EXHIBIT 2
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SUBSCRIPTION AND
STOCK PURCHASE AGREEMENT
Dated as of March 31, 1998
By and Among
PRECISION AUTO CARE, INC.
a Virginia corporation
("PAC")
PRECISION AUTO CARE MEXICO I, X.xx X.X. de C.V.
("PAC Mexico")
(PAC and PAC Mexico are collectively
referred to as the "PAC Parties")
and
PROMOTORA de FRANQUICIAS PRAXIS, S.A. de C.V.,
a Mexican corporation
("PFP")
and
EACH OF PFP'S STOCKHOLDERS NAMED AS
SUCH IN SCHEDULE I TO THIS AGREEMENT
(the "PFP Stockholders")
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TABLE OF CONTENTS
ARTICLE I
THE TRANSACTIONS
Section 1.1 Transactions to occur Prior to Closing... 2
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Section 1.2 Transactions to occur at Closing......... 2
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Section 1.3 Transactions to occur immediately
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following Closing........................ 3
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Section 1.4 Share Holdback........................... 4
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ARTICLE II
ADDITIONAL CONSIDERATION PROVISIONS
Section 2.1 Consideration to be Paid Post-Closing.... 4
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Section 2.2 Transfer Taxes and Costs................. 5
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PFP
AND THE PFP STOCKHOLDERS
Section 3.1 Organization and Standing................ 6
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Section 3.2 Capitalization........................... 6
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Section 3.3 Ownership of Shares...................... 7
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Section 3.4 Affiliates; Investments.................. 8
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Section 3.5 Execution and Effect of Agreement........ 8
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Section 3.6 Restrictions............................. 9
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Section 3.7 Consents................................. 9
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Section 3.8 Financial Statements..................... 9
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Section 3.9 Debt..................................... 11
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Section 3.10 Guarantees............................... 12
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Section 3.11 No Undisclosed Liabilities............... 12
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Section 3.12 Litigation............................... 12
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Section 3.13 Properties; Absence of Encumbrances...... 13
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Section 3.14 Intellectual Property.................... 13
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Section 3.15 Material Contracts....................... 14
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Section 3.16 Employee Benefits and Employment
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Matters.................................. 15
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Section 3.17 Tax Matters.............................. 17
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Section 3.18 Environmental Matters.................... 20
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Section 3.19 Franchise Matters........................ 20
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Section 3.20 Banks; Powers of Attorney................ 21
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Section 3.21 Compliance With Laws..................... 21
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Section 3.22 Licenses and Permits..................... 21
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Section 3.23 Insurance................................ 22
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Section 3.24 Claims of PFP Stockholders, Directors,
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Officers, Etc............................ 22
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Section 3.25 Extraordinary Transactions............... 23
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Section 3.26 Assets................................... 23
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Section 3.27 Corporate Records........................ 24
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Section 3.28 Related Party Transactions............... 24
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Section 3.29 Broker and Finder Fees................... 25
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Section 3.30 Adequate Disclosure...................... 25
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Section 3.31 No Adverse Change or Conditions.......... 25
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Section 3.32 Relationships with Customers and
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Suppliers................................ 25
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Section 3.33 Product Liability........................ 25
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Section 3.34 Change in Control........................ 26
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Section 3.35 Investment Representations............... 26
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PAC PARTIES
Section 4.1 Organization and Good Standing........... 27
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Section 4.2 Execution and Effect of Agreement........ 27
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Section 4.3 Validity of Shares....................... 27
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Section 4.4 Restrictions............................. 27
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Section 4.5 No Consents.............................. 28
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Section 4.6 No Brokers............................... 28
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ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
Section 6.1 Conditions to the Obligations of the PAC
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Parties.................................. 28
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Section 6.2 Conditions to the Obligations of PFP and
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the PFP Stockholders..................... 30
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ARTICLE VII
CLOSING
Section 7.1 Closing.................................. 32
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Section 7.2 Documents to be Delivered at Closing by
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PFP and the PFP Stockholders............. 32
Section 7.3 Documents to be Delivered by the PAC
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Parties.................................. 32
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ARTICLE VIII
OTHER COVENANTS AND AGREEMENTS OF THE PARTIES
ii
Section 8.1 Referral of Customers and Suppliers...... 32
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Section 8.2 Waiver of Claims by the PFP
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Stockholders............................. 33
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Section 8.3 Use of Certain Trademarks and
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Tradenames............................... 33
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Section 8.4 Post-Closing Financial Statements........ 33
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Section 8.5 [Intentionally Blank].................... 34
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Section 8.6 Confidentiality.......................... 34
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Section 8.7 Cooperation.............................. 35
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Section 8.8 Tax Returns.............................. 35
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Section 8.9 PAC Board Seat........................... 38
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ARTICLE IX
[INTENTIONALLY OMITTED]
ARTICLE X
INDEMNIFICATION AND SURVIVAL OF REPRESENTATIONS, WARRANTIES
COVENANTS AND AGREEMENTS
Section 10.1 Indemnification.......................... 38
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Section 10.2 Third Party Claims....................... 40
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Section 10.3 Tax Indemnification...................... 41
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Section 10.4 Limitation on Indemnity Obligation....... 42
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Section 10.5 Set-Off Rights of the PAC Parties; Manner
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of Payment of Claims by the PFP
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Stockholders or the PAC Parties.......... 43
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Section 10.6 Survival of Representations, Warranties,
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Covenants and Agreements................. 44
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Section 10.7 Unlimited Indemnification relating to
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certain Tax and Contingent Liabilities of
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the Praxis Companies..................... 45
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Expenses................................. 46
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Section 11.2 Entire Agreement......................... 46
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Section 11.3 Amendment and Waiver..................... 46
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Section 11.4 Binding Agreement and Successors......... 46
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Section 11.5 Assignment............................... 46
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Section 11.6 No Third Party Beneficiaries............. 46
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Section 11.7 Notices.................................. 47
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Section 11.8 Further Assurances....................... 48
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Section 11.9 Article and Section Headings............. 48
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Section 11.10 Governing Law; Consent to Jurisdiction... 48
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Section 11.11 Certain Definitions...................... 48
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Section 11.12 Construction............................. 53
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Section 11.13 Counterparts............................. 53
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Section 11.14 Time of the Essence...................... 54
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Section 11.15 PFP Representative....................... 54
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Section 11.16 PFP's Knowledge.......................... 54
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Section 11.17 Judgment Currency........................ 54
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Section 11.18 Execution of Agreement as of Closing
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Date..................................... 55
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SCHEDULES
Schedule I PFP Stockholders
Schedule II Ownership of Shares in each of the Praxis Companies
Schedule 1.1 List of Retained Praxis Companies
Schedule 3.6 Restrictions
Schedule 3.8(b) Affiliate Transactions and Relationships
Schedule 3.8(c) Accounts Receivable
Schedule 3.8(d) Accounts Payable
Schedule 3.8(e) Inventory
Schedule 3.10 Guarantees
Schedule 3.12 Litigation
Schedule 3.13 Properties; Absence of Encumbrances
Schedule 3.14 Intellectual Property
Schedule 3.15 Material Contracts; Breaches or Defaults
Schedule 3.16(g) Collective Bargaining Agreements
Schedule 3.16(j) Employees
Schedule 3.16(k) Officers and Directors
Schedule 3.17(g) Jurisdictions of Tax Filings
Schedule 3.17(h) Tax Elections and Special Tax Status
Schedule 3.17(i) Tax Basis and Tax Attributes
Schedule 3.18 Environmental Matters
Schedule 3.19 Franchise Matters
Schedule 3.20 Banks; Powers of Attorney
Schedule 3.23 Insurance
Schedule 3.32 Relationships with Customers and Suppliers
Schedule 3.35(a) PAC Disclosure Materials
Schedule 3.35(b) Restrictive Stock Legend re Securities Laws
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EXHIBITS
Exhibit A Form of Escrow Agreement by and between PAC and the
PFP Stockholders
Exhibit B Financial Statements of the Praxis Companies
Exhibit C Form of Agreement Not to Compete by each of the PFP
Stockholders in favor of PAC
Exhibit D Form of Registration Rights Agreement by and between
PAC and the PFP Stockholders
Exhibit E Form of Opinion of Counsel to PFP and the PFP
Stockholders
Exhibit F Form of Retained Company Promissory Note
Exhibit G Form of PFP Promissory Note
Exhibit H Form of PFP Stockholder Promissory Note II
Exhibit I List of Closing Documents
Exhibit J Form of Franchise Agreement
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SUBSCRIPTION AND STOCK PURCHASE AGREEMENT
THIS SUBSCRIPTION AND STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the 31st day of March 1998, by and among PRECISION AUTO CARE, INC., a
Virginia corporation ("PAC"), PRECISION AUTO CARE MEXICO I, X.xx X.X. de C.V., a
Mexican limited liability corporation with variable capital (sociedad de
responsabilidad limitada de capital variable) all but one share in which is
owned by PAC ("PAC Mexico") (PAC and PAC Mexico are sometimes collectively
hereinafter referred to as the "PAC Parties"), PROMOTORA de FRANQUICIAS PRAXIS
S.A. de C.V., a Mexican corporation ("PFP"), and EACH OF THE PFP STOCKHOLDERS
NAMED AS SUCH IN SCHEDULE I TO THIS AGREEMENT. The PFP Stockholders are
sometimes referred to herein collectively as the "PFP Stockholders". This
Agreement concerns the issuance by PFP to the PAC Parties of shares of capital
stock in PFP and, immediately thereafter, the redemption of PFP's shares owned
by the PFP Stockholders, thereby effecting the recapitalization of PFP resulting
in the transfer to the PAC Parties of ownership in PFP which owns the capital
stock in the following companies, which are sometimes hereinafter referred to,
collectively with PFP, as the "Praxis Companies": (a) Praxis Afinaciones, S.A.
de C.V., a Mexican corporation ("Praxis Mexican Holding Co."), and its
wholly-owned Affiliates (i) Sixar Afinaciones, S.A. de C.V., a Mexican
corporation ("Praxis- Monterrey") (ii) Premier Accesorios, S.A. de C.V., a
Mexican corporation ("Praxis-Mexico City"), (iii) Sixar Guadalajara, S.A. de
C.V., a Mexican corporation ("Praxis-Guadalajara"), and (iv) Sixar Occidente,
S.A. de C.V., a Mexican corporation ("Praxis-Guadalajara II"); (b) Praxis
AutoPartes, S.A. de C.V., a Mexican corporation ("Praxis AutoPartes"); and (c)
Praxis Afinaciones Puerto Rico, Inc., a Puerto Rican corporation ("Praxis Puerto
Rican Holding Co."), and its wholly-owned Affiliate, Sixar Afinaciones Puerto
Rico, Inc., a Puerto Rican corporation ("Praxis-Puerto Rico").
Certain capitalized terms used herein without definition shall have the
meanings given to such terms in Section 11.11 hereof.
W I T N E S S E T H:
WHEREAS, the PFP Stockholders own all of the issued and outstanding
shares of the capital stock of PFP; and
WHEREAS, PFP owns (a) all but one of the issued and outstanding shares
of capital stock in Praxis Mexican Holding Co., which in turn owns all but one
of the issued and outstanding shares of capital stock in each of
Praxis-Monterrey, Praxis-Mexico City, Praxis-Guadalajara and Praxis-Guadalajara
II, (b) 85% of the issued and outstanding shares of capital stock in Praxis Auto
Partes, the
other 15% of which is already owned by a wholly-owned Affiliate of PAC, and (c)
100% of the issued and outstanding shares of capital stock in Praxis Puerto
Rican Holding Co., which in turn owns 100% of the issued and outstanding shares
of capital stock in Praxis- Puerto Rico; and
WHEREAS, in consideration of the mutual agreements of the parties as
set forth herein, PAC, PAC Mexico and PFP deem it in the best interests of their
respective stockholders that the parties engage in the transactions contemplated
by this Agreement upon the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements of the parties contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
THE TRANSACTIONS
Section 1.1 Transactions to occur Prior to Closing. Prior to Closing,
PFP will sell all of the issued and outstanding shares of capital stock owned by
it in any Person other than the Praxis Companies (collectively, the "Retained
Praxis Companies") to Praxis Accesorios, S.A. de C.V., a Mexican corporation
which is one of the Retained Praxis Companies ("Praxis Accesorios"), and PFP
will sell all of the issued and outstanding Shares of Praxis Accesorios to the
PFP Stockholders. The sale of the Retained Praxis Companies shall be evidenced
and secured by a series of promissory notes in substantially the form attached
hereto as Exhibit F and made a part hereof (collectively, the "Retain Company
Promissory Notes").
Section 1.2 Transactions to occur at Closing. At Closing, the following
transactions shall occur in the following order; provided, however, that none of
such transactions shall be effective until all of the transactions outlined
below, together with the transactions outlined in Section 1.3 of this Agreement,
have occurred:
(a) PAC Mexico shall sell to PFP 619,265 shares
(the "PAC Share Consideration") of common stock in PAC ("PAC Common Shares")
for a price equal to the fair market value per share of PAC Common Shares, which
valuation shall be determined on the basis of the closing price per share quoted
on the NASDAQ National Market System for the second business day preceding the
Closing. The purchase price for the PAC Share Consideration shall be evidenced
and secured by a promissory note executed by PFP in favor of PAC Mexico in
substantially the form attached hereto as Exhibit G and made a part hereof (the
"PFP Promissory Note").
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(b) PFP will then sell the PAC Share Consideration to
the PFP Stockholders for the same purchase price and on the same terms and
conditions as the PAC Share Consideration was purchased by PFP from PAC Mexico.
The purchase price for the PAC Share Consideration shall be evidenced and
secured by a promissory note executed, jointly and severally, and delivered by
PFP Stockholders in favor of PFP in substantially the form attached hereto as
Exhibit H and made a part hereof (the "PFP Stockholders Promissory Note").
(c) PAC Mexico will subscribe and pay for
authorized and newly issued shares of capital stock in PFP which, after they
are issued, shall represent 26.56% of all authorized and issued shares of PFP
(the "PFP Share Consideration"). The purchase price for PFP Share Consideration
shall be (i) PAC Mexico's contribution of the PFP Promissory Note and (ii) PAC
Mexico's payment of U.S. $3,770,365 to PFP in cash. Simultaneously with the
payment of the purchase price by PAC Mexico, PFP will deliver PFP Share
Consideration to PAC Mexico.
(d) For no additional consideration, PFP will cause
Xxxx Xxxxxxx Xxxxxxx Xxxxxx to transfer and deliver to PAC Mexican Holding
Company LLC, a Virginia limited liability company which is wholly owned by PAC
("PAC VA. LLC") his one share of issued and outstanding stock in Praxis Mexican
Holding Co., and PFP will cause Xxxxxxxx Xxxxxxxx Xxxxxxxxxx to transfer and
deliver to PAC VA LLC his one share of issued and outstanding stock in each of
Praxis-Monterrey, Praxis-Mexico City, Praxis-Guadalajara and Praxis-Guadalajara
II (such shares to be transferred by Srs. Xxxxxxx and Xxxxxxxx to PAC VA LLC
being sometimes hereinafter referred to collectively as the "Transferred Praxis
Stock").
Section 1.3 Transactions to occur immediately following Closing.
Immediately following the Closing and on the same date as Closing, the following
transactions shall occur; provided, however, that none of the transactions
described in this Section 1.3 or in Section 1.2 of this Agreement shall be
effective until all of the transactions outlined below have occurred:
(a) The PFP Promissory Note will be cancelled by
PFP.
(b) PFP will redeem and cancel all shares of issued
and outstanding capital stock owned by the PFP's Stockholders in PFP for a
redemption price equal to the contribution of the Retained Company Promissory
Notes and the PFP Stockholder Promissory Note and the payment of U.S. $3,770,365
in cash, U.S. $3,482,865 of which shall be deemed to have been paid in full
satisfaction of outstanding indebtedness owed by PFP to Desarrollo Integrado,
S.A. de C.V., one of the PFP Stockholders.
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(c) PAC Mexico will transfer one share of issued and
outstanding capital stock of PFP then owned by it to PAC VA LLC.
(d) The Retained Company Promissory Notes and
the PFP Stockholders' Promissory Note will be cancelled by the PFP
Stockholders.
(e) The PFP Stockholders or their designee shall
purchase from PAC a total of ten to-be-identified franchises in Mexico or Puerto
Rico for a combined initial franchise fee of U.S. $250,000. PFP Stockholders
shall be responsible for making additional royalty and other payments in respect
of the franchises in accordance with the terms of the form of franchise
agreement attached hereto as Exhibit J.
Section 1.4 Share Holdback. Notwithstanding the transactions described
in the foregoing Section 1.2, at the Closing, the PFP Stockholders shall deliver
PAC Common Shares representing ten percent (10%) of the PAC Share Consideration
(the "PAC Share Holdback") to First Union National Bank, as escrow agent for the
benefit of the PAC Parties and the PFP Stockholders (the "Escrow Agent"). The
Share Holdback shall be administered and disbursed by the Escrow Agent as
provided for herein and in an escrow agreement in the form of the Escrow
Agreement attached hereto as Exhibit A (the "Escrow Agreement"). Notwithstanding
the delivery of the PAC Share Holdback to the Escrow Agent, that portion of the
PAC Share Consideration represented by the PAC Share Holdback shall be deemed to
have been issued to the PFP Stockholders in equal ratable shares and shall be
treated by the parties as having been so issued for all purposes, subject only
to the terms of the Escrow Agreement.
ARTICLE II
ADDITIONAL CONSIDERATION PROVISIONS
Section 2.1 Consideration to be Paid Post-Closing. In consideration for
the Agreements Not to Compete to be delivered by each of the PFP Stockholders to
PAC pursuant to Section 6.1(i) hereof, on each of September 30, 1999, September
30, 2000 and September 30, 2001, the PAC Parties shall pay to Praxis Accesorios
or in equal shares to each of the PFP Stockholders, as designated by PFP's
Representative, an amount of Mexican Pesos equal to 25% of the excess in the
actual combined EBITDA of the Praxis Companies over the assumed level of
combined EBITDA of the Praxis Companies for each of the twelve month periods
ended June 30, 1999, 2000 and 2001, as set forth below:
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Tweleve Month Period Assumed Level of
ended June 30 Combined EBITDA
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1999 U.S. $1,793,296
2000 U.S. $2,246,038
2001 U.S. $2,918,878
At the end of each fiscal year for which the actual Combined EBITDA of the
Praxis Companies is to be calculated, the PAC Parties' independent accounting
firm will convert all amounts expressed in Mexican Pesos into United States
Dollars in accordance with FASB Statement No. 52, for purposes of determining
whether the thresholds above have been satisfied.
For purposes of this Section 2.1, EBITDA shall mean, with respect to the Praxis
Companies on a consolidated basis as of the last day of the applicable fiscal
year, Consolidated Net Income plus the sum of interest, taxes, depreciation,
amortization and other noncash expenses or charges reducing income for such
period (to the extent taken into account in the calculation of Consolidated Net
Income for such period) minus noncash credits increasing Consolidated Net Income
for such period (to the extent taken into account in the calculation of
Consolidated Net Income for such period); all as determined in accordance with
GAAP. "Consolidated Net Income" shall mean, for any fiscal period, the net
income or loss of the Praxis Companies, applied to the Praxis Companies on a
consolidated basis, but excluding as income (A) gains on the sale, conversion or
other disposition of capital assets, (B) gains on the acquisition, retirement,
sale or other disposition of stock or securities of any of the Praxis Companies,
(C) any write-up of any asset, or (D) any other gains or credits of an
extraordinary nature; all as determined in accordance with GAAP.
Section 2.2 Transfer Taxes and Costs. All Taxes, stamp duties,
notarial, registration and recording fees and similar charges resulting from or
relating to PFP Share Consideration or the Transferred Praxis Stock pursuant to
the terms of this Agreement shall be borne and paid for one-half (1/2) by PFP
and one-half (1/2) by the PAC Parties, except for Income Taxes and Taxes on,
relating to or measured by income or gains, which shall be borne and paid for
solely by the PFP Stockholders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PFP
AND THE PFP STOCKHOLDERS
In order to induce the PAC Parties to enter into this Agreement, and to
consummate the transactions contemplated hereby, each of PFP and the PFP
Stockholders, jointly and severally, hereby
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make the following representations and warranties to the PAC Parties:
Section 3.1 Organization and Standing. PFP and each of Praxis
Mexican Holding Co., Praxis Monterrey, Praxis-Mexico City, Praxis-Guadalajara,
Praxis-Guadalajara II and Praxis AutoPartes (PFP, Praxis Mexican Holding Co.,
Praxis Monterrey, Praxis-Mexico City, Praxis-Guadalajara, Praxis-Guadalajara II
and Praxis AutoPartes being hereinafter sometimes collectively referred to as
the "Mexican Praxis Companies") and Desarrollo Integrado, S.A. de C.V., a
Mexican corporation and one of the PFP Stockholders ("DISA") is a corporation
duly organized, validly existing and in good standing under the laws of the
United Mexican States. Each of Praxis Puerto Rico Holding Co. and Praxis-Puerto
Rico (Praxis Puerto Rico Holding Co. and Praxis-Puerto Rico being hereinafter
sometimes collectively referred to as the "Puerto Rican Praxis Companies") is a
corporation duly organized and validly existing under the laws of the United
States Commonwealth of Puerto Rico. Praxis-Puerto Rico is in good standing in
Puerto Rico; however, Praxis Puerto Rico Holding co. is not currently in good
standing because it failed to make a required information filing, which will be
made on or immediately following Closing Date. PFP and each of the Praxis
Companies has full power and authority to own, operate and lease its properties,
and to conduct its business as it is now being conducted, and is qualified to
transact business as a foreign corporation in each jurisdiction in which the
operation of its business or the ownership of its properties requires such
qualification. PFP has delivered to the PAC Parties complete and correct copies
of the constitutional, organizational and operational documents of PFP and each
of the Praxis Companies, none of which have been amended or repealed since
delivery to the PAC Parties, and each of which is in full force and effect in
the form delivered to the PAC Parties.
Section 3.2 Capitalization.
(a) Authorized Capital; Outstanding Shares.
Immediately prior to the Closing, the issued and outstanding capital stock of
PFP consisted solely of 8,998 shares of Series A common stock and 3,861,000
shares of Series B common stock, which collectively constitute a single class of
common stock, each share of which has a par value of One Mexican Peso and all of
which shares are owned and held (and as of Closing will be owned and held) by
the PFP Stockholders as set forth in Schedule I to this Agreement. PFP Share
Consideration has been duly authorized to be issued to PAC Mexico in accordance
with Section 1.2 hereof. The total authorized capital stock of PFP is stated in
Schedule II. The capital stock of each of the Praxis Companies consists solely
of the number of authorized, issued and outstanding shares which have a par
value and are owned and held (and as of Closing will be owned and held) by the
persons identified in Schedule II of this Agreement.
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Each of the shares of the capital stock of each of the Praxis Companies
which has been issued and is outstanding as of the date hereof has been duly
authorized and validly issued and is fully paid and non-assessable. None of the
shares of the issued and outstanding capital stock of any of the Praxis
Companies has been issued in violation of shareholder preemptive rights, and
each of such shares has been offered, issued, sold and delivered by the relevant
Praxis Company in compliance with all registration or qualification requirements
(or applicable exemptions therefrom) of all applicable federal and state
securities laws. None of the Praxis Companies have issued or outstanding equity
securities, debt securities or other instruments which are convertible at any
time into equity securities of any of the Praxis Companies. Immediately
following the transactions described in Article I of this Agreement, PAC Mexico
will own all but one issued and outstanding share of capital stock in PFP, and
the remaining issued and outstanding share of capital stock in PFP will be owned
by PAC VA. LLC.
(b) No Obligations to Issue Shares. None of
the Praxis Companies are subject to any commitment or obligation which would
require the issuance or sale of shares of its capital stock at any time under
options, subscriptions, warrants, rights, calls, convertible obligations or any
other fixed or contingent obligations or which would provide the holder thereof
with the right to acquire any equity securities of any of the Praxis Companies.
The constitutive documents of each of the Mexican Praxis Companies give the
holders of shares pre-emptive rights to acquire any equity securities issued by
such companies or transferred by their existing shareholders. The PFP
Stockholders and each of the stockholders of the Mexican Praxis Companies have
duly waived their pre-emptive rights to the extent necessary to permit the
issuance of PFP Share Consideration and the transfer of the Transferred Praxis
Stock in accordance with Article I of this Agreement.
(c) No Obligation to Redeem Shares. Except as
specifically provided in Article I of this Agreement, none of the Praxis
Companies have any obligation (contingent or other) to purchase, redeem or
otherwise acquire any of its equity securities or any interest therein or to pay
any dividend or make any other distribution in respect thereof.
Section 3.3 Ownership of Shares.
(a) PFP. Each of the PFP Stockholders is the
record and beneficial owner of the number of shares and the percentage of
interest in PFP set forth opposite his name in Schedule II to this Agreement and
has good, valid and marketable title to such shares free and clear of all
Encumbrances. Notwithstanding anything to the contrary set forth in this
Agreement, the representation and warranty set forth in the first sentence of
this Section 3.3 is made by the PFP Stockholders severally and not jointly.
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(b) Praxis Companies. The record and beneficial
owner of all shares in each of the Praxis Companies is set forth in Schedule II
to this Agreement. Each owner listed in Schedule II has good, valid and
marketable title to such shares free and clear of all Encumbrances. Except for
shareholder pre-emptive rights, which are contained in the Bylaws of the Praxis
Companies, which have been duly waived, there are no agreements, notes, pledges,
powers of attorney, consents, assignments, security agreements or similar
agreements or arrangements either (i) restricting the transferability of the
shares of the capital stock of any of the Praxis Companies, (ii) relating to the
voting control of any of the shares of the capital stock of any of the Praxis
Companies, or (iii) by which any of the shares of the capital stock of any of
the Praxis Companies are otherwise bound or in any way affected, except for the
restrictions on transfers of shares in certain of the Praxis Companies which are
imposed by the terms of the franchise agreements with PAC or its Affiliates.
Section 3.4 Affiliates; Investments. Except for the Retained
Praxis Companies to be sold to PFP Newco immediately prior to Closing, neither
PFP nor any of the other Praxis Companies owns any shares of capital stock or
equity securities of, or any interest in any other Person.
Section 3.5 Execution and Effect of Agreement.
(a) By PFP. PFP has the corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery by PFP of this Agreement, the issuance by PFP of PFP Share
Consideration to PAC Mexico in accordance with Section 1.2 of this Agreement and
consummation by PFP of the other transactions contemplated hereby, and the
performance by PFP of its obligations hereunder, have been duly and effectively
authorized by all necessary corporate action on the part of PFP. This Agreement
has been duly executed and delivered by PFP and constitutes a legal, valid and
binding obligation of PFP, fully enforceable against PFP in accordance with its
terms; except as enforceability hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the exercise of
judicial discretion in accordance with general principles of equity.
(b) By the PFP Stockholders. The transfer
by the PFP Stockholders of the Transferred Praxis Stock in accordance with
Section 1.2 of this Agreement has been duly authorized by all necessary action
on the part of the PFP Stockholders and the stockholders of the Praxis
Companies. This Agreement has been duly executed and delivered by each of the
PFP Stockholders and constitutes a legal, valid and binding obligation of each
of the PFP Stockholders, fully enforceable against each of them in accordance
with its terms; except as enforceability hereof may be
8
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the exercise of judicial discretion in accordance with
general principles of equity.
Section 3.6 Restrictions. The execution and delivery of this
Agreement by the PFP Stockholders and PFP, the consummation of the issuance of
the PFP Share Consideration and the transfer of the Transferred Praxis Stock and
the other transactions contemplated hereby by the PFP Stockholders and PFP, and
the performance of the obligations of the PFP Stockholders and PFP hereunder
will not (a) violate any of the provisions of the charter or by-laws (estatutos
sociales) of PFP or any of the other Praxis Companies or (b) except as disclosed
in Schedule 3.6, (i) violate or conflict with the provisions of any Applicable
Laws, (ii) result in the creation of any Encumbrance upon any of the assets,
rights or properties of PFP or any of the other Praxis Companies, or (iii)
conflict with, violate any provisions of, result in a breach of or give rise to
a right of termination, modification or cancellation of, constitute a default
of, or accelerate the performance required by, with or without the passage of
time or the giving of notice or both, the terms of any agreement, indenture,
mortgage, deed of trust, security or pledge agreement, lease, contract, note,
bond, license, permit, authorization or other instrument to which any of the PFP
Stockholders, PFP or any of the other Praxis Companies is a party or to which
any of the PFP Stockholders, PFP, or any of the Praxis Companies or any of their
respective assets or shares of capital stock are subject.
Section 3.7 Consents. No filing with, or consent, waiver,
approval or authorization of, or notice to, any Governmental Authority or any
third party is required to be made or obtained by the PFP Stockholders, PFP or
any of the other Praxis Companies in connection with the execution and delivery
of this Agreement or any document or instrument contemplated hereby, the
consummation of any of the transactions contemplated hereby or the performance
of any of their respective obligations hereunder which have not been obtained by
PFP or the PFP Stockholders.
Section 3.8 Financial Statements.
(a) Financial Statements. Attached hereto as
Exhibit B are true and correct copies of (i) the audited, combined balance
sheets and related income statements of the Praxis Companies as at December 31,
1997 and for the year period then-ended (collectively, the "Financial
Statements"). All of the Financial Statements have been prepared in accordance
with GAAP. Except to the extent that the Financial Statements have been restated
in the respect indicated below to conform with GAAP, all of the Financial
Statements have been prepared in a manner consistent with each other and the
books and records of the Praxis Companies. The Financial Statements fairly
present in all material
9
respects the financial condition, results of operations and cash flows of the
Praxis Companies and no other related entities at the dates and for the periods
indicated therein.
(b) Praxis Companies Separate Financial Results.
The Financial Statements represent only the financial results of the Praxis
Companies for the periods covered and do not reflect any operating income
attributable to the Retained Praxis Companies, or any of their Affiliates. Any
material transactions or relationships between any of the Praxis Companies and
PFP or any of its other Affiliates are fully disclosed in the footnotes to the
Financial Statements and are based upon terms and conditions that would have
applied if such transactions had been entered into on an arms-length basis with
independent third parties. Except as set forth in Schedule 3.8(b) to this
Agreement, no assets or personnel of the Retained Praxis Companies or any of
their Affiliates are necessary, required or used in the businesses of the Praxis
Companies.
(c) Accounts Receivable. Attached hereto as
Schedule 3.8(c) is a schedule of all accounts receivable of the Praxis Companies
reflected on the books and records of the Praxis Companies, together with the
allowance for uncollectible accounts attributable to each account, as of
February 28, 1998 All accounts receivable of the Praxis Companies (including the
accounts reflected on the schedules contemplated by this Section 3.8(c)), (i)
are reflected properly on the books and records of the Praxis Companies in
accordance with GAAP and consistent with past practice, (ii) are represented in
amounts net of any allowance for uncollectible accounts, (iii) arose from bona
fide, arms-length transactions in the ordinary course of business for services
performed or goods sold by the Praxis Companies, (iv) are not subject to any
counterclaim, deduction, right of set-off, set-off or recoupment, (v) are
current except as otherwise disclosed in Schedule 3.8(c) hereto, (vi) will be
collectible in the ordinary course of business within 90 days after Closing in
the aggregate face amounts thereof without (to PFP's knowledge) instituting
legal action or incurring fees for collection, and (vii) all accounts payable by
the Retained Praxis Companies or their Affiliates or by any PFP Stockholder to
any of the Praxis Companies will be paid prior to Closing. The amount of any
reserves or allowances for bad debts is equal to or greater than any reasonably
anticipated uncollectible accounts. The books and records of the Praxis
Companies reflect appropriate reserves for uncollectible accounts receivable in
accordance with GAAP and on a basis consistent with the Financial Statements.
(d) Accounts Payable. Attached hereto as
Schedule 3.8(d) is a schedule of all accounts payable of the Praxis Companies as
of February 28, 1998. All accounts payable of the Praxis Companies (including
accounts which are reflected on the schedules contemplated by this Section
3.8(d)) (i) are reflected properly on the books and records of the Praxis
Companies in
10
accordance with GAAP and consistent with past practice, (ii) arose from bona
fide, arms-length transactions in the ordinary course of business for services
performed for or goods sold to the Praxis Companies for which the Praxis
Companies obtained substantially equivalent value, (iii) take advantage of all
available cash discounts, (iv) have been incurred in accordance with applicable
payment or credit terms imposed by the vendors of such services or goods, and
(v) all accounts receivable owned by any of the Praxis Companies to the Retained
Praxis Companies or their Affiliates or to any PFP Stockholder will be paid
prior to Closing. None of the accounts payable of the Praxis Companies have been
due and payable by the Praxis Companies for a period in excess of 35 days from
the date of the receipt of an invoice giving rise thereto or for any shorter
period which has given rise to, or with notice or the passage of time or both
will give rise to, finance charges, late fees or similar charges.
(e) Inventory. Attached hereto as Schedule
3.8(e) is a schedule of all inventories of the Praxis Companies reflected on the
books and records of the Praxis Companies as of February 28, 1998. All inventory
of the Praxis Companies (including the inventory reflected on the schedules
contemplated by this Section 3.8(e)) (i) has been scheduled and is reflected on
the books and records of the Praxis Companies at cost, net of any allowances for
obsolete inventory, (ii) is of a quality and quantity which is good and
marketable, and (iii) is saleable in the ordinary course of the business of the
Praxis Companies as presently conducted at prices which shall result in the
Praxis Companies realizing gross profits on such sales consistent with the gross
profits of the Praxis Companies reflected in the Financial Statements, subject
to changes in prevailing general economic conditions. The cost of all
inventories reflected on the books and records of the Praxis Companies have been
valued in accordance with the first-in, first-out method of accounting in
accordance with GAAP. The amount of any reserves or allowances for obsolete
inventory is equal to or greater than the difference between the cost of such
obsolete inventory and the reasonably anticipated amount that is expected to be
realized on sale or disposition of such obsolete inventory.
(f) Dividends/Cash Withdrawals. Since December
31, 1997, none of the Praxis Companies have paid dividends or made cash advances
or disbursements to any of the PFP Stockholders.
(g) Taxes. The Praxis Companies have accrued in
the Financial Statements in accordance with GAAP any and all Income Taxes and
other Taxes in respect of the conduct of their businesses and the ownership of
their properties and in respect of any transactions through the close of each
accounting period to which such Financial Statements relate.
Section 3.9 Debt. The Debt of PFP and the other Praxis Companies
as of Closing consists of (a) $3,482,865, which amount will be paid and
discharged in full in accordance with, the
11
transactions outlined in Article I of this Agreement, and (b) purchase money
financing for equipment purchases finance leases of equipment and vehicles by
the Puerto Rican Praxis Companies, the aggregate obligations for which do not
exceed U.S. $24,664 in calendar year 1998; U.S. $24,221 in calendar years 1999
and 2000; U.S. $24,563 calendar year 2001; and U.S. $14,178 in calendar year
2002.
Section 3.10 Guarantees. Schedule 3.10 sets forth a complete list
of all Guarantees provided by PFP and the other Praxis Companies for the benefit
of any other party and of all Guarantees provided by any other party (including,
without limitation, PFP and the PFP Stockholders) for the benefit of PFP and the
other Praxis Companies or any party doing business with PFP and the other Praxis
Companies.
Section 3.11 No Undisclosed Liabilities. PFP and the other Praxis
Companies do not have any liabilities or obligations of any nature whatsoever
(whether due or to become due, absolute, accrued, contingent or otherwise, and
whether or not determined or determinable), except for (i) liabilities or
obligations to the extent expressly reflected on the Balance Sheet included
among the Financial Statements or disclosed in the notes thereto, or (ii)
liabilities or obligations of a type reflected on the Balance Sheet and incurred
in the ordinary course of business and consistent with past practices and
amounts since the Balance Sheet Date, and PFP does not have any knowledge of any
basis for the assertion of any other liability or obligation against PFP and the
other Praxis Companies. No dividends have been declared on any capital stock of
PFP and the other Praxis Companies which are unpaid.
Section 3.12 Litigation. There is no suit, claim, action at law
or in equity, proceeding or governmental investigation or audit pending, or, to
PFP's knowledge, threatened, by or before any court, any Governmental Authority
or arbitrator, against any of the PFP's Stockholders, PFP or any of the other
Praxis Companies that reasonably could be expected to prevent the consummation
of any of the transactions contemplated hereby, nor, to PFP's knowledge, is
there any basis for any of the foregoing. Except as disclosed in Schedule 3.12,
there is no suit, claim, action at law or in equity, proceeding or governmental
investigation or audit pending, or to the PFP's knowledge, threatened, by or
before any arbitrator, court, or other Governmental Authority, against PFP or
any of the other Praxis Companies or involving any of the former or present
employees, agents, consultants, businesses, properties, rights or assets of PFP
or any of the other Praxis Companies, nor, to the PFP's knowledge, is there any
basis for the assertion of any of the foregoing. There are no judgments not
reflected in the Financial Statements, orders, injunctions, decrees,
stipulations or awards rendered by any court, Governmental Authority or
arbitrator against PFP or any of the other Praxis Companies or any of their
former or present employees, agents, properties or assets. Neither PFP nor
12
any predecessor to the operations or assets of PFP nor any of the other Praxis
Companies has at any time commenced (or had commenced against it) any proceeding
in bankruptcy, receivership or similar federal or state laws.
Section 3.13 Properties; Absence of Encumbrances. Schedule 3.13
sets forth a complete list of all real property leased by PFP and the other
Praxis Companies and a description of the material terms of each such lease.
Neither PFP nor any of the other Praxis Companies own any interest in real
property. Neither PFP nor any of the other Praxis Companies is in default (nor
will be in default with the passage of time or the receipt of notice or both)
nor has received notice of default, under any lease of real property or under
any other instruments relative to the real property. All real property leased to
PFP and the other Praxis Companies is available for immediate use in the
operation of their businesses and for the purposes for which such property
currently is being utilized. All improvements on real property leased to PFP and
the other Praxis Companies conform to Applicable Laws relating to zoning, health
and safety and access, including without limitation to the extent applicable to
the Puerto Rican Praxis Companies, the Americans With Disabilities Act of 1990,
as amended, and such property is zoned for the purposes for which such property
is being used by PFP and the other Praxis Companies. Subject to the terms and
conditions of the leases, PFP and the other Praxis Companies have full legal and
practical access to all such real property.
Section 3.14 Intellectual Property. Schedule 3.14 sets forth a
complete list of (i) all patents, patent applications, trademarks, trademark
registrations and applications therefor, service marks, service xxxx
registrations and applications therefor, copyrights, copyright registrations and
applications therefor, tradenames, trade secrets, software and computer
programs, know-how, inventions, processes and procedures (collectively the
"Intellectual Property") owned, used or licensed by PFP and the other Praxis
Companies together with the identity of the owner thereof, and (ii) all license
agreements pursuant to which any Intellectual Property is licensed to or by PFP
and the other Praxis Companies. PFP and the other Praxis Companies own their
Intellectual Property free and clear of any and all Encumbrances, or, in the
case of licensed Intellectual Property, have valid, binding and enforceable
rights to use such Intellectual Property to the extent provided in Schedule
3.14. PFP and the other Praxis Companies have duly and timely filed all
renewals, continuations and other filings necessary to maintain their
Intellectual Property or registrations thereof. Except as disclosed in Schedule
3.14, neither PFP nor any of the other Praxis Companies (i) have received any
notice or claim to the effect that the use of any Intellectual Property
infringes upon, conflicts with or misappropriates the rights of any other party
or that any of the Intellectual Property is not valid or enforceable, or (ii)
have made any claim that any party has violated or infringed upon their rights
with respect to any Intellectual Property. PFP does not
13
have any knowledge that any party is infringing upon, misappropriating or
engaging in the unauthorized use of any of the Intellectual Property.
Section 3.15 Material Contracts.
(a) List of Material Contracts. Schedule 3.15
sets forth a list of all written, and a description of all oral, commitments,
agreements or contracts to which PFP or any of the other Praxis Companies is a
party or by which PFP or any of the other Praxis Companies is obligated,
including, but not limited to, all commitments, agreements or contracts
embodying or evidencing the following transactions or arrangements
(collectively, the "Material Contracts"): (i) agreements for the employment by
PFP or any of the other Praxis Companies of, or independent contractor
arrangements involving PFP or any of the other Praxis Companies with, any
officer or other individual employee of PFP, any of the other Praxis Companies
or any other Affiliate of PFP; (ii) any consulting agreement, agency agreement
and any other service agreement that will continue in force after the Closing
Date with respect to the employment or retention by PFP or any of the other
Praxis Companies of sales agents or representatives, brokers, distributors,
subdistributors, dealers, consultants, agents, legal counsel, accountants or
anyone else who is not an employee; (iii) any single contract, purchase order or
commitment providing for expenditures by PFP or any of the other Praxis
Companies after the date hereof of more than $25,000 (or the Mexican Peso
equivalent thereof) or which has been entered into by PFP or any of the other
Praxis Companies otherwise than in the ordinary course of business; (iv)
wholesale, distribution, dealership, franchise and other agreements to which PFP
or any of the other Praxis Companies is a party or pursuant to which PFP or any
of the other Praxis Companies is obligated to purchase or to sell or distribute
the products of any other party other than current purchase orders entered into
in the ordinary course of business consistent with past practices; (v) any
contract containing covenants limiting the freedom of PFP or any of the other
Praxis Companies or any officer, director, or employee of PFP or any of the
other Praxis Companies to engage in any line or type of business or with any
person or in any geographic area; (vi) any commitment or arrangement by PFP or
any of the other Praxis Companies to participate in a partnership, joint
venture, limited liability company or other cooperative undertaking with any
other Person; (vii) any bid, commitment or other proposal submitted by PFP or
any of the other Praxis Companies to any Person involving the provision of
services or the sale of goods by PFP or any of the other Praxis Companies;
(viii) any commitments by PFP or any of the other Praxis Companies for capital
expenditures involving more than $25,000 (or the Mexican Pesos equivalent
thereof) individually or $50,000 (or the Mexican Pesos equivalent thereof) in
the aggregate; and (ix) any other contract, commitment, agreement, understanding
or arrangement that PFP deems to be material to the business of any of the
Praxis Companies.
14
(b) No Breaches or Defaults. PFP and the other
Praxis Companies are in full compliance with each, and are not in default under
any, Material Contract, and no event has occurred that, with notice or lapse of
time or both, would constitute such a default thereunder. Neither PFP nor any of
the other Praxis Companies have waived any rights under or with respect to any
of the Material Contracts. PFP does not have any knowledge and has not received
any notice that any party with whom PFP or any of the other Praxis Companies
have contractual arrangements, written or oral, is in default under any such
contractual arrangements or that any event has occurred that, with notice or
lapse of time or both, would constitute such a default thereunder. Each of the
Material Contracts constitutes a legal, valid and binding obligation of each the
parties thereto and is enforceable against each of the parties thereto in
accordance with its respective terms; except as enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the exercise of judicial discretion in accordance with
general principles of equity.
(c) Copies Delivered to the PAC Parties. True
and complete copies of all written contracts listed on Schedule 3.15 have been
provided to the PAC Parties.
Section 3.16 Employee Benefits and Employment Matters.
(a) Plans and Arrangements. Neither PFP nor any
of the other Praxis Companies is obligated to contribute to any Retirement
Plans, Ex Gratia Arrangements or Benefit Arrangements, except for payments to
the Instituto Mexicano del Seguro Social or the Instituto Nacional del Fondo de
la Vivienda para los Trabajadores or Sistema de Ahorro para el Retireo
(collectively, the "Mexican Labor Commissions") which are required by Mexican
Law. Without limiting the foregoing, there are no Retirement Plans or Benefit
Arrangements to which the Puerto Rican Praxis Companies have an obligation to
contribute which are intended to qualify under Section 401 of the U.S. Internal
Revenue Code or are governed by ERISA.
(b) Compliance with Laws. PFP and the Praxis
Companies have complied in all material respects with all Applicable Laws,
ordinance, rules, regulations and requirements of Governmental Authorities.
(c) Contributions. All contributions or
premiums required to be made to, or benefit liabilities arising under, the terms
of Applicable Law under which PFP or any of the other Praxis Companies is
obligated to contribute for all periods of time prior to the date hereof and
that are attributable to Employees of any of the Praxis Companies have been paid
or otherwise adequately accrued against in the Financial Statements, as the case
may be. Neither PFP nor any of the other Praxis Companies is obligated to make
any
15
contribution under Applicable Law for any Person (including without limitation,
any personnel of Praxis Bienes Raices, S.A. de C.V.) other than its own
Employees.
(d) Arrearages and Employment Disputes. Neither
PFP nor any of the other Praxis Companies is liable for any arrearage of wages,
any accrued or vested vacation pay or any tax or penalty for failure to comply
with any Applicable Law relating to employment or labor, and there is not a
controversy pending, threatened or in prospect between PFP or any of the other
Praxis Companies and any Employees nor is there any basis for any such
controversy. There is no unfair labor practice charge or complaint currently
pending against PFP or any of the other Praxis Companies with respect to or
relating to any of the Employees of PFP or any of the other Praxis Companies
before any Governmental Authority. PFP and other Praxis Companies shall have
paid when due any and all amounts payable as quotas or other required payments
to the Mexican Labor commissions or, with respect to the Puerto Rican Praxis
Companies, to the United States National Labor Relations Board, and no charges
or complaints are currently pending against PFP or any of the other Praxis
Companies before any Governmental Authority, including the Mexican Labor
commissions or, with respect to the Puerto Rican Praxis Companies, before the
United States Equal Employment Opportunity Commission.
(e) Severance Obligations. There are no
contractual arrangements with employees of PFP or any of the other Praxis
Companies which would prevent such employees from being terminated at will and
without giving rise to any severance, change in control or other payment
obligation or liability except as legally imposed on the Mexican Praxis
Companies under Mexican labor law.
(f) Compliance with Laws on Employment
Practices. The Praxis Companies have complied in all material respects with all
Applicable Laws relating to employment and employment practices, terms and
conditions of employment, wages and hours, and to PFP's knowledge, are not
engaged in any unfair labor practice with respect to any of the employees of PFP
or any of the other Praxis Companies.
(g) Collective Bargaining Agreements. Schedule
3.16(g) sets forth a complete list of all collective bargaining agreements to
which the employees of PFP or any of the other Praxis Companies are subject, and
the agreements by which PFP or any of the other Praxis Companies are required to
recognize or bargain with any labor organization or union on behalf of their
employees.
(h) Notices to Employees. PFP and the other
Praxis Companies have provided, or will have provided prior to the Closing, to
individuals entitled thereto all required notices and insurance coverage
required under Applicable Law, including, with respect to the Puerto Rican
Praxis Companies, Section 4980B of the
16
U.S. Internal Revenue Code and the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"), with respect to any "qualifying event" (as
defined in Section 4980B(f)(3) of the U.S. Internal Revenue Code) occurring
prior to and including the Closing Date, and no Tax payable under Applicable
law, including Section 4980B of the U.S. Internal Revenue Code, has been
incurred with respect to any current or former Employees (or their
beneficiaries.)
(i) No Unfunded Liabilities. Neither PFP nor
any of the other Praxis Companies nor any other Person related to the Praxis
Companies has any current or projected liability for any unfunded
post-termination or post-retirement medical or life insurance benefits in
connection with any employee.
(j) Employees. Schedule 3.16(j) sets forth a true,
complete and accurate list of each employee, his or her date(s) of hire by PFP
or any of the other Praxis Companies, his or her position and title (if any),
current rate of compensation (including bonuses, commissions and incentive
compensation (if any), whether such Employee is hourly or salaried, whether such
employee is union or non-union, the number of such employee's accrued sick days
and vacation days, whether such employee is absent from active employment, and
if so, the dates such employee became inactive, the reason for such inactive
status, and, if applicable, the anticipated date of return to active employment.
(k) Officers and Directors. Schedule 3.16(k)
contains a true, complete and correct list of all of the officers and directors
of PFP and each of the other Praxis Companies.
(l) Actions, Suits, Proceedings, etc.;
Materiality. There are no actions, suits, investigations or proceedings, or
claims (other than routine claims for benefits made in the ordinary course of
plan administration) pending or threatened before any Governmental Authority
regarding compliance with Applicable Law on labor matters that could result in
any material liability to PFP or any of the other Praxis Companies, and PFP is
not aware of any basis for any such action, suit, investigation, proceeding or
claim.
Section 3.17 Tax Matters.
(a) Affiliated Groups; Tax Sharing
Arrangements. Neither PFP nor any of the other Praxis Companies is a member of,
and neither PFP nor any of the other Praxis Companies has ever been a member of,
any "Affiliated Group" within the meaning or spirit of any Applicable Law for
purposes of the payment of Taxes. Neither PFP nor any of the other Praxis
Companies is a party to any tax sharing agreement.
(b) All Taxes Paid. PFP and each of the Praxis
Companies have timely filed or will timely file all federal, state,
17
local, and other Tax Returns required to be filed by it under Applicable Laws,
including estimated Tax Returns and reports, and has paid all required Income
Taxes and other Taxes (including any additions to taxes, penalties and interest
related thereto) due and payable by PFP and any of the other Praxis Companies on
a direct, joint and several or contingent basis, on or before the date hereof.
PFP and each of the other Praxis Companies have paid, withheld, or accrued on
the Financial Statements any and all Income Taxes and other Taxes in respect of
the conduct of the businesses of PFP, the Praxis Companies and any other
Affiliates of PFP or the ownership of their respective properties and in respect
of any transactions for all periods (or portions thereof) through the close of
business on the Closing Date. Accordingly, following Closing, neither PFP nor
any of the other Praxis Companies will have any liability or obligation to pay
any Income Taxes or other Taxes in respect of the conduct of the businesses of
PFP, the Praxis Companies and any other Affiliates of PFP or the ownership of
their respective properties and in respect of any transactions for all periods
(or portions thereof) through the close of business on the Closing Date. PFP has
withheld and paid over all Taxes required to have been withheld and paid over on
behalf of itself, any of the other Praxis Companies and any other Affiliates of
PFP, and complied with all information reporting and backup withholding
requirements applicable to itself, any of the other Praxis Companies and any
other Affiliates of PFP, including the maintenance of required records with
respect thereto, in connection with amounts paid or owing to any Employee,
creditor, independent contractor or other third party. There are no Encumbrances
on any of the assets, rights or properties of PFP or any of the other Praxis
Companies with respect to Taxes, other than liens for Taxes for which only the
Praxis Companies will be liable and which are not yet due and payable or for
Taxes (i) which PFP is contesting in good faith through appropriate proceedings,
or (ii) for which appropriate reserves have been established on the Financial
Statements.
(c) Tax Reserves. The amount of the direct,
joint and several and contingent liability of PFP and each of the other Praxis
Companies for unpaid Taxes for all periods ending on or before the date of this
Agreement does not, in the aggregate, exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) as of the date of
this Agreement, and the amount of the direct, joint and several and contingent
liability of PFP and each of the other Praxis Companies for unpaid Taxes for all
periods ending on or before the Closing Date shall not, in the aggregate, exceed
the amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals shall be reflected on the Financial Statements.
(d) Audits; No Deficiencies Asserted Against
PFP. The Tax Returns of PFP and the other Praxis Companies have never been
audited by any Tax Authority, nor is any such audit in
18
process, pending or threatened (either in writing or verbally, formally or
informally). Except for requests for information which have been responded to in
a matter satisfactory to the requesting Tax Authority, no deficiencies have been
asserted (or are expected to be asserted) against PFP or any of the other Praxis
Companies as a result of examinations by any Governmental Authority and no issue
has been raised by any Governmental Authority that, by application of the same
principles, might result in a proposed deficiency for any other period not so
examined.
(e) No Waivers of Limitations. There are no
agreements, waivers of statutes of limitations, or other arrangements providing
for extensions of time in respect of the assessment or collection of any unpaid
Taxes against PFP or the other Praxis Companies. PFP and the other Praxis
Companies have disclosed on its Income Tax Returns all positions taken therein
that could, if not so disclosed, give rise to a substantial understatement
penalty under Applicable Law.
(f) Copies of Tax Returns. PFP has delivered
to the PAC Parties complete and correct copies of all Tax Returns filed by PFP
and the other Praxis Companies for the five most recent taxable years for which
such Tax Returns have been filed immediately preceding the date of this
Agreement. Other than with respect to Income Taxes shown on such Tax Returns,
PFP and the other Praxis Companies are not subject to any tax imposed on net
income in any other jurisdiction.
(g) Jurisdictions Where Returns Filed by PFP.
Schedule 3.17(g) contains a list of all jurisdictions in which PFP and the other
Praxis Companies have filed Tax Returns for income taxes, franchise, license,
property, sales, use, motor vehicle, rolling stock or other taxes prior to the
date hereof.
(h) Tax Elections and Special Tax Status.
Schedule 3.17(h) discloses all tax elections made by PFP and the other Praxis
Companies in any jurisdiction and describes any tax "safe harbor" provisions of
Applicable Law under which PFP has structured any business transactions.
(i) Tax Basis and Tax Attributes. Schedule
3.17(i) contains a true, complete and accurate description of PFP's and the
Praxis Companies' basis in their respective assets, PFP's current and
accumulated earnings and profits, and PFP's and the Praxis Companies' tax
carryovers. Except as disclosed in Schedule 3.17(i), PFP and the Praxis
Companies have no net operating losses or other tax attributes presently subject
to limitation under Applicable Law. Schedule 3.17(i) contains a true, complete
and accurate description of each PFP Stockholders' basis in his shares of the
outstanding capital stock of PFP.
(j) Transaction, Dividend or other Taxes. Based
in part on the letter ruling obtained from the Mexican tax
19
authorities, but without in any way limiting the scope of this representation,
the transactions contemplated by this Agreement will not result in any
transaction, dividend or other tax liability under Applicable Law in Mexico to
PFP and any of the other Praxis Companies.
(k) Net Operating Loss Carryforwards. Following
the transactions contemplated in Article I of this Agreement, PFP and the Praxis
Companies shall have retained and available for use by the PAC Parties following
Closing, not less than a total of the Mexican currency equivalent of U.S.
$1,886,413 in net operating loss carryforwards which shall not expire until the
dates referenced in Schedule 3.17(i) if any and not less than a total of the
Mexican currency equivalent of U.S.$82,625 in VAT tax credits which shall not
expire until the dates referenced in Schedule 3.17(i) if any and which shall
collectively result in a net tax benefit to the PAC Parties of the Mexican
currency equivalent of approximately U.S. $621,000.
Section 3.18 Environmental Matters. Except as disclosed in
Schedule 3.18, neither PFP nor any of the other Praxis Companies have used,
generated, manufactured, stored, or disposed of any Hazardous Materials, on,
under or about any real property currently or previously owned, leased or used
by PFP and any of the other Praxis Companies in violation of any applicable
Environmental Laws, and neither PFP nor any of the other Praxis Companies have
or will become subject to any liability or obligation prior to or following the
Closing by reason of the use, generation, manufacture, storage or disposal of
Hazardous Materials at any time prior to the Closing. Except as disclosed in
Schedule 3.18, PFP and each of the other Praxis Companies have obtained all
permits, licenses and other authorizations that are required under applicable
Environmental Laws and laws relating to the handling, use and storage of
Hazardous Materials by PFP and any of the other Praxis Companies. Except as
disclosed in Schedule 3.18, PFP and each of the other Praxis Companies are in
compliance with the terms and conditions under which the permits, licenses and
other authorizations referenced in the preceding sentence were issued or
granted. Except as set forth in Schedule 3.18, neither PFP nor any of the other
Praxis Companies is subject to any actual or potential liability, fixed or
contingent, under any Environmental Laws. There are no underground storage
tanks, friable asbestos, materials containing friable asbestos, or PCBs at any
of the Facilities. All of the underground storage tanks previously located at
each of the Facilities have been removed in compliance with all applicable
Environmental Laws and any other requirements or recommendations of any
Governmental Authority.
Section 3.19 Franchise Matters. Schedule 3.19 contains a complete
list as of the date hereof of (i) all of the current franchisors and franchisees
by or to whom PFP and any of the other Praxis Companies have received or granted
any franchise or similar rights and (ii) all area development, area franchise,
area
20
subfranchisor, master license or similar agreements that cover the development
or creation of franchises within any area or country or the delegation of duties
with respect to the obligations of PFP and any of the other Praxis Companies as
a franchisor or otherwise (collectively, the "Praxis Franchise Agreements").
Each of the Praxis Franchise Agreements is a legal, valid and binding obligation
of PFP and the other Praxis Companies which is a party to such Franchise
Agreement and is enforceable against PFP and such other Praxis Companies in
accordance with its respective terms. Except as specified in Schedule 3.19, PFP
and the other relevant Praxis Companies is in full compliance with the terms of
each of the Praxis Franchise Agreements and no event has occurred that, with or
without notice or lapse of time or both, constitutes or will constitute a
default by PFP and the other relevant Praxis Companies thereunder or a breach by
PFP and the other relevant Praxis Companies thereof. Except as disclosed in
Schedule 3.19, PFP and the other relevant Praxis Companies has not waived any
rights under or with respect to any of the Praxis Franchise Agreements. Except
as disclosed in Schedule 3.19, to PFP's knowledge, as of the date hereof none of
the franchisors, franchisees, licensors or licensees that are parties to any of
the Praxis Franchise Agreements is in default thereunder and no event has
occurred that, with or without notice or lapse of time or both, constitutes or
will constitute a default thereunder or a breach thereof by such other parties.
Section 3.20 Banks; Powers of Attorney. Schedule 3.20 sets forth
(i) the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which PFP and any of the other
Praxis Companies maintain safe deposit boxes or accounts of any nature, the
number assigned to each such account and the names of all persons authorized to
draw thereon, make withdrawals therefrom or have access thereto and (ii) the
names of all persons to whom PFP and any of the other Praxis Companies has
granted any power of attorney, together with a description thereof.
Section 3.21 Compliance With Laws. PFP and each of the other
Praxis Companies has at all times conducted its business in material compliance
with all (and has not received any notice of any claimed violation of any)
Applicable Laws.
Section 3.22 Licenses and Permits. PFP and each of the other
Praxis Companies possesses all licenses, permits, and other governmental
consents, certificates, approvals, or other authorizations (the "Permits")
necessary for the operation of their respective businesses. PFP and each of the
other Praxis Companies has complied with the terms and conditions of all Permits
in all material respects and all such Permits are in full force and effect, and
(b) there has occurred no event nor is any event, action, investigation or
proceeding pending or, to PFP's knowledge, threatened, which could cause or
permit revocation or suspension of or otherwise adversely affect the maintenance
of any Permits. The
21
transactions contemplated by this Agreement will not lead to the revocation,
cancellation, termination or suspension of any Permits.
Section 3.23 Insurance. Schedule 3.23 sets forth a list and
description of all policies of commercial liability, products liability, fire,
casualty, worker's compensation, errors and omissions, directors and officers
liability, life, health, disability and other forms of insurance carried by PFP
or any of the other Praxis Companies currently, including, with respect to each
policy, a description of the types and limits of the coverage, the amount of
premiums, the name of the carrier, the policy number, the expiration date of the
current premium period and the nature and amount of any claims pending
thereunder. PFP has delivered to the PAC Parties a true, complete and correct
copy of each such insurance policy. Except as set forth on Schedule 3.23, all
insurance coverage has been maintained by PFP or any of the other Praxis
Companies on an "occurrence" rather than a "claims made" basis and PFP and each
of the other Praxis Companies shall be entitled to the full benefits of such
insurance following Closing. PFP and each of the other Praxis Companies have
regularly maintained all insurance policies in amounts and types required by law
and generally carried by reasonably prudent, similarly situated businesses.
Neither PFP nor any of the other Praxis Companies are in default with respect to
any provision contained in any insurance policy, nor have PFP nor any of the
other Praxis Companies failed to give any notice or present any claim thereunder
in due and timely fashion and no cancellation, non-renewal, reduction of
coverage or arrearage in premiums has been threatened or occurred with respect
to any policy, nor is PFP aware of any grounds therefor. There is no basis for
the assertion against PFP or any of the other Praxis Companies of any
retroactive adjustment to the rate or rates of worker's compensation premiums
payable by PFP and any of the other Praxis Companies.
Section 3.24 Claims of PFP Stockholders, Directors, Officers, Etc.
Except for the $3,482,865 debt owed by PFP to DISA which will be paid in full at
Closing in accordance with the transactions described in Article I of this
Agreement, none of PFP's Stockholders nor any employee, director or officer of
PFP and any of the other Praxis Companies, either individually or in any other
capacity, has a claim of any kind whatsoever against PFP and any of the other
Praxis Companies (including, without limitation, in respect of (i) loans
extended to PFP and any of the other Praxis Companies (ii) any bonus or
incentive payments that relate to prior periods or which will become payable if
the transactions contemplated by this Agreement are consummated), except the
right to his or her current salary or wages, any accrued vacation pay, and any
reimbursable expenses arising in the ordinary course of business. Except as
noted in the immediately preceding sentence, neither PFP nor any of the other
Praxis Companies have any obligation to any such Person that has not been fully
performed.
22
Section 3.25 Extraordinary Transactions. Since the Balance Sheet
Date, neither PFP nor any of the other Praxis Companies has (i) mortgaged,
pledged or subjected to any Encumbrance any assets of PFP and any of the other
Praxis Companies; (ii) canceled or compromised any claim of or debts owed to it;
(iii) sold, licensed, leased, exchanged or transferred any of its assets except
in the ordinary course of business; (iv) entered into any material transaction
other than in the ordinary course of business; (v) experienced any material
change in the relationship or course of dealing with any supplier, customer or
creditor; (vi) suffered any material destruction, loss or damage to any of its
assets; (vii) made any management decisions involving any material change in its
policies with regard to pricing, sales, purchasing or other business, financial,
accounting (including reserves and the amounts thereof) or tax policies or
practices; (viii) declared, set aside or paid any dividends on or made any
distributions in respect of any outstanding shares of capital stock or made any
other distributions or payments to any of the PFP Stockholders or PFP, the
Retained Praxis Companies or any Affiliate of any of the foregoing; (ix)
submitted any bid, proposal, quote or commitment to any party in response to a
request for proposal or otherwise; (x) engaged in any merger or consolidation
with, or agreed to merge or consolidate with, or purchased or agreed to
purchase, all or substantially all of the assets or capital stock of, or
otherwise acquire, any other party; (xi) entered into any partnership, joint
venture or similar arrangement with any other party; (xii) incurred or agreed to
incur any Debt; (xiii) issued or agreed to issue to any party, any shares of
stock or other securities; (xiv) redeemed, purchased or agreed to redeem or
purchase any of its outstanding shares of capital stock or other securities;
(xv) employed any employees or, except as specifically agreed by PAC, increased
the rate of compensation payable or to become payable to any of its officers,
directors, employees or agents over the rate being paid to them as of the
Balance Sheet Date or agreed to do so otherwise than in accordance with
contractual agreements with such parties (which contractual arrangements have
been disclosed to the PAC Parties in accordance herewith); (xvi) made or agreed
to make any charitable contributions or incurred or agreed to incur any
non-business expenses; or (xvii) charged off any bad debts or increased its bad
debt reserve except in the manner consistent with its past practices which have
been disclosed to the PAC Parties.
Section 3.26 Assets.
(a) Title to Assets. PFP and each of the other
Praxis Companies has good and marketable title to its assets and properties,
free and clear of restrictions on or conditions to transfer or assignment, and
free and clear of all Encumbrances.
(b) Assets Used in the Business. Except for the
Facilities and certain items of equipment which are leased to PFP and the other
Praxis Companies, the assets owned by PFP and each of the other Praxis Companies
constitute all of the tangible and
23
intangible assets and interests used by PFP and each of the other Praxis
Companies in their respective businesses, and are sufficient to enable the PAC
Parties to continue to conduct such businesses after the Closing in the manner
in which the businesses have been conducted by PFP.
(c) Condition of Tangible Assets. All of the
tangible assets of PFP and each of the other Praxis Companies which are used by
the Praxis Companies in their respective businesses (whether owned or held under
lease), including, without limitation, all heating, air conditioning, plumbing
and electrical systems serving or within the Facilities, have been repaired or
maintained regularly and consistently in accordance with the recommendations of
the manufacturers thereof, and are in good operating condition and repair
(normal wear and tear excepted), free from material defects and suitable for
their intended uses in the ordinary course of the business of the Praxis
Companies.
(d) Software. All of the commercial software
utilized by PFP and each of the other Praxis Companies in the operation of their
respective businesses has been licensed properly and all fees, royalties and
charges payable in connection therewith have been paid in full or otherwise
accrued for in the Financial Statements. All of the software utilized by PFP and
each of the other Praxis Companies in the operation of their businesses, except
for the point of service and accounting software, is commercially available and
anticipated to be "year 2000 compliant".
Section 3.27 Corporate Records. The minute books of PFP and each
of the other Praxis Companies have been made available to the PAC Parties prior
to the Closing and accurately reflect all minutes of proceedings of and actions
taken by the directors of PFP and each of the other Praxis Companies, or any
committee of the Board of Directors of PFP and each of the other Praxis
Companies and all records of meetings of and actions taken by PFP and each of
the other Praxis Companies, that are required by applicable laws to be recorded
in or reflected in the corporate records thereof.
Section 3.28 Related Party Transactions. All transactions,
contracts and other arrangements pursuant to which PFP and any of the other
Praxis Companies is a party or pursuant to which PFP and any of the other Praxis
Companies receives or furnishes the services of personnel or rents or purchases
real or personal property or otherwise involves payments by or to the Retained
Praxis Companies or to any other Affiliate of PFP, any officer, director or
stockholder of PFP and any of the other Praxis Companies, any entity in which
such persons have a financial interest, any relative of any such party or any
partnership, joint venture, limited liability company or corporation in which
any such party is or was a member, partner or stockholder, have been documented
in the Intercompany Services Agreement.
24
Section 3.29 Broker and Finder Fees. None of PFP's Stockholders
nor PFP have engaged any broker or finder in connection with the transactions
contemplated by this Agreement. No action by any of the PFP Stockholders or PFP
will cause or support any claim to be asserted against the PAC Parties or PFP by
any broker, finder or intermediary in connection with such transaction.
Section 3.30 Adequate Disclosure. No representation or warranty
made by PFP or any of the PFP Stockholders in this Agreement, or any statement
contained in any Exhibit or Schedule to this Agreement, or any certificate or
document furnished or to be furnished to the PAC Parties pursuant to the terms
of this Agreement in connection with the transactions contemplated hereby,
contains any untrue or misleading statement of a material fact or omits to state
a material fact necessary in order to make the statements contained therein not
misleading.
Section 3.31 No Adverse Change or Conditions. Except as expressly
contemplated by this Agreement, since the Balance Sheet Date, PFP and the other
Praxis Companies (i) have conducted their businesses in the ordinary course and
consistent with past practice, and (ii) have not suffered any change that has
had a material adverse effect on the financial condition, business, customer
relations or prospects of the Praxis Companies or any of them. There are no
conditions, facts, developments or circumstances of an unusual or special nature
that reasonably could be expected to have a material adverse effect upon the
financial condition, business, customer relations or prospects of PFP and the
other Praxis Companies that have not been disclosed in writing to the PAC
Parties by PFP or the PFP Stockholders.
Section 3.32 Relationships with Customers and Suppliers. Except
as disclosed in Schedule 3.32, neither PFP nor the PFP Stockholders have any
knowledge of any written or oral communication, fact, event or action which
exists or has occurred since the Balance Sheet Date, which would indicate that
there is any material prospect that any customers of or suppliers to PFP and any
of the other Praxis Companies may terminate or reduce materially their business
with PFP and any of the other Praxis Companies.
Section 3.33 Product Liability. Except to the extent covered by
applicable insurance, neither PFP nor any of the other Praxis Companies have any
liability or potential liability arising out of any injury to individuals or
property as a result of the ownership, possession or use of any product
manufactured, sold, leased or delivered by PFP and any of the other Praxis
Companies, and, to PFP's knowledge, there is no basis for the assertion of any
such liability against PFP and any of the other Praxis Companies. PFP and each
of the other Praxis Companies have in full force and effect indemnification
agreements with all vendors, suppliers and manufacturers with which PFP and each
of the other Praxis Companies
25
conduct business, all of which are identified in the Schedules to this
Agreement.
Section 3.34 Change in Control. Neither PFP nor any of the other
Praxis Companies is a party to any contract or arrangement which contains a
"change in control," "potential change in control" or similar provision, and the
consummation of the transactions contemplated hereby shall not (either alone or
upon the occurrence of additional acts or events) result in any payment or
payments becoming due from PFP and any of the other Praxis Companies to any
Person or give any Person the right to terminate or alter the provisions of any
agreement to which PFP and any of the other Praxis Companies is a party.
Section 3.35 Investment Representations.
(a) PFP and each of the PFP Stockholders is an
"accredited investor" within the meaning of Rule 501(a) of the United States
Securities and Exchange Commission Regulation D. PFP and each of the PFP
Stockholders is aware that the PAC Common Shares will not be registered under
the Securities Act on the Closing Date and that the PAC Common Shares may not be
disposed of unless they are registered pursuant to the Registration Rights
Agreement or transferred under an available exemption from the registration
requirements of the United States Securities Laws after providing PAC with the
opinion of qualified legal counsel to that effect. PFP and each of the PFP
Stockholders possesses the requisite knowledge and experience in business
matters to be capable of evaluating the merits and risks of an investment in PAC
Common Shares. PFP and each of the PFP Stockholders have received and reviewed
the materials identified on Schedule 3.35(a) and have had access to the members
of the management team of PAC and to all other information and materials that he
deems necessary or appropriate to review or consider in order to evaluate an
investment in PAC Common Shares.
(b) PFP and each of the PFP Stockholders will acquire
the PAC Share Consideration for its or his own account, for investment purposes
only and not with a view to distribution thereof. PFP and each of the PFP
Stockholder agree and understand that the PAC Common Shares may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
without registration under the Securities Act, except pursuant to a valid
exemption from registration under the Securities Act or pursuant to a
registration statement that has been filed with and declared effective by the
United States Securities and Exchange Commission. PFP and each of the PFP
Stockholders understand that the certificates representing the PAC Share
Consideration shall bear the restrictive legend set forth on Schedule 3.35(b).
26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PAC PARTIES
The PAC Parties represents and warrants to and for the benefit of PFP
as follows:
Section 4.1 Organization and Good Standing. PAC is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has full corporate power and authority to carry on
its business as it is now being conducted. PAC Mexico is a Mexican limited
liability corporation with variable capital (sociedad de responsabilidad
limitada de capital variable) duly organized, validly existing and in good
standing under the laws of the United Mexican States and has full power and
authority to carry on its business as it is now being conducted.
Section 4.2 Execution and Effect of Agreement. Each of the PAC
Parties has the corporate power and authority to enter into, execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by each of the PAC Parties, the consummation by each of the PAC Parties of the
transactions contemplated hereby and the performance of its obligations
hereunder have been duly authorized by all necessary corporate action on the
part of each of the PAC Parties . This Agreement has been duly executed and
delivered by each of the PAC Parties and constitutes a legal, valid and binding
obligation of each of the PAC Parties, enforceable in accordance with its terms,
except as enforceability hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the exercise of
judicial discretion in accordance with general principles of equity.
Section 4.3 Validity of Shares. The PAC Common Shares which will
constitute the PAC Share Consideration shall, when issued, (i) be duly
authorized, validly issued, fully paid and nonassessable and free of any liens
and encumbrances (other than liens created by reason of the Escrow Agreement)
created by PAC, (ii) be free and clear of any transfer restrictions, liens and
encumbrances other than those imposed under applicable United States federal and
state securities laws and regulations and under the Escrow Agreement and (iii)
not be subject to any preemptive rights created by statute, the Articles of
Incorporation or the Bylaws of PAC.
Section 4.4 Restrictions. The execution and delivery of this
Agreement by each of the PAC Parties, the consummation of the transactions
contemplated hereby and the performance of the obligations of each of the PAC
Parties hereunder will not violate any of the provisions of the charter or
by-laws of either of the
27
PAC Parties or the laws of the Commonwealth of Virginia or the United Mexican
States which are applicable to each of the PAC Parties.
Section 4.5 No Consents. Except as set forth herein or
contemplated by this Agreement, no filing with, or consent, waiver, approval or
authorization of, or notice to, any third party is required to be made or
obtained by either of the PAC Parties in connection with the execution and
delivery of this Agreement, the consummation of any of the transactions
contemplated hereby or the performance of any of its obligations hereunder which
have not been obtained by the PAC Parties.
Section 4.6 No Brokers. Neither of the PAC Parties has not
engaged any broker or finder in connection with the transactions contemplated by
this Agreement, and no action by the PAC Parties will cause or support any claim
to be asserted against the PFP Stockholders by any broker, finder or
intermediary in connection with such transaction.
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
Section 6.1 Conditions to the Obligations of the PAC Parties.
The obligations of the PAC Parties to consummate the transactions contemplated
hereby at the Closing and to perform its other obligations under this Agreement
which are to be performed at and after the Closing are subject to the
satisfaction at or prior to the Closing of the conditions precedent set forth in
this Section 6.1 (unless any such condition shall be waived in writing by the
PAC Parties):
(a) No Material Adverse Changes. There having
been no material adverse change in the condition of the business, operations,
assets, rights, properties, liabilities, financial condition, customer or
franchisee relations or prospects of PFP and any of the other Praxis Companies
between the date hereof and the Closing Date.
(b) Consents and Approvals Obtained. Each of
the parties having obtained, prior to the Closing, all consents, approvals,
waivers, and authorizations from governmental authorities, courts, lenders and
other third parties whose consent,
28
approval, waiver or authorization is reasonably necessary or advisable in order
to consummate the transactions contemplated hereby.
(c) Representations and Warranties True. Each
of the representations and warranties of PFP and the PFP Stockholders contained
in this Agreement having been true and correct on and as of the date hereof and
being true and correct on and as of the Closing Date with the same effect as
though made on and as of the Closing Date (except with respect to those
representations and warranties which speak as of a specified date other than the
Closing Date, which representations and warranties need be true and correct only
as of such specified date).
(d) Compliance with Agreement. PFP and the PFP
Stockholders having performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by PFP or the PFP Stockholders on or prior to the Closing Date.
(e) Satisfactory Corporate Proceedings. All
corporate and other proceedings to be taken by PFP and each of the other Praxis
Companies in connection with the transactions contemplated hereby and all
documents incident to such transactions being satisfactory in form and substance
to the PAC Parties.
(f) No Injunctions or Restraining Orders;
Claims. There being no injunction, restraining order or decree of any nature
whatsoever that is in effect which restrains or prohibits the consummation of
the transactions contemplated hereby. No Person other than PFP or the PFP
Stockholders having asserted, or threatened to assert, any claim that such
Person has any rights in PFP Share Consideration or the Transferred Praxis
Shares or any right to acquire or obtain beneficial ownership of any shares of
the capital stock of PFP and any of the other Praxis Companies or that such
Person is entitled to all or any portion of the consideration payable by the PAC
Parties hereunder.
(g) Approval By Board of Directors. The terms
of this Agreement and the transactions contemplated hereby having been approved
by the Board of Directors of PAC on behalf of itself and as the sole member of
PAC Mexico.
(h) Employment Agreements. Xxxxx Xxxxxx Raig
having entered into an Employment Agreement with PAC in form and content
satisfactory to PAC in all respects (the "Employment Agreement"), and, subject
to the occurrence of the Closing, the Employment Agreement being in full force
and effect as of the Closing Date and Xxxxx Xxxxxx Raig being ready, willing and
able to perform his duties thereunder as of the Closing Date.
(i) Agreements Not to Compete. Each of PFP's
Stockholders having entered into an Agreement Not to Compete with
29
PAC in substantially the form attached hereto as Exhibit C (collectively, the
"Agreements Not to Compete"), and, subject to the occurrence of the Closing,
each such Agreement Not to Compete being in full force and effect as of the
Closing Date.
(j) Escrow Agreement. PFP and the PFP
Stockholder having entered into the Escrow Agreement, and, subject to the
occurrence of the Closing, such Escrow Agreement being in full force and effect
as of the Closing Date.
(k) Tax Assurances. The PAC Parties having
received assurances, which must be satisfactory to the PAC Parties and their
advisors in their sole and absolute discretion, as to the Mexican tax treatment
of the transactions described in Article I of this Agreement, including (without
limitation) (i) the opinion of PFP's tax counsel that the transaction described
in Article I of this Agreement do not result in any Mexican taxation of PFP or
any of the Praxis Companies, (ii) the letter ruling from the Mexican tax
authorities which serves as the basis for the foregoing conclusion, and (iii)
the evaluation of tax risks and benefits to PFP and the other Praxis Companies
by PAC independent tax advisors at Ernst & Young.
(l) Financial Statements. The PAC Parties
having received the audited Financial Statements required by Section 3.8 of this
Agreement.
(m) Closing Documentation. The PAC Parties
having received all of the documents, instruments or certificates required by
Section 7.2 hereof to be executed and delivered by PFP and the PFP Stockholders
at the Closing or that PFP and the PFP Stockholders are required to cause to be
executed and delivered to PAC Parties at the Closing under Section 7.2 hereof.
(n) Intercompany Services Agreement. PFP having
caused any of its Affiliates (including, without limitation, Praxis Bienes
Raices, S.A. de C.V.) which presently provide personnel or services to PFP and
any of the other Praxis Companies to execute written agreements to continue to
provide such personnel or services to PFP and the other Praxis Companies after
Closing on essentially the same terms and conditions as are in accordance with
past practice, except to the extent that the PAC Parties and PFP mutually agree
to modify any of such terms and conditions.
Section 6.2 Conditions to the Obligations of PFP and the PFP
Stockholders. The obligations of PFP and the PFP Stockholders to consummate the
transactions contemplated hereby at the Closing and to perform their other
obligations under this Agreement which are to be performed at and after the
Closing are subject to the satisfaction at or prior to the Closing of the
conditions precedent set forth in this Section 6.2 (unless any such condition
shall be waived in writing by the PFP Representative):
30
(a) Representations and Warranties True. Each of
the representations and warranties of the PAC Parties contained in this
Agreement having been true and correct on and as of the date hereof and being
true and correct on and as of the Closing Date with the same effect as though
made on and as of the Closing Date.
(b) Compliance with Agreement. The PAC Parties having
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by the
PAC Parties on or prior to the Closing Date.
(c) Satisfactory Corporate Proceedings. All
corporate and other proceedings to be taken by the PAC Parties in connection
with the transactions contemplated hereby and all documents incident to such
transactions being satisfactory in form and substance to the PFP Representative.
(d) No Injunctions or Restraining Orders. On the
Closing Date, there being no injunction, restraining order or decree of any
nature whatsoever that is in effect which restrains or prohibits the
consummation of the transactions contemplated hereby.
(e) Employment Agreement. PAC having entered
into the Employment Agreement with Xxxxx Xxxxxx Raig, and, subject to the
occurrence of the Closing, such Employment Agreement being in full force and
effect as of the Closing Date.
(f) Escrow Agreement. PAC having entered into
the Escrow Agreement, and, subject to the occurrence of the Closing, such Escrow
Agreement being in full force and effect as of the Closing Date.
(g) Registration Rights Agreement. PAC having
entered into a Registration Rights Agreement with PFP and the PFP Stockholders
with regard to the PAC Common Shares substantially in the form attached hereto
as Exhibit D (the "Registration Rights Agreement"), and, subject to the
occurrence of the Closing, such Registration Rights Agreement being in full
force and effect as of the Closing Date.
(h) Closing Documentation. PFP's Representative
having received all of the documents, instruments or certificates required by
Section 7.3 hereof to be executed and delivered by the PAC Parties at the
Closing or that the PAC Parties is required to cause to executed and delivered
to PFP or the PFP Stockholders at the Closing under Section 7.3 hereof.
31
ARTICLE VII
CLOSING
Section 7.1 Closing. Closing shall take place at the offices of
Miles & Stockbridge P.C., 00 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 at 10:00
a.m., local time, on March 31, 1998, or at such other place and at such other
time and date as may be mutually agreed upon in writing by the PAC Parties and
the PFP Representative. All proceedings to be taken and all documents to be
executed and delivered by the PFP Stockholders or PFP in connection with the
consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to the PAC Parties and its counsel. All
proceedings to be taken and all documents to be executed and delivered by the
PAC Parties in connection with the consummation of the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to the PFP's
Representative and its counsel. All proceedings to be taken and all documents to
be executed and delivered on the Closing Date by the parties shall be deemed to
have been taken and executed simultaneously, and no proceedings shall be deemed
taken nor any documents executed or delivered until all have been taken,
executed or delivered.
Section 7.2 Documents to be Delivered at Closing by PFP and the
PFP Stockholders. At the Closing, PFP and the PFP Stockholders shall deliver,
or shall cause to be delivered, to PAC Parties each of the documents listed on
the List of Closing Documents attached hereto as Exhibit I and made a part
hereof for which Praxis is designated as being responsible and such other
documents, instruments or agreements as may be reasonably requested by the PAC
Parties to effectuate the transactions contemplated by this Agreement.
Section 7.3 Documents to be Delivered by the PAC Parties. At the
Closing, the PAC Parties shall deliver to the PFP Representative each of the
documents listed on the List of Closing Documents attached hereto as Exhibit I
and made a part hereof for which PAC is designated as being responsible and such
other documents, instruments or agreements as may be reasonably requested by the
PFP Representatives to effectuate the transactions contemplated by this
Agreement.
ARTICLE VIII
OTHER COVENANTS AND AGREEMENTS OF THE PARTIES
Section 8.1 Referral of Customers and Suppliers. From and after
the Closing, PFP and the PFP Stockholders shall use their respective best
efforts to facilitate the transfer to the PAC Parties of the relationships of
PFP and the PFP Stockholders with the customers and suppliers of the business of
the Praxis
32
Companies, and shall provide such reasonable assistance to the PAC Parties in
such regard as may be requested by the PAC Parties from time to time. The PFP
Stockholders hereby appoint the PFP Representative to act on their behalf for
this purpose.
Section 8.2 Waiver of Claims by the PFP Stockholders. Each of
the PFP Stockholders hereby waives any and all claims that he may now or
hereafter have against PFP or any of the other Praxis Companies in his capacity
as an officer or director, or former officer or director, for indemnification,
contribution or otherwise which have arisen or may arise under the charter or
bylaws of PFP or any of the other Praxis Companies, as amended, or under
Applicable Law in respect of any matters that may have arisen or occurred prior
to and through the Closing Date, except for the claim of DISA for the payment of
U.S. $3,482,865 in debt owed to it by PFP which is to be repaid in full at
Closing in accordance with the transactions described in Article I of this
Agreement.
Section 8.3 Use of Certain Trademarks and Tradenames. From and
after the Closing, none of the PFP Stockholders (nor any entity in which they
may have an indirect or direct interest) shall use after the Closing Date the
tradenames "Precision Tune," "ACC-U-TUNE," "Jagged Line Design," "Precision Tune
& Jagged Line," "Precision Guard," "Precision Tune Auto Care & Design," or any
other tradename, trademark, service xxxx or logo related to the Precision Tune
franchise business formerly conducted by the Praxis Companies, or any
trademarks, service marks, logos or tradenames that are confusingly similar
thereto or that are a translation or transliteration thereof into any language
or alphabet, in connection with any business that is the same as or similar to
the Precision Tune franchise business formerly conducted by the Praxis
Companies.
Section 8.4 Post-Closing Financial Statements.
(a) Delivery of Financial Statements. Following
Closing, the PFP Stockholders shall promptly provide the PAC Parties with copies
of all financial statements (audited and unaudited) of PFP and the other Praxis
Companies relating to periods of time prior to and through the Closing Date and
provide the PAC Parties' auditors with management letters and other appropriate
assurances with respect to such financial statements that may reasonably be
requested by the PAC Parties and which have not been provided previously to the
PAC Parties, including, without limitation, all audited and unaudited financial
statements of PFP and the other Praxis Companies that shall be required by PAC
in order to make any and all necessary filings with the United States Securities
and Exchange Commission and other Governmental Authorities. The PFP Stockholders
shall also promptly provide to PAC consents from PFP's independent accountants
to the inclusion of their audit reports relating to PFP and any of the other
Praxis Companies in filings with the United States Securities and Exchange
Commission (or in any disclosure documents PAC may utilize in
33
connection with an offering of its securities), "comfort letters," and such
other assurances from the independent accountants of PFP that may be reasonably
requested by PAC or any underwriter, placement agent or purchaser of the
securities of PAC with respect to any financial statements provided to the PAC
Parties pursuant to this Section.
(b) Preparation of Financial Statements. Each of
the financial statements provided by the PFP Stockholders to the PAC Parties, if
any, pursuant to this Section shall be prepared in accordance with GAAP (and
Regulation S-X promulgated by the United States Securities and Exchange
Commission), and the PFP Stockholders covenant and agree that all such financial
statements shall fairly present the financial condition and results of
operations of PFP and the other Praxis Companies at and for the dates and
periods indicated in such financial statements. The costs and expenses of
preparing the 1997 Financial Statements in accordance with GAAP (and Regulation
S-X promulgated by the United States Securities and Exchange Commission) shall
be divided equally and paid for by the PFP Stockholders and the Praxis
Companies. The costs and expenses of preparing the financial statements of the
Praxis Companies for any other period in accordance with GAAP (and Regulation
S-X promulgated by the United States Securities and Exchange Commission) shall
be borne and paid for by the Praxis Companies.
Section 8.5 [Intentionally Blank]
Section 8.6 Confidentiality. Each of the parties hereto for
themselves and their respective officers, directors, employees, stockholders and
representatives, shall hold in confidence all information, books, records and
documents acquired from any other party hereto prior to, on, or after the date
hereof in the course of negotiation of the transactions contemplated hereby or
pursuant to the provisions hereof and will not disclose the same to any third
party except as required by law or as permitted by Section 5.5, or except to the
extent necessary to (a) respond to lawful process, (b) comply with Applicable
Law, (c) establish a lawful claim or defense, or (d) obtain reasonably necessary
advice of counsel. Should the transactions contemplated hereby not be
consummated for any reason, each party shall promptly return to the other all
originals and copies of such documents and other written information obtained
from the other in the course of such negotiations or pursuant hereto and shall
promptly destroy all evaluations and studies prepared by it or by any of its
representatives on the basis of such information, books, records or documents.
The foregoing shall not apply to information concerning PFP and the other Praxis
Companies which was known to the PAC Parties or was in the public domain at the
time it was disclosed to the PAC Parties or which subsequently entered the
public domain through no wrongful act of the PAC Parties, nor shall the PAC
Parties be bound by this provision after the Closing with respect to any
information
34
concerning PFP or the other Praxis Companies or PFP's ownership and operation
thereof.
Section 8.7 Cooperation. From and after the Closing until the
expiration of all relevant statutes of limitations for tax matters under Mexican
Law, the PFP Stockholders shall cooperate fully with the PAC Parties and shall
provide such assistance as may be reasonably requested by the PAC Parties in
connection with the preparation of all financial statements and Tax Returns
relating to PFP and the other Praxis Companies and with respect to all matters
relating to Taxes of the Praxis Companies, including, without limitation, the
defense or prosecution of any Contest, and shall keep the PAC Parties informed
as to any issue relating to Taxes of which the PFP Stockholders may become aware
which could have a bearing on the responsibilities of PFP and the other Praxis
Companies or the PAC Parties for Taxes or the preparation of financial
statements. The PFP Stockholders hereby appoint the PFP Representative to act on
their benefit for this purpose.
Section 8.8 Tax Returns.
(a) Pre-Closing Periods. The Praxis Companies
shall timely and accurately file, or cause to be filed, all Tax Returns for
Taxes (and all amendments thereto) required to be filed by or on behalf of PFP
and the other Praxis Companies for any taxable year or taxable period ending on
or before the Closing Date, including any taxable period that ends on the
Closing Date (all such periods described in this Section being referred to
herein as "Pre-Closing Periods"); provided, however, that the PAC Parties shall
have a reasonable opportunity to review all such Tax Returns and amendments
thereto prior to the filing thereof. The Praxis Companies shall not take any
position on such Tax Returns that relate to PFP and the other Praxis Companies
that would adversely affect PFP and the other Praxis Companies or the PAC
Parties after the Closing Date. The Praxis Companies shall pay for and be solely
responsible for the costs of preparing and filing the Tax Returns for the
Pre-Closing Period.
(b) Post-Closing Periods. The PAC Parties shall
be responsible for the timely preparation and filing of all Tax Returns of PFP
and the other Praxis Companies for any taxable year or period beginning after
the Closing Date and for any taxable period beginning prior to and ending after
the Closing Date (all such periods described in this Section bering referred to
as "Post-Closing Periods"). The PAC Parties shall pay and be responsible for,
and shall be entitled to all refunds and credits of, all Taxes (together with
reasonable attorney's fees and any legal or other expenses for investigating or
defending any actions with respect to Taxes) payable by PFP and the other Praxis
Companies with respect to any Post-Closing Period.
(c) Bridge Periods. If, for any Income Tax
purpose, a taxable year or taxable period of PFP or any of the
35
other Praxis Companies which begins before the Closing Date and ends after the
Closing Date (a "Bridge Period") does not terminate on the Closing Date, and the
PAC Parties have the responsibility to pay Taxes for all or a portion of the
Bridge Period, the parties hereto will, to the extent permitted by Applicable
Law, elect with the relevant Tax Authority to treat the portion of the Bridge
Period on or before the Closing Date (a "PFP Period") for all purposes as a
short taxable period ending as of the close of the Closing Date and such short
taxable period shall be treated as a Pre-Closing Period for purposes of this
Agreement and the portion of the Bridge Period after the Closing Date (the "PAC
Period") shall be treated as a Post-Closing Period for purposes of this
Agreement. In any case where Applicable Law does not permit such an election to
be made, then, for purposes of this Agreement, for the Bridge Period shall be
allocated between the PFP Period and the PAC Period using an
interim-closing-of-the-books method assuming that such taxable period ended at
the close of business on the Closing Date, except that exemptions, allowances or
deductions that are calculated on an annual basis (such as the deduction for
depreciation) shall be apportioned on a per diem basis.
(i) The PAC Parties shall cause PFP and
the other Praxis Companies to prepare and file all Tax Returns and pay all Taxes
due, if any, with respect to PFP and the other Praxis Companies for any Bridge
Period that does not terminate on the Closing Date, for which it is responsible
to pay Taxes in whole or in part, provided that the satisfy their obligations as
set forth in this Section 8.8(c)(i). The PFP Representative shall promptly
deliver to the PAC Parties work papers relating to Taxes due for the PFP Period,
certified by the PFP Representative, setting forth in detail all information
required to complete the applicable Tax Returns. Upon notice from the PAC
Parties, the PFP Stockholders shall pay to the PAC Parties the Taxes for the PFP
Period on or before the second business day prior to the due date for the
payment of such Taxes, by wire transfer of immediately available funds to the
account designated by the PAC Parties. In the event that the PFP Stockholders
fail to make the payments required by this Section 8.8(c)(i) to the PAC Parties
prior to the date any payment for Income Taxes as described in this Section
8.8(c)(i) is due, such required payment shall bear interest from such due date
until paid, at the underpayment rate of interest determined under Applicable
Law.
(ii) The PAC Parties shall have exclusive
control over and responsibility to conduct any Contest for a Post-Closing Period
and for a Bridge Period if the Contest for a Bridge Period relates solely to the
PAC Parties; provided, however, that the PAC Parties shall not enter into any
agreement in compromise or settlement of such Contest which could affect a
Pre-Closing Period or a PFP Period without the written consent of PFP
Representative.
(iii) Unless the PAC Parties agree in
writing to waive any claim for indemnification under Section 10.3 with respect
36
thereto, the PFP shall have exclusive control over and responsibility to conduct
any Contest for a Pre-Closing Period and for a Bridge Period if the Contest for
a Bridge Period relates solely to the PFP Stockholders' Period; provided,
however, that the PFP Stockholders shall not enter into any agreement in
compromise or settlement of such Contest which could affect a Post-Closing
Period or a PAC Period without the written consent of the PAC Parties.
(iv) The PAC Parties shall notify the PFP
Representative in writing promptly upon receipt by PFP or any other Praxis
Company of notice of any Contest or assessment relating thereto for Pre-Closing
Period or a Bridge Period. Failure of the PAC Parties to so notify the PFP
Representative shall not relieve the PFP Stockholders from any liability under
this Section 8.8 or Section 10.3 except to the extent it is proven that the PFP
Stockholders suffered actual prejudice in connection with or in defending
against a Contest. The PFP Representative shall notify the PAC Parties in
writing promptly upon receipt by the PFP Stockholders of notice of any Contest
or assessment relating to a Post-Closing Period or a Bridge Period.
(v) The PAC Parties and the PFP
Stockholders agree to jointly control and conduct any Contest for a Bridge
Period that relates to both the PFP Period and the PAC Period. The PFP
Stockholders and the PAC Parties agree to cooperate fully with each other with
respect to defending or answering any such Contest and to provide each other
with all materials, information and documents as reasonably requested by the
other. Neither the PAC Parties nor the PFP shall be liable for any portion of
any settlement of any contest for a Bridge Period that relates to both the PFP
Stockholders' Period and the PAC Period effected without its written consent,
provided such consent was not unreasonably withheld.
(vi) Except as otherwise provided in this
Agreement and subject to the allocation of liabilities for Taxes, the PFP
Stockholders and the PAC Parties agree to cooperate fully with each other with
respect to the preparation of all Tax Returns and with respect to all matters
relating to Taxes, and to keep each other advised as to any issue relating to
Taxes which could have a bearing on such other party's responsibilities
hereunder.
(vii) In any Contest controlled by the PFP
Stockholders, the PAC Parties will take, and will cause PFP and each other
Praxis Company to take, such action as the PFP Representative may by written
notice reasonably request in connection with such Contest (including the payment
of a Tax preparatory to filing a claim for refund of such Tax); provided that
the PFP Stockholders shall first pay the amount of such Tax to the PAC Parties.
37
(d) Changes by PFP. Without the prior written
consent of the PAC Parties, which consent may be granted or withheld in the PAC
Parties' sole and absolute discretion, the PFP Stockholders shall not, to the
extent that it may affect or relate to PFP or any of the other Praxis Companies,
make or change any tax election, change any annual tax accounting period, adopt
or change any method of tax accounting, file any amended Tax Return, enter into
any closing agreement, settle any Tax claim or assessment, surrender any right
to claim a Tax refund, consent to any extension or waiver of the limitations
period applicable to any Tax claim or assessment or take or omit to take any
other action, if any such action or omission would have the effect of increasing
the Post-Closing Period Tax liability of PFP or any of the other Praxis
Companies.
Section 8.9 PAC Board Seat. In respect of the PAC Common stock
to be issued to PFP at Closing, the management of PAC agrees to nominate and to
support the nomination of Xxxxxxxx Xxxxxxxx Xxxxxxxxxx as a Class I Director of
PAC with a term expiring at the annual meeting of PAC's stockholders to be held
in 2001.
ARTICLE IX
[INTENTIONALLY OMITTED]
ARTICLE X
INDEMNIFICATION AND SURVIVAL OF REPRESENTATIONS, WARRANTIES
COVENANTS AND AGREEMENTS
Section 10.1 Indemnification.
(a) By the PFP Stockholders. From and after the
Closing Date, subject to the limitations set forth in Section 10.4, the PFP
Stockholders, jointly and severally, shall defend, indemnify and hold harmless
the PAC Parties for, from and against all demands, suits, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs, judgments
and expenses, including, without limitation, interest, penalties, reasonable
attorneys' fees, disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses (collectively, the "PAC Parties Losses"), imposed on,
or incurred by the PAC Parties or any of its Affiliates, based upon, arising out
of, asserted against or resulting from, directly or indirectly, (i) the
inaccuracy or untruth of any of the representations made by PFP or the PFP
Stockholders pursuant to this Agreement or in Exhibit B or any Schedule to this
Agreement or in any certificate, document or instrument executed and delivered
by PFP or the PFP Stockholders in connection with this Agreement, (ii) the
breach by
38
PFP or any of the PFP Stockholders of any of the warranties made by the PFP
Stockholders in this Agreement or in any Exhibit or Schedule to this Agreement
or the failure by PFP or any of the PFP Stockholders to perform, observe or
comply with, any of their respective covenants or agreements contained in this
Agreement; (iii) the breach by PFP or any of the PFP Stockholders of, or the
failure of PFP or any of the PFP Stockholders to perform, observe or comply
with, any of its covenants or agreements to be performed, observed or complied
with by PFP or any of the PFP Stockholders prior to or at the Closing; (iv) any
liabilities, obligations, duties, indebtedness or responsibilities of PFP or any
of the PFP Stockholders, of any nature whatsoever; (v) the operation of the
business of PFP or any of the other Praxis Companies prior to the Closing; (vi)
any claims asserted against PFP or any of the other Praxis Companies, whether in
the nature of product liability claims or otherwise, with respect to shipments
of goods, products or services by PFP or any of the other Praxis Companies
following the Closing of any product or goods packaged or services performed by
PFP or any of the other Praxis Companies prior to the Closing; (vii) the matters
disclosed in the Schedules to this Agreement or (viii) any action, suit,
proceeding, investigation, assessment or judgment incident to any of the
foregoing.
(b) By the PAC Parties. From and after the
Closing Date, subject to the limitations set forth in Section 10.4, the PAC
Parties shall indemnify and hold harmless the PFP Stockholders for, from and
against all demands, suits, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs, judgments and expenses, including, without
limitation, interest, penalties, reasonable attorneys' fees, disbursements and
expenses, and reasonable consultants' fees, disbursements and expenses
(collectively "the PFP Stockholders' Losses"), imposed on, or incurred by any of
the PFP Stockholders, based upon, arising out of, asserted against or resulting
from, directly or indirectly, (i) the inaccuracy or untruth of any or the
representations made by the PAC Parties pursuant to this Agreement or in any
certificate, document or instrument executed and delivered by the PAC Parties in
connection with this Agreement, (ii) the breach by the PAC Parties of any of the
warranties or covenants made by the PAC Parties in this Agreement or the failure
by the PAC Parties to perform, observe or comply with, any of their covenants or
agreements to be performed, observed or complied with by the PAC Parties prior
to or at the Closing, or (iii) any action, suit, proceeding, investigation,
assessment or judgment incident to any of the foregoing.
(c) Interest on Losses. The amount of any PAC
Parties Losses or PFP Stockholders' Losses for which any party is entitled to be
indemnified by the other pursuant to the terms of this Section 10.1 shall bear
interest from and after the date on which the same shall be incurred by the
party entitled to such indemnification until paid in full at a per annum rate of
interest of 8%.
39
Section 10.2 Third Party Claims.
(a) Claims. In the event that subsequent to the
Closing Date, any claim is asserted, any event occurs or any proceeding
(including governmental investigations or audits) is instituted relating to any
matter as to which any of the PFP Stockholders or the PAC Parties or any of its
Affiliates are entitled to indemnification pursuant to this Agreement (the
"Indemnified Party"), as soon as practicable after such Indemnified Party
receives any notice or otherwise becomes aware of any such claim, proceeding or
event, the Indemnified Party shall notify the other party (the "Indemnifying
Party") in writing; provided, however that the failure of the Indemnified Party
to so notify the Indemnifying Party shall not relieve the Indemnifying Party
from any liability under this Article, except to the extent it is proved that
the Indemnifying Party suffered actual prejudice in connection with or in
defending against such claim.
(b) Defense of Claims. If any action is brought
against the Indemnified Party in respect thereof, the Indemnifying Party shall
be entitled to participate in the defense of such action and, to the extent that
the Indemnifying Party may wish, to assume sole control over the defense and
settlement of such action; provided, however, that:
(i) the Indemnified Party shall be
entitled to participate in the defense of such action and to employ counsel at
its own expense to assist in the handling of such action;
(ii) the Indemnifying Party shall obtain
the prior written approval of the Indemnified Party before entering into any
settlement of such action or ceasing to defend against such action; and
(iii) the Indemnifying Party shall notify
the Indemnified Party of its election to assume control of the defense of any
such action within 15 days after receipt of written notice of the action from
the Indemnified Party.
Notwithstanding the foregoing, however, the Indemnifying Party shall
not be entitled to assume sole control over the defense and settlement of any
claim, proceeding or action relating to any matter as to which the Indemnified
Party may be entitled to indemnification pursuant to this Agreement if:
(i) the claim, proceeding or action
relates to, could result in, or arises in connection with any criminal
proceeding, action, indictment, allegation or investigation of any officer or
employee of the Indemnified Party;
(ii) the claim, proceeding or action
could result in or cause a material adverse effect on the Indemnified Party in
the reasonable judgment of the Indemnified Party;
40
(iii) the claim, proceeding or action is
one which seeks principally injunctive or equitable relief against the
Indemnified Party or to the extent that the claim, proceeding or action does not
seek injunctive or equitable relief, but a party has entered a motion seeking
such relief; or
(iv) a court, Governmental Authority or
other arbiter of the claim, proceeding or action rules that the Indemnifying
Party failed or is failing to adequately protect the Indemnified Party's
interests, rights or remedies.
(c) Legal Expenses. After written notice by
the Indemnifying Party to the Indemnified Party of its election to assume
control of the defense of any such action in accordance with the foregoing, (i)
the Indemnifying Party shall not be liable to the Indemnified Party, for any
legal or other expenses (other than expenses of investigation) subsequently
incurred by any of such persons in connection therewith except in cases where
the Indemnified Party shall be advised in writing by reputable legal counsel
that it may have defenses available to it which are inconsistent with or
contrary to the defenses available to the Indemnifying Party in connection with
such action, and (ii) as long as the Indemnifying Party is reasonably contesting
such action in good faith, the Indemnified Party shall not admit any liability
with respect to, or settle, compromise or discharge the claim underlying such
action without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. If the Indemnifying Party
does not elect to assume control over the defense or settlement of an action as
provided in Section 10.2(b), the Indemnified Party shall have the right to
defend the action and related claims in any reasonable manner as they may deem
appropriate.
Section 10.3 Tax Indemnification.
(a) Subject to the limitation set forth in
Section 10.4, the PFP Stockholders hereby jointly and severally indemnify the
PAC Parties and each Praxis Company (including PFP) against and agrees to hold
the PAC Parties and each Praxis Company (including PFP) harmless from any (i)
Tax of the Praxis Companies (including PFP) related to the Tax Indemnification
Period, (ii) Tax of the Praxis Companies (including PFP) resulting from a breach
of the provisions of Section 8.8, and (iii) liabilities, costs, expenses
(including, without limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the contest in
good faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, and any liability as transferee (the sum of (i),
(ii), and (iii) being referred to herein as a "Loss"). The PFP Stockholders
shall be entitled to all refunds and credits for any Pre-Closing Tax Period.
41
(b) For purposes of this subsection, in the case
of any Taxes that are imposed on a periodic basis and are payable for a Tax
period that includes (but does not end on) the Closing Date, the portion of such
Tax related to the portion of such Tax period ending on and including the
Closing shall (i) in the case of any Taxes other than payroll, gross receipts,
sales or use Taxes and Taxes based upon or related to income, be deemed to be
the amount of such Tax for the entire Tax Period multiplied by a fraction the
numerator of which is the number of days in the Tax period ending on and
including the Closing Date and the denominator of which is the number of days in
the entire Tax period, and (ii) in the case of any Tax based upon or related to
income and any payroll, gross receipts, sales or use Tax, be deemed equal to the
amount which would be payable if the relevant Tax period ended on and included
the Closing Date. The portion of any credits relating to a Tax period that
begins before and ends after the Closing Date shall be determined as though the
relevant Tax period ended on and included the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Praxis Companies.
(c) No investigation by the PAC Parties or any
of its Affiliates at or prior to the Closing Date shall relieve the PFP
Stockholders of any liability hereunder.
Section 10.4 Limitation on Indemnity Obligation. Notwithstanding
the provisions of Section 10.1 and 10.3, no Indemnified Party shall be entitled
to indemnification from the Indemnifying Party hereunder until the aggregate
amount of all PAC Parties Losses or PFP Stockholders' Losses, as applicable,
incurred by the Indemnified Party exceeds U.S. $100,000 or the foreign currency
equivalent thereof (the "Indemnification Threshold"). In the event the aggregate
amount of all PAC Parties Losses exceeds the Indemnification Threshold, the
Share Holdback shall be applied to satisfy the amounts of PAC Parties Losses in
excess of the Indemnification Threshold. The Share Holdback shall be PAC
Parties' exclusive remedy and source of compensation for the indemnification for
money damages provided by the PFP Stockholders hereunder. As provided in the
Escrow Agreement, the portions of the Share Holdback attributable to each of the
PFP Stockholders shall be applied on a pro rata basis to satisfy the PAC Parties
Losses. Accordingly, the PAC Parties shall not be entitled to proceed against
the PFP Stockholders individually for money damages in the event that the PAC
Parties' Losses exceed the Share Holdback or arise after the termination of the
Escrow Agreement in accordance with its terms, unless a claim is notified to the
Escrow Agent and the PFP Representative during the term of the Escrow Agreement.
Notwithstanding the foregoing, the limitations set forth in this Section 10.4
shall not apply to PAC Parties Losses or PFP Stockholders' Losses that occur as
a result of (i) the breach by any of the PFP Stockholders of a covenant
contained in this Agreement, or (ii) fraudulent misrepresentations or acts.
42
Section 10.5 Set-Off Rights of the PAC Parties; Manner of Payment
of Claims by the PFP Stockholders or the PAC Parties.
(a) Share Holdback. The PACParties shall have
the right to set-off against the Share Holdback securing the obligation of the
PFP Stockholders to provide the indemnification of the PAC Parties and its
Affiliates contemplated by this Article X (the "Indemnity Share Holdback") the
entire amount of any PAC Parties Losses for which PAC Parties determines in good
faith that it and its Affiliates is entitled to indemnification from the PFP
Stockholders under Sections 10.1 and 10.3 in the manner contemplated by the
Escrow Agreement. The terms of the Escrow Agreement shall provide that the
Escrow Agent shall deliver to PAC the portion of the Indemnity Share Holdback
returned to PAC pursuant to this Section, together with any stock distributed in
respect of such PAC Common Shares.
(b) Exercise of Set-Off Rights. The rights to
set-off described in Section 10.4(a) shall be exercised as follows:
(i) The PAC Parties shall deliver
written notice to PFP's Representative of each claim for
indemnification for which the PAC Parties desires to exercise its right
to set-off.
(ii) The PFP Representative shall then have
fifteen days (which period may be extended by mutual consent in
writing) following receipt of such notice in which to accept or dispute
each such claim, in whole or in part. To the extent that any such claim
is not disputed in writing by the PFP Representative within such
fifteen day period, such claim shall be deemed to have been accepted by
the PFP Representative, and the PAC Parties shall be entitled to
set-off the entire amount of such claim against the Indemnity Share
Holdback.
(iii) In the event that the PFP Representative
shall dispute any claim of the PAC Parties, in whole or in part
(hereafter a "Contested Claim"), the portion of the Indemnity Share
Holdback equal to the amount of the Contested Claim shall be retained
by the Escrow Agent. The Escrow Agent shall hold the portion of the
Indemnity Share Holdback until the Contested Claim has been resolved by
agreement of the parties or until otherwise ordered by a court of
competent jurisdiction, all in the manner specified by the terms of the
Escrow Agreement. The Escrow Agent shall be instructed to promptly
disburse the amount of the Contested Claim to the party entitled
thereto (as determined by agreement of the parties or by order of
court) upon receipt of joint, written instructions from PAC Parties and
the PFP Representative to that effect or upon presentation of a
certified copy of an order of a court of competent jurisdiction by
either party.
43
(c) Payments by PAC Parties. Notwithstanding
anything to the contrary herein, any liability of the PAC Parties under this
Agreement for PFP Stockholders' Losses shall be satisfied solely through the
issuance of additional PAC Common Shares, such additional PAC Common Shares to
be valued at the then prevailing market price per share (subject to equitable
adjustment to account for any reclassification, recapitalization,
reorganization, split-up, combination, exchange of shares or readjustment, or a
stock dividend or other extraordinary distribution (other than a nonliquidating
cash dividend) in respect of or affecting the PAC Common Shares which is
effected after the Closing Date and prior to the issuance of such additional PAC
Common Shares) and to be issued on a pro rata basis to the PFP Stockholders
based on their relative equity interests in PFP immediately prior to Closing as
set forth on Schedule I.
Section 10.6 Survival of Representations, Warranties, Covenants
and Agreements.
(a) Survival in General. Except as otherwise
provided in this Agreement, all of the representations, warranties, covenants
and agreements of the parties contained in this Agreement shall survive the
Closing.
(b) Survival of Representations and Warranties.
Except as provided below, the representations and warranties contained in or
made pursuant to this Agreement and the indemnity obligations set forth in
Sections 10.1(a) and 10.1(b) hereof with respect to breaches of them shall
terminate on, and no claim or action with respect thereto may be brought after,
the Indemnity Termination Date; provided, however, that such representations and
warranties, and the related indemnity obligation of any party with respect
thereto, shall not terminate with respect to any claim, whether or not fixed as
to liability or liquidated as to amount, with respect to which such party has
been given written notice prior to the expiration thereof.
(c) Survival of Covenants and Agreements. Each
of the covenants of the parties contained in or made by the parties pursuant to
the terms of this Agreement which are to be performed by the parties at and
after the Closing, other than the indemnity obligations of the parties with
respect to representations and warranties (which shall survive the Closing as
provided for in the foregoing provisions of this Section), shall survive the
Closing until the same shall have been performed or discharged in full.
(d) Effect of Due Diligence by the PAC Parties.
Notwithstanding any investigation or audit conducted by the PAC Parties prior to
the Closing, the PAC Parties shall be entitled to rely upon the representations
and warranties of PFP and the PFP Stockholders which are set forth in this
Agreement, including all representations and warranties made by PFP and the PFP
Stockholders in any Schedules to this Agreement, and such representations and
44
warranties shall not be deemed to have been waived or otherwise affected by any
such investigation or audit or any knowledge attributable to the PAC Parties.
Section 10.7 Unlimited Indemnification relating to certain Tax and
Contingent Liabilities of the Praxis Companies.
(a) The Ernst & Young report to the PAC Parties regarding
the tax attributes of the Praxis Companies describes four principal potential
tax liabilities of the Praxis Companies as follows:
(i) failure to document interest payments on certain
intercompany loans;
(ii) failure to file the required information returns
regarding income tax withholding for royalties, franchise
rights and related late interest payments made to PAC
Affiliates under franchise agreements for the period 1994 to
1997;
(iii) unavailability of asset tax exemptions for
1995; and
(iv) lack of independent valuation of the Retained
Praxis Companies upon which to base the taxable gain on sale.
(b) Section 3.10 of this Agreement and the related
Schedule 3.10 disclose the existence of certain contingent liabilities of the
Praxis Companies for the lease obligations of the Retained Praxis Companies or
their Affiliates. The PFP Stockholders hereby agree to use all commercially
reasonable efforts to have these and any other contingent liabilities of the
Praxis Companies which do not relate to obligations of other Praxis Companies
released in writing prior to or after the Closing Date.
(c) The PFP Stockholders hereby, jointly and severally,
indemnify the Praxis Companies and the PAC Parties for any liability which any
of the Praxis Companies may incur as a result of any of the potential
liabilities described in clauses (a) or (b) of this Section 10.7, including
interest penalties, fines and costs associated therewith. The indemnification
obligations of the PFP Stockholders shall not be limited under Section 10.4 of
this Agreement; however, the PAC Parties may, in their discretion, offset their
losses against the Share Holdback. In addition, the indemnification obligations
of the PFP Stockholders under this Section 10.7 shall run for the entire period
from the Closing until the expiration of the applicable Mexican tax statute of
limitations in the case of clause (a) and for the entire period from Closing
45
until the release of the applicable Praxis Company guarantees in the case of
clause (b).
ARTICLE XI
MISCELLANEOUS
Section 11.1 Expenses. All legal, accounting, investment banking
and other costs and fees incurred by the PFP Stockholders or PFP in connection
with the transactions contemplated by this Agreement shall be borne and paid for
solely by the PFP Stockholders and the PFP Stockholders shall reimburse PFP for
any such fees that have been paid by PFP prior to the date of this Agreement.
All legal, accounting, investment banking and other costs and fees incurred by
the PAC Parties in connection with the transactions contemplated by this
Agreement shall be borne and paid for by the PAC Parties.
Section 11.2 Entire Agreement. This Agreement, together with the
Collateral Agreements, constitutes the entire agreement and understanding
between the parties hereto in respect of the matters set forth herein, and all
prior negotiations, writings and understandings relating to the subject matter
of this Agreement are merged herein and are superseded and canceled by this
Agreement.
Section 11.3 Amendment and Waiver. This Agreement may be amended,
modified, supplemented or changed in whole or in part only by an agreement in
writing making specific reference to this Agreement and executed by each of the
parties hereto. Any of the terms and conditions of this Agreement may be waived
in whole or in part, but only by an agreement in writing making specific
reference to this Agreement and executed by the party that is entitled to the
benefit of the term or condition being waived. The failure of any party hereto
to insist upon strict performance of or compliance with the provisions of this
Agreement shall not constitute a waiver of any right of any such party hereunder
or prohibit or limit the right of such party to insist upon strict performance
or compliance at any other time.
Section 11.4 Binding Agreement and Successors. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Section 11.5 Assignment. This Agreement and the rights of the
parties hereunder may not be assigned, and the obligations of the parties
hereunder may not be delegated, in whole or in part, by any party without the
prior written consent of the other parties hereto.
Section 11.6 No Third Party Beneficiaries. Nothing in this
Agreement is intended to confer any rights or remedies upon any
46
Person other than the parties hereto and the Indemnified Parties under Article
X.
Section 11.7 Notices. Any notice, request, instruction or other
document or communication required or permitted to be given under this Agreement
shall be in writing and shall be deemed given (i) five days after being
deposited in the mail, postage prepaid, certified or registered mail, (ii) on
the next business day after delivery to a reputable overnight delivery service
such as Federal Express; provided that such service is instructed to make
overnight delivery, or (iii) upon personal delivery if delivered or addressed to
the addresses set forth below or to such other address as any party may
hereafter specify by written notice to the other parties hereto:
(a) If to the PFP Stockholders, delivered or
mailed to:
Xxxxx Xxxxxx Raig
Diamante 117 Col. Pedregal Del Xxxxx
San Xxxxx Xxxxx Xxxxxx, X.X. CP 66221
and
Xxxx Xxxxxxx Xxxxxxx Xxxxxx
Xxxxx 2301
Col. La Cima
Garza, Garcia, N.L. CP 66230
and
Desarrollo Integrado, S.A. de C.V.
Blvd. Xxxx Xxxxx #200
Col. Santa Xxxxx
Monterrey, N.L. CP 64650
with a copy to:
Snr. Xxxx X. Xxxxxxxx-Xxxxx
Xxxxxx-Xxxxxxxx-Xxxxx-Xxxxxx
Xxxxxx-Xxxxxxxx-De xx Xxxxx, S.C.
Edificio Losoles Desp X-00
Xxx. Xxxxxx Xxxxxxxx 0000 Pte.
Apdo. Postal 497 Col. Del Xxxxx
San Xxxxx Xxxxx Xxxxxx, X.X. Mexico 66250
(b) If to the PAC Parties, delivered or mailed to:
Precision Auto Care, Inc.
000 Xxxxxx Xxxxx X.X.
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
President and Chief Executive Officer
47
with copies delivered or mailed to:
Xxxx X. Xxxxxx, Esquire
Miles & Stockbridge P.C.
00 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Section 11.8 Further Assurances. The parties hereto each agree to
execute, make, acknowledge, and deliver such instruments, agreements and other
documents as may be reasonably required to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
Section 11.9 Article and Section Headings. The Article and
Section headings contained in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning or interpretation of
this Agreement or any of its terms and conditions.
Section 11.10 Governing Law; Consent to Jurisdiction. This
Agreement shall be construed and enforced in accordance with and shall be
governed by the laws of State of New York, United States of America, without
regard to its principles of conflict of laws. PFP, each of the PFP Stockholders
and the PAC Parties hereby submit to the non-exclusive jurisdiction of any New
York court or federal court sitting in New York over any suit, action or
proceeding arising out of or relating to this Agreement. PFP and each of the PFP
Stockholders hereby irrevocably appoint Xxxx X. Xxxxxxxx Xxxxx, Santos,
Elizondo, Cantu, Rivera, Garcia, Gonzalez, De xx Xxxxx, S.C., Edificio Losoles
Desp. X-00, Xx. Xxxxxx Xxxxxxxx 0000 Pte., Apdo. Postal 497 Col. Del Valle,
Garza Xxxxxx, X.X. 00000 XXXXXX, as agent to accept service of process for them
and on their behalf in any proceeding brought pursuant to the provisions of this
Agreement and the Collateral Agreements. Final judgment in any such suit, action
or proceeding brought in any such court shall be conclusive and binding upon the
parties and may be enforced in any court to the jurisdiction of which any of the
parties is subject, by a suit upon the judgment.
Section 11.11 Certain Definitions. The following terms,
whenever used in capitalized form in this Agreement, shall have the following
meanings:
"Affiliate" shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with the Person in
question. For purposes of determining whether a Person is an Affiliate, the term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of securities, contract or otherwise.
"Affiliate Group" shall mean, individually and collectively
(i) the Praxis Companies, (ii) PFP, and (iii) any
48
Person as to which the Praxis Companies are potentially liable for Taxes
incurred by such Person pursuant to Applicable Laws or with which the Praxis
Companies file a consolidated, combined or unitary Tax Return with such Person.
"Applicable Laws" shall mean any law, statute, ordinance,
code, rule, regulation, standard, ruling, decree, judgment, award, order or
other requirement of any Governmental Authority that is applicable to PFP, the
PFP Stockholders, the PAC Parties or business, assets or properties of the
Praxis Companies.
"Balance Sheet" shall mean the audited, consolidated balance
sheet of the Praxis Companies as at December 31, 1997.
"Balance Sheet Date" shall mean December 31, 1997.
"Benefit Arrangements" shall mean all life and health
benefits, hospitalization, savings, bonus, deferred compensation, profit
sharing, incentive compensation, severance pay, disability, sick pay, vacation
pay, holding pay, stock option, award or similar plans, and fringe benefit
plans, individual employment and severance contracts and other policies and
practices, whether written or oral, providing employee or executive compensation
or benefits to Employees or their dependents, other than Retirement Plans and Ex
Gratia Arrangements.
"Closing" shall mean the consummation of the transactions
contemplated by this Agreement.
"Closing Date" shall mean the date on which the Closing
actually shall occur pursuant to this Agreement.
"Collateral Agreements" shall mean the Employment Agreement,
the Agreements Not to Compete, the Escrow Agreement, the Intercompany Services
Agreement and the Registration Rights Agreement.
"Contest" shall mean any administrative or judicial Tax audit,
examination, proceeding or litigation involving any Tax Authority.
"Debt" shall mean without duplication (in each case whether
such obligation is with full or limited recourse) (i) any and all obligations
for borrowed money, (ii) obligations in respect of the deferred purchase price
for any real or personal property or services, (iii) any and all obligations in
respect of any capital lease, (iv) any and all contingent obligations under any
guarantees of Debt of another Person, (v) all liabilities under any non-compete
agreements, "change in control" agreements or consulting agreements, and (vi)
any other items required to be reported as short-term or long-term debt on
balance sheets in accordance with GAAP.
49
"Employees" shall mean all current employees, former employees
and retired employees.
"Encumbrance" shall mean any interest of any Person,
including, without limitation, any right to acquire, option, right of
preemption, or any mortgage, lease, charge, pledge, lien, encumbrance,
assignment, hypothecation, security interest, title retention, claim, covenant,
condition, easement or any other security agreement or arrangement or any
restriction of any kind or character.
"Environmental Laws" shall mean any law, statute, regulation,
rule, order, consent, decree, or governmental requirement that relates to or
otherwise imposes liability or standards of conduct concerning Hazardous
Materials or discharges or releases of any Hazardous Materials into air, water
or land, including (but not limited to) the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended; the Resource Conservation
and Recovery Act of 1978, as amended; the Clean Water Act, the Clean Air Act, or
any other similar U.S. or Mexican federal, state or local statutes.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Ex Gratia Arrangements" shall mean those practices of paying
income in respect of retired or deceased Employees.
"Facilities" shall mean the real property having the following
addresses:
Praxis Monterrey City Office Address:
Xxxx Xxxxxxx 2500-3er Piso
Col. Obispado, Monterrey, N.L.
Mexico, C.P. 64060
P.A.P. Monterrey City Office Address:
Xxxx Xxxxxxxx 33050-A
Col. Mitras Centro
Monterrey, N.L. CP 64460
Sixar Afinaciones, S.A. de C.V./
Monterrey City Office Address:
Xx. Xxxxxxxxxxx Xxx 0000-X
Xxx. Residencial San Xxxxxxxxx
Xxxxx Xxxxxx, X.X. CP 67170
Sixar Guadalajara, S.A. de C.V./
Guadalajara City Office Address:
Xx. Xxxxx Xxxxxxx 0000
Col. Conjunto Patrio
Zapopan, Jallsco CP 45020
50
51
Sixar Occidente, S.A. de C.V./
Guadalajara City Office Address:
Xx. Xxxxxxxx 0000
Col. Real Vallarta
Zapopan, Jallsco CP 45020
Premier Accesorios, S.A. de C.V./
Mexico City Office Address:
Av. Patriotismo 655
San Xxxx Mixcoac
Delegacion Xxxxxx Xxxxxx
Mexico, D.F. CP 03710
Praxis and P.A.P. Mexico City Office Address:
Xx. Xxxxxxxx 0000
Col. Tres Estrellas
Delegacion Xxxxxxx X Xxxxxx
Mexico, D.F. CP 07820
Praxis Afinaciones Puerto Rico Office Address:
Palmar del Rio #000
00 xxx. Xxxxxxxx
Xxxxxxxx, XX 00000
Sixar Afinaciones Puerto Rico Office Address:
Xx. Xx Xxxxx #000
Xxx. Xx Xxxxxx
Xxx Xxxx, XX 00000
and all of the buildings and other improvements thereon or thereto which is
used currently by PFP and the other Praxis Companies in the operation of their
businesses.
"Financial Statements" shall have the meaning set forth in
Section 3.8.
"GAAP" shall mean generally accepted
accounting principles in effect in the United States as of the date hereof,
without taking into account any subsequent changes.
"Governmental Authority" shall mean any government or state
(or any subdivision thereof), whether domestic, foreign or multinational, or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
"Guarantees" shall mean any obligations, contingent or
otherwise, of a Person in respect of any indebtedness, obligation or liability
of another Person, including but not limited to direct or indirect guarantees,
endorsements (except for collection or deposit in the ordinary course of
business), notes co-made or discounted, recourse agreements, take-or-pay
agreements, keep-well agreements, agreements to purchase or repurchase such
indebtedness, obligation or liability or any security therefor or to provide
52
funds for the payment or discharge thereof, agreements to maintain solvency,
assets, level of income, or other financial condition, and agreements to make
payment other than for value received.
"Hazardous Materials" shall mean (a) any "hazardous waste" as
defined under Applicable Law including, with respect to the Puerto Rican Praxis
Companies, the Resource Conservation and Recovery Act of 1976, as amended from
time to time, and regulations promulgated thereunder; and (b) any "hazardous
substance" as defined under Applicable Law including, with respect to the Puerto
Rican Praxis Companies, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, and regulations
promulgated thereunder; and (c) any "hazardous material" as defined under
Applicable Law including, with respect to the Puerto Rican Praxis Companies, the
Hazardous Materials Transportation Act, as amended from time to time, and
regulations promulgated thereunder; and shall include without limitation,
asbestos, PCBs, petroleum products, and urea-formaldehyde (in situations where
considered hazardous or toxic).
"Income Taxes" shall mean any income, gross receipts, gains,
net worth, surplus, franchise or withholding taxes (including interest,
penalties or other additions to Tax) imposed by a Tax Authority.
"Indemnity Termination Date" shall mean the first anniversary
of the Closing Date.
"Intellectual Property" shall have the meaning set forth in
Section 3.14.
"IRS" shall mean the Internal Revenue Service of the United
States of America.
"Person" shall mean any individual, corporation,
unincorporated association, business trust, estate, partnership, limited
liability company, limited liability partnership, trust, government or any
agency or political subdivision thereof, or any other entity.
"Retirement Plan" shall mean any plan, fund, program, policy
or practice (other than an Ex Gratia Arrangement) which provides retirement
income to an Employee or results in a deferral of income by such Employee for
periods extending to or beyond the termination of the employment of such
Employee by PFP and all of the other Praxis Companies, and pursuant to which PFP
and any of the other Praxis Companies has paid benefits or contributed funds or
has an obligation to pay benefits or contribute funds in respect of such
Employees.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time, and any successor thereto.
53
"Tax Authority" shall mean a United States, Mexican or foreign
federal, state, or local Governmental Authority having jurisdiction over the
assessment, determination, collection or imposition of any Tax, as the context
requires.
"Tax Indemnification Period" shall mean (i) with respect to
any Taxes for any Pre-Closing Periods or the PFP Stockholders' Period portion of
any Bridge Periods of the Praxis Companies (including PFP), and (ii) with
respect to any Taxes imposed on the Praxis Companies (including PFP) as a result
of being a member of an Affiliated Group, or being a party to any agreement or
arrangement whereby liability of the Praxis Companies (including PFP) for
payments of such amounts was determined or taken into account with reference to
the liability of any other Person for any period prior to the Closing Date.
"Tax Returns" shall mean all returns (including information
returns and amended returns), declarations, reports, claims for refunds,
estimates and statements regarding Taxes, required to be filed under Applicable
Laws.
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including without limitation, all net income, gross income, gross
receipts, sales, use, value added, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, windfall profit, alternative or add
on minimum, excise, estimated, severance, stamp, occupation, property or other
taxes, customs, duties, fees, assessments, or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any Tax Authority.
"U.S. Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended.
Section 11.12 Construction. As used in this Agreement, any
reference to the masculine, feminine or neuter gender shall include all genders,
the plural shall include the singular, and the singular shall include the
plural. With regard to each and every term and condition of this Agreement and
any and all agreements and instruments contemplated hereby, the parties hereto
understand and agree that the same have or has been mutually negotiated,
prepared and drafted, and that if at any time the parties hereto desire or are
required to interpret or construe any such term or condition or any agreement or
instrument subject hereto, no consideration shall be given to the issue of which
party hereto actually prepared, drafted or requested any term or condition of
this Agreement or any agreement or instrument subject hereto. The Exhibits and
Schedules to this Agreement constitute a substantive part of this Agreement and
are hereby incorporated into this Agreement by this reference.
Section 11.13 Counterparts. This Agreement may be executed in
counterparts and multiple originals, each of which shall be
54
deemed an original, but all of which taken together shall constitute one and the
same instrument.
Section 11.14 Time of the Essence. Time is of the essence with
respect to each and every term and provision of this Agreement.
Section 11.15 PFP Representative. Each of the PFP Stockholders
hereby appoints Xxxx Xxxxxxx Xxxxxxx as his exclusive agent and attorney-in-fact
to act on his behalf with respect to any and all matters, claims, controversies
or disputes arising out of the terms of this Agreement (the "PFP
Representative"). Each of the PFP Stockholders further agree that the PFP
Representative shall have the power to take any and all actions which the PFP
Representative believes are necessary or appropriate or in the best interest of
the PFP Stockholders for and on behalf of each of the PFP Stockholders, as fully
as if each of the PFP Stockholders were acting on their own behalf, including,
without limitation, asserting any claims for indemnification under this
Agreement, defending all claims for indemnification or the exercise of set-off
rights by the PAC Parties pursuant to this Agreement, consenting to,
compromising and settling any and all claims, disputes or controversies arising
hereunder, dealing with PAC and the Escrow Agent under the Escrow Agreement,
conducting all negotiations with and otherwise dealing with the PAC Parties and
engaging counsel, accountants and other representatives in connection with the
foregoing matters. The PAC Parties shall have the right to rely upon any actions
taken or omitted to be taken by the PFP's Representative as being the act or
omission of each of the PFP Stockholders, without the need for any inquiry, and
any such actions or omissions shall be binding upon each of the PFP
Stockholders. The PFP Stockholders shall have the right to change the identity
of the PFP's Representative upon the vote of the holders of a majority of the
Percentages of Interest (as set forth on Schedule I to this Agreement), and
shall deliver to the PAC Parties prompt written notice of any such change of
identity.
Section 11.16 PFP's Knowledge. Whenever a representation and
warranty or other provision in this Agreement is qualified by the "knowledge of
PFP" or "PFP's knowledge" or matters "known to" PFP, PFP's knowledge shall mean
(i) the actual knowledge of any of the officers or directors of PFP and any of
the other Praxis Companies or any of the PFP Stockholders or any Seller
Affiliate and (ii) the knowledge that any of the officers or directors of PFP
and any of the other Praxis Companies or any of PFP Stockholders or any Seller
Affiliate would have obtained had they made due and diligent inquiry with
respect to the matter that is the subject of the representation and warranty or
other provision in this Agreement.
Section 11.17 Judgment Currency. If, for purposes of obtaining a
judgment, it becomes necessary to convert any amount due in United States
Dollars under this Agreement or any of the related agreements into another
currency, then the conversion shall
55
be made at the official rate of exchange available on the date on which the
payment of the judgment is made.
Section 11.18 Execution of Agreement as of Closing Date. In the
event that the parties to this Agreement execute and deliver this Agreement as
of the Closing Date, the provisions of this Agreement, which contain agreements
to be performed by any party during the time period between the execution and
delivery of this Agreement and the Closing Date or which purport to provide for
the termination of this Agreement if the Closing Date does not occur prior to a
specific date, shall be of no further force and effect.
IN WITNESS WHEREOF, each of the parties hereto have executed this
Agreement as of the day and year first above written.
WITNESS: PRECISION AUTO CARE, INC.
_______________________ By: ___________________________________________
Name: Xxxx X. Xxxxxx
Title: President and Chief
Executive Officer
PRECISION AUTO CARE MEXICO I, X.xx X.X. de C.V.
By: Precision Auto Care, Inc., Member
_______________________ By: ___________________________________________
Name: Xxxx X. Xxxxxx
Title: General Manager
PROMOTORA DE FRANQUICIAS PRAXIS,
S.A. DE C.V.
_______________________ By: ___________________________________________
Name:
Title:
DESARROLLO INTEGRADO, S.A. de C.V.
_______________________ By: ___________________________________________
Name:
Title:
[SIGNATURES CONTINUED ON NEXT PAGE]
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_______________________ ___________________________________________
C.P. Xxxx Xxxxxxx Xxxxxxx Xxxxxx
_______________________ ___________________________________________
Lic. Xxxxx Xxxxxx Raig
[All signatures to be notarized and, if executed in Mexico,
consularized at the U.S. Consulate in Mexico]
57
