STOCK FOR STOCK AGREEMENT
THIS STOCK FOR STOCK AGREEMENT (this "Agreement"), dated
December 29, 2000, is made by and between AUTOMOTIVE DISPOSITION MANAGEMENT
SERVICES, INC., an Arizona corporation ("ADM") and AUTO TRADECENTER.COM INC., an
Arizona corporation ("ATC").
STOCK FOR STOCK
1.1 ADM wishes to acquire from ATC all of its right, title and interest
in the following (hereinafter, each a "Subsidiary" and all collectively,
"Subsidiaries"): Auto Network Group of New Mexico, Inc., a New Mexico
corporation (ATC owns 100% of the issued and outstanding stock); Auto Network
Group Northwest, Inc., an Oregon corporation (ATC owns 100% of the issued and
outstanding stock); Auto Group Management, L.C., a Texas limited liability
company (ATC is the sole member and managing member); and Auto Group of San
Antonio Ltd., a Texas limited partnership (ATC is the sole limited partner, and
the sole general partner is Auto Group Management L.C.).
1.2 ATC is willing to sell, transfer and assign all of its right, title
and interest in and to the Subsidiaries, in exchange for an interest in ADM.
1.3 At the Closing (as hereinafter defined) and in the manner herein
provided, ADM shall issue and deliver shares of stock in ADM representing a
sixteen percent (16%) interest in ADM, on a fully diluted basis (hereinafter
collectively called the "ADM Shares") to ATC, and ATC shall transfer, assign and
deliver all of its stock, member and partnership interests in the Subsidiaries
to ADM (hereinafter collectively called the "ATC Interests").
REPRESENTATIONS AND WARRANTIES OF ATC
ATC hereby represents and warrants to ADM as follows:
2.1 The Subsidiaries are duly organized, validly existing and in good
standing under the laws of the State in which they operate, with all requisite
power and authority to carry on their business as is now being conducted and to
own, operate and lease their properties and assets. The Subsidiaries have all
Federal, state and local licenses, permits or other approvals required for the
operation of their businesses as now being conducted.
2.2 Ownership in each of the Subsidiaries, the ATC Interests, is free
and clear of all encumbrances or claims. There are no issued and outstanding
options, warrants, rights, securities, contracts, commitments, understandings or
arrangements.
2.3 ATC has full power and authority to enter into this Agreement and
to carry out the transactions contemplated hereby.
2.4 Except as set forth herein, ATC is not subject to or obligated
under any article of incorporation, bylaw, law, rule or regulation of any
governmental authority, or any agreement or
instrument, or any license, franchise or permit, or subject to any order, writ,
injunction or decree, which would be breached or violated (or would require
notice, consent or approval) by its execution, delivery and performance of this
Agreement. ATC will comply with all applicable laws, and with all applicable
rules and regulations of all governmental authorities, in connection with the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
2.5 ATC has delivered statements of financial position and statements
of income and retained earnings for the Subsidiaries to ADM. To the best of
ATC's knowledge, all such statements are complete and accurate and fairly
present the financial position at the dates, and the results of operations for
the periods, therein referred to.
2.6 Except for (a) liabilities fully reflected or reserved against on
the balance sheet, and (b) regular or usual liabilities and obligations incurred
in the ordinary course of business consistent with past practices, to the best
of ATC's knowledge, the Subsidiaries have no liabilities, obligations or claims.
2.7 Since the financial statement date and except as contemplated by
this Agreement, there has not been (a) any adverse change in the business,
prospects, condition (financial or otherwise) or operations of the Subsidiaries'
business or assets taken as a whole; (b) any declaration, setting aside or
payment of any dividend or distribution, whether in cash, stock or property in
respect of the Subsidiaries' capital stock, or any redemption, purchase or other
acquisition of such stock by the Subsidiaries; (c) any increase (whether
implemented, approved or promised) in the base compensation, bonus, commission,
insurance, benefit programs or any other component of compensation payable or to
become payable by the Subsidiaries to its shareholders, directors, officers,
employees, agents or brokers; or any extraordinary compensation or bonus paid by
the Subsidiaries; (d) any entry by the Subsidiaries into any material
commitment, borrowing or transaction; (e) any change by the Subsidiaries in
accounting methods, practices or principles; (f) any adoption of any statute,
rule, regulation or order which adversely affects the Subsidiaries; (g) any
termination or waiver of any rights of material value to the business of the
Subsidiaries or (h) any other transactions or event other than in the ordinary
course of the Subsidiaries business.
2.8 The Subsidiaries are not in default or alleged to be in default
under any material contract nor is ATC aware of any default by any other party,
and there exists no event, condition or occurrence which would constitute a
default under any material contract.
2.9 The Subsidiaries have good and marketable title to all of the
properties and assets reflected in the balance sheet or acquired after the date
thereof (except properties sold or otherwise disposed of since the date thereof
in the ordinary course of business consistent with past practices) free and
clear of all mortgages, security interests, liens, pledges, claims, escrows,
options, rights of first refusal, indentures, easements, licenses, security
agreements or other agreements, arrangements, contracts, commitments,
understandings, obligations, royalties, charges or encumbrances of any kind or
character, except as reflected in the financial statements.
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2.10 There are no suit, action, investigation or proceeding pending,
nor any demand for collective bargaining, nor, to the knowledge of ATC, have any
of the foregoing been threatened against the Subsidiaries which, if adversely
determined, would adversely affect the business, prospects, operations,
properties or the condition (financial or otherwise) of the Subsidiaries, nor is
there any judgment, decree injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against Subsidiaries having, or which, insofar as can be reasonably foreseen, in
the future may have, any such effect.
2.11 All taxes arising under the Internal Revenue Code, as amended, or
any laws, rules, regulations or orders promulgated thereunder, or arising under
any Federal, state, local or foreign laws, rules, regulations or orders
(collectively "Taxes"), due and payable by the Subsidiaries have been timely
reported and paid; all Taxes not yet due have been fully accrued on the books of
the Subsidiaries and adequate reserves have been established therefore; there
are no unpaid assessments for additional Taxes for any fiscal period nor is
there any material basis therefor not provided for in said financial statements.
REPRESENTATIONS AND WARRANTIES OF ADM
ADM represents and warrants to ATC as follows:
3 .1 ADM is a corporation duly organized, validly existing and in good
standing under the laws of the State of Arizona.
3.2 As of the date of this Agreement, ADM has authorized capital stock
consisting of 1,000 shares of Common Stock, no par value, and 1,000 shares of
Preferred Stock, no par value, of which 84 shares of Common Stock are issued and
outstanding.
3.3 ADM has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
3.4 ADM is not subject to or obligated under any article of
incorporation, bylaw, law, rule or regulation of any governmental authority, or
any agreement or instrument, or any license, franchise or permit, or subject to
any order, writ, injunction or decree, which would be breached or violated by
its execution, delivery or performance of this Agreement. ADM will comply with
all applicable laws, and with all applicable rules and regulations of any
governmental authority, in connection with its execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
COVENANTS OF ATC
From the date hereof and until the Closing, except as otherwise
consented to or approved by ADM in writing, ATC covenants and agrees (and will
cause the Subsidiaries to act or refrain from acting where required hereinafter)
as follows:
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4.1 The Subsidiaries will operate their businesses diligently, in good
faith, and with reasonable business prudence consistent with past management
practices; will not incur, assume or guarantee any indebtedness (except for
trade payables in the ordinary course of business) and will not enter into any
material transaction or make any material commitment; will not pay or agree to
pay any dividends or bonuses and will make no changes to its organization or
corporate or capital structure; will maintain all of its properties in customary
repair, order and condition, reasonable wear and tear excepted; will maintain
(except for expiration due to lapse of time) all leases and contracts described
herein in effect without change; will comply with the provisions of all laws,
regulations, ordinances and judicial decrees applicable to the conduct of its
business; will not cancel, release, waive or compromise any debts, claims or
rights in its favor having a value, in the aggregate, in excess of $1,000 other
than in connection with returns for credit or replacement in the ordinary course
of business; and will maintain all the Subsidiaries' insurance coverage
currently in existence.
4.2 ATC represents that he has not retained any consultant, broker or
finder in connection with this transaction. ATC agrees to indemnify and hold ADM
harmless against any claim or liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated herein, except to
the extent that such liability arose from the acts of ADM.
OTHER AGREEMENTS
ATC and ADM covenant and agree, provided the Closing occurs, that:
5.1 ATC has certain agreements with the Subsidiaries and their managing
brokers whereby the managing brokers have the right to earn and be issued
certain shares of stock in ATC. These agreements are attached hereto as Exhibit
"5.1" and incorporated herein by reference ("Earn Out Agreements"). Pursuant
thereto, ATC will issue, at the Closing, to ADM, the following shares to satisfy
the Earn Out Agreements: 375,000 shares of ATC stock relating to the potential
earn out for the San Antonio Subsidiary, and 430,465 shares of ATC stock
relating to the potential earn out for the Bend, Oregon Subsidiary, for a total
of 805,465 shares of ATC common stock, to be issued to ADM free and clear of any
and all restrictions, except as set forth herein.
5.2 ADM assumes full responsibility for the transfer to the managing
brokers of the earned ATC stock, pursuant to the terms of the Earn Out
Agreements. If any of the ATC shares issued to ADM hereunder are unearned or
forfeited by the specific managing brokers under the Earn Out Agreements, then
ATC shall have a right, which must be exercised, if at all, within ninety (90)
days of the completion of the audit to determine if the shares are earned by the
managing brokers, to repurchase or redeem such unearned or forfeited shares from
ADM on the following basis: prorata reduction in ATC's sixteen (16%) interest in
ADM for the percentage of the unearned/forfeited shares of ATC repurchased or
redeemed (i.e. 805,465 ATC shares = 16% interest in ADM). If not exercised, ADM
shall retain full rights and powers of ownership in these ATC shares.
5.3 The Earn Out Agreements also have provisions for options to be
granted to the managing brokers, based upon earnings of the Subsidiary in excess
of the targeted annual amounts. ATC
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agrees that it remains fully obligated to grant such options, pursuant to the
terms and conditions of the Earn Out Agreements. ATC and ADM agree that to the
extent of the valid exercise of such options, ADM shall pay to ATC the
corresponding excess earnings of the specific Subsidiary, in consideration of
this Agreement and as set forth in the Earn Out Agreements.
5.4 ATC and ADM acknowledge and agree that ATC is a public company for
purposes of Securities and Exchange Commission ("SEC") filings and disclosures.
ATC assumes full liability and responsibility, and agrees to fully indemnify
ADM, with respect to the full compliance with all necessary SEC disclosures and
filings.
5.5 ATC agrees that the ADM Shares shall be subject to a shareholder
agreement, in the form attached hereto as Exhibit "5.5" and that ATC will be
bound thereby and thereunder.
CONDITIONS TO THE OBLIGATIONS OF ADM
Each and every obligation of ADM under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by ADM:
6.1 The representations and warranties made by ATC herein shall be true
and correct on the date of this Agreement and on the Closing Date with the same
effect as though made on such date; ATC shall have performed and complied with
all agreements, covenants and conditions required by this Agreement to be
performed and complied with by it prior to the Closing Date; there shall have
been no adverse change since the financial statement date (Section 2.5) in the
business, condition (financial or otherwise), operations or prospects of the
Subsidiaries.
6.2 ATC shall have obtained and delivered to ADM all consents from
directors, shareholders, third parties and governmental agencies, including the
SEC, required on the part of ATC to consummate the transactions contemplated
hereby or which, either individually or in the aggregate, if not obtained, would
cause a material adverse effect on the Subsidiaries' financial condition or
business.
6.3 No action, suit or proceeding before any court or any governmental
or regulatory authority shall have been commenced or threatened, and no
investigation by any governmental or regulatory authority shall have been
commenced or threatened against ATC or any of the Subsidiaries, seeking to
restrain, prevent or change the transactions contemplated hereby or questioning
the validity or legality of any of such transactions or seeking damages in
connection with any of such transactions.
6.4 All ATC employees shall immediately resign as officers and
directors of the Subsidiaries.
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6.5 The ATC stock to be issued to ADM pursuant to the Earn Out
Agreements shall be so issued, and the ATC Interests shall be fully transferred
and assigned.
CONDITIONS TO THE OBLIGATIONS OF ATC
Each and every obligation of ATC under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by ATC:
7.1 The representations and warranties made by ADM herein shall be true
and correct on the date of this Agreement and on the Closing Date with the same
effect as though made on such date; and ADM shall have performed and complied
with all agreements, covenants and conditions required by this Agreement to be
performed and complied with by it prior to the Closing Date.
7.2 ADM shall have obtained and delivered to ATC all consents from
directors, shareholders, third parties and governmental agencies, required on
the part of ADM to consummate the transactions contemplated hereby.
7.3 No action, suit or proceeding before any court or any governmental
or regulatory authority shall have been commenced or threatened, and no
investigation by any governmental or regulatory authority shall have been
commenced or threatened against ADM, seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the validity or legality of any
of such transactions or seeking damages in connection with any of such
transactions.
7.4 The ADM Shares to be issued hereunder shall be authorized and
issued.
7.5 The debt of the Subsidiaries to ATC shall be assigned to Mark
Moldenhauer and/or Pinnacle Financial Corporation, in exchange for a prorata
reduction in the debt of ATC to Mark Moldenhauer and/or Pinnacle Financial
Corporation ($1.2 Million Principal).
CLOSING
8.1 Unless this Agreement shall have been terminated or abandoned
pursuant to the provisions hereof, a closing (the "Closing") shall be held on
December 29, 2000, or on such other date (the "Closing Date") mutually agreed
upon at the offices of ATC or such other place as the parties shall designate.
By written notice to the other party, each party has the right at any time to
extend the Closing Date to a date no later than 30 business days from the date
stated above.
8.2 Deliveries at the Closing:
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(a) At the Closing, ATC shall transfer and assign to ADM all of the
right, title and interest in and to the Subsidiaries, by delivering certificates
and stock representing each of the Subsidiaries, duly endorsed for transfer to
ADM, and the other agreements, certificates and other documents required to be
executed and delivered hereunder shall be duly and validly executed and
delivered.
(b) At the Closing, ADM shall deliver to ATC a stock certificate, duly
issued to ATC, representing the ADM Shares.
(c) From time to time after the Closing, at either party's request and
without further consideration, the other party shall execute and deliver such
other instruments of conveyance and transfer and take such other action as
either party reasonably may require to convey, transfer to and vest in said
requesting party, any of the rights or interests to be sold, conveyed,
transferred and/or delivered hereunder.
TERMINATION AND ABANDONMENT
9.1 This Agreement may be terminated and the transactions herein
contemplated may be abandoned at any time:
(a) by mutual consent of ATC or ADM; or
(b) by either ATC or ADM, if (i) such party is not in breach hereunder
and the other party is in breach hereunder and (ii) this Agreement is not
consummated on or before the Closing Date, including extensions.
9.2 In the event of termination and abandonment pursuant hereto, this
Agreement shall terminate and shall be abandoned, without further action by any
of the parties hereto. If this Agreement is terminated as provided herein, (i)
no party hereto which is not in breach hereunder shall have any liability or
further obligation to any other party to this Agreement; and (ii) each party
shall bear its own expenses.
INDEMNIFICATION
10.1 ATC and ADM each agrees to indemnify the other and each of its
shareholders, officers and directors against any loss, damage or expense,
(including, but not limited to, reasonable attorneys' fees) ("Damages") incurred
or sustained by the other and each of the other's shareholders, officers and
directors as a result of (a) any breach of this Agreement by the other party,
(b) any inaccuracy in any of the representations or warranties made by the other
party in this Agreement, or (c) any inaccuracy or misrepresentation in any
certificate or other document or instrument delivered by the other party. In
addition to any other remedy, the party entitled to indemnity hereunder shall be
entitled to offset all such claims for Damages against any obligation it now has
or hereafter existing.
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The obligations set forth above shall be subject to and limited by the
following:
(i) No claim for Damages shall be made by ADM until the cumulative
amount of such Damages shall equal or exceed the amount of the stated retained
earnings for the affected Subsidiary as of the Closing Date, and no claim for
Damages shall be made by ATC in excess of a cumulative amount of $25,000;
PROVIDED, HOWEVER, that such limitation shall not apply to any Damages resulting
from intentional or fraudulent actions, misrepresentations or breaches; and
(ii) The party seeking Damages shall give written notice to the other
stating specifically the basis for the claim for Damages and the amount thereof.
MISCELLANEOUS PROVISIONS
11.1 Subject to applicable law, this Agreement may be amended, modified
and supplemented only by written agreement of ATC and ADM.
11.2 The failure of ATC or ADM to comply with any obligation, covenant,
agreement or condition herein may be waived in writing by ATC or ADM,
respectively, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of or estoppel with respect to any subsequent or other failure.
11.3 Each party will pay its own legal, accounting and other expenses
incurred by it or on its behalf in connection with this Agreement and the
transactions contemplated herein; PROVIDED, HOWEVER, that the parties agree to
split the costs associated with the drafting of this Agreement, and the meeting
on November 21, 2000, relating thereto. There shall be no allocation of any
expenses relating to this Agreement or the transactions contemplated hereunder,
to any Subsidiary.
11.4 The respective representations and warranties of ATC and ADM
contained herein or in any certificates or other documents delivered prior to or
at the Closing shall not be deemed waived or otherwise affected by any
investigation made by any party hereto. Each and every such representation and
warranty shall survive for a period of three (3) years from the Closing Date;
PROVIDED, HOWEVER, all representations, warranties and agreements made relating
to the Earn Out Agreements shall not expire until all obligations are fully
satisfied.
11.5 All consents, approvals, claims, notices, requests, demands and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given or made when delivered by hand, fax or
mailed, first class certified mail, return receipt requested, with postage paid:
(c) If to ATC, to:
Roger Butterwick
8135 E. Butherus, Suite 3
Scottsdale, AZ 85260
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or to such other person or address as ATC shall furnish to ADM in writing.
(d) If to ADM, to:
Mark Moldenhauer
14500 N. Northsight Blvd. #213
Scottsdale, AZ 85260
or to such other person or address as ADM shall furnish to ATC in writing.
11.6 This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
parties hereto without the prior written consent of the other party.
11.7 This Agreement shall be governed by the laws of the State of
Arizona as to all matters including, but not limited to, matters of validity,
construction, effect and performance. In an action for specific performance of
this Agreement, the other party agrees not to plead adequacy of damages at law.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. The article and section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement, which term as used throughout
includes the Exhibits hereto, embodies the entire agreement and understanding of
the parties hereto in respect of the subject matter contained herein. There are
no restrictions, promises, representations, warranties, covenants or
undertakings other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
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IN WITNESS WHEREOF, the parties hereto have made and entered
into this Agreement as of the date first hereinabove set forth.
"ATC"
Attest: AUTO TRADECENTER.COM INC.
/S/ JOHN E. ROWLETT
- ---------------------------------- By: /S/ ROGER L. BUTTERWICK
Secretary -------------------------------------
Its PRESIDENT
-------------------------------------
"ADM"
Attest: AUTO TRADECENTER.COM INC.
/S/ MARK MOLDENHAUER
- ---------------------------------- By:/S/ JULES GOLLINS
Secretary -------------------------------------
Its PRESIDENT
-------------------------------------
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