SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 11 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report February 10, 1999
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CHANCELLOR CORPORATION
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(Exact name of Registrant as specified in its charter)
Massachusetts 0-11663 04-2626079
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
210 South Street, Boston, Massachusetts 02111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 368-2700
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Item 2. Acquisition or Disposition of Assets.
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On January 29, 1999, Chancellor Asset Management Inc. ("CAM" or the "Company"),
a wholly owned subsidiary of Chancellor Corporation ("Chancellor"), acquired all
of the issued and outstanding capital stock of M.R.B. Inc., a Georgia
corporation d/b/a Tomahawk Truck Sales; Tomahawk Truck & Trailer Sales, Inc., a
Florida corporation; Tomahawk Truck & Trailer Sales of Virginia, Inc., a
Virginia corporation; and Tomahawk Truck & Trailer Sales of Missouri, Inc., a
Missouri corporation (collectively "Tomahawk"), pursuant to a Stock Purchase
Agreement (the "Agreement") dated January 29, 1999. The Company acquired the
capital stock of Tomahawk from Ms. M. Rea Brookings and Mr. David F. Herring
(the "Selling Shareholders").
Tomahawk is engaged in a similar line of business as the Company. Tomahawk
retails and wholesales used transportation equipment, primarily tractors and
trailers. Tomahawk operates five (5) retail centers in Conley, Georgia;
Richmond, Virginia; Pompano, Florida; Orlando, Florida; and Kansas City,
Missouri. Additionally, Tomahawk operates its wholesale division from the
Conley, Georgia facility. Tomahawk will be operated as a wholly owned
subsidiary of the Company, with many operations coordinated with the Company, to
achieve operating efficiencies and synergies.
The purchase price paid by the Company consisted of 4,500,000 shares of the
Common Stock of Chancellor (valued at $1.34 per share) and future cash
consideration pursuant to an Earn-Out provision as provided in Section 3 of the
Agreement (the "Earn-Out"). The Earn-Out provides for the payment of seven and
one-half percent (7.5%) of the Adjusted Pre-Tax Earnings of Tomahawk to each of
the Selling Shareholders. The Earn-Out begins in the fiscal year ended December
31, 1999, and ends in the fiscal year ended December 31, 2004. At the time of
the acquisition, Tomahawk had liabilities of approximately $6,617,000. In
addition, the Company incurred acquisition costs of approximately $530,000. In
conection with the Agreement, the Company loaned the Selling Shareholders a
total of $500,000 pursuant to certain promissory notes payable in full on
January 29, 2004. This transaction has been recorded in accordance with the
purchase method of accounting. As a result of a preexisting agreement between
CAM and the Selling Shareholders that gave CAM effective control of Tomahawk's
operations, the designated date of this transaction for accounting purposes will
be August 1, 1998.
The Agreement also: (1) nominates one of the Selling Shareholders as a director
of Chancellor's Board of Directors; (2) elects both of the Selling Shareholders
as directors of the Company's Board of Directors; (3) provides for Employment
Agreements for the Selling Shareholders over a period of five years with minimum
base salaries of $200,000 per annum; (4) prohibits the Selling Shareholders from
competing against the Company or Tomahawk, or soliciting former employees and
customers of Tomahawk; (5) provides for Tomahawk to lease from the Selling
Shareholders the Conely, Georgia facility at fair market value rents of
approximately $8,500 per month; and (6) provides for an option to purchase from
the Selling Shareholders the Conley, Georgia facility for an amount not to
exceed $950,000.
Item 7. Financial Statements and Exhibits.
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a) Financial statements of business acquired.
Financial information relating to the acquisition required by this item will be
filed as soon as practicable but in no event later than sixty (60) days after
the filing of this report.
b) Pro forma financial information.
Financial information relating to the acquisition required by this item will be
filed as soon as practicable but in no event later than sixty (60) days after
the filing of this report.
C) Exhibits.
Exhibit 2 Stock Purchase Agreement, dated January 29, 1999, by
and among Chancellor Asset Management, Inc., M. Rea
Brookings, and David F. Herring.
Exhibit 10.1 Lease Agreement, dated January 29, 1999, by and among
M. Rea Brooking, David F. Herring, and Chancellor Asset
Management, Inc.
Exhibit 10.2 Memorandum of lease, dated January 29, 1999, by and
among M. Rea Brookings, David F. Herring, and
Chancellor Asset Management, Inc.
Exhibit 10.3 Employment Agreement, dated January 29, 1999, by and
among M. R. B., Inc. and M. Rea Brookings.
Exhibit 10.4 Promissory Note, dated January 29, 1999, by and among
M. Rea Brookings and Chancellor Asset Management,
Inc.
Exhibit 10.5 Stock Pledge Agreement, dated January 29, 1999, by and
among Chancellor Asset Management, Inc. and M. Rea
Brookings.
Exhibit 10.6 Employment Agreement, dated January 29, 1999, by and
among M.R. B., Inc. and David F. Herring.
Exhibit 10.7 Promissory Note, dated January 29, 1999, by and among
David F. Herring and Chancellor Asset Management, Inc.
Exhibit 10.8 Stock Pledge Agreement, dated January 29, 1999, by and
among Chancellor Asset Management, Inc. and David F.
Herring.
Exhibit 99 Press Release.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Chancellor Corporation
By /s/ Franklyn E. Churchill
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Franklyn E. Churchill, President
Dated: February 10, 1999