EXHIBIT 6.34
MERGER AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 23rd day of July, 1999
by and among
1-800-AUTOTOW, INC., a Delaware Corporation
1-800-AUTOTOW GULF COAST EAST, INC., a Florida Corporation, and
L&W COLLISION, TOWING & RECOVERY, INC., a Florida Corporation
and
the Stockholders named herein
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MERGER AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of the 23rd day of July 1999, by and among 1-800-AUTOTOW, INC., a Delaware
corporation ("ATOW"), 1-800-AUTOTOW GULF COAST EAST, INC., a Florida corporation
("ATOWSUB"), L&W COLLISION, TOWING & RECOVERY, INC., a Florida corporation (the
"COMPANY"), and the stockholders listed on Annex I (the "Stockholders"). The
Stockholders listed are all the stockholders of the COMPANY. ATOW, ATOWSUB, the
COMPANY and the Stockholders are each referred to in the Agreement as a PARTY
and collectively as the PARTIES.
RECITALS
WHEREAS, the respective Boards of Directors of ATOW, ATOWSUB and the
COMPANY deem it advisable and in the best interests of each of the corporations
and their respective stockholders that the COMPANY merge with and into ATOWSUB
pursuant to this Agreement and the applicable provisions of the laws of the
State of Florida, such transaction sometimes being herein called the Merger;
WHEREAS, the Boards of Directors of ATOW, ATOWSUB and the COMPANY have
approved and adopted this Agreement which is intended to qualify as a
reorganization described in Sections 354 and 356 of the Code;
WHEREAS, all of the Parties hereto desire to enter into this Agreement
to effectuate the Merger of the COMPANY with and into ATOWSUB, pursuant to all
of the terms, conditions, representations, warranties, and covenants contained
in this Agreement.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the Parties hereto hereby agree as follows:
TERMS AND CONDITIONS
1. DEFINITIONS. For purposes of this Agreement, unless the context otherwise
requires, the following capitalized words and phrases used in this
Agreement shall have the meanings set forth below:
1.1 "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes,
liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses.
1.2 "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
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1.3 "Agreement" has the meaning set forth in the first paragraph hereof.
1.4 "ATOW" has the meaning set forth in the first paragraph hereof.
1.5 "ATOWSUB" has the meaning set forth in the first paragraph hereof.
1.6 "ATOW Shares" means any share of common stock, $.001 par value per
share, of ATOW.
1.7 "Balance Sheet Date" has the meaning set forth in Section 3.8.
1.8 "Certificates" has the meaning set forth in the Section 2.12.1.
1.9 "Charter Documents" has the meaning set forth in Section 3.1.
1.10 "Closing" has the meaning set forth in Section 2.9.
1.11 "Closing Date" has the meaning set forth in Section 2.9.
1.12 "Closing Date Balance Sheet" has the meaning set forth in Section
2.14.2.
1.13 "Code" means the Internal Revenue Code of 1986, as amended.
1.14 "Commission" means the Securities and Exchange Commission.
1.15 "Company" has the meaning set forth in the first paragraph hereof.
1.16 "Company Shares" means any share of common stock, .001 par value per
share, of the COMPANY.
1.17 "Company's Subsidiaries" has the meaning set forth in Section 3.7.
1.18 "Disclosure Schedule" has the meaning set forth in Section 3.
1.19 "Draft Closing Date Balance Sheet" has the meaning set forth in
Section 2.14.1.
1.20 "Effective Time" has the meaning set forth in Section 2.3.
1.21 "Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan; (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan; (c)
qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan); (d)
Employee Welfare Benefit Plan; or (e) any bonus, incentive,
severance, stock option, stock purchase, short-term disability plan
or other material fringe benefit plan, program or arrangement,
including policies concerning holidays, vacations and salary
continuation during short absences for illness or otherwise.
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1.22 "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
1.23 "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
1.24 "Employment Agreement, Consulting Agreements and Leases" have the
meaning set forth in Section 7.10 and Exhibits thereunder.
1.25 "Environmental, Health, and Safety Requirements" means the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act of 1976, the
Clean Air Act, the Federal Water Pollution Control Act, the Safe
Drinking Water Act, the Toxic Substance Control Act, the Emergency
Planning and Community Right-to-Know Act of 1986, the Hazardous
Material Transportation Act, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, injunctions, judgments, orders, decrees,
and rulings) of federal, state, local, and foreign governments (and
all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety,
including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials (including petroleum
products and asbestos) or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
1.26 "Environmental Laws" has the meaning set forth in Section 3.12.
1.27 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.28 "Fiduciary" has the meaning set forth in ERISA Section 3(21).
1.29 "Financial Statements" has the meaning set forth in Section 3.8.
1.30 "GAAP" means the United States generally accepted accounting
principles in effect from time to time.
1.31 "FBCA" means Chapter 607 of the Florida Statutes, known as the
Florida Business Corporation Act, as amended from time to time.
1.32 "Indemnified Party" has the meaning set forth in Section 9.3.
1.33 "Indemnifying Party" has the meaning set forth in Section 9.3.
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1.34 "Intellectual Property" means: (a) all trade secrets and confidential
business information (including customer and supplier lists, ideas,
research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, pricing and cost
information, and business and marketing plans and proposals); (b) all
trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and
renewals in connection therewith; (c) all inventions (whether
patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations
thereof; (d) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith;
(e) all computer software (including data and related documentation);
(f) all other proprietary rights; and (g) all copies and tangible
embodiments thereof (in whatever form or medium).
1.35 "IRS" means the Internal Revenue Service.
1.36 "Knowledge" as it applies to the Stockholders, means the actual
knowledge of any of the Stockholders as it applies to ATOW and
ATOWSUB shall mean the actual knowledge of its officers and
directors.
1.37 "Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including but not in any way limited to any
liability for Taxes.
1.38 "Material Adverse Effect" or "Material Adverse Change" means any
change of effect that is materially adverse to the business,
financial condition, results of operations or prospects for future
business
1.39 "Material Contract" has the meaning set forth in Section 3.14.
1.40 "Merger" has the meaning set forth in Section 2.1.
1.41 "Most Recent Financial Statements" has the meaning set forth in
Section 3.8.
1.42 "Most Recent Fiscal Quarter End" has the meaning set forth in Section
3.8.
1.43 "Most Recent Fiscal Year End" has the meaning set forth in Section
3.8.
1.44 "Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
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1.45 "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice, including with respect to
quantity and frequency.
1.46 "Net Equity" has the meaning set forth in Section 2.13.2.1.
1.47 "Party(ies)" has the meaning set forth in the first paragraph hereof.
1.48 "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
1.49 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company or
partnership, a trust, a joint venture, an unincorporated
organization, any other form of entity whatsoever, or a governmental
entity (or any department, agency, or political subdivision thereof).
1.50 "Private Placement Memorandum" means the private placement memorandum
of ATOW relating to the ATOW Shares to be issued hereunder.
1.51 "Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
1.52 "Promissory Note" has the meaning set forth in Section 2.13.1.3.
1.53 "Qualified Plan" has the meaning set forth in Section 3.17.5.
1.54 "Reportable Event" has the meaning set forth in ERISA Section 4043.
1.55 "Securities Act" means the Securities Act of 1933, as amended.
1.56 "Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
1.57 "Security Interest" means any lien, claim, encumbrance, mortgage,
hypothecation, pledge, or other security interest, excluding purchase
money security interests arising in the Ordinary Course of Business
and liens arising by operation of law for Taxes not yet due and
payable.
1.58 "Significant Customers" has the meaning set forth in Section 3.14.
1.59 "Stockholders" has the meaning set forth in the first paragraph
hereof.
1.60 "Stockholders' Agreement" has the meaning set forth in Section
2.13.1.2.
1.61 "Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
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1.62 "Surviving Corporation" has the meaning set forth in Section 2.1.
1.63 "Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use, production, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever,
including interest, penalty, or additions thereto, whether disputed
or not, and whether or not accrued on the Financial Statements.
1.64 "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.65 "Third Party Claim" has the meaning set forth in Section 9.3.
1.66 "Transaction" has the meaning set forth in Section 2.1.
1.67 "Transaction Consideration" has the meaning set forth in Section
2.13.1.
1.68 "Transaction Consideration Adjustment" has the meaning set forth in
Sections 2.13.2.1.
2. TRANSACTION, TRANSACTION CONSIDERATION, CLOSING.
2.1 Transaction. Upon the terms and subject to the conditions hereof and
in accordance with the provisions of the Florida Business Corporation
Act (the "FBCA"), the COMPANY shall be merged with and into ATOWSUB
(the "Merger") and the separate existence of the COMPANY shall
thereupon cease, and ATOWSUB, as the Surviving Corporation (the
"Surviving Corporation"), shall continue to exist under and be
governed by the FBCA (the "Transaction.")
2.2 Effect of the Merger. At and after the Effective Time, the effect of
the Merger shall, in all respects, be as provided in the FBCA. From
and after the Effective Time, the Surviving Corporation shall
continue to be a Florida corporation.
2.3 Effective Time; Filing of Certificates of Merger. The Merger shall be
effected by the filing at the time of the Closing, of the articles of
merger, substantially in the form of Exhibit 2.3 attached hereto with
the Secretary of the State of Florida in accordance with the
provisions of the FBCA. The Merger shall become effective at the
close of business on the date of such filing (the "Effective Time")
and the Parties shall take any and all other lawful actions and do
any and all other lawful things necessary to cause the Merger to
become effective.
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2.4 Articles of Incorporation. At the Effective Time, the articles of
incorporation of ATOWSUB, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the
Surviving Corporation until thereafter amended in accordance with
applicable law.
2.5 By-Laws. The by-laws of ATOWSUB, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving Corporation
until thereafter amended in accordance with applicable law.
2.6 Directors and Officers. The directors and officers of ATOWSUB
immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation. Each director and officer of
the Surviving Corporation shall hold office in accordance with the
articles of incorporation and by-laws of the Surviving Corporation.
At the Closing, the COMPANY shall cause to be delivered to ATOWSUB
the written resignations of all of the directors and officers of the
COMPANY, which resignations shall be unconditional and effective as
of the Closing Date.
2.7 Tax Consequences. It is intended by the Parties hereto that the
Merger shall constitute a tax-free reorganization within the meaning
of Sections 354 and 356 of the Code.
2.8 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further
acts are necessary or desirable: (i) to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, title to and
possession of any property or right of the Company acquired or to be
acquired by reason of, or as a result of, the Merger; or (ii)
otherwise to carry out the purposes of this Agreement, then the
Stockholders shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver
all such deeds, assignments and assurances in law and to do all other
acts necessary or proper to vest, perfect or confirm title to and
possession of such property or rights in the Surviving Corporation
and otherwise to carry out the purposes of this Agreement; and the
officers and directors of the Surviving Corporation are fully
authorized in the name of the Stockholders and the company to take
any and all such actions.
2.9 The Closing. The closing of the Transaction (the "Closing") shall
mean execution of all relevant documents and subsequent payment of
all funds dues. The Closing shall take place at a location in or near
Tampa, Florida designated by ATOWSUB, commencing at 10:00 a.m. local
time on July 23, 1999, or such other date or time as the Parties may
mutually agree (the "Closing Date"). The execution of documents shall
be subject to funding which shall occur at a later date.
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2.10 Actions at the Closing. At the Closing: (i) the Stockholders shall
convey the COMPANY Shares to ATOWSUB and deliver to ATOWSUB the
various certificates, instruments, and the documents elsewhere in
this Agreement; and (ii) ATOW shall deliver to the Stockholders the
Transaction Consideration required to be delivered at the closing and
the various certificates, instruments, and documents referred to
elsewhere in this Agreement.
2.11 No Dissenters' Rights. As the sole shareholders of the COMPANY, the
Stockholders' approval and execution of this Agreement constitutes
unanimous approval of the transactions contemplated herein and
therefore neither the Stockholders, nor any other party, are entitled
to dissenters' rights under the FBCA.
2.12 Surrender of Certificates.
2.12.1 Company's Shares. At the Closing, the Stockholders shall
be required to surrender to ATOWSUB the certificates which
immediately prior to the Effective Time represented all of
the COMPANY's Shares (the "Certificate(s)") (together with
stock powers endorsed to ATOWSUB). Until so surrendered,
each Certificate which immediately prior to the Effective
Time represented the COMPANY's Shares (other than shares
held in the treasury) shall upon and after the Effective
Time by virtue of the Merger be deemed for all purposes to
represent and evidence only the right to receive the ATOW
Shares determined in accordance with Section 2.13.1.2 and
the Cash pursuant to Section 2.13.1.1, as provided in this
Agreement. At the Effective Time, the stock transfer books
of the COMPANY shall be closed and no transfer of the
COMPANY's Shares shall thereafter be made.
2.12.2 Dividends. No dividends or other distributions declared or
made after the date of this Agreement with respect to the
ATOW Shares with a record date after the Effective Time
will be paid to the holder of any unsurrendered
Certificate with respect to the ATOW Shares represented
thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to applicable
law, following surrender of any such Certificate, there
shall be paid to the record holder of the Certificate
representing whole ATOW Shares issued in exchange
therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a
record date after the Effective Time payable with respect
to such whole ATOW Shares.
2.13 Transaction Consideration.
2.13.1 Transaction Consideration Composition and Payment. The
aggregate transaction consideration (the "Transaction
Consideration") shall be paid as follows:
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2.13.1.1 Cash. Five hundred thousand dollars
($500,000.00) on or before July 30, 1999,
payable by certified, bank, or cashier's check
delivered to the Stockholders, or by wire
transfer of immediately available funds to an
account designated by the Stockholders which
account shall be so designated not less than
three (3) business days prior to the date of
Closing.
2.13.1.2 ATOW Shares. _________ shares of ATOW common
stock issued at the Closing Date, to the
respective Stockholders, equivalent to a value
of $600,000.00 based on the average closing
price for the five trading days prior to the
Closing Date and the five trading days after
the Closing Date less a 30 percent discount.
The shares issued to the Stockholders will be
restricted as to their sale subject to Rule 144
pending ATOW'S filing a registration statement
that is expected to be no later than October
1999. The Stockholders will receive piggyback
registration rights for the Shares valued at
$600,000.00. The Shareholders shall receive 10%
annual interest from August 1, 1999 on
$600,00.00, with the first interest payment due
November 1, 1999 and subsequent interest
payments due the first day of every month
thereafter, until such time as the stock is
registered. Should the registration not become
effective by March 30, 2000, ATOW shall pay the
Shareholders the - principal amount and all
accrued interest in six (6) equal monthly
installments.
2.13.1.3 ATOW Shares. _____ shares issued at the Closing
Date, to the respective Stockholders,
equivalent to a value of $1,100,000.00 based on
the average closing price for the five trading
days prior to the Closing Date and the five
trading days after the Closing Date less a 30
percent discount. The ATOW Shares received by
the Stockholders shall not be transferable by
the Stockholders other than: (i) by will, trust
or intestate succession; or (ii) in accordance
with applicable state and federal securities
laws including, but not limited to, Rule 144.
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2.13.1.4 Conversion of Shares. Each share of capital
stock of ATOWSUB issued and outstanding
immediately prior to the Effective Time shall
continue to represent one validly issued, fully
paid and non-assessable share of capital stock
of the Surviving Corporation after the Merger.
By virtue of the Merger and without any action
on the part of the Stockholders thereof, the
COMPANY Shares shall be converted into ATOW
Shares as follows: ___________shares equivalent
to a value of $1,700,000.00, based on the
average closing price for the five trading days
prior to the Closing Date and the five trading
days after the Closing Date less a 30 percent
discount.
2.13.2 Potential Post-Closing Adjustments.
2.13.2.1 Computation of Adjustment. If the Closing Date
Balance Sheet reflects Net Equity that is less
than $388,119.00 then the Transaction
Consideration shall be reduced dollar for
dollar (a "Transaction Consideration
Adjustment") by the amount by which such actual
agreed upon Net Equity set forth in the Closing
Date Balance Sheet is less than $388,119.00.
2.13.2.2 Satisfaction of Adjustment. If an adjustment is
made pursuant to Section 2.13.2.1, ATOW shall
receive within forty-five (45) days of the
completion of the Closing Date, through a
conveyance from the Stockholders to ATOW, from
the ATOW Shares transferred to the Stockholders
hereunder which have not yet become fully
transferable, that number of ATOW Shares
necessary to equal the Transaction
Consideration Adjustment, utilizing the share
value as computed in Section 2.13.1.2 above for
such adjustment; provided, however, if no such
ATOW Shares are available for such purpose, or
not enough ATOW Shares are available for such
purpose, ATOW shall receive the Transaction
Consideration Adjustment in one (1) lump sum
payment from the Stockholders. "Net Equity"
shall be the fair market value of the COMPANY's
tangible assets, less all liabilities of the
---------- COMPANY. Should net equity be more
than $388,119.00, the COMPANY and/or its
stockholders shall be entitled to receive
additional shares at a price as computed in
Section 2.13.1.2 above for such adjustment,
provided, however, that if no such ATOW shares
are available for such purpose or not enough
ATOW shares are available, the shareholderss
shall receive the Transaction Consideration
Adjustment in one lump sum payment from ATOW.
2.14 Preparation of Closing Date Balance Sheet.
2.14.1 Initial Draft Closing Date Balance Sheet. Within ninety
(90) days after the Closing Date, ATOW will prepare and
deliver to the Stockholders a draft balance sheet (the
"Draft Closing Date Balance Sheet") of the COMPANY, taking
into account the conversion of the COMPANY to a "C"
corporation, as of the close of business on the Closing
Date (after giving effect to all transactions occurring on
the Closing Date other than the consummation of the
transactions contemplated by this Agreement). ATOW will
prepare the Draft Closing Date Balance Sheet in accordance
with GAAP through application of the procedures used in
preparing an end-of-year audited financial statement.
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2.14.2 Closing Date Balance Sheet. If the Stockholders have any
objections to the Draft Closing Date Balance Sheet, the
Stockholders will deliver a detailed statement describing
their objections to ATOW within thirty (30) days after
receiving the Draft Closing Date Balance Sheet. If the
Stockholders do not deliver any such objections to ATOW
within such thirty (30) day period, then the Draft Closing
Date Balance Sheet shall be the "Closing Date Balance
Sheet." The Parties shall use reasonable efforts to
resolve any such objections themselves. If the Parties do
not obtain a final resolution within thirty (30) days
after ATOW has received the statement of objections, the
Parties shall select a "Big Six" accounting firm, other
than their respective regular outside accounting firms,
which is mutually acceptable to them to resolve any
remaining objections. The determination of any accounting
firm so selected will be set forth in writing and will be
conclusive and binding upon the Parties. ATOW will revise
the Draft Closing Date Balance Sheet as appropriate to
reflect the resolution of any objections thereto pursuant
to this Section 2.14.2. If any revisions are made to the
Draft Closing Date Balance Sheet, pursuant to the
preceding sentence, the Closing Date Balance Sheet shall
mean the Draft Closing Date Balance Sheet together with
any such revisions.
2.14.3 Accounting Expenses. In the event the Parties submit any
unresolved objections to an accounting firm for resolution
as provided in Section 2.14.2, ATOW and the Stockholders
will share equally the responsibility for the fees and
expenses of the accounting firm.
2.15 Stockholders Consent and Release. The Stockholders hereby consent to
the Transaction and approve the execution and delivery of this
Agreement and the transactions contemplated hereby. Effective as of
the Effective Time, the Stockholders hereby release the COMPANY from
any and all claims of the Stockholders, whether arising before or
after the Effective Time, against the COMPANY, or Liabilities or
obligations of the COMPANY to the Stockholders as a result of any
Stockholders having served as a stockholders, director, officer,
employee, or agent of the COMPANY.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
The COMPANY and each of the Stockholders jointly and severally represent
and warrant that all of the following representations and warranties in
this Section 3 are true at the date of this Agreement and shall be true at
the time of the Closing, except as set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"), and that such
representations and warranties shall survive the Closing Date.
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3.1 Organization. Each of the COMPANY and the subsidiaries of the COMPANY
(the "COMPANY's Subsidiaries") set forth on Schedule 3.7 of the
Disclosure Schedule is a corporation duly organized, validly existing
and in good standing under the laws of the state of its
incorporation, and is duly authorized and qualified to do business
under all applicable laws, regulations, ordinances and orders of
public authorities to carry on its business in the places and in the
manner as now conducted. Schedule 3.1 of the Disclosure Schedule
contains a list of all jurisdictions in which the COMPANY is
authorized or qualified to do business. True copies of the
certificate of incorporation and bylaws, each as amended, of the
COMPANY and each of the COMPANY's Subsidiaries (collectively, the
"Charter Documents"), certified by the Secretary or Assistant
Secretary of the COMPANY, are attached hereto as Schedule 3.1 of the
Disclosure Schedule . A true copy of each certificate of
incorporation included in the Charter Documents, certified by the
Secretary of State or other appropriate authority of the state of
incorporation of the COMPANY or the applicable Subsidiary of the
COMPANY, as applicable, shall be delivered to ATOW at the Closing.
Except as set forth on Schedule 3.1 of the Disclosure Schedule , the
minute books of the COMPANY and each of the COMPANY's Subsidiaries,
as heretofore made available to ATOW, are correct and complete in all
material respects.
3.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to
the terms of this Agreement and (ii) the COMPANY has the full legal
right, power and authority to enter into this Agreement and the
Merger. The execution, delivery and performance of this Agreement by
the COMPANY has been duly authorized and approved by its Board of
Directors and no other corporate proceedings on the part of the
COMPANY are necessary to authorize this Agreement and the
transactions contemplated hereby. The COMPANY has given to the
Stockholders any notice required to be given to the Stockholders
under applicable law. This Agreement constitutes the valid and
legally binding obligation of the COMPANY, enforceable in accordance
with its terms and conditions.
3.3 Capital Stock of the Company. The authorized capital stock of the
COMPANY is 2,000,000 shares. All of the issued and outstanding shares
of the capital stock of the COMPANY are owned by the Stockholders and
in the amounts set forth in Annex I free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the Stockholders and further,
such shares were offered, issued, sold and delivered by the COMPANY
in compliance with all applicable state and federal laws concerning
the issuance of securities. Further, none of such shares were issued
in violation of the preemptive rights of any past or present
stockholders. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights
with respect to the COMPANY. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the
capital stock of the COMPANY.
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3.4 Noncontravention of Company. Except as set forth in Schedule 3.4 of
the Disclosure Schedule, neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby will: (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, or other restriction of
any government, governmental agency or any other third party
whatsoever, or court to which the COMPANY is subject, or any
provision of the charter or bylaws of the COMPANY; or (ii) conflict
with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which the COMPANY is a party or by which it is bound or to which
any of its assets is subject or which would result in the imposition
of any Security Interest upon any of its assets, which conflict,
breach default, acceleration or right would have a Material Adverse
Effect on the Stockholders or otherwise adversely affect the
Stockholders' ability to consummate the transactions contemplated
hereby. Except as set forth in Schedule 3.4 of the Disclosure
Schedule, the Stockholders and the COMPANY do not need to give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency or any
other third party whatsoever in order for the Parties to consummate
the transactions contemplated by this Agreement.
3.5 Broker's Fees. The COMPANY has no Liability or obligation to pay any
fees, expenses, or commissions to any professional representative,
attorney, consultant, broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
3.6 Title to Assets. Schedule 3.6 of the Disclosure Schedule contains a
materially complete, true and materially correct list and brief
description of each item of equipment and tangible asset having an
original purchase cost or aggregate lease cost exceeding FIVE HUNDRED
DOLLARS AND NO/100 ($500.00). The COMPANY has good and marketable
title to, or a valid leasehold interest in, the properties and assets
used by it, located on its premises, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, except for those
assets disposed of in the Ordinary Course of Business after the date
thereof, free and clear of all Security Interests.
3.7 Subsidiaries. Schedule 3.7 of the Disclosure Schedule attached hereto
lists the name of each of the COMPANY's Subsidiaries and sets forth
the number of shares and class of the authorized capital stock of
each of the COMPANY's Subsidiaries and the number of shares of each
of the COMPANY's Subsidiaries which are issued and outstanding, all
of which shares (except as set forth on Schedule 3.7) are owned by
the COMPANY, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions, encumbrances and
claims of every kind. The COMPANY does not presently own, of record
or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is
the COMPANY, directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
14
3.8 Financial Statements. The Stockholders have delivered to ATOW
financial statements of the COMPANY consisting of (i) unaudited
balance sheets, and related statements of income, as of and for the
years ended December 31, 1996, 1997 1998. (December 31, 1998 being
hereinafter referred to as the "Balance Sheet Date" and the "Most
Recent Fiscal Year End") and (ii) the unaudited balance sheet and
income statement (the "Most Recent Financial Statements"), as of and
for the quarter ended [insert date] (the "Most Recent Quarter End")
(Collectively referred to as "Financial Statements"). Such Financial
Statements have been prepared in accordance GAAP applied on a
consistent basis throughout the periods indicated, except as noted.
Such balance sheets as of December 31, 1998, 1997 and 1996 present
fairly the financial position of the COMPANY (and each of the
COMPANY's Subsidiaries on a consolidated basis) as of the dates
indicated thereon, and such statements of income present fairly the
results of their combined operations for the periods indicated
thereon; provided, however, that the Most Recent Financial Statements
are subject to normal year-end adjustments, which will not be
material.
3.9 Liabilities and Obligations. Schedule 3.9 of the Disclosure Schedule
contains an accurate list with respect to the COMPANY and its
Subsidiaries of:
3.9.1 all liabilities which are reflected on the balance sheet
of the COMPANY at the Balance Sheet Date;
3.9.2 all liabilities of the COMPANY not reflected on the
balance sheet of the COMPANY at the Balance Sheet Date
exceeding $100.00 which either (i) should have properly
been accrued on the balance sheet of the COMPANY as of the
Balance Sheet Date in accordance with GAAP consistently
applied, or (ii) are liabilities of the nature described
in Section 3.12 and/or Section 3.18; and
3.9.3 a summary description of the liability together with the
following:
3.9.3.1 copies of all relevant documentation relating to
litigation, arbitration or demand letters;
3.9.3.2 amounts claimed and any other action or relief
sought;
3.9.3.3 name of claimant and all other parties to the
claim, suit or proceeding;
3.9.3.4 the name of each court or agency before which
such claim, suit or proceeding is pending; and
15
3.9.3.5 the date such claim, suit or proceeding was
instituted.
3.10 Accounts and Notes Receivable. Schedule 3.10 of the Disclosure
Schedule contains an accurate list of the accounts and notes
receivable of the COMPANY, including the COMPANY's Subsidiaries, as
of the Balance Sheet Date, including any such amounts which are not
reflected in the balance sheet as of the Balance Sheet Date, and
including receivables from and advances to employees and the
Stockholders. Such accounts and notes are collectible in the amount
shown on Schedule 3.10, net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
3.11 Permits and Intangibles. The COMPANY and the COMPANY's Subsidiaries
holds all valid licenses, franchises, permits and other governmental
authorizations including permits, titles (including motor vehicle
titles and current registrations), fuel permits, trademarks, trade
names, patents, patent applications and copyrights, the absence of
any of which would have a Material Adverse Effect. Schedule 3.11 of
the Disclosure Schedule contains an accurate list and summary
description of all such licenses, franchises, permits and other
governmental authorizations, provided that copyrights need not be
listed unless registered. The COMPANY and the COMPANY's Subsidiaries
have conducted and are conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in
applicable permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing except
where such non-compliance or violation would not have a Material
Adverse Effect. The transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or have a
Material Adverse Effect upon the rights and benefits afforded to the
COMPANY and the COMPANY's Subsidiaries by, any such licenses,
franchises, permits or government authorizations.
3.12 Environmental Matters. The COMPANY and the COMPANY's Subsidiaries
have complied with and are in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees
applicable to any of them or any of their respective properties,
assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to protection of the air,
water or land or to the generation, storage, use, handling,
transportation, treatment or disposal of solid wastes, hazardous
wastes or hazardous substances (as such terms are defined in any
applicable Environmental Law). The COMPANY and the COMPANY's
Subsidiaries have obtained and complied with all necessary permits
and other approvals necessary to treat, transport, store, dispose of
or otherwise handle solid wastes, hazardous wastes or hazardous
substances and have reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by
the COMPANY or any of the COMPANY's Subsidiaries where solid wastes,
hazardous wastes or hazardous substances have been treated, stored,
used, disposed of or otherwise handled. There have been no releases,
as defined in Environmental Laws at, from, under, in or on any
property owned or operated by the COMPANY or any of the COMPANY's
Subsidiaries except as permitted by Environmental Laws. There is no
on-site or off-site location to which the COMPANY or any of the
COMPANY's Subsidiaries has transported or disposed of solid wastes,
hazardous wastes or hazardous substances or arranged for the
transportation of solid wastes, hazardous wastes or hazardous
substances, which site is the subject of any federal, state, local or
foreign enforcement action or any other investigation which could
lead to any claim against the COMPANY, any of the COMPANY's
16
Subsidiaries or ATOW and/or ATOWSUB for any clean-up cost, remedial
work, damage to natural resources or personal injury, including, but
not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended. To the
Knowledge of the COMPANY the COMPANY has no contingent liability in
connection with any release of any solid waste, hazardous waste or
hazardous substance into the environment. Schedule 3.12 of the
Disclosure Schedule lists all releases of hazardous wastes or
hazardous substances by the COMPANY.
3.13 Real and Personal Property. Schedule 3.13 (a), (b), and (c) of the
Disclosure Schedule contains an accurate list of (a) all real and
personal property included (or that will be included) on the balance
sheet of the COMPANY, (b) all other real and personal property of the
COMPANY including the COMPANY's Subsidiaries with a value in excess
of $500.00 (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date, and (c) all leases for real and personal
property to which the COMPANY or any of its subsidiaries is a party
involving real or personal property having a value in excess of
$500.00, including in the case of (c) true copies of all such leases
and including in all cases an indication as to which real and
personal property is currently owned, or was formerly owned, by
Stockholders or business or personal affiliates of the COMPANY or
Stockholders. All of the trucks and other material machinery and
equipment of the COMPANY and the COMPANY's Subsidiaries listed on
Schedules 3.13(a) and (b) are in good working order and condition,
ordinary wear and tear excepted. All leases set forth on Schedule
3.13(c) are in full force and effect and constitute valid and binding
agreements on the COMPANY or a COMPANY Subsidiary, as applicable, and
to the knowledge of the COMPANY, constitute valid and binding
agreements on the other parties thereto (and their successors)
thereto in accordance with their respective terms. All fixed assets
used by the COMPANY and the COMPANY's Subsidiaries that are material
to the operation of their respective businesses are either owned by
the COMPANY or the COMPANY's Subsidiaries or leased under an
agreement indicated on Schedule 3.13(c). Schedule 3.13 shall, without
limitation, contain true copies of all title reports and title
insurance policies received or owned by the COMPANY or the COMPANY's
Subsidiaries.
3.14 Significant Customers, Material Contracts and Commitments. Schedule
3.14 of the Disclosure Schedule contains an accurate list of (i)
those customers representing five percent (5%) or more of the
COMPANY's revenues for the 12 months ended on the Balance Sheet Date,
or who have paid to the COMPANY $25,000.00 or more over any four
consecutive fiscal quarters in the three years ended on the Balance
Sheet Date (the "Significant Customers") and (ii) all contracts
requiring payment or performance by the COMPANY or any COMPANY
17
Subsidiary in an amount or with a value in excess of $15,000.00
("Material Contracts") to which the COMPANY or any of its
Subsidiaries is a party or by which any of them or any of their
respective properties are bound (a) as of the Balance Sheet Date and
(b) entered into since the Balance Sheet Date, and in each case has
delivered true copies of such agreements to ATOW. None of the
COMPANY's including the COMPANY's Subsidiaries significant customers
has cancelled or substantially reduced or, is currently attempting or
threatening to cancel any Material Contract or substantially reduce
utilization of the services provided by the COMPANY including the
COMPANY's Subsidiaries, and the COMPANY and the COMPANY's
Subsidiaries have complied with all material commitments and
obligations pertaining to any Material Contract, and are not in
default under any such Material Contract, and no notice of default
has been received either orally or in writing. The COMPANY and the
COMPANY's Subsidiaries have not been the subject of any election in
respect of union representation of employees and are not bound by or
subject to (and none of its respective assets or properties is bound
by or subject to) any arrangement with any labor union. No employees
of the COMPANY or its Subsidiaries are represented by any labor union
or covered by any collective bargaining agreement and no campaign to
establish such representation has ever occurred or is in progress.
There is no pending or, to the COMPANY's knowledge, threatened labor
dispute involving the COMPANY (including the COMPANY's Subsidiaries)
and any group of its employees, nor has the COMPANY including the
COMPANY's Subsidiaries experienced any labor interruptions over the
past three years, and the COMPANY considers its relationship with
employees to be good.
3.15 Insurance. Schedule 3.15 of the Disclosure Schedule contains an
accurate list as of the Balance Sheet Date of all insurance policies
carried by the COMPANY including the COMPANY's Subsidiaries and, has
delivered to ATOW an accurate list, attached to Schedule 3.15, of all
insurance loss runs or worker's compensation claims received for the
past three (3) policy years. Also attached to Schedule 3.15 are true
copies of all policies currently in effect. Such insurance policies
are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the
COMPANY including any of the COMPANY's Subsidiaries has ever been
cancelled by the insurance COMPANY, and the COMPANY including such
COMPANY's Subsidiaries has never submitted a written application for
insurance and been denied coverage.
3.16 Compensation; Employment Agreements. Schedule 3.16 of the Disclosure
Schedule contains an accurate list showing all officers, directors
and key managers of the COMPANY, including the COMPANY's
Subsidiaries, listing all employment agreements with such officers,
directors and key managers and the rate of compensation (and the
portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of (i) the
Balance Sheet Date and (ii) the Closing Date. The COMPANY has
18
provided to ATOW true copies of any employment agreements for persons
listed on Schedule 3.16. Since the Balance Sheet Date there have been
no increases in the compensation payable or any special bonuses to
any officer, director or key manager.
3.17 Employee Benefits.
3.17.1 Plans. Section 3.17 of the Disclosure Schedule lists each
Employee Benefit or health and welfare plan that the
COMPANY maintains or to which the COMPANY contributes.
3.17.2 Compliance. Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in
form and in operation in all material respects with its
terms and with the applicable requirements of ERISA, the
Code, and other applicable laws.
3.17.3 Reports and Descriptions. All required reports and
descriptions (including Form 5500 Annual Reports, Summary
Annual Reports, PBGC-1's, and Summary Plan Descriptions)
have been filed or distributed appropriately with respect
to each such Employee Benefit Plan. The requirements of
Part 6 of Subtitle B of Title I of ERISA and of Code
Section 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
3.17.4 Contributions. All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any pay period ending on or before the
Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the
COMPANY. All premiums or other payments due for all
periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
3.17.5 Qualified Plan. Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan and is intended to meet
the requirements of a "qualified plan" under Code Section
401(a) meets such requirements and has received, within
the last two (2) years, a favorable determination letter
from the IRS.
3.17.6 Market Value. The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan) equals or exceeds
the present value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for determination.
19
3.17.7 Copies. The Stockholders have delivered to ATOW and
ATOWSUB materially correct and complete copies of the plan
documents and summary plan descriptions, the most recent
determination letter received from the IRS, the most
recent Form 5500 Annual Report, and all related trust
agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit
Plan.
3.17.8 Maintenance of Plans. With respect to each Employee
Benefit Plan that the COMPANY maintains, ever has
maintained, or to which it contributes, ever has
contributed, or ever has been required to contribute:
3.17.8.1 No such Employee Benefit Plan which is an
Employee Pension Benefit Plan has been
completely or partially terminated or been
the subject of a Reportable Event as to
which notices would be required to be filed
with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit
Plan has been instituted or, threatened; and
3.17.8.2 There have been no Prohibited Transactions
with respect to any such Employee Benefit
Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other
failure to act or comply in connection with
the administration or investment of the
assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or
investigation with respect to the
administration or the investment of the
assets of any such Employee Benefit Plan
(other than any Multiemployer Plan), other
than routine claims for benefits, is pending
or threatened. The COMPANY has no Knowledge
of any basis for any such action, suit,
proceeding, hearing, or investigation.
3.18 Conformity with Law. The COMPANY including the COMPANY's Subsidiaries
is not in violation of any law or regulation or any order of any
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having
jurisdiction over any of them which would have a Material Adverse
Effect; and except to the extent set forth in Schedule 3.18 of the
Disclosure Schedule, there are no claims, actions, suits or
proceedings pending or, to the Knowledge of the COMPANY, threatened,
against or affecting the COMPANY (including the COMPANY's
Subsidiaries), at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over any of
them which would have a Material Adverse Effect, and no notice of any
such claim, action, suit or proceeding, whether pending or
threatened, has been received. The COMPANY including all of the
COMPANY's Subsidiaries has conducted and is conducting its business
in compliance with the requirements, standards, criteria and
conditions set forth in applicable federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations and
is not in violation of any of the foregoing which would have a
Material Adverse Effect.
20
3.19 Tax Matters.
3.19.1 Tax Returns. The COMPANY has either filed all Tax Returns
it was required to file or has obtained extensions of the
due dates for such Tax Returns. All such Tax Returns were
correct and complete in all material respects and were
filed on a timely basis. All Taxes owed by the COMPANY
(whether or not shown on any Tax Return) have been paid.
The COMPANY currently is not the beneficiary of any
extension of time within which to file any Tax Return. No
claim is currently pending by an authority in a
jurisdiction where the COMPANY is or may be subject to
taxation by that jurisdiction. There are no Security
Interests on any of the assets of the COMPANY that arose
in connection with any failure (or alleged failure) to pay
any Tax.
3.19.2 Withholding. The COMPANY has withheld and paid all Taxes
required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent
contractor, creditor, stockholders, or other third party.
3.19.3 No Disputes of Claims. No Stockholders or director or
officer (or employee responsible for Tax matters) of the
COMPANY expects any authority to assess any additional
Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax
Liability of the COMPANY either: (i) claimed or raised by
any authority in writing; or (ii) as to which any of the
Stockholders, directors and officers (and employees
responsible for Tax matters) of the COMPANY has Knowledge
based upon personal contact with any agent of such
authority. Schedule 3.19.3 of the Disclosure Schedule
lists all federal, state, local, and foreign Tax Returns
filed with respect to the COMPANY for taxable periods
since the incorporation of the COMPANY, indicates those
Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The
Stockholders have made available to ATOW and ATOWSUB
materially correct and complete copies of all Tax Returns,
examination reports, and statements of deficiencies
assessed against or agreed to by any of the COMPANY and
its Affiliates since the incorporation of the COMPANY.
1-800-AutoTow, Inc. acknowledges receipt of all necessary
documents required by this section and waives any further
compliance by Company.
21
3.19.4 No Waivers. The COMPANY has not waived any statute of
limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
3.19.5 No Special Circumstances. The COMPANY has not made any
payments, is not obligated to make any payments, nor is a
party to any agreement that under certain circumstances
could obligate it to make any payments that will not be
deductible under Code Section 280G. The COMPANY has not
been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section
897(c)(1)(A)(ii). The COMPANY has disclosed on its federal
income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal
income Tax within the meaning of Code Section 6662.
3.19.6 Powers of Attorney. Except as disclosed in Schedule 3.19.6
of the Disclosure Schedules the COMPANY has not executed
any power of attorney with respect to its being
represented in any matter before any tax authority.
3.19.7 Subchapter S. The COMPANY has elected, by the unanimous
consent of the Stockholders and is in compliance with all
applicable legal requirements, to be taxed under
Subchapter "S" of the Code and corresponding provisions
under any applicable state and local tax laws, such
elections are currently in full force and effect for the
COMPANY. No action has been taken by the COMPANY or any
Stockholders that may result in the revocation of any such
elections. The COMPANY has no "Subchapter C earnings and
profits" as defined in Section 1362(d) of the Code. The
COMPANY has no "net unrealized built-in gain" as such term
is defined in Sections 1374(d)(1) and 1374(d)(8) of the
Code. The COMPANY has no Liability for the payment of any
income Taxes under the Code or under Subchapter S of the
Code.
3.19.8 Audits of Tax Returns. Except as set forth on Schedule
3.19.8 of the Disclosure Schedule, no Tax Return of the
COMPANY is currently under audit or examination by any
taxing authority, and the COMPANY has not received a
written notice stating the intention of any taxing
authority to conduct such an audit or examination by the
COMPANY. Each deficiency resulting from any audit or
examination relating to Taxes by any taxing authority has
been paid, except for deficiencies being contested in good
faith. The revenue agents' report related to any prior
audits and examinations are attached as part of Schedule
3.19.8 of the Disclosure Schedule.
22
3.19.9 Period of Assessment. There is no agreement or other
document extending, or having the effect of extending, the
period of assessment or collection of any Taxes.
3.19.10 Tax Agreements. The COMPANY is not a party to or bound by
any tax sharing agreement, tax indemnity obligation or
similar agreement with respect to Taxes (including any
advance pricing agreement, closing agreement or other
agreement relating to Taxes with any taxing authority).
3.19.11 Accounting Methods. There are no accounting method changes
or proposed accounting method changes that could give rise
to an adjustment after the Closing Date. The COMPANY will
not be required to include in a taxable period ending
after the Closing Date taxable income attributable to
income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract
method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481
of the Code with respect to a change in method of
accounting occurring before the Closing Date or comparable
provisions of state, local or foreign tax law.
3.19.12 Consents. The COMPANY has not filed a consent pursuant to
or agreed to the application of Section 341(f) of the
Code.
3.19.13 Personal Holding Company. The COMPANY has not, during the
five (5) year period ending on the Closing Date, been a
personal holding COMPANY within the meaning of Section 541
of the Code.
3.19.14 Consolidated Tax Returns. The COMPANY has never filed or
been included in any combined or consolidated Tax return
with any other person or been a member of an affiliated
group filing a consolidated federal income Tax Return.
3.20 Absence of Changes. Since the Balance Sheet Date, there has not been
with respect to the COMPANY and the COMPANY's Subsidiaries:
3.20.1 any event or circumstance (either singly or in the
aggregate) which would constitute a Material Adverse
Effect;
3.20.2 any change in its authorized capital, or securities
outstanding, or ownership interests or any grant of any
options, warrants, calls, conversion rights or
commitments;
3.20.3 any declaration or payment of any dividend or distribution
in respect of its capital stock or any direct or indirect
redemption, purchase or other acquisition of any of its
capital stock, except any declaration of dividends payable
by any COMPANY Subsidiary to the COMPANY;
23
3.20.4 any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by it to
any of its respective officers, directors, stockholders,
employees, consultants or agents, except for ordinary and
customary bonuses and salary increases for employees
(other than the Stockholders) in accordance with past
practice;
3.20.5 any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character, nor
has the COMPANY entered into any collective bargaining
agreement that would have a Material Adverse Effect;
3.20.6 any distribution, sale or transfer, or any agreement to
sell or transfer any material assets, property or rights
of any of its respective business to any person,
including, without limitation, the Stockholders and their
affiliates, other than distributions, sales or transfers
in the ordinary course of business to persons other than
the Stockholders and their Affiliates;
3.20.7 any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to it, including without
limitation any indebtedness or obligation of any
Stockholders or any affiliate thereof, provided that it
may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past
practice, provided, further, that such adjustments shall
not be deemed to be included in Schedule 3.20.7 of the
Disclosure Schedule unless specifically listed thereon;
3.20.8 any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in
any of its assets, property or rights or requiring consent
of any party to the transfer and assignment of any such
assets, property or rights;
3.20.9 any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire any property, rights or
assets outside of the Ordinary Course of Business;
3.20.10 any waiver of any of its material rights or claims;
3.20.11 any transaction by it outside the ordinary course of their
respective businesses;
3.20.12 any change, modification, cancellation or termination of
a Material Contract;
3.20.13 any permitted the imposition of any security interest on
any of the COMPANY's assets, tangible or intangible;
24
3.20.14 any delay or postponement the payment of any Liability
outside the Ordinary Course of Business;
3.20.15 any material damage, destruction or loss (whether or not
covered by insurance) to its property;
3.20.16 any change made or authorized in the article or bylaws of
the COMPANY, other than as required herein;
3.20.17 any adoption, amendment, modification, or termination of
any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of
its directors, officers, and employees, or taken any such
action with respect to any other Employee Benefit Plan,
other than as contemplated herein;
3.20.18 any pledge to make any charitable contribution; or
3.20.19 any change in any method of accounting or accounting
principle, estimate or practice.
3.21 Deposit Accounts; Powers of Attorney. Schedule 3.21 of the Disclosure
Schedule contains an accurate list as of the date of the Agreement,
of:
3.21.1 the name of each financial institution in which the
COMPANY has accounts or safe deposit boxes;
3.21.2 the names in which the accounts or boxes are held;
3.21.3 the type of account and account number; and
3.21.4 the name of each person authorized to draw thereon or have
access thereto.
Schedule 3.21 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the
COMPANY or any of the COMPANY's Subsidiaries and a description of the terms
of such power.
3.22 Representations and Warranties of Stockholders. Each Stockholders
jointly and severally represents and warrants that the
representations and warranties set forth below are true as of the
date of this Agreement shall be true on the Closing Date, and that
such representations and warranties as made on the Closing Date shall
survive said Closing Date.
3.23 Authority; Ownership. Such Stockholders has the full legal right,
power and authority to enter into this Agreement. Such Stockholders
owns beneficially and of record all of the shares of the COMPANY
stock identified on Annex I as being owned by such Stockholders, and,
except as set forth on Schedule 3.23 of the Disclosure Schedule, such
COMPANY Stock is owned free and clear of all liens, encumbrances and
claims of every kind.
25
3.24 Tax Status. None of the Stockholders are a "nonresident alien
individual" or "foreign corporation" for purposes of Code Section
897(a)(1).
3.25 Preemptive Rights. Such Stockholders does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or
ATOW Shares that such Stockholders has or may have had other than
rights of any Stockholders to acquire ATOW Shares pursuant to (i)
this Agreement or (ii) any option granted by ATOW.
4. REPRESENTATIONS OF ATOW AND ATOWSUB.
ATOW and its subsidiary ATOWSUB represent and warrant that all of the
following representations and warranties are true at the date of this
Agreement and shall be true at the time of the Closing Date and that such
representations and warranties shall survive the Closing Date.
4.1 Organization. ATOW is duly organized, validly existing and in good
standing under the laws of the State of Delaware. ATOWSUB is duly
organized and in good standing under the laws of the State of
Florida. Both are duly authorized and qualified under all applicable
laws, regulations, and ordinances of public authorities to carry on
their business in the places and in the manner as now conducted
except for where the failure to be so authorized or qualified would
not have a Material Adverse Effect.
4.2 ATOW Shares. The ATOW Shares to be delivered to the Stockholders on
the Closing Date shall constitute valid and legally issued shares of
ATOW, fully paid and nonassessable, and except as set forth in this
Agreement, will be owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind created by ATOW, and will be
legally equivalent in all respects to the ATOW Shares issued and
outstanding as of the date hereof. The ATOW Shares to be issued to
the Stockholders pursuant to this Agreement will not be registered
under the Securities Act.
4.3 Validity of Obligations. The execution and delivery of this
Agreement, the Employment Agreements the Consulting Agreements and
the Leases by ATOW and ATOWSUB and the performance by ATOW and
ATOWSUB of the transactions contemplated herein or therein have been
or will be duly and validly authorized by the Boards of Directors of
ATOW and ATOWSUB, and this Agreement, the Employment Agreements, the
Consulting Agreements and the Leases have been or will be duly and
validly authorized by all necessary corporate action, duly executed
and delivered and are or will be legal, valid and binding obligations
of ATOW and ATOWSUB, enforceable against ATOW and ATOWSUB in
accordance with their respective terms.
26
4.4 Authorization. The representatives of ATOW and ATOWSUB executing this
Agreement have the corporate authority to enter into and bind ATOW
and ATOWSUB to the terms of this Agreement. ATOW and ATOWSUB have the
full legal right, power and authority to enter into this Agreement
and the Merger.
4.5 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof
will not:
4.5.1 conflict with, or result in a breach or violation of, the
certificate of incorporation or bylaws of ATOW and
ATOWSUB;
4.5.2 materially conflict with, or result in a material default
(or would constitute a default but for any requirement of
notice or lapse of time or both) under any document,
agreement or other instrument to which ATOWSUB is a party,
or result in the creation or imposition of any lien,
charge or encumbrance on any of ATOWSUB's properties
pursuant to (i) any law or regulation to which ATOWSUB or
any of its property is subject, or (ii) any judgment,
order or decree to which ATOWSUB is bound or any of its
property is subject; or
4.5.3 result in termination or any impairment of any material
permit, license, franchise, contractual right or other
authorization of ATOWSUB.
4.6 Subsidiaries. ATOWSUB does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity
interest in any corporation, association or business entity. ATOWSUB
is not, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
4.7 Conformity with Law. ATOW and ATOWSUB are not in violation of any law
or regulation or any order of any court or federal, state, municipal
or other governmental department, commission, board, bureau, agency
or instrumentality having jurisdiction over either of them which
would have a Material Adverse Effect. There are no claims, actions,
suits or proceedings, pending or, to the Knowledge of ATOWSUB,
threatened, against or affecting ATOWSUB, at law or in equity, or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim,
action, suit or proceeding, whether pending or threatened, has been
received. has conducted and is conducting its business in compliance
with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders,
approvals, variances, rules and regulations and is not in violation
of any of the foregoing which would have a Material Adverse Effect.
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5. COVENANTS PRIOR TO CLOSING.
5.1 Access and Cooperation; Due Diligence. Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the
officers and authorized representatives of ATOW and ATOWSUB access to
all of the COMPANY's, including the COMPANY's Subsidiaries, key
employees, sites, properties, books and records and will furnish ATOW
with such additional financial and operating data and other
information as to the business and properties of the COMPANY,
including the COMPANY's Subsidiaries, as ATOW may from time to time
reasonably request. The COMPANY will cooperate with ATOW and ATOWSUB,
its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with
any documents or materials required by this Agreement. ATOW, ATOWSUB,
the Stockholders and the COMPANY will treat all information obtained
in connection with the negotiation and performance of this Agreement
or the due diligence investigations as confidential in accordance
with the provisions of Section 12 hereof.
5.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, and will cause the
COMPANY's Subsidiaries to:
5.2.1 carry on its respective businesses in substantially the
same manner as it has heretofore and not introduce any
material new method of management, operation or
accounting;
5.2.2 maintain its respective properties and facilities,
including those held under leases, in as good working
order and condition as at present, ordinary wear and tear
excepted;
5.2.3 perform all of its respective obligations under agreements
to which it is a party relating to or affecting its
respective assets, properties or rights;
5.2.4 subject to Section 5.6, keep in full force and effect
present insurance policies or other comparable insurance
coverage;
5.2.5 use best efforts to maintain and preserve its business
organization intact, retain its respective present
employees and maintain its respective relationships with
suppliers, customers and others having business relations
with it;
5.2.6 maintain compliance with all material permits, laws, rules
and regulations, consent orders, and all other orders of
applicable courts, regulatory agencies and similar
governmental authorities; and
5.2.7 maintain compliance with all present debt and lease
instruments and not enter into new or amended debt or
lease instruments over $15,000.00, without the knowledge
and consent of ATOWSUB, which consent shall not be
unreasonably withheld.
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5.3 Prohibited Activities. Between the date of this Agreement and the
Closing Date, the COMPANY has not and, without the prior written
consent of ATOWSUB, will not:
5.3.1 make any change in its articles of incorporation or
bylaws;
5.3.2 issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any
kind other than in connection with the exercise of options
or warrants listed on Schedule 5.3.2 of the Disclosure
Schedule;
5.3.3 declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding,
or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
5.3.4 enter into any contract (including any contract to provide
services to customers) or commitment or incur or agree to
incur any liability or make any capital expenditures,
except if (i) it is in the Ordinary Course of Business or
(i) when aggregated with all other such contracts,
commitments, liabilities and capital expenditures not in
the normal course of business consistent with past
practice, it involves an amount not in excess of
$15,000.00;
5.3.5 increase the compensation payable or to become payable to
any officer, director, Stockholders, employee or agent, or
make any bonus or management fee payment to any such
person, except (i) bonuses to employees (other than the
Stockholders or their affiliates) consistent with past
practice and (ii) increases in salaries and commissions
payable to employees (other than to Stockholders and their
affiliates), provided that neither the salary nor the
commission payable to any employee may increase to a level
higher than one hundred FIVE percent (105%) of such
employee's current salary or bonus, whichever is
applicable;
5.3.6 create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties
whether now owned or hereafter acquired, except (i) with
respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost
not in excess of $15,000.00 necessary or desirable for the
conduct of the businesses of the COMPANY (including the
COMPANY's Subsidiaries), or (ii) liens set forth on
Schedule 5.3.6 of the Disclosure Schedule or (iii) liens
for taxes either not yet due or material men's,
mechanics', workers', repairmen's, employees' or other
like liens arising in the Ordinary Course of Business;
29
5.3.7 sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of
Business;
5.3.8 negotiate for the acquisition of any business or the
start-up of any new business;
5.3.9 merge or consolidate or agree to merge or consolidate
with or into any other corporation;
5.3.10 waive any material rights or claims of the COMPANY,
provided that the COMPANY may negotiate and adjust bills
in the course of good faith disputes with customers in a
manner consistent with past practice, provided, further,
that such adjustments shall not be deemed to be included
in Schedule 5.3.10 of the Disclosure Schedule unless
specifically listed thereon;
5.3.11 commit a material breach or amend or terminate any
Material Contract, or material permit, license or other
right of the COMPANY, or make or terminate any election
involving Taxes which would in any way adversely affect
the tax liability of the COMPANY or ATOWSUB following the
Merger in any taxable period; or
5.3.12 enter into any other transaction outside the Ordinary
Course of Business or prohibited hereunder.
5.4 No Shop. None of the Stockholders, COMPANY, any of the COMPANY's
Subsidiaries nor any agent, officer, director or any representative
of any of the foregoing will, during the period commencing on the
date of this Agreement and ending with the earlier to occur of the
Closing Date or the termination of this Agreement in accordance with
its terms, directly or indirectly:
5.4.1 solicit or initiate the submission of proposals or offers
from any person or,
5.4.2 participate in any discussions pertaining to; or
5.4.3 furnish any information to any person other than ATOW or
ATOWSUB relating to, any acquisition or purchase of all or
a material amount of the assets of, or any equity interest
in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
5.5 Notice to Bargaining Agents. The COMPANY shall satisfy any
requirement for notice of the transactions contemplated by this
Agreement under applicable collective bargaining agreements, and
shall provide ATOW with proof that any required notice has been sent.
5.6 Termination of Plans and Policies. The COMPANY shall terminate all
plans and policies listed in Schedule 5.6 of the Disclosure
Schedules.
30
5.7 Notification of Certain Matters.
5.7.1 The Stockholders and the COMPANY shall give prompt notice
to ATOW of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of the
COMPANY or the Stockholders contained herein to be untrue
or inaccurate in any material respect on or prior to the
Closing Date and (ii) any material failure of any
Stockholders or the COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by such person hereunder with respect to the
occurrence in the Ordinary Course of Business of any event
which would cause Schedules 3.11, 3.12 or 3.15 to be
incorrect.
5.7.2 ATOW and ATOWSUB shall give prompt notice to the COMPANY
of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to
cause any representation or warranty of ATOW and ATOWSUB
contained herein to be untrue or inaccurate in any
material respect at or prior to the Closing Date and (ii)
any material failure of ATOWSUB to comply with or satisfy
any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
5.7.3 The delivery of any notice pursuant to this Section 5.7
shall not be deemed to (i) modify the representations or
warranties hereunder of the Party delivering such notice,
which modification may only be made pursuant to Section
5.8; (ii) modify the conditions set forth in Sections 6
and 7; or (iii) limit or otherwise affect the remedies
available hereunder to the Party receiving such notice.
5.8 Amendment of Schedules. Each Party hereto agrees that, with respect
to the representations and warranties of such Party contained in this
Agreement, such Party shall have the continuing obligation until the
Closing to supplement or amend promptly the Schedules hereto with
respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been
required to be set forth or described in the Disclosure Schedules,
provided however, that supplements and amendments to Schedules 3.11,
3.12 and shall only have to be delivered at the Closing, unless such
Disclosure Schedule is to be amended to reflect an event occurring
other than in the Ordinary Course of Business. In the event that the
COMPANY amends or supplements a Disclosure Schedule pursuant to this
Section 5.8, and ATOW does not consent to the effectiveness of such
amendment or supplement at or before the Closing, this Agreement
shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. In the event that ATOW amends or supplements a
Disclosure Schedule pursuant to this Section 5.8 and COMPANY does not
consent to the effectiveness of such amendment or supplement at or
before the Closing, this Agreement shall be deemed terminated by
mutual consent as set forth in Section 10.1.4 hereof. For all
purposes of this Agreement, including without limitation for purposes
of determining whether the conditions set forth in Sections 6.1 and
7.1 have been fulfilled, the Disclosure Schedules hereto shall be
deemed to be the Disclosure Schedules as amended or supplemented
pursuant to this Section 5.8. If ATOW and the COMPANY do not consent
to the effectiveness of such amendment or supplement at or before the
Closing, this Agreement shall be deemed terminated by mutual consent
as set forth in Section 10.1.4 hereof. For purposes of this Section
5.8, ATOW shall be deemed to have given its consent to the
effectiveness of any amendment or supplement to a Disclosure Schedule
if ATOW does not notify COMPANY of its disapproval within 3 business
days after ATOW is notified of such amendment or supplement, and
COMPANY shall be deemed to have given its consent to the
effectiveness of any amendment or supplement to a Disclosure Schedule
if COMPANY does not notify ATOW of its disapproval within 3 business
days after COMPANY is notified of such amendment or supplement.
31
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY. The
obligations of the Stockholders and the COMPANY with respect to actions to
be taken on the Closing Date are subject to the satisfaction or waiver on
or prior to the Closing Date of the conditions set forth in Sections 6.1
and 6.5.
6.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of ATOW and ATOWSUB contained in
Section 6 shall be true and correct in all material respects as of
the Closing Date. Each and all of the terms, covenants and conditions
of this Agreement to be complied with and performed by ATOW and
ATOWSUB on or before the Closing Date shall have been duly complied
with and performed in all material respects; and a certificate to the
foregoing effect dated the Closing Date and signed by the President
or any Vice President of ATOW shall have been delivered to the
Stockholders.
6.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all
other related legal matters shall be satisfactory to the COMPANY and
its counsel.
6.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of the COMPANY
as a result of which the management of the COMPANY deems it
inadvisable to proceed with the transactions hereunder.
6.4 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of
the transaction contemplated herein shall have been obtained and made
and no action or proceeding shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of COMPANY as a
result of which COMPANY deems it inadvisable to proceed with the
transactions hereunder.
32
6.5 No Material Adverse Change. No event or circumstance shall have
occurred which would constitute a ATOW or ATOWSUB Material Adverse
Effect; and the COMPANY shall have received a certificate signed by
ATOW dated the Closing Date.
6.6 Employment Agreements, Consulting Agreements and Leases. ATOW or
ATOWSUB shall have entered the Employment Agreements, Consulting
Agreements and Leases.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ATOW and ATOWSUB. The obligations of
ATOW and ATOWSUB with respect to actions to be taken on the Closing Date
are subject to the satisfaction or waiver on or prior to the Closing Date
of the conditions set forth in Sections 7.1 and 7.4.
7.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the Stockholders and the COMPANY
contained in this Agreement shall be true and correct in all material
respects as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date;
each and all of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Stockholders and the COMPANY
on or before the Closing Date shall have been duly performed or
complied with in all material respects; and the Stockholders shall
have delivered to ATOW a certificate dated the Closing Date and
signed by them to such effect.
7.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body
shall have taken any other action or made any request of ATOW or
ATOWSUB as a result of which the management of ATOW deems it
inadvisable to proceed with the transactions hereunder.
7.3 Examination of Final Financial Statements. Prior to the Closing Date,
ATOW shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY for the fiscal quarters
beginning after the Balance Sheet Date, and the unaudited
consolidated combined statement of income, cash flows and retained
earnings of the COMPANY for the fiscal quarters beginning after the
Balance Sheet Date, disclosing no Material Adverse Change in the
combined financial condition of the COMPANY or the results of their
operations from the financial statements as of the Balance Sheet
Date.
7.4 No Material Adverse Effect. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and ATOW
shall have received a certificate signed by the Stockholders dated
prior to the Closing Date to such effect.
33
7.5 Stockholders' Release. The Stockholders shall have delivered to ATOW
immediately prior to the Closing Date an instrument releasing the
COMPANY from any and all claims of the Stockholders against the
COMPANY and obligations of the COMPANY to the Stockholders, excluding
liability for certain vehicles for which ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ holds a valid
lien.
7.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement
or incidental hereto and all other related legal matters shall have
been approved by counsel to ATOW.
7.7 Termination of Related Party Agreements. All existing agreements
between the COMPANY and the Stockholders or business or personal
affiliates of the COMPANY or Stockholders, other than those set forth
on Schedule 7.7 of the Disclosure Schedules shall have been
cancelled.
7.8 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of
the transactions contemplated herein shall have been obtained and
made; the COMPANY shall have obtained and delivered to ATOW such
additional consents to the Merger as ATOW may reasonably request
including, without limitation, ATOW's receipt on or prior to the
Closing Date of those licenses, franchises, permits or governmental
authorizations set forth on Schedule 3.11 of the Disclosure Schedules
pursuant to Section 3.11, or assurances reasonably acceptable to it
that such licenses, franchises, permits or governmental
authorizations will be received on the Closing Date or that the
failure to receive such licenses, franchises, permits or governmental
authorizations on the Closing Date will not adversely affect its
ability to conduct the business of the COMPANY as conducted prior to
the Closing Date; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the Merger and no
governmental agency or body shall have taken any other action or made
any request of ATOW or ATOWSUB as a result of which ATOW deems it
inadvisable to proceed with the transactions hereunder.
7.9 Good Standing Certificates. The COMPANY shall have delivered to ATOW
a certificate, dated as of a date no later than five (5) days prior
to the Closing Date, duly issued by the appropriate governmental
authority in the COMPANY's state of incorporation and, unless waived
by ATOW, in each state in which the COMPANY is authorized to do
business, showing the COMPANY is in good standing and authorized to
do business and that all state franchise and/or income Tax Returns
and Taxes due by the COMPANY for all periods prior to the Closing
have been filed and paid. 1-800-AutoTow waives this provision.
34
7.10 Employment Agreements, Consulting Agreements and Leases. Each of the
persons listed on Schedule 7.10(a) of the Disclosure Schedule shall
have entered into an employment agreement with ATOWSUB substantially
in the form of Exhibit 7.10(a) (each an "Employment Agreement"), each
of person listed on Schedule 7.10(b) shall have entered into a
consulting agreement with ATOWSUB substantially in the form of
Exhibit 7.10(b) (each a "Consulting Agreement"), and each of the
Stockholders listed on Schedule 7.10(c) shall have entered into
leases with ATOWSUB substantially in the form attached Exhibit
7.10(c) (collectively the "Leases").
7.11 Repayment of Indebtedness. Prior to the Closing Date, the
Stockholders shall have repaid the COMPANY, including the COMPANY's
Subsidiaries, in full all amounts owing by the Stockholders to the
COMPANY, including the COMPANY's Subsidiaries.
7.12 Insurance. ATOW and ATOWSUB shall be named as additional named
insured on, or alternatively the insurer shall have been notified of
the Merger and shall have confirmed in writing that the Surviving
Corporation will be an insured under, each of the COMPANY's insurance
policies.
8. POST-CLOSING COVENANTS AND SPECIAL TAX MATTERS.
8.1 Tax Returns. The Stockholders shall be responsible for preparing and
filing all income or franchise Tax Returns of the COMPANY relating to
periods of time prior to the Closing Date. ATOWSUB will be
responsible for preparing and filing all income and franchise Tax
Returns of the COMPANY relating to periods after the Closing. After
the Closing, ATOWSUB will provide, or cause to be provided, to the
Stockholders, without charge, any information that may reasonably be
requested by the Stockholders in connection with the preparation of
any Tax Returns relating to the time period prior to the Closing
Date. The Stockholders will provide ATOWSUB and ATOW with an
opportunity to review and comment on such Tax Returns (including any
amended returns). The Stockholders will take no positions on the Tax
Returns of the COMPANY that relate to the tax period prior to the
Closing Date that could adversely affect the COMPANY after the
Closing. The income of the COMPANY will be apportioned to the period
up to the Closing Date and the period from and after the Closing Date
in accordance with the provisions of Section 1362(e)(6)(D) of the
Code by closing the books of the COMPANY as of the close of business
on the last calendar day immediately preceding the Closing Date.
8.2 Release from Guarantees. Shareholders shall be released from all
personal guarantees on or before September 30, 1999. ATOW shall have
the Stockholders released from any and all guarantees on any
obligations of the COMPANY that they have personally guaranteed for
the benefit of the COMPANY (including the COMPANY's Subsidiaries),
with all such guarantees on indebtedness being paid or assumed by
ATOWSUB.
35
9. INDEMNIFICATION.
The Stockholders and ATOWSUB each make the following covenants that are
applicable to them, respectively:
9.1 General Indemnification by the Stockholders. The Stockholders
covenant and agree that they, jointly and severally will indemnify,
defend, protect and hold harmless ATOWSUB, the COMPANY and the
Surviving Corporation at all times from and after the date of this
Agreement from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by ATOWSUB,
the COMPANY or the Surviving Corporation as a result of or arising
from (i) any breach of the representations and warranties of the
Stockholders or the COMPANY set forth herein or on the schedules,
exhibits or certificates delivered in connection herewith or (ii)
any nonfulfillment of any agreement on the part of the Stockholders
or the COMPANY under this Agreement.
9.2 Indemnification by ATOWSUB. ATOWSUB covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the
Stockholders at all times from and after the date of this Agreement
from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by the COMPANY and the
Stockholders as a result of or arising from (i) any breach by ATOWSUB
of its representations and warranties set forth herein or on the
schedules, exhibits or certificates delivered herewith; (ii) any
nonfulfillment of any agreement on the part of ATOWSUB under this
Agreement; (iii) any liabilities which the COMPANY or the
Stockholders may incur due to ATOWSUB's failure to be responsible for
the liabilities and obligations of the COMPANY (except to the extent
that ATOWSUB has claims against the Stockholders by reason of such
liabilities). ATOWSUB shall pay down all corporate debts which are
personally guaranteed by Shareholders by 30% within ten (10) business
days after Closing.
9.3 Third Person Claims. If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
the other Party (the "Indemnifying Party") under this Section 9, then
the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of
the Indemnified Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
9.3.1 Defense by Indemnifying Party. The Indemnifying Party will
have the right to defend the Indemnified Party against the
Third Party Claim with counsel of its choice satisfactory
to the Indemnified Party so long as: (i) the Indemnifying
Party notifies the Indemnified Party in writing within
five (5) business days after the Indemnified Party has
given notice of the Third Party Claim that the
36
Indemnifying Party will indemnify the Indemnified Party
from and against any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim;
(ii) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and
fulfill the Indemnifying Party's indemnification
obligations hereunder; (iii) the Third Party Claim
involves only money damages and does not seek an
injunction or other equitable relief; (iv) settlement of,
or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential
custom of practice adverse to the continuing business
interests of the Indemnified Party; and (v) the
Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
9.3.2 Settlement. So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in
accordance with Section 9.3.1: (i) the Indemnified Party
may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party
Claim; (ii) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld or
delayed unreasonably); and (iii) the Indemnifying Party
will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party
(not to be withheld or delayed unreasonably) and any such
settlement must include a complete release of the
Indemnified Party.
9.3.3 Conditions. In the event any of the conditions in Section
9.3.1 is or becomes unsatisfied, however: (i) the
Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith); (ii) the
Indemnifying Parties will reimburse the Indemnified Party
promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable
attorneys' fees and expenses); and (iii) the Indemnifying
Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 9.
37
9.4 Exclusive Remedy. The indemnification provided for in this Section 9
shall be the exclusive remedy in any action seeking damages or any
other form of monetary relief brought by any party to this Agreement
against another party, provided that nothing herein shall be
construed to limit the right of a party, in a proper case, to seek
injunctive relief for a breach of this Agreement.
9.5 Minimum Indemnification. ATOW and ATOWSUB shall not be entitled to
any indemnification pursuant to Section 9.1, and the Stockholders
shall not be entitled to any indemnification pursuant to Section 9.2,
unless the Adverse Consequences, which occur or are incurred by the
applicable Party, exceed, in the aggregate, [THIRTY THOUSAND AND
NO/100 DOLLARS ($30,000.00)]; provided, however, if such sum does
exceed [THIRTY THOUSAND AND NO/100 DOLLARS ($30,000.00)], the amount
of the indemnification shall include such [THIRTY THOUSAND AND NO/100
DOLLARS ($30,000.00)].
9.6 Special Contest Rights Related to Tax Matters. The Stockholders shall
have the sole right (but not the obligation) to control, defend,
settle, compromise or prosecute in any manner any audit, examination,
investigation, hearing or other proceeding with respect to any Tax
Return of the COMPANY involving only periods prior to the Closing.
The Stockholders shall not agree to compromise or settle any
proceeding with respect to any Tax Return of the COMPANY which will
impact any period subsequent to the Closing without the consent of
ATOW. Except as expressly provided to the contrary in this Section
9.6, ATOWSUB shall have the sole right (but not the obligation) to
control, defend, settle, compromise, or prosecute in any manner an
audit, examination, investigation, hearing or other proceeding with
respect to any Tax Return of the COMPANY.
9.7 Special Notification Requirements Regarding Tax Disputes. ATOWSUB and
the COMPANY shall promptly forward to the Stockholders all written
notifications and other written communications from any tax authority
received by ATOWSUB or the COMPANY relating solely to any periods
prior to the Closing of the COMPANY, and ATOWSUB and the COMPANY
shall execute or cause to be executed any power of attorney or other
document or take such actions as requested by the Stockholders to
enable the Stockholders to take any action Stockholders deem
appropriate with respect to any proceedings relating thereto.
9.8 Refunds. A Party receiving a refund, credit or similar offset (or the
benefit thereof) with respect to Tax effectively paid by another
party shall immediately pay an amount equal to such refund, credit,
offset or benefit (including any interest thereon) to the party that
effectively paid the Tax with respect to which the refund, credit,
offset or benefit relates. A Party entitled to a deduction on account
of a Tax effectively paid by another party shall pay an amount equal
to any Taxes saved by reason of such deduction to the party that
effectively bore the economic cost of the Tax with respect to which
such deduction relates, such amount to be paid immediately after such
saving is realized.
9.9 Optional Payment With Shares. Any Stockholders may make any payment
to ATOW required by this Section 9 by tendering shares of ATOW Shares
obtained by such Stockholders pursuant to Section 2 of this
38
Agreement, with shares so tendered being valued at fair market value
on the trading day prior to the day the indemnification obligation is
paid. No Stockholders will be entitled to make payment with any other
shares of ATOW Shares.
10. TERMINATION OF AGREEMENT.
10.1 This Agreement may be terminated and the transactions herein
contemplated may be abandoned at any time prior to the Closing,
without liability to either Party unless termination occurs as a
result of a breach of a representation or warranty:
10.1.1 by mutual consent of the boards of directors of ATOW,
ATOWSUB and the COMPANY;
10.1.2 at or before the Closing, by the Stockholders or COMPANY,
on the one hand, or by ATOW, ATOWSUB, on the other hand,
if the Closing has not been completed by July 31, 1999,
time being of the essence, unless the failure of such
completion is due to the willful failure of the Party
seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to
be performed by it prior to or on the Closing Date;
10.1.3 at or before the Closing, by the Stockholders or COMPANY,
on the one hand, or by ATOW, ATOWSUB, on the other hand,
if a material breach or default shall be made by the other
in the observance or in the due and timely performance of
any of the covenants, agreements or conditions contained
herein, and such default shall not have been cured and
shall not reasonably be expected to be cured on or before
the Closing Date;
10.1.4 at or before the Closing, pursuant to Section 5.8.
11. NONCOMPETITION.
11.1 Prohibited Activities. The Stockholders shall enter into a
non-competition agreement. ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall enter into an
agreement in the form of 11 A attached hereto. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall
enter into an employment contract with ATOW which shall set forth the
applicable terms and conditions of the non-competition agreement
therein.
11.2 Damages. Because of the difficulty of measuring economic losses to
ATOW or ATOWSUB as a result of a breach of the foregoing covenant,
and because of the immediate and irreparable damage that could be
caused to ATOW and/or ATOWSUB for which it would have no other
adequate remedy, each Stockholders agrees that the foregoing covenant
may be enforced by ATOW or ATOWSUB, in the event of breach by such
Stockholders, by injunctions and restraining orders.
39
11.3 Reasonable Restraint. It is agreed by the Parties hereto that the
foregoing covenants in this Section 11 impose a reasonable restraint
on the Stockholders in light of the activities and business of
ATOWSUB on the date of the execution of this Agreement and the
current plans of ATOW and ATOWSUB; but it is also the intent of ATOW,
ATOWSUB and the Stockholders that such covenants be construed and
enforced in accordance with the changing activities and business of
ATOWSUB throughout the term of this covenant.
It is further agreed by the Parties hereto that, in the event that
any Stockholders who has entered into an Employment Agreement shall
thereafter cease to be employed thereunder, and such Stockholders
shall enter into a business or pursue other activities not in
competition with ATOWSUB and/or any subsidiary thereof, or similar
activities or business in locations the operation of which, under
such circumstances, does not violate clause Section 11.1.1 , and in
any event such new business, activities or location are not in
violation of this Section 11 or of such Stockholders's obligations
under this Section 11, if any, such Stockholders shall not be
chargeable with a violation of this Section 11 if ATOW or ATOWSUB
shall thereafter enter the same, similar or a competitive (i)
business, (ii) course of activities or (iii) location, as applicable.
11.4 Severability; Reformation. The covenants in this Section 11 are
severable and separate, and the unenforceability of any specific
covenant shall not affect the provisions of any other covenant.
Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth
are unreasonable, then it is the intention of the Parties that such
restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
11.5 Independent Covenant. All of the covenants in this Section 11 shall
be construed as an agreement independent of any other provision in
this Agreement, and the existence of any claim or cause of action of
any Stockholders against ATOWSUB whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by
ATOWSUB of such covenants. It is specifically agreed that the period
of five (5) years stated at the beginning of this Section 11, during
which the agreements and covenants of each Stockholders made in this
Section 11 shall be effective, shall be computed by excluding from
such computation any time during which such Stockholders is in
violation of any provision of this Section 11. The covenants
contained in this Section 11 shall not be affected by any breach of
any other provision hereof by any Party hereto, except that upon
ATOWSUB's admission in writing, or a final judicial determination
which is not the subject of appeal or further appeal by ATOWSUB, that
ATOWSUB has materially breached a Stockholders's Employment Agreement
(if applicable), and ATOWSUB's failure to cure such material breach
within 30 days of such admission or final judicial determination,
whichever is applicable, then the covenants contained in this Section
11 with respect to such Stockholders will expire. The covenants
contained in this Section 11 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
40
11.6 Materiality. The COMPANY and the Stockholders hereby agree that this
covenant is a material and substantial part of this transaction.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
12.1 Stockholders. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have,
access to certain confidential information of the COMPANY, ATOW
and/or ATOWSUB, such as lists of customers, operational policies, and
pricing and cost policies that are valuable, special and unique
assets of the COMPANY's, ATOW's and/or ATOWSUB's respective
businesses. The Stockholders agree that they will not disclose such
confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of ATOWSUB, (b) following
the Closing Date, as required in the course of performing their
duties for ATOWSUB, and (c) to counsel and other advisers, provided
that such advisers (other than counsel) agree to the confidentiality
provisions of this Section 12.1; provided, further, that confidential
information shall not include (i) such information which becomes
known to the public generally through no fault of the Stockholders,
(ii) information required to be disclosed by law or the order of any
governmental authority, provided that prior to disclosing any
information pursuant to this clause (ii), the Stockholders shall, if
possible, give prior written notice thereof to ATOWSUB and provide
ATOWSUB with the opportunity to contest such disclosure, or (iii) the
disclosing Party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing
Party. In the event of a breach or threatened breach by any of the
Stockholders of the provisions of this section, ATOW and ATOWSUB
shall be entitled to an injunction restraining such Stockholders from
disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting ATOW and ATOWSUB
from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
12.2 ATOW and ATOWSUB. ATOW and ATOWSUB recognize and acknowledge that it
had in the past and currently has access to certain confidential
information of the COMPANY, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special
and unique assets of the COMPANY's business. ATOW and ATOWSUB agree
that, prior to the Closing, they will not disclose such confidential
information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except (a) to authorized
representatives of the COMPANY, (b) to counsel and other advisers,
provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 12.2, unless (i) such
information becomes known to the public generally through no fault of
ATOW or ATOWSUB (ii) disclosure is required by law or the order of
any governmental authority, provided that prior to disclosing any
information pursuant to this clause (ii), ATOW and ATOWSUB shall, if
possible, give prior written notice thereof to the COMPANY and the
Stockholders and provide the COMPANY and the Stockholders with the
opportunity to contest such disclosure, or (iii) the disclosing Party
reasonably believes that such disclosure is required in connection
with the defense of a lawsuit against the disclosing Party. Upon
termination of this Agreement prior to the Closing Date for any
reason other than the material breach or default of any Stockholders
or COMPANY, ATOW and ATOWSUB will return to COMPANY all documents
containing confidential information of COMPANY that were provided to
ATOW or ATOWSUB by COMPANY or Stockholders and all summaries,
abstractions, projections, pro formas or like material prepared by
ATOW or ATOWSUB incorporating such confidential information. In the
event of a breach or threatened breach by ATOW or ATOWSUB of the
provisions of this section, the COMPANY and the Stockholders shall be
entitled to an injunction restraining ATOW and ATOWSUB from
disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting the COMPANY and the
Stockholders from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
41
12.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 12.1 and
12.2, and because of the immediate and irreparable damage that would
be caused for which they would have no other adequate remedy, the
Parties hereto agree that, in the event of a breach by any of them of
the foregoing covenants, the covenant may be enforced against the
other parties by injunctions and restraining orders.
12.4 Survival. The obligations of the Parties under this Article 12 shall
survive the termination of this Agreement.
13. TRANSFER RESTRICTIONS.
13.1 Transfer Restrictions. Except for transfers as set forth in Section
13.2 below to persons or entities who agree to be bound by the
restrictions set forth in this Section 13.1, for a period of one year
from the Closing Date none of the Stockholders shall (i) sell,
assign, exchange, transfer, encumber, pledge, distribute, appoint, or
otherwise dispose of (a) any ATOW Shares received by the Stockholders
in the Merger, or (b) any interest (including, without limitation, an
option to buy or sell) in any such ATOW Shares, in whole or in part,
and no such attempted transfer shall be treated as effective for any
purpose; or (ii) engage in any transaction, whether or not with
respect to any ATOW Shares or any interest therein, the intent or
effect of which is to reduce the risk of owning the ATOW Shares
acquired pursuant to Section 2 hereof (including, by way of example
and not limitation, engaging in put, call, short-sale, straddle or
similar market transactions). The certificates evidencing the ATOW
Shares delivered to the Stockholders pursuant to Section 2 of this
Agreement will bear a legend substantially in the form set forth
below and containing such other information as ATOW may deem
necessary or appropriate:
42
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE SECURITIES MAY NOT BE SOLD, OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED WITHOUT ONE OF THE FOLLOWING:
(i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURTIES
ACT, OR
(ii) AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
The restrictions set forth herein shall not pertain to the transfers
set forth in Section 2.13.1.2 above.
13.2 Permitted Transferees. Notwithstanding the provisions of Section
13.1, a Stockholders shall have the right to transfer some or all of
the ATOW shares to any one or more of the following, provided that
the transferee agrees to be bound (in a form satisfactory to ATOW and
its counsel) by the terms and conditions of this Agreement with
respect to any further transfer of such shares: (i) any family member
of a Stockholders (including, without limitation, any transfer to a
custodian under any gift to minors statute), with family members
being defined as any spouse, lineal descendant or ancestor of a
Stockholders), (ii) any trust which is for the benefit of one or more
family members of a Stockholders and (iii) any corporation,
partnership, limited liability COMPANY or other entity (a) of which a
majority of the interests therein by value is owned by the
Stockholders and members of the Stockholders's family, and (b) which
is and continues to be controlled by the Stockholders and members of
the Stockholders's family for the period set forth in Section 13.1.
14. FEDERAL SECURITIES ACT REPRESENTATIONS.
The Stockholders acknowledge that the ATOW Shares to be delivered to the
Stockholders pursuant to this Agreement have not been and will not be
registered under the Securities Act and therefore may not be resold without
compliance with the Securities Act. The ATOW Shares to be acquired by such
Stockholders pursuant to this Agreement is being acquired solely for their
own respective accounts, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
14.1 Compliance with Law. The Stockholders covenant, warrant and represent
that none of the ATOW Shares issued to such Stockholders will be
offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of except after full compliance with all of the
applicable provisions of the Securities Act and the rules and
regulations of the Commission. All the ATOW Shares shall bear the
following legend in addition to the legend required under Section 13
of this Agreement:
43
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "1933 ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THE 1933 ACT AND APPLICABLE SECURITIES
LAWS.
14.2 Accredited Investors; Economic Risk; Sophistication. Each
Stockholders represents and warrants that such Stockholders is an
"accredited investor," as that term is defined in Regulation D
promulgated by the Commission under the Securities Act. The
Stockholders are able to bear the economic risk of an investment in
the ATOW Shares acquired pursuant to this Agreement and can afford to
sustain a total loss of such investment and have such knowledge and
experience in financial and business matters that they are capable of
evaluating the merits and risks of the proposed investment in the
ATOW Shares. The Stockholders or their respective purchaser
representatives have had an adequate opportunity to ask questions and
receive answers from the officers of ATOW and ATOWSUB concerning any
and all matters relating to the transactions described herein
including, without limitation, the background and experience of the
current and proposed officers and directors of ATOW and ATOWSUB, the
plans for the operations of the business of ATOW and ATOWSUB, the
business, operations and financial condition of the COMPANY, and any
plans for additional acquisitions and the like.
15. GENERAL.
15.1 Cooperation. The COMPANY, Stockholders, ATOW and ATOWSUB shall each
(i) attempt in good faith (without being required to incur
unreasonable expense) to cause all conditions to actions to be taken
on the Closing Date to be satisfied, and (ii) deliver or cause to be
delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional
instruments, and take such additional actions as can be taken without
unreasonable expense, as any other may reasonably request for the
purpose of carrying out this Agreement. The COMPANY will cooperate
and use its reasonable efforts to have the present officers,
directors and employees of the COMPANY cooperate with ATOWSUB on and
after the Closing Date in furnishing information, evidence, testimony
and other assistance in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
15.2 Successors and Assigns. This Agreement and the rights of the Parties
hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the Parties hereto,
the successors of ATOWSUB, and the heirs and legal representatives of
the Stockholders.
15.3 Entire Agreement. This Agreement including the Disclosure Schedules,
Exhibits, Certificates and Annexes delivered herewith and the
documents delivered pursuant hereto constitute the entire agreement
and understanding among the Stockholders, the COMPANY, ATOW and
ATOWSUB and supersede any prior agreement and understanding relating
to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the Parties
hereto enforceable in accordance with its terms. Except as otherwise
stated herein, this Agreement, Disclosure Schedules, Exhibits,
44
Certificates and the Annexes hereto may be modified or amended only
by a written instrument executed by the Stockholders, the COMPANY,
ATOW and ATOWSUB, acting through their respective officers, duly
authorized by their respective Boards of Directors. Any disclosure
made on any schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other schedule required
hereby.
15.4 Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original
and all of which together shall constitute but one and the same
instrument.
15.5 Brokers and Agents. Each Party represents and warrants that it
employed no broker or agent in connection with this transaction and
agrees to indemnify the other against all loss, cost, damages or
expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by such Indemnifying Party.
15.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, (i) ATOWSUB will pay the fees, expenses and
disbursements of ATOWSUB and its agents, representatives, accountants
and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto, including all costs and
expenses incurred in the performance and compliance with all
conditions to be performed by ATOWSUB under this Agreement, and (ii)
the Stockholders will pay from personal funds and not from COMPANY
funds, the fees, expenses and disbursements of their counsel and
accountants for the Stockholders and the COMPANY incurred in
connection with the subject matter of this Agreement. The
Stockholders shall pay all sales, use, transfer, recording, gains,
stock transfer and other similar taxes and fees incurred in
connection with the transactions contemplated by this Agreement. The
Stockholders shall file all necessary documentation and Tax Returns
with respect to such Taxes. In addition, each Stockholders
acknowledges that he, and not the COMPANY or ATOWSUB, will pay all
Taxes due upon receipt of the consideration payable to such
Stockholders pursuant to Section 2 hereof. Notwithstanding the
foregoing, any of the above fees, expenses or disbursements fairly
attributable to the COMPANY but payable by the Stockholders and
incurred prior to the Closing may be paid from COMPANY funds rather
than from personal funds of the Stockholders, provided that the
Stockholders provide to ATOWSUB, prior to the Closing, a detailed
statement setting forth the type and amount of all such fees,
expenses or disbursements so paid, and, provided further, that the
aggregate amount of same shall be deducted, on a dollar-for-dollar
basis, from the amount of cash into which the COMPANY Stock shall be
converted pursuant to Section 2.13.1.4 hereof.
15.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be given by depositing the same
45
in United States mail, addressed to the party to be notified, postage
prepaid and registered or certified with return receipt requested, or
by delivering the same in person to such party (in the case of a
Stockholders) or to an officer, general partner, member or trustee of
such party (in the case of parties other than Stockholders).
(a) If mailed to ATOW addressed to it at:
1-800-AutoTow, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
(b) If mailed to ATOWSUB addressed to it at:
1-800-AutoTow, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
with copies to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III, PA
▇▇▇ ▇.▇. ▇▇▇ ▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III, Esq.
(c) If mailed to the Stockholders, addressed to them at their addresses set
forth on Annex I, with copies to such counsel as is set forth with
respect to each Stockholders on such Annex I;
(d) If mailed to the COMPANY, addressed to it at:
and marked "Personal and Confidential" with copies to:
or to such other address or counsel as any Party hereto shall specify pursuant
to this Section 15.7 from time to time. Notices mailed as specified above will
be effective upon delivery to the specified address; notices by personal
delivery will be effective upon actual receipt by the Party or an officer,
general partner, member or trustee of the Party, as applicable.
15.8 Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida,
without giving effect to laws concerning choice of law or conflicts
of law. All disputes arising out of this Agreement or the obligations
of the Parties hereunder, including disputes that may arise following
termination of this Agreement, shall be resolved by arbitration in
accordance with the Commercial Rules of the American Arbitration
Association. Arbitration venue shall be Miami, Florida where judgment
upon the award rendered by the Arbitrator(s) may be entered by a
court of competent jurisdiction.
46
15.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the Parties made herein, or
in writing delivered pursuant to the provisions of this Agreement
shall survive the consummation of the transactions contemplated
hereby and any examination on behalf of the Parties.
15.10 Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy
accruing to any Party as a result of any breach or default by any
other Party under this Agreement shall impair any such right, power,
or remedy, nor shall it be construed as a waiver of or acquiescence
in any such breach or default, or of any similar breach or default
occurring later; nor shall any waiver of any single breach or default
be deemed a waiver of any other breach or default occurring before or
after that waiver.
15.11 Time. Time is of the essence with respect to this Agreement.
15.12 Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the
Parties, and if such modification is not possible, such provision
shall be severed from this Agreement, and in either case the
validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
15.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at
law or in equity.
15.14 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or
be used to construe or interpret any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
WITNESS: 1-800-AUTOTOW, INC.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------- ----------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
WITNESS: 1-800-AUTOTOW GULF COAST EAST, INC.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------- ----------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Treasurer
WITNESS: L&W COLLISION, TOWING &
RECOVERY, INC.
/s/ JZE /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------- ----------------------
JZE ▇▇▇▇ ▇▇▇▇▇▇▇
President
WITNESS: Stockholder:
/s/ JZE /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------- ----------------------
JZE ▇▇▇▇▇ ▇▇▇▇▇▇▇
WITNESS: Stockholder:
/s/ JZE /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------- ----------------------
JZE ▇▇▇▇ ▇▇▇▇▇▇▇
47