SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 30, 1997
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ACORN VENTURE CAPITAL CORPORATION
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(Exact name of registrant as specified in charter)
Delaware 814-29 59-2332857
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(State or other jurisdic- (Commission (IRS employer
tion of incorporation) file number) identification no.)
100 Park Avenue, 23rd Floor, New York, New York 10017-5582
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 481-9500
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7020 A.C. Skinner Parkway, Jacksonville, Florida 32256
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(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On May 30, 1997, the Registrant consummated the sale and transfer
of substantially all of the assets of its wholly-owned subsidiary,
Automotive Industries, Inc., a Delaware corporation (the "Seller"), to
Morgan Tire & Auto, Inc., a Florida corporation (the "Purchaser"),
pursuant to an Asset Purchase Agreement by and among the Purchaser, the
Registrant and the Seller. In addition, the parties entered into an
Assumption Agreement pursuant to which the Purchaser agreed to assume
and pay certain liabilities and obligations of the Seller. The purchase
price (the "Purchase Price") paid to the Seller by Purchaser was
$2,500,000, subject to adjustment. In addition, the Purchaser has
agreed to pay to Seller an incentive purchase price ("Incentive Purchase
Price") in an amount equal to 1% of the aggregate gross sales of the
Seller's 28 currently existing locations, for each of the three years
beginning June 1, 1997 and ending May 31, 2000 up to a maximum aggregate
amount of $500,000. The Purchase Price is subject to adjustment on a
dollar for dollar basis in the event and to the extent the difference
between the value of the assets transferred to and the liabilities
assumed by the Purchaser as of the closing date (the "Net Asset Value")
varies from $1,025,000 by more than $25,000. If such adjustment results
in an increase to the Purchase Price (i.e. the Net Asset Value exceeds
$1,050,000), the amount of such increase shall be added to the Incentive
Purchase Price payable to the Seller for the annual period ending May
31, 2000; provided, however, if the Seller has earned the entire
$500,000 of Incentive Purchase Price prior to such date, the increased
amount of the Purchase Price shall be paid to the Seller at the time the
final payment of Incentive Purchase Price is payable to the Seller. If
such adjustment results in a reduction to the Purchase Price (i.e. the
Net Asset Value is less than $1,000,000), the amount of such reduction
shall be deducted from the Incentive Purchase Price payable by the
Purchaser to the Seller for the annual period ending May 31, 1998.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
Exhibit No. Description
2.1 Asset Purchase Agreement, dated May 30, 1997,
by and among Morgan Tire & Auto, Inc., Acorn
Venture Capital Corporation and Automotive
Industries, Inc.
2.2 Assumption Agreement, dated May 30, 1997, by
and among Morgan Tire & Auto, Inc., Acorn
Venture Capital Corporation and Automotive
Industries, Inc.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: June 9, 1997
ACORN VENTURE CAPITAL
CORPORATION
By:Stephen A. Ollendorff
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Stephen A. Ollendorff
Chairman and
Chief Executive Officer
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT dated this 30th day of May, 1997
by and among MORGAN TIRE & AUTO, INC., a Florida corporation (the
"Purchaser"), ACORN VENTURE CAPITAL CORPORATION, a Delaware
corporation (the "Stockholder"), and AUTOMOTIVE INDUSTRIES, INC.,
a Delaware corporation (the "Seller").
W I T N E S S E T H:
WHEREAS, the Seller desires to sell, transfer and assign to
the Purchaser, and the Purchaser desires to purchase and assume
from the Seller, substantially all of the assets and certain of the
liabilities of the Seller, pursuant to and in accordance with the
terms and conditions of this Agreement; and
WHEREAS, the Stockholder owns all of the issued and
outstanding shares of the capital stock of the Seller and agrees to
be jointly and severally liable with the Seller for all of the
obligations of the Seller hereunder.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
SALE OF ASSETS; ASSUMPTION OF LIABILITIES; CLOSING
1.1 Sale of Assets. Subject to the terms and conditions of
this Agreement, at the Closing (as defined herein), the Seller
shall sell, assign, transfer and deliver to the Purchaser, and the
Purchaser shall purchase from the Seller, all of the Seller's
right, title and interest in and to the following assets
(collectively, the "Assets"):
(a) all trade accounts receivable and other
miscellaneous receivables of the Seller but excluding receivables
from the Stockholder and from any officers, directors or affiliates
of the Seller or the Stockholder (collectively, the "Intercompany
Receivables");
(b) all inventory of the Seller;
(c) all fixed assets of the Seller;
(d) subject to Section 1.8 hereof, all agreements,
contracts, leases, license agreements, purchase and sales orders
and other executory instruments to which the Seller is a party and
which relate to the Seller's business, other than this Agreement
and the employment and termination agreements with officers and
employees of the Seller (collectively, the "Contracts");
(e) the real property owned by the Seller located in
Gainesville, Georgia;
(f) the leases of real property leased from third
parties by the Seller and used in the conduct of the Seller's
business;
(g) subject to Section 6.5 hereof, all prepaid expenses
of the Seller (but excluding any prepaid income taxes);
(h) all books and records of or maintained exclusively
for the Seller's business since June 1, 1996 including but not
limited to price lists, mailing lists, customer lists and records,
sales order files, personnel records (to the extent related to
employees to be hired by the Purchaser) and accounting records;
(i) subject to Section 6.1 hereof, all guaranties,
warranties, indemnities and similar rights in favor of the Seller
to the extent related to any Asset;
(j) all rights of the Seller to the names "Automotive
Industries", "Jim Martin Tire", "Mott Tire" and "Wall Tire"; and
(k) all goodwill associated with or attributable to the
Seller's business.
The parties acknowledge and agree that all cash and cash
equivalents of the Seller (in bank accounts or otherwise) and all
deferred tax assets of the Seller are expressly excluded from this
transaction and are not included in the Assets.
1.2 Assumption of Liabilities. Subject to the terms and
conditions of this Agreement, at the Closing, the Purchaser shall
assume and pay, discharge or perform when due the following
liabilities and obligations of the Seller (collectively, the
"Assumed Liabilities"):
(a) all long term debt of the Seller to be set forth on
the Closing Date Balance Sheet in accordance with Section 8.1
hereof, other than such debt owed to Falken Tire Corporation
("Falken") in excess of Three Hundred Thousand Dollars ($300,000)
and notes payable to officers and affiliates of the Seller;
(b) all regular accounts payable of the Seller to be set
forth on the Closing Date Balance Sheet in accordance with Section
8.1 hereof, including any indebtedness to Falken up to Three
Hundred Thousand Dollars ($300,000) converted into accounts payable
or a ledger balance in connection herewith;
(c) all accrued expenses of the Seller to be set forth
on the Closing Date Balance Sheet in accordance with Section 8.1
hereof;
(d) all current sales tax payable by the Seller to be
set forth on the Closing Date Balance Sheet in accordance with
Section 8.1 hereof;
(e) all deferred revenue of the Seller to be set forth
on the Closing Date Balance Sheet in accordance with Section 8.1
hereof;
(f) all notes payable of the Seller (including the
current portion of the Seller's long term debt) to be set forth on
the Closing Date Balance Sheet in accordance with Section 8.1
hereof;
(g) all capitalized lease obligations of the Seller to
be set forth on the Closing Date Balance Sheet in accordance with
Section 8.1 hereof;
(h) subject to Section 1.8 hereof, all liabilities and
obligations of the Seller under the Contracts accruing or to be
performed from and after the Closing Date; and
(i) all indemnities, warranties, service or other
obligations and liabilities arising out of or relating to goods
manufactured or sold or services provided by the Seller on or
before the Closing Date.
The Purchaser does not assume and shall have no liability
whatsoever for any liability or obligation of any nature of the
Seller other than the Assumed Liabilities.
1.3 Purchase Price. The Purchaser shall pay the Seller a
purchase price equal to the sum of Two Million Five Hundred
Thousand Dollars ($2,500,000) (the "Purchase Price"). The Purchase
Price is subject to adjustment as set forth in Section 8.3 hereof.
The Purchase Price shall be payable to the Seller at the Closing by
wire transfer of immediately available funds to an account
designated by the Seller to the Purchaser.
1.4 Allocation of Purchase Price. The parties agree to
allocate the Purchase Price among the Assets and the Assumed
Liabilities as soon as practicable after the Closing Date Balance
Sheet is prepared. Each of the Seller, the Stockholder and the
Purchaser agrees that it will not take a position that is in any
way inconsistent with such allocation on any income tax return,
before any government agency charged with the collection of any
income tax or in any judicial proceeding.
1.5 Incentive Purchase Price. The Purchaser shall also pay
to the Seller an incentive purchase price (the "Incentive Purchase
Price") in an amount equal to one percent (1%) of the aggregate
gross sales of all of the Seller's 28 currently existing locations,
a list of which is set forth on Schedule 1.5 hereto, for each of
the three years beginning June 1, 1997 and ending May 31, 2000 up
to a maximum aggregate amount of Five Hundred Thousand Dollars
($500,000). For purposes of this Agreement, "gross sales" shall
mean all revenues generated from sales made and services performed
less discounts, rebates, credits, refunds and returns during such
period. The Purchaser agrees to grant discounts, rebates, credits,
refunds and returns in a manner generally consistent with past
practice. The Purchaser shall pay the Incentive Purchase Price to
the Seller on or before July 15th immediately following the annual
period that such Incentive Purchase Price was earned. The
Purchaser agrees to provide to the Seller (or the Stockholder, if
the Stockholder so elects in writing) on a quarterly basis a
statement setting forth the total amount of gross sales generated
by such locations during each quarter that the Incentive Purchase
Price may be earned. Each statement shall be accompanied by a
certificate of an officer of the Purchaser certifying that such
statement is accurate and complete. The Seller (or the
Stockholder) shall have fifteen (15) days from the date of receipt
to verify the accuracy of any gross sales statement. The Seller
(or the Stockholder) and the Purchaser shall attempt to promptly
resolve any dispute regarding the accuracy of any statement. If
the parties are unable to resolve any such dispute within fifteen
(15) days, the matter shall be submitted to binding arbitration
using a "big six" accounting firm not otherwise engaged by either
the Seller, the Stockholder or the Purchaser (a "CPA Firm"), the
cost of which shall be shared equally by the Purchaser and the
Seller (or the Stockholder).
Notwithstanding the foregoing, nothing herein shall preclude
the Purchaser from closing any of the locations listed on Schedule
1.5 hereto; provided, however, that in the event the Purchaser
closes any of such locations and opens a new location within two
miles of such closed location and within three months of such
closure, the gross sales generated by such new location shall be
included in the calculation of the Incentive Purchase Price and
provided, further, that in the event the Purchaser sells all or
substantially all of its assets or all or a majority of its
outstanding capital stock to an entity not affiliated with or
managed by Larry C. Morgan, then the entire unpaid amount of the
$500,000 Incentive Purchase Price and any additional Purchase Price
owing to the Seller in accordance with Section 8.3 hereof shall
become immediately due and payable to the Seller (or the
Stockholder, if the Stockholder so elects in writing). In the
event the Seller is unable to assign to the Purchaser a lease for
any of the locations listed on Schedule 1.5 or provide the
operational and economic equivalent (subject to related
liabilities) thereof in accordance with Section 1.8 hereof, then
the Purchaser shall not be obligated to include in the calculation
of the Incentive Purchase Price the gross sales of any new location
opened by the Purchaser in replacement thereof, regardless of the
time or place of the opening of such new location.
1.6 Closing. The closing of the purchase and sale of the
Assets and the assignment and assumption of the Assumed Liabilities
(the "Closing") shall take place at the offices of Shumaker, Loop
& Kendrick LLP, 101 East Kennedy Boulevard, Suite 2800, Tampa,
Florida on May 30, 1997 but with effect on May 31, 1997 (the
"Closing Date"). For purposes hereof, each of the Seller and the
Purchaser agree that the Closing shall be deemed to have occurred
at 11:59 p.m. on May 31, 1997.
1.7 Documents Delivered At Closing. At the Closing:
(a) the Seller shall deliver or cause to be delivered to
the Purchaser the certificates, documents and instruments described
in Section 4; and
(b) the Purchaser shall deliver or cause to be delivered
to the Seller (i) the Purchase Price, in the form and manner
specified in Section 1.2, and (ii) the certificates, documents and
instruments described in Section 5.
1.8 Nonassignability of Assets. Subject to the provisions of
Section 4.5, to the extent that the sale, assignment or transfer to
the Purchaser of any asset that is intended to be an Asset would
require any third party approval and such approval shall not have
been obtained prior to the Closing, the Closing shall proceed
without the sale, assignment or transfer of any such asset and (i)
the asset (and its related liabilities) will not be considered an
Asset or an Assumed Liability for the purposes hereof unless and
until such approval has been obtained (except with respect to
consents to assignments of the properties listed on Schedule 1.5
hereto which properties do constitute Assets and related Assumed
Liabilities); (ii) the parties shall use their reasonable best
efforts to obtain such approval; and (iii) pending such approval
the parties shall cooperate with each other in any mutually
agreeable, reasonable and lawful arrangement designed to provide
the Purchaser with the economic and operational equivalent of the
use of such asset and its related liabilities.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND THE STOCKHOLDER
2. Representations and Warranties of the Seller and the
Stockholder . The Seller and the Stockholder hereby jointly and
severally represent and warrant to the Purchaser as follows, except
as set forth on the Disclosure Schedule attached hereto and made a
part hereof, each of which exception shall specifically identify
and be limited to the relevant subsection hereof to which it
relates and shall be deemed to be a representation and warranty as
if made hereunder (the "Disclosure Schedule"):
2.1 Organization and Good Standing. Each of the Seller and
the Stockholder is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the character or location of the properties
owned or leased by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be
so qualified would not have a material adverse effect on its
operations or condition (financial or otherwise) except for Florida
where the Seller has failed to file an Annual Report due May 1997.
2.2 Corporate Authority. Each of the Seller and the
Stockholder has full corporate power and authority to own and use
its property, to carry on its business as now being conducted and
to execute, deliver and perform all of its obligations under this
Agreement and all other agreements to be executed, delivered and
performed by it hereunder. Each of the Seller and the Stockholder
has taken all necessary corporate action to authorize and approve
the execution, delivery and performance of this Agreement
(including approval by the Boards of Directors of the Seller and
the Stockholder). This Agreement has been duly and validly
executed and delivered by the Seller and the Stockholder and
constitutes a legal, valid and binding obligation of the Seller and
the Stockholder, enforceable against each of them in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance, moratorium and similar laws affecting creditors' rights
and general equity principles.
2.3 No Conflict; Approvals. Neither the execution and
delivery of this Agreement nor the consummation or performance of
any of the transactions contemplated hereby will (i) violate or
conflict with any provision of the Certificate of Incorporation or
By-laws of the Seller or the Stockholder or any constitution,
statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any government, governmental
agency or court to which the Seller or the Stockholder or any of
their respective assets or properties is subject, or (ii) except as
set forth on the Disclosure Schedule, result in the breach or
termination of any provision of, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or
cancel or exercise any remedy under, or require any notice or
constitute a breach or default under, any note, bond, indenture,
lease, material agreement or other instrument or obligation to
which the Seller or the Stockholder is a party or by which any of
the assets or properties of the Seller or the Stockholder may be
subject, bound or affected. Except as set forth on the Disclosure
Schedule, there are no authorizations, consents or approvals of the
parties under any material contracts, commitments or understandings
to which the Seller or the Stockholder is a party or of any other
person (including any public body or authority) required to permit
the consummation on the part of the Seller or the Stockholder of
the transactions contemplated by this Agreement. Except as set
forth on the Disclosure Schedule, neither the Seller nor the
Stockholder is a party to any contract or subject to any legal
restriction that would prevent or restrict complete fulfillment by
the Seller or the Stockholder of all of the terms and conditions of
this Agreement or compliance with any of its obligations hereunder.
2.4 Financial Statements. The Seller has delivered to the
Purchaser (a) the audited balance sheet of the Seller as of
December 31, 1996 and the related statement of operations and
changes in financial position for the fiscal year then ended,
including the notes thereto, and (b) the unaudited balance sheet of
the Seller as of March 31, 1997 (the "Balance Sheet") and the
related statement of operations and changes in financial position
for the period then ended, including the notes thereto
(collectively the "Financial Statements"). The Financial
Statements, including the notes thereto, have been prepared in
accordance with generally accepted accounting principles
consistently applied by the Seller according to past practice
throughout the periods indicated. The Financial Statements fairly
present, in all material respects, the financial condition and the
results of operations of the Seller as at the dates and for the
periods indicated.
2.5 Absence of Changes. Since March 31, 1997, there has not
been any material adverse change in the business, operations,
assets, properties or condition (financial or otherwise) of the
Seller and, to the best knowledge, information and belief of the
Seller and the Stockholder, no event has occurred or circumstance
exists that could reasonably be expected to result in such a
material adverse change. Since March 31, 1997 the Seller has not,
except as expressly set forth in the Disclosure Schedule (i)
incurred any liability or obligation known to the Seller of any
nature (whether accrued, absolute or contingent), except in the
ordinary course of business, (ii) permitted any of its assets to be
subjected to any mortgage, pledge, lien, security interest,
encumbrance, claim, restriction or charge of any kind except in the
ordinary course of business, (iii) sold, transferred or otherwise
disposed of any assets except in the ordinary course of business,
(iv) suffered any loss, damage or destruction to any of its assets
or properties, whether or not covered by insurance, materially and
adversely affecting the Seller, (v) entered into any contract or
made any capital expenditure or commitment therefore, except in the
ordinary course of business, (vi) declared or paid any dividend or
made any distribution on any shares of its capital stock or deeded,
purchased or otherwise acquired any shares of its capital stock or
granted any option, warrant or other right to purchase or acquire
any such shares, (vii) made any bonus payments or profit sharing
distributions or payments of any like kind to the Stockholder or
the employees, officers or directors of the Seller, (viii)
increased its indebtedness for borrowed money, except current
borrowings from banks in the ordinary course of business, or made
any loan to the Stockholder or any officer, employee, person or
entity, (ix) written off as uncollectible any notes or accounts
receivable, except write-offs in the ordinary course of business
charged to applicable reserves, none of which individually or in
the aggregate is materially adverse to the Seller, (x) granted any
increase in the rate of wages, salaries, bonuses or other
remuneration to any executive employee or other employee, except in
the ordinary course of business, (xi) canceled or waived any claims
or rights of substantial value, (xii) made any change in any method
of business accounting, (xiii) amended its Certificate of
Incorporation or By-Laws, or (xiv) agreed, whether or not in
writing, to do any of the foregoing. Since March 31, 1997, the
Seller has conducted its business in the ordinary and usual course
and has used its best efforts to preserve intact its business
organization, keep available the services of its officers and
employees, and maintain satisfactory relationships with vendors,
licensors, suppliers, distributors, clients and others having
business relationships with the Seller.
2.6 Books and Records. The books of account and other
records of the Seller, all of which have been made available to the
Purchaser prior to the Closing, are complete and accurate in all
material respects. The Seller does not have any of its records,
systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon
or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which are not
under the exclusive ownership and direct control of the Seller
(including all means of access thereto and therefrom).
2.7 Title to the Assets. Except as set forth on the
Disclosure Schedule and except with respect to leased property, the
Seller has and at the Closing will transfer to the Purchaser good
and marketable title, in fee simple in the case of real property,
to the tangible Assets and all of the Seller's right and interest
in and to the intangible Assets, in each instance free and clear of
all encumbrances, liens, charges, claims or other restrictions of
any kind or character, except for (i) liens to secure payment of
liabilities to be reflected in the Closing Date Balance Sheet in
accordance with Section 8.1 hereof, (ii) liens consisting of zoning
or planning restrictions, easements, permits and other restrictions
or limitations on the use of real property or irregularities in
title thereto which do not materially detract from the value of, or
materially impair the use of, or otherwise materially impair the
marketability of the Seller's title to such property in the
operation of its business and (iii) liens for current taxes,
assessments or governmental charges or levies on property not yet
due and not delinquent and as to which sufficient reserves have
been created. The Assets constitute all of the assets necessary
for the conduct of the Seller's business in the manner in which it
is currently conducted.
2.8 Real Property. The Disclosure Schedule contains an
accurate and complete list of all real property which is owned by
the Seller in its operations (the "Owned Real Property"). Except
as set forth on the Disclosure Schedule, the Owned Real Property is
not subject to any material rights of way, building use
restrictions, exceptions, variances, reservations or limitations of
any nature and, to the best knowledge, information and belief of
the Seller and the Stockholder, all of the buildings, structures
and appurtenances situated thereon are in good operating condition
and are adequate and suitable for the purposes for which they are
presently being used. None of such buildings, structures or
appurtenances (or any equipment therein), nor the operation or
maintenance thereof, violate in any material respect any
restrictive covenant or any provision of any federal, state or
local law, ordinance, rule or regulation, or encroach on any
property owned by others; and no condemnation proceeding is pending
or, to the best knowledge, information and belief of the Seller and
the Stockholder, threatened which would preclude or materially
impair the use of any such property by the Seller for the purposes
for which it is currently used.
2.9 Leases. The Disclosure Schedule contains an accurate and
complete list and description of certain material terms of all
leases to which the Seller is a party as lessee (the "Leases").
Each Lease is in full force and effect, all rents and additional
rents due to date on each Lease have been paid, in each case the
Seller is in peaceable possession thereunder and is not in material
default thereunder and no waiver, indulgence or postponement of the
Seller's obligations thereunder has been granted by the lessor,
and, except as set forth on the Disclosure Schedule, there exists
no event of default or event, occurrence, condition or act
(including the purchase of the Assets hereunder) which, with the
giving of notice, the lapse of time or the happening of any further
event or condition, would become a material default by the Seller
under any Lease. The Seller has not knowingly violated in any
material respect or, except as set forth on the Disclosure
Schedule, been given written notice of violation of any of the
terms or conditions under any Lease and to the best knowledge,
information and belief of the Seller and the Stockholder, all of
the material covenants to be performed by any other party under any
Lease have been fully performed. The property leased by the Seller
is in a state of reasonably good maintenance and repair and is
reasonably adequate and suitable for the purposes for which it is
presently being used. The parties expressly agree that, for
purposes of the Leases with Jim Martin and Patricia Philippe, all
obligations thereunder to maintain or repair the premises subject
thereto, save painting, are material covenants and terms of such
Leases and any failure to so maintain or repair the premises in
accordance with the requirements of such Leases are material
violations of and material defaults under such Leases.
2.10 Fixed Assets. The Seller has delivered to the Purchaser
a true, correct and complete list, as of May 28, 1997, description
and location of the significant items of machinery, equipment,
furniture, fixtures, tools, signs, small wares and other items of
tangible personal property (excluding inventory) which are owned by
the Seller and used or useful in or pertain to the Seller's
business or the operation thereof, whether or not reflected on the
books of the Seller or in the possession of the Seller and whether
or not presently in use (collectively, the "Fixed Assets"). The
Fixed Assets are in reasonably good operating condition and repair,
subject only to ordinary wear and tear, and are reasonably adequate
and suitable for the purposes for which they are currently being
used.
2.11 Contracts. The Disclosure Schedule contains an accurate
and complete list of all Contracts (other than the Leases) which
(i) are material to the condition (financial or otherwise),
operations, assets or business of the Seller; (ii) involve total
annual sales, payments or commitments by the Seller in excess of
$15,000; (iii) unless cancelable on 30 or fewer days' notice
without any liability, penalty or premium, extend by their terms
beyond one year; (iv) are contracts with security holders,
directors, officers, employees, agents or consultants, or any
affiliates of the foregoing; (v) provide for a discount other than
in the ordinary course of business and consistent with past
practices; (vi) provide for the future purchase by the Seller of
any materials, equipment, services or supplies continuing for a
period of more than twelve months from the date of such contract
(including periods covered by any option to renew by either party),
or provide for a price materially in excess of current market
prices or for purchase obligations in excess of normal operating
requirements over its remaining term; or (vii) involve any of the
following: (A) any borrowings of money or guarantees,
endorsements, commitments or other arrangements rendering the
Seller liable or responsible (whether directly, contingently or
otherwise) for the obligations or any other individual, firm or
corporation; (B) any covenants purporting to limit the freedom of
the Seller to compete in any line of business in any geographic
area, or (C) the performance of which (in accordance with past
practices) can reasonably be expected by the Seller to result in a
financial loss to the Seller. Complete and correct copies of all
such Contracts have been delivered or made available to the
Purchaser. All such Contracts are valid and binding, in full force
and effect and enforceable in accordance with their respective
terms (subject to bankruptcy, insolvency, fraudulent conveyance,
moratorium and similar laws affecting creditors' rights and general
equity principles). Except as set forth on the Disclosure
Schedule, the Seller is not in violation of any of the material
terms of any such Contract, or in material default under any such
Contract, nor has there occurred an event or condition which, with
the passage of time or giving of notice (or both) would constitute
a material violation or a material default by the Seller under any
such Contract, nor, to the best knowledge, information and belief
of the Seller and the Stockholder are any of the other parties to
such Contracts in material violation or material default
thereunder.
2.12 Litigation. 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 or, to the best
knowledge, information and belief of the Seller and the
Stockholder, any investigation by any governmental or other
instrumentality or agency, pending or, to the best knowledge,
information and belief of the Seller and the Stockholder,
threatened against or affecting the Seller or any of its properties
or rights which could reasonably be expected to (i) materially and
adversely affect the right or ability of the Seller to carry on its
business as now conducted; (ii) materially and adversely affect the
condition, whether financial or otherwise, or properties of the
Seller; or (iii) question the validity of this Agreement or any of
the transactions contemplated hereby. The Seller is not subject to
any judgment, order or decree entered in any lawsuit or proceeding
which could reasonably be expected to have a material adverse
effect on any of its operations, business practices or on its
ability to acquire any property or conduct business in any area, or
consummate the transactions contemplated hereby.
2.13 Taxes.
(a) The Seller has, since December 31, 1993, filed, or
prior to the Closing will file, within the times and within the
manner prescribed by law, all federal, state, local and foreign tax
returns, information returns, forms, reports, declarations and all
other tax reports and returns (collectively, "Returns") which are
required to be filed by it through the Closing Date. In addition,
each Affiliated Group (as defined in Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code") and corresponding
provisions of state and local law) that has included the Seller
since January 1, 1994, has filed all federal, state and local
income tax returns ("Consolidated Returns") required to be filed by
such Group for each taxable period during which the Seller was a
member thereof. Each Return and each Consolidated Return is true,
correct and complete and accurately reflects or will fully and
accurately reflect all required and appropriate liability for taxes
of the Seller and each such Affiliated Group for the periods
covered thereby and no Return or Consolidated Return has been
amended. All federal, state, local and foreign income, profits,
franchise, sales, use, occupancy, excise and other taxes and
assessments, including estimated taxes and interest and penalties
(collectively, "Taxes"), payable by or due from the Seller have
been fully and timely paid or fully provided for in the books and
records of the Seller except for such Taxes which are being
contested in good faith and as to which adequate reserves
(determined in accordance with generally accepted accounting
principles consistently applied) have been provided in the Balance
Sheet or which are disclosed in the Disclosure Schedule. All
income Taxes payable and due by each Affiliated Group have been
fully paid or fully provided for in the books and records of such
Affiliated Group. The Seller (and, in the case of any Consolidated
Return, its Affiliated Group) has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to the filing of any Return or Consolidated Return or
the payment of any Tax assessment or deficiency. Notwithstanding
the foregoing, the parties acknowledge that the representations and
warranties contained in this subsection (a) are not being made in
respect of ServiceMax Tire & Auto Centers, Inc. or ServiceMax Tire
and Auto Centers of Michigan, Inc.
(b) All deficiencies proposed as a result of any audits
conducted of the Returns of the Seller by the Internal Revenue
Service or relevant state or local tax authorities have been paid,
reserved against, settled or are being contested in good faith by
appropriate proceedings and are disclosed on the Disclosure
Schedule. No examination, audit or inquiry of any Return, federal,
state or otherwise, of the Seller or of any Consolidated Return is
currently in progress and neither the Seller nor any Affiliated
Group has received notice of intent to commence any examination,
audit or inquiry of any such Return from any taxing authority.
(c) The charges, accruals, and reserves with respect to
Taxes on the Balance Sheet and the books and records of the Seller
are adequate (determined in accordance with generally accepted
accounting principles consistently applied) and are at least equal
to the Seller's liability for Taxes (other than for Taxes reflected
on a Consolidated Return). There exists no proposed tax assessment
against the Seller except as disclosed in the Balance Sheet. All
Taxes that the Seller is or was required to withhold or collect
have been duly withheld or collected and, to the extent required,
have been paid to the proper governmental authority.
2.14 Liabilities. Except as set forth in the Disclosure
Schedule, the Seller has no material liabilities or obligations of
any nature known by the Seller or the Stockholder (whether
absolute, accrued or contingent) except for liabilities or
obligations adequately reflected or reserved against in the Balance
Sheet, current liabilities incurred subsequent to March 31, 1997 in
the ordinary course of business to the extent such liabilities are
reflected on the Seller's books and records and liabilities and
obligations arising out of any Contract to which the Seller is a
party which was entered into in the ordinary course of business.
All trade accounts payable of the Seller set forth on the Balance
Sheet reflect, and to be set forth on the Closing Date Balance
Sheet in accordance with Section 8.1 hereof will reflect,
obligations actually incurred. Substantially all of the trade
payables to be reflected on the Closing Date Balance Sheet in
accordance with Section 8.1 will not be more than thirty (30) days
past due. Except as set forth in the Disclosure Schedule, the
Seller is not in default in any material respect under the terms or
conditions of any indebtedness for which it is obligated directly,
indirectly or as an endorser thereof. To the best knowledge,
information and belief of the Seller and the Stockholder, the
holders and payees of any and all of the Seller's liabilities
comprising a portion of the Assumed Liabilities, material or
otherwise, will not accelerate or demand payment from the Seller of
any such liabilities as a result of the consummation of the
transactions herein described, except as set forth in the
Disclosure Schedule.
2.15 Insurance. Set forth in the Disclosure Schedule is a
true and complete list of all insurance policies which the Seller
maintains with respect to its business, properties, officers,
directors and employees together with the name of the insurer, the
type and amount of coverage, annual premium and deductible amounts
and the expiration dates therefor. All such policies are in full
force and effect and accurate and complete copies thereof have been
delivered to the Purchaser. The Seller has paid all premiums due
and has otherwise performed all of its material obligations under
such policies and there currently exists no right of termination or
refusal of coverage on the part of the insurance carriers as a
result of any prior default on the part of the Seller. Such
policies will continue in full force and effect through the
consummation of this transaction and do not provide for any
retrospective premium adjustment or other experience based
liability on the part of the Seller.
2.16 Intellectual Properties. The Disclosure Schedule lists
all patents, unpatented inventions, software, trademarks, trade
names, service marks, copyrights and all registrations and
applications therefor and licenses thereto owned or used by the
Seller in the operation of its business (collectively the
"Intellectual Property"). The Intellectual Property owned by the
Seller is owned free and clear of all liens, claims, restrictions
and encumbrances of any nature whatsoever. The Seller has the
right to use the Intellectual Property in the operation of its
business without payment to a third party. No Intellectual
Property infringes or, to the best knowledge, information and
belief of the Seller and the Stockholder, is infringed upon by any
rights of third parties or, to the best knowledge, information and
belief of the Seller and the Stockholder, is involved in any
opposition, invalidation or cancellation action. The Intellectual
Property is sufficient for the operation of the Seller's business
as currently conducted.
2.17 Compliance with Laws. The Seller is in compliance in all
material respects with all applicable laws, rules, regulations,
ordinances, orders, judgments and decrees of each and every
jurisdiction applicable to the Seller. Neither the Seller nor the
Stockholder has received any notice or other communication from any
governmental authority or agency regarding any actual, alleged or
potential violation of, or failure to comply with, any law, rule,
regulation, ordinance, order, judgment or decree and, to the best
knowledge, information and belief of the Seller and the
Stockholder, there does not exist any reasonable basis for any
claim of material default under or material violation of any such
law, rule, regulation, ordinance, order, judgment or decree.
2.18 Inventory. The inventory of the Seller have been
acquired and maintained in the ordinary course of business and
consist of a quality and quantity usable or saleable in the
ordinary course of the Seller's business except that all obsolete
inventory, defined by the respective manufacturers as noncurrent
inventory, has either been reserved for on the Balance Sheet (or,
if after the date thereof, on the Seller's books and records) or
written down to net realizable value in accordance with generally
accepted accounting principles consistently applied. The Seller is
not under any liability or obligation with respect to the return of
any inventory in the possession of any third party. All
inventories not written off or written down have been valued at the
lower of weighted average cost or market value.
2.19 Accounts Receivable. All of the accounts receivable
(other than Intercompany Receivables) (the "Accounts Receivable")
due or recorded in the records and books of account of the Seller
as being due to the Seller represent valid obligations arising from
sales actually made or services actually performed in the ordinary
course of business. Unless paid prior to the Closing Date, the
Accounts Receivable will be as of the Closing Date current and
collectible at their recorded amounts, except to the extent of the
reserves to be shown in the Closing Date Balance Sheet in
accordance with Section 8.1 hereof. The reserves set forth on the
Balance Sheet and the books and records of the Seller for periods
subsequent to March 31, 1997 are adequate and established in
accordance with generally accepted accounting principles
consistently applied. None of the Accounts Receivable are on the
date hereof subject to any counterclaim or set-off. There has been
no material adverse change since March 31, 1997 in the amount of
Accounts Receivable, or the reserves with respect thereto, from
that reflected in the Balance Sheet.
2.20 Employees.
(a) The Disclosure Schedule sets forth as of May 24,
1997 an accurate and complete list of all officers and employees of
the Seller showing as to each the nature of the officer's or
employee's job, years of service, the amount or rate of
compensation, all accruals of vacation, personal days and sick
leave and eligibility to participate in any of the Seller's
pension, retirement, profit sharing, deferred compensation, stock
bonus, stock option, stock ownership, insurance, medical or any
other employee benefit plan.
(b) To the best knowledge, information and belief of the
Seller and the Stockholder, no employee of the Seller who is to be
hired by the Purchaser is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, non-
competition or proprietary rights agreement, that in any way
adversely affects (i) the performance of his or her duties as an
employee of the Seller, (ii) the ability of the Seller to conduct
its business or (iii) the consummation of the transactions
contemplated by this Agreement.
2.21 Employment Relations. To the best knowledge, information
and belief of the Seller and the Stockholder (a) the Seller is in
substantial compliance with all federal, state, local, foreign or
other applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours,
and has not and is not engaged in any unfair labor practice or
discrimination which would result in a material adverse effect on
the Seller; (b) no unfair labor practice or discrimination
complaint against the Seller is pending before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any
other governmental body; (c) there is no labor strike, dispute,
slow down or stoppage actually pending or threatened against or
involving the Seller; (d) no representation question exists
respecting the employees of the Seller; (e) no formal labor
grievance against the Seller is currently outstanding, no
arbitration proceeding arising out of or under any collective
bargaining agreement is pending and no claim therefor has been
asserted; (f) no collective bargaining agreement is currently being
negotiated by the Seller; and (g) the Seller has not experienced
any material labor difficulty since December 31, 1993. There has
not been, and to the best knowledge, information and belief of the
Seller and the Stockholder, there will not be, any material adverse
change in relations with employees of the Seller as a result of any
announcement of the transactions contemplated by this Agreement.
2.22 Employee Benefit Plans:
(a) List of Plans. Set forth in the Disclosure Schedule
is an accurate and complete list of all employee benefit plans
("Employee Benefit Plans") within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not any such Employee Benefit Plans are
otherwise exempt from the provisions of ERISA, currently maintained
or contributed to by the Seller.
(b) Status of Plans. The Seller does not maintain or
contribute to any Employee Benefit Plan subject to ERISA which is
not in substantial compliance with ERISA, or which has incurred any
accumulated funding deficiency within the meaning of Section 412 or
418B of the Code, or which has applied for or obtained a waiver
from the Internal Revenue Service of any minimum funding
requirement under Section 412 of the Code. The Seller has not
incurred any liability to the Pension Benefit Guaranty Corporation
("PBGC") in connection with any Employee Benefit Plan covering any
employees of the Seller or of any entity treated as a single
employer with the Seller under Section 414 of the Code (an "ERISA
Affiliate") or ceased operations at any facility or withdrawn from
any such Plan in a manner which could subject it to liability under
Sections 4062(f), 4063 of 4064 of ERISA, and neither the Seller nor
the Stockholder knows of any facts or circumstances which could
reasonably be expected to give rise to any liability of the Seller
to the PBGC under Title IV of ERISA which could reasonably be
expected to result in any claims being made against the Purchaser
by the PBGC. The Seller is not a party to any pension plan that is
a "multi-employer plan" (within the meaning of Section 4001(a)(3)
of ERISA) and has not incurred any withdrawal liability (including
any contingent or secondary withdrawal liability), within the
meaning of Sections 4201 and 4202 of ERISA, to any Employee Benefit
Plan which is a multi-employer plan and no event has occurred, and,
to the best knowledge, information and belief of the Seller and the
Stockholder, there exists no condition or set of circumstances,
which presents a material risk of the occurrence of any withdrawal
from or the partition, termination, reorganization or insolvency of
any multi-employer plan which could result in any liability to a
multi-employer plan.
(c) Contributions. The Seller has made all payments and
contributions which the Seller is required to make and which are
currently due with respect to all Employee Benefit Plans in
accordance with applicable law, the terms of the Employee Benefit
Plans or any agreement relating to any Employee Benefit Plan to
which the Seller is a party as of the last day of the most recent
fiscal year of such Employee Benefit Plan ended prior to the date
hereof. The Seller has made adequate provisions for reserves
required to be reflected in accordance with generally accepted
accounting principles consistently applied in the Balance Sheet to
meet contributions that have not been made because they are not yet
due under the terms of any Employee Benefit Plan or related
agreements. Benefits under all Employee Benefit Plans are as set
forth in the documents evidencing such Plans and have not been
materially increased subsequent to the date as of which documents
have been provided. No contributions have been made nor are any
contributions contemplated to be made to any Employee Benefit Plan
for the period subsequent to March 31, 1997 except for regular
premiums paid and payable on group life, health and disability
plans and except as set forth in the Disclosure Schedule.
(d) Tax Qualification. Each Employee Benefit Plan
required to be qualified under Section 401(a) of the Code has been
determined to be so qualified by the Internal Revenue Service and
neither the Seller nor the Stockholder is aware of any facts or
circumstances that have occurred since the date of the last such
determination which resulted or is likely to result in the
revocation of such determination.
(e) Transactions. No "prohibited transaction" (as
defined in Section 406 of ERISA and Section 4975 of the Code) and
no "reportable event" (as defined in Section 4043 of ERISA) for
which the 30-day notice requirement has not been waived by the PBGC
has occurred with respect to any Employee Benefit Plan and the
Seller and each ERISA Affiliate has not engaged in any transaction
with respect to the Employee Benefit Plans which would subject it
to a tax, penalty or liability for prohibited transactions under
ERISA or the Code, nor has any of its directors, officers or
employees to the extent they or any of them are fiduciaries with
respect to such plans, materially breached any of their
responsibilities or obligations imposed upon fiduciaries under
Title I of ERISA or which would result in any claim being made
under or by or on behalf of any such plans by any party with
standing to make such claim.
(f) Documents. The Seller has delivered or caused to be
delivered to the Purchaser and its counsel true and complete copies
of (i) all Employee Benefit Plans as in effect, together with all
amendments thereto which will become effective at a later date, as
well as the latest Internal Revenue Service Determination letter
obtained with respect to any such Employee Benefit Plan qualified
under Section 401 or 501 of the Code and (ii) completed Form 5500
for each of the last two fiscal years for each Employee Benefit
Plan with respect to which such Forms were required to be filed and
will provide when completed Form 5500 for the most recently
completed fiscal year for each Employee Benefit Plan required to
file such form.
2.23 Environmental Matters. Except as set forth in the
Disclosure Schedule:
(a) As used herein the following terms shall have the
following meanings:
"Hazardous Material" means any substance:
(i) the presence of which requires investigation or
remediation under any federal, state or local statute, regulation,
ordinance, order, action, policy or common law; or
(ii) which is defined as a "solid waste," "hazardous
waste," "hazardous substance," "pollutant" or "contaminant" under
any federal, state or local statute, regulation, rule or ordinance
or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.) and/or the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.); or
(iii) the presence of which, under any applicable statute,
regulation, ordinance, order or common law interpreting any of the
foregoing, poses a hazard to the health or safety of persons on or
about the Property; or
(iv) which contains petroleum, including crude oil or any
fraction thereof.
"Off-Site Location" shall mean any site or facility to which
Hazardous Material generated on the Property prior to the Closing
Date was transported for recycling, reuse, treatment, storage or
disposal.
"Environmental Requirements" means all applicable statutes,
regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises and
similar items of all governmental agencies, departments,
commissions, boards, bureaus or instrumentalities of the United
States, states and political subdivisions thereof and all
applicable judicial, administrative and regulatory decrees,
judgments and orders relating to the protection of human health or
the environment.
"Environmental Damages" means all claims, judgments, damages,
losses, penalties, fines, liabilities (including strict liability),
encumbrances, liens, costs and expenses of investigation and
defense of any claim, whether or not such claim is ultimately
defeated, and of any good faith settlement of judgment, of whatever
kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including without limitation
reasonable attorneys' fees and disbursements and consultants' fees,
any of which are incurred at any time as a result of:
(i) the existence prior to the Closing Date of Hazardous
Material upon, about, beneath the Property or migrating or
threatening to migrate to or from the Property, or the existence of
a violation of Environmental Requirements pertaining to the
Property; or
(ii) the release or threatened release of Hazardous Material
upon, about, beneath Off-Site Locations or the existence of a
violation of Environmental Requirements pertaining to the Off-Site
Location for which the Seller or the Seller is a potentially
responsible party regardless of whether the existence of such
Hazardous Material or the violation of Environmental Requirements
arose prior to the present ownership or operation of the Property.
"Property" means all real property owned, leased or used by
the Seller.
(b) Except as set forth on the Disclosure Schedule,
neither the Seller nor the Stockholder has, in violation of any
Environmental Requirement, engaged in or permitted any operations
or activities upon, or any use or occupancy of the Property, or any
portion thereof, for the purpose of or in any way involving the
handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal of any Hazardous
Materials (whether legal or illegal, accidental or intentional) on,
under, in or about the Property, or transported any Hazardous
Materials to, from or across the Property, nor, to the best
knowledge, information and belief of the Seller and the
Stockholder, are any Hazardous Materials presently constructed,
deposited, stored or otherwise located on, under, in or about the
Property, nor, to the best knowledge, information and belief of the
Seller and the Stockholder, have any Hazardous Materials migrated
from the Property upon or beneath other properties, nor, to the
best knowledge, information and belief of the Seller and the
Stockholder, have any Hazardous Materials migrated or threatened to
migrate from other properties upon, about or beneath the Property.
(c) Except as set forth on the Disclosure Schedule, for
so long as the Seller has owned or used the Property, the use,
maintenance and operation of the Property, and all activities and
conduct of business related thereto, have at all times complied in
all material respects with all Environmental Requirements.
(d) Neither the Seller nor the Stockholder has received
written notice or other communication concerning any alleged
violation of Environmental Requirements, whether or not corrected
to the satisfaction of the appropriate authority, nor notice or
other communication concerning alleged liability for Environmental
Damages both in connection with the Property and in connection with
an Off-Site Location and there exists no writ, injunction, decree,
order or judgment outstanding, nor any lawsuit, claim, proceeding,
citation, directive, summons or investigation, pending or, to the
best knowledge, information and belief of the Seller and the
Stockholder, threatened, relating to the ownership, use,
maintenance or operation of the Property or Off-Site Location by
any person, or from alleged violation of Environmental
Requirements, or from the suspected presence of Hazardous Material
on the Property.
(e) Except as set forth on the Disclosure Schedule, for
so long as the Seller has owned or used the Property, no Hazardous
Material has been generated at the Property and transported to an
Off-Site Location.
(f) Underground tanks located on the Property currently
are being and to the best knowledge, information and belief of the
Seller and the Stockholder always have been operated in compliance
in all material respects with all applicable Environmental
Requirements.
(g) If either the Seller or the Stockholder shall become
aware of or receive written notice or other communication
concerning any actual, alleged, suspected or threatened violation
of Environmental Requirements, or liability of either the Seller or
the Stockholder for Environmental Damages in connection with the
Property or an Off-site Location or past or present activities of
any person thereon, including but not limited to written notice or
other communication concerning any actual or threatened
investigation, inquiry, lawsuit, claim, citation, directive,
summons, proceedings, complaint, notice, order, writ, or
injunction, relating to same, then the Seller or the Stockholder
shall deliver to the Purchaser, within ten days of the receipt of
such notice or communication by the Seller or the Stockholder, a
written description of said violation, liability or actual or
threatened event or condition, together with copies of any
documents evidencing same. Receipt of such notice shall not be
deemed (in and of itself) to create any obligation on the part of
the Purchaser to defend or otherwise respond to any such
notification.
2.24 Bank Accounts, Powers of Attorney. Set forth in the
Disclosure Schedule is an accurate and complete list showing (a)
the name and address of each bank in which the Seller has an
account or safe deposit box, the number of any such account or any
such box and the names of all persons authorized to draw thereon or
to have access thereto and (b) the names of all persons, if any,
holding powers of attorney from the Seller and a summary statement
of the terms thereof.
2.25 Broker's or Finder's Fees. No agent, broker, person or
firm acting on behalf of the Seller or the Stockholder other than
Ron Manganiello 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. All fees payable to Ron
Manganiello in connection with this transaction shall be paid by
the Stockholder.
2.26 Copies of Documents. The Seller has made available for
inspection and copying by the Purchaser and its advisers, true,
complete and correct copies of all documents referred to in this
Agreement or in the Disclosure Schedule.
2.27 Related Transactions. Neither the Stockholder nor the
Seller nor to the best of their knowledge, information and belief
any officer, director, employee or affiliate of the Stockholder or
the Seller currently has any interest in any property (whether
real, personal or mixed and whether tangible or intangible), used
in or pertaining to the Seller's business or owns (of record or as
a beneficial owner) an equity interest or any other financial or
profit interest in, a person or entity that (i) has business
dealings or a material financial interest in any transaction with
the Seller (other than business dealings or transactions conducted
in the ordinary course of business with the Seller at substantially
prevailing market prices and on substantially prevailing market
terms), or (ii) is engaged in competition with the Seller with
respect to any line of the products or services of the Seller in
any market presently served by the Seller. Except as set forth in
the Disclosure Schedule, neither the Stockholder nor any of its or
the Seller's officers, directors, employees or affiliates is a
party to any Contract with, or has any claim or right against the
Seller, other than (i) employment contracts between the Seller and
its officers and employees and (ii) intercompany payables and
receivables between the Seller and the Stockholder or between the
Seller and any of its employees and officers.
2.28 Disclosure. No representation or warranty of the Seller
and the Stockholder in this Agreement, and no statement in the
Disclosure Schedule or any certificate delivered in accordance with
the terms hereof by the Seller or any of its officers contains any
untrue statement of a material fact or omits to state any material
fact necessary, in light of the circumstances under which made, in
order to make the statements contained herein or therein not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
3. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Seller and the
Stockholder as follows:
3.1 Organization and Good Standing. The Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Florida.
3.2 Corporate Authority. The Purchaser has full corporate
power and authority to execute, deliver and perform this Agreement
and the other agreements to be executed, delivered and performed by
the Purchaser hereunder; the execution, delivery and performance of
this Agreement has been duly authorized and approved by all
required corporate action of the Purchaser; and this Agreement has
been duly and validly executed and delivered by the Purchaser and
constitutes a valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance,
moratorium and similar laws affecting creditors' rights and general
equity principles.
3.3 No Conflict; Authorization. Neither the execution and
delivery of this Agreement nor the consummation or performance of
any of the transactions contemplated hereby will violate or
conflict with any provision of the Articles of Incorporation or By-
laws of the Purchaser or any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, governmental agency or court to
which the Purchaser or any of its assets or properties is subject
or any material contract or agreement to which it is a party. No
authorization, consent or approval of any public body or authority
or any third party is necessary to permit the consummation of the
transactions contemplated by this Agreement.
3.4 Broker's or Finder's Fees. No agent, broker, person or
firm acting on behalf of the Purchaser other than Tucker Anthony
Inc. 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. All fees payable to Tucker Anthony Inc. in
connection with this transaction shall be paid by the Purchaser.
ARTICLE IV
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
4. Conditions to the Purchaser's Obligations. The
Purchaser's obligation to purchase the Assets, assume the Assumed
Liabilities and take the other actions required to be taken by the
Purchaser at the Closing is conditional upon receipt by the
Purchaser of all the documents required to be delivered by the
Seller pursuant to this Article 4, and compliance by the Seller
with all of the terms of this Article 4, unless any such condition
shall have been waived by the Purchaser in its sole discretion in
writing.
4.1 Transfer Documents. The Seller shall have delivered to
the Purchaser bills of sale, assignments and other appropriate
documents of transfer, including a Warranty Deed with respect to
the Owned Real Property, in form and substance reasonably
satisfactory to the Purchaser, transferring the Assets to the
Purchaser.
4.2 Good Standing and Tax Certificates. The Seller shall
have delivered to the Purchaser (a) a copy of the Seller's
Certificate of Incorporation, including all amendments thereto,
certified by the Secretary of State of Delaware, (b) certificates
from the Secretary of State of Delaware to the effect that the
Seller and the Stockholder are in good standing in such
jurisdiction and (c) a certificate from the Secretary of State or
other appropriate official in each state in which the Seller is
qualified to do business to the effect that the Seller is in good
standing in such state. All such certificates shall be dated not
more than 15 days prior to the Closing Date. In the event any
certificates required by this Section 4.2(c) are not delivered to
the Purchaser on or before the Closing Date, the Seller agrees to
deliver such certificates to the Purchaser as promptly as
practicable after the Closing. The Seller agrees to file an Annual
Report in Florida as promptly as practicable after the Closing.
4.3 Performance of Agreements. Each and all of the
agreements of the Seller and the Stockholder to be performed on or
before the Closing Date pursuant to the terms hereof shall have
been duly performed in all material respects, and the President of
the Seller and the President of the Stockholder shall have
delivered to the Purchaser a certificate, dated the Closing Date,
to such effect.
4.4 No Litigation Threatened. No action or proceeding shall
have been instituted or, to the best knowledge, information and
belief of the Seller and the Stockholder, shall have been
threatened before a court or other government body or by any public
authority to restrain or prohibit any of the transactions
contemplated hereby or which would have a material adverse effect
on the Seller. The President of the Seller and the President of
the Stockholder shall have delivered to the Purchaser a
certificate, dated the Closing Date, to such effect.
4.5 Approvals and Consents. Consents of the third parties to
the assignment to the Purchaser of all material Contracts for which
such consents are required under the terms thereof shall have been
received by the Purchaser and the Seller shall have expended
reasonable best efforts to obtain all other consents and approvals,
if any, necessary to permit the consummation of the transactions
contemplated by this Agreement.
ARTICLE V
CONDITIONS TO THE SELLER'S OBLIGATIONS
5. Conditions to the Seller's Obligations. The Seller's
obligation to sell the Assets, assign the Assume Liabilities and
take the other actions required to be taken by the Seller at the
Closing is conditional upon receipt by the Seller of the Purchase
Price at the Closing, receipt of all of the documents required to
be delivered by the Purchaser pursuant to this Article 5 and
compliance by the Purchaser with all of the terms of this Article
5, unless any such condition shall have been waived by the Seller
in its sole discretion in writing.
5.1 Assumption Agreement. The Purchaser shall have delivered
to the Seller an Assumption Agreement, in form and substance
reasonably satisfactory to the Seller, pursuant to which the
Assumed Liabilities are assumed by the Purchaser.
5.2 Good Standing Certificate. The Purchaser shall have
delivered to the Seller a certificate from the Secretary of State
of Florida to the effect that the Purchaser is in good standing in
such jurisdiction. Such certificate shall be dated not more than
15 days prior to the Closing Date.
5.3 Performance of Agreements. Each and all of the
agreements of the Purchaser to be performed on or before the
Closing Date pursuant to the terms hereof shall have been duly
performed in all material respects, and the Chief Executive Officer
of the Purchaser shall have delivered to the Seller a certificate,
dated the Closing Date, to such effect.
5.4 No Litigation Threatened. No action or proceeding shall
have been instituted or, to the best knowledge, information and
belief of the Purchaser, shall have been threatened before a court
or other government body or by any public authority to restrain or
prohibit any of the transactions contemplated hereby. The Chief
Executive Officer of the Purchaser shall have delivered to the
Seller a certificate, dated the Closing Date, to such effect.
ARTICLE VI
COVENANTS
6.1 Seller Guarantees. The Purchaser shall use reasonable
best efforts to obtain complete releases of all the guarantees made
and the letter of credit obtained by the Stockholder in respect of
obligations of the Seller as set forth in the Disclosure Schedule
(the "Guarantees"). The Purchaser further agrees that, within
thirty (30) days from the Closing Date, it shall (i) obtain a
complete release and discharge of the Stockholder's obligations to
Falken on the portion of the liability to Falken that is an Assumed
Liability and (ii) replace the Stockholder's pledge of a
certificate of deposit in the principal amount of One Hundred
Thousand Dollars ($100,000) to Prime Leasing Inc. and obtain a
release of such pledge for the benefit of the Stockholder. The
Seller shall cooperate with the Purchaser in obtaining such
releases. The Purchaser agrees to indemnify, defend and hold each
of the Stockholder and the Seller harmless from and against any
Losses (as defined in Section 9.2(a) hereof) it may incur after the
Closing Date as a result of or in connection with such Guarantees.
6.2 Further Assurances. From time to time after the Closing
and without further consideration from the Purchaser, the Seller
and the Stockholder, at their sole cost and expense, shall execute
and deliver, or cause to be executed and delivered, to the
Purchaser such further instruments of sale, assignment, transfer
and delivery and take such other action as the Purchaser may
reasonably request in order to more effectively sell, assign,
transfer and deliver the Assets to the Purchaser and consummate the
transactions contemplated hereby and to afford to the Purchaser the
benefit of the transactions contemplated hereby. Following the
Closing, at the request of the Purchaser, the Seller and the
Stockholder shall cooperate with the Purchaser in the preparation
of any financial statements or tax returns and participate as
witnesses in any lawsuit, investigation or administrative hearing
involving the Seller, at no cost or expense to the Purchaser, other
than reimbursement of the Seller's and the Stockholder's out of
pocket expenses incurred as a result thereof.
6.3 Disclosure. Neither the Seller, the Stockholder, the
Purchaser, nor any of their respective employees, agents or
representatives shall make any public disclosure or announcement
concerning the transactions provided for herein without the consent
of the Seller and the Purchaser, other than disclosures or
announcements required, in the good faith judgment of the party
making such disclosure or announcement, to be made by law,
including any securities listing agreements (and, as to any such
disclosures required by law, a copy shall be provided to the
parties at least one business day prior to the dissemination
thereof).
6.4 Tax Matters.
(a) Except as provided in Section 6.4(c) hereof, the
Seller shall be responsible for the timely, accurate and complete
payment of all Taxes and preparation of all Returns of the Seller
for all Tax periods ending before, on or after the Closing Date.
(b) The Stockholder and the Purchaser agree to furnish
or cause to be furnished to each other, upon request, as promptly
as practicable, such information and assistance (including access
to books and records) relating to the Seller or the Assets as is
reasonably necessary for the preparation of any Return for Taxes or
claim for refund, the conduct of any audit and the prosecution or
defense of any claim, suit or proceeding relating to any proposed
adjustment of any Tax. The Stockholder and the Purchaser agree to
(i) retain all books and records with respect to Tax matters
concerning the Seller and any taxable period beginning before the
Closing Date until the expiration of the statute of limitations and
any extensions thereof and (ii) give each other reasonable prior
written notice before transferring, destroying or discarding any
such books and records and, if the other party so requests, allow
the other party to take possession of such books and records.
(c) All federal, state, local or foreign excise, sales,
use, value added, transfer, stamp, documentary, filing,
recordation, notarial and other similar taxes and fees that may be
imposed or assessed as a result of the sale or transfer of the
Assets to the Purchaser shall be borne by the Purchaser; provided,
however, all such taxes and fees imposed with respect to the sale
or transfer of the Owned Real Property, including all costs
associated with transferring good and marketable title thereto,
shall be shared equally by the Seller and the Purchaser.
6.5 Prepaid Expenses. The Seller and the Stockholder
covenant and agree to use their respective reasonable best efforts
to obtain reimbursement or credit for any and all prepaid expenses
included in the Assets. If any such reimbursements or credits are
issued after the Closing, the Seller and the Stockholder shall pay
such amounts to the Purchaser immediately upon the receipt thereof.
6.6 Environmental Matters. The Purchaser covenants and
agrees that the Seller and the Stockholder may conduct or cause to
be conducted environmental studies and reviews upon any or all of
the Property, at their sole cost and expense and for their sole
benefit and use; provided such studies must be commenced within
sixty (60) days from the Closing Date and provided, further, that
the Seller and the Stockholder must give the Purchaser reasonable
prior notice and conduct or cause to be conducted such studies in
a manner so as not to interfere with the Purchaser's conduct and
operation of its business. The Seller and the Stockholder shall
have the right, at their sole cost and expense, to remedy or
mitigate any environmental problem or other condition on the
Property identified by such studies or reviews or in respect of
which the Purchaser seeks indemnification pursuant to Section
9.2(a) hereof; provided, however, such remedial or mitigative
action shall be taken with prior notice to and written consent of
the Purchaser (which shall not be unreasonably withheld) and shall
be conducted in such a manner so as not to interfere with the
Purchaser's conduct and operation of its business. The Purchaser
agrees to provide the Seller and the Stockholder with true and
correct copies of any environmental studies, review and surveys
that it conducts or causes to be conducted on any Property.
Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that the
Seller's and the Stockholder's indemnification obligations set
forth in Section 9.2 hereof shall not in any way be limited or
otherwise altered by the preparation, content or receipt by any
party of such studies, reviews and surveys.
The parties further acknowledge and agree that in the event
the Purchaser determines, in its reasonable good faith judgment,
that an environmental condition exists that if not remedied could
become the basis of a third party claim for which the Purchaser
would be entitled to indemnification hereunder, the Purchaser shall
so notify the Stockholder promptly upon discovery thereof. Within
seven days of such Purchaser's notice, the Stockholder shall notify
the Purchaser that (i) it agrees with the Purchaser's assessment,
(ii) it disagrees with the Purchaser's assessment or (iii) it
intends to hire an expert to assess the condition. The parties
agree to negotiate in good faith for one week from the date of the
Stockholder's response (or if the Stockholder hires an expert, for
one week from the issuance of such expert's report or opinion) to
attempt to determine the extent, if any, of the remedial action to
be taken by the Purchaser and the Purchaser's and the Stockholder's
respective obligations for such remedial action. If the parties
are unable to so agree within such periods, the Purchaser and the
Stockholder agree to submit the matter to binding arbitration, the
cost of which shall be equally shared by the Purchaser and the
Stockholder. The parties shall attempt to select a mutually
agreeable arbitrator with knowledge of environmental matters.
Failing such agreement, the parties shall each select an arbitrator
who shall select a third arbitrator to arbitrate the matter. The
parties agree to be bound by the determination of such arbitrator
which determination shall address (i) if a violation of any of the
Seller's or the Stockholder's representations, warranties or
covenants in this Agreement has occurred (ii) the appropriate
remedial action to be taken and (iii) the appropriate apportionment
between the Purchaser and the Stockholder of the liability for such
remedial action.
Notwithstanding the foregoing the Stockholder agrees to pay,
promptly upon receipt of invoices therefor, for the removal of five
drums from the Property and contaminated soil from the Property
known as Store No. 52.
6.7 WARN Act. After the Closing, the Purchaser agrees to
timely give all notices required to be given under the Worker
Adjustment and Retraining Notification Act, as amended, with
respect to all employees of the Seller and to indemnify the Seller
and the Stockholder from and against any liability arising from the
Purchaser's failure to so comply with such Act.
6.8 Bulk Sales. The parties hereby waive compliance by the
other parties hereto with the provisions of any so-called bulk
transfer laws of any and all jurisdictions in connection with the
sale and transfer of the Assets to the Purchaser.
6.9 Employees of the Seller. The Seller agrees to retain the
employment of all administrative employees of the Seller to the
extent and for such time as the Purchaser so requests; provided,
however that such time shall not extend beyond July 19, 1997. The
Purchaser agrees to promptly reimburse the Seller for all of the
costs it incurs in retaining such employees, after receipt of
reasonably detailed invoices specifying the nature and amount of
such costs. The Purchaser agrees to permit the employees of the
Seller that it does decide, in its sole discretion, to hire to
participate in the Purchaser's group medical plan and 401(k) plan,
subject to the eligibility requirements contained in such plans.
ARTICLE VII
TERMINATION
7.1 Termination by Either Party. If the Closing has not
occurred hereunder (i) on or before June 15, 1997 or (ii) if the
parties mutually agree in writing, on or before June 30, 1997, the
obligation to consummate the transactions contemplated by this
Agreement may be terminated and cancelled at any time prior to the
Closing by either the Stockholder or the Purchaser, upon written
notice to the other party; provided, that the party exercising such
right is not then in material breach of any provision of this
Agreement (disregarding, for purposes hereof, all qualifications
and exceptions relating to materiality and material adverse effect
contained in such provision). A termination or cancellation by any
nonbreaching party under this Section 7.1 will not operate as a
waiver by such party of any rights it may have to seek damages for
a breach of this Agreement by the other party.
7.2 Termination Upon Material Breach. Either party hereto
may terminate this Agreement at any time prior to the Closing
immediately upon a material breach by the other party hereto of any
of its representations, warranties, covenants or agreements
hereunder upon delivery of written notice thereof to such party;
provided, that the party exercising such right is not then in
breach of this Agreement. A termination or cancellation by any
nonbreaching party under this Section 7.2 will not operate as a
waiver by such party of any rights it may have to seek damages for
a breach of this Agreement by the other party.
7.3 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 7.1 or 7.2 hereof, this Agreement
shall become void and of no effect and there shall be no liability
on the part of the parties hereto; provided, however, that Sections
6.3, 9.2, 10.2 and 10.4 hereof shall survive any termination and
provided, further, that nothing herein shall relieve a party hereto
from liability for a breach of any of its representations,
warranties, agreements and covenants contained in this Agreement.
ARTICLE VIII
CLOSING DATE BALANCE SHEET
8.1 Preparation of Closing Date Balance Sheet. Within forty-
five (45) days following the Closing Date, the Purchaser shall
cause to be prepared and delivered to the Stockholder a balance
sheet of the Seller which shall set forth the assets and the
liabilities of the Seller as at the Closing Date (the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall be prepared
in accordance with generally accepted accounting principles
consistently applied and in the same manner in which the Balance
Sheet was prepared. Upon completion of the Closing Date Balance
Sheet, the Purchaser shall calculate the net asset value of the
Seller as of the Closing Date (the "Net Asset Value") by
subtracting the Assumed Liabilities shown on the Closing Date
Balance Sheet from the Assets (including those reflected on the
Excess Book Value line item on the Closing Date Balance Sheet)
shown on the Closing Date Balance Sheet. The Purchaser shall
deliver such calculation and the Closing Date Balance Sheet to the
Stockholder. The Seller and the Stockholder shall have the right,
upon prior notice thereof, to have a designated representative
present at any physical inventory conducted in connection with the
preparation of the Closing Date Balance Sheet.
8.2 Review and Resolution. The Stockholder shall, within
thirty (30) days after receipt of the Closing Date Balance Sheet
and the Net Asset Value calculation, complete its review thereof.
In the event the Stockholder determines that the Closing Date
Balance Sheet has not been prepared on the basis set forth in
Section 8.1 or otherwise objects to the calculations used in the
preparation thereof, the Stockholder shall, on or before the last
day of such thirty (30) day period, so inform the Purchaser in
writing setting forth a detailed description of the basis of the
Stockholder's determination and the adjustments to the Closing Date
Balance Sheet and Net Asset Value calculation that the Stockholder
believes should be made. If no objection is received from the
Stockholder within such thirty (30) day period, the Net Asset
Value, as calculated by the Purchaser, shall be final. If the
Purchaser and the Stockholder are unable to resolve all of their
disagreements with respect to the proposed adjustments set forth in
the Stockholder's objection within fifteen (15) days, they shall
refer any disagreements to binding arbitration using a CPA Firm,
the cost of which shall be shared equally by the Purchaser and the
Stockholder. The parties agree to afford each other access to all
books and records of the Seller and their respective related work
papers reasonably necessary to prepare and review the Closing Date
Balance Sheet.
8.3 Adjustments to the Purchase Price. The Purchase Price
shall be subject to adjustment on a dollar for dollar basis in the
event and to the extent the Net Asset Value (as such may be
adjusted pursuant to Section 8.2 hereof) differs from One Million
Twenty-Five Thousand Dollars ($1,025,000) by more than Twenty-Five
Thousand Dollars ($25,000). If such adjustment results in an
increase to the Purchase Price (i.e. the Net Asset Value exceeds
$1,050,000), the amount of such increase shall be added to the
Incentive Purchase Price payable to the Seller for the annual
period ending May 31, 2000; provided, however, if the Seller has
earned the entire $500,000 of Incentive Purchase Price prior to
such date, the increased amount of Purchase Price shall be paid to
the Seller at the time the final payment of Incentive Purchase
Price is payable to the Seller. If such adjustment results in a
reduction to the Purchase Price (i.e. the Net Asset Value is less
than $1,000,000), the amount of such reduction shall be deducted
from the Incentive Purchase Price payable by the Purchaser to the
Seller for the annual period ending May 31, 1998.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 Survival of Representations and Warranties. The
respective representations and warranties of the Seller, the
Stockholder and the Purchaser contained in this Agreement or in any
Schedule delivered pursuant hereto shall survive the Closing Date
for a period of two (2) years; provided, that the representations
and warranties contained in Sections 2.7, 2.12, 2.13, and 2.23
shall survive for the applicable statute of limitations periods;
and provided, further, that the representations and warranties
contained in Section 2.23 shall terminate with regard to any parcel
of Property at such time that the Purchaser sells to an entity
unaffiliated with the Purchaser, in the case of the Owned Real
Property, or abandons (or the lease in respect thereof expires or
is terminated), in the case of leased Property, such parcel of
property. In the event written notice of any claim for
indemnification shall have been given within the applicable
survival period, the representations and warranties that are the
subject of such indemnification claim shall survive until such time
as such claim is finally resolved. Each of the parties hereto
agrees that it shall not be liable to any other party for any claim
for indemnification under this Article IX in respect of a breach of
a representation or warranty unless a written notice identifying
such claim is delivered to the Indemnifying Party (as defined
herein) by the Indemnified Party (as defined herein) on or prior to
the applicable date on which such representation and warranty shall
cease to survive hereunder.
9.2 Indemnification.
(a) The Seller and the Stockholder agree to jointly and
severally indemnify, defend and hold harmless the Purchaser and its
officers, directors, employees, agents and "affiliates" (as such
term is defined in Rule 405 of the Securities Act of 1933) from and
against any claim, liability, obligation, loss, damage, assessment,
judgment, cost and expense (including, without limitation,
reasonable attorney's and accountant's fees and costs and expenses
reasonably incurred in investigating, preparing, defending against
or prosecuting any litigation or claim, action, suit, proceeding or
demand) of any kind or character ("Losses") arising out of or in
any manner incident, relating or attributable to (i) any inaccuracy
in any representation or breach of any warranty of the Seller or
the Stockholder contained in this Agreement or in any Schedule,
certificate, instrument or other document or agreement executed and
delivered by the Seller or the Stockholder in accordance with this
Agreement; (ii) any failure by the Seller or the Stockholder to
perform or observe any covenant, agreement or condition to be
performed or observed by either of them under this Agreement or
under any schedule, certificate, instrument or other document or
agreement executed by either of them in accordance with this
Agreement; or (iii) any and all liabilities of the Seller or the
Stockholder to any party other than the Purchaser not included in
the Assumed Liabilities. The obligations of the Seller and the
Stockholder to indemnify the Purchaser as herein stated shall
survive the consummation of the transactions herein described. The
Purchaser shall have the right to set-off and deduct from the
Incentive Purchase Price payable to the Seller hereunder, the
amounts due the Purchaser as indemnification pursuant to the terms
hereof.
(b) The Purchaser agrees to indemnify, defend and hold
harmless the Seller and the Stockholder and their respective
officers, directors, employees, agents and affiliates from and
against any Losses arising out of or in any manner incident,
relating or attributable to (i) any inaccuracy in any
representation or breach of any warranty of the Purchaser contained
in this Agreement, in any Schedule, certificate, instrument or
other document or agreement executed or delivered by the Purchaser
in accordance with this Agreement; (ii) any failure by the
Purchaser to perform or observe any covenant, agreement or
condition to be performed or observed by it under this Agreement or
under any schedule, certificate, instrument or other document or
agreement executed by it in accordance with this Agreement; or
(iii) the failure of the Purchaser to fully pay and discharge any
Assumed Liability in accordance with its terms. The obligation of
the Purchaser to indemnify the Seller and the Stockholder as herein
stated shall survive the consummation of the transactions herein
described.
(c) If the Purchaser believes that a matter has occurred
that entitles it to indemnification under Section 9.2(a) (other
than matters covered by subsection (d) below) or the Seller or the
Stockholder believe that a matter has occurred that entitles it to
indemnification under Section 9.2(b) (other than matters covered by
subsection (d) below), the Purchaser or the Seller or the
Stockholder, as the case may be (the "Indemnified Party"), shall
give prompt written notice to the party or parties against whom
indemnification is sought (each of whom is referred to herein as an
"Indemnifying Party") describing such matter in reasonable detail.
The Indemnified Party shall be entitled to give such notice prior
to the establishment of the amount of its Losses and to supplement
its claim from time to time thereafter by further notices as they
are established. The Indemnifying Party shall send a written
response to such claim for indemnification within thirty (30) days
after receipt of the claim stating its acceptance or objection to
the indemnification claim, and explaining its position with respect
thereto in reasonable detail. If such Indemnifying Party does not
respond within such thirty (30) day period, it will be deemed to
have accepted the Indemnified Party's indemnification claim as
specified in the notice given by the Indemnified Party. If the
Indemnifying Party gives a timely objection notice, then the
parties will negotiate in good faith to attempt to resolve the
dispute. Upon the expiration of an additional thirty (30) day
period from the date of the objection notice or such longer period
as to which the Indemnified and Indemnifying Parties may agree, any
such dispute shall be submitted to arbitration in Miami, Florida to
a member of the American Arbitration Association mutually appointed
by the Indemnified and Indemnifying Parties (or, in the event the
Indemnified and Indemnifying Parties cannot agree on a single such
member, to a panel of three members selected in accordance with the
rules of such Association), who shall promptly arbitrate such
dispute in accordance with the rules of such Association and report
to the parties upon such disputed items, and such report shall be
final, binding and conclusive on the parties. Judgment upon the
award by the arbitrator(s) may be entered in any court having
jurisdiction. The prevailing party in any such arbitration shall
be entitled to recover from, and have paid by, the other party
hereto to all fees and disbursements of such arbitrator or
arbitrators and reasonable attorney's fees, costs and expenses
incurred by the prevailing party in such arbitration.
(d) If a third person asserts a claim against an
Indemnified Party in connection with a matter giving rise to
indemnification rights hereunder, the Indemnified Party shall
promptly (but in no event later than ten (10) days prior to the
time at which an answer or other responsive pleading or notice with
respect to the claim is required) notify the Indemnifying Party of
such claim. The Indemnifying Party shall have the right, at its
election, to pursue the defense or settlement of such claim by
giving prompt notice to the Indemnified Party that it will do so,
such election to be made and notice given in any event at least
five (5) days prior to the time at which an answer or other
responsive pleading or notice with respect thereto is required. If
the Indemnifying Party makes such election, the Indemnifying Party
may conduct the defense of such claim through counsel of its
choosing, will be responsible for the expenses of such defense, may
take all steps to defeat, settle or compromise such claim and shall
be bound by the results of its defense or settlement of the claim
to the extent it produces damage or loss to the Indemnified Party.
The Indemnifying Party shall not settle such claims without prior
written notice to and consultation with the Indemnified Party, and
no such settlement by the Indemnifying Party involving any
injunction or material and adverse effect on the Indemnified Party
may be agreed to without the Indemnified Party's consent. As long
as the Indemnifying Party is diligently contesting or seeking to
settle any such claim in good faith, the Indemnified Party shall
not pay or settle any such claim. If the Indemnifying Party does
not make such election, or having made such election does not
proceed diligently to defend or settle such claim prior to the time
at which an answer or other responsive pleading or notice with
respect thereto is required, or does not continue diligently to
contest or seek to settle such claim, then the Indemnified Party
may conduct the defense and proceed with such claim in its
exclusive discretion, and the Indemnifying Party shall be bound by
any defense or settlement that the Indemnified Party may make in
good faith with respect to such claim. The parties agree to
cooperate in defending such third party claims, and the defending
party shall have reasonable access to records, information and
personnel in control of the other party which are pertinent to the
defense thereof.
(e) The right to indemnification, payment of damages or
any other remedy based on the representations, warranties,
covenants and agreements in this Agreement shall not be affected by
any investigation conducted or any knowledge acquired, whether
before or after the execution of this Agreement, with respect to
the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or agreement; provided, however,
in the event the Purchaser acquires actual knowledge of a breach of
a representation, warranty, covenant or agreement prior to the
Closing and determines to consummate the transactions contemplated
by this Agreement, the Purchaser shall be precluded from seeking
indemnification for any Loss resulting from such breach to the
extent of the Purchaser's knowledge thereof. The parties
acknowledge and agree that the indemnification provisions set forth
in this Article IX shall be their sole and exclusive remedy and
recourse with respect to any and all claims relating to or arising
out of the subject matter of this Agreement; provided; however, the
parties may seek any remedy available to them, in equity or at law,
for any cause of action based on fraud.
(f) The maximum liability of the Seller and the
Stockholder for indemnification under Section 9.2(a)(i) and (ii)
hereof shall not exceed the sum of the Purchase Price and the
Incentive Purchase Price actually paid to the Seller. The maximum
liability of the Purchaser for indemnification under Section 9.2(b)
shall not exceed the amount of the Assumed Liabilities.
(g) In determining the amount of Losses that an
Indemnified Party has incurred, such Losses shall be calculated net
of any third party insurance proceeds received by and/or any tax
benefits accruing to the Indemnified Party in respect of such
Losses.
(h) Neither the Purchaser, the Seller nor the
Stockholder shall be entitled to any indemnification hereunder in
respect of any Loss if, and only to the extent that, the condition
or event giving rise to such Loss is reflected in any Purchase
Price adjustment made pursuant to Article VIII hereof.
(i) Each of the Purchaser, the Seller and the
Stockholder hereby waive any right to punitive damages that it
might otherwise have in connection with a breach by the other party
hereto of its obligations hereunder.
ARTICLE X
MISCELLANEOUS
10.1 Knowledge. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to
the knowledge, information and belief of any party (or words of
similar import), it shall mean the actual knowledge of the
executive officers of such party, after they have made such due and
diligent inquiry as they deem necessary and appropriate as to the
matters that are the subject of such representations and
warranties.
10.2 Professional Expenses. The Seller and the Stockholder,
on the one hand, and the Purchaser, on the other hand, shall each
pay all of its own professional expenses relating to negotiating,
drafting and closing the transactions contemplated by this
Agreement, including, without limitation, the fees and expenses of
its respective counsel, financial advisers, investment bankers and
accountants, whether or not the transactions contemplated hereby
are consummated.
10.3 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
Florida without giving effect to conflicts of laws principles.
10.4 Jurisdiction. Any judicial proceeding brought against
any of the parties to this Agreement on any dispute arising out of
this Agreement or any matter related hereto shall be brought in the
appropriate courts of the State of Florida or the United States
District Court for the Southern District of Florida. By execution
and delivery of the Agreement, each of the parties to this
Agreement consents to the exclusive jurisdiction of the aforesaid
courts, waives any objection to venue therein and irrevocably
agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Process in any such proceeding may be served
on any party hereto anywhere. The prevailing party in any such
proceeding shall be entitled to an award of its attorney's fees,
paralegal fees, costs and expenses incurred at the trial and
appellate levels and in any proceedings in Bankruptcy Court. ANY
RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR PROCEEDING
RELATED TO OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IS WAIVED.
10.5 "Person" Defined. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a
limited liability company, a trust, an unincorporated organization
and a government or other department or agency thereof.
10.6 Captions. The Article and Section captions used herein
are for reference purposes only, and shall not in any way affect
the meaning or interpretation of this Agreement.
10.7 Notices. Any notice or other communications required or
permitted hereunder shall be sufficiently given if delivered in
person or sent by express mail or by registered or certified mail,
postage prepaid, addressed as follows:
(i) If to the Purchaser:
Morgan Tire & Auto, Inc.
2021 Sunnydale Boulevard
Clearwater, Florida 34625
Attention: Larry C. Morgan, Chairman
with a copy to:
W. Thompson Thorn III, Esquire
Shumaker, Loop & Kendrick, LLP
101 East Kennedy Boulevard
Post Office Box 172609
Tampa, Florida 33672-0609
(ii) If to the Stockholder or the Seller:
Acorn Venture Capital Corporation
100 Park Avenue, 23rd Floor
New York, New York 10017
Attention: Stephen A. Ollendorff
with a copy to:
Stephen R. Connoni, Esquire
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
or such other address as shall be furnished in writing by any such
party in accordance with this Section 10.7, and such notice or
communication shall be deemed to have been given as of the date so
personally delivered or received by mail.
10.8 Parties in Interest. This Agreement may not be
transferred, assigned, pledged or hypothecated by any party hereto,
other than by operation of law; provided, however, the Purchaser
may assign its rights and obligations hereunder to any person that,
directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, the
Purchaser. 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. This
Agreement and all of its provisions and conditions are for the sole
and exclusive benefit of the parties to this Agreement. Nothing
expressed or referred to herein is intended or shall be construed
to give any other person any legal or equitable right, remedy or
claim hereunder.
10.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of
which taken together shall constitute one instrument.
10.10 Entire Agreement. This Agreement, including the
Schedules, certificates and other documents referred to herein
which form a part hereof, contains the entire understanding of the
parties hereto with respect to the subject matter contained herein
and therein. This Agreement supersedes all prior agreements and
understandings (oral or written) between the parties with respect
to such subject matter; provided, however, the Confidentiality and
Non-Solicitation Agreement dated April 30, 1997 between the
Purchaser and the Stockholder shall remain in full force and effect
in accordance with its terms. The parties hereto acknowledge and
agree that the only representations and warranties made by the
parties in connection with the transactions contemplated hereby are
those expressly made in writing herein (including the Disclosure
Schedule and the certificates and other agreements delivered in
accordance herewith). No oral representations or warranties have
been made or implied by any party hereto.
10.11 Amendments; Waivers. This Agreement may only be
amended by an agreement in writing signed by the Purchaser, the
Seller and the Stockholder. Neither the failure nor any delay by
any party in exercising any right hereunder will operate as a
waiver of such right, and no single or partial exercise of any such
right will preclude any other or further exercise of such right or
the exercise of any other right.
10.12 Severability. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof will
not in any way be affected or impaired thereby. Any provision held
invalid, illegal or unenforceable in part will remain in full force
and effect to the extent not held invalid, illegal or
unenforceable.
10.13 Rules of Construction. The normal rules of
construction which require the terms of an agreement to be
construed most strictly against the drafter of such agreement are
hereby waived since each party has been represented by counsel in
the drafting and negotiation of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement as of the date and year first above written.
MORGAN TIRE & AUTO, INC.
By: Larry C. Morgan
--------------------------------
Larry C. Morgan
Chairman and Chief
Executive Officer
ACORN VENTURE CAPITAL CORPORATION
By: Edward N. Epstein
--------------------------------
Edward N. Epstein, President
AUTOMOTIVE INDUSTRIES, INC.
By: Orland M. Wolford
-------------------------------
Orland M. Wolford, President
EXHIBIT 2.2
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated May 30, 1997, by and among MORGAN
TIRE & AUTO, INC., a Florida corporation (the "Purchaser"),
AUTOMOTIVE INDUSTRIES, INC., a Delaware corporation (the "Seller'),
and ACORN VENTURE CAPITAL CORPORATION, a Delaware corporation (the
"Stockholder").
WHEREAS, the Purchaser, the Seller and the Stockholder have
entered into an Asset Purchase Agreement, dated May 30, 1997 (the
"Asset Purchase Agreement"), pursuant to which the Seller has
agreed to sell, transfer and assign to the Purchaser, and the
Purchaser has agreed to purchase from the Seller, substantially all
of the Seller's assets (the "Assets"); and
WHEREAS, as further consideration for the sale of the Assets
to the Purchaser, the Asset Purchase Agreement requires that the
Purchaser assume, as of the date hereof, and pay, perform or
discharge when due certain liabilities and obligations of the
Seller.
NOW, THEREFORE, in consideration of the sale, transfer and
assignment by the Seller to the Purchaser of the Assets, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as
follows (capitalized terms not otherwise defined herein shall be
defined as set forth in the Asset Purchase Agreement):
1. Assumption by the Purchaser.
1.1. Assumed Liabilities. Pursuant to and on the terms
and subject to the conditions of the Asset Purchase Agreement, the
Purchaser hereby assumes and agrees to pay, discharge or perform,
when due and otherwise pursuant to their terms, the following
liabilities and obligations of the Seller (collectively, the
"Assumed Liabilities"):
(a) all long term debt of the Seller to be set
forth on the Closing Date Balance Sheet in accordance with Section
8.1 of the Asset Purchase Agreement, other than such debt owed to
Falken in excess of Three Hundred Thousand Dollars ($300,000) and
notes payable to officers and affiliates of the Seller;
(b) all regular accounts payable of the Seller to
be set forth on the Closing Date Balance Sheet in accordance with
Section 8.1 of the Asset Purchase Agreement, including any
indebtedness to Falken of up to Three Hundred Thousand Dollars
($300,000) converted into accounts payable or into a ledger balance
in connection with the Asset Purchase Agreement;
(c) all accrued expenses of the Seller to be set
forth on the Closing Date Balance Sheet in accordance with Section
8.1 of the Asset Purchase Agreement;
(d) all current sales tax payable by the Seller to
be set forth on the Closing Date Balance Sheet in accordance with
Section 8.1 of the Asset Purchase Agreement;
(e) all deferred revenue of the Seller to be set
forth on the Closing Date Balance Sheet in accordance with Section
8.1 of the Asset Purchase Agreement;
(f) all notes payable of the Seller (including the
current portion of the Seller's long term debt) to be set forth on
the Closing Date Balance Sheet in accordance with Section 8.1 of
the Asset Purchase Agreement;
(g) all capitalized lease obligations of the Seller
to be set forth on the Closing Date Balance Sheet in accordance
with Section 8.1 of the Asset Purchase Agreement;
(h) subject to Section 1.8 of the Asset Purchase
Agreement, all liabilities and obligations of the Seller under the
Contracts accruing or to be performed from and after the Closing
Date; and
(i) all indemnities, warranties, service or other
obligations and liabilities arising out of or relating to goods
manufactured or sold or services provided by the Seller on or
before the Closing Date.
1.2. No Assumption of Other Liabilities. It is expressly
agreed that the Purchaser does not hereby assume nor agree to pay,
discharge or perform, any liability or obligation of the Seller
other than the Assumed Liabilities.
1.3. Further Assurances. The Purchaser hereby agrees
that, at any time and from time to time after the date hereof, it
will execute and deliver all such further instruments of assumption
and acknowledgements and take such other action as the Seller may
reasonably request in order to effectuate the Purchaser's
assumption of the Assumed Liabilities.
2. General.
2.1. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their
respective successors and permitted assigns.
2.2. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement
or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
2.3. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and
the same instrument.
2.4. Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in
writing signed by the party against whom enforcement of any such
modification or amendment is sought. Either party hereto may, by
an instrument in writing, waive compliance by the other party with
any term or provision of this Agreement on the part of such other
party hereto to be performed or complied with. The waiver by any
party hereto of a breach of any term or provision of this Agreement
shall not be construed as a waiver of any subsequent breach.
2.5. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Florida,
without giving effect to the choice of law principles thereof.
MORGAN TIRE & AUTO, INC.
By: Larry C. Morgan
-----------------------------
Larry C. Morgan
Chief Executive Officer
AUTOMOTIVE INDUSTRIES, INC.
By: Orland M. Wolford
-----------------------------
Orland M. Wolford, President
ACORN VENTURE CAPITAL CORPORATION
By: Edward N. Epstein
------------------------------
Edward N. Epstein, President
