Exhibit 10.5
MANAGEMENT AGREEMENT
This Management Agreement (the "Agreement") is made and entered into as
of January 5, 1998, by and among JRJ Investments, Inc., a Nevada corporation,
(the "Company"), the Xxxxxxxx Family Trust R-501, u/a/d October 23, 1985 (the
"Seller"), and Xxxxxxxx Diversified Investments, Inc., a Nevada corporation
wholly owned by the Seller ("CDI").
RECITALS
A. The Company owns and operates a new automobile dealership known as
"Xxxxxxxx Motor Cars", located at 0000 Xxxxx Xxxxxxx Xxxxxxxxx, Xxx Xxxxx,
Xxxxxx (the "Dealership"), pursuant to automobile dealer agreements with the
manufacturers (individually, a "Manufacturer" and collectively, the
"Manufacturers") of Land Rover and Rolls Royce and Bentley new automobiles
(individually, a "Franchise" and collectively, the "Franchises") which were
issued to Seller, as the approved owner of the Company.
B. Pursuant to the terms and conditions of that certain Amended and
Restated Stock Purchase Agreement, dated as of November 1, 1997 (the
"Purchase Agreement"), Cross-Continent Auto Retailers, Inc., a Delaware
Corporation ("C-Car"), has purchased from Seller all of the issued and
outstanding capital stock of the Company (the "Acquisition").
C. The Purchase Agreement provided that if , at the time of Closing
(as defined in the Purchase Agreement), C-Car had not received the approval
for the Acquisition from any of the Manufacturers: (i) a portion of the
Purchase Price (as defined in the Purchase Agreement) allocated to each
Franchise would be placed in escrow, pursuant to an escrow agreement (the
"Escrow Agreement"), pending the approval of the Acquisition by the
respective Manufacturers, and (ii) the Company, for the benefit of the
Seller, would manage any such Franchise with respect to which the Acquisition
has not been approved by the applicable Manufacturer (individually, a
"Managed Franchise" and collectively, the "Managed Franchises"), pursuant to
the terms and conditions of this Agreement.
D. In accordance with the provisions of subparagraph 20(c) of the
Purchase Agreement, the Jaguar Assets (as defined in the Purchase Agreement)
have been distributed, at the direction of the Seller, by the Company to CDI.
E. Seller desires that the Company manage and the Company desires to
manage each Managed Franchise, and if the Jaguar Assets are still owned by
CDI, CDI desires that the Company manage and the Company desires to manage
the Jaguar Assets, for the consideration and upon the terms and conditions
set forth in this Agreement.
AGREEMENT
In consideration of the mutual agreements set forth in this Agreement,
the Company, the Seller, and CDI agree as follows:
1. MANAGEMENT OF THE MANAGED FRANCHISES AND THE JAGUAR ASSETS. The
Seller and CDI, if it owns the Jaguar Assets on the Effective Date
(hereinafter defined), respectively, hereby engage the Company as an
independent contractor to manage the Managed Franchises for the Seller and
the Jaguar Assets for CDI at the Dealership. The Company shall assume
management responsibilities under this Agreement effective January 5, 1998
(the "Effective Date"). Subject to paragraph 3 of this Agreement, the
Company shall be responsible for (a) managing and supervising the Managed
Franchises and the Jaguar Assets, and (b) making all management and operating
decisions, including without limitation, decisions concerning sales
practices, inventory management and personnel matters.
2. TERM. The term of this Agreement shall begin on the Effective Date
and shall terminate: (a) with respect to each Managed Franchise on the
earlier of (i) the date the applicable Manufacturer approves the Acquisition,
or (ii) the date following March 1, 1998, that Seller, at its sole
discretion, elects to terminate this Agreement; and (b) with respect to the
Jaguar Assets, on the date that Seller, at its sole discretion, elects to
terminate this Agreement (each of the foregoing being hereinafter a
"Termination Date").
3. CONDUCT OF THE BUSINESS OF THE MANAGED FRANCHISES AND THE JAGUAR
ASSETS. During the term of this Agreement, the Company shall manage each of
the Managed Franchises and, if applicable, the Jaguar Assets in such manner
as to conduct their operations according to the ordinary and usual course of
business reasonably consistent with past and current practices and to
maintain and preserve their assets, customer relationships and vendor and
supplier relationships.
4. MANAGEMENT FEE. As consideration for the Company managing the
Managed Franchises and the Jaguar Assets during the term of this Agreement,
the Seller, with respect to the Managed Franchises, and CDI, with respect to
the Jaguar Assets, shall pay the Company a fee in cash (the "Management Fee")
in an amount equal to the monthly gross profit, resulting from the business
and operations of the Managed Franchises and the Jaguar Assets, as the case
may be. Notwithstanding anything contained in this Agreement to the contrary,
with respect to each Managed Franchise and the Jaguar Assets, as the case may
be: (i) any income, costs or expenses that are not directly related to the
operation of a Managed Franchise or the Jaguar Assets, (ii) any deferred
income, costs or expenses of operating the Dealerships that were earned,
accrued or incurred prior to November 1, 1997, that were not included in the
calculation of Net Worth Adjustments (as defined in the Purchase Agreement),
and (iii) any income, costs or expenses with respect a Managed Franchise or
the Jaguar Assets that are accrued or incurred after the applicable
Termination Date, shall be excluded from the calculation of the Management
Fee. The Management Fee for any partial month shall be prorated. The Seller
and CDI, as applicable, shall pay the Company the Management Fee for each
month or partial month during the term of this Agreement within fifteen (15)
days after the end of such month or partial month.
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5. CONSULTING FEE. The Company shall pay (a) to Seller a monthly
consulting fee in an amount equal to nine percent (9%) per annum on the funds
held in the escrow pursuant to the Escrow Agreement, and (b) to CDI the sum
of $20,000 (collectively, the "Consulting Fees"). In addition, for so long
as any part of the Consulting Fees are payable to either Seller or CDI, the
Company will continue Xxxxx X. Xxxxxxxx, Xx., and his eligible dependents, on
the Company's medical and health insurance policy. In consideration of the
payment of the Consulting Fees, each of Seller and CDI shall cause Xxxxx X.
Xxxxxxxx, Xx. to make himself available at reasonable intervals and for
reasonable periods of time to assist, if requested, the Company in the
performance of its duties hereunder. The Consulting Fees shall be payable by
the Company: (i) to Seller until the Termination Date with respect to all of
the Managed Franchises and (ii) to CDI until the Termination Date with
respect to the Jaguar Assets (the "Jaguar Termination Date"). The Consulting
Fees for any partial month shall be prorated. Consulting Fees shall be paid
to Seller and to CDI for each month, or partial month, up to the applicable
Termination Date within fifteen (15) days after the end of such month or
partial month.
6. JAGUAR ASSETS. On the Effective Date, the Company shall pay to
CDI, the sum of $200,000 as a deposit for the Company's performance of its
obligations to fully cooperate with CDI in allowing the Jaguar Assets to be
inventoried and removed from the Company's possession on the Jaguar
Termination Date (the "Jaguar Deposit"). Seller and CDI, jointly and
severally, covenant and agree to repay, on the Jaguar Termination Date, to
the Company such portion of the Jaguar Deposit, but not in excess of the
Jaguar Deposit, that equals $200,000 less the difference between (a) the
value of the Jaguar Parts (as defined in subparagraph 20(c) of that certain
Amended and Restated Stock Purchase Agreement (the "Purchase Agreement")
dated as of November 1, 1997, by and among Cross-Continent Auto Retailers,
Inc., the Seller and the Company) owned by the Company at the close of
business of the Dealerships (as defined in the Purchase Agreement) on October
31, 1997, and (b) the value of the Jaguar Parts (that are in returnable
condition, undamaged, still in the original, resalable merchandising package,
in unbroken lots, listed for sale in the then current dealer parts and
accessories price schedule of Jaguar Cars or other supplier, and were
purchased directly from Jaguar Cars or other reliable suppliers) in the
possession of the Company at the close of business of the Dealership on the
business day preceding the Jaguar Termination Date. The value of the Jaguar
Parts shall be determined in the manner provided in subparagraph 12(c)(iii)
of the Purchase Agreement. With respect to the New Jaguar Automobiles
purchased by the Company between the Effective Date and the Jaguar
Termination Date, Seller further covenants and agrees that on the Jaguar
Termination Date, Seller will cause CDI to: (A) pay to the Company an amount
equal to performed PDI at the Company's cost (excluding any internal profit),
options added at the Company's cost (excluding any internal profit), and any
freight and handling charges paid by the Company ("Add Ons"), LESS any
factory holdback rebate and any other factory rebate or incentive,
advertising credits and interest credits which the Company may have received
prior to the Jaguar Termination Date ("Deductions") and (B) either pay in
full or, with the consent of the lien holder(s) and the release of the
Company therefrom, assume the Company's floor plan liability, if any, secured
by liens on such New Jaguar Automobiles. If the Deductions exceed the
Add-Ons, CDI may deduct the amount thereof from the amount of the Jaguar
Deposit otherwise payable to C-Car.
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7. LICENSES OF THE COMPANY. The Company's management and supervision of
the Managed Franchises and the Jaguar Assets shall be conducted utilizing the
Company's dealer numbers, dealer licenses and dealer tags.
8. COOPERATION. Each of the Company, the Seller and CDI mutually agree
to cooperate and use their respective reasonable good faith efforts to enable
the Managed Franchises and the Jaguar Assets to be managed and operated by the
Company in accordance with the standards set forth in this Agreement.
9. CORPORATE EXISTENCE OF THE COMPANY. The Company shall maintain its
corporate existence in good standing in the State of Nevada.
10. INDEMNIFICATION BY THE COMPANY. The Company shall indemnify,
defend and hold the Seller, and its trustees and beneficiaries, and CDI, and
its officers, directors, employees, agents and representatives harmless from
and against any and all losses, damages, claims, actions, suits, proceedings,
liabilities, obligations, costs and expenses, including reasonable attorneys'
fees, arising out of, or based upon, any breach of this Agreement, or
otherwise caused, by the Company during the term of this Agreement with
respect to the operation of the Managed Franchises or the Jaguar Assets.
11. INDEMNIFICATION BY THE SELLER AND CDI. The Seller and CDI shall
indemnify, defend, and hold the Company and its officers, directors,
stockholders, employees, agents and representatives harmless from and against
any and all losses, damages, claims, actions, suits, proceedings,
liabilities, obligations, costs and expenses, including reasonable attorneys'
fees, arising out of, or based upon any act, omission, or event occurring
with respect to each Managed Franchise and the Jaguar Assets: (a) prior to
November 1, 1997, with respect to each Managed Franchise or the Jaguar
Assets, (b) during the term of this Agreement with respect to the operation
of each Managed Franchise or the Jaguar Assets if caused by the negligence or
willful misconduct of the Seller or CDI, (c) during the term of this
Agreement with respect to each Managed Franchise or the Jaguar Assets other
than matters related to the operation thereof, and (d) following the
Termination Date with respect to either Managed Franchise or the Jaguar
Assets.
12. AUTHORIZATION AND VALIDITY. Each of the Company, Seller and CDI,
respectively, represent and warrant to the other that (i) it has the power
and authority to make, execute, deliver and perform its obligations under
this Agreement and all such action has been duly authorized by all necessary
proceedings on its part, and (ii) this Agreement has been duly and validly
executed and delivered by it and constitutes the valid and legally binding
obligations of it, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to the enforcement
of creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
13. ACCESS. The Company shall permit the Seller and CDI, and their
respective
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representatives to have full access to, and to examine, at all reasonable
times and places, and in a manner so as not to interfere with the normal
business operations of the Dealership, the books, records, properties,
assets, and operations of the Dealership relating to the Managed Franchises
and the Jaguar Assets.
14. GENERAL PROVISIONS.
(a) ENTIRE AGREEMENT. This Agreement contains and constitutes the entire
agreement between the parties regarding the subject matter hereof and
supersedes all prior agreements and understandings between the parties
relating to the subject matter of this Agreement. Other than as
referenced herein, there are no agreements, understandings,
restrictions, warranties or representations between the parties
relating to the subject matter hereof other than those set forth in
this Agreement. This Agreement is not intended to have any legal
effect whatsoever, or to be a legally binding agreement, or any
evidence thereof, until it has been signed by the Company, the
Seller, and CDI.
(b) FURTHER ACTIONS. From time to time, as and when requested by any
parties hereto, the other parties shall execute and deliver, or cause
to be executed and delivered, all such documents and instruments and
shall take, or cause to be taken, all such further or other actions as
such other parties may reasonably deem necessary or desirable to
consummate the transactions contemplated by this Agreement.
(c) AMENDMENT. This Agreement may not be amended, modified, or
terminated except by an instrument in writing signed by all parties to
this Agreement.
(d) CONSTRUCTION. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter gender thereof or
to the plurals of each, as the identity of the person or persons or
the context may require. The descriptive headings contained in this
Agreement are for reference purposes only and are not intended to
describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision contained in this Agreement.
(e) INVALIDITY. If any provision contained in this Agreement shall for
any reason be held to be invalid, illegal, void or unenforceable in
any respect, such provision shall be deemed modified so as to
constitute a provision conforming as nearly as possible to such
invalid, illegal, void or unenforceable provision while still
remaining valid and enforceable; and the remaining terms or provisions
contained herein shall not be affected thereby.
(f) BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective heirs, administrators, executors, successors and permitted
assigns. The Company may not assign its rights
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or obligations under this Agreement without the written consent of
the Seller and CDI. Any assignment in violation of this Agreement
shall be void.
(g) ATTORNEYS' FEES. In the event any party instigates litigation to
enforce or protect its rights under this Agreement, the party
prevailing in any such litigation shall be entitled, in addition to
all other relief, to reasonable attorneys' fees, out-of-pocket costs
and disbursements relating to such litigation.
(h) NOTICES. All notices and other communications hereunder shall be (i)
in writing, dated with the current date of such notice, and signed by
the party giving such notice, and (ii) mailed, postpaid, registered or
certified, return receipt requested, addressed to the party to be
notified, or delivered by personal delivery or by overnight courier.
Notice shall be deemed given when received by the party to be notified
or when the party to be notified refuses to accept delivery of the
notice. The initial addresses of the parties shall be as follows:
IF TO THE COMPANY:
0000 Xxxxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxxx X. Xxxx
(000) 000-0000
IF TO SELLER OR CDI:
Xxxxx X. Xxxxxxxx, Xx.
40 Innisbrook
Las Vegas, Nevada 89113
with a copy to:
Jones, Jones, Close & Xxxxx, Chartered
0000 Xxxxxx Xxxxxx Xxxxxxx, 0xx Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
The parties hereto shall have the right from time to time to
change their respective addresses by not less than ten (10) days
prior written notice to the other parties.
(i) WAIVER. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent
breach or default of the same or similar
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nature.
(j) GOVERNING LAW. This Agreement shall be construed, enforced, and
governed in accordance with the laws of the State of Nevada.
(k) MEDIATION AND VENUE. If a dispute arises out of or relates to this
Agreement, or the breach thereof, and if the dispute cannot be settled
through negotiation, the parties agree first to try in good faith to
settle the dispute by mediation administered by the American
Arbitration Association under its Commercial Mediation Rules before
resorting to arbitration, litigation, or some other dispute resolution
procedure. The jurisdiction and venue for any proceeding, whether by
mediation, arbitration, litigation or other dispute resolution
procedure, shall be Xxxxx County, Nevada.
(l) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the
same instrument.
(m) INSURANCE POLICIES. The Company shall continue to cause its insurance
policies to name the Seller and CDI as additional insureds during the
term of this Agreement and provide Seller and CDI with evidence of
having done so.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first written above.
COMPANY: JRJ INVESTMENTS, INC., a Nevada corporation
By:
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R. Xxxxx Xxxxx, Secretary
SELLER: THE XXXXXXXX FAMILY TRUST R-501
By:
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Xxxxx X. Xxxxxxxx, Xx., Trustee
CDI: XXXXXXXX DIVERSIFIED INVESTMENTS, INC.
By:
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Xxxxx X. Xxxxxxxx, Xx., President
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