SETTLEMENT AND RELEASE AGREEMENT

         THIS  AGREEMENT  is entered into  between  MICHAEL A. MASON,  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.


<PAGE>

         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.

                                       2
<PAGE>

         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.

                            MICHAEL A MASON, TRUSTEE FOR SERVICEMAX
                                TIRE & AUTO CENTERS OF MICHIGAN, INC.


                            /s/ Michael A. Mason
                            --------------------------------------------------
                            Michael A. Mason

                           ACORN HOLDINGS CORPORATION,
                           a Delaware corporation

                           By:   /s/ Stephen A. Ollendorff
                                 ----------------------------------------------
                           Name:     Stephen A. Ollendorff
                                 ----------------------------------------------
                           Its:      Chairman and Chief Executive Officer
                                 ----------------------------------------------



                                       3