Exhibit 2.1
PLAN OF MERGER AND
EQUITY PURCHASE AGREEMENT
dated
March 12, 2021
by and
among
RumbleOn, Inc., a Nevada corporation
as the
Purchaser,
Merger Sub I, Inc., Merger Sub II, Inc., Merger Sub III, Inc., and
Merger Sub IV, Inc.
as
Merger Subs,
C&W
Motors, Inc., Metro Motorcycle, Inc., Tucson Motorcycles, Inc., and
Tucson Motorsports, Inc.,
as the
Merged Entities,
William Coulter and Mark Tkach,
as the
Principal Owners,
and
together with parties joining herein,
as the
Sellers,
and Mark Tkach,
as the
Sellers’ Representative
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PLAN OF MERGER AND EQUITY PURCHASE AGREEMENT
This
PLAN OF MERGER AND
EQUITY PURCHASE AGREEMENT
(the “Agreement”), dated as of
March 12, 2021, by and among RumbleOn, Inc., a Nevada corporation
(the “Purchaser”), RO Merger
Sub I, Inc., an Arizona corporation and wholly owned subsidiary of
Purchaser (“Merger
Sub I”), RO Merger Sub II, Inc., an Arizona
corporation and wholly owned subsidiary of Purchaser
(“Merger Sub
II”), RO Merger Sub III, Inc., an Arizona corporation
and wholly owned subsidiary of Purchaser (“Merger Sub III”), RO
Merger Sub IV, Inc., an Arizona corporation and wholly owned
subsidiary of Purchaser (“Merger Sub IV” and
together with Merger Sub I, Merger Sub II, and Merger Sub III, the
“Merger
Subs”), C&W Motors, Inc., an Arizona corporation,
Metro Motorcycle, Inc., an Arizona corporation, Tucson Motorcycles,
Inc., an Arizona corporation, and Tucson Motorsports, Inc., an
Arizona corporation, William Coulter, an individual
(“Coulter”), Mark Tkach, an
individual (“Tkach” and together with
Coulter, the “Principal Owners”), and
each other Person who owns an Equity Interest (as defined below) in
any Transferred Entity (as defined below) and executes a Seller
Joinder (as defined below) (together with the Principal Owners, the
“Sellers” and each, a
“Seller”), and Mark Tkach,
as the representative of the Sellers (the “Sellers’
Representative”).
W I T N E S S E T H:
A. As of the date
hereof, the Sellers own all or such portion of the issued and
outstanding (i) Equity Interests (collectively, the
“Transferred Equity
Interests”) of the Persons listed on Schedule 1.1(a) hereto (which
Schedule 1.1(a)
shall also list the Equity Interests owned by each Seller therein
as a percentage of all Equity Interests of such Person)
(collectively, the “Transferred Entities” and
the Transferred Entities together with the direct and indirect
Subsidiaries of the Transferred Entities, the “Purchased Companies”) and
(ii) Equity Interests of the Persons listed on Schedule 1.1(b) hereto (which
Schedule 1.1(b)
shall also list the Equity Interests owned by each Seller therein
as a percentage of all Equity Interests of such Person)
(collectively, the “Merged Entities” and
together with the Purchased Companies and the direct and indirect
Subsidiaries of the Merged Entities, the “Acquired
Companies”);
B. The Acquired
Companies are in the business of the ownership and operation of
PowerSports retail dealerships involving sales, financing, and
parts and service of new and used motorcycles, ATVs, UTVs,
scooters, side by sides, sport bikes, cruisers, watercraft, and
other vehicles and ancillary businesses and activities relating
thereto (the “Business”);
C. At the Closing,
upon the terms and subject to the conditions of this Agreement, the
Sellers will sell and transfer to the Purchaser the Transferred
Equity Interests, and the Purchaser will purchase and acquire from
the Sellers the Transferred Equity Interests;
D. Purchaser provides
a motor vehicle dealer and e-commerce platform utilizing technology
to aggregate, process, and distribute inventory and facilitate
transactions among dealers and consumers to buy, sell, trade,
finance, and transport pre-owned vehicles;
E. The Merger Subs
were formed solely for purposes of consummating the Mergers as set
forth herein;
F. At the Closing,
upon the terms and subject to the conditions of this Agreement (i)
Merger Sub I will merge with and into C&W Motors, Inc., with
C&W Motors, Inc. continuing as a surviving corporation, (ii)
Merger Sub II will merge with and into Metro Motorcycle, with Metro
Motorcycle, Inc. continuing as a surviving corporation, (iii)
Merger Sub III will merge with and into Tucson Motorcycles, with
Tucson Motorcycles continuing as a surviving corporation, and (iv)
Merger Sub IV will merge with and into Tucson Motorsports, with
Tucson Motorsports, Inc. continuing as a surviving corporation, in
each case under the laws of the State of Arizona and each as a
wholly-owned subsidiary of Purchaser;
1
G. The Board of
Directors of the Purchaser, having determined that the Transactions
are fair and advisable to, and in the best interests of Purchaser
and its stockholders, has determined to recommend that the
stockholders of the Purchaser adopt, authorize and approve this
Agreement and the Transactions;
H. As a material
inducement to the Purchaser to enter into this Agreement and
consummate the Transactions, prior to closing (i) Coulter and Tkach
will enter into an Employment Agreement (as defined below) and (ii)
each of the Key Employees (other than the Principal Owners) will
enter into an Employment Agreement, in each case, with each such
Employment Agreement to take effect only upon the Closing;
and
I. As a material
inducement to the Purchaser to enter into this Agreement and
consummate the Transactions, simultaneously with the execution of
this Agreement or a Seller Joinder, as applicable, the Purchaser
and each of the Sellers (the “Voting Parties”) have
entered into a Registration Rights and Lock-Up Agreement set forth
on Exhibit E, with
such Registration Rights and Lock-Up Agreement to each take effect
only upon the Closing.
NOW,
THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE I.
The
following terms, as used herein, have the following
meanings:
1.1 “2020 Annual Financial
Statements” has the meaning set forth in Section 7.5.
1.2 “2020 Tax Acts” means The
Families First Coronavirus Response Act (Pub. L. 116-127), The
Coronavirus Aid, Relief, and Economic Security Act (Pub. L.
116-136), and any Law, U.S. executive order or Presidential
Memorandum and includes any Treasury Regulations or other official
guidance promulgated with respect to the foregoing relating to the
deferral of any Tax liabilities (including withholding Taxes), U.S.
federal payroll taxes, indebtedness or other amounts or Liabilities
for or allocable to any taxable period ending on or prior to the
Closing Date the payment of which is deferred, on or prior to the
Closing Date, to a taxable period (or portion thereof) beginning
after the Closing Date, related to, or in response to the economic
or other effects of, COVID-19.
1.3 “Acquired Companies” has
the meaning set forth in the recitals of this Agreement, provided
that, at the Closing, the Acquired Companies shall exclude any
Excluded Company.
1.4 “Action” means any action,
suit, arbitration, litigation, complaint, citation, summons,
subpoena, charge, claim, demand, investigation, hearing or
proceeding of any nature (in each case, whether civil, criminal,
administrative, regulatory or otherwise), whether at law or in
equity, including any audit, claim or assessment for Taxes or
otherwise.
2
1.5 “Additional Agreements”
means the Voting Agreement, the Registration Rights and Lock-Up
Agreement, the Escrow Agreement, the Employment Agreements, and
each other agreement, document, instrument and/or certificate
contemplated by this Agreement to be executed in connection with
the transactions contemplated hereby.
1.6 “Additional Purchaser
Shares” has the meaning set forth in Section 3.3(b).
1.7 “Adjustment Escrow Amount”
means $5,000,000.
1.8 “Affiliate” means, with
respect to any Person, any other Person directly or indirectly
Controlling, Controlled by, or under common Control with such
Person.
1.9 “Agreed PPP Forgiveness
Amount” means the aggregate amount of those certain
loans made to one or more of the Acquired Companies pursuant to the
Paycheck Protection Program which amount is expected to be forgiven
before the Closing Date.
1.10 “Agreement”
has the meaning set forth in the preamble to this
Agreement.
1.11 “Alternative
Proposal” has the meaning set forth in Section 8.9.
1.12 “Alternative
Transaction” has the meaning set forth in Section 8.9.
1.13 “Annual
Financial Statements” has the meaning set forth in
Section
7.5.
1.14 “Antitrust
Laws” has the meaning set forth in Section 8.1(b).
1.15 “AERA”
has the meaning set forth in Section 2.2(a)(i).
1.16 “ARS”
means the Arizona Revised Statutes, Title 10, as amended from time
to time.
1.17 “Assignment
Agreement” means the (1) Assignment Agreement between
C&W Motors, Inc., on the one hand, and Chilton Properties LLC,
on the other hand and (2) Assignment Agreement between C&W
Motors, Inc., on the one hand, and RideNow Management LLLP, on the
other hand, in each case, executed and delivered on or before the
date hereof.
1.18 “Authority”
means any governmental, quasi-governmental, regulatory or
administrative body, agency, commission or authority, any court or
judicial authority, any arbitrator, or any public, private or
industry regulatory authority, whether international, national,
Federal, state, or local, including any national securities
exchange or national quotation system.
1.19 “Balance
Sheet” has the meaning set forth in Section 4.12(a).
1.20 “Balance
Sheet Date” has the meaning set forth in Section 4.12(a).
1.21 “Base
Cash Consideration” means $400,400,000, as may be
reduced pursuant to Section 3.2.
3
1.22 “Books
and Records” means all books and records, ledgers,
employee records, customer lists, files, correspondence, and other
records of every kind (whether written, electronic, or otherwise
embodied) owned or used by a Person or in which a Person’s
assets, the business or its transactions are otherwise
reflected.
1.23 “Business
Day” means any day other than a Saturday, Sunday, or a
legal holiday on which commercial banking institutions in New York,
New York are authorized to close for business.
1.24 “Cap”
has the meaning set forth in Section 10.3(b).
1.25 “Cash
Consideration” means (i) the Base Cash Consideration,
plus/minus (ii) the Net Working Capital Adjustment, plus/minus
(iii) the Closing Indebtedness Adjustment, minus (iv) the
Adjustment Escrow Amount.
1.26 “Certificate
of Incorporation” means the Purchaser’s
Certificate of Incorporation dated October 24, 2013, as amended by
that certain Certificate of Amendment filed February 13, 2017, that
certain Certificate of Amendment filed June 25, 2018, that certain
Certificate of Designation filed October 25, 2018, that certain
Certificate of Correction filed October 25, 2018, that certain
Certificate of Change filed May 18, 2020, and that certain
Certificate of Correction filed September 17, 2020.
1.27 “Certificate
of Merger” has the meaning set forth in Section 2.2(b).
1.28 “Change
in Control Payments” means all change in control,
transaction, retention and similar bonuses or payments, paid or
payable by the Acquired Companies to any current or former
directors, managers, officers, employees, or other Persons as a
result of the Closing of the Transactions or the execution of this
Agreement, including any deferred compensation, in each instance,
plus the employer portion of any employment Taxes due in connection
with any such payments, but excluding, for the avoidance of doubt,
severance payments relating to a termination of employment
following the Closing.
1.29 “Closing”
has the meaning set forth in Section 2.3.
1.30 “Closing
Date” has the meaning set forth in Section 2.3.
1.31 “Closing
Form 8-K” has the meaning set forth in Section 8.6(b).
1.32 “Closing
Indebtedness” means, as of immediately prior to
Closing, (i) the aggregate amount of Indebtedness of the Acquired
Companies.
1.33 “Closing
Indebtedness Adjustment” means (i) the amount by which
the Closing Indebtedness exceeds the Target Closing Indebtedness,
which will result in a dollar-for-dollar decrease to the Cash
Consideration, (ii) the amount by which the Closing Indebtedness is
less than the Target Company Indebtedness, which will result in a
dollar-for-dollar increase in the Cash Consideration or (iii) $0,
in the event that the Closing Indebtedness does not exceed the
Target Closing Indebtedness and is not less than the Target Closing
Indebtedness.
1.34 “Closing
NWC” means the Net Working Capital of the Acquired
Companies as of immediately prior to the Closing.
4
1.35 “Closing
Payment Shares” means (i) a total number of shares of
Purchaser Class B Common Stock equal to a value of $175,000,000,
valued equally, on a per share basis, based upon the lowest value
of: (A) $30.00; (B) the VWAP of the Purchaser Class B Common Stock
for the twenty (20) trading days immediately preceding the Closing
Date; and (C) the value on a per share basis paid for the Class B
Common Stock or any shares underlying securities convertible into
or exercisable for Class B Common Stock by any Person which
purchases Class B Common Stock or any shares underlying securities
convertible into or exercisable for Class B Common Stock from the
Purchaser from the date of this Agreement until the Closing Date,
not including purchases of Class B Common Stock underlying
currently outstanding options, warrants, convertible notes, or
other derivative securities, minus (ii) Escrow Shares which Escrow
Shares shall be retained solely from the consideration payable to
the Principal Owners.
1.36 “Closing
Per Share Merger Consideration” means for each
applicable Merged Entity (a) the Estimated Cash Consideration and
the number of Closing Payment Shares attributable to such entity,
divided by (b) the aggregate number of shares of common stock of
such Merged Entity outstanding as of immediately prior to the
Effective Time. For the avoidance of doubt, the portion of the
Closing Payment Shares that are retained as Escrow Shares shall be
retained solely from consideration payable to the Principal
Owners.
1.37 “Closing
Press Release” has the meaning set forth in
Section
8.6(b).
1.38 “COBRA”
means collectively, the requirements of Sections 601 through 606 of
ERISA and Section 4980B of the Code.
1.39 “Code”
means the Internal Revenue Code of 1986, as amended.
1.40 “Company
Financial Statements” has the meaning set forth in
Section
4.12(a).
1.41 “Company
Information” has the meaning set forth in Section 8.2(d).
1.42 “Company
Intellectual Property” has the meaning set forth in
Section
4.21(a).
1.43 “Company
Owned Intellectual Property” means all Intellectual
Property Rights owned or purported to be owned by the Acquired
Companies, including any Intellectual Property Rights assigned to,
or acquired by, any Acquired Company prior to Closing pursuant to
the Assignment Agreement.
1.44 “Confidential
Information” means any information that one Party
discloses, directly or indirectly, to another Party, whether
embodied in tangible form or disclosed visually or orally and
whether or not designated as “confidential” or
“proprietary” or by some similar designation, relating
to the prior, current or prospective business of the disclosing
Party, including, without limitation, business models, business
opportunities, business plans, financial information, market
research, marketing plans, pricing and cost data, customers,
suppliers, employees, contractors, ideas, improvements, products
and product plans, technologies, research activities and results,
and any other information that should be reasonably understood by
the receiving Party to be the confidential or proprietary
information of the disclosing Party. Confidential Information shall
not include information (i) that has entered the public domain
through no fault of the receiving Party, (ii) rightfully known by
the receiving Party without obligation of confidentiality to any
third party prior to receipt of same from the disclosing Party,
(iii) independently developed by the receiving Party without using
or referring to any Confidential Information of the disclosing
Party, and (iv) generally made available to the public by the
disclosing Party without obligation of
confidentiality.
5
1.45 “Consent”
means any notice, authorization, qualification, registration,
filing, notification, waiver, Permit, Order, consent or approval to
be obtained from, filed with or delivered to, an Authority or other
Person.
1.46 “Contracts”
means all contracts, agreements, indentures, deeds, notes, bonds,
mortgages, leases (including equipment leases, car leases and
capital leases), licenses, guarantees, commitments, arrangements,
undertakings, client contracts, franchise agreements, sales and
purchase orders and similar instruments, oral or written, to which
any Acquired Company is a party or by which any of their respective
assets are bound or subject, and all amendments
thereto.
1.47 “Control”
of a Person means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by Contract, or otherwise. “Controlled”,
“Controlling” and “under common Control
with” have correlative meanings. Without limiting the
foregoing, a Person (the “Controlled Person”) shall
be deemed Controlled by (a) any other Person (the
“10%
Owner”) (i) owning beneficially, as meant in Rule
13d-3 under the Exchange Act, securities entitling such Person to
cast 10% or more of the votes for election of directors or
equivalent governing authority of the Controlled Person or (ii)
entitled to be allocated or receive 10% or more of the profits,
losses, or distributions of the Controlled Person; (b) an officer,
director, general partner, partner (other than a limited partner),
manager, or member (other than a member having no management
authority that is not a 10% Owner) of the Controlled Person; or (c)
a spouse or lineal descendant who resides in the household of an
Affiliate of the Controlled Person or a trust for the benefit of an
Affiliate of the Controlled Person or of which an Affiliate of the
Controlled Person is a trustee.
1.48 “Coulter”
has the meaning set forth in the preamble to this
Agreement.
1.49 “COVID-19”
means the infectious disease caused by severe acute respiratory
syndrome coronavirus 2 (SARS-CoV-2) and commonly known as
“COVID-19”, any evolution thereof or related or
associated epidemics, pandemics or disease outbreaks.
1.50 “C&W
Motors” means C&W Motors, Inc., an Arizona
corporation.
1.51 “D&O
Persons” has the meaning set forth in Section 8.8(a).
1.52 “D&O
Tail Policy” has the meaning set forth in Section 8.8(b).
1.53 “Data
Activities” has the meaning set forth in Section 4.22(a).
1.54 “Direct
Claim” has the meaning set forth in Section 10.2(b).
1.55 “Direct
Claim Notice” has the meaning set forth in
Section
10.2(b).
1.56 “Disclosure
Schedules” has the meaning set forth in Article IV.
1.57 “Disputed
Amounts” has the meaning set forth in Section 3.2.
1.58 “Dissenting
Shares” has the meaning set forth in Section 2.2(i).
6
1.59 “Effective
Time” has the meaning set forth in Section 2.2(b).
1.60 “Employment
Agreements” means the separate employment agreements
between the applicable Acquired Company and each of the Key
Employees in a form to
be agreed by the Purchaser and the applicable Key Employee
(with respect to the Key Employees set forth on Exhibit A-1) or restrictive
covenant agreements between the applicable Acquired Company and
each of the Key Employees set forth on Exhibit A-2 in a commercially
reasonable form to be agreed upon by Purchaser and Sellers’
Representative, which include customary non-compete,
confidentiality and assignment of inventions provisions and other
customary restrictive covenant provisions.
1.61 “Environmental
Claim” means any threatened or noticed Action by any
Person alleging Liability, including Liability or responsibility
for the costs of enforcement proceedings, investigations, cleanup,
governmental response, removal or remediation, natural resources
damages, property damage, personal injury, medical monitoring,
penalties, contribution, indemnification and injunctive relief,
arising out of, based on or resulting from (a) the presence of,
Release of, or exposure to any Hazardous Materials on or prior to
the Closing Date, or (b) any actual or alleged non-compliance with
any Environmental Law or term or condition of any Environmental
Permit on or prior to the Closing Date.
1.62 “Environmental
Laws” shall mean all Laws relating to pollution or the
protection of human health, safety or the environment, including,
without limitation, those that prohibit, regulate, concern or
control any Hazardous Material or any Hazardous Material Activity,
including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, the Resource
Recovery and Conservation Act of 1976, the Federal Water Pollution
Control Act, the Clean Air Act, the Hazardous Materials
Transportation Act and the Clean Water Act.
1.63 “Environmental
Notice” means any written directive, notice of
violation or infraction, notice of investigation or inquiry, or
other written notice respecting any Environmental Claim, including
relating to actual or alleged non-compliance with any Environmental
Law or any term or condition of any Environmental
Permit.
1.64 “Environmental
Permit” means any Permit issued pursuant to
Environmental Law on or prior to the Closing Date.
1.65 “Equity
Incentive Plan” has the meaning set forth in
Section
8.10.
1.66 “Equity
Interests” means, with regard to any Person, as
applicable, (i) any capital stock, partnership, membership, joint
venture or other ownership or equity interests, or other share
capital of such Person, (ii) any securities of such Person directly
or indirectly convertible into or exchangeable for any capital
stock, partnership, membership, joint venture or other ownership or
equity interests, or other share capital (whether voting or
non-voting, whether preferred, common or otherwise) of such Person
or containing any profit participation features with respect to
such Person, (iii) any rights or options directly or indirectly to
subscribe for or to purchase any capital stock, partnership,
membership, joint venture or other ownership or equity interests,
other share capital of such Person or securities containing any
profit participation features with respect to such Person or
directly or indirectly to subscribe for or to purchase any
securities directly or indirectly convertible into or exchangeable
for any capital stock, partnership, membership, joint venture or
other ownership interests, other share capital of such Person or
securities containing any profit participation features with
respect to such Person, (iv) any share or unit appreciation rights,
phantom share or unit rights, contingent interest or other similar
rights relating to such Person, or (v) any Equity Interests of such
Person issued or issuable with respect to the securities referred
to in clauses (i) through (iv) above in connection with a
combination of shares, units, recapitalization, exchange, merger,
consolidation or other reorganization.
7
1.67 “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
1.68 “Escrow
Agent” means Continental Stock Transfer & Trust
Company.
1.69 “Escrow
Agreement” means the agreement in the form attached
hereto as Exhibit C
between the Sellers’ Representative, Escrow Agent and the
Purchaser with respect to the Escrow Shares.
1.70 “Escrow
Fund” has the meaning set forth in Section
3.1(c).
1.71 “Escrow
Shares” means ten percent (10%) of the Closing Payment
Shares.
1.72 “Estimated
Cash Consideration” means (i) the Base Cash
Consideration, plus/minus (ii) the Net Working Capital Adjustment,
plus/minus (iii) the Closing Indebtedness Adjustment, minus (iv)
the Adjustment Escrow Amount. Solely for purposes of this
calculation, the Net Working Capital Adjustment and the Closing
Indebtedness Adjustment shall be deemed to be $0.
1.73 “Exchange
Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder.
1.74 “Excluded
Company” means, as of the Closing, any entity in which
Purchaser does not acquire any Equity Interest, directly or
indirectly upon the Closing.
1.75 “Factory”
means the manufacturers identified on Schedule 1.76.
1.76 “Federal
Securities Laws” has the meaning set forth in
Section
8.2(d).
1.77 “Financing”
means the arrangement and implementation of any debt or equity
financing to be incurred in connection with the transactions
contemplated by this Agreement, including the Debt
Financing.
1.78 “Financing
Documents” means any documentation necessary or
desirable in connection with the Financing, including, but not
limited to, prospectuses, private placement memoranda, information
memoranda and packages, lender and investor presentations, and the
Debt Financing Documents. For the avoidance of doubt, the Debt
Financing Commitment Letter (as defined in Section 13.17) is not a
Financing Document.
1.79 “Foreign
Corrupt Practices Act” has the meaning set forth in
Section
4.20.
1.80 “Fundamental
Representations” has the meaning set forth in
Section
10.4(e).
1.81 “Hazardous
Material” shall mean any material, chemical, substance
or waste that has been designated by any Authority to be
radioactive, toxic, hazardous, an ozone depleting substance, a
pollutant or a contaminant, the management, use, handling, or
disposal of which is subject to any Environmental Laws, including,
but not limited to, petroleum and petroleum by-products and
breakdown products, polychlorinated biphenyls, per and poly
fluoroalkyl substances, and asbestos.
8
1.82 “Hazardous
Materials Activity” shall mean the transportation,
transfer, recycling, storage, use, treatment, manufacture,
disposal, removal, remediation, release, exposure of others to,
sale, labeling, or distribution of any Hazardous Material or any
product or waste containing a Hazardous Material, including any
required labeling, payment of waste fees or charges (including
so-called e-waste fees) and compliance with any recycling, product
take-back or product content requirements.
1.83 “HSR
Act” means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules promulgated
thereunder.
1.84 “Improvements”
has the meaning set forth in Section 4.30(c).
1.85 “Indebtedness”
means, as of any time of determination and with respect to any
Person, the outstanding principal amount of, accrued and unpaid
interest on, fees, expenses and other payment obligations
(including any prepayment penalties, premium costs, breakage, and
other amounts payable in the event such indebtedness is to be
repaid or assumed on the Closing Date) arising under: (a) any
obligations of such Person for borrowed money, or with respect to
deposits or advances of any kind (including amounts by reason of
overdrafts), (b) any obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) any reimbursement
obligations in respect of letters of credit solely to the extent
drawn or called, performance bonds to the extent drawn or called
and surety bonds to the extent drawn or called and similar
obligations, (d) any payment obligations with respect to interest
rate, currency or commodity derivative, hedging, swap and other
similar arrangements, (e) any obligations of such Person under
conditional sale or other title retention agreements relating to
property purchased by such Person, (f) any obligations of such
Person issued or assumed as the deferred purchase price of property
or services (other than accounts payable to creditors for goods and
services incurred in the ordinary course of business), including
earnouts, milestone payments, seller notes, holdbacks or other
unpaid purchase price obligations or similar obligations, (g) any
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any lien or security interest on property owned or
acquired by such Person, whether or not the obligations secured
thereby have been assumed, (h) all obligations of such Person under
leases required to be accounted for as capital leases under U.S.
GAAP, (i) all guarantees by such Person, (j) any severance
obligations (and any related post-termination obligations) payable
by the Acquired Companies to any current or former director,
manager, officer or employee whose employment has been terminated
prior to Closing (including any COBRA or similar payments); (k) any
Liability arising under any LTIP Agreements and all awards granted
thereunder or annual bonus plan, in each case, that is accrued as
of the Closing; (l) all Change in Control Payments; (m) all
Transaction Expenses, (n) any other liability required to be listed
as a long term liability under GAAP, together with any and all
interest accrued thereon and any and all prepayment or similar
penalties or termination charges with respect thereto, and (o) any
agreement to incur any of the same.
1.86 “Indemnified
Party” has the meaning set forth in Section 10.2(a).
1.87 “Indemnifying
Party” has the meaning set forth in Section 10.2(a).
1.88 “Indemnified
Taxes” means (i) Taxes of any Acquired Company with
respect to any Pre-Closing Tax Period or the portion of any
Straddle Period ending on the Closing Date (as apportioned pursuant
to Section 7.8(c)),
including, in each case, any Taxes that would have been due or
payable on or prior to the Closing Date but for any provision of
the 2020 Tax Acts; (ii) Taxes of any Seller or other owner of any
equity or other interest in any of the Acquired Companies
(including, without limitation, capital gains Taxes arising as a
result of the transactions contemplated by this Agreement) or any
of their Affiliates for any Tax period; (iii) Taxes attributable to
any restructuring or reorganization undertaken by any of the
Sellers or other owners of any equity or other interest in any of
the Acquired Companies or by any of the Acquired Companies prior to
the Closing, (iv) Taxes for which any Acquired Company (or any
predecessor of any Acquired Company) is liable under Treasury
Regulation Section 1.1502-6 (or any similar provision of applicable
Law) by reason of such entity being or having been included in any
consolidated, affiliated, combined or unitary group at any time on
or before the Closing Date; (v) any and all Taxes of any Person
(other than an Acquired Company) imposed upon an Acquired Company
as a transferee or successor, by contract or pursuant to any Law,
which Taxes relate to an event or transaction occurring before the
Closing; (vi) any Taxes resulting from any election by any Acquired
Company under Code §108(i) or Code §965 or any analogous
provision of state Law, on or prior to the Closing Date, (vii) all
Taxes imposed on any Acquired Company, or for which any Acquired
Company may be liable, as a result of any transaction contemplated
by this Agreement, (including the employer-share of any employment
Taxes on any compensatory payments due or made on or before the
Closing Date), (viii) any Taxes resulting from any breach or
inaccuracy of any of the representations set forth in Section 4.32, and (ix) any Tax
liability incurred by or imposed on any Acquired Company in any tax
period (or any portion thereof) beginning after the Closing Date as
a result of the receipt or forgiveness of the PPP Loan, including
the aggregate Tax impact of any disallowance of deductions from
taxable income for expenditures made by the Acquired Company, or of
any increase in income (under the “tax benefit rule” or
otherwise) attributable to the deduction of such expenditures in a
tax period (or portion thereof) ending on or prior to the Closing
Date, that results from its receipt of the PPP Loan or the
forgiveness thereof and (vi) transfer and similar Taxes for which
the Sellers are liable pursuant to Section 7.8(g).
9
1.89 “Independent
Accountants” has the meaning set forth in Section 3.2.
1.90 “Infringe”
has the meaning set forth in Section 4.21(d).
1.91 “Initial
Release Date” has the meaning set forth in
Section
10.4(d).
1.92 “Intellectual
Property Licenses” has the meaning set forth in
Section
4.21(a).
1.93 “Intellectual
Property Right” means all intellectual property and
proprietary rights in any jurisdiction throughout the world,
including (i) any trademark, service mark, trade name, trade dress,
corporate name, logo, or slogan, including any registration thereof
or application for registration therefor including any renewals
thereof and rights related thereto, together with the goodwill
associated with each of the foregoing; (ii) patent and patent
applications, and other governmental grants for the protection of
inventions, and any and all divisions, continuations,
continuations-in-part, reissues, continuing patent applications,
reexaminations, and extensions thereof; (iii) trade secret rights
associated with confidential and proprietary information, including
recipes, trade secrets, processes, methods, formulae, inventions
(whether patentable or unpatentable and whether or not reduced to
practice), invention disclosures, know how, methods, layouts,
designs, and technology; (iv) copyright, copyrightable materials,
copyright registration, application for copyright registration; (v)
Internet domain names; (vi) any registrations or applications for
registration of any of the foregoing; (vii) analogous rights to
those set forth above; and (viii) rights to sue for past, present
and future infringement of the rights set forth above.
1.94 “Inventory”
means inventory of the nature reflected in the Company Financial
Statements, consistent with past practice.
10
1.95 “IRS”
means the U.S. Internal Revenue Service.
1.96 “IT
Systems” has the meaning set forth in Section
4.21(h).
1.97 “Key
Employees” means those Persons set forth on
Exhibit A-1 and
Exhibit
A-2.
1.98 “Knowledge
of Purchaser” or any other similar knowledge
qualification, means the actual knowledge (following due inquiry)
of Marshall Chesrown, Steven Berrard, and Peter Levy.
1.99 “Knowledge
of the Sellers” or any other similar knowledge
qualification, means the actual knowledge (following due inquiry)
of Coulter, Tkach, and each Seller, provided that each
Seller’s (other than the Principal Owners) knowledge is
limited to matters regarding the Acquired Company or Acquired
Companies in which such Seller owns an Equity
Interest.
1.100 “Labor
Agreements” has the meaning set forth in Section 4.27(a).
1.101 “Law”
means any federal, state, municipal, local or foreign laws,
statutes, ordinances, codes, rules, regulations, treaties,
variances, judgments, injunctions, Orders, conditions and licenses
or other binding directive issued, promulgated or enforced by an
Authority having jurisdiction over a given matter or the assets or
the properties of such Party or its Subsidiaries and the operations
thereof.
1.102 “Leased
Real Property” has the meaning set forth in
Section
4.30(b).
1.103 “Leases”
has the meaning set forth in Section 4.30(b).
1.104 “Letter
of Transmittal” has the meaning set forth in
Section
2.2(h).
1.105 “Liability”
or “liability” means any
liability, debt, obligation, deficiency, interest, Tax, penalty,
fine, demand, judgment, claim, cause of action or other loss, cost
or expense of any kind or nature whatsoever, whether asserted or
unasserted, whether or not contingent, known or unknown, accrued or
unaccrued, liquidated or unliquidated, and whether due or become
due and regardless of when asserted.
1.106 “Lien”
means, with respect to any asset or equity, any mortgage, lien,
pledge, charge, claim, security interest, restriction on transfer,
option, right of first refusal, or other encumbrance of any kind in
respect of such asset or equity, as applicable, and any conditional
sale or voting agreement or proxy, including any agreement to give
any of the foregoing.
1.107 “Limitation
Date” has the meaning set forth in Section 10.4(e).
1.108 “Material
Adverse Effect” or “Material Adverse Change”
means any event, development, occurrence, fact, condition, change
or effect that has had or could reasonably be expected to have a
material adverse change or a material adverse effect, individually
or in the aggregate, upon (x) the assets, liabilities, financial
condition, net worth, earnings, cash flows, business, operations or
properties of the Acquired Companies and the Business, taken as a
whole, or (y) the ability of the Sellers or the Acquired Companies
to perform their respective obligations under this Agreement and
the Additional Agreements; provided, however, that for the
purposes of the foregoing clause (x) a Material Adverse Effect or
Material Adverse Change shall not be deemed to have occurred as a
result of any event, occurrence, fact, condition or change arising
out of or attributable to: (i) any change, effect or circumstance
resulting from an action required or permitted by this Agreement;
(ii) any change, effect or circumstance resulting from the
announcement of this Agreement; or (iii) conditions caused by acts
of terrorism or war (whether or not declared) or any natural or
man-made disaster or acts of God (including any pandemic and any
governmental response thereto); provided that any change, effect or
circumstance resulting from a matter described in clause (iii) may
be taken into account in determining whether a Material Adverse
Effect or Material Adverse Change has occurred or could reasonably
be expected to occur to the extent such change, effect or
circumstance has a disproportionate effect on the Acquired
Companies, taken as a whole, relative to other entities operating
in the industries or markets in which the Acquired Companies
operate.
11
1.109 “Material
Contracts” has the meaning set forth in Section 4.17(a).
1.110 “Merged
Entities” has the meaning set forth in the recitals to
this Agreement.
1.111 “Merger
I” has the meaning set forth in Section 2.2(a)(i).
1.112 “Merger
II” has the meaning set forth in Section
2.2(a)(ii).
1.113 “Merger
III” has the meaning set forth in Section
2.2(a)(iii).
1.114 “Merger
IV” has the meaning set forth in Section
2.2(a)(iv).
1.115 “Merger
Sub I” has the meaning set forth in the preamble to
this Agreement.
1.116 “Merger
Sub I Common Stock” has the meaning set forth in
Section
2.2(f)(i).
1.117 “Merger
Sub II” has the meaning set forth in the preamble to
this Agreement.
1.118 “Merger
Sub II Common Stock” has the meaning set forth in
Section
2.2(f)(ii).
1.119 “Merger
Sub III” has the meaning set forth in the preamble to
this Agreement.
1.120 “Merger
Sub III Common Stock” has the meaning set forth in
Section
2.2(f)(iii).
1.121 “Merger
Sub IV” has the meaning set forth in the preamble to
this Agreement.
1.122 “Merger
Sub IV Common Stock” has the meaning set forth in
Section
2.2(f)(iv).
1.123 “Mergers”
has the meaning set forth in Section 2.2(a)(v).
1.124 “Metro
Motorcycle” means Metro Motorcycle, Inc., an Arizona
corporation.
1.125 “Money
Laundering Laws” has the meaning set forth in
Section
4.37.
1.126 “Nasdaq”
means the Nasdaq Capital Market.
1.127 “Net
Working Capital” means, as of any time, the Acquired
Companies’ current assets (consisting of the type and kind
set forth on Exhibit
D, and which excludes cash, if any, escrowed in respect of
the PPP Loans) less the Acquired Companies’ current
liabilities (consisting of the type and kind set forth on
Exhibit D), in each
case, determined in accordance with the Transaction Accounting
Principles, provided that if less than 100% of the Equity Interests
of any Acquired Company are acquired by Purchaser because (w) all
Persons owning the Equity Interests of each of the Purchased
Companies have not joined this Agreement on or prior to the
Closing, (x) any right of first refusal provided in the
Organizational Documents with respect to the right to acquire the
Transferred Equity Interests of a Transferred Entity has been
exercised and not thereafter waived in writing prior to Closing,
(y) any required Consent to the transfer of Equity Interests of a
Transferred Entity (including, for the avoidance of doubt, any
Consent from a Factory for all locations of any Acquired Company)
has not been obtained (in each case as reasonably determined by
Purchaser) or (z) such entity is deemed an Excluded Company
pursuant to Section
8.11 hereof, then the Net Working Capital shall be
automatically reduced for such Acquired Company by the percentage
of the Equity Interests in such Excluded Company which are not
transferred to Purchaser hereunder (which may be up to 100%).
Exhibit D hereto
sets forth a sample calculation of Net Working
Capital.
12
1.128 “Net
Working Capital Adjustment” means (i) the amount by
which the Closing NWC exceeds the Net Working Capital Target, which
will result in a dollar-for-dollar increase to the Cash
Consideration, (ii) the amount by which the Closing NWC is less
than the Net Working Capital Target, which will result in a
dollar-for-dollar decrease in the Cash Consideration or (iii) $0,
in the event that the Closing NWC does not exceed the Net Working
Capital Target and is not less than the Net Working Capital
Target.
1.129 “Net
Working Capital Target” means
$50,000,000.
1.130 “NRS”
means the Nevada Revised Statutes, as amended from time to
time.
1.131 “OFAC”
has the meaning set forth in Section 4.39.
1.132 “Order”
means any decree, order, judgment, decision, settlement, writ,
assessment, award, injunction, stipulation, determination, rule or
consent issued by or entered by, with or under the supervision of
any Authority.
1.133 “Organizational
Documents” means the articles of incorporation,
certificate of incorporation, charter, by-laws, articles of
formation, certificate of formation, operating agreement,
certificate of limited partnership, regulations, partnership
agreement, limited liability company agreement, all
equityholders’ agreements, voting agreements, registration
rights agreements or equivalent agreements, and all other similar
documents, instruments or certificates executed, adopted or filed
in connection with the creation, formation or organization of a
Person, including any amendments thereto.
1.134 “Other
Filings” has the meaning set forth in Section 8.2(d).
1.135 “Outside
Closing Date” has the meaning set forth in
Section
12.1(b).
1.136 “Owned
Real Property” has the meaning set forth in
Section
4.30(a).
1.137 “Parties”
means the parties to this Agreement.
1.138 “Payment
Notice” has the meaning set forth in Section 2.5.
1.139 “PCI
Requirements” has the meaning set forth in
Section
4.22(a).
13
1.140 “Permits”
means any and all permits, authorizations, approvals,
registrations, franchises, licenses, certificates, waivers,
variances or other approvals or similar rights required to be
obtained from any Authority.
1.141 “Permitted
Liens” means (i) with respect to Real Property, all
defects, exceptions, restrictions, easements, rights of way and
encumbrances disclosed in policies of title insurance which have
been made available to Purchaser and which have not and could not
reasonably be expected to impair, individually or in the aggregate,
in any material respect the access to, use, operation or value of
the relevant property; (ii) mechanics’, carriers’,
workers’, repairers’ and similar statutory Liens
arising or incurred in the ordinary course of business for amounts
(A) that are not delinquent, (B) that are not material to the
business, operations and financial condition of the Acquired
Companies so encumbered, either individually or in the aggregate,
and (C) that do not result from a breach, default or violation by
an Acquired Company of any Contract or Law, and (iii) the Liens set
forth on Schedule 1.141.
1.142 “Person”
means an individual, corporation, partnership (including a general
partnership, limited partnership or limited
liability partnership), limited liability company, association,
trust or other entity or organization, including a government,
domestic or foreign, or political subdivision thereof, or an agency
or instrumentality thereof.
1.143 “Personal
Data” means all data relating to one or more
individual(s) or an individual’s device that is personally
identifying (i.e., data that identifies an individual or, in
combination with any other information or data available to the
Acquired Companies, is capable of identifying an individual or an
individual’s device), including, without limitation,
aggregate or data and data collected automatically, including data
collected through a mobile or other electronic device, or as that
term is otherwise defined under any applicable Law.
1.144 “Plan”
has the meaning set forth in Section 4.29(a).
1.145 “Post-Closing
Adjustment” has the meaning set forth in Section 3.2.
1.146 “Post-Closing
Adjustment Statement” has the meaning set forth in
Section
3.2.
1.147 “PPP
Escrow Agent” means JPMorgan Chase Bank,
N.A.
1.148 “PPP
Escrow Agreement” means an Escrow Agreement, in a form
to be provided by the PPP Escrow Agent, by and among the Purchaser,
the Sellers’ Representative, and the PPP Escrow
Agent.
1.149 “PPP
Lender” means JPMorgan Chase Bank, N.A.
1.150 “PPP Loan” means,
collectively, the loans set forth on Schedule 1.150.
1.151 “Pre-Closing Portion” has
the meaning set forth in Section 7.8(c).
1.152 “Pre-Closing Tax Period”
has the meaning set forth in Section 7.8(b).
1.153 “Pre-Closing
Tax Return” has the meaning set forth in Section 7.8(b).
1.154 “Principal
Owners” has the meaning set forth in the preamble to
this Agreement.
14
1.155 “Privacy
and Data Security Policies” has the meaning set forth
in Section
4.22(b).
1.156 “Privacy
Agreements” has the meaning set forth in Section 4.22(a).
1.157 “Privacy
Laws” has the meaning set forth in Section 4.22(a).
1.158 “Pro
Rata Share” has the meaning set forth in Section 2.5.
1.159 “Proxy
Statement” has the meaning set forth in Section 8.2(a).
1.160 “Purchase
Price” has the meaning set forth in Section 3.1.
1.161 “Purchase
Price Allocation Principles” has the meaning set forth
in Section
7.8(a).
1.162 “Purchase
Price Allocation Schedule” has the meaning set forth
in Section
7.8(a).
1.163 “Purchased
Companies” has the meaning set forth in the
Recitals.
1.164 “Purchaser”
has the meaning set forth in preamble to this
Agreement.
1.165 “Purchaser
Class A Common Stock” means the Class A common stock,
par value $0.001 per share, of Purchaser.
1.166 “Purchaser
Class B Common Stock” means the Class B common stock,
par value $0.001 per share, of Purchaser.
1.167 “Purchaser
Common Stock” means the Class A Common Stock and the
Class B Common Stock of Purchaser together.
1.168 “Purchaser
Financial Statements” means the consolidated financial
statements of Purchaser and its subsidiaries included in each of
Purchaser’s Annual Report on Form 10-K for the fiscal years
ended December 31, 2018 and December 31, 2019, Purchaser’s
Quarterly Reports on Form 10-Q for the quarters ended March 31,
2020, June 30, 2020, and September 30, 2020 and contained in any
Purchaser SEC Document filed with the SEC after the date hereof,
including in the case of year-end statements the report of the
independent auditors thereon and in each case the footnotes
thereto.
1.169 “Purchaser
Indemnitees” has the meaning set forth in Section 10.1.
1.170 “Purchaser
Material Adverse Effect” means any event, change or
effect that prevents or materially delays or materially impairs the
ability of the Purchaser (a) to satisfy the conditions precedent to
the consummation of the Transactions or (b) to perform its
obligations under this Agreement, including the obligation to pay
the Purchase Price.
1.171 “Purchaser
Plans” means RumbleOn, Inc. 2017 Stock Incentive
Plan.
1.172 “Purchaser
Preferred Stock” means the preferred stock, par value
$0.001 per share, of Purchaser, none of which is issued and
outstanding.
1.173 “Purchaser
SEC Documents” has the meaning set forth in
Section
6.13(a).
15
1.174 “Purchaser
Stockholder Approval” means the approval of the
Purchaser Proposals by the affirmative vote by the holders of at
least a majority of the outstanding shares of Purchaser Common
Stock, voting together as a single class.
1.175 “Purchaser
Stockholders’ Meeting” has the meaning set forth
in Section
8.4(a).
1.176 “Real
Property” means, collectively, all real properties and
interests therein (including the right to use), together with all
buildings, fixtures, trade fixtures, plant and other improvements
located thereon or attached thereto; all rights arising out of use
thereof (including air, water, oil and mineral rights); and all
subleases, franchises, licenses, permits, easements and
rights-of-way which are appurtenant thereto.
1.177 “Registered
Intellectual Property” has the meaning set forth in
Section
4.21(a).
1.178 “Registration
Rights and Lock-Up Agreement” means the agreement in
the form attached hereto as Exhibit E governing the resale
of the Closing Payment Shares, and the other securities included in
the Registration Rights and Lock-Up Agreement.
1.179 “Related
Parties” has the meaning set forth in Section 4.8(c).
1.180 “Related
Party Transactions” has the meaning set forth in
Section
4.8(c).
1.181 “Released
Claims” has the meaning set forth in Section 13.16.
1.182 “Released
Parties” has the meaning set forth in Section 13.16.
1.183 “Releasing
Parties” has the meaning set forth in Section 13.16.
1.184 “Release”
means any release, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping,
abandonment, disposing, migration or allowing to escape or migrate
into or through the environment (including ambient air (indoor or
outdoor), surface water, groundwater, land surface or subsurface
strata or within any building, structure, facility or
fixture).
1.185 “Remedial
Action” shall mean any removal, cleanup, treatment,
disposal, restoration, response, further investigation, further
assessment, encapsulation, preparation of operations and
maintenance plans, reuse, storage, confinement, neutralization,
recycling, containment, remediation, monitoring, sampling,
abatement measures or other action to address or remedy any Release
or threatened Release of Hazardous Materials or to prevent a
Release or threatened Release of Hazardous Materials.
1.186 “Representatives”
means, with respect to any Person, such Person’s Affiliates
and its and such Affiliates’ respective directors, officers,
employees, members, owners, partners, accountants, consultants,
advisors, attorneys, agents, and other
representatives.
1.187 “Required
Consents” has the meaning set forth in Section 9.2(f).
1.188 “Required
Financial Statements” has the meaning set forth in
Section
7.5.
1.189 “Resolution
Period” has the meaning set forth in Section 3.2.
16
1.190 “Restricted
Business” has the meaning set forth in Section 7.7(f)(i).
1.191 “Restricted
Period” has the meaning set forth in Section
7.7(f)(ii).
1.192 “Restricted
Territory” has the meaning set forth in Section
7.7(f)(iii).
1.193 “Review
Period” has the meaning set forth in Section 3.2.
1.194 “Sarbanes-Oxley
Act” means the Sarbanes-Oxley Act of 2002, as
amended.
1.195 “SEC”
means the Securities and Exchange Commission.
1.196 “Securities
Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
1.197 “Seller”
has the meaning set forth in preamble of this
Agreement.
1.198 “Seller
Joinder” means that certain joinder agreement in the
form attached hereto as Exhibit F, pursuant to which
the signatory thereto agrees to enter into this Agreement effective
as of the date hereof and shall be deemed to be a Seller hereunder
for all purposes as if a signatory hereto on the date
hereof.
1.199 “Sellers’
Representative” has the meaning set forth in preamble
of this Agreement.
1.200 “Sellers’
Representative Losses” has the meaning set forth in
Section
13.14.
1.201 “Shrink-wrap
Licenses” has the meaning set forth in Section 4.17(a).
1.202 “Site
Assessments” has the meaning set forth in Section 8.11.
1.203 “SOL
Representations” has the meaning set forth in
Section
10.4(e).
1.204 “Special
Event Indemnity” means any Losses resulting from the
matters set forth on Schedule 1.204.
1.205 “Statement
of Merger” has the meaning set forth in Section 2.2(b).
1.206 “Statement
of Objections” has the meaning set forth in
Section
3.2.
1.207 “Straddle
Period” has the meaning set forth in Section 7.8(c).
1.208 “Straddle
Return” has the meaning set forth in Section 7.8(c).
1.209 “Subsidiary”
means, with respect to any Person, any corporation, limited
liability company, partnership, association, trust or other
business entity of which (a) if a corporation, a majority of the
total voting power of shares of stock entitled (without regard to
the occurrence of any contingency) to vote in any election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more
of the other Subsidiaries of such Person or a combination thereof;
(b) if a limited liability company, partnership, association,
trust, or other business entity (other than a corporation), a
majority of the ownership interests thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more
Subsidiaries of such Person or a combination thereof; or (c) that
is otherwise consolidated with such Person for financial reporting
purposes. The term “Subsidiary” shall include all
Subsidiaries of such Subsidiary.
17
1.210 “Surviving
Corporation”
has the meaning set forth in Section
2.2(a)(vi).
1.211 “Tangible
Personal Property” means all tangible personal
property and interests therein, including machinery, computers and
accessories, furniture, office equipment, communications equipment,
automobiles, trucks, forklifts and other vehicles owned or leased
by any Acquired Company.
1.212 “Target
Closing Indebtedness” means $15,000,000, provided that
if less than 100% of the Equity Interests of any Acquired Company
are acquired by Purchaser because (w) all Persons owning the Equity
Interests of each of the Purchased Companies have not joined this
Agreement on or prior to the Closing, (x) any right of first
refusal provided in the Organizational Documents with respect to
the right to acquire the Transferred Equity Interests of a
Transferred Entity has been exercised and not thereafter waived in
writing prior to Closing, (y) any required Consent to the transfer
of Equity Interests of a Transferred Entity (including, for the
avoidance of doubt, any Consent from a Factory for all locations of
any Acquired Company) has not been obtained (in each case as
reasonably determined by Purchaser) or (z) such entity is deemed an
Excluded Company pursuant to Section 8.11 hereof, then the
Target Closing Indebtedness shall be automatically reduced by the
percentage of the reduction of the Purchase Price pursuant to the
application of any Pre-Closing Adjustments pursuant to Section 3.2
hereof.
1.213 “Tax”
means any federal, state, local or foreign tax, charge, fee, levy,
custom, duty, deficiency, or other assessment of any kind or nature
imposed by any Authority (including any income (net or gross),
gross receipts, profits, windfall profit, sales, use, goods and
services, ad valorem, franchise, license, withholding, employment,
social security, workers compensation, unemployment compensation,
employment, payroll, transfer, excise, import, real property,
personal property, intangible property, unclaimed property or
escheat (whether or not treated as a tax under local law),
occupancy, recording, minimum, alternative minimum, environmental
or estimated tax), including any liability therefor as a transferee
(including under Section 6901 of the Code or similar provision of
applicable Law) or successor, as a result of Treasury Regulation
Section 1.1502-6 or any similar provision of applicable Law or as a
result of any Tax sharing, indemnification or similar agreement,
together with any interest, penalty (including penalties for
failure to file correct Tax Returns), additions to tax or
additional amount imposed with respect thereto.
1.214 “Tax
Return” means any return, information return,
declaration, claim for refund or credit, report or any similar
statement, and any amendment thereto, including any attached
schedule and supporting information, whether on a separate,
consolidated, combined, unitary or other basis, that is filed or
required to be filed with any Taxing Authority in connection with
the determination, assessment, collection or payment of a Tax or
the administration of any Law relating to any Tax.
1.215 “Taxing
Authority” means the IRS and any other Authority
responsible for the collection, assessment or imposition of any Tax
or the administration of any Law relating to any Tax.
1.216 “Third-Party
Claim” has the meaning set forth in Section 10.2(a).
1.217 “Third-Party
Claim Notice” has the meaning set forth in
Section
10.2(a).
18
1.218 “Tkach”
has the meaning set forth in the preamble to this
Agreement.
1.219 “Transactions”
means the transactions contemplated by this Agreement.
1.220 “Transaction
Accounting Principles” has the meaning set forth in
Section
2.10.
1.221 “Transaction
Effective Time” has the meaning set forth in
Section
2.3.
1.222 “Transaction
Expenses” means (i) all out-of-pocket third-party
costs and expenses that were incurred by the Sellers or the
Acquired Companies in connection with the negotiation,
documentation and execution of this Agreement and the consummation
of the Transactions, including costs, fees and expense of legal
counsel and other Representatives, and which are not paid in full
as of the Closing, and (ii) any fees, costs or expenses, charged by
or otherwise payable to the PPP Escrow Agent for holding and
administering amounts pursuant to the PPP Escrow
Agreement.
1.223 “Transferred
Entity” has the meaning set forth in the recitals to
this Agreement.
1.224 “Transferred
Equity Interest” has the meaning set forth in the
recitals to this Agreement.
1.225 “Tucson
Motorcycles” means Tucson Motorcycles, Inc., an
Arizona corporation.
1.226 “Tucson
Motorsports” means Tucson Motorsports, Inc., an
Arizona corporation.
1.227 “Unaudited
Financial Statements” has the meaning set forth in
Section
4.12(a).
1.228 “Undisputed
Amounts” has the meaning set forth in Section 3.2.
1.229 “Union”
means any labor organization, union, works council or other labor
association or representative.
1.230 “U.S.
GAAP” means U.S. generally accepted accounting
principles, consistently applied.
1.231 “Voting
Parties” has the meaning set forth in the
Recitals.
1.232 “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 on such trading day as an internationally
recognized investment bank retained for this purpose by
Sellers’ Representative determines in good
faith).
1.233 “Waived
Claims” has the meaning set forth in Section 13.16.
1.234 “WARN
Act” means the Worker Adjustment and Retraining
Notification Act of 1988, as amended, and equivalent state or local
Laws.
19
ARTICLE II.
Subject
to the terms and conditions of this Agreement, at the Closing,
simultaneous with the Effective Time, the Sellers shall, in
consideration of the Purchase Price (other than the portion of the
Purchase Price constituting the Closing Per Share Merger
Consideration which is payable in accordance with Section 2.2),
sell, assign, transfer and convey to the Purchaser, and the
Purchaser shall purchase, acquire and accept from the Sellers, all
rights, title and interest in and to the Transferred Equity
Interests, free and clear of all Liens other than restrictions on
transfers arising under applicable securities Law.
(a) Mergers. On the terms and subject to
the conditions set forth in this Agreement and in accordance with
the ARS at the Effective Time:
(i) Merger Sub I shall
be merged (“Merger
I”) with and into C&W Motors in accordance with
the Arizona Entity Restructuring Act (“AERA”) at which time the
separate existence of Merger Sub I shall cease, and C&W Motors
shall be the surviving corporation and shall be a wholly owned,
direct subsidiary of Purchaser;
(ii) Merger
Sub II shall be merged (“Merger II”) with and into
Metro Motorcycle in accordance with AERA at which time the separate
existence of Merger Sub II shall cease, and Metro Motorcycle shall
be the surviving corporation and shall be a wholly owned, direct
subsidiary of Purchaser;
(iii) Merger
Sub III shall be merged (“Merger III”) with and
into Tucson Motorcycles in accordance with AERA at which time the
separate existence of Merger Sub III shall cease, and Tucson
Motorcycles shall be the surviving corporation and shall be a
wholly owned, direct subsidiary of Purchaser;
(iv) Merger
Sub IV shall be merged (“Merger IV” and together
with Merger I, Merger II, and Merger III, the “Mergers”) with and into
Tucson Motorsports in accordance with AERA at which time the
separate existence of Merger Sub IV shall cease, and Tucson
Motorsports shall be the surviving corporation and shall be a
wholly owned, direct subsidiary of Purchaser; and
(v) each of C&W
Motors, Metro Motorcycle, Tucson Motorcycles, and Tucson
Motorsports shall be a “Surviving
Corporation.”
(b) Merger Effective Time. At the Closing,
Purchaser shall duly execute and file a statement of merger with
respect to Merger I, Merger II, Merger III, and Merger IV (each a
“Statement of
Merger” and collectively, the “Statements of Merger”)
with the Arizona Corporation Commission in accordance with Sections
29-2202 and 29-2205 and the other applicable provisions of AERA and
all other filings or recording required thereby to effect such
mergers. The Mergers shall become effective at such time (the
“Effective
Time”) as the Statements of Merger are filed with the
Arizona Corporation Commission (or at such later time as
Sellers’ Representative and Purchaser mutually agree and
specify in the Statements of Merger pursuant to and in accordance
with the ARS).
20
(c) Effects of the Mergers. From and after
the Effective Time, Merger I, Merger II, Merger III, and Merger IV
shall have the effects set forth herein, which the parties
acknowledge and agree constitutes the “plan of merger”
required by Section 29-2202 of AERA, and in the other applicable
provisions of AERA, including Section 29-2206 thereof. Without
limiting the generality of the foregoing, and subject thereto, at
the Effective Time, (i) all of the properties, rights, privileges,
powers and franchises of C&W Motors and Merger Sub I shall vest
in C&W Motors (as the Surviving Corporation), and all debts,
liabilities, obligations, and duties of C&W Motors and Merger
Sub I shall become debts, liabilities, obligations and duties of
C&W Motors (as the Surviving Corporation); (ii) all of the
properties, rights, privileges, powers and franchises of Metro
Motorcycle and Merger Sub II shall vest in Metro Motorcycle (as the
Surviving Corporation), and all debts, liabilities, obligations,
and duties of Metro Motorcycle and Merger Sub II shall become
debts, liabilities, obligations and duties of Metro Motorcycle (as
the Surviving Corporation); (iii) all of the properties, rights,
privileges, powers and franchises of Tucson Motorcycles and Merger
Sub III shall vest in Tucson Motorcycles (as the Surviving
Corporation), and all debts, liabilities, obligations, and duties
of Tucson Motorcycles and Merger Sub III shall become debts,
liabilities, obligations and duties of Tucson Motorcycles (as the
Surviving Corporation); and (iv) all of the properties, rights,
privileges, powers and franchises of Tucson Motorsports and Merger
Sub IV shall vest in Tucson Motorsports (as the Surviving
Corporation), and all debts, liabilities, obligations, and duties
of Tucson Motorsports and Merger Sub IV shall become debts,
liabilities, obligations and duties of Tucson Motorsports (as the
Surviving Corporation).
(d) Articles of Incorporation; Certificate of
Incorporation; Bylaws. At the Effective Time and without any
further action on the part of any party hereto, the:
(i) articles of
incorporation and bylaws of Merger Sub I, as in effect immediately
prior to the Effective Time, shall become the articles of
incorporation and bylaws of C&W Motors (as the Surviving
Corporation) as of the Effective Time, until duly amended in
accordance with applicable Law;
(ii) articles
of incorporation and bylaws of Merger Sub II, as in effect
immediately prior to the Effective Time, shall become the articles
of incorporation and bylaws of Metro Motorcycle (as the Surviving
Corporation) as of the Effective Time, until duly amended in
accordance with applicable Law;
(iii) articles
of incorporation and bylaws of Merger Sub III, as in effect
immediately prior to the Effective Time, shall become the articles
of incorporation and bylaws of Tucson Motorcycles (as the Surviving
Corporation) as of the Effective Time, until duly amended in
accordance with applicable Law; and
(iv) articles
of incorporation and bylaws of Merger Sub IV, as in effect
immediately prior to the Effective Time, shall become the articles
of incorporation and bylaws of Tucson Motorsports (as the Surviving
Corporation) as of the Effective Time, until duly amended in
accordance with applicable Law.
(e) Directors and Officers. From and after
the Effective Time, until successors are duly elected or appointed
and qualified in accordance with applicable Laws, the directors and
the officers of each of the Merged Entities at the Effective Time,
and as set forth on Schedule 4.27(a)(ii), shall be
the directors and officers, respectively, of each such Merged
Entity (in its capacity as a Surviving Corporation).
21
(f) Conversion of Shares. At the Effective
Time, by virtue of the Mergers and without any action on the part
of any party:
(i) Each share of
common stock, no par value, of C&W Motors issued and
outstanding as of the Effective Time (other than Dissenting Shares)
and all rights in respect thereof shall, by virtue of Merger I,
forthwith cease to exist and be converted into and represent the
right to receive the Closing Per
Share Merger Consideration, together with any amounts
that may become payable as a result of the adjustments in
Section 3.3 hereof
or release of Escrow Shares, if any. Each share of common stock,
par value $0.001 per share, of Merger Sub I (“Merger Sub I Common
Stock”), issued and outstanding immediately before the
Effective Time, shall be converted into one newly issued, fully
paid, and nonassessable share of common stock of C&W Motors (as
the Surviving Corporation). From and after the Effective Time, each
certificate evidencing shares of Merger Sub I Common Stock shall
evidence ownership of such shares of common stock of C&W Motors
(as the Surviving Corporation).
(ii) Each
share of common stock, no par value, of Metro Motorcycle issued and
outstanding as of the Effective Time (other than Dissenting Shares)
and all rights in respect thereof shall, by virtue of Merger II,
forthwith cease to exist and be converted into and represent the
right to receive the Closing Per
Share Merger Consideration, together with any amounts
that may become payable as a result of the adjustments in
Section 3.3 hereof
or, with respect to the Principal Owners, release of Escrow Shares,
if any. Each share of common stock, par value $0.001 per share, of
Merger Sub II (“Merger Sub II Common
Stock”), issued and outstanding immediately before the
Effective Time, shall be converted into one newly issued, fully
paid, and nonassessable share of common stock of Metro Motorcycle
(as the Surviving Corporation). From and after the Effective Time,
each certificate evidencing shares of Merger Sub II Common Stock
shall evidence ownership of such shares of common stock of Metro
Motorcycle (as the Surviving Corporation).
(iii) Each
share of common stock, no par value, of Tucson Motorcycles issued
and outstanding as of the Effective Time (other than Dissenting
Shares) and all rights in respect thereof shall, by virtue of
Merger III, forthwith cease to exist and be converted into and
represent the right to receive the Closing Per
Share Merger Consideration, together with any amounts
that may become payable as a result of the adjustments in
Section 3.3 hereof
or release of Escrow Shares, if any. Each share of common stock,
par value $0.001 per share, of Merger Sub III (“Merger Sub III Common
Stock”), issued and outstanding immediately before the
Effective Time, shall be converted into one newly issued, fully
paid, and nonassessable share of common stock of Tucson Motorcycles
(as the Surviving Corporation). From and after the Effective Time,
each certificate evidencing shares of Merger Sub III Common Stock
shall evidence ownership of such shares of common stock of Tucson
Motorcycles (as the Surviving Corporation).
(iv) Each
share of common stock, no par value, of Tucson Motorsports issued
and outstanding as of the Effective Time (other than Dissenting
Shares) and all rights in respect thereof shall, by virtue of
Merger IV, forthwith cease to exist and be converted into and
represent the right to receive the Closing Per
Share Merger Consideration, together with any amounts
that may become payable as a result of the adjustments in
Section 3.3 hereof
or, with respect to the Principal Owners, release of Escrow Shares,
if any. Each share of common stock, par value $0.001 per share, of
Merger Sub IV (“Merger Sub IV Common
Stock”), issued and outstanding immediately before the
Effective Time, shall be converted into one newly issued, fully
paid, and nonassessable share of common stock of Tucson Motorsports
(as the Surviving Corporation). From and after the Effective Time,
each certificate evidencing shares of Merger Sub IV Common Stock
shall evidence ownership of such shares of common stock of Tucson
Motorsports (as the Surviving Corporation).
22
(g) No Further Rights of Transfer. At and
after the Effective Time, each holder of Equity Interests of any
Merged Entity shall cease to have any rights as a stockholder of
such Merged Entity, except as otherwise required by applicable Law
and except for the right of each such holder to surrender his or
her stock certificate or affidavit of lost stock certificate in
exchange for payment of the applicable Closing Per Share Merger
Consideration together with any amounts that may become payable as
a result of the adjustments in Section 3.3 hereof or the release of
Escrow Shares, if any, and no transfer of shares of common stock of
any Merged Entity shall be made on the stock transfer books of the
applicable Surviving Corporation. At the close of business on the
day of the Effective Time, the stock ledger of each Merged Entity
shall be closed.
(h) Surrender and Payment. At or following the Closing, each
Seller holding Equity Interests in any Merged Entity may deliver to
Purchaser an executed and completed copy of the letter of
transmittal in a commercially reasonable form to be agreed upon by
Purchaser and Sellers’ Representative (the
“Letter of
Transmittal”) and, as soon as reasonably practicable
thereafter (but in any event, within three (3) Business Days)
Purchaser shall pay the consideration to be paid to such Seller
pursuant to the Payment Notice, without interest thereon. To the
extent that a Seller holding Equity Interests in any Merged Entity
has not delivered an executed and completed copy of the Letter of
Transmittal, then, promptly after the Effective Time, the Purchaser
shall mail to the applicable Seller: (a) the Letter of
Transmittal and (b) instructions for effecting the surrender
of each Equity Interest in exchange for the amount to be paid to
such Seller pursuant to the Payment Notice, without interest
thereon. Upon surrender of a duly completed and validly executed
Letter of Transmittal after the Effective Time, such Seller shall
be entitled to receive in exchange therefore, and as soon as
reasonably practicable after the surrender thereof (but in any
event, within three (3) Business Days), the Purchaser shall pay,
the consideration payable to such holder pursuant to the Payment
Notice, without interest thereon.
(i) Dissenting Shares. Notwithstanding any
provision of this Agreement to the contrary, shares of
common stock of any Merged Entity issued and outstanding
immediately prior to the Effective Time and held by a holder who
has not voted in favor of adoption of this Agreement or
consented thereto in writing and who has properly exercised
dissenters’ rights or appraisal rights of such shares of
common stock of any Merged Entity in accordance with Section
10-1321 of the ARS (such shares being referred to collectively as
the “Dissenting
Shares” until such time as such holder fails to
perfect or otherwise loses such holder’s appraisal rights
under the ARS with respect to such Shares) shall not be converted
into a right to receive a portion of the Closing Per
Share Merger Consideration together with any amounts that
may become payable as a result of the adjustments in Section 3.3
hereof or the release of Escrow Shares, if any, but instead shall
be entitled to only such rights as are granted by Article 2 of
Chapter 13 of Title 10 of the ARS; provided, however, that if, after
the Effective Time, such holder fails to perfect, withdraws or
loses such holder’s right to appraisal pursuant to Article 2
of Chapter 13 of Title 10 of the ARS or if a court of competent
jurisdiction shall determine that such holder is not entitled to
the relief provided by Article 2 of Chapter 13 of Title 10 of the
ARS, such shares shall be treated as if they had been converted as
of the Effective Time into the right to receive the portion of the
Closing Per Share Merger Consideration together with any amounts
that may become payable as a result of the adjustments in Section
3.3 hereof or the release of Escrow Shares, if any, to which such
holder is entitled pursuant to Section 2.2(f), without
interest thereon. Sellers shall provide Purchaser prompt written
notice of any demands received by any Acquired Company for
appraisal of shares of the Merged Entity, any withdrawal of any
such demand and any other demand, notice or instrument delivered to
any Acquired Company prior to the Effective Time pursuant to the
ARS that relates to such demand, and Purchaser shall have the
opportunity and right to direct all negotiations and proceedings
with respect to such demands. Except with the prior written consent
of Purchaser, neither the Sellers nor any Acquired Company shall
make any payment with respect to, or settle or offer to settle, any
such demands.
23
2.3 Closing;
Transaction Effective Time.
Unless
this Agreement is earlier terminated in accordance with
Article XII, the
closing of the Transactions (the “Closing”) shall take
place electronically or at the offices of Akerman LLP, 201 East Las
Olas Boulevard, Suite 1800, Fort Lauderdale, FL 33301, at 10:00
a.m. local time but shall be deemed to have occurred for all
purposes as of 12:01 a.m. local time (the “Transaction Effective
Time”), no later than two Business Days after the last
of the conditions to Closing set forth in Article IX have been satisfied
or waived (other than conditions which, by their nature, are to be
satisfied on the Closing Date), or at such other time, date and
location as the Purchaser and the Sellers’ Representative
agree to in writing. The Parties may participate in the Closing via
electronic means. The date on which the Closing actually occurs is
hereinafter referred to as the “Closing
Date.”
No
fewer than two (2) Business Days before the Closing Date, the
Sellers’ Representative shall (or shall cause the Acquired
Companies to) prepare and deliver to the Purchaser a written notice
(the “Payment
Notice”) containing the following information: (i) the
full name and mailing address of each Seller, (ii) the portion of
the Estimated Cash Consideration to be paid to each such Seller at
the Closing (expressed in U.S. dollars), (ii) the number of Closing
Payment Shares to be paid to each such Seller at the Closing, (iv)
the number of Escrow Shares to be paid to each such Seller, subject
to Section 10.4(d),
(v) each Seller’s pro rata share of the aggregate Purchase
Price (expressed as a percentage), without duplication, the Closing
Per Share Merger Consideration for each of the Mergers (each
Seller’s “Pro
Rata Share”), and (vi) wire instructions for each such
Seller.
At or
prior to the Closing:
(a) The Purchaser
shall:
(i) deliver (A) the
Escrow Shares to the Escrow Agent to be held pursuant to the Escrow
Agreement and (B) the Adjustment Escrow Amount to the
Sellers’ Representative;
(ii) pay
the Estimated Cash Consideration and deliver the Closing Payment
Shares, in each case, to such Sellers, in such amounts and (in the
case of the Estimated Cash Consideration) to such accounts as are
set forth across from each such Seller’s name in the Payment
Notice, other than any portion of the Estimated Cash Consideration
and Closing Payment Shares that is payable as Closing Per Share
Merger Consideration which shall be paid in accordance with
Section 2.2 at or
prior to the Closing;
(iii) deliver
to the Sellers’ Representative a counterpart signature page
to the Escrow Agreement, duly executed by the
Purchaser;
24
(iv) if
the SBA or PPP Escrow Agent has not yet made a determination with
respect to the Agreed PPP Forgiveness Amount, deliver to the
Sellers’ Representative a counterpart signature page to the
PPP Escrow Agreement, duly executed by the Purchaser;
(v) deliver to the
Sellers’ Representative the counterpart signature page to
each of the Registration Rights and Lock-Up Agreement, duly
executed by the Purchaser;
(vi) deliver
to the Sellers’ Representative a certificate signed by an
authorized officer of the Purchaser stating that the conditions
specified in Section
9.3(a) and Section
9.3(b) have been satisfied.
(b) The Sellers shall
deliver (or cause to be delivered) to the Purchaser each of the
following (each in a form and substance reasonably satisfactory to
the Purchaser):
(i) certificates, duly
endorsed in blank or accompanied by a stock power duly endorsed in
blank, assignments of membership interests or other applicable
instruments of assignment, in each case, with respect to the
Transferred Equity Interests;
(ii) articles
of merger in such form as is required by the relevant provisions of
the ARS to effect the Mergers;
(iii) a
certificate of good standing (or equivalent thereof), dated not
more than ten (10) days prior to the Closing Date, with respect to
each Acquired Company, issued by the appropriate government
official of such Acquired Company’s jurisdiction of
organization or formation;
(iv) an
IRS Form W-9 executed by each Seller;
(v) with respect to
each Seller, (i) an executed certificate pursuant to Treasury
Regulations Section 1.1445-2(b) and (ii) with respect to any
interest in an Acquired Company treated as a partnership for U.S.
federal income tax purposes, a certificate pursuant to Code Section
1446(f) and applicable Treasury Regulations in each case in form
and substance reasonably satisfactory to the Purchaser and
certifying that no withholding is required pursuant to Sections
1445 and 1446 of the Code, as applicable;
(vi) a
counterpart signature page to the Escrow Agreement, duly executed
by the Sellers’ Representative;
(vii) a
counterpart signature page to each of the Registration Rights and
Lock-Up Agreement, duly executed by the Sellers;
(viii) evidence
that each Related Party Transaction (other than those set forth on
Schedule
2.6(b)(viii)) has been terminated as of the Closing Date
with no further liability or other Losses to the Purchaser or any
Acquired Company;
(ix) written
resignations (in each case, effective as of the Closing) of each
manager, director or officer of the Acquired Companies set forth on
Schedule
2.6(b)(ix), duly executed by each such Person;
25
(x) a certificate
signed by the Sellers stating that the conditions specified in
Section 9.2(a),
9.2(b) and
9.2(c) have been
satisfied;
(xi) a
counterpart signature page to the PPP Escrow Agreement, duly
executed by the Sellers’ Representative and the PPP Escrow
Agent;
(xii) if
the SBA or PPP Escrow Agent has not yet made a determination with
respect to the Agreed PPP Forgiveness Amount, evidence satisfactory
to Purchaser that the PPP Lender or SBA has provided Consent to a
change in ownership of each Acquired Company who received a PPP
Loan that has not been forgiven as of the Closing and has entered
into an escrow agreement with the PPP Lender or PPP Escrow Agent
for each such PPP Loan pending a forgiveness application or
decision;
(xiii) a
supplement to Schedule
1.1(a) hereto adding any Person that will be a Transferred
Entity as of the Closing and/or Equity Interests of any Person that
is a Transferred Entity as of the date hereof, in each case, as a
result of the execution of a Seller Joinder after the date hereof
or removing any Transferred Entity listed thereon that has been
acquired after the date hereof by a third party who has exercised a
right of first refusal under the applicable Organizational
Documents of such Transferred Entity preventing the conveyance of
Equity Interests of such Transferred Entity to
Purchaser;
(xiv) an
estoppel certificate from each landlord of the Leased Real Property
listed on Schedule
2.6(b)(xiv), in form and substance reasonably acceptable to
Purchaser with respect to any Lease between an Acquired Company and
an Affiliate or in the form prescribed by the applicable Lease with
respect to any Lease between an Acquired Company and any
non-Affiliate;
(xv) the
consent of the Principal Owners to a change in control under any
Lease between an Acquired Company, as lessee, and an Affiliate, as
lessor, in form and substance reasonably acceptable to
Purchaser;
(xvi) (A)
copies of all filings made pursuant to the DOL Voluntary Fiduciary
Correction Program or IRS Employee Plans Compliance Resolution
System, as applicable, to correct any failure to comply with
elective deferrals of commissioned participants in the Coulter and
RideNow Affiliates 401(k) Plan and Trust and (B) evidence
reasonably satisfactory to Purchaser that all applicable excise
taxes to be paid (with corresponding IRS filings) with respect to
delinquent participant contributions to the Coulter and RideNow
Affiliates 401(k) Plan and Trust have been paid for all applicable
plan years; and
(xvii) such
other documents, instruments or certificates as shall be reasonably
requested by Purchaser.
(c) If the SBA or PPP
Escrow Agent has not yet made a determination with respect to the
Agreed PPP Forgiveness Amount, the applicable Acquired Companies
shall (and the Sellers shall cause the applicable Acquired
Companies to) pay to the PPP Escrow Agent an amount equal to the
Agreed PPP Forgiveness Amount to be held in escrow pursuant to the
terms of the PPP Escrow Agreement.
Notwithstanding
anything to the contrary contained in this
Agreement, the Purchaser (or its agent) shall be entitled to deduct
and withhold from the cash otherwise deliverable under this
Agreement, and from any other payments otherwise required pursuant
to this Agreement or any Additional Agreement, such amounts as the
Purchaser (or its agent) is required to withhold and pay over to
the applicable Authority with respect to any such deliveries and
payments under the Code or any applicable Tax Law. To the extent
that amounts are so withheld and paid over, such withheld amounts
shall be treated for all purposes of this Agreement as having been
delivered and paid to such Person in respect of which such
deduction and withholding was made.
26
2.8 Taking
of Necessary Action; Further Action.
If, at
any time after the Transaction Effective Time, any further action
is necessary or desirable to carry out the purposes of this
Agreement and to vest the Purchaser with full right, title and
interest in, to and under, and/or possession of, all assets,
property, rights, privileges, powers and franchises of the Acquired
Companies, the Parties shall execute such further instruments and
take all lawful action necessary or desirable to accomplish such
purpose or acts, so long as such action is not inconsistent with
this Agreement.
Each of
the Parties acknowledge and agree that each such Party and each of
the owners of any interest in any of the Acquired Companies (i) has
had the opportunity to obtain independent legal and tax advice with
respect to the transactions contemplated by this Agreement, and
(ii) each Seller or other owner of any interest in any of the
Acquired Companies is responsible for paying its own Taxes arising
from the transactions contemplated by this Agreement.
The
Post-Closing Adjustment Statement and the determinations and
calculations set forth therein shall be prepared using and applying
the same accounting principles, practices, procedures, policies and
methods (with consistent classifications, judgments, elections,
inclusions, exclusions and valuation and estimation methodologies)
used and applied by the Acquired Companies in the preparation of
the Company Financial Statements, and, to the extent not addressed
by the foregoing, in accordance with U.S. GAAP except that such
statements, calculations and determinations shall (i) be based on
facts and circumstances as they exist prior to the Closing, (ii)
shall follow the defined terms contained in this Agreement, and
(iii) in the case of the Net Working Capital calculations, shall be
calculated in accordance with the principles set forth on
Exhibit D (the
principles set forth in this Section 2.10, the
“Transaction
Accounting Principles”).
ARTICLE III.
Subject
to Section 3.2
below, the “Purchase
Price” shall consist of the sum of (i) the Cash
Consideration, (ii) the Closing Payment Shares, (iii) the Escrow
Shares (as the same may released to the Sellers’
Representative pursuant to Section 10.4(d)), and (iv) the
Adjustment Escrow Amount (as the same may released by the
Sellers’ Representative pursuant to Section 3.3(b)). Subject to and
upon the terms and conditions set forth in this Agreement, (x) the
Closing Per Share Merger Consideration shall be paid in accordance
with Article II and (y) at the Closing, the Purchase Price shall be
payable as follows:
(a) Cash Consideration. The Purchaser shall
pay the Estimated Cash Consideration (other than any portion of the
Estimated Cash Consideration that is payable as Closing Per Share
Merger Consideration which shall be paid in accordance with
Section 2.2) to the
Sellers on the Closing Date in accordance with Section
2.6(a)(ii).
(b) Closing Payment Shares. The Purchaser
shall issue to Sellers the Closing Payment Shares (other than any
portion of the Closing Payment Shares that is payable as Closing
Per Share Merger Consideration which shall be paid in accordance
with Section 2.2)
in accordance with Section
2.6(a)(ii), which shall be fully paid and free and clear of
all Liens other than restrictions on transfer arising under
applicable securities Law and the Registration Rights and Lock-Up
Agreement. Each Seller shall receive the number of Closing Payment
Shares opposite such Seller’s name on the Payment Notice
(other than any portion of the Closing Payment Shares that is
payable as Closing Per Share Merger Consideration which shall be
paid in accordance with Section 2.2).
27
(c) Escrow Shares; Adjustment Escrow. The
Purchaser shall (and the Principal Owners hereby authorize the
Purchaser to) deliver the Escrow Shares into escrow (the
“Escrow
Fund”) pursuant to the Escrow Agreement. The number of
Escrow Shares to be allocated among the Principal Owners (as the
same may be released to the Sellers’ Representative pursuant
to Section 10.4(d))
and held by the Escrow Agent pursuant to the Escrow Agreement is
set forth opposite each Principal Owner’s name on the Payment
Notice. The Purchaser shall (and the Sellers hereby authorize the
Purchaser to) deliver the Adjustment Escrow Amount to the
Sellers’ Representative to hold until released pursuant to
Section
3.3(b).
(d) No Issuance of Fractional Shares. No
certificates or scrip representing fractional shares of Purchaser
Class B Common Stock will be issued pursuant to the Transactions,
and instead any such fractional share that would otherwise be
issued will be rounded to the nearest whole share.
(e) Legend. Each certificate (or book
entry) issued pursuant to the Transactions shall, if required by
law, bear the legend set forth below, or a legend substantially
equivalent thereto, together with any other legends that may be
required by any securities laws at the time of the issuance of the
shares of Purchaser Class B Common Stock:
THE
SHARES OF CLASS B COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL (I) SUCH OFFER, SALE, TRANSFER,
PLEDGE OR HYPOTHECATION HAS BEEN REGISTERED UNDER THE ACT OR (II)
THE ISSUER OF THE SHARES HAS RECEIVED AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE
ACT.
IN
ADDITION, THE RIGHT TO SELL THE SHARES OF COMMON STOCK REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO A REGISTRATION RIGHTS AND LOCK-UP
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE ISSUER’S
PRINCIPAL PLACE OF BUSINESS.
3.2 Pre-Closing Adjustment.
(a) If all Persons
owning the Equity Interests of each of the Purchased Companies have
not joined this Agreement on or prior to the Closing, then the Cash
Consideration and the Closing Payment Shares components of the
Purchase Price shall be automatically reduced at Closing by the
amount allocated on Schedule 5.5(f) as payable to
such Person who has not executed a Seller Joinder and the Equity
Interests held by such Person shall be deemed excluded from the
Transferred Equity Interests.
28
(b) If any right of
first refusal provided in the Organizational Documents with respect
to the right to acquire the Transferred Equity Interests of a
Transferred Entity has been exercised and not thereafter waived in
writing prior to Closing, any required Consent to the transfer of
Equity Interests of a Transferred Entity (including, for the
avoidance of doubt, any Consent from a Factory for all locations of
any Acquired Company) has not been obtained (in each case as
reasonably determined by Purchaser), or any Acquired Entity is
deemed an Excluded Entity pursuant to Section 8.11, then the Cash
Consideration and the Closing Payment Shares components of the
Purchase Price shall be automatically reduced at Closing by the
amount allocated on Schedule 5.5(f) as payable to
all holders of Equity Interests of such Transferred Entity and the
Equity Interests held by each such Persons shall be deemed excluded
from the Transferred Equity Interests.
3.3 Post-Closing Adjustments.
(a) Within 90 calendar
days after the Closing Date, the Purchaser shall prepare and
deliver to Sellers’ Representative a statement (the
“Post-Closing
Adjustment Statement”) setting forth its good faith
calculation of the Closing Indebtedness, the Closing Indebtedness
Adjustment, the Closing NWC, the Net Working Capital Adjustment,
and the resulting calculation of the Cash Consideration and the
Post-Closing Adjustment (as defined below), which statement shall
contain a balance sheet of each Acquired Company as of the Closing
Date (without giving effect to the transactions contemplated
herein) and be accompanied by all related work papers and
supporting calculations or other materials reasonably requested by
the Sellers’ Representative. The Post-Closing Adjustment
Statement shall be prepared in accordance with the Transaction
Accounting Principles.
(b) Subject to the
provisions of this Section
3.3, the post-closing adjustment shall be an amount equal to
the Cash Consideration minus the Estimated Cash Consideration (the
difference between such amounts, the “Post-Closing
Adjustment”). If the Post-Closing Adjustment is a
positive number, the Sellers’ Representative shall release
the Adjustment Escrow Amount to Sellers and other holders of Equity
Interests in a Merged Entity and Purchaser shall pay to the Sellers
and other holders of Equity Interests in a Merged Entity (in
accordance with their respective Pro Rata Share as may be modified
by Schedule 3.3(b))
an amount equal to the Post-Closing Adjustment at the
Sellers’ Representative’s election in cash or in shares
of Purchaser Class B Common Stock (which election shall be made in
writing to Purchaser prior to Closing, or if not so made shall be
deemed to be payable in cash), with a deemed value equal to the
calculation of the valuation of the Purchaser Class B Common Stock
made for the Closing Payment Shares (or any combination thereof
“Additional
Purchaser Shares”). If the Post-Closing Adjustment is
a negative number, the Sellers shall pay to the Purchaser an amount
equal to the absolute value of the Post-Closing Adjustment (x)
first, by Sellers’ Representative delivering an amount up to
the Adjustment Escrow Amount to Purchaser by wire transfer of
immediately available funds to an account designated in writing by
the Purchaser, (y) second, by surrendering to the Purchaser (in
accordance with their respective Pro Rata Share as may be modified
by Schedule 3.3(b))
a number of shares of Purchaser Class B Common Stock from the
Escrow Fund with an aggregate value equal to the Post-Closing
Adjustment less any amount already satisfied from the Adjustment
Escrow Amount, with a deemed value equal to the calculation of the
valuation of the Purchaser Class B Common Stock made for the
Closing Payment Shares, rounded down to the nearest whole-number or
in the sole discretion of Sellers’ Representative by wire
transfer of all or part of the amount of the Post-Closing
Adjustment in cash in immediately available funds to an account
designated in writing by the Purchaser, provided that if
Sellers’ Representative elects to pay all or part of the
Post-Closing Adjustment in cash but fails to timely pay such amount
in accordance with Section
3.3(h), then immediately upon Purchaser’s request
Sellers’ Representative shall execute any joint written
authorization necessary to release the applicable number of
Escrowed Shares from the Escrow Fund, and (z) third, if the
Post-Closing Adjustment exceeds the Adjustment Escrow Amount and
the value of the shares of Purchaser Class B Common Stock then
remaining in the Escrow Fund, the Principal Owners (jointly and
severally) shall pay to the Purchaser an amount in cash equal to
the Post-Closing Adjustment less the Adjustment Escrow Amount
released to Purchaser and deemed value (determined in accordance
with clause (y) hereof) of the shares of Purchaser Class B Common
Stock released to the Purchaser pursuant to clause (y) hereof, by
wire transfer of immediately available funds to an account
designated in writing by the Purchaser. To the extent that the
Sellers’ Representative satisfies the amount of the
Post-Closing Adjustment in cash as contemplated in clause (y) in
the preceding sentence, then Purchaser and Sellers’
Representative shall execute a joint written authorization
necessary to release a pro rata number of Escrowed Shares from the
Escrow Fund.
29
(c) After receipt of
the Post-Closing Adjustment Statement, the Sellers’
Representative shall have 30 calendar days (the “Review Period”) to review
the Post-Closing Adjustment Statement. During the Review Period,
the Sellers’ Representative and its advisors shall have
reasonable access to the books and records of Purchaser and the
Acquired Companies, the personnel of, and work papers prepared by,
the Purchaser and/or the Purchaser’s accountants to the
extent that they relate to the Post-Closing Adjustment Statement
and to such historical financial information (to the extent in the
Purchaser’s possession) relating to the Post-Closing
Adjustment Statement as the Sellers’ Representative may
reasonably request for the purpose of reviewing the Post-Closing
Adjustment Statement and to prepare a Statement of Objections
(defined below), provided, that such access shall be in a manner
that does not unreasonably interfere with the normal business
operations of the Purchaser or the Acquired Companies; provided, further, that such access shall
not jeopardize the attorney-client privilege or attorney
work-product doctrine or any other applicable privilege to which
any such books and records, materials and other information is
subject.
(d) On or prior to the
last day of the Review Period, the Sellers’ Representative
may object to the Post-Closing Adjustment Statement by delivering
to the Purchaser a written statement setting forth Sellers’
Representative’s objections in reasonable detail, indicating
each disputed item, the disputed amount (including the
Sellers’ Representative determination of the applicable
amount), and the basis for the Sellers’
Representative’s disagreement (the “Statement of
Objections”). If the Sellers’ Representative
fails to deliver the Statement of Objections before the expiration
of the Review Period, the Post-Closing Adjustment Statement and the
Post-Closing Adjustment reflected in the Post-Closing Adjustment
Statement shall be deemed to have been accepted by the
Sellers’ Representative and the Sellers for all purposes
hereunder. If the Sellers’ Representative delivers the
Statement of Objections before the expiration of the Review Period
and in compliance with the terms of this Section 3.3, the Purchaser and
the Sellers’ Representative shall negotiate in good faith to
resolve such objections within 30 calendar days after the delivery
of the Statement of Objections (the “Resolution Period”). The
Parties acknowledge and agree that the Federal Rules of Evidence
Rule 408 and any similar state rules shall apply to the
Sellers’ Representative (and any of its Representatives) and
the Purchaser (and any of its Representatives) during any such
negotiations and any subsequent dispute arising therefrom. If the
objections are resolved within the Resolution Period, the
Post-Closing Adjustment and the Post-Closing Adjustment Statement
with such changes as may have been previously agreed in writing by
the Purchaser and the Sellers’ Representative, shall be
final, conclusive and binding.
30
(e) If the
Sellers’ Representative and the Purchaser fail to reach an
agreement with respect to all of the matters set forth in the
Statement of Objections before expiration of the Resolution Period,
then any amounts remaining in dispute (“Disputed Amounts” and any
amounts not so disputed, the “Undisputed Amounts”)
shall be submitted for resolution to Moss Adams (Phoenix Office),
or if such firm is unable to serve, Purchaser and the
Sellers’ Representative shall appoint by mutual agreement
another independent, nationally recognized firm of certified public
accountants (the “Independent Accountants”)
who, acting as experts and not arbitrators, shall resolve the
Disputed Amounts only and make any adjustments to the Post-Closing
Adjustment, as the case may be, and the Post-Closing Adjustment
Statement. The Independent Accountants shall only decide the
specific items under dispute by the Parties and their decision for
each Disputed Amount must be within the range of values assigned to
each such item in the Closing Adjustment Statement and the
Statement of Objections, respectively. The Independent Accountants
shall make a final determination of each such item based solely on
(A) the definitions and other applicable provisions of this
Agreement (and shall not conduct an independent investigation), (B)
a single written presentation submitted by each of the Purchaser
and the Sellers’ Representative (which the Independent
Accountants shall be instructed to distribute to the Purchaser and
the Sellers’ Representative upon receipt of both such
presentations) and (C) one written response of the Purchaser and
the Sellers’ Representative to each such presentation so
submitted (which the Independent Accountants shall be instructed to
distribute to the Purchaser and the Sellers’ Representative
upon receipt of such responses). For the avoidance of doubt,
neither the Purchaser nor the Sellers’ Representative shall
have any ex parte communications with the Independent Accountants
relating to this Agreement.
(f) The costs and
expenses of the Independent Accountants shall be borne by the
Purchaser, on the one hand, and the Sellers’ Representative,
on the other hand, based on the inverse of the percentage that the
Independent Accountants’ determination bears to the total
amount of the items in dispute as originally submitted to the
Independent Accountant. For example, if the Sellers’
Representative challenges the calculation of the Adjustment Amount
contained in the Post-Closing Adjustment Statement by an aggregate
amount of $100,000, and the Independent Accountants determines that
the Sellers’ Representative has a valid claim for $60,000 of
the $100,000 challenged, then the Purchaser shall bear sixty
percent (60%) of the fees and expenses of the Independent
Accountants and the Sellers’ Representative shall bear forty
percent (40%) of such fees and expenses.
(g) The Independent
Accountants shall make a determination as soon as practicable (but
in any event within 30 calendar days or such other time as the
Parties hereto shall mutually agree in writing) after their
engagement, and their resolution of the Disputed Amounts and their
adjustments to the Post-Closing Adjustment Statement and/or the
Post-Closing Adjustment shall be final, conclusive and binding upon
the Parties hereto.
(h) Except as otherwise
provided herein, any payment of the Post-Closing Adjustment shall
(A) be due (x) within five (5) Business Days of acceptance of the
applicable Post-Closing Adjustment Statement or (y) if there are
Disputed Amounts, then within five (5) Business Days of the
resolution described in Section 3.3 above; and (B) if
paid in cash be paid by wire transfer of immediately available
funds to such accounts as is directed by the Purchaser or the
Sellers’ Representative, as the case may be (after release of
the Adjustment Escrow Amount to Sellers and other holders of Equity
Interests in a Merged Entity). In the event the Post-Closing
Adjustment is a positive amount and if elected by Sellers’
Representative to be paid in additional Shares of Purchaser Class B
Common Stock (which election is provided in writing to Purchaser
prior to Closing) at a deemed value per Share equal to the
calculation of the valuation of the Purchaser Class B Common Stock
made for the Closing Payment Shares (“Additional Purchaser
Shares”), then Purchaser will issue the applicable
number of Additional Purchaser Shares within the aforementioned
five (5) Business Day period to the Sellers allocated among the
Sellers pro rata subject to any modifications made in Schedule 3.3(b), if any, as set
forth in the Payment Notice. In the event the Post-Closing
Adjustment is a negative amount, the Sellers’ Representative
shall pay to Purchaser by wire transfer of immediately available
funds to an account designated in writing by the Purchaser cash up
to the Adjustment Escrow Amount within the aforementioned five (5)
Business Day period and, if insufficient to satisfy the adjustment,
and if Sellers’ Representative does not elect to pay the
additional the amount of the Post-Closing Adjustment in cash or
partially in cash or fails to pay the amount of the Post-Closing
Adjustment elected to be paid in cash within the aforementioned
five (5) Business Day period, the Purchaser and the Sellers’
Representative shall deliver a joint written authorization to the
Escrow Agent within the aforementioned five (5) Business Day period
instructing the Escrow Agent to release to the Purchaser the
applicable number of Escrow Shares (at a deemed value per Share
equal to the calculation of the valuation of the Purchaser Class B
Common Stock made for the Closing Payment Shares), and, then if
insufficient to satisfy the adjustments, the Principal Owners shall
pay Purchaser the remaining amount in cash as set forth in
Section
3.3(b).
31
(i) Any payments made
pursuant to Section
3.3 shall be treated as an adjustment to the Purchase Price
by the Parties for Tax purposes, unless otherwise required by
Law.
ARTICLE IV.
Except
as set forth in the corresponding sections or subsections of the
Disclosure Schedules attached hereto (collectively, the
“Disclosure
Schedules”) (each of which shall qualify the
specifically identified Sections or subsections hereof to which
such Disclosure Schedule relates and those other Sections and
subsections for which the relevance or applicability of such
disclosure is reasonably apparent on the face of such disclosure),
each of the Sellers hereby represents and warrants to the Purchaser
and to the other Sellers as of the date hereof and as of the
Closing Date, as follows, provided that each Seller (other than the
Principal Owners) shall only be deemed to have made the
representations and warranties in this Article IV with respect to
the Acquired Companies in which he, she or it owns Equity
Interests:
Each
Acquired Company is the type of legal entity set forth next to its
name on Schedule
4.1(a) and is duly organized or formed, validly existing and
in good standing under the Laws of its respective jurisdiction of
organization or formation as set forth therein. Each of the
Acquired Companies has all power and authority, corporate and
otherwise, and all governmental licenses, franchises, Permits,
authorizations, consents and approvals required to own and operate
its properties and assets and to carry on the Business as presently
conducted. Each Acquired Company is not qualified to do business as
a foreign entity in any jurisdiction, except as set forth on
Schedule 4.1(b),
and there is no other jurisdiction in which the character of the
property owned or leased by such Acquired Company or the nature of
its activities make qualification of such Acquired Company in any
such jurisdiction necessary, except where the failure to be so
qualified has not had and would not reasonably be expected to have
a Material Adverse Effect. No Acquired Company has any corporate
offices except those located at the addresses set forth on
Schedule 4.1(c). No
Acquired Company has taken any action, adopted any plan, or made
any agreement or commitment in respect of any merger,
consolidation, sale of all or substantially all of its assets,
reorganization, recapitalization, dissolution or liquidation,
except as contemplated herein.
32
4.2 Authorization.
Assuming
all Consents set forth on Schedule 4.3 are obtained, the
execution, delivery and performance by each Acquired Company of
this Agreement and the Additional Agreements to which each such
Acquired Company is a party and the consummation by each such
Acquired Company of the transactions contemplated hereby and
thereby are within the powers and authority of such Acquired
Company and have been duly authorized by all necessary action on
the part of such Acquired Company, including the unanimous approval
of the Sellers. This Agreement constitutes, and, upon their
execution and delivery, each of the Additional Agreements to which
any Acquired Company is a party will constitute, a valid and
legally binding agreement of such Acquired Company enforceable
against such Acquired Company in accordance with their respective
terms.
No
Consent is required to be made or obtained by any Acquired Company
(whether to or from any Person or Authority) in connection with the
execution, delivery and performance of this Agreement or any of the
Additional Agreements or the consummation of the transactions
contemplated hereby or thereby, except (x) for filings required
under or in connection with the HSR Act, and (y) as set forth on
Schedule
4.3.
Subject
to compliance with the HSR Act, assuming all necessary consents set
forth on Schedule
4.3 are obtained, none of the execution, delivery or
performance by any Acquired Company of this Agreement or any
Additional Agreements does or will, directly or indirectly (with or
without the lapse of time or the giving of notice, or both) (a)
contravene, conflict with, constitute a default under or a breach
of the Organizational Documents of any Acquired Company, (b)
contravene, conflict with or constitute a default under or a breach
or violation of any provision of any Law or Order binding upon or
applicable to any Acquired Company, (c) except as set forth on
Schedule 4.4(c),
constitute a default under or breach of (with or without the giving
of notice or the passage of time or both) or violate or give rise
to any right of termination, cancellation, amendment, modification,
suspension, revocation, or acceleration of any right or obligation
of any Acquired Company or any payment or reimbursement or to a
loss of any benefit to which an Acquired Company is entitled under
any provision of any Permit, Contract (including any Material
Contract) or other instrument or obligations binding upon an
Acquired Company or by which any of the Transferred Equity
Interests, Equity Interests of a Merged Entity, or any Acquired
Company’s assets is or may be bound, or (d) result in the
creation or imposition of any Lien on any of the Transferred Equity
Interests, Equity Interests of a Merged Entity, or any Acquired
Company’s assets.
(a) Schedule 4.5(a) sets forth the
capitalization of each of the Acquired Companies, describing in
each case (i) the authorized Equity Interests of such Acquired
Company, including the number of shares, membership interests, or
partnership interests, as applicable, and any applicable par value
thereof; (ii) the number of shares, membership interests, or
partnership interests that are issued and outstanding therein; and
(iii) the owners of each such Equity Interest. Except as set forth
on Schedule 4.5(a),
the Sellers have good and valid title, of record and beneficially,
to all of the Transferred Equity Interests and Equity Interests of
the Merged Entities, free and clear of all Liens, and the
Transferred Equity Interests and Equity Interests of the Merged
Entities constitute all of the issued and outstanding equity
interests of the Acquired Companies.
(b) Except as set forth
on Schedule 4.5(b),
all of the Transferred Equity Interests and Equity Interests of the
Merged Entities have been duly authorized and validly issued, fully
paid and nonassessable and were not issued in violation of (i) any
agreement, arrangement, Contract or other commitment to which any
of the Sellers or the Acquired Companies is a party or is subject
to; (ii) any preemptive or similar rights of any Person; or (iii)
any Law except for “blue sky” laws set forth on
Schedule 4.5(b).
Except as may be set forth in the respective Organizational
Documents, there are no outstanding and authorized (x) options,
subscriptions, warrants or rights of conversion, calls, puts,
rights of first refusal, preemptive rights or other similar rights,
Contracts, agreements, arrangements or commitments obligating any
of the Acquired Companies, the Sellers or their respective
Affiliates to issue, sell or otherwise cause to become outstanding
or to acquire, repurchase or redeem any shares of or other Equity
Interest of any Acquired Company or any interest therein, other
equity interests or securities convertible into or exchangeable for
equity interests in any Acquired Company or the Transferred Equity
Interests, Equity Interests of a Merged Entity, or other direct or
indirect equity interests of the Acquired Companies (whether issued
or unissued); (y) stock appreciation rights, phantom stock, profit
participation or other similar rights or equity equivalents of or
with respect to any Acquired Company; or (z) voting trusts,
stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of
any of the Transferred Equity Interests, Equity Interests of a
Merged Entity, or to which any Acquired Company is a party or by
which any Acquired Company is bound. No claim has been made or
threatened, asserting that any Person is the holder or beneficial
owner of, or has the right to acquire beneficial ownership of, any
Transferred Equity Interests or any other Equity Interests in the
Acquired Companies and no facts or circumstances exist that would
give rise to a valid claim of such ownership by any
Person.
33
(c) Except as set
forth on Schedule 4.5(c), no Acquired
Company owns or within the past five (5) years has owned, directly
or indirectly, any Equity Interest in, or any interest convertible
into or exchangeable or exercisable for, at any time, any equity or
similar interest in, any Person.
Copies
of the Organizational Documents of each Acquired Company have
heretofore been made available to the Purchaser, and such copies
are each true and complete copies of such instruments in effect on
the date hereof. No Acquired Company is in violation of its
Organizational Documents in any material respect.
All
proceedings occurring since January 1, 2018 of the stockholders,
members, managers, general partners, board or other governing body
of the Acquired Companies and all consents to actions taken
thereby, are accurately reflected in the minutes and records
contained in the corporate minute books of each Acquired Company.
The equity holder list and transfer books of each Acquired Company
are complete and accurate. The equity holder list, transfer books
and minute book records of each Acquired Company relating to all
issuances and transfers of Equity Interests in, or any interest
convertible into or exchangeable or exercisable for, at any time,
any equity or similar interest in any Acquired Company have been
made available to the Purchaser, and are the original equity holder
lists and transfer books and minute book records of each such
Acquired Company or true, correct and complete copies
thereof.
(a) Other than the
Persons listed on Schedule
4.8(a), no Acquired Company is Controlled by any Person and,
other than the Persons listed on Schedule 4.8(a), no Acquired
Company is in Control of any other Person.
(b) Except as set forth
on Schedule 4.8(b),
to the Knowledge of Sellers, no Key Employees (a) engage in any
business, except through an Acquired Company, or are employees of
or provide any service for compensation to, any other business
concern or (b) own any Equity Interest in any business concern, in
each case, that competes with the Business of any Acquired Company,
except for publicly traded securities not in excess of 5% of the
issued and outstanding securities with respect to such publicly
traded securities or retail automotive dealerships.
34
(c) To the Knowledge of
the Sellers, Schedule
4.8(c) lists each Contract to which an Acquired Company, on
the one hand, and any officer, director, employee, partner, member,
manager, direct or indirect equity holder (including any Seller) or
Affiliate of any Acquired Company (other than another Acquired
Company), on the other hand (the Persons identified in this clause
(ii), “Related
Parties”) is party, other than agreements with respect
to a Related Party’s employment with an Acquired Company that
has previously been made available to Purchaser. Except as set
forth in Schedule
4.8(c), no Related Party (i) owns, directly or indirectly,
in whole or in part, any tangible or intangible property (including
Intellectual Property Rights) that an Acquired Company uses or the
use of which is necessary for the conduct of the Business or the
ownership or operation of the Acquired Companies’ assets,
(ii) have engaged in any transactions with any Acquired Company,
(iii) possesses, directly or indirectly, any financial interest in,
or is director or officer of, any Person which is a client,
supplier, customer, lessor, lessee, or competitor of any Acquired
Company, or (iv) owes an amount to, or is owed any amount by, any
Acquired Company (other than ordinary course accrued compensation).
All contracts, agreements, arrangements,
understandings and interests described in this Section 4.8(c) are referred to
herein as “Related
Party Transactions”.
Schedule 4.9 is a complete and correct list of all assumed
or “doing business as” names currently or, within five
(5) years of the date of this Agreement, used by each Acquired
Company, including names on any websites. Since January 1, 2018,
each Acquired Company has not used any name other than the names
listed on Schedule
4.9 to conduct the Business. Each Acquired Company has filed
appropriate “doing business as” certificates in all
applicable jurisdictions with respect to itself.
(a) Schedule 4.10(a) sets forth the
name, jurisdiction of formation and capitalization of each of the
Subsidiaries of any Acquired Company, describing in each case (i)
the authorized Equity Interests of such Subsidiary, including the
number of shares, membership interests, or partnership interests,
as applicable, and any applicable par value thereof; (ii) the
number of shares, membership interests, or partnership interests,
as applicable, that are issued and outstanding therein; and (iii)
the owners of each such Equity Interest. All outstanding equity
securities of each Subsidiary of the Acquired Companies have been
duly authorized and validly issued and are owned free and clear of
any Liens other than restrictions on transfer arising under
applicable securities Law and as set forth on Schedule 4.10(a), beneficially
and of record, by one of the Acquired Companies and the holders of
such equity securities have no obligation to make further payments
for their purchase of such equity securities or contributions to
the applicable Subsidiary solely by reason of such ownership.
Except as set forth on Schedule 4.10(a), there are no
outstanding (i) equity securities of any Subsidiary of the Acquired
Companies, (ii) securities of any Subsidiary of the Acquired
Companies convertible into or exchangeable for, at any time, equity
securities of any Subsidiary of the Acquired Companies or (iii)
options or other rights to acquire from any Subsidiary of the
Acquired Companies, in each case, that are owned by a Person other
than one of the Acquired Companies, and no obligation of any
Subsidiary of the Acquired Companies to issue to any Person (other
than one of the Acquired Companies) any equity securities or
securities convertible into or exchangeable for, at any time,
equity securities of any Subsidiary of the Acquired Companies. No
claim has been made or threatened, asserting that any Person, other
than another Acquired Company, is the holder or beneficial owner
of, or has the right to acquire beneficial ownership of, any equity
securities of, or any other Equity Interests in, any Subsidiary of
the Acquired Companies.
35
(b) Except as set forth
on Schedule
4.10(b), no Subsidiary of an Acquired Company owns or within
the past five (5) years has owned, directly or indirectly, any
Equity Interest in, or any interest convertible into or
exchangeable or exercisable for, at any time, any equity or similar
interest in, any Person (other than another Acquired Company).
Each of
the dealerships set forth on Schedule 4.11 has been owned
and continuously operated by an Acquired Company from the date set
forth opposite the name of such dealership on Schedule 4.11.
(a) Schedule 4.12 sets forth
complete and correct copies of (i) the audited combined financial
statements of the Acquired Companies as of and for the fiscal years
ended 2018 and 2019, consisting of the audited combined balance
sheets as of such dates, the audited combined income statements for
the periods then-ended, the audited combined cash flow statements
for the periods then-ended and the corresponding notes to such
combined financial statements, and (ii) the unaudited combined
financial statements of the Acquired Companies consisting of the
combined balance sheet of the Acquired Companies as of December 31,
2020, and the related combined statements income and cash flows for
the 12-month period then-ended (the “Unaudited Financial
Statements”) (collectively, the “Company Financial
Statements” and the balance sheet as of December 31,
2020 included therein, the “Balance Sheet”, and such
date, the “Balance
Sheet Date”).
(b) Other than as set
forth on Schedule
4.12(b), the Company Financial Statements have been prepared
in accordance with U.S. GAAP applied on a consistent basis
throughout the period involved. The Company Financial Statements
are complete and accurate in all material respects and fairly
present, in all material respects, the financial position of the
Acquired Companies as of the dates thereof and the results of
operations of the Acquired Companies for the periods reflected
therein. The Company Financial Statements (i) were prepared from
the Books and Records of the Acquired Companies; (ii) contain and
reflect all necessary adjustments and accruals for a fair
presentation of the Acquired Companies’ financial condition
as of their dates including for all warranty, maintenance, service
and indemnification obligations; and (iii) contain and reflect
adequate provisions for all liabilities for all material Taxes
applicable to the Acquired Companies with respect to the periods
then ended. The Acquired Companies have delivered to Purchaser
complete and accurate copies of all “management
letters” received by them from their accountants and all
responses during the last five (5) years by lawyers engaged by the
Acquired Companies to inquiries from their accountant or any
predecessor accountants.
(c) Except as
specifically disclosed, reflected and fully reserved against on the
Balance Sheet, and for Liabilities incurred in the ordinary course
of business since the date of the Balance Sheet (which are of a
similar nature and in similar amounts to those historically
incurred), no Acquired Company has any Liabilities.
(d) The Balance Sheet
included in the Company Financial Statements accurately reflects
the outstanding Indebtedness of the Acquired Companies as of the
date thereof. Except as set forth in the Company Financial
Statements or on Schedule
4.12(d), no Acquired Company has any
Indebtedness.
36
4.13 Books
and Records.
(a) Each Acquired
Company has made all of its Books and Records available to the
Purchaser for its inspection and has delivered to the Purchaser
complete and accurate copies of all documents referred to in the
Schedules to this Agreement or that the Purchaser otherwise has
requested. All Contracts, documents, and other papers or copies
thereof delivered to the Purchaser by or on behalf of the Acquired
Companies are accurate, complete, and authentic in all material
respects.
(b) The Books and
Records accurately and fairly, in reasonable detail, reflect the
transactions and dispositions of assets of and the providing of
services by the Acquired Companies.
(c) All accounts, books
and ledgers of each Acquired Company have been properly and
accurately kept and completed in all material respects, and there
are no material inaccuracies or discrepancies of any kind contained
or reflected therein.
Since
December 31, 2020, other than policies and procedures implemented
in good faith to respond to the actual or anticipated effect of the
COVID-19 pandemic on the Business, (a) each Acquired Company has
conducted its business in the ordinary course consistent with past
practices, (b) there has not been any change, event, development,
occurrence or circumstance that, individually or in the aggregate,
has had or could reasonably be expected to have a Material Adverse
Effect, and (c) none of the Acquired Companies have taken any
action (or agreed or committed to take any action) nor has any
event occurred which would have required the consent of the
Purchaser pursuant to Article VII herein if such action had been
taken or such event had occurred between the date hereof and the
Closing Date.
(a) The items of
Tangible Personal Property have no material defects, are in good
operating condition and repair and function in accordance with
their intended uses (ordinary wear and tear excepted) and have been
properly maintained, and are suitable for their present uses and
meet all specifications and warranty requirements with respect
thereto. Schedule
4.15(a) sets forth a description and location of each item
of Tangible Personal Property with a value of at least $5,000.
Except as set forth on Schedule 7.1, none of the
Tangible Personal Property is in need of maintenance or repairs
except for routine maintenance and repairs in the ordinary course
of business or that are not material in nature or
cost.
(b) Each Acquired
Company (and not any Affiliate thereof) has good, valid and
marketable title in and to, or a valid leasehold interest or
license in or a right to use, all of its assets reflected on the
Balance Sheet or thereafter acquired. No such asset is subject to
any Liens other than Permitted Liens. The assets of the Acquired
Companies constitute all of the assets of any kind or description
whatsoever, necessary for the Acquired Companies to operate the
Business immediately after the Closing substantially in the same
manner as the Business is currently being conducted.
Other
than as disclosed on Schedule 4.16, there is no
Action pending, or to the Knowledge of the Sellers, threatened (and
to the Knowledge of the Sellers, no event has occurred or
circumstance exists that is reasonably likely to give rise to, or
serve as a basis for, any Action) against or affecting, any
Acquired Company, any of their respective managers, employees,
officers or directors (in their capacities as such), the Business,
any Transferred Equity Interests, Equity Interests of a Merged
Entity, or any Acquired Company’s assets, liabilities, or
Contracts; or which in any manner challenges or seeks to prevent,
enjoin, alter or delay the transactions contemplated hereby or by
the Additional Agreements. There are no outstanding, pending, or,
to the Knowledge of the Sellers, threatened Orders (and to the
Knowledge of the Sellers, no event has occurred or circumstances
exist that is reasonably likely to give rise to, or serve as a
basis for, any Order) against, the Business, the Acquired
Companies, or to which any Acquired Company is otherwise a party.
Except as set forth on Schedule 4.16, no Acquired
Company is, or at any time during the past five (5) years has been,
subject to any Action.
37
4.17 Contracts.
(a) Schedule 4.17(a) (arranged by
identifying subsections corresponding to the subsections set forth
below but not necessarily in all subsections that may apply if the
disclosure is reasonably apparent on its face) lists the following
Contracts, oral or written (Contract required to be set forth on
Schedule 4.17
collectively, the “Material Contracts”), to
which an Acquired Company is a party or by which it or its assets
are bound:
(i) all Contracts that
require annual payments or expenses by, or annual payments or
income to, any Acquired Company of $50,000 or more (other than
standard purchase and sale orders entered into in the ordinary
course of business consistent with past practice);
(ii) all
distributor, dealer, franchise, manufacturer’s representative
Contracts;
(iii) all
sales, advertising, agency, lobbying, broker, sales promotion,
market research, marketing or similar Contracts, in each case
requiring the payment of any commissions by an Acquired Company in
excess of $50,000 annually;
(iv) all
Contracts containing any requirement that any Acquired Company
makes, directly or indirectly, any advance, loan, extension of
credit or capital commitment or contribution to, or other
investment in, any Person, or any capital expenditure after the
date hereof;
(v) all Contracts
containing any right of first refusal or right of first offer or
similar right or that limits or purports to limit the ability of
any of the Acquired Companies (or, following the Closing, the
Purchaser or its Affiliates) to own, operate, sell, transfer,
pledge or otherwise dispose of any material properties or
assets;
(vi) all
Contracts (1) that limits or purports to limit the ability of any
of the Acquired Companies to compete in any line of business or
with any Person or in any geographic area or during any period of
time, (2) providing for any material exclusivity obligations, or
(3) granting any exclusive rights to products or
services;
(vii) all
Contracts obligating the Acquired Companies or any counterparty to
purchase or obtain a minimum or specified amount of any product or
service, or granting any right of first refusal, right of first
offer or similar right with respect to any material assets of the
Business;
38
(viii) all
employment Contracts, employee leasing Contracts, independent
contractor, consultant and sales representatives Contracts with any
current officer, director, employee, independent contractor or
consultant of any Acquired Company or other Person, under which the
Acquired Company (A) has continuing obligations for payment of
annual compensation of at least $50,000 (other than oral
arrangements for at-will employment), (B) has severance or
post-termination obligations to such Person (other than COBRA
obligations), (C) requires more than thirty (30) days’ notice
for a termination by the Acquired Company without cause, or (D) has
an obligation to make a payment upon consummation of the
transactions contemplated hereby or as a result of a change of
control of the Acquired Company, either alone or in conjunction
with any other event or occurrence;
(ix) all
collective bargaining agreements or other Contracts with a
Union;
(x) all staffing
agreements or agreements with a professional employer
organization;
(xi) all
Contracts creating a joint venture, strategic alliance, limited
liability company or similar arrangement involving a sharing of
profits or expenses;
(xii) all
Contracts relating to any acquisitions or dispositions of assets by
an Acquired Company other than (a) the purchase of Inventory in the
ordinary course or (b) acquisitions or dispositions of assets by an
Acquired Company with a value of less than $50,000;
(xiii) all
Contracts relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or
otherwise) that include any earn-out or other similar contingent
obligation to be paid by the Acquired Companies after the date
hereof;
(xiv) all
Contracts for material licensing agreements, including Contracts
licensing Intellectual Property Rights, other than licenses for
commercially available software, in object code form, that is
generally available at a cost to the Acquired Companies of not more
than U.S. $25,000 for a perpetual license (or $10,000 in the
aggregate for any fiscal year) (“Shrink-wrap
Licenses”);
(xv) all
Contracts relating to Intellectual Property Rights of the Acquired
Companies;
(xvi) all
Contracts providing for guarantees, indemnification arrangements
and other hold harmless arrangements made or provided by an
Acquired Company, including all forms of ongoing agreements for
repair, warranty, maintenance, service, or similar
obligations;
(xvii) all
Related Party Contracts;
(xviii) all
Contracts with Authorities;
(xix) all
Contracts relating to property or assets (whether real or personal,
tangible or intangible) in which any Acquired Company holds a
leasehold interest (including the Leases) and which involve
payments to the lessor thereunder in excess of
$50,000;
39
(xx) all
Contracts relating to outstanding Indebtedness, including financial
instruments of indenture or security instruments such as notes,
mortgages, loans and lines of credit and any letters of credit,
performance bonds and surety bonds, whether or not drawn or
called;
(xxi) any
Contract relating to the voting or control of the Equity Interests
of an Acquired Company or the election of the directors, managers
or similar governing body thereof (other than the Organizational
Documents of such Acquired Company);
(xxii) any
Contract not cancellable by an Acquired Company with no more than
60 days’ notice if the effect of such cancellation would
result in monetary penalty to the Acquired Company in excess of
$50,000 per the terms of such contract;
(xxiii) any
Contract for which any of the benefits, compensation or payments
(or the vesting thereof) will be increased or accelerated by the
consummation of the transactions contemplated hereby or the amount
or value thereof will be calculated on the basis of any of the
transactions contemplated by this Agreement;
(xxiv) any
Contract restricting any Acquired Company from paying any dividends
or making any distributions; and
(xxv) any
other Contract that is material to the business and operations of
the Acquired Companies taken as a whole and not otherwise disclosed
pursuant to this Section
4.17.
(b) Each Material
Contract (i) is a valid, legal and binding obligation of the
applicable Acquired Company enforceable in accordance with its
terms against such Acquired Company and, to the Knowledge of the
Sellers, each other party thereto, and (ii) is in full force and
effect. Neither the applicable Acquired Company nor, to the
Knowledge of the Sellers, any other party thereto, is in breach or
default (whether with or without the passage of time or the giving
of notice or both) under the terms of any such Material Contract.
No Acquired Company has assigned, delegated, or otherwise
transferred any of its rights or obligations with respect to any
Material Contracts, or granted any power of attorney with respect
thereto or to any Acquired Company’s assets. No Contract (i)
requires an Acquired Company to post a bond or deliver any other
form of security or payment to secure its obligations thereunder or
(ii) imposes any non-competition covenants that may be binding on,
or restrict the Business or require any payments by or with respect
to Purchaser or any of its Affiliates. Sellers have delivered or
made available a true and correct copy of each Material Contract,
together with all amendments thereto. There are no material
renegotiations ongoing with respect to any Material
Contract.
(c) The Acquired
Companies are in material compliance with all covenants, including
all financial covenants, in all material notes, indentures, bonds
and other instruments or agreements evidencing any
Indebtedness.
Schedule 4.18 sets forth a true,
complete and correct list of all liability, property,
workers’ compensation and other insurance policies currently
in effect that insure the property, assets or business of the
Acquired Companies or their employees (other than self-obtained
insurance policies by such employees). Copies of all such policies
have been made available to Purchaser. Each such insurance policy
is valid and binding and in full force and effect and will continue
in full force and effect following the consummation of the
Transactions, all premiums due thereunder have been paid and no
Acquired Company has received any notice of default, cancellation,
termination or non-renewal in respect of any such policy. No
Acquired Company is in breach or default under the terms of any
such insurance policy (including any breach of default with respect
to the giving of notice of claims). Such policies, in light of the
nature of the Acquired Companies’ business, assets and
properties, are in amounts and have coverage that are reasonable
and customary for Persons engaged in such business and having such
assets and properties. No claim is pending under any such policies
as to which coverage has been questioned, denied or disrupted, or
right reserved to do so, by the underwriters thereof. Except with
respect to the matters set forth on Schedule 4.16, within the last
two (2) years, no Acquired Company has filed any claims exceeding
$100,000 against any of its insurance policies, exclusive of
automobile, life, and health insurance policies. No Acquired
Company has received written notice from any of its insurance
carriers or brokers that any premiums will be materially increased
in the future, and no Acquired Company has any reason to believe
that any insurance coverage listed on Schedule 4.18 will not be
available in the future on substantially the same terms as now in
effect. Schedule
4.18 also contains a list of any pending claims and claims
in the past five (5) years with any insurance company by any
Acquired Company.
40
4.19 Licenses
and Permits.
Schedule 4.19 sets forth a true,
complete and correct list each material Permit affecting, or
relating in any way to, the Business, together with the name of the
Authority issuing the same. Except as indicated on Schedule 4.19, such Permits
listed or required to be listed on Schedule 4.19 are valid and in
full force and effect, and none of such Permits will be terminated
or impaired or become terminable as a result of the transactions
contemplated hereby. Each Acquired Company has all Permits
necessary to operate the Business as presently conducted. None of
the Acquired Companies is, or has been in the last two (2) years,
in default under or violation or breach of, and no event has
occurred which, with the lapse of time or the giving of notice, or
both, would constitute a default under or violation or breach of
any term, condition or provision of any Permit or would reasonably
be expected to result in the revocation, suspension, lapse or
limitation of any Permit. None of the Permits has been challenged,
suspended, or revoked and no written statement of intention to
challenge, suspend or revoke or fail to renew any such Permit has
been received by any of the Acquired Companies. All fees and
charges due on or before the Closing Date with respect to such
Permits as of the date hereof have been paid in full.
No
Acquired Company is in violation of or has violated in any material
respect any Law applicable to the Acquired Companies or their
respective properties or assets or the Business. To the Knowledge
of the Sellers, no Acquired Company is under investigation with
respect to or has been threatened in writing to be charged with any
violation or alleged violation in any material respect of, any Law,
nor, to the Knowledge of the Sellers, is there any basis for any
such charge. Since January 1, 2018, none of the Acquired Companies
has received any written notice or, to the Knowledge of the
Sellers, other oral or written communication from any Authority or
other Person regarding any actual, alleged, or potential violation
of, or failure to comply in any material respect with, any
Laws.
(a) Schedule 4.21(a) sets forth a
true, correct and complete list of U.S. and foreign (i) Company
Owned Intellectual Property that is subject to a registration with
any governmental authority (“Registered Intellectual
Property”); and (ii) all other material Intellectual
Property Rights that are used in or necessary to operate the
Business of the Acquired Companies; and (B) identifies all
contracts to which of the Acquired Companies is a party and under
which any Acquired Company has received or granted a license or
sublicense with respect to any of the Company Intellectual
Property, excluding Shrink-wrap Licenses (all such licenses,
including the Shrink-wrap Licenses, the “Intellectual Property
Licenses”). None of such Registered Intellectual
Property that is owned by any Acquired Company has been cancelled,
abandoned or adjudicated invalid or unenforceable, and all
registration, renewals and maintenance fees in respect of such
Registered Intellectual Property that were due prior to the date
hereof have been duly paid and all necessary documents and
certificates in connection with the Registered Intellectual
Property that have or that must be filed within 120 days of the
date of this Agreement have been timely filed with the relevant
patent, copyright, trademark or other authorities in the United
States or foreign jurisdictions, as the case may be. No loss or
expiration of any Registered Intellectual Property is threatened or
pending or reasonably foreseeable by any Acquired Company. (The
Company Owned Intellectual Property and the Intellectual Property
licensed to any Acquired Company under the Intellectual Property
Licenses is collectively referred to as the “Company Intellectual
Property”).
41
(b) The Acquired
Companies solely own all Company Owned Intellectual Property, free
and clear of all encumbrances and have the sole right to enforce
it. The Acquired Companies possess all right, title, and interest
in and to, or has a valid and enforceable written license and right
to use, all Company Intellectual Property necessary to conduct the
Business of the Acquired Companies. The Company Owned Intellectual
Property owned by Acquired Companies is enforceable, valid, and
subsisting. The Company Intellectual Property shall be available
for use by the Purchaser and the Acquired Companies immediately
after the Closing Date on identical terms and conditions to those
under which the Acquired Companies owned or used the Company
Intellectual Property immediately prior to the Closing Date. With
respect to each Intellectual Property License: (i) the Sellers have
delivered a true, complete and accurate copy of each such
Intellectual Property License to the Purchaser; (ii) such
Intellectual Property License is the valid and binding obligation
of the Company, as applicable, enforceable in accordance with its
terms; and (iii) neither the Acquired Companies nor any other party
to such Intellectual Property License is in material breach of or
default under such Intellectual Property License.
(c) Within the past
five (5) years (or prior thereto if the same is still pending or
subject to appeal or reinstatement) the Acquired Companies have not
been sued or charged in writing with or been a defendant in any
Action that involves a claim of infringement of any Intellectual
Property Rights, and to the Knowledge of the Sellers there is no
other claim of infringement by the Acquired Companies. To the
Knowledge of the Sellers, no Person has or is infringing, diluting,
misappropriating, conflicting or otherwise violating any of the
Company Intellectual Property.
(d) All employees,
agents, consultants or contractors who have contributed to or
participated in the creation or development of any copyrightable,
patentable, confidential, or trade secret material on behalf of the
Acquired Company or any predecessor in interest thereto has
executed an assignment in favor of the Acquired Company (or such
predecessor in interest, as applicable) of all right, title and
interest in such material and preserving and protecting the
confidentiality of such material. All such agreements are valid and
enforceable in accordance with their terms and no Person is in
breach of any such agreement.
(e) None of the
execution, delivery or performance by the Acquired Companies of
this Agreement or any of the Additional Agreements to which each
Acquired Company is a party or the consummation by the Acquired
Companies of the transactions contemplated hereby or thereby will
cause any Intellectual Property Rights owned, licensed, used or
held for use by the Acquired Company immediately prior to the
Closing to not be owned, licensed or available for use by the
Acquired Company on substantially the same terms and conditions
immediately following the Closing.
42
(f) The Acquired
Companies have taken reasonable measures to safeguard and maintain
the confidentiality and value of all trade secrets and other items
of material Company Intellectual Property that are confidential and
all other confidential information, data and materials licensed by
the Company or otherwise used in the operation of the
Business.
(g) The software,
computer firmware, computer hardware, electronic data processing,
information, record keeping, communications, telecommunications,
networks, interfaces, platforms, peripherals and computer systems,
including any outsourced systems and processes, that are owned or
used by the Acquired Companies in the conduct of their Business
(collectively, the “IT Systems”) are
sufficient for the operation of Business of the Acquired Companies
as currently conducted. To the Knowledge of the Sellers, the
Acquired Companies’ service providers and vendors maintain
and keep the IT Systems in sufficiently good working condition to
perform the information technology operations for the Business of
the Acquired Companies. In the last three (3) years, there have
been no (A) unauthorized intrusions or material breaches of
security, or (B) to the Knowledge of Sellers, failures, breakdowns,
continued substandard performance or other material and adverse
events affecting any such IT Systems that have caused any
substantial disruption of or material interruption in or to the use
of such IT Systems which disrupted the Acquired Companies’
Business. To the Knowledge of the Sellers, the Acquired Companies
use efforts designed to protect the IT Systems from becoming
infected by, and to the Knowledge of the Sellers, the IT Systems
are free of, any virus, worm, Trojan horse, automatic restraint,
time bomb or any other unintended, malicious feature or function
designed to cause the erasing, destroying, or corrupting of
Software, systems, databases, or data.
(h) Other than as part
of a commercial software program provided by a software vendor
(including software provided on a cloud service basis), the
Acquired Companies do not use any open source software. No Company
Owned Intellectual Property is subject to any open source
license.
(i) The Acquired
Companies have proper licenses to all third party software
(including software provided on a cloud service basis) used in
their business, and the licenses are the correct type and are
sufficient to cover the actual number of Acquired Companies users
(seats), locations, use cases and activities taken in connection
therewith.
4.22 Privacy and Data Security.
(a) Each Acquired
Company is, and at all times has been, in material compliance with
(A) all federal, state, local and foreign Laws pertaining to (i)
data security, cyber security, and e-commerce; (ii) the collection,
storage, use, access, disclosure, processing, security, and
transfer of Personal Data (referred to collectively in this
Agreement as “Data
Activities”) ((i) and (ii) together,
“Privacy
Laws”); and (B) all Contracts (or portions thereof) to
which such Acquired Company is a party that are applicable to Data
Activities (collectively, “Privacy Agreements”).
Each Acquired Company is, and at all times has been, in compliance
with the PCI Security Standards Council’s Payment Card
Industry Data Security Standard and all other applicable rules and
requirements by the PCI Security Standards Council, by any member
thereof, or by any entity that functions as a card brand, card
association, payment processor, acquiring bank, merchant bank or
issuing bank, including, without limitation, the Payment
Application Data Security Standards and all audit and filing
requirements (collectively, “PCI
Requirements”).
43
(b) The Acquired
Companies have implemented written policies relating to Data
Activities, including, without limitation, a publicly posted
website privacy policy, mobile app privacy policy, and a
comprehensive information security program that includes
appropriate written information security policies
(“Privacy and Data
Security Policies”). At all times, each Acquired
Company has been and is in compliance with all such Privacy and
Data Security Policies. Neither the execution, delivery, or
performance of this Agreement, nor the consummation of any of the
transactions contemplated under this Agreement will violate any of
the Privacy Agreements, Privacy and Data Security Policies or any
applicable, Privacy Laws.
(c) Each Acquired
Company has collected, used, and disclosed all Personal Data in
accordance with applicable Privacy Laws, Privacy and Data Security
Policies in effect at the time of the collection of such Personal
Data, and Privacy Agreements. Neither applicable Privacy Laws,
Privacy and Data Security Policies, nor Privacy Agreements restrict
the transfer of any Personal Data to the Purchaser. Assuming
Purchaser is not otherwise prohibited by Law or contractually
obligated otherwise, Purchaser may use such Personal Data in at
least the same manner as the Acquired Company.
(d) To the Knowledge of
the Sellers, there is no pending, nor has there ever been any,
complaint, audit, proceeding, investigation, or claim against any
Acquired Company initiated by (a) any Person or entity; (b) the
United States Federal Trade Commission, any state attorney general
or similar state official; (c) any other governmental entity,
foreign or domestic; or any regulatory or self-regulatory entity
– alleging that any Data Activity of the Acquired Companies:
(i) is in violation of any applicable Privacy Laws, (ii) is in
violation of any Privacy Agreements, (iii) is in violation of any
Privacy and Data Security Policies, or (iv) otherwise constitutes
an unfair, deceptive, or misleading trade practice.
(e) At all times, each
Acquired Company has taken commercially reasonable steps
(including, without limitation, implementing, maintaining, and
monitoring compliance with government-issued or industry standard
measures with respect to administrative, technical and physical
security) to ensure that all Personal Data and Confidential
Information in its possession or control is protected against
damage, loss, and against unauthorized access, acquisition, use,
modification, disclosure or other misuse. There has been no
unauthorized access, use, or disclosure of Personal Data or
Confidential Information in the possession or control of the
Acquired Companies or, to the Knowledge of the Sellers, any entity
that processes Personal Data on behalf of any Acquired Company, nor
has there been any unauthorized intrusions or breaches of security
into any Acquired Company’s systems.
(f) Each Acquired
Company contractually requires all third parties, including,
without limitation, vendors, Affiliates, and other Persons
providing services to such Acquired Company that have access to or
receive Personal Data from or on behalf of such Acquired Company to
comply with all applicable Privacy Laws, and to take all reasonable
steps to ensure that all Personal Data in such third parties’
possession or control is protected against damage, loss, and
against unauthorized access, acquisition, use, modification,
disclosure or other misuse.
(g) The Acquired
Companies have provided notifications to, and have obtained consent
from, Persons regarding their Data Activities where such notice or
consent is required by Privacy Laws. The Acquired Companies’
collection of Personal Data or other information from third parties
is in accordance with any requirements from such third parties,
including written website terms and conditions. No Acquired Company
has (i) received written communication from any website owner or
operator that the Acquired Company’s access to such website
is unauthorized; (ii) entered into a written agreement with any
website owner or operator prohibiting scraping activity; (iii)
accessed any website’s information through illicitly
circumventing a password requirement or similar technological
barrier; or (iv) scraped any data from a website that has a
clickwrap agreement prohibiting such activity.
44
(h) The Acquired
Companies are, and at all times have been in compliance with all
Laws pertaining to sales, marketing, and electronic and telephonic
communications, including, without limitation, the CAN-SPAM Act,
the Telephone Consumer Protection Act, and the Telemarketing Sales
Rule.
4.23 Suppliers.
(a) Schedule 4.23(a) sets forth a
true, correct and complete list of the aggregate of the Acquired
Companies’ ten (10) largest suppliers, as measured by the
dollar amount of purchases therefrom or thereby, for the fiscal
years ended December 31, 2018, December 31, 2019, December 31,
2020.
(b) Since December 31,
2018, no supplier listed on Schedule 4.23(a) has (i)
terminated its relationship with the Acquired Companies, (ii)
notified the Acquired Companies in writing of its intention to take
any such action, or (iii) to the Knowledge of the Sellers, become
insolvent or subject to bankruptcy proceedings. There are no
material disputes with any supplier listed on Schedule 4.23(a).
All
accounts receivable and notes of the Acquired Companies reflected
on the Company Financial Statements, and all accounts receivable
and notes arising subsequent to the date thereof, represent valid
obligations arising from services actually performed or goods
actually sold by the Acquired Companies in the ordinary course of
business consistent with past practice. The accounts payable of the
Acquired Companies reflected on the Company Financial Statements,
and all accounts payable arising subsequent to the date thereof,
arose from bona fide transactions in the ordinary course consistent
with past practice and have been timely paid or are not yet due and
payable, except to the extent disputed in good faith. There is no
contest, claim, or right of setoff in any agreement with any maker
of an account receivable or note relating to the amount or validity
of such account receivable or note. All items included in the
Inventory of the Acquired Companies consist of a quality and
quantity useable in the ordinary course of business, as
historically conducted except as reserved against in the Company
Financial Statements. The Inventory of the Acquired Companies is
not excessive in kind or amount in light of the business done or
reasonably expected to be done by them. Such Inventory is located
at the Owned Real Property and / or the Leased Real Property and
none of such Inventory is subject to any consignment, bailment,
warehousing or similar arrangement.
No
Acquired Company has received any payments with respect to any
services to be rendered or goods to be provided after the Closing,
except as set forth in the Company Financial Statements or incurred
in the ordinary course of business to the extent arising subsequent
to the date thereof.
45
(a) Schedule 4.26(a) sets forth a
true, correct and complete list of the employees and independent
contractors of the Acquired Companies as of January 1, 2021, with
actual or potential annual compensation (including salary,
annualized wages, bonuses, or other incentive compensation) in
excess of $100,000, including the name, title, current salary or
compensation rate for each such Person and total compensation
(including bonuses) paid to each such Person for the fiscal year
ended December 31, 2020. Unless indicated in such list, no employee
or independent contractor included in such list (i) is currently on
leave, (ii) has given written notice of his or her intent to
terminate his or her relationship with any Acquired Company, or
(iii) has received written notice of such termination from any
Acquired Company. To the Knowledge of the Sellers, no Key Employee
intends to terminate his or her relationship with any Acquired
Company prior to or within six (6) months following the Closing
Date.
(b) Except as disclosed
on Schedule
4.26(b), no Acquired Company is a party to or subject to any
employment contract, consulting agreement, collective bargaining
agreement, confidentiality agreement restricting the activities of
such Acquired Company, non-competition agreement restricting the
activities of such Acquired Company, or any similar agreement, and
to the Knowledge of Sellers, there has been no activity or
proceeding by a Union or representative thereof to organize any
employees of such Acquired Company.
4.27 Employment Matters.
(a) Schedule 4.27(a)(i) sets forth
a true and complete list of every employment agreement, commission
agreement, employee group or executive medical, life, or disability
insurance plan, and each incentive, bonus, profit sharing,
retirement, deferred compensation, equity, phantom stock, stock
option, stock purchase, stock appreciation right or severance plan
of the Acquired Companies now in effect or under which the Acquired
Companies have or might have any obligation, or any understanding
between any Acquired Company and any employee concerning the terms
of such employee’s employment that does not apply to the
Acquired Companies’ employees generally (collectively,
“Labor
Agreements”). The Acquired Companies have previously
delivered to the Purchaser true and complete copies of each such
Labor Agreement, any employee handbook or policy statement of the
Acquired Companies, and complete and correct information in all
material respects concerning the Acquired Companies’
employees and individual independent contractor or consultants.
Schedule
4.27(a)(ii) sets forth a true and complete list of the
names, business addresses and titles of the directors, officers,
general partners, and managers, as applicable, of each Acquired
Company.
(b) Except as disclosed
on Schedule 4.27(b)
(arranged in subsections corresponding to the subsections set forth
below):
(i) all employees of
the Acquired Companies are employees at will, and the employment of
each employee by the Acquired Companies may be terminated
immediately by the Acquired Companies, as applicable, without any
cost or liability except severance in accordance with the Acquired
Companies’ standard severance practice as disclosed on
Schedule
4.27(b);
(ii) to
the Knowledge of the Sellers, no employee of the Acquired Companies
has any plan to terminate his or her employment now or in the near
future, whether as a result of the transactions contemplated hereby
or otherwise;
46
(iii) to
the Knowledge of the Sellers, no employee of the Acquired
Companies, in the ordinary course of his or her duties, has
breached or will breach any obligation to a former employer in
respect of any covenant against competition or soliciting clients
or employees or servicing clients or confidentiality or any
proprietary right of such former employer; and
(iv) No
Acquired Company is a party to any collective bargaining agreement
or other Contract with a Union or has any material labor relations
problems, and there is no pending representation question or Union
organizing activity respecting employees of the Acquired
Companies.
(c) Each Acquired
Company has complied with all Labor Agreements and all applicable
laws relating to employment or labor, including without limitation
all laws relating to labor relations, equal employment
opportunities, fair employment practices, employment
discrimination, harassment, retaliation, reasonable accommodation,
disability rights or benefits, immigration (including without
limitation I-9 and E-Verify requirements), work authorizations,
wages, hours, overtime compensation, child labor, hiring, promotion
and termination of employees, working conditions, meal and break
periods, privacy, health and safety, workers’ compensation,
leaves of absence and unemployment insurance. To the Knowledge of
Sellers, there is no legal prohibition with respect to the
permanent residence of any employee of the Acquired Companies in
the United States or his or her permanent employment by the
Acquired Companies and, to the Knowledge of the Sellers, all
Acquired Companies employees are legally authorized to work in the
United States. The Acquired Companies have properly classified and
treated all of their employees as exempt or non-exempt under the
federal Fair Labor Standards Act and state and local wage and hour
laws. The Acquired Companies have not incurred any liability under
the WARN Act. No present or former employee, officer, director or
manager of any Acquired Company has, or will have at the Closing
Date, any claim against such Acquired Company for any matter
including for wages, salary, or vacation or sick pay, or otherwise
under any Labor Agreement (other than amounts that have not yet
become due and payable and will be provided in the ordinary course
of the relationship as contemplated in such Labor Agreement). All
accrued obligations of the Acquired Companies applicable to their
employees, whether arising by operation of Law, by Contract, by
past custom or otherwise, for payments by the Acquired Companies to
any trust or other fund or to any Authority, with respect to
unemployment or disability compensation benefits, social security
benefits, under ERISA or otherwise, have been paid or adequate
accruals therefor have been made.
(d) Schedule 4.27(d) sets forth all
Actions, proceedings, governmental investigations or administrative
proceedings of any kind against the Acquired Companies of which the
Acquired Companies have been notified within three (3) years
preceding the date of this Agreement regarding their employees,
independent contractors, or consultants including without
limitation any such Actions, proceedings, governmental
investigations or administrative proceedings of any kind related to
the Acquired Companies’ employment practices or operations as
they pertain to conditions of employment, unfair labor practices,
employment discrimination, harassment, retaliation, whistleblowing,
equal pay, health and safety, overtime compensation, unemployment
insurance, workers compensation insurance, or any other employment
related matter before any Authority, including the U.S. Equal
Employment Opportunity Commission, the U.S. Department of Labor,
the Occupational Safety and Health Administration, and/or state or
local equivalents. The Acquired Companies (i) have promptly,
thoroughly and impartially investigated all sexual harassment, or
other discrimination, retaliation or policy violation allegations
of which the Acquired Companies are aware, (ii) have taken prompt
corrective action that is reasonably calculated to prevent further
improper action in response to each such allegation with potential
merit, and (iii) are not aware of any allegations relating to
officers, directors, executives, or other key employees of the
Acquired Companies that, if known to the public, would bring the
Acquired Companies into material disrepute.
47
(e) Except as set forth
in Schedule
4.27(e), there are no material pending or, to the Knowledge
of the Sellers, threatened claims or proceedings against the
Acquired Companies under any worker’s compensation policy or
long-term disability policy.
(f) Except as disclosed
on Schedule
4.27(f), since December 31, 2018 there have been no
“employment losses” as defined under the WARN Act (or
any other applicable state and local plant closing/mass layoff law
or ordinance) as to any employees of the Acquired Companies or any
Subsidiary within the six (6) month period prior to
Closing.
(g) Except as disclosed
on Schedule
4.27(g), in the past five (5) years the Acquired Companies
have not received any notice, complaint, or citation from the
federal Occupational Safety and Health Administration or any state
or local equivalent, or by or on behalf of any Company employee,
related to occupational health and safety laws applicable to
Company employees.
All obligations of each Acquired Company applicable to
its employees, whether arising by operation of Law, by Contract, by
past custom or otherwise, or attributable to payments by such
Acquired Company to trusts or other funds or to any Authority, with
respect to unemployment compensation benefits, social security
benefits or any other benefits for its employees with respect to
the employment of said employees through the date hereof have been
paid or adequate accruals therefor have been made on the Company
Financial Statements, determined without regard to any provision of
the 2020 Tax Acts. All reasonably anticipated obligations of each
Acquired Company with respect to such employees (except for those
related to wages during the pay period immediately prior to the
Closing Date and arising in the ordinary course of business),
whether arising by operation of Law, by Contract, by past custom,
or otherwise, for salaries and holiday pay, bonuses and other forms
of compensation payable to such employees in respect of the
services rendered by any of them prior to the date hereof have been
or will be paid by such Acquired Company as they become due in the
ordinary course, determined without regard to any provision of the
2020 Tax Acts.
(a) Schedule 4.29 sets forth a
true, correct and complete list of each “employee benefit
plan” (as defined in Section 3(3) of ERISA), bonus, deferred
compensation, equity-based or non-equity-based incentive, severance
or other plan or written agreement relating to employee,
independent contractor, or director benefits, compensation, or
fringe benefits, currently maintained or contributed to by the
Acquired Companies and/or with respect to which the Acquired
Companies have any liability or obligation or could incur any
direct or indirect, fixed or contingent liability (each a
“Plan”
and collectively, the “Plans”). Schedule 4.29 specifies the
entity plan sponsor or contracting party for each Plan. Each Plan
is and has been maintained in compliance with all applicable laws,
including but not limited to ERISA, in all material respects, and
has been administered and operated in all material respects in
accordance with its terms.
(b) Each Plan which is
intended to be “qualified” within the meaning of
Section 401(a) of the Code is so qualified and has received a
favorable determination, opinion, or advisory letter from the
Internal Revenue Service and, to the Knowledge of the Sellers, no
event has occurred and no condition exists which could reasonably
be expected to result in the revocation of any such determination.
Full payment has been made of all amounts which the Acquired
Companies were required under the terms of the Plans to have paid
as contributions to such Plans on or prior to the date hereof
(excluding any amounts not yet due).
48
(c) To the Knowledge of
the Sellers, no Acquired Company or any other “disqualified
person” or “party in interest” (as defined in
Section 4975(e)(2) of the Code and Section 3(14) of ERISA,
respectively), has engaged in any transaction in connection with
any Plan that could reasonably be expected to result in the
imposition of a penalty pursuant to Section 502(i) of ERISA,
damages pursuant to Section 409 of ERISA or a tax pursuant to
Section 4975(a) of the Code. The Acquired Companies have not
maintained any Plan (other than a Plan which is intended to be
“qualified” within the meaning of Section 401(a) of the
Code) which provides benefits with respect to current or former
employees or directors following their termination of service with
the Acquired Companies (other than as required pursuant to COBRA).
Each Plan subject to the requirements of COBRA has been operated in
compliance therewith in all material respects.
(d) Neither the
execution of this Agreement nor the consummation of the
transactions contemplated by this Agreement shall, individually, in
the aggregate or in connection with any other event, (a) result in
any payment becoming due to any officer, employee, consultant or
director of the Acquired Companies, (b) increase or modify any
benefits otherwise payable by the Acquired Companies to any
employee, consultant or director of the Acquired Companies, or (c)
result in the acceleration of time of payment or vesting of any
such benefits. No material liability, claim, investigation, audit,
action or litigation has been incurred, made, commenced or, to the
Knowledge of the Sellers, threatened, by or against any Plan or the
Acquired Companies with respect to any Plan.
(e) No Plan is a
“multiemployer plan” (as defined in Section 4001(a)(3)
of ERISA) and the Acquired Companies have not been obligated to
contribute to any multiemployer plan. The Acquired Companies have
never sponsored or maintained a plan subject to Title IV of ERISA
nor do they have any actual or contingent liability relating to any
plan subject to Title IV of ERISA.
(f) Except as disclosed
on Schedule 4.29,
the Acquired Companies do not sponsor or maintain any unfunded
non-tax qualified Plan which provides a pension or retirement
benefit to any employee.
(g) The Acquired
Companies have not made any commitment to create or cause to exist
any employee benefit plan which is not listed on Schedule 4.29, or to modify,
change or terminate any Plan (other than as may be necessary for
compliance with applicable law).
(h) Except as disclosed
on Schedule
4.29(h), the Acquired Companies do not have any plan,
arrangement or agreement providing for “deferred
compensation” that is subject to Section 409A of the Code.
Each Plan subject to Section 409A of the Code has been operated and
maintained in compliance therewith in all material respects at all
times.
(i) With respect to
each Plan, the Acquired Companies have delivered or caused to be
delivered to Purchaser and its counsel true and complete copies of
the following documents, as applicable, for each respective Plan:
(i) all Plan documents, with all amendments thereto; (ii) the
current summary plan description with any applicable summaries of
material modifications thereto as well as any other material
employee or government communications; (iii) all current trust
agreements and/or other documents establishing Plan funding
arrangements; (iv) the most recent IRS determination, opinion, or
advisory letter; (v) the three most recently prepared IRS Forms
5500; (vi) the three most recently prepared financial statements;
and (vii) all material related contracts, including without
limitation, insurance contracts, service provider agreements and
investment management and investment advisory
agreements.
49
4.30 Real
Property.
(a) Schedule 4.30(a) sets forth a
true, correct, and complete description (including the address
thereof, the applicable owner thereof, and the use thereof) of all
Real Property owned by the Acquired Companies (the
“Owned Real
Property”). With respect to each Owned Real Property,
(i) the applicable Acquired Company has valid, good and marketable
fee simple title to such Owned Real Property, free and clear of all
Liens, (ii) the applicable Acquired Company has not leased,
subleased, licensed or otherwise granted to any Person the right to
use or occupy such Owned Real Property or any portion thereof;
(iii) other than the right of the Purchaser pursuant to this
Agreement, there are no outstanding options, rights of first offer
or rights of first refusal to purchase such Owned Real Property or
any portion thereof or interest therein; (iv) no Acquired Company
has received any written notice of any, and to the Knowledge of the
Sellers, there are no existing, pending or threatened condemnation
or eminent domain proceedings relating to any portion of the Owned
Real Property; and (v) to the Knowledge of the Sellers, no Acquired
Company has breached or violated any local zoning ordinance, and no
written notice from any Person has been received by an Acquired
Company or served upon an Acquired Company claiming any violation
of any local zoning ordinance. No Acquired Company is party to any
agreement or option to purchase any Real Property or material
interest therein. To the extent any are in the possession of or
reasonably available to the Acquired Companies, copies of any title
insurance policies (together with copies of any documents of record
listed as exceptions to the title on such policies) currently
insuring each Owned Real Property and copies of the most recent
surveys of the same have been made available to the
Purchaser.
(b) Schedule 4.30(b) sets forth a
true, correct and complete list (including the address thereof, the
applicable lessee thereof, and use thereof) of all of the Real
Property Leased or subleased by the Acquired Companies (the
“Leased Real
Property”) as well as a list of all leases, subleases,
licenses, occupancy agreements or other agreements (including all
amendments thereto and guaranties thereof) pursuant to which any
Acquired Company leases or subleases any Real Property
(collectively, “Leases”). True and
correct copies of all such Leases have been made available to the
Purchaser. With respect to each of the Leases: (i) it is a valid,
legal and binding obligation of the applicable Acquired Company
generally enforceable in accordance with its terms against such
Acquired Company and, to the Knowledge of the Sellers, each other
party thereto and is in full force and effect; (ii) all rents and
additional rents and other sums, expenses and charges due
thereunder have been paid; (iii) no waiver, indulgence or
postponement of the lessees’ obligations thereunder have been
granted by the lessors; (iv) there exists no breach or default, or
event of default, thereunder by the applicable Acquired Company or,
to the Knowledge of the Sellers, by any other party thereto; (v)
there exists no occurrence, condition or act which, with the giving
of notice, the lapse of time or the happening of any further event
or condition, would become a breach or default, or event of
default, by the applicable Acquired Company thereunder; and (vi)
there are no outstanding claims of breach or indemnification or
notice of default or termination thereunder. There are (x) no
written or oral subleases, concessions or other contracts granting
to any Person other than an Acquired Company the right to use or
occupy any Leased Real Property and (y) no outstanding options or
rights of first refusal to purchase all or a portion of such
properties. No Acquired Company has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any Lease or
interest therein; and the estate or interest created by such Lease
in favor of the applicable Acquired Company is free and clear of
all Liens. No Acquired Company has received any written notice of
any, and to the Knowledge of the Sellers, there are no existing,
pending or threatened condemnation or eminent domain proceedings
relating to any portion of the Leased Real Property. No Acquired
Company has received any written notice from any Person that any
Leased Real Property is in violation of any local zoning ordinance
and to the Knowledge of the Sellers, no Leased Real Property
violates any local zoning ordinance.
50
(c) The buildings,
structures, improvements and fixtures located on the Owned Real
Property and the Leased Real Property (the “Improvements”) and all
building systems and equipment related to the business located on
the Owned Real Property and the Leased Real Property are in good
operating conditions and repair in all material respects and are
adequate and suitable for the purposes for which they are presently
being used. There are no material repair or restoration works
likely to be required in connection with any of the Improvements
located on the Owned Real Property. There are no material repair or
restoration works likely to be required in connection with any
Improvements located on the Leased Real Property for which the
applicable Acquired Company is liable for or obligated to perform
under the applicable Lease. An Acquired Company is in physical
possession and actual and exclusive occupation of the whole of the
Owned Real Property and Leased Real Property, none of which are
subleased or assigned to another Person. No Acquired Company owes
any brokerage commission with respect to any Real
Property.
(d) The Owned Real
Property and the Leased Real Property collectively constitute all
interests in real property currently used or currently held for use
in connection with the Business.
(e) No Acquired Company
has received any notice of any existing deficiency, and no facility
redesign or improvements with respect to any Acquired
Company’s dealership facilities have been requested or
required by the Factories. Each Acquired Company’s
dealerships are and have been operated in compliance with Factory
policies.
Schedule 4.31 sets forth a true,
complete and correct list of the checking accounts, deposit
accounts, safe deposit boxes, and brokerage, commodity and similar
accounts of each Acquired Company, including the account number and
name, the name of each depositary or financial institution and the
address where such account is located and the authorized
signatories thereto.
Except
as set forth in Schedule
4.32: (i) Each Acquired Company has duly and timely filed
all Tax Returns (taking into account all available extensions) in
all jurisdictions in which Tax Returns are required to be filed by
or with respect to it, and has paid all Taxes (whether or not shown
on any Tax Returns) which have become due; (ii) all such Tax
Returns are true, correct and complete and accurate in all material
respects and disclose all material Taxes required to be paid; (iii)
there is no Action, pending or proposed or, to the Knowledge of the
Sellers, threatened, with respect to Taxes of any Acquired Company
or for which a Lien may be imposed upon any of the Acquired
Companies’ assets (other than liens for Taxes not yet due and
payable) and, to the Knowledge of the Sellers, no basis exists
therefor; (iv) no statute of limitations in respect of the
assessment or collection of any Taxes of any Acquired Company for
which a Lien may be imposed on any of the Acquired Companies’
assets has been waived or extended, which waiver or extension is in
effect; (v) each Acquired Company has complied in all material
respects with all applicable Laws relating to the reporting,
payment, collection and withholding of Taxes, including sales and
use Taxes and amounts required to be withheld for Taxes of
employees, independent contractors, creditors, equityholders
(including any members of such Acquired Company) or other third
parties, and has duly and timely withheld or collected, paid over
to the applicable Taxing Authority and reported all Taxes
(including income, social, security and other payroll Taxes)
required to be withheld or collected by such Acquired Company,
determined in each case without regard to any provision of the 2020
Tax Acts; (vi) none of
51
the
assets of any Acquired Company is required to be treated as owned
by another Person for income Tax purposes pursuant to Section
168(f)(8) of the Code (as in effect prior to its amendment by the
Tax Reform Act of 1986) or otherwise; (vii) none of the assets of
any Acquired Company is “tax-exempt use property”
within the meaning of Section 168(h) of the Code, “tax-exempt
bond financed property” within the meaning of Section
168(g)(5) of the Code, or subject to a “TRAC lease”
under Section 7701(h) of the Code (or any predecessor provision)
(viii) there is no Lien for Taxes upon any Transferred Equity
Interests or on any of the assets of any Acquired Company (other
than liens for Taxes not yet due and payable); (ix) there is no
outstanding request for a ruling from any Taxing Authority, request
for a consent by a Taxing Authority for a change in a method of
accounting, subpoena or request for information by any Taxing
Authority, or closing agreement (within the meaning of Section 7121
of the Code or any analogous provision of applicable Law), with
respect to any Acquired Company; (x) no claim has ever been made by
a Taxing Authority in a jurisdiction where any Acquired Company has
not paid any Tax or filed Tax Returns, asserting that such Acquired
Company is or may be subject to any Tax or Tax filing obligations
in such jurisdiction; (xi) each Acquired Company has provided to
the Purchaser true, complete and correct copies of all income Tax
Returns relating to, and all audit reports and correspondence
relating to each proposed adjustment, if any, made by any Taxing
Authority with respect to, any taxable period ending after December
31, 2015; (xii) no Acquired Company is, or has ever been, a party
to any Tax sharing, Tax allocation or Tax indemnity Contract;
(xiii) no Acquired 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) ending after the
Closing Date as a result of any: (a) change in method of accounting
or use of an improper method of accounting (including pursuant to
Section 481 of the Code or any similar provision of the Code or the
corresponding Tax Laws of any nation, state or locality) for a
taxable period ending on or prior to the Closing Date; (b)
“closing agreement” as described in Code Section 7121
(or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date;
(c) installment sale or open transaction disposition made on or
prior to the Closing Date; (d) an intercompany item under Treasury
Regulation Section 1.1502-13 or an excess loss account under
Treasury Regulation Section 1.1502-19; (e) election under Section
108(i) or Section 965 of the Code; (f) “long-term
contracts” that are subject to a method of accounting
provided in Section 460 of the Code or any deferred income pursuant
to Section 451(c), Section 455 of the Code, or Section 456 of the
Code (or any corresponding provision of state or local law), IRS
Revenue Procedure 2004-34; (g) interest held in a “controlled
foreign corporation” (as that term is defined in Section 957
of the Code) or in any partnership on or before the Closing Date;
(h) use of the cash method of accounting for Tax purposes; or (i)
prepaid or deferred amount received for a Tax period ending on or
prior to the Closing Date; (xiv) no Acquired Company is or has ever
been included in any consolidated, combined or unitary Tax Return;
(xv) there are no pending or threatened in writing disputes,
claims, audits, examinations or other proceedings regarding any
material Taxes of any Acquired Company or the assets of any
Acquired Company, no deficiency with respect to a material amount
of Taxes has been proposed, asserted or assessed against any
Acquired Company; and to the Knowledge of the Sellers, no issue has
been raised by a Taxing Authority in any prior Action relating to
any Acquired Company with respect to any Tax for any period which,
by application of the same or similar principles, could reasonably
be expected to result in a proposed Tax deficiency of any Acquired
Company for any other period; (xvi) no Acquired Company is a party
to any Contract for services that would result, individually or in
the aggregate, in the payment of any amount that would not be
deductible by such Acquired Company by reason of Section 162 or 404
of the Code; (xvii) during the last two years, no Acquired Company
has engaged in any exchange under which gain realized on the
exchange was not recognized under Section 1031 of the Code; (xviii)
except with respect to the taxation of any of the Acquired
Companies treated as a partnership for federal income Tax purposes
and listed as such on Schedule 4.32(xxxi), there are
no joint ventures, partnerships, limited liability companies, or
other
52
arrangements
or contracts to which any Acquired Company is a party and that are
reasonably likely to be treated as partnerships for federal income
Tax purposes; (xix) each Acquired Company that purports to be a
partnership for federal income Tax purposes is and has been at all
times since its formation treated as a partnership for federal
income Tax purposes and for all similar or corresponding state and
local income Tax purposes and has filed all of its Tax Returns
consistent with such treatment; (xx) each Acquired Company that
purports to be an S corporation for federal income Tax purposes is
and has been at all times since its formation treated as an S
corporation for federal income Tax purposes and for all similar or
corresponding state and local income Tax purposes, will remain an S
corporation for all such purposes up to and including the Closing
Date, and has filed all of its Tax Returns consistent with such
treatment; (xxi) the IRS has not challenged or threatened in
writing to challenge the status of any such Acquired Company as an
S corporation and no such Acquired Company owns any assets for
which it has any potential liability for any Tax under Section 1374
of the Code; (xxii) no Acquired Company that purports to be an S
corporation for federal income tax purposes has in the past five
(5) years, acquired assets from another corporation in a
transaction in which such Acquired Company’s Tax basis for
the acquired assets was determined, in whole or in part, by
reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor; (xxiii) no Acquired
Company that purports to be an S corporation for federal income tax
purposes has, nor has it ever had, any C corporation subsidiaries;
(xxiv) each Acquired Company that purports to be an entity
disregarded as separate from its owner for federal income Tax
purposes is and has at all times since its formation been,
classified as an entity disregarded as separate from its owner for
federal income Tax purposes and for all similar or corresponding
state and local income Tax purposes and has filed all of its Tax
Returns in a manner consistent with such classification; (xxv) no
Acquired Company is currently, or will for any period for which a
Tax Return has not been filed be, required to include any
adjustment in Taxable income for any Tax period (or portion
thereof) pursuant to Section 263A of the Code (or any corresponding
provisions of state, local or foreign Law) as a result of
transactions, events or accounting methods employed prior to the
transactions contemplated by this Agreement; (xxvi) each Acquired
Company has disclosed on its Tax Returns any Tax reporting position
taken which could result in the imposition of penalties under
Section 6662 of the Code (or any comparable provisions of state,
local or foreign Law); (xxvii) no Acquired Company has consummated,
entered into or participated in, or is currently participating in,
any transaction which was or is a “tax shelter”
transaction as defined in Sections 6662 or 6111 of the Code or the
Treasury Regulations promulgated thereunder; (xxviii) no Acquired
Company has participated in, or is currently participating in (a) a
“Listed Transaction” or a “reportable
transaction” (within the meaning of Section 6707A of the Code
or Treasury Regulations §1.6011-4 or any predecessor thereof)
or any transaction requiring disclosure under a corresponding
provision of state, local, or foreign Law or (b) any
“nondisclosed noneconomic substance transaction” within
the meaning of Section 6662(i)(2) of the Code; (xxix) no Acquired
Company has been a party to a transaction that does not have
economic substance within the meaning of Section 7701(o) of the
Code or that fails to meet the requirements of any similar rule of
law as used in Section 6662(b)(6) of the Code; (xxx) the unpaid
Taxes of the Acquired Companies (i) did not, as of the most recent
fiscal month end, exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the Balance
Sheet and (ii) will not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the
past custom and practice of the Acquired Companies in filing their
Tax Returns; (xxxi) Schedule 4.32(xxxi) identifies
the federal income Tax classification of each of the Acquired
Companies as of the Closing Date, and none of the Acquired
Companies, or to the Knowledge of the Sellers, any Tax Authority
has taken a position inconsistent with such treatment; (xxxii) no
intangible asset of any of the Acquired Companies that is acquired
directly or indirectly as a result of the Transactions will be
subject to Section 197(f)(9) of the Code; (xxxiii) each Acquired
Company is on the accrual method of accounting; (xxxiv) no Acquired
Company elected to have the centralized audit provisions of Code
Sections 6221-6241 apply to any Taxable period beginning before
January 2018; (xxxv) after the Mergers, each Surviving Corporation
will own substantially all the assets (as defined for Code Section
368 and applicable Treasury Regulations) of its respective Merged
Entity; and (xxxvi) none of the Acquired Companies has claimed any
employee retention credit or any other Tax credit or Tax benefits
under any provision of the 2020 Tax Acts. No amount may be
nondeductible under Section 280G of the Code or result in any
excise tax under Section 4999 of the Code.
53
4.33 Environmental
Laws.
(a) Each of the
Acquired Companies is, and for the past three (3) years has been,
in material compliance with all Environmental Laws and has not
received from any Person any (i) Environmental Notices or
Environmental Claims, or (ii) written requests for information
pursuant to any Environmental Law, which, in each case, either
remains pending or unresolved, or is the source of ongoing
obligations or requirements as of the Closing Date.
(b) Each Acquired
Company has obtained and is in material compliance with all
Environmental Permits necessary for the ownership, lease, operation
or use of the business and assets as conducted by such Acquired
Company as of the Closing Date.
(c) Except as set forth
in Schedule
4.33(c), to the Knowledge of the Sellers, there has been no
Release of Hazardous Materials by any Acquired Company or, to the
Knowledge of the Sellers, at any real property currently operated
or leased by any Acquired Company, and no Acquired Company has
received an Environmental Notice that any real property currently
operated or leased by any Acquired Company (including soils,
groundwater, surface water, buildings and other structures located
on any such real property) has been contaminated with any Hazardous
Material, in each case which would reasonably be expected to result
in an Environmental Claim against, or a violation of Environmental
Laws or the term of any Environmental Permit by, any of the
Acquired Companies.
(d) To the Knowledge of
the Sellers, none of the following exists at any of the Owned Real
Property or Lease Real Property: (i) underground storage tanks,
(ii) friable asbestos-containing material, (iii) materials or
equipment containing polychlorinated biphenyls or per- and
polyfluoroalkyl substances and owned by the Acquired Companies,
(iv) groundwater monitoring wells, drinking water wells, or
production water wells, or (v) landfills, surface impoundments, or
disposal areas.
(e) No Acquired Company
(i) has treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, manufactured, distributed,
released, or exposed any Person to any Hazardous Materials in a
manner, or (ii) owns or operates any property or facility
(including any real property owned, used or leased by any Acquired
Company), nor formerly owned or operated any real property, that is
or has been contaminated by any Hazardous Materials, in each case
that would give rise to any material liabilities or obligations of
the Acquired Companies pursuant to any Environmental
Laws.
(f) The Acquired
Companies have made available to the Purchaser any and all
environmental reports, studies, audits, records, sampling data,
site assessments and other similar documents with respect to the
business or assets of the Acquired Companies or any real property
or other assets of the Acquired Companies which are in the
possession or control of or used by Sellers or the Acquired
Companies
54
(g) Purchaser
acknowledges that some Hazardous Materials are used in the normal
course of each Acquired Company’s business, including
materials incorporated into, or customarily used in the repair or
restoration of, motorcycles, all-terrain vehicles, utility
vehicles, scooters, and personal watercraft, and that such
Hazardous Materials have been in all material respects used in
compliance with applicable Environmental Laws consistent with the
operation of the Business.
(h) To the Knowledge of
the Sellers, there are no Hazardous Materials in, on, or under any
properties owned, leased or used at any time by the Acquired
Companies such as could give rise to any material liability or
corrective or remedial obligation of the Acquired Companies under
any Environmental Laws or that could be reasonably expected to
impact adversely the ownership, use, operation or transferability
of any such properties.
4.34 Finders’ Fees.
There
is no investment banker, broker, finder or other intermediary who
has been retained by or is authorized to act on behalf of any
Acquired Company or any of their respective Affiliates who will be
entitled to any brokerage, finder’s, investment banker,
financial advisor or other similar fees, commission or like payment
as a result of or in connection with the consummation of the
transactions contemplated by this Agreement.
No
Acquired Company has any general or special powers of attorney
outstanding (whether as grantor or grantee thereof) or any
obligation or liability (whether actual, accrued, accruing,
contingent, or otherwise) as guarantor, surety, co-signer,
endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any Person, other than with respect to another
Acquired Company.
Neither
the Acquired Companies, nor any director, officer, agent or
employee of any of the Acquired Companies, or any Person acting on
behalf of any of the foregoing has, directly or indirectly (i) used
any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees, to foreign or domestic political parties or campaigns or
violated any provision of the Foreign Corrupt Practices Act of 1977
or (iii) made any other unlawful payment. Neither the Acquired
Companies, nor any director, officer, agent or employee of the
Acquired Companies, or any Person acting on behalf of any of the
foregoing has, directly or indirectly, given or agreed to give any
gift or similar benefit in any material amount to any customer,
supplier, governmental employee or other Person who is or may be in
a position to help or hinder an Acquired Company or assist an
Acquired Company in connection with any actual or proposed
transaction.
The
operations of the Acquired Companies are and have been conducted at
all times in compliance with laundering statutes in all applicable
jurisdictions, the rules and regulations thereunder and any related
or similar rules, regulations or guidelines, issued, administered
or enforced by any governmental authority (collectively, the
“Money Laundering
Laws”), and no Action involving the Acquired Companies
with respect to the Money Laundering Laws is pending or, to the
Knowledge of the Sellers, threatened.
Neither
the Acquired Companies, nor any director or officer of any Acquired
Company, or any agent, employee, Affiliate or Person acting on
behalf of any of the foregoing is currently identified on the
specially designated nationals or other blocked person list or
otherwise currently subject to any U.S. sanctions administered by
the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”); and each Acquired
Company has not, directly or indirectly, used any funds, or loaned,
contributed or otherwise made available such funds to any
subsidiary, joint venture partner or other Person, in connection
with any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar
or any other country sanctioned by OFAC or for the purpose of
financing the activities of any Person currently subject to, or
otherwise in violation of, any U.S. sanctions administered by
OFAC.
55
4.39 Not
an Investment Company.
No
Acquired Company is an “investment company” within the
meaning of the Investment Company Act of 1940, as amended, and the
rules and regulations promulgated thereunder.
None of
the information supplied or to be supplied by an Acquired Company
and/or the Sellers expressly for inclusion or incorporation by
reference in the filings with the SEC and mailings to the
Purchaser’s stockholders with respect to the solicitation of
proxies to approve the transactions contemplated by this Agreement
will, at the date of filing as it may be updated for a future
filing, as the case may be, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading (subject to the qualifications and limitations set
forth in the materials provided by an Acquired Company and/or the
Sellers).
For the
avoidance of doubt, none of the representations and warranties set
forth in Article IV
relating to the Acquired Companies are applicable with respect to
Bayou Motorcycles, LLC unless and until Robert Dodson shall have
executed a Seller Joinder to sell his Equity Interest in Bayou
Motorcycles, LLC.
ARTICLE V.
Except
as set forth in the corresponding sections or subsections of the
Disclosure Schedules, each Seller, severally and not jointly, as to
itself only, represents to the Purchaser as of the date hereof and
as of the Closing Date as follows:
(a) Such Seller is the
record and beneficial owner of the Transferred Equity Interests (in
such number, class and series) and Equity Interests of the Merged
Entities set forth opposite its name on Schedule 5.1 and has valid,
good and marketable title to such Transferred Equity Interests and
Equity Interests of the Merged Entities free and clear of any and
all Liens, other than transfer restrictions arising from applicable
securities laws. Such Seller is not party to any option, warrant,
purchase right, or other contract or commitment that could require
such Seller to sell, transfer, or otherwise dispose of the
Transferred Equity Interests or Equity Interests of the Merged
Entities (other than pursuant to this Agreement). Other than as may
be set forth in the Organizational Documents, such Seller is not a
party to any voting trust, proxy or other agreement or
understanding with respect to the voting of the Transferred Equity
Interests or Equity Interests of the Merged Entities. Upon the
consummation of the transactions contemplated by this Agreement, at
the Closing, the Purchaser will acquire from such Seller valid,
good and marketable title to such Transferred Equity Interests free
and clear of all Liens, other than Liens created by the Purchaser
or transfer restrictions arising from applicable securities laws.
The Equity Interests of the Merged Entities held by such Seller
are, at the Effective Time, delivered free and clear of all Liens,
other than Liens created by the Purchaser or transfer restrictions
arising from applicable securities laws.
56
(b) Such Seller has
full legal capacity, power and authority to execute and deliver
this Agreement and the Additional Agreements to which such Seller
is a party, to perform such Seller’s obligations hereunder
and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement
and the Additional Agreements to which such Seller is or will be a
party and the consummation of the transactions contemplated hereby
and thereby have been (or, in the case of any Additional Agreement
entered into after the date of this Agreement, will be, upon
execution thereof), duly authorized by all necessary action on the
part of such Seller. This Agreement has been (and each of the
Additional Agreements to which each Seller is or will be a party
will be, upon execution thereof) duly and validly executed and
delivered by such Seller and are, or upon their execution and
delivery will be, valid, legal and binding obligations of such
Seller, enforceable against each Seller in accordance with their
respective terms.
(c) Such Seller is not
a “foreign person” within the meaning of Section 1445
and 1446(f) of the Code.
5.2 Approvals and Consents.
No
Consent is required to be made or obtained by such Seller (whether
to or from Authority or other Person) in connection with the
execution, delivery and performance of this Agreement by such
Seller and each the Additional Agreements and to which he, she or
it is a party or the consummation of the transactions contemplated
hereby or thereby, except (x) for filings required under or in
connection with the HSR Act, and (y) as set forth on Schedule 5.2.
Neither
the execution, delivery or performance by such Seller of this
Agreement and each of the Additional Agreements to which such
Seller is or will be a party, nor the consummation of the
transactions contemplated hereby and thereby, will, directly or
indirectly (with or without notice or the passage of time or both)
(i) contravene, conflict with, constitute a default under or a
breach of the Organizational Documents of such Seller if it is not
a natural person, (ii) violate or result in a breach of,
contravene, conflict with or constitute a default under any
provision of any Law or Order to which such Seller, or the
Transferred Equity Interests, Equity Interests in a Merged Entity,
or assets owned by such Seller, is subject, (iii) constitute a
default under or breach of (with or without the giving of notice or
the passage of time or both) or violate or give rise to any right
of termination, cancellation, amendment, modification, suspension,
revocation, or acceleration of any right or obligation of such
Seller or any payment or reimbursement or to a loss of any benefit
to which such Seller is entitled under any provision of any
agreement to which such Seller is a party or by which any of its
properties or assets (including any of the Transferred Equity
Interests or Equity Interests in a Merged Entity) are bound, (iv)
result in the creation or imposition of any Lien on any of
Seller’s Transferred Equity Interests or Equity Interests in
a Merged Entity.
Except
as set forth on Schedule
5.4, there is no Action pending or, to the knowledge of such
Seller, threatened, against such Seller or its assets and
properties (including the Transferred Equity Interests or Equity
Interests in a Merged Entity) or which in any manner challenges or
seeks to prevent, enjoin, alter or delay the transactions
contemplated hereby or by the Additional Agreements. Such Seller is
not subject to any Order that would prevent consummation of the
transaction or materially impair the ability of such Seller to
perform its obligations hereunder.
(a) Such Seller is an
“accredited investor” as such term is defined in Rule
501 of Regulation D promulgated under the Act. Such Seller
acknowledges that the Purchaser has the right to require evidence
of such Seller’s status as an accredited investor, if
necessary.
57
(b) Such Seller
acknowledges that it has prior investment experience or has
employed the services of an investment advisory, attorney or
accountant to evaluate the merits and risks of such an investment
on its behalf, and such Seller represents that it, he or she, as
the case may be, understands the highly speculative nature of an
investment in shares of Purchaser Class B Common Stock which may
result in the loss of the total amount of such
investment.
(c) Such Seller has
adequate means of providing for such Seller’s current needs
and possible personal contingencies, and such Seller has no need,
and anticipates no need in the foreseeable future, for liquidity in
such Seller’s investment in shares of the Purchaser Class B
Common Stock. Such Seller is able to bear the economic risks of
this investment and, consequently, without limiting the generality
of the foregoing, such Seller is able to hold the shares of
Purchaser Class B Common Stock for an indefinite period of time and
has a sufficient net worth to sustain a loss of the entire
investment in the event such loss should occur.
(d) Except as otherwise
set forth in Article
VI, the Purchaser has not and is not making any
representations or warranties to the Sellers or providing any
advice or information to the Sellers. Such Seller acknowledges that
it has retained its own professional advisors to evaluate the tax
and other consequences of an investment in the shares of Purchaser
Class B Common Stock.
(e) Such Seller
understands and consents to the placement of a legend on any
certificate or other document evidencing shares of Purchaser Class
B Common Stock delivered to such Seller pursuant to the terms of
this Agreement stating that such shares of Purchaser Class B Common
Stock has not been registered under the Act and setting forth or
referring to the restrictions on transferability and sale thereof.
Each certificate evidencing the shares shall bear the legends set
forth below, or legends substantially equivalent thereto, together
with any other legends that may be required by federal or state
securities laws at the time of the issuance of shares of the
Purchaser Class B Common Stock pursuant to this
Agreement:
THE
SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL (I) SUCH OFFER, SALE, TRANSFER, PLEDGE OR
HYPOTHECATION HAS BEEN REGISTERED UNDER THE ACT OR (II) THE ISSUER
OF THE SHARES HAS RECEIVED AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE
ACT.
IN
ADDITION, THE RIGHT TO SELL THE SHARES OF COMMON STOCK REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO A REGISTRATION RIGHTS AND LOCK-UP
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE ISSUER’S
PRINCIPAL PLACE OF BUSINESS.
(f) Such Seller has
carefully read and understands both the Payment Notice and the
valuation methodology set forth on Schedule 5.5(f) and
acknowledges his, her, or its agreement that the allocations set
forth in the Payment Notice and the amounts and methods set forth
on Schedule 5.5(f)
are, in each case, fair and reasonable. Such Seller has been given
the right and opportunity to consult with its, his, or her
independent Representatives to provide advice related to the
foregoing and is not relying on any valuations conducted by any of
the other Sellers or any Affiliate of Sellers, including but not
limited to the Principal Owners or any Acquired
Company.
58
5.6 Finders’
Fees.
There
is no investment banker, broker, finder or other intermediary who
has been retained by or is authorized to act on behalf of any
Seller or any of their respective Affiliates who will be entitled
to any brokerage, finder’s, investment banker, financial
advisor or other similar fees, commission or like payment as a
result of or in connection with the consummation of the
transactions contemplated by this Agreement.
ARTICLE VI.
The
Purchaser and Merger Subs hereby represent and warrant to the
Sellers that as of the date hereof and as of the Closing Date,
except as set forth in the corresponding sections or subsections of
the Disclosure Schedules:
The
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada. Each Merger
Sub is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Arizona. Each of Purchaser
and each Merger Sub has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its
business as presently conducted.
Subject
to the receipt of the Purchaser Stockholder Approval, the
execution, delivery and performance by the Purchaser and each
Merger Sub of this Agreement and the Additional Agreements to which
the Purchaser or each Merger Sub is or will be a party and the
consummation by the Purchaser and each Merger Sub of the
transactions contemplated hereby and thereby are within the
corporate powers of the Purchaser and each Merger Sub, as
applicable, and have been (or, in the case of any Additional
Agreements entered into after the date of this Agreement, will be,
upon execution thereof) duly authorized by all necessary corporate
action on the part of the Purchaser and each Merger Sub. The
execution and delivery of this Agreement and the documents
contemplated hereby and the consummation of the transactions
contemplated hereby and thereby have been (A) duly and validly
authorized and approved by the Board of Directors of the Purchaser
and each Merger Sub and (B) determined by the Board of Directors of
the Purchaser and each Merger Sub as advisable to the
Purchaser’s or such Merger Sub’s stockholders, as
applicable, and recommended for the Purchaser Stockholder Approval.
This Agreement has been (and each of the Additional Agreements to
which the Purchaser or each Merger Sub, as applicable, is or will
be a party will be, upon execution thereof) duly executed and
delivered by the Purchaser or each Merger Sub, as applicable, and
constitutes or will constitute, upon their execution and delivery,
as applicable, a valid, legal and binding obligation of the
Purchaser or each Merger Sub, as applicable, (assuming this
Agreement has been and the Additional Agreements to which the
Purchaser or each Merger Sub, as applicable, is or will be party
are or will be, upon execution thereof, as applicable, duly
authorized, executed and delivered by the other parties thereto),
enforceable against the Purchaser or such Merger Sub, as
applicable, in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other Laws
affecting generally the enforcement of creditors’ rights and
subject to general principles of equity).
No
Consent is required to be made or obtained by the Purchaser or any
Merger Sub (whether to or from any Person or Authority) in
connection with the execution, delivery and performance of this
Agreement or any of the Additional Agreements or the consummation
of the transactions contemplated hereby or thereby, except (a) for
filings required under or in connection with the HSR Act, (b) such
Consents as may be required under the Exchange Act or the
Securities Act, (c) such Consents as may be required under
applicable state securities or “blue sky” Laws and the
securities Laws of any foreign country or the rules and regulations
of the Nasdaq, (d) the Purchaser Stockholder Approval, and (e) as
set forth on Schedule 6.3.
59
6.4 Non-Contravention.
Neither
the execution, delivery and performance by the Purchaser and each
Merger Sub of this Agreement and the Additional Agreements to which
the Purchaser or each Merger Sub, as applicable, is or will be a
party nor the consummation by the Purchaser and each Merger Sub of
the transactions contemplated hereby or thereby will (a) conflict
with or result in any breach of any provision of the
Purchaser’s or the applicable Merger Sub’s
Organizational Documents, or (b) subject to the filings and other
matters referred to in Section 6.3, contravene or
conflict with or constitute a violation of any Law binding upon the
Purchaser or each Merger Sub, except, in each case, for violations
which would not prevent or materially delay the consummation of the
transactions contemplated hereby or have a Purchaser Material
Adverse Effect.
Other
than B. Riley Securities, there is no investment banker, broker,
finder or other intermediary who has been retained by or is
authorized to act on behalf of the Purchaser or each Merger Sub who
might be entitled to any brokerage, finder’s, investment
banker, financial advisor or other similar fees, commission or like
payment as a result of or in connection with the consummation of
the transactions contemplated by this Agreement.
There
are no pending or, to the Knowledge of the Purchaser, threatened,
Actions against the Purchaser, any Merger Sub, their respective
properties or assets, or, to the knowledge of the Purchaser, any of
their respective directors, managers, or officers (in their
capacity as such) which has not been disclosed in the Purchaser SEC
Documents. There are no investigations or other inquiries pending
or, to the Knowledge of the Purchaser, threatened Orders against
the Purchaser, any Merger Sub, their respective properties or
assets, or, to the knowledge of the Purchaser, any of their
respective directors, managers, or officers (in their capacity as
such) which has not been disclosed in the Purchaser SEC Documents.
As of the date hereof, the Purchaser and each Merger Sub are in
compliance with all applicable Laws in all material respects,
except as could not, individually or in the aggregate, reasonably
be expected to have a Purchaser Material Adverse
Effect.
The
Closing Payment Shares (including the Escrow Shares), when issued
in accordance with this Agreement, will be duly authorized and
validly issued, will be fully paid and nonassessable, and will be
issued in compliance with all applicable state and federal
securities Laws and not subject to, and not issued in violation of,
any Lien, purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any
provision of applicable Law, the Purchaser’s Organizational
Documents, or any material Contract to which the Purchaser is a
party or otherwise bound.
The
authorized share capital of the Purchaser consists of 50,000 shares
of Purchaser Class A Common Stock; 4,950,000 shares of Purchaser
Class B Common Stock and 10,000,000 shares of Purchaser Preferred
Stock. As of the close of business on the day prior to the date of
execution of this Agreement, (i) 50,000 shares of Purchaser Class A
Common Stock, 2,265,466 shares of Purchaser Class B Common Stock,
and no shares of Purchaser Preferred Stock were issued and
outstanding; (ii) no shares of Purchaser Common Stock were held by
Purchaser in its treasury, (iii) 568,265 shares of Purchaser Class
B Common Stock were reserved for issuance under the Purchaser
Plans, (iv) 20,050 shares of Purchaser Class B Common Stock were
issuable upon the exercise of outstanding Purchaser Warrants, and
(v) 973,704 shares of Purchaser Class B Common Stock were
issuable upon conversion of the Purchaser Convertible Debt. All
outstanding shares of Purchaser Common Stock are duly authorized,
validly issued, fully paid and nonassessable. Except as set forth
above, as of the date hereof, there are no outstanding or
authorized options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character
relating to the capital stock of the Purchaser or obligating the
Purchaser to issue or sell any shares of capital stock of, or any
other interest in, the Purchaser. Except as set forth above, as of
the date hereof, the Purchaser does not have outstanding or
authorized any stock appreciation, phantom stock, profit
participation or similar rights. All issued and outstanding equity
interests of the Purchaser (i) have been duly authorized and
validly issued and are fully paid and non-assessable; (ii) have
been offered, sold and issued in compliance with applicable Law,
including federal and state securities Laws, and all requirements
set forth in (A) the Purchaser’s Organizational Documents,
and (B) any other applicable Contracts governing the issuance of
such securities; and (iii) are not subject to, nor have they been
issued in violation of, any purchase option, call option, right of
first refusal, preemptive right, subscription right or any similar
right under any provision of any applicable Law, the
Purchaser’s Organizational Documents or any Contract to which
the Purchaser is a party or otherwise bound.
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6.9 Internal
Controls; Listing; Financial Statements.
Purchaser
maintains systems
of “internal control over financial reporting” (as
defined under Rules 13a-15 and 15d-15 under the Exchange Act
Regulations) that comply with the requirements of the Exchange Act
and have been designed by, or under the supervision of, its
principal executive and principal financial officers, or persons
performing similar functions, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with U.S. GAAP, including, but not limited to, internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s
general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in
conformity with U.S. GAAP and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(a) The Purchaser has
not taken any action prohibited by Section 402 of the
Sarbanes-Oxley Act.
(b) Since formation,
the Purchaser has complied in all material respects with the
applicable listing and corporate governmental rules and regulations
of Nasdaq. The shares of Purchaser Class B Common Stock are listed
on Nasdaq, with trading ticker RMBL. There is no action or
proceeding pending or, to the Knowledge of the Purchaser,
threatened against the Purchaser by Nasdaq with respect to any
intention by Nasdaq to prohibit or terminate the listing of the
shares of Purchaser Class B Common Stock on Nasdaq.
(c) Except as disclosed
in the Purchaser SEC Documents, the Purchaser Financial Statements
(including the related notes and schedules thereto) (i) fairly
present in all material respects the financial position of
Purchaser and its consolidated subsidiaries, as at the respective
dates thereof, and the results of operations and consolidated cash
flows for the respective periods then ended, (ii) were prepared in
conformity with U.S. GAAP applied on a consistent basis during the
periods involved (except as may be indicated therein or in the
notes thereto, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the
Exchange Act), and (iii) comply as to form in all material respects
with the applicable accounting requirements and with the published
rules and regulations of the SEC, the Exchange Act and the
Securities Act in effect as of the respective dates
thereof.
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(d) There are no
outstanding loans or other extensions of credit made by the
Purchaser to any executive officer (as defined in Rule 3b-7 under
the Exchange Act) or director of the Purchaser (except normal
advances for business expenses in the ordinary course of
business).
(e) Except as disclosed
in the Purchaser
(f) SEC
Documents, neither the Purchaser nor the Purchaser’s
independent auditors has identified or been made aware of (i) any
significant deficiency or material weakness in the system of
internal accounting controls utilized by the Purchaser or that have
adversely affected or are reasonably likely to adversely affect
Purchaser’s ability to record, process, summarize and report
financial information, (ii) any fraud known to Purchaser’s
management, whether or not material, that involves the
Purchaser’s management or other employees who have a
significant role in the preparation of financial statements or the
internal accounting controls utilized by the Purchaser or (iii) any
claim or allegation regarding any of the foregoing.
6.10 Reporting Company.
The
Purchaser is a publicly-held company subject to reporting
obligations pursuant to Section 13 of the Exchange Act, and the
shares of Purchaser Class B Common Stock are registered pursuant to
Section 12(b) of the Exchange Act. There is no legal proceeding
pending or, to Purchaser’s knowledge, threatened in writing
against the Purchaser by the SEC with respect to the deregistration
of the shares of Purchaser Class B Common Stock under the Exchange
Act. The Purchaser has taken no action that is designed to
terminate the registration of the shares of Purchaser Class B
Common Stock under the Exchange Act. As of the date hereof, there
are no outstanding or unresolved comments in comment letters
received from the SEC with respect to the Purchaser SEC Documents.
To the Knowledge of the Purchaser, none of the Purchaser SEC
Documents or furnished documents on or prior to the date hereof is
subject to ongoing SEC review or investigation as of the date
hereof.
Each
Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby and has engaged in no business
other than in connection with the transactions contemplated by this
Agreement. All of the issued and outstanding capital stock of each
Merger Sub is owned directly by Purchaser.
The
Purchaser has no Liabilities of a nature that would be required
under U.S. GAAP to be disclosed on a balance sheet or the notes
thereto, except for (i) Liabilities disclosed or reserved against
in the balance sheet included in the most recent Purchaser
Financial Statements or in the notes to the most recent Purchaser
Financial Statements, (ii) Liabilities arising in the ordinary
course of business since the date of the most recent Purchaser
Financial Statement, (iii) Liabilities incurred in connection with
the Transactions, and (iv) Liabilities that would not reasonably be
expected to have, individually or in the aggregate, a Purchaser
Material Adverse Effect.
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(a) The Purchaser has
timely filed all forms, reports, schedules, statements and other
documents, including any exhibits thereto, required to be filed or
furnished by the Purchaser with the SEC since January 1, 2018 under
the Exchange Act or the Securities Act, together with any
amendments, restatements or supplements thereto (the
“Purchaser SEC
Documents”). The Purchaser SEC Documents were prepared
in all material respects in accordance with the requirements of the
Securities Act, the Exchange Act, and the Sarbanes-Oxley Act, as
the case may be, and the rules and regulations thereunder. The
Purchaser SEC Documents did not at the time they were filed with
the SEC (except to the extent that information contained in any
Purchaser SEC Document has been or is revised or superseded by a
later filed Purchaser SEC Document, then on the date of such
subsequent filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. As used in this Section 6.13, the term
“file” shall be broadly construed to include any manner
in which a document or information is furnished, supplied or
otherwise made available to the SEC. The Purchaser is currently
eligible, and will use commercially reasonable efforts to maintain
eligibility, to use Form S-3 pursuant to General Instruction B.3.
for secondary offerings.
(b) As of their
respective dates, each of the Purchaser Financial Statements
(including, in each case, any notes thereto) complied as to form in
all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect
thereto, having been prepared in accordance with GAAP (except as
may be indicated in the notes thereto or, in the case of unaudited
interim financial statements, as may be permitted by the SEC on
Form 10-Q under the Exchange Act) applied on a consistent basis
during the periods involved (except as may be indicated in the
notes thereto) and each fairly presents, in all material respects,
the financial position, results of operations and cash flows of the
Purchaser and its consolidated Subsidiaries as at the respective
dates thereof and for the respective periods indicated therein. The
Purchaser has no off-balance sheet arrangements.
6.14 Absence of Certain Changes.
Since
September 30, 2020, (a) there has not been any Purchaser Material
Adverse Effect; and (b) the Purchaser has conducted its businesses
only in the ordinary course of business.
The
Purchaser acknowledges that it and its Representatives have
received access to such books and records, facilities, equipment,
contracts and other assets of the Acquired Companies which they and
their Representatives have desired or requested to review, and that
they and their Representatives have had full opportunity to meet
with the management of the Acquired Companies and to discuss the
business and assets of the Acquired Companies. The Purchaser
acknowledges and agrees that it has made its own inquiry and
investigation into, and, based thereon, has formed an independent
judgment concerning, the Acquired Companies and their respective
businesses and operations. Notwithstanding the foregoing or
anything else to the contrary in this Agreement, nothing in this
Agreement shall impair or limit any claim by Purchaser based upon
fraud.
Except
as provided in this Article VI, none of the Purchaser, Merger Sub,
or any of their respective Affiliates nor any of their respective
directors, managers, officers, employees, equity holders, partners,
members or representatives has made, or is making, any
representation or warranty whatsoever, express or implied, at law
or in equity, to the Sellers or their respective Affiliates, and
any such other representations or warranties are hereby disclaimed
by such Persons and no such Persons shall be liable in respect of
the accuracy or completeness of any information provided to the
Sellers.
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ARTICLE VII.
(a) From the date
hereof until the earlier of the Closing Date or the termination of
this Agreement in accordance with its terms, the Sellers shall (and
shall cause the Acquired Companies to) conduct the Business only in
the ordinary course (including the payment of accounts payable and
the collection of accounts receivable), consistent with past
practices, cause all Taxes of the Acquired Companies to be paid as
they become due, and shall not (and shall cause the Acquired
Companies not to) enter into any material transactions without the
prior written consent of the Purchaser or except as set forth on
Schedule 7.1(a),
and shall (and shall cause the Acquired Companies to) use their
commercially reasonable efforts to preserve intact their and the
Acquired Companies’ respective business relationships with
employees, clients, suppliers and other third parties.
(b) Without limiting
the generality of the foregoing, from the date hereof until the
earlier of the Closing Date or the termination of this Agreement in
accordance with its terms, without the Purchaser’s prior
written consent or as necessary to consummate any material
transaction set forth on Schedule 7.1(a), the Acquired
Companies shall not (and the Sellers shall cause the Acquired
Companies not to) undertake the following:
(i) amend, restate,
modify or supplement any of their Organizational
Documents;
(ii) amend
or modify (other than in the ordinary course of business consistent
with past practice), waive any rights under or provision of,
terminate prior to its scheduled expiration date, or otherwise
compromise in any way, any Material Contract; or enter into any
Contract that, if in effect as of the date hereof, would constitute
a Material Contract, other than Contracts in the ordinary course of
business consistent with past practice that do not obligate the
Acquired Company party thereto to make annual payments in excess of
$150,000 or have a term longer than three (3) years;
(iii) make
any capital expenditures in excess of $50,000 individually or
$250,000 in the aggregate;
(iv) sell,
lease, license or otherwise dispose of any Acquired Company’s
assets except sales of Inventory in the ordinary course of business
consistent with past practice;
(v) accept returns of
products sold from Inventory except in the ordinary course of
business, consistent with past practice;
(vi) pay,
declare, set aside, make or promise to pay any distributions with
respect to any Acquired Company’s Equity Interests, except as
contemplated on Schedule
7.1(b)(vi); or redeem, repurchase or otherwise acquire any
Equity Interests of any Acquired Company; or effect any
recapitalization, reclassification, or like changes in the
capitalization of any Acquired Company;
(vii) enter
into, amend, modify, or terminate any material employment,
independent contractor, consulting, deferred compensation or other
similar agreement with any director, officer, manager, employee, or
individual independent contractor or consultant (whether or not
doing business as an entity) of the Acquired Companies, or
authorize any salary increase or change the bonus or profit sharing
policies of the Acquired Companies;
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(viii) grant,
implement or adopt any retention, change-in-control or other
similar payments that are contingent on the recipient providing
continued services following the Closing or experiencing a
termination without cause following the Closing;
(ix) enter
into, amend, modify, or terminate any collective bargaining
agreement or other Contract with a Union;
(x) conduct or
implement any mass layoffs, plant closings, or other reductions in
force or measures that, when aggregated, would trigger a notice
obligation under the WARN Act;
(xi) conduct
or implement any salary or wage reductions, furloughs, reductions
in hours, group terminations, layoffs, or other measures affecting
employees of the Acquired Companies (whether or not arising out of
or related to COVID-19);
(xii) obtain
or incur any loan or other Indebtedness, except drawings under the
Acquired Companies’ existing lines of credit in the ordinary
course of business;
(xiii) create,
suffer or incur any Lien, except for Permitted Liens, on the
Transferred Equity Interests, Equity Interests of a Merged Entity,
or any Acquired Company’s assets;
(xiv) suffer
any damage, destruction or loss of property related to any Acquired
Company’s assets, whether or not covered by
insurance;
(xv) delay,
accelerate or cancel any receivables or Indebtedness owed to any
Acquired Company or write off or make further reserves against the
same;
(xvi) except
as set forth on Schedule
7.1(a), acquire in any manner any business or other Person
or be acquired by any other Person (whether by merger or
consolidation, the purchase or sale of an Equity Interest in or a
material portion of the assets of or otherwise);
(xvii) allow
any material insurance policy protecting any Acquired
Company’s assets to lapse;
(xviii) amend
any of its plans set forth in Section 4.29(a) or fail to
continue to make timely contributions thereto in accordance with
the terms thereof;
(xix) make
any change in its accounting principles or methods or write down
the value of any Inventory or assets;
(xx) change
the place of business or jurisdiction of organization of any
Acquired Company;
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(xxi) make
or extend any loans or advances (other than travel or other
expenses advanced to employees in the ordinary course of business
not to exceed $25,000 individually or $150,000 in the aggregate) or
any capital contributions to or investment in any
Person;
(xxii) issue,
sell, transfer, or otherwise dispose of any Equity Interests of any
Acquired Company (including any capital stock, membership interests
or other equity securities) or any securities exchangeable for or
convertible into any of its Equity Interests (including options,
warrants, rights of conversion or other rights, agreements,
arrangements, or commitments obligating any Acquired Company to
issue, deliver or sell any Equity Interests of any Acquired
Company);
(xxiii) initiate
any Actions or enter into, or propose to enter into, any releases,
settlements or compromises of any Actions;
(xxiv) effect
or agree to any material change in any practices or terms,
including payment terms, with respect to customers or suppliers
(including accelerating any accounts receivable or delaying any
accounts payable);
(xxv) make
or change any material Tax election, change any annual Tax
accounting periods, amend any Tax Return, prepare or file any Tax
Return materially inconsistent with past practice or, on any such
Tax Return, take any position, make any election, or adopt any
method that is materially inconsistent with positions taken,
elections made or methods used in preparing or filing similar Tax
Returns in prior periods (including materially inconsistent
positions, elections or methods that would have the effect of
deferring income to periods ending after the Closing Date or
accelerating deductions to periods ending on or before the Closing
Date); settle or otherwise compromise any material Claim relating
to Taxes, enter into any closing agreement or similar agreement
relating to Taxes, otherwise settle any material dispute relating
to Taxes, or request any ruling or similar guidance with respect to
Taxes;
(xxvi) other
than the Assignment Agreement, enter into any Contract or
arrangement between any Acquired Company, on the one hand, and any
Seller or Affiliate of any Seller, on the other hand;
or
(xxvii) agree
to do any of the foregoing.
(c) From
the date hereof until the earlier of the Closing Date or the
termination of this Agreement in accordance with its terms, the
Acquired Companies shall not (and the Sellers shall cause the
Acquired Companies not to) (i) take or agree to take any action
that might make any representation or warranty of the Sellers
regarding the Acquired Companies inaccurate or misleading in any
material respect at, or as of any time prior to, the Closing Date
or (ii) omit to take, or agree to omit to take, any action
necessary to prevent any such representation or warranty from being
materially inaccurate or misleading in any respect at any such
time.
7.2 Purchaser Conduct of Business.
(a) Except as consented
to by the Acquired Companies in writing (such consent not to be
unreasonably withheld, conditioned or delayed), during the period
commencing on the date hereof and concluding on the earlier to
occur of the Closing or the termination of this Agreement in
accordance with Section
12.1, the Purchaser shall not, and the Purchaser shall cause
its Subsidiaries (including Merger Sub) not to, except as otherwise
contemplated by this Agreement or as required by Law:
66
(i) take any action, to
change, modify or amend the Organizational Documents of the
Purchaser or any of its Subsidiaries, except as provided in the
Proxy Statement;
(ii) (A)
make or declare any dividend or distribution to the stockholders of
the Purchaser or make any other distributions in respect of any of
the Purchaser’s or any of its Subsidiaries’, share
capital or equity interests, (B) split, combine, reclassify or
otherwise amend any terms of any shares or series of the
Purchaser’s or any of its Subsidiaries’ equity
interests, or (C) purchase, repurchase, or otherwise acquire any
issued and outstanding share capital, outstanding shares of capital
stock, share capital or membership interests, warrants or other
equity interests of the Purchaser or any of its
Subsidiaries;
(iii) make,
change or revoke any material Tax election or adopt or change any
material Tax accounting method unless required by Law;
(iv) incur
or assume any Indebtedness (other than floor plan financing and
trade payables incurred in the ordinary course of business) or
guarantee any Indebtedness of another Person or issue or sell any
debt securities or securities convertible into an aggregate amount
of greater than Base Cash Consideration plus $5,000,000, provided
that, without duplication of any amounts raised pursuant to Section
7.2(a)(v), Purchaser may incur additional Indebtedness necessary to
fund the difference between $30,000,000 and actual cash and cash
equivalents delivered at Closing;
(v) issue any Purchaser
Common Stock or Purchaser Preferred Stock or securities exercisable
for or convertible into Purchaser Common Stock or Purchaser
Preferred Stock other than to existing holders of warrants, options
or convertible debt securities which exercise their rights to
receive Purchaser Common Stock or to finance the Base Cash
Consideration and working capital in a cash amount of not to exceed
$220,000,000, provided that, without duplication of any amounts
raised pursuant to Section 7.2(a)(iv), Purchaser may issue any
Purchaser Class B Common Stock necessary to fund the difference
between $30,000,000 and actual cash and cash equivalents delivered
at Closing; or
(vi) enter
into any agreement to do any action prohibited under this
Section
7.2.
(b) Prior to the
Closing, the Purchaser shall, and shall cause its Subsidiaries to
comply with, and continue performing under, as applicable, the
Purchaser’s and any Merger Sub’s Organizational
Documents, as applicable.
7.3 Access to Information.
From
the date hereof until the earlier of the Closing Date or the
termination of this Agreement in accordance with its terms, Sellers
shall (and shall cause the Acquired Companies to) (a) provide to
the Purchaser, its legal counsel and other Representatives
reasonable access to the offices, properties and Books and Records,
(b) furnish to the Purchaser, its legal counsel and other
Representatives such information relating to the Business as such
Persons may reasonably request and (c) cause the employees, legal
counsel, accountants and Representatives of the Acquired Companies
to reasonably cooperate with the Purchaser in its investigation of
the Business; provided that no investigation pursuant to this
Section (or any investigation prior to the date hereof) shall
affect any representation or warranty given by Sellers regarding
any Acquired Company or any Purchaser Indemnified Party’s
right to indemnification under this Agreement for breach thereof
and, provided further, that any investigation pursuant to this
Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the Business. Prior to the
Closing, Purchaser and its Representatives shall not contact or
communicate with the employees, contractors, customers, suppliers,
regulators and other business relations of any of the Acquired
Companies in connection with the transactions contemplated hereby
except (i) in connection with obtaining any Consent required in
connection with this Agreement or the transactions contemplated
hereby, or (ii) with the prior written consent of such Acquired
Company (which shall not be unreasonably withheld, conditioned or
delayed), provided that the Acquired Companies shall each have the
right to have a Representative present during any such contact in
the event that it consents to such contact.
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7.4 Notices
of Certain Events by Sellers.
The
Sellers shall promptly notify the Purchaser of:
(a) any notice or other
communication from any Person alleging or raising the possibility
that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement or that the
transactions contemplated by this Agreement might give rise to any
Action or other rights by or on behalf of such Person or result in
the loss of any rights or privileges of any Acquired Company (or
the Purchaser, post-Closing) to any such Person or create any Lien
on any Transferred Equity Interest, any Equity Interest in a
Purchased Company, any Equity Interest of a Merged Entity, or any
Acquired Company’s assets or liabilities;
(b) any notice or other
communication from any Authority in connection with the
transactions contemplated by this Agreement or the Additional
Agreements;
(c) any Actions
commenced or threatened against, relating to or involving or
otherwise affecting any Acquired Company, any Seller, the
Transferred Equity Interests, Equity Interests of a Merged Entity,
or any Acquired Company’s assets, liabilities, or the
Business or that relate to the consummation of the transactions
contemplated by this Agreement or the Additional
Agreements;
(d) the occurrence of
any fact or circumstance which constitutes or results, or might
reasonably be expected to constitute or result, in a Material
Adverse Change;
(e) the occurrence of
any fact or circumstance which results, or might reasonably be
expected to result, in any representation made hereunder by any
Seller to be false or misleading in any respect or to omit or fail
to state a material fact; and
(f) if it becomes aware
of any fact or condition that constitutes a breach of any
representation or warranty made in Article IV or Article V or any
covenant that would cause the conditions set forth in Section 9.2(a) or Section 9.2(b), as applicable,
not to be satisfied as of the Closing Date.
The
Acquired Companies have delivered to the Purchaser annual combined
audited financial statements for the twelve (12) month periods
ended December 31, 2018 and 2019, consisting of the audited
combined balance sheets as of such dates, the audited combined
income statements for the twelve (12) month periods ended on such
dates, the audited combined cash flow statements for the twelve
(12) month periods ended on such dates, and the corresponding notes
to such audited combined financial statements (the
“Annual Financial
Statements”). The Acquired Companies shall deliver to
the Purchaser, as soon as practicable, but in no event later than
April 15, 2021, annual combined audited financial statements for
the twelve (12) month period ended December 31, 2020, consisting of
the audited combined balance sheets as of such date, the audited
combined income statements for the twelve (12) month period ended
on such date, the audited combined cash flow statements for the
twelve (12) month period ended on such date, and the corresponding
notes to such audited combined financial statements (collectively,
the “2020 Annual
Financial Statements”). The 2020 Annual Financial
Statements shall be prepared under U.S. GAAP and in accordance with
requirements of the Public Company Accounting Oversight Board for
public companies, and the 2020 Annual Financial Statements shall be
audited in accordance with the standards of the Public Company
Accounting Oversight Board. After the date hereof and prior to the
Closing, in addition to the 2020 Annual Financial Statements, the
Acquired Companies shall provide the Purchaser with combined
interim financial information of the Acquired Companies no later
than forty (40) calendar days following the end of each three-month
quarter prepared under U.S. GAAP in accordance with requirements of
the Public Company Accounting Oversight Board for public companies
(together with the 2020 Annual Financial Statements, the
“Required Financial
Statements”) and the corresponding quarterly periods
for 2019 and 2020. If the Acquired Companies do not deliver the
Annual Financial Statements and the Required Financial Statements
as required by this Section 7.5, the Purchaser
shall have the right to terminate this Agreement in accordance with
Section 12.1(c)
hereof. The Annual Financial Statements and the Required Financial
Statements shall be accompanied by a certificate of Blake Lawson,
on behalf of the Acquired Companies, to the effect that all such
financial statements fairly present the financial position and
results of operations of the Acquired Companies as of the date or
for the periods indicated, prepared under U.S. GAAP in accordance
with requirements of the Public Company Accounting Oversight Board,
except as otherwise indicated in such statements and subject to
year-end audit adjustments (other than in the case of audited
financial statements). The Acquired Companies will promptly provide
additional financial information requested by the Purchaser for
inclusion in the Proxy Statement and any other filings to be made
by the Purchaser with the SEC. If requested by the Purchaser, such
information must be reviewed or audited by the Acquired
Companies’ auditors.
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7.6 Employees
of the Acquired Companies.
The
Principal Owners shall, as a condition to their continued
employment with the Acquired Companies and the closing of the
Transactions, execute and deliver to the Acquired Companies their
Employment Agreements prior to the Closing and such Employment
Agreements shall not have been repudiated, rescinded, modified or
terminated by the applicable Acquired Company or the applicable
individual party thereto as of the Closing. The Key Employees other
than the Principal Owners shall, as a condition to their continued
employment with the Acquired Companies and the closing of the
Transactions, execute and deliver to the Acquired Companies their
Employment Agreements prior to the Closing and such Employment
Agreements shall not have been repudiated, rescinded, modified or
terminated by the applicable Acquired Company or the applicable
individual party thereto as of Closing. The Acquired Companies
shall satisfy all accrued obligations of the Acquired Companies
applicable to its employees, whether arising by operation of Law,
by Contract, by past custom or otherwise, for payments by the
Acquired Companies to any trust or other fund or to any Authority,
with respect to, social security insurance benefits, unemployment
or disability compensation benefits or otherwise.
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(a) Non-Competition. Each Seller
agrees that, during the Restricted Period, such Seller shall not,
and shall cause such Seller’s Affiliates not to, (a) engage
directly or indirectly in the Restricted Business anywhere in the
Restricted Territory; or (b) directly or indirectly be or become an
officer, director, stockholder, owner, Affiliate, partner, member,
investor, joint venture, employee, agent, representative,
consultant, lender, advisor, manager of, for or to, or otherwise be
or become associated with or acquire or hold (of record,
beneficially or otherwise) any direct or indirect interest in, any
Person that engages directly or indirectly in the Restricted
Business anywhere in the Restricted Territory; provided, however,
that any Seller may, without violating this Section 7.7(a), own, as a
passive investment, shares of capital stock of a publicly-held
corporation that engages in the Restricted Business if (i) such
shares are actively traded on an established national securities
market in the United States or any other foreign securities
exchange, (ii) the number of shares of such corporation’s
capital stock that are owned beneficially (directly or indirectly)
by the applicable Seller and the number of shares of such
corporation’s capital stock that are owned beneficially
(directly or indirectly) by such Seller’s Affiliates
collectively represent less than one percent (1%) of the total
number of shares of such corporation’s capital stock
outstanding, and (iii) neither such Seller nor any Affiliate of
such Seller is otherwise associated directly or indirectly with
such corporation or with any Affiliate of such
corporation.
(b) Non-Solicitation of Customers and
Other Business Relations. During the Restricted Period, each
Seller shall not, and shall cause such Seller’s Affiliates
not to, directly or indirectly solicit, induce or attempt to induce
any Person who, during the preceding two-year period, has a
business relationship with the Acquired Companies, Purchaser, or
any of their Affiliates (including any customer, licensee,
supplier, manufacturer or vendor) (i) to cease doing business with
Purchaser, the Acquired Companies, or any of their Affiliates, or
(ii) to diminish or materially alter in a manner harmful to the
Purchaser, the Acquired Companies, or any of their Affiliates such
Person’s relationship with the Purchaser, the Acquired
Companies, or any of their Affiliates, or (iii) to purchase,
contract for or receive any products or services from any Person
(other than the Purchaser, the Acquired Companies, or any of their
Affiliates) that engages in the Restricted Business anywhere within
the Restricted Territory; provided, however, that nothing contained
in this Section
7.7(b) shall prevent any Seller from contracting with a
third party who has or had a business relationship with Purchaser,
any Acquired Company or their Affiliates if such contracting does
not adversely affect such third party’s business relationship
with the Purchaser, the Acquired Companies, or their
Affiliates.
(c) Hiring or Solicitation of Employees
and Contractors. Each Seller agrees that, during the
Restricted Period, such Seller shall not, and shall cause such
Seller’s Affiliates not to: (a) directly or indirectly hire
any employee, independent contractor, or consultant or any person
who was an employee, independent contractor, or consultant of the
Acquired Companies within the preceding six (6) months, or (b)
directly or indirectly encourage, induce, attempt to induce,
solicit or attempt to solicit (on such Seller’s own behalf or
on behalf of any other Person) any employee, independent
contractor, or consultant to leave or curtail his or her employment
or engagement with the Purchaser, the Acquired Companies, or any of
their Affiliates. Notwithstanding the foregoing, this Section 7.7(c) shall not
prevent any Seller from undertaking general solicitations of
employment not targeted at employees, independent contractors, or
consultants of the Purchaser, the Acquired Companies, or any of
their Affiliates (so long as the applicable Seller does not,
directly or indirectly, hire any such employee, independent
contractor, or consultant).
(d) Confidentiality. During the
Restricted Period, each Seller will keep confidential any
Confidential Information (as defined below) which is now or which
hereafter may become known to such Seller, as a result of such
Seller’s ownership interest in or employment with the
Acquired Companies, and shall not at any time during the Restricted
Period, directly or indirectly, disclose any such information to
any Person or use the same in any way other than in connection with
the business of Purchaser, the Acquired Companies, or their
Affiliates. “Confidential Information”
shall mean any proprietary or confidential information of the
Acquired Companies, including but not limited to any trade secrets,
confidential or secret designs, website technologies, content,
processes, formulae, plans, manuals, devices, machines, know-how,
methods, compositions, ideas, improvements, financial and marketing
information, costs, pricing, sales, sales volume, salaries, methods
and proposals, customer and prospective customer lists, customer
identities, customer volume, or customer contact information,
identity of key personnel in the employ of customers and
prospective customers, amount or kind of customer’s purchases
from the Acquired Companies, manufacturer lists, manufacturer
identities, manufacturer volume, or manufacturer contact
information, identity of key personnel in the employ of
manufacturers, amount or kind of the Acquired Companies’
purchases from manufacturers, system documentation, hardware,
engineering and configuration information, computer programs,
source and object codes (whether or not patented, patentable,
copyrighted or copyrightable), related software development
information, inventions or other confidential or proprietary
information belonging to the Acquired Companies or directly or
indirectly relating to the Acquired Companies’ business and
affairs. Notwithstanding the foregoing, the restrictions set forth
herein shall not be applicable to any information which (i) is or
becomes generally available to the public other than as a result of
a disclosure by any Seller, or (ii) becomes available to the
applicable Seller on a non-confidential basis from a source other
than Purchaser, the Acquired Companies, or their Affiliates or any
of their respective officers, directors, agents or employees,
provided that the source of such information is not known by such
Seller to be bound by a confidentiality agreement with or other
obligation of secrecy to Purchaser, the Acquired Companies, or
their Affiliates or another party.
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(e) Non-Disparagement. During the
Restricted Period, each Seller shall not, and shall cause such
Seller’s Affiliates not to, directly or indirectly disparage
the Purchaser, the Acquired Companies, or their Affiliates in any
way that would adversely affect the goodwill, reputation, or
business relationships of Purchaser, the Acquired Companies, or its
their Affiliates with the public generally, or with any customer,
manufacturer, client, employee, independent contractor, supplier,
licensee, advertiser or vendor of Purchaser, the Acquired
Companies, or any of their Affiliates, with the intent to harm such
Person or relationship, provided that no Seller shall be prevented
from providing true testimony to the extent determined by counsel
is required by any legal proceeding (or in any discovery in
connection therewith) or investigation by a governmental
authority.
(f) Additional Definitions. As used
in this Section
7.7, the following terms shall have the meanings set forth
in this Section
7.7(f):
(i) “Restricted Business”
shall mean (i) the sale, leasing, rental, financing, servicing
(including supply of parts) and ancillary activities relating to
new and used motorcycles, ATVs, UTVs, scooters, side by sides,
sport bikes, two- and three-wheeled cruisers, powered watercraft,
and other motorized water- and land-based vehicles and any other
business conducted or proposed to be conducted by the Acquired
Companies as of the Closing Date and (ii) the business conducted by
the Purchaser, the Acquired Companies, and their Affiliates as of
the Closing, provided that the ownership and operation of Persons
in the principal business of retail (but not wholesale) automobile
sales or leasing shall not be deemed a Restricted
Business.
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(ii) “Restricted
Period” means (i) for the Sellers listed on Schedule
7.7(f)(i), the three (3) year period beginning on the Closing Date;
and (ii) for the Sellers listed on Schedule 7.7(f)(ii), the two (2)
year period beginning on the Closing Date; provided, however, that
in the event of any breach on the part of any Seller of any
provision of this Section
7.7, the Restricted Period applicable to such Seller shall
be automatically extended by a number of days equal to the total
number of days in the period from the date on which such breach
shall have first occurred through the date as of which such breach
shall have been fully cured.
(iii) “Restricted
Territory” means Alabama, Alaska, Arizona, Arkansas,
California, Colorado, Connecticut, Delaware, Florida, Georgia,
Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire,
New Jersey, New Mexico, New York, North Carolina, North Dakota,
Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina,
South Dakota, Tennessee, Texas, Utah, Vermont, Virginia,
Washington, West Virginia, Wisconsin, Wyoming, and each territory
of the United States, including Washington, D.C.
(g) Other Terms.
(i) Reasonableness and Relief.
Sellers acknowledge that the restrictions contained in this
Agreement are a material and substantial part of the Transaction
contemplated by this Agreement (supported by adequate
consideration), and are fair, reasonable and necessary for the
protection of the Purchaser’s and the Acquired
Companies’ legitimate business interests. Each Seller further
acknowledges that: (a) each Seller is deriving substantial economic
benefit from the sale of equity in the Acquired Companies to
Purchaser in connection with the Transaction; (b) each Seller is
entering into this Agreement solely in connection with the sale of
equity in the Acquired Companies and not in connection with any
contemplated employment with Purchaser or any of its Affiliates;
and (c) a breach of any of such covenants or any other provision of
this Section 7.7
will result in irreparable harm and damage to the Purchaser, the
Acquired Companies, or their Affiliates that cannot be adequately
compensated by a monetary award. Accordingly, it is expressly
agreed that in addition to all other remedies available at law or
in equity (including, without limitation, money damages from any
Seller), Purchaser shall be entitled to a temporary restraining
order, preliminary injunction or such other form of injunctive or
equitable relief as may be used by any court of competent
jurisdiction to restrain or enjoin any Seller from breaching any
such covenant or provision or to specifically enforce the
provisions hereof, without the need to post any bond or other
security. Purchaser and the Sellers agree that each Seller shall be
severally liable for any such Seller’s breach of the
provisions of this Section
7.7, and shall not be jointly liable for any other
Seller’s breach of this Section 7.7 except to the
extent such non-breaching Seller contributed in some way to or
conspired with the breaching Seller with respect to such other
Seller’s breach of this Section 7.7.
(ii) Independence
of Obligations. Sellers’ obligations under this
Section 7.7 are
absolute and shall not be terminated or otherwise limited by virtue
of any breach (on the part of Purchaser, the Acquired Companies,
any of their Affiliates or any other Person) of any other provision
of this Agreement or any other agreement, or by virtue of any
failure to perform or other breach of any obligation of Purchaser,
the Acquired Companies, any of their Affiliates or any other
Person. In addition, the covenants and obligations of each Seller
set forth in this Section
7.7 shall be construed as independent of any other agreement
or arrangement between each Seller, on the one hand, and Purchaser,
the Acquired Companies, or any of their Affiliates, on the other
hand, and except as otherwise required by law, the existence of any
claim or cause of action by any Seller against Purchaser, the
Acquired Companies, or any of their Affiliates shall not constitute
a defense to the enforcement of the covenants or obligations in
this Section 7.7
against such Seller.
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(iii) Advice
of Counsel. Each Seller acknowledges that it has either been
represented by independent legal counsel or that it has waived its
right to obtain advice of legal counsel in connection with the
transactions contemplated by this Agreement.
(iv) Specific
Performance. The Sellers agree that irreparable damage would
occur in the event that any of the provisions of this Section 7.7 were not performed
in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that Purchaser shall be entitled to an
injunction or injunctions to prevent breaches of this Section 7.7 and to enforce
specifically the terms and provisions of this Section 7.7 in the Chancery
Court of the State of Delaware or any federal court sitting in the
State of Delaware, without bond or other security being required,
this being in addition to any other remedy to which they are
entitled at law or in equity.
7.8 Tax Matters.
(a) The Parties hereto
do hereby acknowledge and agree that the Tax treatment of the
acquisition of the Acquired Companies shall be as
follows:
(i) With respect to any
Acquired Company treated as a partnership for U.S. federal income
tax purposes:
(A) If
100% of the Equity Interests of the Acquired Company are being
acquired, under the principles set forth in Revenue Ruling 99-6
(Situation 2), the purchase and sale of all the Equity Interests
shall be treated for federal and applicable state and local income
Tax purposes as follows: (A) from the Sellers’ perspective,
such transaction shall be treated as a sale of each Seller’s
respective Equity Interests to the Purchaser, and (B) from the
Purchaser’s perspective, such transaction shall be treated as
a purchase of a proportionate, undivided interest in the assets of
the relevant Acquired Company from each Seller.
(B) If
less than 100% of the Equity Interests of the Acquired Company are
being acquired, the purchase and sale of the Equity Interests shall
be treated for federal and applicable state and local income Tax
purposes as the purchase and sale of each Seller’s respective
Equity Interests.
(ii) The
purchase and sale of the interests in any Acquired Company that is
treated as a disregarded entity for U.S. federal income tax
purposes shall be treated for U.S. federal and applicable state and
local income Tax purposes as the purchase and sale of the assets of
such Acquired Company.
Each of
the Parties hereto shall act consistently with the provisions of
this Agreement and such intended Tax treatment at all times and for
all purposes, including for purposes of reporting the transactions
contemplated by this Agreement to the IRS and any other state or
local taxing authority having jurisdiction over the transactions
contemplated by this Agreement. The Purchaser and the Sellers
further agree not to take any position on any Tax Return or in any
administrative or judicial proceeding with respect to any such Tax
Return inconsistent with such treatment. The Sellers shall not
cause or permit the Sellers’ Representative to knowingly or
voluntarily file any other income or informational Tax Return or
statement inconsistent with the provisions of this Agreement. At
least 30 days prior to the Closing Date, the Purchaser and the
Sellers shall agree on the form of the Purchase Price Allocation
Schedule (as defined below) and the principles on which such
allocations shall be made (the “Purchase Price Allocation
Principles”). Furthermore, within 90 days after the
Closing Date, the Purchaser shall allocate the Purchase Price among
the Acquired Companies and, with respect to each Acquired Company,
among the assets of such Acquired Company (the “Purchase Price Allocation
Schedule”). The Purchase Price Allocation Schedule
will be (i) subject to Sellers’ Representative’s review
and reasonable comment, (ii) prepared in accordance with the
Purchase Price Allocation Principles and applicable provisions of
the Code. The Purchaser, the applicable Acquired Companies, and the
Sellers will file all Tax Returns and applicable Tax forms (and
cause their respective Affiliates to file all Tax Returns and
forms) consistently with the Purchase Price Allocation Schedule (as
appropriately adjusted) and will not take any position during the
course of any audit or other legal proceeding that is inconsistent
with such election, forms or schedule, unless required by a
determination of the applicable Taxing Authority that is
final.
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(b) The Sellers shall
properly prepare or cause to be properly prepared and timely file
or cause to be timely filed at the sole expense of the Sellers all
income Tax Returns and other material Tax Returns of the Acquired
Companies for any period (any such period, a “Pre-Closing Tax Period”)
ending on or prior to the Closing Date, including the final Form
1065 partnership return for the tax period ending on the Closing
Date for any Acquired Company treated as a partnership for U.S.
federal income tax purposes (each, a “Pre-Closing Tax Return”
and, collectively, the “Pre-Closing Tax
Returns”). Such Pre-Closing Tax Returns shall be
prepared in accordance with past practice with respect to the
relevant Acquired Companies, unless otherwise required by
applicable Law. The Sellers’ Representative shall deliver, at
least 30 days prior to the due date for the filing of each such Tax
Return (taking into account extensions), to the Purchaser a copy of
each such Tax Return. The Purchaser shall have the right to review
and make reasonable comments on such Tax Returns. The
Sellers’ Representative and the Purchaser agree to consult
and resolve in good faith any issue arising as a result of the
review of such Tax Returns prior to the date on which such Tax
Returns are required to be filed. In the event that the
Sellers’ Representative and the Purchaser are unable to
resolve any such issue, the issue shall be referred to the
Independent Accountants in accordance with Section 3.3(e). The costs and
expenses of the Independent Accountants shall be borne in
accordance with Section
3.3(f). The Sellers shall pay or cause to be paid all Taxes
due with respect to the periods covered by such Pre-Closing Tax
Returns.
(c) The Purchaser shall
prepare and timely file, or cause to be prepared and timely filed,
all Tax Returns of the Acquired Companies other than Pre-Closing
Tax Returns, including all Tax Returns for any Tax period which
begins before the Closing Date and which ends on (and including)
the Closing Date (any such period, a “Straddle Period,” and any
such Tax Return, a “Straddle Return”). For
purposes of determining the amount of Taxes allocable to the
portion of the Straddle Period ending on (and including) the
Closing Date, (i) in the case of any Taxes (other than Taxes based
upon or related to income, revenue, receipts, or sales) that are
imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of
such Tax which relates to the portion of the Straddle Period ending
on (and including) the Closing Date shall be deemed to be the
amount of such Tax for the entire taxable period multiplied by a
fraction the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of
which is the number of days in such Straddle Period (the
“Pre-Closing
Portion”); and (ii) in the case of any Taxes based
upon or related to income or receipts (and sales and use tax), be
deemed equal to the amount which would be payable if the relevant
Tax period ended on the Closing Date.
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(d) With respect to any
Tax Return to be filed by any of the Acquired Companies for a
Straddle Period, the Purchaser shall deliver, at least 30 days
prior to the due date for the filing of each such Tax Return
(taking into account extensions), to Sellers’ Representative
a statement setting forth the amount of the Pre-Closing Portion of
such Taxes and a copy of each such Tax Return. The Sellers’
Representative shall have the right to review and make reasonable
comments on such Tax Returns. The Sellers’ Representative and
the Purchaser agree to consult and resolve in good faith any issue
arising as a result of the review of such Tax Returns and
statements prior to the date on which such Tax Returns are required
to be filed. In the event that the Sellers’ Representative
and the Purchaser are unable to resolve any such issue, the issue
shall be referred to the Independent Accountants in accordance with
Section 3.3(e). The
costs and expenses of the Independent Accountants shall be borne in
accordance with Section
3.3(f). The Sellers shall pay or cause to be paid all Taxes
due that are allocable to the portion of the Straddle Period ending
on (and including) the Closing Date.
(e) Each income Tax
Return of an Acquired Company that is a partnership for U.S.
federal Tax purposes that includes the Closing Date shall contain a
valid election under Section 754 of the Code. Each Acquired
Company’s income Tax Return shall, to the extent allowable
under the Code or Treasury Regulations (including, but not limited
to, under Code Sections 706 and 1377, and Regulations Section
1.1368-1), elect to use the “closing of the books”
method to allocate income of a Straddle Period.
(f) The Purchaser, the
Sellers, the Sellers’ Representative and each of the Acquired
Companies shall cooperate fully, as and to the extent reasonably
requested by the other Party, in connection with the preparation
and filing of Tax Returns pursuant to this Section 7.8. Such cooperation
shall include the retention and (upon the other Parties’
request) the provision of records and information which are
reasonably relevant to the preparation and filing of any such Tax
Return. The Purchaser and the Sellers shall (i) retain all books
and records with respect to Tax matters pertinent to the Acquired
Companies relating to any taxable period beginning before the
Closing Date until the expiration of the applicable statute of
limitations of the respective taxable periods, and abide by all
record retention agreements entered into with any Taxing Authority
and (ii) give the other Party reasonable written notice prior to
transferring, destroying or discarding any such books and records
and, if the other Party so requests, the Acquired Companies, the
Purchaser or the Sellers, as the case may be, shall allow the other
Party to take possession of such books and records.
(g) Within fifteen (15)
Business Days after the any of the Acquired Companies’ or any
Seller’s receipt of a notice of audit, assessment or other
proceeding respecting an item or items set forth on a Pre-Closing
Tax Return for which the Sellers are solely responsible pursuant to
this Section 7.8,
the Sellers may elect, so long as the Sellers have an obligation to
indemnify the Purchaser or the Acquired Companies hereunder with
respect to such audit, by written notice to the Purchaser, to
contest the audit or assessment in the name of such Acquired
Company. If the Sellers so elect, they shall be solely responsible
for the defense of the item or items at issue, except that the
Purchaser agrees to cooperate, and the Purchaser will cause the
relevant Acquired Company to cooperate, in the contest of such
audit or assessment by making relevant documents and employees
available to the Sellers, and to execute such documents (including
powers of attorney) as may be reasonably necessary to allow the
Sellers to conduct the defense. The Sellers shall bear all costs
relating to such defense. If the Sellers elect to conduct a
defense, the Sellers shall keep the Purchaser informed of the
progress of such audit; shall obtain the prior written consent of
the Purchaser before agreeing to any adjustment or settlement, such
consent not to be unreasonably withheld, conditioned or delayed;
shall not make any Tax election or take any other action that will
or may create an increase in Taxes for any of the Acquired
Companies or the Purchaser in respect of any period ending after
the Closing Date; and shall promptly indemnify the Purchaser and/or
the Acquired Companies, and hold the Purchaser and/or the Acquired
Companies harmless against, any such increase that
occurs.
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(h) Sellers and
Purchaser agree to cause each Acquired Company that is (or was)
treated as a partnership for Tax purposes, to the greatest extent
allowable under Law, to make a Code Section 6226
“push-out” election for any adjustment with respect to
any Tax period that began before the Closing Date such that the
Acquired Company will not be liable for the Tax attributable to the
adjustment.
(i) All transfer,
documentary, sales, use, stamp, registration, conveyance or similar
Taxes or charges arising out of the transactions contemplated
hereby and all charges for or in connection with the recording of
any document, instrument or certificate contemplated hereby shall
be paid 100% by the Purchaser if and when due. The Sellers will
file all necessary Tax Returns and other documentation in
connection with the Taxes and charges encompassed in this
Section 7.8(g), and
the costs of preparing and making such filing shall be paid 50% by
the Purchaser and 50% by the Sellers if and when due.
7.9 Section 280G Approval.
The
Acquired Companies, as applicable, shall (a) no later than ten (10)
Business Days prior to the Closing Date, solicit from each
“disqualified individual” (within the meaning of
Section 280G(c) of the Code) who would otherwise be entitled to
receive any payment or benefits that would constitute a
“parachute payment” (within the meaning of Section
280G(b)(2)(A) of the Code) a waiver of such disqualified
individual’s rights to some or all of such payments or
benefits (the “Waived 280G Benefits”) so
that all remaining payments and/or benefits, if any, shall not be
deemed to be “excess parachute payments” (within the
meaning of Section 280G of the Code) and (b) no later than five (5)
Business Days prior to the Closing Date, with respect to each
individual who agrees to the waivers described in clause (a),
submit to a vote in accordance with Section 280G(b)(5)(B)(i) of the
Code and the regulations promulgated thereunder (along with
adequate disclosure satisfying the requirements of Section
280G(b)(5)(B)(ii) of the Code and the regulations promulgated
thereunder) the right of any such “disqualified
individual” to receive the Waived 280G Benefits (the
“280G
Vote”). The Acquired Companies shall provide drafts of
such waivers and approval materials, and any related calculations,
to the Purchaser for its reasonable review and approval (which
approval will not be unreasonably withheld, conditioned or delayed)
no later than five (5) Business Days prior to soliciting such
waivers and soliciting such approval. If any of the Waived 280G
Benefits fail to be approved as contemplated above, such Waived
280G Benefits shall not be made or provided. Prior to the Closing,
the Acquired Companies shall deliver to the Purchaser evidence
reasonably acceptable to the Purchaser that a 280G Vote was
solicited in accordance with the foregoing provisions of this
Section 7.9 and that either (i) the requisite number of votes of
the Acquired Companies’ equityholders was obtained with
respect to the Waived 280G Benefits in accordance with Section
280G(b)(5)(B)(i) of the Code and the regulations promulgated
thereunder (the “280G Approval”) or (ii)
the 280G Approval was not obtained, and, as a consequence, the
Waived 280G Benefits shall not be made or provided.
Sellers
shall, and shall cause each of the Acquired Companies to, take all
necessary actions to ensure that, except as set forth on
Schedule
2.6(b)(viii), all Related Party Transactions are terminated
at or prior to the Closing, with no further liability or other
Losses to the Purchaser and its Affiliates (including the Acquired
Companies) with respect thereto.
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7.11 Employee
Matters.
(a) Each employee of
the Acquired Companies or any of their Subsidiaries whose
employment is not terminated prior to the Closing shall continue in
employment with the Purchaser and its Affiliates (including the
Acquired Companies or any of their Subsidiaries) immediately
following the Closing (such employees, the “Continuing Employees”),
subject to the Acquired Companies’ right to terminate such
employment at any time.
(b) Effective as of the
Closing, the Purchaser and its Affiliates shall recognize, or shall
cause the Acquired Companies and their Subsidiaries to recognize,
each Continuing Employee’s employment or service with the
Acquired Companies or any of the Acquired Companies’
Subsidiaries (including any current or former Affiliate thereof or
any predecessor of the Acquired Companies or any of their
Subsidiaries) prior to the Closing for purposes of determining, as
applicable, eligibility for participation, vesting and entitlement
of the Continuing Employee under any 401(k) or vacation plans
maintained by the Acquired Companies, their Subsidiaries, the
Purchaser, except to the extent such recognition would result in a
duplication of benefits. In addition, and without limiting the
generality of the foregoing, effective as of the Closing and
thereafter, the Purchaser and its Affiliates shall, or shall cause
the Acquired Companies and their Subsidiaries to, make commercially
reasonable efforts to, if administratively feasible and permitted
by Law, (i) cause any pre-existing conditions or limitations,
eligibility waiting periods, actively at work requirements,
evidence of insurability requirements or required physical
examinations under any health or similar plan of the Acquired
Companies, their Subsidiaries, the Purchaser or an Affiliate of the
Purchaser to be waived with respect to Continuing Employees and
their eligible dependents (the Purchaser, that, in the case of any
insured arrangements, subject to the consent of the applicable
insurer and the Purchaser’s commercially reasonable efforts
to obtain such consent) under a Purchaser group health plan, except
to the extent that any waiting period, exclusions or requirements
still applied to such Continuing Employee under the comparable
Company benefit plan in which such Continuing Employee participated
immediately before the Closing, and (ii) fully credit each
Continuing Employee with all deductible payments, co-payments and
other out-of-pocket expenses incurred by such Continuing Employee
and his or her covered dependents under the medical, dental,
pharmaceutical or vision benefit plans of the Acquired Companies or
any of the Acquired Companies’ Subsidiaries prior to the
Closing during the plan year in which the Closing occurs for the
purpose of determining the extent to which such Continuing Employee
has satisfied the deductible, co-payments, or maximum out-of-pocket
requirements applicable to such Continuing Employee and his or her
covered dependents for such plan year under any medical, dental,
pharmaceutical or vision benefit plan of the Acquired Companies,
its Subsidiaries, the Purchaser or an Affiliate of the Purchaser,
as if such amounts had been paid in accordance with such plan (the
Purchaser, that, in the case of any insured arrangements, subject
to the consent of the applicable insurer and the Purchaser’s
commercially reasonable efforts to obtain such
consent).
(c) (i) Nothing in this
Section 7.11 shall
be treated as an amendment of any Plan (or an undertaking to amend
any such Plan or any other plan or arrangement), (ii) nothing in
this Section 7.11
will prohibit Purchaser or any of its Affiliates (including,
following the Closing, the Acquired Companies or any of their
Subsidiaries) from amending, modifying or terminating any Plan
pursuant to, and in accordance with, the terms thereof, (iii)
nothing in this Section
7.11 will confer upon any current or former employee,
officer, director or consultant, any right to employment or
continued employment or continued service with Purchaser, the
Acquired Companies or any of their Subsidiaries or Affiliates, or
constitute or create an employment agreement with any Person, and
(iv) nothing in this Section 7.11 shall confer any
rights or benefits on any Person other than Purchaser and
Sellers.
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7.12 Notices
of Certain Events by Purchaser.
The
Purchaser shall promptly notify the Sellers Representative
of:
(a) any notice or other
communication from any Person alleging or raising the possibility
that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement or that the
transactions contemplated by this Agreement might give rise to any
Action or other rights by or on behalf of such Person or result in
the loss of any rights or privileges of any Seller;
(b) any notice or other
communication from any Authority in connection with the
transactions contemplated by this Agreement or the Additional
Agreements;
(c) any Actions
commenced or threatened against, relating to or involving or
otherwise affecting Purchaser that relate to the consummation of
the transactions contemplated by this Agreement or the Additional
Agreements;
(d) the occurrence of
any fact or circumstance which results, or might reasonably be
expected to result, in any representation made hereunder by
Purchaser to be false or misleading in any respect or to omit or
fail to state a material fact; and
(e) if it becomes aware
of any fact or condition that constitutes a breach of any
representation or warranty made in Article VI or any covenant that
would cause the conditions set forth in Section 9.3, not to be
satisfied as of the Closing Date.
ARTICLE VIII.
(a) Subject to the
terms and conditions of this Agreement, from the date hereof until
the earlier of the termination of this Agreement and the Closing
Date, the Parties hereto shall use their commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement
(including the satisfaction, but not waiver, of the Closing
conditions set forth in Article IX), and in the case of
the Acquired Companies, all things as reasonably requested by the
Purchaser. The Parties hereto shall execute and deliver, or cause
to be executed and delivered, such other documents, certificates,
agreements and other writings and take such other actions as may be
reasonably necessary or desirable in order to consummate or
implement expeditiously each of the transactions contemplated by
this Agreement. Without limiting the generality of the foregoing,
the Acquired Entities shall use their commercially reasonable
efforts to obtain each third-party consent required under this
Agreement as promptly as practicable hereafter, and the Principal
Owners shall use reasonable efforts to expeditiously cause all
Persons owning Equity Interests of the Acquired Companies to
execute a Seller Joinder.
(b) In furtherance and
not in limitation of this Section 8.1(b), to the extent
required under any Laws that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or
restraint of trade, including the Sherman Antitrust Act, as
amended, the Clayton Antitrust Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other federal,
state or foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other Laws that are
designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of
trade or lessening of competition through merger and acquisition
(“Antitrust
Laws”), each Party hereto agrees to promptly make any
required filing or application under Antitrust Laws, as applicable.
The applicable filing fees with respect to any and all
notifications required under the HSR Act in order to consummate the
transactions contemplated hereby shall be paid 100% by the
Purchaser when due. The Parties hereto agree to supply as promptly
as reasonably practicable any additional information and
documentary material that may be requested pursuant to Antitrust
Laws and to take all other actions reasonably necessary, proper or
advisable to cause the expiration or termination of the applicable
waiting periods or obtain required approvals, as applicable under
Antitrust Laws as soon as practicable, including by requesting
early termination of the waiting period provided for under the HSR
Act. Each Party shall, in connection with its efforts to obtain all
requisite approvals and authorizations for the Transactions under
any Antitrust Law, use its commercially reasonable efforts to: (i)
cooperate in all respects with each other Party or its Affiliates
in connection with any filing or submission and in connection with
any investigation or other inquiry, including any proceeding
initiated by a private Person; (ii) keep the other Parties
reasonably informed of any communication received by such Party or
its Representatives from, or given by such Party or its
Representatives to, any Authority and of any communication received
or given in connection with any proceeding by a private Person, in
each case regarding any of the Transactions; (iii) permit a
Representative of the other Parties and their respective outside
counsel to review any communication given by it to, and consult
with each other in advance of any meeting or conference with, any
Authority or, in connection with any proceeding by a private
Person, with any other Person, and to the extent permitted by such
Authority or other Person, give a Representative or Representatives
of the other Parties the opportunity to attend and participate in
such meetings and conferences; (iv) in the event a Party’s
Representative is prohibited from participating in or attending any
meetings or conferences, the other Parties shall keep such Party
promptly and reasonably apprised with respect thereto; and (v) use
commercially reasonable efforts to cooperate in the filing of any
memoranda, white papers, filings, correspondence or other written
communications explaining or defending the transactions
contemplated hereby, articulating any regulatory or competitive
argument, and/or responding to requests or objections made by any
Authority.
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(c) No Party hereto
shall take any action that could reasonably be expected to
adversely affect or materially delay the approval of any Authority
of any required filings or applications under Antitrust
Laws.
(d) Each Party shall
cooperate in good faith and shall use their respective reasonable
best efforts to obtain the approval to the extent required by
applicable Law or Contract by each Factory of and appointment of
the Purchaser as an authorized dealer of each applicable
Factory’s products. The Sellers shall, or shall cause the
Acquired Companies to, provide notices to the respective Factory
that this Agreement has been entered into within two (2) days of
the date hereof but in no event before the Purchaser has filed a
Form 8-K disclosing the execution of this Agreement. Sellers shall,
and shall cause the Acquired Companies to, cooperate with Purchaser
in preparing applications to the Factories, including providing
documents reasonably requested by Purchaser and facilitating any
inspection of any Owned Real Property or Leased Real Property to
the extent necessary in connection with such application. In
connection with such applications to the Factories, Purchaser shall
use its reasonable best efforts to cause, or assist Sellers to
cause, all Sellers to be removed from all guarantees,
indemnification arrangements and other hold harmless arrangements,
in each case, made or provided by Sellers at the request or for the
benefit of an Acquired Company or its operations. Moreover,
Purchaser shall indemnify and hold each such Seller from any and
all Losses incurred thereunder after the Transaction Effective Time
for matters occurring after the Transaction Effective Time. Each of
Sellers’ Representative, on behalf of the Sellers and
Acquired Companies, and Purchaser shall keep the other party
reasonably informed as to the status of the application process
with each Factory and any communications therefrom. In the event a
Factory disapproves Purchaser’s application to operate any
location operated by an Acquired Company, fails to provide consent
to the Transaction contemplated hereby, or refuses to enter into a
new dealer agreement appointing Purchaser as an authorized dealer
of such Factory’s products at the applicable location
operated by an Acquired Company, then Sellers shall cause the
applicable Acquired Company to file a protest and challenge the
Factory’s action in order to consummate the Transactions as
promptly as practicable, and if approved in writing in advance by
Purchaser including pursuing all administrative and court
proceedings and appeals at Purchaser’s sole cost and expense;
provided that the Sellers shall not be required to pursue any
administrative or court proceedings if the Purchaser does not agree
to reimburse Sellers’ reasonable expenses incurred in
connection therewith at any stage in the proceedings; and provided
further that Seller shall not be obligated to continue to protest
and challenge any Factory’s action after July 31,
2021.
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8.2 Cooperation
with Proxy Statement and Other Filings.
(a) As promptly as
practicable after the date hereof, the Purchaser shall file with
the SEC a proxy statement relating to the Transactions (as amended
or supplemented from time to time, the “Proxy Statement”), all in
accordance with and as required by the Certificate of
Incorporation, applicable law, and any applicable rules and
regulations of the SEC and Nasdaq.
(b) Without limitation,
in the Proxy Statement, the Purchaser shall seek, in accordance
with the Certificate of Incorporation and applicable securities
laws, rules and regulations, including the NRS and rules and
regulations of Nasdaq, from the holders of the Purchaser Common
Stock: (A) approval of this Agreement and the Transactions,
including the approval, for purposes of complying with applicable
listing rules of the Nasdaq, of the issuance of $175,000,000 of
Purchaser Class B Common Stock as provided for herein in connection
with the consummation of the Transactions, (B) adoption of the
Equity Incentive Plan, (C) amend Certificate of Incorporation of
Purchaser to increase the number of shares of authorized Class B
Common Stock to 100,000,000 Shares, and (D) approval to obtain any
and all other approvals necessary or advisable to effect the
consummation of the Transactions (including a proposal to adjourn
any meeting at which approval of the Purchaser Proposals (as
defined below) for the purposes of soliciting additional proxies to
approve the Purchaser Proposals, if necessary, the proposals set
forth in the forgoing clauses (A) through (D), are referred to as
the “Purchaser
Proposals”).
(c) As soon as
practicable after the Proxy Statement is “cleared” by
the SEC, the Purchaser shall cause the Proxy Statement to be
disseminated to holders of shares of Purchaser Class B Common
Stock.
(d) Except with respect
to the information provided by the Acquired Companies for inclusion
in the Proxy Statement and the Financing Documents, the Purchaser
shall ensure that, when filed, the Proxy Statement and the
Financing Documents will comply in all material respects with the
requirements of United States federal securities laws and the rules
and regulations of the SEC promulgated thereunder or otherwise (the
“Federal Securities
Laws”), the NRS and the Nasdaq rules. The Acquired
Companies shall promptly provide to the Purchaser such information
concerning the Acquired Companies, any of its Subsidiaries and the
Sellers as is either required by the Federal Securities Laws or
reasonably requested by the Purchaser for inclusion in the Proxy
Statement and the Financing Documents, including, if applicable,
the Company Financial Statements and the Required Financial
Statements (“Company
Information”). Subject to the Acquired
Companies’ review and approval of the Proxy Statement and the
Financing Documents, including Company Information and the consent
of the Acquired Companies’ auditor to the inclusion of the
Company Financial Statements and Required Financial Statements in
the Proxy Statement and the Financing Documents (in each case, such
approval or consent not to be unreasonably withheld, conditioned or
delayed), the Acquired Companies acknowledge and agree that Company
Information (including the Company Financial Statements and the
Required Financial Statements), or summaries thereof or extracts
therefrom, may be included in the Proxy Statement, the Financing
Documents, and any other filings required under the Exchange Act,
Securities Act or any other United States federal, foreign or blue
sky laws (“Other
Filings”). In connection therewith, the Acquired
Companies shall instruct the employees, counsel, financial
advisors, auditors, and other authorized representatives of the
Acquired Companies to reasonably cooperate with the Purchaser as
relevant if required to achieve the foregoing.
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(e) The Purchaser shall
provide copies of the proposed forms of the Financing Documents
(including any amendments or supplements thereto) to the Acquired
Companies and their representatives as soon as practicable such
that the Acquired Companies and their representatives are afforded
a reasonable amount of time prior to the dissemination or filing
thereof to review such material and comment thereon, and the
Purchaser shall reasonably consider in good faith any comments of
such Persons. The Purchaser and the Acquired Companies shall
promptly correct any information provided by them for use in the
Financing Documents if and to the extent that such information
shall have become false or misleading in any material respect or as
otherwise required by the Federal Securities Laws. The Purchaser
shall provide the Acquired Companies with copies of all written
comments, and shall inform the Acquired Companies of any material
oral comments, that the Purchaser or any of its representatives
receive from the SEC or its staff with respect to the Financing
Documents promptly after the receipt of such comments and shall
give the Acquired Companies and its representatives a reasonable
opportunity prior to responding thereto to review and comment on
any proposed written or material oral responses to such comments.
The Purchaser shall reasonably consider in good faith any such
comments of such Persons. The Purchaser shall use commercially
reasonable efforts to “clear” comments from the SEC and
its staff with respect to the Financing Documents and to permit the
Acquired Companies to participate with the Purchaser or its
representatives in any discussions or meetings with the SEC and its
staff regarding the Financing Documents. The Acquired Companies
shall, and shall cause each of its subsidiaries to, make their
respective directors, officers and employees and use commercially
reasonable efforts to make their accountants, in each case upon
reasonable advance notice, reasonably available to the Purchaser
and its representatives in connection with the drafting of the
public filings with respect to the Transactions (including the
Financing Documents) and responding in a timely manner to comments
thereon from the SEC or its staff.
(f) If at any time
prior to the Transaction Effective Time, any information relating
to the Purchaser, or the Acquired Companies, or any of their
respective Subsidiaries, Affiliates, officers or directors, should
be discovered by the Acquired Companies or the Purchaser, as
applicable, that should be set forth in an amendment or supplement
to the Proxy Statement or the Financing Documents, so that such
documents would 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 Party which discovers such information shall
promptly notify each other Party hereto and an appropriate
amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law,
disseminated to the Purchaser’s stockholders.
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(g) Notwithstanding
anything else to the contrary in this Agreement or any Additional
Agreements, the Purchaser may make any public filing with respect
to the Transactions to the extent required by applicable
Law.
(h) The Acquired
Companies acknowledge that:
(i) the Purchaser must
obtain the Purchaser Stockholder Approval contemplated by this
Agreement prior to the transactions contemplated hereby being
consummated and that, in connection with such approval, the
Purchaser must call a special meeting of its stockholders requiring
the Purchaser to prepare and file with the SEC the Proxy
Statement;
(ii) the
Purchaser will be required to file Quarterly and Annual reports
that may be required to contain information about the transactions
contemplated by this Agreement; and
(iii) the
Purchaser will be required to file Current Reports on Form 8-K to
announce the transactions contemplated hereby and other significant
events that may occur in connection with such
transactions.
8.3 Shareholder Vote; Recommendation of
the Purchaser’s Board of Directors.
The
Purchaser, through the Purchaser’s Board of Directors, shall
recommend that the Purchaser’s stockholders vote in favor of
adopting and approving all Purchaser Proposals, and the Purchaser
shall include such recommendation in the Proxy Statement. Neither
the Purchaser’s Board of Directors nor any committee thereof
shall withdraw or modify, or propose to withdraw or modify, in a
manner adverse to the Sellers, such recommendation or fail to
re-affirm it on or before the fifth (5th) Business Day after
receipt of a written request for reaffirmation from the
Sellers’ Representative, provided that such re-affirmation by
the Purchaser Board of Directors shall not be required more than
once.
(a) The Purchaser shall
use all commercially reasonable efforts to take all action
necessary under applicable Law, Purchaser’s Organizational
Documents, and the rules of Nasdaq to, in consultation with the
Acquired Companies, establish a record date for, call, give notice
of and hold a meeting of the holders of shares of Purchaser Common
Stock to consider and vote on the Purchaser Proposals (such
meeting, the “Purchaser Stockholders’
Meeting”). The Purchaser Stockholders’ Meeting
shall be held as promptly as practicable, in accordance with
applicable Law and the Certificate of Incorporation, after the
Proxy Statement is “cleared” by the SEC. Purchaser
shall take reasonable measures to ensure that all proxies solicited
in connection with the Purchaser Stockholders’ Meeting are
solicited in compliance with all applicable Law. Notwithstanding
anything to the contrary contained herein, if on the date of the
Purchaser Stockholders’ Meeting, or a date preceding the date
on which the Purchaser Stockholders’ Meeting is scheduled,
the Purchaser reasonably believes that (i) it will not receive
proxies sufficient to obtain the Purchaser Required Vote, whether
or not a quorum would be present or (ii) it will not have
sufficient shares of Purchaser Common Stock represented (whether in
person or by proxy) to constitute a quorum necessary to conduct the
business of the Purchaser Stockholders’ Meeting, the
Purchaser may postpone or adjourn, or make one or more successive
postponements or adjournments of, the Purchaser Stockholders’
Meeting in compliance with the NRS and the Certificate of
Incorporation, as long as the date of the Purchaser
Stockholders’ Meeting is not postponed or adjourned more than
an aggregate of 30 calendar days in connection with any
postponements or adjournments.
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8.5 Confidentiality.
Prior
to Closing, except as necessary to complete the Proxy Statement or
any Other Filings, the Acquired Companies and the Sellers, on the
one hand, and the Purchaser, on the other hand, shall hold and
shall cause their respective representatives to hold in strict
confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of Law, all
Confidential Information concerning the other Party furnished to it
by such other Party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent
that such information can be shown to have been (a) previously
known by the Party to which it was furnished, (b) in the public
domain through no fault of such Party or (c) later lawfully
acquired from other sources, which source is not the agent of the
other Party, by the Party to which it was furnished), and each
Party shall not release or disclose such Confidential Information
to any other Person, except its representatives in connection with
this Agreement. In the event that any Party believes that it is
required to disclose any such Confidential Information pursuant to
applicable Laws, such Party shall give timely written notice to the
other Parties so that such Parties may have an opportunity to
obtain a protective order or other appropriate relief. Each Party
shall be deemed to have satisfied its obligations to hold
Confidential Information concerning or supplied by the other
Parties if it exercises the same care as it takes to preserve
confidentiality for its own similar information. The Parties
acknowledge that some previously confidential information will be
required to be disclosed in the Proxy Statement or any Other
Filings. For the avoidance of doubt, that certain Non-Disclosure
and Confidentiality Agreement, dated as of December 16, 2020, by
and among Purchaser and the Acquired Companies party thereto, and
the Principal Owners remains in full force and effect.
(a) As promptly as
practicable after execution of this Agreement, the Purchaser will
prepare and file a Current Report on Form 8-K pursuant to the
Exchange Act to report the execution of this Agreement, a copy of
which will be provided to the Acquired Companies at least one (1)
Business Day before its filing deadline and Purchaser shall
consider in good faith any comments of the Sellers’
Representative prior to filing. Promptly after the execution of
this Agreement, the Purchaser and the Acquired Companies shall also
issue a joint press release announcing the execution of this
Agreement, in form and substance mutually acceptable to the
Purchaser and the Sellers’ Representative.
(b) Before the Closing,
the Acquired Companies shall begin preparing, in consultation with
the Purchaser, a draft Current Report on Form 8-K in connection
with and announcing the Closing, together with, or incorporating by
reference, such information that is required to be disclosed with
respect to the Transactions pursuant to Form 8-K (the
“Closing Form
8-K”). Prior to the Closing, the Purchaser and the
Acquired Companies shall prepare a mutually agreeable press release
announcing the consummation of the Transactions (the
“Closing Press
Release”). Concurrently with the Closing, the
Purchaser shall distribute the Closing Press Release and, as soon
as practicable thereafter, file the Closing Form 8-K with the
SEC.
From
the date of this Agreement through the Closing, the Purchaser shall
use all reasonable efforts that are necessary or desirable for the
Purchaser to remain listed as a public company on, and for shares
of Purchaser Class B Common Stock to be tradable over, the
applicable Nasdaq market(s). The Purchaser shall use commercially
reasonable efforts to cause the Closing Payment Shares and the
Escrow Shares to be listed on Nasdaq at the Purchaser’s
expense.
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8.8 D&O
Insurance; Indemnification of Officers and Directors.
(a) If the Closing
occurs, the Purchaser agrees that all rights to indemnification and
advancement of expenses and all limitations on liability existing
in favor of any employee, officer or director of any of the
Acquired Companies prior to the Closing (collectively, the
“D&O
Persons”), as provided in the Organizational Documents
of the applicable Acquired Company or otherwise in effect as of the
date of this Agreement with respect to any matters occurring on or
prior to the Closing, shall survive the consummation of the
transactions contemplated hereby and continue in full force and
effect and be honored by the Purchaser after the Closing. The
obligations of the Purchaser under this Section 8.8 shall not be
terminated or modified in such a manner as to adversely affect any
D&O Persons to whom this Section 8.8 applies without the
consent of such affected D&O Persons (it being expressly agreed
that the D&O Persons to whom this Section 8.8 applies shall be
intended third party beneficiaries of this Section 8.8).
(b) Prior to the
Closing Date, the Acquired Companies, at their sole cost and
expense, shall purchase and maintain in effect for a period of six
years following the Closing Date, without lapses in coverage, a
“tail” policy providing directors’ and
officers’ liability insurance coverage for the benefit of the
those Persons who are currently covered by any comparable insurance
policies of the Acquired Companies as of the date hereof with
respect to matters occurring on or prior to the Closing Date. Such
“tail” policy shall provide coverage on terms (with
respect to coverage and amount) that are no less favorable in the
aggregate to the insured than the coverage provided under the
Acquired Companies’ directors’ and officers’
liability insurance policies as of the date hereof; provided, that
the Acquired Companies shall not pay a premium for such
“tail” policy in excess of 300% of the most recent
annual premium paid by the Acquired Companies prior to the date of
this Agreement without the prior written consent of Purchaser. In
the event such tail coverage is unavailable with such terms or at
such pricing, the Acquired Companies shall purchase the maximum
coverage available for such 300% of the most recent annual premium
paid (the “D&O
Tail Policy”).
(c) Prior to the
Closing Date, the Purchaser may in its sole discretion direct the
Acquired Companies to purchase and pay for a tail/extended
reporting period for any insurance policy written on a claims-made
basis, either with the incumbent insurer on current terms or, if
unavailable, from a different insurer on substantially similar
terms. Such extended reporting periods shall be for a commercially
reasonable duration but no less than the following unless otherwise
permitted by Purchaser: 2 years for fiduciary liability; 3 years
for employment practices; 3 years for errors & omissions; and 5
years for pollution legal liability.
From
the date hereof through the earlier of the Closing Date or the date
that this Agreement is terminated in accordance with its terms,
neither any Acquired Company nor any of the Sellers shall, and such
Persons shall use commercially reasonable efforts to cause each of
their respective Representatives not to, directly or indirectly,
(i) encourage, solicit, initiate, engage, participate, enter into
discussions or negotiations with any Person concerning any
Alternative Transaction (as hereinafter defined), (ii) take any
other action intended or designed to facilitate the efforts of any
Person relating to a possible Alternative Transaction or (iii)
approve, accept, recommend or enter into any Alternative
Transaction or any Contract related to any Alternative Transaction.
For purposes of this Agreement, the term “Alternative Transaction”
shall mean any of the following transactions involving any of the
Acquired Companies or the Sellers (other than the transactions
contemplated by this Agreement): (i) any merger, acquisition
consolidation, recapitalization, share exchange, business
combination or other similar transaction, possible public
investment or public offering, or (ii) any sale, lease, exchange,
transfer or other disposition of a material portion of the assets
of such Person (other than sales of inventory in the ordinary
course of business) or any class or series of the capital stock,
membership interests or other Equity Interests of any Acquired
Company in a single transaction or series of transactions. In the
event that there is an unsolicited proposal for an Alternative
Transaction, made to any Acquired Company, any of the Sellers or
any of their respective Representatives (each, an
“Alternative
Proposal”), such Party shall as promptly as
practicable (and in any event within one (1) Business Day after
receipt) advise the other Parties to this Agreement orally and in
writing of any Alternative Proposal and the material terms and
conditions of any such Alternative Proposal (including any changes
thereto) and the identity of the Person making any such Alternative
Proposal.
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8.10 Adoption
of Equity Incentive Plan.
The
Purchaser and the Acquired Companies shall prepare a mutually
agreeable long-term incentive plan for employees of Purchaser and
its Subsidiaries (the “Equity Incentive Plan”)
to be effective at or prior to the Closing and allocate options or
restricted stock units to a list of employees provided by
Sellers’ Representative as set forth on Schedule 8.10. The grant of any
award under the Equity Incentive Plan shall be subject to receipt
from the grantee of a restrictive covenant agreement in the form
determined by Purchaser. The adoption of the Equity Incentive Plan
shall be included as a Purchaser Proposal in the Proxy Statement
for approval by the Purchaser’s Stockholders at the Purchaser
Stockholders’ Meeting. The Purchaser agrees to file, as soon
as practicable after Closing, a registration Statement on Form S-8
covering the issuance of shares underlying awards under the Equity
Incentive Plan.
(a) From the date
hereof until the earlier of the termination of this Agreement and
the Closing Date, Purchaser may, at its expense, conduct
environmental site assessment activities including obtaining Phase
I and/or Phase II Environmental Site Assessments and other reports
relating to the condition of the Real Property and compliance with
Environmental Laws (“Site Assessments”). The
Sellers and the Acquired Companies shall cooperate with and give,
and shall cause their respective Affiliates and Representatives to
cooperate with and give, to the Purchaser and its Representatives,
access to the Real Property and the general manager or site
supervisor for purposes of conducting the Site
Assessments.
(b) If the Site
Assessments identify Recognized Environmental Conditions, as
defined in the American Society for Testing and Materials
“Designation: E1527 – 13 Standard Practice for
Environmental Site Assessments: Phase I Environmental Site
Assessment Process” or specify that any Remedial Action is
required to return the location or locations operated by the
Acquired Companies to a condition in compliance with applicable
Laws that is estimated to exceed One Million Dollars ($1,000,000)
in the aggregate, then (i) the Base Cash Consideration shall be
reduced dollar for dollar, not to exceed $1,000,000, for the cost
and expense of the Remedial Action in excess of One Million Dollars
($1,000,000) and (ii) Purchaser will establish the order in which
sites will be remediated. If the cost and expense of the Remedial
Action is estimated to more than Two Million Dollars ($2,000,000)
in the aggregate in order to return the locations operated by the
Acquired Companies to a condition in compliance with applicable
Laws, then the Parties shall negotiate additional remedies or
Purchaser may elect, in its sole discretion, to deem any Acquired
Company with one or more locations that require $50,000 or more of
additional Remedial Action an Excluded Company.
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8.12 Delivery
of Certain Documents. On or
before the thirtieth (30th) day after the date
hereof, Sellers’ Representative shall deliver to Purchaser
true and complete copies of all material Plan-related documents
that the Acquired Companies are able to obtain using commercially
reasonable efforts.
8.13 Certain
Filings. As soon as practicable following the date hereof,
the Principal Owners shall cause (a) the sponsor of the Coulter and
RideNow Affiliates 401(k) Plan and Trust to file all documentation
necessary to correct any failure to comply with elective deferrals
of commissioned participants pursuant to the DOL Voluntary
Fiduciary Correction Program or IRS Employee Plans Compliance
Resolution System, as applicable and (b) all applicable excise
taxes to be paid (with corresponding IRS filings) with respect to
delinquent participant contributions to the Coulter and RideNow
Affiliates 401(k) Plan and Trust in all applicable plan
years.
ARTICLE IX.
The
obligations of the Parties to consummate the transactions
contemplated by this Agreement are subject to the satisfaction (or,
if permitted by applicable Law, waiver by the Party for whose
benefit such condition exists) of all the following
conditions:
(a) All filings and
other notifications required to be made under any Antitrust Law for
the consummation of the transactions contemplated hereby shall have
been made, all waiting periods relating thereto (including all
extensions thereof) shall have expired or been terminated, and all
clearances, authorizations, actions, non-actions, or other consents
required from a Governmental Authority under any Antitrust Law for
the consummation of the transactions contemplated hereby shall have
been received or obtained.
(b) No Authority shall
have issued any Order, or have pending before it a proceeding for
the issuance thereof, and there shall not be any provision of any
applicable Law restraining or prohibiting the consummation of the
Closing, the ownership by the Purchaser of the Transferred Equity
Interests, the effectiveness of any merger contemplated hereby, or
the effective operation of the Business by the Acquired Companies
after the Closing Date. In addition, there shall not be any Action
brought by a third-party non-Affiliate to enjoin or otherwise
restrict the consummation of the Closing.
(c) Purchaser shall
have obtained the Purchaser Stockholder Approval.
(d) The Closing Payment
Shares shall have been approved for listing on Nasdaq.
The
obligation of the Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction or,
if permitted by applicable Law, the waiver at the Purchaser’s
sole and absolute discretion, of all the following further
conditions:
(a) Each of the Sellers
and each of the Acquired Companies shall have duly performed and
complied with all of its obligations hereunder required to be
performed or complied by it on or prior to the Closing
Date.
(b) (1) Each of the
Seller Fundamental Representations shall be true and correct in all
but de minimis respects on and as of the date hereof and on and as
of the Closing Date, as if made at and as of such date, except to
the extent such representations and warranties are expressly made
as of an earlier date, in which case the same shall be true,
correct and complete only as of such date; and (2) each of the
representations and warranties of Sellers contained in this
Agreement (other than the Fundamental Representations),
disregarding all “materiality”, “Material Adverse
Effect” and similar qualifications, shall be true and correct
in all respects on and as of the date hereof and on and as of the
Closing Date, as if made at and as of such date (A) except to the
extent such representations and warranties are expressly made as of
an earlier date, in which case the same shall be true, correct and
complete only as of such date, and (B) except where the failure of
such representations and warranties to be so true and correct, has
not had, and would not have, a Material Adverse
Effect;
86
(c) There shall have
been no event, change or occurrence which individually or together
with any other event, change or occurrence, could reasonably be
expected to have a Material Adverse Effect.
(d) Each Employment
Agreement entered into by the Purchaser and/or the applicable
Acquired Company, on the one hand, and the applicable Principal
Owner, on the other hand, shall remain in full force and effect and
shall not have been repudiated, rescinded, modified or terminated
by the Purchaser and/or the applicable Acquired Company or the
applicable individual party thereto.
(e) Each Key Employee
shall have executed and delivered to Purchaser an Employment
Agreement.
(f) The Purchaser shall have received evidence that
(i) all Consents set forth on Schedule
9.2(f)(i) and any Consent
which should have been listed on Schedule 4.3
(the “General
Consents”) have been
given or obtained and have not been revoked and (ii) with
respect to the manufacturers set forth on Schedule
9.2(f)(ii) (the
“Manufacturer
Consents” and together
with the General Consents, the “Required
Consents”), Consents
have been given or obtained and have not been revoked with respect
to dealership locations operated by the Acquired Companies
representing at least 95% of revenue of the Acquired Companies from
the sale of new vehicles for the twelve (12) months ending December
31, 2020. For purposes of clarity, the failure to deliver a Consent
from a Factory that is not required to satisfy the foregoing
minimum percentage shall not constitute a default hereunder or in
any way be actionable under the indemnification provisions
hereof.
(g) The Assignment
Agreement shall have been executed and delivered by the parties
thereto.
(h) The Registration
Rights and Lock-Up Agreement entered into by the Purchaser and the
Sellers shall remain in full force and effect and shall not have
been repudiated, rescinded, modified or terminated by any of the
Sellers.
(i) The Purchaser shall
have received all of the items set forth in Section 2.6(b).
(j) The Purchaser shall
have completed all arrangements necessary to obtain the Financing
and shall have received the cash proceeds of the Financing
necessary to consummate the transactions contemplated by this
Agreement.
(k) No holders of
Equity Interests in any Transferred Entity shall have exercised
rights of first refusal or other rights preventing the conveyance
of Equity Interests owned by Sellers in such Transferred Entity to
Purchaser; provided however that this condition shall be applicable
separately as to each specific Transferred Entity individually and
the failure to satisfy this condition with respect to any one
Transferred Entity shall not serve as the failure to satisfy this
Closing condition as to any other Transferred Entity.
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(l) The lowest value on
a per share basis used in the calculation of Closing Payment Shares
herein shall not be less than $24.00.
9.3 Conditions to Obligations of the
Sellers.
The
obligations of the Sellers to consummate the Closing is subject to
the satisfaction, or the waiver at the Sellers’
Representative’s discretion, of all of the following further
conditions:
(a) The Purchaser shall
have performed in all material respects all of its obligations
hereunder required to be performed by it at or prior to the Closing
Date.
(b) (1) Each of the
Purchaser Fundamental Representations shall be true and correct in
all but de minimis respects on and as of the date hereof and on and
as of the Closing Date, as if made at and as of such date, except
to the extent such representations and warranties are expressly
made as of an earlier date, in which case the same shall be true,
correct and complete only as of such date; and (2) each of the
representations and warranties of the Purchaser contained in this
Agreement (other than the Fundamental Representations),
disregarding all “materiality”, “Material Adverse
Effect” and similar qualifications, shall be true and correct
in all respects on and as of the date hereof and on and as of the
Closing Date, as if made at and as of such date (A) except to the
extent such representations and warranties are expressly made as of
an earlier date, in which case the same shall be true, correct and
complete only as of such date, and (B) except where the failure of
such representations and warranties to be so true and correct, has
not had, and would not have, a Material Adverse
Effect;
(c) There shall have
been no event, change or occurrence which individually or together
with any other event, change or occurrence could reasonably be
expected to have a Purchaser Material Adverse Effect.
(d) The Sellers’
Representative shall have received all of the items set forth in
Section
2.6(a).
(e) The Equity
Incentive Plan shall have been approved by the Purchaser’s
Board of Directors, as to options granted to employees as allocated
by Sellers’ Representative as contemplated in Section 8.10, and shall be
effective as of the Closing.
(f) William Coulter and
Mark Tkach shall have been appointed as directors of
Purchaser.
(g) The lowest value on
a per share basis used in the calculation of Closing Payment Shares
herein shall not be less than $24.00.
ARTICLE X.
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(a) Indemnification of
Purchaser.
(i) From and
after the Closing, the Principal Owners shall, jointly and
severally, indemnify and hold harmless the Purchaser, each of its
Affiliates (including, following the Closing, the Acquired
Companies) and each of its and their respective managers,
directors, officers, employees, members, partners, stockholders,
successors and permitted assignees (the “Purchaser Indemnitees”),
from and against any and all losses, damages, liabilities,
penalties, Taxes, fines, judgments, awards, settlements, costs,
fees and expenses, including costs of investigation and reasonable
attorneys’ fees) (all of the foregoing collectively,
“Losses”) incurred,
suffered, paid or sustained by any Purchaser Indemnitee as a result
of or in connection with (A) any breach or inaccuracy in of any of
the representations or warranties of the Sellers contained herein;
(B) any breach or non-fulfillment of any covenant, agreement or
obligation to be performed by (x) any Acquired Company contained
herein to be performed prior to or at the Closing, and (y) any
Seller contained in this Agreement; (C) Indemnified Taxes; (D) any
claims made by Sellers (or any direct or indirect holders thereof)
with respect to the computation or allocation of the Purchase Price
among Sellers (including the calculation and determination of their
applicable Pro Rata Share, Per Share Merger Consideration, or the
calculations and determinations set forth in the Payment Notice or
in any Post-Closing Adjustment or disbursement of any Escrow Shares
at any time); (E) dissenters’, appraisal or similar rights
asserted by any equityholder of the Acquired Companies under any
Law; (F) any unpaid Change in Control Payments or Transaction
Expenses; and (G) any Special Indemnity Event.
(ii) From
and after the Closing, each Seller shall, severally and not
jointly, indemnify and hold harmless the Purchaser Indemnitees from
and against any and all Losses incurred, suffered, paid or
sustained by any Purchaser Indemnitee as a result of or in
connection with (A) any breach or inaccuracy in of any of the
representations or warranties of such Seller contained in
Article IV but
solely with respect to the Acquired Company in which they own an
Equity Interest; (B) any breach or inaccuracy in of any of the
representations or warranties of such Seller contained in
Article V; and (C)
any breach or non-fulfillment of any covenant, agreement or
obligation to be performed by such Seller contained in this
Agreement.
(b) Indemnification of Sellers.
From and after the Closing, Purchaser and the Acquired Companies
shall, jointly and severally, indemnify and hold harmless the
Sellers, each of their respective Affiliates and each of their
respective managers, directors, officers, employees, members,
partners, stockholders, successors and permitted assignees (the
“Seller
Indemnitees”), from and against any and all Losses
incurred, suffered, paid or sustained by any Seller Indemnitee as a
result of or in connection with (i) any breach or inaccuracy in of
any of the representations or warranties of Purchaser or the Merger
Subs contained herein; and (ii) any breach or non-fulfillment of
any covenant, agreement or obligation to be performed by Purchaser
or any Merger Sub contained in this Agreement.
10.2 Procedure.
The
following shall apply with respect to all claims by any Purchaser
Indemnitee or Seller Indemnitee, as applicable, (an
“Indemnified
Party”) for indemnification:
(a) Third Party
Claims.
(i) If any Indemnified
Party receives notice of the assertion or commencement of any
Action made or brought by any Person who is not a party to this
Agreement or an Affiliate of a Party to this Agreement (a
“Third-Party
Claim”) against such Indemnified Party with respect to
which the Principal Owners or the Sellers, on one hand, or
Purchaser and the Acquired Companies, on the other hand (as
applicable, the “Indemnifying Party”;
provided, however, that if the Sellers are required to provide
indemnification, Sellers’ Representative shall be the
Indemnifying Party for the purposes of actions to be taken pursuant
to this Section
10.2) are obligated to provide indemnification under this
Agreement, the Indemnified Party shall give the Sellers’
Representative (on behalf of such Indemnifying Party) or Purchaser,
as applicable, prompt written notice thereof (a “Third-Party Claim
Notice”). The failure to give such prompt written
notice shall not, however, relieve the Indemnifying Party of its
indemnification obligations, except and only to the extent that the
Indemnifying Party’s defense of such claim is materially and
adversely prejudiced by reason of such failure. Such notice by the
Indemnified Party shall describe the Third-Party Claim in
reasonable detail (to the extent then known) and shall indicate the
estimated amount, if reasonably practicable, of the Loss that has
been or may be sustained by the Indemnified Party. The Parties
shall reasonably cooperate with each other in good faith in
connection with the defense of any Third-Party Claim.
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(ii) The
Indemnifying Party shall have the right to participate in, or by
giving written notice to the Indemnified Party within thirty days
after receipt of a Third-Party Claim Notice (which written notice
by the Indemnifying Party shall include an irrevocable
acknowledgement of the Indemnifying Party that the Indemnified
Party will be fully indemnified by the Indemnifying Party in
respect of such Third-Party Claim), to assume the defense of any
Third-Party Claim at the Indemnifying Party’s sole cost and
expense, including the engagement of the Indemnifying Party’s
own counsel. Notwithstanding the foregoing, the Indemnifying Party
shall not be entitled to assume the defense (and the Indemnified
Party shall be entitled to have sole control over the defense) of a
Third-Party Claim if: (A) such Third-Party Claim involves criminal
allegations; (B) such Third-Party Claim demands injunctive or other
equitable relief; (C) the Indemnified Party reasonably determines
that it would be inappropriate for a single counsel to represent
both the Indemnifying Party and the Indemnified Party in connection
with such Third-Party Claim under applicable standards of legal
ethics; (D) there are legal defenses available to the Indemnified
Party that are different from or additional to those available to
the Indemnifying Party; (E) such Third-Party Claim is made by or
otherwise involves any of the Acquired Company’s material
business relations (including any of its customers or suppliers,
including (for the avoidance of doubt) manufacturers and their
respective Affiliates); or (F) in the event such claim were to be
decided adversely, the aggregate amount of Losses associated
therewith, together with all other outstanding claims for
indemnification hereunder, would reasonably be expected to exceed
the aggregate liability limitations set forth in this Article
X.
(iii) In
the event that the Indemnifying Party assumes the defense of any
Third-Party Claim, subject to Section 10.2(a)(iv), the
Indemnifying Party shall have the right to take such action as it
deems necessary to avoid, dispute, defend, appeal or make
counterclaims pertaining to any such Third-Party Claim in the name
and on behalf of the Indemnified Party. The Indemnifying Party
shall keep the Indemnified Party apprised of the status of any
matter the defense of which they are maintaining, including
settlement offers, with respect to the Third-Party Claim and permit
the Indemnified Party to participate in the defense of the
Third-Party Claim. The Indemnified Party shall have the right, at
its own cost and expense, to participate in the defense of any
Third-Party Claim with counsel selected by it subject to the
Indemnifying Party’s right to control the defense thereof. If
the Indemnifying Party elects not to compromise or defend such
Third-Party Claim or fails to promptly notify the Indemnified Party
in writing of its election to defend as provided in this Agreement,
the Indemnified Party may pay, compromise, and defend such
Third-Party Claim and seek indemnification for any and all Losses
based upon, arising from or relating to such Third-Party
Claim.
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(iv) Notwithstanding
any other provision of this Agreement, the Indemnifying Party shall
not enter into settlement of any Third-Party Claim without the
prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld or delayed), except as provided in
this Section
10.2(iv). If (1) a firm offer is made to settle a
Third-Party Claim that (A) only involves the payment of monetary
damages that are paid in full by the Indemnifying Party and does
not include any liability or the creation of a financial or other
obligation on the part of the Indemnified Party, (B) provides, in
customary form, for the unconditional release of each Indemnified
Party from all liabilities and obligations in connection with such
Third-Party Claim, (C) does not involve any statement, finding or
admission of any fault of, breach of contract by, or violation of
Law by, the Indemnified Party; (D) includes a reasonable
confidentiality obligation by the third party claimant of the terms
of the settlement in any settlement agreement; and (E) provides
that the Indemnified Party is an express third party beneficiary of
the settlement agreement, entitled to enforce such settlement
agreement, and (2) the Indemnifying Party desires to accept and
agree to such offer, the Indemnifying Party shall give written
notice to that effect to the Indemnified Party. If the Indemnified
Party fails to consent to such firm offer within ten days after its
receipt of such notice, the Indemnified Party may continue to
contest or defend such Third-Party Claim and in such event, the
maximum liability of the Indemnifying Party as to such Third-Party
Claim shall not exceed the amount of such settlement offer. If the
Indemnified Party fails to consent to such firm offer and also
fails to assume defense of such Third-Party Claim, the Indemnifying
Party may settle the Third-Party Claim upon the terms set forth in
such firm offer to settle such Third-Party Claim.
(b) Direct Claims. Any claim by an
Indemnified Party on account of a Loss which does not result from a
Third-Party Claim (a “Direct Claim”) shall be
asserted by the Indemnified Party giving the Indemnifying Party
prompt written notice thereof (a “Direct Claim Notice”).
The failure to give such prompt written notice shall not, however,
relieve the Indemnifying Party of its indemnification obligations,
except and only to the extent that the Indemnifying Party’s
defense of such claim is actually materially and adversely
prejudiced by reason of such failure. Such notice shall describe
the Direct Claim in reasonable detail, shall include copies of all
material written evidence thereof and shall indicate the estimated
amount, if reasonably practicable, of the Loss that has been or may
be sustained by the Indemnified Party. The Indemnifying Party shall
have 30 days after its receipt of such notice to respond in writing
to such Direct Claim. During such 30-day period, the Indemnified
Party shall allow the Indemnifying Party and its Representatives to
investigate the matter or circumstance alleged to give rise to the
Direct Claim, and whether and to what extent any amount is payable
in respect of the Direct Claim by giving reasonable access to the
Acquired Companies’ or Sellers’ personnel, as
applicable, and the right to examine and copy any accounts,
documents or records as the Indemnifying Party or any of its
professional advisors may reasonably request solely to the extent
that they relate to the Direct Claim; provided, that such access
shall be in a manner that does not unreasonably interfere with the
normal business operations of the Purchaser or the Acquired
Companies or applicable Seller, as applicable; provided, further,
that such access shall not jeopardize the attorney-client privilege
or attorney work-product doctrine or any other applicable privilege
to which any such books and records, materials and other
information is subject. If the Indemnifying Party does not so
respond within such 30-day period, the Indemnifying Party shall be
deemed to have accepted such claim.
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10.3 Determination
of Losses; Priority of Claims.
(a) Notwithstanding
anything to the contrary, the Indemnifying Party shall not be
liable to an Indemnified Party for indemnification under
Section
10.1(a)(i)(A) or Section 10.1(b)(i), as
applicable, until the aggregate amount of all Losses in respect of
indemnification under Section 10.1(a)(i)(A) and
Section
10.1(a)(ii)(A) or Section 10.1(b)(i), as
applicable, exceeds $4,000,000, in which event the Indemnifying
Party shall be required to pay or be liable for Losses from dollar
one; provided, however, that the limitation set forth in this
Section 10.3(a)
shall not apply to Losses related to breaches of Fundamental
Representations or the SOL Representations or Losses arising from
claims for fraud, intentional misrepresentation or willful
misconduct.
(b) Notwithstanding
anything to the contrary, the Indemnifying Party’s maximum
aggregate liability to an Indemnified Party for indemnification
under Section
10.1(a)(i)(A), Section 10.1(a)(ii)(A), or
Section 10.1(b)(i),
as applicable, shall not exceed $75,000,000 with respect to the
Principal Owners or Purchaser, as applicable, and, with respect to
the Sellers (other than the Principal Owners), Thirteen Percent
(13%) of portion of the Purchase Price received by the particular
Seller for which indemnification is sought (the “Cap”); provided, however,
that the limitation set forth in this Section 10.3(b) shall not apply
to Losses related to breaches of Fundamental Representations or the
SOL Representations or Losses arising from claims for fraud,
intentional misrepresentation or willful misconduct. Without
limiting the foregoing, in no event shall the Principal
Owners’, the Sellers’, or Purchaser’s maximum
aggregate liability under this Agreement for any and all Losses
under any theory of recovery exceed the Purchase
Price.
(c) Notwithstanding
anything to the contrary, for purposes of determining the amount of
any Losses that are the subject matter of a claim for
indemnification pursuant to this Article X, and for purposes of
determining whether the representations and warranties giving rise
to such indemnification have been breached, each representation and
warranty in this Agreement shall be read without regard and without
giving effect to the term, or, as applicable, clause containing,
“material”, “materiality” or similar
phrases or clauses (including “Material Adverse Effect”
or “material adverse effect”) contained in such
representation or warranty.
(d) If the Indemnifying
Party is a Seller, any claim for indemnification by an Indemnified
Party shall (i) first be brought against the Escrow Fund (using a
value per Escrow Share equal to the VWAP for the five (5) trading
days immediately prior to such payment), or, in the sole discretion
of Sellers’ Representative, by wire transfer of all or part
of the amount of any claim for indemnification by an Indemnified
Party in cash in immediately available funds to an account
designated in writing by the Purchaser, provided that if
Sellers’ Representative elects to pay all or part of any
claim for indemnification by an Indemnified Party in cash but fails
to timely pay such amount, then immediately upon Purchaser’s
request Sellers’ Representative shall execute any joint
written authorization necessary to release the applicable number of
Escrowed Shares from the Escrow Fund; and (ii) thereafter, if an
insufficient number of Escrow Shares remain in the Escrow Fund,
directly against the Indemnifying Parties. To the extent that the
Sellers’ Representative satisfies the amount of any claim for
indemnification by an Indemnified Party in cash as contemplated in
clause (i) in the preceding sentence, then Purchaser and
Sellers’ Representative shall execute a joint written
authorization necessary to release a pro rata number of Escrowed
Shares from the Escrow Fund.
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(e) Notwithstanding
anything to the contrary contained herein, each Seller hereby
waives and acknowledges that it shall not exercise or assert any
right of contribution or right to indemnity or any other right or
remedy against any Acquired Company in connection with any
indemnification obligation or any other Liability to which such
Seller may become subject under this Agreement or otherwise in
connection with any of the transactions contemplated
herein.
10.4 Escrow Fund.
(a) Payment of Dividends; Voting.
Any dividends, interest payments, or other distributions of any
kind made in respect of the Escrow Shares will be delivered
promptly to Sellers’ Representative for distribution to the
Sellers. The Principal Owners shall be entitled to vote the Escrow
Shares on any matters to come before the stockholders of the
Purchaser.
(b) Distribution of Escrow Shares.
If all or any portion of the Escrow Shares are to be released from
the Escrow Fund pursuant to Section 10.4(d), then such
Escrow Shares shall be released to the Sellers’
Representative for distribution to the Principal Owners. The
Purchaser will take such action as may be necessary to cause such
certificates to be issued in the names of the appropriate Persons.
Certificates or book-entry positions representing Escrow Shares so
issued that are subject to resale restrictions under applicable
securities laws will bear a legend to that effect. No fractional
shares shall be released and delivered from the Escrow Fund to the
Sellers’ Representative and all fractional shares shall be
rounded to the nearest whole share.
(c) Assignability. No Escrow Shares
or any beneficial interest therein may be pledged, sold, assigned
or transferred, including by operation of law, by the Principal
Owners or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of any Principal Owner,
prior to the delivery to such Principal Owner by the Sellers’
Representative of the Escrow Shares by the Escrow Agent as provided
herein.
(d) Release from Escrow
Fund.
(i) Within five (5)
business days following the six month anniversary of Closing (the
“Initial Release
Date”), the following number of Escrow Shares will be
released from escrow to the Sellers’ Representative: (A)
one-third of the Escrow Shares, less (B) the number of Escrow
Shares, if any, previously released pursuant to Section 3.3(b) in connection
with any Post-Closing Adjustment; provided, that (notwithstanding
anything to the contrary) in the event that any Purchaser
Indemnified Party shall have delivered a Direct Claim Notice or
Third-Party Claim Notice in accordance with Section 10.2 prior to the
Initial Release Date (whether resolved or unresolved), no Escrow
Shares will be released from escrow on the Initial Release
Date.
(ii) Within
five (5) business days following the twelve (12) month anniversary
of Closing (the “Final Release Date”), the
following number of Escrow Shares will be released from escrow to
the Sellers’ Representative: (A) the remaining number of
Escrow Shares in the Escrow Fund, less (B) the number of Escrow
Shares (using a value per Escrow Share equal to the VWAP for the
five (5) trading days immediately prior to such payment) equal to
the amount of any potential Losses set forth in any Direct Claim
Notice or Third-Party Claim Notice delivered by the Purchaser prior
to the Final Release Date with respect to any pending but
unresolved claim for indemnification; provided that in lieu of the
Escrowed Shares being retained in the Escrow Fund under clause (B)
above, the Sellers’ Representative may elect to deliver cash
in immediately available funds equal to value of such Escrowed
Shares to an escrow agent mutually agreed by Purchaser and
Seller’s Representative and Purchaser and the Sellers’
Representative shall enter into a mutually acceptable escrow
agreement to hold such amount. If Sellers’ Representative
elects to provide cash in lieu of retaining Escrow Shares in the
Escrow Fund, then upon confirmation from the escrow agent that the
cash amount has been received Purchaser and Sellers’
Representative shall execute a joint written authorization
necessary to release the remaining Escrowed Shares from the Escrow
Fund. Escrow Shares, or cash in lieu thereof, retained in escrow as
a result of clause (B) in the immediately preceding sentence shall
be released promptly upon resolution of the related claim for
indemnification in accordance with the provisions of this Article
X.
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(iii) Prior
to the Initial Release Date and the Final Release Date,
respectively and as applicable, the Purchaser and the
Sellers’ Representative shall issue joint instructions to the
Escrow Agent instructing the Escrow Agent to release such number of
Escrow Shares determined in accordance with this Section 10.4(d).
(e) Survival. Except for (1) the
representations and warranties in Sections 4.1 (Corporate
Existence and Power), 4.2 (Authorization),
4.3 (Approvals and
Consents), 4.4
(Non-Contravention), 4.5 (Capitalization),
4.34
(Finder’s Fees), 5.1 (Ownership of Interests;
Authority), 5.2
(Approvals and Consents), 5.3 (Non-Contravention) and
5.6 (Finder’s
Fees) (collectively, the “Seller Fundamental
Representations”) and in Sections 6.1 (Corporate
Existence and Power), 6.2 (Authorization),
6.3 (Approvals and
Consents), 6.4(a)
(Non-Contravention), 6.5 (Finder’s Fees), and
6.8
(Capitalization) (collectively, the “Purchaser Fundamental
Representations” and, together with the Seller
Fundamental Representations, the “Fundamental
Representations”), which shall survive indefinitely,
and (2) the representations and warranties in Sections 4.29 (Employee
Benefits and Compensation), 4.32 (Tax Matters) and
4.33 (Environmental
Laws) (collectively, the “SOL Representations”),
which shall survive until sixty (60) days after the expiration of
the statute of limitations with respect to the subject matter
discussed therein (including any extensions and waivers thereof),
the representations and warranties of the Sellers, Purchaser, and
the Merger Subs shall survive until twelve months following the
Closing. The indemnification to which any Indemnified Party is
entitled from the Indemnifying Parties pursuant to Section 10.1(a) or Section 10.1(b) for Losses
shall be effective so long as an Indemnified Party makes a claim
for indemnification prior to the applicable Limitation Date (in
which case, the applicable representations and warranties shall
survive the applicable Limitation Date solely for purposes of
resolving such claim, until such time as such claim is fully and
finally resolved). “Limitation Date” shall
mean, with respect to any representation or warranty, the date on
which such representation or warranty expires pursuant to this
Section
10.4.
10.5 Tax Treatment of Indemnification
Payments.
All
indemnification payments made under this Agreement shall be treated
by the Parties as an adjustment to the Purchase Price for Tax
purposes, unless otherwise required by Law.
The
Parties acknowledge and agree that the sole and exclusive remedy of
any Purchaser Indemnitee or Seller Indemnitee, as applicable, with
respect to any and all claims (other than claims arising from
fraud, intentional misrepresentation or willful misconduct) for any
breach of any representation, warranty, covenant, agreement or
obligation set forth herein or otherwise relating to the subject
matter of this Agreement, shall be pursuant to the indemnification
provisions set forth in Section 7.8 and this
Article X. In
furtherance of the foregoing, the Purchaser on behalf of all
Purchaser Indemnitees and Sellers’ Representative on behalf
of all Seller Indemnitees hereby waives, to the fullest extent
permitted under Law, any and all rights, claims and causes of
action for any breach of any representation, warranty, covenant,
agreement or obligation set forth herein or otherwise relating to
the subject matter of this Agreement it may have against the other
Parties hereto and their Affiliates and each of their respective
representatives arising under or based upon any Law, except
pursuant to the indemnification provisions set forth in
Section 7.8 and
this Article X and
other than claims arising from fraud, intentional misrepresentation
or willful misconduct. Nothing in this Section 10.6 shall limit any
Person’s right to seek and obtain any equitable relief to
which any Person shall be entitled pursuant to Section 13.15, to obtain the
adjustments described in Sections 3.2 and 3.3, or to seek any remedy on
account of fraud, intentional misrepresentation or willful
misconduct.
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10.7 NO
ADDITIONAL REPRESENTATIONS; NO RELIANCE.
THE
PURCHASER ACKNOWLEDGES AND AGREES THAT: (A) NOTWITHSTANDING ANY
PROVISION OF THIS AGREEMENT TO THE CONTRARY, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY THE SELLERS IN
ARTICLES V AND VI, NEITHER THE ACQUIRED COMPANIES OR THE SELLERS OR
ANY AFFILIATE THEREOF NOR ANY OTHER PERSON HAS MADE ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THE ACQUIRED COMPANIES,
THE BUSINESS OR THE ACQUIRED COMPANY’S OPERATIONS, ASSETS,
LIABILITIES, CONDITION (FINANCIAL OR OTHERWISE) OR PROSPECTS,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE PURCHASER, OR ANY
OF ITS RESPECTIVE AFFILIATES OR REPRESENTATIVES OF ANY
DOCUMENTATION, FORECASTS, PROJECTIONS OR OTHER INFORMATION WITH
RESPECT TO ANY ONE OR MORE OF THE FOREGOING; (B) THE PURCHASER HAS
NOT RELIED ON ANY REPRESENTATION OR WARRANTY FROM AN ACQUIRED
COMPANY OR THE SELLERS OR ANY OTHER PERSON IN DETERMINING TO ENTER
INTO THIS AGREEMENT, EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT; AND (C) NONE OF THE SELLERS, THE ACQUIRED COMPANIES OR
ANY OTHER PERSON WILL HAVE, OR BE SUBJECT TO, ANY LIABILITY TO THE
PURCHASER OR ANY OTHER PERSON RESULTING FROM THE DISTRIBUTION TO
THE PURCHASER, OR ITS USE, OF ANY INFORMATION REGARDING THE
ACQUIRED COMPANIES OR ITS BUSINESS OR MADE AVAILABLE TO THE
PURCHASER AND ITS REPRESENTATIVES, INCLUDING ANY INFORMATION,
DOCUMENTS OR MATERIAL MADE AVAILABLE TO THE PURCHASER IN THE DATA
ROOM HOSTED BY AKERMAN CONNECT, MANAGEMENT PRESENTATIONS OR IN ANY
OTHER FORM IN EXPECTATION OF THE TRANSACTIONS CONTEMPLATED HEREBY.
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY THE
ACQUIRED COMPANIES AND THE SELLERS IN ARTICLES IV AND V AND FOR
FRAUD, INTENTIONAL MISREPRESENTATION OR WILLFUL MISCONDUCT, ALL
OTHER REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR IMPLIED,
ARE EXPRESSLY DISCLAIMED BY THE ACQUIRED COMPANIES AND
SELLERS.
ARTICLE XI.
(a) ANY ACTION ARISING
OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER ADDITIONAL
AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR
ANY ACTION OR OTHER DISPUTE INVOLVING THE DEBT FINANCING SOURCE
RELATED PARTIES ARISING OUT OF OR BASED ON THIS AGREEMENT, THE
OTHER ADDITIONAL AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED
STATES OF AMERICA OR THE COURTS OF THE STATE OF DELAWARE, AND EACH
PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. THE PARTIES
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING
OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND
IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
95
(b) THE PARTIES TO THIS
AGREEMENT HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVE ANY
RIGHT EACH SUCH PARTY MAY HAVE TO TRIAL BY JURY IN ANY ACTION OF
ANY KIND OR NATURE, IN ANY COURT IN WHICH AN ACTION MAY BE
COMMENCED, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE
FINANCING DOCUMENTS, OR THE DEBT FINANCING COMMITMENT LETTER
(INCLUDING ANY SUCH LEGAL PROCEEDING INVOLVING OR AGAINST THE DEBT
FINANCING SOURCE RELATED PARTIES) OR ANY ADDITIONAL AGREEMENT, OR
BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN OR AMONG
ANY OF THE PARTIES TO THIS AGREEMENT OF ANY KIND OR
NATURE.
(c) Each
of the Parties to this Agreement acknowledge that each has been
represented in connection with the signing of this waiver by
independent legal counsel selected by the respective Party and that
such Party has discussed the legal consequences and import of this
waiver with legal counsel. Each of the Parties to this Agreement
further acknowledge that each has read and understands the meaning
of this waiver and grants this waiver knowingly, voluntarily,
without duress and only after consideration of the consequences of
this waiver with legal counsel.
ARTICLE XII.
This
Agreement may be terminated, and the transactions contemplated by
this Agreement may be abandoned, at any time prior to the Closing
as follows:
(a) by mutual written
consent of Purchaser and the Sellers’
Representative;
(b) by either the
Purchaser or the Sellers’ Representative, upon written notice
to the other Party, if:
(i) the Closing has not
occurred by June 30, 2021 (the “Outside Closing Date”);
provided, that the right to terminate under this Section 12.1(b)(i) shall not be
available to any Party whose breach of its obligations, covenants,
representations or warranties has been the primary cause of the
failure to consummate the transactions by the Outside Closing Date;
provided, further, that in the event that (x) the Closing has not
occurred by the Outside Closing Date, (y) this Agreement has not
otherwise been terminated pursuant to this Article XII, and (z) the
Parties are working in good faith to consummate the Transactions,
then the Outside Closing Date shall be extended to July 31, 2021;
and provided, further that if the Closing has not occurred by the
Outside Closing Date solely as a result of a failure to obtain
approval of any Factory, Sellers’ Representative may, in his
sole discretion, extend the Outside Closing Date until thirty (30)
days following the final resolution of any and all proceedings with
a Factory;
96
(ii) any
Authority shall have issued an Order or taken any other action
permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such Order or other
action shall have become final and nonappealable; provided,
however, that neither Purchaser nor the Sellers’
Representative shall have such right to terminate pursuant to this
Section
12.01(b)(ii) unless, prior to such termination, such Party
shall have used its commercially reasonable efforts to oppose any
such Order or other restraint or to have such Order or other
restraint vacated or made inapplicable to the transaction
contemplated hereby and otherwise has fulfilled its obligations
under this Agreement;
(c) by the Purchaser,
by giving written notice to the Sellers’ Representative, if
any of the representations or warranties of Sellers set forth in
this Agreement shall not be true and correct or if Sellers have
failed to perform any covenant or agreement set forth in this
Agreement (including an obligation to consummate the Closing) such
that the condition to Closing set forth in either Section 9.2(a) or Section 9.2(b) would not be
satisfied and the breach or breaches causing such representations
or warranties not to be true and correct, or the failures to
perform any covenant or agreement, as applicable, is (or are) not
cured or cannot be cured within the earlier of (i) thirty days
after written notice thereof is delivered to the Sellers’
Representative and (ii) the Outside Closing Date; provided, however, that the
Purchaser’s right to terminate this Agreement under this
Section 12.1(c)
shall not be available if the Purchaser is also then in breach of
this Agreement so as to prevent the condition to Closing set forth
in either Section
9.3(a) or Section
9.3(b) from being satisfied; or
(d) by the
Sellers’ Representative or by Purchaser if the Purchaser
Stockholder Approval shall not have been obtained at the Purchaser
Stockholders’ Meeting;
(e) by the
Sellers’ Representative, by giving written notice to the
Purchaser, if any of the representations or warranties of the
Purchaser set forth in this Agreement shall not be true and correct
or if the Purchaser has failed to perform any covenant or agreement
set forth in this Agreement (including an obligation to consummate
the Closing) such that the condition to Closing set forth in either
Section 9.3(a) or
Section 9.3(b)
would not be satisfied and the breach or breaches causing such
representations or warranties not to be true and correct, or the
failures to perform any covenant or agreement, as applicable, is
(or are) not cured or cannot be cured within the earlier of (i)
thirty days after written notice thereof is delivered to the
Purchaser and (ii) the Outside Closing Date; provided, however, that the
Sellers’ Representative’s right to terminate this
Agreement under this Section 12.1(e) shall not be
available if the Sellers are also then in breach of this Agreement
so as to prevent the condition to Closing set forth in either
Section 9.2(a) or
Section 9.2(b) from
being satisfied.
12.2 Effect of Termination.
In the
event of the termination of this Agreement pursuant to Articles XII, all obligations
of the Parties hereunder (other than Section 8.5 (Confidentiality),
Article X
(Indemnification), Article XI (Dispute Resolution), this
Article XII
(Termination), and Article
XIII (Miscellaneous), which will survive the termination of
this Agreement) will terminate without any liability of any Party
to any other Party; provided, further, that no termination will
relieve Sellers, the Acquired Companies and their respective
Affiliates from any liability arising from or relating to any
knowing and intentional breach of a representation, a warranty or a
covenant by such Party prior to termination.
97
ARTICLE XIII.
Any
notice hereunder shall be sent in writing, addressed as specified
below, and shall be deemed given: (a) if by hand or recognized
courier service, by 5:00PM Eastern Time on a business day,
addressee’s day and time, on the date of delivery, and
otherwise on the first business day after such delivery; (b) if by
fax or email, on the date that transmission is confirmed
electronically, if by 5:00PM Eastern Time on a business day,
addressee’s day and time, and otherwise on the first business
day after the date of such confirmation; or (c) five days after
mailing by certified or registered mail, return receipt requested.
Notices shall be addressed to the respective Parties as follows
(excluding telephone numbers, which are for convenience only), or
to such other address as a Party shall specify to the others in
accordance with these notice provisions:
if to
the Purchaser or the Acquired Companies (following the Closing),
to:
RumbleOn,
Inc.
901 W.
Walnut Hill Lane
Irving,
Texas 75038
Tel:
469.250.1185
Attention: Marshall
Chesrown (marshall@rumbleon.com),
Steve Berrard (sberrard@newrivercapital.com),
and Peter Levy (peter@rumbleon.com)
with a
copy to (which shall not constitute notice):
Akerman
LLP
The
Main Las Olas
201
East Las Olas Boulevard
Suite
1800
Fort
Lauderdale, FL 33301
Tel:
954.463.2700
Fax:
942.463.2224
Attention: Michael
Francis (michael.francis@akerman.com),
Christina Russo (christina.russo@akerman.com),
and Scott Wasserman (scott.wasserman@akerman.com)
if to
the Acquired Companies (prior to the Closing):
William
Coulter
c/o
Coulter Cadillac
1188 E.
Camelback Road
Phoenix, AZ
85014
Attention: William
Coulter (billc@motorgrp.com)
with a
copy to (which shall not constitute notice):
Gallagher &
Kennedy
2575 E.
Camelback Road, Suite 1100
Phoenix, AZ
85016-9225
Attention: Stephen
R. Boatwright (steve.boatwright@gknet.com)
if to
the Sellers’ Representative:
Mark
Tkach
c/o
Coulter Cadillac
1188 E.
Camelback Road
Phoenix, AZ
85014
Attention: Mark
Tkach (mtkach@ridenow.com)
98
with a
copy to (which shall not constitute notice):
Gallagher &
Kennedy
2575 E.
Camelback Road, Suite 1100
Phoenix, AZ
85016-9225
Attention: Stephen
R. Boatwright (steve.boatwright@gknet.com)
13.2 Amendments; No Waivers; Remedies.
(a) This Agreement
cannot be amended, except by a writing signed by each Party and
cannot be terminated orally or by course of conduct. No provision
hereof can be waived, except by a writing signed by the Party
against whom such waiver is to be enforced, and any such waiver
shall apply only in the particular instance in which such waiver
shall have been given. Notwithstanding anything to the contrary
herein, Sections
11.1, 13.7,
13.13, 13.17 and this Section 13.2(a) (and any
provision of this Agreement to the extent a modification, waiver or
termination of such provision would modify the substance of
Sections 11.1,
13.7, 13.13, 13.17 and this Section 13.2(a)) may not be
modified, waived or terminated in a manner that is materially
adverse to a Debt Financing Source Related Party without the prior
written consent of such Debt Financing Source Related
Party.
(b) Neither any failure
or delay in exercising any right or remedy hereunder or in
requiring satisfaction of any condition herein nor any course of
dealing shall constitute a waiver of or prevent any Party from
enforcing any right or remedy or from requiring satisfaction of any
condition. No notice to or demand on a Party shall waive or
otherwise affect any obligation of that Party or impair any right
of the party giving such notice or making such demand, including
any right to take any action without notice or demand not otherwise
required by this Agreement. No exercise of any right or remedy with
respect to a breach of this Agreement shall preclude exercise of
any other right or remedy, as appropriate to make the aggrieved
Party whole with respect to such breach, or subsequent exercise of
any right or remedy with respect to any other breach.
(c) Except as otherwise
expressly provided herein, no statement herein of any right or
remedy shall impair any other right or remedy stated herein or that
otherwise may be available. No single or partial exercise by a
Party hereto of any right, power or remedy hereunder shall preclude
any other or further exercise thereof.
99
13.4 Publicity.
Except
as required by Law, fiduciary duties, by court process or by
obligations pursuant to any listing agreement with any national
securities exchange and except with respect to the Purchaser SEC
Documents, Sellers, on one hand, and Purchaser, on the other hand,
agree that neither they nor their respective agents shall issue any
press release or make any other public disclosure concerning the
transactions contemplated hereunder without the prior approval of
Purchaser and Sellers’ Representative.
Each
Party shall bear its own costs and expenses in connection with this
Agreement and the transactions contemplated hereby, unless
otherwise specified herein.
No
Party may assign this Agreement or any right, interest or
obligation hereunder, including by merger, consolidation, operation
of law, or otherwise, without the written consent of Purchaser, on
one hand, and Sellers’ Representative, on the other hand. Any
purported assignment or delegation without such consent shall be
void, in addition to constituting a material breach of this
Agreement. Subject to the preceding sentences, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by,
the Parties and their respective successors and
assigns.
This
Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without giving effect to the
conflict of laws principles thereof; provided, that,
notwithstanding the foregoing, any disputes involving the Debt
Financing Source Related Parties will be governed by and construed
in accordance with the laws of the State of New York without giving
effect to the conflicts of law principles thereof.
This
Agreement may be executed in counterparts, each of which shall
constitute an original, but all of which shall constitute one
agreement. This Agreement shall become effective upon delivery to
each Party of an executed counterpart or the earlier delivery to
each Party of original, photocopied, or electronically transmitted
signature pages that together (but need not individually) bear the
signatures of all other Parties. Delivery of an executed
counterpart of this Agreement by facsimile or by electronic
transmission in .PDF format shall be effective to the fullest
extent permitted by applicable Law.
This
Agreement together with the exhibits and schedules hereto and the
Additional Agreements, sets forth the entire agreement of the
Parties with respect to the subject matter hereof and thereof and
supersedes all prior and contemporaneous understandings and
agreements related thereto (whether written or oral), all of which
are merged herein. No provision of this Agreement or any Additional
Agreement may be explained or qualified by any agreement,
negotiations, understanding, discussion, conduct or course of
conduct or by any trade usage. Except as otherwise expressly stated
herein or any Additional Agreement, there is no condition precedent
to the effectiveness of any provision hereof or thereof. No Party
has relied on any representation from, or warranty or agreement of,
any Person in entering into this Agreement, prior hereto or
contemporaneous herewith or any Additional Agreement, except those
expressly stated herein or therein.
A
determination by a court or other legal authority of competent
jurisdiction that any provision that is not of the essence of this
Agreement is legally invalid shall not affect the validity or
enforceability of any other provision hereof. The Parties shall
cooperate in good faith to substitute (or cause such court or other
legal authority to substitute) for any provision so held to be
invalid a valid provision, as alike in substance to such invalid
provision as is lawful.
100
13.11 Construction
of certain terms and references; captions.
In this
Agreement:
(a) References to
particular sections and subsections, schedules, and exhibits not
otherwise specified are cross-references to sections and
subsections, schedules, and exhibits of this
Agreement.
(b) The words
“herein,” “hereof,”
“hereunder,” and words of similar import refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and, unless the context requires otherwise,
“Party” means a party signatory hereto.
(c) Any use of the
singular or plural, or the masculine, feminine, or neuter gender,
includes the others, unless the context otherwise requires;
“including” means “including without
limitation;” “or” means “and/or;”
“any” means “any one, more than one, or
all;” and, unless otherwise specified, any financial or
accounting term has the meaning of the term under United States
generally accepted accounting principles as consistently applied
heretofore by the Acquired Companies.
(d) Unless otherwise
specified, any reference to any agreement (including this
Agreement), instrument, or other document includes all schedules,
exhibits, or other attachments referred to therein, and any
reference to a statute or other law includes any rule, regulation,
ordinance, or the like promulgated thereunder, in each case, as
amended, restated, supplemented, or otherwise modified from time to
time. Any reference to a numbered schedule means the same-numbered
section of the disclosure schedule.
(e) If any action is
required to be taken or notice is required to be given within a
specified number of days following a specific date or event, the
day of such date or event is not counted in determining the last
day for such action or notice. If any action is required to be
taken or notice is required to be given on or before a particular
day which is not a Business Day, such action or notice shall be
considered timely if it is taken or given on or before the next
Business Day. With respect to any date or time period specified
herein or in any Additional Agreement, time is of the
essence.
(f) Captions are not a
part of this Agreement, but are included for convenience,
only.
(g) No reference to or
disclosure of any information in the Disclosure Schedules shall be
construed as an admission or indication that such information is
material or that such information is required to be referred to or
disclosed in the Disclosure Schedules nor shall such information be
deemed to establish a level or standard of materiality for purposes
of this Agreement;
(h) The terms
“Dollars” and “$” mean United States
Dollars;
(i) Information shall
be considered to have been “delivered to” or
“made available” (or words of similar import) to
Purchaser if provided in the “virtual data room” hosted
by Akerman Connect.
Each
Party shall execute and deliver such documents and take such
action, as may reasonably be considered within the scope of such
Party’s obligations hereunder, necessary to effectuate the
transactions contemplated by this Agreement.
101
13.13 Third
Party Beneficiaries.
Except
with respect to Persons entitled to indemnification under
Article X hereof,
neither this Agreement nor any provision hereof confers any benefit
or right upon or may be enforced by any Person not a signatory
hereto; provided, however, that the Debt Financing Source Related
Parties shall be express third party beneficiaries of and have the
right to enforce Sections
11.1, 13.2(a), 13.7, 13.13 and 13.17.
(a) By executing this
Agreement or a Joinder or by executing and delivering a Letter of
Transmittal, each Seller hereby appoints Mark Tkach (and Mark Tkach
hereby consents to such appointment) as agent, proxy and
attorney-in-fact for each Seller for all purposes of this Agreement
and the Additional Agreements, including the full power and
authority on each such Seller’s behalf to (i) to give and
receive notices and communications to or by the Purchaser for any
purpose under this Agreement and the Additional Agreements, (ii) to
agree to, negotiate, enter into settlements and compromises of and
demand mediation and comply with orders of courts and awards of
arbitrators with respect to any indemnification claims (including
Third-Party Claims) under Article XII, the Post-Closing Adjustment,
or other disputes arising under or related to this Agreement or the
Additional Agreements, (iii) to enter into and deliver the Escrow
Agreement on behalf of each of the Sellers and to disburse any
funds or shares of Purchaser Common Stock received hereunder or
pursuant to the Escrow Agreement, (iv) to authorize or object to
delivery to the Purchaser of the Escrow Fund, or any portion
thereof, in satisfaction of indemnification claims by the Purchaser
in accordance with the provisions of the Escrow Agreement, (v) to
act on behalf of Sellers in accordance with the provisions of the
Agreement and the Additional Agreements, the securities described
herein and any other document or instrument executed in connection
with the Agreement and the Transactions, (vi) to endorse and
deliver any certificates or instruments of assignment as Purchase
shall reasonably request; (vii) to execute and deliver on behalf of
each such Seller any amendment, waiver, ancillary agreement and
documents on behalf of any Seller that the Sellers’
Representative deems necessary or appropriate; and (viii) to take
all actions necessary or appropriate in the judgment of the
Sellers’ Representative for the accomplishment of the
foregoing and to do each and every act and exercise any and all
rights which the Sellers collectively are permitted or required to
do or exercise under this Agreement. Purchaser is expressly
authorized to rely on the genuineness of the signature of
Sellers’ Representative and, upon receipt of any writing
which reasonably appears to have been signed by Sellers’
Representative, Purchaser may act in good faith upon the same
without any further duty of inquiry as to the genuineness of the
writing.
(b) Such agency may be
changed by the Sellers from time to time upon no less than twenty
(20) days prior written notice to the Purchaser, provided, however,
that the Sellers’ Representative may not be removed unless
holders of at least 51% of all of the Transferred Equity Interests
on an as-if converted basis outstanding immediately prior to the
Transactions agrees to such removal. Any vacancy in the position of
Sellers’ Representative may be filled by approval of the
holders of at least 51% of all of the Transferred Equity Interests
on an as-if converted basis outstanding immediately prior to the
Transactions. Any removal or change of the Sellers’
Representative shall not be effective until written notice is
delivered to Purchaser. No bond shall be required of the
Sellers’ Representative, and the Sellers’
Representative shall not receive any compensation for his services.
Notices or communications to or from the Sellers’
Representative shall constitute notice to or from the
Sellers.
(c) A decision, act,
consent or instruction of the Sellers’ Representative shall,
for all purposes hereunder, constitute a decision, act, consent or
instruction of all of the Sellers of the Acquired Companies and
shall be final, binding and conclusive upon each of the Sellers. In
connection with this Agreement, the Escrow Agreement and any
instrument, agreement or document relating hereto or thereto, and
in exercising or failing to exercise all or any of the powers
conferred upon the Sellers’ Representative hereunder (i) the
Sellers’ Representative shall incur no responsibility
whatsoever to any Sellers by reason of any error in judgment or
other act or omission performed or omitted hereunder or in
connection with the Escrow Agreement or any such other agreement,
instrument or document, excepting only responsibility for any act
or failure to act which represents willful misconduct, and (ii) the
Sellers’ Representative shall be entitled to rely on the
advice of counsel, public accountants or other independent experts
experienced in the matter at issue, and any error in judgment or
other act or omission of the Sellers’ Representative pursuant
to such advice shall in no event subject the Sellers’
Representative to liability to any Sellers. Each Seller shall
severally (in accordance with their ownership percentages in the
Acquired Companies as set forth on Schedule 13.14(c)), and not
jointly, indemnify the Sellers’ Representative, against all
losses, damages, liabilities, claims, obligations, costs and
expenses, including reasonable attorneys’, accountants’
and other experts’ fees and the amount of any judgment
against them, of any nature whatsoever (including, but not limited
to, any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation,
commenced or threatened or any claims whatsoever)
(“Sellers’
Representative Losses”), arising out of or in
connection with any actions taken or omitted to be taken by the
Sellers’ Representative pursuant to the terms of this
Agreement or the Escrow Agreement (including any claim,
investigation, challenge, action or proceeding or in connection
with any appeal thereof, relating to the acts or omissions of the
Sellers’ Representative hereunder, or under the Escrow
Agreement or otherwise), in each case as such Sellers’
Representative Loss is incurred or suffered. If not paid directly
to the Sellers’ Representative by the Sellers, any such
Sellers’ Representative Loss may be recovered by the
Sellers’ Representative from the Escrow Fund otherwise
distributable to the Sellers pursuant to the terms hereof and the
Escrow Agreement at the time of distribution in accordance with
written instructions delivered by the Sellers’ Representative
to the Escrow Agent; provided that while this section allows the
Sellers’ Representative to be paid from the Escrow Fund, this
does not relieve the Sellers from their obligation to promptly pay
such Sellers’ Representative Losses as they are suffered or
incurred, nor does it prevent the Sellers’ Representative
from seeking any remedies available to it at law or
otherwise.
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13.15 Specific
Performance.
The
Parties agree that irreparable damage would occur if any provision
of this Agreement were not performed in accordance with the terms
hereof and that the Parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy to
which they are entitled at law or in equity.
Effective
as of the Closing and to the fullest extent permitted by applicable
Law, each Seller, on his, her, or its own behalf and on behalf of
its past, present or future officers, managers, partners, agents,
attorneys, advisors, representatives, heirs, successors and
assigns, including any receiver, any assignee for the benefit of
creditors or any trustee under the United States Bankruptcy Code
(each, a “Releasing
Party” and, collectively, the “Releasing Parties”)
hereby absolutely, unconditionally and irrevocably releases and
forever discharges the Acquired Companies and their respective
Affiliates, successors and past, present and future assigns,
trusts, trustees, owners, partners, managers, directors, officers,
agents, attorneys and representatives (collectively, the
“Released
Parties”) from the following (collectively, the
“Released
Claims”): all claims, actions, causes of action,
suits, debts, liabilities, obligations, sums of money, accounts,
covenants, contracts, controversies, agreements, promises, damages,
judgments, executions, claims and demands arising out of, relating
to or in any way connected with the Acquired Companies or the
transactions contemplated by this Agreement, including (without
limitation) all claims related to any Releasing Party’s
ownership or purported ownership in the Acquired Companies or any
actual or promised grants of any of the foregoing, any Releasing
Party’s relationship with any of the Acquired Companies and
all claims related to the payment amounts set forth herein,
including the allocation thereof among the Sellers in accordance
with the Payment Notice, whether known or unknown, suspected or
unsuspected, absolute or contingent, direct or indirect or
nominally or beneficially possessed or claimed by a Releasing
Party, whether the same be in administrative proceedings, in
arbitration or admiralty, at law, in equity or mixed, which such
Releasing Party ever had or now has against the Released Parties
(or any of them), in respect of any and all agreements, liabilities
or obligations entered into or incurred on or prior to the Closing
Date, or in respect of any event occurring or circumstances
existing on or prior to the Closing Date, whether or not relating
to claims or circumstances existing on or prior to the Closing
Date, whether or not relating to claims pending on, or asserted
after, the Closing Date; provided, however, that the Released
Claims shall not include any rights and claims arising under this
Agreement or any Additional Agreement. Each of the Releasing
Parties acknowledges that it may hereafter discover facts in
addition to or different from those that such Releasing Party now
knows or believes to be true with respect to the subject matter of
this release, but it is such Releasing Parties’ intention to
fully and finally and forever settle and release any and all
Released Claims, respectively, that do now exist, may exist or
heretofore have existed with respect to the subject matter of this
release. In furtherance of this intention, the releases contained
in this Section
13.16 shall be and remain in effect as full and complete
general releases notwithstanding the discovery or existence of any
such additional or different facts.
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13.17 Spousal
Consent.
Simultaneously with the execution of this Agreement, each Principal
Owner shall deliver to Purchaser a spousal consent in the
form attached hereto as
Exhibit
G executed by his
spouse.
13.19
Notwithstanding
anything to the contrary herein, the Sellers, on behalf of
themselves, the Acquired Companies, and, to the extent permitted by
law, the other Seller Related Parties (i) acknowledge that none of
the Debt Financing Source Related Parties shall have any liability
to any Seller Related Party under this Agreement or for any claim
made by any Seller Related Party based on, in respect of, or by
reason of, the Transactions, including, but not limited to, any
dispute relating to, or arising from, the Debt Financing, the Debt
Financing Commitment Letter or the performance thereof, (ii) waive
any rights or claims of any kind or nature (whether in law or in
equity, in contract, in tort or otherwise) any Seller Related Party
may have against any Debt Financing Source Related Party relating
to this Agreement, the Debt Financing or the Transactions and (iii)
agree not to commence (and, if commenced, agrees to dismiss or
otherwise terminate, and not to assist) any action, arbitration,
audit, hearing, investigation, litigation, petition, grievance,
complaint, suit or proceeding against any Debt Financing Source
Related Party in connection with this Agreement, the Debt
Financing, the Debt Financing Commitment Letter or the
Transactions. Nothing in this Section 13.17 will limit the
rights of Purchaser or any Merger Sub in respect of the Debt
Financing Commitment Letter, the Debt Financing, or the Debt
Financing Documents. Without limiting the foregoing, no Debt
Financing Source Related Party shall be subject to any special,
consequential, punitive or indirect damages or damages of a
tortious nature to a Seller Related Party.
13.19 Additional Definitions. The
following terms, as used
herein in connection with the Debt Financing, have the following
meanings:
(a) “Debt
Financing” means the arrangement and implementation of
debt financing to be provided by the Debt Financing Sources
pursuant to the Debt Financing Commitment Letter and incurred in
connection with the Transactions.
104
(b) “Debt Financing Commitment
Letter” means that certain commitment letter, by and
among the Purchaser and the Debt Financing Sources, pursuant to
which the Debt Financing Sources thereto have committed, subject to
the terms and conditions thereof, to lend the amounts set forth
therein for the purpose of funding a portion of the aggregate value
of the Transactions.
(c) “Debt Financing Documents”
means any documentation necessary or desirable in connection with
the Debt Financing, including, but not limited to, credit
agreements, security agreements, mortgages, promissory notes,
joinder agreements, prospectuses, private placement memoranda,
information memoranda and packages and lender and investor
presentations. For the avoidance of doubt, the Debt Financing
Commitment Letter is not a Debt Financing Document.
(d) “Debt Financing Source Related
Parties” means the Debt Financing Sources, any other
lenders party from time to time to any agreement related to the
Debt Financing, their respective Affiliates and their and their
respective Affiliates’ respective directors, officers,
employees, agents, advisors and other representatives, and their
successors and permitted assigns.
(e) “Debt Financing Sources”
means the lenders, arrangers and bookrunners party from time to
time to the Debt Financing Commitment Letter.
(f) “Seller Related Parties”
means, collectively, the Sellers, the Acquired Companies, their
respective Affiliates and their and their respective
Affiliates’ respective directors, officers, employees,
agents, advisors and other representatives, and their successors
and permitted assigns.
[The remainder of this page intentionally left blank;
signature pages to follow]
105
IN
WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be duly executed as of the day and year first above
written.
|
|
PURCHASER:
RUMBLEON,
INC.
By:
/s/ Marshall
Chesrown
Name:
Marshall Chesrown
Title:
Chairman of the Board and Chief Executive Officer
SELLERS’
REPRESENTATIVE:
By:
/s/ Mark
Tkach
Name:
Mark Tkach
SELLERS:
By:
/s/ William
Coulter
Name:
William Coulter
By:
/s/ Mark
Tkach
Name:
Mark Tkach
|
106
|
|
MERGED
ENTITIES:
C&W MOTORS, INC.,
an
Arizona corporation
By:
/s/ William
Coulter
Name:
William
Coulter
Title:
Authorized Officer
METRO MOTORCYCLE, INC.,
an
Arizona corporation
By:
/s/ William
Coulter
Name:
William
Coulter
Title:
Authorized
Officer
TUCSON MOTORCYCLES, INC.,
an
Arizona corporation
By:
/s/ William
Coulter
Name:
William
Coulter
Title:
Authorized
Officer
TUCSON MOTORSPORTS, INC.,
an
Arizona corporation
By:
/s/ William
Coulter
Name:
William
Coulter
Title:
Authorized
Officer
|
108
|
|
MERGER
SUBS:
RO MERGER SUB I, INC.,
an
Arizona corporation
By:
/s/ Marshall
Chesrown
Name:
Marshall Chesrown
Title:
President
RO MERGER SUB II, INC.,
an
Arizona corporation
By:
/s/ Marshall
Chesrown
Name:
Marshall Chesrown
Title:
President
RO MERGER SUB III, INC.,
an
Arizona corporation
By:
/s/ Marshall
Chesrown
Name:
Marshall Chesrown
Title:
President
RO MERGER SUB IV, INC.,
an
Arizona corporation
By:
/s/ Marshall
Chesrown
Name:
Marshall Chesrown
Title:
President
|
109
Exhibit
A-1
Key
Employees
William
Coulter
Mark
Tkach
A-1
Exhibit
A-2
Key
Employees
Omitted
A-2
Exhibit B
None
B-1
Exhibit
C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT
(“Agreement”)
is made and entered into as of ________, 2021, by and among:
RumbleOn, Inc., a Nevada corporation (“Purchaser”);the
Sellers’ Representative (as defined in the Purchase Agreement
(as defined below)) of the Persons identified from time to time
on Schedule
1 hereto; and Continental Stock Transfer & Trust
Company, a New York corporation (the “Escrow
Agent”). Except as set
forth herein, each capitalized term used but not otherwise defined
herein shall have the meaning ascribed to such term in the Purchase
Agreement.
WHEREAS, this Agreement is delivered pursuant to
Section 3.1(c) of that certain Plan of Merger and Equity Purchase
Agreement, dated March 12, 2021, by and among Purchaser, RO Merger
Sub I, Inc., an Arizona corporation and wholly owned subsidiary of
Purchaser, RO Merger Sub II, Inc., an Arizona corporation and
wholly owned subsidiary of Purchaser, RO Merger Sub III, Inc., an
Arizona corporation and wholly owned subsidiary of Purchaser, RO
Merger Sub IV, Inc., an Arizona corporation and wholly owned
subsidiary of Purchaser, C&W Motors, Inc., an Arizona
corporation, Metro Motorcycle, Inc., an Arizona corporation, Tucson
Motorcycles, Inc., an Arizona corporation, and Tucson Motorsports,
Inc., an Arizona corporation, William Coulter
(“Coulter”),
Mark Tkach (“Tkach”
and together with Coulter, the “Principal
Owners”), and each other
Person who owns an Equity Interest in any Transferred Entity and
executes a Seller Joinder (together with the Principal Owners, the
“Sellers”
and each, a “Seller”),
and Sellers’ Representative (the “Purchase
Agreement”), pursuant to
which a portion of the consideration payable by Purchaser in
connection with the transactions contemplated by the Purchase
Agreement shall be deposited in an escrow account pursuant to this
Agreement to compensate the Purchaser Indemnitees for any claims by
such parties for Losses suffered or incurred by them and for which
they are entitled to recovery under the Purchase Agreement;
and
WHEREAS,
the Sellers have appointed Sellers’ Representative as their
representative under the Purchase Agreement.
NOW
THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto agree as
follows:
1. Appointment
(a) Each
of Purchaser and Sellers’ Representative hereby appoints the
Escrow Agent as its escrow agent for the purposes set forth herein,
and the Escrow Agent hereby accepts such appointment under the
terms and conditions set forth herein.
(b) All
capitalized terms with respect to the Escrow Agent shall be defined
herein. The Escrow Agent shall act only in accordance with the
terms and conditions contained in this Agreement and shall have no
duties or obligations with respect to the Purchase
Agreement.
2. Escrow
Shares
(a) Purchaser
agrees to deposit with the Escrow Agent [●] shares of Class B
Common Stock, par value $0.001 per share of Purchaser (the
“Escrow
Shares”) on the date
hereof. The Escrow Agent shall hold the Escrow Shares as a
registered in the name of the applicable Seller in the amounts set
forth on Schedule
1.
(b) During
the term of this Agreement, each Seller shall have
the right to exercise any voting rights with respect to any of his,
her or its respective Escrow Shares with respect to any matter for
which the Escrow Shares are permitted to vote.
C-1
(i) Any
dividends paid with respect to the Escrow Shares shall be deemed
part of the Escrow, be delivered to the Escrow Agent to be held in
a bank account, be deposited in a non-interest-bearing account to
be maintained by the Escrow Agent in the name of the Escrow Agent,
and continue to relate to the Escrow Shares for which they were
paid.
(ii) In
the event of any stock split, reverse stock split, stock dividend,
recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other
similar change in capitalization or event, or any distribution to
holders of the Class B Common Stock, par value $0.001 per share of
Purchaser (“Class B Common
Stock”) other than a
regular cash dividend, the Escrow Shares shall be appropriately
adjusted on a pro rata basis.
3. Disposition
and Termination
(a) The
Escrow Agent shall administer the Escrow Shares in accordance with
written instructions to the Escrow Agent from time to time signed
by an authorized representative of Purchaser and the Sellers’
Representative (an “Instruction”)
directing the Escrow Agent to pay or release the Escrow Shares, or
any portion thereof, as set forth in such Instruction. The Escrow
Agent shall make distributions of the Escrow Shares only in
accordance with an Instruction or a written final order of a court
of competent jurisdiction delivered by Purchaser or the
Sellers’ Representative to the Escrow Agent and accompanied
by a written statement from such party to the effect that such
order if from a court of competent jurisdiction and is final and
not subject to further proceedings or appeal (a
“Final
Decision”).
(b) Upon
the delivery of all of the Escrow Shares (and any collected
dividends paid in connection therewith) by the Escrow Agent in
accordance with the terms of this Agreement (including this
Section
3), this Agreement shall
terminate, subject to the provisions of Section 7
and Section 12
which shall survive
termination.
4. Escrow
Agent
(a) The
Escrow Agent shall have only those duties as are specifically and
expressly provided herein, which shall be deemed purely ministerial
in nature, and no other duties shall be implied. The Escrow Agent
shall neither be responsible for, nor chargeable with, knowledge
of, nor have any requirements to comply with, the terms and
conditions of any other agreement, instrument or document between
Purchaser, Sellers’ Representative, and any other person or
entity, in connection herewith, if any, including without
limitation the Purchase Agreement nor shall the Escrow Agent be
required to determine if any person or entity has complied with any
such agreements, nor shall any additional obligations of the Escrow
Agent be inferred from the terms of such agreements, even though
reference thereto may be made in this Agreement. In the event of
any conflict between the terms and provisions of this Agreement,
those of the Purchase Agreement, any schedule or exhibit attached
to this Agreement, or any other agreement between Purchaser,
Sellers’ Representative, and any other person or entity,
solely with respect to Escrow Agent the terms and conditions of
this Agreement shall control. The Escrow Agent may rely upon and
shall not be liable, except to the extent of Escrow Agent’s
fraud, gross negligence, or willful misconduct, for acting or
refraining from acting upon any written notice, document,
instruction or request furnished to it hereunder and believed by it
to be genuine and to have been signed or presented by the Purchaser
or Sellers’ Representative without inquiry and without
requiring substantiating evidence of any kind except as provided
in Section
10 hereof.
The Escrow Agent shall not be liable to any beneficiary or other
person for refraining from acting upon any instruction setting
forth, claiming, containing, objecting to, or related to the
transfer or distribution of the Escrow Shares, or any portion
thereof, unless such instruction shall have been delivered to the
Escrow Agent in accordance with Section 10
below and the Escrow Agent has been
able to satisfy any applicable security procedures as may be
required hereunder and as set forth in Section 10.
Except as expressly provided in
Section
10, the Escrow Agent shall be
under no duty to inquire into or investigate the validity, accuracy
or content of any such document, notice, instruction or request.
The Escrow Agent shall have no duty to solicit any payments which
may be due it or the Escrow Shares nor shall the Escrow Agent have
any duty or obligation to confirm or verify the accuracy or
correctness of any amounts deposited with it
hereunder.
C-2
(b) The
Escrow Agent shall not be liable for any action taken, suffered or
omitted to be taken by it in good faith except to the extent that a
final adjudication of a court of competent jurisdiction determines
that the Escrow Agent’s fraud, gross negligence or willful
misconduct resulted in any loss to any of Purchaser or the Sellers.
The Escrow Agent may execute any of its powers and perform any of
its duties hereunder directly or through affiliates or agents. The
Escrow Agent may consult with counsel, accountants and other
skilled persons to be selected and retained by it. The Escrow Agent
shall not be liable for any action taken, suffered or omitted to be
taken by it in good faith in accordance with, or in reliance upon,
the advice or opinion of any such counsel, accountants or other
skilled persons except to the extent that a final adjudication of a
court of competent jurisdiction determines that the Escrow
Agent’s fraud, gross negligence or willful misconduct
resulted in any loss to either Purchaser or the Sellers. In the
event that the Escrow Agent shall be uncertain or believe there is
some ambiguity as to its duties or rights hereunder or shall
receive instructions, claims or demands from Purchaser or
Sellers’ Representative which, in its opinion, conflict with
any of the provisions of this Agreement, it shall be entitled to
refrain from taking any action and its sole obligation shall be to
keep safely all property held in escrow until it shall be given a
direction in writing which eliminates such ambiguity or uncertainty
to the satisfaction of the Escrow Agent or by a Final
Decision.
5. Succession
(a) The
Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving thirty (30) days’ advance
notice in writing of such resignation to Purchaser and
Sellers’ Representative specifying a date when such
resignation shall take effect, provided that
such resignation shall not take effect
until a successor escrow agent has been appointed in accordance
with this Section 5.
If Purchaser and Sellers’
Representative have failed to appoint a successor escrow agent
prior to the expiration of thirty (30) days following receipt of
the notice of resignation, the Escrow Agent may petition any court
of competent jurisdiction for the appointment of a successor escrow
agent or for other appropriate relief, and any such resulting
appointment shall be binding upon all of the parties hereto. The
Escrow Agent’s sole responsibility after such thirty (30) day
notice period expires shall be to hold the Escrow Shares, and if
applicable, paid dividends thereon, (without any obligation to
reinvest the same) and to deliver the same to a designated
substitute escrow agent designated by Purchaser and Sellers’
Representative by Instruction, if any, or in accordance with the
directions of a final order or judgment of a court of competent
jurisdiction, at which time of delivery the Escrow Agent’s
obligations hereunder shall cease and terminate, subject to the
provisions of Section 7
below.
(b) Any
entity into which the Escrow Agent may be merged or converted or
with which it may be consolidated, or any entity to which all or
substantially all the escrow business may be transferred, shall be
the Escrow Agent under this Agreement without further
act.
6. Compensation
and Reimbursement
The Escrow Agent shall be entitled to compensation
for its services under this Agreement as Escrow Agent and for
reimbursement for its reasonable out-of-pocket costs and expenses,
in the amounts and payable as set forth on Schedule
2, which shall be payable 50%
by Purchaser and 50% by Sellers’s Representative, on behalf
of the Sellers. The Escrow Agent shall also be entitled to payment
of any amounts to which the Escrow Agent is entitled under the
indemnification provisions contained herein as set forth in
Section
7. The obligations of Purchaser
and Sellers’ Representative set forth in this
Section
6 shall survive the
resignation, replacement or removal of the Escrow Agent or the
termination of this Agreement.
7. Indemnity
(a) The
Escrow Agent shall be indemnified and held harmless by Purchaser
and Sellers’ Representative (on behalf of the
Sellers) from and against
any expenses, including actual and reasonable counsel fees and
disbursements, or loss suffered by the Escrow Agent in connection
with any action, suit or other proceeding involving any claim which
in any way, directly or indirectly, arises out of or relates to
this Agreement, the services of the Escrow Agent hereunder, other
than expenses or losses arising from the fraud, gross negligence or
willful misconduct of the Escrow Agent. Promptly after the receipt
by the Escrow Agent of notice of any demand or claim or the
commencement of any action, suit or proceeding, the Escrow Agent
shall notify the other parties hereto in writing. In the event of
the receipt of such notice, the Escrow Agent, in its sole
discretion, may commence an action in the nature of interpleader in
the any state or federal court located in New York County, State of
New York.
C-3
(b) The
Escrow Agent shall not be liable for any action taken or omitted by
it in good faith and in the exercise of its own best judgment, and
may rely conclusively and shall be protected in acting upon any
order, notice, demand, certificate, opinion or advice of counsel
(including counsel chosen by the Escrow Agent), statement,
instrument, report or other paper or document (not only as to its
due execution and the validity and effectiveness of its provisions,
but also as to the truth and acceptability of any information
therein contained) which is believed in good faith by the Escrow
Agent to be genuine and to be signed or presented by the proper
person or persons, subject to compliance with the provisions of
Section 10. The Escrow Agent shall not be bound by any notice or
demand, or any waiver, modification, termination or rescission of
this Agreement unless evidenced by a writing delivered to the
Escrow Agent signed by the proper party or parties and, if the
duties or rights of the Escrow Agent are affected, unless it shall
have given its prior written consent thereto.
(c) Except
to the extent of the Escrow Agent’s fraud, gross negligence
or willful misconduct, the Escrow Agent shall not be liable for any
action taken by it in good faith and believed by it to be
authorized or within the rights or powers conferred upon it by this
Agreement, and may consult with counsel of its own choice and shall
have full and complete authorization and indemnification, for any
action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
(d) This
Section
7 shall survive termination of
this Agreement or the resignation, replacement or removal of the
Escrow Agent for any reason.
8. Patriot
Act Disclosure/Taxpayer Identification Numbers/Tax
Reporting
(a) Patriot
Act Disclosure. Section 326 of the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (“USA PATRIOT
Act”) requires the Escrow
Agent to implement reasonable procedures to verify the identity of
any person that opens a new account with it. Accordingly, each of
Purchaser and Sellers’ Representative acknowledges that
Section 326 of the USA PATRIOT Act and the Escrow Agent’s
identity verification procedures require the Escrow Agent to obtain
information which may be used to confirm identity including without
limitation name, address and organizational documents
(“identifying
information”). Each
Purchaser and Sellers’ Representativeagrees to provide the
Escrow Agent with and consent to the Escrow Agent obtaining from
third parties any such identifying information required as a
condition of opening an account with or using any service provided
by the Escrow Agent.
(b) Such
underlying transaction does not constitute an installment sale
requiring any tax reporting or withholding of imputed interest or
original issue discount to the IRS or other taxing
authority.
9. Notices.
All communications hereunder shall be
in writing and except for communications from Purchaser and
Sellers’ Representative setting forth, claiming, containing,
objecting to, or in any way related to the full or partial transfer
or distribution of the Escrow Shares, including but not limited to
transfer instructions (all of which shall be specifically governed
by Section 10
below), all notices and communications
hereunder shall be deemed to have been duly given and made if in
writing and if (a) served by personal delivery upon the party for
whom it is intended, (b) delivered by registered or certified mail,
return receipt requested, or by Federal Express or similar
reputable overnight courier, or (c) sent by facsimile or email,
provided that the receipt of such facsimile or email is promptly
confirmed, by telephone or confirmatory email, to the party at the
address set forth below, or such other address as may be designated
in writing hereafter, in the same manner, by such
party:
C-4
If
to Purchaser:
RumbleOn,
Inc.
901
W. Walnut Hill Lane
Irving,
Texas 75038
Tel:
469.250.1185
Attention: Marshall Chesrown (marshall@rumbleon.com),
Steve Berrard (sberrard@newrivercapital.com),
and Peter Levy (peter@rumbleon.com)
with
a copy to (which shall not constitute notice):
Akerman
LLP
The
Main Las Olas
201
East Las Olas Boulevard
Suite
1800
Fort
Lauderdale, FL 33301
Tel:
954.463.2700
Fax:
942.463.2224
Attention: Michael Francis (michael.francis@akerman.com),
Christina Russo (christina.russo@akerman.com),
and Scott Wasserman (scott.wasserman@akerman.com)
If
to Sellers’ Representative:
Mark
Tkach
c/o
Coulter Cadillac
1188 E.
Camelback Road
Phoenix, AZ
85014
Attention: Mark
Tkach (mtkach@ridenow.com)
with
a copy to (which shall not constitute notice):
Gallagher &
Kennedy P.A.
2575
East Camelback Road
Phoenix, Arizona,
85016
Attention: Stephen
R. Boatwright
Tel:
602.530.8301
Email: steve.boatwright@gknet.com
If
to the Escrow Agent:
Continental Stock
Transfer and Trust
One
State Street — 30th Floor
New
York, New York 10004
Facsimile No: (212)
616-7615
Attention:
[●]
Email:
[●]
Notwithstanding the above, in the case of communications delivered
to the Escrow Agent, such communications shall be deemed to have
been given on the date received by an officer of the Escrow Agent
or any employee of the Escrow Agent who reports directly to any
such officer at the above-referenced office. In the event that the
Escrow Agent, in its sole discretion, shall determine that an
emergency exists, the Escrow Agent may use such other means of
communication as the Escrow Agent deems appropriate. For purposes
of this Agreement, “Business
Day” shall mean any day
other than a Saturday, Sunday or any other day on which the Escrow
Agent located at the notice address set forth above is authorized
or required by law or executive order to remain
closed.
C-5
Any party may change the address to which notices or other
communications hereunder are to be delivered by giving notice to
the other parties in the manner set forth in this
Section
9.
10. Security
Procedures
(a) Notwithstanding
anything to the contrary as set forth in Section 9,
any instructions setting forth,
claiming, containing, objecting to, or in any way related to the
transfer or distribution, including but not limited to any transfer
instructions that may otherwise be set forth in a written
instruction permitted pursuant to Section 3
of this Agreement, may be given to the
Escrow Agent only by confirmed facsimile or other electronic
transmission (including e-mail) and no instruction for or related
to the transfer or distribution of the Escrow Shares, or any
portion thereof, shall be deemed delivered and effective unless the
Escrow Agent actually shall have received such instruction by
facsimile or other electronic transmission (including e-mail) at
the number or e-mail address provided by the Escrow Agent in
accordance with Section 9
and as further evidenced by a
confirmed transmittal to that number or email address. Any notice
sent to Escrow Agent by Purchaser, on one hand, or Sellers’
Representative, on the other hand, shall be sent simultaneously to
the other party.
(b) In
the event transfer instructions are so received by the Escrow Agent
by facsimile or other electronic transmission (including e-mail),
the Escrow Agent is required and authorized to seek confirmation of
such instructions by telephone call-back to the person or persons
designated on Schedule 3
hereto, and the Escrow Agent may rely
upon the confirmation of anyone purporting to be the person or
persons so designated. The persons and telephone numbers for
call-backs may be changed only in a writing actually received and
acknowledged by the Escrow Agent. If the Escrow Agent is unable to
contact any of Purchaser’s authorized representatives
identified in Schedule 3,
the Escrow Agent is hereby authorized
both to receive written instructions from and seek confirmation of
such instructions by officers of Purchaser (collectively, the
“Senior
Officers”), as the case
may be, which shall include the titles of Chief Executive Officer,
Chief Financial Officer, Chief Operating Officer, and Chief
Administrative Officer, as the Escrow Agent may select. Such Senior
Officer shall deliver to the Escrow Agent a fully executed
incumbency certificate, and the Escrow Agent may rely upon the
confirmation of anyone purporting to be any such
officer.
11. Compliance with
Court Orders. The Escrow Shares
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 Purchaser, the Sellers, or Sellers’
Representative.
12. Miscellaneous.
Except for changes to transfer instructions as provided in
Section
10, the provisions of this
Agreement may be waived, altered, amended or supplemented, in whole
or in part, only by a writing signed by the Escrow Agent and each
of Purchaser and Sellers’ Representative. Neither this
Agreement nor any right or interest hereunder may be assigned in
whole or in part by the Escrow Agent or Purchaser or Sellers’
Representative except as provided in Section 5,
without the prior consent of the
Escrow Agent and each of Purchaser and Sellers’
Representative. 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. This Agreement
shall be governed by and construed under the laws of the State of
New York. Each of Purchaser, Sellers’ Representative, and the
Escrow Agent irrevocably waives any objection on the grounds of
venue, forum non-conveniens or any similar grounds and irrevocably
consents to service of process by mail or in any other manner
permitted by applicable law and consents to the jurisdiction of any
court of the State of New York or United States federal court, in
each case, sitting in New York County, New York. To the extent that
in any jurisdiction any party may now or hereafter be entitled to
claim for itself or its assets, immunity from suit, execution
attachment (before or after judgment), or other legal process, such
party shall not claim, and it hereby irrevocably waives, such
immunity. THE PARTIES FURTHER HEREBY WAIVE ANY RIGHT TO A TRIAL BY
JURY WITH RESPECT TO ANY LAWSUIT OR JUDICIAL PROCEEDING ARISING OR
RELATING TO THIS AGREEMENT. No party to this Agreement is liable to
any other party for losses due to, or if it is unable to perform
its obligations under the terms of this Agreement because of, acts
of God, fire, war, terrorism, floods, strikes, electrical outages,
equipment or transmission failure, or other causes reasonably
beyond its control (a “Force Majeure Event”), provided,
however, that if Escrow Agent suffers a Force Majeure Event which
continues for more than thirty days, then Escrow Agent shall
provide written notice to Purchaser and Sellers’
Representative of such Force Majeure Event and Purchaser and
Sellers’ Representative may appoint a successor escrow agent
in accordance with Section 5
of this Agreement. This Agreement may
be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one
and the same instrument. All signatures of the parties to this
Agreement may be transmitted by facsimile or other electronic
transmission (including e-mail, .pdf, or DocuSign), and such
facsimile or other electronic transmission (including e-mail, .pdf,
or DocuSign) will, for all purposes, be deemed to be the original
signature of such party whose signature it reproduces, and will be
binding upon such party. If any provision of this Agreement is
determined to be prohibited or unenforceable by reason of any
applicable law of a jurisdiction, then such provision shall, as to
such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions
thereof, and any such prohibition or unenforceability in such
jurisdiction shall not invalidate or render unenforceable such
provisions in any other jurisdiction. A person who is not a party
to this Agreement shall have no right to enforce any term of this
Agreement. The parties represent, warrant and covenant that each
document, notice, instruction or request provided by such party to
the other party shall comply with applicable laws and regulations.
Where, however, the conflicting provisions of any such applicable
law may be waived, they are hereby irrevocably waived by the
parties hereto to the fullest extent permitted by law, to the end
that this Agreement shall be enforced as written. Nothing in this
Agreement, whether express or implied, shall be construed to give
to any person or entity other than the Escrow Agent and Purchaser
and Sellers’ Representative any legal or equitable right,
remedy, interest or claim under or in respect of this Agreement or
the Escrow Shares escrowed hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
C-6
IN WITNESS WHEREOF,
the parties hereto have executed this
Agreement as of the date set forth above.
|
|
PURCHASER:
RUMBLEON, INC.
By:
___________________________
Name:
Marshall Chesrown
Title:
President and Chief Executive Officer
SELLERS’ REPRESENTATIVE
______________________________
Mark
Tkach
ESCROW AGENT:
CONTINENTAL STOCK TRANSFER AND TRUST
By:
____________________________
Name:
_________________________
Title:
_________________________
|
C-7
Schedule 1
|
Seller
|
Number of Escrow Shares
|
|
William Coulter
|
|
|
Mark Tkach
|
|
C-8
Schedule 2
[Continental to provide fee schedule]
C-9
Schedule 3
Telephone Number(s) and authorized signature(s) for Person(s)
Designated to give Instructions on behalf of Purchaser or
Sellers’ Representative, as applicable:
For Parent:
Name,
Title
Telephone
Number
Signature_________________
Marshall
Chesrown
_______________________
_________________________
Chief Executive Officer
Steve
Berrard
_______________________
_________________________
Chief Financial Officer
For Company Stockholders Representative:
Name
Telephone
Number
Signature_________________
Mark
Tkach
_______________________
_________________________
C-10
Exhibit
D
Sample
Exhibit
E
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
THIS REGISTRATION RIGHTS AND LOCK-UP
AGREEMENT (this “Agreement”), dated as of
[●], 2021, is made and entered into by and among (i)
RumbleOn, Inc., a Nevada corporation (the “Company”), (ii) each of
the Persons listed on Schedule A attached hereto (the
“Schedule of
Holders”) as of the date hereof, and (iii) each of the
other Persons set forth from time to time on the Schedule of
Holders who, at any time, own securities of the Company and enter
into a joinder to this Agreement agreeing to be bound by the terms
hereof (each Person identified in the foregoing (ii) and (iii), a
“Holder” and,
collectively, the “Holders”).
RECITALS
WHEREAS, the Company, as the purchaser,
has entered into a Plan of Merger and Equity Purchase Agreement,
dated March 12, 2021(the “Merger and Equity Purchase
Agreement”), by and among RO Merger Sub I, Inc.,
an Arizona corporation and wholly owned subsidiary of the Company,
RO Merger Sub II, Inc., an Arizona corporation and wholly owned
subsidiary of the Company, RO Merger Sub III, Inc., an Arizona
corporation and wholly owned subsidiary of the Company, RO Merger
Sub IV, Inc., an Arizona corporation and wholly owned subsidiary of
the Company, C&W Motors, Inc., an Arizona corporation, Metro
Motorcycle, Inc., an Arizona corporation, Tucson Motorcycles, Inc.,
an Arizona corporation, and Tucson Motorsports, Inc., an Arizona
corporation, William Coulter, an individual (“Coulter”), Mark Tkach, an
individual (and together with Coulter, the “Principal Owners”), and
together with the parties joining therein (together with the
Principal Owners, the “Sellers”) and Mark Tkach,
as the representative of the Sellers, setting forth the terms of a
business combination (“Business Combination”);
and
WHEREAS, in connection with the Merger
and Equity Purchase Agreement, the Sellers shall receive shares of
Common Stock, pursuant to the terms of the Merger and Equity
Purchase Agreement.
NOW, THEREFORE, in consideration of the
representations, covenants and agreements contained herein, and
certain other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as
follows:
1. Resale Shelf Registration
Rights.
(a) Registration Statement Covering Resale
of Registrable Securities. The Company shall prepare and
file or cause to be prepared and filed with the Commission, no
later than thirty (30) days following the closing of the Business
Combination (the “Filing Deadline”), a
Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 of the Securities Act registering the
resale from time to time by the holders of all of the Registrable
Securities held by the Holders (the “Resale Shelf Registration
Statement”). The Resale Shelf Registration Statement
shall be on Form S-3 (“Form S-3”) or such other
appropriate form permitting Registration of such Registrable
Securities for resale by such Holders. The Company shall use
commercially reasonable efforts to cause the Resale Shelf
Registration Statement to be declared effective as soon as possible
after filing, but in no event later than the earlier of (i) sixty
(60) days following the Filing Deadline or (ii) ten (10) Business
Days after the Commission notifies the Company that it will not
review the Resale Shelf Registration Statement, if applicable (the
“Effectiveness
Deadline”); provided, that the Effectiveness
Deadline shall be extended by no more than ninety (90) days after
the Filing Deadline if the Registration Statement is reviewed by,
and receives comments from, the Commission. Once effective, the
Company shall use commercially reasonable efforts to keep the
Resale Shelf Registration Statement continuously effective and
shall cause the Resale Shelf Registration Statement to be
supplemented and amended to the extent necessary to ensure that
such Registration Statement is available or, if not available, to
ensure that another Registration Statement is available, under the
Securities Act at all times until such date that theHolders may
sell all of the Registrable Securities owned by such Holder
pursuant to Rule 144 of the Securities Act without any restrictions
as to volume or manner of sale or otherwise (the
“Effectiveness
Period”). The Resale Shelf Registration Statement
shall contain a Prospectus in such form as to permit any Holder to
sell such Registrable Securities pursuant to Rule 415 under the
Securities Act (or any successor or similar provision adopted by
the Commission then in effect) at any time beginning on the
effective date for such Registration Statement (subject to lock-up
restrictions provided in this Agreement), and shall provide that
such Registrable Securities may be sold pursuant to any method or
combination of methods legally available to, and requested by, the
Holders.
E-1
(b) Notification and Distribution of
Materials. The Company shall notify the Holders in writing
of the effectiveness of the Resale Shelf Registration Statement as
soon as practicable, and in any event within one (1) Business Day
after the Resale Shelf Registration Statement becomes effective,
and shall furnish to them, without charge, such number of copies of
the Resale Shelf Registration Statement (including any amendments,
supplements and exhibits), the Prospectus contained therein
(including each preliminary prospectus and all related amendments
and supplements) and any documents incorporated by reference in the
Resale Shelf Registration Statement or such other documents as the
Holders may reasonably request in order to facilitate the sale of
the Registrable Securities in the manner described in the Resale
Shelf Registration Statement.
(c) Amendments and Supplements.
Subject to the provisions of Section 1(a) above, the Company
shall promptly prepare and file with the Commission from time to
time such amendments and supplements to the Resale Shelf
Registration Statement and Prospectus used in connection therewith
as may be necessary to keep the Resale Shelf Registration Statement
effective and to comply with the provisions of the Securities Act
with respect to the disposition of all the Registrable Securities
during the Effectiveness Period. If any Resale Shelf Registration
Statement filed pursuant to Section 1(a) is filed on Form
S-3 and thereafter the Company becomes ineligible to use Form S-3
for secondary sales, the Company shall promptly notify the Holders
of such ineligibility and shall file a shelf registration on Form
S-1 or other appropriate form as promptly as practicable to replace
the shelf registration statement on Form S-3 and use its
commercially reasonable efforts to have such replacement Resale
Shelf Registration Statement declared effective as promptly as
practicable and to cause such replacement Resale Shelf Registration
Statement to remain effective, and shall cause the Resale Shelf
Registration Statement to be supplemented and amended to the extent
necessary to ensure that such Resale Shelf Registration Statement
is available or, if not available, that another Resale Shelf
Registration Statement is available, for the resale of all the
Registrable Securities held by the Holders until all such
Registrable Securities have ceased to be Registrable
Securities;provided,
however, that at any time the Company once again becomes
eligible to use Form S-3, the Company shall cause such replacement
Resale Shelf Registration Statement to be amended, or shall file a
new replacement Resale Shelf Registration Statement, such that the
Resale Shelf Registration Statement is once again on Form
S-3.
(d) Notwithstanding the
registration obligations set forth in this Section 1, in the event the
Commission informs the Company that all of the Registrable
Securities cannot, as a result of the application of Rule 415, be
registered for resale as a secondary offering on a single
registration statement, the Company agrees to promptly (i) inform
each of the Holders thereof and shall file amendments to the Resale
Shelf Registration Statement as required by the Commission and/or
(ii) withdraw the Resale Shelf Registration Statement and file a
new registration statement (a “New Registration
Statement”), on Form S-3, or if Form S-3 is not then
available to the Company for such registration statement, on such
other form available to register for resale the Registrable
Securities as a secondary offering;provided, however, that prior to filing
such amendment or New Registration Statement, the Company shall
advocate with the Commission for the registration of all of the
Registrable Securities in accordance with any publicly-available
written or oral guidance, comments, requirements or requests of the
Commission staff (the “SEC Guidance”), including
without limitation, the Manual of Publicly Available Telephone
Interpretations D.29. Notwithstanding any other provision of this
Agreement, if any SEC Guidance sets forth a limitation of the
number of Registrable Securities permitted to be registered on a
particular Registration Statement as a secondary offering (and
notwithstanding that the Company used diligent efforts to advocate
with the Commission for the registration of all or a greater number
of Registrable Securities), unless otherwise directed in writing by
a Holder as to its Registrable Securities, the number of
Registrable Securities to be registered on such Registration
Statement will be reduced on a pro rata basis based on the total
number of Registrable Securities held by the Holders, subject to a
determination by the Commission that certain Holders must be
reduced first based on the number of Registrable Securities held by
such Holders. In the event the Company amends the Resale Shelf
Registration Statement or files a New Registration Statement, as
the case may be, under clauses (i) or (ii) above, the Company shall
file with the Commission, as promptly as allowed by Commission or
SEC Guidance provided to the Company or to registrants of
securities in general, one or more registration statements on Form
S-3 or such other form available to register for resale those
Registrable Securities that were not registered for resale on the
Resale Shelf Registration Statement, as amended, or the New
Registration Statement.
E-2
2. Reserved.
3. Piggyback
Registrations.
(a) Right to Piggyback. If, at any
time on or after the date the Company consummates the Business
Combination, Form S-3 is not available to the Company for the
Resale Shelf Registration Statement and the Company proposes to
register any of its securities under the Securities Act (other than
(i) pursuant to the Resale Shelf Registration Statement, (ii) in
connection with registrations on Form S-4 or S-8 promulgated by the
Commission or any successor forms, (iii) a registration relating
solely to employment benefit plans, (iv) in connection with a
registration the primary purpose of which is to register debt
securities, or (v) a registration on any form that does not include
substantially the same information as would be required to be
included in a registration statement covering the sale of
Registrable Securities) and the registration form to be used may be
used for the registration of Registrable Securities (a
“Piggyback
Registration”), the Company shall give prompt written
notice to all holders of Registrable Securities of its intention to
effect such a Piggyback Registration and, subject to the terms of
Sections 3(c) and
3(d) hereof, shall
include in such Piggyback Registration (and in all related
registrations or qualifications under blue sky laws or in
compliance with other registration requirements and in any related
underwriting) all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within
10 business days after the delivery of the Company’s notice;
provided that any such other holder may withdraw its request for
inclusion at any time prior to executing the underwriting agreement
or, if none, prior to the applicable registration statement
becoming effective.
(b) Piggyback Expenses. The
Registration Expenses of the holders of Registrable Securities
shall be paid by the Company in all Piggyback Registrations,
whether or not any such registration became effective.
(c) Priority on Primary
Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such
registration exceeds the number of securities which can be sold in
such offering without adversely affecting the marketability,
proposed offering price, timing or method of distribution of the
offering, the Company shall include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the
Registrable Securities requested to be included in such
registration by the Holders which, in the opinion of such
underwriters, can be sold, without any such adverse effect (pro
rata among the holders of such Registrable Securities on the basis
of the number of Registrable Securities owned by each such holder),
and (iii) third, other securities requested to be included in such
registration which, in the opinion of such underwriters, can be
sold, without any such adverse effect.
(d) Priority on Secondary
Registrations. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of the
Company’s securities other than holders of Registrable
Securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to
be included in such registration exceeds the number of securities
which can be sold in such offering without adversely affecting the
marketability, proposed offering price, timing or method of
distribution of the offering, the Company shall include in such
registration (i) first, the securities requested to be included
therein by the holders initially requesting such registration, (ii)
second, the Registrable Securities requested to be included in such
registration by the Holders which, in the opinion of such
underwriters, can be sold, without any such adverse effect (pro
rata among the holders of such Registrable Securities on the basis
of the number of Registrable Securities owned by each such holder),
and (iii) third, other securities requested to be included in such
registration which, in the opinion of such underwriters, can be
sold, without any such adverse effect.
E-3
(e) Other Registrations. If the
Company has previously filed a registration statement with respect
to Registrable Securities pursuant to this Section 3, and if such previous
registration has not been withdrawn or abandoned, then the Company
shall not be required to file or cause to be effected any other
registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any
successor form) at the request of any holder or holders of such
securities until a period of at least 90 days has elapsed from the
effective date of such previous registration.
(f) Right to Terminate
Registration. The Company shall have the right to terminate
or withdraw any registration initiated by it under this
Section 3 whether
or not any holder of Registrable Securities has elected to include
securities in such registration. The Registration Expenses of such
withdrawn registration shall be borne by the Company in accordance
with Section
7.
4. Agreements of
Holders.
(a) If required by the
Applicable Approving Party or the managing underwriter, in
connection with any underwritten Public Offering on or after the
date hereof, each holder of 1% or more of the outstanding
Registrable Securities shall enter into lock-up agreements with the
managing underwriter(s) of such underwritten Public Offering in
such form as agreed to by the Applicable Approving
Party;provided that the
applicable lock-up period shall not exceed 90 days.
(b) The holders of
Registrable Securities shall use commercially reasonable efforts to
provide such information as may reasonably be requested by the
Company, or the managing underwriter, if any, in connection with
the preparation of any Registration Statement, including amendments
and supplements thereto, in order to effect the Registration
Statement, including amendments and supplements thereto, in order
to effect the Registration of any Registrable Securities under the
Securities Act pursuant to Section 3 and in connection
with the Company’s obligation to comply with federal and
applicable state securities laws.
5. Registration Procedures. In
connection with the Registration to be effected pursuant to the
Resale Shelf Registration Statement, and whenever the holders of
Registrable Securities have requested that any Registrable
Securities be registered pursuant to this Agreement, the Company
shall use its commercially reasonable efforts to effect the
registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and
pursuant thereto the Company shall as expeditiously as reasonably
possible:
(a) prepare in
accordance with the Securities Act and all applicable rules and
regulations promulgated thereunder and file with the Commission a
registration statement, and all amendments and supplements thereto
and related prospectuses as may be necessary to comply with
applicable securities laws, with respect to such Registrable
Securities and use commercially reasonable efforts to cause such
registration statement to become effective (provided that at least
five (5) Business Days before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company
shall furnish to counsel selected by the Applicable Approving Party
copies of all such documents proposed to be filed, which documents
shall be subject to the review and comment of such
counsel);
E-4
(b) notify each holder
of Registrable Securities of (A) the issuance by the Commission of
any stop order suspending the effectiveness of any registration
statement or the initiation of any proceedings for that purpose,
(B) the receipt by the Company or its counsel of any notification
with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, and
(C) the effectiveness of each registration statement filed
hereunder;
(c) prepare and file
with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period ending when all of the securities covered by
such registration statement have been disposed of in accordance
with the intended methods of distribution by the sellers thereof
set forth in such registration statement (but not in any event
before the expiration of any longerperiod required under the
Securities Act or, if such registration statement relates to an
underwritten Public Offering, such longer period as in the opinion
of counsel for the underwriters a prospectus is required by law to
be delivered in connection withsale of Registrable Securities by an
underwriter or dealer) and comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(d) furnish to each
seller of Registrable Securities thereunder such number of copies
of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement
(including each preliminary prospectus), each Free-Writing
Prospectus and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such seller;
(e) during any period
in which a prospectus is required to be delivered under the
Securities Act, promptly file all documents required to be filed
with the Commission, including pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Act;
(f) use its
commercially reasonable efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws
of such jurisdictions as the lead underwriter or the Applicable
Approving Party reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such seller (provided that the
Company shall not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 4(f), (ii) consent to
general service of process in any such jurisdiction or (iii)
subject itself to taxation in any such jurisdiction);
(g) promptly notify in
writing each seller of such Registrable Securities (i) after it
receives notice thereof, of the date and time when such
registration statement and each post-effective amendment thereto
has become effective or a prospectus or supplement to any
prospectus relating to a registration statement has been filed and
when any registration or qualification has become effective under a
state securities or blue sky law or any exemption thereunder has
been obtained, (ii) after receipt thereof, of anyrequest by the
Commission for the amendment or supplementing of such registration
statement or prospectus or for additional information, and (iii) at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading,
and, at the request of any such seller, the Company promptly shall
prepare, file with the Commission and furnish to each such seller a
reasonable number of copies of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not contain an
untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not
misleading;
E-5
(h) cause all such
Registrable Securities to be listed on each securities exchange on
which similar securities issued by the Company are then listed and,
if not so listed, to be listed on a securities exchange and,
without limiting the generality of the foregoing, to arrange for at
least two market makers to register as such with respect to such
Registrable Securities with FINRA;
(i) provide a transfer
agent and registrar for all such Registrable Securities not later
than the effective date of such registration
statement;
(j) enter into and
perform such customary agreements (including underwriting
agreements in customary form) and take all such other actions as
the Applicable Approving Party or the underwriters, if any,
reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including, without
limitation, effecting a stock split or a combination of shares and
preparing for and participating in such number of “road
shows”, investor presentations and marketing events as the
underwriters managing such offering may reasonably
request);
(k) make available for
inspection by any seller of Registrable Securities, any underwriter
participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records,
pertinent corporate and business documents and properties of the
Company as shall be necessary to enable them to exercise their due
diligence responsibility, and cause the Company’s officers,
managers, directors, employees, agents, representatives and
independent accountants to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(l) take all reasonable
actions to ensure that any Free-Writing Prospectus utilized in
connection with any Piggyback Registration hereunder complies in
all material respects with the Securities Act, is filed in
accordance with the Securities Act to the extent required thereby,
is retained in accordance with the Securities Act to the extent
required thereby and, when taken together with the related
prospectus, shall not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading;
(m) otherwise use its
commercially reasonable efforts to comply with all applicable rules
and regulations of the Commission;
(n) permit any holder
of Registrable Securities who, in its good faith judgment (based on
the advice of counsel), could reasonably be expected to be deemed
to be an underwriter or a controlling Person of the Company to
participate in the preparation of such registration or comparable
statement and to require the insertion therein of material
furnished to the Company in writing, which in the reasonable
judgment of such holder and its counsel should be
included;
(o) in the event of the
issuance of any stop order suspending the effectiveness of a
registration statement, or of any order suspending or preventing
the use of any related prospectus or suspending the qualification
of any Common Stock included in such registration statement for
sale in any jurisdiction, the Company shall use its commercially
reasonable efforts promptly to obtain the withdrawal of such
order;
E-6
(p) use its
commercially reasonable efforts to cause such Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities
as may be necessary to enable the sellers thereof to consummate the
disposition of such Registrable Securities;
(q) cooperate with the
holders of Registrable Securities covered by the registration
statement and the managing underwriter or agent, if any, to
facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing securities to be sold
under the registration statement and enable such securities to be
in such denominations and registered in such names as the managing
underwriter, or agent, if any, or such holders may
request;
(r) cooperate with each
holder of Registrable Securities covered by the registration
statement and each underwriter or agent participating in the
disposition of such Registrable Securities and their respective
counsel in connection with any filings required to be made with
FINRA;
(s) if such
registration includes an underwritten public offering, use its
commercially reasonable efforts to obtain a cold comfort letter
from the Company’s independent public accountants and
addressed to the underwriters, in customary form and covering such
matters of the type customarily covered by cold comfort letters as
the underwriters in such registration reasonably
request;
(t) provide a legal
opinion of the Company’s outside counsel, dated the effective
date of such registration statement (and, if such registration
includes an underwritten Public Offering, dated the date of the
closing under the underwriting agreement), with respect to the
registration statement, each amendment and supplement thereto, the
prospectus included therein (including the preliminary prospectus)
and such other documents relating thereto in customary form and
covering such matters of the type customarily covered by legal
opinions of such nature, which opinion shall be addressed to the
underwriters;
(u) if the Company
files an Automatic Shelf Registration Statement covering any
Registrable Securities, use its commercially reasonable efforts to
remain a WKSI (and not become an ineligible issuer (as defined in
Rule 405)) during the period during which such Automatic Shelf
Registration Statement is required to remain
effective;
(v) if the Company does
not pay the filing fee covering the Registrable Securities at the
time an Automatic Shelf Registration Statement is filed, pay such
fee at such time or times as the Registrable Securities are to be
sold; and
(w) if an Automatic
Shelf Registration Statement has been outstanding for at least
three (3) years, at the end of the third year, refile a new
Automatic Shelf Registration Statement covering the Registrable
Securities, and, if at any time when the Company is required to
re-evaluate its WKSI status the Company determines that it is not a
WKSI, use its commercially reasonable efforts to refile the
registration statement on Form S-3 and keep such registration
statement effective (including by filing a new Resale Shelf
Registration or Shelf Registration, if necessary) during the period
throughout which such registration statement is required to be kept
effective.
E-7
6. Termination
of Rights. Notwithstanding anything contained herein to the
contrary, the right of any Holder to include Registrable Securities
in any Piggyback Registration shall terminate on such date that
such Holder may sell all of the Registrable Securities owned by
such Holder pursuant to Rule 144 of the Securities Act without any
restrictions as to volume or manner of sale or
otherwise.
7. Registration
Expenses.
(a) All expenses
incident to the Company’s performance of or compliance with
this Agreement, including, without limitation, all registration,
qualification and filing fees, listing fees, fees and expenses of
compliance with securities or blue sky laws, stock exchange rules
and filings, printing expenses, messenger and delivery expenses,
fees and disbursements of custodians, and fees and disbursements of
counsel for the Company and all independent certified public
accountants, underwriters (excluding underwriting discounts and
commissions) and other Persons retained by the Company (all such
expenses being herein called “Registration Expenses”),
shall be borne by the Company as provided in this Agreement and,
for the avoidance of doubt, the Company also shall pay all of its
internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly
review, and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities
issued by the Company are then listed. Each Person that sells
securities pursuant to a Piggyback Registration hereunder shall
bear and pay all underwriting discounts and commissions and
transfer taxes applicable to the securities sold for such
Person’s account.
(b) the Company shall
reimburse the holders of Registrable Securities included in such
registration for the reasonable fees and disbursements, not to
exceed $15,000 with respect to any such Registration, of one
counsel and one local counsel (if necessary) chosen by the
Applicable Approving Party for the purpose of rendering a legal
opinion on behalf of such holders in connection with any Piggyback
Registration.
(c) To the extent
Registration Expenses are not required to be paid by the Company,
each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration
of such holder’s securities so included, and any Registration
Expenses not so allocable shall be borne by all sellers of
securities included in such registration in proportion to the
aggregate selling price of the securities to be so
registered.
8. Indemnification.
(a) The Company agrees
to (i) indemnify and hold harmless, to the fullest extent permitted
by law, each Holder and their respective officers, directors,
members, partners, agents, affiliates and employees and each Person
who controls such Holder (within the meaning of the Securities Act
or the Exchange Act) against all losses, claims, actions, damages,
liabilities and expenses caused by (A) any untrue or alleged untrue
statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make
the statements therein not misleading, or (B) any violation or
alleged violation by the Company of the Securities Act or any other
similar federal or state securities laws or any rule or regulation
promulgated thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any
such registration, qualification or compliance, and (ii) pay to
each Holder and their respective officers, directors, members,
partners, agents, affiliates and employees and each Person who
controls such Holder (within the meaning of the Securities Act or
the Exchange Act), as incurred, any legal and any other expenses
reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, except
insofar as the same are caused by or contained in any information
furnished in writing to the Company or any managing underwriter by
such Holder expressly for use therein;provided, however, that the indemnity
agreement contained in this Section 9 shall not apply to
amounts paid in settlement of any such claim, loss, damage,
liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably
withheld, conditioned or delayed), nor shall the Company be liable
in any such case for any such claim, loss, damage, liability or
action to the extent that it solely arises out of or is based upon
an untrue statement of any material fact contained in the
registration statement or omission to state therein a material fact
required to be statedtherein or necessary to make the statements
therein not misleading, in each case to the extent that such untrue
statement or alleged untrue statement or omission or alleged
omission was made in the registration statement, in reliance upon
and in conformity with written information furnished by such Holder
expressly for use in connection with such registration statement.
In connection with an underwritten offering, the Company shall
indemnify any underwriters or deemed underwriters, their officers
and directors and each Person who controls such underwriters
(within the meaning of the Securities Act or the Exchange Act) to
the same extent as provided above with respect to the
indemnification of the holders of Registrable
Securities.
E-8
(b) In connection with
any registration statement in which a holder of Registrable
Securities is participating, each such holder shall furnish to the
Company in writing such information as the Company reasonably
requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, shall indemnify
the Company, its officers, directors, employees, agents and
representatives and each Person who controls the Company (within
the meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only
to the extent that such untrue statement or omission is contained
in any information so furnished in writing by such holder; provided
that the obligation to indemnify shall be individual, not joint and
several, for each holder and shall be limited to the net amount of
proceeds actually received by such holder from the sale of
Registrable Securities pursuant to such registration
statement.
(c) Any Person entitled
to indemnification hereunder shall (i) give prompt written notice
to the indemnifying party of any claim with respect to which it
seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person’s right to indemnification
hereunder to the extent such failure has not materially prejudiced
the indemnifying party) and (ii) unless in such indemnified
party’s reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to
such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified
party. If such defense is assumed, the indemnifying party shall not
be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent shall not
be unreasonably withheld, conditioned or delayed). An indemnifying
party who is not entitled to, or elects not to, assume the defense
of a claim shall not be obligated to pay the fees and expenses of
more than one counsel (as well as one local counsel) for all
parties indemnified by such indemnifying party with respect to such
claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and
any other of such indemnified parties with respect to such claim.
In such instance, the conflicted indemnified parties shall have a
right to retain one separate counsel, chosen by the holders of a
majority of the Registrable Securities included in the
registration, at the expense of the indemnifying party. No
indemnifying party, in the defense of such claim or litigation,
shall, except with the consent of each indemnified party, consent
to the entry of any judgment or enter into any settlement which
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.
(d) Each party hereto
agrees that, if for any reason the indemnification provisions
contemplated by Sections
8(a) or 8(b)
are unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to therein, then
each 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 losses, claims, damages,
liabilities or expenses (or actions inrespect thereof) in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified party in connection with the
actions which resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, relates to information supplied
by such indemnifying party or indemnified party, and the
parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the holders or any underwriters or all
of them were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the
equitable considerations referred to in this Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such indemnified
party in connection with investigating or, except as provided in
Section 8(c),
defending any such action or claim. 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. The sellers’
obligations in this Section 8(d) to contribute
shall be several in proportion to the amount of securities
registered by them and not joint and shall be limited to an amount
equal to the net proceeds actually received by such seller from the
sale of Registrable Securities effected pursuant to such
registration.
E-9
(e) The indemnification
and contribution provided for under this Agreement shall remain in
full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and shall survive the
transfer of Registrable Securities and the termination or
expiration of this Agreement.
9. Participation in Underwritten
Registrations. No Person may participate in any registration
hereunder which is underwritten unless such Person (a) agrees to
sell such Person’s securities on the basis provided in any
underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements (including, without
limitation, pursuant to any over-allotment or “green
shoe” option requested by the underwriters; provided that no
holder of Registrable Securities shall be required to sell more
than the number of Registrable Securities such holder has requested
to include) and (b) completes and executes all questionnaires,
powers of attorney, custody agreements, stock powers, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements; provided that no holder of
Registrable Securities included in any underwritten registration
shall be required to make any representations or warranties to the
Company or the underwriters (other than representations and
warranties regarding such holder, such holder’s title to the
securities, such Person’s authority to sell such securities
and such holder’s intended method of distribution) or to
undertake any indemnification obligations to the Company or the
underwriters with respect thereto that are materially more
burdensome than those provided in Section 8. Each holder of
Registrable Securities shall execute and deliver such other
agreements as may be reasonably requested by the Company and the
lead managing underwriter(s) that are consistent with such
holder’s obligations under Section 4, Section 5 and this Section 9 or that are necessary
to give further effect thereto. To the extent that any such
agreement is entered into pursuant to, and consistent with,
Section 4 and this
Section 9, the
respective rights and obligations created under such agreement
shall supersede the respective rights and obligations of the
holders, the Company and the underwriters created pursuant to this
Section
9.
10. Other Agreements; Certain Limitations
on Registration Rights. The Company shall file all reports
required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the
Commission thereunder and shall take such further action as the
Holders may reasonably request, all to the extent required to
enablesuch Persons to sell securities pursuant to (a) Rule 144
adopted by the Commission under the Securities Act (as such rule
may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Commission or (b) a registration statement
on Form S-3 or any similar registration form hereafter adopted by
the Commission. Upon request, the Company shall deliver to the
Holders a written statement as to whether it has complied with such
requirements. The Company shall at all times use its commercially
reasonable efforts to cause the securities so registered to
continue to be listed on one or more of the New York Stock
Exchange, the New York Stock Exchange American and the Nasdaq Stock
Market. The Company shall use its best efforts to facilitate and
expedite transfers of Registrable Securities pursuant to Rule 144,
which efforts shall include timely notice to its transfer agent to
expedite such transfers of Registrable Securities and delivery of
any opinions requested by the transfer agent.
E-10
11. Lock-Up
Provisions.
(a) Each Lock-Up Holder
agrees that it, he or she shall not Transfer any Common Stock until
180 days after the completion of the Business Combination (the
“Lock-Up
Period”).
(b) Notwithstanding the
provisions set forth in Section 11(a), Transfers of
shares of Common Stock (collectively, “Restricted Securities”)
that are held by the Lock-Up Holders or any of their Permitted
Transferees (that have complied with this Section 11), are permitted (i)
to the Company’s officers or directors, any affiliate or
family member of any of the Company’s officers or directors,
any affiliate of such Lock-Up Holder or any member of such Lock-Up
Holder; (ii) in the case of an individual, by gift to a member of
such individual’s immediate family or to a trust, the
beneficiary of which is a member of such individual’s
immediate family, an affiliate of such individual or to a
charitable organization; (iii) in the case of an individual, by
virtue of laws of descent and distribution upon death of such
individual; (iv) in the case of an individual, pursuant to a
qualified domestic relations order; or (v) by virtue of the laws of
the State of Nevada or a Lock-Up Holder’s organizational
documents upon dissolution of such Lock-Up Holder (each such
transferee, a “Permitted Transferee”);
provided, however, that, in
each case, any such Permitted Transferees must enter into a written
agreement with the Company agreeing to be bound by the transfer
restrictions herein in this Section 11(c) and the other
restrictions contained in this Agreement.
(c) If any Transfer not
permitted under this Section 11 is made or attempted
contrary to the provisions of this Agreement, such purported
prohibited Transfer shall be null and void ab initio, and the Company shall refuse
to recognize any such purported transferee as one of its equity
holders for any purpose. In order to enforce this Section 11(d), the Company may
impose stop-transfer instructions with respect to the Restricted
Securities of a Holder (and Permitted Transferees and assigns
thereof) until the end of the applicable Lock-Up
Period.
(d) During the Lock-Up
Period, each certificate or book-entry position evidencing any
Restricted Securities held by a Lock-Up Holder shall be marked with
a legend in substantially the following form, in addition to any
other applicable legends:
“THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A REGISTRATION RIGHTS AND LOCK-UP AGREEMENT,
DATED AS OF [●], 2021, BY AND AMONG THE ISSUER OF SUCH
SECURITIES AND THE REGISTERED HOLDER OF THE SHARES. A COPY OF SUCH
AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE
HOLDER HEREOF UPON WRITTEN REQUEST.”
(e) For the avoidance
of doubt, each Lock-Up Holder shall retain all of its rights as a
stockholder of the Company with respect to the Restricted
Securities it holds during the Lock-Up Period, including the right
to vote any such Restricted Securities that are entitled to vote.
The Company agrees to (i) instruct its transfer agent to remove the
legends in Section
11(e) upon the expiration of the applicable Lock-Up Period
and (ii) cause its legal counsel, at the Company’s expense,
to deliver the necessary legal opinions, if any, to the transfer
agent in connection with the instruction under Section 11(f)(i).
E-11
12. Reserved.
13. Definitions.
(a) “Applicable Approving
Party” means the holders of a majority of the
Registrable Securities participating in the applicable
offering.
(b) “Business Day” means any
day that is not a Saturday or Sunday or a legal holiday in the
state in which the Company’s chief executive office is
located or in Miami, FL.
(c) “Commission” means the
U.S. Securities and Exchange Commission.
(d) “Common Stock” means the
Common Stock of the Company, par value $0.001 per
share.
(e) “Exchange Act” means the
Securities Exchange Act of 1934, as amended from time to time, or
any successor federal law then in force, together with all rules
and regulations promulgated thereunder.
(f) “Fair Market Value” means
(i) in the case of any publicly traded security, the average of the
closing sale prices thereof on the principal market on which it is
traded for the last five (5) full trading days prior to the
determination, and (ii) in the case of any other asset or property,
the price, determined by the Board of Directors of the Company, at
which a willing seller would sell and a willing buyer would buy
such asset or property, as of the applicable valuation
determination date (without taking into account events subsequent
to that date) in an arm’s-length transaction.
(g) “FINRA” means the
Financial Industry Regulatory Authority.
(h) “Free-Writing
Prospectus” means a free-writing prospectus, as
defined in Rule 405 of the Securities Act.
(i) “Lock-Up Holders” means
those Holders set forth on Schedule B hereto.
(j) “Person” means an
individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision
thereof.
(k) “
“Prospectus” means the
prospectus included in any Registration Statement, as supplemented
by any and all prospectus supplements and as amended by any and all
post-effective amendments and including all material incorporated
by reference in such prospectus.
(l) “Public Offering” means
any sale or distribution by the Company and/or holders of
Registrable Securities to the public of Common Stock pursuant to an
offering registered under the Securities Act.
E-12
(m) “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.
(n) “Registrable Securities”
means (i) any outstanding share of Common Stock (including the
shares of Common Stock issued or issuable upon the exercise or
conversion of any other equity security) of the Company held by a
Holder as of the date of this Agreement or (ii) any Common Stock
issued or issuable with respect to the securities referred to in
the preceding clause (i) by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular
Registrable Securities, such securities shall cease to be
Registrable Securities on such date that such Holder may sell all
of the Registrable Securities owned by such Holder pursuant to Rule
144 of the Securities Act without any restrictions as to volume or
manner of sale or otherwise.
(o) “Registration Statement”
means any registration statement filed by the Company with the
Commission in compliance with the Securities Act and the rules and
regulations promulgated thereunder for a public offering and sale
of Common Stock or Registrable Securities, including the Prospectus
included in such registration statement, amendments (including
post-effective amendments) and supplements to such registration
statement, and all exhibits to and all material incorporated by
reference in such registration statement (other than a registration
statement on Form S-4 or Form S-8, or their
successors).
(p) “Rule 144”,
“Rule
405”, and “Rule 415” mean, in each
case, such rule promulgated under the Securities Act (or any
successor provision) by the Commission, as the same shall be
amended from time to time, or any successor rule then in
force.
(q) “Securities Act” means the
Securities Act of 1933, as amended from time to time, or any
successor federal law then in force, together with all rules and
regulations promulgated thereunder.
(r) “Shelf Participant” means
any holder of Registrable Securities listed as a potential selling
stockholder in connection with the Resale Shelf Registration
Statement or the Shelf Registration or any such holder that could
be added to such Resale Shelf Registration Statement or Shelf
Registration without the need for a post-effective amendment
thereto or added by means of an automatic post-effective amendment
thereto.
(s) “Transfer” means shall
mean the (a) sale of, offer to sell, contract or agreement to sell,
hypothecate, pledge, grant of any option to purchase or otherwise
dispose of or agreement to dispose of, directly or indirectly, or
establishment or increase of a put equivalent position or
liquidation with respect to or decrease of a call equivalent
position within the meaning of Section 16 of the Exchange Act, and
the rules and regulations of the Commission promulgated thereunder
with respect to, any security, (b) entry into any swap or other
arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of any security, whether any
such transaction is to be settled by delivery of such securities,
in cash or otherwise, or (c) public announcement of any intention
to effect any transaction specified in clause (a) or
(b).
E-13
(t) “WKSI” means a
“well-known seasoned issuer” as defined under Rule
405.
14. Miscellaneous.
(a) No Inconsistent Agreements. The
Company shall not hereafter enter into any agreement with respect
to its securities which is inconsistent with or violates or in any
way impairs the rights granted to the Holders in this
Agreement.
(b) Entire Agreement. This
Agreement constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions among the
parties hereto, written or oral, with respect to the subject matter
hereof, including without limitation the Original
Agreements.
(c) Remedies. Any Person having
rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other
security), to recover damages caused by reason of any breach of any
provision of this Agreement and to exercise all other rights
granted by law. The parties hereto agree and acknowledge that money
damages would not be an adequate remedy for any breach of the
provisions of this Agreement and that, in addition to any other
rights and remedies existing in its favor, any party shall be
entitled to specific performance and/or other injunctive relief
from any court of law or equity of competent jurisdiction (without
posting any bond or other security) in order to enforce or prevent
violation of the provisions of this Agreement.
(d) Other Registration Rights.
Other than as set forth in the Company’s filings with the
Commission, the Company represents and warrants that no person,
other than a holder of Registrable Securities pursuant to this
Agreement, has any right to require the Company to register any
securities of the Company for sale or to include such securities of
the Company in any Registration Statement filed by the Company for
the sale of securities for its own account or for the account of
any other person. Further, the Company represents and warrants that
this Agreement supersedes any other registration rights agreement
or agreement with similar terms and conditions and in the event of
a conflict between any such agreement or agreements and this
Agreement, the terms of this Agreement shall prevail.
(e) Reserved.
(f) Amendments and Waivers.
Compliance with any of the provisions, covenants and conditions set
forth in this Agreement may be waived, or any of such provisions,
covenants or conditions may be amended or modified, with the
written consent of the Company and (i) in the case of the
provisions, covenants and conditions set forth in Section 11, the consent of
Holders holding at least a majority in interest of the outstanding
shares of Common Stock then held by the Lock-Up Holders or (ii) in
the case of any other provision, covenant or condition, the Holders
of at least a majority in interest of the Registrable Securities at
the time in question;provided,
however, that notwithstanding the foregoing, any amendment
hereto or waiver hereof that adversely affects one Holder, solely
in its capacity as a holder of the shares of capital stock of the
Company, in a manner that is materially different from the other
Holders (in such capacity) shall require the consent of the Holder
so affected. Any amendment or waiver effected in accordance with
this Section 14(f)
shall be binding upon each Holder and the Company. No course of
dealing between any Holder or the Company and any other party
hereto or any failure or delay on the part of a Holder or the
Company in exercising any rights or remedies under this Agreement
shall operate as a waiver of any rights or remedies of any Holder
or the Company. No single or partial exercise of any rights or
remedies under this Agreement by a party shall operate as a waiver
or preclude the exercise of any other rights or remedies hereunder
or thereunder by such party.
E-14
(g) Successors and Assigns; No Third-Party
Beneficiaries. This Agreement and the rights, duties and
obligations of the Company hereunder may not be assigned or
delegated by the Company in whole or in part. A Holder may assign
or delegate such Holder’s rights, duties or obligations under
this Agreement, in whole or in part, to (a) a Permitted Transferee
of such Holder or (b) any Person with the prior written consent of
the Company. This Agreement and the provisions hereof shall be
binding upon and shall inure to the benefit of each of the parties
and their respective successors and permitted assigns. This
Agreement shall not confer any rights or benefits on any persons
that are not parties hereto, other than as expressly set forth in
this Agreement. No assignment by any party hereto of such
party’s rights, duties and obligations hereunder shall be
binding upon or obligate the Company unless and until the Company
shall have received (i) written notice of such assignment as
provided in this Section
13(g) and (ii) the written agreement of the assignee, in a
form reasonably acceptable to the Company, to be bound by the terms
and provisions of this Agreement. Any transfer or assignment made
other than as provided in this Section 13(g) shall be null and
void.
(h) All covenants and
agreements in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed
or not. In addition, whether or not any express assignment has been
made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of
Registrable Securities.
(i) Severability. Whenever
possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Agreement is held to be prohibited by or
invalid, illegal or unenforceable in any respect under any
applicable law, such provision shall be ineffective only to the
extent of such prohibition, invalidity, illegality or
unenforceability, without invalidating the remainder of this
Agreement.
(j) Counterparts. This Agreement
may be executed simultaneously in counterparts, any one of which
need not contain the signatures of more than one party, but all
such counterparts taken together shall constitute one and the same
Agreement. Counterparts may be delivered via facsimile, electronic
mail (including any electronic signature covered by the U.S.
federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the
Electronic Signatures and Records Act or other applicable law,
e.g., www.docusign.com) or other transmission method and any
counterpart so delivered shall be deemed to have been duly and
validly delivered and be valid and effective for all
purposes.
(k) Descriptive Headings;
Interpretation. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of
this Agreement. The use of the word “including” herein
shall mean “including without limitation.”
(l) Governing Law; Jurisdiction.
All issues and questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the exhibits
and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Nevada, without giving
effect to any choice of law or conflict of law rules or provisions
(whether of the State of Nevada or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other
than the State of Nevada. The parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based
on any matter arising out of or in connection with, this Agreement
or the transactions contemplated hereby shall be brought in any
Nevada State Court, or if such court does not have subject matter
jurisdiction, any court of the United States located in the State
of Nevada. Each of the parties hereby irrevocably consents to the
jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in
the world, whether within or without the jurisdiction of any such
court.
E-15
(m) Notices. All notices, demands
or other communications to be given or delivered under or by reason
of the provisions of this Agreement shall be in writing and shall
be given (and shall be deemed to have been duly given upon receipt)
by delivery in person, by telecopy or email or by registered or
certified mail (postage prepaid, return receipt requested) to each
Holder at the address indicated on the Schedule of Holders attached
hereto and to the Company at the address indicated below (or at
such other address for a party as shall be specified in a notice
given in accordance with this Section 13(m)):
|
if to
the Company:
RumbleOn,
Inc.
901 W.
Walnut Hill Lane
Irving,
Texas 75038
Tel:
469.250.1185
Attention:
Marshall Chesrown (marshall@rumbleon.com), Steve Berrard
(sberrard@newrivercapital.com),
and Peter Levy (peter@rumbleon.com)
with a
copy to (which shall not constitute notice):
Akerman
LLP
The
Main Las Olas
201
East Las Olas Boulevard
Suite
1800
Fort
Lauderdale, FL 33301
Tel:
954.463.2700
Fax:
942.463.2224
Attention:
Michael Francis (michael.francis@akerman.com) and Christina
Russo (christina.russo@akerman.com)
|
(n) Mutual Waiver of Jury Trial. As
a specifically bargained inducement for each of the parties to
enter into this Agreement (with each party having had opportunity
to consult counsel), each party hereto expressly and irrevocably
waives the right to trial by jury in any lawsuit or legal
proceeding relating to or arising in any way from this Agreement or
the transactions contemplated herein, and any lawsuit or legal
proceeding relating to or arising in any way to this Agreement or
the transactions contemplated herein shall be tried in a court of
competent jurisdiction by a judge sitting without a
jury.
(o) No Strict Construction. The
parties hereto have participated jointly in the negotiation and
drafting of this Agreement. 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 of the provisions of
this Agreement.
signature
pages follow
E-16
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
|
|
RUMBLEON, INC.
By:
_______________________________________
Name: Marshall
Chesrown
Title: Chief
Executive Officer
|
|
|
E-17
Complete the following as appropriate:
|
INDIVIDUAL HOLDER
If you are an individual, print your name and sign
below
|
ENTITY HOLDER
If you are signing on behalf of an entity, please print the name of
the entity, sign below, and indicate your name and
title
|
|
___________________________________
Name of
Individual (Please
print)
|
______________________________________
Name of
Entity (Please
print)
|
|
___________________________________
Signature
|
By:
___________________________________
Name:
Title:
|
|
|
|
|
|
|
|
|
Holder
Address for Notices:
______________________________
______________________________
______________________________
Facsimile:
_____________________
Attention:
_____________________
E-18
Schedule A
Schedule
of Holders
E-19
Schedule B
Lock-Up
Holders
E-20
Exhibit
F
JOINDER AGREEMENT
This
Joinder Agreement (this “Joinder Agreement”),
dated as of [●], 2021, is entered into by the undersigned
(“Seller”).
WHEREAS, Seller
owns an Equity Interest in the Persons listed on Schedule 1 hereto (which
Schedule 1 also lists the number of Equity Interests owned by
Seller in each Person listed thereon); and
WHEREAS, Seller
desires to join as a “Seller” under that certain Plan
of Merger and Equity Purchase Agreement, dated as of March 12, 2021
(the “Purchase
Agreement”), by and among RumbleOn, Inc., a Nevada
corporation (the “Purchaser”), RO Merger
Sub I, Inc., an Arizona corporation and wholly owned subsidiary of
Purchaser, RO Merger Sub II, Inc., an Arizona corporation and
wholly owned subsidiary of Purchaser, RO Merger Sub III, Inc., an
Arizona corporation and wholly owned subsidiary of Purchaser, RO
Merger Sub IV, Inc., an Arizona corporation and wholly owned
subsidiary of Purchaser, C&W Motors, Inc., an Arizona
corporation, Metro Motorcycle, Inc., an Arizona corporation, Tucson
Motorcycles, Inc., an Arizona corporation, and Tucson Motorsports,
Inc., an Arizona corporation, William Coulter, Mark Tkach, and each
other Person who owns an Equity Interest in any Transferred Entity
and executes a Seller Joinder, and Mark Tkach, as the
representative of the Sellers (the “Sellers’
Representative”).
1.
Recitals and Defined Terms. The
recitals to this Joinder Agreement are hereby incorporated by this
reference as if fully set forth herein. Capitalized terms used but
not otherwise defined herein have the meanings ascribed to them in
the Purchase Agreement.
2.
Joinder. By execution of this
Joinder Agreement, Seller hereby joins the Purchase Agreement as a
“Seller” for all purposes of the Purchase Agreement and
agrees to be bound as a “Seller” by all the terms and
provisions of the Purchase Agreement with the same force and effect
as if Seller had been a signatory to the Purchase Agreement on the
execution date thereof.
3.
Spousal Consent. If Seller is a
natural person and is currently married as of the date of this
Joinder Agreement, Seller represents and warrants that he or she is
a resident of a state that is not a “community
property” state, or if he or she is a resident of a state
that is a “community property” state then his/her
spouse has executed and delivered, or shall, concurrently with
Seller’s execution hereof, execute and deliver to Purchaser
and Sellers’ Representative, his or her spouse’s
acknowledgement of and consent to the existence and binding effect
of all provisions contained in this Joinder Agreement and the
Purchase Agreement, which consent is attached in the form of
Exhibit A
hereto.
4.
Miscellaneous. Each party to
the Purchase Agreement is an intended third party beneficiary of
this Joinder Agreement. This Joinder Agreement and the legal
relations between the parties hereto shall be governed by and
construed in accordance with the laws of the State of Delaware,
without regard to the conflict of laws rules thereof. Delivery of
an executed signature page of this Joinder Agreement by facsimile
transmission, pdf, DocuSign or other electronic transmission shall
be as effective as delivery of a manually executed counterpart
hereof. The illegality or unenforceability of any provision of this
Joinder Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or
enforceability of the remaining provisions of this Joinder
Agreement or any instrument or agreement required
hereunder.
[Remainder
of page intentionally left blank.]
IN
WITNESS WHEREOF, the undersigned has caused this Joinder Agreement
to be duly executed and delivered as of the date first above
written.
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[Entity
Seller]
By:
Name:
Title:
Address
for Notices from Sellers’ Representative:
____________________________
____________________________
//
By:
Name:
[Individual Seller]
Address
for Notices from Sellers’ Representative:
____________________________
____________________________
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F-2
Schedule 1
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Person
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Equity Interest
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F-3
Exhibit A
Spousal Consent
[See
attached]
F-4
CONSENT OF SPOUSE
I, ____________________, certify that I am the
spouse of ______________, and acknowledge that I have read the
Joinder Agreement, dated as of _____, 2021, to which this Consent
is attached as Exhibit A
(the “Joinder
Agreement”) and
the Plan of Merger and Equity Purchase Agreement, dated as
of March 12, 2021 (the “Purchase Agreement”), by
and among RumbleOn, Inc., a Nevada corporation (the
“Purchaser”), RO Merger
Sub I, Inc., an Arizona corporation and wholly owned subsidiary of
Purchaser, RO Merger Sub II, Inc., an Arizona corporation and
wholly owned subsidiary of Purchaser, RO Merger Sub III, Inc., an
Arizona corporation and wholly owned subsidiary of Purchaser, RO
Merger Sub IV, Inc., an Arizona corporation and wholly owned
subsidiary of Purchaser, C&W Motors, Inc., an Arizona
corporation, Metro Motorcycle, Inc., an Arizona corporation, Tucson
Motorcycles, Inc., an Arizona corporation, and Tucson Motorsports,
Inc., an Arizona corporation, William Coulter, Mark Tkach, and each
other Person who owns an Equity Interest in any Transferred Entity
and executes a Seller Joinder, and Mark Tkach, as the
representative of the Sellers, and
that I know the contents of the Joinder Agreement and the Purchase
Agreement. I am aware that the Purchase Agreement contains
provisions regarding the sale of equity interests in those entities
set forth in Schedule 1 to the Joinder Agreement
(“Equity
Interests”) that my
spouse owns, including any interest I might have
therein.
I
hereby agree that my interest, if any, in any Equity Interests
shall be irrevocably bound by the Joinder Agreement and the
Purchase Agreement and further understand and agree that any
community property interest, if any, I may have in such Equity
Interests is similarly bound by the Joinder Agreement and the
Purchase Agreement. To the extent that the Equity Interests are
already the sole and separate property of my spouse, I agree and
intend that this Consent shall serve as further evidence and
acknowledgement of the status of such Equity
Interests.
I
hereby agree not to take any action at any time that might
interfere with the operation of the Joinder Agreement, Purchase
Agreement, the Equity Interests, or with the interests or rights
now or later acquired by me or my spouse related to the Joinder
Agreement and Purchase Agreement.
I
am aware that the legal, financial and related matters contained in
the Joinder Agreement and Purchase Agreement are complex and that I
am free to seek independent professional guidance or counsel with
respect to this Consent. I have either sought such guidance or
counsel or determined after reviewing the Joinder Agreement and
Purchase Agreement carefully that I will waive such
right.
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Dated:
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Name:
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F-5
Exhibit
G
CONSENT OF SPOUSE
I, ____________________, certify that I am the
spouse of ____________________, and acknowledge that I have read
the Plan of Merger and Equity Purchase Agreement (the
“Purchase
Agreement”), by and among RumbleOn, Inc., a Nevada
corporation (the “Purchaser”), RO Merger
Sub I, Inc., an Arizona corporation and wholly owned subsidiary of
Purchaser, RO Merger Sub II, Inc., an Arizona corporation and
wholly owned subsidiary of Purchaser, RO Merger Sub III, Inc., an
Arizona corporation and wholly owned subsidiary of Purchaser, RO
Merger Sub IV, Inc., an Arizona corporation and wholly owned
subsidiary of Purchaser, C&W Motors, Inc., an Arizona
corporation, Metro Motorcycle, Inc., an Arizona corporation, Tucson
Motorcycles, Inc., an Arizona corporation, and Tucson Motorsports,
Inc., an Arizona corporation, William Coulter, Mark Tkach, and each
other Person who owns an Equity Interest in any Transferred Entity
and executes a Seller Joinder, and Mark Tkach, as the
representative of the Sellers, and
that I know the contents of the Purchase Agreement. I am aware that
the Purchase Agreement contains provisions regarding the sale of
equity interests in those entities set forth in Schedule 1.1(a) and
Schedule 1.1(b) to the Purchase Agreement
(“Equity
Interests”) that my
spouse owns, including any interest I might have
therein.
I
hereby agree that my interest, if any, in any Equity Interests
shall be irrevocably bound by the the Purchase Agreement and
further understand and agree that any community property interest,
if any, I may have in such Equity Interests is similarly bound by
the Purchase Agreement. To the extent that the Equity Interests are
already the sole and separate property of my spouse, I agree and
intend that this Consent shall serve as further evidence and
acknowledgement of the status of such Equity
Interests.
I
hereby agree not to take any action at any time that might
interfere with the operation of the Purchase Agreement, the Equity
Interests, or with the interests or rights now or later acquired by
me or my spouse related to the Purchase Agreement.
I
am aware that the legal, financial and related matters contained in
the Purchase Agreement are complex and that I am free to seek
independent professional guidance or counsel with respect to this
Consent. I have either sought such guidance or counsel or
determined after reviewing the Purchase Agreement carefully that I
will waive such right.
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Dated:
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Name:
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G-1
Schedule
1.1(a)
Transferred
Entities
110
Schedule
1.1(b)
Merged
Entities
111
