MEMBERSHIP INTEREST PURCHASE AGREEMENT BY AND AMONG RUMBLEON, INC., STEVEN R. BREWSTER, JUSTIN BECKER, and STEVEN R. BREWSTER, as the representative of each Seller October 26, 2018
Exhibit 2.3
BY AND AMONG
XXXXXX XXXXXX,
and
XXXXXX X. XXXXXXXX, as the representative of each
Seller
October 26, 2018
TABLE OF CONTENTS
ARTICLE I
|
PURCHASE AND SALE
|
1
|
Section 1.2
|
Closing Date
|
2
|
Section 1.3
|
Purchase Price
|
2
|
Section 1.4
|
Closing Date Payment
|
2
|
Section 1.5
|
Transaction to be Effected at the Closing
|
2
|
Section 1.6
|
Net Working Capital Adjustment
|
3
|
ARTICLE II
|
REPRESENTATIONS AND WARRANTIES OF SELLERS
|
5
|
Section 2.1
|
Authorization and Enforceability
|
5
|
Section 2.2
|
Conflicts; Consents of Third Parties
|
5
|
Section 2.3
|
Purchased Interests
|
5
|
Section 2.4
|
Brokers Fees
|
6
|
Section 2.5
|
Withholding
|
6
|
ARTICLE III
|
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
|
6
|
Section 3.1
|
Organization and Related Matters
|
6
|
Section 3.2
|
Books and Records
|
7
|
Section 3.3
|
Capitalization
|
7
|
Section 3.4
|
Conflicts; Consents of Third Parties
|
7
|
Section 3.5
|
Financial Statements
|
8
|
Section 3.6
|
No Undisclosed Liabilities
|
8
|
Section 3.7
|
Absence of Certain Developments
|
8
|
Section 3.8
|
Taxes
|
10
|
Section 3.9
|
Real Property
|
12
|
Section 3.10
|
Tangible Personal Property; Title; Sufficiency of
Assets
|
13
|
Section 3.11
|
Intellectual Property
|
13
|
Section 3.12
|
Contracts
|
14
|
Section 3.13
|
Employee Benefits
|
16
|
Section 3.14
|
Labor
|
19
|
Section 3.15
|
Litigation
|
20
|
Section 3.16
|
Compliance with Laws; Permits
|
20
|
Section 3.17
|
Environmental Matters
|
21
|
Section 3.18
|
Insurance
|
22
|
Section 3.19
|
Receivables; Payables
|
22
|
Section 3.20
|
Inventory
|
22
|
Section 3.21
|
Customers and Suppliers
|
22
|
Section 3.22
|
Related Party Transactions
|
23
|
Section 3.23
|
Brokers Fees
|
23
|
Section 3.24
|
Absence of Certain Business Practices
|
23
|
Section 3.25
|
Bank Accounts; Powers of Attorney
|
24
|
i
ARTICLE IV
|
REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
24
|
Section 4.1
|
Organization; Governing Documents
|
24
|
Section 4.2
|
Authorization and Enforceability
|
24
|
Section 4.3
|
Conflicts; Consent of Third Parties
|
24
|
Section 4.4
|
Brokers Fees
|
25
|
Section 4.5
|
No Proceedings
|
25
|
Section 4.6
|
No Other Representations and Warranties
|
25
|
ARTICLE V
|
COVENANTS
|
25
|
Section 5.1
|
Further Assurances
|
25
|
Section 5.2
|
Names and Logos
|
26
|
Section 5.3
|
Tax Covenants
|
26
|
Section 5.4
|
Non-Competition; Non-Solicitation
|
30
|
Section 5.5
|
Resignations
|
31
|
Section 5.6
|
Tangible Property
|
31
|
Section 5.7
|
Discharge of Affiliate Obligations
|
31
|
Section 5.8
|
Employee Matters
|
32
|
Section 5.9
|
Efforts to Consummate Transaction
|
32
|
Section 5.10
|
Estoppel Certificates
|
32
|
ARTICLE VI
|
CLOSING DELIVERABLES
|
32
|
Section 6.1
|
Conditions to the Obligation of Purchaser
|
32
|
Section 6.2
|
Conditions to the Obligation of Sellers
|
34
|
ARTICLE VII
|
INDEMNIFICATION
|
35
|
Section 7.1
|
Indemnity Obligations of Sellers
|
35
|
Section 7.2
|
Indemnity Obligations of Purchaser
|
35
|
Section 7.3
|
Indemnification Procedures
|
36
|
Section 7.4
|
Expiration of Representations and Warranties
|
37
|
Section 7.5
|
Certain Limitations; Calculation of Losses; Mitigation
|
36
|
Section 7.6
|
Indemnification Payments to Purchaser Indemnitees
|
39
|
Section 7.7
|
Treatment of Indemnification Payments
|
40
|
Section 7.8
|
Effect of Knowledge
|
40
|
Section 7.9
|
Sole Remedy; No Claims Against the Company
|
40
|
ARTICLE VIII
|
TERMINATION
|
40
|
Section 8.1
|
Termination of Agreement
|
40
|
Section 8.2
|
Effect of Termination
|
41
|
ARTICLE IX
|
MISCELLANEOUS
|
41
|
Section 9.1
|
Certain Definitions
|
40
|
Section 9.2
|
Expenses
|
48
|
Section 9.3
|
Governing Law; Jurisdiction; Venue
|
48
|
Section 9.4
|
Entire Agreement; Amendments and Waivers
|
49
|
Section 9.5
|
Section Headings
|
49
|
Section 9.6
|
Notices
|
49
|
Section 9.7
|
Severability
|
50
|
Section 9.8
|
Binding Effect; Assignment; Third-Party Beneficiaries
|
51
|
Section 9.9
|
Counterparts
|
51
|
Section 9.10
|
Remedies Cumulative
|
51
|
ii
Section 9.11
|
Exhibits and Schedules
|
51
|
Section 9.12
|
Interpretation
|
51
|
Section 9.13
|
Arm’s Length Negotiations
|
52
|
Section 9.14
|
Construction
|
52
|
Section 9.15
|
Specific Performance
|
52
|
Section 9.16
|
Waiver of Jury Trial
|
52
|
Section 9.17
|
Time of Essence
|
52
|
Section 9.18
|
Appointment of the Representative
|
52
|
Section 9.19
|
Legal Counsel
|
54
|
SCHEDULES:
Schedule
1:
Seller
Allocation
EXHIBITS:
Exhibit
A:
Form of General
Release
iii
This
MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) is dated
October 26, 2018 (the “Effective Date”), by and
among RumbleOn, Inc., a Nevada corporation (“Purchaser”), the members
of Wholesale Express, LLC, a Tennessee limited liability company
(the “Company”) set forth in
Schedule 1 hereto
(each, a “Seller,” and
collectively, the “Sellers”), Xxxxxx X.
Xxxxxxxx, a Tennessee resident, as the representative of each
Seller as more fully described herein (the “Representative”).
Purchaser, Sellers, and Representative are sometimes referred to
herein collectively as the “Parties” and each
individually as a “Party.” Capitalized terms
used herein and not otherwise defined, shall have the meaning set
forth in Section
9.1.
WHEREAS, the
Sellers, collectively, own one hundred percent (100%) of the issued
and outstanding membership interests (the “Membership Interests”) of
Company;
WHEREAS, Purchaser
desires to purchase from Sellers, and Sellers desire to sell to
Purchaser, all of the Membership Interests owned by such Seller
(the “Purchased
Interests”) pursuant to and in accordance with the
terms and conditions set forth in this Agreement;
WHEREAS, on the
Effective Date, certain of the Parties or their Affiliates shall
enter in an Agreement and Plan of Merger, by and among, Purchaser,
RMBL Tennessee, LLC, a Delaware limited liability company and
wholly-owned subsidiary of Purchaser (“Merger Sub”), Wholesale
Holdings, Inc., a Tennessee corporation (“Wholesale Holdings”),
Wholesale, LLC, a Tennessee limited liability company and
wholly-owned subsidiary of Wholesale Holdings, formerly known as
Wholesale Inc. (“Wholesale LLC”), the
shareholders of Wholesale Holdings set forth in Schedule 1 thereto,
Representative, as the representative of each stockholder, and, for
the limited purpose of Section 5.8, Xxxxxxxx Xxxxxxxx and Xxxxxx X.
Xxxxxxx, pursuant to which, among other things, Wholesale Holdings
will merge with and into Merger Sub with Merger Sub continuing as
the surviving company (the “Merger Agreement”);
and
NOW,
THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein and other good and
valuable consideration, the receipt and sufficiency of which hereby
are acknowledged, the Parties agree as follows:
ARTICLE I
PURCHASE AND
SALE
Section
1.1 Purchase and Sale. Subject to
the terms and conditions set forth herein, on the Closing Date,
each Seller shall sell, transfer and deliver to Purchaser, free and
clear of all Liens (other than any restrictions under the
Securities Act and applicable state securities laws
(“Blue Sky
Laws”), and Purchaser shall purchase from each of the
Sellers, all of the Purchased Interests owned by such Seller as set
forth on Schedule 1
(the “Seller
Allocation”) attached hereto, free and clear of all
Liens, for the consideration specified in Section 1.3. In furtherance
thereof, on the Closing Date each Seller shall deliver to
Purchaser, free and clear of all Liens (other than any restrictions
under the Securities Act and Blue Sky Laws), any certificates
representing the Purchased Interests owned by such Seller, each
duly endorsed in blank or with duly executed membership interest
powers attached.
Section
1.2 Closing Date. The Parties
acknowledge and agree that the closing of the purchase and sale of
the Membership Interests contemplated hereby, and all other
transactions contemplated by this Agreement (the
“Closing”)
shall take place on the date of satisfaction or waiver of the
conditions set forth in Section 6.1 and Section 6.2 of this
Agreement (other than those conditions that by their terms cannot
be satisfied until the Closing (such date of Closing, the
“Closing
Date”). The Closing shall be effective for accounting
and tax purposes as of 11:59 PM ET on the Closing
Date.
(a) The aggregate
consideration payable with respect to the Purchased Interests
hereunder (collectively, the “Purchase Price”) shall
consist of:
(i)
$4,000,000.00 in
cash; minus
(ii)
the amount, if any,
by which the Closing Net Working Capital is less than the Target
Net Working Capital; plus
(iii)
the amount, if any,
by which the Closing Net Working Capital is greater than the Target
Net Working Capital.
(b) A portion of
the Purchase Price shall be used to discharge and pay in full (i)
all Indebtedness for Borrowed Money (excluding, for the avoidance
of doubt, the Floor Plan), (ii) the Company Transaction Expenses
and (iii) the Change of Control Payments. In addition, pursuant to
the Merger Agreement, 681,481 shares of Purchaser’s Series B
Non-Voting Convertible Preferred Stock (the “Escrow Amount”) was
deposited at closing to be held by the Escrow Agent (the
“Escrow
Account”) under the terms of that certain Escrow
Agreement, dated as of the date hereof, by and among Purchaser,
Representative and the Escrow Agent for, among other things, as
security for certain obligations of Sellers under Section 1.6 and ARTICLE VII.
The Parties acknowledge and agree that the Escrow Amount, shall be
deemed to have a value of $6.75 per share (the “Per Share Valuation
Amount”) for all purposes when calculating any claim
against, or release from, the Escrow Amount, whether under
Section 1.6,
ARTICLE VII, or otherwise. If at any time while the Escrow Amount
is held pursuant to the Escrow Agreement, there is any stock
dividend, combination, subdivision, split or the like with respect
to the Escrow Amount (any such event, a “Stock Event”), then the
Per Share Valuation Amount shall be equitably adjusted to take into
account the effect of the Stock Event as reasonably agreed to by
Representative and Purchaser acting in good faith.
Section
1.4 Closing Date Payment. The
Representative has prepared and delivered to Purchaser a good faith
estimate of the Net Working Capital as of the Closing Date (the
“Estimated Net
Working Capital”), which shall be certified by
Representative as its good faith estimation of the Net Working
Capital as of the Closing Date. Representative shall have provided
to Purchaser access to all relevant documents and information
reasonably requested by Purchaser in connection with its review of
the Estimated Net Working Capital (including all components
thereof).
Section
1.5 Transaction to be Effected at the
Closing.
2
(a) At the Closing,
Purchaser shall:
(i)
pay to Sellers (in
accordance with the Seller Allocation) an amount in cash, payable
by wire transfer of immediately available funds to the account(s)
specified in writing by Sellers, which shall be equal to the
following (collectively, the “Closing Cash
Consideration”):
A.
$4,000,000; minus
B.
the amount, if any,
by which the Estimated Net Working Capital is less than the Target
Net Working Capital; plus
C.
the amount, if any,
by which the Estimated Net Working Capital is greater than the
Target Net Working Capital; minus
D.
the sum of (x) the
amount of Company Transaction Expenses and (y) the Change of
Control Payments; minus
E.
the aggregate
amount of all Indebtedness for Borrowed Money (excluding, for the
avoidance of doubt, the Floor Plan);
(ii)
pay the amount of
all Indebtedness for Borrowed Money (excluding, for the avoidance
of doubt, the Floor Plan) from the Purchase Price as provided in
the Payoff Letters; and
(iii)
pay the Company
Transaction Expenses and the Change of Control Payments from the
Purchase Price pursuant to written instructions of the
Company.
(a) Within one
hundred twenty (120) days after the Closing Date, Purchaser shall
prepare and deliver to the Representative a statement (the
“Closing
Statement”) calculating the Net Working Capital as of
the Closing Date (the “Closing Net Working
Capital”).
3
(b) If the
Representative disputes any amounts as shown on the Closing
Statement, the Representative shall deliver to Purchaser within
thirty (30) days after receipt of the Closing Statement a notice
(the “Dispute
Notice”) setting forth Representative’s
calculation of such amount and describing in reasonable detail the
basis for the determination of such different amount. If the
Representative does not deliver a Dispute Notice to Purchaser
within such thirty (30) day period, the Closing Statement prepared
and delivered by Purchaser shall be deemed to be the
“Final Closing
Statement.” The Parties shall use commercially
reasonable efforts to resolve such differences within a period of
thirty (30) days after the Representative has given the Dispute
Notice. If the Parties resolve such differences, the Closing
Statement agreed to by the Parties shall be deemed to be the Final
Closing Statement. If Purchaser and the Representative do not reach
a final resolution on the Closing Statement within thirty (30) days
after the Representative has given the Dispute Notice, unless
Purchaser and the Representative mutually agree to continue their
efforts to resolve such differences the Neutral Accountant shall
resolve such differences, pursuant to an engagement agreement among
Purchaser, the Representative and the Neutral Accountant (which
Purchaser and the Representative agree to execute promptly), in the
manner provided below. The Neutral Accountant shall only decide the
specific items under dispute by the Parties, solely in accordance
with the terms of this Agreement. Purchaser and the Representative
shall each be entitled to make a presentation to the Neutral
Accountant, pursuant to procedures to be agreed to among Purchaser,
the Representative and the Neutral Accountant (or, if they cannot
agree on such procedures, pursuant to procedures determined by the
Neutral Accountant), regarding such Party’s determination of
the amounts to be set forth on the Closing Statement; and the
Parties shall use commercially reasonable efforts to cause the
Neutral Accountant to resolve the differences between Purchaser and
the Representative and determine the amounts to be set forth on the
Closing Statement within twenty (20) days after the engagement of
the Neutral Accountant. The Neutral Accountant’s
determination shall be based solely on such presentations of the
Parties (i.e., not on independent review) and on the definitions
and other terms included herein. The Closing Statement determined
by the Neutral Accountant shall be deemed to be the Final Closing
Statement. Such determination by the Neutral Accountant shall be
conclusive and binding upon the Parties, absent fraud or manifest
error. The fees and expenses of the Neutral Accountant shall be
paid by the Party whose calculation of the Closing Net Working
Capital is farther from the Neutral Accountant’s calculation
thereof. Nothing in this Section 1.6(b) shall be
construed to authorize or permit the Neutral Accountant to: (i)
determine any questions or matters whatsoever under or in
connection with this Agreement except for the resolution of
differences between Purchaser and the Representative regarding the
determination of the Final Closing Statement; or (ii) resolve any
such differences by making an adjustment to the Closing Statement
that is outside of the range defined by amounts as finally proposed
by Purchaser and the Representative.
(c) Promptly, but no
later than five (5) Business Days after the final determination
thereof, if the Closing Net Working Capital set forth in the
Closing Statement: (i) exceeds the Estimated Net Working Capital,
Purchaser shall pay such excess amount to Sellers, or (ii) is less
than the Estimated Net Working Capital, at the option and in the
sole discretion of the Representative either (A) the Representative
and Purchaser shall deliver joint written instructions to the
Escrow Agent instructing the Escrow Agent to deliver to Purchaser
from the Escrow Amount an amount equal to such shortfall or (B) the
Sellers shall deliver to Purchaser an amount in immediately
available funds equal to such shortfall and the Representative and
Purchaser shall deliver joint written instructions to the Escrow
Agent instructing the Escrow Agent to deliver to Representative,
for the benefit of the Sellers from the Escrow Amount an amount
equal to such shortfall. Any payments made pursuant to this
Section 1.6 shall
be treated as an adjustment to the Purchase Price by the
Parties.
4
ARTICLE II
Each
Seller, severally but not jointly, and solely with respect to such
Seller, represents and warrants to Purchaser that the following
statements are true and correct:
Section
2.1 Authorization and
Enforceability. Each Seller has all requisite legal
capacity, to execute and deliver this Agreement and each other
Transaction Document to which it is a party, and to consummate the
transactions contemplated hereby and thereby. The execution,
delivery and performance by each Seller of each of the Transaction
Documents to which it is a party have been duly authorized by all
necessary action on the part of such Seller. This Agreement and the
other Transaction Documents have been duly and validly executed and
delivered by each Seller, and constitute legal, valid and binding
obligations of each Seller, enforceable against such Seller in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar Laws
affecting creditors’ rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at Law
or in equity) (collectively, the “Enforceability
Exceptions”).
Section
2.2 Conflicts; Consents of Third
Parties. Except as set forth in Section 2.2 of the Disclosure
Schedule, the execution and delivery by each Seller of this
Agreement and the other Transaction Documents to which it is a
party, the consummation of the transactions contemplated hereby or
thereby, and compliance by each Seller with the provisions hereof
or thereof will not: (a) conflict with, violate, result in the
breach or termination of, constitute a default under, result in an
acceleration of, constitute a change of control under, or create in
any party the right to accelerate, terminate, modify or cancel, any
Contract to which such Seller is a party or by which such Seller or
its properties, assets or Purchased Interests are subject, or
require a Consent from any Person in order to avoid any such
conflict, violation, breach, termination, default or acceleration;
(b) violate any Law or any Order by which such Seller is bound; or
(c) result in the creation of any Lien other than Permitted Liens,
subscriptions, options, warrants, calls, proxies, commitments or
Contracts of any kind upon any of the Purchased Interests. No
Consent, Order, waiver, declaration or filing with, or notification
to any Person, including any Governmental Body, is required on the
part of such Seller in connection with the execution, delivery and
performance of this Agreement or the other Transaction Documents,
or the compliance by such Seller with any of the provisions hereof
or thereof.
Section
2.3 Purchased
Interests.
(a) Each Seller
holds of record and owns beneficially all of the Purchased
Interests set forth opposite his name in Section 2.3(a) of the
Disclosure Schedule, free and clear of all Liens, subscriptions,
commitments and restrictions of any kind (other than Permitted
Liens and restrictions under the Securities Act and Blue Sky Laws).
The Purchased Interests were not issued in violation of (i) any
Contract to which any Seller is or was a party or beneficiary or by
which any Seller or its properties or assets is or was subject or
(ii) of any preemptive or similar rights of any
Person.
5
(b) Except as set
forth in Section
2.3(b) of the Disclosure Schedule, no Seller is party to (i)
any voting agreement, voting trust, proxy, registration rights
agreement, equity holder agreement or other Contract with respect
to the Membership Interests of the Company or (ii) any Contract
obligating such Seller to vote or dispose of any Membership
Interests of, or other equity or voting interests in, the Company
or which has the effect of restricting or limiting the transfer,
voting or other rights associated with the Purchased
Interests.
Section
2.4 Brokers Fees. No Sellers have
any Liability to pay commissions or similar fees to any investment
banker, broker, or finder with respect to the transactions
contemplated by this Agreement.
Section
2.5 Withholding. Purchaser and any
of its agents and Affiliates shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this
Agreement such amounts as are required to be deducted and withheld
under any applicable provision of U.S. federal, state, local Tax
Law, and to request and be provided any necessary Tax forms,
including IRS Form W-9, or any similar information. To the extent
that amounts are so deducted or withheld in accordance with the
foregoing and paid over to the appropriate Governmental Body, such
withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Person in respect of which
such deduction, withholding and payment was made.
ARTICLE III
The
Sellers, jointly and severally, represent and warrant to Purchaser
that the following statements are true and correct:
(a) The Company is a
limited liability company duly organized, validly existing and in
good standing under the Laws of the State of Tennessee and has all
requisite limited liability company power and authority to own,
lease and operate its properties and to carry on its business as
currently conducted. The Company is duly qualified or authorized to
do business as a foreign corporation and is in good standing under
the Laws of each jurisdiction in which it owns or leases real
property and each other jurisdiction in which the conduct of its
business or the ownership of its properties requires such
qualification or authorization, except where the failure to be in
good standing would have a Company Material Adverse
Effect.
(b) The Company does
not have any Subsidiaries.
(c) Sellers have made
available to Purchaser or its representatives complete and correct
copies of the Governing Documents of the Company as presently in
effect. Since its inception, the Company has not consolidated or
merged with, acquired all or substantially all of the assets of, or
acquired the stock of or any interest in any Person.
6
Section
3.2 Books and Records. Except as
set forth on Section
3.2 of the Disclosure Schedule, the minute books of the
Company, which have been made available to Purchaser or its
representatives, contain records of all material corporate actions
taken by the members or the board of managers of the
Company.
(a) Section 3.3 of the
Disclosure Schedule sets forth the following as of immediately
prior to Closing (i) the total number of issued and outstanding
shares of each class of equity interest of the Company, (ii) the
names of the holders of the issued and outstanding equity interests
of the Company, and (iii) the number or percentage of equity
interests of the Company held by each such holder. The issued and
outstanding equity interests set forth in Section 3.3 of the
Disclosure Schedule constitute the Purchased Interests. All of the
Membership Interests of the Company have been duly and validly
authorized and issued, are fully paid and nonassessable, and all
such Membership Interests are held of record and beneficially owned
as set forth on Section 3.3 of the Disclosure Schedule. No such
Membership Interests have been issued in violation of any
preemptive rights or any applicable securities Laws. Except as set
forth in Section 3.3 of the Disclosure Schedule, (i) the Company
has no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights,
preemptive rights or other contracts or commitments that could
require the Company to issue, sell, or otherwise cause to become
outstanding any of its membership interests, or securities
convertible or exchangeable for, or any options, warrants, or
rights to purchase, any of such membership interests; (ii) there
are no outstanding obligations of the Company to repurchase, redeem
or otherwise acquire any of its equity securities; (iii) there are
no outstanding or authorized equity appreciation, phantom equity,
profit participation or similar rights with respect to the Company;
(iv) there are no distributions which have accrued or been declared
but are unpaid on the equity securities of the Company; (v) there
are no voting agreements, voting trusts, proxies, registration
rights agreements, equity holder agreements or other Contracts with
respect to the Company or any of the Membership Interests; and (vi)
there are no Contracts obligating any Seller to vote or dispose of
any equity securities of, or other equity or voting interests in,
the Company or which has the effect of restricting or limiting the
transfer, voting or other rights associated with the Membership
Interests.
Section
3.4 Conflicts; Consents of Third
Parties. Except as set forth in Section 3.4 of the Disclosure
Schedule, the execution and delivery by Sellers of this Agreement
and the other Transaction Documents to which it is a party, and the
consummation of the transactions contemplated hereby and thereby,
and compliance by Sellers with the provisions hereof and thereof do
not and will not, with or without the passage of time or the giving
of notice: (a) conflict with, or result in the breach of, any
provision of the Governing Documents of the Company;
(b) conflict with, violate, result in the breach or
termination of, constitute a default under, result in an
acceleration of, or create in any party the right to accelerate,
terminate, modify or cancel, any Material Contract to which the
Company is a party or by which the Company’s assets are
bound, or require a Consent from any Person in order to avoid any
such conflict, violation, breach, termination, default or
acceleration; (c) violate any Law or any Order by which the Company
is bound; or (d) result in the creation of any Lien upon
the properties or assets of the Company other than Permitted
Liens. No Consent, Order, waiver, declaration or filing with, or
notification to any Person, including any Governmental Body, is
required by or with respect to Sellers, the Company in connection
with the execution, delivery and performance of this Agreement or
the other Transaction Documents, or the compliance by any of them
with any of the provisions hereof or thereof.
7
Section
3.5 Financial Statements. Included in
Section 3.5 of the
Disclosure Schedule are complete copies of (i) the audited
balance sheets of the Company as at December 31, 2015, 2016, and
2017 and the related audited statements of income and retained
earnings, members’ equity and of cash flows of the Company
for the fiscal years then ended, and (ii) the unaudited
condensed balance sheet of the Company (the “Balance Sheet”) as at
September 30, 2018 (the “Balance Sheet Date”)
(together with all the audited statements set forth in (i),
including the related notes and schedules thereto, the
“Financial
Statements”). The Financial Statements have been
prepared from the Books and Records in accordance with GAAP applied
on a consistent basis throughout the periods indicated, except, in
the case of the unaudited financial statements, for the failure to
include the footnotes required by GAAP and subject to normal and
non-recurring year-end audit adjustments (which will not be
material in the aggregate). The Financial Statements fairly present
in all material respects the financial position and results of
operations, members’ equity and cash flows of the Company as
of the dates and for the periods reflected thereon. The Company
maintains a standard system of accounting established and
administered in accordance with GAAP.
Section
3.6 No Undisclosed Liabilities. The
Company does not have any Liabilities of the nature required to be
disclosed in a balance sheet prepared in accordance with GAAP
except (a) to the extent specifically reflected and accrued for or
specifically reserved against in the Balance Sheet, (b) for current
Liabilities incurred subsequent to the Balance Sheet Date in the
ordinary course of business consistent with past practice or (c)
for Liabilities for Company Transaction Expenses and Change of
Control Payments incurred in connection with the transactions
contemplated by this Agreement.
Section
3.7 Absence of Certain
Developments. Except as set forth in Section 3.7 of the Disclosure
Schedule (arranged in subsections corresponding to the subsections
set forth below; provided that all such subsections qualify this
introductory clause), since the Balance Sheet Date, the Company has
conducted its business in the ordinary course materially consistent
with past practice and:
(a) there has not been
any Company Material Adverse Change nor has there occurred any
event which is reasonably likely to result in a Company Material
Adverse Change;
(b) there has not been
any split, combination or reclassification of any shares of capital
stock or other security of the Company that is not reflected in
Section 3.3 of the
Disclosure Schedule;
(c) there has not been
any damage, destruction or loss that is not covered by insurance,
with respect to the property and assets of the Company having a
replacement cost of more than $50,000 for any single loss or
$100,000 in the aggregate for any related losses;
(d) the Company has not
made any change in the rate of compensation, commission or bonus
payable, or paid or agreed or orally promised to pay, conditionally
or otherwise, any bonus, incentive, retention or other
compensation, retirement or severance benefit or vacation pay, to
or in respect of any director, officer or employee of the Company,
other than increases in the ordinary course of business consistent
with past practice;
8
(e) the Company has not
entered into or amended any employment, deferred compensation,
severance or similar agreement;
(f) the Company has not
hired any employees or engaged any individual independent
contractors other than in the ordinary course of business
consistent with past practice;
(g) the Company has not
made any loans, advances or capital contributions to, or
investments in, any Person;
(h) the Company has not
mortgaged, pledged, or subjected to any Lien, other than the
Permitted Liens, any of its assets or sold, assigned, transferred,
conveyed or otherwise disposed of any assets of the Company except
for assets sold, assigned, transferred, conveyed or otherwise
disposed of in the ordinary course of business consistent with past
practice;
(i) the Company has not
canceled or affirmatively waived any debt or claim or amended,
canceled, terminated or affirmatively waived any right under any
Material Contract except in the ordinary course of business
consistent with past practice;
(j) the Company has not
committed to make any capital expenditures or capital additions or
improvements (i) in excess of $50,000 in the aggregate or (ii)
outside the ordinary course of business consistent with past
practices;
(k) the Company has not
accelerated revenue recognition or the sales for periods prior to
the Closing outside of the ordinary course of business consistent
with past practices;
(l) the Company has not
materially changed its policies or practices with respect to the
payment of accounts payable or other current liabilities or the
collection of accounts receivable (including any acceleration or
deferral of the payment or collection thereof);
(m) the Company has not
adopted any plan of merger, consolidation, reorganization,
liquidation or dissolution or filing of a petition in bankruptcy
under any provisions of federal or state bankruptcy Law or
consented to the filing of any bankruptcy petition against it under
any similar Law;
(n) the Company has not
discharged or repaid any Indebtedness for Borrowed money outside
the ordinary course of business consistent with past
practice;
(o) the Company has not
entered into any compromise or settlement of any Legal Proceeding
or investigation by any Governmental Body;
(p) the Company has not
transferred, assigned or granted any license or sublicense of any
material rights under or with respect to any Intellectual Property
other than in the ordinary course of business consistent with past
practice; and
(q) the Company has not
entered into any agreements or commitments to do or perform in the
future any actions referred to in this Section 3.7.
9
Section
3.8 Taxes.
(a) The Company has
timely filed with the appropriate taxing authorities all material
Tax Returns that it has been required to file. All such Tax Returns
are true, correct and complete in all material respects. All Taxes
owed by the Company (whether or not shown on any Tax Return) have
been paid. Adequate reserves have been established on the Financial
Statements to provide for the payment of any Taxes which are not
yet due and payable with respect to the Company for taxable periods
or portions thereof ending on or before the Balance Sheet Date.
Except as set forth on Section 3.8(a) of the
Disclosure Schedule, the Company is not the beneficiary of any
extension of time within which to file any Tax Return. No written
claim has been made in the past six (6) years by an authority with
respect to the Company in a jurisdiction where the Company does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Liens, other than Permitted Liens, on
any of the assets of the Company that have arisen in connection
with any failure (or alleged failure) to pay any Tax.
(b) The Company has
withheld and paid to the appropriate taxing authority or other
Governmental Body all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee,
independent contractor, creditor, interestholder, or other third
party.
(c) The Company has not
waived or extended any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to the assessment,
payment or collection of any Tax.
(d) The Company has no
obligation to make a payment that is not deductible under Section
280G of the Code or that includes an obligation to indemnify or
"gross up" the recipient of such payment for taxes imposed by
Section 4999 of the Code.
(e) None of the
properties or assets of the Company is property which, for Tax
purposes, is required to be treated as owned by another Person. The
Company is not an obligor on, and none of their assets have been
financed directly or indirectly by, any tax-exempt bonds. No
property or assets of the Company is “tax-exempt use
property” within the meaning of Section 168(h) of the
Code.
(f) 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 or other Governmental Body against the
Company. There has not been, within the past five calendar years,
any written notice of potential examination, or to the Knowledge of
the Company, any audit or examination of any Tax Returns filed by
the Company.
(g) Except as set
forth on Section
3.8(g) of the Disclosure Schedule, there is no action, suit,
examination, investigation, Governmental Body proceeding, or audit
or claim for refund in progress, pending, proposed or, to the
Knowledge of the Company, threatened against or with respect to the
Company regarding Taxes.
10
(h) The Company has not
agreed to or been required to make any adjustment pursuant to
Section 481(a) of the Code or any corresponding provision of state,
local or foreign Law by reason of any change in accounting method
initiated by it or on its behalf; no taxing authority has proposed
any such adjustment or change in accounting method; and the Company
does not have an application pending with any taxing authority
requesting permission for any change in accounting method. The
Company will not be required to include any adjustment in taxable
income for any tax period (or portion thereof) pursuant to Section
481 or 263A of the Code or any comparable provision under state,
local or foreign Tax Laws as a result of a change in any method of
accounting employed prior to the Closing Date other than any change
in method of accounting required by applicable Law as a result of
the transactions contemplated by this Agreement. The Company will
not be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or
portion thereof) beginning on or after the Closing Date as a result
of any of the following that occurred prior to the Closing Date:
(i) a “closing agreement” as described in Section 7121
of the Code; (ii) an installment sale or open transaction; (iii)
receipt of a prepaid amount; (iv) an intercompany item under
Treasury Regulation Section 1.1502-13 or an excess loss account
under Treasury Regulation Section 1.1502-19; (v) use of an
accounting method other than the accrual method (vi) an income
inclusion pursuant to Section 965, including an election under
Section 965(h) of the Code or (v) election under Section 108(i) of
the Code.
(i) The Company is not
a member of an affiliated group (as defined in Section 1504 of the
Code), filed or been included in a combined, consolidated or
unitary income Tax Return, and is not a partner, member, owner or
beneficiary of any entity treated as a partnership or a trust for
Tax purposes. The Company does not have Liability for Taxes of any
person under Treasury Regulations Section 1.1502-6 or similar state
or local Laws, as a successor or transferee, by contract or
otherwise.
(j) The Company is not
a party to or bound by any Tax allocation or Tax sharing agreement
and has no contractual obligation to indemnify any other Person
with respect to Taxes.
(k) True, correct and
complete copies of all income and sales Tax Returns filed by or
with respect to the Company for taxable periods ending on or after
January 1, 2015 have been made available to Purchaser or its
representatives by the Company.
(l) The Company has not
participated in any reportable transaction as contemplated in
Treasury Regulations Section 1.6011-4. The Company has disclosed on
its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income
Tax within the meaning of Section 6662 of the Code.
(m) The Company is not
subject to Tax, nor does it have a permanent establishment, in any
foreign jurisdiction.
(n) The Company does
not have pending ruling requests filed by it or on its behalf with
any taxing authority or Governmental Body.
11
(o) The Company
utilizes the accrual method of accounting for income tax
purposes.
(p) Since December 31,
2017, there has not been any material change by the Company in
accounting or Tax reporting principles, methods or policies, any
settlement of any Tax controversy, any amendment of any Tax Return,
or any material Tax election made by or with respect to the
Company.
Section
3.9 Real Property.
(a) The Company does
not own and has not owned any real property or fee title interest
in real property.
(b) Section 3.9(b) of the
Disclosure Schedule sets forth the address of each parcel of real
property leased by the Company as lessee, and a complete list of
all leases related to real property currently leased by the Company
(individually, a “Real Property Lease” and
collectively the “Real Property Leases” and
the real properties specified in the Real Property Leases being
referred to herein collectively as the “Leased Properties”). The
Company has a valid and binding leasehold interest under each of
the Real Property Leases. The Company has not received any written
notice of any default or event that with notice or lapse of time,
or both, would constitute a default under any of the Real Property
Leases, and the Company, and, to the Company’s Knowledge,
each other party thereto, is in material compliance with all
obligations of such party thereunder. Except as set forth on
Section 3.9(b) of
the Disclosure Schedule, the Company has not subleased, assigned or
otherwise granted to any Person the right to use or occupy such
Leased Properties or any portion thereof. The Company’s
possession and quiet enjoyment of Leased Property under each Real
Property Lease has not been disturbed and there are no currently
existing disputes with respect to any Real Property Lease. No
security deposit or portion thereof deposited with respect to any
Real Property Lease has been applied in respect of a breach of or
default under any such Real Property Lease that has not been
redeposited in full. The Company does not owe, nor will it owe in
the future, any brokerage commissions or finder’s fees with
respect to any Real Property Lease. The Company has not
collaterally assigned or granted any other Lien in any Real
Property Lease or any interest therein (other than Permitted Liens
or as expressly set forth in any Real Property Lease). There are no
Liens on the estate or interest created by any Real Property Lease
(other than Permitted Liens or as expressly set forth in any Real
Property Lease). The Company has delivered to Purchaser complete
copies of the Real Property Leases, together with all amendments
and modifications or supplements, if any, thereto.
(c) The Company has
not received any written notice of violation of any applicable
building, zoning, subdivision, health and safety and other land use
Laws, including the Americans with Disabilities Act of 1990, as
amended, and all insurance requirements affecting the Leased
Properties (collectively, the “Real Property Laws”),
and, to the Company’s Knowledge, the current use or occupancy
of the Leased Properties or operation of the Business thereon does
not violate any Real Property Laws. The Company has not received
any written notice of violation of any Real Property Law. To the
Knowledge of the Company, there is no pending or threatened zoning
application or proceeding, or condemnation, eminent domain or
taking proceeding with respect to the Leased
Properties.
12
(d) The Leased
Properties constitute all interests in real property currently used
or currently held for use in connection with the Business or which
are necessary for the continued operation of the Business as the
Business is currently conducted.
Section
3.10 Tangible Personal Property; Title;
Sufficiency of Assets.
(a) Section 3.10(a)3 of the
Disclosure Schedule lists all leases of personal property
(“Personal Property
Leases”) involving annual payments in excess of
$25,000 relating to personal property used by the Company or to
which the Company is a party or by which the properties of the
Company are bound. The Company has made available to Purchaser or
its representatives true, correct and complete copies of the
Personal Property Leases, together with all amendments and material
modifications or supplements, if any, thereto.
(b) The Company has a
valid leasehold interest under each of the Personal Property Leases
under which it is a lessee, and there is no default under any
Personal Property Lease by the Company or, to the Knowledge of the
Company, by any other party thereto, and no event has occurred that
with the lapse of time or the giving of notice or both would
constitute a default thereunder, and the Company, and to the
Knowledge of the Company, each other party thereto is in compliance
with all obligations of the Company or such other party, as the
case may be, thereunder.
(c) The Company
(and not any Affiliate thereof) has good and marketable title to
all its assets, free and clear of any and all Liens, except for
Permitted Liens. Such assets include all assets, rights and
interests reasonably required for the conduct of the Business as
presently conducted.
Section
3.11 Intellectual
Property.
(a) The Company
owns, free and clear from all Liens other than Permitted Liens, or
otherwise possesses sufficient rights to use all of the
Intellectual Property reasonably necessary to the conduct of the
Business as currently conducted. The Intellectual Property owned by
the Company (“Owned
Intellectual Property”), licenses for commercially
available software, and the Intellectual Property licensed to the
Company under the Intellectual Property Licenses comprise all of
the Intellectual Property that is used in or is reasonably
necessary to conduct the Business as currently
conducted.
13
(b) Section 3.11(b) of the
Disclosure Schedule sets forth a true, complete and correct list of
all Owned Intellectual Property for which a registration or
application has been filed with a Governmental Body, including
patents, trademarks, service marks, copyrights and trade names,
issued by or registered with, or for which any application for
issuance or registration thereof has been filed with, any
Governmental Body. All required filings and fees related to the
Owned Intellectual Property have been timely filed with and paid to
the relevant Governmental Body and authorized registrars, and all
Owned Intellectual Property is otherwise in good standing with such
registering bodies. Section 3.11(b)(ii) of the Disclosure Schedule
sets forth a complete and correct list of all written or oral
licenses and arrangements (other than ordinary course licenses of
commercially available software), (A) pursuant to which the
use by any Person of Owned Intellectual Property is permitted by
the Company or (B) pursuant to which the use by the Company of
Intellectual Property is permitted by any Person (collectively, the
“Intellectual
Property Licenses”). The Intellectual Property
Licenses are valid and enforceable between the Company and the
other parties thereto, subject to the Enforceability Exceptions, to
the Knowledge of the Company, binding on the parties thereto, and
are in full force and effect. There is no default under any
Intellectual Property License by the Company or, to the Knowledge
of the Company, by any other party thereto, and, to the Knowledge
of the Company, no event has occurred that with the lapse of time
or the giving of notice or both would constitute a default
thereunder. The Company, and to the Knowledge of the Company, each
other party thereto is in compliance with all obligations under
each Intellectual Property License.
(c) To the Knowledge of
the Company, the operation of the Business as presently conducted
does not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights
of third parties.
(d) There is no written
claim or demand of any Person pertaining to, or any proceeding that
is pending or, to the Knowledge of the Company, threatened, that
challenges the rights of the Company in respect of any Owned
Intellectual Property, or claims that any default exists under any
Intellectual Property License.
(e) Except as
described in Section
3.11(e)(i)
of the Disclosure Schedule, all Persons involved in the development
of Owned Intellectual Property have entered into confidentiality
and assignment of inventions agreements substantially in the form
included in Section
3.11(e)(ii)
of the Disclosure Schedule.
Section
3.12 Contracts.
(a) Section 3.12(a) of the
Disclosure Schedule sets forth all of the Material Contracts. As
used herein, “Material Contracts” shall
mean the following Contracts of the Company that are currently in
effect:
(i) Contracts relating
to the employment or engagement of any employee or individual
independent contractor, or any bonus, deferred compensation,
pension, profit sharing, stock option, employee stock purchase,
retirement, retention, severance, or change of control arrangement
with any current or former employee, individual independent
contractor, officer or director of the Company;
14
(ii) Contracts
with any employee or labor union or association representing any
employee;
(iii) Contracts
relating to capital expenditures that obligate the Company to spend
in excess of $75,000 in any future fiscal year;
(iv) Contracts
entered into within the last five years relating to the acquisition
or disposition of any equity interests in or, except in the
ordinary course of business, assets of any Person;
(v) Contracts creating
or otherwise related to any joint venture or
partnership;
(vi) Contracts
limiting the ability of the Company to engage in any line of
business or to compete with any Person or to conduct business in
any geographical area or to solicit any Person for employment, in
each case, that would be binding upon Purchaser following
Closing;
(vii) Contracts
relating to any Indebtedness for Borrowed Money of the Company
(other than accounts payable to trade creditors in the ordinary and
usual course of business consistent with past custom and practice),
including credit facilities, promissory notes, security agreements,
and other credit support arrangements, and Contracts under which
the Company has imposed or incurred a Lien on any of its assets,
other than Permitted Liens;
(viii) Contracts
granting a power of attorney, revocable or irrevocable, to any
Person for any purpose whatsoever;
(ix) Contracts
that provide for the assumption of any Tax or environmental
Liability of any Person;
(x) Contracts relating
to any loan (other than accounts receivable from trade debtors in
the ordinary and usual course of business consistent with past
custom and practice) or advance to (other than ordinary course
travel allowances to the employees of the Company), or investments
in, any Person;
(xi) Contracts
relating to any guarantee or other contingent Liability in respect
of any Indebtedness for Borrowed Money of any Person (other than
the endorsement of negotiable instruments for collection in the
ordinary and usual course of business consistent with past custom
and practice);
(xii) Contracts
with any Governmental Body;
(xiii) Contracts,
loans and/or lease arrangements involving, directly or indirectly,
any material rebates, payments, commissions, promotional allowances
or any other economic benefits, regardless of their nature or type,
to or from any Affiliate or to or from any customer, supplier,
employee or agent of the Company;
15
(xiv) any
Contracts with a Material Customer or Material Supplier that are
reasonably likely to involve the receipt or payment of an amount in
excess of $50,000 in any 12-month period and that cannot be
cancelled by the Company without material penalty and without more
than sixty (60) days’ notice; and
(xv) any
other Contract that is material to the Company.
(b) True, correct and
complete copies of the Contracts required to be set forth in
Section 3.12(a) of
the Disclosure Schedule have previously been made available to
Purchaser or its representatives by the Company. The Company is not
in default, and no event has occurred that, with the giving of
notice or the passage of time or both, would constitute a default
under any such Material Contract by the Company, and, to the
Knowledge of the Company, no event has occurred that, with the
giving of notice or the passage of time or both, would constitute a
default by any other party to any such Contract. Each of the
Contracts required to be set forth in Section 3.12(a) of the
Disclosure Schedule is in full force and effect, is valid and
enforceable in accordance with its terms, subject to the
Enforceability Exceptions, and, to the Knowledge of the Company, is
not subject to any claims, charges, setoffs or defenses. There are
no disputes pending or, to the Knowledge of the Company, threatened
under any such Material Contract. The Company and, to the Knowledge
of the Company, each other party thereto is in compliance with all
of its material obligations under each such Contract.
Section
3.13 Employee Benefits.
(a) Section 3.13(a) of the
Disclosure Schedule sets forth a complete and correct list of (i)
all “employee benefit plans” as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), and any other
pension plans or employee benefit agreements, arrangements,
programs or payroll practices (including severance pay, other
termination benefits or compensation, vacation pay, salary, company
awards, stock option, stock purchase, salary continuation for
disability, sick leave, retirement, deferred compensation, bonus or
other incentive compensation, stock purchase arrangements or
policies, hospitalization, medical insurance, life insurance and
scholarship programs) (whether funded or unfunded, written or oral,
qualified or nonqualified), sponsored, maintained or contributed to
or required to be contributed to by the Company for the benefit of
any employee, leased employee, director, officer, shareholder or
independent contractor (in each case either current or former) of
the Company (“Employee Benefit Plans”).
Section 3.13(a) of
the Disclosure Schedule identifies, in separate categories,
Employee Benefit Plans that are (i) subject to Section 210(a),
4063 and 4064 of ERISA or Section 413(c) of the Code
(“Multiple Employer
Plans”), (ii) multiemployer plans (as defined in
Section 4001(a)(3) of ERISA) (“Multiemployer Plans”) or
(iii) “benefit plans”, within the meaning of Section
5000(b)(1) of the Code providing continuing benefits after
retirement (other than as required by Section 4980B of the Code or
Part 6 of Title I of ERISA or similar state or local Law). The
Company does not have any Liability or contingent Liability with
respect to any plan, arrangement or practice of the type described
in this Section
3.13(a) other than the Employee Benefit Plans set forth on
Section 3.13(a) of
the Disclosure Schedule.
16
(b) None of the
Company, any of its Affiliates or any other trade or business,
whether or not incorporated, that together with the Company or its
Affiliates would be deemed a “single employer” within
the meaning of Section 4001 of ERISA (a “Company ERISA Affiliate”)
has ever participated in, been required to contribute to, or
otherwise been required to participate in any Multiemployer Plan or
any Multiple Employer Plan. No Employee Benefit Plan is or at any
time was a “defined benefit plan” as defined in Section
3(35) of ERISA or a pension plan subject to the funding standards
of Section 302 of ERISA or Section 412 of the Code. Neither the
Company, nor any of its Affiliates, nor any Company ERISA Affiliate
has ever participated in, been required to contribute to, or
otherwise been required to participate in any plan, program or
arrangement subject to Title IV of ERISA. No Employee Benefit Plan
is a multiple employer welfare arrangement as defined in Section
3(40) of ERISA.
(c) Each of the
Employee Benefit Plans intended to qualify under Section 401(a) or
403(a) of the Code (“Qualified Plans”) has
received a determination letter or opinion from the IRS to such
effect and the trusts maintained thereto are exempt from federal
income taxation under Section 501 of the Code and nothing has
occurred with respect to any such plan which would reasonably be
expected to cause the loss of such qualification or exemption.
There has been no termination or partial termination of such
Qualified Plan within the meaning of Code Section 411(d)(3) and the
present value of all Liabilities under any such plan will not
exceed the current fair market value of the assets of such plan
(determined using the actuarial assumption used for the most recent
actuarial valuation for such plan).
(d) All contributions,
reimbursements, accruals and premiums required by Law or by the
terms of any Employee Benefit Plan or any agreement relating
thereto for all periods ending prior to or as of the Closing have
been timely paid or properly accrued on the Balance Sheet and the
books and records of the Company. No Employee Benefit Plan has any
unfunded Liabilities which are not reflected on the Balance Sheet
or the books and records of the Company.
(e) There has been no
material violation of or material failure to comply with ERISA or
the Code with respect to the filing of applicable returns, reports,
documents and notices regarding any of the Employee Benefit Plans
with the DOL, the IRS, the PBGC or any other Governmental Body or
the furnishing of such notices or documents to the participants or
beneficiaries of the Employee Benefit Plans.
(f) True, correct and
complete copies of the following documents, with respect to
each of the Employee Benefit Plans, have been made available to
Purchaser or its representatives by the Company: (A) any plans and
related trust documents (all amendments thereto), investment
management agreements, administrative service contracts, group
annuity contracts, insurance contracts, collective bargaining
agreements and employee handbooks, (B) the most recent Forms 5500
for the past three years and schedules thereto, (C) the most recent
consolidated financial statements and actuarial valuations for the
past three years, (D) the most recent IRS determination letters,
(E) the most recent summary plan descriptions (including letters or
other documents updating such descriptions) and (F) written
descriptions of all non-written agreements relating to the Employee
Benefit Plans.
17
(g) There are no
pending Legal Proceedings which have been asserted or instituted
or, to the Knowledge of the Company, threatened against any of the
Employee Benefit Plans, the assets of any such plans or of any
related trust or the Company, the plan administrator or any
fiduciary of the Employee Benefit Plans with respect to such plans
(other than routine benefit claims), and, to the Knowledge of the
Company, there are no facts or circumstances that would reasonably
be expected to form the basis for any such Legal Proceeding. No
Employee Benefit Plan is under audit or investigation by the IRS,
DOL, or any other Governmental Body and no such completed audit, if
any, has resulted in the imposition of Tax, interest, or
penalty.
(h) Each of the
Employee Benefit Plans complies in all material respects with its
terms and all provisions of applicable Law, including ERISA and the
Code, and all reporting requirements have been materially satisfied
on a timely basis.
(i) The Company
maintains a “group health plan” within the meaning of
Section 5000(b)(1) of the Code and each plan sponsor or
administrator has complied with the COBRA reporting, disclosure,
notice, election, and other benefit continuation and coverage
requirements of Section 4980B of the Code, the Health Insurance
Portability and Accountability Act of 1996, Part 6 of Title I of
ERISA and the applicable regulations thereunder and any comparable
state Laws, including material compliance with the Company’s
COBRA obligations rising in connection with the transactions
contemplated herein.
(j) No Employee Benefit
Plan provides medical or dental benefits for any current or former
employees or other service providers of the Company after
retirement of employment or other service other than rights that
may be provided by Law.
(k) No
“prohibited transaction”, within the meaning of ERISA
or the Code, or breach of any duty imposed on
“fiduciaries” pursuant to ERISA has occurred with
respect to any Employee Benefit Plan that would reasonably be
expected to result in liability to the Company.
(l) Neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby (in each case either alone or
in conjunction with any other event) will, with or without the
passage of time or the giving of notice (i) result in any payment
becoming due to any service provider; (ii) increase any benefits
otherwise payable to any service provider including under any
Employee Benefit Plan; or (iii) result in the acceleration of the
time of payment or vesting of any such benefits.
(m) No security issued
by the Company forms or has formed any part of the assets of any
Employee Benefit Plan.
(n) The consummation of
the transactions contemplated by this Agreement will not give rise
to any Liability for termination of any agreements related to any
Employee Benefit Plan.
(o) Each Employee
Benefit Plan that purports to provide benefits which qualify for
tax-favored treatment under Sections 79, 105, 106, 117, 120, 125,
127, 129, and 132 of the Code satisfies the requirements of said
Section(s) in all material respects.
18
(p) The Company has
taken such actions necessary with respect to each Employee Benefit
Plan to ensure that no service provider of the Company is subject
to taxes or penalties under Section 409A of the Code that would
reasonably be expected to result in liability to the
Company.
(q) Each Employee
Benefit Plan, its related trust and insurance agreement may be
unilaterally amended or terminated on no more than ninety (90)
days’ notice.
Section
3.14 Labor.
(a) Section 3.14(a) of the
Disclosure Schedule contains a list of all persons who are
employees, consultants or contractors of the Company as of the date
hereof, and sets forth for each such individual, as applicable, the
following: (i) name, (ii) title or position (including whether full
or part time), (iii) hire date, (iv) current annual base
compensation rate, (v) commission, bonus or other incentive-based
compensation paid during the prior fiscal year, and (vi)
designation as either exempt or non-exempt from the overtime
requirements of the Fair Labor Standards Act.
(b) The Company is not,
nor has it ever been, a party to or bound by any labor or
collective bargaining agreement or other Contract with a labor
organization representing any of its employees, and there are no
labor organizations representing or, to the Company’s
Knowledge, purporting or attempting to represent any employee of
the Company with respect to the Business. To the Knowledge of the
Company, there is not, nor has there been within the last three
years, any threat of any strike, slowdown, work stoppage, lockout,
concerted refusal to work overtime, arbitrations or other similar
labor activity or dispute affecting the Company. There are no
grievances, arbitrations, unfair labor practice charges, or other
labor disputes pending or, to the Knowledge of the Company,
threatened against the Company.
(c) No labor
organization or group of employees of the Company has made a
pending demand for recognition, and there are no representation
proceedings or petitions seeking a representation proceeding
presently pending or, to the Knowledge of the Company, threatened
to be brought or filed, with the National Labor Relations Board or
other labor relations tribunal. To the Knowledge of the Company,
there is no organizing activity involving the Company pending or
threatened by any labor organization or group of employees of the
Company.
(d) To the Knowledge of
the Company, no executive or key employee has notified the Company
of his/her intention to terminate employment with the Company
independently of or as a result of the transactions contemplated by
this Agreement.
19
(e) Except as set forth
on Section 3.14(e)
of the Disclosure Schedule, to the Knowledge of the Company, the
Company is and has been in compliance with all applicable Laws in
all material respects pertaining to employment and employment
practices to the extent they relate to the employees of the
Company, including all Laws relating to labor relations, equal
employment opportunities, fair employment practices, employment
discrimination, harassment, retaliation, reasonable accommodation,
disability rights or benefits, immigration, wage and hours,
overtime compensation, child labor, health and safety,
workers’ compensation, uniformed services employment,
whistleblowers, leaves of absence and unemployment insurance. There
are no Legal Proceedings pending against the Company, or to the
Company’s Knowledge, threatened to be brought or filed, by or
with any Governmental Body or arbitrator in connection with the
employment of any current or former employee, consultant or
independent contractor, including any claim relating to unfair
labor practices, employment discrimination, harassment,
retaliation, equal pay or any other employment related matter
arising under applicable Laws. There are no internal written
complaints or reports by any current or former employee, consultant
or independent contractor pursuant to the anti-harassment policy of
the Company that are pending or under investigation by the
Company.
(f) Assuming that
following Closing, the Company makes bona fide offers of employment
(or of continuing employment) commencing upon Closing Date to that
number or percentage of employees and upon such terms so as to
avoid applicability of WARN, the Company has complied with
WARN.
(g) To the Knowledge of
the Company, all employees of the Company are residing and/or
working in the United States (i) free of any restrictions or
limitations on their ability to accept employment lawfully in the
United States and (ii) in compliance with all applicable Laws
relating to immigration. No Legal Proceeding has been filed or
commenced against the Company or, to the Company’s Knowledge,
any employees thereof, that (A) alleges any failure to comply with
any applicable Laws relating to immigration or (B) seeks removal,
exclusion or other restrictions on (I) such employee’s
ability to reside and/or accept employment lawfully in the United
States and/or (II) the continued ability of the Company to sponsor
employees for immigration benefits and, to the Knowledge of the
Company, there is no reasonable basis for any of the foregoing. No
Legal Proceeding is pending against the Company with respect to its
compliance with applicable Laws relating to immigration in
connection with its hiring practices.
Section
3.15 Litigation. Except as set forth
in Section 3.15 of
the Disclosure Schedule, there is no Legal Proceeding pending or,
to the Knowledge of the Company, threatened against the Company
(or, to the Knowledge of the Company, pending or threatened against
any of the officers, directors or key employees of the Company in
relation to the Company or the Business) before any court or other
Governmental Body or any arbitral tribunal. The Company is not
currently engaged in any Legal Proceeding to recover monies due it
or for damages sustained by it. The Company is not subject to any
Order of any Governmental Body.
Section
3.16 Compliance with Laws;
Permits.
20
(a) To the Knowledge of
the Company, the Company is, and for the last three (3) years has
been, in compliance in all material respects with all Laws
applicable to it or the operation, use, occupancy or ownership of
its assets or properties or the conduct of the Business. The
Company has not received written notice from any Governmental Body
of any failure to comply with any Law. There is no investigation by
a Governmental Body pending against or, to the Knowledge of the
Company, threatened against the Company.
(b) Section 3.16(b) of the
Disclosure Schedule contains a complete and accurate list of each
material Permit that is held by the Company or that otherwise
relates to the Business. Each Permit listed or required to be
listed in Section
3.16(b) of the Disclosure Schedule is valid and in full
force and effect. Except as set forth in Section 3.16(b) of the
Disclosure Schedule: (i) the Company is, and has been for the last
three (3) years, in material compliance with all of the terms and
requirements of each Permit identified or required to be identified
in Section 3.16(b)
of the Disclosure Schedule; (ii) the Company has not received
written notice from any Governmental Body regarding any (A) actual,
alleged, possible or potential violation of or failure to comply
with any term or requirement of any Permit listed or required to be
listed in Section
3.16(b) of the Disclosure Schedule that has not been
resolved without a penalty that continues to impact such Permit or
(B) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation or termination of any Permit
listed or required to be listed in Section 3.16(b) of the
Disclosure Schedule that has not been resolved without a penalty
that continues to impact such Permit; and (iii) all applications
required to have been filed for the most-recent renewal of the
Permits identified or required to be identified in Section 3.16(b) of the
Disclosure Schedule have been duly filed on a timely basis with the
appropriate Governmental Bodies. The Permits identified in
Section 3.16(b) of
the Disclosure Schedule collectively constitute all of the material
Permits necessary to enable the Company to lawfully conduct and
operate the Business and to own and use its assets in the manner in
which it currently owns and uses such assets.
Section
3.17 Environmental
Matters.
(a) The operations of
the Company are currently and have been in material compliance with
all applicable Environmental Laws, except as would not cause a
Company Material Adverse Effect.
(b) The Company has
obtained and currently maintains all material Permits required
under all applicable Environmental Laws necessary to operate the
Business as currently conducted.
(c) The Company has not
received any written communication from a Governmental Body
alleging either that it may be in violation of any Environmental
Law or that it may have any Liability under any Environmental
Law.
(d) To the Knowledge of
the Company, the Company does not have any material Liability in
connection with the release of any Hazardous Materials at, on or
under the Leased Properties.
(e) To the Knowledge of
the Company, there is not located at any of the Leased Properties
any underground storage tanks.
21
(f) The Company has
made available to Purchaser or its representatives all
environmental audits, studies, reports, analyses, and results of
investigations that have been performed by or on behalf of the
Company within the previous two years with respect to the Leased
Properties.
Section
3.18 Insurance. Section 3.18 of the Disclosure
Schedule includes a true, correct and complete list and
description, including policy number, coverage and deductible, of
all insurance policies owned by the Company, true, correct and
complete copies of which policies have been made available to
Purchaser or its representatives by the Company. Such policies are
in full force and effect, all premiums due thereon have been paid
and the Company is not in default thereunder. Such insurance
policies are sufficient for compliance with all applicable Laws and
Material Contracts to which the Company is a party or by which it
is bound. The Company has not received any written notice of
cancellation or intent to cancel or materially increase premiums
with respect to such insurance policies. Section 3.18 of the Disclosure
Schedule also contains a list of all pending claims and any claims
in the past year with any insurance company by the Company and any
instances within the previous year of a denial of coverage of the
Company by any insurance company.
(a) The accounts
receivable and notes receivable of the Company reflected in the
Balance Sheet and arising after the date thereof have arisen in
bona fide arm’s-length transactions in the ordinary course of
business consistent with past custom and practice, and, subject to
the allowance for doubtful accounts set forth in the Balance Sheet,
to the Knowledge of the Company, all such receivables that have not
previously been collected are valid and binding obligations of the
account debtors without any counterclaims, setoffs or other
defenses thereto. A complete list of all accounts receivable and
notes receivable of the Company as of the date hereof is included
in Section 3.19 of
the Disclosure Schedule.
(b) All accounts
payable of the Company reflected on the Balance Sheet and arising
after the date thereof are the result of bona fide transactions in
the ordinary course of business.
Section
3.20 Inventory. All Inventory is in
compliance in all material respects with the terms of the Floor
Plan Agreement. All Inventory is owned by the Company free and
clear of all Liens, except for Permitted Liens.
Section
3.21 Customers and
Suppliers.
(a) Section 3.21(a) of the
Disclosure Schedule sets forth a complete and correct list of the
top ten (10) customers of the Company for the most recently ended
fiscal year and for the eight (8) month period ended August 31,
2018 (the “Material
Customers”) and the amount of sales to each such
customer during such period.
22
(b) Section 3.21(b) of the
Disclosure Schedule sets forth a complete and correct list of the
top ten (10) suppliers of each of the Company for the most recently
ended fiscal year and for the eight (8) month period ended August
31, 2018 (the “Material Suppliers”) and
the amount of purchases from each such supplier during such
period.
Section
3.22 Related Party Transactions.
Except as described in Section 3.22 of the Disclosure
Schedule, the Company has not loaned or borrowed any amounts to or
from, and does not have outstanding any Indebtedness or other
similar obligations to or from, any Affiliate of the Company or any
Seller. Except as described in Section 3.22 of the Disclosure
Schedule, neither the Company nor any Affiliate of the Company nor,
to the Knowledge of the Company, any officer or employee of any of
them (i) has owned any direct or indirect interest of any kind in,
or controls or is a director, officer, employee or partner of, or
consultant to, or lender to or borrower from or has the right to
participate in the profits of, any Person that is (A) a competitor,
supplier, distributor, customer, landlord, tenant, creditor or
debtor of the Company, (B) engaged in a business related to the
Business, or (C) a participant in any material transaction to which
the Company has been a party or (ii) has been a party to any
Contract with the Company or engaged in any transaction or business
with the Company. The Company does not have any Contract or
understanding with any officer, director, employee or shareholder
of the Company, or any Affiliate of any such Person that relates,
directly or indirectly, to the subject matter of any Transaction
Document or the consideration payable thereunder or that contains
any terms, provisions or conditions relating to the entry into or
performance of any Transaction Document by the
Company.
Section
3.23 Brokers Fees. The Company does
not have any Liability to pay any commissions or similar fees to
any investment banker, broker or finder with respect to the
transactions contemplated by this Agreement.
Section
3.24 Absence of Certain Business
Practices. Except as set forth in Section 3.24 of the Disclosure
Schedule, the Company has not, and neither Seller, no Affiliate of
a Seller nor, to the Knowledge of the Company, any agent of the
Company, acting alone or together, has directly or indirectly given
or agreed to give any money, gift or similar benefit to any
customer, supplier or employee or agent of any customer or
supplier, any official or employee of any government (domestic or
foreign), or any political party or candidate for office (domestic
or foreign), or other Person who was, is or may be in a position to
help or hinder the business of the Company (or assist the Company
in connection with any actual or proposed transaction), in each
case that (i) will subject the Company to any damage or penalty in
any civil, criminal or governmental litigation or proceeding, (ii)
if not given in the past, would have had a material and adverse
effect on the assets, Business, or operations of the Company, or
(iii) if not continued in the future, would materially and
adversely affect the assets, business, or operations of the
Company. Except as set forth in Section 3.24 of the Disclosure
Schedule, neither Seller, no Affiliate of a Seller nor, to the
actual knowledge of the Sellers, any agent of the Company, acting
alone or together, has received any rebates, payments, commissions
or other economic benefits, regardless of their nature or type,
from any customer, supplier or employee or agent of any customer or
supplier that if not given in the past, in each case that (i) will
subject the Company to any damage or penalty in any civil, criminal
or governmental litigation or proceeding or (ii) would have had a
material and adverse effect on the Business or Financial Statements
of the Company.
23
(a) with respect to any
borrowing or investment arrangements, deposit or checking accounts
or safety deposit boxes of the Company, the name of the financial
institution, the type of account and the account number;
and
(b) the name of each
Person holding a general or special power of attorney from or with
respect to the Company and a description of the terms of each such
power.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PURCHASER
Purchaser,
represents and warrants to Sellers that the following statements
are true and correct:
Section
4.1 Organization; Governing
Documents. Purchaser is a corporation, duly organized,
validly existing and in good standing under the Laws of the State
of Nevada, and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business.
Each of Purchaser and its Subsidiaries are duly qualified or
authorized to do business as a foreign company and is in good
standing under the Laws of each jurisdiction in which the conduct
of its business or the ownership of its properties requires such
qualification or authorization, except where the failure to be in
good standing would have a Material Adverse Effect on Purchaser or
its Subsidiaries. Purchaser has delivered to Sellers accurate and
complete copies of the Governing Documents, for Purchaser and its
Subsidiaries. Neither Purchaser nor any of its Subsidiaries has
taken any action in breach or violation of any of the provisions of
its Governing Documents nor is in breach or violation of any of the
material provisions of their respective Governing Documents, except
as has not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Purchaser.
Section
4.2 Authorization and
Enforceability. The execution, delivery and performance of
the Agreement and Transaction Documents to which Purchaser is a
party have been duly authorized by all necessary action by or on
behalf of Purchaser. Purchaser has full power and authority to
execute and deliver this Agreement and each other Transaction
Document to which it is a party, and to perform its obligations
hereunder and thereunder. This Agreement and each Transaction
Document to which Purchaser is or will be a party has been or will
be duly and validly executed and delivered and constitutes the
valid and legally binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, subject to the
Enforceability Exceptions.
Section
4.3 Conflicts; Consent of Third
Parties. Neither the execution and the delivery by Purchaser
of this Agreement and the other Transaction Documents to which it
is a party, nor the consummation of the transactions contemplated
hereby and thereby on the part of Purchaser, will, with or without
the passage of time or the giving of notice (a) conflict with, or
result in the breach of, any provision of the Governing Documents
of Purchaser or (b) conflict with, violate, result in the breach or
termination of, or constitute a default under, result in an
acceleration of, or create in any party the right to accelerate,
terminate, modify or cancel, any Contract to which Purchaser is a
party or by which Purchaser or any of its properties or assets are
bound.
24
Section
4.4 Brokers Fees. No broker,
finder, agent or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement or any Transaction
Documents based upon arrangements made by or on behalf of
Purchaser.
Section
4.5 No Proceedings. No suit, action
or other proceeding is pending before any Governmental Body seeking
to restrain or prohibit Purchaser from entering into this Agreement
or to prohibit the Closing or the performance of any other
obligation hereunder.
Section
4.6 No Other Representations and
Warranties. Except for the representations and warranties of
Sellers and the Company expressly set forth in ARTICLE II and
ARTICLE III of this Agreement (including the related portions of
the Disclosure Schedule), neither the Sellers, nor the Company, nor
any other Person has made or makes, and Purchaser acknowledges and
agrees on behalf of itself and any other Purchaser Indemnitee that
it has not, will not and is not permitted to rely on, any other
express or implied representation or warranty, either written or
oral, whatsoever, including regarding Sellers, the Company, the
Business, the completeness or accuracy of any information regarding
the Business or as to the future revenue, profitability or success
of the Business, or any representation or warranty arising from
statute or otherwise in law.
ARTICLE V
COVENANTS
(a) If any further
action is necessary to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents)
as any other Party reasonably may request; provided, however, that
no Party shall be required to incur any out-of-pocket expense in
connection therewith if such Party is entitled to indemnity in
connection therewith. Sellers shall reasonably cooperate with
Purchaser to encourage each lessor, licensor, customer, supplier,
or other business associate of the Company to maintain the same
business relationships with the Company after the Closing as it
maintained with the Company prior to the Closing, at
Purchaser’s sole cost and expense. In addition, Sellers shall
use reasonable efforts to cooperate with and provide reasonable
assistance to Purchaser in connection with any securities or
similar filings required under Law with respect to the Company and
the transactions contemplated hereby, at Purchaser’s sole
cost and expense.
(b) Following the
Closing, in the event and for so long as Purchaser actively is
involved in, contesting or defending against any Legal Proceeding
in connection with any fact, situation, circumstances, status,
condition, activity, practice, plan, occurrence, event, incident,
action, Tax matter, failure to act, or transaction involving the
Company and related to pre-Closing periods, each Seller shall
cooperate reasonably with Purchaser and Purchaser’s counsel
in such involvement, contest or defense, and provide such testimony
and access to their books and records as shall be reasonably
necessary in connection with such contest or defense, all at the
sole cost and expense of Purchaser (unless Purchaser is entitled to
indemnification therefor hereunder).
25
Section
5.2 Names and Logos. From and after
the Closing, no Seller will, and each Seller will cause its
Affiliates not to, use any names or logos incorporating or similar
to “Wholesale Express, LLC” or any derivatives thereof
or any other trade name used in the Business.
(a) Purchaser, on the
one hand, and Sellers, on the other, agree, for all Tax purposes,
to report the transactions effected pursuant to the Transaction
Documents in a manner consistent with the terms of this Agreement
and none of them shall take a position on any Tax return, before
any Tax authority or in any judicial proceeding that is, in any
manner, inconsistent with such treatment without the consent of the
others or unless specifically required pursuant to a determination
by an applicable Tax authority. The Parties shall promptly advise
one another of the existence of any Tax audit, controversy or
litigation related to the Tax treatment of the transactions
effected pursuant to the Transaction Documents. For U.S. federal
(and to the extent permitted by Law, state, local and all other)
Tax purposes, the Sellers and Purchaser shall report the purchase
of the Purchased Interests in accordance with IRS Revenue Ruling
99-6, 1999-1 C.B. 432, from Purchaser’s perspective, as a
termination of the Company and a deemed distribution of all assets
of the Company to the Sellers, followed by the sale of all such
assets to Purchaser for the Purchase Price (and any items which,
for federal income tax purposes, are treated as part of the
aggregate consideration paid by Purchaser), and from the
Sellers’ perspective, as a sale of 100% of the membership
interests in the Company.
(b) Notwithstanding
anything to the contrary set forth herein, one-half of any Tax
(including sales Tax, use Tax, income Tax, or documentary stamp
Tax) attributable to the purchase and sale of the Purchased
Interests, or any other transaction contemplated in the Transaction
Documents shall be paid by Sellers and one-half of such Taxes shall
be paid by Purchaser.
(c) For purposes of determining the Taxes of the
Company through a particular date under all provisions of this
Agreement, in the case of any Tax period that includes (but does
not end on) the Closing Date (a “Straddle
Period”), the amount of
any Taxes based on or measured by income or receipts for the
portion of the period ending on the Closing Date shall be
determined based on an interim closing of the books as of the close
of business on the Closing Date (and for such purpose, the Tax
period of any partnership or other pass-through entity in which the
Company holds a beneficial interest shall be deemed to terminate at
such time) and the amount of other Taxes for a Straddle Period
which relates to the portion of the period ending on the Closing
Date shall be deemed to be the amount of such Tax for the entire
Tax period multiplied by a fraction the numerator of which is the
number of days in the Tax period ending on the Closing Date and the
denominator of which is the total number of days in such Straddle
Period.
26
(d) Representative shall prepare or cause to be
prepared, at the Representative’s expense, all income Tax
Returns of the Company for all taxable periods ending on or prior
to the Closing Date with an initial due date after the Closing Date
(taking into account applicable extensions of time to file) (each,
a “Company Pre-Closing
Tax Return”). All Company
Pre-Closing Tax Returns shall be prepared in accordance with
applicable Law, and to the extent not inconsistent with applicable
Law, the past practice of the Company in preparing Tax Returns.
Representative shall provide Purchaser with each Company
Pre-Closing Tax Return no later than thirty (30) days prior to the
due date for such Company Pre-Closing Tax Return (taking into
account applicable extensions of time to file) for
Purchaser’s review, comment and filing. In case of any
dispute regarding a Company Pre-Closing Tax Return provided to
Purchaser for review and involving a disputed item that would have
the effect of increasing the Tax liability of the Company for any
period ending after the Closing Date, such dispute shall be
resolved by the Neutral Accountant in accordance with the procedure
analogous to the procedure set forth in Section
1.6. If any dispute with
respect to a Company Pre-Closing Tax Return is not resolved prior
to the due date of such Tax Return, such Tax Return shall be filed
in the manner which Representative deems correct, without prejudice
to any Party’s rights and obligations under this
Section
5.3. At the request of
Representative, Representative, on behalf of Sellers, and
Purchaser shall cause the Escrow Amount to pay any Taxes shown as
due on any such Company Pre-Closing Tax Returns, but excluding any
Taxes taken into account in determining the Closing Net Working
Capital. Otherwise, Representative, on behalf of Sellers, shall pay
such amounts in cash (excluding any Taxes taken into account in
determining the Closing Net Working Capital).
(e) Purchaser shall
prepare or cause to be prepared and file or cause to be filed all
Tax Returns, other than those described in Section 5.3(d) for the Company
that are filed after the Closing Date and, subject to the right to
payment from the Escrow Account under the last sentence of this
Section 5.3(e),
Purchaser shall pay all Taxes shown as due on those Tax Returns.
All such Tax Returns prepared by Purchaser that relate to a
Pre-Closing Tax Period of the Company or with respect to which
Sellers may have an indemnification obligation under the terms of
this Agreement (each, a “Purchaser Prepared
Return”) shall be prepared in accordance with
applicable Law, and to the extent not inconsistent with applicable
Law, the past practice of the Company in preparing such Tax
Returns. Purchaser shall provide Representative with each Purchaser
Prepared Return prior to the due date for such Purchaser Prepared
Return (taking into account applicable extensions of time to file)
for Representative’s review, comment and approval. In case of
any dispute regarding a Purchaser Prepared Return, such dispute
shall be resolved by the Neutral Accountants in accordance with the
procedure set forth in Section 1.6. If
any dispute with respect to a Purchaser Prepared Return is not
resolved prior to the due date of such Tax Return, such Tax Return
shall be filed (i) with respect to any such Tax Return for a Tax
period that ends on or prior to the Closing Date, in the manner
which Representative deems correct and (ii) with respect to any
such Tax Return for a Tax period ending after the Closing Date, in
the manner which Purchaser deems correct (it being understood that
in either case such filing shall be done without prejudice to any
Party’s rights and obligations under this Section 5.3).
Not later than five days prior to the filing of any such Tax
Returns, Representative shall (A) consent to a payment from the
Escrow Account to Purchaser in respect of any Taxes payable
pursuant to Section
7.1(c) of this Agreement (excluding any Taxes taken into
account in determining the Closing Net Working Capital) or (B) pay,
on behalf of Sellers, any Taxes payable pursuant to Section 7.1(c) of this
Agreement in cash (excluding any Taxes taken into account in
determining the Closing Net Working Capital).
27
(f) The Parties will provide each other with such
reasonable cooperation and information as any of them reasonably
may request of another in filing any Tax Return or conducting any
audit, investigation or other proceeding in respect of Taxes. Each
such Party will make its employees and representatives available on
a mutually convenient basis to provide explanations of any
documents or information provided hereunder. Each such Party will
make available all Tax Returns, schedules and work papers and all
other records or documents relating to Tax matters of the Company
in their possession or control, including audit reports received
from any Tax authority relating to any Tax Return of the Company,
until the expiration of the statute of limitations of the
respective Tax periods to which such Tax Returns and other
documents relate. Any non-public information obtained from the
Parties under this Section 5.3(f)
will be kept confidential, except as
otherwise required by applicable Law.
(g) Except to the
extent required by Law, neither Purchaser nor any Affiliate of
Purchaser (including after the Closing, the Company) shall amend or
cause the Company to amend any Tax Return of the Company for any
Pre-Closing Tax Period without the prior written consent of the
Representative, which consent shall not be unreasonably withheld,
condition or delayed. Without the prior written consent of the
Representative, neither Purchaser nor any Affiliate of Purchaser
shall (or shall cause the Company to) seek any Tax audit or similar
review (including but not limited to participation in any
“voluntary disclosure program” or similar procedure
with any Governmental Body) of the Company relating to any
Pre-Closing Tax Period of the Company.
(h) If any
Governmental Body issues to the Company a written notice of its
intent to conduct any audit, examination, contest, litigation or
other proceeding, suit or dispute with respect to Taxes of the
Company (a “Tax
Proceeding”) or relating to any Tax claim or
deficiency, in each case for any Pre-Closing Tax Period (other than
a Straddle Period) or with respect to any Tax for which Sellers
could reasonably be expected to be responsible by reason of the
indemnity provisions of this Agreement or otherwise, Purchaser
shall promptly (and in all events within ten (10) days of receipt)
notify the Representative of its receipt of such communication from
the Governmental Body; provided,
however, that the failure to notify shall not affect
Sellers’ obligations under the Agreement unless such failure
has materially prejudiced the Representative in the defense of such
Tax Proceeding and, solely to the extent, increased the amount of
Taxes that would have been payable in the absence of such failure
to promptly notify.
(i) The Representative
shall have the right to represent the interests of the Company in
any and all Tax Proceedings relating to Tax Returns or Taxes of the
Company for any Pre-Closing Tax Periods to the extent that such Tax
Proceeding (i) involves any Tax Returns of the Company for any
Pre-Closing Tax Period; (ii) may affect the Tax liability of (or
the amount of any Tax refund, credit or offset of) Sellers for any
Pre-Closing Tax Period; or (iii) is reasonably be expected to give
rise to indemnification obligations from Sellers under this
Agreement. The Representative and Purchaser shall jointly agree on
the conduct of any Tax Proceedings relating to any Straddle Period
Tax Return to the extent that Sellers may have an indemnification
obligation with respect to such Straddle Period Tax Return under
this Agreement.
28
(j) In the event that
Purchaser and, after the Closing, the Company on the one hand, or
the Representative on the other controls a Tax Proceeding of the
Company (such party, the “Controlling Party”) and
the outcome of the Tax Proceeding would reasonably be expected to
give rise to an indemnification obligation under this Agreement by
the other party (the “Participating Party”),
then (i) the Controlling Party shall control such contest
diligently and in good faith; (ii) the Controlling Party shall keep
the Participating Party reasonably informed regarding the status of
such Tax Proceeding and shall provide to Participating Party copies
of any and all correspondence received from the Tax authority
related to such Tax Proceeding; (iii) the Participating Party, at
their sole cost and expense, shall have the right to participate,
or cause the Company to participate in such Tax Proceeding and in
connection therewith, the Controlling Party shall provide the
Participating Party with the opportunity to attend conferences with
the Tax authority and to review and provide comments with respect
to written responses provided to the Tax authority, and (iv) the
Controlling Party shall not settle, resolve, compromise or abandon
(and shall not allow the Company to settle, resolve, or abandon)
such Tax Proceeding without the prior written permission of the
Participating Party (which shall not be unreasonably withheld,
conditioned or delayed). Purchaser shall promptly notify the
Representative in writing upon receipt by Purchaser or any
Affiliate of Purchaser (including the Company) of any pending or
threatened Tax Proceedings relating to the Company or the income,
properties or operations of the Company, for any Tax period ending
on or prior to the Closing Date or any Straddle
Period.
(k) Purchaser
shall, and shall cause the Company to remit, to the Representative
within ten (10) days after receipt (or realization by way of a
reduction in Taxes otherwise payable) by Purchaser, the Company (or
a Tax group of which any of them is a member), the portion of all
refunds or credits of Taxes that relate to any Pre-Closing Tax
Period (or Tax that is or would be the responsibility of Sellers
under this Agreement). The Representative shall be permitted to
file at Sellers’ sole expense, and Purchaser and the Company
(and any Tax group of which the Company is a member) shall
reasonably cooperate with the Representative in connection with,
any claims for refund of Taxes to which the Representative or
Sellers are entitled pursuant to this Section 5.3(k).
(l) The Purchaser
shall prepare or cause to be prepared an allocation in accordance
with Code Section 1060 and the applicable Treasury Regulations
promulgated thereunder of the aggregate Purchase Price (as adjusted
to reflect the Final Adjustment Amount payment and other payments
treated as adjustments to the aggregate Purchase Price under this
Agreement) and any items which, for federal income tax purposes,
are treated as part of the aggregate consideration paid by
Purchaser allocable to the assets of the Company (the
“Purchase Price
Allocation”) and shall, no later than one hundred
twenty (120) days after the Closing Date, provide the Purchase
Price Allocation to Representative for the Representative to
review. The Representative shall notify the Purchaser of any
objections within thirty (30) days after the Purchaser provides the
Purchase Price Allocation to the Representative, and Purchaser and
the Representative will cooperate in good faith to try to resolve
any disputed items or amounts during the twenty (20) day period
immediately following Purchaser’s receipt of the notice of
objection. If Purchaser and the Representative reach an agreement
on the Purchase Price Allocation (or if the Representative fails to
object to the Purchase Price Allocation prepared by the Purchaser),
then neither Purchaser nor the Sellers shall take a position
inconsistent with the Purchase Price Allocation (including in
audits) absent a “determination” within the meaning of
Section 1313 of the Code (or execution of a Form 870-AD or
successor form) to the contrary. If Purchaser and the
Representative are not able to agree on the Purchase Price
Allocation within such twenty (20) day period, then Purchaser and
the Representative shall have no further obligations pursuant to
this Section 5.3(l), and each of Purchaser and the Representative
shall make its own determination of the allocation of the Purchase
Price. For purposes of this Section 5.3(l), the assets of the
Company to be treated as intangible assets as provided in Section
197 of the Code shall not include the
non-competition/non-solicitation agreements of the Sellers
contemplated by Section 5.4, as no portion of the Purchase Price is
intended to be compensatory in nature but rather such agreements
are sought to protect Purchaser's investment in the acquired
goodwill and no separate consideration is being paid
therefor.
29
Section
5.4 Non-Competition;
Non-Solicitation.
(a) Each Seller
acknowledges that it is familiar with the trade secrets and other
confidential information of the Company. Therefore, and in further
consideration of the compensation to be paid to Sellers hereunder,
each Seller agrees to the covenants set forth in this Section 5.4 and acknowledges
that Purchaser would not have entered into this Agreement but for
Sellers’ agreement to the restrictions set forth in this
Section
5.4.
(b) For a period of
three (3) years from and after the Closing Date, no Seller shall,
directly or indirectly, own, operate, lease, manage, control,
engage in, invest in, lend to, own any debt or equity security of,
permit its name to be used by, act as consultant or advisor to, or
render services for (alone or in association with any person, firm,
corporate or other business organization), any Person in any
business that is competitive with the Business; provided, however, that nothing herein
shall prohibit (i) a Seller from doing any of the foregoing
directly or indirectly for, in connection with, or on behalf of,
Purchaser and its Affiliates or (ii) a Seller being a passive,
beneficial owner of less than five percent (5%) of the outstanding
securities of any publicly-traded corporation other than
Purchaser.
(c) For a period of
three (3) years from and after the Closing Date, no Seller shall
directly or indirectly: (i) induce or attempt to induce any person
who is, or was within three (3) months of any such inducement, an
employee or consultant of the Company, Purchaser, or any of their
respective Subsidiaries (collectively, the “Company Parties”) to
leave the employ of, or engagement with, any of the Company
Parties, or in any way interfere with the relationship between any
of the Company Parties and any employee or consultant thereof, (ii)
hire or engage any person who is or was within three (3) months
prior to such hiring or engaging an employee or consultant to the
Company Parties, or (iii) induce or attempt to induce any person or
entity who is a customer, supplier, licensee, licensor or other
business relation of any of the Company Parties to cease doing
business with any of the Company Parties, or in any way interfere
with the relationship between any such customer, supplier,
licensee, licensor, or business relation and any of the Company
Parties. No Seller shall ever make or publish any statement or
communication that is materially disparaging with respect to any of
the Company Parties, or any of their respective executive officers
or directors; provided that the foregoing shall not prohibit any
Seller from (i) responding truthfully to any valid request made
pursuant to any Legal Proceeding or (ii) making any claims under
this Agreement.
30
(d) The Parties hereto
acknowledge and agree that Purchaser and each of its Affiliates,
successors and assigns would suffer irreparable harm from a breach
of this Section 5.4
by any Seller and that money damages would not be an adequate
remedy for any such breach. Therefore, in the event a breach or
threatened breach of this Section 5.4, Purchaser and each
of its Affiliates or their respective successors and assigns, in
addition to other rights and remedies existing in their favor,
shall be entitled to specific performance, injunctive and other
equitable relief from a court of competent jurisdiction in order to
enforce, or prevent any violations of, the provisions hereof
(without posting a bond or other security and at the expense of the
breaching Seller, including reasonable attorneys’ fees and
expenses). The restrictive covenants set forth in this Section 5.4 shall be construed
as agreements independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Seller
against Purchaser, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement by
Purchaser of any restrictive covenant contained in this
Section 5.4.
Purchaser has fully performed all obligations entitling it to the
restrictive covenants set forth in this Section 5.4, and such
restrictive covenants therefore are not executory or otherwise
subject to rejection under chapter 11 of title 11 of the United
States Code.
(e) If the final
judgment of a court of competent jurisdiction declares any term or
provision of this Section
5.4 to be invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the invalid
or unenforceable term or provision, and this Agreement shall be
enforceable as so modified to cover the maximum duration, scope or
area permitted by Law. In addition, in the event of an alleged
breach or violation by any Seller of this Section 5.4, the three (3) year
period described in clauses (b) and (c) above shall be tolled with
respect to such Seller until such breach or violation has been duly
cured. Each Seller agrees that the restrictions contained in this
Section 5.4 are
reasonable.
Section
5.5 Resignations. At the Closing,
Sellers shall deliver to Purchaser written resignations, effective
as of the Closing Date, of the officers and managers of the Company
requested by Purchaser at least three (3) Business Days prior to
the Closing.
Section
5.6 Tangible Property. On the
Closing Date, Sellers shall deliver, or cause to be delivered, to
the Company possession of all tangible property belonging to the
Company that is in their personal possession or under their
control.
Section
5.7 Discharge of Affiliate
Obligations. Prior to the Closing, Sellers shall cause all
Indebtedness of the Company to any of Seller or any of their
respective Affiliates to be satisfied or cancelled, and Sellers
shall cause all Indebtedness of any of Seller or any of their
respective Affiliates to the Company to be satisfied or
cancelled.
31
Section
5.8 Employee
Matters
.
Purchaser hereby covenants and agrees that, for a period commencing
upon the Closing Date and ending one year following the Closing
Date (or if shorter, during the period of employment), Purchaser
shall, or it shall cause the Company and its Subsidiaries to, (i)
provide each employee of the Company as of the Closing Date who is
then employed by the Company or its Subsidiaries (each, an
“Employee”) with at least
the same level of base salary that was provided to each such
Employee immediately prior to the Closing Date, (ii) provide each
Employee who has been with the Company for at least one year prior
to the Closing Date with an incentive compensation opportunity that
is at least equal to that provided to such Employee immediately
prior to the Closing Date and (iii) provide the Employees with
employee benefits that are no less favorable in the aggregate than
the employee benefits provided to such Employees immediately prior
to the Closing Date. Employees shall receive credit for their
service on or prior to the Closing Date with the Company for all
purposes (including, for purposes of eligibility to participate,
vesting, benefit accrual and eligibility to receive benefits, but
excluding the vesting of awards granted pursuant to the Merger
Agreement) under any employee benefit plan, program or arrangement
established or maintained by Purchaser, the Company or any of their
respective Subsidiaries under which each Employee may be eligible
to participate on or after the Closing Date to the same extent
recognized by the Company under comparable plans immediately prior
to the Closing Date. Such plan, program or arrangement shall credit
each such Employee for service accrued or deemed accrued on or
prior to the Closing Date with the Company. For the avoidance of
doubt, no Employee or any other current or former employee of the
Company shall be guaranteed employment hereby or be a third-party
beneficiary with respect to this Section 5.8.
Section
5.9 Efforts to Consummate
Transaction. Sellers and Respresentative shall use best
efforts to take all action required of such Party and do all things
necessary, proper or advisable on its part in order to cause the
satisfaction of the conditions set forth in Section 6.1 on or prior
to October 30, 2018 (and if the Closing has not occurred on or
prior to such date, on the earliest date thereafter until Closing).
Purchaser shall use best efforts to take all action required of it
and do all things necessary, proper or advisable on its part in
order to cause the satisfaction, but not waiver, of the conditions
set forth in Section 6.2 on or prior to October 30, 2018 (and if
the Closing has not occurred on or prior to such date, on the
earliest date thereafter until Closing).
Section
5.10 Estoppel
Certificates.
Section
5.11 Upon
Purchaser’s request, the Sellers shall use commercially
reasonable efforts to assist Purchaser in Purchaser’s efforts
to obtain, within thirty (30) days of the Closing Date, duly
executed estoppel certificates for those Real Property Leases
(other than the New Leases (as defined in the Merger
Agreement).
ARTICLE VI
Section
6.1 Conditions to the Obligation of
Purchaser. At or prior to Closing, the Parties, as
applicable, have delivered (or have been deemed to waive delivery
of) the following:
32
(a) The
representations and warranties of Sellers (i) contained in Article
II and Article III (other than those set forth in clause (ii)
below) of this Agreement shall be true and correct (without giving
effect to any limitation as to materiality or Material Adverse
Effect or similar qualification) both as of the date of this
Agreement and as of the Closing (other than such representations
and warranties that are made as of a specified date, which
representations and warranties shall be true and correct (without
giving effect to any limitation as to materiality or Material
Adverse Effect or similar qualification) as of such date), except
where the failure to be so true and correct has not had a Company
Material Adverse Effect, and (ii) contained in Section 3.1, Section
3.3, Section 3.7(b), (d)-(q), Section 3.10(c), and Section
3.22-Section 3.25 of this Agreement shall be true and correct both
as of the date of this Agreement and as of the date of Closing
(other than such representations and warranties that are made as of
a specified date, which representations and warranties shall be
true and correct as of such date), except where the failure to be
so true and correct would not be material to
Purchaser.
(b) There shall not
have occurred a Company Material Adverse Effect on or after the
Effective Date and prior to Closing.
(c) No temporary
restraining order, preliminary or permanent injunction, cease and
desist Order or other Order issued by any Governmental Body, shall
be in effect prohibiting or preventing the transactions
contemplated by this Agreement.
(d) Sellers shall have
delivered the following to Parent:
(i) a certificate,
dated as of the Closing Date, executed by Representative
representing that the conditions set forth in Section 6.1(a) and
Section 6.1(b) have been satisfied (the “Sellers Closing
Certificate”);
(ii) a
certificate of the secretary of the Company certifying to (A) the
articles of organization, as amended, of the Company, certified by
the Secretary of State of the State of Tennessee, as of a recent
date, and stating that no amendments have been made to such
certificate of organization since such date, (B) all other
Governing Documents of the Company, (C) the adoption of resolutions
by the Company approving the transactions contemplated by the
Transaction Documents;
(iii) a
properly executed affidavit from each Seller in a form satisfactory
to Purchaser, certifying that such Seller is not a foreign person
within the meaning of Section 1445 of the Code;
(iv) a
good standing certificate, as of a recent date, for the Company
certified by the Secretary of State of the State of
Tennessee;
(v) the General
Release, duly executed and delivered by each Seller;
and
(vi) resignation
of the managers and officers of the Company pursuant to
Section
5.5.
33
(e) The conditions set
forth in Section 6.1 of the Merger Agreement shall have been
satisfied or waived (other than those conditions that by their
terms cannot be satisfied until the closing of the transactions
contemplated by the Merger Agreement).
Section
6.2 Conditions to Obligation of
Sellers. The obligation of Sellers to consummate the
transactions contemplated by this Agreement is subject to the
fulfillment on or prior to the Closing Date of each of the
following conditions, any one or more of which (to the extent
permitted by applicable Law) may be waived by Sellers:
(a) The
representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects (other
than those representations and warranties that are qualified by
materiality or Material Adverse Effect or similar qualification,
which shall be true and correct in all respects) both as of the
date of this Agreement and as of the Closing, other than such
representations and warranties that are made as of a specified
date, which representations and warranties shall be true and
correct as of such date. The covenants and agreements contained in
this Agreement to be complied with by Purchaser at or before the
Closing shall have been complied with in all material
respects.
(b) There shall not
have occurred a Material Adverse Effect with respect to Purchaser
on or after the Effective Date and prior to Closing.
(c) No temporary
restraining order, preliminary or permanent injunction, cease and
desist Order or other order issued by any Governmental Body shall
be in effect prohibiting or preventing the transactions
contemplated by this Agreement.
(d) Parent shall have
delivered the following to Representative:
(i) a certificate,
dated as of the Closing Date, executed by a duly authorized officer
of Purchaser representing that the conditions set forth in Section
6.2(a) and Section 6.2(b) have been satisfied (the
“Purchaser Closing
Certificate”);
(ii) a
certificate of the secretary of Purchaser certifying to (A) the
articles of incorporation, as amended, of Purchaser, certified by
the Secretary of State of the State of Nevada, as of a recent date,
and stating that no amendments have been made to such certificate
of organization since such date, (B) all other Governing Documents
of Purchaser and (C) the adoption of resolutions of Purchaser
approving the transactions contemplated by the Transaction
Documents, and (D) a good standing certificate, as of a recent
date, for Purchaser certified by the Secretary of State of
Nevada;
(iii) evidence
satisfactory to Sellers of the termination of any guarantees of
Sellers of the Floor Plan;
(iv) evidence
satisfactory to Sellers of the release of any liens on the assets
and properties of Sellers and their respective Affiliates related
to the Floor Plan; and
(v) a good standing
certificate, as of a recent date, for Purchaser certified by the
Secretary of State of the state of its incorporation.
34
(e) The conditions set
forth in Section 6.2 of the Merger Agreement shall have been
satisfied or waived (other than those conditions that by their
terms cannot be satisfied until the closing of the transactions
contemplated by the Merger Agreement).
ARTICLE VII
Subject
to the limitations set forth herein, each Seller, jointly and
severally, (except with respect to ARTICLE II hereof, which shall
be severally, but not jointly), covenants and
agrees to defend, indemnify and hold harmless Purchaser and its
respective Affiliates (collectively, the “Purchaser Indemnitees”),
from and against, and to pay or reimburse Purchaser Indemnitees
for, any and all claims, Liabilities, obligations, losses, fines,
costs, proceedings or damages, including all reasonable fees and
disbursements of counsel incurred in the investigation or defense
of any of the same or in asserting any of their respective rights
hereunder (collectively, “Losses”), based on,
resulting from, arising out of or relating to:
(a) any breach of
any representation or warranty of any Seller or the Company
contained in this Agreement or the Sellers Closing Certificate, it
being understood that, in determining the amount of any Losses
(but, for the avoidance of doubt, not whether or not a
misrepresentation or breach has occurred) in connection with a
claim under this Section
7.1(a), all representations and warranties shall be read
without regard and without giving effect to any materiality or
Material Adverse Effect or similar qualification contained therein
(as if such qualification were deleted from such representation or
warranty);
(b) any failure of any
Seller, the Company or the Representative to perform any covenant
or agreement of such Party made or contained in this Agreement or
any Transaction Document, or fulfill any obligation in respect
thereof;
(c) any Taxes of
the Company with respect to any tax year or portion thereof ending
on or before the Closing Date (or for any tax year beginning before
and ending after the Closing Date to the extent allocable to the
portion of the period beginning before and ending on the Closing
Date); and
(d) any Company
Transaction Expenses or Change of Control Payments to the extent
not accounted for in the determination of the Purchase
Price.
Section
7.2 Indemnity Obligations of
Purchaser. From and after the Closing, Purchaser covenants
and agrees to defend, indemnify and hold harmless Sellers and their
respective Affiliates from and against any and all Losses based on,
resulting from, arising out of or relating to:
35
(a) any breach of any
representation or warranty of Purchaser contained in this Agreement
or the Purchaser Closing Certificate, it being understood that, in
determining the amount (but, for the avoidance of doubt, not
whether or not a misrepresentation or breach has occurred) of any
Losses in connection with a claim under this Section 7.2(a), all
representations and warranties shall be read without regard and
without giving effect to any materiality or Material Adverse Effect
or similar qualification contained therein (as if such
qualification were deleted from such representation or warranty);
and/or
(b) any failure of
Purchaser to perform any covenant or agreement made or contained in
this Agreement or any Transaction Document, or fulfill any other
obligation in respect thereof.
Section
7.3 Indemnification
Procedures.
(a) Third Party Claims. In the case
of any claim asserted by a third party (a “Third Party Claim”)
against a party entitled to indemnification under this Agreement
(the “Indemnified
Party”), notice shall be given by the Indemnified
Party to the party required to provide indemnification (the
“Indemnifying
Party”) promptly after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be sought.
If the Indemnifying Party provides a written notice to the
Indemnified Party within fifteen (15) days after its receipt of
notice of such claim that it will, subject to the limitations set
forth herein, including without limitation, the Cap and the Basket,
indemnify and hold the Indemnified Parties harmless from all Loss
related to such Third Party Claim for which the Indemnified Party
would be entitled to indemnification under this ARTICLE VII, the
Indemnified Party shall permit the Indemnifying Party (at the
expense of such Indemnifying Party) to assume the defense of such
Third Party Claim or any litigation with a third party resulting
therefrom; provided, however, that (i) the counsel for the
Indemnifying Party who shall conduct the defense of such claim or
litigation shall be subject to approval of the Indemnified Party,
which approval shall not be unreasonably withheld, conditioned or
delayed, (ii) the Indemnified Party may participate in such defense
at such Indemnified Party’s expense, (iii) the failure by any
Indemnified Party to give notice of a Third Party Claim to the
Indemnifying Party as provided herein shall not relieve the
Indemnifying Party of its indemnification obligation under this
Agreement except and only to the extent that, as a result of such
failure to give notice, the defense against such claim is
materially impaired, and (iv) the fees and expenses incurred by the
Indemnified Party prior to the assumption of a Third Party Claim
hereunder by the Indemnifying Party shall be borne by the
Indemnifying Party. Except with the prior written consent of the
Indemnified Party, no Indemnifying Party, in the defense of any
Third Party Claim, shall consent to entry of any judgment or enter
into any settlement that provides for injunctive or other
nonmonetary relief affecting the Indemnified Party or that does not
include as an unconditional term thereof the giving by each
claimant or plaintiff to such Indemnified Party of a general
release from any and all liability with respect to such Third Party
Claim. Notwithstanding anything herein to the contrary, the
Indemnifying Party shall not be entitled to assume control of the
defense against a Third Party Claim if (1) the claim for
indemnification relates to or arises in connection with any
criminal or quasi criminal proceeding, action, indictment,
allegation or investigation; (2) the claim seeks an injunction,
specific performance or any other equitable or non-monetary relief
against the Indemnified Party; (3) the Indemnified Party has been
advised by counsel that a reasonable likelihood exists of a
conflict of interest between the Indemnifying Party and the
Indemnified Party; (4) the Indemnifying Party fails to prosecute or
defend such claim in a timely manner; or (5) taking into account
the Cap, the Indemnified Party is reasonably likely to have Losses
with respect to such Third Party Claim for which it will not be
indemnified that exceed the amount of Losses for which it will be
indemnified; provided, however, that in the case of clause (5), the
Indemnifying Party may participate in such defense at the
Indemnifying Party’s expense. If the Indemnifying Party does
not accept the defense of a Third Party Claim within thirty (30)
days after receipt of the written notice thereof from the
Indemnified Party described above, the Indemnified Party shall have
the full right to defend against any such claim or demand. In any
event, the Indemnifying Party and the Indemnified Party shall
reasonably cooperate in the defense of any Third Party Claim and
the records of each shall be reasonably available to the other with
respect to such defense.
36
(b) Non-Third Party Claims. With
respect to any claim for indemnification hereunder which does not
involve a Third Party Claim, the Indemnified Party will give the
Indemnifying Party written notice of such claim. The Indemnifying
Party may acknowledge and agree by notice to the Indemnified Party
in writing to satisfy such claim within fifteen (15) days of
receipt of notice of such claim from the Indemnified Party. If the
Indemnifying Party shall dispute such claim, the Indemnifying Party
shall provide written notice of such dispute to the Indemnified
Party within such fifteen (15) day period. If the Indemnifying
Party shall fail to provide written notice to the Indemnified Party
within fifteen (15) days of receipt of notice from the Indemnified
Party that the Indemnifying Party either acknowledges and agrees to
pay such claim or disputes such claim, the Indemnifying Party shall
be deemed to have acknowledged and agreed to pay such claim in
full, subject to the limitations set forth herein, and to have
waived any right to dispute such claim.
Section
7.4 Expiration of Representations and
Warranties. All representations and warranties contained in
this Agreement shall survive the Closing until the date which is
one (1) year after the Closing Date (the “General Survival
Period”), subject to Section 7.5. All of the covenants
and agreements and related indemnification obligations under
Section 7.1 and
Section 7.2 (other
than Section 7.1(a)
and Section 7.2(a)
which shall survive as set forth in the previous sentence) shall
survive the Closing until the first to occur of (i) the expiration
by their terms of the obligations of the applicable Party under
such covenant or agreement, (ii) such covenant or agreement being
fully performed or fulfilled, unless non-compliance with such
covenants or agreements is expressly waived in writing by the party
entitled to such performance, or (iii) the date that is one (1)
year following the Closing Date (provided, that solely with respect
to the covenant set forth in Section 5.4, the time period
set forth in this clause (iii) shall be forty-two (42) months) (the
“Covenant Survival
Period” and, together with the General Survival
Period, as applicable, the “Survival Period”).
Notwithstanding the foregoing, the covenants and agreements set
forth in: (a) Section
5.1 and Section
5.4 shall survive for three (3) years following the Closing
Date; (b) Section
5.3 shall survive for five (5) years following the Closing
Date; and (c) Section
5.2 shall survive indefinitely. Each Party’s
indemnification obligations pursuant to this ARTICLE VII shall
terminate at the expiration of the applicable Survival Period;
provided, however, that the Survival Period shall not affect the
Parties’ rights and obligations with respect to any claim
thereunder (a) if written notice of a breach thereof is made in
accordance with this ARTICLE VII and Section 9.6 on or prior to
11:59 p.m. Central Time on the expiration date of the applicable
Survival Period and (b) such claim is made in respect of Losses
incurred prior to the expiration date of the applicable Survival
Period, and any such claim may thereafter be pursued until such
claim is resolved in full.
Section
7.5 Certain Limitations; Calculation of
Losses; Mitigation. The indemnification provided for in
Section 7.1 and
Section 7.2 shall
be subject to the following limitations:
37
(a) Sellers shall not
be liable to Purchaser Indemnitees for indemnification pursuant to
Section 7.1(a)
until the aggregate amount of all Losses in respect of
indemnification under Section 7.1(a) of this
Agreement and Section 7.1(a) of the Merger Agreement exceeds
$400,000 (the “Basket”), in which event
Sellers shall be required to pay or be liable for such Losses
solely in excess of the amount of the Basket, subject to the other
limitations set forth herein. Stockholders (as defined in the
Merger Agreement) and Sellers shall not be liable to Purchaser
Indemnitees for indemnification pursuant to Section 7.1 of this Agreement
and Section 7.1 of the Merger Agreement after the aggregate amount
of all Losses in respect of indemnification under Section 7.1 of this Agreement
and Section 7.1 of the Merger Agreement exceeds the Escrow Amount
(the “Cap”). For the avoidance
of doubt, the Parties acknowledge and agree that, in addition to
this Agreement, the Basket, Cap and Escrow Account shall be
applicable to and aggregated across the indemnification obligations
under the Merger Agreement.
(b) Purchaser shall
not be liable to Sellers for indemnification under Section 7.2(a) of this
Agreement and Section 7.2(a) of the Merger Agreement until the
aggregate amount of all Losses in respect of indemnification under
Section 7.2(a) of
this Agreement and Section 7.2(a) of the Merger Agreement exceeds
the Basket, in which event Purchaser shall be required to pay or be
liable for all such in excess of the amount of the Basket, subject
to the other limitations set forth herein. Sellers shall not be
indemnified pursuant to Section 7.2(a) of this
Agreement and Section 7.2(a) of the Merger Agreement with respect
to any Loss if the aggregate amount of all Losses for which Sellers
have received indemnification pursuant to Section 7.2(a) of this
Agreement and Section 7.2(a) of the Merger Agreement has exceeded
the Cap.
(c) Notwithstanding
anything to the contrary set forth herein, nothing herein,
including without limitation any Survival Period, shall operate to
limit the common law liability of any Seller to Purchaser or the
Company for Fraud, which will be extended to the statute of
limitations in such events.
(d) For the purposes of
calculating Losses to which Purchaser Indemnitees are entitled
under this ARTICLE VII, (i) such Losses shall not include any
punitive, special, indirect, exemplary or consequential damages,
damages for lost profits, damages for diminution in value or
business interruption or damages computed on a multiple of earnings
or similar basis; (ii) such Losses shall be determined without
duplication of recovery by reason of the state of facts giving rise
to such Loss constituting a breach of more than one representation,
warranty, covenant or agreement; (iii) such Losses shall not
include Losses related to any matter that was subject to or could
have been taken into account in the determination of the amount of
any post-Closing adjustment pursuant to Section 1.6; (iv) such Losses
shall be reduced by the amount of any proceeds that any Purchaser
Indemnitee receives pursuant to the terms of any insurance
policies, net of any related increase in premiums associated with
such insurance policies as a result of making such claims;
provided, however, such Purchaser Indemnitee shall promptly
reimburse the Sellers for any subsequent recoveries for such
sources if previously indemnified hereunder so as to avoid a double
recovery; and (v) such Losses shall be reduced by the amount of any
prior or subsequent recovery by a Purchaser Indemnitee with respect
to such Losses; provided, however, such Purchaser Indemnitee shall
promptly reimburse the Sellers for any subsequent recoveries for
such sources if previously indemnified hereunder so as to avoid a
double recovery. Without limiting Purchaser’s rights to
pursue indemnification hereunder, Purchaser Indemnitees covenant
and agree to use commercially reasonable efforts to pursue recovery
for Losses under any available insurance coverage and to use
commercially reasonable efforts to pursue payment under any
agreement, contract, arrangement or commitment pursuant to which a
Purchaser Indemnitee is entitled to indemnification for any Loss
for which a Purchaser Indemnitee seeks indemnification pursuant to
this ARTICLE VII.
38
(e) Each Party shall
use its respective commercially reasonable efforts to mitigate the
character and amount of any of its Losses upon becoming aware of
any event which would reasonably be expected to, or does, give rise
thereto. The Parties acknowledge and agree that any reasonable
out-of-pocket fees, costs or expenses incurred in connection with
such mitigation efforts shall themselves constitute Losses, to the
extent the Losses mitigated would have been indemnifiable pursuant
to this ARTICLE VII, but not in an amount in excess of the amount
by which such Losses were actually mitigated.
(f) If an
indemnification obligation under this ARTICLE VII arises in respect
of any indemnifiable event (i) for which a Purchaser Indemnitee
receives indemnification from the Escrow Amount or Sellers and (ii)
which results in any Tax benefit to a Purchaser Indemnitee or their
Affiliates for any taxable period which would not, but for such
indemnifiable event, be available to such Purchaser Indemnitee,
then Purchaser shall pay, or shall cause to be paid, to
Representative for the account of Sellers the amount of any such
Tax benefit, to the extent then determined, pro rata to each
Seller, an aggregate amount equal to the actual Tax saving produced
by such Tax benefit.
(g) Notwithstanding
anything to the contrary contained herein, no claim for Losses may
be asserted by Purchaser or claimed by any Purchaser Indemnitee as
a breach of any provision of this Agreement or may otherwise be a
subject of indemnity or reimbursement from the Escrow Account or
Sellers hereunder with respect to any of the following: (i) the
value or condition of any Tax asset of the Company (unless accrued
in the Net Working Capital calculation); (ii) the ability of
Purchaser, the Company or their Affiliates to utilize any Tax asset
following the Closing, (iii) any Tax filing positions taken in any
Tax period ending after the Closing Date (except Straddle Periods,
to the extent provided herein).
Section
7.6 Indemnification Payments to Purchaser
Indemnitees. Any indemnification to which Purchaser
Indemnitees are entitled under this ARTICLE VII as a consequence of
any Losses they may suffer shall be made as a release to Purchaser
Indemnitees solely from the Escrow Amount in accordance with the
terms of the Escrow Agreement of a number of Parent Consideration
Shares (as defined in the Merger Agreement) or Conversion Shares
(as defined in the Merger Agreement) for cancellation, as
applicable, which shall be deemed to have a value of the Per Share
Valuation Amount per share, with a value equal to such Losses, and,
to the extent that the Escrow Account is depleted or otherwise
insufficient to satisfy such Losses, other than in the event of
Fraud of a Seller, the Sellers shall have no further liability
pursuant to this ARTICLE VII; provided, that at the option of the
Representative, the Sellers can make all or any portion of any such
required payment to Purchaser Indemnitees in immediately available
funds, and, following such payment, Representative shall be
entitled to direct the Escrow Agent to release an amount of Parent
Consideration Shares or Conversion Shares, which shall be deemed to
have a value of the Per Share Valuation Amount per share, to the
Representative equal to the amount paid in immediately available
funds by Sellers to Purchaser Indemnitees. For the avoidance of
doubt, in no event, other than the Fraud of a Seller, shall any
Seller be required to pay any indemnification claim to Purchaser
Indemnitees in cash or immediately available funds or any other
form of consideration other than the Parent Consideration Shares
and Conversion Shares and in no event, other than the Fraud of a
Seller, shall the Sellers’ and the Stockholders (as defined
in the Merger Agreement) collective indemnification obligations
with respect to this ARTICLE VII and Article VII of the Merger
Agreement exceed the Escrow Amount.
39
Section
7.7 Treatment of Indemnification
Payments. All indemnification payments made under this
Agreement shall be treated by the Parties as an adjustment to the
Purchase Price to the extent permitted by applicable
Law.
Section
7.8 Effect of Knowledge.
Notwithstanding anything herein to the contrary, the Sellers shall
have no Liability for any breach of any representation or warranty
if any executive officer or director of Purchaser had actual
knowledge of said breach or the underlying facts giving rise to
such breach before the Closing. Without limiting the foregoing, the
executive officers and directors of Purchaser shall be deemed to
have actual knowledge of any and all materials, documents and other
information, and the terms, condition and content thereof,
contained in the data room at least three (3) Business Days prior
to the Closing Date.
Section
7.9 Sole Remedy; No Claims Against the
Company. Except for claims based upon Fraud by a Seller, the
indemnification provided for in this ARTICLE VII shall be the sole
remedy of the Purchaser Indemnitees for monetary damages with
respect to breaches of this Agreement and the Transaction Documents
or otherwise arising out of, or related to, this Agreement and the
Transaction Documents and the transactions contemplated hereby and
thereby, and the Purchaser Indemnitees hereby waive, and covenant
and agree not to bring, any claims for monetary damages in
connection therewith other than pursuant to this ARTICLE VII except
for claims based upon Fraud by a Seller. No Seller shall, after the
Closing, be entitled to seek or recover by contribution or
otherwise any amounts from the Company on account of any breach of
any representation or warranty or covenant or other agreement
contained in this Agreement or any other Transaction Document prior
to the Closing or otherwise.
ARTICLE VIII
TERMINATION
Section
8.1 Termination of Agreement.
Certain of the Parties may terminate this Agreement as provided
below:
(a) The Parties may
terminate this Agreement by mutual written consent at any time
prior to the Closing;
(b) Purchaser may
terminate this Agreement (so long as Purchaser is not in material
breach of any of its representations, warranties, covenants or
agreements contained in this Agreement) by giving written notice to
the Representative at any time prior to the Closing (i) in the
event that any Seller has breached any representation, warranty,
covenant or agreement contained in this Agreement, which breach
would cause the failure of any condition set forth in Section 6.1,
or (ii) if the Closing shall not have occurred on or before the
Termination Date, by reason of the failure of any condition
precedent to have occurred; and
40
(c) The Representative
may terminate this Agreement (so long as none of the Sellers is in
material breach of any of its representations, warranties,
covenants or agreements contained in this Agreement) by giving
written notice to Purchaser at any time prior to the Closing (i) in
the event Purchaser has breached any representation, warranty,
covenant or agreement contained in this Agreement which breach
would cause the failure of any condition set forth in Section 6.2;
or (ii) if the Closing shall not have occurred on or before the
Termination Date.
Section
8.2 Effect of Termination. If any
Party terminates this Agreement pursuant to Section 8.1, all rights
and obligations of the Parties hereunder shall terminate without
any liability of any Party to the other Party except for
Purchaser's obligation to pay for the legal and accounting fees,
costs and expenses of Sellers relating to the transaction
contemplated hereby that were incurred on or after October 10, 2018
through the Termination Date.
ARTICLE IX
MISCELLANEOUS
(a) For purposes of
this Agreement, the following terms shall have the meanings
specified in this Section
9.1(a):
“Affiliate” means, with
respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such
Person, and in the case of any natural Person shall include the
spouse, children, parents and siblings of such Person.
“Books and Records” means
all books and records of the Company, including files, manuals,
price lists, mailing lists, distributor lists, customer lists,
sales and promotional materials, purchasing materials, documents
evidencing intangible rights or obligations, personnel records,
accounting records and litigation files (regardless of the media in
which stored).
“Business” means the
business of the Company as conducted as of the date hereof, which
is the purchase and sale of automobiles in the wholesale market and
the sale of automobiles in the retail market.
“Business Day” means any
day of the year on which national banking institutions in the City
of New York are open to the public for conducting business and are
not required or authorized to close.
“Change of Control
Payments” means any and all bonuses or similar
payments payable as a result of the transactions contemplated
hereby that have not been paid prior to Closing.
“Code” shall mean the
Internal Revenue Code of 1986, as amended.
“Company Material Adverse
Change” or “Company Material Adverse
Effect” means a Material Adverse Change or a Material
Adverse Effect with respect to the Company.
41
“Company Transaction
Expenses” means any and all legal, accounting,
consulting, investment advisory, brokers and other fees, costs and
expenses of Sellers or the Company relating to the transaction
contemplated hereby that have not been paid prior to Closing;
provided, however, that Company Transaction Expenses shall not
include any legal or accounting fees, costs and expenses of Sellers
or the Company relating to the transaction contemplated hereby that
were incurred on or after October 10, 2018, which shall be paid by
Purchaser.
“Consent” means any
consent, approval, authorization, waiver, grant, franchise,
concession, exemption or order of, registration, certificate,
declaration or filing with, or report or notice to, any Person,
including any Governmental Body.
“Contract” means any
contract, agreement, indenture, note, bond, loan, mortgage,
license, instrument, lease, understanding, commitment or other
arrangement or agreement, whether written or oral.
“DOL” means the United
States Department of Labor.
“Environmental Law(s)”
means any foreign, federal, state or local statute, regulation,
ordinance, or rule of common law as now in effect relating to the
environment or natural resources including the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
§ 9601 et seq.), the Emergency Planning and Right-To-Know
Act (42 U.S.C. § 11101 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. App. § 1801 et seq.), the
Solid Waste Disposal Act (42 U.S.C. § 6901 et seq.)
(including the Resource Conservation and Recovery Act), the Clean
Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act
(42 U.S.C. § 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. § 2601 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.),
the Safe Drinking Water Act (42 U.S.C. § 300(f) et seq.), the
Lead-Based Paint Exposure Reduction Act (42 U.S.C. § 2681 et
seq.), and the Occupational Safety and Health Act (29 U.S.C.
§ 651 et seq.), and the rules and regulations promulgated
pursuant thereto, each as amended as of the Effective
Date.
“Escrow Agent” means
Continental Stock Transfer & Trust Company.
“Floor Plan” means the
Indebtedness of the Company in connection with that certain Demand
Promissory Note and Loan and Security Agreement, dated on or about
August 28, 2013, by and between Wholesale LLC and NextGear Capital,
Inc., as amended (the “Floor Plan
Agreement”).
“Fraud” means that such
Seller is finally determined by a court of competent jurisdiction
to have willfully and knowingly committed intentional fraud against
Purchaser in making the representations and warranties set forth in
ARTICLE II and ARTICLE III (as qualified by the Disclosure
Schedule), with the specific intent to deceive and mislead
Purchaser in order to induce Purchaser to enter into this
Agreement, and that Purchaser justifiably relied on such fraudulent
representation or warranty to its detriment.
“GAAP” means United States
generally accepted accounting principles as in effect from time to
time.
42
“General Release” means a
General Release in the form of Exhibit B attached
hereto.
“Governing Documents”
means, with respect to any particular entity: (i) if a corporation,
the articles or certificate of incorporation and the bylaws; (ii)
if a general partnership, the partnership agreement and any
statement of partnership; (iii) if a limited partnership, the
limited partnership agreement and the certificate of limited
partnership; (iv) if a limited liability company, the articles of
organization and operating agreement; (v) if another type of
Person, any other charter or similar document adopted or filed in
connection with the creation, formation or organization of the
Person; (vi) all equityholders’ agreements, voting
agreements, voting trust agreements, joint venture agreements,
registration rights agreements or other agreements or documents
relating to the organization, management or operation of any Person
or relating to the rights, duties and obligations of the
equityholders of any Person; and (vii) any amendment or supplement
to any of the foregoing.
“Governmental Body” means
any government or governmental or regulatory authority or body
thereof, or political subdivision thereof, whether federal, state,
local or foreign, or any agency, instrumentality or authority
thereof, or any court or arbitrator (public or private) or tribunal
of competent jurisdiction.
“Hazardous Material(s)”
means any substance, material or waste that is regulated by the
United States under Environmental Laws including petroleum and its
by-products, asbestos or asbestos-containing material,
polychlorinated biphenyls, lead-based paint, and any material or
substance which is defined as a “hazardous waste,”
“hazardous substance,” “hazardous
material,” “restricted hazardous waste,”
“industrial waste,” “solid waste,”
“contaminant,” “pollutant,” “special
waste,” “toxic material,” “toxic
waste” or “toxic substance” under any provision
of Environmental Law.
“Indebtedness” means, with
respect to the Company at any applicable time of determination,
without duplication: (i) all obligations for borrowed money; (ii)
all obligations evidenced by bonds, debentures, notes or other
similar instruments or debt securities; (iii) all obligations under
swaps, xxxxxx or similar instruments; (iv) all obligations in
respect of letters of credit or bankers’ acceptances; (v) all
obligations secured by a Lien, other than a Permitted Lien; (vi)
all guaranties in connection with any of the foregoing; (vii) all
obligations recorded or required to be recorded as capital leases
in accordance with GAAP as of the date of determination of such
Indebtedness; (viii) all obligations for the deferred purchase
price of property or services or the acquisition of a business or
portion thereof, whether contingent or otherwise, as obligor or
otherwise, at the maximum amount payable in respect thereof,
regardless of whether such amount is contingent on future
performance; (x) all obligations created or arising under any
conditional sale or other title retention agreement with respect to
acquired property; (xi) all deferred rent obligations; and (xii)
all accrued interest, prepayment premiums, fees, penalties,
expenses or other amounts payable in respect of any of the
foregoing.
43
“Indebtedness for Borrowed
Money” means, with respect to the Company: (i)
indebtedness for borrowed money; (ii) obligations evidenced by
notes, bonds, debentures or other similar instruments; (iii)
obligations as lessee under leases required to be capitalized
pursuant to GAAP; (iv) obligations for amounts drawn under
acceptance, letters of credit or similar facilities; (v) guarantees
and similar commitments relating to any of the foregoing items, and
(vi) any prepayment penalties, fees and similar amounts payable in
connection with the repayment of any of the foregoing items, in
each case, outstanding immediately prior to the Closing.
Notwithstanding the foregoing, Indebtedness for Borrowed Money
shall not include the Floor Plan.
“Intellectual Property”
means: (i) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and
all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof; (ii) all
trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and
renewals in connection therewith; (iii) all copyrightable works,
all copyrights, and all applications, registrations and renewals in
connection therewith; (iv) all trade secrets and confidential
information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals); (v) all computer
software (including data and related documentation); (vi) all other
proprietary rights; and (vii) all copies and tangible embodiments
thereof (in whatever form or medium).
“Inventory” means all
automobiles owned by the Company and held for resale by the
Company.
“IRS” means the United
States Internal Revenue Service.
“Knowledge” or words of
similar effect, regardless of case, means, with respect to the
Company, the knowledge of each Seller, Xxxxxxx Xxxxxx and Xxxx
Xxxxxxxxxx, and, with respect to Purchaser, the knowledge of each
of each executive officer or director thereof. Each of the
foregoing Persons will be deemed to have knowledge of a particular
fact or other matter if: (A) such Person is actually aware of such
fact or matter; or (B) a similarly situated Person would reasonably
be expected to have knowledge of such fact or matter.
“Law” means any federal,
state, local or foreign law (including common law), statute, code,
ordinance, rule, regulation or other requirement or rule of law of
any Governmental Body.
“Legal Proceeding” means
any judicial, administrative or arbitral actions, suits,
proceedings (public or private), claims, hearings, charges,
complaints, demands or governmental proceedings.
44
“Liability” means any
liability, obligation or commitment of any nature whatsoever
(whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated,
matured or unmatured, or due or to become due, or otherwise),
including any liability for Taxes.
“Lien” means any lien
(including any Tax lien), pledge, mortgage, deed of trust, security
interest, claim, demand, lease, charge, option, warrant, call,
right of first refusal, easement, servitude, transfer restriction
or any other encumbrance, restriction or limitation
whatsoever.
“Material Adverse Effect”
or “Material Adverse
Change” with respect to a Person means any event,
occurrence, fact, condition, change or effect that is, or would
reasonably be expected to become, individually or in the aggregate,
materially adverse to the business, properties, results of
operations or condition (financial or otherwise) of such Person,
other than changes in the following: (i) general market, economic
or political conditions; (ii) GAAP or statutory accounting
principles; and (iii) acts of terrorism or war (whether or not
declared), except, in each case, to the extent such changes cause a
disproportionate and negative effect on or change to such Person as
compared to the industry in which such Person operate as a
whole.
“Net Working Capital”
means the current assets of the Company of the type and nature
listed under the heading Total Cash and Cash Equivalents, Total
Accounts Receivable, Net and Total Prepaid Expenses in the Balance
Sheet less the current liabilities of the Company of the type and
nature listed under the heading Total Accounts Payable, Total
Accrued Liabilities and Total Deferred Tax Liabilities and shall be
calculated in accordance with GAAP and past practices of the
Company.
“Neutral Accountant” means
Xxxxxxx Xxxxx LLC (or if such firm shall decline or is unable to
act, or has a conflict of interest with Purchaser or the
Representative, or any of their respective Affiliates, another
nationally recognized accounting firm mutually acceptable to
Purchaser and the Representative).
“Order” means any order,
injunction, judgment, decree, ruling, writ, assessment or
arbitration award.
“PBGC” means the Pension
Benefit Guaranty Corporation or any successor agency.
“Permit” means any
license, certificate, accreditation, permit, waiver, or other
similar authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or
pursuant to Law.
“Permitted Liens” means
(i) Liens for real estate Taxes not yet due and payable or, to the
extent that the Company has set aside accruals therefor, being
contested in good faith by appropriate procedures, (ii) Liens
arising under equipment leases with third parties set forth in
Section 3.10(a) of
the Disclosure Schedule, (iii) carriers’,
warehousemen’s, mechanics’, materialmen’s,
repairmen’s, or other similar Liens arising in the ordinary
course of business, (iv) statutory landlords’ Liens and Liens
granted to landlords under any Real Property Lease, (v) easements,
rights-of-way, covenants, conditions, defects, exceptions,
restrictions and other encumbrances and all matters of record
existing as of the date hereof or otherwise incurred in the
ordinary course of business, (vi) zoning ordinances and other land
use regulations imposed by any Governmental Body having
jurisdiction over any property that are not violated by the current
use and operation of the property, (vii) all matters affecting any
property that would be shown on current surveys of the real estate
or would be revealed by physical inspections thereof and (viii)
Liens in connection with the Floor Plan.
45
“Person” means any
individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
“Pre-Closing Tax Period”
means any taxable period ending on or before the Closing Date and,
for any taxable period that encompasses periods both before and
after the Closing Date, the portion through the end of the Closing
Date.
“Securities Act” means the
Securities Act of 1933, as amended.
“Subsidiary” means, with
respect to any Person, any corporation, partnership, association,
trust or other form of legal entity of which (i) more than fifty
percent (50%) of the voting power of the outstanding voting
securities are directly or indirectly owned by such Person or (ii)
such Person or any Subsidiary of such Person is a general partner
(excluding partnerships in which such party or any Subsidiary of
such Person does not have a majority of the voting interests in
such partnership).
“Target Net Working
Capital” means $1,946,599.
“Tax” or
“Taxes”
shall mean means any federal, state, provincial, local or foreign
income, alternative minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits,
windfall profits, gross receipts, value added, sales, use, goods
and services, excise, customs duties, transfer, conveyance,
mortgage, registration, stamp, documentary, recording, premium,
severance, environmental (including taxes under Section 59A of
the Code or any analogous or similar provision of any state, local
or foreign Law or regulation), real property, personal property, ad
valorem, intangibles, rent, occupancy, license, occupational,
employment, unemployment insurance, social security, disability,
workers’ compensation, payroll, health care, withholding,
estimated or other similar tax, duty or other governmental charge
or assessment or deficiencies thereof, and including any interest,
penalties or additions to tax attributable to the
foregoing.
“Tax Return” means any
return, report, declaration, form, claim for refund or information
return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment
thereof.
“Termination Date” means
November 1, 2018.
“Transaction Documents”
means, with respect to any Person, this Agreement together with any
other agreements, instruments, certificates and documents executed
by such Person in connection herewith or therewith or in connection
with the transactions contemplated hereby or thereby.
“Treasury Regulations”
means the regulations promulgated under the Code, including
temporary and proposed regulations.
“WARN” means the Worker
Adjustment and Retraining Notification Act, as
amended.
(b) Each of the
following terms is defined in the Section set forth opposite such
term:
46
Term
|
Section
|
Agreement
|
Preamble
|
Authorized
Action
|
Section
9.18(b)
|
Balance
Sheet
|
Section
3.5
|
Balance
Sheet Date
|
Section
3.5
|
Basket
|
Section
7.5(b)
|
BBS
|
Section
9.19
|
Cap
|
Section
7.5(b)
|
Closing
|
Section
1.2
|
Closing
Date
|
Section
1.2
|
Closing
Net Working Capital
|
Section
1.6(a)
|
Closing
Statement
|
Section
1.6(a)
|
Company
|
Preamble
|
Company
ERISA Affiliate
|
Section
3.13(a)
|
Company
Parties
|
Section
5.4(c)
|
Company
Pre-Closing Tax Return
|
Section
5.3(d)
|
Controlling
Party
|
Section
5.3(j)
|
Covenant
Survival Period
|
Section
7.4
|
Disclosure
Schedule
|
Section
9.11
|
Dispute
Notice
|
Section
1.6(b)
|
Effective
Date
|
Preamble
|
Employee
|
Section
5.8
|
Employee
Benefit Plans
|
Section
3.13(a)
|
Enforceability
Exceptions
|
Section
2.1
|
ERISA
|
Section
3.13(a)
|
Escrow
Account
|
Section
1.3(b)
|
Escrow
Amount
|
Section
1.3(b)
|
Estimated
Net Working Capital
|
Section
1.4
|
Final
Closing Statement
|
Section
1.6(b)
|
Financial
Statements
|
Section
3.5
|
Floor
Plan Agreement
|
Section
9.1(a)
|
General
Survival Period
|
Section
7.4
|
Indemnified
Party
|
Section
7.3(a)
|
Indemnifying
Party
|
Section
7.3(a)
|
Intellectual
Property Licenses
|
Section
3.11(b)
|
Leased
Properties
|
Section
3.9(b)
|
Losses
|
Section
7.1
|
Material
Contracts
|
Section
3.12(a)
|
Material
Customer
|
Section
3.21(a)
|
Material
Supplier
|
Section
3.21(b)
|
Membership
Interest
|
Recitals
|
Merger
Agreement
|
Recitals
|
Merger
Sub
|
Recitals
|
47
Multiemployer
Plans
|
Section
3.13(a)
|
Multiple
Employer Plans
|
Section
3.13(a)
|
Owned
Intellectual Property
|
Section
3.11(a)
|
Participating
Party
|
Section
5.3(j)
|
Party
|
Preamble
|
Payoff
Letters
|
Section
6.1(a)
|
Per
Share Valuation Amount
|
Section
1.3(b)
|
Personal
Property Leases
|
Section
3.10(a)
|
Purchased
Interests
|
Recitals
|
Purchase
Price
|
Section
1.3
|
Purchase
Price Allocation
|
Section
5.3(l)
|
Purchaser
|
Preamble
|
Purchaser
Indemnitees
|
Section
7.1
|
Purchaser
Prepared Return
|
Section
5.3(e)
|
Qualified
Plans
|
Section
3.13(c)
|
Real
Property Laws
|
Section
3.9(c)
|
Real
Property Lease
|
Section
3.9(b)
|
Representative
|
Preamble
|
Seller
|
Preamble
|
Seller
Allocation
|
Section
1.1
|
Stock
Event
|
Section
1.3(b)
|
Straddle
Period
|
Section
5.3(c)
|
Survival
Period
|
Section
7.4
|
Tax
Proceeding
|
Section
5.3(h)
|
Third
Party Claim
|
Section
7.3(a)
|
Transactional
Rep
|
Section
7.4
|
Wholesale
LLC
|
Recitals
|
Section
9.2 Expenses. Except as otherwise
provided in this Agreement, including Section 5.3(b), each of the
Parties shall bear its own fees, costs and expenses (including
legal, accounting, consulting and investment advisory fees and
expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. Notwithstanding the foregoing,
all transfer, documentary, sales, use, stamp, registration and
other such Taxes, and all conveyance fees, recording charges and
other fees and charges (including any penalties and interest)
incurred in connection with the consummation of the transactions
contemplated by this Agreement shall be paid by the
Sellers.
Section
9.3 Governing Law; Jurisdiction;
Venue. This Agreement shall be governed by and construed in
accordance with the internal laws of the state of Delaware (without
giving effect to any choice or conflict of law provision or rule
(whether of the state of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other
than the state of Delaware). Each of
the Parties submits to the exclusive jurisdiction of any state or
federal court within Davidson County in the state of Tennessee in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect of
the action or proceeding shall be exclusively heard and determined
in any such court. The Parties hereby irrevocably waive, to the
fullest extent permitted by applicable Law, any objection which
they may now or hereafter have to the laying of venue of any such
dispute brought in such court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or
proceeding so brought.
48
Section
9.4 Entire Agreement; Amendments and
Waivers. This Agreement (including the schedules and
exhibits hereto) represents the entire understanding and agreement
between the Parties with respect to the subject matter hereof and
can be amended, supplemented or changed, and any provision hereof
can be waived, only by written instrument making specific reference
to this Agreement signed by Purchaser, in the case of an amendment,
supplement, modification or waiver sought to be enforced against
Purchaser, or the Representative, in the case of an amendment,
supplement, modification or waiver sought to be enforced against
the Sellers. The waiver by any Party of a breach of any provision
of this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or
subsequent breach. No failure on the part of any Party to exercise,
and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of such right, power or remedy by such Party preclude any
other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and
are not exclusive of any other remedies provided by
Law.
Section
9.5 Section Headings. The section
headings of this Agreement are for reference purposes only and are
to be given no effect in the construction or interpretation of this
Agreement.
Section
9.6 Notices. All notices and other
communications under this Agreement shall be in writing and shall
be given by personal delivery, nationally recognized overnight
courier or certified mail at the following addresses (or to such
other address as a Party may have specified by notice given to the
other Party pursuant to this provision):
If,
before the Closing, to the Company, at:
Wholesale
Express, LLC
0000
Xxxxxxxx Xxxx X
Xxxxxxx,
XX 00000
Attn:
Xxxxxx Xxxxxxxx
With a
copy (which shall not constitute notice) to:
Bass,
Xxxxx & Xxxx PLC
000
Xxxxx Xxxxxx Xxxxx, Xxxxx 0000 Xxxxxxxxx, XX 00000
Attn:
Xxxxx Xxxxxx
Xxxxxx
Xxxxxx
If to
the Sellers, after the Closing, to the Representative:
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|
49
Xxxxxx
Xxxxxxxx
000
Xxxxxxxxx Xxxxx
Xxxxxxxxxxxxxx,
XX 00000
With a
copy (which shall not constitute notice) to:
Bass,
Xxxxx & Xxxx PLC
000
Xxxxx Xxxxxx Xxxxx, Xxxxx 0000 Xxxxxxxxx, XX 00000
Attn:
Xxxxx Xxxxxx
Xxxxxx
Xxxxxx
|
|
If to
Purchaser, or, after the Closing, the Company, to:
0000
Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attn:
Xxxxxxxx Xxxxxxxx
|
|
With a
copy (which shall not constitute notice) to:
Akerman
LLP
000 X.
Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx
Xxxxxxxxxx, XX 00000
Attn:
Xxxxxxx Xxxxxxx
Xxxxxxxxx
X. Xxxxx
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|
Any
such notice or communication shall be deemed to have been received
(i) when delivered, if personally delivered, (ii) on the next
Business Day after dispatch, if sent postage pre-paid by nationally
recognized, overnight courier guaranteeing next Business Day
delivery, and (iii) on the fifth (5th) Business Day following the
date on which the piece of mail containing such communication is
posted, if sent by certified mail, postage prepaid, return receipt
requested.
Section
9.7 Severability. If any provision
of this Agreement is invalid, illegal or unenforceable, the balance
of this Agreement shall remain in effect. Upon such determination
that any term or other provision is invalid, illegal or
unenforceable, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties
as closely as possible in a mutually acceptable manner in order
that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent
possible.
50
Section
9.8 Binding Effect; Assignment;
Third-Party Beneficiaries. This Agreement shall be binding
upon and shall inure to the benefit of the Parties and their
respective successors and permitted assigns; provided, however,
that no Party may assign its rights and/or obligations hereunder
without the consent of the other Parties. Notwithstanding the
foregoing, Purchaser may assign its rights and obligations pursuant
to this Agreement, in whole or in part, in connection with any
disposition or transfer of all or any portion of Purchaser, the
Company or their respective businesses in any form of transaction
without the consent of any of the other Parties. In addition,
Purchaser may assign any or all of its rights pursuant to this
Agreement to any lender of Purchaser or Company as collateral
security without the consent of any of the other Parties. Except as
provided in ARTICLE
VI with respect to Persons entitled to indemnification
thereunder, nothing in this Agreement shall create or be deemed to
create any third party beneficiary rights in any
Person.
Section
9.9 Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together will constitute one
and the same instrument. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile, portable document
format or other electronic means shall be effective as delivery of
a manually executed counterpart to this Agreement.
Section
9.10 Remedies Cumulative. Except as
otherwise provided herein, no remedy herein conferred upon a Party
hereto is intended to be exclusive of any other remedy. Except as
otherwise provided herein, no single or partial exercise by a Party
hereto of any right, power or remedy hereunder shall preclude any
other or further exercise thereof.
Section
9.11 Exhibits and Schedules. The
exhibits and schedules referred to herein are attached hereto and
incorporated herein by this reference. The disclosure schedule
delivered by Sellers to Purchaser in connection with the execution
of this Agreement (the “Disclosure Schedule”)
shall be arranged to correspond to the specific sections of this
Agreement. The information disclosed in each section of the
Disclosure Schedule qualifies the correspondingly numbered and
lettered representation, warranty, covenant or other agreement of
this Agreement and the other representations and warranties in this
Agreement as to which the disclosure on its face is reasonably
apparent. To the extent cross-references are set forth in any
section or subsection of the Disclosure Schedule, such
cross-references are intended solely for convenience and are by no
means intended as statements of limitation as to other appropriate
cross-disclosure pursuant to the foregoing sentence.
Section
9.12 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 text
of all schedules is incorporated herein by reference. Whenever the
words “include,” “includes” or
“including” are used in this Agreement, they shall be
deemed to be followed by the words “without
limitation.” As used herein, words in the singular will be
held to include the plural and vice versa (unless the context
otherwise requires), words of one gender shall be held to include
the other gender (or the neuter) as the context requires, and the
terms “hereof”, “herein”, and
“herewith” and words of similar import will, unless
otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement. As
used in this Agreement, “made available” shall mean
uploaded to the data room for the transaction contemplated hereby,
emailed to Purchaser or its representatives or made available when
Purchaser or its representatives visited the offices or other
locations of the Company or Wholesale LLC.
51
Section
9.13 Arm’s Length
Negotiations. Each Party herein expressly represents and
warrants to all other Parties hereto that (a) said Party has had
the opportunity to seek and has obtained the advice of its own
legal, tax and business advisors before executing this Agreement;
and (b) this Agreement is the result of arm’s length
negotiations conducted by and among the Parties and their
respective counsel.
Section
9.14 Construction. The Parties agree
and acknowledge that they have jointly participated in the
negotiation and drafting of this Agreement. In the event of an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties
and no presumptions or burdens of proof shall arise favoring any
Party by virtue of the authorship of any of the provisions of this
Agreement. Any reference to any federal, state, local, or foreign
statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise.
Section
9.15 Specific Performance. The
Parties agree that irreparable damage would occur if any provision
of this Agreement were not performed by the Parties in accordance
with the specific terms hereof or were otherwise breached by the
Parties. It is accordingly agreed that each Party shall be
entitled, without posting a bond or similar indemnity, to an
injunction or other equitable relief to prevent breaches of this
Agreement or to enforce specifically the performance of the
terms.
Section
9.16 Waiver of Jury Trial. EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
Section
9.17 Time of Essence. With regard to
all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
(a) Irrevocable Power of Attorney.
Each Seller irrevocably constitutes and appoints Xxxxxx Xxxxxxxx as
the Representative, with full and unqualified power to delegate to
one or more Persons the authority granted to it hereunder, to act
as such Person’s true and lawful attorney-in-fact and agent,
with full power of substitution, and authorizes the Representative
acting for such Person and in such Person’s name, place and
stead, in any and all capacities to do and perform every act and
thing required or permitted to be done in connection with the
transactions contemplated by this Agreement and the other
Transaction Documents, as fully to all intents and purposes as such
Person might or could do in person, including:
(i) to take any and all
action on behalf of such Seller from time to time as the
Representative may deem necessary or desirable to fulfill the
interests and purposes of this Agreement and the other Transaction
Documents and to engage agents and representatives (including
accountants and legal counsel) to assist in connection
therewith;
52
(ii) to
deliver all notices required to be delivered by such Sellers or any
of them;
(iii) to
receive all notices required to be delivered to such Sellers or any
of them;
(iv) to
give such orders and instructions as the Representative in its sole
discretion shall determine with respect to this Agreement and the
other Transaction Documents and the transactions contemplated
hereby and thereby;
(v) to take all actions
necessary to handle and resolve claims by or against Purchaser for
indemnification by such Sellers under this Agreement;
(vi) to
take all actions necessary to handle and resolve any adjustment to
the Purchase Price pursuant to Section 1.6;
(vii) to
retain and to pay legal counsel and other professionals in
connection with any and all matters referred to herein or relating
hereto or any other Transaction Documents (which counsel or other
professionals may, but need not, be counsel or other professionals
engaged by the Company);
(viii) to
make, acknowledge, verify and file on behalf of any such Seller
applications, consents to service of process and such other
documents, undertakings or reports as may be required by Law as
determined by the Representative in its sole discretion after
consultation with counsel; and
(ix) to
make, exchange, acknowledge, deliver, amend and terminate all such
other contracts, powers of attorney, orders, receipts, notices,
requests, instructions, certificates, letters and other writings,
and in general to do all things and to take all actions, that the
Representative in its sole discretion may consider necessary or
proper in connection with or to carry out the aforesaid, as fully
as Sellers could if personally present and acting.
Each
Seller hereby irrevocably grants unto said attorney-in-fact and
agent full power and authority to do and perform each and every act
and thing necessary or desirable to be done in connection with the
matters described above, as fully to all intents and purposes as
the undersigned might or could do in person, hereby ratifying and
confirming all that the Representative may lawfully do or cause to
be done by virtue hereof. Each of such Seller further agrees not to
take any action inconsistent with the terms of this Section 9.18 or with the
actions (or decisions not to act) of the Representative hereunder,
and in any case shall not take any action or other position under
this Agreement without the consent of the Representative. To the
extent of any inconsistency between the actions (or decisions not
to act) of the Representative and of any such Seller hereunder, the
actions (or decisions not to act) of the Representative shall
control. EACH SUCH SELLER ACKNOWLEDGES THAT IT IS HIS, HER, OR ITS
EXPRESS INTENTION TO HEREBY GRANT A DURABLE POWER OF ATTORNEY UNTO
THE REPRESENTATIVE AND THAT THIS DURABLE POWER OF ATTORNEY IS NOT
AFFECTED BY SUBSEQUENT INCAPACITY OF SUCH SELLER. Each of such
Seller further acknowledges and agrees that upon execution of this
Agreement, any delivery by the Representative of any waiver,
amendment, agreement, opinion, certificate or other documents
executed by the Representative pursuant to this Section 9.18, such Seller shall
be bound by such documents as fully as if such Seller had executed
and delivered such documents, and any action (or decision not to
act) taken or otherwise implemented by the Representative under
this Agreement shall be binding upon all of Sellers.
53
(b) Actions of the Representative.
Each Seller agrees that Purchaser shall be entitled to rely on any
action taken by the Representative, on behalf of Sellers pursuant
to Section 9.18(a)
above (each, an “Authorized Action”), and
that each Authorized Action shall be binding on each such Seller as
fully as if such Person had taken such Authorized Action. Each
Seller acknowledges and agrees that any payment made by Purchaser
on behalf of such Seller to the Representative pursuant to this
Agreement shall constitute full and complete payment to Sellers and
Purchaser shall have no further liability therefor. No Seller shall
bring, and each Seller hereby waives any right to bring, any Legal
Proceeding against Purchaser as a result of any actions or
inactions of the Representative.
(c) Death or Disability of the
Representative. In the event of the death or permanent
disability of the Representative, or its resignation, a successor
Representative shall be appointed by a majority vote of the holders
of the Membership Interests outstanding immediately prior to the
Closing, with each such holder (or such holder’s successors
or assigns) to be given a vote equal to the number of votes
represented by the Membership Interests held by such holder
immediately prior to the Closing.
(d) Deposit. Each Seller and his or
her spouse, if applicable shall, simultaneous with the execution of
this Agreement, deposit his Membership Interest (together with a an
assignment membership interest executed in blank) with the
Representative for delivery by the Representative to Purchaser at
Closing.
Section
9.19 Legal Counsel. The Parties
acknowledge and agree (both on their own behalf and on behalf of
their directors, managers, equityholders, partners, officers,
employees and Affiliates) (a) to permit (and take all steps
reasonably requested by any party (at the requesting party’s
expense)) any privilege attaching as a result of Bass, Xxxxx &
Xxxx PLC’s (“BBS”) services as counsel
to the Company and/or Sellers in connection with the transactions
contemplated by this Agreement and the Transaction Documents to
survive the Closing and remain in effect; provided that such
attorney client privilege will, after the Closing, be controlled by
the Representative and (b) that after the Closing, all of
BBS’s communications and records related to the preparation,
negotiation and execution of this Agreement and Transaction
Documents and the transactions contemplated hereby and thereby will
become property of (and be controlled by) Sellers, and none of
Purchaser, the Company or any of their post-Closing Affiliates
(other than Sellers) will retain copies of, or otherwise maintain
or be entitled to access to, any such communications and records.
Notwithstanding the foregoing, if a dispute arises between
Purchaser or the Company, on the one hand, and a third-party, other
than a Seller, on the other, after the Closing, the Company may
assert the attorney-client privilege to prevent disclosure of
privileged communications by BBS or a Seller to such third-party;
provided, however, that the Company may not waive such privilege
without the prior written consent of the
Representative.
* * * *
*
54
IN
WITNESS WHEREOF, this Membership Interest Purchase Agreement has
been executed by or on behalf of each of the Parties as of the day
first written above.
|
|
PURCHASER:
By:
/s/
Xxxxxxxx Xxxxxxxx
Name: Xxxxxxxx Xxxxxxxx
Title:
Chief Executive Officer
|
|
|
SELLER:
/s/
Xxxxxx
Xxxxxxxx
Xxxxxx Xxxxxxxx
/s/
Xxxxxx
Xxxxxx
Xxxxxx Xxxxxx |
|
|
REPRESENTATIVE:
/s/
Xxxxxx Xxxxxxxx
Xxxxxx
Xxxxxxxx
|
Exhibit A
GENERAL RELEASE AND COVENANT NOT TO XXX
Xxxxxx Xxxxxxxx
(“Xxxxxxxx”) and Xxxxxx
Xxxxxx (“Xxxxxx”, and together
with Xxxxxxxx, the “Releasors” and each, a
“Releasor”), on behalf of
himself and each of his heirs, administrators, executors, personal
representatives, successors, and assigns (“Affiliates”), hereby
remises, releases, acquits, satisfies and forever discharges,
Wholesale Express, LLC, a Tennessee limited liability company (the
“Releasee”), from any and
all manner of action and actions, claims, causes and causes of
action, suits, debts, dues, sums of money, accounts, reckonings,
bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments,
executions, claims and demands whatsoever, in law or in equity
(“Claims”), which any
Releasor or his Affiliates ever had, now has, or which any
successor, or assign of such party or his Affiliates hereafter can,
shall or may have, against the Releasee, for, upon or by reason of
any matter, cause or thing whatsoever, known or unknown, directly
or indirectly, from the beginning of the world to the date of this
instrument.
It is the specific
intent of each Releasor to specifically forever settle all Claims
that such Releasor or its Affiliates may have against any Releasee,
whether they be known or unknown, matured or unmatured or
otherwise, including all further costs and attorneys’ fees
derived therefrom.
Each Releasor also
represents, warrants and agrees that it has not transferred or
assigned any of the released Claims and is the sole owner of such
rights being released hereby, and that by signing this General
Release and Covenant Not to Xxx (this “Release”), such Releasor
additionally covenants not to, and to cause its Affiliates not to,
xxx or to file any complaint of any kind whatsoever arising out of
or in any way relating to any Claim released hereby.
Each Releasor
hereby agrees that this Release extends to all Claims which
such Releasor or its Affiliates know or suspect to exist in its
favor as of the date of this Release or believes may come into
existence in the future. Each Releasor intends this Release to be a
full and complete release in satisfaction of all Claims,
whether or not known or suspected by such Releasor or its
Affiliates to exist in its favor at the time of execution of this
Release.
The provisions of
this Release may be pleaded as a full and complete defense to, and
may be used as the basis for any injunction against, any action,
suit or other proceeding that may be instituted, prosecuted or
attempted in breach of this Release.
For the avoidance
of all doubt, this Release does not extend to (i) any right to
indemnification that any of the Releasors may have under the
Releasee’s articles of organization, operating agreement, or
under Tennessee law or (ii) any claims arising under the Membership
Interest Purchase Agreement by and among Releasors, Releasee, and
RumbleON, Inc., a
Nevada corporation, dated October 26, 2018, and Releasors
will expressly preserve such rights following the execution of this
Release.
This Release shall
be governed by the laws of the State of Delaware without regard to
any conflict of laws provisions. Any suit, action or proceeding
seeking to enforce any provision of or based on any matter arising
out of or in connection with this Release shall be brought in, and
be subject to the exclusive jurisdiction of, the Chancery courts
within Davidson County in the State of Tennessee or the United
States District Courts for the Middle District of Tennessee located
in Davidson County, Tennessee, should the federal courts have
jurisdiction over such suit, action or proceeding.
THE PARTIES HEREBY
WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY ACTION
ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS
RELEASE, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY
OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN
EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT
AMONG THE PARTIES IRREVOCABLY TO WAIVE THEIR RIGHT TO TRIAL BY JURY
IN ANY ACTION WHATSOEVER BETWEEN OR AMONG THEM RELATING TO THIS
RELEASE, WHICH ACTION WILL INSTEAD BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
If any provision of
this Release is held to be illegal, invalid or unenforceable under
present or future laws, that provision shall be severable and this
Release shall be construed and enforced as if that illegal, invalid
or unenforceable provision never comprised a part hereof, and the
remaining provisions hereof shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable
provision, and there shall be added automatically as part of this
Release a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but when
taken together shall be but one instrument. Executed counterparts
delivered by facsimile or in portable document format (.pdf) shall
be deemed delivery of an originally executed counterpart in all
cases.
[Signature page follows]
IN WITNESS WHEREOF,
the undersigned have executed or caused its duly authorized
representative to execute this Release as of the __ day of October,
2018.
RELEASORS:
_____________________________
Xxxxxx
Xxxxxxxx
[ADDRESS]
[CITY, STATE
ZIP]
_____________________________
Xxxxxx
Xxxxxx
[ADDRESS]
[CITY, STATE
ZIP]
RELEASEE:
Wholesale
Express, LLC
By:_______________________________
Name:
Title:
[Signature Page to Release]