EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
BY AND AMONG
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.,
POTAMKIN AUTO CENTER, LTD.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
AND PLANET AUTOMOTIVE GROUP, INC.
Dated as of
October 19, 1999
TABLE OF CONTENTS
Page
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ARTICLE I............................................................... 2
1.1 Purchase and Sale......................................... 2
1.2 Assumption of Liabilities................................. 2
1.3 Consideration for Assets; TED's Employment............... 3
1.4 Sales and Use Taxes....................................... 5
1.5 Closing................................................... 5
ARTICLE II................................................................ 6
2.1 Organization of Seller.................................... 7
2.2 Capitalization............................................ 7
2.3 Authority; Consents....................................... 7
2.4 Taxes..................................................... 8
2.5 Restrictions on Business Activities....................... 8
2.6 Absence of Liens and Encumbrances......................... 9
2.7 Agreements, Contracts and Commitments..................... 9
2.8 Litigation................................................ 9
2.9 Employee Arrangements..................................... 9
2.10 Compliance with Laws...................................... 9
2.11 Seller Financial Statements............................... 9
2.12 Leases.................................................... 10
2.13 Intellectual Property..................................... 10
2.14 Qualified Dealer.......................................... 11
2.15 Absence of Material Changes............................... 11
2.16 Investment Representations................................ 11
ARTICLE III............................................................... 12
3.1 Organization and Standing................................. 12
3.2 Corporate Power........................................... 12
3.3 Subsidiaries.............................................. 12
3.4 Capitalization............................................ 12
3.5 Authorization............................................. 13
3.6 Proprietary Rights........................................ 13
3.7 Registration Rights....................................... 13
3.8 Governmental Consent, etc................................. 14
3.9 Permits................................................... 14
ARTICLE IV................................................................ 14
4.1 Confidentiality........................................... 14
4.2 Expenses.................................................. 14
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4.3 Bulk Sales................................................ 15
4.4 Trademark, Transfer, License and Covenant Not to Compete.. 15
4.5 Right of First Offer...................................... 21
4.6 Employees................................................. 22
4.7 Services Agreement........................................ 22
4.8 Qualified Dealer Registration............................. 23
4.9 Dealership Arrangements................................... 24
4.10 Inventory Agreement....................................... 24
4.11 Real Estate Agreement..................................... 24
4.12 Advertising Rates......................................... 24
4.13 Public Disclosure......................................... 24
4.14 Excluded Assets........................................... 24
4.15 Waiver of Jury Trial...................................... 24
4.16 Retention of Records...................................... 25
4.17 No Finders or Brokers..................................... 25
4.18 Investor Rights Agreement................................. 25
ARTICLE V................................................................. 25
5.1 Additional Conditions to Obligations of Seller and the
Shareholders.............................................. 25
5.2 Additional Conditions to the Obligations of Buyer......... 26
ARTICLE VI................................................................ 27
6.1 Survival and Limitations of Claims........................ 27
6.2 Indemnification........................................... 28
ARTICLE VII............................................................... 34
7.1 Termination............................................... 34
7.2 Effect of Termination..................................... 35
7.3 Amendment................................................. 35
7.4 Extension; Waiver......................................... 35
7.5 Effect of Closing......................................... 36
ARTICLE VIII.............................................................. 36
8.1 Specific Performance...................................... 36
8.2 Notices................................................... 36
8.3 Interpretation............................................ 37
8.4 Counterparts.............................................. 37
8.5 Entire Agreement; Nonassignability; Parties in Interest... 38
8.6 Severability.............................................. 38
8.7 Remedies Cumulative; Attorneys' Fees...................... 38
8.8 Governing Law............................................. 39
8.9 Rules of Construction..................................... 39
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of October 19, 1999, by and among ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware
corporation ("Buyer"), Potamkin Auto Center, Ltd., a New York corporation
("Seller"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual ("AHP"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an
individual ("RMP") and ▇▇▇ ▇▇▇▇▇▇, an individual ("▇▇▇") (AHP, RMP and ▇▇▇ are
sometimes individually referred to as a "Shareholder" and, collectively as the
"Shareholders"), and, for the purposes of Section 4.4 hereof, Planet Automotive
Group, Inc., a Florida corporation ("Planet").
RECITALS
A. Seller has been engaged in the business of selling and leasing new
and used motor vehicles.
B. Seller wishes to sell to Buyer and Buyer wishes to purchase from
Seller, on the terms and subject to the conditions set forth herein, the assets
of Seller described herein (such transaction herein referred to as the
"Acquisition").
C. The Board of Directors of each of the parties believe it is in the
best interests of their respective companies and shareholders that the
Acquisition be consummated and, in furtherance thereof, has approved the
Acquisition.
D. In connection with the Acquisition, and as a material inducement to
the parties to enter into this Agreement, Buyer and Seller are contemporaneously
entering into an Inventory Agreement substantially in the form attached hereto
as Exhibit A (the "Inventory Agreement").
E. In connection with the Acquisition, and as a material inducement to
the parties to enter into this Agreement, Buyer and Seller are contemporaneously
entering into a Real Estate Agreement substantially in the form attached hereto
as Exhibit B (the "Real Estate Agreement").
F. In connection with the Acquisition, and as a material inducement to
the parties to enter into this Agreement, Buyer and ▇▇▇ are contemporaneously
entering into an Offer Letter substantially in the form attached hereto as
Exhibit C (the "Offer Letter") and a Stock Option Agreement substantially in the
form attached hereto as Exhibit D (the "Stock Option Agreement").
G. Seller and Buyer desire to make certain representations and
warranties and other agreements in connection with the Acquisition.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
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ARTICLE I
PURCHASE AND SALE OF ASSETS
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1.1 Purchase and Sale.
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(a) On the terms and subject to the conditions set forth in this
Agreement, except for those assets, properties and rights set forth on Schedule
1.1 hereto which will not be conveyed, transferred, assigned or delivered to
Buyer (the "Excluded Assets"), Seller will sell, convey, transfer, assign and
deliver to Buyer and Buyer will purchase and acquire from Seller on the Closing
Date (as defined in Section 1.5), all of Seller's right, title and interest in
and to all of the assets, properties and rights of every kind, nature, character
and description, whether real, personal or mixed, whether tangible or
intangible, whether accrued, contingent or otherwise relating to or utilized in
the business of Seller, directly or indirectly, in whole or in part, in
existence on the date hereof and any additions thereto on or before the Closing
Date, whether or not carried on the books and records of Seller and wherever
located (the "Assets") free and clear of all liens, pledges, charges, claims,
security interests or other encumbrances of any sort (collectively, "Liens").
(b) The Assets shall include, without limitation, all rights of Seller
and, to the extent any such rights exist as of the Closing Date (or derived from
rights that exist as of the Closing Date), of the Shareholders and their
affiliates, to conduct activities specified under Section 415 of the Vehicle and
Traffic Law of the State of New York ("New York Dealer Law") as a result of
meeting the criteria of a "Qualified Dealer" pursuant to subdivision 1,
paragraph g of Section 415 of New York Dealer Law (when used in this Agreement,
"Qualified Dealer" shall have the meaning set forth in subdivision 1, paragraph
g of Section 415 of New York Dealer Law). To the extent that Seller acquires any
rights after the date of this Agreement by virtue of being deemed a Qualified
Dealer under New York Dealer Law, this Agreement shall be deemed an automatic
transfer of such rights to Buyer, without any further action on the part of
Buyer, Seller, the Shareholders or their affiliates, the payment of additional
consideration by Buyer to Seller, the Shareholders or their affiliates.
1.2 Assumption of Liabilities.
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(a) Buyer expressly is not assuming any obligations or liabilities,
whether accrued, absolute, contingent, matured, unmatured or other, of Seller,
the Shareholders or their respective affiliates. To the extent that Buyer
assumes any agreement required to be set forth in Section 2.7 of the Seller
Schedule ("Assignable Contracts"), which assumption shall be at Buyer's sole
option exercisable within 90 days of the Closing Date (subject to Seller's
consent not to be unreasonably withheld). Buyer shall also assume and be
responsible for liabilities thereunder arising after the date of assumption
(other than those caused by an act or omission of Seller or its affiliates). If
the assignment to Buyer of an Assignable Contract is subject to the consent of a
third party, the assignment shall be conditioned upon such consent. Buyer and
Seller each shall reasonably cooperate in obtaining any such consent. If such
consent is not obtained, at Buyer's request Seller will perform under such
contract for Buyer's benefit and Buyer will indemnify Seller for any Losses (as
defined in Section 6.2(a)) resulting from such performance. Subject to Article
VI, Seller and the
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Shareholders will severally indemnify and hold Buyer harmless from and against
any and all losses, costs, expenses, claims, liabilities, deficiencies,
judgments and damages (including reasonable attorneys' fees) incurred or
suffered by Buyer related to or arising out of any liabilities or obligations to
third parties of Seller or any of Seller's stockholders, affiliates or
successors, including without limitation the following liabilities or
obligations: (1) any liability or obligation for any Taxes (as defined in
Section 2.4) incurred or accrued by Seller for any period or any liability for
Taxes of any person or entity attributable to the Assets for any period or
portion of any period ending on or prior to the Closing Date; (2) any liability
or obligation of Seller as a result of any legal or equitable action or judicial
or administrative proceeding initiated at any time in respect of anything done
or suffered to be done by the Seller or any of its directors, officers,
employees, or agents to third parties; or (3) any liability or obligation of
Seller relating to or in connection with any product liability or warranty
matters relating to Seller's products (i.e., motor vehicles), or the return of
Seller's products from customers or any other person or entity.
(b) Subject to Article VI, Buyer will indemnify and hold Seller and
Shareholders harmless from and against any and all losses, costs, expenses,
claims, liabilities, deficiencies, judgments and damages (including reasonable
attorney's fees) incurred or suffered by Seller or Shareholders related to or
arising out of any liabilities or obligations to third parties of Buyer,
including without limitation the following liabilities or obligations: (1) any
liability or obligation for any Taxes accrued by Buyer for any period or any
liability for Taxes of any person or entity attributable to the Assets for any
period or portion of any period commencing after the Closing Date; (2) any
liability or obligation of Buyer as a result of any legal or equitable action or
judicial or administrative proceeding initiated at any time in respect of
anything done or suffered to be done by Buyer or any of its directors, officers,
shareholders, employees or agents after the Closing Date; or (3) any liability
or obligation of Buyer relating to or in connection with any product liability
or warranty matters relating to Buyer's products (i.e., motor vehicles),
inventory provided by Seller under the Inventory Agreement or the return of any
product from customers or any other person or entity.
1.3 Consideration for Assets; TED's Employment.
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(a) On the terms and subject to the conditions set
forth in this Agreement, as full payment for the transfer of the Assets by
Seller to Buyer and the other transactions contemplated hereby, Buyer shall
issue and deliver to Seller at the Closing One Million Two Hundred Fifty
Thousand (1,250,000) shares (the "Closing Shares") of the Common Stock of Buyer
(the "Buyer Common Stock").
(b) Buyer shall, at the Closing, issue to and hold for the benefit of
Seller (with Seller having the ability to receive cash dividends and to vote
such shares) an aggregate of Four Hundred Thousand (400,000) shares of Buyer
Common Stock (the "Additional Shares" and, together with the Closing Shares, the
"Shares"), to be delivered to Seller (or a Permitted Transferee (as defined in
Section 4.5(c)) designated by Seller) in increments of 33,333 shares (subject to
adjustment pursuant to Section 1.3(f))on each of the Payment Dates (as defined
below), except that 33,337 shares (subject to adjustment pursuant to Section
1.3(f)) shall be delivered on September 30, 2002, in
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each case if, but only if, on the applicable Payment Date the Earnout Condition
(as defined below) is satisfied or deemed satisfied. If the Earnout Condition is
not satisfied or is deemed not satisfied, the Additional Shares required to be
delivered to Seller (or its Permitted Transferees) hereunder on or after the
date, but not before the date, that the Earnout Condition is not satisfied or
deemed not satisfied shall be automatically cancelled, and Buyer shall have no
further obligation to deliver any Additional Shares.
(c) In the event that Buyer terminates TED's employment without Cause
(as defined below), the Earnout Condition shall be deemed thereafter satisfied.
If ▇▇▇ terminates his employment with Buyer voluntarily for a reason other than
Buyer's failure to provide ▇▇▇ with his salary or employment-related benefits as
set forth in the Offer Letter, the Earnout Condition shall be deemed thereafter
not satisfied.
(d) Upon the (i) death or Disability (as defined below) of ▇▇▇
between April __, 2000 and September 30, 2002, or (ii) TED's voluntary
termination of his employment as a result of Buyer's failure to provide ▇▇▇ with
salary or employment-related benefits as set forth in the Offer Letter, the
Earnout Condition shall be deemed thereafter satisfied. Upon the death or
Disability of ▇▇▇ ▇▇▇▇▇ to April 15, 2000, the Earnout Condition shall be deemed
thereafter satisfied; provided, however, that in such event the number of
Additional Shares deliverable pursuant to Section 1.3(b) shall be 200,000
shares, to be delivered to Seller (or its Permitted Transferees) in equal
whole-share increments on each of the Payment Dates.
(e) For the purposes of this Agreement, the following terms have the
following definitions:
"Cause" shall mean (a) TED's continued material failure to be present
at work and perform his duties as an executive of Buyer having a principal
office in the New York Metro Area (as defined in Section 4.4(h)) or such other
area as ▇▇▇ consents to work (other than as a result of sickness, accident,
Disability, family emergency or similar cause beyond his reasonable control, not
including incarceration) after receipt of written warnings specifying the
misconduct; (b) TED's engaging in willful misconduct that is demonstrably and
materially injurious to Buyer; (c) TED's being convicted of or pleading guilty
or nolo contendre to a felony not directly resulting from the operation of a
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motor vehicle; or (d) TED's committing an act of fraud against or the
misappropriation of material property belonging to Buyer.
"Disability" shall mean that ▇▇▇, by reason of physical or mental
illness or otherwise, is incapable of performing his employment-related duties
for Buyer in any material respect for a continuous period of three (3)
consecutive calendar months.
"Earnout Condition" shall mean that, as of any Payment Date, ▇▇▇ is
employed by Buyer as of such Payment Date and has remained in Buyer's employment
since the Closing Date.
"Payment Date" shall mean each of the following dates: December 31,
1999; March 31, 2000; June 30, 2000; September 30, 2000; December 31, 2000;
March 31, 2001; June 30, 2001;
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September 30, 2001; December 31, 2001; March 31, 2002; June 30, 2002; and
September 30, 2002.
(f) The shares of Buyer Common Stock issuable and deliverable pursuant
to this Section 1.3 are subject to adjustment as set forth below:
(i) The number and type of securities and/or other property
issuable pursuant to this Section 1.3 shall be appropriately and proportionately
adjusted to reflect any stock dividend, stock split, combination of shares,
reclassification, recapitalization or other similar event affecting the number
or character of outstanding shares of Buyer Common Stock, so that the number and
type of securities and/or other property issuable pursuant to this Section 1.3
shall be equal to that which would have been issuable with respect to the number
of shares of Buyer Common Stock subject hereto at the time of such event, had
such shares of Buyer Common Stock then been outstanding.
(ii) In case of any consolidation or merger of Buyer with or into
any other corporation, entity or person, or any other corporate reorganization,
in which Buyer shall not be the continuing or surviving entity of such
consolidation, merger or reorganization (any such transaction being hereinafter
referred to as a "Reorganization"), then, in each case, Seller at any time after
the consummation or effective date of such Reorganization shall receive, in lieu
of Buyer Common Stock issuable pursuant to this Section 1.3, the stock and other
securities and property (including cash) to which Seller would have been
entitled upon the date of such Reorganization if Buyer had issued and delivered
all Shares to Seller prior to such date.
(g) Set-Off. Buyer shall not have the right to set off obligations
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owed to Buyer against the Additional Shares held by Buyer unless Buyer first
obtains an arbitration award or judgment against Seller which is not satisfied
within thirty (30) days after entry of award or judgment.
(h) Arbitration. Any disputes arising under this Section 1.3 shall be
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resolved by arbitration with Buyer having the burden of proving that the Earnout
Condition has not been satisfied or deemed satisfied.
1.4 Sales and Use Taxes. Seller and Buyer shall equally bear and pay any
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sales, use and transfer taxes arising out of the transfer of the Assets (the
"Transfer Taxes"). To the extent permitted by law, Buyer and Seller shall
cooperate fully with one another in minimizing Transfer Taxes. To the extent a
taxing authority provides notice to either party of an audit of the Transfer
Taxes, such party shall promptly notify the other and Buyer and Seller shall
mutually assume responsibility for such audit and shall equally bear and pay
when due any additional Transfer Taxes (plus interest and penalties) ultimately
assessed with respect to the transfer contemplated by this Agreement.
1.5 Closing.
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(a) Closing Date. Unless this Agreement is earlier terminated pursuant
to Section 7.1, the closing of the transactions contemplated by this Agreement
(the "Closing") shall be held at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (and by facsimile at other
locations), at 10:00 a.m. on the date which is two business days following
satisfaction or waiver of the last of the conditions set forth in the Article V
hereof, or on such other time and/or date as the parties agree (the date of the
Closing is referred to herein as the "Closing Date").
(b) Delivery at Closing. In addition to satisfaction or waiver of the
-------------------
other conditions to the respective parties' obligations to consummate the
Acquisition, at the Closing:
(i) Seller shall deliver to Buyer all bills of sale,
endorsements, assignments, consents to assignments and other instruments and
documents as Buyer may reasonably request to sell, convey, assign, transfer and
deliver to Buyer good title to all the Assets free and clear of any and all
Liens;
(ii) Buyer shall issue and deliver the Closing Shares to Seller,
and issue and hold for Seller's benefit the Additional Shares, each in
accordance with Section 1.3;
(iii) Buyer and ▇▇▇ shall deliver the executed Offer Letter
and Stock Option Agreement; and
(iv) Buyer and Seller shall deliver the executed Inventory
Agreement and Real Estate Agreement.
(c) Taking of Necessary Action; Further Action. Each party shall
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execute and deliver such additional instruments and documents and shall take
such further actions as may be reasonably necessary or appropriate to
effectuate, carry out and comply with the terms of this Agreement, including
without limitation, any actions required to vest Buyer with full right, title
and possession of the Assets free and clear of all Liens and to vest Seller, the
Shareholders and the Permitted Transferees, as applicable, with full right,
title and possession of the Closing Shares (and, if the Earnout Condition is
satisfied or deemed satisfied on the applicable Payment Dates, the Additional
Shares) in accordance with Section 1.3 free and clear of all Liens. The
Shareholders agree to cause Seller to perform its obligations hereunder. Each of
the parties agrees to cooperate with the other parties in the preparation and
filing of all forms, notifications, applications, reports and information, if
any, required pursuant to any law, rule, or regulation in connection with the
transactions contemplated by this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
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OF THE SHAREHOLDERS AND SELLER
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Seller and each Shareholder severally, subject to Article VI, represent
and warrant to Buyer, subject to such exceptions as are specifically disclosed
in the disclosure letter and referencing a
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specific representation supplied by Seller and the Shareholders to Buyer (the
"Seller Schedule") as of the date hereof, as follows:
2.1 Organization of Seller. Seller is a corporation duly organized, validly
----------------------
existing and in good standing under the laws of the State of New York. Seller
has the corporate power to own its property and to carry on its business as now
being conducted. Seller is duly qualified to do business and in good standing in
each jurisdiction in which the failure to be so qualified would result in a
Buyer Harm. For the purposes of this Agreement, a "Buyer Harm" shall mean any
(1) material adverse effect on the Assets taken as a whole or Buyer's interest
therein or use (or legal or other right to use) thereof following the Closing
(which use is consistent with Seller's use prior to the Closing), or (2) Losses
(as such term is defined in Section 6.2) of or to Buyer for which (without
regard to Section 6.2(e) hereof) Buyer is entitled to indemnification hereunder
including, without limitation, Losses resulting from any Lien on the Assets.
2.2 Capitalization. Capitalization. The authorized share capital of Seller
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and a description of the currently issued and outstanding shares of Seller are
set forth in Section 2.2 of the Seller Schedule, all of which shares are held by
the Shareholders in the amounts set forth thereon, who each have good and valid
title to their shares of Seller, free and clear of any Liens. All outstanding
shares of capital stock of Seller are duly authorized, validly issued, fully
paid and non-assessable and not subject to preemptive rights in favor of third
parties created by statute, the Certificate of Incorporation and Bylaws of
Seller (the "Organizational Documents") or any agreement to which Seller is a
party or by which it is bound; provided, however, that the outstanding shares of
capital stock of Seller may be subject to restrictions on transfer under state
or federal securities laws and under a shareholders' agreement. All consents
under such shareholders' agreement necessary to complete the transactions
contemplated by this Agreement have been obtained as of the date hereof and such
agreement will have no effect upon Buyer's rights in or rights to use the Assets
following the Closing. Except as set forth on Section 2.2 of the Seller
Schedule, there are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which Seller or any Shareholder
is a party or by which it or he is bound obligating Seller or any Shareholder to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital shares of Seller or to
grant, issue or enter into any option, warrant, call, right, commitment or
agreement.
2.3 Authority; Consents. Seller has all requisite corporate power and
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authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate and shareholder action on the part of Seller. This
Agreement has been duly executed and delivered by Seller and the Shareholders
and constitutes the valid and binding obligation of Seller and the Shareholders,
enforceable in accordance with its terms. Except as otherwise disclosed on
Section 2.3(a) of the Seller Schedule, the execution and delivery of this
Agreement by Seller does not, and, as of the Closing, the consummation of the
transactions contemplated hereby will not, result in any material violation of,
or material default under (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under (any such event, a "Conflict") (i) any
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provision of the Organization Documents, (ii) any mortgage, indenture, lease,
contract or other agreement or instrument or (iii) any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Seller or its properties or assets in the case of
clause (ii), other than as would not have a Buyer Harm. Except as otherwise
disclosed on Section 2.3(b) of the Seller Schedule, no consent, waiver,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other federal, state,
county, local or foreign governmental authority, instrumentality, agency or
commission having jurisdiction over Seller (a "Governmental Entity"), or any
third party, is required by and with respect to Seller in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, other than whose absence would not have a material adverse
effect on the ability of Seller, the Shareholders or Buyer to effectuate the
transactions contemplated hereby or otherwise result in a Buyer Harm.
2.4 Taxes.
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(a) Definition of Taxes. For the purposes of this Agreement,
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"Tax" or, collectively, "Taxes," means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits. Other than as would not have a Buyer
----------------------
Harm, Seller has filed within the time period for filing or any extension
granted with respect thereto all federal, state, local, foreign and other
returns, estimates and reports ("Tax Returns") which it is required to file and
each such Tax Return has been completed in accordance with applicable law. Other
than as would not have a Buyer Harm, Seller has paid all Taxes required under
applicable law to be paid and has withheld with respect to its employees and
paid to the appropriate taxing authority all federal, state and local income
taxes, FICA, FUTA and any other Taxes required to be withheld. There are (and as
of immediately following the Closing there will be) no Liens (other than
statutory liens securing amounts not yet due or payable) on the Assets relating
to or attributable to Taxes. Except as provided in Section 1.4, Buyer will not
be responsible for the payment of any Taxes as a result of any of the
transactions contemplated hereby, including without limitation, the payment of
any sales, use or similar taxes by virtue of any state law providing for the
liability of any successor in interest, or any similar law or regulation.
2.5 Restrictions on Business Activities. Except as otherwise disclosed on
-----------------------------------
Section 2.5 of the Seller Schedule, there is no agreement, commitment, judgment,
injunction, law, rule, order or decree binding upon Seller or any Shareholder
which has or could reasonably be expected to have the effect of prohibiting or
impairing any use by Buyer of the Assets following the Closing and/or the
carrying on of Seller's business by Buyer in substantially the same manner as
generally conducted by Seller prior to the Closing or otherwise would result in
a Buyer Harm.
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2.6 Absence of Liens and Encumbrances. Except as otherwise disclosed on
---------------------------------
Section 2.6 of the Seller Schedule, Seller has and at Closing will have good and
valid title to all of the Assets, free and clear of any Liens. Seller has full
corporate right and corporate power to (and at the Closing will) sell, convey,
assign, transfer and deliver to Buyer good title to all the Assets, free and
clear of all Liens.
2.7 Agreements, Contracts and Commitments. Section 2.7 of the Seller
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Schedule sets forth a list of all agreements, contracts and commitments (written
or oral) (the "Contracts") relating to the Assets to which Seller is a party or
by which it is bound. Except for such (i) breaches, violations and defaults,
(ii) alleged breaches, violation and defaults, and (iii) events that would
constitute a breach, violation or default with the lapse of time, giving of
notice, or both, noted in Section 2.7 of the Seller Schedule and those which
reasonably would not be expected to have a Buyer Harm, Seller is not currently
in breach or violation of or in default under any of the terms or conditions of
any Contract. Each Contract is in full force and effect and, except as otherwise
disclosed in Section 2.7 of the Seller Schedule, is not subject to any default
thereunder of which Seller or any Shareholder has knowledge by any party
obligated to Seller pursuant thereto.
2.8 Litigation. Except as would not result in a Buyer Harm, there is no
----------
action, suit or proceeding of any nature pending or, to Seller's or any
Shareholder's knowledge, threatened against Seller, the Assets or any of
Seller's officers or directors in their respective capacities as such, nor, to
the knowledge of Seller and the Shareholders, is there any basis therefor that
is reasonably likely to be asserted and that would result in a Buyer Harm.
Except as would not result in a Buyer Harm, there is no investigation pending
or, to Seller's and the Shareholders' knowledge, threatened against Seller, its
properties or assets, or any of its officers or directors (nor, to the knowledge
of Seller and the Shareholders, is there any basis therefor) by or before any
Governmental Entity.
2.9 Employee Arrangements. No employee of Seller is subject to any
---------------------
agreement with Seller that would preclude the employment by Buyer of such
individual, or result in an obligation of Buyer to make any payments to any
person or entity in connection with such previous employment by Seller or its
affiliates if any such employee is hired by Buyer.
2.10 Compliance with Laws. To the extent that noncompliance would have a
--------------------
Buyer Harm, Seller has complied with and has not received any notices of
violation with respect to, any federal, state or local statute, law or
regulation, domestic or foreign.
2.11 Seller Financial Statements. Except as otherwise disclosed on Section
---------------------------
2.11 of the Seller Schedule, Seller's Balance Sheet as of July 31, 1999,
Statement of Operations from the period January 1, 1999 to July 31, 1999, and
the accompanying footnotes which are an integral part thereof, copies of which
are attached to Section 2.11 of the Seller Schedule (the "Seller Financials")
(i) have been prepared in good faith based on the consolidated books and records
of Seller, (ii) present fairly in all material respects the financial condition
and operating results of Seller as of July 31, 1999 and during the period then
ended, subject to normal year-end adjustments, and (iii) accurately set forth
sales by new and used units sold (by location), net sales and gross profit for
such periods.
9
2.12 Leases. Section 2.12 of the Seller Schedule contains a complete
------
and accurate list of all leases pursuant to which Seller currently leases real
property from others. Seller has made available to Buyer a true, correct and
complete copy of each of the leases listed in Section 2.12 of the Seller
Schedule.
2.13 Intellectual Property.
---------------------
(a) Definitions. For the purposes of this Agreement, the following
-----------
terms have the following definitions:
"Intellectual Property" means any or all of the following and all rights
in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and
all documentation relating to any of the foregoing; (iii) all copyrights,
copyrights registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (iv) all industrial designs and
any registrations and applications therefor throughout the world; (v) all
trade names, logos, URLs, common law trademarks and service marks,
trademark and service ▇▇▇▇ registrations and applications therefor
throughout the world; (vi) all databases and data collections and all
rights therein throughout the world; (vii) all moral and economic rights of
authors and inventors, however denominated, throughout the world, and
(viii) any similar or equivalent rights to any of the foregoing anywhere in
the world.
"Transferred Intellectual Property" means all Intellectual Property owned
by Seller that is embodied by, necessary to, or that would (absent a
license from Seller) be infringed by, the copying, making, using, selling,
distribution or other exploitation of the Assets.
(b) Section 2.13 of the Seller Schedule lists all Transferred
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority, including (i) patents,
patent applications (including provisional applications), and (ii) registered
copyrights and applications for copyright registration.
(c) Except as set forth in Section 2.13 of the Seller Schedule,
Seller has not transferred ownership of, or granted any license with respect to,
any Intellectual Property that is Transferred Intellectual Property, to any
other person. No Transferred Intellectual Property is the subject of any
proceeding or outstanding decree, order, judgment, agreement or stipulation that
restricts or would restrict in any manner the use, transfer or licensing thereof
by Buyer or may affect the validity, use or enforceability of such Transferred
Intellectual Property.
(d) Neither Seller nor any Shareholder has received notice from any
person claiming that the Assets or any conduct of Seller or the Shareholders
related to the Assets infringes
or misappropriates the Intellectual Property of any person or constitutes unfair
competition or trade practices under the laws of any jurisdiction.
2.14 Qualified Dealer. Seller meets the criteria of a "Qualified Dealer,"
----------------
as such term is, as of the date of this Agreement, set forth in the text of
subdivision 1, paragraph g of Section 415 of New York Dealer Law. Seller and the
Shareholders represent and warrant that, other than Seller, no Shareholder or
entity within the control of Seller or any Shareholder meets the criteria of a
"Qualified Dealer," as such term is, as of the date of this Agreement, set forth
in the text of subdivision 1, paragraph g of Section 415 of New York Dealer Law
2.15 Absence of Material Changes. Except as set forth in Section 2.15 of
---------------------------
the Seller Schedule, Seller has not, since July 31, 1999:
(a) Declared, set aside or paid any dividends on or made any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combined or reclassified any of its capital stock or
issued or authorized the issuance of any securities, or repurchased, redeemed or
otherwise acquired, directly or indirectly, any shares of its capital stock (or
options, warrants or other rights exercisable therefor);
(b) Acquired or agreed to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquired or agreed to acquire any
assets which are material, individually or in the aggregate, to its business; or
(c) Sold, leased, licensed or otherwise disposed of or encumbered
any material Assets, including without limitation any rights as a Qualified
Dealer.
2.16 Investment Representations. Seller and each of the Shareholders:
--------------------------
(a) understands that Buyer is a new business, has a limited
operating history and has in the past and may for the foreseeable future
experience significant operating losses;
(b) understands that no public market now exists for any of the
securities issued by Buyer and that Buyer has made no assurances that a public
market will ever exist for Buyer's securities;
(c) believes it has received all information it considers necessary
or appropriate for deciding whether to invest in the Shares;
(d) represents that it has had an opportunity to ask questions and
receive answers from Buyer regarding the business, properties, prospects and
financial condition of Buyer; and
(e) acknowledges that it is able to fend for itself, can bear the
economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of its investment in the Shares.
2.17 Disclosure. No representation or warranty of Seller or the
----------
Shareholders in this Agreement contains an untrue statement of a material fact
or omits to state a material fact required to be stated therein to make the
statement made, in the context in which made, not materially false or
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller and the Shareholders, subject to
such exceptions as are specifically disclosed in the disclosure letter supplied
by Buyer and referencing a specific representation supplied by Buyer to Seller
(the "Buyer Schedule") as of the date hereof, as follows:
3.1 Organization and Standing. Buyer is a corporation duly organized and
-------------------------
existing under, and by virtue of, the laws of the State of Delaware and is in
good standing under such laws. Buyer has requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as
presently conducted. Buyer is presently qualified to do business as a foreign
corporation in California and there is no other jurisdiction in which the
failure to be so qualified would have a material adverse effect on the business
or financial condition of Buyer.
3.2 Corporate Power. Buyer has all requisite legal and corporate power and
---------------
authority to execute and deliver this Agreement, to sell and issue the Buyer
Common Stock hereunder and to carry out and perform its obligations under the
terms of this Agreement.
3.3 Subsidiaries. Except for Autodata Solutions Company, a Nova Scotia
------------
unlimited liability company, Autodata, Inc., a Delaware corporation, and
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, LLC, a Delaware limited liability company, Buyer has no
subsidiaries or affiliated companies and does not otherwise own or control,
directly or indirectly, any equity interest in any corporation, association or
business entity.
3.4 Capitalization. The authorized capital stock of Buyer consists of
--------------
43,845,000 shares of Common Stock and 29,503,572 shares of Preferred Stock,
10,000,000 of which have been designated Series A Preferred Stock, 9,558,572 of
which have been designated Series B Preferred Stock and 9,945,000 of which have
been designated Series C Preferred Stock. As of the date of this Agreement,
4,560,821 shares of Common Stock (not including shares issued pursuant to the
exercise of options granted under Buyer's 1998 Stock Option Plan), 10,000,000
shares of Series A Preferred Stock, 9,545,584 shares of Series B Preferred Stock
and 9,757,523 shares of Series C Preferred Stock will be outstanding. All
currently outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, and have been issued in
compliance with applicable securities laws. Of the 7,700,000 shares of Common
Stock of Buyer reserved for issuance under Buyer's 1998 Stock Option Plan,
options to purchase fewer than 7,700,000 shares
have been granted. In accordance with the Operating Agreement of
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, LLC, dated as of May 28, 1999, Buyer has an obligation to
issue shares of Common Stock (i) pursuant to the exercise of a warrant issued to
BANK ONE CORPORATION and (ii) in exchange for Additional Members' (defined in
the Operating Agreement) respective Allocation Percentages (defined in the
Operating Agreement). Except as set forth above, there are no options, warrants
or other rights to purchase or acquire any of Buyer's authorized and unissued
capital stock.
3.5 Authorization. All corporate action on the part of Buyer, its
-------------
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement by Buyer, the authorization, sale, issuance
and delivery of the Shares, and the performance of Buyer's obligations under
this Agreement has been taken or will be taken prior to the Closing. This
Agreement, when executed and delivered by Buyer, shall constitute a valid and
binding obligation of Buyer, enforceable in accordance with its terms. The
Shares, when issued in compliance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable, and the Shares will be free of any
Liens other than any Liens created by Seller, a Shareholder or Permitted
Transferee; provided, however, that the Shares may be subject to restrictions on
transfer under state or federal securities laws and restrictions set forth in
this Agreement and in the Rights Agreement. The issuance of the Shares is not
subject to any preemptive rights or rights of first refusal.
3.6 Proprietary Rights. Buyer has title and ownership of, or full right to
------------------
use, all patents, trademarks, service marks, trade names, copyrights, trade
secrets, information, proprietary rights and processes necessary for its
business as now conducted and, to Buyer's knowledge, without any conflict with
or infringement of the rights of others. Other than as would not have a material
adverse effect on Buyer, there are no outstanding options, licenses, or
agreements of any kind relating to the foregoing, nor is Buyer bound by or a
party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person or
entity. Other than as would not have a material adverse effect on Buyer, Buyer
has not received any communications alleging that Buyer has violated or, by
conducting its business as currently conducted, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade proprietary
rights of any other person or entity. Other than as would not have a material
adverse effect on Buyer, to the knowledge of Buyer, none of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of Buyer or that would conflict with
Buyer's business as currently conducted. Neither the execution and delivery of
this Agreement, nor the carrying on of Buyer's business by the employees of
Buyer, nor the conduct of Buyer's business as currently conducted, will, to
Buyer's knowledge, conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. Buyer does not
believe it is or will be necessary to utilize any inventions of any of its
employees (or people it currently intends to hire) made prior to their
employment by Buyer.
3.7 Registration Rights. Except as set forth in the Rights Agreement,
-------------------
Buyer is not under any contractual obligation to register under the Securities
Act of 1933, as amended (the "Securities
Act"), any of its presently outstanding securities or any of its securities
which may hereafter be issued.
3.8 Governmental Consent, etc. No consent, approval order or authorization
-------------------------
of or registration, qualification, designation, declaration or filing with any
governmental authority on the part of Buyer is required in connection with the
valid execution and delivery of this Agreement, or the offer, sale or issuance
of the Shares, or the consummation of any other transaction contemplated hereby,
(other than with respect to dealer licenses under New York state law) and except
the qualification (or taking of such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the Shares
under applicable Blue Sky laws, which filings and qualifications, if required,
will be accomplished in a timely manner.
3.9 Permits. Buyer has or is investigating the requirements for any
-------
material franchises, permits, licenses, and any similar authority necessary for
the conduct of its business as now being conducted by it, the lack of which
would materially and adversely affect the business, properties, or financial
condition of Buyer, and Buyer believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as planned to be
conducted. To its knowledge, Buyer is not in default in any material respect
under any of such franchises, permits, licenses, or other similar authority.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Confidentiality. Each of the parties hereto hereby agrees to keep the
---------------
terms of this Agreement (except to the extent contemplated hereby) and such
information or knowledge obtained in any investigation, or pursuant to the
negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, confidential; provided, however, that the
foregoing shall not apply to information or knowledge which (a) a party can
demonstrate was already lawfully in its possession prior to the disclosure
thereof by the other party, (b) is generally known to the public and did not
become so known through any violation of law, (c) became known to the public
through no fault of such party, (d) is later lawfully acquired by such party
without confidentiality restrictions from other sources, (e) is required to be
disclosed by order of court or government agency with subpoena powers (provided
that such party shall have provided the other party with prior notice of such
order and an opportunity to object or take other available action), (f) which is
disclosed in the course of any litigation between any of the parties hereto or
(g) which is disclosed pursuant to Section 4.13.
4.2 Expenses. All fees and expenses incurred in connection with the
--------
Acquisition including, without limitation, all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties incurred
by a party in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby, shall be
the obligation of the respective party incurring such fees and expenses.
4.3 Bulk Sales. Buyer hereby agrees to waive the requirement, if any, that
----------
Seller comply with any bulk transfer law which may be applicable to the
transactions contemplated by this Agreement; provided, however, that Seller and
the Shareholders agree, subject to Article VI, to indemnify and hold harmless
Buyer with respect to any noncompliance with such laws and Buyer's waiver with
respect thereto.
4.4 Trademark, Transfer, License and Covenant Not to Compete. For purposes
--------------------------------------------------------
of this Section 4.4, certain capitalized terms shall have the meanings therefor
set forth in Section 4.4(h).
(a) Trademark, Transfer and License.
-------------------------------
(i) Transfer and License Grants. Subject to the terms and
---------------------------
conditions of this Agreement, Licensors hereby (i) grant to Buyer and Buyer
accepts from Licensors, a worldwide, royalty-free, fully paid-up license to use
the Non-Exclusive Marks for the Term and (ii) transfer to Buyer all of their
right, title and interest in and to the Exclusive Marks and the goodwill
represented thereby in each case only in connection with the Sale and promotion
of Automobiles, including the online Sale and promotion of Automobiles. Such
transfer and license shall include without limitation for the respective Term
Buyer's right to register in Buyer's, or Buyer's affiliates', own name Internet
domain names incorporating the Marks. Except with respect to the use of the name
"POTAMKIN" in a ▇▇▇▇, Buyer shall not use the name "POTAMKIN" for any purpose
without the prior written consent of Seller's Designee, which consent maybe
withheld in the sole discretion of Seller's Designee. Buyer acknowledges and
agrees that Seller and the Shareholders do not make, and have not made, any
representations or warranties relating to use or ownership of the Marks, except
that Seller and the Shareholders represent and warrant that, as of the date of
this Agreement, no Non-Competing Party (as defined in Section 4.4(b)) has
authorized any third party or any related party to use the Marks and, as between
the Non-Competing Parties, only Licensors are authorized to use the Marks.
(ii) Exclusivity. Subject to the terms and conditions of this
-----------
Agreement, the grants set forth above shall be exclusive (including as to
Licensors) with respect to the Marks. If Licensors have recorded as an Internet
domain name any Marks, Licensors shall transfer such domain names to Buyer for
the respective Term. Notwithstanding any provision to the contrary herein, the
Marks may not be used for any purpose other than in connection with the Sale of
Automobiles.
(iii) Forfeiture of Marks. The use of the Marks by Buyer shall
-------------------
be subject to the following limitations:
(1) If Buyer commits an act that results in a material
adverse effect on the goodwill of the Marks and which subjects any Licensor or
any Non-Competing Party to public hatred, scorn, obloquy or shame (such event,
an "Event of Obloquy"), Buyer shall take prompt action to cease or otherwise
cure such conduct which gave rise to such Event of Obloquy. Following the
occurrence of a second Event of Obloquy and upon written notice from Seller's
Designee evidencing that such Event of Obloquy has occurred, Buyer shall, not
later than six (6) months
following the date of receipt of such notice, discontinue use of the Marks and
all rights with respect to such Marks shall revert back to Seller's Designee.
(2) All rights to the Marks shall automatically revert
back to Seller's Designee if:
a) Buyer files any petition or action for relief under
any bankruptcy, reorganization, insolvency or moratorium law, or any other law
for the relief of, or relating to, debtors, now or hereafter in effect, or makes
any assignment for the benefit of creditors, or takes any corporate action in
furtherance of any of the foregoing; or
b) An involuntary petition is filed against Buyer
(unless such petition is dismissed or discharged within sixty (60) days), under
any bankruptcy statute now or hereafter in effect, or a custodian, receiver,
trustee or assignee for the benefit of creditors (or other similar official) is
appointed to take possession, custody or control of any property of Buyer
(unless such appointment is rescinded or removed within sixty (60) days).
(3) If, at any time after the date of this Agreement, a
▇▇▇▇ is due to enter the public domain as a result of Buyer's failure to use
such ▇▇▇▇, then Seller's Designee shall provide Buyer written notice of such
fact. If Buyer does not then use such ▇▇▇▇, then, immediately prior to such
Mark's entry into the public domain, all rights to such ▇▇▇▇ shall revert back
to Seller's Designee.
(iv) Maintenance of Marks.
--------------------
(1) Buyer shall not enter into any agreement with any
third party that in any way alters, diminishes or restricts the rights of
Licensors in the Marks or places any restrictions or conditions upon the use or
appearance of the Marks other than as used by Buyer or as set forth in this
Agreement.
(2) Other than as set forth in Section 4.4(a)(i), Buyer
shall not without the prior written consent of Seller's Designee (which consent
shall not be unreasonably withheld) prosecute any application for the
registration of any ▇▇▇▇.
(b) Restricted Activities.
---------------------
(i) In order to protect and realize the value and goodwill
associated with the Assets and as an inducement to Buyer to enter into this
Agreement, neither Seller, the Shareholders nor Planet (collectively, the "Non-
Competing Parties") shall, nor shall they permit any of their subsidiaries or
affiliates now or hereafter under their control, to (each of the following
activities, a "Restricted Activity"):
(1) Commencing on the Closing Date and ending on June 15,
2000, Operate a Consolidated Internet Site.
a) Notwithstanding this Section 4.4(b)(i)(1) to the
contrary, Non-Competing Parties (i) located within the same geographic
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ (▇.▇., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇) may Engage in the Sale of
Automobiles from a Consolidated Internet Site if but only if the Automobiles
offered on such Consolidated Internet Site bear a nameplate for which any Non-
Competing Party now or hereafter controls a franchised dealership in such
geographic metropolitan area and (ii) may link their Internet sites together.
(2) Commencing on the Closing Date and ending on April 15,
2001, Engage in the use, licensing or any other exploitation of any Restricted
▇▇▇▇ online in connection with the Sale of Automobiles.
a) Notwithstanding this Section 4.4(b)(i)(2) to the
contrary, but subject to Section 4.4(b)(i)(3), below, (i) any Automobile dealer
located within the New York Metro Area, now or hereafter controlled by a Non-
Competing Party, may use those marks listed on Schedule 4.4(b) hereto (the
"Schedule 4.4(b) Marks") in connection with the Sale of Automobiles, provided
that such Automobiles bear a nameplate for which any Non-Competing Party now or
hereafter owns or controls a franchised dealership in the New York Metro Area
and (ii) Planet may use the Schedule 4.4(b) Marks for the purpose of linking to
Internet sites of the Automobile dealers referred to in clause (i) of this
paragraph.
b) Notwithstanding this Section 4.4(b)(i)(2) to the
contrary, (i) any Automobile dealer located within the Miami Metro Area, now or
hereafter controlled by a Non-Competing Party, may use all Restricted Marks
(except for the Licensed Marks) in connection with the Sale of Automobiles,
provided such Automobile bears a nameplate for which any Non-Competing Party now
or hereafter owns or controls a franchised dealership in the Miami Metro Area
and (ii) Planet may use the Restricted Marks (except for the Licensed Marks) for
the purpose of linking to Internet sites of the Automobile dealers referred to
in clause (i) of this paragraph.
(3) Commencing on the Closing Date and ending on January
15, 2001, Engage in the Sale of Automobiles (x) from a location within the New
York Metro Area or (y) online to any customer who resides in the New York Metro
Area.
a) Notwithstanding this Section 4.4(b)(i)(3) to the
contrary, any Non-Competing Party may Engage in the Sale of Automobiles if such
Automobiles bear a nameplate for which any Non-Competing Party now or hereafter
controls a franchised dealership in the New York Metro Area.
b) Notwithstanding this Section 4.4(b)(i)(3) to the
contrary, this restriction shall cease to apply to Planet and its subsidiaries
if and when there is a Change of Control of Planet. In addition, in the event
that there is a Change of Control of Planet that is consummated after the
Trigger Date (as defined herein) and the securities of the acquiring entity or
its parent are publicly traded, then this Section 4.4(b)(i)(3) shall cease to
apply to such acquiring entity and its parent, if any, as well as to the
shareholders of Planet solely with respect to such shareholders' future
participation, if any, in the ownership or control of such acquiring entity or
its
parent, if any. For the purposes hereof, "Trigger Date" shall mean the earlier
of (i) ten months after the Closing Date or (ii) six months after a Buyer IPO,
if any.
c) Notwithstanding this Section 4.4(b)(i)(3) to the
contrary, an individual Automobile dealer located outside the New York Metro
Area now or hereafter controlled by a Non-Competing Party may Engage in the Sale
of Automobiles to residents of the New York Metro Area, provided that such
Automobiles bear a nameplate for which such individual dealer is a franchisee.
d) Notwithstanding this Section 4.4(b)(i)(3) to the
contrary, this restriction shall not apply with respect to Seller performing its
obligations or exercising its rights under the Inventory Agreement or Seller
performing its obligations, if any, under Section 4.8.
e) Link to Buyer Internet Site. Commencing on the
---------------------------
Closing Date and ending on the first to occur of (i) January 15, 2001, (ii) an
initial public offering of Planet capital stock, or (iii) a Change in Control of
Planet, to the extent that Planet Operates a Consolidated Internet Site as
permitted under this Section 4.4(b)(i)(3), Planet will use its best efforts to
link or otherwise refer to Buyer's Internet site all customers who make
inquiries on Planet's Consolidated Internet Site that Planet identifies as being
residents of the New York Metro Area (either through point of purchase
recognition or through customer self-selection) who are interested in purchasing
Automobiles for which a Non-Competing Party does not now or hereafter control a
franchised dealership in the New York Metro Area.
(c) Non-Solicitation. For a period commencing on the Closing Date and
----------------
ending on the third anniversary of the Closing Date (the "Non-Solicitation
Period"), the Non-Competing Parties shall not solicit, encourage, take any other
action which is intended to induce or encourage, or has the effect of inducing
or encouraging any employee of Buyer (who prior to the Closing Date was an
employee of Seller) to terminate his or her employment with Buyer. Further,
during the Non-Solicitation Period, the Non-Competing Parties shall not solicit
or encourage any employee of Buyer (who prior to the Closing Date was an
employee of Seller) to accept employment with Seller, any Non-Competing Party or
any of their respective affiliates. Seller and the Shareholders represent and
warrant that all persons employed by any Non-Competing Party or any affiliate
thereof who operate the business being purchased by Buyer from Seller in the
ordinary course prior to the Closing Date are employees solely of Seller, other
than as listed in Section 4.4(c) of the Seller Schedule.
(d) Separate Covenants. The covenants contained herein shall be
------------------
construed as a series of separate covenants, one for each county, city or other
area of geographic scope. If, in any judicial proceeding, a court refuses to
enforce any of such separate covenants (or any part thereof), then such
unenforceable covenant (or such part) shall be eliminated from this Agreement to
the extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced. In the event that the provisions of this Section are
deemed to exceed the time, geographic or scope limitations permitted by
applicable law, then such provisions shall be reformed to the maximum time,
geographic or scope limitations, as the case may be, permitted by applicable
laws.
(e) Acknowledgment. Seller, the Shareholders and Planet acknowledge
--------------
that: (i) Planet is currently under the control of RMP and AHP; (ii) the
goodwill associated with the Assets is reflected in the consideration for the
Acquisition to be received by Seller; (iii) Seller's, the Shareholders' and
Planet's agreements set forth herein are necessary to preserve the value of the
Acquisition to Buyer. The parties also acknowledge that the limitations of time,
geographic scope and scope of activity agreed to in this Agreement are
reasonable because, among other things, (x) Seller and Buyer are engaged in a
highly competitive industry, (y) the Shareholders, have unique access to, and
will continue to have access to, the trade secrets and know-how included in the
Assets, including without limitation the plans and strategy (and, in particular,
the competitive strategy) of Buyer; and (iv) Seller and the Shareholders are
receiving significant consideration in connection with the Acquisition. The
parties acknowledge that ▇▇▇ is not currently employed by or an owner of Planet
or any of Planet's subsidiaries.
(f) Remedies. Seller, the Shareholders and Planet, on the one hand,
--------
and Buyer, on the other hand, agree that it would be impossible or inadequate to
measure and calculate the other's damages from any breach of the covenants set
forth in this Section 4.4. Accordingly, Seller, the Shareholders and Planet, on
the one hand, and Buyer, on the other hand, agree that if any party breaches any
provision of this Section 4.4, the other will have available, in addition to any
other right or remedy otherwise available, the right to obtain an injunction
from a court of competent jurisdiction restraining such breach or threatened
breach and to an order of specific performance of any such provision of this
Agreement. Buyer, Seller, the Shareholders and Planet further agree that no bond
or other security shall be required in obtaining such equitable relief, nor will
proof of actual damages be required for such equitable relief. Buyer, Seller,
the Shareholders and Planet hereby expressly consent to the issuance of such
injunctive relief, whether in the form of a temporary restraining order or
otherwise, and to the ordering of such specific performance.
(g) Buyer Obligations. Until April 15, 2001, Buyer shall refer to
-----------------
an Internet address designated by Seller's Designee, all prospective customers
who (i) Buyer knows reside in the Miami Metro Area, (ii) arrived at an Internet
site controlled by Buyer through a Link or other similar access from an Internet
address with a Licensed ▇▇▇▇ as its domain name, and (iii) have expressed an
interest in purchasing an Automobile.
(h) Definitions. For purposes of this Section 4.4, the following
-----------
definitions apply:
(i) "Automobile" means new cars, new sport utility vehicles,
new minivans, new trucks with gross vehicle weight less than 10,000 lbs. and any
similar new motor vehicles.
(ii) "Change of Control" means, with respect to a party: (a)
the sale of all or substantially all of the assets of such party to an entity
unaffiliated with such party or its shareholders prior to such transaction or
(b) the acquisition of such party by another entity unaffiliated with such party
or its shareholders prior to such transaction by means of merger or
consolidation resulting in the exchange of the outstanding shares of such party
for securities or consideration issued, or caused to be issued, by the acquiring
corporation or its subsidiary, unless in the case of either (a) or (b) the
stockholders of such party (when aggregated with their affiliates)
beneficially own at least 50% of the voting power or equity of the surviving,
purchasing or resulting entity or its parent, if any, in such a transaction.
(iii) "Consolidated Internet Site" means an Internet site that
permits a user to (a) configure online (e.g., select color, options and/or
accessories) an Automobile from a selection of a variety of makes and models of
Automobiles and (b) obtain the sales price for the configured Automobile.
(iv) "Engage" means, with respect to any Restricted Activity:
(a) to engage in or conduct (whether himself or itself or as an employee,
officer or director) such Restricted Activity; (b) to have any ownership
interest (except for ownership of 4.9% or less) in or profits interest in (other
than profits derived from ordinary course business activity unrelated to the
Sale of Automobiles to the New York Metro Area), any entity engaged in such
Restricted Activity; or (iii) to exercise in any material respect executive
control of, any firm, partnership, corporation, entity or business (other than
Buyer) that engages in or conducts such Restricted Activity.
(v) "Exclusive Marks" means "POTAMKIN DIRECT" or "POTAMKIN
AUTO CENTER," and trademarks or service marks incorporating such ▇▇▇▇, and any
confusingly similar variation thereof, including Internet domain names (whether
.com, .net, .org or similar such extension) incorporating or based on such
marks.
(vi) "Licensor" means any of Seller, the Shareholders or Planet
(or any entity controlled by or under common control with any of the foregoing)
to the extent that any of such parties now or hereafter has any rights to the
Marks; provided, however, that RMP and AHP represent to Buyer that no entity
controlled by RMP and/or AHP or under common control with any of Seller, any
Shareholder or Planet has any interest in any of the Marks.
(vii) "Marks" means the Exclusive Marks and the Non-Exclusive
Marks.
(viii) "Miami Metro Area" means that geographic area co-extensive
with the following counties in Florida: Dade County, Broward County and Monroe
County.
(ix) "New York Metro Area" means that geographic area bounded
by a circle whose radius extends forty-five (45) miles from the World Trade
Center in New York City, New York, and includes the facility in Nanuet, New
York, operated by Seller prior to the Closing.
(x) "Non-Exclusive Marks" means ▇▇▇▇▇▇▇▇.▇▇▇, and trademarks
or service marks incorporating such ▇▇▇▇, and any confusingly similar variation
thereof, including without limitation Internet domain names (whether .com, .net,
.org or similar such extension) incorporating or based on such marks.
(xi) "Operate" means to launch to the public, control, host or
manage an Internet site or series of related Internet sites.
(xii) "Restricted Marks" means the following trademark and
terms, or any confusingly similar variation thereof: "POTAMKIN," including
without limitation (X) the Marks and (Y) all Internet domain names (whether
.com, .net, .org or similar such extension) based on or incorporating such marks
and terms.
(xiii) "Sale" means any transaction involving the wholesale,
retail or fleet sales or leasing of Automobiles, including any transaction
whereby a person acts a dealer, broker or agent for the purchase, sale or
leasing of an Automobile.
(xiv) "Seller's Designee" means RMP, AHP or any entity
designated by RMP or AHP which is under the control of RMP or AHP.
(xv) "Term" means: (a) with respect to the Exclusive Marks, a
period commencing on the Effective Date and lasting in perpetuity; and (b) with
respect to the Non-Exclusive Marks, the period commencing on the Effective Date
and ending on April 15, 2001.
4.5 Right of First Offer. Prior to the date of Buyer's initial public
--------------------
offering, if any, pursuant to an effective registration statement under the
Securities Act, covering the offer and sale of Buyer Common Stock to the public
(a "Buyer IPO") and except as set forth in Section 4.5 (c), before there can be
a valid sale or transfer for consideration of any of the Shares by any holder
thereof (each such holder, a "Selling Shareholder"), such Selling Shareholder
shall first offer such Shares to Buyer in the following manner:
(a) The Selling Shareholder shall deliver a notice in writing to
Buyer (an "Offer Notice") stating the price, terms, and conditions of such
proposed sale or transfer, the number of Shares to be sold or transferred, and
his or her intention to so sell or transfer such Shares. Within thirty (30) days
thereafter, Buyer shall have the prior right to purchase all but not less than
all of the Shares offered at the price and upon the terms and conditions stated
in such notice (it being understood that Buyer may assign this right in its sole
discretion).
(b) If all of the Shares in the Offer Notice are not purchased by
Buyer (or an assignee of Buyer) within a thirty (30)-day period from the date
the Offer Notice is delivered by a Selling Shareholder to Buyer, the Selling
Shareholder may sell or transfer to any person or persons all Shares referred to
in the Offer Notice, but only within a period of sixty (60) days from the date
the Offer Notice is delivered to Buyer; provided, however, that the Selling
Shareholder shall not sell or transfer such Shares at a lower price or on terms
more favorable to the purchaser or transferee than those specified in the Offer
Notice. After said sixty (60)-day period, the foregoing procedure for first
offering Shares to Buyer shall again apply if the proposed sale or transfer has
not been completed.
(c) Notwithstanding anything contained herein to the contrary, Seller
and the Shareholders may transfer any of the Shares to up to twelve (12)
Permitted Transferees (as defined below) in addition to the Shareholders without
complying with the requirements of this Section 4.5, provided that (i) such
transfer is otherwise effected in accordance with applicable securities laws,
(ii) until six months after the Closing Date, such transfer is for value no
greater than $1.50 per Share,
21
(iii) until the earlier of (x) a Buyer IPO or (y) three years after the Closing
Date, such transfer is for no greater price per Share than the fair market value
as then determined by the Board of Directors of Buyer, (iv) written notice is
promptly given to Buyer, and (v) such Permitted Transferee agrees to be bound by
the provisions of this Section 4.5, except that all transfers by Permitted
Transferees shall be aggregated with the transfers by Seller for the purpose of
determining whether the maximum of twelve (12) Permitted Transferees has been
met. For the purpose of this Agreement, "Permitted Transferee" shall mean a
Shareholder, a family member, friend, associate, relative or affiliate of a
Shareholder, or a trust or any other entity established for such Shareholder's,
family member's, friend's, associate's, relative's or affiliate's benefit;
provided, however, that ▇▇▇ ▇▇▇ designate no more than two (2) Permitted
Transferees.
(d) Buyer shall not be required to recognize any sale or transfer or
purported sale or transfer of the Shares, and any sale or transfer or purported
sale or transfer of the Shares shall be null and void, unless the terms,
conditions, and provisions of this Section 4.5 are observed and followed.
4.6 Employees. Buyer shall have the right to offer employment to any
---------
employees of Seller (the "Designated Employees"), other than those employees of
Seller, the Shareholders or their affiliates listed in Section 4.4(c) of the
Seller Schedule, effective upon the Closing or at any time within a period of
one hundred twenty (120) days following the Closing Date. Seller shall use all
reasonable efforts to assist and encourage the transition of employment of the
Designated Employees from Seller to Buyer, but shall not be obligated to incur
any expenses in connection therewith. Seller will not assert a claim (of
tortious interference, theft of trade secrets or otherwise) as a result of
Buyer's recruitment of employees or former employees of Seller as of the date of
this Agreement. Seller agrees not to rehire any of the Designated Employees
hired by Buyer, whether as employees or otherwise, until the later of (i) the
termination of their employment with Buyer and (ii) one hundred eighty (180)
days after the Closing Date; provided, however, that if Buyer terminates the
employment of any of Seller's former employees, Seller may rehire such
terminated employees.
4.7 Services Agreement. From the Closing Date until six (6) months
------------------
following the Closing Date, unless earlier terminated by Buyer, Seller or an
affiliate of Seller shall, upon the reasonable written request of Buyer, assist
Buyer in the performance of back-office accounting-related functions related to
the business acquired by Buyer from Seller hereunder, including accounting and
other related services. Buyer shall reimburse Seller on a monthly basis for all
reasonable costs incurred by Seller or an affiliate of Seller in the performance
of such services, including without limitation, an allocation of payroll
expenses and out-of-pocket costs.
4.8 Qualified Dealer Registration.
-----------------------------
(a) Promptly after and from time to time following the Closing, at
Buyer's request, Seller shall and the Shareholders shall cause Seller to make an
application and pay any necessary fees for a registration certificate to qualify
Seller as a Qualified Dealer pursuant to Section 415 of New York Dealer Law and
shall use their reasonable efforts to cause such certificate(s) to be issued as
promptly as practicable.
(b) From time to time following the Closing, at Buyer's written
request, Seller and the Shareholders shall perform such acts as may be
reasonably necessary and within their power and control to maintain the status
of Buyer as a Qualified Dealer under Section 415 of New York Dealer Law to the
fullest extent permitted thereunder, including without limitation filing renewal
applications and paying any necessary fees. Any rights of Seller or its
successor, if any, as a Qualified Dealer, upon renewal or otherwise after the
Closing Date, shall automatically, by the terms of this Agreement, be
transferred to Buyer without the payment of any additional consideration
therefor to the fullest extent permitted under New York Dealer Law.
(c) Promptly after and from time to time following the Closing, at the
written request of Buyer, Seller shall and the Shareholders shall cause Seller
to apply to transfer all of Seller's rights as a Qualified Dealer to Buyer
pursuant to Section 415 of New York Dealer Law to the fullest extent permitted
under New York Dealer Law and shall use their reasonable efforts to cause such
transfer to occur as promptly as practicable.
(d) As of and following the date of this Agreement, neither Seller nor
any Shareholder shall, nor shall they permit any affiliate to transfer, nor
shall Seller or any Shareholder suffer or permit involuntarily the transfer, of
any of Seller's rights as a Qualified Dealer under Section 415 of New York
Dealer Law to any person or entity other than Buyer.
(e) Except as otherwise provided in Section 4.8(a), Buyer shall
promptly reimburse Seller and the Shareholders for all of out-of-pocket expenses
reasonably incurred by Seller and the Shareholders in performing their
obligations under this Section 4.8.
(f) Notwithstanding any provision to the contrary contained herein,
the parties acknowledge and agree that (i) the only representations and
warranties provided by Seller and the Shareholders with respect to Seller's, the
Shareholders' and their affiliates' status as a Qualified Dealer under New York
Dealer Law are set forth in Sections 2.14, (ii) Seller and Shareholders do not
bear any risk or responsibility in the event that, a certificate registering
Seller as a Qualified Dealer under New York Dealer Law is not issued to Seller,
Seller is unable to transfer its status as a Qualified Dealer to Buyer, or Buyer
is unable to qualify as a dealer or maintain its status as a Qualified Dealer,
unless such events are caused by a breach by Seller or any Shareholder of this
Agreement, and (iii) Seller and the Shareholders do not bear any risk resulting
from an amendment to or repeal or interpretation of New York Dealer Law by the
legislature or any Governmental Entity.
23
(g) If the rights of Seller to conduct the activities of a Qualified
Dealer (the "Qualified Dealer License") are not transferred to Buyer for any
reason other than (i) Buyer's refusal to comply with regulations or other
requirements of the New York State Department of Motor Vehicles (the "NYS DMV")
necessary to obtain the Qualified Dealer License or (ii) Buyer's failing to meet
any criteria established by the NYS DMV in order to qualify for a new dealer's
license, then the Shareholders and Seller agree that the Broker Period (as
defined in the Inventory Agreement) will be extended to a date which is the
earlier of (x) the fifth anniversary of the date of this Agreement or (y) the
date on which Buyer obtains the Qualified Dealer License. To the extent that the
Qualified Dealer License is not issued to Buyer, at Buyer's option, Seller shall
be deemed not to have transferred to Buyer hereunder rights as a Qualified
Dealer, but rather, shall be deemed to have retained such rights in order to
perform its obligations under this subsection (g) to the fullest extent
permitted by New York Dealer Law.
4.9 Dealership Arrangements. Buyer, Seller and the Shareholders shall use
-----------------------
their respective reasonable efforts to facilitate Buyer's entering into supply
arrangements with automobile dealerships controlled by Seller and/or the
Shareholders.
4.10 Inventory Agreement. Buyer and Seller shall execute and deliver the
-------------------
Inventory Agreement at the Closing.
4.11 Real Estate Agreement. Buyer and Seller shall execute and deliver the
---------------------
Real Estate Agreement at the Closing.
4.12 Advertising Rates. Seller and the Shareholders shall use their
-----------------
reasonable efforts to assist Buyer in obtaining local and other advertising
rates equivalent to those rates paid by Seller and other dealerships located in
the New York metropolitan area that are owned or controlled by any
Shareholder(s).
4.13 Public Disclosure. Upon the execution of this Agreement, the parties
-----------------
shall release a mutually agreed upon press release regarding the public
announcement of the transactions contemplated hereby in the form set forth on
Schedule 4.13. Unless otherwise required by law (including, without limitation,
foreign, federal and state corporate and securities laws) and by the rules and
regulations of the Nasdaq Stock Market, no public disclosure (whether or not in
response to an inquiry) of the subject matter of this Agreement shall be made by
any party hereto (or their directors or officers) unless approved by Buyer and
either AHP or RMP prior to release, provided that such approval shall not be
unreasonably withheld.
4.14 Excluded Assets. The Excluded Assets are being retained by Seller and
---------------
Buyer is not acquiring an interest therein. In the event that any of the
Excluded Assets shall come into Buyer's possession, Buyer shall promptly provide
such Excluded Assets to Seller, including, without limitation, all accounts
receivable of Seller accrued prior to the Closing.
4.15 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably
--------------------
waives any and all right to trial by jury in any legal proceeding arising out of
or related to this Agreement or the transactions contemplated hereby.
24
4.16 Retention of Records. Commencing on the Closing and continuing for a
--------------------
period seven (7) years thereafter, the parties each shall retain and make
available for the other parties' reasonable use, inspection and copying, all
documents and files related to the Assets and the business being acquired by
Buyer from Seller pursuant to this Agreement.
4.17 No Finders or Brokers. Each party represents and warrants to the other
---------------------
parties that there are no investment bankers, brokers, finders or other
intermediaries which have been retained by or which have been authorized to act
on behalf of such party who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
4.18 Investor Rights Agreement. Upon the issuance of Buyer's next series of
-------------------------
Preferred Stock after the date of this Agreement, and in no event later than
December 31,1999, Buyer shall amend its current Investor Rights Agreement to
provide that Seller and the Shareholders and Permitted Transferees reasonably
acceptable to Buyer will be and will, subject to the terms of such Investor
Rights Agreement, have the rights and obligations of "Holders" under the terms
of such agreement and that the Shares will be "Registrable Securities" under the
terms of such agreement.
ARTICLE V
CONDITIONS TO THE ACQUISITION
5.1 Additional Conditions to Obligations of Seller and the Shareholders.
-------------------------------------------------------------------
The obligations of Seller and the Shareholders to consummate the Acquisition and
the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, by Seller and the Shareholders:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date, except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct in all material respects as of such
date), with the same force and effect as if made on and as of the Closing Date;
(b) Agreements and Covenants. Buyer in all material respects shall
------------------------
have performed or be in compliance with all agreements and covenants required by
this Agreement to be performed or complied with by Buyer on or prior to the
Closing Date, including, without limitation, delivery at the Closing of the
items set forth in Section 1.5 required to be delivered by Buyer;
(c) No Governmental Litigation. There shall not be pending any suit
--------------------------
by, action by or proceeding by any Governmental Entity, (i) challenging the
Acquisition or any of the transactions contemplated hereby, seeking to restrain
or prohibit the consummation of the Acquisition, or seeking to place limitations
on the ownership of the Assets by Buyer, (ii) seeking to prohibit or materially
limit the ownership or operation by Buyer of any of its affiliates of any
portion of any of their respective assets (including without limitation the
Assets) or businesses, or to compel Buyer or any of its affiliates to dispose of
or hold separate any portion of any of their respective assets (including
without limitation the Assets) or businesses, as a result of the Acquisition, or
(iii)
25
seeking to prohibit Buyer of any of its affiliates from effectively controlling
in any material respect the Assets;
(d) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Acquisition shall be in effect,
nor shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Acquisition, which makes
the consummation of the Acquisition illegal;
(e) Inventory Agreement. Buyer shall have executed and delivered the
-------------------
Inventory Agreement to Seller;
(f) Real Estate Agreement. Buyer shall have executed and delivered
---------------------
the Real Estate Agreement to Seller;
(g) Offer Letter; Stock Option Agreement. Buyer shall have executed
------------------------------------
and delivered the Offer Letter and the Stock Option Agreement to ▇▇▇; and
(h) Certificate of Buyer. Seller and the Shareholders shall have been
--------------------
provided with a certificate executed on behalf of Buyer to the effect that, as
of the Closing, the conditions set forth in this Section 5.1 have been
satisfied.
5.2 Additional Conditions to the Obligations of Buyer. The obligations of
-------------------------------------------------
Buyer to consummate the Acquisition and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing, by
Buyer:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Seller and the Shareholders contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date, except
for those representations and warranties which address matters only as of a
particular date (which shall remain true and correct in all material respects as
of such date), with the same force and effect as if made on and as of the
Closing Date;
(b) Agreements and Covenants. Seller and the Shareholders in all
------------------------
material respects shall have performed or be in compliance with all agreements
and covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing, including, without limitation, delivery at the
Closing of the items set forth in Section 1.5 required to be delivered by them;
(c) Seller Stockholder Approval. This Agreement and the Acquisition
---------------------------
shall have been approved and adopted by the stockholders of Seller by the
requisite vote under applicable law and Seller's Organizational Documents;
26
(d) No Governmental Litigation. There shall not be pending any suit
--------------------------
by, action by or proceeding by any Governmental Entity, (i) challenging the
Acquisition or any of the transactions contemplated hereby, seeking to restrain
or prohibit the consummation of the Acquisition, or seeking to place limitations
on the ownership of the Assets by Buyer, (ii) seeking to prohibit or materially
limit the ownership or operation by Buyer of any of its affiliates of any
portion of any of their respective assets (including without limitation the
Assets) or businesses, or to compel Buyer or any of its affiliates to dispose of
or hold separate any portion of any of their respective assets (including
without limitation the Assets) or businesses, as a result of the Acquisition, or
(iii) seeking to prohibit Buyer of any of its affiliates from effectively
controlling in any material respect the Assets;
(e) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Acquisition shall be in effect,
nor shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Acquisition, which makes
the consummation of the Acquisition illegal;
(f) Inventory Agreement. Seller shall have executed and delivered the
-------------------
Inventory Agreement to Buyer;
(g) Real Estate Agreement. Seller shall have executed and delivered
---------------------
the Real Estate Agreement to Buyer;
(h) Offer Letter; Stock Option Agreement. ▇▇▇ shall have executed and
------------------------------------
delivered the Offer Letter and Stock Option Agreement to Buyer; and
(i) Certificate of Seller. Buyer shall have been provided with a
---------------------
certificate on behalf of Seller and the Shareholders to the effect that, as of
the Closing, the conditions set forth in this Section 5.2 have been satisfied.
ARTICLE VI
SURVIVAL; INDEMNIFICATION
6.1 Survival and Limitations of Claims.
----------------------------------
(a) All representations and warranties in this Agreement shall
survive the Closing and shall continue until (in each of the following cases,
the "Expiration Date"): (i) in the case of the representations and warranties in
Sections 2.1, 2.2, 2.3, 2.5, 2.6, 2.8, 2.10 and 2.14 and Article III, two (2)
years after the Closing Date; (ii) in the case of the representations and
warranties in Sections 2.4, the expiration of the applicable statute of
limitations relative to the liability relating to such representation or
warranty; and (iii) in the case of all other representations and warranties in
this Agreement, one (1) year after the Closing Date.
27
(b) All claims for indemnification based upon the breach of a
representation or warranty in this Agreement shall be asserted by the delivery
of a Claim Notice (as defined below) to the applicable breaching party(ies) no
later than the applicable Expiration Date. All claims for indemnification based
upon the breach of a covenant contained in this Agreement, including without
limitation those contained in Section 1.2, shall be asserted by the delivery of
a Claim Notice no later than five (5) years after the Closing Date; provided,
however, that the five (5)-year limitation on the delivery of Claim Notices
shall not apply with respect to Section 4.4(a) or with respect to claims for
indemnification by any party related thereto. Furthermore, the five (5)-year
limitation on the delivery of Claim Notices shall not apply with respect to
claims seeking only specific performance of the obligations under Section 4.8
for the period commencing on the fifth anniversary of the Closing Date and
ending on the earlier of (i) the tenth anniversary of the Closing Date or (ii)
the date of Seller's liquidation.
6.2 Indemnification.
---------------
(a) Seller's Indemnity. Subject to the limitations in this Article
------------------
VI, the Seller and each Shareholder, severally (each an "Indemnitor" and
collectively, the "Indemnitors"), will indemnify Buyer against and agree to hold
harmless Buyer from any and all damage, loss, liability, claim or obligation of
any nature whatsoever and all expenses incurred in connection therewith
(including any reasonable expenses of investigation and reasonable attorneys'
fees and expenses) (each a "Loss") incurred by Buyer arising out of any breach
of any representation or warranty, covenant of the parties other than Buyer
contained in this Agreement.
(b) Buyer's Indemnity. Subject to the limitations in this Article VI,
-----------------
Buyer will indemnify, defend and hold harmless Seller and each Shareholder from
and against any and all Losses arising from Buyer's breach of any covenant in
this Agreement. Buyer shall not be liable for any breach of representation or
warranty in this Agreement other than (i) those breaches that arise from an act
of fraud by Buyer or (ii) the representation that, when issued and delivered in
accordance with the terms of this Agreement, the Shares will be duly authorized,
validly issued, fully paid and non-assessable, and will be free of monetary
Liens created by Buyer.
(c) Delivery of Claim Notice; Opportunity to Cure.
----------------------------------------------
(i) In the event Buyer desires to assert a claim for
indemnification under this Agreement, Buyer shall deliver to each of the other
parties a certificate (a "Claim Notice") signed by any officer of Buyer. In the
event Seller or a Shareholder desires to assert a claim for indemnification
under this Agreement such party shall deliver to Buyer a Claim Notice signed by
any officer of Seller or such Shareholder, as the case may be. A Claim Notice
shall (i) state that the party seeking indemnification has paid or properly
accrued or reasonably anticipates that it will have to pay or accrue Losses and
(ii) specify in reasonable detail the individual items of Losses included in the
amount so stated, the date each item was paid or properly accrued, or the basis
for anticipated liability, and the nature of the misrepresentation, breach of
warranty or covenant to which item is related.
28
(ii) Opportunity to Cure. Following the delivery of a Claim
-------------------
Notice to a party, such party shall have a period of twenty (20) business days
to cure any breach alleged in the Claim Notice.
(d) Limitation on Liability.
-----------------------
(i) Shareholder Liability. Notwithstanding any provision to
---------------------
the contrary contained in this Agreement, the aggregate liability of each
Shareholder under this Agreement shall be capped at Four Million Dollars
($4,000,000) (the "Shareholder Liability Cap"), for a total of Twelve Million
Dollars ($12,000,000) in the aggregate; provided, however, that each Shareholder
may incur liability in excess of the Shareholder Liability Cap for Losses
incurred by Buyer as a result of (collectively, the "Excess Losses") (i)
Seller's or such Shareholder's transfer or participation in the transfer of
Seller's rights as a Qualified Dealer (other than to Buyer or its successors),
without the prior written consent of Buyer, or (ii) Seller's or such
Shareholder's willful material failure to perform its or his obligations under
Section 4.4(b) or Section 4.8; provided, however, that (x) neither RMP nor AHP
shall be liable for Seller's action if such action was caused by ▇▇▇ without the
authority or participation of RMP or AHP and (y) ▇▇▇ shall not be liable for
Seller's action if such action was caused by either RMP or AHP without the
authority or participation of ▇▇▇. The Excess Losses that RMP and AHP may each
severally incur as a result of any of the items (i) and (ii) above (each of
them, a "Deliberate Bad Act") shall not exceed, in the aggregate, $1,750,000
each. The Excess Losses that ▇▇▇ ▇▇▇ incur as a result of any of the Deliberate
Bad Acts shall not exceed, in the aggregate, $7,500,000. By way of illustration,
if RMP or AHP (but not ▇▇▇) breaches any of the Deliberate Bad Acts and as a
result of such breach, Buyer incurs a Loss of $11,500,000, RMP and AHP would
each severally be responsible for $5,750,000 of such Loss and ▇▇▇ would incur no
liability for such Loss. By way of further illustration, if ▇▇▇ (but not RMP or
AHP) breaches any of the Deliberate Bad Acts and as a result of such breach,
Buyer incurs a Loss of $11,500,000, ▇▇▇ would be responsible for $11,500,000 of
such Loss and RMP and AHP would incur no liability for such Loss. Each of RMP's
and AHP's respective Shareholder Liability Cap and responsibility for Excess
Losses shall be reduced by 50% of the Losses sustained by Buyer that are paid by
Planet.
(ii) Shareholder Liability Several.
-----------------------------
(1) Except as otherwise provided in Section 6.2(d)(ii),
the liabilities of each Shareholder hereunder shall be several and not joint and
several. Except as otherwise provided in Section 6.2(d)(ii), but subject to
Section 6.2(d)(i), with respect to any Loss incurred by Buyer hereunder, each
Shareholder shall only be responsible to pay his Prorata Share (as defined
below) of a Loss, not to exceed in the case of each Shareholder the Shareholder
Liability Cap with respect to all Losses.
(2) For purposes of this Agreement, the "Prorata Share" of
each Loss means with respect to (x) RMP, twenty-five percent (25%) of such Loss,
(y) AHP, twenty-five percent (25%) of such Loss, and (z) ▇▇▇, fifty percent
(50%) of such Loss.
29
(3) Notwithstanding this Section 6.2(d)(ii) to the
contrary, ▇▇▇ shall be responsible for the payment of all Losses incurred by
Buyer as a result of the breach of a specific covenant contained in this
Agreement by ▇▇▇ or any entity under TED's control, and neither RMP, AHP nor any
entity under either of their control shall be responsible for any such Loss,
unless RMP, AHP or an entity under either of their control participated in the
breach of such covenant.
(4) Notwithstanding this Section 6.2(d)(ii) to the
contrary, RMP shall be responsible for the payment of all Losses incurred by
Buyer as a result of the breach of a specific covenant contained in this
Agreement by RMP or AHP or any entity under the control of either RMP or AHP,
and neither ▇▇▇ nor any entity under TED's control shall be responsible for any
such Loss, unless ▇▇▇ or an entity under TED's control participated in the
breach of such covenant. ▇▇▇ shall not be responsible for the payment of any
Losses incurred by Buyer as a result of the breach of a specific covenant
contained in this Agreement by Planet.
(5) Notwithstanding this Section 6.2(d)(ii) to the
contrary, AHP shall be responsible for the payment of all Losses incurred by
Buyer as a result of the breach of a specific covenant contained in this
Agreement by AHP or RMP or any entity under the control of either AHP or RMP,
and neither ▇▇▇ nor any entity under TED's control shall be responsible for any
such Loss, unless ▇▇▇ or an entity under TED's control participated in the
breach of such covenant.
(6) Notwithstanding this Section 6.2(d)(ii) to the
contrary, RMP and AHP shall each be responsible for the payment of all Losses
incurred by Buyer as a result of the breach of a specific covenant contained in
this Agreement by an entity under their joint control (excluding Seller), and
neither ▇▇▇ nor any other entity (including Seller) shall be responsible for any
such Loss, unless ▇▇▇ or such entity participated in the breach of such
covenant.
(iii) Planet Liability. The aggregate liability of Planet under
----------------
this Agreement shall be capped at Eight Million Dollars ($8,000,000); provided,
however, that Planet's aggregate liability shall be increased to Eleven Million
Dollars ($11,000,000) in the event of Planet's willful material failure to
perform its obligations under Section 4.4(b). Planet's liability cap under this
Section 6.2(d)(iii) shall be reduced by any Losses or Excess Losses paid by RMP
or AHP.
(iv) Seller and Buyer Liability. The aggregate liability of
--------------------------
each of Seller and Buyer under this Agreement shall be capped at Twenty-Three
Million Dollars ($23,000,000).
(e) Deductible. Claims for Losses made by Buyer on the one hand or
----------
Seller and/or the Shareholders on the other hand pursuant to this Agreement
shall be payable only if the aggregate amount of all such Losses exceeds Five
Hundred Thousand Dollars ($500,000), in which case the only amount of such
Losses in excess of $500,000 shall be paid by Seller and/or the Shareholders to
Buyer or by Buyer to the Seller and/or the Shareholders, as the case may be.
(f) Exceptions. Notwithstanding anything contained herein to the
----------
contrary, (i) the limitations on liability set forth in this Article VI, shall
not apply with respect to Seller and each
30
Shareholder, as the case may be, if the Loss for which Buyer is seeking
indemnity is for Taxes attributable to the Assets, Seller or the Shareholders
for any period on or prior to the Closing Date (except that 6.2(d)(ii) shall
apply) or (ii) with respect to Losses incurred by a party arising from an act of
fraud by another party, the defrauded parties shall have, in addition to the
rights and remedies provided herein, all other rights and remedies available to
a defrauded party at law or in equity.
(g) Payment.
-------
(i) Subject to Section 6.2(h) and paragraphs (g)(i)(1) and
(g)(i)(2) below, the Indemnitors shall promptly, and in no event later than
thirty (30) days after delivery of the Claim Notice delivered by Buyer, pay to
Buyer all Losses set forth in such Claim Notice, by (x) wire transfer of
immediately available funds, (y) the delivery of that number of Shares equal to
the amount of the applicable Loss divided by the Indemnity Value (as defined
below), or (z) any combination of the foregoing.
(1) Notwithstanding this Section 6.2(g)(i) to the
contrary, the liability, if any, of RMP and AHP with respect to Deliberate Bad
Acts occurring on or prior to 15 months after the Closing Date, shall be
satisfied only as follows: first, by the delivery in no event later than thirty
(30) days after delivery of the Claim Notice delivered by Buyer of that number
of Shares, not to exceed 312,500 Shares in the aggregate (i.e. up to 156,250
Shares for each of RMP and AHP), equal to the amount of Buyer's Losses in
respect of such Deliberate Bad Acts divided by the Indemnity Value (as defined
in subclause (C) of Section 6.2(g)(iii)), and to the extent that Buyer's Losses
exceed 312,500 multiplied by the Indemnity Value, then only by wire transfer of
immediately available funds.
(2) Notwithstanding this Section 6.2(g)(i) to the
contrary, the aggregate liability, if any, of RMP and AHP with respect to
Deliberate Bad Acts occurring after 15 months after the Closing Date, and all
liability of ▇▇▇ with respect to Deliberate Bad Acts whenever they shall occur
shall be satisfied by only by wire transfer of immediately available funds no
later than thirty (30) days after delivery of the Claim Notice delivered by
Buyer.
(ii) Subject to Section 6.2(h), Buyer shall promptly, and in no
event later than thirty (30) days after delivery of the Claim Notice by Seller
and/or the Shareholders, pay to Seller and/or the Shareholders, as applicable,
all Losses set forth in such Claim Notice, by wire transfer of immediately
available funds.
(iii) For the purpose of this Agreement, "Indemnity Value" shall
mean (A) to the extent that a Loss is paid or accrued after a Buyer IPO, the
average closing price of Buyer Common Stock quoted on any exchange on which
Buyer Common Stock is listed, as published in The Wall Street Journal for the
ten (10) trading days prior to but not including the date of delivery of such
payment or accrual of the Loss(es) set forth in the Claim Notice, (B) to the
extent that a Loss is paid or accrued prior to a Buyer IPO, 0.85 multiplied by
the price per share (on an as converted to Buyer Common Stock basis) at which
Buyer shall have sold its then most recently issued series of Preferred Stock,
and (C) to the extent a Loss arises from a Deliberate Bad Act by Seller or any
Shareholder, whether paid or accrued prior to or after a Buyer IPO, 0.85
multiplied by the price per
31
share (on an as-converted to Buyer Common Stock basis) at which Buyer sells its
next issued series of Preferred Stock after the date of this Agreement.
Notwithstanding the foregoing to the contrary, in no event shall the Indemnity
Value be less than 0.85 multiplied by the price per share (on an as-converted to
Buyer Common Stock basis) at which Buyer sells its next issued series of
Preferred Stock after the date of this Agreement.
(h) Resolution of Conflicts; Arbitration.
------------------------------------
(i) If indemnification is being sought under Section 6.2(a)
from RMP, AHP and/or Seller, the Indemnitors' Agent (as defined below) shall be
empowered to take all necessary and appropriate Indemnitors' Agent Action (as
defined below) in respect thereof. If a party objects in writing to any claim or
claims made in any Claim Notice within thirty (30) days after delivery of such
Claim Notice, the parties shall attempt in good faith to agree upon the rights
of the respective parties with respect to each of the claims in the Claim
Notice. If the parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by the parties and such memorandum shall
be final, binding and conclusive upon all parties hereto.
(ii) All disputes arising under this Agreement shall be
resolved by arbitration, except that each party shall have the right to seek
equitable and injunctive relief from a court of competent jurisdiction. If a
dispute arises under this Agreement or if no agreement as to a party's
objections to any claim in a Claim Notice can be reached, in each case after
good faith negotiation, any party may demand arbitration of the matter unless
the amount of the damage or loss is at issue in pending litigation with a third
party, in which event arbitration shall not be commenced until an amount is
ascertained or all parties agree to arbitration; and in either event the matter
shall be settled by arbitration conducted by one arbitrator mutually agreeable
to Buyer and the Indemnitors' Agent. In the event that, within thirty (30) days
after a party submits any dispute to arbitration, the parties cannot mutually
agree on an arbitrator, Buyer and the Indemnitors' Agent shall each select one
arbitrator within ten (10) days following such thirty (30)-day period, and the
two arbitrators so selected shall select a third arbitrator within ten (10) days
following such ten (10)-day period. The arbitrator or arbitrators shall set a
limited time period not to exceed forty-five (45) days and establish procedures
designed to reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgement of the arbitrator or a majority of
the three arbitrators, as the case may be, to discover relevant information from
the opposing parties about the subject matter of the dispute. The arbitrator or
a majority of the three arbitrators, as the case may be, shall rule upon motions
to compel or limit discovery and shall have the authority to impose sanctions,
including attorneys' fees and costs, to the same extent as a court of competent
law or equity, should the arbitrator or a majority of the three arbitrators, as
the case may be, determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of the arbitrator or a majority of the three
arbitrators, as the case may be, as to the validity and amount of any claim in
the Claim Notice shall be binding and conclusive upon the parties to this
Agreement. Such decision shall be written and shall be supported by written
findings of fact and conclusions which shall set forth the award, judgment,
decree or order awarded by the arbitrator(s). The arbitrator(s) shall not have
the authority to award a party more than that requested in the Claim Notice
(except that the arbitrator may award punitive
32
damages to Buyer only in connection with Deliberate Bad Acts, after taking into
consideration the Indemnity Value) or in excess of the limitations imposed by
Section 6.2. Within ten (10) business days of any entry of a decision of the
arbitrator(s) requiring payment by Buyer, Buyer shall make such payment to the
Indemnitors' Agent. Within ten (10) business days of a decision of an
arbitrator(s) requiring payment by any of the Indemnitors, such Indemnitors
shall make such payment to Buyer.
(iii) Judgment upon any award rendered by the arbitrator(s) may
be entered in any court having jurisdiction. Any arbitration shall be held in
Wilmington, Delaware, U.S.A., under the commercial arbitration rules then in
effect of the American Arbitration Association. The arbitrator(s) shall
determine how all expenses of and fees of the arbitrator(s) and the
administrative fees of the American Arbitration Association shall be paid.
(i) The term "Indemnitors' Agent" shall have the meaning as set forth
herein. Seller, ▇▇▇, RMP and AHP agree that, in the event a claim for a Loss is
made against Seller, then RMP or AHP, on the one hand, and ▇▇▇, on the other
hand, acting jointly, are hereby appointed as agents and attorneys-in-fact for
the Seller and shall be deemed the Indemnitors' Agent for Seller when acting
jointly. RMP and AHP agree that, in the event that a claim for a Loss is made
against either RMP or AHP, each of RMP and AHP acting individually are hereby
appointed as agent and attorney-in-fact for each other and shall be deemed to be
the Indemnitors' Agent for each other. In the event that a claim for a Loss is
made against ▇▇▇, ▇▇▇ shall be deemed to be the Indemnitors' Agent for ▇▇▇. The
Indemnitors' Agent is empowered to give and receive notices and communications,
to authorize or object to Buyer's actions (including those pursuant to this
Section 6.2), to negotiate and settle any disputes with Buyer and to demand
arbitration and comply with the orders of courts and awards of arbitrators with
respect to such adjustments, and to take all actions necessary or appropriate in
the judgment of the Indemnitors' Agent for the accomplishment of the foregoing,
all to the extent set forth in this Agreement. In the case of a claim for a Loss
made against Seller, RMP, AHP, or ▇▇▇, such parties agree that the decisions,
acts, consents and instructions of the applicable Indemnitors' Agent with regard
to matters for which such Indemnitors' Agent is empowered to act on their behalf
(each an "Indemnitors' Agent Action") shall be final, binding and conclusive
upon such parties, as if each such party had taken such Indemnitors' Agent
Action itself and on its own behalf. Buyer may rely upon any Indemnitors' Agent
Action as being the decision, act, consent or instruction of the party for whom
such Indemnitors' Agent acts as an agent. Buyer is hereby relieved of any
liability to any person for any acts done by them in accordance with an
Indemnitors' Agent Action. The Indemnitors' Agent shall not be liable for any
act done or omitted as Indemnitors' Agent while acting in good faith and in the
exercise of reasonable judgment. Seller hereby agrees to indemnify and hold
harmless RMP, AHP and ▇▇▇ against any loss, liability or expense incurred
without negligence or bad faith on his part as Indemnitors' Agent and arising
out of or in connection with the acceptance or administration of the
Indemnitors' Agent's duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by him. A new Indemnitors' Agent on
behalf of Seller may be appointed by the unanimous consent of RMP or AHP (to the
extent alive), on the one hand, and ▇▇▇ (to the extent alive), on the other
hand, and upon twenty (20) business days written notice to Buyer. In the event
of death of an Indemnitors' Agent representing Seller, a new Indemnitors' Agent
shall be appointed
33
within fifteen (15) days (by court order if RMP or AHP, on the one hand, and
▇▇▇, on the other hand, cannot agree). In the event of the death or disability
of ▇▇▇, TED's executor or guardian, as the case may be, may select or act as the
Indemnitors' Agent on behalf of ▇▇▇. In the event of the death or disability of
both RMP and AHP, RMP's executor or guardian, as the case may be, may select or
act as the Indemnitors' Agent on behalf of RMP, and AHP's executor or guardian,
as the case may be, may select or act as the Indemnitors' Agent on behalf of
AHP.
(j) Third-Party Claims. In the event a party becomes aware of a
------------------
third-party claim which such party believes may result in a Loss to such party,
such party shall notify the other parties of the claim, and such parties (in the
case of the Indemnitors, the notice shall be provided to the applicable
Indemnitors' Agent) shall be permitted to participate in the defense of such
claim. The party seeking indemnification shall have the right in its sole
discretion to settle any such claim. In the event that the party from whom
indemnification is sought (in the case of the Indemnitors, the Indemnitors'
Agent) has consented to any settlement (which consent shall not be unreasonably
withheld), the other parties shall have no power or authority to object to such
party's right to indemnification for the amount of any such settlement; in the
event that no consent is given to such settlement, then, provided that the
consent was reasonably withheld, the arbitrator(s) shall determine the amount of
the Loss subject to indemnification, without regard to the actual amount of the
settlement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. Except as provided in Section 7.2 below, this Agreement
-----------
may be terminated and the Acquisition abandoned at any time prior to the
Closing, but in no event after Closing:
(a) by mutual consent of Seller, the Shareholders and Buyer;
(b) by Buyer if: (i) there shall be a final nonappealable order of a
foreign, federal or state court in effect preventing consummation of the
Acquisition, or (ii) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Acquisition by any
Governmental Entity that would make consummation of the Acquisition illegal;
(c) by Seller or Buyer if such party is not in material breach of its
obligations under this Agreement and if the Closing has not occurred before 5:00
p.m. (California time) on October 31, 1999;
(d) by Seller or Buyer if there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Acquisition, by any Governmental Entity, which would: (i) prohibit Buyer's
ownership or operation of all or any portion of the Assets or (ii) compel Buyer
or Seller to dispose of or hold separate all or a portion of the business or
assets
34
(including without limitation the Assets) of Buyer or any of its affiliates as a
result of the Acquisition;
(e) by Buyer if it is not in material breach of its obligations under
this Agreement and there has been a material breach of any covenant or agreement
contained in this Agreement on the part of Seller or any Shareholder and such
breach has not been cured within twenty (20) business days after written notice
to Seller and the Shareholders; provided, however, that, no cure period shall be
required for a breach which by its nature cannot be cured;
(f) by Seller if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any covenant or
agreement contained in this Agreement on the part of Buyer and such breach has
not been cured within twenty (20) business days after written notice to Buyer;
provided, however, that, no cure period shall be required for a breach which by
its nature cannot be cured; and
(g) by Buyer if the required approvals of the stockholders of Seller
contemplated by this Agreement shall not have been obtained by reason of the
failure to obtain the required vote upon a vote taken at a meeting of
stockholders, duly convened therefor or at any adjournment thereof.
Where action is taken to terminate this Agreement pursuant to this Section 7.1,
it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
7.2 Effect of Termination. In the event of termination of this Agreement
---------------------
prior to Closing, this Agreement shall become void and there shall be no
liability or obligation on the part of Buyer, Seller or the Shareholders, or the
respective officers, directors or stockholders of Buyer or Seller, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; and provided further that, the provisions of Sections 4.1, 4.2,
6.2(h), and this Section 7.2 and Article VIII of this Agreement shall remain in
full force and effect and survive any termination of this Agreement.
7.3 Amendment. Except as is otherwise required by applicable law after the
---------
stockholders of Seller approve this Agreement, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Closing, Buyer and Seller
-----------------
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations of the other, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
35
7.5 Effect of Closing. Effective upon Closing, this Article VII shall be
-----------------
of no further force or effect and claims may not be asserted by any party.
ARTICLE VIII
GENERAL PROVISIONS
------------------
8.1 Specific Performance. The parties agree that irreparable damage would
--------------------
occur in the event that any of the post-Closing covenants contained in Sections
1.1, 1.3, 4.4 and 4.8 were not performed in accordance with their specific terms
or were otherwise breached. Moreover, each party's post-Closing obligations
under the foregoing Sections of this Agreement are unique. If any party should
default in its obligations under those post-Closing covenants contained in
Sections 1.1, 1.3, 4.4 or 4.8, the parties each acknowledge that it would be
extremely impracticable to measure the resulting damages. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of those post-Closing covenants contained in Sections 1.1, 1.3,
4.4 or 4.8 and, subject to Section 8.8, to enforce specifically such provisions
hereof in any court of the U.S. or any state having jurisdiction, this being in
addition to any other remedy provided under this Agreement.
8.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given (i) when received if delivered personally or
(ii) the next day if delivered overnight by commercial delivery service, or
(iii) three (3) days after mailing by registered or certified mail (return
receipt requested) to the parties at the following address (or at such other
address for a party as shall be specified by like notice):
(a) if to Seller or the respective Shareholders to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Casaurina Concourse
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
with copies to:
36
Kleinbard, ▇▇▇▇ & ▇▇▇▇▇▇▇, LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Elias, Goodman, ▇▇▇▇▇▇ & Zizmor, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
The Potamkin Companies
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
(b) if to Buyer, to:
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
8.3 Interpretation. When a reference is made in this Agreement to
--------------
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
8.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
37
8.5 Entire Agreement; Nonassignability; Parties in Interest.
-------------------------------------------------------
(a) This Agreement and the documents and instruments and other
agreements specifically referred to herein or delivered pursuant hereto,
including the Exhibits and the Schedules, (i) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and may be amended only by a writing
signed by the parties; (ii) are not intended to confer upon any other person or
entity (including without limitation any stockholder, affiliate or creditor of
the parties) any rights or remedies hereunder; and (iii) shall not be assigned
by operation of law or otherwise, except as otherwise specifically provided
herein.
(b) Buyer may not, without the prior written consent of Seller's
Designee, sell, assign, grant or otherwise transfer the Marks, except that Buyer
shall have the right to:
(i) assign the Marks to any purchaser of substantially all of
its assets or capital stock so long as (i) such assignment is within the scope
of, is subject to the limitations set forth in, and otherwise complies with,
this Agreement; and (ii) such purchaser or successor executes and delivers to
Seller's Designee a written agreement to be bound by the terms of Sections
4.4(a), 4.4(d), 4.4(e), 4.4(f), 4.4(g), and 4.4(h), Article VI (as it relates to
the performance of such obligations) and Article VIII of this Agreement; and
(ii) sublicense (with right of further sublicense) any or all
of the Marks to any of its wholly-owned subsidiaries (now or hereafter existing)
so long as: (i) such sublicense is within the scope of, is subject to the
limitations set forth in, and otherwise complies with, this Agreement; (ii)
Buyer remains responsible for all of Buyer's and any sublicensees' obligations
under this Agreement; and (iii) each sublicensee executes and delivers to
Seller's Designee a written agreement to be bound by the terms of Sections
4.4(a), 4.4(d), 4.4(e), 4.4(f), 4.4(g), 4.4(h), Article VI (as it relates to the
performance of such obligations), and Article VIII of this Agreement.
8.6 Severability. In the event that any provision of this Agreement, or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Remedies Cumulative; Attorneys' Fees. Any and all remedies herein
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expressly conferred upon a party will be deemed cumulative with and not
exclusive, of any other remedy conferred hereby, and the exercise by a party of
any one remedy will not preclude the exercise of any other remedy conferred
hereby. In the event of any action arising out of this Agreement, the prevailing
party(ies) shall be entitled to recover reasonable attorney's fees and other
reasonable costs incurred in connection therewith. All of the remedies of the
parties are set forth herein and are subject to the limitations provided for
herein; provided, however, that with respect to losses incurred
38
by a party arising from an act of fraud by a party, the defrauded party(ies)
shall have, in addition to the rights and remedies provided herein, all other
rights and remedies available to a defrauded party at law or in equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware regardless of the laws that
might otherwise govern under applicable principles of conflicts of law. Each of
the parties hereto irrevocably consents to the exclusive jurisdiction and venue
of any court located within the State of Delaware, in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
agrees that process may be served upon them in any manner authorized by the laws
of the State of Delaware for such persons and waives and covenants not to assert
or plead any objection which they might otherwise have to such jurisdiction and
such process. Notwithstanding the foregoing to the contrary, all disputes among
the parties based upon or arising out of this Agreement or the matters
contemplated herein will be resolved pursuant to Section 6.2, except that each
party may enforce an arbitration award and seek equitable and injunctive
non-monetary relief from a court located in the State of Delaware.
8.9 Rules of Construction. The parties agree that they have been
---------------------
represented by counsel during the negotiation, preparation and execution of this
Agreement and have each participated in the drafting of this Agreement, and
therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
(Remainder of page intentionally left blank).
39
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first written above.
"BUYER"
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: CEO
---------------------------------
"SELLER"
POTAMKIN AUTO CENTER, LTD.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title: President
--------------------------------
"SHAREHOLDERS"
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇ ▇. ▇▇▇▇▇▇
*****ASSET PURCHASE AGREEMENT*****
The undersigned hereby agrees to the
provisions of Section 4.4, Article VI
and Article VIII as they relate to the
undersigned and its subsidiaries.
"PLANET"
PLANET AUTOMOTIVE GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Title: Co-CEO and Co-Chairman
---------------------------
