1
EXHIBIT 2.3
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") dated as of
March 1, 1998 is entered into by and among the following parties
(the "Parties"): ▇▇▇▇▇▇▇▇▇ OLDSMOBILE-CADILLAC, INC., a Georgia corporation
("Company"), ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, JR., an individual ("Stockholder"), SUNBELT
AUTOMOTIVE GROUP, INC., a Georgia corporation ("Sunbelt"), and ▇▇▇▇▇▇▇▇▇▇▇
AUTOMOTIVE GROUP, INC., a Georgia corporation ("BAG").
WITNESSETH:
WHEREAS, the Company operates Oldsmobile, Cadillac, Isuzu, and Mazda
automobile dealerships in Gainesville, Hall County, Georgia;
WHEREAS, the Stockholder owns all of the issued and outstanding shares
of common stock of the Company (the "Common Stock"); and
WHEREAS, Sunbelt desires to purchase all of the issued and outstanding
shares of Common Stock from the Stockholder (such shares being collectively
referred to herein as the "Shares") and the Stockholder desires to sell the
Shares to Sunbelt (upon the terms and subject to the conditions set forth in
this Agreement) such that immediately after giving effect to such purchase and
sale, Sunbelt will own one hundred percent (100%) of all of the issued and
outstanding shares of Common Stock, on a fully diluted basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
CERTAIN DEFINITIONS.
"Accounting Principles" has the meaning set forth in ss.1.3(a) below.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses.
2
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act
"Affiliated Group" means any affiliated group within the meaning of
Code ss. 1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
"Applicable Rate" means the corporate base rate of interest publicly
announced from time to time by NationsBank of Georgia, N. A.
"Associate" used to indicate a relationship with any Person means: (i)
any corporation, partnership, joint venture or other entity of which such Person
is an officer or partner or is, directly or indirectly, through one or more
intermediaries the beneficial owner of thirty percent (30%) or more of: (1) any
class or type of equity securities or other profits interest; or (2) the
combined voting power of interests ordinarily entitled to vote for management or
otherwise; and (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity.
"Balance Sheet" means the Company's unaudited balance sheet as of
October 31, 1997.
"Base Price" has the meaning set forth in ss. 1.1 below.
"Basis" means any past or present fact, situation, circumstance,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that actually forms or could reasonably form the
basis for any specified consequence.
"Best Efforts" shall be deemed to not include any obligation on the
part of any Person to undertake any liabilities, expend any funds or perform
acts which are materially burdensome to such Person; provided, however, that
notwithstanding the foregoing, the term "best efforts" shall include an
obligation to take such actions which are normally incident to or reasonably
foreseeable in conjunction with such obligation or the transactions contemplated
hereby.
"Business Day" shall mean any day excluding Saturday, Sunday and any
day which is a legal holiday under federal law.
"Claims" has the meaning set forth in ss. 2.9 below.
"Closing" has the meaning set forth in ss. 1.1(b) below.
"Closing Date" has the meaning set forth in ss. 1.1(b) below.
"Closing Date Balance Sheet" has the meaning set forth in ss. 1.3(a)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
-2-
3
"Company" has the meaning set forth in the preface above.
"Company Agreement" has the meaning set forth in ss. 2.15 below.
"Compensation Commitment" has the meaning set forth in ss. 2.18(a)
below.
"Confidential Information" means any and all data or information of the
Stockholder or the Company which relates directly and primarily to the business
of the Company and which is not generally known to or by Persons whose
businesses are competitive with the Company, including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, business and
marketing plans and proposals, information relating to sales records, profit and
performance reports, sales and training manuals, selling and pricing procedures,
financing methods, the special demands of particular customs, the current and
anticipated demands of particular customers, specifications of any new services
under development, and any other such information treated by the Stockholder or
the Company as being confidential or labeled "Confidential," as well as all
physical embodiments of any of the foregoing.
"Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to,
any Person, including but not limited to any Governmental Authority.
"Costs" for Article 9 has the meaning set forth in ss. 9.7 below.
"Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan: (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi-employer Plan); or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA ss.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss.
3(1).
"Employment Agreement" means the Employment Agreement between the
Company, Sunbelt, BAG and the Stockholder attached hereto as Exhibit A.
"Employment and Labor Agreement" has the meaning set forth in ss. 2.16
below.
"Environmental, Health and Safety Requirements" shall mean all federal,
state and local statutes, regulations, ordinances and other provisions having
the force or effect of law, all judicial
-3-
4
and administrative orders and determinations, all contractual obligations and
all applicable common law concerning public health and safety, worker health and
safety, and pollution or protection of the environment, including without
limitation all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or cleanup
of any hazardous materials, substances or wastes, chemical substances or
mixtures, pesticides. pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation,
each as amended and as now or hereafter in effect.
"Environmental Law" has the meaning set forth in ss. 2.11 below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plans" means all Employee Pension Benefit Plans and Employee
Welfare Benefit Plans of the Company.
"Escrow Agent" has the meaning set forth in the Escrow Agreement.
"Escrow Agreement" refers to Exhibit B attached to this Agreement.
"Escrow Amount" has the meaning set forth in the Escrow Agreement.
"Estimated Closing Date Balance Sheet" has the meaning set forth in
ss. 6.6 below.
"Factory Statements" has the meaning set forth in ss. 2.5(c) below.
"Fiduciary" has the meaning set forth in ERISA ss. 3(21).
"FIFO Net Worth" has the meaning set forth in Section 1.2 below.
"Financial Statement" has the meaning set forth in ss. 2.5 below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any entity exercising an executive,
legislative, judicial, regulatory or administrative function of or pertaining to
government, including without limitation, any government authority, agency,
department, board, commission or instrumentality of the United States, any State
of the United States or any political subdivision thereof, and any tribunal or
arbitrator of competent jurisdiction and any self-regulatory organization.
-4-
5
"Governmental Approval" means any material Consent of, with or to any
Governmental Authority.
"Guaranty" refers to Exhibit C attached to this Agreement.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act" or "H.S.R. Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended.
"Hazardous Materials" has the meaning set forth in ss. 2.11 below.
"Improvements" has the meaning set forth in ss. 2.10 below.
"Indemnified Party" has the meaning set forth in ss. 9.3 below.
"Indemnifying Party" has the meaning set forth in ss. 9.3 below.
"Insider" shall mean the Stockholder, any director or officer of the
Company, and any Affiliate, Associate or Relative of any of the foregoing
persons.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof; (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith; (c) all copyrights, and all applications, registrations, and renewals
in connection therewith; (d) all mask works and all applications, registrations,
and renewals in connection therewith; (e) all trade secrets and confidential
business information; (f) all computer software (including data and related
documentation); (g) all other proprietary rights; and (i) all copies and
tangible embodiments thereof (in whatever form or medium).
"Judgment" has the meaning set forth in ss. 2.9 below.
"Knowledge of the Stockholder", "Stockholder's Knowledge" or "Known to
the Stockholder" means only the actual knowledge of the Stockholder and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, and shall not include implied or constructive knowledge, or
knowledge that would have been available after investigation or inquiry.
"Leased Real Property" has the meaning set forth in ss. 2.10(b) below.
-5-
6
"Legal Requirements" means material laws, ordinances, codes, rules,
regulations, standards, judgments and other requirements of all governmental,
administrative or judicial entities.
"Liability" means any material liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any Liability for Taxes.
"Liens" shall mean any material mortgages, pledges, title defects or
objections, liens, claims, security interests, and encumbrances or charges of
any kind against the Company's property, other than Permitted Liens.
"Market Value" means with respect to any share of Sunbelt Common Stock,
the opening sale price of Sunbelt IPO Stock on the public securities trading
markets on the Closing Date.
"Material Adverse Effect" shall mean any change in, or effect on, the
Company (including the business thereof) which is, or could reasonably be
expected to be, materially adverse to the overall financial condition of the
Company taken as a whole.
"Multi-Employer Plan" has the meaning set forth in ERISA ss. 3(37).
"Non-competition and Confidentiality Agreement" refers to Exhibit D
attached to this Agreement.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Property" has the meaning set forth in ss. 2.10(a) below.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means material franchises, licenses, permits, registrations,
certificates, consents, approvals or authorizations.
"Permitted Liens" means: (a) Liens reserved against in the Company's
Balance Sheet, to the extent so reserved; (b) Liens for Taxes not yet due and
payable or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
Company's books in accordance with GAAP; or (c) Liens that, individually and in
the aggregate, do not and would not materially detract from the value of any of
the property or assets of the Company or materially interfere with the use
thereof as currently used or contemplated to be used.
-6-
7
"Person" shall mean and include any individual, corporation, limited
liability company, partnership, joint venture, association, trust, any other
incorporated or unincorporated organization or entity and any governmental
entity or any department or agency thereto.
"Post-Closing Real Estate Lease" means the lease of the Company's
facilities attached hereto as Exhibit E.
"Prohibited Transaction" has the meaning set forth in ERISA ss. 406 and
Code ss. 4975.
"Registration Rights Agreement" refers to Exhibit F attached to this
Agreement.
"Relative" of a Person shall mean such Person's spouse, parents,
sisters, brothers, children and the spouses of the foregoing, and any member of
the immediate household of such Person.
"Reportable Event" has tile meaning set forth in ERISA ss. 4043.
"Reviewer" has the meaning set forth in ss. 1.3(b) below.
"Reviewed Balance Sheet" has the meaning set forth in ss. 1.3(b) below.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Share" means any share of the Common Stock of the Company.
"Share Consideration" has the meaning set forth in ss. 1.1(c)(iii)
below.
"Stock Restriction Agreement" has the meaning set forth in ss. 2.3
below.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Sunbelt" has the meaning set forth in the preface above.
"Sunbelt Public Offering Date" shall mean the date of the consummation
of an underwritten public offering (the "Sunbelt IPO") pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offering and sale of shares of Sunbelt common stock (the "Sunbelt IPO
Stock").
"Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental
-7-
8
(including taxes under Code ss. 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property (including property taxes paid by the Company pursuant to any
lease), personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in ss. 9.3 below.
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF THE SHARES.
(A) PURCHASE AND SALE. Upon the terms and subject to the
conditions set forth in this Agreement, the Stockholder shall sell to Sunbelt,
and Sunbelt shall purchase from the Stockholder, the Shares for an aggregate
purchase price (the "Purchase Price") equal to the sum of (i) Four Million Seven
Hundred Thousand Dollars ($4,700,000) (the "Base Price"), plus (ii) the "FIFO
Net Worth" of the Company as shown on the Estimated Closing Date Balance Sheet.
The Purchase Price is subject to adjustment after the Closing as provided in ss.
1.3(g) below.
(B) CLOSING. Subject to the conditions set forth in this
Agreement, the purchase and sale of the Shares pursuant to this Agreement (the
"Closing") shall take place at the offices of Sunbelt's legal counsel in
Atlanta, Georgia, or any other location agreed upon by the Parties, on the
earlier of the Sunbelt Public Offering Date or a mutually agreeable date no
later than June 30, 1998, subject to the Stockholder's and Sunbelt's respective
rights to extend the Closing as provided in Section 8.1(b) hereof. The date on
which the Closing occurs is herein referred to as the "Closing Date."
(C) DELIVERIES AT THE CLOSING. Subject to the conditions set forth
in this Agreement, at the Closing:
(i) the Stockholder shall sell, assign, convey, transfer
and deliver to Sunbelt the Shares representing one
hundred percent (100%) of the outstanding capital
stock of the Company, free and clear of all Liens,
and the Stockholder shall deliver to Sunbelt: (A)
certificates representing the Shares bearing the
restrictive legend customarily placed on securities
that
-8-
9
have not been registered under applicable federal and
state securities laws and accompanied by stock powers
duly executed in blank, and any other documents that
are necessary to transfer to Sunbelt good title to
all the Shares, and (B) all opinions, certificates
and other instruments and documents required to be
delivered by the Stockholder at or prior to the
Closing or otherwise required in connection herewith;
(ii) Sunbelt shall accept and purchase the Shares from the
Stockholder and in payment therefor by wire transfer
in immediately available funds pay to the Stockholder
the Purchase Price, less the Escrow Amount and less
$400,000;
(iii) Sunbelt shall deliver to the Stockholder (A)
certificates representing Sunbelt common stock with
an aggregate Market Value of $400,000 (the "Share
Consideration"), bearing the restrictive legend
customarily placed on securities that have not been
registered under applicable federal and state
securities laws, and any other documents that are
necessary to transfer to Stockholder good title to
such shares of Sunbelt Common Stock, or (B) at
Sunbelt's option, in lieu of the delivery of such
shares of Sunbelt common stock, an additional
$400,000 by wire transfer in immediately available
funds;
(iv) Sunbelt shall deliver to the Stockholder all options,
certificates and other instruments and documents
required to be delivered by Sunbelt and BAG at or
prior to the Closing or otherwise required in
connection herewith;
(v) Sunbelt, BAG, the Company and the Stockholder shall
sign and deliver to one another executed copies of
the Employment Agreement attached as Exhibit A;
(vi) Sunbelt, the Stockholder and Escrow Agent shall sign
and deliver to one another executed copies of the
Escrow Agreement attached as Exhibit B;.
(vii) Sunbelt and BAG shall sign and deliver to the
Stockholder an executed copy of the Guaranty attached
as Exhibit C.
(viii) Sunbelt shall pay and deliver the Escrow Amount to
the Escrow Agent pursuant to the terms of the Escrow
Agreement;
(ix) Sunbelt, BAG and the Stockholder shall sign and
deliver to one another executed copies of the
Non-competition and Confidentiality Agreement
attached as Exhibit D;
-9-
10
(x) The Company, Sunbelt, BAG and the Stockholder (as the
lessor) shall sign and deliver to one another
executed copies of the Post-Closing Real Estate Lease
attached as Exhibit E; and
(xi) The Stockholder and Sunbelt shall sign and deliver to
one another executed copies of the Registration
Rights Agreement attached as Exhibit F.
1.2 COMPUTATION OF FIFO NET WORTH.
(A) Generally Accepted Accounting Principals ("GAAP"),
consistently applied, shall be utilized in determining the FIFO Net Worth of the
Company on the Closing Date for purposes of the Estimated Closing Date Balance
Sheet, the Closing Date Balance Sheet, the Reviewed Balance Sheet and the Final
Balance Sheet. For purposes of this Agreement the following methods of valuation
shall be deemed to be in accordance with GAAP and consequently shall be used for
the purpose of determining the amounts to be included in the calculation of the
FIFO Net Worth of the Company on the Closing Date.
(i) Parts, Accessories, Chemicals and Miscellaneous Supplies.
All new, undamaged parts, accessories, chemicals and supplies shall be valued by
an independent inventory valuation service (a) at prices determined by each
automobile manufacturer's most current Parts Catalog price immediately prior to
the Closing without regard to whether they were purchased directly from such
manufacturer; and (b) if not listed in the automobile manufacturer's most
current Parts Catalog, then all such unlisted parts and supplies (e.g., "NPNs"
and "aftermarket parts") shall be valued at the Company's cost for such items as
of the Closing Date. Sunbelt and the Company shall each pay one-half (1/2) of
the fees and cost of the independent inventory valuation service engaged by the
Parties to complete the inventory. NPNs shall include all nuts, bolts, brackets,
clips and similar supplies used in connection with the Company's business.
Damaged parts shall not be required to be included in the valuation. Used parts
and obsolete parts (those parts on the Closing Date with no sales during the
twelve (12) month period preceding the Closing Date and which are non-returnable
to the manufacturer or distributor) shall be valued at a price determined in
good faith negotiations between Sunbelt and the Stockholder. In maintaining its
books and records, the Company's practice is to book the automobile
manufacturer's then current Parts Catalog price as the cost of any item referred
to in clause (a) of this subparagraph (i) and to recognize as income or loss
when purchased the difference between (1) the automobile manufacturer's then
current Parts Catalog price for an item referred to in clause (a) of this
subparagraph (i), and (2) the Company's cost thereof when not purchased from the
automobile manufacturer (e.g., when purchased from another automotive dealer or
a distributor that is not wholly owned by the automobile manufacturer). In
computing the FIFO Net Worth of the Company for purposes of the Estimated
Closing Date Balance Sheet, the Closing Date Balance Sheet, the Reviewed Balance
Sheet and the Final Balance Sheet, the value of any items referred to in clause
(a) of this subparagraph (i) that were not purchased from an automobile
manufacturer shall be determined in the same manner as stated in the preceding
sentence.
-10-
11
(ii) New Vehicles. All untitled new, demonstrator and
courtesy loaner/rental motor vehicles of the Company shall be valued under the
FIFO (first in-first out) method of accounting at a price (the "Vehicle Cost")
equal to the sum of (i) the Company's original factory invoice cost, minus (ii)
any factory holdback received by the Company; minus (iii) any dealer marketing
allowance ("DMA") received or to be received by the Company on eligible Mazda
vehicles, plus (iv) the cost of dealer installed items, and plus (v) vehicle
freight and handling charges (not otherwise included in the invoice cost). For
the purpose of Sections 1.2 (a)(ii) and (iii), the cost of dealer installed
items shall be equal to the charge for parts and labor customarily placed on the
Company's vehicle inventory records, plus the actual cost of all sublet and
outside vendor charges on such vehicles. Notwithstanding the foregoing, the
value of any untitled demonstrator or courtesy loaner/rental vehicle shall be
the lesser of (a) the Vehicle Cost (as determined above) reduced by a
depreciation charge of $.10 per mile for all miles in excess of 2,500 on the
odometer of such vehicle, or (b) the Vehicle Cost (as determined above) reduced
by any rental credits applied to that vehicle in the Company's vehicle inventory
records. No other depreciation shall be taken on such vehicle for purposes of
Sections 1.2 and 1.3 hereof.
(iii) Used Vehicles. The valuation of the Company's used
vehicle inventory as of the Closing shall be at (a) the Company's actual cost
(including buyer fees, transportation and auction fees) as shown on its used
vehicle inventory records before (without) write down to market if lower than
cost, plus (b) the cost of refurbishing and dealer installed items (computed in
accordance with subparagraph (ii) immediately above); provided, however, that
any used vehicle in the Company's inventory for more than seventy-five (75) days
as of the Closing Date shall be valued at ninety percent (90%) of the Company's
cost for such vehicle, as determined in accordance with clauses (a) and (b) of
this sentence. Thus, the used vehicle valuation shall be made without (and
consequently shall disregard) any used vehicle reserve that otherwise may be on
the Company's books and records. The used vehicles to be valued pursuant to this
subparagraph (iii) as modified by Section 1.2(b) below shall be listed in
SCHEDULE 1.2(A)(III) USED VEHICLES INVENTORY to be prepared by the Parties
immediately prior to the Closing and initialed by them at the Closing. Said
Schedule shall show the valuation price of each used vehicle.
(iv) Depreciation. All of the Company's assets eligible
for depreciation, including those previously expensed under Code ss. 179, shall
be valued under the straight line method of depreciation regardless of whether
they were expensed under Code ss. 179 or how they were depreciated for tax or
financial accounting purposes.
(v) Special Tools. All manufacturer's "special tools"
(as they are commonly referred to in automotive dealerships) that were expensed
when acquired by the Company shall be valued in the aggregate at Ten Thousand
($10,000) Dollars.
(B) It is further agreed that in the event any (1) new, demonstrator or
courtesy loaner/rental vehicle referred to in Section 1.2(a)(ii) shall have been
damaged prior to the Closing, or (2) used vehicle referred to in Section
1.2(a)(iii) shall have been damaged prior to the Closing
-11-
12
after such used vehicle was purchased by the Company, (i) the Company shall
repair such vehicle to the reasonable satisfaction of Sunbelt, or (ii) in the
event any such vehicle has not been so repaired prior to the Closing, the
Stockholder, Company and Sunbelt shall agree on the cost to complete such
repairs, computed in accordance with the Company's past practice at the
Company's internal cost of repair for a physically damaged vehicle, and such
cost less the amount of the insurance proceeds eligible to be recovered thereon
shall be deducted from the value referred to herein. The new, demonstrator or
courtesy loaner/rental vehicles to be valued pursuant to Section 1.2(a)(ii) as
modified by this paragraph shall be listed in SCHEDULE 1.2 (A)(II) NEW AND
DEMONSTRATOR INVENTORY to be prepared by the Parties immediately prior to the
Closing and initialed by them at the Closing. Said Schedule shall show the value
of each vehicle computed as set forth in Section 1.2(a)(ii) as modified by this
paragraph (b) and when delivered to Sunbelt shall become a part of this
Agreement as if initially a part hereof.
(C) In determining the FIFO Net Worth of the Company, the deferred
tax liability arising from the Company's use of LIFO based accounting principles
for tax purposes shall be discounted to present value (calculated at a discount
rate equal to the Applicable Rate) based on the payment of such tax liability in
four (4) annual installments as provided by the applicable federal income tax
rules and regulations, and such present value shall be reflected as a liability
in determining the FIFO Net Worth of the Company on the Estimated Closing Date
Balance Sheet, the Closing Date Balance Sheet, the Reviewed Balance Sheet and
the Final Balance Sheet.
(D) Notwithstanding any requirement or principle under GAAP or any
contrary entry on any of the Company's financial statements, in determining the
FIFO Net Worth of the Company for purposes of this Agreement, (i) any reserves
for finance chargebacks, credit life chargebacks and service contract
chargebacks shall not exceed the sum of $12,000 in the aggregate, (ii) any
reserves for doubtful accounts and bad debts shall not exceed in the aggregate
$2,000, (iii) any reserves against the uncollectibility of warranty receivables
shall not exceed $2,000, (iv) any reserves for accrued but unpaid vacation, sick
or holiday leave shall not exceed in the aggregate $2,000, and (v) any reserves
against manufacturer warranty and incentive chargebacks shall not exceed in the
aggregate $10,000.
(E) If the transactions contemplated by this Agreement are not
consummated by May 25, 1998, then in determining the FIFO Net Worth of the
Company for purposes of this Agreement, the settlement amount paid by the
Company in accordance with Internal Revenue Procedure 97-44, up to $20,000,
shall be treated as an add-back in determining the FIFO Net Worth of the Company
on the Estimated Closing Date Balance Sheet, the Closing Date Balance Sheet, the
Reviewed Balance Sheet and the Final Balance Sheet.
1.3 PAYMENT OF FIFO NET WORTH.
(A) As soon as practicable after the Closing Date, the Stockholder
shall deliver to Sunbelt a balance sheet of the Company dated as the Closing
Date (such balance sheet so delivered is referred to herein as the "Closing Date
Balance Sheet"). Sunbelt shall reimburse the
-12-
13
Company for all reasonable fees and expenses incurred by the Company's certified
public accountants in connection with the preparation of both the Closing Date
Balance Sheet and the Estimated Closing Date Balance Sheet referred to in
Section 6.6. The Closing Date Balance Sheet shall be prepared in good faith on
the same basis and in accordance with the accounting principles, methods and
practices used in preparing the Company Financial Statements (as defined in
Section 2.5 hereof), except as modified by GAAP and subject to the
modifications, adjustments and exceptions to GAAP and such accounting
principles, methods and practices set forth in ss. 1.2 above (such accounting
principles, methods and practices as so modified and adjusted, and such
procedures, are referred to herein as the "Accounting Principles"). As provided
in Section 1.2 above in connection with the preparation for the calculation of
inventory to be valued for purposes of determining the FIFO Net Worth of the
Company, the Stockholder and the Company and the Reviewer (as defined below) and
other representatives of Sunbelt will conduct a physical inventory at each
location where inventory is held by the Company. From the results of such
inventory and immediately prior to the Closing Date, Sunbelt and the Stockholder
(or the respective representatives thereof) will prepare a schedule, which shall
be signed by the Parties setting forth the nature and quality of such inventory
and such other items as shall be agreed upon by Sunbelt and the Stockholder to
be included in the Estimated Closing Date Balance Sheet, the Closing Date
Balance Sheet, the Reviewed Balance Sheet and the Final Balance Sheet.
(B) Within thirty (30) days after delivery of the Closing Date
Balance Sheet, (i) Ernst & Young, LLC or such other national accounting firm
(the "Reviewer") selected by Sunbelt, shall audit or otherwise review the
Closing Date Balance Sheet in such manner as Sunbelt and the Reviewer deem
appropriate, and (ii) Sunbelt shall deliver such reviewed balance sheet (the
"Reviewed Balance Sheet"), together with the Reviewer's report thereon, to the
Stockholder. The Reviewed Balance Sheet (i) shall be prepared on the same basis
and in accordance with the Accounting Principles and (ii) shall include a
schedule showing the Reviewer's computation of the FIFO Net Worth, computed in
accordance with the calculation of FIFO Net Worth set forth in Section 1.2
hereof. Sunbelt and the Reviewer shall have the opportunity to consult with the
Stockholder, the Company and each of the accountants and other representatives
of the Stockholder and the Company and examine the work papers, schedules and
other documents prepared by the Stockholder, the Company and each of such
accountants and other representatives during the preparation of the Closing Date
Balance Sheet. The Stockholder and the Stockholder's independent public
accountants shall have the opportunity to consult with the Reviewer and examine
the work papers, schedules and other documents prepared by Sunbelt and the
Reviewer during the preparation of the Reviewed Balance Sheet. If Sunbelt does
not deliver to Stockholder a Reviewed Balance Sheet within thirty (30) days
after the Closing Date Balance Sheet is delivered to Sunbelt, then the Closing
Date Balance Sheet shall be accepted as the "Final Balance Sheet," and a
supplemental closing (the "Supplemental Closing") shall take place within ten
(10) Business Days following the expiration of such 30-day period, or on such
other date as may be mutually agreed upon in writing by Sunbelt and the
Stockholder.
(C) The Stockholder shall have a period of fifteen (15) days after
delivery to the Stockholder of the Reviewed Balance Sheet to present in writing
to Sunbelt all objections the
-13-
14
Stockholder may have to any of the matters set forth or reflected therein, which
objections shall be set forth in reasonable detail. During said fifteen (15) day
period, the Stockholder, his accountants and other representatives of the
Stockholder may examine Reviewer's work papers, schedules, research notes and
all correspondence between Reviewer and Sunbelt or any representative of
Sunbelt, which relate to the Closing Date Balance Sheet or Reviewed Balance
Sheet and any entry thereto made or considered by Reviewer. If no objections are
raised within such 15 day period, the Reviewed Balance Sheet shall be deemed
accepted and approved by the Stockholder (the "Final Balance Sheet") and a
supplemental closing (the "Supplemental Closing") shall take place within ten
(10) Business Days following the expiration of such 15-day period, or on such
other date as may be mutually agreed upon in writing by Sunbelt and the
Stockholder.
(D) If the Stockholder shall raise any objection within the 15-day
period, Sunbelt and the Stockholder shall attempt to resolve the matter or
matters in dispute and, if resolved shall be reflected in a "Final Balance
Sheet," and the Supplemental Closing shall take place within ten (10) Business
Days following such resolution.
(E) If such dispute cannot be resolved by Sunbelt and the
Stockholder within fifteen (15) days after the delivery of the Reviewed Balance
Sheet to the Stockholder, then the specific matters in dispute shall be
submitted to a firm of independent certified public accountants having a
reputation for special expertise in automobile dealership accounting and
mutually acceptable to Sunbelt and the Stockholder, which firm shall make a
final and binding determination as to such matter or matters, which shall be
reflected in the "Final Balance Sheet." Such accounting firm shall send its
written determination to Sunbelt and the Stockholder and the Supplemental
Closing, if any, shall take place five (5) Business Days following the receipt
of such determination by Sunbelt and the Stockholder. The fees and expenses of
the accounting firm referred to in this Section 1.3(e) shall be paid by Sunbelt.
(F) Sunbelt and the Stockholder agree to cooperate with each other
and each other's authorized representatives and with any accounting firm
selected by Sunbelt and the Stockholder pursuant to Section 1.3(e) hereof in
order that any and all matters in dispute shall be resolved as soon as possible.
(G) The difference between (i) the FIFO Net Worth as shown on the
Estimated Closing Date Balance Sheet, and (ii) the FIFO Net Worth as shown on
the Final Balance Sheet shall be paid as follows to the Stockholder if (ii) is
greater than (i) (a "Positive Post-Closing Adjustment"), or to Sunbelt if (i) is
greater than (ii) (a "Negative Post-Closing Adjustment"):
(1) the Parties shall cause the Escrow Agent (a) to
deliver to Sunbelt at the Supplemental Closing the amount of any Negative
Post-Closing Adjustment from the Escrow Account, and (b) to deliver to the
Stockholder at the Supplemental Closing any balance remaining after the payment
of the Negative Post-Closing Adjustment to Sunbelt from the Escrow Account, with
any deficiency in the Escrow Account paid directly by the Stockholder to Sunbelt
at the Supplemental Closing; or
-14-
15
(2) the amount of any Positive Post-Closing Adjustment
shall be paid by Sunbelt and/or BAG to the Stockholder at the Supplemental
Closing and in such event, the Parties shall cause the Escrow Agent to deliver
to the Stockholder at the Supplemental Closing all funds then in the Escrow
Account.
ARTICLE 2
REPRESENTATION AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDER
Subject to the Parties' agreement and acknowledgment that all of the
Schedules referred to in this Article 2 or Article 5 are to be delivered by the
Company and the Stockholder no later than sixty (60) days after the execution of
this Agreement, the Company and the Stockholder hereby jointly and severally
represent and warrant to Sunbelt and BAG that the following statements contained
in this Article 2 are correct and complete as of the date of this Agreement:
2.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized and validly existing under the laws of the State of its
incorporation and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. The Company is duly qualified to do business and is in good
standing as a foreign corporation in each state and jurisdiction where
qualification as a foreign corporation is required except where the lack of such
qualification would not have a Material Adverse Effect on the financial
condition of the Company. SCHEDULE 2.1(a) hereto lists: (i) the states and other
jurisdictions where the Company is so qualified; and (ii) the assumed names
under which the Company conducts business and contains complete and correct
copies of the Company's Articles of Incorporation and Bylaws, each as amended
and presently in effect.
2.2 SUBSIDIARIES. Except as set forth in SCHEDULE 2.2 hereof, the
Company does not have any subsidiaries or any other similar active business
interest or investment in any Person.
2.3 CAPITALIZATION. The authorized stock of the Company and the
number of shares of capital stock that are issued and outstanding are set forth
on SCHEDULE 2.3(A) hereto. The shares listed on SCHEDULE 2.3(A) hereto
constitute all the issued and outstanding shares of capital stock of the
Company, have been validly authorized and issued, are fully paid and
non-assessable, have not been issued in violation of any preemptive rights or of
any federal or state securities law and no personal liability attaches to the
ownership thereof. Except for the stock restriction agreement set forth on
SCHEDULE 2.3(B) hereto (the "Stock Restriction Agreement") which will be
terminated prior to the Closing Date and except for the provisions in any
automobile manufacturer's franchise agreements under which the Company has an
automobile franchise, there is no security, option, warrant, right, call,
subscription, agreement, commitment or understanding of any nature whatsoever,
fixed or contingent, that directly or indirectly: (i) calls for issuance, sale,
pledge or other disposition of any Shares of capital stock of the Company or
-15-
16
any securities convertible into, or other rights to acquire, any Shares of
capital stock of the Company; (ii) obligates the Company to grant, offer or
enter into any of the foregoing; or (iii) relates to the voting or control of
such capital stock, securities or rights, except as provided in this Agreement.
The Company has not agreed to register any securities under the Securities Act.
2.4 AUTHORITY, APPROVALS AND CONSENTS. The Company has the
corporate power and authority to enter into this Agreement and the other
documents referenced herein or related hereto (collectively, the "Transaction
Documents") and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly authorized and approved by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize and approve this Agreement and the Transaction Documents
and the transactions contemplated hereby and thereby. This Agreement has been
duly executed and delivered by, and constitutes a valid and binding obligation
of, the Company, enforceable against the Company in accordance with its terms.
The execution, delivery and performance by the Company and the Stockholder of
this Agreement and, at the Closing, the Post Closing Real Estate Lease and the
consummation of the transactions contemplated hereby and thereby do not and will
not, except as set forth on SCHEDULE 2.4:
(A) contravene any provisions of the Charter or Bylaws of the
Company;
(B) to the Knowledge of the Stockholder, after notice or lapse of
time or both, conflict with, result in a breach of any provision of, constitute
a default under, result in the modification or cancellation of, or give rise to
any right of termination or acceleration in respect of, any Company Agreement,
require any consent or waiver of any party to any Company Agreement, except
where such conflict or default would not have a Material Adverse Effect on the
financial condition of the Company or on the ability of the Parties to
consummate the transactions contemplated by this Agreement;
(C) to the Knowledge of the Stockholder, result in the creation of
any Lien upon, or any Person obtaining any right to acquire, any properties,
assets or rights of the Company (other than the rights of Sunbelt to acquire the
Shares pursuant to this Agreement) except where such Lien or rights would not
have a Material Adverse Effect on the financial condition of the Company or on
the ability of the Parties to consummate the transactions contemplated by this
Agreement;
(D) to the Knowledge of the Stockholder, violate or conflict with
any Legal Requirements applicable to the Company or any of its businesses or
properties, except where such conflict or violation would not have a Material
Adverse Effect on the financial condition of the Company or on the ability of
the parties to consummate the transactions contemplated by this Agreement; or
-16-
17
(E) to the Knowledge of the Stockholder, require any
authorization, Consent, order, permit or approval of, or notice to, or filing,
registration or qualification with, any Governmental Authority, other than in
connection with or in compliance with the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act, except where the absence of such Consent or filing, qualification or
registration would not have a Material Adverse Effect on the financial condition
of the Company or on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
2.5 FINANCIAL STATEMENTS. Attached as SCHEDULE 2.5 are true and
complete copies of:
(A) the unaudited balance sheet of the Company as of December 31,
1996, and the related statements of income, stockholder's equity and cash flow
for the fiscal year ended December 31, 1996, together with the notes thereto, in
each case accompanied by the reviewed report of independent certified public
accountants;
(B) the unaudited balance sheet of the Company as of October 31,
1997 (the "Balance Sheet") and the unaudited statements of income and
stockholder's equity for the ten (10) month period ended on such date; and
(C) the most recent monthly and year-to-date financial statements
provided to each automotive manufacturer with which the Company has an
automotive franchise dealership (the "Factory Statements");
(the financial statements referred to in clauses (a) and (b) above, including
the notes referred to in clause (a), being referred to herein collectively as
the "Financial Statements"). The December 31, 1996 year end financial statement
of the Company is in accordance with the books and records of the Company,
fairly presents the financial position, results of operations, stockholder's
equity and changes in the financial position of the Company as of the date and
for the period indicated, is in conformity with GAAP (except as disclosed
therein or in SCHEDULE 2.5 hereto or as such statement would otherwise be
modified by SECTION 1.2 hereof) during such periods, and can be legitimately
reconciled with the financial statements and the financial records maintained
and the accounting methods applied by the Company for federal income tax
purposes. The Balance Sheet is in accordance with the books and records of the
Company, fairly presents the financial position and Stockholder's equity of the
Company as of the date indicated, is in conformity with the Company's accounting
principles consistently applied in preparing interim statements, and can be
legitimately reconciled with the financial statements and records maintained and
accounting methods applied by the Company for federal income tax purposes. The
statements of income included in the Financial Statements of the Company do not
contain any material items of special or non-recurring income except as
expressly identified therein, and the balance sheets included in the Financial
Statements of the Company do not reflect any material write up or revaluation
increasing the book value of any assets except as expressly identified therein
or as described in Section 1.2(a)(i). The books and accounts of the Company are
complete and current in all
-17-
18
material respects and fairly reflect all of the transactions, items of income
and expense and assets and liabilities of the businesses of the Company
consistent with prior practices of the Company.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. To the Knowledge of the
Stockholder, the Company does not have any material liability of any nature
whatsoever (whether due or to become due, accrued, absolute or contingent),
including, without limitation, any unfunded obligation under Employee Benefit
Plans or arrangements as described in Sections 2.17 and 2.18 hereof or
liabilities for Taxes, except for: (a) liabilities reflected or reserved against
on the Company's Balance Sheet; (b) current liabilities incurred after the date
of the Company's Balance Sheet in the Ordinary Course of Business and consistent
with past practice; and (c) liabilities disclosed on SCHEDULE 2.6 hereto. Except
as set forth in SCHEDULE 2.6 hereto, none of the employees of the Company are
now or will by the passage of time become entitled to receive any vacation time,
vacation pay or severance pay attributable to services rendered prior to the
date of the Closing Date.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(A) To the Knowledge of the Stockholder, since October 31, 1997,
except as set forth on SCHEDULE 2.7(A) hereto, the Company has operated in the
Ordinary Course of Business consistent with past practice and there has not
been:
(i) any material adverse change in the assets,
properties, business, contractual relations, operations, net income or financial
condition of the Company resulting in, or which could be reasonably expected to
result in, a Material Adverse Effect;
(ii) any material loss, damage, destruction or other
casualty to the property or other assets of the Company, whether or not covered
by insurance;
(iii) any change in the method of accounting or accounting
practice of the Company; or
(iv) any loss of the employment, services or benefits of
any key employee of the Company.
(B) To the Knowledge of the Stockholder, since October 31, 1997,
except as set forth in SCHEDULE 2.7(B) hereto, the Company has not:
(i) incurred any material obligation or liability
(whether absolute, accrued or contingent), except in the Ordinary Course of
Business consistent with past practice;
(ii) except in the Ordinary Course of Business consistent
with past practice failed to satisfy any Lien when due or pay or satisfy when
due any obligation or liability (whether
-18-
19
absolute, accrued or contingent), other than liabilities being contested in good
faith and for which adequate reserves have been provided;
(iii) except in the Ordinary Course of Business, mortgaged,
pledged or subjected to any Lien any of its property or other assets except for
Permitted Liens and mechanics' liens;
(iv) sold or transferred any asset or canceled any debts
or claims or waived any rights, except in the Ordinary Course of Business
consistent with past practices;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except for the
signing of this Agreement or in the Ordinary Course of Business consistent with
past practice;
(vii) except in the Ordinary Course of Business, written
down the value of any inventory, or written off as uncollectible any accounts
receivable or any portion thereof reflected in the Company's Financial
Statements;
(viii) received any notice of termination of any contract,
lease or other agreement which, in any case or in the aggregate, has had a
Material Adverse Effect;
(ix) transferred or granted any rights under, or entered
into any settlement regarding the breach or infringement of, any material
Intellectual Property, or modified any material existing rights with respect
thereto;
(x) made any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable, or paid or
agreed or orally promised to pay, conditionally or otherwise any bonus,
incentive, retention or other Compensation, retirement, welfare, fringe or
severance benefit or vacation pay, to or in respect of any employee, salesman,
distributor or agent of the Company other than increases (1) in accordance with
past practices not exceeding fifteen percent (15%), or (2) in addition to (1),
to the Stockholder or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇;
(xi) encountered any labor union organizing activity, had
any actual or threatened employee strikes, work stoppages, slowdowns or
lockouts;
(xii) failed to replenish inventories and supplies in a
normal and customary manner consistent with its prior practice, or made any
purchase commitment materially in excess of the normal, ordinary and usual
requirements of its business or at any price materially in excess of
then-current market price or upon terms and conditions materially more onerous
than those usual and customary in the industry for businesses of like size and
nature, or made any material change in its selling, pricing, advertising or
personnel practices inconsistent with its prior practice;
-19-
20
(xiii) instituted, settled or agreed to settle any, or had
any material involvement in, litigation, action or proceeding before any court
or governmental body relating to the Company other than in the Ordinary Course
of Business consistent with past practices but not in any individual case
involving amounts in excess of $100,000;
(xiv) entered into any transaction, contract or commitment
other than in the Ordinary Course of Business or paid or agreed to pay any
legal, accounting, brokerage, finder's fee, Taxes or other expenses in
connection with, or incurred any severance pay obligations by reason of, this
Agreement or the action contemplated hereby;
(xv) declared, set aside or paid any dividend or other
distribution in respect of any shares of capital stock of the Company or any
repurchase, redemption or other acquisition by any Stockholder or the Company of
any outstanding shares of capital stock or other securities of, or other
ownership interest in, the Company;
(xvi) made any individual capital expenditure in excess of
$50,000.00, or aggregate capital expenditures in excess of $100,000.00, or
additions to property, plant and equipment other than ordinary repairs and
maintenance;
(xvii) discontinued any of the Company's franchise
agreements for its Cadillac, Oldsmobile, Mazda or Isuzu dealerships; or
(xviii) entered into any agreement or made any commitment to
do any of the foregoing.
2.8 TAXES. Except as set forth on SCHEDULE 2.8, for the fiscal year
ending December 31, 1996, the Company has filed timely all federal, state, local
and foreign tax returns, reports and declarations required to be filed (or has
obtained or timely applied for an extension with respect to such filing)
correctly reflecting, to the Stockholder's Knowledge, the Taxes and all other
information required to be reported thereon and has paid, or made adequate
provision for the payment of, all Taxes which are due pursuant to such returns
or pursuant to any assessment received by the Company. Copies of all tax returns
for each fiscal year since the date of incorporation of the Company (the "Tax
Returns") have been furnished or will be made available to Sunbelt or its
representatives and such copies are accurate and complete as of the dates
thereof. The Company will furnish or make available for review by Sunbelt
correct and complete copies of any material notices and correspondence sent or
received since 1995 by the Company to or from any federal, state or local tax
authorities. To the Knowledge of the Stockholder, the Company has made adequate
provision on its books (on an annual basis) for the payment of all Taxes
(including for the current fiscal period) owed by the Company. Except to the
extent reserves therefor are reflected on the Company's Balance Sheet and to the
Stockholder's Knowledge, the Company is not liable, or will not become liable,
for any Taxes for any period ending prior to or inclusive of the date of the
Company's Balance Sheet, except as set forth on SCHEDULE 2.8 hereto. On the
Estimated Closing Date
-20-
21
Balance Sheet, the Closing Date Balance Sheet, the Reviewed Balance Sheet and
the Final Balance Sheet, there shall be an adequate reserve for the payment of
any Taxes Known to the Stockholder for any period ending on the day immediately
prior to the date of the Closing and in addition, there shall be an accrual as
provided in Section 1.2(c) above for Taxes attributable to the Company's
anticipated conversion to FIFO based accounting principles from and after the
Closing. Except as set forth on SCHEDULE 2.8 hereto, since January 1, 1995, the
Company has not been subject to a federal or state tax audit of any kind and no
adjustment has been proposed by the Internal Revenue Service ("IRS") with
respect to any return for any year commencing on or after January 1, 1995. With
respect to the audits referred to on SCHEDULE 2.8 hereto, no such audit has
resulted in an adjustment in excess of $50,000.00. The Stockholder has no
Knowledge of any assertion of a deficiency for Taxes against the Company. The
Stockholder will cooperate with the Company in the filing of any returns and in
any audit or refund claim proceedings involving Taxes for which the Company may
be liable or with respect to which the Company may be entitled to a refund.
Furthermore:
(A) the Company has not executed or filed with the IRS or any
other taxing authority any agreement, waiver or other document or arrangement
extending or having the effect of extending the period for assessment or
collection of Taxes (including, but not limited to, any applicable statute of
limitation), and no power of attorney with respect to any Tax matter is
currently in force;
(B) all Taxes, which to the Knowledge of the Stockholder, are
required to be withheld by the Company have been duly and timely withheld and
have been paid over as due to the appropriate taxing authorities for all periods
under all applicable laws;
(C) SCHEDULE 2.8 lists all material types of Taxes paid and
material types of tax returns filed by or on behalf of the Company. Except as
set forth on SCHEDULE 2.8, no claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns such that it is or may
be subject to taxation by that jurisdiction;
(D) except as set forth on SCHEDULE 2.8, all deficiencies asserted
or assessments made as a result of any examinations by the IRS or any other
taxing authority of the tax returns of or covering or including the Company have
been fully paid, and to Stockholder's Knowledge, there are no other audits or
investigations by any taxing authority in progress, nor have the Stockholder and
the Company received any notice from any taxing authority that it intends to
conduct such an audit or investigation. No issue has been raised by a federal,
state, local or foreign taxing authority in any current or prior examination
which, by application of the same or similar principles, could reasonably be
expected to result in a proposed deficiency for any subsequent tax period;
(E) except as set forth in SCHEDULE 2.8, neither the Company nor
any other Person (including the Stockholder) on behalf of the Company has: (i)
agreed to, or to the Stockholder's Knowledge, is required to make any
adjustments pursuant to ss.481(a) of the Code or any similar
-21-
22
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or has Knowledge that the IRS has proposed any
such adjustment or change in accounting method, or has any application pending
with any taxing authority requesting permission for any changes in accounting
methods that relate to the business or operations of the Company; (ii) executed
or entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law with respect to the Company; or (iii) requested any extension of
time within which to file any tax return, which tax return has not since been
filed;
(F) no property owned by the Company is: (i) property required to
be treated as being owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986; (ii)
constitutes "tax-exempt use property" within the meaning of Section 168(h)(1) of
the Code; or (iii) is "tax-exempt bond financed property" within the meaning of
Section 168(g) of the Code;
(G) the Stockholder is not a foreign person within the meaning of
Section 1445 of the Code;
(H) the Company is not a party to any tax-sharing or similar
agreement or arrangement (whether or not written) pursuant to which it will have
any obligation to make any payments after the Closing;
(I) there is no contract, agreement, plan or arrangement covering
any person that, individually or collectively, could give rise to the payment of
any amount that would not be deductible by the Company by reason of Section 280G
of the Code, or would constitute compensation in excess of the limitation set
forth in Section 162(m) of the Code;
(J) the Company is not subject to any private letter ruling of the
IRS or comparable rulings of other taxing authorities;
(K) there are no Liens as a result of any unpaid Taxes upon any of
the assets of the Company other than Permitted Liens;
(L) the Company has properly and timely elected under Section 1362
of the Code, and under each analogous or similar provision of state or local law
in each jurisdiction where the Company is required to file a tax return, to be
treated as an "S" corporation for all taxable periods since January 1, 1987.
Sunbelt will be provided with a copy of any such election and there has not been
any voluntary or involuntary termination or revocation of such election prior to
the Closing;
-22-
23
(M) except as set forth in SCHEDULE 2.8, the Company has never
owned any subsidiaries and has never been a member of any consolidated, combined
or affiliated group of corporations for any Tax purposes;
(N) except as set forth in SCHEDULE 2.8, the Company does not have
any undistributed earnings and profits and has not had for any taxable year
gross receipts more than twenty-five percent (25%) of which are "passive
investment income" (as defined in Section 1375 of the Code).
2.9 LEGAL MATTERS.
(A) Except as set forth on SCHEDULE 2.9(A) hereto: (i) there is no
claim, action, suit, litigation or proceeding (collectively, "Claims'") pending
against, or, to the Knowledge of the Stockholder, threatened against or
affecting, the Company or any ERISA Plan or any of their respective assets,
properties or rights before any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, domestic or foreign; and (ii)
neither the Company nor any of its assets are subject to any judgment, decree,
writ, injunction, ruling or order (collectively, "Judgments") of any
Governmental Authority, domestic or foreign.
(B) To the Knowledge of the Stockholder, the business of the
Company is being conducted in compliance with all Legal Requirements applicable
to the Company or its business or properties, except where the failure to comply
would not have a Material Adverse Effect upon the financial condition of the
Company. To the Knowledge of the Stockholder, the Company holds, and is in
compliance with, all Permits required by all applicable Legal Requirements,
except where the failure to comply would not have a Material Adverse Effect upon
the financial condition of the Company. A list of all Permits is set forth on
SCHEDULE 2.9(B) hereof. To the Knowledge of the Stockholder, no event has
occurred and is continuing which permits, or after notice or lapse of time or
both would permit, any modification or termination of any Permit, except as
disclosed on SCHEDULE 2.9(b).
(C) SCHEDULE 2.9(C) sets forth all Governmental Approvals and
other Consents which to the Stockholder's Knowledge are necessary for, or
otherwise material to, the conduct of the Company's business. Except as set
forth in SCHEDULE 2.9(C), all such Governmental Approvals and Consents have been
duly obtained and, and to the Stockholder's Knowledge, are in full force and
effect and the Company is in substantial compliance with each of such
Governmental Approvals and Consents held by it.
(D) To the Stockholder's Knowledge, there have been no citations,
notices or complaints issued to or received by the Company from the Occupational
Health and Safety Administration or any similar state or local agency except as
listed on SCHEDULE 2.9(D).
2.10 PROPERTY. To the Knowledge of the Stockholder, except as disclosed
on SCHEDULE 2.10, the properties and assets owned by or leased to the Company
(including
-23-
24
improvements to the Real Property (the "Improvements") and all machinery,
equipment and other tangible property) are in substantially good repair and
operating condition (subject to normal wear and tear) and, to the Knowledge of
the Stockholder, there are no facts or conditions affecting such assets which
could, individually or in the aggregate, interfere in any material respect with
the use, occupancy or operation thereof as currently used, occupied or operated.
(A) OWNED REAL PROPERTY. SCHEDULE 2.10 contains a complete list of
all real property owned by the Company (the "Owned Real Property") setting forth
the address and owner of each parcel and describing all improvements thereon,
including without limitation, the Owned Real Property reflected as being so
owned on the Company's Financial Statements. The Company has, or on the Closing
Date will have, good, valid and marketable fee simple title to the Owned Real
Property indicated on SCHEDULE 2.10 as being owned by it, free and clear of all
Liens other than Permitted Liens. There are no outstanding leases, options or
rights of first refusal to purchase the Owned Real Property, or any portion
thereof or interest therein.
(B) LEASES. SCHEDULE 2.10 contains a complete list of all leases
(the "Leases") of real property (the "Real Property") setting forth the address,
landlord and tenant for each Lease. Stockholder has delivered or will make
available to Sunbelt complete copies of the Leases. Each Lease is legal, valid,
binding, enforceable, and in full force and effect, except as may be limited by
bankruptcy, insolvency, reorganization and similar applicable laws affecting
creditors generally and by the availability of equitable remedies. The Company
is not in default, violation or breach in any respect under any Lease, and no
event has occurred and is continuing that constitutes or, with notice or the
passage of time or both, would constitute a default, violation or breach in any
respect under any Lease. Each Lease grants the tenant under the Lease the
exclusive right to use and occupy the demised premises thereunder (the "Leased
Real Property"). The Company has good and valid title to the leasehold estate
under each Lease free and clear of all recorded Liens other than Permitted
Liens. The Company enjoys peaceful and undisturbed possession under its
respective Leases for the Leased Real Property. At the Closing all of the then
existing Leases shall be canceled and replaced by the Post-Closing Real Estate
Lease attached hereto as Exhibit E.
(C) FEE AND LEASEHOLD INTERESTS. The Real Property constitutes all
the fee and leasehold interests in real property held by the Company for use in
connection with, or otherwise material to, the business of the Company as it is
currently conducted.
(D) NO PROCEEDINGS. There are no eminent domain or other similar
proceedings pending, or to the Stockholder's Knowledge, threatened or affecting
any portion of the Real Property. There is no writ, injunction, decree, order or
judgment outstanding, nor any action, claim, suit or proceeding, pending, or to
the Stockholder's Knowledge, threatened, relating to the ownership, lease, use,
occupancy or operation by any Person of any Real Property.
(E) CURRENT USE. Except as noted on SCHEDULE 2.10(E), to the
Knowledge of the Stockholder, the use and operation of the Real Property by the
Company does not violate in any
-24-
25
material respect any instrument of record or agreement affecting the Real
Property. To the Knowledge of the Stockholder, there is no violation of any
covenant, condition, restriction, easement or order of any Governmental
Authority having jurisdiction over such property or of any other Person entitled
to enforce the same affecting the Real Property or the use or occupancy thereof.
No damage or destruction has occurred with respect to any of the Real Property
that would, individually or in the aggregate, have a Material Adverse Effect.
(F) COMPLIANCE WITH REAL PROPERTY LAWS. To the Stockholder's
Knowledge, the Real Property is in substantial compliance with all material
building, zoning, subdivision and other land use and similar applicable laws
affecting the Real Property (collectively, the "Real Property Laws"), and the
Stockholder has not received any notice of violation or claimed violation of any
Real Property Law. To the Knowledge of the Stockholder, there is no pending or
anticipated change in any Real Property Law that will have or result in a
material adverse effect upon the ownership, alteration, use, occupancy or
operation of the Real Property or any portion thereof. To the Stockholder's
Knowledge, no current use by the Company of the Real Property is dependent on a
nonconforming use approval, the absence of which would materially limit the use
of such properties or assets held for use in connection with, necessary for the
conduct of, or otherwise material to, the business of the Company as currently
conducted.
(G) REAL PROPERTY TAXES. Except as noted in SCHEDULE 2.10(G), each
parcel included in the Real Property is assessed for real property tax purposes
as a wholly independent tax lot, separate from adjoining land or Improvements
not constituting a part of that parcel.
(H) LEASED PREMISES. Except as noted in SCHEDULE 2.10(H), with
respect to Leased Real Property, to the Knowledge of the Stockholder, the
Company has substantially complied with and caused such premises to
substantially comply with: (i) all material federal, state, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances or
recommendations affecting such premises or any part thereof, or the use thereof,
including without limitation, the Americans with Disabilities Act; (ii) all
material rules, orders and regulations of the National Board of Fire
Underwriters or other bodies exercising similar functions and responsibilities
in connection with the prevention of fire or other correction of hazardous
conditions which apply to such premises; and (iii) the requirements of all
policies of public liability, fire and other insurance which may be in force
with respect to such premises.
(I) CERTIFICATE OF OCCUPANCY; UTILITIES; EMINENT DOMAIN. To the
Knowledge of the Stockholder, the Company has obtained any required certificate
of occupancy with respect to the Improvements. To the Knowledge of the
Stockholder, all utilities servicing the Real Property and the Improvements are
provided by publicly dedicated utility lines. No notice of any pending,
threatened or contemplated action by any governmental authority or agency having
the power of eminent domain has been given to the Company and the Stockholder
with respect to the Real Property.
-25-
26
2.11 ENVIRONMENTAL MATTERS.
(A) Except as set forth on SCHEDULE 2.11(A) hereto: (i) the
Stockholder has not received notice that the Real Property, the Improvements and
any property formerly owned, occupied or leased by the Company are not in
compliance with all Environmental Laws (as defined below); (ii) to the Knowledge
of the Stockholder, the Company has obtained all Environmental Permits (as
defined below); (iii) such Environmental Permits are in full force and effect;
and (iv) the Stockholder has not received a notice of non-compliance regarding
the terms and conditions of such Environmental Permits. As used herein,
"Environmental Laws" shall mean all material applicable requirements of
environmental, public or employee health and safety, public or community right
to know, ecological or natural resource laws or regulations or controls,
including all applicable requirements imposed by any law (including, without
limitation, common law), rule, order, or regulations of any federal, state or
local executive, legislative, judicial, regulatory or administrative agency,
board or authority, or any applicable private agreement (such as covenants,
conditions and restrictions), which relate to: (A) noise; (B) pollution or
protection of the air, surface water, groundwater or soil; (C) solid, gaseous or
liquid waste generation, treatment, storage, disposal or transportation; (D)
exposure to Hazardous Materials (as defined below); or (E) regulation of the
manufacture, processing, distribution and commerce, use or storage of Hazardous
Materials. As used herein, "Environmental Permits" shall mean all material
permits, licenses, approvals, authorizations, consents or registrations required
under applicable Environmental Law in connection with ownership, use and/or
operation of the Company's business or the Real Property or Improvements.
As used in this ss. 2.11, "Hazardous Materials" shall mean,
collectively: (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste." "hazardous substances,"
"hazardous materials," "toxic substances" or similar terms in or pursuant to:
the Comprehensive Environmental Response Compensation and Liability Act of 1980
(42 U.S.C. ss. 9601 et seq. ("CERCLA"), as amended by Superfund Amendments and
Reauthorization Act of 1986 (Pub. L. 99-499, 100 State, 1613); the Resource
Conservation and Recovery Act of 1776 (42 U.S.C. ss. 6901 et seq.) ("RCRA"); the
Occupational Safety and Health Act of 1970 (29 U.S.C, ss. 651 et seq.) ("OSHA");
and the Hazardous Materials Transportation Act (49 U.S.C, ss. 1801 et seq.
("HWA"), and in the regulations promulgated pursuant to such laws, all as
amended; (ii) those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); (iii) any material waste or
substance which is or contains: (A) petroleum, including crude oil or any
fraction thereof, natural gas or synthetic gas usable for fuel or any mixture
thereof; (B) asbestos; (C) polychlorinated biphenyls; (D) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C.
ss. 1251 et seq. (33 U.S.C. ss. 1317) or listed pursuant to Section 307 of the
Clean Water Act (33 U.S.C. ss. 1317); (E) flammable explosives; (F) radioactive
materials; and (iv) such other substances, materials and wastes which are
regulated or classified as hazardous, toxic or as "special wastes" under any
Environmental Laws.
-26-
27
(B) To the Knowledge of the Stockholder, the Company and the
Stockholder have not done any act which would give rise to liability under any
Environmental Law. To the Knowledge of the Stockholder, no event has occurred
with respect to the Real Property, the Improvements or any property formerly
owned, occupied or leased by the Company, which, with the passage of time or the
giving of notice, or both, would constitute a violation of or noncompliance with
any applicable Environmental Law. To the Knowledge of the Stockholder, the
Company has no contingent liability under any Environmental Law. To the
Knowledge of the Stockholder, there are no Liens under any Environmental Law on
the Real Property.
(C) To the Knowledge of the Stockholder, except as set forth on
SCHEDULE 2.11(C) hereto: (i) neither the Company, the Real Property or any
portion thereof, the Improvements or any property formerly owned, occupied or
leased by the Company, nor, any property adjacent to the Real Property is being
used or has been used for the treatment, generation, transportation, processing,
handling, production or disposal of any Hazardous Materials or as a landfill or
the waste disposal site in violation any Environmental Law and there has been no
spill, release or migration of any Hazardous Materials on or under the Real
Property and no Hazardous Material is present on or under the Real Property
(provided, however, that certain petroleum products are stored and handled on
the Real Property in the ordinary course of the Company's business in
substantial compliance with all Environmental Laws, including the existing
regulations of the United States Environmental Protection Agency and the State
of Georgia requiring spill protection, overfill protection and corrosion
protection by December 22, 1998); (ii) none of the Real Property or portion
thereof, the Improvements or any property formerly owned, occupied or leased by
the Company has been subject to investigation by any Governmental Authority
evaluating the need to investigate or undertake Remedial Action (as defined
below) at such property; and (iii) none of the Real Property, the Improvements
or any property formerly owned, occupied or leased by the Company or any site or
location where the Company sent waste of any kind, is identified on the current
or proposed: (A) National Priorities List under 40 C.F.R. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇; (B)
CERCLA Inventory System list; or (C) any use arising from any statute analogous
to CERCLA. As used herein, "Remedial Action" shall mean any action required to:
(i) clean up, remove or treat Hazardous Materials; (ii) prevent a release or
threat of release of any Hazardous Material; (iii) perform pre-remedial studies,
investigations or post-remedial monitoring and care; (iv) cure a violation of
Environmental Law; or (v) take corrective action under Sections 3004(u), 3004(v)
or 3008(h) of RCRA or analogous state law.
(D) To the Knowledge of the Stockholder, except as set forth in
SCHEDULE 2.11(D) hereto, there have been and are no: (i) above ground or
underground storage tanks, subsurface disposal systems, or wastes, drums or
containers disposed of or buried on, in or under the ground or any surface
waters; (ii) asbestos or asbestos containing materials or radon gas; (iii)
polychlorinated biphenyls ("PCD") or PCB-containing equipment, including
transformers; or (iv) wetlands (as defined under any Environmental Law) located
within any portion of the Real Property, nor have any Liens been placed upon any
portion of the Real Property or the Improvements or any property formerly owned,
occupied or leased by the Company in connection with any actual or alleged
liability under any Environmental Law.
-27-
28
(E) Except as set forth on SCHEDULE 2.11(E) hereto: (i) there is
no pending or, to the Knowledge of the Stockholder, threatened claim, litigation
or administrative proceeding, or to the Knowledge of the Stockholder, prior
claim, litigation or administrative proceeding, arising under any Environmental
Law involving the Company, the Real Property, the Improvements, any property
formerly owned, leased or occupied by the Company, any off site contamination
affecting the business of the Company or any operations conducted at the Real
Property; (ii) there are no ongoing negotiations with or agreements with any
Governmental Authority relating to any Remedial Action or other environmental
related claim; (iii) the Company has not submitted notice pursuant to Section
103 of CERCLA or analogous statute or notice under any other applicable
Environmental Law reporting a release of a Hazardous Material into the
environment; and (iv) the Company and the Stockholder has not received any
notice, claim, demand, suit or request for information from any governmental or
private entity with respect to any liability or alleged liability under any
Environmental Law, nor to Knowledge of the Stockholder, has any other entity
whose liability therefor, in whole or in part, may be attributed to the Company,
received such notice claim, demand, suit or request for information.
(F) The Stockholder will make available to Sunbelt all
environmental studies and reports obtained by them or Known to the Stockholder
pertaining to the Real Property, the Improvements, the Company and any property
formerly owned, occupied or leased by the Company, and will permit prior to the
Closing Date the testing of the soil, groundwater, building components, tanks,
containers and equipment on the Real Property or the Improvements by Sunbelt or
Sunbelt's agents or experts as they have or shall have deemed necessary or
appropriate to confirm the condition of such properties.
2.12 INVENTORIES. The values at which inventories are carried on
the Company's Balance Sheet reflect the normal inventory valuation policies of
the Company. All inventories reflected on the Company's Balance Sheet and
Company's Factory Statements or arising since the date thereof can reasonably be
anticipated to be sold or disposed of in the Ordinary Course of Business, in
such manner or manners and at such rates as are substantially consistent with
the Company's historical experience, taking into account the Company's customary
practices with respect to the sale of obsolete, off-grade or slow-moving
inventory items from time to time during prior periods.
2.13 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable reflected on the Company's Balance Sheet, and all notes and accounts
receivable that will be reflected on the Estimated Closing Date Balance Sheet,
the Closing Date Balance Sheet, the Reviewed Balance Sheet and the Final Balance
Sheet will represent receivables arising from sales made or services performed
in the Ordinary Course of Business.
2.14 INSURANCE. All material properties and assets of the Company which
are of an insurable character are insured against loss or damage by fire and
other risks to the extent and in the manner the Stockholder deems reasonable in
light of the risks attendant to the businesses and activities in which the
Company is engaged. Set forth on SCHEDULE 2.14 hereto is a list and
-28-
29
brief description (including the name of the insurer) of the type of coverage
provided, the amount of the annual premium for the current policy period, the
amount of remaining coverage and deductibles and the coverage period of all
policies for such insurance and the Company has made or will make available to
Sunbelt true and complete copies of all such policies. No notice of cancellation
or non-renewal with respect to, or disallowance of any claim under any such
policy has been received by the Company as of the date hereof.
2.15 CONTRACTS.
(A) SCHEDULE 2.15 contains a complete list of all material
agreements, contracts, commitments and other instruments and arrangements
(whether written or oral) of the types described below to which the Company is a
party or by which it is bound ("Company Agreements"):
(i) leases, master rental agreements, service agreements,
insurance polices, Governmental Approvals and other
contracts concerning or relating to the Real Property
(including those referred to on SCHEDULE 2.10);
(ii) loan agreements, indentures, letters of credit,
mortgages, security agreements, pledge agreements,
deeds of trust, bonds, notes, guarantees and other
agreements and instruments relating to the borrowing
of money or obtaining of or extension of credit;
(iii) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or
limiting the use of, any Intellectual Property;
(iv) brokerage or finder's agreements;
(v) joint venture, partnership and similar contracts
involving a sharing of profits or expenses (including
but not limited to joint research and development and
joint marketing contracts);
(vi) asset purchase agreements and other acquisition or
divestiture agreements, including but not limited to
any agreements relating to the sale, lease or
disposal of any assets (other than sales of inventory
in the Ordinary Course of Business) or involving
continuing indemnity or other obligations;
(vii) sales agency, manufacturer's representative, dealer,
marketing or distributorship agreements;
(viii) master lease agreements providing for the leasing of
personal property used in, or held for use in
connection with, the Company's business; and
-29-
30
(ix) powers of attorney.
For purposes of this Agreement "material agreements, contracts,
commitments and other instruments and arrangements" means only those contracts,
agreements, commitments, instruments or arrangements with respect to which the
aggregate amount that could reasonably be expected to be paid or received
thereunder in the future exceeds $12,000 per annum.
(B) The Company and the Stockholder will use their Best Efforts to
make available for review by Sunbelt complete copies of all written Company
Agreements together with all amendments thereto, and accurate descriptions of
all material terms of all oral Company Agreements set forth or required to be
set forth on SCHEDULE 2.15.
(C) To the Knowledge of Stockholder, all Company Agreements are in
full force and effect and enforceable against each party thereto, except as such
enforceability may be limited by the effect of bankruptcy, insolvency or similar
laws affected creditors' rights generally or by general principles of equity. To
the Knowledge of Stockholder, there does not exist under any Company Agreement
any event of default or event or condition that, after notice or lapse of time
or both, would constitute a violation, breach or event of default thereunder on
the part of the Company, or, any other party thereto, except as set forth in
SCHEDULE 2.15, and except for such events or conditions that, individually and
in the aggregate: (i) have not had or result in, and will not have or result in,
a Material Adverse Effect; and (ii) have not and will not materially impair the
ability of the Company or the Stockholder to perform their obligations under
this Agreement. Except as set forth in SCHEDULE 2.15, to the Knowledge of the
Stockholder, no consent of any third party is required under any Company
Agreement as a result of or in connection with, and the enforceability of any
Company Agreement will not be affected in any manner by, the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby.
(D) To the Knowledge of the Stockholder, there are no material
unresolved disputes involving the Stockholder, the Company or its employees
under any Company Agreement
2.16 LABOR RELATIONS.
(A) To the Knowledge of the Stockholder, the Company has paid or
made provision consistent with prior practices for the payment of all salaries
and accrued wages and has complied in all material respects with all material
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and to the Knowledge of the Stockholder, has withheld
and paid to the appropriate Governmental Authority, or is holding for payment
not yet due, to such authority, any amounts required by law or agreement to be
withheld from the wages or salaries paid by the Company to its employees.
-30-
31
(B) Except as set forth on SCHEDULE 2.16(B) hereto, the Company is not
a party to any: (i) outstanding employment agreements or contracts with officers
or employees that are not terminable at will; (ii) agreement, policy or practice
that requires it to pay termination or severance pay to non-exempt or hourly
employees (other than as required by law); (iii) collective bargaining agreement
or other labor union contract applicable to persons employed by the Company, nor
are there, to the Knowledge of the Stockholder, any activities or proceedings of
any labor union to organize any such employees. The Company will make available
to Sunbelt complete and correct copies of all such agreements ("Employment and
Labor Agreements"). To the Knowledge of the Stockholder, the Company has not
materially breached or otherwise materially failed to comply with any material
provisions of any Employment or Labor Agreement.
(C) Except as set forth in SCHEDULE 2.16(C) hereto, to the
Stockholder's Knowledge: (i) there is no unfair labor practice, charge or
complaint pending before the National Labor Relations Board ("NLRB"); (ii) there
is no labor strike, material slowdown or material work stoppage or lockout
actually pending or threatened against or affecting the Company, and the Company
has not experienced any such material slow down or material work stoppage,
lockout or other collective labor action by or with respect to employees of the
Company; (iii) there is no representation claim or petition pending before the
NLRB or any similar foreign agency and no question concerning representation
exists relating to the employees of the Company; (iv) there are no charges with
respect to or relating to the Company pending before the Equal Employment
Opportunity Commission or any state, local or foreign agency responsible for the
prevention of unlawful employment practices; (v) the Company and the Stockholder
have not received formal notice from any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of the Company and no such investigation is in
progress; and (vi) the consents of the unions that are parties to any Employment
and Labor Agreements are not required to complete the transactions contemplated
by this Agreement.
(D) The Company has never caused any "plant closing" or "mass layoff"
as such actions are defined in the Worker Adjustment and Retraining Notification
Act, as codified at 29 U.S.C. ss.ss.2101-2109, and the regulations promulgated
therein.
2.17 EMPLOYEE BENEFIT PLANS.
(A) Set forth on SCHEDULE 2.17(A) hereto is a true and complete list
of:
(i) each Employee Pension Benefit Plan maintained by the Company
or to which the Company is required to make contributions; and
(ii) each Employee Welfare Benefit Plan maintained by the Company
or to which the Company is required to make contributions.
-31-
32
True and complete copies of all ERISA Plans have been delivered to or will be
made available to Sunbelt together with, as applicable with respect to each such
ERISA Plan, trust agreements, summary plan descriptions, the most recent IRS
determination letter and, if any, pending applications therefor, with respect to
any Pension Benefit Plan intended to be qualified pursuant to Section 401(a) of
the Code, and valuation or actuarial reports, accountant's opinions, financial
statements, IRS Form 5500 (or 5500-C or 5500-R) and summary annual reports for
the last three years.
(B) With respect to the ERISA Plans, except as set forth on SCHEDULE
2.17(B):
(i) there is no ERISA Plan which is a Multi-Employer Plan;
(ii) to the Knowledge of the Stockholder, no event has occurred or
is threatened or about to occur which would constitute a
prohibited transaction under Section 406 of ERISA or under
Section 4975 of the Code;
(iii) to the Knowledge of the Stockholder, each ERISA Plan has
operated since its inception in all material respects with the
reporting and disclosure requirements imposed under ERISA and
the Code and has timely filed Form 5500 (or 5500-C or 5500-R)
and predecessors thereof; and
(iv) to the Knowledge of the Stockholder, no ERISA Plan is liable
for any federal, state, local or foreign Taxes.
(C) Each Pension Benefit Plan, intended to be qualified under Section
401(a) of the Code, to the Knowledge of the Stockholder:
(i) has been qualified, from its inception, under Section 401(a)
of the Code, and the trust established thereunder has been
exempt from taxation under Section 501(a) of the Code and is
currently in material compliance with applicable federal laws;
(ii) has been operated, since its inception, in all material
respects in accordance with its terms and there exists no fact
which would adversely affect its qualified status; and
(iii) is not currently under investigation, audit or review by the
IRS and no such action is contemplated or under consideration
and the IRS has not asserted that any Pension Benefit Plan is
not qualified under Section 401(a) of the Code or that any
trust established under a Pension Benefit Plan is not exempt
under Section 501(a) of the Code.
-32-
33
(D) With respect to each Employee Pension Benefit Plan which is a
defined benefit plan under Section 414(j) and each defined contribution plan
under Section 414(i) of the Code:
(i) to the Knowledge of the Stockholder, no liability to the PBGC
under Sections 4062-4064 of ERISA has been incurred by the
Company since the effective date of ERISA and all premiums due
and owing to the FBOC have been timely paid;
(ii) no notification from the PBGC has been received by the Company
or any Employee Pension Benefit Plan of the commencement of
any proceedings under Section 4042 of' ERISA to terminate any
such plan;
(iii) to the Knowledge of the Stockholder, no event has occurred
since the inception of any Employee Pension Benefit Plan or is
threatened or about to occur which would constitute a
reportable event within the meaning of Section 4043(b) of
ERISA;
(iv) no Employee Pension Benefit Plan ever has incurred an
"accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code); and
(v) if any of such Employee Pension Benefit Plans were to be
terminated on the Closing Date: (A) to the Knowledge of the
Stockholder, no liability under Title IV of ERISA would be
incurred by the Company; and (B) all benefits accrued to the
day prior to the Closing Date (whether or not vested) would be
fully funded in accordance with the actuarial assumptions and
method utilized by such plan for valuation purposes.
(E) With respect to each Employee Pension Benefit Plan, SCHEDULE
2.17(A) contains a list of all Employee Pension Benefit Plans to which ERISA has
applied which have been or are being terminated, or for which a termination is
contemplated, and a description of the actions taken by the PBGC and the IRS
with respect thereto.
(F) The aggregate of the amounts of contributions by the Company to be
paid or accrued under ERISA Plans for the current fiscal year is not expected to
exceed approximately one hundred and fifty percent (150%) of the amounts of such
contributions for the past fiscal year. To the extent required in accordance
with GAAP, the Company's Final Balance Sheet shall reflect in the aggregate an
accrual of all amounts of employer contributions accrued and unpaid by the
Company under the ERISA Plans as of the date thereof.
(G) With respect to any Multi-Employer Plan: (i) the Company has not,
since its formation, made or suffered any "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of
ERISA, (ii) there is no withdrawal liability of
-33-
34
the Company under any Multi-Employer Plan, computed as if a "complete
withdrawal" by the Company had occurred under each such Plan as of December 31,
1996; and (iii) the Company has not received notice to the effect that any
Multi-Employer Plan is either in reorganization (as defined in Section 4241 of
ERISA) or insolvent (as defined in Section 4245 of ERISA).
(H) With respect to the Employee Welfare Benefit Plans, except as
disclosed on SCHEDULE 2.17(H):
(i) There are no liabilities of the Company under
Employee Welfare Benefit Plans with respect to any
condition which relates to a claim filed on or before
the Closing Date other than claims being processed in
the normal course of business; and
(ii) No claims for benefits are presently in litigation
or, to the Stockholder's Knowledge, in dispute.
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(A) The Company will furnish or make available to Sunbelt true and
correct copies of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation,
performance, bonus, incentive, vacation pay, holiday
pay, insurance, severance, retirement, excess benefit
or other plan, trust or arrangement which is not an
ERISA Plan whether written or oral, which the Company
maintains or is required to make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral,
with any current or former officer, director or
consultant of the Company pursuant to which payments
may be required to be made at any time following the
date hereof (including, without limitation, any
employment, deferred compensation, severance,
supplemental pension, termination or consulting
agreement or arrangement); and
(iii) each employee of the Company (other than the
Stockholder and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇) whose aggregate
compensation for the fiscal year ended December 31,
1997 exceeded $75,000. True and complete copies of
all of the written plans, arrangements and agreements
referred to on SCHEDULE 2.18(A) ("Compensation
Commitments") have been provided or will be made
available to Sunbelt together with, where prepared by
or for the Company, any valuation, actuarial or
accountant's opinion or other financial reports with
respect to each Compensation Commitment for the last
three years. An accurate and complete written summary
has been
-34-
35
provided or will be made available to Sunbelt with
respect to any Compensation Commitment which is
unwritten.
(B) To the Knowledge of the Stockholder, each Compensation
Commitment:
(i) since its inception, has been operated in all
material respects in accordance with its terms;
(ii) is not currently under investigation, audit or review
by the IRS or any other federal or state agency and
no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or
foreign Taxes;
(iv) has no claim subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the
Code; and
(vi) has operated, since its inception, in material
compliance with the reporting and disclosure
requirements imposed under ERISA and the Code.
2.19 TRANSACTIONS WITH INSIDERS. Set forth on SCHEDULE 2.19 hereto
is a complete and accurate description of all material transactions between the
Company or any ERISA Plan, on the one hand, and any Insider, on the other hand,
that have occurred since December 31, 1996.
2.20 PROPRIETY OF PAST PAYMENTS. To the Knowledge of the
Stockholder, except as set forth on SCHEDULE 2.20 hereto: (a) no funds or assets
of the Company have been used for illegal purposes; (b) no unrecorded funds or
assets of the Company have been established for any purpose; (c) no accumulation
or use of the Company's corporate funds or assets has been made without being
accounted for in the respective books and records of the Company; (d) all
payments by or on behalf of the Company have been recorded and accounted for in
their respective books and records; (e) no false or artificial entry has been
made in the books and records of the Company for any reason; (f) no payment has
been made by or on behalf of the Company with the understanding that any part of
such payment is to be used for any purpose other than that described in the
documents supporting such payment; (g) and the Company has not made, directly or
indirectly, any illegal contributions to any political Party or candidate,
either domestic or foreign. To the Knowledge of the Stockholder, neither the IRS
nor any other federal, state, local or foreign government agency or entity has
initiated nor is there pending any investigation of any payment made by the
Company of, or alleged to be, the type described in this ss.2.20.
2.21 INTEREST IN COMPETITORS. Except as set forth on SCHEDULE 2.21,
neither the Company nor the Stockholder, nor any of their Affiliates, have any
interest, either by way of contract or by way of investment (other than as
holder of not more than two percent (2%) of the
-35-
36
outstanding capital stock of a publicly traded Person, so long as such holder
has no other connection or relationship with such person) or otherwise, directly
or indirectly, in any Person other than the Company that is engaged in the
retail sale of automobiles in Hall County, Georgia.
2.22 BROKERS. Neither the Company, nor any director, officer or
employee thereof, nor the Stockholder or any representative of the Stockholder,
has employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement.
2.23 ACCOUNTS. SCHEDULE 2.23 hereof correctly identifies each bank
account maintained by or on behalf of or for the benefit of the Company, and the
name of each person with any power or authority to act with respect thereto.
2.24 TERRITORIAL RESTRICTIONS. Except as restricted in its
automobile manufacturer franchise agreement or as set forth on SCHEDULE 2.24,
the Company is not restricted by any written agreement or understanding with any
Person from carrying on its business anywhere in the world by reason of any
contract, agreement or arrangement to which the Company is a party.
2.25 INTELLECTUAL PROPERTY.
(A) TITLE. SCHEDULE 2.25(A) contains a complete list of all
Intellectual Property with a value greater than $50,000 or on behalf of which
payments greater than $50,000 per year are made by the Company, that is owned by
the Company and primarily related to, used in, held for use in connection with,
or necessary for the conduct of, or otherwise material to the Company (the
"Owned Intellectual Property") other than: (i) inventions, trade secrets,
processes, formulae, compositions, designs and confidential business and
technical information; and (ii) Intellectual Property that is both not
registered or subject to application for registration and not material to the
Company. To the Stockholder's Knowledge, except as set forth on SCHEDULE 2.25(A)
the Company owns or has the exclusive right to use pursuant to license or
sublicense agreement or permission all Intellectual Property which is the
subject of the license, free from any Liens (other than Permitted Liens) and
free from any requirement of any past, present or future royalty payments,
license fees, charges or other payments or conditions or restrictions
whatsoever. As of the date hereof, the Intellectual Property comprises all of
the Intellectual Property necessary for the Company to conduct and operate the
Company as it is now being conducted. To the Stockholder's Knowledge, the
Company does not infringe on or otherwise conflict with any rights of any Person
in respect of any Intellectual Property. For purposes of this Section 2.25,
Intellectual Property shall exclude any Intellectual Property obtained by the
Company from any automobile manufacturer with whom the Company has executed a
franchise agreement.
(B) LICENSING ARRANGEMENTS. SCHEDULE 2.25(B) sets forth all
agreements or arrangements: (i) pursuant to which the Company has licensed
Intellectual Property to, or the use of Intellectual Property is otherwise
permitted (through non-assertion, settlement or similar agreements or otherwise)
by, any other Person; and (ii) pursuant to which the Company has had
-36-
37
Intellectual Property licensed to it, or has otherwise been permitted to use
Intellectual Property, in each case under which agreement or arrangement
payments greater than $50,000 per year are made or received by the Company. To
the Stockholder's Knowledge, except as set forth on SCHEDULE 2.25(B), all of the
agreements or arrangements set forth on SCHEDULE 2.25(B): (A) are in full force
and effect in accordance with their terms and no default exists thereunder by
the Company, or to the Knowledge of the Stockholder, by any other party thereto;
(B) are free and clear of all Liens; and (C) do not contain any change in
control or other terms or conditions that will become applicable or inapplicable
as a result of the consummation of the transactions contemplated by this
Agreement. Stockholder has delivered or will make available to Sunbelt copies of
all written licenses and arrangements (including amendments) set forth on
SCHEDULE 2.25(B). All royalties, license fees, charges and other amounts payable
by, on behalf of, to, or for the account of, the Company in respect of any
Intellectual Property are disclosed in the Company's Financial Statements to the
extent material to the Company's Financial Statements.
(C) LITIGATION. Except as set forth in SCHEDULE 2.25(C), the
Company and the Stockholder have not received notice that any claim or demand of
any Person has been made, nor is there any proceeding that is pending, or to the
Knowledge of Stockholder, threatened, which: (i) challenges the rights of the
Company in respect of any Intellectual Property; (ii) asserts that the Company
is infringing or otherwise in conflict with, or is, except as set forth in
SCHEDULE 2.25(B), required to pay any royalty, license fee, charge or other
amount with regard to, any Intellectual Property; or (iii) claims that any
default exists under any agreement or arrangement listed on SCHEDULE 2.25(B). To
the Knowledge of the Stockholder, none of the Intellectual Property is subject
to any outstanding order, ruling, decree, judgment or stipulation by or with any
court, arbitrator or administrative agency.
(D) USE OF NAME AND ▇▇▇▇. Except as set forth in SCHEDULE 2.25(D)
or elsewhere in this Agreement, there are, and immediately after the Closing
will be, no contractual restriction or limitation pursuant to any orders,
decisions, injunctions, judgments, awards or decrees of any Governmental
Authority on Company's right to use the name and ▇▇▇▇ "▇▇▇▇ ▇▇▇▇▇▇▇▇▇" in the
conduct of the business as presently carried on by the Company.
2.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 2.26 contains
an accurate list, as of the date of this Agreement, of:
(A) the name of each financial institution in which the Company
has accounts or safe deposit boxes;
(B) the names in which the accounts or boxes are held:
(C) the type of account; and
(D) the name of each person authorized to draw thereon or have
access thereto.
-37-
38
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
Subject to the Parties' agreement and acknowledgment that all of the
Schedules referred to in this Article 3 are to be delivered by the Company and
the Stockholder no later than sixty (60) days after the execution of this
Agreement, the Company and the Stockholder hereby jointly and severally
represent and warrant to Sunbelt and BAG that the following statements contained
in this Article 3 are correct and complete as of the date of this Agreement:
3.1 OWNERSHIP OR SHARES; TITLE. The Stockholder is the owner of
record and beneficiary of the Shares set forth on SCHEDULE 3.1 hereof and has,
and shall transfer to Sunbelt at the Closing, good and marketable title to the
Shares owned by him, free and clear of any and all Liens, claims and
encumbrances and free and clear of any restrictions on transfer (other than
restrictions on transfer imposed by applicable federal and state securities
laws), proxies and voting, or other agreements. The Stockholder is not a party
to any option, warrant, purchase right or other contract or commitment that
could require the Stockholder to sell, transfer or otherwise dispose of the
Shares (other than this Agreement). The Stockholder is not a party to any voting
trust, proxy or other agreement or understanding with respect to the voting of
any capital stock of the Company.
3.2 AUTHORITY. The Stockholder has all requisite power and
authority and has full legal capacity and is competent to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby
(including the disposition of the Shares to Sunbelt as contemplated by
Agreement). This Agreement has been duly executed and delivered by the
Stockholder and constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms. Except as set
forth on SCHEDULE 3.2, the execution, delivery and performance of this Agreement
by the Stockholder and the consummation of the transactions contemplated hereby,
do not and will not, to the Knowledge of the Stockholder:
(A) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result in
the modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any material contract, agreement, commitment,
understanding, arrangement or restriction to which the Stockholder is a party or
to which the Stockholder or any of Stockholder's property is subject;
(B) violate or conflict with any Legal Requirements applicable
to the Stockholder or any of the Stockholder's businesses or properties; or
(C) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with, any
Governmental Authority, except in connection with or in compliance with the
provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
-38-
39
3.3 BROKER'S FEES. The Stockholder has no Liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which Sunbelt, BAG or the
Company could become liable or obligated.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SUNBELT AND BAG
Sunbelt and BAG hereby jointly and severally represent and warrant to
the Company and the Stockholder as follows:
4.1 ORGANIZATION AND GOOD STANDING. Except as set forth on
Schedule 4.1 attached hereto, each of Sunbelt and BAG is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. Except as set forth on Schedule 4.1 attached hereto, each of
Sunbelt and BAG is duly qualified to do business and is in good standing as a
foreign corporation in each state and jurisdiction where qualification as a
foreign corporation is required, except for such failures to be qualified and in
good standing, if any, which when taken together with all other such failures of
Sunbelt and/or BAG would not, or could not reasonably be expected to, in the
aggregate have a material adverse effect on Sunbelt and/or BAG.
4.2 AUTHORITY; APPROVALS AND CONSENTS. Sunbelt and BAG have the
corporate power and authority to enter into this Agreement and to perform their
respective obligations hereunder. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Sunbelt and
BAG, enforceable against Sunbelt and BAG in accordance with its terms. Except as
set forth on SCHEDULE 4.2 hereto, the execution, delivery and performance by
Sunbelt and BAG of this Agreement and the consummation of the transactions
contemplated hereby do not and will not:
(i) contravene any provisions of the certificate of
incorporation or bylaws of Sunbelt or BAG;
(ii) (after notice or lapse of time or both) conflict
with, result in a breach of any provision, constitute
a default under, result in the modification or
cancellation of, or give rise to any contract,
agreement, commitment, understanding, arrangement or
restriction or, require any Consent or waiver of any
party to any such agreement, restriction or
arrangement other than agreements the breach or
violation of which could not reasonably be expected
to have a Material Adverse Effect on Sunbelt or BAG;
-39-
40
(iii) violate or conflict with any Legal Requirements
applicable to Sunbelt or BAG, or any of their
respective businesses or properties; or
(iv) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or
qualification within any governmental, administrative
or judicial authority, except in connection with or
in compliance with the provisions of the H.S.R. Act.
4.3 BROKERS. Neither Sunbelt or BAG, nor any of their respective
directors, officers, employees or agents has employed any broker or finder or
has incurred or will incur any broker's, finder's or similar fees, commissions
or expenses, in each case in connection with the transactions contemplated by
this Agreement or the Post-Closing Real Estate Lease.
4.4 SHARE CONSIDERATION. The Share Consideration to be delivered
to the Stockholder pursuant to this Agreement will be duly authorized, validly
issued, fully paid and nonassessable. The delivery of the Share Consideration
pursuant to this Agreement will transfer to the Stockholder valid title to such
shares of Sunbelt Common Stock, free and clear of all liens, encumbrances and
claims of every kind except for any created by the Stockholder. Except for the
restrictions on transfer imposed by the Securities Act and other applicable
federal and state securities laws and those normal and customary restrictions
imposed by the underwriters of the Sunbelt IPO, all shares of Sunbelt Common
Stock delivered to the Stockholder pursuant to this Agreement will be eligible
for resale under the Securities Act.
4.5 DISCLOSURE. As of the Closing Date, the prospectus relating to
the Sunbelt IPO filed or to be filed with the Securities and Exchange Commission
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY. Between the date hereof and the
Closing Date, the Stockholder and the Company will: (a) provide to the officers
and other authorized representatives of Sunbelt full access, during normal
business hours, to any and all premises, properties, files, books, records,
documents and other information of the Company, and at the request of Sunbelt,
will furnish to Sunbelt and its authorized representatives any and all
financial, technical and operating data and other information pertaining to the
businesses and properties of the Company (including the Real Property and the
Improvements); and (b) make available for inspection and copying by Sunbelt true
and complete copies of any documents relating to the foregoing; provided,
however, that scheduling of any and all inspections, tours or other due
-40-
41
diligence activities at the premises of the Company shall be subject to the
prior approval of the Stockholder; and provided, further, that neither Sunbelt
or BAG nor any representative of any such party shall contact any employee,
agent, representative, supplier or creditor of the Company (other than the
Stockholder or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇) without the prior approval of the
Stockholder. From and after the date hereof, Sunbelt and BAG will hold, and will
cause their representatives to hold, in confidence (unless and to the extent
compelled to disclose by judicial or administrative process) all Confidential
Information (as defined in this Agreement) and will not use or disclose the
Confidential Information to any third party except in connection with obtaining
financing and the transactions contemplated hereby, including any due diligence
review by or on behalf of Sunbelt and/or BAG. If this Agreement is terminated,
Sunbelt and BAG will, and will cause their representatives to, promptly return
to the Company, all Confidential Information furnished by the Company, the
Stockholder, or their representatives, including all copies and summaries
thereof. As used herein, "Confidential Information" shall not include
information (i) obtained from public information; (ii) received from a third
party not employed by or otherwise affiliated with the Company or to BAG's or
Sunbelt's knowledge, not under any duty not to disclose or use the Confidential
Information; or (iii) which is or becomes known to the public other than through
a breach by Sunbelt or BAG, or any of their respective representatives of this
Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS. The Stockholder and the
Company, on the one hand, and Sunbelt and BAG, on the other hand, will, as soon
as practical after reasonable request therefor, furnish to the other all
information concerning the Stockholder and the Company or Sunbelt and BAG,
respectively, required for inclusion in any statement or application made by
Sunbelt and BAG or the Company or the Stockholder to any governmental or
regulatory body or to any manufacturer or distributor or in connection with
obtaining any third party consent in connection with the transactions
contemplated by this Agreement. Neither the Stockholder nor the Company, on the
one hand, nor Sunbelt or BAG, on the other hand, nor any representative thereof
shall issue any press release or otherwise make any public statement with
respect to the transactions contemplated hereby without the prior written
consent of the other, except as may be required by law. Sunbelt shall reimburse
the Company and the Stockholder for any reasonable expenses, fees and costs
incurred by the Company and the Stockholder in connection with this Section.
5.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) Except as set forth on SCHEDULE 5.3(A), from and after the
date of this Agreement and until the Closing Date, the Company shall, and the
Stockholder shall cause the Company to, conduct its business solely in the
ordinary course consistent with past practices and, without the prior written
consent of Sunbelt, neither the Stockholder nor the Company will, except as
required or contemplated herein, cause the Company to:
-41-
42
(i) make any material change in the conduct of its
business and operations or enter into any transaction
other than in the Ordinary Course of Business
consistent with past practices;
(ii) make any change in its Bylaws, issue any additional
shares of capital stock or equity securities or grant
any option, warrant or right to acquire any capital
stock or equity securities or issue any security
convertible into or exchangeable for its capital
stock or alter any material term of any if its
outstanding securities or make any change in its
outstanding shares of capital stock or other
ownership interests or its capitalization, whether by
reason of a reclassification, recapitalization, stock
split or combination, exchange or readjustment of
shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or
other corporate securities or grant any option,
warrant or right to purchase any thereof, except
pursuant to transactions in the Ordinary Course of
Business consistent with past practices; (B) issue
any securities convertible or exchangeable for debt
securities of the Company; or (C) issue any options
or other rights to acquire from the Company, directly
or indirectly, debt securities of the Company or any
security convertible into or exchangeable for such
debt securities;
(iv) make any sale, assignment, transfer, abandonment or
other conveyance of any of its assets or any part
thereof, except transactions pursuant to existing
contracts and other dispositions in the Ordinary
Course of Business consistent with past practices;
(v) subject any of its assets, or any part thereof, to
any Liens or suffer such to be imposed other than
such Liens as may arise in the Ordinary Course of
Business consistent with past practices;
(vi) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any
combinations thereof) in respect of any shares of its
capital stock which would decrease the FIFO Net Worth
of the Company as of the Closing Date below
$1,000,000;
(vii) acquire any assets, raw materials or properties, or
enter into any other transaction, other than in the
Ordinary Course of Business consistent with past
practices;
(viii) except to comply with ERISA or other applicable law,
enter into any new (or amend any existing) employee
benefit plan, program or arrangement or
-42-
43
any new (or amend any existing) employment, severance
or consulting agreement; grant any general increase
in the compensation of officers or employees
(including any such increase pursuit to any bonus,
pension, profit-sharing or other plan or commitment)
or grant any increase in compensation payable or to
become payable to any employee (other than to the
Stockholder or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇), except in
accordance with pre-existing contractual provisions
or consistent with past practices;
(ix) make or commit to make any individual capital
expenditure in excess of $50,000, or aggregate
capital expenditures in excess of $100,000, except in
the Ordinary Course of Business;
(x) pay, loan or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into
any agreement or arrangement with, any of its
Affiliates, except in the Ordinary Course of Business
or as expressly contemplated in this Agreement such
as by execution of the Post-Closing Real Estate
Lease;
(xi) guarantee any indebtedness for borrowed money or any
other obligation of any other Person, other than in
the Ordinary Course of Business consistent with past
practice;
(xii) fail to keep in full force and effect insurance
comparable in amount and scope to coverage maintained
by it (or on behalf of it) on the date hereof;
(xiii) make any loan, advance or capital contribution or
investment in any Person, except in the Ordinary
Course of Business;
(xiv) make any change in any method of accounting or
accounting principle, method, estimate or practice
except for any such change required to conform to
GAAP accounting (with incorporation of the
modifications referred to in Section 1.2 above) or
write-down the value of any inventory or write-off as
uncollectible any accounts receivable except in the
Ordinary Course of Business consistent with past
practices;
(xv) settle, release or forgive any material claim or
litigation or waive any material right;
(xvi) make, enter into, modify, amend in any material
respect or terminate any material commitment, bid or
expenditure, other than in the Ordinary Course of
Business; or
(xvii) commit itself to do any of the foregoing.
-43-
44
(b) Except as set forth on SCHEDULE 5.3(B), from and after the
date hereof and until the Closing Date, the Stockholder and the Company will use
their reasonable Best Efforts to cause the Company to:
(i) continue to maintain, in all material respects, the
Company's properties, all Real Property and all
Improvements in accordance with present practices in
a condition suitable for their current use;
(ii) substantially comply with all material Environmental
Laws which, to the Knowledge of the Stockholder,
applies to the Company;
(iii) file, when due or required, federal, state, foreign
and other tax returns and other reports required to
be filed and pay when due all Taxes of which the
Stockholder has Knowledge, assessments, fees and
other charges lawfully levied or assessed against it
unless the validity thereof is contested in good
faith and by appropriate proceedings diligently
conducted;
(iv) keep its books of account, records and files in the
Ordinary Course of Business and in accordance with
existing practices; and
(v) continue to conduct its business in the Ordinary
Course of Business consistent with past practices.
5.4 NO INTERCOMPANY PAYABLES OR RECEIVABLES. At the Closing there
will be no intercompany payables or intercompany receivables due and/or owing
between the Stockholder and any of its Affiliates, on the one hand, and the
Company, on the other hand, except any obligations of the Company to the
Stockholder arising under the Post-Closing Real Estate Lease or the predecessor
Lease of the Real Property subject thereto.
5.5 NEGOTIATIONS. Until the earlier of one hundred eighty (180)
days from the date hereof or the termination of this Agreement pursuant to
Section 8.1 hereof, neither the Stockholder, nor the Company, nor its directors,
▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Jr. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, nor anyone acting on behalf of
the Stockholder pursuant to express direction from him, shall, directly or
indirectly, solicit, initiate or engage in discussions or negotiations with any
person (other than Sunbelt or BAG or their representatives or the Stockholder's
attorneys) concerning any merger, sale of assets (other than in the Ordinary
Course of Business), purchase or sale of shares of capital stock or similar
transaction involving the Company. The Stockholder shall promptly communicate to
Sunbelt any inquiries or communications concerning any such transaction which
the Stockholder may receive.
-44-
45
5.6 CONSENTS; COOPERATION. Subject to the terms and conditions
hereof, the Company and Sunbelt and BAG will use their respective Best Efforts
at their own expense (except as noted below):
(A) at Sunbelt's expense, to obtain prior to the earlier of the
date required (if so required) or the Closing Date, all Government Approvals,
and make all filings and registrations with Governmental Authorities which are
required on their respective parts for: (i) the consummation of the transactions
contemplated by this Agreement; (ii) the ownership or leasing and operating
after the Closing by the Company of all its material properties; and (iii) the
conduct after the Closing by the Company of its business as conducted by it on
the date hereof;
(B) at Sunbelt's expense (including all legal fees, other fees and
all costs incurred), to obtain approval of each respective automobile
manufacturer of its automotive dealer sales and service agreement for the
Company's ongoing operation of its Cadillac, Oldsmobile, Isuzu and Mazda
franchise, as the case may be, in Gainesville, Hall County, Georgia; and
(C) to furnish each other such information and assistance as may
reasonably be requested in connection with the foregoing.
5.7 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of
this Agreement, each of the Company, Sunbelt and BAG agrees to use its Best
Efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under Legal Requirements
applicable to such Party to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers of the Company, Sunbelt and BAG shall take all
such necessary action.
5.8 INTERIM FINANCIAL STATEMENTS. Upon Sunbelt's request, the
Company will deliver to Sunbelt copies of the Company Factory Statements
hereafter provided monthly to the automobile manufacturers of the Company's
franchised dealerships within five (5) Business Days of their delivery to the
respective manufacturers.
5.9 NOTIFICATION OF CERTAIN MATTERS.
(A) Between the date hereof and the Closing, each Party to this
Agreement after obtaining actual knowledge (and for purposes of this Section
5.9, "actual knowledge" of the Stockholder or the Company shall mean the
"Knowledge of the Stockholder" as defined in the preface to this Agreement) will
give prompt notice in writing to the other Party hereto of (i) any information
that indicates that any representation and warranty of such Party contained
herein was not true and correct as of the date made, or will not be true and
correct as of the Closing; (ii) the occurrence of any event which could result
in the failure to satisfy a condition specified in Article 6 or Article 7
hereof, as applicable; (iii) any notice or other communication from any third
person alleging that the consent of such third person is or may be required in
connection with the
-45-
46
transactions contemplated by this Agreement; and (iv) in the case of the
Stockholder and the Company, any notice of, or other communication relating to,
any default or event which, with notice or lapse of time or both, would become a
default under any Company Agreement set forth on SCHEDULE 2.15. The Company and
the Stockholder will: (a) promptly advise Sunbelt of any event that has, or
could reasonably be expected in the future to have, a Material Adverse Effect on
the Company; (b) confer on a regular and frequent basis with one or more
designated representatives of Sunbelt to report operational matters and to
report the general status of ongoing operations; and (c) notify Sunbelt of any
emergency or other change in the normal course of business or relating to the
Real Property or Improvements of the Company and of any complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any Governmental Authority or adjudicatory proceedings
involving the Company, the Real Property or the Improvements and will keep
Sunbelt fully informed of such events and permit Sunbelt's representatives
access to all materials prepared in connection therewith. The Stockholder shall
give prompt notice to Sunbelt of any notice or other communication from any
third person asserting any right, title or interest in any of the Shares held by
the Stockholder, including, without limitation, any threat to commence, or
notice of the commencement of any action or other proceeding with respect to the
Shares held by the Stockholder, or the occurrence of any other event of which
the Stockholder has Knowledge which could result in any failure by the
Stockholder to consummate the sale of the Shares as contemplated hereby.
(B) The Stockholder may elect at any time prior to the Closing
deliver written notification to Sunbelt of any development or change causing a
breach of any of the representations, warranties or covenants in Article 2,
Article 3 or Section 5.3 hereof, which notice shall state that it is being
delivered pursuant to this Section 5.9(b). Unless Sunbelt otherwise has the
right to terminate this Agreement pursuant to Section 8.1 (e) hereof by reason
of the development or change and exercises that right within the period of ten
(10) Business Days referred to in Section 8.1(e), the written notice pursuant to
this Section 5.9(b) will be deemed to have amended the relevant Schedules
hereto, to have qualified the representations, warranties and covenants
contained in Article 2, Article 3 and Section 5.3 hereof, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development or change.
5.10 ASSURANCE BY THE STOCKHOLDER. The Stockholder shall use his
Best Efforts to cause the Company to comply with its respective covenants set
forth in this Agreement
5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE. Sunbelt, BAG, the
Stockholder and the Company, as applicable, shall each file or cause to be filed
with the Federal Trade Commission and the United States Department of Justice
and any notifications required to be filed by the respective "ultimate parent"
entities under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and the rules and regulations
promulgated thereunder with respect to the transactions contemplated herein.
Sunbelt shall pay the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act filing fee and all legal and other
fees, costs and expenses reasonably incurred by any Party relating to such
filings. The Parties shall use their Best Efforts
-46-
47
to make such filings promptly, to respond to any requests for additional
information made by either of such agencies, to cause the waiting periods under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act to terminate or expire at the earliest possible date,
and to resist vigorously, at Sunbelt's expense (including, without limitation,
the institution or defense of legal proceedings), any assertion that the
transactions contemplated herein constitute a violation of the antitrust laws,
all to the end of expediting consummation of the transactions contemplated
herein; provided, however, that if Sunbelt shall reasonably determine that
continuing such resistance is not likely to result in a favorable determination,
Sunbelt may, by written notice to the other Parties, terminate this Agreement
with the effect set forth in ss.8.2 hereof
5.12 USE OF BUSINESS NAME. After the Closing Date, Sunbelt and the
Company may use the name "▇▇▇▇ ▇▇▇▇▇▇▇▇▇" in connection with business of the
Company. After the Closing, neither the Stockholder nor any of his Affiliates
shall use the name ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in connection with the sale or servicing of
new or used automobiles, light-duty trucks or any other motorized vehicles
within a thirty (30) mile radius of the Real Property prior to the fifth (5th)
year anniversary of the Closing Date. Effective as of the Closing Date, the
Company hereby grants to the Stockholder a perpetual, non-exclusive and
nontransferable license to use the trade name and trade ▇▇▇▇ "▇▇▇▇ ▇▇▇▇▇▇▇▇▇",
subject to the restrictions set forth above in this Section 5.12. The
Stockholder shall not be required to pay for the use of such trade name or trade
▇▇▇▇.
5.13 RELATED PARTY/STOCKHOLDER LOAN. On or before the Closing Date,
the Stockholder shall cause the Company to pay, and the Company shall pay, the
outstanding principal and all accrued but unpaid interest on any related
party/Stockholder loans (the "Stockholder Loans"). For purposes of this Section,
the Stockholder Loans shall mean the loans to the Company from Stockholder and
his Affiliates as set forth on the Company's Balance Sheet and listed on
SCHEDULE 5.13.
5.14 STOCK RESTRICTION AGREEMENT. Prior to the Closing Date, any
and all stock restriction agreements, buy/sell agreements, shareholder
agreements or other similar agreements of the Company (the "Stock Restriction
Agreement") shall be terminated in accordance with its terms and the parties
thereto shall have released any and all claims arising under or relating to the
Stock Restriction Agreement and its termination.
5.15 PERSONAL ITEMS. The parties acknowledge and agree that the
Stockholder may retain certain personal items (which items are not reflected as
assets on the Company's Balance Sheet and will not be reflected as assets on the
Final Balance Sheet of the Company). These items will include personal pictures,
awards and mementos and paintings.
5.16 CONTINUING INDEMNIFICATION OF OFFICERS AND DIRECTORS; OTHER
RELEASE BY STOCKHOLDER. The Stockholder hereby agrees and confirms that except
as otherwise provided in this Agreement, as of the Closing he will fully
release, acquit and forever discharge the Company from any and all liability,
claim, damage, suit, cost, expense or obligation of any nature whatsoever
whether known or unknown, arising in respect of or in connection with any time
or
-47-
48
period of time on or prior to the Closing Date, except for (a) compensation
payable by the Company to the Stockholder for services prior to the Closing
Date; (b) reimbursable expenses owed to Stockholder on or prior to the Closing;
and (c) the Stockholder's rights to indemnification for serving as an officer,
director and employee of the Company. Sunbelt and BAG agree that (i) all rights
to indemnification existing in favor of any director, officer, employee or agent
of the Company (the "Indemnified Parties") as provided in the Articles of
Incorporation or Bylaws of the Company or in written indemnification agreements
with the Company, in effect as of the date hereof, shall survive the Closing and
shall continue in full force and not less than six (6) years from the Closing
Date, and (ii) Sunbelt and BAG shall jointly and severally guarantee the
performance by the Company of its obligations referred to in this Section 5.16,
provided that, in the event any claim or claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim or
claims, and Sunbelt's and BAG's guarantee with respect thereto, shall continue
until final disposition of any and all such claims. Sunbelt and BAG jointly and
severally agree to indemnify all Indemnified Parties to the fullest extent
permitted by applicable law with respect to all acts and omissions arising out
of such individuals' services as officers, directors, employees or agents of the
Company occurring prior to the Closing Date. Without limiting the generality of
the foregoing, if any such Indemnified Party is or becomes involved in any
capacity in any action, proceeding or investigation in connection with any
matter occurring prior to the Closing Date, the Company shall pay as incurred
such Indemnified Party's legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith; provided that
Sunbelt shall have the right to approve such Indemnified Party's legal counsel,
which approval shall not be unreasonably withheld.
5.17 RETENTION OF RECORDS; POST-CLOSING ACCESS. Without cost to the
Stockholder, Sunbelt and BAG shall cause the Company to retain all books and
records of the Company (the "Records") in existence as of the Closing Date for
the greater of five (5) years from the Closing Date or such longer period of
time as required by applicable statutes, rules and regulations. For a period of
not less than five (5) years after the Closing Date, and for such longer period
as the Records are maintained, the Stockholder and his agents and
representatives shall have reasonable access to the Records at his sole cost and
expense for purposes of preparing and filing tax returns, preparing for audits
and for all other purposes as the Stockholder may reasonably request from time
to time.
5.18 SPECIAL INDEMNITY. The Parties acknowledge and agree that it
is anticipated that the Company will incur tax liability as a result of the
Company's expected conversion after the Closing Date from LIFO based accounting
methods to FIFO based accounting methods. In contemplation of such anticipated
tax liability, an adjustment to FIFO Net Worth (a reduction to the Purchase
Price) has been provided under Section 1.2(c) above. It is the Parties'
intention that such tax liability will be recognized by the Company after the
Closing Date as a C corporation, rather than during any period in which its
election to be treated as a Subchapter S corporation is in effect. In short, the
Parties intend that the Company, and not the Stockholder, bear any tax liability
resulting from the Company's conversion from LIFO based accounting methods to
FIFO based accounting methods. If for any reason the tax liability for such
conversion from LIFO to
-48-
49
FIFO based accounting methods is properly recognizable by the Stockholder rather
than by the Company, then Sunbelt, BAG and the Company shall jointly and
severally indemnify and hold the Stockholder, his estate, heirs, representatives
and assigns (collectively, the "Tax Indemnitees") harmless from and against any
and all taxes and interest suffered, incurred or paid by any of the Tax
Indemnitees arising from the Company's conversion or deemed conversion from LIFO
based accounting methods to FIFO based accounting methods. The aggregate amount
of the indemnification obligations under this Section 5.18 shall be limited to:
(A) in the event the Company does not report and pay the tax
liability resulting from the conversion, the total amount of the actual
adjustment under Section 1.2(c) to FIFO Net Worth, plus interest at the
Applicable Rate from the Closing Date through the date of the indemnification
payment; or
(B) in the event the Company does report and pay the tax liability
resulting from the conversion, the total amount of the actual adjustment under
Section 1.2(c) to FIFO Net Worth, plus the aggregate amount of interest, if any,
paid to the Company by the Department of the Treasury and the Georgia Department
of Revenue in connection with any refund of any such tax liability payment.
5.19 RELEASE FROM COMPANY OBLIGATIONS. Sunbelt, BAG and the Company
shall use their respective Best Efforts to secure the release of the Stockholder
from any and all claims, debts, liabilities and obligations of the Company
guaranteed by the Stockholder or for which the Stockholder is otherwise liable,
including but not limited to, any dealer charges under or with respect to the
Company's dealer codes (collectively, the "Guarantee Liabilities"). Sunbelt, BAG
and the Company shall jointly and severally indemnify and hold the Stockholder,
his estate, heirs, representatives and assigns (collectively, the "Guarantee
Indemnitees") harmless from and against any and all claims, costs, expenses
(including reasonable attorneys' fees), losses and liabilities incurred or
suffered by any of the Guarantee Indemnitees arising from or related to the
Guarantee Liabilities.
5.20 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. The
Stockholder shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for the Company for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. The Stockholder shall
permit Sunbelt and BAG to review and comment on each such Tax Return prior to
filing, and shall consider any revisions reasonably requested by Sunbelt or BAG.
To the extent permitted by applicable law, the Stockholder shall include any
income, gain, loss, deduction or other tax items for such periods on his Tax
Returns in a manner consistent with the Schedule K-1s prepared by the
Stockholder for such periods.
5.21 TAX PERIODS BEGINNING ON OR BEFORE AND ENDING AFTER THE
CLOSING DATE. Sunbelt shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns of the Company for Tax periods which begin on or before
the Closing Date and end after the Closing Date. BAG and Sunbelt shall permit
the Stockholder to review and comment on each such Tax
-49-
50
Return prior to filing and to make such revisions to such Tax Returns as are
reasonably requested by the Stockholder.
5.22 COOPERATION ON TAX MATTERS.
(A) BAG, Sunbelt, the Company and the Stockholder shall cooperate
fully, as and to the extent reasonably requested by the other Parties, in
connection with the filing of Tax Returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon any Party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Each of the Parties agrees: (A) to retain all books
and records within their possession with respect to Tax matters pertinent to the
Company relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent notified by any
of the Parties, any extensions thereof) of the respective taxable periods, and
to abide by all record retention agreements entered into with any taxing
authority; and (B) to give the other Parties reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if any
other Party so requests, each of the other Parties shall allow the other Party
to take possession of such books and records.
(B) Each of the Parties further agrees, upon request, to use its
Best Efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(C) Each of the Parties further agrees, upon request, to provide
the other Parties with all information that any other Party may be required to
report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF SUNBELT AND BAG TO EFFECT THE CLOSING
The Obligations of Sunbelt and BAG required to be performed by them at
the Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by Sunbelt and BAG
as provided herein except as otherwise required by applicable law, and Sunbelt
and BAG, shall, to the extent within their control, use their respective Best
Efforts to cause such conditions to be satisfied:
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS. Each of
the representations and warranties of the Company and the Stockholder contained
in this Agreement
-50-
51
shall be true and correct in all material respects as of the Closing. Each of
the obligations of the Company, and the Stockholder required by this Agreement
to be performed by them at or prior to the Closing shall have been duly
performed and complied with in all material respects as of the Closing. At the
Closing, Sunbelt shall have received a certificate, dated the Closing Date and
duly executed by the Stockholder that the conditions set forth in the two
preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENT.
(A) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and all collateral agreements, and
the consummation of the transactions contemplated hereby shall have been duly
and validly taken by the Company. All filings required to be made under the
H.S.R. Act in connection with transactions contemplated hereby shall have been
made and all applicable waiting periods with respect to each such filing,
including extensions thereof, shall have expired or been terminated.
(B) All notices to, and declarations, rulings and registrations
with, and material consents, authorizations, approvals and waivers from,
governmental and regulatory bodies and third persons, required to consummate the
transactions contemplated hereby and all material Consents or waivers shall have
been made or obtained. This Section 6.2 shall not apply to any consents,
authorizations, approvals and waivers from any automobile manufacturer.
6.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDER'S COUNSEL.
Sunbelt and BAG shall have been furnished with the opinion of the Company's and
the Stockholder's counsel, dated the Closing Date, in the form and substance
reasonably satisfactory to Sunbelt and BAG and their counsel.
6.4 ABSENCE OF LITIGATION. No order, stay, injunction or decree of
any court of competent jurisdiction in the United States shall be in effect (i)
that prevents or delays the consummation of any of the transactions contemplated
hereby or (ii) would impose any limitation on the ability of Sunbelt effectively
to exercise full rights of ownership of the Shares. No action, suit or
proceeding before any court or any governmental or regulatory entity shall be
pending (or threatened by any governmental or regulatory entity), and no
investigation by any governmental or regulatory entity shall have been commenced
(and be pending), seeking to restrain or prohibit (or questioning the validity
or legality of) the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith which Sunbelt, in good
faith and with the advice of counsel, believes makes it undesirable to proceed
with the consummation of the transactions contemplated hereby.
6.5 NO MATERIAL ADVERSE EFFECT. During the period from December
31, 1997 to the Closing Date, the Company shall not have suffered a Material
Adverse Effect other than dividend distributions and other payments to
Stockholder that are not in violation of the terms of this Agreement.
-51-
52
6.6 NET WORTH. On the Closing Date, the Stockholder shall deliver
to Sunbelt a balance sheet of the Company dated as of the most recent
practicable date preceding the Closing Date, prepared in accordance with the
Accounting Principles as modified by Section 1.2 above (the "Estimated Closing
Date Balance Sheet"). As a condition to Sunbelt's performance of its obligations
hereunder, the Estimated Closing Date Balance Sheet shall show as of the date
thereof) after taking into account the obligation for payment of any of the
non-reimbursable fees, costs and expenses incurred by the Company in connection
with this Agreement, FIFO Net Worth of no less than $1,000,000.
6.7 DUE DILIGENCE. Sunbelt shall be reasonably satisfied with the
results of their due diligence examination of the Company, the Real Property and
the Improvements.
6.8 REAL ESTATE LEASE. Stockholder shall have executed and
delivered the Post-Closing Real Estate Lease attached hereto as Exhibit E.
6.9 CERTIFICATES. The Stockholder and the Company shall have
furnished Sunbelt with a certificate, dated as of the Closing Date, executed by
the Stockholder certifying to the fulfillment as required herein and shall have
furnished Sunbelt with any other such certificates of its officers as Sunbelt
may reasonably request to evidence compliance with the conditions set forth in
this Article 6.
6.10 LEGAL MATTERS. All certificates, instruments, opinions and
title documents required to be executed or delivered by or on behalf of the
Stockholder and the Company under the provisions of this Agreement, and all
other actions and proceedings required to be taken by or on behalf of the
Stockholder and the Company in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
Sunbelt.
6.11 APPROVAL OF MANUFACTURER. Each automotive manufacturer of the
Company's automotive franchised dealerships shall have consented to, authorized
and approved (subject to Sunbelt and BAG fulfilling all requirements to obtain
such consent [monetary and otherwise]) the transactions contemplated by this
Agreement on terms substantially no less favorable than the terms which the
Company is subject to immediately prior to the execution of this Agreement. If
Sunbelt does not terminate this Agreement pursuant to Section 8.1(d) hereof
within thirty (30) days after their receipt of a Definitive Response (as
hereinafter defined) from any automobile manufacturer concerning the transaction
contemplated herein, then for all purposes of this Agreement, including, but not
limited to, this Section 6.11, the consent of such automobile manufacturer shall
be conclusively deemed to have been given to the transactions contemplated
herein. For purposes of this Section 6.11, "Definitive Response" shall mean any
automobile manufacturer's written response to any notice delivered by the
Company of the transactions contemplated hereby, which response withholds
consent or conditions consent or further consideration on specified actions or
obligations to be undertaken by Sunbelt, BAG, the
-52-
53
Company, the Stockholder and/or any other party; provided, that a response
including only a request for additional information shall not be considered a
Definitive Response.
6.12 EMPLOYMENT AGREEMENT. The Stockholder shall have executed and
delivered the Employment Agreement.
6.13 ENVIRONMENTAL LAWS. The Company shall be in substantial
compliance with all applicable, material Environmental Laws.
6.14 NONDISTURBANCE AGREEMENT. The Stockholder (as lessor of the
Real Property) shall have obtained from the holder of the security deed
encumbering the Real Property a nondisturbance agreement in form and substance
reasonably satisfactory to the Company and Sunbelt.
6.15 TITLE INSURANCE. The Company shall have obtained leasehold
title insurance with respect to the Real Property subject to the Post-Closing
Real Estate Lease in form and substance reasonably satisfactory to Sunbelt.
Sunbelt shall be responsible for the cost of such title insurance and the legal
fees and costs for examination of title.
6.16 LEASE. The Stockholder shall have signed and delivered to the
Company the Post-Closing Real Estate Lease and a Memorandum of Lease in form
and substance reasonably satisfactory to the Stockholder, Sunbelt and BAG.
6.17 RESIGNATION OF THE COMPANY'S DIRECTORS. Each of the persons
who is a director of the Company on the Closing Date shall have tendered to
Sunbelt in writing his or her resignation in such in form and substance as is
reasonably satisfactory to Sunbelt.
6.18 SCHEDULES. The Company and the Stockholder shall have
delivered to Sunbelt all Schedules and updates thereof to the Closing Date as
referred to in Articles 2 and 3 and such Schedules shall be reasonably
acceptable in form and substance to Sunbelt.
6.19 SUNBELT TRANSACTION. Sunbelt shall have (i) filed with the SEC
a registration statement on Form S-1 (the "Registration Statement") covering the
offer and sale of the Sunbelt IPO stock; the Registration Statement shall have
been declared effective by the SEC and the underwriters named therein shall have
agreed to acquire shares of the Sunbelt IPO stock; and the closing of the sale
of the Sunbelt IPO Stock to the underwriters shall have occurred simultaneously
with the Closing hereunder, or (ii) after the date hereof, fifty percent (50%)
or more of the outstanding capital stock of Sunbelt, BAG or any Associate or
Affiliate of either, shall have been sold, transferred or otherwise disposed of,
whether in a single transaction or in a series of related transactions, to an
independent third party in an arms-length transaction (or series of
transactions) for fair market value, or (iii) Sunbelt, BAG or any Associate or
Affiliate of either, shall have combined with an independent third party in an
arms-length transaction (or series of transactions) pursuant to a merger,
consolidation or other similar transaction, for fair market
-53-
54
value, or (iv) all or substantially all of the assets of Sunbelt, BAG or any
Associate or Affiliate of either, shall have been sold, transferred or otherwise
disposed of, whether in a single transaction or in a series of related
transactions, to an independent third party in an arms-length transaction (or
series of transactions) for fair market value.
6.20 ESCROW AGREEMENT. The Stockholder and the Escrow Agent shall
have executed the Escrow Agreement.
6.21 NON-COMPETITION AND CONFIDENTIALITY AGREEMENT. The Stockholder
shall have executed and delivered the Non-competition and Confidentiality
Agreement.
6.22 REGISTRATION RIGHTS AGREEMENT. The Stockholder shall have
executed and delivered the Registration Rights Agreement.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDER TO EFFECT THE CLOSING
The obligations of the Stockholder and the Company required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by the Company and the Stockholder as provided herein except as otherwise
required by applicable law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS. Each of the
representations and warranties of Sunbelt and BAG contained in this Agreement
shall be true and correct as of the date made and shall be true and correct in
all material respects as of the Closing. Each of the obligations of Sunbelt and
BAG required by this Agreement to be performed by them at or prior to the
Closing shall have been duly performed and complied with in all material
respects as of the Closing. At the Closing, the Stockholder shall have been paid
by wire transfer in immediately available funds all cash due at Closing, the
Escrow Amount shall have been delivered to the Escrow Agent, who along with
Sunbelt shall have signed the Escrow Agreement, and the Stockholder shall have
received a certificate, dated the Closing Date and duly executed by an officer
of Sunbelt and of BAG to the effect that the conditions set forth in the
preceding two sentences have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT; CONSENTS.
(A) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the other documents executed
pursuant to the terms hereof, and the consummation of the transactions
contemplated hereby shall have been duly and validly
-54-
55
taken by Sunbelt and BAG. All filings required to be made under the H.S.R. Act
in connection with transactions contemplated hereby shall have been made and all
applicable waiting periods with respect to each such ruling, including
extensions thereof, shall have expired or been terminated.
(B) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has a franchise agreement (or
comparable instrument) required to consummate the transactions contemplated
hereby (which may be conditioned on Sunbelt and/or BAG fulfilling monetary and
other obligations to obtain such consents) and all consents or waivers shall
have been made or obtained.
7.3 OPINIONS OF SUNBELT'S AND BAG'S COUNSEL. The Stockholder shall
have been furnished with the opinion of The ▇▇▇▇▇▇▇ Law Firm, counsel to Sunbelt
and BAG, dated the Closing Date, in the form and substance satisfactory to the
Stockholder and his counsel, which opinions, when taken together, shall have
been rendered with respect to those matters contained in Sections 4.1 and 4.2
hereof.
7.4 ABSENCE OF LITIGATION. No order, stay, judgment or decree
shall have been issued by any court and be in effect restraining or prohibiting
the consummation of the transactions contemplated hereby. No action, suit or
proceeding before any court or any governmental or regulatory entity shall be
pending (or threatened by any governmental or regulatory entity), and no
investigation by any governmental or regulatory entity shall have been commenced
(and be pending), seeking to restrain or prohibit (or questioning the validity
or legality of) the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith which Stockholder, in good
faith and with the advice of counsel, believes makes it undesirable to proceed
with the consummation of the transactions contemplated hereby.
7.5 REAL ESTATE; LEASES. The Company shall have executed and
delivered the Post-Closing Real Estate Lease attached hereto as Exhibit E.
7.6 CERTIFICATES. Sunbelt and BAG shall have furnished the
Stockholder with such certificates of its officers and others to evidence
compliance with the conditions set forth in this Article 7 as may be reasonably
requested by the Stockholder.
7.7 LEGAL MATTERS. All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of Sunbelt
and/or BAG under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of Sunbelt or BAG in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for the Stockholder.
-55-
56
7.8 EMPLOYMENT AGREEMENT. The Employment Agreement shall have been
executed and delivered by the Company, BAG and Sunbelt.
7.9 REGISTRATION RIGHTS AGREEMENT. BAG shall have executed and
delivered the Registration Rights Agreement.
7.10 GUARANTY. BAG and Sunbelt shall have executed and delivered
the Guaranty.
ARTICLE 8
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time
prior to Closing:
(A) by mutual consent of Sunbelt, BAG, the Company and the
Stockholder;
(B) subject to the Parties' rights in this Section 8.1(b) to
extend the date of the Closing, by either Sunbelt or the Stockholder if the
Closing shall not have taken place on or prior to June 30, 1998, or such later
date as shall have been approved by Sunbelt and the Stockholder, which approval
may be conditioned or withheld for any reason or no reason whatsoever (provided
that the terminating Party is not otherwise in material breach of its
representations, warranties, covenants or agreements under this Agreement). By
written notice to Sunbelt within ten (10) days prior to the date of the last
designated Closing, the Stockholder shall have the right to extend the date of
the Closing from June 30, 1998 to September 30, 1998, and if such option is
exercised (or Sunbelt exercises its option provided in this Section 8.1(b)), to
again extend the date of the Closing from September 30, 1998 to December 31,
1998. So long as Sunbelt and BAG are continuing to use their Best Efforts to
effect the Sunbelt IPO and there remains a reasonable probability that the
Sunbelt Public Offering Date will occur prior to September 30, 1998, Sunbelt
shall have the right to extend the date of the Closing from June 30, 1998 to
September 30, 1998 by delivering written notice to the Stockholder within ten
(10) days prior to the date of the last designated Closing;
(C) by Sunbelt or the Stockholder if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and non-appealable;
(D) by Sunbelt if any of the conditions specified in Article 6
hereof have not been met or waived by Sunbelt at such time and such condition is
no longer capable of satisfaction (provided that Sunbelt is not otherwise in
material breach of its representations, warranties, covenants or agreements
under this Agreement);
-56-
57
(E) by Sunbelt if (i) the Stockholder has within the then previous
ten (10) Business Days given Sunbelt any notice pursuant to Section 5.9(b)
hereof, and (ii) the development or change that is the subject of the notice has
had, or could reasonably be expected to have, a Material Adverse Effect;
(F) by the Stockholder if any of the conditions specified in
Article 7 hereof have not been met or waived by the Stockholder at such time and
such condition is no longer capable of satisfaction (provided that the
Stockholder is not otherwise in material breach of its material representations,
warranties, covenants or agreements under this Agreement);
(G) by Sunbelt on one side or the Stockholder on the other side if
there has been a material breach on the part of the other side of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within thirty (30) Business Days following
receipt by the breaching Party of written notice of such breach; or
(H) within twenty (20) days after the Stockholder's and the
Company's initial delivery of all of the Schedules referred to in Article 2,
Article 3 or Article 5 hereof, by Sunbelt if Sunbelt determines in its
reasonable discretion that any matter disclosed in such Schedules would
materially and adversely affect the value or prospects of the Company; provided,
that the Company shall have twenty (20) days after receipt of notice from
Sunbelt of its intention to terminate this Agreement to resolve or cure any such
matter; and provided, further, that Sunbelt shall not have the right to
terminate this Agreement under this Section 8.1(h) as a result of any matter of
a kind or amount which Sunbelt could reasonably expect to find present with
respect to any business of a like kind and size.
If Sunbelt, the Company or the Stockholder shall terminate this
Agreement pursuant to the provisions hereof, such termination shall be
effectuated by notice to the other Parties specifying the provision hereof
pursuant to which such termination is made.
8.2 EFFECT OF TERMINATION. Termination of this Agreement shall be
deemed an election of remedies, and thus, if this Agreement is terminated
pursuant to Section 8.1, all rights and obligations of the Parties under this
Agreement will terminate, except that the obligations in Section 5.1, Section
5.2, Section 8.3 and Section 10.2 shall survive.
8.3 TERMINATION FEE. Within thirty (30) days after the termination
of this Agreement by any Party for any reason other than (i) Sunbelt's
termination of this Agreement due to a breach of the no shop provisions of
Section 5.5 above, or (ii) the failure to receive the consent of the automobile
manufacturers to the transactions contemplated herein (as provided in Section
6.11 hereof), or (iii) Sunbelt's termination of this Agreement pursuant to
Section 8.1(e), or (iv) Sunbelt's termination of this Agreement pursuant to
Section 8.1(h) hereof, Sunbelt shall pay to the Stockholder Fifty Thousand
Dollars ($50,000.00) as a termination fee. The Parties hereby acknowledge and
agree that the Stockholder's damages from termination of this Agreement will be
difficult to ascertain and that the termination fee is a negotiated liquidated
damages provision
-57-
58
designed to compensate the Stockholder for the costs and expenses incurred in
connection with transactions contemplated hereby, including, but not limited to,
attorney's fees, time spent in negotiating and working towards the consummation
of the transactions contemplated hereby and the opportunity cost of agreeing to
the no shop provisions of Section 5.5, and not as a penalty.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDER. Notwithstanding the
Closing or the delivery of the Shares, the Stockholder shall indemnify and fully
defend, save and hold harmless Sunbelt, BAG and the Company (after the Closing)
(each a "Sunbelt Indemnified Party"), if a Sunbelt Indemnified Party (including
the Company after the Closing Date) shall at any time or from time to time
suffer any Costs (as defined in Section 9.7 below) arising, directly or
indirectly, out of or resulting from, or shall pay or become obligated to pay
any sum on account of any and all Stockholder Events of Breach (as defined
below). As used herein, "Stockholder Event of Breach" shall be and mean any one
or more of the following: (i) any material untruth or inaccuracy in any
representation of the Stockholder or the Company in this Agreement or the
material breach of any warranty of the Stockholder or the Company contained in
this Agreement, including, without limitation, any misrepresentation in, or
omission from, any statement, certificate, schedule, exhibit, annex or other
document attached to this Agreement by the Stockholder or delivered by the
Stockholder to Sunbelt at the Closing, and (ii) any intentional failure of the
Stockholder at any time, or the Company prior to the Closing to duly perform or
observe any material term, provision, covenant, agreement or condition of such
Party in this Agreement on the part of the Stockholder or the Company to be
performed or observed at or prior to the Closing.
9.2 INDEMNIFICATION BY SUNBELT AND BAG. Notwithstanding the
Closing, Sunbelt and BAG shall jointly and severally indemnify and fully defend,
save and hold harmless the Stockholder and his estate, heirs, representatives
and assigns, the Company, and any of their respective officers, directors,
employees, advisors, representatives, agents and affiliates (each a "Stockholder
Indemnified Party"), if a Stockholder Indemnified Party (including the Company)
shall at any time or from time to time suffer any Costs arising, directly or
indirectly, out of or resulting from, or shall pay or become obligated to pay
any sum on account of any and all Sunbelt Events of Breach (as defined below).
As used herein, "Sunbelt Event of Breach" shall be and mean any one or more of
the following: (i) any untruth or inaccuracy in any representation of Sunbelt
and/or BAG or the breach of any warranty of Sunbelt and/or BAG contained in this
Agreement, including, without limitation, any misrepresentation in, or omission
from, any statement, certificate, schedule, exhibit, annex or other document
furnished pursuant to this Agreement by Sunbelt and/or BAG (or any
representative of Sunbelt or BAG) to the Stockholder (or any representative of
the Stockholder) and any misrepresentation in or omission from many document
furnished to the Stockholder in connection with the Closing, and (ii) any
failure of
-58-
59
Sunbelt or BAG duly to perform or observe any term, provision, covenant,
agreement or condition on the part of Sunbelt or BAG to be performed or observed
under this Agreement.
9.3 PROCEDURES.
(a) For all purposes of this Section 9.3, Sunbelt shall
mean and include Sunbelt and BAG as the Sunbelt Indemnified Party. If (i) the
Stockholder Event of Breach occurs or is alleged and a Sunbelt Indemnified Party
asserts that the Stockholder has or may become obligated to a Sunbelt
Indemnified Party pursuant to Section 9.1, or any claim, action, suit or
proceeding is begun, made or instituted as a result of which the Stockholder may
become obligated to a Sunbelt Indemnified Party hereunder (a "Third Party
Claim"), or (ii) a Sunbelt Event of Breach occurs or is alleged and a
Stockholder Indemnified Party asserts that Sunbelt has become obligated to a
Stockholder Indemnified Party pursuant to Section 9.2, or if any claim, action,
suit or proceeding is begun, made or instituted as a result of which Sunbelt may
become obligated to a Stockholder Indemnified Party hereunder (a "Third Party
Claim") (for purposes of this Article 9, any Sunbelt Indemnified Party and
Stockholder Indemnified Party are sometimes referred to as an "Indemnified
Party" and Sunbelt and BAG on the one hand or the Stockholder on the other hand
is sometimes referred to as an "Indemnified Party," and Sunbelt and BAG on the
one hand and the Stockholder on the other hand are sometimes referred to as an
"Indemnifying Party," in each case as the context so requires), such Indemnified
Party shall give written notice to the Indemnifying Party within ten (10)
Business Days after the Indemnified Party becomes aware of such breach or claim
in as much detail as is reasonably possible of the basis for the Indemnifying
Party's obligation to provide indemnification hereunder.
(b) The Indemnifying Party shall have the right to assume
the control of the defense of such Third Party Claim with counsel of its
choosing, and subject to the restrictions contained in this Section 9.3, shall
have the right to settle or compromise any such claim. Such Indemnified Party
shall have the right, but not the obligation, to participate at its own expense
in the defense thereof by counsel of such Indemnified Party's choice and shall
in any event cooperate with and assist the Indemnifying Party to the extent
reasonably possible. If the Indemnifying Party fails timely to defend, contest
or otherwise protect against any Third Party Claim against any Indemnified Party
for which the Indemnifying Party was given timely written notice of such Third
Party Claim by the Indemnified Party, such Indemnified Party shall have the
right to do so, including, without limitation, the right to make any reasonable
compromise or settlement thereof (with the prior written consent of the
Indemnifying Party), and such Indemnified Party shall be entitled to recover the
entire Cost thereof from the Indemnifying Party, including, without limitation,
reasonable attorneys' fees, disbursements and amounts paid (or of which such
Indemnified Party has become obligated to pay) as the result of such Third Party
Claim. Failure by the Indemnifying Party to notify such Indemnified Party of its
or their election to defend against any such Third Party Claim within fifteen
(15) days after notice thereof shall have been given to the Indemnifying Party
shall be deemed a waiver by the Indemnifying Party of its or their right to
against defend such Third Party Claim. If the Indemnifying Party assumes the
defense of the particular Third Party Claim, the Indemnifying Party shall not,
in the defense of such Third Party Claim, consent to entry of any judgment or
enter into any settlement which does not include
-59-
60
as an unconditional term thereof the giving by the claimant or the plaintiff to
such Indemnified Party a full release from all liability in respect of such
Third Party Claim. Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to control (but shall be entitled to participate at their own
expense in the defense of), and the Indemnified Party shall be entitled to have
sole control over, the defense or settlement of any Third Party Claim to the
extent the Third Party Claim seeks an order, injunction or other equitable
relief against the Indemnified Party which, if successful could materially
adversely interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party.
9.4 OFFSET. In addition to and not in limitation of all rights of
offset that an Indemnified Party may have under applicable law, the Parties
agree that, at any Indemnified Party's option, any or all amounts owing to such
Indemnified Party under this Article 9 or any other provision of this Agreement
or any other liability (other than under the Post-Closing Real Estate Lease) of
the other Parties (or any Affiliate (excluding the landlord under the Real
Estate Lease) of the other parties) to such Indemnified Party in connection with
this Agreement or the transactions contemplated hereby may be recovered by the
Indemnified Party by an offset against any or all amounts due to such other
Parties pursuant to this Agreement.
9.5 REMEDIES. Except as provided in Article 8 and Section 10.2
hereof, the remedies provided in this Article 9 constitute the sole and
exclusive remedies for recovery against any Party to this Agreement based upon
any inaccuracy, untruth, incompleteness or breach of any representation,
warranty, covenant or obligation contained herein.
9.6 LIMITATION ON INDEMNIFICATION. Except for indemnification
claims based on fraud, no Sunbelt Indemnified Party shall be entitled to
indemnification for any Costs hereunder unless the aggregate amount of Costs
incurred by all of the Sunbelt Indemnified Parties exceeds the amount of
$250,000, in which event the Sunbelt Indemnified Parties shall be entitled to
indemnification for all such Costs in excess of $250,000. Further provided that,
except for indemnification claims based on fraud, the maximum liability
hereunder of the Stockholder and the Company, in the aggregate shall not exceed
the sum of $500,000.
9.7 DEFINITIONS. For purposes of this Article 9, "Costs" shall
mean all liabilities, losses, costs and actual damages and reasonable expenses,
reasonable attorneys' fees, reasonable experts' fees, reasonable consultants'
fees, and reasonable disbursements of any kind or of any nature whatsoever. The
amount of any Cost arising from the breach of any representation, warranty,
covenant or agreement shall be the entire amount of any Cost suffered, paid or
required to be paid to the respective Indemnified Party as a result of such
breach; provided, however, that the liability of a Party under this Agreement
shall be limited to direct, actual damages and in any event shall not include
any incidental, consequential or special damages, or damages for lost profits.
9.8 ADJUSTMENTS. Costs as defined in Section 9.7 above arising or
resulting from any Stockholder Event of Breach or Sunbelt Event of Breach shall
be reduced to the extent of the
-60-
61
amount of any tax savings resulting from the indemnified matter to which such
Costs relate which are actually realized (or can reasonably be expected to be
realized in future years) by the Indemnified Party. Costs as defined in Section
9.7 above, arising or resulting from any Stockholder Event of Breach or Sunbelt
Event of Breach shall also be reduced to the extent of the amount of any
insurance proceeds payable to the Indemnified Party resulting from the
indemnified matter to which such Costs relate.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(A) The respective representations, covenants and agreements of
each of the Parties to this Agreement (except covenants and agreements which are
expressly required to be performed and are performed in full on or before the
Closing Date) shall survive indefinitely the Closing Date and the consummation
of the transactions contemplated by this Agreement, subject to Section 10.1(b)
below. In the event of a breach of any such representations or covenants, the
Party (Sunbelt and BAG on one side, and the Stockholder and the Company (before
the Closing) on the other side) to whom such representations or covenants have
been made shall have all rights and remedies for such breach available to it
under the provisions of this Agreement, but only so long as such Party (such
side) had no knowledge of such breach by the other Party (side) on or before the
Closing Date. For purposes of the immediately preceding sentence, "knowledge" of
the Company or the Stockholder, shall mean the Knowledge of the Stockholder, and
"knowledge" of Sunbelt or BAG shall mean the actual knowledge of any of ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and the accountants of Sunbelt and/or BAG, and shall
not include implied or constructive knowledge.
(B) Each of the representations and warranties set forth in
Article 2, Article 3 and Article 4 hereof and in any certificate delivered
pursuant to Article 6 or Article 7 hereof, and the indemnification obligations
set forth in Article 9 hereof shall survive, and not be affected in any respect
by the Closing, but shall terminate on the later of (i) the date that is one (1)
year after the Closing Date, and (ii) with respect to any claim for which
Indemnifying Party receives written notice prior to the expiration of the one
(1) year period after the Closing Date with respect to any breach of such
representations and warranties pursuant to Section 9.3 hereof, on the date such
claim is finally liquidated or otherwise resolved; provided, however, that
(1) indemnification obligations set forth in Article 9
hereof arising from the breach or default of any covenant or provision set forth
in Article 5 (other than Sections 5.3 or 5.9 thereof) shall survive indefinitely
the Closing Date and the transactions contemplated by this Agreement;
-61-
62
(2) indemnification obligations set forth in Article 9
arising from any claim based on fraud shall survive indefinitely the Closing
Date and the transactions contemplated by this Agreement;
(3) indemnification obligations set forth in Article 9
arising from any claim arising from the breach of Sections 2.1, 2.2, 2.3,
2.4(a), 2.22, 3.1, 3.3, 4.1, 4.2, 4.3 or the first sentence of Section 3.2 shall
survive indefinitely the Closing Date and the transactions contemplated by this
Agreement.
Notice of any claims or violations must be made within thirty days
after discovery.
10.2 FEES AND EXPENSES. Except as otherwise expressly provided in
this Agreement, all legal and other fees, costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby through
the Closing Date shall be paid by the Party incurring such fees, costs or
expenses; provided, however, that if the Closing does not occur and Section 5.5
hereof is breached and if Sunbelt terminates this Agreement solely as a result
thereof immediately upon learning of a breach by Stockholder of Section 5.5,
then the Company shall pay to Sunbelt, within five (5) Business Days after
receipt of a request therefor, an amount equal to all of the legal and other
out-of-pocket fees, costs and expenses incurred by Sunbelt in connection with
this Agreement and the transactions contemplated hereby.
10.3 HEADINGS. The section headings herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof.
10.4 NOTICES. All notices or other communications required or
permitted hereunder shall be given in writing and shall be deemed sufficient if
delivered by hand, recognized overnight delivery service or facsimile
transmission or mailed by registered or certified mail, postage prepaid (return
receipt requested), as follows:
If to the Company before the Closing Date:
▇▇▇▇▇▇▇▇▇ Oldsmobile-Cadillac, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Jr.
with a copy to (which shall not constitute notice):
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.; Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-62-
63
If to the Company after the Closing Date:
▇▇▇▇▇▇▇▇▇ Oldsmobile-Cadillac, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
with a copy to (which shall not constitute notice):
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
c/o The ▇▇▇▇▇▇▇ Law Firm
6111 Peachtree Dunwoody Road, NE
Suite 102-D
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Stockholder:
▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Jr.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to (which shall not constitute notice):
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to Sunbelt or BAG:
▇▇▇▇▇▇▇▇▇▇▇ Automotive Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to (which shall not constitute notice):
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
c/o The ▇▇▇▇▇▇▇ Law Firm
6111 Peachtree ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇-▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
-63-
64
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three (3) days after the date so mailed;
provided, however, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.5 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Parties hereto (and with
respect to the Stockholder, the personal representatives and heirs of the
Stockholder) and their respective successors and permitted assigns, and the
provisions of Article 9 hereof shall inure to the benefit of the Indemnified
Parties referenced to therein; provided, however, that neither this Agreement
nor any of the rights, interests, or obligations hereunder may be assigned by
any of the Parties hereto without the prior written consent of the other
Parties. Notwithstanding the foregoing, Sunbelt shall have the unrestricted
right to assign this Agreement and to delegate all or any part of their
obligations hereunder to BAG, but in such event Sunbelt shall remain fully
liable for the performance of all of such obligations in the manner prescribed
in this Agreement.
10.6 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) embody the entire agreement and understanding of the Parties
with respect to the transactions contemplated hereby and supersede all prior
written or oral commitments, arrangements or understandings between the Parties
with respect thereto and all prior drafts of this Agreement, including, but not
limited to, the Stock Purchase Agreement dated effective as of January 3, 1998,
by and among BAG, Sunbelt ▇▇▇▇▇▇▇ ▇▇, Inc., the Company and the Stockholder.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings with respect to the transactions contemplated hereby other than
those expressly set forth herein. Prior drafts of this Agreement shall not be
used as a basis for interpreting this Agreement
10.7 WAIVER AND AMENDMENTS. The Stockholder, the Company and
Sunbelt may by written notice to the other Parties (i) extend the time for the
performance of any of the obligations or other actions of the other Parties,
(ii) waive any inaccuracies in the representations or warranties of the other
Parties contained in this Agreement, (iii) waive compliance with any of the
covenants of the other Parties contained in this Agreement, (iv) waive
performance of any of the obligations of the other Parties created under this
Agreement, or (v) waive fulfillment of any of the conditions to its own
obligations under this Agreement. The waiver by any Party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach, whether or not similar. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the Parties
hereto.
10.8 BAG GUARANTY. BAG hereby absolutely, unconditionally and
jointly and severally guarantees the full, prompt and faithful performance by
Sunbelt of all covenants and obligations to be performed by Sunbelt under this
Agreement, including, but not limited to, the payment of all sums and delivery
of all documents, instruments and stock certificates by Sunbelt pursuant to this
Agreement. If Sunbelt fails to fully perform all such covenants and obligations
in
-64-
65
accordance with their terms or pay all or any part of such sums when due, BAG
will perform all such covenants and obligations in accordance with their terms
and immediately pay to the Stockholder the amount due and unpaid by Sunbelt, it
being understood that each such covenant or obligation and each obligation to
pay any such amount constitutes the direct and primary obligation of BAG. BAG
hereby waives presentment, demand of payment, protest, dishonor, notice of
protest or dishonor, and notice of acceptance of the guaranty set forth in this
Section 10.8 and all rights to require Stockholder or the Company to proceed
against Sunbelt, or to pursue any other remedy either or both may have against
Sunbelt in the event of a breach by Sunbelt of any obligation or covenant
contained in this Agreement. If Sunbelt is not liable to perform any such
obligation or covenant because the act creating such obligation or covenant is
ultra ▇▇▇▇▇, unauthorized or set aside by operation of law, and for such reason
such obligation or covenant cannot be enforced against Sunbelt, such fact shall
not affect BAG's liability under this Section 10.8. In the event of termination,
liquidation, dissolution or bankruptcy of Sunbelt, this unconditional guaranty
shall continue in full force and effect.
10.9 GOVERNING LAW; COUNTERPARTS. This Agreement shall be governed
by and construed in accordance with the laws of the State of Georgia without
giving effect to any choice or conflict of law provision or rule that would
cause the laws of any other jurisdiction to apply. This Agreement may be
executed in any number of counterparts, all of which shall be considered one and
the same agreement and each of which shall be deemed an original.
10.10 ACCOUNTING TERMS. All accounting terms used herein which are
not expressly defined in this Agreement shall have the respective meanings given
to them in accordance with GAAP.
10.11 SCHEDULES. Disclosure of any matter in any provision,
subprovision, section, subsection or Schedule hereto or in the Financial
Statements shall be considered as disclosure pursuant to any other provision,
subprovision, Section or subsection of this Agreement or Schedule to this
Agreement.
10.12 SEVERABILITY. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby. To the extent permitted by applicable law, each Party
waives any provision of law which renders any provision of this Agreement
invalid, illegal or unenforceable in any respect.
10.13 REMEDIES. The remedies provided for in this Agreement,
including termination of this Agreement as set forth in Article 8,
indemnification as set forth in Article 9, the payment of certain fees, costs
and expenses as set forth in Section 10.2, shall be the exclusive remedy of a
Party for a breach of this Agreement, the Parties hereto having no right to seek
any other remedy in law or equity in lieu of or in addition to any remedies
provided in this Agreement.
10.14 TIME IS OF THE ESSENCE. Time is of the essence for purposes of
this Agreement.
-65-
66
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SUNBELT AUTOMOTIVE GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Title: Chief Executive Officer
---------------------------------
▇▇▇▇▇▇▇▇▇▇▇ AUTOMOTIVE GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Title: Secretary and Treasurer
---------------------------------
▇▇▇▇▇▇▇▇▇ OLDSMOBILE-CADILLAC, INC.
By: /s/ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Jr.
------------------------------------
▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Jr., President
Attest: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Secretary
(Signatures Continued on Next Page)
-66-
67
(Signatures Continued from Previous Page)
STOCKHOLDER:
/s/ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Jr.
-----------------------------------
▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Jr.
-67-