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