANT'S COMPILATION REPORT
F-44
<PAGE>
D&D TOWING & RECOVERY INC
SUPPLEMENTARY SCHEDULE
ACCOUNTING 1,273
BANK CHARGES 329
ADVERTISING 374
GAS & OIL 7,064
DUES 55
INTEREST EXPENSE 6,987
TRAINING 2,783
WATER SUPPLY 152
OFFICE EXPENSE 432
PAYROLL TAXES 619
TELEPHONE EXPENSE 1,706
UTILITIES 865
LICENSES 486
REPA IRS 83
DEPRECIATION 17,177
UNIFORMS 1,326
INSURANCES 5,001
PAGERS 143
TRAVEL 398
HEALTH INSURANCE 171
PAYROLL PROCESSING 160
SECURITY 133
JANI TORIAL 1,005
TOTAL 48,772
F-45
<PAGE>
D&D TOWING & RECOVERY INC.
STATEMENT OF CASH FLOWS 03/31/98
CASH FLOWS FROM OPERATIONS
net income from operations 4,162
adjustments to reconcile
N/I to cash flows/oper.
Depreciation 17,177
increase in prepaids -736
decrease in payables -8,840
increase in receivables -600
increase in deposits
decrease in debt -2,798
net cash flow from ops. 8,365
CASH FLOWS FROM FINANCING
dividend distribution -20,536
NET INCREASE IN CASH & EQUIV -12,171
CASH - BEGINNING BALANCE 12,171
CASH & EQUIV - YEAR END 0
SEE ACCOUNTANTS CONPILATION REPORT
F-46
<PAGE>
D&D TOWING & RECOVERY INC
STOCKHOLDERS EQUITY 03/31/98
share capital 01/01/98 500
paid in capital 01/01/98 88,830
retained deficit 01/01/98 -87,331
TOTAL: 1,999
1ST QUARTER NET EARNINGS 4,162
CONTRIBUTED BY STOCKHOLDER 0
DIVIDEND DISTRIBUTION -20,536
STOCKHOLDER'S EQUITY 12/31/98 -14,375
SEE ACCOUNTANT'S COMPILATION REPORT
F-47
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
The company was formed in 1988 and performs towing services as well as light
mechanical repairs for the automotive industry. Revenue is recognized when
services are performed and expenses recognized when incurred.
The company's equipment is financed primarily through capitalized leases. These
assets and liabilities are shown on the balance sheet assuming a 10% cost or
capital in accordance with FAS 55.
Depreciation has been calculated using 5 year straight line.
No provision for income tax has been made because the company has elected to be
taxed under Sub-chapter "S" of the Internal Revenue Code. As a result all taxes
are assessed on the shareholders and not on the company's earnings.
SEE ACCOUNTANT'S COMPILATION REPORT
F-48
<PAGE>
THE DIRECTOR'S
D&D TOWING & RECOVERY INC.
TAMPA, FL 33611
AUGUST 10, 1999
I have compiled the accompanying Balance Sheet as at DECEMBER 31, 1996 and the
related Statement of Operations, Cash Flows and Stockholder's equity for the
twelve months then ended, in accordance with statements on standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compi1ation is limited to presenting in the form of financial statements,
information that is the representation of management. I have not audited or
reviewed them and according1y do not express an opinion or any other form of
assurance on them.
Michael O. Reedy
Certified Public Accountant
<TABLE>
<CAPTION>
D&D TOWING & RECOVERY
BALANCE SHEET AS AT 12/31/96
<S> <C> <C> <C>
ACCOUNTS RECEIVABLE 17,856
PREPAID EXPENSE 310
TOTAL CURRENT ASSETS 18,166
P.P.E 266,492
ACCUMULATED DEP'N 60,834
N.B.V. 205,658
DEPOSITS 412
TOTAL ASSETS 224,236
OVERDRAFT 4,838
ACCOUNTS PAYABLE 811
ACCRUED INTEREST 1,499
CURRENT INST. L/T DEBT 62,190
TOTAL CURRENT LIABILITIES 69,338
LONG TERM DEBT 93,718
TOTAL LIABILITIES 163,056
SHARE CAPITAL 500
ADDITIONAL CAPITAL 52,806
RETAINED EARNINGS 7,874
TOTAL STOCKHOLDERS EQUITY 61,180
TOTAL LIAB/STOCKH. EQUITY 224,236
</TABLE>
SEE ACCOUNTANT'S COMPILATION REPORT
F-49
<PAGE>
D&D TOWING & RECOVERY
BALANCE SHEET AS AT 12/31/96
NET REVENUE 327,105
DIRECT EXPENSE 155,322
GROSS MARGIN 171,783
ADMIN EXPENSES l60,430
OPERATING PROFIT 11,353
INCOME TAX EXPENSE 0
NET INCOME 11,353
SEE ACCOUNTANT'S COMPILATION REPORT
F-50
<PAGE>
D&D TOWING & RECOVERY
SUPPLEMENTARY SCHEDULE
ACCOUNTING 5,056
BANK CHARGES 1,316
ADVERTISING 2,558
GAS & OIL 27,663
DUES 779
INTEREST EXPENSE 16,126
ENTERTAINMENT 651
WATER SUPPLY 1,654
OFFICE EXPENSE 3,082
PAYROLL TAXES 1,903
TELEPHONE EXPENSE 4,646
UTILITIES 5,170
LICENSES 2,111
REPAIRS 3,837
SMALL TOOLS 1,557
UNIFORMS 3,452
INSURANCES 23,525
PAGERS 3,383
TRAVEL 945
OFFICER COMP 3,600
RENT EXPENSE 4,250
CREDIT CARD RENT 51
JANITORIAL 1,176
PROPERTY TAXES 2,692
DEPRECIATION 38,452
CHARITABLE 795
TOTAL 160,430
SEE ACCOUNTANT'S COMPILATION REPORT
F-51
<PAGE>
D&D TOWING & RECOVERY INC.
STATEMENT OF CASH FLOWS 12/31/96
CASH FLOWS FROM OPERATIONS
net income from operations 11,353
adjustments to reconcile
N/I to cash flows/oper.
depreciation 38,452
decrease in prepaids 16,670
increase in payables 6,436
decrease in receivables 3,594
increase in deposits -412
increase in debt 34,118
net cash flow from ops 110,211
CASH FLOWS FROM INVESTING
restating book accum. Depn -24, 142
purchase of equipment -121,096
CASH FLOWS FROM FINANCING
additional paid in capital 32,773
NET INCREASE IN CASH & EQUIY -2,254
CASH - BEGINNING BALANCE 2,254
CASH & EQUIV - YEAR END 0
SEE ACCOUNTANTS COMPILATION REPORT
F-52
<PAGE>
D&D TOWING & RECOVERY INC
STOCKHOLDER'S EQUITY 12/31/96
share capital 01/01/96 500
paid in capital 01/01/96 20,033
retained deficit 01/01/96 -1,697
TOTAL: 18,846
1996 NET EARNINGS 11,353
CONTRIBUTED BY STOCKHOLDER 32,773
DIVIDEND DISTRIBUTION -1,792
STOCKHOLDER'S EQUITY 12/31/96 61,180
SEE ACCOUNTANT'S COMPILATION REPORT
F-53
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
The company was formed in 1988 and performs towing services as well as light
mechanical repairs for the automotive industry. Revenue is recognized when
services are performed and expenses recognized when incurred.
The company's equipment is financed primarily through capitalized leases. These
assets and liabilities are shown on the balance sheet assuming a 10% cost or
capital in accordance with FAS 55.
Depreciation has been calculated using 5 year straight line.
No provision for income tax has been made because the company has elected to be
taxed under Sub-chapter "S" of the Internal Revenue Code. As a result all taxes
are assessed on the shareholders and not on the company's earnings.
SEE ACCOUNTANT'S COMPILATION REPORT
F-54
<PAGE>
PART III
EXHIBITS
<TABLE>
<CAPTION>
ITEM 1. INDEX TO EXHIBITS
Exhibits Description of Document
- -------- -----------------------
<S> <C>
2.1 Amended and Restated Certificate of Incorporation of
1-800-AutoTow, Inc. dated August 6, 1999
2.2 Certificate of Merger dated March 30, 1998 for the merger of
Keey Corp. with and into 1-800-AutoTow, Inc.
2.3 Articles of Merger dated June 1, 1998 for the merger of D & D
Towing and Recovery, Inc.
2.4 Articles of Merger dated July 22, 1999 for the merger of L&W
Collision, Towing & Recovery
2.5 Articles of Merger dated July 22, 1999 for the merger of Arrow
Towing & Recovery, Inc.
2.6 Articles of Merger dated August, 1998 for the merger of McGann
& Chester, Inc.
<PAGE>
2.7 Amended and Restated By-laws of 1-800-AutoTow, Inc.
3.1 Certificate of Designations, Preferences and Rights of Series
B 8% Cumulative Convertible Preferred Stock dated August 5, 1999
6.1 Amended and Restated 1-800-AutoTow, Inc. 1997 Stock Option
Plan dated July 26, 1999
6.2 Employment Agreement with Joel B. Nagelmann dated August 1, 1999
6.3 Employment Agreement with Eugene A. Iarocci dated August 1, 1999
6.4 Employment Agreement with Steven B. Teeters dated August 1, 1999
6.5 Employment Agreement with William Chester dated August 1, 1998
6.6 Employment Agreement with Robert M. McGann dated August 1, 1998
6.7 Employment Agreement with Glenn Michael Dempsey dated June 1, 1998
6.8 Employment Agreement with Jim Stewart dated July 22, 1999
6.9 Employment Agreement with Walter Terenik dated July 23, 1999
6.10 Employment Agreement with Muhammad Choudary dated July 28, 1999
6.11 Employment Agreement with Robert T. Mennings dated July 23, 1999
6.12 Employment Agreement with Helen Hohn dated July 23, 1999
6.13 Consulting Agreement with Zinna Terenik dated July 23, 1999
6.14 Consulting Agreement with Dennis W. Meyer dated July 22, 1999.
6.15 Consulting Agreement with Frank Rice dated July 22, 1999.
6.16 Non-Competition Agreement with Zinna Terenik dated July 23, 1999
6.17 Non-Competition Agreement with Don Lyons and Bobbye Lyons
dated July 28, 1999.
6.18 Non-Competition Agreement with Sandra K. Stewart dated July 22, 1999.
6.19 Non-Competition Agreement with Kurshid A. Choudary dated July 28,1999.
6.20 Non-Competition Agreement with Dennis W. Meyer and Shari Noles
dated July 22,1999.
6.21 Non-Competition Agreement with Frank W. Rice dated July 22, 1999.
6.22 Non-Competition Agreement with Brian J. Rice dated July 22, 1999
<PAGE>
6.23 Asset Purchase Agreement dated July 28, 1999 by and among
Lyons Towing, Inc., 1-800-AutoTow, Inc. and 1-800-AutoTow
Florida, Inc
6.24 Asset Purchase Agreement dated July 28, 1999 by and among
Lyons Autobody, Inc., 1-800-AutoTow, Inc. and 1-800-AutoTow
Florida, Inc.
6.25 Amendment to Asset Purchase Agreement (with Lyons Towing, Inc.
and Lyons Autobody, Inc.) Dated July 30, 1999.
6.26 Asset Purchase Agreement dated July 22, 1999 by and among
1-800-AutoTow, Inc., 1-800-AutoTow Gulf Coast East, Inc., and
Town `N Country Towing, Inc.
6.27 Amendment to Asset Purchase Agreement (with Town `N Country
Towing, Inc.) Dated July 30, 1999.
6.28 Asset Purchase Agreement dated July 28, 1999 by and among
A-Ace Towing, Muhammad A. Choudary and Kurshid A. Choudary,
1-800-AutoTow, Inc., and 1-800-AutoTow Gulf Coast S.W., Inc.
6.29 Amendment to Asset Purchase Agreement (with A-Ace Towing,
Muhammad A. Choudary and Kurshid A. Choudary) Dated July 30, 1999.
6.30 Asset Purchase Agreement dated February 26, 1999 by and among
1-800-AutoTow, Inc., 1-800-AutoTow Gulf Coast East, Inc.,
Dixie Grande Towing, Roberts Towing, Sandra K. Stewart and Jim Stewart.
6.31 Amendment to Asset Purchase Agreement (with Dixie Grande
Towing) dated June 24, 1999.
6.32 Second Amendment to Asset Purchase Agreement (with Dixie
Grande Towing) dated July 22, 1999.
6.33 Third Amendment to Asset Purchase Agreement (with Dixie Grande
Towing) dated July 30, 1999.
6.34 Merger Agreement and Plan of Reorganization dated July 23,
1999 by and among, 1-800-AutoTow, Inc., 1-800-AutoTow Gulf
Coast East, Inc., and L&W Collision, Towing & Recovery, Inc.
and the Stockholders named herein.
6.35 Amendment to Merger Agreement (with L&W Collision) Dated July 30, 1999.
6.36 Merger Agreement and Plan of Reorganization dated July 23,
1999 by and among 1-800-AutoTow, Inc., 1-800-AutoTow Gulf
Coast East, Inc., and Arrow Towing & Recovery, Inc., and the
Stockholder named herein.
6.37 Amendment to Merger Agreement (with Arrow Towing) Dated July 30, 1999.
6.38 Asset Purchase Agreement dated July 22, 1999 by and among
Dennis W. Meyer, Inc., d/b/a Denny's Towing Service,
1-800-AutoTow, Inc. and1-800-AutoTow Gulf Coast East, Inc.
<PAGE>
6.39 Amendment to Asset Purchase Agreement (with Dennis W. Meyer,
Inc. dated July 30, 1999.
6.40 Addendum to Asset Purchase Agreement (with Dennis W. Meyer)
dated July 27, 1999.
6.41 Lease Agreement dated July 28 1999 by and among Muhammad
Choudary and 1-800-AutoTow Gulf Coast S.W., Inc.
6.42 Lease Agreement dated July 28, 1999 by and among Don Sinclair
Lyons and Bobbye Gail Lyons and 1-800-AutoTow Florida, Inc.
6.43 Lease Agreement dated July 28, 1999 by and among Lyons
Autobody, Inc. and 1-800-AutoTow Florida, Inc.
6.44 Lease Agreement dated July 23, 1999 by and among Walter
Terenik and 1- 800-AutoTow Gulf Coast East, Inc.
6.45 Sublease dated July 22, 1999 by and among Jim Stewart and
1-800-AutoTow Gulf Coast East, Inc.
6.46 Sublease Agreement dated July 22, 1999 by and among Dennis W.
Meyer, Inc. and 1-800-AutoTow Gulf Coast East, Inc.
6.47 Lease Agreement dated July 22, 1999 by and among Frank Rice
and 1-800-Autotow Gulf Coast East, Inc.
6.48 Lease Agreement dated June 1, 1998 by and among G. Michael
Dempsey and D&D Towing and Recovery, Inc.
6.49 Lease Agreement dated August 1, 1998 by and among William
Chester, Jr., Robert A. McGann, Robert M. McGann and McGann &
Chester, Inc.
6.50 Sublease Agreement dated January 20, 1998 by and among
1-800-AutoTow, Inc. and AeroTek, Inc.
6.51 Agreement for the purchase of stock and warrants by and
between GMA Capital Partners-AutoTow, LLC. And 1-800-AutoTow,
Inc. dated August 6, 1999.
6.52 Finova Capital Corporation Agreement and 1-800-AutoTow, Inc.
dated August 6, 1999.
6.53 Engagement Agreement by and between GMA Partners, Inc. and
1-800-AutoTow, Inc. dated March 11, 1999
27 Financial Data Schedule
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
1-800-AUTOTOW, INC.
Dated: August 16, 1999
By: /s/ Joel B. Nagelmann
-------------------------
Joel B. Nagelmann
Chief Executive Officer
Dated: August 16, 1999
By: /s/ Steven B. Teeters
-------------------------
Steven B. Teeters
Vice President of Finance
EXHIBIT 2.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
1-800-AUTO-TOW, INC.
1-800-AUTO-TOW, INC., (the "Corporation"), a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the Corporation is 1-800-AutoTow, Inc. The original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on September 2, 1997.
2. Pursuant to Sections 242 and 245 of the Delaware General Corporation
Law, this Amended and Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Corporation's Certificate of
Incorporation.
3. The terms and provisions of this Amended and Restated Certificate of
Incorporation have been duly approved by written consent of the required number
of shares of outstanding Common Stock and Series A Preferred Stock of the
Corporation pursuant to Section 228 of the Delaware General Corporation Law and
by the Board of Directors of the Corporation.
The Corporation's Certificate of Incorporation is hereby Amended and
Restated as follows:
FIRST: The name of the Corporation is 1-800-Auto-Tow, Inc.
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware
19801. The name of the Corporation's registered agent at the address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted are: to engage in the formation, acquisition, financing and operation
of the vehicle towing, transportation and recovery services, and related
activities, and to engage in any other lawful act or activity for which
corporations may be organized under the General Corporation Law of the Sate of
Delaware.
1
<PAGE>
FOURTH: The Corporation is authorized to issue two classes of stock,
designated Common Stock and Preferred Stock, respectively. The maximum number of
shares of Common Stock that this Corporation shall be authorized to issue and
have outstanding at any one time shall be 75,000,000, par value $.001 per share.
The maximum number of shares of Preferred Stock that this Corporation shall be
authorized to issue and have outstanding at any one time shall be 5,000,000, par
value $.001 per share. Series of the Preferred Stock may be created and issued
from time to time, with such designations, preferences, conversion rights,
cumulative, relative, participating, optional or other rights, including voting
rights, qualifications, limitations or restrictions thereof as shall be stated
and expressed in the resolution or resolutions providing for the creation and
issuance of such series of Preferred Stock as adopted by the Board of Directors
pursuant to the authority in this paragraph given.
Pursuant to the authority granted to, and vested in, the Board of
Directors herein, the Board of Directors of the Corporation has adopted a
resolution creating a series of preferred stock entitled Series A Convertible
Preferred Stock as follows:
RESOLVED 100,000 shares of the authorized Preferred Stock of the
Corporation, par value $.001, shall be designated "Series A Convertible
Preferred Stock" (hereinafter referred to as "Series A Preferred Stock"). The
rights, preferences, privileges, restrictions and other matters relating to the
shares of Series A Preferred Stock are as follows:
1. Dividends.
The Series A Preferred Stock shall have an annual dividend rate of 7%
per annum until July 21, 1999 after which time any unconverted Series A
Preferred Stock shall have a dividend rate of 12% per annum. Dividends shall be
paid quarterly, in cash, or at the sole discretion of the Board of Directors in
shares of the Corporation's $.001 par value common stock (the "Common Stock").
Dividends paid in Common Stock shall be paid based on the average closing price
of the Corporation's Common Stock traded over the counter or on Nasdaq or any
other national exchange for the ten trading days immediately prior to July 21,
October 31, January 21 and April 21 of each year during which Series A Preferred
Stock is issued and outstanding.
2
<PAGE>
2. Liquidation Preference.
(1) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of Series A Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets or surplus funds of the Corporation to the holders of the
Common Stock by reason of their ownership thereof, all accrued but unpaid
dividends on their respective shares of Series A Preferred Stock then held by
them and no more (the "Series A Preferred Liquidation Preference"). If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series A Preferred Stock
in proportion to the shares then held by them.
(2) A consolidation or merger of the Corporation with or into any other
corporation or corporations or a sale of all or substantially all of the assets
of the Corporation shall be deemed a liquidation, dissolution or winding up
within the meaning of this Section if more than fifty percent (50%) of the
surviving entity is not owned by persons who were holders of capital stock or
securities convertible into capital stock of the Corporation immediately prior
to such merger, consolidation or sale. In such event, the Series A Preferred
Liquidation Preference may be paid in cash or securities of any entity surviving
such liquidation event.
3. No Voting Rights. The holder of each share of the Series A Preferred
Stock shall not be entitled to vote for any matter brought before the holders of
the Corporation's Common Stock.
4. Conversion. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(1) Right to Convert.
(1) Conversion. Each share of Series A Preferred Stock shall
be convertible, at the option of the holder thereof, at the office of the
Corporation or any transfer agent for the Series A Preferred Stock, into the
Corporation's Common Stock during the period commencing on the date on which a
Registration Statement is declared effective by the Securities and Exchange
Commission regarding the Common Stock underlying the Series A Preferred Stock
until July 20, 2001 (the "Expiration Date"). The number of shares of Common
Stock into which one share of Series A Preferred will be converted will be equal
to $50.00 (the "Series A Original Purchase Price") divided by the Series A
Conversion Price (as hereinafter defined) then in effect, such conversion ratio
being referred to as the "Series A Conversion Rate." The initial Series A
Conversion Price will be $3.00 and will be subject to adjustment as provided
herein. Upon any decrease or increase of the Series A Conversion Price or the
Series A Conversion Rate as described in this Section 4, the Series A Conversion
Rate or Series A Conversion Price, as the case may be, will be increased or
decreased appropriately.
(2) Fractional Shares Upon Conversion. No fractional shares of
Common Stock will be issued upon conversion of Series A Preferred Stock, and any
fractional shares that otherwise would result from conversion by a holder of all
of such holder's shares of Series A Preferred Stock (in the aggregate) will be
redeemed by payment in an amount equal to such fraction of the then effective
Series A Conversion Price as promptly as funds legally are available therefor.
3
<PAGE>
(2) Mechanics of Conversion. Any holder of Series A Preferred Stock
wishing to convert shares of Series A Preferred Stock into Common Stock pursuant
to Section 4(a)(i) shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or any transfer agent for the
Series A Preferred Stock and will give the Corporation written notice stating
the name or names in which the holder wishes the certificate or certificates for
shares of Common Stock to be issued. Any conversion pursuant to Section 4(a)(i)
shall be deemed to be effective for all purposes upon receipt by the Corporation
or a transfer agent for the Series A Preferred Stock of such certificates, duly
endorsed, and such written notice and shall be deemed to have been made
immediately prior to the close of business on the date thereof. As soon as
practicable after the effectiveness of any conversion of Series A Preferred
Stock and receipt by the Corporation or the appropriate transfer agent of
certificates representing such Series A Preferred Stock, duly endorsed, together
with written notice stating the name or names in which the holder wishes the
certificate or certificates for shares of Common Stock to be issued, the
Corporation shall cause to be issued and delivered pursuant to the written
instructions of the holder of the converted Series A Preferred Stock
certificates representing the Common Stock into with such Series A Preferred
Stock has been converted; provided, however, that the Corporation shall not be
required to issue certificates for Common Stock in any name other than that of
the holder in the absence of assurances reasonably satisfactory to the
Corporation that all stamp and other transfer taxes relating to the transfer of
such securities have been or will be paid. Notwithstanding any issuance or lack
thereof of certificates representing Common Stock, from and after the
effectiveness of any conversion of Series A Preferred Stock, the person or
persons entitled to receive the shares of Common Stock issuable upon conversion
shall be treated by the Corporation for all purposes as the record holders of
the Common Stock obtainable upon such conversion and shall cease to have any
other rights of holders of Series A Preferred Stock.
(3) Adjustment of Series A Conversion Price. If at any time prior to
the Expiration Date or the conversion of the Series A Preferred Stock, the
Corporation increases or decreases the number of its issued and outstanding
shares of Common Stock, or changes in any way the rights and privileges of such
shares of Common Stock, by means of (i) the payment of a share dividend or the
making of any other distribution on such shares of Common Stock payable in its
shares of Common Stock, (ii) a split or subdivision of shares of Common Stock,
or (iii) a consolidation or combination of shares of Common Stock, then the
Series A Conversion Price in effect at the time of such action and the Series A
Conversion Rate at that time shall be proportionately adjusted so that the
numbers, rights and privileges relating to the Common Stock then purchasable
upon the conversion of the Series A Preferred Stock shall be increased,
decreased or changed in like manner, for the same aggregate price, as if the
Common Stock purchasable upon the conversion of the Series A Preferred Stock
immediately prior to the event had been issued, outstanding, fully paid and
nonassessable at the time of that event. Any dividend paid or distributed on the
shares of Common Stock in shares of any other class of shares of the Corporation
or securities convertible into shares of Common Stock shall be treated as a
dividend paid in shares of Common Stock to the extent shares of Common Stock are
issuable on the payment or conversion thereof.
4
<PAGE>
In the event, prior to the Expiration Date or the exercise of
the Series A Preferred Stock, the Corporation shall be recapitalized by
reclassifying its outstanding shares of Common Stock into shares with a
different par value, or by changing its outstanding shares of Common Stock to
shares without par value or in the event of any other material change of the
capital structure of the Corporation or of any successor corporation by reason
of any reclassification, recapitalization or conveyance, prompt, proportionate,
equitable, lawful and adequate provision shall be made whereby any registered
owner of the Series A Preferred Stock shall thereafter have the right to
purchase, in lieu of the Common Stock purchasable on the conversion of any
Series A Preferred Stock, such securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
purchasable on conversion of the Series A Preferred Stock had such
reclassification, recapitalization or conveyance not taken place; and in any
such event, the rights of any registered owner of the Series A Preferred Stock
to any number of shares of Common Stock purchasable on conversion of such Series
A Preferred Stock, as set forth above, shall continue and be preserved in
respect of any stock, securities or assets which the registered owner becomes
entitled to purchase.
No adjustment of the Series A Conversion Price or Series A
Conversion Rate shall be made as a result of or in connection with (i) the
issuance of shares of Common Stock of the Corporation pursuant to options,
warrants, employee stock ownership plans and share purchase agreements
outstanding or in effect on the date hereof or the Placement Agent Warrants or
options that may be issued in accordance with the terms of the Corporation's
Confidential Private Placement Memorandum dated July 21, 1998, (ii) the
establishment of additional option plans of the Corporation, the modification,
renewal or extension of any plan now in effect or hereafter created, or the
issuance of shares of Common Stock on exercise of any options pursuant to such
plans, and (iii) the issuance of shares of Common Stock in connection with the
compensation arrangements for officers, employees or agents of the Corporation
or any subsidiary, and the like.
(4) No Impairment. The Corporation, whether by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
merger, dissolution, issue or sale of securities or any other voluntary action,
will not avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Corporation, but at all times
in good faith will assist in the carrying out of all of such action as may be
necessary or appropriate in order to protect the conversion rights pursuant to
this Section 4 of the holders of Series A Preferred Stock against impairment.
(5) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, payable in
additional shares of Common Stock or other securities or rights or any right to
subscribe for or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation will
deliver to each holder of Series A Preferred Stock at least thirty days' prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or rights,
and the amount and character of such dividend, distribution or right. Any
notices required by the provisions of this subsection will be deemed given when
deposited in the United States mail, postage prepaid, directed to the address of
a holder of shares of Series A Preferred Stock as it appears on the records of
the Corporation. Without limiting the obligation of the Corporation to provide
notice to the holders of shares of Series A Preferred Stock under this
subsection, the failure of the Corporation to give such notice shall not
invalidate the corporate action.
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(6) Reservation of Stock Issuable Upon Conversion. The Corporation at
all times will reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series A Preferred Stock such number of its shares of Common Stock as
from time to time will be sufficient to effect the conversion of all then
outstanding shares of Series A Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock is not sufficient to effect the
conversion of all then outstanding shares of Series A Preferred Stock, in
addition to such other remedies as may be available to the holders of Series A
Preferred Stock for such failure, the Corporation will take such corporate
action as, in the opinion of its counsel, may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as will
be sufficient for such purpose.
FIFTH: The Board of Directors is authorized to make, alter or repeal
the By-Laws of the Corporation, except that any by-law adopted by the
stockholders may be altered or repealed only by the stockholders if such by-law
specifically so provides.
SIXTH: Any one or more directors may be removed, with or without cause,
by the vote or written consent of the holders of a majority of the issued and
outstanding shares of stock of the Corporation.
SEVENTH: Meetings of stockholders shall be held at such place, within
or without the State of Delaware, as may be designated by or in the manner
provided in the By-Laws, or, if not so designated, at the registered office of
the Corporation in the State of Delaware. Elections of directors need not be by
ballot, unless and to the extent that the By-Laws so provide.
EIGHTH: (a) The Corporation shall indemnify and hold harmless, by
bylaws, agreement, insurance or otherwise, each officer, director, employee and
agent to the fullest extent permitted by law.
(b) A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability: (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law for unlawful payment of dividend or unlawful stock purchase or
redemption, (iii) under Section 174 of the Delaware General Corporation Law, or
(iv) for any transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation law is amended after the filing of
the Certificate of Incorporation of which this article is a part, to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
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NINTH: The Corporation reserves the right to amend, alter or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by statute, and all rights of stockholders herein are
subject to this reservation.
The undersigned has signed this Amended and Restated Certificate of
Incorporation on the sixth day of August , 1999.
1-800-AUTOTOW, INC.
/s/ Joel Nagelmann
------------------
Joel Nagelmann, President
7
EXHIBIT 2.2
CERTIFICATE OF MERGER OF
KEEY CORP. WITH AND INTO
1-800-AUTOTOW, INC.
Keey Corp. and 1-800-AutoTow, Inc. certify that:
1. The name and state of Incorporation of each of the constituent
corporations are:
(a) Keey Corp., a Delaware corporation (Acquired corporation)
(b) 1-800-AutoTow, Inc., a Delaware corporation
(Acquiring corporation)
2. An Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with the provisions of subsection (c) of Section 251 of the General
Corporation Law of the State of Delaware.
3. The Board of Directors of both constituent corporations unanimously
approved the Agreement and Plan of Merger. The Consent of shareholders holding a
majority of the issued and outstanding shares of 1-800-AutoTow, Inc. was given
on March 30, 1998. The transaction was approved by Consent of Shareholders of
Keey Corp., under Delaware General Corporation Law 228, dated March 30, 1998 by
shareholders holding 17,647,731 shares, which is 90% of the 19,608,590 shares
entitled to vote. Only a majority of shares were required; therefore, the
Agreement and Plan of Merger was approved by the required votes. Notice of
Action Taken without unanimous consent was mailed to all 1-800-AutoTow, Inc. and
Keey Corp. shareholders who did not consent pursuant to 262(d)(2) of the
Delaware General Corporation Law.
4. The name of the surviving corporation is 1-800-AutoTow, Inc., a
Delaware corporation.
5. The Certificate of Incorporation, as amended by Amendment to
Certificate of Incorporation dated December 23, 1997 of 1-800-AutoTow, Inc.
shall be the Certificate of Incorporation of the surviving corporation.
6. The complete executed Agreement and Plan of Merger is on file at the
principal place of business of 1-800-AutoTow, Inc. located at 1301 N. Congress
Ave., Suite 330, Boynton Beach, FL 33426.
7. A copy of the Agreement and Plan of Merger will be furnished by
1-800-AutoTow, Inc. on request and without cost, to any shareholder of the
constituent corporations.
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8. 1-800-AutoTow, Inc. hereby irrevocably appoints the Delaware
Secretary of State as its agent to accept service of process in any suit or
proceeding. A copy of such process shall be mailed by the Secretary of State to
1-800-AutoTow, Inc. located at 1301 N. Congress Ave., Suite 330, Boynton Beach,
FL 33426.
IN WITNESS WHEREOF, the corporations have hereunto set their hands and
seals.
Dated this 30th day of March, 1998.
KEEY CORP.
a Delaware corporation
ACKNOWLEDGED:
/s/ R.V. Davidson /s/ William Bossung
- -------------------- -------------------
R.V. Davidson William Bossung
Secretary Sole Director
1-800-AUTOTOW, INC.
a Delaware corporation
ACKNOWLEDGED:
/s/ J. Konigsberg /s/ Joel Nagelmann
- ----------------- ------------------
J. Konigsberg Joel Nagelmann
Secretary President, Director
2
EXHIBIT 2.3
ARTICLES OF MERGER
AUTOTOW SUB-ONE, INC.
D&D TOWING AND RECOVERY INC.
Pursuant to the provisions of Florida Statute 607.1105, the undersigned
corporations adopt the following articles of merger for the purpose of merging
them into one of such corporations:
Article One
A plan of reorganization providing for the merger of AutoTow Sub-One,
Inc., a Florida corporation, into D&D Towing and Recovery Inc., a Florida
corporation, is incorporated by reference and attached hereto as Exhibit "A."
Article Two
AutoTow Sub-One, Inc. is a wholly owned subsidiary of 1-800-AutoTow,
Inc., and possesses no other shareholders. The plan of reorganization for the
merger had been approved by the Board of Directors of 1-800-AutoTow, Inc., on
April 27, 1998, as evidenced by the Board of Director meeting minutes attached
hereto as Exhibit "B." The Plan was subsequently adopted by 1-800-AutoTow, Inc.
and AutoTow Sub-One, Inc. on the 1st day of June, 1998.
Article Three
Glenn Michael Dempsey is the sole shareholder of D&D Towing And
Recovery Inc. Mr. Dempsey's approval of the plan of reorganization occurred on
April 27, 1998. Mr. Dempsey's shareholder adoption of the, is reflected by his
signature to the merger agreement, dated June 1,1998.
Article Four
As reflected by the plan of reorganization, the effective date of the
merger was the 1st day of June, 1998.
Date: June 1, 1998
AutoTow Sub-1, Inc. D&D Towing & Recovery, Inc.
/s/ Eugene Iarocci /s/ Glenn Michael Dempsey
- ------------------ -------------------------
Eugene Iarocci Glenn Michael Dempsey
President Principal
EXHIBIT 2.4
ARTICLES OF MERGER
1-800-AUTOTOW GULF COAST EAST, INC.
L&W COLLISION, TOWING & RECOVERY, INC.
Pursuant to the provisions of Florida Statute 607.1105, the undersigned
corporations adopt (he following articles of merger for the purpose of merging
them into one of such corporations:
Article One
A plan of reorganization providing for the merger of L&W Collision, Towing &
Recovery, Inc., a Florida corporation into 1-800-AutoTow Gulf Coast East, Inc.,
a Florida corporation, is incorporated by reference and attached hereto as
Exhibit "A."
Article Two
1-800-AutoTow Gulf Coast East, Inc. is a wholly owned subsidiary of
1-800-AutoTow, Inc, and possess no other shareholders. The plan of
reorganization for the merger has been approved by the Board of Directors of
1-800-AutoTow, inc, on July 21, 1999, as evidenced by the Board or Director
meeting minutes attached hereto as Exhibit "B." The Plan was subsequently
adapted by 1 -800-AutoTow, Inc. and 1-800-AutoTow Gulf Coast East, Inc. on the
22nd day of July, 1999.
Article Three
Walter Terenik and Zinna Terenik are the sole shareholders of L&W Collision,
Towing & Recovery, Inc. The plan of reorganization was approved by both
shareholders on July 21, 1999. The shareholders adoption of the plan of
reorganization, is reflected by the signatures of Walter Terenick and Zinna
Terenick to the Merger Agreement dated July 22, 1999.
Article Four
As reflected by the plan of reorganization, the effective date of the merger was
the 22nd day of July, 1999.
Date: July 22, 1999
1-800-AutoTow Gulf Coast East, Inc. L&W Collision, Towing & Recovery, Inc.
/s/ Steven B. Teeters /s/ Walter Terenick
- --------------------- --------------------
Steven B. Teeters Walter Terenick
Treasurer Shareholder
/s/ Zinna Terenick
--------------------
Zinna Terenick
Shareholder
EXHIBIT 2.5
ARTICLES OF MERGER
1-800-AUTOTOW GULF COAST EAST, INC.
ARROW TOWING & RECOVERY, INC.
Pursuant to the provisions of Florida Statute 607.1105, the undersigned
corporations adopt (he following articles of merger for the purpose of merging
them into one of such corporations:
Article One
A plan of reorganization providing for the merger of Arrow Towing & Recovery,
Inc., a Florida corporation into 1-800-AutoTow Gulf Coast East, Inc., a Florida
corporation, is incorporated by reference and attached hereto as Exhibit "A."
Article Two
1-800-AutoTow Gulf Coast East, Inc. is a wholly owned subsidiary of
1-800-AutoTow, Inc, and possess no other shareholders. The plan of
reorganization for the merger has been approved by the Board of Directors of
1-800-AutoTow, inc, on July 21, 1999, as evidenced by the Board or Director
meeting minutes attached hereto as Exhibit "B." The Plan was subsequently
adapted by 1 -800-AutoTow, Inc. and 1-800-AutoTow Gulf Coast East, Inc. on the
22nd day of July, 1999.
Article Three
Robert Menniges and Helen Hohn are the sole shareholders of Arrow Towing &
Recovery, Inc. The plan of reorganization was approved by both shareholders on
July 21, 1999. The shareholders adoption of the plan of reorganization, is
reflected by the signatures of Robert Menniges and Helen Hohn to the Merger
Agreement dated July 22, 1999.
Article Four
As reflected by the plan of reorganization, the effective date of the merger was
the 22nd day of July, 1999.
Date: July 22, 1999
1-800-AutoTow Gulf Coast East, Inc. Arrow Towing & Recovery, Inc.
/s/ Steven B. Teeters /s/ Robert Menniges
- --------------------- --------------------
Steven B. Teeters Robert Menniges
Treasurer Shareholder
/s/ Helen Hohn
--------------------
Helen Hohn
Shareholder
EXHIBIT 2.6
ARTICLES OF MERGER
1-800-AUTOTOW, INC.
AUTOTOW SUB-2, INC.
MCGANN & CHESTER, INC.
Pursuant to the provisions of Pennsylvania Statute 1926, the
undersigned corporations adopt the following articles of merger for the purpose
of merging them into one of such corporations:
Article I
A plan of reorganization providing for the merger of AutoTow Sub-2,
Inc., a Pennsylvania corporation and wholly owned subsidiary of 1-800-AutoTow,
Inc. - a Delaware Corporation - into McGann & Chester, Inc., a Pennsylvania
corporation, is incorporated by reference and attached hereto as Exhibit "A."
Article II
The name and location of the registered agent of the surviving
corporation is as follows: William Chester, Jr., 201 Sawmill Run Boulevard,
Pittsburgh, Pennsylvania, 15226. The name and location of the registered agent
of AutoTow Sub-Two, Inc. is as follows: c/o R.W. Worthington, M. Burr Keim
Company, 2021 Arch Street, Philadelphia, PA 19103.
Article III
The plan of merger attached hereto became effective as of August 1,
1998.
Article IV
The plan of merger was adopted by McGann & Chester by way of a
unanimously passed shareholder resolution, and was adopted by AutoTow Sub-2,
Inc. by way of corporate resolution unanimously passed by the directors of the
sole shareholder and parent thereof, 1-800-Autotow, Inc.
Date: September 16, 1998
AutoTow Sub-2, Inc. McGann & Chester, Inc.
/s/ Eugene A. Iarocci /s/ Robert McGann
- --------------------- --------------------
Eugene A. Iarocci Robert McGann
President Vice President
EXHIBIT 2.7
1-800-AUTOTOW, INC.
-------------------
AMENDED AND RESTATED BY-LAWS
-----------------------------
ARTICLE ONE
STOCKHOLDERS
SECTION 1.1. Annual Meetings. An annual meeting of stockholders to
elect directors and transact such other business as may properly be presented to
the meeting shall be held at such place as the Board of Director may from time
to time fix, at 11:00 A.M. on the last Tuesday on April in each year or, if that
day shall be a legal holiday in the jurisdiction in which the meeting is to be
held, then on the next day not a legal holiday, or as set by the Board of
Directors.
SECTION 1.2 Special Meetings. A special meeting of stockholders may be
called at any time by the Board of Directors its Chairman, the Executive
Committee or the President and shall be called by any of them or by the
Secretary upon receipt of a written request to do so specifying the matter or
matters, appropriate for action at such a meeting, proposed to be presented at
the meeting and signed by holders of record of a majority of the shares of stock
that would be entitled to be voted on such matter or matters if the meeting were
held on the day such request is received and the record date for such meeting
were the close of business on the preceding day. Any such meeting shall be held
at such time and at such place, within or without the State of Delaware, as
shall be determined by the body or person calling such meeting and as shall be
stated in the notice of such meeting.
SECTION 1.3. Notice of meeting. For each meeting of stockholders
written notice shall be given stating the place, date and hour and, in the case
of a special meeting, the purpose or purposes for which the meeting is called
and, if the list of stockholders required by Section 1.9 is to be at such place
at least 10 days prior to the meeting, the place where such list will be. Except
as otherwise provided by Delaware law, the written notice of any meeting shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each stockholder entitled to vote at such meeting. If mailed, notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation.
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SECTION 1.4. Quorum. Except as otherwise required by law or the
Certificate of Incorporation, the holders of record of a majority of the shares
of stock entitled to be voted present in person or represented by proxy at a
meeting shall constitute a quorum for the transaction of business at the
meeting, but in the absence of a quorum the holders of record present or
represented by proxy at such meeting may vote to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is obtained. At any such adjourned session of the meeting at which there shall
be present or represented the holders of record of the requisite number of
shares, any business may be transacted that might have been transacted at the
meeting as originally called.
SECTION 1.5. Chairman and Secretary at Meeting. At each meeting of
stockholders the President, or in his absence the person designated in writing
by the President, or if no person is so designated, then a person designated by
the Board of Directors, shall preside as chairman of the meeting; if no person
is so designated, then the meeting shall choose a chairman by plurality vote.
The Secretary or in his absence a person designated by the chairman of the
meeting shall act as secretary of the meeting.
SECTION 1.6. Voting; Proxies. Except as otherwise provided by law or
the Certificate of Incorporation, and subject to the provisions of Section 1.10:
(a) Each stockholder shall at every meeting of the stockholders be entitled to
one vote for each share of capital stock held by him.
(b) Each stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy, but no such proxy
shall be voted or acted upon after ten (10) months from its date. (c) Directors
shall be elected by a plurality vote. (d) Each matter, other than election of
directors, properly presented to any meeting shall be decided by a majority of
the votes cast on the matter. (e) Election of directors and the vote on any
other matter presented to a meeting shall be by written ballot only if so
ordered by the chairman of the meeting, or if so requested by any stockholder
present, or represented by proxy, at the meeting entitled to vote in such
election or on such matter, as the case may be.
SECTION 1.7. Adjourned Meetings. A meeting of stockholders may be
adjourned to another time or place as provided in Sections 1.4 or 1.6(d). Unless
the Board of Directors fixes a new record date, stockholders of record for an
adjourned meeting shall be as originally determined for the meeting from which
the adjournment was taken. If the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote. At the adjourned meeting any business may be transacted that
might have been transacted at the meeting as originally called.
SECTION 1.8. Consent of Stockholders in Lieu of Meeting. Any action
that may be taken at any annual or special meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Notice of the taking of such
action shall be given promptly to each stockholder that would have been entitled
to vote thereon at a meeting of stockholders, and that did not consent thereto
in writing.
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<PAGE>
SECTION 1.9. List of Stockholders Entitled to Vote. At least 10 days
before every meeting of stockholders a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder, shall be prepared and shall be open to the examination of any
stockholder for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. Such list shall be produced and kept at the time and
place of the meeting during the whole time thereof and may be inspected by any
stockholder who is present.
SECTION 1.10. Fixing of Record Date. In order that the Corporation may
determine the stockholders entitled to notice of, or to vote at, any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than 60 or less than 10 days
before the date of such meeting, nor more than 60 days prior to any other
action. If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. The record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; and the record date for any other
purposes shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
ARTICLE II
DIRECTORS
SECTION 2.1. Number; Term of Office; Qualifications; Vacancies. The
business and affairs of the Corporation shall be managed by a Board of
Directors. The number of directors that shall constitute the whole Board shall
be determined by action of the Board of Directors taken by the affirmative vote
of a majority of the whole Board. Directors shall be elected at the annual
meeting of stockholders to hold office, subject to Sections 2.2 and 2.3, until
the next annual meeting of stockholders and until their respective successors
are elected and qualified. Vacancies and newly elected directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by the
sole remaining director, and the directors so chosen shall hold office, subject
to Sections 2.2 and 2.3, until the next annual meeting of stockholders and until
their respective successors are elected and qualified.
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<PAGE>
SECTION 2.2. Resignation. Any director of the Corporation may resign at
any time by giving written notice of such resignation to the Board of Directors,
the President, or the Secretary of the Corporation. Any such resignation shall
take effect at the time specified therein, or if no time is specified, upon
receipt thereof by the Board of Directors or one of the above-named officers;
and, unless specified therein, the acceptance of such resignation shall not be
necessary to make it effective. When one or more directors shall resign from the
Board of Directors effective at a future date, a majority of the directors then
in office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in these By-Laws.
SECTION 2.3. Removal. Any one or more directors may be removed, with or
without cause, by the vote or written consent of the holders of a majority of
the issued and outstanding shares of stock of the Corporation entitled to vote
for the election of directors.
SECTION 2.4. Regular and Annual Meetings; Notice. Regular meetings of
the Board of Directors shall be held at such time and at such place, within or
without the State of Delaware, as the Board of Directors from time to time
prescribe. No notice need be given of any regular meeting, and a notice, if
given, need not specify the purposes thereof. A meeting of the Board of
Directors may be held without notice immediately after an annual meeting of
stockholders at the same place as that at which such annual meeting was held.
SECTION 2.5. Special Meetings; Notice. A special meeting of the Board
of Directors may be called at any time by the Board of Directors, its Chairman,
the Executive Committee, the President or any person acting in the place of the
President and shall be called by any one of them or by the Secretary upon
receipt of a written request to do so specifying the matter or matters
appropriate for action at such a meeting, proposed to be presented at the
meeting, and signed by at least two directors. Any such meeting shall be held at
such time and at such place, within or without the State of Delaware, as shall
be determined by the body or person calling such meeting. Notice of such meeting
stating the time and place thereof shall be given (a) by deposit of the notice
in the United States mail first class, postage prepaid, at least five days
before the day fixed for the meeting addressed to each director at his address
as it appears on the Corporation's records or at such other address as the
director may have furnished the Corporation for that purpose, or (b) by delivery
of the notice similarly addressed for dispatch by telegraph, fax, courier, or by
delivery of the notice by telephone or person, in each case at least 48 hours
before the time fixed for the meeting.
SECTION 2.6. Presiding Officer and Secretary at Meetings. Each meeting
of the Board of Directors shall be presided over by the Chairman of the Board of
Directors or in his absence by the President of if neither is present by such
member of the Board of Directors as shall be chosen by the meeting. The
Secretary, or in his absence an Assistant Secretary, shall act as secretary of
the meeting, or if no such officer is present, a secretary of the meeting, shall
be designated by the person presiding over the meeting.
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<PAGE>
SECTION 2.7. Quorum. A majority of the whole Board of Directors shall
constitute a quorum for the transaction of business, but in the absence of a
quorum a majority of those present (or if only one be present, then that one)
may adjourn the meeting, without notice other than announcement at the meeting,
until such times as a quorum is present. Except as otherwise required by the
Certificate of Incorporation or the By-Laws, the vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 2.8. Meeting by Telephone. Members of the board of Directors or
of any committee thereof may participate in meetings of the Board of Directors
or of such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in person at such
meeting.
SECTION 2.9. Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board of Directors or of
such committee, as the case may be, consent thereto in writing and the writing
or writings are filed with the minutes of proceedings of the Board of Directors
or of such committee.
SECTIONS 2.10. Executive and Other Committees. The Board of Directors
may, by resolution passed by a majority of the whole Board of Directors,
designate an Executive Committee and one or more other committees, each such
committee to consist of one or more directors as the Board of Directors may from
time to time determine. Any such committee, to the extent provided in such
resolution or resolutions, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, including the power to authorize the seal of the
Corporation to be affixed to all papers that may require it; but no such
committee shall have such power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease, or exchange of all, or
substantially all, of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-Laws; and unless the resolution shall expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. In the absence or disqualification of a member
of a committee, the number of members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board Directors to act at the meeting
in the place of any such absent or disqualified member. Each such committee
other than the Executive Committee shall have such name as may be determined
from time to time by the Board of Directors.
SECTION 2.11. Compensation. No director shall receive any stated salary
for his services as a director or as a member of a committee but shall receive
such sum, if any, as may from time to time be fixed by the Board of Directors
for attendance at each meeting of the Board of Directors or of a committee. He
may also be reimbursed for his expenses in attending any meeting. However, any
director who serves the Corporation in any capacity other than as a member of
the Board of Directors or of a committee may receive compensation therefor.
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ARTICLE THREE
OFFICERS
SECTION 3.1. Election; Qualification. The officers of the Corporation
shall be a Chairman, President, one or more Vice Presidents, a Secretary and a
Treasurer, each of whom shall be elected by the Board of Directors. The Board of
Directors may elect a Chairman of the Board of Directors, and such other
officers as the Board may from time to time determine. The Chairman of the Board
of Directors, if any, and the President shall be elected from among the
directors. Two or more offices may be held by the same person.
SECTION 3.2. Term of Office. Each officer shall hold office from the
time of his election and qualification to the time at which a successor is
elected and qualified unless sooner he shall die, resign, or is removed pursuant
to Section 3.4.
SECTION 3.3. Resignation. Any officer of the Corporation may resign at
any time by giving written notice of such resignation to the Board of Directors,
the President or the Secretary of the Corporation. Any such resignation shall
take effect at the time specified therein or, if no time is specified, upon
receipt thereof by the Board of Directors or one of the above-named officers;
and, unless specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 3.4. Removal. Any officer may be removed at any time with or
without cause, by the vote of a majority of the whole Board of Directors.
SECTION 3.5. Vacancies. Any vacancy however caused in any office of the
Corporation may be filled by the Board of Directors.
SECTION 3.6. Compensation. The compensation of each officer shall be
such as the Board of Directors may from time to time determine.
SECTION 3.7. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall have such powers and duties as the Board of Directors
may from time to time prescribe. There may also be a Vice Chairman of the Board
of Directors who shall handle the duties of the Chairman in his absence and have
such other powers and duties as the Board of Directors may from time to time
prescribe.
SECTION 3.8. President. The President shall have charge of the business
and operating affairs of the Corporation, subject however to the right of the
Board of Directors to confer specified powers on officers and subject generally
to the direction of the Board of Directors and the Executive Committee, if any.
SECTION 3.9. Vice President. Each Vice President shall have such powers
and duties as generally pertain to the office of Vice President and as the Board
of Directors or the President may from time to time prescribe. During the
absence of the President or his inability to act, the Vice President, or if
there shall be more than one Vice President, then that one designated by the
Board of Directors, shall exercise the powers and shall perform the duties of
the President, subject to the direction of the Board of Directors and the
Executive Committee, if any.
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SECTION 3.10. Secretary. The Secretary shall keep the minutes of all
meetings of stockholders and of the Board of Directors. He shall be custodian of
the corporate seal and shall affix it or cause it to be affixed to such
instruments as require such seal and attest the same and shall exercise the
powers and shall perform the duties incident to the office of Secretary, subject
to the direction of the Board of Directors and the Executive Committee, if any.
SECTION 3.11. Treasurer. The Treasurer shall have care of all funds and
securities of the Corporation and shall exercise the powers and shall perform
the duties incident to the office of Treasurer, subject to the direction of the
Board of Directors and the Executive Committee, if any.
SECTION 3.12. Other Officers. Each other officer of the Corporation
shall exercise the powers and shall perform the duties incident to his office,
subject to the direction of the Board of Directors and the Executive Committee,
if any.
ARTICLE FOUR
CAPITAL STOCK
SECTION 4.1. Stock Certificates. The interest of each holder of stock
of the Corporation shall be evidenced by a certificate or certificates in such
form as the Board of Directors may from time to time prescribe. Each certificate
shall be signed by or in the name of the Corporation, by the Chairman of the
Board of Directors or the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary. Any of, or
all of, the signatures on the certificate may be a facsimile. If any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
SECTION 4.2. Transfer of Stock. Shares of stock shall be transferable
on the books of the Corporation pursuant to applicable law and such rules and
regulations as the Board of Directors shall from time to time prescribe.
SECTION 4.3. Holders of Record. Prior to due presentment for
registration or transfer, the Corporation may treat the holder of record of a
share of its stock as the complete owner thereof exclusively entitled to vote,
to receive notifications, and otherwise entitled to all the rights and powers of
a complete owner thereof, notwithstanding notice to the contrary.
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SECTION 4.4. Lost, Stolen, Destroyed or Mutilated Certificates. The
Corporation shall issue a new certificate of stock to replace a certificate
theretofore issued by it, alleged to have been lost, destroyed or wrongfully
taken, if the owner or his legal representative (i) requests replacement before
the Corporation has notice that the stock certificate has been acquired by a
bona fide purchaser; (ii) filed with the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss or destruction of any such stock certificate; and
(iii) satisfies such other terms and conditions as the Board of Directors may
from time to time prescribe.
ARTICLE FIVE
MISCELLANEOUS
SECTION 5.1. Indemnity.
(a) The Corporation shall indemnify, subject to the requirements of subsection
(d) of this Section, any person who was or is a party or who is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation), by reason of the fact that he is or was
a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees) judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith, and in manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
(b) The Corporation shall indemnify, subject to the requirements of subsection
(d) of this Section, any person who was or is a party or who is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorney fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duties to the Corporation, unless and only
to the extent, that the Court of Chancery of the State of Delaware or the court
in which such action or suit was brought shall determine upon application, that
despite the adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the Court of Chancery of the State of Delaware or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation, has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
Section, or in defense of any claim, issue or matter therein, the Corporation
shall indemnify him against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
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(d) Any indemnification under subsections (a) and (b) of this Section (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
Section. Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorney's fees) incurred by a director, officer,
employee or agent in defending a civil or criminal action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Section.
(f) The indemnification provided by this Section shall not limit the Corporation
from providing any other indemnification permitted by law nor shall it be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in their official capacity and as to
action in any other capacity while holding such office, and shall continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
(g) The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Section.
(h) For purposes of this Section, references to "the Corporation" include all
constituent corporations the Corporation has absorbed in a consolidation or
merger so that any person who is or was a director, officer, employee or agent
of such a constituent corporation or is or was serving at the request of such
constituent corporation as director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Section with respect to the
Corporation as he would if he had served the Corporation in the same capacity.
SECTION 5.2. Waiver of Notice. Whenever notice is required by the
Certificate of Incorporation, the By-Laws or any provision of the General
Corporation Law of the State of Delaware, a written waiver thereof, signed by
the person entitled to notice, whether before or after the time required for
such notice, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, directors or
members of a committee of directors need be specified in any written waiver of
notice.
SECTION 5.3. Fiscal Year. The fiscal year of the Corporation shall end
on the last day of March in each year.
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SECTION 5.4. Corporate Seal. The corporate seal shall be in such form
as the Board of Directors may from time to time prescribe, and the same may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
ARTICLE SIX
AMENDMENT OF BY-LAWS
SECTION 6.1. Amendment. The By-Laws may be made, altered or repealed at
any meeting of stockholders; or at any meeting of the Board of Directors by a
majority vote of the whole Board.
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EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF
SERIES B 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
1-800-AUTOTOW, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
1-800-AutoTow, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that, pursuant to the authority contained in the Fourth Article
of its Certificate of Incorporation, as amended, and in accordance with Section
151 of the General Corporation Law of the State of Delaware, the following
resolutions creating a series of Preferred Stock, $.001 par value, designated as
Series B 8% Cumulative Convertible Preferred Stock, were duly adopted by the
Board of Directors of the Corporation (the "Board") as of August 5, 1999:
RESOLVED, that the Board hereby creates from among the Corporation's
4,900,000 authorized and previously undesignated shares of Preferred Stock,
$.001 par value, a series of such Preferred Stock to be known as the "Series B
8% Cumulative Convertible Preferred Stock" and to comprise 500,000 shares, and
hereby adopts and prescribes therefore the designation, relative rights,
preferences and limitations, and other terms and conditions of such series as
set forth in, and governed by, Exhibit A attached to these minutes, with such
Exhibit A being hereby incorporated as part of this resolution; and
FURTHER RESOLVED, that the officers of the Corporation be and hereby
are authorized and directed to take any and all further action that may be
necessary or desirable to accomplish the above authorized action, including but
not limited to the execution and filing of all instruments or documents that may
be necessary to create, designate, issue or evidence shares of the Corporation's
Series B 8% Cumulative Convertible Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed in its name by the undersigned duly authorized officers of the
Corporation, this 5 day of August, 1999.
SIGNED:
/s/ Joel Nagelmann
-------------------
Joel Nagelmann
President & CEO
ATTEST:
/s/ V. Gelormine
- ----------------
V. Gelormine
Vice President
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Exhibit A
Series B 8% Cumulative Convertible Preferred Stock
of
1-800-AutoTow, Inc., a Delaware Corporation
(the "Corporation")
2. Designation; Rank. 500,000 shares of the preferred stock, $.001 par
value, stated value $10.00 per share (the "Stated Value"), of the Corporation
are hereby constituted as a series of the preferred stock designated as "Series
B 8% Cumulative Convertible Preferred Stock" (the "Series B Preferred Stock")
and having relative rights and preferences to all other classes and series of
the capital stock of the Corporation as set forth herein. The Series B Preferred
Stock shall rank senior to all other classes or series of capital stock of the
Corporation, except as permitted by Section 4(b) hereof, and except as expressly
provided in Sections 2(b) and 3(a) hereof.
3. Dividends.
(1) The Board of Directors of the Corporation or a duly authorized
committee thereof (the "Board") shall declare, out of funds legally available
therefor, a cumulative, annual cash dividend of eight percent (8%) of the Stated
Value, calculated at the simple interest rate of 8% per annum from the Issue
Date, and no more, for each share of the Series B Preferred Stock held by each
Record Holder, payable on or about the 15th day of July, and the 15th day of
January of each year, commencing January 15, 2000 (the "Dividend Payment
Dates"). Each dividend declared by the Board shall be paid to the Record Holders
as their names appear on the stock books of the Corporation on the first day of
the month in which the Dividend Payment Dates fall, provided, however, that
whether or not declared for payment by the Board, dividends at the rate
prescribed above shall be deemed to accrue in arrears and accumulate on each
outstanding share of the Series B Preferred Stock from month to month as of the
15th day of each month, commencing with the month next following the month in
which such share is issued, until such dividends are declared for payment by the
Board and payment is accordingly made, in cash, therefor. Dividends in arrears
for any year may be declared and paid at any time, without reference to any
regular Dividend Payment Dates, to the Record Holders on the date fixed by the
Board as their names appear on the stock books of the Corporation; provided that
such date fixed by the Board shall not exceed 15 days preceding the payment date
thereof. Any dividend payment made on shares of Series B Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due for such
shares.
(2) During any fiscal year of the Corporation, no dividend shall be
paid upon, or declared and set apart for, any share of Series B Preferred Stock
or for any share of any other series of the Preferred Stock ranking pari passu
with shares of the Series B Preferred Stock as to dividends, unless during such
fiscal year a like proportionate dividend, ratably in proportion to the
respective dividends applicable thereto, shall be paid upon, or be declared and
set apart for, all shares of Series B Preferred Stock as to which dividends
shall have accrued. Record Holders of shares of Series B Preferred Stock shall
not be entitled to any dividend, whether payable in cash, securities or other
property, in excess of the full cumulative dividends on shares of the Series B
Preferred Stock.
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(3) So long as any Series B Preferred Stock is outstanding, no dividend
shall be declared or paid or set aside for payment, nor shall any other
distribution be declared or made, upon the Common Stock or upon any other stock
of the Corporation ranking junior to or pari passu with the Series B Preferred
Stock as to dividends or upon liquidation, including without limitation the
Corporation's Series A Convertible Preferred Stock ("Series A Preferred Stock")
(except for dividends on such Series A Preferred Stock which are paid by the
Corporation in shares of Common Stock), nor shall any of the Common Stock or any
other stock of the Corporation ranking junior to or pari passu with the Series B
Preferred Stock as to dividends or upon liquidation, including without
limitation the Series A Preferred Stock, be redeemed, repurchased or otherwise
acquired for any consideration (or any monies paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by the
Corporation or any subsidiary thereof (except by conversion into or exchange for
shares of Common Stock or of any other stock of the Corporation ranking junior
to the Series B Preferred Stock as to dividends and upon liquidation) unless, in
each case, the full cumulative dividends on all outstanding shares of the Series
B Preferred Stock for all dividends in arrears shall have been declared and
paid.
(4) Subject to the foregoing provisions, dividends, whether payable in
cash, stock or otherwise as the Board may determine, may be declared and paid
from time to time on Common Stock and on any other class or series of stock of
the Corporation, out of funds of the Corporation legally available for the
payment of dividends, and the Series B Preferred Stock shall not be entitled to
participate in any such dividends.
4. Preference on Liquidation.
(1) Liquidation Preference for Series B Preferred Stock. In the event
that the Corporation shall commence a voluntary case under the federal
bankruptcy laws or any other applicable federal or state bankruptcy, insolvency
or similar law, or consent to the entry of an order for relief in an involuntary
case under such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the federal bankruptcy laws or any other applicable
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution of
the assets of the Corporation shall be made to the holders of shares of Common
Stock, Series A Preferred Stock (other than for accrued but unpaid dividends on
the issued and outstanding Series A Preferred Stock) or other Junior Securities
(and no monies shall be set apart for such purpose) unless prior thereto, the
Record Holders of shares of Series B Preferred Stock shall have received from
the assets of the Corporation an amount per share equal to the Stated Value (the
"Series B Liquidation Preference").
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(2) Pro Rata Payments. If, upon any such liquidation, dissolution or
other winding up of the affairs of the Corporation, the assets of the
Corporation shall be insufficient to permit the payment in full of the Series B
Liquidation Preference for each share of Series B Preferred Stock then
outstanding and the full liquidating payments on all Parity Securities, then the
assets of the Corporation remaining after the distribution to holders of any
Senior Securities of the full amounts to which they may be entitled shall be
ratably distributed among the record holders of Series B Preferred Stock and of
any Parity Securities in proportion to the full amounts to which they would
otherwise be respectively entitled if all amounts thereon were paid in full.
(3) Sale not a Liquidation. Neither the voluntary sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation, merger or other business combination of the
Corporation with or into one or more corporations shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
(4) Notice of Liquidation. Written notice of any liquidation,
dissolution or winding up of the Corporation, stating the payment date or dates
when and the place or places where amounts distributable in such circumstances
shall be payable, shall be given by first class mail, postage prepaid, not less
than twenty (20) days prior to any payment date specified therein, to the Record
Holders of the Series B Preferred Stock.
5. Voting.
(1) General Rights. In addition to any voting rights provided in the
Certificate of Incorporation or By-laws, the Series B Preferred Stock shall vote
together with the Common Stock on all actions to be voted on by the stockholders
of the Corporation. Each share of Series B Preferred Stock shall entitle the
Record Holder thereof to such number of votes per share on each such action as
shall equal the number of shares of Common Stock (rounded up to the nearest
whole share of Common Stock) into which each share of Series B Preferred Stock
is then convertible. The Record Holders of Series B Preferred Stock shall be
entitled to notice of any stockholders' meeting in accordance with the By-Laws
of the Corporation.
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(2) Special Voting Rights on Certain Corporate Actions. The Corporation
shall not, without the prior consent (in addition to any other vote or consent
required by law, contract or otherwise) of the Record Holders of seventy-five
percent (75%) of the outstanding shares of Series B Preferred Stock, voting as a
class in person or by proxy in writing or at a special meeting called for the
purpose: (i) create or authorize any additional stock or any class or series
unless the same ranks junior to the Series B Preferred Stock as to dividends, as
to redemptions and as to the distribution of assets on dissolution, liquidation
or winding up, whether voluntary or involuntary, or create or authorize any
obligation or security convertible into shares of stock of any class or series
unless the same ranks junior to the Series B Preferred Stock as to dividends, as
to redemptions and as to the distribution of assets on dissolution, liquidation
or winding up, whether voluntary or involuntary, whether any such creation or
authorization shall be by means of amendment of the Certificate of
Incorporation, this Certificate of Designations, merger, consolidation or
otherwise; or (ii) amend, alter or repeal the Certificate of Incorporation, this
Certificate of Designations or Bylaws, or file any directors' resolutions
pursuant to the General Corporation Law of the State of Delaware, containing, in
any such case, any provision which in any manner adversely affects the
respective powers, designations, preferences or rights, or the qualifications,
limitations or restrictions thereof, of the Series B Preferred Stock, (iii)
agree to, or permit any subsidiary to agree to, any provision in any agreement
that would impose any restrictions on the Corporation's right to make any
redemption of or convert any of the Series B Preferred Shares or otherwise
prohibit the Corporation from honoring the exercise of any rights the Record
Holders of the Series B Preferred Shares now have or may hereafter have, (iv)
engage in any merger, share exchange, consolidation or reorganization which
would result in the holders of Common Stock of the Corporation who immediately
prior to such transaction owned more than fifty percent (50%) of the Common
Stock owning less than fifty percent (50%) of the Common Stock of the
Corporation, or such surviving entity, immediately after such transaction; or
(v) engage in any sale of all, or substantially all, of the assets of the
Corporation.
6. Conversion. The Record Holders of Series B Preferred Stock shall
have the right to convert all or a portion of such shares into fully paid and
nonassessable shares of Common Stock or any capital stock or other securities
into which such Common Stock shall have been changed or any capital stock or
other securities resulting from a reclassification thereof as follows:
(1) Optional Conversion. Subject to and upon compliance with the
provisions of this Section 5, a Record Holder of shares of Series B Preferred
Stock shall have the right without payment of any additional consideration, at
the option of such Record Holder, at any time or from time to time, to convert
each of such shares into the number of fully paid and nonassessable shares of
Common Stock obtained by dividing the Stated Value by the Conversion Price then
in effect (such number to be rounded up to the nearest whole number) and by
surrender of such shares of Series B Preferred Stock, such surrender to be made
in the manner provided in paragraph (b) of this Section 5. The Common Stock
issuable upon conversion of the shares of Series B Preferred Stock, when such
Common Stock shall be issued in accordance with the terms hereof, are hereby
declared to be and shall be duly authorized, validly issued, fully paid and
nonassessable Common Stock held by the holders thereof.
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(2) Mechanics of Conversion. Each Record Holder of Series B Preferred
Stock that desires to convert the same into shares of Common Stock shall
surrender the certificate or certificates therefor, duly endorsed, at the
principal office of the Corporation or of any transfer agent for the Series B
Preferred Stock or Common Stock, accompanied by written notice to the
Corporation setting forth the name or names in which such Record Holder wishes
the certificate or certificates for shares of Common Stock to be issued if such
name or names shall be different than that of such Record Holder. In case such
notice shall specify a name or names other than that of such Record Holder, such
notice shall be accompanied by payment of all transfer taxes payable upon the
issuance and delivery of shares of Common Stock in such name or names.
Thereupon, the Corporation shall issue and deliver at such office on the fifth
(5th) succeeding Business Day (unless such conversion is in connection with an
underwritten public offering of Common Stock, in which event concurrently with
such conversion) to such Record Holder or on such Record Holder's written order,
(i) a certificate or certificates for the number of validly issued, fully paid
and nonassessable full shares of Common Stock to which such Record Holder is
entitled and (ii) if less than the full number of shares of Series B Preferred
Stock evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the number of
shares evidenced by such surrendered certificate or certificates less the number
of shares converted.
Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date of such surrender of the shares to be
converted (except that if such conversion is in connection with an underwritten
public offering of Common Stock, then such conversion shall be deemed to have
been effected upon such surrender) so that the rights of the Record Holder
thereof as to the shares being converted shall cease at such time except for the
right to receive shares of Common Stock, and the person entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common Stock at such time.
(3) Adjustment of the Conversion Price. The Conversion Price shall be
adjusted from time to time as follows:
(1) Stock Splits and Combinations. In the event the Corporation shall
at any time exchange, as a whole, by subdivision or combination in any manner or
by the making of a stock dividend, the number of shares of Common Stock then
outstanding into a different number of shares, with or without par value, then
the number of shares of Common Stock that each Record Holder of shares of Series
B Preferred Stock would receive upon conversion of its shares of Series B
Preferred Stock (calculated immediately prior to such change) shall be increased
or decreased, as the case may be, in direct proportion to the increase or
decrease in the number of shares of outstanding Common Stock of the Corporation
by reason of such change, and the Conversion Price after such change shall, in
the event of an increase in the number of shares of Common Stock outstanding, be
proportionately reduced, and, in the event of a decrease in the number of shares
of Common Stock outstanding, be proportionately increased.
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(2) Reorganization, Reclassification, Merger or Consolidation. If the
Corporation shall at any time reorganize or reclassify the outstanding shares of
Common Stock (other than a change in par value, or from no par value to par
value, or from par value to no par value, or as a result of a subdivision or
combination) or consolidate with or merge into another corporation (where the
Corporation is not the continuing corporation after such merger or
consolidation), the Record Holders of Series B Preferred Stock shall thereafter
be entitled to receive upon conversion of the Series B Preferred Stock in whole
or in part, the same kind and number of shares of stock and other securities,
cash or other property (and upon the same terms and with the same rights) as
would have been distributed to a Record Holder upon such reorganization,
reclassification, consolidation or merger had such Record Holder converted its
Series B Preferred Stock immediately prior to such reorganization,
reclassification, consolidation or merger (subject to subsequent adjustments
under Section 5(c) hereof). The Conversion Price upon such conversion shall be
the Conversion Price that would otherwise be in effect pursuant to the terms
hereof. Notwithstanding anything herein to the contrary, the Corporation will
not effect any such reorganization, reclassification, merger or consolidation
unless prior to the consummation thereof, the corporation who may be required to
deliver any stock, securities or other assets upon the conversion of the Series
B Preferred Stock shall agree by an instrument in writing to deliver such stock,
cash, securities or other assets to the Record Holders of the Series B Preferred
Stock. A sale, transfer or lease of all or substantially all of the assets of
the Corporation to another person shall be deemed a reorganization,
reclassification, consolidation or merger for the foregoing purposes.
(3) Issuance of Common Stock at a Price Below Conversion Price. In case
the Corporation at any time or from time to time shall issue after the Issue
Date shares of its Common Stock (or securities convertible into its Common
Stock) at a price per share (or having a conversion price per share) less than
the Conversion Price (as defined in Section 7 below) per share of Common Stock,
and in such case, the number of shares of Common Stock into which each share of
the Series B Preferred Stock is convertible shall be adjusted so that the Record
Holder of each share thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by multiplying (a) the
number of shares of Common Stock into which such share was convertible
immediately prior to such event by (b) a fraction, the numerator of which shall
be the sum of (I) the number of shares of Common Stock outstanding immediately
prior to such event, plus (II) the number of additional shares of Common Stock
issued (or into which the securities issued are convertible), plus (III) the
aggregate number of shares of Common Stock which would be issued upon the
conversion or exercise of any outstanding options, warrants or other convertible
securities which entitle the holders thereof to purchase, or otherwise receive,
any Common Stock, and the denominator of which shall be the sum of (IV) the
number of shares of Common Stock outstanding immediately prior to such event,
plus (V) the number of shares of Common Stock which the aggregate consideration
receivable by the Corporation for the total number of shares of Common Stock so
issued would purchase at such Conversion Price on the date of such issuance,
plus (VII) the aggregate number of shares of Common Stock which would be issued
upon the conversion or exercise of any outstanding options, warrants or other
convertible securities which entitle the holders thereof to purchase, or
otherwise receive, any Common Stock.
(4) Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
shares of Common Stock into which the Series B Preferred Stock is convertible
and the Conversion Price at which the Series B Preferred Stock is convertible
provided for in this Section 5(c):
(1) When Adjustments to Be Made. The adjustments required by this
Section 5(c) shall be made whenever and as often as any event requiring an
adjustment shall occur. For the purpose of any adjustment, any event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(1)
7
<PAGE>
(2) Challenge to Good Faith Determination. Whenever the Board shall be
required to make a determination in good faith of the fair value of any item
under this Section 5(c), such determination may be challenged in good faith by a
Record Holder of Series B Preferred Stock and any dispute shall be resolved by
an investment banking firm of recognized national standing selected by the
Corporation and acceptable to such Record Holder. The fees of such investment
banker shall be borne by such Record Holder if the Corporation's calculation is
determined to be correct and otherwise by the Corporation.
(4) No Fractional Share Adjustments. No fractional shares shall be
issued upon conversion of the Series B Preferred Stock. If more than one share
of the Series B Preferred Stock is to be converted at one time by the same
stockholder, the number of full shares issuable upon such conversion shall be
computed on the basis of the aggregate amount of the shares to be converted (and
shall be rounded up to the nearest whole number).
(5) Shares to be Reserved. The Corporation shall at all times reserve
and keep available, out of its authorized and unissued stock, solely for the
purpose of effecting the conversion of the Series B Preferred Stock, such number
of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Series B Preferred Stock from time to time outstanding
including all those required under subsection 2(b). The Corporation shall from
time to time, in accordance with the laws of the State of Delaware, increase the
authorized number of shares of Common Stock if at any time the number of shares
of authorized but unissued Common Stock shall be insufficient to permit the
conversion in full of the Series B Preferred Stock.
(6) Taxes and Charges. The Corporation will pay any and all issue or
other taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock on conversion of any shares of Series B Preferred Stock. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance or delivery of Common Stock
in a name other than that of the Record Holder of the Series B Preferred Stock
being converted in connection therewith, and no such issuance or delivery shall
be made unless and until the Person requesting such issuance has paid to the
Corporation the amount of such tax or has established, to the reasonable
satisfaction of the Corporation, that such tax has been paid.
(7) Accrued Dividends. Upon conversion of any shares of the Series B
Preferred Stock, the Record Holder thereof shall be entitled to receive any
accrued but unpaid dividends in respect of the shares of Series B Preferred
Stock so converted to the date of such conversion in the form of cash.
(8) Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any shares of Series B Preferred Stock or
of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series B Preferred Stock in any manner which interferes with the
timely conversion of such shares of Series B Preferred Stock.
8
<PAGE>
7. Shares to be Retired. Any share of Series B Preferred Stock
converted, redeemed or otherwise acquired by the Corporation shall be retired
and canceled and shall upon cancellation be restored to the status of authorized
but unissued shares of preferred stock, subject to reissuance by the Board as
shares of preferred stock of one or more other series but not as shares of
Series B Preferred Stock.
8. Definitions. As used herein, the following terms shall have the
respective meanings set forth below:
"Business Day" means any day that is not a Saturday, a Sunday
or a day on which banks are required or permitted to be closed in the
State of Florida.
"Common Stock" means the Corporation's Common Stock, $.001 par
value per share, and any stock into which such Common Stock may
hereafter be changed or for which such Common Stock may be exchanged
after giving effect to the terms of such change or exchange (by way of
reorganization, recapitalization, merger, consolidation or otherwise).
"Conversion Price" means the Conversion Price per share of
Common Stock into which the Series B Preferred Stock is convertible, as
such Conversion Price may be adjusted pursuant to Section 5 hereof. The
initial Conversion Price shall be $0.1503547788.
"Issue Date" means, as to any share of Series B Preferred
Stock, the date of original issuance thereof by the Corporation.
"Junior Securities" means the Common Stock and any other class
of capital stock or series of preferred stock hereafter created by the
Corporation which does not expressly provide that it ranks senior to or
pari passu with the Series B Preferred Stock as to dividends, other
distributions, liquidation preference or otherwise.
"Parity Securities" means any class of capital stock or series
of preferred stock hereafter created by the Corporation, in accordance
with Section 4(b) hereof, which expressly provides that it ranks pari
passu with the Series B Preferred Stock as to dividends, other
distributions, liquidation preference or otherwise.
"Person" or "person" shall mean an individual, partnership,
corporation, trust, unincorporated organization, joint venture,
government or agency, political subdivision thereof, or any other
entity of any kind.
"Public Equity Offering" means an underwritten offering with
gross proceeds to the Corporation of at least $15 million pursuant to a
registration statement that has been declared effective by the
Commission (other than a registration statement on Form S-8 or
otherwise relating to equity securities issuable under any employee
benefit plan of the Corporation).
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<PAGE>
"Senior Securities" means any class of capital stock or series
of preferred stock hereafter created by the Corporation, in accordance
with Section 4(b) hereof, which expressly provides that it ranks senior
to the Series B Preferred Stock as to dividends, other distributions,
liquidation preference or otherwise.
"Record Holder" means each holder of record of issued and
outstanding shares of the Series B Preferred Stock.
"Series B Liquidation Preference" shall have the meaning set
forth in Section 3(a).
"Series B Preferred Stock" shall have the meaning set forth in
Section 1.
"Trading Day" shall mean any day in which The Nasdaq Stock
Market, or any other market or exchange upon which the Common Stock is
traded, is open and no less than 100 shares of 1-800-AutoTow, Inc.,
Inc. are traded.
9. Notices. Except as may otherwise be provided for herein, all notices
referred to herein shall be in writing, and all notices hereunder shall be
deemed to have been given (i) upon receipt, in the case of a notice of
conversion given to the Corporation as contemplated in Section 5(b) hereof, or
(ii) in all other cases, upon the earlier of (x) receipt of such notice, (y)
three Business Days after the mailing of such notice if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms hereof) or (z) the Business Day following sending such notice by
overnight courier, in any case with postage or delivery charges prepaid,
addressed: if to the Corporation, to its offices at 1301 N. Congress Ave., Suite
330, Boynton Beach, Florida 33426, Attention: President, or to an agent of the
Corporation designated as permitted by the Articles of Incorporation, or, if to
any Record Holder of the Series B Preferred Stock, to such Record Holder at the
address of such Record Holder of the Series B Preferred Stock as listed in the
stock record books of the Corporation.
10
EXHIBIT 6.1
1-800-AUTOTOW, INC.
1997 STOCK OPTION PLAN
1. Grant of Options; Generally. In accordance with the provisions hereinafter
set forth in this stock option plan, the name of which is the 1-800-AUTOTOW,
INC. 1997 STOCK OPTION PLAN (the "Plan"), the Board of Directors (the "Board")
or, the Compensation Committee (the "Stock Option Committee") of 1-800-AUTOTOW,
INC. (the "Corporation") is hereby authorized to issue from time to time on the
Corporation's behalf to any one or more Eligible Persons, as hereinafter
defined, options to acquire shares of the Corporation's $.001 par value common
stock (the "Stock").
2. Type of Options. The Board or the Stock Option Committee is authorized to
issue Incentive Stock Options ("ISOS") which meet the requirements of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), which options
are hereinafter referred to collectively as ISOs, or singularly as an ISO. The
Board or the Stock Option Committee is also, in its discretion, authorized to
issue options which are not ISOs, which options are hereinafter referred to
collectively as Non Statutory Options ("NSOs"), or singularly as an NSO. The
Board or the Stock Option Committee is also authorized to issue "Reload Options"
in accordance with Paragraph 9 herein, which options are hereinafter referred to
collectively as Reload Options, or singularly as a Reload Option. Except where
the context indicates to the contrary, the term "Option" or "Options" means
ISOs, NSOs and Reload Options.
3. Amount of Stock. The aggregate number of shares of Stock which may be
purchased pursuant to the exercise of Options shall 7,500,000 shares. Of this
amount, the Board or the Stock Option Committee shall have the power and
authority to designate whether any Options so issued shall be ISOs or NSOs,
subject to the restrictions on ISOs contained elsewhere herein. If an Option
ceases to be exercisable, in whole or in part, the shares of Stock underlying
such Option shall continue to be available under this Plan. Further, if shares
of Stock are delivered to the Corporation as payment for shares of Stock
purchased by the exercise of an Option granted under this Plan, such shares of
Stock shall also be available under this Plan. If there is any change in the
number of shares of Stock due to the declaration of stock dividends,
recapitalization resulting in stock split-ups, or combinations or exchanges of
shares of Stock, or otherwise, the number of shares of Stock available for
purchase upon the exercise of Options, the outstanding Option shall be
appropriately adjusted by the Board or the Stock Option Committee. The Board or
the Stock Option Committee shall give notice of any adjustments to each Eligible
Person granted an Option under this Plan, and such adjustments shall be
effective and binding on all Eligible Persons. If because of one or more
recapitalizations, reorganizations or other corporate events, the holders of
outstanding Stock receive something other than shares of Stock then, upon
exercise of an Option, the Eligible Person will receive what the holder would
have owned if the holder had exercised the Option immediately before the first
such corporate event and not disposed of anything the holder received as a
result of the corporate event. The number of shares of Common Stock subject to
this Plan (and not subject to outstanding Option grants) shall not subsequently
be affected by any forward or reverse stock splits or recapitalizations
undertaken by the Company.
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4. Eligible Persons.
(a) With respect to 1505, an Eligible Person means any individual who has been
employed by the Corporation or by any subsidiary of the corporation, for a
continuous period of at least sixty (60) days.
(b) With respect to NSOs, an Eligible Person means (i) any individual who has
been employed by the Corporation or by any subsidiary of the Corporation, for a
continuous period of at least sixty (60) days, (ii) any director of the
Corporation or any subsidiary of the Corporation or (iii) any consultant of the
Corporation or any subsidiary of the corporation.
5. Grant of Options. The Board or the Stock Option Committee has the right to
issue the Options established by this Plan to Eligible Persons. The Board or the
Stock Option Committee shall follow the procedures prescribed for it elsewhere
in this Plan. A grant of Options shall be set forth in a writing signed on
behalf of the Corporation or by a majority of the members of the Stock Option
Committee. The writing shall identify whether the Option being granted is an
ISO, an NSO or Reload Option and shall set forth the terms which govern the
Option. The terms shall be determined by the Board or the Stock Option
Committee, and may include, among other terms, the number of shares of Stock
that may be acquired pursuant to the exercise of the Options, when the Options
may be exercised, the period for which the Option is granted and including the
expiration date, the effect on the Options if the Eligible Person terminates
employment, whether the Eligible Person may deliver shares of Stock or other
consideration to pay for the shares of Stock to be purchased by the exercise of
the Option, and such other terms and conditions whether or not specifically
provided for under the terms hereinafter set forth. However, no term shall be
set forth in the writing which is specifically inconsistent with any of the
terms of this Plan. The terms of an Option granted to an Eligible Person may
differ from the terms of an Option granted to another Eligible Person, and may
differ from the terms of an earlier Option granted to the same Eligible Person.
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<PAGE>
6. Option Price. The option price per share shall be determined by the Board or
the Stock Option Committee at the time any Option is granted, and shall be not
less than (i) in the case of an ISO, the fair market value, (ii) in the case of
an ISO granted to a 10% or greater stockholder, 110% of the fair market value,
or (iii) in the case of an NSO, not less than the par value thereof, as
determined by the Board or the Stock Option Committee. Fair market value as used
herein shall be:
(a) If shares of Stock shall be traded on an exchange or over-the-counter
market, the mean between the high and low sales prices of Stock on such exchange
or over-the-counter market on which such shares shall be traded on that date, or
if such exchange or over-the-counter market is closed or if no shares shall have
traded on such date, on the last preceding date on which such shares shall have
traded.
(b) If shares of Stock shall not be traded on an exchange or over-the-counter
market, the value as determined by a recognized appraiser as selected by the
Board or the Stock Option Committee.
7. Purchase of Shares. Option shall be exercised by the tender to the
Corporation of the full purchase price of the Stock with respect to which the
Option is exercised and written notice of the exercise. The purchase price of
the Stock shall be in United States dollars, payable in cash, check, Promissory
Note secured by the Shares issued through exercise of the related Options, or in
property, Corporation stock, or other consideration if so permitted by the Board
or the Stock Option Committee in accordance with the discretion granted in
Paragraph 5 hereof, having a value equal to such purchase price. The Corporation
shall not be required to issue or deliver any certificates for shares of Stock
purchased upon the exercise of an Option prior to (i) if requested by the
Corporation, the filing with the Corporation by the Eligible Person of a
representation in writing that it is the Eligible Person1s then present
intention to acquire the Stock being purchased for investment and not for
resale, and/or (ii) the completion of any registration or other qualification of
such shares under any government regulatory body, which the Corporation shall
determine to be necessary or advisable.
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<PAGE>
8. Grant of Reload Options. In granting an Option under this Plan, the Board or
the Stock Option Committee may include a Reload Option provision therein,
subject to the provisions set forth in Paragraphs 19 and 20 herein. A Reload
Option provision provides that if the Eligible Person pays the exercise price of
shares of Stock to be purchased by the exercise of an ISO, NSO or another Reload
Option (the "Original Option") by delivering to the Corporation shares of Stock
already owned by the Eligible Person (the "Tendered Shares"), the Eligible
Person shall receive a Reload Option which shall be a new Option to purchase
shares of Stock equal in number to the tendered shares. The terms of any Reload
Option shall be determined by the Board or the Stock Option Committee consistent
with the provisions of this Plan.
9. Stock Option Committee. The Stock Option Committee may be appointed from time
to time by the Corporation's Board of Directors. The Board may from time to time
remove members from or add members to the Stock Option Committee. The Stock
Option Committee shall be constituted so as to permit the Plan to comply in all
respects with the provisions set forth in Paragraph 9 herein. The members of the
Stock Option Committee may elect one of its members as its chairman. The Stock
Option Committee shall hold its meetings at such times and places as its
chairman shall determine. A majority of the Stock Option Committee's members
present in person shall constitute a quorum for the transaction of business. All
determinations of the Stock Option Committee will be made by the majority vote
of the members constituting the quorum. The members may participate in a meeting
of the Stock Option Committee by conference telephone or similar communications
equipment by means of which all members participating in the meeting can hear
each other. Participation in a meeting in that manner will constitute presence
in person at the meeting. Any decision or determination reduced to writing and
signed by all members of the Stock Option Committee will be effective as if it
had been made by a majority vote of all members of the Stock Option Committee at
a meeting which is duly called and held.
10. Administration of plan. In addition to granting Options and to exercising
the authority granted to it elsewhere in this Plan, the Board or the Stock
Option Committee is granted the full right and authority to interpret and
construe the provisions of this Plan, promulgate, amend and rescind rules and
procedures relating to the implementation of the Plan and to make all other
determinations necessary or advisable for the administration of the Plan,
consistent, however, with the intent of the Corporation that Options granted or
awarded pursuant to the Plan comply with the provisions of Paragraph 19 and 20
herein. All determinations made by the Board or the Stock Option Committee shall
be final, binding and conclusive on all persons including the Eligible Person,
the Corporation and its stockholders, employees, officers and directors and
consultants. No member of the Board or the Stock Option Committee will be liable
for any act or omission in connection with the administration of this Plan
unless it is attributable to that member's willful misconduct.
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<PAGE>
11. Provisions Applicable to ISOs. The following provisions shall apply to all
ISOs granted by the Board or the Stock Option Committee and are incorporated by
reference into any writing granting an ISO:
(a) An ISO may only be granted within ten (10) years from October 2, 1997, the
date that this Plan was originally adopted by the Corporation's Board of
Directors.
(b) An ISO may not be exercised after the expiration of ten (10) years from the
date the ISO is granted.
(c) The option price may not be less than the fair market value of the Stock at
the time the ISO is granted.
(d) An ISO is not transferrable by the Eligible Person to whom it is granted
except by will or the laws of descent and distribution, and is exercisable
during his or her lifetime only by the Eligible Person.
(e) If the Eligible Person receiving the ISO owns at the time of the grant stock
possessing more than ten (10%) percent of the total combined voting power of all
classes of stock of the employer corporation or of its parent or subsidiary
corporation (as those terms are defined in the Code), then the option price
shall be at least 110% of the fair market value of the Stock, and the ISO shall
not be exercisable after the expiration of five (5) years from the date the ISO
is granted.
(f) The aggregate fair market value (determined at the time the ISO is granted)
of the Stock with respect to which the ISO is first exercisable by the Eligible
Person during any calendar year (under this Plan and any other incentive stock
option plan of the Corporation) shall not exceed $l00,000.
(g) Even if the shares of Stock which are issued upon exercise of an ISO are
sold within one year following the exercise of such ISO so that the sale
constitutes a disqualifying disposition for ISO treatment under the Code, no
provision of this Plan shall be construed as prohibiting such a sale.
(h) This Plan was adopted by the corporation on October 2, 1997, by virtue of
its approval by the Corporation's Board of Directors and the stockholders of the
Corporation.
12. Determination of Fair market Value. In granting 1505 under this Plan, the
Board or the Stock Option Committee shall make a good faith determination as to
the fair market value of the Stock at the time of granting the ISO.
13. Restrictions on Issuance of Stock. The corporation shall not be obligated to
sell or issue any shares of Stock pursuant to the exercise of an Option unless
the Stock with respect to which the Option is being exercised is at that time
effectively registered or exempt from registration under the Securities Act of
1923, as amended, and any other applicable laws, rules and regulations. The
corporation may condition the exercise of an Option granted in accordance
herewith upon receipt from the Eligible Person, or any other purchaser thereof,
of a written representation that at the time of such exercise it is his or her
then present intention to acquire the shares of Stock for investment and not
with a view to, or for sale in connection with, any distribution thereof; except
that, in the case of a legal representative of an Eligible Person,
11distribution'1 shall be defined to exclude distribution by will or under the
laws or descent and distribution. Prior to issuing any shares of Stock pursuant
to the exercise or an Option, the Corporation shall take such steps as it deems
necessary to satisfy any withholding tax obligations imposed upon it by any
level of government.
14. Exercise in the Event of Death or Termination of Employment.
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(a) Except as may otherwise be provided under the terms of the Option, if an
optionee shall die (i) while an employee of the Corporation or a Subsidiary or
(ii) within three months after termination of his employment with the
Corporation or a Subsidiary because of his disability, or retirement or
otherwise, his Options may be exercised, to the extent that the optionee shall
have been entitled to do so on the date of his death or such termination or
employment, by the person or persons to whom the optionee's right under the
Option pass by will or applicable law, or if no such person has such richt1 by
his executors or administrators, at any time, or from time to time. In the event
of termination of employment because of his death while an employee or because
or disability, his Options may be exercised not later than the expiration date
specified in Paragraph 5 or one year after the optionee's death, whichever date
is earlier, or in the event of termination of employment because of retirement
or otherwise, not later than the expiration date specified in Paragraph 5 hereof
or one year after the optionee's death, whichever date is earlier.
(b) Except as may otherwise be provided under the terms of the Option, if an
optionee's employment by the Corporation or a Subsidiary shall terminate because
of his disability and such optionee has not died within the following three
months, he may exercise his Options, to the extent that he shall have been
entitled to do so at the date of the termination of his employment, at any time,
or from time to time, but not later than the expiration date specified in
Paragraph 5 hereof or one year after termination of employment, whichever date
is earlier.
(c) If an optionee's employment shall terminate by reason of his retirement in
accordance with the terms of the corporation's tax-qualified retirement plans if
any, or with the consent Of the Board or the Stock Option Committee or
involuntarily other than by termination for cause7 and such optionee has not
died within the following three months, he may exercise his Option to the extent
he shall have been entitled to do so at the date of the termination of his
employment, at any time and from to time, but not later than the expiration date
specified in Paragraph 5 hereof or 30 days after termination of employment,
whichever date is earlier. For purposes of this Paragraph 14, termination for
cause shall mean; (i) termination of employment for cause as defined in the
optionee's Employment Agreement or (ii) in the absence Of an Employment
Agreement for the optionee, termination of employment by reason of the
optionee's commission of a felony, fraud or willful misconduct which has
resulted, or is likely to result, in substantial and material damage to the
Corporation or a Subsidiary, all as the Board or the Stock Option Committee in
its sole discretion may determine.
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<PAGE>
(d) If an optionee's employment shall terminate for any reason other than death,
disability, retirement or otherwise, all right to exercise his Option shall
terminate at the date of such termination of employment absent specific
provisions in the optionee's Option Agreement.
15. Coroorate Events. In the event of the proposed dissolution or liquidation of
the Corporation, a proposed sale of all or substantially all of the assets of
the Corporation, a merger or tender for the Corporation1s shares of Common Stock
the Board of Directors may declare that each Option granted under this Plan
shall terminate as of a date to be fixed by the Board of Directors; provided
that not less than 30 days written notice of the date so fixed shall be given to
each Eligible Person holding an Option, and each such Eligible Person shall have
the right, during the period of 30 days preceding such termination, to exercise
his Option as to all or any part of the shares of Stock covered thereby,
including shares of Stock as to which such option would not otherwise be
exercisable. Nothing set forth herein shall extend the term set for purchasing
the shares of Stock set forth in the Option.
16. No Guarantee of Employment. Nothing in this Plan or in any writing granting
an Option will confer upon any Eligible Person the right to continue in the
employ of the Eligible Person's employer, or will interfere with or restrict in
any way the right of the Eligible Person's employer to discharge such Eligible
Person at any time for any reason whatsoever, with or without cause.
17. Nontransferability. Except as may be provided under the terms of any Option;
no Option granted under the Plan shall be transferable other than by will or by
the laws of descent and distribution. During the lifetime of the optionee, an
Option shall be exercisable only by him.
18. No Rights as Stockholder. No optionee shall have any rights as a stockholder
with respect to any shares subject to his Option prior to the date of issuance
to him of a certificate or certificates for such shares.
19. Amendment and Discontinuance of Plan. The Corporation's Board of Directors
may amend, suspend or discontinue this Plan at any time; however, no such action
may prejudice the rights of any Eligible Person who has prior thereto been
granted Options under this Plan. Further, no amendment to this Plan which has
the effect of (a) increasing the aggregate number of shares of Stock subject to
this Plan (except for adjustments pursuant to Paragraph 3 herein), or (b)
changing the definition of Eligible Person under this Plan, may be effective
unless and until approval of the stockholders of the Corporation is obtained in
the same manner as approval of this Plan is required. The Corporation1s Board of
Directors is authorized to seek the approval of the Corporation's stockholders
for any other changes it proposes to make to this Plan which require such
approval, however, the Board of Directors may modify the Plan, as necessary, to
effectuate the intent of the Plan as a result of any changes in the tax,
accounting or securities laws treatment of Eligible Persons and the Plan,
subject to the provisions set forth in Paragraphs 16, 19 and 20.
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20. Compliance with Rule l6b-3. This Plan is intended to comply in all respects
with Rule l6b-3 ("Rule 16b-3") promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with respect to participants who are subject to Section 16 of the
Exchange Act, and any provision(s) herein that is/are contrary to Rule 16b-3
shall be deemed null and void to the extent appropriate by either the Stock
option Committee or the Corporation's Board of Directors.
21. Compliance with Code. The aspects of this Plan on 1505 is intended to comply
in every respect with Section 422 of the Code and the regulations promulgated
thereunder. In the event any future statute or regulation shall modify the
existing statute, the aspects of this Plan on ISOs shall be deemed to
incorporate by reference such modification. Any stock option agreement relating
to any option granted pursuant to this Plan outstanding and unexercised at the
time any modifying statute or regulation becomes effective shall also be deemed
to incorporate by reference such modification and no notice of such modification
need be given to optionee.
If any provision of the aspects of this Plan on ISOs is determined to disqualify
the shares purchasable pursuant to the Options granted under this Plan from the
special tax treatment provided by Code Section 422, such provision shall be
deemed null and void and to incorporate by reference the modification required
to qualify the shares for said tax treatment.
22. Compliance With Other Laws and Regulations. The Plan, the grant and exercise
of Options thereunder, and the obligation of the Corporation to sell and deliver
Stock under such options, shall be subject to all applicable federal and state
laws, rules, and regulations and to such approvals by any government or
regulatory agency as may be required. The Corporation shall not be required to
issue or deliver any certificates for shares of Stock prior to (a) the listing
of such shares on any stock exchange or over-the-counter market on which the
Stock may then be listed and (b) the completion of any registration or
qualification of such shares under any federal or state law, or any ruling or
regulation of any government body which the Corporation shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option may be
exercised if its exercise or the receipt of Stock pursuant thereto would be
contrary to applicable laws.
23. Disposition of Shares. In the event any share of Stock acquired by an
exercise of an Option granted under the Plan shall be transferable other than by
will or by the laws of descent and distribution within two years of the date
such Option was granted or within one year after the transfer of such Stock
pursuant to such exercise, the optionee shall give prompt written notice thereof
to the Corporation or the Stock Option Committee.
24. Name. The Plan shall be known as the "1-800-AUTOTOW, INC. 1997 Stock Option
Plan."
8
<PAGE>
25. Notices. Any notice hereunder shall be in writing and sent by certified
mail, return receipt requested or by facsimile transmission (with electronic or
written confirmation of receipt) and when addressed to the Corporation shall be
sent to it at its office, 1301 N. Congress Avenue, Suite 330, Boynton Beach, FL
33426 and when addressed to the Board of Directors shall be sent to it at 1301
N. Congress Avenue, Suite 330, Boynton Beach, FL 33426 subject to the right of
either party to designate at any time hereafter in writing some other address,
facsimile number or person to whose attention such notice shall be sent.
26. Headings. The headings preceding the text of Sections and subparagraphs
hereof are inserted solely for convenience of reference, and shall not
constitute a part of this Plan nor shall they affect its meaning, construction
or effect.
27. Effective Date. This Plan, the 1-800-AUTOTOW, INC. 1997 Stock Option Plan,
was adopted by the Board of Directors and Shareholders of the Corporation on
October 2, 1997. The effective date of the Plan shall be the same date.
Dated as of October 2, 1997 as first amended December 22, 1997 with subsequent
amendments on July 6, 1998 and July 26, 1999.
1-800-AUTOTOW, INC.
/s/ Joel Nagelmann
- -------------------
Joel Nagelmann
President & CEO
9
EXHIBIT 6.2
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) effective on the 1st day of August 1999,
and entered into between 1-800-AutoTow, Inc., a Delaware corporation
("Company"), and Joel B. Nagelmann, ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Employee is an individual
possessing unique management and operating talents of value to the
Company.
B. Company desires to employ Employee as the President and CEO of Company and
in such other capacities as agreed on from time to time in writing by
Employee and Company, and Employee desires to accept such employment, all
on the terms and conditions set forth in this Agreement.
C. Company and Employee each desire to prevent other competitive businesses
from securing Employee's services and utilizing Employee's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1
<PAGE>
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of three (3)
years, commencing August 1, 1999 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of its
initial three-year term only as set forth below. Unless this Agreement is so
terminated, or unless the Company elects not to renew this Agreement at the end
of its initial three-year term, or any subsequent term, by giving notice to
Employee of such non-renewal at least 90 days prior to the end of such term,
this Agreement shall be automatically renewed on the same terms for successive
one year periods.
2. Duties: Employee agrees to render to the Company the services as President
and CEO of the Company as outlined in Attachment A.
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Employee with the following compensation and benefits:
(a) Base Salary: For all services rendered by Employee to Company
hereunder, Employee's base salary shall be $ 160,000.00 per
year, which shall commence the 1st day of August, 1999,
subject to annual adjustment, payable in accordance with the
Company's payroll practices as in effect from time to time,
and subject to such withholding as is required by law.
(b) Bonus: In addition to the base salary specified above,
Employee may be paid a bonus which shall be in an amount, and
payable in a manner, as defined in exhibit B attached.
(c) Vacation: Employee shall be entitled to 2 weeks paid vacation
during the first year of this Agreement and then shall be 3
weeks the next year and then 4 weeks thereafter. If the
vacation is not used during the year earned, it will be lost
and not carried forward into subsequent years.
(d) Life Insurance: Company shall provide Employee, at the
Company's cost, with a Term Life Insurance Policy on the life
of Employee (assuming insurability), in an amount equal
$500,000.00.
2
<PAGE>
(e) Business Expenses: The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee in the
course of performing services for the Company subject to the
Company written guidelines.
(f) Stock Options: Employee shall be granted an option to purchase
2,160,939 shares of common stock (per the attached earnback
spreadsheet, "Attachment C"), par value $.001 per share at an
option price of $.20 per share, of Company subject to the
terms and conditions of the stock option agreement attached
hereto as "Attachment B." The terms and conditions of such
stock option agreement are incorporated herein by reference.
(g) Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical
insurance and disability insurance, as is provided by Company
to its other executive employees.
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of his death to
Employee's estate or beneficiary.
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of his termination.
3
<PAGE>
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of his
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless the Board of Directors, in its
sole discretion, determines that a cure is not deemed possible
or appropriate.
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary, life and disability insurance, and the cost of
continued health care coverage for Employee for a period of 12
months after the notice of termination. Any accrued bonus
shall be calculated on a period-to-date basis and prorated to
date of termination. All stock options which have not vested
at the time of termination without cause shall be immediately
vested.
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 60 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 60 day period and shall receive salary
during this period of transition.
4
<PAGE>
(f) Change in control: "Should a change in control of the Company
occur and your employment terminates either voluntarily or
involuntarily, and this Employment Agreement terminates either
voluntarily or involuntarily, Employee shall then be entitled
to receive the then existing salary with all benefits in
existence at the time of termination continuing for a period
of 12 months and furthermore, all inchoate options will
automatically vest. Employee shall have no duty to seek
employment or otherwise mitigate the amount of compensation
paid to him under the terms of this agreement nor shall any
amounts received by him with respect to other employment
reduce the amount of such compensation.
(g) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (f) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
(h) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
5
<PAGE>
(a) During the entire term of Employee's employment with the
Company, and for two (2) years thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) During the entire term of Employee's employment by the Company
and for one (1) year thereafter, Employee shall not induce or
attempt to induce any employee of the Company to leave the
Company's employ except for the sole benefit of the Company or
with its express written consent.
(c) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company. Employee shall
disclose all such matters to the Company, assign all right, title and interest
Employee may have in copyright, trademark, or other legal protection.
7. Non-Competition:
(a) Employee covenants and agrees that while in the employment of
Company and for one (1) year after the termination or
expiration of this Agreement, Employee shall not, for his own
account or either as agent, consultant, servant or employee,
or as a shareholder of any corporation or member of any firm,
own, manage, operate, join, control, or participate in the
ownership, management, operation or control of any individual,
or that division or part of any entity or business that
develops and markets towing for the transportation industry
and services (such as automated dispatching) for the vehicle
towing, transportation and recovery services within or without
the United States which competes with the Company in a
particular geographic area.
6
<PAGE>
(b) In the event of an actual or threatened breach by Employee of
any of the provisions in Paragraph 7(a) hereof, Company shall
be entitled to an injunction restraining Employee from the
prohibited conduct without the necessity of establishing
irreparable injury to Company unless required under Florida
law. If a court of competent jurisdiction should hold that the
duration and/or scope (geographic or otherwise) of the
covenants contained in Paragraph 7(a) hereof are in violation
of Florida law, then, to the extent permitted under Florida
law, the Circuit Court for Palm Beach County shall enforce all
such covenants (geographic and otherwise) to the fullest
extent permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated shall be
construed as prohibiting Company from pursuing any other
remedies available to it for such breach or threatened breach,
including the recovery of damages from Employee. In any action
or proceeding to enforce the provisions of this Paragraph 7,
or seeking damages for breach or threatened breach of this
Paragraph 7, the prevailing party shall be reimbursed by the
other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees, incurred
either at the trial level or at all appellate levels. Such
reimbursement, if any, shall be paid within thirty (30)
calendar days after the rendition of a final order in such
action or proceeding.
(c) The existence of any claim or cause of action by Employee
against Company, shall not constitute a defense to the
enforcement by Company of the foregoing restrictive covenant.
(d) In the event Company obtains an injunction against Employee
arising from Employee's violation of any of the covenants set
7
<PAGE>
forth in this Paragraph 7, then all of the terms of and
covenants in this Paragraph 7 shall automatically be extended
for a period of one (1) year, with such extension period
commencing, without Order of Court or any writing or other
action by the parties hereto, on the date that an injunction
Order is entered against Employee in any such action or
proceeding to enforce the provisions of this Paragraph 7.
8. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
the Company, and shall not accept other employment or engage in any other
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
9. Company's Right to Disclose: During Employee's employment hereunder and at
all times subsequent thereto, Employee hereby grants to Company the right to
notify all future employers of Employee of the non-competition restrictions on
Employee contained in this Agreement, and Employee hereby holds harmless and
indemnifies Company from any liability to Company which may arise from any such
disclosure.
10. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
11. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Employer: 1-800-AutoTow, Inc.
1301 N. Congress Ave. Suite 330
Boynton Beach, FL 33426
8
<PAGE>
Employee: Joel B. Nagelmann
47 Spanish River Drive
Ocean Ridge, FL 33435
12. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
13. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
14. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
15. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
16. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of his obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(b) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
9
<PAGE>
(c) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original for all
purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 27 day of July, 1999.
"Company" "Employee"
1-800-AutoTow, Inc. Joel B. Nagelmann
/s/ Steven B. Teeters /s/ Joel B. Nagelmann
--------------------- ------------------------
Steven B. Teeters Joel B. Nagelmann
Vice President Employee & President/CEO
Attachment C
Stock Option Vesting Schedule
Total Shares Immediate Vest Year 1 Vest Year 2 Vest
- ------------ -------------- ----------- -----------
2,160,939 720,313 720,313 720,313
10
Exhibit 6.3
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) effective on the 1st day of August 1999,
and entered into between 1-800-AutoTow, Inc., a Delaware corporation
("Company"), and Eugene A. Iarocci, ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Employee is an individual
possessing unique management and operating talents of value to the Company.
B. Company desires to employ Employee as Senior Vice President, COO of Company
and in such other capacities as agreed on from time to time in writing by
Employee and Company, and Employee desires to accept such employment, all
on the terms and conditions set forth in this Agreement.
C. Company and Employee each desire to prevent other competitive businesses
from securing Employee's services and utilizing Employee's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of three (3)
years, commencing August 1, 1999 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of its
initial three-year term only as set forth below. Unless this Agreement is so
terminated, or unless the Company elects not to renew this Agreement at the end
of its initial three-year term, or any subsequent term, by giving notice to
Employee of such non-renewal at least 90 days prior to the end of such term,
this Agreement shall be automatically renewed on the same terms for successive
one year periods.
1
<PAGE>
2. Duties: Employee agrees to render to the Company the services as Senior Vice
President, COO of the Company as outlined in Attachment A.
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Employee with the following compensation and benefits:
(a) Base Salary: For all services rendered by Employee to Company
hereunder, Employee's base salary shall be $ 125,000.00 per
year, which shall commence the 1st day of August, 1999,
subject to annual adjustment, payable in accordance with the
Company's payroll practices as in effect from time to time,
and subject to such withholding as is required by law.
(b) Bonus: In addition to the base salary specified above,
Employee may be paid a bonus which shall be in an amount, and
payable in a manner, as defined in exhibit B attached.
(c) Vacation: Employee shall be entitled to 2 weeks paid vacation
during the first year of this Agreement and then shall be 3
weeks the next year and then 4 weeks thereafter. If the
vacation is not used during the year earned, it will be lost
and not carried forward into subsequent years.
(d) Life Insurance: Company shall provide Employee, at the
Company's cost, with a Term Life Insurance Policy on the life
of Employee (assuming insurability), in an amount equal
$325,000.00.
(e) Business Expenses: The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee in the
course of performing services for the Company subject to the
Company written guidelines.
(f) Stock Options: Employee shall be granted an option to purchase
2,160,939 shares of common stock (per the attached earnback
spreadsheet, "Attachment C"), par value $.001 per share at an
option price of $.20 per share, of Company subject to the
terms and conditions of the stock option agreement attached
hereto as "Attachment B." The terms and conditions of such
stock option agreement are incorporated herein by reference.
2
<PAGE>
(g) Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical
insurance and disability insurance, as is provided by Company
to its other executive employees.
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of his death to
Employee's estate or beneficiary.
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of his termination.
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of his
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless the Board of Directors, in its
sole discretion, determines that a cure is not deemed possible
or appropriate.
3
<PAGE>
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary, life and disability insurance, and the cost of
continued health care coverage for Employee for a period of 12
months after the notice of termination. Any accrued bonus
shall be calculated on a period-to-date basis and prorated to
date of termination. All stock options which have not vested
at the time of termination without cause shall be immediately
vested.
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 60 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 60 day period and shall receive salary
during this period of transition.
(h) Change in control: "Should a change in control of the Company
occur and your employment terminates either voluntarily or
involuntarily, and this Employment Agreement terminates either
voluntarily or involuntarily, Employee shall then be entitled
to receive the then existing salary with all benefits in
existence at the time of termination continuing for a period
of 12 months and furthermore, all inchoate options will
automatically vest. Employee shall have no duty to seek
employment or otherwise mitigate the amount of compensation
paid to him under the terms of this agreement nor shall any
amounts received by him with respect to other employment
reduce the amount of such compensation.
(i) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (f) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
4
<PAGE>
(h) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Employee's employment with the
Company, and for two (2) years thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) During the entire term of Employee's employment by the Company
and for one (1) year thereafter, Employee shall not induce or
attempt to induce any employee of the Company to leave the
Company's employ except for the sole benefit of the Company or
with its express written consent.
5
<PAGE>
(c) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company. Employee shall
disclose all such matters to the Company, assign all right, title and interest
Employee may have in copyright, trademark, or other legal protection.
7. Non-Competition:
(a) Employee covenants and agrees that while in the employment of
Company and for one (1) year after the termination or
expiration of this Agreement, Employee shall not, for his own
account or either as agent, consultant, servant or employee,
or as a shareholder of any corporation or member of any firm,
own, manage, operate, join, control, or participate in the
ownership, management, operation or control of any individual,
or that division or part of any entity or business that
develops and markets towing for the transportation industry
and services (such as automated dispatching) for the vehicle
towing, transportation and recovery services within or without
the United States which competes with the Company in a
particular geographic area.
(b) In the event of an actual or threatened breach by Employee of
any of the provisions in Paragraph 7(a) hereof, Company shall
be entitled to an injunction restraining Employee from the
prohibited conduct without the necessity of establishing
irreparable injury to Company unless required under Florida
6
<PAGE>
law. If a court of competent jurisdiction should hold that the
duration and/or scope (geographic or otherwise) of the
covenants contained in Paragraph 7(a) hereof are in violation
of Florida law, then, to the extent permitted under Florida
law, the Circuit Court for Palm Beach County shall enforce all
such covenants (geographic and otherwise) to the fullest
extent permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated shall be
construed as prohibiting Company from pursuing any other
remedies available to it for such breach or threatened breach,
including the recovery of damages from Employee. In any action
or proceeding to enforce the provisions of this Paragraph 7,
or seeking damages for breach or threatened breach of this
Paragraph 7, the prevailing party shall be reimbursed by the
other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees, incurred
either at the trial level or at all appellate levels. Such
reimbursement, if any, shall be paid within thirty (30)
calendar days after the rendition of a final order in such
action or proceeding.
(c) The existence of any claim or cause of action by Employee
against Company, shall not constitute a defense to the
enforcement by Company of the foregoing restrictive covenant.
(d) In the event Company obtains an injunction against Employee
arising from Employee's violation of any of the covenants set
forth in this Paragraph 7, then all of the terms of and
covenants in this Paragraph 7 shall automatically be extended
for a period of one (1) year, with such extension period
commencing, without Order of Court or any writing or other
action by the parties hereto, on the date that an injunction
Order is entered against Employee in any such action or
proceeding to enforce the provisions of this Paragraph 7.
8. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
the Company, and shall not accept other employment or engage in any other
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
7
<PAGE>
9. Company's Right to Disclose: During Employee's employment hereunder and at
all times subsequent thereto, Employee hereby grants to Company the right to
notify all future employers of Employee of the non-competition restrictions on
Employee contained in this Agreement, and Employee hereby holds harmless and
indemnifies Company from any liability to Company which may arise from any such
disclosure.
10. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
11. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Employer: 1-800-AutoTow, Inc.
1301 N. Congress Ave. Suite 330
Boynton Beach, FL 33426
Employee: Eugene A. Iarocci
684 Cypress Green Circle
Wellington, FL 33414
12. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
13. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
14. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
8
<PAGE>
15. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
16. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of his obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(b) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
(c) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original for all
purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 27th day of July, 1999.
"Company" "Employee"
1-800-AutoTow, Inc. Eugene A. Iarocci
/s/ Joel B. Nagelmann /s/ Eugene A. Iarocci
--------------------- ------------------------
Joel B. Nagelmann Eugene A. Iarocci
President & CEO Employee/Senior V.P./COO
Attachment C
Stock Option Vesting Schedule
Total Shares Immediate Vest Year 1 Vest Year 2 Vest
- ------------ -------------- ----------- -----------
2,160,939 720,313 720,313 720,313
9
EXHIBIT 6.4
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) effective on the 1st day of August 1999,
and entered into between 1-800-AutoTow, Inc., a Delaware corporation
("Company"), and Steven B. Teeters, ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Employee is an individual
possessing unique management and operating talents of value to the
Company.
B. Company desires to employ Employee as the Vice President of Finance of
Company and in such other capacities as agreed on from time to time in
writing by Employee and Company, and Employee desires to accept such
employment, all on the terms and conditions set forth in this Agreement.
C. Company and Employee each desire to prevent other competitive businesses
from securing Employee's services and utilizing Employee's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of three (3)
years, commencing August 1, 1999 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of its
initial three-year term only as set forth below. Unless this Agreement is so
terminated, or unless the Company elects not to renew this Agreement at the end
of its initial three-year term, or any subsequent term, by giving notice to
Employee of such non-renewal at least 90 days prior to the end of such term,
this Agreement shall be automatically renewed on the same terms for successive
one year periods.
1
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2. Duties: Employee agrees to render to the Company the services as Vice
President of Finance of the Company as outlined in Attachment A.
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Employee with the following compensation and benefits:
(a) Base Salary: For all services rendered by Employee to Company
hereunder, Employee's base salary shall be $ 90,000.00 per
year, which shall commence the 1st day of August, 1999,
subject to annual adjustment, payable in accordance with the
Company's payroll practices as in effect from time to time,
and subject to such withholding as is required by law.
(b) Bonus: In addition to the base salary specified above,
Employee may be paid a bonus which shall be in an amount, and
payable in a manner, as defined in exhibit B attached.
(c) Vacation: Employee shall be entitled to 2 weeks paid vacation
during the first year of this Agreement and then shall be 3
weeks the next year and then 4 weeks thereafter. If the
vacation is not used during the year earned, it will be lost
and not carried forward into subsequent years.
(d) Life Insurance: Company shall provide Employee, at the
Company's cost, with a Term Life Insurance Policy on the life
of Employee (assuming insurability), in an amount equal
$200,000.00.
(e) Business Expenses: The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee in the
course of performing services for the Company subject to the
Company written guidelines.
(f) Stock Options: Employee shall be granted an option to purchase
399,600 shares of common stock (per the attached earnback
spreadsheet, "Attachment C"), par value $.001 per share at an
option price of $.20 per share, of Company subject to the
terms and conditions of the stock option agreement attached
hereto as "Attachment B." The terms and conditions of such
stock option agreement are incorporated herein by reference.
2
<PAGE>
(g) Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical
insurance and disability insurance, as is provided by Company
to its other executive employees.
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of his death to
Employee's estate or beneficiary.
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of his termination.
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of his
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless the Board of Directors, in its
sole discretion, determines that a cure is not deemed possible
or appropriate.
3
<PAGE>
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary, life and disability insurance, and the cost of
continued health care coverage for Employee for a period of 6
months after the notice of termination. Any accrued bonus
shall be calculated on a period-to-date basis and prorated to
date of termination. All stock options which have not vested
at the time of termination without cause shall be immediately
vested.
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 60 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 60 day period and shall receive salary
during this period of transition.
(j) Change in control: "Should a change in control of the Company
occur and your employment terminates either voluntarily or
involuntarily, and this Employment Agreement terminates either
voluntarily or involuntarily, Employee shall then be entitled
to receive the then existing salary with all benefits in
existence at the time of termination continuing for a period
of 12 months and furthermore, all inchoate options will
automatically vest. Employee shall have no duty to seek
employment or otherwise mitigate the amount of compensation
paid to him under the terms of this agreement nor shall any
amounts received by him with respect to other employment
reduce the amount of such compensation.
(k) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (f) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
4
<PAGE>
(h) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Employee's employment with the
Company, and for two (2) years thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) During the entire term of Employee's employment by the Company
and for one (1) year thereafter, Employee shall not induce or
attempt to induce any employee of the Company to leave the
Company's employ except for the sole benefit of the Company or
with its express written consent.
5
<PAGE>
(c) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company. Employee shall
disclose all such matters to the Company, assign all right, title and interest
Employee may have in copyright, trademark, or other legal protection.
7. Non-Competition:
(a) Employee covenants and agrees that while in the employment of
Company and for one (1) year after the termination or
expiration of this Agreement, Employee shall not, for his own
account or either as agent, consultant, servant or employee,
or as a shareholder of any corporation or member of any firm,
own, manage, operate, join, control, or participate in the
ownership, management, operation or control of any individual,
or that division or part of any entity or business that
develops and markets towing for the transportation industry
and services (such as automated dispatching) for the vehicle
towing, transportation and recovery services within or without
the United States which competes with the Company in a
particular geographic area.
(b) In the event of an actual or threatened breach by Employee of
any of the provisions in Paragraph 7(a) hereof, Company shall
be entitled to an injunction restraining Employee from the
prohibited conduct without the necessity of establishing
irreparable injury to Company unless required under Florida
6
<PAGE>
law. If a court of competent jurisdiction should hold that the
duration and/or scope (geographic or otherwise) of the
covenants contained in Paragraph 7(a) hereof are in violation
of Florida law, then, to the extent permitted under Florida
law, the Circuit Court for Palm Beach County shall enforce all
such covenants (geographic and otherwise) to the fullest
extent permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated shall be
construed as prohibiting Company from pursuing any other
remedies available to it for such breach or threatened breach,
including the recovery of damages from Employee. In any action
or proceeding to enforce the provisions of this Paragraph 7,
or seeking damages for breach or threatened breach of this
Paragraph 7, the prevailing party shall be reimbursed by the
other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees, incurred
either at the trial level or at all appellate levels. Such
reimbursement, if any, shall be paid within thirty (30)
calendar days after the rendition of a final order in such
action or proceeding.
(c) The existence of any claim or cause of action by Employee
against Company, shall not constitute a defense to the
enforcement by Company of the foregoing restrictive covenant.
(d) In the event Company obtains an injunction against Employee
arising from Employee's violation of any of the covenants set
forth in this Paragraph 7, then all of the terms of and
covenants in this Paragraph 7 shall automatically be extended
for a period of one (1) year, with such extension period
commencing, without Order of Court or any writing or other
action by the parties hereto, on the date that an injunction
Order is entered against Employee in any such action or
proceeding to enforce the provisions of this Paragraph 7.
8. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
the Company, and shall not accept other employment or engage in any other
7
<PAGE>
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
9. Company's Right to Disclose: During Employee's employment hereunder and at
all times subsequent thereto, Employee hereby grants to Company the right to
notify all future employers of Employee of the non-competition restrictions on
Employee contained in this Agreement, and Employee hereby holds harmless and
indemnifies Company from any liability to Company which may arise from any such
disclosure.
10. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
11. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Employer: 1-800-AutoTow, Inc.
1301 N. Congress Ave. Suite 330
Boynton Beach, FL 33426
Employee: Steven B. Teeters
631 E. Woolbright, # 207
Boynton Beach, FL 33435
12. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
13. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
14. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
8
<PAGE>
15. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
16. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of his obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(b) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
(c) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original for all
purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 27th day of July, 1999.
"Company" "Employee"
1-800-AutoTow, Inc. Steven B. Teeters
/s/ Joel B. Nagelmann /s/ Steven B. Teeters
--------------------- ------------------------
Joel B. Nagelmann Steven B. Teeters
President & CEO Employee & V.P. Finance
Attachment C
Stock Option Vesting Schedule
Total Shares Immediate Vest Year 1 Vest Year 2 Vest
- ------------ -------------- ----------- -----------
399,600 133,200 133,200 133,200
9
EXHIBIT 6.5
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) is made this 1st day of August, 1998 and
entered into between 1-800-AutoTow, Inc., a Delaware corporation ("Company"),
and William Chester III, ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Employee is an individual
possessing unique management and operating talents of value to the
Company.
B. Company desires to employ Employee as a Regional Vice President of Company
and in such other capacities as agreed on from time to time in writing by
Employee and Company, and Employee desires to accept such employment, all
on the terms and conditions set forth in this Agreement.
C. Company and Employee each desire to prevent other competitive businesses
from securing Employee's services and utilizing Employee's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of five (5) years,
commencing August 1, 1998 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of its
initial five-year term only as set forth below. Unless this Agreement is so
terminated, or unless the Company elects not to renew this Agreement at the end
of its initial five-year term, or any subsequent term, by giving notice to
Employee of such non-renewal at least 90 days prior to the end of such term,
this Agreement shall be automatically renewed on the same terms for successive
one year periods.
1
<PAGE>
2. Duties: Employee agrees to render to the Company the services as Service Area
Manager of the Company as outlined in Attachment A.
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Employee with the following compensation and benefits:
(a) Base Salary: For all services rendered by Employee to Company
hereunder, Employee's base salary shall be $80,000 per year,
which shall commence the date of acquisition of McGann &
Chester Inc. by the Company, subject to annual adjustment,
payable in accordance with the Company's payroll practices as
in effect from time to time, and subject to such withholding
as is required by law.
(b) Bonus: In addition to the base salary specified above,
Employee may be paid a bonus which shall be in an amount,
and payable in a manner, to be determined at the sole
discretion of Company.
(c) Vacation: Employee shall be entitled to 2 weeks paid vacation
during the first year of this Agreement and 3 weeks in
subsequent years. If the vacation is not used during the year
earned, it will be lost and not carried forward into
subsequent years.
(d) Life Insurance: Company shall provide a cafeteria plan whereby
the Employee can buy Life Insurance to suit his particular
needs.
(e) Business Expenses: The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee in the
course of performing services for the Company subject to the
Company written guidelines.
(f) Stock Options: Employee shall be granted an option to purchase
4,000 shares of common stock at a price of $2.00 per share, or
if already trading, the closing price of the stock on the day
prior to the effective date of employment. The Options of
Company are subject to the terms and conditions of the stock
option agreement attached hereto as "Attachment B." The terms
and conditions of such stock option and agreement are
incorporated herein by reference.
(g) Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical
insurance and disability insurance, as is provided by Company
to its other employees.
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of his death to
Employee's estate or beneficiary.
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of his termination.
2
<PAGE>
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of his
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless the Board of Directors, in its
sole discretion, determines that a cure is not deemed possible
or appropriate.
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary for the remainder of the contract. Any accrued bonus
shall be calculated on a period-to-date basis and prorated to
date of termination. All stock options which have not vested
at the time of termination without cause shall be immediately
vested. All remaining Company benefits will be discontinued at
the time of termination.
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 30 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 30 day period and shall receive salary
during this period of transition.
3
<PAGE>
(f) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
(g) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Employee's employment with the
Company, and for two (2) years thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
4
<PAGE>
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company. Employee shall
disclose all such matters to the Company, assign all right, title and interest
Employee may have in copyright, trademark, or other legal protection.
7. Non-Competition: Employee covenants and agrees that while in the employment
of Company or while receiving severance payments in lieu of active employment,
and for two (2) years after the termination or expiration of this Agreement or
the receipt of the Employee's last severance payment, Employee shall not;
(a) for his own account or either as agent, consultant, servant or
employee, or as a shareholder of any corporation or member of
any firm, own, manage, operate, join, control, or participate
in the ownership, management, operation or control of any
individual, or that division or part of any entity or business
that is in the vehicle towing, transport, salvage or auction
businesses, within one hundred (100) miles of the Company or
any affiliated company operation;
(b) call upon any person who is, at that time, an employee of the
Company or any affiliated company in a managerial capacity for
the purpose or with the intent of enticing such employee away
from or out of the employ of the Company or any affiliated
company;
(c) call upon any person or entity which is, at that time or which
has been, within one (1) year prior to that time, a customer
of the Company, or any affiliated company for the purpose of
soliciting or selling products or services in direct
competition with the Company, or any affiliated Company;
(d) call upon any prospective acquisition candidate, on his behalf or on behalf
of any competitor in the vehicle towing or transport business; or
(e) disclose customers, whether in existence or proposed, of the
Company or any affiliated company, to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever excluding disclosure to the Company or any
affiliated company.
(f) In the event of an actual or threatened breach by Employee of
any of the provisions in Paragraph 7(a) hereof, Company shall
be entitled to an injunction restraining Employee from the
prohibited conduct without the necessity of establishing
irreparable injury to Company unless required under Florida
law. If a court of competent jurisdiction should hold that the
duration and/or scope (geographic or otherwise) of the
covenants contained in Paragraph 7(a) hereof are in violation
of Florida law, then, to the extent permitted under Florida
law, the Circuit Court for Palm Beach County shall enforce all
such covenants (geographic and otherwise) to the fullest
extent permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated shall be
construed as prohibiting Company from pursuing any other
remedies available to it for such breach or threatened breach,
including the recovery of damages from Employee. In any action
or proceeding to enforce the provisions of this Paragraph 7,
or seeking damages for breach or threatened breach of this
Paragraph 7, the prevailing party shall be reimbursed by the
other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees, incurred
either at the trial level or at all appellate levels. Such
reimbursement, if any, shall be paid within thirty (30)
calendar days after the rendition of a final order in such
action or proceeding.
5
<PAGE>
(g) The existence of any claim or cause of action by Employee
against Company, shall not constitute a defense to the
enforcement by Company of the foregoing restrictive covenant.
(h) In the event Company obtains an injunction against Employee
arising from Employee's violation of any of the covenants set
forth in this Paragraph 7, then all of the terms of and
covenants in this Paragraph 7 shall automatically be extended
for a period of one (1) year, with such extension period
commencing, without Order of Court or any writing or other
action by the parties hereto, on the date that an injunction
Order is entered against Employee in any such action or
proceeding to enforce the provisions of this Paragraph 7.
(i) The covenants of this Paragraph 7 will not pertain to Employee
if the Company ceases business and thereby results with the
Employee's employment being discontinued.
8. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
the Company, and shall not accept other employment or engage in any other
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
9. Company's Right to Disclose: During Employee's employment hereunder and at
all times subsequent thereto, Employee hereby grants to Company the right to
notify all future employers of Employee of the non-competition restrictions on
Employee contained in this Agreement, and Employee hereby holds harmless and
indemnifies Company from any liability to Company which may arise from any such
disclosure.
10. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
11. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Employer: 1-800-AutoTow, Inc.
1301 N. Congress
Suite 330
Boynton Beach, FL 33426
Employee: Robert M. McGann
700 Hargrove Street
Pittsburgh, PA 15226
6
<PAGE>
12. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
13. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
14. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
15. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
16. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of his obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(b) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
(c) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original for all
purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 1st day of August, 1998.
"Company" "Employee"
1-800-AutoTow, Inc. William Chester III
/s/ Steven B. Teeters /s/ William Chester
--------------------- ------------------------
Steven B. Teeters William Chester
Vice President Employee
7
EXHIBIT 6.6
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) is made this 1st day of August, 1998 and
entered into between McGann & Chester, Inc., a Pennsylvania corporation
("Company"), and Robert M. McGann, ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Employee is an individual
possessing unique management and operating talents of value to the
Company.
B. Company desires to employ Employee as a Service Area Manager of Company
and in such other capacities as agreed on from time to time in writing by
Employee and Company, and Employee desires to accept such employment, all
on the terms and conditions set forth in this Agreement.
C. Company and Employee each desire to prevent other competitive businesses
from securing Employee's services and utilizing Employee's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of five (5) years,
commencing August 1, 1998 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of its
initial five-year term only as set forth below. Unless this Agreement is so
terminated, or unless the Company elects not to renew this Agreement at the end
of its initial five-year term, or any subsequent term, by giving notice to
Employee of such non-renewal at least 90 days prior to the end of such term,
this Agreement shall be automatically renewed on the same terms for successive
one year periods.
1
<PAGE>
2. Duties: Employee agrees to render to the Company the services as Service Area
Manager of the Company as outlined in Attachment A.
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Employee with the following compensation and benefits:
(a) Base Salary: For all services rendered by Employee to Company
hereunder, Employee's base salary shall be $60,000 per year,
which shall commence the date of acquisition of McGann &
Chester Inc. by 1-800-AutoTow(TM), subject to annual
adjustment, payable in accordance with the Company's payroll
practices as in effect from time to time, and subject to such
withholding as is required by law.
(b) Bonus: In addition to the base salary specified above,
Employee may be paid a bonus which shall be in an amount, and
payable in a manner, to be determined at the sole discretion
of Company.
(c) Vacation: Employee shall be entitled to 2 weeks paid vacation
during the first year of this Agreement and 3 weeks in
subsequent years. If the vacation is not used during the year
earned, it will be lost and not carried forward into
subsequent years.
(d) Life Insurance: Company shall provide a cafeteria plan whereby
the Employee can buy Life Insurance to suit his particular
needs.
(e) Business Expenses: The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee in the
course of performing services for the Company subject to the
Company written guidelines.
2
<PAGE>
(f) Stock Options: Employee shall be granted an option to purchase
4,000 shares of common stock at a price of $2.00 per share, or
if already trading, the closing price of the stock on the day
prior to the effective date of employment. The Options of
1-800-AutoTow, Inc. are subject to the terms and conditions of
the stock option agreement attached hereto as "Attachment B."
The terms and conditions of such stock option and agreement
are incorporated herein by reference.
(g) Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical
insurance and disability insurance, as is provided by Company
to its other employees.
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of his death to
Employee's estate or beneficiary.
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of his termination.
3
<PAGE>
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of his
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless the Board of Directors, in its
sole discretion, determines that a cure is not deemed possible
or appropriate.
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary for the remainder of the contract. Any accrued bonus
shall be calculated on a period-to-date basis and prorated to
date of termination. All stock options which have not vested
at the time of termination without cause shall be immediately
vested. All other Company benefits will be discontinued at the
time of termination.
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 30 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 30 day period and shall receive salary
during this period of transition.
4
<PAGE>
(f) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
(g) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Employee's employment with the
Company, and for two (2) years thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
5
<PAGE>
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company. Employee shall
disclose all such matters to the Company, assign all right, title and interest
Employee may have in copyright, trademark, or other legal protection.
7. Non-Competition: Employee covenants and agrees that while in the employment
of Company or while receiving severance payments in lieu of active employment,
and for two (2) years after the termination or expiration of this Agreement or
the receipt of the Employee's last severance payment, Employee shall not;
(a) for his own account or either as agent, consultant, servant or
employee, or as a shareholder of any corporation or member of
any firm, own, manage, operate, join, control, or participate
in the ownership, management, operation or control of any
individual, or that division or part of any entity or business
that is in the vehicle towing, transport, salvage or auction
businesses, within one hundred (100) miles of the Company or
any affiliated company operation;
(b) call upon any person who is, at that time, an employee of the
Company or any affiliated company in a managerial capacity for
the purpose or with the intent of enticing such employee away
from or out of the employ of the Company or any affiliated
company;
(f) call upon any person or entity which is, at that time or which
has been, within one (1) year prior to that time, a customer
of the Company, or any affiliated company for the purpose of
soliciting or selling products or services in direct
competition with the Company, or any affiliated Company;
(g) call upon any prospective acquisition candidate, on his
behalf or on behalf of any competitor in the vehicle towing or
transport business;
(h) disclose customers, whether in existence or proposed, of
the Company or any affiliated company, to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever excluding disclosure to the Company or any
affiliated company.
(f) In the event of an actual or threatened breach by Employee of
any of the provisions in Paragraph 7(a) hereof, Company shall
be entitled to an injunction restraining Employee from the
prohibited conduct without the necessity of establishing
irreparable injury to Company unless required under Florida
law. If a court of competent jurisdiction should hold that the
duration and/or scope (geographic or otherwise) of the
covenants contained in Paragraph 7(a) hereof are in violation
of Florida law, then, to the extent permitted under Florida
law, the Circuit Court for Palm Beach County shall enforce all
such covenants (geographic and otherwise) to the fullest
extent permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated shall be
construed as prohibiting Company from pursuing any other
remedies available to it for such breach or threatened breach,
including the recovery of damages from Employee. In any action
or proceeding to enforce the provisions of this Paragraph 7,
or seeking damages for breach or threatened breach of this
Paragraph 7, the prevailing party shall be reimbursed by the
other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees, incurred
either at the trial level or at all appellate levels. Such
reimbursement, if any, shall be paid within thirty (30)
calendar days after the rendition of a final order in such
action or proceeding.
6
<PAGE>
(g) The existence of any claim or cause of action by Employee
against Company shall not constitute a defense to the
enforcement by Company of the foregoing restrictive covenant.
(h) In the event Company obtains an injunction against
Employee arising from Employee's violation of any of the
covenants set forth in this Paragraph 7, then all of the terms
of and covenants in this Paragraph 7 shall automatically be
extended for a period of one (1) year, with such extension
period commencing, without Order of Court or any writing or
other action by the parties hereto, on the date that an
injunction Order is entered against Employee in any such
action or proceeding to enforce the provisions of this
Paragraph 7.
(i) The covenants of this Paragraph 7 will not pertain to
Employee if the Company discontinues business resulting with
the Employee's employment being discontinued.
8. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
the Company, and shall not accept other employment or engage in any other
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
9. Company's Right to Disclose: During Employee's employment hereunder and at
all times subsequent thereto, Employee hereby grants to Company the right to
notify all future employers of Employee of the non-competition restrictions on
Employee contained in this Agreement, and Employee hereby holds harmless and
indemnifies Company from any liability to Company which may arise from any such
disclosure.
10. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
7
<PAGE>
11. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Employer: McGann & Chester, Inc.
1301 N. Congress
Suite 330
Boynton Beach, FL 33426
Employee: Robert M. McGann
700 Hargrove Street
Pittsburgh, PA 15226
12. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
13. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
14. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
15. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
16. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of his obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
8
<PAGE>
(b) This Agreement constitutes the entire Agreement between
the parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
(c) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
for all purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 1st day of August, 1998.
"Company" "Employee"
McGann & Chester, Inc. Robert M. McGann
/s/ Steven B. Teeters /s/ Robert M. McGann
--------------------- ------------------------
Steven B. Teeters Robert M. McGann
Vice President Employee
9
EXHIBIT 6.7
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) is made this 1st day of June, 1998 and
entered into between D&D Towing and Recovery, Inc., a Florida corporation
("Company"), and G. Michael Dempsey ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Employee is an individual
possessing unique management and operating talents of value to the Company.
B. Company desires to employ Employee as a Service Area Manager of Company and
in such other capacities as agreed on from time to time in writing by
Employee and Company, and Employee desires to accept such employment, all
on the terms and conditions set forth in this Agreement.
C. Company and Employee each desire to prevent other competitive businesses
from securing Employee's services and utilizing Employee's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of three (3)
years, commencing June 1, 1998 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of its
initial three-year term only as set forth below. Unless this Agreement is so
terminated, or unless the Company elects not to renew this Agreement at the end
of its initial three-year term, or any subsequent term, by giving notice to
Employee of such non-renewal at least 90 days prior to the end of such term,
this Agreement shall be automatically renewed on the same terms for successive
one year periods.
1
<PAGE>
2. Duties: Employee agrees to render to the Company the services as Service Area
Manager of the Company as outlined in Attachment A.
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Employee with the following compensation and benefits:
(a) Base Salary: For all services rendered by Employee to Company
hereunder, Employee's base salary shall be $60,000 per year,
which shall commence the date of acquisition of D&D Towing and
Recovery, Inc. by the Company, subject to annual adjustment,
payable in accordance with the Company's payroll practices as
in effect from time to time, and subject to such withholding
as is required by law.
(b) Bonus: In addition to the base salary specified above,
Employee may be paid a bonus which shall be in an amount
representing 20 to 25 percent of base salary. For the period
beginning with the Closing and ending with the end of the
Company's first fiscal year (3/31/99), Employee shall be
guaranteed a minimum bonus of $6,000 dollars. The performance
criteria will be mutually developed during the first 30 days
subsequent to the Closing.
(c) Vacation: Employee shall be entitled to 2 weeks paid vacation
during the first year of this Agreement and 3 weeks in
subsequent years. If the vacation is not used during the year
earned, it will be lost and not carried forward into
subsequent years.
(d) Life Insurance: Company shall provide a cafeteria benefit
program that will include a Life Insurance option.
(e) Business Expenses: The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee in the
course of performing services for the Company subject to the
Company written guidelines and approval.
2
<PAGE>
(f) Stock Options: Employee shall be granted an option to purchase
15,000 shares of common stock at a price of $2.50 per share,
or if already trading, the closing price of the stock on the
day prior to the effective date of employment. These Options
will vest equally over a three-year period. The Options of the
Company are subject to the terms and conditions of the stock
option agreement attached hereto as "Attachment B." The terms
and conditions of such stock option and agreement are
incorporated herein by reference.
(g) Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical
insurance and disability insurance, as is provided by Company
to its other employees.
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of his death to
Employee's estate or beneficiary.
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of his termination.
3
<PAGE>
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of his
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless the Board of Directors, in its
sole discretion, determines that a cure is not deemed possible
or appropriate.
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary for a period of 12 months after the notice of
termination. Any accrued bonus shall be calculated on a
period-to-date basis and prorated to date of termination. All
stock options which have not vested at the time of termination
without cause shall be immediately vested.
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 30 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 30 day period and shall receive salary
during this period of transition.
4
<PAGE>
(f) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
(g) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Employee's employment with the
Company, and for two (2) years thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) During the entire term of Employee's employment by the Company
and for one (1) year thereafter, Employee shall not induce or
attempt to induce any employee of the Company to leave the
Company's employ except for the sole benefit of the Company or
with its express written consent.
5
<PAGE>
(c) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company. Employee shall
disclose all such matters to the Company, assign all right, title and interest
Employee may have in copyright, trademark, or other legal protection.
7. Non-Competition:
(a) Employee covenants and agrees that while in the employment of Company
or while receiving severance payments in lieu of active employment,
and for one (1) year after the termination or expiration of this
Agreement or the receipt of the Employee's last severance payment,
Employee shall not for his own account or either as agent, consultant,
servant or employee, or as a shareholder of any corporation or member
of any firm, own, manage, operate, join, control, or participate in
the ownership, management, operation or control of any individual, or
that division or part of any entity or business that performs towing
in the transportation industry and provides services (such as
automated dispatching) for the vehicle towing, transportation and
recovery services within or without the United States which competes
with the Company in a particular geographic area. Nothing in Paragraph
7(a) will prevent Employee from accepting employment with a "motor
club".
6
<PAGE>
(b) In the event of an actual or threatened breach by Employee of any of
the provisions in Paragraph 7(a) hereof, Company shall be entitled to
an injunction restraining Employee from the prohibited conduct without
the necessity of establishing irreparable injury to Company unless
required under Florida law. If a court of competent jurisdiction
should hold that the duration and/or scope (geographic or otherwise)
of the covenants contained in Paragraph 7(a) hereof are in violation
of Florida law, then, to the extent permitted under Florida law, the
Circuit Court for Palm Beach County shall enforce all such covenants
(geographic and otherwise) to the fullest extent permitted under
Florida law and the parties hereto agree to be bound by same. Nothing
herein stated shall be construed as prohibiting Company from pursuing
any other remedies available to it for such breach or threatened
breach, including the recovery of damages from Employee. In any action
or proceeding to enforce the provisions of this Paragraph 7, or
seeking damages for breach or threatened breach of this Paragraph 7,
the prevailing party shall be reimbursed by the other party for all
costs incurred in such action or proceeding including, without
limitation, all court costs and filing fees, and all reasonable
attorneys' fees, incurred either at the trial level or at all
appellate levels. Such reimbursement, if any, shall be paid within
thirty (30) calendar days after the rendition of a final order in such
action or proceeding.
(c) The existence of any claim or cause of action by Employee against
Company shall not constitute a defense to the enforcement by Company
of the foregoing restrictive covenant.
(d) In the event Company obtains an injunction against Employee arising
from Employee's violation of any of the covenants set forth in this
Paragraph 7, then all of the terms of and covenants in this Paragraph
7 shall automatically be extended for a period of one (1) year, with
such extension period commencing, without Order of Court or any
writing or other action by the parties hereto, on the date that an
injunction Order is entered against Employee in any such action or
proceeding to enforce the provisions of this Paragraph 7.
8. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
the Company, and shall not accept other employment or engage in any other
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
7
<PAGE>
9. Company's Right to Disclose: During Employee's employment hereunder and at
all times subsequent thereto, Employee hereby grants to Company the right to
notify all future employers of Employee of the non-competition restrictions on
Employee contained in this Agreement, and Employee hereby holds harmless and
indemnifies Company from any liability to Company which may arise from any such
disclosure.
10. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
11. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Employer: D&D Towing and Recovery, Inc.
C/o 1-800-AutoTow, Inc.
1301 N. Congress Ave., Suite 330
Boynton Beach, FL 33426
Employee: G. Michael Dempsey
5108 Ingraham Street
Tampa, FL 33616
Attorney: Stratton Smith, Esq.
611 W. Azeele Street
Tampa, FL 33606
12. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
13. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
8
<PAGE>
14. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
15. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
16. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of his obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(b) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
(c) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original for all
purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 1st day of June, 1998.
"Company" "Employee"
D&D Towing and Recovery, Inc. G. Michael Dempsey
/s/ Eugene A. Iarocci /s/ G. Michael Dempsey
--------------------- ------------------------
Eugene A. Iarocci G. Michael Dempsey
President Employee
9
EXHIBIT 6.8
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) is made this 22 day of July, 1999 and
entered into between 1-800 AutoTow Gulf East, Inc., a Florida corporation
("Company"), and Jim Stewart, ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing
and other services in the transportation industry. Employee is an
individual possessing unique management and operating talents of value
to the Company.
B. Company desires to employ Employee as a Service Area Manager of Company
and in such other capacities as agreed on from time to time in writing
by Employee and Company, and Employee desires to accept such
employment, all on the terms and conditions set forth in this
Agreement.
C. Company and Employee each desire to prevent other competitive
businesses from securing Employee's services and utilizing Employee's
experience, background, confidential information and inventions as
hereinafter set forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of two (2) years,
commencing August 1, 1999 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of its
initial two-year term only as set forth below. Unless this Agreement is so
terminated, or unless the Company elects not to renew this Agreement at the end
of its initial two-year term, or any subsequent term, by giving notice to
Employee of such non-renewal at least 90 days prior to the end of such term,
this Agreement shall be automatically renewed on the same terms for successive
one year periods.
1
<PAGE>
2. Duties: Employee agrees to render to the Company the services as Service Area
Manager of the Company as outlined in Attachment A.
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Employee with the following compensation and benefits:
(a) Base Salary: For all services rendered by Employee to Company
hereunder, Employee's base salary shall be $60,000.00 per
year, which shall commence the date of acquisition of Dixie
Grande Towing and Robert's Towing by 1-800-AutoTow, Inc., and
1-800 AutoTow Gulf Coast East, Inc., subject to annual
adjustment, payable in accordance with the Company's payroll
practices as in effect from time to time, and subject to such
withholding as is required by law.
(b) Vacation: Employee shall be entitled to 2 weeks paid vacation.
If the vacation is not used during the year earned, it will be
lost and not carried forward into subsequent years.
(c) Life Insurance: Company shall provide a cafeteria plan whereby
the Employee can buy Life Insurance to suit his particular
needs.
(d) Business Expenses: The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee in the
course of performing services for the Company subject to the
Company written guidelines.
2
<PAGE>
(e) Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical
insurance and disability insurance, as is provided by Company
to its other employees.
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of his death to
Employee's estate or beneficiary.
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of his termination.
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of his
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless the Board of Directors, in its
sole discretion, determines that a cure is not deemed possible
or appropriate.
3
<PAGE>
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary for a period of 12 months after notice of termination
or the balance of the Employee's contract term. Any accrued
bonus shall be calculated on a period-to-date basis and
prorated to date of termination. All stock options which have
not vested at the time of termination without cause shall be
immediately vested. All other Company benefits will be
discontinued at the time of termination.
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 30 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 30 day period and shall receive salary
during this period of transition.
(f) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
(g) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
4
<PAGE>
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Employee's employment with the
Company, and for two (2) years thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company. Employee shall
disclose all such matters to the Company, assign all right, title and interest
Employee may have in copyright, trademark, or other legal protection.
5
<PAGE>
7. Non-Competition: Employee covenants and agrees that while in the employment
of Company or while receiving severance payments in lieu of active employment,
and for two (2) years after the termination or expiration of this Agreement or
the receipt of the Employee's last severance payment, Employee shall not;
(a) for his own account or either as agent, consultant, servant or
employee, or as a shareholder of any corporation or member of
any firm, own, manage, operate, join, control, or participate
in the ownership, management, operation or control of any
individual, or that division or part of any entity or business
that is in the vehicle towing, transport, salvage or auction
businesses, within one hundred (100) miles of the Company or
any affiliated company operation;
(b) call upon any person who is, at that time, an employee of the
Company or any affiliated company in a managerial capacity for
the purpose or with the intent of enticing such employee away
from or out of the employ of the Company or any affiliated
company;
(i) call upon any person or entity which is, at that time or which
has been, within one (1) year prior to that time, a customer
of the Company, or any affiliated company for the purpose of
soliciting or selling products or services in direct
competition with the Company, or any affiliated Company;
(j) call upon any prospective acquisition candidate, on his behalf
or on behalf of any competitor in the vehicle towing or
transport business;
(k) disclose customers, whether in existence or proposed, of the
Company or any affiliated company, to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever excluding disclosure to the Company or any
affiliated company.
(f) In the event of an actual or threatened breach by Employee of
any of the provisions in Paragraph 7(a) hereof, Company shall
be entitled to an injunction restraining Employee from the
prohibited conduct without the necessity of establishing
irreparable injury to Company unless required under Florida
law. If a court of competent jurisdiction should hold that the
6
<PAGE>
duration and/or scope (geographic or otherwise) of the
covenants contained in Paragraph 7(a) hereof are in violation
of Florida law, then, to the extent permitted under Florida
law, the Circuit Court for Palm Beach County shall enforce all
such covenants (geographic and otherwise) to the fullest
extent permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated shall be
construed as prohibiting Company from pursuing any other
remedies available to it for such breach or threatened breach,
including the recovery of damages from Employee. In any action
or proceeding to enforce the provisions of this Paragraph 7,
or seeking damages for breach or threatened breach of this
Paragraph 7, the prevailing party shall be reimbursed by the
other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees, incurred
either at the trial level or at all appellate levels. Such
reimbursement, if any, shall be paid within thirty (30)
calendar days after the rendition of a final order in such
action or proceeding.
(g) The existence of any claim or cause of action by Employee
against Company shall not constitute a defense to the
enforcement by Company of the foregoing restrictive covenant.
(j) In the event Company obtains an injunction against Employee
arising from Employee's violation of any of the covenants set
forth in this Paragraph 7, then all of the terms of and
covenants in this Paragraph 7 shall automatically be extended
for a period of one (1) year, with such extension period
commencing, without Order of Court or any writing or other
action by the parties hereto, on the date that an injunction
Order is entered against Employee in any such action or
proceeding to enforce the provisions of this Paragraph 7.
(k) The covenants of this Paragraph 7 will not pertain to Employee
if the Company discontinues business resulting with the
Employee's employment being discontinued.
8. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
the Company, and shall not accept other employment or engage in any other
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
7
<PAGE>
9. Company's Right to Disclose: During Employee's employment hereunder and at
all times subsequent thereto, Employee hereby grants to Company the right to
notify all future employers of Employee of the non-competition restrictions on
Employee contained in this Agreement, and Employee hereby holds harmless and
indemnifies Company from any liability to Company which may arise from any such
disclosure.
10. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
11. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Employer: 1-800 AutoTow Gulf Coast East, Inc.
1301 N. Congress
Suite 330
Boynton Beach, FL 33426
Employee: Jim Stewart
2509 9th Street West
Bradenton, Fl 34205
12. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
13. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
14. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
15. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
8
<PAGE>
16. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of his obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(d) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
(e) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original for all
purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 22nd day of July, 1999.
1-800-AutoTow Gulf Coast East, Inc. "Employee"
/s/ Steven B. Teeters /s/ Jim Stewart
- ---------------------- ----------------
Steven B. Teeters Jim Stewart
Treasurer Employee
9
EXHIBIT 6.9
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) is made this 23rd day of July, 1999 and
entered into between 1-800-AutoTow Inc., a Florida corporation ("Company"), and
Walter Terenik, ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Employee is an individual
possessing unique management and operating talents of value to the Company.
B. Company desires to employ Employee as a Manager of Transportation of
Company and in such other capacities as agreed on from time to time in
writing by Employee and Company, and Employee desires to accept such
employment, all on the terms and conditions set forth in this Agreement.
C. Company and Employee each desire to prevent other competitive businesses
from securing Employee's services and utilizing Employee's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of two (2) years,
commencing August 1, 1999 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of its
initial two-year term only as set forth below. Unless this Agreement is so
terminated, or unless the Company elects not to renew this Agreement at the end
of its initial two-year term, or any subsequent term, by giving notice to
Employee of such non-renewal at least 90 days prior to the end of such term,
this Agreement shall be automatically renewed on the same terms for successive
one year periods.
1
<PAGE>
2. Duties: Employee agrees to render to the Company the services as Manager of
Transportation of the Company as outlined in Attachment A.
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Employee with the following compensation and benefits:
(a) Base Salary: For all services rendered by Employee to Company
hereunder, Employee's base salary shall be $60,000 per year,
which shall commence the date of acquisition of L&W Collision,
Towing & Recovery, Inc., by 1-800-AutoTow, subject to annual
adjustment, payable in accordance with the Company's payroll
practices as in effect from time to time, and subject to such
withholding as is required by law.
(b) Bonus: In addition to the base salary specified above,
Employee may be paid a bonus which shall be in an amount, and
payable in a manner, to be determined at the sole discretion
of Company.
(c) Vacation: Employee shall be entitled to 2 weeks paid vacation.
If the vacation is not used during the year earned, it will be
lost and not carried forward into subsequent years.
(d) Life Insurance: Company shall provide a cafeteria plan whereby
the Employee can buy Life Insurance to suit his particular
needs.
(e) Business Expenses: The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee in the
course of performing services for the Company subject to the
Company written guidelines.
(f) Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical
insurance and disability insurance, as is provided by Company
to its other employees.
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of his death to
Employee's estate or beneficiary.
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of his termination.
2
<PAGE>
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of his
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless the Board of Directors, in its
sole discretion, determines that a cure is not deemed possible
or appropriate.
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary for a period of 12 months after notice of termination.
Any accrued bonus shall be calculated on a period-to-date
basis and prorated to date of termination. All stock options
which have not vested at the time of termination without cause
shall be immediately vested. All other Company benefits will
be discontinued at the time of termination. If the Employee's
employment is terminated without cause, by the Company,
employee is released from paragraph 7 hereof, NON-COMPETITION.
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 30 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 30 day period and shall receive salary
during this period of transition.
(f) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
(g) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
3
<PAGE>
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Employee's employment with the
Company, and for two (2) years thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company. Employee shall
disclose all such matters to the Company, assign all right, title and interest
Employee may have in copyright, trademark, or other legal protection.
7. Non-Competition: Employee covenants and agrees that while in the employment
of Company or while receiving severance payments in lieu of active employment,
and for five(5) years after the termination or expiration of this Agreement or
the receipt of the Employee's last severance payment, Employee shall not;
(a) for his own account or either as agent, consultant, servant or
employee, or as a shareholder of any corporation or member of
any firm, own, manage, operate, join, control, or participate
in the ownership, management, operation or control of any
individual, or that division or part of any entity or business
that is in the vehicle towing, transport, salvage or auction
businesses, within one hundred (100) miles of the Company or
any affiliated company operation;
4
<PAGE>
(b) call upon any person who is, at that time, an employee of the
Company or any affiliated company in a managerial capacity for
the purpose or with the intent of enticing such employee away
from or out of the employ of the Company or any affiliated
company;
(l) call upon any person or entity which is, at that time or which
has been, within one (1) year prior to that time, a customer
of the Company, or any affiliated company for the purpose of
soliciting or selling products or services in direct
competition with the Company, or any affiliated Company;
(m) call upon any prospective acquisition candidate, on his behalf
or on behalf of any competitor in the vehicle towing or
transport business;
(n) disclose customers, whether in existence or proposed, of the
Company or any affiliated company, to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever excluding disclosure to the Company or any
affiliated company.
(f) In the event of an actual or threatened breach by Employee of
any of the provisions in Paragraph 7(a) hereof, Company shall
be entitled to an injunction restraining Employee from the
prohibited conduct without the necessity of establishing
irreparable injury to Company unless required under Florida
law. If a court of competent jurisdiction should hold that the
duration and/or scope (geographic or otherwise) of the
covenants contained in Paragraph 7(a) hereof are in violation
of Florida law, then, to the extent permitted under Florida
law, the Circuit Court for Palm Beach County shall enforce all
such covenants (geographic and otherwise) to the fullest
extent permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated shall be
construed as prohibiting Company from pursuing any other
remedies available to it for such breach or threatened breach,
including the recovery of damages from Employee. In any action
or proceeding to enforce the provisions of this Paragraph 7,
or seeking damages for breach or threatened breach of this
Paragraph 7, the prevailing party shall be reimbursed by the
other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees, incurred
either at the trial level or at all appellate levels. Such
reimbursement, if any, shall be paid within thirty (30)
calendar days after the rendition of a final order in such
action or proceeding.
5
<PAGE>
(g) The existence of any claim or cause of action by Employee
against Company shall not constitute a defense to the
enforcement by Company of the foregoing restrictive covenant.
(l) In the event Company obtains an injunction against Employee
arising from Employee's violation of any of the covenants set
forth in this Paragraph 7, then all of the terms of and
covenants in this Paragraph 7 shall automatically be extended
for a period of one (1) year, with such extension period
commencing, without Order of Court or any writing or other
action by the parties hereto, on the date that an injunction
Order is entered against Employee in any such action or
proceeding to enforce the provisions of this Paragraph 7.
(m) The covenants of this Paragraph 7 will not pertain to Employee
if the Company discontinues business resulting with the
Employee's employment being discontinued.
8. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
the Company, and shall not accept other employment or engage in any other
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
9. Company's Right to Disclose: During Employee's employment hereunder and at
all times subsequent thereto, Employee hereby grants to Company the right to
notify all future employers of Employee of the non-competition restrictions on
Employee contained in this Agreement, and Employee hereby holds harmless and
indemnifies Company from any liability to Company which may arise from any such
disclosure.
10. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
11. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
6
<PAGE>
Employer: 1-800-AutoTow, Inc.
1301 N. Congress Ave., Suite 330
Boynton Beach, FL 33426
Employee: Walter Terenik
114 Guava Street
Lady Lake, FL 32159
12. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
13. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
14. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
15. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
16. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of his obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(f) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
7
<PAGE>
(g) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original for all
purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 23rd day of July, 1999.
1-800-AutoTow, Inc. "Employee"
/s/ Joel B. Nagelmann /s/ Walter Terenik
- ---------------------- ----------------
Joel B. Nagelmann Walter Terenik
President Employee
8
EXHIBIT 6.10
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) is made this 28th day of July, 1999 and
entered into between 1-800-AutoTow Gulf Coast S. W., Inc., a Texas Corporation
("Company"), and Muhammad Choudary, ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Employee is an individual
possessing unique management and operating talents of value to the Company.
B. Company desires to employ Employee as a Service Area Manager of Company and
in such other capacities as agreed on from time to time in writing by
Employee and Company, and Employee desires to accept such employment, all
on the terms and conditions set forth in this Agreement.
C. Company and Employee each desire to prevent other competitive businesses
from securing Employee's services and utilizing Employee's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of three (3)
years, commencing August 1, 1999 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of its
initial three-year term only as set forth below. Unless this Agreement is so
terminated, or unless the Company elects not to renew this Agreement at the end
of its initial three-year term, or any subsequent term, by giving notice to
Employee of such non-renewal at least 90 days prior to the end of such term,
this Agreement shall be automatically renewed on the same terms for successive
one year periods.
1
<PAGE>
2. Duties: Employee agrees to render to the Company the services as Service Area
Manager of the Company as outlined in Attachment A.
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Employee with the following compensation and benefits:
(a) Base Salary: For all services rendered by Employee to Company
hereunder, Employee's base salary shall be $60,000 per year,
which shall commence the date of acquisition of A-Ace Towing
by the Company, subject to annual adjustment, payable in
accordance with the Company's payroll practices as in effect
from time to time, and subject to such withholding as is
required by law.
(b) Vacation: Employee shall be entitled to 2 weeks paid vacation.
If the vacation is not used during the year earned, it will be
lost and not carried forward into subsequent years.
(c) Life Insurance: Company shall provide a cafeteria plan whereby
the Employee can buy Life Insurance to suit his particular
needs.
(d) Business Expenses: The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee in the
course of performing services for the Company subject to the
Company written guidelines.
(e) Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical
insurance and disability insurance, as is provided by Company
to its other employees.
2
<PAGE>
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of his death to
Employee's estate or beneficiary.
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of his termination.
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of his
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless the Board of Directors, in its
sole discretion, determines that a cure is not deemed possible
or appropriate.
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary for the remainder of the contract. Any accrued bonus
shall be calculated on a period-to-date basis and prorated to
date of termination. All stock options which have not vested
at the time of termination without cause shall be immediately
vested. All other Company benefits will be discontinued at the
time of termination.
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 30 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 30 day period and shall receive salary
during this period of transition.
3
<PAGE>
(f) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
(g) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Employee's employment with the
Company, and for two (2) years thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company. Employee shall
disclose all such matters to the Company, assign all right, title and interest
Employee may have in copyright, trademark, or other legal protection.
4
<PAGE>
7. Non-Competition: Employee covenants and agrees that while in the employment
of Company or while receiving severance payments in lieu of active employment,
and for two (2) years after the termination or expiration of this Agreement or
the receipt of the Employee's last severance payment, Employee shall not;
(a) for his own account or either as agent, consultant, servant or
employee, or as a shareholder of any corporation or member of
any firm, own, manage, operate, join, control, or participate
in the ownership, management, operation or control of any
individual, or that division or part of any entity or business
that is in the vehicle towing, transport, salvage or auction
businesses, within one hundred (100) miles of the Company or
any affiliated company operation;
(b) call upon any person who is, at that time, an employee of the
Company or any affiliated company in a managerial capacity for
the purpose or with the intent of enticing such employee away
from or out of the employ of the Company or any affiliated
company;
(o) call upon any person or entity which is, at that time or which
has been, within one (1) year prior to that time, a customer
of the Company, or any affiliated company for the purpose of
soliciting or selling products or services in direct
competition with the Company, or any affiliated Company;
(p) call upon any prospective acquisition candidate, on his
behalf or on behalf of any competitor in the vehicle towing or
transport business;
(q) disclose customers, whether in existence or proposed, of
the Company or any affiliated company, to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever excluding disclosure to the Company or any
affiliated company.
(f) In the event of an actual or threatened breach by Employee of
any of the provisions in Paragraph 7(a) hereof, Company shall
be entitled to an injunction restraining Employee from the
prohibited conduct without the necessity of establishing
irreparable injury to Company unless required under Florida
law. If a court of competent jurisdiction should hold that the
duration and/or scope (geographic or otherwise) of the
covenants contained in Paragraph 7(a) hereof are in violation
of Florida law, then, to the extent permitted under Florida
law, the Circuit Court for Palm Beach County shall enforce all
such covenants (geographic and otherwise) to the fullest
extent permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated shall be
construed as prohibiting Company from pursuing any other
remedies available to it for such breach or threatened breach,
5
<PAGE>
including the recovery of damages from Employee. In any action
or proceeding to enforce the provisions of this Paragraph 7,
or seeking damages for breach or threatened breach of this
Paragraph 7, the prevailing party shall be reimbursed by the
other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees, incurred
either at the trial level or at all appellate levels. Such
reimbursement, if any, shall be paid within thirty (30)
calendar days after the rendition of a final order in such
action or proceeding.
(g) The existence of any claim or cause of action by Employee
against Company shall not constitute a defense to the
enforcement by Company of the foregoing restrictive covenant.
(h) In the event Company obtains an injunction against Employee
arising from Employee's violation of any of the covenants set
forth in this Paragraph 7, then all of the terms of and
covenants in this Paragraph 7 shall automatically be extended
for a period of one (1) year, with such extension period
commencing, without Order of Court or any writing or other
action by the parties hereto, on the date that an injunction
Order is entered against Employee in any such action or
proceeding to enforce the provisions of this Paragraph 7.
(i) The covenants of this Paragraph 7 will not pertain to Employee
if the Company discontinues business resulting with the
Employee's employment being discontinued.
8. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
the Company, and shall not accept other employment or engage in any other
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
9. Company's Right to Disclose: During Employee's employment hereunder and at
all times subsequent thereto, Employee hereby grants to Company the right to
notify all future employers of Employee of the non-competition restrictions on
Employee contained in this Agreement, and Employee hereby holds harmless and
indemnifies Company from any liability to Company which may arise from any such
disclosure.
10. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
6
<PAGE>
11. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Employer: 1-800-AutoTow Gulf Coast S. W., Inc.
1301 N. Congress, Ave., Suite 330
Boynton Beach, FL 33426
Employee: Muhammed Choudary
12761 Nacogdoches Dr.
San Antonio, TX 78217
12. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
13. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
14. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
15. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
16. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of his obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(i) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
(j) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
for all purposes hereof.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 28th day of July, 1999.
"Company" "Employee"
1-800-AutoTow Gulf Coast S.W., Inc. Muhammad Choudary
/s/ Eugene A. Iarocci /s/ Muhammad Choudary
- ---------------------- ----------------------
Eugene A. Iarocci Muhammad Choudary
President Employee
8
EXHIBIT 6.11
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) is made this 23rd day of July, 1999 and
entered into between 1-800-AutoTow Gulf Coast East, Inc., a Florida corporation
("Company"), and Robert T. Menniges, ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Employee is an individual
possessing unique management and operating talents of value to the
Company.
B. Company desires to employ Employee as a Regional Marketing Manager of
Company and in such other capacities as agreed on from time to time in
writing by Employee and Company, and Employee desires to accept such
employment, all on the terms and conditions set forth in this Agreement.
C. Company and Employee each desire to prevent other competitive businesses
from securing Employee's services and utilizing Employee's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1
<PAGE>
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of two (2) years,
commencing August 1, 1999 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of its
initial two-year term only as set forth below. Unless this Agreement is so
terminated, or unless the Company elects not to renew this Agreement at the end
of its initial two-year term, or any subsequent term, by giving notice to
Employee of such non-renewal at least 90 days prior to the end of such term,
this Agreement shall be automatically renewed on the same terms for successive
one year periods.
2. Duties: Employee agrees to render to the Company the services as Regional
Marketing Manager of the Company as outlined in Attachment A.
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Employee with the following compensation and benefits:
(a) Base Salary: For all services rendered by Employee to Company
hereunder, Employee's base salary shall be $60,000 per year,
which shall commence the date of acquisition of Arrow Towing &
Recovery, Inc. by 1-800-AutoTow(TM), subject to annual
adjustment, payable in accordance with the Company's payroll
practices as in effect from time to time, and subject to such
withholding as is required by law.
(b) Bonus: In addition to the base salary specified above,
Employee may be paid a bonus which shall be in an amount, and
payable in a manner, to be determined at the sole discretion
of Company.
(c) Vacation: Employee shall be entitled to 2 weeks paid vacation.
If the vacation is not used during the year earned, it will be
lost and not carried forward into subsequent years.
2
<PAGE>
(d) Life Insurance: Company shall provide a cafeteria plan whereby
the Employee can buy Life Insurance to suit his particular
needs.
(e) Business Expenses: The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee in the
course of performing services for the Company subject to the
Company written guidelines.
(f) Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical
insurance and disability insurance, as is provided by Company
to its other employees.
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of his death to
Employee's estate or beneficiary.
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of his termination.
3
<PAGE>
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of his
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless the Board of Directors, in its
sole discretion, determines that a cure is not deemed possible
or appropriate.
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary for a period of 12 months after notice of termination
or the balance of the Employee's contract term. Any accrued
bonus shall be calculated on a period-to-date basis and
prorated to date of termination. All stock options which have
not vested at the time of termination without cause shall be
immediately vested. All other Company benefits will be
discontinued at the time of termination.
4
<PAGE>
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 30 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 30 day period and shall receive salary
during this period of transition.
(f) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
(g) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
5
<PAGE>
(a) During the entire term of Employee's employment with the
Company, and for two (2) years thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company. Employee shall
disclose all such matters to the Company, assign all right, title and interest
Employee may have in copyright, trademark, or other legal protection.
7. Non-Competition: Employee covenants and agrees that while in the employment
of Company or while receiving severance payments in lieu of active employment,
and for two (2) years after the termination or expiration of this Agreement or
the receipt of the Employee's last severance payment, Employee shall not;
(a) for his own account or either as agent, consultant, servant or
employee, or as a shareholder of any corporation or member of
any firm, own, manage, operate, join, control, or participate
in the ownership, management, operation or control of any
individual, or that division or part of any entity or business
that is in the vehicle towing, transport, salvage or auction
businesses, within one hundred (100) miles of the Company or
any affiliated company operation;
6
<PAGE>
(b) call upon any person who is, at that time, an employee of the
Company or any affiliated company in a managerial capacity for
the purpose or with the intent of enticing such employee away
from or out of the employ of the Company or any affiliated
company;
(c) call upon any person or entity which is, at that time or which
has been, within one (1) year prior to that time, a customer
of the Company, or any affiliated company for the purpose of
soliciting or selling products or services in direct
competition with the Company, or any affiliated Company;
(d) call upon any prospective acquisition candidate, on his behalf
or on behalf of any competitor in the vehicle towing or
transport business;
(e) disclose customers, whether in existence or proposed, of
the Company or any affiliated company, to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever excluding disclosure to the Company or any
affiliated company.
(f) In the event of an actual or threatened breach by Employee of
any of the provisions in Paragraph 7(a) hereof, Company shall
be entitled to an injunction restraining Employee from the
prohibited conduct without the necessity of establishing
irreparable injury to Company unless required under Florida
law. If a court of competent jurisdiction should hold that the
duration and/or scope (geographic or otherwise) of the
covenants contained in Paragraph 7(a) hereof are in violation
7
<PAGE>
of Florida law, then, to the extent permitted under Florida
law, the Circuit Court for Palm Beach County shall enforce all
such covenants (geographic and otherwise) to the fullest
extent permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated shall be
construed as prohibiting Company from pursuing any other
remedies available to it for such breach or threatened breach,
including the recovery of damages from Employee. In any action
or proceeding to enforce the provisions of this Paragraph 7,
or seeking damages for breach or threatened breach of this
Paragraph 7, the prevailing party shall be reimbursed by the
other party for all costs incurred in such action or
proceeding including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees, incurred
either at the trial level or at all appellate levels. Such
reimbursement, if any, shall be paid within thirty (30)
calendar days after the rendition of a final order in such
action or proceeding.
(g) The existence of any claim or cause of action by Employee
against Company shall not constitute a defense to the
enforcement by Company of the foregoing restrictive covenant.
(h) In the event Company obtains an injunction against Employee
arising from Employee's violation of any of the covenants set
forth in this Paragraph 7, then all of the terms of and
covenants in this Paragraph 7 shall automatically be extended
for a period of one (1) year, with such extension period
commencing, without Order of Court or any writing or other
action by the parties hereto, on the date that an injunction
Order is entered against Employee in any such action or
proceeding to enforce the provisions of this Paragraph 7.
(i) The covenants of this Paragraph 7 will not pertain to Employee
if the Company discontinues business resulting with the
Employee's employment being discontinued.
8. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
8
<PAGE>
the Company, and shall not accept other employment or engage in any other
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
9. Company's Right to Disclose: During Employee's employment hereunder and at
all times subsequent thereto, Employee hereby grants to Company the right to
notify all future employers of Employee of the non-competition restrictions on
Employee contained in this Agreement, and Employee hereby holds harmless and
indemnifies Company from any liability to Company which may arise from any such
disclosure.
10. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
11. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Employer: 1-800-AutoTow Gulf Coast East, Inc.
1301 N. Congress Ave., Suite 330
Boynton Beach, FL 33426
Employee: Robert Menniges
6503 E. Broadway
Tampa, FL 33619
12. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
13. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
9
<PAGE>
14. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
15. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
16. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of his obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(b) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
(c) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
for all purposes hereof.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 23rd day of July, 1999.
1-800-AutoTow Gulf Coast East, Inc. "Employee"
/s/ Steven B. Teeters /s/ Robert T. Menniges
--------------------- ----------------------
Steven B. Teeters Robert T. Menniges
Treasurer Employee
11
EXHIBIT 6.12
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) is made this 23rd day of July,
1999 and entered into between 1-800-AutoTow Gulf Coast East, Inc., a Florida
corporation ("Company"), and Helen Hohn, ("Employee").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Employee is an individual
possessing unique operating talents of value to the Company.
B. Company desires to employ Employee as an Area Administrative Assistant
and in such other capacities as agreed on from time to time in writing by
Employee and Company, and Employee desires to accept such employment, on
the terms and conditions set forth in this Agreement. This position will
be located at 6503 E. Broadway, Tampa, Florida.
C. Company and Employee each desire to prevent other competitive businesses
from securing Employee's services and utilizing Employee's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1
<PAGE>
1. Employment: Company hereby hires Employee to perform the duties and render
the services hereinafter set forth in Section 2, for a period of one (1) year,
commencing August 1, 1999 (the "Employment Term"), subject to earlier
termination as herein provided, and Employee hereby accepts said employment and
agrees to perform said services during the term of this Agreement. This
Agreement may be terminated by the Company prior to the expiration of the
one-year term only as set forth below. At the expiration of the term of this
Agreement future employment with 1-800-AutoTow Gulf Coast East, Inc., will be on
an at-will basis.
2. Duties: Employee agrees to render to the Company the services as Area
Administrative Assistant of the Company as outlined in Attachment A.
3. Compensation: As compensation for her services to be performed hereunder,
Company shall provide Employee with a Base Salary for all services rendered by
Employee to Company hereunder, of $28,000 per year, which shall commence the
date of acquisition of Arrow Towing & Recovery, Inc., by 1-800-AutoTow.
Other Benefits: Company shall provide Employee with such other
employment benefits, including without limitation, medical insurance
and disability insurance, as is provided by Company to its other
employees.
4. Termination: This Agreement and Employee's employment are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation
shall be payment of all compensation due Employee for services
rendered by Employee prior to the date of her death to
Employee's estate or beneficiary.
2
<PAGE>
(b) Disability: The Company may terminate Employee's employment in
the event that Employee is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Employee for services rendered by Employee
prior to the date of her termination.
(c) Termination of Employment With Cause: The Company may
terminate Employee's employment immediately upon written
notice to Employee in the event Employee (1) is convicted of a
felony by a court of competent jurisdiction; (2) commits any
gross misconduct, willful breach, or habitual neglect of her
duties; (3) willfully violates any policy or procedure of the
Company that causes a material adverse effect on the Company;
or (4) uses illegal or controlled substances. In any event,
the Company's sole obligation to Employee shall be payment of
all compensation due Employee for services rendered by
Employee prior to notice of termination under this subsection.
The Company shall give thirty (30) days notice to cure any
conduct set forth herein unless management, in its sole
discretion, determines that a cure is not deemed possible or
appropriate.
(d) Termination Without Cause: The Company in its sole discretion
may terminate Employee's employment without cause or prior
warning immediately upon written notice to Employee in which
event the Company's only obligation shall be to pay all
compensation owing for services rendered by Employee prior to
notice of termination, and to continue paying Employee's base
salary for a period of 2 months after notice of termination or
the balance of the Employee's contract term.
All other Company benefits will be discontinued at the time of
termination.
3
<PAGE>
(e) Resignation: Upon resignation, Employee shall only be entitled
to compensation earned as of the date of resignation. Any
stock options that have not been vested as of the date of
resignation shall be forfeited. Employee shall give 30 days
notice of resignation in order for an appropriate transition.
Employee agrees to cooperate with the Company upon reasonable
request during the 30 day period.
(f) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Employee may claim in
connection with employment with the Company.
(g) Return of Company Property: Upon termination of employment for
any reason, Employee shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
(h) In the event that employee is required to relocate outside
of Hillsborough County, Florida, employee may reject such
relocation, and shall: (a) be entitled t o sixty (60) days
notice; (b) be released from any non-competition restraints
whether contained herein or in the "Merger Agreement and Plan
of Reorganization"; and (c) shall not be required to relocate
during the foregoing sixty (60) day period.
4
<PAGE>
5. Confidentiality: Employee acknowledges and agrees that Employee has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Employee's employment with the
Company, and for one (1) year thereafter, Employee shall not
disclose or exploit any Confidential Information except as
necessary in the performance of Employee's duties under this
Agreement or with the Company's express written consent.
(b) Employee acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Employee therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Employee
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the employment relationship as defined herein.
5
<PAGE>
6. Developments: Any and all patents, copyrights, trademarks, inventions,
discoveries, development, or trade secrets developed or perfected by Employee as
the result of Employee's employment with the Company shall constitute the sole
and exclusive property of the Company. Employee shall disclose all such matters
to the Company, assign all right, title and interest Employee may have in
copyright, trademark, or other legal protection.
7. Conflict of Interest: During the term of this Agreement, Employee shall
devote Employee's full working time, ability, and attention to the business of
the Company, and shall not accept other employment or engage in any other
outside business activity which interferes with the performance of Employee's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
8. Assignment: This Agreement may not be assigned by Employee, but may be
assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to the benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, administrators, and legal
representatives.
9. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Employer: 1-800-AutoTow Gulf Coast East, Inc.
1301 N. Congress Ave., Suite 330
Boynton Beach, FL 33426
Employee: Helen Hohn
6503 E. Broadway
Tampa, FL 33619
10. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
6
<PAGE>
11. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
12. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
13. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
14. Miscellaneous:
(a) The Employee acknowledges and agrees that the Company's remedy
at law for any breach of any of her obligations hereunder
would be inadequate, and agrees and consents that temporary
and permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(d) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Employee and the Company or between the Employee
and any other individuals or entities other than those set
forth herein. No amendment to this Agreement shall be
effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Employee are merged in this agreement and are of no legal
effect.
7
<PAGE>
(e) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
for all purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 23rd day of July, 1999.
1-800-AutoTow Gulf Coast East, Inc. "Employee"
/s/ Steven B. Teeters /s/ Helen Hohn
--------------------- ----------------------
Steven B. Teeters Helen Hohn
Treasurer Employee
8
EXHIBIT 6.13
CONSULTING AGREEMENT
This Consulting Agreement (Agreement) is made this 23rd day of July,
1999 and entered into between 1-800-AutoTow Gulf Coast East, Inc. a Florida
corporation ("Company"), and Zinna Terenik, ("Consultant").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Consultant is an
individual possessing unique management and operating talents of value to
the Company.
B. Company desires to engage Consultant and Consultant desires to
accept such engagement, all on the terms and conditions set forth in
this Agreement.
C. Company and Consultant each desire to prevent other competitive
businesses from securing Consultant's services and utilizing Consultant's
experience, background, confidential information and inventions as
hereinafter set forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Engagement: Company hereby hires Consultant to perform the duties and render
the services hereinafter set forth in Section 2, for a minimum of six months,
commencing with the Company's purchase of L&W Collision, Towing & Recovery,
Inc., and Consultant hereby accepts said engagement and agrees to perform said
services during the term of this Agreement.
2. Duties: Consultant agrees to render to the Company the services as outlined
in Attachment A.
1
<PAGE>
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Consultant with the following compensation and benefits:
(a) Base Compensation: For all services rendered by Consultant to
Company hereunder, Consultant's base fee shall be $4,316.00
per month, which shall commence the date of acquisition of L&W
Collision, Towing & Recovery, Inc. by 1-800-AutoTow(TM).
4. Termination: This Agreement and Consultant's engagement are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Consultant's death, in which event the Company's only
obligation shall be payment of all compensation due Consultant
for services rendered by Consultant prior to the date of his
death to Consultant's estate or beneficiary.
(b) Disability: The Company may terminate Consultant's engagement
in the event that Consultant is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Consultant for services rendered by
Consultant prior to the date of his termination.
2
<PAGE>
(c) Termination of Engagement With Cause: The Company may
terminate Consultant's engagement immediately upon written
notice to Consultant in the event Consultant (1) is convicted
of a felony by a court of competent jurisdiction; (2) commits
any gross misconduct, willful breach, or habitual neglect of
his duties; (3) willfully violates any policy or procedure of
the Company that causes a material adverse effect on the
Company; or (4) uses illegal or controlled substances. In any
event, the Company's sole obligation to Consultant shall be
payment of all compensation due Consultant for services
rendered by Consultant prior to notice of termination under
this subsection. The Company shall give thirty (30) days
notice to cure any conduct set forth herein unless the Board
of Directors, in its sole discretion, determines that a cure
is not deemed possible or appropriate.
(d) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Consultant may claim in
connection with engagement with the Company.
(e) Return of Company Property: Upon termination of engagement for
any reason, Consultant shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
3
<PAGE>
5. Confidentiality: Consultant acknowledges and agrees that Consultant has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Consultant's engagement with the
Company, and for two (2) years thereafter, Consultant shall
not disclose or exploit any Confidential Information except as
necessary in the performance of Consultant's duties under this
Agreement or with the Company's express written consent.
(b) Consultant acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Consultant therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Consultant
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the engagement relationship as defined herein.
6. Non-Competition: Will be covered under an addendum to the purchase agreement
between L&W Collision, Towing & Recovery, Inc., and 1-800-AutoTow.
7. Conflict of Interest: During the term of this Agreement, Consultant shall
devote Consultant's full working time, ability, and attention to the business of
4
<PAGE>
the Company, and shall not accept other engagement or engage in any other
outside business activity which interferes with the performance of Consultant's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
8. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Company: 1-800-AutoTow Florida, Inc.
1301 N. Congress Ave., Suite 330
Boynton Beach, FL 33426
Consultant: Zinna Terenik
114 Guava Street
Lady Lake, FL 32159
9. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
10. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
11. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
12. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
5
<PAGE>
13. Miscellaneous:
(a) The Consultant acknowledges and agrees that the Company's
remedy at law for any breach of any of his obligations
hereunder would be inadequate, and agrees and consents that
temporary and permanent injunctive relief may be granted in
any proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(f) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Consultant and the Company or between the
Consultant and any other individuals or entities other than
those set forth herein. No amendment to this Agreement shall
be effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Consultant are merged in this agreement and are of no legal
effect.
(g) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
for all purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 23rd day of July, 1999.
1-800-AutoTow Gulf Coast East, Inc. "Consultant"
/s/ Steven B. Teeters /s/ Zinna Terenik
--------------------- --------------------
Steven B. Teeters Zinna Terenik
Treasurer Consultant
6
<PAGE>
ATTACHMENT A
Consulting Services to provide advice and services on the day-to-day operations
to the office staff at Lady Lake, FL.
7
EXHIBIT 6.14
CONSULTING AGREEMENT
This Consulting Agreement (Agreement) is made this 22nd day of July,
and entered into between 1-800-AutoTow Gulf Coast East, Inc. a Florida
corporation ("Company"), and Dennis W. Meyer, ("Consultant").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Consultant is an individual
possessing unique management and operating talents of value to the Company.
B. Company desires to engage Consultant and Consultant desires to accept such
engagement, all on the terms and conditions set forth in this Agreement.
C. Company and Consultant each desire to prevent other competitive businesses
from securing Consultant's services and utilizing Consultant's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Engagement: Company hereby hires Consultant to perform the duties and render
the services hereinafter set forth in Section 2, for a period of 3 months,
commencing August 1, 1999 (the "Engagement Term"), and Consultant hereby accepts
said engagement and agrees to perform said services during the term of this
Agreement.
2. Duties: Consultant agrees to render to the Company the services as outlined
in Attachment A.
1
<PAGE>
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Consultant with the following compensation and benefits:
(a) Base Compensation: For all services rendered by Consultant to
Company hereunder, Consultant's base fee shall be $3,000 per
month, which shall commence the date of acquisition of the
assets of Dennis W. Meyer, Inc., d/b/a Denny's Towing Service
by Company.
4. Termination: This Agreement and Consultant's engagement are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Consultant's death, in which event the Company's only
obligation shall be payment of all compensation due Consultant
for services rendered by Consultant prior to the date of his
death to Consultant's estate or beneficiary.
(b) Disability: The Company may terminate Consultant's engagement
in the event that Consultant is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Consultant for services rendered by
Consultant prior to the date of his termination.
2
<PAGE>
(c) Termination of Engagement With Cause: The Company may
terminate Consultant's engagement immediately upon written
notice to Consultant in the event Consultant (1) is convicted
of a felony by a court of competent jurisdiction; (2) commits
any gross misconduct, willful breach, or habitual neglect of
his duties; (3) willfully violates any policy or procedure of
the Company that causes a material adverse effect on the
Company; or (4) uses illegal or controlled substances. In any
event, the Company's sole obligation to Consultant shall be
payment of all compensation due Consultant for services
rendered by Consultant prior to notice of termination under
this subsection. The Company shall give thirty (30) days
notice to cure any conduct set forth herein unless the Board
of Directors, in its sole discretion, determines that a cure
is not deemed possible or appropriate.
(d) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Consultant may claim in
connection with engagement with the Company.
(e) Return of Company Property: Upon termination of engagement for
any reason, Consultant shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
3
<PAGE>
5. Confidentiality: Consultant acknowledges and agrees that Consultant has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Consultant's engagement with the
Company, and for five (5) years thereafter, Consultant shall
not disclose or exploit any Confidential Information except as
necessary in the performance of Consultant's duties under this
Agreement or with the Company's express written consent.
(b) Consultant acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Consultant therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Consultant
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the engagement relationship as defined herein.
6. Non-Competition: Will be covered under an addendum to the purchase agreement
between Dennis W. Meyer, Inc., and 1-800-AutoTow Gulf coast East, Inc.
7. Conflict of Interest: During the term of this Agreement, Consultant shall
devote Consultant's full working time, ability, and attention to the business of
4
<PAGE>
the Company, and shall not accept other engagement or engage in any other
outside business activity which interferes with the performance of Consultant's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
8. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Company: 1-800-AutoTow Gulf Coast East, Inc.
1301 N. Congress Ave., Suite 330
Boynton Beach, FL 33426
Consultant: Dennis W. Meyer
2600 24th Street
St. Petersburg, FL 33713
9. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
10. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
11. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
12. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
5
<PAGE>
13. Miscellaneous:
(a) The Consultant acknowledges and agrees that the Company's
remedy at law for any breach of any of his obligations
hereunder would be inadequate, and agrees and consents that
temporary and permanent injunctive relief may be granted in
any proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(h) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Consultant and the Company or between the
Consultant and any other individuals or entities other than
those set forth herein. No amendment to this Agreement shall
be effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Consultant are merged in this agreement and are of no legal
effect.
(i) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
for all purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 22nd day of July, 1999.
1-800-AutoTow Gulf Coast East, Inc. "Consultant"
/s/ Steven B. Teeters /s/ Dennis W. Meyer
--------------------- --------------------
Steven B. Teeters Dennis W. Meyer
Treasurer Consultant
6
EXHIBIT 6.15
CONSULTING AGREEMENT
This Consulting Agreement (Agreement) is made this 22nd day of July,
and entered into between 1-800-AutoTow Gulf Coast East, Inc. a Florida
corporation ("Company"), and Frank W. Rice, ("Consultant").
RECITALS
A. Company is a corporation engaged in the business of providing towing and
other services in the transportation industry. Consultant is an individual
possessing unique management and operating talents of value to the Company.
B. Company desires to engage Consultant and Consultant desires to accept such
engagement, all on the terms and conditions set forth in this Agreement.
C. Company and Consultant each desire to prevent other competitive businesses
from securing Consultant's services and utilizing Consultant's experience,
background, confidential information and inventions as hereinafter set
forth.
AGREEMENT
In consideration of the foregoing recitals and the covenants and
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. Engagement: Company hereby hires Consultant to perform the duties and render
the services hereinafter set forth in Section 2, for a minimum of three months,
commencing with the Company's purchase of the assets of Town `N Country Inc.,
and Consultant hereby accepts said engagement and agrees to perform said
services during the term of this Agreement.
2. Duties: Consultant agrees to render to the Company the services as outlined
in Attachment A.
1
<PAGE>
3. Compensation: As compensation for his services to be performed hereunder,
Company shall provide Consultant with the following compensation and benefits:
(a) Base Compensation: For all services rendered by Consultant to
Company hereunder, Consultant's base fee shall be $5,000.00
per month, which shall commence the date of acquisition of
Town `N Country, Inc. by 1-800-AutoTow Gulf Coast East, Inc.
4. Termination: This Agreement and Consultant's engagement are subject to
immediate termination at any time as follows:
(a) Death: This Agreement shall terminate immediately upon
Consultant's death, in which event the Company's only
obligation shall be payment of all compensation due Consultant
for services rendered by Consultant prior to the date of his
death to Consultant's estate or beneficiary.
(b) Disability: The Company may terminate Consultant's engagement
in the event that Consultant is disabled from performing all
assigned duties under this Agreement due to illness or injury
for a period in excess of three (3) consecutive months, in
which event the Company's only obligation shall be to pay all
compensation due Consultant for services rendered by
Consultant prior to the date of his termination.
2
<PAGE>
(c) Termination of Engagement With Cause: The Company may
terminate Consultant's engagement immediately upon written
notice to Consultant in the event Consultant (1) is convicted
of a felony by a court of competent jurisdiction; (2) commits
any gross misconduct, willful breach, or habitual neglect of
his duties; (3) willfully violates any policy or procedure of
the Company that causes a material adverse effect on the
Company; or (4) uses illegal or controlled substances. In any
event, the Company's sole obligation to Consultant shall be
payment of all compensation due Consultant for services
rendered by Consultant prior to notice of termination under
this subsection. The Company shall give thirty (30) days
notice to cure any conduct set forth herein unless the Board
of Directors, in its sole discretion, determines that a cure
is not deemed possible or appropriate.
(d) Company's Sole Obligation: In the event of any termination
pursuant to this Section, the payment of the amounts set forth
in subsections (a) through (e) above as applicable constitute
the sole obligations of the Company and are in lieu of any
damages or other compensation that Consultant may claim in
connection with engagement with the Company.
(e) Return of Company Property: Upon termination of engagement for
any reason, Consultant shall immediately return to the Company
without condition all files, records, keys, and other property
of the Company.
3
<PAGE>
5. Confidentiality: Consultant acknowledges and agrees that Consultant has been
entrusted with trade secrets and proprietary information regarding the products,
processes, methods of manufacture and delivery, know-how, designs, formula, work
in progress, research and development, computer software and data bases,
copyrights, trademarks, patents, marketing techniques, and future business
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
(a) During the entire term of Consultant's engagement with the
Company, and for two (2) years thereafter, Consultant shall
not disclose or exploit any Confidential Information except as
necessary in the performance of Consultant's duties under this
Agreement or with the Company's express written consent.
(b) Consultant acknowledges and agrees that any violation of this
Section would cause immediate irreparable damage to the
Company, and that it shall be extremely difficult or
impossible to determine the amount of damage caused to the
Company. Consultant therefore consents to the issuance of a
temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without
limiting any other remedies the Company may have. Consultant
agrees to the sole and exclusive jurisdiction of the Circuit
Court for Palm Beach County, Florida should any dispute arise
out of the engagement relationship as defined herein.
6. Non-Competition: Will be covered under an addendum to the purchase agreement
between Town `N Country, Inc., and 1-800-AutoTow Gulf Coast East, Inc.
4
<PAGE>
7. Conflict of Interest: During the term of this Agreement, Consultant shall
devote Consultant's full working time, ability, and attention to the business of
the Company, and shall not accept other engagement or engage in any other
outside business activity which interferes with the performance of Consultant's
duties and responsibilities under this Agreement or which involves actual or
potential competition with the business of the Company, except with the express
written consent of the Company.
8. Notices: All notices and other communications under this Agreement shall be
in writing and shall be delivered personally or mailed by registered mail,
return receipt requested and shall be deemed given when so delivered or mailed,
to a party at such address as a party may, from time to time, designate in
writing to the other party. The initial addresses for notices are as follows:
Company: 1-800-AutoTow Gulf Coast East, Inc.
1301 N. Congress Ave., Suite 330
Boynton Beach, FL 33426
Consultant: Frank W. Rice
9447 W. Hillsborough Ave.
Tampa, FL 33615
9. Severability: In the event any provision of this Agreement is void or
unenforceable, the remaining provisions shall continue in full force and effect.
10. Waiver: No waiver of any breach of this Agreement shall constitute a waiver
of any subsequent breach.
11. Applicable Law: This Agreement shall be construed according to the laws of
the State of Florida. In the event action be brought to enforce any provisions
of this Agreement in the Circuit Court for Palm Beach County, the prevailing
party shall be entitled to reasonable attorneys' fees as fixed by the court.
12. Headings: The paragraph and subparagraph headings herein are for convenience
only and shall not affect the construction hereof.
5
<PAGE>
13. Miscellaneous:
(a) The Consultant acknowledges and agrees that the Company's
remedy at law for any breach of any of his obligations
hereunder would be inadequate, and agrees and consents that
temporary and permanent injunctive relief may be granted in
any proceeding that may be brought to enforce any provision of
this Agreement without the necessity of proof of actual damage
and without any bond or other security being required. Such
remedies shall not be exclusive and shall be in addition to
any other remedy, which the Company may have.
(j) This Agreement constitutes the entire Agreement between the
parties regarding the above matters, and each party
acknowledges that there are no other written or verbal
Agreements or understandings relating to such subject matter
between the Consultant and the Company or between the
Consultant and any other individuals or entities other than
those set forth herein. No amendment to this Agreement shall
be effective unless it is in writing and signed by both the
parties hereto. All prior written or oral agreements
concerning the relationship between the Company and the
Consultant are merged in this agreement and are of no legal
effect.
(k) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
for all purposes hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
this 22nd day of July, 1999.
1-800-AutoTow Gulf Coast East, Inc. "Consultant"
/s/ Steven B. Teeters /s/ Frank W. Rice
--------------------- --------------------
Steven B. Teeters Frank W. Rice
Treasurer Consultant
6
EXHIBIT 6.16
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (Agreement) is made this 23rd day of July, 1999,
and entered into between 1-800-AutoTow Gulf Coast East, Inc., a Florida
corporation ("Company"), and Zinna Terenik.
AGREEMENT
1. In consideration, Zinna Terenik covenant and agree that for a period of
five (5) years they shall not;
(a) for their own accounts or either as agents,
consultants or servants, or as a seller of any
corporation or member of any firm, own, manage,
operate, join, control, or participate in the
ownership, management, operation or control of any
individual, or that division or part of any entity or
business that is in the vehicle towing, transport,
salvage or auction businesses, within one hundred
(100) miles of the Company or any affiliated company
operation;
(b) call upon any person who is, at that time, an
employee of the company or any affiliated company in
a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of
the employ of the Company or any affiliated company;
(c) call upon any person or entity which is, at that time
or which as been, within one (1) year prior to that
time, a customer of the Company, or any affiliated
company for the purpose of soliciting or selling
products or services in direct competition with the
Company, or any affiliated Company;
(d) call upon any prospective acquisition candidate, on
his behalf or on behalf of any competitor in the
vehicle towing or transport business; or
1
<PAGE>
(e) disclose customers, whether in existence or proposed,
of the Company or any affiliated company, to any
person, firm, partnership, corporation or business
for any reason or purpose whatsoever excluding
disclosure to the Company or any affiliated company.
(f) In the event of an actual or threatened breach by
Zinna Terenik of any of the provisions in Paragraph 1
hereof, Company shall be entitled to an injunction
restraining Zinna Terenik from the prohibited conduct
without the necessity of establishing irreparable
injury to Company unless required under Florida law.
If a court of competent jurisdiction should hold that
the duration and/or scope (geographic or otherwise)
of the covenants contained in Paragraph 1 hereof are
in violation of Florida law, then, to the extent
permitted under Florida law, the Circuit Court for
Palm Beach County shall enforce all such covenants
(geographic and otherwise) to the fullest extent
permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated
shall be construed as prohibiting Company from
pursuing any other remedies available to it for such
breach or threatened breach, including the recovery
of damages from Zinna Terenik. In any action or
proceeding to enforce the provisions of this
agreement, or seeking damages for breach or
threatened breach of this agreement, the prevailing
party shall be reimbursed by the other party for all
costs incurred in such action or proceeding
including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees,
incurred either at the trial level or at all
appellate levels. Such reimbursement, if any, shall
be paid within thirty (30) calendar days after the
rendition of a final order in such action or
proceeding.
2
<PAGE>
(g) The existence of any claim or cause of action by
Zinna Terenik against Company, shall not constitute a
defense to the enforcement by Company of the
foregoing restrictive covenant.
(h) In the event Company obtains an injunction against
Zinna Terenik arising from Zinna Terenik's violation
of any of the covenants set forth in this agreement,
then all of the terms of and covenants in this
agreement shall automatically be extended for a
period of one (1) year, with such extension period
commencing, without Order of Court or any writing or
other action by the parties hereto, on the date that
an injunction Order is entered against Zinna Terenik
in any such action or proceeding to enforce the
provisions of this agreement.
1-800-AutoTow, Gulf Coast East, Inc. L & W Collision, Towing & Recovery, Inc.
/s/ Steven B. Teeters /s/ Zinna Terenik
--------------------- --------------------
Steven B. Teeters Zinna Terenik
Treasurer
3
EXHIBIT 6.17
NON-COMPETITION AGREEMENT
-------------------------
This Non-Competition Agreement (Agreement) is made this 28rd day of July, 1999,
and entered into between 1-800-AutoTow Florida, Inc., a Florida corporation
("Company"), and Don Lyons and Bobbye Gail Lyons.
AGREEMENT
1. In consideration, Don Lyons and Bobbye Gail Lyons covenant and agree
that for a period of five (5) years they shall not;
(a) for their own accounts or either as agents,
consultants or servants, or as a seller of any
corporation or member of any firm, own, manage,
operate, join, control, or participate in the
ownership, management, operation or control of any
individual, or that division or part of any entity or
business that is in the vehicle towing, transport,
salvage or auction businesses, within one hundred
(100) miles of the Company or any affiliated company
operation;
(b) call upon any person who is, at that time, an
employee of the company or any affiliated company in
a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of
the employ of the Company or any affiliated company;
(c) call upon any person or entity which is, at that time
or which as been, within one (1) year prior to that
time, a customer of the Company, or any affiliated
company for the purpose of soliciting or selling
products or services in direct competition with the
Company, or any affiliated Company;
1
<PAGE>
(d) call upon any prospective acquisition candidate,
on his behalf or on behalf of any competitor in the
vehicle towing or transport business; or
(e) disclose customers, whether in existence or proposed,
of the Company or any affiliated company, to any
person, firm, partnership, corporation or business
for any reason or purpose whatsoever excluding
disclosure to the Company or any affiliated company.
(f) In the event of an actual or threatened breach by Don
Lyons and Bobbye Gail Lyons of any of the provisions
in Paragraph 1 hereof, Company shall be entitled to
an injunction restraining Don Lyons and Bobbye Gail
Lyons from the prohibited conduct without the
necessity of establishing irreparable injury to
Company unless required under Florida law. If a court
of competent jurisdiction should hold that the
duration and/or scope (geographic or otherwise) of
the covenants contained in Paragraph 1 hereof are in
violation of Florida law, then, to the extent
permitted under Florida law, the Circuit Court for
Palm Beach County shall enforce all such covenants
(geographic and otherwise) to the fullest extent
permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated
shall be construed as prohibiting Company from
pursuing any other remedies available to it for such
breach or threatened breach, including the recovery
of damages from Don Lyons and Bobbye Gail Lyons. In
any action or proceeding to enforce the provisions of
this agreement, or seeking damages for breach or
threatened breach of this agreement, the prevailing
party shall be reimbursed by the other party for all
costs incurred in such action or proceeding
including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees,
incurred either at the trial level or at all
appellate levels. Such reimbursement, if any, shall
be paid within thirty (30) calendar days after the
rendition of a final order in such action or
proceeding.
2
<PAGE>
(g) The existence of any claim or cause of action by Don
Lyons and Bobbye Gail Lyons against Company, shall
not constitute a defense to the enforcement by
Company of the foregoing restrictive covenant.
(h) In the event Company obtains an injunction against
Don Lyons and Bobbye Gail Lyons arising from Don
Lyons and Bobbye Gail Lyons' violation of any of the
covenants set forth in this agreement, then all of
the terms of and covenants in this agreement shall
automatically be extended for a period of one (1)
year, with such extension period commencing, without
Order of Court or any writing or other action by the
parties hereto, on the date that an injunction Order
is entered against Don Lyons and Bobbye Gail Lyons in
any such action or proceeding to enforce the
provisions of this agreement.
1-800-AutoTow Florida, Inc. Lyons Towing, Inc.
/s/ Eugene A. Iarocci /s/ Don Lyons
--------------------- --------------------
Eugene A. Iarocci Don Lyons
President
/s/ Bobbye Gail Lyons
---------------------
Bobbye Gail Lyons
3
EXHIBIT 6.18
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (Agreement) is made this 22nd day of July, 1999,
and entered into between 1-800-AutoTow, Inc., a Florida corporation ("Company"),
and Sandra K. Stewart ("Seller").
AGREEMENT
1. In consideration, Seller covenants and agrees that for a period of five
(5) years Seller shall not;
(a) for her own account or either as agent, consultant or
servant, or as a seller of any corporation or member
of any firm, own, manage, operate, join, control, or
participate in the ownership, management, operation
or control of any individual, or that division or
part of any entity or business that is in the vehicle
towing, transport, salvage or auction businesses,
within one hundred (100) miles of the Company or any
affiliated company operation;
(b) call upon any person who is, at that time, an
employee of the company or any affiliated company in
a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of
the employ of the Company or any affiliated company;
(c) call upon any person or entity which is, at that time
or which as been, within one (1) year prior to that
time, a customer of the Company, or any affiliated
company for the purpose of soliciting or selling
products or services in direct competition with the
Company, or any affiliated Company;
(d) call upon any prospective acquisition candidate,
on his behalf or on behalf of any competitor in the
vehicle towing or transport business; or
1
<PAGE>
(e) disclose customers, whether in existence or proposed,
of the Company or any affiliated company, to any
person, firm, partnership, corporation or business
for any reason or purpose whatsoever excluding
disclosure to the Company or any affiliated company.
(f) In the event of an actual or threatened breach by
Seller of any of the provisions in Paragraph 1
hereof, Company shall be entitled to an injunction
restraining Seller from the prohibited conduct
without the necessity of establishing irreparable
injury to Company unless required under Florida law.
If a court of competent jurisdiction should hold that
the duration and/or scope (geographic or otherwise)
of the covenants contained in Paragraph 1 hereof are
in violation of Florida law, then, to the extent
permitted under Florida law, the Circuit Court for
Palm Beach County shall enforce all such covenants
(geographic and otherwise) to the fullest extent
permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated
shall be construed as prohibiting Company from
pursuing any other remedies available to it for such
breach or threatened breach, including the recovery
of damages from Seller. In any action or proceeding
to enforce the provisions of this agreement, or
seeking damages for breach or threatened breach of
this agreement, the prevailing party shall be
reimbursed by the other party for all costs incurred
in such action or proceeding including, without
limitation, all court costs and filing fees, and all
reasonable attorneys' fees, incurred either at the
trial level or at all appellate levels. Such
reimbursement, if any, shall be paid within thirty
(30) calendar days after the rendition of a final
order in such action or proceeding.
(g) The existence of any claim or cause of action by
Seller against Company, shall not constitute a
defense to the enforcement by Company of the
foregoing restrictive covenant.
2
<PAGE>
(h) In the event Company obtains an injunction against
Seller arising from Seller's violation of any of the
covenants set forth in this agreement, then all of
the terms of and covenants in this agreement shall
automatically be extended for a period of one (1)
year, with such extension period commencing, without
Order of Court or any writing or other action by the
parties hereto, on the date that an injunction Order
is entered against Seller in any such action or
proceeding to enforce the provisions of this
agreement.
1-800-AutoTow, Inc. Seller
/s/ Joel B. Nagelmann /s/ Sandra K. Stewart
--------------------- --------------------
Joel B. Nagelmann Sandra K. Stewart
President
3
EXHIBIT 6.19
NON-COMPETITION AGREEMENT
-------------------------
This Non-Competition Agreement (Agreement) is made this 28th day of July, 1999,
and entered into between 1-800-AutoTow Gulf Coast S.W., Inc., a Texas
corporation ("Company"), and Kurshid A. Choudary.
AGREEMENT
1. In consideration, Kurshid A. Choudary covenants and agrees that for a
period of five (5) years Kurshid A. Choudary shall not;
(a) for her own account or either as agent, consultant or
servant, or as a seller of any corporation or member
of any firm, own, manage, operate, join, control, or
participate in the ownership, management, operation
or control of any individual, or that division or
part of any entity or business that is in the vehicle
towing, transport, salvage or auction businesses,
within one hundred (100) miles of the Company or any
affiliated company operation;
(b) call upon any person who is, at that time, an
employee of the company or any affiliated company in
a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of
the employ of the Company or any affiliated company;
(c) call upon any person or entity which is, at that time
or which as been, within one (1) year prior to that
time, a customer of the Company, or any affiliated
company for the purpose of soliciting or selling
products or services in direct competition with the
Company, or any affiliated Company;
(d) call upon any prospective acquisition candidate,
on his behalf or on behalf of any competitor in the
vehicle towing or transport business; or
1
<PAGE>
(e) disclose customers, whether in existence or proposed,
of the Company or any affiliated company, to any
person, firm, partnership, corporation or business
for any reason or purpose whatsoever excluding
disclosure to the Company or any affiliated company.
(f) In the event of an actual or threatened breach by
Kurshid A. Choudary of any of the provisions in
Paragraph 1 hereof, Company shall be entitled to an
injunction restraining Seller from the prohibited
conduct without the necessity of establishing
irreparable injury to Company unless required under
Florida law. If a court of competent jurisdiction
should hold that the duration and/or scope
(geographic or otherwise) of the covenants contained
in Paragraph 1 hereof are in violation of Florida
law, then, to the extent permitted under Florida law,
the Circuit Court for Palm Beach County shall enforce
all such covenants (geographic and otherwise) to the
fullest extent permitted under Florida law and the
parties hereto agree to be bound by same. Nothing
herein stated shall be construed as prohibiting
Company from pursuing any other remedies available to
it for such breach or threatened breach, including
the recovery of damages from Kurshid A. Choudary. In
any action or proceeding to enforce the provisions of
this agreement, or seeking damages for breach or
threatened breach of this agreement, the prevailing
party shall be reimbursed by the other party for all
costs incurred in such action or proceeding
including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees,
incurred either at the trial level or at all
appellate levels. Such reimbursement, if any, shall
be paid within thirty (30) calendar days after the
rendition of a final order in such action or
proceeding.
2
<PAGE>
(g) The existence of any claim or cause of action by
Kurshid A. Choudary against Company, shall not
constitute a defense to the enforcement by Company of
the foregoing restrictive covenant.
(h) In the event Company obtains an injunction against
Kurshid A. Choudary arising from Kurshid A.
Choudary's violation of any of the covenants set
forth in this agreement, then all of the terms of and
covenants in this agreement shall automatically be
extended for a period of one (1) year, with such
extension period commencing, without Order of Court
or any writing or other action by the parties hereto,
on the date that an injunction Order is entered
against Kurshid A. Choudary in any such action or
proceeding to enforce the provisions of this
agreement.
1-800-AutoTow Gulf Coast S.W., Inc.
/s/ Eugene A. Iarocci /s/ Kurshid A. Choudary
--------------------- --------------------
Eugene A. Iarocci Kurshid A. Choudary
President
3
EXHIBIT 6.20
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (Agreement) is made this 22nd day of July, 1999,
and entered into between 1-800-AutoTow Gulf Coast East, Inc., a Florida
corporation ("Company"), and Dennis W. Meyer, and Shari Noles.
AGREEMENT
1. In consideration, Dennis W. Meyer and Shari Noles covenant and agree
that for a period of five (5) years they shall not;
(a) for their own accounts or either as agents,
consultants or servants, or as a seller of any
corporation or member of any firm, own, manage,
operate, join, control, or participate in the
ownership, management, operation or control of any
individual, or that division or part of any entity or
business that is in the vehicle towing, transport,
salvage or auction businesses, within one hundred
(100) miles from 2600 24th Street north, St.
Petersburg, Florida;
(b) call upon any person who is, at that time, an
employee of the company or any affiliated company in
a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of
the employ of the Company or any affiliated company;
(c) call upon any person or entity which is, at that time
or which as been, within one (1) year prior to that
time, a customer of the Company, or any affiliated
company for the purpose of soliciting or selling
products or services in direct competition with the
Company, or any affiliated Company;
(d) call upon any prospective acquisition candidate,
on his behalf or on behalf of any competitor in the
vehicle towing or transport business; or
(e) disclose customers, whether in existence or proposed,
of the Company or any affiliated company, to any
person, firm, partnership, corporation or business
for any reason or purpose whatsoever excluding
disclosure to the Company or any affiliated company.
1
<PAGE>
(f) In the event of an actual or threatened breach by
Dennis W. Meyer and or Shari Noles of any of the
provisions in Paragraph 1 hereof, Company shall be
entitled to an injunction restraining Dennis W. Meyer
and or Shari Noles from the prohibited conduct
without the necessity of establishing irreparable
injury to Company unless required under Florida law.
If a court of competent jurisdiction should hold that
the duration and/or scope (geographic or otherwise)
of the covenants contained in Paragraph 1 hereof are
in violation of Florida law, then, to the extent
permitted under Florida law, the Circuit Court for
Palm Beach County shall enforce all such covenants
(geographic and otherwise) to the fullest extent
permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated
shall be construed as prohibiting Company from
pursuing any other remedies available to it for such
breach or threatened breach, including the recovery
of damages from Dennis W. Meyer and or Shari Noles.
In any action or proceeding to enforce the provisions
of this agreement, or seeking damages for breach or
threatened breach of this agreement, the prevailing
party shall be reimbursed by the other party for all
costs incurred in such action or proceeding
including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees,
incurred either at the trial level or at all
appellate levels. Such reimbursement, if any, shall
be paid within thirty (30) calendar days after the
rendition of a final order in such action or
proceeding.
(g) The existence of any claim or cause of action by
Dennis W. Meyer and or Shari Noles against Company,
shall not constitute a defense to the enforcement by
Company of the foregoing restrictive covenant.
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<PAGE>
(h) In the event Company obtains an injunction against
Dennis W. Meyer and or Shari Noles arising from
Dennis W. Meyer's and or Shari Noles' violation of
any of the covenants set forth in this agreement,
then all of the terms of and covenants in this
agreement shall automatically be extended for a
period of one (1) year, with such extension period
commencing, without Order of Court or any writing or
other action by the parties hereto, on the date that
an injunction Order is entered against Dennis W.
Meyer and or Shari Noles in any such action or
proceeding to enforce the provisions of this
agreement.
1-800-AutoTow, Gulf Coast East, Inc. Dennis W. Meyer, Inc.
d/b/a/ Denny's Towing Service
/s/ Steven B. Teeters /s/ Dennis W. Meyer
--------------------- --------------------
Steven B. Teeters Dennis W. Meyer
Treasurer
/s/ Shari Noles
--------------------
Shari Noles
3
EXHIBIT 6.21
NON-COMPETITION AGREEMENT
-------------------------
This Non-Competition Agreement (Agreement) is made this 22nd day of July, 1999,
and entered into between 1-800-AutoTow Gulf Coast East, Inc., a Florida
corporation ("Company"), and Frank W. Rice.
AGREEMENT
1. In consideration, Frank W. Rice covenants and agrees that for a period
of five (5) years shall not;
(a) for his own account or either as agent, consultant or
servant, or as a seller of any corporation or member
of any firm, own, manage, operate, join, control, or
participate in the ownership, management, operation
or control of any individual, or that division or
part of any entity or business that is in the vehicle
towing, transport, salvage or auction businesses,
within one hundred (100) miles of Town `N Country's
current premises at 9447 W. Hillsborough Ave., Tampa,
Florida 33615. This Agreement shall not preclude
Frank W. Rice from engaging in the Collateral
Recovery business however;
(b) call upon any person who is, at that time, an
employee of the company or any affiliated company in
a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of
the employ of the Company or any affiliated company;
(c) call upon any person or entity which is, at that time
or which as been, within one (1) year prior to that
time, a customer of the Company, or any affiliated
company for the purpose of soliciting or selling
products or services in direct competition with the
Company, or any affiliated Company;
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(d) call upon any prospective acquisition candidate,
on his behalf or on behalf of any competitor in the
vehicle towing or transport business; or
(e) disclose customers, whether in existence or proposed,
of the Company or any affiliated company, to any
person, firm, partnership, corporation or business
for any reason or purpose whatsoever excluding
disclosure to the Company or any affiliated company.
(f) In the event of an actual or threatened breach by
Frank W. Rice of any of the provisions in Paragraph 1
hereof, Company shall be entitled to an injunction
restraining Frank W. Rice from the prohibited conduct
without the necessity of establishing irreparable
injury to Company unless required under Florida law.
If a court of competent jurisdiction should hold that
the duration and/or scope (geographic or otherwise)
of the covenants contained in Paragraph 1 hereof are
in violation of Florida law, then, to the extent
permitted under Florida law, the Circuit Court for
Palm Beach County shall enforce all such covenants
(geographic and otherwise) to the fullest extent
permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated
shall be construed as prohibiting Company from
pursuing any other remedies available to it for such
breach or threatened breach, including the recovery
of damages from Frank W. Rice. In any action or
proceeding to enforce the provisions of this
agreement, or seeking damages for breach or
threatened breach of this agreement, the prevailing
party shall be reimbursed by the other party for all
costs incurred in such action or proceeding
including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees,
incurred either at the trial level or at all
appellate levels. Such reimbursement, if any, shall
be paid within thirty (30) calendar days after the
rendition of a final order in such action or
proceeding.
2
<PAGE>
(g) The existence of any claim or cause of action by
Frank W. Rice against Company, shall not constitute a
defense to the enforcement by Company of the
foregoing restrictive covenant.
(h) In the event Company obtains an injunction
against Seller arising from Frank W. Rice's violation
of any of the covenants set forth in this agreement,
then all of the terms of and covenants in this
agreement shall automatically be extended for a
period of one (1) year, with such extension period
commencing, without Order of Court or any writing or
other action by the parties hereto, on the date that
an injunction Order is entered against Seller in any
such action or proceeding to enforce the provisions
of this agreement.
1-800-AutoTow Gulf Coast East, Inc.
/s/ Steven B. Teeters /s/ Frank W. Rice
--------------------- --------------------
Steven B. Teeters Frank W. Rice
Treasurer
3
EXHIBIT 6.22
NON-COMPETITION AGREEMENT
-------------------------
This Non-Competition Agreement (Agreement) is made this 22nd day of July, 1999,
and entered into between 1-800-AutoTow Gulf Coast East, Inc., a Florida
corporation ("Company"), and Brian J. Rice.
AGREEMENT
1. In consideration, Brian J. Rice covenants and agrees that for a period
of five (5) years shall not;
(a) for his own account or either as agent, consultant or
servant, or as a seller of any corporation or member
of any firm, own, manage, operate, join, control, or
participate in the ownership, management, operation
or control of any individual, or that division or
part of any entity or business that is in the vehicle
towing, transport, salvage or auction businesses,
within one hundred (100) miles of Town `N Country's
current premises at 9447 W. Hillsborough Ave., Tampa,
Florida 33615. This Agreement shall not preclude
Frank W. Rice from engaging in the Collateral
Recovery business however;
(b) call upon any person who is, at that time, an
employee of the company or any affiliated company in
a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of
the employ of the Company or any affiliated company;
(c) call upon any person or entity which is, at that time
or which as been, within one (1) year prior to that
time, a customer of the Company, or any affiliated
company for the purpose of soliciting or selling
products or services in direct competition with the
Company, or any affiliated Company;
(d) call upon any prospective acquisition candidate,
on his behalf or on behalf of any competitor in the
vehicle towing or transport business; or
1
<PAGE>
(e) disclose customers, whether in existence or proposed,
of the Company or any affiliated company, to any
person, firm, partnership, corporation or business
for any reason or purpose whatsoever excluding
disclosure to the Company or any affiliated company.
(f) In the event of an actual or threatened breach by
Brian J. Rice of any of the provisions in Paragraph 1
hereof, Company shall be entitled to an injunction
restraining Brian J. Rice from the prohibited conduct
without the necessity of establishing irreparable
injury to Company unless required under Florida law.
If a court of competent jurisdiction should hold that
the duration and/or scope (geographic or otherwise)
of the covenants contained in Paragraph 1 hereof are
in violation of Florida law, then, to the extent
permitted under Florida law, the Circuit Court for
Palm Beach County shall enforce all such covenants
(geographic and otherwise) to the fullest extent
permitted under Florida law and the parties hereto
agree to be bound by same. Nothing herein stated
shall be construed as prohibiting Company from
pursuing any other remedies available to it for such
breach or threatened breach, including the recovery
of damages from Brian J. Rice. In any action or
proceeding to enforce the provisions of this
agreement, or seeking damages for breach or
threatened breach of this agreement, the prevailing
party shall be reimbursed by the other party for all
costs incurred in such action or proceeding
including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees,
incurred either at the trial level or at all
appellate levels. Such reimbursement, if any, shall
be paid within thirty (30) calendar days after the
rendition of a final order in such action or
proceeding.
2
<PAGE>
(g) The existence of any claim or cause of action by
Brian J. Rice against Company, shall not constitute a
defense to the enforcement by Company of the
foregoing restrictive covenant.
(h) In the event Company obtains an injunction
against Seller arising from Frank W. Rice's violation
of any of the covenants set forth in this agreement,
then all of the terms of and covenants in this
agreement shall automatically be extended for a
period of one (1) year, with such extension period
commencing, without Order of Court or any writing or
other action by the parties hereto, on the date that
an injunction Order is entered against Seller in any
such action or proceeding to enforce the provisions
of this agreement.
1-800-AutoTow Gulf Coast East, Inc.
/s/ Steven B. Teeters /s/ Brian J. Rice
--------------------- --------------------
Steven B. Teeters Brian J. Rice
Treasurer
3
EXHIBIT 6.23
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is dated this 28th day of July, 1999,
between Lyons Towing, Inc., a Florida corporation, ("SELLER"), and
1-800-AutoTow, Inc., a Delaware corporation (ATOW) and 1-800-AutoTow Florida,
Inc a Florida corporation (ATOW SUB) the ("Purchasers"). SELLER desires to sell
to Purchasers and Purchasers desire to purchase from SELLER certain of the
Assets (as defined below) of SELLER, upon the terms and conditions set forth
below.
Therefore, in consideration of the covenants, representations,
warranties and agreements contained in this Agreement, the receipt and
sufficiency of which are acknowledged, the parties intending to be legally
bound, covenant and agree as follows:
1. Definitions. The following words shall mean, when used in this
Agreement:
(a) "Assets" shall mean all of the rights and assets
of the SELLER, whether real, personal or mixed,
tangible or intangible, which are used in or relate
to the vehicle towing business of SELLER located and
operated at 1107 Old Dixie Highway, Lake Park,
Florida (the "premises"), excluding cash and accounts
receivable, and including but not limited to the
following: the goodwill associated with the business,
all permits, licenses, agreements and rights
associated with the premises, machinery and
equipment, tools and tooling, inventory including
trucks, repair equipment and other related products,
office equipment and supplies, cash registers,
furniture and furnishings, telephone and other
communication systems, computer hardware and software
systems, all contracts and agreements made on behalf
of SELLER pertaining to its business and books of
account, files, ledgers, vendor lists, customer
records, operations manuals, confidential
information, papers and records pertaining to its
businesses at the premises.
1
<PAGE>
(b) "Closing" shall mean the events which take place for
the purpose of the consummation of this Agreement,
the same to occur at the offices of ATOW on or
before July 30, 1999.
2. Sale and Transfer of Assets. Upon the terms and subject to the
conditions set forth in this agreement, SELLER agrees to sell, transfer, assign,
grant, convey and deliver to ATOW SUB, at Closing, free and clear of all
mortgages, liens, security interests, pledges, charges and other encumbrances
and ATOW agrees to purchase from SELLER, at Closing, all of SELLER's Assets,
except those Assets excluded above. The parties also expressly agree that the
names "Lyons Towing" shall be an asset transferred by SELLER to ATOW SUB.
3. Assumption of Liabilities or Obligations. ATOW or ATOW SUB have not
assumed, and are not assuming, any liability or obligation of SELLER of any
nature, known or unknown, existing or contingent, including but not limited to
any liabilities or obligations with respect to any employees of SELLER other
than as specifically provided in this Agreement. All liabilities of SELLER other
than those specified shall continue to be the sole responsibility of SELLER,
which shall pay and discharge all of such liabilities as they come due. SELLER
agrees to indemnify and hold ATOW an ATOW SUB harmless from and against any
loss, liability, damage, cost or expense in respect of any liabilities or
obligations which have not been specifically assumed by ATOW or ATOW SUB
pursuant to this Agreement.
4. Payment for the Assets.
(a) The purchase price for the Assets shall be
$1,885,000. The Company will pay the Seller the
following for these assets:
(b) Cash at final Closing: $1,260,000.
(c) A promissory note ("Note") attached as Exhibit B, at
8 % interest, for $695,000. Interest will be due
quarterly with the first payment due March 31, 2000.
Principal will be paid in full by July 31, 2001.
Seller shall have the option, with 30 days notice
prior to a principal payment to convert the Note
Principal into common stock of 1-800-ATOW at a
conversion price of $2.00/share.
(d) The Purchase Price shall be allocated among the
Assets by SELLER and ATOW in accordance with attached
Exhibit A. SELLER and ATOW agree that they will
report the sale of the Assets for income tax purposes
in accordance with the allocations set forth in
Exhibit A.
2
<PAGE>
(e) Any sales tax, use tax, excise tax, transfer tax,
recording fee or other tax or fee imposed upon the
transfer of the Assets from SELLER to ATOW SUB shall
be paid by ATOW SUB.
5. Subordinated Provisions.
(a) SELLER's obligation shall be subject to its ability
to assume its identical form or in such form as is
acceptable to ATOW.
(b) Don Lyons and Bobbye Gail Lyons shall enter into a
non-compete agreement with ATOW similar in substance
and form to that contained in paragraph 13 herein,
the formation of which shall serve as a condition
precedent to the purchase by ATOW of the assets of
SELLER.
6. Asset Value. Upon completion of due diligence, should ATOW determine
the fair market value of an asset detailed in Exhibit A is less than the listed
value, the parties agree to negotiate in good faith to establish a fair value.
If the parties are unable to arrive at an agreement as to the value of any
specific asset, ATOW reserves the right to exclude that asset from the assets
being purchased and reduce the purchase price by an amount equal to the
estimated fair market value listed on Exhibit A. In the event the total of such
excluded assets equals or exceeds 10% of the total assets listed on Exhibit A,
ATOW shall be exempt from having to honor any agreement to purchase the assets
of Seller.
7. Cooperation. Seller agrees to cooperate fully with ATOW in
completing its due diligence including, but not limited to the following:
(a) obtaining and/or assigning all cotracts, permits,
regulatory clearances, federal, state or local
licenses and approvals. At the option of ATOW, it may
elect to close this transaction prior to completing
all such assignments and approvals. In the event that
ATOW elects to do so, Seller agrees to undertake good
faith efforts to assist ATOW in obtaining such
assignments, licenses or approvals.
8. Instruments of Transfer. SELLER agrees to execute and deliver
to ATOW SUB such instruments of transfer, assignment and
conveyance as shall be necessary in the judgment of ATOW to
vest in ATOW SUB good and marketable title to the Assets free
and clear of all mortgages, liens, security interests,
pledges, charges and other encumbrances. Such instruments of
transfer shall include but not be limited to a Bill of Sale in
the form of attached Exhibit E and a lease agreement Exhibit C
for the premises at 2178 Stafford Avenue, West Palm Beach.
3
<PAGE>
9. Representations and Warranties of SELLER. SELLER represents,
warrants and agrees to and with ATOW as follows:
(a) SELLER has been duly organized, is validly existing
and in good standing under the laws of the State of
Florida.
(b) SELLER has all requisite power and all necessary
permits, certificates, contracts, approvals and other
authorizations required by any and all federal,
state, city, county or other municipal bodies to own,
lease, use and operate its properties and to conduct
its business in the manner in which such business is
presently conducted.
(c) The execution, delivery and performance of this
Agreement have been duly authorized by the SELLER,
and SELLER has the complete and unrestricted power
and authority, and has taken all action necessary, to
enter into, execute and deliver this Agreement and to
perform all of its obligations hereunder.
(d) Upon execution and delivery of it on the part of
SELLER and ATOW, this Agreement shall constitute the
valid and legally binding obligation of SELLER
enforceable in accordance with its terms except as
may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights. This Agreement does not violate
any law or regulation and does not conflict with any
other agreement affecting SELLER or the Assets.
(e) The representations made in Exhibit G hereto are
correct and accurately reflect the business conducted
at the premises. The SELLER understands that the ATOW
is relying on the accuracy of these representations
to evaluate the value of the assets being acquired on
a going concern basis and SELLER warrants that this
is a true and accurate statement of the SELLER's
financial history and condition. The SELLER agrees
that it will pay, settle, or otherwise dispose of all
its liabilities, both current and contingent, in such
a manner as to not damage or diminish the value of
the assets being acquired including, but not limited
to, trademarks, contracts, and goodwill.
(f) SELLER has good and marketable title to all of the
Assets, free and clear of all mortgages, liens,
security interests, pledges, charges or other
encumbrances. In the event that any of SELLER's
Assets are encumbered, payment of such encumbrances
shall be made by SELLERs at Closing out of the
proceeds received from the sale of the Assets.
4
<PAGE>
(g) Exhibit H contains a list of all agreements,
commitments and contracts, written or oral,
pertaining to the Assets and to which SELLER is a
party, which (i) are not terminable on 30 days'
notice or less without any obligation of SELLER, and
(ii) which are either individually or in the
aggregate material to SELLER.
(h) There is no action, suit, proceeding, inquiry or
investigation at law or in equity, or before any
court, arbitrator, public board or body, pending or
threatened against SELLER in which an unfavorable
decision, ruling or finding would in any way
adversely affect the transaction contemplated by this
Agreement or the business, assets or financial
condition of SELLER.
(i) SELLER is not obligated under any contract or
agreement or subject to any charge or other
restriction which materially and adversely affects
the business, assets or financial condition of
SELLER. SELLER is not in violation or default under
any indenture, contract, lease or agreement to which
it is a party or by which the Assets are bound or
with respect to any law, regulation, rule, order,
writ, injunction or decree of any court or any
federal, state, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality, nor will the execution, delivery and
performance of this Agreement cause or result in any
such violation or default or result in the creation
of any lien, claim, pledge or encumbrance or any kind
upon any of the Assets of SELLER.
(j) SELLER has filed all federal, state and local income,
franchise, capital stock, sales or use, excise,
property or other tax returns which are required to
be filed by SELLER and has paid all taxes as shown on
such returns and on any assessment received by SELLER
and all other taxes payable without requiring the
filing of any return. Such tax returns are correct
and complete and SELLER has not received any notice
of any proposed tax deficiency.
(k) All of the Assets are adequately insured against loss
and all insurance policies relating to them will be
assigned to ATOW SUB, if ATOW SUB so requests.
(l) All tangible Assets of SELLER are in good order and
repair and in good operating condition, reasonable
wear and tear excepted, and suitable for the uses for
which intended.
5
<PAGE>
(m) SELLER is not subject to any order of any court or
governmental authority or agency, nor is there any
legal action, governmental proceeding or
investigation pending or threatened or known to
SELLER to compel SELLER to make any material change
in the character or location of any of the assets or
that would materially and adversely affect the assets
or which could subject SELLER to any fine, forfeiture
or other sanction.
(n) With respect to the premises, SELLER has not engaged
in, or allowed third parties to engage in, any
actions, and SELLER has no knowledge of any fact or
condition, which would constitute a violation of the
National Environmental Policy Act, 42 USCA, Section
4321 et seq., the Resource Conservation Recovery Act
(RCRA) 42 USCA, Section 6901 et seq., the
Comprehensive Environmental Response Compensation and
Liability Act (CERCLA) 42 USCA, Section 6911 et seq.,
or any regulations promulgated by the United States
Environmental Protection Agency pursuant to those
Acts, or any applicable state or local environmental
law, regulation or order. SELLER shall be solely
responsible, and ATOW and any of its affiliates shall
have no liability, for any and all liability
resulting from such violation which occurs prior to
the Closing, even if the violations are not
discovered until after the date of the final Closing
documents. Any such liability shall include but not
be limited to, any costs, penalties, assessments,
expenses or fees, including reasonable attorneys'
fees, incurred by ATOW or any of its affiliates in
connection with bringing the premises into full
compliance with applicable environmental laws,
statutes, ordinances, rules and regulations.
(o) The only persons (including, but not limited to,
governmental authorities and agencies, creditors of
SELLER, parties to leases and subleases or any other
instruments or agreements to which SELLER is a party
or by which it is bound) whose approval or consent to
the execution, delivery and performance of this
Agreement by SELLER is legally or contractually
required are specified on attached Exhibit I, and the
approvals and consents of all such persons will be
duly obtained by Closing, or alternatively, waived in
writing by ATOW and obtained by SELLER promptly after
Closing, in which event the transfer under this
Agreement relating to the subject matter of such
consent shall be deemed to be conditional on receipt
of such consent.
6
<PAGE>
(p) Neither this Agreement nor any Exhibit or financial
statement, certificate or other written material
furnished by or on behalf of SELLER contain any
untrue statement of a fact or omits to state a fact
necessary in order to make the statements contained
in it not misleading. There is no fact known to
SELLER which materially and adversely affects the
business or financial condition of SELLER or the
assets which has not been set forth in this Agreement
or in any Exhibit, or financial statement,
certificate or other written material furnished
pursuant to it.
(q) The parties agree that the terms and conditions of
this Agreement are highly confidential in nature and
both ATOW and SELLER agree not to disclose the terms
and conditions of this Agreement without the written
consent of the other, unless such disclosure is
required by law. Violation of this provision may, at
the discretion of the other party, be cause for
termination and the non-disclosing party shall be
entitled to damages in an amount equal to the costs
of its due diligence including staff, attorney,
accounting, travel, and related expenses. The SELLER
recognizes that this non-disclosure provision shall
not extend to regulatory requirements of the
Securities and Exchange Commission or to any filing
in connection with a Registration Statement or other
required filing.
(r) Except as contemplated in this Agreement, since the
most recent fiscal year end, the SELLER has conducted
its business only in the ordinary course of business
and there have not been any material changes with
respect to the SELLER. Without limiting the
generality of the foregoing, since that date, the
SELLER has not:
(i) sold, assigned, transferred, mortgaged,
pledged, subjected to lien, or entered into
any conditional sale or other title
retention agreement with respect to any of
the assets being purchased;
(ii) entered into any agreement with any labor
union or association representing any
employee or made any wage or salary increase
or bonus, or increase in any other direct or
indirect compensation or employment
agreement, for any of its officers,
directors or employees;
(iii) borrowed any money or incurred any
liability, other than in the ordinary course
of business;
(iv) mortgaged, pledged or subjected to lien any
of its assets or entered into any
conditional sale or other title retention
agreement with respect to any of its real or
personal property;
7
<PAGE>
(v) sold, assigned or transferred any of its
assets, except for sales in the ordinary
course of business;
(vi) or made any capital expenditures or
commitments in excess of $5,000.00,
individually or $15,000 in the aggregate
without written approval from ATOW.
(s) Seller acknowledges that each certificate
representing 1-800-AutoTow's Common Stock acquired
pursuant to this Agreement shall bear the following
restrictive legend:
THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE "SHARES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD
OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE OF
THE FOLLOWING:
(i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE SECURITIES ACT, OR
(ii) AN OPINION OF COUNSEL, SATISFACTORY TO THE
CORPORATION, THAT SUCH REGISTRATION IS NOT
REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
Seller's further acknowledge that they are acquiring
1-800-AutoTow Common Stock for their own account and not with
a view to its distribution within the meaning of Section 2(11)
of the Securities Act. Sellers are "accredited investors" as
such term is defined in Rule 501(a) under the Securities Act.
(t) Seller represents that it is currently
contracting with the Department of
Transportation ("DOT") for service along
Interstate 95. Seller represents that it has
discussed this sale of assets with a DOT
representative who has acknowledged that the
contract will remain in full force and effect
after the sale of assets subject to the terms
and conditions of that contract.
10. Representations and Warranties of ATOW AND ATOW SUB. ATOW and ATOW
SUB represent, warrant and agree as follows:
8
<PAGE>
(a) ATOW and ATOW SUB are corporations duly organized,
validly existing and in good standing under the laws
of the State of Delaware and the State of Florida
respectively.
(b) ATOW and ATOW SUB have the power and authority, and
have taken all action necessary to enter into,
execute and deliver this Agreement and to perform all
of their obligations under it.
(c) Upon execution and delivery of it on the part of
SELLER to ATOW, this Agreement shall constitute the
valid and legally binding obligation of ATOW and ATOW
SUB, enforceable in accordance with its terms, except
as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally. This Agreement does not
violate any law or regulation pertaining to ATOW and
ATOW SUB and does not conflict with any other
agreement affecting ATOW or ATOW SUB.
(d) ATOW and ATOW SUB hereby assume all liability,
beginning August 1, 1999, under the leases and
subleases with respect to the premises (subject to
the provisions of Section 6), and ATOW and ATOW SUB
shall indemnify and hold harmless SELLER and any of
its officers, directors and shareholders who
personally guaranteed the performance of SELLER under
them.
11. Survival of Representations; Indemnification. The representations,
warranties, covenants and agreements contained in this Agreement shall survive
Closing, regardless of any investigations made by or on behalf of, or knowledge
of, any of the parties. SELLER agrees to indemnify ATOW and its affiliates, its
successors and assigns, against, and hold them harmless from and in respect of,
any loss, liability, damage, cost or expense accruing from or resulting by
reason of any falsity or breach of the representations, warranties, covenants or
agreements made or to be performed by SELLER pursuant to this Agreement. ATOW
and ATOW SUB agrees to indemnify SELLER, its successors and assigns, against,
and hold them harmless from and in respect of, any loss, liability, damage, cost
or expense accruing from or resulting by reason of any falsity or breach of the
representations, warranties, covenants or agreements made or to be performed by
ATOW and ATOW SUB pursuant to this Agreement. For the purposes of this
indemnification, ATOW and/or ATOW SUB shall have the right to recoup any amount
paid to Lyons Towing, Inc., as a result of a non-assumed claim or liability.
12. Compliance with Bulk Sales. SELLER and Purchasers agree to waive
compliance with any applicable laws of the State of Florida pertaining to Bulk
Transfers. In consideration of such waiver, and without limiting any provisions
of Section 8, SELLER agrees to indemnify and hold harmless Purchasers from and
9
<PAGE>
against, and allow Purchasers to set off against amounts due to SELLER, any and
all losses, liabilities, claims, damages or expenses, including attorneys' fees,
arising as a result of claims or demands by third parties against SELLERS in
connection with its operation of its business prior to Closing.
13. Non-Compete Agreement.
(a) Prohibited Activities. Don Lyons and Bobbye Gail
Lyons shall enter into a non-competition agreement
which shall be in the form attached as Exhibit 13 A.
(b) Damages. Because of the difficulty of measuring
economic losses to ATOW as a result of a breach of
the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to ATOW
for which it would have no other adequate remedy,
each individual agrees that the foregoing covenant
may be enforced by ATOW, in the event of breach by
such individual, by injunctions and restraining
orders.
(c) Reasonable Restraint. It is agreed by the Parties
hereto that the foregoing covenants in this section
impose a reasonable restraint on the individuals in
light of the activities and business of ATOW on the
date of the execution of this Agreement and the
current plans of ATOW; but it is also the intent of
ATOW, and the Individuals that such covenants be
construed and enforced in accordance with the
changing activities and business of ATOW throughout
the term of this covenant.
It is further agreed by the Parties hereto that, in
the event that any individual shall enter into a
business or pursue other activities not in
competition with the ATOW and/or any subsidiary
thereof, or similar activities or business in
locations the operation of which, under such
circumstances, does not violate clause Section 13(a),
and in any event such new business, activities or
location are not in violation of this Section 13 or
of such individual's obligations under this Section
13, if any, such individual shall not be chargeable
with a violation of this Section 13 if ATOW shall
thereafter enter the same, similar or a competitive
(i) business, (ii) course of activities or (iii)
location, as applicable.
(d) Severability; Reformation. The covenants in this
section are severable and separate, and the
unenforceability of any specific covenant shall not
10
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affect the provisions of any other covenant.
Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable,
then it is the intention of the Parties that such
restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall
thereby be reformed.
(e) Independent Covenant. All of the covenants in this
Section 13 shall be construed as an agreement
independent of any other provision in this Agreement,
and the existence of any claim or cause of action of
any individual against the ATOW whether predicated on
this Agreement or otherwise, shall not constitute a
defense to the enforcement by the ATOW of such
covenants. It is specifically agreed that the period
of five (5) years stated at the beginning of this
Section 13, during which the agreements and covenants
of each individual made in this Section 13 shall be
effective, shall be computed by excluding from such
computation any time during which such individual is
in violation of any provision of this Section 13. The
covenants contained in this Section 13 shall not be
affected by any breach of any other provision hereof
by any Party hereto. The covenants contained in this
Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
(f) Materiality. ATOW and the individuals hereby agree
that this covenant is a material and substantial part
of this transaction.
14. Miscellaneous.
(a) The parties understand that notwithstanding any other
representation to the contrary, the agreement is
subject to ATOW obtaining financing for this
transaction prior to July 30, 1999. Should ATOW not
obtain financing on or before July 30, 1999, this
agreement shall be null and void and neither party
shall owe any amount to the other, and the
non-refundable deposit, referenced in Section 4(b)
shall remain with the Seller, unless the parties, in
writing, agree to extend this agreement.
(b) From and after the date of Closing, SELLER shall
execute and deliver to or cause to be executed and
delivered to ATOW SUB any such further instruments of
transfer, assignment and conveyance and shall take
such other action as ATOW SUB may reasonably require
to carry out more effectively the sale, transfer,
assignment and conveyance to ATOW SUB of the assets
and to confirm and assure ATOW SUB's title to them.
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<PAGE>
(c) Each party covenants and agrees that it shall be
responsible for and shall bear its own legal and
other costs and expenses in connection with the
negotiation, preparation and execution of this
Agreement, and performance of the transactions
contemplated by it.
(d) Neither party shall assign, in whole or in part, this
Agreement or its rights and obligations under it
without the express prior written consent of the
other party.
(e) In the event that any provision of this Agreement
shall be held invalid, illegal or unenforceable under
applicable law, the remainder of this Agreement shall
remain valid and enforceable unless such invalidity,
illegality or unenforceability substantially
diminishes the rights and obligations, taken as a
whole, of SELLER or Purchasers.
(f) This Agreement and the Exhibits contain the entire
agreement among the parties with respect to the sale
and purchase of the Assets and supersede all previous
written or oral negotiations, commitments and
writings.
(g) This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute
one and the same instrument.
(h) This Agreement may be amended only in writing
executed by the parties affected by such amendment.
(i) This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of
Florida.
(j) Any controversy or claim arising out of or
relating to this contract, of the breach thereof,
shall be settled by arbitration administered by the
American Arbitration Association (AAA), in its Miami,
Florida branch office, under its Commercial
Arbitration rules, and judgement on the award
rendered by the arbitrator(s) may be entered in any
court of competent jurisdiction within the State of
Florida.
(k) Seller shall make available all current and prior
years financial statements of Seller to ATOW SUB upon
request during normal business hours.
In witness, the parties have caused this Agreement to be duly executed
under seal as of the date written above.
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<PAGE>
Lyons Towing, Inc.
Attest: /s/ Don S. Lyons /s/ Bobbye G. Lyons
---------------- ---------------------
Don S. Lyons Bobbye G. Lyons
1-800 AUTOTOW FLORIDA, INC.
Attest: /s/ Steven B. Teeters /s/ E.A. Iarocci
---------------- ---------------------
Steven B. Teeters E.A. Iarocci
President
1-800-AUTOTOW, INC.
Attest: /s/ Steven B. Teeters /s/ E.A. Iarocci
---------------- ---------------------
Steven B. Teeters E.A. Iarocci
Sr. Vice President, COO
13
EXHIBIT 6.24
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is dated this 28th day of July, 1999,
between Lyons AutoBody, Inc., a Florida corporation, ("SELLER"), and
1-800-AutoTow, Inc., a Delaware corporation (ATOW) and 1-800-AutoTow Florida,
Inc a Florida corporation (ATOW SUB) the ("Purchasers"). SELLER desires to sell
to Purchasers and Purchasers desire to purchase from SELLER certain of the
Assets (as defined below) of SELLER, upon the terms and conditions set forth
below.
Therefore, in consideration of the covenants, representations,
warranties and agreements contained in this Agreement, the receipt and
sufficiency of which are acknowledged, the parties intending to be legally
bound, covenant and agree as follows:
1. Definitions. The following words shall mean, when used in
this Agreement:
(a) "Assets" shall mean all of the rights and assets
of the SELLER, whether real, personal or mixed,
tangible or intangible, which are used in or relate
to the vehicle towing business of SELLER located and
operated at 1107 Old Dixie Highway, Lake Park,
Florida (the "premises"), excluding cash and accounts
receivable, and including but not limited to the
following: the goodwill associated with the business,
all permits, licenses, agreements and rights
associated with the premises, machinery and
equipment, tools and tooling, inventory including
trucks, repair equipment and other related products,
office equipment and supplies, cash registers,
furniture and furnishings, telephone and other
communication systems, computer hardware and software
systems, all contracts and agreements made on behalf
of SELLER pertaining to its business and books of
account, files, ledgers, vendor lists, customer
records, operations manuals, confidential
information, papers and records pertaining to its
businesses at the premises.
(b) "Closing" shall mean the events which take place
for the purpose of the consummation of this
Agreement, the same to occur at the offices of ATOW
on or before July 30, 1999.
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<PAGE>
2. Sale and Transfer of Assets. Upon the terms and subject to the
conditions set forth in this agreement, SELLER agrees to sell, transfer, assign,
grant, convey and deliver to ATOW SUB, at Closing, free and clear of all
mortgages, liens, security interests, pledges, charges and other encumbrances
and ATOW agrees to purchase from SELLER, at Closing, all of SELLER's Assets,
except those Assets excluded above. The parties also expressly agree that the
names "Lyons Autobody" shall be an asset transferred by SELLER to ATOW SUB.
3. Assumption of Liabilities or Obligations. ATOW or ATOW SUB have not
assumed, and are not assuming, any liability or obligation of SELLER of any
nature, known or unknown, existing or contingent, including but not limited to
any liabilities or obligations with respect to any employees of SELLER other
than as specifically provided in this Agreement. All liabilities of SELLER other
than those specified shall continue to be the sole responsibility of SELLER,
which shall pay and discharge all of such liabilities as they come due. SELLER
agrees to indemnify and hold ATOW and ATOW SUB harmless from and against any
loss, liability, damage, cost or expense in respect of any liabilities or
obligations which have not been specifically assumed by ATOW or ATOW SUB
pursuant to this Agreement.
4. Payment for the Assets.
(a) The purchase price for the Assets shall be
$415,000. The Company will pay the Seller the
following for these assets:
(b) Cash at final Closing: $240,000.
(c) A promissory note ("Note") attached as Exhibit B, at
8 % interest, for $175,000. due in two payments.
Principal will be due quarterly with the first
payment due March 31, 2000. Principal will be paid in
full by July 31, 2001. Seller shall have the option,
with 30 days notice prior to a principal payment to
convert the Note principal into common stock of ATOW
at a conversion price of $2.00/share.
2
<PAGE>
(d) The Purchase Price shall be allocated among the
Assets by SELLER and ATOW in accordance with attached
Exhibit A. SELLER and ATOW agree that they will
report the sale of the Assets for income tax purposes
in accordance with the allocations set forth in
Exhibit A.
(e) Any sales tax, use tax, excise tax, transfer tax,
recording fee or other tax or fee imposed upon the
transfer of the Assets from SELLER to ATOW SUB shall
be paid by ATOW SUB.
5. Subordinated Provisions.
(a) SELLER's obligation shall be subject to its ability
to assume its identical form or in such form as is
acceptable to ATOW.
6. Asset Value. Upon completion of due diligence, should ATOW determine
the fair market value of an asset detailed in Exhibit A is less than the listed
value, the parties agree to negotiate in good faith to establish a fair value.
If the parties are unable to arrive at an agreement as to the value of any
specific asset, ATOW reserves the right to exclude that asset from the assets
being purchased and reduce the purchase price by an amount equal to the
estimated fair market value listed on Exhibit A. In the event the total of such
excluded assets equals or exceeds 10% of the total assets listed on Exhibit A,
ATOW shall be exempt from having to honor any agreement to purchase the assets
of Seller.
7. Cooperation. Seller agrees to cooperate fully with ATOW in
completing its due diligence including, but not limited to the following:
(b) obtaining and/or assigning all contracts,
permits, regulatory clearances, federal, state or
local licenses and approvals. At the option of ATOW,
it may elect to close this transaction prior to
completing all such assignments and approvals. In the
event that ATOW elects to do so, Seller agrees to
undertake good faith efforts to assist ATOW in
obtaining such assignments, licenses or approvals.
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<PAGE>
9. Instruments of Transfer. SELLER agrees to execute and deliver to
ATOW SUB such instruments of transfer, assignment and conveyance as shall be
necessary in the judgment of ATOW to vest in ATOW SUB good and marketable title
to the Assets free and clear of all mortgages, liens, security interests,
pledges, charges and other encumbrances. Such instruments of transfer shall
include but not be limited to a Bill of Sale in the form of attached Exhibit E
and a lease agreement Exhibit C for the premises at 1107 Old Dixie Hwy, Lake
Park, FL.
9. Representations and Warranties of SELLER. SELLER represents,
warrants and agrees to and with ATOW as follows:
(a) SELLER has been duly organized, is validly existing
and in good standing under the laws of the State of
Florida.
(b) SELLER has all requisite power and all necessary
permits, certificates, contracts, approvals and other
authorizations required by any and all federal,
state, city, county or other municipal bodies to own,
lease, use and operate its properties and to conduct
its business in the manner in which such business is
presently conducted.
(c) The execution, delivery and performance of this
Agreement have been duly authorized by the SELLER,
and SELLER has the complete and unrestricted power
and authority, and has taken all action necessary, to
enter into, execute and deliver this Agreement and to
perform all of its obligations hereunder.
(d) Upon execution and delivery of it on the part of
SELLER and ATOW, this Agreement shall constitute the
valid and legally binding obligation of SELLER
enforceable in accordance with its terms except as
may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights. This Agreement does not violate
any law or regulation and does not conflict with any
other agreement affecting SELLER or the Assets.
(e) The representations made in Exhibit G hereto are
correct and accurately reflect the business conducted
at the premises. The SELLER understands that the ATOW
is relying on the accuracy of these representations
to evaluate the value of the assets being acquired on
a going concern basis and SELLER warrants that this
is a true and accurate statement of the SELLER's
financial history and condition. The SELLER agrees
that it will pay, settle, or otherwise dispose of all
its liabilities, both current and contingent, in such
a manner as to not damage or diminish the value of
the assets being acquired including, but not limited
to, trademarks, contracts, and goodwill.
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<PAGE>
(f) SELLER has good and marketable title to all of the
Assets, free and clear of all mortgages, liens,
security interests, pledges, charges or other
encumbrances. In the event that any of SELLER's
Assets are encumbered, payment of such encumbrances
shall be made by SELLERs at Closing out of the
proceeds received from the sale of the Assets.
(g) Exhibit H contains a list of all agreements,
commitments and contracts, written or oral,
pertaining to the Assets and to which SELLER is a
party, which (i) are not terminable on 30 days'
notice or less without any obligation of SELLER, and
(ii) which are either individually or in the
aggregate material to SELLER.
(h) There is no action, suit, proceeding, inquiry or
investigation at law or in equity, or before any
court, arbitrator, public board or body, pending or
threatened against SELLER in which an unfavorable
decision, ruling or finding would in any way
adversely affect the transaction contemplated by this
Agreement or the business, assets or financial
condition of SELLER.
(i) SELLER is not obligated under any contract or
agreement or subject to any charge or other
restriction which materially and adversely affects
the business, assets or financial condition of
SELLER. SELLER is not in violation or default under
any indenture, contract, lease or agreement to which
it is a party or by which the Assets are bound or
with respect to any law, regulation, rule, order,
writ, injunction or decree of any court or any
federal, state, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality, nor will the execution, delivery and
performance of this Agreement cause or result in any
such violation or default or result in the creation
of any lien, claim, pledge or encumbrance or any kind
upon any of the Assets of SELLER.
(j) SELLER has filed all federal, state and local income,
franchise, capital stock, sales or use, excise,
property or other tax returns which are required to
be filed by SELLER and has paid all taxes as shown on
such returns and on any assessment received by SELLER
and all other taxes payable without requiring the
filing of any return. Such tax returns are correct
and complete and SELLER has not received any notice
of any proposed tax deficiency.
5
<PAGE>
(k) All of the Assets are adequately insured against loss
and all insurance policies relating to them will be
assigned to ATOW SUB, if ATOW SUB so requests.
(l) All tangible Assets of SELLER are in good order and
repair and in good operating condition, reasonable
wear and tear excepted, and suitable for the uses for
which intended.
(m) SELLER is not subject to any order of any court or
governmental authority or agency, nor is there any
legal action, governmental proceeding or
investigation pending or threatened or known to
SELLER to compel SELLER to make any material change
in the character or location of any of the assets or
that would materially and adversely affect the assets
or which could subject SELLER to any fine, forfeiture
or other sanction.
(n) With respect to the premises, SELLER has not engaged
in, or allowed third parties to engage in, any
actions, and SELLER has no knowledge of any fact or
condition, which would constitute a violation of the
National Environmental Policy Act, 42 USCA, Section
4321 et seq., the Resource Conservation Recovery Act
(RCRA) 42 USCA, Section 6901 et seq., the
Comprehensive Environmental Response Compensation and
Liability Act (CERCLA) 42 USCA, Section 6911 et seq.,
or any regulations promulgated by the United States
Environmental Protection Agency pursuant to those
Acts, or any applicable state or local environmental
law, regulation or order. SELLER shall be solely
responsible, and ATOW and any of its affiliates shall
have no liability, for any and all liability
resulting from such violation which occurs prior to
the Closing, even if the violations are not
discovered until after the date of the final Closing
documents. Any such liability shall include but not
be limited to, any costs, penalties, assessments,
expenses or fees, including reasonable attorneys'
fees, incurred by ATOW or any of its affiliates in
connection with bringing the premises into full
compliance with applicable environmental laws,
statutes, ordinances, rules and regulations.
(o) The only persons (including, but not limited to,
governmental authorities and agencies, creditors of
SELLER, parties to leases and subleases or any other
instruments or agreements to which SELLER is a party
or by which it is bound) whose approval or consent to
the execution, delivery and performance of this
Agreement by SELLER is legally or contractually
required are specified on attached Exhibit I, and the
6
<PAGE>
approvals and consents of all such persons will be
duly obtained by Closing, or alternatively, waived in
writing by ATOW and obtained by SELLER promptly after
Closing, in which event the transfer under this
Agreement relating to the subject matter of such
consent shall be deemed to be conditional on receipt
of such consent.
(p) Neither this Agreement nor any Exhibit or financial
statement, certificate or other written material
furnished by or on behalf of SELLER contain any
untrue statement of a fact or omits to state a fact
necessary in order to make the statements contained
in it not misleading. There is no fact known to
SELLER which materially and adversely affects the
business or financial condition of SELLER or the
assets which has not been set forth in this Agreement
or in any Exhibit, or financial statement,
certificate or other written material furnished
pursuant to it.
(q) The parties agree that the terms and conditions of
this Agreement are highly confidential in nature and
both ATOW and SELLER agree not to disclose the terms
and conditions of this Agreement without the written
consent of the other, unless such disclosure is
required by law. Violation of this provision may, at
the discretion of the other party, be cause for
termination and the non-disclosing party shall be
entitled to damages in an amount equal to the costs
of its due diligence including staff, attorney,
accounting, travel, and related expenses. The SELLER
recognizes that this non-disclosure provision shall
not extend to regulatory requirements of the
Securities and Exchange Commission or to any filing
in connection with a Registration Statement or other
required filing.
(r) Except as contemplated in this Agreement, since the
most recent fiscal year end, the SELLER has conducted
its business only in the ordinary course of business
and there have not been any material changes with
respect to the SELLER. Without limiting the
generality of the foregoing, since that date, the
SELLER has not:
(i) sold, assigned, transferred, mortgaged,
pledged, subjected to lien, or entered into
any conditional sale or other title
retention agreement with respect to any of
the assets being purchased;
(ii) entered into any agreement with any labor
union or association representing any
employee or made any wage or salary increase
or bonus, or increase in any other direct or
indirect compensation or employment
agreement, for any of its officers,
directors or employees;
7
<PAGE>
(iii) borrowed any money or incurred any
liability, other than in the ordinary course
of business;
(iv) mortgaged, pledged or subjected to lien any
of its assets or entered into any
conditional sale or other title retention
agreement with respect to any of its real or
personal property;
(v) sold, assigned or transferred any of its
assets, except for sales in the ordinary
course of business;
(vi) or made any capital expenditures or
commitments in excess of $5,000.00,
individually or $15,000 in the aggregate
without written approval from ATOW.
(s) Seller acknowledges that each certificate
representing 1-800-AutoTow's Common Stock acquired
pursuant to this Agreement shall bear the following
restrictive legend:
THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE
"SHARES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE OF THE
FOLLOWING:
(i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE SECURITIES ACT, OR
(ii) AN OPINION OF COUNSEL, SATISFACTORY TO THE
CORPORATION, THAT SUCH REGISTRATION IS NOT
REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
Seller's further acknowledge that they are acquiring
1-800-AutoTow Common Stock for their own account and
not with a view to its distribution within the
meaning of Section 2(11) of the Securities Act.
Sellers are "accredited investors" as such term is
defined in Rule 501(a) under the Securities Act.
10. Representations and Warranties of ATOW AND ATOW SUB. ATOW and ATOW
SUB represent, warrant and agree as follows:
8
<PAGE>
(a) ATOW and ATOW SUB are corporations duly organized,
validly existing and in good standing under the laws
of the State of Delaware and the State of Florida
respectively.
(b) ATOW and ATOW SUB have the power and authority, and
have taken all action necessary to enter into,
execute and deliver this Agreement and to perform all
of their obligations under it.
(c) Upon execution and delivery of it on the part of
SELLER to ATOW, this Agreement shall constitute the
valid and legally binding obligation of ATOW and ATOW
SUB, enforceable in accordance with its terms, except
as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally. This Agreement does not
violate any law or regulation pertaining to ATOW and
ATOW SUB and does not conflict with any other
agreement affecting ATOW or ATOW SUB.
(d) ATOW and ATOW SUB hereby assume all liability,
beginning August 1, 1999, under the leases and
subleases with respect to the premises (subject to
the provisions of Section 6), and ATOW and ATOW SUB
shall indemnify and hold harmless SELLER and any of
its officers, directors and shareholders who
personally guaranteed the performance of SELLER under
them.
11. Survival of Representations; Indemnification. The representations,
warranties, covenants and agreements contained in this Agreement shall survive
Closing, regardless of any investigations made by or on behalf of, or knowledge
of, any of the parties. SELLER agrees to indemnify ATOW and its affiliates, its
successors and assigns, against, and hold them harmless from and in respect of,
any loss, liability, damage, cost or expense accruing from or resulting by
reason of any falsity or breach of the representations, warranties, covenants or
agreements made or to be performed by SELLER pursuant to this Agreement. ATOW
and ATOW SUB agrees to indemnify SELLER, its successors and assigns, against,
and hold them harmless from and in respect of, any loss, liability, damage, cost
or expense accruing from or resulting by reason of any falsity or breach of the
representations, warranties, covenants or agreements made or to be performed by
ATOW and ATOW SUB pursuant to this Agreement. For the purposes of this
indemnification, ATOW and/or ATOW SUB shall have the right to recoup any amount
paid to Lyons Towing, Inc., as a result of a non-assumed claim or liability.
14. Compliance with Bulk Sales. SELLER and Purchasers agree to waive
compliance with any applicable laws of the State of Florida pertaining to Bulk
Transfers. In consideration of such waiver, and without limiting any provisions
of Section 8, SELLER agrees to indemnify and hold harmless Purchasers from and
against, and allow Purchasers to set off against amounts due to SELLER, any and
all losses, liabilities, claims, damages or expenses, including attorneys' fees,
arising as a result of claims or demands by third parties against SELLERS in
connection with its operation of its business prior to Closing.
9
<PAGE>
13. Miscellaneous.
(a) The parties understand that notwithstanding any other
representation to the contrary, the agreement is
subject to ATOW obtaining financing for this
transaction prior to July 30, 1999. Should ATOW not
obtain financing on or before July 30, 1999, this
agreement shall be null and void and neither party
shall owe any amount to the other, and the
non-refundable deposit, referenced in Section 4(b)
shall remain with the Seller, unless the parties, in
writing, agree to extend this agreement.
(b) From and after the date of Closing, SELLER shall
execute and deliver to or cause to be executed and
delivered to ATOW SUB any such further instruments of
transfer, assignment and conveyance and shall take
such other action as ATOW SUB may reasonably require
to carry out more effectively the sale, transfer,
assignment and conveyance to ATOW SUB of the assets
and to confirm and assure ATOW SUB's title to them.
(c) Each party covenants and agrees that it shall be
responsible for and shall bear its own legal and
other costs and expenses in connection with the
negotiation, preparation and execution of this
Agreement, and performance of the transactions
contemplated by it.
(d) Neither party shall assign, in whole or in part, this
Agreement or its rights and obligations under it
without the express prior written consent of the
other party.
(e) In the event that any provision of this Agreement
shall be held invalid, illegal or unenforceable under
applicable law, the remainder of this Agreement shall
remain valid and enforceable unless such invalidity,
illegality or unenforceability substantially
diminishes the rights and obligations, taken as a
whole, of SELLER or Purchasers.
(f) This Agreement and the Exhibits contain the entire
agreement among the parties with respect to the sale
and purchase of the Assets and supersede all previous
written or oral negotiations, commitments and
writings.
10
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(g) This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute
one and the same instrument.
(h) This Agreement may be amended only in writing
executed by the parties affected by such amendment.
(i) This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of
Florida.
(l) Any controversy or claim arising out of or
relating to this contract, of the breach thereof,
shall be settled by arbitration administered by the
American Arbitration Association (AAA), in its Miami,
Florida branch office, under its Commercial
Arbitration rules, and judgement on the award
rendered by the arbitrator(s) may be entered in any
court of competent jurisdiction within the State of
Florida.
(m) Seller shall make available all current and prior
years financial statements of Seller to ATOW SUB upon
request during normal business hours.
In witness, the parties have caused this Agreement to be duly executed
under seal as of the date written above.
Lyons Autobody, Inc.
Attest: /s/ Bobbye G. Lyons /s/ Don S. Lyons
---------------- ---------------------
Bobbye G. Lyons Don S. Lyons
President
1-800 AUTOTOW FLORIDA, INC.
Attest: /s/ Steven B. Teeters /s/ E.A. Iarocci
---------------- ---------------------
Steven B. Teeters E.A. Iarocci
President
1-800-AUTOTOW, INC.
Attest: /s/ Steven B. Teeters /s/ E.A. Iarocci
---------------- ---------------------
Steven B. Teeters E.A. Iarocci
Sr. Vice President, COO
11
EXHIBIT 6.25
Amendment to Asset Purchase Agreement
Don Lyons and Bobbye Gail Lyons
Lyons Towing, Inc.
Lyons Autobody, Inc.
July 30, 1999
The legal documentation necessary to close the funding has not been completed
despite a tremendous effort by the personnel at 1-800-AutoTow and the attorneys
for all parties. We request an extension on your Purchase Agreement until August
6, 1999.
By executing this Amendment, you acknowledge a waiver of the July 30, 1999
funding date in the Purchase Agreement and grant an extension until the end of
this week (August 6, 1999).
Sincerely,
Agreed:
/s/ Joel B. Nagelmann /s/ Don S. Lyons
- --------------------- -----------------
Joel B. Nagelmann Don S. Lyons
President & CEO Seller
/s/ Bobbye G. Lyons
-----------------
Bobbye G. Lyons
Seller
EXHIBIT 6.26
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is dated this 22nd day of July, 1999,
between Town 'N Country Towing, Inc., ("Seller"), and 1-800-AutoTow, Inc., a
Delaware corporation ("ATOW") and 1-800-AutoTow Gulf Coast East, Inc., ("ATOW
SUB"), a Florida corporation ("Purchasers"). Seller desires to sell to
Purchasers and Purchasers desire to purchase from Seller certain of the Assets
(as defined below) of Seller, upon the terms and conditions set forth below.
Therefore, in consideration of the covenants, representations,
warranties and agreements contained in this Agreement, the receipt and
sufficiency of which are acknowledged, the parties intending to be legally
bound, covenant and agree as follows:
1. Definitions. The following words shall mean, when used in this
Agreement:
(a) "Assets" shall mean all of the rights and assets of the Seller which are
used in or relate to the vehicle towing business of Seller located and operated
at 9447 W. Hillsborough Ave., Tampa, FL 33615 (the "premises"), excluding those
of Town 'N Country Transport, the telephone, fax numbers, server and PC used to
handle Town 'N Country Transport, all cash and accounts receivable, and all real
property of seller. Assets shall include but not be limited to the following:
the goodwill associated with the business, all permits, licenses, agreements and
rights associated with the premises, machinery and equipment, tools and tooling,
inventory including trucks, repair equipment and other related products, office
equipment and supplies, cash registers, furniture and furnishings, telephone and
other communication systems, computer hardware and software systems, all
contracts and agreements made on behalf of Seller pertaining to its business and
books of account, files, ledgers, vendor lists, customer records, operations
manuals, confidential information, papers and records pertaining to its
businesses at the premises. Seller shall retain the right to any vehicles stored
prior to closing, including the proceeds derived from the sale or storage
thereof after closing.
(b) "Closing" shall mean the events which take place for the purpose of the
consummation of this Agreement, the same to occur at the offices of ATOW on or
before July 30, 1999.
2. Sale and Transfer of Assets. Upon the terms and subject to the
conditions set forth in this agreement, Seller agrees to sell, transfer, assign,
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grant, convey and deliver to ATOW SUB, at Closing, free and clear of all
mortgages, liens, security interests, pledges, charges and other encumbrances,
and ATOW SUB agrees to purchase from Seller, at Closing, all of Seller's Assets
pursuant to Section 1(a) above. The parties also expressly agree that the names
"Town 'N Country Towing, Inc.", and "Independent Wrecker Service" shall be
included among the assets sold by Seller to ATOW SUB.
3. Assumption of Liabilities or Obligations. ATOW and ATOW SUB have not
assumed, and are not assuming, any liability or obligation of Seller of any
nature, known or unknown, existing or contingent, including but not limited to
any liabilities or obligations with respect to any employees of Seller other
than as specifically provided in this Agreement. All liabilities of Seller other
than those specified shall continue to be the sole responsibility of Seller,
which shall pay and discharge all of such liabilities as they come due. The
parties shall indemnify and hold each other harmless from and against any loss,
liability, damage, cost or expense with respect to any and all liabilities or
obligations resulting from their ownership or operation of the business.
Seller's indemnification of Purchasers shall include any and all liabilities to
creditors of Frank W. Rice, Brian J. Rice, Frank S. Rice and Leah C. McElreath,
individually.
4. Payment for the Assets. The Purchasers agree to purchase the assets
of Seller listed in Exhibit A, subject to the terms and conditions of this
Agreement for $975,000.00 The Purchasers will pay the Seller the following for
these assets:
(a) Cash at final Closing, on or before July 30, 1999: $825,000.00
(b) ATOW shall also transfer to Seller Common Stock having a total
value of $150,000.00. The number of shares to be issued shall
be determined by applying a 30% discount to the average
closing price for the five trading days prior to Closing and
the five trading days subsequent to Closing. The shares issued
to the Seller will be restricted as to their sale pursuant to
Rule 144. Necessary documentation to effectuate such issuance
shall be forwarded by ATOW to its transfer agent within ten
(10) days after closing.
(c) The Purchase Price shall be allocated among the Assets by
Seller and ATOW in accordance with attached Exhibit A. Seller
and ATOW agree that they will report the sale of the Assets
for income tax purposes in accordance with the allocations set
forth above and there shall be an allocation of the purchase
price in accordance with generally accepted accounting
principles (GAAP).
(d) Any sales tax, use tax, excise tax, transfer tax, recording
fee or other tax or fee imposed upon the transfer of the
Assets from Seller to ATOW SUB shall be paid by ATOW SUB.
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5. Special Provisions.
(a) Seller shall retain all rights to Town 'N Country Transport,
as well as the server and PC used to handle that business.
Town 'N Country Transport is in the collateral recovery
business and the sale of certain assets of Town 'N Country
Towing, Inc. to 1-800-AutoTow, Inc. shall preclude Town 'N
Country Transport from competing with the company as more
fully set forth in the non-compete agreement to be executed at
closing, which shall not preclude Town 'N Country Transport
from engaging in a collateral recovery business.
Notwithstanding and subject to the foregoing, nothing
contained herein, or in any separate non-compete agreement
shall be construed to prevent a past or present officer,
director or employee of Seller from managing and/or servicing
the Town 'N Country Transport account.
(b) ATOW SUB shall be responsible for the cost of transferring
and/or re-registering the assets conveyed hereunder. Further,
ATOW SUB shall reimburse Seller for the pro-rata unexpired
portion of the vehicle licensing fees and 50% of the
wreckmaster tuition.
(c) Seller will lease the premises located at 9447 W. Hillsborough
Ave., Tampa, FL 33615, on a month-to-month basis to ATOW SUB
until ATOW SUB can effect a smooth transition. An example of
the Lease Agreement is attached as Exhibit E. The parties
agree that if ATOW SUB determines during the transition period
that the premises located at 9447 W. Hillsborough Ave., is
best suited for its operations, the parties will negotiate a
long term lease for the premises. Nothing herein contained
shall preclude Seller from leasing to an unrelated third party
who may avail itself of towing rotation slots if permitted by
the appropriate authorities.
(d) ATOW SUB will enter into a Consulting Agreement Exhibit F with
Frank Rice for a minimum of three (3) months, at $5,000.00 per
month, to begin the day of the final Closing.
(e) Seller shall make all current and prior years financial books
and records available to ATOW SUB upon request during
reasonable business hours.
6. Instruments of Transfer. Seller agrees to execute and deliver to
ATOW such instruments of transfer, assignment and conveyance as shall be
necessary in the judgment of ATOW to vest in ATOW SUB good and marketable title
to the Assets free and clear of all mortgages, liens, security interests,
pledges, charges and other encumbrances.
Such instruments of transfer shall include but not be limited to a Bill of Sale
in the form of attached Exhibit B.
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7. Representations and Warranties of Seller. Seller represents,
warrants and agrees to and with ATOW SUB as follows:
(a) Seller has all requisite power and all necessary permits,
certificates, contracts, approvals and other authorizations
required by any and all federal, state, city, county or other
municipal bodies to own, lease, use and operate its properties
and to conduct its business in the manner in which such
business is presently conducted.
(b) The execution, delivery and performance of this Agreement have
been duly authorized by the Seller, and Seller has the
complete and unrestricted power and authority, and has taken
all action necessary, to enter into, execute and deliver this
Agreement and to perform all of its obligations hereunder.
(c) Upon execution and delivery of it on the part of Seller and
ATOW SUB, this Agreement shall constitute the valid and
legally binding obligation of Seller enforceable in accordance
with its terms except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting creditors' rights. This Agreement does not violate
any law or regulation and does not conflict with any other
agreement affecting Seller or the Assets.
(d) The representations made in Exhibit C hereto are correct and
accurately reflect the business conducted at the premises. The
Seller understand that the Purchasers are relying on the
accuracy of these representations to evaluate the value of the
assets being acquired on a going concern basis and Seller
warrants that this is a true and accurate statement of the
Seller's financial history and condition. The Seller agrees
that it will pay, settle, or otherwise dispose of all its
liabilities, both current and contingent, in such a manner as
to not damage or diminish the value of the assets being
acquired including, but not limited to trademarks, trademarks,
contracts, and goodwill.
(e) Seller has good and marketable title to all of the Assets,
free and clear of all mortgages, liens, security interests,
pledges, charges or other encumbrances. In the event that any
of Seller' Assets are encumbered, payment of such encumbrances
shall be made by Seller at Closing out of the proceeds
received from the sale of the Assets.
(f) Exhibit D contains a list of all agreements, commitments and
contracts, written or oral, pertaining to the Assets and to
which Seller is a party, which (i) are not terminable on 30
days' notice or less without any obligation of Seller, and
(ii) which are either individually or in the aggregate
material to Seller.
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(g) There is no action, suit, proceeding, inquiry or investigation
at law or in equity, or before any court, arbitrator, public
board or body, pending or threatened against Seller in which
an unfavorable decision, ruling or finding would in any way
adversely affect the transaction contemplated by this
Agreement or the business, assets or financial condition of
Seller.
(h) Seller is not obligated under any contract or agreement or
subject to any charge or other restriction which materially
and adversely affects the business, assets or financial
condition of Seller. Seller is not in violation or default
under any indenture, contract, lease or agreement to which it
is a party or by which the Assets are bound or with respect to
any law, regulation, rule, order, writ, injunction or decree
of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, nor will the execution, delivery and
performance of this Agreement cause or result in any such
violation or default or result in the creation of any lien,
claim, pledge or encumbrance or any kind upon any of the
Assets of Seller.
(i) Seller has filed all federal, state and local income,
franchise, capital stock, sales or use, excise, property or
other tax returns which are required to be filed by Seller and
has paid all taxes as shown on such returns and on any
assessment received by Seller and all other taxes payable
without requiring the filing of any return. Such tax returns
are correct and complete and Seller has not received any
notice of any proposed tax deficiency.
(j) All of the Assets are adequately insured against loss and all
insurance policies relating to them will be assigned to ATOW
SUB, if ATOW SUB so requests. If such assignment occurs,
Seller shall be reimbursed for any unused premium.
(k) At closing, all tangible Assets of Seller will be in good
order and repair and in good operating condition, reasonable
wear and tear excepted, and suitable for the uses for which
intended. Seller makes no other warranties concerning the
condition or fitness of the tangible assets, express or
implied.
(l) Seller is not subject to any order of any court or
governmental authority or agency, nor is there any legal
action, governmental proceeding or investigation pending or
threatened or known to Seller to compel Seller to make any
material change in the character or location of any of the
assets or that would materially and adversely affect the
assets or which could subject Seller to any fine, forfeiture
or other sanction.
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(m) With respect to the premises, Seller has not engaged in, or
allowed third parties to engage in, any actions, and Seller
has no knowledge of any fact or condition, which would
constitute a violation of the National Environmental Policy
Act of 1969, 42 USCA 4321 et seq., the Resource Conservation
Recovery Act of 1976 (RCRA) 42 USCA 6901 et seq., the
Comprehensive Environmental Response Compensation and
Liability Act (CERCLA) 42 USCA 9601 et seq., or any
regulations promulgated by the United States Environmental
Protection Agency pursuant to those Acts, or any applicable
state or local environmental law, regulation or order. Seller
shall be solely responsible, and ATOW or ATOW SUB shall have
no liability, for any and all liability resulting from such
violation which occurs prior to the Closing, even if the
violations are not discovered until after the date of the
final Closing documents. Any such liability shall include but
not be limited to, any costs, penalties, assessments, expenses
or fees, including reasonable attorneys' fees, incurred by
ATOW or ATOW SUB in connection with bringing the premises into
full compliance with applicable environmental laws, statutes,
ordinances, rules and regulations.
(n) The only persons (including, but not limited to, governmental
authorities and agencies, creditors of Seller, parties to
leases and subleases or any other instruments or agreements to
which Seller is a party or by which it is bound) whose
approval or consent to the execution, delivery and performance
of this Agreement by Seller is legally or contractually
required are specified on attached Exhibit G, and the
approvals and consents of all such persons will be duly
obtained by Closing, or alternatively, waived in writing by
ATOW SUB and obtained by Seller promptly after Closing, in
which event the transfer under this Agreement relating to the
subject matter of such consent shall be deemed to be
conditional on receipt of such consent.
(o) Neither this Agreement nor any Exhibit or financial statement,
certificate or other written material furnished by or on
behalf of Seller contain any untrue statement of a fact or
omits to state a fact necessary in order to make the
statements contained in it not misleading. There is no fact
known to Seller which materially and adversely affects the
business or financial condition of Seller or the assets which
has not been set forth in this Agreement or in any Exhibit, or
financial statement, certificate or other written material
furnished pursuant to it.
(p) The parties agree that the terms and conditions of this
Agreement are highly confidential in nature and both the
Purchasers and Seller agrees not to disclose the terms and
conditions of this Agreement without the written consent of
the other, unless such disclosure is required by law.
Violation of this provision may, at the discretion of the
other party, be cause for termination and the non-disclosing
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party shall be entitled to damages in an amount equal to the
costs of its due diligence including staff, attorney,
accounting, travel, and related expenses. The Seller
recognizes that this non-disclosure provision shall not extend
to regulatory requirements of the Securities and Exchange
Commission or to any filing in connection with a Registration
Statement or other required filing.
(q) Except as contemplated in this Agreement, since the most
recent fiscal year end, the Seller has conducted its business
only in the ordinary course of business and there have not
been any material changes with respect to the Seller. Without
limiting the generality of the foregoing, since that date, the
Seller has not:
(i) sold, assigned, transferred, mortgaged, pledged,
subjected to lien, or entered into any conditional
sale or other title retention agreement with respect
to any of the assets being purchased;
(ii) entered into any agreement with any labor union or
association representing any employee or made any
wage or salary increase or bonus, or increase in any
other direct or indirect compensation or employment
agreement, for any of its officers, directors or
employees.
8. Representations and Warranties of ATOW and ATOW SUB. ATOW and ATOW
SUB represent, warrant and agree as follows:
(a) ATOW and ATOW SUB are corporations duly organized, validly
existing and in good standing under the laws of the State of
Delaware and Florida respectively.
(b) ATOW and ATOW SUB have the power and authority, and have taken
all action necessary to enter into, execute and deliver this
Agreement and to perform all of its obligations under it.
(c) Upon execution and delivery of it on the part of Seller, ATOW
and ATOW SUB, this Agreement shall constitute the valid and
legally binding obligation of ATOW and ATOW SUB, enforceable
in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally. This Agreement
does not violate any law or regulation pertaining to ATOW and
ATOW SUB and does not conflict with any other agreement
affecting ATOW and ATOW SUB.
9. Survival of Representations; Indemnification. The representations,
warranties, covenants and agreements contained in this Agreement shall survive
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Closing, regardless of any investigations made by or on behalf of, or knowledge
of, any of the parties. Seller agrees to indemnify ATOW and ATOW SUB, its
successors and assigns, against, and hold them harmless from and in respect of,
any loss, liability, damage, cost or expense accruing from or resulting by
reason of any falsity or breach of the representations, warranties, covenants or
agreements made or to be performed by Seller pursuant to this Agreement. ATOW
and ATOW SUB agree to indemnify Seller, its successors and assigns, against, and
hold them harmless from and in respect of, any loss, liability, damage, cost or
expense accruing from or resulting by reason of any falsity or breach of the
representations, warranties, covenants or agreements made or to be performed by
ATOW and ATOW SUB pursuant to this Agreement. For the purposes of this
indemnification, ATOW and ATOW SUB shall have the right to recoup any amount
paid to Town 'N Country Towing and Independent Wrecker Service as a result of a
non-assumed claim or liability.
10. Compliance with Bulk Sales. Seller and ATOW SUB agree to waive
compliance with any applicable laws of the State of Florida pertaining to Bulk
Transfers. In consideration of such waiver, and without limiting any provisions
of Section 9, Seller agrees to indemnify and hold harmless ATOW and ATOW SUB
from and against any and all losses, liabilities, claims, damages or expenses,
including attorneys' fees, arising as a result of claims or demands by third
parties against Seller in connection with its operation of its business prior to
Closing.
11. Non-Compete Agreement.
(a) Prohibited Activities. Frank W. Rice, Brian J. Rice, Frank
Scott Rice and Leah Cory McElreath shall enter into a
non-competition agreement which shall be in the form attached
as Exhibits 11 A. The agreement shall prohibit those
individuals from engaging, directly or indirectly, in the
motor vehicle towing business for a period of five (5) years
from the date of Closing and shall preclude competition within
one hundred (100) miles of the premises as defined herein.
(b) Damages. Because of the difficulty of measuring economic
losses to ATOW or ATOW SUB as a result of a breach of the
foregoing covenant, and because of the immediate and
irreparable damage that could be caused to ATOW and/or ATOW
SUB for which it would have no other adequate remedy, each
individual agrees that the foregoing covenant may be enforced
by ATOW or ATOW SUB, in the event of breach by such
individual, by injunctions and restraining orders.
(c) Reasonable Restraint. It is agreed by the Parties hereto that
the foregoing covenants in this section impose a reasonable
restraint on the individuals in light of the activities and
business of ATOW or ATOW SUB on the date of the execution of
this Agreement and the current plans of ATOW and ATOW SUB.
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It is further agreed by the Parties hereto that, in the event
that any individual shall enter into a business or pursue
other activities not in competition with the ATOW or ATOW SUB
and/or any subsidiary thereof, or similar activities or
business in locations the operation of which, under such
circumstances, does not violate clause Section 11(a), and in
any event such new business, activities or location are not in
violation of this Section 11 or of such individual's
obligations under this Section 11, if any, such individual
shall not be chargeable with a violation of this Section 11 if
ATOW or ATOW SUB shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
(d) Severability; Reformation. The covenants in this section are
severable and separate, and the unenforceability of any
specific covenant shall not affect the provisions of any other
covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it
is the intention of the Parties that such restrictions be
enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
(e) Independent Covenant. All of the covenants in this Section 11
shall be construed as an agreement independent of any other
provision in this Agreement, and the existence of any claim or
cause of action of any individual against the ATOW or ATOW SUB
whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the ATOW or ATOW
SUB of such covenants. It is specifically agreed that the
period of five (5) years stated at the beginning of this
Section 11, during which the agreements and covenants of each
individual made in this Section 11 shall be effective, shall
be computed by excluding from such computation any time during
which such individual is in violation of any provision of this
Section 11. The covenants contained in this Section 11 shall
not be affected by any breach of any other provision hereof by
any Party hereto. The covenants contained in this Section 11
shall have no effect if the transactions contemplated by this
Agreement are not consummated.
(f) Materiality. ATOW and the individuals hereby agree that this
covenant is a material and substantial part of this
transaction.
12. Miscellaneous.
(a) The parties understand that notwithstanding any other
representation to the contrary, the agreement is subject to
ATOW obtaining financing for this transaction prior to July
30, 1999. Should ATOW not obtain financing for this
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transaction prior to July 30, 1999, this agreement shall be
null and void and except as provided in the Binding Letter of
Intent neither party shall owe any amount to the other, unless
the parties, in writing, agree to extend this agreement.
(b) From and after the date of Closing, Seller shall execute and
deliver to or cause to be executed and delivered to ATOW SUB
any such further instruments of transfer, assignment and
conveyance and shall take such other action as ATOW SUB may
reasonably require to carry out more effectively the sale,
transfer, assignment and conveyance to ATOW SUB of the assets
and to confirm and assure ATOW SUB's title to them.
(c) Each party covenants and agrees that it shall be responsible
for and shall bear its own legal and other costs and expenses
in connection with the negotiation, preparation and execution
of this Agreement, and performance of the transactions
contemplated by it.
(d) Neither party shall assign, in whole or in part, this
Agreement or its rights and obligations under it without the
express prior written consent of the other party.
(e) In the event that any provision of this Agreement shall be
held invalid, illegal or unenforceable under applicable law,
the remainder of this Agreement shall remain valid and
enforceable unless such invalidity, illegality or
unenforceability substantially diminishes the rights and
obligations, taken as a whole, of Seller or ATOW or ATOW SUB.
(f) This Agreement and the Exhibits contain the entire agreement
among the parties with respect to the sale and purchase of the
Assets and supersede all previous written or oral
negotiations, commitments and writings.
(g) This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(h) This Agreement may be amended only in writing executed by the
parties affected by such amendment.
(i) This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Florida.
(j) Any controversy or claim arising out of or relating to
this contract, of the breach thereof, shall be settled by
arbitration administered by the American Arbitration
Association (AAA), in the county of Palm Beach, pursuant to
the Commercial Arbitration rules of the AAA, and judgement on
the award rendered by the arbitrator(s) may be entered in any
court of competent jurisdiction within the State of Florida.
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In witness, the parties have caused this Agreement to be duly executed
under seal as of the date written above.
TOWN `N COUNTRY TOWING, INC.
Attest: /s/ S. Nall /s/ Frank W. Rice
------------------- ---------------------
S. Nall Frank W. Rice
CEO
1-800 AUTOTOW GULF COAST EAST, INC.
Attest: /s/ Delmer C. Gowing /s/ Steven B. Teeters
-------------------- ---------------------
Delmer C. Gowing Steven B. Teeters
Attorney Treasurer
1-800-AUTOTOW, INC.
Attest: /s/ Delmer C. Gowing /s/ Joel B. Nagelmann
-------------------- ---------------------
Delmer C. Gowing Joel B. Nagelmann
Attorney President
10
EXHIBIT 6.27
Amendment to Asset Purchase Agreement
Frank W. Rice
Town `N Country Towing
July 30, 1999
The legal documentation necessary to close the funding has not been completed
despite a tremendous effort by the personnel at 1-800-AutoTow and the attorneys
for all parties. We request an extension on your Purchase Agreement until August
6, 1999.
Because of this delay and for your consideration of this extension, rather than
utilize the contracted stock price calculation in the Agreement, we are willing
to fix your stock price at $0.70 per share.
By executing this Amendment, you acknowledge a waiver of the July 30, 1999
funding date in the Purchase Agreement and grant an extension until the end of
this week (August 6, 1999).
Sincerely,
Agreed:
/s/ Joel B. Nagelmann /s/ Frank W. Rice
- --------------------- -----------------
Joel B. Nagelmann Frank W. Rice
President & CEO Seller
EXHIBIT 6.28
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is dated this 28th day of July, 1999,
between A-Ace Towing, Muhammad A. Choudary and Kurshid A. Choudary ("Sellers"),
and 1-800- AutoTow, Inc., a Delaware Corporation ("ATOW") and 1-800-AutoTow Gulf
Coast S.W. ("ATOW SUB"), a Texas Corporation ("Purchasers"). Sellers desire to
sell to Purchasers and Purchasers desire to purchase from Sellers certain of the
Assets (as defined below) of Sellers, upon the terms and conditions set forth
below.
Therefore, in consideration of the covenants, representations,
warranties and agreements contained in this Agreement, the receipt and
sufficiency of which are acknowledged, the parties intending to be legally
bound, covenant and agree as follows:
1. Definitions. The following words shall mean, when used in
this Agreement:
(a) "Assets" shall mean all of the rights and assets of the
Sellers, whether real, personal or mixed, tangible or
intangible, which are used in or relate to the vehicle towing
business of Sellers located and operated at 12761 Nacogdoches
Drive, San Antonio, Texas 78217 (the "premises"), excluding
cash and accounts receivable, and including but not limited to
the following: the goodwill associated with the business, all
permits, licenses, agreements and rights associated with the
towing business, trucks, office equipment and supplies, cash
registers, furniture and furnishings, telephone and other
communication systems, computer hardware and software systems,
all contracts and agreements made on behalf of Sellers
pertaining to its business and books of account, files,
ledgers, vendor lists, customer records, operations manuals,
confidential information, papers and records pertaining to its
businesses at the premises and the name "A-Ace Towing.
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(b) "Closing" shall mean the events which take place for the
purpose of the consummation of this Agreement, the same to
occur at the offices of ATOW on July 28, 1999.
2. Sale and Transfer of Assets. Upon the terms and subject to the
conditions set forth in this agreement, Sellers agree to sell, transfer, assign,
grant, convey and deliver to ATOW SUB, at Closing, free and clear of all
mortgages, liens, security interests, pledges, charges and other encumbrances
and ATOW SUB agrees to purchase from Sellers, at Closing, all of Sellers'
Assets, except those Assets excluded above. The parties also expressly agree
that the name A-Ace Towing shall be an asset transferred by Sellers to ATOW SUB.
3. Assumption of Liabilities or Obligations. ATOW SUB has not assumed,
and is not assuming, any liability or obligation of Sellers of any nature, known
or unknown, existing or contingent, including but not limited to any liabilities
or obligations with respect to any employees of Sellers other than as
specifically provided in this Agreement. All liabilities of Sellers shall
continue to be the sole responsibility of Sellers, which shall pay and discharge
all of such liabilities as they come due. Sellers agree to indemnify and hold
ATOW and ATOW SUB harmless from and against any loss, liability, damage, cost or
expense in respect of any liabilities or obligations.
4. Payment for the Assets.
(a) The purchase price for the Assets shall be $845,000.
(b) The purchase price paid at closing shall be: $362,000 and a
promissory note, attached as Exhibit B, in the amount of
$200,000 at 8% interest. Interest is payable quarterly with
the principal due on or before April 1, 2000.
(c) ATOW shall also transfer to Sellers at closing ATOW Common
Stock in an amount equal to $283,000.00 dollars at the average
closing stock price for the five (5) trading days prior to the
Closing and the five (5) trading days subsequent to the
Closing less a thirty percent discount. The shares issued to
the seller will be restricted as to their sale subject to Rule
144.
(d) Any sales tax, use tax, excise tax, transfer tax, recording
fee or other tax or fee imposed upon the transfer of the
Assets from Sellers to ATOW shall be paid by ATOW SUB.
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5. Instruments of Transfer. Sellers agree to execute and deliver to
ATOW SUB such instruments of transfer, assignment and conveyance as shall be
necessary in the judgment of ATOW to vest in ATOW SUB good and marketable title
to the Assets free and clear of all mortgages, liens, security interests,
pledges, charges and other encumbrances except as specifically set forth in
Exhibit A subject to the provisions of (2) above. Such instruments of transfer
shall include but not be limited to a Bill of Sale in the form of attached
Exhibit D, a lease agreement (Exhibit E) for the premises and a vehicle service
contract for maintenance and repair (Exhibit F). Further, ATOW and ATOW SUB
agree that Muhammad A. Choudary shall be employed by ATOW SUB pursuant to an
employment agreement attached hereto as Exhibit G.
6. Asset Value. Upon completion of due diligence, should ATOW determine
the fair market value of an asset detailed in Exhibit C is less than the listed
value, the parties agree to negotiate in good faith to establish a fair value.
If the parties are unable to arrive at an agreement as to the value of any
specific asset, ATOW reserves the right to exclude that asset from the assets
being purchased and reduce the purchase price by an amount equal to the
estimated fair market value listed on Exhibit C. In the event the total of such
excluded assets equals or exceeds 10% of the total assets listed on Exhibit C,
ATOW shall be exempt from having to honor any agreement to purchase the assets
of SELLER.
7. Cooperation. SELLER agrees to cooperate fully with ATOW in
completing its due diligence including, but not limited to the following:
(a) Communicating with all creditors in writing or otherwise to
verify the nature and extent of their liabilities; and
(b) obtaining and/or assigning all contracts, permits, regulatory
clearances, federal, state or local licenses and approvals. At
the option of ATOW, it may elect to close this transaction
prior to completing all such assignments and approvals. In the
event that ATOW elects to do so, SELLER agrees to undertake
good faith efforts to assist ATOW in obtaining such
assignments, licenses or approval.
8. Representations and Warranties of Sellers. Sellers represent,
warrant and agree to and with ATOW and ATOW SUB as follows:
(a) Sellers have all requisite power and all necessary permits,
certificates, contracts, approvals and other authorizations
required by any and all federal, state, city, county or other
municipal bodies to own, lease, use and operate its properties
and to conduct its business in the manner in which such
business is presently conducted.
(b) The execution, delivery and performance of this Agreement have
been duly authorized by the Sellers, and Sellers have the
complete and unrestricted power and authority, and has taken
all action necessary, to enter into, execute and deliver this
Agreement and to perform all of its obligations hereunder.
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(c) Upon execution and delivery of it on the part of Sellers and
ATOW and ATOW SUB, this Agreement shall constitute the valid
and legally binding obligation of Sellers enforceable in
accordance with its terms except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights. This Agreement does not
violate any law or regulation and does not conflict with any
other agreement affecting Sellers or the Assets.
(d) The representations made in Exhibit H hereto are correct and
accurately reflect the business conducted at the premises. The
Sellers understand that the Purchasers are relying on the
accuracy of these representations to evaluate the value of the
assets being acquired on a going concern basis and Sellers
warrant that this is a true and accurate statement of the
Sellers' financial history and condition. The Sellers agree
that they will pay, settle, or otherwise dispose of all their
liabilities, both current and contingent in such a manner as
to not damage or diminish the value of the assets being
acquired including, but not limited to trademarks, trademarks,
contracts, and goodwill.
(e) Sellers have good and marketable title to all of the Assets,
free and clear of all mortgages, liens, security interests,
pledges, charges or other encumbrances. In the event that any
of Sellers' Assets are encumbered, payment of such
encumbrances shall be made by Sellers at Closing out of the
proceeds received from the sale of the Assets.
(f) Exhibit I contains a list of all agreements, commitments and
contracts, written or oral, pertaining to the Assets and to
which Sellers are a party, which (i) are not terminable on 30
days' notice or less without any obligation of Sellers, and
(ii) which are either individually or in the aggregate
material to Sellers.
(g) There is no action, suit, proceeding, inquiry or investigation
at law or in equity, or before any court, arbitrator, public
board or body, pending or threatened against Sellers in which
an unfavorable decision, ruling or finding would in any way
adversely affect the transaction contemplated by this
Agreement or the business, assets or financial condition of
Sellers.
(h) Sellers are not obligated under any contract or agreement or
subject to any charge or other restriction which materially
and adversely affects the business, assets or financial
condition of Sellers. Sellers are not in violation or default
under any indenture, contract, lease or agreement to which it
is a party or by which the Assets are bound or with respect to
any law, regulation, rule, order, writ, injunction or decree
of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, nor will the execution, delivery and
performance of this Agreement cause or result in any such
violation or default or result in the creation of any lien,
claim, pledge or encumbrance or any kind upon any of the
Assets of Sellers.
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(i) Sellers have filed all federal, state and local income,
franchise, capital stock, sales or use, excise, property or
other tax returns which are required to be filed by Sellers
and has paid all taxes as shown on such returns and on any
assessment received by Sellers and all other taxes payable
without requiring the filing of any return. Such tax returns
are correct and complete and Sellers have not received any
notice of any proposed tax deficiency.
(j) All of the Assets are adequately insured against loss and all
insurance policies relating to them will be assigned to ATOW
SUB, if ATOW SUB so requests.
(k) All tangible Assets of Sellers are in good order and repair
and in good operating condition, reasonable wear and tear
excepted, and suitable for the uses for which intended.
(l) Sellers are not subject to any order of any court or
governmental authority or agency, nor is there any legal
action, governmental proceeding or investigation pending or
threatened or known to Sellers to compel Sellers to make any
material change in the character or location of any of the
assets or that would materially and adversely affect the
assets or which could subject Sellers to any fine, forfeiture
or other sanction.
(m) With respect to the premises, Sellers have not engaged in, or
allowed third parties to engage in, any actions, and Sellers
have no knowledge of any fact or condition, which would
constitute a violation of the National Environmental Policy
Act, 42 USCA, Section 4321 et seq., the Resource Conservation
Recovery Act (RCRA) 42 USCA, Section 6901 et seq., the
Comprehensive Environmental Response Compensation and
Liability Act (CERCLA) 42 USCA, Section 6911 et seq., or any
regulations promulgated by the United States Environmental
Protection Agency pursuant to those Acts, or any applicable
state or local environmental law, regulation or order. Sellers
shall be solely responsible, and ATOW and ATOW SUB shall have
no liability, for any and all liability resulting from such
violation which occurs prior to the Closing, even if the
violations are not discovered until after the date of the
final Closing documents. Any such liability shall include but
not be limited to, any costs, penalties, assessments, expenses
or fees, including reasonable attorneys' fees, incurred by
ATOW and or ATOW SUB in connection with bringing the premises
into full compliance with applicable environmental laws,
statutes, ordinances, rules and regulations.
(n) The only persons (including, but not limited to, governmental
authorities and agencies, creditors of Sellers, parties to
leases and subleases or any other instruments or agreements to
which Sellers are a party or by which it is bound) whose
approval or consent to the execution, delivery and performance
of this Agreement by Sellers is legally or contractually
required are specified on attached Exhibit J, and the
approvals and consents of all such persons will be duly
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obtained by Closing, or alternatively, waived in writing by
ATOW SUB and obtained by Sellers promptly after Closing, in
which event the transfer under this Agreement relating to the
subject matter of such consent shall be deemed to be
conditional on receipt of such consent.
(o) Neither this Agreement nor any Exhibit or financial statement,
certificate or other written material furnished by or on
behalf of Sellers contain any untrue statement of a fact or
omits to state a fact necessary in order to make the
statements contained in it not misleading. There is no fact
known to Sellers which materially and adversely affects the
business or financial condition of Sellers or the assets which
has not been set forth in this Agreement or in any Exhibit, or
financial statement, certificate or other written material
furnished pursuant to it.
(p) The parties agree that the terms and conditions of this
Agreement are highly confidential in nature and both the
Purchasers and Sellers agree not to disclose the terms and
conditions of this Agreement without the written consent of
the other, unless such disclosure is required by law.
Violation of this provision may, at the discretion of the
other party, be cause for termination and the non-disclosing
party shall be entitled to damages in an amount equal to the
costs of its due diligence including staff, attorney,
accounting, travel, and related expenses. The Sellers
recognize that this non-disclosure provision shall not extend
to regulatory requirements of the Securities and Exchange
Commission or to any filing in connection with a Registration
Statement or other required filing.
(q) Except as contemplated in this Agreement, since the most
recent fiscal year end, the Sellers have conducted their
business only in the ordinary course of business and there
have not been any material changes with respect to the
Sellers. Without limiting the generality of the foregoing,
since that date, the Sellers have not:
(i) sold, assigned, transferred, mortgaged, pledged,
subjected to lien, or entered into any conditional
sale or other title retention agreement with respect
to any of the assets being purchased;
(ii) entered into any agreement with any labor union or
association representing any employee or made any
wage or salary increase or bonus, or increase in any
other direct or indirect compensation or employment
agreement, for any of its officers, directors or
employees.
9. Seller acknowledges that each certificate representing
1-800-AutoTow's Common Stock acquired pursuant to this Agreement shall bear the
following restrictive legend:
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THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE "SHARES") HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE
OR OTHERWISE DISTRIBUTED WITHOUT ONE OF THE FOLLOWING:
(i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE
SECURITIES ACT, OR
(ii) AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
Seller's further acknowledge that they are acquiring 1-800-AutoTow
Common Stock for their own account and not with a view to its distribution
within the meaning of Section 2(11) of the Securities Act. Sellers are
"accredited investors" as such term is defined in Rule 501(a) under the
Securities Act.
10. Representations and Warranties of ATOW and ATOW SUB. ATOW and ATOW
SUB represent, warrant and agree as follows:
(a) ATOW and ATOW SUB are corporations duly organized, validly
existing and in good standing under the laws of the State of
Delaware and Texas respectively.
(b) ATOW and ATOW SUB have the power and authority, and have taken
all action necessary to enter into, execute and deliver this
Agreement and to perform all of its obligations under it.
(c) Upon execution and delivery of it on the part of Sellers, ATOW
and ATOW SUB, this Agreement shall constitute the valid and
legally binding obligation of ATOW and ATOW SUB, enforceable
in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally. This Agreement
does not violate any law or regulation pertaining to ATOW and
ATOW SUB and does not conflict with any other agreement
affecting ATOW and ATOW SUB.
(d) ATOW SUB hereby assume all liability, on the first day after
the Closing, under the leases and subleases with respect to
the premises (subject to the provisions of Section 6), and
ATOW SUB shall indemnify and hold harmless Sellers and any of
their officers, directors and shareholders who personally
guaranteed the performance of Sellers under them.
11. Survival of Representations; Indemnification. The representations,
warranties, covenants and agreements contained in this Agreement shall survive
Closing, regardless of any investigations made by or on behalf of, or knowledge
of, any of the parties. Sellers agree to indemnify ATOW and ATOW SUB, its
successors and assigns, against, and hold them harmless from and in respect of,
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any loss, liability, damage, cost or expense accruing from or resulting by
reason of any falsity or breach of the representations, warranties, covenants or
agreements made or to be performed by Sellers pursuant to this Agreement. ATOW
and ATOW SUB agree to indemnify Sellers, their successors and assigns, against,
and hold them harmless from and in respect of, any loss, liability, damage, cost
or expense accruing from or resulting by reason of any falsity or breach of the
representations, warranties, covenants or agreements made or to be performed by
ATOW and ATOW SUB pursuant to this Agreement. For the purposes of this
indemnification, ATOW and ATOW SUB shall have the right to recoup any amount
paid to Muhammad A. Choudary and Kurshid A. Choudary as a result of a
non-assumed claim or liability.
12. Compliance with Bulk Sales. Sellers and ATOW SUB agree to waive
compliance with any applicable laws of the State of Texas pertaining to Bulk
Transfers. In consideration of such waiver, and without limiting any provisions
of Section 8, Sellers agree to indemnify and hold harmless ATOW and/or ATOW SUB
from and against, and allow ATOW and/or ATOW SUB to set off against amounts due
to Sellers, any and all losses, liabilities, claims, damages or expenses,
including attorneys' fees, arising as a result of claims or demands by third
parties against Sellers in connection with its operation of its business prior
to Closing.
13. Non-Compete Agreement.
(a) Prohibited Activities. Kurshid A. Choudary shall enter into a
non-competition agreement which shall be in the form attached
as Exhibit 12 A.
(b) Damages. Because of the difficulty of measuring economic
losses to ATOW or ATOW SUB as a result of a breach of the
foregoing covenant, and because of the immediate and
irreparable damage that could be caused to ATOW and/or ATOW
SUB for which it would have no other adequate remedy, each
individual agrees that the foregoing covenant may be enforced
by ATOW or ATOW SUB, in the event of breach by such
individual, by injunctions and restraining orders.
(c) Reasonable Restraint. It is agreed by the Parties hereto that
the foregoing covenants in this section impose a reasonable
restraint on the individuals in light of the activities and
business of ATOW or ATOW SUB on the date of the execution of
this Agreement and the current plans of ATOW and ATOW SUB; but
it is also the intent of ATOW, ATOW SUB and the Individuals
that such covenants be construed and enforced in accordance
with the changing activities and business of ATOW and ATOW SUB
throughout the term of this covenant.
It is further agreed by the Parties hereto that, in the event
that any individual shall enter into a business or pursue
other activities not in competition with ATOW or ATOW SUB
and/or any subsidiary thereof, or similar activities or
business in locations the operation of which, under such
circumstances, does not violate clause Section 12(a), and in
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any event such new business, activities or location are not in
violation of this Section 12 or of such individual's
obligations under this Section 12, if any, such individual
shall not be chargeable with a violation of this Section 12 if
ATOW or ATOW SUB shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
(d) Severability; Reformation. The covenants in this section are
severable and separate, and the unenforceability of any
specific covenant shall not affect the provisions of any other
covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it
is the intention of the Parties that such restrictions be
enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
(e) Independent Covenant. All of the covenants in this Section 12
shall be construed as an agreement independent of any other
provision in this Agreement, and the existence of any claim or
cause of action of any individual against ATOW or ATOW SUB
whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by ATOW or ATOW SUB of
such covenants. It is specifically agreed that the period of
five (5) years stated at the beginning of this Section 10,
during which the agreements and covenants of each individual
made in this Section 12 shall be effective, shall be computed
by excluding from such computation any time during which such
individual is in violation of any provision of this Section
12. The covenants contained in this Section 12 shall not be
affected by any breach of any other provision hereof by any
Party hereto, except that upon ATOW or ATOW SUB admission in
writing, or a final judicial determination which is not the
subject of appeal or further appeal by ATOW or ATOW SUB, that
either ATOW or ATOW SUB has materially breached Muhammad A.
Choudary's Employment Agreement (if applicable), and ATOW or
ATOW SUB failure to cure such material breach within 30 days
of such admission or final judicial determination, whichever
is applicable, then the covenants contained in this Section 12
with respect to Muhammad A. Choudary will expire. The
covenants contained in this Section 12 shall have no effect if
the transactions contemplated by this Agreement are not
consummated.
(f) Materiality. ATOW and ATOW SUB and the individuals hereby
agree that this covenant is a material and substantial part of
this transaction.
14. Miscellaneous.
(a) The parties understand that notwithstanding any other
representation to the contrary, the agreement is subject to
ATOW obtaining financing for this transaction prior to July
30, 1999. Should ATOW not obtain financing for this
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transaction prior to July 30, 1999, this agreement shall be
null and void and neither party shall owe any amount to the
other, unless the parties, in writing, agree to extend this
agreement.
(b) Seller shall make all current and prior years financial books
and records available to ATOW SUB upon request during
reasonable business hours.
(c) From and after the date of Closing, Sellers shall execute and
deliver to or cause to be executed and delivered to ATOW SUB
any such further instruments of transfer, assignment and
conveyance and shall take such other action as ATOW SUB may
reasonably require to carry out more effectively the sale,
transfer, assignment and conveyance to ATOW SUB of the assets
and to confirm and assure ATOW SUB's title to them.
(d) Each party covenants and agrees that it shall be responsible
for and shall bear its own legal and other costs and expenses
in connection with the negotiation, preparation and execution
of this Agreement, and performance of the transactions
contemplated by it.
(e) Neither party shall assign, in whole or in part, this
Agreement or its rights and obligations under it without the
express prior written consent of the other party.
(f) In the event that any provision of this Agreement shall be
held invalid, illegal or unenforceable under applicable law,
the remainder of this Agreement shall remain valid and
enforceable unless such invalidity, illegality or
unenforceability substantially diminishes the rights and
obligations, taken as a whole, of Sellers or ATOW or ATOW SUB.
(g) This Agreement and the Exhibits contain the entire agreement
among the parties with respect to the sale and purchase of the
Assets and supersede all previous written or oral
negotiations, commitments and writings.
(h) This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(i) This Agreement may be amended only in writing executed by the
parties affected by such amendment.
(j) This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Florida.
(k) Any controversy or claim arising out of or relating to this
contract, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration
Association (AAA), in its Miami, Florida branch office, under
its Commercial Arbitration rules, and judgement on the award
rendered by the arbitrator(s) may be entered in any court of
competent jurisdiction within the State of Florida.
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In witness, the parties have caused this Agreement to be duly executed
under seal as of the date written above.
Attest: /s/ V. Gelormine By: /s/ Kurshid A. Choudary
----------------- ----------------------
V. Gelormine Kurshid A. Choudary
Seller
Attest: /s/ V. Gelormine By: /s/ M. Choudary
----------------- ----------------------
V. Gelormine M. Choudary
Seller
1-800 AUTOTOW GULF COAST S. W., INC.
Attest: /s/ Steven B. Teeters By: /s/ E. A. Iarocci
------------------------ -------------------
Steven B. Teeters E. A. Iarocci
President
1-800-AUTOTOW, INC.
Attest: /s/ Steven B. Teeters By: /s/ E. A. Iarocci
------------------------ -------------------
Steven B. Teeters E. A. Iarocci
Sr. V.P./COO
11
EXHIBIT 6.29
Amendment to Asset Purchase Agreement
Muhammed Choudary
A Ace Towing
July 30, 1999
The legal documentation necessary to close the funding has not been completed
despite a tremendous effort by the personnel at 1-800-AutoTow and the attorneys
for all parties. We request an extension on your Purchase Agreement until August
6, 1999.
Because of this delay and for your consideration of this extension, rather than
utilize the contracted stock price calculation in the Agreement, we are willing
to fix your stock price at $0.70 per share.
By executing this Amendment, you acknowledge a waiver of the July 30, 1999
funding date in the Purchase Agreement and grant an extension until the end of
this week (August 6, 1999).
Sincerely,
Agreed:
/s/ Joel B. Nagelmann /s/ M. Choudary
- --------------------- -----------------
Joel B. Nagelmann M. Choudary
President & CEO Seller
EXHIBIT 6.30
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is dated this 26th day of February, 1999,
between Dixie Grande Towing, Robert's Towing, Sandra K. Stewart and Jim Stewart
("Sellers"), and 1-800 AutoTow, Inc., a Delaware corporation ("ATOW") and 1-800
AutoTow Gulf Coast East, Inc., ("ATOW SUB"), a Florida corporation
("Purchasers"). Sellers desire to sell to Purchasers and Purchasers desire to
purchase from Sellers certain of the Assets (as defined below) of Sellers, upon
the terms and conditions set forth below.
Therefore, in consideration of the covenants, representations,
warranties and agreements contained in this Agreement, the receipt and
sufficiency of which are acknowledged, the parties intending to be legally
bound, covenant and agree as follows:
1. Definitions. The following words shall mean, when used in
this Agreement:
(a) "Assets" shall mean all of the rights and assets of the
Sellers, whether real, personal or mixed, tangible or
intangible, which are used in or relate to the vehicle towing
business of Sellers located and operated at 2509 9th Street
West, Bradenton, FL 34205 (the "premises"), excluding cash and
accounts receivable, and including but not limited to the
following: the goodwill associated with the business, all
permits, licenses, agreements and rights associated with the
premises, machinery and equipment, tools and tooling,
inventory including trucks, repair equipment and other related
products, office equipment and supplies, cash registers,
furniture and furnishings, telephone and other communication
systems, computer hardware and software systems, all contracts
and agreements made on behalf of Sellers pertaining to its
business and books of account, files, ledgers, vendor lists,
customer records, operations manuals, confidential
information, papers and records pertaining to its businesses
at the premises.
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(b) "Closing" shall mean the events which take place for the
purpose of the consummation of this Agreement, the same to
occur at the offices of ATOW on or before June 30, 1999.
2. Sale and Transfer of Assets. Upon the terms and subject to the
conditions set forth in this agreement, Sellers agree to sell, transfer, assign,
grant, convey and deliver to ATOW SUB, at Closing, free and clear of all
mortgages, liens, security interests, pledges, charges and other encumbrances
except those specifically set forth on attached Exhibit A, and ATOW SUB agrees
to purchase from Sellers, at Closing, all of Sellers' Assets, except those
Assets excluded above. The parties expressly agree that after the execution of
this agreement but prior to the final Closing, on or before, June 30, 1999, the
encumbrances listed on Exhibit A may change. Therefore, the encumbrances
scheduled with the final Closing documents will be the encumbrances assumed in
this transaction. The parties also expressly agree that the name Dixie Grande
Towing and Robert's Towing shall be assets transferred by Sellers to ATOW SUB.
3. Assumption of Liabilities or Obligations. Except for the obligations
which are specifically set forth on Exhibit A to this agreement and expressly
assumed by ATOW SUB, ATOW and ATOW SUB have not assumed, and are not assuming,
any liability or obligation of Sellers of any nature, known or unknown, existing
or contingent, including but not limited to any liabilities or obligations with
respect to any employees of Sellers other than as specifically provided in this
Agreement. All liabilities of Sellers other than those specified shall continue
to be the sole responsibility of Sellers, which shall pay and discharge all of
such liabilities as they come due. Sellers agree to indemnify and hold ATOW and
ATOW SUB harmless from and against any loss, liability, damage, cost or expense
in respect of any liabilities or obligations which have not been specifically
assumed by ATOW SUB pursuant to this Agreement. The parties expressly agree that
after the execution of this agreement but prior to the final closing, on or
before, June 30, 1999, the liabilities or obligations listed on Exhibit A may
change. Therefore, the liabilities or obligations scheduled with the final
Closing documents will be the liabilities or obligations assumed in this
transaction.
4. Payment for the Assets.
(a) The purchase price for the Assets shall be $550,000 less the
assumption of liabilities as set forth in Exhibit A, up to
$157,000.
(b) A non-refundable cash deposit of $25,000 to be paid on
February 26, 1999 upon both parties execution of this
agreement. See Exhibit 4 (b).
(c) The purchase price paid at Closing shall be $125,000 less the
deposit referenced in (b) above.
(d) ATOW shall also transfer to Sellers at Closing ATOW Common
Stock in an amount equal to $268,000.00 dollars at the average
closing stock price for the previous ten days trading prior to
executing this Agreement. The shares issued to the Sellers
will be restricted as to their sale to Rule 144.
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(e) The Purchase Price shall be allocated among the Assets by
Sellers and ATOW in accordance with attached Exhibit B.
Sellers and ATOW agree that they will report the sale of the
Assets for income tax purposes in accordance with the
allocations set forth above.
(f) Any sales tax, use tax, excise tax, transfer tax, recording
fee or other tax or fee imposed upon the transfer of the
Assets from Sellers to ATOW SUB shall be paid by Sellers.
5. Instruments of Transfer. Sellers agree to execute and deliver to
ATOW such instruments of transfer, assignment and conveyance as shall be
necessary in the judgment of ATOW to vest in ATOW SUB good and marketable title
to the Assets free and clear of all mortgages, liens, security interests,
pledges, charges and other encumbrances except as specifically set forth in
Exhibit A except as specifically set forth in Exhibit A subject to the
provisions of (2) above. Such instruments of transfer shall include but not be
limited to a Bill of Sale in the form of attached Exhibit C, a sub-lease
agreement (Exhibit D) for the premises. Further, ATOW and ATOW SUB agree that
Jim Stewart shall be employed by ATOW SUB pursuant to an employment agreement
attached hereto as Exhibit E.
6. Representations and Warranties of Sellers. Sellers represent,
warrant and agree to and with ATOW SUB as follows:
(a) Sellers have all requisite power and all necessary permits,
certificates, contracts, approvals and other authorizations
required by any and all federal, state, city, county or other
municipal bodies to own, lease, use and operate its properties
and to conduct its business in the manner in which such
business is presently conducted.
(b) The execution, delivery and performance of this Agreement have
been duly authorized by the Sellers, and Sellers have the
complete and unrestricted power and authority, and has taken
all action necessary, to enter into, execute and deliver this
Agreement and to perform all of its obligations hereunder.
(c) Upon execution and delivery of it on the part of Sellers and
ATOW SUB, this Agreement shall constitute the valid and
legally binding obligation of Sellers enforceable in
accordance with its terms except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights. This Agreement does not
violate any law or regulation and does not conflict with any
other agreement affecting Sellers or the Assets.
(d) The representations made in Exhibit F hereto are correct and
accurately reflect the business conducted at the premises. The
Sellers understand that the Purchasers are relying on the
accuracy of these representations to evaluate the value of the
assets being acquired on a going concern basis and Sellers
warrant that this is a true and accurate statement of the
Sellers' financial history and condition. The Sellers agree
that they will pay, settle, or otherwise dispose of all their
liabilities, both current and contingent, not being assumed by
ATOW SUB, in such a manner as to not damage or diminish the
value of the assets being acquired including, but not limited
to trademarks, trademarks, contracts, and goodwill.
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(e) Sellers have good and marketable title to all of the Assets,
free and clear of all mortgages, liens, security interests,
pledges, charges or other encumbrances except those set forth
on Exhibit A subject to the provisions of (2) above. In the
event that any of Sellers' Assets are encumbered other than as
set forth on Exhibit A or otherwise modified in accordance
with the provisions of (2) above, payment of such encumbrances
shall be made by Sellers at Closing out of the proceeds
received from the sale of the Assets.
(f) Exhibit I contains a list of all agreements, commitments and
contracts, written or oral, pertaining to the Assets and to
which Sellers are a party, which (i) are not terminable on 30
days' notice or less without any obligation of Sellers, and
(ii) which are either individually or in the aggregate
material to Sellers.
(g) There is no action, suit, proceeding, inquiry or investigation
at law or in equity, or before any court, arbitrator, public
board or body, pending or threatened against Sellers in which
an unfavorable decision, ruling or finding would in any way
adversely affect the transaction contemplated by this
Agreement or the business, assets or financial condition of
Sellers.
(h) Sellers are not obligated under any contract or agreement or
subject to any charge or other restriction which materially
and adversely affects the business, assets or financial
condition of Sellers. Sellers are not in violation or default
under any indenture, contract, lease or agreement to which it
is a party or by which the Assets are bound or with respect to
any law, regulation, rule, order, writ, injunction or decree
of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, nor will the execution, delivery and
performance of this Agreement cause or result in any such
violation or default or result in the creation of any lien,
claim, pledge or encumbrance or any kind upon any of the
Assets of Sellers.
(i) Sellers have filed all federal, state and local income,
franchise, capital stock, sales or use, excise, property or
other tax returns which are required to be filed by Sellers
and has paid all taxes as shown on such returns and on any
assessment received by Sellers and all other taxes payable
without requiring the filing of any return. Such tax returns
are correct and complete and Sellers have not received any
notice of any proposed tax deficiency.
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(j) All of the Assets are adequately insured against loss and all
insurance policies relating to them will be assigned to ATOW
SUB, if ATOW SUB so requests.
(k) All tangible Assets of Sellers are in good order and repair
and in good operating condition, reasonable wear and tear
excepted, and suitable for the uses for which intended.
(l) Sellers are not subject to any order of any court or
governmental authority or agency, nor is there any legal
action, governmental proceeding or investigation pending or
threatened or known to Sellers to compel Sellers to make any
material change in the character or location of any of the
assets or that would materially and adversely affect the
assets or which could subject Sellers to any fine, forfeiture
or other sanction.
(m) With respect to the premises, Sellers have not engaged in, or
allowed third parties to engage in, any actions, and Sellers
have no knowledge of any fact or condition, which would
constitute a violation of the National Environmental Policy
Act, 42 USCA, Section 4321 et seq., the Resource Conservation
Recovery Act (RCRA) 42 USCA, Section 6901 et seq., the
Comprehensive Environmental Response Compensation and
Liability Act (CERCLA) 42 USCA, Section 6911 et seq., or any
regulations promulgated by the United States Environmental
Protection Agency pursuant to those Acts, or any applicable
state or local environmental law, regulation or order. Sellers
shall be solely responsible, and ATOW or ATOW SUB shall have
no liability, for any and all liability resulting from such
violation which occurs prior to the Closing, even if the
violations are not discovered until after the date of the
final Closing documents. Any such liability shall include but
not be limited to, any costs, penalties, assessments, expenses
or fees, including reasonable attorneys' fees, incurred by
ATOW or ATOW SUB in connection with bringing the premises into
full compliance with applicable environmental laws, statutes,
ordinances, rules and regulations.
(n) The only persons (including, but not limited to, governmental
authorities and agencies, creditors of Sellers, parties to
leases and subleases or any other instruments or agreements to
which Sellers are a party or by which it is bound) whose
approval or consent to the execution, delivery and performance
of this Agreement by Sellers is legally or contractually
required are specified on attached Exhibit G, and the
approvals and consents of all such persons will be duly
obtained by Closing, or alternatively, waived in writing by
ATOW SUB and obtained by Sellers promptly after Closing, in
which event the transfer under this Agreement relating to the
subject matter of such consent shall be deemed to be
conditional on receipt of such consent.
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(o) Neither this Agreement nor any Exhibit or financial statement,
certificate or other written material furnished by or on
behalf of Sellers contain any untrue statement of a fact or
omits to state a fact necessary in order to make the
statements contained in it not misleading. There is no fact
known to Sellers which materially and adversely affects the
business or financial condition of Sellers or the assets which
has not been set forth in this Agreement or in any Exhibit, or
financial statement, certificate or other written material
furnished pursuant to it.
(p) The parties agree that the terms and conditions of this
Agreement are highly confidential in nature and both the
Purchasers and Sellers agree not to disclose the terms and
conditions of this Agreement without the written consent of
the other, unless such disclosure is required by law.
Violation of this provision may, at the discretion of the
other party, be cause for termination and the non-disclosing
party shall be entitled to damages in an amount equal to the
costs of its due diligence including staff, attorney,
accounting, travel, and related expenses. The Sellers
recognize that this non-disclosure provision shall not extend
to regulatory requirements of the Security an Exchange
Commission or to any filing in connection with a Registration
Statement or other required filing.
(q) Except as contemplated in this Agreement, since the most
recent fiscal year end, the Sellers have conducted their
business only in the ordinary course of business and there
have not been any material changes with respect to the
Sellers. Without limiting the generality of the foregoing,
since that date, the Sellers have not:
(i) sold, assigned, transferred, mortgaged, pledged,
subjected to lien, or entered into any conditional
sale or other title retention agreement with respect
to any of the assets being purchased;
(ii) entered into any agreement with any labor union or
association representing any employee or made any
wage or salary increase or bonus, or increase in any
other direct or indirect compensation or employment
agreement, for any of its officers, directors or
employees.
7. Representations and Warranties of ATOW and ATOW SUB. ATOW and ATOW
SUB represent, warrant and agree as follows:
(a) ATOW and ATOW SUB are corporations duly organized, validly
existing and in good standing under the laws of the State of
Delaware and Florida respectively.
(b) ATOW and ATOW SUB have the power and authority, and have taken
all action necessary to enter into, execute and deliver this
Agreement and to perform all of its obligations under it.
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(c) Upon execution and delivery of it on the part of Sellers, ATOW
and ATOW SUB, this Agreement shall constitute the valid and
legally binding obligation of ATOW and ATOW SUB, enforceable
in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally. This Agreement
does not violate any law or regulation pertaining to ATOW and
ATOW SUB and does not conflict with any other agreement
affecting ATOW and ATOW SUB.
(d) ATOW SUB hereby assumes all liability, on the first business
day after the Closing, under the leases and subleases with
respect to the premises (subject to the provisions of Section
6), and ATOW SUB shall indemnify and hold harmless Sellers and
any of their officers, directors and shareholders who
personally guaranteed the performance of Sellers under them.
8. Survival of Representations; Indemnification. The representations,
warranties, covenants and agreements contained in this Agreement shall survive
Closing, regardless of any investigations made by or on behalf of, or knowledge
of, any of the parties. Sellers agree to indemnify ATOW and ATOW SUB, its
successors and assigns, against, and hold them harmless from and in respect of,
any loss, liability, damage, cost or expense accruing from or resulting by
reason of any falsity or breach of the representations, warranties, covenants or
agreements made or to be performed by Sellers pursuant to this Agreement. ATOW
and ATOW SUB agree to indemnify Sellers, their successors and assigns, against,
and hold them harmless from and in respect of, any loss, liability, damage, cost
or expense accruing from or resulting by reason of any falsity or breach of the
representations, warranties, covenants or agreements made or to be performed by
ATOW and ATOW SUB pursuant to this Agreement. For the purposes of this
indemnification, ATOW and ATOW SUB shall have the right to recoup any amount
paid to Sandra K. Stewart and Jim Stewart as a result of a non-assumed claim or
liability.
9. Compliance with Bulk Sales. Sellers and ATOW SUB agree to waive
compliance with any applicable laws of the State of Florida pertaining to Bulk
Transfers. In consideration of such waiver, and without limiting any provisions
of Section 8, Sellers agree to indemnify and hold harmless ATOW and ATOW SUB
from and against, and allow ATOW or ATOW SUB to set off against amounts due to
Sellers, any and all losses, liabilities, claims, damages or expenses, including
attorneys' fees, arising as a result of claims or demands by third parties
against Sellers in connection with its operation of its business prior to
Closing.
10. Non-Compete Agreement.
(a) Prohibited Activities. Sandra K. Stewart shall enter
into a non-competition agreement which shall be in
the form attached as Exhibit 10 A.
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(b) Damages. Because of the difficulty of measuring
economic losses to ATOW or ATOW SUB as a result of a
breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused
to ATOW and/or ATOW SUB for which it would have no
other adequate remedy, each individual agrees that
the foregoing covenant may be enforced by ATOW or
ATOW SUB, in the event of breach by such individual,
by injunctions and restraining orders.
(c) Reasonable Restraint. It is agreed by the Parties
hereto that the foregoing covenants in this section
impose a reasonable restraint on the individuals in
light of the activities and business of ATOW or ATOW
SUB on the date of the execution of this Agreement
and the current plans of ATOW and ATOW SUB; but it is
also the intent of ATOW, ATOW SUB and the Individuals
that such covenants be construed and enforced in
accordance with the changing activities and business
of ATOW and ATOW SUB throughout the term of this
covenant.
It is further agreed by the Parties hereto that, in
the event that any individual shall enter into a
business or pursue other activities not in
competition with the ATOW or ATOW SUB and/or any
subsidiary thereof, or similar activities or business
in locations the operation of which, under such
circumstances, does not violate clause Section 10(a),
and in any event such new business, activities or
location are not in violation of this Section 10 or
of such individual's obligations under this Section
10, if any, such individual shall not be chargeable
with a violation of this Section 10 if ATOW or ATOW
SUB shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities
or (iii) location, as applicable.
(d) Severability; Reformation. The covenants in this
section are severable and separate, and the
unenforceability of any specific covenant shall not
affect the provisions of any other covenant.
Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable,
then it is the intention of the Parties that such
restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall
thereby be reformed.
(e) Independent Covenant. All of the covenants in this
Section 10 shall be construed as an agreement
independent of any other provision in this Agreement,
and the existence of any claim or cause of action of
any individual against the ATOW or ATOW SUB whether
predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the ATOW
or ATOW SUB of such covenants. It is specifically
8
<PAGE>
agreed that the period of five (5) years stated at
the beginning of this Section 10, during which the
agreements and covenants of each individual made in
this Section 10 shall be effective, shall be computed
by excluding from such computation any time during
which such individual is in violation of any
provision of this Section 10. The covenants contained
in this Section 10 shall not be affected by any
breach of any other provision hereof by any Party
hereto, except that upon the ATOW or ATOW SUB's
admission in writing, or a final judicial
determination which is not the subject of appeal or
further appeal by the ATOW or ATOW SUB, that either
ATOW or ATOW SUB has materially breached Jim
Stewart's Employment Agreement (if applicable), and
ATOW or ATOW SUB failure to cure such material breach
within 30 days of such admission or final judicial
determination, whichever is applicable, then the
covenants contained in this Section 10 with respect
to Jim Stewart will expire. The covenants contained
in this Section 10 shall have no effect if the
transactions contemplated by this Agreement are not
consummated.
(f) Materiality. ATOW and the individuals hereby agree
that this covenant is a material and substantial part
of this transaction.
11. Miscellaneous.
(a) The parties understand that notwithstanding any other
representation to the contrary, the agreement is subject to
ATOW obtaining financing for this transaction prior to June
30, 1999. Should ATOW not obtain financing for this
transaction prior to June 30, 1999, this agreement shall be
null and void and neither party shall owe any amount to the
other, and the non-refundable deposit, referenced in Section
4(b) shall be the Sellers, unless the parties, in writing,
agree to extend this agreement.
(b) From and after the date of Closing, Sellers shall execute and
deliver to or cause to be executed and delivered to ATOW SUB
any such further instruments of transfer, assignment and
conveyance and shall take such other action as ATOW SUB may
reasonably require to carry out more effectively the sale,
transfer, assignment and conveyance to ATOW SUB of the assets
and to confirm and assure ATOW SUB's title to them.
(c) Each party covenants and agrees that it shall be responsible
for and shall bear its own legal and other costs and expenses
in connection with the negotiation, preparation and execution
of this Agreement, and performance of the transactions
contemplated by it.
(d) Neither party shall assign, in whole or in part, this
Agreement or its rights and obligations under it without the
express prior written consent of the other party.
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<PAGE>
(e) In the event that any provision of this Agreement shall be
held invalid, illegal or unenforceable under applicable law,
the remainder of this Agreement shall remain valid and
enforceable unless such invalidity, illegality or
unenforceability substantially diminishes the rights and
obligations, taken as a whole, of Sellers or ATOW or ATOW SUB.
(f) This Agreement and the Exhibits contain the entire agreement
among the parties with respect to the sale and purchase of the
Assets and supersede all previous written or oral
negotiations, commitments and writings.
(g) This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(h) This Agreement may be amended only in writing executed by the
parties affected by such amendment.
(i) This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Florida.
(j) Any controversy or claim arising out of or relating to this
contract, of the breach thereof, shall be settled by
arbitration administered by the American Arbitration
Association (AAA), in its Miami, Florida branch office, under
its Commercial Arbitration rules, and judgement on the award
rendered by the arbitrator(s) may be entered in any court of
competent jurisdiction within the State of Florida.
In witness, the parties have caused this Agreement to be duly executed
under seal as of the date written above.
ATTEST:
/s/ James Kegley By: /s/ Jim Stewart
----------------- ----------------------
James Kegley Jim Stewart
Seller
/s/ Rhonda Ganske /s/ Sandra Stewart
----------------- ------------------
Rhonda Ganske Sandra Stewart
Seller
1-800 AUTOTOW GULF COAST EAST, INC.
ATTEST:
/s/ J. Konigsberg By: /s/ E.A. Iarocci
----------------- ----------------------
J. Konigsberg E.A. Iarocci
President
1-800 AUTOTOW, INC.
ATTEST:
/s/ E.A. Iarocci By: /s/ J. Konigsberg
----------------- ----------------------
E.A. Iarocci J. Konigsberg
Vice President
10
EXHIBIT 6.31
AMENDMENT TO ASSET PURCHASE AGREEMENT
Between 1-800-AutoTow, Inc., a Delaware Corporation and 1-800-AutoTow Gulf
Coast East, Inc., a Florida Corporation
And
Dixie Grande Towing, Roberts Towing, Sandra K. Stewart and Jim Stewart
On this 24th day of June, 1999 the parties set forth herein agree to modify and
amend the Asset Purchase Agreement executed on February 26, 1999. The parties
expressly incorporate by reference all original representations, terms and
conditions contained in the Asset Purchase Agreement dated February 26, 1999,
and modify only the closing date of "on or before June 30, 1999" to read in
every instance "on or before July 30, 1999".
1-800-AutoTow, Inc. Dixie Grande Towing
By: /s/ E.A. Iarocci By: /s/ Jim Stewart
----------------- ----------------------
E.A. Iarocci Jim Stewart
Seller
/s/ Sandra Stewart
------------------
Sandra Stewart
Seller
1-800-AutoTow Gulf Coast East, Inc. Roberts Towing
By: /s/ E.A. Iarocci By: /s/ Jim Stewart
----------------- ----------------------
E.A. Iarocci Jim Stewart
Seller
/s/ Sandra Stewart
------------------
Sandra Stewart
Seller
EXHIBIT 6.32
SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT
This Amendment dated this 22nd day of July, 1999 constitutes an
amendment to the Asset Purchase Agreement (Agreement) dated February 26, 1999
between Dixie Grand Towing, Robert's Towing, Sandra K. Stewart and Jim Stewart
(Sellers).
NOW THEREFORE,
In consideration of the covenants, representations, warranties and
agreements contained in the Agreement, the receipt and sufficiency of which is
acknowledged, the parties agree to the following Amendment to said Agreement:
Section 4 shall be and hereby is amended to read:
(a) The purchase price of the assets shall be $589,906.25 less the
assumption of liabilities as set forth in Exhibit A up to
$157,000.00.
(d) ATOW shall transfer to Sellers at Closing 506,209 shares of
1-800-AutoTow common stock representing the amount of
$287,906.25 for the purchase price based upon an agreed upon
stock price of $0.56875 as referenced in a letter amendment of
Section 4(d) of the Asset Purchase Agreement which amendment
is dated March 5, 1999.
In witness, the parties have caused this Agreement to be duly executed
under seal as of the date written above.
Attest:
/s/ Delmer Gowing By: /s/ Jim Stewart
----------------- ----------------------
Delmer Gowing Jim Stewart
Attorney Seller
/s/ Sandra Stewart
------------------
Sandra Stewart
Seller
1-800-AutoTow Gulf Coast East, Inc.
Attest:
By: /s/ Delmer Gowing By: /s/ Steven B. Teeters
----------------- ----------------------
Delmer Gowing Steven B. Teeters
Attorney Treasurer
1-800-AutoTow, Inc.
Attest:
By: /s/ Delmer Gowing By: /s/ Joel B. Nagelmann
----------------- ----------------------
Delmer Gowing Joel B. Nagelmann
Attorney President
EXHIBIT 6.33
Third Amendment to Asset Purchase Agreement
Jim Stewart
Dixie Grande Towing
July 30, 1999
The legal documentation necessary to close the funding has not been completed
despite a tremendous effort by the personnel at 1-800-AutoTow and the attorneys
for all parties. We request an extension on your Purchase Agreement until August
6, 1999.
Because of this delay and for your consideration of this extension, rather than
utilize the contracted stock price calculation in the Agreement, we are willing
to fix your stock price at $0.50 per share.
By executing this Amendment, you acknowledge a waiver of the July 30, 1999
funding date in the Purchase Agreement and grant an extension until the end of
this week (August 6, 1999).
Sincerely,
Agreed:
/s/ Joel B. Nagelmann /s/ Jim Stewart
- --------------------- -----------------
Joel B. Nagelmann Jim Stewart
President & CEO Seller
EXHIBIT 6.34
MERGER AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 23rd day of July, 1999
by and among
1-800-AUTOTOW, INC., a Delaware Corporation
1-800-AUTOTOW GULF COAST EAST, INC., a Florida Corporation, and
L&W COLLISION, TOWING & RECOVERY, INC., a Florida Corporation
and
the Stockholders named herein
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MERGER AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of the 23rd day of July 1999, by and among 1-800-AUTOTOW, INC., a Delaware
corporation ("ATOW"), 1-800-AUTOTOW GULF COAST EAST, INC., a Florida corporation
("ATOWSUB"), L&W COLLISION, TOWING & RECOVERY, INC., a Florida corporation (the
"COMPANY"), and the stockholders listed on Annex I (the "Stockholders"). The
Stockholders listed are all the stockholders of the COMPANY. ATOW, ATOWSUB, the
COMPANY and the Stockholders are each referred to in the Agreement as a PARTY
and collectively as the PARTIES.
RECITALS
WHEREAS, the respective Boards of Directors of ATOW, ATOWSUB and the
COMPANY deem it advisable and in the best interests of each of the corporations
and their respective stockholders that the COMPANY merge with and into ATOWSUB
pursuant to this Agreement and the applicable provisions of the laws of the
State of Florida, such transaction sometimes being herein called the Merger;
WHEREAS, the Boards of Directors of ATOW, ATOWSUB and the COMPANY have
approved and adopted this Agreement which is intended to qualify as a
reorganization described in Sections 354 and 356 of the Code;
WHEREAS, all of the Parties hereto desire to enter into this Agreement
to effectuate the Merger of the COMPANY with and into ATOWSUB, pursuant to all
of the terms, conditions, representations, warranties, and covenants contained
in this Agreement.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the Parties hereto hereby agree as follows:
TERMS AND CONDITIONS
1. DEFINITIONS. For purposes of this Agreement, unless the context otherwise
requires, the following capitalized words and phrases used in this
Agreement shall have the meanings set forth below:
1.1 "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes,
liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses.
1.2 "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
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1.3 "Agreement" has the meaning set forth in the first paragraph hereof.
1.4 "ATOW" has the meaning set forth in the first paragraph hereof.
1.5 "ATOWSUB" has the meaning set forth in the first paragraph hereof.
1.6 "ATOW Shares" means any share of common stock, $.001 par value per
share, of ATOW.
1.7 "Balance Sheet Date" has the meaning set forth in Section 3.8.
1.8 "Certificates" has the meaning set forth in the Section 2.12.1.
1.9 "Charter Documents" has the meaning set forth in Section 3.1.
1.10 "Closing" has the meaning set forth in Section 2.9.
1.11 "Closing Date" has the meaning set forth in Section 2.9.
1.12 "Closing Date Balance Sheet" has the meaning set forth in Section
2.14.2.
1.13 "Code" means the Internal Revenue Code of 1986, as amended.
1.14 "Commission" means the Securities and Exchange Commission.
1.15 "Company" has the meaning set forth in the first paragraph hereof.
1.16 "Company Shares" means any share of common stock, .001 par value per
share, of the COMPANY.
1.17 "Company's Subsidiaries" has the meaning set forth in Section 3.7.
1.18 "Disclosure Schedule" has the meaning set forth in Section 3.
1.19 "Draft Closing Date Balance Sheet" has the meaning set forth in
Section 2.14.1.
1.20 "Effective Time" has the meaning set forth in Section 2.3.
1.21 "Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan; (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan; (c)
qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan); (d)
Employee Welfare Benefit Plan; or (e) any bonus, incentive,
severance, stock option, stock purchase, short-term disability plan
or other material fringe benefit plan, program or arrangement,
including policies concerning holidays, vacations and salary
continuation during short absences for illness or otherwise.
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1.22 "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
1.23 "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
1.24 "Employment Agreement, Consulting Agreements and Leases" have the
meaning set forth in Section 7.10 and Exhibits thereunder.
1.25 "Environmental, Health, and Safety Requirements" means the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act of 1976, the
Clean Air Act, the Federal Water Pollution Control Act, the Safe
Drinking Water Act, the Toxic Substance Control Act, the Emergency
Planning and Community Right-to-Know Act of 1986, the Hazardous
Material Transportation Act, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, injunctions, judgments, orders, decrees,
and rulings) of federal, state, local, and foreign governments (and
all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety,
including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials (including petroleum
products and asbestos) or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
1.26 "Environmental Laws" has the meaning set forth in Section 3.12.
1.27 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.28 "Fiduciary" has the meaning set forth in ERISA Section 3(21).
1.29 "Financial Statements" has the meaning set forth in Section 3.8.
1.30 "GAAP" means the United States generally accepted accounting
principles in effect from time to time.
1.31 "FBCA" means Chapter 607 of the Florida Statutes, known as the
Florida Business Corporation Act, as amended from time to time.
1.32 "Indemnified Party" has the meaning set forth in Section 9.3.
1.33 "Indemnifying Party" has the meaning set forth in Section 9.3.
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1.34 "Intellectual Property" means: (a) all trade secrets and confidential
business information (including customer and supplier lists, ideas,
research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, pricing and cost
information, and business and marketing plans and proposals); (b) all
trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and
renewals in connection therewith; (c) all inventions (whether
patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations
thereof; (d) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith;
(e) all computer software (including data and related documentation);
(f) all other proprietary rights; and (g) all copies and tangible
embodiments thereof (in whatever form or medium).
1.35 "IRS" means the Internal Revenue Service.
1.36 "Knowledge" as it applies to the Stockholders, means the actual
knowledge of any of the Stockholders as it applies to ATOW and
ATOWSUB shall mean the actual knowledge of its officers and
directors.
1.37 "Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including but not in any way limited to any
liability for Taxes.
1.38 "Material Adverse Effect" or "Material Adverse Change" means any
change of effect that is materially adverse to the business,
financial condition, results of operations or prospects for future
business
1.39 "Material Contract" has the meaning set forth in Section 3.14.
1.40 "Merger" has the meaning set forth in Section 2.1.
1.41 "Most Recent Financial Statements" has the meaning set forth in
Section 3.8.
1.42 "Most Recent Fiscal Quarter End" has the meaning set forth in Section
3.8.
1.43 "Most Recent Fiscal Year End" has the meaning set forth in Section
3.8.
1.44 "Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
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1.45 "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice, including with respect to
quantity and frequency.
1.46 "Net Equity" has the meaning set forth in Section 2.13.2.1.
1.47 "Party(ies)" has the meaning set forth in the first paragraph hereof.
1.48 "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
1.49 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company or
partnership, a trust, a joint venture, an unincorporated
organization, any other form of entity whatsoever, or a governmental
entity (or any department, agency, or political subdivision thereof).
1.50 "Private Placement Memorandum" means the private placement memorandum
of ATOW relating to the ATOW Shares to be issued hereunder.
1.51 "Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
1.52 "Promissory Note" has the meaning set forth in Section 2.13.1.3.
1.53 "Qualified Plan" has the meaning set forth in Section 3.17.5.
1.54 "Reportable Event" has the meaning set forth in ERISA Section 4043.
1.55 "Securities Act" means the Securities Act of 1933, as amended.
1.56 "Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
1.57 "Security Interest" means any lien, claim, encumbrance, mortgage,
hypothecation, pledge, or other security interest, excluding purchase
money security interests arising in the Ordinary Course of Business
and liens arising by operation of law for Taxes not yet due and
payable.
1.58 "Significant Customers" has the meaning set forth in Section 3.14.
1.59 "Stockholders" has the meaning set forth in the first paragraph
hereof.
1.60 "Stockholders' Agreement" has the meaning set forth in Section
2.13.1.2.
1.61 "Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
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1.62 "Surviving Corporation" has the meaning set forth in Section 2.1.
1.63 "Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use, production, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever,
including interest, penalty, or additions thereto, whether disputed
or not, and whether or not accrued on the Financial Statements.
1.64 "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.65 "Third Party Claim" has the meaning set forth in Section 9.3.
1.66 "Transaction" has the meaning set forth in Section 2.1.
1.67 "Transaction Consideration" has the meaning set forth in Section
2.13.1.
1.68 "Transaction Consideration Adjustment" has the meaning set forth in
Sections 2.13.2.1.
2. TRANSACTION, TRANSACTION CONSIDERATION, CLOSING.
2.1 Transaction. Upon the terms and subject to the conditions hereof and
in accordance with the provisions of the Florida Business Corporation
Act (the "FBCA"), the COMPANY shall be merged with and into ATOWSUB
(the "Merger") and the separate existence of the COMPANY shall
thereupon cease, and ATOWSUB, as the Surviving Corporation (the
"Surviving Corporation"), shall continue to exist under and be
governed by the FBCA (the "Transaction.")
2.2 Effect of the Merger. At and after the Effective Time, the effect of
the Merger shall, in all respects, be as provided in the FBCA. From
and after the Effective Time, the Surviving Corporation shall
continue to be a Florida corporation.
2.3 Effective Time; Filing of Certificates of Merger. The Merger shall be
effected by the filing at the time of the Closing, of the articles of
merger, substantially in the form of Exhibit 2.3 attached hereto with
the Secretary of the State of Florida in accordance with the
provisions of the FBCA. The Merger shall become effective at the
close of business on the date of such filing (the "Effective Time")
and the Parties shall take any and all other lawful actions and do
any and all other lawful things necessary to cause the Merger to
become effective.
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2.4 Articles of Incorporation. At the Effective Time, the articles of
incorporation of ATOWSUB, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the
Surviving Corporation until thereafter amended in accordance with
applicable law.
2.5 By-Laws. The by-laws of ATOWSUB, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving Corporation
until thereafter amended in accordance with applicable law.
2.6 Directors and Officers. The directors and officers of ATOWSUB
immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation. Each director and officer of
the Surviving Corporation shall hold office in accordance with the
articles of incorporation and by-laws of the Surviving Corporation.
At the Closing, the COMPANY shall cause to be delivered to ATOWSUB
the written resignations of all of the directors and officers of the
COMPANY, which resignations shall be unconditional and effective as
of the Closing Date.
2.7 Tax Consequences. It is intended by the Parties hereto that the
Merger shall constitute a tax-free reorganization within the meaning
of Sections 354 and 356 of the Code.
2.8 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further
acts are necessary or desirable: (i) to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, title to and
possession of any property or right of the Company acquired or to be
acquired by reason of, or as a result of, the Merger; or (ii)
otherwise to carry out the purposes of this Agreement, then the
Stockholders shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver
all such deeds, assignments and assurances in law and to do all other
acts necessary or proper to vest, perfect or confirm title to and
possession of such property or rights in the Surviving Corporation
and otherwise to carry out the purposes of this Agreement; and the
officers and directors of the Surviving Corporation are fully
authorized in the name of the Stockholders and the company to take
any and all such actions.
2.9 The Closing. The closing of the Transaction (the "Closing") shall
mean execution of all relevant documents and subsequent payment of
all funds dues. The Closing shall take place at a location in or near
Tampa, Florida designated by ATOWSUB, commencing at 10:00 a.m. local
time on July 23, 1999, or such other date or time as the Parties may
mutually agree (the "Closing Date"). The execution of documents shall
be subject to funding which shall occur at a later date.
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2.10 Actions at the Closing. At the Closing: (i) the Stockholders shall
convey the COMPANY Shares to ATOWSUB and deliver to ATOWSUB the
various certificates, instruments, and the documents elsewhere in
this Agreement; and (ii) ATOW shall deliver to the Stockholders the
Transaction Consideration required to be delivered at the closing and
the various certificates, instruments, and documents referred to
elsewhere in this Agreement.
2.11 No Dissenters' Rights. As the sole shareholders of the COMPANY, the
Stockholders' approval and execution of this Agreement constitutes
unanimous approval of the transactions contemplated herein and
therefore neither the Stockholders, nor any other party, are entitled
to dissenters' rights under the FBCA.
2.12 Surrender of Certificates.
2.12.1 Company's Shares. At the Closing, the Stockholders shall
be required to surrender to ATOWSUB the certificates which
immediately prior to the Effective Time represented all of
the COMPANY's Shares (the "Certificate(s)") (together with
stock powers endorsed to ATOWSUB). Until so surrendered,
each Certificate which immediately prior to the Effective
Time represented the COMPANY's Shares (other than shares
held in the treasury) shall upon and after the Effective
Time by virtue of the Merger be deemed for all purposes to
represent and evidence only the right to receive the ATOW
Shares determined in accordance with Section 2.13.1.2 and
the Cash pursuant to Section 2.13.1.1, as provided in this
Agreement. At the Effective Time, the stock transfer books
of the COMPANY shall be closed and no transfer of the
COMPANY's Shares shall thereafter be made.
2.12.2 Dividends. No dividends or other distributions declared or
made after the date of this Agreement with respect to the
ATOW Shares with a record date after the Effective Time
will be paid to the holder of any unsurrendered
Certificate with respect to the ATOW Shares represented
thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to applicable
law, following surrender of any such Certificate, there
shall be paid to the record holder of the Certificate
representing whole ATOW Shares issued in exchange
therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a
record date after the Effective Time payable with respect
to such whole ATOW Shares.
2.13 Transaction Consideration.
2.13.1 Transaction Consideration Composition and Payment. The
aggregate transaction consideration (the "Transaction
Consideration") shall be paid as follows:
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2.13.1.1 Cash. Five hundred thousand dollars
($500,000.00) on or before July 30, 1999,
payable by certified, bank, or cashier's check
delivered to the Stockholders, or by wire
transfer of immediately available funds to an
account designated by the Stockholders which
account shall be so designated not less than
three (3) business days prior to the date of
Closing.
2.13.1.2 ATOW Shares. _________ shares of ATOW common
stock issued at the Closing Date, to the
respective Stockholders, equivalent to a value
of $600,000.00 based on the average closing
price for the five trading days prior to the
Closing Date and the five trading days after
the Closing Date less a 30 percent discount.
The shares issued to the Stockholders will be
restricted as to their sale subject to Rule 144
pending ATOW'S filing a registration statement
that is expected to be no later than October
1999. The Stockholders will receive piggyback
registration rights for the Shares valued at
$600,000.00. The Shareholders shall receive 10%
annual interest from August 1, 1999 on
$600,00.00, with the first interest payment due
November 1, 1999 and subsequent interest
payments due the first day of every month
thereafter, until such time as the stock is
registered. Should the registration not become
effective by March 30, 2000, ATOW shall pay the
Shareholders the - principal amount and all
accrued interest in six (6) equal monthly
installments.
2.13.1.3 ATOW Shares. _____ shares issued at the Closing
Date, to the respective Stockholders,
equivalent to a value of $1,100,000.00 based on
the average closing price for the five trading
days prior to the Closing Date and the five
trading days after the Closing Date less a 30
percent discount. The ATOW Shares received by
the Stockholders shall not be transferable by
the Stockholders other than: (i) by will, trust
or intestate succession; or (ii) in accordance
with applicable state and federal securities
laws including, but not limited to, Rule 144.
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2.13.1.4 Conversion of Shares. Each share of capital
stock of ATOWSUB issued and outstanding
immediately prior to the Effective Time shall
continue to represent one validly issued, fully
paid and non-assessable share of capital stock
of the Surviving Corporation after the Merger.
By virtue of the Merger and without any action
on the part of the Stockholders thereof, the
COMPANY Shares shall be converted into ATOW
Shares as follows: ___________shares equivalent
to a value of $1,700,000.00, based on the
average closing price for the five trading days
prior to the Closing Date and the five trading
days after the Closing Date less a 30 percent
discount.
2.13.2 Potential Post-Closing Adjustments.
2.13.2.1 Computation of Adjustment. If the Closing Date
Balance Sheet reflects Net Equity that is less
than $388,119.00 then the Transaction
Consideration shall be reduced dollar for
dollar (a "Transaction Consideration
Adjustment") by the amount by which such actual
agreed upon Net Equity set forth in the Closing
Date Balance Sheet is less than $388,119.00.
2.13.2.2 Satisfaction of Adjustment. If an adjustment is
made pursuant to Section 2.13.2.1, ATOW shall
receive within forty-five (45) days of the
completion of the Closing Date, through a
conveyance from the Stockholders to ATOW, from
the ATOW Shares transferred to the Stockholders
hereunder which have not yet become fully
transferable, that number of ATOW Shares
necessary to equal the Transaction
Consideration Adjustment, utilizing the share
value as computed in Section 2.13.1.2 above for
such adjustment; provided, however, if no such
ATOW Shares are available for such purpose, or
not enough ATOW Shares are available for such
purpose, ATOW shall receive the Transaction
Consideration Adjustment in one (1) lump sum
payment from the Stockholders. "Net Equity"
shall be the fair market value of the COMPANY's
tangible assets, less all liabilities of the
---------- COMPANY. Should net equity be more
than $388,119.00, the COMPANY and/or its
stockholders shall be entitled to receive
additional shares at a price as computed in
Section 2.13.1.2 above for such adjustment,
provided, however, that if no such ATOW shares
are available for such purpose or not enough
ATOW shares are available, the shareholderss
shall receive the Transaction Consideration
Adjustment in one lump sum payment from ATOW.
2.14 Preparation of Closing Date Balance Sheet.
2.14.1 Initial Draft Closing Date Balance Sheet. Within ninety
(90) days after the Closing Date, ATOW will prepare and
deliver to the Stockholders a draft balance sheet (the
"Draft Closing Date Balance Sheet") of the COMPANY, taking
into account the conversion of the COMPANY to a "C"
corporation, as of the close of business on the Closing
Date (after giving effect to all transactions occurring on
the Closing Date other than the consummation of the
transactions contemplated by this Agreement). ATOW will
prepare the Draft Closing Date Balance Sheet in accordance
with GAAP through application of the procedures used in
preparing an end-of-year audited financial statement.
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2.14.2 Closing Date Balance Sheet. If the Stockholders have any
objections to the Draft Closing Date Balance Sheet, the
Stockholders will deliver a detailed statement describing
their objections to ATOW within thirty (30) days after
receiving the Draft Closing Date Balance Sheet. If the
Stockholders do not deliver any such objections to ATOW
within such thirty (30) day period, then the Draft Closing
Date Balance Sheet shall be the "Closing Date Balance
Sheet." The Parties shall use reasonable efforts to
resolve any such objections themselves. If the Parties do
not obtain a final resolution within thirty (30) days
after ATOW has received the statement of objections, the
Parties shall select a "Big Six" accounting firm, other
than their respective regular outside accounting firms,
which is mutually acceptable to them to resolve any
remaining objections. The determination of any accounting
firm so selected will be set forth in writing and will be
conclusive and binding upon the Parties. ATOW will revise
the Draft Closing Date Balance Sheet as appropriate to
reflect the resolution of any objections thereto pursuant
to this Section 2.14.2. If any revisions are made to the
Draft Closing Date Balance Sheet, pursuant to the
preceding sentence, the Closing Date Balance Sheet shall
mean the Draft Closing Date Balance Sheet together with
any such revisions.
2.14.3 Accounting Expenses. In the event the Parties submit any
unresolved objections to an accounting firm for resolution
as provided in Section 2.14.2, ATOW and the Stockholders
will share equally the responsibility for the fees and
expenses of the accounting firm.
2.15 Stockholders Consent and Release. The Stockholders hereby consent to
the Transaction and approve the execution and delivery of this
Agreement and the transactions contemplated hereby. Effective as of
the Effective Time, the Stockholders hereby release the COMPANY from
any and all claims of the Stockholders, whether arising before or
after the Effective Time, against the COMPANY, or Liabilities or
obligations of the COMPANY to the Stockholders as a result of any
Stockholders having served as a stockholders, director, officer,
employee, or agent of the COMPANY.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
The COMPANY and each of the Stockholders jointly and severally represent
and warrant that all of the following representations and warranties in
this Section 3 are true at the date of this Agreement and shall be true at
the time of the Closing, except as set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"), and that such
representations and warranties shall survive the Closing Date.
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3.1 Organization. Each of the COMPANY and the subsidiaries of the COMPANY
(the "COMPANY's Subsidiaries") set forth on Schedule 3.7 of the
Disclosure Schedule is a corporation duly organized, validly existing
and in good standing under the laws of the state of its
incorporation, and is duly authorized and qualified to do business
under all applicable laws, regulations, ordinances and orders of
public authorities to carry on its business in the places and in the
manner as now conducted. Schedule 3.1 of the Disclosure Schedule
contains a list of all jurisdictions in which the COMPANY is
authorized or qualified to do business. True copies of the
certificate of incorporation and bylaws, each as amended, of the
COMPANY and each of the COMPANY's Subsidiaries (collectively, the
"Charter Documents"), certified by the Secretary or Assistant
Secretary of the COMPANY, are attached hereto as Schedule 3.1 of the
Disclosure Schedule . A true copy of each certificate of
incorporation included in the Charter Documents, certified by the
Secretary of State or other appropriate authority of the state of
incorporation of the COMPANY or the applicable Subsidiary of the
COMPANY, as applicable, shall be delivered to ATOW at the Closing.
Except as set forth on Schedule 3.1 of the Disclosure Schedule , the
minute books of the COMPANY and each of the COMPANY's Subsidiaries,
as heretofore made available to ATOW, are correct and complete in all
material respects.
3.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to
the terms of this Agreement and (ii) the COMPANY has the full legal
right, power and authority to enter into this Agreement and the
Merger. The execution, delivery and performance of this Agreement by
the COMPANY has been duly authorized and approved by its Board of
Directors and no other corporate proceedings on the part of the
COMPANY are necessary to authorize this Agreement and the
transactions contemplated hereby. The COMPANY has given to the
Stockholders any notice required to be given to the Stockholders
under applicable law. This Agreement constitutes the valid and
legally binding obligation of the COMPANY, enforceable in accordance
with its terms and conditions.
3.3 Capital Stock of the Company. The authorized capital stock of the
COMPANY is 2,000,000 shares. All of the issued and outstanding shares
of the capital stock of the COMPANY are owned by the Stockholders and
in the amounts set forth in Annex I free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the Stockholders and further,
such shares were offered, issued, sold and delivered by the COMPANY
in compliance with all applicable state and federal laws concerning
the issuance of securities. Further, none of such shares were issued
in violation of the preemptive rights of any past or present
stockholders. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights
with respect to the COMPANY. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the
capital stock of the COMPANY.
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3.4 Noncontravention of Company. Except as set forth in Schedule 3.4 of
the Disclosure Schedule, neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby will: (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, or other restriction of
any government, governmental agency or any other third party
whatsoever, or court to which the COMPANY is subject, or any
provision of the charter or bylaws of the COMPANY; or (ii) conflict
with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which the COMPANY is a party or by which it is bound or to which
any of its assets is subject or which would result in the imposition
of any Security Interest upon any of its assets, which conflict,
breach default, acceleration or right would have a Material Adverse
Effect on the Stockholders or otherwise adversely affect the
Stockholders' ability to consummate the transactions contemplated
hereby. Except as set forth in Schedule 3.4 of the Disclosure
Schedule, the Stockholders and the COMPANY do not need to give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency or any
other third party whatsoever in order for the Parties to consummate
the transactions contemplated by this Agreement.
3.5 Broker's Fees. The COMPANY has no Liability or obligation to pay any
fees, expenses, or commissions to any professional representative,
attorney, consultant, broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
3.6 Title to Assets. Schedule 3.6 of the Disclosure Schedule contains a
materially complete, true and materially correct list and brief
description of each item of equipment and tangible asset having an
original purchase cost or aggregate lease cost exceeding FIVE HUNDRED
DOLLARS AND NO/100 ($500.00). The COMPANY has good and marketable
title to, or a valid leasehold interest in, the properties and assets
used by it, located on its premises, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, except for those
assets disposed of in the Ordinary Course of Business after the date
thereof, free and clear of all Security Interests.
3.7 Subsidiaries. Schedule 3.7 of the Disclosure Schedule attached hereto
lists the name of each of the COMPANY's Subsidiaries and sets forth
the number of shares and class of the authorized capital stock of
each of the COMPANY's Subsidiaries and the number of shares of each
of the COMPANY's Subsidiaries which are issued and outstanding, all
of which shares (except as set forth on Schedule 3.7) are owned by
the COMPANY, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions, encumbrances and
claims of every kind. The COMPANY does not presently own, of record
or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is
the COMPANY, directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
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3.8 Financial Statements. The Stockholders have delivered to ATOW
financial statements of the COMPANY consisting of (i) unaudited
balance sheets, and related statements of income, as of and for the
years ended December 31, 1996, 1997 1998. (December 31, 1998 being
hereinafter referred to as the "Balance Sheet Date" and the "Most
Recent Fiscal Year End") and (ii) the unaudited balance sheet and
income statement (the "Most Recent Financial Statements"), as of and
for the quarter ended [insert date] (the "Most Recent Quarter End")
(Collectively referred to as "Financial Statements"). Such Financial
Statements have been prepared in accordance GAAP applied on a
consistent basis throughout the periods indicated, except as noted.
Such balance sheets as of December 31, 1998, 1997 and 1996 present
fairly the financial position of the COMPANY (and each of the
COMPANY's Subsidiaries on a consolidated basis) as of the dates
indicated thereon, and such statements of income present fairly the
results of their combined operations for the periods indicated
thereon; provided, however, that the Most Recent Financial Statements
are subject to normal year-end adjustments, which will not be
material.
3.9 Liabilities and Obligations. Schedule 3.9 of the Disclosure Schedule
contains an accurate list with respect to the COMPANY and its
Subsidiaries of:
3.9.1 all liabilities which are reflected on the balance sheet
of the COMPANY at the Balance Sheet Date;
3.9.2 all liabilities of the COMPANY not reflected on the
balance sheet of the COMPANY at the Balance Sheet Date
exceeding $100.00 which either (i) should have properly
been accrued on the balance sheet of the COMPANY as of the
Balance Sheet Date in accordance with GAAP consistently
applied, or (ii) are liabilities of the nature described
in Section 3.12 and/or Section 3.18; and
3.9.3 a summary description of the liability together with the
following:
3.9.3.1 copies of all relevant documentation relating to
litigation, arbitration or demand letters;
3.9.3.2 amounts claimed and any other action or relief
sought;
3.9.3.3 name of claimant and all other parties to the
claim, suit or proceeding;
3.9.3.4 the name of each court or agency before which
such claim, suit or proceeding is pending; and
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3.9.3.5 the date such claim, suit or proceeding was
instituted.
3.10 Accounts and Notes Receivable. Schedule 3.10 of the Disclosure
Schedule contains an accurate list of the accounts and notes
receivable of the COMPANY, including the COMPANY's Subsidiaries, as
of the Balance Sheet Date, including any such amounts which are not
reflected in the balance sheet as of the Balance Sheet Date, and
including receivables from and advances to employees and the
Stockholders. Such accounts and notes are collectible in the amount
shown on Schedule 3.10, net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
3.11 Permits and Intangibles. The COMPANY and the COMPANY's Subsidiaries
holds all valid licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle
titles and current registrations), fuel permits, trademarks, trade
names, patents, patent applications and copyrights, the absence of
any of which would have a Material Adverse Effect. Schedule 3.11 of
the Disclosure Schedule contains an accurate list and summary
description of all such licenses, franchises, permits and other
governmental authorizations, provided that copyrights need not be
listed unless registered. The COMPANY and the COMPANY's Subsidiaries
have conducted and are conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in
applicable permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing except
where such non-compliance or violation would not have a Material
Adverse Effect. The transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a
Material Adverse Effect upon the rights and benefits afforded to the
COMPANY and the COMPANY's Subsidiaries by, any such licenses,
franchises, permits or government authorizations.
3.12 Environmental Matters. The COMPANY and the COMPANY's Subsidiaries
have complied with and are in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees
applicable to any of them or any of their respective properties,
assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to protection of the air,
water or land or to the generation, storage, use, handling,
transportation, treatment or disposal of solid wastes, hazardous
wastes or hazardous substances (as such terms are defined in any
applicable Environmental Law). The COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits
and other approvals necessary to treat, transport, store, dispose of
or otherwise handle solid wastes, hazardous wastes or hazardous
substances and have reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by
the COMPANY or any of the COMPANY's Subsidiaries where solid wastes,
hazardous wastes or hazardous substances have been treated, stored,
used, disposed of or otherwise handled. There have been no releases,
as defined in Environmental Laws at, from, under, in or on any
property owned or operated by the COMPANY or any of the COMPANY's
Subsidiaries except as permitted by Environmental Laws. There is no
on-site or off-site location to which the COMPANY or any of the
COMPANY's Subsidiaries has transported or disposed of solid wastes,
hazardous wastes or hazardous substances or arranged for the
transportation of solid wastes, hazardous wastes or hazardous
substances, which site is the subject of any federal, state, local or
foreign enforcement action or any other investigation which could
lead to any claim against the COMPANY, any of the COMPANY's
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Subsidiaries or ATOW and/or ATOWSUB for any clean-up cost, remedial
work, damage to natural resources or personal injury, including, but
not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended. To the
Knowledge of the COMPANY the COMPANY has no contingent liability in
connection with any release of any solid waste, hazardous waste or
hazardous substance into the environment. Schedule 3.12 of the
Disclosure Schedule lists all releases of hazardous wastes or
hazardous substances by the COMPANY.
3.13 Real and Personal Property. Schedule 3.13 (a), (b), and (c) of the
Disclosure Schedule contains an accurate list of (a) all real and
personal property included (or that will be included) on the balance
sheet of the COMPANY, (b) all other real and personal property of the
COMPANY including the COMPANY's Subsidiaries with a value in excess
of $500.00 (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date, and (c) all leases for real and personal
property to which the COMPANY or any of its subsidiaries is a party
involving real or personal property having a value in excess of
$500.00, including in the case of (c) true copies of all such leases
and including in all cases an indication as to which real and
personal property is currently owned, or was formerly owned, by
Stockholders or business or personal affiliates of the COMPANY or
Stockholders. All of the trucks and other material machinery and
equipment of the COMPANY and the COMPANY's Subsidiaries listed on
Schedules 3.13(a) and (b) are in good working order and condition,
ordinary wear and tear excepted. All leases set forth on Schedule
3.13(c) are in full force and effect and constitute valid and binding
agreements on the COMPANY or a COMPANY Subsidiary, as applicable, and
to the knowledge of the COMPANY, constitute valid and binding
agreements on the other parties thereto (and their successors)
thereto in accordance with their respective terms. All fixed assets
used by the COMPANY and the COMPANY's Subsidiaries that are material
to the operation of their respective businesses are either owned by
the COMPANY or the COMPANY's Subsidiaries or leased under an
agreement indicated on Schedule 3.13(c). Schedule 3.13 shall, without
limitation, contain true copies of all title reports and title
insurance policies received or owned by the COMPANY or the COMPANY's
Subsidiaries.
3.14 Significant Customers, Material Contracts and Commitments. Schedule
3.14 of the Disclosure Schedule contains an accurate list of (i)
those customers representing five percent (5%) or more of the
COMPANY's revenues for the 12 months ended on the Balance Sheet Date,
or who have paid to the COMPANY $25,000.00 or more over any four
consecutive fiscal quarters in the three years ended on the Balance
Sheet Date (the "Significant Customers") and (ii) all contracts
requiring payment or performance by the COMPANY or any COMPANY
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Subsidiary in an amount or with a value in excess of $15,000.00
("Material Contracts") to which the COMPANY or any of its
Subsidiaries is a party or by which any of them or any of their
respective properties are bound (a) as of the Balance Sheet Date and
(b) entered into since the Balance Sheet Date, and in each case has
delivered true copies of such agreements to ATOW. None of the
COMPANY's including the COMPANY's Subsidiaries significant customers
has cancelled or substantially reduced or, is currently attempting or
threatening to cancel any Material Contract or substantially reduce
utilization of the services provided by the COMPANY including the
COMPANY's Subsidiaries, and the COMPANY and the COMPANY's
Subsidiaries have complied with all material commitments and
obligations pertaining to any Material Contract, and are not in
default under any such Material Contract, and no notice of default
has been received either orally or in writing. The COMPANY and the
COMPANY's Subsidiaries have not been the subject of any election in
respect of union representation of employees and are not bound by or
subject to (and none of its respective assets or properties is bound
by or subject to) any arrangement with any labor union. No employees
of the COMPANY or its Subsidiaries are represented by any labor union
or covered by any collective bargaining agreement and no campaign to
establish such representation has ever occurred or is in progress.
There is no pending or, to the COMPANY's knowledge, threatened labor
dispute involving the COMPANY (including the COMPANY's Subsidiaries)
and any group of its employees, nor has the COMPANY including the
COMPANY's Subsidiaries experienced any labor interruptions over the
past three years, and the COMPANY considers its relationship with
employees to be good.
3.15 Insurance. Schedule 3.15 of the Disclosure Schedule contains an
accurate list as of the Balance Sheet Date of all insurance policies
carried by the COMPANY including the COMPANY's Subsidiaries and, has
delivered to ATOW an accurate list, attached to Schedule 3.15, of all
insurance loss runs or worker's compensation claims received for the
past three (3) policy years. Also attached to Schedule 3.15 are true
copies of all policies currently in effect. Such insurance policies
are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the
COMPANY including any of the COMPANY's Subsidiaries has ever been
cancelled by the insurance COMPANY, and the COMPANY including such
COMPANY's Subsidiaries has never submitted a written application for
insurance and been denied coverage.
3.16 Compensation; Employment Agreements. Schedule 3.16 of the Disclosure
Schedule contains an accurate list showing all officers, directors
and key managers of the COMPANY, including the COMPANY's
Subsidiaries, listing all employment agreements with such officers,
directors and key managers and the rate of compensation (and the
portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of (i) the
Balance Sheet Date and (ii) the Closing Date. The COMPANY has
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provided to ATOW true copies of any employment agreements for persons
listed on Schedule 3.16. Since the Balance Sheet Date there have been
no increases in the compensation payable or any special bonuses to
any officer, director or key manager.
3.17 Employee Benefits.
3.17.1 Plans. Section 3.17 of the Disclosure Schedule lists each
Employee Benefit or health and welfare plan that the
COMPANY maintains or to which the COMPANY contributes.
3.17.2 Compliance. Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in
form and in operation in all material respects with its
terms and with the applicable requirements of ERISA, the
Code, and other applicable laws.
3.17.3 Reports and Descriptions. All required reports and
descriptions (including Form 5500 Annual Reports, Summary
Annual Reports, PBGC-1's, and Summary Plan Descriptions)
have been filed or distributed appropriately with respect
to each such Employee Benefit Plan. The requirements of
Part 6 of Subtitle B of Title I of ERISA and of Code
Section 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
3.17.4 Contributions. All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any pay period ending on or before the
Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the
COMPANY. All premiums or other payments due for all
periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
3.17.5 Qualified Plan. Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan and is intended to meet
the requirements of a "qualified plan" under Code Section
401(a) meets such requirements and has received, within
the last two (2) years, a favorable determination letter
from the IRS.
3.17.6 Market Value. The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan) equals or exceeds
the present value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for determination.
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3.17.7 Copies. The Stockholders have delivered to ATOW and
ATOWSUB materially correct and complete copies of the plan
documents and summary plan descriptions, the most recent
determination letter received from the IRS, the most
recent Form 5500 Annual Report, and all related trust
agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit
Plan.
3.17.8 Maintenance of Plans. With respect to each Employee
Benefit Plan that the COMPANY maintains, ever has
maintained, or to which it contributes, ever has
contributed, or ever has been required to contribute:
3.17.8.1 No such Employee Benefit Plan which is an
Employee Pension Benefit Plan has been
completely or partially terminated or been
the subject of a Reportable Event as to
which notices would be required to be filed
with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit
Plan has been instituted or, threatened; and
3.17.8.2 There have been no Prohibited Transactions
with respect to any such Employee Benefit
Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other
failure to act or comply in connection with
the administration or investment of the
assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or
investigation with respect to the
administration or the investment of the
assets of any such Employee Benefit Plan
(other than any Multiemployer Plan), other
than routine claims for benefits, is pending
or threatened. The COMPANY has no Knowledge
of any basis for any such action, suit,
proceeding, hearing, or investigation.
3.18 Conformity with Law. The COMPANY including the COMPANY's Subsidiaries
is not in violation of any law or regulation or any order of any
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having
jurisdiction over any of them which would have a Material Adverse
Effect; and except to the extent set forth in Schedule 3.18 of the
Disclosure Schedule, there are no claims, actions, suits or
proceedings pending or, to the Knowledge of the COMPANY, threatened,
against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over any of
them which would have a Material Adverse Effect, and no notice of any
such claim, action, suit or proceeding, whether pending or
threatened, has been received. The COMPANY including all of the
COMPANY's Subsidiaries has conducted and is conducting its business
in compliance with the requirements, standards, criteria and
conditions set forth in applicable federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations and
is not in violation of any of the foregoing which would have a
Material Adverse Effect.
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3.19 Tax Matters.
3.19.1 Tax Returns. The COMPANY has either filed all Tax Returns
it was required to file or has obtained extensions of the
due dates for such Tax Returns. All such Tax Returns were
correct and complete in all material respects and were
filed on a timely basis. All Taxes owed by the COMPANY
(whether or not shown on any Tax Return) have been paid.
The COMPANY currently is not the beneficiary of any
extension of time within which to file any Tax Return. No
claim is currently pending by an authority in a
jurisdiction where the COMPANY is or may be subject to
taxation by that jurisdiction. There are no Security
Interests on any of the assets of the COMPANY that arose
in connection with any failure (or alleged failure) to pay
any Tax.
3.19.2 Withholding. The COMPANY has withheld and paid all Taxes
required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent
contractor, creditor, stockholders, or other third party.
3.19.3 No Disputes of Claims. No Stockholders or director or
officer (or employee responsible for Tax matters) of the
COMPANY expects any authority to assess any additional
Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax
Liability of the COMPANY either: (i) claimed or raised by
any authority in writing; or (ii) as to which any of the
Stockholders, directors and officers (and employees
responsible for Tax matters) of the COMPANY has Knowledge
based upon personal contact with any agent of such
authority. Schedule 3.19.3 of the Disclosure Schedule
lists all federal, state, local, and foreign Tax Returns
filed with respect to the COMPANY for taxable periods
since the incorporation of the COMPANY, indicates those
Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The
Stockholders have made available to ATOW and ATOWSUB
materially correct and complete copies of all Tax Returns,
examination reports, and statements of deficiencies
assessed against or agreed to by any of the COMPANY and
its Affiliates since the incorporation of the COMPANY.
1-800-AutoTow, Inc. acknowledges receipt of all necessary
documents required by this section and waives any further
compliance by Company.
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3.19.4 No Waivers. The COMPANY 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.
3.19.5 No Special Circumstances. The COMPANY has not made any
payments, is not obligated to make any payments, nor is a
party to any agreement that under certain circumstances
could obligate it to make any payments that will not be
deductible under Code Section 280G. The COMPANY has not
been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section
897(c)(1)(A)(ii). The COMPANY has disclosed on its federal
income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal
income Tax within the meaning of Code Section 6662.
3.19.6 Powers of Attorney. Except as disclosed in Schedule 3.19.6
of the Disclosure Schedules the COMPANY has not executed
any power of attorney with respect to its being
represented in any matter before any tax authority.
3.19.7 Subchapter S. The COMPANY has elected, by the unanimous
consent of the Stockholders and is in compliance with all
applicable legal requirements, to be taxed under
Subchapter "S" of the Code and corresponding provisions
under any applicable state and local tax laws, such
elections are currently in full force and effect for the
COMPANY. No action has been taken by the COMPANY or any
Stockholders that may result in the revocation of any such
elections. The COMPANY has no "Subchapter C earnings and
profits" as defined in Section 1362(d) of the Code. The
COMPANY has no "net unrealized built-in gain" as such term
is defined in Sections 1374(d)(1) and 1374(d)(8) of the
Code. The COMPANY has no Liability for the payment of any
income Taxes under the Code or under Subchapter S of the
Code.
3.19.8 Audits of Tax Returns. Except as set forth on Schedule
3.19.8 of the Disclosure Schedule, no Tax Return of the
COMPANY is currently under audit or examination by any
taxing authority, and the COMPANY has not received a
written notice stating the intention of any taxing
authority to conduct such an audit or examination by the
COMPANY. Each deficiency resulting from any audit or
examination relating to Taxes by any taxing authority has
been paid, except for deficiencies being contested in good
faith. The revenue agents' report related to any prior
audits and examinations are attached as part of Schedule
3.19.8 of the Disclosure Schedule.
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3.19.9 Period of Assessment. There is no agreement or other
document extending, or having the effect of extending, the
period of assessment or collection of any Taxes.
3.19.10 Tax Agreements. The COMPANY is not a party to or bound by
any tax sharing agreement, tax indemnity obligation or
similar agreement with respect to Taxes (including any
advance pricing agreement, closing agreement or other
agreement relating to Taxes with any taxing authority).
3.19.11 Accounting Methods. There are no accounting method changes
or proposed accounting method changes that could give rise
to an adjustment after the Closing Date. The COMPANY will
not be required to include in a taxable period ending
after the Closing Date taxable income attributable to
income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract
method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481
of the Code with respect to a change in method of
accounting occurring before the Closing Date or comparable
provisions of state, local or foreign tax law.
3.19.12 Consents. The COMPANY has not filed a consent pursuant to
or agreed to the application of Section 341(f) of the
Code.
3.19.13 Personal Holding Company. The COMPANY has not, during the
five (5) year period ending on the Closing Date, been a
personal holding COMPANY within the meaning of Section 541
of the Code.
3.19.14 Consolidated Tax Returns. The COMPANY has never filed or
been included in any combined or consolidated Tax return
with any other person or been a member of an affiliated
group filing a consolidated federal income Tax Return.
3.20 Absence of Changes. Since the Balance Sheet Date, there has not been
with respect to the COMPANY and the COMPANY's Subsidiaries:
3.20.1 any event or circumstance (either singly or in the
aggregate) which would constitute a Material Adverse
Effect;
3.20.2 any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any
options, warrants, calls, conversion rights or
commitments;
3.20.3 any declaration or payment of any dividend or distribution
in respect of its capital stock or any direct or indirect
redemption, purchase or other acquisition of any of its
capital stock, except any declaration of dividends payable
by any COMPANY Subsidiary to the COMPANY;
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3.20.4 any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by it to
any of its respective officers, directors, stockholders,
employees, consultants or agents, except for ordinary and
customary bonuses and salary increases for employees
(other than the Stockholders) in accordance with past
practice;
3.20.5 any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character, nor
has the COMPANY entered into any collective bargaining
agreement that would have a Material Adverse Effect;
3.20.6 any distribution, sale or transfer, or any agreement to
sell or transfer any material assets, property or rights
of any of its respective business to any person,
including, without limitation, the Stockholders and their
affiliates, other than distributions, sales or transfers
in the ordinary course of business to persons other than
the Stockholders and their Affiliates;
3.20.7 any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to it, including without
limitation any indebtedness or obligation of any
Stockholders or any affiliate thereof, provided that it
may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past
practice, provided, further, that such adjustments shall
not be deemed to be included in Schedule 3.20.7 of the
Disclosure Schedule unless specifically listed thereon;
3.20.8 any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in
any of its assets, property or rights or requiring consent
of any party to the transfer and assignment of any such
assets, property or rights;
3.20.9 any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or
assets outside of the Ordinary Course of Business;
3.20.10 any waiver of any of its material rights or claims;
3.20.11 any transaction by it outside the ordinary course of their
respective businesses;
3.20.12 any change, modification, cancellation or termination of
a Material Contract;
3.20.13 any permitted the imposition of any security interest on
any of the COMPANY's assets, tangible or intangible;
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3.20.14 any delay or postponement the payment of any Liability
outside the Ordinary Course of Business;
3.20.15 any material damage, destruction or loss (whether or not
covered by insurance) to its property;
3.20.16 any change made or authorized in the article or bylaws of
the COMPANY, other than as required herein;
3.20.17 any adoption, amendment, modification, or termination of
any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of
its directors, officers, and employees, or taken any such
action with respect to any other Employee Benefit Plan,
other than as contemplated herein;
3.20.18 any pledge to make any charitable contribution; or
3.20.19 any change in any method of accounting or accounting
principle, estimate or practice.
3.21 Deposit Accounts; Powers of Attorney. Schedule 3.21 of the Disclosure
Schedule contains an accurate list as of the date of the Agreement,
of:
3.21.1 the name of each financial institution in which the
COMPANY has accounts or safe deposit boxes;
3.21.2 the names in which the accounts or boxes are held;
3.21.3 the type of account and account number; and
3.21.4 the name of each person authorized to draw thereon or have
access thereto.
Schedule 3.21 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms
of such power.
3.22 Representations and Warranties of Stockholders. Each Stockholders
jointly and severally represents and warrants that the
representations and warranties set forth below are true as of the
date of this Agreement shall be true on the Closing Date, and that
such representations and warranties as made on the Closing Date shall
survive said Closing Date.
3.23 Authority; Ownership. Such Stockholders has the full legal right,
power and authority to enter into this Agreement. Such Stockholders
owns beneficially and of record all of the shares of the COMPANY
stock identified on Annex I as being owned by such Stockholders, and,
except as set forth on Schedule 3.23 of the Disclosure Schedule, such
COMPANY Stock is owned free and clear of all liens, encumbrances and
claims of every kind.
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3.24 Tax Status. None of the Stockholders are a "nonresident alien
individual" or "foreign corporation" for purposes of Code Section
897(a)(1).
3.25 Preemptive Rights. Such Stockholders does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or
ATOW Shares that such Stockholders has or may have had other than
rights of any Stockholders to acquire ATOW Shares pursuant to (i)
this Agreement or (ii) any option granted by ATOW.
4. REPRESENTATIONS OF ATOW AND ATOWSUB.
ATOW and its subsidiary ATOWSUB represent and warrant that all of the
following representations and warranties are true at the date of this
Agreement and shall be true at the time of the Closing Date and that such
representations and warranties shall survive the Closing Date.
4.1 Organization. ATOW is duly organized, validly existing and in good
standing under the laws of the State of Delaware. ATOWSUB is duly
organized and in good standing under the laws of the State of
Florida. Both are duly authorized and qualified under all applicable
laws, regulations, and ordinances of public authorities to carry on
their business in the places and in the manner as now conducted
except for where the failure to be so authorized or qualified would
not have a Material Adverse Effect.
4.2 ATOW Shares. The ATOW Shares to be delivered to the Stockholders on
the Closing Date shall constitute valid and legally issued shares of
ATOW, fully paid and nonassessable, and except as set forth in this
Agreement, will be owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind created by ATOW, and will be
legally equivalent in all respects to the ATOW Shares issued and
outstanding as of the date hereof. The ATOW Shares to be issued to
the Stockholders pursuant to this Agreement will not be registered
under the Securities Act.
4.3 Validity of Obligations. The execution and delivery of this
Agreement, the Employment Agreements the Consulting Agreements and
the Leases by ATOW and ATOWSUB and the performance by ATOW and
ATOWSUB of the transactions contemplated herein or therein have been
or will be duly and validly authorized by the Boards of Directors of
ATOW and ATOWSUB, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and
validly authorized by all necessary corporate action, duly executed
and delivered and are or will be legal, valid and binding obligations
of ATOW and ATOWSUB, enforceable against ATOW and ATOWSUB in
accordance with their respective terms.
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4.4 Authorization. The representatives of ATOW and ATOWSUB executing this
Agreement have the corporate authority to enter into and bind ATOW
and ATOWSUB to the terms of this Agreement. ATOW and ATOWSUB have the
full legal right, power and authority to enter into this Agreement
and the Merger.
4.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof
will not:
4.5.1 conflict with, or result in a breach or violation of, the
certificate of incorporation or bylaws of ATOW and
ATOWSUB;
4.5.2 materially conflict with, or result in a material default
(or would constitute a default but for any requirement of
notice or lapse of time or both) under any document,
agreement or other instrument to which ATOWSUB is a party,
or result in the creation or imposition of any lien,
charge or encumbrance on any of ATOWSUB's properties
pursuant to (i) any law or regulation to which ATOWSUB or
any of its property is subject, or (ii) any judgment,
order or decree to which ATOWSUB is bound or any of its
property is subject; or
4.5.3 result in termination or any impairment of any material
permit, license, franchise, contractual right or other
authorization of ATOWSUB.
4.6 Subsidiaries. ATOWSUB does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity
interest in any corporation, association or business entity. ATOWSUB
is not, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
4.7 Conformity with Law. ATOW and ATOWSUB are not in violation of any law
or regulation or any order of any court or federal, state, municipal
or other governmental department, commission, board, bureau, agency
or instrumentality having jurisdiction over either of them which
would have a Material Adverse Effect. There are no claims, actions,
suits or proceedings, pending or, to the Knowledge of ATOWSUB,
threatened, against or affecting ATOWSUB, at law or in equity, or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim,
action, suit or proceeding, whether pending or threatened, has been
received. has conducted and is conducting its business in compliance
with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders,
approvals, variances, rules and regulations and is not in violation
of any of the foregoing which would have a Material Adverse Effect.
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5. COVENANTS PRIOR TO CLOSING.
5.1 Access and Cooperation; Due Diligence. Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the
officers and authorized representatives of ATOW and ATOWSUB access to
all of the COMPANY's, including the COMPANY's Subsidiaries, key
employees, sites, properties, books and records and will furnish ATOW
with such additional financial and operating data and other
information as to the business and properties of the COMPANY,
including the COMPANY's Subsidiaries, as ATOW may from time to time
reasonably request. The COMPANY will cooperate with ATOW and ATOWSUB,
its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with
any documents or materials required by this Agreement. ATOW, ATOWSUB,
the Stockholders and the COMPANY will treat all information obtained
in connection with the negotiation and performance of this Agreement
or the due diligence investigations as confidential in accordance
with the provisions of Section 12 hereof.
5.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the
COMPANY's Subsidiaries to:
5.2.1 carry on its respective businesses in substantially the
same manner as it has heretofore and not introduce any
material new method of management, operation or
accounting;
5.2.2 maintain its respective properties and facilities,
including those held under leases, in as good working
order and condition as at present, ordinary wear and tear
excepted;
5.2.3 perform all of its respective obligations under agreements
to which it is a party relating to or affecting its
respective assets, properties or rights;
5.2.4 subject to Section 5.6, keep in full force and effect
present insurance policies or other comparable insurance
coverage;
5.2.5 use best efforts to maintain and preserve its business
organization intact, retain its respective present
employees and maintain its respective relationships with
suppliers, customers and others having business relations
with it;
5.2.6 maintain compliance with all material permits, laws, rules
and regulations, consent orders, and all other orders of
applicable courts, regulatory agencies and similar
governmental authorities; and
5.2.7 maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or
lease instruments over $15,000.00, without the knowledge
and consent of ATOWSUB, which consent shall not be
unreasonably withheld.
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5.3 Prohibited Activities. Between the date of this Agreement and the
Closing Date, the COMPANY has not and, without the prior written
consent of ATOWSUB, will not:
5.3.1 make any change in its articles of incorporation or
bylaws;
5.3.2 issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any
kind other than in connection with the exercise of options
or warrants listed on Schedule 5.3.2 of the Disclosure
Schedule;
5.3.3 declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding,
or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
5.3.4 enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to
incur any liability or make any capital expenditures,
except if (i) it is in the Ordinary Course of Business or
(i) when aggregated with all other such contracts,
commitments, liabilities and capital expenditures not in
the normal course of business consistent with past
practice, it involves an amount not in excess of
$15,000.00;
5.3.5 increase the compensation payable or to become payable to
any officer, director, Stockholders, employee or agent, or
make any bonus or management fee payment to any such
person, except (i) bonuses to employees (other than the
Stockholders or their affiliates) consistent with past
practice and (ii) increases in salaries and commissions
payable to employees (other than to Stockholders and their
affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level
higher than one hundred FIVE percent (105%) of such
employee's current salary or bonus, whichever is
applicable;
5.3.6 create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties
whether now owned or hereafter acquired, except (i) with
respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost
not in excess of $15,000.00 necessary or desirable for the
conduct of the businesses of the COMPANY (including the
COMPANY's Subsidiaries), or (ii) liens set forth on
Schedule 5.3.6 of the Disclosure Schedule or (iii) liens
for taxes either not yet due or material men's,
mechanics', workers', repairmen's, employees' or other
like liens arising in the Ordinary Course of Business;
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5.3.7 sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of
Business;
5.3.8 negotiate for the acquisition of any business or the
start-up of any new business;
5.3.9 merge or consolidate or agree to merge or consolidate
with or into any other corporation;
5.3.10 waive any material rights or claims of the COMPANY,
provided that the COMPANY may negotiate and adjust bills
in the course of good faith disputes with customers in a
manner consistent with past practice, provided, further,
that such adjustments shall not be deemed to be included
in Schedule 5.3.10 of the Disclosure Schedule unless
specifically listed thereon;
5.3.11 commit a material breach or amend or terminate any
Material Contract, or material permit, license or other
right of the COMPANY, or make or terminate any election
involving Taxes which would in any way adversely affect
the tax liability of the COMPANY or ATOWSUB following the
Merger in any taxable period; or
5.3.12 enter into any other transaction outside the Ordinary
Course of Business or prohibited hereunder.
5.4 No Shop. None of the Stockholders, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative
of any of the foregoing will, during the period commencing on the
date of this Agreement and ending with the earlier to occur of the
Closing Date or the termination of this Agreement in accordance with
its terms, directly or indirectly:
5.4.1 solicit or initiate the submission of proposals or offers
from any person or,
5.4.2 participate in any discussions pertaining to; or
5.4.3 furnish any information to any person other than ATOW or
ATOWSUB relating to, any acquisition or purchase of all or
a material amount of the assets of, or any equity interest
in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
5.5 Notice to Bargaining Agents. The COMPANY shall satisfy any
requirement for notice of the transactions contemplated by this
Agreement under applicable collective bargaining agreements, and
shall provide ATOW with proof that any required notice has been sent.
5.6 Termination of Plans and Policies. The COMPANY shall terminate all
plans and policies listed in Schedule 5.6 of the Disclosure
Schedules.
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5.7 Notification of Certain Matters.
5.7.1 The Stockholders and the COMPANY shall give prompt notice
to ATOW of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of the
COMPANY or the Stockholders contained herein to be untrue
or inaccurate in any material respect on or prior to the
Closing Date and (ii) any material failure of any
Stockholders or the COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by such person hereunder with respect to the
occurrence in the Ordinary Course of Business of any event
which would cause Schedules 3.11, 3.12 or 3.15 to be
incorrect.
5.7.2 ATOW and ATOWSUB shall give prompt notice to the COMPANY
of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to
cause any representation or warranty of ATOW and ATOWSUB
contained herein to be untrue or inaccurate in any
material respect at or prior to the Closing Date and (ii)
any material failure of ATOWSUB to comply with or satisfy
any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
5.7.3 The delivery of any notice pursuant to this Section 5.7
shall not be deemed to (i) modify the representations or
warranties hereunder of the Party delivering such notice,
which modification may only be made pursuant to Section
5.8; (ii) modify the conditions set forth in Sections 6
and 7; or (iii) limit or otherwise affect the remedies
available hereunder to the Party receiving such notice.
5.8 Amendment of Schedules. Each Party hereto agrees that, with respect
to the representations and warranties of such Party contained in this
Agreement, such Party shall have the continuing obligation until the
Closing to supplement or amend promptly the Schedules hereto with
respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been
required to be set forth or described in the Disclosure Schedules,
provided however, that supplements and amendments to Schedules 3.11,
3.12 and shall only have to be delivered at the Closing, unless such
Disclosure Schedule is to be amended to reflect an event occurring
other than in the Ordinary Course of Business. In the event that the
COMPANY amends or supplements a Disclosure Schedule pursuant to this
Section 5.8, and ATOW does not consent to the effectiveness of such
amendment or supplement at or before the Closing, this Agreement
shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. In the event that ATOW amends or supplements a
Disclosure Schedule pursuant to this Section 5.8 and COMPANY does not
consent to the effectiveness of such amendment or supplement at or
before the Closing, this Agreement shall be deemed terminated by
mutual consent as set forth in Section 10.1.4 hereof. For all
purposes of this Agreement, including without limitation for purposes
of determining whether the conditions set forth in Sections 6.1 and
7.1 have been fulfilled, the Disclosure Schedules hereto shall be
deemed to be the Disclosure Schedules as amended or supplemented
pursuant to this Section 5.8. If ATOW and the COMPANY do not consent
to the effectiveness of such amendment or supplement at or before the
Closing, this Agreement shall be deemed terminated by mutual consent
as set forth in Section 10.1.4 hereof. For purposes of this Section
5.8, ATOW shall be deemed to have given its consent to the
effectiveness of any amendment or supplement to a Disclosure Schedule
if ATOW does not notify COMPANY of its disapproval within 3 business
days after ATOW is notified of such amendment or supplement, and
COMPANY shall be deemed to have given its consent to the
effectiveness of any amendment or supplement to a Disclosure Schedule
if COMPANY does not notify ATOW of its disapproval within 3 business
days after COMPANY is notified of such amendment or supplement.
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6. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY. The
obligations of the Stockholders and the COMPANY with respect to actions to
be taken on the Closing Date are subject to the satisfaction or waiver on
or prior to the Closing Date of the conditions set forth in Sections 6.1
and 6.5.
6.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of ATOW and ATOWSUB contained in
Section 6 shall be true and correct in all material respects as of
the Closing Date. Each and all of the terms, covenants and conditions
of this Agreement to be complied with and performed by ATOW and
ATOWSUB on or before the Closing Date shall have been duly complied
with and performed in all material respects; and a certificate to the
foregoing effect dated the Closing Date and signed by the President
or any Vice President of ATOW shall have been delivered to the
Stockholders.
6.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all
other related legal matters shall be satisfactory to the COMPANY and
its counsel.
6.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of the COMPANY
as a result of which the management of the COMPANY deems it
inadvisable to proceed with the transactions hereunder.
6.4 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of
the transaction contemplated herein shall have been obtained and made
and no action or proceeding shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of COMPANY as a
result of which COMPANY deems it inadvisable to proceed with the
transactions hereunder.
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6.5 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a ATOW or ATOWSUB Material Adverse
Effect; and the COMPANY shall have received a certificate signed by
ATOW dated the Closing Date.
6.6 Employment Agreements, Consulting Agreements and Leases. ATOW or
ATOWSUB shall have entered the Employment Agreements, Consulting
Agreements and Leases.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ATOW and ATOWSUB. The obligations of
ATOW and ATOWSUB with respect to actions to be taken on the Closing Date
are subject to the satisfaction or waiver on or prior to the Closing Date
of the conditions set forth in Sections 7.1 and 7.4.
7.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the Stockholders and the COMPANY
contained in this Agreement shall be true and correct in all material
respects as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date;
each and all of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Stockholders and the COMPANY
on or before the Closing Date shall have been duly performed or
complied with in all material respects; and the Stockholders shall
have delivered to ATOW a certificate dated the Closing Date and
signed by them to such effect.
7.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of ATOW or
ATOWSUB as a result of which the management of ATOW deems it
inadvisable to proceed with the transactions hereunder.
7.3 Examination of Final Financial Statements. Prior to the Closing Date,
ATOW shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY for the fiscal quarters
beginning after the Balance Sheet Date, and the unaudited
consolidated combined statement of income, cash flows and retained
earnings of the COMPANY for the fiscal quarters beginning after the
Balance Sheet Date, disclosing no Material Adverse Change in the
combined financial condition of the COMPANY or the results of their
operations from the financial statements as of the Balance Sheet
Date.
7.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and ATOW
shall have received a certificate signed by the Stockholders dated
prior to the Closing Date to such effect.
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7.5 Stockholders' Release. The Stockholders shall have delivered to ATOW
immediately prior to the Closing Date an instrument releasing the
COMPANY from any and all claims of the Stockholders against the
COMPANY and obligations of the COMPANY to the Stockholders, excluding
liability for certain vehicles for which Walter Terenik holds a valid
lien.
7.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement
or incidental hereto and all other related legal matters shall have
been approved by counsel to ATOW.
7.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the Stockholders or business or personal
affiliates of the COMPANY or Stockholders, other than those set forth
on Schedule 7.7 of the Disclosure Schedules shall have been
cancelled.
7.8 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of
the transactions contemplated herein shall have been obtained and
made; the COMPANY shall have obtained and delivered to ATOW such
additional consents to the Merger as ATOW may reasonably request
including, without limitation, ATOW's receipt on or prior to the
Closing Date of those licenses, franchises, permits or governmental
authorizations set forth on Schedule 3.11 of the Disclosure Schedules
pursuant to Section 3.11, or assurances reasonably acceptable to it
that such licenses, franchises, permits or governmental
authorizations will be received on the Closing Date or that the
failure to receive such licenses, franchises, permits or governmental
authorizations on the Closing Date will not adversely affect its
ability to conduct the business of the COMPANY as conducted prior to
the Closing Date; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the Merger and no
governmental agency or body shall have taken any other action or made
any request of ATOW or ATOWSUB as a result of which ATOW deems it
inadvisable to proceed with the transactions hereunder.
7.9 Good Standing Certificates. The COMPANY shall have delivered to ATOW
a certificate, dated as of a date no later than five (5) days prior
to the Closing Date, duly issued by the appropriate governmental
authority in the COMPANY's state of incorporation and, unless waived
by ATOW, in each state in which the COMPANY is authorized to do
business, showing the COMPANY is in good standing and authorized to
do business and that all state franchise and/or income Tax Returns
and Taxes due by the COMPANY for all periods prior to the Closing
have been filed and paid. 1-800-AutoTow waives this provision.
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7.10 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 7.10(a) of the Disclosure Schedule shall
have entered into an employment agreement with ATOWSUB substantially
in the form of Exhibit 7.10(a) (each an "Employment Agreement"), each
of person listed on Schedule 7.10(b) shall have entered into a
consulting agreement with ATOWSUB substantially in the form of
Exhibit 7.10(b) (each a "Consulting Agreement"), and each of the
Stockholders listed on Schedule 7.10(c) shall have entered into
leases with ATOWSUB substantially in the form attached Exhibit
7.10(c) (collectively the "Leases").
7.11 Repayment of Indebtedness. Prior to the Closing Date, the
Stockholders shall have repaid the COMPANY, including the COMPANY's
Subsidiaries, in full all amounts owing by the Stockholders to the
COMPANY, including the COMPANY's Subsidiaries.
7.12 Insurance. ATOW and ATOWSUB shall be named as additional named
insured on, or alternatively the insurer shall have been notified of
the Merger and shall have confirmed in writing that the Surviving
Corporation will be an insured under, each of the COMPANY's insurance
policies.
8. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
8.1 Tax Returns. The Stockholders shall be responsible for preparing and
filing all income or franchise Tax Returns of the COMPANY relating to
periods of time prior to the Closing Date. ATOWSUB will be
responsible for preparing and filing all income and franchise Tax
Returns of the COMPANY relating to periods after the Closing. After
the Closing, ATOWSUB will provide, or cause to be provided, to the
Stockholders, without charge, any information that may reasonably be
requested by the Stockholders in connection with the preparation of
any Tax Returns relating to the time period prior to the Closing
Date. The Stockholders will provide ATOWSUB and ATOW with an
opportunity to review and comment on such Tax Returns (including any
amended returns). The Stockholders will take no positions on the Tax
Returns of the COMPANY that relate to the tax period prior to the
Closing Date that could adversely affect the COMPANY after the
Closing. The income of the COMPANY will be apportioned to the period
up to the Closing Date and the period from and after the Closing Date
in accordance with the provisions of Section 1362(e)(6)(D) of the
Code by closing the books of the COMPANY as of the close of business
on the last calendar day immediately preceding the Closing Date.
8.2 Release from Guarantees. Shareholders shall be released from all
personal guarantees on or before September 30, 1999. ATOW shall have
the Stockholders released from any and all guarantees on any
obligations of the COMPANY that they have personally guaranteed for
the benefit of the COMPANY (including the COMPANY's Subsidiaries),
with all such guarantees on indebtedness being paid or assumed by
ATOWSUB.
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9. INDEMNIFICATION.
The Stockholders and ATOWSUB each make the following covenants that are
applicable to them, respectively:
9.1 General Indemnification by the Stockholders. The Stockholders
covenant and agree that they, jointly and severally will indemnify,
defend, protect and hold harmless ATOWSUB, the COMPANY and the
Surviving Corporation at all times from and after the date of this
Agreement from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by ATOWSUB,
the COMPANY or the Surviving Corporation as a result of or arising
from (i) any breach of the representations and warranties of the
Stockholders or the COMPANY set forth herein or on the schedules,
exhibits or certificates delivered in connection herewith or (ii)
any nonfulfillment of any agreement on the part of the Stockholders
or the COMPANY under this Agreement.
9.2 Indemnification by ATOWSUB. ATOWSUB covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the
Stockholders at all times from and after the date of this Agreement
from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by the COMPANY and the
Stockholders as a result of or arising from (i) any breach by ATOWSUB
of its representations and warranties set forth herein or on the
schedules, exhibits or certificates delivered herewith; (ii) any
nonfulfillment of any agreement on the part of ATOWSUB under this
Agreement; (iii) any liabilities which the COMPANY or the
Stockholders may incur due to ATOWSUB's failure to be responsible for
the liabilities and obligations of the COMPANY (except to the extent
that ATOWSUB has claims against the Stockholders by reason of such
liabilities). ATOWSUB shall pay down all corporate debts which are
personally guaranteed by Shareholders by 30% within ten (10) business
days after Closing.
9.3 Third Person Claims. If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
the other Party (the "Indemnifying Party") under this Section 9, then
the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of
the Indemnified Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
9.3.1 Defense by Indemnifying Party. The Indemnifying Party will
have the right to defend the Indemnified Party against the
Third Party Claim with counsel of its choice satisfactory
to the Indemnified Party so long as: (i) the Indemnifying
Party notifies the Indemnified Party in writing within
five (5) business days after the Indemnified Party has
given notice of the Third Party Claim that the
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Indemnifying Party will indemnify the Indemnified Party
from and against any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim;
(ii) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and
fulfill the Indemnifying Party's indemnification
obligations hereunder; (iii) the Third Party Claim
involves only money damages and does not seek an
injunction or other equitable relief; (iv) settlement of,
or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential
custom of practice adverse to the continuing business
interests of the Indemnified Party; and (v) the
Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
9.3.2 Settlement. So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in
accordance with Section 9.3.1: (i) the Indemnified Party
may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party
Claim; (ii) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld or
delayed unreasonably); and (iii) the Indemnifying Party
will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party
(not to be withheld or delayed unreasonably) and any such
settlement must include a complete release of the
Indemnified Party.
9.3.3 Conditions. In the event any of the conditions in Section
9.3.1 is or becomes unsatisfied, however: (i) the
Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith); (ii) the
Indemnifying Parties will reimburse the Indemnified Party
promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable
attorneys' fees and expenses); and (iii) the Indemnifying
Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 9.
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9.4 Exclusive Remedy. The indemnification provided for in this Section 9
shall be the exclusive remedy in any action seeking damages or any
other form of monetary relief brought by any party to this Agreement
against another party, provided that nothing herein shall be
construed to limit the right of a party, in a proper case, to seek
injunctive relief for a breach of this Agreement.
9.5 Minimum Indemnification. ATOW and ATOWSUB shall not be entitled to
any indemnification pursuant to Section 9.1, and the Stockholders
shall not be entitled to any indemnification pursuant to Section 9.2,
unless the Adverse Consequences, which occur or are incurred by the
applicable Party, exceed, in the aggregate, [THIRTY THOUSAND AND
NO/100 DOLLARS ($30,000.00)]; provided, however, if such sum does
exceed [THIRTY THOUSAND AND NO/100 DOLLARS ($30,000.00)], the amount
of the indemnification shall include such [THIRTY THOUSAND AND NO/100
DOLLARS ($30,000.00)].
9.6 Special Contest Rights Related to Tax Matters. The Stockholders shall
have the sole right (but not the obligation) to control, defend,
settle, compromise or prosecute in any manner any audit, examination,
investigation, hearing or other proceeding with respect to any Tax
Return of the COMPANY involving only periods prior to the Closing.
The Stockholders shall not agree to compromise or settle any
proceeding with respect to any Tax Return of the COMPANY which will
impact any period subsequent to the Closing without the consent of
ATOW. Except as expressly provided to the contrary in this Section
9.6, ATOWSUB shall have the sole right (but not the obligation) to
control, defend, settle, compromise, or prosecute in any manner an
audit, examination, investigation, hearing or other proceeding with
respect to any Tax Return of the COMPANY.
9.7 Special Notification Requirements Regarding Tax Disputes. ATOWSUB and
the COMPANY shall promptly forward to the Stockholders all written
notifications and other written communications from any tax authority
received by ATOWSUB or the COMPANY relating solely to any periods
prior to the Closing of the COMPANY, and ATOWSUB and the COMPANY
shall execute or cause to be executed any power of attorney or other
document or take such actions as requested by the Stockholders to
enable the Stockholders to take any action Stockholders deem
appropriate with respect to any proceedings relating thereto.
9.8 Refunds. A Party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another
party shall immediately pay an amount equal to such refund, credit,
offset or benefit (including any interest thereon) to the party that
effectively paid the Tax with respect to which the refund, credit,
offset or benefit relates. A Party entitled to a deduction on account
of a Tax effectively paid by another party shall pay an amount equal
to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which
such deduction relates, such amount to be paid immediately after such
saving is realized.
9.9 Optional Payment With Shares. Any Stockholders may make any payment
to ATOW required by this Section 9 by tendering shares of ATOW Shares
obtained by such Stockholders pursuant to Section 2 of this
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Agreement, with shares so tendered being valued at fair market value
on the trading day prior to the day the indemnification obligation is
paid. No Stockholders will be entitled to make payment with any other
shares of ATOW Shares.
10. TERMINATION OF AGREEMENT.
10.1 This Agreement may be terminated and the transactions herein
contemplated may be abandoned at any time prior to the Closing,
without liability to either Party unless termination occurs as a
result of a breach of a representation or warranty:
10.1.1 by mutual consent of the boards of directors of ATOW,
ATOWSUB and the COMPANY;
10.1.2 at or before the Closing, by the Stockholders or COMPANY,
on the one hand, or by ATOW, ATOWSUB, on the other hand,
if the Closing has not been completed by July 31, 1999,
time being of the essence, unless the failure of such
completion is due to the willful failure of the Party
seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to
be performed by it prior to or on the Closing Date;
10.1.3 at or before the Closing, by the Stockholders or COMPANY,
on the one hand, or by ATOW, ATOWSUB, on the other hand,
if a material breach or default shall be made by the other
in the observance or in the due and timely performance of
any of the covenants, agreements or conditions contained
herein, and such default shall not have been cured and
shall not reasonably be expected to be cured on or before
the Closing Date;
10.1.4 at or before the Closing, pursuant to Section 5.8.
11. NONCOMPETITION.
11.1 Prohibited Activities. The Stockholders shall enter into a
non-competition agreement. Zinna Terenik shall enter into an
agreement in the form of 11 A attached hereto. Walter Terenik shall
enter into an employment contract with ATOW which shall set forth the
applicable terms and conditions of the non-competition agreement
therein.
11.2 Damages. Because of the difficulty of measuring economic losses to
ATOW or ATOWSUB as a result of a breach of the foregoing covenant,
and because of the immediate and irreparable damage that could be
caused to ATOW and/or ATOWSUB for which it would have no other
adequate remedy, each Stockholders agrees that the foregoing covenant
may be enforced by ATOW or ATOWSUB, in the event of breach by such
Stockholders, by injunctions and restraining orders.
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11.3 Reasonable Restraint. It is agreed by the Parties hereto that the
foregoing covenants in this Section 11 impose a reasonable restraint
on the Stockholders in light of the activities and business of
ATOWSUB on the date of the execution of this Agreement and the
current plans of ATOW and ATOWSUB; but it is also the intent of ATOW,
ATOWSUB and the Stockholders that such covenants be construed and
enforced in accordance with the changing activities and business of
ATOWSUB throughout the term of this covenant.
It is further agreed by the Parties hereto that, in the event that
any Stockholders who has entered into an Employment Agreement shall
thereafter cease to be employed thereunder, and such Stockholders
shall enter into a business or pursue other activities not in
competition with ATOWSUB and/or any subsidiary thereof, or similar
activities or business in locations the operation of which, under
such circumstances, does not violate clause Section 11.1.1 , and in
any event such new business, activities or location are not in
violation of this Section 11 or of such Stockholders's obligations
under this Section 11, if any, such Stockholders shall not be
chargeable with a violation of this Section 11 if ATOW or ATOWSUB
shall thereafter enter the same, similar or a competitive (i)
business, (ii) course of activities or (iii) location, as applicable.
11.4 Severability; Reformation. The covenants in this Section 11 are
severable and separate, and the unenforceability of any specific
covenant shall not affect the provisions of any other covenant.
Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth
are unreasonable, then it is the intention of the Parties that such
restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
11.5 Independent Covenant. All of the covenants in this Section 11 shall
be construed as an agreement independent of any other provision in
this Agreement, and the existence of any claim or cause of action of
any Stockholders against ATOWSUB whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by
ATOWSUB of such covenants. It is specifically agreed that the period
of five (5) years stated at the beginning of this Section 11, during
which the agreements and covenants of each Stockholders made in this
Section 11 shall be effective, shall be computed by excluding from
such computation any time during which such Stockholders is in
violation of any provision of this Section 11. The covenants
contained in this Section 11 shall not be affected by any breach of
any other provision hereof by any Party hereto, except that upon
ATOWSUB's admission in writing, or a final judicial determination
which is not the subject of appeal or further appeal by ATOWSUB, that
ATOWSUB has materially breached a Stockholders's Employment Agreement
(if applicable), and ATOWSUB's failure to cure such material breach
within 30 days of such admission or final judicial determination,
whichever is applicable, then the covenants contained in this Section
11 with respect to such Stockholders will expire. The covenants
contained in this Section 11 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
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11.6 Materiality. The COMPANY and the Stockholders hereby agree that this
covenant is a material and substantial part of this transaction.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
12.1 Stockholders. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have,
access to certain confidential information of the COMPANY, ATOW
and/or ATOWSUB, such as lists of customers, operational policies, and
pricing and cost policies that are valuable, special and unique
assets of the COMPANY's, ATOW's and/or ATOWSUB's respective
businesses. The Stockholders agree that they will not disclose such
confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of ATOWSUB, (b) following
the Closing Date, as required in the course of performing their
duties for ATOWSUB, and (c) to counsel and other advisers, provided
that such advisers (other than counsel) agree to the confidentiality
provisions of this Section 12.1; provided, further, that confidential
information shall not include (i) such information which becomes
known to the public generally through no fault of the Stockholders,
(ii) information required to be disclosed by law or the order of any
governmental authority, provided that prior to disclosing any
information pursuant to this clause (ii), the Stockholders shall, if
possible, give prior written notice thereof to ATOWSUB and provide
ATOWSUB with the opportunity to contest such disclosure, or (iii) the
disclosing Party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing
Party. In the event of a breach or threatened breach by any of the
Stockholders of the provisions of this section, ATOW and ATOWSUB
shall be entitled to an injunction restraining such Stockholders from
disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting ATOW and ATOWSUB
from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
12.2 ATOW and ATOWSUB. ATOW and ATOWSUB recognize and acknowledge that it
had in the past and currently has access to certain confidential
information of the COMPANY, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special
and unique assets of the COMPANY's business. ATOW and ATOWSUB agree
that, prior to the Closing, they will not disclose such confidential
information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except (a) to authorized
representatives of the COMPANY, (b) to counsel and other advisers,
provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 12.2, unless (i) such
information becomes known to the public generally through no fault of
ATOW or ATOWSUB (ii) disclosure is required by law or the order of
any governmental authority, provided that prior to disclosing any
information pursuant to this clause (ii), ATOW and ATOWSUB shall, if
possible, give prior written notice thereof to the COMPANY and the
Stockholders and provide the COMPANY and the Stockholders with the
opportunity to contest such disclosure, or (iii) the disclosing Party
reasonably believes that such disclosure is required in connection
with the defense of a lawsuit against the disclosing Party. Upon
termination of this Agreement prior to the Closing Date for any
reason other than the material breach or default of any Stockholders
or COMPANY, ATOW and ATOWSUB will return to COMPANY all documents
containing confidential information of COMPANY that were provided to
ATOW or ATOWSUB by COMPANY or Stockholders and all summaries,
abstractions, projections, pro formas or like material prepared by
ATOW or ATOWSUB incorporating such confidential information. In the
event of a breach or threatened breach by ATOW or ATOWSUB of the
provisions of this section, the COMPANY and the Stockholders shall be
entitled to an injunction restraining ATOW and ATOWSUB from
disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting the COMPANY and the
Stockholders from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
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12.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 12.1 and
12.2, and because of the immediate and irreparable damage that would
be caused for which they would have no other adequate remedy, the
Parties hereto agree that, in the event of a breach by any of them of
the foregoing covenants, the covenant may be enforced against the
other parties by injunctions and restraining orders.
12.4 Survival. The obligations of the Parties under this Article 12 shall
survive the termination of this Agreement.
13. TRANSFER RESTRICTIONS.
13.1 Transfer Restrictions. Except for transfers as set forth in Section
13.2 below to persons or entities who agree to be bound by the
restrictions set forth in this Section 13.1, for a period of one year
from the Closing Date none of the Stockholders shall (i) sell,
assign, exchange, transfer, encumber, pledge, distribute, appoint, or
otherwise dispose of (a) any ATOW Shares received by the Stockholders
in the Merger, or (b) any interest (including, without limitation, an
option to buy or sell) in any such ATOW Shares, in whole or in part,
and no such attempted transfer shall be treated as effective for any
purpose; or (ii) engage in any transaction, whether or not with
respect to any ATOW Shares or any interest therein, the intent or
effect of which is to reduce the risk of owning the ATOW Shares
acquired pursuant to Section 2 hereof (including, by way of example
and not limitation, engaging in put, call, short-sale, straddle or
similar market transactions). The certificates evidencing the ATOW
Shares delivered to the Stockholders pursuant to Section 2 of this
Agreement will bear a legend substantially in the form set forth
below and containing such other information as ATOW may deem
necessary or appropriate:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE SECURITIES MAY NOT BE SOLD, OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED WITHOUT ONE OF THE FOLLOWING:
(i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURTIES
ACT, OR
(ii) AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
The restrictions set forth herein shall not pertain to the transfers
set forth in Section 2.13.1.2 above.
13.2 Permitted Transferees. Notwithstanding the provisions of Section
13.1, a Stockholders shall have the right to transfer some or all of
the ATOW shares to any one or more of the following, provided that
the transferee agrees to be bound (in a form satisfactory to ATOW and
its counsel) by the terms and conditions of this Agreement with
respect to any further transfer of such shares: (i) any family member
of a Stockholders (including, without limitation, any transfer to a
custodian under any gift to minors statute), with family members
being defined as any spouse, lineal descendant or ancestor of a
Stockholders), (ii) any trust which is for the benefit of one or more
family members of a Stockholders and (iii) any corporation,
partnership, limited liability COMPANY or other entity (a) of which a
majority of the interests therein by value is owned by the
Stockholders and members of the Stockholders's family, and (b) which
is and continues to be controlled by the Stockholders and members of
the Stockholders's family for the period set forth in Section 13.1.
14. FEDERAL SECURITIES ACT REPRESENTATIONS.
The Stockholders acknowledge that the ATOW Shares to be delivered to the
Stockholders pursuant to this Agreement have not been and will not be
registered under the Securities Act and therefore may not be resold without
compliance with the Securities Act. The ATOW Shares to be acquired by such
Stockholders pursuant to this Agreement is being acquired solely for their
own respective accounts, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
14.1 Compliance with Law. The Stockholders covenant, warrant and represent
that none of the ATOW Shares issued to such Stockholders will be
offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of except after full compliance with all of the
applicable provisions of the Securities Act and the rules and
regulations of the Commission. All the ATOW Shares shall bear the
following legend in addition to the legend required under Section 13
of this Agreement:
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THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THE 1933 ACT AND APPLICABLE SECURITIES
LAWS.
14.2 Accredited Investors; Economic Risk; Sophistication. Each
Stockholders represents and warrants that such Stockholders is an
"accredited investor," as that term is defined in Regulation D
promulgated by the Commission under the Securities Act. The
Stockholders are able to bear the economic risk of an investment in
the ATOW Shares acquired pursuant to this Agreement and can afford to
sustain a total loss of such investment and have such knowledge and
experience in financial and business matters that they are capable of
evaluating the merits and risks of the proposed investment in the
ATOW Shares. The Stockholders or their respective purchaser
representatives have had an adequate opportunity to ask questions and
receive answers from the officers of ATOW and ATOWSUB concerning any
and all matters relating to the transactions described herein
including, without limitation, the background and experience of the
current and proposed officers and directors of ATOW and ATOWSUB, the
plans for the operations of the business of ATOW and ATOWSUB, the
business, operations and financial condition of the COMPANY, and any
plans for additional acquisitions and the like.
15. GENERAL.
15.1 Cooperation. The COMPANY, Stockholders, ATOW and ATOWSUB shall each
(i) attempt in good faith (without being required to incur
unreasonable expense) to cause all conditions to actions to be taken
on the Closing Date to be satisfied, and (ii) deliver or cause to be
delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional
instruments, and take such additional actions as can be taken without
unreasonable expense, as any other may reasonably request for the
purpose of carrying out this Agreement. The COMPANY will cooperate
and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with ATOWSUB on and
after the Closing Date in furnishing information, evidence, testimony
and other assistance in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
15.2 Successors and Assigns. This Agreement and the rights of the Parties
hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the Parties hereto,
the successors of ATOWSUB, and the heirs and legal representatives of
the Stockholders.
15.3 Entire Agreement. This Agreement including the Disclosure Schedules,
Exhibits, Certificates and Annexes delivered herewith and the
documents delivered pursuant hereto constitute the entire agreement
and understanding among the Stockholders, the COMPANY, ATOW and
ATOWSUB and supersede any prior agreement and understanding relating
to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the Parties
hereto enforceable in accordance with its terms. Except as otherwise
stated herein, this Agreement, Disclosure Schedules, Exhibits,
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Certificates and the Annexes hereto may be modified or amended only
by a written instrument executed by the Stockholders, the COMPANY,
ATOW and ATOWSUB, acting through their respective officers, duly
authorized by their respective Boards of Directors. Any disclosure
made on any schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other schedule required
hereby.
15.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original
and all of which together shall constitute but one and the same
instrument.
15.5 Brokers and Agents. Each Party represents and warrants that it
employed no broker or agent in connection with this transaction and
agrees to indemnify the other against all loss, cost, damages or
expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such Indemnifying Party.
15.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) ATOWSUB will pay the fees, expenses and
disbursements of ATOWSUB and its agents, representatives, accountants
and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto, including all costs and
expenses incurred in the performance and compliance with all
conditions to be performed by ATOWSUB under this Agreement, and (ii)
the Stockholders will pay from personal funds and not from COMPANY
funds, the fees, expenses and disbursements of their counsel and
accountants for the Stockholders and the COMPANY incurred in
connection with the subject matter of this Agreement. The
Stockholders shall pay all sales, use, transfer, recording, gains,
stock transfer and other similar taxes and fees incurred in
connection with the transactions contemplated by this Agreement. The
Stockholders shall file all necessary documentation and Tax Returns
with respect to such Taxes. In addition, each Stockholders
acknowledges that he, and not the COMPANY or ATOWSUB, will pay all
Taxes due upon receipt of the consideration payable to such
Stockholders pursuant to Section 2 hereof. Notwithstanding the
foregoing, any of the above fees, expenses or disbursements fairly
attributable to the COMPANY but payable by the Stockholders and
incurred prior to the Closing may be paid from COMPANY funds rather
than from personal funds of the Stockholders, provided that the
Stockholders provide to ATOWSUB, prior to the Closing, a detailed
statement setting forth the type and amount of all such fees,
expenses or disbursements so paid, and, provided further, that the
aggregate amount of same shall be deducted, on a dollar-for-dollar
basis, from the amount of cash into which the COMPANY Stock shall be
converted pursuant to Section 2.13.1.4 hereof.
15.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same
45
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in United States mail, addressed to the party to be notified, postage
prepaid and registered or certified with return receipt requested, or
by delivering the same in person to such party (in the case of a
Stockholders) or to an officer, general partner, member or trustee of
such party (in the case of parties other than Stockholders).
(a) If mailed to ATOW addressed to it at:
1-800-AutoTow, Inc.
1301 North Congress Ave., Suite 330
Boynton Beach, FL 33426
Attn: Joel B. Nagelmann, Chief Executive Officer
(b) If mailed to ATOWSUB addressed to it at:
1-800-AutoTow, Inc.
1301 North Congress Ave., Suite 330
Boynton Beach, FL 33426
Attn: Joel B. Nagelmann, Chief Executive Officer
with copies to:
Delmer C. Gowing III, PA
101 S.E. 6th Ave.
Delray Beach, FL 33483
Attn: Delmer C. Gowing III, Esq.
(c) If mailed to the Stockholders, addressed to them at their addresses set
forth on Annex I, with copies to such counsel as is set forth with
respect to each Stockholders on such Annex I;
(d) If mailed to the COMPANY, addressed to it at:
and marked "Personal and Confidential" with copies to:
or to such other address or counsel as any Party hereto shall specify pursuant
to this Section 15.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the Party or an officer,
general partner, member or trustee of the Party, as applicable.
15.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida,
without giving effect to laws concerning choice of law or conflicts
of law. All disputes arising out of this Agreement or the obligations
of the Parties hereunder, including disputes that may arise following
termination of this Agreement, shall be resolved by arbitration in
accordance with the Commercial Rules of the American Arbitration
Association. Arbitration venue shall be Miami, Florida where judgment
upon the award rendered by the Arbitrator(s) may be entered by a
court of competent jurisdiction.
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15.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the Parties made herein, or
in writing delivered pursuant to the provisions of this Agreement
shall survive the consummation of the transactions contemplated
hereby and any examination on behalf of the Parties.
15.10 Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy
accruing to any Party as a result of any breach or default by any
other Party under this Agreement shall impair any such right, power,
or remedy, nor shall it be construed as a waiver of or acquiescence
in any such breach or default, or of any similar breach or default
occurring later; nor shall any waiver of any single breach or default
be deemed a waiver of any other breach or default occurring before or
after that waiver.
15.11 Time. Time is of the essence with respect to this Agreement.
15.12 Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the
Parties, and if such modification is not possible, such provision
shall be severed from this Agreement, and in either case the
validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
15.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at
law or in equity.
15.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or
be used to construe or interpret any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
WITNESS: 1-800-AUTOTOW, INC.
/s/ Delmer Gowing /s/ Joel B. Nagelmann
- -------------------- ----------------------
Delmer Gowing Joel B. Nagelmann
President
WITNESS: 1-800-AUTOTOW GULF COAST EAST, INC.
/s/ Delmer Gowing /s/ Steven B. Teeters
- -------------------- ----------------------
Delmer Gowing Steven B. Teeters
Treasurer
WITNESS: L&W COLLISION, TOWING &
RECOVERY, INC.
/s/ JZE /s/ Walt Terenik
- -------------------- ----------------------
JZE Walt Terenik
President
WITNESS: Stockholder:
/s/ JZE /s/ Zinna Terenik
- -------------------- ----------------------
JZE Zinna Terenik
WITNESS: Stockholder:
/s/ JZE /s/ Walt Terenik
- -------------------- ----------------------
JZE Walt Terenik
47
EXHIBIT 6.35
Amendment to Merger Agreement
Walt Terenik
L&W Collision, Towing and Recovery, Inc.
July 30, 1999
The legal documentation necessary to close the funding has not been completed
despite a tremendous effort by the personnel at 1-800-AutoTow and the attorneys
for all parties. We request an extension on your Purchase Agreement until August
6, 1999.
Because of this delay and for your consideration of this extension, rather than
utilize the contracted stock price calculation in the Agreement, we are willing
to fix your stock price at $0.70 per share.
By executing this Amendment, you acknowledge a waiver of the July 30, 1999
funding date in the Purchase Agreement and grant an extension until the end of
this week (August 6, 1999).
Sincerely,
Agreed:
/s/ Joel B. Nagelmann /s/ Walt Terenik
- --------------------- -----------------
Joel B. Nagelmann Walt Terenik
President & CEO Seller
/s/ Zinna Terenik
-----------------
Zinna Terenik
Seller
EXHIBIT 6.36
MERGER AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 23rd day of July, 1999
by and among
1-800-AUTOTOW, INC., a Delaware Corporation
1-800-AUTOTOW GULF COAST EAST, INC., a Florida Corporation, and
ARROW TOWING & RECOVERY, INC., a Florida Corporation
and
the Stockholder named herein
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MERGER AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of the 23rd day of July 1999, by and among 1-800-AUTOTOW, INC., a Delaware
corporation ("ATOW"), 1-800-AUTOTOW GULF COAST EAST, INC., a Florida corporation
("ATOWSUB"), ARROW TOWING & RECOVERY, INC a Florida corporation (the "COMPANY"),
and the stockholder listed on Annex I (the "Stockholder"). The Stockholder are
all the stockholder of the COMPANY. ATOW, ATOWSUB, the COMPANY and the
Stockholder are each referred to in the Agreement as a Party and collectively as
the Parties.
RECITALS
WHEREAS, the respective Boards of Directors of ATOW, ATOWSUB and the
COMPANY deem it advisable and in the best interests of each of the corporations
and their respective stockholder that the COMPANY merge with and into ATOWSUB
pursuant to this Agreement and the applicable provisions of the laws of the
State of Florida, such transaction sometimes being herein called the Merger;
WHEREAS, the Boards of Directors of ATOW, ATOWSUB and the COMPANY have
approved and adopted this Agreement which is intended to qualify as a
reorganization described in Sections 354 and 356 of the Code;
WHEREAS, all of the Parties hereto desire to enter into this Agreement
to effectuate the Merger of the COMPANY with and into ATOWSUB, pursuant to all
of the terms, conditions, representations, warranties, and covenants contained
in this Agreement.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the Parties hereto hereby agree as follows:
TERMS AND CONDITIONS
3. DEFINITIONS. For purposes of this Agreement, unless the context otherwise
requires, the following capitalized words and phrases used in this
Agreement shall have the meanings set forth below:
1.1 "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, liabilities, obligations, taxes,
liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses.
1.2 "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
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1.3 "Agreement" has the meaning set forth in the first paragraph hereof.
1.4 "ATOW" has the meaning set forth in the first paragraph hereof.
1.5 "ATOWSUB" has the meaning set forth in the first paragraph hereof.
1.6 "ATOW Shares" means any share of common stock, $.001 par value per
share, of ATOW.
1.7 "Balance Sheet Date" has the meaning set forth in Section 3.8.
1.8 "Certificates" has the meaning set forth in the Section 2.12.1.
1.9 "Charter Documents" has the meaning set forth in Section 3.1.
1.10 "Closing" shall mean the day of funding, but no later than July 30,
1999.
1.11 "Closing Date" has the meaning set forth in Section 2.9.
1.12 "Closing Date Balance Sheet" has the meaning set forth in Section
2.14.2.
1.13 "Code" means the Internal Revenue Code of 1986, as amended.
1.14 "Commission" means the Securities and Exchange Commission.
1.15 "Company" has the meaning set forth in the first paragraph hereof.
1.16 "Company Shares" means any share of common stock, of the COMPANY.
1.17 "Company's Subsidiaries" has the meaning set forth in Section 3.7.
1.18 "Disclosure Schedule" has the meaning set forth in Section 3.
1.19 "Draft Closing Date Balance Sheet" has the meaning set forth in
Section 2.14.1.
1.20 "Effective Time" has the meaning set forth in Section 2.3.
1.21 "Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan; (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan; (c)
qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan); (d)
Employee Welfare Benefit Plan; or (e) any bonus, incentive,
severance, stock option, stock purchase, short-term disability plan
or other material fringe benefit plan, program or arrangement,
including policies concerning holidays, vacations and salary
continuation during short absences for illness or otherwise.
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1.22 "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
1.23 "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
1.24 "Employment Agreement, Consulting Agreements and Leases" have the
meaning set forth in Section 7.10 and Exhibits thereunder.
1.25 "Environmental, Health, and Safety Requirements" means the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act of 1976, the
Clean Air Act, the Federal Water Pollution Control Act, the Safe
Drinking Water Act, the Toxic Substance Control Act, the Emergency
Planning and Community Right-to-Know Act of 1986, the Hazardous
Material Transportation Act, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, injunctions, judgments, orders, decrees,
and rulings) of federal, state, local, and foreign governments (and
all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety,
including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials (including petroleum
products and asbestos) or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
1.26 "Environmental Laws" has the meaning set forth in Section 3.12.
1.27 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.28 "Fiduciary" has the meaning set forth in ERISA Section 3(21).
1.29 "Financial Statements" has the meaning set forth in Section 3.8.
1.30 "GAAP" means the United States generally accepted accounting
principles in effect from time to time.
1.31 "FBCA" means Chapter 607 of the Florida Statutes, known as the
Florida Business Corporation Act, as amended from time to time.
1.32 "Indemnified Party" has the meaning set forth in Section 9.3.
1.33 "Indemnifying Party" has the meaning set forth in Section 9.3.
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1.34 "Intellectual Property" means: (a) all trade secrets and confidential
business information (including customer and supplier lists, ideas,
research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, pricing and cost
information, and business and marketing plans and proposals); (b) all
trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and
renewals in connection therewith; (c) all inventions (whether
patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations
thereof; (d) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith;
(e) all computer software (including data and related documentation);
(f) all other proprietary rights; and (g) all copies and tangible
embodiments thereof (in whatever form or medium).
1.35 "IRS" means the Internal Revenue Service.
1.36 "Knowledge" as it applies to the Stockholder, means the actual
knowledge of any of the Stockholder as it applies to ATOW and ATOWSUB
shall mean the actual knowledge of its officers and directors.
1.37 "Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including but not in any way limited to any
liability for Taxes.
1.38 "Material Adverse Effect" or "Material Adverse Change" means any
change of effect that is materially adverse to the business,
financial condition, results of operations or prospects for future
business
1.39 "Material Contract" has the meaning set forth in Section 3.14.
1.40 "Merger" has the meaning set forth in Section 2.1.
1.41 "Most Recent Financial Statements" has the meaning set forth in
Section 3.8.
1.42 "Most Recent Fiscal Quarter End" has the meaning set forth in Section
3.8.
1.43 "Most Recent Fiscal Year End" has the meaning set forth in Section
3.8.
1.44 "Multiemployer Plan" has the meaning set forth in ERISA Section
3(37).
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1.45 "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice, including with respect to
quantity and frequency.
1.46 "Net Equity" has the meaning set forth in Section 2.13.2.1.
1.47 "Party(ies)" has the meaning set forth in the first paragraph hereof.
1.48 "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
1.49 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company or
partnership, a trust, a joint venture, an unincorporated
organization, any other form of entity whatsoever, or a governmental
entity (or any department, agency, or political subdivision thereof).
1.50 "Private Placement Memorandum" means the private placement
memorandum of ATOW relating to the ATOW Shares to be issued
hereunder.
1.51 "Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
1.52 "Promissory Note" has the meaning set forth in Section 2.13.1.3.
1.53 "Qualified Plan" has the meaning set forth in Section 3.17.5.
1.54 "Reportable Event" has the meaning set forth in ERISA Section 4043.
1.55 "Securities Act" means the Securities Act of 1933, as amended.
1.56 "Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
1.57 "Security Interest" means any lien, claim, encumbrance, mortgage,
hypothecation, pledge, or other security interest, excluding purchase
money security interests arising in the Ordinary Course of Business
and liens arising by operation of law for Taxes not yet due and
payable.
1.58 "Significant Customers" has the meaning set forth in Section 3.14.
1.59 "Stockholder" has the meaning set forth in the first paragraph hereof.
1.60 "Stockholder' Agreement" has the meaning set forth in Section
2.13.1.2.
1.61 "Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
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1.62 "Surviving Corporation" has the meaning set forth in Section 2.1.
1.63 "Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use, production, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever,
including interest, penalty, or additions thereto, whether disputed
or not, and whether or not accrued on the Financial Statements.
1.64 "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.65 "Third Party Claim" has the meaning set forth in Section 9.3.
1.66 "Transaction" has the meaning set forth in Section 2.1.
1.67 "Transaction Consideration" has the meaning set forth in Section
2.13.1.
1.68 "Transaction Consideration Adjustment" has the meaning set forth in
Sections 2.13.2.1.
4. TRANSACTION, TRANSACTION CONSIDERATION, CLOSING.
2.1 Transaction. Upon the terms and subject to the conditions hereof and
in accordance with the provisions of the Florida Business Corporation
Act (the "FBCA"), the COMPANY shall be merged with and into ATOWSUB
(the "Merger") and the separate existence of the COMPANY shall
thereupon cease, and ATOWSUB, as the surviving corporation (the
"Surviving Corporation"), shall continue to exist under and be
governed by the FBCA (the "Transaction.")
2.2 Effect of the Merger. At and after the Effective Time, the effect of
the Merger shall, in all respects, be as provided in the FBCA. From
and after the Effective Time, the Surviving Corporation shall
continue to be a Florida corporation.
2.3 Effective Time; Filing of Certificates of Merger. The Merger shall be
effected by the filing at the time of the Closing, of the articles of
merger, substantially in the form of Exhibit 2.3 attached hereto with
the Secretary of the State of Florida in accordance with the
provisions of the FBCA. The Merger shall become effective at the
close of business on the date of such filing (the "Effective Time")
and the Parties shall take any and all other lawful actions and do
any and all other lawful things necessary to cause the Merger to
become effective.
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2.4 Articles of Incorporation. At the Effective Time, the articles of
incorporation of ATOWSUB, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the
Surviving Corporation until thereafter amended in accordance with
applicable law.
2.5 By-Laws. The by-laws of ATOWSUB, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving Corporation
until thereafter amended in accordance with applicable law.
2.6 Directors and Officers. The directors and officers of ATOWSUB
immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation. Each director and officer of
the Surviving Corporation shall hold office in accordance with the
articles of incorporation and by-laws of the Surviving Corporation.
At the Closing, the COMPANY shall cause to be delivered to ATOWSUB
the written resignations of all of the directors and officers of the
COMPANY, which resignations shall be unconditional and effective as
of the Closing Date.
2.7 Tax Consequences. It is intended by the Parties hereto that the
Merger shall constitute a tax-free reorganization within the meaning
of Sections 354 and 356 of the Code and shall prohibit Company from
utilizing IRC Section 338 to "step up" the basis of the assets of
Seller after acquisition.
2.8 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further
acts are necessary or desirable: (i) to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, title to and
possession of any property or right of the Company acquired or to be
acquired by reason of, or as a result of, the Merger; or (ii)
otherwise to carry out the purposes of this Agreement, then the
Stockholder shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver
all such deeds, assignments and assurances in law and to do all other
acts necessary or proper to vest, perfect or confirm title to and
possession of such property or rights in the Surviving Corporation
and otherwise to carry out the purposes of this Agreement; and the
officers and directors of the Surviving Corporation are fully
authorized in the name of the Stockholder and the company to take any
and all such actions.
2.9 The Closing. The closing of the Transaction (the "Closing") shall
take place at Tampa, Florida, commencing at 1:00 p.m. local time on
July 23, 1999, or such other date or time as the Parties may mutually
agree. The Closing shall not be final until funding occurs on or
before July 30, 1999.
2.10 Actions at the Closing. At the Closing: (i) the Stockholder shall
convey the COMPANY Shares to ATOWSUB and deliver to ATOWSUB the
various certificates, instruments, and the documents elsewhere in
this Agreement; and (ii) ATOW shall deliver to the Stockholder the
Transaction Consideration required to be delivered at the closing and
the various certificates, instruments, and documents referred to
elsewhere in this Agreement.
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2.11 No Dissenters' Rights. As the sole shareholder of the COMPANY, the
Stockholder' approval and execution of this Agreement constitutes
unanimous approval of the transactions contemplated herein and
therefore neither the Stockholder, nor any other party, are entitled
to dissenters' rights under the FBCA.
2.12 Surrender of Certificates.
2.12.1 Company's Shares. At the Closing, the Stockholder shall be
required to surrender to ATOWSUB the certificates which
immediately prior to the Effective Time represented all of
the COMPANY's Shares (the "Certificate(s)") (together with
stock powers endorsed to ATOWSUB). Until so surrendered,
each Certificate which immediately prior to the Effective
Time represented the COMPANY's Shares (other than shares
held in the treasury) shall upon and after the Effective
Time by virtue of the Merger be deemed for all purposes to
represent and evidence only the right to receive the ATOW
Shares determined in accordance with Section 2.13.1.2 and
the Cash pursuant to Section 2.13.1.1, as provided in this
Agreement. At the Effective Time, the stock transfer books
of the COMPANY shall be closed and no transfer of the
COMPANY's Shares shall thereafter be made.
2.12.2 Dividends. No dividends or other distributions declared or
made after the date of this Agreement with respect to the
ATOW Shares with a record date after the Effective Time
will be paid to the holder of any unsurrendered
Certificate with respect to the ATOW Shares represented
thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to applicable
law, following surrender of any such Certificate, there
shall be paid to the record holder of the Certificate
representing whole ATOW Shares issued in exchange
therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a
record date after the Effective Time payable with respect
to such whole ATOW Shares.
2.13 Transaction Consideration.
2.13.1 Transaction Consideration Composition and Payment. The
aggregate transaction consideration (the "Transaction
Consideration") shall be paid as follows:
2.13.1.1 Cash $158,467.00 to be paid at the Closing or
by July 30, 1999, payable by certified, bank,
or cashier's check delivered to the
Stockholder, or by wire transfer of immediately
available funds to an account designated by the
Stockholder not less than three (3) business
days prior to the Closing Date;
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2.12.1.2 ATOW Shares. _____ shares issued at the Closing
Date, to the respective Stockholder, equivalent
to a value of $175,000.00 based on the average
price per share for the five (5) previous days
trading to the Closing and for the five (5)
trading days after the Closing less a thirty
percent discount. The ATOW Shares received by
the Stockholder shall not be transferable by
the Stockholder other than: (i) by will, trust
or intestate succession; or (iii) in accordance
with applicable state and federal securities
laws including, but not limited to, Rule 144;
or (iii) Section 13.2 hereof.
2.13.1.3 Conversion of Shares. Each share of capital
stock of ATOWSUB issued and outstanding
immediately prior to the Effective Time shall
continue to represent one validly issued, fully
paid and non-assessable share of capital stock
of the Surviving Corporation after the Merger.
By virtue of the Merger and without any action
on the part of the Stockholder thereof, the
COMPANY Shares shall be converted into ATOW
Shares as follows: ___________shares equivalent
to a value of $175,000, based on the average
price per share of the five (5) previous day's
trading to the Closing and for the five (5)
trading days after the Closing less a thirty
percent discount.
2.13.2 Potential Post-Closing Adjustments.
2.13.2.1 Computation of Adjustment. If the Closing Date
Balance Sheet reflects Net Equity that is less
than $78,508.00 then the Transaction
Consideration shall be reduced dollar for
dollar (a "Transaction Consideration
Adjustment") by the amount by which such actual
agreed upon Net Equity set forth in the Closing
Date Balance Sheet is less than $78,508.00.
2.13.2.2 Satisfaction of Adjustment. If an adjustment is
made pursuant to Section 2.13.2.1, ATOW shall
receive within forty-five (45) days of the
completion of the Closing Date, through a
conveyance from the Stockholder to ATOW, from
the ATOW Shares transferred to the Stockholder
hereunder which have not yet become fully
transferable, that number of ATOW Shares
necessary to equal the Transaction
Consideration Adjustment, utilizing
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_____________ per share for such adjustment;
provided, however, if no such ATOW Shares are
available for such purpose, or not enough ATOW
Shares are available for such purpose, ATOW
shall receive the Transaction Consideration
Adjustment in one (1) lump sum payment from the
Stockholder. "Net Equity" shall be the fair
market value of the COMPANY's tangible assets,
less all liabilities of the COMPANY. Should net
equity be more than $78,508.00, the COMPANY
and/or its stockholder shall be entitled to
receive additional shares at a price as stated
in Article 2.13.1.3 above per share for such
adjustment, provided, however, that if no such
ATOW shares are available for such purpose or
not enough ATOW shares are available, the
shareholder shall receive the Transaction
Consideration Adjustment in one lump sum
payment from ATOW.
2.14 Preparation of Closing Date Balance Sheet.
2.14.1 Initial Draft Closing Date Balance Sheet. Within ninety
(90) days after the Closing Date, ATOW will prepare and
deliver to the Stockholder a draft balance sheet (the
"Draft Closing Date Balance Sheet") of the COMPANY, taking
into account the conversion of the COMPANY to a "C"
corporation, as of the close of business on the Closing
Date (after giving effect to all transactions occurring on
the Closing Date other than the consummation of the
transactions contemplated by this Agreement). ATOW will
prepare the Draft Closing Date Balance Sheet in accordance
with GAAP through application of the procedures used in
preparing an end-of-year audited financial statement.
2.14.2 Closing Date Balance Sheet. If the Stockholder have any
objections to the Draft Closing Date Balance Sheet, the
Stockholder will deliver a detailed statement describing
their objections to ATOW within thirty (30) days after
receiving the Draft Closing Date Balance Sheet. If the
Stockholder do not deliver any such objections to ATOW
within such thirty (30) day period, then the Draft Closing
Date Balance Sheet shall be the "Closing Date Balance
Sheet." The Parties shall use reasonable efforts to
resolve any such objections themselves. If the Parties do
not obtain a final resolution within thirty (30) days
after ATOW has received the statement of objections, the
Parties shall select a "Big Six" accounting firm, other
than their respective regular outside accounting firms,
which is mutually acceptable to them to resolve any
remaining objections. The determination of any accounting
firm so selected will be set forth in writing and will be
conclusive and binding upon the Parties. ATOW will revise
the Draft Closing Date Balance Sheet as appropriate to
reflect the resolution of any objections thereto pursuant
to this Section 2.14.2. If any revisions are made to the
Draft Closing Date Balance Sheet, pursuant to the
preceding sentence, the Closing Date Balance Sheet shall
mean the Draft Closing Date Balance Sheet together with
any such revisions.
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2.14.3 Accounting Expenses. In the event the Parties submit any
unresolved objections to an accounting firm for resolution
as provided in Section 2.14.2, ATOW and the Stockholder
will share equally the responsibility for the fees and
expenses of the accounting firm.
2.15 Stockholder Consent and Release. The Stockholder hereby consent to
the Transaction and approve the execution and delivery of this
Agreement and the transactions contemplated hereby. Effective as of
the Effective Time, the Stockholder hereby release the COMPANY from
any and all claims of the Stockholder, whether arising before or
after the Effective Time, against the COMPANY, or Liabilities or
obligations of the COMPANY to the Stockholder as a result of any
Stockholder having served as a stockholder, director, officer,
employee, or agent of the COMPANY.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER.
The COMPANY and each of the Stockholder jointly and severally represent and
warrant that all of the following representations and warranties in this
Section 3 are true at the date of this Agreement and shall be true at the
time of the Closing, except as set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"), and that such
representations and warranties shall survive the Closing Date.
3.1 Organization. Each of the COMPANY and the subsidiaries of the COMPANY
(the "COMPANY's Subsidiaries") set forth on Schedule 3.7 of the
Disclosure Schedule is a corporation duly organized, validly existing
and in good standing under the laws of the state of its
incorporation, and is duly authorized and qualified to do business
under all applicable laws, regulations, ordinances and orders of
public authorities to carry on its business in the places and in the
manner as now conducted. Schedule 3.1 of the Disclosure Schedule
contains a list of all jurisdictions in which the COMPANY is
authorized or qualified to do business. True copies of the
certificate of incorporation and bylaws, each as amended, of the
COMPANY and each of the COMPANY's Subsidiaries (collectively, the
"Charter Documents"), certified by the Secretary or Assistant
Secretary of the COMPANY, are attached hereto as Schedule 3.1 of the
Disclosure Schedule . A true copy of each certificate of
incorporation included in the Charter Documents, certified by the
Secretary of State or other appropriate authority of the state of
incorporation of the COMPANY or the applicable Subsidiary of the
COMPANY, as applicable, shall be delivered to ATOW at the Closing.
Except as set forth on Schedule 3.1 of the Disclosure Schedule , the
minute books of the COMPANY and each of the COMPANY's Subsidiaries,
as heretofore made available to ATOW, are correct and complete in all
material respects.
3.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to
the terms of this Agreement and (ii) the COMPANY has the full legal
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right, power and authority to enter into this Agreement and the
Merger. The execution, delivery and performance of this Agreement by
the COMPANY has been duly authorized and approved by its Board of
Directors and no other corporate proceedings on the part of the
COMPANY are necessary to authorize this Agreement and the
transactions contemplated hereby. The COMPANY has given to the
Stockholder any notice required to be given to the Stockholder under
applicable law. This Agreement constitutes the valid and legally
binding obligation of the COMPANY, enforceable in accordance with its
terms and conditions.
3.3 Capital Stock of the Company. The authorized capital stock of the
COMPANY is 10,000 shares. All of the issued and outstanding shares of
the capital stock of the COMPANY are owned by the Stockholder and in
the amounts set forth in Annex I free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the Stockholder and further, such
shares were offered, issued, sold and delivered by the COMPANY in
compliance with all applicable state and federal laws concerning the
issuance of securities. Further, none of such shares were issued in
violation of the preemptive rights of any past or present
stockholder. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights
with respect to the COMPANY. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the
capital stock of the COMPANY.
3.4 Noncontravention of Company. Except as set forth in Schedule 3.4 of
the Disclosure Schedule, neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby will: (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, or other restriction of
any government, governmental agency or any other third party
whatsoever, or court to which the COMPANY is subject, or any
provision of the charter or bylaws of the COMPANY; or (ii) conflict
with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which the COMPANY is a party or by which it is bound or to which
any of its assets is subject or which would result in the imposition
of any Security Interest upon any of its assets, which conflict,
breach default, acceleration or right would have a Material Adverse
Effect on the Stockholder or otherwise adversely affect the
Stockholder' ability to consummate the transactions contemplated
hereby. Except as set forth in Schedule 3.4 of the Disclosure
Schedule, the Stockholder and the COMPANY do not need to give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency or any
other third party whatsoever in order for the Parties to consummate
the transactions contemplated by this Agreement.
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3.5 Broker's Fees. The COMPANY has no Liability or obligation to pay any
fees, expenses, or commissions to any professional representative,
attorney, consultant, broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
3.6 Title to Assets. Schedule 3.6 of the Disclosure Schedule contains a
materially complete, true and materially correct list and brief
description of each item of equipment and tangible asset having an
original purchase cost or aggregate lease cost exceeding FIVE HUNDRED
DOLLARS AND NO/100 ($500.00). The COMPANY has good and marketable
title to, or a valid leasehold interest in, the properties and assets
used by it, located on its premises, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, except for those
assets disposed of in the Ordinary Course of Business after the date
thereof, free and clear of all Security Interests.
3.7 Subsidiaries. Schedule 3.7 of the Disclosure Schedule attached hereto
lists the name of each of the COMPANY's Subsidiaries and sets forth
the number of shares and class of the authorized capital stock of
each of the COMPANY's Subsidiaries and the number of shares of each
of the COMPANY's Subsidiaries which are issued and outstanding, all
of which shares (except as set forth on Schedule 3.7) are owned by
the COMPANY, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions, encumbrances and
claims of every kind. The COMPANY does not presently own, of record
or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is
the COMPANY, directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
3.8 Financial Statements. The Stockholder have delivered to ATOW
financial statements of the COMPANY consisting of (i) unaudited
balance sheets, and related statements of income, as of and for the
years ended December 31, 1996, 1997 1998. (December 31, 1998 being
hereinafter referred to as the "Balance Sheet Date" and the "Most
Recent Fiscal Year End") and (ii) the unaudited balance sheet and
income statement (the "Most Recent Financial Statements"), as of and
for the quarter ended [insert date] (the "Most Recent Quarter End")
(Collectively referred to as "Financial Statements"). Such Financial
Statements have been prepared in accordance GAAP applied on a
consistent basis throughout the periods indicated, except as noted.
Such balance sheets as of December 31, 1998, 1997 and 1996 present
fairly the financial position of the COMPANY (and each of the
COMPANY's Subsidiaries on a consolidated basis) as of the dates
indicated thereon, and such statements of income present fairly the
results of their combined operations for the periods indicated
thereon; provided, however, that the Most Recent Financial Statements
are subject to normal year-end adjustments, which will not be
material.
3.9 Liabilities and Obligations. Schedule 3.9 of the Disclosure Schedule
contains an accurate list with respect to the COMPANY and its
Subsidiaries of:
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3.9.1 all liabilities which are reflected on the balance sheet
of the COMPANY at the Balance Sheet Date;
3.9.2 all liabilities of the COMPANY not reflected on the
balance sheet of the COMPANY at the Balance Sheet Date
exceeding $100 which should have properly been accrued on
the balance sheet of the COMPANY as of the Balance Sheet
Date in accordance with GAAP consistently applied;
3.9.3 a summary description of the liability together with the
following:
3.9.3.1 copies of all relevant documentation relating to
litigation, arbitration or demand letters;
3.9.3.2 amounts claimed and any other action or relief
sought;
3.9.3.3 name of claimant and all other parties to the
claim, suit or proceeding;
3.9.3.4 the name of each court or agency before which
such claim, suit or proceeding is pending; and
3.9.3.5 the date such claim, suit or proceeding was
instituted.
3.10 Accounts and Notes Receivable. Schedule 3.10 of the Disclosure
Schedule contains an accurate list of the accounts and notes
receivable of the COMPANY, including the COMPANY's Subsidiaries, as
of the Balance Sheet Date, including any such amounts which are not
reflected in the balance sheet as of the Balance Sheet Date, and
including receivables from and advances to employees and the
Stockholder. Such accounts and notes are collectible in the amount
shown on Schedule 3.10, net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
3.11 Permits and Intangibles. The COMPANY and the COMPANY's Subsidiaries
holds all valid licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle
titles and current registrations), fuel permits, trademarks, trade
names, patents, patent applications and copyrights, the absence of
any of which would have a Material Adverse Effect. Schedule 3.11 of
the Disclosure Schedule contains an accurate list and summary
description of all such licenses, franchises, permits and other
governmental authorizations, provided that copyrights need not be
listed unless registered. The COMPANY and the COMPANY's Subsidiaries
have conducted and are conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in
applicable permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing except
where such non-compliance or violation would not have a Material
Adverse Effect. The transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a
Material Adverse Effect upon the rights and benefits afforded to the
COMPANY and the COMPANY's Subsidiaries by, any such licenses,
franchises, permits or government authorizations.
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3.12 Environmental Matters. The COMPANY and the COMPANY's Subsidiaries
have complied with and are in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees
applicable to any of them or any of their respective properties,
assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to protection of the air,
water or land or to the generation, storage, use, handling,
transportation, treatment or disposal of solid wastes, hazardous
wastes or hazardous substances (as such terms are defined in any
applicable Environmental Law). The COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits
and other approvals necessary to treat, transport, store, dispose of
or otherwise handle solid wastes, hazardous wastes or hazardous
substances and have reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by
the COMPANY or any of the COMPANY's Subsidiaries where solid wastes,
hazardous wastes or hazardous substances have been treated, stored,
used, disposed of or otherwise handled. There have been no releases,
as defined in Environmental Laws at, from, under, in or on any
property owned or operated by the COMPANY or any of the COMPANY's
Subsidiaries except as permitted by Environmental Laws. There is no
on-site or off-site location to which the COMPANY or any of the
COMPANY's Subsidiaries has transported or disposed of solid wastes,
hazardous wastes or hazardous substances or arranged for the
transportation of solid wastes, hazardous wastes or hazardous
substances, which site is the subject of any federal, state, local or
foreign enforcement action or any other investigation which could
lead to any claim against the COMPANY, any of the COMPANY's
Subsidiaries or ATOW and/or ATOWSUB for any clean-up cost, remedial
work, damage to natural resources or personal injury, including, but
not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended. To the
Knowledge of the COMPANY the COMPANY has no contingent liability in
connection with any release of any solid waste, hazardous waste or
hazardous substance into the environment. Schedule 3.12 of the
Disclosure Schedule lists all releases of hazardous wastes or
hazardous substances by the COMPANY.
3.13 Real and Personal Property. Schedule 3.13 (a), (b), and (c) of the
Disclosure Schedule contains an accurate list of (a) all real and
personal property included (or that will be included) on the balance
sheet of the COMPANY, (b) all other real and personal property of the
COMPANY including the COMPANY's Subsidiaries with a value in excess
of $500 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date, and (c) all leases for real and personal property
to which the COMPANY or any of its subsidiaries is a party involving
real or personal property having a value in excess of $500, including
in the case of (c) true copies of all such leases and including in
all cases an indication as to which real and personal property is
currently owned, or was formerly owned, by Stockholder or business or
personal affiliates of the COMPANY or Stockholder. All of the trucks
and other material machinery and equipment of the COMPANY and the
COMPANY's Subsidiaries listed on Schedules 3.13(a) and (b) are in
good working order and condition, ordinary wear and tear excepted.
All leases set forth on Schedule 3.13(c) are in full force and effect
and constitute valid and binding agreements on the COMPANY or a
COMPANY Subsidiary, as applicable, and to the knowledge of the
COMPANY, constitute valid and binding agreements on the other parties
thereto (and their successors) thereto in accordance with their
respective terms. All fixed assets used by the COMPANY and the
COMPANY's Subsidiaries that are material to the operation of their
respective businesses are either owned by the COMPANY or the
COMPANY's Subsidiaries or leased under an agreement indicated on
Schedule 3.13(c). Schedule 3.13 shall, without limitation, contain
true copies of all title reports and title insurance policies
received or owned by the COMPANY or the COMPANY's Subsidiaries.
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3.14 Significant Customers, Material Contracts and Commitments. Schedule
3.14 of the Disclosure Schedule contains an accurate list of (i)
those customers representing five percent (5%) or more of the
COMPANY's revenues for the 12 months ended on the Balance Sheet Date,
or who have paid to the COMPANY $10,000.00 or more over any four
consecutive fiscal quarters in the three years ended on the Balance
Sheet Date (the "Significant Customers") and (ii) all contracts
requiring payment or performance by the COMPANY or any COMPANY
Subsidiary in an amount or with a value in excess of $25,000.00
("Material Contracts") to which the COMPANY or any of its
Subsidiaries is a party or by which any of them or any of their
respective properties are bound (a) as of the Balance Sheet Date and
(b) entered into since the Balance Sheet Date, and in each case has
delivered true copies of such agreements to ATOW. None of the
COMPANY's including the COMPANY's Subsidiaries significant customers
has cancelled or substantially reduced or, is currently attempting or
threatening to cancel any Material Contract or substantially reduce
utilization of the services provided by the COMPANY including the
COMPANY's Subsidiaries, and the COMPANY and the COMPANY's
Subsidiaries have complied with all material commitments and
obligations pertaining to any Material Contract, and are not in
default under any such Material Contract, and no notice of default
has been received either orally or in writing. The COMPANY and the
COMPANY's Subsidiaries have not been the subject of any election in
respect of union representation of employees and are not bound by or
subject to (and none of its respective assets or properties is bound
by or subject to) any arrangement with any labor union. No employees
of the COMPANY or its Subsidiaries are represented by any labor union
or covered by any collective bargaining agreement and no campaign to
establish such representation has ever occurred or is in progress.
There is no pending or, to the COMPANY's knowledge, threatened labor
dispute involving the COMPANY (including the COMPANY's Subsidiaries)
and any group of its employees, nor has the COMPANY including the
COMPANY's Subsidiaries experienced any labor interruptions over the
past three years, and the COMPANY considers its relationship with
employees to be good.
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3.15 Insurance. Schedule 3.15 of the Disclosure Schedule contains an
accurate list as of the Balance Sheet Date of all insurance policies
carried by the COMPANY including the COMPANY's Subsidiaries and, has
delivered to ATOW an accurate list, attached to Schedule 3.15, of all
insurance loss runs or worker's compensation claims received for the
past three (3) policy years. Also attached to Schedule 3.15 are true
copies of all policies currently in effect. Such insurance policies
are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the
COMPANY including any of the COMPANY's Subsidiaries has ever been
cancelled by the insurance COMPANY, and the COMPANY including such
COMPANY's Subsidiaries has never submitted a written application for
insurance and been denied coverage.
3.16 Compensation; Employment Agreements. Schedule 3.16 of the Disclosure
Schedule contains an accurate list showing all officers, directors
and key managers of the COMPANY, including the COMPANY's
Subsidiaries, listing all employment agreements with such officers,
directors and key managers and the rate of compensation (and the
portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of (i) the
Balance Sheet Date and (ii) the Closing Date. The COMPANY has
provided to ATOW true copies of any employment agreements for persons
listed on Schedule 3.16. Since the Balance Sheet Date there have been
no increases in the compensation payable or any special bonuses to
any officer, director or key manager.
3.17 Employee Benefits.
3.17.1 Plans. Section 3.17 of the Disclosure Schedule lists each
Employee Benefit or health and welfare plan that the
COMPANY maintains or to which the COMPANY contributes.
3.17.2 Compliance. Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in
form and in operation in all material respects with its
terms and with the applicable requirements of ERISA, the
Code, and other applicable laws.
3.17.3 Reports and Descriptions. All required reports and
descriptions (including Form 5500 Annual Reports, Summary
Annual Reports, PBGC-1's, and Summary Plan Descriptions)
have been filed or distributed appropriately with respect
to each such Employee Benefit Plan. The requirements of
Part 6 of Subtitle B of Title I of ERISA and of Code
Section 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
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3.17.4 Contributions. All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any pay period ending on or before the
Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the
COMPANY. All premiums or other payments due for all
periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
3.17.5 Qualified Plan. Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan and is intended to meet
the requirements of a "qualified plan" under Code Section
401(a) meets such requirements and has received, within
the last two (2) years, a favorable determination letter
from the IRS.
3.17.6 Market Value. The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan) equals or exceeds
the present value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for determination.
3.17.7 Copies. The Stockholder have delivered to ATOW and ATOWSUB
materially correct and complete copies of the plan
documents and summary plan descriptions, the most recent
determination letter received from the IRS, the most
recent Form 5500 Annual Report, and all related trust
agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit
Plan.
3.17.8 Maintenance of Plans. With respect to each Employee
Benefit Plan that the COMPANY maintains, ever has
maintained, or to which it contributes, ever has
contributed, or ever has been required to contribute:
3.17.8.1 No such Employee Benefit Plan which is an
Employee Pension Benefit Plan has been
completely or partially terminated or been
the subject of a Reportable Event as to
which notices would be required to be filed
with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit
Plan has been instituted or, threatened; and
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3.17.8.2 There have been no Prohibited Transactions
with respect to any such Employee Benefit
Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other
failure to act or comply in connection with
the administration or investment of the
assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or
investigation with respect to the
administration or the investment of the
assets of any such Employee Benefit Plan
(other than any Multiemployer Plan), other
than routine claims for benefits, is pending
or threatened. The COMPANY has no Knowledge
of any basis for any such action, suit,
proceeding, hearing, or investigation.
3.18 Conformity with Law. The COMPANY including the COMPANY's Subsidiaries
is not in violation of any law or regulation or any order of any
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having
jurisdiction over any of them which would have a Material Adverse
Effect; and except to the extent set forth in Schedule 3.18 of the
Disclosure Schedule, there are no claims, actions, suits or
proceedings pending or, to the Knowledge of the COMPANY, threatened,
against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over any of
them which would have a Material Adverse Effect, and no notice of any
such claim, action, suit or proceeding, whether pending or
threatened, has been received. The COMPANY including all of the
COMPANY's Subsidiaries has conducted and is conducting its business
in compliance with the requirements, standards, criteria and
conditions set forth in applicable federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations and
is not in violation of any of the foregoing which would have a
Material Adverse Effect.
3.19 Tax Matters.
3.19.1 Tax Returns. The COMPANY has either filed all Tax Returns
it was required to file or has obtained extensions of the
due dates for such Tax Returns. All such Tax Returns were
correct and complete in all material respects and were
filed on a timely basis. All Taxes owed by the COMPANY
(whether or not shown on any Tax Return) have been paid.
The COMPANY currently is not the beneficiary of any
extension of time within which to file any Tax Return. No
claim is currently pending by an authority in a
jurisdiction where the COMPANY is or may be subject to
taxation by that jurisdiction. There are no Security
Interests on any of the assets of the COMPANY that arose
in connection with any failure (or alleged failure) to pay
any Tax.
3.19.2 Withholding. The COMPANY has withheld and paid all Taxes
required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
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3.19.3 No Disputes of Claims. No Stockholder or director or
officer (or employee responsible for Tax matters) of the
COMPANY expects any authority to assess any additional
Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax
Liability of the COMPANY either: (i) claimed or raised by
any authority in writing; or (ii) as to which any of the
Stockholder, directors and officers (and employees
responsible for Tax matters) of the COMPANY has Knowledge
based upon personal contact with any agent of such
authority. Schedule 3.19.3 of the Disclosure Schedule
lists all federal, state, local, and foreign Tax Returns
filed with respect to the COMPANY for taxable periods
since the incorporation of the COMPANY, indicates those
Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The
Stockholder have made available to ATOW and ATOWSUB
materially correct and complete copies of all Tax Returns,
examination reports, and statements of deficiencies
assessed against or agreed to by any of the COMPANY and
its Affiliates since the incorporation of the COMPANY.
3.19.4 No Waivers. The COMPANY 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.
3.19.5 No Special Circumstances. The COMPANY has not made any
payments, is not obligated to make any payments, nor is a
party to any agreement that under certain circumstances
could obligate it to make any payments that will not be
deductible under Code Section 280G. The COMPANY has not
been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section
897(c)(1)(A)(ii). The COMPANY has disclosed on its federal
income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal
income Tax within the meaning of Code Section 6662.
3.19.6 Powers of Attorney. Except as disclosed in Schedule 3.19.6
of the Disclosure Schedules the COMPANY has not executed
any power of attorney with respect to its being
represented in any matter before any tax authority.
3.19.7 Subchapter S. The COMPANY has elected, by the unanimous
consent of the Stockholder and is in compliance with all
applicable legal requirements, to be taxed under
Subchapter "S" of the Code and corresponding provisions
under any applicable state and local tax laws, such
elections are currently in full force and effect for the
COMPANY. No action has been taken by the COMPANY or any
Stockholder that may result in the revocation of any such
elections. The COMPANY has no "Subchapter C earnings and
profits" as defined in Section 1362(d) of the Code. The
COMPANY has no "net unrealized built-in gain" as such term
is defined in Sections 1374(d)(1) and 1374(d)(8) of the
Code. The COMPANY has no Liability for the payment of any
income Taxes under the Code or under Subchapter S of the
Code.
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3.19.8 Audits of Tax Returns. Except as set forth on Schedule
3.19.8 of the Disclosure Schedule, no Tax Return of the
COMPANY is currently under audit or examination by any
taxing authority, and the COMPANY has not received a
written notice stating the intention of any taxing
authority to conduct such an audit or examination by the
COMPANY. Each deficiency resulting from any audit or
examination relating to Taxes by any taxing authority has
been paid, except for deficiencies being contested in good
faith. The revenue agents' report related to any prior
audits and examinations are attached as part of Schedule
3.19.8 of the Disclosure Schedule.
3.19.9 Period of Assessment. There is no agreement or other
document extending, or having the effect of extending, the
period of assessment or collection of any Taxes.
3.19.10 Tax Agreements. The COMPANY is not a party to or bound by
any tax sharing agreement, tax indemnity obligation or
similar agreement with respect to Taxes (including any
advance pricing agreement, closing agreement or other
agreement relating to Taxes with any taxing authority).
3.19.11 Accounting Methods. There are no accounting method changes
or proposed accounting method changes that could give rise
to an adjustment after the Closing Date. The COMPANY will
not be required to include in a taxable period ending
after the Closing Date taxable income attributable to
income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract
method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481
of the Code with respect to a change in method of
accounting occurring before the Closing Date or comparable
provisions of state, local or foreign tax law.
3.19.12 Consents. The COMPANY has not filed a consent pursuant to
or agreed to the application of Section 341(f) of the
Code.
3.19.13 Personal Holding Company. The COMPANY has not, during the
five (5) year period ending on the Closing Date, been a
personal holding COMPANY within the meaning of Section 541
of the Code.
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3.19.14 Consolidated Tax Returns. The COMPANY has never filed or
been included in any combined or consolidated Tax return
with any other person or been a member of an affiliated
group filing a consolidated federal income Tax Return.
3.20 Absence of Changes. Since the Balance Sheet Date, there has not been
with respect to the COMPANY and the COMPANY's Subsidiaries:
3.20.1 any event or circumstance (either singly or in the
aggregate) which would constitute a Material Adverse
Effect;
3.20.2 any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any
options, warrants, calls, conversion rights or
commitments;
3.20.3 any declaration or payment of any dividend or distribution
in respect of its capital stock or any direct or indirect
redemption, purchase or other acquisition of any of its
capital stock, except any declaration of dividends payable
by any COMPANY Subsidiary to the COMPANY;
3.20.4 any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by it to
any of its respective officers, directors, stockholder,
employees, consultants or agents, except for ordinary and
customary bonuses and salary increases for employees
(other than the Stockholder) in accordance with past
practice;
3.20.5 any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character, nor
has the COMPANY entered into any collective bargaining
agreement that would have a Material Adverse Effect;
3.20.6 any distribution, sale or transfer, or any agreement to
sell or transfer any material assets, property or rights
of any of its respective business to any person,
including, without limitation, the Stockholder and their
affiliates, other than distributions, sales or transfers
in the ordinary course of business to persons other than
the Stockholder and their Affiliates;
3.20.7 any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to it, including without
limitation any indebtedness or obligation of any
Stockholder or any affiliate thereof, provided that it may
negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past
practice, provided, further, that such adjustments shall
not be deemed to be included in Schedule 3.20.7 of the
Disclosure Schedule unless specifically listed thereon;
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3.20.8 any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in
any of its assets, property or rights or requiring consent
of any party to the transfer and assignment of any such
assets, property or rights;
3.20.9 any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or
assets outside of the Ordinary Course of Business;
3.20.10 any waiver of any of its material rights or claims;
3.20.11 any transaction by it outside the ordinary course of their
respective businesses;
3.20.12 any change, modification, cancellation or termination of a
Material Contract;
3.20.13 any permitted the imposition of any security interest on
any of the COMPANY's assets, tangible or intangible;
3.20.14 any delay or postponement the payment of any Liability
outside the Ordinary Course of Business;
3.20.15 any material damage, destruction or loss (whether or not
covered by insurance) to its property;
3.20.16 any change made or authorized in the article or bylaws of
the COMPANY, other than as required herein;
3.20.17 any adoption, amendment, modification, or termination of
any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of
its directors, officers, and employees, or taken any such
action with respect to any other Employee Benefit Plan,
other than as contemplated herein;
3.20.18 any pledge to make any charitable contribution; or
3.20.19 any change in any method of accounting or accounting
principle, estimate or practice.
3.21 Deposit Accounts; Powers of Attorney. Schedule 3.21 of the
Disclosure Schedule contains an accurate list as of the date of the
Agreement, of:
3.21.1 the name of each financial institution in which the
COMPANY has accounts or safe deposit boxes;
3.21.2 the names in which the accounts or boxes are held;
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3.21.3 the type of account and account number; and
3.21.4 the name of each person authorized to draw thereon or have
access thereto.
Schedule 3.21 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms
of such power.
3.22 Representations and Warranties of Stockholder. Each Stockholder
jointly and severally represents and warrants that the
representations and warranties set forth below are true as of the
date of this Agreement shall be true on the Closing Date, and that
such representations and warranties as made on the Closing Date shall
survive said Closing Date.
3.23 Authority; Ownership. Such Stockholder has the full legal right,
power and authority to enter into this Agreement. Such Stockholder
owns beneficially and of record all of the shares of the COMPANY
stock identified on Annex I as being owned by such Stockholder, and,
except as set forth on Schedule 3.23 of the Disclosure Schedule, such
COMPANY Stock is owned free and clear of all liens, encumbrances and
claims of every kind.
3.24 Tax Status. None of the Stockholder are a "nonresident alien
individual" or "foreign corporation" for purposes of Code Section
897(a)(1).
3.25 Preemptive Rights. Such Stockholder does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or
ATOW Shares that such Stockholder has or may have had other than
rights of any Stockholder to acquire ATOW Shares pursuant to (i) this
Agreement or (ii) any option granted by ATOW.
4. REPRESENTATIONS OF ATOW AND ATOWSUB.
ATOW and its subsidiary ATOWSUB represent and warrant that all of the
following representations and warranties are true at the date of this
Agreement and shall be true at the time of the Closing Date and that such
representations and warranties shall survive the Closing Date.
4.1 Organization. ATOW is duly organized, validly existing and in good
standing under the laws of the State of Delaware. ATOWSUB is duly
organized and in good standing under the laws of the State of
Florida. Both are duly authorized and qualified under all applicable
laws, regulations, and ordinances of public authorities to carry on
their business in the places and in the manner as now conducted
except for where the failure to be so authorized or qualified would
not have a Material Adverse Effect.
4.2 ATOW Shares. The ATOW Shares to be delivered to the Stockholder on
the Closing Date shall constitute valid and legally issued shares of
ATOW, fully paid and nonassessable, and except as set forth in this
Agreement, will be owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind created by ATOW, and will be
legally equivalent in all respects to the ATOW Shares issued and
outstanding as of the date hereof. The ATOW Shares to be issued to
the Stockholder pursuant to this Agreement will not be registered
under the Securities Act.
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4.3 Validity of Obligations. The execution and delivery of this
Agreement, the Employment Agreements the Consulting Agreements and
the Leases by ATOW and ATOWSUB and the performance by ATOW and
ATOWSUB of the transactions contemplated herein or therein have been
or will be duly and validly authorized by the Boards of Directors of
ATOW and ATOWSUB, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and
validly authorized by all necessary corporate action, duly executed
and delivered and are or will be legal, valid and binding obligations
of ATOW and ATOWSUB, enforceable against ATOW and ATOWSUB in
accordance with their respective terms.
4.4 Authorization. The representatives of ATOW and ATOWSUB executing this
Agreement have the corporate authority to enter into and bind ATOW
and ATOWSUB to the terms of this Agreement. ATOW and ATOWSUB have the
full legal right, power and authority to enter into this Agreement
and the Merger.
4.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof
will not:
4.5.1 conflict with, or result in a breach or violation of, the
certificate of incorporation or bylaws of ATOW and
ATOWSUB;
4.5.2 materially conflict with, or result in a material default
(or would constitute a default but for any requirement of
notice or lapse of time or both) under any document,
agreement or other instrument to which ATOWSUB is a party,
or result in the creation or imposition of any lien,
charge or encumbrance on any of ATOWSUB's properties
pursuant to (i) any law or regulation to which ATOWSUB or
any of its property is subject, or (ii) any judgment,
order or decree to which ATOWSUB is bound or any of its
property is subject; or
4.5.3 result in termination or any impairment of any material
permit, license, franchise, contractual right or other
authorization of ATOWSUB.
4.6 Subsidiaries. ATOWSUB does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity
interest in any corporation, association or business entity. ATOWSUB
is not, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
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4.7 Conformity with Law. ATOW and ATOWSUB are not in violation of any law
or regulation or any order of any court or federal, state, municipal
or other governmental department, commission, board, bureau, agency
or instrumentality having jurisdiction over either of them which
would have a Material Adverse Effect. There are no claims, actions,
suits or proceedings, pending or, to the Knowledge of ATOWSUB,
threatened, against or affecting ATOWSUB, at law or in equity, or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim,
action, suit or proceeding, whether pending or threatened, has been
received. has conducted and is conducting its business in compliance
with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders,
approvals, variances, rules and regulations and is not in violation
of any of the foregoing which would have a Material Adverse Effect.
5. COVENANTS PRIOR TO CLOSING.
5.1 Access and Cooperation; Due Diligence. Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the
officers and authorized representatives of ATOW and ATOWSUB access to
all of the COMPANY's, including the COMPANY's Subsidiaries, key
employees, sites, properties, books and records and will furnish ATOW
with such additional financial and operating data and other
information as to the business and properties of the COMPANY,
including the COMPANY's Subsidiaries, as ATOW may from time to time
reasonably request. The COMPANY will cooperate with ATOW and ATOWSUB,
its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with
any documents or materials required by this Agreement. ATOW, ATOWSUB,
the Stockholder and the COMPANY will treat all information obtained
in connection with the negotiation and performance of this Agreement
or the due diligence investigations as confidential in accordance
with the provisions of Section 12 hereof.
5.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the
COMPANY's Subsidiaries to:
5.2.1 carry on its respective businesses in substantially the
same manner as it has heretofore and not introduce any
material new method of management, operation or
accounting;
5.2.2 maintain its respective properties and facilities,
including those held under leases, in as good working
order and condition as at present, ordinary wear and tear
excepted;
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5.2.3 perform all of its respective obligations under agreements
to which it is a party relating to or affecting its
respective assets, properties or rights;
5.2.4 subject to Section 5.6, keep in full force and effect
present insurance policies or other comparable insurance
coverage;
5.2.5 use best efforts to maintain and preserve its business
organization intact, retain its respective present
employees and maintain its respective relationships with
suppliers, customers and others having business relations
with it;
5.2.6 maintain compliance with all material permits, laws, rules
and regulations, consent orders, and all other orders of
applicable courts, regulatory agencies and similar
governmental authorities; and
5.2.7 maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or
lease instruments over $10,000.00, without the knowledge
and consent of ATOWSUB, which consent shall not be
unreasonably withheld.
5.3 Prohibited Activities. Between the date of this Agreement and the
Closing Date, the COMPANY has not and, without the prior written
consent of ATOWSUB, will not:
5.3.1 make any change in its articles of incorporation or
bylaws;
5.3.2 issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any
kind other than in connection with the exercise of options
or warrants listed on Schedule 5.3.2 of the Disclosure
Schedule;
5.3.3 declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding,
or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
5.3.4 enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to
incur any liability or make any capital expenditures,
except if (i) it is in the Ordinary Course of Business or
(i) when aggregated with all other such contracts,
commitments, liabilities and capital expenditures not in
the normal course of business consistent with past
practice, it involves an amount not in excess of
$10,000.00;
5.3.5 increase the compensation payable or to become payable to
any officer, director, Stockholder, employee or agent, or
make any bonus or management fee payment to any such
person, except (i) bonuses to employees (other than the
Stockholder or their affiliates) consistent with past
practice and (ii) increases in salaries and commissions
payable to employees (other than to Stockholder and their
affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level
higher than one hundred FIVE percent (105%) of such
employee's current salary or bonus, whichever is
applicable;
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5.3.6 create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties
whether now owned or hereafter acquired, except (i) with
respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost
not in excess of $15,000 necessary or desirable for the
conduct of the businesses of the COMPANY (including the
COMPANY's Subsidiaries), or (ii) liens set forth on
Schedule 5.3.6 of the Disclosure Schedule or (iii) liens
for taxes either not yet due or material men's,
mechanics', workers', repairmen's, employees' or other
like liens arising in the Ordinary Course of Business;
5.3.7 sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of
Business;
5.3.8 negotiate for the acquisition of any business or the
start-up of any new business;
5.3.9 merge or consolidate or agree to merge or consolidate with
or into any other corporation;
5.3.10 waive any material rights or claims of the COMPANY,
provided that the COMPANY may negotiate and adjust bills
in the course of good faith disputes with customers in a
manner consistent with past practice, provided, further,
that such adjustments shall not be deemed to be included
in Schedule 5.3.10 of the Disclosure Schedule unless
specifically listed thereon;
5.3.11 commit a material breach or amend or terminate any
Material Contract, or material permit, license or other
right of the COMPANY, or make or terminate any election
involving Taxes which would in any way adversely affect
the tax liability of the COMPANY or ATOWSUB following the
Merger in any taxable period; or
5.3.12 enter into any other transaction outside the Ordinary Course
of Business or prohibited hereunder.
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5.4 No Shop. None of the Stockholder, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative
of any of the foregoing will, during the period commencing on the
date of this Agreement and ending with the earlier to occur of the
Closing Date or the termination of this Agreement in accordance with
its terms, directly or indirectly:
5.4.1 solicit or initiate the submission of proposals or offers
from any person or,
5.4.2 participate in any discussions pertaining to; or
5.4.3 furnish any information to any person other than ATOW or
ATOWSUB relating to, any acquisition or purchase of all or
a material amount of the assets of, or any equity interest
in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
5.5 Notice to Bargaining Agents. The COMPANY shall satisfy any
requirement for notice of the transactions contemplated by this
Agreement under applicable collective bargaining agreements, and
shall provide ATOW with proof that any required notice has been sent.
5.6 Termination of Plans and Policies. The COMPANY shall terminate all
plans and policies listed in Schedule 5.6 of the Disclosure
Schedules.
5.7 Notification of Certain Matters.
5.7.1 The Stockholder and the COMPANY shall give prompt notice
to ATOW of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of the
COMPANY or the Stockholder contained herein to be untrue
or inaccurate in any material respect on or prior to the
Closing Date and (ii) any material failure of any
Stockholder or the COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by such person hereunder with respect to the
occurrence in the Ordinary Course of Business of any event
which would cause Schedules 3.11, 3.12 or 3.15 to be
incorrect.
5.7.2 ATOW and ATOWSUB shall give prompt notice to the COMPANY
of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to
cause any representation or warranty of ATOW and ATOWSUB
contained herein to be untrue or inaccurate in any
material respect at or prior to the Closing Date and (ii)
any material failure of ATOWSUB to comply with or satisfy
any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
5.7.3 The delivery of any notice pursuant to this Section 5.7
shall not be deemed to (i) modify the representations or
warranties hereunder of the Party delivering such notice,
which modification may only be made pursuant to Section
5.8; (ii) modify the conditions set forth in Sections 6
and 7; or (iii) limit or otherwise affect the remedies
available hereunder to the Party receiving such notice.
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5.8 Amendment of Schedules. Each Party hereto agrees that, with respect
to the representations and warranties of such Party contained in this
Agreement, such Party shall have the continuing obligation until the
Closing to supplement or amend promptly the Schedules hereto with
respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been
required to be set forth or described in the Disclosure Schedules,
provided however, that supplements and amendments to Schedules 3.11,
3.12 and shall only have to be delivered at the Closing, unless such
Disclosure Schedule is to be amended to reflect an event occurring
other than in the Ordinary Course of Business. In the event that the
COMPANY amends or supplements a Disclosure Schedule pursuant to this
Section 5.8, and ATOW does not consent to the effectiveness of such
amendment or supplement at or before the Closing, this Agreement
shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. In the event that ATOW amends or supplements a
Disclosure Schedule pursuant to this Section 5.8 and COMPANY does not
consent to the effectiveness of such amendment or supplement at or
before the Closing, this Agreement shall be deemed terminated by
mutual consent as set forth in Section 10.1.4 hereof. For all
purposes of this Agreement, including without limitation for purposes
of determining whether the conditions set forth in Sections 6.1 and
7.1 have been fulfilled, the Disclosure Schedules hereto shall be
deemed to be the Disclosure Schedules as amended or supplemented
pursuant to this Section 5.8. If ATOW and the COMPANY do not consent
to the effectiveness of such amendment or supplement at or before the
Closing, this Agreement shall be deemed terminated by mutual consent
as set forth in Section 10.1.4 hereof. For purposes of this Section
5.8, ATOW shall be deemed to have given its consent to the
effectiveness of any amendment or supplement to a Disclosure Schedule
if ATOW does not notify COMPANY of its disapproval within 3 business
days after ATOW is notified of such amendment or supplement, and
COMPANY shall be deemed to have given its consent to the
effectiveness of any amendment or supplement to a Disclosure Schedule
if COMPANY does not notify ATOW of its disapproval within 3 business
days after COMPANY is notified of such amendment or supplement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER AND COMPANY. The
obligations of the Stockholder and the COMPANY with respect to actions to
be taken on the Closing Date are subject to the satisfaction or waiver on
or prior to the Closing Date of the conditions set forth in Sections 6.1
and 6.5.
6.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of ATOW and ATOWSUB contained in
Section 6 shall be true and correct in all material respects as of
the Closing Date. Each and all of the terms, covenants and conditions
of this Agreement to be complied with and performed by ATOW and
ATOWSUB on or before the Closing Date shall have been duly complied
with and performed in all material respects; and a certificate to the
foregoing effect dated the Closing Date and signed by the President
or any Vice President of ATOW shall have been delivered to the
Stockholder.
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6.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all
other related legal matters shall be satisfactory to the COMPANY and
its counsel.
6.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of the COMPANY
as a result of which the management of the COMPANY deems it
inadvisable to proceed with the transactions hereunder.
6.4 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of
the transaction contemplated herein shall have been obtained and made
and no action or proceeding shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of COMPANY as a
result of which COMPANY deems it inadvisable to proceed with the
transactions hereunder.
6.5 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a ATOW or ATOWSUB Material Adverse
Effect; and the COMPANY shall have received a certificate signed by
ATOW dated the Closing Date.
6.6 Employment Agreements, Consulting Agreements and Leases. ATOW or
ATOWSUB shall have entered the Employment Agreements, Consulting
Agreements and Leases.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ATOW and ATOWSUB. The obligations of
ATOW and ATOWSUB with respect to actions to be taken on the Closing Date
are subject to the satisfaction or waiver on or prior to the Closing Date
of the conditions set forth in Sections 7.1 and 7.4.
7.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the Stockholder and the COMPANY
contained in this Agreement shall be true and correct in all material
respects as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date;
each and all of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Stockholder and the COMPANY
on or before the Closing Date shall have been duly performed or
complied with in all material respects; and the Stockholder shall
have delivered to ATOW a certificate dated the Closing Date and
signed by them to such effect.
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7.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of ATOW or
ATOWSUB as a result of which the management of ATOW deems it
inadvisable to proceed with the transactions hereunder.
7.3 Examination of Final Financial Statements. Prior to the Closing Date,
ATOW shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY for the fiscal quarters
beginning after the Balance Sheet Date, and the unaudited
consolidated combined statement of income, cash flows and retained
earnings of the COMPANY for the fiscal quarters beginning after the
Balance Sheet Date, disclosing no Material Adverse Change in the
combined financial condition of the COMPANY or the results of their
operations from the financial statements as of the Balance Sheet
Date.
7.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and ATOW
shall have received a certificate signed by the Stockholder dated
prior to the Closing Date to such effect.
7.5 Stockholder' Release. The Stockholder shall have delivered to ATOW
immediately prior to the Closing Date an instrument releasing the
COMPANY from any and all claims of the Stockholder against the
COMPANY and obligations of the COMPANY to the Stockholder except for
the loan from Helen Hohn to the Company and accrued payroll.
7.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement
or incidental hereto and all other related legal matters shall have
been approved by counsel to ATOW.
7.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the Stockholder or business or personal
affiliates of the COMPANY or Stockholder, other than those set forth
on Schedule 7.7 of the Disclosure Schedules shall have been
cancelled.
7.8 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of
the transactions contemplated herein shall have been obtained and
made; the COMPANY shall have obtained and delivered to ATOW such
additional consents to the Merger as ATOW may reasonably request
including, without limitation, ATOW's receipt on or prior to the
Closing Date of those licenses, franchises, permits or governmental
authorizations set forth on Schedule 3.11 of the Disclosure Schedules
pursuant to Section 3.11, or assurances reasonably acceptable to it
that such licenses, franchises, permits or governmental
authorizations will be received on the Closing Date or that the
failure to receive such licenses, franchises, permits or governmental
authorizations on the Closing Date will not adversely affect its
ability to conduct the business of the COMPANY as conducted prior to
the Closing Date; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the Merger and no
governmental agency or body shall have taken any other action or made
any request of ATOW or ATOWSUB as a result of which ATOW deems it
inadvisable to proceed with the transactions hereunder.
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7.9 Good Standing Certificates. The COMPANY shall have delivered to ATOW
a certificate, dated as of a date no later than five (5) days prior
to the Closing Date, duly issued by the appropriate governmental
authority in the COMPANY's state of incorporation and, unless waived
by ATOW, in each state in which the COMPANY is authorized to do
business, showing the COMPANY is in good standing and authorized to
do business and that all state franchise and/or income Tax Returns
and Taxes due by the COMPANY for all periods prior to the Closing
have been filed and paid.
7.10 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 7.10(a) of the Disclosure Schedule shall
have entered into an employment agreement with ATOWSUB substantially
in the form of Exhibit 7.10(a) (each an "Employment Agreement"), each
of person listed on Schedule 7.10(b) shall have entered into a
consulting agreement with ATOWSUB substantially in the form of
Exhibit 7.10(b) (each a "Consulting Agreement"), and each of the
Stockholder listed on Schedule 7.10(c) shall have entered into leases
with ATOWSUB substantially in the form attached Exhibit 7.10(c)
(collectively the "Leases").
7.11 Repayment of Indebtedness. Prior to the Closing Date, the Stockholder
shall have repaid the COMPANY, including the COMPANY's Subsidiaries,
in full all amounts owing by the Stockholder to the COMPANY,
including the COMPANY's Subsidiaries.
7.12 Insurance. ATOW and ATOWSUB shall be named as additional named
insured on, or alternatively the insurer shall have been notified of
the Merger and shall have confirmed in writing that the Surviving
Corporation will be an insured under, each of the COMPANY's insurance
policies.
8. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
8.1 Tax Returns. The Stockholder shall be responsible for preparing and
filing all income or franchise Tax Returns of the COMPANY relating to
periods of time prior to the Closing Date. ATOWSUB will be
responsible for preparing and filing all income and franchise Tax
Returns of the COMPANY relating to periods after the Closing. After
the Closing, ATOWSUB will provide, or cause to be provided, to the
Stockholder, without charge, any information that may reasonably be
requested by the Stockholder in connection with the preparation of
any Tax Returns relating to the time period prior to the Closing
Date. The Stockholder will provide ATOWSUB and ATOW with an
opportunity to review and comment on such Tax Returns (including any
amended returns). The Stockholder will take no positions on the Tax
Returns of the COMPANY that relate to the tax period prior to the
Closing Date that could adversely affect the COMPANY after the
Closing. The income of the COMPANY will be apportioned to the period
up to the Closing Date and the period from and after the Closing Date
in accordance with the provisions of Section 1362(e)(6)(D) of the
Code by closing the books of the COMPANY as of the close of business
on the last calendar day immediately preceding the Closing Date.
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8.2 Release from Guarantees. ATOW shall use its best efforts to have the
Stockholder released from any and all guarantees on any obligations
of the COMPANY that they personally guaranteed for the benefit of the
COMPANY (including the COMPANY's Subsidiaries), with all such
guarantees on indebtedness being assumed by ATOWSUB. ATOWSUB and ATOW
agrees to indemnify the Stockholder against any and all claims made
by lenders under such guarantee which arise as a result of ATOWSUB's
failure to cause such guarantee to be released on or prior to the
Closing Date.
8.3 Within 30 days of Closing, Helen Hohn shall be repaid a loan made by
her to the Company.
9. INDEMNIFICATION.
The Stockholder and ATOWSUB each make the following covenants that are
applicable to them, respectively:
9.1 General Indemnification by the Stockholder. The Stockholder
covenant and agree that they, jointly and severally will indemnify,
defend, protect and hold harmless ATOWSUB, the COMPANY and the
Surviving Corporation at all times from and after the date of this
Agreement from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by ATOWSUB,
the COMPANY or the Surviving Corporation as a result of or arising
from (i) any breach of the representations and warranties of the
Stockholder or the COMPANY set forth herein or on the schedules,
exhibits or certificates delivered in connection herewith or (ii)
any nonfulfillment of any agreement on the part of the Stockholder
or the COMPANY under this Agreement.
9.2 Indemnification by ATOWSUB and ATOW. ATOWSUB and ATOW covenants and
agrees that it will indemnify, defend, protect and hold harmless the
COMPANY and the Stockholder at all times from and after the date of
this Agreement from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by the
COMPANY and the Stockholder as a result of or arising from (i) any
breach by ATOWSUB of its representations and warranties set forth
herein or on the schedules, exhibits or certificates delivered
herewith; (ii) any nonfulfillment of any agreement on the part of
ATOWSUB under this Agreement; (iii) any liabilities which the COMPANY
or the Stockholder may incur due to ATOWSUB's failure to be
responsible for the liabilities and obligations of the COMPANY
(except to the extent that ATOWSUB has claims against the Stockholder
by reason of such liabilities).
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9.3 Third Person Claims. If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
the other Party (the "Indemnifying Party") under this Section 9, then
the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of
the Indemnified Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
9.3.1 Defense by Indemnifying Party. The Indemnifying Party will
have the right to defend the Indemnified Party against the
Third Party Claim with counsel of its choice satisfactory
to the Indemnified Party so long as: (i) the Indemnifying
Party notifies the Indemnified Party in writing within
five (5) business days after the Indemnified Party has
given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party
from and against any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim;
(ii) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and
fulfill the Indemnifying Party's indemnification
obligations hereunder; (iii) the Third Party Claim
involves only money damages and does not seek an
injunction or other equitable relief; (iv) settlement of,
or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential
custom of practice adverse to the continuing business
interests of the Indemnified Party; and (v) the
Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
9.3.2 Settlement. So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in
accordance with Section 9.3.1: (i) the Indemnified Party
may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party
Claim; (ii) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld or
delayed unreasonably); and (iii) the Indemnifying Party
will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party
(not to be withheld or delayed unreasonably) and any such
settlement must include a complete release of the
Indemnified Party.
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9.3.3 Conditions. In the event any of the conditions in Section
9.3.1 is or becomes unsatisfied, however: (i) the
Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith); (ii) the
Indemnifying Parties will reimburse the Indemnified Party
promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable
attorneys' fees and expenses); and (iii) the Indemnifying
Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 9.
9.4 Exclusive Remedy. The indemnification provided for in this Section 9
shall be the exclusive remedy in any action seeking damages or any
other form of monetary relief brought by any party to this Agreement
against another party, provided that nothing herein shall be
construed to limit the right of a party, in a proper case, to seek
injunctive relief for a breach of this Agreement.
9.5 Minimum Indemnification. ATOW and ATOWSUB shall not be entitled to
any indemnification pursuant to Section 9.1, and the Stockholder
shall not be entitled to any indemnification pursuant to Section 9.2,
unless the Adverse Consequences, which occur or are incurred by the
applicable Party, exceed, in the aggregate, [THIRTY THOUSAND AND
NO/100 DOLLARS ($30,000.00)]; provided, however, if such sum does
exceed [THIRTY THOUSAND AND NO/100 DOLLARS ($30,000.00)], the amount
of the indemnification shall include such [THIRTY THOUSAND AND NO/100
DOLLARS ($30,000.00)].
9.6 Special Contest Rights Related to Tax Matters. The Stockholder shall
have the sole right (but not the obligation) to control, defend,
settle, compromise or prosecute in any manner any audit, examination,
investigation, hearing or other proceeding with respect to any Tax
Return of the COMPANY involving only periods prior to the Closing.
The Stockholder shall not agree to compromise or settle any
proceeding with respect to any Tax Return of the COMPANY which will
impact any period subsequent to the Closing without the consent of
ATOW. Except as expressly provided to the contrary in this Section
9.6, ATOWSUB shall have the sole right (but not the obligation) to
control, defend, settle, compromise, or prosecute in any manner an
audit, examination, investigation, hearing or other proceeding with
respect to any Tax Return of the COMPANY.
9.7 Special Notification Requirements Regarding Tax Disputes. ATOWSUB and
the COMPANY shall promptly forward to the Stockholder all written
notifications and other written communications from any tax authority
received by ATOWSUB or the COMPANY relating solely to any periods
prior to the Closing of the COMPANY, and ATOWSUB and the COMPANY
shall execute or cause to be executed any power of attorney or other
document or take such actions as requested by the Stockholder to
enable the Stockholder to take any action Stockholder deem
appropriate with respect to any proceedings relating thereto.
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9.8 Refunds. A Party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another
party shall immediately pay an amount equal to such refund, credit,
offset or benefit (including any interest thereon) to the party that
effectively paid the Tax with respect to which the refund, credit,
offset or benefit relates. A Party entitled to a deduction on account
of a Tax effectively paid by another party shall pay an amount equal
to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which
such deduction relates, such amount to be paid immediately after such
saving is realized.
9.9 Optional Payment With Shares. Any Stockholder may make any payment to
ATOW required by this Section 9 by tendering shares of ATOW Shares
obtained by such Stockholder pursuant to Section 2 of this Agreement,
with shares so tendered being valued at fair market value on the
trading day prior to the day the indemnification obligation is paid.
No Stockholder will be entitled to make payment with any other shares
of ATOW Shares.
10. TERMINATION OF AGREEMENT.
10.1 This Agreement may be terminated and the transactions herein
contemplated may be abandoned at any time prior to the Closing,
without liability to either Party unless termination occurs as a
result of a breach of a representation or warranty:
10.1.1 by mutual consent of the boards of directors of ATOW,
ATOWSUB and the COMPANY;
10.1.2 at or before the Closing, by the Stockholder or COMPANY,
on the one hand, or by ATOW, ATOWSUB, on the other hand,
if the Closing has not been completed by July 31, 1999,
time being of the essence, unless the failure of such
completion is due to the willful failure of the Party
seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to
be performed by it prior to or on the Closing Date;
10.1.3 at or before the Closing, by the Stockholder or COMPANY,
on the one hand, or by ATOW, ATOWSUB, on the other hand,
if a material breach or default shall be made by the other
in the observance or in the due and timely performance of
any of the covenants, agreements or conditions contained
herein, and such default shall not have been cured and
shall not reasonably be expected to be cured on or before
the Closing Date;
10.1.4 at or before the Closing, pursuant to Section 5.8.
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11. NONCOMPETITION.
11.1 Prohibited Activities. The Stockholder shall enter into a non-
competition agreement which shall be in the form attached as
Exhibit 11 A.
11.2 Damages. Because of the difficulty of measuring economic losses to
ATOW or ATOWSUB as a result of a breach of the foregoing covenant,
and because of the immediate and irreparable damage that could be
caused to ATOW and/or ATOWSUB for which it would have no other
adequate remedy, each Stockholder agrees that the foregoing covenant
may be enforced by ATOW or ATOWSUB, in the event of breach by such
Stockholder, by injunctions and restraining orders.
11.3 Reasonable Restraint. It is agreed by the Parties hereto that the
foregoing covenants in this Section 11 impose a reasonable restraint
on the Stockholder in light of the activities and business of ATOWSUB
on the date of the execution of this Agreement and the current plans
of ATOW and ATOWSUB; but it is also the intent of ATOW, ATOWSUB and
the Stockholder that such covenants be construed and enforced in
accordance with the changing activities and business of ATOWSUB
throughout the term of this covenant.
It is further agreed by the Parties hereto that, in the event that
any Stockholder who has entered into an Employment Agreement shall
thereafter cease to be employed thereunder, and such Stockholder
shall enter into a business or pursue other activities not in
competition with ATOWSUB and/or any subsidiary thereof, or similar
activities or business in locations the operation of which, under
such circumstances, does not violate clause Section 11.1.1 , and in
any event such new business, activities or location are not in
violation of this Section 11 or of such Stockholder's obligations
under this Section 11, if any, such Stockholder shall not be
chargeable with a violation of this Section 11 if ATOW or ATOWSUB
shall thereafter enter the same, similar or a competitive (i)
business, (ii) course of activities or (iii) location, as applicable.
11.4 Severability; Reformation. The covenants in this Section 11 are
severable and separate, and the unenforceability of any specific
covenant shall not affect the provisions of any other covenant.
Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth
are unreasonable, then it is the intention of the Parties that such
restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
11.5 Independent Covenant. All of the covenants in this Section 11 shall
be construed as an agreement independent of any other provision in
this Agreement, and the existence of any claim or cause of action of
any Stockholder against ATOWSUB whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by
ATOWSUB of such covenants. It is specifically agreed that the period
of five (5) years stated at the beginning of this Section 11, during
which the agreements and covenants of each Stockholder made in this
Section 11 shall be effective, shall be computed by excluding from
such computation any time during which such Stockholder is in
violation of any provision of this Section 11. The covenants
contained in this Section 11 shall not be affected by any breach of
any other provision hereof by any Party hereto, except that upon
ATOWSUB's admission in writing, or a final judicial determination
which is not the subject of appeal or further appeal by ATOWSUB, that
ATOWSUB has materially breached a Stockholder's Employment Agreement
(if applicable), and ATOWSUB's failure to cure such material breach
within 30 days of such admission or final judicial determination,
whichever is applicable, then the covenants contained in this Section
11 with respect to such Stockholder will expire. The covenants
contained in this Section 11 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
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11.6 Materiality. The COMPANY and the Stockholder hereby agree that this
covenant is a material and substantial part of this transaction.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
12.1 Stockholder. The Stockholder recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have,
access to certain confidential information of the COMPANY, ATOW
and/or ATOWSUB, such as lists of customers, operational policies, and
pricing and cost policies that are valuable, special and unique
assets of the COMPANY's, ATOW's and/or ATOWSUB's respective
businesses. The Stockholder agree that they will not disclose such
confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of ATOWSUB, (b) following
the Closing Date, as required in the course of performing their
duties for ATOWSUB, and (c) to counsel and other advisers, provided
that such advisers (other than counsel) agree to the confidentiality
provisions of this Section 12.1; provided, further, that confidential
information shall not include (i) such information which becomes
known to the public generally through no fault of the Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority, provided that prior to disclosing any
information pursuant to this clause (ii), the Stockholder shall, if
possible, give prior written notice thereof to ATOWSUB and provide
ATOWSUB with the opportunity to contest such disclosure, or (iii) the
disclosing Party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing
Party. In the event of a breach or threatened breach by any of the
Stockholder of the provisions of this section, ATOW and ATOWSUB shall
be entitled to an injunction restraining such Stockholder from
disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting ATOW and ATOWSUB
from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
12.2 ATOW and ATOWSUB. ATOW and ATOWSUB recognize and acknowledge that it
had in the past and currently has access to certain confidential
information of the COMPANY, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special
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and unique assets of the COMPANY's business. ATOW and ATOWSUB agree
that, prior to the Closing, they will not disclose such confidential
information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except (a) to authorized
representatives of the COMPANY, (b) to counsel and other advisers,
provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 12.2, unless (i) such
information becomes known to the public generally through no fault of
ATOW or ATOWSUB (ii) disclosure is required by law or the order of
any governmental authority, provided that prior to disclosing any
information pursuant to this clause (ii), ATOW and ATOWSUB shall, if
possible, give prior written notice thereof to the COMPANY and the
Stockholder and provide the COMPANY and the Stockholder with the
opportunity to contest such disclosure, or (iii) the disclosing Party
reasonably believes that such disclosure is required in connection
with the defense of a lawsuit against the disclosing Party. Upon
termination of this Agreement prior to the Closing Date for any
reason other than the material breach or default of any Stockholder
or COMPANY, ATOW and ATOWSUB will return to COMPANY all documents
containing confidential information of COMPANY that were provided to
ATOW or ATOWSUB by COMPANY or Stockholder and all summaries,
abstractions, projections, pro formas or like material prepared by
ATOW or ATOWSUB incorporating such confidential information. In the
event of a breach or threatened breach by ATOW or ATOWSUB of the
provisions of this section, the COMPANY and the Stockholder shall be
entitled to an injunction restraining ATOW and ATOWSUB from
disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting the COMPANY and the
Stockholder from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
12.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 12.1 and
12.2, and because of the immediate and irreparable damage that would
be caused for which they would have no other adequate remedy, the
Parties hereto agree that, in the event of a breach by any of them of
the foregoing covenants, the covenant may be enforced against the
other parties by injunctions and restraining orders.
12.4 Survival. The obligations of the Parties under this Article 12 shall
survive the termination of this Agreement.
13. TRANSFER RESTRICTIONS.
13.1 Transfer Restrictions. Except for transfers as set forth in Section
13.2 below to persons or entities who agree to be bound by the
restrictions set forth in this Section 13.1, for a period of one year
from the Closing Date none of the Stockholder shall (i) sell, assign,
exchange, transfer, encumber, pledge, distribute, appoint, or
otherwise dispose of (a) any ATOW Shares received by the Stockholder
in the Merger, or (b) any interest (including, without limitation, an
option to buy or sell) in any such ATOW Shares, in whole or in part,
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and no such attempted transfer shall be treated as effective for any
purpose; or (ii) engage in any transaction, whether or not with
respect to any ATOW Shares or any interest therein, the intent or
effect of which is to reduce the risk of owning the ATOW Shares
acquired pursuant to Section 2 hereof (including, by way of example
and not limitation, engaging in put, call, short-sale, straddle or
similar market transactions). The certificates evidencing the ATOW
Shares delivered to the Stockholder pursuant to Section 2 of this
Agreement will bear a legend substantially in the form set forth
below and containing such other information as ATOW may deem
necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [insert the first
anniversary of the Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
13.2 Permitted Transferees. Notwithstanding the provisions of Section
13.1, a Stockholder shall have the right to transfer some or all of
the ATOW shares to any one or more of the following, provided that
the transferee agrees to be bound (in a form satisfactory to ATOW and
its counsel) by the terms and conditions of this Agreement with
respect to any further transfer of such shares: (i) any family member
of a Stockholder (including, without limitation, any transfer to a
custodian under any gift to minors statute), with family members
being defined as any spouse, lineal descendant or ancestor of a
Stockholder), (ii) any trust which is for the benefit of one or more
family members of a Stockholder and (iii) any corporation,
partnership, limited liability company or other entity (a) of which a
majority of the interests therein by value is owned by the
Stockholder and members of the Stockholder's family, and (b) which is
and continues to be controlled by the Stockholder and members of the
Stockholder's family for the period set forth in Section 13.1.
14. FEDERAL SECURITIES ACT REPRESENTATIONS.
The Stockholder acknowledge that the ATOW Shares to be delivered to the
Stockholder pursuant to this Agreement have not been and will not be
registered under the Securities Act and therefore may not be resold without
compliance with the Securities Act. The ATOW Shares to be acquired by such
Stockholder pursuant to this Agreement is being acquired solely for their
own respective accounts, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
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14.1 Compliance with Law. The Stockholder covenant, warrant and represent
that none of the ATOW Shares issued to such Stockholder will be
offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of except after full compliance with all of the
applicable provisions of the Securities Act and the rules and
regulations of the Commission. All the ATOW Shares shall bear the
following legend in addition to the legend required under Section 13
of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THE 1933 ACT AND APPLICABLE SECURITIES
LAWS.
14.2 Accredited Investors; Economic Risk; Sophistication. Each Stockholder
represents and warrants that such Stockholder is an "accredited
investor," as that term is defined in Regulation D promulgated by the
Commission under the Securities Act. The Stockholder are able to bear
the economic risk of an investment in the ATOW Shares acquired
pursuant to this Agreement and can afford to sustain a total loss of
such investment and have such knowledge and experience in financial
and business matters that they are capable of evaluating the merits
and risks of the proposed investment in the ATOW Shares. The
Stockholder or their respective purchaser representatives have had an
adequate opportunity to ask questions and receive answers from the
officers of ATOW and ATOWSUB concerning any and all matters relating
to the transactions described herein including, without limitation,
the background and experience of the current and proposed officers
and directors of ATOW and ATOWSUB, the plans for the operations of
the business of ATOW and ATOWSUB, the business, operations and
financial condition of the COMPANY, and any plans for additional
acquisitions and the like.
15. GENERAL.
15.1 Cooperation. The COMPANY, Stockholder, ATOW and ATOWSUB shall each
(i) attempt in good faith (without being required to incur
unreasonable expense) to cause all conditions to actions to be taken
on the Closing Date to be satisfied, and (ii) deliver or cause to be
delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional
instruments, and take such additional actions as can be taken without
unreasonable expense, as any other may reasonably request for the
purpose of carrying out this Agreement. The COMPANY will cooperate
and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with ATOWSUB on and
after the Closing Date in furnishing information, evidence, testimony
and other assistance in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
15.2 Successors and Assigns. This Agreement and the rights of the Parties
hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the Parties hereto,
the successors of ATOWSUB, and the heirs and legal representatives of
the Stockholder.
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15.3 Entire Agreement. This Agreement including the Disclosure Schedules,
Exhibits, Certificates and Annexes delivered herewith and the
documents delivered pursuant hereto constitute the entire agreement
and understanding among the Stockholder, the COMPANY, ATOW and
ATOWSUB and supersede any prior agreement and understanding relating
to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the Parties
hereto enforceable in accordance with its terms. Except as otherwise
stated herein, this Agreement, Disclosure Schedules, Exhibits,
Certificates and the Annexes hereto may be modified or amended only
by a written instrument executed by the Stockholder, the COMPANY,
ATOW and ATOWSUB, acting through their respective officers, duly
authorized by their respective Boards of Directors. Any disclosure
made on any schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other schedule required
hereby.
15.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original
and all of which together shall constitute but one and the same
instrument.
15.5 Brokers and Agents. Each Party represents and warrants that it
employed no broker or agent in connection with this transaction and
agrees to indemnify the other against all loss, cost, damages or
expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such Indemnifying Party.
15.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) ATOWSUB will pay the fees, expenses and
disbursements of ATOWSUB and its agents, representatives, accountants
and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto, including all costs and
expenses incurred in the performance and compliance with all
conditions to be performed by ATOWSUB under this Agreement, and (ii)
the Stockholder will pay from personal funds and not from COMPANY
funds, the fees, expenses and disbursements of their counsel and
accountants for the Stockholder and the COMPANY incurred in
connection with the subject matter of this Agreement. The Stockholder
shall pay all sales, use, transfer, recording, gains, stock transfer
and other similar taxes and fees incurred in connection with the
transactions contemplated by this Agreement. The Stockholder shall
file all necessary documentation and Tax Returns with respect to such
Taxes. In addition, each Stockholder acknowledges that he, and not
the COMPANY or ATOWSUB, will pay all Taxes due upon receipt of the
consideration payable to such Stockholder pursuant to Section 2
hereof. Notwithstanding the foregoing, any of the above fees,
expenses or disbursements fairly attributable to the COMPANY but
payable by the Stockholder and incurred prior to the Closing may be
paid from COMPANY funds rather than from personal funds of the
Stockholder, provided that the Stockholder provide to ATOWSUB, prior
to the Closing, a detailed statement setting forth the type and
amount of all such fees, expenses or disbursements so paid, and,
provided further, that the aggregate amount of same shall be
deducted, on a dollar-for-dollar basis, from the amount of cash into
which the COMPANY Stock shall be converted pursuant to Section
2.13.1.4 hereof.
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15.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage
prepaid and registered or certified with return receipt requested, or
by delivering the same in person to such party (in the case of a
Stockholder) or to an officer, general partner, member or trustee of
such party (in the case of parties other than Stockholder).
(a) If mailed to ATOW addressed to it at:
1-800-AutoTow, Inc.
1301 North Congress Ave., Suite 330
Boynton Beach, FL 33426
Attn: Joel B. Nagelmann, Chief Executive Officer
(b) If mailed to ATOWSUB addressed to it at:
1-800-AutoTow, Inc.
1301 North Congress Ave., Suite 330
Boynton Beach, FL 33426
Attn: Joel B. Nagelmann, Chief Executive Officer
with copies to:
Delmer C. Gowing III, PA
101 S.E. 6th Ave.
Delray Beach, FL 33483
Attn: Delmer C. Gowing III
(c) If mailed to the Stockholder, addressed to them at their addresses
set forth on Annex I, with copies to such counsel as is set forth with
respect to each Stockholder on such Annex I;
(d) If mailed to the COMPANY, addressed to it at:
Robert Menniges
113 Barrington Drive
Brandon, FL 33511
and marked "Personal and Confidential" with copies to:
H. Stratton Smith
611 W. Azeele Street
Tampa, FL 33606
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or to such other address or counsel as any Party hereto shall specify pursuant
to this Section 15.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the Party or an officer,
general partner, member or trustee of the Party, as applicable.
15.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida,
without giving effect to laws concerning choice of law or conflicts
of law. All disputes arising out of this Agreement or the obligations
of the Parties hereunder, including disputes that may arise following
termination of this Agreement, shall be resolved by arbitration in
accordance with the Commercial Rules of the American Arbitration
Association. Arbitration venue shall be Miami, Florida where judgment
upon the award rendered by the Arbitrator(s) may be entered by a
court of competent jurisdiction.
15.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the Parties made herein, or
in writing delivered pursuant to the provisions of this Agreement
shall survive the consummation of the transactions contemplated
hereby and any examination on behalf of the Parties.
15.10 Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy
accruing to any Party as a result of any breach or default by any
other Party under this Agreement shall impair any such right, power,
or remedy, nor shall it be construed as a waiver of or acquiescence
in any such breach or default, or of any similar breach or default
occurring later; nor shall any waiver of any single breach or default
be deemed a waiver of any other breach or default occurring before or
after that waiver.
15.11 Time. Time is of the essence with respect to this Agreement.
15.12 Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the
Parties, and if such modification is not possible, such provision
shall be severed from this Agreement, and in either case the
validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
15.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at
law or in equity.
15.14 Captions. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
WITNESS: 1-800-AUTOTOW, INC.
/s/ Delmer Gowing /s/ Joel B. Nagelmann
- -------------------- ----------------------
Delmer Gowing Joel B. Nagelmann
President
WITNESS: 1-800-AUTOTOW GULF COAST EAST, INC.
/s/ Delmer Gowing /s/ Steven B. Teeters
- -------------------- ----------------------
Delmer Gowing Steven B. Teeters
Treasurer
WITNESS: ARROW, TOWING &
RECOVERY, INC.
/s/ H. Stratton Smith /s/ Robert Menniges
- -------------------- ----------------------
H. Stratton Smith Robert Menniges
President
Stockholder:
/s/ Robert Menniges
----------------------
Robert Menniges
Stockholder:
/s/ Helen Hohn
----------------------
Helen Hohn
47
EXHIBIT 6.37
Amendment to Merger Agreement
Robert Menniges
Arrow Towing and Recovery, Inc.
July 30, 1999
The legal documentation necessary to close the funding has not been completed
despite a tremendous effort by the personnel at 1-800-AutoTow and the attorneys
for all parties. We request an extension on your Purchase Agreement until August
6, 1999.
Because of this delay and for your consideration of this extension, rather than
utilize the contracted stock price calculation in the Agreement, we are willing
to fix your stock price at $0.70 per share. Regarding the $25,000 of stock that
was a deposit, we acknowledge that it is forfeited to you, however, in
determining the number of shares for the deposit, that portion will be
calculated in the orginal way, which is, the average stock price of the 5
trading days before and the 5 trading days after the closing (funding).
By executing this Amendment, you acknowledge a waiver of the July 30, 1999
funding date in the Purchase Agreement and grant an extension until the end of
this week (August 6, 1999).
Sincerely,
Agreed:
/s/ Joel B. Nagelmann /s/ Robert Menniges
- --------------------- -----------------
Joel B. Nagelmann Robert Menniges
President & CEO Seller
EXHIBIT 6.38
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is dated this 22nd day of July, 1999,
between Dennis W. Meyer, Inc., a Florida corporation, d/b/a Denny's Towing
Service ("SELLER"), and 1-800-AutoTow, Inc., a Delaware corporation (ATOW) and
1-800-AutoTow Gulf Coast East, Inc a Florida corporation (ATOW SUB) the
("Purchasers"). SELLER desires to sell to Purchasers and Purchasers desire to
purchase from SELLER certain of the Assets (as defined below) of SELLER, upon
the terms and conditions set forth below.
Therefore, in consideration of the covenants, representations,
warranties and agreements contained in this Agreement, the receipt and
sufficiency of which are acknowledged, the parties intending to be legally
bound, covenant and agree as follows:
1. Definitions. The following words shall mean, when used in this
Agreement:
(a) "Assets" shall mean all of the rights and assets of
the SELLER, whether real, personal or mixed, tangible
or intangible, which are used in or relate to the
vehicle towing business of SELLER located and
operated at 2600 24th Street, St. Petersburg, Florida
(the "premises"), excluding cash, and including but
not limited to the following: accounts receivable,
the goodwill associated with the business, all
permits, licenses, agreements and rights associated
with the premises, machinery and equipment, tools and
tooling, inventory including trucks, repair equipment
and other related products, office equipment and
supplies, cash registers, furniture and furnishings,
telephone and other communication systems, computer
hardware and software systems, all contracts and
agreements made on behalf of SELLER pertaining to its
business and books of account, files, ledgers, vendor
lists, customer records, operations manuals,
confidential information, papers and records
pertaining to its businesses at the premises.
(b) "Closing" shall mean the events which take place for
the purpose of the consummation of this Agreement,
the same to occur at the offices of ATOW on or before
July 30, 1999.
2. Sale and Transfer of Assets. Upon the terms and subject to the
conditions set forth in this agreement, SELLER agrees to sell, transfer, assign,
grant, convey and deliver to ATOW SUB, at Closing, free and clear of all
mortgages, liens, security interests, pledges, charges and other encumbrances
and ATOW agrees to purchase from SELLER, at Closing, all of SELLER's Assets,
except those Assets excluded above. The parties also expressly agree that the
names "Denny's Towing Service", "Denny's Transport" and "Denny's Towing &
Transport Service" shall be an asset transferred by SELLER to ATOW SUB.
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3. Assumption of Liabilities or Obligations. ATOW or ATOW SUB have not
assumed, and are not assuming, any liability or obligation of SELLER of any
nature, known or unknown, existing or contingent, including but not limited to
any liabilities or obligations with respect to any employees of SELLER other
than as specifically provided in this Agreement. All liabilities of SELLER other
than those specified shall continue to be the sole responsibility of SELLER,
which shall pay and discharge all of such liabilities as they come due. SELLER
agrees to indemnify and hold ATOW an ATOW SUB harmless from and against any
loss, liability, damage, cost or expense in respect of any liabilities or
obligations which have not been specifically assumed by ATOW or ATOW SUB
pursuant to this Agreement.
4. Payment for the Assets.
(a) The purchase price for the Assets shall be $780,000
plus 80% of the Accounts Receivable on the Effective
Date of this Transaction. The Company will pay the
Seller the following for these assets:
(b) Cash at final Closing: $580,000
(c) Upon receipt of, but no later than 10 days after the
effective date of this transaction, a detailed
accounts receivable aging report dated the day prior
to the effective date of this transaction, the
Company will pay the Seller 80% of the total accounts
receivable listed on the aging report.
(d) A three year promissory note for $150,000.00 payable
at an 8% per annum interest attached as Exhibit B.
(e) 1-800-AutoTow, Inc., Common Stock ("Shares")
representing a value of $50,000 at the average
closing price for the five trading days prior to the
Closing and the five trading days after the Closing
less a 30 percent discount. The shares issued to the
Seller will be restricted as to their sale subject to
Rule 144 but will be included in the Company's next
registration statement filing.
(f) The Purchase Price shall be allocated among the
Assets by SELLER and ATOW in accordance with attached
Exhibit A. SELLER and ATOW agree that they will
report the sale of the Assets for income tax purposes
in accordance with the allocations set forth in
Exhibit A.
(g) Any sales tax, use tax, excise tax, transfer tax,
recording fee or other tax or fee imposed upon the
transfer of the Assets from SELLER to ATOW SUB shall
be paid by ATOW SUB.
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5. Subordinated Provisions.
(a) ATOW agrees to enter into a consulting agreement
with Dennis W. Meyer, See, Exhibit D
(b) SELLER's obligation shall be subject to its ability
to assume its identical form or in such form as is
acceptable to ATOW.
(c) ATOW SUB's assumption of Dennis W. Meyer, Inc.'s
leasehold interest in favor or Sheldon Wind Trustee
of the 2600 24th Street Trust shall be a condition
precedent to the purchase by ATOW of the assets of
SELLER.
(d) Dennis W. Meyer and Shari Noles shall enter into a
non-compete agreement with ATOW similar in substance
and form to that contained in paragraph 13 herein,
the formation of which shall serve as a condition
precedent to the purchase by ATOW of the assets of
SELLER.
6. Asset Value. Upon completion of due diligence, should ATOW determine
the fair market value of an asset detailed in Exhibit A is less than the listed
value, the parties agree to negotiate in good faith to establish a fair value.
If the parties are unable to arrive at an agreement as to the value of any
specific asset, ATOW reserves the right to exclude that asset from the assets
being purchased and reduce the purchase price by an amount equal to the
estimated fair market value listed on Exhibit A. In the event the total of such
excluded assets equals or exceeds 10% of the total assets listed on Exhibit A,
ATOW shall be exempt from having to honor any agreement to purchase the assets
of Seller.
7. Cooperation. Seller agrees to cooperate fully with ATOW in
completing its due diligence including, but not limited to the following:
(a) obtaining and/or assigning all cotracts, permits,
regulatory clearances, federal, state or local
licenses and approvals. At the option of ATOW, it may
elect to close this transaction prior to completing
all such assignments and approvals. In the event that
ATOW elects to do so, Seller agrees to undertake good
faith efforts to assist ATOW in obtaining such
assignments, licenses or approvals.
8. Instruments of Transfer. SELLER agrees to execute and deliver to
ATOW SUB such instruments of transfer, assignment and conveyance as shall be
necessary in the judgment of ATOW to vest in ATOW SUB good and marketable title
to the Assets free and clear of all mortgages, liens, security interests,
pledges, charges and other encumbrances. Such instruments of transfer shall
include but not be limited to a Bill of Sale in the form of attached Exhibit E.
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9. Representations and Warranties of SELLER. SELLER represents,
warrants and agrees to and with ATOW as follows:
(a) SELLER has been duly organized, is validly existing
and in good standing under the laws of the State of
Florida.
(b) SELLER has all requisite power and all necessary
permits, certificates, contracts, approvals and other
authorizations required by any and all federal,
state, city, county or other municipal bodies to own,
lease, use and operate its properties and to conduct
its business in the manner in which such business is
presently conducted.
(c) The execution, delivery and performance of this
Agreement have been duly authorized by the SELLER,
and SELLER has the complete and unrestricted power
and authority, and has taken all action necessary, to
enter into, execute and deliver this Agreement and to
perform all of its obligations hereunder.
(d) Upon execution and delivery of it on the part of
SELLER and ATOW, this Agreement shall constitute the
valid and legally binding obligation of SELLER
enforceable in accordance with its terms except as
may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights. This Agreement does not violate
any law or regulation and does not conflict with any
other agreement affecting SELLER or the Assets.
(e) The representations made in Exhibit G hereto are
correct and accurately reflect the business conducted
at the premises. The SELLER understands that the ATOW
is relying on the accuracy of these representations
to evaluate the value of the assets being acquired on
a going concern basis and SELLER warrants that this
is a true and accurate statement of the SELLER's
financial history and condition. The SELLER agrees
that it will pay, settle, or otherwise dispose of all
its liabilities, both current and contingent, in such
a manner as to not damage or diminish the value of
the assets being acquired including, but not limited
to, trademarks, contracts, and goodwill.
(f) SELLER has good and marketable title to all of the
Assets, free and clear of all mortgages, liens,
security interests, pledges, charges or other
encumbrances. In the event that any of SELLER's
Assets are encumbered, payment of such encumbrances
shall be made by SELLERs at Closing out of the
proceeds received from the sale of the Assets.
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(g) Exhibit H contains a list of all agreements,
commitments and contracts, written or oral,
pertaining to the Assets and to which SELLER is a
party, which (i) are not terminable on 30 days'
notice or less without any obligation of SELLER, and
(ii) which are either individually or in the
aggregate material to SELLER.
(h) There is no action, suit, proceeding, inquiry or
investigation at law or in equity, or before any
court, arbitrator, public board or body, pending or
threatened against SELLER in which an unfavorable
decision, ruling or finding would in any way
adversely affect the transaction contemplated by this
Agreement or the business, assets or financial
condition of SELLER.
(i) SELLER is not obligated under any contract or
agreement or subject to any charge or other
restriction which materially and adversely affects
the business, assets or financial condition of
SELLER. SELLER is not in violation or default under
any indenture, contract, lease or agreement to which
it is a party or by which the Assets are bound or
with respect to any law, regulation, rule, order,
writ, injunction or decree of any court or any
federal, state, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality, nor will the execution, delivery and
performance of this Agreement cause or result in any
such violation or default or result in the creation
of any lien, claim, pledge or encumbrance or any kind
upon any of the Assets of SELLER.
(j) SELLER has filed all federal, state and local income,
franchise, capital stock, sales or use, excise,
property or other tax returns which are required to
be filed by SELLER and has paid all taxes as shown on
such returns and on any assessment received by SELLER
and all other taxes payable without requiring the
filing of any return. Such tax returns are correct
and complete and SELLER has not received any notice
of any proposed tax deficiency.
(k) All of the Assets are adequately insured against loss
and all insurance policies relating to them will be
assigned to ATOW SUB, if ATOW SUB so requests.
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(l) All tangible Assets of SELLER are in good order and
repair and in good operating condition, reasonable
wear and tear excepted, and suitable for the uses for
which intended.
(m) SELLER is not subject to any order of any court or
governmental authority or agency, nor is there any
legal action, governmental proceeding or
investigation pending or threatened or known to
SELLER to compel SELLER to make any material change
in the character or location of any of the assets or
that would materially and adversely affect the assets
or which could subject SELLER to any fine, forfeiture
or other sanction.
(n) With respect to the premises, SELLER has not engaged
in, or allowed third parties to engage in, any
actions, and SELLER has no knowledge of any fact or
condition, which would constitute a violation of the
National Environmental Policy Act, 42 USCA, Section
4321 et seq., the Resource Conservation Recovery Act
(RCRA) 42 USCA, Section 6901 et seq., the
Comprehensive Environmental Response Compensation and
Liability Act (CERCLA) 42 USCA, Section 6911 et seq.,
or any regulations promulgated by the United States
Environmental Protection Agency pursuant to those
Acts, or any applicable state or local environmental
law, regulation or order. SELLER shall be solely
responsible, and ATOW and any of its affiliates shall
have no liability, for any and all liability
resulting from such violation which occurs prior to
the Closing, even if the violations are not
discovered until after the date of the final Closing
documents. Any such liability shall include but not
be limited to, any costs, penalties, assessments,
expenses or fees, including reasonable attorneys'
fees, incurred by ATOW or any of its affiliates in
connection with bringing the premises into full
compliance with applicable environmental laws,
statutes, ordinances, rules and regulations.
(o) The only persons (including, but not limited to,
governmental authorities and agencies, creditors of
SELLER, parties to leases and subleases or any other
instruments or agreements to which SELLER is a party
or by which it is bound) whose approval or consent to
the execution, delivery and performance of this
Agreement by SELLER is legally or contractually
required are specified on attached Exhibit I, and the
approvals and consents of all such persons will be
duly obtained by Closing, or alternatively, waived in
writing by ATOW and obtained by SELLER promptly after
Closing, in which event the transfer under this
Agreement relating to the subject matter of such
consent shall be deemed to be conditional on receipt
of such consent.
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(p) Neither this Agreement nor any Exhibit or financial
statement, certificate or other written material
furnished by or on behalf of SELLER contain any
untrue statement of a fact or omits to state a fact
necessary in order to make the statements contained
in it not misleading. There is no fact known to
SELLER which materially and adversely affects the
business or financial condition of SELLER or the
assets which has not been set forth in this Agreement
or in any Exhibit, or financial statement,
certificate or other written material furnished
pursuant to it.
(q) The parties agree that the terms and conditions of
this Agreement are highly confidential in nature and
both ATOW and SELLER agree not to disclose the terms
and conditions of this Agreement without the written
consent of the other, unless such disclosure is
required by law. Violation of this provision may, at
the discretion of the other party, be cause for
termination and the non-disclosing party shall be
entitled to damages in an amount equal to the costs
of its due diligence including staff, attorney,
accounting, travel, and related expenses. The SELLER
recognizes that this non-disclosure provision shall
not extend to regulatory requirements of the
Securities and Exchange Commission or to any filing
in connection with a Registration Statement or other
required filing.
(r) Except as contemplated in this Agreement, since the
most recent fiscal year end, the SELLER has conducted
its business only in the ordinary course of business
and there have not been any material changes with
respect to the SELLER. Without limiting the
generality of the foregoing, since that date, the
SELLER has not:
(i) sold, assigned, transferred, mortgaged,
pledged, subjected to lien, or entered into
any conditional sale or other title
retention agreement with respect to any of
the assets being purchased;
(ii) entered into any agreement with any labor
union or association representing any
employee or made any wage or salary increase
or bonus, or increase in any other direct or
indirect compensation or employment
agreement, for any of its officers,
directors or employees;
(iii) borrowed any money or incurred any
liability, other than in the ordinary course
of business;
(iv) mortgaged, pledged or subjected to lien any
of its assets or entered into any
conditional sale or other title retention
agreement with respect to any of its real or
personal property;
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(v) sold, assigned or transferred any of its
assets, except for sales in the ordinary
course of business;
(vi) or made any capital expenditures or
commitments in excess of $5,000.00,
individually or $15,000 in the aggregate
without written approval from ATOW.
10. Representations and Warranties of ATOW AND ATOW SUB. ATOW and ATOW
SUB represent, warrant and agree as follows:
(a) ATOW and ATOW SUB are corporations duly organized,
validly existing and in good standing under the laws
of the State of Delawareand the State of Florida
respectively.
(b) ATOW and ATOW SUB have the power and authority, and
have taken all action necessary to enter into,
execute and deliver this Agreement and to perform all
of their obligations under it.
(c) Upon execution and delivery of it on the part of
SELLER to ATOW, this Agreement shall constitute the
valid and legally binding obligation of ATOW and ATOW
SUB, enforceable in accordance with its terms, except
as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally. This Agreement does not
violate any law or regulation pertaining to ATOW and
ATOW SUB and does not conflict with any other
agreement affecting ATOW or ATOW SUB.
(d) ATOW and ATOW SUB hereby assume all liability,
beginning August 1, 1999, under the leases and
subleases with respect to the premises (subject to
the provisions of Section 6), and ATOW ATOW SUB shall
indemnify and hold harmless SELLER and any of its
officers, directors and shareholders who personally
guaranteed the performance of SELLER under them.
11. Survival of Representations; Indemnification. The representations,
warranties, covenants and agreements contained in this Agreement shall survive
Closing, regardless of any investigations made by or on behalf of, or knowledge
of, any of the parties. SELLER agrees to indemnify ATOW and its affiliates, its
successors and assigns, against, and hold them harmless from and in respect of,
any loss, liability, damage, cost or expense accruing from or resulting by
reason of any falsity or breach of the representations, warranties, covenants or
agreements made or to be performed by SELLER pursuant to this Agreement. ATOW
and ATOW SUB agrees to indemnify SELLER, its successors and assigns, against,
and hold them harmless from and in respect of, any loss, liability, damage, cost
or expense accruing from or resulting by reason of any falsity or breach of the
representations, warranties, covenants or agreements made or to be performed by
ATOW and ATOW SUB pursuant to this Agreement. For the purposes of this
indemnification, ATOW and/or ATOW SUB shall have the right to recoup any amount
paid to Dennis W. Meyer, Inc., as a result of a non-assumed claim or liability.
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12. Compliance with Bulk Sales. SELLER and Purchasers agree to waive
compliance with any applicable laws of the State of Florida pertaining to Bulk
Transfers. In consideration of such waiver, and without limiting any provisions
of Section 8, SELLER agrees to indemnify and hold harmless Purchasers from and
against, and allow Purchasers to set off against amounts due to SELLER, any and
all losses, liabilities, claims, damages or expenses, including attorneys' fees,
arising as a result of claims or demands by third parties against SELLERS in
connection with its operation of its business prior to Closing.
13. Non-Compete Agreement.
(a) Prohibited Activities. Dennis W. Meyer and Shari
Noles shall enter into a non-competition agreement
which shall be in the form attached as Exhibit 13 A.
(b) Damages. Because of the difficulty of measuring
economic losses to ATOW as a result of a breach of
the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to ATOW
for which it would have no other adequate remedy,
each individual agrees that the foregoing covenant
may be enforced by ATOW, in the event of breach by
such individual, by injunctions and restraining
orders.
(c) Reasonable Restraint. It is agreed by the Parties
hereto that the foregoing covenants in this section
impose a reasonable restraint on the individuals in
light of the activities and business of ATOW on the
date of the execution of this Agreement and the
current plans of ATOW; but it is also the intent of
ATOW, and the Individuals that such covenants be
construed and enforced in accordance with the
changing activities and business of ATOW throughout
the term of this covenant.
It is further agreed by the Parties hereto that, in
the event that any individual shall enter into a
business or pursue other activities not in
competition with the ATOW and/or any subsidiary
thereof, or similar activities or business in
locations the operation of which, under such
circumstances, does not violate clause Section 13(a),
and in any event such new business, activities or
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location are not in violation of this Section 13 or
of such individual's obligations under this Section
13, if any, such individual shall not be chargeable
with a violation of this Section 13 if ATOW shall
thereafter enter the same, similar or a competitive
(i) business, (ii) course of activities or (iii)
location, as applicable.
(d) Severability; Reformation. The covenants in this
section are severable and separate, and the
unenforceability of any specific covenant shall not
affect the provisions of any other covenant.
Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable,
then it is the intention of the Parties that such
restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall
thereby be reformed.
(e) Independent Covenant. All of the covenants in this
Section 13 shall be construed as an agreement
independent of any other provision in this Agreement,
and the existence of any claim or cause of action of
any individual against the ATOW whether predicated on
this Agreement or otherwise, shall not constitute a
defense to the enforcement by the ATOW of such
covenants. It is specifically agreed that the period
of five (5) years stated at the beginning of this
Section 13, during which the agreements and covenants
of each individual made in this Section 13 shall be
effective, shall be computed by excluding from such
computation any time during which such individual is
in violation of any provision of this Section 13. The
covenants contained in this Section 13 shall not be
affected by any breach of any other provision hereof
by any Party hereto. The covenants contained in this
Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
(f) Materiality. ATOW and the individuals hereby agree
that this covenant is a material and substantial part
of this transaction.
14. Miscellaneous.
(a) The parties understand that notwithstanding any other
representation to the contrary, the agreement is
subject to ATOW obtaining financing for this
transaction prior to July 30, 1999. Should ATOW not
obtain financing on or before July 30, 1999, this
agreement shall be null and void and neither party
shall owe any amount to the other, and the
non-refundable deposit, referenced in Section 4(b)
shall remain with the Seller, unless the parties, in
writing, agree to extend this agreement.
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(b) From and after the date of Closing, SELLER shall
execute and deliver to or cause to be executed and
delivered to ATOW SUB any such further instruments of
transfer, assignment and conveyance and shall take
such other action as ATOW SUB may reasonably require
to carry out more effectively the sale, transfer,
assignment and conveyance to ATOW SUB of the assets
and to confirm and assure ATOW SUB's title to them.
(c) Each party covenants and agrees that it shall be
responsible for and shall bear its own legal and
other costs and expenses in connection with the
negotiation, preparation and execution of this
Agreement, and performance of the transactions
contemplated by it.
(d) Neither party shall assign, in whole or in part, this
Agreement or its rights and obligations under it
without the express prior written consent of the
other party.
(e) In the event that any provision of this Agreement
shall be held invalid, illegal or unenforceable under
applicable law, the remainder of this Agreement shall
remain valid and enforceable unless such invalidity,
illegality or unenforceability substantially
diminishes the rights and obligations, taken as a
whole, of SELLER or Purchasers.
(f) This Agreement and the Exhibits contain the entire
agreement among the parties with respect to the sale
and purchase of the Assets and supersede all previous
written or oral negotiations, commitments and
writings.
(g) This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute
one and the same instrument.
(h) This Agreement may be amended only in writing
executed by the parties affected by such amendment.
(i) This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of
Florida.
(j) Any controversy or claim arising out of or relating
to this contract, of the breach thereof, shall be
settled by arbitration administered by the American
Arbitration Association (AAA), in its Miami, Florida
branch office, under its Commercial Arbitration
rules, and judgement on the award rendered by the
arbitrator(s) may be entered in any court of
competent jurisdiction within the State of Florida.
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(k) Seller shall make available all current and prior
years financial statements of Seller to ATOW SUB upon
request during normal business hours.
In witness, the parties have caused this Agreement to be duly executed
under seal as of the date written above.
Dennis W. Meyer, Inc.
d/b/a DENNY'S TOWING SERVICE
ATTEST: /s/ Walter Sanders /s/ Dennis W. Meyer
---------------- -------------------
Walter Sanders Dennis W. Meyer
President
1-800 AUTOTOW GULF COAST EAST, INC.
ATTEST: /s/ Delmer Gowing /s/ Steven B. Teeters
---------------- -------------------
Delmer Gowing Steven B. Teeters
Treasurer
1-800-AUTOTOW, INC.
ATTEST: /s/ Delmer Gowing /s/ Joel B. Nagelmann
---------------- -------------------
Delmer Gowing Joel B. Nagelmann
President
12
EXHIBIT 6.39
Amendment to Asset Purchase Agreement
Dennis Meyer
Denny's Towing
July 30, 1999
The legal documentation necessary to close the funding has not been completed
despite a tremendous effort by the personnel at 1-800-AutoTow and the attorneys
for all parties. We request an extension on your Purchase Agreement until August
6, 1999.
Because of this delay and for your consideration of this extension, rather than
utilize the contracted stock price calculation in the Agreement, we are willing
to fix your stock price at $0.70 per share.
By executing this Amendment, you acknowledge a waiver of the July 30, 1999
funding date in the Purchase Agreement and grant an extension until the end of
this week (August 6, 1999).
Sincerely,
Agreed:
/s/ Joel B. Nagelmann /s/ Dennis Meyer
- --------------------- -----------------
Joel B. Nagelmann Dennis Meyer
President & CEO Seller
EXHIBIT 6.40
Addendum to Asset Purchase Agreement
Buyer will not be responsible for the collection of accounts
receivable. All accounts receivable received by the buyer or seller will be the
property of the Seller. Therefore the inference of payment of 80% is not
applicable.
Dated: July 27, 1999
Seller Buyer
/s/ Dennis W. Meyer /s/ Joel B. Nagelmann
- -------------------- ----------------------
Dennis W. Meyer Joel B. Nagelmann
President President
EXHIBIT 6.41
LEASE AGREEMENT
THIS AGREEMENT made this 28th day of July, 1999, by and between
MUHAMMAD CHOUDARY, 12761 Nacogdoches, San Antonio, Texas 78217 in Bexar County,
Texas, hereinafter referred to as "Landlord"; and 1-800-AutoTow Gulf Coast S.W.,
Inc. d/b/a A-ACE TOWING, a Texas Corporation with principal offices at 1301 N.
Congress Avenue, Suite 330, Boynton Beach, Florida 33426 in Palm Beach County,
hereinafter referred to as "Tenant".
WHEREAS Landlord is the owner of the real property located in Bexar
County, Texas, which property has a physical address of 12761 Nacogdoches, San
Antonio, Texas;
WHEREAS the parties desire to enter a lease agreement to define their
respective rights, duties and liabilities relating to the area.
WITNESSETH
IN CONSIDERATION of the mutual covenants contained herein and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties agree as follows:
1. Landlord leases to Tenant and Tenant hires and takes as Tenant the
area described in the Attachment at the above physical address, for a term of
twenty-four (24) months. The rental period shall begin on the 1st day of August,
(hereinafter the "anniversary date"), 1999, and shall end on the last day of
July, 2001 (hereinafter the termination date).
2. This lease shall be automatically renewed on the same terms, with a
five (5) percent increase in the lease payment, for an additional twelve month
period on the anniversary date first following the termination date, and on each
anniversary date thereafter unless notice to the contrary is provided by either
party to the other at least ninety (90) days in advance of the termination date
and each applicable anniversary of the termination date thereafter. However, all
future lease payment increases, other than the above referenced, must be agreed
to by both parties 90 days in advance of the termination date of the applicable
anniversary. Each party's respective failure to so notify the other party will
conclusively be deemed that party's affirmative agreement to extend this lease.
3. The area herein leased shall be for the exclusive use of Tenant.
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RENT
4. The total amount due under the initial period of this lease
agreement is $65,928.00, payable at the rate of $2,747.00 per month, on the
first day of each month.
INSURANCE
5. Landlord shall be responsible for and required to maintain property
coverage on the leasehold property. Tenant will indemnify Landlord against any
liability claims occurring due to the negligence of Tenant or Tenant's
employees.
USE OF AREA
6. Tenant shall use or permit the area to be used for all purposes
consistent with a vehicle towing service. Tenant shall not perform any act or
use the area in any manner that may be prohibited under fire, safety, health or
sanitation codes or regulations.
7. Tenant shall comply with all governmental laws, ordinances,
regulations and statutes affecting the area either now or in the future. Tenant
shall not use the area in any manner which is unlawful, and any such use shall
terminate the lease immediately.
8. Landlord shall put Tenant in actual possession of the area at the
beginning of the term and hereby covenants that Tenant, on paying the said rent
and performing the covenants herein agreed to, shall peacefully and quietly
have, hold and enjoy the said demised area for the entire term, subject to the
terms of this Lease. If for any reason Landlord does not deliver possession of
the area at the commencement of the term, but does so deliver possession within
thirty (30) days of the commencement of the term of the lease, then this lease
shall not be void or voidable. However, there shall be a proportionate reduction
in total rent covering the period between the commencement of the term and
actual delivery of the area to Tenant, in the event of late delivery by
Landlord. Any delivery of the area later than thirty (30) days of the
commencement of the term of the lease shall render this lease voidable by
Tenant, and Tenant may so void by providing Landlord with notice that such lease
shall be void if the area herein leased by Tenant are not delivered within a
period no less than five (5) days after such notice. Landlord shall not be
liable to Tenant for any loss or damage resulting from any failure of Landlord
to deliver the area to Tenant, except Landlord shall promptly return any
unearned sums paid or deposited by Tenant.
9. In the event either party seeks enforcement of this lease against
the other party, then the prevailing party shall be awarded as damages all costs
and reasonable attorney's fees incurred in such enforcement.
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10. Landlord represents that there are no environmental violations with
respect to any prior usage of the area and shall defend and hold Tenant harmless
for any claim made with respect to any such prior usage.
RESPONSIBILITIES OF PARTIES
11. Tenant will keep the area in a clean and healthy condition, in
accordance with the ordinances of the applicable municipal government or other
governing body and the direction of the proper authorities; Tenant will keep the
area in good repair, and at the end of the term will deliver the area in good
order and condition, reasonable use and wear alone excepted. Landlord or his
agents shall be permitted at any time upon notice during the term hereby created
to enter and examine said area at any reasonable hour of the day. Whenever
necessary for any repairs, servants and agents of the Landlord shall be
permitted to enter and to make the same. "Reasonable hours" shall be deemed to
be at least twenty-four hours advance notice to Tenant except for the making of
repairs.
12. Tenant will not assign, transfer, or set over this lease, or sublet
all or any part of the area, without explicit written agreement of the Landlord
which shall not be unreasonably withheld. Any attempt to transfer, assign or set
over this lease, or to sublet all or any part of the area without such explicit
written agreement of the Landlord shall immediately terminate this lease, and
Tenant shall remain responsible for all sums due under this lease.
13. During the three months prior to the expiration of the term hereby
created, if notice to terminate has been given, Tenant will permit the Landlord
or his agents to enter and show the area to persons desiring to rent the same
during reasonable hours of the day until rented. Any such showings shall be with
at least 24 hours advance notice whenever possible.
CONDITION OF AREA
14. Landlord's sole liability in the event that any portion of the area
is denied use to Tenant by any governmental authority or agency shall be a
pro-rata abatement of rent. If area is unavailable by more than 30 days, the
tenant shall have the option to terminate the lease.
15. Tenant shall not remove any leasehold improvements whether made by
Landlord or Tenant, inclusive of window dressings, carpeting, wall coverings,
doors and all other such improvements, unless specifically agreed to by Landlord
in writing.
16. Tenant shall, upon vacating the area for any reason, leave the area
in a clean, repaired, tenantable condition, normal wear and tear excepted, and
shall be responsible for all costs or expenses necessary to place the area in
such condition, including such reasonable charges as may be made by Landlord for
Landlords time and efforts to place such area into such proper condition.
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DAMAGE TO AREA
17. If the area, during the term of this lease, is destroyed or damaged
by fire, storm or other unavoidable casualty so that they are rendered unfit for
Tenant, or in case Tenant shall be prevented from using the area by reason of
any action on the part of city or state officers, then the rent or a just
proportionate part thereof according to the nature and extent of the injury
sustained, shall be suspended or abated until the area shall have been put in
proper condition for use by Tenant, or until Tenant is permitted to resume use
by said city or state officers. In case of fire, Tenant shall give immediate
notice to the Landlord, who shall cause the damage to be repaired with all
convenient speed; but if the area be so damaged or rendered unusable and that
use by Tenant will be delayed by more than thirty (30) days, then Tenant shall
have the option to terminate and any prepaid rent unaccrued to the time of such
damage shall be refunded to Tenant together with Tenant's security deposit.
PROHIBITION AGAINST OTHER LIENS
18. Tenant is specifically prohibited against contracting for any
repairs, construction or improvements wherein the area may be subject to a lien
by any laborer, contractor or material supplier. All such persons shall
specifically waive any and all lien rights otherwise available under law as a
condition precedent to entering the area, delivering goods and/or performing
services. Tenant is specifically not Landlord's agent for any such repair or
improvement, and is without authority of any type or kind to commit to contracts
on behalf of Landlord, or to subject the area to any lien. Landlord shall cause
a short form of this lease to be recorded in the office of the Recording Clerk
of the county where the area is located.
SUBORDINATION AND ATTORNMENT
Tenant agrees: (a) that, except as hereinafter provided, this Lease is,
and all of Tenant's rights hereunder are and shall always be, subject and
subordinate to any mortgages or security instruments (collectively called
"Mortgage") that now exist, or may hereafter be placed upon the area or any part
thereof, and to all advances made or to be made thereunder and to the interest
thereon, and all renewals, replacements, modifications, consolidations, or
extensions thereof, now or at any future time, (b) that if the holder of any
such Mortgage ("Mortgagee") or if the purchaser at any foreclosure sale or at
any sale under a power of sale contained in any Mortgage shall at its sole
option so request, Tenant will attorn to, and recognize such Mortgagee or
purchaser, as the case may be, as Landlord under this Lease for the balance then
remaining of the lease Term, subject to all the terms of this Lease Agreement
and any extensions thereof; and (c) that the aforesaid provision shall be self
operative and no further instrument or document shall be necessary unless
required by any such Mortgagee or purchaser in which event Tenant shall execute
such instrument or document within ten (10) days after the request therefor.
Should Landlord or any Mortgagee or purchaser desire confirmation of such
subordination or attornment, as the case may be, Tenant upon written request,
and from time to time, will execute and deliver without charge and in form
satisfactory to Landlord, the Mortgagee or the purchaser all instruments and/or
documents that may be requested to acknowledge such subordination and/or
agreement to attorn, in recordable form.
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BREACH
19. Tenant shall breach this lease and shall be considered in default
if:
(a) Tenant fails to pay any rent due within seven (7) days of
receiving notice from the Landlord;
(b) Tenant fails to perform or comply with any of the
non-monetary covenants or conditions of this lease and such failure continues
for a period of thirty (30) days after receipt of notice thereof from Landlord;
20. In the event of a breach in the lease as set forth above, the
rights of the Landlord shall be as follows:
(a) Landlord shall have the right to terminate the lease
subject to paragraph 22 below, by giving to Tenant not less than thirty (30)
days notice. On expiration of the time fixed in the notice, the lease shall
terminate, except as to Tenant's liability, as of the date fixed in the notice
of cancellation; and
(b) All notices, demands or writings in this lease shall be
deemed to have been fully given when made in writing and deposited in U. S.
Mail, certified return receipt requested, to the addresses of the respective
parties first stated herein, or at the leased area. The addresses to which any
notice, demand or writing may be given as above provided may be changed by
written notice given by such party as above provided.
21. Neither party shall have the right to cancel this lease for default
of the other party unless such default remains for thirty (30) days after notice
in writing given such defaulting party specifying the nature of the default;
provided, however, that if, because of the circumstances beyond the Landlord's
control, the Landlord cannot cure the default on his part within such time, and
such default does not interfere with Tenant's use, occupancy and quiet enjoyment
of the demised area, then the Landlord shall have reasonable additional time in
which to cure such default.
22. If Tenant holds possession of the area after the term of this
lease, Tenant shall become a Tenant from month to month. Tenant shall continue
to be a month to month Tenant until the tenancy shall be terminated by the
Landlord or until Tenant has given to Landlord a written notice of at least one
(1) month, prior to the date of termination of the monthly tenancy of Tenant's
intention to terminate the tenancy.
23. If either party notifies the other as provided herein at section 2
of the intention not to extend such lease, then such lease shall terminate on
the termination date. Tenant shall timely remove from the area, and shall leave
the area in good and proper condition. Failure to so remove and leave the area
in good and proper condition shall conclusively establish that:
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(a) That Tenant has held over; and
(b) That Tenant has knowingly accepted as a month to month
rent such sum as may be permitted by statute in respect to the rent provided for
herein; and
(c) That such reliance by Landlord shall not impair Landlords
right to retake such area or terminate tenancy or any other right granted by the
laws of the State of Florida or in this lease, without regard to this paragraph.
24. The covenants and condition herein contained shall, subject to the
provisions as to assignment, transfer, subletting, apply to and bind the heirs,
successors, executors, administrators and assigns of the parties hereto. All of
the parties hereto shall be jointly and severally liable hereunder.
25. The remedies herein given to the Landlord shall be cumulative and
the exercise of any one remedy by the Landlord shall not be to the exclusion of
any other remedy.
26. This lease shall at all times be construed and subject to the laws
of the State of Florida. Any provision contained herein which conflicts with
such laws shall be construed in the manner required by any such law, and such
law shall control in lieu of any provision.
RULES AND REGULATIONS
27. Landlord may from time to time publish reasonable rules and
regulations necessary to maintain the safety, cleanliness, orderliness and good
functioning of the area; and such rules and regulations shall be as binding upon
Tenant as if contained herein.
TENANT'S PROPERTY
28. Landlord shall not be responsible or liable for any property of
Tenant, and Tenant shall maintain contents insurance upon said property within
the area. Should Tenant fail to maintain such insurance, then in the event of
any loss, unless caused by Landlord's negligence, Landlord shall not be liable,
and Tenant hereby waives any claim or right of action against Landlord.
ATTORNEYS' FEES
29. If any action at law or in equity is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, investigatory expenses in addition to
any other relief that may be available.
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IN WITNESS WHEREOF, the parties hereto set their hands and seals the
day and date set forth above.
"Tenant"
1-800-AutoTow Gulf Coast S.W., Inc.
/s/ Eugene A. Iarocci
---------------------
Eugene A. Iarocci, President
"Landlord"
Muhammad Choudary
/s/ Muhammad Choudary
---------------------
Muhammad Choudary, Landlord
7
EXHIBIT 6.42
LEASE AGREEMENT
THIS AGREEMENT, entered into this 28th day of July, 1999, between Don
Sinclair Lyons and Bobbye Gail Lyons of 9801 Buttercup Circle, Palm Beach
Gardens, Florida, hereinafter called the Lessor or Landlord, party in the first
part, and 1-800-AutoTow Florida, Inc. of the County of Palm Beach and State of
Florida, hereinafter called Lessee or Tenant, party of the second part:
WITNESSETH, that the said Lessor or Landlord does this day lease unto
said Lessee, and said Lessee does hereby hire and take as Tenant the following
described premises:
2178 Stafford Avenue, West Palm Beach, Florida 33409
situate in Palm Beach County in the State of Florida, to be used and occupied by
the Lessee as a vehicle towing and transportation company and attendant uses
thereto, and for no other purposes or uses whatsoever, for the term of one year
with a one-year renewal option, subject and conditioned on the provisions of
clause ten and eleven of this lease beginning the first day of August, 1999, and
ending the last day of July, 2000, at and for the agreed total rent of $24,000
dollars, payable as follows:
$2,000 (two thousand dollars) per month plus applicable sales tax
with all payments to be made to the lessor on the first day of each and every
month in advance without demand at 9801 Buttercup Circle, Palm Beach Gardens,
Florida 33410 or at such other place and to such other person, as the Lessor may
from time to time designate in writing.
The following express stipulations and conditions are made a part of this lease
and are hereby assented to by the Lessee:
FIRST: The Lessee shall not assign this lease, nor sub-let the
premises, without the written consent of the Lessor, which shall not be
unreasonably or arbitrarily withheld from Lessee.
SECOND: Lessee has examined and knows the condition of the premises,
and has received the same in good order and repair, except as herein otherwise
specified; that Lessee will keep premises in good repair, and on termination of
this lease, will yield up the premises to Lessor in good condition and repair
(loss by fire not due to Lessee's neglect and ordinary wear excepted). Lessee
shall allow Lessor free access to premises for purpose of examining or
exhibiting same, or to make any needful repairs or alterations of premises, to
which Lessor and Lessee agree. Lessor agrees that such access shall, to the
extent possible, not be made or sought in a manner that unreasonably interferes
with the daily operation or function of the business of Lessee.
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THIRD: Lessee shall not be liable to Lessor for any damage occasioned
by a condition pre-existing to the formation of this agreement, environmental
damages resulting from its reasonable use of the premises, or damage done or
occasioned by the bursting, leaking or running of any cistern, tank, water,
stream, sewer, or other pipe in, above, on or about the building or premises, or
for any damage done or occasioned by water, snow or ice being on or coming
through the roof, any trapdoor, water closet, waste pipe or otherwise. Lessee
agrees to use the premises solely in the lawful, diligent, and businesslike
operation of a vehicle towing and transportation company and attendant business
thereto.
FOURTH: Lessor affirms that the premises are heretofore in total
compliance with all federal, state, and local rules, regulations and ordinances
and that Lessor indemnifies and holds harmless Lessee from any infractions
thereof up to and including the date of this agreement. Lessee agrees to the
continued adherence to all such rules, regulations and ordinances and shall not
use said premises for any unlawful purpose. Lessor shall pay all ad valorem
taxes assessed upon the premises except an increase in such taxes attributable
to or assessed upon any improvements, additions or equipment installed by
Lessee.
FIFTH: Lessee agrees not to allow the premises to be used for any
purpose other than that specified above. Lessee further agrees that no material
alterations shall be made to the premises absent prior written consent of the
Lessor which shall not be arbitrarily or unreasonably withheld.
SIXTH: Lessee shall maintain the premises in a clean, orderly, sanitary
and safe condition. Lessee shall not store, or permit to be stored on the
premises any trash or other unsightly materials except in properly closed
containers and except as that which is associated with the normal and ordinary
course of the vehicle towing and transportation business. Lessee at its own
expense shall be solely responsible for removal of ice and snow from the
premises, and care of the grass and shrubbery.
SEVENTH: Lessor shall repair any damage to the premises which is not
direct or indirect result of Lessee's willful misconduct, negligence or fault.
So long as the premises remain fit for the operation of Lessee's business,
Lessee shall continue to pay the rents stipulated herein during such period of
repair.
EIGHTH: Lessor, with its agents, representatives and employees, shall
have the right to enter on the premises for the purposes of examination and
inspection to ascertain Lessee's compliance with the terms of this lease and,
upon 30 days' written notice to Lessee.
NINTH: The parties to this lease agree that the agreements herein
contained shall be binding upon, apply and insure to their respective heirs,
executors, administrators, successors and assigns.
TENTH: If the Lessee shall become insolvent or if bankruptcy
proceedings shall be begun by or against the Lessee, before the end of said term
the Lessor is hereby irrevocably authorized at its option, to cancel this lease,
as for a default. Lessor may elect to accept rent from such receiver, trustee,
or other judicial officer during the term of their occupancy in their fiduciary
capacity without affecting Lessor's rights as contained in this contract, but no
receiver, trustee or other judicial officer shall ever have the right, title or
interest in or to the above-described property by virtue of this contract.
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ELEVENTH: Lessee shall have the right to renew this lease on the same
terms and conditions for an additional term of one year. Lessee must give Lessor
notice of its exercise of this renewal option at least 30 days prior to the
expiration of the initial term.
TWELVTH: Right of First Refusal: If during the term of this Lease, or
any renewal thereof, the Landlord wishes to sell the leased property, the
Landlord will first enter into negotiations with Tenant for the purchase of the
property. If Landlord and Tenant fail to reach an agreement for the Tenant to
purchase the property, the Landlord may put the property for sale on the open
market. Any such sale will be subject to the Tenant's rights under this Lease.
IN WITNESS WHEREOF, the parties have executed this instrument for the
purpose herein expressed, the day and year above written.
Witness "Tenant"
1-800-AutoTow Florida, Inc.
/s/ Delmer C. Gowing /s/ Eugene A. Iarocci
- --------------------- ---------------------
Delmer C. Gowing Eugene A. Iarocci, President
Attorney At Law
"Landlord"
/s/ Don S. Lyons
---------------------
Don S. Lyons, Landlord
/s/ Bobbye G. Lyons
---------------------
Bobbye G. Lyons, Landlord
3
EXHIBIT 6.43
LEASE AGREEMENT
THIS AGREEMENT, entered into this 28th day of July, 1999, between Lyons
Autobody, Inc. of 9801 Buttercup Circle, Palm Beach Gardens, Florida,
hereinafter called the Lessor or Landlord, party in the first part, and
1-800-AutoTow Florida, Inc. of the County of Palm Beach and State of Florida,
hereinafter called Lessee or Tenant, party of the second part:
WITNESSETH, that the said Lessor or Landlord does this day lease unto
said Lessee, and said Lessee does hereby hire and take as Tenant the following
described premises:
1107 Old Dixie Highway, Lake Park, Florida 33403
situated in Palm Beach County in the State of Florida, to be used and occupied
by the Lessee as a vehicle towing and transportation company and attendant uses
thereto, and for no other purposes or uses whatsoever, for the term of five (5)
years with a five-year renewal option, subject and conditioned on the provisions
of clause ten and eleven of this lease beginning the first day of August, 1999,
and ending the last day of July, 2004, at and for the agreed total rent of
300,000 dollars, payable as follows:
$5,000 (five thousand dollars) per month plus applicable sales tax;
all payments to be made to the lessor on the first day of each and every month
in advance without demand at 9801 Buttercup Circle, Palm Beach Gardens, Florida
33410 or at such other place and to such other person, as the Lessor may from
time to time designate in writing.
The following express stipulations and conditions are made a part of this lease
and are hereby assented to by the Lessee:
FIRST: The Lessee shall not assign this lease, nor sub-let the
premises, without the written consent of the Lessor, which shall not be
unreasonably or arbitrarily withheld from Lessee.
SECOND: Lessee has examined and knows the condition of the premises,
and has received the same in good order and repair, except as herein otherwise
specified; that Lessee will keep premises in good repair, and on termination of
this lease, will yield up the premises to Lessor in good condition and repair
(loss by fire not due to Lessee's neglect and ordinary wear excepted). Lessee
shall allow Lessor free access to premises for purpose of examining or
exhibiting same, or to make any needful repairs or alterations of premises, to
which Lessor and Lessee agree. Lessor agrees that such access shall, to the
extent possible, not be made or sought in a manner that unreasonably interferes
with the daily operation or function of the business of Lessee.
THIRD: Lessee shall not be liable to Lessor for any damage occasioned
by a condition pre-existing to the formation of this agreement, environmental
damages resulting from its reasonable use of the premises, or damage done or
occasioned by the bursting, leaking or running of any cistern, tank, water,
stream, sewer, or other pipe in, above, on or about the building or premises, or
for any damage done or occasioned by water, snow or ice being on or coming
through the roof, any trapdoor, water closet, waste pipe or otherwise. Lessee
agrees to use the premises solely in the lawful, diligent, and businesslike
operation of a vehicle towing and transportation company and attendant business
thereto.
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FOURTH: Lessor affirms that the premises are heretofore in total
compliance with all federal, state, and local rules, regulations and ordinances
and that Lessor indemnifies and holds harmless Lessee from any infractions
thereof up to and including the date of this agreement. Lessee agrees to the
continued adherence to all such rules, regulations and ordinances and shall not
use said premises for any unlawful purpose. Lessor shall pay all ad valorem
taxes assessed upon the premises except an increase in such taxes attributable
to or assessed upon any improvements, additions or equipment installed by
Lessee.
FIFTH: Lessee agrees not to allow the premises to be used for any
purpose other than that specified above. Lessee further agrees that no material
alterations shall be made to the premises absent prior written consent of the
Lessor which shall not be arbitrarily or unreasonably withheld.
SIXTH: Lessee shall maintain the premises in a clean, orderly, sanitary
and safe condition. Lessee shall not store, or permit to be stored on the
premises any trash or other unsightly materials except in properly closed
containers and except as that which is associated with the normal and ordinary
course of the vehicle towing and transportation business. Lessee at its own
expense shall be solely responsible for removal of ice and snow from the
premises, and care of the grass and shrubbery.
SEVENTH: Lessor shall repair any damage to the premises which is not
direct or indirect result of Lessee's willful misconduct, negligence or fault.
So long as the premises remain fit for the operation of Lessee's business,
Lessee shall continue to pay the rents stipulated herein during such period of
repair.
EIGHTH: Lessor, with its agents, representatives and employees, shall
have the right to enter on the premises for the purposes of examination and
inspection to ascertain Lessee's compliance with the terms of this lease and,
upon 30 days' written notice to Lessee.
NINTH: The parties to this lease agree that the agreements herein
contained shall be binding upon, apply and insure to their respective heirs,
executors, administrators, successors and assigns.
TENTH: If the Lessee shall become insolvent or if bankruptcy
proceedings shall be begun by or against the Lessee, before the end of said term
the Lessor is hereby irrevocably authorized at its option, to cancel this lease,
as for a default. Lessor may elect to accept rent from such receiver, trustee,
or other judicial officer during the term of their occupancy in their fiduciary
capacity without affecting Lessor's rights as contained in this contract, but no
receiver, trustee or other judicial officer shall ever have the right, title or
interest in or to the above-described property by virtue of this contract.
ELEVENTH: Lessee shall have the right to renew this Lease for an
additional term of five (5) years. The new monthly rental shall be subject to a
one-time adjustment based on the net change in the Consumer Price Index (CPI)
during the original term of this Lease. All other terms and conditions are to
remain the same. Lessee must give Lessor notice of its exercise of the renewal
option at least 30 days prior to the expiration of the initial term.
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<PAGE>
TWELVTH: Both the Tenant and Landlord agree to conduct a Phase I
Environmental Inspection on the property prior to the Tenant taking possession.
The Landlord will arrange for the inspection. The cost of the inspection will be
shared equally between the parties. However, the Tenant's portion of the
inspection shall not exceed $1,250 (one thousand two hundred fifty dollars)
without the prior written consent of Tenant.
THIRTEENTH: Right of First Refusal: If during the term of this Lease,
or any renewal thereof, the Landlord wishes to sell the leased property, the
Landlord will first enter into negotiations with Tenant for the purchase of the
property. If Landlord and Tenant fail to reach an agreement for the Tenant to
purchase the property, the Landlord may put the property for sale on the open
market. Any such sale will be subject to the Tenant's rights under this Lease.
IN WITNESS WHEREOF, the parties have executed this instrument for the
purpose herein expressed, the day and year above written.
Witness "Tenant"
1-800-AutoTow Florida, Inc.
/s/ Delmer C. Gowing /s/ Eugene A. Iarocci
- --------------------- ---------------------
Delmer C. Gowing Eugene A. Iarocci, President
Attorney At Law
"Landlord"
/s/ Don S. Lyons
---------------------
Don S. Lyons, Landlord
/s/ Bobbye G. Lyons
---------------------
Bobbye G. Lyons, Landlord
3
EXHIBIT 6.44
LEASE AGREEMENT
THIS AGREEMENT made this 23rd day of July, 1999, by and between Walter
Terenik, hereinafter referred to as "Landlord"; and 1-800-AutoTow Gulf Coast
East, Inc., a Florida Corporation with principal offices in Palm Beach County,
Florida, hereinafter referred to as "Tenant".
WHEREAS Landlord is the owner of the real property located in Lake,
County, which property has a physical address of 114 Guava Street, Lady Lake, FL
32159;
WHEREAS the parties desire to enter a lease agreement to define their
respective rights, duties and liabilities relating to the premises.
WITNESSETH
IN CONSIDERATION of the mutual covenants contained herein and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties agree as follows:
1. Landlord leases to Tenant and Tenant hires and takes as Tenant the
premises at the above physical address, for a term of sixty (60) months. The
rental period shall begin on the 1st day of August (hereinafter the "anniversary
date"), 1999, and shall end on the last day of July, 2004 (hereinafter the
termination date).
2. This lease shall be automatically renewed on the same terms for an
additional twelve month period on the anniversary date first following the
termination date, and on each anniversary date thereafter unless notice to the
contrary is provided by either party to the other at least ninety (90) days in
advance of the termination date and each applicable anniversary of the
termination date thereafter. Each party's respective failure to so notify the
other party will conclusively be deemed that party's affirmative agreement to
extend this lease.
3. The premises herein leased shall be for the exclusive use of Tenant.
RENT
4. The total amount due under the initial period of this lease
agreement is $180,000.00, payable at the rate of $3,000.00 per month plus
applicable sales/use tax. Tenant shall pay the above monthly rental sum in
advance.
PROPERTY ASSESSMENTS
5. All taxes assessed against the property by the Lake County Tax
Appraiser's office shall be paid by Landlord on or before the due date of such
taxes. These include, but are not limited to, all assessments by City, County,
School, and/or Special Districts.
6. Any tax assessment will be paid as it comes due, and will be
chargeable against Landlord. Failure to pay such taxes will constitute a breach
of this agreement. In the event that a tax certificate should issue against the
property as a result of Landlord's failure to pay any tax bill, Tenant may cure
such lien against the property and apply said amount against the monthly lease
obligations.
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7. In the event special assessments are charged against the property,
then Landlord shall be responsible for the payment of the assessment. These
assessments may include water and/or sewer line repair/replacement, road repair
or resurfacing, or any other such assessment as may be made under any Municipal,
County, Special District governmental or quasi-governmental commission, entity,
or other authority.
INSURANCE
8. Tenant shall be responsible for and required to maintain insurance
on the leasehold property. Such insurance must include, but is not limited to:
liability insurance against personal injury for all persons on, within, or about
the leasehold premise whether employees or business invitees/licensees; property
coverage for any damage to the leasehold premise which shall include
hurricane/wind coverage. Landlord reserves the right to specify the amount and
type of insurances to be provided, so long as such insurance is commercially
reasonable in light of all circumstances. Failure to maintain such insurance
shall constitute a breach of this agreement. Landlord shall, at no expense to
Landlord, be named an additional named insured on such policies of insurance.
USE OF PREMISES
9. Tenant shall use or permit the premises to be used for all purposes
consistent with a vehicle towing service and attendant repair services. Tenant
shall not perform any act or use the premises in any manner that may be
prohibited under fire, safety, health or sanitation codes or regulations.
10. Tenant shall comply with all governmental laws, ordinances,
regulations and statutes affecting the premises either now or in the future.
Tenant shall not use the premises in any manner which is unlawful and any such
use shall terminate the lease immediately.
11. Landlord shall put Tenant in actual possession of the premises at
the beginning of the term and hereby covenants that Tenant, on paying the said
rent and performing the covenants herein agreed to, shall peacefully and quietly
have, hold and enjoy the said demised premises for the entire term, subject to
the terms of this Lease. If for any reason Landlord does not deliver possession
of the premises at the commencement of the term, but does so deliver possession
within thirty (30) days of the commencement of the term of the lease, then this
lease shall not be void or voidable. However, there shall be a proportionate
reduction in total rent covering the period between the commencement of the term
and actual delivery of the premises to Tenant, in the event of late delivery by
Landlord. Any delivery of the premises later than thirty (30) days of the
commencement of the term of the lease shall render this lease voidable by
Tenant, and Tenant may so void by providing Landlord with notice that such lease
shall be void if the premises herein leased by Tenant are not delivered within a
period no less than five (5) days after such notice. Landlord shall not be
liable to Tenant for any loss or damage resulting from any failure of Landlord
to deliver the premises to Tenant, except Landlord shall promptly return any
unearned sums paid or deposited by Tenant.
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<PAGE>
12. In the event either party seeks enforcement of this lease against
the other party, then the prevailing party shall be awarded as damages all costs
and reasonable attorney's fees incurred in such enforcement.
13. Landlord represents that there are no environmental violations with
respect to any prior usage of the premises and shall defend and hold Tenant
harmless for any claim made with respect to any such prior usage.
RESPONSIBILITIES OF PARTIES
14. Tenant shall provide and pay for electric power, water, sewage,
garbage collection, all taxes and assessments, and any and all costs or expenses
of normal maintenance of the property subject to normal wear and tear. Tenant
shall also maintain all appliances, heating, air conditioning, plumbing, water
heater, telephone system, backup generator or the like in usable and safe
condition.
15. Tenant will keep the premises in a clean and healthy condition, in
accordance with the ordinances of the applicable municipal government or other
governing body and the direction of the proper authorities; Tenant will keep the
premises in good repair, and at the end of the term will deliver the premises in
good order and condition, reasonable use and wear alone excepted. Landlord or
his agents shall be permitted at any time upon notice during the term hereby
created to enter and examine said premises at any reasonable hour of the day.
Whenever necessary for any repairs, servants and agents of the Landlord shall be
permitted to enter and to make the same. "Reasonable hours" shall be deemed to
be at least twenty-four hours advance notice to Tenant except for the making of
repairs.
16. Tenant will not assign, transfer, or set over this lease, or sublet
all or any part of the premises, without explicit written agreement of the
Landlord, which shall not be unreasonably withheld. Any attempt to transfer,
assign or set over this lease, or to sublet all or any part of the premises
without such explicit written agreement of the Landlord shall immediately
terminate this lease, and Tenant shall remain responsible for all sums due under
this lease.
17. During the three months prior to the expiration of the term hereby
created, if notice to terminate has been given, Tenant will permit the Landlord
or his agents to enter and show the premises to persons desiring to rent the
same during reasonable hours of the day until rented. Any such showings shall be
with at least 24 hours advance notice whenever possible. During the last thirty
(30) days of the three month period prior to the expiration of the term hereby
created, Tenant will permit the Landlord or his agent to place upon the said
premises any notice or sign of "For Rent" or the like, and Tenant shall allow
any such notice or sign to remain there without hindrance or molestation until
rented. Tenant will permit the Landlord or his agent to place upon the said
premises any notice or sign of "For Sale" or the like at any time, and Tenant
shall allow any such notice or sign to remain there without hindrance or
molestation until such property is sold.
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<PAGE>
CONDITION OF PREMISES
18. Landlord's sole liability in the event that any portion of the
premises is denied use to Tenant by any governmental authority or agency shall
be a pro-rata abatement of rent.
19. Tenant shall not remove any leasehold improvements whether made by
Landlord or Tenant, inclusive of window dressings, carpeting, wall coverings,
doors and all other such improvements, unless specifically agreed to by Landlord
in writing.
20. Tenant shall, upon vacating the premises for any reason, leave the
premises in a clean, repaired, tenantable condition, normal wear and tear
excepted, and shall be responsible for all costs or expenses necessary to place
the premises in such condition, including such reasonable charges as may be made
by Landlord for Landlords time and efforts to place such premises into such
proper condition.
DAMAGE TO PREMISES
21. If the premises, during the term of this lease, are destroyed or
damaged by fire, storm or other unavoidable casualty so that they are rendered
unfit for Tenant, or in case Tenant shall be prevented from using the premises
by reason of any action on the part of city or state officers, then the rent or
a just proportionate part thereof according to the nature and extent of the
injury sustained, shall be suspended or abated until the premises shall have
been put in proper condition for use by Tenant, or until Tenant is permitted to
resume use by said city or state officers. In case of fire, Tenant shall give
immediate notice to the Landlord, who shall cause the damage to be repaired with
all convenient speed; but if the premises be so damaged that use by Tenant will
be delayed by more than thirty (30) days, then Tenant shall have the option to
terminate and any prepaid rent unaccrued to the time of such damage shall be
refunded to Tenant together with Tenant's security deposit.
LANDLORD'S LIEN
22. Tenant hereby grants to Landlord a landlord's lien, pursuant to
Florida statutes, in Tenant's property placed in and upon the premises, for
rents and damages which may become due and owing by Tenant.
PROHIBITION AGAINST OTHER LIENS
23. In accordance with Florida Statutes at 713.10, Tenant is
specifically prohibited against contracting for any repairs, construction or
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improvements wherein the premises may be subject to a lien by any laborer,
contractor or material supplier. All such persons shall specifically waive any
and all lien rights otherwise available under law as a condition precedent to
entering the premises, delivering goods and/or performing services. Tenant is
specifically not Landlord's agent for any such repair or improvement, and is
without authority of any type or kind to commit to contracts on behalf of
Landlord, or to subject the premises to any lien. Landlord may cause a short
form of this lease to be recorded in the office of the Recording Clerk of the
county where the premises are located.
SUBORDINATION AND ATTORNMENT
Tenant agrees: (a) that, except as hereinafter provided, this Lease is,
and all of Tenant's rights hereunder are and shall always be, subject and
subordinate to any mortgages or security instruments (collectively called
"Mortgage") that now exist, or may hereafter be placed upon the premises or any
part thereof, and to all advances made or to be made thereunder and to the
interest thereon, and all renewals, replacements, modifications, consolidations,
or extensions thereof, now or at any future time, (b) that if the holder of any
such Mortgage ("Mortgagee") or if the purchaser at any foreclosure sale or at
any sale under a power of sale contained in any Mortgage shall at its sole
option so request, Tenant will attorn to, and recognize such Mortgagee or
purchaser, as the case may be, as Landlord under this Lease for the balance then
remaining of the lease Term, subject to all the terms of this Lease Agreement
and any extensions thereof; and (c) that the aforesaid provision shall be self
operative and no further instrument or document shall be necessary unless
required by any such Mortgagee or purchaser in which event Tenant shall execute
such instrument or document within ten (10) days after the request therefor.
Should Landlord or any Mortgagee or purchaser desire confirmation of such
subordination or attornment, as the case may be, Tenant upon written request,
and from time to time, will execute and deliver without charge and in form
satisfactory to Landlord, the Mortgagee or the purchaser all instruments and/or
documents that may be requested to acknowledge such subordination and/or
agreement to attorn, in recordable form.
BREACH
24. Tenant shall breach this lease and shall be considered in default
if:
(a) Tenant fails to pay any rent due within seven (7) days of
the date due, or any late payment penalties due to Landlord; and Landlord's
acceptance of any rent paid late does not waive thereby, Landlord's right to
such late payment penalty;
(b) Tenant fails to perform or comply with any of the
covenants or conditions of this lease and such failure continues for a period of
thirty (30) days after receipt of notice thereof from Landlord;
(c) Breach by Tenant shall be deemed as a notice under
paragraph 24(a) as of the date of breach, if such breach is not cured timely by
Tenant, as provided in this Lease Agreement;
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(d) In the event of Tenant's default on account of failure to
pay rent, Landlord shall be entitled to damages as provided herein, inclusive of
any late payment penalties accrued earlier but not paid, inclusive of a late
payment penalty of $ 150.00 for the rent due but unpaid which caused such
default.
25. In the event of a breach in the lease as set forth above, the
rights of the Landlord shall be as follows:
(a) Landlord shall have the right to terminate the lease
subject to paragraph 26 below, by giving to Tenant not less than ten (10) days
notice. On expiration of the time fixed in the notice, the lease shall
terminate, except as to Tenant's liability, as of the date fixed in the notice
of cancellation; and
(b) All notices, demands or writings in this lease shall be
deemed to have been fully given when made in writing and deposited in U. S.
Mail, certified return receipt requested, to the addresses of the respective
parties first stated herein, or at the leased premises. The addresses to which
any notice, demand or writing may be given as above provided may be changed by
written notice given by such party as above provided.
26. Neither party shall have the right to cancel this lease for default
of the other party unless such default remains for ten (10) days after notice in
writing given such defaulting party specifying the nature of the default;
provided, however, that if, because of the circumstances beyond the Landlord's
control, the Landlord cannot cure the default on his part within such time, and
such default does not interfere with Tenant's use, occupancy and quiet enjoyment
of the demised premises, then the Landlord shall have reasonable additional time
in which to cure such default.
27. If Tenant holds possession of the premises after the term of this
lease, Tenant shall become a Tenant from month to month. Tenant shall continue
to be a month to month Tenant until the tenancy shall be terminated by the
Landlord or until Tenant has given to Landlord a written notice of at least one
(1) month, prior to the date of termination of the monthly tenancy of Tenant's
intention to terminate the tenancy.
28. If either party notifies the other as provided herein at section 2
of the intention not to extend such lease, then such lease shall terminate on
the termination date. Tenant shall timely remove from the premises, and shall
leave the premises in good and proper condition. Failure to so remove and leave
the premises in good and proper condition shall conclusively establish that:
(a) That Tenant has held over; and
(b) That Tenant has knowingly accepted as a month to month
rent such sum as may be permitted by statute in respect to the rent provided for
herein; and
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(c) That such reliance by Landlord shall not impair Landlords
right to retake such premises or terminate tenancy or any other right granted by
the laws of the State of Florida or in this lease, without regard to this
paragraph.
29. The covenants and condition herein contained shall, subject to the
provisions as to assignment, transfer, subletting, apply to and bind the heirs,
successors, executors, administrators and assigns of the parties hereto. All of
the parties hereto shall be jointly and severally liable hereunder.
30. The remedies herein given to the Landlord shall be cumulative and
the exercise of any one remedy by the Landlord shall not be to the exclusion of
any other remedy.
31. This lease shall at all times be construed and subject to the laws
of the State of Florida. Any provision contained herein which conflicts with
such laws shall be construed in the manner required by any such law, and such
law shall control in lieu of any provision.
RULES AND REGULATIONS
32. Landlord may from time to time publish reasonable rules and
regulations necessary to maintain the safety, cleanliness, orderliness and good
functioning of the premises; and such rules and regulations shall be as binding
upon Tenant as if contained herein.
TENANT'S PROPERTY
33. Landlord shall not be responsible or liable for any property of
Tenant, and Tenant shall maintain contents insurance upon said property within
the premises. Should Tenant fail to maintain such insurance, then in the event
of any loss, unless caused by Landlord's negligence, Landlord shall not be
liable, and Tenant hereby waives any claim or right of action against Landlord.
ATTORNEYS' FEES
34. If any action at law or in equity is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, investigatory expenses in addition to
any other relief that may be available.
IN WITNESS WHEREOF, the parties hereto set their hands and seals the
day and date set forth above.
Witnessed: "Tenant"
1-800-AutoTow Gulf Coast East, Inc.
/s/ Delmer C. Gowing /s/ Steven B. Teeters
- --------------------- -------------------
Delmer C. Gowing Steven B. Teeters
Attorney at Law Treasurer
"Landlord"
/s/ Walter Terenik
---------------------
Walter Terenik
Landlord
7
EXHIBIT 6.45
SUBLEASE AGREEMENT
THIS AGREEMENT made this 22nd day of July, 1999, by and between Jim
Stewart, hereinafter referred to as "Sub-lessor"; and 1-800-AutoTow Gulf Coast
East, Inc., a Florida Corporation with principal offices in Palm Beach County,
Florida, hereinafter referred to as "Tenant".
WHEREAS Sub-lessor leases from Louis J.M. and Lois-Lynn Bellemare, the
owners of the real property located in Manatee County, which property has a
physical address of 2509 9th Street West, Bradenton, Florida 34205.
WHEREAS the parties desire to enter a sublease agreement to define
their respective rights, duties and liabilities relating to the potion of the
premises to be subleased.
WHEREAS the parties agree that if for any reason the lease between the
Owner and the Sub-lessor is cancelled or not renewed, this sub-lease shall be
null and void.
WITNESSETH
IN CONSIDERATION of the mutual covenants contained herein and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties agree as follows:
1. Sub-lessor subleases to Tenant and Tenant hires and takes as Tenant
the agreed to portion of the premises at the above physical address, for a term
of thirty-six (36) months. The rental period shall begin on the 1st day of
August, (hereinafter the "anniversary date"), 1999, and shall end on the last
day of July, 2002 (hereinafter the termination date).
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2. This Sublease shall be automatically renewed on the same terms for
an additional twelve month period on the anniversary date first following the
termination date, and for an additional twelve month period thereafter unless
notice to the contrary is provided by the Tenant at least ninety (90) days in
advance of the termination date and each applicable anniversary of the
termination date thereafter. The Sub-lessee's failure to so notify the other
party will conclusively be deemed that party's affirmative agreement to extend
this Sublease.
3. The agreed to portion of the premises as described in Exhibit A
herein Subleased shall be for the exclusive use of Tenant.
RENT
4. The total amount due under the initial period of this Sublease
agreement is $55,800.00, payable at the rate of $1,550.00 per month plus
applicable sales/use tax. Tenant shall pay the above monthly rental sum in
advance.
PROPERTY ASSESSMENTS
5. All taxes assessed against the property by the Manatee County Tax
Appraiser's office shall be paid by Sub-Lessor on or before the due date of such
taxes. These include, but are not limited to, all assessments by City, County,
School, and/or Special Districts.
INSURANCE
6. Tenant shall be responsible for and required to maintain insurance
on its operations conducted on the property being Sub-leased. Such insurance
must include, but is not limited to: liability insurance against personal injury
for all persons on, within, or about the Subleased premises whether employees or
business invitees/licensees. Failure to maintain such insurance shall constitute
a breach of this agreement. Sub-lessor shall, at no expense to Sub-lessor, be
named an additional named insured on such policies of insurance.
USE OF PREMISES
7. Tenant shall use or permit the portion of the premises to be used
for all purposes consistent with a vehicle towing service and attendant repair
services. Tenant shall not perform any act or use the premises in any manner
that may be prohibited under fire, safety, health or sanitation codes or
regulations.
8. Tenant shall comply with all governmental laws, ordinances,
regulations and statutes affecting the portion of the premises either now or in
the future. Tenant shall not use the portion of the premises in any manner which
is unlawful and any such use shall terminate the Sublease immediately.
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9. Sub-lessor shall put Tenant in actual possession of the portion of
the premises at the beginning of the term and hereby covenants that Tenant, on
paying the said rent and performing the covenants herein agreed to, shall
peacefully and quietly have, hold and enjoy the said demised portion of the
premises for the entire term, subject to the terms of this Sublease. If for any
reason Sub-lessor does not deliver possession of the portion of the premises at
the commencement of the term, but does so deliver possession within thirty (30)
days of the commencement of the term of the Sublease, then this Sublease shall
not be void or voidable. However, there shall be a proportionate reduction in
total rent covering the period between the commencement of the term and actual
delivery of the portion of the premises to Tenant, in the event of late delivery
by Sub-lessor. Any delivery of the portion of the premises later than thirty
(30) days of the commencement of the term of the Sublease shall render this
Sublease voidable by Tenant, and Tenant may so void by providing Sub-lessor with
notice that such Sublease shall be void if the portion of the premises herein
Subleased by Tenant are not delivered within a period no less than five (5) days
after such notice. Sub-lessor shall not be liable to Tenant for any loss or
damage resulting from any failure of Sub-lessor to deliver the portion of the
premises to Tenant, except Sub-lessor shall promptly return any unearned sums
paid or deposited by Tenant.
10. In the event either party seeks enforcement of this Sublease
against the other party, then the prevailing party shall be awarded as damages
all costs and reasonable attorney's fees incurred in such enforcement.
11. Sub-lessor represents that there are no environmental violations
with respect to any prior usage of the premises and shall defend and hold Tenant
harmless for any claim made with respect to any such prior usage.
RESPONSIBILITIES OF PARTIES
12. Tenant shall provide and pay for its portion of the electric power,
water, sewage, garbage collection, and any and all costs or expenses of normal
maintenance of the portion of the property it Subleases subject to normal wear
and tear. Tenant shall also maintain its appliances, heating, air conditioning,
plumbing, water heater, telephone system, backup generator or the like in usable
and safe condition.
13. Tenant will keep the its portion of the premises in a clean and
healthy condition, in accordance with the ordinances of the applicable municipal
government or other governing body and the direction of the proper authorities;
Tenant will keep its portion of the premises in good repair, and at the end of
the term will deliver its portion of the premises in good order and condition,
reasonable use and wear alone excepted. Sub-lessor or his agents shall be
permitted at any time upon notice during the term hereby created to enter and
examine said premises at any reasonable hour of the day. Whenever necessary for
any repairs, servants and agents of the Sub-lessor shall be permitted to enter
and to make the same. "Reasonable hours" shall be deemed to be at least
twenty-four hours advance notice to Tenant except for the making of repairs.
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14. Tenant will not assign, transfer, or set over this Sublease, or
sublet all or any part of the premises, without explicit written agreement of
the Sub-lessor, which shall not be unreasonably withheld. Any attempt to
transfer, assign or set over this Sublease, or to sublet all or any part of the
premises without such explicit written agreement of the Sub-lessor shall
immediately terminate this Sublease, and Tenant shall remain responsible for all
sums due under this Sublease.
15. During the three months prior to the expiration of the term hereby
created, if notice to terminate has been given, Tenant will permit the
Sub-lessor or his agents to enter and show its portion of the premises to
persons desiring to rent the same during reasonable hours of the day until
rented. Any such showings shall be with at least 24 hours advance notice
whenever possible. During the last thirty (30) days of the three month period
prior to the expiration of the term hereby created, Tenant will permit the
Sub-lessor or his agent to place upon the said premises any notice or sign of
"For Rent" or the like, and Tenant shall allow any such notice or sign to remain
there without hindrance or molestation until rented. Tenant will permit the
Sub-lessor or his agent to place upon the said premises any notice or sign of
"For Sale" or the like at any time, and Tenant shall allow any such notice or
sign to remain there without hindrance or molestation until such property is
sold.
CONDITION OF PREMISES
16. Sub-lessor's sole liability in the event that any portion of the
premises is denied use to Tenant by any governmental authority or agency shall
be a pro-rata abatement of rent.
17. Tenant shall not remove any Sublease hold improvements whether made
by Sub-lessor or Tenant, inclusive of window dressings, carpeting, wall
coverings, doors and all other such improvements, unless specifically agreed to
by Sub-lessor in writing.
18. Tenant shall, upon vacating its portion of the premises for any
reason, leave its portion of the premises in a clean, repaired, tenantable
condition, normal wear and tear excepted, and shall be responsible for all costs
or expenses necessary to place the premises in such condition, including such
reasonable charges as may be made by Sub-lessor for Sub-lessors time and efforts
to place such premises into such proper condition.
DAMAGE TO PREMISES
19. If the premises, during the term of this Sublease, are destroyed or
damaged by fire, storm or other unavoidable casualty so that they are rendered
unfit for Tenant, or in case Tenant shall be prevented from using its portion of
the premises by reason of any action on the part of city or state officers, then
the rent or a just proportionate part thereof according to the nature and extent
of the injury sustained, shall be suspended or abated until the premises shall
have been put in proper condition for use by Tenant, or until Tenant is
permitted to resume use by said city or state officers. In case of fire, Tenant
shall give immediate notice to the Sub-lessor, who shall cause the damage to be
repaired with all convenient speed; but if the premises are so damaged that use
by Tenant will be delayed by more than thirty (30) days, then Tenant shall have
the option to terminate and any prepaid rent unaccrued to the time of such
damage shall be refunded to Tenant together with Tenant's security deposit.
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PROHIBITION AGAINST OTHER LIENS
20. In accordance with Florida Statutes at 713.10, TENANT IS
SPECIFICALLY PROHIBITED AGAINST CONTRACTING FOR ANY REPAIRS, CONSTRUCTION OR
IMPROVEMENTS WHEREIN THE PREMISES MAY BE SUBJECT TO A LIEN BY ANY LABORER,
CONTRACTOR OR MATERIAL SUPPLIER. All such persons shall specifically waive any
and all lien rights otherwise available under law as a condition precedent to
entering the premises, delivering goods and/or performing services. Tenant is
specifically not Sub-lessor's agent for any such repair or improvement, and is
without authority of any type or kind to commit to contracts on behalf of
Sub-lessor, or to subject the premises to any lien. Sub-lessor may cause a short
form of this Sublease to be recorded in the office of the Recording Clerk of the
county where the premises are located.
SUBORDINATION AND ATTORNMENT
Tenant agrees: (a) that, except as hereinafter provided, this Sublease
is, and all of Tenant's rights hereunder are and shall always be, subject and
subordinate to any mortgages or security instruments (collectively called
"Mortgage") that now exist, or may hereafter be placed upon the premises or any
part thereof, and to all advances made or to be made thereunder and to the
interest thereon, and all renewals, replacements, modifications, consolidations,
or extensions thereof, now or at any future time, (b) that if the holder of any
such Mortgage ("Mortgagee") or if the purchaser at any foreclosure sale or at
any sale under a power of sale contained in any Mortgage shall at its sole
option so request, Tenant will attorn to, and recognize such Mortgagee or
purchaser, as the case may be, as Sub-lessor under this Sublease for the balance
then remaining of the Sublease Term, subject to all the terms of this Sublease
Agreement and any extensions thereof; and (c) that the aforesaid provision shall
be self operative and no further instrument or document shall be necessary
unless required by any such Mortgagee or purchaser in which event Tenant shall
execute such instrument or document within ten (10) days after the request
therefor. Should Sub-lessor or any Mortgagee or purchaser desire confirmation of
such subordination or attornment, as the case may be, Tenant upon written
request, and from time to time, will execute and deliver without charge and in
form satisfactory to Sub-lessor, the Mortgagee or the purchaser all instruments
and/or documents that may be requested to acknowledge such subordination and/or
agreement to attorn, in recordable form.
BREACH
21. Tenant shall breach this Sublease and shall be considered in
default if:
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(a) Tenant fails to pay any rent due within seven (7) days of
the date due, and after notice is received.
(b) Tenant fails to perform or comply with any of the
non-monetary covenants or conditions of this Sublease and such failure continues
for a period of thirty (30) days after receipt of notice thereof from
Sub-lessor;
(c) Breach by Tenant shall be deemed as a notice under
paragraph 22(a) as of the date of breach, if such breach is not cured timely by
Tenant, as provided in this Sublease Agreement;
22. In the event of a breach in the Sublease as set forth above, the
rights of the Sub-lessor shall be as follows:
(a) Sub-lessor shall have the right to terminate the Sublease
subject to paragraph 23 below, by giving to Tenant not less than thirty (30)
days notice. On expiration of the time fixed in the notice, the Sublease shall
terminate, except as to Tenant's liability, as of the date fixed in the notice
of cancellation; and
(b) All notices, demands or writings in this Sublease shall be
deemed to have been fully given when made in writing and deposited in U. S.
Mail, certified return receipt requested, to the addresses of the respective
parties first stated herein, or at the Subleased premises. The addresses to
which any notice, demand or writing may be given as above provided may be
changed by written notice given by such party as above provided.
23. Neither party shall have the right to cancel this Sublease for
default of the other party unless such default remains for thirty (30) days
after notice in writing given such defaulting party specifying the nature of the
default; provided, however, that if, because of the circumstances beyond the
Sub-lessor's control, the Sub-lessor cannot cure the default on his part within
such time, and such default does not interfere with Tenant's use, occupancy and
quiet enjoyment of the demised premises, then the Sub-lessor shall have
reasonable additional time in which to cure such default.
24. If Tenant holds possession of the premises after the term of this
Sublease, Tenant shall become a Tenant from month to month. Tenant shall
continue to be a month to month Tenant until the tenancy shall be terminated by
the Sub-lessor or until Tenant has given to Sub-lessor a written notice of at
least one (1) month, prior to the date of termination of the monthly tenancy of
Tenant's intention to terminate the tenancy.
25. If either party notifies the other as provided herein at section 2
of the intention not to extend such Sublease, then such Sublease shall terminate
on the termination date. Tenant shall timely remove from the premises, and shall
leave the premises in good and proper condition. Failure to so remove and leave
the premises in good and proper condition shall conclusively establish that:
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(a) That Tenant has held over; and
(b) That Tenant has knowingly accepted as a month to month
rent such sum as may be permitted by statute in respect to the rent provided for
herein; and
(c) That such reliance by Sub-lessor shall not impair
Sub-lessors right to retake such premises or terminate tenancy or any other
right granted by the laws of the State of Florida or in this Sublease, without
regard to this paragraph.
26. The covenants and condition herein contained shall, subject to the
provisions as to assignment, transfer, subletting, apply to and bind the heirs,
successors, executors, administrators and assigns of the parties hereto. All of
the parties hereto shall be jointly and severally liable hereunder.
27. The remedies herein given to the Sub-lessor shall be cumulative and
the exercise of any one remedy by the Sub-lessor shall not be to the exclusion
of any other remedy.
28. This Sublease shall at all times be construed and subject to the
laws of the State of Florida. Any provision contained herein which conflicts
with such laws shall be construed in the manner required by any such law, and
such law shall control in lieu of any provision.
RULES AND REGULATIONS
29. Sub-lessor may from time to time publish reasonable rules and
regulations necessary to maintain the safety, cleanliness, orderliness and good
functioning of the premises; and such rules and regulations shall be as binding
upon Tenant as if contained herein.
TENANT'S PROPERTY
30. Sub-lessor shall not be responsible or liable for any property of
Tenant, and Tenant shall maintain contents insurance upon said property within
the premises. Should Tenant fail to maintain such insurance, then in the event
of any loss, unless caused by Sub-lessor's negligence, Sub-lessor shall not be
liable, and Tenant hereby waives any claim or right of action against
Sub-lessor.
ATTORNEYS' FEES
31. If any action at law or in equity is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, investigatory expenses in addition to
any other relief that may be available.
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IN WITNESS WHEREOF, the parties hereto set their hands and seals the
day and date set forth above.
Witnessed: "Tenant"
1-800-AutoTow Gulf Coast East, Inc.
/s/ Delmer C. Gowing /s/ Steven B. Teeters
- --------------------- -------------------
Delmer C. Gowing Steven B. Teeters
Attorney at Law Treasurer
"Sub-lessor"
/s/ Jim Stewart
---------------------
Jim Stewart, Sub-lessor
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EXHIBIT 6.46
SUBLEASE AGREEMENT
THIS AGREEMENT made this 22nd day of July, 1999, by and between Dennis
W. Meyer, Inc., hereinafter referred to as "Sub-lessor"; and 1-800-AutoTow Gulf
Coast East, Inc., a Florida Corporation with principal offices in Palm Beach
County, Florida, hereinafter referred to as "Tenant".
WHEREAS Sub-lessor leases from Sheldon Wind Trustee: of the 2600 24th
Street Trust, the owners of the real property located in Pinellas County, which
property has a physical address of 2600 24th Street North, St. Petersburg,
Florida 33615.
WHEREAS the parties desire to enter a sublease agreement to define
their respective rights, duties and liabilities relating to the potion of the
premises to be subleased.
WHEREAS the parties agree that if for any reason the lease between the
Owner and the Sub-lessor is cancelled or not renewed, this sub-lease shall be
null and void.
WITNESSETH
IN CONSIDERATION of the mutual covenants contained herein and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties agree as follows:
1. TERM Sub-lessor subleases to Tenant and Tenant hires and takes as
Tenant the premises at the above physical address, for the remaining term of the
original Lease. The rental period shall begin on the 1st day of August, 1999,
and shall end January 31, 2002 (hereinafter the termination date).
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2. RENT The Sub-Lessee hereby covenants and agrees to pay rent to
Sub-Lessor in the amount of $2,575 (plus applicable sales tax) subject to an
annual 3% increase on February 26 of each year during the term of the sublease.
3. PROPERTY ASSESSMENTS All taxes assessed against the property by the
Pinellas County Tax Appraiser's office shall be paid by Sub-Lessee to
Sub-Lessor.
4. INSURANCE Tenant shall be responsible for and required to maintain
insurance on its operations conducted on the property being Sub-leased. Such
insurance must include, but is not limited to: liability insurance against
personal injury for all persons on, within, or about the Subleased premises
whether employees or business invitees/licensees. In addition, Sub-Lessee will
maintain building and property coverage in the amount of $100,000 and $500,000
in liability coverage. Failure to maintain such insurance shall constitute a
breach of this agreement. Sub-lessor shall, at no expense to Sub-lessor, be
named an additional named insured on such policies of insurance.
5. USE OF PREMISES Tenant shall use or permit the premises to be used
for all purposes consistent with a vehicle towing service and attendant repair
services. Tenant shall not perform any act or use the premises in any manner
that may be prohibited under fire, safety, health or sanitation codes or
regulations.
Tenant shall comply with all governmental laws, ordinances, regulations
and statutes affecting the premises either now or in the future. Tenant shall
not use the premises in any manner which is unlawful and any such use shall
terminate the Sublease immediately.
Sub-lessor shall put Tenant in actual possession of the premises at the
beginning of the term and hereby covenants that Tenant, on paying the said rent
and performing the covenants herein agreed to, shall peacefully and quietly
have, hold and enjoy the said demised premises for the entire term, subject to
the terms of this Sublease. If for any reason Sub-lessor does not deliver
possession of the premises at the commencement of the term, but does so deliver
possession within thirty (30) days of the commencement of the term of the
Sublease, then this Sublease shall not be void or voidable. However, there shall
be a proportionate reduction in total rent covering the period between the
commencement of the term and actual delivery of the premises to Tenant, in the
event of late delivery by Sub-lessor. Any delivery of the premises later than
thirty (30) days of the commencement of the term of the Sublease shall render
this Sublease voidable by Tenant, and Tenant may so void by providing Sub-lessor
with notice that such Sublease shall be void if the premises herein Subleased by
Tenant are not delivered within a period no less than five (5) days after such
notice. Sub-lessor shall not be liable to Tenant for any loss or damage
resulting from any failure of Sub-lessor to deliver the premises to Tenant,
except Sub-lessor shall promptly return any unearned sums paid or deposited by
Tenant.
In the event either party seeks enforcement of this Sublease against
the other party, then the prevailing party shall be awarded as damages all costs
and reasonable attorney's fees incurred in such enforcement.
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Sub-lessor represents that there are no environmental violations with
respect to any prior usage of the premises and shall defend and hold Tenant
harmless for any claim made with respect to any such prior usage.
6. RESPONSIBILITIES OF PARTIES Tenant shall provide and pay for
electric power, water, sewage, garbage collection, and any and all costs or
expenses of normal maintenance of the portion of the property it Subleases
subject to normal wear and tear. Tenant shall also maintain its appliances,
heating, air conditioning, plumbing, water heater, telephone system, backup
generator or the like in usable and safe condition.
Tenant will keep the premises in a clean and healthy condition, in
accordance with the ordinances of the applicable municipal government or other
governing body and the direction of the proper authorities; Tenant will keep the
premises in good repair, and at the end of the term will deliver the premises in
good order and condition, reasonable use and wear alone excepted. Sub-lessor or
his agents shall be permitted at any time upon notice during the term hereby
created to enter and examine said premises at any reasonable hour of the day.
Whenever necessary for any repairs, servants and agents of the Sub-lessor shall
be permitted to enter and to make the same. "Reasonable hours" shall be deemed
to be at least twenty-four hours advance notice to Tenant except for the making
of repairs.
Tenant will not assign, transfer, or set over this Sublease, or sublet
all or any part of the premises, without explicit written agreement of the
Sub-lessor, which shall not be unreasonably withheld. Any attempt to transfer,
assign or set over this Sublease, or to sublet all or any part of the premises
without such explicit written agreement of the Sub-lessor shall immediately
terminate this Sublease, and Tenant shall remain responsible for all sums due
under this Sublease.
During the three months prior to the expiration of the term hereby
created, if notice to terminate has been given, Tenant will permit the
Sub-lessor or his agents to enter and show its portion of the premises to
persons desiring to rent the same during reasonable hours of the day until
rented. Any such showings shall be with at least 24 hours advance notice
whenever possible. During the last thirty (30) days of the three month period
prior to the expiration of the term hereby created, Tenant will permit the
Sub-lessor or his agent to place upon the said premises any notice or sign of
"For Rent" or the like, and Tenant shall allow any such notice or sign to remain
there without hindrance or molestation until rented. Tenant will permit the
Sub-lessor or his agent to place upon the said premises any notice or sign of
"For Sale" or the like at any time, and Tenant shall allow any such notice or
sign to remain there without hindrance or molestation until such property is
sold.
7. CONDITION OF PREMISES Sub-lessor's sole liability in the event that
any portion of the premises is denied use to Tenant by any governmental
authority or agency shall be a pro-rata abatement of rent.
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Tenant shall not remove any Sublease hold improvements whether made by
Sub-lessor or Tenant, inclusive of window dressings, carpeting, wall coverings,
doors and all other such improvements, unless specifically agreed to by
Sub-lessor in writing.
Tenant shall, upon vacating the premises for any reason, leave the
premises in a clean, repaired, tenantable condition, normal wear and tear
excepted, and shall be responsible for all costs or expenses necessary to place
the premises in such condition, including such reasonable charges as may be made
by Sub-lessor for Sub-lessors time and efforts to place such premises into such
proper condition.
8. DAMAGE TO PREMISES If the premises, during the term of this
Sublease, are destroyed or damaged by fire, storm or other unavoidable casualty
so that they are rendered unfit for Tenant, or in case Tenant shall be prevented
from using the premises by reason of any action on the part of city or state
officers, then the rent or a just proportionate part thereof according to the
nature and extent of the injury sustained, shall be suspended or abated until
the premises shall have been put in proper condition for use by Tenant, or until
Tenant is permitted to resume use by said city or state officers. In case of
fire, Tenant shall give immediate notice to the Sub-lessor, who shall cause the
damage to be repaired with all convenient speed; but if the premises are so
damaged that use by Tenant will be delayed by more than thirty (30) days, then
Tenant shall have the option to terminate and any prepaid rent unaccrued to the
time of such damage shall be refunded to Tenant together with Tenant's security
deposit.
9. PROHIBITION AGAINST OTHER LIENS In accordance with Florida Statutes
at 713.10, Tenant is specifically prohibited against contracting for any
repairs, construction or improvements wherein the premises may be subject to a
lien by any laborer, contractor or material supplier. All such persons shall
specifically waive any and all lien rights otherwise available under law as a
condition precedent to entering the premises, delivering goods and/or performing
services. Tenant is specifically not Sub-lessor's agent for any such repair or
improvement, and is without authority of any type or kind to commit to contracts
on behalf of Sub-lessor, or to subject the premises to any lien. Sub-lessor may
cause a short form of this Sublease to be recorded in the office of the
Recording Clerk of the county where the premises are located.
10. SUBORDINATION AND ATTORNMENT Tenant agrees: (a) that, except as
hereinafter provided, this Sublease is, and all of Tenant's rights hereunder are
and shall always be, subject and subordinate to any mortgages or security
instruments (collectively called "Mortgage") that now exist, or may hereafter be
placed upon the premises or any part thereof, and to all advances made or to be
made thereunder and to the interest thereon, and all renewals, replacements,
modifications, consolidations, or extensions thereof, now or at any future time,
(b) that if the holder of any such Mortgage ("Mortgagee") or if the purchaser at
any foreclosure sale or at any sale under a power of sale contained in any
Mortgage shall at its sole option so request, Tenant will attorn to, and
recognize such Mortgagee or purchaser, as the case may be, as Sub-lessor under
this Sublease for the balance then remaining of the Sublease Term, subject to
all the terms of this Sublease Agreement and any extensions thereof; and (c)
that the aforesaid provision shall be self operative and no further instrument
or document shall be necessary unless required by any such Mortgagee or
purchaser in which event Tenant shall execute such instrument or document within
ten (10) days after the request therefor. Should Sub-lessor or any Mortgagee or
purchaser desire confirmation of such subordination or attornment, as the case
may be, Tenant upon written request, and from time to time, will execute and
deliver without charge and in form satisfactory to Sub-lessor, the Mortgagee or
the purchaser all instruments and/or documents that may be requested to
acknowledge such subordination and/or agreement to attorn, in recordable form.
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11. BREACH Tenant shall breach this Sublease and shall be considered in
default if:
(a) Tenant fails to pay any rent due within seven (7) days of
the date due, and after notice is received.
(b) Tenant fails to perform or comply with any of the
non-monetary covenants or conditions of this Sublease and such failure continues
for a period of thirty (30) days after receipt of notice thereof from
Sub-lessor;
(c) Breach by Tenant shall be deemed as a notice under
paragraph 22(a) as of the date of breach, if such breach is not cured timely by
Tenant, as provided in this Sublease Agreement;
In the event of a breach in the Sublease as set forth above, the rights
of the Sub-lessor shall be as follows:
(a) Sub-lessor shall have the right to terminate the Sublease
subject to paragraph (c) below, by giving to Tenant not less than thirty (30)
days notice. On expiration of the time fixed in the notice, the Sublease shall
terminate, except as to Tenant's liability, as of the date fixed in the notice
of cancellation; and
(b) All notices, demands or writings in this Sublease shall be
deemed to have been fully given when made in writing and deposited in U. S.
Mail, certified return receipt requested, to the addresses of the respective
parties first stated herein, or at the Subleased premises. The addresses to
which any notice, demand or writing may be given as above provided may be
changed by written notice given by such party as above provided.
(c) Neither party shall have the right to cancel this Sublease
for default of the other party unless such default remains for thirty (30) days
after notice in writing given such defaulting party specifying the nature of the
default; provided, however, that if, because of the circumstances beyond the
Sub-lessor's control, the Sub-lessor cannot cure the default on his part within
such time, and such default does not interfere with Tenant's use, occupancy and
quiet enjoyment of the demised premises, then the Sub-lessor shall have
reasonable additional time in which to cure such default.
If Tenant holds possession of the premises after the term of this
Sublease, Tenant shall become a Tenant from month to month. Tenant shall
continue to be a month to month Tenant until the tenancy shall be terminated by
the Sub-lessor or until Tenant has given to Sub-lessor a written notice of at
least one (1) month, prior to the date of termination of the monthly tenancy of
Tenant's intention to terminate the tenancy.
On the termination date, Tenant shall timely remove from the premises,
and shall leave the premises in good and proper condition. Failure to so remove
and leave the premises in good and proper condition shall conclusively establish
that:
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(a) That Tenant has held over; and
(b) That Tenant has knowingly accepted as a month to month
rent such sum as may be permitted by statute in respect to the rent provided for
herein; and
(d) That such reliance by Sub-lessor shall not impair
Sub-lessors right to retake such premises or terminate tenancy or any other
right granted by the laws of the State of Florida or in this Sublease, without
regard to this paragraph.
The covenants and condition herein contained shall, subject to the
provisions as to assignment, transfer, subletting, apply to and bind the heirs,
successors, executors, administrators and assigns of the parties hereto. All of
the parties hereto shall be jointly and severally liable hereunder.
The remedies herein given to the Sub-lessor shall be cumulative and the
exercise of any one remedy by the Sub-lessor shall not be to the exclusion of
any other remedy.
This Sublease shall at all times be construed and subject to the laws
of the State of Florida. Any provision contained herein which conflicts with
such laws shall be construed in the manner required by any such law, and such
law shall control in lieu of any provision.
12. RULES AND REGULATIONS Sub-lessor may from time to time publish
reasonable rules and regulations necessary to maintain the safety, cleanliness,
orderliness and good functioning of the premises; and such rules and regulations
shall be as binding upon Tenant as if contained herein.
13. TENANT'S PROPERTY Sub-lessor shall not be responsible or liable for
any property of Tenant, and Tenant shall maintain contents insurance upon said
property within the premises. Should Tenant fail to maintain such insurance,
then in the event of any loss, unless caused by Sub-lessor's negligence,
Sub-lessor shall not be liable, and Tenant hereby waives any claim or right of
action against Sub-lessor.
14. ATTORNEYS' FEES If any action at law or in equity is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, investigatory expenses in addition to
any other relief that may be available.
IN WITNESS WHEREOF, the parties hereto set their hands and seals the
day and date set forth above.
Witnessed: "Tenant"
1-800-AutoTow Gulf Coast East, Inc.
/s/ Delmer C. Gowing /s/ Steven B. Teeters
- --------------------- -------------------
Delmer C. Gowing Steven B. Teeters
Attorney at Law Treasurer
"Sub-lessor"
/s/ Dennis Meyer
---------------------
Dennis Meyer, Sub-lessor
6
EXHIBIT 6.47
LEASE AGREEMENT
THIS AGREEMENT made this 22nd day of July, 1999, by and between FRANK
RICE, 9447 W. Hillsborough Ave, Tampa, FL 33615 in Hillsborough County, Florida,
hereinafter referred to as "Landlord"; and 1-800-AutoTow Gulf Coast East, d/b/a
TOWN & COUNTRY TOWING AND INDEPENDENT WRECKER SERVICE a Florida Corporation with
principal offices at 1301 N. Congress Avenue, Suite 330, Boynton Beach, Florida
33426 in Palm Beach County, hereinafter referred to as "Tenant".
WHEREAS Landlord is the owner of the real property located in
Hillsborough County, Florida, which property has a physical address of 9447 W.
Hillsborough Ave., Tampa, Florida;
WHEREAS the parties desire to enter a lease agreement to define their
respective rights, duties and liabilities relating to the area.
WITNESSETH
IN CONSIDERATION of the mutual covenants contained herein and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties agree as follows:
1. Landlord leases to Tenant and Tenant hires and takes as Tenant the
area described in the Attachment at the above physical address, on a
month-to-month basis. The rental period shall begin on the 1st day after the
Closing where 1-800-AutoTow Gulf Coast East, Inc. purchases certain of the
assets of Town & Country Towing And Independent Wrecker Service.
2. The area herein leased shall be for the exclusive use of Tenant.
RENT
3. The amount due is $2,500. per month, payable on the first day of
each month.
INSURANCE
4. Landlord shall be responsible for and required to maintain property
coverage on the leasehold property. Tenant will indemnify Landlord against any
liability claims occurring due to the negligence of Tenant or Tenant's
employees.
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USE OF AREA
5. Tenant shall use or permit the area to be used for all purposes
consistent with a vehicle towing service. Tenant shall not perform any act or
use the area in any manner that may be prohibited under fire, safety, health or
sanitation codes or regulations.
6. Tenant shall comply with all governmental laws, ordinances,
regulations and statutes affecting the area either now or in the future. Tenant
shall not use the area in any manner which is unlawful, and any such use shall
terminate the lease immediately.
7. Landlord shall put Tenant in actual possession of the area at the
beginning of the term and hereby covenants that Tenant, on paying the said rent
and performing the covenants herein agreed to, shall peacefully and quietly
have, hold and enjoy the said demised area for the entire term, subject to the
terms of this Lease.
8. In the event either party seeks enforcement of this lease against
the other party, then the prevailing party shall be awarded as damages all costs
and reasonable attorney's fees incurred in such enforcement.
9. Landlord represents that there are no environmental violations with
respect to any prior usage of the area and shall defend and hold Tenant harmless
for any claim made with respect to any such prior usage.
RESPONSIBILITIES OF PARTIES
10. Tenant will keep the area in a clean and healthy condition, in
accordance with the ordinances of the applicable municipal government or other
governing body and the direction of the proper authorities; Tenant will keep the
area in good repair, and at the end of the term will deliver the area in good
order and condition, reasonable use and wear alone excepted. Landlord or his
agents shall be permitted at any time upon notice during the term hereby created
to enter and examine said area at any reasonable hour of the day. Whenever
necessary for any repairs, servants and agents of the Landlord shall be
permitted to enter and to make the same. "Reasonable hours" shall be deemed to
be at least twenty-four hours advance notice to Tenant except for the making of
repairs.
CONDITION OF AREA
11. Landlord's sole liability in the event that any portion of the area
is denied use to Tenant by any governmental authority or agency shall be a
pro-rata abatement of rent.
12. Tenant shall not remove any leasehold improvements whether made by
Landlord or Tenant, inclusive of window dressings, carpeting, wall coverings,
doors and all other such improvements, unless specifically agreed to by Landlord
in writing.
13. Tenant shall, upon vacating the area for any reason, leave the area
in a clean, repaired, tenantable condition, normal wear and tear excepted.
DAMAGE TO AREA
14. If the area, during the term of this lease, is destroyed or damaged
by fire, storm or other unavoidable casualty so that they are rendered unfit for
Tenant, or in case Tenant shall be prevented from using the area by reason of
any action on the part of city or state officers, then the rent or a just
proportionate part thereof according to the nature and extent of the injury
sustained, shall be suspended or abated until the area shall have been put in
proper condition for use by Tenant, or until Tenant is permitted to resume use
by said city or state officers. In case of fire, Tenant shall give immediate
notice to the Landlord, who shall cause the damage to be repaired with all
convenient speed; but if the area be so damaged or rendered unusable and that
use by Tenant will be delayed by more than ten (10) days, then Tenant shall have
the option to terminate and any prepaid rent unaccrued to the time of such
damage shall be refunded to Tenant together with Tenant's security deposit.
PROHIBITION AGAINST OTHER LIENS
15. Tenant is specifically prohibited against contracting for any
repairs, construction or improvements wherein the area may be subject to a lien
by any laborer, contractor or material supplier. All such persons shall
specifically waive any and all lien rights otherwise available under law as a
condition precedent to entering the area, delivering goods and/or performing
services. Tenant is specifically not Landlord's agent for any such repair or
improvement, and is without authority of any type or kind to commit to contracts
on behalf of Landlord, or to subject the area to any lien. Landlord shall cause
a short form of this lease to be recorded in the office of the Recording Clerk
of the county where the area is located.
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BREACH
16. Tenant shall breach this lease and shall be considered in default
if:
(a) Tenant fails to pay any rent due within seven (7) days of
receiving notice from the Landlord;
(b) Tenant fails to perform or comply with any of the
non-monetary covenants or conditions of this lease and such failure continues
for a period of ten (10) days after receipt of notice thereof from Landlord;
17. In the event of a breach in the lease as set forth above, the
rights of the Landlord shall be as follows:
(a) Landlord shall have the right to terminate the lease by
giving to Tenant not less than ten (10) days notice. On expiration of the time
fixed in the notice, the lease shall terminate, except as to Tenant's liability,
as of the date fixed in the notice of cancellation; and
(b) All notices, demands or writings in this lease shall be
deemed to have been fully given when made in writing and deposited in U. S.
Mail, certified return receipt requested, to the addresses of the respective
parties first stated herein, or at the leased area. The addresses to which any
notice, demand or writing may be given as above provided may be changed by
written notice given by such party as above provided.
18. Neither party shall have the right to cancel this lease for default
of the other party unless such default remains for ten (10) days after notice in
writing given such defaulting party specifying the nature of the default;
provided, however, that if, because of the circumstances beyond the Landlord's
control, the Landlord cannot cure the default on his part within such time, and
such default does not interfere with Tenant's use, occupancy and quiet enjoyment
of the demised area, then the Landlord shall have reasonable additional time in
which to cure such default.
19. If either party notifies the other as provided herein at section 2
of the intention not to extend such lease, then such lease shall terminate 30
days after such notice. Tenant shall timely remove from the area, and shall
leave the area in good and proper condition.
20. The remedies herein given to the Landlord shall be cumulative and
the exercise of any one remedy by the Landlord shall not be to the exclusion of
any other remedy.
21. This lease shall at all times be construed and subject to the laws
of the State of Florida. Any provision contained herein which conflicts with
such laws shall be construed in the manner required by any such law, and such
law shall control in lieu of any provision.
RULES AND REGULATIONS
22. Landlord may from time to time publish reasonable rules and
regulations necessary to maintain the safety, cleanliness, orderliness and good
functioning of the area; and such rules and regulations shall be as binding upon
Tenant as if contained herein.
TENANT'S PROPERTY
23. Landlord shall not be responsible or liable for any property of
Tenant, and Tenant shall maintain contents insurance upon said property within
the area. Should Tenant fail to maintain such insurance, then in the event of
any loss, unless caused by Landlord's negligence, Landlord shall not be liable,
and Tenant hereby waives any claim or right of action against Landlord.
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<PAGE>
ATTORNEYS' FEES
24. If any action at law or in equity is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, investigatory expenses in addition to
any other relief that may be available.
IN WITNESS WHEREOF, the parties hereto set their hands and seals the
day and date set forth above.
Witnessed: "Tenant"
1-800-AutoTow Gulf Coast East, Inc.
/s/ Delmer C. Gowing /s/ Steven B. Teeters
- --------------------- -------------------
Delmer C. Gowing Steven B. Teeters
Attorney at Law Treasurer
"Landlord"
/s/ Frank W. Rice
---------------------
Frank W. Rice, Landlord
4
EXHIBIT 6.48
LEASE AGREEMENT
THIS AGREEMENT made this 1st day of June, 1998, by and between G.
MICHAEL DEMPSEY, 8015 Interbay Boulevard, Tampa, Florida 33616 in Hillsborough
County, Florida, hereinafter referred to as "Landlord"; and D & D TOWING AND
RECOVERY, INC., a Florida Corporation with principal offices at 1301 N. Congress
Avenue, Suite 330, Boynton Beach, Florida 33426 in Palm Beach County,
hereinafter referred to as "Tenant".
WHEREAS Landlord is the owner of the real property located in
Hillsborough County, Florida, which property has a physical address of 5108 West
Ingraham St., Tampa, Florida;
WHEREAS the parties desire to enter a lease agreement to define their
respective rights, duties and liabilities relating to the premises.
WITNESSETH
IN CONSIDERATION of the mutual covenants contained herein and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties agree as follows:
1. Landlord leases to Tenant and Tenant hires and takes as Tenant the
premises at the above physical address, for a term of sixty (60) months. The
rental period shall begin on the 1st day of June, (hereinafter the "anniversary
date"), 1998, and shall end on the last day of May, 2003 (hereinafter the
termination date).
2. This lease shall be automatically renewed on the same terms for an
additional twelve month period on the anniversary date first following the
termination date, and on each anniversary date thereafter unless notice to the
contrary is provided by either party to the other at least ninety (90) days in
advance of the termination date and each applicable anniversary of the
termination date thereafter. Each party's respective failure to so notify the
other party will conclusively be deemed that party's affirmative agreement to
extend this lease.
3. The premises herein leased shall be for the exclusive use of Tenant.
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RENT
4. The total amount due under the initial period of this lease
agreement is TWO HUNDRED SEVEN THOUSAND ($207,000), payable at the rate of THREE
THOUSAND FOUR HUNDRED FIFTY DOLLARS ($3,450) per month.
(a) Tenant shall pay the above monthly rental sum in advance
to Landlord.
(b) Tenant shall thereafter pay the above monthly rental sum
in advance to Landlord for each subsequent month through the term of this lease
and any extensions hereof.
PROPERTY ASSESSMENTS
5. All taxes assessed against the property by the Hillsborough County
Tax Appraiser's office shall be paid by Landlord on or before the due date of
such taxes. These include, but are not limited to, all assessments by City,
County, School, and/or Special Districts.
6. Any tax assessment will be paid as it comes due, and will be
chargeable against Landlord. Failure to pay such taxes will constitute a breach
of this agreement. In the event that a tax certificate should issue against the
property as a result of Landlord's failure to pay any tax bill, Tenant may cure
such lien against the property and apply said amount against the monthly lease
obligations.
7. In the event special assessments are charged against the property,
then Landlord shall be responsible for the payment of the assessment. These
assessments may include water and/or sewer line repair/replacement, road repair
or resurfacing, or any other such assessment as may be made under any Municipal,
County, Special District governmental or quasi-governmental commission, entity,
or other authority.
INSURANCE
8. Tenant shall be responsible for and required to maintain insurance
on the leasehold property. Such insurance must include, but is not limited to:
liability insurance against personal injury for all persons on, within, or about
the leasehold premise whether employees or business invitees/licensees; property
coverage for any damage to the leasehold premise excluding flood/hurricane/wind
coverage. Landlord reserves the right to specify the amount and type of
insurances to be provided, so long as such insurance is commercially reasonable
in light of all circumstances. Failure to maintain such insurance shall
constitute a breach of this agreement. Landlord shall, at no expense to
Landlord, be named an additional named insured on such policies of insurance.
2
<PAGE>
USE OF PREMISES
9. Tenant shall use or permit the premises to be used for all purposes
consistent with a vehicle towing service and attendant repair services. Tenant
shall not perform any act or use the premises in any manner that may be
prohibited under fire, safety, health or sanitation codes or regulations.
10. Tenant shall comply with all governmental laws, ordinances,
regulations and statutes affecting the premises either now or in the future.
Tenant shall not use the premises in any manner which is unlawful and any such
use shall terminate the lease immediately.
11. Landlord shall put Tenant in actual possession of the premises at
the beginning of the term and hereby covenants that Tenant, on paying the said
rent and performing the covenants herein agreed to, shall peacefully and quietly
have, hold and enjoy the said demised premises for the entire term, subject to
the terms of this Lease. If for any reason Landlord does not deliver possession
of the premises at the commencement of the term, but does so deliver possession
within thirty (30) days of the commencement of the term of the lease, then this
lease shall not be void or voidable. However, there shall be a proportionate
reduction in total rent covering the period between the commencement of the term
and actual delivery of the premises to Tenant, in the event of late delivery by
Landlord. Any delivery of the premises later than thirty (30) days of the
commencement of the term of the lease shall render this lease voidable by
Tenant, and Tenant may so void by providing Landlord with notice that such lease
shall be void if the premises herein leased by Tenant are not delivered within a
period no less than five (5) days after such notice. Landlord shall not be
liable to Tenant for any loss or damage resulting from any failure of Landlord
to deliver the premises to Tenant, except Landlord shall promptly return any
unearned sums paid or deposited by Tenant.
12. In the event either party seeks enforcement of this lease against
the other party, then the prevailing party shall be awarded as damages all costs
and reasonable attorney's fees incurred in such enforcement.
13. Landlord represents that there are no environmental violations with
respect to any prior usage of the premises and shall defend and hold Tenant
harmless for any claim made with respect to any such prior usage.
RESPONSIBILITIES OF PARTIES
14. Tenant shall provide and pay for electric power, water, sewage,
garbage collection and any and all costs or expenses of normal maintenance of
the property subject to normal wear and tear. Tenant shall also maintain all
appliances, heating, air conditioning, plumbing, water heater, telephone system,
backup generator or the like in usable and safe condition subject to normal wear
and tear.
15. Tenant will keep the premises in a clean and healthy condition, in
accordance with the ordinances of the applicable municipal government or other
governing body and the direction of the proper authorities; Tenant will keep the
premises in good repair, and at the end of the term will deliver the premises in
good order and condition, reasonable use and wear alone excepted. Landlord or
3
<PAGE>
his agents shall be permitted at any time upon notice during the term hereby
created to enter and examine said premises at any reasonable hour of the day.
Whenever necessary for any repairs, servants and agents of the Landlord shall be
permitted to enter and to make the same. "Reasonable hours" shall be deemed to
be at least twenty-four hours advance notice to Tenant except for the making of
repairs.
16. Tenant will not assign, transfer, or set over this lease, or sublet
all or any part of the premises, without explicit written agreement of the
Landlord which shall not be unreasonably withheld. Any attempt to transfer,
assign or set over this lease, or to sublet all or any part of the premises
without such explicit written agreement of the Landlord shall immediately
terminate this lease, and Tenant shall remain responsible for all sums due under
this lease.
17. During the three months prior to the expiration of the term hereby
created, if notice to terminate has been given, Tenant will permit the Landlord
or his agents to enter and show the premises to persons desiring to rent the
same during reasonable hours of the day until rented. Any such showings shall be
with at least 24 hours advance notice whenever possible. During the last thirty
(30) days of the three month period prior to the expiration of the term hereby
created, Tenant will permit the Landlord or his agent to place upon the said
premises any notice or sign of "For Rent" or the like, and Tenant shall allow
any such notice or sign to remain there without hindrance or molestation until
rented. Tenant will permit the Landlord or his agent to place upon the said
premises any notice or sign of "For Sale" or the like at any time, and Tenant
shall allow any such notice or sign to remain there without hindrance or
molestation until such property is sold.
CONDITION OF PREMISES
18. Landlord's sole liability in the event that any portion of the
premises is denied use to Tenant by any governmental authority or agency shall
be a pro-rata abatement of rent. If premises are unavailable by more than 30
days, the tenant shall have the option to terminate the lease.
19. Tenant shall not remove any leasehold improvements whether made by
Landlord or Tenant, inclusive of window dressings, carpeting, wall coverings,
doors and all other such improvements, unless specifically agreed to by Landlord
in writing.
20. Tenant shall, upon vacating the premises for any reason, leave the
premises in a clean, repaired, tenantable condition, normal wear and tear
excepted, and shall be responsible for all costs or expenses necessary to place
the premises in such condition, including such reasonable charges as may be made
by Landlord for Landlords time and efforts to place such premises into such
proper condition.
4
<PAGE>
DAMAGE TO PREMISES
21. If the premises, during the term of this lease, are destroyed or
damaged by fire, storm or other unavoidable casualty so that they are rendered
unfit for Tenant, or in case Tenant shall be prevented from using the premises
by reason of any action on the part of city or state officers, then the rent or
a just proportionate part thereof according to the nature and extent of the
injury sustained, shall be suspended or abated until the premises shall have
been put in proper condition for use by Tenant, or until Tenant is permitted to
resume use by said city or state officers. In case of fire, Tenant shall give
immediate notice to the Landlord, who shall cause the damage to be repaired with
all convenient speed; but if the premises be so damaged or rendered unusable and
that use by Tenant will be delayed by more than thirty (30) days, then Tenant
shall have the option to terminate and any prepaid rent unaccrued to the time of
such damage shall be refunded to Tenant together with Tenant's security deposit.
PROHIBITION AGAINST OTHER LIENS
22. In accordance with Florida Statutes at 713.10, Tenant is
specifically prohibited against contracting for any repairs, construction or
improvements wherein the premises may be subject to a lien by any laborer,
contractor or material supplier. All such persons shall specifically waive any
and all lien rights otherwise available under law as a condition precedent to
entering the premises, delivering goods and/or performing services. Tenant is
specifically not Landlord's agent for any such repair or improvement, and is
without authority of any type or kind to commit to contracts on behalf of
Landlord, or to subject the premises to any lien. Landlord shall cause a short
form of this lease to be recorded in the office of the Recording Clerk of the
county where the premises is located.
SUBORDINATION AND ATTORNMENT
Tenant agrees: (a) that, except as hereinafter provided, this Lease is,
and all of Tenant's rights hereunder are and shall always be, subject and
subordinate to any mortgages or security instruments (collectively called
"Mortgage") that now exist, or may hereafter be placed upon the premises or any
part thereof, and to all advances made or to be made thereunder and to the
interest thereon, and all renewals, replacements, modifications, consolidations,
or extensions thereof, now or at any future time, (b) that if the holder of any
such Mortgage ("Mortgagee") or if the purchaser at any foreclosure sale or at
any sale under a power of sale contained in any Mortgage shall at its sole
option so request, Tenant will attorn to, and recognize such Mortgagee or
purchaser, as the case may be, as Landlord under this Lease for the balance then
remaining of the lease Term, subject to all the terms of this Lease Agreement
and any extensions thereof; and (c) that the aforesaid provision shall be self
operative and no further instrument or document shall be necessary unless
required by any such Mortgagee or purchaser in which event Tenant shall execute
such instrument or document within ten (10) days after the request therefor.
Should Landlord or any Mortgagee or purchaser desire confirmation of such
subordination or attornment, as the case may be, Tenant upon written request,
and from time to time, will execute and deliver without charge and in form
satisfactory to Landlord, the Mortgagee or the purchaser all instruments and/or
documents that may be requested to acknowledge such subordination and/or
agreement to attorn, in recordable form.
5
<PAGE>
BREACH
23. Tenant shall breach this lease and shall be considered in default
if:
(a) Tenant fails to pay any rent due within seven (7) days of
the date due, or any late payment penalties due to Landlord; and Landlord's
acceptance of any rent paid late does not waive thereby, Landlord's right to
such late payment penalty;
(b) Tenant fails to perform or comply with any of the
covenants or conditions of this lease and such failure continues for a period of
thirty (30) days after receipt of notice thereof from Landlord;
(c) Breach by Tenant shall be deemed as a notice under
paragraph 24.(a) as of the date of breach, if such breach is not cured timely by
Tenant, as provided in this Lease Agreement;
(d) In the event of Tenant's default on account of failure to
pay rent, Landlord shall be entitled to damages as provided herein, inclusive of
any late payment penalties accrued earlier but not paid, inclusive of a late
payment penalty of $ 15.00 for the rent due but unpaid which caused such
default. Landlord shall further be entitled to interest at the rate of eighteen
percent (18%) per annum on any rent, late payment penalties, and costs of
repairs chargeable to the Tenant which are due but unpaid, such interest
accruing from the date such sums became due from Tenant.
24. In the event of a breach in the lease as set forth above, the
rights of the Landlord shall be as follows:
(a) Landlord shall have the right to terminate the lease
subject to paragraph 26 below, by giving to Tenant not less than ten (10) days
notice. On expiration of the time fixed in the notice, the lease shall
terminate, except as to Tenant's liability, as of the date fixed in the notice
of cancellation; and
(b) All notices, demands or writings in this lease shall be
deemed to have been fully given when made in writing and deposited in U. S.
Mail, certified return receipt requested, to the addresses of the respective
parties first stated herein, or at the leased premises. The addresses to which
any notice, demand or writing may be given as above provided may be changed by
written notice given by such party as above provided.
25. Neither party shall have the right to cancel this lease for default
of the other party unless such default remains for ten (10) days after notice in
writing given such defaulting party specifying the nature of the default;
provided, however, that if, because of the circumstances beyond the Landlord's
control, the Landlord cannot cure the default on his part within such time, and
such default does not interfere with Tenant's use, occupancy and quiet enjoyment
of the demised premises, then the Landlord shall have reasonable additional time
in which to cure such default.
6
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26. If Tenant holds possession of the premises after the term of this
lease, Tenant shall become a Tenant from month to month. Tenant shall continue
to be a month to month Tenant until the tenancy shall be terminated by the
Landlord or until Tenant has given to Landlord a written notice of at least one
(1) month, prior to the date of termination of the monthly tenancy of Tenant's
intention to terminate the tenancy.
27. If either party notifies the other as provided herein at section 2
of the intention not to extend such lease, then such lease shall terminate on
the termination date. Tenant shall timely remove from the premises, and shall
leave the premises in good and proper condition. Failure to so remove and leave
the premises in good and proper condition shall conclusively establish that:
(a) That Tenant has held over; and
(b) That Tenant has knowingly accepted as a month to month
rent such sum as may be permitted by statute in respect to the rent provided for
herein; and
(c) That such reliance by Landlord shall not impair Landlords
right to retake such premises or terminate tenancy or any other right granted by
the laws of the State of Florida or in this lease, without regard to this
paragraph.
28. The covenants and condition herein contained shall, subject to the
provisions as to assignment, transfer, subletting, apply to and bind the heirs,
successors, executors, administrators and assigns of the parties hereto. All of
the parties hereto shall be jointly and severally liable hereunder.
29. The remedies herein given to the Landlord shall be cumulative and
the exercise of any one remedy by the Landlord shall not be to the exclusion of
any other remedy.
30. This lease shall at all times be construed and subject to the laws
of the State of Florida. Any provision contained herein which conflicts with
such laws shall be construed in the manner required by any such law, and such
law shall control in lieu of any provision.
RULES AND REGULATIONS
31. Landlord may from time to time publish reasonable rules and
regulations necessary to maintain the safety, cleanliness, orderliness and good
functioning of the premises; and such rules and regulations shall be as binding
upon Tenant as if contained herein.
7
<PAGE>
TENANT'S PROPERTY
32. Landlord shall not be responsible or liable for any property of
Tenant, and Tenant shall maintain contents insurance upon said property within
the premises. Should Tenant fail to maintain such insurance, then in the event
of any loss, unless caused by Landlord's negligence, Landlord shall not be
liable, and Tenant hereby waives any claim or right of action against Landlord.
ATTORNEYS' FEES
33. If any action at law or in equity is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, investigatory expenses in addition to
any other relief that may be available.
IN WITNESS WHEREOF, the parties hereto set their hands and seals the
day and date set forth above.
Witnessed: "Tenant"
D&D Towing and Recovery, Inc.
/s/ Steven B. Teeters /s/ Eugene A. Iarocci
- --------------------- -------------------
Steven B. Teeters Eugene A. Iarocci
Treasurer President
"Landlord"
/s/ G. Michael Dempsey
---------------------
G. Michael Dempsey
Landlord
7
EXHIBIT 6.49
LEASE AGREEMENT
THIS AGREEMENT, entered into this 1st day of August, 1998, between
WILLIAM CHESTER, JR., ROBERT A. McGANN, and ROBERT M. MCGANN, hereinafter called
the Lessors or Landlord, parties of the first part, and McGann & Chester, Inc.,
a Pennsylvania Corporation, of the County of Alleghney and State of Pennsylvania
hereinafter called Lessee or tenant, party of the second part:
WITNESSETH, that the said Lessors or landlord does this day lease unto
said Lessee, and said Lessee does hereby hire and take as tenant McGann &
Chester, Inc., a Pennsylvania Corporation, under said Lessors the following
described premises:
ALL that piece of ground situate in the 19th Ward, City of Pittsburgh,
County of Allegheny, Commonwealth of Pennsylvania; an irregular parcel
containing 7.94 acres extending from MP 51.87 adjacent to Dawn Avenue on the
Southeast to MP 52.23 near Crane Avenue on the Northwest, located on the north
side of the mainline in Pittsburgh, Allegheny County, Pennsylvania,
situate in the 19th Ward, City of Pittsburgh, State of Pennsylvania, to be used
and occupied by the Lessee as a vehicle towing and transportation company and
attendant uses thereto, and for no other purposes or uses whatsoever, for the
term of five (5) years, subject and conditioned on the provisions of Clause Ten
of this Lease beginning the 1st day of August, 1998, and ending the 31st day of
July, 2003, at and for the agreed total rent of Eight Thousand One Hundred
Twenty Five ($8,125.00) Dollars per month, payable as follows:
All payments to be made to the Lessors on the first day of each and
every month in advance without demand at 700 Hargrove Street, Pittsburgh, PA
15226, or at such other place and to such other person, as the Lessors may from
time to time designate in writing.
The following express stipulations and conditions are made a part of
this Lease and are hereby assented to by the Lessee:
FIRST: The Lessee shall not assign this Lease, nor sub-let the
premises, without the written consent of the Lessors, which shall not be
unreasonably or arbitrarily withheld from Lessee.
SECOND: Lessee has examined and knows the condition of the premises,
and has received the same in good order and repair, except as herein otherwise
specified; that Lessee will keep premises in good repair, and on termination of
this Lease, will yield up the premises to Lessors in good condition and repair
(loss by fire and ordinary wear excepted). Lessee shall allow Lessors free
access to premises for purpose of examining or exhibiting same, or to make any
needful repairs or alterations of premises, to which Lessors and Lessee agree.
Lessors agrees that such access shall, to the extent possible, not be made or
sought in a manner that unreasonably interferes with the daily operation or
function of the business of Lessee. Lessee agrees to be subordinate to the
existing Lease of Lessors and Wheeling and Lake Erie Railway Company and the
Lessors herein.
THIRD: Lessee shall not be liable to Lessors for any damage occasioned
by a condition pre-existing to the formation of this agreement, environmental
damages resulting from its reasonable use of the premises, or damage done or
occasioned by the bursting, leaking or running of any cistern, tank, water,
stream, sewer or other pipe in, above, on or about building or premises, or for
any damage done or occasioned by water, snow or ice being on or coming through
roof, any trapdoor, water closet, waste pipe or otherwise. Lessee agrees to use
the premises solely in the lawful, diligent, and businesslike operation of a
vehicle towing and transportation company and attendant business thereto.
1
<PAGE>
FOURTH: Lessors affirms that the premises are heretofore in total
compliance with all federal, state, and local rules, regulations and ordinances
and that Lessors indemnifies and holds harmless Lessee from any infractions
thereof up to and including the date of this agreement. Lessee agrees to the
continued adherence to all such rules, regulations and ordinances and shall not
use said premises for any unlawful purpose. Lessee shall pay all ad valorem and
real estate taxes assessed upon the premises.
The Lessors, William Chester, Jr., Robert A. McGann,
and Robert M. McGann, shall perform all maintenance and repairs to the structure
necessitated directly or indirectly by the negligence or willful act or
omissions of the Lessors, its agents, employees or contractors.
The Lessee agrees that it will procure and maintain,
at its expense, in full force and effect with a financially responsible
insurance company: (a) workers compensation insurance with employers liability
insurance in the minimum limit of $100,000.00 workers compensation from an
appropriate state agency; (b) public liability insurance with completed
operations coverage with a minimum limit of $2,000,000.00 for bodily injury
limits in any one occurrence and a minimum limit of $100,000.00 for property
damages in any one occurrence; (c) fire casualty insurance policy on the subject
structure/building in an amount not less than Three Hundred Fifty Thousand
($350,000.00) Dollars. Lessee shall furnish Lessors at its address with
certificate of insurance evidencing the above required insurances and providing
that no such policy (policies) may be cancelled or changed materially without at
least thirty (30) days prior written notice to Lessors.
FIFTH: Lessee agrees not to allow the premises to be used for any
purpose other than that specified above. Lessee further agrees that no material
alterations shall be made to the premises absent prior written consent of the
Lessors which shall not be arbitrarily or unreasonably withheld.
SIXTH: Lessee shall maintain the premises in a clean, orderly, sanitary
and safe condition. Lessee shall not store, or permit to be stored on the
premises any trash or other unsightly materials except in properly closed
containers and except as that which is associated with the normal and ordinary
course of the vehicle towing and transportation business. Lessee at its own
expense shall be solely responsible for removal of ice and snow from the
premises, and care of the grass and shrubbery.
SEVENTH: Lessors shall repair any damage to the premises, which is not
the direct or indirect result of Lessee's willful conduct, negligence or fault.
So long as the premises remain fit for the operation of Lessee's business,
Lessee shall continue to pay the rents stipulated herein during such period of
repair.
EIGHTH: Lessors, with its agents, representatives and employees, shall
have the right to enter on the premises for the purposes of examination and
inspection to ascertain Lessee's compliance with the terms of this Lease and,
upon thirty (30) days' written notice to Lessee.
2
<PAGE>
NINTH: The parties to this Lease agree that the agreements herein
contained shall be binding upon, apply and insure to their respective heirs,
executors, administrators, successors and assigns.
TENTH: If the Lessee shall become insolvent or if bankruptcy
proceedings shall be begun by or against the Lessee, before the end of said term
the Lessors is hereby irrevocably authorized at its option, to cancel this
Lease, as for a default. Lessors may elect to accept rent from such receiver,
trustee, or other judicial officer during the term of their occupancy in their
fiduciary capacity without affecting Lessors' rights as contained in this
contract, but no receiver, trustee or other judicial officer shall ever have the
right, title or interest in or to the above-described property by virtue of this
contract.
IN WITNESS WHEREOF, the parties have executed this instrument for the
purpose herein expressed, the day and year above written.
"Lessors" "Tenant"
McGann & Chester, Inc.
/s/ William Chester, Jr. /s/ Steven B. Teeters
- ---------------------------- --------------------
William Chester, Jr., Lessor Vice President
/s/ Robert A. McGann
- ----------------------------
Robert A. McGann, Lessor
/s/ Robert M. McGann
- -----------------------------
Robert M. McGann, Lessor
3
EXHIBIT 6.50
SUBLEASE
This AGREEMENT OF SUBLEASE made this 20th day of January l998 by and between
1-800-AutoTow, Inc., a Delaware corporation ("Sublessee") and Aerotek Inc., a
Maryland corporation ("Sublessor").
NOW, therefore, the parties hereto agree as follows:
1. Premises: For and in consideration of the rental and other sums hereinafter
provided for, to be paid by the Sublessee, and the terms, covenants, conditions,
and agreements hereinafter set forth, Sublessor hereby leases to the Sublessee
approxirnately 4.272 rentable square feet (A portion of Suite 300 to be called
suite 330) of the Leased Premises ("Sublease Premises"), located at 1301 N.
Congress Avenue, Boynton Beach, FL 33426.
2. Sublease Term: The term of this sublease shall commence upon the receipt of
the C.O. and end on June 30, 2001. However, the commencement date will be no
later than 45 days from the time at which Sublessor has made the space available
to Sublessee which is scheduled for March 1, 1998 with a target date of Rent and
Sublease commencement to be on 4/01/98.
3. Basic Rent: Sublessee covenants and agrees to pay the Sublessor without
notice or demand or offset Basic Rent which shall be inclusive of all operating
expenses during the first full 12 calendar months. Sublessee shall be granted a
1998 base year for operating expenses and shall pay its proportionate share of
any increases above the base year. Sublessee's proportionate share shall be
54.6% percent of the leased Premises calculated as follows 4,272 RSF divided by
7,830 RSF. In addition to Basic Rent, Sublessee shall be responsible for its
proportionate share of electric which is used within the premises. Sublessee
must also pay all applicable sales tax on the Basic Rent which is currently six
(6) percent however, is subject to change at anytime based on governmental
action. The Sublessee shall pay at the signing of this sublease agreement the
security deposit as required in Section 15 of this Sublease Agreement and
Sublessee shall be required to pay the first month's rent by February 1, 1998.
Sublessee shall rnake payments on or before the first (1st) day of each month of
the Sublease Term in accordance with the following Base Rent schedule:
<TABLE>
<CAPTION>
Base Rent Annually Monthlv Period
- --------- -------- -------
<S> <C> <C> <C>
Year 1 $64,080.00 $5,340.00 4/01198-3/31/99
Year2 $67,284.00 $5,607.00 4/01/99-3/31100
Year3 $70,488.00 $5,874.00 4/01/00-3/31/01
Balance of Term $16,821.00 $5,607.00 4/0l/0l-6/30/0l (Approx. 3 Months)
Total: $218,673.00
</TABLE>
1
<PAGE>
* lf any installment of Basic Rent or additional rent provided for in this
Sublease, or any part hereof, is not paid by the due date, it shall be subject
to a service charge of (2%) of the unpaid rent due for each month or fraction
thereof (or such lesser percentage as may be the maximum amount permitted by
law) until paid.
* The operating expense amounts may be changed based on expenses established or
actually paid by Landlord (Lessor). If the Sublease Term shall commence on a day
other than the first (1st) day of a month, Sublessee shall pay on the
Commencement Date for the fractional part of a month at the beginning of the
term, a prorated amount of such month's rent If the Sublease Term shall end on a
date other than the last day of a mouth, then Sublessee shall pay a prorated
amount of such month's rent All rent checks should be made payable to Aerotek
Inc., 7301 Parkway Drive, Hanover, MD 21076, Attn: Corporate Real Estate
(Sublease).
4. Prime Lease: This Sublease is subject and subordinate to the Prime Lease. All
the terms, covenants and conditions in the Prime Lease shall be applicable to
this Sublease with the same force and effect as if the Sublessor were the
Landlord under the Prime Lease and Sublessee were the Tenant thereunder; and in
case of any breach or default hereof by Sublessee, Sublessor shall have all the
rights against the Sublessee as would be available to the Landlord against the
Tenant under the Prime Lease if such breach were by the Tenant thereunder.
Sublessee shall neither do nor permit anything to be done which would cause the
Prime Lease to be terminated or forfeited by reason of any right of termination
or forfeiture reserved or vested in the Landlord under the Prime Lease.
Sublessee has examined said Lease, understands the terms herein and agrees to
abide by the terms conditions therein.
5. Limitation: Notwithstanding anything herein contained, the only services or
rights to which Sublessee is entitled hereunder are those to which Sublessor is
entitled under the Prime Lease and that for all such services and rights
Sublessee will look to the Landlord under the Prime Lease.
6. Imnrovements to the Sublease Premises: Sublessor will provide an allowance of
up to $14,000.00 to Sublessee in order to perform any modifications, including
any demising wall for the separation of the two spaces within the Premises. All
construction and times of construction are subject to the approval of the
Sublessor and Landlord and the municipality in which the building is located.
This allowance is inclusive of any costs of construction drawings, space
planning, required permits, and inclusive of a management supervision fee equal
to five (5) percent Sublessor will contract out the interior improvements upon
the completion of an agreed upon space plan and any required construction
documents between Sublessor and Subtenant. If the cost for all of the
improvements, inclusive of construction drawings, space planning, and required
permits exceed the allowance of $14,000.00, then Sublessee shall reimburse
Sublessor for any variance within 30 days of receipt of invoice. Subject to any
direct costs, fees or expenses incurred by Landlord or its mana8ement company
ill association with this Sublease.
7. Sublessee Imorovements: Sublessee understands that there are to be no
improvements or modifications made to the Sublease Premises, without the prior
written consent of Sublessor and Landlord in each instance. Should consent be
given, it is understood that any work performed in the space shall only be
performed by a state licensed contractor. The Sublessee shall be responsible for
obtaining all permits required by the municipality for said improvements after
the initial improvements to the Premises are cornpleted.
8. Surrender of Premises: Upon any termination or expiration of this Sublease,
Sublessee shall surrender the Sublease Premises in a clean and operational
condition, except for normal "wear and tear." Sublessee, at Sublessee's sole
cost and expense, shall be responsible for repairing any damage to the Sublease
Premises excluding normal "wear and tear" which may exist at the termination or
expiration of this Sublease. This Sublease shall automatically terminate upon
the termination, expiration, cancellation or other expiration of the Prime
Lease.
2
<PAGE>
9. Subleasing and Assigning: Sublessee covenants and agrees that the Subleased
Premises shall be used and occupied by the Sublessee in a careful, safe, and
proper manner. Sublessee, for itself, its heirs, personal representatives,
successors and assigns, expressly covenants that it shall not be permitted to
assign, mortgage or encumber this Sublease, or lease, use or Permit the Sublease
Premises or any part thereof to be used by others unless otherwise provided for
within the Master Lease.
10. Renresentations and Warranties: Sublessee represents and warrants to
Sublessor that: (a) Sublessee is a corporation duly organized, validly existing
and in good standing in accordance with the laws of the state under which it was
organized; (b) the individual executing this Sublease on behalf of Sublessee is
authorized to do so, and such execution shall bind Sublessee (please provide
authorization documentation); and (c) Sublessee has read and is familiar with
the terms of the Prime Lease.
11. Use: It is understood and agreed the Sublessor permits Sublessee to use the
Leased Premises for and only for general office purposes, and for no other
purposes whatsoever. Any other use of the Subleased Premises by the Sublessee
shall be subject to the review and written approval of the Sublessor and the
Landlord.
12. Insurance: It is understood and agreed that Sublessee shall carry all
insurance required as noted in Article 32 of the Prime Lease and shall protect
both Sublessor and Landlord against all potential casualties and losses. Prior
to any construction or occupancy, Sublessee shall provide Landlord with all
required certificates of insurance required therein.
13. Notices: Any notice required or desired to be given to any party hereto
shall be in writing and sent by certified mail, return receipt requested, and be
addressed to the parties hereto at their addresses as set forth below:
If to Sublessee - Republic Security Bank Building
1 -800-AutoTow, Inc.
1301 N. Congress Avenue
Suite 330
Boynton Beach, FL 33426
Attn: Joel Nagelmann
If to Sublessor - Aerotek Inc.
7301 Parkway Drive
Hanover, MD 21076
Attn: Corporate Real Estate
To Landlord:
Canterbury Realty
2295 Corporate Blvd., #134
Boca Raton, FL 33431
14. Option to Terminate: Sublessee shall have the one time right to cancel this
sublease agreement on 12/31/98 with written notice provided to Sublessor no
later than 7/31/98. Sublessee shall pay a penalty at the time of written
notification to Sublessor in the amount of $32,000.00. Sublessor will guarantee
to Sublessee, provided that Sublessee does not exercise its termination option
and so long as Sublessee is not in default of any of the terms and conditions of
the Lease, Sublessor will not exercise its termination option.
15. Securitv Deposit Sublessee will deliver to Sublessor an amount of $11,214.00
as a security deposit to be refunded upon Lease expiration or upon the
termination of this sublease as provided by herein. The security deposit will be
used to offset any damage beyond normal wear and tear in the Premises due to
Subtenant's negligence. The security deposit will be due upon the signing of the
Sublease Agreement
16. Building Directorv: Subject to the prior Lease Landlord or Sublessor
(subject to Landlord's written approval) shall place Sublessee's name on the
building directory at Sublessee's sole cost and expense. Landlord and Sublessor
shall permit Sublessee to place its name and logo on or by Sublessee's entrance
door at Sublessee's sole cost and expense according to building standards.
17. Signage: Subject to the prior Lease Sublessor will allow Sublessee, subject
to Landlord's written approval, to share the available space on both sides of
the Pylon Adjacent to Congress Avenue. Sublessee agrees to pay its proportionate
share of expenses related to obtaining the signage.
3
<PAGE>
18. Right Of First Refusal: Subject to Landlord's consent and the Prior Lease
Sublessor shall assign to Sublessee its Right of First Offer as stated in
Section 48 of the Master Lease provided that it is permissible by law.
19. Entire Ageement This Sublease constitutes the entire agreement between the
parties hereto and no earlier statements or prior written matters shall have any
force or effect. Sublessee and Sublessor agree that neither party is relying on
any representations or agreements of the other, except those contained in this
Sublease. This Sublease shall not be modified, canceled, or amended except by
written instrument subscribed by both parties.
IN WITNESS WHEREOF, Sublessor and Sublessee have respectively signed and sealed
this Sublease as of the day and year first written above.
WITNESS: AEROTEK, INC.
("Sublessor")
/s/ Eric Murray
-------------------
Eric Murray
Corp. Real Estate Mgr.
1-800-AutoTow, Inc.
("Sublessee")
/s/ J. Konigsberg /s/ Joel B. Nagelmann
- ----------------- ---------------------
J. Konigsberg Joel B. Nagelmann
Vice President President
4
EXHIBIT 6.51
AGREEMENT FOR THE PURCHASE OF STOCK AND WARRANTS
THIS AGREEMENT FOR THE PURCHASE OF STOCK AND WARRANTS (this
"Agreement"), has been entered into as of the 6th day of August, 1999, by and
between GMA CAPITAL PARTNERS-AUTOTOW, LLC, a Georgia limited liability company
("Investor"), and 1-800-AUTOTOW, INC., a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, the Company is authorized to issue 500,000 shares of Series B
8% Cumulative Convertible Preferred Stock, ("Company Preferred Stock") having
the preferences and designations set forth in that certain Certificate of
Designations, Preferences and Rights of Series B 8% Cumulative Convertible
Preferred Stock, attached hereto as Exhibit A (the "Certificate of
Designations"); and
WHEREAS, the Company desires to sell to Investor, and Investor desires
to purchase from the Company, a certain number of shares of Company Preferred
Stock to be determined in accordance with Article I hereof (the "Purchased
Shares") which shall be convertible into a certain number of shares of Company
Common Stock equal to fifty-nine and four tenths percent (59.4%) of the issued
and outstanding Company Common Stock, such number to be determined at the date
such Purchased Shares are issued and on a fully-diluted basis after considering:
(1) the issued and outstanding Company Common Stock (including the shares to be
issued by the Company in connection with the acquisition of the Acquired
Companies (as defined in Section 2.5, below), without regard to when such shares
are issued), (2) the conversion of the Purchased Shares, (3) the conversion or
exercise of any outstanding options, warrants (other than the Purchased Warrants
and any warrants issued to any affiliate of Investor on or before the Closing
Date) or other convertible securities which entitle the holders thereofto
purchase, or otherwise receive, any Company Common Stock, provided that Company
Common Stock (up to 12.5% of the then outstanding Company Common Stock) reserved
under the management stock option plan described in Exhibit 1.4 attached hereto,
shall be excluded from such calculation, and provided further that shares of
Company Common Stock that may be issued upon the conversion of any shares of
Company Preferred Stock issued to Investor pursuant to Section 8.5 below, shall
be excluded from such calculation, and (4) any Company Common Stock that the
Company is obligated, or may become obligated, to issue to then current
shareholders pursuant to the terms and conditions of previous acquisition
agreements to which the Company is a party; and
WHEREAS, the Company desires to sell to Investor, and Investor desires
to purchase from the Company, one (1) warrant to purchase one (1) share of
Company Common Stock for each five (5) shares of Company Common Stock into which
the Purchased Shares are convertible, each such warrant to be in the form
attached hereto as Exhibit B (all such warrants to be purchased by Investor are
hereinafter collectively referred to as the "Purchased Warrants," the Purchased
Warrants and the Purchased Shares are hereinafter sometimes referred to
collectively as the "Purchased Securities"), in accordance with the terms and
conditions of this Agreement;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto covenant and agree as follows:
1
<PAGE>
ARTICLE I
SALE OF SECURITIES
1.1 Sale of Purchased Securities. Subject to the terms and conditions
of this Agreement, and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to sell, assign, transfer and deliver
the Purchased Securities to Investor, and Investor, in reliance on the Company's
representations, warranties and covenants set forth herein, agrees to purchase
the Purchased Securities from the Company. The Company shall deliver the
Purchased Securities to Investor as follows:
(a) At the Closing (as defined below), the Company shall issue
to Investor 363,723 shares of Company Preferred Stock and shall deliver to
Investor certificates evidencing such shares.
b) At the Closing, the Company shall issue to Investor
4,838,202 warrants each to purchase one (1) share of Company Common Stock and
shall deliver to Investor certificates evidencing such warrants in the form of
Exhibit B attached hereto.
(c) Following the Closing, the Company shall issue to
Investor additional shares of Company Preferred Stock (which shall be included
in the Purchased Shares) and additional warrants to purchase Company Common
Stock (which shall be included in the Purchased Warrants) in accordance with
Section 1.4, below.
1.2 Purchase Price. In full consideration for the purchase by
Investor of the Purchased Securities, Investor shall pay to the Company at the
Closing, TWO MILLION SEVEN HUNDRED THOUSAND DOLLARS ($2,700,000), payable in
immediately available United States funds by delivery of a company check and/or
by wire transfer to an account or accounts designated by the Company.
1.3 Closing of Purchase and Sale. The closing of the purchase and
sale provided for herein (the "Closing") shall take place at the offices of
Smith, Gambrell & Russell, LLP, Suite 3100, Promenade II, 1230 Peachtree Street,
N.E., Atlanta, Georgia 33039-3592, beginning at 9:00A.M. on August 6, 1999, or
at such other time and place as the parties shall mutually agree upon. The date
upon which the Closing actually occurs shall be referred to in this Agreement as
the "Closing Date."
-2-
<PAGE>
1.4 Post-Closing Covenants Relating to the Purchased Securities.
(a) Purchased Shares Adjustment. In the event the Company
shall, following the Closing, issue additional shares of Company Common Stock to
the former owners of any of the Subsidiaries (as defined below) (each such
issuance, a "Section 1.4 Event"), the Company shall, in each such instance: (i)
within ten (10) days following such Section 1.4 Event, give notice to Investor
of such Section 1.4 Event, and (ii) within fifteen (15) days following the
giving of such notice, issue to Investor additional shares of Company Preferred
Stock such that the aggregate number of Purchased Shares then issued to Investor
will be convertible into a certain number of shares of Company Common Stock (the
"Purchased Shares Conversion") equal to fifty-nine and four tenths percent
(59.4%) of the Company Common Stock on a fully-diluted basis, as of the date
such additional shares are issued, after considering: (1) the issued and
outstanding Company Common Stock (including the shares to be issued by the
Company in connection with the acquisition of the Acquired Companies (as defined
in Section 2.5, below), without regard to when such shares are issued), (2) the
conversion of the Purchased Shares, (3) the conversion or exercise of any
outstanding options, warrants (other than the Purchased Warrants and any
warrants issued to any affiliate of Investor on or before the Closing Date) or
other convertible securities which entitle the holders thereof to purchase, or
otherwise receive, any Company Common Stock, provided that Company Common Stock
(up to 12.5% of the then outstanding Company Common Stock) reserved under the
management stock option plan described in Exhibit 1.4 attached hereto, shall be
excluded from such calculation, and provided further. that shares of Company
Common Stock that may be issued upon the conversion of any shares of Company
Preferred Stock issued to Investor pursuant to Section 8.5 below, shall be
excluded from such calculation, and (4) any Company Common Stock that the
Company is obligated, or may become obligated, to issue to then current
shareholders pursuant to the terms and conditions of previous acquisition
agreements to which the Company is a party.
b) Purchased Warrants Adjustment Simultaneously with each
issuance to Investor of additional shares of Company Preferred Stock in
connection with any Section 1.4 Event, as set forth in Section 1.4(a), the
Company shall issue to Investor additional warrants to purchase Company Common
Stock such that the aggregate number of Purchased Warrants shall equal the
quotient obtained by dividing the Purchased Shares Conversion (following such
issuance of additional Company Preferred Stock) by five (5).
ARTICLE II
REPRESENTATIONS. WARRANTIES. AND COVENANTS OF THE COMPANY
As a material inducement to Investor to enter into this Agreement and
to consummate the transactions contemplated hereby, and with the knowledge that
Investor shall rely thereon, the Company represents, warrants and covenants to
Investor as follows (all representations and warranties are made as of the
Closing Date and as of the date hereof):
2.1 Due Incorporation and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has the corporate
-3-
<PAGE>
power and lawful authority to carry on its business as now being conducted, and
to own or lease and operate its properties and assets as now owned, leased or
operated by the Company. The Company is duly licensed and qualified to do
business and is in good standing as a foreign corporation in each other
jurisdiction where the character of its business or the nature of its properties
or assets makes such qualification or licensing necessary, except where the
failure to be qualified or licensed would not have a material adverse effect on
the Company.
2.2 Outstanding Capital Stock. The title, par value, number of
authorized shares and number of issued and outstanding shares of each class of
capital stock of the Company is described on Schedule 2.2 annexed hereto. No
other class of capital stock of the Company is authorized or outstanding. All of
the issued and outstanding capital stock of the Company is duly authorized and
is validly issued, fully paid and non-assessable.
2.3 Options or Other Rights. Except as described on Schedule 2.3
annexed hereto, there is no outstanding right, subscription, warrant, conversion
right, call, unsatisfied preemptive right, commitment, option or other agreement
or right of any kind pursuant to which any person or entity has the right or
option to purchase or otherwise to receive from the Company any shares of the
capital stock or any other security of the Company and there is no outstanding
security of any kind convertible into or redeemable or exchangeable for any
shares of the capital stock or any other security of the Company. There is no
shareholders' agreement, voting trust or similar agreement or arrangement to
which the Company is a party which affects or restricts in any way the Purchased
Securities.
2.4 Title To Securities. Voting Rights. The Company has full corporate
power and authority to convey, free and clear of all liens, encumbrances,
equities, assessments, restrictions, rights of third parties, claims and
obligations of every kind ("Liens"), all of the Purchased Securities and, upon
delivery of and payment for the Purchased Securities as herein provided,
Investor will acquire good and, subject to compliance with all federal and state
securities laws and regulations, marketable title to the Purchased Securities,
free and clear of all Liens and the Purchased Securities will be fully paid and
non-assessable. The Purchased Shares, when issued, shall be voting stock
entitled to cast, on each matter to be voted upon by the shareholders of the
Company, a number of votes equal to the Purchased Shares Conversion. Upon
delivery of and payment for each share of Company Common Stock issued to
Investor as provided in the Purchased Warrants, the Company shall cause Investor
to acquire good and, subject to compliance with all federal and state securities
laws and regulations, marketable title to such share of Company Common Stock,
free and clear of all Liens, and such share of Company Common Stock shall be
fully paid and non-assessable.
2.5 Subsidiaries and Investments. Except for McGann & Chester, Inc., a
Pennsylvania corporation ("MCI"), D&D Towing and Recovery, Inc., a Florida
corporation ("D&I)"), and shell corporations formed by the Company specifically
to acquire the Acquired Companies, the Company does not have any subsidiaries
nor does the Company own, directly or indirectly, any capital stock or other
equity or ownership or proprietary interest in, or have any investment in, any
other corporation, partnership, association, trust, joint venture or other
entity. The Company owns all of the outstanding capital stock of MCI and D&D,
and each of MCI and D&D are wholly-owned
-4-
<PAGE>
subsidiaries of the Company. Simultaneously with the Closing of the transactions
contemplated hereby, the Company shall use the Purchase Price being paid by
Investor hereunder, in conjunction with other available funds, to consummate the
acquisition of each of the companies (or the assets thereof) set forth on
Schedule 2.5 attached hereto (the "Acquired Companies") (the Acquired Companies
(including any shell corporation formed by the Company to acquire, by merger or
otherwise, any Acquired Company), MCI and D&D are sometimes hereinafter
collectively referred to as the "Subsidiaries" and each individually as a
"Subsidiary"). Schedule 2.5 includes true and complete copies of the definitive
purchase or merger agreements (and all schedules and exhibits thereto) pursuant
to which the Company shall acquire each of the Acquired Companies. Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state in which it is incorporated, and has the
corporate power and lawful authority to carry on its business as now being
conducted, and to own or lease and operate its properties and assets as now
owned, leased or operated by such Subsidiary. Each Subsidiary is duly licensed
and qualified to do business and is in good standing as a foreign corporation in
each other jurisdiction where the character of its business or the nature of its
properties or assets makes such qualification or licensing necessary, except
where the failure to be licensed or qualified would not have a material adverse
effect on such Subsidiary.
2.6 Articles of Incorporation and By-Laws. Schedule 2.6 annexed hereto
contains true and complete copies of the Articles of Incorporation of the
Company and each Subsidiary, including all amendments thereto (certified by the
Secretary of State of such entity's jurisdiction of incorporation), and By-laws
of the Company and each Subsidiary, including all amendments thereto (certified
by its corporate secretary), as in effect on the date hereof, and such By-Laws
and Articles of Incorporation will not be amended, rescinded or otherwise
modified between the date hereof and the Closing Date, except as specifically
contemplated and allowed by this Agreement.
2.7 Books and Records. The corporate minute books, stock certificate
books, stock registers and other corporate records of the Company and each
Subsidiary are true, correct and complete in all material respects, and the
signatures appearing on all documents contained therein are the true signatures
of the persons purporting to have signed the same. All actions reflected in said
books and records were duly and validly taken in compliance with the laws of the
state of incorporation of the Company or such Subsidiary, as applicable.
2.8 Authority of the Company and Subsidiaries. The Company has full
power and authority to execute and deliver this Agreement, the Acquisition
Agreements (as defined below) and the other agreements required to be executed
and delivered by the Company hereunder and thereunder (the "Company Documents")
and to carry out the transactions contemplated hereby. The Company and each of
the Acquired Companies has full power and authority to execute and deliver the
agreements pursuant to which the Company will acquire the Acquired Companies
(the "Acquisition Agreements"). This Agreement, the Company Documents and the
Acquisition Agreements are valid and binding agreements of the Company
enforceable against the Company in accordance with their respective terms. Each
of the Acquisition Agreements is a valid and binding agreement of the Acquired
Company party thereto enforceable against such Acquired Company in accordance
with its respective terms. Except as described in Schedule 2.8 annexed hereto,
no
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consent, authorization or approval of, or declaration, filing or registration
with, any governmental or regulatory authority, or any consent, authorization or
approval of any other third party, is necessary in order to enable the Company
or any Acquired Company to enter into and perform its obligations under this
Agreement, the Company Documents or any of the Acquisition Agreements to which
it is a party, and neither the execution and delivery of this Agreement, the
Company Documents or any of the Acquisition Agreements, nor the consummation of
the transactions contemplated thereby will:
(a) conflict with, require any consent under, result in the
violation of or constitute a breach of any provision of the Articles of
Incorporation or By-Laws of the Company or any of the Subsidiaries;
(b) conflict with, require any consent under, result in the
violation of; constitute a breach of or accelerate the performance required on
the part of the Company or any of the Subsidiaries by the terms of; any evidence
of indebtedness or agreement (whether or not related to indebtedness) to which
the Company or any of the Subsidiaries is a party, in each case with or without
notice or lapse of time or both, including any mortgage or deed of trust or
other agreement creating a lien, charge or encumbrance to which any property of
the Company or any of the Subsidiaries is subject, or permit the termination of
any such agreement by another person;
(c) result in the creation or imposition of any Lien upon, or
restriction on the use of, any property or assets of the Company or any of the
Subsidiaries under any agreement or commitment to which the Company or any of
the Subsidiaries is bound;
(d) accelerate, or constitute an event entitling, or which
would, on notice or lapse of time or both, entitle the holder of any
indebtedness of the Company to accelerate the maturity of any such indebtedness;
(e) conflict with or result in the breach or violation of any
writ, judgment, order, injunction, decree or award of any court or governmental
body or agency or arbitration tribunal that is binding on the Company or any of
the Subsidiaries; or
(f) constitute a violation by the Company or any of the
Subsidiaries of any statute, law or regulation of any jurisdiction, where such
violation would result in a material adverse effect on the Company or any
Subsidiary.
2.9 Financial Statements. The Company has heretofore furnished Investor
with (i) true and complete copies of the unaudited balance sheets and related
statements of income and retained earnings and changes in financial position of
the Company, as of and for the fiscal year ended on March 31, 1999, and of each
Subsidiary, as of and for the fiscal year ended on December 31, 1998, and (ii)
the latest unaudited balance sheets of the Company and each Subsidiary (the
"Latest Balance Sheets;" with respect to each of the Latest Balance Sheets, the
date thereof is hereinafter referred to as the "Balance Sheet Date") and the
related unaudited statements of income and retained earnings for the Company for
the period then ended (hereinafter, the financial statements
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referred to in subsections (i) and (ii), together with the footnotes and
supporting schedules thereto, are referred to as the "Financial Statements").
Copies of the Financial Statements are annexed hereto as Schedule 2.9. The
Financial Statements fairly present the financial condition of the Company and
each Subsidiary at the dates thereof and the related statements of income and
retained earnings and changes in financial position, fairly present the results
of the operations of the Company and each Subsidiary and the changes in its
financial position for the periods indicated. Each of the Financial Statements
relating to each of the Subsidiaries are auditable based upon the books and
records of such Subsidiary as such books and records now exist. The Company
shall cause an audit of the Financial Statements of the Company and each
Subsidiary deemed to be a '1signiflcant subsidiary" by its certified public
accountant, Grant Thornton LLC, to be completed by such certified public
accountant within seventy-five (75) days following the Closing Date and deliver
such audits promptly to Investor.
2.10 No Undisclosed Liabilities. Except as disclosed on Schedule 2.10
and except as reflected and reserved against in the Latest Balance Sheets, as of
the Balance Sheet Date, neither the Company nor any Subsidiary has incurred any
liabilities or obligations (whether long term or current and whether accrued,
absolute or contingent), including without limitation with respect to Taxes,
and, except for liabilities and obligations incurred since the Balance Sheet
Date in the ordinary course of business, as of the Closing Date, neither the
Company nor any Subsidiary will have incurred any liabilities or obligations
(whether long term or current and whether accrued, absolute or contingent)
which, individually or in the aggregate, are materially adverse to the Company,
or such Subsidiary, respectively.
2.11 Limitation. Except as described in Schedule 2.11 annexed hereto,
there is no action, suit, proceeding at law or in equity by any person or
entity, or any arbitration, or any administrative or other proceeding by or
before any governmental or other instrumentality or agency, pending, or, to the
knowledge of the Company threatened, against or affecting the Company or any of
the Subsidiaries or any of their respective properties, assets or rights.
Neither the Company nor any of the Subsidiaries is subject to any judgment,
order, award or decree entered in any lawsuit or proceeding which may have an
adverse effect on any of its respective operations, business practices or on its
respective ability to acquire any property or conduct business in any area.
2.12 Taxes.
(a) For purposes of this Agreement, (i) "Taxes" shall mean all federal,
state, local and foreign income, gross receipts, profits, windfall profits,
capital gains, franchise, sales, use, license, occupation, property, property
transfer, capital stock, premium, excise, ad valorem, employment, payroll,
withholding, estimated, severance, stamp, environmental, fuel, customs duties,
social security, unemployment, disability, registration, value added,
alternative or add-on minimum and other taxes, assessments or governmental
charges of any nature, kind or character, and including any interest, additions
to tax and penalties thereon; and (ii) "Tax Returns" shall mean all returns,
declarations, reports and forms, claims for refunds, or information returns and
reports relating to Taxes, including any schedule or attachment thereto, and
including any amendments thereof.
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(b) The Company (since its inception) and each Subsidiary (since the
1994 tax year) have timely filed all Tax Returns that the Company or such
Subsidiary was required to file. All such Tax Returns were correct and complete
in all respects material to such Tax Return. Except as set forth on Schedule
2.12(b), all Taxes owed by the Company or any Subsidiary (whether or not shown
on any Tax Return) have been paid. Neither the Company nor any Subsidiary is
currently the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction where the
Company or any Subsidiary does not file Tax Returns that the Company or such
Subsidiary is or may be subject to taxation by that jurisdiction. There are no
Liens on any of the assets of the Company or any Subsidiary that arose in
connection with any failure (or alleged failure) to pay any Tax. Following the
Closing, and in a timely manner, the Company and each Subsidiary shall file all
Tax Returns which the Company or such Subsidiary is required to file and pay any
Taxes owed by the Company or such Subsidiary as the same shall become due.
(c) The Company and each Subsidiary has withheld and paid all Taxes
required to have been withheld and paid by it in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.
2.13 Title and Sufficiency of Assets. In all material respects, the
Company and each Subsidiary has good, valid and marketable title to all of its
respective properties and assets (tangible and intangible), including without
limitation, all properties and assets of the Company or such Subsidiary shown on
the Latest Balance Sheets and all properties and assets purchased or acquired by
the Company or such Subsidiary since the Balance Sheet Date; in each case
subject to no Liens, except for (i) Liens reflected on the Latest Balance
Sheets; (ii) Liens for current taxes, assessments or governmental charges or
levies on property not yet due or delinquent and (iii) Liens described on
Schedule 2.13 hereto ("Permitted Liens"). Except for the leases of real and
personal property described in Schedule 2.18 the Company and each Subsidiary
owns outright, and are in exclusive possession of, all assets, properties and
rights currently used in their respective businesses. All property and assets
owned or utilized by the Company and the Subsidiaries are in good operating
condition and repair (ordinary wear and tear excepted), free from any defects
(except such minor defects as do not interfere with the use thereof in the
conduct of normal operations), have been maintained in a manner consistent with
the standards generally followed in the industry and are sufficient to carry on
the Company Business (as defined below) as conducted during the twelve-month
period immediately preceding the Closing Date, and as to rolling stock, are
fully road worthy and in compliance with all safety requirements in all material
respects. Ml buildings and other structures owned, leased or otherwise utilized
by the Company and the Subsidiaries are, to the knowledge of the Company, in
good condition and repair.
2.14 Compliance with Laws. Neither the Company nor any Subsidiary has
violated the Foreign Corrupt Practices Act or any other Law regarding the
payment of bribes, kickbacks, gratuities or other monies in exchange for
favorable treatment by any customer, supplier, government official or other
person. To the knowledge of the Company, the Company and the Subsidiaries
(including each and all of its and their operations, practices, properties, real
or personal, owned or leased, and assets) are in compliance with all applicable
federal, state, local and foreign
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laws, ordinances, orders, rules and regulations (collectively, "Laws"),
including without limitation, those applicable to registration for the offer or
sale of securities, discrimination in employment, the Americans with
Disabilities Act, occupational safety and health, trade practices, competition
and pricing, product warranties, zoning, building and sanitation, employment,
unemployment, retirement and labor relations and product advertising, except for
such non-compliance which would not have a material adverse effect on the
Company or any Subsidiary. To the knowledge of the Company, each parcel of real
property owned, leased or utilized by the Company or any of the Subsidiaries is
unconditionally zoned a classification that allows its current use, and such
zoning is not being challenged by legal process, and no change or modification
thereof is being sought by any person or entity, including, but not limited to,
governmental or quasi-governmental authorities. Neither the Company, the
Subsidiaries nor, to the knowledge of the Company, any landlord of the Company
or any Subsidiary, has received notice of any violation or alleged violation of,
or is subject to liability (whether accrued, absolute, contingent, direct or
indirect) for past or continuing violation of, any Laws. All reports and returns
required to be filed by the Company or any Subsidiary with any governmental
authority have been filed, and were accurate and complete in all material
respects when filed. Without limiting the generality of the foregoing, and in
all material respects:
(a) Except as disclosed in Schedule 2.14(a), the operation of
the business of the Company and the Subsidiaries (the "Company Business") has
and does not, nor does any condition existing at any of the facilities in which
the Company Business is conducted (collectively, the "Facilities"), in any
manner constitute a material breach or violation of any lease or other agreement
governing the use of such Facilities or a nuisance or other tortious
interference with the rights of any person or persons in such a manner as to
give rise to or constitute the grounds for a suit, action, claim or demand by
any such person or persons seeking compensation or damages or seeking to
restrain, enjoin or otherwise prohibit any aspect of the conduct of such
business or the manner in which it is now conducted.
(b) the Company and each Subsidiary has made all required
payments to its respective unemployment compensation reserve accounts with the
appropriate governmental departments of the states where it is required to
maintain such accounts, and each of such accounts has a positive balance.
(c) the Company and each Subsidiary is in compliance with all
Laws relating to workers compensation, maintains policies of insurance
sufficient to meet its obligations under all such Laws and has paid all premiums
due and payable on all such policies of insurance.
(d) the Company has delivered to Investor copies of all
reports of the Company and each Subsidiary required under the federal
Occupational Safety and Health Act of 1970, as amended, and under all other
applicable health and safety laws and regulations. The deficiencies, if any,
noted on such reports have been corrected.
2.15 Licenses and Permits. The Company and each Subsidiary have all
licenses, permits, approvals, authorizations and consents of all governmental
and regulatory authorities and all certification organizations (collectively,
"Authorizations), required for the conduct of the
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Company Business (as presently conducted), and operation of the Facilities
except where the failure to have such Authorizations would not have a material
adverse effect on the Company or any Subsidiary. All such licenses, permits,
approvals, authorizations and consents are described in Schedule 2.15 are in
full force and effect and will not be affected or made subject to loss,
limitation or any obligation to reapply as a result of the transactions
contemplated hereby. Except as set forth in Schedule 2.15 the Company and each
Subsidiary (including their operations, properties, whether owned or leased, and
assets) are and have been in compliance with all such permits and licenses,
approvals, authorizations and consents.
2.16 Contracts and Other Agreements. Schedule 2.16 annexed hereto
contains a complete and accurate list of all of the following contracts and
other agreements to which the Company or any Subsidiary is a party or by or to
which it or its respective assets or properties are bound or subject or which
are necessary for the conduct of its respective business as presently conducted:
(a) contracts and other agreements with any current or former
officer, director, employee, consultant, agent or other representative or with
any person or entity in which any ofthe foregoing has an interest, including any
"Affiliate" or "Associate" of such person or entity, as such terms are defined
in the Securities Act and the rules and regulations published thereunder;
(b) contracts and other agreements with any employee or any
labor union or association representing any employee;
(c) contracts and other agreements which obligate the Company
or any Subsidiary to supply to any party all or a portion of such party's
requirements of any product or service sold or rendered by the Company or any
Subsidiary, including without limitation, towing, recovery or transportation
contracts;
(d) contracts and other agreements for the sale or lease of
any of its assets or properties other than in the ordinary course of business or
for the grant to any person of any preferential rights to purchase any of its
assets or properties;
(e) joint venture or partnership agreements;
(f) contracts or other agreements under which the Company
agrees to indemnification any party or to share tax liability of any party;
(g) contracts or other agreements of guaranty or relating to
matters of suretyship to which the Company or any Subsidiary is a party or by
which any assets or properties of the Company or such Subsidiary are subject or
bound;
(h) contracts and other agreements calling for an aggregate
price or fee, or payments in any one year, of more than $10,000;
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(i) contracts and other agreements that cannot be
canceled without liability, premium or penalty upon thirty (30) days'
notice;
0) contracts and other agreements with customers or
suppliers for the sharing of fees, the rebating of charges or other
similar arrangements;
(k) contracts and other agreements containing
obligations or liabilities of any kind to holders of the securities of
the Company or any Subsidiary as such (including, without limitation, an
obligation to register any of such securities under any federal or state
securities laws);
(1) contracts and other agreements containing
covenants of the Company or any Subsidiary not to compete in any line of
business or with any person in any geographical area or covenants of any
other person or entity not to compete with the Company or any Subsidiary
in any line of business or in any geographical area;
(m) contracts and other agreements relating to the
acquisition by the Company of any operating business or the capital
stock of any other person, corporation or other entity;
(n) contracts or agreements relating to Intellectual
Property (as defined in Section 2.19) owned, licensed or used by the
Company or any Subsidiary in the course of its respective business,
including without limitation all contracts and agreements relating to
the development and use of Software (as defined in Section 2.1);
(o) contracts and other agreements requiring the
payment to any person of a royalty, override or similar commission or
fee;
p) contracts and other agreements relating to the
borrowing of money by the Company or any Subsidiary or subjecting any
assets or properties of the Company or any Subsidiary to security
interests, liens or other liabilities or obligations;
(q) any agreement, contract or commitment which might
reasonably be expected to have a potential adverse impact on the
business or operations of the Company or any Subsidiary;
(r) any contract or other agreement not made in the
ordinary course of business; or
(s) any other material contract or other agreement
whether or not made in the ordinary course of business.
There have been delivered or made available to Investor true and complete copies
of all of the written contracts and other agreements described on Schedule 2.16.
Each such contract or other agreement is valid and binding upon the Company or
the Subsidiary which is a party thereto in accordance with its terms, and the
Company or the Subsidiary which is a party thereto has performed, in all
material respects, all contractual obligations required to be performed by it to
date
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and is not in default under each such contract and has not taken any action, or
failed to take any action, whereupon such action or failure to act constitutes,
or with notice or lapse of time or both would constitute, a default under such
contract. No other party to any such contract is in default in the performance
of its obligations thereunder or has taken any action, or failed to take any
action, whereupon such action or failure to act constitutes, or with notice or
lapse of time or both would constitute, a breach or anticipatory breach thereof.
Except as separately identified on Schedule 2.16. no approval or consent of any
person is needed in order that the contracts and other agreements set forth on
Schedule 2.16 or on any other Schedule continue in full force and effect
following the consummation of the transactions contemplated by this Agreement.
As used in this Section 2.16, the term "contract" or "agreement" includes any
written or oral agreement, commitment, understanding or arrangement to which the
Company or any Subsidiary is a party with respect to its business or by which
any of its respective assets are bound.
2.17 Software. Schedule 2.17 annexed hereto contains a complete list
of all computer software which is material to the business of the Company or any
Subsidiary and which has been designed specifically for use by the Company or
any Subsidiary or as to which the Company or any Subsidiary claims any
proprietary rights (the "Company Software"). Except as described in Schedule
2.17 the Company or a Subsidiary is the exclusive owner of all patents,
copyrights, trademarks, intellectual property rights, trade secrets and other
proprietary information, processes, and formulae used in connection with the
Company Software. All work performed by employees, independent contractors or
others in connection with the Company Software on behalf of the Company or any
Subsidiary has been performed either pursuant to a "work-for-hire" arrangement
or agreement with the Company or such Subsidiary in accordance with applicable
state and federal law, that has accorded the Company or such Subsidiary full,
effective, exclusive and original ownership of all tangible and intangible
property arising thereby or subject to an executed instrument of assignment in
favor of the Company or such Subsidiary that has conveyed to the Company full,
effective and exclusive ownership of all tangible and intangible property
arising in connection with the work performed. The Company or such Subsidiary
has exclusive ownership, possession and control of all source codes, system
documentation, statements of principles of operation, and schematics for all the
Company Software that may be necessary to render such materials understandable
and usable by a trained computer programmer. The Company or such Subsidiary has
taken adequate measures consistent with industry practice to safeguard the
confidentiality of any confidential information or trade secrets relating to the
Company Software. The Company Software is not in the public domain. The Company
Software performs in accordance with the documentation and other written
material used in connection with the Company Software and is free from material
defects in programming or operation. With respect to any computer software
licensed by the Company or any Subsidiary from a third party (the "Licensed
Software"), such Licensed Software is sufficient for the purpose used and no
such Licensed Software has been utilized by any person, or for any purpose, not
authorized by the license agreement applicable thereto. The Licensed Software,
is of a recent version and is, to the knowledge of the Company, purported be Y2K
Compliant by the licensor thereof. The Company Software is Y2K compliant as of
the date hereof. "Y2K compliant" shall mean that the computer software so
described will (i) handle date information involving any and all dates before,
during and/or after January 1, 2000, including accepting input, providing output
and performing date calculations in whole or in part, (ii)
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operate accurately without interruption on or in respect of any and all dates
before, during and/or after January 1, 2000 and without any change in
performance, (iii) respond to and process two digit year input without creating
any ambiguity as to the century, and (iv) store and provide date input
information without creating any ambiguity as to the century.
2.18 Leases. Schedule 2.18 annexed hereto contains a complete and
accurate list of any real property lease binding the Company or any of the
Subsidiaries or to which the Company or any of the Subsidiaries is a party
("Leases'1) and all termination dates, renewal options and dates by which notice
of renewal or cancellation, as applicable, must be given with respect to such
Leases. Each such Lease is in full force and effect, and the Company or the
Subsidiary party to such Lease has fully performed, in all respects material
thereto, all of its obligations to be performed to date under such Lease. The
Company or the Subsidiary party to each such Lease is current with respect to
the payment of all rents and other charges due thereunder and, to the knowledge
of the Company, their use and occupancy of the premises which are the subject
matter of such Lease do not violate any of the terms of such Lease in any
respect which is significant to the Lease, is in conformity with all applicable
building, zoning, health, fire, safety and other laws, ordinances, codes and
regulations and is not in violation of the conditions of any policy of insurance
held by the Company or any Subsidiary. To the knowledge of the Company, all of
the buildings, structures and appurtenances situated on any premises that is
subject to any of the Leases are, and as of the Closing Date, will be, in good
operating condition and state of maintenance and repair and will be adequate and
suitable for the purposes for which they are presently being or are intended to
be used, and the Company or the Subsidiary party to such Lease has adequate
rights of ingress and egress and utility services for the operation of its
business in the ordinary course. No lessor or landlord under any Lease is in
default in the performance of its obligations thereunder and neither the Company
nor any Subsidiary has received notice from any such lessor or landlord of its
intention to exercise any option thereunder which would adversely affect or
terminate the use or occupancy of the demised premises under such Lease by the
Company or such Subsidiary. Except as specifically disclosed in Schedule 2.18
all of the Leases permit the consummation of the transactions contemplated
hereby without modification of the terms thereof and without the consent of the
applicable lessor or landlord. Neither the Company nor any Subsidiary owns any
real property and the Company has never owned any real property.
2.19 Trade Name and Other Intangibles. Schedule 2.19 annexed hereto
contains a complete and accurate list of all patents, patent rights, licenses,
methodologies, trade secrets, know-how, trademarks, trademark rights, trade
names, trade name rights, service marks, service mark rights, copyrights or
similar rights ("Intellectual Property") (other than Company Software listed
separately on Schedule 2.17) which are either (i) wholly or partly owned or
licensed by the Company or any Subsidiary, or (ii) used in the conduct of the
business of the Company or any Subsidiary. Except as described on Schedule 2.19
annexed hereto, to the knowledge of the Company, no person or entity, other than
the Company or a Subsidiary, has any rights under or in respect of, and, to the
knowledge of the Company, no person is infringing or otherwise acting adversely
with respect to, the rights of the Company or a Subsidiary under or in respect
of the Intellectual Property, and, to the knowledge of the Company, the Company
or a Subsidiary is the exclusive owner of such rights and there is no claim for
damages or any proceeding pending or threatened with respect thereto. Neither
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the Company nor any Subsidiary is infringing or otherwise acting adversely to
the right of any person under or in respect to any Intellectual Property, and
there is no claim for damages or any proceeding pending or, to the knowledge of
the Company, threatened with respect thereto.
2.20 Labor Relations: Employees. Other than amounts which are accrued
on the Financial Statements but have not yet become payable in accordance with
the customary practices of the Company or the applicable Subsidiary, and which
will be paid in a timely manner when so payable, the Company and each
Subsidiary: (a) has paid in full to its full and part-time employees all wages,
salaries, commissions, bonuses and other direct compensation for all services
performed by them to date, and b) has paid, or will pay in a timely manner, all
severance pay, if any, and benefits, FICA, withholding taxes and vacation pay,
if any, for all of its employees and is not subject to any claim for non-payment
or non-performance of any of the foregoing. To the knowledge of the Company, the
Company and each Subsidiary is in compliance with all federal, state and local
laws and regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours. Neither the Company nor any
Subsidiary has improperly characterized as an independent contractor or
consultant, any individual who should have been treated as an employee for tax
withholding or any other purpose, where such improper characterization would
have a material adverse effect on the Company or any Subsidiary. Neither the
Company nor any Subsidiary is a party to any collective bargaining agreement
with respect to any of its employees.
2.21 Emnloyee Benefit Plans.
(a) Each pension, profit sharing, retirement, deferred
compensation, bonus, stock purchase, severance, hospitalization, medical
insurance, life insurance, vacation policy or other employee benefit plan or
program providing benefits for current or former employees of the Company or any
Subsidiary, other than salaries or cash wages for straight time, overtime or
shift differential (each a "Plan") has been maintained in substantial compliance
with the requirements of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA'1). No Plan is a "multiemployer plan" within the meaning of
ERISA.
(b) No "reportable event" (within the meaning of section
4043(b) of ERISA) has occurred with respect to any pension plan that is subject
to Title IV of ERISA maintained by any trade or business (whether or not
incorporated) that is under common control with the Company, within the meaning
of section 414(c) of the Code and the regulations thereunder (hereinafter any
such plan shall be referred to as an "Affiliate Plan" and any such trade or
business shall be referred to as an "ERISA Affiliate"), and no "reportable
event" will occur with respect to any Plan or Affiliate Plan as a result of any
transaction contemplated by this Agreement.
(c) The Company and each Subsidiary has satisfied all material
reporting and disclosure requirements and all other requirements applicable to
it under the Code or ERISA, and the Department of Labor and the Internal Revenue
Service regulations promulgated thereunder, with respect to the Plans. None of
the Company, the Subsidiaries or any other "party in interest" or "disqualified
person" (within the meaning of section 3(14) of ERISA or section 4975(e)(2) of
the
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Code, respectively) with respect to any Plan has engaged in any "prohibited
transaction" (within the meaning of section 406 of ERISA or section 4975 of the
Code) which could subject any Plan, Investor, the Company, any Subsidiary or any
trustee, administrator or other fiduciary of any Plan, to any penalty or excise
tax imposed on prohibited transactions by section 502(i) of ERISA or section
4975 of the Code. There are no material actions, suits or claims pending (other
than routine claims for benefits) or threatened, against any Plan or against the
assets of any Plan. No Plan which is subject to Part III of Subtitle B of Title
I of ERISA or section 412 of the Code has incurred any "accumulated funding
deficiency" (as defined in ERISA), whether or not waived.
2.22 Insurance. All policies and binders of insurance issued to or on
behalf of the Company are valid and enforceable in accordance with their terms,
are in full force and effect, and insure against risks and liabilities to the
extent and in the manner reasonably determined by the Company to be appropriate
and sufficient and are adequate to protect the Company, the Subsidiaries and its
and their respective assets and properties. The Company or the Subsidiary that
is insured under each such policy or binder has paid all premiums due thereon
and is not in default with respect to any provision contained in such policy or
binder and has not failed to give any notice or present any claim under such
policy or binder in a due and timely fashion. Except for claims described on
Schedule 2.22 there are no outstanding unpaid claims under any such policy or
binder. Neither the Company nor any Subsidiary has received any notice of
cancellation or non-renewal of any such policy or binder. None of the policies
provides that premiums paid in respect of the periods prior to the Closing Date
may be adjusted or recomputed based on claims-paying experience of such policies
or otherwise. Neither the Company nor, to the knowledge of the Company, any
Subsidiary has received any notice from any of its respective insurance carriers
that any insurance premiums will be increased in the future or that any
currently in-force insurance coverage will not be available in the future on the
same terms as now in effect.
2.23 Environmental Matters.
(a) With the exception of (i) gasoline or diesel fuel
contained in vehicle fuel tanks for onboard consumption, (ii) motor oil
contained in engine crank cases, (ii) small quantities of fuel in portable
containers used to provide emergency fueling to motor vehicles (as is customary
in the towing industry), or (iii) motor vehicle batteries (none of items (i),
(ii), or (iii) having leaked or discharged any of their contents while in the
custody and control of the Company or any Subsidiary other than insignificant
oil leaks inherent to internal combustion engines), to the knowledge of the
Company, neither the Company nor any Subsidiary has ever generated, transported,
used, stored, treated, disposed of; or managed any Hazardous Waste (as defined
below); no Hazardous Material (as defined below) has ever been or, to the
knowledge of the Company or any Subsidiary is threatened to be spilled,
released, or disposed of at any site presently or formerly owned, operated,
leased or used by the Company or any Subsidiary, or has ever come to be located
in the soil or groundwater at any such site; no Hazardous Material has ever been
transported by or at the direction of the Company or any Subsidiary from any
site presently or formerly owned, operated, leased, or used by the Company or
such Subsidiary for treatment, storage, or disposal at any other place; and no
Lien has ever been imposed by any governmental agency on any property, facility,
machinery,
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or equipment owned, operated, leased, or used by the Company or any Subsidiary
in connection with the presence of any Hazardous Material.
(b) Except for any of the following which, in the aggregate,
would not have a material adverse effect on the Company or any Subsidiary,
neither the Company nor any Subsidiary has any liability under, nor has the
Company or any Subsidiary ever violated, any Environmental Law (as defined
below); the Company and each Subsidiary and any property owned, operated,
leased, or used by the Company or any Subsidiary, and any facilities and
operations thereon are presently in compliance with all applicable Environmental
Laws and any permits or licenses issued pursuant thereto; neither the Company
nor any Subsidiary has ever entered into or been subject to any judgment,
consent decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and neither the
Company nor any Subsidiary has any knowledge or reason to know that any of the
items enumerated in the immediately preceding clause of this paragraph will be
forthcoming.
(c) Except as disclosed in Schedule 2.23(c), to the knowledge
of the Company, no site currently owned, operated, leased, or used by the
Company or any Subsidiary contains any asbestos or asbestos-containing material,
any polychlorinated biphenyls PCBs) or equipment containing PCBs, any
underground or above-ground storage tanks, or any urea formaldehyde foam
insulation.
(d) The Company has provided to Investor copies of all
documents, records, and information concerning any environmental or health and
safety matter relevant to the Company or any Subsidiary, whether generated by
the Company, a Subsidiary or others, including, without limitation,
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Materials, spill control
plans, and reports, correspondence, permits, licenses, approvals, consents, and
other authorizations related to environmental or health and safety matters
issued by any governmental agency.
(e) For purposes of this Agreement, "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; "Hazardous Waste"
shall mean and include any hazardous waste as defined or regulated under any
Environmental Law; "Environmental Law" shall mean any environmental or health
and safety related law, regulation, rule, ordinance, or by-law at the foreign,
federal, state, or local level, existing at any time prior to the Closing Date,
including, without limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), each
as amended, and their state and local counterparts, as amended.
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2.24 Restrictive Documents. To the knowledge of the Company, neither
the Company nor any Subsidiary is subject to, or a party to, any charter,
by-law, mortgage, lien, lease, license, permit, agreement, contract, instrument,
law, rule, ordinance, regulation, order, judgment or decree, or any other
restriction of any kind, which materially and adversely affects the business
practices, operations or condition of the Company, any Subsidiary, or any of
their respective assets or property, or which would prevent consummation of the
transactions contemplated by this Agreement or the continued operation of its
respective business after the date hereof or the Closing Date on substantially
the same basis as heretofore operated or which would restrict its ability to
acquire any property or conduct business in any area.
2.25 Transactions with Affiliated Parties. Except as set forth on
Schedule 2.25, no Associate or Affiliate of the Company or any Subsidiary (i)
has any ownership interest, directly or indirectly, in any competitor, supplier
or customer of the Company or any Subsidiary, (ii) has any outstanding loan or
receivable, in either event to or from the Company or any Subsidiary, or (iii)
is a party to or has any interest in any contract or agreement with the Company
or any Subsidiary.
2.26 No Changes Prior to Closing Date. During the period from the
Balance Sheet Date to and including the Closing Date, except as expressly
contemplated hereby or in the ordinary course of business, neither the Company
nor any Subsidiary will have (i) incurred any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise),, none of which,
even in the ordinary course of business, will be materially adverse to the
business of the Company or such Subsidiary, (ii) permitted any of its assets to
be subjected to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind, (iii) sold, transferred or otherwise disposed
of any assets, (iv) made any capital expenditure or commitment therefor, (v)
declared or paid any dividend or made any distribution on any shares of its
capital stock, or redeemed, purchased or otherwise acquired any shares of its
capital stock or granted or canceled any option, warrant or other right to
purchase or acquire any such shares, (vi) made any bonus or profit sharing
distribution or similar payment of any kind, (vii) increased its indebtedness
for borrowed money, or made any loan to any person, (viii) made or permitted any
amendment or termination of any contract, agreement or license to which it is a
party or by which it or any of its assets and properties are subject or bound,
(ix) entered into any agreement or arrangement granting any preferential rights
to purchase any of its assets or properties or requiring the consent of any
party to the transfer and assignment of any of its assets or properties, (x)
written off as uncollectible any notes or accounts receivable (xi) granted any
increase in the rate of wages, salaries, bonuses or other remuneration of any
executive employee or other employees, except as set forth in Schedule 2.26
(xii) canceled or waived any claims or rights of substantial value, (xiii) made
any change in any method of accounting or auditing practice, (xiv) otherwise
conducted its business or entered into any transaction, or (xv) agreed, whether
or not in writing, to do any of the foregoing.
2.27 Disclosure. Neither this Agreement, nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereofby the Company's
directors or officers, in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit any statement of a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact known to
the Company
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which materially and adversely affects the business, prospects (financial or
otherwise) or financial condition of the Company, the Subsidiaries or its or
their respective properties or assets, which has not been set forth in this
Agreement or in the Schedules or Exhibits or certificates furnished in
connection with the transactions contemplated by this Agreement.
2.28 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of the Company or any Subsidiary is, or will be, entitled to
any commission or broker's or finder's fees from any of the parties hereto, or
from any person controlling, controlled by or under common control with any of
the parties hereto, in connection with any of the transactions contemplated
herein or the Company's acquisition of the Acquired Companies.
2.29 Securities Law Compliance. At all times since its formation, the
Company has been in compliance with, and following the closing, the Company
shall remain in compliance with, the Securities Act, the Exchange Act and all
other Laws, including without limitation state "blue sky" laws, which affect the
issuance or transfer of securities of any kind. The Company has never been
registered with the SEC and has never been so required to register under Section
12 of the Exchange Act. The Company shall register with the SEC on SEC Form 10
(the "Initial Filing") within forty-five (45) days following the date hereof
and, thereafter, shall file with the SEC in a timely manner such other periodic
reports and other information which the Company shall be required to file under
the Securities Act or the Exchange Act. The Initial Filing and such other
periodic reports and information shall comply in all material respects with the
Securities Act and the Exchange Act, as applicable, and shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances in which they are made, not misleading.
2.30 No Further Issuance of Series A Preferred Stock. For so long as
any of the Purchased Shares or the Purchased Warrants remains outstanding,
Company covenants that it will not issue additional shares of its Series A
Preferred Stock without the prior written consent of Investor.
ARTICLE III
REPRESENTATIONS OF INVESTOR
3.1 Incorporation and Qualification. Investor is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Georgia, and has appropriate power and lawful authority to carry on
its business as now being conducted, and to own, lease and operate its
properties and assets as now owned, leased or operated by Investor.
3.2 Articles of Organization and Operating Agreement. Schedule 3.2
annexed hereto contains true and complete copies of the Articles of Organization
of Investor, including all amendments thereto (certified by the Secretary of
State of its jurisdiction of incorporation), and the Operating Agreement of
Investor, including all amendments thereto (certified by its Manager or
Secretary), as in effect on the date hereof and such Operating Agreement and
Articles of
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Organization will not be amended, rescinded or otherwise modified between the
date hereof and the Closing Date.
3.3 Authority of Investor. Investor has full power and legal capacity
to execute and deliver this Agreement and the other agreements required to be
executed and delivered by Investor hereunder (the "Investor Documents") and to
carry out the transactions contemplated hereby. The execution, delivery and
performance of the Investor Documents by Investor have been duly authorized by
all necessary action on the part of Investor. The Investor Documents are valid
and binding agreements of Investor enforceable against Investor in accordance
with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles and the discretion of courts applying such
laws and principles. Except as set forth in Schedule 3.3 annexed hereto, no
consent, authorization or approval of, or declaration, filing or registration
with, any governmental or regulatory authority, or any consent, authorization or
approval of any third party, is necessary in order to enable Investor to enter
into and perform Investor's obligations under the Investor Documents, and
neither the execution and delivery of the Investor Documents nor the
consummation of the transactions contemplated thereby will:
(a) conflict with, require any consent under, result in the
violation of; or constitute a breach of any provision of the Articles of
Organization or the Operating Agreement of Investor;
(b) conflict with, require any consent under, result in the
violation of, constitute a breach of, or accelerate the performance required on
the part of Investor by the terms of, any evidence of indebtedness or agreement
to which Investor is a party, in each case with or without notice for lapse of
time or both, including any mortgage or deed of trust or other agreement
creating a lien, charge or encumbrance to which any property of Investor is
subject, or permit the termination of any such agreement by another person;
(c) result in the creation of imposition of any security
interest, lien, charge or other encumbrance upon, or restriction on the use of;
any property or assets of Investor under any agreement or commitment to which
Investor is bound;
(d) accelerate, constitute an event entitling, or which would,
on notice or lapse of time or both, entitle the holder of any indebtedness of
Investor to accelerate the maturity of such indebtedness;
(e) conflict with or result in the breach of or violation of
any writ, judgment, order, injunction, decree or award of any court of
governmental body or agency or arbitration tribunal that is binding on Investor
or
(f) constitute a violation by Investor of any statute, law, or
regulation of any jurisdiction.
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3.4 Securities Acknowledgment.
(a) Investor is acquiring the Purchased Securities solely for
Investor's own account for investment purposes and not with a view to or an
interest in participating, directly or indirectly, in the resale thereof.
Investor's principal place of business is located in the State of Georgia.
Investor acknowledges that all of the Purchased Securities acquired by Investor
will be sold to Investor without registration and reliance upon certain
exemptions under the Securities Act, in reliance upon certain exemptions from
registration requirements and under applicable state securities laws. Investor
will make no transfer or assignment of any of the stock except in compliance
with the Securities Act, as amended, and any other applicable securities laws,
or pursuant to applicable exemptions from the aforementioned laws.
(b) Neither the Company nor any person acting on its behalf
has offered the Purchased Securities to Investor by means of general or public
solicitation or general or public advertising, such as newspaper or magazine
advertisements, by broadcast media, or at any seminar or meeting whose attendees
were solicited by such means.
(c) Investor consents, agrees and acknowledges that the
certificate or certificates representing the Purchased Securities will be
inscribed with the following legend, or another legend to the same effect, and
agrees to the restrictions set forth therein:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTION AND HAVE
BEEN ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION
PERTAINING TO SUCH SECURITIES AND PURSUANT TO A
REPRESENTATION BY THE SECURITY HOLDER NAMED HEREON THAT SAID
SECURITIES HAVE BEEN ACQUIRED FOR PURPOSES OF INVESTMENT AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF REGISTRATION. FURTHERMORE, NO
OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS TO TAKE
PLACE WITHOUT THE PRIOR WTITTEN APPROVAL OF COUNSEL OF THE
ISSUER BEING AFFIXED TO THIS CERTIFICATE. THE TRANSFER AGENT
HAS BEEN ORDERED TO EXECUTE TRANSFERS OF THIS CERTIFICATE
ONLY IN ACCORDANCE WITH THE ABOVE INSTRUCTIONS"
3.5 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of Investor is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated herein.
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ARTICLE IV
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The parties hereto covenant and agree that between the date hereof and
the Closing Date:
4.1 Operation in Ordinary Course. From the date hereof to the Closing
Date, the Company shall, and shall use its reasonable best efforts to cause each
Subsidiary to (i) conduct its business only in the ordinary course and in
substantially the same manner as conducted at the date hereof, (ii) use its
reasonable best efforts to preserve its business organization intact and to
retain the services of its key employees, purchasing and sales personnel and
representatives, (iii) use its reasonable best efforts to preserve favorable
relations with its employees, customers, suppliers and others having business
relations with it, (iv) comply with all laws, ordinances and regulations
applicable to it in the conduct of its business, (v) not enter into, amend in
any material respect or terminate any lease, contract or agreement, (vi) conduct
its business in such a manner that the representations and warranties contained
in Article II shall continue to be true and correct on and as of the Closing
Date as if made on and as of the Closing Date, and (vii) with respect only to
the Company, use its reasonable best efforts to consummate the acquisition of
each of the Acquired Companies.
4.2 Notice of Events. The Company shall promptly notify Investor of (i)
any event, condition or circumstance occurring from the date hereof through the
Closing Date that would constitute a violation or breach of this Agreement, (ii)
any event, occurrence, transaction or other item which would have been required
to have been disclosed on any Schedule or statement delivered hereunder, had
such event, occurrence, transaction or item existed on the date hereof, other
than items arising in the ordinary course of business which would not render any
representation or warranty of the Company inaccurate or misleading, and (iii)
any lawsuits, claims, proceedings or investigations which after the date
heretofore threatened or commenced against the Company or any of its officers,
directors, employees, consultants, agents or shareholders with respect to the
affairs of the Company.
4.3 Exclusive Dealing. During the period from the date of this
Agreement to the Closing Date, other than the transactions with the Acquired
Companies, the Company shall not take any action to directly or indirectly
encourage, initiate or engage in discussions or negotiations with, or provide
any information to, any corporation, partnership, person, or other entity or
group, other than Investor, (a) concerning the merger of the Company with any
other entity, (b)the purchase and sale of the assets and properties of the
Company, (c) the purchase or sale of any shares of the capital stock of the
Company, (d) any transaction similar to the foregoing involving the Company, or
(e) any other transaction, agreement or arrangement which, in Investor's
reasonable opinion, would hinder or frustrate the spirit and intent of this
Agreement.
4.4 Examinations and Investigations. Prior to the Closing Date,
Investor shall be entitled, through its employees and representatives,
including, without limitation, its counsel, Smith,
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Gambrell & Russell, LLP, and Investor's accountants, to make such investigation
of the assets, properties, business and operations of the Company, and such
examination of the books, records and financial condition of the Company as
Investor wishes. Any such investigation and examination shall be conducted at
reasonable times and under reasonable circumstances and the Company shall
cooperate fully therein. No investigation by Investor (or failure to conduct
such an investigation) shall diminish or obviate any of the representations,
warranties, covenants or agreements of the Company under this Agreement, or
Investor's rights under Article VIII of this Agreement unless Investor had
actual knowledge (which for purposes of this provision shall be the actual
knowledge of Jay W. Clark or Troy T. Taylor without a duty of inquiry) of a
non-intentional breach by the Company prior to Closing, and consummated the
Closing without informing the Company of the breach and providing an opportunity
to the Company, for a period of five (5) business days, to either cure the
breach or elect to terminate this Agreement. In order that Investor may have
full opportunity to make such business, accounting and legal review, examination
or investigation as it may wish of the business and affairs of the Company, the
Company shall furnish, and shall cause the Company to furnish, the
representatives of Investor during such period with all such information and
copies of such documents concerning the affairs of the Company as such
representatives may reasonably request and cause its officers, employees,
consultants, agents, accountants and attorneys to cooperate fully with such
representatives in connection with such review and examination. If this
Agreement terminates, Investor, its employees and representatives shall keep
confidential and shall not use in any manner any information or documents
obtained from the Company concerning its assets, properties, business and
operations, unless readily ascertainable from public or published information,
or trade sources, or subsequently developed by Investor independent of any
investigation of the Company, or received from a third party not under an
obligation to the Company to keep such information confidential. If this
Agreement terminates, any documents obtained from the Company shall be returned.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATION OF INVESTOR TO CLOSE
The obligation of Investor to enter into and complete the Closing is
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by Investor only in writing:
5.1 Representations Warranties and Covenants. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date. The Company shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by the
Company on or prior to the Closing Date. The Company shall deliver to Investor a
certificate to such effect signed by an executive officer of the Company and
dated the Closing Date.
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5.2 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted or
threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the transactions contemplated by this Agreement or
to seek damages or a discovery order in connection with such transactions, or
that has or could reasonably be expected to have a materially adverse effect on
the assets, properties, business, operations or financial condition of the
Company or any Subsidiary.
5.3 Contemporaneous Transactions. Simultaneously with the Closing of
the transactions contemplated hereby, the Company shall (i) have consummated the
acquisition of each of the Acquired Companies in a manner satisfactory to
Investor, and (ii) have received bank financing in the amount of approximately
five million ninety eight thousand two hundred thirty three dollars ($5,098,233)
upon terms reasonably satisfactory to Investor.
5.4 Registration Rights Agreement. Simultaneously with the Closing of
the transactions contemplated hereby, Investor and the Company shall have
entered into a Registration Rights Agreement, with respect to the Company Common
Stock into which the Purchased Shares are convertible following the filing of
the Amendment, in form and substance acceptable to Investor (the "Registration
Rights Agreement").
5.5 Employment/Non-Competition Agreements. The Company shall have
entered into employment and non-competition agreements with each of Joel
Nagelmann, Eugene Iarocci and Steven Teeters, in form and substance acceptable
to Investor.
5.6 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful consummation of
the Closing and the continued operation of the business of the Company and the
Subsidiaries shall have been obtained.
5.7 Resolutions. There shall have been delivered to Investor a copy of
the resolutions duly adopted by the board of directors and the shareholders of
the Company, certified accurate by an executive officer of the Company as of the
Closing Date, authorizing and approving the terms and conditions of this
Agreement and the consummation by the Company of the transactions contemplated
hereby.
5.8 Third-Party Consents. All consents, permits, waivers and
approvals from parties to material contracts or other agreements with the
Company that may be required in connection with the performance by the Company
of its obligations under this Agreement or the continuance of such contracts or
other agreements with the Company without material modification after the
Closing shall have been obtained (with satisfactory written evidence thereof, in
recordable form where necessary, to be furnished to Investor at the Closing).
5.9 Due Diligence. Investor shall have completed its due diligence
review of the Company and shall be satisfied with the results thereof,
including, but not limited to Investor's satisfaction with the Financial
Statements of the Company and the Subsidiaries.
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5.10 No Material Adverse Change. Prior to the Closing Date, there
shall be no material adverse change in the assets or liabilities, the business
or condition (financial or otherwise) of the Company, the Subsidiaries or its or
their employees or customers regardless of reason, including, but not limited
to, those changes that are as a result of any legislative or regulatory change,
the announcement of the transactions described herein, revocation of any license
or rights to do business, failure to obtain any environmental permits at the
normal time or in the manner applied for by the Company or any Subsidiary, fire,
explosion, accident, casualty, labor trouble, flood, riot, storm, condemnation
or act of God or other public force or otherwise. The Company shall have
delivered to Investor a certificate, dated the Closing Date, to such effect.
5.11 Books and Records. Investor shall have received copies of the
minute books, stock certificate books, stock transfer books, corporate seals,
books of account and all books, papers, records, correspondence and instruments
of, or relating to, the Company and its business.
5.12 Manager Approval. The Manager of Investor shall have approved
this Agreement and the transactions contemplated hereby.
5.13 Good Standing Certificates. Etc. The Company shall have
delivered all certified resolutions, certificates, documents or instruments with
respect to the Company's and each Subsidiary's corporate existence and authority
as Investor may have reasonably requested prior to the Closing Date.
5.14 Schedules and Exhibits. The Company shall have delivered to
Investor, at least three (3) days prior to Closing, all schedules and exhibits
required hereunder, and such schedules and exhibits shall be true and correct in
all material respects on and as of the Closing Date. The Company shall have
delivered to Investor a certificate to such effect, signed by an executive
officer of the Company and dated the Closing Date. Notwithstanding anything else
to the contrary herein, if any information set forth (or, as the case may be,
omitted) in any schedule or exhibit so delivered and certified is, in Investor's
sole discretion, reasonably adverse to the operation or financial condition of
the Company or the Subsidiaries, then Investor may at its option terminate this
Agreement.
5.15 Opinion of Counsel to the Company. The Company shall have
delivered to Investor an opinion of: (a) Delmer C. Gowing III, P.A., acquisition
counsel to the Company, dated the Closing Date, in the form of Exhibit 5.15 (a)
attached hereto, and (b) Atlas, Pearlman, Trop & Borkson, P.A., securities
counsel to the Company, dated the Closing Date, in the form of Exhibit 5.15(b)
attached hereto (the opinions described in (a) and (b)), hereinafter the
"Company Legal Opinions").
5.16 Resignations and Releases. The Company shall have delivered to
Investor (a) a copy of a resignation and release of claims against the Company
executed by each of the Company's officers and directors, as such, other than
Joel Nagelmann, Gene Iarocci, and Steven Teeters in the form of Exhibit 5.16(a);
(b)a copy of a resignation and release of claims executed by each of the
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current officers and directors, as such, of each Acquired Company, in a form
reasonably satisfactory to Investor.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE
The obligation of the Company to enter into and complete the Closing
is subject, at the Company's option, to the fulfillment of the following
conditions, any one or more of which may be waived by the Company only in
writing:
6.1 Representations. Warranties and Covenants. The representations and
warranties of Investor contained in this Agreement shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date. Investor shall have performed and complied
with in all material respects all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. Investor shall deliver to the Company a certificate to such effect signed
by the chief manager of Investor and dated the Closing Date.
6.2 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted or
threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the transactions contemplated hereby, or to seek
damages or a discovery order in connection with such transaction, or that has or
could reasonably be expected to have a materially adverse effect on the assets,
properties, business, operations or financial condition of Investor.
6.3 Governmental Permits and Approvals. All permits and approvals from
any governmental or regulatory body required for the lawful consummation of the
Closing and the continued operation of the business of the Company shall have
been obtained.
6.4 Resolutions. There shall have been delivered to the Company a
copy of the resolutions duly adopted by the Manager of Investor authorizing and
approving the execution and delivery by Investor of this Agreement, and the
consummation by Investor of the transactions contemplated hereby.
6.5 Good Standing Certificates etc. Investor shall have delivered all
such certified resolutions, certificates, documents or instruments with respect
to Investor's corporate existence and authority as the Company's counsel may
have reasonably requested prior to the Closing Date.
6.6 Contemporaneous Transactions. Simultaneously with the Closing of
the transactions contemplated hereby, the Company shall (i) have consummated the
acquisition of each of the Acquired Companies in a manner satisfactory to the
Company, and (ii) have received bank financing in the amount of approximately
five million ninety eight thousand two hundred thirty three dollars ($5,098,233)
upon terms reasonably satisfactory to the Company.
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6.7 Employment/Non-Competition Agreements. The Company shall have
entered into employment and non-competition agreements with each of Joel
Nagelmann, Eugene Iarocci and Steven Teeters, in form and substance acceptable
to the Company.
ARTICLE VII
ACTIONS TO BE TAKEN AT THE CLOSING
The following actions shall be taken at the Closing, each of which
shall be conditioned on completion of all the others and all of which shall be
deemed to have taken place simultaneously:
7.1 Stock Certificates. The Company shall deliver to Investor a stock
certificate representing all of the Purchased Shares.
7.2 Warrant Certificates. The Company shall deliver to Investor a
certificate representing all of the Purchased Warrants.
7.3 Registration Rights Agreement.
Registration Rights Agreement. Investor and the Company shall enter into the
7.4 Purchase Price. Investor shall deliver to the Company the
Purchase Price in accordance with the terms of this Agreement.
7.5 Opinion of Counsel to the Company. The Company shall deliver to
Investor the Company Legal Opinions.
7.6 Opinion of Counsel to Investor. Investor shall deliver to the
Company an opinion of Smith, Gambrell & Russell, LLP, counsel to Investor, dated
the Closing Date, in the form of Exhibit 7.6.
7.7 Closing Certificate of the Company. The Company shall deliver to
Investor a closing certificate executed by an executive officer of the Company,
dated the Closing Date, in the form of Exhibit 7.7.
7.8 Closing Certificate of Investor. Investor shall deliver to the
Company a closing certificate signed by the Manager of Investor, dated the
Closing Date, in the form of Exhibit 7.8.
7.9 Other Documents and Certificates. Investor and the Company shall
deliver such certificates, agreements, permits, approvals and other documents as
are reasonably requested by counsel for Investor or the Company, as the case may
be, to satisfy, or to evidence the satisfaction of, as the case may be, the
conditions precedent to Closing set forth in Articles V and VI.
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ARTICLE VIII
SURVWAL OF REPRESENTATIONS AND WARRANTIES: INDEMNIFICATION
8.1 Survival of Representations and Warranties. All of the
representations and warranties of the Company and Investor contained in this
Agreement shall survive the Closing until the third (3rd) anniversary of the
Closing.
8.2 The Company's Indemnity Agreement. The Company shall defend,
indemnify and hold harmless Investor (and its managers, members, officers,
employees, agents, affiliates, successors and assigns) from and against any and
all direct or indirect requests, demands, claims, payments, defenses,
obligations, recoveries, deficiencies, fines, penalties, interest, assessments,
actions, liens, causes of action, suits, proceedings, judgments, losses
(including without limitation any Investment Loss), damages (including without
limitation punitive, exemplary or consequential damages, lost income and
profits, and interruptions of business), liabilities, costs, and expenses of any
kind (including without limitation (i) interest, penalties and attorneys' fees
and expenses, (ii) attorneys' fees and expenses necessary to enforce their
rights to indemnification hereunder, (iii) consultants' fees and other costs of
defending or investigating any claim hereunder, and (iv) expenses incurred in
complying with any award of injunctive relief), and interest on any amount
payable as a result of the foregoing, whether accrued, absolute, contingent,
known, unknown, or otherwise as of the Closing Date or thereafter asserted
against, imposed upon or incurred by Investor or any of its respective managers,
members, employees, agents, affiliates, successors or assigns (a "Loss of
Investor") by reason of, resulting from, arising out of, based upon, awarded or
asserted against in respect of or otherwise in respect of:
(a) any breach of any representation and warranty contained in
this Agreement (without giving effect to any materiality or knowledge
qualifications contained in any such representation or warranties) or any
misrepresentation in or omission on the part of the Company contained in any
certificate furnished or to be furnished to Investor by the Company pursuant to
this Agreement;
(1)) any breach or nonfulfillment on the part of the Company
of any covenant contained in this Agreement;
(c) any failure of the Company to transfer the Purchased
Securities to Investor, free and clear of all Liens;
(d) any liability or loss to the Company arising from facts in
existence prior to the Closing Date, unless such loss or liability was disclosed
herein or was reserved against or accrued on the Latest Balance Sheets; or
(e) any claims with respect to brokers' or finders' fees due
with respect to the transactions contemplated herein and alleged to arise from
any contract, agreement or arrangement entered into by the Company or any of the
Acquired Companies.
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8.3 Investor's Indemnity Agreement. Investor shall indemnify and hold
harmless the Company from and against any and all direct or indirect requests,
demands, claims, payments, defenses, obligations, recoveries, deficiencies,
fines, penalties, interest, assessments, actions, liens, causes of action,
suits, proceedings, judgments, losses, damages (including without limitation
punitive, exemplary or consequential damages and lost income and profits and
interruptions of business), liabilities, costs, and expenses of any kind
(including without limitation (i) interest, penalties and attorneys' fees and
expenses, (ii) attorneys' fees and expenses necessary to enforce their rights to
indemnification hereunder, (iii) consultants' fees and other costs of defending
or investigating any claim hereunder, and (iv) expenses incurred in complying
with any award of injunctive relief), and interest on any amount payable as a
result of the foregoing, whether accrued, absolute, contingent, known, unknown,
or otherwise as of the Closing Date or thereafter asserted against, imposed upon
or incurred by the Company or any of its respective directors, officers,
employees, agents, affiliates, successors or assigns (a "Loss of Company") by
reason of, resulting from, arising out of, based upon, awarded or asserted
against in respect of or otherwise in respect of:
(a) any breach of any representation and warranty or
nonfulfillment of any covenant or agreement on the part of investor contained in
this Agreement, or any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Investor contained in any certificate furnished
or to be furnished to the Company by Investor pursuant to this Agreement; or
b) any claims with respect to brokers' or finders' fees due
with respect to the transactions contemplated herein and alleged to arise from
any contract, agreement or arrangement entered into by Investor.
8.4 Indemnification Procedure.
(a) Upon obtaining knowledge thereof, the party to be
indemnified hereunder (the "Indemnitee") shall promptly notify the indemnifying
party hereunder (the "Indemnitor") in writing of any damage, claim, loss,
liability or expense or other matter which the Indemnitee has determined has
given or could give rise to a claim for which indemnification rights are granted
hereunder (such written notice referred to as the "Notice of Claim"). The Notice
of Claim shall specify, in reasonable detail, the nature and estimated amount of
any such claim giving rise to a right of indemnification, to the extent the same
can reasonably be estimated at such time, provided. however, that such estimate
shall not be binding on either the Indemnitor or Indemnitee. Any failure on the
part of an Indemnitee to give timely notice to the Indemnitor of a claim shall
not affect the right of the Indemnitee to obtain indemnification from the
Indemnitor with respect to such claim unless the Indemnitor is actually harmed
by such failure to notify, and only to the extent of such actual harm.
(b) With respect to any matter set forth in a Notice of Claim
relating to a third party claim, the Indemnitor shall defend, in good faith and
at its expense, any such claim or demand, and the Indemnitee, at its expense,
shall have the right to participate in the defense of any such third party
claim. So long as Indemnitor is defending, in good faith, any such third party
claim, the
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Indemnitee shall not settle or compromise such third party claim. The
Indemnitee shall make available to the Indemnitor or its
representatives all records and other materials reasonably required by
them for use in contesting any third party claim and shall cooperate
fully with the Indemnitor in the defense of all such claims. If the
Indemnitor does not defend any such third party claim or if the
Indemnitor does not provide the Indemnitee with prompt and reasonable
assurances that the Indemnitor will satisfy the third party claim, the
Indemnitee may, at its option, elect to defend any such third party
claim, at the Indemnitor's expense.
(c) An Indemnitor may not settle or compromise any third party
claim without obtaining a full and unconditional release of the Indemnitee,
unless the Indemnitee consents in writing to such settlement or compromise.
Further, an Indemnitor shall not enter into any settlement of any third party
claim, if, pursuant to or as a result of such settlement, (i) injunctive or
other equitable relief would be imposed against the Indemnitee, or (ii) such
settlement would lead to liability or create any financial or other obligation
on the part of the Indemnitee for which it is not entitled to indemnification
hereunder.
8.5 Payment of Indemnity Obligations. Any amount due in respect of the
indemnification obligations between the parties hereto set forth in this Article
VIII shall be payable as follows:
(a) if payable by the Company to Investor, such amount shall
be paid, at the option of Investor, (i) in cash, (ii) in shares of Company
Preferred Stock, or (iii) in any combination of the foregoing; or
(b) if payable by Investor to the Company, such amount shall
be paid, at the option of Investor, (i) in cash, (ii) by an offsetting reduction
to any unpaid dividends then accrued on the Purchased Shares (any such reduction
shall be first applied to the dividend earliest accrued but unpaid, and any
amount paid by such a reduction shall be discounted to its present value (as of
the date of accrual of the dividend being offset) based on a discount rate of
eight percent (8%) per annum), (iii) by the waiver of the right to receive
selected future dividends on the Purchased Shares (the amount of any such future
dividend shall be discounted to its present value (as of the date of waiver
based on a discount rate of eight percent (8%) per annum), (iv) in shares of
Company Preferred Stock, (v) by cancellation of a portion of the Purchased
Warrants, or (vi) in any combination of the foregoing.
(c) For purposes of this Section 8.5, each share of Company
Preferred Stock shall have a value equal to the value of the Company Common
Stock into which such share is convertible, as determined by the Average Market
Value. Each of the Purchased Warrants shall have a value equal to the Average
Market Value of the Company Common Stock into which such Purchased Warrant is
convertible less the exercise price of such Purchased Warrant. As used herein,
"Average Market Value" shall mean the average of the Closing Price of Company
Common Stock for the twenty (20) trading days (during which a trade in the
Company Common Stock occurred) prior to determination. As used herein, "Closing
Price" shall mean (a) if the primary market for the Company Common Stock is a
national securities exchange, the NASDAQ National Market System, or other market
or quotation system in which last sale transactions are reported on a
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contemporaneous basis, the last reported sales price of such security on such
exchange or in such quotation system for such trading day; or (b) if the primary
market for the Company Common Stock is not a national securities exchange or
quotation system in which last sale transactions are contemporaneously reported,
the last bid quotation in the over-the-counter market on such trading day as
reported by the National Association of Securities Dealers through NASDAQ, its
automated system for reporting quotations, or its successor or such other
generally accepted source of publicly reported bid quotations as the Company may
reasonably designate; or (c) if a Closing Price cannot be ascertained by either
of the methods set forth in the immediately preceding clauses (a) and (b), such
Closing Price shall be deemed to be the amount equal to a quotient determined by
dividing the Fair Market Value by the number of shares (including any fractional
shares) of Common Stock then outstanding. As used herein, "Fair Market Value"
shall mean the price, as determined by a written appraisal prepared by an
appraiser acceptable to the Company, that would be paid by the most likely
hypothetical buyer in a single transaction, for 100% of the equity capital of
the Company on a going-concern basis. The Company shall pay for the cost of any
such appraisal.
8.6 Limits On Indemnification. The maximum indemnification of
either party hereunder shall be limited to an amount equal to the Purchase Price
set forth in Section 1.2 above.
8.7 Deductible. Investor shall not have the right to
indemnification under this Article VIII unless and until the aggregate amount of
any and all claims for a Loss of Investor exceeds the amount of one hundred
thousand dollars ($100,000), inclusive of all actual, direct, indirect,
consequential and incidental damages; lost profits; fines, penalties, and
assessments; and expenses and costs, (including court costs and the fees and
expenses of attorneys, accountants, expert witnesses and other professionals
(the "Deductible")), and shall only be applicable to the extent such
indemnification claims exceed the Deductible. Notwithstanding the foregoing, the
Deductible shall not apply (that is, there is no deductible or indemnity basket)
to Investor claims arising out of breaches by the Company of the representations
and warranties contained in Sections 2.4,2.12,2.21, 2.23 hereof, breaches of the
Company's covenants set forth herein, or claims against the Company arising out
of fraud, intentional misrepresentation or misrepresentation arising out of the
gross negligence of the Company.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated at or prior to
the Closing only as follows:
(a) at the election of the Company, if: (i) any one or more of the
conditions to the obligation of the Company to close has not been fulfilled, or
(ii) Investor has breached, or if the Closing occurs would breach, in any
material respect, any representation, warranty, covenant or agreement contained
in this Agreement;
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(b) at the election of Investor, if (i) any one or more of the
conditions to its obligations to close has not been fulfilled, or (ii) the
Company has breached, or if the Closing occurs would breach, in any material
respect, any representation, warranty, covenant or agreement contained in this
Agreement;
(c) at the election of the Company or Investor, if any legal proceeding
is commenced or threatened by any governmental or regulatory body or other
person (i) if such proceeding is directed against the consummation of the
Closing or any other transaction contemplated under this Agreement and either
the Company or Investor, as the case may be, reasonably and in good faith deems
it impractical or inadvisable to proceed in view of such legal proceeding or
threat thereof or (ii) if such proceeding is directed against the Company or any
of the Subsidiaries and the success of any claim asserted in such proceeding
would either (x) cause the Company to breach any representation, warranty or
covenant contained in this Agreement, or &) have a materially adverse effect on
the Company or any of the Subsidiaries;
(d) at any time on or prior to the Closing Date, by mutual written
consent of the parties hereto; or
(e) at any time after August 14, 1999, at the election of either
Investor or the Company.
9.2 Survival. If this Agreement is terminated pursuant to
Sections 9.1 or 5.14. this Agreement shall become void and of no further force
and effect, except for the provisions of Section 4.4 (relating to the obligation
of Investor to keep certain information confidential), Section 11.1 (relating to
publicity) and Section 11.4 (relating to expenses), and none of the parties
hereto shall have any liability in respect of such termination, except that any
party shall be liable to the extent that failure to satisfy the conditions of
Articles V, VI or VII results from such party acting in bad faith or from the
intentional or willful violation of the representations, warranties, covenants
or agreements of such party under this Agreement. In furtherance of; and without
limiting the foregoing, the Company further acknowledges and agrees that if
Investor terminates this Agreement in accordance with the provisions of Section
9.1, and such termination causes the acquisition of any of the Acquired
Companies not to close, Investor shall not be liable to the Company or any other
person for damages, or be subject to equitable relief arising out the failure of
such acquisition to close.
ARTICLE X
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
"AAA" shall mean the American Arbitration Association
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"Acquired Companies" shall have the meaning set forth in Section 2.5.
"Acquisition Agreements" shall have the meaning set forth in Section
2.8.
"Affiliate" shall have the meaning set forth in the Securities Act.
"Affiliate Plan1' shall have the meaning set forth in Section 2.21(b).
"Agreement" shall have the meaning set forth in the preamble.
"Associate" shall have the meaning set forth in the Securities Act.
"Authorizations" shall have the meaning set forth in Section 2.15.
"Average Market Value" shall have the meaning set forth in Section
8.5(b).
"Balance Sheet Date" shall have the meaning set forth in Section 2.9.
"CERCLA" shall have the meaning set forth in Section 2.23(e).
"Certificate of Designations" shall have the meaning set forth in the
preamble.
"Closing" shall have the meaning set forth in Section 1.3.
"Closing Date" shall have the meaning set forth in Section 1.3.
"Closing Price" shall have the meaning set forth in Section 8.5(b).
"Company" shall mean 1-800-AutoTow, Inc., a Delaware corporation.
"Company Business" shall have the meaning set forth in Section 2.14(a).
"Company Common Stock" shall mean the common stock, $.001 par value per share,
of the Company.
"Company Documents" shall have the meaning set forth in Section 2.8.
"Company Legal Opinions" shall have the meaning set forth in Section 5.15.
"Company Preferred Stock" shall have the meaning set forth in the
preamble. "Company Software" shall have the meaning set forth in Section 2.17.
"D&D" shall have the meaning set forth in Section 2.5.
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"Deductible" shall have the meaning set forth in Section 8.7.
"Environmental Law" shall have the meaning set forth in Section
2.23(e).
"ERISA" shall have the meaning set forth in Section 2.21(a).
"ERISA Affiliate" shall have the meaning set forth in Section 2.21(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, all as in effect at the time.
"Facilities" shall have the meaning set forth in Section 2.14(a).
"Fair Market Value" shall have the meaning set forth in Section 8.5(b).
"Financial Statements" shall have the meaning set forth in Section 2.9.
"Hazardous Material" shall have the meaning set forth in Section
2.23(e).
"Hazardous Waste" shall have the meaning set forth in Section 2.23(e).
"Indemnitee" shall have the meaning set forth in Section 8.4(a).
"Indemnitor" shall have the meaning set forth in Section 8.4(a).
"Initial Filing" shall have the meaning set forth in Section 2.29.
"Intellectual Property" shall have the meaning set forth in Section
2.17.
"Investment Loss" shall mean, with respect to any claim for indemnity
made by Investor pursuant to Article VIII hereof, and with respect to each sale
by Investor of Purchased Securities and/or any Company Common Stock issued upon
conversion of any Purchased Securities (each such sale, an "Investor Sale"), the
product obtained by multiplying (1) the aggregate reduction in the earnings per
share of Company Common Stock reflected in the Company's audited year-end
financial statements for each fiscal year prior to and including the fiscal year
in which such Investor Sale occurred, in which the event or circumstance, upon
which such indemnity claim is based, resulted in a loss to the Company, whether
such loss shall arise out of payments to a third party, remediation costs, or
otherwise (each such loss, a "Realized Loss"), which reduction is attributable
to such Realized Losses, and (2) the number of shares of Company Common Stock
Investor shall have sold (including, if Investor shall have sold any Purchased
Securities, the number of shares of Company Common Stock into which such
Purchased Securities were convertible at the time of such sale) pursuant to such
Investor Sale.
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"Investor" shall mean GMA Capital Partners-AutoTow, LLC, a Georgia
limited liability company.
"Investor Documents" shall have the meaning set forth in Section 3.3.
"Latest Balance Sheets" shall have the meaning set forth in Section
2.9.
"Laws" shall have the meaning set forth in Section 2.14.
"Leases" shall have the meaning set forth in Section 2.18.
"Liens" shall have the meaning set forth in Section 2.4.
"Licensed Software" shall have the meaning set forth in Section 2.17.
"Loss of Company" shall have the meaning set forth in Section 8.3.
"Loss of Investor" shall have the meaning set forth in Section 8.2.
"material" or "materially" shall, unless otherwise specified herein,
mean that the event, circumstance or effect so described has, had, or will have
an impact which shall equal or exceed $20,000 for any one occurrence, or equal
or exceed $60,000 in the aggregate for all matters qualified by "material" or
"materially" herein.
"MCI" shall have the meaning set forth in Section 2.5.
"multiemployer plan" shall have the meaning set forth in Section
2.21(a).
"Notice of Claim" shall have the meaning set forth in Section 8.4.
"Permitted Liens" shall have the meaning set forth in Section 2.13.
"Plan" shall have the meaning set forth in Section 2.21.
"Purchased Securities" shall have the meaning set forth in the
preamble.
"Purchased Shares" shall have the meaning set forth in the preamble.
"Purchased Shares Conversion" shall have the meaning set forth in
Section 1.4(a).
"Purchased Warrants" shall have the meaning set forth in the preamble.
"Registration Rights Agreement" shall have the meaning set forth in
Section 5.4.
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"reportable event" shall have the meaning set forth in Section 2.21(b).
"SEC" shall mean the United States Securities and Exchange Commission.
"Section 1.4 Event" shall have the meaning set forth in Section 1.4.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations thereunder, all as in effect at the time.
"Subsidiaries" shall have the meaning set forth in Section 2.5.
"Taxes" shall have the meaning set forth in Section 2.12.
"Tax Returns" shall have the meaning set forth in Section 2.12.
"Y2K compliant" shall have the meaning set forth in Section 2.17.
ARTICLE XI
MISCELLANEOUS
11.1 Publicity. Except as otherwise required by law or stock
exchange rules, none of the parties hereto shall issue any press release or make
any other public statement, in each case relating to or in connection with or
arising out of this Agreement or the matters contained herein, without obtaining
the prior written approval of all parties hereto as to the contents and manner
of presentation and publication thereof, which consent shall not be unreasonably
withheld.
11.2 Knowledge. Where any representation or warranty contained in this
Agreement is expressly qualified by reference to the knowledge, information or
belief of the Company, the Company confirms that they have made due and diligent
inquiry as to the matters that are the subject of such representations and
warranties.
11.3 Gender. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
11.4 Expenses. The Company shall pay, at Closing and following Closing
as invoices or bills therefor are presented to the Company by Investor,
Investor's expenses, including the fees and disbursements of Investor's counsel
in connection with the negotiation, preparation and execution of this Agreement
and the consummation of the transactions contemplated hereby. Any expenses of
the Company shall be borne by the Company.
11.5 Entire Agreement: Waivers and Consents Amendments. This Agreement,
including all schedules and exhibits hereto, constitutes the entire agreement of
the parties with respect to the
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subject matter hereof, supersedes all prior agreements, negotiations
or letters of intent. All waivers and consents given hereunder shall
be in writing. No waiver by any party hereto of any breach or
anticipated breach of any provision hereofby any other party shall be
deemed a waiver of any other contemporaneous, preceding or succeeding
breach or anticipated breach, whether or not similar, on the part of
the same or any other party. This Agreement, including without
limitation the provisions of this Section, may not be modified,
amended or terminated except by a written instrument specifically
referring to this Agreement signed by each of the parties hereto. The
provisions of this Section may not be changed, amended, modified,
terminated, or waived as a result of any failure to enforce any
provision or the waiver of any specific breach or breaches thereof or
any course of conduct or dealing of the parties.
11.6 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given only if and when (i)
personally delivered or (ii) three (3) business days after mailing, postage
prepaid, by certified mail or (iii) when delivered (as evidenced by a receipt)
by a nationally recognized overnight delivery service, addressed in each case as
follows:
(a) If to the Company to:
1 -800-AutoTow, Inc.
1301 N. Congress Ave., Suite 330
Boynton Beach, Florida 33426
Attention: Joel Nagelmann
with a copy in like manner to:
Atlas, Pearlman, Trop & Borkson, P.A.
New River Center, Suite 1900
P.O. Box 14610
200 East Las Olas Boulevard,
Fort Lauderdale, Florida 33302
Attention: Charles B. Pearlman, Esq.
(b) If to Investor to:
GMA Capital Partners-AutoTow, LLC
C/o GMA Partners, Inc.
Lenox Towers, Suite 625
3400 Peachtree Road, NE
Atlanta, Georgia 30326
Attention: Jay W. Clark
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with a copy in like manner to:
Smith, Gambrell & Russell, LLP
1230 Peachtree Street, N.E.
Suite 3100, Promenade II
Atlanta, Georgia 30309-3592
Attention: Robert I. Paller, Esq.
Each party may change its address for the giving of notices and
communications to it, and/or copies thereof, by written notice to the
other parties in conformity with the foregoing.
11.7 No Third Party Beneficiaries. All conditions of the obligations of
the parties hereto, and all undertakings herein, are solely and exclusively for
the benefit of the parties hereto and their respective successors and assigns,
and no other person or entity shall have standing to require satisfaction of
such conditions or to enforce such undertakings in accordance with their terms,
or be entitled to assume that any party hereto will refuse to consummate the
purchase and sale contemplated hereby in the absence of strict compliance with
any or all thereof, and no other person or entity shall, under any
circumstances, be deemed a beneficiary of such conditions or undertakings, any
or all of which may be freely waived in whole or in part, by mutual consent of
the parties hereto at any time, if in their sole discretion they deem it
desirable to do so. Without limiting the generality of the foregoing, in no
event shall Investor have any liability under this Agreement to any of the
former owners of the Acquired Companies.
11.8 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.9 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Georgia.
11.10 Parties in Interest. Prior to the Closing, Investor may assign
its rights hereunder to any wholly-owned subsidiary of Investor; provided,
however, that such assignment shall not relieve Investor of any of Investor's
obligations hereunder. Except as expressly stated above, this Agreement may not
be transferred, assigned, pledged or hypothecated by either party hereto, other
than by operation of law or with the consent of the other party. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, successors and permitted
assigns.
11.11 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
11.12 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereofwill not in any way be affected
or impaired thereby; provided however, such remaining provisions shall be
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modified to the minimum extent necessary to effect the spirit and intent of this
Agreement and to give each of the parties hereto the benefit of its bargain.
11.13 Dispute Resolution.
(a) Any controversy or claim arising out of or relating to this
Agreement, the agreements to be entered into between or among the parties hereto
pursuant to this Agreement or the transactions contemplated hereby and thereby,
shall be submitted to and be finally resolved by arbitration pursuant to the
provisions of the United States Arbitration Act (9 U.S.C. 1 et seq.), to be
conducted by the AAA, with such arbitration to be held in Atlanta, Georgia in
accordance with the AAA's Commercial Arbitration Rules then in effect. Each
party hereby irrevocably agrees that service of process, summons, notices or
other communications related to the arbitration procedure shall be deemed served
and accepted by the other party if given in accordance with Section 11.6. The
arbitrators shall render a judgement of default against any party who fails to
appear in a properly noticed arbitration proceeding. The arbitration shall be
conducted by a panel of three arbitrators selected pursuant to AAA Rules. Any
award or decision rendered in such arbitration shall be final and binding on
both parties, and judgment may be entered thereon in any court of competent
jurisdiction if necessary.
(b) Notwithstanding subsection (a) above to the contrary, any party may
seek temporary or preliminary injunctive relief against the other party in any
court or proper jurisdiction with respect to any and all preliminary injunctive
or restraining procedures pertaining to this Agreement or the breach thereof,
pending the outcome of any arbitration proceeding.
(c) Subject to subsection (a) above, any judicial proceeding brought
against any of the parties to this Agreement in connection with any dispute
arising out of this Agreement or any matter related hereto may be brought in the
courts of the State of Georgia, or in the United States District Court for the
Northern District of Georgia, Atlanta Division, and, by execution and delivery
of this Agreement, each of the parties to this Agreement accepts for itself the
exclusive personal and subject matter jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties have executed this agreement, under seal, as of
the date first above written.
INVESTOR:
GMA CAPITAL PARNTERS-AUTOTOW, LLC
By: GMA PARTNERS, INC., its Chief Manager
/s/ Jay W. Clark
--------------------
Jay W. Clark
Managing Director
THE COMPANY
1-800-AutoTow, Inc.
By: /s/ Eugene Iarocci
-----------------------
Eugene Iarocci
Chief Operating Officer
[CORPORATE SEAL]
-38-
LOAN AND SECURITY AGREEMENT
1-800-AutoTow, Inc.
D&D Towing & Recovery, Inc.
McGann & Chester, Inc.
1-800-AutoTow Gulf Coast East, Inc.
1-800-AutoTow Gulf Coast S.W., Inc.
1-800-AutoTow Florida, Inc.
Borrower
1301 N. Congress Avenue
Suite 330
Boynton Beach, Florida 33426
Address
65-0783268
59-2890019
25-1583950
65-0935926
65-0935925
65-0935924
Borrower Fed ID Tax No.
$5,098,233, subject to increase as provided herein
Credit Limit
August 6, 1999
Date
================================================================================
CORPORATE FINANCE
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
1. DEFINITIONS.................................................................................................1
1.1 Defined Terms............................................................................................1
1.2 Other Terms..............................................................................................6
2. LOANS; INTEREST RATE AND OTHER CHARGES......................................................................6
2.1 Total Facility...........................................................................................6
2.2 Loans....................................................................................................6
2.3 Overlines; Overadvances..................................................................................6
2.4 [RESERVED]...............................................................................................6
2.5 Loan Account.............................................................................................6
2.6 Interest; Fees...........................................................................................6
2.7 Default Interest Rate....................................................................................6
2.8 Examination Fee..........................................................................................6
2.9 Excess Interest..........................................................................................6
2.10 Principal Payments; Proceeds of Collateral...........................................................7
2.11 Application of Collateral.............................................................................8
2.12 Application of Payments...............................................................................8
2.13 Notification of Closing...............................................................................8
3. SECURITY....................................................................................................9
3.1 Security Interest in the Collateral......................................................................9
3.2 Perfection and Protection of Security Interest...........................................................9
3.3 Preservation of Collateral...............................................................................9
3.4 Insurance................................................................................................9
3.5 Collateral Reporting.....................................................................................9
3.6 Receivables.............................................................................................10
3.7 Equipment...............................................................................................10
3.8 Other Liens; No Disposition of Collateral..............................................................10
3.9 Collateral Security.....................................................................................10
4. CONDITIONS OF CLOSING......................................................................................11
4.1 Initial Advance.........................................................................................11
4.2 Subsequent Advances.....................................................................................13
5. REPRESENTATIONS AND WARRANTIES.............................................................................13
5.1 Due Organization........................................................................................13
5.2 Other Names.............................................................................................13
5.3 Due Authorization.......................................................................................13
5.4 Binding Obligation......................................................................................13
5.5 Intangible Property.....................................................................................13
5.6 Capital.................................................................................................13
5.7 Material Litigation.....................................................................................14
5.8 Title; Security Interests of FINOVA.....................................................................14
5.9 Restrictive Agreements; Labor Contracts.................................................................14
5.10 Laws.................................................................................................14
5.11 Consents.............................................................................................14
5.12 Defaults.............................................................................................14
5.13 Financial Condition..................................................................................14
5.14 ERISA................................................................................................14
5.15 Taxes................................................................................................14
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5.16 Locations; Federal Tax ID No.........................................................................14
5.17 Business Relationships...............................................................................14
5.18 Reaffirmations.......................................................................................14
5.19 Year 2000 Representations & Warranties...............................................................15
6. COVENANTS..................................................................................................15
6.1 Affirmative Covenants...................................................................................15
6.1.1 Taxes.............................................................................................15
6.1.2 Notice of Litigation..............................................................................15
6.1.3 ERISA.............................................................................................15
6.1.4 Change in Location................................................................................15
6.1.5 Corporate Existence...............................................................................15
6.1.6 Labor Disputes....................................................................................15
6.1.7 Violations of Law.................................................................................15
6.1.8 Defaults..........................................................................................15
6.1.9 Capital Expenditures..............................................................................15
6.1.10 Books and Records.................................................................................15
6.1.11 Leases; Warehouse Agreements.....................................................................15
6.1.12 Additional Documents..............................................................................15
6.1.13 Financial Covenants...............................................................................15
6.1.14 Year 2000 Covenants...............................................................................16
6.2 Negative Covenants......................................................................................16
6.2.1 Mergers...........................................................................................16
6.2.2 Loans.............................................................................................16
6.2.3 Dividends.........................................................................................16
6.2.4 Adverse Transactions..............................................................................16
6.2.5 Indebtedness of Others............................................................................16
6.2.6 Repurchase........................................................................................16
6.2.7 Name..............................................................................................16
6.2.8 Prepayment........................................................................................16
6.2.9 Capital Expenditure...............................................................................16
6.2.10 Compensation......................................................................................16
6.2.11 Indebtedness......................................................................................16
6.2.12 Affiliate Transactions............................................................................16
6.2.13 Nature of Business................................................................................16
6.2.14 FINOVA's Name.....................................................................................16
6.2.15 Margin Security...................................................................................17
6.2.16 Real Property.....................................................................................17
7. DEFAULT AND REMEDIES.......................................................................................17
7.1 Events of Default.......................................................................................17
7.2 Remedies................................................................................................18
7.3 Standards for Determining Commercial Reasonableness.....................................................18
8. EXPENSES AND INDEMNITIES...................................................................................18
8.1 Expenses................................................................................................18
8.2 Environmental Matters...................................................................................19
9. MISCELLANEOUS..............................................................................................19
9.1 Examination of Records; Financial Reporting.............................................................19
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9.2 Term; Termination.......................................................................................20
9.3 Recourse to Security; Certain Waivers...................................................................20
9.4 No Waiver by FINOVA.....................................................................................20
9.5 Binding on Successors and Assigns.......................................................................20
9.6 Severability............................................................................................21
9.7 Amendments; Assignments.................................................................................21
9.8 Integration.............................................................................................21
9.9 Survival................................................................................................21
9.10 Evidence of Obligations..............................................................................21
9.11 Loan Requests........................................................................................21
9.12 Notices..............................................................................................21
9.13 Brokerage Fees.......................................................................................21
9.14 Disclosure...........................................................................................21
9.15 Publicity............................................................................................21
9.16 Captions.............................................................................................21
9.17 Injunctive Relief....................................................................................21
9.18 Counterparts; Facsimile Execution....................................................................21
9.19 Construction.........................................................................................22
9.20 Time of Essence......................................................................................22
9.21 Limitation of Actions................................................................................22
9.22 Liability............................................................................................22
9.23 Notice of Breach by FINOVA...........................................................................22
9.24 Application of Insurance Proceeds....................................................................22
9.25 Power of Attorney....................................................................................22
9.26 Common Enterprise....................................................................................23
9.27 Governing Law; Waivers...............................................................................23
</TABLE>
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THIS LOAN AND SECURITY AGREEMENT (collectively with the Schedule to Loan
Agreement (the "Schedule") attached hereto, the "Agreement") dated the date set
forth on the cover page, is entered into by and between the borrower named on
the cover page (jointly and severally, and individually and collectively, the
"Borrower"), whose address is set forth on the cover page and FINOVA Capital
Corporation ("FINOVA"), whose address is 355 South Grand Avenue, Los Angeles,
California 90071.
1. DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following terms have
the definitions set forth below:
"Acquisition" has the meaning set forth in the Schedule.
"Acquisition Documents" has the meaning set forth in the Schedule.
"ADA" has the meaning set forth in Section 4.1(w) hereof.
"Additional Sums" has the meaning set forth in Section 2.9(a) hereof.
"Affiliate" means any Person controlling, controlled by or under common
control with Borrower. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause direction of
the management and policies of any Person, whether through ownership of common
or preferred stock or other equity interests, by contract or otherwise. Without
limiting the generality of the foregoing, each of the following shall be an
Affiliate: any officer, director, employee or other agent of Borrower, any
shareholder, member or subsidiary of Borrower, and any other Person with whom or
which Borrower has common shareholders, officers or directors.
"Agreement" has the meaning set forth in the preamble.
"Applicable Law" has the meaning set forth in Section 8.2(a) hereof.
"Applicable Usury Law" has the meaning set forth in Section 2.9(b)
hereof.
"Blocked Account" has the meaning set forth in Section 2.10(c) hereof.
"Business Day" means any day on which commercial banks in both Los
Angeles, California and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities
incurred for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto which has a useful life of more than one year
and including, without limitation, those arising in connection with Capital
Leases.
"Capital Lease" means any lease of property by Borrower that, in
accordance with GAAP, should be capitalized for financial reporting purposes and
reflected as a liability on the balance sheet of Borrower.
"Closing Fee" has the meaning set forth in the Schedule.
"Closing Date" means the date of the initial advance made by FINOVA
pursuant to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 3.1 hereof.
"Collateral Monitoring Fee" has the meaning set forth in the Schedule.
"Conversion Date" has the meaning set forth in the Schedule.
"Current Assets" at any date means the amount at which the current
assets of Borrower would be shown on a balance sheet of Borrower as at such
date, prepared in accordance with GAAP, provided that amounts due from
Affiliates and investments in Affiliates shall be excluded therefrom.
"Current Liabilities" at any date means the amount at which the current
liabilities of Borrower would be shown on a balance sheet of Borrower as at such
date, prepared in accordance with GAAP.
"Deposit Accounts" has the meaning set forth in Section 9105 of the
Code.
"Dominion Account" has the meaning set forth in Section 2.10(c) hereof.
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"Earnings Before Interest, Taxes, Depreciation and Amortization" for
any fiscal period of Borrower means the net income of Borrower for such fiscal
period, plus interest expense, depreciation and amortization and provision for
income taxes for such fiscal period, and minus non-recurring miscellaneous
income and expenses, all calculated in accordance with GAAP.
"Eligible Receivables" means Receivables arising in the ordinary course
of Borrower's business from the sale of goods or rendition of services, which
FINOVA, in its Permitted Discretion, shall deem eligible based on such
considerations as FINOVA may from time to time deem appropriate. Without
limiting the foregoing, a Receivable shall not be deemed to be an Eligible
Receivable if (i) the account debtor has failed to pay the Receivable within a
period equal to the lesser of (A) ninety (90) days or (B) that number of days
equal to three (3) times payment terms after invoice date, to the extent of any
amount remaining unpaid after such period; (ii) the account debtor has failed to
pay more than 25% of all outstanding Receivables owed by it to Borrower within
the lesser of (A) ninety (90) days after invoice date or (B) that number of days
equal to three times payment terms after invoice date; (iii) the account debtor
is an Affiliate of Borrower; (iv) the goods relating thereto are placed on
consignment, guaranteed sale, "bill and hold," "COD" or other terms pursuant to
which payment by the account debtor may be conditional; (v) the account debtor
is not located in the United States, unless the Receivable is supported by a
letter of credit or other form of guaranty or security, in each case in form and
substance satisfactory to FINOVA; (vi) the account debtor is the United States
or any department, agency or instrumentality thereof or any State, city or
municipality of the United States; (vii) Borrower is or may become liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower; (viii) the account debtor's total obligations to Borrower exceed 15%
of all Eligible Receivables, to the extent of such excess; (ix) the account
debtor disputes liability or makes any claim with respect thereto (up to the
amount of such liability or claim), or is subject to any insolvency or
bankruptcy proceeding, or becomes insolvent, fails or goes out of a material
portion of its business; (x) the amount thereof consists of late charges or
finance charges; (xi) the amount thereof consists of a credit balance more than
ninety (90) days past due; (xii) the face amount thereof exceeds $100,000,
unless accompanied by evidence of shipment of the goods relating thereto
satisfactory to FINOVA in its Permitted Discretion; (xiii) the invoice
constitutes a progress billing on a project not yet completed, except that the
final billing at such time as the matter has been completed and delivered to the
customer may be deemed an Eligible Receivable; or (xiv) the amount thereof is
not yet represented by an invoice or bill issued in the name of the applicable
account debtor.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Environmental Costs" has the meaning set forth in Section 8.2(b)
hereof.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which Borrower is a member and which is treated as a single
employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"Examination Fee" has the meaning set forth in the Schedule.
"Excess Availability" means, as of the date of determination thereof,
the amount by which the average daily total principal balance of the Revolving
Credit Loans facility which Borrower would be permitted to have outstanding over
the prior 30 days, based on the formulas and reserves set forth in the Schedule,
exceeds the sum of the Revolving Credit Loans then actually outstanding, such
excess then being reduced by an amount necessary to provide for the payment of
all accounts payable of Borrower which are more than 30 days past due date and
all book overdrafts.
"FINOVA Affiliate" has the meaning set forth in Section 9.22 hereof.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
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"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
Trademarks, Licenses and Patents, names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against FINOVA, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance), tax refunds and claims,
computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower to secure
payment of any of the Receivables by an account debtor, all rights to
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Hazardous Substance" has the meaning set forth in Section 8.2(a)
hereof.
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising, whether under
written or oral agreement, operation of law or otherwise, and includes, without
limiting the foregoing (i) the Obligations, (ii) obligations and liabilities of
any Person secured by a lien, claim, encumbrance or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
lease (including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower, even
though the rights and remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities and (v)
deferred taxes.
"Initial Term" has the meaning set forth on the Schedule.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease, all raw materials, work
in process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in Borrower's business or
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise or other personal property, and all
documents of title or other documents representing them.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Loans" has the meaning set forth in Section 2.2 hereof.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower and payable to FINOVA, and any other present or future
agreement entered into in connection with this Agreement, together with all
alterations, amendments, changes, extensions, modifications, refinancings,
refundings, renewals, replacements, restatements, or supplements, of or to any
of the foregoing.
"Loan Party" means Borrower, each Subordinating Creditor and each other
party (other than FINOVA) to any Loan Document.
"Loan Reserves" means, as of any date of determination, such amounts as
FINOVA may from time to time establish and revise in good faith reducing the
amount of Revolving Credit Loans which would otherwise be available to Borrower
under the lending formula(s) provided in the Schedule: (a) to reflect events,
conditions, contingencies or risks which, as determined by FINOVA in good faith,
do or may affect either (i) the Collateral or any other property which is
security for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or (iii) the security interests and other rights of FINOVA
in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect FINOVA's good faith belief that any collateral report
or financial information furnished by or on behalf of Borrower to FINOVA is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) in respect of any state of facts which FINOVA determines in good faith
constitutes an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default.
"Loan Year" means each twelve month period commencing on the Closing
Date.
"Maximum Interest Rate" has the meaning set forth in Section 2.9(c)
hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of
Borrower or any ERISA Affiliate.
"Net Worth" at any date means the Borrower's net worth as determined in
accordance with GAAP.
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time owing
by Borrower to FINOVA, whether evidenced by this Agreement, any note or other
instrument or document, whether arising from an extension of credit, opening of
3
<PAGE>
a letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by FINOVA in Borrower's debts owing
to others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, Examination Fee, Collateral Monitoring Fee, Closing Fee, Success
Fee, Unused Line Fee, Termination Fee and any other sums chargeable to Borrower
hereunder or under any other agreement with FINOVA.
"Operating Cash Flow/Actual" means, for any period, Borrower's net
income or loss (excluding the effect of any extraordinary gains or losses),
determined in accordance with GAAP, plus or minus each of the following items,
to the extent deducted from or added to the revenues of Borrower in the
calculation of net income or loss: (i) depreciation; (ii) amortization and other
non-cash charges; (iii) interest expense paid or accrued; (iv) total federal and
state income tax expense determined as the accrued liability of Borrower in
respect of such period, regardless of what portion of such expense has actually
been paid by Borrower during such period; and after deduction for each of (a)
federal and state income taxes, to the extent actually paid during such period;
(b) any non-cash income; and (c) all actual Capital Expenditures made during
such period and not financed.
"Overadvance" has the meaning set forth in Section 2.3.
"Overline" has the meaning set forth in Section 2.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Discretion" means FINOVA's judgment exercised in good faith
based upon its consideration of any factor which FINOVA believes in good faith:
(i) will or could adversely affect the value of any Collateral, the
enforceability or priority of FINOVA's liens thereon or the amount which FINOVA
would be likely to receive (after giving consideration to delays in payment and
costs of enforcement) in the liquidation of such Collateral; (ii) suggests that
any collateral report or financial information delivered to FINOVA by any Person
on behalf of the Borrower is incomplete, inaccurate or misleading in any
material respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving the Borrower, any Loan
Party or any of the Collateral, or (iv) creates or reasonably could be expected
to create an Event of Default. In exercising such judgment, FINOVA may consider
such factors already included in or tested by the definition of Eligible
Receivables (if applicable), as well as any of the following: (i) the financial
and business climate of the Borrower's industry and general macroeconomic
conditions, (ii) changes in collection history and dilution with respect to the
Receivables, (iii) changes in any concentration of risk with respect to
Receivables, and (iv) any other factors that change the credit risk of lending
to the Borrower on the security of the Receivables. The burden of establishing
lack of good faith hereunder shall be on the Borrower.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on the Schedule.
"Permitted Senior Indebtedness" has the meaning set forth in the
Schedule.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, government, or any agency or political division thereof, or
any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a
Multiemployer Plan. "Pledgors" has the meaning set forth in Section
4.1(cc) hereof.
"Preferred Stock" has the meaning set forth in the Schedule.
"Prepared Financials" means the balance sheets of Borrower as of the
date set forth in the Schedule in the section entitled `Reporting Requirements'
, and as of each subsequent date on which audited balance sheets are delivered
to FINOVA from time to time hereunder, and the related statements of operations,
changes in stockholder's equity and changes in cash flow for the periods ended
on such dates.
"Prime Rate" has the meaning set forth in the Schedule.
"Prohibited Transaction" means any transaction described in Section 406
of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c)(2) of the IRC.
"Property" has the meaning set forth in Section 8.2(a) hereof.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), proceeds of any letters of
credit naming Borrower as beneficiary, contract rights, chattel paper,
instruments, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, whether secured or
4
<PAGE>
unsecured, all merchandise returned to or repossessed by Borrower, and all
rights of stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured party.
"Renewal Term" has the meaning set forth on the Schedule.
"Reportable Event" means a reportable event described in Section 4043
of ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section 4068(f)
of ERISA.
"Revolving Credit Loans" has the meaning set forth in the Schedule.
"Revolving Credit Limit" has the meaning set forth in the Schedule.
"Revolving Interest Rate" has the meaning set forth in the Schedule.
"Schedule" has the meaning set forth in the preamble.
"Seller" has the meaning set forth in the Schedule.
"Seller Subordinated Debt" has the meaning set forth in the Schedule.
"Senior Contractual Debt Service" means, for any period, the sum of
payments made or required to be made by Borrower during such period for (i)
interest and scheduled principal payments due on the Term Loans (excluding
voluntary prepayment and (ii) interest only payments due on the Revolving Credit
Loans facility plus the Collateral Monitoring Fee, the Success Fee and the
Unused Line Fee, and (iii) principal and interest payments due on the Permitted
Senior Indebtedness.
"Start Date" has the meaning set forth in the Schedule.
"Stock Pledge Agreement" has the meaning set forth in Section 4.1(y)
hereof.
"Subordinated Debt" means liabilities of Borrower the repayment of
which is subordinated, to the payment and performance of the Obligations,
pursuant to a subordination agreement acceptable to FINOVA in its sole
discretion. The Subordinated Debt shall include, without limitation, the Seller
Subordinated Debt.
"Subordinating Creditor" has the meaning set forth in the Schedule.
"Success Fee" has the meaning set forth in the Schedule.
"Term Loans" has the meaning set forth in the Schedule.
"Termination Fee" has the meaning set forth in Section 9.2(d) hereof.
"Total Contractual Debt Service" means, for any period, the sum of
payments made (or, as to clause (i) of this sentence, required to be made) by
Borrower during such period for (i) Senior Contractual Debt Service, and (ii)
interest and scheduled principal payments due on any and all other Indebtedness
of Borrower, including without limitation, the Subordinated Indebtedness.
"Total Facility" has the meaning set forth in Section 2.1 hereof.
"Trademarks, Copyrights, Licenses and Patents" means all of Borrower's
right, title and interest in and to, whether now owned or hereafter acquired:
(i) trademarks, trademark registrations, trade names, trade name registrations,
and trademark or trade name applications, including without limitation such as
are listed on the Schedule attached hereto and made a part hereof, as the same
may be amended from time to time, and (a) renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including without limitation, damages and payments for past or
future infringements thereof, (c) the right to sue for past, present and future
infringements thereof, (d) all rights corresponding thereto throughout the
world, and (e) the goodwill of the business operated by Borrower connected with
and symbolized by any trademarks or trade names; (ii) copyrights, copyright
registrations and copyright applications, including without limitation such as
are listed on the Schedule attached hereto and made a part hereof, as the same
may be amended from time to time, and (a) renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including without limitation, damages and payments for past or
future infringements thereof, (c) the right to sue for past, present and future
infringements thereof, and (d) all rights corresponding thereto throughout the
world; (iii) license agreements, including without limitation such as are listed
on the Schedule attached hereto and made a part hereof, and the right to prepare
for sale, sell and advertise for sale any Inventory now or hereafter owned by
Borrower and now or hereafter covered by such licenses; and (iv) patents and
patent applications, registered or pending, including without limitation such as
are listed on the Schedule attached hereto, together with all income, royalties,
shop rights, damages and payments thereto, the right to sue for infringements
thereof, and all rights thereto throughout the world and all reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof.
"Unused Line Fee" has the meaning set forth in the Schedule.
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1.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
2.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default, shall have
occurred and be continuing, FINOVA shall, upon Borrower's request, make advances
to Borrower from time to time in an aggregate outstanding principal amount not
to exceed the Total Facility amount (the "Total Facility") set forth on the
Schedule hereto, subject to deduction of reserves for accrued interest and such
other reserves as FINOVA deems proper from time to time, and less amounts FINOVA
may be obligated to pay in the future on behalf of Borrower. The Schedule is an
integral part of this Agreement and all references to "herein", "herewith" and
words of similar import shall for all purposes be deemed to include the
Schedule.
2.2 Loans. Advances under the Total Facility ("Loans" and individually,
a "Loan") shall be comprised of the amounts shown on the Schedule.
2.3 Overlines; Overadvances. If at any time or for any reason the
outstanding amount of advances extended or issued pursuant hereto exceeds any of
the dollar limitations ("Overline") or percentage limitations ("Overadvance") in
the Schedule, then Borrower shall, upon FINOVA's demand, immediately pay to
FINOVA, in cash, the full amount of such Overline or Overadvance. Without
limiting Borrower's obligation to repay to FINOVA on demand the amount of any
Overline or Overadvance, Borrower agrees to pay FINOVA interest on the
outstanding principal amount of any Overline or Overadvance, on demand, at the
rate set forth on the Schedule and applicable to the Revolving Credit Loans.
2.4 [RESERVED].
2.5 Loan Account. All advances made hereunder shall be added to and
deemed part of the Obligations when made. FINOVA may from time to time charge
all Obligations of Borrower to Borrower's loan account with FINOVA.
2.6 Interest; Fees. Borrower shall pay FINOVA interest on the daily
outstanding balance of the Obligations at the per annum rate set forth on the
Schedule. Borrower shall also pay FINOVA the fees set forth on the Schedule.
2.7 Default Interest Rate. Upon the occurrence and during the
continuation of an Event of Default, Borrower shall pay FINOVA interest on the
daily outstanding balance of the Obligations at a rate per annum which is two
percent (2%) in excess of the rate which would otherwise be applicable thereto
pursuant to the Schedule.
2.8 Examination Fee. Borrower agrees to pay to FINOVA the Examination
Fee in the amount set forth on the Schedule in connection with each audit or
examination of Borrower performed by FINOVA prior to or after the date hereof.
Without limiting the generality of the foregoing, Borrower shall pay to FINOVA
an initial Examination Fee in an amount equal to the amount set forth on the
Schedule. Such initial Examination Fee shall be deemed fully earned at the time
of payment and due and payable upon the closing of this transaction, and shall
be deducted from any good faith deposit paid by Borrower to FINOVA prior to the
date of this Agreement.
2.9 Excess Interest.
(a) The contracted for rate of interest of the loan contemplated
hereby, without limitation, shall consist of the following: (i) the interest
rate set forth on the Schedule, calculated and applied to the principal balance
of the Obligations in accordance with the provisions of this Agreement; (ii)
interest after an Event of Default, calculated and applied to the amount of the
Obligations in accordance with the provisions hereof; and (iii) all Additional
Sums (as herein defined), if any. Borrower agrees to pay an effective contracted
for rate of interest which is the sum of the above-referenced elements. The
Examination Fee, attorneys fees, expert witness fees, Collateral Monitoring Fee,
Closing Fee, Success Fees, Termination Fee, Unused Line Fee, other charges,
goods, things in action or any other sums or things of value paid or payable by
Borrower (collectively, the "Additional Sums"), whether pursuant to this
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to this
lending transaction, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrower as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
(b) It is the intent of the parties to comply with the usury laws of
the State of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed
that notwithstanding any provisions to the contrary in this Agreement, or in any
of the documents securing payment hereof or otherwise relating hereto, in no
event shall this Agreement or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "Maximum Interest Rate"). In the event (a) any such
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excess of interest otherwise would be contracted for, charged or received from
Borrower or otherwise in connection with the loan evidenced hereby, or (b) the
maturity of the Obligations is accelerated in whole or in part, or (c) all or
part of the Obligations shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other Person now or hereafter liable
for the payment of the Obligations shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Maximum Interest Rate, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal amount of the Obligations or refunded
to Borrower, at FINOVA's option, and (4) the effective rate of interest shall be
automatically reduced to the Maximum Interest Rate. It is further agreed,
without limiting the generality of the foregoing, that to the extent permitted
by the Applicable Usury Law; (x) all calculations of interest which are made for
the purpose of determining whether such rate would exceed the Maximum Interest
Rate shall be made by amortizing, prorating, allocating and spreading during the
period of the full stated term of the loan evidenced hereby, all interest at any
time contracted for, charged or received from Borrower or otherwise in
connection with such loan; and (y) in the event that the effective rate of
interest on the loan should at any time exceed the Maximum Interest Rate, such
excess interest that would otherwise have been collected had there been no
ceiling imposed by the Applicable Usury Law shall be paid to FINOVA from time to
time, if and when the effective interest rate on the loan otherwise falls below
the Maximum Interest Rate, to the extent that interest paid to the date of
calculation does not exceed the Maximum Interest Rate, until the entire amount
of interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the Maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
2.10 Principal Payments; Proceeds of Collateral.
(a) Principal Payments. Except where evidenced by notes or other
instruments issued or made by Borrower to FINOVA specifically containing payment
provisions which are in conflict with this Section 2.10 (in which event the
conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of principal payable on
account of Loans shall be payable by Borrower to FINOVA immediately upon the
earliest of (i) the receipt by FINOVA or, except as provided in Section 2.10(b)
below, Borrower of any proceeds of any of the Collateral, to the extent of said
proceeds, (ii) the occurrence of an Event of Default in consequence of which
FINOVA elects to accelerate the maturity and payment of such loans, or (iii) any
termination of this Agreement pursuant to Section 9.2 hereof; provided, however,
that any Overadvance or Overline shall be payable on demand pursuant to the
provisions of Section 2.3 hereof.
(b) Collections. Until Finova notifies Borrower to the contrary, as
provided in the next succeeding sentence, Borrower may make collection of all
Receivables. Immediately upon FINOVA's directing Borrower to do so, Borrower
shall, as directed by FINOVA, either (i) make collection of all Receivables for
FINOVA by directing all accounts debtors and other third parties to remit all
payments owing to Borrower to a lockbox established in connection with a Blocked
Account (and to the extent that Borrower nevertheless receives any payments
directly, Borrower shall receive all payments as trustee of FINOVA in their
original form as set forth below, duly endorsed in blank or cause the same to be
deposited in a Blocked Account or Lockbox Account) or (ii) make collection of
all Receivables for FINOVA and receive all such payments or sums as trustee of
FINOVA and immediately deliver all such payments or sums to FINOVA in their
original form, duly endorsed in blank or cause the same to be deposited into a
Blocked Account or Dominion Account. FINOVA or its designee may, at any time,
notify account debtors that the Receivables have been assigned to FINOVA and of
FINOVA's security interest therein, and may collect the Receivables directly and
charge the collection costs and expenses to Borrower's loan account. Borrower
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by FINOVA on account of the Obligations one (1) Business
Day after receipt by FINOVA of good funds which have been finally credited to
FINOVA's account, whether such funds are received directly from Borrower or from
the Blocked Account bank or the Dominion Account bank, pursuant to Section
2.10(c) hereof, and this provision shall apply regardless of the amount of the
Obligations outstanding or whether any Obligations are outstanding; provided,
that if any such good funds are received after 12:00 p.m. noon (Los Angeles
time) on any Business Day or at any time on any day not constituting a Business
Day, such funds shall be deemed received on the immediately following Business
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Day. FINOVA is not, however, required to credit Borrower's account for the
amount of any item of payment which is unsatisfactory to FINOVA in its Permitted
Discretion and FINOVA may charge Borrower's loan account for the amount of any
item of payment which is returned to FINOVA unpaid.
(c) Establishment of a Lockbox Account or Dominion Account. Upon
FINOVA's direction to Borrower to do so, as provided hereinabove, Borrower shall
cause all proceeds of Collateral to be deposited into a lockbox account, or such
other "blocked account" as FINOVA may require (each, a "Blocked Account")
pursuant to an arrangement with such bank as may be selected by Borrower and be
acceptable to FINOVA which proceeds, unless otherwise provided herein, shall be
applied in payment of the Obligations in such order as FINOVA determines in its
sole discretion. Borrower shall issue to any such bank an irrevocable letter of
instruction directing said bank to transfer such funds so deposited to FINOVA,
either to any account maintained by FINOVA at said bank or by wire transfer to
appropriate account(s) of FINOVA. All funds deposited in a Blocked Account shall
immediately become the sole property of FINOVA and Borrower shall obtain the
agreement by such bank to waive any offset rights against the funds so
deposited. FINOVA assumes no responsibility for any Blocked Account arrangement,
including without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder. Alternatively, FINOVA
may establish depository accounts in the name of FINOVA at a bank or banks for
the deposit of such funds (each, a "Dominion Account") and Borrower shall
deposit all proceeds of Receivables and all cash proceeds of any sale of
Inventory or, to the extent permitted herein, Equipment or cause same to be
deposited, in kind, in such Dominion Accounts of FINOVA in lieu of depositing
same to Blocked Accounts, and, unless otherwise provided herein, all such funds
shall be applied by FINOVA to the Obligations in such order as FINOVA determines
in its sole discretion.
(d) Payments Without Deductions. Borrower shall pay principal,
interest, and all other amounts payable hereunder, or under any other Loan
Document, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
(e) Collection Days Upon Repayment. In the event Borrower repays the
Obligations in full at any time hereafter, such payment in full shall be
credited (conditioned upon final collection) to Borrower's loan account one (1)
Business Day after FINOVA's receipt thereof.
(f) Monthly Accountings. FINOVA shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless Borrower
notifies FINOVA in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or admissions.
2.11 Application of Collateral. Except as otherwise provided herein,
FINOVA shall have the continuing and exclusive right to apply or reverse and
re-apply any and all payments to any portion of the Obligations in such order
and manner as FINOVA shall determine in its sole discretion. To the extent that
Borrower makes a payment or FINOVA receives any payment or proceeds of the
Collateral for Borrower's benefit which is subsequently invalidated, declared to
be fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or any other party under any bankruptcy law,
common law or equitable cause, or otherwise, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by FINOVA.
2.12 Application of Payments. The amount of all payments or amounts
received by FINOVA with respect to the Loan shall be applied to the extent
applicable under this Agreement: (i) first, to accrued interest through the date
of such payment, including any Default Interest; (ii) then, to any late fees,
overdue risk assessments, Examination Fee and expenses, collection fees and
expenses and any other fees and expenses due to FINOVA hereunder; and (iii)
last, the remaining balance, if any, to the unpaid principal balance of the
Loan; provided however, while an Event of Default exists under this Agreement,
or under any other Loan Document, each payment hereunder shall be (x) held as
cash collateral to secure contingent obligations arising under the Loan
Documents and/or (y) applied to amounts owed to FINOVA by Borrower as FINOVA in
its sole discretion may determine. In calculating interest and applying payments
as set forth above: (a) interest shall be calculated and collected through the
date a payment is actually applied by FINOVA under the terms of this Agreement;
(b) interest on the outstanding balance shall be charged during any grace period
permitted hereunder; (c) at the end of each month, all accrued and unpaid
interest and other charges provided for hereunder shall be added to the
principal balance of the Loan; and (d) to the extent that Borrower makes a
payment or FINOVA receives any payment or proceeds of the Collateral for
Borrower's benefit that is subsequently invalidated, set aside or required to be
repaid to any other Person, then, to such extent, the Obligations intended to be
satisfied shall be revived and continue as if such payment or proceeds had not
been received by FINOVA and FINOVA may adjust the Loan balances as FINOVA, in
its sole discretion, deems appropriate under the circumstances.
2.13 Notification of Closing. Borrower shall provide FINOVA with at
least forty-eight (48) hours prior written notice of the Closing Date, to enable
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FINOVA to arrange for the availability of funds. In the event the closing does
not take place on the date specified in Borrower's notice to FINOVA, other than
through the fault of FINOVA, Borrower agrees to reimburse FINOVA for FINOVA's
costs to maintain the necessary funds available for the closing, at the Term
Interest Rate A with respect to the applicable amount specified in the Schedule,
at the Term Interest Rate B and C with respect to the applicable amount
specified in the Schedule, and at the Revolving Interest Rate with respect to an
amount equal to the initial advance under the Revolving Credit Loans facility
which is to be made on the Closing Date, for the number of days which elapse
between the date specified in Borrower's notice and the date upon which the
closing actually occurs (which number of days shall not include the date
specified in Borrower's notice, but shall include the Closing Date).
3. SECURITY.
3.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, Borrower hereby grants to FINOVA a
first priority security interest (subject only to Permitted Encumbrances) in all
of Borrower's now owned or hereafter acquired or arising Inventory, Equipment,
Receivables, life insurance policies and the proceeds thereof, Trademarks,
Copyrights, Licenses and Patents, Borrower's rights, but not its obligations,
under the Acquisition Documents, Investment Property (as defined in Section
9-115 of the Code) and General Intangibles, including, without limitation, all
of Borrower's Deposit Accounts, money, any and all property now or at any time
hereafter in FINOVA's possession (including claims and credit balances), and all
proceeds (including proceeds of any insurance policies, proceeds of proceeds and
claims against third parties), all products and all books and records and
computer data related to any of the foregoing (all of the foregoing, together
with all other property in which FINOVA may be granted a lien or security
interest, is referred to herein, collectively, as the "Collateral").
3.2 Perfection and Protection of Security Interest. Borrower shall, at
its expense, take all actions requested by FINOVA at any time to perfect,
maintain, protect and enforce FINOVA's first priority security interest and
other rights in the Collateral and the priority thereof from time to time,
including, without limitation, (i) executing and filing financing or
continuation statements and amendments thereof and executing and delivering such
documents and titles in connection with motor vehicles as FINOVA shall require,
all in form and substance satisfactory to FINOVA, (ii) maintaining a perpetual
inventory and complete and accurate stock records, (iii) delivering to FINOVA
warehouse receipts covering any portion of the Collateral located in warehouses
and for which warehouse receipts are issued, and transferring Inventory to
warehouses designated by FINOVA, (iv) placing notations on Borrower's books of
account to disclose FINOVA's security interest therein and (v) delivering to
FINOVA all letters of credit on which Borrower is named beneficiary. FINOVA may
file, without Borrower's signature, one or more financing statements disclosing
FINOVA's security interest under this Agreement. Borrower agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. If any Collateral is
at any time in the possession or control of any warehouseman, bailee or any of
Borrower's agents or processors, Borrower shall notify such Person of FINOVA's
security interest in such Collateral and, upon FINOVA's request, instruct them
to hold all such Collateral for FINOVA's account subject to FINOVA's
instructions. From time to time, Borrower shall, upon FINOVA's request, execute
and deliver confirmatory written instruments pledging the Collateral to FINOVA,
but Borrower's failure to do so shall not affect or limit FINOVA's security
interest or other rights in and to the Collateral. Until the Obligations have
been fully satisfied and FINOVA's obligation to make further advances hereunder
has terminated, FINOVA's security interest in the Collateral shall continue in
full force and effect.
3.3 Preservation of Collateral. FINOVA may, in its Permitted
Discretion, at any time discharge any lien or encumbrance on the Collateral or
bond the same, pay any insurance, maintain guards, pay any service bureau,
obtain any record or take any other action to preserve the Collateral and charge
the cost thereof to Borrower's loan account as an Obligation; provided, however,
that unless an Event of Default has occurred and is continuing, FINOVA shall
provide Borrower with five (5) days advance notice of its intention to take any
such action.
3.4 Insurance. Borrower will maintain and deliver evidence to FINOVA of
such insurance as is required by FINOVA, written by insurers, in amounts, and
with lender's loss payee, additional insured, and other endorsements,
satisfactory to FINOVA. All premiums with respect to such insurance shall be
paid by Borrower as and when due. Accurate and certified copies of the policies
shall be delivered by Borrower to FINOVA. If Borrower fails to comply with this
Section, FINOVA may (but shall not be required to) procure such insurance and
endorsements at Borrower's expense and charge the cost thereof to Borrower's
loan account as an Obligation.
3.5 Collateral Reporting.
(a) Invoices. Borrower shall not re-date any invoice or sale from the
original date thereof or make sales on extended terms beyond those customary in
Borrower's industry, or otherwise extend or modify the term of any Receivable.
If Borrower becomes aware of any matter affecting any Receivable, including
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information affecting the credit of the account debtor thereon, Borrower shall
promptly notify FINOVA in writing.
(b) Instruments. In the event any Receivable is or becomes evidenced by
a promissory note, trade acceptance or any other instrument for the payment of
money, Borrower shall immediately deliver such instrument to FINOVA
appropriately endorsed to FINOVA and, regardless of the form of any presentment,
demand, notice of dishonor, protest and notice of protest with respect thereto,
Borrower shall remain liable thereon until such instrument is paid in full.
3.6 Receivables.
(a) Bona Fide Sale, Etc. (i) Borrower represents and warrants that each
Receivable covers and shall cover a bona fide sale or lease and delivery by it
of goods or the rendition by it of services in the ordinary course of its
business, and shall be for a liquidated amount and FINOVA's security interest
shall not be subject to any offset, deduction, counterclaim, rights of return or
cancellation, lien or other condition. If, prior to the Conversion Date, any
representation or warranty herein is breached as to any Receivable, FINOVA may
remove such Receivable from the Receivables included in calculating the
availability of Revolving Credit Loans pursuant to Section 2.2 of the Schedule.
If from and after the Conversion Date, any representation or warranty herein is
breached as to any Receivable or any Receivable ceases to be an Eligible
Receivable for any reason other than payment thereof, then FINOVA may, in
addition to its other rights hereunder, designate any and all Receivables owing
by that account debtor as not Eligible Receivables. FINOVA shall in any such
event retain its security interest in all Receivables, whether or not included
in the availability calculation prior to the Conversion Date or included as
Eligible Receivables from and after the Conversion Date, until the Obligations
have been fully satisfied and FINOVA's obligation to provide loans hereunder has
terminated.
(ii) FINOVA at any time shall be entitled to (i) establish and increase
or decrease reserves against Receivables, prior to the Conversion Date, and
Eligible Receivables after the Conversion Date, (ii) reduce the advance rate in
the Schedule or restore such advance rate to any level equal to or below the
advance rates set forth in the Schedule or (iii) impose additional restrictions
(or eliminate the same) to the standards of eligibility set forth in the
definition of "Eligible Receivables", in the exercise of its Permitted
Discretion. FINOVA may but shall not be required to rely on the schedules and/or
reports delivered to FINOVA in connection herewith in determining the
eligibility of Receivables at any time after the Conversion Date. Reliance
thereon by FINOVA from time to time shall not be deemed to limit the right of
FINOVA to revise advance rates or standards of eligibility as provided above.
(b) Disputes. Borrower shall notify FINOVA promptly of all disputes or
claims and settle or adjust such disputes or claims at no expense to FINOVA, but
no discount, credit or allowance shall be granted to any account debtor and no
returns of merchandise shall be accepted by Borrower without FINOVA's consent,
except for discounts, credits and allowances made or given in the ordinary
course of Borrower's business. FINOVA may, at any time after the occurrence of
an Event of Default, settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which FINOVA considers advisable in its
reasonable credit judgment and, in all cases, FINOVA shall credit Borrower's
loan account with only the net amounts received by FINOVA in payment of any
Receivables.
3.7 Equipment. Borrower shall keep and maintain the Equipment in good
operating condition and repair and make all necessary replacements thereto to
maintain and preserve the value and operating efficiency thereof at all times
consistent with Borrower's past practice, ordinary wear and tear excepted.
Borrower shall not permit any item of Equipment to become a fixture (other than
a trade fixture) to real estate or an accession to other property.
3.8 Other Liens; No Disposition of Collateral. Borrower represents,
warrants and covenants that except for FINOVA's security interest, Permitted
Encumbrances, and such other liens, claims and encumbrances as may be permitted
by FINOVA in its sole discretion from time to time in writing, (a) all
Collateral is and shall continue to be owned by it free and clear of all liens,
claims and encumbrances whatsoever and (b) Borrower shall not, without FINOVA's
prior written approval, sell, encumber or dispose of or permit the sale,
encumbrance or disposal of any Collateral or all or any substantial part of any
of its other assets (or any interest of Borrower therein), except for the sale
of Inventory in the ordinary course of Borrower's business. In the event FINOVA
gives any such prior written approval with respect to any such sale of
Collateral, the same may be conditioned on the sale price being equal to, or
greater than, an amount acceptable to FINOVA. The proceeds of any such sales of
Collateral shall be remitted to FINOVA pursuant to this Agreement for
application to the Obligations.
3.9 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, (i) exchange,
enforce, waive or release any of the Collateral, (ii) apply Collateral and
direct the order or manner of sale thereof as it may determine, and (iii)
settle, compromise, collect or otherwise liquidate any Collateral in any manner
without affecting its right to take any other action with respect to any other
Collateral.
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4. CONDITIONS OF CLOSING.
4.1 Initial Advance. The obligation of FINOVA to make the initial
advance hereunder is subject to the fulfillment, to the satisfaction of FINOVA
and its counsel, of each of the following conditions on or prior to the date set
forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following
Loan Documents: (i) the Agreement fully and properly executed by Borrower; (ii)
promissory notes in such amounts and on such terms and conditions as FINOVA
shall specify, executed by Borrower; (iii) Support Agreements executed by the
applicable parties; (iv) such security agreements, intellectual property
assignments, pledge agreements, mortgages and deeds of trust as FINOVA may
require with respect to this Agreement executed by each of the parties thereto
and, if applicable, duly acknowledged for recording or filing in the appropriate
governmental offices; (v) Subordination Agreements in form and substance
acceptable to FINOVA, executed by each of the Subordinating Creditors, together
with copies of all instruments subject thereto showing a legend indicating such
subordination; (vi) such Blocked Account or Dominion Account agreements as it
shall determine; and (vii) such other documents, instruments and agreements in
connection herewith as FINOVA shall require, executed, certified and/or
acknowledged by such parties as FINOVA shall designate;
(b) Minimum Excess Availability. Borrower shall have Excess
Availability under the Revolving Credit Loans facility of not less than the
amount specified in the Schedule, after giving effect to the initial advance
hereunder and after giving effect to any applicable Loan Reserves against
borrowing availability under the Revolving Credit Loans.
(c) Terminations by Existing Lender. Borrower's and Seller's existing
lender(s) shall have executed and delivered UCC termination statements and other
documentation evidencing the termination of its liens and security interests in
the assets of Borrower (including, without limitation, all of those assets being
acquired pursuant to the Acquisition) or a subordination agreement in form and
substance satisfactory to FINOVA in its sole discretion;
(d) Charter Documents. FINOVA shall have received copies of Borrower's
By-laws and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of Borrower;
(e) Good Standing. FINOVA shall have received a certificate of
corporate status with respect to Borrower, dated within ten (10) days of the
Closing Date, by the Secretary of State of the state of incorporation of
Borrower, which certificate shall indicate that Borrower is in good standing in
such state;
(f) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to Borrower and each other Loan Party, each dated
within ten (10) days of the Closing Date, issued by the Secretary of State of
each state in which such party's failure to be duly qualified or licensed would
have a material adverse effect on its financial condition or assets, indicating
that such party is in good standing;
(g) Authorizing Resolutions and Incumbency. FINOVA shall have received
a certificate from the Secretary of Borrower attesting to (i) the adoption of
resolutions of Borrower's Board of Directors, and shareholders or members if
necessary, authorizing the borrowing of money from FINOVA and execution and
delivery of this Agreement and the other Loan Documents to which Borrower is a
party, and authorizing specific officers of Borrower to execute same, and (ii)
the authenticity of original specimen signatures of such officers;
(h) Insurance. FINOVA shall have received the insurance certificates
and certified copies of policies required by Section 3.4 hereof, in form and
substance satisfactory to FINOVA and its counsel, together with an additional
insured endorsement in favor of FINOVA with respect to all liability policies
and a lender's loss payable endorsement in favor of FINOVA with respect to all
casualty and business interruption policies, each in form and substance
acceptable to FINOVA and its counsel;
(i) Searches; Certificates of Title. FINOVA shall have received
searches reflecting the filing of its financing statements and fixture filings
in such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been duly
executed in a manner sufficient to perfect all of the security interests granted
to FINOVA;
(j) Landlord, Bailee and Mortgagee Waivers. FINOVA shall have received
landlord, bailee and/or mortgagee waivers from the lessors, bailees and/or
mortgagees of all locations where any Collateral is located;
(k) Fees. Borrower shall have paid all fees payable by it on the
Closing Date pursuant to this Agreement;
(l) Opinion of Counsel. FINOVA shall have received an opinion of
Borrower's counsel covering such matters as FINOVA shall determine in its sole
discretion;
(m) Officer Certificate. FINOVA shall have received a certificate of
the President and the Chief Financial Officer or similar official of Borrower,
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attesting to the accuracy of each of the representations and warranties of
Borrower set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(n) Solvency Certificate. If requested, FINOVA shall have received a
signed certificate of the Borrower's duly elected Chief Financial Officer
concerning the solvency and financial condition of Borrower, on FINOVA's
standard form;
(o) Blocked Account. The Blocked Account referred to in Section 2.10(c)
hereof shall have been established to the satisfaction of FINOVA in its sole
discretion;
(p) [Intentionally Not Used];
(q) [Intentionally Not Used];
(r) Search and References. FINOVA shall have received and approved the
results of UCC, tax lien, litigation, judgment, and bankruptcy searches
regarding Borrower, Seller and such other Persons as Lender shall determine, and
shall have received satisfactory customer, vendor and credit reference checks on
Seller.
(s) No Material Adverse Changes. Prior to the Closing Date, there shall
have occurred no material adverse change in the financial condition of Seller or
Borrower, or in the condition of the assets of Seller, from that shown on the
draft financial statements for Seller and Borrower dated on the date set forth
in the Schedule. At the closing, Borrower shall deliver to FINOVA an officer's
certification confirming that Borrower is unaware of the existence of any such
material adverse change in Borrower's or Seller's financial condition.
(t) Material Agreements. FINOVA shall have received, reviewed and
approved all material agreements to which Borrower shall be a party, including
any such agreements of Seller which Borrower shall assume.
(u) Projections. Borrower shall submit cash flow projections and pro
forma balance sheet with adjusting entries (i) showing that the proposed
financing will provide sufficient funds for the Borrower's projected working
capital needs, and (ii) showing: (1) that the Borrower will have reasonably
sufficient capital for the conduct of its business following the initial
funding, and (2) that the Borrower will not incur debts beyond its ability to
pay such debts as they mature.
(v) Opinions. To the extent any Person other than Borrower shall be
parties to the Loan Documents, FINOVA reserves the right to require satisfactory
opinions of counsel for each such Person concerning the proper organization of
such Person and the due authorization, execution, delivery, enforceability,
validity and binding effect of the Loan Documents to which such Person is a
party. Each such opinion of counsel shall confirm, to the satisfaction of
FINOVA, that the opinion is being delivered to FINOVA at the instruction of the
party represented by such counsel, that FINOVA is entitled to rely on such
opinion and that for purposes of such reliance, FINOVA is deemed to be in
privity with the opining counsel.
(w) ADA Compliance. If necessary, as of the Closing Date, Borrower
shall be in compliance with the Americans with Disabilities Act of 1990 ("ADA"),
or, if any renovations of Borrower's facilities or modifications of Borrower's
employment practices shall be required to bring them into compliance with the
ADA, review and approval by FINOVA of Borrower's proposed plan to come into such
compliance. Borrower shall deliver representations and warranties to FINOVA
concerning Borrower's compliance with the ADA, and no evidence shall have come
to the attention of FINOVA indicating that Borrower is not in compliance with
the ADA (except to the extent that FINOVA has reviewed and approved Borrower's
plan to come into compliance).
(x) Subordination and Intercreditor Agreements. FINOVA and each
Subordinating Creditor shall have entered into a Subordination Agreement, in
form and substance satisfactory to FINOVA. Without limiting the generality of
the foregoing, Seller shall enter into one or more Subordination Agreements with
FINOVA, in form and substance satisfactory to FINOVA, providing that Seller's
right to payments in respect of the Seller Subordinated Indebtedness shall be
subordinated in right of payment to the Loan.
(y) Stock Pledge. 1-800 Auto Tow, Inc. ("Pledgor") shall have executed
and delivered to FINOVA a stock pledge agreement ("Stock Pledge Agreement"),
pledging in favor of FINOVA all of the issued and outstanding common capital
stock of each Borrower, other than Pledgor. FINOVA shall be in possession on the
Closing Date of original stock certificates evidencing the shares of each
Borrower's stock so pledged to FINOVA, and of undated stock Powers and
Assignments Apart from Certificate, executed in blank by Pledgors with respect
to all such shares.
(z) Acquisition Documents. FINOVA must review and find satisfactory all
Acquisition Documents. The Acquisition Documents must contain specific
representations and warranties, in form and substance satisfactory to FINOVA,
with respect to the accuracy of the financial information submitted by Seller,
and shall further contain indemnity provisions acceptable to FINOVA which shall
address, among other items, liability for environmental contamination and clean
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up, if any. In addition, FINOVA must review and find satisfactory all terms and
conditions applicable to any promissory notes delivered to evidence the Seller
Subordinated Debt.
(aa) Employment and Non-compete Agreements. FINOVA shall have reviewed
and approved all employment and non-compete agreements to be in effect as of the
Closing Date between Borrower and any Person.
(bb) Asset Appraisal. Borrower shall have provided to FINOVA, at
Borrower's sole cost and expense, an asset appraisal of all Borrower's fixed
assets upon which FINOVA shall be granted a first priority lien and security
interest, which appraisal must be acceptable to FINOVA in all respects.
(cc) Transaction Costs. Borrower shall provide to FINOVA a complete,
itemized summary of all transaction costs paid or incurred by any Person in
connection with the making of the Loan and the consummation of the Acquisition,
which transaction costs shall not exceed the amount set forth in the Schedule,
as well as appropriate documentation evidencing such costs and the payment
thereof. All such information must be acceptable to FINOVA, in FINOVA's sole
discretion, exercised in good faith.
(dd) Schedule Conditions. Borrower shall have complied with all
additional conditions precedent as set forth in the Schedule attached hereto.
(ee) Other Matters. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance satisfactory to FINOVA
and its counsel including, without limitation, each of the items listed on the
Closing Checklist attached as Exhibit 4.1 to the Schedule.
4.2 Subsequent Advances. The obligation of FINOVA to make any advance
(including the initial advance) shall be subject to the further conditions
precedent that, on and as of the date of such advance: (a) the representations
and warranties of Borrower set forth in this Agreement shall be accurate, before
and after giving effect to such advance and to the application of any proceeds
thereof; (b) no Event of Default and no event which, with notice or passage of
time or both, would constitute an Event of Default has occurred and is
continuing, or would result from such advance or from the application of any
proceeds thereof; (c) no material adverse change has occurred in the Borrower's
business, operations, financial condition, in the condition of the Collateral or
other assets of Borrower or in the prospect of repayment of the Obligations; and
(d) FINOVA shall have received such other approvals, opinions or documents as
FINOVA shall reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
5.1 Due Organization. It is a corporation duly organized, validly
existing and in good standing under the laws of the State set forth on the
Schedule, is qualified and authorized to do business and is in good standing in
all states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property, and has all requisite power
and authority to conduct its business as presently conducted, to own its
property and to execute and deliver each of the Loan Documents to which it is a
party and perform all of its Obligations thereunder, and has not taken any steps
to wind-up, dissolve or otherwise liquidate its assets;
5.2 Other Names. Borrower has not, during the preceding five (5) years,
been known by or used any other corporate or fictitious name except as set forth
on the Schedule, nor has Borrower been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person
during such time;
5.3 Due Authorization. The execution, delivery and performance by
Borrower of the Loan Documents to which it is a party have been authorized by
all necessary corporate action and do not and shall not constitute a violation
of any applicable law or of Borrower's Articles or Certificate of Incorporation
or By-Laws or any other document, agreement or instrument to which Borrower is a
party or by which Borrower or its assets are bound;
5.4 Binding Obligation. Each of the Loan Documents to which Borrower is
a party is the legal, valid and binding obligation of Borrower enforceable
against Borrower in accordance with its terms;
5.5 Intangible Property. Borrower possesses adequate assets, licenses,
patents, patent applications, copyrights, trademarks, trademark applications and
trade names for the present and planned future conduct of its business without
any known conflict with the rights of others, and each is valid and has been
duly registered or filed with the appropriate governmental authorities; each of
Borrower's patents, patent applications, copyrights, trademarks and trademark
applications which have been registered or filed with any governmental authority
(including the U.S. Patent and Trademark Office and the Library of Congress) are
listed by name, date and filing number on the Schedule;
5.6 Capital. Borrower has capital sufficient to conduct its business,
is able to pay its debts as they mature, and owns property having a fair salable
value greater than the amount required to pay all of its debts (including
contingent debts);
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5.7 Material Litigation. Borrower has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely affect
its business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of FINOVA's interests therein;
5.8 Title; Security Interests of FINOVA. Borrower has good,
indefeasible and merchantable title to the Collateral and, upon the execution
and delivery of the Loan Documents, the filing of UCC-1 Financing Statements,
delivery of the certificate(s) evidencing any pledged securities, the filing of
any collateral assignments or security agreements regarding Borrower,
Trademarks, Copyrights, Licenses and/or Patents, if any, with the appropriate
governmental offices and the recording of any mortgages or deeds of trust with
respect to real property, in each case in the appropriate offices, this
Agreement and such documents shall create valid and perfected first priority
liens in the Collateral, subject only to Permitted Encumbrances;
5.9 Restrictive Agreements; Labor Contracts. Borrower is not a party or
subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or which
restricts its right or ability to incur Indebtedness, and it is not party to any
labor dispute. In addition, no labor contract is scheduled to expire during the
Initial Term of this Agreement, except as disclosed to FINOVA in writing prior
to the date hereof;
5.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or its
business, assets, operations, prospects or condition, financial or otherwise;
5.11 Consents. Borrower has obtained or caused to be obtained or issued
any required consent of a governmental agency or other Person in connection with
the financing contemplated hereby;
5.12 Defaults. Borrower is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other agreement to which it
is a party or by which it or its assets are bound, nor has any event occurred
which, with the giving of notice or the lapse of time, or both, would cause such
a default;
5.13 Financial Condition. The Prepared Financials fairly present
Borrower's financial condition and results of operations and those of such other
Persons described therein as of the date thereof in accordance with GAAP; there
are no material omissions from the Prepared Financials or other facts or
circumstances not reflected in the Prepared Financials; and there has been no
material and adverse change in such financial condition or operations since the
date of the initial Prepared Financials delivered to FINOVA hereunder;
5.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or
has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor has Borrower or any ERISA Affiliate received any
notice to such effect. No notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA, nor has any Plan been terminated under ERISA. The
PBGC has not instituted proceedings to terminate, or appointed a trustee to
administer, a Plan. No lien upon the assets of Borrower has arisen with respect
to a Plan. No prohibited transaction or Reportable Event has occurred with
respect to a Plan. Neither Borrower nor any ERISA Affiliate has incurred any
withdrawal liability with respect to any Multiemployer Plan. Borrower and each
ERISA Affiliate have made all contributions required to be made by them to any
Plan or Multiemployer Plan when due. There is no accumulated funding deficiency
in any Plan, whether or not waived;
5.15 Taxes. Borrower has filed all tax returns and such other reports
as it is required by law to file and has paid or made adequate provision for the
payment on or prior to the date when due of all taxes, assessments and similar
charges that are due and payable;
5.16 Locations; Federal Tax ID No. Borrower's chief executive office
and the offices and locations where it keeps the Collateral (except for
Inventory in transit) are at the locations set forth on the Schedule, except to
the extent that such locations may have been changed after notice to FINOVA in
accordance with Section 6.4 hereof; Borrower's federal tax identification number
is as shown on the Schedule;
5.17 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower and any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of Borrower, or with any material supplier, and there exists no present
condition or state of facts or circumstances which would materially and
adversely affect Borrower or prevent Borrower from conducting such business
after the consummation of the transactions contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted; and
5.18 Reaffirmations. Each request for a loan made by Borrower pursuant
to this Agreement shall constitute (i) an automatic representation and warranty
by Borrower to FINOVA that there does not then exist any Event of Default and
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(ii) a reaffirmation as of the date of said request of all of the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents.
5.19 Year 2000 Representations & Warranties. Borrower has taken all
action necessary to assure that there will be no material adverse change to
Borrower's business by reason of the advent of the year 2000, including without
limitation that all computer-based systems, embedded microchips and other
processing capabilities effectively recognize and process dates after July 31,
1999.
6. COVENANTS.
6.1 Affirmative Covenants. Borrower covenants that, so long as any
Obligation remains outstanding and this Agreement is in effect, it shall:
6.1.1 Taxes. File all tax returns and pay or make adequate
provision for the payment of all taxes, assessments and other charges on or
prior to the date when due;
6.1.2 Notice of Litigation. Promptly notify FINOVA in writing
of any litigation, suit or administrative proceeding which may materially and
adversely affect the Collateral or Borrower's business, assets, operations,
prospects or condition, financial or otherwise, whether or not the claim is
covered by insurance;
6.1.3 ERISA. Notify FINOVA in writing (i) promptly upon the
occurrence of any event described in Paragraph 4043 of ERISA, other than a
termination, partial termination or merger of a Plan or a transfer of a Plan's
assets and (ii) prior to any termination, partial termination or merger of a
Plan or a transfer of a Plan's assets;
6.1.4 Change in Location. Notify FINOVA in writing forty-five
(45) days prior to any change in the location of Borrower's chief executive
office or the location of any Collateral, or Borrower's opening or closing of
any other place of business;
6.1.5 Corporate Existence. Maintain its corporate existence
and its qualification to do business and good standing in all states necessary
for the conduct of its business and the ownership of its property and maintain
adequate assets, licenses, patents, copyrights, trademarks and trade names for
the conduct of its business;
6.1.6 Labor Disputes. Promptly notify FINOVA in writing of any
labor dispute to which Borrower is or may become subject and the expiration of
any labor contract to which Borrower is a party or bound;
6.1.7 Violations of Law. Promptly notify FINOVA in writing of
any violation of any law, statute, regulation or ordinance of any governmental
entity, or of any agency thereof, applicable to Borrower which may materially
and adversely affect the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise;
6.1.8 Defaults. Notify FINOVA in writing within five (5)
Business Days of Borrower's default under any note, indenture, loan agreement,
mortgage, lease or other agreement to which Borrower is a party or by which
Borrower is bound, or of any other default under any Indebtedness of Borrower;
6.1.9 Capital Expenditures. Promptly notify FINOVA in writing
of the making of any Capital Expenditure materially affecting Borrower's
business, assets, prospects, operations or condition, financial or otherwise,
except to the extent permitted in the Schedule;
6.1.10 Books and Records. Keep adequate records and books of
account with respect to its business activities in which proper entries are made
in accordance with GAAP, reflecting all of its financial transactions;
6.1.11 Leases; Warehouse Agreements. Provide FINOVA with (i)
copies of all agreements between Borrower and any landlord, warehouseman or
bailee which owns any premises at which any Collateral may, from time to time,
be located (whether for processing, storage or otherwise), and (ii) without
limiting the landlord, bailee and/or mortgagee waivers to be provided pursuant
to Section 4.1(j) hereof, additional landlord, bailee and/or mortgagee waivers
in form acceptable to FINOVA with respect to all locations where any Collateral
is hereafter located;
6.1.12 Additional Documents. At FINOVA's request, promptly
execute or cause to be executed and delivered to FINOVA any and all documents,
instruments or agreements deemed necessary by FINOVA to facilitate the
collection of the Obligations or the Collateral or otherwise to give effect to
or carry out the terms or intent of this Agreement or any of the other Loan
Documents. Without limiting the generality of the foregoing, if any of the
Receivables with a face value in excess of $1,000 arises out of a contract with
the United States of America or any department, agency, subdivision or
instrumentality thereof, Borrower shall promptly notify FINOVA of such fact in
writing and shall execute any instruments and take any other action required or
requested by FINOVA to comply with the provisions of the Federal Assignment of
Claims Act; and
6.1.13 Financial Covenants. Comply with the financial
covenants set forth on the Schedule.
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6.1.14 Year 2000 Covenants. Borrower shall take all action
necessary to assure that there will be no material adverse change to Borrower's
business by reason of the advent of the year 2000, including without limitation
that all computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process dates after July 31, 1999. At
FINOVA's request, Borrower shall provide to FINOVA assurance reasonably
acceptable to FINOVA that Borrower's computer-based systems, embedded microchips
and other processing capabilities are year 2000 compatible.
6.2 Negative Covenants. Without FINOVA's prior written consent, which
consent FINOVA may withhold in its sole discretion, so long as any Obligation
remains outstanding and this Agreement is in effect, Borrower shall not:
6.2.1 Mergers. Merge or consolidate with or acquire any other
Person, or make any other material change in its capital structure or in its
business or operations which might adversely affect the repayment of the
Obligations;
6.2.2 Loans. Make advances, loans or extensions of credit to,
or invest in, any Person, except for loans or cash advances to employees which
are permitted in the Schedule;
6.2.3 Dividends. Declare or pay cash dividends upon any of its
stock or distribute any of its property or redeem, retire, purchase or acquire
directly or indirectly any of its stock;
6.2.4 Adverse Transactions. Enter into any transaction which
materially and adversely affects the Collateral or its ability to repay the
Obligations in full as and when due;
6.2.5 Indebtedness of Others. Guarantee or become directly or
contingently liable for the Indebtedness of any Person, except by endorsement of
instruments for deposit and except for the existing guarantees made by Borrower
prior to the date hereof, if any, which are set forth in the Schedule;
6.2.6 Repurchase. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or any other repurchase or return basis;
6.2.7 Name. Use any corporate or fictitious name other than
its corporate name as set forth in its Articles or Certificate of Incorporation
on the date hereof or as set forth on the Schedule;
6.2.8 Prepayment. Prepay any Indebtedness other than trade
payables and other than the Obligations;
6.2.9 Capital Expenditure. Make or incur any Capital
Expenditure if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by Borrower in any fiscal year would exceed the amount set forth on
the Schedule;
6.2.10 Compensation. Pay total compensation, including
salaries, withdrawals, fees, bonuses, commissions, drawing accounts and other
payments, whether directly or indirectly, in money or otherwise, during any
fiscal year to all of Borrower's executives, officers and directors (or any
relative thereof) in an amount in excess of the amount set forth on the
Schedule;
6.2.11 Indebtedness. Create, incur, assume or permit to exist
any Indebtedness (including Indebtedness in connection with Capital Leases) in
excess of the amount set forth on the Schedule, other than (i) the Obligations,
(ii) trade payables and other contractual obligations to suppliers and customers
incurred in the ordinary course of business, and (iii) other Indebtedness
existing on the date of this Agreement and reflected in the Prepared Financials
(except Indebtedness paid on the date of this Agreement from proceeds of the
initial advances hereunder), and (iv) Subordinated Debt;
6.2.12 Affiliate Transactions. Except as set forth below,
sell, transfer, distribute or pay any money or property to any Affiliate, or
invest in (by capital contribution or otherwise) or purchase or repurchase any
stock or Indebtedness, or any property, of any Affiliate, or become liable on
any guaranty of the indebtedness, dividends or other obligations of any
Affiliate. Notwithstanding the foregoing, Borrower may pay compensation
permitted by Section 6.2.10 to employees who are Affiliates and, if no Event of
Default has occurred, Borrower may (i) engage in transactions with Affiliates in
the normal course of business, in amounts and upon terms which are fully
disclosed to FINOVA and which are no less favorable to Borrower than would be
obtainable in a comparable arm's length transaction with a Person who is not an
Affiliate, and (ii) make payments to a Subordinating Creditor that is an
Affiliate, subject to and only to the extent expressly permitted in the
Subordination Agreement between such Subordinating Creditor and FINOVA;
6.2.13 Nature of Business. Enter into any new business or make
any material change in any of Borrower's business objectives, purposes or
operations;
6.2.14 FINOVA's Name. Use the name of FINOVA in connection
with any of Borrower's business or activities, except in connection with
internal business matters or as required in dealings with governmental agencies
and financial institutions or with trade creditors of Borrower, solely for
credit reference purposes; or
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6.2.15 Margin Security. Borrower will not (and has not in the
past) engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation G or Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of any Loan or other
advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock, or in any
manner which might cause such Loan or other advance or the application of such
proceeds to violate (or require any regulatory filing under) Regulation G,
Regulation T, Regulation U, Regulation X or any other regulation of the Board of
Governors of the Federal Reserve System, in each case as in effect on the date
or dates of such Loan or other advance and such use of proceeds. Further, no
proceeds of any Loan or other advance will be used to acquire any security of a
class which is registered pursuant to Section 12 of the Securities Exchange Act
of 1934.
6.2.16 Real Property. Purchase or acquire any real property
without FINOVA's prior written consent, a condition of which consent shall
include delivery of appropriate environmental reports and analysis, in form and
substance satisfactory to FINOVA and its counsel.
7. DEFAULT AND REMEDIES.
7.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise;
(b) Borrower or any other Loan Party fails or neglects to perform,
keep, or observe any Obligation including, but not limited to, any term,
provision, condition, covenant or agreement contained in any Loan Document to
which Borrower or such other Loan Party is a party;
(c) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the
value or priority of FINOVA's security interest in the Collateral is materially
impaired;
(e) Any portion of Borrower's assets is seized, attached, subjected to
a writ or distress warrant, is levied upon or comes into the possession of any
judicial officer;
(f) Borrower shall generally not pay its debts as they become due or
shall enter into any agreement (whether written or oral), or offer to enter into
any agreement, with all or a significant number of its creditors regarding any
moratorium or other indulgence with respect to its debts or the participation of
such creditors or their representatives in the supervision, management or
control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding is commenced by
Borrower, or any such proceeding is commenced against Borrower and remains
undischarged or unstayed for forty-five (45) days;
(h) Any notice of lien, levy or assessment is filed of record with
respect to any of Borrower's assets;
(i) Any judgments are entered against Borrower in an aggregate amount
exceeding $25,000 in any fiscal year;
(j) Any default shall occur under (i) any material agreement between
Borrower and any third party including, without limitation, any default which
would result in a right by such third party to accelerate the maturity of any
Indebtedness of Borrower to such third party, or (ii) any Subordinated Debt;
(k) Any representation or warranty made or deemed to be made by
Borrower, any Affiliate or any other Loan Party in any Loan Document or any
other statement, document or report made or delivered to FINOVA in connection
therewith shall prove to have been misleading in any material respect;
(l) Any Prohibited Transaction or Reportable Event shall occur with
respect to a Plan which could have a material adverse effect on the financial
condition of Borrower; any lien upon the assets of Borrower in connection with
any Plan shall arise; Borrower or any of its ERISA Affiliates shall fail to make
full payment when due of all amounts which Borrower or any of its ERISA
Affiliates may be required to pay to any Plan or any Multiemployer Plan as one
or more contributions thereto; Borrower or any of its ERISA Affiliates creates
or permits the creation of any accumulated funding deficiency, whether or not
waived; or
(m) Any transfer of more than ten percent (10%) of the issued and
outstanding shares of common stock or other evidence of ownership of Borrower
(other than pursuant to the Acquisition or in connection with the conversion of
the Preferred Stock to common stock).
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE
RIGHT TO CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND
THEREAFTER IF AN EVENT OF DEFAULT HAS OCCURRED.
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7.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may,
at its option and in its sole discretion and in addition to all of its other
rights under the Loan Documents, cease making Loans, terminate this Agreement
and/or declare all of the Obligations to be immediately payable in full.
Borrower agrees that FINOVA shall also have all of its rights and remedies under
applicable law, including, without limitation, the default rights and remedies
of a secured party under the Code, and upon the occurrence of an Event of
Default Borrower hereby consents to the appointment of a receiver by FINOVA in
any action initiated by FINOVA pursuant to this Agreement and to the
jurisdiction and venue set forth in Section 9.27 hereof, and Borrower waives
notice and posting of a bond in connection therewith. Further, FINOVA may, at
any time, take possession of the Collateral and keep it on Borrower's premises,
at no cost to FINOVA, or remove any part of it to such other place(s) as FINOVA
may desire, or Borrower shall, upon FINOVA's demand, at Borrower's sole cost,
assemble the Collateral and make it available to FINOVA at a place reasonably
convenient to FINOVA. FINOVA may sell and deliver any Collateral at public or
private sales, for cash, upon credit or otherwise, at such prices and upon such
terms as FINOVA deems advisable, at FINOVA's discretion, and may, if FINOVA
deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Borrower agrees that FINOVA has no
obligation to preserve rights to the Collateral or marshall any Collateral for
the benefit of any Person. FINOVA is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks and advertising matter, or any similar
property, in completing production, advertising or selling any Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
FINOVA's benefit. Any requirement of reasonable notice shall be met if such
notice is mailed postage prepaid to Borrower at its address set forth in the
heading to this Agreement at least ten (10) days before sale or other
disposition. The proceeds of sale shall be applied, first, to all attorneys fees
and other expenses of sale, and second, to the Obligations in such order as
FINOVA shall elect, in its sole discretion. FINOVA shall return any excess to
Borrower and Borrower shall remain liable for any deficiency to the fullest
extent permitted by law.
7.3 Standards for Determining Commercial Reasonableness. Borrower and
FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially reasonable
(but other conduct by FINOVA, including, but not limited to, FINOVA's use in its
sole discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): Any
public or private disposition: (i) as to which on no later than the fifth
calendar day prior thereto written notice thereof is mailed or personally
delivered to Borrower and, with respect to any public disposition, on no later
than the fifth calendar day prior thereto notice thereof describing in general
non-specific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be conducted
(provided that no notice of any public or private disposition need be given to
the Borrower or published if the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market); (ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at any time
between 8:00 a.m. and 5:00 p.m. Without limiting the generality of the
foregoing, Borrower expressly agrees that, with respect to any disposition of
accounts, instruments and general intangibles, it shall be commercially
reasonable for FINOVA to direct any prospective purchaser thereof to ascertain
directly from Borrower any and all information concerning the same, including,
but not limited to, the terms of payment, aging and delinquency, if any, the
financial condition of any obligor or account debtor thereon or guarantor
thereof, and any collateral therefor.
8. EXPENSES AND INDEMNITIES
8.1 Expenses. Borrower covenants that, so long as any Obligation
remains outstanding and this Agreement remains in effect, it shall promptly
reimburse FINOVA for all costs, fees and expenses incurred by FINOVA in
connection with the negotiation, preparation, execution, delivery,
administration and enforcement of each of the Loan Documents, including, but not
limited to, the attorneys' and paralegals' fees of in-house and outside counsel,
expert witness fees, lien, title search and insurance fees, appraisal fees, all
charges and expenses incurred in connection with any and all environmental
reports and environmental remediation activities, and all other costs, expenses,
taxes and filing or recording fees payable in connection with the transactions
contemplated by this Agreement, including without limitation all such costs,
fees and expenses as FINOVA shall incur or for which FINOVA shall become
obligated in connection with (i) any inspection or verification of the
Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and FINOVA's
security interest therein, including, without limitation, the defense or
prosecution of any action involving FINOVA and Borrower or any third party, (iv)
enforcement of any of FINOVA's rights and remedies with respect to the
Obligations or Collateral and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Loan Party or any Affiliate, whether or not suit is filed or the
issues are peculiar to federal bankruptcy or state insolvency laws. Borrower
shall also pay all FINOVA charges in connection with bank wire transfers,
forwarding of loan proceeds, deposits of checks and other items of payment,
returned checks, establishment and maintenance of lockboxes and other Blocked
Accounts, and all other bank and administrative matters, in accordance with
FINOVA's schedule of bank and administrative fees and charges in effect from
time to time.
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8.2 Environmental Matters.
(a) Definitions. The following definitions apply to the provisions of
this Section 8.2: (a) the term "Applicable Law" shall include, but shall not be
limited to, all local, state and/or federal laws, rules, regulations or
ordinances, whether currently in existence or hereafter enacted, which govern,
to the extent applicable to the Property or to Borrower, (i) the existence,
cleanup and/or remedy of contamination on real property; (ii) the protection of
the environment from soil, air or water pollution, or from spilled, deposited or
otherwise emplaced contamination; (iii) the emission or discharge of hazardous
substances into the environment; (iv) the control of hazardous wastes; or (v)
the use, generation, transport, treatment, removal or recovery of Hazardous
Substances; (b) the term "Hazardous Substance" shall mean (i) any oil, flammable
substance, explosives, radioactive materials, hazardous wastes or substances,
toxic wastes or substances or any other wastes, materials or pollutants which
either pose a hazard to the Property or to persons on or about the Property or
cause the Property to be in violation of any Applicable Law; (ii) asbestos in
any form which is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment which contain dielectric fluid containing levels
of polychlorinated biphenyls, or radon gas; (iii) any chemical, material or
substance defined as or included in the definition of "hazardous substances,"
"waste," "hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," or "toxic substances" or words of similar import
under any Applicable Law; (iv) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority which may or could pose a hazard to the health or safety of the
occupants of the Property or the owners and/or occupants of property adjacent to
or surrounding the Property, or any other person coming upon the Property or
adjacent property; and (v) any other chemical, materials or substance which may
or could pose a hazard to the environment; and (c) the term "Property" shall
mean all real property, wherever located, in which Borrower or any Affiliate of
Borrower has any right, title or interest, whether now existing or hereafter
arising, and including, without limitation, as owner, lessor or lessee.
(b) Covenants and Representations. (1) Borrower represents and warrants
that there have not been during the period of Borrower's possession of any
interest in the Property and, to the best of its knowledge after reasonable
inquiry, there have not been at any other times, any activities on the Property
involving, directly or indirectly, the use, generation, treatment, storage or
disposal of any Hazardous Substances except in compliance with Applicable Law
(i) under, on or in the land included in the Property, whether contained in
soil, tanks, sumps, ponds, lagoons, barrels, cans or other containments,
structures or equipment, (ii) incorporated in the buildings, structures or
improvements included in the Property, including any building material
containing asbestos, or (iii) used in connection with any operations on or in
the Property. (2) Without limiting the generality of the foregoing and to the
extent not included within the scope of this Section 8.2(b), Borrower represents
and warrants that it is in full compliance with Applicable Law and has received
no notice from any Person or any governmental agency or other entity of any
violation by Borrower or its Affiliates of any Applicable Law. (3) Borrower
shall be solely responsible for and agrees to indemnify FINOVA, protect and
defend FINOVA with counsel reasonably acceptable to FINOVA, and hold FINOVA
harmless from and against any claims, actions, administrative proceedings,
judgments, damages, punitive damages, penalties, fines, costs, liabilities
(including sums paid in settlements of claims), interest or losses, attorneys'
fees (including any fees and expenses incurred in enforcing this indemnity),
consultant fees, expert fees, and other out-of-pocket costs or expenses actually
incurred by FINOVA (collectively, the "Environmental Costs"), that may, at any
time or from time to time, arise directly or indirectly from or in connection
with: (i) the presence, suspected presence, release or suspected release of any
Hazardous Substance whether into the air, soil, surface water or groundwater of
or at the Property, or any other violation of Applicable Law, or (ii) any breach
of the foregoing representations and covenants; except to the extent any of the
foregoing result from the actions of FINOVA, its employees, agents and
representatives. All Environmental Costs incurred or advanced by FINOVA shall be
deemed to be made by FINOVA in good faith and shall constitute Obligations
hereunder.
9. MISCELLANEOUS.
9.1 Examination of Records; Financial Reporting.
(a) Examinations. FINOVA shall at all reasonable times have full access
to and the right to examine, audit, make abstracts and copies from and inspect
Borrower's records, files, books of account and all other documents, instruments
and agreements relating to the Collateral and the right to check, test and
appraise the Collateral. Borrower shall deliver to FINOVA any instrument
necessary for FINOVA to obtain records from any service bureau maintaining
records for Borrower. All instruments and certificates prepared by Borrower
showing the value of any of the Collateral shall be accompanied, upon FINOVA's
request, by copies of related purchase orders and invoices. FINOVA may, at any
time after the occurrence of an Event of Default, remove from Borrower's
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premises Borrower's books and records (or copies thereof) or require Borrower to
deliver such books and records or copies to FINOVA. FINOVA may, without expense
to FINOVA, use such of Borrower's personnel, supplies and premises as may be
reasonably necessary for maintaining or enforcing FINOVA's security interest.
(b) Reporting Requirements. Borrower shall furnish FINOVA, upon
request, such information and statements as FINOVA shall request from time to
time regarding Borrower's business affairs, financial condition and the results
of its operations. Without limiting the generality of the foregoing, Borrower
shall provide FINOVA with: (i) FINOVA's standard form collateral and loan
report, monthly (or more often as FINOVA may request) (prepared on an individual
basis for each entity included within the definition with Borrower and on an
aggregate basis for all such entities), and upon FINOVA's request, copies of
sales journals, cash receipt journals, and deposit slips; (ii) upon FINOVA's
request, copies of sales invoices, customer statements and credit memoranda
issued, remittance advices and reports; (iii) copies of shipping and delivery
documents, upon request; (iv) on or prior to the date set forth on the Schedule,
monthly agings (aged from invoice date) and reconciliations of Receivables (with
listings of concentrated accounts) (prepared on an individual basis for each
entity included within the definition of Borrower and on an aggregate basis for
all such entities), payables reports, inventory reports, compliance certificates
and unaudited financial statements with respect to the prior month prepared on a
basis consistent with such statements prepared in prior months and otherwise in
accordance with GAAP; (v) audited annual consolidated and consolidating
financial statements, prepared in accordance with GAAP applied on a basis
consistent with the most recent Prepared Financials provided to FINOVA by
Borrower, including balance sheets, income and cash flow statements, accompanied
by the unqualified report thereon of independent certified public accountants
acceptable to FINOVA, as soon as available, and in any event, within ninety (90)
days after the end of each of Borrower's fiscal years; and (vi) such
certificates relating to the foregoing as FINOVA may request, including, without
limitation, a monthly certificate from the president and the chief financial
officer of Borrower showing Borrower's compliance with each of the financial
covenants set forth in this Agreement, and stating whether any Event of Default
has occurred or event which, with giving of notice or the passage of time, or
both, would constitute an Event of Default, and if so, the steps being taken to
prevent or cure such Event of Default. All reports or financial statements
submitted by Borrower shall be in reasonable detail and shall be certified by
the principal financial officer of Borrower as being complete and correct.
9.2 Term; Termination.
(a) Term. The Initial Term of the Revolving Credit Loans facility and
the obligation of FINOVA to made advances with respect thereto in accordance
with this Agreement shall be as set forth on the Schedule, and the Revolving
Credit Loans facility and this Agreement shall be automatically renewed for one
or more Renewal Term(s) as set forth in the Schedule, unless earlier terminated
as provided herein.
(b) Prior Notice. Each party shall have the right to terminate this
Agreement effective at the end of the Initial Term or at the end of any Renewal
Term by giving the other party written notice not less than sixty (60) days
prior to the effective date of such termination, by registered or certified
mail.
(c) Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
(d) Early Termination; Termination Fee. In addition to the procedure
set forth in Section 9.2(b), Borrower may terminate this Agreement at any time
but only upon sixty (60) days' prior written notice and prepayment of the
Obligations. Upon any such early termination by Borrower or any termination of
this Agreement by FINOVA upon the occurrence of an Event of Default, then, and
in any such event, Borrower shall pay to FINOVA upon the effective date of such
termination a fee (the "Termination Fee") in an amount equal to the amount shown
on the Schedule.
9.3 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination of
this Agreement; recourse to security shall not be required at any time. Borrower
waives presentment and protest of any instrument and notice thereof, notice of
default and, to the extent permitted by applicable law, all other notices to
which Borrower might otherwise be entitled.
9.4 No Waiver by FINOVA. Neither FINOVA's failure to exercise any
right, remedy or option under this Agreement, any supplement, the Loan Documents
or other agreement between FINOVA and Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. No waiver by FINOVA shall be
effective unless in writing and then only to the extent stated. No waiver by
FINOVA shall affect its right to require strict performance of this Agreement.
FINOVA's rights and remedies shall be cumulative and not exclusive.
9.5 Binding on Successors and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
FINOVA's and Borrower's respective representatives, successors and assigns.
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9.6 Severability. If any provision of this Agreement shall be
prohibited or invalid under applicable law, it shall be ineffective only to such
extent, without invalidating the remainder of this Agreement.
9.7 Amendments; Assignments. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower and
FINOVA. Borrower may not sell, assign or transfer any interest in this Agreement
or any other Loan Document, or any portion thereof, including, without
limitation, any of Borrower's rights, title, interests, remedies, powers and
duties hereunder or thereunder. Borrower hereby consents to FINOVA's
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement and any of the other Loan Documents, or of
any portion hereof or thereof, including, without limitation, FINOVA's rights,
title, interests, remedies, powers and duties hereunder or thereunder. In
connection therewith, FINOVA may disclose all documents and information which
FINOVA now or hereafter may have relating to Borrower or Borrower's business. To
the extent that FINOVA assigns its rights and obligations hereunder to a third
party, FINOVA shall thereafter be released from such assigned obligations to
Borrower and such assignment shall effect a novation between Borrower and such
third party.
9.8 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan Documents, reflect the entire understanding of
the parties with respect to the transactions contemplated hereby.
9.9 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and acceptance
of this Agreement by the parties. No termination of this Agreement or of any
guaranty of the Obligations shall affect or impair the powers, obligations,
duties, rights, representations, warranties or liabilities of the parties hereto
and all shall survive such termination.
9.10 Evidence of Obligations. Each Obligation may, in FINOVA's
discretion, be evidenced by notes or other instruments issued or made by
Borrower to FINOVA. If not so evidenced, such Obligation shall be evidenced
solely by entries upon FINOVA's books and records.
9.11 Loan Requests. Each oral or written request for a loan by any
Person who purports to be any employee, officer or authorized agent of Borrower
shall be made to FINOVA on or prior to 11:00 a.m., Eastern Daylight time, on the
Business Day on which the proceeds thereof are requested to be paid to Borrower
and shall be conclusively presumed to be made by a Person authorized by Borrower
to do so and the crediting of a loan to Borrower's operating account shall
conclusively establish Borrower's obligation to repay such loan. Unless and
until Borrower otherwise directs FINOVA in writing, all loans shall be wired to
Borrower's operating account set forth on the Schedule.
9.12 Notices. Any notice required hereunder shall be in writing and
addressed to the Borrower and FINOVA at their addresses set forth at the
beginning of this Agreement. Notices hereunder shall be deemed received on the
earlier of receipt, whether by mail, personal delivery, facsimile, or otherwise,
or upon deposit in the United States mail, postage prepaid.
9.13 Brokerage Fees. Borrower represents and warrants to FINOVA that,
with respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission, except as described on
Exhibit 9.13 to the Schedule, and Borrower agrees to indemnify and hold FINOVA
harmless against any and all such claims.
9.14 Disclosure. No representation or warranty made by Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrower
or which reasonably should be known to Borrower which Borrower has not disclosed
to FINOVA in writing with respect to the transactions contemplated by this
Agreement which materially and adversely affects the business, assets,
operations, prospects or condition (financial or otherwise), of Borrower.
9.15 Publicity. FINOVA is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the consummation of
this transaction and the aggregate amount thereof.
9.16 Captions. The Section titles contained in this Agreement are
without substantive meaning and are not part of this Agreement.
9.17 Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its Obligations under this
Agreement, any remedy at law may prove to be inadequate relief to FINOVA.
Therefore, FINOVA, if it so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
9.18 Counterparts; Facsimile Execution. This Agreement may be executed
in one or more counterparts, each of which taken together shall constitute one
and the same instrument, admissible into evidence. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile shall also
deliver a manually executed counterpart of this Agreement, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
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9.19 Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments
or exhibits hereto.
9.20 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
9.21 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against FINOVA, or any of FINOVA's directors, officers,
employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Agreement, or any other present or future agreement, or any
other transaction contemplated hereby or thereby or relating hereto or thereto,
or any other matter, cause or thing whatsoever, whether or not relating hereto
or thereto, occurred, done, omitted or suffered to be done by FINOVA, or by
FINOVA's directors, officers, employees, agents, accountants or attorneys,
whether sounding in contract or in tort or otherwise, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after
[the date on which Borrower knew or reasonably should have known of such claim
or cause of action] and service of a summons and complaint on an officer of
FINOVA or any other Person authorized to accept service of process on behalf of
FINOVA, within 30 days thereafter. Borrower agrees that such one-year period of
time is a reasonable and sufficient time for Borrower to investigate and act
upon any such claim or cause of action. The one-year period provided herein
shall not be waived, tolled, or extended except by a specific written agreement
of FINOVA. This provision shall survive any termination of this Loan Agreement
or any other agreement.
9.22 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable
for any indirect, special, incidental or consequential damages in connection
with any breach of contract, tort or other wrong relating to this Agreement or
the Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if FINOVA has been advised of the possibility of such
damages. Neither FINOVA, nor any FINOVA Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by the Borrower through the ordinary negligence of FINOVA,
or any FINOVA Affiliate. "FINOVA Affiliate" shall mean FINOVA's directors,
officers, employees, agents, attorneys or any other Person or entity affiliated
with or representing FINOVA.
9.23 Notice of Breach by FINOVA. Borrower agrees to give FINOVA written
notice of (i) any action or inaction by FINOVA or any attorney of FINOVA in
connection with any Loan Documents that may be actionable against FINOVA or any
attorney of FINOVA or (ii) any defense to the payment of the Obligations for any
reason, including, but not limited to, commission of a tort or violation of any
contractual duty or duty implied by law. Borrower agrees that unless such notice
is fully given as promptly as possible (and in any event within thirty (30)
days) after Borrower has knowledge, or with the exercise of reasonable diligence
should have had knowledge, of any such action, inaction or defense, Borrower
shall not assert, and Borrower shall be deemed to have waived, any claim or
defense arising therefrom.
9.24 Application of Insurance Proceeds. The net proceeds of any
casualty insurance insuring the Collateral, after deducting all costs and
expenses (including attorneys' fees) of collection, shall be applied, at
FINOVA's option, either toward replacing or restoring the Collateral, in a
manner and on terms satisfactory to FINOVA, or toward payment of the
Obligations. Any proceeds applied to the payment of Obligations shall be applied
in such manner as FINOVA may elect. In no event shall such application relieve
Borrower from payment in full of all installments of principal and interest
which thereafter become due in the order of maturity thereof.
9.25 Power of Attorney. Borrower appoints FINOVA and its designees as
Borrower's attorney, with the power to endorse Borrower's name on any checks,
notes, acceptances, money orders or other forms of payment or security that come
into FINOVA's possession; to sign Borrower's name on any invoice or bill of
lading relating to any Receivable, on drafts against customers, on assignments
of Receivables, on notices of assignment, financing statements and other public
records, on verifications of accounts and on notices to customers or account
debtors; to send requests for verification of Receivables to customers or
account debtors; after the occurrence of any Event of Default, to notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by FINOVA and to open and dispose of all mail addressed to
Borrower; and to do all other things FINOVA deems necessary or desirable to
carry out the terms of this Agreement. Borrower hereby ratifies and approves all
acts of such attorney. Neither FINOVA nor any of its designees shall be liable
for any acts or omissions nor for any error of judgment or mistake of fact or
law while acting as Borrower's attorney. This power, being coupled with an
interest, is irrevocable until the Obligations have been fully satisfied and
FINOVA's obligation to provide loans hereunder shall have terminated
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9.26 Common Enterprise. Each Person comprising Borrower (if more than
one) (each "Borrower Party") acknowledges and agrees that it is part of a common
business enterprise together with each other Borrower Party pursuant to which
loans and financial accommodations (including, particularly, those contemplated
hereunder), made to any one such Borrower Party (and its use of the proceeds of
such accommodations) shall result in direct and substantial economic benefit to
each other Borrower Party; and that, in consideration of such benefits, each
Borrower Party, as an inducement to Lender's extending such accommodations
hereunder, and with knowledge of Lender's reliance hereupon, has agreed to bind
itself, JOINTLY AND SEVERALLY, for all Obligations of Borrower hereunder and to
pledge its assets as security therefor to Lender.
9.27 Governing Law; Waivers. THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION ENFORCEMENT OF THE OBLIGATIONS, SHALL BE INTERPRETED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE STATE OF
ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. BORROWER
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE SOLE
OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH FINOVA SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND VENUE.
BORROWER FURTHER WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN THE MANNER SET FORTH IN
SECTION 9.12 HEREOF FOR THE GIVING OF NOTICE. BORROWER FURTHER WAIVES ANY RIGHT
IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST IT.
9.28 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; (ii) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND BORROWER; OR (iii)
ANY CONDUCT, ACTS OR OMISSIONS OF FINOVA OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
FINOVA OR BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
1-800 AUTO TOW, INC.
Fed. Tax I.D. # 65-0783268
By:/s/ Eugene A. Iarocci
------------------------
Name: Eugene A. Iarocci
Title: Senior Vice President
and Chief Operating Officer
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
D&D TOWING & RECOVERY, INC.
Fed. Tax I.D. # 59-2890019
By: /s/ Eugene A. Iarocci
-------------------------
Name: Eugene A. Iarocci
Title: President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
MCGANN & CHESTER, INC.
Fed. Tax I.D. # 25-1583950
By: /s/ Eugene A. Iarocci
-------------------------
Name: Eugene A. Iarocci
Title: President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
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1-800-AUTOTOW GULF COAST
EAST, INC.
Fed. Tax I.D. # 65-0935926
By: /s/ Eugene A. Iarocci
-------------------------
Name: Eugene A. Iarocci
Title: President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
1-800-AUTOTOW GULF COAST S.W., INC.
Fed. Tax I.D. # 65-0935925
By: /s/ Eugene A. Iarocci
-------------------------
Name: Eugene A. Iarocci
Title: President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
1-800-AUTOTOW FLORIDA, INC.
Fed. Tax I.D. # 65-0935924
By:/s/ Eugene A. Iarocci
------------------------
Name: Eugene A. Iarocci
Title: President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
FINOVA:
FINOVA CAPITAL CORPORATION
By:/s/ John Lewis
-----------------
Name:John Lewis
---------------
Title:Vice President
24
<PAGE>
Schedule to
Loan and Security Agreement
Borrower: 1-800-AutoTow, Inc.
D&D Towing & Recovery, Inc.
McGann & Chester, Inc.
1-800-AutoTow Gulf Coast East, Inc.
1-800-AutoTow Gulf Coast S.W., Inc.
1-800-AutoTow Florida, Inc.
Address: 1301 N. Congress Avenue
Suite 330
Boynton Beach, Florida 33426
Date: August 6, 1999
This Schedule forms an integral part of the Loan and Security Agreement between
the above Borrower and FINOVA Capital Corporation dated the above date, and all
references herein and therein to "this Agreement" shall be deemed to refer to
said Agreement and to this Schedule.
================================================================================
DEFINITIONS (SECTION 1):
"Acquisition" means, collectively, those seven acquisitions described
on Exhibit 1A attached hereto.
"Acquisition Documents" means, collectively, those stock and asset
purchase documents described on Exhibit 1B attached hereto pertaining to the
Acquisition, all other documents referred to therein, and all other instruments
to be executed between Borrower and Seller in connection with the Acquisition.
"Conversion Date" means that date on which pursuant to Section 2.2
hereof FINOVA elects to change the basis upon which availability of Revolving
Credit Loans is determined to 80% of the net amount of Eligible Accounts.
"Permitted Senior Indebtedness" means all the debt described on Exhibit
1D attached hereto.
"Preferred Stock" means Borrower's 8% Cumulative Preferred Stock.
"Seller" means, collectively, all of the sellers under the Acquisition,
as identified on Exhibit 1A attached hereto.
"Seller Subordinated Debt" means, collectively, the Subordinated Debt
held by Seller, as described on Exhibit 1C attached hereto.
1
<PAGE>
"Subordinating Creditor" means each Seller holding Seller Subordinated
Debt.
================================================================================
TOTAL FACILITY (SECTION 2.1):
$5,098,233, subject to increase to up to $5,483,233 as
provided in the "Additional Provisions" section below
================================================================================
LOANS (SECTION 2.2):
Revolving Credit Loans: A revolving line of credit
consisting of loans against Borrower's Eligible
Receivables ("Revolving Credit Loans") in an
aggregate outstanding principal amount not to
exceed the lesser of (a) or (b) below:
(a) One Million Dollars ($1,000,000) (the
"Revolving Credit Limit"), less any Loan
Reserves, or
(b) an amount equal to (A) (i) 65% of the
net amount of Receivables less (1) any
Receivables owing by any account debtor
which is an Affiliate of Borrower and (2)
any Receivables which are more than ninety
(90) days past due, or, (ii) if FINOVA so
elects in its sole discretion at any time by
written notice to Borrower, 80% of the net
amount of Eligible Receivables, less (B) in
each case, any Loan Reserves.
Term Loans: those certain three term loans against
the value of Borrower's machinery, equipment
and/or real estate in the respective principal
amounts not to exceed Three Million Three Hundred
Ninety Eight Thousand Two Hundred Thirty-Three
Dollars ($3,398,233) ("Term Loan A"), Five Hundred
Thousand Dollars ($500,000) ("Term Loan B") and
Two Hundred Thousand Dollars ($200,000) ("Term
Loan C"; Term Loan A, Term Loan B and Term Loan C,
collectively, the "Term Loans"); provided, that
the Terms Loans shall be made on such terms (in
addition to the terms set forth herein) as are set
forth on separate promissory notes of Borrower
from time to time, each in form and substance
satisfactory to FINOVA in its sole discretion.
2
<PAGE>
================================================================================
INTEREST AND FEES (SECTION 2.6):
Revolving Interest Rate. Borrower shall pay FINOVA
interest on the daily outstanding balance of
Borrower's Revolving Credit Loans at a per annum
rate of 1.5% in excess of the rate of interest
announced publicly by Citibank, N.A., (or any
successor thereto), from time to time as its
"prime rate" (the "Revolving Interest Rate") which
may not be such institution's lowest rate.
Term Interest Rate A. Borrower shall pay FINOVA
interest on the daily outstanding balance of Term
Loan A at a rate per annum of 1.5% in excess of
the Prime Rate ("Term Interest Rate A"). Term
Interest Rate B and C. Borrower shall pay FINOVA
interest on the daily outstanding balance of Term
Loan B and Term Loan C at a rate per annum of 3.0%
in excess of the Prime Rate ("Term Interest Rate B
and C").
The Revolving Interest Rate, Term Interest Rate A
and Term Interest Rate B and C shall be increased
or decreased, as the case may be, without notice
or demand of any kind, upon the announcement of
any change in the Prime Rate. Each change in the
Prime Rate shall be effective hereunder on the
first day following the announcement of such
change. Interest charges and all other fees and
charges herein shall be computed on the basis of a
year of 360 days and actual days elapsed and shall
be payable to FINOVA in arrears on the first day
of each month.
Collateral Monitoring Fee. At the closing of this
transaction and on the first day of each calendar
month thereafter, Borrower shall pay FINOVA a
collateral monitoring fee of $600 ("Collateral
Monitoring Fee"); provided however, that Borrower
agrees and acknowledges that each Loan Year a full
year's fee shall be deemed earned at the beginning
of the respective Loan Year.
Closing Fee. At the closing of this transaction,
Borrower shall pay to FINOVA a closing fee in an
amount equal to $50,982 ("Closing Fee"), which
shall be deemed fully earned on the date such
payment is due.
Success Fee. Borrower shall pay to FINOVA a
success fee ("Success Fee") in the amount of
$15,000 per annum. The Success Fee shall be deemed
3
<PAGE>
fully earned at the time when due and is otherwise
due and payable annually, commencing upon the
first anniversary of the date of this Agreement
and continuing on each subsequent anniversary
thereof. To the extent that Borrower prepays the
Loans prior to the expiration of the Initial Term,
Borrower shall be required to pay to FINOVA in
connection with such prepayments any unpaid
Success Fee to the extent necessary to cause the
aggregate amount of the Success Fees paid
hereunder prior to and concurrently with such
prepayment to equal or exceed $45,000.
Unused Line Fee. With respect to each fiscal
quarter, or portion thereof during the term of
this Agreement, Borrower shall unconditionally pay
to FINOVA a fee equal to one-half of one percent
(0.50%) per annum of the difference between the
Revolving Credit Limit and the average daily
outstanding balance of the Revolving Credit Loans
during such quarter, or portion thereof ("Unused
Line Fee"), which fee shall be calculated and
payable quarterly, in arrears, and shall be due
and payable, commencing on the first Business Day
of the Borrower's first fiscal quarter following
the Closing Date and continuing on the first
Business Day of each fiscal quarter thereafter.
Examination Fee. Borrower agrees to pay to FINOVA
an examination fee in the amount of $600 per
person per day in connection with each audit or
examination of Borrower performed by FINOVA prior
to or after the date hereof, plus all costs and
expenses incurred in connection therewith (the
"Examination Fee"). Without limiting the
generality of the foregoing, Borrower shall pay to
FINOVA an initial Examination Fee in an amount
equal to $600 per person per day, plus all costs
and expenses incurred in connection therewith.
Such initial Examination Fee shall be deemed fully
earned at the time of payment and due and payable
upon the closing of this transaction, and shall be
deducted from any good faith deposit paid by
Borrower to FINOVA prior to the date of this
Agreement. Notwithstanding anything contained
herein to the contrary so long as no Event of
Default has occurred and is continuing, Borrower
shall not be required to pay for more than four
(4) such audits in any calendar year.
================================================================================
NOTIFICATION OF CLOSING (SECTION 2.13):
The Term Loan A amount for purposes of Section
2.13 shall be $3,398,233. The Term Loan B and C
amount for purposes of Section 2.13 shall be
$700,000.
4
<PAGE>
================================================================================
CONDITIONS OF CLOSING (SECTION 4.1):
The obligation of FINOVA to make the initial
advance hereunder or to issue or arrange for the
issuance of the initial Letter of Credit hereunder
is subject to the fulfillment, to the satisfaction
of FINOVA and its counsel, of each of the
following conditions, in addition to the
conditions set forth in Sections 4.1 and 4.2
above:
(a) Minimum Excess Availability (Section 4.1(b)).
Not less than $700,000. Accounts payable
outstanding: 30 days or more from their invoice
date.
(b) No Material Adverse Change (Section 4.1(s)).
Draft financial statements for Seller dated as of
the dates specified on Exhibit 4.1. Further, no
material adverse change has occurred in the
Borrower's business, operations, financial
condition, or assets or in the prospect of
repayment of the Obligations since March 31, 1999.
(c) Equity Investment. FINOVA shall have received
evidence satisfactory to itself that, on or before
the Closing Date, Borrower has received cash
contributions in the aggregate principal amount of
$2,700,000 in exchange for the issuance of
Preferred Stock, on a basis satisfactory to
FINOVA, and that the Seller has accepted common
stock as payment of at least $3,014,000 of the
purchase price under the Acquisition on terms and
conditions satisfactory to FINOVA.
(d) Preferred Stock. The terms of the Preferred
Stock shall be satisfactory to FINOVA in all
respects.
(e) Support Agreements. Joel Nagelmann, Eugene
Iarocci and Steven Teeters shall each have
delivered a Support Agreement in favor of FINOVA,
and in form and substance satisfactory to FINOVA.
(f) Transaction Costs. (Section 4.1(cc)). Not to
exceed $600,000.
(g) Common Stock. 1-800-AutoTow, Inc. shall have
issued to FINOVA shares of its common stock in an
amount equal to two percent (2%) of the issued and
outstanding common stock of Borrower on terms and
conditions satisfactory to FINOVA.
Borrower shall cause the conditions precedent set
forth in Section 4.1 of this Agreement and set
forth above in this Schedule to be satisfied, and
shall provide evidence to FINOVA that all such
conditions precedent have been satisfied, on or
before August 6, 1999.
5
<PAGE>
<TABLE>
<CAPTION>
================================================================================
BORROWER INFORMATION:
<S> <C>
Borrower's State of Incorporation (Section 5.1): See Exhibit 5.1
-----------
Borrower's copyrights, patents trademarks, and licenses (Section 5.5): See Exhibit 5.5
-----------
Fictitious Names/Prior Corporate Names (Section 5.2): See Exhibit 5.2
-----------
Prior Corporate Names: See Exhibit 5.2
Fictitious Names: See Exhibit 5.2
Borrower Locations (Section 5.16) See Exhibit 5.16
------------
Borrower's Federal Tax Identification Number (Section 5.16): See Exhibit 5.16
------------
</TABLE>
Permitted Encumbrances (Section 1.1): See Exhibit 1.1
================================================================================
FINANCIAL COVENANTS (SECTION 6.1.13):
Borrower shall comply with all of the
following covenants. Compliance shall be
determined as of the end of each month or
quarter (as determined by FINOVA in its sole
discretion), except as otherwise
specifically provided below:
Current Ratio. Borrower shall maintain a ratio of Current
Assets to Current Liabilities of not less
than the ratio specified below for each
applicable period specified below:
<TABLE>
<CAPTION>
Applicable Period Ratio
----------------- -----
<S> > <C>
Fiscal Year ending March 31, 2000 .80:1.00
Fiscal Year ending March 31, 2001 .80:1.00
Fiscal Year ending March 31, 2002 .90:1.00
Fiscal Year ending March 31, 2003 1.10:1.00
Fiscal Year ending March 31, 2004 and thereafter 1.30:1.00
</TABLE>
Debt to Net Worth. Borrower shall maintain a ratio of
Indebtedness to Net Worth of not greater
than the ratio specified below for each
applicable period:
6
<PAGE>
<TABLE>
<CAPTION>
Applicable Period Ratio
----------------- -----
<S> <C>
Fiscal Year ending March 31, 2000 1.0:1.00
Fiscal Year ending March 31, 2001 .70:1.00
Fiscal Year ending March 31, 2002 .50:1.00
Fiscal Year ending March 31, 2003 and thereafter .30:1.00
EBITDA. Borrower shall achieve Earnings Before
Interest, Taxes, Depreciation and
Amortization of not less than the amount
specified below with respect to each
applicable period specified below:
Applicable Period Amount
----------------- ------
Fiscal Year ending March 31, 2000 $2,200,000
Fiscal Year ending March 31, 2001 $2,300,000
Fiscal Year ending March 31, 2002 $2,400,000
Fiscal Year ending March 31, 2003 $2,500,000
Fiscal Year ending March 31, 2004 and each fiscal $2,700,000
year ending thereafter
Net Worth. Borrower shall maintain Net Worth of not
less than the amount specified below for
each applicable period specified below:
Applicable Period Net Worth
----------------- ---------
Fiscal Year ending March 31, 2000 $6,200,000
Fiscal Year ending March 31, 2001 $7,000,000
Fiscal Year ending March 31, 2002 $7,700,000
Fiscal Year ending March 31, 2003 $8,300,000
Fiscal Year ending March 31, 2004 and each fiscal $9,000,000
year thereafter
</TABLE>
Senior Debt Service Coverage Ratio. As of the last day of each calendar
quarter ended March 31, June 30,
September 30 or December 31,
Borrower's Operating Cash
Flow/Actual for the consecutive
12-month period ending as of such
last day must be at least 1.3 times
the amount necessary to meet
Borrower's Senior Contractual Debt
7
<PAGE>
Service for such 12-month period;
provided however, that, the initial
such calculation of such ratio
shall be for the period from the
Closing Date through December 31,
1999; and, provided further, that
all such determinations shall be
made on a consolidated basis.
Total Debt Service Coverage Ratio. As of the last day of each calendar
quarter ended March 31, June 30,
September 30 or December 31,
Borrower's Operating Cash
Flow/Actual for the consecutive
12-month period ending as of such
last day must be at least 1.10
times the amount necessary to meet
Borrower's Total Contractual Debt
Service for such 12-month period;
provided however, that, the initial
such calculation of such ratio
shall be for the period from the
Closing Date through December 31,
1999; and, provided further, that
all such determinations shall be
made on a consolidated basis.
================================================================================
NEGATIVE COVENANTS (SECTION 6.2):
Employee Advances: Borrower shall not make
any loans or advances to Employees
except in the ordinary course of
business and consistent with past
practices of Borrower in an
aggregate amount not exceeding at
any time $25,000.
Existing Guaranties: [None]
Capital Expenditures: Borrower shall not
make or incur any Capital
Expenditure if, after giving effect
thereto, the aggregate amount of
all Capital Expenditures by
Borrower in any fiscal year
(beginning with the 1999 fiscal
year) would exceed $650,000.
Compensation: Borrower shall not pay total
compensation, including salaries,
withdrawals, fees, bonuses,
commissions, drawing accounts and
other payments, whether directly or
indirectly, in money or otherwise,
during any fiscal year to all of
Borrower's executives, officers and
directors (or any relative thereof)
in an amount in excess of $650,000
during the fiscal years of Borrower
ending on December 31, 1999 and
December 31, 2000 and in excess of
110% of such total compensation
paid in the preceding fiscal year
in each fiscal year thereafter;
provided, however, that Borrower
may pay reasonable compensation to
one additional officer hired after
the Closing Date without reference
to such restrictions.
Indebtedness Borrower shall not create, incur,
assume or permit to exist any
Indebtedness (including
Indebtedness in connection with
Capital Leases) in excess of
$100,000 other than (i) the
Obligations, (ii) trade payables
and other contractual obligations
to suppliers and customers incurred
in the ordinary course of business
and (iii) the Subordinated Debt
(other than Indebtedness paid on
the date of this Agreement from
proceeds of initial advances
hereunder).
8
<PAGE>
================================================================================
REPORTING REQUIREMENTS (SECTION 9.1):
1. Borrower shall provide FINOVA with monthly
agings aged by invoice date and reconciliations
of Receivables within ten (10) days after
the end of each month.
2. Borrower shall provide FINOVA with monthly
accounts payable agings aged by invoice date,
outstanding or held check registers and inventory
certificates within ten (10) days after the end
of each month.
3. Borrower shall provide FINOVA with monthly
unaudited consolidated and consolidating
financial statements within thirty (30) days
after the end of each month.
4. Borrower shall provide FINOVA with audited
consolidated and consolidating financial
statements within ninety (90) days after the end
of each fiscal year, as more specifically
described in Section 9.1(b) hereof, and with an
opinion issued by a Certified Public Accountant
which is acceptable to FINOVA.
5. Borrower shall provide FINOVA with annual
operating budgets (including income statements,
balance sheets and cash flow statements, by
month) for the upcoming fiscal year of Borrower
within thirty (30) days prior to the end of each
fiscal year of Borrower.
6. Borrower's balance sheets for purposes of the
definition of Prepared Financials shall be as of
March 31, 1999.
================================================================================
TERM (SECTION 9.2):
The initial term of this Agreement shall be five
year(s) from the date hereof (the "Initial Term")
and shall be automatically renewed for successive
periods of one (1) year each (each, a "Renewal
Term"), unless earlier terminated as provided in
Section 7 or 9.2 above or elsewhere in this
Agreement.
================================================================================
TERMINATION FEE (SECTION 9.2):
(A) Revolving Credit Loans Facility. The
Termination Fee applicable to the Revolving Credit
Loans facility provided for in Section 9.2(d)
9
<PAGE>
shall be an amount equal to the following
percentage of the Revolving Credit Limit:
(i) three percent (3%), if such early termination
occurs on or prior to the first anniversary of the
date of this Agreement;
(ii) two percent (2%), if such early termination
occurs after the first anniversary of the date of
this Agreement but prior to the second anniversary
of he date of this Agreement; and
(iii) one percent (1%) if such early termination
occurs after the second anniversary of the date of
this Agreement.
(B) Term Loans. The Termination Fee applicable to
the Term Loans provided for in Section 9.2(d)
shall be equal to :
(i) three percent (3%) of the amount prepaid if
such prepayment is made during the Loan Year
beginning on the Closing Date;
(ii) two percent (2%) of the amount prepaid if
such prepayment is made during the Loan Year
beginning on the first anniversary of the Closing
Date; and
(iii) one percent (1%) of the amount prepaid if
such prepayment is made during the Loan Year
beginning on the second anniversary of the Closing
Date;
================================================================================
DISBURSEMENT (SECTION 9.11):
Unless and until Borrower otherwise directs FINOVA
in writing, all loans shall be wired to Borrower's
following operating account: See Exhibit 9.11
================================================================================
ADDITIONAL PROVISIONS:
1. Accounting System. Borrower will implement a
comprehensive and uniform accounting system at all
of its locations on or prior to December 31, 1999.
2. Subordinated Debt. Borrower will not make any
payments on any Subordinated Debt except as
permitted under the subordination agreement
applicable thereto.
3. Increase in Term Loan A. During the period
commencing on the date hereof and ending thirty
(30) days after the date hereof, at Borrower's
request made in connection with its consummation
of the acquisition of the assets of BJ's Transport
(the "BJ Transport Acquisition"), FINOVA shall
make an additional advance to Borrower in the
10
<PAGE>
amount of up to Three Hundred Eighty Five Thousand
Dollars ($385,000) which shall be reflected as an
increase in Term Loan A in like amount (the "Term
Loan A Addition"); subject to the conditions
precedent that (a) FINOVA shall have reviewed and
approved all of the documents pertaining to the BJ
Transport Acquisition and the assets being
acquired thereunder (including, without
limitation, that FINOVA shall have a first
priority security interest therein) and any
liabilities being assumed thereunder, (b) each of
the conditions set forth in Section 4.2 shall have
been satisfied and (c) Borrower shall have
executed and delivered to FINOVA such amendments
to or amendments and restatements of the existing
term note evidency the Term Loan A as FINOVA shall
request (which shall provide that the Term Loan A
Addition shall amortize on the same basis as the
Term Loan A), such documents as FINOVA shall
request to evidence and perfect FINOVA's first
priority security interest in the assets acquired
in the BJ Transport Acquisition and such other
documents, instruments and agreements as FINOVA
shall request to evidence or secure the Term Loan
A Addition and (d) Borrower shall have paid to
Lender a term loan increase fee in an amount equal
to one percent (1%) of such increase. In the event
that the Term Loan A Addition is made to Borrower,
the Total Facility shall be increased by the
amount thereof.
11
<PAGE>
================================================================================
1-800-AUTOTOW, INC.
Fed. Tax I.D. # 65-0783268
By:/s/ Eugene A. Iarocci
------------------------
Name: Eugene A. Iarocci
Title: Senior Vice President and
Chief Executive
Officer
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
12
<PAGE>
D&D TOWING & RECOVERY, INC.
Fed. Tax I.D. # 59-2890019
By: /s/ Eugene A. Iarocci
-------------------------
Name: Eugene A. Iarocci
Title: President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
MCGANN & CHESTER, INC.
Fed. Tax I.D. # 25-1583950
By: /s/ Eugene A. Iarocci
-------------------------
Name: Eugene A. Iarocci
Title: President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
1-800-AUTOTOW GULF COAST
EAST, INC.
Fed. Tax I.D. # 65-0935926
By: /s/ Eugene A. Iarocci
-------------------------
Name: Eugene A. Iarocci
Title: President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
13
<PAGE>
1-800-AUTOTOW GULF COAST S.W., INC.
Fed. Tax I.D. # 65-0935925
By:/s/ Eugene A. Iarocci
------------------------
Name: Eugene A. Iarocci
Title: President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
1-800-AUTOTOW FLORIDA, INC.
Fed. Tax I.D. # 65-0935924
By: /s/ Eugene A. Iarocci
-------------------------
Name: Eugene A. Iarocci
Title: President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
FINOVA:
FINOVA CAPITAL CORPORATION
By:/s/ John Lewis
-----------------
Name:John Lewis
---------------
Title:Vice President
Signed, sealed and delivered
in the presence of:
/s/ Diane White
---------------
Notary Public
14
<PAGE>
EXHIBIT 1A
----------
Acquisitions
------------
1. Acquisition of the assets of A-Ace Towing, Inc., Muhammad A.
Choudary and Kurshid A. Choudary related to their towing business
located at 1271 Nacogoches Drive, San Antonio, Texas by 1-800-AutoTow
Gulf Coast S.W. Inc.
2. Merger of Arrow Towing and Recovery, Inc. with and into
1-800-AutoTow Gulf Coast East, Inc., with 1-800-AutoTow Gulf Coast
East, Inc. as the surviving corporation.
3. Acquisition of the assets of Dennis W. Meyer, Inc. d/b/a Denny's
Towing Service related to its towing business located at 2600 24th
Street, St. Petersburg, Florida by 1-800-AutoTow Gulf Coast East, Inc.
4. Acquisition of the assets of Dixie Grand Towing, Robert's Towing,
Sandra K. Stewart and Jim Stewart relating to their towing business
located at 2509 9th Street West, Bradenton, Florida 34205 by
1-800-AutoTow Gulf Coast East, Inc.
5. Merger of L&W Collision, Towing and Recovery, Inc. into
1-800-AutoTow Gulf Coast East, Inc. with 1-800-AutoTow Gulf Coast East,
Inc. as the surviving corporation.
6. (a) Acquisition of the assets of Lyons Towing, Inc. related to
its vehicle towing business located at 1107 Old Dixie Highway, Lake
Park, Florida by 1-800-AutoTow Gulf Coast East, Inc.
(b) Acquisition of the assets of Lyons Autobody, Inc. related
to its vehicle towing business located at 1107 Old Dixie Highway, Lake
Park, Florida by 1-800-AutoTow Gulf Coast East, Inc.
7. Acquisition of the assets of Town N' Country Towing, Inc. related to
its vehicle towing business located at 9447 W. Hillsborough Avenue,
Tampa, Florida 33615 by 1-800-AutoTow Gulf Coast East, Inc.
<PAGE>
EXHIBIT 1B
----------
Acquisition Documents
---------------------
1. Asset Purchase Agreement between A-Ace Towing, Muhammad A. Choudary
and Kurshid A. Choudary and 1-800-AutoTow, Inc. and 1-800-AutoTow Gulf
Coast S.W., Inc. and all related assignments, bills of sale,
certificates, and other documents, instruments and agreements.
2. Merger Agreement and Plan of Reorganization dated as of July 23,
1998 among 1-800-AutoTow, Inc., 1-800-AutoTow Gulf Coast East, Inc.,
and Arrow Towing and Recovery, Inc. and the shareholders listed therein
and all related documents, instruments and agreements.
3. Asset Purchase Agreement between Dennis W. Meyer, Inc. d/b/a/
Denny's Towing Service and 1-800-AutoTow, Inc. and 1-800-AutoTow Gulf
Coast East, Inc and all related assignments, bills of sale,
certificates and documents, instruments and agreements.
4. Asset Purchase Agreement between Dixie Grande Towing, Robert's
Towing, Sandra K. Stewart and Jim Stewart and 1-800-AutoTow, Inc. and
1-800-AutoTow Gulf Coast East, Inc. and all related assignments, bills
of sale, certificates and documents, instruments and agreements.
5. Merger Agreement and Plan of Reorganization among 1-800-AutoTow,
Inc., 1-800-AutoTow Gulf Coast East, Inc., L&W Collision, Towing and
Recovery, Inc. and the stock holders listed therein and all related
documents, instruments and agreements.
6. (a) Asset Purchase Agreement among Lyons Towing, Inc.,
1-800-AutoTow, Inc. and 1-800-AutoTow Florida, Inc. and all related
assignments, bills of sale, certificates and other documents,
instruments and agreements.
(b) Asset Purchase Agreement among Lyons Auto Body, Inc.,
1-800-AutoTow, Inc. and 1-800-AutoTow Florida, Inc. and all related
assignments, bills of sale, certificates and other documents,
instruments and agreements.
7. Asset Purchase Agreement among Town `N Country Towing, Inc., and
1-800-AutoTow, Inc. and 1-800-AutoTow Gulf Coast East, Inc. and all
related assignments, bills of sale, certificates and other documents,
instruments and agreements.
<PAGE>
EXHIBIT 1C
----------
Seller Subordinated Debt
------------------------
1. Promissory Note in the amount of $200,000 made by
1-800-AutoTow, Inc. in favor of A-Ace Towing, Inc., Muhammad
A. Choudary and Kurshid A. Choudary.
2. Promissory Note in the amount of $150,000 made by
1-800-AutoTow, Inc. in favor of Dennis W. Meyer, Inc.
3. Promissory Note in the amount of $625,000 made by
1-800-AutoTow, Inc. in favor of Lyons Towing, Inc.
4. Promissory Note in the amount of $175,000 made by
1-800-AutoTow, Inc. in favor of Lyon Autobody, Inc.
<PAGE>
EXHIBIT 4.1
-----------
Closing Checklist
-----------------
[See Attached]
<PAGE>
EXHIBIT 1D
----------
Permitted Senior Indebtedness
-----------------------------
<PAGE>
EXHIBIT 5.1
-----------
States of Incorporation
-----------------------
1-800-AutoTow, Inc. Delaware
D&D Towing & Recovery, Inc. Florida
McGann & Chester, Inc. Pennsylvania
1-800-AutoTow Gulf Coast East, Inc. Florida
1-800-AutoTow Gulf Coast S.W., Inc. Texas
1-800-AutoTow Florida, Inc. Florida
<PAGE>
EXHIBIT 5.2
-----------
Prior Corporate Names; Fictitious Names
---------------------------------------
Aroars Towing & Recovery (name used by D&D Towing & Recovery, Inc.)
Pittsburgh Auto & Truck Center (name used by McGann & Chester, Inc.)
<PAGE>
EXHIBIT 5.5
-----------
Patents, Trademarks, etc.
-------------------------
Application Application No.
- ----------- ---------------
1-800-AUTOTOW 75/354824
<PAGE>
EXHIBIT 5.16
------------
Borrower Locations
------------------
<TABLE>
<CAPTION>
Company/Fed Tax I.D. # Address County
---------------------- ------- ------
<S> <C> <C>
1-800-AutoTow, Inc. 1301 N. Congress Avenue Palm Beach
Fed Tax I.D. # 65-0783268 Suite 330
Boynton Beach, FL 33426
D&D Towing & Recovery, Inc. 5108 Ingraham Street Hillsborough
Fed Tax I.D. # 59-2890019 Tampa, FL 33616
McGann & Chester, Inc. 700 Hargrove Street Alleghney
Fed Tax I.D. # 25-1583950 Pittsburgh, PA 15226
1-800-AutoTow Gulf Coast East, Inc. 1301 N. Congress Avenue Palm Beach
Fed Tax I.D. #69-0935926 Suite 330
Boynton Beach, FL 33426
6503 E. Broadway Hillsborough
Tampa, FL
2600 24th Street Pinellas
St. Petersburg, FL
2509 9th Street Manatee
Bradenton, FL
114 Guava Street
Lady Lake, FL
9447 W. Hillsborough Ave.
Tampa, FL
1-800-AutoTow Gulf Coast S.W., Inc. 1301 N. Congress Avenue Palm Beach
Fed Tax I.D. # 65-0935925 Suite 330
Boynton Beach, FL 33426
1271 Nachogdoches Drive Bexar
San Antonio, Texas
1-800-AutoTow Gulf Coast, Florida, Inc. 1301 N. Congress Avenue Palm Beach
Fed Tax I.D. # 65-0935924 Suite 330
Boynton Beach, FL 33426
1107 Old Dixie Highway Palm Beach
Lake Park, FL
2178 Stafford Avenue Palm Beach
West Palm Beach, FL
</TABLE>
EXHIBIT 6.53
March 11, 1999
Mr. Joel B. Nagelmann
President and CEO
1-800-AutoTow, Inc.
1301 N. Congress Ave.
Suite 330
Boynton Beach, FL 33426
Dear Joel:
This letter confirms our understanding and agreement ("Agreement") of
the basis upon which GMA Partners, Inc. ("GMA") is being engaged to represent
and provide financial advisory services to 1-800-AutoTow, Inc. ("AutoTow" or the
"Company"). GMA is being engaged as the Company's exclusive financial advisor to
assist in arranging acquisition financing ("Financing") for the Company. This
financing effort shall include the possible sale of any of the Company's
securities or any other related transaction involving the issuance of any debt
or equity securities. For purposes of this Agreement, any of the foregoing shall
constitute a "Transaction."
This Agreement shall become effective upon the execution hereof by the
Company. The term of this Agreement shall be six (6) months, and thereafter
until terminated or, if a transaction is pending at termination, thereafter
until its conclusion or abandonment (the "Term"). This Agreement may be
terminated by either the Company or GMA after the six (6) months for any reason
by providing the other party 10 days prior written notice of its election to
terminate. The Company shall be liable for fees and expense reimbursements as
provided for in this Agreement and the Company's indemnification obligations set
forth herein shall survive such termination.
If the Company closes a Transaction during (i) the Term of this
Agreement or (ii) during the twelve (12) month period following the termination
of this Agreement with any debt or equity investor with which any "Contact" as
hereinafter defined has occurred during the Term of this Agreement with the
Company or GMA, including any Contacts which were introduced by SunTrust
Equitable Securities; then GMA shall be due and paid the Success Fee as
hereinafter defined upon the closing of such Transaction. For purposes of this
Agreement, "Contacts" are defined as meetings (in person or telephonic),
telecopier communication, written communication, or transmission of
communication or information by computer medium, with or to prospective debt or
equity investors.
1
<PAGE>
I. Performance of Services.
In performing its services GMA will:
(i) Assist the Company in raising new debt and/or equity capital to
complete the Company's currently anticipated acquisitions;
(ii) Discuss with the Company various alternative strategies, which may
be implemented in order to raise capital from new investors or lenders in a
manner that will create the greatest value for the Company's shareholders.
Working with the Company's management, GMA will assist in evaluating these
strategies and provide advice as to the manner in which to structure and
implement a Transaction designed to achieve the Company's stated objectives;
(iii) Assist management in preparing confidential descriptive memoranda
of the Company and its operations and finances, including financial information
for the Company's current acquisition candidates, for use in discussions with
potential investors or lenders;
(iv) Prepare a list of potential lenders, investors or financing
partners for the purpose of identifying, contacting and conducting discussions
with target lenders/investors in order to determine the level of interest in the
proposed Transaction. GMA will then qualify and screen potential
lenders/investors as well as arrange and attend exploratory meetings; and
(v) Render advice to the Company as to the values and financial
implications of various negotiating strategies and other considerations, which
could impact the likelihood and/or value of a Transaction. GMA will advise the
Company regarding specific offers by potential investors/lenders and, to the
extent deemed appropriate, assist and/or direct negotiations intended to lead to
a closing of any proposed Transaction.
The Company agrees to provide to GMA, among other things, all financial
data, corporate records, and information requested or reasonably required by GMA
to provide its services outlined in this Agreement. GMA shall have the right to
rely upon the accuracy and completeness of all information provided regarding
the Company, without the need for GMA to independently verify such accuracy or
completeness. All information included in any descriptive memorandum shall be
provided by and be the responsibility of the Company.
In the event that the Company requires additional investment banking
assistance, GMA and the Company will agree upon mutually acceptable compensation
to be paid to GMA, taking into account, among other things, the results
obtained, GMA's role in the additional investment banking assistance, and the
custom and practice among investment bankers acting in similar transactions.
2
<PAGE>
II. Compensation of Services
In consideration of services performed, the Company agrees to pay or
compensate GMA as follows:
a. A Retainer Fee ("Retainer Fee") equal to 50,000 shares of
restricted common stock of AutoTow will be issued to GMA upon
execution of this Agreement.
b. Upon invoice, reimbursement is due for all reasonable expenses
incurred in connection with the performance of GMA's services
pursuant to this Agreement. Such expenses shall primarily
consist of, but are not limited to, travel, delivery and data
services as well as other related communications expenses.
Once expenses reach an aggregate total of $7,500, GMA will
seek the Company's approval before incurring any additional
expenses.
Upon completion of a Transaction, GMA shall receive:
c. A Success Fee ("Success Fee"), payable in cash at closing,
equal to 4% of the total amount of Financing either funded or
committed to the Company, excluding any funded amount provided
by the shareholders of the Company or Banyan Capital through a
private placement of preferred stock, or other equity type
securities, currently expected to be between $750,000 and $2
million, or an affiliated entity of GMA.
d. In addition, the Company shall issue to GMA common stock
purchase warrants ("GMA Warrants") exercisable for six (6)
years from the closing date of any Transaction, to purchase
2.0% of the fully diluted common stock, post Transaction, of
the Company for a purchase price of $0.01 per share. The
Warrants will have unlimited piggyback registration rights as
well as standard anti-dilution provisions.
III. Indemnification
In the event that GMA becomes involved in any capacity in any
action, proceeding or investigation in connection with the performance by GMA of
the services contemplated by this letter, which involvement is not a result of
GMA's gross negligence or willful malfeasance in the performance of such
services, the Company will, upon the request of GMA from time to time, reimburse
GMA for its reasonable legal and other expenses (including the reasonable cost
of any investigation and preparation) incurred in connection therewith. The
Company will also indemnify GMA against any losses, claims, damages or
liabilities to which it may become subject in connection with the performance by
GMA of the services contemplated by this letter, except to the extent that any
such loss, claim, damage, liability or expense results from GMA's gross
negligence or willful malfeasance in performing the services which are the
subject of this letter. If for any reason the foregoing indemnification is
unavailable to GMA or insufficient to hold GMA harmless, then the Company shall
contribute to the amount paid or payable by GMA as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the Company on the one hand and GMA on the other
hand, but also the relative fault of the Company and GMA, as well as any
3
<PAGE>
relative equitable considerations, except that the Company shall not in any
event be responsible for any such loss, claim, damage or liability resulting
from GMA's gross negligence or willful malfeasance in performing the services
which are the subject of this Agreement; provided, however, that in no event
shall the amount contributed by GMA pursuant to this paragraph exceed the amount
of fees actually received by GMA under this Agreement. The Company's
reimbursement, indemnity and contribution obligations under this paragraph shall
be in addition to any liability which it may otherwise have, shall extend upon
the same terms and conditions to GMA's employees and controlling persons (if
any), and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of GMA and any such person. The
Company agrees that neither GMA nor any of its directors, agents, or affiliates
shall have any liability to the Company for any losses, damages, liabilities or
expenses arising out of the performance of services by GMA under this Agreement,
unless it is finally determined judicially that such losses, damages,
liabilities or expenses resulted directly from the gross negligence or willful
malfeasance of GMA.
IV. Exclusivity
In order to coordinate the efforts of GMA and the Company, and to
maximize the possibility of completing satisfactory Transactions during the Term
of this Agreement, GMA shall have the authority to initiate discussions with
potential investors/lenders. The Company and any of its shareholders or officers
shall conduct any discussions with regard to a proposed Transaction in
conjunction with GMA. In the event the Company, its directors, officers,
employees or shareholders receive any inquiries concerning the availability of
the Company's securities or assets for purchase, then the Company shall promptly
notify GMA of such inquiry or communication.
V. Disclosure
Except as required by law, any financial or other advice, descriptive
memoranda or other documentation rendered by GMA or prepared by or on behalf of
GMA pursuant to this Agreement may not be disclosed publicly in any manner
without the prior consent of GMA. All non-public information provided by the
Company to GMA will be considered confidential information and shall be
maintained as such by GMA until the same becomes generally known to third
parties or the public without release thereof by GMA.
VI. Public Notice
Following the completion of a Transaction, the Company and GMA both
agree that either the Company or GMA has the right to place advertisements in
financial and other newspapers and journals as the Company or GMA deems
appropriate, describing the Transaction and the services provided to AutoTow,
provided that the Company on one hand and GMA on the other shall submit copies
of such advertisements to the other party so that the form, content and timing
of such advertisements may be approved. Such approval shall not be unreasonably
withheld or delayed.
4
<PAGE>
VII. Entire Agreement and Governing Law
This Agreement sets forth the entire understanding of the parties
relating to the subject matter hereof and supersedes and cancels any prior
communications, understandings and agreements. This Agreement cannot be modified
or changed, nor can any of its provisions be waived, except by written agreement
executed by both parties hereto.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Georgia. The parties hereto agree to submit to
arbitration any action or dispute arising under this Agreement or any action to
enforce the terms hereof. Such arbitration shall be determined pursuant the
Commercial Arbitration Rules of the American Arbitration Association.
If any term, provision, covenant or restriction contained in this
Agreement, including Article III, is held by a court of competent jurisdiction
or other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
VIII. Acceptance
Please confirm your acceptance of the foregoing terms of the Agreement
by signing on behalf of the Company, then returning an executed original of the
Agreement to GMA Partners, Inc. whereupon it shall become a binding agreement
between the Company and GMA.
The terms of this Agreement will expire on March 16, 1999, unless accepted by
you prior to such date.
Very truly yours,
GMA PARTNERS, INC.
/s/ Jaw W. Clark
----------------
Jay W. Clark
Managing Director
Accepted and agreed to as of March 11, 1999:
1-800-AUTOTOW, INC.
/s/ Joel B. Nagelmann
- ---------------------
Joel B. Nagelmann
President
5
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 49,699
<SECURITIES> 0
<RECEIVABLES> 149,718
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 287,916
<PP&E> 1,149,485
<DEPRECIATION> 211,335
<TOTAL-ASSETS> 2,348,435
<CURRENT-LIABILITIES> 1,149,291
<BONDS> 0
0
9
<COMMON> 8,429
<OTHER-SE> 876,350
<TOTAL-LIABILITY-AND-EQUITY> 2,348,435
<SALES> 1,487,296
<TOTAL-REVENUES> 1,487,296
<CGS> 703,034
<TOTAL-COSTS> 703,034
<OTHER-EXPENSES> 2,105,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (60,748)
<INCOME-PRETAX> (1,548,486)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,548,486)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,548,486)
<EPS-BASIC> (0.21)
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</TABLE>
