UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 25,
2018
RumbleOn, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or Other
Jurisdiction
of Incorporation)
000-55182
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46-3951329
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(Commission
File Number)
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|
(I.R.S. Employer
Identification No.)
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4521 Sharon Road, Suite 370
Charlotte, North Carolina
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28211
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(Address of Principal Executive Offices)
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(Zip Code)
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(704) 448-5240
(Registrant’s Telephone Number, Including Area
Code)
(Former Name or Former Address, If Changed Since Last
Report)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2 (b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4 (c))
Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (17 CFR
§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934
(17 CFR §240.12b-2).
Emerging
growth company ☒
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☒
Item 1.01. Entry into a Material Definitive
Agreement
Acquisition of Wholesale, LLC
On October 26, 2018 (the
“
Effective
Date
”), RumbleOn, Inc.
(the “
Company
”)
entered into an Agreement and Plan of Merger (as amended, the
“
Merger
Agreement
”) by and among the Company, the
Company’s newly-formed acquisition subsidiary RMBL Tennessee,
LLC, a Delaware limited liability company
(“
Merger
Sub
”), Wholesale
Holdings, Inc., a Tennessee corporation (“
Holdings
”),
Wholesale, LLC, a Tennessee limited liability company
(“
Wholesale
”),
Steven Brewster and Janelle Brewster (each a
“
Stockholder
”,
and together the “Stockholders”), Steven Brewster, a
Tennessee resident, as the representative of each Stockholder (the
“
Representative
”),
and, for the limited purposes of Section 5.8, Marshall Chesrown and
Steven R. Berrard, providing for the merger (the
“
Wholesale
Merger
”) of Holdings with
and into Merger Sub, with Merger Sub surviving the Wholesale Merger
as a wholly-owned subsidiary of the Company. On October 29, 2018,
the Company entered into an Amendment to the Merger Agreement (the
“
Merger Agreement
Amendment
”) making a
technical correction to the definition of “Parent
Consideration Shares” contained in the Merger
Agreement.
On October 30, 2018 (the
“
Closing
Date
”), the Company
completed the Wholesale Merger. As consideration for the Wholesale
Merger, the Company (i) paid cash consideration of $12,000,000,
subject to certain customary post-closing adjustments, and (ii)
issued to the Stockholders 1,317,329 shares (the
“
Stock
Consideration
”) of the
Company’s Series B Non-Voting Convertible Preferred Stock,
par value $0.001 (the “
Series B
Preferred
”), as described
below.
The
foregoing description of the Merger Agreement, the Merger Agreement
Amendment, and the transactions contemplated thereby does not
purport to be complete and is qualified in its entirety by the
terms and conditions of the Merger Agreement and the Merger
Agreement Amendment, which are attached hereto as Exhibits 2.1
and 2.2, respectively, and are incorporated herein by
reference.
Acquisition of Wholesale Express
Also on the Effective Date, the Company entered
into a Membership Interest Purchase Agreement (the
“
Purchase
Agreement
”), by and among
the Company, Steven Brewster and Justin Becker (together the
“
Express
Sellers
”), and Steven
Brewster as representative of the Express Sellers, pursuant to
which the Company will acquire all of the membership interests (the
“
Express
Acquisition
”) in
Wholesale Express, LLC, a Tennessee limited liability company
(“
Wholesale
Express
”). The Express
Acquisition was completed on the Closing Date.
As consideration for the Express Acquisition, the
Company paid cash consideration of $4,000,000, subject to certain
customary post-closing adjustments.
The
foregoing description of the Purchase Agreement and the
transactions contemplated thereby does not purport to be complete
and is qualified in its entirety by the terms and conditions of the
Purchase Agreement, which is attached hereto as Exhibit 2.3
and is incorporated herein by reference.
Registration Rights Agreement
In connection with the Wholesale Merger, on the
Closing Date, the Company entered into a registration rights
agreement, by and among the Company and the Stockholders who
received the Stock Consideration (the “
Registration Rights
Agreement
”). Pursuant to
the Registration Rights Agreement (i) the Stockholders were granted
certain piggyback registration rights with respect to registration
statements filed subsequent to the Closing Date and (ii) the
Company agreed to file a resale registration statement for the
Class B Common Stock underlying the Series B Preferred (the
“
Conversion
Shares
”) as soon as
practicable after the issuance of the Conversion Shares and in any
event within ten days of such issuance, and to use commercially
reasonable efforts to cause it to become effective as promptly as
practicable following such filing.
The
foregoing description of the Registration Rights Agreement does not
purport to be complete and is qualified in its entirety by the
terms and conditions of the Registration Rights Agreement, which is
attached hereto as Exhibit 10.1 and is incorporated herein by
reference.
Merger Escrow Agreement
On the Closing Date, the Company together with the
Representative entered into an escrow agreement (the
“
Escrow
Agreement
”) with
Continental Stock Transfer & Trust Company (the
“
Escrow
Agent
”) pursuant to which
the Company delivered 681,481 shares of the Stock Consideration
(collectively, the “
Escrow
Shares
”) to the Escrow
Agent. The Escrow Shares will be available to secure claims that
may arise with respect to the representations, warranties,
covenants or indemnification obligations of the Stockholders and
the Express Sellers subject to the terms and conditions in the
Merger Agreement and the Purchase Agreement during the period of 12
months following the Closing Date in which case the Escrow Shares
will serve to reimburse the Company, by the forfeiture of such
shares, in accordance with the valuation of such Escrow Shares as
set forth in the Escrow Agreement. The Escrow Agreement will
terminate on the first anniversary of the date of the Escrow
Agreement, at which time the Escrow Agent will disburse the Escrow
Shares pursuant to the terms of the Escrow
Agreement.
The
foregoing description of the Escrow Agreement and the transactions
contemplated thereby does not purport to be complete and is
qualified in its entirety by the terms and conditions of the Escrow
Agreement, which is attached hereto as Exhibit 10.2 and is
incorporated herein by reference.
Item 2.01. Completion of Acquisition or Disposition of
Assets
The
information set forth under Item 1.01 of this Current Report on
Form 8-K with respect to the Wholesale Merger and the Express
Acquisition is incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of
a Registrant.
Amendment to Loan and Security Agreement
On the Closing Date, the Company, NextGen Pro,
LLC, a Delaware limited liability company
(“
NextGen
Pro
”), RMBL Missouri,
LLC, a Delaware limited liability company
(“
RMBL
Missouri
”), RMBL Texas,
LLC, a Delaware limited liability company
(“
RMBL
Texas
,” and together with
the Company, NextGen Pro, and RMBL Missouri, each, an
“
Existing
Borrower
”, and collectively, the
“
Existing
Borrowers
”), Merger Sub, Wholesale, Wholesale
Express, RMBL Express, LLC, a Delaware limited liability company
(“
RMBL
Express
”, and together
with Merger Sub, Wholesale and Wholesale Express, the
“
New
Borrowers
”; together with the Existing
Borrowers, the “
Borrowers
”),
Hercules Capital, Inc., a Maryland corporation
(“
Hercules
”),
in its capacity as lender (in such capacity,
“
Lender
”),
and Hercules, in its capacity as administrative agent and
collateral agent for Lender (in such capacities,
“
Agent
”),
entered into the First Amendment and Waiver to Loan and Security
Agreement (the “
Amendment
”),
amending that certain Loan and Security Agreement, dated as of
April 30, 2018 (the “
Loan
Agreement
”; as amended by
the Amendment, the “
Amended Loan
Agreement
”), by and among
the Existing Borrowers, Lender and Agent.
Under the terms of the Amendment, $5,000,000
(less certain fees and expenses) were funded by Lender
to the Borrowers in connection with the Closing Date
(the “
Tranche II
Advance
”). The Tranche II
Advance has a maturity date of October 1, 2021 and an initial
interest rate of 11.00%.
Advances under the
Amended Loan Agreement (“
Advances
”)
will bear interest at a per annum rate
equal to the greater of either (i) the prime
rate as reported in The Wall Street Journal plus 5.75% or (ii)
10.25%,
based on a year
consisting of 360 days, with interest computed daily based on the
actual number of days elapsed. The Tranche II Advance, and any
future amounts that may be advanced under the Amended Loan
Agreement, will be due and payable on October 1,
2021.
Upon any event of default, the Agent may, at its option, exercise
its right to demand immediate payment of all liabilities and other
indebtedness and amounts owed to Lender by Borrowers. Conditions
for an event of default remain unchanged by the
Amendment.
Agent is secured by a grant of (i) a first
lien security interest in all assets of the Borrowers (other than
Wholesale) and (ii) a second lien security interest in all assets
of Wholesale (clauses (i) and (ii), collectively, the
“
Collateral
”),
except that the Collateral should not include (a) more than 65% of
the presently existing and later arising issued and outstanding
shares of capital stock owned by any Borrower of any foreign
subsidiary which shares entitle the holder thereof to vote for
directors or any other matter and (b) nonassignable licenses or
contracts.
The
foregoing description of the Amendment is qualified, in its
entirety, by the full text of the Amendment, a copy of which is
attached hereto as Exhibit 10.3, and is incorporated by reference
herein.
Warrant
On the Closing Date, the Company issued to Lender
a warrant to purchase 20,950 shares of the Company’s Class B
Common Stock at an exercise price of $7.16 per share (the
“
Warrant
”). The
Warrant is immediately exercisable and expires on October 30, 2023.
The Company agreed to file a registration statement registering the
resale of the shares underlying the Warrant no later than 90 days
after issuance.
The
information set forth under Item 3.02 of this Current Report on
Form 8-K with respect to the Warrant is incorporated herein by
reference.
The
foregoing description of the Warrant is qualified, in its entirety,
by the full text of the Warrant, a copy of which is attached hereto
as Exhibit 4.1, and is incorporated by reference
herein.
NextGear Floorplan Financing Credit Line
On the Closing Date, Wholesale, as borrower,
entered into a floorplan vehicle financing credit line (the
“
NextGear Credit
Line
”) with NextGear
Capital, Inc. (“
NextGear
”),
as lender, pursuant to that certain Demand Promissory Note and Loan
and Security Agreement and Amendment thereto, each dated as of the
Closing Date. The available credit under the NextGear Credit Line
is initially $63,000,000, will decrease to $55,000,000 after
February 28, 2019 and will decrease to zero dollars after October
31, 2019. NextGear retains the exclusive right to make the decision
to make an advance to or on behalf of Wholesale, whether or not an
event of default has occurred, and NextGear may refuse to make an
advance under the NextGear Credit Line at any time, with or without
cause and without prior notice of such decision to Wholesale or its
affiliates.
Advances under the NextGear Credit Line will bear interest at an
initial per annum rate of 5.25%, based upon a 360-day year, and
compounded daily, and the per annum interest rate will vary based
on a base rate, plus the contract rate, which is currently negative
2.0%, until the outstanding liabilities to NextGear are paid in
full.
Advances under the
NextGear Credit Line require Wholesale to maintain at least
$5,500,000 cash collateral in a reserve account in favor of
NextGear, which amount is subject to change in NextGear's sole
discretion.
Advances under NextGear Credit Line, if not demanded earlier, are
due and payable, without notice, on or before the maturity date,
which is (a) for all liabilities relating to inventory or
receivables financed, the date set forth on the applicable advance
schedule or the date of a maturity event that causes NextGear to
declare an event of default, or October 31, 2019; (b) for all
liabilities not relating to inventory or receivables financed, 10
days after the date such liability is posted to Wholesale’s
account; and (c) for loans in excess of the market value of a unit
financed, the date on which such loan is posted to
Wholesale’s account. Notwithstanding the foregoing, upon the
declaration of an event of default by NextGear, the maturity date
for all liabilities will be the earlier of (i) the date on which
such event of default is declared by NextGear, or (ii) the date on
which such event of default first occurred.
Upon any event of default (including, without limitation,
Wholesale’s obligation to pay upon demand any outstanding
liabilities of the NextGear Credit Line), NextGear may, at its
option and without notice to Wholesale, exercise its right to
demand immediate payment of all liabilities and other indebtedness
and amounts owed to NextGear and its affiliates by Wholesale and
its affiliates.
The NextGear Credit Line is secured by a
grant of a first lien security interest in all of Wholesale’s
assets. Payment to NextGear is guaranteed by unsecured guaranties
of each of the Company and Merger Sub (collectively, the
“
Parent
Guaranties
”).
In connection with the Amendment and the NextGear
Credit Line, NextGear and Agent will enter into an intercreditor
agreement (the “
Wholesale Inventory
Financing Intercreditor Agreement
”) within 30 days of the Closing Date, by
and among NextGear and Agent, in form and substance satisfactory to
NextGear and Agent in Agent’s reasonable discretion. The
terms of the Wholesale Inventory Financing Intercreditor Agreement
and any additional intercreditor arrangements will control the
priority of Agent’s security interest in the Collateral of
Wholesale relative to NextGear’s security interest in the
Collateral of Wholesale.
The
foregoing description of the NextGear Credit Line and Parent
Guaranties does not purport to be complete and is qualified in its
entirety by the terms and conditions of the NextGear Credit Line
and Parent Guaranties, which are attached hereto as Exhibits 10.4
and 10.5, respectively, and are incorporated herein by
reference.
Item 3.02. Unregistered Sales of Equity Securities
The Private Placement
On October 25, 2018 (the “
Placement Date
”), the
Company also entered into a Securities Purchase Agreement (the
“
Securities Purchase
Agreement
”) with certain
accredited investors (the “
Investors
”)
pursuant to which the Company agreed to sell in a private placement
(the “
Private
Placement
”) an aggregate
of 3,030,000 shares of its Class B Common Stock (the
“
Private Placement
Shares
”), at a purchase
price of $7.10 per share
for
non-affiliates of the Company, and, with respect to directors
participating in the Private Placement, at a price of $8.10 per
share. The gross proceeds for the private placement were
approximately $21.6 million. National Securities Corporation, a
wholly owned subsidiary of National Holdings Corporation, and
Craig-Hallum Capital Group (together the “
Placement
Agents
”) served as the
placement agents for the Private Placement. The Company paid the
Placement Agents a fee of 6.5% of the gross proceeds in the Private
Placement. Net proceeds from the Private Placement and $5,000,000
funded under the Tranche II Advance were used to partially fund the
cash consideration of the Wholesale Merger and the Express
Acquisition and the balance will be used for working capital
purposes. In connection with the Private Placement, the Company and
the Placement Agents entered into an Escrow Agreement to facilitate
the Private Placement, which is included as
Exhibit A
to the Securities Purchase Agreement,
attached hereto as Exhibit 10.6.
Denmar
Dixon, a member of the Company’s Board of Directors, invested
through Blue Flame Capital, LLC (an entity controlled by Mr. Dixon)
$243,000 in the Private Placement for 30,000 shares of Class B
Common Stock. Also, Joseph Reece, a member of the
Company’s Board of Directors, individually invested $81,000
in the Private Placement for 10,000 shares of Class B Common Stock.
These purchases were approved by the Company’s Board of
Directors in accordance with Rule 16b-3(d)(1) of the Exchange Act.
Messrs. Dixon and Reece abstained from the Company’s Board of
Directors’ vote in favor of the Private
Placement.
Pursuant
to the Securities Purchase Agreement, the Company has agreed to
file with the SEC a registration statement with respect to the
resale of the Private Placement Shares purchased by the Investors
under the Securities Purchase Agreement no later than 30 days after
the Placement Date, and to have such registration statement
declared effective by the SEC no later than (i) 90 days after the
Placement Date in the event the SEC does not review such
registration statement, or, if earlier, five business days after a
determination by the SEC that it will not review such registration
statement, or (ii) 180 days after the Placement Date in the event
the SEC does review such registration statement, or, if earlier,
five business days after the completion of any review by the SEC.
In the event the Company does not file such registration statement
or does not cause such registration statement to become effective
by the applicable deadline or after such registration statement
becomes effective it is suspended or ceases to be effective, then
the Company will be required to make certain payments as liquidated
damages to the Investors under the Securities Purchase
Agreement.
The
foregoing summary of the Securities Purchase Agreement does not
purport to be complete and is qualified in its entirety by
reference to the complete text of the form of Securities Purchase
Agreement, which is attached hereto as Exhibit 10.6 and is
incorporated herein by reference.
The
shares of Series B Preferred (including the underlying Class B
Common Stock) issued in the Wholesale Merger and the Class B Common
Stock issued in the Private Placement and the Warrant (including
the underlying Class B Common Stock) were and will be issued in
reliance on the exemption from registration provided by Section
4(a)(2) under the Securities Act of 1933, as amended, and
Regulation D thereunder, as a sale not involving any public
offering.
Lock-up Agreements
On October 25, 2018, and as a condition precedent
to the closing of the Private Placement, the directors and
executive officers of the Company delivered executed lock-up
agreements (the “
Lock-Up
Agreements
”) to the
Placement Agents, pursuant to which the directors and executive
officers of the Company agreed, subject to certain customary
exceptions, not to sell, transfer or dispose of any Company common
stock for a period of ninety (90) days from the Closing
Date.
This
description of the Lock-Up Agreements does not purport to be
complete and is qualified in its entirety by the terms and
conditions of the form of the Lock-Up Agreement, a copy of which is
attached as Exhibit A to the Securities Purchase Agreement attached
hereto as Exhibit 10.6 and is incorporated herein by
reference.
Item 5.03
Amendments to Articles of
Incorporation or Bylaws; Change in Fiscal Year
Creation of Series B Convertible Preferred Stock
On the Placement Date, the Company filed the
Certificate of Designation, Preferences, and Rights of Series B
Non-Voting Convertible Preferred Stock (“
Certificate of
Designation
”) with the
Secretary of State for the State of Nevada, designating 2,500,000
shares of the Company’s preferred stock, par value $0.001 per
share, as Series B Preferred. Shares of Series B Preferred
rank
pari
passu
with the Class B Common
Stock, except that holders of Series B Preferred shall not be
entitled to vote on any matters presented to the stockholders of
the Company. The Certificate of Designation became effective on the
Placement Date.
Each
share of Series B Preferred is convertible on a one-for-one basis
into shares of the Company’s Class B Common Stock. The Series
B Preferred will automatically convert into Class B Common Stock 21
days after the mailing of a definitive information statement of the
type contemplated by and in accordance with Regulation 14C of the
Securities Exchange Act of 1934, as amended (“the Exchange
Act”), to the Company’s stockholders, without any
further action on the part of the Company or any
holder.
In
connection with the Wholesale Merger, stockholders of the Company
holding a majority of the voting power of the Company’s
common stock approved the conversion of the Series B Preferred into
an equal number of shares of Class B Common Stock. A definitive
information statement describing the acquisitions and the
conversion will be mailed to non-consenting stockholders of the
Company in accordance with Regulation 14C of the Exchange
Act.
The
foregoing description of the Series B Preferred is qualified, in
its entirety, by the full text of the Certificate of Designation, a
copy of which is attached to this Current Report on Form 8-K as
Exhibit 3.1, and is incorporated by reference
herein.
Item
8.01
Other
Events.
On
the Closing Date, the Company issued a press release announcing the
closing of the Wholesale Merger, the Express Acquisition and the
Private Placement. A copy of the press release is furnished as
Exhibit 99.1 and incorporated herein by reference.
Item
9.01. Financial Statements and Exhibits.
(a)
Financial Statements of Businesses Acquired.
The
financial statements required by Item 9.01(a) will be filed by
amendment to this Current Report on Form 8-K not later than 71 days
after the date on which this Current Report is required to be
filed.
(b) Pro
Forma Financial Information.
The pro
forma financial information required by Item 9.01(b) will be filed
by amendment to this Current Report on Form 8-K not later than 71
days after the date on which this Current Report is required to be
filed.
(d)
Exhibits
|
Agreement
and Plan of Merger, dated October 26, 2018, by and among RumbleOn,
Inc., RMBL Tennessee, LLC, Wholesale Holdings, Inc., Steven
Brewster and Janet Brewster, Wholesale, LLC, and Steven Brewster as
representative, and for limited purposes, Marshall Chesrown and
Steven R. Berrard.*
|
|
Amendment
to the Agreement and Plan of Merger, dated October 29, 2018, by and
among RumbleOn, Inc., RMBL Tennessee, LLC, Wholesale Holdings,
Inc., Steven Brewster and Janet Brewster, Wholesale, LLC, and
Steven Brewster as representative.
|
|
Membership
Interest Purchase Agreement, dated October 26, 2018, by and among
RumbleOn, Inc. Steven Brewster, Justin Becker, and Steven Brewster
as representative.*
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Certificate
of Designation for the Series B Preferred Stock
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|
Warrant
to Purchase Class B Common Stock, dated October 30,
2018
|
|
Registration
Rights Agreement, dated October 30, 2018, by and among RumbleOn,
Inc.,
Steven Brewster and
Janet Brewster, and Steven Brewster as representative.
|
|
Escrow
Agreement, dated October 30, 2018, by and among RumbleOn, Inc.,
Steven Brewster as representative, and Continental Stock Transfer
and Trust Company.
|
|
Amendment
to Loan and Security Agreement, dated October 30, 2018, by and
among the Company, NextGen Pro, LLC, RMBL Missouri, LLC, RMBL
Texas, LLC, RMBL Tennessee, LLC, Wholesale, LLC, Wholesale Express,
LLC, RMBL Express, LLC, and Hercules Capital,
Inc.
|
|
Demand
Promissory Note and Loan and Security Agreement, dated October 30,
2018, by and between NextGear Capital, Inc. and Wholesale,
LLC.
|
|
Corporate
Guaranty, in favor of NextGear Capital, Inc., dated October 30,
2018.
|
|
Form of
Securities Purchase Agreement, dated October 25, 2018.
|
|
Form of
Lock-Up Agreement, dated October 25, 2018 (included as Exhibit D to
the Securities Purchase Agreement attached hereto as Exhibit
10.6).
|
|
Press
Release
|
|
|
*
Schedules and similar attachments to the Agreement and Plan of
Merger and the Membership Interest Purchase Agreement, both dated
as of October 26, 2018, have been omitted pursuant to Item
601(b)(2) of Regulation S-K. The registrant hereby undertakes to
furnish on a supplemental basis a copy of any omitted schedules and
similar attachments to the Securities and Exchange Commission upon
request.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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RUMBLEON, INC.
|
|
|
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Date:
October 31, 2018
|
By:
|
/s/
Steven R.
Berrard
|
|
|
Steven
R. Berrard
|
|
|
Chief
Financial Officer
|
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RUMBLEON, INC.,
RMBL TENNESSEE, LLC,
WHOLESALE HOLDINGS, INC.,
WHOLESALE, LLC,
THE STOCKHOLDERS SET FORTH IN
SCHEDULE 1
HERETO,
STEVEN
BREWSTER,
AS
REPRESENTATIVE,
AND
FOR THE LIMITED PURPOSE OF
SECTION 5.8
,
MARSHALL CHESROWN AND STEVEN R. BERRARD
October 26, 2018
TABLE OF CONTENTS
ARTICLE
I THE MERGER
|
2
|
Section 1.1
|
The Merger
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2
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Section 1.2
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Closing Date
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3
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Section 1.3
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Effect of the Merger
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3
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Section 1.4
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Articles of Organization; Operating Agreement
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3
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Section 1.5
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Managers; Officers
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3
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Section 1.6
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Effect on Equity Interests
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3
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Section 1.7
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Merger Consideration
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4
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Section 1.8
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Closing Date Payment
.
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5
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Section 1.9
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Net Working Capital Adjustment
.
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6
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ARTICLE II REPRESENTATIONS AND WARRANTIES OF
STOCKHOLDERS
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7
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Section 2.1
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Authorization and Enforceability
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7
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Section 2.2
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Conflicts; Consents of Third Parties
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7
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Section 2.3
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The Shares
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8
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Section 2.4
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Accredited Investor Status
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8
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Section 2.5
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Restricted Securities
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8
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Section 2.6
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Brokers Fees
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9
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Section 2.7
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Withholding
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9
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ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
AND WHOLESALE HOLDINGS
|
9
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Section 3.1
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Organization and Related Matters
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9
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Section 3.2
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Books and Records
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10
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Section 3.3
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Capitalization; Reorganization
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10
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Section 3.4
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Conflicts; Consents of Third Parties
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11
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Section 3.5
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Financial Statements
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11
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Section 3.6
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No Undisclosed Liabilities
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11
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Section 3.7
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Absence of Certain Developments
|
12
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Section 3.8
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Taxes
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13
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Section 3.9
|
Real Property
|
16
|
Section 3.10
|
Tangible Personal Property; Title; Sufficiency of
Assets
|
17
|
Section 3.11
|
Intellectual Property
|
17
|
Section 3.12
|
Contracts
|
18
|
Section 3.13
|
Employee Benefits
|
20
|
Section 3.14
|
Labor
.
|
23
|
Section 3.15
|
Litigation
|
24
|
Section 3.16
|
Compliance with Laws; Permits
.
|
25
|
Section 3.17
|
Environmental Matters
.
|
25
|
Section 3.18
|
Insurance
|
26
|
Section 3.19
|
Receivables; Payables
.
|
26
|
Section 3.20
|
Inventory
|
26
|
Section 3.21
|
Customers and Suppliers
.
|
27
|
Section 3.22
|
Related Party Transactions
|
27
|
Section 3.23
|
Brokers Fees
|
27
|
Section 3.24
|
Absence of Certain Business Practices
|
28
|
Section 3.25
|
Bank Accounts; Powers of Attorney
|
28
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB
|
28
|
Section 4.1
|
Organization; Governing Documents
|
29
|
Section 4.2
|
Authorization and Enforceability
|
29
|
Section 4.3
|
Conflicts; Consent of Third Parties
|
29
|
Section 4.4
|
Brokers Fees
|
29
|
Section 4.5
|
No Proceedings
|
30
|
Section 4.6
|
Capitalization
|
30
|
Section 4.7
|
Issuance of Parent Consideration Shares
|
30
|
Section 4.8
|
Parent SEC Reports; Financial Statements; Absence of Certain
Developments
|
31
|
Section 4.9
|
Merger Sub
|
33
|
Section 4.10
|
No Other Representations and Warranties
|
33
|
ARTICLE
V COVENANTS
|
33
|
Section 5.1
|
Further Assurances
|
33
|
Section 5.2
|
Names and Logos
|
34
|
Section 5.3
|
Tax Covenants
.
|
34
|
Section 5.4
|
Non-Competition; Non-Solicitation
.
|
37
|
Section 5.5
|
Resignations
|
39
|
Section 5.6
|
Tangible Property
|
39
|
Section 5.7
|
Discharge of Affiliate Obligations
|
39
|
Section 5.8
|
Conversion of Parent Consideration Shares;
Registration
|
39
|
Section 5.9
|
Parent Stock Incentive Plan
|
41
|
Section 5.10
|
Parent Observer and Information Rights
|
41
|
Section 5.11
|
Employee Matters
|
42
|
Section 5.12
|
Estoppel Certificates
.
|
42
|
Section 5.13
|
Efforts to Consummate Transaction
.
|
42
|
ARTICLE VI CLOSING CONDITIONS
|
43
|
Section 6.1
|
Conditions to Obligation of Parent and Merger
Sub
.
|
43
|
Section 6.2
|
Conditions to Obligation of Wholesale Holdings, the Company, and
Stockholders
.
|
44
|
ARTICLE
VII INDEMNIFICATION
|
46
|
Section 7.1
|
Indemnity Obligations of Stockholders
.
|
46
|
Section 7.2
|
Indemnity Obligations of Parent
|
46
|
Section 7.3
|
Indemnification Procedures
.
|
47
|
Section 7.4
|
Expiration of Representations and Warranties
|
48
|
Section 7.5
|
Certain Limitations; Calculation of Losses; Mitigation
|
48
|
Section 7.6
|
Indemnification Payments to Parent Indemnitees
|
50
|
Section 7.7
|
Treatment of Indemnification Payments
|
51
|
Section 7.8
|
Effect of Knowledge
|
51
|
Section 7.9
|
Sole Remedy; No Claims Against the Company or Wholesale
Holdings
|
51
|
ARTICLE
VIII
|
51
|
Section 8.1
|
Termination of Agreement
.
|
51
|
Section 8.2
|
Effect of Termination
..
|
52
|
ARTICLE IX MISCELLANEOUS
|
52
|
Section 9.1
|
Certain Definitions
.
|
52
|
Section 9.2
|
Expenses
|
61
|
Section 9.3
|
Governing Law; Jurisdiction; Venue
|
61
|
Section 9.4
|
Entire Agreement; Amendments and Waivers
|
62
|
Section 9.5
|
Section Headings
|
62
|
Section 9.6
|
Notices
|
62
|
Section 9.7
|
Severability
|
63
|
Section 9.8
|
Binding Effect; Assignment; Third-Party Beneficiaries
|
64
|
Section 9.9
|
Counterparts
|
64
|
Section 9.10
|
Remedies Cumulative
|
64
|
Section 9.11
|
Exhibits and Schedules
|
64
|
Section 9.12
|
Interpretation
|
64
|
Section 9.13
|
Arm’s Length Negotiations
|
65
|
Section 9.14
|
Construction
|
65
|
Section 9.15
|
Specific Performance
|
65
|
Section 9.16
|
Waiver of Jury Trial
|
65
|
Section 9.17
|
Time of Essence
|
65
|
Section 9.18
|
Appointment of the Representative
.
|
65
|
Section 9.19
|
Legal Counsel
|
67
|
SCHEDULES:
Schedule
1:
Stockholders and
Shares
Schedule
1.5(a):
Managers
Schedule
1.5(b):
Officers
Schedule
2:
Per Share Merger
Consideration
Schedule
4.1:
Charters and
Policies
Schedule
4.6:
Registration Rights
Agreements
Schedule
5.9:
Parent Stock
Incentive Plan Grants
EXHIBITS:
Exhibit
A:
Form of Articles of
Merger
Exhibit
B:
Form of Escrow
Agreement
Exhibit
C:
Form of
Registration Rights Agreement
Exhibit
D:
Form of New
Lease
Exhibit
E:
Form of General
Release
AGREEMENT AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this “
Agreement
”) is dated
October 26, 2018 (the “
Effective Date
”), by and
among RumbleOn, Inc., a Nevada corporation (“
Parent
”), RMBL Tennessee,
LLC, a Delaware limited liability company and a wholly-owned
subsidiary of Parent (“
Merger Sub
”), Wholesale
Holdings, Inc., a Tennessee corporation (“
Wholesale Holdings
”), the
shareholders of Wholesale Holdings set forth in
Schedule 1
hereto (each, a
“
Stockholder
,” and
collectively, the “
Stockholders
”),
Wholesale, LLC, a Tennessee limited liability company (together
with Wholesale Predecessor as described in Section 9.12, the
“
Company
”), Steven
Brewster, a Tennessee resident, as the representative of each
Stockholder as more fully described herein (the “
Representative
”), and,
for the limited purpose of Section 5.8, Marshall Chesrown
(“
Chesrown
”) and Steven R.
Berrard (“
Berrard
”). Parent, Merger
Sub, Wholesale Holdings, the Company, the Stockholders, and the
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, until
consummation of the Reorganization described below, the
Stockholders collectively owned all of the issued and outstanding
shares of common stock of Wholesale, Inc., a Tennessee corporation
(“
Wholesale
Predecessor
”);
WHEREAS, prior to
the date hereof, the Stockholders caused the following transactions
to be consummated (collectively, the “
Reorganization
”): (i) on
October 22, 2018 the Stockholders formed Wholesale Holdings as a
Tennessee corporation and, on October 23, 2018, contributed all of
the shares of capital stock owned by each of them in Wholesale
Predecessor to Wholesale Holdings in exchange for the same number
and class of shares in Wholesale Holdings as the Stockholders owned
in Wholesale Predecessor prior to such contribution (each share of
Wholesale Holdings, a “
Share
” and, collectively,
the “
Shares
”), such that,
immediately after such contribution, Wholesale Predecessor became a
wholly-owned subsidiary of Wholesale Holdings (the
“
Wholesale
Contribution
”); (ii) effective upon the Wholesale
Contribution, Wholesale Holdings elected to treat Wholesale
Predecessor as a qualified subchapter S subsidiary for federal
income tax purposes (the “
Q-Sub Election
”), such
that the Wholesale Contribution together with the Q-Sub Election
shall be treated as tax free reorganizations of Wholesale
Predecessor pursuant to Section 368(a)(1)(F) of the Code; and (iii)
on October 24, 2018, following the Wholesale Contribution and Q-Sub
Election, Wholesale Holdings caused Wholesale Predecessor to
convert from a Tennessee corporation to a Tennessee limited
liability company, Wholesale, LLC (as so converted,
“
Wholesale
Successor
”);
WHEREAS, as a
result of the Reorganization, Wholesale Holdings owns of record all
of the issued and outstanding membership interests of Wholesale
Successor (the “
Membership
Interests
”);
WHEREAS, Parent has
formed Merger Sub solely for the purpose of having Wholesale
Holdings merge with and into Merger Sub, with Merger Sub continuing
as the surviving company and as a wholly-owned subsidiary of
Parent;
WHEREAS, the board
of directors of Wholesale Holdings has unanimously (a) determined
that the merger of Wholesale Holdings with and into Merger Sub,
upon the terms and subject to the conditions set forth below (the
“
Merger
”), is fair to, and
in the best interest of, Wholesale Holdings and its shareholders,
and declared that the Merger is advisable, (b) adopted, authorized
and approved this Agreement, the Merger and the consummation of the
transactions contemplated hereby, and (c) recommended that
Wholesale Holdings’ stockholders accept, approve and adopt
the Merger and this Agreement, in accordance with the Tennessee
Code, as amended (the “
TCode
”);
WHEREAS, the
Stockholders have (a) determined that Merger is fair to, and in the
best interests of, such Stockholders, (b) authorized and approved
this Agreement, the Merger and the consummation of the transactions
contemplated hereby, and (c) accepted and adopted the Merger and
this Agreement, in accordance with the TCode;
WHEREAS, the
respective boards of directors of Parent and Merger Sub have (a)
determined that the Merger is fair to, and in the best interest of,
each corporation and its respective stockholders, and declared that
the Merger is advisable, and (b) authorized and approved this
Agreement, the Merger, and the consummation of the transactions
contemplated hereby;
WHEREAS, the
Parties intend that the Merger will qualify, for U.S. federal
income Tax purposes, as a reorganization within the meaning of
Section 368(a) of the Code, and the Treasury Regulations
promulgated thereunder, and that this Agreement, as to the Merger,
constitutes a “plan of reorganization” within the
meaning of Section 1.368-2(g) of the Treasury Regulations;
and
WHEREAS, on the
Effective Date, certain of the Parties shall enter into a
Membership Interest Purchase Agreement, pursuant to which Parent
shall acquire all of the issued and outstanding membership
interests of Wholesale Express, LLC (the “
MIPA
”).
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
THE
MERGER
Section
1.1
The Merger
. On the Closing
Date, and subject to and upon the terms and conditions of this
Agreement and the applicable provisions of the Code, TCode and the
Delaware Limited Liability Company Act (“
DLLCA
”), Wholesale
Holdings shall be merged with and into Merger Sub, the separate
corporate existence of Wholesale Holdings shall cease, and Merger
Sub shall continue as the surviving company. Merger Sub, as the
surviving company after the Merger, is hereinafter referred to as
the “
Surviving
Company
.”
Section
1.2
Closing
Date
. The Parties
acknowledge and agree that the closing of the Merger and all other
transactions contemplated by this Agreement (the
“
Closing
”)
shall take place on the date of the 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 11:59:59 p.m. on the Closing Date. Upon the
terms and subject to the conditions set forth in this Agreement, at
the Closing, the Parties shall file (i) the Articles of Merger (the
“
Articles of
Merger
”) in the form attached hereto as
Exhibit A
with the Secretary of
the State of Tennessee and (ii) the Plan of Merger (individually,
the “
Plan of
Merger
” and together with the Articles of Merger, the
“
Merger
Filings
”) with the Secretary of State of Delaware, and
whereupon, Wholesale Holdings shall be merged with and into Merger
Sub, pursuant to the provisions of the TCode and the DLLCA. The
Merger shall become effective upon the filing of the Merger Filings
with the applicable Secretary of the State pursuant to applicable
law, on the Closing Date.
Section
1.3
Effect
of the Merger
. From and after
the Closing Date, the effect of the Merger shall be as provided in
this Agreement and the applicable provisions of the TCode and the
DLLCA.
Section
1.4
Articles
of Organization; Operating Agreement
.
(a)
As of the Closing
Date, the articles of organization of Merger Sub shall be the
articles of organization of the Surviving Company as in effect
immediately prior to the Closing Date.
(b)
As of the Closing
Date, the operating agreement of Merger Sub shall be the operating
agreement of the Surviving Company as in effect immediately prior
to the Closing Date.
Section
1.5
Managers;
Officers
.
(a)
As of the Closing
Date, the managers of Merger Sub on the Closing Date shall be the
managers of the Surviving Company, who are set forth on
Schedule
1.5(a)
.
(b)
As of the Closing
Date, the officers of Merger Sub on the Closing Date shall be the
officers of the Surviving Company, who are set forth on
Schedule
1.5(b)
.
Section
1.6
Effect
on Equity Interests
. On the Closing
Date, by virtue of the Merger and without any action on the part of
the holders of any Shares or any membership interests of Merger
Sub:
(a)
Each issued and
outstanding Share of capital stock of Wholesale Holdings shall be
cancelled. From and after the Closing Date, the Surviving
Company’s membership interests shall be the only issued and
outstanding equity interest of the Surviving Company and shall be
owned by Parent.
(b)
Any Shares that
are owned by Wholesale Holdings as treasury stock shall be
automatically canceled and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(c)
Each issued and
outstanding Share (other than shares to be canceled in accordance
with Section 1.6(b)) shall be converted into the right to receive
the pro rata portion of the Merger Consideration as further set
forth in
Schedule
2
, without interest. As of the Closing Date, all such Shares
shall no longer be outstanding and shall automatically be canceled
and shall cease to exist, and each holder of Shares shall cease to
have any rights with respect thereto, except the right to receive
the pro rata portion of the Merger Consideration, without
interest.
Section
1.7
Merger
Consideration
.
(a)
The aggregate
consideration payable with respect to the Shares hereunder
(collectively, the “
Merger Consideration
”)
shall consist of:
(i)
$12,000,000 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;
plus
(iv)
the Parent
Consideration Shares to be issued to the Stockholders in exchange
for the Shares and in accordance with
Schedule 2
hereto and to be
delivered to each Stockholder as specified in writing by the
Representative for the benefit of each such
Stockholder.
(b)
A cash portion
of the Merger Consideration 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,
681,481 of the Parent Consideration Shares (the “
Escrow Amount
”) shall be
deposited at Closing to be held by the Escrow Agent (the
“
Escrow
Account
”) under the terms of an escrow agreement
substantially in the form attached hereto as
Exhibit B
(the
“
Escrow
Agreement
”) to be executed as of Closing Date by
Parent, the Representative and the Escrow Agent as security for
certain obligations of Stockholders under Section 1.9 and ARTICLE
VII. The Parties acknowledge and agree that the Parent
Consideration Shares and/or Conversion Shares, as applicable, 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
1.9, ARTICLE VII, or otherwise. If at any time while the Parent
Consideration Shares and/or Conversion Shares, as applicable, are
held pursuant to the Escrow Agreement, there is any stock dividend,
combination, subdivision, split or the like with respect to the
Parent Consideration Shares and/or Conversion Shares, as applicable
(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 Parent acting in good faith.
Section
1.8
Closing Date
Payment
.
(a)
The Company has
prepared and delivered to Parent a good faith estimate of the Net
Working Capital as of the day prior to the Effective Date (the
“
Estimated Net
Working Capital
”), which shall be certified by the
Company as its good faith estimation of the Net Working Capital as
of the day prior to the Effective Date. The Company shall have
provided Parent access to all relevant documents and information
reasonably requested by Parent in connection with its review of the
Estimated Net Working Capital (including all components
thereof).
(b)
On the Closing
Date, Wholesale Holdings shall deliver to Parent a fully-executed
and completed stock power of each Stockholder, and upon surrender
thereof to Parent, Parent shall:
(i)
pay to the
Representative, for the benefit of the Stockholders, an amount in
cash, payable by wire transfer of immediately available funds to
the account(s) specified in writing by the Representative, which
shall be equal to the following (collectively, the
“
Closing Cash
Consideration
”):
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 more than the Target
Net Working Capital;
minus
D.
the sum of (x) the
amount of the Company Transaction Expenses and (y) the Change of
Control Payments, if any;
minus
E.
the aggregate
amount of all Indebtedness for Borrowed Money (excluding, for the
avoidance of doubt, the Floor Plan);
(ii)
deposit the Escrow
Amount with the Escrow Agent;
(iii)
pay the amount of
all Indebtedness for Borrowed Money (excluding, for the avoidance
of doubt, the Floor Plan) from the Closing Cash
Consideration;
(iv)
pay the Company
Transaction Expenses and the Change of Control Payments from the
Closing Cash Consideration pursuant to written instructions of the
Company; and
(v)
issue the Parent
Consideration Shares to the Stockholders in accordance with
Schedule 2
hereto.
(c)
Promptly after
receipt of the Closing Cash Consideration, the Representative shall
deliver to each Stockholder the Per Share Closing Cash
Consideration payable to such Stockholder with respect to its
Shares.
Section
1.9
Net Working Capital
Adjustment
.
(a)
Within one
hundred twenty (120) days after the Closing Date, Parent 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
”).
(b)
If the
Representative disputes any amounts as shown on the Closing
Statement, the Representative shall deliver to Parent within thirty
(30) days after receipt of the Closing Statement a notice (the
“
Dispute
Notice
”) setting forth the 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 Parent within
such thirty (30) day period, the Closing Statement prepared and
delivered by Parent 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 Parent 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 Parent 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 Parent, the
Representative and the Neutral Accountant (which Parent 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. Parent and the Representative shall each be
entitled to make a presentation to the Neutral Accountant, pursuant
to procedures to be agreed to among Parent, 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 Parent 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 1.9(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 Parent
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 Parent 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,
Parent shall pay such excess amount to the Representative, for the
benefit of the Stockholders; 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 Parent shall
deliver joint written instructions to the Escrow Agent instructing
the Escrow Agent to deliver to Parent from the Escrow Amount an
amount equal to such shortfall or (B) the Stockholders shall
deliver to Parent an amount in immediately available funds equal to
such shortfall and the Representative and Parent shall deliver
joint written instructions to the Escrow Agent instructing the
Escrow Agent to deliver to Representative, for the benefit of the
Stockholders from the Escrow Amount an amount equal to such
shortfall. Any payments made pursuant to this Section 1.9 shall be
treated as an adjustment to the Merger Consideration by the
Parties.
ARTICLE II
REPRESENTATIONS
AND WARRANTIES OF STOCKHOLDERS
Each
Stockholder, severally but not jointly, and solely with respect to
such Stockholder, represents and warrants to Parent and Merger Sub
that the following statements are correct:
Section
2.1
Authorization and
Enforceability
. Each Stockholder
has all requisite power and authority, and, in the case of any
Stockholder that is an individual, the 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 Stockholder of each of the Transaction
Documents to which it is a party have been duly authorized by all
necessary action on the part of each such Stockholder. This
Agreement and the other Transaction Documents have been duly and
validly executed and delivered by each Stockholder and constitute
legal, valid and binding obligations of each Stockholder,
enforceable against such Stockholder 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 Stockholder 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 Stockholder 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 Stockholder is a party or by which such Stockholder or
its properties, assets or Shares 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 Stockholder 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 Shares. No Consent, Order, waiver, declaration
or filing with, or notification to any Person, including any
Governmental Body, is required on the part of such Stockholder in
connection with the execution, delivery and performance of this
Agreement or the other Transaction Documents, or the compliance by
such Stockholder with any of the provisions hereof or
thereof.
Section
2.3
The
Shares
.
(a)
Each Stockholder
holds of record and owns beneficially all of the Shares set forth
opposite such Stockholder’s name in
Schedule 1
hereto under the
heading “Number of Shares Owned,” 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 number of Shares set forth opposite
such Stockholder’s name in
Schedule 1
hereto under the
heading “Number of Shares Owned” correctly sets forth
all of the capital stock of Wholesale Holdings owned of record or
beneficially by such Stockholder, and such Stockholder does not own
(or have any rights in or to acquire) any other capital stock of
Wholesale Holdings or any other securities convertible into, or
exercisable or exchangeable for, capital stock of Wholesale
Holdings. Such Stockholder’s Shares were not issued in
violation of (i) any Contract to which such Stockholder is or was a
party or beneficiary or by which such Stockholder or its properties
or assets is or was subject or (ii) of any preemptive or similar
rights of any Person.
(b)
Except as set
forth in Section 2.3(b) of the Disclosure Schedule, such
Stockholder is not party to (i) any voting agreement, voting trust,
proxy, registration rights agreement, stockholder agreement or
other Contract with respect to the capital stock of Wholesale
Holdings or (ii) any Contract obligating such Stockholder to vote
or dispose of any shares of the capital stock of, or other equity
or voting interests in, Wholesale Holdings or which has the effect
of restricting or limiting the transfer, voting or other rights
associated with the Shares.
Section
2.4
Accredited Investor
Status
. Each Stockholder
(a) represents, understands and acknowledges that the Parent
Consideration Shares and the Conversion Shares are being acquired
under this Agreement in good faith solely for its own account, for
investment and not with a view toward resale or other distribution
in violation of the Securities Act or applicable state securities
Laws (“
Blue Sky
Laws
”), and that such securities will not be offered
for sale, sold or otherwise transferred without either registration
under the Securities Act or an exemption from registration under
the Securities Act and Blue Sky Laws that is then available; (b)
has such knowledge and experience in financial and business matters
that such Party is capable of evaluating the merits and risks of
the investment in the Parent Consideration Shares, and such Party
understands and is able to bear the economic risks associated with
such investment (including the inherent risk of total or partial
loss of value of the Parent Consideration Shares); (c) has had such
opportunity as it has deemed adequate to obtain from directors and
executive officers of Parent such information as is necessary to
permit it to evaluate the merits and risks of its investment in
Parent; and (d) is an “accredited investor” within the
meaning of Rule 501 of Regulation D promulgated under the
Securities Act.
Section
2.5
Restricted
Securities
. Each Stockholder
understands and acknowledges that all Parent Consideration Shares
and Conversion Shares to be issued to the Stockholders in
accordance with this Agreement have not been issued in a
transaction registered under the Securities Act and will be
“restricted securities” within the meaning of Rule 144
under the Securities Act and may be offered, sold, pledged or
otherwise transferred by such Stockholder, directly or indirectly,
only pursuant to an effective registration statement meeting the
requirements of the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act
and all applicable state securities Laws. Each Stockholder
acknowledges and understands that the Parent Consideration Shares
and the Conversion Shares shall bear the following
legend:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FROM THE
ISSUER WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”) AND ARE RESTRICTED
SHARES AS THAT TERM IS DEFINED UNDER RULE 144, PROMULGATED UNDER
THE SECURITIES ACT. THESE SHARES MAY NOT BE SOLD, PLEDGED,
TRANSFERRED, DISTRIBUTED, OR OTHERWISE DISPOSED OF IN ANY MANNER
UNLESS SUCH TRANSACTION IS REGISTERED UNDER THE SECURITIES ACT OR
EXCEPT PURSUANT TO A VALID EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS AS EVIDENCED BY AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE ISSUER, STATING THAT THE TRANSFER DOES NOT
INVOLVE A TRANSACTION REQUIRING REGISTRATION OF SUCH SHARES UNDER
THE SECURITIES ACT.
Section
2.6
Brokers
Fees
. No Stockholder
has 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
2.7
Withholding
.
Parent 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
REPRESENTATIONS
AND WARRANTIES CONCERNING THE COMPANY AND WHOLESALE
HOLDINGS
The
Company, Wholesale Holdings and Stockholders jointly and severally
represent and warrant to Parent and Merger Sub that the following
statements are true and correct (in each case, other than Section
3.3(b), excluding any breach caused by or related to the
Reorganization):
Section
3.1
Organization
and Related Matters
.
(a)
Wholesale Holdings
is a corporation validly existing and in good standing under the
laws of the State of Tennessee and has all requisite corporate
power and authority to own, lease and operate its properties and to
carry on its business as currently conducted. The Company is a
limited liability company 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. Each of the Company and Wholesale Holdings is duly
qualified or authorized to do business as a foreign corporation or
limited liability company, as applicable, 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. Wholesale Holdings owns 100% of the
membership interests of the Company and has no other
Subsidiaries.
(c)
The Company has
made available to Parent or its representatives complete and
correct copies of the Governing Documents of the Company and
Wholesale Holdings as presently in effect. Since inception, other
than in connection with the Reorganization, neither the Company nor
Wholesale Holdings has consolidated or merged with, acquired all or
substantially all of the assets of, or acquired the stock of or any
interest in any Person.
Section
3.2
Books and
Records
. Except as set
forth on Section 3.2 of the Disclosure Schedule, the minute books
of the Company and Wholesale Holdings, which have been made
available to Parent or its representatives, contain records of all
material corporate or limited liability company, as applicable,
actions taken by the shareholders (or members) or the board of
directors of the Company and Wholesale Holdings.
Section
3.3
Capitalization;
Reorganization
.
(a)
Section 3.3(a)
of the
Disclosure Schedule sets forth the following as of the Closing: (i)
the total number of issued and outstanding shares of each class of
capital stock of Wholesale Holdings and the total number of issued
and outstanding Membership Interests of the Company, (ii) the names
of the holders of the issued and outstanding shares of each class
of capital stock of Wholesale Holdings and the names of the holders
of the issued and outstanding Membership Interests of the Company,
and (iii) the number of shares of each class of capital stock and
membership interests held by each such holder. The issued and
outstanding shares of capital stock and membership interests set
forth in Section 3.3(a) of the Disclosure Schedule constitute the
Shares and Membership Interests, as applicable. All of the Shares
and Membership Interests, as applicable, have been duly and validly
authorized and issued, are fully paid and nonassessable, and all
such Shares and Membership Interests, as applicable, are held of
record and owned beneficially as set forth in Section 3.3(a) of the
Disclosure Schedule. No Shares or Membership Interests have been
issued in violation of any preemptive rights or any applicable
securities Laws. Neither the Company nor Wholesale Holdings has any
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 or Wholesale Holdings to issue, sell, or otherwise cause to
become outstanding any of its capital stock or other equity
security, or securities convertible or exchangeable for, or any
options, warrants, or rights to purchase, any of such capital stock
or other equity security. There are no outstanding obligations of
the Company or Wholesale Holdings to repurchase, redeem or
otherwise acquire any of its capital stock or other equity
security. There are no outstanding or authorized stock
appreciation, phantom equity, profit participation or similar
rights with respect to the Company or Wholesale Holdings. There are
no dividends which have accrued or been declared but are unpaid on
the capital stock of Wholesale Holdings or any distributions
payable by the Company. Except as set forth in Section 3.3(a) of
the Disclosure Schedule, there are no voting agreements, voting
trusts, proxies, registration rights agreements, stockholder
agreements or other Contracts with respect to any of the Shares or
Membership Interests.
(b)
Prior to the
Effective Date, Stockholders, Wholesale Holdings and the Company
have undertaken the Reorganization as described in the Recitals
hereto. The Company has made available to Parent copies of the
documents executed as part of the Reorganization.
Section
3.4
Conflicts; Consents of Third
Parties
. Except as set
forth in Section 3.4 of the Disclosure Schedule or as caused by the
Reorganization, the execution and delivery of this Agreement and
the other Transaction Documents to which the Company and/or
Wholesale Holdings is a party, the consummation of the transactions
contemplated hereby or thereby, and compliance by the Company and
Wholesale Holdings with the provisions hereof or thereof does 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 or Wholesale Holdings is a party or by which the
Company’s or Wholesale Holdings’ 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 or Wholesale
Holdings is bound; or (d) result in the creation of any Lien upon
the properties or assets of the Company or Wholesale Holdings,
other than Permitted Liens. Except as set forth in Section 3.4 of
the Disclosure Schedule or as caused by the Reorganization, no
Consent, Order, waiver, declaration or filing with, or notification
to any Person, including any Governmental Body, is required on the
part of the Company or Wholesale Holdings 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.
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, stockholders’ 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, shareholders’ 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
. Neither the
Company nor Wholesale Holdings has 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 Expenses 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 (which term
shall also include Wholesale Holdings for purposes of this Section
3.7) 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;
(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.
Section
3.8
Taxes
.
(a)
Wholesale
Holdings and the Company have 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 Wholesale
Holdings and 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 Wholesale Holdings and
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, neither Wholesale Holdings nor
the Company is 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 Wholesale
Holdings or the Company in a jurisdiction where Wholesale Holdings
or 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 Wholesale Holdings or
the Company that have arisen in connection with any failure (or
alleged failure) to pay any Tax.
(b)
Wholesale Holdings
and 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, stockholder, or
other third party.
(c)
Neither Wholesale
Holdings not the Company has 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)
Neither Wholesale
Holdings nor the Company has any 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 Wholesale Holdings or the Company is
property which, for Tax purposes, is required to be treated as
owned by another Person. Neither Wholesale Holdings nor the Company
is an obligor on, and none of their assets have been financed
directly or indirectly by, any tax-exempt bonds. No property or
assets of Wholesale Holdings or 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 Wholesale
Holdings or the Company. There has not been, within the past five
calendar years, any written notice of potential examination, or to
the Knowledge of Wholesale Holdings or 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 Wholesale Holdings or the Company,
threatened against or with respect to Wholesale Holdings or the
Company regarding Taxes.
(h)
Neither Wholesale
Holdings nor the Company has 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 neither Wholesale Holdings nor the Company
have an application pending with any taxing authority requesting
permission for any change in accounting method. Neither Wholesale
Holdings nor the Company will 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.
Neither Wholesale Holdings nor the Company will 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)
Neither Wholesale
Holdings nor the Company is 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, or is a
partner, member, owner or beneficiary of any entity treated as a
partnership or a trust for Tax purposes. Neither Wholesale Holdings
nor the Company has 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)
Neither Wholesale
Holdings nor the Company is 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 Parent or its
representatives by the Company.
(l)
Neither Wholesale
Holdings nor the Company has 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)
Neither Wholesale
Holdings nor the Company is subject to Tax, nor does it have a
permanent establishment, in any foreign jurisdiction.
(n)
Neither Wholesale
Holdings nor the Company has pending ruling requests filed by it or
on its behalf with any taxing authority or Governmental
Body.
(o)
At all times prior
to the Reorganization, the Company was an S corporation as defined
in Section 1361(a)(1) of the Code for federal and applicable state
income tax purposes and is eligible for such treatment. Except as
part of the Reorganization, the Company’s election to be
treated as an S corporation was timely filed with the IRS and has
not been superseded by any subsequent filing. Wholesale Holdings is
an S Corporation for federal and applicable state income tax
purposes and is eligible for such treatment. The IRS has not sent
any correspondence to the Company questioning its status as an S
corporation. Neither Wholesale Holdings nor the Company nor the
Stockholders have been or will be subject to any Taxes for any
period ending on or prior to the Closing Date pursuant to Section
1374 or Section 1375 of the Code.
(p)
Since the election
date of its conversion to a limited liability company, the Company
is and has been properly classified as an entity disregarded as
separate from its owner Wholesale Holdings as described in Treasury
Regulation Section 3.01.7701-3(b)(1)(ii), and no Party has taken
any action or made any election to the contrary.
(q)
Wholesale Holdings
and the Company utilize the accrual method of accounting for income
tax purposes.
(r)
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)
Neither the Company
nor Wholesale Holdings owns nor has owned any real property or fee
title interest in real property. Wholesale Holdings is not a party
to any Real Property Lease.
(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 Parent complete
copies of the Real Property Leases, together with all amendments
and modifications or supplements, if any, thereto.
(c)
Neither the
Company nor Wholesale Holdings has 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.
(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)
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. Wholesale Holdings is not a party to any
Personal Property Lease. The Company has made available to Parent
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)
Wholesale Holdings
(and not any Affiliate thereof) has valid title to the Membership
Interests, free and clear of any Liens (other than Permitted Liens
and restrictions under the Securities Act and Blue Sky Laws). 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)
Wholesale
Holdings does not own any registered Intellectual Property. 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.
(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 or Wholesale Holdings
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;
(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 Parent 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;
(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 Parent or its representatives by the Company.
Other than as a result of the Reorganization, neither the Company
nor Wholesale Holdings is 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 or Wholesale Holdings, 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. Each of the Company and Wholesale Holdings 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.
(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 Effective Date
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
Parent 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.
(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.
(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)
Wholesale Holdings
has no (and never has had any) employees, consultants or
contractors. 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)
Neither the Company
nor Wholesale Holdings is, nor has 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 or
Wholesale Holdings. 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 or
Wholesale Holdings.
(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.
(e)
Except as set forth
on Section 3.14(e) of the Disclosure Schedule, to the Knowledge of
the Company, each of the Company and Wholesale Holdings 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 Wholesale Holdings, 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 Wholesale Holdings (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. Neither the Company nor Wholesale
Holdings is currently engaged in any Legal Proceeding to recover
monies due it or for damages sustained by it. Neither the Company
nor Wholesale Holdings is subject to any Order of any Governmental
Body.
Section
3.16
Compliance with Laws;
Permits
.
(a)
To the Knowledge of
the Company, each of the Company and Wholesale Holdings 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. Neither the Company nor Wholesale Holdings has
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)
Wholesale Holdings
does not hold any Permits with respect to the Business. 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 and Wholesale Holdings are currently and have been in
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)
Neither the Company
nor Wholesale Holdings has 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, neither the Company nor Wholesale Holdings has 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.
(f)
The Company has
made available to Parent 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
. Wholesale
Holdings does not own any insurance policies. 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
Parent 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.
Section
3.19
Receivables;
Payables
.
(a)
Wholesale Holdings
does not have any accounts receivable. 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)
Wholesale Holdings
does not have any accounts payable. 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
.
Wholesale Holdings does not have any 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 Liens in connection with the Floor
Plan.
Section
3.21
Customers and
Suppliers
.
(a)
Wholesale
Holdings does not have any customers or suppliers. 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.
(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,
neither the Company nor Wholesale Holdings has 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 Wholesale Holdings or any Stockholder. Except as
described in Section 3.22 of the Disclosure Schedule, neither the
Company nor any Affiliate of either of them 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
or Wholesale Holdings. Neither the Company nor Wholesale Holdings
has any Contract or understanding with any officer, director,
employee or shareholder of the Company or Wholesale Holdings, 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 or Wholesale
Holdings.
Section
3.23
Brokers
Fees
. Neither the
Company nor Wholesale Holdings has 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, neither the
Company nor Wholesale Holdings has, and no Stockholder, no
Affiliate of a Stockholder nor, to the Knowledge of the Company,
any agent of the Company or Wholesale Holdings, 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 Wholesale Holdings (or assist the
Company or Wholesale Holdings in connection with any actual or
proposed transaction), in each case that (i) will subject the
Company or Wholesale Holdings 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 Wholesale
Holdings, or (iii) if not continued in the future, would materially
and adversely affect the assets, business, or operations of the
Company or Wholesale Holdings. Except as set forth in Section 3.24
of the Disclosure Schedule, no Stockholder, no Affiliate of a
Stockholder nor, to the actual knowledge of the Stockholders, any
agent of the Company or Wholesale Holdings, 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 or Wholesale Holdings 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.
Section
3.25
Bank Accounts; Powers of
Attorney
. Section 3.25 of
the Disclosure Schedule sets forth:
(a)
with respect to any
borrowing or investment arrangements, deposit or checking accounts
or safety deposit boxes of the Company or Wholesale Holdings, 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 or Wholesale Holdings and a description of
the terms of each such power.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB
Parent
and Merger Sub, jointly and severally, represent and warrant to the
Company that the following statements are true and
correct:
Section
4.1
Organization;
Governing Documents
. Each of Parent
and Merger Sub is a corporation or limited liability company, as
applicable, duly organized, validly existing and in good standing
under the Laws of the State of its incorporation or formation, as
applicable, and has all requisite corporate or limited liability
company, as applicable, power and authority to own, lease and
operate its properties and to carry on its business. Each of
Parent, Merger Sub and their respective Subsidiaries is 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 Parent,
Merger Sub or their respective Subsidiaries. Parent has delivered
to the Company accurate and complete copies of the Governing
Documents, for Parent and its Subsidiaries. Schedule 4.1 lists, and
Parent has delivered to the Company, accurate and complete copies
of: (a) the charters of all committees of their respective boards
of directors of Parent and its Subsidiaries; and (b) any code of
conduct or similar policy adopted by Parent and its Subsidiaries,
or by their respective boards of directors, or any committee of
their respective boards of directors. Neither Parent 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 Parent.
Section
4.2
Authorization
and Enforceability
. The execution,
delivery and performance of the Agreement and Transaction Documents
to which each of Parent and Merger Sub is a party have been duly
authorized by all necessary action by or on behalf of Parent and
Merger Sub, respectively. Each of Parent and Merger Sub 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 each of Parent and Merger Sub 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 Parent and Merger Sub, respectively, enforceable against Parent
and Merger Sub 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 each of Parent and Merger Sub 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 Parent and Merger Sub, 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 Parent or Merger Sub 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 Parent or Merger is a party or by which Parent or Merger Sub
or any of their properties or assets are bound.
Section
4.4
Brokers
Fees
. Neither Parent
nor Merger Sub has any Liability to pay any fees or commissions to
any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
Section
4.5
No
Proceedings
. No suit, action
or other proceeding is pending before any Governmental Body seeking
to restrain or prohibit Parent or Merger Sub from entering into
this Agreement or to prohibit the Closing or the performance of any
other obligation hereunder.
Section
4.6
Capitalization
.
As of the Effective Date, the authorized capital stock of Parent
consists of 1,000,000 shares of Class A Common Stock, of which
1,000,000 are outstanding as of the date hereof, 99,000,000 shares
of Class B Common Stock, of which 14,438,291 are outstanding as of
the date hereof, and 10,000,000 shares of preferred stock,
including but not limited to Class B Preferred Stock, of which 0
shares are outstanding as of the date hereof. All of the issued and
outstanding shares of Common Stock and shares of Preferred Stock
have been duly authorized, validly issued and are fully paid and
nonassessable, and have been issued in compliance with all
applicable Laws. Other than (x) 785,500 shares of Class B Common
Stock reserved for issuance under the Parent Stock Incentive Plan,
(y) 1,061,500 shares of Class B Common Stock underlying outstanding
restricted stock units granted under the Parent Stock Incentive
Plan, and (z) 300,068 shares of Class B Common Stock reserved for
issuance underlying warrants, the Company had no shares of common
stock or shares of preferred stock reserved for issuance as of the
date of this Agreement. Except as set forth above, there are no
outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, calls,
commitments, preemptive or other rights or agreements of any kind
that obligate Parent to repurchase, redeem, acquire, issue or sell
any shares of capital stock or other securities of Parent or any of
its Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or that give any Person a
right to subscribe for or acquire, any securities of Parent or any
of its Subsidiaries, and no securities or obligations evidencing
such rights are authorized, issued or outstanding. Except as set
forth in
Schedule
4.6
and as contemplated by this Agreement, there are no
voting agreements, stock plans or other equity incentive plans,
voting trusts, proxies, registration rights agreements, stockholder
agreements or other Contracts with respect to any capital stock of
Parent. As of the Closing Date, the authorized capital stock of
Parent shall consist of 1,000,000 shares of Class A Common Stock,
of which 1,000,000 shall be outstanding, 99,000,000 shares of Class
B Common Stock, of which 17,468,291 shall be outstanding, and
10,000,000 shares of preferred stock, including but not limited to
Class B Preferred Stock, of which no shares will be outstanding
other than the Parent Consideration Shares.
Section
4.7
Issuance
of Parent Consideration Shares
. The issuance of
the Parent Consideration Shares hereunder is duly authorized and,
when issued and delivered in accordance with this Agreement, will
be duly and validly issued, fully paid and nonassessable, will have
been issued in compliance with applicable securities Laws or
exemptions therefrom, will not be issued in violation of any
preemptive rights of any stockholder of Parent or any other Person
and shall be issued and delivered by Parent to the Stockholders
pursuant to this Agreement, free of any Liens, subject to the
restrictions set forth herein and applicable securities Laws. The
issuance of the Conversion Shares, when duly authorized and, when
issued and delivered in accordance with this Agreement, will be
duly and validly issued, fully paid and nonassessable, will have
been issued in compliance with applicable securities Laws or
exemptions therefrom, will not be issued in violation of any
preemptive rights of any stockholder of Parent or any other Person
and shall be issued and delivered by Parent to the Stockholders,
free of any Liens, subject to the restrictions set forth herein and
applicable securities Laws. Parent is, and to Parent’s
Knowledge shall remain, eligible to register secondary offerings of
securities, including the resale of its Class B Common Stock with
the SEC pursuant to a registration statement on Form S-3 under the
Securities Act, and the resale registration of the Conversion
Shares, may, and, as set forth in Section 5.8(e), shall be done in
compliance with all applicable Laws and any applicable rules and
regulations of Nasdaq.
Section
4.8
Parent
SEC Reports; Financial Statements; Absence of Certain
Developments
.
(a)
Since January 9,
2017, Parent has timely filed or furnished all SEC Reports required
to be filed or furnished by it. Each of the SEC Reports at the time
of its filing or being furnished complied in all material respects
with the requirements of the Securities Act, the Exchange Act and
the Sarbanes-Oxley Act of 2002 (the “
Sarbanes-Oxley Act
”), and
any rules and regulations promulgated thereunder applicable to the
SEC Reports, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading. There are no outstanding or
unresolved comments received from the U.S. Securities and Exchange
Commission (the “
SEC
”) with respect to any
of the SEC Reports, and, to Parent and Merger Sub’s
Knowledge, none of the SEC Reports is the subject of any ongoing
review by the SEC. The certifications and statements required by
(i) Rule 13a-14 under the Exchange Act and (ii) 18 U.S.C.
§1350 (Section 906 of the Sarbanes-Oxley Act) relating to the
SEC Reports are accurate and complete in all material respects and
comply as to form and content in all material respects with all
applicable law.
(b)
The financial
statements of Parent included in the SEC Reports comply in all
material respects with applicable accounting requirements and the
rules and regulations of the SEC with respect thereto as in effect
at the time of filing. Such financial statements have been prepared
in accordance with GAAP and practices as in effect from time to
time and applied on a consistent basis throughout the periods
involved, except that unaudited financial statements may not
contain all footnotes required by such accounting principles, but
otherwise comply with Article X of Regulations S-X in respect of
condensed interim financial statements, and fairly present in all
material respects the financial position of Parent and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited interim financial statements, to
normal, immaterial, year-end audit adjustments in accordance with
GAAP consistently applied during the periods involved.
(c)
Parent is in
compliance in all material respects with the applicable listing and
corporate governance rules and regulations of Nasdaq. From January
1, 2017 through the date hereof, Parent has not received any
comment letter from the SEC or the staff thereof or any
correspondence from Nasdaq or the staff thereof relating to the
delisting or maintenance of listing of the Class B Common Stock on
Nasdaq, other than such disclosures or documents that can be
obtained on the SEC’s website at www.sec.gov.
(d)
Parent maintains
disclosure controls and procedures as required by Rule 13a-15 or
15d-15 under the Exchange Act. Such disclosure controls and
procedures are effective to ensure that all information required to
be disclosed by Parent is recorded and reported on a timely basis
to the individuals responsible for the preparation of
Parent’s SEC Reports and other public disclosure documents.
Parent maintains internal control over financial reporting (as
defined in Rule 13a-15 or 15d-15, as applicable, under the Exchange
Act). Such internal control over financial reporting is effective
in providing reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with GAAP and includes policies and
procedures that (i) pertain to the maintenance of records that are
in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets of Parent, (ii) provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP,
and that receipts and expenditures of Parent are being made only in
accordance with authorizations of management and directors of
Parent, and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition
of Parent’s assets that could have a material effect on its
financial statements. No attorney representing Parent or any of its
Subsidiaries, whether or not employed by Parent or any of its
Subsidiaries, has reported evidence of a violation of securities
Laws, breach of fiduciary duty or similar violation by Parent or
any of its officers, directors, employees or agents pursuant to the
rules adopted pursuant to Section 307 of the Sarbanes-Oxley
Act.
(e)
Parent’s
auditor has at all times since January 1, 2017 been: (i) a
registered public accounting firm (as defined in Section 2(a)(12)
of the Sarbanes-Oxley Act); (ii) to the Knowledge of Parent,
“independent” with respect to Parent within the meaning
of Regulation S-X under the Exchange Act; and (iii) to the
Knowledge of Parent, in compliance with applicable subsections of
Section 10A of the Exchange Act and the rules and regulations
promulgated by the SEC and the Public Company Accounting Oversight
Board thereunder.
(f)
Parent has
disclosed, based on the most recent evaluation by its chief
executive officer and its chief financial officer prior to the date
hereof, to Parent’s auditors and the audit committee of
Parent’s board of directors (i) any significant
deficiencies in the design or operation of its internal controls
over financial reporting that are reasonably likely to adversely
affect Parent’s ability to record, process, summarize and
report financial information and has identified for Parent’s
auditors and audit committee of the Parent’s board of
directors any material weaknesses in internal control over
financial reporting and (ii) any fraud, whether or not
material, that involves management or other employees who have a
significant role in the Parent’s internal control over
financial reporting. Parent has delivered to the Company prior to
the date hereof (A) a complete and correct summary of any such
disclosure and (B) any material communication made by
management or Parent’s auditors to the audit committee
required or contemplated by listing standards of Nasdaq, the audit
committee’s charter or professional standards of the Public
Company Accounting Oversight Board. No material complaints from any
source regarding accounting, internal accounting controls or
auditing matters, and no concerns from Parent’s employees
regarding questionable accounting or auditing matters, have been
received by Parent or, to the Knowledge of Parent, Parent’s
independent registered public accounting firm.
(g)
Since June 30,
2018, Parent has conducted its business in the ordinary course
materially consistent with past practice. Since June 30, 2018,
there has not been any Material Adverse Change with respect to
Parent or any of its Subsidiaries nor has there occurred any event
that is reasonably likely to result in a Material Adverse Change
with respect to Parent or any of its Subsidiaries.
Section
4.9
Merger
Sub
. Merger Sub was
formed solely for the purpose of consummating the Merger and
engaging in the transactions contemplated hereby and has not
conducted any operations or engaged in any business activities,
other than those reasonably necessary to consummate the
transactions contemplated hereby.
Section
4.10
No
Other Representations and Warranties
. Except for the
representations and warranties of the Stockholders 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 Stockholders, nor the Company, nor any other Person has
made or makes, and Parent and Merger Sub acknowledge and agree on
behalf of themselves and any other Parent Indemnitee that they have
not, will not and are not permitted to rely on, any other express
or implied representation or warranty, either written or oral,
whatsoever, including regarding the Stockholders, 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. Notwithstanding the representations
and warranties of the Stockholders and the Company set forth in
ARTICLE II and ARTICLE III of this Agreement (including the related
portions of the Disclosure Schedule), other than Section 3.3(b),
Parent and Merger Sub acknowledge and agree on behalf of themselves
and any other Parent Indemnitee that the Stockholders shall have no
Liability for a breach of a representation or warranty if such
breach is caused by the Reorganization.
ARTICLE V
COVENANTS
Section
5.1
Further
Assurances
.
(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. The Stockholders shall reasonably cooperate
with Parent 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 Parent’s
sole cost and expense. In addition, the Stockholders shall use
reasonable efforts to cooperate with and provide reasonable
assistance to Parent in connection with any securities or similar
filings required under Law with respect to the Company and the
transactions contemplated hereby, at Parent’s sole cost and
expense.
(b)
Following the
Closing, in the event and for so long as Parent 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 or Wholesale Holdings and related to pre-Closing periods,
each Stockholder shall cooperate reasonably with Parent and
Parent’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 Parent (unless Parent
is entitled to indemnification therefor hereunder).
Section
5.2
Names and
Logos
. From and after
the Closing, no Stockholder will, and each Stockholder will cause
its Affiliates (excluding, for the avoidance of doubt, the Company
or the Surviving Company and its Affiliates) not to, use any names
or logos incorporating or similar to “Wholesale, Inc.”
or any derivatives thereof or any other trade name used in the
Business.
Section
5.3
Tax Covenants
.
(a)
Parent, on the one
hand, and Stockholders, 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.
(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 Merger, or any other transaction
contemplated in the Transaction Documents shall be paid by
Stockholders and one-half of such Taxes shall be paid by
Parent.
(c)
For purposes of determining the Taxes of Wholesale
Holdings and 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
Wholesale Holdings or 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.
(d)
Representative shall prepare or cause to be
prepared, at the Representative’s expense, all income Tax
Returns of Wholesale Holdings and 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 Wholesale Holdings and the Company in
preparing Tax Returns. Representative shall provide Parent 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
Parent’s review, comment and filing. In case of any dispute
regarding a Company Pre-Closing Tax Return provided to Parent for
review and involving a disputed item that would have the effect of
increasing the Tax liability of Wholesale Holdings or 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 1.9
.
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 the
Stockholders, and Parent 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 the
Stockholders, shall pay such amounts in cash (excluding any Taxes
taken into account in determining the Closing Net Working
Capital).
(e)
Parent 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
Wholesale Holdings and 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), Parent shall pay
all Taxes shown as due on those Tax Returns. All such Tax Returns
prepared by Parent that relate to a Pre-Closing Tax Period of the
Company or with respect to which Stockholders may have an
indemnification obligation under the terms of this Agreement (each,
a “
Parent 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. Parent shall provide Representative with each Parent
Prepared Return prior to the due date for such Parent 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 Parent Prepared Return, such dispute shall
be resolved by the Neutral Accountants in accordance with the
procedure set forth in Section 1.9. If any dispute with respect to
a Parent 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 Parent 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 Parent 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 the Stockholders, 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).
(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 Wholesale
Holdings or the Company in their possession or control, including
audit reports received from any Tax authority relating to any Tax
Return of Wholesale Holdings or 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 Parent nor any Affiliate of Parent
(including after the Closing, the Surviving Company or its
Subsidiaries) shall amend or cause the Surviving Company to amend
any Tax Return of
Wholesale Holdings
or
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 (which consent shall
not be unreasonably withheld, conditioned, or delayed), neither
Parent nor any Affiliate of Parent shall (or shall cause the
Surviving Company or its Subsidiaries 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
Wholesale Holdings or
the Company relating
to any Pre-Closing Tax Period of the Company.
(h)
If any Governmental
Body issues to
Wholesale Holdings
or
the Company or the Surviving 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 the
Stockholders could reasonably be expected to be responsible by
reason of the indemnity provisions of this Agreement or otherwise,
the Parent 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 the Stockholders’ 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 Wholesale Holdings or the Company for any Pre-Closing
Tax Periods to the extent that such Tax Proceeding (i) involves any
Tax Returns of Wholesale Holdings or 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) the Stockholders
for any Pre-Closing Tax Period; or (iii) is reasonably be expected
to give rise to indemnification obligations from the Stockholders
under this Agreement. The Representative and Parent shall jointly
agree on the conduct of any Tax Proceedings relating to any
Straddle Period Tax Return to the extent that the Stockholders may
have an indemnification obligation with respect to such Straddle
Period Tax Return under this Agreement.
(j)
In the event that
Parent and, after the Closing, the Surviving Company or its
Subsidiaries on the one hand, or the Representative on the other
controls a Tax Proceeding of the Company or the Surviving 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, Surviving Company or its Subsidiaries, 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 or the Surviving 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). Parent shall promptly notify the
Representative in writing upon receipt by Parent or any Affiliate
of Parent (including the Company or the Surviving Company) of any
pending or threatened Tax Proceedings relating to the Company or
the Surviving Company or the income, properties or operations of
the Company, the Surviving Company or any of its Subsidiaries for
any Tax period ending on or prior to the Closing Date or any
Straddle Period.
(k)
Parent shall,
and shall cause the Surviving Company and its Subsidiaries to
remit, to the Representative within ten (10) days after receipt (or
realization by way of a reduction in Taxes otherwise payable) by
the Parent, the Surviving Company or its Subsidiaries (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 the Stockholders
under this Agreement). Parent, the Surviving Company and its
Subsidiaries (and any Tax group of which the Surviving Company or
any of its Subsidiaries is a member) shall reasonably cooperate
with the Representative in connection with, any claims for refund
of Taxes to which the Representative or the Stockholders are
entitled pursuant to this Section 5.3(k).
(l)
None of Parent, the
Company, the Surviving Company or any of its Subsidiaries, or the
Stockholders shall take any action that could reasonably be
expected to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
Section
5.4
Non-Competition;
Non-Solicitation
.
(a)
Each Stockholder
acknowledges that it is familiar with the trade secrets and other
confidential information of the Company and Wholesale Holdings.
Therefore, and in further consideration of the compensation to be
paid to Stockholders hereunder, each Stockholder agrees to the
covenants set forth in this Section 5.4 and acknowledges that
Parent would not have entered into this Agreement but for
Stockholders’ 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 Stockholder
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 Stockholder from doing any of
the foregoing directly or indirectly for, in connection with, or on
behalf of, Parent and its Affiliates or (ii) a Stockholder being a
passive, beneficial owner of less than five percent (5%) of the
outstanding securities of any publicly-traded corporation other
than Parent.
(c)
For a period of
three (3) years from and after the Closing Date, no Stockholder
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, Wholesale
Holdings, Parent, the Surviving Company 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 Stockholder 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
Stockholder from (i) responding truthfully to any valid request
made pursuant to any Legal Proceeding or (ii) making any claims
under this Agreement.
(d)
The Parties hereto
acknowledge and agree that Parent and each of its Affiliates,
successors and assigns would suffer irreparable harm from a breach
of this Section 5.4 by any Stockholder 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, Parent 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 Stockholder, 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 Stockholder against Parent, whether
predicated upon this Agreement or otherwise, shall not constitute a
defense to the enforcement by Parent of any restrictive covenant
contained in this Section 5.4. Parent 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 Stockholder of this Section 5.4, the
three (3) year period described in clauses (b) and (c) above shall
be tolled with respect to such Stockholder until such breach or
violation has been duly cured. Each Stockholder agrees that the
restrictions contained in this Section 5.4 are
reasonable.
(f)
No portion of the
Merger Consideration shall be allocated to the
non-competition/non-solicitation provisions set forth in this
Section 5.4, as such provisions are not intended to be compensatory
in nature but rather such agreements are sought to protect
Parent’s investment in the acquired goodwill of the Company
and no separate consideration is being paid therefor.
Section
5.5
Resignations
. At the Closing,
the Company and Wholesale Holdings shall deliver to Parent written
resignations, effective as of the Closing Date, of the officers and
directors of the Company and Wholesale Holdings requested by Parent
at least three (3) Business Days prior to the Closing.
Section
5.6
Tangible
Property
. On the Closing
Date, Stockholders shall deliver to the Company possession of all
tangible property belonging to the Company or Wholesale Holdings
that is in their personal possession or under their
control.
Section
5.7
Discharge
of Affiliate Obligations
. Prior to the
Closing, Stockholders shall cause all Indebtedness of the Company
or Wholesale Holdings to any of Stockholders or any of their
respective Affiliates to be satisfied or cancelled, and
Stockholders shall cause all Indebtedness of any of Stockholders or
any of their respective Affiliates to the Company or Wholesale
Holdings to be satisfied or cancelled.
Section
5.8
Conversion of Parent Consideration
Shares; Registration
.
(a)
As soon as
practicable after the Closing, and in any event within 30 days,
Parent, Chesrown, and Berrard shall use their best efforts to take
any actions to seek and obtain any required consent from the board
of directors and the stockholders of Parent to provide for the
conversion of the Parent Consideration Shares into shares of Class
B Common Stock (the stockholders’ consent, the
“
Conversion
Consent
,” and the shares of Class B Common Stock
issuable upon conversion of the Parent Consideration Shares, the
“
Conversion
Shares
”). After the date the Conversion Consent
becomes effective in accordance with its terms (the
“
Consent
Date
”), Parent shall, and Chesrown, and Berrard shall
cause Parent to, cause the Conversion Shares to be duly authorized
and reserved for issuance upon conversion of the Parent
Consideration Shares as described in this Section 5.8.
(b)
As soon as
practicable after the Reviewed Financial Statements Delivery Date,
and in any event within 10 days of the Reviewed Financial
Statements Delivery Date, Parent will (i) file with the SEC a
preliminary information statement of the type contemplated by and
in accordance with Regulation 14C of the Exchange Act (including
Rule 14c-2 promulgated under the Exchange Act) and containing the
information specified in Schedule 14C under the Exchange Act
concerning the Conversion Consent, the Merger, and the other
transactions contemplated by this Agreement, including the
conversion of the Parent Consideration Shares and the issuance of
the Conversion Shares (the “
Information Statement
”)
and (ii) use its best efforts to obtain approval from the Nasdaq
for the listing of the Conversion Shares (the “
Nasdaq Approval
”) . As
soon as practicable after approval (or lack of further comment)
from the SEC with respect to the preliminary Information Statement,
Parent will mail to its stockholders a definitive Information
Statement (the actual date of such mailing, the “
Mailing Date
”). The
Parties acknowledge and agree that the unaudited condensed balance
sheet of the Company as at September 30, 2018 and the related
audited statements of income and retained earnings,
stockholders’ equity and of cash flows of the Company for the
nine-month period then ended (the “
Reviewed Financial
Statements
”) are currently being prepared by Henderson
Hutcherson & McCullough, PLLC, and must be delivered prior to
the filing of the Information Statement. Each Party hereby
covenants and agrees to use commercially reasonable efforts to
ensure that the Reviewed Financial Statements are delivered as soon
as possible following the Closing Date (such actual date of
delivery, the “
Reviewed Financial Statements Delivery
Date
”).
(c)
The Stockholders
shall use commercially reasonable efforts to provide promptly to
Parent such information concerning the Company’s business
affairs and financial statements and any information concerning the
Stockholders to the extent applicable, and shall direct that their
counsel and auditors cooperate with Parent’s counsel and
accountants in the preparation of the Information Statement.
Company and Stockholders will use commercially reasonable efforts
to ensure that none of the information supplied, or to be supplied,
by the Company or the Stockholders in writing specifically for
inclusion in the Information Statement shall contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are
made, not misleading. If any Stockholder obtains Knowledge that any
information provided by any Stockholder or the Company in writing
specifically for inclusion in the Information Statement is
discovered or any event occurs with respect to any Stockholder or
the Company, or any change occurs with respect to the other
information provided by any Stockholder or the Company included in
the Information Statement that is required to be described in an
amendment of, or a supplement to, the Information Statement so that
such document does not include any misstatement of a material fact
or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading, the Stockholders shall notify Parent promptly of
such event.
(d)
As soon as
practicable after the later of (i) 21 days after the Mailing Date
and (ii) receipt of the Nasdaq Approval, Parent shall cause the
Conversion Shares to be issued in book-entry form to the
Stockholders in exchange for and upon receipt by the
Company’s transfer agent of certificates representing the
Parent Consideration Shares.
(e)
As soon as
practicable after the issuance of the Conversion Shares to the
Stockholders, and in any event within 10 days, Parent shall file a
Registration Statement on Form S-3 (or any successor to Form S-3)
with the SEC, registering for resale the Conversion Shares and
shall use commercially reasonable efforts to cause such
registration statement to become effective as soon as practicable
thereafter. If Parent is not Form S-3 eligible at the time of
filing, Parent shall file a Registration Statement for a Shelf
Registration on Form S-1 (or any successor to Form S-1) and cause
it to be declared effective as soon as practicable. In the event
that Parent files on a Form S-1 and thereafter becomes eligible to
register the Conversion Shares on Form S-3, Parent shall, after
consultation with and receipt of consent by the Stockholders, use
its commercially reasonable efforts to convert the Form S-1 to a
Form S-3 as soon as practicable after Parent becomes so eligible.
Parent shall use its commercially reasonable efforts, (a) to the
extent required by the rules and regulations of Nasdaq, to prepare
and submit to Nasdaq the requisite notification and forms for the
listing of the Conversion Shares, and to cause such shares to be
approved for listing (subject to official notice of issuance) prior
to issuance.
(f)
Parent, Chesrown,
and Berrard covenant and agree not to amend, rescind or revoke the
Board Consents or the Majority Consent.
Section
5.9
Parent Stock Incentive
Plan
. As soon as
practicable following the Closing Date, Parent will issue
restricted stock units from the Parent Stock Incentive Plan to such
employees of the Company and in such amounts as set forth on
Schedule 5.9
, which
restricted stock units shall be issued subject to the vesting
schedule set forth on
Schedule 5.9
. The issuance of
these restricted stock units shall be made pursuant to grant
agreements in substantially the form attached hereto as
Schedule 5.9
.
Immediately following the Closing Date, Parent shall make such
filings and seek such approvals as necessary to ensure the shares
of Class B Common Stock underlying the units are registered on Form
S-8 promptly following the Closing Date. Parent covenants and
agrees not to amend, rescind or revoke the Incentive
Consent.
Section
5.10
Parent Observer and Information
Rights
(a)
. For so long as
Representative and/or an Affiliate of Representative is the
beneficial owner of no less than 500,000 shares of Class B
Preferred Stock and/or Class B Common Stock and/or securities
convertible into no less than 500,000 shares of Class B Preferred
Stock and/or Class B Common Stock, in the aggregate (the
“
Minimum
Threshold
”), Representative shall have the option,
upon written notice to Parent, to appoint one individual as a
non-voting observer to Parent’s board of directors (a
“
Board
Observer
”). Any Board Observer shall be entitled to
attend all meetings of Parent’s board of directors and any
committees of Parent’s board of directors and to receive all
information provided to the members of Parent’s board of
directors or its committees (including minutes of previous meetings
of Parent’s board of directors or such committees); provided,
that (i) the Board Observer shall not be entitled to vote on any
matter submitted to Parent’s board of directors or any of its
committees nor to offer any motions or resolutions to
Parent’s board of directors or such committees and (ii) the
Board Observer shall have entered into a confidentiality agreement
on terms reasonably satisfactory to Parent prior to the exercise of
the rights contained in this paragraph.
So long
as Representative and/or an Affiliate of Representative own, in the
aggregate, the Minimum Threshold, Representative shall have the
option, upon written notice to Parent, to receive all information
provided to the members of Parent’s board of directors or its
committees (including minutes of previous meetings of
Parent’s board of directors or such committees).
Section
5.11
Employee
Matters
. Parent 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), Parent shall, or it shall cause
the Surviving Company and its Subsidiaries (including the Company)
to, (i) provide each employee of the Company as of the Closing Date
who is then employed by the Company, the Surviving 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 Section 5.9)
under any employee benefit plan, program or arrangement established
or maintained by Parent, the Company, the Surviving 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. As soon as is
practicable following the Closing Date, Parent shall cause the
Company to, and Representative shall, negotiate in good faith with
respect to the terms of a consulting agreement between such
parties. As soon as is practicable following the Closing Date,
Parent shall cause the Company to, and Steve Watson and Chad
Cunningham shall, negotiate in good faith with respect to the terms
of employment agreements between such respective parties. 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
5.11.
Section
5.12
Estoppel
Certificates
.
(b)
Upon
Parent’s request, the Stockholders shall use commercially
reasonable efforts to assist Parent in Parent’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).
Section
5.13
Efforts to Consummate
Transaction
. The Company, Wholesale Holdings and the
Stockholders 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). Parent and Merger Sub 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, 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).
ARTICLE
VI
CLOSING
CONDITIONS
Section
6.1
Conditions to Obligation of Parent and
Merger Sub
. The obligation of Parent and Merger Sub 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 Parent and
Merger Sub:
(a)
The
representations and warranties of Wholesale Holdings, the Company
and Stockholders (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 Sections 3.1, 3.3(a), 3.7 (b), (d)-(q), 3.10(c) and 3.22-3.25 of
this Agreement shall be true and correct 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), except where the failure to be so true
and correct would not be material to the Company and Wholesale
Holdings, taken as a whole.
(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)
Wholesale Holdings,
the Company, and/or the Stockholders, as applicable, shall have
delivered the following to Parent:
(e)
a certificate,
dated as of the Closing Date, executed by a duly authorized officer
of the Company representing that the conditions set forth in
Section 6.1(a) and Section 6.1(b) have been satisfied (the
“
Company Closing
Certificate
”);
(f)
a fully-executed
stock power of each Stockholder;
(g)
a certificate of
the secretary of each of Wholesale Holdings and the Company
certifying to (A) the articles of organization or incorporation (as
applicable), as amended, of the Company and stating that no
amendments have been made to such articles of organization or
incorporation, as applicable, since such date, (B) all other
Governing Documents of each such entity, and (C) the adoption of
resolutions by each such entity approving the transactions
contemplated by the Transaction Documents;
(h)
a properly executed
affidavit from each Stockholder in a form satisfactory to Parent,
certifying that such Stockholder is not a foreign person within the
meaning of Section 1445 of the Code;
(i)
the Escrow
Agreement, duly executed and delivered by the
Representative;
(j)
the General
Release, duly executed and delivered by each Stockholder and the
Company;
(k)
the
Registration Rights Agreement, substantially in the form attached
hereto as
Exhibit C
(the “
Registration
Rights Agreement
”), duly executed and delivered by
each Stockholder;
(l)
resignations of the
officers and directors of the Company and Wholesale Holdings
pursuant to Section 5.5; and
(m)
new leases with
respect to the Leased Properties owned by Affiliates of the
Stockholders, substantially in the form attached hereto as
Exhibit D
(the
“
New
Leases
”), executed by the Company and the applicable
landlord.
(n)
The conditions set
forth in Section 6.1 of the MIPA 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
MIPA).
Section
6.2
Conditions to Obligation of Wholesale
Holdings, the Company, and Stockholders
. The obligation of
Wholesale Holdings, the Company and the Stockholders 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 Wholesale Holdings,
the Company and the Stockholders:
(a)
The
representations and warranties of Parent and Merger Sub 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 Parent and Merger Sub 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 Parent or
Merger Sub 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)
the Parent
Consideration Shares will be issued by Parent to the Stockholders
in accordance with
Schedule 2
hereto;
(e)
Parent shall have
delivered the following to Representative:
(i)
a certificate,
dated as of the Closing Date, executed by a duly authorized officer
of Parent and Merger Sub representing that the conditions set forth
in Section 6.2(a) and Section 6.2(b) have been satisfied (the
“
Parent Closing
Certificate
”);
(ii)
a
certificate of the secretary of Parent and Merger Sub certifying to
(A) the certificate of incorporation, as amended, of such entity,
certified by the Secretary of State of the jurisdiction in which
each such entity is incorporated or organized, as of a recent date,
and stating that no amendments have been made to such certificate
of incorporation (or similar incorporation or formation documents)
since such date, (B) all other Governing Documents of such entity,
(C) the adoption of resolutions by the board of directors or
similar governing body (and, with respect to Parent, the pricing
committee of the board) of such entity approving the transactions
contemplated by the Transaction Documents (the “
Board Consents
”), (D) the
adoption of resolutions by the compensation committee of Parent
approving the grants contemplated by Section 5.9 (the
“
Incentive
Consent
”), and (E) the written consent of the holders
of a majority of the voting rights of Parent approving the
conversion of the Parent Consideration Shares into shares of Class
B Common Stock (the “
Majority
Consent
”);
(iii)
evidence
satisfactory to the Stockholders of the termination of all
guarantees of the Stockholders of the Floor Plan;
(iv)
evidence
satisfactory to the Stockholders of the release of any liens on the
assets and properties of the Stockholders and their respective
Affiliates related to the Floor Plan;
(v)
a good standing
certificate, as of a recent date, for each of Parent and Merger Sub
certified by the Secretary of State of the state of its
incorporation;
(vi)
the
Escrow Agreement, duly executed and delivered by Parent and the
Escrow Agent; and
(vii)
the
Registration Rights Agreement, duly executed and delivered by
Parent.
(f)
The Representative
shall be satisfied that the Merger will qualify, for U.S. federal
income Tax purposes, as a reorganization within the meaning of
Section 368(a) of the Code, and the Treasury Regulations
promulgated thereunder, and that this Agreement, as to the Merger,
constitutes a “plan of reorganization” within the
meaning of Section 1.368-2(g) of the Treasury
Regulations.
(g)
The conditions set
forth in Section 6.2 of the MIPA 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
MIPA).
ARTICLE
VII
INDEMNIFICATION
Section
7.1
Indemnity Obligations of
Stockholders
.
Subject
to the limitations set forth herein, each Stockholder, 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 Parent, Merger Sub
and their respective Affiliates (including, after the Closing, the
Surviving Company and its Subsidiaries) (collectively, and for the
avoidance of doubt excluding any Stockholder or Affiliate thereof,
the “
Parent
Indemnitees
”), from and against, and to pay or
reimburse Parent 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 Stockholder, Wholesale
Holdings or the Company contained in this Agreement or the Company
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
Stockholder, the Company, Wholesale Holdings 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
Wholesale Holdings or 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);
(d)
any Company
Transaction Expenses or Change of Control Payments to the extent
not accounted for in the determination of Closing Cash
Consideration; and
(e)
dissenters’,
appraisal or similar rights asserted by a stockholder of Wholesale
Holdings or equityholder of the Company under any Law.
Section
7.2
Indemnity Obligations of
Parent
. From and after
the Closing, Parent, the Company and the Surviving Company, jointly
and severally, covenant and agree to defend, indemnify and hold
harmless the Stockholders and their respective Affiliates from and
against any and all Losses based on, resulting from, arising out of
or relating to:
(a)
any breach of any
representation or warranty of Parent or Merger Sub contained in
this Agreement or the Parent 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
Parent or Merger Sub to perform any covenant or agreement of such
Party 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.
(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(c). 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,
Section 5.8 and Section 5.10 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:
(a)
Stockholders shall
not be liable to Parent 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 MIPA exceeds $400,000 (the
“
Basket
”),
in which event Stockholders 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 and
Sellers (as defined in the MIPA) shall not be liable to Parent
Indemnitees for indemnification pursuant to Section 7.1 of this
Agreement and Section 7.1 of the MIPA after the aggregate amount of
all Losses in respect of indemnification under Section 7.1 of this
Agreement and Section 7.1 of the MIPA 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 MIPA.
(b)
Parent shall not be
liable to Stockholders for indemnification under Section 7.2(a) of
this Agreement and Section 7.2(a) of the MIPA 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 MIPA exceeds the
Basket, in which event Parent 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. Stockholders shall not be
indemnified pursuant to Section 7.2(a) of this Agreement and
Section 7.2(a) of the MIPA with respect to any Loss if the
aggregate amount of all Losses for which Stockholders have received
indemnification pursuant to Section 7.2(a) of this Agreement and
Section 7.2(a) of the MIPA 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 Stockholder to Parent or the
Surviving Company for Fraud, which will be extended to the statute
of limitations in such events.
(d)
For the purposes of
calculating Losses to which Parent 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 1.9; (iv) such
Losses shall be reduced by the amount of any proceeds that any
Parent 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 Parent Indemnitee shall promptly reimburse
the Stockholders 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 Parent Indemnitee with respect to such
Losses; provided, however, such Parent Indemnitee shall promptly
reimburse the Stockholders for any subsequent recoveries for such
sources if previously indemnified hereunder so as to avoid a double
recovery. Without limiting Parent’s rights to pursue
indemnification hereunder, Parent 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 Parent Indemnitee is
entitled to indemnification for any Loss for which a Parent
Indemnitee seeks indemnification pursuant to this ARTICLE
VII.
(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 Parent Indemnitee
receives indemnification from the Escrow Amount or the Stockholders
and (ii) which results in any Tax benefit to a Parent Indemnitee or
their Affiliates for any taxable period which would not, but for
such indemnifiable event, be available to such Parent Indemnitee,
then Parent shall pay, or shall cause to be paid, to Representative
for the account of the Stockholders the amount of any such Tax
benefit, to the extent then determined, pro rata to each
Stockholder, 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 Parent or claimed by any Parent 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
Stockholders 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 Parent, the Company, the Surviving 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 Parent Indemnitees
. Any
indemnification to which Parent Indemnitees are entitled under this
ARTICLE VII as a consequence of any Losses they may suffer shall be
made as a release to Parent Indemnitees solely from the Escrow
Account in accordance with the terms of the Escrow Agreement of a
number of Parent Consideration Shares or Conversion Shares 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 Stockholder, the Stockholders shall have no
further liability pursuant to this ARTICLE VII; provided, that at
the option of the Stockholders, the Stockholders can make all or
any portion of any such required payment to Parent 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 the Stockholders to
Parent Indemnitees. For the avoidance of doubt, in no event, other
than the Fraud of a Stockholder, shall any Stockholder be required
to pay any indemnification claim to Parent 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 Stockholder, shall the
Stockholders’ and the Sellers (as defined in the MIPA)
collective indemnification obligations with respect to this ARTICLE
VII and Article VII of the MIPA exceed the Escrow
Amount.
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 Merger Consideration to the
extent permitted by applicable Law.
Section
7.8
Effect
of Knowledge
. Notwithstanding
anything herein to the contrary, the Stockholders shall have no
Liability for any breach of any representation or warranty if any
executive officer or director of Parent or Merger Sub 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 Parent or Merger Sub Parent and
Merger Sub 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 or Wholesale
Holdings
. Except for claims
based upon Fraud by a Stockholder, the indemnification provided for
in this ARTICLE VII shall be the sole remedy of the Parent
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 Parent
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 Stockholder. No Stockholder shall, after the Closing, be entitled
to seek or recover by contribution or otherwise any amounts from
the Company or Wholesale Holdings 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
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)
Parent and Merger
Sub may terminate this Agreement (so long as Parent or Merger Sub
is not in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement) by
giving written notice to the Company at any time prior to the
Closing (i) in the event that any Stockholder, Wholesale Holdings,
or the Company 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
(c)
the Company,
Wholesale Holdings and the Representative may terminate this
Agreement (so long as none of the Company, the Representative or
any Stockholder is in material breach of any of its
representations, warranties, covenants or agreements contained in
this Agreement) by giving written notice to Parent at any time
prior to the Closing (i) in the event Parent or Merger Sub 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 Parent's
obligation to pay for the legal and accounting fees, costs and
expenses of Stockholders, Wholesale Holdings or the Company
relating to the transaction contemplated hereby that were incurred
on or after October 10, 2018 through the Termination
Date.
ARTICLE IX
MISCELLANEOUS
Section
9.1
Certain
Definitions
.
(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 and Wholesale Holdings,
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.
“
Class B Common Stock
”
shall mean the Class B Common Stock of Parent, par value $0.001 per
share.
“
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 and Wholesale Holdings,
taken as a whole.
“
Company Transaction
Expenses
” means any and all legal, accounting,
consulting, investment advisory, brokers and other fees, costs and
expenses of the Stockholders, Wholesale Holdings 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 Stockholders, Wholesale Holdings or the Company
relating to the transaction contemplated hereby that were incurred
on or after October 10, 2018, which shall be paid by
Parent.
“
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.
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“
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 the Company and NextGear Capital,
Inc., as amended (the “
Floor Plan
Agreement
”).
“
Fraud
” means that such
Stockholder is finally determined by a court of competent
jurisdiction to have willfully and knowingly committed intentional
fraud against Parent or Merger Sub 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 Parent or Merger Sub in order to induce Parent
or Merger Sub to enter into this Agreement, and that Parent or
Merger Sub 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.
“
General Release
” means a
General Release in the form of
Exhibit E
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 or Wholesale Holdings 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, hedges 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.
“
Indebtedness for Borrowed
Money
” means, with respect to the Company or Wholesale
Holdings: (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 or Wholesale Holdings and held for
resale by the Company or Wholesale Holdings.
“
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 Stockholder, Stephen Watson and Chad
Cunningham, and, with respect to Parent or Merger Sub, 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.
“
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.
“
Nasdaq
” means the Nasdaq
Stock Market.
“
Net Working Capital
”
means the current assets of the Company and Wholesale Holdings of
the type and nature listed under the headings Accounts Receivable,
Inventory, Prepaid Expenses, Deferred Taxes and Investment Accounts
in the Balance Sheet less the current liabilities of the Company
and Wholesale Holdings of the type and nature listed under the
headings Checks Drawn in Excess of Available Bank Balance, Note
Payable – Floorplan, Accounts Payable and Accrued Expenses
and shall be calculated in accordance with GAAP and the past
practices of the Company.
“
Neutral Accountant
” means
Elliot Davis LLC (or if such firm shall decline or is unable to
act, or has a conflict of interest with Parent or the
Representative, or any of their respective Affiliates, another
nationally recognized accounting firm mutually acceptable to Parent
and the Representative).
“
Order
” means any order,
injunction, judgment, decree, ruling, writ, assessment or
arbitration award.
“
Parent Consideration
Shares
” means 1,125,926 shares of Parent's Series B
Non-Voting Convertible Preferred Stock;
provided, however
if the VWAP of the
Class B Common Stock for the five (5) trading days immediately
preceding the Closing Date is less than 8.60, Parent shall deliver
additional shares of Parent's Series B Non-Voting Convertible
Preferred Stock such that the total number of shares of Parent's
Series B Non-Voting Convertible Preferred Stock, valued equally, on
per share basis, to the VWAP of the Class B Common Stock for the
five (5) trading days immediately preceding the Closing Date for
the purposes of this calculation, equals no less than
$9,680,000.
“
Parent Stock Incentive
Plan
” means the 2017 RumbleOn, Inc. Stock Incentive
Plan, as amended.
“
PBGC
” means the Pension
Benefit Guaranty Corporation or any successor agency.
“
Per Share Closing Cash
Consideration
” means an amount equal to (a) the
Closing Cash Consideration, divided by (b) an amount equal to the
total number of Shares.
“
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.
“
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.
“
SEC Reports
” means,
collectively, all reports, schedules, forms, statements and other
documents required to be furnished or filed by Parent under the
Securities Act and the Exchange Act since January 9, 2017,
including the exhibits thereto and documents incorporated by
reference therein.
“
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 negative $1,656,308.41.
“
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.
“
VWAP
” means the
volume-weighted average price per share of common stock as
displayed under the heading “Bloomberg VWAP” on
Bloomberg page “RMBL” (or its equivalent successor if
such page is not available or the corresponding Bloomberg VWAP page
for such other security), in respect of the period from the
scheduled open of trading until the scheduled close of trading of
the primary trading session on such trading day (or if such
volume-weighted average price is unavailable, the market value of
one share of common stock (or other security) on such trading day
as an internationally recognized investment bank retained for this
purpose by Seller determines in good faith using a volume-weighted
average method.
“
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:
Term
|
Section
|
Agreement
|
Preamble
|
Articles
of Merger
|
Section
1.2
|
Authorized
Action
|
Section
9.18(b)
|
Balance
Sheet
|
Section
3.5
|
Balance
Sheet Date
|
Section
3.5
|
Basket
|
Section
7.5(a)
|
Berrard
|
Preamble
|
Blue
Sky Laws
|
Section
2.4
|
Board
Consents
|
Section
6.1(e)(ii)
|
Board
Observer
|
Section
5.10
|
Cap
|
Section
7.5(a)
|
Chesrown
|
Preamble
|
Closing
|
Section
1.2
|
Closing
Cash Consideration
|
Section
1.8(a)(i)
|
Closing
Date
|
Section
1.2
|
Closing
Net Working Capital
|
Section
1.9(a)
|
Closing
Statement
|
Section
1.9(a)
|
Company
|
Preamble
|
Company
ERISA Affiliate
|
Section
3.13(b)
|
Company
Parties
|
Section
5.4(c)
|
Company
Pre-Closing Tax Return
|
Section
5.3(d)
|
Consent
Date
|
Section
5.8(a)
|
Controlling
Party
|
Section
5.3(j)
|
Conversion
Consent
|
Section
5.8
|
Conversion
Shares
|
Section
5.8
|
Covenant
Survival Period
|
Section
7.4
|
Disclosure
Schedule
|
Section
9.11
|
Dispute
Notice
|
Section
1.9(b)
|
DLLCA
|
Section
1.1
|
Effective
Date
|
Preamble
|
Employee
|
Section
5.11
|
Employee
Benefit Plans
|
Section
3.13(a)
|
Enforceability
Exceptions
|
Section
2.1
|
ERISA
|
Section
3.13(a)
|
Escrow
Account
|
Section
1.7(b)
|
Escrow
Agreement
|
Section
1.7(b)
|
Escrow
Amount
|
Section
1.7(b)
|
Estimated
Net Working Capital
|
Section
1.8(a)
|
Final
Closing Statement
|
Section
1.9(b)
|
Financial
Statements
|
Section
3.5
|
General
Survival Period
|
Section
7.4
|
Incentive
Consent
|
Section
6.1(e)(ii)
|
Indemnified
Party
|
Section
7.3(a)
|
Indemnifying
Party
|
Section
7.3(a)
|
Information
Statement
|
Section
5.8(b)
|
Intellectual
Property Licenses
|
Section
3.11(b)
|
Leased
Properties
|
Section
3.9(b)
|
Losses
|
Section
7.1
|
Mailing
Date
|
Section
5.8(b)
|
Majority
Consent
|
Section
6.1(e)(ii)
|
Material
Contracts
|
Section
3.12(a)
|
Material
Customer
|
Section
3.21(a)
|
Material
Supplier
|
Section
3.21(b)
|
Membership
Interests
|
Recitals
|
Merger
|
Recitals
|
Merger
Consideration
|
Section
1.7(a)
|
Merger
Filings
|
Section
1.2
|
Merger
Sub
|
Preamble
|
Minimum
Threshold
|
Section
5.10
|
MIPA
|
Recitals
|
Multiemployer
Plans
|
Section
3.13(a)
|
Multiple
Employer Plans
|
Section
3.13(a)
|
Nasdaq
Approval
|
Section
5.8(b)
|
New
Leases
|
Section
6.1(m)
|
Owned
Intellectual Property
|
Section
3.11(a)
|
Parent
|
Preamble
|
Parent
Indemnitees
|
Section
7.1
|
Parent
Prepared Return
|
Section
5.3(e)
|
Participating
Party
|
Section
5.3(j)
|
Party
|
Preamble
|
Per
Share Valuation Amount
|
Section
1.7(b)
|
Personal
Property Leases
|
Section
3.10(a)
|
Plan of
Merger
|
Section
1.2
|
Q-Sub
Election
|
Recital
|
Qualified
Plans
|
Section
3.13(c)
|
Real
Property Laws
|
Section
3.9(c)
|
Real
Property Lease
|
Section
3.9(b)
|
Registration
Rights Agreement
|
Section
6.1(k)
|
Reorganization
|
Recitals
|
Representative
|
Preamble
|
Reviewed
Financial Statements
|
Section
5.8(b)
|
Reviewed
Financial Statements Delivery Date
|
Section
5.8(b)
|
Sarbanes-Oxley
Act
|
Section
4.8
|
SEC
|
Section
4.8
|
Shares
|
Recitals
|
Straddle
Period
|
Section
5.3(c)
|
Stockholder
|
Preamble
|
Survival
Period
|
Section
7.4
|
Surviving
Company
|
Section
1.1
|
Tax
Proceeding
|
Section
5.3(i)
|
TCode
|
Recitals
|
Third
Party Claim
|
Section
7.3(a)
|
Wholesale
Contribution
|
Recital
|
Wholesale
Holdings
|
Preamble
|
Wholesale
Predecessor
|
Recital
|
Wholesale
Successor
|
Recital
|
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 Stockholders.
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.
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 Parent, in
the case of an amendment, supplement, modification or waiver sought
to be enforced against Parent, or the Representative, in the case
of an amendment, supplement, modification or waiver sought to be
enforced against the Stockholders. 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 to
the Company or Wholesale Holdings, before the Closing
at:
Wholesale,
LLC
1811
Gallatin Pike N
Madison,
TN 37115
Attn:
Steven Brewster
With a
copy
(which shall not
constitute notice) to:
Bass,
Berry & Sims PLC
150
Third Avenue South, Suite 2800 Nashville, TN 37201
Attn:
Allen Overby
Taylor
Ashley
If to
the Stockholders, after the Closing, to the
Representative:
|
|
Steven
Brewster
250
Bluegrass Dr.
Hendersonville,
TN 37075
With a
copy (which shall not constitute notice) to:
Bass,
Berry & Sims PLC
150
Third Avenue South, Suite 2800 Nashville, TN 37201
Attn:
Allen Overby
Taylor
Ashley
|
|
If to
Parent, Merger Sub, or, after the Closing, the Company or the
Surviving Company, to:
RumbleOn,
Inc.
4521
Sharon Road, Suite 370
Charlotte,
NC 28211
Attn:
Marshall Chesrown
|
|
With a
copy (which shall not constitute notice) to:
Akerman
LLP
350 E.
Las Olas Boulevard, Suite 1600
Fort
Lauderdale, FL 33301
Attn:
Michael Francis
Christina
C. Russo
|
|
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.
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, Parent 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 Parent, the
Company, Wholesale Holdings or their respective businesses in any
form of transaction without the consent of any of the other
Parties. In addition, Parent may assign any or all of its rights
pursuant to this Agreement and the Escrow Agreement to any lender
to Parent, Wholesale Holdings or the Company as collateral security
without the consent of any of the other Parties. Except as provided
in ARTICLE VII 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 the
Company to Parent 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, (i) “made available” shall mean
uploaded to the data room for the transaction contemplated hereby,
emailed to Parent or its representatives or made available when
Parent or its representatives visited the offices or other
locations of the Company or Express, and (ii) “Company”
includes for any period following the Reorganization, Wholesale
Successor and, for any period prior to the Reorganization,
Wholesale Predecessor.
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.
Section
9.18
Appointment of the
Representative
.
(a)
Irrevocable Power of Attorney
.
Each Stockholder irrevocably constitutes and appoints Steven
Brewster 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 Stockholders 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;
(ii)
to
deliver all notices required to be delivered by such Stockholders
or any of them;
(iii)
to
receive all notices required to be delivered to such Stockholders
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 Parent for
indemnification by such Stockholders under this
Agreement;
(vi)
to
take all actions necessary to handle and resolve any adjustment to
the Merger Consideration pursuant to Section 1.9;
(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
Stockholder 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 could such Stockholders if personally present and
acting.
Each of
such Stockholders 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
Stockholders 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 Stockholder hereunder, the
actions (or decisions not to act) of the Representative shall
control. EACH SUCH STOCKHOLDER 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 STOCKHOLDER. Each of
such Stockholders 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 Stockholder shall be bound by such documents as fully as
if such Stockholder 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 Stockholders.
(b)
Actions of the Representative
.
Each Stockholder agrees that Parent shall be entitled to rely on
any action taken by the Representative, on behalf of Stockholders
pursuant to Section 9.18(a) above (each, an “
Authorized Action
”), and
that each Authorized Action shall be binding on each such
Stockholder as fully as if such Person had taken such Authorized
Action. Each Stockholder acknowledges and agrees that any payment
made by Parent on behalf of such Stockholder to the Representative
pursuant to this Agreement shall constitute full and complete
payment to Stockholder and Parent shall have no further liability
therefor. No Stockholder shall bring, and each Stockholder hereby
waives any right to bring, any Legal Proceeding against Parent 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 Shares 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 Shares
held by such holder immediately prior to the Closing.
(d)
Deposit
. Each Stockholder and
his or her spouse, if applicable shall, simultaneous with the
execution of this Agreement, deposit his, her or its Shares
(together with a stock power executed in blank) with the
Representative for delivery by the Representative to Parent 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, Berry &
Sims PLC’s (“
BBS
”) services as counsel
to the Company and/or the Stockholders 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) the
Stockholders, and none of Parent, Merger Sub, the Company, the
Surviving Company or any of their post-Closing Affiliates (other
than the Stockholders) 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 Parent
or the Surviving Company, on the one hand, and a third-party, other
than a Stockholder, on the other, after the Closing, the Surviving
Company may assert the attorney-client privilege to prevent
disclosure of privileged communications by BBS or a Stockholder to
such third-party; provided, however, that the Company may not waive
such privilege without the prior written consent of the
Representative.
* * * *
*
IN
WITNESS WHEREOF, this Agreement and Plan of Merger has been
executed by or on behalf of each of the Parties as of the day first
written above.
|
|
PARENT
:
RUMBLEON,
INC.
By:
/s/
Marshall Chesown
Name:
Marshall Chesown
Title:
Chief Executive Officer
MERGER SUB
:
RMBL
TENNESSEE, LLC
By:
/s/
Marshall Chesown
Name:
Marshall Chesrown
Title:
Manager
|
|
|
WHOLESALE
HOLDINGS:
WHOLESALE HOLDINGS,
INC.
By:
/s/ Steven
Brewster
Name:
Steven Brewster
Title:
President
|
|
|
COMPANY
:
WHOLESALE,
LLC
By:
/s/ Steven Brewster
Name:
Steven Brewster
Title:
President
|
[
Signature
Page to Agreement and Plan of Merger
]
STOCKHOLDERS
:
/s/Steven Brewster /s/Janelle
Brewster
Steven
and Janelle Brewster, joint tenants
with
right of survivorship
|
REPRESENTATIVE
:
/s/
Steven Brewster
Steven
Brewster
|
For the
limited purpose of Section 5.8 of this Agreement only:
CHESROWN
:
/s/
Marshall Chesrown
Marshall
Chesrown
|
BERRARD
:
/s/ Steven R. Berrard
Steven
R. Berrard
|
[
Signature Page to Agreement and Plan of
Merger
]
Exhibit A
Artiles of
Merger
ARTICLES OF MERGER
OF
WHOLESALE HOLDINGS, INC.,
a Tennessee corporation,
WITH AND INTO
RMBL TENNESSEE, LLC
a Delaware limited liability company
Pursuant
to Chapter 21 of the Tennessee Business Corporation Act and Section
18-209 of the Delaware Limited Liability Company Act, as amended,
Wholesale Holdings, Inc., a Tennessee corporation, and RMBL
Tennessee, LLC, a Delaware limited liability company, do hereby
adopt the following Articles of Merger:
1.
The names of the entities that are parties to the merger
contemplated by these
Articles
of Merger (the “Merger”) are:
(i)
WHOLESALE
HOLDINGS, INC., a Tennessee corporation (the “Merging
Company”); and
(ii)
RMBL
TENNESSEE, LLC, a Delaware limited liability company (the
“Surviving Company”).
2.
The Merging Company is hereby merged with and into the Surviving
Company
and
the separate existence of the Merging Company shall cease. The
Surviving Company is the surviving entity in the Merger and its
name, as the surviving entity shall remain RMBL TENNESSEE, LLC. A
copy of the Agreement and Plan of Merger is attached hereto as
Exhibit “A” and made a part hereof by reference as if
fully set forth herein. The Merger, the Agreement and Plan of
Merger and the performance of the terms of the Agreement and Plan
of Merger were duly authorized by all action required by or under
the laws of the State of Delaware and the State of Tennessee, the
charters of the Merging Company, the certificate of formation of
the Surviving Company, and the other governing and/or organic
documents of the Merging Company and the Surviving Company. The
Agreement and Plan of Merger has been duly executed by the
Surviving Company and the Merging Company. The Agreement and Plan
of Merger is on file at a place of business of the Surviving
Company, which is 4521 Sharon Road, Suite 370, Charlotte, North
Carolina 28211. A copy of the Agreement and Plan of Merger will be
furnished by the Surviving Company on request and without cost, to
any member of the Surviving Company or any person holding an
interest in the Merging Company.
3.
The Merger and the Agreement and Plan of Merger was unanimously
approved
by
the affirmative vote of the Board of Directors and the shareholders
of the Merging Company by unanimous written consents each dated as
of October 25, 2018, in accordance with applicable Tennessee law
and the charter of the Merging Company.
4.
The
Merger and the Agreement and Plan of Merger was unanimously
approved by the affirmative vote of the Board of Managers and the
sole member of the Surviving Company by unanimous written consent
dated as of October 25, 2018, in accordance with applicable
Delaware law and the charter of the Surviving Company.
5.
The
Merger shall become effective on the date of the filing of these
Articles of Merger with the Delaware Secretary of
State.
6.
The
certificate of formation and the operating agreement of the
Surviving Company as in existence prior to the Merger shall be the
certificate of formation and the operating agreement of the
Surviving Company, without amendment.
The parties have caused these Articles of Merger to be executed on
October
29,
2018
|
MERGING COMPANY:
WHOLESALE HOLDINGS, INC.
By
:
/s/
Steven Brewster
Name:
Steven Brewster
Title:
President
SURVIVING COMPANY:
RMBL TENNESSEE, LLC
By:
/s/
Marshall Chesrown
Name: Marshall Chesrown
Title: Manage
|
Exhibit B
Escrow
Agreement
[See Exhibit 10.2
to for 8-K]
Exhibit C
Registration
Rights Agreement
[See Exhibit 10.1
to Form 8-K]
Exhibit D
Form of
Lease
LEASE AGREEMENT
THIS
LEASE AGREEMENT is made and entered into as of October __, 2018
(the “Effective Date”), by and between:
(i)
Steven
and Janelle Brewster, each an individual, with a principal office
and place of business at 250B Blue Grass Drive, Hendersonville, TN
37075 (collectively, “Landlord”); and
(ii)
Wholesale,
LLC a Tennessee limited liability company, with a mailing address
of 4521 Sharon Road, Suite 370, Charlotte, NC 28211
(“Tenant”).
WITNESSETH
:
Landlord
leases to Tenant, and Tenant rents from Landlord, that certain real
property commonly known as 1809 Gallatin Pike North, Madison,
Tennessee 37115, together with all rights and privileges that are
appurtenant to such real property, inclusive of all easements
benefiting such land, and together with that certain building
located thereon consisting of approximately 28,743 square feet (the
“Premises”).
The
following additional stipulations are hereby declared to be
covenants of this Lease and shall, unless otherwise expressly
stated, be applicable at all times throughout the term of this
Lease and any extension or renewal thereof:
For
purposes of this Lease, the following terms shall have the
definitions ascribed to them below:
“Commencement
Date” shall mean the Effective Date.
“Improvements”
shall mean all improvements and structures located on the real
property or hereafter constructed on the real
property.
“Lease”
shall include this Lease Agreement and all amendments hereto, if
any, entered into from time to time hereafter.
“Lease
Year” shall mean each consecutive twelve (12) month period
during the term of this Lease and any extensions hereof. The first
Lease Year shall begin on the Commencement Date and shall expire on
the last day of the twelfth (12th) month thereafter and each
subsequent Lease Year shall begin on the day immediately following
the prior Lease Year and shall expire on the last day of the
twelfth (12th) month thereafter; provided, however, that in the
event the Commencement Date is not the first (1st) day of acalendar
month, then the first Lease Year shall be longer than twelve (12)
months, it being agreed that such Lease Year shall commence on the
Commencement Date and shall expire on the last day of the twelfth
(12th) month after the first (1st) day of the calendar month
following the Commencement Date.
“Material
Alteration” shall mean any proposed construction or
alteration or change affecting the Premises, the cost of which,
individually or together with other such activities to be completed
concurrently therewith, exceeds Fifteen Thousand and No/100 Dollars
($15,000.00) or adversely affects the structural integrity or
components of any Improvements.
“Permitted
Use” shall mean automotive dealership and service shop with
associated office space and for no other purpose.
“Rent”
shall mean the rent payable under this Lease and shall include Base
Rent (as hereinafter defined), together with all other items
described in this Lease as “additional
rent”.
“Tenant”
shall include the named Tenant and any permitted assignee or
subtenant thereof pursuant to an assignment or sublease under
Section 15 of this Lease.
2.
TERM
.
The term of this Lease shall begin on
the Commencement Date and shall expire on the last day of the third
(3
rd
)
Lease Year (hereinafter the “Termination Date”), unless
previously terminated or renewed or extended as provided
herein.
Provided
no Default (as hereinafter defined) exists beyond applicable notice
and cure periods, Tenant shall have the right, upon at least ninety
(90) days prior written notice to Landlord prior to the Termination
Date or the first Renewal Term, as applicable, to renew this Lease
for two (2) additional terms of five (5) years each (each, the
“Renewal Term”), upon the same terms and conditions
contained in this Lease except: (i) the second Renewal Term will
contain no further renewal options unless expressly granted by
Landlord in writing; and (ii) the Base Rent for the Premises shall
increase by ten percent (10%) over the immediately preceding Base
Rent amount then due, with lease terms commencing on or about the
date of commencement of the renewal term.
3.
RENT
(a)
Commencement
of Rent
. Payment of Base Rent
(as defined below) shall commence as of the Commencement
Date.
(b)
Base
Rent
. Tenant covenants and
agrees to pay to Landlord base rent (“Base Rent”) as
follows:
Date
|
Monthly Base Rent
|
Yearly Base Rent
|
October
__, 2018 – October __, 2021
|
$31,000
|
$372,000
|
October
__, 2021 – October __, 2026, if applicable
|
$34,100
|
$409,200
|
October
__, 2026 – October __, 2031, if applicable
|
$37,510
|
$450,120
|
(c)
All
Base Rent shall be paid in monthly installments, in advance, on
or
before the first (1
st
)
day of each month; provided, however, that if the Commencement Date
occurs on a day other than the first day of the calendar month, the
first payment of
2
Base
Rent shall be the prorated Base Rent for the remainder of the
calendar month in which the payment of Base Rent
commences.
(d)
Sales/Use
Tax
. Tenant shall also pay to
Landlord any applicable sales and use tax imposed on any Rents
payable hereunder from time to time by state law or any other
governmental entity, which sums shall constitute additional rent
and shall be due monthly at the same time as monthly installments
of Base Rent are due under this Section 3.
(e)
Late
Charges
. In the event any
installment of Rent is not received by Landlord within ten (10)
business days of its respective due date, there shall be a late
charge due to Landlord from Tenant in the amount of five percent
(5%) of such delinquent installment of Rent. All such latecharges
due hereunder shall be deemed additional rent, and are not
penalties but rather are charges attributable to administrative and
collection costs arising out of such delinquency. In addition, if
any payment due from Tenant remains overdue for more than ten (10)
days of its respective due date, an additional late charge in an
amount equal to the lesser of (a) ten percent (10%) per annum or
(b) the maximum rate allowable by law of the delinquent amount may
be charged by Landlord, and shall be due and payable with respect
to such payment from the due date thereof until Landlord receives
such payment.
(f)
Payments
of Rents
. At Landlord’s
request, all Rent payments shall be made by electronic funds
transfer to Landlord to the account and in accordance with the
procedures designated by Landlord, or in such other manner as
Landlord or its successors or assigns, respectively, may from time
to time designate in writing.Prior to the establishment of said
electronics funds transfer process, the parties agree that Tenant
shall make Rent payments by check payable to the order of Landlord
and sent to Landlord at Steve Brewster Rentals, 250B Blue Grass
Drive, Hendersonville, TN 37075, or to such other address as
Landlord may hereafter direct in writing to
Tenant.
(g)
No
Abatement
. Unless otherwise
stated in the Lease, no abatement, offset, diminution or reduction
of (i) Rent, charges or other compensation, or (ii) Tenant’s
other obligations under this Lease shall be allowed to Tenant or
any person claiming under Tenant, under any circumstances or for
any reason whatsoever.
(h)
Recalculation
of Base Rent
. Notwithstanding
anything contained herein to the contrary, Tenant shall have the
one-time right during the initial term of this Lease to have the
Base Rent hereunder recalculated in accordance with this subsection
(h). Within thirty (30) days after Landlord's receipt of Tenant's
recalculation notice, Landlord and Tenant shall each select an
independent disinterested MAI appraiser, which appraisers shall
(within ten (10) days) mutually select a third independent
disinterested MAI appraiser. Landlord and Tenant shall then each
submit for arbitration to the third appraiser their respective
offers of the Fair Market Value for the Base Rent. Such third
appraiser shall then (within five (5) business days) select only
the Landlord's or the Tenant's offer as the Fair Market Rental
Value of the Premises. The decision of such third appraiser shall
be final and binding on the parties and the fees and costs of such
third appraiser shall be borne by the unsuccessful party. At a
minimum, each of the MAI
3
appraisers
shall be disinterested commercial real estate appraisers in Wilson
County, Tennessee experienced in commercial leasing
4.
INTENTIONALLY
DELETED
.
5.
ALTERATIONS
AND IMPROVEMENTS, MECHANIC’S LIENS
(a)
Alterations and
Improvements
.
(i)
Tenant’s
Property
. Tenant shall be
permitted to install, use on and about, and remove from the
Premises at any time and from time to time all trade fixtures,
signage and other moveable personal property (exclusive of lighting
affixed to the Premises, plumbing, electrical and heating and air
conditioning improvements) which are not a component of the
building located or to be located on the Premises (hereinafter
referred to as the “Tenant’s Property”), all of
which at all times shall remain the property of Tenant with the
right of removal (subject to subparagraph 5(c) below) at the
expiration of this Lease.
(ii)
Subsequent
Improvements
. Tenant shall have
the right, from time to time, to make interior, non-structural
alterations to the Premises as Tenant shall desire without
Landlord's prior consent; provided, however, that (i) as to any
Material Alteration, (A) Tenant shall submit to Landlord, at least
ten (10) business days in advance of the proposed construction
date, a floor plan generally depicting any changes to the
configuration of space within the building and a listing of the
proposed alterations (and the cost thereof) to be completed in such
Material Alteration, and Landlord must, in its reasonable opinion,
approve or object to such Material Alteration within ten (10)
business days after Landlord’s receipt of such floor plan and
listing of the proposed alteration, and (B) at Landlord’s
reasonable request, Tenant shall deliver to Landlord
contractors’ unconditional payment and performance bonds for
such work naming Landlord and Tenant as dual obligees; and (ii) as
to all construction or alteration (regardless of whether any such
activities constitute Material Alteration), (A) all construction
shall be completed in a workmanlike manner and in compliance with
applicable laws, at Tenant’s sole expense, and (B) such
construction or alteration shall not reduce the fair market value
of the Premises. Landlord’s failure to respond to
Tenant’s request for approval of any proposed Material
Alteration within ten (10) business days after Landlord’s
receipt thereof shall be deemed to constitute Landlord’s
disapproval of such proposed Material Alteration. In the event
Landlord objects to any proposed Material Alteration as provided
above, Tenant may re-submit a revised floor plan and/or listing of
the proposed Tenant’s Improvements for review by Landlord as
provided in this Section 5(a)(ii). Changes or alterations to any
floor plan and listing of proposed Material Alteration previously
approved by Landlord that would affect the total cost thereof by
more than Ten Thousand and No/100 Dollars ($10,000.00) shall
constitute new Material Alteration which must be submitted to
Landlord or approval as provided above in this Section 5(a)(ii).
One reproducible final copy of the plans for all completed Material
Alterations shall be signed by Tenant and
4
submitted
to Landlord within ninety (90) days following the completion
thereof. All alterations shall not weaken or impair the structural
strength or materially decrease the value of the Premises and shall
be constructed in compliance with the requirements of this Lease.
Prior to the commencement of construction, all required approvals
of such construction must have been obtained from the applicable
governmental authorities and utilities having jurisdiction thereof.
Upon completion of the construction or alteration, Tenant shall
provide Landlord: (i) with respect to a Material Alteration, a
certification from the applicable construction contractor,
architect or engineer that such alterations or improvements have
been constructed, altered or changed in strict compliance with all
applicable laws, and (ii) with respect to a Material Alteration, a
fully executed lien waiver, in a form reasonably acceptable to
Landlord, from each contractor or subcontractor participating in
such construction or alteration or change of such alterations or
improvements, if and as applicable. Landlord shall be permitted to
inspect such constructed, altered or changed improvements. Except
as set forth herein, Tenant shall not remove or demolish, in whole
or in part, any alterations or improvements upon or within the
Premises without the prior approval of Landlord, which approval may
be conditioned upon the obligation of Tenant to return the Premises
to their original condition, wear and tear and casualty excepted.
All alterations and improvements shall be included within the
meaning of the term “Premises” hereunder.
(iii)
Ownership of
Improvements
. Except as set
forth herein, upon termination or expiration of this Lease, title
to any and all improvements, repairs, alterations, additions or
other improvements shall immediately and automatically vest in,
revert to and become the property of Landlord.
(b)
Mechanic’s
and Other Liens
. Tenant shall
not do or suffer anything to be done whereby the Premises, or any
part thereof, may be encumbered by a mechanic’s,
materialman’s, or other liens for work or labor done,
services performed, materials, appliances, or power contributed,
used, or furnished in or to the Premises or in connection with any
operations of Tenant, or similar lien, and, if, whenever and as
often as any such lien is filed against the Premises, or any part
thereof, purporting to be for or on account of any labor done,
materials or services furnished in connection with any work in or
about the Premises, done by, for or under the authority of Tenant,
or anyone claiming by, through or under Tenant, Tenant shall
discharge the same of record within thirty (30) days after service
upon Tenant of notice of the filing thereof; provided, however,
Tenant shall have the right to remove such lien by bonding same in
accordance with applicable law.
(c)
Title
to Tenant’s Property
. All
of Tenant’s Property placed in or upon the Premises by Tenant
shall remain the property of Tenant with the right to remove the
same at any time during the term of this Lease.
5
6.
INSURANCE
(a)
Tenant,
at its expense and as additional rent hereunder, shall, throughout
the term of this Lease and any extension or renewal thereof, keep
the Improvements located on the Premises insured against fire and
other casualty, with “Special Form Causes of Loss”
coverage (as such term is used in the insurance industry), at least
as broad as the most current ISO Special Cause of Loss Form,
including, but not limited to, coverage for glass breakage,
vandalism and malicious mischief, and builder’s risk (during
the period of any construction), in an amount of not less than the
full replacement value with no co-insurance penalty, with any
deductible in excess of $100,000 to be reasonably approved by
Landlord.
(b)
Tenant
shall also maintain throughout the term of this Lease and any
extension thereof, at its own expense and as additional rent,
commercial general liability insurance covering the Premises and
the Improvements, at least as broad as the most current ISO
Commercial General Liability Policy Form (occurrence basis),
against all claims for personal injury, death, or property damage
for the joint benefit of and insuring Tenant and Landlord (and
Landlord’s lender if so requested by Landlord), with limits
not less than Two Million Dollars ($2,000,000.00) per occurrence,
with any deductible in excess of $100,000 to be reasonably approved
by Landlord, and an umbrella liability policy or excess liability
policy, in an amount of not less than Four Million Dollars
($4,000,000.00) per occurrence, with any deductible in excess of
$250,000 to be reasonably approved by Landlord.
(c)
Intentionally
omitted.
(d)
All
insurance companies providing the coverage required under this
Section 6 shall be selected by Tenant and shall be rated A minus
(A-) or better by Best’s Insurance Rating Service, shall be
licensed to write insurance policies in the state in which the
Premises is located, and shall be acceptable to Landlord in
Landlord’s reasonable discretion. On or prior to the
Effective Date and thereafter prior to the expiration of any of the
policies providing the coverages described herein, Tenant shall
provide Landlord with copies of all certificates of such coverage
for the insurance coverages referenced in this Section 6. All
commercial general liability and umbrella liability or excess
liability policies (except as to the property policy) shall
designate Landlord and any mortgagee reasonably designated by
Landlord as an additional insured. Any such coverage for additional
insureds shall be primary and non-contributory with any insurance
carried by Landlord or any other additional insured hereunder. All
property insurance policies shall name Landlord (and
Landlord’s lender if so requested by Landlord) as an
additional named insured or as a loss payee as Landlord’s
interests may appear, and shall provide that all losses shall be
payable as herein provided. Tenant shall use commercially
reasonable efforts to require its insurer(s) that all such policies
of insurance shall provide that the amount thereof shall not be
reduced and that none of the provisions, agreements or covenants
contained therein shall be modified or canceled by the insuring
company or companies without thirty (30) days prior written notice
being given to Landlord; provided, however, the failure of any
policies to include the foregoing requirements of this sentence
shall not be a default under this Lease. Such policy
or
6
policies
of insurance shall also cover loss or damage to Tenant’s
Property, and the insurance proceeds applicable to Tenant’s
Property shall not be paid to Landlord or any mortgagee but shall
accrue and be payable solely to Tenant. In the event of a casualty,
Tenant shall be responsible for any deficiency between the
replacement cost of the Premises and the amount actually paid by
the insurance company.
(e)
Intentionally
omitted.
7.
MAINTENANCE AND REPAIR
(a)
Except
as set forth in subparagraph (d) below, Tenant shall maintain the
Premises and all buildings and improvements thereon in good order
and repair and, subject to the provisions of Section 8 with respect
to a termination of this Lease as a result of a casualty or a
“taking”, return the Premises and all buildings and
improvements thereon or constructed thereon by Tenant at the
expiration of the term of this Lease or any extension thereof in
good condition and repair, ordinary wear and tear, casualty, and
condemnation excepted.
(b)
Tenant
agrees that Landlord shall have no obligation under this Lease to
make any repairs or replacements (including the replacement of
obsolete components) to the Premises or the buildings or
improvements thereon, or any alteration, addition, change,
substitution or improvement thereof or thereto, whether structural
or otherwise, except to the extent any such repairs or replacements
are due to Landlord's or Landlord's agents', employees', or
contractors' negligence or willful misconduct. The terms
“repair” and “replacement” include the
replacement of any portions of the Premises which have outlived
their useful life during the term of the Lease (or any extensions
thereof). Except as set forth herein, Landlord and Tenant intend
that the Rent received by Landlord shall be free and clear of any
expense to Landlord for the construction, care, maintenance,
operation, repair, replacement, alteration, addition, change,
substitution and improvement of or to the Premises and any building
and improvement thereon, it being agreed that all such costs and
expenses shall be the responsibility of Tenant, except to the
extent any repair, replacement or improvements are necessary due to
Landlord's or Landlord's agents', employees', or contractors'
negligence or willful misconduct.
(c)
Tenant
acknowledges and agrees that the Premises are and shall be leased
by Landlord to Tenant in its present “AS IS” condition,
and that Landlord makes absolutely no representations or warranties
whatsoever with respect to the Premises or the condition thereof.
Tenant acknowledges that Landlord has not investigated and does not
warrant or represent to Tenant that the Premises are fit for the
purposes intended by Tenant or for any other purpose or purposes
whatsoever, and Tenant acknowledges that the Premises are to be
leased to Tenant in their existing condition, i.e., “AS
IS”, on and as of the Commencement Date. Notwithstanding the
foregoing, Landlord represents that as of the date of this Lease,
Landlord has received no written notice that either the Premises or
the property are not in compliance with all applicable laws
(including, without limitation, the Americans with Disabilities
Act).
7
(d)
Landlord
shall maintain and repair, at its expense, the roof, the structural
soundness of the foundation, the structural soundness of the
exterior walls of the building, the driveways, alleys, landscape,
drainage systems and grounds surrounding the Premises (but not
including Tenant's fenced-in parking area). Tenant shall promptly
give Landlord written notice of any repair required by Landlord
pursuant to this paragraph, after which Landlord shall have a
reasonable opportunity to repair.
()
Any
repairs or replacements required to be made by Landlord shall be
fully amortized in accordance with the Formula (defined below) and
reimbursed to Landlord over the remainder of the term of this
Lease, without regard to any extension or renewal option not then
exercised. The "Formula" shall mean that number, the numerator of
which shall be the number of months of the term of this Lease
remaining after such Landlord work, and the denominatorof which
shall be the amortization period (in months) equal to the useful
life of such repair or replacement multiplied by the cost of such
repair or replacement. Landlord shall pay for such repairs and
replacements, and Tenant shall reimburse Landlord for its amortized
share (as determined above) in equal monthly installments in the
same manner as the payment by Tenant to Landlord of the Base Rent.
In the event Tenant extends the Lease Term either by way of an
option or negotiated extension, such reimbursement by Tenant shall
continue as provided above until such amortization period has
expired.
8.
CONDEMNATION; CASUALTY
(a)
In
the event that the whole or any material part of the Premises shall
be taken during the term of this Lease or any extension or renewal
thereof for any public or quasi-public use under any governmental
law, ordinance, regulation or by right of eminent domain, or shall
be sold to the condemning authority under threat of condemnation
with the result that the Premises cannot continue to be operated
for the Permitted Use in Tenant's reasonable discretion, or if all
reasonable access to the adjacent roadways from the existing or
comparable curb cuts shall be taken (any of such events being
hereinafter referred to as a “taking”), Landlord or
Tenant shall have the option of terminating this Lease as of a date
no earlier than the date of such taking, such termination date to
be specified in a notice of termination to be given by the
terminating party to the other party not fewer than fourteen (14)
days after the date on which possession of the Premises, or part
thereof, must be surrendered to the condemning authority or its
designee.
(b)
In
the event of any taking which does not give rise to an option to
terminate (as described above) or in the event of a taking which
does give rise to an option to terminate (as described above) and
neither Landlord or Tenant elect to terminate, then and in either
such event, this Lease shall terminate (as of the date of such
“taking”) with respect only to the portion of the
Premises so taken, but shall remain in full force and effect with
respect to the remainder of the Premises, and Landlord shall, to
the extent of the award from such taking (which word
“award” shall mean the net proceeds of any award with
respect to such taking after deducting reasonable expenses of any
settlement, or net purchase price under a sale in lieu of
condemnation but shall exclude any portion of the total award that
relates to Landlord’s reversionary interest),
8
promptly
restore or repair the Premises and all improvements thereon (except
those items of Tenant’s Property which Tenant is permitted to
remove under the terms of this Lease) to the same condition as
existed immediately prior to such taking insofar as is reasonably
possible. If the estimated cost of restoration or repair shall
exceed the amount of such award, Landlord may elect to expend such
excess to restore or repair the Premises or may elect to terminate
this Lease. In such event, from and after the dateof such taking,
Base Rent and other charges payable to Landlord shall be reduced in
proportion to the amount of the Premises taken. If the award shall
exceed the amount spent or to be spent promptly to effect such
restoration, repair or replacement, such excess shall
unconditionally belong to Landlord.
(c)
Nothing
contained herein shall be construed to preclude Tenant, at its
cost, from independently prosecuting any claim directly against the
condemning authority in such condemnation proceeding for damage to,
or cost of removal of, stock, trade fixtures, furniture, other
personal property belonging to Tenant, and loss of Tenant's
business; provided, however, that no such claim shall diminish or
otherwise adversely affect Landlord's award.
(d)
If
this Lease is terminated by reason of a taking, then Landlord and
Tenant shall share the award in any such condemnation or eminent
domain proceedings or purchase, with Tenant getting any award
specifically made to reimburse Tenant for the taking of
Tenant’s Property or for moving expenses or business losses
and Landlord getting the balance of the award.
(e)
If
the Premises should be damaged or destroyed by fire or other
casualty to the extent that the same cannot be reasonably repaired
or restored within 180 days after the occurrence of such casualty,
Landlord or Tenant may terminate this Lease upon giving notice to
the other party within thirty (30) days after the casualty occurs.
In the event of any such termination, except to the extent they are
for Tenant’s Property, all insurance proceeds payable in
connection with such casualty shall be shared by Landlord and
Tenant in the same manner that Landlord and Tenant share in a
condemnation award under Section 8(c) above.
(f)
If
the Premises are damaged by fire or other casualty and this Lease
is not terminated pursuant to subparagraph 8(e) above, then this
Lease shall continue in effect and the Premises shall be promptly
restored by Landlord or Tenant, at Landlord’s sole election,
to the condition in which it existed at the time the casualty
occurred (or to such other condition as may be reasonably
possible), and all insurance proceeds payable with respect to such
casualty shall be applied to the cost of such repairs and/or
reconstruction, and if it reasonably appears that the cost of the
repairs and restoration will exceed the amount of the insurance
proceeds actually received, Tenant will pay such
deficiency.
(a)
From
and after the Effective Date and continuing throughout the term of
this Lease and all extensions thereof, Tenant shall pay, prior to
delinquency, all taxes and assessments which may be levied upon or
assessed against the Premises and all taxes and
9
assessments
of every kind and nature whatsoever arising in any way from the
use, occupancy or possession of the Premises or assessed against
the improvements situated thereon, together with all taxes levied
upon or assessed against Tenant’s Property. To that end,
Landlord shall not be required to pay any taxes or assessments
whatsoever which relate to or may be assessed against this Lease,
the Rent and other amounts due hereunder, the Premises,
improvements and Tenant’s Property; provided, however, that
any taxes or assessments which may be levied or assessed against
the Premises for the first and last years in which this Lease is in
effect shall be appropriately prorated between Landlord and Tenant.
Notwithstanding the foregoing, in no event shall Tenant be
responsible for payment of Landlord’s income, inheritance,
estate, and capital gains taxes.
(b)
Within
thirty (30) days after Tenant receives the paid receipted tax
bills, Tenant shall furnish Landlord with copies thereof. Tenant
may, at its option, contest in good faith and by appropriate and
timely legal proceedings any such tax and assessment so long as
such contest is conducted by Tenant diligently and so long as such
contest does not subject the Premises or any portion thereof to
risk of forfeiture; provided, however, that Tenant shall indemnify
and hold harmless Landlord from any loss or damage resulting from
any such contest, and all expenses of same (including, without
limitation, all attorneys’ and paralegal fees, court and
other costs) shall be paid solely by Tenant.
10.
COMPLIANCE, USE, UTILITIES, SURRENDER
(a)
Tenant
at its expense shall promptly comply with all applicable
governmental requirements, whether or not compliance therewith
shall require structural changes to the Premises; will procure and
maintain all permits, licenses, approvals and other authorizations
required for the use of the Premises or any part thereof then being
made and for the lawful and proper installation, operation and
maintenance of all equipment and appliances necessary or
appropriate for the operation and maintenance of the Premises;and
shall comply with all easements, restrictions, reservations and
other instruments of record applicable to the Premises, including
without limitation, the procuring and maintaining of insurance as
set forth herein. Tenant shall indemnify and save Landlord harmless
from all expenses and damages by reason of any notices, orders,
violations or penalties filed against or imposed upon the Premises,
or against Landlord as owner thereof, due to Tenant’s failure
to comply with this paragraph, except to the extent such expenses
and damages are due to Landlord's or Landlord's agents',
employees', or contractors' negligence or willful
misconduct.
(b)
Notwithstanding
any other provision contained in this Lease to the contrary, Tenant
shall not use the Premises for (i) any noxious or offensive use,
(ii) any use that is not in compliance with all applicable laws and
ordinances, (iii) any use in violation of any matter of record, or
(iv) any use that is not a Permitted Use.
(c)
Tenant
shall pay all charges for heat, water, gas, sewage, electricity and
other utilities used or consumed on the Premises directly to such
utility company and shall contract for the same in its own name.
Landlord shall not be liable for any interruption or failure in the
supply of any such utility service to the Premises.
10
(d)
Tenant
shall peacefully surrender possession of the Premises and the
buildings and other improvements thereon to Landlord at the
expiration, or earlier termination, of the original term or any
extended or renewed term of this Lease, reasonable wear and tear
and casualty excepted.
11.
QUIET
ENJOYMENT
Landlord
covenants and warrants that Landlord has full power and authority
to make this Lease, and that Tenant shall have and enjoy full,
quiet and peaceful possession of the Premises, their appurtenances
and all rights and privileges incidental thereto during the term
hereof and any renewals or extensions, subject to the provisions of
this Lease.
12.
DEFAULT
(a)
If
any one or more of the following events occur, said event or events
shall hereby be referred to as a
“Default”:
(i)
If
Tenant fails to pay Rent, any additional rent, or any other charges
required hereunder when same shall become due and payable, and such
failure continues for five (5) days after receipt of written notice
from Landlord.
(ii)
If
Tenant shall fail to perform or observe any term, condition,
covenant, agreement or obligation under this Lease and such failure
continues for more than thirty (30) days after receipt of written
notice from Landlord (except that such thirty (30) day period shall
be automatically extended for such additional period of time as is
reasonably necessary to cure such default, if such default is
capable of being cured, but cannot reasonably be cured within such
period, provided Tenant is at all times in the process of
diligently curing the same).
(iii)
If
Tenant shall make an assignment for the benefit of creditors or
file a petition, in any federal or state court, in bankruptcy,
reorganization, composition, or make an application in any such
proceedings for the appointment of a trustee or receiver for all or
any portion of its property.
(iv)
If
any petition shall be filed under federal or state law against
Tenant in any bankruptcy, reorganization, or insolvency
proceedings, and said proceedings shall not be dismissed or vacated
within thirty (30) days after such petition is filed.
(v)
If
a receiver or trustee shall be appointed under federal or state law
for Tenant, or for all or any portion of the property of Tenant,
and such receivership or trusteeship shall not be set aside within
thirty (30) days after such appointment.
(vi)
Tenant
shall fail to deliver the documents required by Landlord pursuant
to Section 16 below.
11
(vii)
Except
as set forth herein, Tenant subleases the Premises, or any portion
thereof, without the written permission of Landlord or Tenant
assigns this Lease, whether by operation of law or otherwise,
without the written permission of Landlord.
(viii)
The
Premises shall be abandoned, deserted, or vacated for more than
thirty (30) consecutive days (other than for fire, casualty,
condemnation, repairs, or as consented to by Landlord in writing),
or Tenant fails to take possession of the Premises and initially
open for business to the public, or Tenant otherwise ceases its
business activity in the Premises (other than for fire, casualty,
condemnation, repairs, or as consented to by Landlord in writing)
prior to the expiration of the Term.
(b)
Upon
the happening of any one or more of the aforementioned Defaults,
Landlord shall have the right, in addition to any other rights and
remedies, to terminate this Lease by giving written notice of same
to Tenant. Upon such notice, this Lease shall cease and expire, and
Tenant shall surrender the Premises to Landlord in accordance with
this Lease. Notwithstanding such termination, Tenant’s
liability and obligation under all provisions of this Lease,
including the obligation to pay Rent and any and all other amounts
due hereunder shall survive and continue. In addition, in the event
of Tenant’s Default under this Lease, Landlord may, by notice
to Tenant, accelerate the monthly installments of Rent due
hereunder for the remaining term of this Lease, in which event such
amount, together with any sums then in arrears, shall immediately
be due and payable to Landlord. Tenant hereby expressly agrees that
its occupation of the Premises after Default constitutes forcible
detainer (or equivalent) as is defined by the law in force in the
jurisdiction in which the Premises are located.
(c)
Upon
the occurrence of a Default, regardless of whether this Lease shall
be terminated as provided hereinabove, Landlord may re-enter the
Premises and remove Tenant, its agents and sub-tenants, together
with all or any of Tenant’s Property, by suitable action at
law, or by force. Landlord shall not be liable in any way in
connection with any action it takes pursuant to this paragraph, to
the extent that its actions are in accordance with applicable law.
Notwithstanding such re-entry or removal, Tenant’s liability
under Lease shall survive and continue.
(d)
In
case of re-entry, repossession and/or termination of this Lease,
Tenant shall remain liable for Rent, any additional rent and all
other charges provided for in this Lease for the otherwise
remaining term of this Lease, and any and all expenses which
Landlord may have incurred in re-entering the Premises including,
but not limited to, allocable overhead, alterations to the
building, leasing, construction, architectural, legal and
accounting fees. Regardless of whether this Lease has been
terminated as provided above, Landlord shall use reasonable efforts
to relet the whole or part of the Premises upon terms which
Landlord, in its sole discretion, deems appropriate and Tenant
shall be responsible for all expenses incurred by Landlord in
re-letting or attempting to re-let, and all rent collected for
reletting shall be credited against all of Tenant’s
obligations hereunder.
12
(e)
In
the event of a Default, Landlord may, at its sole option, enter
upon the Premises, if deemed necessary by Landlord in its sole
discretion (but without any obligation to do so), and/or do
whatever may be deemed necessary by Landlord in its sole discretion
to cure such failure by Tenant. Tenant shall pay to Landlord within
five (5) days of Landlord’s request, all costs incurred by
Landlord in connection with Landlord’s curing of such
failure. In addition to the above costs, in the event Landlord does
not receive payment from Tenant when due under this subparagraph
12(e), then interest at the rate of ten percent (10%) per annum or,
if less, the highest rate allowable by law, shall be due and
payable with respect to such payment from the due date thereof
until Landlord receives such payment.
(f)
In
the event Landlord engages legal counsel in connection with the
enforcement of any of the terms and provisions of this Lease, then,
in addition to all other sums due from Tenant to Landlord under
this Lease, Tenant shall pay to Landlord any and all reasonable
attorneys’ fees, paralegal fees, court costs and other costs
and expenses incurred by Landlord, whether or not judicial
proceedings are filed, and including on appeal and in any
bankruptcy proceedings.
(g)
Notwithstanding
the foregoing, in the event Tenant fails to maintain and keep in
full force and effect any or all of the insurance required pursuant
to Section 6 of this Lease (“Insurance Premiums”), or
pay any taxes required under Section 9 above (“Taxes”),
then at Landlord’s request and in Landlord’s sole
discretion, Tenant shall thereafter escrow funds for payment of
such Insurance Premiums and Taxes in the following
manner:
(i)
Tenant
shall immediately pay to Landlord all sums expended by Landlord,
plus an additional ten percent (10%), for purposes of (1) bringing
current or reinstating or purchasing the Insurance Premiums
required under Section 6 of this Lease and (2) bringing current all
Taxes, together with any late fees or fines thereon. Thereafter,
Tenant shall pay to Landlord on the first (1st) day of each month
along with the monthly Rent payment a sum (the “Escrow
Funds”) equal to one-twelfth (1/12
th
)
of the yearly Insurance Premiums and Taxes.
(ii)
Landlord
shall apply the Escrow Funds to pay said Insurance Premiums as and
when the applicable premiums shall become due and to such Taxes
prior to delinquency. No interest shall be payable by Landlord on
the Escrow Funds unless required by applicable law, in which event
all such interest shall be applied by Landlord to pay such
Insurance Premiums and Taxes. Landlord shall provide to Tenant an
annual accounting of the Escrow Funds in Landlord’s normal
format showing credits and debits to the Escrow Funds and the
purpose for which each debit to the Escrow Funds was made, within
thirty (30) days after the expiration of such annual
accounting.
(iii)
If
the amount of the Escrow Funds held by Landlord at the time of the
annual accounting thereof shall exceed the amount deemed necessary
by Landlord to provide for the payment of Insurance Premiums and
Taxes, such
13
excess
shall be credited to Tenant on the next monthly installment or
installments of Escrow Funds due. If at any time the amount of the
Escrow Funds held by Landlord shall be less than the amount deemed
necessary by Landlord to pay the Insurance Premiums and Taxes,
Tenant shall pay to Landlord any amount necessary to make up the
deficiency within thirty (30) days after written notice from
Landlord to Tenant requesting payment thereof.
(iv)
The foregoing Escrow Funds arrangement shall terminate if Tenant
fully and faithfully complies with the provisions of this Section
12(g) for a period of twenty-four (24) consecutive months. Upon the
termination of this Lease, so long as Tenant is not in default
hereunder, Landlord shall promptly refund (or credit to Tenant in
the case of termination due to Tenant’s default) any Escrow
Funds held by Landlord.
(h)
The
rights and remedies of Landlord set forth herein shall be in
addition to any other right and remedy now or hereinafter provided
by law or in equity, and all such rights and remedies shall be
cumulative. No action or inaction by Landlord shall constitute a
waiver of any Default, and no waiver of any Default shall be
effective unless it is in writing, signed by Landlord.
(i)
In
the event of a default by Landlord, Tenant's remedy, in addition to
any other remedies it may have at law or in equity, shall be an
action for actual damages or injunction, but prior to any such
action, Tenant shall give Landlord written notice specifying such
default, and Landlord shall have a period of thirty (30) days
following the receipt of such notice in which to cure the default
(provided, however, that if such default reasonably requires more
than thirty (30) days to cure, Landlord shall have a reasonable
time to cure such default, provided Landlord commences to cure
within such thirty (30) day period and thereafter diligently
prosecutes such cure to completion).
13.
HOLDING
OVER
In
the event Tenant remains in possession of the Premises after the
expiration of this Lease without executing a new written lease
acceptable to Landlord and Tenant, Tenant shall occupy the Premises
as a tenant from month to month subject to all the terms hereof
(except as modified by this paragraph), but such possession shall
not limit Landlord’s rights and remedies by reason thereof.
In the event of such month to month tenancy, the monthly
installment of Base Rent due for each such month shall increase to
be one and a half (1.5) times the monthly installment thereof which
was payable during the last month of the term of this
Lease.
14.
WAIVER
OF SUBROGATION
Notwithstanding
anything in this Lease to the contrary, neither party shall be
liable to the other for any damage or destruction of the Premises
or any other property resulting from fire or other casualty covered
by insurance required of either party hereunder (or which could be
insured against), whether or not such loss, damage or destruction
of the Premises or other property are caused by or results from the
negligence of such party (which term includes such party’s
officers, employees, agents and invitees), and each party hereby
expressly releases the
14
other
from all liability for or on account of any said insured loss,
damage or destruction, whether or not the party suffering the loss
is insured against such loss, and if insured whether fully or
partially. Each party shall procure all endorsements of insurance
policies carried by it necessary to protect the other from any
right of subrogation and/or liability in the event of such
loss.
15.
ASSIGNMENT AND SUBLETTING
(a)
Tenant
shall not have the right, without first obtaining Landlord’s
prior written consent, which shall not be unreasonably withheld,
conditioned, or delayed, to assign or sublet any part or all of the
Premises to any party for any purpose. A change in ownership of the
controlling interest of Tenant (whether direct or indirect) shall
also constitute an assignment subject to this subparagraph.
Landlord, without being deemed unreasonable, may withhold its
consent to any proposed assignment or subletting where (as
determined by Landlord in Landlord’s sole discretion) (i)
such assignment or subletting would violate the terms of any then
existing agreement applicable to the Premises, or (ii) the
financial capacity of such assignee or subtenant is materially less
than that of Tenant as of the date of such proposed assignment or
the date of this Lease, whichever is greater. Even if such consent
to assignment or subletting is given by Landlord or not required,
such assignment or subletting shall not relieve Tenant of its
liability for the continued performance of all terms, covenants and
conditions of this Lease, including without limitation the payment
of all Rent and other charges thereunder, except to the extent
otherwise agreed to in writing by Landlord. In the event of the
subletting or assignment of this Lease, Landlord is entitled to
receive fifty percent (50%) of all gross revenues received by
Tenant from the assignee/sublessee, net of the Rent due under this
Lease by Tenant to Landlord.
(b)
Prior
to any assignment allowed hereunder, Tenant shall deliver to
Landlord (i) a copy of the assignment documents (including copies
of any recorded documents related thereto); (ii) the name, address
and telephone number of such assignee and a designated contact
person for such assignee; (iii) a new insurance certificate
complying with the terms of this Lease and naming such assignee as
the tenant of the Premises; and (iv) an agreement executed by such
assignee whereby such assignee assumes and agrees to discharge all
obligations of Tenant under this Lease. Notwithstanding anything in
this Lease to the contrary, in the event of any assignment of this
Lease or subletting of the Premises, Tenant shall not be released
from its obligations under this Lease unless specifically released
by virtue of a separate written instrument executed by Landlord,
which may be withheld in Landlord’s sole
discretion.
(c)
Landlord
shall have the right without limitation to sell, convey, transfer
or assign its interest in the Premises or its interest in this
Lease, and upon such conveyance being completed, all covenants and
obligations of Landlord under this Lease accruing thereafter shall
cease, but such covenants and obligations shall run with the land
and shall be binding upon the subsequent landlord or owners of the
Premises or of this Lease.
(d)
Notwithstanding
anything to the contrary contained in this section 15, Tenant shall
have the right, without Landlord's prior written consent, to assign
this Lease or sublease all or any portion of the Premises to any
party which directly or indirectly: (i)
15
wholly
owns or controls Tenant; (ii) is wholly owned or controlled by
Tenant, (iii) is under common ownership or control with Tenant, or
(iv) into which Tenant or any of the foregoing parties is merged,
consolidated or reorganized, or to which all or substantially all
of Tenant's assets or any such other party's assets are sold,
provided, however, (a) Tenant gives Landlord thirty (30) days prior
written notice of such assignment or subletting, and (b) the
transferee, in the case of an assignment, shall expressly assume
Tenant's obligations under this Lease. Notwithstanding any
assignment or sublease under this section 15(d), the original
Tenant shall not be released from its obligations for the payment
of Base Rent and other amounts due under this Lease, and compliance
with all of Tenant’s obligations under this
Lease.
16.
SUBORDINATION,
NON-DISTURBANCE, ATTORNMENT, ESTOPPEL
CERTIFICATE.
(a)
Upon
written request of the holder of any mortgage (which term
“mortgage” shall also include deeds of trust) now or
hereafter relating to the Premises, Tenant will subordinate its
rights under this Lease to the lien thereof and to all advances
made or hereafter to be made upon the security thereof, and Tenant
shall execute, acknowledge and deliver an instrument in the form
customarily used by such encumbrance holder to effect such
subordination (and reasonably approved by Tenant); provided,
however, as a condition of all such subordinations, the holder of
such mortgage shall be first required to agree in writing with
Tenant that, notwithstanding the foreclosure or other exercise of
rights under any such first or other mortgage, Tenant’s
possession and occupancy of the Premises and the improvements and
its leasehold estate shall not be disturbed or interfered with nor
shall Tenant’s rights and obligations under this Lease be
altered or adversely affected thereby so long as Tenant is not in
Default beyond applicable notice and cure periods.
(b)
Notwithstanding
anything set out in subparagraph (a) above to the contrary, in the
event the holder of any such mortgage elects to have this Lease be
superior to its mortgage, then upon Tenant’s being notified
in writing to that effect by such encumbrance holder, this Lease
shall be deemed prior to the lien of said mortgage, whether this
Lease is dated prior or subsequent to the date of said mortgage,
and Tenant shall execute, acknowledge and deliver an instrument, in
the form customarily used by such encumbrance holder (and
reasonably approved by Tenant), effecting such
priority.
(c)
In
the event proceedings are brought for the foreclosure of, or in the
event of the exercise of the power of sale under any mortgage made
by Landlord encumbering the Premises, or in the event of delivery
of a deed in lieu of foreclosure under such a mortgage, Tenant will
attorn to the purchaser upon any such foreclosure or sale and
recognize such purchaser as “Landlord” under this
Lease, and upon the request of the purchaser, Tenant shall execute,
acknowledge and deliver an instrument, in form and substance
satisfactory to such purchaser and reasonably acceptable to
Tenant.
(d)
Each
party agrees, within fifteen (15) days after written request by the
other, to execute, acknowledge and deliver to and in favor of any
proposed mortgagee or purchaser of the Premises, an estoppel
certificate, in the form customarily used by such
16
proposed
mortgagee or purchaser, stating, among other things (i) whether
this Lease is in full force and effect, (ii) whether this Lease has
been modified or amended and, if so, identifying and describing any
such modification or amendment, (iii) the date to which Rent and
other charges have been paid, and (iv) whether the party furnishing
such certificate knows of any default on the part of the other
party or has any claim against such party and, if so, specifying
the nature of such default or claim.
(e)
Upon
written demand by the holder of any mortgage covering the Premises,
Tenant shall forthwith execute, acknowledge and deliver an
agreement in favor of and in the form customarily used by such
encumbrance holder, by the terms of which Tenant will agree to give
prompt written notice to such encumbrance holder in the event of
any casualty damage to the Premises or in the event of any default
on the part of Landlord under this Lease, and will agree to allow
such encumbrance holder a reasonable length of time after notice to
cure or cause the curing of such default before exercising
Tenant’s rights under this Lease, or terminating or declaring
a default under this Lease.
17.
NOTICES
All
notices and other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by a
nationally recognized overnight courier or mailed by registered or
certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Landlord:
Steven
and Janelle Brewster
If to
Tenant:
Wholesale,
LLC
4521
Sharon Road, Suite 370
Any
party may change its address for notices by written notice in like
manner as provided in this paragraph and such change of address
shall be effective seven (7) days after the date notice of such
change of address is given. Notice for purposes of this Lease shall
be deemed given when it shall have been received or rejected by the
intended recipient.
18.
INDEMNIFICATION
Tenant
does hereby indemnify Landlord against and from all liabilities,
losses, obligations, damages, penalties, claims, costs, charges and
expenses, including reasonable architects’ fees,
attorneys’ fees, paralegal fees, and legal costs and
expenses, incurred by Landlord, whether or not judicial proceedings
are filed, and including (but without limitation) on appeal and in
any bankruptcy proceedings, which may be imposed upon or asserted
against or incurred by Landlord by reason of any of the following
occurring, except to the extent such liabilities, obligations,
damages, and expenses are caused by Landlord's negligence or
willful misconduct:
17
(a)
any
work or thing done by Tenant in respect of construction of, in or
to the Premises or any part of the improvements now or hereafter
constructed on the Premises by Tenant;
(b)
any
use, possession, occupation, operation, maintenance or management
of the Premises or any part hereof by Ten;
(c)
any
failure to properly, use, possess, occupy, operate, maintain or
manage the Premises or any part thereof by Tenant;
(d)
the
condition, including environmental conditions arising after the
date of this Lease and not in existence on the Premises prior to
the date of this Lease, of the Premises or any part thereof, to the
extent in Tenant's control or resulting from Tenant’s use,
occupancy or operation at the Premises;
(e)
any
negligence on the part of Tenant or any of its agents, contractors,
servants, employees, licensees or invitees;
(f)
any
accident, injury or damage to any person or property occurring in,
on or about the Premises or any part thereof including any sidewalk
adjacent thereto; or
(g)
any
failure on the part of Tenant to perform or comply with any of the
covenants, agreements, terms or conditions contained in this Lease
on its part to be performed or complied with beyond applicable
notice and cure periods.
19.
HOLD
HARMLESS
Tenant
agrees to hold Landlord harmless from and against any and all
claims, damages, accidents and injuries to persons or property
caused by or resulting from or in connection with anything in or
pertaining to or upon the Premises during the term of this Lease or
while Tenant is occupying the Premises, except if such claim,
damage, accident or injury shall be caused by the gross negligence
or willful misconduct of Landlord or its agents. Landlord shall not
be liable to Tenant, Tenant’s employees, agents, invitees,
licensees or any other person whomsoever for any injury to person
or damage to property on or about the Premises caused by the
negligence or misconduct of Tenant, its agents, servants or
employees or of any other person entering the building under
expressed or implied invitation by Tenant or due to any other cause
whatsoever, unless caused by the gross negligence or willful
misconduct of Landlord, its employees or its authorized
representatives.
20.
LANDLORD’S
LIABILITIES
The
term “Landlord” as used in this Lease means the owner
from time to time of the Premises. Neither Landlord nor any
partner, member, shareholder or beneficiary thereof shall have any
personal liability with respect to any of the provisions of this
Lease and if Landlord is in default with respect to its obligations
hereunder Tenant shall look solely to the equity of Landlord in the
Premises.
18
21.
SUCCESSORS
The
covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their
respective heirs, legal representatives, successors and
assigns.
22.
ENTIRE
AGREEMENT
This
Lease contains the entire agreement between the parties hereto and
may not be modified in any manner other than in writing signed by
the parties hereto or their successors in interest.
23.
GENDER
Whenever
the context hereof permits or requires, words in the singular may
be regarded as in the plural and vice-versa, and personal pronouns
may be read as masculine, feminine and neuter.
24.
BROKERAGE
FEES
The
parties agree that no broker or finder (“Broker”) was
used or engaged by either party in connection with the drafting or
negotiating of this Lease and that neither Landlord nor Tenant
shall not be responsible for any such fees or commissions to any
Broker. No representation by any Broker or any other third party
shall bind Landlord or Tenant and in no event shall be used to
interpret this Lease. Each party shall indemnify the other party
against, and hold it harmless from, any liability for any
compensation to any Broker or other person who may be deemed or
held entitled thereto because of a relationship with such
party.
25.
CAPTIONS
The
captions of this Lease are for convenience only, and do not in any
way define, limit, disclose, or amplify terms or provisions of this
Lease or the scope or intent thereof.
26.
NET
LEASE
It
is the intention of the parties hereto that this Lease is and shall
be treated as a triple net lease. Any present or future law to the
contrary notwithstanding, except as expressly provided in this
Lease, this Lease shall not terminate, nor shall Tenant be entitled
to any abatement, suspension, deferment, reduction, setoff,
counterclaim, or defense with respect to the Rent, nor shall the
obligations of Tenant hereunder be affected by reason of: any
damage to or destruction of the Premises or any part thereof; any
taking of the Premises or any part thereof or interest therein by
condemnation or otherwise; any prohibition, limitation, restriction
or prevention of Tenant’s use, occupancy or enjoyment of the
Premises or any part thereof; any interference with such use,
occupancy or enjoyment by any person or for any other reason; any
action of governmental authority; or any defect in the condition,
quality or fitness for use of the Premises or any part thereof. The
parties intend that the obligations of Tenant hereunder shall be
separate
19
and
independent covenants and agreements and shall continue unaffected
unless such obligations shall have been modified or terminated in
accordance with an express provision of this Lease.
27.
WAIVER
No
waiver by Landlord or Tenant of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent
breach by Tenant or Landlord of the same or any other provision.
Landlord’s consent to, or approval of, any act as required
hereunder shall not be deemed to render unnecessary the obtaining
of Landlord’s consent to or approval of any such subsequent
act by Tenant. The acceptance of Rent hereunder by Landlord shall
not be a waiver of any preceding default by Tenant of any provision
hereof, other than the failure of Tenant to pay the particular rent
so accepted, regardless of Landlord’s knowledge of such
preceding breach at the time of acceptance of such
rent.
28.
TIME
OF THE ESSENCE
Landlord
and Tenant agree that time shall be of the essence of all terms and
provisions of this Lease.
29.
GOVERNING
LAW
This
Lease shall be construed in accordance with the laws of the state
in which the Premises are located.
30.
NOT
A SECURITY ARRANGEMENT
The
parties hereto agree and acknowledge that this transaction is not
intended as a security arrangement or financing secured by real
property, but shall be construed for all purposes as a true
lease.
31.
HAZARDOUS
SUBSTANCES
.
Tenant
shall comply, at its sole expense, with all laws, ordinances,
orders, rules and regulations of all state, federal, municipal and
other governmental or judicial agencies or bodies relating to the
protection of public health, safety, welfare or the environment
(collectively, “Environmental Laws”) in the use,
occupancy and operation of the Premises. Tenant agrees that no
Hazardous Substances shall be used, located, stored or processed on
the Premises by Tenant or any of its agents, employees,
contractors, assigns, subtenants, guest or invitees, and no
Hazardous Substances will be generated, released or discharged from
the Premises. The term “Hazardous Substances” shall
mean and include all hazardous and toxic substances, waste or
materials, any pollutant or contaminant, including, without
limitation, PCB’s, asbestos and raw materials that include
hazardous constituents or any other similar substances or materials
that are now or hereafter included under or regulated by any
environmental laws or that would pose a health, safety or
environmental hazard. Tenant hereby agrees to indemnify, defend and
hold harmless Landlord and Landlord’s officers, agents,
employees and affiliates from and against any and all claims,
causes of action, demands, liens, losses, liabilities (including,
but not limited to, strict liability), damages, injuries, fines,
costs and expenses (including, but not limited to,
20
court
costs, litigation expenses, reasonable attorney’s fees and
costs of settlement or judgment), of any and every kind whatsoever
paid, incurred or suffered by, or asserted against, Landlord by any
person, entity or governmental agency for, with respect to, or as a
direct or indirect result of (i) the presence in or the escape,
leakage, spillage, discharge, emission or release from the Premises
of any Hazardous Substances or the presence of any Hazardous
Substances placed on or discharged from the Premises by Tenant or
any of its agents, employees, contractors, assigns, subtenants,
guest or invitees, or (ii) any violation or alleged violation of
any environmental laws by Tenant or any of its agents, employees,
contractors, assigns, subtenants, guests or invitees in relation to
the Premises. In the event of the release of Hazardous Substances
in or about the Premises by Tenant or any of its agents, employees,
contractors, assigns, subtenants, guests or invitees, Tenant shall
immediately notify Landlord about such release and advise Landlord
of the procedures being taken for remediation. Landlord reserves
the right to reenter the Premises should Tenant fail to respond to
the release and/or to remediate the Premises. Tenant shall be
responsible for any costs assessed Landlord in connection to such
release and/or remediation, including attorney’s fees.
Landlord shall have the right to require that Tenant deliver
periodic environmental audits of the Premises evidencing that no
violations have occurred.
Landlord
represents and warrants that as of the Effective Date Landlord is
not actually aware of any Hazardous Substances on, in, or under the
Premises, nor has Landlord received any written notice of any
Hazardous Substances on, in, or under the Premises.
This
Section shall survive the expiration or earlier termination of this
Lease.
32.
RIGHT
OF FIRST OFFER TO PURCHASE
.
During the Initial Term and
any
Renewal
Term, provided that Tenant is not in default under any of the terms
or conditions of this Lease beyond applicable notice and cure
periods, prior to selling the Premises to any third party, Landlord
shall first deliver a written offer (“Offer”) to Tenant
setting forth the material terms upon which Landlord proposes to
offer to sell the Premises to such third party, and Tenant shall
have the right for a period of ten (10) days after receipt of the
Offer, to elect to purchase the Premises on the same terms and
conditions set forth in the Offer by delivery of a written notice
to Landlord accepting the Offer within such time period (the
“Acceptance”). If Tenant does not timely deliver the
Acceptance of the Offer without any modification, then Landlord
shall be free to sell the Premises to a third party on the exact
terms and conditions set forth in the Offer and Tenant shall no
longer have a right of first offer with respect to the Offer. Prior
to Landlord offering the Premises for sale or entering into a
purchase contract on terms materially different than those set
forth in the Offer, Landlord shall deliver an updated written Offer
setting forth such revised terms and the foregoing process shall be
repeated.
If
Tenant timely accepts the Offer (as evidenced by its timely
delivery to Landlord of the Acceptance), then the parties shall
proceed to closing of the sale of the Premises within thirty (30)
days on industry standard terms.
[Signature page follows]
IN
WITNESS WHEREOF, the parties hereto have caused this Lease
Agreement to be executed the day and date first above
written.
LANDLORD
Steven
Brewster
Janelle
Brewster
TENANT
Wholesale,
LLC a Tennessee limited liability company
LEASE AGREEMENT
THIS
LEASE AGREEMENT is made and entered into as of October __, 2018
(the “Effective Date”), by and between:
(i)
Steven
Brewster d/b/a Steve Brewster Rentals, with a principal office and
place of business at 250B Blue Grass Drive, Hendersonville, TN
37075 (“Landlord”); and
(ii)
Wholesale,
LLC a Tennessee limited liability company, with a mailing address
of 4521 Sharon Road, Suite 370, Charlotte, NC 28211
(“Tenant”).
WITNESSETH
:
Landlord
leases to Tenant, and Tenant rents from Landlord, that certain real
property commonly known as 8037 Eastgate Boulevard, Mount Juliet,
Tennessee 37122, together with all rights and privileges that are
appurtenant to such real property, inclusive of all easements
benefiting such land, and together with that certain building
located thereon consisting of approximately 11,944 total square
feet (the “Premises”).
The
following additional stipulations are hereby declared to be
covenants of this Lease and shall, unless otherwise expressly
stated, be applicable at all times throughout the term of this
Lease and any extension or renewal thereof:
For
purposes of this Lease, the following terms shall have the
definitions ascribed to them below:
“Commencement
Date” shall mean the Effective Date.
“Improvements”
shall mean all improvements and structures located on the real
property or hereafter constructed on the real
property.
“Lease”
shall include this Lease Agreement and all amendments hereto, if
any, entered into from time to time hereafter.
“Lease
Year” shall mean each consecutive twelve (12) month period
during the term of this Lease and any extensions hereof. The first
Lease Year shall begin on the Commencement Date and shall expire on
the last day of the twelfth (12th) month thereafter and each
subsequent Lease Year shall begin on the day immediately following
the prior Lease Year and shall expire on the last day of the
twelfth (12th) month thereafter; provided, however, that in the
event the Commencement Date is not the first (1st) day of a
calendar month, then the first Lease Year shall be longer than
twelve (12) months, it being agreed that such Lease Year shall
commence on the Commencement Date and shall expire on the last day
of the twelfth (12th) month after the first (1st) day of the
calendar month following the Commencement Date.
“Material
Alteration” shall mean any proposed construction or
alteration or change affecting the Premises, the cost of which,
individually or together with other such activities to be completed
concurrently therewith, exceeds Twenty Thousand and No/100 Dollars
($20,000.00).
“Permitted
Use” shall mean automotive dealership and service shop with
associated office space and for no other purpose.
“Rent”
shall mean the rent payable under this Lease and shall include Base
Rent (as hereinafter defined), together with all other items
described in this Lease as “additional
rent”.
“Tenant”
shall include the named Tenant and any permitted assignee or
subtenant thereof pursuant to an assignment or sublease under
Section 15 of this Lease.
2.
TERM
.
The term of this Lease shall begin on
the Commencement Date and shall
expire on the last day of the third
(3
rd
)
Lease Year (hereinafter the “Termination Date”), unless
previously terminated or renewed or extended as provided
herein.
Provided
no Default (as hereinafter defined) exists beyond applicable notice
and cure periods, Tenant shall have the right, upon at least ninety
(90) days prior written notice to Landlord prior to the Termination
Date, to renew this Lease for two (2) additional terms of five (5)
years each (each, the “Renewal Term”), upon the same
terms and conditions contained in this Lease except: (i) the second
Renewal Term will contain no further renewal options unless
expressly granted by Landlord in writing; and (ii) the Base Rent
for the Premises for each applicable Renewal Term shall be an
amount equal to the then Fair Market Rental Value (as hereinafter
defined) of the Premises, with lease terms commencing on the date
of commencement each applicable Renewal Term. If Tenant exercises
either of its renewal options in accordance herewith, Landlord
shall, within twenty (20) days after the receipt of Tenant's notice
of exercise, notify Tenant in writing ("Rent Notice") of Landlord's
reasonable determination of the fair market Base Rent for the
Premises (the “Fair Market Rental Value”), for the
applicable period of the applicable renewal option, which amount
shall be determined using a per square foot rental rate, taking
into account all relevant factors for space of this type in the
Wilson County, Tennessee submarket area, including all tenant
incentives (including, but not limited to, rent abatement and
tenant improvement allowances) being offered to a new tenant with
similar size and creditworthiness. Tenant shall have twenty (20)
days from its receipt of the Rent Notice to notify Landlord in
writing that Tenant does not agree with Landlord's determination of
the Fair Market Rental Value and thereafter the parties shall
negotiate in good faith to reach an agreement on the Fair Market
Rental Value. If Tenant does not notify Landlord of an objection to
Landlord's determination within twenty (20) days of delivery of the
Rent Notice, then Fair Market Rental Value shall be the Fair Market
Rental Value sent forth in the Rent Notice. If Landlord and Tenant
have not agreed on the Fair Market Rental Value on or before thirty
(30) days prior to the expiration of the then-current term of this
Lease, within ten (10) days, Landlord and Tenant shall each select
an independent disinterested MAI appraiser, which appraisers shall
(within ten (10) days) mutually select a third independent
disinterested MAI appraiser. Landlord and Tenant shall then each
submit for arbitration to the third appraiser their respective
offers of the fair market Base Rent for the Premises (the
“Fair Market Rental Value”). Such third appraiser shall
then (within five (5) business days) select only the Landlord's or
the Tenant's offer as the Fair Market Rental Value of the Premises.
The decision of such third
2
appraiser
shall be final and binding on the parties and the fees and costs of
such third appraiser shall be borne by the unsuccessful party;
provided, however, that if the third appraiser selects the
Landlord's determination of Fair Market Rental Value, Tenant may
withdraw its exercise of the applicable renewal option. At a
minimum, each of the MAI appraisers shall be disinterested
commercial real estate appraisers in Wilson County, Tennessee
experienced in commercial leasing.
(a)
Commencement
of Rent
. Payment of Base Rent
(as defined below) shall commence as of the Commencement
Date.
(b)
Base
Rent
. Tenant covenants and
agrees to pay to Landlord base rent (“Base Rent”) as
follows:
Date
|
Monthly Base Rent
|
Yearly Base Rent
|
October
__, 2018 – October __, 2021
|
$23,000
|
$276,000
|
(c)
All
Base Rent shall be paid in monthly installments, in advance, on or
before the first (1
st
)
day of each month; provided, however, that if the Commencement Date
occurs on a day other than the first day of the calendar month, the
first payment of Base Rent shall be the prorated Base Rent for the
remainder of the calendar month in which the payment of Base Rent
commences.
(d)
Sales/Use
Tax
. Tenant shall also pay to
Landlord any applicable sales and use tax imposed on any Rents
payable hereunder from time to time by state law or any other
governmental entity, which sums shall constitute additional rent
and shall be due monthly at the same time as monthly installments
of Base Rent are due under this Section 3.
(e)
Late
Charges
. In the event any
installment of Rent is not received by Landlord within ten (10)
days after written notice by Landlord, there shall be a late charge
due to Landlord from Tenant in the amount of five percent (5%) of
such delinquent installment of Rent. All such late charges due
hereunder shall be deemed additional rent, and are not penalties
but rather are charges attributable to administrative and
collection costs arising out of such delinquency. If any payment
due from Tenant remains overdue for morethan thirty (30) days after
written notice to Tenant of nonpayment, an additional late charge
in an amount equal to the lesser of (a) ten percent (10%) per annum
or (b) the maximum rate allowable by law of the delinquent amount
may be charged by Landlord, and shall be due and payable with
respect to such payment from the due date thereof until Landlord
receives such payment.
(f)
Payments
of Rents
. At Landlord’s
request, all Rent payments shall be made by electronic funds
transfer to Landlord to the account and in accordance with the
procedures designated by Landlord, or in such other manner as
Landlord or its successors or assigns, respectively, may from time
to time designate in writing. Prior to the
3
establishment
of said electronics funds transfer process, the parties agree that
Tenant shall make Rent payments by check payable to the order of
Landlord and sent to Landlord at Steve Brewster Rentals, 250B Blue
Grass Drive, Hendersonville, TN 37075, or to such other address as
Landlord may hereafter direct in writing to Tenant.
(g)
No
Abatement
. Unless otherwise
stated in the Lease, no abatement, offset, diminution or reduction
of (i) Rent, charges or other compensation, or (ii) Tenant’s
other obligations under this Lease shall be allowed to Tenant or
any person claiming under Tenant, under any circumstances or for
any reason whatsoever.
(h)
Recalculation
of Base Rent
. Notwithstanding
anything contained herein to the contrary, Tenant shall have the
one-time right during the initial term of this Lease to have the
Base Rent hereunder recalculated in accordance with this subsection
(h). Within thirty (30) days after Landlord's receipt of Tenant's
recalculation notice, Landlord and Tenant shall each select an
independent disinterested MAI appraiser, which appraisers shall
(within ten (10) days) mutually select a third independent
disinterested MAI appraiser. Landlord and Tenant shall then each
submit for arbitration to the third appraiser their respective
offers of the Fair Market Value for the Base Rent. Such third
appraiser shall then (within five (5) business days) select only
the Landlord's or the Tenant's offer as the Fair Market Rental
Value of the Premises. The decision of such third appraiser shall
be final and binding on the parties and the fees and costs of such
third appraiser shall be borne by the unsuccessful party. At a
minimum, each of the MAI appraisers shall be disinterested
commercial real estate appraisers in Wilson County, Tennessee
experienced in commercial leasing.
4.
INTENTIONALLY
DELETED
.
5.
ALTERATIONS
AND IMPROVEMENTS, MECHANIC’S LIENS
(a)
Alterations and
Improvements
.
(i)
Tenant’s
Property
. Tenant shall be
permitted to install, use on and about, and remove from the
Premises at any time and from time to time all trade fixtures,
signage and other moveable personal property (exclusive of lighting
affixed to the Premises, plumbing, electrical and heating and air
conditioning improvements) which are not a component of the
building located or to be located on the Premises (hereinafter
referred to as the “Tenant’s Property”), all of
which at all times shall remain the property of Tenant with the
right of removal (subject to subparagraph 5(c) below) at the
expiration of this Lease.
(ii)
Subsequent
Improvements
. Tenant shall have
the right, from time to time, to make interior, non-structural
alterations to the Premises as Tenant shall desire without
Landlord's prior consent; provided, however, that (i) as to any
Material Alteration, (A) Tenant shall submit to Landlord, at least
ten (10) business days in advance of the proposed construction
date, a floor plan generally depicting any changes to the
configuration of space within the building and a listing of the
proposed alterations (and the cost thereof) to be completed in
such
4
Material Alteration, and Landlord must, in its reasonable opinion,
approve or object to such Material Alteration within ten (10)
business days after Landlord’s receipt of such floor plan and
listing of the proposed alteration, and (B) at Landlord’s
reasonable request, Tenant shall deliver to Landlord
contractors’ unconditional payment and performance bonds for
such work naming Landlord and Tenant as dual obligees; and (ii) as
to all construction or alteration (regardless of whether any such
activities constitute Material Alteration), all construction shall
be completed in a workmanlike manner and in compliance with
applicable laws, at Tenant’s sole expense. Landlord’s
failure to respond to Tenant’s request for approval of any
proposed Material Alteration within ten (10) business days after
Landlord’s receipt thereof shall be deemed to constitute
Landlord’s approval of such proposed Material Alteration. In
the event Landlord objects to any proposed Material Alteration as
provided above, Tenant may re-submit a revised floor plan and/or
listing of the proposed Tenant’s Improvements for review by
Landlord as provided in this Section 5(a)(ii). Changes or
alterations to any floor plan and listing of proposed Material
Alteration previously approved by Landlord that would affect the
total cost thereof by more than Ten Thousand and No/100 Dollars
($10,000.00) shall constitute new Material Alteration which must be
submitted to Landlord or approval as provided above in this Section
5(a)(ii). One reproducible final copy of the plans for all
completed Material Alterations shall be signed by Tenant and
submitted to Landlordwithin ninety (90) days following the
completion thereof. All alterations shall not weaken the structural
strength or materially decrease the value of the Premises and shall
be constructed in compliance with the requirements of this Lease.
Prior to the commencement of construction, all required approvals
of such construction must have been obtained from the applicable
governmental authorities and utilities having jurisdiction thereof.
Upon completion of the construction or alteration, Tenant shall
provide Landlord: (i) with respect to a Material Alteration, a
certification from the applicable construction contractor,
architect or engineer that such alterations or improvements have
been constructed, altered or changed in strict compliance with all
applicablelaws, and (ii) with respect to a Material Alteration, a
fully executed lien waiver, in a form reasonably acceptable to
Landlord, from each contractor or subcontractor participating in
such construction or alteration or change of such alterations or
improvements, if and as applicable. Landlord shall be permitted to
inspect such constructed, altered or changed improvements, at
Landlord's expense. Except as set forth herein, Tenant shall not
remove or demolish, in whole or in part, any alterations or
improvements upon or within the Premises without the prior approval
of Landlord, which approval may be conditioned upon the obligation
of Tenant to return the Premises to their original condition, wear
and tear and casualty excepted. All alterations and improvements
shall be included within the meaning of the term
“Premises” hereunder.
(iii)
Ownership of
Improvements
. Except as set
forth herein, upon termination or expiration of this Lease, title
to any and all improvements, repairs, alterations, additions or
other improvements shall immediately and automatically vest in,
revert to and become the property of Landlord.
5
(b)
Mechanic’s
and Other Liens
. Tenant shall
not do or suffer anything to be done whereby the Premises, or any
part thereof, may be encumbered by a mechanic’s,
materialman’s, or other liens for work or labor done,
services performed, materials, appliances, or power contributed,
used, or furnished in or to the Premises or in connection with any
operations of Tenant, or similar lien, and, if, whenever and as
often as any such lien is filed against the Premises, or any part
thereof, purporting to be for or on account of any labor done,
materials or services furnished in connection with any work in or
about the Premises, done by, for or under the authority of Tenant,
or anyone claiming by, through or under Tenant, Tenant shall
discharge the same of record within thirty (30) days after service
upon Tenant of notice of the filing thereof; provided, however,
Tenant shall have the right to remove such lien by bonding same in
accordance with applicable law.
(c)
Title
to Tenant’s Property
. All
of Tenant’s Property placed in or upon the Premises by Tenant
shall remain the property of Tenant with the right to remove the
same at any time during the term of this Lease.
6.
INSURANCE
(a)
Tenant,
at its expense and as additional rent hereunder, shall, throughout
the term of this Lease and any extension or renewal thereof, keep
the Improvements constructed by Tenant and located on the Premises
insured against fire and other casualty, with “Special Form
Causes of Loss” coverage (as such term is used in the
insurance industry), at least as broad as the most current ISO
Special Cause of Loss Form, including, but not limited to, coverage
for glass breakage, vandalism and malicious mischief, and
builder’s risk (during the period of any construction), in an
amount of not less than the full replacement value with no
co-insurance penalty, with any deductible in excess of $100,000 to
be reasonably approved by Landlord.
(b)
Tenant
shall also maintain throughout the term of this Lease and any
extension thereof, at its own expense and as additional rent,
commercial general liability insurance covering the Premises and
the Improvements, at least as broad as the most current ISO
Commercial General Liability Policy Form (occurrence basis),
against all claims for personal injury, death, or property damage
for the joint benefit of and insuring Tenant and Landlord (and
Landlord’s lender if so requested by Landlord), with limits
not less than Two Million Dollars ($2,000,000.00) per occurrence,
with any deductible in excess of $100,000 to be reasonably approved
by Landlord, and an umbrella liability policy or excess liability
policy, in an amount of not less than Two Million Dollars
($2,000,000.00) per occurrence, with any deductible in excess of
$250,000 to be reasonably approved by Landlord.
(c)
Intentionally
omitted.
(d)
All
insurance companies providing the coverage required under this
Section 6 shall be selected by Tenant and shall be rated A minus
(A-) or better by Best’s Insurance Rating Service, shall be
licensed to write insurance policies in the state in which the
Premises is located, and shall be acceptable to Landlord in
Landlord’s
6
reasonable
discretion. On or prior to the Effective Date and thereafter prior
to the expiration of any of the policies providing the coverages
described herein, Tenant shall provide Landlord with copies of all
certificates of such coverage for the insurance coverages
referenced in this Section 6. All commercial general liability and
umbrella liability or excess liability policies (except as to the
property policy) shall designate Landlord and any mortgagee
reasonably designated by Landlord as an additional insured. Any
such coverage for additional insureds shall be primary and
non-contributory with any insurance carried by Landlord or any
other additional insured hereunder. All property insurance policies
shall name Landlord (and Landlord’s lender if so requested by
Landlord) as an additional named insured or as a loss payee as
Landlord’s interests may appear, and shall provide that all
losses shall be payable as herein provided. Tenant shall request to
its insurer(s) that all such policies of insurance shall provide
that the amount thereof shall not be reduced and that none of the
provisions, agreements or covenants contained therein shall be
modified or canceled by the insuring company or companies without
thirty (30) days prior written notice being given to Landlord;
provided, however, the failure of any policies to include the
foregoing requirements of this sentence shall not be a default
under this Lease. Such policy or policies of insurance shall also
cover loss or damage to Tenant’s Property, and the insurance
proceeds applicable to Tenant’s Property shall not be paid to
Landlord or any mortgagee but shall accrue and be payable solely to
Tenant. In the event of a casualty, Tenant shall be responsible for
any deficiency between the replacement cost of the Premises and the
amount actually paid by the insurance company, provided, however,
that if this Lease terminates in accordance with Section 8, Tenant
shall not be responsible for rebuilding the Premises or any cost
thereof, and any amounts received by the insurance company shall
remain with Tenant.
(e)
Intentionally
omitted.
7.
MAINTENANCE AND REPAIR
(a)
Except
as set forth in subparagraph (d) below, Tenant shall maintain the
Premises and all buildings and improvements thereon in good order
and repair and, subject to the provisions of Section 8 with respect
to a termination of this Lease as a result of a casualty or a
“taking”, return the Premises and all buildings and
improvements thereon or constructed thereon by Tenant at the
expiration of the term of this Lease or any extension thereof in
good condition and repair, ordinary wear and tear, casualty, and
condemnation excepted.
(b)
Tenant
agrees that Landlord shall have no obligation under this Lease to
make any repairs or replacements (including the replacement of
obsolete components) to the Premises or the buildings or
improvements thereon, or any alteration, addition, change,
substitution or improvement thereof or thereto, whether structural
or otherwise, except to the extent any such repairs or replacements
are due to Landlord's or Landlord's agents', employees', or
contractors' negligence or willful misconduct. The terms
“repair” and “replacement” include the
replacement of any portions of the Premises which have outlived
their useful life during the term of the Lease (or any extensions
thereof). Except as set forth herein, Landlord and Tenant intend
that the Rent received by Landlord shall be free and clear of any
expense to Landlord for the construction, care,
maintenance,
7
operation,
repair, replacement, alteration, addition, change, substitution and
improvement of or to the Premises and any building and improvement
thereon, it being agreed that all such costs and expenses shall be
the responsibility of Tenant, except to the extent any repair,
replacement or improvements are necessary due to Landlord's or
Landlord's agents', employees', or contractors' negligence or
willful misconduct.
(c)
Tenant
acknowledges and agrees that the Premises are and shall be leased
by Landlord to Tenant in its present “AS IS” condition,
and that Landlord makes absolutely no representations or warranties
whatsoever with respect to the Premises or the condition thereof.
Tenant acknowledges that Landlord has not investigated and does not
warrant or represent to Tenant that the Premises are fit for the
purposes intended by Tenant or for any other purpose or purposes
whatsoever, and Tenant acknowledges that the Premises are to be
leased to Tenant in their existing condition, i.e., “AS
IS”, on and as of the Commencement Date. Notwithstanding the
foregoing, Landlord represents that as of the date of this Lease,
to the best of Landlord's knowledge, the Premises and the property
are in compliance with all applicable laws (including, without
limitation, the Americans with Disabilities Act), and to the extent
the Premises and/or the property are in violation of any such
law(s), then the work required to bring the applicable item into
compliance will be performed by Landlord, at its
expense.
(d)
Landlord
shall maintain and repair, at its expense, the roof, the structural
soundness of the foundation, the structural soundness of the
exterior walls of the building, the driveways, alleys, landscape,
drainage systems and grounds surrounding the Premises (but not
including Tenant's fenced-in parking area). Tenant shall promptly
give Landlord written notice of any repair required by Landlord
pursuant to this paragraph, after which Landlord shall have a
reasonable opportunity to repair.
8.
CONDEMNATION; CASUALTY
(a)
In
the event that the whole or any material part of the Premises shall
be taken during the term of this Lease or any extension or renewal
thereof for any public or quasi-public use under any governmental
law, ordinance, regulation or by right of eminent domain, or shall
be sold to the condemning authority under threat of condemnation
with the result that the Premises cannot continue to be operated
for the Permitted Use in Tenant's reasonable discretion, or if all
reasonable access to the adjacent roadways from the existing or
comparable curb cuts shall be taken (any of such events being
hereinafter referred to as a “taking”), Landlord or
Tenant shall have the option of terminating this Lease as of a date
no earlier than the date of such taking, such termination date to
be specified in a notice of termination to be given by the
terminating party to the other party not fewer than fourteen (14)
days after the date on which possession of the Premises, or part
thereof, must be surrendered to the condemning authority or its
designee.
(b)
In
the event of any taking which does not give rise to an option to
terminate (as described above) or in the event of a taking which
does give rise to an option to terminate (as described above) and
neither Landlord or Tenant elect to terminate, then and in either
such event, this Lease shall terminate (as of the date of
such
8
“taking”)
with respect only to the portion of the Premises so taken, but
shall remain in full force and effect with respect to the remainder
of the Premises, and Landlord shall, to the extent of the award
from such taking (which word “award” shall mean the net
proceeds of any award with respect to such taking after deducting
reasonable expenses of any settlement, or net purchase price under
a sale in lieu of condemnation but shall exclude any portion of the
total award that relates to Landlord’s reversionary
interest), promptly restore or repair the Premises and all
improvements thereon (except those items of Tenant’s Property
which Tenant is permitted to remove under the terms of this Lease)
to the same condition as existed immediately prior to such taking.
If the estimated cost of restoration or repair shall exceed the
amount of such award, Landlord may elect to expend such excess to
restore or repair the Premises or may elect to terminate this
Lease. In such event, from and after the date of such taking, Base
Rent and other charges payable to Landlord shall be reduced in
proportion to the amount of the Premises taken. If the award shall
exceed the amount spent or to be spent promptly to effect such
restoration, repair or replacement, such excess shall
unconditionally belong to Landlord.
(c)
Nothing
contained herein shall be construed to preclude Tenant, at its
cost, from independently prosecuting any claim directly against the
condemning authority in such condemnation proceeding for damage to,
or cost of removal of, stock, trade fixtures, furniture, other
personal property belonging to Tenant, and loss of Tenant's
business; provided, however, that no such claim shall diminish or
otherwise adversely affect Landlord's award.
(d)
If
this Lease is terminated by reason of a taking, then Landlord and
Tenant shall share the award in any such condemnation or eminent
domain proceedings or purchase, with Tenant getting any award
specifically made to reimburse Tenant for the taking of
Tenant’s Property or for moving expenses or business losses
and Landlord getting the balance of the award.
(e)
If
the Premises should be damaged or destroyed by fire or other
casualty to the extent that the same cannot be reasonably repaired
or restored within 180 days after the occurrence of such casualty,
Landlord or Tenant may terminate this Lease upon giving notice to
the other party within thirty (30) days after the casualty occurs.
In the event of any such termination, except to the extent they are
for Tenant’s Property, all insurance proceeds payable in
connection with such casualty shall be shared by Landlord and
Tenant in the same manner that Landlord and Tenant share in a
condemnation award under Section 8(c) above.
(f)
If
the Premises are damaged by fire or other casualty and this Lease
is not terminated pursuant to subparagraph 8(e) above, then this
Lease shall continue in effect and the Premises shall be promptly
restored by Landlord or Tenant, at Landlord’s sole election,
to the condition in which it existed at the time the casualty
occurred, and all insurance proceeds payable with respect to such
casualty shall be applied to the cost of such repairs and/or
reconstruction, and if it reasonably appears that the cost of the
repairs and restoration will exceed the amount of the insurance
proceeds actually received, Tenant will pay such
deficiency.
9
(a)
From
and after the Effective Date and continuing throughout the term of
this Lease and all extensions thereof, Tenant shall pay, prior to
delinquency, all taxes and assessments which may be levied upon or
assessed against the Premises and all taxes and assessments of
every kind and nature whatsoever arising in any way from the use,
occupancy or possession of the Premises or assessed against the
improvements situated thereon, together with all taxes levied upon
or assessed against Tenant’s Property. To that end, Landlord
shall not be required to pay any taxes or assessments whatsoever
which relate to or may be assessed against this Lease, the Rent and
other amounts due hereunder, the Premises, improvements and
Tenant’s Property; provided, however, that any taxes or
assessments which may be levied or assessed against the Premises
for the first and last years in which this Lease is in effect shall
be appropriately prorated between Landlord and Tenant.
Notwithstanding the foregoing, in no event shall Tenant be
responsible for payment of Landlord’s income, inheritance,
estate, and capital gains taxes.
(b)
Within
thirty (30) days after Tenant receives the paid receipted tax
bills, Tenant shall furnish Landlord with copies thereof. Tenant
may, at its option, contest in good faith and by appropriate and
timely legal proceedings any such tax and assessment so long as
such contest is conducted by Tenant diligently and so long as such
contest does not subject the Premises or any portion thereof to
risk of forfeiture; provided, however, that Tenant shall indemnify
and hold harmless Landlord from any loss or damage resulting from
any such contest, and all expenses of same (including, without
limitation, all attorneys’ and paralegal fees, court and
other costs) shall be paid solely by Tenant.
10.
COMPLIANCE, USE, UTILITIES, SURRENDER
(a)
Tenant
at its expense shall promptly comply with all applicable
governmental requirements, whether or not compliance therewith
shall require structural changes to the Premises; will procure and
maintain all permits, licenses, approvals and other authorizations
required for the use of the Premises or any part thereof then being
made and for the lawful and proper installation, operation and
maintenance of all equipment and appliances necessary or
appropriate for the operation and maintenance of the Premises; and
shall comply with all easements, restrictions, reservations and
other instruments of record applicable to the Premises, including
without limitation, the procuring and maintaining of insurance as
set forth herein. Tenant shall indemnify and save Landlord harmless
from all expenses and damages by reason of any notices, orders,
violations or penalties filed against or imposed upon the Premises,
or against Landlord as owner thereof, due to Tenant’s failure
to comply with this paragraph, except to the extent such expenses
and damages are due to Landlord's or Landlord's agents',
employees', or contractors' negligence or willful
misconduct.
(b)
Notwithstanding
any other provision contained in this Lease to the contrary, Tenant
shall not use the Premises for (i) any noxious or offensive use,
(ii) any use that is not in compliance with all applicable laws and
ordinances, (iii) intentionally omitted, or (iv) any use that is
not a Permitted Use.
10
(c)
Tenant
shall pay all charges for heat, water, gas, sewage, electricity and
other utilities used or consumed on the Premises directly to such
utility company and shall contract for the same in its own name.
Landlord shall not be liable for any interruption or failure in the
supply of any such utility service to the Premises.
Notwithstanding
anything in this Lease to the contrary, if there is an interruption
in an essential service (such as, but not limited to, electricity,
water, or HVAC), and such interruption (x) is caused by the
negligence or willful misconduct of Landlord, its agents,
employees, or contractors, and (y) renders all or any portion ofthe
Premises untenantable, and (z) continues for a period of three (3)
consecutive business days after Landlord's receipt of notice from
Tenant, then so long as the correct of the problem is within
Landlord's reasonable control, Tenant shall be entitled to an
abatement of Base Rent and any other expenses for each day that the
Premises are untenantable with respect to the portion of the
Premises that is untenantable.
(d)
Tenant
shall peacefully surrender possession of the Premises and the
buildings and other improvements thereon to Landlord at the
expiration, or earlier termination, of the original term or any
extended or renewed term of this Lease, reasonable wear and tear
and casualty excepted.
11.
QUIET
ENJOYMENT
Landlord
covenants and warrants that Landlord has full power and authority
to make this Lease, and that Tenant shall have and enjoy full,
quiet and peaceful possession of the Premises, their appurtenances
and all rights and privileges incidental thereto during the term
hereof and any renewals or extensions, subject to the provisions of
this Lease.
12.
DEFAULT
(a)
If
any one or more of the following events occur, said event or events
shall hereby be referred to as a
“Default”:
(i)
If
Tenant fails to pay Rent, any additional rent, or any other charges
required hereunder when same shall become due and payable, and such
failure continues for five (5) days after receipt of written notice
from Landlord.
(ii)
If
Tenant shall fail to perform or observe any term, condition,
covenant, agreement or obligation under this Lease and such failure
continues for more than thirty (30) days after receipt of written
notice from Landlord (except that such thirty (30) day period shall
be automatically extended for such additional period of time as is
reasonably necessary to cure such default, if such default is
capable of being cured, but cannot reasonably be cured within such
period, provided Tenant is at all times in the process of
diligently curing the same).
(iii)
If
Tenant shall make an assignment for the benefit of creditors or
file a petition, in any federal or state court, in bankruptcy,
reorganization,
11
composition,
or make an application in any such proceedings for the appointment
of a trustee or receiver for all or any portion of its
property.
(iv)
If
any petition shall be filed under federal or state law against
Tenant in any bankruptcy, reorganization, or insolvency
proceedings, and said proceedings shall not be dismissed or vacated
within thirty (30) days after such petition is filed.
(v)
If
a receiver or trustee shall be appointed under federal or state law
for Tenant, or for all or any portion of the property of Tenant,
and such receivership or trusteeship shall not be set aside within
thirty (30) days after such appointment.
(vi)
Tenant
shall fail to deliver the documents required by Landlord pursuant
to Section 16 below.
(vii)
Except
as set forth herein, Tenant subleases the Premises, or any portion
thereof, without the written permission of Landlord or Tenant
assigns this Lease, whether by operation of law or otherwise,
without the written permission of Landlord.
(viii)
The
Premises shall be abandoned, deserted, or vacated for more than
thirty (30) consecutive days (other than for fire, casualty,
condemnation, repairs, or as consented to by Landlord in writing),
or Tenant fails to take possession of the Premises and initially
open for business to the public, or Tenant otherwise ceases its
business activity in the Premises (other than for fire, casualty,
condemnation, repairs, or as consented to by Landlord in writing)
prior to the expiration of the Term.
(b)
Upon
the happening of any one or more of the aforementioned Defaults,
Landlord shall have the right, in addition to any other rights and
remedies, to terminate this Lease by giving thirty (30) days'
written notice of same to Tenant. Upon such notice, this Lease
shall cease and expire, and Tenant shall surrender the Premises to
Landlord in accordance with this Lease. Notwithstanding such
termination, Tenant’s liability and obligation under all
provisions of this Lease, including the obligation to pay Rent and
any and all other amounts due hereunder shall survive and continue.
In addition, in the event of Tenant’s Default under this
Lease, Landlord may, by notice to Tenant, accelerate the monthly
installments of Rent due hereunder for the remaining term of this
Lease, in which event such amount, together with any sums then in
arrears, shall immediately be due and payable to Landlord;
provided, however, Landlord shall only have the right to accelerate
the Rent provided above for what would have been the following one
(1) year period of the term (had Tenant's rights to possession not
been terminated), discounted to present value and subject to a
credit for reletting, and Landlord may, on each anniversary of the
date of such acceleration again accelerate the Rent hereunder for
what would have been the next following one (1) year period which
shall not have previously been declared due and payable, discounted
to present value and subject to a credit for reletting. Tenant
hereby expressly agrees that its occupation of the Premises after
Default
12
constitutes
forcible detainer (or equivalent) as is defined by the law in force
in the jurisdiction in which the Premises are located.
(c)
Upon
the occurrence of a Default, regardless of whether this Lease shall
be terminated as provided hereinabove, Landlord may re-enter the
Premises and remove Tenant, its agents and sub-tenants, together
with all or any of Tenant’s Property, by suitable action at
law, or by force. Landlord shall not be liable in any way in
connection with any action it takes pursuant to this paragraph, to
the extent that its actions are in accordance with applicable law.
Notwithstanding such re-entry or removal, Tenant’s liability
under Lease shall survive and continue.
(d)
In
case of re-entry, repossession and/or termination of this Lease,
Tenant shall remain liable for Rent, any additional rent and all
other charges provided for in this Lease for the otherwise
remaining term of this Lease, and any and all reasonable expenses
which Landlord may have incurred in re-entering the Premises
including, but not limited to, allocable overhead, necessary
alterations to the building, and reasonable legal and accounting
fees. Regardless of whether this Lease has been terminated as
provided above, Landlord shall use reasonable efforts to relet the
whole or part of the Premises upon terms which Landlord, in its
reasonable discretion, deems appropriate and Tenant shall be
responsible for all reasonable, actual, out-of-pocket expenses
incurred by Landlord in re-letting or attempting to re-let, and all
rent collected for reletting shall be credited against all of
Tenant’s obligations hereunder.
(e)
In
the event of a Default, and after applicable notice and cure
periods, Landlord may enter upon the Premises, if deemed necessary
by Landlord in its reasonable discretion (but without any
obligation to do so), and/or do whatever may be deemed necessary by
Landlord in its sole discretion to cure such failure by Tenant.
Tenant shall pay to Landlord within five (5) days of
Landlord’s request, all actual, reasonable, out-of-pocket
costs incurred by Landlord in connection with Landlord’s
curing of such failure. In addition to the above costs, in the
event Landlord does not receive payment from Tenant when due under
this subparagraph 12(e), then interest at the rate of ten percent
(10%) per annum or, if less, the highest rate allowable by law,
shall be due and payable with respect to such payment from the due
date thereof until Landlord receives such payment.
(f)
In
the event Landlord engages legal counsel in connection with the
enforcement of any of the terms and provisions of this Lease, then,
in addition to all other sums due from Tenant to Landlord under
this Lease, Tenant shall pay to Landlord any and all reasonable
attorneys’ fees, paralegal fees, court costs and other costs
and expenses incurred by Landlord, whether or not judicial
proceedings are filed, and including on appeal and in any
bankruptcy proceedings.
(g)
Notwithstanding
the foregoing, in the event Tenant fails to maintain and keep in
full force and effect any or all of the insurance required pursuant
to Section 6 of this Lease (“Insurance Premiums”), or
pay any taxes required under Section 9 above (“Taxes”),
then at Landlord’s request and in Landlord’s sole
discretion, Tenant shall
13
thereafter
escrow funds for payment of such Insurance Premiums and Taxes in
the following manner:
(i)
Tenant
shall immediately pay to Landlord all sums expended by Landlord,
plus an additional ten percent (10%), for purposes of (1) bringing
current or reinstating or purchasing the Insurance Premiums
required under Section 6 of this Lease and (2) bringing current all
Taxes, together with any late fees or fines thereon. Thereafter,
Tenant shall pay to a third-party escrow agent (the "Escrow Agent")
on the first (1st) day of each month along with the monthly Rent
payment a sum (the “Escrow Funds”) equal to one-twelfth
(1/12
th
)
of the yearly Insurance Premiums and Taxes.
(ii)
Landlord
shall instruct the Escrow Agent to apply the Escrow Funds to pay
said Insurance Premiums as and when the applicable premiums shall
become due and to such Taxes prior to delinquency. No interest
shall be payable on the Escrow Funds unless required by applicable
law, in which event all such interest shall be applied by the
Escrow Agent to pay such Insurance Premiums and Taxes. Landlord
shall cause the Escrow Agent to provide to Tenant an annual
accounting of the Escrow Funds in Escrow Agent's normal format
showing credits and debits to the Escrow Funds and the purpose for
which each debit to the Escrow Funds was made, within twenty (20)
days after.
(iii)
If
the amount of the Escrow Funds held by Escrow Agent at the time of
the annual accounting thereof shall exceed the amount deemed
necessary to provide for the payment of Insurance Premiums and
Taxes, such excess shall be released by Escrow Agent and credited
to Tenant on the next monthly installment or installments of Escrow
Funds due. If at any time the amount of the Escrow Funds shall be
less than the amount deemed necessary to pay the Insurance Premiums
and Taxes, Tenant shall pay to Escrow Agent any amount necessary to
make up the deficiency within thirty (30) days after written notice
from Landlord to Tenant requesting payment thereof.
(iv)
The
foregoing Escrow Funds arrangement shall terminate if Tenant fully
and faithfully complies with the provisions of this Section 12(g)
for a period of twenty-four (24) consecutive months. Upon the
termination of this Lease, so long as Tenant is not in default
hereunder, Escrow Agent shall promptly refund (or credit to Tenant
in the case of termination due to Tenant’s default) any
Escrow Funds held by Escrow Agent.
(h)
The
rights and remedies of Landlord set forth herein shall be in
addition to any other right and remedy now or hereinafter provided
by law or in equity, and all such rights and remedies shall be
cumulative. No action or inaction by Landlord shall constitute a
waiver of any Default, and no waiver of any Default shall be
effective unless it is in writing, signed by Landlord.
(i)
In
the event of a default by Landlord, Tenant's remedy, in addition to
any other remedies it may have at law or in equity, shall be an
action for actual damages or
14
injunction,
but prior to any such action, Tenant shall give Landlord written
notice specifying such default, and Landlord shall have a period of
thirty (30) days following the date of such notice in which to cure
the default (provided, however, that if such default reasonably
requires more than thirty (30) days to cure, Landlord shall have a
reasonable time to cure such default, provided Landlord commences
to cure within such thirty (30) day period and thereafter
diligently prosecutes such cure to completion).
13.
HOLDING
OVER
In
the event Tenant remains in possession of the Premises after the
expiration of this Lease without executing a new written lease
acceptable to Landlord and Tenant, Tenant shall occupy the Premises
as a tenant from month to month subject to all the terms hereof
(except as modified by this paragraph), but such possession shall
not limit Landlord’s rights and remedies by reason thereof.
In the event of such month to month tenancy, the monthly
installment of Base Rent due for each such month shall increase to
be one and a half (1.5) times the monthly installment thereof which
was payable during the last month of the term of this
Lease.
14.
WAIVER
OF SUBROGATION
Notwithstanding
anything in this Lease to the contrary, neither party shall be
liable to the other for any damage or destruction of the Premises
or any other property resulting from fire or other casualty covered
by insurance required of either party hereunder (or which could be
insured against), whether or not such loss, damage or destruction
of the Premises or other property are caused by or results from the
negligence of such party (which term includes such party’s
officers, employees, agents and invitees), and each party hereby
expressly releases the other from all liability for or on account
of any said insured loss, damage or destruction, whether or not the
party suffering the loss is insured against such loss, and if
insured whether fully or partially. Each party shall procure all
endorsements of insurance policies carried by it necessary to
protect the other from any right of subrogation and/or liability in
the event of such loss.
15.
ASSIGNMENT
AND SUBLETTING
(a)
Tenant
shall not have the right, without first obtaining Landlord’s
prior written consent, which shall not be unreasonably withheld,
conditioned, or delayed, to assign or sublet any part or all of the
Premises to any party for any purpose. A change in ownership of the
controlling interest of Tenant (whether direct or indirect) shall
also constitute an assignment subject to this subparagraph.
Landlord, without being deemed unreasonable, may withhold its
consent to any proposed assignment or subletting where (as
determined by Landlord in Landlord’s reasonable discretion)
(i) such assignment or subletting would violate the terms of any
then existing agreement applicable to the Premises, or (ii) the
financial capacity of such assignee or subtenant is materially less
than that of Tenant as of the date of such proposed assignment.
Even if such consent to assignment or subletting is given by
Landlord or not required, such assignment or subletting shall not
relieve Tenant of its liability for the continued performance of
all terms, covenants and conditions of this Lease, including
without limitation the payment of all Rent and other charges
thereunder, except to the extent otherwise agreed to in writing by
Landlord. In the event of the subletting or assignment of this
Lease, Landlord
15
is
entitled to receive forty (40%) of all gross revenues received by
Tenant from the assignee/sublessee, net of the Rent due under this
Lease by Tenant to Landlord, as well as reasonable marketing,
commissions, or inducement expenses incurred by Tenant associated
with such assignment or sublease.
(b)
Prior
to any assignment allowed hereunder, Tenant shall deliver to
Landlord (i) a copy of the assignment documents (including copies
of any recorded documents related thereto); (ii) the name, address
and telephone number of such assignee and a designated contact
person for such assignee; (iii) intentionally omitted; and (iv) an
agreement executed by such assignee whereby such assignee assumes
and agrees to discharge all obligations of Tenant under this Lease.
Notwithstanding anything in this Lease to the contrary, in the
event of any assignment of this Lease or subletting of the
Premises, Tenant shall not be released from its obligations under
this Lease unless specifically released by virtue of a separate
written instrument executed by Landlord, which may be withheld in
Landlord’s sole discretion.
(c)
Landlord
shall have the right without limitation to sell, convey, transfer
or assign its interest in the Premises or its interest in this
Lease, and upon such conveyance being completed, and such
assignee's assumption of the obligations of Landlord in writing,
all covenants and obligations of Landlord under this Lease accruing
thereafter shall cease, but such covenants and obligations shall
run with the land and shall be binding upon the subsequent landlord
or owners of the Premises or of this Lease.
(d)
Notwithstanding
anything to the contrary contained in this section 15, Tenant shall
have the right, without Landlord's prior written consent, to assign
this Lease or sublease all or any portion of the Premises to any
party which directly or indirectly: (i) wholly owns or controls
Tenant; (ii) is wholly owned or controlled by Tenant, (iii) is
under common ownership or control with Tenant, or (iv) into which
Tenant or any of the foregoing parties is merged, consolidated or
reorganized, or to which all or substantially all of Tenant's
assets or any such other party's assets are sold, provided,
however, (a) Tenant gives Landlord thirty (30) days prior written
notice of such assignment or subletting, and (b) the transferee, in
the case of an assignment, shall expressly assume Tenant's
obligations under this Lease.
16.
SUBORDINATION,
NON-DISTURBANCE, ATTORNMENT, ESTOPPEL
CERTIFICATE.
(a)
Upon
written request of the holder of any mortgage (which term
“mortgage” shall also include deeds of trust) now or
hereafter relating to the Premises, Tenant will subordinate its
rights under this Lease to the lien thereof and to all advances
made or hereafter to be made upon the security thereof, and Tenant
shall execute, acknowledge and deliver an instrument in the form
customarily used by such encumbrance holder to effect such
subordination (and reasonably approved by Tenant); provided,
however, as a condition of all such subordinations, the holder of
such mortgage shall be first required to agree in writing with
Tenant that, notwithstanding the foreclosure or other exercise of
rights under any such first or other mortgage, Tenant’s
possession and occupancy of the Premises and the improvements and
its leasehold estate
16
shall
not be disturbed or interfered with nor shall Tenant’s rights
and obligations under this Lease be altered or adversely affected
thereby so long as Tenant is not in Default beyond applicable
notice and cure periods.
(b)
Notwithstanding
anything set out in subparagraph (a) above to the contrary, in the
event the holder of any such mortgage elects to have this Lease be
superior to its mortgage, then upon Tenant’s being notified
in writing to that effect by such encumbrance holder, this Lease
shall be deemed prior to the lien of said mortgage, whether this
Lease is dated prior or subsequent to the date of said mortgage,
and Tenant shall execute, acknowledge and deliver an instrument, in
the form customarily used by such encumbrance holder (and
reasonably approved by Tenant), effecting such
priority.
(c)
In
the event proceedings are brought for the foreclosure of, or in the
event of the exercise of the power of sale under any mortgage made
by Landlord encumbering the Premises, or in the event of delivery
of a deed in lieu of foreclosure under such a mortgage, Tenant will
attorn to the purchaser upon any such foreclosure or sale and
recognize such purchaser as “Landlord” under this
Lease, and upon the request of the purchaser, Tenant shall execute,
acknowledge and deliver an instrument, in form and substance
satisfactory to such purchaser and reasonably acceptable to
Tenant.
(d)
Each
party agrees, within fifteen (15) days after written request by the
other, to execute, acknowledge and deliver to and in favor of any
proposed mortgagee or purchaser of the Premises, an estoppel
certificate, in the form customarily used by such proposed
mortgagee or purchaser, stating, among other things (i) whether
this Lease is in full force and effect, (ii) whether this Lease has
been modified or amended and, if so, identifying and describing any
such modification or amendment, (iii) the date to which Rent and
other charges have been paid, and (iv) whether the party furnishing
such certificate knows of any default on the part of the other
party or has any claim against such party and, if so, specifying
the nature of such default or claim.
(e)
Upon
written demand by the holder of any mortgage covering the Premises,
Tenant shall forthwith execute, acknowledge and deliver an
agreement in favor of and in the form customarily used by such
encumbrance holder, by the terms of which Tenant will agree to give
prompt written notice to such encumbrance holder in the event of
any casualty damage to the Premises or in the event of any default
on the part of Landlord under this Lease, and will agree to allow
such encumbrance holder a reasonable length of time after notice to
cure or cause the curing of such default before exercising
Tenant’s rights under this Lease, or terminating or declaring
a default under this Lease.
17.
NOTICES
All
notices and other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by a
nationally recognized overnight courier or mailed by registered or
certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to
Landlord:
Steve
Brewster Rentals
17
Hendersonville,
TN 37075
Attn:
Steven Brewster
with
copy to:
If to
Tenant:
Wholesale,
LLC
4521
Sharon Road, Suite 370
with
copy to:
Any
party may change its address for notices by written notice in like
manner as provided in this paragraph and such change of address
shall be effective seven (7) days after the date notice of such
change of address is given. Notice for purposes of this Lease shall
be deemed given when it shall have been received or rejected by the
intended recipient.
18.
INDEMNIFICATION
Tenant
does hereby indemnify Landlord against and from all liabilities,
losses, obligations, damages, penalties, claims, costs, charges and
expenses, including reasonable architects’ fees,
attorneys’ fees, paralegal fees, and legal costs and
expenses, incurred by Landlord, whether or not judicial proceedings
are filed, and including (but without limitation) on appeal and in
any bankruptcy proceedings, which may be imposed upon or asserted
against or incurred by Landlord by reason of any of the following
occurring, except to the extent such liabilities, obligations,
damages, and expenses are caused by Landlord's negligence or
willful misconduct:
(a)
any
work or thing done by Tenant in respect of construction of, in or
to the Premises or any part of the improvements now or hereafter
constructed on the Premises by Tenant;
(b)
any
use, possession, occupation, operation, maintenance or management
of the Premises or any part hereof by Tenant;
(c)
any
failure to properly, use, possess, occupy, operate, maintain or
manage the Premises or any part thereof by Tenant;
(d)
the
condition, including environmental conditions arising after the
date of this Lease and not in existence on the Premises prior to
the date of this Lease, of the Premises or any part thereof, to the
extent in Tenant's control;
18
(e)
any
negligence on the part of Tenant or any of its agents, contractors,
or employees;
(f)
any
accident, injury or damage to any person or property occurring in,
on or about the Premises or any part thereof under the direct
control of Tenant (and not including adjacent sidewalks or other
grass areas); or
(g)
any
failure on the part of Tenant to perform or comply with any of the
covenants, agreements, terms or conditions contained in this Lease
on its part to be performed or complied with beyond applicable
notice and cure periods.
Except
to the extent caused by Tenant's negligence or willful misconduct,
Landlord agrees to indemnify and hold harmless Tenant from all
liabilities, losses, obligations, damages, penalties, claims,
costs, charges and expenses, including reasonable architects’
fees, attorneys’ fees, paralegal fees, and legal costs and
expenses, incurred by Tenant, whether or not judicial proceedings
are filed, arising from Landlord's or its agents', employees', or
contractors' negligence or willful misconduct in or about the
Premises or any part thereof.
19.
HOLD
HARMLESS
Tenant
agrees to hold Landlord harmless from and against any and all
claims, damages, accidents and injuries to persons or property
caused by or resulting from or in connection with Tenant's use of
the Premises during the term of this Lease or while Tenant is
occupying the Premises, except if such claim, damage, accident or
injury shall be caused by the negligence or willful misconduct of
Landlord or its agents, employees, or contractors. Landlord shall
not be liable to Tenant, Tenant’s employees, agents,
invitees, licensees or any other person whomsoever for any injury
to person or damage to property on or about the Premises caused by
the negligence or misconduct of Tenant, its agents, servants or
employees or of any other person entering the building under
expressed or implied invitation by Tenant, unless caused by the
negligence or willful misconduct of Landlord, its employees,
contractors, or its authorized representatives.
20.
LANDLORD’S
LIABILITIES
The
term “Landlord” as used in this Lease means the owner
from time to time of the Premises. Neither Landlord nor any
partner, member, shareholder or beneficiary thereof shall have any
personal liability with respect to any of the provisions of this
Lease and if Landlord is in default with respect to its obligations
hereunder Tenant shall look solely to the equity of Landlord in the
Premises.
21.
SUCCESSORS
The
covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their
respective heirs, legal representatives, successors and
assigns.
19
22.
ENTIRE
AGREEMENT
This
Lease contains the entire agreement between the parties hereto and
may not be modified in any manner other than in writing signed by
the parties hereto or their successors in interest.
23.
GENDER
Whenever
the context hereof permits or requires, words in the singular may
be regarded as in the plural and vice-versa, and personal pronouns
may be read as masculine, feminine and neuter.
24.
BROKERAGE
FEES
The
parties agree that no broker or finder (“Broker”) was
used or engaged by either party in connection with the drafting or
negotiating of this Lease and that neither Landlord nor Tenant
shall not be responsible for any such fees or commissions to any
Broker. No representation by any Broker or any other third party
shall bind Landlord or Tenant and in no event shall be used to
interpret this Lease. Each party shall indemnify the other party
against, and hold it harmless from, any liability for any
compensation to any Broker or other person who may be deemed or
held entitled thereto because of a relationship with such
party.
25.
CAPTIONS
The
captions of this Lease are for convenience only, and do not in any
way define, limit, disclose, or amplify terms or provisions of this
Lease or the scope or intent thereof.
26.
NET
LEASE
It
is the intention of the parties hereto that this Lease is and shall
be treated as a triple net lease. Any present or future law to the
contrary notwithstanding, except as expressly provided in this
Lease, this Lease shall not terminate, nor shall Tenant be entitled
to any abatement, suspension, deferment, reduction, setoff,
counterclaim, or defense with respect to the Rent, nor shall the
obligations of Tenant hereunder be affected by reason of: any
damage to or destruction of the Premises or any part thereof; any
taking of the Premises or any part thereof or interest therein by
condemnation or otherwise; any prohibition, limitation, restriction
or prevention of Tenant’s use, occupancy or enjoyment of the
Premises or any part thereof; any interference with such use,
occupancy or enjoyment by any person or for any other reason; any
action of governmental authority; or any defect in the condition,
quality or fitness for use of the Premises or any part thereof. The
parties intend that the obligations of Tenant hereunder shall be
separate and independent covenants and agreements and shall
continue unaffected unless such obligations shall have been
modified or terminated in accordance with an express provision of
this Lease.
27.
WAIVER
20
No
waiver by Landlord or Tenant of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent
breach by Tenant or Landlord of the same or any other provision.
Landlord’s consent to, or approval of, any act as required
hereunder shall not be deemed to render unnecessary the obtaining
of Landlord’s consent to or approval of any such subsequent
act by Tenant. The acceptance of Rent hereunder by Landlord shall
not be a waiver of any preceding default by Tenant of any provision
hereof, other than the failure of Tenant to pay the particular rent
so accepted, regardless of Landlord’s knowledge of such
preceding breach at the time of acceptance of such
rent.
28.
TIME
OF THE ESSENCE
Landlord
and Tenant agree that time shall be of the essence of all terms and
provisions of this Lease.
29.
GOVERNING
LAW
This
Lease shall be construed in accordance with the laws of the state
in which the Premises are located.
30.
NOT
A SECURITY ARRANGEMENT
The
parties hereto agree and acknowledge that this transaction is not
intended as a security arrangement or financing secured by real
property, but shall be construed for all purposes as a true
lease.
31.
HAZARDOUS
SUBSTANCES
.
Tenant
shall comply, at its sole expense, with all laws, ordinances,
orders, rules and regulations of all applicable state, federal,
municipal and other governmental or judicial agencies or bodies
relating to the protection of public health, safety, welfare or the
environment (collectively, “Environmental Laws”) in the
use, occupancy and operation of the Premises. Tenant agrees that no
Hazardous Substances shall be used, located, stored or processed on
the Premises by Tenant or any of its agents, employees, or
contractors, and no Hazardous Substances will be generated,
released or discharged from the Premises by Tenant, its agents,
employees, or contractors. The term “Hazardous
Substances” shall mean and include all hazardous and toxic
substances, waste or materials, any pollutant or contaminant,
including, without limitation, PCB’s, asbestos and raw
materials that include hazardous constituents or any other similar
substances or materials that are now or hereafter included under or
regulated by any environmental laws or that would pose a health,
safety or environmental hazard. Tenant hereby agrees to indemnify,
defend and hold harmless Landlord and Landlord’s officers,
agents, employees and affiliates from and against any and all
claims, causes of action, demands, liens, losses, liabilities,
damages, injuries, fines, costs and expenses (including, but not
limited to, court costs, litigation expenses, reasonable
attorney’s fees and costs of settlement or judgment), of any
and every kind whatsoever paid, incurred or suffered by, or
asserted against, Landlord by any person, entity or governmental
agency for, with respect to, or as a direct or indirect result of
any of the following that occur after the date of this Lease and
are not due to any Hazardous Substances on the Premises as of the
date of this Lease (latent or otherwise) (i) the presence in
or
21
the
escape, leakage, spillage, discharge, emission or release from the
Premises by Tenant of any Hazardous Substances or the presence of
any Hazardous Substances placed on or discharged from the Premises
by Tenant or any of its agents, employees, or contractors, or (ii)
any violation or alleged violation of any environmental laws by
Tenant or any of its agents, employees, or contractors in relation
to the Premises;except to the extent any of the above is due to
Landlord's or Landlord's agents', employees', or contractors'
negligence or willful misconduct. In the event of the release of
Hazardous Substances in or about the Premises by Tenant or any of
its agents, employees, contractors, assigns, subtenants, guests or
invitees, Tenant shall immediately notify Landlord about such
release caused by Tenant and advise Landlord of the procedures
being taken for remediation. Landlord reserves the right to reenter
the Premises should Tenant fail to respond to the release and/or to
remediate the Premises within a reasonable period of time. Tenant
shall be responsible for any reasonable, actual, out-of-pocket
costs assessed Landlord in connection to such release and/or
remediation, including reasonable attorney’s fees. Landlord
shall have the right to require that Tenant deliver periodic
environmental audits of the Premises evidencing that no violations
have occurred (but no more than once per calendar
year).
Landlord
hereby agrees to indemnify, defend and hold harmless Tenant and
Tenant’s officers, agents, employees and affiliates from and
against any and all claims, causes of action, demands, liens,
losses, liabilities, damages, injuries, fines, costs and expenses
(including, but not limited to, court costs, litigation expenses,
reasonable attorney’s fees and costs of settlement or
judgment), of any and every kind whatsoever paid, incurred or
suffered by, or asserted against, Tenant by any person, entity or
governmental agency for, with respect to, or as a direct or
indirect result of any of any Hazardous Substances on, in, or under
the Premises prior to the date of this Lease (latent or
otherwise).
Landlord
represents and warrants that Landlord is not aware of any Hazardous
Substances on, in, or under the Premises, nor has Landlord received
any notice (written or oral) of any Hazardous Substances on, in, or
under the Premises.
This
Section shall survive the expiration or earlier termination of this
Lease.
32.
Right
of First Offer to Purchase
.
During the term of the Lease (or any
extensions
thereof), provided that Tenant is not in default under any of the
terms or conditions of this Lease beyond applicable notice and cure
periods, prior to selling the Premises to any third party or
listing the Premises for sale, Landlord shall first deliver a
written offer (“Offer”) to Tenant setting forth the
terms upon which Landlord proposes to offer to sell the Premises to
third parties, and Tenant shall have the right for a period of ten
(10) business days after receipt of the Offer, to elect to purchase
the Premises on the exact terms and conditions set forth in the
Offer by delivery of a written notice to Landlord accepting the
offer (the “Acceptance”). If Tenant does not timely
deliver the Acceptance of the Offer without any modification, then
Landlord shall be free to sell the Premises to a third party on the
exact terms and conditions set forth in the Offer. Prior to
Landlord offering the Premises for sale or entering into a purchase
contract on terms different than those set forth in the Offer,
Landlord shall deliver an updated written Offer setting forth such
revised terms and the foregoing process shall be
repeated.
If
Tenant timely accepts the Offer (as evidenced by its timely
delivery to Landlord of the
22
Acceptance),
then the parties shall proceed to closing of the sale of the
Premises within thirty (30) days on industry standard
terms.
[Signature page follows]
23
IN
WITNESS WHEREOF, the parties hereto have caused this Lease
Agreement to be executed the day and date first above
written.
LANDLORD
TENANT
Wholesale,
LLC a Tennessee limited liability company
24
LEASE AGREEMENT
THIS
LEASE AGREEMENT is made and entered into as of October __, 2018
(the “Effective Date”), by and between:
(i)
Steven
Brewster d/b/a Steve Brewster Rentals, with a principal office and
place of business at 250B Blue Grass Drive, Hendersonville, TN
37075 (“Landlord”); and
(ii)
Wholesale,
LLC a Tennessee limited liability company, with a mailing address
of 4521 Sharon Road, Suite 370, Charlotte, NC 28211
(“Tenant”).
WITNESSETH
:
Landlord
leases to Tenant, and Tenant rents from Landlord, that certain real
property commonly known as 7901-7905 Eastgate Boulevard, Mount
Juliet, Tennessee 37122, together with all rights and privileges
that are appurtenant to such real property, inclusive of all
easements benefiting such land, and together with that certain
building located thereon consisting of approximately 4,794 square
feet (the “Premises”).
The
following additional stipulations are hereby declared to be
covenants of this Lease and shall, unless otherwise expressly
stated, be applicable at all times throughout the term of this
Lease and any extension or renewal thereof:
For
purposes of this Lease, the following terms shall have the
definitions ascribed to them below:
“Commencement
Date” shall mean the Effective Date.
“Improvements”
shall mean all improvements and structures located on the real
property or hereafter constructed on the real
property.
“Lease”
shall include this Lease Agreement and all amendments hereto, if
any, entered into from time to time hereafter.
“Lease
Year” shall mean each consecutive twelve (12) month period
during the term of this Lease and any extensions hereof. The first
Lease Year shall begin on the Commencement Date and shall expire on
the last day of the twelfth (12th) month thereafter and each
subsequent Lease Year shall begin on the day immediately following
the prior Lease Year and shall expire on the last day of the
twelfth (12th) month thereafter; provided, however, that in the
event the Commencement Date is not the first (1st) day of a
calendar month, then the first Lease Year shall be longer than
twelve (12) months, it being agreed that such Lease Year shall
commence on the Commencement Date and shall expire on the last day
of the twelfth (12th) month after the first (1st) day of the
calendar month following the Commencement Date.
“Material
Alteration” shall mean any proposed construction or
alteration or change affecting the Premises, the cost of which,
individually or together with other such activities to be completed
concurrently therewith, exceeds Fifteen Thousand and No/100 Dollars
($15,000.00) or adversely affects the structural integrity or
components of any Improvements.
“Permitted
Use” shall mean general office use and for no other
purpose.
“Rent”
shall mean the rent payable under this Lease and shall include Base
Rent (as hereinafter defined), together with all other items
described in this Lease as “additional
rent”.
“Tenant”
shall include the named Tenant and any permitted assignee or
subtenant thereof pursuant to an assignment or sublease under
Section 15 of this Lease.
2.
TERM
.
The term of this Lease shall begin on
the Commencement Date and shall expire on the last day of the third
(3
rd
)
Lease Year (hereinafter the “Termination Date”), unless
previously terminated or renewed or extended as provided
herein.
Provided
no Default (as hereinafter defined) exists beyond applicable notice
and cure periods, Tenant shall have the right, upon at least ninety
(90) days prior written notice to Landlord prior to the Termination
Date or the first Renewal Term, as applicable, to renew this Lease
for two (2) additional terms of five (5) years each (each, the
“Renewal Term”), upon the same terms and conditions
contained in this Lease except: (i) the second Renewal Term will
contain no further renewal options unless expressly granted by
Landlord in writing; and (ii) the Base Rent for the Premises shall
increase by ten percent (10%) over the immediately preceding Base
Rent amount then due, with lease terms commencing on or about the
date of commencement of the renewal term.
3.
RENT
(a)
Commencement
of Rent
. Payment of Base Rent
(as defined below) shall commence as of the Commencement
Date.
(b)
Base
Rent
. Tenant covenants and
agrees to pay to Landlord base rent (“Base Rent”) as
follows:
Date
|
Monthly Base Rent
|
Yearly Base Rent
|
October
__, 2018 – October __, 2021
|
$500
|
$6,000
|
October
__, 2021 – October __, 2026, if applicable
|
$550
|
$6,600
|
October
__, 2026 – October __, 2031, if applicable
|
$605
|
$7,260
|
(c)
All
Base Rent shall be paid in monthly installments, in advance, on
or
before the first (1
st
)
day of each month; provided, however, that if the Commencement Date
occurs on a day other than the first day of the calendar month, the
first payment of Base Rent shall be the prorated Base Rent for the
remainder of the calendar month in
2
which
the payment of Base Rent commences.
(d)
Sales/Use
Tax
. Tenant shall also pay to
Landlord any applicable sales and use tax imposed on any Rents
payable hereunder from time to time by state law or any other
governmental entity, which sums shall constitute additional rent
and shall be due monthly at the same time as monthly installments
of Base Rent are due under this Section
3.
(e)
Late
Charges
. In the event any
installment of Rent is not received by Landlord within ten (10)
business days of its respective due date, there shall be a late
charge due to Landlord from Tenant in the amount of five percent
(5%) of such delinquent installment of Rent. All such late charges
due hereunder shall be deemed additional rent, and are not
penalties but rather are charges attributable to administrative and
collection costs arising out of such delinquency. In addition, if
any payment due from Tenant remains overdue for more than ten (10)
days of its respective due date, an additional late charge in an
amount equal to the lesser of (a) ten percent (10%) per annum or
(b) the maximum rate allowable by law of the delinquent amount may
be charged by Landlord, and shall be due and payable with respect
to such payment from the due date thereof until Landlord receives
such payment.
(f)
Payments
of Rents
. At Landlord’s
request, all Rent payments shall be made by electronic funds
transfer to Landlord to the account and in accordance with the
procedures designated by Landlord, or in such other manner as
Landlord or its successors or assigns, respectively, may from time
to time designate in writing. Prior to the establishment of said
electronics funds transfer process, the parties agree that Tenant
shall make Rent payments by check payable to the order of Landlord
and sent to Landlord at Steve Brewster Rentals, 250B Blue Grass
Drive, Hendersonville, TN 37075, or to such other address as
Landlord may hereafter direct in writing to
Tenant.
(g)
No
Abatement
. Unless otherwise
stated in the Lease, no abatement, offset, diminution or reduction
of (i) Rent, charges or other compensation, or (ii) Tenant’s
other obligations under this Lease shall be allowed to Tenant or
any person claiming under Tenant, under any circumstances or for
any reason whatsoever.
4.
INTENTIONALLY
DELETED
.
5.
ALTERATIONS
AND IMPROVEMENTS, MECHANIC’S LIENS
(a)
Alterations and
Improvements
.
(i)
Tenant’s
Property
. Tenant shall be
permitted to install, use on and about, and remove from the
Premises at any time and from time to time all trade fixtures,
signage and other moveable personal property (exclusive of lighting
affixed to the Premises, plumbing, electrical and heating and air
conditioning improvements) which are not a component of the
building located or to be located on the Premises (hereinafter
referred to as the “Tenant’s Property”), all of
which at all times shall remain the property of Tenant with the
right of removal (subject to subparagraph 5(c) below) at the
expiration of this Lease.
3
(ii)
Subsequent
Improvements
. Tenant shall have
the right, from time
to time, to make interior, non-structural alterations to the
Premises as Tenant shall desire without Landlord's prior consent;
provided, however, that (i) as to any Material Alteration, (A)
Tenant shall submit to Landlord, at least ten (10) business days in
advance of the proposed construction date, a floor plan generally
depicting any changes to the configuration of space within the
building and a listing of the proposed alterations (and the cost
thereof) to be completed in such Material Alteration, and Landlord
must, in its reasonable opinion, approve or object to such Material
Alteration within ten (10) business days after Landlord’s
receipt of such floor plan and listing of the proposed alteration,
and (B) at Landlord’s reasonable request, Tenant shall
deliver to Landlord contractors’ unconditional payment and
performance bonds for such work naming Landlord and Tenant as dual
obligees; and (ii) as to all construction or alteration (regardless
of whether any such activities constitute Material Alteration), (A)
all construction shall be completed in a workmanlike manner and in
compliance with applicable laws, at Tenant’s sole expense,
and (B) such construction or alteration shall not reduce the fair
market value of the Premises. Landlord’s failure to respond
to Tenant’s request for approval of any proposed Material
Alteration within ten (10) business days after Landlord’s
receipt thereof shall be deemed to constitute Landlord’s
disapproval of such proposed Material Alteration. In the event
Landlord objects to any proposed Material Alteration as provided
above, Tenant may re-submit a revised floor plan and/or listing of
the proposed Tenant’s Improvements for review by Landlord as
provided in this Section 5(a)(ii). Changes or alterations to any
floor plan and listing of proposed Material Alteration previously
approved by Landlord that would affect the total cost thereof by
more than Ten Thousand and No/100 Dollars ($10,000.00) shall
constitute new Material Alteration which must be submitted to
Landlord or approval as provided above in this Section 5(a)(ii).
One reproducible final copy of the plans for all completed Material
Alterations shall be signed by Tenant and submitted to Landlord
within ninety (90) days following the completion thereof. All
alterations shall not weaken or impair the structural strength or
materially decrease the value of the Premises and shall be
constructed in compliance with the requirements of this Lease.
Prior to the commencement of construction, all required approvals
of such construction musthave been obtained from the applicable
governmental authorities and utilities having jurisdiction thereof.
Upon completion of the construction or alteration, Tenant shall
provide Landlord: (i) with respect to a Material Alteration, a
certification from the applicable construction contractor,
architect or engineer that such alterations or improvements have
been constructed, altered or changed in strict compliance with all
applicable laws, and (ii) with respect to a Material Alteration, a
fully executed lienwaiver, in a form reasonably acceptable to
Landlord, from each contractor or subcontractor participating in
such construction or alteration or change of such alterations or
improvements, if and as applicable. Landlord shall be permitted to
inspect such constructed, altered or changed improvements. Except
as set forth herein, Tenant shall not remove or demolish, in whole
or in part, any alterations or improvements upon or within the
Premises without the prior approval of
4
Landlord,
which approval may be conditioned upon the obligation of Tenant to
return the Premises to their original condition, wear and tear and
casualty excepted. All alterations and improvements shall be
included within the meaning of the term “Premises”
hereunder.
(iii)
Ownership of
Improvements
. Except as set
forth herein, upon termination or expiration of this Lease, title
to any and all improvements, repairs, alterations, additions or
other improvements shall immediately and automatically vest in,
revert to and become the property of Landlord.
(b)
Mechanic’s
and Other Liens
. Tenant shall
not do or suffer anything to be done whereby the Premises, or any
part thereof, may be encumbered by a mechanic’s,
materialman’s, or other liens for work or labor done,
services performed, materials, appliances, or power contributed,
used, or furnished in or to the Premises or in connection with any
operations of Tenant, or similar lien, and, if, whenever and as
often as any such lien is filed against the Premises, or any part
thereof, purporting to be for or on account of any labor done,
materials or services furnished in connection with any work in or
about the Premises, done by, for or under the authority of Tenant,
or anyone claiming by, through or under Tenant, Tenant shall
discharge the same of record within thirty (30) days after service
upon Tenant of notice of the filing thereof; provided, however,
Tenant shall have the right to remove such lien by bonding same in
accordance with applicable law.
(c)
Title
to Tenant’s Property
. All
of Tenant’s Property placed in or upon the Premises by Tenant
shall remain the property of Tenant with the right to remove the
same at any time during the term of this Lease.
6.
INSURANCE
(a)
Tenant,
at its expense and as additional rent hereunder, shall, throughout
the term of this Lease and any extension or renewal thereof, keep
the Improvements located on the Premises insured against fire and
other casualty, with “Special Form Causes of Loss”
coverage (as such term is used in the insurance industry), at least
as broad as the most current ISO Special Cause of Loss Form,
including, but not limited to, coverage for glass breakage,
vandalism and malicious mischief, and builder’s risk (during
the period of any construction), in an amount of not less than the
full replacement value with no co-insurance penalty, with any
deductible in excess of $100,000 to be reasonably approved by
Landlord.
(b)
Tenant
shall also maintain throughout the term of this Lease and any
extension thereof, at its own expense and as additional rent,
commercial general liability insurance covering the Premises and
the Improvements, at least as broad as the most current ISO
Commercial General Liability Policy Form (occurrence basis),
against all claims for personal injury, death, or property damage
for the joint benefit of and insuring Tenant and Landlord (and
Landlord’s lender if so requested by Landlord), with limits
not less than Two Million Dollars ($2,000,000.00) per occurrence,
with any deductible in excess of $100,000 to be reasonably approved
by Landlord, and an umbrella liability
5
policy
or excess liability policy, in an amount of not less than Four
Million Dollars ($4,000,000.00) per occurrence, with any deductible
in excess of $250,000 to be reasonably approved by
Landlord.
(c)
Intentionally
omitted.
(d)
All
insurance companies providing the coverage required under this
Section 6 shall be selected by Tenant and shall be rated A minus
(A-) or better by Best’s Insurance Rating Service, shall be
licensed to write insurance policies in the state in which the
Premises is located, and shall be acceptable to Landlord in
Landlord’s reasonable discretion. On or prior to the
Effective Date and thereafter prior to the expiration of any of the
policies providing the coverages described herein, Tenant shall
provide Landlord with copies of all certificates of such coverage
for the insurance coverages referenced in this Section 6. All
commercial general liability and umbrella liability or excess
liability policies (except as to the property policy) shall
designate Landlord and any mortgagee reasonably designated by
Landlord as an additional insured. Any such coverage for additional
insureds shall be primary and non-contributory with any insurance
carried by Landlord or any other additional insured hereunder. All
property insurance policies shall name Landlord (and
Landlord’s lender if so requested by Landlord) as an
additional named insured or as a loss payee as Landlord’s
interests may appear, and shall provide that all losses shall be
payable as herein provided. Tenant shall use commercially
reasonable efforts to require its insurer(s) that all such policies
of insurance shall provide that the amount thereof shall not be
reduced and that none of the provisions, agreements or covenants
contained therein shall be modified or canceled by the insuring
company or companies without thirty (30) days prior written notice
being given to Landlord; provided, however, the failure of any
policies to include the foregoing requirements of this sentence
shall not be a default under this Lease. Such policy or policies of
insurance shall also cover loss or damage to Tenant’s
Property, and the insurance proceeds applicable to Tenant’s
Property shall not be paid to Landlord or any mortgagee but shall
accrue and be payable solely to Tenant. In the event of a casualty,
Tenant shall be responsible for any deficiency between the
replacement cost of the Premises and the amount actually paid by
the insurance company.
(e)
Intentionally
omitted.
7.
MAINTENANCE AND REPAIR
(a)
Except
as set forth in subparagraph (d) below, Tenant shall maintain the
Premises and all buildings and improvements thereon in good order
and repair and, subject to the provisions of Section 8 with respect
to a termination of this Lease as a result of a casualty or a
“taking”, return the Premises and all buildings and
improvements thereon or constructed thereon by Tenant at the
expiration of the term of this Lease or any extension thereof in
good condition and repair, ordinary wear and tear, casualty, and
condemnation excepted.
(b)
Tenant
agrees that Landlord shall have no obligation under this Lease to
make any repairs or replacements (including the replacement of
obsolete components) to
6
the
Premises or the buildings or improvements thereon, or any
alteration, addition, change, substitution or improvement thereof
or thereto, whether structural or otherwise, except to the extent
any such repairs or replacements are due to Landlord's or
Landlord's agents', employees', or contractors' negligence or
willful misconduct. The terms “repair” and
“replacement” include the replacement of any portions
of the Premises which have outlived their useful life during the
term of the Lease (or any extensions thereof). Except as set forth
herein, Landlord and Tenant intend that the Rent received by
Landlord shall be free and clear of any expense to Landlord for the
construction, care, maintenance, operation, repair, replacement,
alteration, addition, change, substitution and improvementof or to
the Premises and any building and improvement thereon, it being
agreed that all such costs and expenses shall be the responsibility
of Tenant, except to the extent any repair, replacement or
improvements are necessary due to Landlord's or Landlord's agents',
employees', or contractors' negligence or willful
misconduct.
(c)
Tenant
acknowledges and agrees that the Premises are and shall be leased
by Landlord to Tenant in its present “AS IS” condition,
and that Landlord makes absolutely no representations or warranties
whatsoever with respect to the Premises or the condition thereof.
Tenant acknowledges that Landlord has not investigated and does not
warrant or represent to Tenant that the Premises are fit for the
purposes intended by Tenant or for any other purpose or purposes
whatsoever, and Tenant acknowledges that the Premises are to be
leased to Tenant in their existing condition, i.e., “AS
IS”, on and as of the Commencement Date. Notwithstanding the
foregoing, Landlord represents that as of the date of this Lease,
Landlord has received no written notice that either the Premises or
the property are not in compliance with all applicable laws
(including, without limitation, the Americans with Disabilities
Act).
(d)
Landlord
shall maintain and repair, at its expense, the roof, the structural
soundness of the foundation, the structural soundness of the
exterior walls of the building, the driveways, alleys, landscape,
drainage systems and grounds surrounding the Premises (but not
including Tenant's fenced-in parking area). Tenant shall promptly
give Landlord written notice of any repair required by Landlord
pursuant to this paragraph, after which Landlord shall have a
reasonable opportunity to repair.
(e)
Any
repairs or replacements required to be made by Landlord shall be
fully amortized in accordance with the Formula (defined below) and
reimbursed to Landlord over the remainder of the term of this
Lease, without regard to any extension or renewal option not then
exercised. The "Formula" shall mean that number, the numerator of
which shall be the number of months of the term of this Lease
remaining after such Landlord work, and the denominator of which
shall be the amortization period (in months) equal to the useful
life of such repair or replacement multiplied by the cost of such
repair or replacement. Landlord shall pay for such repairs and
replacements, and Tenant shall reimburse Landlord for its amortized
share (as determined above) in equal monthly installments in the
same manner as the payment by Tenant to Landlord of the Base Rent.
In the event Tenant extends the Lease Term either by way of an
option or negotiated extension, such reimbursement by Tenant shall
continue as provided above until such amortization period has
expired.
7
46728984;4
8.
CONDEMNATION; CASUALTY
(a)
In
the event that the whole or any material part of the Premises shall
be taken during the term of this Lease or any extension or renewal
thereof for any public or quasi-public use under any governmental
law, ordinance, regulation or by right of eminent domain, or shall
be sold to the condemning authority under threat of condemnation
with the result that the Premises cannot continue to be operated
for the Permitted Use in Tenant's reasonable discretion, or if all
reasonable access to the adjacent roadways from the existing or
comparable curb cuts shall be taken (any of such events being
hereinafter referred to as a “taking”), Landlord or
Tenant shall have the option of terminating this Lease as of a date
no earlier than the date of such taking, such termination date to
be specified in a notice of termination to be given by the
terminating party to the other party not fewer than fourteen (14)
days after the date on which possession of the Premises, or part
thereof, must be surrendered to the condemning authority or its
designee.
(b)
In
the event of any taking which does not give rise to an option to
terminate (as described above) or in the event of a taking which
does give rise to an option to terminate (as described above) and
neither Landlord or Tenant elect to terminate, then and in either
such event, this Lease shall terminate (as of the date of such
“taking”) with respect only to the portion of the
Premises so taken, but shall remain in full force and effect with
respect to the remainder of the Premises, and Landlord shall, to
the extent of the award from such taking (which word
“award” shall mean the net proceeds of any award with
respect to such taking after deducting reasonable expenses of any
settlement, or net purchase price under a sale in lieu of
condemnation but shall exclude any portion of the total award that
relates to Landlord’s reversionary interest), promptly
restore or repair the Premises and all improvements thereon (except
those items of Tenant’s Property which Tenant is permitted to
remove under the terms of this Lease) to the same condition as
existed immediately prior to such taking insofar as is reasonably
possible. If the estimated cost of restoration or repair shall
exceed the amount of such award, Landlord may elect to expend such
excess to restore or repair the Premises or may elect to terminate
this Lease. In such event, from and after the date of such taking,
Base Rent and other charges payable to Landlord shall be reduced in
proportion to the amount of the Premises taken. If the award shall
exceed the amount spent or to be spent promptly to effect such
restoration, repair or replacement, such excess shall
unconditionally belong to Landlord.
(c)
Nothing
contained herein shall be construed to preclude Tenant, at its
cost, from independently prosecuting any claim directly against the
condemning authority in such condemnation proceeding for damage to,
or cost of removal of, stock, trade fixtures, furniture, other
personal property belonging to Tenant, and loss of Tenant's
business; provided, however, that no such claim shall diminish or
otherwise adversely affect Landlord's award.
(d)
If
this Lease is terminated by reason of a taking, then Landlord and
Tenant shall share the award in any such condemnation or eminent
domain proceedings or purchase, with Tenant getting any award
specifically made to reimburse Tenant for the
8
taking
of Tenant’s Property or for moving expenses or business
losses and Landlord getting the balance of the award.
(e)
If
the Premises should be damaged or destroyed by fire or other
casualty to the extent that the same cannot be reasonably repaired
or restored within 180 days after the occurrence of such casualty,
Landlord or Tenant may terminate this Lease upon giving notice to
the other party within thirty (30) days after the casualty occurs.
In the event of any such termination, except to the extent they are
for Tenant’s Property, all insurance proceeds payable in
connection with such casualty shall be shared by Landlord and
Tenant in the same manner that Landlord and Tenant share in a
condemnation award under Section 8(c) above.
(f)
If
the Premises are damaged by fire or other casualty and this Lease
is not terminated pursuant to subparagraph 8(e) above, then this
Lease shall continue in effect and the Premises shall be promptly
restored by Landlord or Tenant, at Landlord’s sole election,
to the condition in which it existed at the time the casualty
occurred (or to such other condition as may be reasonably
possible), and all insurance proceeds payable with respect to such
casualty shall be applied to the cost of such repairs and/or
reconstruction, and if it reasonably appears that the cost of the
repairs and restoration will exceed the amount of the insurance
proceeds actually received, Tenant will pay such
deficiency.
(a)
From
and after the Effective Date and continuing throughout the term of
this Lease and all extensions thereof, Tenant shall pay, prior to
delinquency, all taxes and assessments which may be levied upon or
assessed against the Premises and all taxes and assessments of
every kind and nature whatsoever arising in any way from the use,
occupancy or possession of the Premises or assessed against the
improvements situated thereon, together with all taxes levied upon
or assessed against Tenant’s Property. To that end, Landlord
shall not be required to pay any taxes or assessments whatsoever
which relate to or may be assessed against this Lease, the Rent and
other amounts due hereunder, the Premises, improvements and
Tenant’s Property; provided, however, that any taxes or
assessments which may be levied or assessed against the Premises
for the first and last years in which this Lease is in effect shall
be appropriately prorated between Landlord and Tenant.
Notwithstanding the foregoing, in no event shall Tenant be
responsible for payment of Landlord’s income, inheritance,
estate, and capital gains taxes.
(b)
Within
thirty (30) days after Tenant receives the paid receipted tax
bills, Tenant shall furnish Landlord with copies thereof. Tenant
may, at its option, contest in good faith and by appropriate and
timely legal proceedings any such tax and assessment so long as
such contest is conducted by Tenant diligently and so long as such
contest does not subject thePremises or any portion thereof to risk
of forfeiture; provided, however, that Tenant shall indemnify and
hold harmless Landlord from any loss or damage resulting from any
such contest, and all expenses of same (including, without
limitation, all attorneys’ and paralegal fees, court and
other costs) shall be paid solely by Tenant.
9
10.
COMPLIANCE, USE, UTILITIES, SURRENDER
(a)
Tenant
at its expense shall promptly comply with all applicable
governmental requirements, whether or not compliance therewith
shall require structural changes to the Premises; will procure and
maintain all permits, licenses, approvals and other authorizations
required for the use of the Premises or any part thereof then being
made and for the lawful and proper installation, operation and
maintenance of all equipment and appliances necessary or
appropriate for the operation and maintenance of the Premises; and
shall comply with all easements, restrictions, reservations and
other instruments of record applicable to the Premises, including
without limitation, the procuring and maintaining of insurance as
set forth herein. Tenant shall indemnify and save Landlord harmless
from all expenses and damages by reason of any notices, orders,
violations or penalties filed against or imposed upon the Premises,
or against Landlord as owner thereof, due to Tenant’s failure
to comply with this paragraph, except to the extent such expenses
and damages are due to Landlord's or Landlord's agents',
employees', or contractors' negligence or willful
misconduct.
(b)
Notwithstanding
any other provision contained in this Lease to the contrary, Tenant
shall not use the Premises for (i) any noxious or offensive use,
(ii) any use that is not in compliance with all applicable laws and
ordinances, (iii) any use in violation of any matter of record, or
(iv) any use that is not a Permitted Use.
(c)
Tenant
shall pay all charges for heat, water, gas, sewage, electricity and
other utilities used or consumed on the Premises directly to such
utility company and shall contract for the same in its own name.
Landlord shall not be liable for any interruption or failure in the
supply of any such utility service to the Premises.
(d)
Tenant
shall peacefully surrender possession of the Premises and the
buildings and other improvements thereon to Landlord at the
expiration, or earlier termination, of the original term or any
extended or renewed term of this Lease, reasonable wear and tear
and casualty excepted.
Landlord
covenants and warrants that Landlord has full power and authority
to make this Lease, and that Tenant shall have and enjoy full,
quiet and peaceful possession of the Premises, their appurtenances
and all rights and privileges incidental thereto during the term
hereof and any renewals or extensions, subject to the provisions of
this Lease.
12.
DEFAULT
(a)
If
any one or more of the following events occur, said event or events
shall hereby be referred to as a
“Default”:
(i)
If
Tenant fails to pay Rent, any additional rent, or any other charges
required hereunder when same shall become due and payable, and such
failure continues for five (5) days after receipt of written notice
from Landlord.
10
(ii)
If
Tenant shall fail to perform or observe any term, condition,
covenant, agreement or obligation under this Lease and such failure
continues for more than thirty (30) days after receipt of written
notice from Landlord (except that such thirty (30) day period shall
be automatically extended for such additional period of time as is
reasonably necessary to cure such default, if such default is
capable of being cured, but cannot reasonably be cured within such
period, provided Tenant is at all times in the process of
diligently curing the same).
(iii)
If
Tenant shall make an assignment for the benefit of creditors or
file a petition, in any federal or state court, in bankruptcy,
reorganization, composition, or make an application in any such
proceedings for the appointment of a trustee or receiver for all or
any portion of its property.
(iv)
If
any petition shall be filed under federal or state law against
Tenant in any bankruptcy, reorganization, or insolvency
proceedings, and said proceedings shall not be dismissed or vacated
within thirty (30) days after such petition is filed.
(v)
If
a receiver or trustee shall be appointed under federal or state law
for Tenant, or for all or any portion of the property of Tenant,
and such receivership or trusteeship shall not be set aside within
thirty (30) days after such appointment.
(vi)
Tenant
shall fail to deliver the documents required by Landlord pursuant
to Section 16 below.
(vii)
Except
as set forth herein, Tenant subleases the Premises, or any portion
thereof, without the written permission of Landlord or Tenant
assigns this Lease, whether by operation of law or otherwise,
without the written permission of Landlord.
(viii)
The
Premises shall be abandoned, deserted, or vacated for more than
thirty (30) consecutive days (other than for fire, casualty,
condemnation, repairs, or as consented to by Landlord in writing),
or Tenant fails to take possession of the Premises and initially
open for business to the public, or Tenant otherwise ceases its
business activity in the Premises (other than for fire, casualty,
condemnation, repairs, or as consented to by Landlord in writing)
prior to the expiration of the Term.
(b)
Upon
the happening of any one or more of the aforementioned Defaults,
Landlord shall have the right, in addition to any other rights and
remedies, to terminate this Lease by giving written notice of same
to Tenant. Upon such notice, this Lease shall cease and expire, and
Tenant shall surrender the Premises to Landlord in accordance with
this Lease. Notwithstanding such termination, Tenant’s
liability and obligation under all provisions of this Lease,
including the obligation to pay Rent and any and all other amounts
due hereunder shall survive and continue. In addition, in the event
of Tenant’s
11
Default
under this Lease, Landlord may, by notice to Tenant, accelerate the
monthly installments of Rent due hereunder for the remaining term
of this Lease, in which event such amount, together with any sums
then in arrears, shall immediately be due and payable to Landlord.
Tenant hereby expressly agrees that its occupation of the Premises
after Default constitutes forcible detainer (or equivalent) as is
defined by the law in force in the jurisdiction in which the
Premises are located.
(c)
Upon
the occurrence of a Default, regardless of whether this Lease shall
be terminated as provided hereinabove, Landlord may re-enter the
Premises and remove Tenant, its agents and sub-tenants, together
with all or any of Tenant’s Property, by suitable action at
law, or by force. Landlord shall not be liable in any way in
connection with any action it takes pursuant to this paragraph, to
the extent that its actions are in accordance with applicable law.
Notwithstanding such re-entry or removal, Tenant’s liability
under Lease shall survive and continue.
(d)
In
case of re-entry, repossession and/or termination of this Lease,
Tenant shall remain liable for Rent, any additional rent and all
other charges provided for in this Lease for the otherwise
remaining term of this Lease, and any and all expenses which
Landlord may have incurred in re-entering the Premisesincluding,
but not limited to, allocable overhead, alterations to the
building, leasing, construction, architectural, legal and
accounting fees. Regardless of whether this Lease has been
terminated as provided above, Landlord shall use reasonable efforts
to relet the whole or part of the Premises upon terms which
Landlord, in its sole discretion, deems appropriate and Tenant
shall be responsible for all expenses incurred by Landlord in
re-letting or attempting to re-let, and all rent collected for
reletting shall be credited against all of Tenant’s
obligations hereunder.
(e)
In
the event of a Default, Landlord may, at its sole option, enter
upon the Premises, if deemed necessary by Landlord in its sole
discretion (but without any obligation to do so), and/or do
whatever may be deemed necessary by Landlord in its sole discretion
to cure such failure by Tenant. Tenant shall pay to Landlord within
five (5) days of Landlord’s request, all costs incurred by
Landlord in connection with Landlord’s curing of such
failure. In addition to the above costs, in the event Landlord does
not receive payment from Tenant when due under this subparagraph
12(e), then interest at the rate of ten percent (10%) per annum or,
if less, the highest rate allowable by law, shall be due and
payable with respect to such payment from the due date thereof
until Landlord receives such payment.
(f)
In
the event Landlord engages legal counsel in connection with the
enforcement of any of the terms and provisions of this Lease, then,
in addition to all other sums due from Tenant to Landlord under
this Lease, Tenant shall pay to Landlord any and all reasonable
attorneys’ fees, paralegal fees, court costs and other costs
and expenses incurred by Landlord, whether or not judicial
proceedings are filed, and including on appeal and in any
bankruptcy proceedings.
(g)
Notwithstanding
the foregoing, in the event Tenant fails to maintain and keep in
full force and effect any or all of the insurance required pursuant
to Section 6 of
12
this
Lease (“Insurance Premiums”), or pay any taxes required
under Section 9 above (“Taxes”), then at
Landlord’s request and in Landlord’s sole discretion,
Tenant shall thereafter escrow funds for payment of such Insurance
Premiums and Taxes in the following manner:
(i)
Tenant
shall immediately pay to Landlord all sums expended by Landlord,
plus an additional ten percent (10%), for purposes of (1) bringing
current or reinstating or purchasing the Insurance Premiums
required under Section 6 of this Lease and (2) bringing current all
Taxes, together with any late fees or fines thereon. Thereafter,
Tenant shall pay to Landlord on the first (1st) day of each month
along with the monthly Rent payment a sum (the “Escrow
Funds”) equal to one-twelfth (1/12
th
)
of the yearly Insurance Premiums and Taxes.
(ii)
Landlord
shall apply the Escrow Funds to pay said Insurance Premiums as and
when the applicable premiums shall become due and to such Taxes
prior to delinquency. No interest shall be payable by Landlord on
the Escrow Funds unless required by applicable law, in which event
all such interest shall be applied by Landlord to pay such
Insurance Premiums and Taxes. Landlord shall provide to Tenant an
annual accounting of the Escrow Funds in Landlord’s normal
format showing credits and debits to the Escrow Funds and the
purpose for which each debit to the Escrow Funds was made, within
thirty (30) days after the expiration of such annual
accounting.
(iii)
If
the amount of the Escrow Funds held by Landlord at the time of the
annual accounting thereof shall exceed the amount deemed necessary
by Landlord to provide for the payment of Insurance Premiums and
Taxes, such excess shall be credited to Tenant on the next monthly
installment or installments of Escrow Funds due. If at any time the
amountof the Escrow Funds held by Landlord shall be less than the
amount deemed necessary by Landlord to pay the Insurance Premiums
and Taxes, Tenant shall pay to Landlord any amount necessary to
make up the deficiency within thirty (30) days after written notice
from Landlord to Tenant requesting payment thereof.
(iv)
The
foregoing Escrow Funds arrangement shall terminate if Tenant fully
and faithfully complies with the provisions of this Section 12(g)
for a period of twenty-four (24) consecutive months. Upon the
termination of this Lease, so long as Tenant is not in default
hereunder, Landlord shall promptly refund (or credit to Tenant in
the case of termination due to Tenant’s default) any Escrow
Funds held by Landlord.
(h)
The
rights and remedies of Landlord set forth herein shall be in
addition to any other right and remedy now or hereinafter provided
by law or in equity, and all such rights and remedies shall be
cumulative. No action or inaction by Landlord shall constitute a
waiver of any Default, and no waiver of any Default shall be
effective unless it is in writing, signed by
Landlord.
13
(i)
In
the event of a default by Landlord, Tenant's remedy, in addition to
any other remedies it may have at law or in equity, shall be an
action for actual damages or injunction, but prior to any such
action, Tenant shall give Landlord written notice specifying such
default, and Landlord shall have a period of thirty (30) days
following the receipt of such notice in which to cure the default
(provided, however, that if such default reasonably requires more
than thirty (30) days to cure, Landlord shall have a reasonable
time to cure such default, provided Landlord commences to cure
within such thirty (30) day period and thereafter diligently
prosecutes such cure to completion).
13.
HOLDING
OVER
In
the event Tenant remains in possession of the Premises after the
expiration of this Lease without executing a new written lease
acceptable to Landlord and Tenant, Tenant shall occupy the Premises
as a tenant from month to month subject to all the terms hereof
(except as modified by this paragraph), but such possession shall
not limit Landlord’s rights and remedies by reason thereof.
In the event of such month to month tenancy, the monthly
installment of Base Rent due for each such month shall increase to
be one and a half (1.5) times the monthly installment thereof which
was payable during the last month of the term of this
Lease.
14.
WAIVER
OF SUBROGATION
Notwithstanding
anything in this Lease to the contrary, neither party shall be
liable to the other for any damage or destruction of the Premises
or any other property resulting from fire or other casualty covered
by insurance required of either party hereunder (or which could be
insured against), whether or not such loss, damage or destruction
of the Premises or other property are caused by or results from the
negligence of such party (which term includes such party’s
officers, employees, agents and invitees), and each party hereby
expressly releases the other from all liability for or on account
of any said insured loss, damage or destruction, whether or not the
party suffering the loss is insured against such loss, and if
insured whether fully or partially. Each party shall procure all
endorsements of insurance policies carried by it necessary to
protect the other from any right of subrogation and/or liability in
the event of such loss.
15.
ASSIGNMENT
AND SUBLETTING
(a)
Tenant
shall not have the right, without first obtaining Landlord’s
prior written consent, which shall not be unreasonably withheld,
conditioned, or delayed, to assign or sublet any part or all of the
Premises to any party for any purpose. A change in ownership of the
controlling interest of Tenant (whether direct or indirect) shall
also constitute an assignment subject to this subparagraph.
Landlord, without being deemed unreasonable, may withhold its
consent to any proposed assignment or subletting where (as
determined by Landlord in Landlord’s sole discretion) (i)
such assignment or subletting would violate the terms of any then
existing agreement applicable to the Premises, or (ii) the
financial capacity of such assignee or subtenant is materially less
than that of Tenant as of the date of such proposed assignment or
the date of this Lease, whichever is greater. Even if such consent
to assignment or subletting is given by Landlord or not required,
such assignment or subletting shall not relieve Tenant of its
liability for the continued performance of all terms, covenants and
conditions of this
14
Lease,
including without limitation the payment of all Rent and other
charges thereunder, except to the extent otherwise agreed to in
writing by Landlord. In the event of the subletting or assignment
of this Lease, Landlord is entitled to receive fifty percent (50%)
of all gross revenues received by Tenant from the
assignee/sublessee, net of the Rent due under this Lease by Tenant
to Landlord.
(b)
Prior
to any assignment allowed hereunder, Tenant shall deliver to
Landlord (i) a copy of the assignment documents (including copies
of any recorded documents related thereto); (ii) the name, address
and telephone number of such assignee and a designated contact
person for such assignee; (iii) a new insurance certificate
complying with the terms of this Lease and naming such assignee as
the tenant of the Premises; and (iv) an agreement executed by such
assignee whereby such assignee assumes and agrees to discharge all
obligations of Tenant under this Lease. Notwithstanding anything in
this Lease to thecontrary, in the event of any assignment of this
Lease or subletting of the Premises, Tenant shall not be released
from its obligations under this Lease unless specifically released
by virtue of a separate written instrument executed by Landlord,
which may be withheld in Landlord’s sole
discretion.
(c)
Landlord
shall have the right without limitation to sell, convey, transfer
or assign its interest in the Premises or its interest in this
Lease, and upon such conveyance being completed, all covenants and
obligations of Landlord under this Lease accruing thereafter shall
cease, but such covenants and obligations shall run with the land
and shall be binding upon the subsequent landlord or owners of the
Premises or of this Lease.
(d)
Notwithstanding
anything to the contrary contained in this section 15, Tenant shall
have the right, without Landlord's prior written consent, to assign
this Lease or sublease all or any portion of the Premises to any
party which directly or indirectly: (i) wholly owns or controls
Tenant; (ii) is wholly owned or controlled by Tenant, (iii) is
under common ownership or control with Tenant, or (iv) into which
Tenant or any of the foregoing parties is merged, consolidated or
reorganized, or to which all or substantially all of Tenant's
assets orany such other party's assets are sold, provided, however,
(a) Tenant gives Landlord thirty (30) days prior written notice of
such assignment or subletting, and (b) the transferee, in the case
of an assignment, shall expressly assume Tenant's obligations under
this Lease. Notwithstanding any assignment or sublease under this
section 15(d), the original Tenant shall not be released from its
obligations for the payment of Base Rent and other amounts due
under this Lease, and compliance with all of Tenant’s
obligations under this Lease.
16.
SUBORDINATION,
NON-DISTURBANCE, ATTORNMENT, ESTOPPEL
CERTIFICATE.
(a)
Upon
written request of the holder of any mortgage (which term
“mortgage” shall also include deeds of trust) now or
hereafter relating to the Premises, Tenant will subordinate its
rights under this Lease to the lien thereof and to all advances
made or hereafter to be made upon the security thereof, and Tenant
shall execute, acknowledge and deliver an instrument in the form
customarily used by such encumbrance holder to effect such
subordination (and reasonably approved by
Tenant);
15
provided,
however, as a condition of all such subordinations, the holder of
such mortgage shall be first required to agree in writing with
Tenant that, notwithstanding the foreclosure or other exercise of
rights under any such first or other mortgage, Tenant’s
possession and occupancy of the Premises and the improvements and
its leasehold estate shall not be disturbed or interfered with nor
shall Tenant’s rights and obligations under this Lease be
altered or adversely affected thereby so long as Tenant is not in
Default beyond applicable notice and cure periods.
(b)
Notwithstanding
anything set out in subparagraph (a) above to the contrary, in the
event the holder of any such mortgage elects to have this Lease be
superior to its mortgage, then upon Tenant’s being notified
in writing to that effect by such encumbrance holder, this Lease
shall be deemed prior to the lien of said mortgage, whether this
Lease is dated prior or subsequent to the date of said mortgage,
and Tenant shall execute, acknowledge and deliver an instrument, in
the form customarily used by such encumbrance holder (and
reasonably approved by Tenant), effecting such
priority.
(c)
In
the event proceedings are brought for the foreclosure of, or in the
event of the exercise of the power of sale under any mortgage made
by Landlord encumbering the Premises, or in the event of delivery
of a deed in lieu of foreclosure under such a mortgage, Tenant will
attorn to the purchaser upon any such foreclosure or sale and
recognize such purchaser as “Landlord” under this
Lease, and upon the request of the purchaser, Tenant shall execute,
acknowledge and deliver an instrument, in form and substance
satisfactory to such purchaser and reasonably acceptable to
Tenant.
(d)
Each
party agrees, within fifteen (15) days after written request by the
other, to execute, acknowledge and deliver to and in favor of any
proposed mortgagee or purchaser of the Premises, an estoppel
certificate, in the form customarily used by such proposed
mortgagee or purchaser, stating, among other things (i) whether
this Lease is in full force and effect, (ii) whether this Lease has
been modified or amended and, if so, identifying and describing any
such modification or amendment, (iii) the date to which Rent and
other charges have been paid, and (iv) whether the party furnishing
such certificate knows of any default on the part of the other
party or has any claim against such party and, if so, specifying
the nature of such default or claim.
(e)
Upon
written demand by the holder of any mortgage covering the Premises,
Tenant shall forthwith execute, acknowledge and deliver an
agreement in favor of and in the form customarily used by such
encumbrance holder, by the terms of which Tenant will agree to give
prompt written notice to such encumbrance holder in the event of
any casualty damage to the Premises or in the event of any default
on the part of Landlord under this Lease, and will agree to allow
such encumbrance holder a reasonable length of time after notice to
cure or cause the curing of such default before exercising
Tenant’s rights under this Lease, or terminating or declaring
a default under this Lease.
17.
NOTICES
16
All
notices and other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by a
nationally recognized overnight courier or mailed by registered or
certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Landlord:
Steve
Brewster Rentals
If to
Tenant:
Wholesale,
LLC
4521
Sharon Road, Suite 370
Any
party may change its address for notices by written notice in like
manner as provided in this paragraph and such change of address
shall be effective seven (7) days after the date notice of such
change of address is given. Notice for purposes of this Lease shall
be deemed given when it shall have been received or rejected by the
intended recipient.
18.
INDEMNIFICATION
Tenant
does hereby indemnify Landlord against and from all liabilities,
losses, obligations, damages, penalties, claims, costs, charges and
expenses, including reasonable architects’ fees,
attorneys’ fees, paralegal fees, and legal costs and
expenses, incurred by Landlord, whether or not judicial proceedings
are filed, and including (but without limitation) on appeal and in
any bankruptcy proceedings, which may be imposed upon or asserted
against or incurred by Landlord by reason of any of the following
occurring, except to the extent such liabilities, obligations,
damages, and expenses are caused by Landlord's negligence or
willful misconduct:
(a)
any
work or thing done by Tenant in respect of construction of, in or
to the Premises or any part of the improvements now or hereafter
constructed on the Premises by Tenant;
(b)
any
use, possession, occupation, operation, maintenance or management
of the Premises or any part hereof by Tenant;
(c)
any
failure to properly, use, possess, occupy, operate, maintain or
manage the Premises or any part thereof by Tenant;
(d)
the
condition, including environmental conditions arising after the
date of this Lease and not in existence on the Premises prior to
the date of this Lease, of the Premises or any part thereof, to the
extent in Tenant's control or resulting from Tenant's use,
occupancy or operation at the Premises;
(e)
any
negligence on the part of Tenant or any of its agents, contractors,
servants, employees, licensees or invitees;
17
(f)
any
accident, injury or damage to any person or property occurring in,
on or about the Premises or any part thereof including any sidewalk
adjacent thereto; or
(g)
any
failure on the part of Tenant to perform or comply with any of the
covenants, agreements, terms or conditions contained in this Lease
on its part to be performed or complied with beyond applicable
notice and cure periods.
19.
HOLD
HARMLESS
Tenant
agrees to hold Landlord harmless from and against any and all
claims, damages, accidents and injuries to persons or property
caused by or resulting from or in connection with anything in or
pertaining to or upon the Premises during the term of this Lease or
while Tenant is occupying the Premises, except if such claim,
damage, accident or injury shall be caused by the gross negligence
or willful misconduct of Landlord or its agents. Landlord shall not
be liable to Tenant, Tenant’s employees, agents, invitees,
licensees or any other person whomsoever for any injury to person
or damage to property on or about the Premises caused by the
negligence or misconduct of Tenant, its agents, servants or
employees or of any other person entering the building under
expressed or implied invitation by Tenant or due to any other cause
whatsoever, unless caused by the gross negligence or willful
misconduct of Landlord, its employees or its authorized
representatives.
20.
LANDLORD’S
LIABILITIES
The
term “Landlord” as used in this Lease means the owner
from time to time of the Premises. Neither Landlord nor any
partner, member, shareholder or beneficiary thereof shall have any
personal liability with respect to any of the provisions of this
Lease and if Landlord is in default with respect to its obligations
hereunder Tenant shall look solely to the equity of Landlord in the
Premises.
21.
SUCCESSORS
The
covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their
respective heirs, legal representatives, successors and
assigns.
22.
ENTIRE
AGREEMENT
This
Lease contains the entire agreement between the parties hereto and
may not be modified in any manner other than in writing signed by
the parties hereto or their successors in interest.
18
23.
GENDER
Whenever
the context hereof permits or requires, words in the singular may
be regarded as in the plural and vice-versa, and personal pronouns
may be read as masculine, feminine and neuter.
24.
BROKERAGE
FEES
The
parties agree that no broker or finder (“Broker”) was
used or engaged by either party in connection with the drafting or
negotiating of this Lease and that neither Landlord nor Tenant
shall not be responsible for any such fees or commissions to any
Broker. No representation by any Broker or any other third party
shall bind Landlord or Tenant and in no event shall be used to
interpret this Lease. Each party shall indemnify the other party
against, and hold it harmless from, any liability for any
compensation to any Broker or other person who may be deemed or
held entitled thereto because of a relationship with such
party.
25.
CAPTIONS
The
captions of this Lease are for convenience only, and do not in any
way define, limit, disclose, or amplify terms or provisions of this
Lease or the scope or intent thereof.
26.
NET
LEASE
It
is the intention of the parties hereto that this Lease is and shall
be treated as a triple net lease. Any present or future law to the
contrary notwithstanding, except as expressly provided in this
Lease, this Lease shall not terminate, nor shall Tenant be entitled
to any abatement, suspension, deferment, reduction, setoff,
counterclaim, or defense with respect to the Rent, nor shall the
obligations of Tenant hereunder be affected by reason of: any
damage to or destruction of the Premises or any part thereof; any
taking of the Premises or any part thereof or interest therein by
condemnation or otherwise; any prohibition, limitation, restriction
or prevention of Tenant’s use, occupancy or enjoyment of the
Premises or any part thereof; any interference with such use,
occupancy or enjoyment by any person or for any other reason; any
action of governmental authority; or any defect in the condition,
quality or fitness for use of the Premises or any part thereof. The
parties intend that the obligations of Tenant hereunder shall be
separate and independent covenants and agreements and shall
continue unaffected unless such obligations shall have been
modified or terminated in accordance with an express provision of
this Lease.
27.
WAIVER
No
waiver by Landlord or Tenant of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent
breach by Tenant or Landlord of the same or any other provision.
Landlord’s consent to, or approval of, any act as required
hereunder shall not be deemed to render unnecessary the obtaining
of Landlord’s consent to or approval of any such subsequent
act by Tenant. The acceptance of Rent hereunder by Landlord shall
not be a waiver of any preceding default by Tenant of any provision
hereof, other than the failure of Tenant to pay the particular rent
so accepted, regardless of Landlord’s knowledge of such
preceding breach at the time of acceptance of such
rent.
19
28.
TIME
OF THE ESSENCE
Landlord
and Tenant agree that time shall be of the essence of all terms and
provisions of this Lease.
29.
GOVERNING
LAW
This
Lease shall be construed in accordance with the laws of the state
in which the Premises are located.
30.
NOT
A SECURITY ARRANGEMENT
The
parties hereto agree and acknowledge that this transaction is not
intended as a security arrangement or financing secured by real
property, but shall be construed for all purposes as a true
lease.
31.
HAZARDOUS
SUBSTANCES
.
Tenant
shall comply, at its sole expense, with all laws, ordinances,
orders, rules and regulations of all state, federal, municipal and
other governmental or judicial agencies or bodies relating to the
protection of public health, safety, welfare or the environment
(collectively, “Environmental Laws”) in the use,
occupancy and operation of the Premises. Tenant agrees that no
Hazardous Substances shall be used, located, stored or processed on
the Premises by Tenant or any of its agents, employees,
contractors, assigns, subtenants, guest or invitees, and no
Hazardous Substances will be generated, released or discharged from
the Premises. The term “Hazardous Substances” shall
mean and include all hazardous and toxic substances, waste or
materials, any pollutant or contaminant, including, without
limitation, PCB’s, asbestos and raw materials that include
hazardous constituents or any other similar substances or materials
that are now or hereafter included under or regulated by any
environmental laws or that would pose a health, safety or
environmental hazard. Tenant hereby agrees to indemnify, defend and
hold harmless Landlord and Landlord’s officers, agents,
employees and affiliates from and against any and all claims,
causes of action, demands, liens, losses, liabilities (including,
but not limited to, strict liability), damages, injuries, fines,
costs and expenses (including, but not limited to, court costs,
litigation expenses, reasonable attorney’s fees and costs of
settlement or judgment), of any and every kind whatsoever paid,
incurred or suffered by, or asserted against, Landlord by any
person, entity or governmental agency for, with respect to, or as a
direct or indirect result of (i) the presence in or the escape,
leakage, spillage, discharge, emission or release from the Premises
of any Hazardous Substances or thepresence of any Hazardous
Substances placed on or discharged from the Premises by Tenant or
any of its agents, employees, contractors, assigns, subtenants,
guest or invitees, or (ii) any violation or alleged violation of
any environmental laws by Tenant or any of its agents, employees,
contractors, assigns, subtenants, guests or invitees in relation to
the Premises. In the event of the release of Hazardous Substances
in or about the Premises by Tenant or any of its agents, employees,
contractors, assigns, subtenants, guests or invitees, Tenant shall
immediately notify Landlord about such release and advise Landlord
of the procedures being taken for remediation. Landlord reserves
the right to reenter the Premises should Tenant fail to respond to
the release and/or to remediate the Premises. Tenant shall
be
20
responsible
for any costs assessed Landlord in connection to such release
and/or remediation, including attorney’s fees. Landlord shall
have the right to require that Tenant deliver periodic
environmental audits of the Premises evidencing that no violations
have occurred.
Landlord
represents and warrants that as of the Effective Date Landlord is
not actually aware of any Hazardous Substances on, in, or under the
Premises, nor has Landlord received any written notice of any
Hazardous Substances on, in, or under the Premises.
This
Section shall survive the expiration or earlier termination of this
Lease.
32.
RIGHT
OF FIRST OFFER TO PURCHASE
.
During the Initial Term and
any
Renewal
Term, provided that Tenant is not in default under any of the terms
or conditions of this Lease beyond applicable notice and cure
periods, prior to selling the Premises to any third party, Landlord
shall first deliver a written offer (“Offer”) to Tenant
setting forth the material terms upon which Landlord proposes to
offer to sell the Premises to such third party, and Tenant shall
have the right for a period of ten (10) days after receipt of the
Offer, to elect to purchase the Premises on the same terms and
conditions set forth in the Offer by delivery of a written notice
to Landlord accepting the Offer within such time period (the
“Acceptance”). If Tenant does not timely deliver the
Acceptance of the Offer without any modification, then Landlord
shall be free to sell the Premises to a third party on the exact
terms and conditions set forth in the Offer and Tenant shall no
longer have a right of first offer with respect to the Offer. Prior
to Landlord offering the Premises for sale or entering into a
purchase contract on terms materially different than those set
forth in the Offer, Landlord shall deliver an updated written Offer
setting forth such revised terms and the foregoing process shall be
repeated.
If
Tenant timely accepts the Offer (as evidenced by its timely
delivery to Landlord of the Acceptance), then the parties shall
proceed to closing of the sale of the Premises within thirty (30)
days on industry standard terms.
[Signature page follows]
21
IN
WITNESS WHEREOF, the parties hereto have caused this Lease
Agreement to be executed the day and date first above
written.
LANDLORD
TENANT
Wholesale,
LLC a Tennessee limited liability company
22
Exhibit E
Form of General
Release
GENERAL RELEASE AND COVENANT NOT TO SUE
Steven Brewster (“
Mr.
Brewster
”) and Janelle
Brewster (“
Mrs.
Brewster
”, and together
with Mr. Brewster, the “
Releasors
”
and each, a “
Releasor
”),
on behalf of himself or herself and each of his or her heirs,
administrators, executors, personal representatives, successors,
and assigns (“
Affiliates
”),
hereby remises, releases, acquits, satisfies and forever
discharges, Wholesale Holdings, Inc., a Tennessee corporation and
Wholesale, LLC, a Tennessee limited liability company (including,
for the avoidance of doubt, its predecessor Wholesale, Inc., a
Tennessee corporation) (collectively, “
Releasees
”),
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 or her Affiliates ever had, now has, or
which any successor, or assign of such party or his or her
Affiliates hereafter can, shall or may have, against the Releasees,
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 Sue (this
“
Release
”),
such Releasor additionally covenants not to, and to cause its
Affiliates not to, sue 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.
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, articles of incorporation, bylaws, operating
agreement, or under Tennessee law or (ii) any claims arising under
the
Merger
Agreement by and among Releasors, Releasees, RumbleON, Inc., a
Nevada corporation,
RMBL
Tennessee, LLC, a Delaware limited liability company, Mr. Brewster,
a Tennessee resident, as the representative of each Shareholder (as
defined therein), and certain other parties named therein,
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
HEREAFTERARISING, 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
]
2
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
:
Steven Brewster
[ADDRESS]
[CITY,
STATE ZIP]
Janelle Brewster
[ADDRESS]
[CITY,
STATE ZIP]
RELEASEES
:
Wholesale Holdings, Inc.
Name:
Title:
Wholesale, LLC
Name:
Title:
|
[Signature Page to Release]
Exhibit 2.2
Amendment to Merger Agreement
This
AMENDMENT (this “
Amendment
”), dated
October 29, 2019, to that certain AGREEMENT AND PLAN OF MERGER (the
“
Merger
Agreement
”), dated October 26, 2018, by and among
RumbleOn, Inc., a Nevada corporation (“
Parent
”), RMBL Tennessee,
LLC, a Delaware limited liability company and a wholly-owned
subsidiary of Parent (“
Merger Sub
”), Wholesale
Holdings, Inc., a Tennessee corporation (“
Wholesale Holdings
”), the
shareholders of Wholesale Holdings set forth in
Schedule 1
thereto (each, a
“
Stockholder
,” and
collectively, the “
Stockholders
”),
Wholesale, LLC, a Tennessee limited liability company (together
with Wholesale Predecessor as described in Section 9.12, the
“
Company
”), Steven
Brewster, a Tennessee resident, as the representative of each
Stockholder as more fully described therein (the
“
Representative
”),
and, for the limited purpose of Section 5.8 thereof, Marshall
Chesrown (“
Chesrown
”) and Steven R.
Berrard (“
Berrard
”). Capitalized
terms used herein and not otherwise defined, shall have the meaning
set forth in the Merger Agreement.
Whereas,
the parties desire to amend the Merger Agreement pursuant to
Section 9.4 thereof;
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:
1.
The definition of
Parent Consideration Shares in the Merger Agreement is hereby
amended and restated in its entirety as follows:
“
Parent Consideration
Shares
” means 1,125,926 shares of Parent's Series B
Non-Voting Convertible Preferred Stock;
provided, however
if the VWAP of the
Class B Common Stock for the five (5) trading days immediately
preceding the date of this Amendment is less than 8.60, Parent
shall deliver additional shares of Parent's Series B Non-Voting
Convertible Preferred Stock such that the total number of shares of
Parent's Series B Non-Voting Convertible Preferred Stock, valued
equally, on per share basis, to the VWAP of the Class B Common
Stock for the five (5) trading days immediately preceding the date
of this Amendment for the purposes of this calculation, equals no
less than $9,680,000.
2.
The parties agree
to the treat the Merger as qualifying as a reorganization within
the meaning of Section 368(a) of the Code and the Treasury
Regulations promulgated thereunder, and to treat the Merger
Agreement, as amended by this Amendment, as a “plan of
reorganization” within the meaning of Section 1.368-2(g) of
the Treasury Regulations and a “binding contract”
within the meaning of Section 1.368-2(e)(2)(ii) of the Treasury
Regulations as of the date of this Amendment unless there is a
“determination” within the meaning of Section 1313 of
the Code (or execution of a Form 870-AD or successor form) to
the contrary.
3.
Except as expressly
provided herein, the Parties agree that the Merger Agreement
remains unmodified, and the Merger Agreement as hereby amended is
in full force and effect.
4.
The provisions set
forth in 9.2 through 9.17 of the Merger Agreement shall apply to
this Amendment,
mutatis
mutandis
.
IN
WITNESS WHEREOF, this Amendment has been executed by or on behalf
of each of the Parties as of the day first written
above.
PARENT
:
RUMBLEON,
INC.
By:
/s/ Steven R.
Berrard
Name:
Steven
R. Berrard
Title:
Chief Financial Officer
MERGER SUB
:
RMBL
TENNESSEE, LLC
By:
/s/ Steven R.
Berrard
Name:
Steven
R. Berrard
Title:
Manager
|
REPRESENTATIVE
:
/s/ Steven Brewster
Steven
Brewster
|
MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND AMONG
RUMBLEON, INC.,
JUSTIN BECKER,
and
STEVEN R. BREWSTER, 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
|
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
|
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
MEMBERSHIP INTEREST PURCHASE AGREEMENT
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
”), Steven R.
Brewster, 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, Marshall Chesrown and Steven R.
Berrard, 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.
Section
1.3
Purchase Price
.
(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
.
(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
”):
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.
Section
1.6
Net Working Capital
Adjustment
.
(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
”).
(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.
ARTICLE II
REPRESENTATIONS
AND WARRANTIES OF SELLERS
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.
(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
REPRESENTATIONS
AND WARRANTIES CONCERNING THE COMPANY
The
Sellers, jointly and severally, represent and warrant to Purchaser
that the following statements are true and correct:
Section
3.1
Organization and Related
Matters
.
(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.
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.
Section
3.3
Capitalization
.
(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.
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;
(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
.
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.
(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.
(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.
(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.
(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;
(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;
(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.
(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.
(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.
(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.
(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
.
(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.
(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.
Section
3.19
Receivables;
Payables
.
(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.
(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.
Section
3.25
Bank Accounts; Powers of
Attorney
.
Section
3.25
of the Disclosure Schedule sets forth:
(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.
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
Section
5.1
Further
Assurances
.
(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).
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.
Section
5.3
Tax Covenants
.
(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.
(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).
(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.
(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.
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.
(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.
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:
(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
.
(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.
(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
Section
7.1
Indemnity Obligations of
Sellers
.
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:
(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.
(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:
(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.
(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.
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
(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
Section
9.1
Certain
Definitions
.
(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.
“
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.
“
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, hedges 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.
“
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, Stephen Watson and Chad
Cunningham, 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.
“
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
Elliott Davis 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.
“
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:
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
|
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.
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
1811
Gallatin Pike N
Madison,
TN 37115
Attn:
Steven Brewster
With a
copy (which shall not constitute notice) to:
Bass,
Berry & Sims PLC
150
Third Avenue South, Suite 2800 Nashville, TN 37201
Attn:
Allen Overby
Taylor
Ashley
If to
the Sellers, after the Closing, to the Representative:
|
|
Steven
Brewster
250
Bluegrass Drive
Hendersonville,
TN 37075
With a
copy (which shall not constitute notice) to:
Bass,
Berry & Sims PLC
150
Third Avenue South, Suite 2800 Nashville, TN 37201
Attn:
Allen Overby
Taylor
Ashley
|
|
If to
Purchaser, or, after the Closing, the Company, to:
RumbleOn,
Inc.
4521
Sharon Road, Suite 370
Charlotte,
NC 28211
Attn:
Marshall Chesrown
|
|
With a
copy (which shall not constitute notice) to:
Akerman
LLP
350 E.
Las Olas Boulevard, Suite 1600
Fort
Lauderdale, FL 33301
Attn:
Michael Francis
Christina
C. Russo
|
|
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.
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.
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.
Section
9.18
Appointment of the
Representative
.
(a)
Irrevocable Power of Attorney
.
Each Seller irrevocably constitutes and appoints Steven Brewster 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;
(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.
(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, Berry &
Sims 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.
* * * *
*
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
:
RUMBLEON,
INC.
By:
/s/
Marshall Chesrown
Name: Marshall
Chesrown
Title:
Chief Executive Officer
|
|
|
SELLER
:
/s/
Steven
Brewster
Steven Brewster
/s/
Justin
Becker
Justin Becker
|
|
|
REPRESENTATIVE
:
/s/
Steven Brewster
Steven
Brewster
|
[
Signature
Page to Membership Interest Purchase Agreement
]
Exhibit A
GENERAL RELEASE AND COVENANT NOT TO SUE
Steven Brewster
(“
Brewster
”) and Justin
Becker (“
Becker
”, and together
with Brewster, 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 Sue (this “
Release
”), such Releasor
additionally covenants not to, and to cause its Affiliates not to,
sue 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
:
_____________________________
Steven
Brewster
[ADDRESS]
[CITY, STATE
ZIP]
_____________________________
Justin
Becker
[ADDRESS]
[CITY, STATE
ZIP]
RELEASEE
:
Wholesale
Express, LLC
By:_______________________________
Name:
Title:
[Signature Page to Release]
Exhibit 3.1
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
THE SERIES B NON-VOTING CONVERTIBLE PREFERRED STOCK
OF
RUMBLEON, INC.
Pursuant
to Section 78.1955 of the Nevada Revised Statutes, it is
hereby certified that:
WHEREAS
, the name of the Company (hereinafter called the
“
Company
”)
is RumbleOn, Inc., a Nevada corporation.
WHEREAS
, the Articles of Incorporation of the Company, as
amended (the “
Articles
of Incorporation
”)
authorizes the issuance of 10 million (10,000,000) shares
of preferred stock, $0.001 par value per share, and expressly
authorizes the Board of Directors of the Company (the
“
Board
”)
to designate, out of the undesignated shares of preferred stock,
one or more series, and to determine or change by resolution for
each such series its designation, the number of shares of such
series, the powers, preferences and rights and the qualifications,
limitations, or restrictions for the shares of such
series.
WHEREAS
, the Board, pursuant to the authority expressly
vested in it as aforesaid, has adopted the following resolutions
designating a new series of preferred stock as Series B Non-Voting
Convertible Preferred Stock.
RESOLVED
, that the Board deems it advisable to, and hereby
does, designate a Series B Non-Voting Convertible Preferred Stock
and fixes and determines the preferences, rights, qualifications,
limitations and restrictions relating to the Series B Non-Voting
Convertible Preferred Stock as follows, in addition to any set
forth in the Articles of Incorporation:
Section 1.
Definitions
.
For the purposes hereof, the following terms shall have the
following meanings:
“
Affiliate
”
shall have the meaning ascribed to it pursuant to Rule 144
promulgated under the Securities Act of 1933, as
amended.
“
Business
Day
” means any day except
Saturday, Sunday, and any day which shall be a federal legal
holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close. Whenever any payment or
other obligation hereunder shall be due on a day other than a
Business Day, such payment shall be made on the next succeeding
Business Day.
“
Common
Stock
” means the
Company’s Class B common stock, par value $0.001 per share,
and stock of any other class of securities into which such
securities may hereafter be reclassified or changed
into.
“
Conversion
Shares
” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Series B Preferred in accordance with the terms
hereof.
“
Equity
Securities
” means all
shares of capital stock of the Company, including, without
limitation, all securities convertible into or exchangeable for
shares of capital stock of the Company, and all options, warrants,
and other rights to purchase or otherwise acquire from the Company
shares of such capital stock, including any stock appreciation or
similar rights, contractual or otherwise.
“
Holder
”
shall mean any owner of shares of Series B
Preferred.
“
Person
”
means an individual, entity, corporation, partnership, association,
limited liability company, limited liability partnership,
joint–stock company, trust or unincorporated
organization.
Section
2.
Designation and
Amount.
The series of
preferred stock designated by this Certificate of Designation shall
be designated as the Company’s Series B Non-Voting
Convertible Preferred Stock (the “
Series
B Preferred
”), with
2,500,000 shares designated as Series B
Preferred.
Section
3.
Rank
.
As long as any shares of Series B Preferred remain outstanding,
such shares of Series B Preferred shall, with respect to (i) any
voluntary or involuntary liquidation, dissolution or winding-up of
the affairs of the Corporation, (ii) any merger or consolidation of
the Company with or into another Person, (iii) any sale of all or
substantially all of its assets in one transaction or a series of
related transactions, (iv) any tender offer or exchange offer
(whether by the Company or another Person) pursuant to which
holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, (v) any
reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (vi) declaration or payment of a dividend on the Common Stock,
rank
pari
passu
with the Common Stock,
and shall be treated in the case of any such event on an
as-converted basis.
Section
4.
Voting
Rights
. Except as required by
law, the Holders of Series B Preferred shall not be entitled to
vote, as a separate class or otherwise, on any matter presented to
the stockholders of the Company for their action or consideration
at any meeting of stockholders of the Company (or by written
consent of stockholders in lieu of meeting).
Section
5.
Conversion
.
(a)
Conversion
Date
. Subject to the provisions
of this Section 5, each share of Series B Preferred shall
automatically convert into Common Stock on the later of (i) 21 days
after the mailing of a definitive information statement of the type
contemplated by and in accordance with Regulation 14C of the
Securities Exchange Act of 1934, as amended, to the Company’s
stockholders and (ii) receipt of approval from the Nasdaq for the
listing of the Conversion Shares (such date, the
“
Conversion
Date
”), without any
further action on the part of the Company or any Holder. All
accrued and unpaid dividends on the shares being converted pursuant
to this Section 5(a) shall be paid in cash on the applicable
Conversion Date.
(b)
Conversion
Ratio
. The number of duly
authorized, validly issued, fully paid and non-assessable shares of
Common Stock issuable upon conversion of each share of Series B
Preferred shall be equal to the product obtained by multiplying
each such share of Series B Preferred being converted by one (1)
(subject to adjustment in the event of any stock split, stock
dividend, combination, recapitalization, reorganization,
reclassification or other similar event as set forth herein, the
“
Conversion
Ratio
”).
(c)
Mechanics of
Conversion.
i.
Delivery of Shares
Upon Conversion.
As soon
as practicable after the Conversion Date, the Company shall
deliver, or cause to be delivered to each Holder a copy of the
irrevocable instructions to the Company’s transfer agent
instructing the transfer agent to issuance, in book entry form, of
the number of Conversion Shares being acquired upon the conversion
of shares of Series B Preferred then held by such Holder, which
will contain any restrictive notation required by the Securities
Act. The Person in whose name the certificate or certificates in
book entry form for Common Stock are to be issued shall be deemed
to have become a stockholder of Common Stock of record on the date
of such occurrence.
ii.
Reservation of Shares
Issuable Upon Conversion.
The Company covenants that it will at all
times reserve and keep available out of its authorized and unissued
shares of Common Stock for the sole purpose of issuance upon
conversion of the Series B Preferred, free from preemptive rights
or any other actual contingent purchase rights of Persons other
than the Holders of Series B Preferred, not less than such
aggregate number of shares of the Common Stock as are issuable upon
the conversion of all outstanding shares of Series B Preferred. The
Company covenants that all shares of Common Stock so issuable
shall, upon issue, be duly authorized, validly issued, fully paid
and nonassessable and all outstanding shares of Series B Preferred
shall be deemed cancelled.
iv.
Transfer
Taxes.
Any transfer,
documentary stamp or similar taxes arising on account of a
conversion of any shares of Series B Preferred shall be the
responsibility of and paid by the Holder. Furthermore, the Company
will not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such
certificate upon conversion. The Company will not be required to
issue or deliver such certificates unless or until the Person or
Persons requesting the issuance thereof will have paid to the
Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been
paid.
(d)
Record
Holder
. The Person or Persons
entitled to receive the Conversion Shares shall be treated for all
purposes as the record holder or holders of such shares on the
Conversion Date until the subsequent transfer
thereof.
Section 6.
Miscellaneous
.
(a)
Notices.
Any
and all notices or other communications or deliveries to be
provided by the Holders hereunder shall be in writing and delivered
personally, by facsimile, electronic mail, or sent by a nationally
recognized overnight courier service, addressed to the Company, at
the address of its principal office or such other address as the
Company may specify for such purposes by notice to the Holders
delivered in accordance with this Section. Any and all notices or
other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by
facsimile, electronic mail, or sent by a nationally recognized
overnight courier service addressed to each Holder at the address
of such Holder appearing on the books of the Company, or if no such
address appears on the books of the Company, at the principal place
of business of such Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the
earliest of the Business Day following the date of mailing, if sent
by nationally recognized overnight courier service, or upon actual
receipt by the party to whom such notice is required to be
given.
(b)
Lost or Mutilated
Series B Preferred Certificate.
If a Holder’s Series B Preferred
certificate, if any, becomes mutilated, lost, stolen or destroyed,
the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated certificate, or in lieu of
or in substitution for a lost, stolen or destroyed certificate, a
new certificate for the shares of Series B Preferred so mutilated,
lost, stolen or destroyed, but only upon receipt of evidence of
such loss, theft or destruction of such certificate, and of the
ownership thereof reasonably satisfactory to the Company and any of
additional documentation the transfer agent of the Company may
require.
(c)
Governing
Law.
All questions
concerning the construction, validity, enforcement and
interpretation of this Certificate of Designation will be governed
by and construed and enforced in accordance with the internal laws
of the State of Nevada, without regard to the principles of
conflict of laws thereof. The Company and, by accepting Series B
Preferred, each Holder agree that all legal proceedings concerning
the interpretation, enforcement and defense of the transactions
contemplated by this Certificate of Designation (whether brought
against the Company or a Holder or their respective affiliates,
directors, officers, shareholders, employees or agents) may be
commenced only in the state and federal courts sitting in the State
of Nevada. The Company and, by accepting Series B Preferred, each
Holder hereby irrevocably submit to the exclusive jurisdiction of
such courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waive, and agree not to
assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such courts, or such
courts are improper or inconvenient venue for such proceeding. The
Company and, by accepting Series B Preferred, each Holder hereby
irrevocably waive personal service of process and consent to
process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Certificate of
Designation and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by applicable law. The
Company and, by accepting Series B Preferred, each Holder hereby
irrevocably waive, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Certificate of Designation or
the transactions contemplated hereby. If the Company or any Holder
shall commence an action or proceeding to enforce any provisions of
this Certificate of Designation, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its
attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or
proceeding.
(d)
Waiver.
Any
waiver by the Company or a Holder of a breach of any provision of
this Certificate of Designation shall not operate as or be
construed to be a waiver of any other breach of such provision or
of any breach of any other provision of this Certificate of
Designation or a waiver by any other Holders. The failure of the
Company or a Holder to insist upon strict adherence to any term of
this Certificate of Designation on one or more occasions shall not
be considered a waiver or deprive that party (or any other Holder)
of the right thereafter to insist upon strict adherence to that
term or any other term of this Certificate of Designation. Any
waiver by the Company or a Holder must be in
writing.
(e)
Severability.
If
any provision of this Certificate of Designation is invalid,
illegal or unenforceable, the balance of this Certificate of
Designation shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and
circumstances.
(f)
Status of Converted
Series B Preferred.
If any
shares of Series B Preferred shall be converted or reacquired by
the Company, such shares shall resume the status of authorized but
unissued preferred stock of the Company.
(g)
Non-circumvention.
The
Company hereby covenants and agrees that the Company will not, by
amendment of its Articles of Incorporation , bylaws or through any
reorganization, transfer of assets, consolidation, merger, scheme
of arrangement, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Certificate of Designation,
and will at all times in good faith carry out all the provisions of
this Certificate of Designation and take all action as may be
required to protect the rights of the Holders.
(h)
Amendment.
The
terms of this Certificate of Designation shall not be amended
except with the consent of the Holders of a majority of the
outstanding Series B Preferred voting as one
class.
[Signature on next page.]
IN WITNESS WHEREOF
, this
Certificate of Designation has been executed by a duly authorized
officer of the Company as of this 25
th
day of October,
2018.
|
Company Name
RUMBLEON,
INC.
|
|
|
|
|
By:
|
/s/ Marshall
Chesrown
|
|
|
Name: Marshall
Chesrown
|
|
|
Title:
Chief Executive Officer
|
Exhibit 4.1
WARRANT TO PURCHASE CLASS B COMMON STOCK
OF
RUMBLEON, INC.
ISSUED
ON October 30, 2018
VOID
AFTER 5:30 P.M., EASTERN TIME, ON October 30, 2023
THIS
WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “
ACT
”), AND MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREFROM.
FOR
VALUE RECEIVED, RUMBLEON, INC., a Nevada corporation (the
“
Company
”),
hereby agrees to sell upon the terms and conditions hereinafter set
forth, but no later than 5:30 p.m., Eastern Time, on the Expiration
Date (as hereinafter defined) to Hercules Capital, Inc. or its
registered assigns (the “
Holder
”), under the terms as
hereinafter set forth,
the Applicable
Number of
fully paid and non-assessable shares of the
Company’s Class B Common Stock, par value $0.001 per share
(the “
Warrant
Shares
”), at a per share purchase price equal to $7.16
per share (the “
Warrant
Price
”), pursuant to this warrant (this
“
Warrant
”). The
term “
Applicable
Number
” shall mean 20,950 shares. The number of
Warrant Shares to be so issued and the Warrant Price are subject to
adjustment in certain events as hereinafter set forth. The term
“
Class B
Common Stock
” shall mean, when
used herein, unless the context otherwise requires, the stock and
other securities and property at the time receivable upon the
exercise of this Warrant.
1.
Definitions
a. “
Act
”
has the meaning set forth in the legend above.
b. “
Aggregate
Exercise Price
” has the meaning set forth in Section
10(c) hereof.
c. “
Applicable
Number
” has the meaning set forth in the preamble
hereto.
d. “
Articles
”
means the Company’s Articles of Incorporation, as may be
amended from time to time.
e. “
Business
Day
” means a day Monday through Friday on which banks
are generally open for business in New York City.
f. “
Buy-In
”
has the meaning set forth in Section 6 hereof.
g. “
Class
B
Common Stock
”
has the meaning set forth in the preamble hereto.
h. “
Common
Stock
” means the common stock of the Company, as
defined in the Articles, and including the Class A Common Stock and
the Class B Common Stock.
i. “
Company
”
has the meaning set forth in the preamble hereto.
j. “
Dilutive
Issuance
” has the meaning set forth in Section 7(d)
hereof.
k. “
Excluded
Securities
” means:
(i) shares
of Class B Common Stock, or options to acquire shares of Class B
Common Stock, issued to directors, officers, employees and
consultants of the Company or any subsidiary pursuant to any
qualified or non-qualified stock option plan or agreement, stock
purchase plan or agreement, stock restriction agreement, employee
stock ownership plan, consultant equity compensation plan or
arrangement approved by the Board of Directors of the Company or an
authorized committee thereof, including any repurchase or stock
restriction agreement, or such other options, issuances,
arrangements, agreements or plans intended principally as a means
of providing compensation for employment or services and approved
by the Board of Directors of the Company;
(ii) shares
of Class B Common Stock, or warrants or options to purchase Class B
Common Stock, issued in connection with bona fide acquisitions,
mergers or similar transactions, the terms of which are approved by
the Board of Directors of the Company; and
(iii) shares
of Class B Common Stock issued upon exercise or conversion of any
options, warrants or convertible notes of the Company set forth on
the capitalization table set forth on
Schedule A
hereto.
l. “
Expiration
Date
” means October 30, 2023.
m. “
fair
market value
” has the meaning set forth in Section
2(a) hereof.
n. “
Filing
Date
” has the meaning set forth in Section 10(a)
hereof.
o. “
Final
Prospectus
” has the meaning set forth in Section 10(f)
hereof.
p. “
Fully-Diluted
Basis
” means, at any given time and without
duplication, the aggregate number of Common Stock and Preferred
Stock (as such terms are defined in the Articles) and any other
shares of the Company outstanding at such time plus the aggregate
number of Common Stock and Preferred Stock and any other shares of
the Company issuable (subject to readjustment upon the actual
issuance thereof) upon the exercise, conversion or exchange of any
option, right, warrant or convertible or exchangeable security
outstanding at such time.
q. “
Holder
”
has the meaning set forth in the preamble hereto.
r. “
Indemnified
Party
” has the meaning set forth in Section 10(f)
hereof.
s. “
Indemnifying
Party
” has the meaning set forth in Section 10(f)
hereof.
t. “
Loan
Agreement
”
has the meaning set forth in the
preamble hereto.
u. “
Net
Issuance
” has the meaning set forth in Section 2(a)
hereof.
v. “
New
Issuance
” means (A) any issuance or sale by the
Company of any class of shares of the Company (including the
issuance or sale of any shares owned or held by or for the account
of the Company) other than Excluded Securities, (B) any issuance or
sale by the Company of any options, rights or warrants to subscribe
for any class of shares of the Company other than Excluded
Securities, or (C) the issuance or sale of any securities
convertible into or exchangeable for any class of shares of the
Company other than Excluded Securities.
w. “
New
Issuance Price
” has the meaning set forth in Section
7(d) hereof.
x. “
Penalty
Period
” has the meaning set forth in Section 10(c)
hereof.
y. “
Purchase
Price
” means, with respect to any exercise of this
Warrant, an amount equal to the Warrant Price as of the relevant
time multiplied by the number of shares of Common Stock requested
to be exercised under this Warrant pursuant to such
exercise.
z. “
Registrable
Securities
” means the Warrant Shares;
provided
,
however
, that the Warrant
Shares shall only be treated as Registrable Securities if and only
for so long as they (i) have not been disposed of pursuant to a
Registration Statement declared effective by the SEC, (ii) have not
been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Act so that all transfer
restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale or (iii) are held by the
Holder or a permitted transferee pursuant to Section
10(i).
aa. “
Registration
Default
” has the meaning set forth in Section 10(c)
hereof.
bb. “
Registration
Expenses
” means all expenses incurred by the Company
in complying with Section 10 hereof, including, without limitation,
all registration, qualification and filing fees, printing expenses,
escrow fees, fees and expenses of counsel for the Company, blue sky
fees and expenses and the expense of any special audits incident to
or required by any such registration (but excluding the fees of
legal counsel for the Holder).
cc. “
Registration
Period
” has the meaning set forth in Section 10(d)
hereof.
dd. “
Registration
Statement
” has the meaning set forth in Section 10(a)
hereof.
ee. “
Selling
Expenses
” means all selling commissions applicable to
the sale of Registrable Securities and all fees and expenses of
legal counsel for the Holder.
ff. “
Trading
Day
” means a day on which the New York Stock Exchange
is open for trading.
gg. “
Trading
Market
” means any of the following markets or
exchanges on which the Class B Common Stock is listed or quoted for
trading on the date in question: the NYSE American, LLC, The NASDAQ
Capital Market, The NASDAQ Global Market, The NASDAQ Global Select
Market, or the New York Stock Exchange (or any successors to any of
the foregoing).
hh. “
Transfer
Notice
” has the meaning set forth in Section 3(b)
hereof.
ii. “
VWAP
”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Class B Common Stock is
then listed or quoted on a Trading Market, the daily volume
weighted average price of the Class B Common Stock for such date
(or the nearest preceding date) on the Trading Market on which the
Class B Common Stock is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time)), (b) if Class B
Common Stock is not then listed or quoted for trading on a Trading
Market, the volume weighted average price of a share of Class B
Common Stock for such date (or the nearest preceding date) on the
OTCQB or OTCQX as applicable, (c) if Class B Common Stock is not
then listed or quoted for trading on the OTCQB or OTCQX and if
prices for Class B Common Stock are then reported in the
“Pink Sheets” published by OTC Markets Group, Inc. (or
a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of Class B
Common Stock so reported, or (d) in all other cases, the fair
market value of the Class B Common Stock as determined by an
independent appraiser selected in good faith by the Holder and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
jj. “
Warrant
”
means this Warrant and any subsequent Warrant issued in accordance
with the terms hereof.
kk. “
Warrant
Price
”
has
the meaning set forth in the preamble hereto.
ll. “
Warrant
Register
” has the meaning set forth in Section 9(c)
hereof.
mm. “
Warrant
Share Delivery Date
” has the meaning set forth in
Section 6 hereof.
nn. “
Warrant
Shares
” means has the meaning set forth in the
preamble hereto.
2.
Exercise
of Warrant
.
a. The
Holder or its assignee may exercise this Warrant according to its
terms by completing the subscription form attached hereto and
surrendering this Warrant to the Company at the address set forth
in Section 14, accompanied by payment in full of the Purchase
Price, as specified in the subscription form, or as otherwise
provided in this Warrant, prior to 5:30 p.m., Eastern Time on the
Expiration Date. Payment of the purchase price may be made (i) in
cash or certified check or by bank draft in lawful money of the
United States of America or (ii) in accordance with the net
issuance formula below (“
Net
Issuance
”).
If the
Holder elects the Net Issuance method of payment, then the Company
shall issue to Holder upon exercise such number of shares of Class
B Common Stock determined in accordance with the following
formula:
X=
Y(A-B)
A
Where X
= the number of shares of Class B Common Stock to be issued to the
Holder;
Y = the
number of shares of Class B Common Stock with respect to which the
Holder is exercising its rights under this Warrant;
A = the
fair market value of one (1) share of Class B Common Stock on the
date of exercise; and
B = the
Warrant Price.
For
purposes of the above calculation, “
fair market value
” shall
mean:
(i)
if the Class B
Common Stock is listed or traded on the NASDAQ stock market or any
United States securities exchange or quoted on any securities
quotation service operated by NASDAQ (including the OTC Bulletin
Board), the twenty day volume weighted average trading price for
the twenty Trading Days ending on the second Trading Day prior to
the date of exercise; or
(ii)
if at any time the
Class B Common Stock is not listed or traded on any United States
stock exchange or quoted on any securities quotation service
operated by NASDAQ, the fair market value determined in good faith
by the Board of Directors of the Company and approved in good faith
by the Holder. In the event that the Holder does not accept the
valuation determined by the board of directors of the Company, then
the Company and the Holder shall, in good faith, select an
independent valuation firm mutually acceptable to each of them to
conduct a valuation of the price of a Warrant Share. The Holder may
elect, in its sole discretion, to receive the number of shares of
Class B Common Stock issuable to it upon exercise of this Warrant
calculated using the fair market value as determined in good faith
by the Board of Directors of the Company. Upon the determination of
the independent valuation firm, the Company and the Holder will
make adjustments to the issuance of Class B Common Stock based on
the determination of such independent valuation firm. The
determination of such independent valuation firm shall be
conclusive, absent manifest error, as between the Company and the
Holder for purposes herein. The Company shall pay all costs and
expenses associated with the engagement of the independent
valuation firm;
provided
that a valuation is
not required more than once in any given twelve (12) consecutive
month period. If at any time there will be more than one Holder,
then any determination of the fair market value, made with respect
to a Holder, shall apply to all the Holders, unless any party
proves that a material change in the valuation of the Company has
occurred since the valuation was determined.
b. This
Warrant may be exercised in whole or in part so long as any
exercise in part hereof would not involve the issuance of
fractional shares of Warrant Shares. If exercised in part, the
Company shall deliver to the Holder a new Warrant, identical in
form, in the name of the Holder, evidencing the right to purchase
the number of Warrant Shares as to which this Warrant has not been
exercised, which new Warrant shall be signed by the Chairman, Chief
Executive Officer or President and the Secretary or Assistant
Secretary of the Company.
c. No
fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. The Company shall pay
cash in lieu of fractional shares with respect to the Warrants
based upon the fair market value of such fractional shares of Class
B Common Stock (which, for purposes of this Section 2(c), shall be
the closing price of such shares on the exchange or market on which
the Class B Common Stock is then traded) at the time of exercise of
this Warrant.
3.
Disposition
of Warrant Shares and Warrant
.
a. The
Holder hereby acknowledges that (i) this Warrant and any Warrant
Shares purchased pursuant hereto are, as of the date hereof, not
registered: (A) under the Act on the ground that the issuance of
this Warrant is exempt from registration under Section 4(2) of the
Act as not involving any public offering or (B) under any
applicable state securities law because the issuance of this
Warrant does not involve any public offering and (ii) the
Company’s reliance on the
Section 4(2)
exemption of the Act and under applicable state securities laws is
predicated in part on the representations hereby made to the
Company by the Holder. The Holder represents and warrants that it
is (i) an “accredited investor” within the meaning of
Rule 501(a) of Regulation D under the Securities Act, (ii) (A)
familiar with the business and affairs of the Company and (B)
knowledgeable and experienced in financial and business matters to
the extent that such Holder is capable of evaluating the merits and
risks of an investment in the Warrant and the Warrant Shares, and
(iii) acquiring this Warrant and will acquire the Warrant Shares
for investment for its own account, with no present intention of
dividing his, her or its participation with others or reselling or
otherwise distributing the same such that Holder may be deemed an
“underwriter” as such term is defined under the
Securities Act of 1933, as amended.
b. Subject
to compliance with applicable federal and state securities laws and
the immediately following sentence, and if such intended transferee
is not an affiliate of the Holder and the intended transferee
provides a duly executed written confirmation that the
representations and warranties in Section 3(a) of this Warrant are
true and correct as to such intended transferee, this Warrant and
all rights hereunder are transferable, in whole or in part, without
charge to the Holder (except for transfer taxes) upon surrender of
this Warrant properly endorsed. The Holder hereby agrees that it
will not sell or transfer all or any part of this Warrant and/or
Warrant Shares unless and until it shall first have given notice to
the Company describing such sale or transfer and, if requested by
the Company in writing, furnished to the Company either (i) an
opinion, reasonably satisfactory to counsel for the Company, of
counsel (skilled in securities matters, selected by the Holder and
reasonably satisfactory to the Company) to the effect that the
proposed sale or transfer may be made without registration under
the Act and without registration or qualification under any state
law, or (ii) an interpretative letter from the Securities and
Exchange Commission to the effect that no enforcement action will
be recommended if the proposed sale or transfer is made without
registration under the Act. Each taker and holder of this Warrant,
by taking or holding the same, consents and agrees that this
Warrant, when endorsed in blank, shall be deemed negotiable subject
to the transfer restrictions provided for herein, and that the
holder hereof, when this Warrant shall have been so endorsed and
its transfer recorded on the Company’s books, shall be
treated by the Company and all other persons dealing with this
Warrant as the absolute owner hereof for any purpose and as the
person entitled to exercise the rights represented by this Warrant
and, notwithstanding any other provision of this Warrant to the
contrary, shall be the Holder as referred to in this
Warrant.
The
proper transfer of this Warrant shall be recorded in the registry
referred to in Section 9(c) upon receipt by the Company of a notice
of transfer in the form attached hereto as
Exhibit II
(the
“
Transfer
Notice
”), at its principal offices and the payment to
the Company of all transfer taxes and other governmental charges
imposed on such transfer. Until the Company receives such Transfer
Notice, the Company may treat the registered owner hereof as the
owner for all purposes.
c. If,
at the time of issuance of the shares issuable upon exercise of
this Warrant, no Registration Statement is in effect with respect
to such shares under applicable provisions of the Act, the Company
may at its election require that the Holder provide the Company
with written reconfirmation of the Holder’s investment intent
and that any stock certificate delivered to the Holder of a
surrendered Warrant shall bear legends reading substantially as
follows:
“THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THIS CERTIFICATE
THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT.”
In
addition, so long as the foregoing legend may remain on any stock
certificate delivered to the Holder, the Company may maintain
appropriate “stop transfer” orders with respect to such
certificates and the shares represented thereby on its books and
records and with those to whom it may delegate registrar and
transfer functions.
4.
Reservation
of Shares
. The outstanding shares of capital stock of the
Company as of the issue date of this Warrant is as set forth on
Schedule A
hereto.
The Company hereby agrees that at all times there shall be reserved
for issuance upon the exercise of this Warrant such number of
shares of its Class B Common Stock as shall be required for
issuance upon exercise of this Warrant and shall at all times have
a sufficient number of authorized shares so as to permit the
issuance of the shares of Class B Common Stock upon exercise of
this Warrant. The Company further agrees that all Warrant Shares
represented by this Warrant will be duly authorized and will, upon
issuance and against payment of the exercise price, be validly
issued, fully paid and non-assessable.
5.
Exchange,
Transfer or Assignment of Warrant
. This Warrant is
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office
of its stock transfer agent, if any, for other Warrants of
different denominations, entitling the Holder or Holders thereof to
purchase in the aggregate the same number of shares of Class B
Common Stock purchasable hereunder. Upon surrender of this Warrant
to the Company or at the office of its stock transfer agent, if
any, with funds sufficient to pay any transfer tax, the Company
shall, without charge, execute and deliver a new Warrant in the
name of the assignee named in such instrument of assignment and
this Warrant shall promptly be canceled.
6.
Delivery
of Stock Certificate Upon Exercise
. Within the third day
after the Notice of Exercise is delivered pursuant to this Warrant
(the “
Warrant Share Delivery
Date
”) and payment of the Warrant Price (which payment
shall be deemed to have occurred when the funds are immediately
available to the Company), if applicable, the Company will cause to
be issued in the name of and delivered to the registered Holder
hereof or its assigns, or such Holder’s nominee or nominees,
a certificate or certificates for the full number of shares of
Class B Common Stock of the Company to which such Holder shall be
entitled upon exercise (and in the case of partial exercise, a
Warrant of like tenor for the unexercised portion remaining subject
to exercise prior to the Expiration Date set forth herein). For all
corporate purposes, such certificate or certificates shall be
deemed to have been issued and such Holder or Holder’s
designee to be named therein shall be deemed to have become a
holder of record of such shares of Class B Common Stock as of the
date the duly executed exercise form pursuant to this Warrant,
together with the full payment of the Warrant Price, is received by
the Company as aforesaid. No fraction of a share or scrip
certificate for such fraction shall be issued upon exercise of this
Warrant; in lieu thereof, the Company will pay or cause to be paid
to such Holder cash equal to a like fraction at the prevailing fair
market price for such share as determined in good faith by the
Company. If the Company fails for any reason to deliver to the
Holder the Warrant Shares subject to a Notice of Exercise by the
second Trading Day following the Warrant Share Delivery Date, the
Company shall pay to the Holder, in cash, as liquidated damages and
not as a penalty, for each $1,000 of Warrant Shares subject to such
exercise (based on the VWAP of the Class B Common Stock on the date
of the applicable Notice of Exercise), $10 per Trading Day
(increasing to $20 per Trading Day on the fifth Trading Day after
such liquidated damages begin to accrue) for each Trading Day after
the second Trading Day following such Warrant Share Delivery Date
until such Warrant Shares are delivered or Holder rescinds such
exercise. In addition, if the Company fails to cause its transfer
agent to transmit to the Holder the Warrant Shares pursuant to an
exercise on or before the second Trading Day following the Warrant
Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or
otherwise) or the Holder’s brokerage firm otherwise
purchases, shares of Class B Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which
the Holder anticipated receiving upon such exercise (a
“
Buy-In
”), then
the Company shall (A) pay in cash to the Holder the amount, if any,
by which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Class B Common
Stock so purchased exceeds (y) the amount obtained by multiplying
(1) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue
times (2) the price at which the sell order giving rise to such
purchase obligation was executed, and (B) at the option of the
Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored
(in which case such exercise shall be deemed rescinded) or deliver
to the Holder the number of shares of Class B Common Stock that
would have been issued had the Company timely complied with its
exercise and delivery obligations hereunder. For example, if the
Holder purchases Class B Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted exercise
of shares of Class B Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause
(A) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder
in respect of the Buy-In and, upon request of the Company, evidence
of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver shares of
Class B Common Stock upon exercise of the Warrant as required
pursuant to the terms hereof.
7.
Adjustment
of Warrant Price and Number of Warrant Shares
. The number of
Warrant Shares purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment as
follows:
a.
Recapitalization,
Reclassification and Succession
. If any recapitalization of
the Company or reclassification of its Common Stock or any merger
or consolidation of the Company into or with a corporation or other
business entity, or the sale or transfer of all or substantially
all of the Company’s assets or of any successor
corporation’s assets to any other corporation or business
entity (any such corporation or other business entity being
included within the meaning of the term “successor
corporation”) shall be effected, at any time while this
Warrant remains outstanding and unexpired, then, as a condition of
such recapitalization, reclassification, merger, consolidation,
sale or transfer, lawful and adequate provision shall be made
whereby the Holder of this Warrant thereafter shall have the right
to receive upon the exercise hereof as provided in Section 2 and in
lieu of the shares of Common Stock immediately theretofore issuable
upon the exercise of this Warrant, such shares of capital stock,
securities or other property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock
immediately theretofore issuable upon the exercise of this Warrant
had such recapitalization, reclassification, merger, consolidation,
sale or transfer not taken place, and in each such case, the terms
of this Warrant shall be applicable to the shares of stock or other
securities or property receivable upon the exercise of this Warrant
after such consummation.
b.
Subdivision
or Combination of Shares
. If the Company at any time while
this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, the number of Warrant Shares purchasable
upon exercise of this Warrant shall be adjusted in accordance with
Section 7(d)(i).
c.
Stock
Dividends and Distributions
. If the Company at any time
while this Warrant is outstanding and unexpired shall issue or pay
the holders of its Common Stock, or take a record of the holders of
its Common Stock for the purpose of entitling them to receive, a
dividend payable in, or other distribution of, Common Stock, then
the Warrant Price shall be adjusted in accordance with Section
7(d)(ii).
d.
Anti-Dilution
.
(i) If,
at any time during the one-year period commencing on the date of
issuance of this Warrant, (A) the Company shall make a New Issuance
for no consideration or for a consideration per share less than the
Warrant Price in effect immediately prior to such New Issuance (a
“
Dilutive
Issuance
”) or (B) the total consideration paid
(including exercise price of any option, right or warrant to
subscribe for any class of shares of the Company or the conversion
price of any security convertible into or exchangeable for any
class of shares of the Company) (other than an option, right or
warrant that is an Excluded Security) is when issued or is later
adjusted downward to a price that is less than the exercise price
in effect immediately prior to such downward adjustment (such lower
consideration price or adjusted exercise price or conversion price,
the “
New Issuance
Price
”), then immediately after such Dilutive Issuance
or downward adjustment of such exercise price or conversion price,
the Warrant Price then in effect shall be reduced to an amount
equal to the New Issuance Price. For purposes of this Warrant, if a
part or all of the consideration received by the Company in
connection with a New Issuance consists of property other than
cash, such consideration shall be deemed to have a fair market
value as defined in Section 2(a) above.
(ii) If,
at any time after the one-year period commencing on the date of
issuance of this Warrant, the Company makes a Dilutive Issuance,
then, upon such issuance, the Warrant Price shall be reduced to
equal the amount computed using the following formula:
A * [(C
+ D)/B]
where:
A = the
Warrant Price in effect immediately prior to the Dilutive
Issuance;
B = the
number of shares of Common Stock outstanding immediately after the
New Issuance (calculated on a Fully-Diluted Basis);
C = the
number of shares of Common Stock outstanding immediately prior to
the New Issuance (calculated on a Fully-Diluted Basis);
and
D = the
number of shares of Common Stock that would be issuable for the
total consideration to be received for the New Issuance if the
purchaser paid the Warrant Price in effect immediately prior to the
New Issuance.
(iii) Upon
each adjustment in the Warrant Price pursuant to this Section 7,
the number of Warrant Shares purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Warrant Shares purchasable immediately
prior to such adjustment by a fraction, (i) the numerator of which
shall be the Warrant Price immediately prior to such adjustment,
and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
e.
Certain
Shares Excluded
. The number of shares of Class B Common
Stock outstanding at any given time for purposes of the adjustments
set forth in this Section 7 shall exclude any shares then directly
or indirectly held in the treasury of the Company.
f.
No
Impairment
. The Company will not, in any way whatsoever,
including by amendment of the Articles, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed hereunder, or impair the economic interest of the Holder,
but will at all times in good faith assist in the carrying out of
all of the provisions hereof and in the taking of all such actions
and making of all such adjustments as may be necessary or
appropriate in order to protect the rights and economic interests
of the Holder against impairment.
8. Representations,
Warranties And Covenants of the Company.
a.
Reservation
of Common Stock
. The Warrant Shares have been duly and
validly reserved and, when issued in accordance with the provisions
of this Warrant, will be validly issued, fully paid and
non-assessable, and will be free of any taxes, liens, charges or
encumbrances of any nature whatsoever;
provided
that the Common Stock
issuable pursuant to this Warrant may be subject to restrictions on
transfer under state and/or federal securities laws. The Company
has made available to the Holder true, correct and complete copies
of its Articles and current bylaws. The issuance of certificates
for shares of Common Stock upon exercise of this Warrant shall be
made without charge to the Holder for any issuance tax in respect
thereof, or other cost incurred by the Company in connection with
such exercise and the related issuance of shares of Common Stock;
provided
that the
Company shall not be required to pay any tax that may be payable in
respect of any transfer and the issuance and delivery of any
certificate in a name other than that of the Holder.
b.
Due
Authority
. The execution, delivery and issuance by the
Company of this Warrant and the performance of all obligations of
the Company hereunder, including the issuance to Holder of the
Warrant Shares, have been duly authorized by all necessary
corporate action on the part of the Company. This Warrant
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium, or
other laws affecting the enforcement of creditors’ rights in
general, and except that the enforceability of this Warrant is
subject to general principles of equity.
c.
Consents
and Approvals
. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of
any state, federal or other governmental authority or agency is
required with respect to the execution, delivery and performance by
the Company of its obligations under this Warrant, except for the
filing of notices pursuant to Regulation D under the Act, and any
filing required by applicable state securities law and any required
filings or notifications regarding the issuance or listing of
additional shares with NASDAQ.
d.
Exempt
Transaction
. Subject to the accuracy of the Holder’s
representations in Section 10, the issuance of the Class B Common
Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the
Act and (ii) the qualification requirements of the applicable state
securities laws.
e.
Compliance
with Rule 144
. If the Holder proposes to sell Class B Common
Stock issuable upon the exercise of this Warrant and in compliance
with Rule 144, then, upon Holder’s written request to the
Company, the Company shall furnish to the Holder, within ten days
after receipt of such request, a written statement confirming the
Company’s compliance with the filing requirements of the SEC
as set forth in such Rule, as such Rule may be amended from time to
time.
9.
Notice
To Holders
.
a.
Notice
of Record Date
. In case:
(i) the
Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time receivable upon the exercise
of this Warrant) for the purpose of entitling them to receive any
dividend (other than a cash dividend payable out of earned surplus
of the Company) or other distribution, or any right to subscribe
for or purchase any shares of stock of any class or any other
securities;
(ii) of
any capital reorganization of the Company, any reclassification of
the capital stock of the Company, any consolidation with or merger
of the Company into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another
corporation; or
(iii) of
any voluntary dissolution, liquidation or winding-up of the
Company;
then,
and in each such case, the Company will mail or cause to be mailed
to the Holder hereof a notice specifying, as the case may be, (A)
the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (B) the date
on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the
holders of record of Common Stock (or such stock or securities at
the time receivable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other
stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution or winding-up. Unless otherwise agreed to
by the parties, such notice shall be mailed at least 10 days prior
to the record date therein specified; provided, however, failure to
provide any such notice shall not affect the validity of such
transaction.
b.
Notice
of Adjustment
. Whenever any adjustment shall be made
pursuant to Section 7 hereof, the Company shall promptly notify the
Holder of this Warrant of the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was
calculated and the Warrant Price and number of Warrant Shares
purchasable upon exercise of this Warrant after giving effect to
such adjustment.
c.
Warrant
Register
. The Company shall maintain a registry showing the
name and address of the registered holder of this Warrant (the
“
Warrant
Register
”). The Holder may change such address by
giving written notice of the change to the Company.
10.
Registration
Rights
a.
Filing
of Registration Statement
. As soon as reasonably
practicable, but in no event later than 90 days after the issue
date of this Warrant (such date of filing is referred to as the
“
Filing Date
”),
the Company shall file a registration statement covering the resale
of the Registrable Securities on a registration statement (the
“
Registration
Statement
”) with the SEC and effect the registration,
qualifications or compliances (including, without limitation, the
execution of any required undertaking to file post-effective
amendments, appropriate qualifications or exemptions under
applicable blue sky or other state securities laws and appropriate
compliance with applicable securities laws, requirements or
regulations) as promptly as possible after the filing thereof, but
in any event prior to the date that is 180 days after the issue
date of this Warrant. The Registration Statement will be on Form
S-3;
provided
that
if Form S-3 is not available for use by the Company on the Filing
Date, then the Registration Statement will be on such form as is
then available.
b.
Expenses
.
All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to
this Section 10 shall be borne by the Company. All Selling Expenses
relating to the sale of securities registered by or on behalf of
the Holder shall be borne by the Holder.
c.
Registration
Defaults
. The Company further agrees that, in the event that
the Registration Statement (i) has not been filed with the SEC
within 90 days after the issue date of this Warrant, (ii) has not
been declared effective by the SEC within 180 days after the issue
date of this Warrant, or (iii) after the Registration Statement is
declared effective by the SEC, is suspended by the Company or
ceases to remain continuously effective as to all Registrable
Securities for which it is required to be effective, other than, in
each case, within the time period(s) permitted by Section 10(g)(ii)
(each such event referred to in clauses (i), (ii) and (iii), (a
“
Registration
Default
”)), for any thirty-day period (a
“
Penalty
Period
”) during which the Registration Default remains
uncured (which initial thirty-day period shall commence on the
fifth Business Day after the date of such Registration Default if
such Registration Default has not been cured by such date), the
Company shall pay to the Holder an amount equal to one percent (1%)
of the aggregate Purchase Price due and payable upon full exercise
of the Warrants (the “
Aggregate Exercise Price
”) for
each Penalty Period during which the Registration Default remains
uncured;
provided
,
however
, that if
the Holder fails to provide the Company with any information that
is required to be provided in the Registration Statement with
respect to the Holder as set forth herein, then the commencement of
the Penalty Period described above shall be extended until five
Business Days following the date of receipt by the Company of such
required information;
provided
further
, that the amount
payable to the Holder hereunder for any partial Penalty Period
shall be prorated for the number of actual days during such Penalty
Period during which a Registration Default remains uncured; and
provided
further
, that in no
event shall the Company be required to pay to the Holder pursuant
to this Section 10(c) an aggregate amount that exceeds 10% of the
Aggregate Exercise Price. The Company shall deliver said cash
payment to the Holder by the fifth Business Day after the end of
such Penalty Period. If the Company fails to pay said cash payment
to the Holder in full by the fifth Business Day after the end of
such Penalty Period, the Company will pay interest thereon at a
rate of 10% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Holder, accruing
daily from the date such liquidated damages are due until such
amounts, plus all such interest thereon, are paid in
full.
d.
Registration
Period Covenants
. In the case of the registration,
qualification, exemption or compliance effected by the Company
pursuant to this Warrant, the Company shall, upon reasonable
request, inform the Holder as to the status of such registration,
qualification, exemption and compliance. At its expense, during the
Registration Period, the Company shall:
(i) except
for such times as the Company is permitted hereunder to suspend the
use of the prospectus forming part of the Registration Statement
under Section 10(g)(ii), use its commercially reasonable efforts to
keep such registration, and any qualification, exemption or
compliance under state securities laws that the Company determines
to obtain, continuously effective with respect to the Holder, and
to keep such Registration Statement free of any material
misstatements or omissions, until the earlier of the following: (i)
the second anniversary of the issue date of this Warrant and (ii)
the date all Warrant Shares may be sold under Rule 144 during any
90 day period. The period of time during which the Company is
required hereunder to keep the Registration Statement effective is
referred to herein as the “
Registration Period
;”
(ii) advise
the Holders:
A. within
two Business Days when the Registration Statement or any amendment
thereto has been filed with the SEC and when the Registration
Statement or any post-effective amendment thereto has become
effective;
B. within
five Business Days of any request by the SEC for amendments or
supplements to the Registration Statement or the prospectus
included therein or for additional information;
C. within
five Business Days of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for such purpose;
D. within
five Business Days of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Registrable Securities included therein for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
E. within
five Business Days of the occurrence of any event that requires the
making of any changes in the Registration Statement or the
prospectus so that, as of such date, the statements therein are not
misleading and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the
case of the prospectus, in the light of the circumstances under
which they were made) not misleading;
(iii) use
its commercially reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of any Registration Statement as
soon as reasonably practicable;
(iv) promptly
deliver to the Holder, without charge, as many copies of the
prospectus included in such Registration Statement and any
amendment or supplement thereto as the Holder may reasonably
request in writing; and the Company consents to the use, consistent
with the provisions hereof, of the prospectus or any amendment or
supplement thereto by the Holder of Registrable Securities in
connection with the offering and sale of the Registrable Securities
covered by the prospectus or any amendment or supplement
thereto;
(v) if
the Holder so requests in writing, deliver to the Holder, without
charge, (i) one copy of the following documents, other than those
documents available via EDGAR: (A) its annual report to its
stockholders, if any (which annual report shall contain financial
statements audited in accordance with generally accepted accounting
principles in the United States of America by a firm of certified
public accountants of recognized standing), (B) if not included in
substance in its annual report to stockholders, its annual report
on Form 10-K (or similar form), (C) its definitive proxy statement
with respect to its annual meeting of stockholders, (D) each of its
quarterly reports to its stockholders, and, if not included in
substance in its quarterly reports to stockholders, its quarterly
report on Form 10-Q (or similar form), and (E) a copy of the full
Registration Statement (the foregoing, in each case, excluding
exhibits); and (ii) if explicitly requested, all exhibits excluded
by the parenthetical to the immediately preceding clause
(E);
(vi) prior
to any public offering of Registrable Securities pursuant to any
Registration Statement, promptly take such actions as may be
necessary to register or qualify or obtain an exemption for offer
and sale under the securities or blue sky laws of such United
States jurisdictions as any such Holders reasonably request in
writing, provided that the Company shall not for any such purpose
be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and
do any and all other acts or things reasonably necessary or
advisable to enable the offer and sale in such jurisdictions of the
Registrable Securities covered by such Registration
Statement;
(vii) upon
the occurrence of any event contemplated by Section 10(d)(ii)(E)
above, except for such times as the Company is permitted hereunder
to suspend the use of the prospectus forming part of the
Registration Statement, the Company shall use its commercially
reasonable efforts to as soon as reasonably practicable prepare a
post-effective amendment to the Registration Statement or a
supplement to the related prospectus, or file any other required
document so that, as thereafter delivered to purchasers of the
Registrable Securities included therein, the prospectus will not
include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading;
(viii)
otherwise use its commercially reasonable efforts to comply
in all material respects with all applicable rules and regulations
of the SEC that could affect the sale of the Registrable
Securities;
(ix)
use its commercially reasonable efforts to cause all Registrable
Securities to be listed on each securities exchange or market, if
any, on which equity securities issued by the Company have been
listed;
(x) use
its commercially reasonable efforts to take all other steps
necessary to effect the registration of the Registrable Securities
contemplated hereby and to enable the Holders to sell Registrable
Securities under Rule 144;
(xi) provide
to the Holder and its representatives, if requested, the
opportunity to conduct a reasonable inquiry of the Company’s
financial and other records during normal business hours and make
available on reasonable prior notice and during normal business
hours its officers, directors and employees for questions regarding
information that the Holder may reasonably request in order to
fulfill any due diligence obligation on its part; and
(xii) permit
a single counsel for the Holder to review the Registration
Statement and all amendments and supplements thereto, at least two
Business Days prior to the filing thereof with the
SEC;
provided that, in
the case of clauses (xi) and (xii) above, the Company shall not be
required (A) to delay the filing of the Registration Statement or
any amendment or supplement thereto as a result of any ongoing
diligence inquiry by or on behalf of the Holder or to receive any
comments to the Registration Statement or any amendment or
supplement thereto by or on behalf of the Holder if such inquiry or
comments would require or result in a delay in the filing of such
Registration Statement, amendment or supplement, as the case may
be, or (B) to provide, and shall not provide, the Holder or its
representatives with material, non-public information unless the
Holder agrees to receive such information and enters into a written
confidentiality agreement with the Company in a form reasonably
acceptable to the Company.
e.
Certain
Limitations
. The Holder shall have no right to take any
action to restrain, enjoin or otherwise delay any registration
pursuant to Section 10 hereof as a result of any controversy that
may arise with respect to the interpretation or implementation of
the Warrants.
f.
Indemnity
.
To the extent permitted by law, the Company shall indemnify the
Holder and each person controlling the Holder within the meaning of
Section 15 of the Act, with respect to which any registration that
has been effected pursuant to this Section 10, against all claims,
losses, damages and liabilities (or action in respect thereof),
including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 10(f)(iii)
below), arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in the Registration
Statement, prospectus, any amendment or supplement thereof, or
other document incident to any such registration, qualification or
compliance or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, in light of the
circumstances in which they were made, or any violation by the
Company of any rule or regulation promulgated by the Act applicable
to the Company and relating to any action or inaction required of
the Company in connection with any such registration, qualification
or compliance, and will reimburse the Holder and each person
controlling the Holder, for reasonable legal and other
out-of-pocket expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability
or action as incurred;
provided
that the Company will
not be liable in any such case to the extent that any untrue
statement or omission or allegation thereof is made in reliance
upon and in conformity with written information furnished to the
Company by or on behalf of the Holder for use in preparation of
such Registration Statement, prospectus, amendment or supplement;
provided
further
that the
Company will not be liable in any such case where the claim, loss,
damage or liability arises out of or is related to the failure of
the Holder to comply with the covenants and agreements contained in
this Warrant respecting sales of Registrable Securities, and except
that the foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any such untrue statement or alleged
untrue statement or omission or alleged omission made in the
preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the Registration
Statement becomes effective or in the amended prospectus filed with
the SEC pursuant to Rule 424(b) or in the prospectus subject to
completion under Rule 434 of the Act, which together meet the
requirements of Section 10(a) of the Act (the “
Final Prospectus
”), such indemnity
shall not inure to the benefit of the Holder or any such
controlling person, if a copy of the Final Prospectus furnished by
the Company to the Holder for delivery was not furnished to the
person or entity asserting the loss, liability, claim or damage at
or prior to the time such furnishing is required by the Act and the
Final Prospectus would have cured the defect giving rise to such
loss, liability, claim or damage.
(ii) The
Holder will severally, and not jointly, indemnify the Company, each
of its directors and officers, and each person who controls the
Company within the meaning of Section 15 of the Act, against all
claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened (subject to Section
10(f)(iii) below), arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in the
Registration Statement, prospectus, or any amendment or supplement
thereof, incident to any such registration, or based on any
omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they
were made, and will reimburse the Company, such directors and
officers, and each person controlling the Company for reasonable
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability
or action as incurred, in each case to the extent, but only to the
extent, that such untrue statement or omission or allegation
thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Holder
for use in preparation of the Registration Statement, prospectus,
amendment or supplement;
provided
that the indemnity
shall not apply to the extent that such claim, loss, damage or
liability results from the fact that a current copy of the
prospectus was not made available to the person or entity asserting
the loss, liability, claim or damage at or prior to the time such
furnishing is required by the Act and the Final Prospectus would
have cured the defect giving rise to such loss, claim, damage or
liability. Notwithstanding the foregoing, the Holder’s
aggregate liability pursuant to this subsection (b) shall be
limited to the net amount received by the Holder from the sale of
the Registrable Securities giving rise to such claims, losses,
damages and liabilities (and actions in respect
thereof).
(iii) Each
party entitled to indemnification under this Section 10(f) (the
“
Indemnified
Party
”) shall give notice 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, and shall permit the Indemnifying
Party (at its expense) to assume the defense of any such claim or
any litigation resulting therefrom;
provided
that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld or delayed), and the
Indemnified Party may participate in such defense at such
Indemnified Party’s expense;
provided
further
that the failure of any
Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this
Warrant, unless such failure is materially prejudicial to the
Indemnifying Party in defending such claim or litigation. An
Indemnifying Party shall not be liable for any settlement of an
action or claim effected without its written consent (which consent
will not be unreasonably withheld or delayed). No Indemnifying
Party, in its defense of any such claim or litigation, shall,
except with the consent (such consent not to be unreasonably
withheld or delayed) of the Indemnified Party consent to entry of
any judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
(iv) If
the indemnification provided for in this Section 10(f) is held by a
court of competent jurisdiction to be unavailable to an Indemnified
Party or is insufficient to hold such Indemnified Party harmless
with respect to any loss, liability, claim, damage or expense
referred to therein, then the Indemnifying Party shall contribute
to the amount paid or payable by such Indemnified Party as a result
of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on
the other in connection with the statements or omissions that
resulted in such loss, liability, claim, damage or expense as well
as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the
parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the Holder’s aggregate
liability pursuant to this subsection (iv) shall be limited to the
net amount received by the Holder from the sale of Registrable
Securities giving rise to such loss, liability, claim, damage or
expense (or actions in respect thereof) less all other amounts paid
as damages in respect thereto.
g.
Additional
Covenants and Agreements of the Holder
. The Holder agrees
that, upon receipt of any notice from the Company of the happening
of any event requiring the preparation of a supplement or amendment
to a prospectus relating to Registrable Securities so that, as
thereafter delivered to the Holder, such prospectus shall not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading, the Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the
Registration Statement and prospectus contemplated by Section 10(a)
until its receipt of copies of the supplemented or amended
prospectus from the Company and, if so directed by the Company, the
Holder shall deliver to the Company all copies, other than
permanent file copies then in the Holder’s possession, of the
prospectus covering such Registrable Securities current at the time
of receipt of such notice.
(ii) The
Holder shall suspend, upon request of the Company, any disposition
of Registrable Securities pursuant to the Registration Statement
and prospectus contemplated by Section 10(a) during no more than 90
calendar days (which need not be consecutive days) during any
12-month period to the extent that the Board of Directors of the
Company determines in good faith that the sale of Registrable
Securities under the Registration Statement would be reasonably
likely to cause a violation of the Act or Exchange
Act.
(iii) As
a condition to the inclusion of its Registrable Securities, the
Holder shall furnish to the Company such information regarding the
Holder and the distribution proposed by the Holder as the Company
may reasonably request in writing, including completing a
Registration Statement questionnaire in the form provided by the
Company, or as shall be required in connection with any
registration referred to in this Section 10.
(iv) The
Holder hereby covenants with the Company (A) not to make any sale
of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Act to be satisfied, and
(B) if such Registrable Securities are to be sold by any method or
in any transaction other than on a national securities exchange,
Nasdaq or in the over-the-counter market, in privately negotiated
transactions, or in a combination of such methods, to notify the
Company at least five Business Days prior to the date on which the
Holder first offers to sell any such Registrable
Securities.
(v) The
Holder acknowledges and agrees that the Registrable Securities sold
pursuant to the Registration Statement are not transferable on the
books of the Company unless the stock certificate submitted to the
transfer agent evidencing such Registrable Securities is
accompanied by a certificate reasonably satisfactory to the Company
to the effect that (A) the Registrable Securities have been sold in
accordance with such Registration Statement and (B) the requirement
of delivering a current prospectus has been satisfied.
(vi) The
Holder agrees not to take any action with respect to any
distribution deemed to be made pursuant to such Registration
Statement that would constitute a violation of Regulation M under
the Exchange Act or any other applicable rule, regulation or
law.
(vii) At
the end of the Registration Period, the Holders shall discontinue
sales of shares pursuant to such Registration Statement upon
receipt of notice from the Company of its intention to remove from
registration the shares covered by such Registration Statement
which remain unsold, and such Holders shall notify the Company of
the number of shares registered which remain unsold immediately
upon receipt of such notice from the Company.
h.
Additional
Covenants and Agreements of the Company
. With a view to
making available to the Holder the benefits of certain rules and
regulations of the SEC that at any time permit the sale of the
Registrable Securities to the public without registration, so long
as the Holder still own Registrable Securities, the Company shall
use its commercially reasonable efforts to:
(i) make
and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
(ii) file
with the SEC in a timely manner all reports and other documents
required of the Company under the Exchange Act; and
(iii) so
long as the Holder owns any Registrable Securities, make available
or furnish to the Holder, upon any reasonable request, a written
statement by the Company as to its compliance with Rule 144 and of
the Exchange Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the
Company as the Holder may reasonably request in availing itself of
any rule or regulation of the SEC allowing the Holder to sell any
such securities without registration.
i.
Assignment
of Registration Rights
. The rights to cause the Company to
register Registrable Securities granted to the Holder by the
Company under Section 10(a) may be assigned by the Holder in
connection with a transfer by the Holder to a single transferee of
the Warrants and all Registrable Securities,
provided
,
however
, that (i) such transfer
complies with all applicable securities laws and with the terms and
provisions of Section 10 of each of the Warrants; (ii) the Holder
gives prior written notice to the Company; and (iii) such
transferee agrees in writing to comply with the terms and
provisions of each of the Warrants, and has provided the Company
with a completed Registration Statement questionnaire in such form
as is reasonably requested by the Company. Except as specifically
permitted by this Section 10(i), the rights of the Holder with
respect to Registrable Securities as set out herein shall not be
transferable to any other person.
j.
Waiver
of Registration Rights
. The rights of the Holder under any
provision of this Section 10 may be waived (either generally or in
a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely) or amended
by an instrument in writing signed by the Holders holding not less
than a majority of the Registrable Securities;
provided
,
however
, that no consideration
shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of this Section 10 unless
the same consideration also is offered to all holders of
Registrable Securities.
11.
Loss,
Theft, Destruction or Mutilation
. Upon receipt by the
Company of evidence reasonably satisfactory to it of the ownership
and the loss, theft, destruction or mutilation of this Warrant and,
in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company and, in the case of mutilation, upon
surrender and cancellation thereof, the Company will execute and
deliver a new Warrant of like tenor dated the date
hereof.
12.
Warrant
Holder not a Stockholder
. The Holder of this Warrant, in its
capacity as a warrant holder, shall not be entitled by reason of
this Warrant to any rights whatsoever as a stockholder of the
Company.
13.
[Reserved]
14.
Notices
.
Any notice required or contemplated by this Warrant shall be deemed
to have been duly given if transmitted by registered or certified
mail, return receipt requested, or nationally recognized overnight
delivery service, to the Company at its principal executive offices
at 4251 Sharon Road, Suite 370, Charlotte, NC 28211, Attention:
Chief Executive Officer, or to the Holder at the name and address
set forth in the Warrant Register maintained by the
Company.
15.
Choice
of Law
. THIS WARRANT IS ISSUED UNDER AND SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
16.
Jurisdiction
and Venue
. The Company and the Holder hereby agree that any
dispute which may arise between them arising out of or in
connection with this Warrant shall be adjudicated before a court
located in Santa Clara County, California and they hereby submit to
the exclusive jurisdiction of the federal and state courts of the
State of California located in Santa Clara County with respect to
any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have
respecting the venue of any such action or proceeding brought in
such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Warrant or
any acts or omissions relating to the sale of the securities
hereunder, and consent to the service of process in the manner set
forth in Section 13 of this Warrant.
[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]
[SIGNATURE
PAGE TO WARRANT TO PURCHASE STOCK]
IN
WITNESS WHEREOF, the undersigned has duly executed this Warrant as
of the date set forth above.
|
RUMBLEON,
INC.
|
|
|
|
|
|
|
By:
|
/s/ Marshall
Chesrown
|
|
|
|
Name:
Marshall
Chesrown
|
|
|
|
Title:
Chief Executive Officer
|
|
EXHIBIT I
FORM OF
EXERCISE
(to be
executed by the registered holder hereof)
1.
In lieu of
exercising the attached Warrant for cash, certified check or bank
draft, the undersigned hereby elects to effect the Net Issuance
provision of Section 2 of this Warrant and receive ______________
(leave blank if you choose Alternative No.2 below) shares of Class
B Common Stock, par value $0.001 per share (“Class B Common
Stock”), of RumbleON, Inc. issuable pursuant to the terms of
the Warrant. (Initial here if the undersigned elects this
alternative) _____
2.
The undersigned
hereby exercises the right to purchase _____________ (leave blank
if you choose Alternative No.1 above) shares of Class B Common
Stock of RumbleON, Inc., evidenced by the within this Warrant
Certificate for a Warrant Price equal to $
7.16
per share and herewith makes payment
of the Purchase Price in full of $_________.
3.
Kindly issue
certificates for shares of Class B Common Stock (and for the
unexercised balance of the Warrants evidenced by the within
Warrant, if any) in accordance with the instructions given
below.
Dated:
________________, 20__.
Instructions
for registration of stock:
Name
(Please Print)
Social Security or other identifying Number:
City/State
and Zip Code
Instructions
for registration of certificate representing
the
unexercised balance of Warrants (if any)
Name
(Please Print)
Social
Security or other identifying Number:
EXHIBIT II
TRANSFER
NOTICE
(To
transfer or assign the foregoing Warrant execute this form and
supply required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby transferred and assigned to
(Please
Print)
NOTE:
The signature to this Transfer Notice must correspond with the name
as it appears on the face of the Warrant, without alteration or
enlargement or any change whatever. Officers of corporations and
those acting in a fiduciary or other representative capacity should
file proper evidence of authority to assign the foregoing
Warrant.
Exhibit 10.1
REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT (this "
Agreement
") is
entered into as of October __, 2018, by and among (i) RumbleOn,
Inc., a Nevada corporation (including any successor entity thereto,
the "
Parent
"), (ii) each
of the shareholders of the Company set forth in Schedule 1
(individually and collectively, the "
Investor
" or
"
Investors
") of the
Merger Agreement (as defined below) and (iii) Steven Brewster, a
Tennessee resident, as the representative of each Investor (the
"
Representative
").
WHEREAS
, on October 26, 2018, the
Parent, RMBL Tennessee, LLC, a Nevada limited liability company and
a wholly-owned subsidiary of Parent ("
Merger Sub
"),
Wholesale, Inc., a Tennessee corporation (the "
Company
"), the
Investors and the Representative entered into that certain
Agreement and Plan of Merger (as amended from time to time in
accordance with the terms thereof (the "
Merger Agreement
"),
pursuant to which, subject to the terms and conditions thereof, the
Company will merge with and into Merger Sub, with Merger Sub
continuing as the surviving entity upon the terms and subject to
the conditions set forth in the Merger Agreement (the "
Merger
");
WHEREAS
,
in connection with the Merger, the
Investors will receive the Conversion Shares that are convertible
into shares of Parent’s Class B common stock, par value
$0.001 per share (the "
Class B Common
Stock
");
WHEREAS
, resales by the Investors of the
Class B Common Stock may be required to be registered under the
Securities Act of 1933, as amended (the "
Securities Act
") and
applicable state securities laws, depending upon the status of an
Investor or the intended method of distribution of the Class B
Common Stock; and
WHEREAS
, the parties desire to enter
into this Agreement to provide each Investor with certain rights
relating to the registration of the Class B Common Stock held by
him or her or which her or she may acquire.
NOW
,
THEREFORE
, in consideration of the
mutual covenants and agreements set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1.
DEFINITIONS
. Any capitalized
term used but not defined in this Agreement will have the meaning
ascribed to such term in the Merger Agreement. The following
capitalized terms used herein have the following
meanings:
"
Agreement
" means
this Agreement, as amended, restated, supplemented, or otherwise
modified from time to time.
"
Class B Common
Stock
" is defined in the recitals to this
Agreement.
"
Company
" is defined
in the recitals to this Agreement.
"
Exchange Act
" is
defined as the Securities Exchange Act of 1934, as amended from
time to time.
"
Form S-3
" is defined
in Section 2.3.
"
Indemnified Party
"
is defined in Section 4.3.
"
Indemnifying Party
"
is defined in Section 4.3.
"
Investor
" and
"
Investors
" are
defined in the preamble to this Agreement, and include any
transferee of the Registrable Securities (so long as they remain
Registrable Securities) of the respective Investor permitted under
this Agreement.
"
Investor Indemnified
Party
" is defined in Section 4.1.
"
Merger
" is defined
in the recitals to this Agreement.
"
Merger Agreement
" is
defined in the recitals to this Agreement.
"
Merger Sub
" is
defined in the recitals to this Agreement.
"
Parent
" is defined
in the preamble to this Agreement, and shall include Parent’s
successors by merger, acquisition, reorganization or
otherwise.
"
Piggy-Back
Registration
" is defined in Section 2.2.1.
"
Pro Rata
" is defined
in Section 2.2.2(a).
"
Proceeding
" is
defined in Section 6.10.
"
register
,"
"
registered
,
"
and "
registration
" mean a
registration effected by preparing and filing a registration
statement or similar document in compliance with the requirements
of the Securities Act, and the applicable rules and regulations
promulgated thereunder, and such registration statement becoming
effective.
"
Registrable
Securities
" means, at any time, the Class B Common Stock
owned by each Investor, whether owned on the date hereof or
acquired hereafter, including any shares of Class B Common Stock
which may be issued or distributed in respect of such shares of
Class B Common Stock by way of conversion, concession, stock
dividend or stock split or other distribution, recapitalization or
reclassification or similar transaction; provided, however, that
Registrable Securities shall not include any shares (i) the sale of
which has been registered pursuant to the Securities Act and which
shares have been sold pursuant to such registration (other than,
for the avoidance of doubt, the sale of shares to the Investor as a
result of the consummation of the transactions contemplated by the
Merger Agreement) or (ii) which have been sold pursuant to Rule
144.
"
Registration
Expenses
" is defined in Section 3.3.
"
Registration
Statement
" means a registration statement filed by Parent
with the SEC in compliance with the Securities Act and the rules
and regulations promulgated thereunder for a public offering and
sale of equity securities, or securities or other obligations
exercisable or exchangeable for, or convertible into, equity
securities (other than a registration statement on Form S-4 or Form
S-8, or their successors, or any registration statement covering
only securities proposed to be issued in exchange for securities or
assets of another entity).
"
Specified Courts
" is
defined in Section 6.10.
"
Underwriter
" means a
securities dealer who purchases any Registrable Securities as
principal in an underwritten offering and not as part of such
dealer’s market-making activities.
2.
REGISTRATION
RIGHTS
.
2.1
Piggy-Back
Registration
.
2.1.1
Piggy-Back
Rights
. If at any time after the Closing Parent proposes to
file a Registration Statement under the Securities Act or conducts
a takedown from an effective Shelf Registration Statement with
respect to an offering of equity securities, or securities or other
obligations exercisable or exchangeable for, or convertible into,
equity securities, by Parent for its own account or for security
holders of Parent for their account, other than a Registration
Statement (i) filed in connection with any employee share option or
other benefit plan, (ii) for an exchange offer or offering of
securities solely to Parent’s existing shareholders, (iii)
for an offering of debt that is convertible into equity securities
of Parent or (iv) for a dividend reinvestment plan, then Parent
shall (x) give written notice of such proposed filing to the
Investor as soon as practicable but in no event less than five (5)
days before the anticipated filing date, which notice shall
describe the amount and type of securities to be included in such
offering, the intended method(s) of distribution, and the name of
the proposed managing Underwriter or Underwriters, if any, of the
offering, and (y) offer to the Investor in such notice the
opportunity to register the sale of such number of Registrable
Securities as the Investor may request in writing within five (5)
days following receipt of such notice (a "
Piggy-Back
Registration
"). To the extent permitted by applicable
securities laws with respect to such registration by Parent or
another demanding shareholder, Parent shall cause such Registrable
Securities to be included in such registration and shall use its
best efforts to cause the managing Underwriter(s) of a proposed
underwritten offering to permit the Registrable Securities
requested to be included in a Piggy-Back Registration on the same
terms and conditions as any similar securities of Parent and to
permit the sale or other disposition of such Registrable Securities
in accordance with the intended method(s) of distribution thereof.
If the Investor proposes to distribute its Registrable Securities
through a Piggy-Back Registration that involves an Underwriter or
Underwriters, the Investor shall enter into an underwriting
agreement in customary form with the Underwriter or Underwriters
selected for such Piggy-Back Registration. Each participating
Investor may, at its option, require that any or all of the
representations and warranties by, and the other agreements on the
part of, Parent to and for the benefit of such Underwriter(s) also
be made to and for such participating Investor’s benefit and
that any or all of the conditions precedent to the obligations of
such Underwriter(s) under such underwriting agreement also be
conditions precedent to its obligations.
2.1.2
Reduction
of Offering
. If the managing Underwriter(s) for a Piggy-Back
Registration that is to be an underwritten offering in good faith
advises Parent and the Investor in writing that the dollar amount
or number of Class B Common Stock Parent desires to sell, taken
together with the Registrable Securities as to which registration
has been requested under this Section 2.1.2 exceeds the maximum
number of shares that can be sold in such offering without
adversely affecting the proposed offering price, the timing, the
distribution method, or the probability of success of such offering
(such maximum dollar amount or maximum number of shares, as
applicable, the "
Maximum Number of
Shares
"), then Parent shall include in any such
registration: (i) first, the Class B Common Stock or other
securities that Parent desires to sell that can be sold without
exceeding the Maximum Number of Shares; and (ii) second, to the
extent that the Maximum Number of Shares has not been reached under
the foregoing clause (i), the Registrable Securities of the
Investor as to which registration has been requested pursuant to
this Section 2.1.2 that can be sold without exceeding the Maximum
Number of Shares. If an Investor is unable to include all of its
Registrable Securities in a Piggy-Back Registration due to the
limitations of this Section 2.1.2, such Investor shall nevertheless
continue to have the right to include any Registrable Securities in
any subsequent Piggyback Registration as described in Section
2.1.1.
2.1.3
Withdrawal
.
The Investor may elect to withdraw its request for inclusion of
Registrable Securities in any Piggy-Back Registration by giving
written notice to Parent of such request to withdraw. Parent may
withdraw a Registration Statement at any time before the pricing of
the proposed equity offering without any liability to the Investor.
Notwithstanding any such withdrawal, Parent shall pay all expenses
incurred in connection with such Piggy-Back
Registration.
2.2
Registrations on Form S-3
. As
soon as practicable after the issuance of the Conversion Shares to
the Investor, and in any event within 10 days, Parent will prepare
and file a shelf registration on Form S-3 or any similar short-form
registration which may be available at such time (the "
Shelf Registration
Statement
") registering for resale the Registrable
Securities under the Securities Act. The plan of distribution
indicated in the Shelf Registration Statement will include all such
methods of sale as the Investor may reasonably request in writing
prior to the filing of the Shelf Registration Statement and that
can be included in the Shelf Registration Statement under the rules
and regulations of the SEC. Parent shall use commercially
reasonable efforts to cause the Shelf Registration Statement to be
declared effective by the SEC as promptly as practicable following
such filing. Until such time as all Registrable Securities cease to
be Registrable Securities or Parent is no longer eligible to
maintain a Shelf Registration Statement, Parent shall use
commercially reasonable efforts to keep current and effective such
Shelf Registration Statement and file such supplements or
amendments to such Shelf Registration Statement (or file a new
Shelf Registration Statement when such preceding Shelf Registration
Statement expires pursuant to the rules of the SEC) as may be
necessary or appropriate in order to keep such Shelf Registration
Statement continuously effective and useable for the resale of all
Registrable Securities under the Securities Act.
The
Parent represents that any Shelf Registration Statement when
declared effective (including the documents incorporated therein by
reference) will comply in all material respects as to form with all
applicable requirements of the Securities Act and the Exchange Act
and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary
to make the statements therein not misleading,
provided
,
however
, that Parent makes no
representation with respect to information furnished to Parent, in
writing, by such Investor expressly for use in any Shelf
Registration Statement.
If
Parent is not S-3 eligible at the time of filing, Parent shall file
a Registration Statement for a Shelf Registration on Form S-1 (or
any successor to Form S-1, "
Form S-1
") and cause
it to be declared effective as soon as practicable. In the event
that Parent files on a Form S-1 and thereafter becomes eligible to
register the Conversion Shares on Form S-3, Parent shall, after
consultation with and receipt of consent by the Investor, use its
commercially reasonable efforts to convert the Form S-1 to a Form
S-3 as soon as practicable after Parent becomes so eligible. Parent
shall use its commercially reasonable efforts, (a) to the extent
required by the rules and regulations of Nasdaq, to prepare and
submit to Nasdaq the requisite notification and forms for the
listing of the Class B Common Stock to be issued in connection with
this Agreement, and to cause such shares to be approved for listing
(subject to official notice of issuance) prior to
issuance.
3.
REGISTRATION
PROCEDURES
.
3.1
Filings; Information
. Whenever
Parent is required to effect the registration of any Registrable
Securities by the Investor pursuant to Section 2, Parent shall use
its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended method(s) of
distribution thereof as expeditiously as practicable, and in
connection with any such request:
3.1.1
Copies
.
Parent shall, prior to filing a Registration Statement or
prospectus, or any amendment or supplement thereto, furnish without
charge to the Investor and its legal counsel if the Investor is
including Registrable Securities in such registration copies of
such Registration Statement as proposed to be filed, each amendment
and supplement to such Registration Statement (in each case
including all exhibits thereto and documents incorporated by
reference therein), the prospectus included in such Registration
Statement (including each preliminary prospectus), and such other
documents as the Investor or its legal counsel may request in order
to facilitate the disposition of the Registrable Securities owned
by the Investor.
3.1.2
Amendments
and Supplements
. Parent shall prepare and file with the SEC
such amendments, including post-effective amendments, and
supplements to such Registration Statement and the prospectus used
in connection therewith as may be necessary to keep such
Registration Statement effective and in compliance with the
provisions of the Securities Act until all Registrable Securities
and other securities covered by such Registration Statement have
been disposed of in accordance with the intended method(s) of
distribution set forth in such Registration Statement or such
securities have been withdrawn or until such time as the
Registrable Securities cease to be Registrable Securities as
defined by this Agreement.
3.1.3
Notification
.
After the filing of a Registration Statement, Parent shall
promptly, and in no event more than three (3) Business Days after
such filing, notify the Investor of such filing, and shall further
notify the Investor promptly and confirm such advice in writing in
all events within three (3) Business Days after the occurrence of
any of the following: (i) when such Registration Statement becomes
effective; (ii) when any post-effective amendment to such
Registration Statement becomes effective; (iii) the issuance or
threatened issuance by the SEC of any stop order (and Parent shall
take all actions required to prevent the entry of such stop order
or to remove it if entered); and (iv) any request by the SEC for
any amendment or supplement to such Registration Statement or any
prospectus relating thereto or for additional information or of the
occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to
the purchasers of the securities covered by such Registration
Statement, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and promptly make available to the Investor any such
supplement or amendment; except that before filing with the SEC a
Registration Statement or prospectus or any amendment or supplement
thereto, Parent shall furnish to the Investor and its legal counsel
copies of all such documents proposed to be filed no fewer than
three (3) days in advance of such filing to provide the Investor
and its legal counsel with a reasonable opportunity to review such
documents and comment thereon.
3.1.4
State
Securities Laws Compliance
. Prior to any public offering of
Registrable Securities, Parent shall use its best efforts to (i)
register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of
such jurisdictions in the United States as the Investor (in light
of his or her intended plan of distribution) may reasonably request
and (ii) take such action necessary to cause such Registrable
Securities covered by the Registration Statement to be registered
with or approved by such other governmental authorities as may be
necessary by virtue of the business and operations of Parent and do
any and all other acts and things that may be necessary or
advisable to enable the Investor to consummate the disposition of
such Registrable Securities in such jurisdictions;
provided
,
however
, that Parent shall not
be required to qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
paragraph or take any action to which it would be subject to
general service of process or taxation in any such jurisdiction
where it is not then otherwise so subject.
3.1.5
Agreements
for Disposition
. Parent shall enter into customary
agreements (including, if applicable, an underwriting agreement in
customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such
Registrable Securities. If requested by the Underwriter(s) for an
Underwritten Shelf Takedown, Parent shall enter into an
underwriting agreement with such Underwriter(s) for such offering,
such agreement to be form and substance (including with respect to
representations and warranties by Parent) as is customarily given
by Parent to underwriters in an underwritten public offering, and
to contain indemnities to the effect and to the extent provided in
Section 4. The participating Investors in the Underwritten Shelf
Takedown shall be parties to such underwriting agreement; provided,
however, that no such Investor shall be required to (i) make any
representations or warranties in connection with any such
registration other than representations and warranties as to (A)
such Investor’s ownership of his or her Registrable
Securities to be sold or transferred free and clear of all liens,
claims and encumbrances, (B) such Investor’s power and
authority to effect such transfer and (C) such customary matters
pertaining to compliance with securities laws as may be reasonably
requested or (ii) undertake any indemnification obligations to
Parent or the Underwriter(s) with respect thereto except as
otherwise provided in Section 4. No Investor may participate in the
Underwritten Shelf Takedown unless such Investor agrees to sell his
or her Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all
questionnaires, powers of attorney, indemnities (subject to clause
(ii) in the above proviso) and other documents reasonably required
under the terms of such underwriting agreement.
Each
participating Investor may, at its option, require that any or all
of the representations and warranties by, and the other agreements
on the part of, Parent to and for the benefit of such
Underwriter(s) also be made to and for such participating
Investor’s benefit and that any or all of the conditions
precedent to the obligations of such Underwriter(s) under such
underwriting agreement also be conditions precedent to its
obligations.
3.1.6
Cooperation
.
The principal executive officer of Parent, the principal financial
officer of Parent, the principal accounting officer of Parent and
all other officers and members of the management of Parent shall
cooperate fully in any offering of Registrable Securities
hereunder, which cooperation shall include the preparation of the
Registration Statement with respect to such offering and all other
offering materials and related documents, and participation in
meetings with Underwriter(s), attorneys, accountants and potential
investors.
3.1.7
Listing
.
Parent shall use its best efforts to cause all Registrable
Securities that are Class B Common Stock included in any
registration to be listed on such exchanges or otherwise designated
for trading in the same manner as similar securities issued by
Parent are then listed or designated or, if no such similar
securities are then listed or designated, in a manner satisfactory
to the Investor.
3.2
Obligation to Suspend
Distribution
. Upon receipt of any notice from Parent of the
happening of any event of the kind described in Section 3.1.3(iv),
or, in the case of a resale registration on Form S-3 pursuant to
Section 2.3 hereof, upon any suspension by Parent, pursuant to a
written insider trading compliance program adopted by
Parent’s Board of Directors, of the ability of all "insiders"
covered by such program to transact in Parent’s securities
because of the existence of material non-public information, the
Investor shall immediately discontinue disposition of its
Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until the Investor receives
the supplemented or amended prospectus contemplated by Section
3.1.3(iv) or the restriction on the ability of "insiders" to
transact in Parent’s securities is removed, as applicable,
and, if so directed by Parent, the Investor will deliver to Parent
all copies, other than permanent file copies then in the
Investor’s possession, of the most recent prospectus covering
such Registrable Securities at the time of receipt of such
notice.
3.3
Registration Expenses
. Subject
to Section 4, Parent shall bear all costs and expenses incurred in
connection with any Piggy-Back Registration pursuant to Section
2.1, and any registration on Form S-3 effected pursuant to Section
2.2, and all expenses incurred in performing or complying with its
other obligations under this Agreement, whether or not the
Registration Statement becomes effective ("
Registration
Expenses
"),
including: (i) all registration and filing fees; (ii) fees and
expenses of compliance with securities or "blue sky" laws
(including fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities); (iii)
printing expenses; (iv) Parent’s internal expenses (including
all salaries and expenses of its officers and employees); (v) the
fees and expenses incurred in connection with the listing of the
Registrable Securities as required by Section 3.1.11; (vi)
Financial Industry Regulatory Authority fees; (vii) fees and
disbursements of counsel for Parent and fees and expenses for
independent certified public accountants retained by Parent
(including the expenses or costs associated with the delivery of
any opinions or comfort letters requested pursuant to Section
3.1.9); (viii) the fees and expenses of any special experts
retained by Parent in connection with such registration and (ix)
the reasonable fees and expenses of one legal counsel selected by
the Investor not to exceed $10,000 in connection with a Piggy-Back
Registration and $5,000 in connection with and any registration on
Form S-3 effected pursuant to Section 2.2. Parent shall have no
obligation to pay any underwriting discounts or selling commissions
attributable to the Registrable Securities being sold by the
Investor, which underwriting discounts or selling commissions shall
be borne by the Investor. Additionally, in an underwritten
offering, all selling security holders and Parent shall bear the
expenses of the Underwriter pro rata in proportion to the
respective amount of securities each is selling in such
offering.
3.4
Information
. Each Investor
shall provide such information about such Investor, the Registrable
Securities held by such Investor and intended method of
disposition, in each case as may reasonably be requested by Parent,
or the managing Underwriter, if any, in connection with the
preparation of any Registration Statement including any Registrable
Securities of the Investor, including amendments and supplements
thereto, as is required to effect the registration of any
Registrable Securities under the Securities Act pursuant to Section
2 and in connection with the obligation to comply with federal and
applicable state securities laws. Any such information provided by
an Investor will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not
misleading.
4.
INDEMNIFICATION AND
CONTRIBUTION
.
4.1
Indemnification by Parent
.
Parent agrees to indemnify and hold harmless the Investor, and the
Investor’s affiliates, attorneys and agents, and each Person,
if any, who controls the Investor (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) (each, an
"
Investor
Indemnified Party
"), from and against any expenses, losses,
judgments, claims, damages or liabilities, whether joint or
several, arising out of or based upon any untrue statement of a
material fact contained in any Registration Statement under which
the sale of such Registrable Securities was registered under the
Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arising
out of or based upon any omission to state a material fact required
to be stated therein or necessary to make the statements therein
not misleading, or any violation by Parent of the Securities Act or
any rule or regulation promulgated thereunder applicable to Parent
and relating to action or inaction required of Parent in connection
with any such registration; and Parent shall promptly reimburse the
Investor Indemnified Party for any legal and any other expenses
reasonably incurred by such Investor Indemnified Party in
connection with investigating and defending any such expense, loss,
judgment, claim, damage, liability or action;
provided
,
however
, that Parent will not
be liable in any such case to the extent that any such expense,
loss, claim, damage or liability arises out of or is based upon any
untrue statement or omission to state therein a material fact
required to be stated therein made in such Registration Statement,
preliminary prospectus, final prospectus, or summary prospectus, or
any such amendment or supplement, in reliance upon and in
conformity with information furnished to Parent, in writing, by
such Investor expressly for use therein. Parent also shall
indemnify any Underwriter of the Registrable Securities, their
officers, affiliates, directors, partners, members and agents and
each Person who controls such Underwriter on substantially the same
basis as that of the indemnification provided above in this Section
4.1 and shall be part of the "Investor Indemnified
Party."
4.2
Indemnification by the
Investor
. The Investor will, in the event that any
registration is being effected under the Securities Act pursuant to
this Agreement of any Registrable Securities held by the Investor,
indemnify and hold harmless Parent, each of its directors and
officers and each Underwriter (if any), and each other selling
holder and each other Person, if any, who controls another selling
holder or such Underwriter within the meaning of the Securities
Act, against any losses, claims, judgments, damages or liabilities,
whether joint or several, only insofar as such losses, claims,
judgments, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement of a material
fact contained in any Registration Statement under which the sale
of such Registrable Securities was registered under the Securities
Act, any preliminary prospectus, final prospectus or summary
prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise out
of or are based upon any omission to state a material fact required
to be stated therein or necessary to make the statement therein not
misleading, only if the statement or omission was made in reliance
upon and in conformity with information furnished in writing to
Parent by the Investor expressly for use therein, and shall
reimburse Parent, its directors and officers, each Underwriter and
each other selling holder or controlling Person for any legal or
other expenses reasonably incurred by any of them in connection
with investigation or defending any such loss, claim, damage,
liability or action. The Investor’s indemnification
obligations hereunder shall be several and not joint and shall be
limited to the amount of any net proceeds actually received by the
Investor.
4.3
Conduct of Indemnification
Proceedings
. Promptly after receipt by any Person of any
notice of any loss, claim, damage or liability or any action in
respect of which indemnity may be sought pursuant to Section 4.1 or
4.2, such Person (the "
Indemnified Party
")
shall, if a claim in respect thereof is to be made against any
other Person for indemnification hereunder, notify such other
Person (the "
Indemnifying Party
")
in writing of the loss, claim, judgment, damage, liability or
action; provided, however, that the failure by the Indemnified
Party to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability which the Indemnifying Party
may have to such Indemnified Party hereunder, except and solely to
the extent the Indemnifying Party is actually prejudiced by such
failure. If the Indemnified Party is seeking indemnification with
respect to any claim or action brought against the Indemnified
Party, then the Indemnifying Party shall be entitled to participate
in such claim or action, and, to the extent that it wishes, jointly
with all other Indemnifying Parties, to assume control of the
defense thereof with counsel satisfactory to the Indemnified Party.
After notice from the Indemnifying Party to the Indemnified Party
of its election to assume control of the defense of such claim or
action, the Indemnifying Party shall not be liable to the
Indemnified Party for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation; provided,
however, that in any action in which both the Indemnified Party and
the Indemnifying Party are named as defendants, the Indemnified
Party shall have the right to employ separate counsel (but no more
than one such separate counsel) to represent the Indemnified Party
and its controlling Persons who may be subject to liability arising
out of any claim in respect of which indemnity may be sought by the
Indemnified Party against the Indemnifying Party, with the fees and
expenses of such counsel to be paid by such Indemnifying Party if,
based upon the written opinion of counsel of such Indemnified
Party, representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, consent to entry of
judgment or effect any settlement of any claim or pending or
threatened proceeding in respect of which the Indemnified Party is
or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such judgment or
settlement includes an unconditional release of such Indemnified
Party from all liability arising out of such claim or
proceeding.
4.4
Contribution
.
4.4.1
If
the indemnification provided for in the foregoing Sections 4.1, 4.2
and 4.3 is unavailable to any Indemnified Party in respect of any
loss, claim, damage, liability or action referred to herein, then
each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, claim, damage,
liability or action in such proportion as is appropriate to reflect
the relative fault of the Indemnified Parties and the Indemnifying
Parties in connection with the actions or omissions which resulted
in such loss, claim, damage, liability or action, as well as any
other relevant equitable considerations. The relative fault of any
Indemnified Party and any Indemnifying Party shall be determined by
reference to, among other things, whether the untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by such Indemnified Party or such Indemnifying
Party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
4.4.2
The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.4 were determined by pro
rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the
immediately preceding Section 4.4.1.
4.4.3
The
amount paid or payable by an Indemnified Party as a result of any
loss, claim, damage, liability or action referred to in the
immediately preceding paragraph shall be deemed to include, subject
to the limitations set forth above, any legal or other expenses
incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the
provisions of this Section 4.4, no Investor shall be required to
contribute any amount in excess of the dollar amount of the net
proceeds (after payment of any underwriting fees, discounts,
commissions or taxes) actually received by such the respective
Investor from the sale of such Registrable Securities which gave
rise to such contribution obligation. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent
misrepresentation.
5.
UNDERWRITING AND
DISTRIBUTION
.
5.1
Rule 144
. Parent covenants that
it shall file any reports required to be filed by it under the
Securities Act and the Exchange Act and shall take such further
action as the Investor may reasonably request, all to the extent
required from time to time to enable the Investor to sell
Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144
under the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
SEC.
6.
MISCELLANEOUS
.
6.1
Other Registration Rights
.
Parent represents and warrants that as of the date of this
Agreement, except as set forth in Schedule 4.6 of the Merger
Agreement, no Person has any right to require Parent to register
any of Parent’s capital stock for sale or to include
Parent’s capital stock in any registration filed by Parent
for the sale of capital stock for its own account or for the
account of any other Person.
6.2
Assignment; No Third Party
Beneficiaries
. This Agreement and the rights, duties and
obligations of Parent hereunder may not be assigned or delegated by
Parent in whole or in part. This Agreement and the rights, duties
and obligations of the Investor hereunder may be freely assigned or
delegated by the Investor in conjunction with and to the extent of
any permitted transfer of Registrable Securities by the Investor.
In the event of any such assignment by the Investor of some but not
all of its rights hereunder, the assignee will be included in the
term "
Investor
" under this
Agreement and shall have pro rata rights under this Agreement with
respect to the Registrable Securities so transferred to it, but any
determination, consent or action by the Investor hereunder will
require the holders of a majority-in-interest of the Registrable
Securities. This Agreement and the provisions hereof shall be
binding upon and shall inure to the benefit of each of the parties,
to the permitted assigns of the Investor or of any assignee of the
Investor. This Agreement is not intended to confer any rights or
benefits on any Persons that are not party hereto other than as
expressly set forth in Article 4 and this Section 6.2.
6.3
Notices
. All notices, consents,
waivers and other communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered (i) in
person, (ii) by facsimile or other electronic means, with
affirmative confirmation of receipt, (iii) one Business Day after
being sent, if sent by reputable, nationally recognized overnight
courier service or (iv) three (3) Business Days after being mailed,
if sent by registered or certified mail, pre-paid and return
receipt requested, in each case to the applicable Party at the
following addresses (or at such other address for a Party as shall
be specified by like notice):
If to the Parent, to:
|
With a copy to (which shall not constitute notice:
|
RumbleOn,
Inc.
4521 Sharon Road,
Suite 370
Charlotte,
NC 28211
|
Ackerman LLP
350 E. Las Olas
Boulevard, Suite 1600
Fort
Lauderdale, FL 33301
|
Attn:
|
Attn: Michael
Francis
Christina C.
Russo
|
If to the Investors,
to:
|
With a copy to (which shall not
constitute notice):
|
Steven
Brewster
250
Bluegrass
Dr.
Hendersonville,
TN
37075
|
Bass, Berry &
Sims PLC
150
Third Avenue South, Suite 2800
Nashville,
TN 37201
|
Janelle
Brewster
250 Bluegrass
Dr.
Hendersonville,
TN 37075
|
Attn: Allen
Overby
Taylor
Ashley
|
6.4
Severability
. This Agreement
shall be deemed severable, and the invalidity or unenforceability
of any term or provision hereof shall not affect the validity or
enforceability of this Agreement or of any other term or provision
hereof. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be
added as a part of this Agreement a provision as similar in terms
to such invalid or unenforceable provision as may be possible that
is valid and enforceable.
6.5
Counterparts
. This Agreement
may be executed in multiple counterparts (including by facsimile or
pdf or other electronic document transmission), each of which shall
be deemed an original, and all of which taken together shall
constitute one and the same instrument.
6.6
Entire Agreement
. This
Agreement (together with the Merger Agreement to the extent
incorporated herein, and including all agreements entered into
pursuant hereto or thereto or referenced herein or therein and all
certificates and instruments delivered pursuant hereto and thereto)
constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous
agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written, relating
to the subject matter hereof;
provided
, that, for the
avoidance of doubt, the foregoing shall not affect the rights and
obligations of the parties under the Merger Agreement.
6.7
Interpretation
. Titles and
headings of sections of this Agreement are for convenience only and
shall not affect the construction of any provision of this
Agreement. In this Agreement, unless the context otherwise
requires: (i) any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice
versa; (ii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding or succeeding such term and shall be deemed in each case
to be followed by the words "without limitation"; (iii) the words
"herein," "hereto," and "hereby" and other words of similar import
in this Agreement shall be deemed in each case to refer to this
Agreement as a whole and not to any particular section or other
subdivision of this Agreement; and (iv) the term "or" means
"and/or". The parties have participated jointly in the negotiation
and drafting of this Agreement. Consequently, in the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties
hereto, and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any
provision of this Agreement.
6.8
Amendments; Waivers
. Any term
of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular
instance, and either retroactively or prospectively) only with the
written agreement or consent of Parent and the Investor. No failure
or delay by a party in exercising any right hereunder shall operate
as a waiver thereof. No waivers of or exceptions to any term,
condition, or provision of this Agreement, in any one or more
instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, condition, or
provision
6.9
Remedies Cumulative
. In the
event a party fails to observe or perform any covenant or agreement
to be observed or performed under this Agreement, the other parties
may proceed to protect and enforce its rights by suit in equity or
action at law, whether for specific performance of any term
contained in this Agreement or for an injunction against the breach
of any such term or in aid of the exercise of any power granted in
this Agreement or to enforce any other legal or equitable right, or
to take any one or more of such actions, without being required to
post a bond. None of the rights, powers or remedies conferred under
this Agreement shall be mutually exclusive, and each such right,
power or remedy shall be cumulative and in addition to any other
right, power or remedy, whether conferred by this Agreement or now
or hereafter available at law, in equity, by statute or
otherwise.
6.10
Governing
Law; Jurisdiction
. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware without regard to the conflict of laws principles thereof.
All actions, claims or other legal proceedings arising out of or
relating to this Agreement (a "
Proceeding
") shall
be heard and determined exclusively in any state or federal court
located in Davidson County in the state of Tennessee (or in any
court in which appeal from such courts may be taken) (the
"
Specified
Courts
"). Each party hereto hereby (a) submits to the
exclusive jurisdiction of any Specified Court for the purpose of
any Proceeding brought by any party hereto and (b) irrevocably
waives, and agrees not to assert by way of motion, defense or
otherwise, in any such Proceeding, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the
Proceeding is brought in an inconvenient forum, that the venue of
the Proceeding is improper, or that this Agreement or the
transactions contemplated hereby may not be enforced in or by any
Specified Court. Each party agrees that a final judgment in any
Proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by applicable law. Each party irrevocably consents to the
service of the summons and complaint and any other process in any
Proceeding, on behalf of itself, or its property, by personal
delivery of copies of such process to such party at the applicable
address set forth in Section 6.3. Nothing in this Section 6.10
shall affect the right of any party to serve legal process in any
other manner permitted by applicable law.
6.11
WAIVER
OF TRIAL BY JURY
. EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION,
SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE
ACTIONS OF THE INVESTORS IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.
6.12
Limitation
on Subsequent Registration Rights
. After the date of this
Agreement, Parent shall not (i) enter into any agreement with any
holder or prospective holder of any securities of Parent that would
grant such holder or prospective holder rights to demand the
registration of any securities of Parent that are more favorable
than or inconsistent with the rights granted to the Investors
hereunder or (ii) enter into any agreement, take any action, or
permit any change to occur, with respect to its securities that
violates or subordinates the rights expressly granted to the
Investors in this Agreement, unless expressly approved by the
Investors in writing.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGES FOLLOW]
IN
WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed and delivered as of the date first written
above.
Parent
:
RUMBLEON,
INC.
By:
/s/
Marshall
Chesrown
Name:
Marshall
Chesrown
Title:
Chief Executive Officer
Investors:
/s/
Steven Brewster
Name:
Steven Brewster
/s/ Janelle
Brewster
Name:
Janelle Brewster
Representative:
/s/ Steven
Brewster
Name:
Steven Brewster
{Signature Page to Registration Rights Agreement}
ESCROW AGREEMENT
This
Escrow Agreement
(this
“
Agreement
”)
is made and entered into as of October
30, 2018
by and among RumbleOn, Inc., a Nevada corporation
located at 4521 Sharon Road, Suite 370, Charlotte, NC 28211
(“
Buyer
”),
Steven Brewster, a Tennessee resident (“
Representative
”), as
representative of the Sellers under the Acquisition Agreements (as
defined below)
, and Continental Stock
Transfer & Trust Company, a New York corporation located at 1
State Street, 30
th
Floor, New York, New York 10004 (the
“
Escrow
Agent
”). Each capitalized
term used but not otherwise defined herein shall have the meaning
ascribed to such term in the Merger Agreement (as defined
below).
Recitals
WHEREAS
,
Buyer, Wholesale Holdings, Inc., a Tennessee corporation
(“
Wholesale
”),
Wholesale, LLC, a Tennessee corporation,
Representative,
certain shareholders of Wholesale (the “
Stockholders
”), and
certain other parties named therein have entered into an Agreement
and Plan of Merger
dated as of October
26, 2018 (the “
Merger
Agreement
”);
WHEREAS, Buyer, the members (individually, the
“
Express
Sellers
,” and together
with the Stockholders, the “
Sellers
”)
of Wholesale Express LLC, a Tennessee limited liability company
(individually, “
Express
”
and together with Wholesale, the “
Companies
”),
Representative,
and certain other parties named therein have
entered into a Membership Interest Purchase Agreement
dated as of the date hereof (individually, the
“
MIPA
,”
and together with the Merger Agreement, the
“
Acquisition
Agreements
”);
WHEREAS,
the Sellers have duly appointed Representative to act as their
representative under the Acquisition Agreements; and
WHEREAS
,
the Acquisition Agreements contemplate placing in escrow certain
stock consideration to secure certain rights of Buyer and the other
Parent Indemnitees pursuant to the Acquisition
Agreements.
Agreement
NOW,
THEREFORE, in consideration of the premises and the mutual promises
herein made, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as
follows:
Section 1.
Escrow
.
1.1
Appointment; Cash and
Shares Placed in Escrow
.
Buyer and Representative
hereby appoint the
Escrow Agent as their escrow agent for the purposes set forth
herein, and the Escrow Agent hereby accepts such appointment under
the terms and conditions set forth herein. Contemporaneously with
the execution and delivery of this Agreement,
Buyer shall deliver or cause to be delivered to
the Escrow Agent one or more newly issued certificates representing
six hundred eighty-one thousand four hundred eighty-one (681,481)
shares of Buyer’s Series B Non-Voting Convertible Preferred
Stock or, following conversion, Conversion Shares (the
“
Escrow
Shares
”), registered in
the name of the Stockholders, to be held in escrow under this
Agreement.
1.2
Escrow
Fund; Escrow Accounts
.
(a)
The Escrow Shares
being held in escrow pursuant to this Agreement shall collectively
constitute an escrow fund (the “
Escrow Fund
”) securing
the indemnification, compensation and reimbursement rights of Buyer
and the other Parent Indemnitees under the Acquisition
Agreements.
(b)
The
Escrow Shares
shall be
deposited and held in a separate account (the “
Escrow Account
”),
subject to the terms and conditions of
this Agreement
.
1.3
Voting of Escrow
Shares
. The Representative (on
behalf of the Stockholders) shall be entitled to exercise all
voting rights with respect to such Escrow Shares. The Escrow Agent
is not obligated to distribute to the Representative or any other
person any proxy materials and other documents related to the
Escrow Shares received by the Escrow Agent from
Buyer.
1.4
Interest
.
The Escrow Fund shall be held in the
escrow accounts uninvested and without interest accruing
thereon
.
1.5
Dividends,
Etc
.
The Stockholders shall remain the beneficial
owners of the Escrow Shares unless any such Escrow Shares are
transferred to a Parent Indemnitee or Purchaser Indemnitee pursuant
to this Agreement and, until such time, the Stockholders shall
retain all rights and benefits of a holder of such Escrow Shares,
subject to the terms and limitations of this Agreement.
Buyer and Representative agree that any cash distributed in respect
of the Escrow Shares shall be distributed to the beneficial owners
of the Escrow Shares.
Buyer and
Representative agree that any equity shares of Buyer
(“
Buyer
Shares
”) or other
property (excluding cash) distributable or issuable (whether by way
of dividend, stock split or otherwise) in respect of or in exchange
for any Escrow Shares (including pursuant to or as a part of a
merger, consolidation, acquisition of property or stock,
reorganization or liquidation involving Buyer) shall not be
distributed or issued to the beneficial owners of such Escrow
Shares, but rather shall be distributed or issued to and held by
the Escrow Agent in the Escrow Account as part of the Escrow Fund.
Any securities or other property (excluding cash distributed in
respect of the Escrow Shares) received by the Escrow Agent in
respect of any Escrow Shares held in escrow as a result of any
stock split or combination of Buyer Shares, payment of a stock
dividend or other stock distribution in or on Buyer Shares, or
change of Buyer Shares into any other securities pursuant to a
conversion or as a part of a merger, consolidation, acquisition of
property or stock, reorganization or liquidation involving Buyer,
or otherwise, shall be held by the Escrow Agent in the Escrow
Account as part of the Escrow Fund.
1.6
Trust
Fund
.
The Escrow Fund shall be held in trust and shall
not be subject to any lien, attachment, trustee process or any
other judicial process of any creditor of Buyer or Representative.
The Escrow Agent shall hold and safeguard the Escrow Fund until the
Termination Date (as defined in
Section
5
) or earlier distribution in
accordance with this Agreement.
Section
2.
Indemnification
Claims; Release of Escrow Fund.
2.1
Claims
.
Buyer shall give Representative and the Escrow Agent written notice
of any indemnification claim made by any Parent Indemnitee or
Purchaser Indemnitee pursuant to the applicable Acquisition
Agreement setting forth the facts giving rise to such claim, the
provisions of the applicable Acquisition Agreement that were
breached by such facts and the amount of any Losses arising
therefrom (a “
Claim
Notice
”).
2.2
Disbursement
.
The
Escrow Agent shall make disbursements as provided in this
Section 2.2
from
the Escrow Account to satisfy the Sellers’ indemnification
obligations under the Acquisition Agreements.
(a)
At any time prior
to the First Escrow Distribution Date or Second Escrow Distribution
Date (as such terms are defined below), as promptly as practicable,
but in any event within five (5) Business Days after receiving (i)
joint written instructions from Buyer and Representative, (ii)
written instruction from Buyer attaching a final non-appealable
court order from a court of competent jurisdiction setting forth
the amount of the Losses and relating to the release of any Escrow
Shares from the Escrow Account, or (iii) written instruction from
Representative pursuant to Section 7.6 of the Merger Agreement
attaching evidence of payment by Representative of cash in lieu of
Escrow Shares in final settlement of any Claim to Parent or Parent
Indemnitees pursuant to an Acquisition Agreement (each of the
forgoing, “
Release
Instructions
”), the Escrow Agent shall release or
cause to be released any such Escrow Shares in the amounts, to the
Persons, and in the manner set forth in such Release
Instructions.
(b)
On March 31, 2019
(the “
First Escrow
Distribution Date
”), the Escrow Agent shall release
from the Escrow Account twenty-five percent (25%) of the Escrow
Shares then remaining in the Escrow Account to the Representative
for further distribution to the Stockholders, less the amount in
number of Escrow Shares (valued at the Per Share Valuation Amount)
equal to the Losses claimed in any Pending Claims (as defined
below) that were made prior to the First Escrow Distribution Date.
A “
Pending
Claim
” means any (A) claim asserted in good faith
pursuant to a Claim Notice in accordance with this Agreement and
the appropriate Acquisition Agreement by any Parent Indemnitee for
indemnification for Losses that are pending before a court of
competent jurisdiction or otherwise remains unresolved or (B) any
portion of the Escrow Fund due and owing to Buyer or the other
Parent Indemnitees pursuant to Release Instructions but not yet
paid. Following the First Escrow Distribution Date, upon resolution
of any Pending Claim, the Escrow Agent shall, within two (2)
Business Days after receiving Release Instructions release to the
Representative for further distribution to the Stockholders from
the Escrow Account such number of Escrow Shares equal to the
portion of such Pending Claim resolved that is not required to pay
the Losses pursuant to such Pending Claim.
(c)
On the first
anniversary of the date of this Agreement (the “
Second Escrow Distribution
Date
”), the Escrow Agent shall release from the Escrow
Account the balance of the Escrow Shares then remaining in the
Escrow Account to the Representative for further distribution to
the Stockholders, less the amount in number of Escrow Shares
(valued at the Per Share Valuation Amount) equal to the Losses
claimed in any Pending Claims. Following the Second Escrow
Distribution Date, upon resolution of any Pending Claim, the Escrow
Agent shall, within two (2) Business Days after receiving Release
Instructions release to the Representative for further distribution
to the Stockholders from the Escrow Account such number of Escrow
Shares equal to the portion of such Pending Claim resolved that is
not required to pay the Losses pursuant to such Pending
Claim.
(d)
The parties to this
Agreement acknowledge and agree that the Escrow Shares 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 Account. If at any time while
the Escrow Shares are held pursuant to this Agreement, there is any
stock dividend, combination, subdivision, split or the like with
respect to the Escrow Shares, (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 Buyer acting in
good faith.
Section 3.
Fees
and Expenses
.
The
Escrow Agent shall be entitled to receive, from time to time, fees
in accordance with
Schedule 1
, which fees shall be
paid by Buyer. In accordance with
Schedule 1
, the Escrow Agent
will also be entitled to reimbursement for reasonable and
documented out-of-pocket expenses incurred by the Escrow Agent in
the performance of its duties hereunder and the execution and
delivery of this Agreement, which fees shall be paid by
Buyer.
Section 4.
Limitation of Escrow
Agent’s Liability
.
4.1
The
Escrow Agent undertakes to perform such duties as are specifically
set forth in this Agreement only and shall have no duty under any
other agreement or document, and no implied covenants or
obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall incur no liability with respect to
any action taken by it or for any inaction on its part in reliance
upon any notice, direction, instruction, consent, statement or
other document believed by it in good faith to be genuine and duly
authorized, nor for any other action or inaction except for its own
gross negligence or willful misconduct. In all questions arising
under this Agreement and/or its interpretation hereof in
conjunction with the Acquisition Agreements, the Escrow Agent may
rely on the advice of counsel, and for anything done, omitted or
suffered in good faith by the Escrow Agent based upon such advice
the Escrow Agent shall not be liable to anyone. In no event shall
the Escrow Agent be liable for incidental, punitive or
consequential damages.
4.2
Buyer
and Representative hereby agree to jointly and severally indemnify
the Escrow Agent and its officers, directors, employees and agents
for, and hold it and them harmless against, any loss, liability or
expense (including attorney fees) incurred without gross negligence
or willful misconduct on the part of the Escrow Agent, arising out
of or in connection with the Escrow Agent’s carrying out its
duties hereunder. This right of indemnification shall survive the
termination of this Agreement and the resignation of the Escrow
Agent.
Section 5.
Termination
.
This Agreement shall terminate upon
the release by the Escrow Agent of the final amounts held in the
Escrow Accounts in accordance with
Section 1
(the date of such release being
referred to as the “
Termination
Date
”).
Section 6.
Successor
Escrow Agent
.
In the event the Escrow Agent becomes
unavailable or unwilling to continue as escrow agent under this
Agreement, the Escrow Agent may resign and be discharged from its
duties and obligations hereunder by giving its written resignation
to the parties to this Agreement. Such resignation shall take
effect not less than 30 days after it is given to all the other
parties hereto. In such event, Buyer may appoint a successor Escrow
Agent (acceptable to Representative, acting reasonably). If Buyer
fails to appoint a successor Escrow Agent within 15 days after
receiving the Escrow Agent’s written resignation, the Escrow
Agent shall have the right to apply to a court of competent
jurisdiction for the appointment of a successor Escrow Agent. The
successor Escrow Agent shall execute and deliver to the Escrow
Agent an instrument accepting such appointment, and the successor
Escrow Agent shall, without further acts, be vested with all the
estates, property rights, powers and duties of the predecessor
Escrow Agent as if originally named as Escrow Agent herein. The
Escrow Agent shall act in accordance with written instructions from
Buyer and Representative as to the transfer of the Escrow Fund to a
successor Escrow Agent.
Section 7.
Representative
.
Unless and until Buyer and the Escrow Agent shall have received
written notice of the appointment of a successor Representative,
each of Buyer and the Escrow Agent shall be entitled to rely on,
and shall be fully protected in relying on, the power and authority
of Representative to act on behalf of the
Sellers.
Section 8.
Miscellaneous
.
8.1
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 to Buyer:
|
RumbleOn,
Inc.
4521
Sharon Road, Suite 370
Charlotte, NC
28211
Attention: Thomas
Aucamp, Corporate Secretary
Email:
tom@rumbleon.com
|
With a copy, which shall not constitute notice, to:
|
Akerman
LLP
350 E.
Las Olas Boulevard, Suite 1600
Fort
Lauderdale, FL 33301
Attention: Michael
Francis
Christina
C. Russo
Email:
michael.francis@akerman.com
;
christina.russo@akerman.com
|
If to Representative:
|
Steven
Brewster
250
Bluegrass Dr.
Hendersonville, TN
37075
Email:
steve.brewster@wholesalenashville.com
|
With a copy, which shall not constitute notice, to:
|
Bass,
Berry & Sims PLC
150
Third Avenue South, Suite 2800 Nashville, TN 37201
Attention:
Allen Overby
Taylor
Ashley
Email:
aoverby@bassberry.com
;
tashley@bassberry.com
|
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.
Any party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein
set forth. Notwithstanding the foregoing, notices addressed to the
Escrow Agent shall be effective only upon receipt. If any notice or
other document is required to be delivered to the Escrow Agent and
any other Person, the Escrow Agent may assume without inquiry that
notice or other document was received by such other Person on the
date on which it was received by the Escrow Agent.
8.2
Headings
.
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement
.
8.3
Counterparts
.
This Agreement may be executed in one or more counterparts
(including by means of electronic mail or facsimile), each of which
shall be deemed an original but all of which together will
constitute one and the same instrument.
8.4
Governing
Law
.
This Agreement and any claim, controversy or dispute arising out of
or related to this Agreement, any of the transactions contemplated
hereby, the relationship of the parties, and/or the interpretation
and enforcement of the rights and duties of the parties, whether
arising in contract, tort, equity or otherwise, shall be governed
by and construed in accordance with the internal laws of the state
of New York (without giving effect to any choice or conflict of law
provision or rule (whether of the state of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the state of New York).
8.5
Waiver of Jury
Trial
.
BUYER AND
REPRESENTATIVE EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OR
RELATED TO THIS AGREEMENT IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY
OTHER PARTY OR ANY AFFILIATE OF ANY OTHER SUCH PARTY, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THE PARTIES
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR
ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT.
8.6
Succession
and Assignment
.
This Agreement
shall be binding upon and shall inure to the benefit of each of the
parties hereto and each of their respective permitted successors
and assigns; provided, however, that neither Buyer nor
representative may assign its rights and/or obligations hereunder
without the consent of the other.
8.7
Amendments and
Waivers
.
No amendment of any
provision of this Agreement shall be valid unless the same shall be
in writing and signed by the Escrow Agent, Buyer and
Representative. No waiver by any party hereto of any provision of
this Agreement or any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall
be valid unless the same shall be in writing and signed by the
party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such
occurrence.
8.8
Severability
.
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other
jurisdiction.
8.9
No
Third-Party Beneficiaries
.
Except as expressly provided herein,
this
Agreement shall not confer any rights or remedies upon any Person
other than the parties hereto and their respective successors and
permitted assigns.
8.10
Entire
Agreement
.
This Agreement and the Acquisition Agreements set
forth the entire agreement among the parties hereto relating to the
subject matter hereof and supersede
any prior
understandings, agreements, or representations by or among the
parties hereto, written or oral, to the extent they relate in any
way to the subject matter hereof.
8.11
Cooperation
.
Representative
and Buyer agree to cooperate fully with each other and the Escrow
Agent and to execute and deliver such further documents,
certificates, agreements, stock powers and instruments and to take
such other actions as may be reasonably requested by Buyer,
Representative or the Escrow Agent to carry out the intent and
purposes of this Agreement.
8.12
Construction
.
(a)
For
purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neutral genders;
the feminine gender shall include the masculine and neutral
genders; and the neutral gender shall include masculine and
feminine genders.
(b)
The
parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party
shall not be applied in the construction or interpretation of this
Agreement.
(c)
As
used in this Agreement, the words “include” and
“including,” and variations thereof, shall not be
deemed to be terms of limitation, but rather shall be deemed to be
followed by the words “without
limitation.”
(d)
Except
as otherwise indicated, all references in this Agreement to
“Sections” and “Schedules” are intended to
refer to Sections of this Agreement and Schedules to this
Agreement.
[
Remainder of page intentionally left
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In
Witness Whereof
,
the parties hereto have duly caused this Agreement
to be executed as of the day and year first above
written.
BUYER:
RUMBLEON, INC.,
a Nevada
corporation
By:
/s/ Marshall
Chesrown
Name:
Marshall Chesrown
Title:
Chief Executive Officer
REPRESENTATIVE:
/s/
Steven Brewster
Steven
Brewster
ESCROW AGENT:
CONTINENTAL STOCK
TRANSFER & TRUST COMPANY,
a
New York corporation
By:
/s/ Francis E.
Wolf
Name:
Francis E. Wolf
Title:
Vice President
Schedule 1
Escrow Agent’s Fees
Administration
fee, M&A stock escrow, annually
|
$6,250.00
|
The
acceptance fee and administration fee covers all account set-up
services, the review, negotiation and execution of the escrow agent
agreement, KYC, OFAC and USA Patriot Act due diligence, comply with
investment instructions, claim instructions and release
instructions, coordinate with exchange agent for on-going account
maintenance and subsequent distributions or additional merger
consideration payments, compliance review, records retention,
escheat services The escrow agent acceptance fee and administration
fee is due and payable upon the effective date of appointment.
See assumptions for
duration.
Claims
processing, each claim
|
$750.00
|
Out-of-pocket
expenses
|
At
cost
|
Out-of-pocket
expenses when applicable will be billed at cost at the sole
discretion of Continental Stock Transfer & Trust
Company.
Extraordinary
services
|
Market
rate
|
Fees
for services not specifically covered in this schedule will be
billed in accordance with our prevailing rates for such
services.
These
costs may include, but are not limited to, review of IRS Form
W-8IMY for foreign holders, shareholder presentment status updates,
shareholder record adjustments, electronic copies of shareholder
presentments and non-standard shareholder records.
Assumptions
This
proposal is based upon the following assumptions with respect to
the role of escrow agent. Should any of the assumptions, duties or
responsibilities change, we reserve the right to affirm, modify or
rescind this proposal.
●
All escrow releases
are expected to be completed by April 2020. Beyond this duration,
fees of $450.00/month will be in effect.
●
All funds held by
Continental Stock Transfer & Trust Company will be
uninvested.
●
ALL FUNDS WILL BE
RECEIVED FROM OR DISTRIBUTED TO AN INDIVIDUAL OR A DOMESTIC OR AN
APPROVED FOREIGN ENTITY
FIRST AMENDMENT AND WAIVER TO LOAN AND SECURITY
AGREEMENT
THIS
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
“
Amendment
”), dated as of
October 30, 2018 (the “
First Amendment Effective
Date
”), is entered into by and among
RUMBLEON, INC., a Nevada corporation
(“
Parent
”),
RMBL MISSOURI, LLC, a Delaware limited liability company
(“
RMBL
Missouri
”), RMBL TEXAS,
LLC, a Delaware limited liability company
(“
RMBL
Texas
”), NEXTGENPRO, LLC,
a Delaware limited liability company (“
NextGen
Pro
”, and together with
Parent, RMBL Missouri and RMBL Texas, the
“
Existing
Borrowers
”), RMBL
TENNESSEE, LLC, a Delaware limited liability company
(“
RMBL
Tennessee
”), RMBL
EXPRESS, LLC, a Delaware limited liability company
(“
RMBL
Express
”), WHOLESALE,
LLC, a Tennessee limited liability company
(“
Wholesale
”),
and WHOLESALE EXPRESS, LLC, a Tennessee limited liability company
(“
Wholesale
Express
”, and together
with RMBL Tennessee, RMBL Express and Wholesale, collectively,
“
New
Borrowers
”, and Existing
Borrowers and New Borrowers,
together with any Qualified
Subsidiaries from time to time party hereto, collectively
“
Borrowers
”, and each, a
“
Borrower
”), the several
banks and other financial institutions or entities from time to
time party thereto as Lender, and HERCULES CAPITAL, INC., a
Maryland corporation, in its capacity as administrative agent and
collateral agent for Lender (in such capacity, together with its
successors and assigns in such capacity, “
Agent
”).
A.
Existing Borrowers,
Lender and Agent are parties to a Loan and Security Agreement,
dated as of April 30, 2018 (as amended, restated or modified
from time to time, the “
Loan
Agreement
”).
B.
Each of the New
Borrowers have entered into a Joinder Agreement as of the First
Amendment Effective Date.
C.
Existing Borrowers
have requested consent to the consummation of the Wholesale
Transaction, as described below.
D.
Pursuant to
Section 11.3(b)
of
the Loan Agreement, the parties desire to enter into this Amendment
to modify the terms of the Loan Agreement as set forth in this
Amendment, including, without limitation, to permit the
consummation of the Wholesale Transaction, in each case, on the
terms and subject to the conditions set forth in this
Amendment.
SECTION
1
DEFINITIONS;
INTERPRETATION.
(a)
Terms Defined in Loan Agreement
. All
capitalized terms used in this Amendment (including in the recitals
hereof) and not otherwise defined herein shall have the meanings
assigned to them in the Loan Agreement.
(b)
Rules of Construction
. The rules of
construction that appear in the last paragraph of
Section 1.1
of the Loan
Agreement shall be applicable to this Amendment and are
incorporated herein by this reference.
SECTION
2
AMENDMENTS
TO THE LOAN AGREEMENT.
(a)
The Loan Agreement
shall be amended as follows effective as of the date
hereof:
(i)
The following
defined terms in
Section
1.1
of the Loan Agreement are hereby amended and restated as
set forth below, or, if applicable, are added to
Section 1.1
of the Loan
Agreement in appropriate alphabetical order:
“
Amortization
Date
” means June 30,
2019, provided, that if the Interest-Only Extension Condition is
met, the Amortization Date shall be extended to December 30,
2019.
“
Budget
”
means a budget for Parent and its Subsidiaries, on a consolidated
basis, acceptable to Agent, provided that in any event a budget
reflecting Revenue, Adjusted EBITDA, if applicable, and Gross
Profit, if applicable, of no less than the amounts set forth in the
projections delivered to Agent as of the First Amendment Effective
Date will be acceptable to Agent, provided further that, if a
Borrower consummates a Permitted Acquisition and such Permitted
Acquisition is reasonably likely to affect the projections
previously delivered, as reasonably determined by Agent based on
its review of the proposed transaction, at all times thereafter, a
budget will be acceptable to Agent if reflecting Revenue, Adjusted
EBITDA, if applicable, and Gross Profit, if applicable, of no less
than the amounts set forth in the updated projections reasonably
approved by Agent in connection with such
transaction.
“
First Amendment
” means
the First Amendment to this Agreement, dated as of October 30,
2018.
“
First Amendment Effective
Date
” means October 30, 2018.
“
Interest Only
Extension Condition
”
means that prior to December 15, 2019, a Growth Capital Term Loan
Advance in principal amount of $5,000,000 shall have been made
pursuant to Tranche III.
“
Inventory Financing
Agreement
” means that
certain Inventory Financing and Security Agreement, by and among
Inventory Financing Lenders and RMBL Missouri, dated February 16,
2018, as modified by that certain Addendum No. 1 dated as of June
29, 2018 and that certain Addendum No. 2 dated as of September 25,
2018, and as may be further modified or amended in compliance with
the Inventory Financing Intercreditor Agreement and similar
agreements entered into with any Inventory Financing
Lender.
“
Inventory Financing
Lenders
” means, with
respect to the Inventory Financing Agreement, Ally Bank and Ally
Financial Inc., collectively, and with respect to the Wholesale
Inventory Financing, NextGear Capital, Inc., in each case, together
with each of their assigns or successors in interest, and any
additional or replacement lenders providing inventory financing to
any Borrower other than Parent, provided that such lender shall be
domiciled in the United States and shall be in the business of
extending credit of such type in the ordinary course of
business.
“
Performance Milestone
III
” means Borrower
Representative shall have provided evidence reasonably satisfactory
to Agent that Parent, on a consolidated basis, shall have achieved:
(i) Adjusted EBITDA for any consecutive six month period prior to
December 15, 2019 of at least $5,000,000 for such period; and (ii)
as of the date such evidence is provided, no Event of Default shall
have occurred and be continuing.
“
Permitted Inventory
Financing Cash Collateral
” means cash collateral required to be
provided pursuant to any Inventory Financing Agreement, provided
that (a) with respect to a Qualified Inventory Financing, (i) the
aggregate amount of such cash collateral shall not in any event
exceed the greater of (A) $250,000 and (B) 10.0% of the approved
credit line pursuant to such Qualified Inventory Financing, (b)
with respect to a Wholesale Inventory Financing, $7,000,000, and
(c) at any time, no additional cash collateral shall be provided if
doing so would result in an Event of Default or could reasonably be
expected to result in an Event of Default.
“
Qualified
Cash
” means the
aggregate balance maintained in all Borrowers’ Deposit
Accounts and accounts in which Investment Property of Borrowers is
maintained, in each case, that are subject to an Account Control
Agreement in favor of Agent and pursuant to which Agent has a first
lien perfected security interest, and, for the avoidance of doubt,
excluding any Permitted Inventory Financing Cash
Collateral.
“
Term Loan Maturity
Date
” means, with respect
to Tranche I, May 1, 2021, and with respect to Tranche II,
Tranche III and Tranche IV, October 1, 2021.
“
Tranche
”
means any of Tranche I, Tranche II, Tranche III or Tranche
IV.
“
Wholesale Express
Acquisition
” means the acquisition of all of the
issued and outstanding membership interests of Wholesale Express,
LLC, a Tennessee limited liability company, by Parent, pursuant to
that certain Membership Interest Purchase Agreement, dated as of
October 26, 2018 (the “
Wholesale Express Purchase
Agreement
”, and together with all schedules, exhibits
and annexes thereto, all side letters and material ancillary
agreements entered into in connection therewith, the
“
Wholesale Express
Purchase Documents
”).
“
Wholesale Inventory
Financing
” means
Indebtedness owing to Inventory Financing Lenders pursuant to the
Wholesale Inventory Financing Documents, provided that (i) no
Borrower other than Wholesale shall be a borrower pursuant thereto,
(ii) no Borrower other than Parent and RMBL Tennessee shall be a
guarantor with respect thereto, (iii) the obligations pursuant to
such facility shall not be secured by any Lien other than a Lien on
property of Wholesale, (iv) the Wholesale Inventory Financing
Documents shall not prohibit (A) the Indebtedness incurred or Liens
granted pursuant to this Agreement (including with respect to
Wholesale) or (B) the payment of any amounts when due pursuant to
this Agreement (including by Wholesale), (v) the Wholesale
Inventory Financing Intercreditor Agreement shall be in full force
and effect, (vi) the aggregate amount of Indebtedness
outstanding thereunder shall not exceed $75,000,000 at any time,
(vii) the advance rates shall not deviate materially from the
advance rate structure pursuant to the inventory financing
arrangements provided by NextGear Capital, Inc. as in effect on the
First Amendment Effective Date, and (viii) the interest rate and
applicable fees shall not be higher and the cash collateral or
deposit required shall not be a higher percentage of the approved
credit limit, in each case, relative to the inventory financing
arrangements provided by NextGear Capital, Inc. as in effect on the
First Amendment Effective Date.
“
Wholesale Inventory
Financing Intercreditor Agreement
” means an intercreditor agreement, to be
entered into subsequent to the First Amendment Effective Date in
accordance with Appendix II (Item 4) of the First Amendment, by and
among NextGear Capital, Inc. and Agent, in form and substance
satisfactory to Agent in Agent’s reasonable discretion, as
amended, restated, supplemented or otherwise modified from time to
time, or any similar agreement entered into by and among any
Inventory Financing Lender and Agent, in form and substance
satisfactory to Agent, in Agent’s reasonable discretion with
respect to a Wholesale Inventory Financing as in effect from time
to time.
“
Wholesale Inventory
Financing Documents
”
means (i) that certain Demand Promissory Note and Loan and Security
Agreement, dated as of the First Amendment Effective Date, (ii)
that certain Amendment to Demand Promissory Note and Loan and
Security Agreement, dated as of the First Amendment Effective Date,
(iii) that certain Corporate Guaranty, dated as of the First
Amendment Effective Date by Parent and (iv) that certain Corporate
Guaranty, dated as of the First Amendment Effective Date by RMBL
Tennessee, in each case, as amended, restated, supplemented or
otherwise modified from time to time, or any similar agreements
entered into with respect to a replacement inventory financing
facility provided by an Inventory Financing Lender, in each case,
consistent with the defined term “Wholesale Inventory
Financing” and any other restriction with respect thereto
pursuant to this Agreement.
“
Wholesale Merger
” means
the merger of Wholesale Holdings, Inc., a Tennessee corporation
(“
Wholesale
Holdings
”), into RMBL Tennessee, pursuant to that
certain Agreement and Plan of Merger, dated as of October 26, 2018
(as amended by that certain Amendment to Merger Agreement, dated as
of October 29, 2018, the “
Wholesale Merger
Agreement
”, and together with all schedules, exhibits
and annexes thereto, all side letters and material ancillary
agreements entered into in connection therewith, the
“
Wholesale Merger
Documents
”), by and among the Parent, RMBL Tennessee,
the shareholders of Wholesale Holdings, Wholesale, LLC, a
wholly-owned subsidiary of Wholesale Holdings formerly known as
Wholesale, Inc., Steven Brewster, a Tennessee resident, as the
representative of the shareholders of Wholesale Holdings, and, for
the limited purpose of Section 5.8 of the Wholesale Merger
Agreement, Marshall Chesrown and Steven R. Berrard, pursuant to
which Wholesale Holdings shall merge with and into RMBL Tennessee,
with RMBL Tennessee as the surviving entity.
Wholesale, LLC, a Tennessee limited liability
company (f/k/a Wholesale, Inc., a Tennessee corporation) is a
wholly-owned direct subsidiary of RMBL Tennessee and an indirect
Subsidiary of Parent.
“
Wholesale Transaction
”
means, collectively the Wholesale Merger and the Wholesale Express
Acquisition.
“
Wholesale Transaction
Documents
” means, collectively the Wholesale Merger
Documents and the Wholesale Express Purchase
Documents.
(ii)
The
specified clauses of the defined term “Permitted
Indebtedness” set forth in
Section 1.1
of the
Agreement are amended and restated as set forth below:
(b) Indebtedness
of up to $1,000,000 outstanding at any time secured by a Lien
described in clause (f) of the defined term “Permitted
Liens”, provided in the case of acquired Equipment such
Indebtedness does not exceed the cost of the Equipment financed
with such Indebtedness;
(f) reimbursement
obligations in connection with letters of credit that are secured
by Cash and issued on behalf of a Borrower or a Subsidiary in an
amount not to exceed $500,000 at any time outstanding, and
reimbursement obligations in connection with letters of credit
serving as a lease deposit;
(h) (i)
Indebtedness pursuant to a Qualified Inventory Financing, and (ii)
Indebtedness of Wholesale, as a borrower, pursuant to the Wholesale
Inventory Financing, and any unsecured guaranty obligations of
Parent and RMBL Tennessee with respect to the Wholesale Inventory
Financing;
(i) Indebtedness
of any Person whose assets or Equity Interests are acquired by a
Borrower or any of its Subsidiaries in a Permitted Acquisition
provided, that the aggregate amount of such Indebtedness
outstanding at any time does not exceed $250,000 and was not
incurred in connection with, or in contemplation of, such Permitted
Acquisition;
(l) other
Indebtedness, including Indebtedness covered by, but in excess of
the amounts permitted under clauses (b), (f) and (i) above, at any
time outstanding in an amount not to exceed $2,000,000, (which
amount shall be reduced by the aggregate amount of Indebtedness
described in clauses (b), (f) and (i) above, in each case up to the
amount permitted thereunder, that is outstanding as of the date of
determination).
(iii)
The
specified clauses of the defined term “Permitted
Investments” set forth in
Section 1.1
of the
Agreement are amended and restated as set forth below:
(b) (i)
all repurchases of stock from former employees, directors, or
consultants of Borrower under the terms of applicable repurchase
agreements at the original issuance price of such securities in an
aggregate amount not to exceed $100,000 in any fiscal year,
provided that no Event of Default has occurred and is continuing or
could exist after giving effect to the repurchases, and (ii) all
repurchases of stock from former employees, directors, officers or
consultants pursuant to the Wholesale Transaction
Documents;
(j) joint
ventures or strategic alliances in the ordinary course of
Borrowers’ business consisting of the nonexclusive licensing
of technology, the development of technology or the providing of
technical support, provided that cash Investments (if any) by any
Borrower do not exceed $750,000 in the aggregate in any fiscal
year;
(l) additional
Investments, including Investments covered by, but in excess of the
amounts permitted under, clauses (b)(i) and (j) above, that do not
exceed $1,500,000 during the term of this Agreement (less the
amount of Investments described in clauses (b)(i) and (j) above
made, in each case, up to the amount permitted thereunder, from the
Closing Date through the date of determination).
(iv)
The
specified clauses of the defined term “Permitted Liens”
set forth in
Section 1.1
of the
Agreement are amended and restated as set forth below:
(m) (i)
Liens on Cash securing obligations permitted under clause (f) of
the definition of Permitted Indebtedness and (ii) security deposits
in connection with real property leases, the combination of (i) and
(ii) in an aggregate amount not to exceed $500,000 at any
time;
(o)
Liens
securing Indebtedness pursuant to a Qualified Inventory Financing
or a Wholesale Inventory Financing, provided that (i) such Liens
are subject to the Inventory Financing Intercreditor Agreement or
Wholesale Inventory Financing Intercreditor Agreement, as
applicable, (ii) any cash collateral subject to a Lien in favor of
Inventory Financing Lenders shall not exceed the amount of the
Permitted Inventory Financing Cash Collateral, and (iii) with
respect to the Wholesale Inventory Financing, such Liens are
limited to the assets of Wholesale.
(v)
The defined term
“Permitted Transfers” set forth in
Section 1.1
of the
Agreement is amended by amending and restating
clause (e)
thereof as
follows:
(e) other
transfers of assets having a fair market value of not more than
$750,000 in the aggregate in any fiscal year.
(vi)
The
defined term “Qualified Inventory Financing” set forth
in Section 1.1 of the Agreement is hereby amended and restated as
follows:
“
Qualified Inventory
Financing
” means Indebtedness owing to Inventory
Financing Lenders pursuant to an Inventory Financing Agreement
(excluding, for the avoidance of doubt, the Wholesale Inventory
Financing), provided that (i) any Inventory Financing Lender shall
have entered into and continue to be subject to the Inventory
Financing Intercreditor Agreement with respect to any Inventory
Financing Agreement to which it is a party, (ii) the aggregate
amount of such Indebtedness at any time outstanding shall not
exceed an amount equal (x) 85% of the aggregate book value of all
Inventory of Borrowers, on consolidated basis less (y) the
aggregate amount of cash collateral maintained by such Inventory
Financing Lenders, (iii) the advance rates shall not deviate
materially from the advance rate structure pursuant to the
inventory financing arrangements as in effect on the
First Amendment Effective Date
, and (iv)
the interest rate and applicable fees shall not be higher and the
cash collateral or deposit required shall not be a higher
percentage of the approved credit limit, in each case, relative to
the inventory financing arrangements as in effect on the
First Amendment Effective
Date
.
(vii)
Section
1.1
of the Loan Agreement is hereby amended to delete each
of the following defined terms:
“Performance
Milestone I”
“Performance
Milestone II”
(viii)
Section
2.1(a)
of the Loan Agreement is hereby amended and restated
to read as follows:
(a)
Growth
Capital Term Commitment. As of the Closing Date, Lender severally
(and not jointly) has made a Growth Capital Term Loan Advance in
principal amount of $5,000,000 (“
Tranche
I
”). On the First
Amendment Effective Date, Lender will severally (and not jointly)
make, and Borrower Representative shall request, a Growth Capital
Term Loan Advance in principal amount of $5,000,000
(“
Tranche
II
”). During the period
commencing upon Borrowers’ achievement of Performance
Milestone III and ending December 15, 2019, Borrower Representative
may request an additional Growth Capital Term Loan Advance in an
amount of $5,000,000 (“
Tranche
III
”). Upon Borrower
Representative’s request and approval by Lender’s
investment committee, in its sole discretion, Borrower
Representative may request additional Growth Capital Term Loan
Advances in an aggregate principal amount $5,000,000
(“
Tranche
IV
”). The aggregate
principal Growth Capital Term Loan Advances outstanding shall not
exceed the Maximum Growth Capital Term Loan
Amount.
(ix)
Section
2.1(d)
of the Loan Agreement is hereby amended and restated
to read as follows:
(d)
Payment.
Borrowers will pay interest on each Growth Capital Term Loan
Advance on the first Business Day of each month, beginning the
month after the Advance Date continuing until (but not including)
the Amortization Date. Borrowers shall repay the aggregate
principal balance of the Growth Capital Term Loan Advances under
each Tranche that is outstanding on the day immediately preceding
the Amortization Date, in equal monthly installments of principal
and interest (mortgage style) beginning on the Amortization Date
and continuing on the first Business Day of each month thereafter
until the Secured Obligations (other than inchoate indemnity
obligations) are repaid, provided that if the Term Loan Interest
Rate is adjusted in accordance with its terms
, or the Amortization Date is extended, the amount
of each subsequent monthly installment shall be recalculated. If
the Interest-Only Extension Condition is met after June 30, 2019,
Borrowers may from the first Business Day of each month after the
date the Interest-Only Extension Condition is met, make payments of
interest only through the Amortization Date, as extended in
accordance with its terms, provided that in no event shall any
payment of principal and interest made prior to the date the
Interest-Only Extension Condition was met be refunded. The entire
principal balance of the Growth Capital Term Loan Advances pursuant
to each Tranche and all accrued but unpaid interest hereunder,
shall be due and payable on the applicable Term Loan Maturity Date.
Borrowers shall make all payments under this Agreement without
setoff, recoupment or deduction and regardless of any counterclaim
or defense. Lender will initiate debit entries to the applicable
Borrower’s account as authorized on the ACH Authorization (i)
on each payment date of all periodic obligations payable to Lender
under each Growth Capital Term Loan Advance and (ii) out-of-pocket
legal fees and costs incurred by Agent or Lender in connection
with
Section 11.11
of this Agreement; provided that, with
respect to
clause (i)
above, in the event that Lender or
Agent informs Borrower Representative that Lender will not initiate
a debit entry to such Borrower’s account for a certain amount
of the periodic obligations due on a specific payment date,
Borrowers shall pay to Lender such amount of periodic obligations
in full in immediately available funds on such payment date;
provided, further, that, with respect to
clause (i)
above, if Lender or Agent informs
Borrower Representative that Lender will not initiate a debit entry
as described above later than the date that is three (3) Business
Days prior to such payment date, Borrowers shall pay to Lender such
amount of periodic obligations in full in immediately available
funds on the date that is three (3) Business Days after the date on
which Lender or Agent notifies Borrower Representative thereof;
provided, further, that, with respect to
clause (ii)
above, in the event that Lender or
Agent informs Borrower Representative that Lender will not initiate
a debit entry to a Borrower’s account for specified
out-of-pocket legal fees and costs incurred by Agent or Lender,
Borrowers shall pay to Lender such amount in full in immediately
available funds within three (3) Business Days.
(x)
Section 2.4
of the Loan
Agreement is hereby amended and restated to read as
follows:
2.4
Prepayment.
At its option, upon at least seven (7) Business Days prior written
notice to Agent, Borrowers may prepay all, but not less than all,
of the outstanding Advances by paying the entire principal balance,
all accrued and unpaid interest thereon, together with
the applicable prepayment charge equal
to the following percentage of the Advance amount being prepaid:
(x) with respect to amounts advanced pursuant to Tranche I prepaid
on or prior to the one year anniversary of the Closing Date, 3.0%,
and (y) with respect to amounts advanced pursuant to any Tranche
other than Tranche I prepaid on or prior to the one year
anniversary of the First Amendment Effective Date, 3.0%; and
thereafter through the date that is forty-five (45) days prior to
the applicable Term Loan Maturity Date, 1.0% (each, a
“
Prepayment
Charge
”), provided that
if the Secured Obligations are prepaid from the proceeds of the
issuance of Indebtedness, Borrowers shall afford Agent the
opportunity to provide a term sheet to refinance the Secured
Obligations (but no Borrower shall be required to enter into a
refinancing transaction with Agent or any Lender even if on
substantially similar terms as the proposed issuance). Borrowers
agree that the Prepayment Charge is a reasonable calculation of
Lender’s lost profits in view of the difficulties and
impracticality of determining actual damages resulting from an
early repayment of the Advances. Borrowers shall prepay the
outstanding amount of all principal and accrued interest through
the prepayment date and the Prepayment Charge upon the occurrence
of a Change in Control.
(xi)
Section
2.5
of the Loan Agreement is hereby amended and restated to
read as follows:
2.5
End of Term Charge. Borrowers shall pay Lender (i) on the earliest
to occur of (A) the Term Loan Maturity Date applicable to Tranche
I, (B) the date that Borrowers prepay the outstanding Secured
Obligations (other than any inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the
termination of this Agreement) in full, or (C) the date that the
Secured Obligations otherwise become due and payable, a charge of
$562,500, and (ii) on the earliest to occur of (A) the Term Loan
Maturity Date applicable to Tranche II and Tranche III, (B) the
date that Borrowers prepay the outstanding Secured Obligations
(other than any inchoate indemnity obligations and any other
obligations which, by their terms, are to survive the termination
of this Agreement) in full, or (C) the date that the Secured
Obligations otherwise become due and payable, a charge equal to the
sum of $295,000 and (iii) 2.35% of any principal amount paid
or prepaid in respect of a Growth Capital Term Loan Advance made
pursuant to Tranche IV. Notwithstanding the required payment date
of such charge, it shall be deemed earned in full by Lender as of
the First Amendment Effective Date, except that amounts payable
based on Growth Capital Term Loan Advances made pursuant to Tranche
IV shall be deemed earned on the applicable Advance Date with
respect to such Advances.
(xii)
Section
3.
2 of the Loan Agreement is
hereby amended by adding the following sentence at the end thereof:
“Notwithstanding anything to the contrary set forth in this
Agreement, (x) the terms of any Inventory Financing Intercreditor
Agreement and Wholesale Inventory Financing Intercreditor Agreement
shall control the required priority of Agent’s security
interest in the Collateral, to the extent applicable, and any
reference to Agent having a “first lien” or
“highest priority lien” in the Collateral shall, to the
extent applicable, be subject to the priority set forth in such
Inventory Financing Intercreditor Agreement or Wholesale Inventory
Financing Intercreditor Agreement and (y) with respect to
Collateral of Wholesale, prior to the execution and delivery of the
Wholesale Inventory Financing Intercreditor Agreement, any
reference to Agent having a “first lien” or
“highest priority lien” in the Collateral shall be
amended to state that Agent has a “second lien” or
“junior priority lien” in the
Collateral.”
(xiii)
Section
4.2(a)
of the Loan Agreement is hereby amended and restated
to read as follows:
(a) Agent
shall have received (i) an Advance Request for the relevant Advance
as required by
Section
2.1(b)
, duly executed by Borrower Representative’s
Chief Executive Officer or Chief Financial Officer and (ii) with
respect to the Advance pursuant to Tranche III, a warrant to
purchase Class B Common Stock of Parent, in form and having a
“Warrant Price” and “Applicable Number”
that is the same as such warrant issued to Lender as of the First
Amendment Effective Date.
(xiv)
Section
7.1(i)
of the Loan Agreement is hereby amended and restated
to read as follows:
(i)
any
material statement, or notice of increased commitment, change in
terms, non-renewal or default or any demand for payment pursuant to
a Qualified Inventory Financing or Wholesale Inventory Financing;
and
(xv)
Section
7.2
of the Loan Agreement is
hereby amended by adding the following sentence at the end thereof:
“This
Section 7.2
shall not apply to
Wholesale.”.
(xvi)
Section
7.4
of the Loan Agreement is hereby amended to amend and
restate clause (d) as follows: “(d)
as permitted pursuant to any Inventory Financing
Intercreditor Agreement or any subordination agreement related to
Subordinated Indebtedness,
or prepayments of amounts owing
under the Wholesale Inventory Financing in the ordinary course of
business,”
(xvii)
Section
7.6
of the Loan Agreement is hereby amended to replace the
reference to “$250,000” therein to
“$1,000,000”.
(xviii)
Section
7.11
of the Loan Agreement is hereby amended to amend and
restate the final sentence at the end of such Section: “With
respect to any leased location or location where Collateral (other
than vehicles not constituting Inventory) is held by a bailee,
Borrowers shall deliver a landlord waiver or bailee agreement in
favor of Agent, in form and substance reasonably satisfactory to
Agent, provided that for locations existing as of the Closing Date
and for which a landlord waiver or bailee agreement would be
required, Borrowers may deliver the same within thirty (30) days of
the Closing Date (subject to extension from time to time in
Agent’s reasonable discretion if Borrowers have demonstrated
their use of commercially reasonable efforts to obtain such
landlord waivers and agreements), and for locations existing as of
the First Amendment Effective Date and for which a landlord waiver
or bailee agreement would be required, Borrowers may deliver the
same within thirty (30) days of the First Amendment Effective Date
(subject to extension from time to time in Agent’s reasonable
discretion if Borrowers have demonstrated their use of commercially
reasonable efforts to obtain such landlord waivers and agreements),
and provided further that no landlord waiver or bailee agreement
shall be required to the extent that Collateral (other than
vehicles not constituting Inventory) at all leased or bailee
locations not subject to such a landlord waiver or bailee agreement
does not exceed $750,000 at any time.”
(xix)
Section
7.12
of the Loan Agreement is hereby amended by amending and
restating the last sentence thereof to read as follows: “Any
Subsidiary, including RMBL Missouri but excluding Wholesale, that
receives proceeds from the sale of Inventory, shall, after
settlement of any amounts due in respect of a Qualified Inventory
Financing, with respect to the Inventory sold, immediately transfer
the excess proceeds, if any, to a Deposit Account that is subject
to an Account Control Agreement in favor of Agent pursuant to which
Agent is the first lien or controlling secured party, as
applicable.”
(xx)
Section
7.21
of the Loan Agreement is hereby amended and restated to
read as follows:
7.21 Financial
Covenants.
(a) For
each fiscal quarter prior to the draw of Tranche III, Borrowers
shall either (i) achieve Adjusted EBITDA and Gross Profit for such
fiscal quarter, in an amount not less than the amounts set forth in
the schedule below for the relevant period (the “
Performance Covenant
”) or
(ii) maintain Qualified Cash of at least $10,000,000 at all times
(the “
Liquidity
Covenant
”), provided that if at any time the
Performance Covenant is not met for the immediately preceding
fiscal quarter, after the Compliance Certificate is delivered for
such fiscal quarter, Borrowers shall not be in default under this
Section 7.21(a)
if
Borrowers maintain compliance with the Liquidity Covenant at all
times thereafter until such time as the Performance Covenant is met
(at which time quarterly testing shall resume).
Fiscal Quarter Ended
|
Minimum Gross Profit
|
Minimum EBITDA
|
December 31, 2018
|
$9,600,000
|
Not applicable
|
March 31, 2019
|
$16,300,000
|
$1
|
June 30, 2019
|
$20,500,000
|
$1,000,000
|
September 30, 2019
|
$25,000,000
|
$1,500,000
|
December 31, 2019
|
$28,300,000
|
$2,000,000
|
March 31, 2020
|
$31,800,000
|
$2,000,000
|
June 30, 2020
|
$33,700,000
|
$2,000,000
|
September 30, 2020
|
$36,200,000
|
$2,000,000
|
December 31, 2020
|
$39,900,000
|
$2,000,000
|
(b) Beginning
with the draw of Tranche III, Borrowers shall be subject to the
following financial covenants:
(i) Parent
shall achieve Revenue for each quarterly period in an amount of at
least 75% of the amount set forth in the Budget for such period,
tested quarterly.
(ii) If
during any fiscal quarter, the average of Qualified Cash during the
fiscal quarter is less than $15,000,000, then Parent shall achieve
quarterly Adjusted EBITDA of not less than $2,000,000 for such
quarter, tested quarterly.
(xxi)
A
new
Section 7.25
is
hereby added to the Loan Agreement to read as follows:
7.25 Additional
Limitations on Wholesale. For as long as a Wholesale Inventory
Financing is in effect, (a) (i) on and after the First Amendment
Effective Date and until the earlier to occur of (A) November 6,
2018 and (B) the effective date of the Wholesale Inventory
Financing Intercreditor Agreement, any Borrower shall be permitted
to make Investments in Wholesale, (ii) if the Wholesale Inventory
Financing Intercreditor Agreement is in effect on or before
November 6, 2018, after the effective date of the Wholesale
Inventory Financing Intercreditor Agreement, no Borrower shall be
permitted to make any Investment in Wholesale unless the amount of
Qualified Cash immediately prior to and after giving pro forma
effect to such Investment is at least $10,000,000 and (iii) if the
Wholesale Inventory Financing Intercreditor Agreement is not in
effect on or before November 6, 2018, (A) after November 6, 2018
and until the effective date of the Wholesale Inventory Financing
Intercreditor Agreement, no Borrower shall be permitted to make any
Investment in Wholesale unless the amount of Qualified Cash
immediately prior to and after giving pro forma effect to such
Investment is at least $13,000,000 and (B) after the effective date
of the Wholesale Inventory Financing Intercreditor Agreement, no
Borrower shall be permitted to make any Investment in Wholesale
unless the amount of Qualified Cash immediately prior to and after
giving pro forma effect to such Investment is at least $10,000,000;
(b) no Borrower shall transfer material assets to Wholesale; (c) no
Borrower shall merge with or into Wholesale; and (d) Wholesale
shall not (i) conduct any material business other than the business
conducted as of the First Amendment Effective Date and any business
incidental thereto or otherwise applicable to the other Borrowers
hereunder; (ii) own any material assets other than Inventory
consisting of pre-owned cars and other assets reasonably necessary
in connection with the business permitted to be conducted by
Wholesale or otherwise applicable to other Borrowers hereunder; or
(iii) own any Subsidiary or enter into any Permitted
Acquisition.
(xxii)
Section
9.6
of the Loan Agreement is hereby amended and restated to
read as follows:
9.6 Attachments;
Judgments. Any material portion of any Borrower’s assets is
attached or seized, or a levy is filed against any such assets, or
a judgment or judgments is/are entered for the payment of money
(not covered by independent third party insurance as to which
liability has been accepted (subject to customary reservation of
rights) by such insurance carrier), individually or in the
aggregate, of at least $750,000, or any Borrower is enjoined or in
any way prevented by court order from conducting any material part
of its business;
(xxiii)
Section
9.7
of the Loan Agreement is hereby amended and restated to
read as follows:
9.7 Other
Obligations. The occurrence of any default and the passing of any
applicable grace period under any agreement or obligation of any
Borrower (including pursuant to any Inventory Financing Agreement
or Wholesale Inventory Financing Documents) involving any
Indebtedness in excess of $750,000, which could entitle or permit
any Person to accelerate such Indebtedness, or any other material
agreement or obligation, if a Material Adverse Effect could
reasonably be expected to result from such default; or
(xxiv)
Exhibit
C
to the Loan Agreement is hereby supplemented with respect
to New Borrowers as set forth in
Exhibit C
attached
hereto.
(xxv)
Exhibit
D
to the Loan Agreement is hereby supplemented with respect
to New Borrowers as set forth in
Exhibit D
attached
hereto.
(xxvi)
Exhibit
E
to the Loan Agreement is hereby supplemented with respect
to New Borrowers as set forth in
Exhibit E
attached
hereto.
(xxvii)
Exhibit
F
to the Loan Agreement is hereby amended and restated as
set forth in
Exhibit F
attached
hereto.
(xxviii)
Schedule
1.1
to the Loan Agreement is hereby amended and restated as
set forth in
Schedule
1.1
attached hereto.
(xxix)
Schedule
5.14
to the Loan Agreement is hereby supplemented with
respect to New Borrowers as set forth in
Schedule 5.14
attached
hereto.
(b)
Wholesale Transaction as “Permitted
Acquisition”
. Notwithstanding the conditions set forth
in the defined term “Permitted Acquisition”, the
Wholesale Transaction shall be deemed to be a Permitted Acquisition
and Permitted Investment, in each case for all purposes of the Loan
Agreement.
(c)
References Within Loan Agreement
. Each
reference in the Loan Agreement to “this Agreement” and
the words “hereof,” “herein,”
“hereunder,” or words of like import, shall mean and be
a reference to the Loan Agreement as amended by this Amendment.
This Amendment shall be a Loan Document.
SECTION
3
Conditions of Effectiveness.
The
effectiveness of this Amendment shall be subject to Agent’s
receipt of the documents and satisfaction of the conditions as set
forth in
Appendix I
hereto.
SECTION
4
Post-Closing Deliveries.
Borrowers agree
to satisfy the conditions and deliver the documents set forth in
Appendix I
hereto
within the period set forth therein, provided that a failure to
comply with this
Section
4
shall constitute an immediate Event of Default without
cure period.
SECTION
5
Representations and Warranties
. To
induce Agent and Lender to enter into this Amendment, each Borrower
hereby confirms, as of the date hereof, (a) that the
representations and warranties made by it in Section 5 of the Loan
Agreement and in the other Loan Documents are true and correct in
all material respects;
provided
,
however
, that such materiality
qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in
the text thereof; and (b) that there has not been and there does
not exist a Material Adverse Effect.
SECTION
6
Miscellaneous.
(a)
Loan Documents Otherwise Not Affected;
Reaffirmation
. Except as expressly amended pursuant hereto
or referenced herein, the Loan Agreement and the other Loan
Documents shall remain unchanged and in full force and effect and
are hereby ratified and confirmed in all respects. Lender’s
and Agent’s execution and delivery of, or acceptance of, this
Amendment shall not be deemed to create a course of dealing or
otherwise create any express or implied duty by any of them to
provide any other or further amendments, consents or waivers in the
future. Each Borrower hereby reaffirms the security interest
granted pursuant to the Loan Documents and hereby reaffirms that
such grant of security in the Collateral secures all Secured
Obligations under the Loan Agreement and the other Loan
Documents.
(b)
Conditions
. For purposes of determining
compliance with the conditions specified in
Section 4
, each Lender that has
signed this Amendment shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to a Lender unless Agent shall have
received notice from such Lender prior to the date hereof
specifying its objection thereto.
(c)
Release
.
In consideration of the agreements of
Agent and Lender contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, each Borrower, on behalf of itself and its
successors, assigns, and other legal representatives, hereby fully,
absolutely, unconditionally and irrevocably releases, remises and
forever discharges Agent and Lender, and its successors and
assigns, and its present and former shareholders, affiliates,
subsidiaries, divisions, predecessors, directors, officers,
attorneys, employees, agents and other representatives (Agent,
Lender and all such other persons being hereinafter referred to
collectively as the “
Releasees
” and individually as a
“
Releasee
”), of
and from all demands, actions, causes of action, suits, covenants,
contracts, controversies, agreements, promises, sums of money,
accounts, bills, reckonings, damages and any and all other claims,
counterclaims, defenses, rights of set-off, demands and liabilities
whatsoever of every name and nature, known or unknown, suspected or
unsuspected, both at law and in equity, which any Borrower, or any
of its successors, assigns, or other legal representatives may now
or hereafter own, hold, have or claim to have against the Releasees
or any of them for, upon, or by reason of any circumstance, action,
cause or thing whatsoever which arises at any time on or prior to
the day and date of this Amendment, including, without limitation,
for or on account of, or in relation to, or in any way in
connection with the Loan Agreement, or any of the other Loan
Documents or transactions thereunder or related thereto. Each
Borrower waives the provisions of California Civil Code section
1542, which states:
A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER, MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE
DEBTOR.
Each
Borrower understands, acknowledges and agrees that the release set
forth above may be pleaded as a full and complete defense and may
be used as a basis for an injunction against any action, suit or
other proceeding which may be instituted, prosecuted or attempted
in breach of the provisions of such release. Each Borrower agrees
that no fact, event, circumstance, evidence or transaction which
could now be asserted or which may hereafter be discovered shall
affect in any manner the final, absolute and unconditional nature
of the release set forth above. The provisions of this section
shall survive payment in full of the Secured Obligations, full
performance of all the terms of this Amendment and the other Loan
Documents.
(d)
No Reliance
. Each Borrower hereby
acknowledges and confirms to Agent and Lender that such Borrower is
executing this Amendment on the basis of its own investigation and
for its own reasons without reliance upon any agreement,
representation, understanding or communication by or on behalf of
any other Person.
(e)
Costs and Expenses
. Each Borrower agrees
to pay to Agent the date hereof the reasonable out-of-pocket costs
and expenses of Agent and Lender party hereto, and the fees and
disbursements of counsel to Agent and Lender party hereto in
connection with the negotiation, preparation, execution and
delivery of this Amendment and any other documents to be delivered
in connection herewith on the date hereof, and including any
recording tax due in connection with the filing of any UCC
Financing Statement.
(f)
Binding Effect
. This Amendment binds and
is for the benefit of the successors and permitted assigns of each
party.
(g)
Governing Law.
This Amendment and the
other Loan Documents shall be governed by, and construed and
enforced in accordance with, the laws of the State of California,
excluding conflict of laws principles that would cause the
application of laws of any other jurisdiction.
(h)
Complete Agreement; Amendments
. This
Amendment and the Loan Documents represent the entire agreement
about this subject matter and supersede prior negotiations or
agreements with respect to such subject matter. All prior
agreements, understandings, representations, warranties, and
negotiations between the parties about the subject matter of this
Amendment and the Loan Documents merge into this Amendment and the
Loan Documents.
(i)
Severability of Provisions.
Each
provision of this Amendment is severable from every other provision
in determining the enforceability of any provision.
(j)
Counterparts
. This Amendment may be
executed in any number of counterparts and by different parties on
separate counterparts, each of which, when executed and delivered,
is an original, and all taken together, constitute one Amendment.
Delivery of an executed counterpart of a signature page of this
Amendment by facsimile, portable document format (.pdf) or other
electronic transmission will be as effective as delivery of a
manually executed counterpart hereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE
PAGE TO FIRST AMENDMENT TO LOAN AND SECURITY
AGREEMENT]
IN
WITNESS WHEREOF, the parties hereto have duly executed this
Amendment, as of the date first above written.
|
EXISTING
BORROWERS
:
RUMBLEON,
INC.
Signature:
/s/
Marshall Chesrown
Print Name:
Marshall Chesrown
Title: Chief
Executive Officer
NEXTGEN
PRO, LLC
Signature:
/s/
Marshall Chesrown
Print Name:
Marshall Chesrown
Title:
President
RMBL
MISSOURI, LLC
Signature:
/s/
Marshall Chesrown
Print Name:
Marshall Chesrown
Title:
Manager
RMBL
TEXAS, LLC
Signature:
/s/
Marshall Chesrown
Print Name:
Marshall Chesrown
Title:
Manager
|
[SIGNATURE
PAGE TO FIRST AMENDMENT TO LOAN AND SECURITY
AGREEMENT]
IN
WITNESS WHEREOF, the parties hereto have duly executed this
Amendment, as of the date first above written.
|
NEW BORROWERS
:
RMBL
TENNESSEE, LLC
Signature:
/s/
Marshall Chesrown
Print Name:
Marshall Chesrown
Title:
Manager
RMBL
EXPRESS, LLC
Signature:
/s/
Marshall Chesrown
Print Name:
Marshall Chesrown
Title: Chief
Executive Officer
WHOLESALE,
LLC
Signature:
/s/ Thomas
Aucamp
Print Name: Thomas
Aucamp
Title: Chief
Administrative Officer and Corporate Secretary
WHOLESALE EXPRESS,
LLC
Signature:
/s/ Thomas
Aucamp
Print Name: Thomas
Aucamp
Title: Chief
Administrative Officer and Corporate Secretary
|
[SIGNATURE
PAGE TO FIRST AMENDMENT TO LOAN AND SECURITY
AGREEMENT]
IN
WITNESS WHEREOF, the parties hereto have duly executed this
Amendment, as of the date first above written.
|
AGENT
:
HERCULES CAPITAL,
INC.
Signature:
/s/ Zhuo
Huang
Print Name:
Zhuo Huang
Title: Associate
General Counsel
LENDER
:
HERCULES CAPITAL,
INC.
Signature:
/s/ Zhuo
Huang
Print Name: Zhuo
Huang
Title: Associate
General Counsel
|
APPENDIX I
CLOSING CONDITIONS
1.
Agent
shall have received satisfactory evidence of Parent’s receipt
of $15,000,000 in net cash proceeds (not including any proceeds
from the conversion or cancellation of Indebtedness) from the
issuance of its Equity Interests immediately prior to the
consummation of the Wholesale Transaction.
2.
All
conditions to the consummation of the Wholesale Transaction in
accordance with the Wholesale Transaction Documents shall have been
satisfied.
3.
Agent
shall have received the following, each of which shall be in form
and substance satisfactory to Agent:
(a)
a
Perfection Certificate, which shall be true and complete, after
giving pro forma effect to the Wholesale Transaction;
(b)
this
Amendment, duly executed by Borrowers, Agent and
Lender;
(c)
a
warrant to purchase common stock of Parent;
(d)
an
Advance Request with respect to the Growth Capital Advance to be
made on the First Amendment Effective Date;
(e)
a
Joinder Agreement, duly executed by each New Borrower;
(f)
a copy of the Inventory Financing Agreement, as in
effect with NextGear Capital as of the First Amendment Effective
Date, and
all schedules, exhibits, annexes, appendices and
amendments thereto, all side letters and material ancillary
agreements entered into in connection therewith (other than the
Wholesale Inventory Financing Intercreditor Agreement)
, and a copy of any consent, waiver or
modification pursuant to or guaranty or collateral security
document entered into by another Borrower in connection with such
Inventory Financing Agreement and the Wholesale
Transaction;
(g)
a
duly executed certificate of an officer, manager or member of each
Borrower certifying and attaching copies of (A) the Charter,
certified as of a recent date by the jurisdiction of organization
of such Borrower; (B) the bylaws, operating agreement or similar
governing document of such Borrower; (C) resolutions of such
Borrower’s Board, members or managers, evidencing approval of
(1) this Amendment or the Joinder Agreement, as applicable, and
with respect to Parent and (2) the warrant issued in connection
with this Amendment and issuance of Equity Interests in accordance
with its terms; (D) resolutions of the holders of such
Borrower’s Equity Interests in connection with the
transactions contemplated by this Agreement, to the extent required
pursuant to the terms of the Charter or other governing document,
in each case, as in effect as of the First Amendment Effective
Date; and (E) a schedule setting forth the name, title and specimen
signature of officers or other authorized signers on behalf of such
Borrower to the extent not already delivered to Agent;
(h)
true
and complete copies of fully executed Wholesale Transaction
Documents; and
(i)
an
updated Budget giving pro forma effect to the Wholesale
Transaction, acceptable to Agent.
4.
Agent
shall have received satisfactory evidence that all Indebtedness to
be repaid pursuant to the terms of the Wholesale Transaction
Documents shall have been paid in full, and all Liens granted in
connection therewith shall have been terminated, and arrangements
with respect to any filings evidencing such terminations
satisfactory to Agent shall have been made.
Agent
shall have received a commitment fee of $125,000, which may be
deducted from the Advance made on the First Amendment Effective
Date.
APPENDIX II
POST-CLOSING DELIVERIES
1.
Within 30 days of the First Amendment Effective
Date, Agent shall have received landlord waivers and bailee
agreements as required pursuant to
Section 7.11
of the Loan Agreement with respect to
any locations maintained by a New Borrower.
2.
Within 30 days of the First Amendment Effective
Date, Agent shall have received Account Control Agreements with
respect to all Deposit Accounts and any accounts where Investment
Property is maintained, as required by
Section 7.12
of the Loan Agreement, with respect to
Deposit accounts or accounts where Investment Property is
maintained as may be maintained by any New
Borrower.
3.
Within 30 days of the First
Amendment Effective Date, Agent shall have received certificate of
insurance and endorsements with respect to each New Borrower as
required by
Section
6.2
of the
Loan Agreement, with respect to insurance required to be maintained
by any New Borrower.
4.
Within
30 days of the First Amendment Effective Date, Agent shall have
received the duly executed Wholesale Inventory Financing
Intercreditor Agreement, duly executed by the parties thereto;
provided that Agent shall use best efforts to consent to and
execute and deliver such Wholesale Inventory Financing
Intercreditor Agreement (such consent, execution and delivery not
be unreasonably withheld, conditioned or delayed) and Agent shall
negotiate in good faith with NextGear Capital, Inc.
EXHIBIT C
NAME, LOCATIONS, AND OTHER INFORMATION FOR NEW
BORROWERS
1.
Borrower
Representative hereby represents and warrants to Agent, on behalf
of each New Borrower, that each of New Borrower’s current
names and organizational status is as follows:
Name:
Type of organization:
State of organization:
Organization file number:
Fiscal year end:
Federal taxpayer identification number:
Former Name(s):
|
RMBL Express, LLC
limited liability company
Delaware
File #7091687
December 31
82-2190594
N/A
|
|
|
Name:
Type of organization:
State of organization:
Organization file number:
Fiscal year end:
Federal taxpayer identification number:
Former Name(s):
|
RMBLTennessee, LLC
limited liability company
Delaware
File #7076747
December 31
83-2073629
N/A
|
|
|
Name:
Type of organization:
State of organization:
Organization file number:
Fiscal year end:
Federal taxpayer identification number:
Former Name(s):
|
Wholesale Express, LLC
limited liability company
Tennessee
File#000824155
December 31
81-0798547
N/A
|
|
|
Name:
Type of organization:
State of organization:
Organization file number:
Fiscal year end:
Federal taxpayer identification number:
Former Name(s):
|
Wholesale, LLC
limited liability company
Tennessee
File#000445847
December 31
76-0729552
Wholesale, Inc.
|
2.
Borrower Representative hereby
r
epresents and warrants to
Agent, on behalf of New Borrowers, that each New Borrower’s
chief executive office is located at the following
location:
1350
Lakeshore Drive, Suite 160
Coppell,
TX 75019
3.
Borrower
Representative hereby represents and warrants to Agent, on behalf
of New Borrowers, that New Borrowers also utilize the following
locations:
4521
Sharon Road
Suite
370
Charlotte,
North Carolina 28211
Wholesale Express,
LLC:
Woodfield Office
Park
29548
Southfield Road, Suite 200
Southfield,
Michigan 48076
7901-7905 Eastgate
Boulevard
Mount
Juliet, Tennessee 37122
1930
South Alma School Road, Suite A-206
Mesa,
Arizona 85210
Wholesale,
LLC:
7
Industrial Parkway, Unit No. 24
Livingston, New Jersey 07039
Richmond
Professional Suites
711 S 11th St
,
Suite 101
Richmond, Texas
77469
1809
Gallatin Pike
8037
Eastgate Boulevard
Mount
Juliet, Tennessee 37122
Bailee
locations: None.
EXHIBIT D
NEW BORROWERS’ PATENTS, TRADEMARKS, COPYRIGHTS AND
LICENSES
PATENTS
None.
TRADEMARKS
None.
COPYRIGHTS
None.
LICENSES
Company
|
Type of License
|
Description of License Agreement
|
Wholesale,
LLC
|
In-bound
license
|
Master
Data License Agreement by and between Manheim Remarketing, Inc. and
Wholesale, Inc., dated April 11, 2017
|
EXHIBIT E
DEPOSIT ACCOUNTS AND INVESTMENT ACCOUNTS
[On file with Agent]
EXHIBIT F
COMPLIANCE CERTIFICATE
Hercules Capital, Inc.
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
Reference is made to that certain Loan and
Security Agreement dated as of April 30, 2018 (as amended,
restated, supplemented or otherwise modified from time to time, the
“
Loan
Agreement
”), by and among
RUMBLEON, INC., a Nevada corporation, NEXTGEN PRO, LLC, a Delaware
limited liability company, RMBL MISSOURI, LLC, a Delaware liability
company, RMBL TEXAS, LLC, a Delaware limited liability company,
RMBL TENNESSEE, LLC, a Delaware limited liability company, RMBL
EXPRESS, LLC, a Delaware limited liability company, WHOLESALE, LLC,
a Tennessee limited liability company, WHOLESALE EXPRESS, LLC, a
Tennessee limited liability company, and each of their Qualified
Subsidiaries from time to time party to the Loan Agreement
(individually, each, a “
Borrower
”,
and collectively, “
Borrowers
”),
the several banks and other financial institutions or entities from
time to time parties to this Agreement (collectively,
“
Lender
”)
and HERCULES CAPITAL, INC., a Maryland corporation, in its capacity
as administrative agent and administrative agent for Lender (in
such capacity “
Agent
”).
All capitalized terms not defined herein shall have the same
meaning as defined in the Loan Agreement.
The undersigned is an Officer of the Borrower
Representative, knowledgeable of all Borrowers’ financial
matters, and is authorized to provide certification of information
regarding Borrowers; hereby certifies, in such capacity, that in
accordance with the terms and conditions of the Loan Agreement,
each Borrower is in compliance in all material respects for the
period ending ___________ with all covenants, conditions and terms
and hereby reaffirms that as of the date of the fiscal quarter
ended _________________ all representations and warranties
contained therein (except
Sections 5.3
and
5.4
) are true and correct on and as of the date of
this Compliance Certificate with the same effect as though made on
and as of such date, except to the extent such representations and
warranties expressly relate to an earlier date, after giving effect
in all cases to any standard(s) of materiality contained in the
Loan Agreement as to such representations and warranties. Attached
are the required documents and calculations supporting the above
certification. The undersigned further certifies that the financial
statements and calcu
lations are
prepared in accordance with GAAP (to the extent required pursuant
to the terms of the Loan Agreement) and are consistent from one
period to the next except as explained below.
REPORTING REQUIREMENT
|
REQUIRED
|
CHECK IF ATTACHED
|
Monthly Financial Statements (
Section 7.1(a)
)
|
Monthly, within 30 days
|
☐
|
Quarterly Financial Statements (or link to 10-Q filing)
(
Section
7.1(b)
)
|
Quarterly, within 45 days or such later date as permitted by the
SEC or under the applicable securities laws (which may be delivered
by link through investor relations page)
|
☐
|
Annual Financial Statements (or link to 10-K) (
Section 7.1(c)
)
|
Annually, within 90 days or such later date as is permitted by the
SEC or under the applicable securities laws (which may be delivered
by link through investor relations page)
|
☐
|
Compliance Certificate (
Section
7.1(d)
)
|
Together with Monthly or Quarterly Statements
|
☐
|
A/R Agings Report (if A/R > $1,000,000) (
Section 7.1(e)
)
|
Monthly, within 30 days
|
☐
|
A/P Agings Report (if A/P > $600,000) (
Section 7.1(e)
)
|
Monthly, within 30 days
|
☐
|
Budget and Projections (
Section
7.1(g)
)
|
Annually, within 60 days of fiscal year end, and promptly upon any
Board approved update
|
☐
|
Daily Inventory Report (including detail of financed / not financed
Inventory) for Qualified Inventory Financing (
Section 7.1(h)
)
|
Every Business Day
|
☐
|
Material Statement, Report or Notice of any increased commitment,
change in terms, non-renewal or default or any demand for payment
received pursuant to Qualified Inventory Financing or Wholesale
Inventory Financing (
Section
7.1(i)
)
|
When received
|
☐
|
FINANCIAL COVENANTS
|
REQUIRED
|
ACTUAL
|
Minimum Cash / Minimum Gross Profit and EBITDA (prior to Tranche
III Advance)
|
Maintain levels of Gross Profit and EBITDA set forth in
Section 7.21(a)
,
tested quarterly: [is met/not met/not required to be
met];
OR
Maintain Minimum Cash of at least $10,000,000: [is met/not met/not
required to be met]
|
☐
not
applicable
As of most recent fiscal quarter ended:
Required Gross Profit
$
Actual Gross Profit
$
Required EBITDA
$
Actual EBITDA
$
Unrestricted First Lien Cash: $
|
Minimum Quarterly Revenue (after Tranche III Advance)
|
75% of Budget
|
☐
not
applicable
Budget Quarterly Revenue
$
Actual Quarterly Revenue
$
% of Budget
|
Minimum Quarterly Adjusted EBITDA, if average cash balance is less
than $15,000,000 (after Tranche III Advance)
|
$2,000,000
|
☐
not
applicable
$
|
OTHER COVENANTS
|
REQUIRED
|
ACTUAL
|
Equipment Financing
|
Not to exceed $1,000,000 outstanding at any time
|
$
|
Letters of Credit (cash secured) except for security for
leases
|
Not to exceed $500,000 outstanding at any time
|
$
|
Acquired Indebtedness
|
Not to exceed $250,000 outstanding at any time
|
$
|
Other Indebtedness
|
Not to exceed $2,000,000 (less on Equipment Financing, Letters of
Credit and Acquired Indebtedness outstanding) outstanding at any
time
|
$
|
Qualified Inventory Financing
|
Not to exceed 85% of aggregate Inventory value less Inventory
Financing Lenders’ aggregate cash collateral
|
(1) Aggregate Inventory value:
$
(2) Aggregate Inventory financing Lender cash
collateral
$
Maximum Inventory financing permitted (line 1 less line
2)
$
Actual Inventory financing amount outstanding
$
|
Wholesale Inventory Financing
|
Not to exceed $75,000,000 outstanding at any time
|
$
|
Repurchases of stock from employees, directors or
consultants
|
Not to exceed $100,000 in any fiscal year (excluding repurchases in
connection with the Wholesale Transaction Documents, which
repurchases shall not count toward this cap)
|
$
|
Joint Ventures
|
Cash contributions not to exceed $750,00 in any fiscal
year
|
$
|
Additional Investments
|
Not to exceed $1,500,000 (less Repurchases and Joint Ventures made
during the term) during the term
|
$
|
Investments in Foreign Subsidiaries
|
As approved by Agent
|
$
|
Cash Collateral and Security Deposits
|
Not to exceed $500,000 at any time
|
$
|
Landlord Waivers and Bailee Agreements
|
For locations where Collateral (other than non-Inventory vehicles)
in excess of $750,000 is maintained
|
☐
all applicable
locations covered
☐
landlord waiver or
bailee agreement required for the following new
location:
|
The undersigned hereby also confirms the below accounts represent
all depository accounts and securities accounts presently open in
the name of each Borrower or Subsidiary, as
applicable.
|
|
Depository AC #
|
Financial Institution
|
Account Type (Depository / Securities)
|
Last Month Ending Account Balance
|
Purpose of Account
|
BORROWER Name/Address:
|
|
|
1
|
|
|
|
|
|
2
|
|
|
|
|
|
3
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
|
|
7
|
|
|
|
|
|
|
BORROWER SUBSIDIARY COMPANY Name/Address
|
|
|
1
|
|
|
|
|
|
2
|
|
|
|
|
|
3
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
|
|
7
|
|
|
|
|
|
|
SCHEDULE
1.1
COMMITMENTS
LENDER
|
TRANCHE I COMMITMENT
|
TRANCHE II COMMITMENT
|
TRANCHE III COMMITMENT
|
TRANCHE IV COMMITMENT
|
Hercules Capital, Inc.
|
$5,000,000
|
$5,000,000
|
$5,000,000
|
$5,000,000, in Agent’s sole discretion, upon approval by
Agent’s investment committee
|
TOTAL COMMITMENTS
|
$5,000,000
|
$5,000,000
|
$5,000,000
|
$5,000,000, in Agent’s sole discretion, upon approval by
Agent’s investment committee
|
SCHEDULE
5.14
SUBSIDIARIES
RMBL
Express, LLC, a Delaware limited liability company
RMBL
Tennessee, LLC, a Delaware limited liability company
Wholesale,
LLC, a Tennessee limited liability company
Wholesale
Express, LLC, a Tennessee limited liability company
FORM OF
SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this
“
Agreement
”
)
is dated as of October 25, 2018, between RumbleOn, Inc., a Nevada
corporation (the
“
Company
”
),
and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a
“
Purchaser
”
and collectively the
“
Purchasers
”
).
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to an exemption from the registration requirements of Section 5 of
the Securities Act (as defined below) contained in Section 4(a)(2)
thereof and/or Regulation D thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and
not jointly, desires to purchase from the Company, securities of
the Company as more fully described in this Agreement;
and
WHEREAS, in
connection with the offering, the Company, together with National
Securities Corporation and Craig Hallum Capital Group LLC
(collectively, the “
Placement Agents
”), have
entered into an escrow agreement, in the form attached hereto as
Exhibit A
(the
“
Escrow
Agreement
”), with Continental Stock Transfer &
Trust Company (the “
Escrow Agent
”), to hold
the Subscription Amount (as defined below), to be released at the
Closing (as defined below) to the Company in accordance with the
Escrow Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Company
and each Purchaser agree as follows:
ARTICLE I
DEFINITIONS
1.1
Definitions
. In
addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms have the meanings
set forth in this Section 1.1:
“
Action
”
means any action, suit, inquiry, notice of violation, proceeding or
investigation pending or threatened before or by any court,
arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign).
“
Affiliate
”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under
Rule 405 under the Securities Act.
“
Board of
Directors
”
means
the board of directors of the Company.
“
Business
Day
”
means any day
except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
“
Closing
”
means the closing of the purchase and sale of the Shares pursuant
to Section 2.1.
“
Closing
Date
”
means the
Trading Day on which all of the Subscription Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers
’
obligations to pay the Subscription
Amount and (ii) the Company
’
s obligations to deliver the Shares,
in each case, have been satisfied or waived, but in no event later
than the third Trading Day following the date hereof.
“
Commission
”
means the United States Securities and Exchange
Commission.
“
Common
Stock
”
means the
Class B Common Stock of the Company, par value $0.001 per share,
and any other class of securities into which such securities may
hereafter be reclassified or changed.
“
Company
Counsel
”
means
Akerman LLP, with offices located at 350 East Las Olas Boulevard,
Fort Lauderdale, Florida 33301.
“
Disqualification Events
”
shall have the meaning ascribed to such term in Section
3.1(o).
“
Effectiveness Period
”
shall have the meaning ascribed to such term in Section
5.1(b).
“
Event
Date
” shall have the
meaning ascribed to such terms in Section
5.1(c).
“
Exchange
Act
”
means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“
Initial Filing Date
”
shall have the meaning ascribed to such term in Section
5.1(a).
“
Intellectual Property
Rights
” shall have the
meaning ascribed to such term in Section
3.1(q).
“
Investor
Questionnaire
”
means the investor questionnaire attached hereto as
Exhibit B
.
“
GAAP
”
shall have the meaning ascribed to such term in Section
3.1(h).
“
Liens
”
means a lien, charge, pledge, security interest, encumbrance, right
of first refusal, preemptive right or other
restriction.
“
Lock-up Agreement
” shall
have the meaning ascribed to such term in Section
4.10.
“
Material Adverse
Effect
” means
(i)
a material adverse effect on the legality, validity or
enforceability of any Subscription Document, (ii) a material
adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company
’
s
ability to perform in any material respect on a timely basis its
obligations under any Subscription Document.
“
Per Share Purchase
Price
”
equals
$7.10, subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement but
before the Closing Date.
“
Person
”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“
Proceeding
”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
“
Registrable Securities
”
shall have the meaning ascribed to such term in Section
5.1(a).
“
Registration Statement
”
shall have the meaning ascribed to such term in Section
5.1(a).
“
Required
Approvals
”
shall
have the meaning ascribed to such term in Section
3.1(e).
“
Risk
Factors
”
means the
risk factors attached hereto as
Exhibit C
.
“
Rule
144
”
means Rule
144 promulgated by the Commission pursuant to the Securities Act,
as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“
Rule
424
”
means Rule
424 promulgated by the Commission pursuant to the Securities Act,
as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“
SEC
Reports
”
shall
have the meaning ascribed to such term in Section
3.1(h).
“
Securities
Act
”
means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“
Shares
”
means the shares of Common Stock issued to each Purchaser pursuant
to this Agreement.
“
Short
Sales
”
means all
“
short sales
”
as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to
include the location and/or reservation of borrowable shares of
Common Stock).
“
Solicitor
”
shall have the meaning ascribed to such term in Section
3.1(o).
“
Subscription
Amount
”
means, as
to each Purchaser, the amount to be paid for Shares purchased
hereunder as specified below such Purchaser
’
s name on the signature page of this
Agreement and next to the heading
“
Subscription Amount,
”
in United States dollars and in
immediately available funds.
“
Subscription
Documents
”
means
this Agreement, any other documents or agreements executed in
connection with the transactions contemplated
hereunder.
“
S-1 Registration
Statement
” shall have the meaning ascribed to such
term in Section 5.1(a).
“
S-3 Registration
Statement
” shall have the meaning ascribed to such
term in Section 5.1(a).
“
Subsidiary
”
means any subsidiary of the Company as set forth in the SEC
Reports, and shall, where applicable, also include any direct or
indirect subsidiary of the Company formed or acquired after the
date hereof.
“
Trading
Day
”
means a day
on which the principal Trading Market is open for
trading.
“
Trading
Market
”
means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE MKT,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange (or any
successors to any of the foregoing).
“
Transaction
Documents
”
means
the Company’s presentation dated September 2018 and the form
of agreements, including exhibits thereto, in connection with the
Company’s proposed acquisition of Wholesale Holdings, Inc.
and Wholesale Express, LLC.
“
Transfer
Agent
”
means West
Coast Stock Transfer, Inc., the current transfer agent of the
Company, with a mailing address of 721 N. Vulcan Avenue, Suite 205,
Encinitas, California 92024, and any successor transfer agent of
the Company.
“
Variable Rate
Transactions
” shall have the meaning ascribed to such
term in Section 4.9.
ARTICLE II
PURCHASE AND
SALE
2.1
Closing
. On the
Closing Date, upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company
agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $23,000,000 of Shares in
increments of $100,000, subject to lesser amounts being accepted at
the Company’s discretion;
provided
,
however
, that the number of Shares sold
pursuant to this Agreement shall not exceed 19.9% of the
Company’s issued and outstanding shares of Class A Common
Stock of the Company, par value $0.001 per share, and Common Stock
at the time of Closing, on a pre-transaction basis. On or prior to
the Closing Date, each Purchaser shall deliver to the Escrow Agent
such Purchaser
’
s
Subscription Amount via wire transfer of immediately available
funds in accordance with the Escrow Agreement. On the Closing Date,
each Purchaser shall release such Purchaser’s Subscription
Amount from escrow in accordance with the Escrow Agreement and the
Company shall deliver to each Purchaser its respective Shares as
determined pursuant to Section 2.2(a), and the Company and each
Purchaser shall deliver the other items set forth in Section 2.2.
Upon satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of
Company Counsel or such other location as the parties shall
mutually agree.
2.2
Deliveries
.
(a)
On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:
(i)
this Agreement duly
executed by the Company; and
(ii)
a
copy of the irrevocable instructions to the Transfer Agent
instructing the Transfer Agent to issuance in book entry form the
Shares equal to such Purchaser
’
s Subscription Amount divided by the
Per Share Purchase Price, registered in the name of such
Purchaser.
(b)
On or prior to the
Closing Date, each Purchaser shall deliver or cause to be delivered
the following:
(i)
to the Company, a
completed Investor Questionnaire;
(ii)
to
the Company, this Agreement duly executed by such
Purchaser;
(iii)
to
the Escrow Agent, such Purchaser’s Subscription Amount by
wire transfer of immediately available funds in accordance with the
Escrow Agreement; and
(iv)
to
the Company, such Purchaser’s Subscription Amount by release
of such Purchaser’s Subscription Amount from escrow in
accordance with the Escrow Agreement.
2.3
Closing
Conditions
.
(a)
The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:
(i)
the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) on the Closing Date of the representations and warranties
of the Purchasers contained herein (unless as of a specific date
therein in which case they shall be accurate as of such
date);
(ii)
all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the Closing Date shall have been
performed; and
(iii)
the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.
(b)
The respective
obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being
met:
(i)
the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a
specific date therein in which case they shall be accurate as of
such date);
(ii)
all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;
(iii)
the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv)
there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(v)
from the date
hereof to the Closing Date, trading in the Common Stock shall not
have been suspended by the Commission or the Company
’
s principal Trading Market, and, at
any time prior to the Closing Date, trading in securities generally
as reported by Bloomberg L.P. shall not have been suspended or
limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared
either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of
such Purchaser, makes it impracticable or inadvisable to purchase
the Shares at the Closing.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES
3.1
Representations and
Warranties of the Company
. Except as set forth in the SEC
Reports, which SEC Reports shall be deemed a part hereof and shall
qualify any representation or otherwise made herein to the extent
of the disclosure contained in the SEC Reports, or as set forth in
the Schedules attached hereto, the Company hereby makes the
following representations and warranties to each
Purchaser:
(a)
Organization and
Qualification
. The Company and each of the Subsidiaries is
an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on
its business as described in the SEC Reports. Neither the Company
nor any Subsidiary is in violation nor default of any of the
provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.
Each of the Company and the Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be
expected to result in a
Material
Adverse Effect
.
(b)
Authorization;
Enforcement
. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Subscription
Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and each
of the other Subscription Documents by the Company and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the
Company, the Board of Directors or the Company
’
s stockholders in connection
herewith or therewith other than in connection with the Required
Approvals. This Agreement and each other Subscription Document to
which the Company is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors
’
rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(c)
No Conflicts
.
The execution, delivery and performance by the Company of this
Agreement and the other Subscription Documents to which it is a
party, the issuance and sale of the Shares and the consummation by
it of the transactions contemplated hereby and thereby do not and
will not (i) conflict with or violate any provision of the
Company
’
s or any
Subsidiary
’
s certificate
or articles of incorporation, bylaws or other organizational or
charter documents, (ii) conflict with, or constitute a default (or
an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the
properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or
by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse
Effect.
(d)
Conduct of Business
. Since June
30, 2018, the Company has conducted its business in the ordinary
course materially consistent with past practice. Since June 30,
2018, there has not been any Material Adverse Effect with respect
to the Company or any of its Subsidiaries nor has there occurred
any event that is reasonably likely to result in a Material Adverse
Effect with respect to the Company or any of its
Subsidiaries.
(e)
Filings, Consents and
Approvals
. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Subscription Documents, other than: (i) the filings
required pursuant to Section 4.3 of this Agreement, (ii)
application(s) to each applicable Trading Market for the listing of
the Shares for trading thereon in the time and manner required
thereby, and (iii) such filings as are required to be made under
applicable state securities laws (collectively, the
“
Required
Approvals
”
).
(f)
Issuance of the
Shares
. The Shares are duly authorized and, when issued and
paid for in accordance with the applicable Subscription Documents,
will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens imposed by the Company.
(g)
Capitalization
.
The capitalization of the Company is as set forth in the SEC
Reports. Except as provided for in the Transaction Documents, the
Company has not issued any capital stock since its most recently
filed periodic report under the Exchange Act, other than pursuant
to the vesting and delivery of awards under the Company
’
s employee equity plans outstanding
as of the date of the most recently filed periodic report under the
Exchange Act. No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate
in the transactions contemplated by the Subscription
Documents.
(h)
SEC Reports; Financial
Statements
. Since January 9, 2017, the Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof
(the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively
referred to herein as the
“
SEC
Reports
”
), on a
timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of
the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of
the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (
“
GAAP
”
),
except as may be otherwise specified in such financial statements
or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present
in all material respects the financial position of the Company and
its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i)
Disclosure Controls
. The
Company maintains disclosure controls and procedures as required by
Rule 13a-15 or 15d-15 under the Exchange Act. Such disclosure
controls and procedures are effective to ensure that all
information required to be disclosed by the Company is recorded and
reported on a timely basis to the individuals responsible for the
preparation of the SEC Reports and other public disclosure
documents. The Company maintains internal control over financial
reporting (as defined in Rule 13a-15 or 15d-15, as applicable,
under the Exchange Act). Such internal control over financial
reporting is effective in providing reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP
and includes policies and procedures that (i) pertain to the
maintenance of records that are in reasonable detail and accurately
and fairly reflect the transactions and dispositions of the assets
of the Company, (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company, and
(iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on its
financial statements. No attorney representing the Company or any
of its Subsidiaries, whether or not employed by the Company or any
of its Subsidiaries, has reported evidence of a violation of
securities laws, breach of fiduciary duty or similar violation by
the Company or any of its officers, directors, employees or agents
pursuant to the rules adopted pursuant to Section 307 of the
Sarbanes-Oxley Act.
(j)
Internal Controls
. The Company
has disclosed, based on the most recent evaluation by its chief
executive officer and its chief financial officer prior to the date
hereof, to the Company’s auditors and the Audit Committee of
Board of Directors (i) any significant deficiencies in the
design or operation of its internal controls over financial
reporting that are reasonably likely to adversely affect the
Company’s ability to record, process, summarize and report
financial information and has identified for the Company’s
auditors and Audit Committee of the Board of Directors any material
weaknesses in internal control over financial reporting and
(ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Company’s internal control over financial reporting. The
Company has delivered to the Company prior to the date hereof
(A) a complete and correct summary of any
such disclosure and (B) any material communication made by
management or the Company’s auditors to the Audit Committee
of the Board of Directors required or contemplated by listing
standards of Trading Market, the Audit Committee’s charter or
professional standards of the Public Company Accounting Oversight
Board. No material complaints from any source regarding accounting,
internal accounting controls or auditing matters, and no concerns
from the Company’s employees regarding questionable
accounting or auditing matters, have been received by the Company
or, to the knowledge of the Company, the Company’s
independent registered public accounting firm.
(k)
Trading Market
. The Company is
in compliance in all material respects with the applicable listing
and corporate governance rules and regulations of Trading Market.
From January 1, 2017 through the date hereof, the Company has not
received any comment letter from the Commission or the staff
thereof or, except as disclosed in the SEC Reports, any
correspondence from the Trading Market or the staff thereof
relating to the delisting or maintenance of listing of Common Stock
on Trading Market, other than such disclosures or documents that
can be obtained on the Commission’s website at www.sec.gov.
The Company has not taken and will not take any action designed to
or that might reasonably be expected to cause or result in an
unlawful manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(l)
Certain Fees
.
Except as set forth on Schedule 3.1(l), no brokerage or
finder
’
s fees or
commissions are or will be payable by the Company or any Subsidiary
to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by the Subscription Documents. The
Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by the Subscription
Documents.
(m)
Investment
Company
. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Shares, will not be or
be an Affiliate of, an
“
investment company
”
within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“
investment
company
”
subject to
registration under the Investment Company Act of 1940, as
amended.
(n)
Registration
Rights
. Except as set forth in the SEC Reports, the
Transaction Documents and Section 5.1 of this Agreement, no
Person has any right to cause the Company or any Subsidiary to
effect the registration under the Securities Act of any securities
of the Company or any Subsidiary.
(o)
No “Bad Actor”
Disqualification
. The Company has exercised reasonable care,
in accordance with Commission rules and guidance, and has conducted
a factual inquiry, the nature and scope of which reflect reasonable
care under the relevant facts and circumstances, to determine
whether any Covered Person (as defined below) is subject to any of
the “bad actor” disqualifications described in Rule
506(d)(1)(i) to (viii) under the Securities Act
(“
Disqualification
Events
”). To the Company’s knowledge, after
conducting such sufficiently diligent factual inquiries, no Covered
Person is subject to a Disqualification Event, except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3) under
the Securities Act. The Company has complied, to the extent
applicable, with any disclosure obligations under Rule 506(e) under
the Securities Act. “
Covered Persons
” are
those persons specified in Rule 506(d)(1) under the Securities Act,
including the Company; any predecessor or affiliate of the Company;
any director, executive officer, other officer participating in the
offering, general partner or managing member of the Company; any
beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power;
any promoter (as defined in Rule 405 under the Securities Act)
connected with the Company in any capacity at the time of the sale
of the Shares; and any person that has been or will be paid
(directly or indirectly) remuneration for solicitation of
purchasers in connection with the sale of the Shares (a
“
Solicitor
”), any general
partner or managing member of any Solicitor, and any director,
executive officer or other officer participating in the offering of
any Solicitor or general partner or managing member of any
Solicitor.
(p)
Information Provided
. The
Company confirms that, to its knowledge, with the exception of (i)
the proposed sale of the Shares under this Agreement and the
Subscription Documents relating thereto and (ii) the potential
acquisition of a business disclosed to the Purchasers and the
Transaction Documents relating thereto, neither the Company nor any
other persons acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that
constitutes or might constitute material, nonpublic information.
The Company further confirms that until public disclosure of the
events described in (i) and (ii) above, the Purchasers will be
restricted by the insider trading prohibitions under the Exchange
Act from trading or “tipping” on the basis of such
information.
(q)
Intellectual Property
. Except
as would not reasonably be expected to result, individually or in
the aggregate, in a Material Adverse Effect, the Company owns or
possesses or has valid rights to use all patents, trademarks,
service marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses, trade secrets and similar
rights (“
Intellectual Property
Rights
”), if any, necessary for the conduct of the
business of the Company as currently carried on and as described in
the Company’s SEC Reports. To the knowledge of the Company,
no action or use by the Company necessary for the conduct of its
business as currently carried on and as described in the
Company’s SEC Reports infringes any Intellectual Property
Rights of others. Except as would not reasonably be expected to
result, individually or in the aggregate, in a Material Adverse
Effect, the Company has not received any notice alleging any such
infringement with asserted Intellectual Property Rights of others.
Except as would not reasonably be expected to result, individually
or in the aggregate, in a Material Adverse Effect (A) to the
knowledge of the Company, there is no infringement,
misappropriation or violation by third parties of any of the
Intellectual Property Rights owned by the Company; (B) there is no
pending or, to the knowledge of the Company, threatened action,
suit, proceeding or claim by others challenging the rights of the
Company in or to any such Intellectual Property Rights, and the
Company is unaware of any facts which would form a reasonable basis
for any such claim, that would, individually or in the aggregate,
together with any other claims in this Section 3.1(q), reasonably
be expected to result in a Material Adverse Effect; (C) the
Intellectual Property Rights owned by the Company and, to the
knowledge of the Company, the Intellectual Property Rights licensed
to the Company, have not been adjudged by a court of competent
jurisdiction invalid or unenforceable, in whole or in part, and
there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others challenging
the validity or scope of any such Intellectual Property Rights, and
the Company is unaware of any facts which would form a reasonable
basis for any such claim that would, individually or in the
aggregate, together with any other claims in this Section 3.1(q),
reasonably be expected to result in a Material Adverse Effect; (D)
there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others that the
Company infringes, misappropriates or otherwise violates any
Intellectual Property Rights or other proprietary rights of others,
the Company has not received any written notice of such claim and
the Company is unaware of any other facts which would form a
reasonable basis for any such claim that would, individually or in
the aggregate, together with any other claims in this Section
3.1(q), reasonably be expected to result in a Material Adverse
Effect; and (E) to the Company’s knowledge, no employee of
the Company is in violation in any material respect of any term of
any employment contract, patent disclosure agreement, invention
assignment agreement, non-competition agreement, non-solicitation
agreement, nondisclosure agreement or any restrictive covenant to
or with a former employer where the basis of such violation relates
to such employee’s employment with the Company, or actions
undertaken by the employee while employed with the Company and
could reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect. To the Company’s
knowledge, all material trade secrets developed by and belonging to
the Company which have not been patented have been kept
confidential. The Company is not a party to or bound by any
options, licenses or agreements with respect to the Intellectual
Property Rights of any other person or entity that are required to
be set forth in the Company’s SEC Reports and are not
described therein. To the Company’s knowledge, none of the
technology employed by the Company has been obtained or is being
used by the Company in violation of any contractual obligation
binding on the Company or any of its officers, directors or
employees, or otherwise in violation of the rights of any
persons.
3.2
Representations and
Warranties of the Purchasers
. Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows
(unless as of a specific date therein, in which case they shall be
accurate as of such date):
(a)
Organization;
Authority
. Each Purchaser is either an individual or an
entity duly incorporated or formed, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
formation with full right, corporate, partnership, limited
liability company or similar power and authority to enter into and
to consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and performance by
such Purchaser of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate, partnership,
limited liability company, investment management agreement or
similar action, as applicable, on the part of such Purchaser. Each
Subscription Document to which it is a party has been duly executed
by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors
’
rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(b)
Investment
Purpose
. Each Purchaser is
acquiring the Shares for its own account for investment only and
not with a view towards, or for resale in connection with, the
public sale or distribution thereof. Each Purchaser acknowledges
that the Shares will be issued in book entry form with a notation
of restriction as set forth in Section 4.1.
(c)
Experience
of Such Purchaser
. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in
the Shares, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an
investment in the Shares and, at the present time, is able to
afford a complete loss of such investment.
(d)
Accredited
Investor Status
. Each
Purchaser is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D, as promulgated
under the Securities Act
and has delivered to the Company a completed
Investor Questionnaire.
(e)
Reliance
on Exemptions
. Each
Purchaser understands that the Shares are being offered and sold to
it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of,
and each Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of each
Purchaser set forth herein in order to determine the availability
of such exemptions and the eligibility of each Purchaser to acquire
the Shares.
(f)
Information
.
Each Purchaser and its representatives, if any, have been furnished
with all materials relating to the business, finances and
operations of the Company and other information each Purchaser
deemed material to making an informed investment decision regarding
its purchase of the Shares, which have been requested by each
Purchaser. Purchaser acknowledges that it has reviewed a copy
of the Subscription Documents, including the Risk Factors, the
Transaction Documents and the SEC Reports. Each Purchaser and
its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management. Neither such
inquiries, nor any other due diligence investigations conducted by
any Purchaser or its advisors, if any, or its representatives,
shall modify, amend or affect each Purchaser’s right to rely
on the Company’s representations and warranties contained in
Section 3.1. Each Purchaser understands that its investment
in the Shares involves a high degree of risk. Each Purchaser
has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with
respect to its acquisition of the Shares.
(g)
General
Solicitation
. Each
Purchaser is not purchasing the Shares as a result of any
advertisement, article, notice or other communication regarding the
Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or
any other general solicitation or general
advertisement.
(h)
Company Affiliated Investors
.
Each Purchaser acknowledges that certain officers and directors of
the Company may purchase Shares pursuant to this
Agreement.
(i)
No Governmental Review
. Each
Purchaser understands that no United States federal or state
governmental authority has passed on or made any recommendation or
endorsement of the Shares, or the fairness or suitability of the
investment in the Shares, nor have such governmental authorities
passed upon or endorsed the merits of the offering of the
Shares.
(j)
Certain Transactions
and Confidentiality
. Other than consummating the
transactions contemplated hereunder, each Purchaser has not, nor
has any Person acting on behalf of or pursuant to any understanding
with such Purchaser, directly or indirectly executed any purchases
or sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Other than to
other Persons party to this Agreement or to such
Purchaser
’
s
representatives, including, without limitation, its officers,
directors, partners, legal and other advisors, employees, agents
and Affiliates, such Purchaser has maintained the confidentiality
of all disclosures made to it in connection with this transaction
(including the existence and terms of this
transaction).
ARTICLE IV
OTHER AGREEMENTS OF
THE PARTIES
4.1
Transfer and Restrictive
Legend
.
(a)
The Shares may only
be disposed of in compliance with state and federal securities
laws. In connection with any transfer of Shares other than pursuant
to an effective registration statement, the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Shares
under the Securities Act.
(b)
The Purchasers
agree to a restrictive notation on the Shares to be issued in book
entry form as follows:
THESE
SHARES HAVE BEEN ACQUIRED FROM THE ISSUER WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) AND ARE RESTRICTED SHARES AS THAT TERM IS DEFINED UNDER
RULE 144, PROMULGATED UNDER THE SECURITIES ACT. THESE SHARES MAY
NOT BE SOLD, PLEDGED, TRANSFERRED, DISTRIBUTED, OR OTHERWISE
DISPOSED OF IN ANY MANNER UNLESS SUCH TRANSACTION IS (I) REGISTERED
UNDER THE SECURITIES ACT, (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT, OR (III) SOLD PURSUANT TO A VALID
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS AS EVIDENCED BY AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER, STATING
THAT THE TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING
REGISTRATION OF SUCH SHARES UNDER THE SECURITIES ACT.
4.2
Integration
.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Shares in a manner that would require the
registration under the Securities Act of the sale of the Shares or
that would be integrated with the offer or sale of the Shares for
purposes of the rules and regulations of any Trading Market such
that it would require shareholder approval prior to the closing of
such other transaction unless shareholder approval is obtained
before the closing of such subsequent transaction.
4.3
Securities Laws
Disclosure; Publicity
. On the Trading Day immediately
following the Closing Date, the Company shall file a Current Report
on Form 8-K (the
“
Announcement
8-K
”
), including
the Subscription Documents and the Transaction Documents with the
Commission. From and after the filing of the Announcement 8-K, the
Company represents to the Purchasers that it shall have publicly
disclosed all material, non-public information delivered to any of
the Purchasers by the Company or any of its Subsidiaries, or any of
their respective officers, directors, employees or agents in
connection with the transactions contemplated by the Subscription
Documents and the Transaction Documents.
4.4
Use of
Proceeds
. The Company shall use the net proceeds from the
sale of the Shares hereunder as set forth in the Transaction
Documents and for working capital purposes.
4.5
Reservation of Common
Stock
. As of the date hereof, the Company has reserved and
the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of
Common Stock for the purpose of enabling the Company to issue
Shares pursuant to this Agreement.
4.6
Listing of Common
Stock
. The Company hereby agrees to use best efforts to
maintain the listing or quotation of the Common Stock on the
Trading Market on which it is currently listed, and concurrently
with the Closing, the Company shall apply to list or quote all of
the Shares on such Trading Market and promptly secure the listing
of all of the Shares on such Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on
any other Trading Market, it will then include in such application
all of the Shares, and will take such other action as is necessary
to cause all of the Shares to be listed or quoted on such other
Trading Market as promptly as possible. The Company will then take
all action reasonably necessary to continue the listing and trading
of its Common Stock on a Trading Market and will comply in all
respects with the Company
’
s reporting, filing and other
obligations under the bylaws or rules of the Trading Market. The
Company agrees to maintain the eligibility of the Common Stock for
electronic transfer through the Depository Trust Company or another
established clearing corporation, including, without limitation, by
timely payment of fees to the Depository Trust Company or such
other established clearing corporation in connection with such
electronic transfer.
4.7
Certain Transactions
and Confidentiality
. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it nor
any Affiliate acting on its behalf or pursuant to any understanding
with it will execute any purchases, sales or effect any other
transactions, including Short Sales of any of the
Company
’
s securities
during the period commencing with the execution of this Agreement
and ending at such time that the transactions contemplated by the
Subscription Documents and Transaction Documents are first publicly
announced pursuant to the filing of the Announcement 8-K as
described in Section 4.3. Each Purchaser, severally and not jointly
with the other Purchasers, covenants that until such time as the
transactions contemplated by the Subscription Documents and
Transaction Documents are publicly disclosed by the Company
pursuant to the filing of the Announcement 8-K as described in
Section 4.3, such Purchaser will maintain the confidentiality of
the existence and terms of this transaction and the information
included in the Subscription Documents and Transaction
Documents.
4.8
Form D; Blue Sky
Filings
. The Company agrees to timely file a Form D with
respect to the Shares as required under Regulation D and to provide
a copy thereof, promptly upon request of any Purchaser. The Company
shall take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the
Shares for, sale to the Purchasers at the Closing under applicable
securities or
“
Blue
Sky
”
laws of the states
of the United States, and shall provide evidence of such actions
promptly upon request of any Purchaser.
4.9
Restriction on Variable Rate
Transactions
. From the date hereof until the one-year
anniversary of the Closing Date, the Company shall be prohibited
from effecting or entering into an agreement to effect any issuance
by the Company or any of its subsidiaries of Common Stock or any
outstanding convertible instruments, options or warrants or similar
securities (or a combination of units thereof) involving a Variable
Rate Transaction. “
Variable Rate
Transaction
” means a transaction in which the Company
(i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the
right to receive additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price
that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt
or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock or (ii) enters into
any agreement, including, but not limited to, an agreement for an
equity line of credit or “at-the-market” offering,
whereby the Company may issue securities at a future determined
price (other than standard and customary “preemptive”
or “participation” rights and excluding any agreement
by the Company to issue shares of its Common Stock as consideration
in an acquisition, merger or similar business combination
transaction). For the avoidance of doubt, the issuance of a
security which is subject to customary anti-dilution protections,
including where the conversion, exercise or exchange price is
subject to adjustment as a result of stock splits, reverse stock
splits and other similar recapitalization or reclassification
events, shall not be deemed to be a “Variable Rate
Transaction.” Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.
4.10
Restriction
on Future Issuances
. The Company agrees that, without the
prior written consent of the Private Placement Agents, it will not,
for a period of ninety (90) days after the date of the Closing
Date, (a) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of
capital stock of the Company or any securities convertible into or
exercisable or exchangeable for shares of capital stock of the
Company, (b) file or cause to be filed any registration statement
with the Commission relating to the offering of any shares of
capital stock of the Company or any securities convertible into or
exercisable or exchangeable for shares of capital stock of the
Company (except for registration statements on Form S-4 or Form S-8
and a resale registration statement on Form S-3 for the shares of
capital stock of the Company issued hereunder and pursuant to the
Transaction Documents) or (c) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of capital stock of the
Company, whether any such transaction described in clause (a), (b)
or (c) above is to be settled by delivery of shares of capital
stock of the Company or such other securities, in cash or
otherwise. The restrictions contained in this Section 4.10 shall
not apply to (A) sales of shares of capital stock of the
Company under any trading plan pursuant to Rule 10b5-1 under the
Securities Exchange Act of 1934, as amended, existing as of the
date of this Agreement or (B) dispositions or transfers of
shares of capital stock of the Company customarily excluded from
lock-up restrictions of this type. The restrictions contained in
this Section 4.10 shall not apply to (i) the Shares to be sold
hereunder, (ii) the issuance by the Company of shares of capital
stock of the Company upon the exercise of a stock option or warrant
or the conversion or vesting of a security outstanding on the date
hereof, (iii) the issuance by the Company of equity awards of the
Company under any equity compensation plan of the Company, (iv) the
issuance by the Company of shares of capital stock of the Company
or securities convertible into, exchangeable for or that represent
the right to receive shares of capital stock of the Company in
connection with the acquisition by the Company of the securities,
business, technology, property or other assets of another person or
entity, including the issuance by the Company of shares of capital
stock pursuant to the Transaction Documents, (v) the sale of shares
of capital stock of the Company to cover the payment of exercise
prices or the payment of taxes associated with the exercise or
vesting of equity awards under any equity compensation plan of the
Company, or (vi) the filing of a post-effective amendment to the
Company’s registration statements on Forms S-3 (Reg. Nos.
333-223425, 333-225217 and 333-226514) and Forms S-8 (Reg. No.
333-219203, 333-223428 and 333-226440) with the Commission to
maintain effectiveness of such registration statements, provided
that in each of (ii) and (iii) above, the underlying shares of
capital stock of the Company held by the Company’s directors
and officers shall be restricted from sale pursuant to the Lock-up
Agreement (defined below). The Company has caused to be delivered
to the Placement Agents prior to the date of this Agreement a
letter, in the form of Exhibit D hereto (the “
Lock-Up Agreement
”), from
each of the Company’s directors and executive officers. The
Company will enforce the terms of each Lock-Up Agreement and issue
stop-transfer instructions to the transfer agent for the Common
Stock with respect to any transaction or contemplated transaction
that would constitute a breach of or default under the applicable
Lock-Up Agreement.
ARTICLE V
REGISTRATION
RIGHTS
5.1
Registration Procedures and Expenses;
Liquidated Damages for Certain Events
.
(a)
The Company shall
prepare and file with the Commission, as promptly as reasonably
practicable following Closing, but in no event later than 30 days
following the date hereof (the “
Initial Filing Date
”), a
registration statement on Form S-3 (or any successor to Form S-3),
covering the resale of the Registrable Securities (as defined
below) (the “
S-3
Registration Statement
”) and as soon as reasonably
practicable thereafter but in no event later than 90 days following
the date hereof (180 days in the event of a review of the S-3
Registration Statement by the SEC), to effect such registration and
any related qualification or compliance with respect to all
Registrable Securities held by the Purchasers. For purposes of this
Agreement, the term “
Registrable Securities
”
shall mean (i) the Shares; and (iii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in
replacement of, any Shares. In the event that Form S-3 (or any
successor form) is or becomes unavailable to register the resale of
the Registrable Securities at any time prior to the expiration of
the Purchasers’ registration rights pursuant to Article V,
the Company shall prepare and file with the SEC, as promptly as
reasonably practicable following the Closing but in no event later
than the Initial Filing Date, a registration statement on Form S-1
(or any successor to Form S-1), covering the resale of the
Registrable Securities (the “
S-1 Registration
Statement
” and collectively the S-3 Registration
Statement, the “
Registration Statement
”)
and as soon as reasonably practicable thereafter but in no event
later than 60 days following the date hereof (120 days in the event
of a review of the S-1 Registration Statement by the SEC), to
effect such registration and any related qualification or
compliance with respect to all Registrable Securities held by the
Purchasers. If the Company is not eligible to use Form S-3 at
Initial Filing Date, and the Company subsequently becomes eligible
to use Form S-3 during the Effectiveness Period (as defined below),
the Company shall file, as promptly as reasonably practicable, a
new S-3 Registration Statement covering the resale of the
Registrable Securities and replace the S-1 Registration Statement
with the new S-3 Registration Statement upon the effectiveness of
the new S-3 Registration Statement.
(b)
The Company shall,
during the Effectiveness Period, use its reasonable best efforts
to:
(i)
prepare and file
with the Commission such amendments and supplements to the
Registration Statement and the Prospectus used in connection
therewith as may be necessary or advisable to keep the Registration
Statement current and effective for the resale of the Registrable
Securities held by a Purchaser for a period ending on the earlier
of (i) the second anniversary of the Closing Date, (ii) the date on
which all Registrable Securities may be sold pursuant to Rule 144
during any three-month period without the requirement for the
Company to be in compliance with the current public information
required under Rule 144(c)(1) or (iii) such time as all Registrable
Securities have been sold pursuant to a registration statement or
Rule 144 (collectively, the “
Effectiveness Period
”).
The Company shall notify each Purchaser promptly upon the
Registration Statement and each post-effective amendment thereto
being declared effective by the Commission and advise each
Purchaser that the form of Prospectus contained in the Registration
Statement or post-effective amendment thereto, as the case may be,
at the time of effectiveness meets the requirements of Section
10(a) of the Securities Act or that it intends to file a Prospectus
pursuant to Rule 424(b) under the Securities Act that meets the
requirements of Section 10(a) of the Securities Act;
(ii)
furnish
to each Purchaser with respect to the Registrable Securities
registered under the Registration Statement such number of copies
of the Registration Statement and the Prospectus (including
supplemental prospectuses) filed with the Commission in conformance
with the requirements of the Securities Act and other such
documents as such Purchaser may reasonably request, in order to
facilitate the public sale or other disposition of all or any of
the Registrable Securities by such Purchaser;
(iii)
make
any necessary blue sky filings;
(iv)
pay
the expenses incurred by the Company and the Purchasers in
complying with Article V, including, all registration and filing
fees, FINRA fees, exchange listing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and
expenses and the expense of any special audits incident to or
required by any such registration (but excluding attorneys’
fees of any Purchaser and any and all underwriting discounts and
selling commissions applicable to the sale of Registrable
Securities by the Purchasers);
(v)
advise the
Purchasers, promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the Commission
delaying or suspending the effectiveness of the Registration
Statement or of the initiation of any proceeding for that purpose;
and it will promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued;
and
(vi)
with
a view to making available to the Purchaser the benefits of Rule
144 and any other rule or regulation of the Commission that may at
any time permit the Purchasers to sell Registrable Securities to
the public without registration, the Company covenants and agrees
to: (i) make and keep public information available, as such term is
understood and defined in Rule 144, until the earlier of (A) such
date as all of the Registrable Securities qualify to be resold
immediately pursuant to Rule 144 or any other rule of similar
effect during any three-month period without the requirement for
the Company to be in compliance with the current public information
required under Rule 144(c)(1) or (B) such date as all of the
Registrable Securities shall have been resold pursuant to Rule 144
(and may be further resold without restriction); (ii) file with the
Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and under the
Exchange Act; and (iii) furnish to any Purchaser upon request, as
long as such Purchaser owns any Registrable Securities, (A) a
written statement by the Company as to whether it has complied with
the reporting requirements of the Securities Act and the Exchange
Act, (B) a copy of the Company’s most recent Annual Report on
Form 10-K or Quarterly Report on Form 10-Q, and (C) such other
information as may be reasonably requested in order to avail the
Purchaser of any rule or regulation of the Commission that permits
the selling of any such Registrable Securities without
registration.
The
Company understands that the Purchasers disclaim being an
underwriter, but acknowledges that a determination by the
Commission that a Purchaser is deemed an underwriter shall not
relieve the Company of any obligations it has hereunder. The
Company will not name any Purchaser as an underwriter in a
Registration Statement or Prospectus.
(c)
If (i) the
Registration Statement is not filed on or prior to the Initial
Filing Date, or (ii) the Company fails to file with the Commission
a request for acceleration of the Registration Statement in
accordance with Rule 461 under the Securities Act, within five
Trading Days after the date the Company is first notified (orally
or in writing) by the Commission that the Registration Statement
will not be “reviewed” or will not be subject to
further review or comment, or (iii) prior to the effective date of
the Registration Statement, the Company fails to file a
pre-effective amendment and otherwise respond in writing to
comments made by the Commission in respect of such Registration
Statement within 21 days after the receipt of comments by or notice
from the Commission that such amendment or resolution of such
comments is required in order for such Registration Statement to be
declared effective, or (iv) there occurs the issuance of by the
Commission or any other federal or state governmental authority of
any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose or
(v) at any time during the period commencing from the six-month
anniversary of the date hereof and ending at such time that all of
the Registrable Securities may be resold during any three-month
period without the requirement for the Company to be in compliance
with the current public information required under Rule 144(c)(1),
the Company shall fail to satisfy the current public information
requirement under Rule 144(c) (any of the foregoing being referred
to as an “
Event
”, and for purposes
of clauses (i) and (v), the date on which such Event occurs, and
for purpose of clause (ii) the date on which such five Trading Day
period is exceeded, and for purpose of clause (iii) the date which
such 21-day period is exceeded, being the “
Event Date
”), then except
during any period of time during which the Registrable Securities
may be resold pursuant to Rule 144 without volume limitations, in
addition to any other rights the Purchasers may have hereunder or
under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall
not have been cured by such date) until the applicable Event is
cured, the Company shall pay to each Purchaser an amount in cash,
as liquidated damages and not as a penalty, equal to the product of
1.0% multiplied by the Purchase Price paid by such Purchaser with
respect to the Registrable Securities affected by such Event and
held by such Purchaser on such Event Date or monthly anniversary
thereof, up to a maximum of 10.0% of the Purchase Price for such
Registrable Securities provided that such maximum shall not apply
if the applicable Event is the Event described in clause (v). If
the Company fails to pay any liquidated damages pursuant to this
Section in full within seven days after the date payable, the
Company will pay interest thereon at a rate of 12% per annum (or
such lesser maximum amount that is permitted to be paid by
applicable law) to the Purchasers, accruing daily from the date
such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The liquidated damages pursuant
to the terms hereof shall apply on a daily pro rata basis for any
portion of a month prior to the cure of an Event.
ARTICLE VI
MISCELLANEOUS
6.1
Termination
.
This Agreement may be terminated by any Purchaser, as to such
Purchaser
’
s obligations
hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to
the other parties, if the Closing has not been consummated on or
before October 31, 2018;
provided
,
however
, that
no such termination will affect the right of any party to sue for
any breach by any other party (or parties).
6.2
Fees and
Expenses
. Except as expressly set forth in the Subscription
Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance
of this Agreement. The Company shall pay all Transfer Agent fees
(including, without limitation, any fees required for same-day
processing of any instruction letter delivered by the Company and
any exercise notice delivered by a Purchaser), stamp taxes and
other taxes and duties levied in connection with the delivery of
any Shares to the Purchasers.
6.3
Entire
Agreement
. The Subscription Documents, together with the
exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof
and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
6.4
Notices
. Any
and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via
facsimile or email attachment at the facsimile number or email
address as set forth on the signature pages attached hereto at or
prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the
next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile or email attachment at the
facsimile number or email address as set forth on the signature
pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the
second (2
nd
)
Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto. To the extent that
any notice provided pursuant to any Subscription Document
constitutes, or contains, material, non-public information
regarding the Company or any Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K.
6.5
Amendments;
Waivers
. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by the Company and the
Purchasers. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of
any such right. Any proposed amendment or waiver that
disproportionately, materially and adversely affects the rights and
obligations of any Purchaser relative to the comparable rights and
obligations of the other Purchasers shall require the prior written
consent of such adversely affected Purchaser. Any amendment
effected in accordance with accordance with this Section 6.5 shall
be binding upon each Purchaser and holder of Shares and the
Company.
6.6
Headings
. The
headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of
the provisions hereof.
6.7
Successors and
Assigns
. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each
Purchaser (other than by merger). Any Purchaser may assign any or
all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Shares, provided that such
transferee agrees in writing to be bound, with respect to the
transferred Shares, by the provisions of the Subscription Documents
that apply to the
“
Purchasers.
”
6.8
No Third-Party
Beneficiaries
. The Placement Agents shall be the third party
beneficiary of the representations and warranties of the Company in
Section 3.1 and the representations and warranties of the
Purchasers in Section 3.2. This Agreement is intended for the
benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as
otherwise set forth in this Section 6.8.
6.9
Governing Law
.
All questions concerning the construction, validity, enforcement
and interpretation of the Subscription Documents shall be governed
by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal
Proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement and any other
Subscription Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Subscription Documents), and hereby
irrevocably waives, and agrees not to assert in any Action or
Proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such Action or Proceeding is
improper or is an inconvenient venue for such Proceeding. Each
party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding
by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by law. If any party shall commence an Action or
Proceeding to enforce any provisions of the Subscription Documents,
then the prevailing party in such Action or Proceeding shall be
reimbursed by the non-prevailing party for its reasonable
attorneys
’
fees and other
costs and expenses incurred with the investigation, preparation and
prosecution of such Action or Proceeding.
6.10
Survival
.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Shares.
6.11
Execution
.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a
“
.pdf
”
format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or
“
.pdf
”
signature page were an original
thereof.
6.12
Severability
.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
6.13
Rescission
and Withdrawal Right
. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Subscription Documents, whenever any Purchaser
exercises a right, election, demand or option under a Subscription
Document and the Company does not timely perform its related
obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its
future actions and rights.
6.14
Saturdays,
Sundays, Holidays, etc.
If the last or appointed day for the
taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding
Business Day.
6.15
Construction
.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Subscription
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Subscription Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Subscription Document shall be subject to adjustment for
reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock
that occur after the date of this Agreement but before the Closing
Date.
6.16
WAIVER
OF JURY TRIAL.
EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES.
ACCORDINGLY, IN ANY ACTION, SUIT, OR
PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE
GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY,
UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
RUMBLEON,
INC.
By:_________________
Name: Steven R.
Berrard
Title: Chief
Financial Officer
|
Address for
Notice:____________________
4521 Sharon Rd Ste
370
Charlotte NC
28211
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With
a copy to (which shall not constitute notice):
Akerman
LLP
Attn: Michael
Francis
Christina
Russo
350 E. Las Olas
Boulevard
Fort
Lauderdale, FL 33301
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
[PURCHASER
SIGNATURE PAGES TO RUMBLEON SECURITIES PURCHASE
AGREEMENT]
IN
WITNESS WHEREOF, the undersigned, severally and not jointly with
other Purchasers, have caused this Securities Purchase Agreement to
be duly executed by their respective authorized signatories or
legally designated and authorized investment manager as of the date
first indicated above.
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Name of
Purchaser:
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Signature of Authorized Signatory of Purchaser
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Name of
Authorized Signatory:
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Title
of Authorized Signatory:
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Email
Address of Authorized Signatory:
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Address
for Notice to Purchaser:
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Address
for Delivery of Shares to Purchaser (if not same as address
for
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notice):
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Social Security
Number or Taxpayer ID of
Purchaser:
Subscription
Amount:
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Shares:
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☐
Notwithstanding anything contained in this Agreement
to the contrary, by checking this box (i) the obligations of the
above-signed to purchase the securities set forth in this Agreement
to be purchased from the Company by the above-signed, and the
obligations of the Company to sell such securities to the
above-signed, shall be unconditional and all conditions to Closing
shall be disregarded, (ii) the Closing shall occur on the third
(3
rd
)
Trading Day following the date of this Agreement and (iii) any
condition to Closing contemplated by this Agreement (but prior to
being disregarded by clause (i) above) that required delivery by
the Company or the above-signed of any agreement, instrument,
certificate or the like or purchase price (as applicable) shall no
longer be a condition and shall instead be an unconditional
obligation of the Company or the above-signed (as applicable) to
deliver such agreement, instrument, certificate or the like or
purchase price (as applicable) to such other party on the Closing
Date.
EXHIBIT A
ESCROW AGREEMENT
ESCROW AGREEMENT
This
ESCROW AGREEMENT (this “
Agreement
”) made as of October 25,
2018, by and among National Securities Corporation and Craig Hallum
Capital Group LLC (together, the “
Placement Agents
”), RumbleOn, Inc.
(the “
Issuer
”),
whose addresses and other information appear on the Information
Sheet (as defined herein) attached to this Agreement, and
Continental Stock Transfer & Trust Company, 1 State Street,
30
th
Floor, New York, NY 10004 (the “
Escrow Agent
”).
WITNESSETH
:
WHEREAS, the Issuer
is offering to “accredited investors” up to $23,000,000
of shares of the Issuer’s Class B Common Stock, par value
$0.001 per share (the “
Securities
”). The offering of the
Securities is herein referred to as the “
Offering
”;
WHEREAS, the Issuer
and the Placement Agents propose to establish an escrow account
(the “
Escrow
Account
”), to which subscription monies which are
received by the Escrow Agent from the prospective purchasers of the
Securities are to be credited, and the Escrow Agent is willing to
establish the Escrow Account on the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, the Escrow
Agent has agreed to establish a special bank account at J.P. Morgan
Chase Bank (the “
Bank
”) into which the subscription
monies, which are received by the Escrow Agent from the prospective
purchasers and credited to the Escrow Account, are to be
deposited.
NOW,
THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as
follows:
1.
Information Sheet
. Each
capitalized term not otherwise defined in this Agreement shall have
the meaning set forth for such term on the information sheet which
is attached to this Agreement as
Exhibit A
and is incorporated
by reference herein and made a part hereof (the “
Information Sheet
”).
2.
Establishment of the Bank
Account
.
2.1.
The
Escrow Agent shall establish a non-interest-bearing bank account at
the branch of Bank selected by the Escrow Agent, and bearing the
designation set forth on the Information Sheet (the
“
Bank Account
”);
while the funds are on deposit, the Escrow Agent may earn bank
credits or other consideration. The purpose of the Bank Account is
for (a) the deposit of all subscription monies (checks or wire
transfers) from prospective purchasers of the Securities which are
delivered to the Escrow Agent, (b) the holding of amounts of
subscription monies which are collected through the banking system
and (c) the disbursement of collected funds, all as described
herein.
2.2.
On
or before the date of the initial deposit in the Bank Account
pursuant to this Agreement, the Placement Agents shall notify the
Escrow Agent in writing of the date of the commencement of the
Offering (the “
Effective
Date
”), and the Escrow Agent shall not be required to
accept any amounts for credit to the Escrow Account or for deposit
in the Bank Account prior to its receipt of such
notification.
2.3.
The
“
Offering
Period
,” which shall be deemed to commence on the
Effective Date, shall consist of the number of calendar days or
business days set forth on the Information Sheet. The Offering
Period shall be extended at the Placement Agents’ discretion
(an “
Extension
Period
”) only if the Escrow Agent shall have received
written notice thereof prior to the expiration of the Offering
Period. The Extension Period, which shall be deemed to commence on
the next calendar day following the expiration of the Offering
Period, shall consist of the number of calendar days or business
days set forth on the Information Sheet. The last day of the
Offering Period, or the last day of the Extension Period (if the
Escrow Agent has received written notice thereof as herein above
provided), is referred to herein as the“
Termination Date
”. Except as
provided in Section 4.3 hereof, after the Termination Date,
prospective purchasers shall not deposit, and the Escrow Agent
shall not accept, any additional amounts representing payments by
prospective purchasers.
3.
Deposits to the Bank
Account
.
3.1.
Prospective
purchasers shall promptly deliver to the Escrow Agent subscription
monies, which monies shall be in the form of checks or wire
transfers; “Money Orders” are not acceptable. Upon the
Escrow Agent’s receipt of such monies, they shall be credited
to the Escrow Account. All checks delivered to the Escrow Agent
shall be made payable to “CST&T AAF RumbleOn, Inc. 2018
Escrow Account.” Any check payable other than to the Escrow
Agent as required hereby shall be returned by the Escrow Agent to
the prospective purchaser, or if the Escrow Agent has insufficient
information to do so, then to the Placement Agents (together with
any Subscription Information, as defined below or other documents
delivered therewith), such check shall be deemed not to have been
delivered to the Escrow Agent pursuant to the terms of this
Agreement.
3.2.
Promptly
after receiving subscription monies as described in Section 3.1,
the Escrow Agent shall deposit the same into the Bank Account.
Amounts of monies so deposited are hereinafter referred to as
“
Escrow
Amounts
”. The Escrow Agent shall cause the Bank to
process all Escrow Amounts for collection through the banking
system.
Simultaneously with each
deposit to the Escrow Account, the Placement Agents shall inform
the Escrow Agent in writing of the name, address, and the tax
identification number of the purchaser, the amount of Securities
subscribed for by such purchase, and the aggregate dollar amount of
such subscription (collectively, the “Subscription
Information”).
3.3.
The
Escrow Agent shall not accept or recognize for credit to the Escrow
Account, any deposit, including deposits made by bank wire, for
which the Escrow Agent has not received the appropriate
Subscription Information defined in paragraph 3.2.
3.4.
The
Escrow Agent shall not be required to accept in the Escrow Account
any amounts representing payments by prospective purchasers,
whether by check or wire, except during the Escrow Agent’s
regular business hours.
3.5.
Only
those Escrow Amounts that have been deposited into the Bank
Account, accompanied by the required subscriber information,
cleared the banking system and collected by the Escrow Agent, are
herein referred to as the “
Fund
.”
3.6.
If
the Offering is terminated before the Termination Date, the Escrow
Agent shall refund any portion of the Fund prior to disbursement of
the Fund in accordance with Article 4 hereof upon instructions in
writing signed by both the Issuer and the Placement
Agents.
3.7.
If
prior to the disbursement of the Fund in accordance with Section
4.2 below, the Escrow Agent has received notice from the Issuer
that the subscription of a prospective purchaser has been rejected
since such purchaser does not qualify as an investor in the
Offering, the Escrow Agent shall promptly refund to such purchaser
the amount of payment received from such purchaser which is then
held in the Fund or which thereafter clears the banking system,
without interest thereon or deduction therefrom, by drawing a check
on the Bank Account for the amount of such payment and transmitting
it to the purchaser.
4.
Disbursement from the Bank
Account
.
4.1.
If
the Escrow Agent has received joint instructions from the Issuer
and the Placement Agents that the Offering is terminated, the
Escrow Agent shall promptly refund to each prospective purchaser
the amount of payment received from such purchaser which is then
held in the Fund or which thereafter clears the banking system,
without interest thereon or deduction there from, by drawing checks
on the Bank Account for the amounts of such payments and
transmitting them to the purchasers. In such event, the Escrow
Agent shall promptly notify the Issuer and the Placement Agent of
its distribution of the Fund.
4.2.
If
at any time up to the close of regular banking hours on the
Termination Date, the Escrow Agent has received joint written
instructions from the Issuer and the Placement Agents that all
conditions for release of funds have been met for closing of the
Offering, the Escrow Agent shall promptly disburse the Fund in
accordance with instructions.
4.3.
Upon
disbursement of the Fund pursuant to the terms of this Article 4,
the Escrow Agent shall be relieved of further obligations and
released from all liability under this Agreement. It is expressly
agreed and understood that in no event shall the aggregate amount
of payments made by the Escrow Agent exceed the amount of the
Fund.
5.
Rights, Duties and Responsibilities of
Escrow Agent
. It is understood and agreed that the duties of
the Escrow Agent are purely ministerial in nature, and
that:
5.1.
The
Escrow Agent shall notify the Placement Agents, on a daily basis,
of the Escrow Amounts which have been deposited in the Bank Account
and of the amounts, constituting the Fund, which have cleared the
banking system and have been collected by the Escrow
Agent.
5.2.
The
Escrow Agent shall not be responsible for or be required to enforce
any of the terms or conditions of the selling agreement or any
other agreement between the Placement Agents and the Issuer nor
shall the Escrow Agent be responsible for the performance by the
Placement Agents or the Issuer of their respective obligations
under this Agreement.
5.3.
The
Escrow Agent shall not be required to accept from the Placement
Agents (or the Issuer) any Subscription Information pertaining to
prospective purchasers unless such Subscription Information is
accompanied by checks or wire transfers meeting the requirements of
Section 3.1, nor shall the Escrow Agent be required to keep records
of any information with respect to payments deposited by
prospective purchasers except as to the amount of such payments;
however, the Escrow Agent shall notify the Placement Agents within
a reasonable time of any discrepancy between the amount set forth
in any Subscription Information and the amount delivered to the
Escrow Agent therewith. Such amount need not be accepted for
deposit in the Escrow Account until such discrepancy has been
resolved.
5.4.
The
Escrow Agent shall be under no duty or responsibility to enforce
collection of any check delivered to it hereunder. The Escrow
Agent, within a reasonable time, shall return to the Placement
Agents any check received which is dishonored, together with the
Subscription Information, if any, which accompanied such
check.
5.5.
The
Escrow Agent shall be entitled to rely upon the accuracy, act in
reliance upon the contents, and assume the genuineness of any
notice, instruction, certificate, signature, instrument or other
document which is given to the Escrow Agent pursuant to this
Agreement without the necessity of the Escrow Agent verifying the
truth or accuracy thereof. The Escrow Agent shall not be obligated
to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or
instructions or to execute any such certificate, instrument or
other document.
5.6.
If
the Escrow Agent is uncertain as to its duties or rights hereunder
or shall receive instructions with respect to the Bank Account, the
Escrow Amounts or the Fund which, in its sole determination, are in
conflict either with other instructions received by it or with any
provision of this Agreement, it shall be entitled to hold the
Escrow Amounts, the Fund, or a portion thereof, in the Bank Account
pending the resolution of such uncertainty to the Escrow
Agent’s sole satisfaction, by final judgment of a court or
courts of competent jurisdiction or otherwise.
5.7.
The
Escrow Agent shall not be liable for any action taken or omitted
hereunder, or for the misconduct of any employee, agent or attorney
appointed by it, except in the case of willful misconduct or gross
negligence. The Escrow Agent shall be entitled to consult with
counsel of its own choosing and shall not be liable for any action
taken, suffered or omitted by it in accordance with the advice of
such counsel.
5.8.
The
Escrow Agent shall have no responsibility at any time to ascertain
whether or not any security interest exists in the Escrow Amounts,
the Fund or any part thereof or to file any financing statement
under the Uniform Commercial Code with respect to the Fund or any
part thereof.
6.
Amendment; Resignation or Removal of
Escrow Agent
. This Agreement may be altered or amended only
with the written consent of the Issuer, the Placement Agents and
the Escrow Agent. The Escrow Agent may resign and be discharged
from its duties hereunder at any time by giving written notice of
such resignation to the Issuer and the Placement Agents specifying
a date when such resignation shall take effect and upon delivery of
the Fund to the successor escrow agent designated by the Issuer or
the Placement Agents in writing. Such successor Escrow Agent shall
become the Escrow Agent hereunder upon the resignation date
specified in such notice. If the Issuer or the Placement Agents
fail to designate a successor Escrow Agent within thirty (30) days
after such notice, then the resigning Escrow Agent shall promptly
refund the amount in the Fund to each prospective purchaser,
without interest thereon or deduction. The Escrow Agent shall
continue to serve until its successor accepts the escrow and
receives the Fund. The Issuer shall have the right, with the prior
written consent of the Placement Agents, at any time to remove the
Escrow Agent and substitute a new escrow agent by giving notice
thereof to the Escrow Agent then acting. Upon its resignation and
delivery of the Fund as set forth in this Section 6, the Escrow
Agent shall be discharged of and from any and all further
obligations arising in connection with the escrow contemplated by
this Agreement. Without limiting the provisions of Section 8
hereof, the resigning Escrow Agent shall be entitled to be
reimbursed by the Issuer and the Placement Agents for any expenses
incurred in connection with its resignation, transfer of the Fund
to a successor escrow agent or distribution of the Fund pursuant to
this
Section
6
.
7.
Representations and Warranties
.
The Issuer and the Placement Agents hereby severally represent and
warrant to the Escrow Agent that:
7.1.
No
party other than the parties hereto and the prospective purchasers
have, or shall have, any lien, claim or security interest in the
Escrow Amounts or the Fund or any part thereof.
7.2.
No
financing statement under the Uniform Commercial Code is on file in
any jurisdiction claiming a security interest in or describing
(whether specifically or generally) the Escrow Amounts or the Fund
or any part thereof.
7.3.
The
Subscription Information submitted with each deposit shall, at the
time of submission and at the time of the disbursement of the Fund,
be deemed a representation and warranty that such deposit
represents a bona fide payment by the purchaser described therein
for the amount of Securities set forth in such Subscription
Information.
7.4.
All
of the information contained in the Information Sheet is, as of the
date hereof, and will be, at the time of any disbursement of the
Fund, true and correct in all material respects.
8.
Fees and Expenses
. The Escrow
Agent shall be entitled to the Escrow Agent Fees set forth on the
Information Sheet, payable as and when stated therein. In addition,
the Issuer and the Placement Agents jointly and severally agree to
reimburse the Escrow Agent for any reasonable expenses incurred in
connection with this Agreement, including, but not limited to,
reasonable counsel fees.
9.
Indemnification and
Contribution
.
9.1.
The
Issuer and the Placement Agents (collectively referred to as the
“
Indemnitors
”)
jointly and severally agree to indemnify the Escrow Agent and its
officers, directors, employees, agents and shareholders
(collectively referred to as the “
Indemnitees
”) against, and hold
them harmless of and from, any and all loss, liability, cost,
damage and expense, including without limitation, reasonable
counsel fees, which the Indemnitees may suffer or incur by reason
of any action, claim or proceeding brought against the Indemnitees
arising out of or relating in any way to this Agreement or any
transaction to which this Agreement relates, unless such action,
claim or proceeding is the result of the willful misconduct or
gross negligence of the Indemnitees.
9.2.
If
the indemnification provided for in Section 9.1 is applicable, but
for any reason is held to be unavailable, the Indemnitors shall
contribute such amounts as are just and equitable to pay, or to
reimburse the Indemnitees for, the aggregate of any and all losses,
liabilities, costs, damages and expenses, including counsel fees,
actually incurred by the Indemnitees as a result of or in
connection with, and any amount paid in settlement of, any action,
claim or proceeding arising out of or relating in any way to any
actions or omissions of the Indemnitors.
9.3.
The
provisions of this Article 9 shall survive any termination of this
Agreement, whether by disbursement of the Fund, resignation of the
Escrow Agent or otherwise.
10.
Termination
of Agreement
. This Agreement
shall terminate on the final disposition of the Fund pursuant to
Section 4, provided that the rights of the Escrow Agent and the
obligations of the other parties hereto under Section 9 shall
survive the termination hereof and the resignation or removal of
the Escrow Agent.
11.
Governing Law and Assignment
.
This Agreement shall be construed in accordance with and governed
by the laws of the State of New York, without regard to the
conflicts of laws principles thereof, and shall be binding upon the
parties hereto and their respective successors and
assigns;
provided
,
however
, that any
assignment or transfer by any party of its rights under this
Agreement or with respect to the Escrow Amounts or the Fund shall
be void as against the Escrow Agent unless (a) written notice
thereof shall be given to the Escrow Agent; and (b) the Escrow
Agent shall have consented in writing to such assignment or
transfer.
12.
Notices
. All notices required
to be given in connection with this Agreement shall be sent by
registered or certified mail, return receipt requested, or by hand
delivery with receipt acknowledged, or by the Express Mail service
offered by the United States Postal Service, and addressed, if to
the Issuer or the Placement Agents, at their respective addresses
set forth on the Information Sheet, and if to the Escrow Agent, at
its address set forth above, to the attention of the Trust
Department.
13.
Severability
. If any provision
of this Agreement or the application thereof to any person or
circumstance shall be determined to be invalid or unenforceable,
the remaining provisions of this Agreement or the application of
such provision to persons or circumstances other than those to
which it is held invalid or unenforceable shall not be affected
thereby and shall be valid and enforceable to the fullest extent
permitted by law.
14.
Execution in Several
Counterparts
. This Agreement may be executed in several
counterparts or by separate instruments and by facsimile
transmission and all of such counterparts and instruments shall
constitute one agreement, binding on all of the parties
hereto.
15.
Entire Agreement
. This
Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings (written or oral) of the
parties in connection therewith.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
ESCROW
AGENT:
CONTINENTAL
STOCK TRANSFER
&
TRUST COMPANY
PLACEMENT
AGENTS:
NATIONAL
SECURITIES CORPORATION
CRAIG
HALLUM CAPITAL LLC
ISSUER:
RUMBLEON,
INC.
EXHIBIT
A
ESCROW
AGREEMENT INFORMATION SHEET
Name:
RumbleOn, Inc.
Address:
4521 Sharon Road
Suite
370
Charlotte, NC
28211
Tax
Identification Number: 46-3951329
Name
:
National Securities Corporation
Address:
200 Vesey Street, 25th Floor
New
York, NY 10581
Name:
Craig Hallum Capital Group LLC
Address:
222 South Ninth Street – Suite 350
Minneapolis, MN
55402
Description of the
Securities to be offered: Up to $23,000,000 of shares of the
Issuer’s Class B Common Stock.
4.
Plan of Distribution of the Securities
Initial
Offering Period: Through October 15, 2018.
Extension Period,
if any: October 31, 2018.
5.
Title of Escrow Account:
“CST&T
AAF RumbleOn, Inc. 2018 Escrow Account”
6.
Escrow Agent Fees and Charges
$5,500
(for up to 50 investing shareholders); $7,500 (for up to 100
shareholders); $9,000 + $12.00/account (over 100
shareholders); $3,500 payable at signing of the Escrow
Agreement, plus estimated balance as invoiced is due 30 days after
launch. Any remaining fees will be invoiced at Closing. An
additional fee of $5,000 will be charged if the program is
terminated for any reason causing the deposited funds to be
returned. (Note: $250.00 online “view only”
access to the bank account is included). A fee of $500
will be payable for document review services related to each
amendment/extension to the Escrow Agreement. In
addition, the Escrow Agent shall be paid a fee of $500.00 for each
additional closing beyond the Initial Offering
Period. Should the Escrow Agent continue for more than
six months, the Escrow Agent shall receive a fee of $600.00 per
month, or any portion thereof, payable in advance or the first
business day of the month.
Distribution
charges
:
$45.00
per check
$50.00
per wire
$100.00
per check returned (NSF) check
$100.00
lost check replacement fee
$50.00
per DWAC (share movement to DTC)
$10.00
per share certificate
EXHIBIT B
INVESTOR QUESTIONNAIRE
IN
CONNECTION WITH RUMBLEON, INC.'S PROPOSED SALE OF CLASS B COMMON
STOCK (THE “SHARES”) , PLEASE INDICATE IF YOU QUALIFY
AS AN "ACCREDITED INVESTOR" UNDER
ONE OR MORE
OF THE FOLLOWING
(
please check
all
that apply
):
Any
individual whose net worth, or joint net worth with that
person’s spouse, at the time of his or her purchase of the
Shares, exceeds US$1,000,000. For purposes of calculating net worth
under this section, (i) the person's primary residence shall not be
included as an asset; (ii) indebtedness that is secured by the
person's primary residence, up to the estimated fair market value
of the primary residence at the time of the sale of the Shares,
shall not be included as a liability (except that if the amount of
such indebtedness outstanding at the time of sale of securities
exceeds the amount outstanding 60 days before such time, other than
as a result of the acquisition of the primary residence, the amount
of such excess shall be included as a liability); and (iii)
indebtedness that is secured by the person's primary residence in
excess of the estimated fair market value of the primary residence
at the time of the sale of the Shares shall be included as a
liability.
Any
individual who had an individual income in excess of US$200,000 in
each of the two most recent years or joint income with that
person’s spouse in excess of US$300,000 in each of those
years and reasonably expects to reach the same income level in the
current year.
Any
director or executive officer of RumbleOn, Inc. For purposes of
this section, “executive officer” means the president;
any vice president in charge of a principal business unit, division
or function, such as sales, administration or finance; or any other
person or persons who perform(s) similar policymaking functions for
RumbleOn, Inc.
Any
organization described in section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or
partnership (which the parties understand includes a limited
liability company) not formed for the specific purpose of acquiring
the Shares, with total assets in excess of $5,000,000.
Any
trust, with total assets in excess of US$5,000,000, not formed for
the specific purpose of acquiring the Shares, whose purchase is
directed by a sophisticated person as described in Rule
506(b)(2)(ii) under the Securities Act of 1933, as
amended.
Any
bank, as defined in Section 3(a)(2) of the Securities Act of 1933,
or a savings and loan association or other institution as defined
in Section 3(a)(5)(A) of the Securities Act of 1933, whether acting
in its individual or fiduciary capacity
Any
broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended.
Any
insurance company as defined in Section 2(a)(13) of the Securities
Act of 1933.
Any
investment company registered under the Investment Company Act of
1940 or a business development company as defined in Section
2(a)(48) of such Act.
Any
Small Business Investment Company licensed by the U. S. Small
Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958.
Any
plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such
plan has total assets in excess of $5,000,000.
Any
employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 (“ERISA”), and either the
decision to acquire the Shares has been made by a plan fiduciary,
as defined in Section 3(21) of ERISA, which is either a bank,
savings and loan association, insurance company or registered
investment advisor, or the employee benefit plan has total assets
in excess of $5,000,000, or if a self-directed plan, investment
decisions are made solely by persons who are accredited
investors.
Any
private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
Any
entity in which all of the equity owners are Accredited Investors,
as described above.
By
signing below, the Investor confirms that the information in this
Investor Questionnaire is true, correct and complete.
Name of
Investor
By:________________________________
Signature
Title:_______________________________
(if
any)
Date:______________________________
, 2018
EXHIBIT C
RISK FACTORS
In this Exhibit C – Risks Factors, we refer to RumbleOn, Inc.
as the “Company,” “we,” “us,”
and “our,” and similar words. Capitalized terms not
defined herein have the meanings set forth in the Securities
Purchase Agreement.
In addition to other information contained or incorporated by
reference in this Exhibit, you should carefully consider the risks
described below and incorporated herein by reference to our Annual
Report on Form 10-K for the fiscal year ended December 31, 2017,
and our subsequent periodic reports, in evaluating our company and
our business before making a decision to invest in our Class B
Common Stock. Additional risks not presently known to us or that we
currently deem immaterial could also materially and adversely
affect our financial condition, results of operations, business and
prospects. The trading price of our Class B Common Stock could
decline due to any of these risks, and you may lose all or part of
your investment.
Risks Related to the Proposed Acquisitions (the
“Acquisitions”) of Wholesale Holdings, Inc. and
Wholesale Express, LLC (together
“Wholesale”)
We cannot assure you that the proposed Acquisitions will be
completed on a timely basis or at all.
There
are a number of risks and uncertainties relating to the
Acquisitions. For example, the Acquisitions may not be completed,
or may not be completed in the time frame, on the terms or in the
manner currently anticipated, as a result of a number of factors,
including the failure of the parties to satisfy one or more of the
conditions to closing. There can be no assurance that the
conditions to closing of the Acquisitions will be satisfied or
waived or that other events will not intervene to delay or result
in the failure to close the Acquisitions.
In the
event the Acquisitions are not consummated, we may use the proceeds
from the offering of the Shares for working capital and general
corporate purposes, which may include purchases of additional
inventory held for sale, increased spending on marketing and
advertising and capital expenditures necessary to grow the
business, and for the repayment of outstanding indebtedness.
However, we would have broad authority to use such net proceeds for
other purposes that may not be accretive to our earnings per
share.
We may be unable to realize the anticipated synergies related to
the Acquisitions, which could have a material adverse effect on our
business, financial condition and results of
operations.
We
expect to realize significant synergies related to the
Acquisitions. We also expect to incur costs to achieve these
synergies. While we believe these synergies are achievable, our
ability to achieve such estimated synergies in the amounts and
timeframe expected is subject to various assumptions by our
management based on expectations that are subject to a number of
risks, which may or may not be realized, as well as the incurrence
of other costs in our operations that may offset all or a portion
of such synergies and other factors outside our control. As a
consequence, we may not be able to realize all of these synergies
within the time frame expected or at all, or the amounts of such
synergies could be significantly reduced. In addition, we may incur
additional and unexpected costs to realize these synergies. Failure
to achieve the expected synergies could significantly reduce the
expected benefits associated with the Acquisitions and adversely
affect our business following the Acquisitions. We have incurred
and will continue to incur substantial expenses in connection with
the negotiation and consummation of the transactions contemplated
by the Transaction Documents. These costs, as well as other
unanticipated costs and expenses, could have a material adverse
effect on our financial condition and operating results following
the consummation of the Acquisitions and many of these costs will
be borne by us even if the Acquisitions are not
consummated.
Following the consummation of the Acquisitions, we may be unable to
successfully integrate Wholesale’s business and realize the
anticipated benefits of the Acquisitions.
We and
Wholesale currently operate as independent companies. After the
closing of the Acquisitions, we will be required to devote
significant management attention and resources to integrating the
business and operations of Wholesale. Potential difficulties we may
encounter in the integration process include the
following:
|
●
|
|
the
inability to successfully combine our business and the businesses
of Wholesale in a manner that results in the anticipated benefits
and synergies of the Acquisitions not being realized in the time
frame currently anticipated or at all;
|
|
●
|
|
the
loss of sales, customers or business partners of ours or of
Wholesale’s as a result of such parties deciding not to
continue business at the same or similar levels with us or
Wholesale after the Acquisitions;
|
|
●
|
|
challenges
associated with operating the combined business in markets and
geographies in which we do not currently operate;
|
|
●
|
|
difficulty
integrating our direct sales and distribution channels with
Wholesale’s to effectively sell the vehicles of the combined
company following the closing of the Acquisitions;
|
|
●
|
|
the
complexities associated with managing our company and integrating
personnel from Wholesale, resulting in a significantly larger
combined company, while at the same time providing high quality
services to customers;
|
|
●
|
|
unanticipated
issues in coordinating accounting, information technology,
communications, administration and other systems;
|
|
●
|
|
difficulty
addressing possible differences in corporate culture and management
philosophies;
|
|
●
|
|
the
failure to retain key employees of ours or of
Wholesale;
|
|
●
|
|
potential
unknown liabilities and unforeseen increased expenses, delays or
regulatory conditions associated with the
Acquisitions;
|
|
●
|
|
performance
shortfalls as a result of the diversion of management’s
attention caused by consummating the Acquisitions and integrating
Wholesale’s operations; and
|
|
●
|
|
managing
the increased debt levels incurred in connection with the
Acquisitions.
|
An
inability to realize the anticipated benefits and cost synergies of
the Acquisitions, as well as any delays encountered in the
integration process, could have a material adverse effect on the
operating results of the combined company, which may materially
adversely affect the value of our Class B Common Stock following
the consummation of the Acquisitions.
In
addition, the actual integration may result in additional and
unforeseen expenses, and the anticipated benefit of our plan for
integration may not be realized. Actual synergies, if achieved at
all, may be lower than what we expect and may take longer to
achieve than anticipated. For example, the elimination of
duplicative costs may not be possible or may take longer than
anticipated, or the benefits from the Acquisitions may be offset by
costs incurred or delays in integrating the companies. If we are
not able to adequately address these challenges, we may be unable
to successfully integrate Wholesale’s operations into our own
or, even if we are able to combine the business operations
successfully, to realize the anticipated benefits of the
integration of the companies.
Our business relationships, those of Wholesale or the combined
company may be subject to disruption due to uncertainty associated
with the Acquisitions.
Parties
with which we or Wholesale do business may experience uncertainty
associated with the Acquisitions, including with respect to current
or future business relationships with us, Wholesale or the combined
company. Our and Wholesale’s business relationships may be
subject to disruption, as customers, distributors, suppliers,
vendors, and others may seek to receive confirmation that their
existing business relations with us or Wholesale, as the case may
be, will not be adversely impacted as a result of the Acquisitions
or attempt to negotiate changes in existing business relationships
or consider entering into business relationships with parties other
than us, Wholesale, or the combined company as a result of the
Acquisitions. Any of these other disruptions could have a material
adverse effect on our or Wholesale’s businesses, financial
condition, or results of operations or on the business, financial
condition or results of operations of the combined company, and
could also have an adverse effect on our ability to realize the
anticipated benefits of the Acquisitions.
If we are unable to maintain effective internal control over
financial reporting for the combined companies following the
Acquisitions, we may fail to prevent or detect material
misstatements in our financial statements, in which case investors
may lose confidence in the accuracy and completeness of our
financial statements.
We and
Wholesale currently maintain separate internal control over
financial reporting with different financial reporting processes
and different process control software. After the closing of
the Acquisitions, we plan to integrate our internal control over
financial reporting with those of Wholesale. We may encounter
difficulties and unanticipated issues in combining our respective
accounting systems due to the complexity of the financial reporting
processes. We may also identify errors or misstatements that could
require audit adjustments. If we are unable to implement and
maintain effective internal control over financial reporting
following completion of the Acquisitions, we may fail to prevent or
detect material misstatements in our financial statements, in which
case investors may lose confidence in the accuracy and completeness
of our financial reports and the market price of our securities may
decline.
Wholesale may have liabilities that are not known, probable or
estimable at this time.
As a
result of the Acquisitions, Wholesale will become subsidiaries of
the Company and remain subject to their past, current and future
liabilities. There could be unasserted claims or assessments
against or affecting Wholesale, including the failure to comply
with applicable laws, regulations, orders and consent decrees or
infringement or misappropriation of third party intellectual
property or other proprietary rights that we failed or were unable
to discover or identify in the course of performing our due
diligence investigation of Wholesale. In addition, there are
liabilities of Wholesale that are neither probable nor estimable at
this time that may become probable or estimable in the future,
including indemnification requests received from customers of
Wholesale relating to claims of infringement or misappropriation of
third party intellectual property or other proprietary rights, tax
liabilities arising in connection with ongoing or future tax audits
and liabilities in connection with other past, current and future
legal claims and litigation. Any such liabilities, individually or
in the aggregate, could have a material adverse effect on our
financial results. We may learn additional information about
Wholesale that adversely affects us, such as unknown, unasserted,
or contingent liabilities and issues relating to compliance with
applicable laws or infringement or misappropriation of third party
intellectual property or other proprietary rights.
As a result of the Acquisitions, we and Wholesale may be unable to
retain key employees.
Our
success after the Acquisitions will depend in part upon our ability
to retain key employees of ours and Wholesale. Key employees may
depart because of a variety of reasons relating to the
Acquisitions. If we and Wholesale are unable to retain key
personnel who are critical to the successful integration and future
operations of the combined company, we could face disruptions in
our operations, loss of existing customers, loss of key
information, expertise or know-how, and unanticipated
additional recruitment and training costs. In addition, the loss of
key personnel could diminish the anticipated benefits of the
Acquisitions.
EXHIBIT D
FORM OF LOCK-UP AGREEMENT
October
__, 2018
National
Securities Corporation
200
Vesey Street, 25th Floor
New
York, New York 10281
Ladies
and Gentlemen:
In
connection with the proposed Securities Purchase Agreement (the
“Securities Purchase Agreement”) between the
undersigned and RumbleOn, Inc., a Nevada corporation (the
“Company”), providing for the issuance and sale by the
Company (the “Offering”) of up to $23,000,000 of the
Company’s Class B Common Stock, $0.001 par value per share
(the “Shares”), the undersigned hereby agrees that,
without the prior written consent of National Securities
Corporation (“NSC”) and Craig Hallum Capital Group LLC
(“CH”, and together with NSC, the “Placement
Agents”), the undersigned will not, during the period
commencing on the date hereof and ending ninety (90) days after the
Closing Date (as defined in the Securities Purchase Agreement) (the
“Lock-Up Period”), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for
shares of capital stock of the Company, whether now owned or
hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition
(collectively, the “Lock-Up Securities”); (2) enter
into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
Lock-Up Securities, whether any such transaction is to be settled
by delivery of shares of Lock-Up Securities, in cash or otherwise;
(3) make any demand for or exercise any right with respect to the
registration of any Lock-Up Securities; or (4) publicly disclose
the intention to make any offer, sale, pledge or disposition, or to
enter into any transaction, swap, hedge or other arrangement
relating to any Lock-Up Securities. Notwithstanding the foregoing,
and subject to the conditions below, the undersigned may transfer
Lock-Up Securities without the prior written consent of the
Placement Agents in connection with (a) transactions relating to
Lock-Up Securities acquired in open market transactions after the
completion of the Offering; provided that no filing under Section
16(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), shall be required or shall be
voluntarily made in connection with subsequent sales of Lock-Up
Securities acquired in such open market transactions; (b) transfers
of Lock-Up Securities as a bona fide gift, by will or intestacy or
to a family member or trust for the benefit of a family member (for
purposes of this lock-up agreement, “family member”
means any relationship by blood, marriage or adoption, not more
remote than first cousin); (c) transfers of Lock-Up Securities to a
charity or educational institution; (d) if the undersigned,
directly or indirectly, controls a corporation, partnership,
limited liability company or other business entity, any transfers
of Lock-Up Securities to any shareholder, partner or member of, or
owner of similar equity interests in, the undersigned, as the case
may be, or (e) the sales of Shares to cover the payment of the
exercise prices or the payment of taxes associated with the
exercise or vesting of equity awards under any equity compensation
plan of the Company; provided that in the case of any transfer
pursuant to the foregoing clauses (b), (c) or (d), (i) any such
transfer shall not involve a disposition for value, (ii) each
transferee shall sign and deliver to the Underwriter a lock-up
agreement substantially in the form of this lock-up agreement and
(iii) no filing under Section 16(a) of the Exchange Act shall be
required or shall be voluntarily made, except for a Form 5. The
undersigned also agrees and consents to the entry of stop transfer
instructions with the Company’s transfer agent and registrar
against the transfer of the undersigned’s Lock-Up Securities
except in compliance with this lock-up agreement.
If the
undersigned is an officer or director of the Company, (i) the
undersigned agrees that the foregoing restrictions shall be equally
applicable to any issuer-directed or “friends and
family” Shares that the undersigned may purchase in the
Offering; (ii) the Placement Agents agree that, at least three (3)
business days before the effective date of any release or waiver of
the foregoing restrictions in connection with a transfer of Lock-Up
Securities, the Placement Agents will notify the Company of the
impending release or waiver; and (iii) the Company agrees to
announce the impending release or waiver by press release through a
major news service at least two (2) business days before the
effective date of the release or waiver. Any release or waiver
granted by the Placement Agents hereunder to any such officer or
director shall only be effective two (2) business days after the
publication date of such press release. The provisions of this
paragraph will not apply if (a) the release or waiver is effected
solely to permit a transfer of Lock-Up Securities not for
consideration and (b) the transferee has agreed in writing to be
bound by the same terms described in this lock-up agreement to the
extent and for the duration that such terms remain in effect at the
time of such transfer.
No
provision in this agreement shall be deemed to restrict or prohibit
the exercise, exchange or conversion by the undersigned of any
securities exercisable or exchangeable for or convertible into
Shares, as applicable; provided that the undersigned does not
transfer the Shares acquired on such exercise, exchange or
conversion during the Lock-Up Period, unless otherwise permitted
pursuant to the terms of this lock-up agreement. In addition, no
provision herein shall be deemed to restrict or prohibit the entry
into or modification of a so-called “10b5-1” plan at
any time (other than the entry into or modification of such a plan
in such a manner as to cause the sale of any Lock-Up Securities
within the Lock-Up Period).
The
undersigned understands that the Company and the Placement Agents
are relying upon this lock-up agreement in proceeding toward
consummation of the Offering. The undersigned further understands
that this lock-up agreement is irrevocable and shall be binding
upon the undersigned’s heirs, legal representative,
successors and assigns.
The
undersigned understands that, if the Securities Purchase Agreement
is not executed by October 31, 2018, or if the Securities Purchase
Agreement (other than the provisions thereof which survive
termination) shall terminate or be terminated prior to payment for
and delivery of the Shares to be sold thereunder, then this lock-up
agreement shall be void and of no further force or
effect.
Whether
or not the Offering actually occurs depends on a number of factors,
including market conditions. Any Offering will only be made
pursuant to a Securities Purchase Agreement, the terms of which are
subject to negotiation between the Company and the
undersigned.
Very
truly yours,
__________________________________________________
(Name -
Please Print)
__________________________________________________
(Signature)
__________________________________________________
(Name
of Signatory, in the case of entities - Please Print)
__________________________________________________
(Title
of Signatory, in the case of entities - Please Print)
Address:
___________________________________________
___________________________________________
___________________________________________
Exhibit 99.1
RumbleOn Closes Acquisitions of Wholesale, LLC and Wholesale
Express, LLC
Closes $21.6 million Private Placement of Class B Common
Stock
CHARLOTTE, N.C. — October 30, 2018
—
RumbleOn
,
Inc.
(NASDAQ:
RMBL
) today
announced the closing of its acquisitions of Wholesale, LLC. and
Wholesale Express, LLC (together “Wholesale”), for
aggregate consideration of $16 million in cash and 1,317,329 in
shares of RumbleOn Series B Preferred Stock.
“Wholesale
accelerates our plan to enter the huge automobile marketplace and
allows us to do it with meaningful size and scale, without the
significant investments typically associated with new market
entries. The combined company will benefit from RumbleOn’s
powerful technology platform which will allow us to quickly ramp
acquisitions direct from consumers and grow retail sales to
consumers both of which drive margin expansion. In addition, we
will have multiple opportunities to leverage our marketing efforts
across the platform. Our CFO, Steve Berrard, and I have deep
experience in the automotive sector and we are highly confident
that the addition of Wholesale to the RumbleOn platform will
provide significant opportunities to drive shareholder value. We
look forward to providing more detail and updates on our progress
in the near term,”
commented
Marshall Chesrown, Founder, Chairman and CEO of
RumbleOn.
In
connection with the acquisitions, stockholders of the Company
holding a majority of the voting power of RumbleOn’s common
stock approved the conversion of the Series B Preferred Stock into
an equal number of shares of RumbleOn’s Class B Common Stock.
The Series B Preferred Stock automatically converts into shares of
Class B Common Stock 21 days after the mailing of a definitive
information statement describing the acquisitions and the
conversion to non-consenting stockholders of the Company in
accordance with the Federal Securities law.
RumbleOn
also announced the closing of a $21.6 million private placement of
its Class B Common Stock priced at $7.10 per share and the
expansion of its existing credit facility by $5.0 million. RumbleOn
used the proceeds from the private placement and the credit
facility to fund the acquisitions of the Wholesale entities and
will use the remaining balance for working capital.
National
Securities Corporation, a wholly owned subsidiary of National
Holdings Corporation, and Craig-Hallum Capital Group served as
co-placement agents on behalf of RumbleOn for the offering. Akerman
LLP served as legal counsel to RumbleOn and McGuireWoods LLP served
as legal counsel to the placement agents.
About RumbleOn
RumbleOn
operates a capital-light disruptive e-commerce
platform facilitating the ability of both consumers and dealers to
Buy-Sell-Trade-Finance pre-owned vehicles in one online location.
RumbleOn’s goal is to transform the way pre-owned vehicles
are bought and sold by providing users with the most efficient,
timely and transparent transaction experience. RumbleOn’s
initial focus is the market for VIN specific pre-owned powersport
vehicles with an emphasis on motorcycles and other powersports.
Serving both consumers and dealers, through its 100-percent-online
marketplace platform, RumbleOn makes cash offers for the purchase
of pre-owned vehicles. In addition, RumbleOn offers a large
inventory of pre-owned vehicles for sale along with third-party
financing and associated products.
Forward Looking Statements:
This
press release contains “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. Readers are cautioned not to place undue reliance on these
forward-looking statements, which are based on our expectations as
of the date of this press release and speak only as of the date of
this press release and are advised to consider the factors under
the heading “Forward-Looking Statements” and
“Risk Factors” in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2017, as may be
supplemented or amended by the Company’s Quarterly Reports on
Form 10-Q and other filings with the SEC. We undertake no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as required by law.
Investor Contact:
investors@rumbleon.com
Media Contact