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EXHIBIT 2.5
MERGER AGREEMENT
This MERGER AGREEMENT (this "Agreement") is entered into as of November
15, 1996 by and among Republic Industries, Inc., a Delaware corporation
("Republic"); RI/RB Merger Corp., RI/GFB Merger Corp., both Florida corporations
and wholly-owned subsidiaries of Republic (collectively, RI/RB Merger Corp. and
RI/GFB Merger Corp. shall be referred to herein as the "Republic Merger Subs,"
and together with Republic, the "Republic Companies"); R & B Holding Company,
Inc. d/b/a Xxxxxxx Toyota and Kendall KIA ("R&B"), a Florida corporation, G.F.B.
Enterprises, Inc. d/b/a Lexus of Xxxxxxx ("GFB"), a Florida corporation
(collectively R&B and GFB shall be referred to herein as the "Companies"); and
Xxxxxx X. Xxxx, a resident of the State of Florida and the sole shareholder of
the Companies (the "Shareholder").
RECITALS
Republic and the Boards of Directors of the Companies have determined
that it is in the best interests of their respective shareholders for Republic
to acquire all of the issued and outstanding equity interests of the Companies.
In order to effectuate the acquisition, Republic has organized the Republic
Merger Subs as wholly-owned subsidiaries, and the parties have agreed, subject
to the terms and conditions set forth in this Agreement, to merge the Republic
Merger Subs with and into the Companies as provided herein, so that the
Companies continue as surviving corporations and wholly-owned subsidiaries of
Republic, and the Shareholder will be issued certain shares of common stock of
Republic in exchange for the issued and outstanding equity interests of each of
the Companies.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGERS
1.1 THE MERGERS. Subject to the terms and conditions of this
Agreement, and in accordance with the Business Corporations laws of the State of
Florida (the "Corporations Code"), at the Effective Time (as defined in Section
1.5), the Republic Merger Subs will be merged with and into the Companies (the
"Mergers") as follows:
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(a) RI/RB Merger Corp. shall be merged into and with R&B;
and
(b) RI/GFB Merger Corp. shall be merged into and with
GFB.
As a result of the Mergers, the separate corporate existence of each of
the Republic Merger Subs shall cease, and the Companies shall continue as
surviving corporations in the Mergers (the "Surviving Corporations") and
wholly-owned subsidiaries of Republic.
1.2 THE CLOSING. Subject to the terms and conditions of this
Agreement, the consummation of the Mergers (the "Closing") shall take place as
promptly as practicable (and in any event within five (5) business days) after
satisfaction or waiver of the conditions set forth in Articles VI and VII
hereof, as and when determined by Republic, at the offices of Akerman,
Senterfitt & Xxxxxx, P.A. in Miami, Florida, or such other place and time as the
parties may otherwise agree.
1.3 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Mergers and without any action on the part of the Companies, the Republic
Companies, or the Shareholder:
(a) Each share of common stock of R&B, par value $0.00 per share,
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive a number of shares (rounded to the nearest
whole share) of common stock, par value $.01 per share, of Republic (the
"Republic Common Stock") determined by dividing (i) $66,000,000 less the sum
allocated in Schedule 1.3(a) to GFB, minus (A) the amount of all bank
indebtedness and any long-term non-bank debt of R&B as of the Effective Date,
and minus (B) the amount (if any) by which R&B's current liabilities exceed its
current assets as of the Effective Date, (the "R&B Purchase Price"), by (ii) the
average closing sale price of a share of Republic Common Stock as quoted on the
Nasdaq Stock Market ("Nasdaq") for the fifteen consecutive trading days which
precede the third trading day which is immediately prior to the Closing, as
reported (absent manifest error in the printing thereof) by the Wall Street
Journal (Eastern Edition) (the "Average Closing Sale Price"), and then (iii)
dividing the quotient determined under (i) and (ii) above by the aggregate
number of shares of common stock of R&B issued and outstanding at the Effective
Time.
(b) Each share of common stock of GFB, par value $1.00 per share,
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive a number of shares (rounded to the nearest
whole share) of Republic Common Stock determined by dividing (i) $66,000,000
less the sum allocated in Schedule 1.3(b) to R&B, minus (A) the amount of all
bank indebtedness and any long-term non-bank debt of GFB as of the Effective
Date, and minus (B) the amount (if any) by which GFB's current liabilities
exceed its current assets as of the Effective Date, (the "GFB Purchase Price"),
by (ii) the Average Closing Sale Price, and then (iii) dividing the quotient
determined under (i) and (ii) above by the aggregate number of shares of common
stock of GFB issued and outstanding at the Effective Time. The sum of the R&B
Purchase Price and the GFB Purchase shall be referred hereto as the "Total
Purchase Price."
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(c) Each share of common stock of the Republic Merger Subs issued
and outstanding at the Effective Time shall be converted into one share of the
common stock of the Surviving Corporation into which it is merging.
(d) The parties agree that the calculation of current liabilities
and current assets pursuant to this Section 1.3 shall be consistent with past
practice and shall include all short-term non-bank debt of the Companies.
For purposes of clarification, the total Purchase Price shall equal
$66,000,000, minus the amount of all bank indebtedness and any long-term
non-bank debt of R&B and GFB and minus the amount by which the total current
liabilities of R&B and GFB exceed the total current assets of R&B and GFB as of
the Effective Time.
1.4 TIMING OF TOTAL PURCHASE PRICE DETERMINATION. At least two days
prior to the Closing, the Companies and Republic shall estimate the Total
Purchase Price by mutual agreement as of the Effective Time for purposes of
determining the number of Republic Shares to be delivered by Republic at the
Effective Time (which estimated amount is referred to herein as the "Estimated
Value"). Within 60 days after the Effective Time, Republic shall prepare and
deliver to the Shareholder (in accordance with Section 13.1) a determination
(the "Determination") of the actual Total Purchase Price as of the Effective
Time (which actual value is referred to herein as the "Actual Value"), which
shall be prepared on a basis consistent with the determination of the Estimated
Value. If, within 30 days after the date on which a Determination is delivered
to the Shareholder, the Shareholder shall not have given written notice to
Republic setting forth in detail any objection of the Shareholder to such
Determination, then such Determination shall be final and binding on the parties
hereto. In the event the Shareholder gives written notice of any objection to
such Determination within the 30-day period, Republic and the Shareholder shall
use all reasonable efforts to resolve the dispute within the 30-day period
following the delivery of the written notice. If the parties are unable to reach
an agreement within such 30-day period, the matter shall be submitted to Xxxxxx
Xxxxxxxx LLP, a firm of independent certified public accountants, for
determination of the Actual Value which shall be final and binding upon Republic
and the Shareholder. Republic and the Shareholder shall contribute equally to
the costs (including fees and expenses charged by Xxxxxx Xxxxxxxx LLP) in
connection with the resolution of any such dispute. If the Actual Value is
lesser than the Estimated Value, Republic shall be entitled to set off against
the Held Back Shares (as defined in Section 1.8) the difference between the
Actual Value and the Estimated Value (assuming a value per share for purposes of
such calculation equal to the Average Closing Sale Price ), which set off shall
be deemed to be Indemnifiable Damages under Article IX hereof but such set-off
shall not count against or toward the Indemnification Threshold (as defined in
Section 9.1). If the Actual Value is greater than the Estimated Value, Republic
shall issue to the Shareholder such additional Republic Shares as would have a
value (assuming a value per share equal to the Average Closing Sale Price),
equal to the difference between the Actual Value and the Estimated Value.
1.5 FILING OF PLANS OF MERGER. At the Closing, the parties shall
cause the Mergers to be consummated by filing duly executed Certificates of
Merger with the Secretary of State of the State of Florida, in such form as
Republic determines is required by and in accordance with the relevant
provisions of the Corporations Code (the date and time of such filing is
referred to herein as the "Effective Date" or "Effective Time").
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1.6 EFFECT OF THE MERGERS. At the Effective Time, the effect of the
Mergers shall be as provided under the Corporations Code. Without limiting the
generality of the foregoing, at the Effective Time:
(a) all property, rights, privileges, policies and franchises of
each of the Companies and the Republic Merger Subs shall vest in the Surviving
Corporations, and all debts, liabilities and duties of each of the Companies and
Republic Merger Subs shall become the debts, liabilities and duties of the
Surviving Corporations.
(b) the Articles of Incorporation and Bylaws of each of the
Companies, as in effect immediately prior to the Effective Time, shall remain
its Articles of Incorporation and Bylaws thereafter, unless and until amended in
accordance with their terms and as provided by law; and
(c) the directors and officers or each of the Republic Merger Subs
at the Effective Time shall be the directors and officers of R&B and GFB,
respectively, each to hold a directorship or office in accordance with the
Articles of Incorporation and Bylaws of the respective Surviving Corporations,
until their respective successors are duly elected and qualified.
1.7 TAX TREATMENT. The parties hereto acknowledge and agree that the
Mergers contemplated hereby shall be treated for tax purposes as a tax-free
reorganization under Section 368 of the Code.
1.8 PROCEDURE AT THE CLOSING. At the Closing, the parties agree that
the following shall occur:
(a) The Companies and the Shareholder shall have satisfied each of
the conditions set forth in Article VI and shall deliver to Republic the
documents, certificates, opinions, consents and letters required by Article VI.
(b) The Republic Companies shall have satisfied each of the
conditions set forth in Article VII and shall deliver to the Companies the
documents, certificates, consents and letters required by Article VII.
(c) Republic shall issue the shares of Republic Common Stock
issuable pursuant to Section 1.3, registered in the names of the Shareholder and
shall deliver such shares in the following manner: (i) Republic shall set aside
and hold in accordance with Section 9.3 stock certificates representing shares
of Republic Common Stock having a value (based upon the Average Closing Sale
Price) equal to 5% of the Total Purchase Price (the "Held Back Shares"), and
(ii) Republic shall deliver stock certificates representing the balance of the
shares of Republic Common Stock issuable in accordance with Section 1.3 to the
Shareholder. The shares of Republic Common Stock issuable pursuant to Section
1.3, including the Held Back Shares, are referred to herein as the "Republic
Shares."
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE REPUBLIC COMPANIES
As a material inducement to the Companies and the Shareholder to enter
into this Agreement and to consummate the transactions contemplated hereby, the
Republic Companies make the following representations and warranties to the
Companies and the Shareholder:
2.1 CORPORATE STATUS. Republic is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to own or lease its properties and to carry on
its business as presently conducted. The Republic Merger Subs are corporations
duly organized, validly existing and in good standing under the laws of the
State of Florida, and is a wholly-owned subsidiary of Republic. There is no
pending or, to the knowledge of Republic, threatened proceeding for the
dissolution, liquidation, insolvency or rehabilitation of Republic.
2.2 CORPORATE POWER AND AUTHORITY. Each of the Republic Companies has
the corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. Each of the Republic Companies has taken all corporate
action necessary to authorize its execution and delivery of this Agreement, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby.
2.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by each of the Republic Companies and constitutes their legal, valid and binding
obligation enforceable against each of the Republic Companies in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
2.4 REPUBLIC COMMON STOCK. Upon consummation of the transactions
contemplated hereby and the issuance and delivery of certificates representing
the Republic Shares to the Shareholder, the Republic Shares will be duly
authorized, validly issued, fully paid, non-assessable shares, and free and
clear of any Liens, other than Liens arising by operating of law or Liens on any
particular Shareholder's Republic Shares that may be created or permitted to
exist by such Shareholder's actions.
2.5 CAPITALIZATION. As of the date hereof, the authorized capital stock
of Republic consists of 500,000,000 shares of Republic Common Stock and
5,000,000 shares of preferred stock. As ofNovember 6, 1996 (i) 192,150,630
shares of Republic Common Stock were validly issued and outstanding, fully paid
and nonassessable, and (ii) no shares of preferred stock were issued or
outstanding.
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2.6 NO VIOLATION. The execution and delivery of this Agreement by
Republic, the performance by Republic of its obligations hereunder and the
consummation by Republic of the transactions contemplated by this Agreement will
not (a) contravene any provision of the Certificate of Incorporation or Bylaws
of Republic, (b) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment, ruling or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon, or enforceable against Republic, (c) conflict with, result in
any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under, or
give rise to a right to terminate, amend, modify, abandon or accelerate, any
material Contract which is applicable to, binding upon or enforceable against
Republic, (d) result in or require the creation or imposition of any Lien upon
or with respect to any of the property or assets of Republic, (e) give to any
individual or entity a right or claim against Republic, which would have a
Material Adverse Effect on Republic or (f) require the consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, any court or tribunal or any other Person, except (i) pursuant to the
Exchange Act and the Securities Act and applicable inclusion requirements of
Nasdaq, (ii) filings required under the securities or blue sky laws of the
various states, (iii) filings required under the HSR Act or (iv) any filings
required to be made by the Companies or the Shareholder. Republic will use its
best efforts to ensure its continued inclusion in, and the continued eligibility
of the Republic Common Stock for trading on, the Nasdaq Stock Market or a
similar market, for a period of one year from the date hereof.
2.7 REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1996, except
where failure to have done so did not and would not have a Material Adverse
Effect on Republic, Republic has filed all reports, registrations and
statements, together with any required amendments thereto, that it was required
to file with the SEC, including, but not limited to Forms 10-K, Forms 10-Q,
Forms 8-K and proxy statements (collectively, the "Republic Reports"). Republic
has previously furnished or made available to the Companies and the Shareholder
copies of all Republic Reports filed with the SEC since January 1, 1996. As of
their respective dates (but taking into account any amendments filed prior to
the date of this Agreement), the Republic Reports complied in all material
respects with all the rules and regulations promulgated by the SEC and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of Republic included in the Republic Reports comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP consistently applied during the periods
presented (except, as noted therein, or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present (subject,
in the case of the unaudited statements, to normal audit adjustments) the
financial position of Republic and its consolidated subsidiaries as of the date
thereof and the results of their operations and their cash flows for the periods
then ended.
2.8 NO COMMISSIONS. Republic has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANIES AND THE SHAREHOLDER
As a material inducement to the Republic Companies to enter into this
Agreement and to consummate the transactions contemplated hereby, the Companies
and the Shareholder, jointly and severally, make the following representations
and warranties to the Republic Companies:
3.1 CORPORATE STATUS. Each of the Companies is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has the requisite power and authority to own or lease its properties
and to carry on its business as now being conducted. Each of the Companies is
legally qualified to do business as a foreign corporation in each of the
jurisdictions set forth in Schedule 3.1, which represent all jurisdictions where
the nature of its properties and the conduct of its business require such
qualification, and is in good standing in each of the jurisdictions in which it
is so qualified. Each of the Companies has fully complied with all of the
requirements of any statute governing the use and registration of fictitious
names, and each of the Companies has the legal right to use the names under
which it operates its businesses including, in the case of R&B, the names
"Kendall Toyota" and "Xxxxxxx KIA" and in the case of GFB, the name "Lexus of
Xxxxxxx." There is no pending or threatened proceeding for the dissolution,
liquidation, insolvency or rehabilitation of the Companies.
3.2 POWER AND AUTHORITY. Each of the Companies has the corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. Each of the
Companies has taken all corporate action necessary to authorize the execution
and delivery of this Agreement, the performance of its obligations hereunder,
and the consummation of the transactions contemplated hereby. The Shareholder is
an individual residing in the State of Florida and has the requisite competence
and authority to execute and deliver this Agreement, to perform his obligations
hereunder and to consummate the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by each of the Companies and the Shareholder, and constitutes the legal, valid
and binding obligation of each of them, enforceable against each of them in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
3.4 CAPITALIZATION. Schedule 3.4 sets forth, as of the date hereof,
with respect to each of the Companies, (a) the number of authorized shares of
each class of its capital stock, (b) the number of issued and outstanding shares
of each class of its capital stock and (c) the number of shares of each class of
its capital stock which are held in treasury. All of the issued and outstanding
shares of capital stock of each of the Companies (i) have been duly authorized
and validly issued and
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are fully paid and non-assessable, (ii) were issued in compliance with all
applicable state and federal securities laws and (iii) were not issued in
violation of any preemptive rights or rights of first refusal. No preemptive
rights or rights of first refusal exist with respect to the shares of capital
stock of either of the Companies and no such rights arise by virtue of or in
connection with the transactions contemplated hereby. There are no outstanding
or authorized rights, options, warrants, convertible securities, subscription
rights, conversion rights, exchange rights or other agreements or commitments of
any kind that could require either of the Companies to issue or sell any shares
of its capital stock (or securities convertible into or exchangeable for shares
of its capital stock). There are no outstanding stock appreciation, phantom
stock, profit participation or other similar rights with respect to either of
the Companies. There are no proxies, voting rights or other agreements or
understandings with respect to the voting or transfer of the capital stock of
either of the Companies. Neither Company is obligated to redeem or otherwise
acquire any of its outstanding shares of capital stock.
3.5 SHAREHOLDERS OF THE COMPANIES. Schedule 3.5 sets forth, with
respect to each of the Companies (i) the name, address and federal taxpayer
identification number of, and the number of outstanding shares of each class of
its capital stock owned by the Shareholder of record as of the close of business
on the date of this Agreement; and (ii) the name, address and federal taxpayer
identification number of, and number of shares of each class of its capital
stock beneficially owned by, each beneficial owner of outstanding shares of
capital stock (to the extent that record and beneficial ownership of any such
shares are different). The Shareholder is the sole holder of all issued and
outstanding shares of capital stock of the Companies, and the Shareholder owns
such shares as is set forth on Schedule 3.5, free and clear of all Liens,
restrictions and claims of any kind.
3.6 NO VIOLATION. Except as set forth on Schedule 3.6, the execution
and delivery of this Agreement by the Companies and the Shareholder, the
performance by the Companies and the Shareholder of their obligations hereunder
and the consummation by them of the transactions contemplated by this Agreement
will not (a) contravene any provision of the Articles of Incorporation or Bylaws
of either of the Companies, (b) violate or conflict with any law, statute,
ordinance, rule, regulation, decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against either of the Companies or the
Shareholder, (c) conflict with, result in any breach of, or constitute a default
(or an event which would, with the passage of time or the giving of notice or
both, constitute a default) under, or give rise to a right of payment under or
the right to terminate, amend, modify, abandon or accelerate, any Contract which
is applicable to, binding upon or enforceable against either of the Companies or
the Shareholder, (d) result in or require the creation or imposition of any Lien
upon or with respect to any of the properties or assets of either of the
Companies, (e) give to any individual or entity a right or claim against either
of the Companies or the Shareholder or (f) require the consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, any court or tribunal or any other Person, except any applicable
filings required under the HSR Act and any SEC and other filings required to be
made by the Republic Companies.
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3.7 RECORDS OF THE COMPANIES. The copies of the Articles of
Incorporation and Bylaws of each of the Companies which were provided to
Republic are true, accurate, and complete and reflect all amendments made
through the date of this Agreement. The minute books for each of the Companies
made available to Republic for review were correct and complete as of the date
of such review, no further entries have been made through the date of this
Agreement, such minute books contain the true signatures of the persons
purporting to have signed them, and such minute books contain an accurate record
of all corporate actions of the shareholders and directors (and any committees
thereof) of the Companies taken by written consent or at a meeting since
incorporation. All corporate actions taken by the Companies have been duly
authorized or ratified. All corporate books, corporate ledgers and official and
other corporate records of the Companies have been fully, properly and
accurately kept and are complete, and there are no inaccuracies or discrepancies
of any kind contained therein. The stock ledgers of the Companies, as previously
made available to Republic, contain accurate and complete records of all
issuances, transfers and cancellations of shares of the capital stock of the
Companies.
3.8 SUBSIDIARIES. Except as set forth on Schedule 3.8, the Companies do
not own, directly or indirectly, any outstanding voting securities of or other
interests in, or controls, any other corporation, partnership, joint venture or
other business entity.
3.9 FINANCIAL STATEMENTS. The Companies have delivered to Republic the
financial statements of the Companies for the fiscal year ended December 31,
1995, and for the year-to-date period and month ended October 31, 1996,
including the notes thereto, (collectively, the "Financial Statements"), copies
of which are attached to Schedule 3.9 hereto. The balance sheets of the
Companies dated as of October 31, 1996, included in the Financial Statements are
referred to herein collectively as the "Current Balance Sheets." The Financial
Statements fairly present the financial position of each of the Companies at
each of the balance sheet dates and the results of operations for the periods
covered thereby. The books and records of each of the Companies fully and fairly
reflect all of its transactions, properties, assets and liabilities. There are
no material special or non-recurring items of income or expense during the
periods covered by the Financial Statements, and the balance sheets included in
the Financial Statements do not reflect any writeup or revaluation increasing
the book value of any assets, except as specifically disclosed in the notes
thereto. The Financial Statements reflect all adjustments necessary for a fair
presentation of the financial information contained therein. The Companies have
and at the Effective Time continue to have sufficient working capital to meet
the aggregate of the minimum working capital requirements imposed by the
Factories pursuant to the Franchise Agreements (as defined in Section 3.25). The
reserve for Chargebacks (as defined in Section 11.1) maintained by the Companies
on the Current Balance Sheet is sufficient to cover any Chargebacks which may be
made to the Companies on account of any sales of vehicles made on or prior to
the date of the Current Balance Sheet and the reserve for Chargebacks maintained
by the Companies in Balance Sheet prepared as of the date of Closing will be
sufficient to cover any Chargebacks which may be made to the Companies on
account of any sales of vehicles made on or prior to the Effective Time.
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3.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as set forth
on Schedule 3.10 hereto, since the date of the Current Balance Sheets, the
Companies have not (a) issued, sold, pledged, disposed of, encumbered, or
authorized the issuance, sale, pledge, disposition, grant or encumbrance of any
shares of its capital stock or of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock or any other ownership interest of the Companies; (b) declared,
set aside, made, or paid any dividend or other distribution payable in cash,
stock, property or otherwise of or with respect to its capital stock or other
securities, or reclassified, combined, split, subdivided or redeemed, purchased
or otherwise acquired, directly or indirectly, any of its capital stock or other
securities; (c) paid any bonus to or increased the rate of compensation of any
of its officers, or salaried employees or amended any other terms of employment
of such persons; (d) sold, leased or transferred any of its properties or assets
or acquired any properties or assets other than in the ordinary course of
business consistent with past practice; (e) made or obligated itself to make
capital expenditures out of the ordinary course of business consistent with past
practice; (f) made any payment in respect of its liabilities other than in the
ordinary course of business consistent with past practice; (g) incurred any
obligations or liabilities (including, without limitation, any indebtedness for
borrowed money, issuance of any debt securities, or the assumption, guarantee,
or endorsement of the obligations of any person) or entered into any transaction
or series of transactions involving in excess of $25,000in the aggregate out of
the ordinary course of business, except for this Agreement and the transactions
contemplated hereby; (h) suffered any theft, damage, destruction or casualty
loss, whether or not covered by insurance, in excess of $25,000in the aggregate;
(i) suffered any extraordinary losses (whether or not covered by insurance); (j)
waived, canceled, compromised or released any rights having a value in excess of
$25,000in the aggregate; (k) made or adopted any change in its accounting
practice or policies; (l) made any adjustment to its books and records other
than in respect of the conduct of its business activities in the ordinary course
consistent with past practice; (m) entered into any transaction with the
Shareholder or any Affiliate of the Companies or the Shareholder; (n) entered
into any employment agreement; (o) terminated, amended or modified any agreement
involving an amount in excess of $25,000in the aggregate; (p) imposed any
security interest or other Lien on any of its assets other than in the ordinary
course of business consistent with past practice; (q) delayed paying any account
payable beyond 45 days following the date on which it is due and payable except
to the extent being contested in good faith; (r) made or pledged any charitable
contributions in excess of $25,000in the aggregate; (s) acquired (including,
without limitation, for cash or shares of stock, by merger, consolidation, or
acquisition of stock or assets) any interest in any corporation, partnership or
other business organization or division thereof or any assets, or made any
investment either by purchase of stock or securities, contributions or property
transfer of capital other than as permitted or provided in this Agreement; (t)
increased or decreased prices charged to customers, except in the ordinary
course of business consistent with past practice, materially increased or
decreased the average monthly New Parts and Accessories Inventory, Other Parts
and Accessories Inventory, New Vehicle Inventory or Other Vehicle Inventory,
other than in the ordinary course of business consistent with past practice,
ordered any New Vehicle Inventory from the Factory which would be inconsistent
with the prior practices of the Companies, or taken any actions which might
reasonably result in any material increase in the loss of customers; (u) made
any dealer trades other than in the ordinary course of business consistent with
past practice, or (v) entered into any other transaction
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or been subject to any event which has or may reasonably be expected to have a
Material Adverse Effect on the Companies; or (w) agreed to do or authorized any
of the foregoing.
3.11 LIABILITIES OF THE COMPANIES. The Companies have no liabilities or
obligations, whether accrued, absolute, contingent or otherwise, except (a) to
the extent reflected on the Current Balance Sheet and not heretofore paid or
discharged, (b) liabilities incurred in the ordinary course of business
consistent with past practice since the date of the Current Balance Sheet (none
of which relates to breach of contract, breach of warranty, tort, infringement
or violation of law, or which arose out of any action, suit, claim, governmental
investigation or arbitration proceeding), (c) liabilities incurred in the
ordinary course of business prior to the date of the Current Balance Sheet
which, in accordance with GAAP consistently applied, were not required to be
recorded thereon and which, in the aggregate, are not material. Schedule 3.11
lists all indebtedness owed by the Companies to a bank or any other Person,
including without limitation, indebtedness for borrowed money (including
principal and accrued but unpaid interest) and capitalized equipment leases of
the Companies.
3.12 LITIGATION. Except as set forth in Schedule 3.12 hereto, there is
no action, suit or other legal or administrative proceeding or governmental
investigation pending, threatened, anticipated or contemplated against, by or
affecting the Companies or Shareholder (which, in the case of the Shareholder,
relate to or concern the Companies or for which the Companies may be
responsible), or the Companies' properties or assets, or which question the
validity or enforceability of this Agreement or the transactions contemplated
hereby, and there is no basis for any of the foregoing. There are no outstanding
orders, decrees or stipulations issued by any Governmental Authority in any
proceeding to which either of the Companies is or was a party which have not
been complied with in full or which continue to impose any material obligations
on the Companies.
3.13 ENVIRONMENTAL MATTERS.
(a) Each of the Companies and the Shareholder are and have at all
times been in full compliance with all Environmental Laws governing its
business, operations, properties and assets, including, without limitation: (i)
all requirements relating to the Discharge and Handling of Hazardous Substances;
(ii) all requirements relating to notice, record keeping and reporting; (iii)
all requirements relating to obtaining and maintaining Licenses (as defined
herein) for the ownership by each of the Companies of its properties and assets
and the operation of its business as presently conducted or the ownership by the
Companies and the Shareholder and use by the Companies of the Shareholder Owned
Properties; or (iv) all applicable writs, orders, judgements, injunctions,
governmental communications, decrees, informational requests or demands issued
pursuant to, or arising under, any Environmental Laws.
(b) There are no (and there is no basis for any) non-compliance
orders, warning letters, notices of violation (collectively "Notices"), claims,
suits, actions, judgments, penalties, fines, or administrative or judicial
investigations of any nature or proceedings (collectively "Proceedings") pending
or threatened against or involving any of the Companies, their businesses,
operations,
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properties or assets or the Shareholder Owned Properties, issued by any
Governmental Authority or third party with respect to any Environmental Laws or
Licenses issued to any of the Companies thereunder in connection with, related
to or arising out of the ownership by any of the Companies of their properties
or assets or the operation of its businesses or the ownership by the Shareholder
and use by the Companies of the Shareholder Owned Properties, which have not
been resolved to the satisfaction of the issuing Governmental Authority or third
party in a manner that would not impose any obligation, burden or continuing
liability on Republic in the event that the transactions contemplated by this
Agreement are consummated.
(c) None of the Companies nor the Shareholder has at any time
Handled or Discharged, nor has it or he at any time allowed or arranged for any
third party to Handle or Discharge, Hazardous Substances to, at or upon: (i) any
location other than a site lawfully permitted to receive such Hazardous
Substances; (ii) any parcel of real property owned or leased at any time by any
of the Companies (including, without limitation, the Company Owned Properties)
or any of the Shareholder Owned Properties, except in compliance with applicable
Environmental Laws; or (iii) any site which, pursuant to CERCLA or any similar
state law (x) has been placed on the National Priorities List or its state
equivalent, or (y) the Environmental Protection Agency or any relevant state
agency has notified any of the Companies that it has proposed or is proposing to
place on the National Priorities List or its state equivalent. There has not
occurred, nor is there presently occurring, a Discharge, or threatened
Discharge, of any Hazardous Substance on, into or beneath the surface of, or
adjacent to, any real property owned or leased at any time by any of the
Companies or the Shareholder Owned Properties.
(d) Except as set forth on Schedule 3.13(d), (i) none of the
Companies uses, nor has any of them used, any Aboveground Storage Tanks or
Underground Storage Tanks, (ii) there are not now nor have there ever been any
Underground Storage Tanks on any real property owned or leased at any time by
any of the Companies, or the Shareholder Owned Properties (iii) there has been
no Discharge from or rupture of any such Aboveground Storage Tanks or
Underground Storage Tanks listed on Schedule 3.13(d).
(e) Schedule 3.13(e) identifies (i) all environmental audits,
assessments or occupational health studies undertaken since the date that any of
the Companies was incorporated by any of the Companies or its agents or
representatives thereof or, to the knowledge of any of the Companies or
Shareholder, undertaken by any Governmental Authority, or any third party,
relating to or affecting any of the Companies or any real property owned or
leased at any time by any of the Companies or the Shareholder Owned Properties;
(ii) the results of any ground, water, soil, air or asbestos monitoring
undertaken by any of the Companies or its agents or representatives thereof or
undertaken by any Governmental Authority or any third party, relating to or
affecting any of the Companies or any real property owned or leased at any time
by any of the Companies or the Shareholder Owned Properties; (iii) all material
written communications between any of the Companies and any Governmental
Authority arising under or related to Environmental Laws including but not
limited to, any notices of violation and notices of non-compliance; and (iv) all
outstanding citations issued under OSHA, or similar state or local statutes,
laws, ordinances, codes,
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rules, regulations, orders, rulings or decrees, relating to or affecting any of
the Companies or any real property owned or leased at any time by any of the
Companies or the Shareholder Owned Properties.
(f) For purposes of this Section, the following terms shall
have the meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Aboveground Storage
Tanks.
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing, migrating or emitting, as any of such terms may
further be defined in any Environmental Law, into or through any medium
including, without limitation, ground water, surface water, land, soil
or air.
"Environmental Laws" means all federal, state, regional or
local statutes, laws, rules, regulations, codes, ordinances, orders,
plans, injunctions, decrees, rulings, licenses, and changes thereto, or
judicial or administrative interpretations thereof, or similar laws of
foreign jurisdictions where the Companies or any of its subsidiaries
conducts business, whether currently in existence or hereafter enacted,
issued, or promulgated, any of which govern, purport to govern, or
relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, waste disposal, hazardous or
toxic substances, solid or hazardous waste or occupational health and
safety, as any of these terms are or may be defined in such statutes,
laws, rules, regulations, codes, orders, ordinances, plans,
injunctions, decrees, rulings , licenses, and changes thereto, or
judicial or administrative interpretations thereof, including, without
limitation: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendment and
Reauthorization Act of 1986, 42 U.S.C. ss.9601, et seq. (herein,
collectively, "CERCLA"); the Solid Waste Disposal Act, as amended by
the Resource Conversation and Recovery Act of 1976 and subsequent
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. ss.6901 et seq.
(herein, collectively, "RCRA"); the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. ss.1801, et seq., (the "Hazardous Materials
Transportation Act"); the Clean Water Act, as amended, 33 U.S.C.
ss.1311, et seq., (the "Clean Water Act"); the Clean Air Act, as
amended (42 U.S.C. ss.7401-7642) (the "Clean Air Act"); the Toxic
Substances Control Act, as amended, 15 U.S.C. ss.2601 et seq., (the
"Toxic Substances Control Act"); the Federal Insecticide, Fungicide,
and Rodenticide Act as amended, 7 U.S.C. ss.136-136y ("FIFRA"); the
Emergency Planning and Community Right-to-Know Act of 1986 as amended,
42 U.S.C. ss.11001, et seq. (Title III of XXXX) ("EPCRA"); and the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
ss.651, et seq. ("OSHA").
"Handle" means any manner of generating, accumulating,
storing, treating, disposing of, transporting, transferring, labeling,
handling, manufacturing or using, as any of such terms may further be
defined in any Environmental Law.
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"Hazardous Substances" shall be construed broadly to include
any toxic or hazardous substance, material or waste, and any other
contaminant, pollutant or constituent thereof, whether liquid, solid,
semi-solid, sludge and/or gaseous, including without limitation,
chemicals, compounds, by-products, pesticides, asbestos containing
materials, petroleum or petroleum products, and polychlorinated
biphenyls, the presence of which requires investigation or remediation
under any Environmental Laws or which are or become regulated, listed
or controlled by, under or pursuant to any Environmental Laws, or which
has been or shall be determined or interpreted at any time by any
Governmental Authority to be a hazardous or toxic substance regulated
under any other statute, law, regulation, order, code, rule, order, or
decree.
"Licenses" means all licenses, certificates, permits,
approvals, decrees and registrations.
"Underground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Underground Storage
Tanks.
3.14 REAL ESTATE
(a) Schedule 3.14(a)(1) contains the legal description and
street address of any real property or any interest therein (including
without limitation any option or other right or obligation to purchase
any real property or any interest therein) owned by the Companies as of
the date hereof (the "Company Owned Properties"). Schedule 3.14(a)(2)
contains a list of the locations of any real property (or any interest
therein) owned by the Companies and disposed of in any manner on or
prior to the date hereof (the "Previously Owned Properties"). Schedule
3.14(a)(3) contains the legal descriptions and the street addresses of
any real property (or any interest therein) owned by the Shareholder or
any of his Affiliates (the "Shareholder Owned Properties," and together
with the Company Owned Properties, the "Owned Properties"), which will
be conveyed, as additional contributions of capital, to one of the
Companies prior to the Effective Time. With respect to each such parcel
of Owned Properties, except as set forth on Schedule 3.14(a)(4): (i)
one of the Companies has (and in the case of Shareholder Owned
Properties, will as of the Effective Time have) good and marketable
title, free and clear of any covenants, conditions, easements and
exceptions other than the Permitted Exceptions (as defined in Section
5.14), and of any Lien other than liens for real estate taxes not yet
due and payable, (ii) there are no pending or threatened condemnation
proceedings, suits or administrative actions relating to the Owned
Properties or other matters affecting adversely the current use,
occupancy or value thereof; (iii) the legal descriptions for the Owned
Properties contained in the deeds thereof describe such parcels fully
and adequately; (iv) the buildings and improvements are located within
the boundary lines of the described parcels of land, are not in
violation of applicable setback requirements, local comprehensive plan
provisions, zoning laws and ordinances (and none of the properties
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or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure"
classifications), building code requirements, permits, licenses or
other forms of approval by any Governmental Authority, and do not
encroach on any easement which may burden the land; the land does not
serve any adjoining property for any purpose inconsistent with the use
of the land; and the Owned Properties are not located within any flood
plain or subject to any similar type restriction for which any permits
or licenses necessary to the use thereof have not been obtained; (v)
all facilities have received all material approvals of Governmental
Authorities (including licenses and permits) required in connection
with the ownership or operation thereof and have been operated and
maintained in accordance with applicable laws, ordinances, rules and
regulations; (vi) there are no Contracts granting to any party or
parties the right of use or occupancy of any portion of the Owned
Properties and there are no parties (other than the Companies) in
possession of the Owned Properties; (vii) there are no outstanding
options or rights of first refusal to purchase the Owned Properties or
any portion thereof or interest therein (other than by the Companies);
(viii) all facilities located on the Owned Properties are supplied with
utilities and other services necessary for their operation, all of
which services are adequate in accordance with all applicable laws,
ordinances, rules and regulations, and are provided via public roads or
via permanent, irrevocable, appurtenant easements benefitting the Owned
Properties; (ix) the Owned Properties abut on and have adequate direct
vehicular access to a public road, and there is no pending or
threatened termination of such access; (x) all improvements, buildings
and systems on the Owned Properties are in good repair, safe for
occupancy, and adequate for the current use of such Owned Properties;
and (xi) there are no Contracts relating to service, management or
similar matters which affect any of the Owned Properties.
(b) Schedule 3.14(b) sets forth a list of all leases, licenses
or similar agreements to which either of the Companies is a party,
which are for the use or occupancy of real estate owned by a third
party ("Leases")(copies of which have previously been furnished to
Republic), in each case, setting forth (i) the lessor and lessee
thereof and the commencement date, term and renewal rights under each
of the Leases, and (ii) the street address or legal description of each
property covered thereby (the "Leased Premises"). The Leases are in
full force and effect and have not been amended, and no party thereto
is in default or breach under any such Lease. No event has occurred
which, with the passage of time or the giving of notice or both, would
cause a material breach of or default under any of such Leases. Except
as set forth in Schedule 3.14(b), with respect to each such Leased
Premises: (i) one of the Companies has a valid leasehold interest in
the Leased Premises, free and clear of any Liens, covenants and
easements or title defects of any nature whatsoever; (ii) the portions
of the buildings located on the Leased Premises that are used in the
business of the Companies are each in good repair and condition, normal
wear and tear excepted, and are in the aggregate sufficient to satisfy
the Companies' current and reasonably anticipated normal business
activities as conducted thereat; (iii) each of the Leased Premises (a)
has direct access to public roads or access to public roads by means of
a perpetual access easement, such access being sufficient to satisfy
the current and reasonably anticipated normal
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transportation requirements of the business presently conducted at such
parcel; and (b) is served by all utilities in such quantity and quality
as are sufficient to satisfy the current normal business activities
conducted at such parcel; and (iv) neither of the Companies has
received notice of (a) any condemnation proceeding with respect to any
portion of the Leased Premises or any access thereto, and no such
proceeding is contemplated by any Governmental Authority; or (b) any
special assessment which may affect any of the Leased Premises, and no
such special assessment is contemplated by any Governmental Authority.
3.15 GOOD TITLE TO AND CONDITION OF ASSETS; INVENTORY.
(a) The Companies own and operate the motor vehicle
dealerships (the "Dealerships") listed on Schedule 3.15, at the
locations set forth thereon. Except as set forth on Schedule 3.15(a),
the Companies have good and valid title to all of their Assets free and
clear of any Liens. For purposes of this Agreement, the term "Assets"
means all of the properties and assets owned by the Companies, other
than the Owned Properties and the Leased Premises, whether personal or
mixed, tangible or intangible, wherever located.
(b) Except as provided in Schedule 3.15(b), the Fixed Assets
currently in use by the Companies are, in the aggregate, in good
operating condition, normal wear and tear excepted, and have been
maintained substantially in accordance with all applicable
manufacturer's specifications and warranties. For purposes of this
Agreement, the term "Fixed Assets" means all vehicles (other than
vehicles held as inventory), machinery, equipment, tools, supplies,
leasehold improvements, furniture and fixtures used by or located on
the premises of the Companies or set forth on the Current Balance Sheet
or acquired by the Companies since the date of the Current Balance
Sheet.
(c) None of the vehicles owned by the Companies as of the date
hereof has been, or will be on the Closing Date, salvaged or rebuilt or
have any frame, flood or other damage impairing its salability in the
ordinary course of business, and with respect to each vehicle, one of
the Companies has or will have prior to the Closing Date on file true
and correct odometer statement, none of which indicate that the actual
mileage is unknown.
(d) Schedule 3.15(d) sets forth a true, complete and correct
list of any and all dealer trades made by the Companies within the last
90 days from the date hereof.
3.16 COMPLIANCE WITH LAWS. Except as set forth in Schedule 3.16(a),
each of the Companies, the Shareholder, and any Affiliate is and has been in
compliance with all laws, regulations and orders applicable to their businesses
and operations (as conducted now and in the past), the Assets, the Owned
Properties and the Leased Premises and any other properties and assets (in each
case owned or used now or in the past). Except as provided in Schedule 3.16(b),
neither of the Companies has been cited, fined or otherwise notified of any
asserted past or present failure to comply with any laws, regulations or orders
and no proceeding with respect to any such violation is pending or threatened.
Neither of the Companies is subject to any Contract, decree or injunction
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in which it is a party which restricts the continued operation of any business
or the expansion thereof to other geographical areas, customers and suppliers or
lines of business. Neither of the Companies, nor any of its employees or agents,
has made any payment of funds in connection with its business which is
prohibited by law, and no funds have been set aside to be used in connection
with its business for any payment prohibited by law.
3.17 LABOR AND EMPLOYMENT MATTERS. Neither of the Companies is a party
to or bound by any collective bargaining agreement or any other agreement with a
labor union, and there has been no effort by any labor union during the 24
months prior to the date hereof to organize any employees of the Companies into
one or more collective bargaining units. Except as set forth in Schedule 3.17,
there is not now, and there has not been during the 24 months prior to the date
hereof, any actual threatened labor dispute, strike or work stoppage which
affects or which may affect the businesses of the Companies or which may
interfere with their continued operations, except for employment disputes with
individual employees. Neither of the Companies nor any agent, representative or
employee thereof has since the date of incorporation of the Companies committed
any unfair labor practice as defined in the National Labor Relations Act, as
amended, and there is no pending or, to the knowledge of the Companies or the
Shareholder, threatened charge or complaint against either of the Companies by
or with the National Labor Relations Board or any representative thereof.
Neither of the Companies is aware that any executive or key employee or group of
employees has any plans to terminate his, her or their employment with either of
the Companies as a result of the transactions contemplated hereby or otherwise.
The Companies have complied with applicable laws, rules and regulations relating
to employment, civil rights and equal employment opportunities, including but
not limited to, the Civil Rights Act of 1964, the Fair Labor Standards Act, and
the Americans with Disabilities Act, as amended.
3.18 EMPLOYEE BENEFIT PLANS.
(a) Employee Benefit Plans. Schedule 3.18 contains a list setting
forth each employee benefit plan or arrangement of the Companies, including but
not limited to employee pension benefit plans, as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
multiemployer plans, as defined in Section 3(37) of ERISA, employee welfare
benefit plans, as defined in Section 3(1) of ERISA, deferred compensation plans,
stock option plans, bonus plans, stock purchase plans, hospitalization,
disability and other insurance plans, severance or termination pay plans and
policies, whether or not described in Section 3(3) of ERISA, in which employees,
their spouses or dependents, of the Companies participate ("Employee Benefit
Plans") (true and accurate copies of which, together with the most recent annual
reports on Form 5500 and summary plan descriptions with respect thereto, were
furnished to Republic).
(b) Compliance with Law. With respect to each Employee Benefit
Plan (i) each has been administered in all material respects in compliance with
its terms and with all applicable laws, including, but not limited to, ERISA and
the Internal Revenue Code of 1986, as amended (the "Code"); (ii) no actions,
suits, claims or disputes are pending, or threatened; (iii) no audits,
inquiries, reviews, proceedings, claims, or demands are pending with any
governmental or regulatory agency;
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(iv) there are no facts which could give rise to any material liability in the
event of any such investigation, claim, action, suit, audit, review, or other
proceeding; (v) all material reports, returns, and similar documents required to
be filed with any governmental agency or distributed to any plan participant
have been duly or timely filed or distributed; and (vi) no "prohibited
transaction" has occurred within the meaning of the applicable provisions of
ERISA or the Code.
(c) Qualified Plans. With respect to each Employee Benefit Plan
intended to qualify under Code Section 401(a) or 403(a) (i) the Internal Revenue
Service has issued a favorable determination letter, true and correct copies of
which have been furnished to Republic, that such plans are qualified and exempt
from federal income taxes; (ii) no such determination letter has been revoked
nor has revocation been threatened, nor has any amendment or other action or
omission occurred with respect to any such plan since the date of its most
recent determination letter or application therefor in any respect which would
adversely affect its qualification or materially increase its costs; (iii) no
such plan has been amended in a manner that would require security to be
provided in accordance with Section 401(a)(29) of the Code; (iv) no reportable
event (within the meaning of Section 4043 of ERISA) has occurred, other than one
for which the 30- day notice requirement has been waived; (v) as of the
Effective Date, the present value of all liabilities that would be "benefit
liabilities" under Section 4001(a)(16) of ERISA if benefits described in Code
Section 411(d)(6)(B) were included will not exceed the then current fair market
value of the assets of such plan (determined using the actuarial assumptions
used for the most recent actuarial valuation for such plan); (vi) all
contributions to, and payments from and with respect to such plans, which may
have been required to be made in accordance with such plans and, when
applicable, Section 302 of ERISA or Section 412 of the Code, have been timely
made; and (vii) all such contributions to the plans, and all payments under the
plans (except those to be made from a trust qualified under Section 401(a) of
the Code) and all payments with respect to the plans (including, without
limitation, PBGC (as defined below) and insurance premiums) for any period
ending before the Closing Date that are not yet, but will be, required to be
made are properly accrued and reflected on the Current Balance Sheet.
(d) Multiemployer Plans. With respect to any multiemployer plan,
as described in Section 4001(a)(3) of ERISA ("MPPA Plan") (i) all contributions
required to be made with respect to employees of the Companies have been timely
paid; (ii) the Companies have not incurred, and are not expected to incur,
directly or indirectly, any withdrawal liability under ERISA with respect to any
such plan (whether by reason of the transactions contemplated by the Agreement
or otherwise); (iii) Schedule 3.18 sets forth (A) the withdrawal liability under
ERISA to each MPPA Plan, (B) the date as of which such amount was calculated,
and (C) the method for determining the withdrawal liability; and (iv) no such
plan is (or is expected to be) insolvent or in reorganization and no accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists or is expected to exist with respect to any
such plan.
(e) Welfare Plans. (i) The Companies are not obligated under any
employee welfare benefit plan as described in Section 3(1) of ERISA ("Welfare
Plan") to provide medical or death benefits with respect to any employee or
former employee of the Companies or their
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predecessors after termination of employment; (ii) the Companies have complied
with the notice and continuation coverage requirements of Section 4980B of the
Code and the regulations thereunder with respect to each Welfare Plan that is,
or was during any taxable year for which the statute of limitations on the
assessment of federal income taxes remains, open, by consent or otherwise, a
group health plan within the meaning of Section 5000(b)(1) of the Code; and
(iii) there are no reserves, assets, surplus or prepaid premiums under any
Welfare Plan which is an Employee Benefit Plan. The consummation of the
transactions contemplated by this Agreement will not entitle any individual to
severance pay, and, will not accelerate the time of payment or vesting, or
increase the amount of compensation, due to any individual.
(f) Controlled Group Liability. Neither of the Companies nor any
entity that would be aggregated with the Companies under Code Section 414(b),
(c), (m) or (o): (i) has ever terminated or withdrawn from an employee benefit
plan under circumstances resulting (or expected to result) in liability to the
Pension Benefit Guaranty Corporation ("PBGC"), the fund by which the employee
benefit plan is funded, or any employee or beneficiary for whose benefit the
plan is or was maintained (other than routine claims for benefits); (ii) has any
assets subject to (or expected to be subject to) a lien for unpaid contributions
to any employee benefit plan; (iii) has failed to pay premiums to the PBGC when
due; (iv) is subject to (or expected to be subject to) an excise tax under Code
Section 4971; (v) has engaged in any transaction which would give rise to
liability under Section 4069 or Section 4212(c) of ERISA; or (vi) has violated
Code Section 4980B or Section 601 through 608 of ERISA.
(g) Other Liabilities. (i) None of the Employee Benefit Plans
obligates either of the Companies to pay separation, severance, termination or
similar benefits solely as a result of any transaction contemplated by this
Agreement or solely as a result of a "change of control" (as such term is
defined in Section 280G of the Code); (ii) all required or discretionary (in
accordance with historical practices) payments, premiums, contributions,
reimbursements, or accruals for all periods ending prior to or as of the
Effective Date shall have been made or properly accrued on the Current Balance
Sheet or will be properly accrued on the books and records of the Companies as
of the Effective Date; and (iii) none of the Employee Benefit Plans has any
unfunded liabilities which are not reflected on the Current Balance Sheet or the
books and records of the Companies.
3.19 TAX MATTERS. All Tax Returns required to be filed prior to the
date hereof with respect to each of the Companies or any of its income,
properties, franchises or operations have been timely filed, each such Tax
Return has been prepared in compliance with all applicable laws and regulations,
and all such Tax Returns are true and accurate in all respects. All Taxes due
and payable by or with respect to each of the Companies have been paid or are
accrued on the Current Balance Sheet or will be accrued on the Companies' books
and records as of the Closing. Except as set forth in Schedule 3.19 hereto: (i)
with respect to each taxable period of each of the Companies, either such
taxable period has been audited by the relevant taxing authority or the time for
assessing or collecting Taxes with respect to each such taxable period has
closed and such taxable period is not subject to review by any relevant taxing
authority; (ii) no deficiency or proposed adjustment which has not been settled
or otherwise resolved for any amount of Taxes has been asserted or assessed by
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any taxing authority against either of the Companies; (iii) neither of the
Companies has consented to extend the time in which any Taxes may be assessed or
collected by any taxing authority; (iv) neither of the Companies has requested
or been granted an extension of the time for filing any Tax Return to a date
later than the Closing; (v) there is no action, suit, taxing authority
proceeding, or audit or claim for refund now in progress, pending or threatened
against or with respect to either of the Companies regarding Taxes; (vi) neither
of the Companies has made an election or filed a consent under Section 341(f) of
the Code (or any corresponding provision of state, local or foreign law) on or
prior to the Closing; (vii) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of either of the Companies;
(viii) neither of the Companies will be required (A) as a result of a change in
method of accounting for a taxable period ending on or prior to the Effective
Date, to include any adjustment under Section 481(c) of the Code (or any
corresponding provision of state, local or foreign law) in taxable income for
any taxable period (or portion thereof) beginning after the Effective Date or
(B) as a result of any "closing agreement," as described in Section 7121 of the
Code (or any corresponding provision of state, local or foreign law), to include
any item of income or exclude any item of deduction from any taxable period (or
portion thereof) beginning after the Effective Date; (ix) neither of the
Companies has been a member of an affiliated group (as defined in Section 1504
of the Code) or filed or been included in a combined, consolidated or unitary
income Tax Return; (x) neither of the Companies is a party to or bound by any
tax allocation or tax sharing agreement and has no current or potential
contractual obligation to indemnify any other Person with respect to Taxes; (xi)
no taxing authority will claim or assess any additional Taxes against either of
the Companies for any period for which Tax Returns have been filed; (xii)
neither of the Companies has made any payments, is or will become obligated
(under any contract entered into on or before the Closing) to make any payments,
that will be non-deductible under Section 280G of the Code (or any corresponding
provision of state, local or foreign law); (xiii) neither of the Companies has
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code (or any corresponding provision of state, local or
foreign law) during the applicable period specified in Section 897(c)(1)(a)(ii)
of the Code (or any corresponding provision of state, local or foreign law);
(xiv) no claim has ever been made by a taxing authority in a jurisdiction where
either of the Companies does not file Tax Returns that such Company is or may be
subject to Taxes assessed by such jurisdiction; (xv) neither of the Companies
has any permanent establishment in any foreign country, as defined in the
relevant tax treaty between the United States of America and such foreign
country; (xvi) true, correct and complete copies of all income and sales Tax
Returns filed by or with respect to the Companies for the past three years have
been furnished or made available to Republic; (xvii) neither of the Companies
will be subject to any Taxes for the period ending at the Closing for any period
for which a Tax Return has not been filed imposed pursuant to Section 1374 or
Section 1375 of the Code (or any corresponding provision of state, local or
foreign law); (xviii) no sales or use tax will be payable by the Companies or
Republic on the transfer of any Assets pursuant to the isolated or occasional
sale rule, Fla. Admin. Code 12A-1.037 and the resale provisions of Fla. Admin.
Code 12A-1.038 as a result of this transaction, and there will be no
non-recurring intangible tax, documentary stamp tax, or other excise (or
comparable tax imposed by any governmental entity) as a result of this
transaction; and (xix) the Companies have duly and validly filed elections for S
corporation status under the Code, and such
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S elections have not been revoked or terminated, and neither of the Companies
nor the Shareholder have taken any action which would cause a termination of any
of such S elections.
3.20 INSURANCE. The Companies are covered by valid, outstanding and
enforceable policies of insurance issued to it by reputable insurers covering
its properties, assets and businesses against risks of the nature normally
insured against by corporations in the same or similar lines of business and in
coverage amounts typically and reasonably carried by such corporations (the
"Insurance Policies"). Such Insurance Policies are in full force and effect, and
all premiums due thereon have been paid. Through the Effective Time, each of the
Insurance Policies will be in full force and effect. The Companies have complied
with the provisions of such Insurance Policies. Schedule 3.20 contains (i) a
complete and correct list of all Insurance Policies and all amendments and
riders thereto (copies of which have been or prior to Closing will be provided
to Republic) and (ii) a detailed description of each pending claim under any of
the Insurance Policies for an amount in excess of $10,000 that relates to loss
or damage to the properties, assets or businesses of the Companies. Neither of
the Companies have failed to give, in a timely manner, any notice required under
any of the Insurance Policies to preserve its rights thereunder.
3.21 RECEIVABLES. All of the Receivables are valid and legally binding,
represent bona fide transactions and arose in the ordinary course of business of
the Companies. All of the Receivables are good and collectible receivables, and
will be collected in full in accordance with the terms of such receivables (and
in any event within six months following the Effective Date), without set off or
counterclaims, subject to the allowance for doubtful accounts, if any, set forth
on the Current Balance Sheet. For purposes of this Agreement, the term
"Receivables" means all receivables of the Companies, including, without
limitation, all manufacturer's warranty receivables and all trade account
receivables arising from the provision of services, sale of inventory, notes
receivable, and insurance proceeds receivable.
3.22 LICENSES AND PERMITS. Except as set forth in Schedule 3.22, the
Companies possess all licenses and required governmental or official approvals,
permits or authorizations (collectively, the "Permits") for their businesses and
operations, including with respect to the operations of each of the Owned
Properties and Leased Premises, and Schedule 3.22 sets forth a true, complete
and accurate list of all such Permits. All such Permits are valid and in full
force and effect, the Companies are in compliance with the respective
requirements thereof, and no proceeding is pending or threatened to revoke or
amend any of them. None of such Permits is or will be impaired or in any way
affected by the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
3.23 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND
SUPPLIERS; AFFILIATED TRANSACTIONS. The Assets, Owned Properties, and Leased
Premises constitute, in the aggregate, all of the assets and properties
necessary for the conduct of each of the businesses of the Companies in the
manner in which and to the extent to which such business is currently being
conducted. No current supplier to the Companies of items essential to the
conduct of their businesses has threatened to terminate its business
relationship with either of the Companies for any reason. Neither of the
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Companies has a direct or indirect interest in any customer, supplier or
competitor of the Companies, or in any person from whom or to whom the Companies
lease real or personal property. Except as set forth on Schedule 3.23, no
officer, director, shareholder, or partner of the Companies, nor any person
related by blood or marriage to any such person, nor any entity in which any
such person owns any beneficial interest, is a party to any Contract or
transaction with the Companies or has any interest in any property used by the
Companies.
3.24 INTELLECTUAL PROPERTY. The Companies have full legal right, title
and interest in and to all trademarks, service marks, trade names, copyrights,
know-how, patents, trade secrets, licenses (including licenses for the use of
computer software programs), and other intellectual property used in the conduct
of its business and set forth on Schedule 3.24 (the "Intellectual Property").
The conduct of the businesses of the Companies as presently conducted, and the
unrestricted conduct and the unrestricted use and exploitation of the
Intellectual Property, does not infringe or misappropriate any rights held or
asserted by any Person, and, to the knowledge of the Companies and the
Shareholder, no Person is infringing on the Intellectual Property. No payments
are required for the continued use of the Intellectual Property. None of the
Intellectual Property has ever been declared invalid or unenforceable, or is the
subject of any pending threatened action for opposition, cancellation,
declaration, infringement, or invalidity, unenforceability or misappropriation
or like claim, action or proceeding.
3.25 CONTRACTS. Schedule 3.25 sets forth a list of each Contract to
which each of the Companies is a party or by which any of them or their
properties and assets are bound and which is material to any of their
businesses, assets, properties or prospects (the "Material Contracts"),
including all franchise, sales and service, dealer and other agreements or
understandings (the "Franchise Agreements") with Toyota Motor Sales, U.S.A.,
Inc. and KIA Motors America, Inc. (collectively, the "Factories"). One of the
Companies is party to Franchise Agreements for each of the Dealerships, granting
such Company full rights and privileges necessary to operate the Dealerships.
The copy of each Material Contract furnished to Republic is a true and complete
copy of the document it purports to represent and reflects all amendments
thereto made through the date of this Agreement. The Companies have not violated
any of the terms or conditions of any Material Contract or any term or condition
which would permit termination or material modification of any Material
Contract, all of the covenants to be performed by any other party thereto, to
the knowledge of the Companies and the Shareholder, have been fully performed,
and there are no claims for breach or indemnification or notice of default or
termination under any Material Contract. No event has occurred which
constitutes, or after notice or the passage of time, or both, would constitute,
a default by the Companies under any Material Contract, and no such event has
occurred which constitutes or would constitute a default by any other party. The
Companies are not subject to any liability or payment resulting from
renegotiation of amounts paid under any Material Contract. As used in this
Section 3.25, Material Contracts shall include, without limitation, formal or
informal, written or oral (a) loan agreements, indentures, mortgages, pledges,
hypothecations, deeds of trust, conditional sale or title retention agreements,
security agreements, equipment financing obligations or guaranties, or other
sources of contingent liability in respect of any indebtedness or obligations to
any other Person, or letters of intent or commitment letters with respect to
same, which individually or in the aggregate
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exceed $25,000; (b) contracts obligating the Companies to provide products or
services for a period of one year or more, excluding standard warranty contracts
entered into in the ordinary course of its business without material
modification from the preprinted forms used by the Companies in the ordinary
course of business, copies of which have been supplied to Republic and which
individually or in the aggregate exceed $25,000; (c) leases of real property;
(d) leases of personal property which individually or in the aggregate provide
for total payments in excess of $25,000 (other than those which individually
provide for annual payments of less than $25,000 and which are cancelable
without penalty on notice of sixty (60) days or less; (e) distribution, sales
agency or franchise or similar agreements, or agreements providing for an
independent contractor's services, or letters of intent with respect to same;
(f) employment agreements, management service agreements, consulting agreements,
confidentiality agreements, non-competition agreements, employee handbooks,
policy statements and any other agreements relating to any employee, officer or
director of either of the Companies; (g) licenses, assignments or transfers of
trademarks, trade names, service marks, patents, copyrights, trade secrets or
know how, or other agreements regarding proprietary rights or intellectual
property; (h) any contract relating to pending capital expenditures by the
Companies; (i) contracts obligating the Companies to purchase vehicles, parts,
accessories, supplies, equipment, oil, advertising, media and media related
services of any kind, not cancelable without penalty on notice of thirty (30)
days or less; (j) any non-competition agreements restricting either of the
Companies in any manner; and (k) other material Contracts or understandings,
irrespective of subject matter and whether or not in writing, and not otherwise
disclosed on the Schedules.
3.26 ACCURACY OF INFORMATION FURNISHED. No representation, statement or
information contained in this Agreement (including, without limitation, the
various Schedules attached hereto) or any agreement executed in connection
herewith or in any certificate delivered pursuant hereto or thereto or made or
furnished to Republic or its representatives by the Companies or the
Shareholder, contains or shall contain any untrue statement of a material fact
or omits or shall omit any material fact necessary to make the information
contained therein not misleading. The Companies have provided Republic with
true, accurate and complete copies of all documents listed or described in the
various Schedules attached hereto.
3.27 INVESTMENT INTENT; ACCREDITED INVESTOR STATUS; SECURITIES
DOCUMENTS. The Shareholder has had the opportunity to discuss the transactions
contemplated hereby with Republic and has had the opportunity to obtain such
information pertaining to Republic as has been requested, including but not
limited to filings made by Republic with the SEC under the Exchange Act. The
Shareholder is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act, and has such knowledge and experience in
business or financial matters that he is capable of evaluating the merits and
risks of an investment in the Republic Shares. The Shareholder hereby represents
that he can bear the economic risk of losing his investment in the Republic
Shares and has adequate means for providing for his current financial needs and
contingencies. The Shareholder has received copies of all Republic Reports filed
with the SEC since January 1, 1996.
3.28 BANK ACCOUNTS; BUSINESS LOCATIONS. As of the date hereof, the
Companies have no office or place of business other than as identified on
Schedules 3.14(a) and 3.14(b) and the
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Companies' principal places of business and chief executive offices are
indicated on Schedule 3.14(a). All locations where the equipment, inventory,
chattel paper and books and records of the Companies are located as of the date
hereof are fully identified on Schedules 3.14(a) and 3.14(b). Schedule 3.28
lists each account of the Companies with any bank, broker or other depository
institution, and the names of all persons authorized to withdraw funds from each
such account.
3.29 NAMES; PRIOR ACQUISITIONS; NO COMMISSIONS. All names under which
each of the Companies does business as of the date hereof are specified on
Schedule 3.29. Except as otherwise disclosed in Schedule 3.29, neither of the
Companies has changed its name or used any assumed or fictitious name, or been
the surviving entity in a merger, acquired any business or changed its principal
place of business or chief executive office, within the past three years.
Neither of the Companies nor the Shareholder has incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 CONDUCT OF BUSINESS BY THE COMPANIES PENDING THE CLOSING. The
Companies and the Shareholder, jointly and severally, covenant and agree that,
between the date of this Agreement and the Effective Time, the business of the
Companies shall be conducted only in, and the Companies shall not take any
action except in, the ordinary course of business consistent with past practice.
The Companies and the Shareholder shall use their or his reasonable best efforts
to preserve intact the Companies' business organizations, to keep available the
services of their current officers, employees and consultants, and to preserve
their present relationships with customers, suppliers and other persons with
which they have significant business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, each of the Companies
shall not, between the date of this Agreement and the Effective Time, directly
or indirectly, do or propose or agree to do any of the following without the
prior written consent of Republic:
(a) amend or otherwise change their Articles of Incorporation,
Bylaws, or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber, or, authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i)
any shares of its capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest, of it,
or (ii) any of its assets, tangible or intangible, except, in the case
of (ii), in the ordinary course of business consistent with past
practice;
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(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, for cash or
shares of stock, by merger, consolidation or acquisition of stock or
assets) any interest in any corporation, partnership or other business
organization or division thereof or any assets, or make any investment
either by purchase of stock or securities, contributions of capital or
property transfer, or, except in the ordinary course of business,
consistent with past practice, purchase any property or assets of any
other Person, (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any Person, or
make any loans or advances, except for its "floor plan" financing of
vehicle inventories in the ordinary course of business consistent with
past practice or (iii) modify, terminate, or enter into any Contract
other than as provided herein or in the ordinary course of business,
consistent with past practice;
(f) increase the compensation payable or to become payable to
its officers or employees, or, except as presently bound to do, grant
any severance or termination pay to, or enter into any employment or
severance agreement with, any of its directors, officers or other
employees, or establish, adopt, enter into or amend or take any action
to accelerate any rights or benefits which any collective bargaining,
bonus, profit sharing, trust, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(g) take any action with respect to accounting policies or
procedures other than in the ordinary course of business and in a
manner consistent with past practices;
(h) pay, discharge or satisfy any existing claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of due
and payable liabilities reflected or reserved against in its financial
statements, as appropriate, or liabilities incurred after the date
thereof in the ordinary course of business and consistent with past
practice;
(i) increase or decrease prices charged to its customers,
except in the ordinary course of business consistent with past
practices, or take any other action which might reasonably result in
any material increase in the loss of customers; materially increase or
decrease the average monthly parts and accessories inventory,
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New Vehicle Inventory, or Other Vehicle Inventory, other than in the
ordinary course of business and in a manner consistent with past
practice; and order any New Vehicles from the Factory which would be
inconsistent with the prior ordering practices of the Companies;
(j) make any dealer trades other than in the ordinary course
of business consistent with past practice;
(k) enter into any transaction with the Shareholder or
Affiliate thereof; or
(l) agree, in writing or otherwise, to take or authorize any
of the foregoing actions or any action which would make any
representation or warranty in Article III untrue or incorrect in any
material respect.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
5.2 COMPLIANCE WITH COVENANTS. The Shareholder shall cause the
Companies to comply with all of the covenants of the Companies under this
Agreement.
5.3 COOPERATION. Each of the parties agrees to cooperate with the other
in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation in connection with the transactions contemplated by this
Agreement and to use their respective best efforts to agree jointly on a method
to overcome any objections by any Governmental Authority to any such
transactions.
5.4 FACTORIES APPLICATIONS AND OTHER ACTIONS. Each of the parties
hereto shall (a) cooperate in the preparation and filing of, and take all
appropriate actions in connection with, the application to the Factories for
approval of the transactions contemplated hereby, and (b) use its reasonable
best efforts to take, or cause to be taken, all appropriate actions, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated herein, including, without limitation, using its best efforts to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of any Governmental Authority and parties to Contracts
with the Companies as are necessary for the consummation of the transactions
contemplated hereby. Each of the parties shall make on a prompt and timely basis
all governmental or regulatory notifications and filings required to be made by
it
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for the consummation of the transactions contemplated hereby. The parties also
agree to use best efforts to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby and to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby.
5.5 HSR ACT. Republic and the Companies shall make promptly (unless
they have already made) their respective filings, if any, and thereafter make
any other required submissions, under the HSR Act, with respect to the
transactions contemplated hereby, and shall, if requested by Republic, seek
early termination of the applicable waiting period under the HSR Act. Republic
shall pay the HSR Act filing fee.
5.6 ACCESS TO INFORMATION. From the date hereof to the Effective Time,
the Companies shall, and shall cause its directors, officers, employees,
auditors, counsel and agents to, afford Republic and Republic's officers,
employees, auditors, counsel and agents reasonable access at all reasonable
times to its properties, offices and other facilities (including access to
perform environmental and other tests and assessments), to its officers and
employees and to all books and records, and shall furnish such persons with all
financial, operating and other data and information as may be requested. No
information provided to or obtained by Republic shall affect any representation
or warranty in this Agreement.
5.7 NOTIFICATION OF CERTAIN MATTERS. The Companies shall give prompt
notice to Republic of the occurrence or non-occurrence of any event which would
likely cause any representation or warranty contained herein to be untrue or
inaccurate, or any covenant, condition or agreement contained herein not to be
complied with or satisfied (provided, however, that, any such disclosure shall
not in any way be deemed to amend, modify or in any way affect the
representations, warranties and covenants made by the Companies and the
Shareholder in or pursuant to this Agreement).
5.8 TAX TREATMENT. Republic and the Companies and the Shareholder will
use their respective reasonable best efforts to cause the transactions
contemplated hereby to qualify as a reorganization under the provisions of
Section 368(a) of the Code. All parties hereto agree to file the Plans of Merger
with their respective federal income tax returns for the year in which the
Mergers are effective, and to comply with the reporting requirements of Treasury
Regulation 1.368-3.
5.9 CONFIDENTIALITY; PUBLICITY. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement, the subject matter or terms hereof or any
confidential information or other proprietary knowledge concerning the business
or affairs of the other party which it may have acquired from such party in the
course of pursuing the transactions contemplated by this Agreement without the
prior consent of the other party hereto; provided, that any information that is
otherwise publicly available, without breach of this provision,
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or has been obtained from a third party, shall not be deemed confidential
information. No press release or other public announcement related to this
Agreement or the transactions contemplated hereby shall be issued by any party
hereto without the prior approval of the other parties, except that Republic may
make such public disclosure which it believes in good faith to be required by
law or by the terms of any listing agreement with or requirements of Nasdaq (in
which case Republic will consult with the Companies prior to making such
disclosure).
5.10 NO OTHER DISCUSSIONS. The Companies and the Shareholder and their
Affiliates, employees, agents and representatives will not (a) initiate,
encourage the initiation by others of discussions or negotiations with third
parties or respond to solicitations by third persons relating to any merger,
sale or other disposition of any substantial part of the assets, capital stock
(or derivatives thereof), business or properties of the Companies (whether by
merger, consolidation, sale of stock, sale of assets, or otherwise), or (b)
enter into any agreement or commitment (whether or not binding) with respect to
any of the foregoing transactions. The Companies and the Shareholder will
immediately notify Republic if any third party attempts to initiate any
solicitation, discussion, or negotiation with respect to any of the foregoing
transactions, and shall provide Republic with the name of such third parties and
the terms of any offers.
5.11 RESTRICTIVE COVENANT. In order to assure that Republic will
realize the benefits of the Mergers, the Shareholder agrees with Republic that
he will not:
(a) during the Restricted Period, directly or indirectly,
alone or as a partner, joint venturer, officer, director, member,
employee, consultant, agent, independent contractor or stockholder of,
or lender to, any company or business, engage in selling, leasing, or
servicing any new or used vehicles (the "Auto Business") or in the
wholesale or retail supply of parts with respect thereto (the "Parts
Business") anywhere in the Restricted Territory; provided, however,
that, the beneficial ownership of less than five percent (5%) of the
shares of stock of any corporation having a class of equity securities
actively traded on a national securities exchange or over-the-counter
market shall not be deemed, in and of itself, to violate the
prohibitions of this Section;
(b) during the Restricted Period, directly or indirectly (i)
induce any Person which is a customer of the Companies, Republic or any
Affiliate of the Companies or Republic to patronize any business
directly or indirectly in competition with the Auto Business or the
Parts Business conducted by the Companies, Republic or any Affiliate of
the Companies or Republic; (ii) canvass, solicit or accept from any
Person which is a customer of the Companies, Republic or any Affiliate
of the Companies or Republic, any such competitive business; or (iii)
request or advise any Person which is a customer of the Companies,
Republic or any Affiliate of the Companies or Republic, to withdraw,
curtail or cancel any such customer's business with the Companies,
Republic or any Affiliate of the Companies or Republic, or its or their
successors;
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(c) during the Restricted Period, directly or indirectly
employ, or knowingly permit any company or business directly or
indirectly controlled by him, to employ, any person who was employed by
either of the Companies, Republic or any Affiliate of the Companies or
Republic at or within the prior six months, or in any manner seek to
induce any such person to leave his or her employment;
(d) during the Restricted Period, directly or indirectly, in
any way utilize, disclose, copy, reproduce or retain in his possession
any of the Companies' proprietary rights or records, including, but not
limited to, any of its customer lists.
Notwithstanding the provisions of this Section 5.11, the parties agree that the
Shareholder's ownership interest and operation of KIA dealership in St. Lucie
County, Florida shall not be deemed a violation hereof. For purposes of this
Section 5.11, (a) the "Restricted Period" for any individual shall mean the
period beginning on the Effective Time and ending on the later of (i) the fifth
anniversary of the Effective Time (the "Purchase Restricted Period"), or (ii)
the second anniversary of the termination of the employment of such individual
with Republic, the Companies, or any Affiliate of Republic or the Companies (the
"Employment Restricted Period"), and (b) the "Restricted Territory" for any
individual shall mean (i) during the Employment Restricted Period, anywhere in
the United States, and (ii) during the Purchase Restricted Period, anywhere
within the city limits or within fifty miles of the city limits of those cities
listed on Schedule 5.11. The Shareholder agrees and acknowledges that the
restrictions contained in this Section 5.11 are reasonable in scope and duration
and are necessary to protect Republic and the Companies after the Effective
Time. If any provision of this Section 5.11, as applied to any party or to any
circumstance, is adjudged by a court to be invalid or unenforceable, the same
will in no way affect any other circumstance or the validity or enforceability
of the remainder of this Agreement. If any such provision, or any part thereof,
is held to be unenforceable because of the duration of such provision or the
area covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision,
and/or to delete specific words or phrases, and in its reduced form, such
provision shall then be enforceable and shall be enforced. The parties agree and
acknowledge that the breach of this Section 5.11 will cause irreparable damage
to Republic and upon breach of any provision of this Section 5.11, Republic
shall be entitled to injunctive relief, specific performance or other equitable
relief; provided, however, that the foregoing remedies shall in no way limit any
other remedies which Republic may have (including, without limitation, the right
to seek monetary damages).
5.12 TRADING IN REPUBLIC COMMON STOCK. Except as otherwise expressly
consented to by Republic, from the date of this Agreement until the Effective
Time, neither of the Companies, the Shareholder nor any of their Affiliates will
directly or indirectly purchase or sell (including short sales) any shares of
Republic Common Stock in any transactions effected on Nasdaq or otherwise.
5.13 EMPLOYMENT OF SHAREHOLDER. Republic or its assignee and the
Shareholder shall enter into an employment agreement in the form attached hereto
as Schedule 5.13.
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5.14 TITLE INSURANCE AND SURVEYS.
(a) Within 10 business days after the date of this Agreement, the
Companies and the Shareholder shall obtain and deliver to Republic commitments
(the "Commitments") issued by a title insurance company acceptable to Republic
(the "Title Company") and dated not earlier than November 15, 1996 for the
issuance of an ALTA Owners Policy of Title Insurance (10-17-92) (with Florida
Modifications), (the "Title Policy") for the Owned Properties. The Title Policy
shall be in the amount allocated to the real property herein, showing fee simple
title to the Owned Properties vested now or to be vested at the Effective Time
in one of the Companies subject only to current real estate Taxes not yet due
and payable as of the Effective Time, and such other covenants, conditions,
easements, and exceptions to title as Republic may approve in writing
(collectively, the "Permitted Exceptions"). The Commitments and the Title Policy
to be issued by the Title Company shall have all Standard and General Exceptions
deleted so as to afford full "extended form coverage" and shall contain an ALTA
Zoning Endorsement 3.1, contiguity (where appropriate), and such other
endorsements as may be reasonably requested by Republic, excluding
non-imputation and creditors rights endorsements. At the Closing, the
Shareholder or his Affiliates shall deliver such affidavits or other instruments
as the Title Company may reasonably require to delete Standard and General
Exceptions and to provide the special endorsements required hereunder. The
Shareholder shall cause the Commitments to be later-dated to cover the Closing
and to cause the Title Company to deliver the Title Policy at the Closing as
directed by Republic. The cost of the Title Policy shall be borne one-half by
Republic and one-half by the Companies and the Shareholder
(b) Within 20 days after the date of this Agreement but before the
Closing, the Companies and the Shareholder shall deliver to Republic and the
Title Company an as-built plat of survey of each of the Owned Properties and the
Leased Premises (the "Surveys") prepared by a registered land surveyor or
engineer, licensed in the respective states in which such properties are
located, dated on or after the date hereof, certified to Republic, the Title
Company, and such other entities as Republic may designate in writing to the
Companies and the Shareholder prior to the Closing, and conforming to current
ALTA/ACSM Minimum Detail Requirements for Land Title Surveys, sufficient to
cause the Title Company to delete the standard printed survey exception. Each
Survey shall show access from the land to dedicated roads and shall include a
flood plain certification. Any survey may be a recertification of a prior
survey, provided that it meets the above-described criteria.
(c) Republic shall notify the Companies and the Shareholder in writing,
within ten (10) business days of the receipt of any Commitment of Survey, if (i)
such Commitment discloses a title exception other than a Permitted Exception (an
"Unpermitted Exception") or (ii) such Survey discloses any encroachment,
overlap, or gap or any other matter which renders title to any of the Owned
Properties unmarketable or reflects that any utility service to the improvements
or access thereto does not lie wholly within the applicable parcel of real
property, or within an encumbered easement for the benefit of such parcel of
real property, or reflects any other matter adversely affecting the use or
improvements of such parcel of real property (a "Survey Defect"), then the
Companies and the Shareholder, twenty (20) days prior to the Closing, shall have
the Unpermitted
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Exception removed from such Commitment or the Survey Defect corrected or insured
over by an appropriate title insurance endorsement, all in a manner reasonably
satisfactory to Republic, or, if unable to do so, the parties may terminate this
Agreement.
5.15 SHAREHOLDER AND DIRECTOR VOTE. The Shareholder, in executing this
Agreement, consents as a director, shareholder, and/or partner (as applicable)
of the Companies to the transactions contemplated hereby, and waives notice of
any meeting in connection therewith.
5.16 SCHEDULES. The parties hereto acknowledge and agree that, as of
the date hereof, the Schedules to this Agreement are preliminary in nature and,
therefore, are incomplete. The parties hereto further acknowledge and agree that
(i) the Shareholder and the Companies shall be permitted to finalize the
Schedules to this Agreement, including providing new Schedules, within fourteen
(14) business days of the date hereof (the "Schedule Date"), and (ii) Republic
shall have ten (10) business days from the Schedule Date to accept or object to
any matter disclosed in any Schedule, including the Schedules attached hereto.
5.17 DUE DILIGENCE REVIEW. Republic shall be entitled to conduct a due
diligence review of the assets, real and personal properties, corporate and
financial books, records, plans, programs, and any other matters relating to the
Companies or their properties, which shall be completed on the tenth (10th)
business day (the "Due Diligence Date") after the later of (i) the Schedule
Date, or (ii) receipt by Republic of all documents, items, and information
requested by Republic to complete such due diligence review. Republic may, at
any time up to and including the Due Diligence Date, elect not to close the
transactions contemplated by this Agreement for any reason, in which case this
Agreement shall be terminated and the parties shall be released from any and all
obligations hereunder.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE REPUBLIC COMPANIES
The obligations of the Republic Companies to effect the Mergers shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions, any or all of which may be waived in whole or in part by the
Republic Companies:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Companies and the
Shareholder contained in this Agreement shall be true and correct at and as of
the Effective Time with the same force and effect as though made at and as of
that time except that those representations and warranties which address matters
only as of a particular date shall remain true and correct as of such date. The
Companies and the Shareholder shall have performed and complied with all of
their obligations required by this Agreement to be performed or complied with at
or prior to the Closing Date. The Companies and the Shareholder shall have
delivered to Republic a certificate, dated as of the Closing Date, (which
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in case of the Companies shall be duly signed by its Chief Executive Officer and
Chief Financial Officer) certifying that such representations and warranties are
true and correct and that all such obligations have been performed and complied
with.
6.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between the
date hereof and the Closing Date, (a) there shall have been no Material Adverse
Change to the Companies, (b) there shall have been no adverse federal, state or
local legislative or regulatory change affecting in any material respect the
services, products or business of the Companies and (c) none of the Assets of
the Companies shall have been damaged by fire, flood, casualty, act of God or
the public enemy or other cause (regardless of insurance coverage for such
damage) which damages may have a Material Adverse Effect thereon, and the
Companies and the Shareholder shall have delivered to Republic a certificate,
dated as of the Closing Date, to that effect.
6.3 OPINION OF COUNSEL. Republic shall have received an opinion dated
as of the Closing Date from counsel for the Companies and the Shareholder in
form and substance acceptable to Republic, in the form set forth on Schedule
6.3.
6.4 CONSENTS. The Companies and Republic shall have received consents
to the Mergers contemplated hereby and waivers of rights to terminate or modify
any material rights or obligations of the Companies from any Person from whom
such consent or waiver is required under any Material Contract (including but
not limited to, any franchise, dealer or other agreement with the Factories) or
under the HSR Act as of a date not more than five days prior to the Closing
Date, or who, as a result of the transactions contemplated hereby, would have
such rights to terminate or modify such Contracts or instruments, either by the
terms thereof or as a matter of law. Republic shall have received consents to
the transfer of the Franchise Agreements between each of the Companies and each
of the Factories or shall have entered into new dealer and franchise agreements
of the type generally in use at that time to operate a dealership of each of the
Factories at the Companies' current locations, subject only to such additional
terms and conditions as are acceptable to Republic. Republic shall have obtained
any applicable dealer license or other approvals required under laws of the
States of Florida and terms from the Motor Vehicle Commission of the State of
Florida and other Governmental Authorities with respect to the Mergers.
6.5 SECURITIES LAWS. Republic shall have received all necessary
consents and otherwise complied with any state Blue Sky or securities laws
applicable to the issuance of the Republic Shares in connection with the
transactions contemplated hereby.
6.6 STOCK POWERS. At the Closing, the Shareholder shall have delivered
to Republic, for use in connection with the Held Back Shares, ten stock powers
executed in blank, with signature guarantees.
6.7 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit,
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invalidate or collect damages arising out of the Mergers, and which, in the
judgment of Republic, makes it inadvisable to proceed with the transactions
contemplated hereby.
6.8 EMPLOYMENT AGREEMENTS. At or prior to the Closing, the Shareholder
shall have entered into employment agreements with the Companies, Republic, or
at Republic's option, one or more of its assignees provided that such assignment
shall not require the Shareholder to move outside the South Florida area, in the
form attached hereto as Schedule 5.13.
6.9 BOARD APPROVAL. The Board of Directors (the "Board") of Republic
shall have authorized and approved this Agreement, the Mergers, and the
transactions contemplated hereby. Republic shall notify the Companies and the
Shareholder of such approval or rejection by the Board before the end of the
third (3) business day following the Due Diligence Date. Upon notification by
Republic to the Companies of the Board's rejection of this Agreement and the
transactions contemplated hereby, this Agreement shall be terminated and the
parties shall be released from any and all obligations hereunder. Failure by
Republic to notify the Companies of the Board's rejection within the period
provided herein shall be deemed a waiver of this condition by Republic.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
THE SHAREHOLDER AND COMPANIES
The obligations of the Shareholder and the Companies to effect the
Mergers shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions, any or all of which may be waived in whole or in part
by the Shareholder and the Companies:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Republic Companies
contained in this Agreement shall be true and correct at and as of the Effective
Time with the same force and effect as though made at and as of that time except
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date. Republic shall
have performed and complied with all of its obligations required by this
Agreement to be performed or complied with at or prior to the Effective Time.
The Republic Companies shall each have delivered to the Companies a certificate,
dated as of the Effective Time, and signed by an executive officer, certifying
that such representations and warranties are true and correct and that all such
obligations have been performed and complied with.
7.2 REPUBLIC SHARES. At the Closing, Republic shall have issued all of
the Republic Shares and shall have delivered to the Shareholder (a) certificates
representing the Republic Shares issued to them hereunder, other than the Held
Back Shares, and (b) copies of certificates representing the Held Back Shares
issued to the Shareholder.
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7.3 NO ORDER OR INJUNCTION. There shall not be issued and in effect by
or before any court or other governmental body an order or injunction
restraining or prohibiting the transactions contemplated hereby.
7.4 HSR ACT WAITING PERIOD. Any applicable waiting period under the HSR
Act shall have expired or been terminated.
7.5 CONSENTS. The Companies and the Shareholder shall have received
consents to the Mergers contemplated hereby and waivers of rights to terminate
or modify any material rights or obligations of the Companies from any Person
from whom such consent or waiver is required under any Material Contract
(including but not limited to, any franchise, dealer or other agreement with the
Factories) or under the HSR Act as of a date not more than five days prior to
the Closing Date, or who, as a result of the transactions contemplated hereby,
would have such rights to terminate or modify such Contracts or instruments,
either by the terms thereof or as a matter of law.
ARTICLE VIII
REGISTRATION RIGHTS
The Shareholder shall have the following registration rights with
respect to the Republic Shares issued to them hereunder.
8.1 REGISTRATION RIGHTS FOR REPUBLIC SHARES; FILING OF REGISTRATION
STATEMENT. Republic will utilize its reasonable best efforts to cause, as soon
as practicable following the Closing Date, a registration statement to be filed
under the Securities Act or an existing registration statement to be amended for
the purpose of registering the Republic Shares for resale by a Holder thereof
(the "Registration Statement"). For purposes of this Article VIII, a person is
deemed to be a "Holder" of Republic Shares whenever such person is the record
owner of Republic Shares. Republic will use its reasonable best efforts to have
the Registration Statement become effective and cause the Republic Shares to be
registered under the Securities Act, and registered, qualified or exempted under
the state securities laws of such jurisdictions as any Holder reasonably
requests, as soon as reasonably practicable following the Effective Date,
provided, however, that Republic shall not be required to qualify to do business
in any state or to consent to be subject to general service of process in any
state where it is not otherwise required to be so qualified or subject.
8.2 EXPENSES OF REGISTRATION. Republic shall pay all expenses incurred
by Republic in connection with the registration, qualification and/or exemption
of the Republic Shares, including any SEC and state securities law registration
and filing fees, listing fees, printing expenses, fees and disbursements of
Republic's counsel and accountants, transfer agents' and registrars' fees, fees
and disbursements of experts used by Republic in connection with such
registration, qualification and/or exemption, and expenses incidental to any
amendment or supplement to the Registration Statement
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or prospectuses contained therein. Republic shall not, however, be liable for
any sales, broker's or underwriting commissions upon sale by any Holder of any
of the Republic Shares.
8.3 FURNISHING OF DOCUMENTS. Republic shall furnish to the Holders such
reasonable number of copies of the Registration Statement, such prospectuses as
are contained in the Registration Statement and such other documents as the
Holders may reasonably request in order to facilitate the offering of the
Republic Shares.
8.4 AMENDMENTS AND SUPPLEMENTS. Republic shall prepare and promptly
file with the SEC and promptly notify the Holders of the filing of such
amendments or supplements to the Registration Statement or prospectuses
contained therein as may be necessary to correct any statements or omissions if,
at the time when a prospectus relating to the Republic Shares is required to be
delivered under the Securities Act, any event shall have occurred as a result of
which any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, provided, however, that Republic
shall be entitled to delay any such filing and the use of the prospectus if
Republic determines that such filing would impede, delay, or interfere with any
significant financing, acquisition, or other transaction involving Republic, or
require disclosure of material information which Republic has a bona fide
business purpose for preserving as confidential. Republic shall also advise the
Holders promptly after it shall receive notice or obtain knowledge thereof, of
the issuance of any stop order by the SEC suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceeding for
that purpose and promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued.
8.5 DURATION. Republic shall maintain the effectiveness of the
Registration Statement until such time as Republic reasonably determines, based
on an opinion of counsel, that all of the Holders will be eligible to sell all
of the Republic Shares then owned by the Holders without the need for continued
registration of the shares within the three month period immediately following
the termination of the effectiveness of the Registration Statement. Republic's
obligations contained in Sections 8.1, 8.3 and 8.4 shall terminate on the second
anniversary of the Effective Date.
8.6 FURTHER INFORMATION. If Republic Shares owned by a Holder are
included in any registration, such Holder shall furnish Republic such
information regarding itself as Republic may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
8.7 INDEMNIFICATION
(a) Republic will indemnify and hold harmless the Holders and
each person, if any, who controls a Holder within the meaning of the
Securities Act, from and against any and all losses, damages,
liabilities, costs and expenses to which the Holders or any such
controlling person may become subject under the Securities Act or
otherwise, insofar as such
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losses, claims, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that, Republic will not be liable in any
such case to the extent that any such loss, claim, damage, liability,
cost or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by or on behalf of any Holder or
such controlling person in writing specifically for use in the
preparation thereof.
(b) Each of the Holders, jointly and severally, will indemnify
and hold harmless Republic and each person, if any, who controls
Republic within the meaning of the Securities Act, from and against any
and all losses, damages, liabilities, costs and expenses to which
Republic or any such controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in strict
conformity with written information furnished by or on behalf of any
Holder specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section 8.7 of notice of
the commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the
indemnifying party of the commencement thereof; but the omission to so
notify the indemnifying party will not relieve it from any liability
which it may have hereunder unless the indemnifying party has been
materially prejudiced thereby nor will such failure to so notify the
indemnifying party relieve it from any liability which it may have to
any indemnified party otherwise than hereunder. In case such action is
brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party shall have
the right to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified
party; provided, however, if the defendants in any action include both
the indemnified party and the indemnifying party and there is a
conflict of interest which would prevent counsel for the indemnifying
party from also representing the indemnified party, the indemnified
party or parties shall have the right to select separate counsel to
participate in the defense of such action on behalf of such indemnified
party or parties. After notice from the indemnifying
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party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a) or
(b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party
shall have employed counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the
commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
(d) In the event any of the Republic Shares are sold by any
Holder or Holders in an underwritten public offering consented to by
Republic, Republic shall provide indemnification to the underwriters of
such offering and any person controlling any such underwriter on behalf
of the Holder or Holders making the offering; provided, however, that
Republic shall not be required to consent to any such underwriting or
to provide such indemnification in respect of the matters described in
the proviso to the first sentence of Section 8.7(a).
ARTICLE IX
INDEMNIFICATION
9.1 AGREEMENT BY THE SHAREHOLDER FOR INDEMNIFICATION. The Shareholder
agrees to indemnify and hold Republic and its shareholders, directors, officers,
employees, attorneys, agents and Affiliates harmless from and against, and
Republic shall be entitled to recover by set off against the Held Back Shares in
accordance with Section 9.3, the aggregate of all expenses, losses, costs,
deficiencies, liabilities and damages (including, without limitation, related
counsel and paralegal fees and expenses) incurred or suffered by Republic
arising out of, relating to, or resulting from (i) any breach of a
representation or warranty made by the Companies or the Shareholder in or
pursuant to this Agreement, (ii) any breach of the covenants or agreements made
by the Companies or the Shareholder in or pursuant to this Agreement, or (iii)
any inaccuracy in any certificate, instrument or other document delivered by the
Companies or the Shareholder as required by this Agreement (collectively,
"Indemnifiable Damages"). Without limiting the generality of the foregoing, with
respect to the measurement of Indemnifiable Damages, Republic shall have the
right to be put in the same pre-tax consolidated financial position as it would
have been in had each of the representations and warranties of the Shareholder
hereunder been true and correct and had the agreements of the Companies and the
Shareholder hereunder been performed in full, and such Indemnifiable Damages
shall be reduced by and to the extent Republic receives proceeds under insurance
policies, including title insurance policies, as a result of, and in
compensation for, the subject matter of such claim. In no event, however, shall
the aggregate amount of Indemnifiable Damages payable by the Shareholder exceed
the Total Purchase Price. Notwithstanding anything to the contrary contained
herein,
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Republic shall not be entitled to any Indemnifiable Damages unless the
aggregate of all such Indemnifiable Damages exceeds $250,000 ("Indemnification
Threshold"). The Indemnification Threshold shall not be applicable to any claim
under (ii) above or any claim arising under Section 3,19.
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Shareholder in this Agreement or
pursuant hereto shall survive for a period of two years after the Effective
Time, except that the representations and warranties made in Section 3.12,
Section 3.18, and Section 3.19 shall survive for the length of any applicable
period of limitations, and the representations and warranties made by the
Shareholder in Sections 3.4, 3.5, and 3.13, shall never expire. No claim for the
recovery of Indemnifiable Damages may be asserted by Republic after such
representations and warranties shall thus expire; provided, however, that claims
for Indemnifiable Damages first asserted within the applicable period shall not
thereafter be barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the right to
fully rely on the representations, warranties, covenants and agreements of the
other parties contained in this Agreement or in any other documents or papers
delivered in connection herewith. Each representation, warranty, covenant and
agreement of the parties contained in this Agreement is independent of each
other representation, warranty, covenant and agreement. Each of the
representations and warranties of the Republic Companies shall expire at the
Effective Time.
9.3 SECURITY FOR THE SHAREHOLDER'S INDEMNIFICATION OBLIGATION. As
security for the indemnification obligations contained in this Article IX, at
the Closing, Republic shall set aside and hold certificates representing the
Held Back Shares issued pursuant to this Agreement. Republic may set off against
the Held Back Shares any loss, damage, cost or expense for which the Shareholder
may be responsible pursuant to this Agreement (including without limitation, any
Indemnifiable Damages) whether or not indemnified pursuant to this Article IX,
subject, however, to the following terms and conditions:
(a) Republic shall give written notice to the Shareholder of
any claim for Indemnifiable Damages or any other damages hereunder,
which notice shall set forth (i) the amount of Indemnifiable Damages or
other loss, damage, cost or expense which Republic claims to have
sustained by reason thereof, and (ii) the basis of such claim;
(b) Such set off shall be effected on the later to occur on
the expiration of 15 days from the date of such notice or, if such
claim is contested, the date the dispute is resolved, and such set off
shall be charged proportionally against the shares set aside;
(c) After the Held Back Shares are registered and any
restrictions on sale imposed under the Securities Act or otherwise are
terminated, the Shareholder may
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instruct Republic to sell some or all of the Held Back Shares and the
net proceeds thereof shall be substituted for such Held Back Shares in
any set off to be made by Republic pursuant to any claim hereunder
subject to continued compliance with any applicable SEC and other
regulations; and
(d) For purposes of any set off against the Held Back Shares
pursuant to this Article IX, the shares of Republic Common Stock not
sold as provided in clause (d) of this Section shall be valued at the
Average Closing Sale Price.
9.4 VOTING OF AND DIVIDENDS ON THE HELD BACK SHARES. Except with
respect to shares transferred pursuant to the foregoing right of set off (and in
the case of such shares, until the same are transferred), all Held Back Shares
shall be deemed to be owned by the Shareholder and the Shareholder shall be
entitled to vote the Held Back Shares; provided, however, that, there shall also
be deposited with Republic subject to the terms of this Article IX, all shares
of Republic Common Stock issued to the Shareholder as a result of any stock
dividend or stock split and all cash issuable to the Shareholder as a result of
any cash dividend, with respect to the Held Back Shares. All stock and cash
issued or paid upon Held Back Shares shall be distributed to the person or
entity entitled to receive such Held Back Shares together with such Held Back
Shares.
9.5 DELIVERY OF HELD BACK SHARES. Republic agrees to deliver to the
Shareholder no later than one year after the Effective Date any Held Back Shares
then held by it (or proceeds from the Held Back Shares) unless there then
remains unresolved any claim for Indemnifiable Damages or other damages
hereunder as to which notice has been given, in which event any Held Back Shares
(or proceeds from the sale of Held Back Shares) remaining on deposit after such
claim shall have been satisfied shall be returned to the Shareholder promptly
after the time of satisfaction.
9.6 ADJUSTMENT TO TOTAL PURCHASE PRICE. All payments for Indemnifiable
Damages made pursuant to this Article IX shall be treated as adjustments to the
consideration granted in the Mergers under Section 1.3.
9.7 NO BAR. If the Held Back Shares are insufficient to set off any
claim for Indemnifiable Damages made hereunder (or have been delivered to the
Shareholder prior to the making or resolution of such claim), then Republic may
take any action or exercise any remedy available to it by appropriate legal
proceedings to collect the Indemnifiable Damages.
9.8 REMEDIES CUMULATIVE. The remedies provided herein shall be
cumulative and shall not preclude Republic from asserting any other right, or
seeking any other remedies against the Shareholder.
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ARTICLE X
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after the Effective Time of the Republic Shares:
10.1 DISPOSITION OF SHARES. The Shareholder agrees that he will not
sell, transfer or otherwise dispose of any Republic Shares, except pursuant to
(a) an exemption from the registration requirements under the Securities Act,
which does not require the filing by Republic with the SEC of any registration
statement, offering circular or other document, in which case, each such
Shareholder shall first supply to Republic an opinion of counsel (which counsel
and opinions shall be satisfactory to Republic) that such exemption is
available, or (b) an effective registration statement filed by Republic with the
SEC under the Securities Act.
10.2 LEGEND. The certificates representing the Republic Shares shall
bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE ACT, AND IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO,
OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
Republic may, unless a registration statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
ARTICLE XI
DEFINITIONS
11.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
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"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
hereof.
"Chargebacks" shall mean (a) any amount which either of the Companies
may be required to pay back to any party purchasing retail paper, warranties or
the like from such Companies, or (b) any amount which may be set-off or
otherwise deducted from any amount due and owing to either of the Companies by
any party purchasing retail paper, warranties or the like from such Companies.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment agreement,
license, instrument, purchase and sales order, commitment, undertaking,
obligation, whether written or oral, express or implied.
"Current Assets" shall mean all current assets of each of the
Companies, the value of which shall be determined in accordance with the rules
and policies of each of the Factories (or in the case of any Factory for which
no such rules or policies have been established, in accordance with GAAP).
"Current Liabilities" shall mean all current liabilities of each of the
Companies, the value of which shall be determined in accordance with the rules
and policies of each of the Factories (or in the case of any Factory for which
no such rules or policies have been established, in accordance with GAAP).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
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"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, but not limited to, any conditional sale or
other title retention agreement, any lease in the nature thereof, and the filing
of or agreement to give any financing statement under the Uniform Commercial
Code or comparable law or any jurisdiction in connection with such mortgage,
pledge, security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets, liabilities, rights,
obligations, operations, business or prospects which change (or effect)
individually or in the aggregate, is materially adverse to such condition,
properties, assets, liabilities, rights, obligations, operations, business or
prospects.
"New Parts and Accessories Inventory" shall mean new, non-damaged and
non-obsolete parts and accessories inventory that may be returned to the
manufacturer.
"New Vehicle Inventory" shall mean vehicles which are new, unused
(meaning untitled and unreported as sold with full factory warranty) and
undamaged (meaning having repairable damage costing less than $100) and have
less than 100 miles.
"Other Parts and Accessories Inventory" shall mean parts and
accessories inventory other than New Parts and Accessories Inventory.
"Other Vehicle Inventory" shall mean vehicle inventory other than New
Vehicle Inventory.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, estate, trust,
unincorporated association, joint venture, Governmental Authority or other
entity, of whatever nature.
"Register", "registered" and "registration" refer to a registration of
the offering and sale of securities effected by preparing and filing a
registration statement in compliance with the Securities Act and the declaration
or ordering of the effectiveness of such registration statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
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"Tax Return" means any tax return, filing or information
statement required to be filed in connection with or with respect to
any Tax.
"Taxes" means all taxes, fees or other assessments, including,
but not limited to, income, excise, property, sales, use, franchise,
intangible, payroll, withholding, social security and unemployment
taxes imposed by any federal, state, local or foreign governmental
agency, and any interest or penalties related thereto.
11.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the
defined meanings when used in any certificates, reports or other documents made
or delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with
this Agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods, where
applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
ARTICLE XII
TERMINATION, AMENDMENT AND WAIVER
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time.
(a) by mutual written consent of all of the parties hereto
at any time prior to the Closing; or
(b) by Republic, ten days after delivery of written notice
to the Companies and the Shareholder in accordance with Section 13.1 of this
Agreement in the event of a material breach by the Companies or the Shareholder
of any provision of this Agreement if the Companies and the Shareholder have not
cured said material breach; or
(c) by the Companies and the Shareholder ten days after
delivery of written notice to Republic in accordance with Section 13.1 of this
Agreement in the event of a
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material breach by Republic of any provision of this Agreement, if Republic has
not cured said material breach; or
(d) by Republic or the Companies upon delivery of written
notice to the other in accordance with Section 13.1 of this Agreement, if the
Closing shall not have occurred by January 31, 1996.
12.2 EFFECT OF TERMINATION. Except for the provisions of Article IX
hereof, which shall survive any termination of this Agreement, in the event of
termination of this Agreement pursuant to Section 12.1, this Agreement shall
forthwith become void and of no further force and effect, and the parties shall
be released from any and all obligations hereunder; provided, however, that
nothing herein shall relieve any party from liability for the willful breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage pre-paid),
guaranteed overnight delivery or facsimile transmission if such transmission is
confirmed by delivery by certified or registered mail (first class postage
pre-paid) or guaranteed overnight delivery, to the following addresses and
telecopy numbers (or to such other addresses or telecopy numbers which such
party shall designate in writing to the other party):
(a) IF TO REPUBLIC TO:
Republic Industries, Inc.
000 Xxxx Xxx Xxxx Xxxx., Xxxxx 0000
Xx. Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, General Counsel
Telecopy: (000) 000-0000
WITH A COPY TO:
Akerman, Senterfitt & Xxxxxx, P.A.
Xxx Xxxxxxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. March, Esq.
Telecopy: (000) 000-0000
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(b) IF TO THE COMPANIES AND/OR THE SHAREHOLDER
TO:
00000 Xxxxx Xxxxx Xxxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxx
Telecopy: (000) 000-0000
WITH A COPY TO:
Greenberg, Traurig, Hoffman, Lipoff, Xxxxx
& Quentel, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
13.2 ENTIRE AGREEMENT. This Agreement (including the Schedules attached
hereto) and other documents delivered at the Closing pursuant hereto, contains
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements and understandings (oral or written) between or
among the parties with respect to such subject matter. The Schedules constitute
a part hereof as though set forth in full above.
13.3 EXPENSES; SALES TAX. Except as otherwise provided herein, the
parties shall pay their own fees and expenses, including their own counsel fees,
incurred in connection with this Agreement or any transaction contemplated
hereby.
13.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts.
13.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights
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hereunder. Except as expressly provided herein, the rights and obligations of
this Agreement may not be assigned by the Companies without the prior written
consent of Republic. Republic may assign all or any portion of its rights
hereunder to one or more of its wholly owned subsidiaries.
13.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
13.7 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement.
13.8 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of
Florida applicable to contracts executed and to be wholly performed within such
State.
13.9 JURISDICTION.
(a) The parties to this Agreement agree that any suit, action
or proceeding arising out of, or with respect to, this Agreement or any judgment
entered by any court in respect thereof may be brought only in the courts of
Dade County, Florida or in the U.S. District Court for the Southern District of
Florida and the parties hereto hereby accept the exclusive jurisdiction of those
courts for the purpose of any suit, action or proceeding.
(b) In addition, each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any judgment entered
by any court in respect thereof brought in Dade County, Florida or the U.S.
District Court for the Southern District of Florida, and hereby further
irrevocably waives any claim that any suit, action or proceedings brought in
Dade County, Florida or in such District Court has been brought in an
inconvenient forum.
13.10 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
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Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
REPUBLIC INDUSTRIES, INC., a Delaware
corporation
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxx X. Xxxxxxx, President
RI/RB MERGER CORP., a Florida corporation
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxx X. Xxxxxxx, President
RI/GFB MERGER CORP., a Florida corporation
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxx X. Xxxxxxx, President
R & B HOLDING COMPANY, INC., a Florida
corporation
By: /s/ Xxxxxx X. Xxxx
----------------------------------------
Xxxxxx X. Xxxx, President
G.F.B. ENTERPRISES, INC., a Florida
corporation
By: /s/ Xxxxxx X. Xxxx
----------------------------------------
Xxxxxx X. Xxxx, President
/s/ Xxxxxx X. Xxxx
-------------------------------------------
Xxxxxx X. Xxxx, individually
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