EXHIBIT 2.1
AGREEMENT FOR STRATEGIC ALLIANCE
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made as of this 1st day of October 1998, by and between
MIDAS, International Corporation, having its corporate seat in ▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇
("MIDAS")
and
MAGNETI MARELLI S.p.A., having its corporate seat in ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇
("MARELLI")
hereinafter collectively referred to as the "Parties" or singularly as a
"Party".
WHEREAS:
a) MIDAS owns certain famous trademarks, valuable goodwill and know-how (the
"Midas System") in the field of limited menu fast service auto repair (the
"Business") which it uses for the developement of Midas Shops around the
world;
b) developement of the Business is very foreseeable in the future and will
lead to an increase in demand by the customers especially in Europe and
South America, and such developement will require substantial investments
by the developers;
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c) MARELLI, which is not actually present in the Business, desires to enter
into the Business with the Midas System, and is envisaging to invest a
substantial amount of financial and operational resources for the next
twenty years in the Midas System by improving the present Midas franchisee
network in the Territories and by establishing new franchisee networks for
the Midas System in other countries;
d) MIDAS and MARELLI believe that a long-term cooperation which will encompass
the Parties' common developements and improvements in the performance of
the Midas System is necessary in order to offer to European and South
American consumers the most advanced products/services and to achieve a
satisfactory return on the substantial investment which will be made by
MARELLI;
e) the Parties therefore wish to establish a long-term strategic alliance and
cooperation for the developement of the Midas System throughout the world;
f) MIDAS, either directly or through subsidiaries, owns certain assets in
Europe and Brasil and companies in Europe or companies involved in the
European business of MIDAS by which it is developing the Midas System
through company-owned and franchised Midas Shops;
g) in the framework and as a first step of the alliance and cooperation
mentioned above, MARELLI desires to acquire and MIDAS desires to sell the
Midas Companies to MARELLI, and in addition MIDAS desires to transfer to
MARELLI a long-term license for the Midas System in Europe and South
America and to further provide support and assistance as detailed
hereinafter.
NOW THEREFORE, and in consideration thereof, it is hereby agreed as follows:
I. DEFINITIONS
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- "Accounting Principles" means the generally accepted accounting
principles in the United States of America, consistently applied.
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- "Accounts" means the last available financial statements of the Midas
Companies.
- "Agreement" means this agreement and all its annexes.
- "Assets" means the assets of the Midas Companies as of the Closing Date.
- "Closing Date" means the date of transfer of the Midas Companies in
accordance with clause III.2.2 hereinafter.
- "Environmental Rules" has the meaning set forth in clause III.12.10.1
hereinafter.
- "Intellectual Property" has the meaning set forth in clause III.12.6.1
hereinafter.
- "Liabilities" means any payment, damages, loss, liabilities,
obligations, deficiencies and expenses (including attorney's fees), or
the like, incurred by MARELLI or the Midas Companies resulting in whole
or in part from or in connection with the fact that one or more of the
representations and warranties of MIDAS set forth herein, and in any
statement or instrument delivered to MARELLI pursuant to or in relation
to this Agreement is incorrect, untrue or incomplete in any respect, or
which arise out of acts or omissions by MIDAS or the Midas Companies
occurring prior to the Closing Date, and are not duly accounted or
reserved for in the Accounts.
- "License Agreement" means the agreement form of which is hereattached as
Annex C.
- "Midas Companies" means the companies listed in Annex A.
- "Net Invested Capital" means the presentation (although not necessarily
the specific numbers shown) in Annex B.
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- "TERRITORIES" means Austria, Brasil, Belgium, France, Italy, Monaco,
Poland, Portugal, Spain, and Switzerland.
II. THE STRATEGIC ALLIANCE AND COOPERATION
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1. For a period of 15 years starting from the date hereof the Parties
hereby establish a strategic alliance and cooperation for the
worldwide developement of the Midas System, on the basis of the
following rules and obligations.
2. Cooperation in Developement of the Midas System
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As long as the License Agreement remains in full force and effect
MIDAS and MARELLI agree to cooperate in the continued improvement of
the Midas System.
2.1 As long as the License Agreement remains in full force and effect,
MIDAS will provide support to MARELLI with advice in the following
areas:
(i) commercial, management and technical training of MARELLI's
trainers;
(ii) marketing and pricing;
(iii) franchisee recruitment;
(iv) real estate selection;
(v) shop development (including image, facility, equipment, etc.);
(vi) operations management;
(vii) purchasing;
(viii) documentation;
(ix) software unique to the Midas System;
(x) human resource selection;
(xi) finance and accounting;
(xii) material handling, warehouse management and logistics.
Such advice shall be at no cost to MARELLI.
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2.2 MIDAS' standard training programs will be available to MARELLI in
Chicago, USA, and on a limited basis in Europe, as may be agreed upon
by the Parties. As a general rule, training will be conducted in the
language of the country in which the training is conducted.
Advanced scheduling will be required to coordinate dedicated training
classes.
There will be no additional fees for this training; however,
transportation, food, lodging and other expenses will be the sole
expense of the party attending training.
The European training may be in English at MIDAS' option, based upon
availability of multi-lingual trainers.
2.3 Before the Closing Date, MIDAS will support MARELLI in identifying the
key managers within the present European MIDAS organization and
arrange with them, to any extent possible or legally feasible,
appropriate agreements in agreement with MARELLI for the retention of
such key managers and at no extra-cost to MIDAS.
2.4 As long as the License Agreement remains in full force and effect,
MARELLI will communicate to MIDAS any material experience gained in
exploiting the Midas System and MARELLI, if appropriate, is prepared
to grant it a license with respect thereof upon terms and conditions
to be agreed upon by the Parties from time to time.
2.5 It is hereby agreed that, in the framework of the strategic alliance
contemplated herein, quarterly meetings will be held between MIDAS and
MARELLI representatives for an exchange of views on the development
and performance of the Business.
In no event the information exchanged in those connections will
include any information which are particularly sensitive to the
respective businesses, such as pricing, margins and other topics which
could create antitrust concerns, or infringe any other law to which
the Parties are bound.
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2.6 The Parties will exchange monthly a report on the performance of the
respective businesses. The items of such a report will be agreed upon
by the Parties as soon as practical after the signature of this
Agreement, but they will not encompass any information which could
violate any law to which the Parties are bound.
2.7 A joint committee (the "Joint Committee") will be established. Two of
the top managers from each Party will be appointed as members of the
Joint Committee and shall convene at least twice a year, in order to
discuss and monitor the developments of the strategic alliance between
MIDAS and MARELLI.
3. Transfer of intellectual property of the Midas System
3.1 For the Territories MIDAS will license to MARELLI its trademark, and
the technology and know-how and any development and improvement
thereto relevant to the Midas System according to the License
Agreement to be signed at Closing.
MIDAS shall not be entitled to any other fee at any title whatsoever,
other than the Purchase Price set forth in section III.2.1 of this
Agreement, as may be adjusted, and the fees and royalties set forth in
the License Agreement.
3.2 If at any time during the term of the License Agreement, MIDAS stops
its activities with respect to the Midas System, then no royalties
will be due to MIDAS.
4. Developement in the Territories
No restrictions, except those contained in the existing franchising
contracts, will apply to the development of the Midas System as
defined in the License Agreement in the Territories pursuant to the
License Agreement provided that MARELLI (or any MARELLI affiliate or
FIAT affiliate), for the period of the non-competition clause set
forth in clause II.8.1 hereinafter, can only
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use the Midas System to conduct the Business in the Territories,
except as provided for in clause II.8.2 hereinafter.
5. Rights of first refusal and option rights
5.1 MIDAS agrees that for two years after the signature of this Agreement
it shall refrain from developing the Midas System in any New
Countries. At any time, after the second anniversary of the signature
of this Agreement, if MIDAS wishes to develop the Midas System in a
New Country, it shall request MARELLI to enter into such New Country
with the Midas System and MARELLI shall have 180 days time to agree or
reject such request. In case of rejection, MIDAS shall be entitled to
introduce the Midas System in such New Country directly or through
third parties.
5.2 In the event that MIDAS will decide to introduce the Midas System
through other parties in countries not included in the Territories and
listed in Annex D hereattached (the "New Countries"), then MARELLI
will have rights of first refusal to be exercised within 120 days from
the notification by MIDAS of such occurrence.
5.3 In both events, the Purchase Price for MARELLI for the development
rights for each New Country will be US $ 10.000 times the number of
potential shops calculated on the basis of the AAMA Data Vehicle
latest available on the car population in the concerned country. The
80% of such number will be divided by 50.000 and the result will be
the number of potential shops in such country.
5.4 A License Agreement in the form attached as Annex C will be issued for
each New Country which MARELLI develops with the Midas System.
5.5 MIDAS shall have rights of first option and first refusal as well to
acquire from MARELLI the assets and rights relevant to the Midas
System in any country if MARELLI ever wishes to no longer operate the
Midas System in
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a particular country, other than through a majority owned affiliate of
FIAT S.p.A.
If MIDAS, however, does not exercise the right of first option hereby
granted to it within 60 days after notification by MARELLI, MARELLI
can seek to sell those assets and rights provided that the buyer is
not a critical competitor for MIDAS in the Business and has US $ 25
million net worth. If MARELLI obtains an offer from a buyer, MIDAS
shall then have 60 days from notification to exercise its right of
first refusal on the same terms.
6 Supplies
6.1 If MIDAS enters into a business in the supply chain (manufacturing,
supplying or distribution) in any country in which MARELLI is engaged
in the Midas System, with products that are not being supplied by
MARELLI to the Midas System, MARELLI will grant MIDAS a preferred
supplier status so long as MIDAS products are of equal quality and
competitively priced.
6.2 MIDAS, as well, and upon same terms and conditions hereby grants to
MARELLI a preferred supplier status for the Midas System in North
America, for products that are not being supplied by MIDAS to the
Midas System in North America.
7 Distribution
If MARELLI decides to initiate distribution or to extend its
distribution network in the automotive after-market parts business in
new or existing countries where MIDAS is or will be present, and to
that purpose will require or desire a partner or an investor, MARELLI
is hereby assuring MIDAS that MIDAS will be considered for such
participation.
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8 Non-competition
8.1 In order to preserve the investments by MARELLI, MIDAS and franchisees
in the Midas System and the Business of the franchisees of the Midas
System, MARELLI and MIDAS agree not to compete with each other with
the Midas System in the Territories, or in other countries where the
Midas System exists, or in the New Countries for which MARELLI
exercised the rights provided for in clause II.5, for the period of
cooperation stated in clause II.1 and for 5 years thereafter.
8.2 MIDAS represents that for the Brasilian market Midas Silenciador SA
already granted an exclusive Master Franchise to Wheist.
Notwithstanding anything to the contrary above, should Wheist not
waive its exclusivity rights under the Master Franchise nor reach an
agreement with MARELLI, satisfactory to MARELLI, then MIDAS will not
prevent MARELLI from entering into the Brasilian market with its own
or anybody else's system.
In any event MIDAS will support MARELLI in its negotiations with
Wheist.
III. SALE AND PURCHASE OF MIDAS COMPANIES
1. Upon Closing Date MARELLI will acquire the MIDAS assets, interests and
Midas Companies in the Territories according to the following
provisions.
2. The transaction
2.1 The Purchase Price for the acquisition of MIDAS assets, interests and
Midas Companies in the Territories, will be US $ 84 million, pursuant
to Annex A on the assumption that the Net Invested Capital is and
will be no less than US $ 49 million.
2.2 Upon execution of this Agreement, and upon fullfilment of the
conditions precedent set forth in clause III.9 hereinafter, MARELLI
will acquire from
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MIDAS or Midas Companies all MIDAS assets, interests and Midas
Companies in the Territories at a Purchase Price, subject to clause
III.3, of US $ 84 million.
MIDAS hereby represents that its Austrian subsidiary is the Master
Franchisor and owns 49% equity interest in Midas Poland, and therefore
through the acquisition of the Austrian subsidiary, MARELLI will
indirectly acquire any and all title, rights and interests of MIDAS in
Poland at no extra cost.
The Parties anticipate that MIDAS, through its Austrian subsidiary,
will acquire the other 51% of the Polish joint venture prior to
Closing. In that case, MARELLI will pay MIDAS an additional amount
equal to MIDAS' purchase price of the 51% interest.
Furthermore MIDAS represents that its Spanish subsidiary is the Master
Franchisor for Brasil and therefore through the acquisition of the
Spanish subsidiary MARELLI will indirectly acquire all MIDAS rights
and interests in Brasil at no extra cost.
2.3 The transfer of MIDAS interests in each country concerned, will occur
by means of a stock sale of the relevant MIDAS subsidiaries and not
merely as a transfer of assets.
2.4 On or before any stock transfer contemplated herein MIDAS will settle
all intercompany and third parties loans relevant to the Midas
Companies involved.
2.5 All payments contemplated in this Agreement will be effected in US
dollars.
3. Adjustments of Purchase Price
3.1 The overall Purchase Price of MIDAS interests referred to in clause
III.2.1 has been established by the Parties on the assumption that the
Net Invested Capital of MIDAS in the business which is the object of
the Transaction is US $ 49 million, according to the criteria and
calculation of Net Invested Capital enclosed as Annex B hereto.
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3.2 Immediately after the signature of this Agreement, MARELLI will
perform a due diligence investigation including but not limited to the
Net Invested Capital of MIDAS in such activities, legal, tax,
accounts, real estate, labor matters.
The due diligence investigation will be performed within 30 days from
the date hereof.
3.3 If a deficiency in Net Invested Capital will result, unless contested
by MIDAS in which event clause III.3.5 will apply, and subject to the
provisions of section III.3.5, MARELLI will be entitled to an
adjustment of the relevant Purchase Price for an equal amount.
3.4 If a surplus in Net Invested Capital will result, then MIDAS will be
entitled to an adjustment for an equal amount.
3.5 In the event that MIDAS will contest a deficiency in Net Invested
Capital shown by the results of the due diligence investigation
performed by MARELLI under clauses III.3.2, III.3.3 and III.3.4 above,
then within 10 days the Parties shall appoint an independent auditor
(the "Independent Auditor"). The Independent Auditor within 15 days
from its appointment shall deliver its determinations of Net
Invested Capital to the Parties, which determinations shall be final
and binding on the Parties. If a deficiency of Net Invested Capital
arises which is US $ 5 million or less, MARELLI shall be entitled to
an adjustment of the Purchase Price as provided in section III.3.3. If
a deficiency of Net Invested Capital arises which is over and above
US $ 5 million, the Parties shall negotiate with respect to any amount
which is in excess of the US $ 5 million. Failing an agreement about
the payment of such excess amount either Party shall have the right
to terminate this Agreement. Fees, costs and expenses of the
Independent Auditor shall be equally shared between the Parties.
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4. Covenants
MIDAS, during the period between the date hereof and the Closing Date,
except as expressly contemplated by this Agreement or otherwise
consented to by MARELLI in writing, agrees to the following.
4.1 The Midas Companies shall be conducted only in the ordinary course of
business and in accordance with past practices, which were in
accordance with the law, prudent and customary in all material
respects under the circumstances, and no liability unrelated to the
ordinary course of business shall be incurred.
4.2 No action shall be taken by MIDAS, and/or the Midas Companies, that
may affect or modify the business or the organization of the Midas
Companies, except for those certain shareholder and corporate
structure changes which have been disclosed to MARELLI.
No employees, consultants, commercial agents or representatives of the
Midas Companies shall be hired or dismissed; none or the respective
rights and obligations thereof shall be modified, except in the
ordinary course of business in accordance with past practices or as
mandated by law or applicable national collective bargaining
agreements.
4.3 No leases, real estate conveyances, major contracts (including
licensing or distribution agreements, mortgages, pledges, joint
venture agreements, loans or credit agreements) of any of the Midas
Companies shall be made, amended or terminated.
4.4 No contracts or commitments shall be entered into by or on behalf of
any of the Midas Companies that extend beyond the Closing Date, or
involve the purchase, sale, or encumbrance of fixed assets, except
commitments which are normal in the ordinary course of the business.
4.5 None of the Midas Companies shall commence any litigation, except for
those which are necessary to preserve their business or their rights,
provided
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that MARELLI shall be immediately informed thereof and kept fully
informed of any development; in addition, none of the Midas Companies
shall settle any threatened or pending litigation without the prior
consent of MARELLI.
4.6 No transaction shall take place between any of the Midas Companies,
MIDAS and their respective shareholders, or any subsidiary or
affiliated company thereof, except transactions at arm's length or
transactions which were not and shall not be detrimental to the Midas
Companies.
5. Representation and warranties by MIDAS
MIDAS acknowledges that MARELLI is entering into the Agreement in full
reliance upon its representations and warranties. Therefore, MIDAS
hereby represents and warrants to MARELLI as follows:
5.1 Midas Companies
5.1.1 The Midas Companies are duly organized, validly existing and
in good standing under relevant laws. The Midas Companies
have all the requisite power and authority to carry out
their activities and have always observed the corporate law
requirements and the regulations regarding the corporate
books, and any other documents necessary for the regular
performance of the Midas Companies' activity.
5.1.2 The Midas Companies are not insolvent nor have been declared
bankrupt, and no action or request is pending to declare the
Midas Companies bankrupt or to make the Midas Companies
subject to any proceeding contemplated by their relevant
bankruptcy law.
5.1.3 The Midas Companies collectively are capable of operating
and fully equipped to operate on a self-sufficient basis,
and no
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services provided for by MIDAS and/or any of its
subsidiaries or affiliated companies outside the Midas
Companies, are necessary for the orderly operations of the
Midas Companies.
5.2 Corporate Capital
5.2.1 The corporate capital of the Midas Companies is duly and
validly issued, fully paid in.
5.2.2 The shares held by MIDAS in the Midas Companies are the
exclusive property of MIDAS or other MIDAS subsidiaries.
There are no capital increases, issuance of shares or other
operations relating to the capital of the Midas Companies
pending or authorized, except those mentioned in clause
III.4.2.
5.2.3 All the shares of the Midas Companies are free from any and
all pledges, restrictions, obligations, sequestration,
privileges, claims, options, usufruct, burdens or
encumbrances, rights or claims of third parties for the
acquisition of the shares or any interest therein, or for
the issuance of other shares or quotas of the Midas
Companies.
5.2.4 MIDAS may enter into and perform this Agreement without the
necessity of obtaining the consent, authorization, or
approval from any third parties or public authorities,
except as indicated in this Agreement. The drafting of this
Agreement, and the carrying out of the transactions
contemplated herein, shall not violate the deed of
incorporation or the by-laws of the Midas Companies, or
constitute a breach of any agreement or contract which
MIDAS, and/or the Midas Companies are a party to.
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5.3 Accounts
5.3.1 The Accounts are true, accurate, and complete, and were
drafted in compliance with the Accounting Principles and
fairly presents the situation of the Midas Companies on such
dates.
5.3.2 The Liabilities in the Accounts are fairly presented.
5.4 Assets and Liabilities
5.4.1 The Midas Companies have, or shall have, on the Closing
Date, full title, exclusive possession and use of all the
material and immaterial assets utilized in their activity,
free from any and all mortgages, pledges, encumbrances,
privileges, registrations, and rights of third parties.
5.4.2 The Midas Companies have, or shall have on the Closing Date
all the authorizations, licenses, concessions, permits,
certifications and registrations necessary and advisable for
the carrying out of their respective activities, and for the
regular use of their assets.
5.4.3 None of the Midas Companies has agreed to make any material
investment in any project which will not be disclosed to
MARELLI.
5.4.4 To the best of MIDAS knowledge and belief, the Midas
Companies (and MIDAS, as far as its activity may have any
impact on the Midas Companies, their properties and
businesses) have materially complied and are in material
compliance with all applicable laws, statutes, rules,
regulations, orders, authorizations, licenses, or decrees
promulgated by any supranational, national, regional or
local governmental authority, or department, bureau, board,
agency, or division
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thereof, relating to the operations and conduct of their
respective properties and businesses.
In particular, as of today's date and until the Closing
Date, there are no facts that have taken place or may take
place which would make any of the Midas Companies
responsible for material violations of third party rights,
and in general, violations of provisions in the matters of
zoning, safety, hygiene, health, environmental protection
and pollution.
Neither the Midas Companies nor MIDAS (as far as the
operations or properties of the Midas Companies may be
affected) are currently in receipt of any notice of alleged
material violations of any laws, statutes, rules,
regulations, orders, authorizations, licenses, or decrees.
5.4.5 The Assets utilized by the Midas Companies, including real
estate, plants, machinery, equipment and any other movable
property are in a good state of preservation and efficiency,
except for the wear and tear due to normal use; the Assets
comply with all the applicable regulations as required by
law for the performance and continuation of the Midas
Companies' activities with respect to, among others,
manufacturing, safety, hygiene, health, environmental
protection and pollution.
5.4.6 The accounts receivable and notes reflected on the assets
side of the Accounts of the Midas Companies are valid,
existing and collectable in accordance with their terms and
past practice (with the exception of the reserves set aside
in the Accounts for such purpose), and are not subject to
any dispute or right of cancellation.
5.4.7 The inventory of the Midas Companies is reflected in the
Accounts, is preserved in normal condition, free from
defects, and has been evaluated in a manner consistent with
the Accounting Principles.
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5.4.8 Except to the extent reflected or reserved for in full in
the Accounts or disclosed to MARELLI, the Midas Companies
shall have no material Liabilities of any nature, including
labor, tax, social security, customs, environmental or other
Liabilities, which were incurred by them on or prior to the
Closing Date, or arose or arise out of transactions entered
into, or facts, acts or omissions occurring on or prior to
that date.
At present, and on the Closing Date, the Liabilities
mentioned above are and shall be duly indicated in the Midas
Companies' books and those created between the date hereof
and the Closing Date are and shall be the consequence of the
ordinary, day-to day business activity carried out by the
Midas Companies. There are no laws, statutes, rules,
regulations, orders, authorizations, licenses or decrees in
existence or, to the best knowledge of MIDAS and the Midas
Companies, proposed, which require or would require
extraordinary actions or material expenditures by or on
behalf of the Midas Companies.
5.5 Taxes and Social Security
Except as disclosed to MARELLI, the Midas Companies and, as far as the
operations or properties of the Midas Companies may be affected,
MIDAS:
(i) have fully and timely complied with all requirements in the
matters of tax, social security and customs charges,
withholdings, and other contributions;
(ii) have duly and timely filed accurate and complete tax, social
security, customs and any other report, notice, or
documentation with the competent tax, social security and
customs authority;
(iii) have regularly and timely made all payments and withholdings
with respect to taxes, social security and other
contributions, and customs duties;
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(iv) have duly indicated in the Accounts all credits, obligations
or Liabilities related to taxes, social security or other
contributions and customs matters; and
(v) have not received any past due assessment, injunction, request
for payment, or any other communication from tax, social
security, or customs authorities over the last 5 years, which
are still pending.
5.6 Intellectual Property Rights
5.6.1 Except as otherwise disclosed to MARELLI, the Midas
Companies hold exclusive and full title to all the patents,
trademarks, commercial trade names, formulas, inventions,
copyright, know-how or any other right of intellectual or
commercial property utilized in their activity (the
"Intellectual Property"). The Intellectual Property will be
fully disclosed to MARELLI during the due diligence
investigation, is valid, effective, and in existence under
relevant laws and the Intellectual Property may be utilized
without violation of third parties' rights, except to the
extent licensed in franchise contracts which are being
acquired by MARELLI. To the best knowledge of MIDAS and the
Midas Companies, the rights of any of the Midas Companies
have not been violated by acts of third parties.
5.6.2 Except as will be disclosed to MARELLI, there does not exist
any agreement, contract, nor obligation which grants,
reserves, or guarantees to any third parties, the license or
right to use the Intellectual Property in the Territories;
in the same manner, the Midas Companies have no obligations
with respect to third parties for royalties or any other
obligations in relation to the utilization of the
Intellectual Property.
5.6.3 The software programs presently used by the Midas Companies
are all those necessary for the operations, management and
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administration of the Midas Companies and are the property
of the Midas Companies, which hold the source code of such
programs, except as otherwise will be disclosed to MARELLI.
5.7 Labor Relations
5.7.1 The employees of the Midas Companies (divided by category)
are reported in Annex E.
The general terms and conditions of their employment will be
communicated to MARELLI in connection with the due
diligence.
There are no facts based on acts or omissions of any of the
Midas Companies from which a material claim by any of the
respective employees can be derived.
5.7.2 No key manager or employee has officially expressed his/her
intention to resign from his/her position with any of the
Midas Companies.
5.7.3 The consultants of the Midas Companies, as well as the terms
and conditions of their relationship with the Midas
Companies, have been communicated to MARELLI. The Midas
Companies do not have any agent and there is no person who
may claim the status of agent from any of the Midas
Companies. There are no facts based on acts or omissions of
any of the Midas Companies from which a claim by any
consultants can be derived.
5.7.4 Contracts or understandings between any of the Midas
Companies and their employees or managers, and which contain
(or shall contain at the Closing Date) provisions that are
more favorable than those required by law or by the
applicable national collective bargaining agreements, will
be disclosed to MARELLI in connection with the due
diligence.
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5.8 Relevant Contracts and Obligations
5.8.1 All the existing Franchise Agreements that MIDAS or the
Midas Companies hold with franchisees in the Territories are
valid and binding between the parties and none of them is
terminable as a consequence of the present Transaction.
5.8.2 Except for the Franchise Agreements referred to in clause
III.5.8.1 above, leases for Midas Shops in the normal course
of business, and except for the contracts listed in Annex F
(to be provided by MIDAS on or before the Closing Date),
there does not exist any contract in the course of
performance between any of the Midas Companies and third
parties, whether oral or written, that holds any of the
Midas Companies liable for an amount more than US $50,000,
or which contains provisions for any indeterminate time
without the right of the Midas Companies to withdraw or give
the Midas Companies the right of withdrawal by means of a
notice period of more than twelve (12) months (except for
contracts necessary for the ordinary administration of the
Midas Companies, such as telephone, water, and electricity
supplies). All contracts which the Midas Companies are a
party to are valid, and are being regularly and timely
fulfilled by the Parties.
5.8.3 Except as will be disclosed to MARELLI, the Midas Companies
have not issued any guarantee in favor or in the interest of
any third parties, including MIDAS or other Midas
subsidiaries, or affiliates.
5.8.4 The Midas Companies are not a party to contracts beyond the
normal course of business.
21
5.8.5 All transactions between the Midas Companies, MIDAS and/or
any subsidiary or affiliated company of MIDAS shall be at
arm's length.
5.9 Litigation
Except as will be disclosed to MARELLI, none of the Midas Companies is
engaged in any arbitration, civil, criminal, administrative or fiscal
proceedings, and there are no threatened proceedings of such nature
which may result in liabilities or have a negative effect on the
activity and use of their Assets by the Midas Companies.
5.10 Environmental, Health and Safety Matters
5.10.1 None of the Midas Companies is in material violation of any
environmental, health and safety statute, decree,
regulation, rule, order, license, permit, approval, or
authorization in force from time to time (the "Environmental
Rules").
5.10.2 All necessary licenses, permits, approvals and
authorizations for the performance of the activities of the
Midas Companies are, or will be at Closing, in full force
and effect and have not been suspended, canceled, revoked,
or non-renewed for any reason whatsoever.
5.10.3 The Midas Companies have made all modifications and
investments necessary to remain in material compliance with
the Environmental Rules.
5.10.4 The Midas Companies have paid or accrued all duties, levies,
taxes and fees, if any, especially those concerning waste
disposal or water discharges, as well as all other duties,
levies or taxes imposed on its activities, if any.
22
5.10.5 The Midas Companies have satisfied their obligations, if
any, to keep books and registers for dangerous substances
and any other books and registers that are mandatory under
the Environmental Rules.
5.10.6 The Midas Companies have made all filings required by the
Environmental Rules.
5.10.7 There are no inspections pending by any governmental agency.
5.10.8 The Midas Companies have not received notice and have no
knowledge of any dangerous substance, waste or any other
pollutant, contaminant, or chemical, as regulated by the
Environmental Rules, which has been illegally disposed of or
arranged for disposal at, or found at a site where there is
a release or a threatened release of those substances.
5.11 Insurance
The Midas Companies carry the necessary insurance coverage for the
performance of their activities; payment for the relative premiums
have been regularly made until present and shall be made until the
Closing Date. No claims of liability have been brought forward in
relation to such policies which are still pending.
5.12 Claims by Third Parties
The signing and execution of the Agreement shall not give third
parties, that have or may have relations with MIDAS or the Midas
Companies, the right to demand the advance payment of accounts
receivable, guarantees, to withdraw or terminate contracts or to
modify existing relations with the Midas Companies.
23
5.13 Miscellaneous
5.13.1 The declarations and warranties set forth herein shall be
true, accurate, complete and not misleading on the Closing
Date, even if not expressly repeated. MIDAS undertakes to
promptly communicate to MARELLI, on or after the Closing
Date and for the entire duration of their Liability under
the Agreement, any and all material circumstances - which
have taken place on or before the Closing Date - that are
susceptible of rendering untrue, inaccurate, or incomplete
the above-mentioned declarations or warranties.
5.13.2 No information supplied to MARELLI, nor declaration or
warranty of MIDAS contained in the Agreement, and/or other
documents shall contain any material untrue, inaccurate or
incomplete statements or facts. MIDAS has not failed to
deliver any documents, or failed to make reference to any
fact or data, in such a manner as to modify in substance
and/or to render deceptive or misleading, the
representations, warranties, and information contained
herein.
5.13.3 MIDAS has all requisite power and authority to execute and
perform the Agreement and carry out the transactions
contemplated thereby, and when executed, shall constitute a
valid and binding obligation of MIDAS, enforceable in
accordance with its terms.
5.13.4 There is no firm, corporation, or person that is entitled to
a finder's fee or any type of brokerage commission in
relation to or in connection with the transactions
contemplated by the Agreement as a result of any agreement
or understanding with MIDAS, that may claim a brokerage or
other commission from ▇▇▇▇▇▇▇.
▇▇
▇. Representations and warranties by MARELLI
MARELLI represents and warrants to MIDAS as follows:
6.1 MARELLI is a corporation duly organized, validly existing and in good
standing under the laws of the Republic of Italy.
6.2 MARELLI is not insolvent nor has been declared bankrupt, and no action
or request is pending to declare MARELLI bankrupt or to make MARELLI
subject to any proceeding contemplated by the bankruptcy law of the
Republic of Italy.
6.3 MARELLI has all requisite power and authority to execute and perform
the Agreement and carry out the transactions contemplated thereby,
when executed, shall constitute a valid and binding obligation of
MARELLI enforceable in accordance with its terms.
6.4 There is no firm, corporation, or other person that is entitled to a
finder's fee or any type of brokerage commission in relation to or in
connection with the transactions contemplated herein as a result of
any agreement or understanding or dealing with MARELLI that may claim
a brokerage or other commissions from MIDAS.
6.5 MARELLI may enter into the Agreement without the necessity of
obtaining the consent, authorization, or approval from any third
parties or public authorities, except as indicated in the Agreement.
The drafting of the Agreement, and the carrying out of the
transactions contemplated therein, shall not violate the deed of
incorporation nor the by-laws of MARELLI, nor constitute a breach of
any agreement or contract of which MARELLI is a party to.
25
7. Obligations of MARELLI
7.1 MARELLI agrees that no portion of the net operating loss carryovers
generated through the date of acquisition of Midas Spain, Inc,
(sucursal en Espana) and Midas Italia Srl, will be used to offset the
income of another person under the laws of Spain and Italy,
respectively.
7.2 MARELLI will provide annual certification to MIDAS that the net
operating loss carryovers generated through the date of acquisition of
Midas Spain, Inc. (sucursal en Espana) and Midas Italy, Srl, were not
used to offset the income of another person under the laws of Spain
and Italy, respectively. The annual certification will be required
through the last year that the net operating loss carryover is
available to offset the income in the respective country.
7.3 MARELLI will cooperate with MIDAS and provide the necessary
information to allow MIDAS to prepare Form 5471, Annual Return of
Controlled Foreign Corporation, for the year ended including the year
of the acquisition. MARELLI will provide the information in the format
used in prior years and provide the information within 4 months
following the closing of the Transaction.
7.4 In the event that any amounts payable by MARELLI to MIDAS are subject
to withholding or other taxes that MARELLI is required to deduct from
such payments, MARELLI shall promptly deliver to MIDAS receipts of
applicable governmental authorities for all such taxes withheld or
paid. MARELLI shall be responsible for and shall indemnify and hold
MIDAS harmless against any penalties, interest and expenses incurred
by MARELLI for failure to withhold and timely remit the taxes to the
appropriate taxing authority.
26
8. Indemnification by MIDAS
8.1 Without in any way limiting any other obligation imposed upon it in
accordance with the law or the terms of this Agreement, as an
inducement to MARELLI to enter into this Agreement and in
consideration of MARELLI's undertakings hereunder, MIDAS agrees to
hold harmless and indemnify MARELLI or, at the option of MARELLI, the
Midas Companies, and their respective successors (by operation of law
or pursuant to an assignment permitted under the terms of this
Agreement), if any, from and against any Liabilities existing on the
Closing Date relating to the Midas Companies' operations which are
caused by MIDAS or the Midas Companies. Notwithstanding anything
contained herein to the contrary, MIDAS shall not be required to
indemnify MARELLI with respect to, and MARELLI shall assume full
responsibility for, any and all Liabilities that either (i) are
reflected or reserved against on the books and Accounts of the Midas
Companies, or (ii) were otherwise accurately disclosed or known to
MARELLI at any time on or prior to the Closing Date. The Parties agree
that the indemnity provided for in this clause III.8 shall be the
exclusive remedy of MARELLI and/or the Midas Companies for violations
by MIDAS of the representations and warranties set forth in clause
III.5 herein, to the exclusion of any other remedy provided by law or
otherwise.
8.2 The representations and warranties of MIDAS set forth in clause
III.5.1 (Companies), III.5.2 (Corporate Capital), III.5.5 (Taxes and
Social Security), III.5.7 (Labor Relations), shall last for the period
of the statute of limitations applicable to the underlying claims.
The representations and warranties of MIDAS set forth in clause
III.5.10 (Environmental, Health and Safety Matters) shall last for a
period of seven years from the Closing Date.
All the other representations and warranties of MIDAS set forth in
clause III.5 shall last for a period of three years from the Closing
Date.
In any event, the representations and warranties by MIDAS shall
continue until final adjudication of any claim or demand brought by
MARELLI against MIDAS prior to the expiration of such periods.
27
8.3 The liability of MIDAS under this clause shall be subject to an
aggregate deductible of US $ 500,000, so that MARELLI and/or the Midas
Companies shall have no indemnification rights until the liability of
MIDAS under this clause has reached, in the aggregate, such amount and
the obligation of MIDAS to indemnify MARELLI and/or the Midas
Companies shall be limited to any sum in excess of that amount.
In no event will the responsibility of MIDAS under this clause III.8
exceed US $ 51 million.
The indemnity provided for in this clause III.8 shall be limited to
the after-tax amount of any Liability, if and to the extent any such
Liability is tax deductible for the Midas Companies or their
affiliates or shareholders, and indeed reduces the amount of corporate
income tax payable by the Midas Companies or their affiliates or
shareholders in the year in which the Liability is incurred or in any
subsequent year.
8.4 If MARELLI is of the opinion that MIDAS is liable on the basis of the
proceeding provisions, it shall address in a reasonably timely fashion
its request to MIDAS, by registered letter return receipt requested,
indicating the reasons and the amount, if known, of such request.
8.5 Within thirty business days after receipt of the aforesaid registered
letter, MIDAS shall notify MARELLI by means of registered letter
return receipt requested, of any objection (explaining the reasons and
the grounds thereof) that it might have in connection with the request
submitted by MARELLI; in the event that MIDAS agrees or fails to
object within the above time limit, MIDAS shall pay promptly to
MARELLI the entire amount requested by the latter (with value date
to be the day upon which the Liability is actually paid or accrued by
MARELLI or the Midas Companies), as the case may be.
In the event, instead, that MIDAS duly objects to MARELLI's request,
the dispute shall be resolved by arbitration pursuant to section V
below. The amounts due by MIDAS to MARELLI, under each arbitration
procedure,
28
shall be paid in full within five working days of the receipt of the
arbitration award.
8.6 In the event of a Liability as a consequence of the actions or claims
by third parties (including administrative and tax authorities),
MARELLI and/or the Midas Companies shall diligently and timely oppose
the proposed claims; MIDAS shall be entitled to appoint a lawyer or
consultant of its own who will join those appointed by MARELLI or the
Midas Companies, it being understood that MARELLI and/or the Midas
Companies will not be entitled to waive any right or settle any
controversy without MIDAS's prior consent, which cannot be
unreasonably withheld.
9. Conditions precedent
The obligations of MARELLI as provided in this Agreement are subject
to the satisfaction, on or before the Closing Date, of all of the
conditions in its favor set forth in this Agreement and, in
particular, in this clause III.9. MARELLI may in writing waive any or
all of said conditions, in whole or in part, without prior notice;
provided, however, that no such waiver of a condition shall constitute
a waiver by MARELLI of any other condition or right or action under
this Agreement. The conditions precedent in favor of MARELLI shall be
the following and shall be fully and exactly fulfilled also on the
Closing Date:
9.1 All representations and warranties by MIDAS contained in this
Agreement, or in any written statement or instrument delivered to
MARELLI pursuant to this Agreement shall be true, correct and not
misleading in all material respect on and as of the Closing Date as
though such representations and warranties were made at and as of such
date.
9.2 MIDAS shall have in all material respects performed, satisfied, and
complied with all covenants and agreements, and satisfied all
conditions that it is respectively required by this Agreement to
perform, comply with, or satisfy, on or before the Closing Date.
29
9.3 During the period between the date hereof and the Closing Date, there
shall not have been any material adverse change in the results of the
operations of the Midas Companies taken as a whole, and the Midas
Companies shall not have sustained any material loss or damage,
whether or not insured, that affects their ability to conduct a part
of their business, or results in a diminution in the value of their
business, taken as a whole.
9.4 No action or proceeding shall be pending or threatened by or before
any court, administrative agency, or any other entity, seeking to
restrain or prevent or declare unlawful, or seeking damages in
connection with, any of the transactions contemplated by this
Agreement or any aspect thereof, or the acquisition of a controlling
interest in the Midas Companies.
9.5 MAPELLI and MIDAS shall have received all approvals necessary for the
completion of the transactions contemplated herein.
9.6 The Parties hereto shall use their best efforts to satisfy all
conditions precedent contained in this Agreement, and shall cooperate
with each other in every way in carrying out the transactions
contemplated by this Agreement, in obtaining any and all required
approvals, permits, and authorizations, in filing the notifications
and reports, if any, which may be required, and in executing and
delivering all documents, instruments, and copies thereof necessary or
useful to the other Party.
9.7 Should the conditions precedent provided for herein not have been
fulfilled (or waived by the interested Party) on or before December
31, 1998, either Party shall have the right to terminate this
Agreement by notice to the other Party by registered letter, return
receipt requested. Such terminations shall not give the right to
either Party to claim damages, except in case of willful misconduct or
gross negligence or breach of this Agreement.
30
IV. MISCELLANEOUS PROVISIONS
1. The Parties agree that clause I and clause 8.1 of section II and the
terms and conditions of the License Agreement are of the essence to
this Agreement.
The Parties further agree to seek comfort from the Commission of the
European Community that the provisions of this Agreement and of the
License Agreement do not contravene Article 85(1) EC or would qualify
for an exemption under Article 85(3) EC.
If all or a portion of clause 1 and clause 8.1 of section II or the
License Agreement is adversely affected to the detriment of MIDAS or
MARELLI as the result of any action taken by any governmental,
judicial, administrative or other body having jurisdiction over the
transactions contemplated by this Agreement, including the Commission
of the European Community, then the Parties agree to renegotiate in
good faith the terms of this Agreement and the License Agreement to
reflect the change in the terms of clause 1 and clause 8.1 of section
II or the License Agreement.
2. Confidentiality
MARELLI and MIDAS shall keep, and shall cause their officers,
directors, employees and consultants to keep, secret and confidential
the terms and conditions of this Agreement, provided that neither
Party shall be in breach of this provision by virtue of any disclosure
required by law or regulatory authorities, or made pursuant to an
arbitration proceeding under clause V.2 below, or if necessary to
enforce performance of this Agreement.
3. Right to Designate
MARELLI may designate one or more persons to purchase the Midas
Companies provided that such designation is notified in writing to
MIDAS on or before the Closing Date and each designee is a majority
owned subsidiary of FIAT SpA, and provided that no such designation
shall relieve MARELLI from any of its obligations hereunder.
31
4. Right to Assign
MARELLI shall have the right to assign this Agreement, in whole or in
part, including any rights and claims arising thereunder, without
relief of its obligations to any majority owned subsidiary of FIAT
SpA, and MIDAS hereby consents to such assignment.
5. No Waiver
No waiver of any right, breach or default hereunder shall be
considered valid unless expressly made in writing and executed by the
Party giving such waiver, and no waiver shall be deemed a waiver of a
subsequent breach or default, whether or not of the same or similar
nature.
6. Entire Agreement
This Agreement, including Annexes and the License Agreement to be
executed at the Closing, constitutes the entire agreement between the
Parties with respect to the transactions contemplated by the Agreement
and supersede any prior understanding, written or oral, with respect
to such transactions or any other matter peripheral or ancillary
thereto.
7. Changes in Writing
No amendment of or supplement to the Agreement shall be valid or
effective unless in writing and executed by the Parties hereto or
their successors.
8. Headings
The article headings contained in this Agreement are for the purpose
of convenience only and do not constitute a part of the text of the
Agreement.
32
9. Partial Invalidity
In the event of invalidity, ineffectiveness, or unacceptability to any
competent supervisory or regulatory authority of any non-essential
provision of this Agreement, or portions thereof, the remaining
portions of this Agreement shall not be affected thereby but the
Parties agree to negotiate in good faith to replace such provision, or
portions thereof, with other valid and effective agreements having, as
far as legally permissible, substantially the same effect, having
regard to the subject matter and purposes of this Agreement.
10. Expenses
Each Party shall bear all costs and expenses for legal, accounting or
other purposes, incurred by it in connection with the negotiation,
preparation, execution of, and performance under this Agreement.
11. Notices
Notices or communication required or permitted to be given hereunder
shall be in writing, in English and, except as otherwise specifically
provided for in this Agreement, shall be sent by telex, hand
delivered letter, telecopier (confirmed by registered mail) or by
registered mail, return receipt requested, addressed as follows:
As to MIDAS: MIDAS INTERNATIONAL CORPORATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
Attn.: Chief Executive Officer
Copy to: General Counsel
33
As to MARELLI: MAGNETI MARELLI S.p.A.
▇.▇▇ ▇▇▇▇▇▇▇▇ ▇▇/▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇) - ▇▇▇▇▇▇
Fax: (▇▇)▇▇▇.▇▇▇▇▇
Attn. Chief Executive Officer
----
Copy to: General Counsel
-------
The Parties shall have the right to amend, by written communication
pursuant hereto, the above respective addresses. All notices shall be
deemed received when actually received at the above addresses.
V. APPLICABLE LAW AND ARBITRATION
------------------------------
1. Applicable law
--------------
This Agreement shall be governed by, and construed and enforced in
accordance with Swiss law.
2. Arbitration
-----------
The Parties shall use their best good faith efforts to settle in an
amicable way any dispute that might arise between or among them in
connection with this Agreement or the carrying out of the transactions
contemplated herein. Should any Party consider it not possible to
reach an amicable settlement, then the dispute shall be settled by
arbitration in Geneva under the UNCITRAL Arbitration Rules by a panel
of three arbitrators, one to be appointed by each of MIDAS and
MARELLI, and the other to be appointed by agreement between MIDAS and
MARELLI, or, failing such agreement, in accordance with the UNCITRAL
Rules. The Appointing Authority shall be the President (for the time
being) of the Tribunal of Geneva. The language of the arbitration
shall be English.
The arbitration award shall be final and binding between the Parties.
34
MARELLI and/or the Midas Companies may involve MIDAS in any law suit
brought by a third party against any of the Midas Companies in order
to enforce MIDAS indemnification provided for in this Agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
by their respective officers or representatives thereunto duly authorized, all
in the place and as of the date first above written.
FOR MIDAS INTERNATIONAL CORPORATION FOR MAGNETI MARELLI S.p.A.
By: /s/ ▇▇▇▇▇▇ ▇. Province /s/ By: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
...................... ........................
▇▇▇▇▇▇ ▇. PROVINCE ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
CHAIRMAN AND PRESIDENT AND
CHIEF EXECUTIVE OFFICER CHIEF EXECUTIVE OFFICER
Annex A
-------
Midas Companies Price (000-US$)
-----
Midas Spain, Inc. (US) - Spain 500
Midas Italy, Inc. (US) - Owns 90% of Midas Italia ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇. (▇▇) - ▇▇▇▇ 10% of Midas Italia 70
Midas Europe, ▇▇▇ (Monaco) ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ - ▇▇▇▇▇ 14,000
Midas Autoservice GmbH - Austria 4,300
Midas Schweiz AG - Switzerland ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ - ▇▇▇▇▇▇ 54,000
Midas SA - Belgium 5,800
Carex Uitlaacenter NV - Belgium 4,000
----------------------------------------------------------------------
Total Purchase Price 84,000
Annex B
-------
Midas, Inc.
Balance Sheets as of July 31, 1998
U.S. Dollars Based on Exchange Rates as of Balance Sheet Date
European Operations
---------------------------------------------------------------- European Total
French Belgium Spanish Italian Austrian Swiss HQ Europe
--------------------------------------------------------------------------------------
Assets:
Cash $ 6,076 $ 793 $ 1,409 $ 458 $ 338 $176 $ - $ 9,250
Receivables 15,739 1,869 2,323 119 56 7 557 20,670
Inventory 6,788 2,600 1,777 107 452 144 - 11,868
Other Current assets 2,8O6 175 209 13 24 40 11 3,278
--------------------------------------------------------------------------------------
Total Current assets 31,409 5,437 5,718 697 870 367 568 45,066
Investments in joint venture - - - - 360 - - 360
Fixed assets 14,413 4,182 4,440 403 658 73 120 24,289
Intangibles 8,275 75 224 4 61 - 6 8,645
Other assets 3,707 100 724 84 - - 15 4,630
--------------------------------------------------------------------------------------
Total assets 57,804 9,794 11,106 1,188 1,949 440 709 82,990
--------------------------------------------------------------------------------------
Liabilities:
Accounts payable 17,595 1,651 2,342 215 192 39 68 22,102
Income taxes payable 1,115 - (12) (10) - - - 1,093
Accrued wages payable 2,391 1,221 163 245 132 5 253 4,410
Accrued taxes other than income taxes 3,385 219 187 39 49 7 179 4,065
Accrued interest 698 - - - - - - 698
Accrued expenses 435 542 145 283 165 21 410 2,001
--------------------------------------------------------------------------------------
Total Liabilities 25,619 3,633 2,825 772 538 72 910 34,369
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Net Invested Capital (1) $32,185 $6,161 $ 8,281 $ 416 $1,411 $368 $(201) $48,621
======================================================================================
(1) As defined per agreement. All intercompany and third party debt has been
eliminated.
Annex C
-------
LICENSE AGREEMENT
-----------------
Midas International Corporation ("Midas") for, and in consideration
of, the promises and covenants herein contained, hereby grants to Magneti
Marelli, S.p.A ("Licensee") the exclusive right, license and privilege (the
"License") to use and authorize others to use the Midas System and the
Licensed Marks (both as defined in Exhibit A, and collectively referred to as
the "Intellectual Property") in the Territory solely in connection with the
performance of services in the automotive aftermarket repair and service
industry.
Territory: The License is limited to those countries and territories listed
on Exhibit A (the "Territory"). Licensee agrees that it will not make, or
authorize, any use, direct or indirect, of the Intellectual Property in any
other area.
Term: The term of this License as it applies to the Licensed Marks shall be
for a period of thirty (30) years beginning on the date indicated immediately
above the signatures to this License, with an option by Licensee to extend such
License for additional thirty (30) year periods on the same terms and
conditions. The term of this License as it applies to the Midas System shall be
fifteen (15) years from the date hereof. Thereafter, MARELLI's (including its
successors and assigns, if any) use of the Midas System will be on a non-
exclusive basis.
Fee and Royalty: Licensee is paying Midas at the signing of this Agreement
a License Fee of Sixteen Million Dollars (US$16,000,000). In addition, Licensee
shall pay Midas a monthly royalty based upon the total Gross Revenue (as defined
in Exhibit A) of all retail shops using the Intellectual Property in the
Territory pursuant to the Royalty Schedule (as defined in Exhibit A).
Payment: Royalty payments for each month shall be made in U.S. currency and
shall be received by Midas by the 20th day of the following month, accompanied
by a statement certified to be accurate by Licensee showing the Gross Revenues
for the preceding month. Midas shall have the right upon reasonable notice, to
examine and copy Licensee's books of account and records insofar as they
relate to the Gross Revenues reported to Midas.
Exclusive Property of Midas: Licensee acknowledges that the Intellectual
Property belongs exclusively to Midas and that upon expiration or termination of
this License, Licensee shall cease all use of the Intellectual Property promptly
and will not use the same thereafter. Licensee agrees not to misuse or harm or
bring into public disrepute the Intellectual Property. Licensee agrees to
cooperate fully and in good faith with Midas for the purpose of securing and
preserving Midas' rights in and to the Intellectual Property.
Notices: All notices, requests, approvals, disapprovals, consents and
statements and all payments made hereunder shall be given or made at the
respective addresses of Midas and Licensee set forth on Exhibit A unless
notification of a change of address is given in writing.
No Assignment: This Agreement and any rights granted herein shall not be
assigned by Licensee without written consent of Midas, except that no consent
will be required if the assignment is to a majority owned subsidiary company.
Governing Law and Forum: This Agreement, including all matters relating to
the validity, construction, performance and enforcement thereof shall be
governed by United States law. The only proper forums for the resolution of
disputes arising under this Agreement shall be Chicago, Illinois, USA
and_____________.
This Agreement is entered into as of _______________, 1998.
Midas International Corporation Magneti Marelli S.p.A.
By:_____________________________ By:______________________________
▇▇▇▇▇▇ ▇. Province ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman and Chief Executive President and Chief Executive
Officer Officer
Witness:________________________ Witness:_________________________
38
EXHIBIT A
--------
Midas System means Midas' unique system for the establishment, management
and operation of automotive specialty shops known as "Midas Shops", which engage
in the sale and installation of products and services in the automotive
aftemarket repair and service industry. The Midas System includes proprietary
know-how relating to site selection, shop construction and layout, equipment
selection and installation, purchasing and inventory control methods, accounting
methods, merchandising, advertising, sales, and promotional techniques,
installation techniques, personnel training, and other matters relating to the
efficient and successful operation of said Midas Shops and the maintenance of
high standards of quality.
Licensed Marks means all presently registered trademarks and service marks,
together with any trademarks or service marks which may be registered by Midas
in the future, in the Territory.
Territory shall mean the countries of Italy, Spain, Brazil, Portugal,
Austria, Poland, Switzerland, France, Belgium, and Monaco.
Gross Revenue means the total retail sales derived from the operation of a
shop(s) using the Intellectual Property, whether the sales are for cash or
credit, and irrespective of collection, including sales of both merchandise and
services, less any bona fide consumer refunds, rebates and discounts.
Royalty Schedule means 2.5% of Gross Revenue for the first 6 years
beginning on the date of signing of this agreement; 2% of Gross Revenue for the
following 4 years; and 1.25% of Gross Revenue for the remainder of the term.
Addresses of the Parties:
-------------------------
As to Midas: MIDAS INTERNATIONAL CORPORATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
As to Licensee: MAGNETI MARELLI S.p.A.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇/▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇) -- ▇▇▇▇▇▇
Fax: (▇▇)▇▇▇.▇▇▇▇▇
Attn: Chief Executive Officer
Copy to: General Counsel
Annex D
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EUROPE
EUROPEAN COUNTRIES
------------------
1. Albania
2. Austria
3. Belarus
4. Belgium
5. Bosnia and Herzegovina
6. Bulgaria
7. Croatia
8. Czech Republic
9. ▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇
11. Finland
12. France
13. F.Y.R.O. Macedonia
14. Germany
15. Great Britain
16. Greece
17. Hungary
18. Iceland
19. Ireland
20. Italy
21. Latvia
22. Lithuania
23. ▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇▇
25. Norway
26. Poland
27. Portugal
28. Romania
29. Russia
30. ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇
32. Spain
33. Sweden
34. Switzerland
3S. Ukraine
36. Yugoslavia
2
Annex D
------
SOUTH AMERICA
SOUTH AMERICAN COUNTRIES
------------------------
1. Argentina
2. Bolivia
3. Brasil
4. Chile
5. ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
7. French Guiana
8. Guyana
9. ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇
11. Suriname
12. Uruguay
13. Venezuela
3
Annex D
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ASIA
ASIAN COUNTRIES
---------------
1. China
2. India
3. Turkey
Annex E
EMPLOYEES
---------
AS OF 8/31/1998
---------------
Salaried Hourly Part-Time TOTAL
-------- ------ --------- -----
FRANCE 125 580 13 718
BELGIUM 94 98 1 193
AUSTRIAN 6 34 0 40
SWISS 0 7 0 7
SPAIN 38 160 0 198
ITALY 9 11 0 20
EUROP.HEAD. 11 0 0 11
--- --- -- -----
TOTAL 283 890 14 1,187
Annex F
MATERIAL CONTRACTS
------------------
