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Exhibit 10.42
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is entered
into as of May 28, 1996 by and among Reddi Brake Supply Corporation, a Nevada
corporation ("Purchaser"), and Xxxxx X. Xxxxxxx ("Xxxxxxx") and Xxxxx Xxxxxxx
("Xxxxxxx," and together with Xxxxxxx, "Sellers").
X. Xxxxxxx owns 75 shares of common stock of Express
Undercar Parts Warehouse, Inc., Nevada (the "Company"), and Xxxxxxx owns 25
shares of common stock of the Company. Together, the Sellers own 100% of the
issued and outstanding shares of stock of the Company. All of the stock of the
Company is referred to as the "Shares."
X. Xxxxxxx wish to sell the Shares to Purchaser, and
Purchaser desires to purchase the Shares, all on the terms and conditions of
this Agreement.
THEREFORE, the parties agree as follows:
1. PURCHASE AND SALE OF THE SHARES. Subject to the
terms and conditions of this Agreement, at the Closing (as defined below),
Sellers shall sell, transfer, convey and deliver to Purchaser the Shares, and
Purchaser shall purchase the Shares, free and clear of all claims, liens,
charges, encumbrances, restrictions on transfer, options and security
interests.
2. PURCHASE PRICE.
2.1 PURCHASE PRICE. The purchase price (the
"Purchase Price") for the Shares shall be an amount (payable in Purchaser's
stock as provided in Section 2.2 below) equal to 1.3 times the "Net Asset
Value" of the Company, as of the close of business on April 30, 1996 (the
"Valuation Date"). The Net Asset Value on such date and the Purchase Price
have been determined as follows:
Assets of the Company at April 30, 1996 Value
--------------------------------------- ------------
Inventory and Miscellaneous Assets $ 1,395,720
Accounts Receivable 155,299
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Total Fixed Assets $ 1,551,019
Accounts Payable & Miscellaneous Liabilities (429,459)
Bank Loans (250,000)
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Net Asset Value $ 871,560
Estimated Purchase Price at 130% $ 1,133,028
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The Purchase Price shall be allocated among Xxxxxxx and Xxxxxxx in accordance
with written instructions provided to the Purchaser on behalf of the Sellers.
2.1.1 GOOD FAITH DEPOSIT. Purchaser has
previously delivered to Sellers a good faith cash deposit of $75,000 (the
"Deposit") pursuant to the letter of intent between the parties hereto dated
April 23, 1996 (the "Letter"). At the Closing (as defined in Section 3 below),
the Deposit shall be returned to Purchaser. Notwithstanding the foregoing, if
this Agreement is terminated prior to Closing, the Deposit shall be refunded to
Purchaser.
2.2 MANNER OF PAYMENT. The Purchase Price shall
be paid to Sellers at the Closing, as follows:
The Purchase Price shall be paid in shares of
Purchaser's Common Stock determined by dividing the Purchase Price by $1.63,
the deemed value of a share of Common Stock. Such deemed value is the average
between the closing offer and bid prices of the Purchaser's common stock in the
over the counter market on April 16, 1996, the date on which the Purchaser's
Board of Directors approved this transaction, discounted by 10%.
3. CLOSING. The closing (the "Closing") of the
transactions described herein shall take place at 2:00 p.m. on June 3, 1996, or
such later date as the parties may agree to (the "Closing Date") at the offices
of Xxxxxxxxx, Xxxxxxxx & Pines, 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000, Xxx
Xxxxxxx, Xxxxxxxxxx 00000. If the Closing does not occur by June 5, 1996, the
Deposit shall be refunded to Purchaser immediately, and this Agreement shall be
terminated, with neither party having any obligation or liability to the other.
Notwithstanding the actual date of Closing (if the Closing occurs), the Closing
shall be deemed to have occurred as of the close of business on the Valuation
Date so that the Shares shall be deemed to be beneficially owned by Purchaser
as of that time with all income received by the Company and all payments made
and obligations and liabilities incurred by the Company after such time
remaining the income, expenses, obligations and liabilities of the Company on
and after the Closing Date.
4. INDIVIDUAL REPRESENTATIONS AND WARRANTIES. Xxxxxxx
and Xxxxxxx, each separately and individually as to his own Shares of the
Company, represents and warrants to Purchaser that:
4.1 TITLE TO SHARES. Xxxxxxx is the sole owner
of 75 Shares, and Xxxxxxx is the sole owner of 25 Shares, each having good and
marketable title to his Shares and owning his Shares beneficially and of
record, free and clear of all liens, claims, security interests or agreements,
shareholder or buy-sell
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agreements, proxies, voting trust agreements, encumbrances, options, charges
and restrictions (collectively, "Encumbrances"). Each has the full right,
power and authority to sell, convey, transfer and deliver his Shares, without
obtaining the approval or consent of any other person; except for the consent
of Xxxxxxx'x spouse and Xxxxxxx'x spouse in form reasonably satisfactory to
Purchaser, which shall be obtained prior to the Closing Date. Together,
Xxxxxxx and Xxxxxxx own beneficially and of record all of the issued and
outstanding capital stock of the Company.
4.2 BINDING AGREEMENT. Xxxxxxx and Xxxxxxx each
have full right, power and authority to enter into and perform their respective
obligations under this Agreement. This Agreement and all other agreements,
documents and instruments to be executed by Sellers in connection herewith have
been (or upon execution will have been) duly executed and delivered by each
Seller and constitute (or upon execution will constitute) legal, valid and
binding obligations of each Seller, enforceable in accordance with their
respective terms.
4.3 NO CONFLICTS. The execution and delivery of
this Agreement, the sale of the Shares, the compliance by Xxxxxxx and Xxxxxxx
with all of the provisions of this Agreement and the consummation of the
transactions contemplated by this Agreement (a) will not conflict with or
result in a breach or violation of the Company's Articles of Incorporation or
Bylaws, or to Sellers' actual knowledge, any federal, state or local law,
statute, code, rule, regulation or ordinance (collectively, "Laws"), or any
judgment, order, writ, decree of any court, tribunal or other governmental body
or instrumentality, or any of the terms or provisions of, or constitute a
default under, or require notice, approval, or consent under, any bond or other
agreement, document or instrument to which either Sheerin, Morford, or Company
is a party, or by which any of the Company's properties is subject or bound, or
(b) results in the creation of any Encumbrance upon any of the Shares or any
"Lien" (as defined in Paragraph 5.8 below) on the assets or properties of the
Company.
4.4 ENTIRETY OF INTEREST. 75 Shares represent
Xxxxxxx'x and 25 Shares represent Xxxxxxx'x complete legal, equitable and
beneficial interest in Company.
4.5 COMPLIANCE WITH SECURITIES LAWS. Each Seller
represents and warrants to Purchaser that (a) he understands that the shares of
Purchaser's Common Stock issuable to him under Paragraph 2.2 hereof have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or the securities laws of any state, and are being issued and sold in
reliance upon exemptions afforded thereunder for transactions not involving any
public offering; (b) each such Seller is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Securities Act; (c) each such
Seller is a
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bona fide resident and domiciliary of the State of Nevada; (d) the shares of
Purchaser's Common Stock to be acquired by such Seller hereunder are being
acquired for such Seller's own account for investment and without any view
toward or for sale in connection with any distribution thereof to any other
person; (e) such Seller will neither sell nor otherwise dispose of the
Purchaser's Common Stock being issued to him hereunder except in compliance
with the registration requirements or exemptive provisions of the Securities
Act and the rules and regulations thereunder, and under any applicable state
securities laws; (f) such Seller has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
the acquisition of the Purchaser's Common Stock; (g) such Seller has consulted
with counsel, to the extent he deemed necessary, as to all matters covered by
this Agreement; (h) such Seller has, to his full satisfaction, made such
investigation into the business, financial condition and operations of
Purchaser as he deemed necessary; (i) such Seller has not relied upon the
Purchaser for any explanation of the application of the various federal or
state securities laws with regard to the acquisition of the Purchaser's Common
Stock; (j) such Seller acknowledges that Purchaser has made no representations
or warranties with respect to the Purchaser's Common Stock other than those
expressly set forth herein; and (k) such Seller agrees that the Purchaser may
endorse on each certificate representing shares of Purchaser's Common Stock
being delivered to such Seller hereunder a restrictive legend consistent with
the information set forth in this paragraph. Sellers acknowledge that Sellers
are receiving certain registration rights as to the shares of Purchaser's
Common Stock pursuant to a Registration Rights Agreement as set forth in
Paragraph 8.3 herein.
5. JOINT REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers, jointly and severally, hereby represent and warrant to Purchaser that:
5.1 ORGANIZATION, GOOD STANDING AND
QUALIFICATION. Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada, and has full power and
authority to own its properties and assets and to conduct its business as it is
now being conducted; and is entitled to own, lease or operate the properties
and assets it now owns, leases or operates. Seller has delivered to Purchaser
(a) a true and correct copy of the Company's Articles of Incorporation, with
copies of amendments, if any, all certified by the Secretary of State of
Nevada; (b) the Bylaws and all minutes and resolutions of any meeting, or
written consent or action in lieu thereof, of the Company's shareholders or
Board of Directors (or any committee thereof); (c) all permits, orders and
consents issued by the State of Nevada relating to the Company, and all
applications for such permits, orders and consents; and (d) the stock transfer
book of the Company (collectively, the "Corporate Documents").
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5.2 CAPITAL STOCK. The Company has an authorized
capitalization solely consisting of 2500 shares of common stock, of which 100
shares are issued and outstanding. All such outstanding shares have been duly
authorized and validly issued and are fully paid and non-assessable, and have
not been issued in violation of any preemptive rights of stockholders. No
other class of capital stock of the Company is authorized or outstanding.
There are (and at the Closing will be) no outstanding options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, preemptive
rights, commitments, plans or other agreements of any character providing for
the purchase, issuance or sale of any shares of the capital stock of the
Company, or of any options, warrants or other securities of the Company.
5.3 SUBSIDIARIES. The Company has no
subsidiaries and does not own, directly or indirectly, any interest in any
corporation, partnership, business, joint venture, partnership, trust or
investment (whether debt or equity) or other entity.
5.4 FINANCIAL STATEMENTS. Sellers have delivered
to Purchaser balance sheets of the Company as of April 30, 1996, and the
related statements of earnings and retained earnings for the periods ended
April 30, 1996, and changes in financial position as of April 30, 1996, all of
which Purchaser acknowledges receiving. Each of the foregoing financial
statements was prepared in the Company's ordinary course of business, is the
sole financial statement that was prepared for the time period covered and is
the financial statement used by the Company in the conduct of its business.
Each of the foregoing financial statements was prepared in accordance with the
books and records of the Company applied consistently during the periods
covered thereby, and presents fairly the Company's financial condition at the
dates of said statements and the Company's results of operations for the period
covered thereby. (Each of the foregoing financial statements, as well as any
financial statements for subsequent periods prior to the Closing, is referred
to, in the singular, as a "Financial Statement", and, in the plural, as the
"Financial Statements.")
5.5 LIABILITIES. The Company has no material
liabilities, obligations and debts of any nature, whether accrued, absolute,
contingent or otherwise (collectively, the "Liabilities"), except as set forth
on the face of the Balance Sheet dated as of April 30, 1996, or as otherwise
set forth in any Schedule attached to this Agreement. Any material liabilities
incurred since that date have been incurred in the ordinary course of the
Company's business as previously conducted. Neither Seller has any actual
knowledge of any basis for an assertion against the Company of any other
Liability other than those set forth in any Schedule referenced in this
Paragraph 5.
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5.6 NO ADVERSE CHANGE. Since April 30, 1996, the
Company has operated its business in the ordinary course as previously
conducted, and there has not been, and there is not threatened, (a) any change
in the Company's business or other occurrence that would be materially adverse
to the Company's properties, assets business, or financial condition, or (b)
any event or occurrence that, if taken during the time period between the date
hereof and the Closing, would have constituted a material violation of
Paragraph 7.3, 7.4, 7.6, 7.7, 7.8 or 7.10.
5.7 TAXES. Sellers have delivered to the
Purchaser true, correct and complete federal, foreign, state and local tax
returns and reports filed by the Company through the date of this Agreement.
Neither the Company nor the Sellers have knowledge that the Company has failed
to properly file all federal, foreign, state, local and other tax returns and
reports which are required to be filed by it, or that it has failed to pay all
taxes owing as indicated on the Sellers' Financial Statements to be due and
owing by it, except taxes which have not yet accrued or otherwise become due
for which adequate provision has been made in the Balance Sheet referred to in
Paragraph 5.5 above. Sellers have no knowledge that the federal income tax
returns of the Company have been examined by the Internal Revenue Service since
the Company's inception or that any extension of time for the assessment of
deficiencies for any year is in effect. To the knowledge of each of the
Sellers, neither the Internal Revenue Service nor any other taxing authority is
now asserting or threatening to assert against the Company any deficiency or
claim for additional taxes or interest thereon or penalties in connection
therewith.
5.8 REAL PROPERTY. The Company does not own any
real property. Attached as Schedule 5.8 is a complete list of all real
property leases (collectively, the "Leases") to which the Company is a party.
Except as described on Schedule 5.8, (a) no event has occurred that
constitutes, or that with the giving of notice or passage of time, or both,
would constitute a material default by the Company or any other party under any
of the Leases, (b) the Leases constitute all of the real property that is used
or held for use by the Company in connection with its business, (c) the
Company's interest in each of the Leases is free and clear of any liens,
charges, claims, security interests or other encumbrances (collectively,
"Liens") created by, through or under the Company or any person or entity
controlling, controlled by or under common control with the Company
(collectively, "Affiliates"), (d) there are no parties in possession of any
portion of the properties (the "Leased Lands") subject to the Leases as
sublessees, subtenants or otherwise, (e) neither the Company nor the Sellers
have knowledge of any pending or threatened condemnation, eminent domain or
similar proceeding affecting the properties subject to the Leases or that the
Leased Lands are not in compliance with all Laws applicable thereto, and (f)
neither of Sellers, nor any officer, director,
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shareholder, employee, relative or Affiliate of either Seller or the Company,
owns, directly or indirectly, in whole or in part, any interest in the Leased
Lands. The Sellers have delivered to the Purchaser true, correct and complete
copies of each of said Leases, together with any amendments thereto. Also
listed in Schedule 5.8 is the amount of the security deposits, if any, and
advance rentals paid, if any.
5.9 CONTRACTS, LEASES AND COMMITMENTS. Sellers
have caused the Company to furnish to Purchaser true and complete copies of all
contracts, leases, agreements, licenses and commitments to which the Company is
a party or by which any of its assets or properties are bound or are subject
and which are material to the operation of the Company's business or any of its
stores, all of which are listed in Schedule 5.9 hereto, including summaries of
the terms of any unwritten commitments (collectively, the "Contracts"). Except
as set forth in Schedule 5.9, the Contracts are valid and enforceable, in full
force and effect and there exists no event or condition which does, or that
with the giving of notice or the passage of time, or both, would, constitute a
material default under or give rise to a right to accelerate or terminate any
provision thereof, or give rise to any Lien or restriction on any of the assets
or properties of the Company. The Company has not assigned or otherwise
transferred any interest in or any of its rights or benefits accruing from any
of the Contracts.
5.10 CUSTOMERS AND SUPPLIERS. Except as disclosed
in Schedule 5.10 hereto, during the Company's fiscal year ended June 30, 1995
and the ten-month period ended April 30, 1996, (a) not more than 10% of the
Company's revenues were attributable to any single customer or (to the
knowledge of Sellers) to any group of affiliated customers, and (b) not more
than 10% of the Company's inventory was attributable to any single supplier or
(to the knowledge of Sellers) to any group of affiliated suppliers. The
Company is engaged in no material disputes with any customers, suppliers,
airlines or other entities with which the Company does business. Sellers have
no actual knowledge that any customer, supplier, or other entity with which the
Company does business is considering termination, non-renewal, or any adverse
modification of its arrangements with the Company, and the transactions
contemplated by this Agreement will not have a material adverse effect on the
Company's relationship with any of its suppliers, customers, airlines or other
entities with which the company does business.
5.11 ACCOUNTS RECEIVABLE. Schedule 5.11 hereto is
an aging list of all of the Company's accounts receivable as of April 30, 1996.
The Company's accounts receivable arose in the ordinary course of business for
goods or services delivered or rendered and were recorded consistently in
accordance with the Company's past practice.
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5.12 PERMITS; COMPLIANCE WITH LAWS. Neither the
Company nor the Sellers have knowledge that the Company has failed to comply
with all applicable Laws or that the Company's business is and has been
operated other than in compliance with all applicable Laws, or that any
required reports and filings with governmental authorities have not been
properly made by the Company. To the Company and the Sellers' knowledge, the
Company possesses, and Schedule 5.12 sets forth a complete list of, all of the
permits, licenses, authorizations and approvals required by any governmental
body or instrumentality or political subdivision in connection with the conduct
of the Company's business as presently conducted (collectively, the "Permits").
The execution and delivery of this Agreement, the sale of the Shares, the
compliance by Sellers with all of the provisions of this Agreement and the
consummation of the transaction contemplated by this Agreement will not result
in any violation of any Law, or any Permit of the Company, or any rule,
judgment, writ, decree or order of any court, tribunal or other governmental
body or instrumentality. No consent, registration or qualification of, or
filing or registration with, any person, court, or governmental agency is
required for the sale of the Shares, the compliance by the Sellers with the
provisions of this Agreement, the maintenance by Purchaser of any of the
Permits immediately following the Closing, or the consummation of the
transactions contemplated hereby.
5.13 EMPLOYEES. Other than as set forth in
Schedule 5.13, the Company is not a party to or subject to any written
agreement, or any oral agreement providing for any bonus, severance payment,
deferred compensation, pensions, options, profit sharing or similar benefits
not terminable within 30 days by and without penalty or further liability to
the Company, with any employee, consultant, officer, director, agent or
representative. The Company has no "Employee Benefit Plans" as that term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended. All obligations of the Company with respect to all of its
Employees, consultants, directors, officers, agents and representatives and due
on or prior to the date hereof have been paid by the Company.
5.14 LITIGATION. Neither the Company nor the
Sellers have knowledge of any pending or threatened actions, suits,
proceedings, claims, judgments, orders, arbitration proceedings, administrative
or governmental investigations against the Company or any of its properties or
assets, or, in connection with the Company's business, any of the Company's
officers, directors, employees, consultants, agents or representatives.
5.15 BANK ACCOUNTS. Schedule 5.15 is an accurate
and complete list showing the name of each bank, savings and loan or other
financial institution in which the Company has an account, outstanding debt,
credit line or safe deposit box, the
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number of each of the foregoing and the names of all persons authorized to draw
thereon or to have access thereto.
5.16 TRANSACTIONS WITH INTERESTED PERSONS. Except
as set forth in Schedule 5.16, there is no (a) obligation or liability incurred
by the Company to either of Sellers or any of its officers, directors or
shareholders, or any loans or advances made by the Company to either of Sellers
or any of its officers, directors or employees, except normal compensation
payable in accordance with past practice, and (b) neither of Sellers owns,
directly or indirectly, any interest in, or serves as an officer or director
of, any entity which has any contract, commitment or arrangement with the
Company.
5.17 NO BROKERS. Neither of Sellers nor the
Company have entered, directly or indirectly, into any agreement, understanding
or commitment with any person or entity that provides for the payment of any
commission, brokerage or "finder's fee" arising out of the transaction
contemplated by this Agreement.
5.18 TANGIBLE PERSONAL PROPERTY. Sellers have
caused the Company to furnish to Purchaser computer schedules showing all
leasehold improvements, fixtures, machinery, equipment (including office
equipment), computer hardware, vehicles, furniture and other tangible personal
property used in connection with the Company's business (the "Tangible Personal
Property"). To the Company's and to the Sellers' knowledge, such list is
complete and accurate in all material respects. To Sellers' knowledge or
except as set forth in Schedule 5.18, the Company has good and marketable title
to each item of Tangible Personal Property free and clear of all Liens.
5.19 INVENTORY. Sellers have caused the Company
to furnish to Purchaser a computer schedule of all inventory of the Company as
of April 30, 1996. To the Company's and to the Sellers' knowledge, such list
is complete and accurate in all material respects.
5.20 INTELLECTUAL PROPERTY. Except for the trade
name "Express Undercar Parts Warehouse", neither the Company nor the Sellers
have knowledge of tradenames, trademarks, copyrights or registrations or
applications related to the foregoing or any other intellectual property rights
(collectively, "Intangibles"). Neither the Company nor the Sellers have any
actual knowledge of any pending or threatened claim, action or proceeding
against the Company contesting the Company's right to use any Intangibles.
5.21 INSURANCE. Schedule 5.21 sets forth a list
of all insurance policies maintained by or for the benefit of the Company. The
Company has not received and the Sellers have no actual knowledge of any notice
cancelling or threatening to
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cancel, or amending or increasing the annual or other premiums payable under
any of such policies.
5.22 HAZARDOUS SUBSTANCES. Neither the Company
nor the Sellers have any actual knowledge (a) of any Hazardous Materials
present on any of the Leased Land or the premises or improvements located
thereon, or on any property in the immediate vicinity of the Leased Lands (b)
that Hazardous Materials have been disposed or otherwise released into the
environment by or on behalf of the Company or its Affiliates, and (c) that any
of the following items is located on the Leased Land: underground containers
or vessels or water, gas or oil xxxxx. Neither the Company nor the Sellers
have actual knowledge of any receipt of any notice or other communications
concerning any violation or alleged violation of any Laws relating to the
protection of health and the environment (collectively "Environmental
Requirements"). Neither the Company nor the Sellers have actual knowledge of
the existence of any writ, injunction, decree, order or judgment outstanding,
nor any pending or threatened claim, action or proceeding, relating to any
alleged or suspected violation of Environmental Requirements arising out of the
ownership, use or operation of the Leased Lands and the premises or
improvements thereon pertaining to the property or any properties in the
immediate vicinity of the Leased Lands or the operation of the Company's
business. As used herein, "Hazardous Materials" shall mean any substances
(including, without limitation, any asbestos, formaldehyde, radioactive
substance, hydrocarbons, polychlorinated biphenyls, industrial solvents,
flammables, explosives and any other hazardous substance, solid waste or toxic
material) that are defined as hazardous or toxic substances under Environmental
Requirements or that are known, as of the date of this Agreement, to pose a
threat to or to endanger health or the environment, except for those substances
that are contained within products sold by Seller at its stores, the handling,
labeling and sale of which does not require a permit or other authorization
from, delivery of notice to, or filing with any court, tribunal or other
governmental body or instrumentality.
5.23 REPRESENTATIONS TRUE AT CLOSING. All
representations by the Sellers in Sections 4 and 5 shall be true and accurate
as of the date when made and shall be deemed to be made again at the Closing as
of the Closing Date and shall then be true and accurate in all respects.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to Sellers that:
6.1 BINDING AGREEMENT. Purchaser has all
requisite corporate right, power and authority to enter into and perform its
obligations under this Agreement. This Agreement has been duly authorized,
executed and delivered by Purchaser and
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constitutes a valid and legally binding obligation of Purchaser, enforceable in
accordance with its terms.
6.2 PURCHASE OF SHARES NOT FOR DISTRIBUTION. The
Shares are being purchased for investment and not with a view to distribution,
it being understood that the Shares are not registered or qualified under the
Securities Act, or any state law.
6.3 STOCK OF PURCHASER. Purchaser has the
requisite number of shares of its Common Stock authorized and available to
issue the shares to be issued by it hereunder, and to issue the shares to be
issued by it pursuant to the warrants and options described in Paragraph 8.2.
6.4 NO CONFLICTS. The execution and delivery of
this Agreement, the purchase of the Shares, the compliance by Purchaser with
all of the provisions of this Agreement and the consummation of the
transactions contemplated by this Agreement will not conflict with or result in
a breach or violation of the Articles of Incorporation or Bylaws of Purchaser.
This Agreement and all other agreements, documents and instruments to be
executed by Purchaser in connection herewith have been (or upon execution will
have been) authorized by Purchaser's Board of Directors, duly executed and
delivered by the Purchaser and constitute (or upon execution will constitute)
legal, valid and binding obligations of Purchaser, enforceable in accordance
with their respective terms, or any of the terms or provisions of, or
constitute default under, or require notice, approval, or consent under, any
bond or other agreement, document or instrument to which Purchaser is a party,
or to Purchaser's knowledge, any Laws or any judgment, order, writ, decree of
any court, tribunal or other governmental body or instrumentality.
6.5 PERMITS; COMPLIANCE WITH LAWS. To the
knowledge of Purchaser's Chief Executive Officer and Chief Financial Officer,
Purchaser has complied, and continues to comply, with all applicable Laws, and
the Purchaser's business is and has been operated in compliance with all
applicable Laws and all required reports and filings with governmental
authorities have been properly made by Purchaser. To Purchaser's knowledge,
Purchaser possesses all of the Permits and approvals required by any
governmental body or instrumentality or political subdivision in connection
with the conduct of Purchaser's business as presently conducted. The execution
and delivery of this Agreement, the purchase of the Shares, the compliance by
Purchaser with all of the provisions of this Agreement and the consummation of
the transaction contemplated by this Agreement will not result in any violation
of any Law, or any Permit of the Purchaser, or any rule, judgment, writ,
decree, or order of any court, tribunal or other governmental body or
instrumentality. No consent, registration or qualification of, or filing or
registration with, any person, court, or governmental agency is
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required for the purchase of the Shares, the compliance by the Purchaser with
the provisions of this Agreement, or the consummation of the transactions
contemplated hereby.
6.6 LITIGATION. Except as set forth on Schedule
6.6, there are no material actions, suits, proceedings, claims, judgments,
orders, arbitration proceedings, administrative or governmental investigations
pending or, to the knowledge of Purchaser, threatened against Purchaser or any
of its properties or assets, or, in connection with the Purchaser's business,
or any of Purchaser's officers, directors, employees, consultants, agents or
representatives.
6.7 SECURITIES FILINGS. Purchaser has delivered
to Seller copies of its most recent Reports on Form 10-Q, 10-K, and Proxy
Statement, each of which, as of its respective date, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make statements and facts contained therein, in
light of the circumstances in which they were made, not false or misleading.
6.8 CAPITAL STOCK. The Purchaser has an
authorized capitalization consisting of 35,000,000 shares of common stock,
$.0001 par value, and 2,500,000 shares of preferred stock, $.0001 par value,
400,000 of which are designated as Class A Preferred Stock and 550,000 of which
are designated as Class B Preferred Stock. As of May 8, 1996, 16,624,344
shares of common stock and 400,000 shares of Class A Preferred Stock are issued
and outstanding. All such outstanding shares have been duly authorized and
validly issued and are fully paid and non-assessable, and have not been issued
in violation of any preemptive rights of stockholders. No other class of
capital stock of the Purchaser is authorized or outstanding. There are (and at
the Closing will be) no outstanding options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, preemptive rights,
commitments, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of the capital stock of the Purchaser,
or of any options, warrants or other securities of the Purchaser.
6.9 FINANCIAL STATEMENTS. Purchaser has
delivered to Sellers a balance sheet of the Purchaser as of March 31, 1996, and
the related statements of operations and cash flow for the periods ended March
31 1996, and changes in financial position as of March 31, 1996, all of which
Purchaser acknowledges receiving. Each of the foregoing financial statements
was prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby. Each of
the foregoing financial statements was prepared in accordance with the books
and records
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of the Purchaser and presents fairly the Purchaser's financial condition at the
dates of said statements and the Purchaser's results of operations and cash
flow for the period covered thereby.
6.10 LIABILITIES. The Purchaser has no material
liabilities, obligations and debts of any nature, whether accrued, absolute,
contingent or otherwise (collectively, the "Liabilities"), except as set forth
on the face of the Balance Sheet as described in its Report on Form 10-Q for
the quarter ended March 31, 1996, or as otherwise set forth in any Schedule
attached to this Agreement. Any liabilities incurred since that date have been
incurred in the ordinary course of the Purchaser's business as previously
conducted.
6.11 NO ADVERSE CHANGE. Since March 31, 1996, the
Purchaser has operated its business in the ordinary course as previously
conducted, and, except for matters disclosed in Purchaser's Report on Form 10-Q
for the quarter ended March 31, 1996, there has not been, and there is not
threatened, any change in the Purchaser's business or other occurrence that
would be materially adverse to the Purchaser's properties, assets business, or
financial condition.
6.12 NO BROKERS. The Purchaser has not entered,
directly or indirectly, into any agreement, understanding or commitment with
any person or entity that provides for the payment of any commission, brokerage
or "finder's fee" arising out of the transaction contemplated by this
Agreement.
6.13 REPRESENTATIONS TRUE AT CLOSING. All
representations by the Purchaser in this Section 6 shall be true and accurate
as of the date when made and shall be deemed to be made again at the Closing as
of the Closing Date and shall then be true and accurate in all respects.
7. COVENANTS AND AGREEMENTS OF SELLERS. Sellers
covenant and agree as follows:
7.1 REPRESENTATIONS AND WARRANTIES. Between the
date hereof and the Closing, Sellers shall not, and shall cause the Company not
to, take any action which would cause any of the representations and warranties
made herein or the documents or Schedules delivered to Purchaser not to be true
and correct on and as of the Closing Date with the same force and effect as if
such representations and warranties had been made on and as of the Closing
Date.
7.2 ACCESS BY PURCHASER. Between the date hereof
and the Closing, Sellers shall allow Purchaser and its representatives and
advisers to have free and full access during normal business hours to the
Company's assets, properties, premises, books and records, agreements,
documents and
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instruments, and be given the opportunity to meet with the Company's key
employees, accountants, and major suppliers and customers. Purchaser shall be
furnished with such information and copies of such documents as it may
reasonably request. Purchaser shall be promptly furnished with all Financial
Statements of the Company that are prepared in the ordinary course of business.
If, during its due diligence, Purchaser obtains actual knowledge of any breach
of any representation or warranty by Sheerin, Morford, or the Company,
Purchaser may elect not to purchase the Shares, but may not purchase the Shares
and then make a claim against Sheerin, Morford, or the Company for losses
suffered by Purchaser as a result of such breach, except to the extent that
Purchaser brings such breach to Seller's attention prior to making such claim
and subsequently suffers losses attributable to material facts or information
relating to such breach which Seller withheld from Purchaser or misrepresented
to Purchaser.
7.3 CONDUCT OF BUSINESS. Between the date hereof
and the Closing, Sellers shall cause the Company to conduct its business in the
ordinary course, consistent with its prior conduct, and to use its best efforts
to maintain, preserve, and protect its assets and goodwill, and to maintain its
business organization intact (including maintaining its present employees and
preserving its present relationships with suppliers, customers, and others
having business relationships with the Company). Without limiting the
generality of the foregoing, Seller shall not allow the Company to (except with
the prior written consent of the Purchaser) (a) purchase or commit to purchase
or lease capital or fixed assets exceeding $10,000, (b) take any action which
would create a Lien on any of the Company's assets or properties, (c) dispose
of any interest in any of the Company's assets or properties other than sales
of inventory in the ordinary course of business, consistent with past practice,
(d) in any manner pledge the credit of the Company, except in the ordinary
course of business consistent with past practice, or (e) enter into any lease,
agreement, instrument, commitment or arrangement with any Affiliate. Further,
between the date hereof and the Closing, Sellers shall cause the Company to (a)
in a timely manner make all payments due under and otherwise perform in all
material respects all of the obligations under all Leases, Contracts, Permits
and Intangibles in accordance with their respective terms, and not cancel,
amend, modify, abandon, extend or renew any of the same, or permit any of the
same to lapse; (b) maintain the Tangible Personal Property and the improvements
and premises on the Leased Lands in their current condition, ordinary wear and
tear excepted, and in accordance with past practice; and (c) to comply in all
material respects with and fulfill its obligations and responsibilities under
all Laws. Sellers shall cooperate with Purchaser in the collection of accounts
receivable from periods through the Closing due and payable following the
Closing.
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7.4 MAINTENANCE OF INSURANCE. Sellers shall
cause the Company to continue to carry its existing insurance through the date
of Closing and to provide whatever information is needed to enable Purchaser,
at its option, to obtain new insurance coverage.
7.5 SUPPLEMENTS. Sellers shall, within two
business days after they occur, inform Purchaser of all material developments,
whether favorable or adverse, relating to the Company's business, properties or
financial condition. If any representation, warranty or statement made herein,
or any Schedule delivered to Purchaser, shall be or become incorrect, Sellers
shall promptly deliver to Purchaser a supplement in order that said
representation, warranty, statement or Schedule, as so supplemented, shall be
true and correct.
7.6 CORPORATE MATTERS. Between the date hereof
and the Closing, Sellers shall cause the Company not to (a) amend its Articles
of Incorporation or Bylaws; (b) issue any shares of stock; (c) issue or create
any warrants, obligations, subscriptions, options, convertible securities, or
other commitments under which shares may be authorized or issued; or (d)
declare or pay any dividend or distribution on any securities of the Company.
7.7 EMPLOYEES AND COMPENSATION. Between the date
hereof and the Closing, Sellers shall cause the Company not to, and not to
agree to do any of the following: (a) Make or commit to make any change in
compensation payable or to become payable to any officer, director, employee,
consultant, sales agent or representative; (b) pay any benefits to any officer,
director, employee, sale agent or representative under any bonus plan, Employee
Benefit Plan or other agreement; (c) negotiate or enter into any employment
agreement, or (d) hire or fire any employees, consultants or agents or
representatives except in the ordinary course of business, consistent with past
practice.
7.8 NEW TRANSACTIONS. Between the date hereof
and the Closing, Sellers shall cause the Company not to, without Purchaser's
written consent, do or agree to do any of the following: (a) Enter into any
contract, commitment or transaction not in the usual and ordinary course of
business; or (b) enter into any contract, commitment or transaction in the
ordinary and usual course of business involving an amount exceeding $10,000
individually or $20,000 in the aggregate.
7.9 NO NEGOTIATIONS. Sellers shall not, through
May 31, 1996, negotiate with, or make any agreement, proposal, or commitment
with or to any other party concerning the sale or disposition of the Shares or
the business of the Company.
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7.10 EXISTING AGREEMENTS. Between the date hereof
and the Closing, Sellers shall cause the Company not to modify, amend, cancel,
or terminate any of its existing contracts or agreements, or agree to do any of
these acts.
7.11 RESIGNATIONS OF SELLERS. At the Closing,
Sellers shall deliver to the Company, in form acceptable to Purchaser, each of
their resignations as employees, officers, and directors of the Company, as
applicable, effective as of the Closing Date.
7.12 COVENANT NOT TO COMPETE. The parties
acknowledge that the Company carries on its business throughout the United
States. For a period of three (3) years after the Closing, Xxxxxxx agrees that
he will not, without the prior written consent of Purchaser in (a) the counties
in which the Company's stores are located and any adjacent county thereto, and
(b) any county where Purchaser presently operates stores and any adjacent
county thereto by or for himself or as the employee or other agent of or for
another or through others as his employees or agents, own (other than stock in
Purchaser and passive ownership of up to 2% of the stock in any other public
company), manage, operate, join, control, be employed by or participate in the
ownership, management, control or operation of or be connected with, in any
way, any business which "competes" with the business of Purchaser. For
purposes of this Agreement, a business shall be deemed to "compete" with the
business of Purchaser if it is in the retail or wholesale automotive parts
supply business. It is expressly recognized and agreed that any breach of this
paragraph will cause irreparable harm to Purchaser which cannot be fully
compensable by damages, so that, in addition to any and all of the rights and
remedies available to Purchaser by operation of law, in the event of breach of
this covenant, Purchaser shall be entitled to injunctive relief enjoining or
restraining whatever violation may have occurred or be occurring. It is
expressly agreed that if any provision of this paragraph is determined by a
court of competent jurisdiction to be unenforceable, such court shall limit the
scope or duration of such provision and enforce any lesser restriction or
restrictions determined by it to be reasonable.
8. COVENANTS AND AGREEMENTS OF PURCHASER.
8.1 INVENTORY. Purchaser shall, for 2 years from
the Closing, purchase as much of its inventory from Standard Motor Products,
Inc. -- EIS Brake Division as is required by that company's agreement with the
Company or the Sellers.
8.2 WARRANTS AND OPTIONS. Purchaser shall make
the following adjustments to the below listed warrants and options to purchase
shares of Purchaser's common stock effective on the Closing:
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========================================================================================
Warrants/ Existing Adjusted
Name Options Quantity Price Price
----------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx Class D 312,500 $3.50 $2.50
Warrants
----------------------------------------------------------------------------------------
Xxxxx Xxxxxxx Class D 25,000 $3.50 $2.50
Warrants
----------------------------------------------------------------------------------------
Xxxxx Xxxxxxx Class D 12,500 $3.50 $2.50
Warrants
----------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx Class C 50,000 $2.50 $2.50
Warrants
----------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx Option Dated 150,000 $4.41 $3.00
--------
----------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx Option Dated 20,000 $5.00 $3.00
--------
========================================================================================
The exercise period of the above listed warrants and options by each person
stated above or his heirs, affiliates or assigns shall be extended to (if they
expire before) June 30, 1998.
8.3 REGISTRATION RIGHTS. Sellers shall have
demand registration rights to compel a registration by Purchaser as to the
shares of Purchaser's stock being acquired by Sellers under Paragraph 2.3
hereof 18 months after the Closing Date. Sellers shall also have "piggyback"
registration rights as to any other registration by Purchaser of Purchaser's
stock. At the Closing, the parties shall enter into a Registration Rights
Agreement in connection with the registration rights granted to Sellers
hereunder.
8.4 ADDITIONAL CONSIDERATIONS. At the Closing,
Purchaser shall sell, transfer, deliver and convey to Xxxxxxx a sufficient
number of shares of Purchaser (valued at the average between the closing offer
and bid prices one trading day before the Closing Date less twenty percent
(20%) to equal a market value of $17,500.
8.5 AVAILABILITY OF PURCHASER'S STOCK. Purchaser
shall reserve a sufficient number of shares of its stock to issue shares to
Sellers as described in Paragraph 2.2 and to allow for issuance of shares upon
exercise of the warrants and options described in Paragraph 8.2.
8.6 STATUS REPORT ON LAWSUITS. Within five days
prior to the Closing, Purchaser shall deliver to Sellers an accurate report by
its litigation counsel describing the status
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of Xxxxx X. Xxxxxx, et al. x. Xxxxx Brake Supply Corporation, et al. (U.S.
District Court for the Central District of California) and Xxxxxx X. Xxxxxxx
and Xxxxx X. Xxxxxxx x. Xxxxx Brake Supply Corp., et al. (Superior Court of
Maricopa County, Arizona), and any other material lawsuit filed or otherwise
pending against Purchaser, and such report shall include an analysis of
settlement possibilities and amounts, including a discussion of whether such
amounts are anticipated to be covered by insurance. Each of Sellers hereby
agrees to maintain all information given to them by Purchaser concerning such
lawsuits in the strictest confidence, and shall not disclose any such
information to any other person or entity for any purpose whatsoever and shall
not acquire or dispose of any securities of Purchaser, except for the shares of
Common Stock being issued to Sellers pursuant to Paragraph 2.2 hereof, in
reliance on or as a result of obtaining any such information.
8.7 REPAYMENT OF AMBANK LOAN. On or before the
Closing Date, Purchaser shall have paid any and all amounts due to American
Bank of Commerce by Company and by Express Undercar Parts Warehouse, Inc.,
California.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
The obligations of Purchaser to consummate the transactions contemplated by
this Agreement are subject to the satisfaction, at or before the Closing, of
each of the following conditions, except to the extent waived by Purchaser in
writing, and Sellers shall use their best efforts to cause such conditions to
be fulfilled:
9.1 REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Sellers of the Company in this Agreement
(including the Schedules hereto), shall be true and correct on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
9.2 PERFORMANCE BY SELLERS. Sellers shall have
performed and complied with all agreements, covenants, and conditions required
herein to be performed or complied with by them on or before the Closing.
9.3 CONSENTS. On or before the Closing, Sellers
shall have delivered to Purchaser all required consents, approvals, or waivers
from regulatory authorities and third parties, if any are required for the
execution, delivery, and performance of Sellers' obligations hereunder or for
the Company's continued maintenance of all Permits, Intangibles, Leases, and
Contracts after the Closing.
9.4 LITIGATION. No action, suit or proceeding
shall be pending or threatened before any court, tribunal, or governmental
body, and no claim or demand shall have been made against Purchaser, the
Company, or Sellers seeking to restrain or
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prohibit the transactions contemplated herein, and no claim or demand shall
have been made against Purchaser or the Company to obtain damages or other
relief in connection with the consummation of the transactions contemplated
herein.
9.5 RESIGNATIONS. Sellers shall have delivered
to Purchaser the written resignations described in Paragraph 7.11.
9.6 GOOD STANDING AND OTHER CERTIFICATES.
Sellers shall have delivered to the Purchaser a Good Standing Certificate from
the Nevada Secretary of State for the Company, dated no earlier than ten (10)
days prior to the Closing Date. Each of Sellers and the Company shall have
delivered to Purchaser written certification that the conditions set forth in
Paragraphs 9.1 and 9.2 have been fulfilled.
9.7 STOCK CERTIFICATES. Xxxxxxx and Xxxxxxx
shall each have delivered to Purchaser the share certificate(s) evidencing
each's respective ownership of his Shares duly endorsed in blank for transfer,
or accompanied by a Stock Assignment Separate From Certificate duly endorsed in
blank for transfer.
9.8 COMPLETION OF DUE DILIGENCE. Purchaser shall
have completed its due diligence investigation of the Company, and be satisfied
with the financial, operating, and business affairs and prospects of the
Company.
9.9 AUDITABLE FINANCIAL STATEMENTS. If
Purchaser's public accountants, KPMG Peat Marwick, LLP, determine that the
Financial Statements of the Company must be audited for purposes of Purchaser's
compliance with federal securities laws, then such accountants must further
determine that such Financial Statements are auditable within the requisite
time period and at a price reasonably satisfactory to Purchaser.
9.10 NO ADVERSE CHANGE. There shall not have
occurred between the date hereof and the Closing Date any material adverse
change in the results of operations, condition (financial or otherwise),
assets, liabilities (whether absolute, accrued, contingent or otherwise),
business or prospects of the Company.
9.11 SPOUSAL CONSENTS. Xxxxxxx'x spouse and
Xxxxxxx'x spouse shall have consented in writing to the sale of Xxxxxxx'x
shares and Xxxxxxx'x shares respectively, in a form reasonably satisfactory to
Purchaser ("the Spousal Consents").
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS. The
obligations of Sellers to consummate the transactions contemplated by this
Agreement are subject to the satisfaction,
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at or before the Closing, of each of the following conditions, except to the
extent waived by the Sellers in writing, and Purchaser shall use its best
efforts to cause such conditions to be fulfilled:
10.1 REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser in this Agreement shall be true and
correct on and as of the Closing Date with the same force and effect as though
the same had been made on and as of the Closing Date.
10.2 PERFORMANCE BY PURCHASER. Purchaser shall
have performed and complied with all agreements, covenants, and conditions
required herein to be performed or complied with by him on or before the
Closing.
10.3 LITIGATION. No action, suit or proceeding
shall be pending or threatened before any court, tribunal, or governmental
body, and no claim or demand shall have been made against Purchaser, the
Company, or Sellers seeking to restrain or prohibit or to obtain damages or
other relief, in connection with the consummation of the transactions
contemplated herein. Sellers shall be satisfied with the report from
Purchaser's counsel regarding the class action lawsuit and broker lawsuit.
10.4 WRITTEN CERTIFICATION. Purchaser shall have
delivered to Sellers written certification that the conditions set forth in
Paragraphs 10.1 and 10.2 have been fulfilled.
10.5 NO ADVERSE CHANGE. There shall not have
occurred between the date hereof and the Closing Date any material adverse
changes in the results of operations, condition (financial or otherwise),
assets, liabilities (whether absolute, accrued, contingent or otherwise),
business or prospects of the Purchaser.
10.6 STATUS REPORT. Sellers shall be satisfied
with the status report rendered pursuant to Section 8.6 above.
11. CLOSING OBLIGATIONS.
11.1 DELIVERIES OF SELLERS. At the Closing,
Sellers shall deliver, or shall cause to be delivered, to Purchaser the
following:
(a) Certificates representing the
Shares, registered in the name of Xxxxxxx and Xxxxxxx, as to each of their
respective Shares, duly endorsed in blank for transfer or accompanied by a
Stock Assignment Separate From Certificate duly endorsed in blank for transfer,
together with all such other documents as may be required to affect a valid
transfer of the Shares, free and clear of any and all liens, encumbrances,
charges or claims.
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(b) Executed copies of the governmental
and third party consents, approvals, or waivers, if any, required to consummate
the transactions described herein.
(c) The written resignations described
in Paragraph 7.11.
(d) An executed copy of the Registration
Rights Agreement, and Escrow Agreement.
(e) The Spousal Consents.
11.2 DELIVERIES OF PURCHASER. At the Closing,
Purchaser shall deliver or cause to be delivered to Sellers the following:
(a) Stock certificates for the shares of
Purchaser's Common Stock issuable to Xxxxxxx under Paragraph 2.2 hereof in
100,000 increments (or any fraction thereof, as appropriate) and to Xxxxxxx
under Paragraph 2.2 hereof in 20,000 increments (or any fraction thereof, as
appropriate).
(b) Amendments to the options and
warrants, as described in Paragraph 8.2.
(c) Payment of the attorneys' fees and
costs.
(d) Resolutions of Board of Directors of
Purchaser approving the transaction.
(e) An executed copy of the Registration
Rights Agreement, and Escrow Agreement.
12. ESCROW; INDEMNIFICATION.
12.1 ESCROW. At the Closing, Sellers shall
deposit with an escrow agent a sufficient number of shares of Purchaser's stock
(valued at $1.63 per Share) to equal a market value of $125,000 (the "Escrow").
Six months after the Closing Date, such number of shares shall be adjusted
based on the average between the closing offer and bid prices on such date (the
"Six Month Adjustment"); provided, however, that any number of shares subject
to a claim made by Purchaser prior to the Six Month Adjustment shall not be so
adjusted. The Escrow shall be maintained for a period of one year (the "Escrow
Period") from the earlier of the Closing Date of that certain purchase and sale
agreement by and between Purchaser and Xxxxxxx for Purchaser's purchase of
Xxxxxxx'x stock in Express Undercar Parts Warehouse, Inc., California (the
"California Agreement") and June 30, 1996.
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12.2 INDEMNIFICATION. Subject to the terms of this
Paragraph 12.2, Sellers, jointly and severally, shall indemnify and hold
harmless Purchaser, promptly upon demand at any time and from time to time,
against any and all losses, liabilities, claims, actions, damages and expenses,
including, without limitation, reasonable attorneys' fees and disbursements,
(collectively, "Losses") arising out of or in connection with any
misrepresentation or breach of any warranty, representation, covenant or
agreement made by either Seller in this Agreement. If Purchaser determines
that it is entitled to indemnification for Losses, Purchaser shall give prompt
written notice to Sellers of each claim (a "Claimed Loss") for a Loss
specifying the amount and nature of such claim, and of any matter which in the
opinion of Purchaser is likely to give rise to claim for a Loss. Purchaser's
notice of Claimed Loss shall include its estimate of its fees and expenses,
including without limitation reasonable attorney's fees and disbursements, in
any claim or legal proceeding related thereto, subject to adjustment once the
claim or legal proceeding has concluded and Purchaser's actual fees and
expenses are known. Sellers, within twenty (20) days after Purchaser has given
such notice, shall respond in writing, either acknowledging their obligation
for such Claimed Loss or denying such obligation. If Sellers acknowledge such
obligation, Purchaser may withdraw from the Escrow a number of shares (valued
as set forth above) equal to the amount of the Claimed Loss, to the maximum
amount then remaining in the Escrow. If Sellers deny such obligation for a
Claimed Loss, Sellers and Purchaser shall proceed to arbitration pursuant to
paragraph 12.3. If either or both of Sellers are found by the arbitration
provided for below (or by any other body which can make a final determination)
to be liable, in whole or in part, for a Claimed Loss, Purchaser may withdraw
from the Escrow a number of shares equal to the amount of the Claimed Loss, to
the maximum amount then remaining in the Escrow, and shall, in addition
thereto, be entitled to cash payment or reimbursement by Sellers, jointly and
severally, of Purchaser's reasonable attorneys' fees and costs (provided that
if the Loss awarded is only part of that Claim, any payment for attorneys' fees
and costs shall be proportionate thereto). The Escrow is being established to
protect Purchaser against all Claimed Losses and Purchaser may resort to the
Escrow established hereunder in such event. The maximum liability of Sellers
for any and all Losses under this Agreement, in the aggregate, shall be the
amount of the Escrow, and except as provided in Section 7.12 above, Purchaser
shall have no other recourse against Sellers hereunder. Any claim by Purchaser
for a Loss under this Agreement must be filed by the end of the Escrow Period.
With respect to any Claimed Loss which has been asserted hereunder that is
pending or unresolved at the end of the Escrow Period, the number of shares
subject to such Claimed Loss shall remain in the Escrow, and the Escrow Period
shall be extended until the matter relating to such Claimed Loss has been
terminated or otherwise resolved. If no claims have been filed by the end of
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the Escrow Period, the shares held in Escrow shall automatically, and without
need for further action or approval by Purchaser, be delivered to Sellers. The
parties shall enter into an escrow agreement with the escrow holder
incorporating the terms of this Agreement.
12.3 ARBITRATION. If Sellers deny any obligation
for a Claimed Loss as described in Section 12.2 above, a determination of
whether a Loss exists shall be made by a three-person panel of arbitrators
designated according to the rules of the American Arbitration Association. The
arbitration procedure shall be governed according to the rules of the American
Arbitration Association.
12.4 INDEMNIFICATION BY PURCHASER. Purchaser
shall indemnify, defend, and hold harmless Sellers, promptly upon demand at any
time and from time to time, against any and all Losses arising out of or in
connection with any misrepresentation or breach of any warranty,
representation, covenant or agreement made by Purchaser in this Agreement.
12.5 INDEMNIFICATION PROCEDURE. If Sellers seek
indemnification under 12.4 hereof, Seller shall give prompt written notice to
Purchaser of each claim for indemnification hereunder, specifying the amount
and nature of the claim, and of any matter which in the opinion of the Sellers
is likely to give rise to an indemnification claim. In the event of any claim
for indemnification hereunder resulting from or in connection with any claim or
legal proceeding brought by, or which the Sellers reasonably believe is likely
to be brought by, a third party, such notice shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom.
Purchaser, within ten (10) days after the Sellers has given such notice (or
within such shorter period of time as an answer or responsive motion may be
required), shall acknowledge in writing its obligation to indemnify. Purchaser
shall then have the right to control, at its sole cost and expense, the defense
of such claim or proceeding, with counsel reasonably satisfactory to the
Sellers. The Sellers shall not settle or compromise such claim or proceeding
without the written consent of the Purchaser, which consent shall not
unreasonably be withheld or delayed. The Sellers may in any event participate
in any such defense with its own counsel and at its own expense. Each of the
parties hereto shall cooperate in the defense of any claim and shall provide
the other with access to records as may reasonably be required.
Notwithstanding the foregoing, the rights of Sellers
to be indemnified hereunder shall not be adversely affected by the Sellers'
failure to give notice in accordance with the foregoing unless and only to the
extent that the Purchaser is materially prejudiced by such failure.
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If the Purchaser, within twenty (20) days of receipt
of notice of a claim (or within such shorter time as may be required for an
answer or responsive motion), fails to assume the defense, the Sellers shall
have the right to undertake the defense, compromise or settlement on behalf of
and for the account and risk of the Purchaser.
12.6 SURVIVAL OF INDEMNIFICATION. The
indemnifications contained in Section 12.4 shall survive for one year after the
Closing. Any matter as to which a claim has been asserted hereunder that is
pending or unresolved at the end of such period shall continue to be covered by
this indemnification until finally terminated or otherwise resolved.
13. TERMINATION. This Agreement may be terminated prior
to the Closing:
(a) By written agreement of the parties hereto;
(b) Automatically, without further action by any
party, if the Closing shall not have occurred on or before May 31, 1996 or such
later date, if any, to which Purchaser and Sellers shall agree in writing;
(c) By Purchaser or Sellers if a condition to
their respective obligations to consummate the transactions contemplated hereby
has not been met by the Closing Date; or
(d) By Purchaser if, in the course of its due
diligence review, it discovers information which Purchaser believes has a
material adverse effect on or relating to the value, business, properties,
financial condition, prospects, liabilities or obligations of the Company; or
(e) By Sellers, if in the course (i) of their due
diligence review, Sellers discover information which Sellers believe has a
material adverse effect on or relating to the value, business, properties,
financial condition, prospects, liabilities or obligations of the Purchaser, or
(ii) they are not satisfied with the status report it receives pursuant to
paragraph 8.6.
14. MISCELLANEOUS.
14.1 SURVIVAL. All representations, warranties,
indemnities, covenants, and agreements made by the parties in connection with
the transaction described herein shall survive the Closing for a period of one
year after the Closing, provided, however, that any matter as to which an
indemnification claim has been asserted under Paragraph 12 that is pending or
unresolved at the end of such period shall continue to be covered by such
indemnification until finally terminated or otherwise resolved.
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14.2 FURTHER ASSURANCES. The parties shall
cooperate and take such actions, and execute such other documents, at the
Closing or subsequently, as either may reasonably request in order to carry out
the provisions or purpose of this Agreement.
14.3 NOTICES. All notices or other communications
in connection with this Agreement shall be in writing and shall be considered
given when personally delivered or five (5) days after mailing when mailed by
registered or certified mail, postage prepaid, return receipt requested, or
upon receipt when sent via commercial courier or facsimile (with telephonic or
electronic confirmation of receipt) directed, as follows:
If to Purchaser:
Reddi Brake Supply Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: S. Xxxxxx Xxxxx
Executive Vice President
With a copy to:
Xxxxx, Xxxxx & Xxxxxx
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
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If to Sellers:
If to Xxxxxxx to:
Xx. Xxxxx Xxx Xxxxxxx
0000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxx 00000
With a copy to:
Xxxxxxxxx, Xxxxxxxx & Pines
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
If to Xxxxxxx to:
Xx. Xxxxx Xxxxxxx
0000 Xxxxxx Xxxx Xxx
Xxx Xxxxx, XX 00000
With a copy to:
Schreck, Jones, Bernhard, Woloson & Xxxxxxx
000 X. Xxxxxxxxxx Xxxx.
Xxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
The above addresses may be changed by notice given in accordance with this
Paragraph.
14.4 ENTIRE AGREEMENT. This Agreement (which
includes the Schedules and Exhibits hereto) sets forth the parties' final and
entire agreement with respect to its subject matter (except for the matters to
be covered by the Registration Rights Agreement, the Escrow Agreement and the
Covenant Not to Compete) and supersedes any and all prior understandings and
agreements. This Agreement may be amended, supplemented, or changed, and any
provision hereof may be waived, only by a written instrument signed by both
parties.
14.5 SUCCESSORS. The rights under this Agreement
shall not be assignable nor the duties delegable by Purchaser or Sellers
without the written consent of the other, provided, however, that Purchaser
shall have the right to transfer the assets or stock of the Company to, or
merge the Company with and into, Purchaser's wholly-owned subsidiary, Reddi
Brake Supply Company, Inc., a California corporation. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, personal representatives,
successors, and assigns.
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14.6 PARAGRAPH HEADINGS. The paragraph headings
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
14.7 SEVERABILITY. If any provision of this
Agreement shall be held by any court of competent jurisdiction to be illegal,
invalid, or unenforceable, such provision shall be construed and enforced as if
it had been more narrowly drawn so as not to be illegal, invalid or
unenforceable, and such illegality, invalidity or unenforceability shall have
no effect upon and shall not impair the enforceability of any other provision
of this Agreement.
14.8 GOVERNING LAW. This Agreement shall be
governed by and construed and interpreted in accordance with the laws of the
State of California.
14.9 COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same instrument.
14.10 ATTORNEYS' FEES. In the event that any party
shall bring an action in connection with the performance, breach or
interpretation of this Agreement, or in any action related to the transaction
contemplated hereby, the prevailing party in such action, as may be determined
by the court or other tribunal having jurisdiction, shall be entitled to
recover from
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the losing party in such action all actual costs and expenses of such
litigation, including attorneys' fees, court costs, costs of investigation,
accounting, and other costs reasonably related to such litigation, in such
amount as may be determined in the discretion of the court or other tribunal
having jurisdiction of such action.
EXECUTED as of the date first above written.
PURCHASER:
---------
Reddi Brake Supply Corporation
By:
---------------------------------------
S. Xxxxxx Xxxxx
Executive Vice President and CFO
By:
---------------------------------------
Title:
------------------------------------
SELLERS:
-------
-------------------------------------------
Xxxxx X. Xxxxxxx
-------------------------------------------
Xxxxx Xxxxxxx
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