OPTION AGREEMENT
This Option Agreement is entered into as of this 20th day of October
2006, by and between Bloomington Center Associates ("BCA"), a Michigan limited
liability company and Midnight Auto Franchise Corporation, a Michigan
corporation ("MAFC") and Midnight Holdings Group, Inc. ("MHG").
R E C I T A L S
A. WHEREAS, of even date herewith, MHG, MAFC, a wholly-owned subsidiary
of MHG, and BCA formed All Night Auto of Bloomington/Normal, LLC ("▇▇▇ B/N")
pursuant to that certain Operating Agreement of even date herewith (the
"Operating Agreement") for the purpose of owning and operating auto repair
service and retail stores in Illinois (the "Stores");
B. WHEREAS, BCA agreed to invest $475,000.00 for the working capital
necessary for the launch of a retail store and MAFC agreed to manage such store
along with a contributed service center pursuant to the Operating Agreement and
that certain Management Agreement of even date herewith (the "Management
Agreement");
C. WHEREAS, MAFC plans to open additional service and retail stores
throughout the United States similar to the initial retail store and service
center owned by the ▇▇▇ B/N and managed by MAFC; and
D. WHEREAS, the parties hereto are desirous of granting BCA the
opportunity to invest in and own multiple future hub and spoke service
center/retail store combinations throughout the United States (except for those
market areas already committed to others, a list of which is attached hereto as
Exhibit A) (such store combinations exclusive of those set forth on Exhibit A
the "Future Stores").
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree:
1. GRANT OF ASSIGNABLE OPTION TO ACQUIRE EQUITY INTEREST IN FUTURE
STORES.
In consideration of the foregoing, MAFC, MHG and their related parties
and affiliates hereby grants BCA an irrevocable assignable option (the "Option")
to acquire 100% of the equity interest in any and all Future Stores on the terms
and conditions set forth herein. Provided, however, in the event that there
exists no uncured event of default under the Operating Agreement, the Guaranty
attached thereto as Exhibit D, this Option Agreement, and further provided the
Management Agreement has not been terminated by ▇▇▇ B/N, then the Option shall
not be assigned to a person, business or entity that sells or provides auto
repair retail products or services, or manages franchises that sell such retail
products or services, or is otherwise a competitor of ▇▇▇ B/N.
2. EXERCISE OF OPTION.
a. MAFC and/or MHG shall notify BCA each time Future Stores
are to be opened. BCA, or its assignee(s) may, within thirty (30) days, in
its sole discretion, exercise the Option after receiving in writing the
following from MAFC or MHG:
i. Executed Letters of Intent for leases for the Future
Stores locations;
ii. Financial projections for the Future Stores which shall
include in reasonable detail a budget, business plan
and pro forma financial statements.
iii. A narrative discussion of the merits of the proposed
Future Stores;
iv. Such other information as may be reasonably requested
by BCA.
The foregoing items must be complete and accurate, to the reasonable
satisfaction of BCA, prior to the commencement of the 30 day time period.
b. If BCA exercises the Option, it shall notify MAFC and MHG
in writing within thirty days of the receipt of the items in Section
2(a)(i) through (iv) above, and deposit $25,000.00 in the client trust
account of Seyburn, Kahn, et al.
3. PURCHASE OF EQUITY AND CLOSING.
a. The closing pursuant to the exercise of the Option shall
occur at such date as the parties shall mutually agree but in no event later
than forty (40) days after BCA's exercise of its Option.
b. The closing shall consist of the following:
i. The execution by the parties hereto of a Management
Agreement, and Subleases in the form attached hereto as
Exhibit A (the "Model Documents");
ii. The formation by BCA of a limited liability company
(the "LLC") to own and operate the Future Stores;
iii. The deposit in the bank account of the LLC sufficient
funds for the working capital of the Future Stores;
provided however, it is estimated that generally this
would amount to $375,000.00 for a comparable retail
store and $400,000.00 for a comparable service store.
Stores in certain
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geographical locations may have increased or decreased
costs due to market conditions which may require an
increase or decrease in funding. BCA may in its sole
discretion, cause the LLC, to finance or lease,
property and equipment to be used in the operation of
the Future Stores in lieu of a capital contribution in
cash.
4. DAMAGES. In the event that MAFC, or any related party or affiliate,
directly or indirectly, opens Future Stores without first allowing BCA to
exercise its Option then BCA shall be entitled to receive twenty (20%) of the
gross revenue received by MAFC, MHG or its related parties and affiliates from
such Future Stores. Gross revenue shall include any amounts of any kind or
nature received from such Future Centers including but not limited to fees,
royalties, rents, or sales proceeds.
5. TERMINATION OF OPTION. In the event both of the following conditions
have been fulfilled, the Option shall terminate upon sixty (60) days advance
written notice by MAFC to BCA:
a. Neither MHG nor MAFC have breached any of the terms of this
Option Agreement, the Operating Agreement or the Management Agreement; and
b. MAFC and MHG have opened Future Stores on at least six (6)
consecutive occasions where BCA has failed to exercise its Option and
where MAFC and MHG have obtained the working capital for such Future
Stores from third parties on substantially the same terms and conditions
as set forth in the Option. In the event BCA exercises its Put right under
the Operating Agreement, or similar Put rights under Operating Agreements
applicable to Future Stores, the Stores or Future Stores applicable to
such Put rights shall not be deemed Stores or Future Stores with respect
to which BCA has failed to exercise its Option hereunder.
6. FURTHER DOCUMENTS AND ACTIONS. MAFC, MHG and BCA shall perform all
further acts and execute any and all further documents as are reasonably
required or necessary to carry out the acts and transactions contemplated by
this Option Agreement.
7. GOVERNING LAW. This Amendment shall be governed by the law of the
State of Michigan, without application of its choice of laws rules.
8. ARBITRATION. Any dispute between the parties regarding any provision
in this Agreement shall be resolved at the option of the aggrieved party by
expedited binding arbitration before a single arbitrator according to the rules
of commercial arbitration of the American Arbitration Association (AAA). The
parties need not use the services of AAA or an AAA selected arbitrator if they
can agree among themselves on a neutral arbitrator and suitable location. If the
parties are unable to so agree, then such arbitration shall be conducted using
the services and facilities of the AAA. Such arbitration shall occur in
Southfield, Michigan. Judgment upon the award of the arbitrators may be entered
by any court of competent jurisdiction. Costs of the arbitrator and fees of AAA
shall be allocated among the parties as determined by the arbitrator.
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9. WAIVER OF JURY TRIAL: THE PARTIES ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,
AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY LITIGATION REGARDING THE PERFORMANCE
OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO: (i) THIS AGREEMENT; or (ii) ANY OF
THE TRANSACTIONS OR OTHER AGREEMENTS CONTEMPLATED BY THIS AGREEMENT.
10. ENTIRE AGREEMENT. This writing contains the entire agreement
between the parties with respect to the subject matter hereof and is intended to
be a fully integrated expression of the parties' intentions and is intended to
supersede any prior on contemporaneous negotiations or agreements.
11. SECTION HEADINGS. The section headings contained in this Amendment
are for reference purposes only and do not in any way affect the meaning or
interpretation of the text of this Agreement.
12. COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which will be deemed an original but all of which will
constitute one and the same.
(signatures on following page)
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BLOOMINGTON CENTER ASSOCIATES LLC,
a Michigan limited liability company
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇
By:
Its: Manager
Midnight Auto Franchise Corporation,
a Michigan corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Its: President
Midnight Holdings Group, Inc.,
a Delaware corporation
By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Its: President
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