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Exhibit 99.1
NATIONAL AUTO CREDIT, INC.
00000 XXXXXX XX.
SOLON, OHIO 44139
May 10, 1999
Xxxxxx X. Xxxxxx XX
0000 X. Xxxxxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Dear Xx. Xxxxxx:
This agreement sets forth our mutual understanding with respect to the
grant of an option to purchase certain shares of the Company's common stock held
by you and certain other related matters. Accordingly we hereby agree as
follows.
1. GRANT OF OPTIONS.
a. You are the beneficial owner of 2,849,630 shares (the "Shares") of
the Common Stock, par value $0.05 per share (the "Common Stock"), of National
Auto Credit, Inc. (the "Company"). For and in consideration of the sum of
$1,000,000 (the "Payment"), paid concurrently herewith by the Company by either
check or wire transfer of immediately available funds to an account designated
by you (the receipt of which is hereby acknowledged), you hereby grant the
Company the right and option (the "Option") to purchase all but not less than
all of the Shares from you at any time from the date hereof and continuing for a
period of 45 days (as it may be extended, the "Term"), at a purchase price of
$1.50 per Share; provided that, the Company may, at its option, extend the Term
for an additional 45 days for and in consideration of the sum of $500,000,
payable in the manner set forth above (the "Second Payment"), and provided
further that, the aggregate of the Payment and one-half of any Second Payment
shall be deducted from the aggregate amount payable by the Company to you upon
exercise of the Option. The Company shall have the right to transfer the Option
at any time during the Term to any third-party.
b. In the event that the Company fails to exercise the Option during
the Term, (i) the Company hereby agrees to provide you with the right, for so
long as you own at least 2,500,000 Shares, to designate one member to the Board
of Directors of the Company (which member shall be subject to the approval of a
majority of the Company's existing Board of Directors and/or Directors approved
by them ("Existing Directors"), such approval not to be unreasonably withheld or
delayed) and (ii) the Company hereby grants you the right and the option (the
"Shareholder Option") to purchase up to 2,849,630 shares of Common Stock from
the Company, in whole or in part, at any time from the expiration of the Term
and continuing for a period of 30 days, at a per share purchase price equal to
the lower of (A) $1.50 or (B) the average of the daily closing sale price of the
Common Stock in the over-the-counter market (as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, or if the Common Stock is not quoted by any such
organization, the daily average of the closing bid and asked price as furnished
by a professional market maker making a market in the Common Stock selected by
the Existing Directors and you) over the ten trading days immediately prededing
the expiration of the Term.
c. You hereby represent to the Company that the Shares are the only
shares of Common Stock that you beneficially own, that you are the owner of the
Shares and that upon the exercise of the Option by the Company, valid and
marketable title to the Shares, free and clear of all liens, encumbrances and
restrictions, will pass to the Company (or any third-party transferee of the
Option, as the case may be). Concurrently with the grant of the Option to the
Company, you will
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May 10, 1999
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enter into a proxy in favor of Xxxxx Xxx, in the form attached hereto as
Appendix I, and an escrow agreement (pursuant to which you will deposit
certificates evidencing the Shares and the Company will deposit the amounts to
be paid to you in consideration thereof), in the form attached hereto as
Appendix II. The Company hereby represents to you that it has the power and
authority to enter into and execute this Agreement and perform the transactions
contemplated hereby; that this Agreement and such transactions have been
approved by any necessary action on the part of the Company; that the execution
and delivery of this Agreement and the performance by the Company of such
transactions will not violate or conflict with any provisions of the Company's
Certificate of Incorporation or Bylaws, any material contract to which the
Company is a party or by which the Company or any of its properties may be
bound or any law, rule, regulation, order, decree or judgment to which the
Company is subject; and that any shares of Common Stock issued to you pursuant
to the valid exercise of the Shareholder Option will be validly issued,
fully paid and non-assessable.
2. CERTAIN ACTIONS.
a. In connection with the transactions contemplated hereby, you
hereby agree that for a period of one year from the date of this Agreement, you
will not take (and you will use your reasonable best efforts to cause your
affiliates and associates to refrain from taking), directly or indirectly,
without the prior written consent of the Existing Directors, any action which
adversely impacts or interferes with the (i) business and operations of the
Company, (ii) completion of the audit of the Company's financial statements,
(iii) existence, composition, function or purpose of the Special Committee of
the Company's Board of Directors or (iv) efforts of the Board of Directors to
(A) preserve and maximize the assets of the Company, (B) continue to stabilize
the operations of the Company; (C) ensure proper financial and accounting
reporting and controls and (D) restore public confidence in the Company;
provided, however, that nothing in this Agreement shall restrict the ongoing
business operations of the Ugly Duckling Corporation or its subsidiaries, which
the parties acknowledge has business operations similar to those of the
Company. In addition, you hereby agree that for a period of one year from the
date of this Agreement, you will not acquire beneficial ownership of any
additional shares of Common Stock without the prior written consent of the
Existing Directors.
b. In addition, you agree to cooperate with the Company and its Board
of Directors, as well as all governmental, quasi-governmental and regulatory
authorities and securities exchanges, in connection with all inquiries,
investigations and proceedings that currently exist and may hereafter arise,
provided that, the Company will reimburse you for your reasonable out of pocket
expenses (including customary hourly fees charged by you and reasonable
attorneys' fees and costs) in connection with all such inquiries,
investigations and proceedings.
c. You hereby acknowledge that you are aware, and that you will
advise your Representatives (as defined below), as appropriate, that the United
States securities laws may prohibit any person who has received material,
non-public information concerning certain matters which are the subject of this
Agreement from purchasing or selling securities of the Company or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell
such securities.
3. CONFIDENTIAL TREATMENT.
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a. Unless otherwise agreed to in writing by the Company, you agree
to, except as required by law, keep all confidential information about the
Company confidential and not to disclose or reveal any such confidential
information to any person.
b. You agree that you will have no discussion, correspondence or other
contact or communication with the Company concerning the Company or its
securities except with the Chairman of the Board of Directors, the President of
the Company and their designated representatives.
4. Miscellaneous.
a. The parties agree that money damages would not be a sufficient
remedy for any breach of this Agreement by the other party or its
Representatives, and that in addition to all other remedies, each party shall
be entitled to specific performance and injunctive and other equitable relief
as a remedy for any such breach. Each party further agrees to waive, and to use
its respective best efforts to cause its Representatives to waive, any
requirement for the securing or posting of any bond in connection with such
remedy.
b. For the purpose of this Agreement, the term "Representatives" when
used in respect of any person, shall mean such person's affiliates, directors,
officers, employees, agents or controlling persons.
c. Each party hereby releases, discharges, cancels and waives any and
all claims, demands, causes of action, damages and liabilities of any nature
whatsoever, whether in law or in equity, whether known or unknown to the
parties and whether contingent or otherwise, which such party has against the
other at the time of execution of this Agreement. Nothing contained in this
Agreement shall be construed as an admission by any party that such party has
violated any statute, law, rule or regulation, or breached any contract or
agreement.
d. The parties hereby acknowledge that the Company has not nominated
or appointed you as a Director of officer of the Company and you have neither
been elected nor served as such; and that based on the information contained in
your Schedule 13D filed with the Securities and Exchange Commission on April
20, 1999, you are not a beneficial owner of 10% or more of the Common Stock.
The Company hereby agrees that it will not seek to recover any profit that may
be realized by you in connection with the transactions contemplated hereby
pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended.
e. From the date hereof until the expiration of the Term, each of the
parties agrees to consult with the other in issuing any press release or
otherwise making any public statement with respect to this Agreement and the
transactions contemplated hereby, and neither party shall issue any such press
release or make any such public statement without the prior written consent of
the other, except as may be required by applicable law, rule or regulation,
order of a court or governmental agency or by obligations pursuant to any
listing agreement with any national securities exchange or automated quotation
service.
f. The parties shall not make, and shall use their respective
reasonable best efforts to cause their respective Representatives to refrain
from making, at any time after the date hereof, disparaging or derogatory
remarks, whether oral or written, regarding the other or its Representatives;
provided that this obligation shall not apply to disclosures required by
applicable law, rule or
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provided that this obligation shall not apply to disclosures required by
applicable law, rule or regulation, order of a court or governmental agency or
obligations pursuant to any listing agreement with any national securities
exchange or automated quotation service.
g. You hereby withdraw (i) your letter (the "April 20 Letter") to the
Board of Directors of the Company dated April 20, 1999, pursuant to which you
requested certain information of the Company pursuant to Section 220(d) of the
General Corporation Law of the State of Delaware (the "DGCL"); (ii) the written
consent of stockholders pursuant to Section 228 of the DGCL enclosed with the
Aril 20 Letter; and (iii) the Notice of Special Meeting, dated April 20, 1999,
called by you and Xxxxxx Xxxxxxx (it being understood that following the
expiration of the Term, nothing herein shall prevent you from exercising any
rights in this regard that may have been available to you).
h. No failure or delay by a party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof, or the
exercise of any right, power or privilege hereunder. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to principles of conflict of laws. The exclusive forum for all
disputes arising out of this Agreement and the transactions contemplated hereby
shall be the state courts of the State of Delaware. All modifications of,
waivers of and amendments to this Agreement must be in writing and signed by you
and the Company.
i. Either party may terminate this Agreement upon a material breach by
the other party; provided that without otherwise limiting the rights of the
parties, (i) in the event of such a breach by you, you will return the Payment
and any Second Payment to the Company no later than two business days following
demand by the Company and (ii) in the event of such a breach by the Company, you
shall not be required to return the Payment or any Second Payment to the Company
(it being agreed that the provisions of this Section 4(i) are in addition to and
not in satisfaction of the rights and remedies that each party may have against
the other). In addition, the provisions of Section 2(a), 2(b) (solely as it
relates to your agreement to cooperate with the Company and its Board of
Directors), 4(c) and 4(e) shall terminate in the event that the Company fails to
exercise the Option.
Please confirm your agreement with the foregoing by signing where
indicated below and returning to the undersigned a copy of this Agreement.
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Very truly yours,
NATIONAL AUTO CREDIT, INC.
------------------------------
Name:
Title:
Accepted and Agreed as of the
date first written above:
/s/ Xxxxxx X. Xxxxxx XX
--------------------------------
XXXXXX X. XXXXXX XX (*)
*On his own behalf and, for the purposes of
Section 1(a), on behalf of Verde Investments,
Inc., in his capacity as President.
/s/ Xxxxxx Xxxxxxx
---------------------------------
XXXXXX XXXXXXX (**)
**For the purposes of Section 4(c), (d) and
(g) only
