SETTLEMENT AND RELEASE AGREEMENT
THIS AGREEMENT is entered into between XXXXXXX X. XXXXX, Chapter 7
bankruptcy trustee ("Trustee") for ServiceMax Tire and Auto Centers of Michigan,
Inc., a Michigan corporation which is debtor ("Debtor") under Chapter 7 in a
case pending in the United States Bankruptcy Court for the Eastern District of
Michigan as Case No. 97-30580 and ACORN HOLDING CORPORATION a Delaware
corporation ("Acorn") as of June 30, 2000, and is based upon the following
facts:
A. On May 14, 1999, Trustee filed an adversary proceeding, captioned as
Adversary Proceeding No. 99-3029, against Acorn, both in its own right and as
the alleged successor in interest to Automotive Industries, Inc. (the "Adversary
Proceeding"), seeking the turnover of certain property of the estate allegedly
in Acorn's hands, and recovery of pre-petition transfers of approximately
$1,750,000 in property and money of the Debtor to Automotive Industries as
either preferential transfers or fraudulent conveyances.
B. In informal discovery after the filing of the Adversary Proceeding,
Acorn demonstrated to the Trustee that Automotive Industries had been a
principal supplier of goods and services to the Debtor, and that all transfers
made by the Debtor to Automotive Industries were for fair consideration,. Acorn
also provided evidence to the Trustee that the obligations of the debtor to
Automotive Industries were secured, pursuant to properly perfected liens granted
more than one year before the filing of the involuntary petition against the
Debtor.
C. Acorn offered to pay the Trustee the sum of $10,000 (the "Settlement
Amount") in full and final settlement of all claims the Trustee raised or could
have raised against Acorn in the Adversary Proceeding, not as an admission of
liability, but to avoid the legal expenses incident to discovery and bring a
motion for summary judgment and to bring the matter to a more expeditious
resolution.
D. After careful review of the evidence provided by Acorn, Trustee and
his counsel determined both that there was little likelihood that Trustee could
prevail in the Adversary Proceeding, and that the costs of pursuing the claims
would exceed any likely recovery to the estate. They determined that the
settlement proposed by Acorn would be in the best interests of the estate and
its creditors.
E. The Trustee thereafter filed an Application for Authority to
Compromise Claim (the "Application"), seeking the authority of the Bankruptcy
Court to settle the Adversary Proceeding on the terms proposed by Acorn. The
Application has been served on all creditors of the estate, the United States
Trustee and Acorn. It remains pending before the court, pursuant to the twenty
day notice requirement of Bankruptcy Rule of Procedure 2002. The final approval
of the Application by the Bankruptcy Court is a condition precedent to the
effectiveness of this Settlement Agreement.
IT IS THEREFORE AGREED AS FOLLOWS:
1. Payment of Settlement Amount. Acorn agrees that it will pay the
Settlement Amount on later of the eleventh day after an Order Approving
Application to Compromise Claim (the "Order") is entered by the Bankruptcy Court
(assuming no appeal or motion respecting the validity of the Order is filed); or
when the Order becomes final and non-appealable.
2. Release. Upon timely payment of the Settlement Amount, Trustee shall
release and forever discharge Acorn, Automotive Industries, Inc. and their
respective officers, directors, employees, agents, successors, legal
representatives and assigns from all claims, actions, causes of action, demands,
damages, costs, expenses, and claims for attorney fees, all whether known or
unknown, absolute or contingent, which were or could have been raised in the
Adversary Proceeding, or otherwise, arising out of transactions among or between
the Debtor, Acorn and/or Automotive Industries, Inc.
3. No Prior Assignment. Trustee expressly warrants that he has not
assigned a part of or all of any claim which he has, or may have, against Acorn
or Automotive Industries, Inc. to any person, corporation, limited liability
company, partnership or other entity.
4. Condition Precedent to Effectiveness of Agreement. An express
condition precedent to the effectiveness of this Agreement is the entry of an
Order Approving Application to Compromise which has become final and
non-appealable.
5. Dismissal of Adversary Proceeding. Upon payment of the Settlement
Amount, the Adversary Proceeding shall be =dismissed with prejudice and without
costs to either party.
6. Miscellaneous.
a. The undersigned parties declare that the terms of this
Agreement have been completely read and are fully understood, which is
voluntarily accepted for the purpose of making a full and final compromise of
any and all claims, disputed or otherwise, arising out of transactions among or
between the Debtor, Acorn or Automotive Industries, Inc.
b. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their respective successor, assigns,
representatives, agents, directors, officers, employees or shareholders.
c. This Agreement shall constitute the entire agreement
between the parties pertaining to the subject matter contained in this
Agreement. This Agreement shall not be modified or amended except by an
instrument in writing signed by each of the parties to the Agreement.
d. The undersigned parties acknowledge that they have each
participated in the drafting of this documents. Thus, for purposes of the
principles of law regarding its interpretation, one of the parties shall be
deemed the drafter of this document.
e. This Agreement shall not be construed as an admission by
Acorn of any liability to the Trustee, the Debtor or any creditors of the
Debtor.
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THIS IS A FULL AND FINAL SETTLEMENT. The undersigned parties, after
consulting with counsel of their choosing, indicate their agreement to its terms
by their signatures below.
XXXXXXX X XXXXX, TRUSTEE FOR SERVICEMAX
TIRE & AUTO CENTERS OF MICHIGAN, INC.
/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
ACORN HOLDINGS CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxxx
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Its: Chairman and Chief Executive Officer
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