SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 6, 1995
AUTOINFO, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-14786 13-2867481
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1600 ROUTE 208, FAIR LAWN, NEW JERSEY 07410
(Address of principal executive office) (Zip Code)
(201) 703-0500
Registrant's telephone number, including area code:
N/A
(Former name or former address, if changed since last report)
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Item 2: Acquisition or Disposition of Assets
On December 6, 1995, AutoInfo, Inc. (the "Registrant") acquired, through a
wholly-owned subsidiary, AutoInfo Finance of Virginia, Inc., substantially all
of the assets of Falk Finance Company, Inc., a consumer finance company
primarily engaged in the business of purchasing retail installment sales
contracts which are securred by late model automobiles. The aggregate
consideration paid for the assets acquired included a payment of $5,125,000 plus
the assumption of approximately $33 million of debt, including $22 million of
senior debt.
Item 7: Financial Statements, Pro Forma Financial
Information and Exhibits
Financial Statement of Business Acquired:
The Registrant is in the process of completing the financial
statements and pro forma financial data required by the provisions of
Item 7 of Form 8-K. Such required financial statements and pro forma
financial information will be filed on a Form 8-K/A not later than sixty
(60) days after this report on Form 8-K was due.
Exhibits:
A Form of Asset Purchase Agreement among AutoInfo Finance of
Virginia, Inc. and AutoInfo, Inc., on the one hand, and
Falk Finance Company, et.al., on the other hand, dated
December 6, 1995.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AUTOINFO, INC.
Date: December 21, 1995 By: /s/ WILLIAM WUNDERLICH
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William Wunderlich, Chief Financial Officer
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AGREEMENT
AGREEMENT dated as of December 6, 1995 by and between AUTOINFO FINANCE
OF VIRGINIA, INC., a Virginia corporation ("Buyer"), and AUTOINFO, INC. a
Delaware corporation ("Auto"), on one hand, and FALK FINANCE COMPANY, INC., a
Virginia corporation ("FFC"), FALK HOLDING CORP., a Virginia corporation
("FHC"), CHARLES E. FALK, SR. ("Falk"), CHARLES E. FALK, JR. ("Eddie") and
CHARLES A. MILLS III ("Mills"), on the other hand.
W I T N E S S E T H:
WHEREAS, FFC is a consumer finance company primarily engaged in the
business of purchasing retail installment sales contracts which are secured by
late model automobiles and which provide financing for individuals with
"sub-prime" credit profiles (the "Business"); and
WHEREAS, FHC is the sole shareholder of FFC; and
WHEREAS, Mills is a former shareholder of FFC;
WHEREAS, Falk is a shareholder of FHC; and
WHEREAS, Eddie is an officer of FHC and CFAW (as herein defined);
WHEREAS, Buyer wishes to purchase and FFC wishes to sell to Buyer
substantially all of the assets (both tangible and intangible) of FFC,
including, without limitation, those assets used in connection with the
Business.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto hereby agree as follows:
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ARTICLE I
PURCHASE AND SALE OF ASSETS
1.01 Purchase of Assets. On the terms and subject to the conditions set
forth herein, at the "Closing" (as defined in Section 2.01) Buyer shall purchase
from FFC, and FFC shall sell, assign, transfer, convey and deliver to Buyer,
FFC's right, title and interest in and to all of the assets and properties owned
or used by FFC of every kind and description including, without limitation, the
assets and properties used in the Business described in Section 1.02 hereof,
except for the Excluded Assets (as defined below); all of such assets and
properties being hereinafter collectively referred to as the "Purchased Assets."
1.02 Purchased Assets. Except as expressly provided in Section 1.03
hereof, the Purchased Assets shall include, without limitation, all of FFC's
right, title and interest in and to all of the following assets whether real,
personal, mixed, tangible or intangible:
(a) all cash and cash equivalents;
(b) all notes, accounts and other receivables (including,
without limitation all finance receivables) all of which existing as of
November 30, 1995 are listed on Schedule 1.02(b) hereof;
(c) all fixed assets used in the Business (including, without
limitation, all computer equipment);
(d) all vehicles held for resale;
(e) 1000 shares of the capital stock (the "Insurance Shares")
of FFC Reinsurance Company, Ltd., a corporation existing under the laws
of the Turks & Caicos Islands ("FFC Insurance");
(f) all trademarks, trade names, computer software and other
proprietary rights used in the Business, including, without limitation,
the rights to the tradename "Point Finance";
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(g) all rights and privileges under and pursuant to all
contracts relating to the Business (including, without limitation, all
insurance on the life of each of Larry Cline and Robert Upton);
(h) all claims against third parties relating to the Business
or the Purchased Assets;
(i) all customer lists, customer records and other records and
documents relating to the Business;
(j) all recourse contracts between FFC and CFAW (as defined
below);
(k) all intangible assets relating to the Business, including,
without limitation, the goodwill and going concern values thereof;
(l) 15,900 shares of Capital Stock of Auto Banc, Inc.;
(m) all telephone numbers used by the Business, all of which
are listed on Schedule 1.02(m); and
(n) the right to purchase shares of the capital stock of
Eastern Virginia Small Business Investment Corporation (the "EVSBIC
Agreement").
1.03 Excluded Assets. The Purchased Assets shall not include:
(a) the minute books and the seal of FFC;
(b) the tax returns of FFC;
(c) any deficiencies or deficiency judgments which arose on or
before August 31, 1995 with respect to finance contracts purchased by
FFC from Charlie Falk's Auto Wholesale Incorporated ("CFAW"), all of
which are listed on Schedule 1.03 hereof;
(d) those items of fixed assets listed on Schedule 1.03
hereof;
(e) shares of the capital stock of (1) FFC Insurance Services,
Inc., a Virginia corporation ("Services") and (2) FFC Auto Sales Inc.,
a Virginia corporation ("FFC Auto");
(f) shares of the capital stock of Point Finance Co. Inc., a
Delaware corporation ("Point"); and
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(g) all amounts included as assets on the books of FFC which
are derived solely from the general ledger accounts designated as
"Floor Plan" and "Car Contract Advance."
The foregoing are collectively referred to herein as the "Excluded
Assets."
1.04 FFC's Accounting Records. At all times after the Closing Date, FFC
and Falk shall retain and make available to Buyer the original accounting and
tax records and tax returns pertaining to FFC, and, to the extent necessary to
enable Buyer to carry on the Business, shall permit Buyer to make copies
thereof.
1.05 Instruments of Transfer. FFC shall deliver to Buyer at Closing (a)
a certified check in the amount of all cash included in the Purchased Assets,
(b) the Insurance Shares and stock powers with respect thereto executed in
blank, all as may be necessary to vest in Buyer good and valid title to the
Insurance Shares and (c) such other bills of sale, stock powers, title documents
and assignments and consents (where required) in form and substance satisfactory
to Buyer and its counsel, including a power of attorney in the form of Schedule
1.05 annexed hereto sufficient to permit Buyer to transfer title to the vehicles
included in the Purchased Assets, sufficient to vest in Buyer good and valid
title to all of FFC's right, title and interest in and to the Purchased Assets
free and clear of all mortgages, claims, liens, charges or encumbrances of any
kind or nature whatsoever except for Permitted Encumbrances (as defined below).
1.06 Endorsement of Checks. FFC hereby agrees that any check received
by Buyer on or after the Closing Date as payment with respect to any receivable
included in the Purchased Assets, which is payable to FFC, may be endorsed by
Buyer for its own account.
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ARTICLE II
CLOSING
2.01 Closing. The Closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Morse, Zelnick, Rose & Lander,
LLP, 450 Park Avenue, New York, New York 10022, on December 6, 1995, or at such
other place or time as shall be mutually agreed on by the parties hereto (such
time on such date or such other agreed upon time and date is called the "Closing
Date").
ARTICLE III
CONSIDERATION
3.01 Purchase Price. The purchase price to be paid by Buyer for and in
consideration of the sale, assignment, transfer, conveyance and delivery of the
Purchased Assets and for the Covenants Not to Compete set forth in Section 7.01
shall be equal to $,3,625,000 (the "Transferred Consideration") plus the amount
of the liabilities assumed by Buyer, as determined in accordance with Section
4.01 hereof (the "Purchase Price").
3.02 Allocation of Purchase Price. The parties agree that the Purchase
Price shall be allocated to the Covenants Not to Compete and to the various
assets and properties included in Purchased Assets in the manner set forth on
Schedule 3.02 hereof.
3.03 Payment of Purchase Price. In consideration of, and as full
payment for the sale, assignment, transfer, conveyance and delivery of the
Purchased Assets and for the Covenants Not to Compete, at the Closing, Buyer
shall (a) pay the Transferred Consideration to FFC by delivery to FFC of (i) a
certified or bank check in the amount of $2,025,000 and (ii) a note in the
principal amount of $1,600,000 and otherwise having terms identical to, and pari
passu with, the Junior Subordinated Notes (as defined below) and (b) assume and
agree to pay, perform and discharge the Assumed Obligations (as defined below).
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ARTICLE IV
ASSUMED OBLIGATIONS
4.01 Assumption. At the Closing, Buyer shall assume and agree to pay,
perform and discharge the obligations of FFC (the "Assumed Obligations") (a) due
to Finova Capital Corporation ("Finova") in the approximate principal amount of
$22 million (the "Finova Debt"), (b) with respect to the New 1994 Notes (as
defined below) up to a maximum principal amount of $4,900,000, (c) with respect
to the Other Shareholders Cash Payment (as defined below) up to a maximum amount
of $1,600,000, (d) with respect to the Upton Cash Payment (as defined below) up
to a maximum of $120,000, (e) with respect to the Junior Subordinated Notes up
to a maximum principal amount of $3,531,000, (f) with respect to all accounts
payable and accrued expenses incurred by FFC in the ordinary course of business
and not more than thirty (30) days past due as of the Closing Date, (g) to pay
the reasonable legal and accounting fees incurred by FFC in connection with the
transactions contemplated by this Agreement, (h) to pay the reasonable legal
fees incurred by the holders of Junior Subordinated Notes and the New 1994 Notes
(as defined below) in connection with the transactions contemplated by this
Agreement (which legal fees FFC has agreed to pay) up to a maximum of $25,000
less any and all prior payments made by FFC on account thereof, but excluding
payments with respect to fees and expenses accrued prior to September 1, 1995,
(i) due to the Bank of the Commonwealth in the principal amount of $250,000 plus
all accrued and unpaid interest thereon (the "B of C Debt"), (j) under the
EVSBIC Agreement and (k) arising from and after the Closing Date pursuant to
those contracts of FFC being transferred to Buyer and specifically identified as
an "Assumed Contract" on Schedule 5.21 hereof (the "Assumed Contracts"). Any
other provision of this Agreement to the contrary notwithstanding (including,
without limitation, the previous sentence of this Section 4.01), Buyer shall not
and does not assume any liability or obligation of FFC whether or not disclosed
in this Agreement or on any Schedule hereto (a) with respect to Taxes (as
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defined below) or Employee Plans (as defined below) and (b) other than as is set
forth in this Section 4.01.
4.02 Performance of Other Obligations. FFC shall perform, or cause to
be performed, all of the obligations of FFC and shall satisfy all liabilities of
FFC, of any kind or nature whatsoever not expressly assumed by Buyer pursuant to
Section 4.01 hereof. FFC shall execute such additional documents as may be
necessary to convey good and marketable title to Buyer and take any and all
other actions as may be reasonably necessary to prevent any person, firm or
governmental authority from having any interest in the Purchased Assets, or
recourse against Buyer or the Purchased Assets based upon liabilities or
obligations of FFC not assumed by Buyer.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FFC, FHC AND FALK
FFC, FHC and Falk hereby jointly and severally represent and warrant to
and agree with Buyer as follows:
5.01 Organization and Good Standing. FFC is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. FFC Insurance is a corporation duly organized, validly
existing and in good standing under the laws of the Turks and Caicos Islands.
Each of FFC and FFC Insurance (hereinafter collectively, the "FFC Companies")
has full corporate power and authority to conduct its business as now conducted
and to own or lease and operate the assets and properties now owned or leased
and operated by it. Each of the FFC Companies is duly qualified to do business
and is in good standing in each jurisdiction (both foreign and domestic) in
which the nature of its business or the character of its properties required
such qualification, all of which are set forth on Schedule 5.01; except where
the failure to be so qualified would not have a material adverse effect on the
FFC Business (as defined below).
5.02 Capital Stock. The total authorized shares of capital stock of FFC
consists of 20,000,000 shares of Class A Common Stock, no par value per share
("Class A Common") and 1,000,000 shares of Class B Common Stock, no par value
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per share ("Class B Common"). Prior to the transactions contemplated by Sections
8.11 and 8.12 hereof, there were 3,200,000 shares of Class A Common and 500,000
shares of Class B Common, respectively, issued and outstanding, which issued and
outstanding shares were owned beneficially and of record as is set forth on
Schedule 5.02.
5.03 Options or Other Rights. Except as set forth on Schedule 5.03,
there are no outstanding rights, subscriptions, warrants, options, commitments
or other agreements of any kind to purchase or receive from either of the FFC
Companies any shares of their capital stock and there is not outstanding any
security convertible into any such capital stock.
5.04 Subsidiaries of FFC. Except for the Insurance Shares or as is set
forth on Schedule 5.04, FFC owns no interests in any other corporation, company,
partnership, joint venture or other entity. The Insurance Shares represent all
of the outstanding shares of capital stock of FFC Insurance. Neither Services
nor Point nor FFC Auto has ever engaged in any business whatsoever.
5.05 Authority and Compliance. Each of FFC and FHC has full corporate
power and authority to execute and deliver this Agreement and any and all
documents in connection herewith. The consummation and performance by FFC and
FHC of the transactions contemplated by this Agreement, including, without
limitation, the transactions contemplated by Sections 8.11 and 8.12 hereof, have
been duly and validly authorized by all necessary corporate and other
proceedings including, without limitation, the approval of the shareholders of
FFC. This Agreement has been duly and validly executed and delivered by FFC,
FHC, Falk and Eddie and constitutes a valid obligation of each of them,
enforceable against each of them in accordance with its terms, except to the
extent that such enforceability may be limited by applicable insolvency,
bankruptcy, reorganization or similar laws affecting the enforcement of
creditors' rights generally and by general equity principles. Except as set
forth on Schedule 5.05, no consent, authorization or approval of, exemption by,
or filing with, any domestic governmental or administrative authority, or any
court, or any third party is required to be obtained or made by the FFC
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Companies or FHC in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby.
5.06 Articles of Incorporation; By-Laws. Attached hereto as Schedule
5.06 are true, correct and complete copies of the Articles of Incorporation and
the By-Laws of FFC and the Memorandum of Association and Articles of Association
of FFC Insurance.
5.07 No Conflict. The performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, (i) the articles of incorporation or by-laws or similar governing
documents of either of the FFC Companies, (ii) any contract or other agreement
or instrument to which the FFC Companies or FHC is a party or by which any of
them or their respective properties or assets are bound except as set forth on
Schedule 5.07, or (iii) any law, order, rule, regulation, writ, injunction or
decree applicable to the FFC Companies or FHC; in the case of clause (ii) and
(iii) except where any such breach, violation or default would not have a
material adverse effect on the FFC Business.
5.08 Compliance with Law. FFC and its use of the Purchased Assets and
its conduct of the Business and FFC Insurance and its conduct of its business
(the "Insurance Business," together with the Business being hereinafter called
the "FFC Business") are in compliance in all material respects with all, and not
in violation in any material respect of any, and none of the FFC Companies has
received any claim or notice that it is in violation of any, applicable law or
ordinance, or any order, rule or regulation of any governmental agency or body
to which the FFC Companies, the FFC Business or the Purchased Assets are
subject, including, without limitation, any laws, ordinances, orders, rules or
regulations relating to the protection of consumers or the regulation of
insurance companies; nor have the FFC Companies failed to obtain or to adhere in
all material respects to the requirements of any government license, permit or
authorization necessary to the ownership of the Purchased Assets or to the
conduct of the FFC Business. All governmental permits, licenses and
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authorizations required by the FFC Companies in the conduct of the FFC Business
are set forth in Schedule 5.08. Without limiting the generality of the
foregoing, neither the FFC Companies, nor their shareholders, nor any director,
officer, employee or agent of, or any consultant to, the FFC Companies nor any
other person authorized to act on behalf of the FFC Companies has unlawfully
offered, paid, or agreed to pay, directly or indirectly, any money or anything
of value to or for the benefit of any individual who is or was a member of the
armed forces, a candidate for office or an official or employee of any
government (federal, state, local or foreign), or any agency or instrumentality
thereof, or an officer or employee of any client, customer or supplier of the
FFC Companies.
5.09 Financial Statements.
(a) Schedule 5.09(a) contains copies of the audited financial
statements of FFC for each of the three years ended December 31, 1994 (the
"Financial Statements"). The Financial Statements are true and correct and
present fairly, in all material respects, the financial position of FFC as of
December 31, 1994, December 31, 1993 and December 31, 1992, as the case may be,
and the results of its operations and its cash flows for each of the years then
ended in conformity with generally accepted accounting principles, consistently
applied.
(b) Schedule 5.09(b) contains copies of the unaudited financial
statements of FFC for the nine months ended September 30, 1995 (the "Interim
Statements"). The Interim Statements are true and correct and present fairly, in
all material respects, the financial position of FFC as of September 30, 1995
and the results of its operations and cash flows for the nine month period then
ended in conformity with generally accepted accounting principles, consistently
applied (except that no representation is made with respect to the FFC bad debt
reserve being true and correct at September 30, 1995; provided, however, that
such bad debt reserve was, at September 30, 1995, taken in conformity with
generally accepted accounting principles, consistently applied).
(c) Schedule 5.09(c) contains copies of the financial statements of FFC
Insurance for each of the two years ended December 31, 1994 (the "Insurance
Financial Statements"). The Insurance Financial Statements are true and correct
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and present fairly, in all material respects, the financial position of FFC
Insurance as of December 31, 1994, and December 31, 1993, as the case may be,
and the results of its operations and its cash flows for each of the years then
ended in conformity with generally accepted accounting principles, consistently
applied.
(d) Schedule 5.09(d) contains copies of the financial statements of FFC
Insurance for the nine months ended September 30, 1995 (the "Insurance Interim
Statements"). The Insurance Interim Statements are true and correct and present
fairly, in all material respects, the financial position of FFC Insurance as of
September 30, 1995 and the results of its operations and cash flows for the nine
month period then ended in conformity with generally accepted accounting
principles, consistently applied.
(e) Except as may be included in the Insurance Interim Statements or as
may have been incurred in the ordinary course of business since September 30,
1995, FFC Insurance has no liabilities (contingent or otherwise) whatsoever.
5.10 Title to Assets. At the Closing, FFC will convey to Buyer good and
valid marketable title to all of the Purchased Assets, free and clear of all
liens, pledges, mortgages, security interests, conditional sales contracts,
leases, subleases, licenses, concession or occupancy agreements, and other
encumbrances of any kind or nature whatsoever, except for any such encumbrances
as are set forth on Schedule 5.10 ("Permitted Encumbrances").
5.11 Condition of Assets. All tangible assets and properties included
in the Purchased Assets are as of the date hereof and on the Closing Date will
be in good operating condition and repair in all material respects (normal wear
and tear excepted) and are usable in the ordinary course of the Business as
previously conducted.
5.12 Receivables. All finance receivables and other receivables
reflected on the Interim Statements and all finance and other receivables
acquired or created by FFC subsequent to September 30, 1995 to and including the
Closing Date arose and/or will arise from bonafide transactions in the ordinary
course of business.
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5.13 Taxes and Tax Returns.
(a) All federal, state, county, local, foreign and other taxes
(including, without limitation, income, profits, premium, estimated, excise,
sales, use, occupancy, gross receipts, franchise, ad valorem, severance, capital
levy, production, transfer, withholding, employment, unemployment compensation,
payroll related and property taxes, import duties and other governmental charges
and assessments), whether or not measured in whole or in part by net income, and
including deficiencies, interest, additions to tax or interest, and penalties
with respect thereto (collectively "Taxes") required to be paid by or with
respect to the FFC Companies on or before the date hereof have been timely paid
and any Taxes required to be paid by or with respect to FFC after the date
hereof and on or before the Closing Date shall be timely paid.
(b) All returns and other reports required to be filed by or with
respect to the FFC Companies with respect to Taxes ("Tax Returns") on or before
the date hereof have been timely filed (or validly filed extensions thereof have
been timely filed). All Tax Returns required to be filed by or with respect to
the FFC Companies after the date hereof and on or before the Closing Date shall
be prepared and timely filed, in a manner consistent with prior years and
applicable laws and regulations.
5.14 Absence of Certain Events. Except as set forth on Schedule 5.14,
since January 1, 1995 none of the FFC Companies have:
(a) sold, assigned or transferred any of its assets or
properties necessary for the operation of the FFC Business, except in
the ordinary course of business consistent with past practice;
(b) made any amendment or termination of any material
contract, commitment or agreement relating to the FFC Business to which
it is a party or by which it is bound, in each case other than in the
ordinary course of business consistent with past practice which would,
individually or in the aggregate, have a material adverse effect on the
conduct of the FFC Business consistent with past practice;
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(c) suffered any damage, destruction or physical loss, whether
or not covered by insurance, materially and adversely affecting the FFC
Business, or suffered any repeated, recurring or prolonged shortage,
cessation or interruption of supplies or utility services materially
necessary to conduct the FFC Business consistent with past practice or
suffered any materially adverse change in the financial condition of
the FFC Business;
(d) suffered any material adverse change or received verbal or
written notice of a material adverse change other than in the ordinary
course of business consistent with past practices in their business
relations with any of the major suppliers or customers of the FFC
Business which would, individually or in the aggregate, have a material
adverse effect on the conduct of the FFC Business consistent with past
practice;
(e) with respect to the employees of the FFC Business,
received notice or had knowledge of any strike or disruption of work of
a concerted nature or any threat thereof;
(f) entered into any material transaction with respect to the
FFC Business, other than in the ordinary course of business consistent
with past practice; or
(g) lost the services of any key employee of the FFC Business
or received notification of the threatened or imminent loss of any such
employee.
5.15 Patents, Trademarks, Copyrights, etc. Except as set forth on
Schedule 5.15, there are no patents, patent rights, patent applications,
licenses, shop rights, trademarks, trademark applications, trade names,
copyrights, computer software and similar rights (collectively "Rights")
currently owned or used in the conduct of the FFC Business. The Purchased Assets
include all Rights and other proprietary information necessary to the conduct of
the FFC Business as currently being conducted. No patents, formulae, know-how,
secrets, trademarks, trademark registrations, logos, trade names, assumed names,
copyrights or computer software used in the FFC Business infringe on any
patents, trademarks, or copyrights, or any other rights of any person. Each of
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the FFC Companies has taken all reasonable measures to maintain and protect, the
patents, trademarks, trademark registrations, logos, trade names, assumed names,
copyrights and copyright registrations listed on Schedule 5.15. To the best
knowledge of FFC, FHC and Falk, the FFC Companies have not received notice of
any claims which have been asserted by any person to the use of any such
patents, trademarks, trademark registrations, logos, trade names, assumed names,
copyrights and copyright registrations or challenging or questioning the
validity or effectiveness of any such license or agreement, and, to the best
knowledge of FFC, FHC and Falk, there is no valid basis for any such claim which
would, individually or in the aggregate, have a material adverse effect on the
FFC Business.
5.16 Legal Proceedings, Etc. Except as set forth on Schedule 5.16
hereto, there are no claims, actions, suits, proceedings, arbitrations or
investigations, either administrative or judicial, pending or, to the best
knowledge of FFC, FHC and Falk, threatened by, or against the FFC Companies, or
affecting the FFC Business or any of the Purchased Assets, including tort
claims, whether or not covered by insurance, or specifically relating to the
transactions contemplated by this Agreement, at law or in equity or otherwise,
before or by any court or governmental agency or body, domestic or foreign, or
before an arbitrator of any kind. Neither FFC, FHC nor Falk is aware of any
facts which may give rise to any claim, action, suit, proceeding, arbitration or
investigation affecting the FFC Business, the Purchased Assets or the
transactions contemplated by this Agreement.
5.17 Labor Disputes. There are no strikes or disruptions of work
involving the employees of the FFC Business of a concerted nature or to the best
knowledge of FFC, FHC and Falk any threat thereof affecting the FFC Business.
None of the FFC Companies is a party to any collective bargaining agreement with
any union or other representative of employees and no question concerning
representation exists with regard to any employees of the FFC Companies.
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5.18 Customers; Suppliers; Adverse Conditions. Except as set forth on
Schedule 5.18, there has not, since January 1, 1995, been any termination or
cancellation, nor have the FFC Companies received verbal or written notice of
any threatened termination or cancellation of the business relationship of the
FFC Companies with (a) any of the customers of the FFC Business, or (b) any of
the major suppliers of the FFC Business (including, without limitation, American
Heritage Insurance Company), which would, either individually or in the
aggregate have a material adverse effect on either the Business or the Insurance
Business as conducted consistent with past practice; and to the best knowledge
of FFC, FHC and Falk there does not exist any facts or circumstances (except for
general economic and industry conditions) which have had a material adverse
effect or will have a material adverse effect on either the Business or the
Insurance Business or the conduct thereof substantially consistent with past
practice.
5.19 Insurance. Schedule 5.19 contains copies of all policies or
binders of fire, liability, product liability, vehicular, title and other
insurance held by or on behalf of the FFC Companies or relating to the FFC
Business or any of the Purchased Assets. The policies and binders included in
Schedule 5.19 are in full force and effect, are valid, binding and enforceable
in accordance with their terms, insure the FFC Companies in sufficient amounts
against those risks usually insured against by persons operating similar
businesses or properties in the localities where such businesses or properties
are located. There is no default with respect to any material provision
contained in any such policy or binder nor has there been any failure to give
any notice or present any claim under any such policy or binder in due and
timely fashion. No notice of cancellation or nonrenewal of any such policy or
binder has been received.
5.20 Schedules of Assets; Properties; Customers; Suppliers. Set forth
on Schedule 5.20 are complete and accurate lists of the following:
(a) All machinery and equipment included in the Purchased Assets;
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(b) All machinery, vehicles and equipment under lease to the FFC
Companies and material to the FFC Business, together with the identity of the
lessor and the annual rental and unexpired lease term for any such leased
property;
(c) All real property and interests in real property (including the
location thereof and the description of any structures located thereon) under
lease to the FFC Companies, together with the annual rental and unexpired lease
term and identity of the lessor;
(d) Each vehicle held for resale as of November 30, 1995 including the
serial number thereof and the location where such vehicle is currently stored;
(e) The five largest suppliers to the FFC Business for the year ended
December 31, 1994 and the volume of business done with such suppliers.
(f) All entities or persons to whom the FFC Companies have paid
aggregate fees to, and/or made aggregate purchases from, in excess of $50,000
during the year ended December 31, 1994; and
(g) All potential material contracts or agreements in active process of
negotiation which are not otherwise described on any other Schedule hereto.
5.21 Contracts and Commitments.
(a) Except as listed and described on Schedule 5.20 or 5.21, none of
the FFC Companies is a party to any:
(i) Contract (as defined below) with any present or former shareholder,
director, officer, employee or consultant (including, without
limitation, any employment agreement);
(ii) Contract for the future purchase of, or payment for, supplies,
products, insurance or financial instruments involving payment of in
excess of $50,000 or for the performance of services by a third party
involving payment in excess of $25,000;
(iii) Contract to sell or supply products or financial instruments or
to perform services involving receipt by the FFC Companies of in excess
of $50,000;
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(iv) Representative, sales agency or distribution agreement, contract
or commitment, not terminable by the FFC Companies on sixty (60) days
notice or less without cost or liability in excess of $1,000 for any
such agreement, contract or commitment;
(v) lease under which either of the FFC Companies is the lessor or
lessee relating to either real or personal property and involving
annual payments by or to the FFC Companies in excess of $10,000;
(vi) Contract or Contracts for the borrowing of money for a line of
credit, or for a guarantee, pledge or undertaking of the indebtedness
of any other person;
(vii) factoring agreement or agreement for the assignment or
receivables or inventory;
(viii) Contract with respect to the Insurance Business, including,
without limitation, any contract with any other insurance company
relating to reinsurance;
(ix) Contract with respect to any Rights;
(x) Contract for any capital expenditure involving future payments,
which, together with future payments under all other existing Contracts
for all capital projects are in excess of $50,000;
(xi) Contract limiting or restraining in any respect the FFC Companies
from engaging or competing in any lines of business or with any person;
(xii) Contract requiring the FFC Companies to loan money to any person
in the future; or
(xiii) any other Contract material to the operation of the Business or
the Insurance Business.
As used in the Agreement, the term "Contract" includes any mortgage, indenture,
agreement, contract, commitment or lease.
(b) Except as may be otherwise set forth on Schedule 5.21 with respect
to each of the Contracts listed on any Schedule to this Agreement, (i) such
Contract is valid and enforceable in accordance with its terms, except to the
extent that such enforceability may be limited by applicable insolvency,
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bankruptcy, reorganization or similar laws affecting the enforcement of
creditors' rights generally and by general equity principles, (ii) the FFC
Companies are in compliance with the provisions thereof, (iii) to the best
knowledge of FFC, FHC and Falk, no party is in default in the performance,
observance or fulfillment of any obligations, covenant or condition contained
therein and (iv) to the best knowledge of FFC, FHC and Falk, no event has
occurred which with or without the giving of notice or lapse of time, or both,
would constitute a default thereunder by the FFC Companies. No such Contract
contains any requirement with which there is a reasonable likelihood that (i)
the FFC Companies or, to the best knowledge of FFC, FHC and Falk, any other
party thereto will be unable to comply or (ii) compliance therewith by the FFC
Companies will have a material adverse effect on the FFC Business. Except as set
forth on Schedule 5.21, the transactions as contemplated by this Agreement, will
not (i) result in the automatic termination of any Contract listed on any
Schedule to this Agreement; or (ii) result in the automatic amendment of any of
the terms of any such Contract; or (iii) give rise to a right in any party to
unilaterally amend the terms of, or terminate, any such Contract. Except as set
forth on Schedule 5.21, the assignment of each Contract designated as an
"Assumed Contract" on Schedule 5.21 to Buyer as contemplated by this Agreement
does not require the consent of (i) the other party or parties thereto or (ii)
any other person or entity (all such required consents being hereinafter called
the "Assumed Contract Consents").
5.22 Employee Benefit Plans.
(a) Set forth on Schedule 5.22 is a summary of any bonus, incentive,
deferred compensation, profit sharing, pension, retirement, disability,
hospitalization, life insurance, health benefit, medical reimbursement,
vacation, sick pay, severance pay or other plan or agreement providing benefits
to any of the employees of the FFC Companies ("Employee Plans").
(b) Set forth on Schedule 5.22 is the total amount of cumulative fringe
benefits to which employees have accrued entitlement as of September 30, 1995.
All amounts required by the provisions of any Employee Plan and applicable law
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to be contributed to any Employee Plan have been, or will be, contributed to
such Employee Plan through the Closing Date.
(c) None of the Employee Plans is a "multiemployer plan" as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and FFC has never at any time contributed to a "multiemployer plan."
All Employee Plans are in compliance in all material respects with the
requirements prescribed by any and all applicable statutes, orders or
governmental rules or regulations currently in effect with respect thereto, and
FFC has performed all material obligations required to be performed by it under,
and is not in default under or in violation of, any of the Employee Plans. Each
Employee Plan intended to be qualified under Section 401(a) of the Internal
Revenue Code (the "Code") has heretofore been determined by the Internal Revenue
Service (the "IRS") to so qualify, and each trust created thereunder has
heretofore been determined by the IRS to be exempt from tax under the provisions
of Section 501(a) of the Code. As of the date hereof, FFC has not incurred any
"withdrawal liability" within the meaning of Section 4201 of ERISA with respect
to any Employee Plan. There are no actions, suits or claims pending, threatened
or anticipated (other than routine claims for benefits) against any Employee
Plan or against the assets of any Employee Plan. None of the transactions
contemplated herein will (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Employee Plan or individual
agreement that will or may result in any payment (whether of severance pay or
otherwise), acceleration, vesting, or increase in benefits with respect to any
employee, former employee or director of FFC. None of the Employee Plans nor any
of the trusts relating thereto has incurred any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA. No person has
engaged in any transaction involving any Employee Plan which is a "prohibited
transaction" under Section 406 of ERISA or Section 4975 of the Code.
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(c) FFC has provided Buyer with true and correct copies of all Employee
Plans, any related trusts and the most recent IRS determination letters with
respect to each Employee Plan intended to qualify under Section 401(a) of the
Code.
5.23 Employees. Schedule 5.23 hereof sets forth each employee of the
FFC Companies who performs services related to the FFC Business and the rate of
compensation of each such employee as of (a) the date hereof and (b) December
31, 1994.
5.24 Assets Being Transferred. The Purchased Assets constitute such
assets as are materially necessary to permit Buyer to continue the FFC Business
in a manner substantially consistent with the manner in which the FFC Companies
are operating the FFC Business on the date hereof.
5.25 Interests in Property or Activities of the Business. Except as set
forth on Schedule 5.25, neither Falk, Eddie nor FHC, nor any former shareholder,
director or employee of FFC or FHC has any material interest in any person or
entity which conducts business with the FFC Companies.
5.26 Bulk Sale Act Compliance. Based upon an opinion of counsel
rendered to FFC, the Virginia Bulk Sales Act and the Bulk Sales Act of any other
jurisdiction are not applicable to the transactions contemplated by this
Agreement.
5.27 Finder. There is no firm, corporation, agency or other person that
is entitled to a finder's fee or any type of brokerage commission in relation to
or in connection with the transactions contemplated by this Agreement as a
result of any agreement or understanding with FFC or any agent of FFC, except
for Chicago Corporation the fees of which ("Chicago Fees") shall be paid by FHC.
5.28 Full Disclosure. No representation or warranty by FFC, FHC or Falk
in this Agreement or in any document to be delivered by either FFC, FHC or Falk
pursuant hereto contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary to make any statement
herein or therein not materially misleading.
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ARTICLE V(a)
REPRESENTATIONS AND WARRANTIES OF MILLS
Mills hereby represents and warrants to and agrees with Buyer as
follows, and Buyer agrees that the represenations and warranties contained in
this Article V(a) are the sole representations and warranties made by Mills
under this Agreement:
5(a).01 Authority and Compliance. This Agreement has been duly and
validly executed and delivered by Mills and constitutes a valid obligation of
him, enforceable against him in accordance with its terms, except to the extent
that such enforceability may be limited by applicable insolvency, bankruptcy,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and by general equity principles.
5(a).02 Capital Stock. Mills, prior to the transactions contemplated by
Sections 8.11 and 8.12 hereof, was the beneficial and record owner of that
number of shares of Class A Common and Class B Common as is set forth next to
his name on Schedule 5.02.
5(a).03 Authority from Other Shareholders. Annexed hereto as Schedule
5(a).03 is a true and correct copy of the documents executed by each of the
record and beneficial holders of the Other Shares (as defined below) and the Old
1994 Notes granting Mills the authority to act on their behalf in connection
with the transactions contemplated by Sections 8.11 and 8.14 hereof (the
"Authority Documents").
5(a).04 Interests in Property or Activities of the Business. Except as
set forth on Schedule 5(a).04, neither Mills nor any affiliate of Mills has any
material interest in any person or entity which conducts business with the FFC
Companies.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Buyer and Auto hereby jointly and severally represent and warrant to,
and agree with, FFC, FHC, Falk, Eddie and Mills as follows:
6.01 Organization; Good Standing; Ownership. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. Auto is a corporation duly organized, validly existing
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and in good standing under the laws of the State of Delaware. Each of Buyer and
Auto has full corporate power and authority to conduct its respective business
as now conducted and to own or lease and operate the assets and properties now
owned or leased and operated by it. All of the outstanding shares of the capital
stock of Buyer are owned beneficially and of record by Auto.
6.02 Authority and Compliance. Each of Buyer and Auto has full
corporate power and authority to execute and deliver this Agreement and any
other document to be executed and delivered by either of them as contemplated
herein (the "Ancillary Documents"). The consummation and performance by Buyer
and Auto of the transactions contemplated by this Agreement have been duly and
validly authorized by all necessary corporate and other proceedings. This
Agreement has been, and when executed and delivered the Ancillary Documents will
be, duly and validly executed and delivered on behalf of Buyer and Auto and
constitutes, and will constitute, valid obligations of Buyer and Auto,
enforceable in accordance with their terms, except to the extent that such
enforceability may be limited by applicable insolvency, bankruptcy,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and by general equity principles. No consent, authorization or
approval of, exemption by, or filing with, any domestic governmental or
administrative authority, or any court, is required to be obtained or made by
Buyer or Auto in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
6.03 No Conflict. The performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, (i) any contract or other agreement or instrument to which Buyer or Auto
is a party or by which Buyer or Auto or any of their properties or assets is
bound, or (ii) the articles or certificate of incorporation or by-laws of Buyer
or Auto or (iii) any law, order, rule, regulation, writ, injunction or decree
applicable to Buyer or Auto.
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6.04 Finder. There is no firm, corporation, agency or other person that
is entitled to a finder's fee or any type of brokerage commission in relation to
or in connection with the transactions contemplated by this Agreement as a
result of any agreement or understanding with Buyer or any of its directors,
officers, employees or shareholders except for Richard Benson, the fees of whom
shall be paid by Buyer.
6.05 SEC Documents. Buyer has previously delivered to FFC copies of
Auto's Form 10-K for the year ended May 31, 1995, as amended (the "Form 10-K")
and copies of Auto's Form 10-Q for the quarter ended August 31, 1995 (the "Form
10-Q"). Buyer and Auto understand that FFC has delivered copies thereof to the
holders of the Other Shares and the Old 1994 Notes in connection with the
transactions contemplated by Sections 8.11, 8.14 and 9.04 hereof. In connection
therewith, Buyer and Auto represent to FFC that the Form 10-K and Form 10-Q are
true and correct in all material respects and Buyer has not filed any Current
Report on Form 8-K since May 31, 1995. .
6.06 Full Disclosure. No representation or warranty by Buyer or Auto in
this agreement or any document to be delivered by Buyer or Auto pursuant hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make any statement herein or
therein not materially misleading.
ARTICLE VII
COVENANTS
7.01 Covenant Not to Compete. For a period of ten (10) years from and
after the Closing Date with respect to FFC, FHC, Falk and Eddie and for a period
of five (5) years from and after the Closing Date with respect to Mills, each of
FFC, FHC, Falk, Eddie and Mills hereby covenants and agrees with Buyer that,
unless acting as an officer, employee or consultant to Buyer, or an affiliate of
Buyer, or with Buyer's prior written consents, he or it will not anywhere in (a)
the Commonwealth of Virginia, or (b) the States of North Carolina South
Carolina, Georgia, Florida, Maryland, Tennessee or Kentucky: (i) compete,
directly or indirectly, with Buyer, Auto or any of their affiliates in the
Business; (ii) directly or indirectly, on his or its own behalf or in behalf of
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or as an employee or agent of any other person or entity, contact or approach
any person or business, wherever located, for the purpose of competing with
Buyer in the Business; (iii) participate as a director, officer, consultant, or
partner of, or have any other direct or indirect financial interest in, any
enterprise which engages in the Business (provided, however, that Falk and Eddie
in the aggregate and/or Mills individually (or through or together with any
entity in which Mills owns an interest) may own up to five (5%) percent of the
capital stock of any corporation required to file reports pursuant to the
Securities Exchange Act of 1934 that is in competition with the Business if the
fair market value of such corporation's outstanding capital stock exceeds $25
million); or (iv) participate as an employee, agent, representative or
consultant in, or render any services to, any enterprise in which his
responsibility competes, directly or indirectly, with the Business. The parties
acknowledge that the covenant set forth in this Section 7.01 is subject to
modification under certain circumstances all as provided in Section 14 of the
Purchase Agreement by and between CFAW and Buyer of even date herewith which is
deemed incorporated herein by reference..
7.02 Confidential Information. Each of FFC, FHC, Falk, Eddie and Mills
shall keep secret and retain in strictest confidence, and shall not use for the
benefit of itself or others, all confidential matters relating to the FFC
Business, including, without limitation, customer lists, methods of credit
analysis, operational methods and other business affairs relating to the FFC
Business known by any of them and, except as otherwise required by law, shall
not disclose them to anyone, except with the Buyer's express prior written
consent.
7.03 Employees of the Buyer. None of FFC, FHC, Falk, Eddie or Mills
shall, directly or indirectly, hire, solicit or encourage to leave the
employment of Buyer or any of its affiliates, any employee of Buyer or any of
its affiliates who work in the FFC Business or hire any such employee who has
left the employment of Buyer or any of its affiliates within six months of the
termination of such employee's employment with Buyer or any of its affiliates,
other than an employee who has been terminated by Buyer or an affiliate thereof.
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The foregoing covenant shall not apply to those employees set forth on Schedule
7.03 (the "Excluded Employees").
7.04 Acknowledgment; Severability. Each of FFC, FHC, Falk, Eddie and
Mills acknowledge that the restrictions contained in Sections 7.01, 7.02 and
7.03 are reasonable and necessary to protect the business and interests of Buyer
and that any violation of these restrictions will cause substantial and
irreparable injury to Buyer. Therefore, FFC, FHC, Falk, Eddie and Mills each
agree that Buyer is entitled, in addition to any other remedies, to preliminary
and permanent injunctive relief to secure specific performance, and to prevent a
breach or contemplated breach, of Sections 7.01, 7.02 and 7.03 The restrictions
set forth herein shall be construed as independent covenants, and the existence
of any claim or cause of action against Buyer, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Buyer of the restrictions contained in Sections 7.01, 7.02 and 7.03. In the
event that the provisions of Sections 7.01, 7.02 and 7.03 should ever be deemed
to exceed the time or geographic limitations or any other limitations permitted
under applicable laws, then such provisions shall be deemed reformed to the
maximum extent permitted by applicable laws.
7.05 Consents. FFC shall use its best efforts to obtain the Assumed
Contract Consents.
7.06 Chicago Fees. Subject to the Closing having occurred, Buyer hereby
agrees to pay FHCan amount equal to the lesser of 50% of the Chicago Fees and
$100,000 upon receipt by Buyer of evidence of payment of such fees by FHC.
7.07 Post Closing Employment. Subject to the Closing having occurred,
Buyer shall offer employment to each employee of the FFC Companies listed on
Schedule 5.23, except for any of the Excluded Employees (the "Acquired
Employees") and shall make available to each Acquired Employee such salary and
benefits as are currently provided to such Acquired Employees by the FFC
Companies. For a period of 32 days following the Closing Date, Buyer agrees that
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it shall not terminate the employment of any of the Acquired Employees.
7.08 Buyer and Auto Representations. Buyer and Auto agree that in
connection with the transactions contemplated by Sections 8.11, 8.14 9.04 and
9.08 hereof, the holders of the Other Shares and the Old 1994 Notes may rely
upon the representations contained in Sections 6.01, 6.02, 6.03, 6.05 and 6.06.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
The obligations of Buyer pursuant to this Agreement are subject to the
satisfaction at the Closing of each of the following conditions, any one or more
of which may be waived as provided in Section 11.07.
8.01 Accuracy of Representation and Warranties. The representations and
warranties of FFC, FHC and Falk contained in this Agreement shall be true on and
as of the Closing Date with the same force and effect as through made on and as
of the Closing Date, except as effected by transactions contemplated hereby.
8.02 Performance of Agreement. FFC, FHC, Falk and Eddie shall have
performed and complied with all covenants, obligations and agreements to be
performed or complied with by them on or before the Closing Date pursuant to
this Agreement.
8.03 Legal Opinions. Buyer shall have received from Clark & Stant, P.C
a favorable opinion addressed to the Buyer, dated as of the Closing Date as to
(a) the matters set forth in Sections 5.01, 5.02, 5.03 (to such counsel's
knowledge), 5.04 (to such counsel's knowledge), 5.05, 5.07 ((ii) and (iii) to
such counsel's knowledge), 5.08 (first two sentences), 5.16 (to such counsel's
knowledge) and 5.26 hereof and Buyer shall have received from Miller & Simons,
an opinion in the form annexed hereto as Exhibit A.
8.04 Litigation, etc.
(a) No claim, action, suit, proceeding, arbitration, or hearing or
notice of hearing shall be pending (and no action or investigation by any
governmental authority shall be threatened) which seeks to enjoin or prevent the
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consummation of the transactions contemplated by this Agreement.
(b) No law, regulation or decree shall have been adopted or
promulgated after the date hereof, the enforcement of which would materially
adversely affect any of the assets, properties, financial condition, results of
operations, properties or business of the Business; and no law, regulation or
decree shall have been adopted or promulgated after the date hereof, the
enforcement of which would materially adversely affect Buyer's ability to
consummate the transactions contemplated by this Agreement.
8.05 Officer's Certificate. Buyer shall have received a certificate of
the chief executive officer of FFC, dated the Closing Date, certifying as to the
fulfillment of the conditions set forth in Sections 8.01, 8.02, 8.08 and 8.10
through 8.16 hereof.
8.06 Actions, Proceedings, etc. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by this
Agreement and all other related legal maters shall be reasonably satisfactory to
Buyer and its counsel; and Buyer shall have been furnished with such other
instruments and documents as it shall have reasonably requested.
8.07 Casualty Condemnation. Subsequent to September 30, 1995 and prior
to the Closing Date, no material portion of the physical operating assets of the
Business shall have been destroyed or damaged (whether or not such entity is
insured against such loss) and no material portion of the physical operating
assets shall have been taken by condemnation or eminent domain or made the
subject of such a proceeding.
8.08 No Material Adverse Change. Between September 30, 1995 and the
Closing Date (i) there shall not have occurred any changes in the financial
condition, properties, assets, business or prospects of FFC which in the
aggregate are materially adverse to the Business, and (ii) Buyer shall not have
learned of any facts which, in its reasonable judgment, it believes are
materially adverse to the assets, business, financial condition, or prospects of
the Business.
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8.09 Good Standing Certificates. Buyer shall have received a
certificate of the State Corporation Commission of the Commonwealth of Virginia,
dated within ten (10) days of the Closing Date certifying that FFC is in good
standing and validly existing under the laws of such state.
8.10 Consent to Assignment. FFC shall have obtained and delivered to
Buyer the Assumed Contract Consents.
8.11 Redemption of Shares. Prior to the Closing, all of the 1,600,000
shares of the capital stock of FFC not owned by FHC or Upton (the "Other
Shares") shall be redeemed by FFC in exchange for (a) the obligation of FFC to
pay $1.00 per share in cash (for an aggregate of $1,600,000) immediately
following the Closing (the "Other Shareholders Cash Payment") and (b)
subordinated notes of FFC (i) with respect to 600,000 of the Other Shares owned
by Mills and the Mills Value Adviser, Inc. ("MVA") in the principal amount equal
to $.50 per share and (ii) with respect to 1,000,000 of the Other Shares not
owned by Mills or MVA in the principal amount equal to $3.00 per share (for an
aggregate principal amount of $3,300,000), which subordinated notes, shall be in
the form of the Junior Subordinated Note annexed hereto as Exhibit B (a " Junior
Subordinated Note").
8.12 Redemption of Upton Shares. Prior to the Closing all of the shares
of the capital stock of FFC owned by Upton shall be redeemed by FFC in exchange
for (a) the obligation to pay $120,000 in cash immediately following the Closing
(the "Upton Cash Payment") and (b) a Junior Subordinated Note in the principal
amount of $231,000.
8.13 Ownership of Shares. At the Closing all of the outstanding shares
of the capital stock of FFC shall be owned beneficially and of record by FHC.
8.14 Exchange of Notes. All of the holders of the 12% Subordinated
Notes issued by FFC during 1994 (the "Old 1994 Notes") shall have exchanged the
Old 1994 Notes for a subordinated note in equal principal amount and with the
same interest rate and with such other terms and conditions as are set forth in
the form annexed hereto as Exhibit C (the "New 1994 Notes").
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8.15 Finova Waiver. Finova shall have waived its rights to accelerate
the payment of the Finova Debt as a result of the Closing of the transactions
contemplated by this Agreement.
8.16 Amendment to CFAW Purchase Agreement. The agreement between CFAW
and FFC with respect to the purchase by FFC from CFAW of finance contracts shall
be amended and restated in its entirety, in consideration for the payment by
Buyer to CFAW of the sum of $1,500,000, to be an agreement between CFAW and
Buyer, as set forth in Exhibit D annexed hereto (the "New CFAW Purchase
Agreement").
8.17 Financial Statements. On or prior to the Closing Date, FFC shall
have delivered to Buyer and Auto financial statements of FFC for each of the
years ended December 31, 1994, December 31, 1993 and December 31, 1992, which
financial statements shall have been reported on by KPMG Peat Marwick, without
qualification, and which financial statements shall be in form satisfactory to
meet the rules and regulations of the Securities and Exchange Commission.
8.18 Premises at 536 East 21st Street. Buyer and CFAW shall have
entered into a lease agreement wherein Buyer shall lease from FHC the premises
at 536 West 21st Street, Norfolk, Virginia currently occupied by FFC for a
period of six months from and after the Closing Date at a rental of $7,500 per
month, plus utilities, with a right of Buyer only to terminate the lease at any
time upon thirty (30) days prior notice all in the form annexed hereto as
Exhibit E (the "Norfolk Lease").
8.19 Termination of Related Party Arrangements. Except for the
obligations of Buyer under the New CFAW Purchase Agreement, the Norfolk Lease,
the New 1994 Notes, the note described in Section 3.03(ii) and the Junior
Subordinated Notes, each of FFC, FHC, Falk, Eddie and Mills shall release Buyer
from any and all obligations to any of them or their affiliates by executing a
release in the form annexed hereto as Exhibit F.
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8.20 Employment Agreements. Each of Robert Upton and Larry Cline shall
have executed and delivered to Buyer an employment agreement in the form annexed
hereto as Exhibit G.
8.21 Authority Documents. Mills shall have delivered a certificate to
FFC in which he shall certify to FFC that the Authority Documents have not been
amended and are in full force and effect as of the Closing Date, and Mills shall
agree that Buyer and Auto may rely on such certificate.
8.22 Name Change. On or before the Closing Date, FFC shall have caused
each of FFC and Point to amend its respective certificate or articles of
incorporation to effect the change of its name to a name which does not include
the word "Point" or "Falk" or any word or words similar thereto.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATION OF FFC
The obligations of FFC under this Agreement are subject to the
satisfaction at the Closing of each of the following conditions, any one or more
of which may be waived by FFC as provided in Section 11.07; provided that any
such waiver must be approved by Mills in writing.
9.01 Accuracy of Representation and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true on and as of the
Closing Date with the same force and effect as through made on and as of the
Closing Date, except as effected by transactions contemplated hereby.
9.02 Performance of Agreement. Buyer shall have performed and complied
with all covenants, obligations and agreements to be performed or complied with
by them on or before the Closing Date pursuant to this Agreement.
9.03 Buyer Assumption. Buyer shall have executed and delivered to each
holder of a New 1994 Note and/or a Junior Subordinated Note and an agreement of
assumption in the form annexed hereto as Exhibit H.
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9.04 Delivery of Note. Buyer shall have executed and delivered to FFC
the note described in Section 3.03(ii).
9.05 Auto Guarantee. In connection with the assumption by Buyer of the
New 1994 Notes, Auto shall have executed and delivered to each holder of a New
1994 Note a guaranty of payment in the form annexed hereto as Exhibit I.
9.06 Falk Guarantee. Auto shall have executed and delivered to Falk a
letter wherein Auto shall agree to (a) use its best efforts to obtain the
release of Falk from his guarantee of the Finova Debt as soon as practicable,
but in no event later than the second anniversary of the Closing and (b)
indemnify Falk with respect to such guarantee from and after the Closing, all in
the form annexed hereto as Exhibit J.
9.07 B of C Debt. Simultaneously with the Closing, Buyer shall repay
the B of C Debt.
9.08 Redemption and Exchange. The transactions contemplated by Sections
8.11, 8.12 and 8.14 shall have occurred.
9.09 Cash Payments. Simultaneously with the Closing, Buyer shall pay
the Other Shareholders Cash Payment and the Upton Cash Payment.
ARTICLE X
INDEMNIFICATION
10.01 Indemnification by FFC, FHC, Falk, Eddie and Mills.
(a) FFC, FHC and Falk hereby jointly and severally covenant and
agree with Buyer and Auto that they shall reimburse and indemnify Buyer, Auto
and their respective successors and assigns and hold them harmless from, against
and in respect of any and all costs, losses, claims, liabilities, fines,
penalties, damages and expenses, including interest which may be imposed in
connection therewith and court costs and reasonable fees and disbursements of
counsel (collectively "Claims") incurred by them due to, arising out of, or in
connection with, (i) a breach of any of the representations, warranties,
covenants or agreements made by FFC, FHC or Falk in this Agreement, or (ii) any
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liability or obligation of FFC to any person or entity, except for any of the
Assumed Obligations.
(b) Eddie hereby covenants and agrees with Buyer and Auto that he
shall reimburse and indemnify Buyer and Auto and their respective successors and
assigns and hold them harmless, from against and in respect of any and all
Claims, incurred by them due to, arising out of, or in connection with the
breach of any of the representations, warranties, covenants and agreements made
by Eddie in Sections 7.01, 7.02, 7.03 and 7.04 hereof.
(c) Mills hereby covenants and agrees with Buyer and Auto that he
shall reimburse and indemnify Buyer and Auto and their respective successors and
assigns and hold them harmless, from against and in respect of any and all
Claims, incurred by them due to, arising out of, or in connection with the
breach of any of the representations, warranties, covenants and agreements made
by Mills in Sections 5(a).01, 5(a).02, 5(a).03, 5(a).04, 7.01, 7.02, 7.03, 7.04
and 8.21 hereof.
10.02 Indemnification by Buyer. Buyer and Auto hereby covenant and
agree with FFC that they shall reimburse and indemnify FFC and its respective
successors and assigns and hold them harmless from, against and in respect of
any and all Claims incurred by FFC due to, arising out of, or in connection with
(a) a breach of any of the representations, warranties, covenants or agreements
made by Buyer and Auto in this Agreement, (b) any Assumed Obligation, or (c)
liabilities relating to the operation of the Business from and after the Closing
Date.
10.03 Satisfaction of Indemnification Obligation. Obligations of
indemnification under this Article X shall be satisfied within ten (10) days
after written notice thereof from the Indemnified Party to the indemnifying
party or parties upon a settlement between the Indemnified Party and the
indemnifying party or a final determination of a court or tribunal of competent
jurisdiction.
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10.04 Right to Defend, etc.
(a) If an Indemnified Party receives notice of any claim or other
commencement of any action or proceeding with respect to which any other party
(or parties) is obligated to provide indemnification (the "Indemnifying Party")
pursuant to this Agreement, the Indemnified Party shall give the Indemnifying
Party written notice thereof. Such notice shall specify, in reasonable detail,
the facts forming the basis for the claim, a good faith estimate of the amount
of the claim, and the provisions under this Agreement providing for such
indemnification. Such notice shall be a condition precedent to any liability of
the Indemnifying Party under the provisions for indemnification contained in
this Agreement. If the facts giving rise to any such indemnification shall
involve any actual claim or demand by any third party against an Indemnified
Party, the Indemnifying Party shall be entitled (without prejudice to the right
of any Indemnified Party to participate at its expense through counsel of its
own choosing) to defend or prosecute such claim at its expense and through
counsel of its own choosing, subject to the Indemnified Party's approval which
may not be unreasonably withheld, if it advises in writing of its intention to
do so to the Indemnified Party within thirty (30) days after notice of such
Claim has been given to the Indemnifying Party. Such Indemnified Party shall
cooperate in the defense and/or settlement of such Claim, but shall be entitled
to be reimbursed, as provided in Section 10.01 or 10.02 hereof, as the case may
be, for all costs and expenses incurred by it in connection therewith. No
settlement of any Claim may be made without the consent of the Indemnifying
Party, which consent may not be unreasonably withheld; provided, however, that
if such Indemnifying Party has been offered the opportunity to defend such Claim
and has elected not to do so then settlement may be made without the consent of
the Indemnifying Party. The Indemnifying Party shall have the right to settle or
compromise a Claim if the Indemnified Party is provided a complete release of
further liability and obligations relating to such Claim in any way.
(b) Notwithstanding Section 10.04(a) hereof, if, in the reasonable
opinion of an Indemnified Party, any Claim involves an issue or matter which
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could have a materially adverse effect on the business, operations, assets or
prospects of such Indemnified Party, then, and in such event, the Indemnified
Party shall have the right, upon written notice to the Indemnifying Party, to
control the defense of any such Claim at its expense and through counsel of its
choosing. If the Indemnified Party should so elect to exercise such right the
Indemnifying Party shall have the right to participate in, but not control, the
defense or settlement of such Claim at its sole cost and expense. No settlement
of any such Claim may be made without the consent of the Indemnifying Party,
which consent may not be unreasonably withheld.
10.05 Limitations on Indemnification. The indemnification provided for
in Sections 10.01(a) and 10.01(c) shall be subject to the following limitations:
(a) Buyer and Auto shall not be entitled to receive any
indemnification amounts pursuant to clause (i) of Section 10.01(a) until the
aggregate indemnification amounts pursuant thereto equal $50,000 (the "First
Basket Amount") whereupon Buyer shall be entitled to receive payments to the
extent that such aggregate exceeds the First Basket Amount. The limitation on
indemnification set forth in this Section 10.05(a) shall not apply to any Claims
based upon, arising out of, or otherwise in respect of (i) Section 5.27 - Finder
- - or (ii) any covenant or agreement of FFC, FHC or Falk contained herein,
including, without limitation, those covenants and agreements made in Article
VII hereof.
(b) Buyer and Auto shall not be entitled to receive any
indemnification amounts pursuant to Section 10.01(c) until the aggregate
indemnification amounts pursuant thereto equal $50,000 (the "Second Basket
Amount") whereupon Buyer shall be entitled to receive payments to the extent
that such aggregate exceeds the Second Basket Amount. The limitation on
indemnification set forth in this Section 10.05(b) shall not apply to any Claims
based upon, arising out of, or otherwise in respect of (i) any covenant or
agreement of Mills contained herein, including, without limitation, those
covenants and agreements made in Article VII hereof.
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(c) The aggregate liability of FFC, FHC and Falk with respect to
its indemnification obligations based upon a breach of any of the
representations or warranties made by FFC, FHC or Falk in Article V of this
Agreement (the "Breach Indemnification") shall not exceed $5,125,000; except
that the aggregate liability of FFC, FHC and Falk with respect to the Breach
Indemnification shall not exceed $1,000,000 with respect to any breaches of the
representations or warranties made by FFC, FHC or Falk (1) in Sections 5.01
through 5.08 and 5.10 through 5.28 of this Agreement where FFC, FHC and Falk (i)
did not know or (ii) should not have reasonably been expected to have known of
such breach or any of the material facts or circumstances giving rise to such
breach and (2).in Section 5.09 where FFC, FHC and Falk did not know of such
breach or any of the material facts or circumstances giving rise to such breach.
ARTICLE XI
GENERAL PROVISIONS
11.01 Survival of Representations, Warranties, Covenants and
Agreements. The representations and warranties contained in Articles V, V(a) and
VI of this Agreement shall survive the execution of this Agreement until August
31, 1997 except that the representations and warranties contained in Sections
5.05, 5.27, 5(a).01, 5(a).03, 6.02 and 6.05 shall survive in perpetuity. If any
claim for indemnity has been timely made but has not been resolved by the
parties prior to the expiration of the applicable time period of survival then,
and in such event, such claim shall survive until finally resolved.
11.02 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
11.03 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to any of the other parties shall be in writing and
shall be deemed to have been duly given when delivered personally or five (5)
days after dispatch by registered or certified mail, postage prepaid, return
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receipt requested, to the party to whom the same is so given or made:
If to Buyer or AutoInfo AutoInfo, Inc.
1600 Route 208
Fair Lawn, New Jersey 07410
Attn: Scott Zecher, President
with a copy to: Morse, Zelnick, Rose & Lander, LLP
450 Park Avenue
New York, New York 10022
Attn: Kenneth S. Rose, Esq.
If to FFC, FHC, Falk
or Eddie addressed to: c/o Charles E. Falk, Sr.
Falk Holding Corp.
536 West 21st Street
Norfolk, Virginia 23610
with a copy to: Frank J. Santoro, Esq.
Marcus, Santoro & Kozak
355 Crawford Street, Suite 700
P. O. Box 69
Portsmouth, Virginia 23705-0069
If to Mills addressed to: Charles A. Mills III
c/o Anderson & Strudwick
3 Commercial Place
Suite 100
Norfolk, Virginia 23510
with a copy to: James J. Wheaton, Esq.
Willcox & Savage, P.C.
1800 NationsBank Center
Norfolk, Virginia 23510
11.05 Assignability and Amendments. This Agreement shall not be
assignable by any of the parties. This Agreement cannot be altered or otherwise
amended except pursuant to an instrument in writing signed by each of the
parties.
11.06 Entire Agreement. This Agreement and the Exhibits and Schedules
which are a part hereof and the other writings and agreements specifically
identified herein contain the entire agreement between the parties with respect
to the transactions contemplated herein and supersede all previous written or
oral negotiations, commitments and understandings.
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11.07 Waivers, Remedies. Any waiver hereunder must be in writing and
signed by the party to be bound thereby. A waiver of any of the terms or
conditions of this Agreement shall not in any way affect, limit or waive a
party's rights under any other term or condition of this Agreement. All remedies
under this Agreement shall be cumulative and not alternative.
11.08 Counterparts and Headings. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. All headings are inserted
for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
11.09 Severability. If and to the extent that any court of competent
jurisdiction holds any provision (or any part thereof) of this Agreement to be
invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.
11.10 Binding Effects. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, their successors, legal representatives
and assigns.
11.12 Governing Law. This Agreement shall be governed by the laws of
the State of Delaware applicable to agreements made and to be performed entirely
within such State.
11.13 No Third Party Beneficiaries. Except as provided in Section 7.08
nothing contained in this Agreement shall be deemed (a) to confer rights on any
person or entity (including, without limitation, any employees of FFC), or (b)
to indicate that this Agreement has been entered into for the benefit of any
person or entity (including, without limitation, any employees of FFC) other
than the parties hereto.
11.14 Knowledge of Falk. For the purposes of this Agreement, whenever
the phrase "to the best knowledge of" or any similar phrase is used with respect
to Falk it shall be deemed to include the knowledge of Eddie, Kitty Falk, FHC,
CFAW and Falk, but no other person or entity.
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IN WITNESS WHEREOF, the Parties hereto have duly executed this
Agreement as of the day and year first above written.
AUTOINFO, INC.
By :_____________________________
AUTOINFO FINANCE OF VIRGINIA, INC.
By :_____________________________
__________________________________
FALK FINANCE COMPANY, INC.
By :_____________________________
FALK HOLDING CORP.
By: ______________________________
__________________________________
CHARLES E. FALK, SR.
__________________________________
CHARLES E. FALK, JR.
__________________________________
CHARLES A. MILLS III
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