EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
THIS AGREEMENT (this "Agreement") is made by and among Atlantic Automotive
Corp., a Maryland corporation, 00 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000
("Shareholder"), its wholly-owned subsidiary, Mr. Tire, Inc., a Maryland
corporation ("Seller"), and Monro Muffler Brake, Inc., a New York corporation,
000 Xxxxxxxx Xxxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 ("Buyer"). Shareholder, Seller,
and Buyer are sometimes referred to herein as a "Party" and are referred to
herein collectively as the "Parties".
R E C I T A L S:
I. Seller is engaged in the Business (as hereinafter defined);
II. Seller desires to sell certain Assets (as hereinafter defined) now
owned and held by it and used or usable in connection with the operation of the
Business;
III. Buyer desires to purchase the Assets upon the terms and conditions
hereinafter set forth and to continue the operation of the Business; and
IV. Shareholder is the owner of all of the issued and outstanding capital
stock of Seller.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter contained, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
ascribed to them in this Article I.
Acquisition Cost. Seller's cost of acquiring each item of inventory which
will be calculated in accordance with the cost marked as "loaded in the
computer" (per Acquisition Cost Definition Exhibit attached to Schedule 2.05B)
pursuant to Schedule 2.05B. This cost is
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calculated on a FIFO basis and is based on the invoice price less certain
discounts as explained in the Acquisition Cost Definition Exhibit. The cost of
inventory acquired by the Buyer will be reduced by $100,000.00 in aggregate
which reflects the estimated value of cooperative advertising credits, volume,
and vendor rebates and anticipatory discounts which are not reflected as a
reduction in the cost of the inventory on this Schedule.
Agreement. This Asset Purchase Agreement including all amendments hereto
and all Schedules referred to herein.
Assets. The assets relating to the Business, as defined and set forth in
Paragraph 2.01, to be acquired by Buyer hereunder.
Breakup Fee. Two Million Five Hundred Thousand Dollars ($2,500,000.00).
Business. The business of under-car and other automotive repairs including,
but not limited to exhaust systems, brakes, inspections, shocks, springs,
struts, mufflers, tailpipes, belts, filters, wipers, electrical systems, lights,
oil changes, chassis lubrication, steering, suspensions, alignments, tires,
wheels, batteries, radiators, heating and cooling systems, CV and U-joints and
related parts and accessories, as operated by Seller.
Buyer. Monro Muffler Brake, Inc., a New York corporation.
Buyer's Attorney. Xxxxxxxxx & Xxxxxxx LLP, 0000 Xxxxx Xxxxxx, Xxxxxxxxx,
Xxx Xxxx 00000.
Cap. Two Million Five Hundred Thousand Dollars ($2,500,000.00).
Closing. The closing of the transactions contemplated by this Agreement,
which will occur on the Closing Date.
Closing Date. March 1, 2004, effective as of the close of Business on
February 29, 2004 or such other date and time as the parties may agree to in
writing or pursuant to Seller's or Buyer's exercise of the option for the
Extension Period Closing (as hereinafter defined), upon which the Closing shall
occur.
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Code. The Internal Revenue Code of 1986, as amended.
Confidential Information. Any and all trade secrets and other technical,
research, operational, manufacturing, marketing, sales and financial information
of the Seller regardless of how acquired or developed concerning the Business
and the policies, research, processes, inventions, products and business
operations and methods relating in any way to the Business.
Consents. The consents or approvals necessary to transfer and assign the
Contracts or the Real Property leases pursuant to the terms hereof.
Contract. Any and all written or oral contracts or commitments of any kind
or nature relating to the Business or the Assets, including, without limitation,
any loan agreement, note, guarantee, security agreement, pledge agreement,
lease, employment or labor agreement, stock option, stock purchase, pension or
profit sharing plan, retirement or bonus plan, agreement or other arrangement
(whether current or deferred), construction or building commitment, insurance
contract, sales representation contract, advertising contract, brokerage
contract, purchase or sales order or contract or franchise or license agreement.
Deferred Consents. Consents that are not obtained prior to the Closing
despite Seller's best efforts.
Environmental Claims. Any complaint, summons, citation, notice, directive,
order, claim, litigation, investigation, judicial or administrative proceeding,
judgment, letter or other communication confirmed in writing from any
governmental agency, department, bureau, office or other authority, or any third
party involving violations of Environmental Laws at or releases of a Hazardous
Substance from, to, at or onto, any Real Property locations.
Environmental Laws. Any and all laws, rules, regulations, orders or
guidance documents of any Governmental Authority relating to public health and
safety, worker health and safety, pollution or the protection of the environment
including, without limitation, those relating to actual or threatened emissions,
discharges or releases of pollutants, contaminants, hazardous or
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toxic materials, substances or wastes into ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, hazardous or toxic materials, substances or wastes.
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
Escrow Agent. Buyer's Attorney and Seller's Attorney, jointly.
Escrow Agreement. Escrow Agreement, dated as of the Closing Date, by and
among the Parties, Seller's Attorney, and Buyer's Attorney.
Extension Period Closing. The extension by either the Buyer or the Seller
(but not both) of the Closing Date for a period of not more than ninety (90)
days beyond March 1, 2004.
Fixed Assets. Seller's furniture, fixtures, machinery, equipment (including
all oil and lube dispensing and used oil equipment acquired by Shareholder under
the terms of its Supply Agreement, dated July 20, 1999, with Castrol North
America Inc., as amended from time to time), motorized vehicles and tools used
in, and leasehold improvements relating to, the Business, as defined in
Paragraph 2.01B and as listed on Schedule 2.01B.
GAAP. Generally accepted accounting principles applied on a basis
consistent with prior periods.
Governmental Authority. Any and all federal, state, municipal or other
governments or governmental departments, commissions, boards, bureaus, agencies
or instrumentalities, domestic or foreign.
Hazardous Substance. Any materials or substances defined as or included in
the definition of "Hazardous Substances", "Hazardous Materials", "Hazardous
Wastes", "Toxics", "Contamination" or "Pollutants" under any Environmental Laws,
including any substance which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic,
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microbial or which contains polychlorinated biphenyls (PCBs), gasoline, diesel
fuel, petroleum or petroleum hydrocarbons or asbestos.
Xxxxxxxxx Agreement. License Agreement dated December 31, 1997 by and
between Seller and Xxxxxxxxx Holdings, Inc. relating to the use by Xxxxxxxxx
Holdings, Inc. of the "Mr. Tire" marks.
Intellectual Property. Any and all copyrights, patents, trademarks, service
marks, trade names, computer software, inventions, designs, formulas, trade
secrets, manufacturing processes, know-how and other similar rights.
Inventory. Seller's inventory relating to the Business, as further defined
in Paragraph 2.01A.
Litigation. Any and all litigation, proceedings, suits, actions,
controversies or investigations, at law or in equity, before or by any court or
Governmental Authority, or any claims in respect thereof.
Losses. Any loss, liability, damage, cost, or expense, including, without
limitation, reasonable attorneys' fees and expenses.
Material Adverse Change. A material adverse change or an extraordinary
event which could reasonably be expected to result in a material adverse change,
in the financial condition, assets, liabilities or business of the Seller
relating to the Business; other than changes in the ordinary course of business,
none of which, individually or in the aggregate, have been materially adverse.
Permitted Encumbrances. As set forth on Schedule 2.01, those encumbrances,
to the free and clear transfer of title to the Assets, which will be permitted
by Buyer.
Purchase Price. The aggregate amount to be paid by Buyer to Seller and
Shareholder, set forth in Paragraph 2.04 of this Agreement and subject to the
adjustments thereto as set forth elsewhere in the Agreement.
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Real Property. Any and all of the parcels of real property, together with
the buildings, structures and other improvements thereon, which are leased or
otherwise used or occupied by the Seller in connection with the operation of the
Business, including, without limitation, those parcels more particularly
described in Schedule 3.10A.
Seller. Mr. Tire, Inc.
Seller's Attorney. Xxxxxx & Xxxxxxxx, P.A., 000 Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxx, Xxxxxxxx 00000.
Seller's Knowledge. The actual knowledge of Xxxxxx Xxxxxxxxx, Xx. and
Xxxxxxx X. Xxxxxxxxx, which includes any knowledge gained by Messrs. Xxxxxxxxx
following their due inquiry of each of the officers and regional managers of
Seller with respect to each such officer's and regional manager's knowledge of
any fact, matter or thing relating to or arising from the representations and
warranties set forth in this Agreement.
Shareholder. Atlantic Automotive Corp.
Shareholder Change of Control. Any event or transaction, the result of
which is that the parent of Shareholder, Summa Holdings, Ltd., is no longer the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Securities
and Exchange Act of 1934), directly or indirectly, of Shareholder's securities
representing 50% or more of the combined voting power of the Shareholder's then
issued and outstanding securities; or the closing of (a) the sale of all or
substantially all of the assets of the Shareholder, if the holders of
Shareholder securities representing all voting power for the election of
directors before the transaction hold less than a majority of the total voting
power for the election of directors of all entities which acquire such assets,
or (b) the merger of the Shareholder with or into another corporation if the
holders of the Shareholder securities representing all voting power for the
election of directors before the transaction hold less than the majority of the
total voting power for the election of directors of the surviving entity.
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Shareholder's Knowledge. The actual knowledge of Xxxxxx X. Xxxxx, which
includes any knowledge gained by Xx. Xxxxx following his due inquiry of each of
the officers of Shareholder with respect to each such officer's knowledge of any
fact, matter or thing relating to or arising from the representations and
warranties set forth in this Agreement.
Sub-cap. Seven Hundred Thirty-Five Thousand Dollars ($735,000) of the Cap.
Taxes. Any and all Federal, state, local or foreign income, gross receipts,
franchise, estimated, minimum, sales, use, transfer, registration, value added,
excise, natural resources, severance, stamp, occupation, premium, windfall
profit, environmental, customs, duties, real property, personal property,
capital stock, social security, unemployment, disability, payroll, license,
employee or other withholding, or any other Tax, of any kind whatsoever,
including any interest, penalties or additions to Tax or additional amounts in
respect of any of the foregoing.
Threshold Amount. Losses which, in the aggregate, exceed $250,000.00.
Transferred Employees. Those employees of Seller set forth on Schedule
6.05A.
ARTICLE II
PURCHASE AND SALE
2.01 Purchase of Assets.
On the Closing Date, Seller agrees to sell and Buyer agrees to
purchase, subject to the terms and conditions of this Agreement, the assets,
properties and rights of Seller relating to the Business (the "Assets") as
follows, free and clear of any claims, liabilities, security interests,
mortgages, liens, pledges, charges, or encumbrances of any nature whatsoever
(except for Permitted Encumbrances listed and described on Schedule 2.01):
A. All of Seller's inventory, parts and supplies relating to the
Business, including any inventory, parts, or supplies in transit, as the same
shall exist on the Closing Date and which are usable and saleable in the
ordinary course of business, which is defined in the case of non-tire Inventory
as being listed on Seller's vendors' current price sheets and in the case of
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tire Inventory as within three (3) years of its date of manufacture based upon
each Inventory item's Department of Transportation Code.
B. All of Seller's furniture, fixtures, machinery, equipment, tools,
supplies and leasehold improvements relating to the Business as the same shall
exist on the Closing Date, as such items are listed and described in Schedule
2.01B hereto. No less than seven (7) days before the Closing, Seller will
provide to Buyer its proposed Schedule 2.01B , which will include the values
assigned to such Fixed Assets, including, for no less than fifty percent (50%)
of the aggregate value of the leasehold improvements, a copy of the invoices and
date(s) of acquisition for each such leasehold improvements. Once the Buyer and
Seller agree upon the values for the Fixed Assets listed, the list will become
Schedule 2.01B. In the event Seller and Buyer cannot agree upon the values of
the Fixed Assets listed prior to the Closing, the Fixed Assets and values in
dispute will be resolved by arbitration as provided in Paragraph 11.03.
C. Certain of Seller's trademarks, tradenames (including "Mr. Tire"),
domain names, goodwill, intangible assets and records relating to the Business,
including, but not limited to, Seller's telephone numbers, customer lists and
history, mailing lists, accounting, sales and purchasing correspondence and
records, customer deposits, prepayments, data processing records, all of the
operational books, records and data used by Seller in connection with the
Business, and the Xxxxxxxxx Agreement, all as such items are listed and
described on Schedule 2.01C; and
D. Certain pre-paid expenses with respect to the Business as of the
Closing, as such expenses are described in Schedule 2.01D. All such pre-paid
expenses shall be calculated in accordance with GAAP as of the Closing Date,
with supporting calculations provided to Buyer, and, with respect to business
licenses, must be related to licenses transferable to Buyer as of the Closing.
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E. Certain other assets of Seller set forth on Schedule 2.01E. All
assets set forth on Schedule 2.01E will be calculated in accordance with GAAP
and as of the Closing Date. It is the intention of the parties hereto that the
Assets shall include only those assets of Seller specifically listed in the
Schedules attached hereto and made a part hereof.
F. The following are excluded from the Assets: Seller's cash (in banks
or on hand, other than as set forth on Schedule 2.01E), cash equivalent and
deposits, all interest receivable in connection with any such items, rights in
and to bank accounts, marketable and other securities and similar investments of
Seller, accounts receivable and the other items listed on Schedule 2.01F.
2.02 Liabilities. Except as set forth in Schedule 2.02, it is expressly
understood and agreed that Buyer does not, nor will it assume or become liable
for, any of Seller's liabilities of any kind or nature at any time existing or
asserted, whether fixed, contingent or otherwise, including without limitation,
accounts, notes and taxes payable, withholdings payable, workers compensation
claims, liability claims, warranty claims, claims arising under Environmental
Laws or circumstances or incidents which may give rise to claims under
Environmental Laws (including but not limited to claims pursuant to the
Comprehensive Environmental Response and Recovery Act, as amended, 42 USC 9601
et. seq.) in each case based on matters occurring prior to the Closing Date,
Litigation or claims in respect thereof, lease obligations accrued prior to the
Closing Date, salaries, wages, severance or separation pay, or vacation, profit
sharing, retirement, pension, bonus, hospitalization, medical, health or other
employee benefits or any unemployment or other benefit taxes relating to any of
the employees. All liabilities set forth on Schedule 2.02 will be calculated in
accordance with GAAP and as of the Closing Date.
2.03 Assignment of Leases and Contracts. Seller agrees to assign to Buyer,
and Buyer agrees to assume and accept, all of Seller's right, title and interest
in and to (A) the Real
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Property leases described in Schedule 2.03A and (B) the Contracts itemized and
described in Schedule 2.02 hereto.
2.04 Purchase Price. The Purchase Price to be paid by Buyer to Seller for
the Assets shall be $25,050,000.00 plus the Warrant Amount (as defined in
paragraph 2.06B), subject to adjustment as hereafter set forth (the "Purchase
Price").
2.05 Purchase Price Adjustments. The Purchase Price shall be adjusted as
follows:
A. If the Seller exercises its right to delay the Closing for the
Extension Period Closing, such that the Closing occurs after March 1, 2004, the
Purchase Price will be adjusted based upon the actual date of the Extension
Period Closing, as follows:
Extension Period Closing Extension Period Purchase Price
------------------------ -------------------------------
March 1, 2004 $25,050,000.00
April 1, 2004 $24,883,333.00
May 1, 2004 $24,716,666.00
June 1, 2004 $24,550,000.00
Following the Seller's exercise of the option for the Extension Period Closing,
should the Closing occur between March 1, 2004 and June 1, 2004 on a date other
than those listed above, the Purchase Price will be adjusted pro rata.
B. The Purchase Price assumes that on the Closing Date Seller has on
hand Inventory valued at Seller's Acquisition Cost of at least $3,000,000.00.
The actual value of the Inventory on the Closing Date (the "Closing Inventory
Schedule") shall be determined by a physical inventory count conducted jointly
by Seller and Buyer at or near the Closing Date based on the agreed upon closing
procedures set forth on Schedule 2.05B, with each item of Inventory to be valued
at Seller's Acquisition Cost as provided on the Closing Inventory Schedule.
Within forty-five (45) days after the physical inventory is taken, Seller shall
prepare a final inventory schedule, setting forth each item of Inventory by the
physical count agreed upon by the Parties, valued at its Acquisition Cost, its
extended value and the total value by store (the "Inventory Statement"). Buyer
shall have forty-five (45) days to audit and reconcile such
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Inventory Statement, during which xxxx Xxxxxx and Shareholder shall use best
efforts to respond in a timely manner to any requests of Buyer for additional
information or documentation to assist Buyer during its audit and reconciliation
of the Inventory Statement. If Buyer disputes an item or items in the Inventory
Statement, Buyer shall prepare and submit to Seller a notice of inventory
dispute which shall set forth Buyer's revised Inventory Statement. If Buyer
fails to deliver a notice of dispute within forty-five (45) days of its receipt
of the Inventory Statement from Seller, the Inventory Statement shall be deemed
accepted for purposes of any adjustment to the Purchase Price. Upon receipt by
Seller of a notice of dispute regarding the Inventory Statement, Seller and
Buyer shall, for a period of twenty (20) days following delivery of such notice,
seek in good faith to resolve any disputed items and agree on a final Inventory
Statement. The Purchase Price shall then be adjusted up or down to the extent
that the final Inventory Statement values the Inventory at more or less than
$3,000,000.00. In the event Seller and Buyer cannot resolve a disputed item,
such dispute shall be resolved by arbitration as provided in Paragraph 11.03 of
this Agreement.
C. The Purchase Price assumes that as of the Closing, the Fixed Assets
set forth on Schedule 2.01B, will have an aggregate book value of $3,000,000.00
(the "Fixed Asset Value"). At or near the Closing, the Buyer and Seller shall
conduct a joint physical inventory count of the Fixed Assets located at the Real
Property in accordance with the agreed upon inventory procedures set forth on
Schedule 2.05C Within thirty (30) days after the physical inventory is taken,
Seller shall prepare a final count of the Fixed Assets, setting forth each Fixed
Asset identified during the physical count by the Parties, valued at its
agreed-upon value as per Paragraph 2.01B, and the total value by store to
determine the Fixed Asset Value (the "Fixed Asset Statement"). Buyer shall have
thirty (30) days to audit and reconcile such Fixed Asset Statement, during which
xxxx Xxxxxx and Shareholder shall use best efforts to respond in a timely manner
to any requests of Buyer for additional information or documentation to assist
Buyer
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during its audit and reconciliation of the Fixed Asset Statement. If Buyer
disputes an item or items in the Fixed Asset Statement, Buyer shall prepare and
submit to Seller a notice of fixed asset dispute which shall set forth Buyer's
revised Fixed Asset Statement. If Buyer fails to deliver a notice of dispute
within thirty (30) days of its receipt of the Fixed Asset Statement from Seller,
the Fixed Asset Statement shall be deemed accepted for purposes of any
adjustment to the Purchase Price. Upon receipt by Seller of a notice of dispute
regarding the Fixed Asset Statement, Seller and Buyer shall, for a period of
twenty (20) days following delivery of such notice, seek in good faith to
resolve any disputed items and agree on a final Fixed Asset Statement. If the
parties determine that the Fixed Asset Value on the final Fixed Asset Statement
is $2,750,000.00 or less, the Purchase Price will be adjusted downward and the
Seller will promptly pay to the Buyer the difference between $2,750,000.00 and
the Fixed Asset Value. If the Fixed Asset Value is $3,250,000.00 or greater, the
Purchase Price will be adjusted upward, and Buyer will promptly pay to the
Seller the difference between the Fixed Asset Value on the final Fixed Asset
Statement and $3,250,000.00. If any Fixed Asset not listed on Schedule 2.01B is
identified during the physical count conducted pursuant to the terms of this
Paragraph, the Buyer may purchase, at its sole option, such Fixed Asset and the
Seller and Buyer will seek in good faith to determine the value for such asset
as part of the procedure set forth in Paragraph 2.01B. In the event Seller and
Buyer cannot resolve a disputed item, such dispute shall be resolved by
arbitration as provided in Paragraph 11.03 of this Agreement.
D. All Real Property taxes, rent payments and deposits, utility
charges and deposits, license fees and other charges relating to the Real
Property leases to be assumed by Buyer pursuant to Paragraph 2.03A hereof will
be adjusted as of the Closing Date. All payments due or prepayments received by
Seller under the Contracts to be assigned to Buyer pursuant to Paragraph 2.03B
hereof shall be prorated as of the Closing Date, and the prorated portion of
such payments and prepayments representing payment for the period commencing
with the Closing
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Date will be paid or credited by Seller to Buyer at the Closing or shortly
thereafter. Fifty Percent (50%) of the vacation and sick time accrued as of
Closing with respect to any Transferred Employees will be paid or credited by
Seller to Buyer against the Purchase Price at Closing. Buyer shall receive a
credit against the Purchase Price of One Hundred Seventy Five Thousand Dollars
($175,000.00) for environmental concerns, identified in the Sentinel
Technologies, Inc. Environmental and Industrial Remediation Report, completed in
January 2004, previously provided to the Seller and Shareholder by Buyer (the
"Environmental Report"). Such credit shall not be calculated as part of the
Threshold Amount and shall not limit Buyer's right to indemnification except as
otherwise set forth in Paragraph 9.04.
E. Any payments, deposits, charges, fees or other monetary obligations
assumed by Buyer pursuant to its assumptions of certain of Buyer's liabilities
under Paragraph 2.02 (and not otherwise addressed in subparagraph 2.05D), will
be paid or credited by Seller to Buyer at the Closing or shortly thereafter.
F. The application of the Arlington Credit (as defined in Paragraph
9.08), if applicable, calculated pursuant to the terms of Paragraph 9.08.
G. Schedule 2.05G sets forth the Parties' understanding of the amount
of the Purchase Price and estimated Purchase Price adjustments as of the Closing
Date based upon the information available as of the date of execution of this
Agreement. The parties agree that Schedule 2.05G will be used for the payment of
the Purchase Price at the Closing and that the Purchase Price will thereafter be
subject to adjustment as set forth therein.
2.06 Payment of Purchase Price. The Purchase Price shall be paid or
evidenced by the delivery at the Closing of:
A. The deposit by Buyer with the Escrow Agent of the sum of $1,000,000
(the "Escrowed Amount") to be held in an interest bearing escrow account and
guaranteed to Buyer to earn five percent (5%) interest, and to be disbursed
after Closing in
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accordance with the terms set forth in the Escrow Agreement. The Escrowed Amount
shall be used to fund: (i) the post-Closing adjustments (without regard to the
Threshold Amount); and (ii) indemnification pursuant to Paragraph 9.04 for the
breach, if any, of the representations and warranties of Seller set forth in
Paragraph 3.13 (to which claims the Threshold Amount shall apply), as well as
any and all representations and warranties of Seller or Shareholder with respect
to environmental compliance (to which claims the Threshold Amount shall apply).
B. The issuance on the Closing Date by Buyer to Shareholder of a
two-year warrant agreement in the form of Schedule 2.06B hereto (the "Warrant")
pursuant to which the Shareholder may purchase from Buyer 100,000 shares of
Buyer's $.01 par value Common Stock, at a price equal to the closing price of
Buyer's stock on the last trading day preceding the execution of this Agreement
(the "Warrant Amount"). The Warrant shall not be exercisable by Shareholder for
a period of six (6) months after the Closing Date. Within one hundred and twenty
(120) days after the Closing Date, Buyer shall use its best efforts to submit
all required information and filings with the Securities and Exchange Commission
in order to register the shares of Buyer's Common Stock sufficient to cover
Shareholder's exercise of the Warrant.
C. Payment by Buyer to Seller of the aggregate amount of the Purchase
Price, less the Escrowed Amount, Warrant Amount and any adjustments made at
Closing, by wire transfer of immediately available funds to bank account(s)
identified by Seller within two (2) days prior to Closing.
The amount of the post-Closing adjustment to the Purchase Price shall be
paid by Buyer or Seller, as applicable, by wire transfer of immediately
available funds one hundred eighty (180) calendar days after the Closing Date;
provided, however, the Parties may mutually agree to an earlier payment of such
amounts. Further, if, prior to the expiration of such 180 day period, Buyer
notifies Seller that it is prepared to resolve an issue with respect to
post-Closing adjustments to the Purchase Price such that Seller must pay money
to Buyer, the portion of the
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Escrowed Amount equal to the amount owed to Buyer shall cease to accrue further
interest pursuant to Paragraph 2.06A.
2.07 Closing. Closing hereunder shall take place at the offices of Seller's
Attorney on the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
SELLER AND SHAREHOLDER
Seller and Shareholder jointly and severally represent and warrant to Buyer
as follows:
3.01 Corporate Standing. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. Seller
has full corporate power and authority to own or lease its properties and to
carry on the Business as it is now being conducted. Seller is (or on the Closing
Date will be) duly licensed or qualified to do business and is in good standing
as a foreign corporation under the corporation and tax laws of all jurisdictions
in which the nature of the activities conducted by it and/or the character of
the assets owned or leased by it makes such license or qualification necessary,
such jurisdictions being listed on Schedule 3.01 hereto.
3.02 Authority. The Seller and the Shareholder have taken all such action
as may be necessary, advisable or proper to authorize this Agreement, the
execution and delivery hereof, the consummation of the transactions contemplated
hereby and the execution and delivery of each of the documents required to be
delivered hereunder. This Agreement has been duly executed by the Seller and the
Shareholder and is valid, binding and enforceable against each of them in
accordance with its terms, except as the enforceability of this Agreement may be
affected by bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by the application of general equitable principles.
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3.03 Consents; Conflicts. Except as set forth on Schedule 3.03, the
execution and delivery of this Agreement and the consummation of the
transactions provided hereunder do not require any third party consent and do
not violate, conflict with, result in the breach of, or cause the acceleration
of or default under any provision of (a) the Articles of Incorporation or
By-Laws, as the same may have been amended from time to time, of the Seller, or
(b) any obligation, mortgage, lien, lease, agreement, instrument, law, order,
arbitration award, judgment, decree or any other restriction to which the Seller
is a party or by which the Seller or the Shareholder is subject or bound.
3.04 Financial Statements. Seller has delivered to Buyer the Seller's
Internal Financial Statements as of December 31, 2003 and December 31, 2002
annexed hereto as Schedule 3.04 and a reconciliation of the Seller's December
31, 2002 Internal Financial Statements to the Seller's December 31, 2002
Financial Statements audited in connection with the audit of the Shareholder's
Financial Statements at December 31, 2002 (separate audited financial statements
are not prepared for the Seller) and a reconciliation of the Seller's December
31, 2001 and 2002 Internal Financial Statements to the Seller's 2001 and 2002
State Corporate Income Tax Return, respectively (collectively, the "Financial
Statements"). These Financial Statements (a) are prepared in accordance with
GAAP, except for the accounting for certain inventory vendor discounts, of which
approximately $200,000.00 are recorded directly to income rather than as a
reduction of inventory cost at year-end, and the accounting for current and
deferred taxes which is recorded in the Shareholder's Consolidated Financial
Statements, (b) are in accordance with the books and records of the Business,
and (c) except with respect to the accounting for certain inventory vendor
discounts described herein, present fully, fairly and accurately the
consolidated financial position of the Business as of said dates and the
operational results of the Business for the periods represented thereby. The
Brake Adjustment History for the period ended December 31, 2003, attached as
part of Schedule 2.02, presents an accurate
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history of brake warranty claims and calculation of Seller's cost for the
"Brakes-For-Ever" Warranty program during the period.
3.05 Title to Assets. Except as set forth in Schedule 3.05 hereto, the
Seller has good title to all of the Assets, free and clear of all liabilities,
mortgages, conditional sales agreements, security interests, leases, liens,
pledges, encumbrances, restrictions, charges, claims or imperfections of title
whatsoever (other than the Permitted Encumbrances). True, correct and complete
copies of each document or instrument relating to any such imperfection of title
have been hereto delivered to Buyer.
3.06 Condition of Assets. All Assets are in good working order and useable
in the ordinary course of the Business, ordinary wear and tear alone excepted.
3.07 Inventory. All Inventory owned by the Seller, relating to the Business
and existing as of the Closing Date will (a) be located at the Real Property on
the Closing Date, (b) be useable or saleable in the ordinary course of the
Business (as defined in Paragraph 2.01A), (c) be in a quantity and of a quality
suitable for sale in the ordinary course of the Business, (d) not be damaged or
defective, and (e) in the case of non-tire Inventory, be listed on Seller's
vendors' current price sheets and, in the case of tire Inventory, be within
three (3) years of its date of manufacture based upon each item of Inventory's
Department of Transportation Code.
3.08 Contracts. Seller is not a party to any Contract material to the
operation of the Business which is not set forth in Schedule 2.02 hereto.
A. The Contracts listed in Schedule 2.02 are valid, binding and
enforceable on all parties thereto and in full force and effect. The Seller has
not violated any of the terms thereof in any material respect; to Shareholder's
and Seller's knowledge, no other party to any Contract is in material breach
thereof. No claim has been made by any party thereto that any other party is in
default thereunder; and the Seller has not received any notice that any such
Contract is being or will be canceled. Except as set forth on Schedule 3.08,
neither the execution
21
of this Agreement nor the consummation of the transactions contemplated hereby
will constitute an event which will, upon the giving of notice, lapse of time or
both, result in a default under or termination of any such Contract. True,
correct and complete copies of each of the Contracts set forth on Schedule 2.02
have been supplied by Seller to Buyer prior to the date hereof.
B. Seller does not have any outstanding purchase commitment which is
in excess of the normal, usual and customary requirements of the Business or (i)
is at a price in excess of the current market price, or (ii) contains terms and
conditions which are more onerous than those which are usual and customary in
the industry. There are no outstanding bids, sales proposals, contracts or
unfilled orders quoting prices which do not include a markup over estimated
cost, based upon actual cost experience, consistent with past markup on similar
contracts. A list of all purchase commitments and orders of the Seller relating
to the Business which have not been received as of the date of this Agreement,
in amounts in excess of $10,000.00 in any single case and $50,000.00 in the
aggregate from all suppliers is annexed hereto as Schedule 3.08B. A list of all
sales commitments and orders of the Seller that have not been sold as of the
date of this Agreement, in amounts in excess of $10,000.00 in any single case
and $50,000.00 in the aggregate from all customers is annexed hereto as Schedule
3.08 B. Each sales commitment or order of the Seller is valid, binding and
enforceable against the customer.
3.09 Trade Relations. Trade relations between the Seller and its respective
major customers and suppliers are in good standing and the continuation of such
relations is not dependent upon the continued ownership of the Business by the
Seller or the continued management or administration of the Business by Seller's
respective present personnel. The Seller has no reason to believe that any major
customer, franchisor, distributor or supplier will or may cancel a major
contract, terminate its relationship with, or materially decrease its volume of
purchases from or sales to the Seller, whether or not by reason of the
transactions contemplated by this Agreement.
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3.10 Real Property.
A. Schedule 3.10A hereto contains an accurate and complete list of all
Real Property occupied by the Seller under a lease or similar arrangement and
with regard to each lease sets forth (i) the address of the subject property,
(ii) the name and address of the lessor, (iii) the expiration date of the lease,
(iv) the monthly rent and any additional rent called for under the lease, and
(v) any other material terms which affect possession or occupancy thereunder.
True, correct and complete copies of such leases and amendments thereto have
heretofore been delivered to Buyer. The Seller: (i) is in good standing under
each such lease and there are no material breaches of any such lease; and (ii)
has not received any notice of default from any lessor or received any notice of
non-compliance with applicable laws, rules or regulations of any Governmental
Authority. Seller has no obligation as lessee which it has not fully performed,
nor is it aware of any expenditures which are likely to be required under the
provisions of any such lease for any purpose other than the payment of rent,
except as otherwise disclosed on Schedule 3.10A. Unless otherwise indicated in
Schedule 3.10A, the consummation of the transactions contemplated by this
Agreement will not, by itself or upon the giving of notice or lapse of time or
both, result in a default under or termination of any such lease.
B. Seller does not own any Real Property.
C. Except as set forth in Schedule 3.10C, the Real Property and the
current use thereof by the Seller, do not violate any building, zoning or
similar land use law, rule or regulation of any Governmental Authority. All
buildings, structures and other improvements located on the Real Property are
(i) in good operating condition, (ii) in a state of good maintenance and repair,
ordinary wear and tear excepted, (iii) adequate and suitable for the purposes
for which they are presently being used, and (iv) located fully within the lines
of record title. Seller has not received any notice, official or otherwise, that
any condemnation proceeding is contemplated or has been commenced against any of
the Real Property or that any Real
23
Property, or the use thereof, is in violation of any applicable building, zoning
or similar land use law, rule or regulation of any Governmental Authority. To
Shareholder's and Seller's knowledge, the Seller has all necessary occupancy
certificates, licenses and permits with respect to its use and occupancy of each
parcel of Real Property.
D. Except as may be set forth in Schedule 3.10D, no Real Property
(whether now or previously owned or leased by the Seller) has ever been used for
the generation, storage or disposal of Hazardous Substances or as a landfill or
other waste disposal site. To Shareholder's and Seller's knowledge, no Hazardous
Substances exist on the Real Property in violation of applicable law; and prior
to Closing all Hazardous Substances shall be legally removed from the Real
Property, except for those stored in compliance with applicable law and used in
ordinary course of the Business. Except as set forth in Schedule 3.10D, (i)
there are not now, nor have there ever been, underground storage tanks, septic
tanks or in ground lifts on the Real Property, and (ii) the improvements on the
Real Property do not contain asbestos or lead based paint nor does any equipment
on the Real Property contain any polychlorinated biphenyls (PCB's).
E. There are no agreements, judgments, orders, writs, injunctions,
decrees, license or permit conditions or other directives of any court or
Governmental Authority which relate to the use of the Real Property or require
any change in the present condition of such premises.
F. To Shareholder's and Seller's knowledge, no parcel of Real Property
is in violation of any Environmental Law or any permit or license issued
thereunder, and no event has occurred which, with the passage of time or the
giving of notice or both, would constitute a violation of any Environmental Law
or any such permit or license.
24
G. Seller has delivered or caused to be delivered to Buyer all
instrument surveys, certificates of title, title insurance policies and
environmental reports covering or relating to the Real Property which are in its
possession or control.
3.11 Intellectual Property. Schedule 3.11 contains an accurate and complete
list of all Intellectual Property, which Seller has, except as otherwise noted
on Schedule 3.11, the exclusive right to use and transfer or otherwise assign to
Buyer, free and clear of all royalties, claims or rights of others and all of
which represents the Intellectual Property necessary or desirable to the conduct
of the Business. Except as set forth in Schedule 3.11 hereto, (a) Seller does
not own any copyright, patent, trademark, service xxxx or trade name or have any
application pending with respect thereto relating to the Business, (b) Seller
does not utilize any assumed names relating to the Business and (c) Seller is
not a party to any franchise, copyright, patent, trademark or service xxxx
license agreement relating to the Business. Seller is not a party to and, to
Shareholder's and Seller's knowledge, there is no Litigation relating to or
arising from Intellectual Property which is necessary or desirable to the
conduct of the Business, or any basis for any such Litigation, adversely
affecting or which might adversely affect the Business. The Seller has not given
any notice of infringement to any third party with respect to any of the
Intellectual Property and, to Shareholder's and Seller's knowledge, no such
infringement exists.
3.12 Taxes. The Seller has filed returns for and paid in full all of its
Taxes to the extent such filings and payments are required. All such returns
were true and correct when filed. Seller has not received notice of any
governmental investigation, examination or audit of any Tax return of the Seller
and, to Shareholder's and Seller's knowledge, no such investigation, examination
or audit is currently in progress. Seller has had no Tax deficiencies proposed
against it which remain unpaid, nor has it executed any waiver of the statute of
limitations on the assessment or collection of any Tax.
25
3.13 Litigation. Except as set forth on Schedule 3.13, there is no
Litigation existing, pending or, to Shareholder's and Seller's knowledge,
threatened against the Seller, and there is no fact known to the Shareholder or
Seller which could form the basis for any such Litigation. There are no
judgments, orders, writs, injunctions or decrees of any court or any
Governmental Authority, whether or not filed, against the Seller. Neither the
Seller nor the Shareholder has received any inquiry, written or oral, from any
Governmental Authority concerning the Business or its operations.
3.14 Governmental Compliance.
A. The Seller has complied in all material respects with all
applicable federal, state and local laws, rules, regulations, judgments, orders,
writs, injunctions or decrees of all courts and Governmental Authorities with
respect to the Business. Seller has not received any notice that it is claimed
to be in violation of any law, rule or regulation or in default with respect to
any judgment, order, injunction or decree, of any court or Governmental
Authority. All reports, returns and other documents which have been filed by the
Seller with any Governmental Authority are true, correct and complete in all
material respects.
B. The Seller has obtained all permits, licenses and other
authorizations which are required for the operation of the Business in all
material respects and the ownership, use and operation of its real and personal
properties, including without limitation all permits, licenses and other
authorizations required under any Environmental Law, all of which are listed and
described on Schedule 3.14B. To Shareholder's and Seller's knowledge, the
operation of the Business (as currently conducted and as previously conducted by
the Seller) does not violate any Environmental Law or any permit or license
issued thereunder, and no event has occurred which by itself or with the passage
of time or the giving of notice or both, would constitute a violation of any
Environmental Laws or such permits or licenses
26
C. There are no agreements, judgments, orders, writs, injunctions,
decrees, license or permit conditions or other directives of any court or
Governmental Authority which relate to the operation of the Business or require
any material change in the present methods of operation of the Business. There
is no Litigation pending or, to Shareholder's and Seller's knowledge, threatened
relating to (i) violation of or non-compliance with any Environmental Law, (ii)
the disposal, discharge or release of liquid or solid wastes or Hazardous
Substances or (iii) exposure to any chemical or other Hazardous Substances,
noises or vibrations. To Shareholder's and Seller's knowledge, no consent or
approval pursuant to any Environmental Law is needed from any Governmental
Authority in connection with the execution of this Agreement or the Closing, nor
is any notice required to be given by any party.
3.15 Labor Relations. With respect to the employees of the Business, the
Seller has complied in all material respects with all applicable agreements,
laws, rules and regulations relating to the employment of labor, including those
related to wages, hours and payroll taxes. The Seller has withheld and remitted
to the proper Governmental Authorities all amounts required by law or agreement
to be withheld from wages or salaries of its employees and is not liable for any
arrearage of wages or any Taxes or penalties for failure to comply with any of
the foregoing. With respect to the employees of the Business, within the last 12
months there have been no strikes, work stoppages, slowdowns, threatened unfair
labor practice charges or other material controversies pending or threatened by
any of its employees; and the Seller has not entered into any collective
bargaining agreement and no union represents, or in the past twelve (12) months
has demanded or requested to represent or is currently attempting to represent,
any of the employees of the Seller. Except as set forth in Schedule 3.15 hereto,
the Seller has not promulgated any policy or entered into any agreement relating
to the payment of any medical insurance premium, retirement pay, severance pay,
vacation pay or sick leave to any present or former employees of the Seller.
Schedule 3.15 lists all of the employees of the Seller employed
27
by the Business and their current wage rates, none of which since December 31,
2003, has been increased, except for the implementation of annual wage rate
increases and bonuses consistent with past practice. Schedule 3.15 reflects all
unused vacation and sick pay accrued as of December 31, 2003 (and to be adjusted
through the Closing Date pursuant to Schedule 2.05G) for all of Seller's
employees employed by the Business. Schedule 3.15 also sets forth the name of
any employees of the Seller engaged in the Business who are currently on a leave
of absence for any reason including military duty, sickness, injury or
disability, and states the reason for and other details of such leave. True,
correct and complete copies of all written employment policies and all employee
manuals which are still in effect for any present, former or retired employee of
the Seller employed by the Business have heretofore been delivered to Buyer.
3.16 ERISA Matters.
A. Employee Plans. Seller does not maintain any pension benefit,
profit sharing, retirement, deferred compensation, welfare, insurance, health,
survivor, disability, bonus, incentive, commission, vacation pay, severance pay
and other similar plans, programs and agreements, whether reduced to writing or
not or whether defined in ERISA Section 3(3) or not, relating to the employees
of the Seller being transferred to Buyer hereunder, except as listed on Schedule
3.16 (the "Employee Plans"). To Shareholder's and Seller's knowledge, neither
Seller nor any employer within a group of employers of which the Seller is a
member (as defined in Code Section 414 (b), (c), (m) or (o) as an "ERISA
Affiliate") has ever been obligated to contribute to any "multi-employer plan,"
as such term is defined in Section 3(37) of ERISA, or to any multiple employer
or single employer plan covered by the termination provisions of Title IV of
ERISA, with respect to Transferred Employees hereunder. Seller agrees that it
retains all liability that may arise on account of contributions that may have
been made to any such plan prior to the Closing Date, such that there will be no
carryover liability to Buyer with respect thereto.
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B. Copies of Employee Plans and Related Documents. Seller has
previously delivered to the Buyer true, correct and complete copies of all
Employee Plans which have been reduced to writing and written descriptions of
all Employee Plans which have not been reduced to writing, and all agreements,
including trust agreements and insurance contracts, related to such Employee
Plans, the Summary Plan Description and all modifications thereto for each
Employee Plan communicated to employees and, if applicable, the Form 5500 filed
in each of the last three plan years with respect to each Employee Plan.
3.17 Books and Records.
A. Except as set forth in Schedule 3.17, the Seller does not have any
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 (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of the Seller.
B. Seller will be able to adequately maintain the books and records of
Buyer for as long as needed by Buyer after the Closing, pursuant to the terms of
the Transition Agreement (as defined in Paragraph 7.07B).
3.18 Interests in Clients, Suppliers, Etc. Except as set forth in Schedule
3.18, neither the Shareholder nor any officer or director of the Seller or the
Shareholder possesses, directly or indirectly, any financial interest in, or is
a director, officer, owner or employee of, any corporation, firm, association or
business organization which is a client, supplier, customer, lessor, lessee,
competitor or potential competitor of the Seller or has any right, option or
agreement to be or become any of the foregoing. Ownership of less than five
percent (5%) of the securities of a company which are traded on a recognized
stock exchange or market shall not be deemed to be a financial interest for
purposes of this Paragraph 3.18.
29
3.19 Insurance. Seller has in full force and effect insurance policies of
the types and in the amounts described in Schedule 3.19 hereto. True, correct
and complete copies of said policies have heretofore been delivered to Buyer.
These policies are in types and amounts customarily deemed to be adequate in
Seller's industry, and all premiums due to the date hereof have been paid in
full. To Shareholder's and Seller's knowledge, all of such policies have been
issued by reputable insurance companies which are actively engaged in the
insurance business and authorized to issue policies in the State of Maryland.
3.20 Absence of Certain Changes. Except as set forth in Schedule 3.20
hereto, there has not been since December 30, 2003:
A. Any Material Adverse Change;
B. Any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the Assets;
C. Any material transactions entered into or any material liabilities
or obligations incurred by the Seller (to be considered a "material transaction"
or a "material liability or obligation", it must be for an amount of at least
$10,000.00), or any sale, transfer, encumbrance of, or any contract to sell,
transfer or encumber, any of the Assets, or any payment, cancellation or
compromise of any debt, other than in the ordinary course of business;
D. Any payment or declaration of any bonus or salary increase other
than in the ordinary course of the Business and consistent with past practice,
or adjustment or additional or extraordinary payment to any officer, employee or
agent of the Seller; or
E. Any other event of any kind or character which would or could
materially and adversely affect the Business or the Assets.
3.21 General Warranty. Seller has made due inquiry with respect to each
fact, matter or thing relating to or arising from the representation and
warranty set forth in this Agreement. No representation or warranty of the
Seller or Shareholder contained in this Agreement, and no
30
Schedule, exhibit, statement, document, instrument or certificate furnished to
or to be furnished by the Seller or the Shareholder to Buyer pursuant to the
terms hereof, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or fails or
will fail to state a material fact necessary to make the statements contained or
incorporated therein or herein not misleading.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents and warrants to the Seller and Shareholder as follows:
4.01 Corporate Standing. Buyer is a corporation duly organized, validly
existing and in good standing under the corporation and franchise tax laws of
the State of New York. Buyer has full corporate power and authority to own its
properties and to carry on its business as currently conducted and to own and
use the assets currently owned and used by it.
4.02 Corporate Authority. Buyer has full corporate power and authority to
enter into, execute and deliver this Agreement, to purchase the Assets and
comply with the terms and conditions of this Agreement. Buyer has taken all such
corporate action as may be necessary or advisable and proper to authorize this
Agreement, the execution and delivery thereof, the consummation of the
transactions contemplated hereby and the execution and delivery of each of the
documents required to be delivered hereunder, so that Buyer will have full
right, power and authority to purchase the Assets from the Seller and to perform
all of its obligations under this Agreement at the Closing. This Agreement
constitutes the legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms and conditions, except as the enforceability
of this Agreement may be effected by bankruptcy, insolvency or similar laws
affecting creditor's rights generally or by the application of general equitable
principles.
31
4.03 Consents. Except as set forth in Schedule 3.03, neither the execution
of this Agreement nor the consummation of the transactions contemplated hereby
on the part of Buyer requires the consent of any third party.
4.04 Compliance With Laws. The Buyer is in compliance in all material
respects with all applicable federal, state and local laws, rules and
regulations and, to Buyer's knowledge, Buyer has received no notice of any
action threatened or pending alleging non-compliance therewith.
4.05 Litigation. There is not pending or, to Buyer's knowledge, threatened,
any suit, claim, action, proceeding or arbitration relating to the business or
operations of the Buyer which seeks to enjoin or obtain damages in respect to
the transactions contemplated hereby. Buyer has received no citation, order,
judgment, writ, injunction or decree of any court, government or governmental or
administrative agency against or affecting the Buyer for the operation of the
Buyer's business.
ARTICLE V
COVENANTS OF SELLER AND SHAREHOLDER
Seller and Shareholder jointly and severally covenant and agree with Buyer
as follows:
5.01 Conduct of Business. To keep and maintain the Business as a going
business with present personnel, to conduct the Business pending the Closing in
the normal and usual manner consistent with past practice. Without the prior
approval of Buyer (which approval may be withheld by Buyer for any reason in its
sole discretion), Seller shall not to make any change in the policies affecting
the operation and conduct of the Business, the Assets or the Real Property nor,
except as permitted in Schedule 5.01 hereof, to commence negotiations for, or
enter into, any material or unusual contracts or agreements affecting the
Business, the Assets or the Real Property, or extending beyond the Closing. From
December 31, 2003 through the Closing Date, the Seller shall not enter into any
purchase commitments or orders, except in the ordinary course of the Business
and in amounts not in excess of $10,000.00 for each such order or $50,000.00 in
the aggregate from all suppliers, without the prior written approval of Buyer.
From the date hereof through the Closing Date, Seller will not enter into any
sales commitments or orders, except in the ordinary course
32
of the Business and in amounts not in excess of $10,000.00 for each such order
or $50,000.00 in the aggregate from all customers, without the prior written
approval of Buyer.
5.02 Instruction. From the date hereof and for twelve (12) months
thereafter, instruct Buyer, through the authorized personnel and agents of
Buyer, concerning the Business and its operations, including such assistance and
cooperation as may be requested or necessary to assure the orderly transfer of
the Business to Buyer and the continuation thereof by Buyer subsequent to the
Closing.
5.03 Changes. Between the date hereof and the Closing, to notify Buyer of
any adverse changes, problems or developments with respect to the Business and
the status of its liabilities, obligations and relationship with its creditors,
customers and suppliers.
5.04 Access. Upon reasonable prior notice, allow the authorized personnel
and agents of Buyer to have access to any and all of the employees, records and
premises of the Seller relating to the Business at all reasonable times between
the date hereof and the Closing to permit Buyer to conduct at its expense any
tests, surveys, audits, inquires or investigations relating to Environmental Law
matters which are contemplated by this Agreement; to furnish Buyer with all
information concerning the affairs of the Seller relating to the Business as
Buyer may reasonably request; and to permit Buyer to make extracts from, and
copies of, all of the tax returns, books, records, appraisals, files, purchase
orders, sales orders and other business records of the Seller relating to the
Business, whether written or in machine readable form. Further, the Seller's
Auditors will provide the Buyer reasonable access to the audit work papers to
allow the Buyer to determine that the Internal Financial Statements at December
31, 2002 provided by the Seller to
33
the Buyer, including year-end adjustments as provided in Paragraph 3.04, were
taken from the Audited Statements at December 31, 2002 of the Seller in
connection with the December 31, 2002 Audited Financial Statements of the
Shareholder.
5.05 Exclusive Dealing. Pending Closing hereunder, to refrain and cause the
Seller, and the officers, directors, employees and agents thereof to refrain
from taking any action, directly or indirectly, to encourage, initiate or engage
in discussions or negotiations with or provide any information to, any
corporation, partnership, person, or other entity or group, other than Buyer,
concerning any purchase of the capital stock in Seller, any merger of, with or
into Seller, sale of the Assets or similar transaction involving the Seller or
the Business.
5.06 Cooperation. To (a) execute, acknowledge and deliver to Buyer on
request, both prior and subsequent to the Closing, all such instruments,
consents, authorizations, certifications, books, records and data, (b) take all
other action, as heretofore agreed or as may be reasonably necessary or
advisable in the opinion of Buyer to satisfy the Conditions to Closing contained
in Article VII hereof, and (c) refrain from taking any actions which would, may
or could cause a breach of the representations and warranties contained in
Article III hereof or cause the Conditions to Closing contained in Article VII
hereof to fail to be satisfied; and, further, to assist and cooperate with Buyer
in connection with any litigation involving the Business acquired from Seller
hereunder, before or after Closing.
5.07 Liabilities. In the ordinary course of Seller's business, Seller shall
pay and discharge, or make adequate provision for, all of Seller's liabilities,
indebtedness, obligations, claims and losses arising out of, or by reason of,
the operation of the Business prior to Closing.
5.08 Noncompetition. A. For a period of seven (7) years from and after the
Closing Date, neither the Seller, the Shareholder nor any affiliate of either
shall engage or compete, directly or indirectly, as principals, on his, its or
their own account, or as principals, shareholders, officers, directors,
employees, agents, consultants, partners or joint venturers in
34
any corporation or business entity, in any business engaged in the operation of
automotive tire sales and service centers or automotive service centers, which
in any case is the same as, similar to or otherwise in competition with the
Business, from, at or into any geographical area in which the Seller has
heretofore marketed its products or services relating to the Business; nor
during such period and within the same area to extend credit, lend money,
furnish quarters or give advice to any such business or proposed business
entity; nor within the same area to ship or cause to be shipped or participate
in the shipping of any such products for purposes of resale; nor at any time
solicit, directly or indirectly, any present employee of the Seller actively
involved in the Business to become an employee of any other business or entity;
nor at any time without the consent of the Buyer, directly or indirectly
discuss, publish or otherwise divulge any Confidential Information, unless such
information is or becomes rightfully publicly known; provided, however, that
nothing contained herein shall be construed as preventing: (i) an investment in
less than five percent (5%) of the securities of a company traded on a
recognized stock exchange or market, (ii) the Seller, the Shareholder or any of
their affiliates from providing at any location which is primarily a new or used
car sales dealership owned or operated by the Seller, the Shareholder or any of
their affiliates within the restricted geographical area, sales or service of
tires and the service of vehicles in connection with the operation of those
dealerships in the ordinary course of business, including the operation of
"satellite service facilities", (iii) the Seller, from providing the following
automotive services: automotive body repair and cosmetic work, including
paintless dent repair, or (iv) the operation by Seller and/or Shareholder of any
of Seller's locations for which Buyer receives an adjustment to the Purchase
Price, as provided by Paragraphs 9.07C and 9.08 of this Agreement, due to
Seller's inability to obtain the Consent to the assignment of the Real Property
lease for such location; provided, however, that, in no event, shall Seller or
Shareholder use any of the tradenames, trademarks, or slogans purchased by Buyer
pursuant to this Agreement or anything confusingly similar thereto. To be
considered a "satellite
35
service facility," such facility must be associated (in name and otherwise) with
a new or used car dealership then-owned or -operated by Seller.
B. The seven (7) year term of the foregoing covenant shall terminate
as to both the Seller and the Shareholder upon a Shareholder Change of Control
pursuant to which the control of Shareholder is transferred to a then-competitor
of Buyer, engaged (at the time of the such Shareholder Change in Control) in the
operation of automotive tire sales and service centers (a "Competitor of
Buyer"). The terms of the foregoing covenant shall otherwise be automatically
assigned to any successor or assign of Shareholder, including pursuant to a
Shareholder Change in Control.
C. If any of the restrictions on post-Closing competitive activities
contained in this Paragraph 5.08 shall for any reason be held by a court of
competent jurisdiction to be excessively broad as to duration, geographical
scope, activity or subject, such restrictions shall be construed so as to be
limited or reduced to be enforceable to the maximum extent compatible with the
applicable law as it shall then appear; it being understood that by the
execution of this Agreement the parties hereto regard the restrictions herein as
reasonable and compatible with their respective rights. Seller and Shareholder
acknowledge that Buyer would not have entered into this Agreement if it did not
include the foregoing covenants.
D. In the event of a breach by Seller, Shareholder or any affiliate to
the covenant set forth in this Paragraph 5.08 (including but not limited to the
occurrence of a Shareholder Change of Control to a person or entity not deemed a
Competitor of Buyer which person or entity refuses to honor the provisions of
this Paragraph 5.08), Shareholder shall pay to Buyer, as liquidated damages and
not as a penalty, the amount of One Million Dollars ($1,000,000.00), which
amount shall be reduced pro rata monthly so long as Seller and Shareholder are
not in breach of the provisions set forth in this Paragraph 5.08. Under no
circumstances shall Shareholder be liable under this Paragraph 5.08D or
Paragraph 5.09B,
36
individually or in the aggregate, to make any payment of liquidated damages to
Buyer in excess of One Million Dollars ($1,000,000.00),
5.09 Kiosk Rental.
A. For a period of seven (7) years from and after the Closing Date,
the Buyer shall have the right, on a rent-free basis, to staff and operate
service kiosks in the Seller's car dealership locations described in Schedule
5.09A. Six (6) months prior to the end of the initial term, Buyer and Seller
shall in good faith negotiate a market rate monthly rental amount to be
applicable during the seven (7) year renewal term of this rental arrangement.
The initial term or renewal term of this kiosk rental arrangement shall earlier
terminate by thirty (30) day written notice (i) from the Seller to the Buyer,
upon a Change in Control, or (ii) from the Buyer to the Seller, given without
cause.
B. The terms of this Paragraph 5.09 shall be embodied in the Kiosk
Lease Agreement, in the form set forth as Schedule 5.09B. Such lease agreement
shall include a provision that in the event of a breach by Seller, Shareholder
(including but not limited to the occurrence of a Shareholder Change of Control
to a person or entity not deemed a Competitor of Buyer, which person or entity
refuses to honor the provisions of this Paragraph 5.09 and the Kiosk Lease
Agreement), or any affiliate of Seller or Shareholder, Shareholder shall pay to
Buyer, as liquidated damages and not as a penalty, the amount of One Million
Dollars ($1,000,000.00), which amount shall be reduced pro rata monthly so long
as Seller and Shareholder are not in breach of the provisions set forth in such
lease agreement. Under no circumstances shall Shareholder be liable under this
Paragraph 5.09B or Paragraph 5.08D, individually or in the aggregate, to make
any payment of liquidated damages to Buyer in excess of One Million Dollars
($1,000,000.00).
5.10 Transition Matters. Seller shall, for a period of one (1) year after
the Closing Date, allow Buyer's personnel and outside accountants full and
complete access during Seller's
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regular business hours, to Seller's computer system, accounting records and
customer and vendor records to assure the orderly transition of the Business to
Buyer subsequent to the Closing Date.
5.11 Non-Hire. Neither Seller nor Shareholder shall, for a period of one
(1) year following the Closing, directly or indirectly, solicit or hire any
store manager or other management-level employee of the Business retained after
Closing by Buyer, to become an employee or contractor to any other business or
business entity.
5.12 Shareholder Sales to Buyer. Except for those dealerships of
Shareholder listed on Schedule 5.12 that currently do not have an arrangement to
purchase tires from Seller, for a period of seven (7) years after Closing Date,
Buyer shall be Shareholder's vendor of first choice with respect to the purchase
of tires for its dealerships, so long as Buyer offers competitive pricing and
provides service to Shareholder consistent with the past practices of Seller.
This provision will terminate following a Shareholder Change of Control.
ARTICLE VI
COVENANTS OF BUYER
Buyer covenants and agrees with Seller as follows:
6.01 Changes. Between the date hereof and the Closing, to notify Seller of
any adverse changes, problems or developments with respect to the Buyer's
ability to consummate the transactions contemplated by this Agreement.
6.02 Cooperation. To (a) execute, acknowledge and deliver to Seller on
request, both prior and subsequent to the Closing, all such instruments,
consents, authorizations, certifications, books, records and data; (b) take all
other action, as heretofore agreed or as may be reasonably necessary or
advisable in the opinion of Seller to satisfy the Conditions to Closing
contained in Article VIII hereof; and (c) refrain from taking any actions which
would, may or could cause a breach of the representations and warranties
contained in Article IV hereof or cause the Conditions to Closing contained in
Article VIII hereof to fail to be satisfied; and, further, to
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assist and cooperate with Seller in connection with any litigation involving the
Business after the Closing Date regarding events prior to the Closing Date.
6.03 Assumption of Liabilities. On the Closing Date, to assume the
liabilities set forth on Schedule 2.02 to this Agreement and the liabilities
relating to the Transferred Employees in each case for obligations accruing from
and after the Closing Date.
6.04 Customer List Agreement. At the Closing, enter into a written
agreement with Shareholder in the form of Schedule 6.04 hereto pursuant to which
Buyer will provide certain customer lists to Shareholder to be used by
Shareholder to solicit automobile purchases and certain permitted automotive
service work from Buyer's customers.
6.05 Employee Matters.
A. Buyer shall offer employment after the Closing Date to those
Transferred Employees listed on Schedule 6.05A, which list shall include all
personnel employed at Seller's retail service centers and service kiosks located
at Seller's car dealerships. Buyer shall use reasonable efforts to employ each
such Transferred Employee as an employee at-will in substantially the same
position, income level and location following the Closing. Buyer shall not
terminate without cause any such Transferred Employee for a period of at least
ninety (90) days following the Closing.
B. Schedule 6.05B identifies those personnel of Seller whose services
Buyer will utilize for a certain period of time after the Closing Date (the
"Interim Period"), pursuant to the terms of the Transition Agreement (as defined
herein). Buyer shall notify each such person identified on Schedule 6.05B
within: (i) for accounting/administrative personnel, sixty (60) days; and (ii)
for operations and wholesale/warehouse personnel, thirty (30) days, after the
Closing as to Buyer's decision with respect to an offer of employment to such
person following the Interim Period.
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C. Except as provided otherwise in this Paragraph 6.05, Seller shall
pay, discharge and be responsible for (i) all salary and compensation arising
out of or relating to the employment of the Transferred Employees prior to and
including the Closing Date, and (ii) any employee benefits arising under the
benefit plans or benefit arrangements of Seller during the period prior to and
including the Closing Date. From and after the Closing Date, Buyer shall pay,
discharge and be responsible for all salary, compensation and benefits arising
out of or relating to the employment of the Transferred Employees by Buyer after
the Closing Date. Buyer shall be responsible for all COBRA liabilities for any
Transferred Employees terminated by Buyer on or after the Closing Date. Seller
shall be responsible for all severance liabilities and all COBRA liabilities for
all of Seller's employees who do not become employed by the Buyer on the Closing
Date.
D. Buyer shall cause all Transferred Employees as of the Closing Date
to be eligible to participate in its "employee welfare benefit plans" and
"employee pension benefit plans" (as defined in Paragraph 3(1) and 3(2) of
ERISA, respectively) in accordance with Buyer's benefits policies.
E. For purposes of any length of service requirements, waiting period,
vesting periods or differential benefits based on length of service in any such
plan for which a Transferred Employee may be eligible after the Closing, Buyer
shall ensure that, to the extent permitted by law, and except as limited by
Buyer's existing personnel policies, service by such Transferred Employee with
Seller, or any prior owner of the Business, shall be deemed to have been service
with the Buyer. In addition, Buyer shall ensure that each Transferred Employee
receives credit under any welfare benefit plan of Buyer for any deductibles or
co-payments paid by such Transferred Employee and his or her dependents for the
current plan year under a plan maintained by Seller to the extent allowable
under any such plan, so long as each such Transferred Employee is able to
produce satisfactory documentation to Buyer of the payment of
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any such deductibles and co-payments during the current plan year. Buyer shall
grant credit to each Transferred Employee for all sick leave in accordance with
the policies of Buyer applicable generally to their employees after giving
effect to service for Seller, or any prior owner of the Business, as service for
Buyer.
F. As soon as practicable following the Closing Date, Buyer shall make
available to the Transferred Employees Buyer's 401(k) Plan. To the extent
requested by a Transferred Employee, Seller shall cause to be transferred to
Buyer's 401(k) Plan, in cash all of the individual account balances of
Transferred Employees under the Seller's 401(k) plan, including any outstanding
plan participant loan receivables allocated to such accounts.
G. Nothing in this Agreement shall be construed to provide employees
of Seller with any rights under this Agreement, and no person, other than the
Parties hereto, is or shall be entitled to bring any action to enforce any
provision of this Agreement against any of the parties hereto, and the covenants
and agreements set forth in this Agreement shall be solely for the benefit of,
and shall only be enforceable by, the parties hereto and their respective
successors and assigns as permitted hereunder.
6.06 Compliance with Bulk Sales Laws. Buyer hereby waives compliance by
Seller and Shareholder, in connection with the transactions contemplated hereby,
with the provisions of any applicable bulk sale or bulk transfer laws. Such
waiver shall not be deemed to waive Seller or Shareholder's representation with
respect to title to the Assets, as set forth in Paragraph 3.05.
ARTICLE VII
CONDITIONS OF CLOSING BY BUYER
The obligation of Buyer to consummate the transactions contemplated by this
Agreement shall be subject, at Buyer's sole option, to the satisfaction of the
following conditions precedent:
7.01 Representations. All of the representations and warranties of the
Shareholder and the Seller (as applicable) herein contained shall be true and
correct as of the date of this
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Agreement, and as of the Closing Date as if expressly made on and as of the
Closing Date (except for representations and warranties that speak as of a
specific date or time which need only be true and complete as of such date or
time).
7.02 Performance of Covenants. All of the covenants to be performed and all
of the conditions to be satisfied by the Shareholder and the Seller (as
applicable) prior to the Closing Date shall have been performed or satisfied on
or before the Closing.
7.03 Condition of Property. All of the Assets of the Seller shall be in the
same condition on the Closing Date as the same are as of the date hereof,
ordinary wear and tear alone excepted, it being understood and agreed between
the Parties hereto that any uninsured destruction, loss or damage by fire or
casualty prior to the Closing which exceeds One Hundred Thousand Dollars
($100,000.00) shall constitute a failure of the condition precedent set forth in
this Paragraph 7.03.
7.04 Terminations. Except with respect to Permitted Encumbrances and except
as otherwise provided by this Agreement, the termination by Seller of any and
all encumbrances to the Assets, including but not limited to those listed on
Schedule 3.05. With respect to any encumbrances arising from leases of equipment
by Seller, whether listed on Schedule 3.05 or otherwise, Seller shall be
obligated at Closing to provide reasonable evidence of: (a) its satisfaction of
any and all payment obligations to the lessor; and (b) such lessor's commitment
as a secured party to complete any documentation necessary to terminate any UCC
filing or other encumbrance with respect thereto. Seller shall work diligently
to ensure the filing of all documentation necessary to terminate such
encumbrances as soon as practicable, but in no event later than sixty (60) days
after the Closing Date.
7.05 Required Consents. The assignment to Buyer of Seller's rights under
the Real Property leases connected to no less than twenty-three (23) of Seller's
retail automotive service center locations listed on Schedule 7.05, including
the landlord's written consent, where
42
required, the landlord's executed estoppel certificates confirming the
commencement and termination dates of the lease, any renewal options, the
monthly rent and any additional rent, and that there are no defaults by landlord
or tenant under the terms of the lease (or setting forth the details of such
defaults, if any; and the consent of Shareholder's lenders under its present
credit facility, as referenced in Schedule 3.08.
7.06 Name Change. Seller's corporate name shall be changed from "Mr. Tire"
to a dissimilar name at or prior to the Closing Date to enable Buyer, at its
option, to utilize the "Mr. Tire" name, or a variation thereof, in Buyer's
continuation of the Business; and, further, Seller shall have taken all such
action as may be necessary to terminate Seller's use of the "Mr. Tire" name in
each other jurisdiction where Seller uses the "Mr. Tire" name; provided,
however, nothing in this Agreement shall require Seller or Shareholder to breach
the Xxxxxxxxx Agreement, and the Parties agree and acknowledge that the
Xxxxxxxxx Agreement shall continue in full force and effect after the Closing
Date.
7.07 Delivery of Documents. Buyer shall have received all such documents,
certificates, opinions and papers required of the Seller and Shareholder
pursuant to the terms of this Agreement, or which shall have been reasonably
requested by Buyer in connection therewith, in form and substance as approved
prior to the Closing by Buyer's Attorney, including expressly, but not limited
to, the following:
A. Bills of Sale or other instruments in form and substance
satisfactory to Buyer's Attorney sufficient to properly evidence the transfer of
the Assets from Seller to Buyer.
B. A certificate executed by the Seller's or Shareholder's Secretary,
as applicable, of resolutions unanimously adopted by Seller's Board of Directors
and by the Board of Directors of the Shareholder authorizing the execution of
this Agreement, the consummation of the transactions contemplated hereby and the
execution and delivery of the documents required to be delivered hereunder.
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C. A certificate, dated as of the Closing Date, certifying to the
effect that, (i) as of the Closing Date, all of the representations and
warranties of the Seller and Shareholder contained in this Agreement and the
Schedules hereto are true, correct and complete as of the Closing Date (except
for representations and warranties that speak as of a specific date or time,
which need only be true and complete at such date or time), and (ii) all of the
agreements, covenants and conditions contained in this Agreement to be performed
or satisfied by the Seller and Shareholder on or prior to the Closing have been
performed or satisfied on or before the Closing Date.
D. A favorable written opinion of Seller's Attorney, dated as of the
Closing Date, in the form of Schedule 7.07D hereto.
E. A WRITTEN TRANSITION AGREEMENT EMBODYING THE TERMS SET FORTH IN
SCHEDULE 7.07E, EXECUTED BY SHAREHOLDER AND SELLER (THE "TRANSITION AGREEMENT").
F. The Kiosk Lease Agreement, embodying the terms set forth in
Paragraph 5.09, executed by Shareholder and Seller.
G. The Escrow Agreement executed by Seller and Shareholder.
H. The Customer List Agreement, executed by Shareholder.
I. The Warrant, executed by Shareholder.
7.08 Licenses, Permits, Etc. Buyer shall have obtained all licenses,
permits, approvals and authorizations from any Governmental Authority necessary,
in Buyer's opinion, to operate the Business after Closing.
7.09 No Material Adverse Change. Between the date of this Agreement and the
Closing, there shall not have been any Material Adverse Change.
7.10 Operating Systems. Seller shall have obtained a license from
Compu-Power, Inc. required to operate the computer systems as required under the
Transition Agreement.
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ARTICLE VIII
CONDITIONS OF CLOSING BY SELLER AND SHAREHOLDER
The obligation of Seller and Shareholder to consummate the transactions
contemplated by this Agreement shall be subject, at Seller's and Shareholder's
sole option, to the satisfaction of the following conditions precedent:
8.01 Representations. All of the representations and warranties of Buyer
herein contained shall be true and correct as of the date of this Agreement and
as of the Closing Date as if made on and as of the Closing Date (except for
representations and warranties that speak as of a specific date or time which
need only be true and complete as of such date and time).
8.02 Covenants and Conditions. All of the covenants to be performed and all
of the conditions to be satisfied by Buyer prior to the Closing Date shall have
been performed or satisfied on or before the Closing except.
8.03 Delivery of Documents. Seller shall have received all such documents,
certificates, opinions and papers required of Buyer pursuant to the terms of
this Agreement, or which shall have been reasonably requested by Seller and
Shareholder in connection therewith, in form and substance as approved prior to
the Closing by Seller's Attorney, including expressly, but not limited to, the
following:
A. Payment of the Purchase Price as adjusted, to the extent and in the
manner set forth in this Agreement.
B. A certificate of resolutions adopted by Buyer's Board of Directors
or the Governance Committee thereof authorizing the execution of this Agreement,
the consummation of the transactions contemplated hereby and the execution and
delivery of the documents required to be delivered hereunder, appropriately
certified by Buyer's corporate Secretary.
C. A certificate of Buyer, dated as of the Closing Date certifying, to
the effect that, (i) as of the Closing Date, all of the representations and
warranties of Buyer contained
45
in this Agreement are true and correct as of the Closing Date (except for
representations and warranties that speak as of a specific date or time, which
need only be true and complete as such date or time), and (ii) all of the
covenants and conditions contained in this Agreement to be performed or met by
Buyer prior to Closing have been performed or satisfied on or prior to the
Closing Date.
D. A written agreement, in the form of Schedule 6.04 hereto pursuant
to which Buyer will provide certain customer lists to Seller, to be used by
Seller to solicit automobile purchases and certain permitted automotive service
work from Buyer's customers.
E. A written agreement pursuant to which Buyer assumes certain
liabilities of Seller including but not limited to, those liabilities set forth
on Schedule 2.02 and the Real Property lease obligations described in Schedule
2.03A.
F. The Transition Agreement, executed by Buyer.
G. The Escrow Agreement, executed by Buyer.
H. The Warrant, executed by Buyer.
ARTICLE IX
OTHER MATTERS
9.01 Tax Status and Effect. It is understood and agreed that neither
Seller, Shareholder nor Buyer has or have made any representations to each other
as to the tax status or tax effect of the transactions contemplated by this
Agreement, and each of the Parties hereto is therefore separately consulting
with their respective counsel as to such matters and each is responsible and
shall assume liability, subject only to the express and specific provisions of
this Agreement, any tax which may be incurred by reason of the carrying out of
the terms and provisions hereof. In the event that (a) any sales or use Tax
shall be due to any state or local Governmental Authority by reason of the sale
of the Assets, or (b) any transfer Taxes or the like
46
shall be due to any state or local Governmental Authority by reason of the
assignment to Buyer or creation in favor of Buyer of leases of the Real Property
as contemplated by Paragraph 7.05, such tax or taxes, if any, split equally
between Seller and Buyer. In addition, Seller shall be solely responsible for
any sales taxes arising out of the operation of the Business prior to Closing
Date.
9.02 Brokerage Commissions. Seller, Shareholder and Buyer represent and
warrant, each to the other, that this Agreement and the transactions
contemplated hereunder were brought about without the assistance of any broker,
person or firm, and that no one is entitled to a commission, fee or payment of
any kind relative to this Agreement or the transactions contemplated hereby,
except that Seller shall pay the finder's fee due in connection with the
transactions contemplated by this Agreement in the aggregate amount of One
Hundred Thousand Dollars ($100,000.00).
9.03 Expenses of Parties. Except as otherwise provided by this Agreement or
any Schedule hereto, all expenses involved in the preparation, authorization and
consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants, shall be borne
solely by the Party which shall have incurred the same, and the other Party
shall have no liability with respect thereto; provided, however, that in the
event this Agreement fails to close on the Closing Date due to breach or failure
to comply with the terms of this Agreement by Seller, Shareholder or Buyer, then
the breaching party shall, upon demand, be liable to reimburse the non-breaching
party for the non-breaching party's expenses, including, without limitation,
disbursements, accounting and attorney's fees, in connection with the
non-breaching party's negotiation and performance of this Agreement. The parties
acknowledge and agree that any fees payable to any landlord in connection with
the assignment by Seller to Buyer of any leases for the Real Property shall be
paid by the Seller.
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9.04 Indemnification by Seller and Shareholder.
A. Except as set forth in Paragraph 9.04B, Seller and Shareholder
jointly and severally covenant and agree to fully indemnify and hold harmless
Buyer, its directors, officers, agents, employees, successors and assigns, as
applicable, from and against and in respect of any and all liabilities,
obligations, damages, losses and expenses, including claims of every kind and
nature, whether accrued, absolute, contingent or otherwise, and reasonable
attorneys' fees and the costs of defense, incurred by any of the indemnified
parties as a result, or by reason, of the breach, falsity or failure of any of
the Seller's or Shareholder's representations, warranties, covenants or
undertakings contained in this Agreement, as well as for any liability with
respect to litigation disclosed on Schedule 3.13.
B. Except as otherwise set forth in this Paragraph, with respect to
environmental claims for indemnification, Buyer may seek indemnification from
Shareholder or Seller for Environmental Claims. To this end, Buyer, its agents,
servants and employees, agree to refrain from instituting or initiating,
directly or indirectly, any environmental investigations unless necessitated by
an Environmental Claim not instituted or initiated (directly or indirectly) by
Buyer, its agents, servants or employees (and Buyer will document such
necessity).
C. With respect to the environmental matters identified in the
Environmental Report, Buyer may seek indemnification from Seller or Shareholder
only with respect to Environmental Claims for those items identified on the
Environmental Report with an asterisk. Seller or Shareholder shall not be
responsible for any additional claims for indemnification arising from the
Environmental Report once the amount paid on prior claims, in the aggregate,
exceeds the Sub-Cap. It is understood that the Sub-Cap serves only as a cap to
the Seller and Shareholder's liability for indemnification arising from the
Environmental Report and in no way limits the amount of the Cap with respect to
indemnification generally.
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D. Seller and Shareholder shall have no liability with respect to
claims for indemnification pursuant to this Paragraph 9.04 or otherwise under or
in connection with this Agreement, unless Buyer has paid, suffered and/or
incurred Losses in excess of the Threshold Amount, after which xxxx Xxxxxx and
Shareholder, jointly and severally, shall indemnify Buyer for all Losses
incurred, subject, however, to the Cap. Neither Seller nor Shareholder,
collectively, shall have any liability to indemnify Buyer for Losses, in the
aggregate, after payment has been made to Buyer in the amount of the Cap.
E. Notwithstanding anything to the contrary in Paragraph 9.04D, under
no circumstances shall the Threshold Amount or the Cap apply to any Losses
resulting: (i) from fraud, which shall be defined to be the knowing and
intentional misrepresentation or omission of facts in connection with the
transactions contemplated by this Agreement; and (ii) liability arising from any
carryover liability on account of contributions that may have been made to a
"multi-employer plan" or to any multiple employer or single employer plan, as
described in Paragraph 3.16A.
9.05 Indemnification by Buyer. Buyer covenants and agrees to fully
indemnify and hold harmless Seller and Shareholder, their directors, officers,
agents, employees, successors and assigns, as applicable, from and against and
in respect of any and all liabilities, obligations, damages, losses and
expenses, including claims of every kind and nature, whether accrued, absolute,
contingent or otherwise, and reasonable attorneys' fees and the cost of defense,
incurred by any of the indemnified parties as a result or by reason of the
breach, falsity or failure of any of the Buyer's representations, warranties,
covenants or undertakings contained in this Agreement, as well as arising
directly from Buyer's use of the Print Manage forms purchased by Buyer as part
of this transaction.
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9.06 Procedure for Indemnification.
A. If any Party shall claim indemnification pursuant to Paragraphs
9.04 and 9.05, such Party shall promptly notify the other Parties in writing of
such claim, setting forth the nature and amount of the claim in detail; provided
however, that the failure of a Party to so notify the other Parties shall not
bar any claim for indemnification hereunder.
B. If the indemnification claim arises from the claim or demand of a
third party, the indemnifying Party shall have the right, with the indemnified
Party or Parties prior consent, not to be unreasonably withheld, to compromise
or, if appropriate, conduct and defend at their own cost and through counsel of
their own choosing, reasonably acceptable to such indemnified Party, the claim
or demand of any third party giving rise to such claim for indemnification. The
opportunity to compromise or defend, if applicable, shall be conditions
precedent to any asserted indemnification liability under Paragraphs 9.04 and
9.05. If the indemnifying Party undertakes to compromise or defend any such
claim or demand, they shall promptly notify the indemnified party in writing of
its or their intention to do so. After the assumption of the defense by the
indemnifying Party and so long as such Party shall diligently pursue such
defense, the indemnifying Party shall be liable for any legal expenses
subsequently incurred by the indemnifying Party in connection with such defense,
but the indemnified Party may participate in such defense at its own expense.
Each Party shall fully cooperate with the other Party and its counsel in the
defense or compromise of such claim or demand. The indemnifying Party shall not,
except with the written consent of the indemnified Party, consent to the entry
of a judgment or settlement which does not include as an unconditional term
thereof, the unconditional release of the indemnified Party from all liability
in respect of such third party claim or demand.
C. If the indemnification claim arises from other than the claim or
demand of a third party and the indemnifying Party does not object in writing to
the indemnification
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claim from the indemnified Party within 20 business days of receipt of the
notice of claim, the indemnifying Party shall be deemed to have accepted the
claim and shall have no further right to dispute the obligation to indemnify the
indemnified Party. If the indemnifying Party shall notify the indemnified Party
in writing within 20 business days with an objection to the claim for
indemnification or the amount thereof, then, the validity of the indemnification
claim and/or the amount thereof shall be conclusively determined by arbitration
pursuant to Paragraph 11.03. Attorney's fees and expenses in connection with
'the indemnified Party's pursuit of indemnification shall become part of 'the
indemnified Party's claim under Paragraphs 9.04 or 9.05, as applicable.
9.07 Consents.
A. Immediately after execution of this Agreement, Seller shall use its
best efforts to obtain all Consents. Seller shall obtain such Consents without
any material adverse change in the terms or conditions of any Contract or Real
Property lease. Seller shall promptly advise Buyer of any difficulties
experienced in obtaining any of the Consents and any of the conditions proposed,
considered or requested for any of the Consents. Buyer will cooperate reasonably
with Seller's efforts to obtain any Consent. Notwithstanding the foregoing and
except as otherwise expressly provided in this Agreement, no Party shall have
any obligation to expend funds to obtain any of the Consents (other than
ministerial processing fees, out of-pocket expenses to its attorneys or other
agents, or fees expressly contractually required to be paid in connection with
obtaining any Consents).
B. If any such Consent is not obtained by the Closing, such shall be
deemed a Deferred Consent. It is understood that Buyer, in its sole discretion,
may: (i) extend the Closing until Seller satisfies its condition to close set
forth in Paragraph 7.05; (ii) determine to close with such Deferred Consents
pursuant to the terms of this Paragraph; or (iii) terminate the Agreement
pursuant to Paragraph 10.01D. With respect to a Closing with Deferred Consents
pursuant to
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subparagraph (ii) hereof, (i) Seller and Buyer will cooperate in all
reasonable respects to obtain such Deferred Consents as soon as practicable;
provided that Seller shall have no obligation (y) to expend funds to obtain any
Deferred Consent other than ministerial processing fees, Seller's out-of-pocket
expenses to its attorneys or other agents, or fees expressly provided in any
such Contract or Real Estate lease incurred in connection with obtaining any
Deferred Consent, or (z) to agree to any adverse change in any Contract or Real
Estate lease in order to obtain a Deferred Consent, and (ii) until such Deferred
Consent is obtained, Seller and Buyer will cooperate in all reasonable respects
to provide the Buyer the benefits under such Contract or Real Estate lease to
which such Deferred Consent relates (with the Buyer responsible for all of the
liabilities and obligations thereunder). In particular, in the event that any
such Deferred Consent is not obtained prior to Closing, then Buyer and Seller
shall enter into such arrangements (including subleasing or subcontracting if
permitted) to provide to the Parties the economic and operational equivalent of
obtaining such Deferred Consent and assigning or transferring such Contract or
Real Estate lease, including enforcement for the benefit of the Buyer of all
claims or rights arising thereunder, and the performance by the Buyer of the
obligation thereunder on a prompt and punctual basis.
C. In the event any Deferred Consent for a Real Property lease has not
been obtained within one hundred eighty (180) calendar days after the Closing
Date (the "Deferred Consent Date"), Buyer shall have the right, but not the
obligation, to turn the location back over to Seller and receive an adjustment
to the Purchase Price pursuant to the formula set forth in Schedule 9.07C to
this Agreement. Buyer must exercise its right under this Paragraph 9.07C within
fifteen (15) days after the Deferred Consent Date by written notice to Seller,
or Buyer shall be deemed to have determined to continue to operate the location
without obtaining the Consent, and neither Seller nor Shareholder shall have any
further obligation to Buyer in connection with obtaining such Consent.
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9.08 Arlington, Virginia Location.
A. Buyer will use its best efforts following the Closing to secure
either: (i) an extension of the current Real Property lease (whether
month-to-month or otherwise); or (ii) a new lease agreement, with the present
landlord at the Real Property location in Arlington, Virginia ("Arlington") for
a term of not less than thirty-six (36) months. Seller and Shareholder shall
cooperate with Buyer in order to obtain such lease extension or new agreement.
Buyer shall not be required to enter into any extension or new agreement
containing terms which would constitute a material adverse change in the terms
or conditions of the Arlington Real Property lease referenced in Schedule 3.10A.
Neither (i) the term of thirty-six months; or (ii) a proposed increase in rent
not exceeding twenty-five percent (25%) of the current rental amount currently
paid by Seller, shall be deemed a "material adverse change."
B. If Buyer is either: (i) unable to secure an extension or new
agreement under the terms set forth in Paragraph 9.08A; or (ii) during the term
of any extension or new agreement, the landlord requires Buyer to vacate
Arlington without cause before June 30, 2007, then Shareholder shall promptly
pay to Buyer a credit to the Purchase Price (the "Arlington Credit"). If Buyer
should be required to vacate the Arlington location, the Arlington Credit, if
any, shall be calculated as $900,000 minus:
(i) $35,000 times the number of months remaining from June 30,
2006 until June 30, 2007 during which Buyer will not occupy
the Arlington location and pro rata, if necessary, for the
month in which Buyer vacates (if Buyer vacates during this
period);
(ii) $25,000 times the number of months from July 1, 2005 until
June 30, 2006 during which Buyer will not occupy the
Arlington location and pro rata, if necessary, for the month
in which Buyer vacates (if Buyer vacates during this period);
and
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(iii) If Buyer vacates Arlington after June 30, 2004, $15,000 times
the number of months remaining until June 30, 2005 during
which Buyer will not occupy the Arlington location and PRO
RATA, if necessary, for the month in which Buyer vacates (if
Buyer vacates during this period).
ARTICLE X
TERMINATION
10.01 Termination. This Agreement may be terminated at any time prior to
the Closing in accordance with the following:
A. Upon the mutual consent to all parties hereto;
B. By either Buyer or the Seller if any order to restrain, enjoin or
otherwise prevent the consummation of this Agreement or transaction contemplated
hereby shall have been entered and remains in effect on the Closing Date or, if
on the Closing Date, there is any pending or threatened litigation in any court,
or any proceeding by or before any governmental body, seeking to restrain or
prohibit consummation of this Agreement or in which damages are sought in
connection with this Agreement, or if any investigation by any governmental body
is pending or threatened which might result in any such litigation or other
proceeding;
C. By either Buyer or Seller if the Closing has not occurred (other
than through the failure of the party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before the
thirtieth (30th) day following the Closing Date, unless such date has been
extended pursuant to Paragraph 2.05, in which case, either Buyer or Seller may
terminate this Agreement on or after the thirtieth (30th) day after the
expiration of the Extension Closing Period.
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D. By Buyer, if Seller is unable to comply with the conditions to
Closing set forth in Article VII by the Closing Date.
E. By either Buyer or Seller, if the Closing has not occurred by July
1, 2004.
F. By Buyer at any time for any reason other than as set forth in
Paragraphs 10.01A, 10.01B, 10.01C, 10.01D, or 10.01E.
G. By Seller and Shareholder at any time for any reason other than as
set forth in Paragraphs 10.01A, 10.01B, 10.01C, or 10.01E.
10.02 Effect of Termination. Termination of this Agreement pursuant to
Paragraph 10.01A or 10.01E shall not result in any liability on the part of any
Party hereto or their respective representatives, directors, officers,
shareholders or agents. Upon termination of this Agreement pursuant to Paragraph
10.01B. C or D, the Party effecting the termination shall retain such rights, if
any, it may have against the other Party(s) for the other Party(s) breach or
failure of the representations, warranties, covenants or conditions of this
Agreement. Upon termination of this Agreement by Buyer pursuant to Paragraph
10.01F, Buyer shall pay to Seller the Breakup Fee by wire transfer of
immediately available funds within five (5) days of such termination. Upon
termination of this Agreement by Seller pursuant to Paragraph 10.01G, Seller
shall pay to Buyer the Breakup Fee by wire transfer of immediately available
funds within five (5) days of such termination.
10.03 Employee Matters. Upon termination of this Agreement prior to
Closing, each of the Parties agrees it will not, for a period of one (1) year
following the effective date of termination, directly or indirectly, solicit or
hire any store manager or other management-level employee of the other Party to
become an employee of or contractor to any other business or business entity.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01 Survival of Representations and Warranties. All representations and
warranties of the Seller, Shareholders and Buyer contained in this Agreement
shall survive the execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and the transfer and delivery of the Assets
for a period of twelve (12) calendar months from the Closing Date. The
representations and warranties of a party shall not be deemed waived or
otherwise affected by any investigation made by or knowledge of the other party.
11.02 Publicity and Confidentiality. No press release shall be released by
any Party hereto prior to the Closing Date concerning the execution of this
Agreement and the transactions contemplated hereunder except with the consent of
the other Parties hereto or when required by law. Notwithstanding the
immediately preceding sentence, it is understood that, upon the execution of
this Agreement by the parties the Buyer will be legally required to disclose the
execution of this Agreement and the transactions contemplated hereby, and Seller
shall disclose the execution of this Agreement to its employees. The provisions
of the Confidentiality and Non-Disclosure Agreement, dated November 12, 2003,
executed between Buyer and Seller shall survive until the Closing Date (and
thereafter in respect of any of Buyer's confidential information delivered to
Seller) and, if the Closing does not occur, in accordance with the terms of such
agreement. If for any reason the transactions provided for hereunder shall not
be consummated, each Party hereto (a) shall return all Confidential Information
which it received from any other Party hereto in the course of investigating and
negotiating the transactions provided for hereunder and (b) shall not disclose
to any third party any such Confidential Information.
11.03 Arbitration. Claims arising pursuant to or in connection with the
covenants and agreements in Paragraphs 5.08 and 11.02 shall be resolved in the
courts of competent jurisdiction
56
specified in Paragraph 11.11. In the event that any other dispute shall arise in
connection with the transactions provided for hereunder subsequent to the
Closing Date, the matter shall be submitted to arbitration in Rochester, New
York before a single arbitrator designated by the American Arbitration
Association and in accordance with the expedited rules thereof relating to the
arbitration of commercial disputes.
11.04 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective personal
representatives, successors and assigns.
11.05 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Parties hereto and supersedes any prior understandings,
memoranda or other written or oral agreements between or among any of them
respecting the within subject matter. There are no representations, agreements,
arrangements or understandings, oral or written, between or among any of the
Parties relating to the subject matter of this Agreement which are not fully
expressed herein.
11.06 Modifications; Waiver. No modification or waiver of this Agreement or
any part hereof shall be valid or effective unless in writing and signed by the
Party or Parties sought to be charged therewith and no waiver of any breach or
condition of this Agreement shall be deemed to be a waiver of any other
subsequent breach or condition, whether of like or different nature. No course
of dealing between or among any of the Parties hereto will be deemed effective
to modify, amend or discharge any part of this Agreement or the rights or
obligations of any Party hereunder.
11.07 Partial Invalidity. If any provision of this Agreement shall be held
by an arbitrator or court of competent jurisdiction to be invalid or
unenforceable, such provision shall be construed so as to be limited or reduced
to be enforceable to the maximum extent compatible with the law as it shall then
appear. The total invalidity or unenforceability of any particular
57
provision of this Agreement shall not affect the other provisions hereof and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.08 No Third Party Beneficiary. None of the provisions of this Agreement
shall be for the benefit of, or enforceable by, any person or entity which is
not a Party hereto.
11.09 Notices. Any notice or other communication required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given: (i) upon hand delivery; (ii) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid; or (iii) on the first day following delivery to a
nationally recognized United States overnight courier service, fee prepaid,
return receipt or other confirmation of delivery requested. Any such notice or
communication shall be directed to a Party at its address set forth below or at
such other address as may be designated by a party in a notice given to all
other Parties hereto in accordance with the provisions of this Paragraph.
Notice to Buyer shall Monro Muffler Brake, Inc.
be sent to: 000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: President and General Counsel
with a copy to: Xxxxxxxxx & Xxxxxxx LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Esquire
Notice to Seller or Atlantic Automotive Corp.
Shareholder 00 Xxxxxx Xxxxxx
shall be sent to: Xxxxxxxxx, XX 00000
Attn: Chief Executive Officer
with a copy to: Xxxxxx & Xxxxxxxx, P.A.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esquire
11.10 Governing Law. Except with respect to any provisions herein regarding
indemnification, which shall be construed in accordance with the laws of the
State of New York
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(without taking into account conflicts of laws principles), this Agreement shall
be governed by and construed in accordance with the laws of the State of
Maryland pertaining to contracts made and to be wholly performed within such
state, without taking into account conflicts of laws principles.
11.11 Jurisdiction and Venue. In the event that any legal proceedings are
to be commenced in any court pursuant to the terms of this Agreement, the
Parties hereto specifically consent and agree that:
(a) the courts of the State of Maryland and/or the United States
Federal Courts for the District of Maryland (Northern Division) shall have
exclusive jurisdiction over each of the Parties and such proceedings; and
(b) the venue of any such action shall be in Baltimore County,
Maryland or the United States District Court for the District of Maryland
sitting in Baltimore, Maryland.
11.12 Headings. The headings contained in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
11.13 Gender. Whenever the context may require, any pronoun used herein
shall include the corresponding masculine, feminine or neuter forms and the
singular of nouns, pronouns and verbs shall include the plural and vice versa.
11.14 Fair Meaning. This Agreement shall be construed according to its fair
meaning, the language used shall be deemed the language chosen by the Parties
hereto to express their mutual intent, and no presumption or rule of strict
construction should be applied against any Party hereto.
11.15 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and all of said counterparts shall
together constitute but one and the same instrument which may be sufficiently
evidenced by one counterpart.
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11.16 Assignment. Seller and Shareholder shall have the right to assign
all or any portion of their rights under this Agreement to a Qualified
Intermediary under Paragraph 1031 of the Code, provided that such assignment
shall not relieve either Seller or Shareholder of their rights, duties, and
obligations under this Agreement. Buyer shall have the right to assign all or
any portion of its rights under this Agreement to any subsidiary of Buyer,
provided that such assignment shall not relieve Buyer of its obligations and
duties hereunder.
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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement on
February 9, 2004.
BUYER: MONRO MUFFLER BRAKE, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
SELLER: MR. TIRE, INC.
By: /s/ Xxxxxx Xxxxxxxxx, Xx.
----------------------------------------
Its: Executive Vice President
SHAREHOLDER: ATLANTIC AUTOMOTIVE CORP.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
Its: CEO
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