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property rights. The outcome of such litigation can be uncertain, and the cost of prosecuting such litigation may have an adverse impact |
on our earnings. We have patent and trademark registrations for several patents and marks. However, any registrations may not adequately |
cover our intellectual property or protect us against infringement by others. Effective patent, trademark, service mark, copyright and |
trade secret protection may not be available in every country in which our products and services may be made available online. We also |
currently own or control a number of Internet domain names and have invested time and money in the purchase of domain names and other |
intellectual property, which may be impaired if we cannot protect such intellectual property. We may be unable to protect these domain |
names or acquire or maintain relevant domain names in the United States and in other countries. If we are not able to protect our patents, |
trademarks, domain names or other intellectual property, we may experience difficulties in achieving and maintaining brand recognition |
and customer loyalty. Because we are involved in litigation from |
time to time and are subject to numerous laws and governmental regulations, we could incur substantial judgments, fines, legal fees and |
other costs as well as reputational harm. We are sometimes the |
subject of complaints or litigation from customers, employees or other third parties for various reasons. The damages sought against us |
in some of these litigation proceedings could be substantial. Although we maintain liability insurance for some litigation claims, if |
one or more of the claims were to greatly exceed our insurance coverage limits or if our insurance policies do not cover a claim, this |
could have a material adverse effect on our business, financial condition, results of operations and cash flows. 63 Existing or future |
government regulation could expose us to liabilities and costly changes in our business operations and could reduce customer demand for |
our products and services. We are subject to federal |
and state consumer protection laws and regulations, including laws protecting the privacy of customer non-public information and regulations |
prohibiting unfair and deceptive trade practices, as well as laws and regulations governing businesses in general and the Internet and |
e-commerce and certain environmental laws. Additional laws and regulations may be adopted with respect to the Internet. These laws may |
cover issues such as user privacy, spyware and the tracking of consumer activities, marketing e-mails and communications, other advertising |
and promotional practices, money transfers, pricing, content and quality of products and services, taxation, electronic contracts and |
other communications, intellectual property rights, and information security. Furthermore, it is not clear how existing laws such as those |
governing issues such as property ownership, sales and other taxes, trespass, data mining and collection, and personal privacy apply to |
the Internet and e-commerce. To the extent we expand into international markets, we will be faced with complying with local laws and regulations, |
some of which may be materially different than U.S. laws and regulations. Any such foreign law or regulation, any new U.S. law or regulation, |
or the interpretation or application of existing laws and regulations to our business may have a material adverse effect on our business, |
prospects, financial condition and results of operations by, among other things, subjecting us to fines, penalties, damages or other liabilities, |
requiring costly changes in our business operations and practices, and reducing customer demand for our products and services. We may |
not maintain sufficient, or any, insurance coverage to cover the types of claims or liabilities that could arise as a result of such regulation. We may be affected |
by global climate change or by legal, regulatory, or market responses to such change. The growing political |
and scientific sentiment is that global weather patterns are being influenced by increased levels of greenhouse gases in the earth’s |
atmosphere. This growing sentiment and the concern over climate change have led to legislative and regulatory initiatives aimed at reducing |
greenhouse gas emissions which warm the earth’s atmosphere. These warmer weather conditions could result in a decrease in demand |
for auto parts in general. Moreover, proposals that would impose mandatory requirements on greenhouse gas emissions continue to be considered |
by policy makers in the United States. Laws enacted that directly or indirectly affect our suppliers (through an increase in the cost |
of production or their ability to produce satisfactory products) or our business (through an impact on our inventory availability, cost |
of sales, operations or demand for the products we sell) could adversely affect our business, financial condition, results of operations |
and cash flows. Significant increases in fuel economy requirements or new federal or state restrictions on emissions of carbon dioxide |
that may be imposed on vehicles and automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we |
sell or lead to changes in automotive technology. Compliance with any new or more stringent laws or regulations, or stricter interpretations |
of existing laws, could require additional expenditures by us or our suppliers. Our inability to respond to such changes could adversely |
impact the demand for our products and our business, financial condition, results of operations or cash flows. Possible new tariffs |
that might be imposed by the United States government could have a material adverse effect on our results of operations. Changes in U.S. and foreign |
governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the U.S., |
among other restrictions. Throughout 2018 and 2019, the U.S. imposed tariffs on imports from several countries, including China. If further |
tariffs are imposed on imports of our products, or retaliatory trade measures are taken by China or other countries in response to existing |
or future tariffs, we could be forced to raise prices on all of our imported products or make changes to our operations, any of which |
could materially harm our revenue or operating results. Any additional future tariffs or quotas imposed on our products or related materials |
may impact our sales, gross margin and profitability if we are unable to pass increased prices onto our customers. 64 Risks Related to Our Relationship with Our |
Manager Termination of the management services agreement |
will not affect our manager’s rights to receive profit allocations and removal of our manager may cause us to incur significant |
fees. Our manager owns all of our allocation shares, |
which generally will entitle our manager to receive a profit allocation as a form of preferred distribution. In general, this profit allocation |
is designed to pay our manager 20% of the excess of the gains upon dispositions of our subsidiaries, plus an amount equal to the net income |
of such subsidiaries since their acquisition by us, over an annualized hurdle rate. If our manager resigns or is removed, for any reason, |
it will remain the owner of our allocation shares. It will therefore remain entitled to all profit allocations while it holds our allocation |
shares regardless of whether it is terminated as our manager. If we terminate our manager, it may therefore be difficult or impossible |
for us to find a replacement to serve the function of our manager, because we would not be able to force our manager to transfer its allocation |
shares to a replacement manager so that the replacement manager could be entitled to a profit allocation. Therefore, as a practical matter, |
it may be difficult for us to replace our manager without its cooperation. If it becomes necessary to replace our manager and we are unable |
to replace our manager without its cooperation, we may be unable to continue to manage our operations effectively and our business may |
fail. If we terminate the management services agreement |
with our manager, any fees, costs and expenses already earned or otherwise payable to our manager upon termination would become immediately |
due. Moreover, if our manager were to be removed and our management services agreement terminated by a vote of our board of directors |
and a majority of our common shares other than common shares beneficially owned by our manager, we would also owe a termination fee to |
our manager on top of the other fees, costs and expenses. In addition, the management services agreement is silent as to whether termination |
of our manager “for cause” would result in a termination fee; there is therefore a risk that the agreement may be interpreted |
to entitle our manager to a termination fee even if terminated “for cause”. The termination fee would equal twice the sum |
of the amount of the quarterly management fees calculated with respect to the four fiscal quarters immediately preceding the termination |
date of the management services agreement. As a result, we could incur significant management fees as a result of the termination of our |
manager, which may increase the risk that our business may be unable to meet its financial obligations or otherwise fail. Mr. Ellery W. Roberts, our Chairman and Chief |
Executive Officer, controls our manager. If some event were to occur to cause Mr. Roberts (or his designated successor, heirs, beneficiaries |
or permitted assigns) not to control our manager without the prior written consent of our board of directors, our manager would be considered |
terminated under our agreement. Our manager and the members of our management |
team may engage in activities that compete with us or our businesses. Although our Chief Executive Officer intends to |
devote substantially all of his time to the affairs of our company and our manager must present all opportunities that meet our acquisition |
and disposition criteria to our board of directors, neither our manager nor our Chief Executive Officer is expressly prohibited from investing |
in or managing other entities. In this regard, the management services agreement and the obligation to provide management services will |
not create a mutually exclusive relationship between our manager and its affiliates, on the one hand, and our company, on the other. See |
Item 1 “ Business—Our Manager ” for more information about our relationship with our manager and our management |
team. Our manager need not present an acquisition |
opportunity to us if our manager determines on its own that such acquisition opportunity does not meet our acquisition criteria. Our manager will review any acquisition opportunity |
to determine if it satisfies our acquisition criteria, as established by our board of directors from time to time. If our manager determines, |
in its sole discretion, that an opportunity fits our criteria, our manager will refer the opportunity to our board of directors for its |
authorization and approval prior to signing a letter of intent, indication of interest or similar document or agreement. Opportunities |
that our manager determines do not fit our criteria do not need to be presented to our board of directors for consideration. In addition, |
upon a determination by our board of directors not to promptly pursue an opportunity presented to it by our manager, in whole or in part, |
our manager will be unrestricted in its ability to pursue such opportunity, or any part that we do not promptly pursue, on its own or |
refer such opportunity to other entities, including its affiliates. If such an opportunity is ultimately profitable, we will have not |
participated in such opportunity. See Item 1 “ Business—Our Manager—Acquisition and Disposition Opportunities ” |
for more information about our current acquisition criteria. Our Chief Executive Officer, Mr. Ellery |
W. Roberts, controls our manager and, as a result we may have difficulty severing ties with Mr. Roberts. Under the terms of the management services agreement, |
our board of directors may, after due consultation with our manager, at any time request that our manager replace any individual seconded |
to us, and our manager will, as promptly as practicable, replace any such individual. However, because Mr. Roberts controls our manager, |
we may have difficulty completely severing ties with Mr. Roberts absent terminating the management services agreement and our relationship |
with our manager. Further, termination of the management services agreement could give rise to a significant financial obligation, which |
may have a material adverse effect on our business and financial condition. See Item 1 “ Business—Our Manager ” |
for more information about our relationship with our manager. 65 If the management services agreement is |
terminated, our manager, as holder of the allocation shares, has the right to cause us to purchase its allocation shares, which may have |
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