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EXHIBIT 2.3
MERGER AND REORGANIZATION AGREEMENT
This MERGER AND REORGANIZATION AGREEMENT (this "Agreement") is entered
into as of February 2, 1997 by and among (i) Republic Industries, Inc., a
Delaware corporation ("Republic"); (ii) RI/WF Merger Corp., a Florida
corporation, RI/WN Merger Corp., a Florida corporation, RI/WD Merger Corp., a
Florida corporation, RI/WLM Merger Corp., a Florida corporation, RI/SLM Merger
Corp., a Florida corporation, RI/BWE Merger Corp., a Florida corporation and
RI/MWP Merger Corp., a Florida corporation (the foregoing "Merger" corporations
are referred to herein collectively as the"Republic Subsidiaries" and
individually as a "Republic Subsidiary"); (iii) Xxxxxxx Xxxx, Inc., a Florida
corporation, Xxxxxxx Nissan, Inc., a Florida corporation, Xxxxxxx Xxxxx, Inc., a
Florida corporation, Xxxxxxx Xxxxxxx-Mercury, Inc., a Florida corporation,
Xxxxxx Xxxxxxx-Mercury, Inc., a Florida corporation, Xxxx Xxxxxxx Enterprises,
Inc., d/b/a Stuart Mitsubishi, a Florida corporation ("WI"), Xxxxxxx Imports,
Inc., a Florida corporation, and Mechanical Warranty Protection, Inc., a Florida
corporation, (each referred to individually as an "Acquired Entity" and
collectively as the "Acquired Entities"); and (iv) Xxxxxxx X. Xxxxxxx, the sole
shareholder of the Acquired Entities (the "Shareholder"). Republic and the
Republic Subsidiaries are sometimes referred to herein individually as a
"Republic Company" and collectively as the "Republic Companies".
RECITALS
A. Republic and the Acquired Entities desire to merge the automotive
operations of the Acquired Entities with Republic's automotive businesses.
B. Republic, the Republic Subsidiaries and the Acquired Entities 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
Acquired Entities as provided herein in order to effectuate the acquisition of
the automotive dealerships and related businesses of the Acquired Entities
(other than WI), Republic has organized each Republic Subsidiary as a
wholly-owned subsidiary, and the parties have agreed, subject to the terms and
conditions set forth in this Agreement, to merge the respective Republic
Subsidiaries with and into the respective Acquired Entities so that the Acquired
Entities continue as surviving corporations of the respective mergers and as
wholly-owned subsidiaries of Republic, and, in the case of WI, to exchange all
of the outstanding stock of WI for shares of Republic common stock so that the
Shareholder will be issued certain shares of common stock of Republic as
provided herein in exchange for his respective issued and outstanding equity
interests in the Acquired Entities.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
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ARTICLE I
MERGERS; SHARE EXCHANGE; RELATED TRANSACTIONS; CLOSING
1.1 THE CLOSING. Subject to the terms and conditions of this
Agreement, the consummation of the Mergers (as defined below) and the
other transactions contemplated hereby (the "Closing") shall take place as
promptly as practicable (and in any event within five (5) business days after
the satisfaction or waiver of the conditions set forth in Articles VI and VII
hereof), at the offices of Akerman, Senterfitt & Xxxxxx, P.A. in Miami,
Florida, or such other place and time as the parties may otherwise agree, and
the date of the Closing is referred to herein as the "Closing Date."
1.2 THE MERGERS AND SHARE EXCHANGE. The mergers described in
this Section are referred to herein collectively as the "Mergers" and
individually as a "Merger," and the share exchange described in this section is
referred to herein as the "Share Exchange". The surviving corporations of such
Mergers and WI after the Share Exchange are referred to herein collectively as
the "Surviving Corporations" and individually as a "Surviving Corporation."
(a) The Xxxxxxx Xxxx, Inc. Merger. Subject to the terms and
conditions of this Agreement, and in accordance with the Florida
Business Corporation Act (the "Florida Act"), at the Effective Time,
RI/WF Merger Corp. will be merged with and into Xxxxxxx Xxxx, Inc. with
Xxxxxxx Xxxx, Inc. being the Surviving Corporation in the Merger and
becoming a wholly-owned subsidiary of Republic, and the separate
corporate existence of RI/WF Merger Corp. shall cease.
(b) The Xxxxxxx Nissan, Inc. Merger. Subject to the terms and
conditions of this Agreement, and in accordance with the Florida Act,
at the Effective Time, RI/WN Merger Corp. will be merged with and into
Xxxxxxx Nissan, Inc., with Xxxxxxx Nissan, Inc. being the Surviving
Corporation in the Merger and becoming a wholly-owned subsidiary of
Republic, and the separate corporate existence of RI/WN Merger Corp.
shall cease.
(c) The Xxxxxxx Xxxxx, Inc. Merger. Subject to the terms and
conditions of this Agreement, and in accordance with the Florida Act,
at the Effective Time, RI/WD Merger Corp. will be merged with and into
Xxxxxxx Xxxxx, Inc., with Xxxxxxx Xxxxx, Inc. being the Surviving
Corporation in the Merger and becoming a wholly-owned subsidiary of
Republic, and the separate corporate existence of RI/WD Merger Corp.
shall cease.
(d) The Xxxxxxx-Xxxxxxx Mercury, Inc. Merger. Subject to the
terms and conditions of this Agreement, and in accordance with the
Florida Act, at the Effective Time, RI/WLM Merger Corp. will be merged
with and into Xxxxxxx-Xxxxxxx Mercury, Inc., with Xxxxxxx-Xxxxxxx
Mercury, Inc. being the Surviving Corporation in the Merger and
becoming a wholly-owned subsidiary of Republic, and the separate
corporate existence of RI/WLM Merger Corp. shall cease.
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(e) The Xxxxxx Xxxxxxx-Mercury, Inc. Merger. Subject to the
terms and conditions of this Agreement, and in accordance with the
Florida Act, at the Effective Time, RI/SLM Merger Corp. will be merged
with and into Xxxxxx Xxxxxxx-Mercury, Inc., with Xxxxxx
Xxxxxxx-Mercury, Inc. being the Surviving Corporation in the Merger and
becoming a wholly-owned subsidiary of Republic, and the separate
corporate existence of RI/SLM Merger Corp. shall cease.
(f) The Xxxx Xxxxxxx Enterprises, Inc. Merger. Subject to the
terms and conditions of this Agreement, and in accordance with the
Florida Act, at the Effective Time, RI/BWE Merger Corp. will be merged
with and into Xxxx Xxxxxxx Enterprises, Inc., with Xxxx Xxxxxxx
Enterprises, Inc. being the Surviving Corporation in the Merger and
becoming a wholly-owned subsidiary of Republic, and the separate
corporate existence of RI/BWE Merger Corp. shall cease.
(g) The Xxxxxxx Imports, Inc. Share Exchange. Subject to the
terms and conditions of this Agreement, at the Effective Time Republic
shall acquire from the Shareholder all of the issued and outstanding
shares of capital stock of WI in the Share Exchange in accordance with
the Florida Act, with WI becoming a wholly-owned subsidiary of
Republic.
(h) The Mechanical Warranty Protection, Inc. Merger. Subject
to the terms and conditions of this Agreement, and in accordance with
the Florida Act, at the Effective Time, RI/MWP Merger Corp. will be
merged with and into Mechanical Warranty Protection, Inc., with
Mechanical Warranty Protection, Inc. being the Surviving Corporation in
the Merger and becoming a wholly-owned subsidiary of Republic, and the
separate corporate existence of RI/MWP Merger Corp. shall cease.
1.3 SHAREHOLDER RECEIVABLES, PAYABLES. Prior to Closing, all debt
owed by the Shareholder to any of the Acquired Entities (estimated to have a
current aggregate balance of approximately $5,100,000), and all notes payable
by any of the Acquired Entities to the Shareholder or related parties
(estimated to have a current aggregate balance of approximately $1,650,000)
will be paid in full, and the Shareholder will obtain or deliver, as
appropriate, proper releases and satisfactions therefor in form satisfactory to
Republic.
1.4 PURCHASE PRICE; CONVERSION OF SECURITIES.
(a) Aggregate Consideration. For purposes of this Agreement,
"Aggregate Consideration" means the 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) Fifty Five Million Dollars
($55,000,000) (the "Purchase Price"), minus (x) the Transaction Fees (as defined
below), if any, minus (y) the amount, if any, by which Working Capital (as
defined below) as of the Closing Date is less than Nine Million Nine Hundred
Thousand Dollars ($9,900,000) (items (x) and (y) are referred to herein as the
"Purchase Price Adjustment"), by (ii) $32.75 (the "Price per
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Share"). For purposes of determining the Purchase Price Adjustment, (i) "Working
Capital" shall mean the amount, if any, by which the aggregate of the Current
Assets of the Acquired Entities exceeds the aggregate of the Current Liabilities
of the Acquired Entities; (ii) "Current Assets" shall mean on a combined basis
all current assets of the Acquired Entities determined in accordance with GAAP;
and (iii) "Current Liabilities" shall mean on a combined basis the current
liabilities of the Acquired Entities determined in accordance with GAAP
(excluding any reserve for Chargebacks and any reserve for LIFO inventories).
"Transaction Fees" shall mean all legal, accounting, tax, consulting and
financial advisory and other fees and expenses, including any transfer taxes,
fees and expenses and the cost of title insurance, incurred, paid, or payable by
the Acquired Entities in connection with the transactions contemplated hereby.
(b) At the Effective Time, by virtue of the Mergers and the
Share Exchange and without any action on the part of the Acquired Entities,
Republic, the Republic Subsidiaries or the Shareholder, the outstanding shares
of capital stock of each of the Acquired Entities that is party to a Merger or
the Share Exchange shall be converted into the right to receive that portion of
the Aggregate Consideration determined as provided in Exhibit A hereto, which
Exhibit A shall be reasonably acceptable to Republic, shall be attached within
15 days of the date of this Agreement, and shall be incorporated into this
Agreement.
(c) Each share of common stock of each Republic Subsidiary
that is party to a Merger, issued and outstanding at the Effective Time shall be
converted into one share of the voting common stock of the Surviving Corporation
into which it is merged.
(d) Each share of common stock of WI shall be exchanged for
such number of shares of the voting common stock of Republic as is determined in
accordance with this Section 1.4.
1.5 TIMING OF PURCHASE PRICE ADJUSTMENT. At least two days prior
to the Closing Date, the Acquired Entities and Republic shall estimate by mutual
written agreement the amount of the Purchase Price Adjustment, if any, as of the
Closing Date for purposes of determining the number of Republic Shares to be
delivered by Republic to the Acquired Entities at Closing (which estimated
amount is referred to herein as the "Estimated Value"). Within 60 days after the
Closing Date, Republic shall prepare and deliver to the Acquired Entities (in
accordance with Section 13.1) a determination (the "Determination") of the
actual amount of the Purchase Price Adjustment as of the Closing Date (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.
Republic shall also provide the Shareholder any supporting documentation for the
Determination. If, within 30 days after the date on which a Determination is
delivered to the Acquired Entities, the Acquired Entities shall not have given
written notice to Republic setting forth in detail any objection of the Acquired
Entities to such Determination, then such Determination shall be final and
binding on the parties hereto. In the event the Acquired Entities give written
notice of any objection to such Determination within the 30-day period, Republic
and the Acquired Entities 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
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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 Acquired Entities. Republic and the Shareholder shall contribute equally
to costs (including fees and expenses charged by Xxxxxx Xxxxxxxx LLP) in
connection with the resolution of any such dispute. The Shareholder hereby
represents and warrants that the Estimated Value will be accurate. If, as
finally determined, the Actual Value is greater than the Estimated Value,
Republic shall be entitled to set off against the Held Back Shares (as defined
in Section 1.9(c)) the difference between the Actual Value and the Estimated
Value (assuming a value per share for purposes of such calculation equal to the
Price per Share), which set off shall be deemed to be Indemnifiable Damages
under Article IX hereof, provided that the Indemnification Threshold (as defined
in Section 9.1) shall not be applicable to such setoff, and such setoff shall
not count against such Indemnification Threshold.
1.6 FILING OF MERGER AND SHARE EXCHANGE DOCUMENTS; EFFECTIVE
TIME. At the Closing, the parties shall cause the Mergers and the Share
Exchange to be consummated by executing and filing duly executed Articles of
Merger with respect to each of the Mergers and the Plan of Share Exchange with
respect to the Share Exchange 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 Florida Act (the date and time of such
filings is referred to herein as the "Effective Date" or "Effective Time").
1.7 EFFECT OF THE MERGERS AND SHARE EXCHANGE. At the Effective
Time, the effect of the Mergers shall be as provided under the Florida Act.
Without limiting the generality of the foregoing, at the Effective Time:
(a) All property, rights, privileges, policies and franchises
of each Acquired Entity that is party to a Merger and the Republic
Subsidiary with which it is merged shall vest in the Surviving
Corporation of such Merger and all debts, liabilities and duties of
such Acquired Entity and the Republic Subsidiary with which it is
merged shall become the debts, liabilities and duties of the Surviving
Corporation of such Merger.
(b) The Articles of Incorporation and the Bylaws of each
Acquired Entity that is party to a Merger, 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 of each Republic Subsidiary that is merged
in one of the Mergers at the Effective Time shall be the respective
directors and officers of the Acquired Entity into which it is merged,
each to hold a directorship or office in accordance with the Articles
of Incorporation and Bylaws of the Surviving Corporation of such
Merger, until their respective successors are duly elected and
qualified, and the parties listed on Schedule 1.7 shall be the
respective officers of the Surviving Corporations as identified on
Schedule 1.7; and
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(d) The entire equity interest of WI shall be owned by
Republic, and the directors and officers of WI shall be appointed or
elected by Republic as identified on Schedule 1.7.
1.8 TAX AND ACCOUNTING TREATMENT. The parties hereto acknowledge
and agree that the Mergers and the Share Exchange contemplated hereby shall be
treated for accounting purposes as a pooling of interests business combination,
and are intended to be treated for tax purposes as tax-free reorganizations
under Section 368 of the Code.
1.9 PROCEDURE AT THE CLOSING. At the Closing, the parties agree
that the following shall occur:
(a) The Acquired Entities 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 the documents,
certificates, consents and letters required by Article VII.
(c) Republic shall issue the shares of Republic Common Stock
issuable pursuant to Section 1.4. registered in the name 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 Price per Share) equal to 10% of the Purchase
Price (the "Held Back Shares"), based on the Estimated Value, and (ii)
Republic shall deliver stock certificates representing the balance of
the shares of Republic Common Stock issuable in accordance with Section
1.4 to the Shareholder. The shares of Republic Common Stock issuable
pursuant to Section 1.4 including the Held Back Shares, are referred to
herein as the "Republic Shares."
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE REPUBLIC COMPANIES
As a material inducement to the Acquired Entities 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 Acquired Entities 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,
authorized to do business in the State of Florida, and has the requisite power
and authority to own or lease its properties and to carry on its business as
presently conducted. Each Republic Subsidiary is a corporation duly organized,
validly
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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 any of the Republic Companies.
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 as provided in this Agreement, the Republic Shares will be
validly issued, fully paid, non-assessable shares.
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 of January 15, 1997 (i) 251,015,811
shares of Republic Common Stock were validly issued and outstanding, and (ii) no
shares of preferred stock were issued or outstanding.
2.6 NO VIOLATION. The execution and delivery of this Agreement by the
Republic Companies, the performance by the Republic Companies of their
respective obligations hereunder and the consummation by the Republic Companies
of the transactions contemplated by this Agreement will not (a) contravene any
provision of the Certificates of Incorporation or Bylaws of the Republic
Companies, (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 the Republic Companies, (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 Contract which is applicable to, binding upon or enforceable
against the Republic Companies, (d) result in or require the creation or
imposition of any Lien upon or with respect to any of the property or assets of
the Republic Companies, (e) give to any individual or entity a right or claim
against the Republic Companies, 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
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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, (iv) any filings or consents required to be made or obtained by the
Acquired Entities or the Shareholder or (v) any governmental permits or licenses
required to operate the dealerships and other businesses of the Acquired
Entities.
2.7 REPORTS AND FINANCIAL STATEMENTS. From January 1, 1996 to the date
hereof, 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 will furnish or make available to the Acquired Entities and
the Shareholder copies of all Republic Reports filed with the SEC since January
1, 1996 within five days of the date of this Agreement. 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.
2.9 TAX MATTERS. Republic has no current plan or intention to cause any
of the Surviving Corporations to issue additional shares of stock after the
Closing that would result in Republic's losing control of any of the Surviving
Corporations within the meaning of Section 368(c) of the Code. Republic has no
current plan or intention to liquidate, merge or sell or otherwise dispose of
the stock of any of the Surviving Corporations after the Closing, except for
transfers of stock or assets to an affiliated corporation or corporations (as
defined in Section 1504(a) of the Code), or sell or otherwise dispose of any of
the assets of any of the Surviving Corporations after the Closing, except for
dispositions in the ordinary course of business or transfers described in
Section 368(a)(2)(c) of the Code. Republic currently intends to cause, after the
Closing, each of the Surviving Corporations to continue its historic business or
use a significant portion of each Surviving Corporation's historic business
assets in a business.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE ACQUIRED ENTITIES AND THE SHAREHOLDER
As a material inducement to the Republic Companies to enter into this
Agreement and to consummate the transactions contemplated hereby, the Acquired
Entities and the Shareholder, jointly and severally, make the following
representations and warranties to the Republic Companies:
3.1 CORPORATE STATUS. Each Acquired Entity 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 Acquired Entity is
legally qualified to do business as a foreign corporation in each of the
jurisdictions in which it is required to be so qualified, 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 Acquired Entity has fully complied with all of
the requirements of any statute governing the use and registration of fictitious
names, and has the legal right to use the names under which it operates its
businesses. There is no pending or threatened proceeding for the dissolution,
liquidation, insolvency or rehabilitation of any Acquired Entity.
3.2 POWER AND AUTHORITY. Each Acquired Entity 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 Acquired
Entity 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 Acquired Entities and by 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 Acquired Entity, respectively, (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 Acquired Entity (i) have
been duly authorized and validly issued and are fully paid and nonassessable,
(ii) were issued in compliance with all applicable state
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and federal securities laws and (iii) were not issued in violation of any
preemptive rights or rights of first refusal or similar rights. No preemptive
rights or rights of first refusal or similar rights exist with respect to any
shares of capital stock of any Acquired Entity 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 any Acquired Entity 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 any
Acquired Entity. There are no proxies, voting rights or other agreements or
understandings with respect to the voting or transfer of the capital stock of
any Acquired Entity. No Acquired Entity is obligated to redeem or otherwise
acquire any of its outstanding shares of capital stock.
3.5 SHAREHOLDER OF THE ACQUIRED ENTITIES. Schedule 3.5 sets forth, with
respect to each Acquired Entity (i) the name, address and federal taxpayer
identification number of the Shareholder, and the number of outstanding shares
of each class of its capital stock owned by the Shareholder 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 or interests are different). The Shareholder constitutes the record and
beneficial holder of all issued and outstanding shares of capital stock of the
Acquired Entities, 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 for any approvals or consents required under
the Franchise Agreements (as defined in Section 3.25), the execution and
delivery of this Agreement by the Acquired Entities and the Shareholder, the
performance by the Acquired Entities 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 or other organizational or governing document of any Acquired Entity,
(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 any Acquired Entity 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 any Acquired Entity 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 any Acquired Entity or the Shareholder, (e) give to any individual
or entity a right or claim against any Acquired Entity 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 by the Acquired
Entities, the Shareholder, and the
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Republic Companies, any SEC and other filings required to be made by the
Republic Companies, and any notifications or filings to the Florida Department
of Motor Vehicles.
3.7 RECORDS OF THE ACQUIRED ENTITIES. The copies of the Articles of
Incorporation, Bylaws and other documents and agreements of the Acquired
Entities which were provided to Republic are true, accurate, and complete and
reflect all amendments made through the date of this Agreement. The minute books
and other records of corporate actions for the Acquired Entities 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 (except for
appropriate resolutions by the Boards of Directors of the Acquired Entities and
by the Shareholder approving the execution of this Agreement and the
consummation of its terms), such minute books and records contain the true
signatures of the persons purporting to have signed them, and such minute books
and records contain an accurate record of all corporate actions of the
shareholders and directors (and any committees thereof) of the Acquired Entities
taken by written consent or at a meeting or otherwise since incorporation or
formation. All corporate actions by the Acquired Entities have been duly
authorized or ratified. All accounts, books, ledgers and official and other
records of the Acquired Entities 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 Acquired Entities, 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
Acquired Entities.
3.8 SUBSIDIARIES. The Acquired Entities do not, directly or indirectly,
own any outstanding voting securities of or other interests in, or control, any
other corporation, partnership, joint venture or other entity.
3.9 FINANCIAL STATEMENTS. Each of the Acquired Entities has delivered
to Republic the financial statements of such Acquired Entity for the fiscal
years ended December 31, 1995 and December 31, 1996 (collectively, the
"Financial Statements"), copies of which are attached to Schedule 3.9 hereto and
will, prior to the Closing Date, deliver to Republic combined audited financial
statements of the Acquired Entities as of December 31, 1996 audited by
Xxxxxxxxxx Xxxxxxxxx Xxxxxxxxxxx, LLP (the "Audited Financial Statements"). The
respective individual balance sheets of the Acquired Entities dated as of
December 31, 1996, included in the Financial Statements are referred to herein
as the "Current Balance Sheets." The Financial Statements fairly present the
financial position of the respective Acquired Entities at each of the balance
sheet dates and the results of operations for the periods covered thereby, and
have been prepared in accordance with GAAP consistently applied throughout the
periods indicated. The Audited Financial Statements will upon delivery fairly
present the combined financial position of the Acquired Entities at the balance
sheet dates, and the results of operations for the period covered thereby, and
the Audited Financial Statements will be prepared in accordance with GAAP
consistently applied throughout the period indicated. The books and records of
each of the Acquired Entities 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 write-up or revaluation increasing the book
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value of any assets. The Financial Statements reflect all adjustments necessary
for a fair presentation of the financial information contained therein. There
will be no material special or non-recurring items of income or expense during
the period covered by the Audited Financial Statements, and the balance sheet
included in the Audited Financial Statements will not upon delivery reflect any
write-up or revaluation increasing the book value of any assets.
3.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Since the date of
its Current Balance Sheet included in the Financial Statements, no Acquired
Entity has (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 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 such Acquired Entity; (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,
salaried employees or amended any other terms of employment or engagement 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) except in the
ordinary course of business, 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 $25,000 in the aggregate, 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 $25,000 in 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 $25,000 in 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 any of the Acquired Entities or the
Shareholder, (n) entered into any employment agreement that is not terminable at
Closing without any liability or obligation; (o) terminated, amended or modified
any agreement involving an amount in excess of $25,000 in 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 $25,000 in 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
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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 Acquired Entity, or taken any actions which
might reasonably result in any material loss of customers; (u) entered into any
other transaction or been subject to any event which has or may reasonably be
expected to have a Material Adverse Effect on such Acquired Entity; or (v)
agreed to do or authorized any of the foregoing.
3.11 LIABILITIES. Except as set forth in Schedule 3.11, no Acquired
Entity has any liabilities or obligations, whether accrued, absolute, contingent
or otherwise, except (a) to the extent reflected on such Acquired Entity's
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 such Acquired Entity's 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), and (c) liabilities incurred in the ordinary course
of business prior to the date of such Acquired Entity's 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 (the liabilities
and obligations referenced in (a), (b) and (c) above and those accrued and
unpaid obligations of WI and Xxxxxxx Xxxx, Inc. described on Schedule 3.11 are
referred to as the "Designated Liabilities"). Schedule 3.11 lists all
indebtedness owed by any of the Acquired Entities, itemized with respect to each
Acquired Entity, 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. Schedule 3.11 also lists, for each
Acquired Entity, the account numbers and names of each bank, broker or other
depository institution, and the names of all persons authorized to withdraw
funds from each such account.
3.12 LITIGATION. Except as provided in Schedule 3.12, there is no
action, suit or other legal or administrative proceeding or governmental
investigation pending, or, to the knowledge of the Acquired Entities and the
Shareholder, threatened, anticipated or contemplated (i) against, by or
affecting any Acquired Entity or the Shareholder (which, in the case of the
Shareholder, relates to or concerns any Acquired Entity or for which any
Acquired Entity may be responsible), or any Acquired Entity's properties or
assets, except for routine customer claims and complaints arising in the
ordinary course consistent with past practice which involve amounts less than
$10,000 individually or $100,000 in the aggregate, or (ii) 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 any Acquired Entity is or was a party which have not been
complied with in full or which continue to impose any material obligations on
any Acquired Entity. Shareholder shall remain responsible for any matters listed
on Schedule 3.12 in which the Shareholder or any of the Acquired Entities is a
defendant, except, the Shareholder shall not be responsible for any routine
customer claims and complaints arising in the ordinary course consistent with
past practice which involve amounts less than $10,000 individually or $100,000
in the aggregate.
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3.13 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Schedule 3.13, each of the Acquired
Entities 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 Acquired Entities of its properties and assets and the operation of its
business as presently conducted or the ownership by the Acquired Entities and
use by the Acquired Entities of the Shareholder Owned Properties (as defined in
Section 3.14); and (iv) all applicable writs, orders, judgments, injunctions,
governmental communications, decrees, informational requests or demands issued
pursuant to, or arising under, any Environmental Laws.
(b) Except as set forth in Schedule 3.13, there are no (and,
to the best knowledge of the Shareholder and the Acquired Entities, 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 Acquired Entities, their businesses, operations, 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
Acquired Entities thereunder in connection with, related to or arising out of
the ownership by any of the Acquired Entities of its properties or assets or the
operation of its businesses or the ownership by the Shareholder and use by the
Acquired Entities 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 or any Surviving Corporation in the event that the
transactions contemplated by this Agreement are consummated.
(c) Except as set forth in Schedule 3.13, none of the Acquired
Entities nor the Shareholder has at any time Handled or Discharged, nor has it
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 Acquired Entities (including, without
limitation, the Company Owned Properties (as defined in Section 3.14)) 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 Acquired Entities 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 directly beneath the
surface of any real property owned or leased at any time by any of the Acquired
Entities or the Shareholder Owned Properties.
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(d) Except as set forth in Schedule 3.13, none of the Acquired
Entities uses, nor has any of them used, any Aboveground Storage Tanks or
Underground Storage Tanks; 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 Acquired Entities, or the Shareholder Owned Properties; and there has
been no Discharge from or rupture of any Aboveground Storage Tanks or
Underground Storage Tanks.
(e) Schedule 3.13 identifies (i) all environmental audits,
assessments or occupational health studies undertaken since January 1, 1994 and
to the knowledge of any of the Acquired Entities or the Shareholder, undertaken
by any Governmental Authority, or any third party, relating to or affecting any
of the Acquired Entities or Company Owned Properties or the Shareholder Owned
Properties since January 1, 1994; (ii) all ground, water, soil, air or asbestos
monitoring undertaken by any of the Acquired Entities or its agents or
representatives thereof or undertaken by any Governmental Authority or any third
party, relating to or affecting any of the Company Owned Properties or any real
property owned or leased at any time by any of the Acquired Entities or the
Shareholder Owned Properties since January 1, 1994; (iii) all Notices of
violation and notices of non-compliance issued to any of the Acquired Entities
or the Shareholder arising under or related to Environmental Laws and pertaining
to the Company Owned Properties or the Shareholder Owned Properties; and (iv)
all outstanding citations issued under OSHA, or similar state or local statutes,
laws, ordinances, codes, rules, regulations, orders, rulings or decrees,
relating to or affecting any of the Acquired Entities or any real property owned
or leased at any time by any of the Acquired Entities 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,
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, 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
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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 Conservation 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.
"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.
(g) Notwithstanding any other provision of this Agreement,
Environmental Costs incurred by Republic post-closing to correct any
matters addressed in Schedule 3.13 of this Agreement are Indemnifiable
Damages subject to Section 9.1 of the Agreement, as long as such
Environmental Costs relate to a Recognized Environmental Condition.
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3.14 REAL ESTATE.
(a) Schedule 3.14(a) contains the street addresses of, and
indicates the owner(s) of, any real property or any leasehold or other
interest therein (including without limitation any option or other
right or obligation to purchase any real property or any interest
therein) owned by any of the Acquired Entities as of the date hereof
(the "Company Owned Properties"). Except as listed on Schedule 3.14(b),
there has been no real property (or any interest therein) owned by any
of the Acquired Entities within the past five years that is not owned
by such Acquired Entity as of the date of this Agreement. Schedule
3.14(c) contains the legal descriptions and the street addresses of any
real property (or any interest therein) which was owned by the
Shareholder or any of his Affiliates (the "Shareholder Owned
Properties," and together with the Company Owned Properties, the "Owned
Properties"), and used in any Acquired Entity's business which has been
conveyed as additional contributions of capital, or otherwise conveyed,
to any Acquired Entity other than such real property interests listed
in Schedule 3.14(a). Schedule 3.14(a) also sets forth the location and
approximate size of, and description of the principal improvements and
buildings on, the Owned Properties, together with a list of all title
insurance policies and commitments relating to such properties, all of
which policies and commitments have previously been delivered or made
available to Republic by the Acquired Entities. With respect to each
such parcel of Owned Properties: (i) the Acquired Entity that owns such
parcel as indicated in the Schedules to this Section 3.14 has good and
marketable title, free and clear of any covenants, conditions,
easements and exceptions other than the Permitted Exceptions (as
defined in Section 5.15), and of any Lien other than liens for real
estate taxes not yet due and payable, (ii) there are no pending or, to
the knowledge of the Shareholder or the Acquired Entities, 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) except as provided on Schedule 3.14(d),
(each of which is a "Permitted Exception") the buildings and
improvements are located within the boundary lines of the described
parcels of land and are not in violation of applicable setback
requirements, local comprehensive plan provisions, zoning laws and
ordinances (and none of the properties 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, regulation or
restrictions by any Governmental Authority, and, other than perimeter
walls and fences owned by the Acquired Entities, 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
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the right of use or occupancy of any portion of the Owned Properties,
and there are no parties (other than the Acquired Entities) in
possession of any of the Owned Properties; (vii) there are no
outstanding options or rights of first refusal or similar rights to
purchase any of the Owned Properties or any portion thereof or interest
therein, (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
benefiting 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, to the knowledge of the Shareholder or the Acquired
Entities, threatened termination of such access; and (x) all
improvements, buildings and systems on the Owned Properties are in good
repair, and safe for occupancy and use.
(b) Schedule 3.14(e) sets forth a list of all leases, licenses
or similar agreements to which any Acquired Entity 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; (ii) the street address or legal description of each
property covered thereby; and (iii) a brief description (including
approximate size and function) of the principal improvements and
buildings thereon (the "Leased Premises"). The Leases are in full force
and effect and have not been amended except as disclosed in Schedule
3.14(e), 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. With respect to each such Leased Premises:
(i) the Acquired Entity that is the lessee has a valid leasehold
interest in the Leased Premises, which leasehold interest is 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 Acquired Entity
are each in good repair and condition, normal wear and tear excepted,
and are in the aggregate sufficient to satisfy the Acquired Entity's
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 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) no Acquired Entity or the Shareholder 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, to the best knowledge of the Acquired Entities and the Shareholder,
contemplated by any Governmental Authority; or (b) any special
assessment which may affect any of the Leased Premises, and, to the
best knowledge of the Acquired Entities and the Shareholder, no such
special assessment is contemplated by any Governmental Authority.
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3.15 BUSINESS; GOOD TITLE TO AND CONDITION OF ASSETS;
INVENTORY
(a) The Shareholder is not engaged in the Auto Business or the
Parts Business (as defined in Section 5.11) and does not own an interest in any
Person engaged in the Auto Business or the Parts Business, other than (A) the
Auto Business and Parts Business conducted by the Acquired Entities or (B) the
Shareholder's ownership interests in the Acquired Entities. The Acquired
Entities own and operate the motor vehicle dealerships (the "Dealerships")
listed on Schedule 3.15 at the locations set forth thereon, and each Dealership
is owned and operated by the Acquired Entity indicated in Schedule 3.15. Upon
the consummation of the transactions contemplated hereby, the Republic Companies
will have acquired and own all of the Acquired Entities' assets and operations
engaged in the Auto Business or Parts Business and related rights and interests.
Except as specifically disclosed in the Financial Statements, each Acquired
Entity has good and marketable title to all of its Assets free and clear of any
Liens. For purposes of this Agreement, the term "Assets" means all of the
properties and assets of any nature of the Acquired Entities.
(b) The Fixed Assets currently in use or necessary for the
business and operations of the Acquired Entities are 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, owned, used by or located on the
premises of the Acquired Entities or set forth on the Current Balance Sheets or
acquired by the Acquired Entities since the date of the Current Balance Sheets.
(c) Except for such vehicles as are acquired as trade-ins in
the ordinary course of business and sold or to be sold wholesale, none of the
vehicles owned by the Acquired Entities 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, the Acquired Entities owning such vehicles have or will
have prior to the Closing Date on file true and correct odometer statements,
none of which indicate that the actual mileage is unknown.
3.16 COMPLIANCE WITH LAWS. Each of the Acquired Entities and the
Shareholder (as it relates to his ownership or operation of the Acquired
Entities) and his Affiliates has been in compliance in all material respects
with all laws, regulations and orders applicable to it, its business and
operations (as conducted by it 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 by it now or in the past). Except as disclosed in Schedule
3.16, no Acquired Entity 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.
Except for the Franchise Agreements, no Acquired Entity is subject to any
Contract, decree or injunction to 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. No Acquired
Entity, nor any of their
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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. Each of
the Acquired Entities is and at all times has been in full compliance with the
terms and provisions of the Immigration Reform and Control Act of 1986, as
amended (the "Immigration Act"). With respect to each Employee (as defined in 8
C.F.R. 274a.1(f)) of the Acquired Entities for whom compliance with the
Immigration Act is required, the Acquired Entities have on file a true,
accurate and complete copy of (i) each Employee's Form I-9 (Employment
Eligibility Verification Form) and (ii) all other records, documents or other
papers prepared, procured and/or retained pursuant to the Immigration Act. None
of the Acquired Entities has been cited, fined, served with a Notice of Intent
to Fine or with a Cease and Desist Order, nor has any action or administrative
proceeding been initiated or threatened against any of the Acquired Entities,
by the Immigration and Naturalization Service by reason of any actual or
alleged failure to comply with the Immigration Act. Except as specifically
provided for in Section 3.12, and Schedule 3.12, the Shareholder and the
Acquired Entities shall remain responsible for and liable under any matters
disclosed in Schedule 3.16 subject to the terms and provisions of Article IX.
3.17 LABOR AND EMPLOYMENT MATTERS. No Acquired Entity is a party
to or bound by any collective bargaining agreement or any other agreement with
a labor union, and there has been no labor union prior to the date hereof
organizing any employees of the Acquired Entities into one or more collective
bargaining units. There is not now, and there has not been prior to the date
hereof, any actual or threatened labor dispute, strike or work stoppage which
affects or which may affect the business of the Acquired Entities or which may
interfere with their continued operations. No Acquired Entity, and no employee,
agent or representative thereof, has since the date of incorporation or
formation of such Acquired Entity committed any unfair labor practice as
defined in the National Labor Relations Act, as amended, and there is no
pending or threatened charge or complaint against any Acquired Entity by or
with the National Labor Relations Board or any representative thereof. There
has been no strike, walkout or work stoppage involving any of the employees of
any of the Acquired Entities prior to the date hereof. No executive or key
employee or group of employees has any plans to terminate his, her or their
employment with any Acquired Entity as a result of the transactions
contemplated hereby or otherwise. Each Acquired Entity has 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, all 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 each of the Acquired
Entities, 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, material bonus plans, stock purchase
plans, hospitalization, disability and other insurance plans, severance or
termination pay plans and policies, whether or not described in
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Section 3(3) of ERISA, in which employees, their spouses or dependents, of any
of the Acquired Entities 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; (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 Effective 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. No Acquired Entity is or has been
obligated with respect to any multiemployer plan as described in Section
4001(a)(3) of ERISA ("MPPA Plan").
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(e) Welfare Plans. (i) No Acquired Entity is 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 Acquired Entities or their predecessors after
termination of employment; (ii) each Acquired Entity has 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. No Acquired Entity nor any
entity that would be aggregated with any Acquired Entity 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) 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 any Acquired Entity 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
Sheets or will be properly accrued on the books and records of the Acquired
Entities 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
Sheets or the books and records of the Company.
3.19 TAX MATTERS. All Tax Returns required to be filed prior to the
date hereof with respect to any of the Acquired Entities or any of their
respective 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 Acquired Entity have been
paid or are accrued on the applicable Current Balance Sheet or will be accrued
on the Acquired Entity's books and records as of the Closing. Except as set
forth on Schedule 3.19: (i) with respect to each taxable period of each Acquired
Entity, either such taxable period has been audited by the relevant taxing
authority
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or the time for assessing or collecting Taxes with respect to each such taxable
period has closed and each 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 any taxing authority against any Acquired Entity; (iii) no
Acquired Entity has consented to extend the time in which any Taxes may be
assessed or collected by any taxing authority; (iv) no Acquired Entity 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 any Acquired Entity regarding Taxes; (vi) no Acquired
Entity 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 Effective Date; (vii) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of any Acquired Entity; (viii) no
Acquired Entity 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) no Acquired Entity 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)
no Acquired Entity 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; no taxing authority will claim or assess
any additional Taxes against any of the Companies for any period for which Tax
Returns have been filed; (xi) no taxing authority will claim or assess any
additional Taxes against any of the Acquired Entities for any period for which
Tax Returns have been filed; (xii) no Acquired Entity has made any payments or,
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); and
(xiii) no Acquired Entity 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)(l)(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 any Acquired Entity does not file Tax
Returns that an Acquired Entity is or may be subject to Taxes assessed by such
jurisdiction; (xv) no Acquired Entity 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 any Acquired Entity
for the past three years have been furnished or made available to Republic;
(xvii) no Acquired Entity 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); and (xviii) no sales or use tax will
be payable by any Acquired Entity or Republic or any Surviving Corporation or
transferee as a result of this transaction, and there will be no non-recurring
intangible tax,
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documentary stamp tax other than on the Republic Shares, or other excise tax (or
comparable tax imposed by any governmental entity) as a result of this
transaction. Each Acquired Entity has timely and properly filed an S corporation
election under the Code and under applicable state and local Tax law for its
first taxable year, and no such S election has been revoked or terminated and
neither the Acquired Entities nor the Shareholder has taken any action that
would cause a termination of such S election.
3.20 INSURANCE. Each Acquired Entity is covered by valid, outstanding
enforceable policies of insurance issued to it by reputable insurers covering
its properties, assets and business against risks of the nature normally insured
against by similar entities in the same or similar lines of business in coverage
amounts typically and reasonably carried by such entities (the "Insurance
Policies"). Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid through the date of this Agreement and will
be paid through the Effective Time. Each Acquired Entity has complied with the
provisions of such Insurance Policies applicable to it, and has provided
Republic copies of all Insurance Policies and all amendments and riders thereto.
Other than claims which may have been filed by an Acquired Entity with respect
to matters described in Schedule 3.12, and other than worker's compensation
claims filed by employees of an Acquired Entity in the ordinary course of
business which are covered by insurance, there is no pending claim under any of
the Insurance Policies for an amount in excess of $25,000 individually or
$100,000 in the aggregate, including any claim for loss or damage to the
properties, assets or business of any Acquired Entity. No Acquired Entity has
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 Acquired Entities. All of the Receivables are good and collectible
receivables, and will be collected in accordance with past practice and the
terms of such receivables (and in any event within six months following the
Closing Date), without set off or counterclaims, subject to the allowance for
doubtful accounts, if any, set forth on the Current Balance Sheets, as
reasonably adjusted since the date of the Current Balance Sheets in the ordinary
course of business, consistent with GAAP. For purposes of this Agreement, the
term "Receivables" means all receivables of the Acquired Entities, including
without limitation all contracts in transit, 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. Each Acquired Entity possesses all licenses
and required governmental or official approvals, permits or authorizations
(collectively, the "Permits") for its business and operations, including with
respect to the operations of each of the Owned Properties and Leased Premises.
Schedule 3.22 sets forth a true, complete and accurate list of all such Permits,
itemized for each Acquired Entity. All such Permits are valid and in full force
and effect, each Acquired Entity is 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.
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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 Acquired Entities in
the manner in which and to the extent to which such business is currently being
conducted. No current supplier to the Acquired Entities of items material to the
conduct of their business has threatened to terminate its business relationship
with any of the Acquired Entities for any reason. No Acquired Entity has any
direct or indirect interest in any customer, supplier or competitor of any
Acquired Entity or in any person from whom or to whom the Acquired Entity leases
real or personal property. No officer, director or shareholder of any Acquired
Entity, 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 Acquired Entity or has any interest in any
property used by the Acquired Entity.
3.24 INTELLECTUAL PROPERTY. Each Acquired Entity has 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 (the "Intellectual Property"). The conduct of the
business of the Acquired Entities 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 Acquired Entities and the Shareholder, no Person is
infringing on any 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 or 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 any Acquired Entity 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"), true, correct and complete
copies of which have been provided to Republic, including without limitation all
franchise, sales and service, dealer and other agreements or undertakings (the
"Franchise Agreements") with the Ford Division of the Ford Motor Company, Nissan
Division of Nissan Motor Corporation in U.S.A., the Dodge Division of the
Chrysler Corporation, the Lincoln-Mercury division of Ford Motor Company, and
Mitsubishi Motor Sales of America, Inc. or any other automobile manufacturer or
distributor (collectively, the "Factories"). As indicated in Schedule 3.25,
certain Acquired Entities are parties to Franchise Agreements for each of the
Dealerships, which Franchise Agreements grant the Acquired Entities 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 Acquired Entities 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 have been fully performed,
and there are no claims for breach or indemnification or notice of default or
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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 any Acquired Entity under any Material Contract, and no such event
has occurred which constitutes or would constitute a default by any other party.
No Acquired Entity is 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, in each case which is material to any of the Acquired
Entities' business, assets, properties or prospects (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 (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); (b) contracts obligating
any Acquired Entity 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 Acquired Entities in the ordinary course of business, copies of which have
been supplied to Republic; (c) leases of real property; (d) leases of personal
property (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 (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); (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 the Acquired Entities; (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
Acquired Entities; (i) contracts obligating any Acquired Entity to purchase
vehicles, parts, accessories, supplies, equipment, oil, advertising, media and
media related services of any kind (other than those which individually provide
for annual payments of less than $25,000 and which are cancelable without
penalty on notice of thirty (30) days or less); (j) any non-competition
agreements restricting any Acquired Entity 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 Acquired Entities 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 Acquired Entities have provided Republic
with true, accurate and complete copies of all documents listed or described in
the various Schedules attached hereto.
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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 NO COMMISSIONS. No Acquired Entity 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.
3.29 CERTAIN ACCOUNTING MATTERS. No Acquired Entity nor the
Shareholder, nor any of their Affiliates, has taken or agreed to take any action
that (without regard to any action taken or agreed to be taken by Republic or
any of its Affiliates) would prevent Republic from accounting for the
transactions contemplated hereby as pooling of interests business combinations
in accordance with GAAP and the criteria of Accounting Principles Board Opinion
No. 16 and the regulations of the SEC.
3.30 ADVERSE IMPACT OF ACTIONS OR PROPOSALS OF MANUFACTURERS. To the
knowledge of the Shareholder and each of the Acquired Entities, none of the
Factories nor any other dealer has taken or proposed to take any action that
could have an adverse impact on any of the Dealerships, including, but not
limited to, (i) relocating or closing any of the Dealerships, (ii) relocating
any other dealership or establishing or awarding a new franchise for a
dealership to a location that could have an adverse impact on any of the
Dealerships, or (iii) protesting any action taken or proposed to be taken by any
of the Dealerships. The Shareholder and the Acquired Entities have delivered to
Republic copies of any written documentation or proposals relating to the
foregoing, including any strategic plans of the Factories relating to
distribution, marketing, facilities or divisional image or alignment or any
documentation relating to specific plans or proposals with respect to any of the
Dealerships.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 CONDUCT OF BUSINESS BY THE ACQUIRED ENTITIES PENDING THE CLOSING.
The Acquired Entities and the Shareholder, jointly and severally, covenant and
agree that, except as otherwise specifically required by the terms of this
Agreement, between the date of this Agreement and the Effective Time, the
business of the Acquired Entities shall be conducted only in, and the Acquired
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Entities shall not take any action except in the ordinary course of business
consistent with past practice. The Acquired Entities and the Shareholder shall
each use its or his reasonable best efforts to preserve intact the Acquired
Entities' 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, the Acquired Entities 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 its 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;
(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, except that the Acquired Entities
may make cash distributions only to the extent necessary to pay for the
Shareholder's tax liability for earnings of the Acquired Entities,
consistent with past practice in the ordinary course.
(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
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enter into any employment or severance agreement with, any of its
directors, officers or 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 New or Other Parts and Accessories
Inventory, New Vehicle Inventory, or Other Vehicle Inventory, other
than in the ordinary course of business and in a manner consistent with
past practice; or order any New Vehicles from the Factory which would
be inconsistent with the prior ordering practices of the Acquired
Entities;
(j) enter into any transaction with the Shareholder or an
Affiliate thereof; or
(k) 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
Acquired Entities to comply with all of the covenants of the Acquired Entities
under this Agreement.
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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 reasonable best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of any Governmental Authority and parties to Contracts
with the Acquired Entities 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 for the consummation of the transactions contemplated hereby.
The parties also agree to use reasonable 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, the Acquired Entities and the Shareholder 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 all filing fees required to be paid by the Acquired
Entities and the Shareholder in connection with any such filing under the HSR
Act.
5.6 ACCESS TO INFORMATION. From the date hereof to the Effective Time,
the Acquired Entities and the Shareholder shall, and shall cause their
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,
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. Following the Effective Time,
the Shareholder shall have reasonable access to the Acquired Entities' tax
records to prepare his own tax return.
5.7 NOTIFICATION OF CERTAIN MATTERS. Each of the parties to this
Agreement shall give prompt notice to the other parties of the occurrence or
non-occurrence of any event which would likely cause any representation or
warranty made by such party herein to be untrue or inaccurate or any covenant,
condition or agreement contained herein not to be complied with or satisfied
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(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 any party in or pursuant to this Agreement).
5.8 TAX AND ACCOUNTING TREATMENT. Republic, the Acquired Entities and
the Shareholder will use their respective reasonable best efforts to cause the
Mergers contemplated hereby to qualify as a reorganization under the provisions
of Section 368(a) of the Code and the Share Exchange to qualify as a
reorganization under Section 368(a)(1)(B) of the Code. All parties hereto agree
to file the Plans of Merger for the Mergers and the Plan of Share Exchange for
the Share Exchange with their respective federal income tax returns for the year
in which the Mergers and the Share Exchange are effective, and to comply with
the reporting requirements of Treasury Regulation 1.368-3. In addition,
Republic, the Acquired Entities and the Shareholder will not take any action
after the date hereof to cause the Merger and the Share Exchange contemplated
hereby not to be accounted for as a pooling of interests business combination.
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 any 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 parties hereto; provided, that any information that
is otherwise publicly available, without breach of this provision, or has been
obtained from a third party without a breach of such third party's duties, 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
Acquired Entities prior to making such disclosure).
5.10 NO OTHER DISCUSSIONS. The Acquired Entities, 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 any Acquired Entities
(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 Acquired Entities 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 COVENANTS. In order to assure that Republic will
realize the benefits of the transactions contemplated hereby, the Shareholder
agrees with Republic that he will not:
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(a) during the Restricted Period (defined below), other than
as an employee of Republic or its Affiliates, 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 (defined below);
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 or supplier of any Acquired
Entity, Republic or any Affiliate of the Acquired Entities or Republic
to patronize any business directly or indirectly in competition with
the Auto Business or the Parts Business conducted by the Acquired
Entities, Republic or any Affiliate of the Acquired Entities or
Republic; (ii) canvass, solicit or accept from any Person which is a
customer of the Acquired Entities, Republic or any Affiliate of the
Acquired Entities or Republic, any such competitive business; or (iii)
request or advise any Person which is a customer or supplier of the
Acquired Entities, Republic or any Affiliate of the Acquired Entities
or Republic, or its or their successors, to withdraw, curtail or cancel
any such customer's business with any such entity;
(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
the Acquired Entities, Republic or any Affiliate of the Acquired
Entities or Republic at or within the then 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 Acquired Entities' proprietary rights or records of the
Acquired Entities or Republic, including, but not limited to any
customer lists.
For purposes of this Section 5.11. (a) the "Restricted Period" shall mean the
period beginning on the Effective Time and ending on the later of (i) the fifth
anniversary of the Effective Time (the "Five-Year Restricted Period"), and (ii)
the second anniversary of the termination of the Shareholder's employment
following the Effective Time (the "Two-Year Restricted Period"), and (b) the
"Restricted Territory" shall mean (i) during the Two-Year Restricted Period,
anywhere in the United States, and (ii) during the Five-Year Restricted Period
(to the extent it extends longer than the Two Year Restricted Period), anywhere
within twenty-five (25) miles of any new or used automotive dealership owned or
operated by Republic or any Affiliate of Republic (including any AutoNation USA
used car superstore) at such time. The Shareholder agrees and acknowledges that
the restrictions contained in this Section 5.11 are reasonable in scope and
duration and are necessary
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to protect Republic and the Acquired Entities 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 scope or duration of such provision or the
geographic area covered thereby, the parties agree that the court making such
determination shall have the power to reduce the scope, 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 in writing by Republic, from the date of this Agreement until the
Effective Time, neither the Acquired Entities, 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. At the Closing, Republic or its
assignee and the Shareholder shall enter into an employment agreement in the
form attached hereto as Schedule 5.13. The Shareholder shall use reasonable best
efforts to facilitate Republic and Xxxxx Xxxxx entering into a reasonably
acceptable employment arrangement.
5.14 DUE DILIGENCE REVIEW AND ENVIRONMENTAL ASSESSMENT. Republic, at
its expense, shall be entitled to conduct prior to Closing a due diligence
review of the assets, properties, books and records of the Acquired Entities and
an environmental assessment of the Owned Properties and Leased Premises
(hereinafter referred to as "Environmental Assessment"). The Environmental
Assessment may include, but not be limited to, a physical examination of the
Owned Properties and Leased Premises, and any structures, facilities, or
equipment located thereon, soil samples, ground and surface water samples,
storage tank testing, review of pertinent records (including but not limited to,
off-site disposal records and manifests), documents, and Licenses of the
Acquired Entities. The Acquired Entities shall provide Republic or its
designated agents or consultants with the access to such properties which
Republic, its agents or consultants require to conduct the Environmental
Assessment. If the Environmental Assessment identifies Recognized Environmental
Conditions (as defined by ASTM Standard Practice E-1527) which require
remediation or further evaluation under the Environmental Laws as defined in
Section 3.13(f) of this Agreement, then Republic shall notify the Acquired
Entities and the Shareholder in writing and the Acquired Entities and the
Shareholder shall be financially responsible for the remediation of all
Recognized Environmental Conditions which remediation is, may or would be
required by any appropriate governmental agency. Republic's failure or decision
not to conduct any such Environmental Assessment shall not affect any
representation or warranty of the Acquired Entities or the Shareholder under
this Agreement. Prior
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to Closing, the parties hereto shall agree on the appropriate actions (and the
cost thereof) to be taken with respect to any such Recognized Environmental
Conditions (provided further that in the event the parties do not agree prior to
Closing on which action is to be taken with respect to any such Recognized
Environmental Conditions, after Closing, Republic shall at its reasonable
discretion, determine the appropriate course of action (and the cost thereof)
with respect thereto). Such costs, being Environmental Costs, will be considered
Excluded Liabilities and be borne by the Shareholder as Indemnifiable Damages in
accordance with Article IX of this Agreement.
5.15 TITLE INSURANCE AND SURVEYS.
(a) Within ten (10) business days after the date of this
Agreement, the Acquired Entities and the Shareholder shall deliver copies of
previous owner policies or other title evidence sufficient to obtain commitments
(the "Commitments") to be issued by Shareholder's counsel as agent for
Attorneys' Title Insurance Fund (the "Title Company") for the issuance of an
ALTA Owners Policy of Title Insurance (10-17-92) (with Florida Modifications,
the "Title Policy") for each of the Owned Properties (and such of the Leased
Properties as Republic may designate) in an amount not to exceed the fair market
value of the Owned Properties. The premium for the Title Policy shall be paid by
the Shareholder. The Title Policy shall show fee simple title to the Owned
Properties vested now or to be vested at or immediately prior to the Closing in
the Acquired Entities 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 Permitted Exceptions shall
include, but shall not be limited to, mortgages or instruments securing any of
the Designated Liabilities, and such of the following matters as do not affect
the current use of the Owned Properties: (i) zoning restrictions imposed by
Governmental Authority (so long as there exists no violation of any such
restrictions by the use of or improvements on the Owned Properties), (ii)
restrictions and matters appearing on the Plat or otherwise common to the
subdivision, and (iii) utility easements that are not subject to any
encroachment by existing improvements on the Owned Properties (other than
perimeter walls and fences). 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 contiguity (where
appropriate), survey, and such other endorsements as may be reasonably requested
by Republic, excluding nonimputation and creditors rights endorsements. At the
Closing, the Acquired Entities, the Shareholder and their 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 Acquired Entities and the Shareholder shall
cause the Commitments to be later-dated to cover the Closing and to cause the
Title Company to delete all Schedule B-1 requirements and all Standard
Exceptions in the Commitment at the Closing as directed by Republic.
(b) Within 20 days after the date of this Agreement but before
the Closing, the Acquired Entities and the Shareholder shall deliver to Republic
and the Title Company an as-built 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
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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
Acquired Entities and the Shareholder within such 20-day period 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) If (i) any Commitment discloses a title exception other
than a Permitted Exception (an "Unpermitted Exception") or (ii) any Survey
discloses any encroachment, overlap, boundary dispute, 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 Acquired Entities and the
Shareholder, prior to the Closing, shall exercise reasonable best efforts to
have the Unpermitted Exception removed from such Commitment or the Survey Defect
corrected or insured over by an appropriate title insurance endorsement, all in
a manner satisfactory to Republic. Should the Shareholder fail to release said
Unpermitted Exception or correct or insure over a Survey Defect in a manner
satisfactory to Republic, Republic may, at its option, (i) terminate and render
this Agreement null and void, or (ii) close on the transactions contemplated by
this Agreement, in which case, any damages incurred by Republic or the Acquired
Entities, as a result of such Unpermitted Exception or the Survey Defect shall
be considered Indemnifiable Damages under Article IX but shall not be included
in nor deducted from the Indemnification Threshold, provided, however, that if
the cost of releasing such Unpermitted Exception or correcting or insuring over
such Survey Defect would be reasonably determined by Republic and the
Shareholder to exceed ten percent (10%) of the Purchase Price, either Republic
or the Shareholder and the Acquired Entities may terminate and render this
Agreement null and void.
5.16 SHAREHOLDER AND DIRECTOR VOTE. The Shareholder, in executing
this Agreement, consents as a director and shareholder (as applicable) of the
Acquired Entities to the Mergers, the Share Exchange and other transactions
contemplated hereby, and waives notice of any meeting in connection therewith
and hereby releases and waives all rights with respect to the transactions
contemplated hereby under any agreements relating to the sale, purchase or
voting of stock of the Acquired Entities.
5.17 AUDITED FINANCIAL STATEMENTS OF ACQUIRED ENTITIES. The
Acquired Entities acknowledge and agree that they shall engage a certified
public accounting firm acceptable to Republic to complete an audit and prepare
audited financial statements for each of the Acquired Entities (the "Audited
Statements") as soon as practicable, it being anticipated that it will be
completed the 21st day after the date of this Agreement, and the Acquired
Entities shall deliver such Audited Statements (including signed audit opinions
relating thereto) to Republic upon completion. The Audited Statements shall
comply with all laws and regulations of the Securities and Exchange
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Commission that require Republic to file audited financial statements with the
SEC with respect to registrations under the Securities Act and for reporting
purposes under the Securities Exchange Act.
5.18 SHAREHOLDER'S LIABILITY. At Closing, Republic shall use its
reasonable best efforts to cause the Shareholder to be released from the
Shareholder's guarantees of the Acquired Entity indebtedness listed on Schedule
3.11. In the event a release is not obtained, Republic agrees to indemnify and
hold the Shareholder harmless from any claims resulting from the failure to
obtain such release.
5.19 PURCHASE OF WI'S ASSET. Prior to the Closing, the Shareholder or
his assignee shall purchase from WI at fair market value (which approximates the
amount of the indebtedness relating thereto, which indebtedness shall be assumed
by the Shareholder), the airplane (the "Airplane") more particularly described
as a Hawker 700. The Shareholder agrees that any gain resulting from the sale of
the Airplane will be reported in WI's S Short Year (as defined in Treasury
Regulation Section 1.1362-3(a)). The Shareholder further specifically agrees
that allocation between the S Short Year and the C Short Year (as defined in
Treasury Regulation Section 1.1362-3(a)) shall be made pursuant to Section
1.362(e)(3) of the Code.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE REPUBLIC COMPANIES
The obligations of the Republic Companies to effect the Mergers and the
Share Exchange and the other transactions contemplated hereby 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 Acquired Entities and the
Shareholder in this Agreement shall be true and correct at and as of the Closing
Date with the same force and effect as though made at and as of that time except
(i) for changes specifically permitted by this Agreement, and (ii) that those
representations and warranties which address matters only as of particular date
shall remain true and correct as of such date. The Acquired Entities and the
Shareholder shall have performed or complied with all of their obligations
required by this Agreement to be performed or complied with at or prior to the
Closing Date. The Acquired Entities and the Shareholder shall have delivered to
Republic a certificate, dated as of the Closing Date, (which in case of the
Acquired Entities shall be duly signed by their respective Chief Executive
Officers and Chief Financial Officers) certifying that such representations and
warranties, as specifically permitted to be amended by the terms of this Section
6.1, are true and correct and that all such obligations have been performed and
complied with.
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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 any of the Acquired Entities, (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 any of the Acquired
Entities and (c) none of the Assets of the Acquired Entities 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 Acquired Entities and the Shareholder
shall have delivered to Republic a certificate, dated as of the Closing Date, to
that effect.
6.3 CORPORATE CERTIFICATE. The Acquired Entities shall have delivered
to the Republic Companies (i) copies of the Articles of Incorporation of each of
the Acquired Entities certified by the Florida Secretary of State no longer than
15 days prior to the Effective Time and copies of the Bylaws of each Acquired
Entity as in effect immediately prior to the Effective Time, (ii) copies of
resolutions adopted by the Board of Directors and shareholders of each Acquired
Entity authorizing the transactions contemplated by this Agreement, and (iii) a
certificate of good standing of each of the Acquired Entities issued by the
state of its incorporation or formation and each other state in which it is
qualified to do business as of a date not more than 5 days prior to the Closing
Date, and all of such documents as to each Acquired Entity shall be certified as
of the Closing Date by the Secretary of such Acquired Entity as being true,
correct and complete.
6.4 OPINION OF COUNSEL. Republic shall have received an opinion, dated
as of the Closing Date, from counsel for the Acquired Entities and the
Shareholder, in form and substance acceptable to Republic, including but not
limited to such matters as set forth on Schedule 6.4.
6.5 CONSENTS. The Acquired Entities, the Shareholder, and Republic
shall have received consents to the Mergers, the Share Exchange and other
transactions contemplated hereby and waivers of rights to terminate or modify
any material rights or obligations of the Acquired Entities or the Shareholder,
from any Person from whom such consent or waiver is required, including without
limitation, under any Material Contract listed or required to be listed in
Schedule 3.25 (including but not limited to, any Franchise Agreement or any
other franchise, dealer or other agreement with the Factories) or under the HSR
Act or other law or regulation as of a date not more than five days prior to the
Closing, 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 all consents
required under the Franchise Agreements between the Acquired Entities and the
Factories or shall have entered into new arrangements and franchise agreements
of the type generally in use at that time to operate a dealership of each of the
Factories at the current locations of the Dealerships, 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
state laws or the applicable state motor vehicle authorities and all other
Governmental Authorities with respect to the transactions contemplated hereby.
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6.6 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.
6.7 POOLING LETTERS. The Acquired Entities shall have received from
Xxxxxxxxxx Xxxxxxxxx Xxxxxxxxxxx, LLP, a letter, dated the Closing Date,
confirming that to their knowledge after due and diligent inquiry of management,
there have been no transactions or events with respect to the Acquired Entities
which would, and the ownership structure and attributes of the Acquired Entities
and the Shareholder would not, prohibit the transactions contemplated hereby, if
consummated, from being accounted for as pooling of interests business
combinations in accordance with GAAP and the criteria of Accounting Principles
Board Opinion No. 16 and the regulations of the SEC. Republic shall have
requested and received from Xxxxxx Xxxxxxxx LLP, a letter, dated the Closing
Date, confirming that the transactions contemplated hereby, if consummated, can
properly be accounted for as pooling of interests combinations in accordance
with GAAP and the criteria of Accounting Principles Board Opinion No. 16 and the
regulations of the SEC.
6.8 POOLING UNDERTAKINGS. At or prior to the Closing, the Shareholder
and other appropriate Persons shall have delivered to Republic a letter
agreement relating to "pooling of interests" criteria, in form and substance
satisfactory to Republic.
6.9 AUDITED STATEMENTS. The Audited Statements shall have been timely
delivered to Republic as required by Section 5.17.
6.10 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.
6.11 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, invalidate or collect damages arising out of
the Mergers, the Share Exchange or other transactions hereunder, or which, in
the judgment of Republic, makes it inadvisable to proceed with the transactions
contemplated hereby.
6.12 EMPLOYMENT AGREEMENT. At or prior to the Closing, as provided in
Section 5.13, the Shareholder shall have entered into an employment agreement
and Xxxxx Xxxxx shall have entered into an employment arrangement satisfactory
to Republic, with one of the Acquired Entities, Republic, or at Republic's
option, one or more of its assignees.
6.13 LIABILITIES. Prior to the Closing, each Acquired Entity shall have
obtained full satisfactions or releases of all obligations and liabilities due
from the Acquired Entities which is due to be satisfied or released by the terms
of this Agreement to or on behalf of (i) any Affiliate of any Acquired Entity or
(ii) the Shareholder or any Affiliate of the Shareholder.
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6.14 RELEASES. At the Closing, each of the Acquired Entities and the
Shareholder and such of their Affiliates as may be designated by Republic, shall
deliver to Republic a release (collectively, the "Releases") in such form
satisfactory to Republic releasing all claims of any nature against the Republic
Companies and the Acquired Entities and any claims arising out of the Mergers,
the Share Exchange and the other transactions contemplated by this Agreement,
except for claims and obligations set forth in the express terms of this
Agreement.
6.15 BOARD APPROVAL. The Board of Directors of Republic shall have
authorized and approved this Agreement and the transactions contemplated hereby
on the earlier of the Closing Date or within thirty (30) days of the date of
this Agreement.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
THE ACQUIRED ENTITIES AND THE SHAREHOLDER
The obligations of the Acquired Entities and the Shareholder to effect
the Mergers and the Share Exchange 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 Acquired Entities and the Shareholder.
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 Closing
Date with the same force and effect as though made at and as of that time except
(i) for changes specifically permitted by this Agreement, and (ii) 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 Closing Date. The Republic
Companies shall each have delivered to the Acquired Entities a certificate,
dated as of the Closing Date, and signed by an executive officer, certifying
that such representations and warranties are true and correct, as specifically
permitted to be amended by the terms of this Section 7.1, 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
for the Republic Shares issued to him hereunder, other than the Held Back
Shares, and (b) copies of certificates representing the Held Back Shares.
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.
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7.4 HSR ACT WAITING PERIOD. Any applicable waiting period under the HSR
Act shall have expired or been terminated.
ARTICLE VIII
REGISTRATION RIGHTS
The Shareholder shall have the following registration rights with
respect to the Republic Shares issued to him 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 for resale 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, 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 or prospectuses contained therein. Republic shall not,
however, be liable for any sales, broker's or underwriting commissions or
discounts 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
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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 (and the Holders shall
not use any prospectus to offer or sell Republic Shares until such amendments or
supplements are completed and the Registration Statement is effective),
provided, however, that Republic shall be entitled to delay any such filing and
the Holders' 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 Closing Date; provided, however, that if the two-year holding
period under Rule 144 under the Securities Act is reduced to one year, such
terminations shall take effect as of the first anniversary of the Closing 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 or as required
by applicable law 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 losses, claims, damages,
liabilities, costs or expenses are caused by any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, any
prospectus contained therein or any amendment or supplement thereto, or are 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 statement 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
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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, if such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
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 reasonably
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 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.
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(d) In the event that Republic determines in its sole
discretion to allow any of the Republic Shares to be sold by any Holder or
Holders in an underwritten public offering, (i) Republic shall provide customary
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), and (ii) the
Holders desiring to participate in such offering shall enter into the
underwriting agreement for such offering.
ARTICLE IX
INDEMNIFICATION
9.1 AGREEMENT BY THE SHAREHOLDER FOR INDEMNIFICATION. The Shareholder
agrees to indemnify and hold Republic and its stockholders, directors, officers,
employees, attorneys, agents and Affiliates harmless from and against, and at
Republic's election in its sole discretion 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 Acquired Entities or
the Shareholder in or pursuant to this Agreement, (ii) any breach of the
covenants or agreements made by the Acquired Entities or the Shareholder in or
pursuant to this Agreement, (iii) any inaccuracy in any certificate, instrument
or other document delivered by the Acquired Entities or the Shareholder as
required by this Agreement; or (iv) any Excluded Liabilities (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 pretax consolidated financial position (taking into
consideration any insurance proceeds actually received or agreed to be paid) as
it would have been in if the breach or inaccuracy referenced in the foregoing
clauses (i), (ii), and (iii), and (iv) that caused such Indemnifiable Damages
had not occurred.
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Acquired Entities and the Shareholder
in this Agreement or pursuant hereto shall survive for a period of one year
after the Closing Date. No claim for the recovery of Indemnifiable Damages may
be asserted by Republic after such one-year period has expired; provided,
however, that claims for Indemnifiable Damages first asserted within such 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
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expire at the Effective Time. Notwithstanding the foregoing, no claim for
Indemnifiable Damages (except for claims under clause (ii) of Section 9.1 ,
Section 3.19 , and matters under Schedule 3.19) shall be asserted by the
Republic Companies until the aggregate of all such Indemnifiable Damages exceeds
the sum of $200,000, in which case the Republic Companies shall be entitled to
the full amount of Indemnifiable Damages in excess of such $200,000, provided
that the aggregate Indemnifiable Damages that may be paid by the Shareholder
herein shall not exceed the Purchase Price.
9.3 SECURITY FOR THE 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. Subject to the provisions of Section 9.2,
Republic may set off against the Held Back Shares any Indemnifiable Damages (to
the extent not paid in full by the Shareholder prior to the expiration of the
ten (10) day period provided in Section 9.3(b) below) subject, however, to the
following, terms and conditions:
(a) Republic shall give written notice to the holders of Held
Back Shares 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 of
the expiration of ten (10) days from the date of such notice (the
"Notice of Contest Period") or, if such claim is contested, the date
the dispute is resolved;
(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 instruct Republic to sell some or all
of the Held Back Shares and the net proceeds thereof shall be held by
Republic in an interest-bearing account and 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 (c) of this Section shall be valued at the
Price per Share.
9.4 VOTING OF AND DIVIDENDS ON THE HELD BACK SHARES. Except with
respect to Held Back Shares sold pursuant to the foregoing Section 9.3(c) (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 or other assets issued to or paid upon Held Back
Shares as a result of any stock or other dividend or distribution or stock split
with respect to the Held Back Shares. All stock or other distributions issued or
paid upon the Held Back Shares shall be delivered to the person or entity
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entitled to receive such Held Back Shares together with the delivery of such
Held Back Shares pursuant to Section 9.5.
9.5 DELIVERY OF HELD BACK SHARES. Republic agrees to deliver to the
Shareholder one-half of the Held Back Shares six months following the Effective
Date, provided that no claim for Indemnifiable Damages has been made during that
period. Republic agrees to deliver to the Shareholder any remaining Held Back
Shares no later than one year after the Effective Date any Held Back Shares (and
distributions thereon) then held by Republic (or proceeds, together with
interest thereon, if any, from the sale of Held Back Shares) unless there then
remains unresolved any claim for Indemnifiable Damages hereunder for which
notice has been given, in which event Republic shall retain such number of Held
Back Shares (and such amount of proceeds therefrom, together with interest, if
any, or distributions thereon) as is sufficient to satisfy any such unresolved
claim, as well as the attorney fees and costs associated therewith, and shall
release the remaining Held Back Shares (and such remaining proceeds, together
with interest, if any, and distributions) to the Shareholder. Any Held Back
Shares (and proceeds, together with interest, if any, from the sale of, or
distributions on, Held Back Shares) remaining on deposit after all such claims
shall have been satisfied shall be returned to the Shareholder promptly after
the time of satisfaction.
9.6 ADJUSTMENT TO PURCHASE PRICE. All payments for Indemnifiable
Damages made pursuant to this Article IX shall be treated as adjustments to the
Aggregate Consideration provided in Section 1.4.
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-WAIVER. 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. The Shareholder hereby
waives any right to contribution or any other similar right it may have against
any of the Acquired Entities as a result of his Agreement to Indemnify in this
Article IX.
9.9 DEFENSE OF THIRD PARTY CLAIMS. With respect to each third party
claim for which Republic seeks indemnification under this Article (a "Third
Party Claim"), Republic shall give prompt notice to the Shareholder of the Third
Party Claim, provided that failure to give such notice promptly shall not
relieve or limit the obligations of the Shareholder unless the Shareholder has
been materially prejudiced thereby (and such failure to notify the Shareholder
will not relieve him from any other liability he may have to Republic). If the
remedy sought in the Third Party Claim is solely money damages or if Republic
otherwise permits, then the Shareholder, at his sole cost and expense, may, upon
notice to Republic within fifteen (15) days after the Shareholder receives
notice of the Third Party Claim, assume the defense of the Third Party Claim. If
the Shareholder assumes the defense of a Third Party Claim, then the Shareholder
shall select counsel reasonably satisfactory to
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Republic to conduct the defense. The Shareholder shall not consent to a
settlement of, or the entry of any judgment arising from, any Third Party Claim,
unless (i) the settlement or judgment is solely for money damages and the
Shareholder admits in writing his liability to hold Republic harmless from and
against any losses, damages, expenses and liabilities arising out of such
settlement or judgment or (ii) Republic consents thereto, which consent shall
not be unreasonably withheld. The Shareholder shall provide Republic with
fifteen (15) days prior notice before it consents to a settlement of, or the
entry of a judgment arising from, any Third Party Claim. Republic shall be
entitled to participate at its own expense in the defense of any Third Party
Claim, the defense of which is assumed by the Shareholder with his own counsel
and at his own expense. With respect to Third Party Claims in which the remedy
sought is not solely money damages and Republic does not permit the Shareholder
to assume the defense, the Shareholder shall, upon notice to Republic within
fifteen (15) days after the Shareholder receives notice of the Third Party
Claim, be entitled to participate in the defense with his own counsel at his own
expense. If the Shareholder does not assume or participate in the defense of any
Third Party Claim in accordance with the terms of this Section, then the
Shareholder shall be bound by the results obtained by Republic with respect to
the Third Party Claim. The parties shall cooperate in the defense of any Third
Party Claim and the relevant records of each party shall be made available on a
timely basis.
ARTICLE X
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
deposition after the Closing Date of the Republic Shares:
10.1 DISPOSITION OF SHARES.
(a) The Shareholder acknowledges that (i) he may be deemed to
be an "affiliate" of the Acquired Entities for purposes of qualifying the
transactions contemplated hereby as pooling of interests business combinations
under applicable accounting and SEC rules and regulations, and (ii) the Republic
Shares constitute "restricted securities" as defined in Rule 144 under the
Securities Act. The Shareholder agrees that prior to Closing he will not dispose
of any shares of capital stock of the Acquired Entities, and following the
Closing he will not sell, transfer or otherwise dispose of any of his Republic
Shares until such time as final results of operations of Republic covering at
least thirty (30) days of combined operations of Republic and the Acquired
Entities have been published.
(b) 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 Person shall first
supply to Republic an opinion of counsel (which counsel and opinions shall be
satisfactory to Republic) that
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such exemption is available, or (b) an effective registration statement filed by
Republic with the SEC under the Securities Act.
10.2 LEGENDS. 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, AND ALSO MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT
COMPLIANCE WITH THE SECURITIES AND EXCHANGE COMMISSION'S
ACCOUNTING SERIES RELEASES 130 AND 135.
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:
"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 an Acquired
Entity may be required to pay back to any party purchasing retail
paper, warranties, insurance or the like from the Acquired Entity, or
(b) any amount which may be set-off or otherwise deducted from any
amount due and owing to the Acquired Entity by any party purchasing
retail paper, warranties, insurance or the like from the Acquired
Entity.
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"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.
"Environmental Costs" shall mean any and all expenses, costs,
damages, liabilities, or obligations (including, without limitation,
fees and expenses of counsel) incurred by, under or pursuant to any
Environmental Laws or related to the Discharge, Handling, presence or
clean up of Hazardous Substances arising as a result of events
occurring or facts or circumstances arising or existing on or prior to
the Closing Date (whether or not in the ordinary course of business).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Liabilities" shall mean (i) any obligations and
liabilities of the Acquired Entities, absolute or contingent, known or
unknown, other than Designated Liabilities, (ii) any liability or
obligation of the Acquired Entities arising under this Agreement, (iii)
any liability or obligation of the Acquired Entities relating to any
default under any Designated Liability to the extent such default
existed and was not cured prior to the Closing, (iv) any liability or
obligation of the Acquired Entities with respect to, or arising out of,
any employee benefit plan, executive deferred compensation plan, or any
other plans or arrangements for the benefit of any employees or
officers of the Acquired Entities (except for those listed on Schedule
3.18), (v) any liability or obligation of the Acquired Entities to the
Shareholder or any Affiliate of the Acquired Entities or the
Shareholder or to any party claiming to have a right to acquire any
shares of capital stock or other securities convertible into or
exchangeable for any shares of capital stock of the Acquired Entities
and (vi) any Environmental Costs or Litigation Costs.
"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-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).
"Litigation Costs" shall mean any and all expenses, costs,
damages, liabilities, or obligations (including, without limitation,
fees and expenses of counsel) incurred in connection with any action,
suit, or other legal or administrative proceeding or governmental
investigation arising as a result of events occurring or facts or
circumstances arising or existing on or prior to the Closing Date
(whether or not in the ordinary course of business), except for routine
customer claims and complaints arising in the ordinary course
consistent with past practice which involve amounts less than $10,000
individually or $100,000 in the aggregate.
"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 nonobsolete parts and accessories inventory that may be
returned to the manufacturer.
"New Vehicle Inventory" shall mean all new vehicle inventory
including all demonstrator vehicles.
"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.
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"Securities Act" means the Securities Act of 1933, as amended.
"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 government
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 upon delivery of written notice to the
Acquired Entities and the Shareholder in accordance with Section 13.1
of this Agreement in the event of a material breach by any Acquired
Entity or the Shareholder of any provisions of this Agreement,
including covenants, warranties or representations; or
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(c) by the Acquired Entities and the Shareholder upon delivery
of written notice to Republic in accordance with Section 13.1 of this
Agreement in the event of a material breach by Republic of any
provision of this Agreement, including covenants, warranties or
representations; or
(d) by Republic or the Acquired Entities and the Shareholder
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 June
30, 1997.
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 any party
shall designate in writing to the other parties):
(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
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with a copy to:
Akerman, Senterfitt & Xxxxxx, P.A.
SunTrust International Center
Xxx Xxxxxxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxx, XX 00000-0000
Attn: Xxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
(b) IF TO THE ACQUIRED ENTITIES AND/OR THE SHAREHOLDER
TO:
Xxxxxxx X. Xxxxxxx
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
with a copy to:
A. Xxxxxx Xxxxxxx III
Xxxxx & Xxxxxxx, P.A.
World Trade Center
00 X.X. 0xx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000
Xxxxxx X. Xxxxxxx, XX
Attorney at Law
515 Gables International Plaza
0000 XxXxxxx Xxxx
Xxxxx Xxxxxx, XX 00000
13.2 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits attached hereto) and other documents delivered at the Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matters and supersedes all prior agreements and understanding (oral or
written) between or among the parties with respect to such subject matter. The
Schedules and Exhibits constitute a part hereof as though set forth in full
above.
13.3 EXPENSES. 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
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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 hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned or delegated by the Acquired Entities or the
Shareholder 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 with 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 in the courts of Broward
County, Florida or in the U.S. District Court for the Southern District of
Florida as Republic (in its sole discretion) may elect, and the Acquired
Entities and the Shareholder hereby accept the non-exclusive jurisdiction of
those courts for the purpose of any suit, action or proceeding.
(b) In addition, each of the Acquired Entities and the
Shareholders 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 Broward County,
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Florida or the U.S. District Court for the Southern District of Florida, as
selected by Republic, and hereby further irrevocably waives any claim that any
suit, action or proceedings brought in Broward 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 advise 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
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
13.11 PREVAILING PARTY. The prevailing party in all litigation
concerning this Agreement shall be entitled to recover all reasonable attorney's
fees and expenses incurred in connection with such litigation (and any appeal
thereof).
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/ Xxxxxxx X. Xxxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxxx, Senior Vice President
RI/WF MERGER CORP., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxxx, Senior Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
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RI/WN MERGER CORP., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, Senior Vice President
RI/WD MERGER CORP., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, Senior Vice President
RI/WLM MERGER CORP., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, Senior Vice President
RI/SLM MERGER CORP., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, Senior Vice President
RI/BWE MERGER CORP., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, Senior Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
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RI/MWP MERGER CORP., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, Senior Vice President
XXXXXXX XXXX, INC., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, President
XXXXXXX NISSAN, INC., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, President
XXXXXXX XXXXX, INC., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, President
XXXXXXX IMPORTS, INC., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, President
[SIGNATURES CONTINUED ON NEXT PAGE]
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XXXXXXX XXXXXXX-MERCURY, INC., a Florida
corporation
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxx, President
XXXXXX XXXXXXX-MERCURY, INC., a Florida
corporation
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxx, President
XXXX XXXXXXX ENTERPRISES, INC., d/b/a
Stuart Mitsubishi, a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxx, President
MECHANICAL WARRANTY PROTECTION, INC., a Florida
corporation
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxx, President
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------
XXXXXXX X. XXXXXXX, Individually
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