Exhibit 2.3
Execution Copy 1/10/02
STOCK PURCHASE AGREEMENT
(▇▇▇▇▇▇)
THIS STOCK PURCHASE AGREEMENT dated as of January 11, 2002 (this
"Agreement") by and between SONIC AUTOMOTIVE, INC., a Delaware corporation (the
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"Buyer"), and THE ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ REVOCABLE TRUST, a trust formed pursuant to
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an agreement dated December 13, 2001 (the "Seller").
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WITNESSETH:
WHEREAS, the companies listed on Exhibit A-1 hereto (collectively the
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"Companies" and each, individually, a "Company") are engaged in the automobile
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dealership businesses set forth opposite their names on said Exhibit A-1; and
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WHEREAS, the Seller owns the issued and outstanding shares of common stock
of the Companies (collectively, the "Shares"), which shares represent all of the
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issued and outstanding shares of capital stock of the Companies; and
WHEREAS, the Buyer desires to purchase the Shares from the Seller, and the
Seller is willing to sell the Shares to the Buyer, entirely in exchange for
shares of common stock of the Buyer and otherwise upon the terms and conditions
hereinafter set forth; and
WHEREAS, the parties intend for the purchase and sale of the Shares
contemplated by this Agreement to be a tax free reorganization pursuant to
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Buyer and other parties referred to on Exhibit A-2 hereto are
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entering into the agreements listed on said Exhibit A-2 (such agreements on such
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Exhibit A-2, excluding this Agreement, being hereinafter collectively called the
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"Other Agreements"); and
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WHEREAS, contemporaneously with the execution and delivery of this
Agreement, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual resident of the State of Michigan
("▇▇▇▇▇▇"), and the Buyer have entered into a Guaranty Agreement, pursuant to
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which ▇▇▇▇▇▇ guarantees to the Buyer the performance of all of the obligations
and liabilities of the Seller hereunder; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Seller is notifying the Manufacturer (as defined in Article 2 below) of the
transactions contemplated by this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and representations hereinafter stated, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1
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PURCHASE AND SALE
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1.1 Agreement of Purchase and Sale. On the terms and subject to the
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conditions of this Agreement and in reliance upon the representations and
warranties of the parties herein, at the closing referred to in Article 2 hereof
(the "Closing"), the Seller shall transfer, convey and deliver to the Buyer, and
the Buyer shall acquire from the Seller, the Shares.
1.2 The Purchase Price.
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(a) The Purchase Price. As the full purchase price to be paid by the
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Buyer for the Shares (the "Purchase Price"), the Buyer shall issue and deliver
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to the Seller at the Closing an aggregate total of One Million Four Hundred
Seventy Thousand Five Hundred Eighty-eight (1,470,588) shares (the "Registered
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Common Shares") of the Buyer's Class A Common Stock, par value $.01 per share
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(the "Common Stock"), subject to delivery of a portion of the Registered Common
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Shares into escrow pursuant to Section 1.2(c) below and subject to adjustment
pursuant to Section 1.2(d) below.
(b) Regarding the Registered Common Shares.
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(i) The offer and sale of the Registered Common Shares by the
Buyer is made pursuant to the Prospectus dated January 5, 2001, (the
"Prospectus"), previously delivered to the Seller by the Buyer, and is
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registered under an effective "shelf" registration statement on Form S-4
(Registration No. 333-51978) (as amended by pre-effective Amendment No. 1
thereto dated January 5, 2001 and as further amended and supplemented from time
to time, the "Acquisition Shelf Registration Statement") initially filed by the
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Buyer with the Securities and Exchange Commission (the "SEC") on December 15,
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2000.
(ii) The Buyer shall list the Registered Common Shares for
trading on the New York Stock Exchange prior to such time the Seller is able to
sell any of the Registered Common Shares hereunder.
(iii) The Seller agrees and acknowledges, with regard to the
offer or resale by it of any of the Registered Common Shares, that:
(A) any offering of any of the Registered Common Shares by
the Seller will be effected in an orderly manner through a securities dealer,
acting as broker or dealer, selected by the Buyer and reasonably acceptable to
the Seller (the "Designated Broker");
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(B) the certificates representing the Registered Common
Shares will be issued by the Buyer to the Seller with a restrictive legend
referencing the lock-up provisions of Section 1.2(b)(vi) below, but otherwise
without restrictive legends;
(C) the Seller shall provide the Buyer with all information
concerning the Seller and its resale of the Registered Common Shares as may be
required by the Securities Act of 1933, as amended (the "Securities Act"), and
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the regulations of the SEC thereunder for preparation of any supplements and/or
amendments to the Acquisition Shelf
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Registration Statement and the Prospectus, and the Seller shall indemnify the
Buyer for any liabilities (the "Seller's Liabilities") arising under the
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Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
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Act"), or any state securities or blue sky laws resulting from any material
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misstatements in, or omissions of material information from, such information
provided by the Seller to the Buyer pursuant to this clause (C); and
(D) The Seller shall pay any and all expenses directly
related to the resale of the Registered Common Shares, including, but not
limited to, the commissions or fees of the Designated Broker.
(iv) The Buyer agrees that:
(A) The Buyer shall pay all expenses, including legal and
accounting fees, SEC registration fees and exchange listing fees, in connection
with the preparation, filing and maintenance of the Acquisition Shelf
Registration Statement, including amendments and supplements thereto, and the
Prospectus, including supplements thereto, the issuance of certificates
representing the Registered Common Shares, and other expenses incurred by the
Buyer in meeting its obligations set forth in this Section 1.2(b), including
fees incurred for compliance with any applicable state securities laws;
(B) The Buyer shall indemnify the Seller for any
liabilities arising under the Securities Act, the Exchange Act or any state
securities or blue sky laws resulting from any material misstatements in, or
omissions of material information from, the Acquisition Shelf Registration
Statement, including the information incorporated by reference therein, except
for the Seller's Liabilities; and
(C) The certificates representing the Registered Common
Shares will be issued by the Buyer to the Seller with a restrictive legend
referencing the lock-up provisions of Section 1.2(b)(vi) below, but otherwise
without restrictive legends.
(v) Notwithstanding any provision of this Agreement to the
contrary, the Seller shall not have any right to take any action (and the Seller
hereby agrees that it will not take any action) to restrain, enjoin or otherwise
delay any registration by the Buyer of its securities under the Securities Act
as a result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement. Nothing contained in this
Section 1.2(b)(v) shall prevent any party from making a claim for monetary
relief.
(vi) Except as set forth in the last sentence of this Section
1.2(b)(vi), during the Lock-Up Period (as defined below), the Seller agrees that
it will not, without the prior written consent of the Buyer, directly or
indirectly, (i) offer, pledge, sell, sell short, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right to warrant for the sale of, or otherwise dispose of or
transfer any of the Registered Common Shares or any securities convertible into
or exchangeable or exercisable for the Registered Common Shares, whether now
owned or hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition, or file any
registration statement under the Securities Act, with respect to any of the
foregoing, or (ii) enter into any swap or any other agreement or hedging
arrangement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of
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the Registered Common Shares, whether any such swap or transaction is to be
settled by delivery of Registered Common Shares or other securities, in cash or
otherwise. The "Lock-Up Period" shall be for a period beginning on the Closing
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Date and ending on the second anniversary of the Closing Date. Notwithstanding
the foregoing, other than with respect to those of the Registered Common Shares
constituting any part of the Escrow Shares (as defined in Section 1.2(c) below),
(i) the Seller may transfer Registered Common Shares to ▇▇▇▇▇▇ or ▇▇▇▇▇▇'▇
spouse or lineal descendant (natural or adopted) or to an executor,
administrator or testamentary trustee (in their capacity as such) of the Seller
or to a trust the beneficiaries of which include only ▇▇▇▇▇▇ and his spouse or
lineal descendants (natural or adopted); provided, however, it shall be a
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condition precedent to such transfer that the transferee agrees in a writing
reasonably satisfactory to the Buyer to be bound by the terms of this Subsection
(vi), and (ii) after the first anniversary of the Closing Date, the Seller shall
be entitled to sell that number of shares as would be permissible to be sold
under paragraph (e) of Rule 144 under the Securities Act, assuming Rule 144 were
applicable to the resale of the Registered Common Shares.
(vii) Commencing on the earlier of the day after the Closing or, if
required by law, the day after the filing by the Buyer of its Form 8-K setting
forth any required historical and pro forma financial information concerning the
acquisition transaction contemplated by this Agreement pursuant to Item 2 of
such form (the "Registration Commencement Date"), and, subject to the provisions
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of Section 1.2(b)(viii) below, if at any time the Buyer proposes to register any
of its Common Stock under the Securities Act in connection with an underwritten
primary public offering of such securities solely for cash on a form that would
permit the registration of the resale of the Registered Common Shares by the
Seller (except Form S-8 and Form S-4 and any successor form to either of them),
then the Buyer shall promptly give the Seller written notice of such
determination. Upon written request of the Seller given within ten (10) days
after the giving of such notice by the Buyer, the Buyer shall use its best
reasonable efforts to cause the registration under the Securities Act of the
offer and sale by the Seller of the number of Registered Common Shares the
Seller has requested in such notice to be registered, not to exceed twenty-five
percent (25%) of the total shares of Common Stock in such offering (the
"Piggyback Registration"). If necessary, the Buyer shall use its best reasonable
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efforts to effect the registration of the offer and sale of the Registered
Common Shares subject to the Piggyback Registration under the state securities
or blue sky laws of such states, as determined by the Buyer in its sole
discretion, for the distribution of such Registered Common Shares. The Buyer
shall bear all expenses incurred in connection with the effecting of the
Piggyback Registration, except for: fees and expenses of counsel, if any,
retained by the Seller; any expenses or fees incurred in connection with the
resale of the Registered Common Shares, including but not limited to
underwriter's fees and broker's commissions; and any blue sky registration and
filing fees in those jurisdictions where the applicable blue sky regulatory
authorities require the Seller to bear such fees, which all shall be borne by
the Seller pro rata in accordance with the relationship between the number of
the Seller's shares registered and the total number of shares registered in such
offering. The Buyer and the Seller shall indemnify each other to the same extent
as set forth in Section 1.2(b)(iv)(B) (in the case of indemnification by the
Buyer) and Section 1.2(b)(iii)(C) (in the case of indemnification by the
Seller). The Seller's right to Piggyback Registration hereunder shall terminate
at such time as the Seller would be able to sell all of the Registered Common
Shares then held by the Seller in a single sale under Rule 144, assuming that
Rule 144 were to apply to sales of the Registered Common Shares.
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(viii) The Seller's right to Piggyback Registration hereunder shall be
subject to limitations imposed by the managing or lead managing underwriter
including, without limitation, cutbacks, and shall be subject to pro-ration with
other holders of registration rights. If requested by the managing or lead
managing underwriter for the offering, the Seller shall execute and deliver an
underwriting agreement with the managing or lead managing underwriter in such
form as is customarily used by such underwriter with any modifications as the
parties thereto shall mutually agree. In connection with any such registration,
the Seller shall supply to the Buyer such information as may be reasonably
requested by the Buyer in connection with the preparation and filing of a
registration statement with the SEC. The Seller shall not supply any information
to the Buyer for inclusion in such registration statement that will, taken as a
whole, at the time the registration statement becomes effective under the
Securities Act, 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 were
made, not misleading.
(c) Escrow Agreement. At the Closing, the Seller shall place into
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escrow with First Union National Bank or another escrow agent mutually
acceptable to the parties hereto (the "Escrow Agent") Fifty-eight Thousand Eight
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Hundred Twenty-four (58,824) of the Registered Common shares (the "Escrow
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Shares). The Escrow Shares shall be held by the Escrow Agent in accordance with
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the escrow agreement in the form of Exhibit B hereto, with such other changes
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thereto as the Escrow Agent shall reasonably request (the "Escrow Agreement")
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and which are reasonably acceptable to the Buyer and the Seller. The term of the
Escrow Agreement shall be for a period of ninety (90) days from the Closing Date
(or such longer period of time as shall be necessary to complete the
determination of Net Book Value pursuant to Section 1.2(d) below). If, as of the
date which is ninety (90) days from the Closing Date (or such later date as
shall be necessary to complete the determination of the Net Book Value pursuant
to Section 1.2(d) below), the Buyer shall have made no claims for any Net Book
Value Shortfall (as defined in Section 1.2(d)(iii) below) or for indemnification
pursuant to Article 9 below, the Buyer will execute a joint instruction with the
Seller pursuant to the Escrow Agreement to instruct the Escrow Agent to deliver
all of the Escrow Shares to the Seller pursuant to the terms of the Escrow
Agreement.
(d) Adjustment Procedures.
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(i) Not later than 60 days after the Closing Date, the Buyer
will prepare and deliver to the Seller, an unaudited combined balance sheet (the
"Closing Balance Sheet") of the Companies as of the Closing Date, consisting of
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a computation of the net book value of the tangible assets of the Companies
(excluding the Distributed Assets, as defined in Section 1.5 hereof) as of the
Closing Date, less the book value of the liabilities of the Companies as of the
Closing Date, all in accordance with generally accepted accounting principles
("GAAP") as consistently applied by the Companies and subject to the exceptions
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to GAAP set forth on Schedule 3.13, and subject to the additional principles set
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forth below. The tangible net book value reflected on the Closing Balance Sheet
is hereinafter called the "Net Book Value." The Closing Balance Sheet will be
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prepared in accordance with the following additional principles: (A) it will
utilize the first in-first out (FIFO) method of inventory accounting; (B) the
liabilities of the Companies shall include any Tax (as defined in Section
3.21(a)) liabilities associated with the conversion from the last in-first out
(LIFO) method of accounting to the FIFO method of accounting; (C) there shall
not be included a reserve for doubtful accounts
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receivable and bad debts; (D) any receivables due the Companies from the Seller
or any of the directors, officers, employees or Affiliates (as defined in
Section 3.5 below) of the Companies or the Seller shall be excluded as assets,
provided, that any such receivables from employees that are not material in
amount and are in the ordinary course of the Company's business and for which
there are in place reimbursement arrangements acceptable to the Buyer shall be
included as assets; (E) all real property (other than leasehold improvements
subject to a Lease) shall be excluded as assets; (F) the liabilities of the
Companies shall include appropriate accruals for all Tax liabilities, and all
other costs and expenses, of the Companies associated with the distribution of
the Distributed Assets; (G) in the event that the Distributed Assets are subject
to any liabilities or encumbrances which are not satisfied and discharged in
full at or prior to Closing, such liabilities and encumbrances shall be included
as liabilities of the Companies; and (H) the values of the following asset
categories shall be calculated as follows:
(I) New Vehicles. Subject to Section 1.2(d)(i)(III)(B),
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the value of each Company's untitled new 2001 and 2002 model year motor vehicles
(excluding Demonstrators (as defined below), service loaners, rental car
vehicles, company-owned vehicles, conversion vans, vehicles for commercial
and/or municipal use or sale, or similar-type vehicles) in stock and unsold as
of the Closing Date (collectively, the "New Vehicles") shall be the price at
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which the New Vehicle was invoiced to the respective Company by the Manufacturer
(as defined in Article 2 below); provided, however, the value of New Vehicles
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acquired by any Company in the ordinary course of such Company's business
pursuant to a dealer trade with a party other than an Affiliate of the Companies
or ▇▇▇▇▇▇, shall be the amount paid to the other dealer for such New Vehicle;
provided, further, that the value of New Vehicles shall be adjusted pursuant to
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clauses (III) and (IV) below and that the price of any pre-reported sold
vehicles for which the sale cannot be reversed shall be as mutually agreed by
the Buyer and the Seller. In the event the Buyer and the Seller cannot agree
upon a price with respect to any such pre-reported sold vehicle, the Closing
Balance Sheet shall allocate no value to such vehicle and the Seller may cause
the respective Company to divest such vehicle prior to Closing in accordance
with Section 1.5.
(II) Demonstrators. Subject to Section 1.2(d)(i)(III)(B),
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the value of each Company's untitled new 2001 and 2002 model year motor vehicles
(excluding service loaners, rental car vehicles, company-owned vehicles,
conversion vans, vehicles for commercial and/or municipal use or sale, and
similar-type vehicles) in stock and unsold as of the Closing Date which is
either (A) used in the ordinary course of business for the purpose of
demonstration or (B) has, as of the Closing Date, more than 500 miles on its
odometer (collectively, the "Demonstrators") shall be the price at which the
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Demonstrator was invoiced to the respective Company by the Manufacturer, as
adjusted pursuant to clauses (III) and (IV). Any Demonstrator having an odometer
reading in excess of 6,000 miles and any prior model year (as of the Closing
Date) motor vehicle as well as any Excess Vehicles (as defined in Section
1.2(d)(i)(III)(B) shall be treated as a used vehicle under Clause V below.
(III) Adjustment to Value of New Vehicles and Demonstrators.
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(A) The value of each New Vehicle and each Demonstrator shall be: (x) increased
by the dealer cost of any equipment and accessories which have been installed by
the respective Company in the ordinary course of business; and (y) decreased by
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(1) the dealer cost of any equipment and accessories which have been removed
from such vehicles, (2) [***] of any factory floorplan assistance relative to
such vehicles, (3) all paid or unpaid rebates,
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
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discounts, holdback for dealer account and other factory incentives (including
without limitation rebates applied for and paid but not earned and incentive
monies claimed on pre-reported units), and (4) refundable advertising
allowances, if any, provided, with respect to clauses (3) and (4), no such
decrease shall be made if the incentive or allowance is unpaid as of the Closing
Date and will accrue to the benefit of the respective Company after the Closing
Date.
(B) Notwithstanding anything herein to the contrary,
the Buyer shall have no obligation hereunder and under the Asset Purchase
Agreement dated the date hereof between the Buyer, the Seller and the sellers
named therein (the "Asset Purchase Agreement") to purchase an aggregate amount
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of New Vehicles or Demonstrators exceeding (i) [***] 2001 model year Cadillacs,
(ii) [***] 2001 model year cars of models (other than Cadillac) manufactured by
General Motors Corporation, (iii) [***] 2001 model year cars manufactured by
American Honda Motor Co., Inc., (iv) [***] 2001 model year cars manufactured by
Saab Cars USA Inc., and each such excess vehicle (collectively, the "Excess
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Vehicles") shall be deemed to be "used" rather than a "Demonstrator" or a "New
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Vehicle".
(IV) Damaged New Vehicles and Demonstrators. If any New
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Vehicles or Demonstrators shall have suffered any damage on or prior to the
Closing Date, the Seller and the Buyer will attempt to agree on the cost to
cover such repairs, which amount shall be deducted from the value of such New
Vehicle or Demonstrator. With respect to any New Vehicle or Demonstrator which
shall have been damaged and repaired prior to the Closing Date and with respect
to which notification of such damage must be given to any purchaser pursuant to
applicable state law, the Seller and the Buyer will attempt to agree on an
adjustment to the price to reflect the decrease, if any, in the wholesale value
of such New Vehicle or Demonstrator resulting from such damage and repair, which
amount shall be deducted from the value of such New Vehicle or Demonstrator. In
the event the Buyer and the Seller cannot agree on the cost of repairs, the
amount of reduction or such adjustment, the Closing Balance Sheet shall allocate
no value to such damaged New Vehicle or Demonstrator, and the Seller may cause
the respective Company to divest any such damaged New Vehicle or Demonstrator
prior to Closing in accordance with Section 1.5.
(V) Used Vehicles. The value of each motor vehicle owned by
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each Company that is not a New Vehicle or a Demonstrator as of the Closing Date,
including prior model year new vehicles, demonstrator automobiles having an
odometer reading in excess of 6,000 miles, service loaners, rental car vehicles,
company-owned vehicles, conversion vans, vehicles for commercial and/or
municipal use or sale, and similar-type vehicles as well as any Excess Vehicles
(collectively, the "Used Vehicles"), shall be valued based upon the valuation
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method set forth in Exhibit C hereto; provided, however, such valuation will
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assign no value to those used vehicles older than the 1995 model year or with an
odometer reading in excess of 70,000 miles that have not been reconditioned and
have not passed a safety inspection consistent with the respective Company's
past practices. With respect to any Used Vehicle for which no value is
established in accordance with this clause (V) or Exhibit C attached hereto, the
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Closing Balance Sheet shall allocate no value to such Used Vehicle, and the
Seller may cause the respective Company to divest any such Used Vehicle prior to
Closing in accordance with Section 1.5.
(VI) Inventory. The Buyer and the Seller shall engage a
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mutually acceptable third party engaged in the business of appraising, valuing
and preparing
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
7
inventories for automobile dealerships (hereinafter referred to as the
"Inventory Service") to prepare an inventory list (the "Inventory") of the parts
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and accessories, as well as the Miscellaneous Inventories (as defined in Clause
VIII below), owned by the Companies. The Inventory (insofar as it relates to
parts and accessories) shall be posted to the Manufacturer's approved systems of
inventory control and will show each item extended by its unit price. The
Inventory shall be completed as of the Closing Date. The Inventory shall
identify each part and accessory and its purchase price. The cost of the
Inventory shall be borne equally by the Buyer and the Seller.
(VII) Returnable and Nonreturnable Replacement Parts
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and Accessories. The Inventory shall classify replacement parts and accessories
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as "returnable" or "nonreturnable." For purposes of this Agreement, the terms
"returnable parts" and "returnable accessories" shall describe and include only
those new undamaged replacement parts and new undamaged accessories (excluding
prior model year vehicle accessories) for vehicles which are listed (coded) in
the latest current Master Parts Price List Suggested List Prices and Dealer
Prices, or other applicable similar price lists, of the Manufacturer, with
supplements or the equivalent in effect as of the Closing Date (the "Master
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Price List"), as returnable to the Manufacturer at not less than the purchase
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price reflected in the Master Price List or in the most recent applicable price
list. The value of each "returnable part" and "returnable accessory" will be the
price therefor listed in the Master Price List with no reduction for stock order
discounts or any other discounts; [***]. As used herein, the term "Aged Parts"
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shall mean, with respect to any Company, all items in inventory of those stock
keeping units of "returnable parts" and "returnable accessories" for which such
Company has had no bona-fide sale to an unaffiliated third party at arm's length
within [***] months of the Closing Date. All parts and accessories listed
(coded) in the Master Price List as nonreturnable to the Manufacturer shall be
classified as "nonreturnable." The value for each "nonreturnable" part and
accessory, non-Manufacturer part or accessory, "Jobber" or "NPN" parts and
accessories (collectively, the "Nonreturnable Parts"), shall be equal to [***]
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percent ([***}%) of dealer cost; provided, however, in the event that the
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aggregate value for Nonreturnable Parts (determined as aforesaid) for the
Companies exceeds [***] percent ([***]%) of the aggregate value for the parts
Inventory with respect to the Companies, the value for such Nonreturnable Parts
whose aggregate value (determined as aforesaid) is in excess of [***] percent
([***]%) of the aggregate value for the parts Inventory shall be as mutually
agreed by the Buyer and the Seller. The value of any other parts not addressed
in this subsection shall equal a value as mutually agreed between the Buyer and
the Seller. Special accessories such as vogue tires, custom wheels, chrome trim,
gold trim, tops, CD players, etc., which are compatible with current model year
New Vehicles will be valued at dealer cost; provided, however, the amount of
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such special accessory inventory shall not exceed a supply that will reasonably
equip [***] vehicles per store. The value of special accessories in excess of
that needed to reasonably equip [***] vehicles per store, as well as special
accessories for prior model year vehicles, will be valued as mutually agreed
between the Buyer and the Seller. The Closing Balance Sheet shall allocate no
value to any damaged parts or accessories, parts and accessories with component
parts missing, superseded or obsolete parts or accessories, or used parts or
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
8
accessories and the Seller may cause the respective Company to divest any such
parts or accessories prior to Closing in accordance with Section 1.5. As to any
item for which the value must be mutually agreed between the Buyer and the
Seller, if an agreed upon value cannot be reached for such item, no value shall
be allocated to such item and the Seller may cause the respective Company to
divest any such item prior to Closing in accordance with Section 1.5.
(VIII) Miscellaneous Inventories. "Miscellaneous
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Inventories" shall include all useable gas, oil and grease, all undercoat
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material and body materials in unopened cans and such other miscellaneous
useable and saleable articles in unbroken lots (including office supplies) which
are owned by the Companies on the Closing Date provided that Miscellaneous
Inventories shall not include any miscellaneous inventories which represent more
than a sixty (60) day supply of any particular item(s). The value of the
Miscellaneous Inventories shall be equal to the replacement cost of the
Miscellaneous Inventories as determined by the Inventory Service and set forth
on the Inventory. The Closing Balance Sheet shall allocate no value to any
miscellaneous items that are not included in the Miscellaneous Inventories,
including such items of miscellaneous inventories which represent more than a
sixty (60) day supply of such item, and the Seller may cause the respective
Company to divest any such miscellaneous items prior to Closing in accordance
with Section 1.5.
(IX) Work in Process. The value of any repair orders
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which are in process at the opening of business on the Closing Date shall be the
respective Company's actual cost for parts and labor for such orders as the
respective Company shall have caused to be performed.
(X) Fixtures and Equipment. The value of all
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fixtures, machinery, equipment (including special tools and shop equipment
reasonably necessary for the servicing of motor vehicles), furniture, and all
signs and office equipment (including, without limitation, computer equipment
used in normal dealership operations) owned by each Company and used or held for
use in such Company's business, but excluding leasehold improvements unless they
are located at premises which are subject to a Lease and any vehicles used or
held for use in such Company's business, such as (without limitation)
Company-owned vehicles, service loaners, and rental car vehicles (collectively,
"Fixtures and ------------ Equipment"), shall be the respective Company's
depreciated book value thereof; --------- provided, however, the Closing Balance
Sheet shall allocate no value to any -------- ------- items of Fixtures and
Equipment which (a) are leased, or (b) are not physically identifiable.
(XI) Prepaid Expenses. The Closing Balance Sheet will
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include as an asset the amount of all prepaid expenses of the respective Company
to the extent the amount of such prepaid expenses can be used by the respective
Company at such Company's actual cost, prorated as of the Closing Date.
(ii) If within 30 days following delivery of the Closing
Balance Sheet (or the next Business Day if such 30th day is not a Business Day),
the Seller has not given the Buyer notice of the Seller's objection to the
computation of the Net Book Value as set forth in the Closing Balance Sheet
(such notice to contain a statement in reasonable detail of the nature of the
Seller's objection), then the Net Book Value reflected in the Closing Balance
Sheet will be deemed mutually agreed by the Buyer and the Seller. If the Seller
shall have given such notice of objection in a timely manner then the Buyer and
the Seller shall use their reasonable best
9
efforts to resolve the items in dispute. If the Buyer and the Seller are unable
to resolve their dispute within thirty (30) days from the date of the Seller's
notice of objection, then the issues in dispute will be submitted to the
Detroit, Michigan office of a "Big Five" or other accounting firm which is
mutually acceptable to the Buyer and the Seller (the "Accountants") for
-----------
resolution. If issues in dispute are submitted to the Accountants for
resolution: (A) each party will furnish to the Accountants such work papers and
other documents and information relating to the disputed issues as the
Accountants may request and are available to the party or its subsidiaries (or
its independent public accountants), with a copy of such work papers, documents
and information being provided to the other party, and will be afforded the
opportunity to present to the Accountants any material relating to the
determination (with a copy of such material being provided to the other party)
and, at the request of the Accountants, the parties may jointly conduct a
conference with the Accountants to discuss the determination; (B) the
Accountants will be instructed to determine the Net Book Value based upon their
resolution of the issues in dispute; (C) such determination by the Accountants
of the Net Book Value, as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties; and (D) the Buyer
and the Seller shall each bear 50% of the fees and expenses of the Accountants
for such determination. For purposes of this Agreement, a "Business Day" is a
------------
day other than a Saturday, a Sunday or a day on which banks are required to be
closed in the State of North Carolina.
(iii) If the Net Book Value, as deemed mutually agreed by
the parties or as determined by the Accountants, as aforesaid, is at least
equal to the Six Million Dollars ($6,000,000), or if there is a Net Book Value
Excess (as defined below), the Buyer and the Seller shall, except to the extent
there are pending claims for indemnity, promptly execute and deliver to the
Escrow Agent a joint instruction to deliver all of the Escrow Shares held under
the Escrow Agreement to the Seller. To the extent that the Net Book Value, as
deemed mutually agreed by the parties or as determined by the Accountants, as
aforesaid, is greater than Six Million Dollars ($6,000,000), the Buyer shall be
obligated to pay the amount of such excess (the "Net Book Value Excess") by
---------------------
delivering as promptly as possible to the Seller, that number of additional
shares of Common Stock (the "Additional Shares") obtained by dividing the Net
-----------------
Book Value Excess by the Market Price (as defined below) as of the date of
delivery, rounded to the next whole share. As used herein, the term "Market
------
Price" shall mean the average of the daily closing prices on the New York Stock
-----
Exchange for one share of Common Stock for the twenty (20) consecutive trading
days ending on the last trading day immediately prior to the date of
determination. All such Additional Shares shall be deemed to be "Registered
Common Shares" for purposes of this Agreement. To the extent that the Net Book
Value, as deemed mutually agreed by the parties or as determined by the
Accountants, as aforesaid, is less than Six Million Dollars ($6,000,000), the
Seller shall be obligated to pay the amount of such shortfall (the "Net Book
--------
Value Shortfall") promptly to the Buyer. In furtherance of such obligation of
---------------
the Seller, the Buyer shall be entitled to a disbursement under the Escrow
Agreement of that number of the Escrow Shares, up to all of the Escrow Shares,
obtained by dividing the Net Book Value Shortfall by the Market Price as of the
date of disbursement, rounded to the next whole share, or substituted cash as
provided in Section 5(j) of the Escrow Agreement, and the Seller shall be
obligated to execute and deliver promptly to the Escrow Agent a joint
instruction with the Buyer to deliver such number of the Escrow Shares, or such
substituted cash, to the Buyer, with any remaining Escrow Shares to be delivered
to the Seller. To the extent that the Net Book Value Shortfall exceeds the value
of the Escrow Shares disbursed to the Buyer, determined based upon the Market
Price of such Escrow Shares as of the date of disbursement, the Seller shall be
10
obligated to deliver promptly to the Buyer Registered Common Shares having a
value, determined based upon the Market Price as of the date of delivery, equal
to such excess and, failing to do so, to pay promptly to the Buyer, in cash or
by wire transfer to an account or accounts designated by the Buyer, the amount
of such excess, together with interest on the amount of such excess at the
Buyer's floor plan financing rate from time to time in effect.
1.3 Delivery of the Shares. At the Closing, the Seller shall deliver to
----------------------
the Buyer a certificate or certificates representing the Shares, duly endorsed
in blank or with a fully executed stock power attached, all in proper form for
transfer with all transfer taxes, if any, paid by the Seller. The Shares shall
be delivered to the Buyer free and clear of all liens, pledges, encumbrances,
claims, security interests, charges, voting trusts, voting agreements, other
agreements, rights, options, warrants or restrictions or claims of any kind,
nature or description (collectively, "Encumbrances").
------------
1.4 Other Agreements. It is the intention of the Buyer and the Seller
----------------
that the Closing under this Agreement take place concurrently with the
respective closings under the Other Agreements.
1.5 Certain Divestitures Prior to Closing. Prior to the Closing, the
-------------------------------------
Companies may distribute to the Seller certain New Vehicles, Demonstrators, Used
Vehicles, parts and accessories, and/or Miscellaneous Inventories, as
contemplated by Section 1.2(d)(i) above (herein collectively referred to as the
"Distributed Assets"). Such distribution shall be without representation or
------------------
warranty of any kind by the Companies and the Seller acknowledges that the
Distributed Assets shall be distributed by the Companies "AS IS - WHERE IS". The
Seller shall have a period of thirty (30) days following the closing to remove
the Distributed Assets from the premises. The Buyer shall, and shall cause the
Companies to, provide timely and reasonable access to the Seller for the purpose
of removing the Distributed Assets during such thirty (30) day period.
1.6 Accounts Receivable - Collections
---------------------------------
(a) Commencing on and from the Closing Date, the Buyer shall
cause each Company to make reasonably diligent and continuing efforts to timely
collect all accounts receivable of such Company reflected on the Closing Balance
Sheet (the "Accounts Receivable"); provided, however, (i) a Company shall not be
------------------- -------- -------
obligated to continue to do business with any account debtor if it believes that
such continuation will not be in its best interests, and (ii) a Company will not
be obligated to incur any Extraordinary Collection Costs (as hereinafter
defined), nor will a Company incur any Extraordinary Collection Costs or
compromise, settle or accept less than the full amount due in satisfaction of
any account without the prior written approval of the Seller to be obtained in
each case. As used herein, "Extraordinary Collection Costs" means direct
------------------------------
out-of-pocket fees and expenses paid to outside debt collection agencies and/or
attorneys for services in connection with the collection of the Accounts
Receivable.
(b) All monies received by each Company from account debtors
shall be credited to the account of the remitting debtor in the order of the
longest outstanding indebtedness due on the account; provided, however, a
-------- -------
Company shall not be obligated to credit
11
such monies to any disputed amount of such accounts which the Seller reasonably
agrees is in dispute.
(c) Any amounts due on the Accounts Receivable which are not
collected or realized by the Companies within one hundred twenty (120) days
after the date the respective Accounts Receivable were billed shall be deemed
uncollectible and the Companies shall have no further obligation to collect such
amounts and the Seller shall, promptly upon demand by the Companies, pay such
amounts to the respective Company or its designee and such Company shall, upon
such payment, assign to the Seller the specific accounts in respect to which
such payment is being made free and clear of all security interests, liens,
charges and encumbrances.
(d) In the event that a court of competent jurisdiction in a
proceeding under any federal or state bankruptcy, insolvency or other similar
law then in effect with respect to any account debtor shall order a Company to
repay any of the Accounts Receivable collected and credited to the account of
such account debtor, the amount of such repayment(s), plus the amount of all the
reasonable costs and expenses of such Company (including reasonable attorneys'
fees) incurred and/or paid in such proceeding, shall become the obligation of
the Seller to such Company, payable on demand of such Company and such Company
shall, upon receipt of such payment, assign to the Seller, without recourse and
against an appropriate indemnity in favor of such Company, any rights of such
Company with respect to such bankruptcy proceedings.
ARTICLE 2
---------
CLOSING
-------
The Closing shall take place at a mutually agreed upon location in
Detroit, Michigan at 9:30 a.m., local time, on the date which is the sixtieth
(60/th/) day after the date of this Agreement (the "Closing Date Deadline"),
---------------------
subject to prior receipt by the Buyer of the approvals of General Motors
Corporation (the "Manufacturer") contemplated in Sections 7.10 and 8.10 and
------------
provided that the audited financial statements contemplated in Section 7.13
shall have been completed and the other conditions to Closing set forth in
Article 7 and Article 8 shall have been satisfied. If, as of the Closing Date
Deadline, the Buyer shall not have obtained such approvals and/or such audited
financial statements and other conditions to closing shall not have been
completed or satisfied, the Buyer shall have the option (a) to terminate this
Agreement if it appears unlikely that the approvals of the Manufacturer required
by Sections 7.10 and 8.10 above shall be forthcoming, or (b) to extend the
Closing Date Deadline for an additional thirty (30) day period. In addition to
the foregoing, if the Seller reasonably believes that the approvals of the
Manufacturer required by Sections 7.10 and 8.10 above will be forthcoming, the
Seller may elect to extend the original Closing Date Deadline for an additional
thirty (30) days. The date upon which the Closing shall take place is
hereinafter called the "Closing Date." The Closing shall be deemed to be
------------
effective as of the opening of business on the Closing Date.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF THE SELLER
--------------------------------------------
12
The Seller hereby represents and warrants to the Buyer, as follows:
3.1 Ownership of Shares. The Seller owns of record and beneficially the
-------------------
Shares. The Seller has, and will have at the time of the Closing, good and valid
title to the Shares to be sold by the Seller hereunder, free and clear of all
Encumbrances.
3.2 The Seller's Power and Authority; Consents and Approvals.
--------------------------------------------------------
(a) The Seller is a trust duly formed and validly existing
under the laws of the State of Michigan. The Seller has full trust capacity,
right, power and authority to execute and deliver this Agreement and the other
agreements, documents and instruments to be executed and delivered by the Seller
in connection herewith, to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. ▇▇▇▇▇▇, as the
sole trustee of the Seller, has the full power and authority to execute and
deliver this Agreement on behalf of the Seller, and to execute and deliver all
other agreements, documents and instruments to be executed and delivered by the
Seller pursuant hereto.
(b) Except as set forth on Schedule 3.2(b) hereto, no
---------------
authorization, approval or consent of, or notice to or filing or registration
with, any governmental agency or body, or any other third party with respect to
a Material Agreement, is required in connection with the execution and delivery
by the Seller of this Agreement and the other agreements, documents and
instruments to be executed and delivered by the Seller in connection herewith,
the consummation of the transactions contemplated hereby and thereby and the
performance by the Seller of its obligations hereunder and thereunder.
3.3 Execution and Enforceability. This Agreement has been duly executed
----------------------------
and delivered by the Seller and constitutes, and the other agreements, documents
and instruments to be executed by the Seller in connection herewith, when duly
executed and delivered by the Seller, shall constitute, the legal, valid and
binding obligations of the Seller, enforceable against the Seller in accordance
with their respective terms except to the extent that enforceability may be
limited by bankruptcy, insolvency and other securities laws affecting the
enforcement of creditors' rights generally and general equity principles.
3.4 Litigation Regarding the Seller and ▇▇▇▇▇▇. There are no actions,
------------------------------------------
suits, claims, investigations or legal, administrative or arbitration
proceedings pending or, to the Seller's knowledge, threatened against the Seller
or ▇▇▇▇▇▇ relating to the Shares, this Agreement or the transactions
contemplated hereby before any court, governmental or administrative agency or
other body. No judgment, order, writ, injunction, decree or other similar
command of any court or governmental or administrative agency or other body has
been entered against or served upon the Seller or ▇▇▇▇▇▇ relating to the Shares,
this Agreement or the transactions contemplated hereby.
3.5 Interest in Competitors and Related Entities; Certain Transactions.
------------------------------------------------------------------
(a) Except as set forth on Schedule 3.5 hereto, neither the Seller
------------
or ▇▇▇▇▇▇, nor any Affiliate of the Seller or ▇▇▇▇▇▇, (i) has any direct or
indirect interest in any person or entity engaged or involved in the business of
owning and operating automobile and truck dealerships, which business includes,
without limitation, the marketing and selling of new and
13
used vehicles, the servicing of automobiles and trucks, collision and repair
servicing of automobiles and trucks, or the provision of financing and insurance
to the automotive customers, (ii) has any direct or indirect interest in any
person or entity which is a lessor of assets or properties to, material supplier
of, or provider of services to, any of the Companies, or (iii) has a beneficial
interest in any contract or agreement to which any of the Companies is a party;
provided, however, that the foregoing representation and warranty shall not
apply to any person or entity, or any interest or agreement with any person or
entity, which is a publicly held corporation in which the Seller or ▇▇▇▇▇▇, as
the case may be, individually owns less than 3% of the issued and outstanding
voting stock. For purposes of this Agreement, the term "Affiliate" shall mean
---------
any entity directly or indirectly controlling, controlled by or under common
control with the specified person, whether by stock ownership, agreement or
otherwise, or any parent, child or sibling of such specified person and the
concept of "control" means the possession, direct or indirect, of the power to
-------
direct or cause the direction of the management and policies of such person or
entity, whether through the ownership of voting securities, by contract or
otherwise.
(b) Except as set forth in Schedule 3.5 hereto, there are no
------------
transactions between any of the Companies and the Seller or ▇▇▇▇▇▇ (including
the Seller's or ▇▇▇▇▇▇'▇ Affiliates), or any of the directors, officers or
salaried employees of any of the Companies, the family members of ▇▇▇▇▇▇, or
Affiliates of any of the above (other than for services as employees, officers
and directors), including, without limitation, any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from, the Seller or ▇▇▇▇▇▇, or any such officer, director or salaried
employee, family member of ▇▇▇▇▇▇, or Affiliate or any corporation, partnership,
trust or other entity in which such family member, Affiliate, officer, director
or, to the knowledge of the Seller, salaried employee has a substantial interest
or is a shareholder, officer, director, trustee or partner.
3.6 The Seller Not Foreign Person. Each of the Seller and ▇▇▇▇▇▇ is a
-----------------------------
"United States person" as that term is defined in Section 7701(a)(30) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
----
promulgated thereunder.
3.7 Organization; Good Standing, Etc. Each of the Companies is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of its incorporation and has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. Each of the Companies is not qualified, and the nature of its
business does not require it to be qualified, to do business as a foreign
corporation in any other jurisdictions.
3.8 Capitalization. The authorized capital stock of each of the
--------------
Companies is set forth on Schedule 3.8 hereto. The Shares constitute all of the
------------
issued and outstanding shares of capital stock of the Companies. All of the
Shares are duly authorized, validly issued, fully paid and non-assessable and
are held by the Seller. Except as set forth on Schedule 3.8 hereto, there are no
------------
preemptive rights, whether at law or otherwise, to purchase any of the
securities of any of the Companies, and there are no outstanding options,
warrants, "phantom" stock plans, subscriptions, agreements, plans or other
commitments pursuant to which any of the Companies is or may become obligated to
sell or issue any shares of its capital stock or any other debt or equity
security, and there are no outstanding securities convertible or exchangeable
into shares of
14
such capital stock or any other debt or equity security. There are no voting
trusts, shareholder agreements or other agreements, instruments or rights of any
kind or nature outstanding or in effect with respect to shares of capital stock
of any of the Companies.
3.9 Subsidiaries and Investments. None of the Companies owns or
----------------------------
maintains, directly or indirectly, any capital stock of or other equity or
ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity and does not have any
commitment to contribute to the capital of, make loans to, or share in the
losses of, any such entity.
3.10 No Violation; Conflicts. Except as set forth on Schedule 3.10
----------------------- -------------
hereto, the execution and delivery by the Seller of this Agreement and the other
agreements, documents and instruments to be executed and delivered by the Seller
in connection herewith, the consummation by the Seller of the transactions
contemplated hereby and thereby and the performance by the Seller of its
obligations hereunder and thereunder do not and will not (a) conflict with or
violate any of the terms of the Articles of Incorporation or By-Laws of any of
the Companies, or the trust agreement of the Seller, (b) violate or conflict
with any domestic law, ordinance, rule or regulation, or any judgment, order,
writ, injunction, decree or similar command of any court, administrative or
governmental agency or other body, material to any of the Companies, (c) violate
or conflict with the terms of, or result in the acceleration of, any
indebtedness or obligation of any of the Companies under, or violate or conflict
with or result in a breach of, or constitute a default under, any indenture,
mortgage, deed of trust, or Material Agreement (as defined in Section 3.29) to
which any of the Companies is a party or by which any of the Companies or any of
their respective assets or properties is bound, (d) result in the creation or
imposition of any Encumbrance of any nature upon any of the assets or properties
of any of the Companies, (e) constitute an event permitting termination of any
Material Agreement of any of the Companies, or (f) require any authorization,
approval or consent of, or any notice to or filing or registration with, any
governmental agency or body, or any other third party with respect to a Material
Agreement, in each case, applicable to any of the Companies or any of their
respective properties or assets.
3.11 Title to Assets; Related Matters.
--------------------------------
(a) Each of the Companies has good and valid title to all
assets, rights, interests and properties, tangible and intangible, owned by
them, other than the Distributed Assets (collectively, the "Assets"), free and
------
clear of all Encumbrances, except those specified on Schedule 3.11 and liens for
-------------
Taxes not yet due and payable; provided, however, the foregoing shall not apply
-------- -------
to the Real Property.
(b) The Assets include all properties and assets (real, personal
and mixed, tangible and intangible) owned by the Companies and used or held for
use in the conduct of their respective businesses other than the Distributed
Assets.
3.12 Possession. The tangible assets included within the Assets are
----------
physically identifiable and are in the possession or control of the respective
Companies and, except as set forth on Schedule 3.12, no other person or entity
-------------
has a right to possession or claims possession of all or any part of such
Assets, except the rights of lessors of Leased Equipment and Leased Premises
(each as defined in Section 3.16 hereof) under their respective contracts and
leases.
15
3.13 Financial Statements.
--------------------
(a) The Seller has delivered to the Buyer prior to the date
hereof:
(i) the unaudited balance sheets of the respective
Companies and the related unaudited statements of income for the last two fiscal
years of the respective Companies (including the notes thereto and any other
information included therein) (collectively, the "Annual Financial Statements");
---------------------------
and
(ii) the monthly year-to-date unaudited balance sheet of
the respective Companies and the related unaudited statements of income
(collectively, the "Interim Financial Statements"; the Annual Financial
----------------------------
Statements and the Interim Financial Statements are hereinafter collectively
referred to as the "Financial Statements").
--------------------
(b) The Financial Statements (i) are in accordance in all
material respects with the books and records of the respective Companies, which
books and records are true, correct and complete in all material respects, (ii)
fairly present the financial condition of the respective Companies as of the
dates indicated and the results of operations of the respective Companies for
the periods indicated, and (iii) except as set forth in Schedule 3.13, have been
-------------
prepared in accordance with GAAP consistently applied, subject, in the case of
unaudited financial statements, to the absence of footnotes and for normal
year-end adjustments.
3.14 [Intentionally Left Blank].
3.15 Inventories. The levels of the inventories of the respective
-----------
Companies are materially consistent with the levels maintained by the respective
Companies in the ordinary course consistent with past practice and the
respective Companies' obligations under their respective agreements with the
Manufacturer and all applicable distributors. The values at which such
inventories are carried are based on the LIFO method and are stated in
accordance with GAAP by the respective Companies at the lower of historic cost
or market. To the knowledge of the Seller, an adequate reserve has been
established by each of the Companies for damaged, spoiled, obsolete, defective,
or slow-moving goods and such reserve is consistent with both the operation of
such Company in the ordinary course of business and past practice.
3.16 Real Property; Machinery and Equipment.
--------------------------------------
(a) Schedule 3.16(a) hereto contains a complete list and brief
----------------
description of all real property owned by the respective Companies, as well as
all the real property of the respective Companies to be acquired by the Buyer
pursuant to the Other Agreements, and a summary description of the improvements
(including buildings and other structures) located thereon (collectively, the
"Owned Real Property"). Each of the Companies is the sole owner of the Owned
-------------------
Real Property owned by it and, as of the Closing, shall hold such Owned Real
Property in fee simple or its equivalent under local law, free and clear of all
building use restrictions, exceptions, variances, limitations or other title
defects of any nature whatsoever, except those set forth in Schedule 3.16(a)
----------------
hereto and the "Permitted Exceptions" under the respective Real Property
Agreements (the "Permitted Encumbrances"). Except as set forth on Schedule
---------------------- --------
3.16(a) hereto, there are no leases, written or oral, affecting all or any part
-------
of the
16
Owned Real Property. The only real property (other than the Leased Premises)
used by each of the Companies in connection with such Company's business is the
Owned Real Property. To the knowledge of the Seller, the Owned Real Property
(including, without limitation, the roof, the walls and all plumbing, wiring,
electrical, heating, air conditioning, fire protection and other systems, as
well as all paved areas, included therein or located thereat) is in good working
order, condition and repair and is not in need of maintenance or repairs except
for maintenance and repairs which are routine, ordinary and not material in
nature or cost.
(b) Schedule 3.16(b) hereto contains a complete list and
----------------
description (including buildings and other structures thereon and the name of
the owner thereof) of all real property of which any of the Companies is a
tenant (herein collectively referred to as the "Leased Premises," and, together
---------------
with the Owned Real Property, sometimes collectively referred to as the "Real
----
Property"). True, correct and complete copies of all leases of all Leased
--------
Premises (the "Leases") have been delivered to the Buyer. The Leased Premises
------
(including, without limitation, the roof, the walls and all plumbing, wiring,
electrical, heating, air conditioning, fire protection and other systems, as
well as all paved areas, included therein or located thereat) are in good
working order, condition and repair and are not in need of maintenance or
repairs except for maintenance and repairs which are routine, ordinary and not
material in nature or cost. With respect to each Lease, to the knowledge of the
Seller, no event or condition currently exists which would give rise to a
material repair or restoration obligation if such Lease were to terminate.
Except as set forth in the Leases, the Seller has no knowledge of any event or
condition which currently exists which would create a legal or other impediment
to the use of the Leased Premises as currently used, or would increase the
additional charges or other sums payable by the tenant under any of the Leases
(including, without limitation, any pending Tax reassessment or other special
assessment affecting the Leased Premises).
(c) To the knowledge of the Seller, there has been no work
performed, services rendered or materials furnished in connection with repairs,
improvements, construction, alteration, demolition or similar activities with
respect to the Leased Premises for at least ninety (90) days before the date
hereof; there are no outstanding claims or persons entitled to any claim or
right to a claim for a mechanics' or materialman's lien against the Leased
Premises; and there is no person or entity other than the respective Company in
or entitled to possession of the Leased Premises.
(d) To the knowledge of the Seller, each of the Companies has
all easements and rights, including, but not limited to, easements for power
lines, water lines, sewers, roadways and other means of ingress and egress,
necessary to conduct the business the respective Company now conducts, all such
easements and rights are perpetual, unconditional appurtenant rights to the
Leased Premises, and none of such easements or rights are subject to any
forfeiture or divestiture rights.
(e) Neither the whole nor any portion of any of the Real
Property has been condemned, expropriated, ordered to be sold or otherwise taken
by any public authority, with or without payment or compensation therefor, and
to the knowledge of the Seller, no such condemnation, expropriation, sale or
taking is threatened or contemplated. The Seller has no knowledge of any pending
assessments which would affect the Real Property.
17
(f) None of the Real Property is in violation in any material
respect of any public or private restriction or any law or any building, zoning,
health, safety, fire or other law, ordinance, code or regulation, and no notice
from any governmental body has been served upon any of the Companies or upon any
of the Real Property claiming any violation in any material respect of any such
law, ordinance, code or regulation or requiring or calling to the attention of
any of the Companies the need for any work, repair, construction, alterations or
installation on or in connection with said properties which has not been
complied with in all material respects. To the knowledge of the Seller, all
improvements which comprise a part of the Real Property are located within the
record lines of the Real Property and none of the improvements located on the
Real Property encroach upon any adjoining property or any easements or rights of
way and no improvements located on any adjoining property encroach upon any of
the Real Property or any easements or rights of way servicing the Real Property.
(g) Schedule 3.16(g) hereto sets forth a list of all material
----------------
machinery, equipment, motor vehicles, furniture and fixtures owned by each of
the Companies (collectively, the "Owned Equipment").
---------------
(h) Schedule 3.29(a) hereto contains a list of all Material
----------------
Agreements, whether written or oral, under which each of the Companies is lessee
of or holds or operates any items of machinery, equipment, motor vehicles,
furniture and fixtures or other property (other than real property) owned by any
third party (collectively, the "Leased Equipment").
----------------
(i) The Owned Equipment and the Leased Equipment are, taken as a
whole with respect to each Company, in good operating condition, maintenance and
repair taking into account the age thereof.
3.17 Patents; Trademarks; Tradenames; Service Marks; Copyrights;
----------------------------------------------------------
Licenses, Etc.
--------------
(a) Except as set forth on Schedule 3.17 hereto, there are no
-------------
patents, trademarks, trade names, service marks, service names and copyrights,
and there are no applications therefor or licenses thereof, whether patentable
or unpatentable, that are owned or leased by any of the Companies or used in the
conduct of any Company's business. None of the Companies are a party to, and no
Company pays royalty to anyone under, any license or similar agreement. Neither
the Seller nor any of the Companies has received a written claim, and, to the
knowledge of the Seller, there is no reasonable basis for any claim, against any
of the Companies that any of its operations, activities or products infringe the
patents, trademarks, trade names, copyrights or other property rights of others
or that any of the Companies is otherwise wrongfully using the property rights
of others. Neither the Seller nor any of the Companies has asserted any claim,
and, to the knowledge of the Seller, there is no reasonable basis for any claim
by any Company against any third party that the operations, activities or
products of such third party infringe the patents, trademarks, trade names,
service marks, service names, copyrights or other property rights of such
Company or that such third party is otherwise wrongfully using the property
rights of such Company.
(b) To the knowledge of the Seller, each of the Companies has
the right to use in the State or States set forth opposite such Company's name
on Schedule 3.17 hereto, the names "▇▇▇▇▇▇" and "▇▇▇ ▇▇▇▇▇▇" and the other
-------------
tradenames and service marks listed opposite
18
such Company's name on Schedule 3.17 hereto, and, except as set forth on
-------------
Schedule 3.17 to the knowledge of the Seller, no person uses, or has the right
-------------
to use, such names, tradenames or service marks or any derivation thereof in
connection with the manufacture, sale, marketing or distribution of products or
services commonly associated with an automobile dealership in the territories in
which the Companies operate their respective businesses.
3.18 Certain Liabilities.
------------------
(a) All accounts payable by the respective Companies to third
parties as of the date hereof arose in the ordinary course of business and none
are delinquent or past-due.
(b) Schedule 3.18 hereto sets forth a list of all indebtedness
-------------
of each Company, other than accounts payable, as of the close of business on the
day preceding the date hereof, including, without limitation, money borrowed,
indebtedness of such Company owed to stockholders and former stockholders, the
deferred purchase price of assets, letters of credit and capitalized leases,
indicating, in each case, the name or names of the lender, the date of maturity,
the rate of interest, any prepayment penalties or premiums and the unpaid
principal amount of such indebtedness as of such date.
3.19 No Undisclosed Liabilities. No Company has any material
--------------------------
liabilities or obligations of any nature, known or unknown, fixed or contingent,
matured or unmatured (including, without limitation, any of the foregoing which
may be owed to the Seller, ▇▇▇▇▇▇ or any of its or his Affiliates), other than
those (a) reflected in the Financial Statements, (b) incurred in the ordinary
course of business since the date of the Financial Statements and of the type
and kind reflected in the Financial Statements, (c) disclosed specifically on
Schedule 3.19 hereto or otherwise reasonably disclosed in this Agreement or the
-------------
other schedules hereto, or (d) executory obligations under any Material
Agreements or under any other contracts entered into in the ordinary course of
business.
3.20 Absence of Changes. Since October 31, 2001, the business of the
------------------
Companies has been operated in the ordinary course, consistent with past
practices and, except as set forth on Schedule 3.20 hereto, there has not been
-------------
incurred, nor has there occurred, except as contemplated in Section 1.5 hereof
and except for matters generally affecting the Companies' industry: (a) any
damage, destruction or loss (whether or not covered by insurance), adversely
affecting the business or assets of the Companies in excess of $50,000; (b) any
strikes, work stoppages or other labor disputes involving the employees of any
of the Companies; (c) any sale, transfer, pledge or other disposition of any of
the assets of the Companies having an aggregate book value of $50,000 or more
(except sales of vehicles and parts and accessories inventory in the ordinary
course of business); (d) any declaration or payment of any dividend or other
distribution in respect of its capital stock or any redemption, repurchase or
other acquisition of its capital stock other than distributions reflected in the
Closing Balance Sheet; (e) any amendment, termination, waiver or cancellation of
any Material Agreement (as defined in Section 3.29 hereof) or any termination,
amendment, waiver or cancellation of any material right or claim of any of the
Companies under any Material Agreement (except in each case in the ordinary
course of business and consistent with past practice); (f) any (i) general
uniform increase in the compensation of the employees of any of the Companies
(including, without limitation, any increase pursuant to any bonus, pension,
profit-sharing, deferred compensation or other plan or commitment), other than
in the ordinary course of business, (ii) increase in any such
19
compensation payable to any individual officer, director, consultant or agent
thereof, other than in the ordinary course of business, or (iii) loan or
commitment therefor made by any of the Companies to any officer, director,
stockholder, employee, consultant or agent of any of the Companies; (g) any
change in the accounting methods, procedures or practices followed by any of the
Companies or any change in depreciation or amortization policies or rates
theretofore adopted by any of the Companies; (h) any material change in
policies, operations or practices of any of the Companies with respect to
business operations followed by any of the Companies, including, without
limitation, with respect to selling methods, returns, discounts or other terms
of sale, or with respect to the policies, operations or practices of any of the
Companies concerning the employees of any of the Companies; (i) any capital
appropriation or expenditure or commitment therefor on behalf of any of the
Companies in excess of $50,000 individually or $100,000 in the aggregate; (j)
any write-down or write-up of the value of any inventory or equipment of any of
the Companies or any increase in inventory levels in excess of historical levels
for comparable periods; (k) any account receivable in excess of $50,000 or note
receivable in excess of $50,000 owing to any of the Companies which (1) has been
written off as uncollectible, in whole or in part, (2) has had asserted against
it any claim, refusal or right of setoff, or (3) the account or note debtor has
refused to, or threatened not to, pay for any reason, or such account or note
debtor has become insolvent or bankrupt; (l) any other change in the condition
(financial or otherwise), business operations, assets, earnings or business of
any of the Companies which has, or could reasonably be expected to have, a
material adverse effect on the assets, business or operations of any of the
Companies; or (m) any agreement, whether in writing or otherwise, for any of the
Companies to take any of the actions enumerated in this Section 3.20.
3.21 Tax Matters.
-----------
(a) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise, payroll, withholding, employment,
estimated and other taxes of any nature, including interest, penalties and other
additions to such taxes ("Taxes"), payable by, or due from, the respective
-----
Companies for all periods prior to the date hereof have been fully paid or
adequately reserved for by the respective Companies or, with respect to Taxes
required to be accrued, such Company has properly accrued or will properly
accrue such Taxes in the ordinary course of business consistent with past
practice of such Company. References herein to "Tax" are references to one or
more Taxes.
(b) All federal, state and local Tax returns and Tax reports
required as of the date hereof to be filed by each Company for taxable periods
ending prior to the date hereof have been duly and timely filed prior to the due
date thereof (as such due date may have been lawfully extended) by each Company
with the appropriate governmental agencies, and all such returns and reports are
true, correct and complete in all material respects.
(c) The federal and state income Tax returns of each Company
have been audited by the Internal Revenue Service ("IRS") or are closed by the
---
applicable statutes of limitations for all taxable years through the date set
forth on Schedule 3.21. Except as set forth on Schedule 3.21 hereto, no Company
------------- -------------
has received any notice of any assessed or proposed claim or deficiency against
it in respect of, or of any present dispute between it and any governmental
agency concerning, any Taxes. Except as set forth on Schedule 3.21 hereto, no
-------------
examination or audit of any Tax return or report of any Company by any
applicable Taxing authority is currently
20
in progress and there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax return or report of such
Company. Copies of all federal, state and local Tax returns and reports required
to be filed by such Company for the years ended 2000, 1999 and 1998, together
with all schedules and attachments thereto, have been delivered by the Seller to
the Buyer.
(d) No Company is now, nor has it ever been, a member of a
consolidated group for federal income Tax purposes or a consolidated, combined
or similar group for state Tax purposes. No consent under Code Section 341 has
been made affecting any Company. No Company is a party to any agreement or
arrangement that would result in the payment of any "excess parachute payments"
under Code Section 280G. No Company is required to make any adjustment under
Code Section 481(a). No power of attorney relating to Taxes is currently in
effect affecting any Company.
3.22 Compliance with Laws, Etc. The Companies have conducted their
-------------------------
respective operations and business in material compliance with, and all of the
Assets (including all of the Real Property and Leased Equipment) comply in all
material respects with, (a) all applicable laws, rules, regulations and codes
(including, without limitation, any laws, rules, regulations and codes relating
to anti-competitive practices, contracts, discrimination, employee benefits,
employment, health, safety, fire, building and zoning, but excluding
Environmental Laws which are the subject of Section 3.36 hereof) and (b) all
applicable orders, rules, writs, judgments, injunctions, decrees and ordinances.
None of the Companies has received in the past five (5) years any written
notification of any asserted present or past failure by it to comply with such
laws, rules or regulations, or such orders, writs, judgments, injunctions,
decrees or ordinances. Set forth on Schedule 3.22 hereto are all orders, writs,
-------------
judgments, injunctions, decrees and other awards of any court or governmental
agency applicable to the respective Companies and/or their respective business
or operations. The Seller has delivered to the Buyer copies of all reports in
the Seller's possession, or reasonably available to the Seller, if any, of the
respective Companies required to be submitted since January 1, 1996 under the
Federal Occupational Safety and Health Act of 1970, as amended, and under all
other applicable health and safety laws and regulations. The deficiencies, if
any, noted on such reports have been corrected by the respective Companies and
any deficiencies noted by inspection through the Closing Date will have been
corrected by the respective Companies by the Closing Date.
3.23 Litigation Regarding the Companies. Except as set forth on
----------------------------------
Schedule 3.23 hereto, there are no actions, suits, claims, investigations or
-------------
legal, administrative or arbitration proceedings pending, or, to the Seller's
knowledge, threatened, against any of the Companies or relating to any of their
respective assets, business or operations or the transactions contemplated by
this Agreement, and the Seller does not know of any reasonable basis for the
institution of any such suit or proceeding. Except as set forth on Schedule
--------
3.23, to the knowledge of the Seller, all actions, suits or proceedings pending
----
or, to the knowledge of the Seller, threatened against or affecting any of the
Companies are covered in full by insurance, without any reservations of rights,
subject only to the payment of applicable deductibles. No order, writ, judgment,
injunction, decree or similar command of any court or any governmental or
administrative agency or other body has been entered against or served upon any
of the Companies relating to any of the Companies or any of their respective
assets, business or operations.
21
3.24 Permits, Etc. Set forth on Schedule 3.24 hereto is a list of all
------------ -------------
material governmental licenses, permits, approvals, certificates of inspection
and other authorizations, filings and registrations that are necessary for the
Companies to own and operate their respective businesses as presently conducted
(collectively, the "Permits"). All such Permits have been duly and lawfully
-------
secured or made by the respective Companies and are in full force and effect.
There is no proceeding pending, or, to the Seller's knowledge, threatened or
probable of assertion, to revoke or limit any such Permit. Except as set forth
on Schedule 3.24 hereto, none of the transactions contemplated by this Agreement
-------------
will terminate, violate or limit the effectiveness of any such Permit.
3.25 Employees; Labor Relations. As of the date hereof, the Companies
--------------------------
employ the total number of employees set forth on Schedule 3.25. As of the date
-------------
hereof: (a) none of the Companies is delinquent in the payment (i) to or on
behalf of its past or present employees of any wages, salaries, commissions,
bonuses, benefit plan contributions or other compensation for all periods prior
to the date hereof, or (ii) of any amount which is due and payable to any state
or state fund pursuant to any workers' compensation statute, rule or regulation
or any amount which is due and payable to any workers' compensation claimant;
(b) there are no collective bargaining agreements currently in effect between
any of the Companies and labor unions or organizations representing any
employees of any of the Companies; (c) no collective bargaining agreement is
currently being negotiated by any of the Companies; (d) to the knowledge of the
Seller, there are no union organizational drives in progress and there has been
no formal or informal request to any of the Companies for collective bargaining
or for an employee election from any union or from the National Labor Relations
Board; and (e) to the knowledge of the Seller, no dispute exists between any of
the Companies and any of its sales representatives or, to the knowledge of the
Seller, between any such sales representatives with respect to territory,
commissions, products or any other terms of their representation. No employees
of the Companies will be entitled to any severance or other payment in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
3.26 Compensation. Schedule 3.26 contains a schedule of all employees
------------ -------------
(including sales representatives) and consultants of the respective Companies
(a) whose individual cash compensation for the year ended December 31, 2000 is
in excess of $100,000, or (b) whose individual cash compensation is expected to
exceed $100,000 in the current calendar year, together with the amount of total
compensation paid to each such person for the twelve month period ended December
31, 2000 and the current aggregate base salary or hourly rate (including any
bonus or commission) for each such person.
3.27 Employee Benefits.
-----------------
(a) The Seller has listed on Schedule 3.27 and has delivered to the
Buyer true and complete copies of all Employee Plans (as defined below)
established, maintained or contributed to by or on behalf of the Companies
(which shall include for this purpose and for the purpose of all of the
representations in this Section 3.27, all employers, whether or not
incorporated, that are treated together with the Companies as a single employer
within the meaning of Section 414 of the Code). The term "Employee Plan" shall
include all plans described in ------------- Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and also shall
include, without limitation, any deferred compensation, ----- stock, employee or
retiree pension benefit, welfare benefit or other similar fringe or employee
benefit
22
plan, program, policy, contract or arrangement, written or oral, qualified or
nonqualified, funded or unfunded, foreign or domestic, covering employees or
former employees of the respective Companies and maintained or contributed to by
the respective Companies.
(b) Where applicable, each Employee Plan (i) has been administered in
material compliance with the terms of such Employee Plan and the requirements of
ERISA, the Code and all other applicable laws; and (ii) is in material
compliance with the reporting and disclosure requirements of ERISA and the Code.
None of the Companies maintains nor contributes to, and has never maintained or
contributed to, an Employee Plan subject to Title IV of ERISA or a
"multiemployer plan." There are no facts relating to any Employee Plan that (i)
have resulted in a "prohibited transaction" of a material nature or have
resulted or are reasonably likely to result in the imposition of a material
excise tax, penalty or liability pursuant to Section 4975 of the Code, (ii) have
resulted in a material breach of fiduciary duty or violation of Part 4 of Title
I of ERISA, or (iii) have resulted or are reasonably likely to result in any
material liability (whether or not asserted as of the date hereof) of any of the
Companies or any ERISA affiliate pursuant to Section 412 of the Code arising
under or related to any event, act or omission occurring on or prior to the date
hereof. Each Employee Plan that is intended to qualify under Section 401(a) or
to be exempt under Section 501(c) of the Code is so qualified or exempt as of
the date hereof in each case as such Employee Plan has received favorable
determination letters from the Internal Revenue Service with respect thereto. To
the knowledge of the Seller, the amendments to and operation of any Employee
Plan subsequent to the issuance of such determination letters do not adversely
affect the qualified status of any such Employee Plan. No Employee Plan has an
"accumulated funding deficiency" as of the date hereof, whether or not waived,
and no waiver has been applied for. None of the Companies has made any promises
or incurred any liability under any Employee Plan or otherwise to provide health
or other welfare benefits to current or future retirees or other former
employees of such Company, except as specifically required by law. Neither the
Seller nor any of the Companies has received any written claim and, to the
knowledge of the Seller, there are no threatened claims (other than routine
claims for benefit) or lawsuits with respect to any of the Companies' Employee
Plans. Schedule 3.27 hereto sets forth a list of each Company's employees or
-------------
former employees who are currently receiving COBRA continuation coverage. As
used in this Section 3.27, all technical terms enclosed in quotation marks shall
have the meaning set forth in ERISA or the Code, as the case may be. No
termination, "back-end" load or other similar fee or expense is payable in
connection with the termination and winding up of any of the Employee Plans in
accordance with Section 5.15 below.
3.28 Powers of Attorney. There are no persons, firms, associations,
------------------
corporations or business organizations or entities holding general or special
powers of attorney from any of the Companies.
3.29 Material Agreements.
-------------------
(a) Set forth on Schedule 3.29(a) hereto is a list or, where
----------------
indicated, a brief description of all leases and all other contracts,
agreements, documents, instruments, guarantees, plans, understandings or
arrangements, written or oral, which, in all cases, are material to any Company
or its business or assets (collectively, the "Material Agreements"). For
-------------------
purposes of this Agreement, a "material" contract, lease or other obligation
contemplated by this Section 3.29(a) shall be any contract, lease or other
obligation of the Company which either (a) gives rise
23
to an ordinary course payment obligation of $5,000 per month or more or (b) is
not terminable upon notice of thirty (30) days or less without penalty. True
copies of all written Material Agreements and written summaries of all oral
Material Agreements described or required to be described on Schedule 3.29(a)
----------------
have been furnished to the Buyer.
(b) Each of the Companies has in all material respects performed all
of its obligations required to be performed by it to the date hereof, and is not
in default or alleged to be in default in any material respect, under any
Material Agreement, and there exists no event, condition or occurrence which,
after notice or lapse of time or both, would constitute such a default. To the
knowledge of the Seller, no other party to any Material Agreement is in default
in any material respect of any of its obligations thereunder. Each of the
Material Agreements is valid and in full force and effect and enforceable
against the Company and, to the knowledge of the Seller, the other parties
thereto in accordance with their respective terms, and, except as set forth in
Schedule 3.29(b) hereto, the consummation of the transactions contemplated by
----------------
this Agreement will not (i) require the consent of any party thereto or (ii)
constitute an event permitting termination thereof.
3.30 Brokers' or Finders' Fees, Etc. No agent, broker, investment banker,
------------------------------
person or firm acting on behalf of any of the Companies or the Seller or ▇▇▇▇▇▇
or any person, firm or corporation affiliated with ▇▇▇▇▇▇ or under his authority
is or will be entitled to any brokers' or finders' fee or any other commission
or similar fee directly or indirectly from any of the parties hereto in
connection with the sale of the Shares contemplated hereby, other than any such
fee or commission the entire cost of which will be borne by the Seller.
3.31 Bank Accounts, Credit Cards, Safe Deposit Boxes and Cellular
------------------------------------------------------------
Telephones. Schedule 3.31 hereto lists all bank accounts, credit cards and safe
---------- -------------
deposit boxes in the name of, or controlled by, the respective Companies, and
all cellular telephones provided and/or paid for by the respective Companies,
and details about the persons having access to or authority over such accounts,
credit cards, safe deposit boxes and cellular telephones.
3.32 Insurance.
---------
(a) Schedule 3.32(a) hereto contains a list of all policies of
----------------
liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and any other insurance and bonds maintained by, or on
behalf of, the Companies on their respective properties, operations,
inventories, assets, business or personnel (specifying the insurer, amount of
coverage, type of insurance, policy number and any pending claims in excess of
$5,000 thereunder). None of the Companies is in material default with respect to
any provision contained in any such insurance policy or has failed to give any
notice or present any material claim under any such insurance policy in a due
and timely fashion. No notice of cancellation or termination has been received
with respect to any such policy. None of the Companies has, during the last
three (3) fiscal years, been denied or had revoked or rescinded any policy of
insurance.
(b) Set forth on Schedule 3.32(b) hereto is a summary of information
----------------
pertaining to material property damage and personal injury claims in excess of
$5,000 against the respective Companies during the past five (5) years, all of
which are fully satisfied or are being defended by the insurance carrier.
24
3.33 Warranties. Set forth on Schedule 3.33 hereto are descriptions or
---------- -------------
copies of the forms of all express warranties and disclaimers of warranty made
by the respective Companies (separate and distinct from any applicable
manufacturers', suppliers' or other third-parties' warranties or disclaimers of
warranties) during the past two (2) years to customers or users of the vehicles,
parts, products or services of the respective Companies. There have been no
breach of warranty or breach of representation claims against any of the
Companies during the past five (5) years which have resulted in any cost,
expenditure or exposure to such Companies of more than $50,000 individually or
in the aggregate (on annual basis).
3.34 Directors and Officers. Set forth on Schedule 3.34 hereto is a true
---------------------- -------------
and correct list of the names and titles of each director and officer of each of
the Companies.
3.35 Suppliers and Customers. None of the Companies is required to provide
-----------------------
bonding or any other security arrangements in connection with any transactions
with any of its respective customers and suppliers.
3.36 Environmental Matters.
---------------------
(a) For purposes of this Section 3.36, the following terms shall have
the following meaning: (i) "Environmental Law" means all applicable federal,
-----------------
state and local laws, statutes, regulations, rules, ordinances and common law,
and all judgments, decrees, orders, agreements, or permits, issued, promulgated,
approved or entered thereunder by any government authority relating to
pollution, Hazardous Materials, worker safety or protection of human health or
the environment; (ii) "Hazardous Materials" means any waste, pollutant,
-------------------
chemical, hazardous material, hazardous substance, toxic substance, hazardous
waste, special waste, solid waste, asbestos, radioactive materials,
polychlorinated biphenyls, petroleum or petroleum-derived substance or waste
(regardless of specific gravity), or any constituent or decomposition product of
any such pollutant, material, substance or waste, regulated under or as defined
by any Environmental Law.
(b) The Companies have obtained all permits, licenses and other
authorizations or approvals required under Environmental Laws for the lawful
conduct and operation of the Assets and the businesses of the respective
Companies in all material respects ("Environmental Permits"). All such
---------------------
Environmental Permits are in good standing, each of the Companies is and has
been in compliance in all material respects with the terms and conditions of all
such Environmental Permits applicable to it, and, to the knowledge of the
Seller, no appeal or any other action is pending or threatened to revoke any
such Environmental Permit.
(c) Each of the Companies and their respective businesses, operations
and assets are and have been in compliance in all material respects with all
Environmental Laws.
(d) None of the Companies, the Seller or ▇▇▇▇▇▇ has received in the
past five (5) years any written (or oral in the case of ▇▇▇▇▇▇) order, notice,
complaint, request for information, claim, demand or other communication from
any government authority or other person, whether based in contract, tort,
implied or express warranty, strict liability, or any other common law theory,
or any criminal or civil statute, arising from or with respect to (i) the
presence, release or threatened release of any Hazardous Material on, in or
under the Real Property or any other property formerly owned, used or leased by
any Company, (ii) any other
25
circumstances forming the basis of any actual or alleged violation by any
Company, the Seller or ▇▇▇▇▇▇ of any Environmental Law or any liability of such
Company, the Seller or ▇▇▇▇▇▇ under any Environmental Law, (iii) any remedial or
removal action required to be taken by any Company, the Seller or ▇▇▇▇▇▇ under
any Environmental Law, or (iv) any harm, injury or damage to real or personal
property, natural resources, the environment or any person alleged to have
resulted from the foregoing, nor does the Seller have knowledge of any facts
which might reasonably give rise to such notice or communication. Except as set
forth on Schedule 3.36, none of the Companies, the Seller or ▇▇▇▇▇▇ is a party
-------------
to any agreements concerning any removal or remediation of Hazardous Materials.
(e) No lawsuits, claims, civil actions, criminal actions,
administrative proceedings, investigations or enforcement or other actions are
pending or, to the knowledge of the Seller, threatened under any Environmental
Law with respect to any of the Companies, the Seller, ▇▇▇▇▇▇ or the Real
Property.
(f) No Hazardous Materials are or have been released, discharged,
spilled or disposed of or have migrated onto, the Real Property or any other
property previously owned, operated or leased by the respective Companies in
material violation of, or so as to impose liability under, any Environmental
Law, and no environmental condition exists (including, without limitation, the
presence, release, threatened release or disposal of Hazardous Materials)
related to the Real Property, to any property previously owned, operated or
leased by any of the Companies, or to such Company's past or present operations,
which would constitute a material violation of any Environmental Law, or
otherwise impose liability under, any Environmental Law.
(g) To the knowledge of the Seller, none of the Companies, the Seller
or ▇▇▇▇▇▇ or any of their respective predecessors in interest, has transported
or disposed of, or arranged for the transportation or disposal of, any Hazardous
Materials to any location (i) which is listed on the National Priorities List,
the CERCLIS list under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or any similar federal, state or local
list, (ii) which is the subject of any federal, state or local enforcement
action or other investigation, or (iii) about which any of the Companies, the
Seller or ▇▇▇▇▇▇ has received or has reason to expect to receive a potentially
responsible party notice or other notice under any Environmental Law.
(h) No environmental lien has attached or, to the knowledge of the
Seller, is threatened to be attached to the Real Property.
(i) No employee of any of the Companies in the course of his or her
employment with such Company has been exposed to any Hazardous Materials or
other substance, generated, produced or used by such Company which could impose
liability (whether or not a claim has been asserted) against such Company.
(j) Except as set forth on Schedule 3.36 hereto, the Real Property
-------------
does not contain any: (i) septic tanks into which process wastewater or any
Hazardous Materials have been disposed; (ii) asbestos in a form which requires
removal or remediation; (iii) polychlorinated biphenyls (PCBs) in a form which
requires removal or remediation; (iv) underground injection or monitoring ▇▇▇▇▇;
or (v) underground storage tanks.
26
(k) To the knowledge of the Seller, except as set forth on Schedule
--------
3.36, there have been no environmental studies or reports made relating to the
----
Real Property or, to the knowledge of the Seller, any other property or facility
previously owned, operated or leased by any of the Companies.
(l) No Company has agreed to assume, defend, undertake, guarantee, or
provide indemnification for, any liability, including, without limitation, any
obligation for corrective or remedial action, of any other person or entity
under any Environmental Law for environmental matters or conditions.
3.37 [Intentionally Left Blank].
3.38 Manufacturer Communications. Except as set forth on Schedule 3.38, the
--------------------------- -------------
Manufacturer has not (a) notified any of the Companies in writing, or ▇▇▇▇▇▇ in
any manner, of any deficiency in dealership operations, including, but not
limited to, the following areas: (i) brand imaging, (ii) facility conditions,
(iii) sales efficiency, (iv) customer satisfaction, (v) warranty work and
reimbursement, or (vi) sales incentives; (b) otherwise advised any of the
Companies in writing, or ▇▇▇▇▇▇ in any manner, of a present or future need for
facility improvements or upgrades in connection with any Company's business; or
(c) notified any of the Companies in writing, or ▇▇▇▇▇▇ in any manner, of the
awarding or possible awarding of its franchise to an entity or entities other
than such Company in the Metropolitan Statistical Area in which such Company
operates.
3.39 Special Representations Regarding the Registered Common Shares. The
--------------------------------------------------------------
Seller represents and warrants to the Buyer as follows with respect to the
Registered Common Shares to be acquired by the Seller hereunder (for purposes of
this Section 3.39, the "Securities"):
----------
(a) The Seller has received copies of the Prospectus and the Reports
(as defined in Section 4.8 below).
(b) The Seller understands, and has the financial capability of
assuming, the economic risk of an investment in the Securities for an indefinite
period of time, and acknowledges that the Securities are subject to restrictions
during the Lock-Up Period.
(c) The Seller has, to the extent the Seller has deemed necessary,
consulted with the Seller's own investment advisors, legal counsel and tax
advisors regarding an investment in the Securities.
(d) The Seller acknowledges that, except as specifically set forth in
this Agreement (including the Exhibits hereto), the Buyer is not under any
obligation (i) to register the Securities or any offers and sales of the
Securities by the Seller, or (ii) to furnish any information or to take any
other action to assist the Seller in complying with the terms and conditions of
any exemption which might be available under the Securities Act or any state
securities laws with respect to sales of the Securities by the Seller.
27
3.40 Misstatements and Omissions. To the knowledge of the Seller, no
---------------------------
representation and warranty by the Seller contained in this Agreement, and no
statement contained in any certificate or Schedule furnished or to be furnished
by the Seller to the Buyer in connection with this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make such representation and warranty or
such statement not misleading.
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer hereby represents and warrants to the Seller as follows:
4.1 Organization and Good Standing. The Buyer is a corporation duly
-------------------------------
organized and validly existing and in good standing under the laws of the State
of Delaware.
4.2 Buyer's Power and Authority; Consents and Approvals.
---------------------------------------------------
(a) The Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and the other agreements, documents and
instruments to be executed and delivered by the Buyer in connection herewith, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder.
(b) Except as set forth in Schedule 4.2(b) hereto, no authorization,
---------------
approval or consent of, or notice to or filing or registration with, any
governmental agency or body, or any other third party, is required in connection
with the execution and delivery by the Buyer of this Agreement and the other
agreements, documents and instruments to be executed by the Buyer in connection
herewith, the consummation by the Buyer of the transactions contemplated hereby
or thereby or the performance by the Buyer of its obligations hereunder and
thereunder.
4.3 Execution and Enforceability. This Agreement has been executed and
----------------------------
delivered by the Buyer and this Agreement constitutes, and the other agreements,
documents and instruments to be executed and delivered by the Buyer in
connection herewith, when executed and delivered by the Buyer, shall constitute
the legal, valid and binding obligations of the Buyer, enforceable against the
Buyer in accordance with their respective terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditor's rights generally and general equity
principles.
4.4 Litigation Regarding Buyer. There are no actions, suits, claims,
--------------------------
investigations or legal, administrative or arbitration proceedings pending or,
to the Buyer's knowledge, threatened against the Buyer relating to this
Agreement or the transactions contemplated hereby before any court, governmental
or administrative agency or other body, and no judgment, order, writ,
injunction, decree or other similar command of any court or governmental or
administrative agency or other body has been entered against or served upon the
Buyer relating to this Agreement or the transactions contemplated hereby.
28
4.5 No Violation; Conflicts. The execution and delivery by the Buyer of
-----------------------
this Agreement and the other agreements, documents and instruments to be
executed and delivered by the Buyer in connection herewith, the consummation by
the Buyer of the transactions contemplated hereby and thereby and the
performance by the Buyer of its obligations hereunder and thereunder do not and
will not (a) conflict with or violate any of the terms of the Certificate of
Incorporation or By-Laws of the Buyer, (b) violate or conflict with any domestic
law, ordinance, rule or regulation, or any judgment, order, writ, injunction or
decree of any court, administrative or governmental agency or other body,
material to the Buyer or (c) violate any material agreement to which the Buyer
is a party or by which the Buyer is bound.
4.6 Authorization of Registered Common Shares. The issuance of the
-----------------------------------------
Registered Common Shares has been duly authorized by all necessary corporate
action of the Buyer. Upon the issuance of the Registered Common Shares pursuant
to this Agreement, the Registered Common Shares shall be validly issued, fully
paid and non-assessable.
4.7 Capitalization. The authorized capital stock of the Buyer consists of:
--------------
(a) 3,000,000 shares of Preferred Stock, par value $0.10 per share, of
which 300,000 shares are designated Class A Convertible Preferred Stock and are,
in turn, divided into 100,000 shares of Series I (the "Series I Preferred
------------------
Stock"), 100,000 shares of Series II (the "Series II Preferred Stock") and
----- -------------------------
100,000 shares of Series III (the "Series III Preferred Stock"); as of November
--------------------------
13, 2001, no shares of Series I Preferred Stock are issued and outstanding
and/or are committed to be issued by the Buyer, no shares of Series II Preferred
Stock are issued and outstanding and/or are committed to be issued by the Buyer,
and no shares of Series III Preferred Stock are issued and outstanding and/or
are committed to be issued by the Buyer;
(b) 100,000,000 shares of Class A Common Stock, par value $0.01 per
share, of which 28,308,039 shares are issued and outstanding as of November 13,
2001; and
(c) 30,000,000 shares of Class B Common Stock, par value $0.01 per
share, of which 12,029,375 shares are issued and outstanding as of November 13,
2001.
4.8 Disclosure Materials. The Buyer has delivered to the Seller true,
--------------------
correct and complete copies of (i) the Prospectus, (ii) the Buyer's Annual
Report on Form 10-K for the Fiscal Year ended December 31, ▇▇▇▇ (▇▇▇ "▇▇▇▇
----
▇▇-▇"), (▇▇▇) the Buyer's Quarterly Reports on Form 10-Q for the quarters ended
----
March 31, 2001, June 30, 2001 and September 30, 2001 (the "Forms 10-Q"), (iv)
----------
any Current Reports on Form 8-K filed since the period covered by the Form ▇▇-▇
(▇▇▇ "▇▇▇▇▇ ▇-▇"), each in the form (excluding exhibits) filed with the SEC, and
---------
(iv) the Buyer's Definitive Proxy Statement filed with the SEC on April 4, 2001
(the "Proxy Statement" and together with the Form 10-K, the Forms 10-Q and the
---------------
Forms 8-K, "Reports"). Neither the Prospectus nor any of the Reports contained,
-------
at the time of filing thereof with the SEC, any untrue statement of any material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading.
4.9 Brokers' or Finders' Fees, Etc. No agent, broker, investment banker,
------------------------------
person or firm acting on behalf of the Buyer or any person, firm or corporation
affiliated with the Buyer or
29
under its authority is or will be entitled to any brokers' or finders' fee or
any other commission or similar fee directly or indirectly from any of the
parties hereto in connection with the sale of the Shares contemplated hereby.
4.10 Absences or Changes. Since September 30, 2001, the business of the
-------------------
Buyer and its subsidiaries and affiliates has been operated in the ordinary
course, consistent with past practice and, except for matters generally
affecting the Buyer's industry, there has not been any of the following which
has had, or could reasonably be expected to have, a material adverse effect on
the Buyer and its subsidiaries and affiliates taken as a whole: (a) any physical
damage, destruction or loss (whether or not covered by insurance); (b) any
strike, work stoppage or other general labor dispute involving the Buyer or any
of its subsidiaries or affiliates; (c) any action, suit, claim, investigation or
legal, administrative or arbitration proceeding pending, or to Buyer's
knowledge, threatened against Buyer, its subsidiaries or affiliates; or (d) any
other change to the condition (financial or otherwise), business operation,
assets, earnings, or business of Buyer, its subsidiaries or affiliates.
4.11 Investment/Operational Interest.
-------------------------------
(a) The Buyer has sufficient knowledge and experience in financial and
business matters to enable it to evaluate the merits and risks of the
transactions contemplated by this Agreement.
(b) The Buyer is acquiring the Shares for its own account, for
investment or operational purposes, and not with a view to resale or for
distribution of all or any portion of the Shares.
4.12 Misstatements and Omissions. To the knowledge of the Buyer, no
---------------------------
representation and warranty by the Buyer contained in this Agreement, and no
statement contained in any certificate or Schedule furnished or to be furnished
by the Buyer to the Seller in connection with this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make such representation and warranty or
such statement not misleading.
ARTICLE 5
---------
PRE-CLOSING COVENANTS OF THE SELLER
-----------------------------------
The Seller hereby covenants and agrees that, from and after the date hereof
until the Closing:
5.1 Provide Access to Information; Cooperation with Buyer.
-----------------------------------------------------
(a) As promptly as possible after the date hereof, but in no event
later than thirty (30) days after the date of this Agreement, the Seller shall
deliver to the Buyer all of the due diligence materials described on Schedule
--------
5.1 hereto. The Seller shall afford, and cause the Companies to afford, to the
---
Buyer, its attorneys, accountants, and representatives, free and full access at
all reasonable times, and upon reasonable prior notice, to the properties, books
and
30
records of the Companies, and to interview personnel, suppliers and customers of
the Companies, in order that the Buyer may have a full opportunity to make such
investigation (including the Environmental Audit contemplated by Section 5.11
below) as it shall reasonably desire of the assets, businesses and operations of
the Companies (including, without limitation, any appraisals or inspections
thereof), and provide to the Buyer and its attorneys, accountants and
representatives, such additional financial and operating data and other
information as to the businesses and properties of the Companies as the Buyer
shall from time to time reasonably request. The Seller's contact person(s) for
purposes of arranging such access and requesting such additional information is
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. All initial due diligence contacts shall be approved by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
(b) The Seller shall promptly notify the Manufacturer of the execution
and delivery of this Agreement, and thereafter shall use reasonable best efforts
in cooperating with the Buyer in the preparation of and delivery to the
Manufacturer, as soon as practicable after the date hereof, of applications and
any other information necessary to obtain the Manufacturer's consent to or the
approval of the transactions contemplated by this Agreement. At the request of
the Buyer, the Seller shall use its reasonable best efforts to assist the Buyer
in effecting any one-time parts return offered by the Manufacturer, and will
promptly pay over to the Buyer any monies received from the Manufacturer related
thereto. The Seller's contact person(s) for purposes of requests by the Buyer
for such assistance is ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
(c) Within twenty (20) days after the date hereof, the Seller will
obtain from a nationally recognized provider and provide to the Buyer, at the
Seller's expense, a Uniform Commercial Code ("UCC") search report, judgment lien
---
reports and federal, state and local tax lien reports, with respect to each
Company from all jurisdictions in which such Company and its assets are located.
The Seller will obtain and provide to the Buyer separate UCC reports with
respect to each Company's corporate name and all other names it has used in the
last five (5) years. If the Seller does not timely provide such reports to the
Buyer, the Buyer may obtain such reports, and the Seller shall reimburse the
Buyer for all expenses incurred by the Buyer in connection therewith.
5.2 Operation of Businesses of the Companies. Except as otherwise
provided in this Agreement, the Seller shall cause each of the Companies to (a)
maintain its corporate existence in good standing, (b) operate its business
substantially as presently operated and only in the ordinary course and
consistent with past operations and its obligations under any existing
agreements with all applicable automobile manufacturers or distributors, (c) use
its reasonable best efforts to preserve intact its present business
organizations and employees and its relationships with persons having business
dealings with them, including, but not limited to, all applicable automobile
manufacturers or distributors and any floor plan financing creditors, (d) comply
in all material respects with all applicable laws, rules and regulations, (e)
maintain its insurance policies or, if any insurance policy terminates, obtain a
replacement insurance policy with substantially similar coverages, (f) pay all
Taxes, charges and assessments when due, subject to any valid objection or
contest of such amounts asserted in good faith and adequately reserved against,
(g) make all debt service payments when contractually due and payable, (h) pay
all accounts payable and other current liabilities when due, (i) maintain the
Employee Plans and each plan, agreement and arrangement listed on Schedule 3.27,
and (j) maintain its property, plant ------------- and equipment in good
operating condition in accordance with past practices. Notwithstanding the
foregoing, the respective Companies may pay any or all amounts due from
31
such Company to the Seller or any Affiliate thereof prior to the Closing and
such payments shall be reflected in the Closing Balance Sheet.
5.3 Books of Account. The Seller shall cause each of the Companies to
----------------
maintain its books and records of account in the usual, regular and ordinary
manner.
5.4 Employees. The Seller shall (a) use its reasonable best efforts
---------
(which shall not require the payment of money outside of the ordinary course) to
encourage such personnel of each of the Companies as the Buyer may designate in
writing to remain employees of such Company after the date of the Closing, and
(b) not take any action, or permit each of the Companies to take any action, to
encourage any of the personnel of such Company to leave their positions with
such Company.
5.5 Certain Prohibitions. The Seller shall not permit any of the
--------------------
Companies to (a) issue any equity or debt security or any options or warrants,
(b) enter into any subscriptions, agreements, plans or other commitments
pursuant to which such Company is or may become obligated to issue any of its
debt or equity securities, (c) otherwise change or modify its capital structure,
(d) engage in any reorganization or similar transaction or sell or otherwise
dispose of any of its assets, other than sales of inventory in the ordinary
course of business, (e) declare or make payment of any dividend or other
distribution in respect of its capital stock or redeem, repurchase or otherwise
acquire any of its capital stock unless such dividend, redemption, repurchase or
acquisition is reflected in the Closing Balance Sheet, or (f) agree to take any
of the foregoing actions.
5.6 Other Changes. The Seller shall not take, nor shall they permit any
-------------
of the Companies to take, cause, agree to take or cause to occur any of the
actions or events set forth in Sections 3.20(c)-(j) and (m) of this Agreement.
5.7 Additional Information. The Seller shall furnish and cause the
----------------------
respective Companies to furnish to the Buyer such additional information with
respect to any matters or events arising or discovered subsequent to the date
hereof which, if existing or known on the date hereof, would have rendered any
representation or warranty made by the Seller or any information contained in
any Schedule hereto or in other information supplied in connection herewith then
inaccurate or incomplete. The receipt of such additional information by the
Buyer shall not operate as a waiver by the Buyer of the obligations of the
Seller to satisfy the conditions to Closing set forth in Section 7.1 hereof.
5.8 Publicity. Except as may be required by law or the rules of the New
---------
York Stock Exchange, or as necessary in connection with the transaction
contemplated hereby, the Seller shall not (a) make or permit any of the
Companies to make any press release or other public announcement relating to
this Agreement or the transactions contemplated hereby, without the prior
written approval of the Buyer, and (b) otherwise disclose the existence and
nature of its discussions or negotiations regarding the transactions
contemplated hereby to any person or entity other than its accountants,
attorneys and similar professionals, all of whom shall be subject to this
nondisclosure obligation as agents of the Seller. The Seller shall cooperate
with the Buyer in the preparation and dissemination of any public announcements
of the transactions contemplated by this Agreement.
32
5.9 Other Negotiations. The Seller shall not pursue, initiate,
------------------
encourage or engage in, nor shall any of its respective Affiliates or agents
pursue, initiate, encourage or engage in, and the Seller shall cause each of the
Companies and its Affiliates, directors, officers and agents not to pursue,
initiate, encourage or engage in, any negotiations or discussions with, or
provide any information to, any other person or entity (other than the Buyer and
its representatives and Affiliates) regarding the sale of the assets or capital
stock of any of the Companies or any merger or similar transaction involving any
of the Companies.
5.10 Closing Conditions. The Seller shall use all reasonable best
------------------
efforts to satisfy promptly the conditions to Closing set forth in Article 7
hereof required herein to be satisfied by the Seller prior to the Closing;
provided that the Seller shall not be required to pay any amount (outside of the
ordinary course) in order to obtain any consent or approval hereunder.
5.11 Environmental Audit. The Seller shall cause each of the Companies
-------------------
to allow an environmental consulting firm selected by the Buyer (the
"Environmental Auditor") to have prompt access to the Real Property in order to
---------------------
conduct an environmental investigation of the Owned Real Property, as
contemplated by the respective Real Property Purchase Agreements, and the Leased
Premises, as contemplated by Section 9.6 below, and otherwise, satisfactory to
the Buyer in scope (such scope being sufficient to result in a Phase I
environmental audit report and a Phase II environmental audit report, if desired
by the Buyer), of, and to prepare a report with respect to, the Real Property
(the "Environmental Audit"). The Seller shall cause each of the Companies to
-------------------
provide to the Environmental Auditor: (a) reasonable access to all its existing
records concerning the matters which are the subject of the Environmental Audit;
and (b) reasonable access to the employees of such Company and the last known
addresses of former employees of such Company who are most familiar with the
matters which are the subject of the Environmental Audit (the Seller agreeing to
use reasonable efforts to have such former employees respond to any reasonable
requests or inquiries by the Environmental Auditor). The Environmental Auditor
shall coordinate visits to the Real Property and conversations with employees of
each of the Companies with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, who shall reasonably cooperate
with the Buyer in such regard, and shall use reasonable efforts to minimize
disruption of the Company's business performing such investigations and to
restore the Real Property to its prior condition. The Seller shall otherwise
cooperate and cause each of the Companies to cooperate with the Environmental
Auditor in connection with the Environmental Audit. The Buyer shall bear 100% of
the costs, fees and expenses incurred in connection with the Environmental
Audit.
5.12 Audited Financial Statements. The Seller shall allow, cooperate
----------------------------
with and assist the Buyer's accountants, and shall instruct each of the
Companies' accountants to cooperate, in the preparation of audited financial
statements of the Company as necessary for any required filings by the Buyer
with the SEC or with the Buyer's lenders; provided that the expense of such
audit shall be borne by the Buyer.
5.13 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Subject to the determination by the Buyer and
-----------------
the Seller that any of the following actions is not required, the Seller shall
promptly prepare and file Notification and Report Forms under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act")
-------
with the Federal Trade Commission (the "FTC") and the Antitrust Division of the
---
Department of Justice (the "Antitrust Division"), and respond as promptly as
------------------
practicable to all inquiries received from the FTC or the Antitrust Division for
additional information or documentation.
33
5.14 Curing Breaches of Representations and Warranties. Upon written
-------------------------------------------------
notice by the Buyer of the discovery by the Buyer prior to the Closing of a
breach of any representation and warranty of the Seller contained in this
Agreement, the Seller will, if requested in writing by the Buyer, at its
expense, undertake reasonable efforts to cure such breach prior to the Closing.
If the Buyer shall have requested the Seller to cure any such breach pursuant to
this Section 5.14 and the Seller shall have cured such breach prior to the
Closing, the Buyer shall not be entitled to claim such breach as a failure of
the Buyer's condition to close under Section 7.1 below.
5.15 Concerning Employee Plans.
-------------------------
(a) The Seller and each of the Companies will permit the Buyer and
its agents to perform due diligence with respect to each Company's Employee
Plans, including without limitation by providing the Buyer with (i) access to
all benefit plan administrators, record keepers, custodians, agents and
advisers, (ii) evidence of such Company's 401(k) plan's tax-qualified status and
timely Form 5500 filings, (iii) such documentation that such Company may have or
may reasonably obtain that will allow the Buyer to determine the amount, if any,
of fees, loads or other charges that will be triggered by the ceasing of new
contributions to the current Company's 401(k) plan or otherwise by virtue of the
transactions contemplated hereby and (iv) such other documentation as the Buyer
shall request with respect to such Company's 401(k) plan.
(b) Effective as of the Closing, the Seller shall remove the
Company as a plan sponsor of and/or participating employer in any Employee Plan
that includes a cash or deferred arrangement under Section 401(k) of the Code
(the "401(k) Plan") and, if applicable, shall provide for the sponsorship of any
-----------
such plan to be assumed by another entity owned or controlled by the Seller. In
addition, the Seller shall cause the 401(k) Plan to be amended as of the Closing
Date to (i) bring the 401(k) Plan into compliance with current applicable law,
(ii) provide that the employees of the Company who are participants in the
401(k) Plan shall be deemed to incur a "severance from employment" for purposes
of Section 401(k)(2) of the Code in connection with the consummation of the
transactions contemplated by this Agreement, (iii) fully vest all accounts of
all such participants in the 401(k) Plan, and (iv) provide for the distribution
of all such accounts. In addition, subject to acceptance by the Buyer's 401(k)
plan, the Seller shall cause the 401(k) Plan to allow employees of the Company
who are participants therein to roll over outstanding participant loans to the
Buyer's 401(k) plan and the Seller's 401(k) Plan shall not treat such
outstanding loans as in default. The Seller shall also cause the Company to
initiate the termination of all Employee Plans as of the Closing Date and shall
provide the Buyer at Closing with documentation satisfactory to the Buyer to
such effect; provided, however, that the Buyer shall have the option, in its
sole discretion and exercised by the delivery to the Seller of a written
request, to require the Seller to cause the Company to transfer any or all of
the Company's plans or related insurance policies to the Buyer (or other related
entity which will continue the Company's business). Notwithstanding the
foregoing, if the Company participates in any other Employee Plans in which
other entities owned or controlled by the Seller will continue to participate
after the Closing (hereinafter called "Other Plans"), the Seller shall cause the
-----------
Company to terminate its participation in any or all of such Other Plans as of
the Closing Date. At the Closing, the Seller shall deliver to the Buyer
resolutions of the Board of Directors of the Company and other applicable
entities and related plan amendments reflecting the foregoing 401(k) Plan
amendments, plan terminations and
34
termination of the Company's sponsorship of and participation in the 401(k) Plan
and Other Plans. The Seller shall deliver drafts of the foregoing documents to
the Buyer at least fifteen (15) days prior to the Closing. The Seller shall
reimburse the Buyer for all fees and expenses (including but not limited to
attorneys' fees) paid or incurred by the Company or the Buyer in connection with
the foregoing amendments and/or terminations of Employee Plans, except to the
extent provided by this Agreement or included in the Closing Balance Sheet. The
Seller shall retain all liability and responsibility for the 401(k) Plan and
Other Plans.
5.16 Schedules.
---------
(a) The Schedules attached or to be attached to this Agreement
pursuant to Article III hereof are deemed to constitute an integral part of this
Agreement and to supplement the representations, warranties, covenants or
agreements of the Seller contained in this Agreement. The inclusion of any item
of any such Schedule shall not be construed as an indication of the materiality
or lack of materiality of such item. Each item disclosed in such Schedules shall
be deemed to be disclosed for all sections of this Agreement to which such
disclosure could reasonably be construed to apply.
(b) Prior to the Closing, the Seller may amend any Schedule
attached to this Agreement pursuant to Article III hereof from time to time by
written notice to the Buyer, in order to provide supplemental and updating
information; provided, however, no such amendment shall be effective if such
amendment, either alone or in combination with any prior or contemporaneous
amendments to any of the Schedules, discloses a Material Adverse Item not
previously disclosed in the Schedules. For purposes of this Section 5.16(b) (and
not to be construed as a definition of materiality for any other purpose in this
Agreement) a "Material Adverse Item" shall mean (i) any event, occurrence or
---------------------
state of facts which does, or could reasonably be expected to, (A) prohibit or
prevent or substantially restrain or delay the sale contemplated by this
Agreement, (B) substantially impair or challenge the power and authority of the
Seller to enter into this Agreement or carry out its obligations hereunder, or
(C) substantially impair or challenge the legality or validity of the sale
contemplated by this Agreement, or (ii) any single item or group of related
items outside the ordinary course of business (including, without limitation,
contracts or leases) which adversely affects, or could reasonably be expected to
adversely affect, the Assets, the Shares, the Real Property or the Companies
(including, without limitation, their respective financial condition or results
of operations) by $[***] or more.
ARTICLE 6
---------
PRE-CLOSING COVENANTS OF BUYER
------------------------------
The Buyer hereby covenants and agrees that, from and after the date
hereof until the Closing:
6.1 Publicity. Except as may be required by law or by the rules of the
---------
New York Stock Exchange, or as necessary in connection with the transactions
contemplated hereby, the Buyer shall not (a) make any press release or other
public announcement relating to this Agreement or the transactions contemplated
hereby, without the prior written approval of the
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
35
Seller, or (b) otherwise disclose the existence and nature of its discussions or
negotiations regarding the transactions contemplated hereby to any person or
entity other than its accountants, attorneys and similar professionals, all of
whom shall be subject to this nondisclosure obligation as agents of the Buyer.
The Buyer shall cooperate with the Seller in the preparation and dissemination
of any public announcement of the transactions contemplated by this Agreement.
6.2 Closing Conditions. The Buyer shall use all reasonable best efforts
------------------
to satisfy promptly the conditions to Closing set forth in Article 8 hereof
required herein to be satisfied by the Buyer prior to the Closing.
6.3 Application to Manufacturer. With the reasonable cooperation of the
---------------------------
Seller, the Buyer shall provide to the Manufacturer as promptly as practicable
after the execution and delivery of this Agreement any application or other
information with respect to such application necessary in connection with the
seeking of the consents of the Manufacturer to the transactions contemplated by
this Agreement and the issuance of franchises to operate automobile dealerships
on the Real Property or at such other locations as the Buyer shall determine in
its sole discretion. For purposes of the Buyer's application to the
Manufacturer, as contemplated herein, the address of the Manufacturer and the
relevant contact persons at the Manufacturer is set forth on Schedule 6.3
hereto.
6.4 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Subject to the determination by the Buyer that
-----------------
any of the following actions is not required, the Buyer shall promptly prepare
and file Notification and Report Forms under the HSR Act with the FTC and the
Antitrust Division, and subject to Section 10.1(d) hereof, respond as promptly
as practicable to all inquiries received from the FTC or the Antitrust Division
for additional information or documentation, and the Buyer shall pay all filing
fees in connection therewith.
6.5 Access to Information; Confidentiality. The Buyer shall, and shall
--------------------------------------
cause its officers, employees, counsel, financial advisors and other
representatives to, afford to the Seller and its representatives reasonable
access during normal business hours to the properties, books and records of the
Buyer which may be relevant to the transaction contemplated hereby, and, during
such period, the Buyer shall furnish, or otherwise make available, promptly to
the Seller (i) a copy of each report and other document filed by it during such
period pursuant to the requirements of the Exchange Act and (ii) all other
material information concerning its business, properties, financial condition,
operations and personnel as the Seller may from time to time reasonably request.
The Seller will hold, and will cause its respective directors, officers,
employees, accountants, counsel, financial advisors and other representatives
and Affiliates to hold, any nonpublic information in confidence.
ARTICLE 7
---------
CONDITIONS TO OBLIGATIONS OF THE BUYER AT THE CLOSING
-----------------------------------------------------
The obligations of the Buyer to perform this Agreement at the Closing
are subject to the satisfaction at or prior to the Closing of the following
conditions, unless waived in writing by the Buyer:
36
7.1 Representations and Warranties. The representations and warranties
------------------------------
made by the Seller in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing as
though made at and as of the Closing.
7.2 Performance of Obligations of the Seller. The Seller shall have
----------------------------------------
delivered the stock certificates and stock powers for the Shares, as described
in Section 1.3 hereof, and shall have performed in all material respects all
other obligations required to be performed by the Seller under this Agreement,
and complied in all material respects with all covenants for which compliance by
the Seller is required under this Agreement, prior to or at the Closing.
7.3 Closing Documentation. The Buyer shall have received the following
---------------------
documents, agreements and instruments from the Seller:
(a) a certificate signed by the Seller and dated the date of the
Closing certifying as to the satisfaction of the conditions set forth in
Sections 7.1 and 7.2 hereof;
(b) such duly signed resignations of the directors and officers of
each Company as the Buyer shall have previously requested;
(c) wire transfer instructions from the Seller, with respect to the
payment at the Closing of the Purchase Price;
(d) an opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., and such Michigan counsel
reasonably acceptable to the Buyer, dated the date of the Closing and addressed
to the Buyer, in substantially the form of Exhibit D hereto;
---------
(e) copies of all authorizations, approvals, consents, notices,
registrations and filings referred to in Schedules 3.2(b), 3.10 and
---------------- ----
3.29(b) hereof, specifically including any consents required under the Leases,
-------
other than from the Manufacturer;
(f) with respect to each Company, certificates dated as of a recent
date from (i) the Secretary of State of the State of incorporation of such
Company to the effect that the Company is duly incorporated and in good standing
in such state and, if available, stating that the Company owes no franchise
taxes in such state and listing all documents of the Company on file with said
Secretary of State, and (ii) the Secretary of State of each State in which the
Company is qualified as a foreign corporation to the effect that the Company is
duly qualified and authorized to do business in such State and, if available,
stating that the Company owes no franchise taxes in such State;
(g) a copy of the Articles of Incorporation of each Company,
including all amendments thereto, certified as of a recent date by the Secretary
of State of the State of incorporation of such Company;
(h) evidence, reasonably satisfactory to the Buyer, of the
authority and incumbency of the persons acting on behalf of each Company in
connection with the execution of any document delivered in connection with this
Agreement;
37
(i) Uniform Commercial Code Search Reports on Form UCC-11 with
respect to each Company from the states and local jurisdictions where the
principal place of business of the Company and its assets are located, updating
the UCC reports referred to in Section 5.1(c);
(j) a certificate of the Seller as to the Seller's non-foreign
status in appropriate form;
(k) with respect to each Company, the corporate minute books and
stock record books of the Company, and all other books and records of, or
pertaining to, the businesses and operations of the Company;
(l) pay-off letters of lenders to the respective Companies, in form
and substance reasonably satisfactory to the Buyer, with respect to amounts
owing by the respective Companies as of the Closing;
(m) a release from the Seller and ▇▇▇▇▇▇, in form and substance
reasonably satisfactory to the Buyer, with respect to all claims, demands,
causes of action, obligations, debts and liabilities, which the Seller or ▇▇▇▇▇▇
may have against the Companies arising out of transactions or occurrences prior
to the Closing;
(n) estoppel certificates and/or subordination and non-disturbance
agreements, in form and substance reasonably acceptable to the Buyer, from the
owners, lessors and/or mortgagees of real property that is leased by any of the
Companies; and
(o) such other instruments and documents as the Buyer shall
reasonably request not inconsistent with the provisions hereof.
7.4 Approval of Legal Matters. The form of all instruments,
-------------------------
certificates and documents to be executed and delivered by the Seller to the
Buyer pursuant to this Agreement and all legal matters in respect of the
transactions as herein contemplated shall be reasonably satisfactory to the
Buyer and its counsel, none of whose approval shall be unreasonably withheld or
delayed.
7.5 No Litigation. No action, suit or proceeding shall have been
-------------
instituted by a governmental agency or any other third party to prohibit or
restrain the sale contemplated by this Agreement or otherwise challenge the
power and authority of the Buyer or the Seller to enter into this Agreement or
to carry out their obligations hereunder or the legality or validity of the sale
contemplated by this Agreement.
7.6 No Material Adverse Change. There shall have been no material
--------------------------
adverse change or development in the business, prospects, properties, earnings,
results of operations or financial condition of any of the Companies, or any of
its assets; provided that the foregoing shall not apply to changes generally
occurring in the Company's industry.
7.7 No Adverse Laws. There shall not have been enacted, adopted or
---------------
promulgated any statute, rule, regulation or order which materially adversely
affects the business or assets of any of the Companies.
38
7.8 Affiliate and Other Transactions. All amounts owing to the
--------------------------------
respective Companies from the Seller or any Affiliate thereof or from the
respective Companies' officers and employees shall have been paid in full on or
prior to the Closing Date, except for employee receivables included in the
Closing Balance Sheet in accordance with Section 1.2(c).
7.9 Escrow Agreement. The Seller and the Escrow Agent shall have duly
----------------
executed and delivered to the Buyer the Escrow Agreement.
7.10 Manufacturer Approval. The Manufacturer shall have given any
---------------------
required approval of the transfer of the Shares to the Buyer and shall have
given any required approval of O. ▇▇▇▇▇▇ ▇▇▇▇▇ or his designee as the authorized
dealer operator of the respective Companies' dealership franchises with the
Manufacturer at the present dealership locations, and the Manufacturer shall
have executed any required dealer agreements and/or amendments or supplements
thereto in connection with the foregoing.
7.11 Other Agreements. The closings under the Other Agreements shall
----------------
have occurred or shall be occurring simultaneously with the Closing.
7.12 Cancellation of Stock Options. All outstanding options, warrants,
-----------------------------
"phantom" stock options and other plans, agreements or arrangements of the
respective Companies with respect to the purchase, or the issuance of, or
otherwise relating to, any capital stock or other securities of the respective
Companies shall have been canceled and terminated prior to the Closing at no
expense to the Buyer, and the Buyer shall have received reasonably satisfactory
evidence thereof.
7.13 Audited Financial Statements. The Buyer shall have completed
----------------------------
preparation of such audited financial statements of the Companies as may be
required by applicable regulations of the SEC or by any of the Buyer's lenders.
7.14 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period. All applicable waiting periods
--------------------------------
under the HSR Act shall have expired without any indication by the Antitrust
Division or the FTC that either of them intends to challenge the transactions
contemplated hereby or, if any such challenge or investigation is made or
commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
ARTICLE 8
---------
CONDITIONS TO OBLIGATIONS OF THE SELLER AT THE CLOSING
------------------------------------------------------
The obligations of the Seller to perform this Agreement at the Closing
are subject to the satisfaction at or prior to the Closing of the following
conditions, unless waived in writing by the Seller:
8.1 Representations and Warranties. The representations and warranties
------------------------------
made by the Buyer in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing as
though made at and as of the Closing.
39
8.2 Performance of Obligations of the Buyer. The Buyer shall have paid
---------------------------------------
the Purchase Price pursuant to Section 1.2(b) hereof and shall have performed in
all material respects all other obligations required to be performed by it under
this Agreement, and complied in all material respects with all covenants for
which compliance by it is required under this Agreement, prior to or at the
Closing.
8.3 Closing Documentation. The Seller shall have received the following
---------------------
documents, agreements and instruments from the Buyer:
(a) a certificate signed by a duly authorized signatory of the
Buyer and dated as of the Closing Date certifying as to the satisfaction of the
conditions set forth in Sections 8.1 and 8.2 hereof;
(b) payment of the portion of the Purchase Price payable to the
Seller at the Closing pursuant to Section 1.2 hereof;
(c) an opinion of Parker, Poe, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ L.L.P., counsel
for the Buyer, dated as of the Closing Date and addressed to the Seller, in
substantially the form of Exhibit E hereto;
---------
(d) a certificate dated as of a recent date from the Secretary of
State of the State of Delaware to the effect that the Buyer is duly incorporated
and in good standing in such State;
(e) a copy of the Buyer's Certificate of Incorporation, including
all amendments thereto, certified by the Secretary of State of the State of
Delaware;
(f) a certificate of the Secretary or an Assistant Secretary of the
Buyer as to (i) the bylaws of the Buyer, (ii) the resolutions of the Buyer's
Board of Directors authorizing this Agreement and the transactions contemplated
hereby, and (iii) the authority and incumbency of the persons acting on behalf
of the Buyer in connection with the execution of any document delivered in
connection with this Agreement;
(g) a release from each Company and the Buyer, in form and
substance reasonably satisfactory to the Seller, with respect to all claims,
demands, causes of action, obligations, debts and liabilities, which such
Company or the Buyer may have against ▇▇▇▇▇▇, arising our of or based upon the
acts or omissions of ▇▇▇▇▇▇, in his capacity as an officer, director, employee
or agent of such Company; and
(h) such other instruments and documents as the Seller shall
reasonably request not inconsistent with the provisions hereof.
8.4 Approval of Legal Matters. The form of all certificates,
-------------------------
instruments and documents to be executed or delivered by the Buyer to the Seller
pursuant to this Agreement and all legal matters in respect of the transactions
as herein contemplated shall be reasonably satisfactory to the Seller and its
counsel, none of whose approval shall be unreasonably withheld or delayed.
40
8.5 No Litigation. No action, suit or proceeding shall have been
-------------
instituted by a governmental agency or any other third party to prohibit or
restrain the sale contemplated by this Agreement or otherwise challenge the
power and authority of the Buyer or the Seller to enter into this Agreement or
to carry out their obligations hereunder or the legality or validity of the sale
contemplated by this Agreement.
8.6 Escrow Agreement. The Buyer and the Escrow Agent shall have duly
----------------
executed and delivered the Escrow Agreement to the Seller.
8.7 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period. All applicable waiting periods
--------------------------------
under the HSR Act shall have expired without any indication of the Antitrust
Division or the FTC that either of them intends to challenge the transactions
contemplated hereby, or, if any such challenge or investigation is made or
commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
8.8 Other Agreements. The closings under the Other Agreements shall
----------------
have occurred or shall be occurring contemporaneously with the Closing.
8.9 Approvals and Consents. The Seller shall have all approvals,
----------------------
consents, notices, registrations and filings referred to in Schedules 3.2(b),
----------------
3.10 and 3.29(b) hereof, including any consents required under the Leases other
---- -------
than from the Manufacturer. The Seller acknowledges that it is the Seller's
obligation to use best reasonable efforts to obtain such authorizations,
consents and approvals.
8.10 Manufacturer Approval. The Manufacturer shall have given any
---------------------
required approval of the transfer of the Shares to the Buyer and shall have
given any required approval of O. ▇▇▇▇▇▇ ▇▇▇▇▇ or his designee as the authorized
dealer operator of the Company's dealership franchises with the Manufacturer at
the present dealership locations, and the Manufacturer shall have executed any
required dealer agreements and/or amendments or supplements thereto in
connection with the foregoing.
ARTICLE 9
---------
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC.
-----------------------------------------------------------------
9.1 Survival. All statements contained in any Schedule or certificate
--------
delivered hereunder or in connection herewith by or on behalf of any of the
parties pursuant to this Agreement shall be deemed representations and
warranties by the respective parties hereunder unless otherwise expressly
provided herein. The representations and warranties of the Seller or the Buyer
contained in this Agreement, including those contained in any Schedule or
certificate delivered hereunder or in connection herewith, shall survive the
Closing for a period of [***] years with the exception of (i) the
representations and warranties of the Seller contained in Section 3.21, which
shall survive the Closing until the expiration of the applicable tax statutes of
limitation plus a period of sixty (60) days, (ii) the representations and
warranties of the Seller contained in Sections 3.19 and 3.36, which shall
survive the Closing for a period of [***] years, (iii) the representations and
warranties of the Seller contained in Sections 3.1 and 3.11(a),
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
41
which shall survive the Closing indefinitely, and (iv) the representations and
warranties of the Buyer contained in Section 4.8, which shall survive the
Closing for the applicable statute of limitations plus sixty (60) days. As to
each representation and warranty of the parties hereto, the date to which such
representation and warranty shall survive is hereinafter referred to as the
"Survival Date".
-------------
9.2 Agreement to Indemnify by the Seller. Subject to the terms and
------------------------------------
conditions of Sections 9.4 and 9.5 hereof, the Seller hereby agrees to indemnify
and save the Buyer, the Companies, their respective subsidiaries, officers and
directors, and the permitted successors and assigns of each of the foregoing
(each, a "Buyer Indemnitee") harmless from and against, for and in respect of,
----------------
any and all damages, losses, obligations, liabilities, demands, judgments,
injuries, penalties, claims, actions or causes of action, encumbrances, costs,
and expenses (including, without limitation, reasonable attorneys' fees and
expert witness fees), suffered, sustained, incurred or required to be paid by
any Buyer Indemnitee (collectively, "Buyer's Damages") arising out of, based
---------------
upon, in connection with, or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Seller contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in connection
herewith, excluding any breach of any representation and warranty contained in
Sections 3.1, 3.2(a), 3.3, 3.6, 3.11(a) and 3.19 above;
(b) the untruth, inaccuracy or breach of any representation
and warranty contained in Sections 3.1, 3.2(a), 3.3, 3.6, 3.11(a) and 3.19
above;
(c) the breach or nonfulfillment of any covenant or agreement
of the Seller contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto;
(d) the presence, at any time during the period commencing on
the Closing Date and ending on the [***] anniversary of the Closing Date, of
Hazardous Materials at, on, under or around the Real Property, in violation of,
or so as to impose liability under, any applicable Environmental Laws
(including, without limitation, the soil, groundwater, surface water, sediment
or other media) which resulted from events that occurred or conditions that
existed prior to the Closing ( Buyer's Damages relating to the facts and
circumstances set forth in this clause (d) are referred to as, the
"Environmental Liabilities");
-------------------------
(e) any and all actions, suits, claims, investigations and
legal, administrative and arbitration proceedings listed or referred to in
Schedule 3.23; or
-------------
(f) any and all Taxes arising out of or based upon the
Distributed Assets or the distribution thereof as contemplated by Section 1.5.
9.3 Agreement to Indemnify by Buyer. Subject to the terms and
-------------------------------
conditions of Sections 9.4 and 9.5 hereof, the Buyer hereby agrees to indemnify
and save the Seller and its successors and assigns (each, a "Seller Indemnitee")
-----------------
harmless from or against, for and in respect of, any and all damages, losses,
obligations, liabilities, demands, judgments, injuries, penalties, claims,
actions or causes of action, encumbrances, costs, and expenses (including,
without limitation, reasonable attorneys' fees and expert witness fees)
suffered, sustained,
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
42
incurred or required to be paid by any Seller Indemnitee (collectively,
"Seller's Damages") arising out of, based upon or in connection with or as a
----------------
result of:
(a) the untruth, inaccuracy or breach of any representation
and warranty of the Buyer (regardless of any knowledge thereof by the Seller at
or prior to the Closing) contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in connection
herewith;
(b) the breach or nonfulfillment of any covenant or agreement
of the Buyer contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto.
9.4 Limitations on Indemnification.
------------------------------
(a) No claim for indemnification with respect to a breach of a
representation and warranty shall be made under this Agreement after the
applicable Survival Date unless prior to such Survival Date the Buyer Indemnitee
or the Seller Indemnitee, as the case may be, shall have given the Seller or the
Buyer, as the case may be, written notice of such claim for indemnification
based upon actual loss sustained, or potential loss anticipated, as a result of
the existence of any claim, demand, suit, or cause of action against such Buyer
Indemnitee or Seller Indemnitee, as the case may be. No claim for
indemnification pursuant to Section 9.2(d) or Section 9.2(c) insofar as such
claim relates to a breach of Section 9.6 below shall be made by any Buyer
Indemnitee after the [***] anniversary of the Closing Date unless prior to such
date the Buyer Indemnitee shall have given the Sellers written notice of such
claim for indemnification based upon actual loss sustained, or potential loss
anticipated as a result of the existence of any claim, demand, suit, or cause of
action against such Buyer Indmenitee.
(b) The Sellers shall have no indemnification liability under
this Agreement unless and until (and only to the extent that) all claims with
respect to such Buyer's Damages pursuant to this Agreement and for "Buyer's
Damages" under the Arngar Stock Purchase Agreement (as defined on Exhibit A-2)
-----------
and "Losses" under the ▇▇▇▇▇▇ Asset Purchase Agreement (as defined on Exhibit
-------
A-2) exceed a cumulative aggregate total of [***] (the "Basket"); provided,
--- ------ --------
however, the foregoing Basket limitation shall not apply to (1) claims under
-------
Sections 9.2(b), (2) claims under Section 9.2(c), in so far as such claims
relate to a breach of Section 9.6 below, (3) claims pursuant to Section 9.2(d)
through (f), or (4) claims based upon fraud. With respect to any claim for
indemnity under Section 9.2(a) above, if the matter is also the basis for a
claim for indemnity under any other provision of Section 9.2 for which the
Basket limitation is not applicable, the Basket limitation shall not be
applicable to such claim.
(c) Except in the case of claims based upon fraud, the
aggregate indemnification liability of the Seller under this Agreement and the
"Seller" under the Arngar Stock Purchase Agreement and the "Sellers" and the
"Stockholder" under the ▇▇▇▇▇▇ Asset Purchase Agreement shall be [***], which
amount is inclusive of indemnification obligations contemplated by the
Environmental Indemnification Cap (as defined below). Notwithstanding the
foregoing, the Seller shall have no indemnification obligations hereunder with
respect to indemnification obligations contemplated by the Environmental
Indemnification Cap to the extent such indemnification obligations would require
payments by the Seller in
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
43
excess of the Environmental Indemnification Cap. As used in this Agreement, the
"Environmental Indemnification Cap" shall mean the obligations under this
---------------------------------
Agreement and the Other Agreements to (i) remediate environmental contamination,
including, without limitation, pursuant to (A) Paragraph 5(e) of the "Owned Real
Property Rider" under the Arngar Stock Purchase Agreement, (B) Paragraph 7(e) of
the respective Real Property Purchase Agreements, (C) Section 9.6 below, (D)
Section 9.6 of the Arngar Stock Purchase Agreement or (E) Section 10.9 of the
▇▇▇▇▇▇ Asset Purchase Agreement, and/or (ii) to indemnify for Environmental
Liabilities or breaches of representations or warranties with respect to
environmental matters, in either case with respect to the Owned Real Property
and/or the Leased Premises, and the "Owned Real Property" and/or the "Leased
Premises" under each of the Arngar Stock Purchase Agreement and the ▇▇▇▇▇▇ Asset
Purchase Agreement, in the maximum aggregate amount of [***].
(d) In connection with any claim for indemnification with
respect to which the Buyer or the Seller, as the case may be, have an
enforceable claim against any third party (contractual or otherwise) on account
of the item for which such claim for indemnification has been made, the Buyer or
the Seller, as the case may be, shall, at the time of payment by the
indemnifying party of the claim for indemnification, assign to the other party
such claim; provided, however, the assignee of such claim shall further protect
-------- -------
and indemnify the assignor in connection with the pursuit by the assignee of
such claim against such third party; provided, further, however, this clause (d)
-------- ------- -------
shall not require the assignment of any claims under any insurance policy.
(e) No Buyer Indemnitee or Seller Indemnitee, as the case may
be, shall be entitled to indemnification pursuant to this Article 9 to the
extent of any insurance (including title insurance) proceeds received by the
Buyer Indemnitee or Seller Indemnitee, as the case may be, in connection with
the facts giving rise to such indemnification (and the Buyer Indemnitee or
Seller Indemnitee shall seek full recovery under all insurance policies covering
any Buyer's Damages or Seller's Damages, as the case may be, to the extent
permitted), provided that this clause (e) shall not be applicable to the extent
it would give the insurance company a basis to deny coverage with respect to the
particular claim involved.
(f) No Buyer Indemnitee shall be entitled to indemnification
pursuant to this Article 9 to the extent that an applicable reserve for such
Buyer' Damages was included in the Closing Balance Sheet.
(g) With respect to the Seller's obligations to pay Buyer's
Damages pursuant to Section 9.2 of this Agreement, to the extent that the Escrow
Shares remain held pursuant to the terms of the Escrow Agreement, the Buyer
shall first make demand under the Escrow Agreement for delivery of that number
of Escrow Shares, up to all of the Escrow Shares, obtained by dividing the
amount of the Buyer's Damages by the Market Price as of the date of delivery,
rounded to the next whole share, or substituted cash as provided in Section 5(j)
of the Escrow Agreement. To the extent that the Buyer's Damages exceed the value
of the Escrow Shares delivered to the Buyer, determined based upon the Market
Price of such shares as of the date of delivery, or such substituted cash, or
the Escrow Shares no longer remain held pursuant to the terms of the Escrow
Agreement, the Seller shall be obligated to return promptly to the Buyer
Registered Common Shares having a value, determined as aforesaid, equal to the
unpaid portion of such Buyer's Damages and, failing to do so, to pay promptly to
the Buyer, in cash or
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
44
by wire transfer to an account or accounts designated by the Buyer, the amount
of the unpaid portion of such Buyer's Damages.
(h) The provisions of this Article 9 shall be effective upon
consummation of the Closing, and prior to the Closing, shall have no force and
effect. Following the Closing, except in the case of claims based upon fraud,
the sole and exclusive remedy for the breach of any representation, warranty or
covenant contained in, or otherwise relating to, this Agreement shall be
indemnification provided for in this Agreement.
9.5 Procedures Regarding Third Party Claims. The procedures to be
---------------------------------------
followed by the Buyer and the Seller with respect to indemnification hereunder
regarding claims by third persons which could give rise to an indemnification
obligation hereunder shall be as follows:
(a) Promptly after receipt by any Buyer Indemnitee or Seller
Indemnitee, as the case may be, of notice of the commencement of any action or
proceeding (including, without limitation, any notice relating to a Tax audit)
or the assertion of any claim by a third person which the person receiving such
notice has reason to believe may result in a claim by it for indemnity pursuant
to this Agreement, such person (the "Indemnified Party") shall give a written
-----------------
notice of such action, proceeding or claim to the party against whom
indemnification pursuant hereto is sought (the "Indemnifying Party"), setting
------------------
forth in reasonable detail the nature of such action, proceeding or claim,
including copies of any documents and written correspondence from such third
person to such Indemnified Party; provided, however, that failure to give such
-------- -------
notice promptly shall not relieve the Indemnifying Party of its or his
obligations hereunder except to the extent it or he shall have been materially
prejudiced by such failure.
(b) The Indemnifying Party shall be entitled, at its own
expense, to participate in the defense of such action, proceeding or claim, and,
if (i) the action, proceeding or claim involved seeks (and continues to seek)
solely monetary damages and is a matter other than a tax audit, (ii) the
Indemnifying Party confirms, in writing, its obligation hereunder to indemnify
and hold harmless the Indemnified Party with respect to such damages in their
entirety pursuant to Sections 9.2 or 9.3 hereof, as the case may be, and (iii)
the Indemnifying Party shall be, in the reasonable judgment of the Indemnified
Party, able to adequately satisfy any adverse judgment as a result of its
indemnification obligation with respect to such action, proceeding or claim,
then the Indemnifying Party shall be entitled to assume and control such defense
with counsel chosen by the Indemnifying Party and approved by the Indemnified
Party, which approval shall not be unreasonably withheld or delayed. The
Indemnified Party shall be entitled to participate therein after such
assumption, the costs of such participation following such assumption to be at
its own expense. Upon assuming such defense, the Indemnifying Party shall have
full rights to enter into any monetary compromise or settlement which is
dispositive of the matters involved, subject to the consent of the Indemnified
Party, such consent not to be unreasonably withheld or delayed.
(c) With respect to any action, proceeding or claim as to
which (i) the Indemnifying Party does not have the right to assume the defense
or (ii) the Indemnifying Party shall not have exercised its right to assume the
defense, the Indemnified Party shall assume and control the defense of and
contest such action, proceeding or claim with counsel chosen by it and approved
by the Indemnifying Party, which approval shall not be unreasonably withheld.
The Indemnifying Party shall be entitled to participate in the defense of such
action, proceeding or
45
claim, the cost of such participation to be at its own expense. The Indemnifying
Party shall be obligated to pay the reasonable attorneys' fees and expenses of
the Indemnified Party to the extent that such fees and expenses relate to claims
as to which indemnification is due under Sections 9.2 or 9.3 hereof, as the case
may be. The Indemnified Party shall have full rights to enter into any monetary
compromise or settlement which is dispositive of the matters involved, subject
to the consent of the Indemnified Party, such consent not to be unreasonably
withheld or delayed.
(d) Both the Indemnifying Party and the Indemnified Party
shall cooperate fully with one another in connection with the defense,
compromise or settlement of any such action, proceeding or claim, including,
without limitation, by making available to the other all pertinent information
and witnesses within its control.
9.6 Remediation of Leased Premises.
------------------------------
(a) Following the execution of this Agreement, the Buyer may,
at its option, commission the Environmental Audit with respect to the Leased
Premises. The Environmental Audit shall be conducted in accordance with
standards and procedures selected by the Buyer and the Environmental Auditor,
and may include, without limitation, drilling and soil borings at the Leased
Premises at locations specified by the Environmental Auditor, collecting and
analyzing samples of the soil, groundwater, surface water, sediment or other
media at, on, under or around the Leased Premises, and sampling for the presence
of any Hazardous Materials on the Leased Premises, and shall otherwise be
conducted as provided in Section 5.11 above. In doing the Environmental Audit,
the Buyer shall not unreasonably interfere with the respective Company's
business operations and shall restore the Leased Premises to its prior
condition.
(b) If the Environmental Audit disclose that Hazardous
Materials are present at, on, under or around the Leased Premises in violation
of, or so as to impose liability under, applicable Environmental Laws (including
without limitation, the soil, ground water, surface water, sediment or other
media) then the Buyer and the Environmental Auditor in consultation with the
respective Seller shall formulate a plan to remove and/or remediate such
Hazardous Materials in accordance with all applicable Environmental Laws to the
level required by the applicable governmental agency. The remediation shall be
done by remediation firms selected by the Buyer and the Environmental Auditor in
accordance with the remediation plan formulated in consultation with the Seller
and the Seller shall be reasonably apprised of the status of the remediation and
the costs incurred on an ongoing basis. The remediation shall be complete upon
the receipt of documentation evidencing the satisfaction of the applicable
governmental agency.
(c) If at any time during the period commencing on the Closing
Date and ending on the [***] anniversary date of the Closing Date, Hazardous
Materials are found to be present at, on, under or around the Leased Premises,
in violation of, or so as to impose liability under, any applicable
Environmental Laws (including without limitation, the soil, groundwater, surface
water, sediment or other media) which resulted from events that occurred or
conditions that existed prior to the Closing and provided that such Hazardous
Materials were not the subject of remediation pursuant to Paragraph (b) above,
the Seller, at its expense, shall be obligated to remediate and/or remove such
Hazardous Material in accordance with all applicable Environmental Laws to the
level required by the applicable governmental agency; provided, however, that
the Buyer's recovery shall be subject to the Environmental Indemnification Cap.
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
46
Any costs in excess of such amount shall be the responsibility of the Buyer. In
connection with such remediation, the Buyer shall: provide the Seller with
access to the Leased Premises to conduct its own investigation or testing with
regards to the matter, provide the Seller with the results, including analytical
data, of any investigation or testing conducted by the Buyer or, if available to
the Buyer, any third party, provide the Seller with a copy of, or otherwise
inform the Seller of, any contact with any governmental agency with respect
thereto, and cooperate in good faith with such Seller in performing such tasks
as it and its technical professionals and representatives may reasonably request
as being necessary to complete any environmental investigations or environmental
remediation being undertaken by them pursuant to this Section 9.6(c), with the
Buyer being compensated for any such services rendered.
ARTICLE 10
----------
TERMINATION
-----------
10.1 Termination. Notwithstanding any other provision herein
-----------
contained to the contrary, this Agreement may be terminated at any time prior to
the Closing Date:
(a) By the written mutual consent of the Buyer and the Seller;
(b) At any time prior to the Closing Date Deadline (as the
same may have been extended pursuant to Article 2 hereof) by the Buyer or the
Seller, as the case may be, by written notice to the other party(ies) hereto, in
the event of a material breach by the other party of any of its respective
representations, warranties, covenants or agreements contained in this Agreement
which breach is not cured within thirty (30) days (or such shorter period ending
on the Closing Date Deadline) after receipt of notice of such breach from the
other party;
(c) At any time after the Closing Date Deadline (as the same
may have been extended pursuant to Article 2 hereof), by written notice by the
Buyer or the Seller to the other party hereto if the Closing shall not have been
completed on or before the Closing Date Deadline (as the same may have been
extended pursuant to Article 2 hereof); provided, however, the Buyer shall not
be entitled to terminate this Agreement under this clause (c) prior to the
extended Closing Date Deadline unless it appears unlikely that the conditions to
Closing contained in Section 7.10 above shall not be satisfied prior to such
extended Closing Date Deadline;
(d) By written mutual consent of the Buyer and the Seller if,
after any initial HSR Act filing, the FTC makes a "second request" for
information, or if the FTC or the Antitrust Division challenges the transactions
contemplated hereby; or
(e) By written notice by the Buyer or the Seller to the other
party, in the event that the Manufacturer (or any person claiming by, through or
under such Manufacturer) shall exercise any right of first refusal, preemptive
right or other similar right, with respect to the dealership business of any
Company;
provided, however, no party may terminate this Agreement pursuant to Section
-------- -------
10.1(b) or (c) above if such party is in material breach of any representation,
warranty, covenant or agreement of such party contained in this Agreement. In
addition to any other provisions of this Agreement
47
providing for termination, if any of the Other Agreements is terminated for any
reason thereunder, then either the Buyer or the Seller may terminate this
Agreement by notice in writing to the other party(ies) hereto; provided,
--------
however: (a) the Buyer may not terminate this Agreement pursuant to this clause
-------
if such Other Agreement is terminated because the Buyer was in material breach
of any of its representations, warranties, covenants or agreements contained in
such Other Agreement; (b) the Seller may not terminate this Agreement pursuant
to this clause if such Other Agreement is terminated because the Seller or any
of the other "sellers" under such Other Agreement was in material breach of any
of its representations, warranties, covenants or agreements contained in such
Other Agreement; or (c) no party hereto may terminate this Agreement pursuant to
this clause if such party is in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement.
10.2 Procedure and Effect of Termination. In the event of
-----------------------------------
termination of this Agreement pursuant to Section 10.1, this Agreement shall be
of no further force or effect; provided, however, that any termination pursuant
to Section 10.1(b), (c), (d) or (f) shall not relieve any party hereto of any
liability for breach of any representation and warranty, covenant or agreement
hereunder occurring prior to such termination. No termination of this Agreement
shall affect any liability of the Buyer or the Seller to pay the fees and
expenses of third parties. In addition, in the event of any such termination,
all filings, applications and other submissions made pursuant to this Agreement
or prior to the execution of this Agreement in contemplation thereof shall, to
the extent practicable, be withdrawn from the agency or other entity to which
made.
ARTICLE 11
----------
OTHER COVENANTS
---------------
11.1 Certain Taxes and Expenses.
--------------------------
(a) All sales, use, transfer, intangible, excise, documentary
stamp, recording, gross income, gross receipts and other similar Taxes or fees
which may be due or payable in connection with the consummation of the
transactions contemplated hereby shall be paid 50% by the Buyer and 50% by the
Seller.
(b) Except as otherwise herein provided, the Seller and the
Buyer shall be responsible for the payment of their respective fees, costs and
expenses incurred in connection with the negotiation and consummation of the
transactions contemplated hereby and shall not be liable to the other party or
parties for the payment of any such fees, costs and expenses.
11.2 Concerning Names. The Seller acknowledges and agrees that the
----------------
Buyer has acquired all of the goodwill of the Companies and, in so doing, all of
the Companies' right, title and interest in and to their respective names,
tradenames and service marks in, or referenced in, Section 3.17(b) above and
shall be free to use, from and after the Closing, such names, tradenames and
service marks, and derivations thereof, in the manufacture, sale, marketing or
distribution of products or services commonly associated with an automobile
dealership. Accordingly, the Seller, for itself ▇▇▇▇▇▇ and the Affiliates of
▇▇▇▇▇▇, hereby agree that, from and after the Closing, the Seller shall not,
directly or indirectly, use in the States of Texas and
48
Michigan, any of the names, tradenames and service marks referred to in Section
3.17(b) above, or any derivation thereof, in connection with (a) the
manufacture, sale, marketing or distribution of products or services commonly
associated with an automobile dealership or (b) any other business where the use
of such names, tradenames and service marks, or any derivation thereof, would
cause confusion with any of the names, tradenames and service marks referred to
in said Section 3.17(b); provided, however, notwithstanding the foregoing,
-------- -------
nothing contained in this Section 11.2 shall prohibit the family members of
▇▇▇▇▇▇ from owning and operating an automobile dealership business under a name
which includes the name "▇▇▇▇▇▇", provided that, (i) such dealership is not
located within one hundred (100) miles of the Companies' businesses and (ii) the
name "▇▇▇▇▇▇" is not used alone and is used only in conjunction with such family
member's full name (e.g., ▇▇▇▇▇▇ ▇▇▇▇▇▇) and in no event is used in conjunction
with the name "▇▇▇▇▇▇", "Don" or other derivations thereof.
[***]
ARTICLE 12
----------
MISCELLANEOUS
-------------
12.1 Certain Tax Returns. Following the Closing, (a) the Buyer shall, and
-------------------
shall cause the each of the Companies to, reasonably cooperate with and provide
reasonable assistance to the Seller, including reasonable access to each of the
Company's systems, in connection with the preparation and filing of all federal,
state, local and foreign income Tax returns which relate to each Company's 2001
tax years, and (b) the Seller shall reasonably cooperate with and provide
reasonable assistance to the Buyer and the Companies in connection with the
preparation and filing of all federal, state, local and foreign income Tax
returns which relate to each Company's 2002 tax years and to the period from
January 1, 2002 to the Closing Date. At least twenty (20) days prior to the
filing of such Tax returns, the preparing party shall provide a copy of such
returns to the other party for such party's approval, such approval not to be
unreasonably withheld or delayed.
12.2 Parties in Interest; No Third-Party Beneficiaries. Subject to Section
-------------------------------------------------
12.4 hereof, this Agreement will be binding upon, inure to the benefit of, and
be enforceable by, the respective successors and assigns of the parties hereto.
Nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon or give to any employee of the Companies or the Buyer,
or any other person, firm, corporation or legal entity, other than the parties
hereto and their successors and assigns, any rights, remedies or other benefits
under or by reason of this Agreement.
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
49
12.3 Entire Agreement; Amendments. This Agreement (including all Exhibits
----------------------------
and Schedules hereto) and the other writings referred to herein or delivered
pursuant hereto contain the entire understanding of the parties hereto with
respect to its subject matter. Except for the Confidentiality Agreement between
the Buyer and ▇▇▇▇▇▇ which shall remain in full force and effect until Closing,
this Agreement supersedes all prior agreements and understandings between the
parties hereto with respect to its subject matter. This Agreement may be amended
or modified only by a written instrument duly executed by the parties hereto.
12.4 Assignment. This Agreement shall not be assignable by any party hereto
----------
without the prior written consent of the other parties; provided, however, the
-------- -------
Buyer may, without the consent of the Seller, assign its rights and obligations
hereunder to any Affiliate of the Buyer presently existing or hereafter formed
and to any person or entity that shall acquire all or substantially all of the
assets of the Buyer (including any such acquisition by merger or consolidation);
provided, further, that no such assignment shall release the Buyer from its
-------- -------
obligations hereunder without the consent of the Seller. Nothing contained in
this Agreement shall prohibit its assignment by the Buyer as collateral security
and the Seller hereby agrees to execute any acknowledgment of such assignment by
the Buyer as may be required by any lender to the Buyer.
12.5 Remedies. Except as expressly provided in this Agreement to the
--------
contrary, each of the parties to this Agreement is entitled to all remedies in
the event of breach provided at law or in equity, specifically including, but
not limited to, specific performance.
12.6 Headings. The Article and Section headings contained in this Agreement
--------
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.7 Notices. All notices, claims, certificates, requests, demands and
-------
other communications hereunder shall be given in writing and shall be delivered
personally, sent by telecopier or sent by a nationally recognized overnight
courier, postage prepaid, and shall be deemed to have been duly given when so
delivered personally, or when telecopier receipt is acknowledged or one (1)
Business Day after the date of deposit with such nationally recognized overnight
courier. All such notices, claims, certificates, requests, demands and other
communications shall be addressed to the respective parties at the addresses set
forth below or to such other address as the person to whom notice is to be given
may have furnished to the others in writing in accordance herewith.
If to the Buyer, to:
Sonic Automotive, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
50
With a copy to:
Parker, Poe, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller or the Companies (prior to the Closing),
to the Seller at:
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Trust
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇)▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
12.8 Counterparts; Facsimile Signatures. This Agreement may be executed in
----------------------------------
any number of counterparts, and each such counterpart hereof shall be deemed to
be an original instrument, and all such counterparts together shall constitute
but one agreement. This Agreement may be executed by one or more facsimile
signatures.
12.9 Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of Michigan, without giving effect to its
rules governing conflict of laws.
12.10 Waivers. To the extent permitted by applicable law, no claim or right
-------
arising out of this Agreement or the documents referred to in this Agreement can
be discharged by a party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by all the parties hereto. Any
waiver by a party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach of such
provision or any other provision of this Agreement. Neither the failure nor any
delay by any party hereto in exercising any right or power under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right or power, and no single or partial exercise of any such right or power
will preclude any other or further exercise of such right or power or the
exercise of any other right or power.
12.11 Severability; Construction.
--------------------------
51
(a) In the event that any provision, or part thereof, in this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions, or parts thereof, shall not in
any way be affected or impaired thereby.
(b) This Agreement shall be construed equitably in accordance with its
terms, without regard to the degree to which the Seller or the Buyer, or their
respective legal counsel, have participated in the drafting of this Agreement.
12.12 Knowledge. Whenever any representation or warranty of the Seller
---------
contained herein or in any other document executed and delivered in connection
herewith is based upon the knowledge of the Seller, such knowledge shall be
deemed to include the actual knowledge, information and belief of any of ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, or the general mangers of the Companies, after due inquiry of
the dealership management.
12.13 No Publicity. Except as may be required by law or the rules of the
------------
New York Stock Exchange or as necessary in connection with the transactions
contemplated hereby, after the Closing, no party hereto shall (a) make any press
release or other public announcement relating to this Agreement or the
transactions contemplated hereby, without the prior approval of the other
parties hereto or (b) otherwise disclose the existence and nature of the
transactions contemplated hereby to any person or entity other than such party's
accountants, attorneys, agents and representatives, all of whom shall be subject
to this nondisclosure obligation as agents of such party.
12.14 Cooperation in SEC Filings. At the request of the Buyer and at the
--------------------------
Buyer's expense, the Seller shall reasonably cooperate in the preparation by the
Buyer of all filings to be made by the Buyer with the SEC including, without
limitation any filing with respect to any periodic filing or any registered
offering of its securities by the Buyer and the closing of the offering
registered thereby.
12.15 Dispute Resolution. In the event of any dispute or disagreement
------------------
between the parties relating to this Agreement, the Buyer and the Seller agree
to use their reasonable best efforts to attempt to resolve such dispute or
disagreement through good faith negotiations for a thirty (30) day period prior
to initiating any judicial or equitable proceeding in connection with such
dispute; provided, however, a party shall not be obligated to participate in
-------- -------
such negotiations to the extent that the failure to seek judicial or equity
remedies prior to the expiration of such thirty (30) day period would materially
prejudice such in pursuing any such remedy.
12.16 Good Faith Efforts. Whenever the parties are required to agree or
------------------
attempt to agree on a certain matter or issue under this Agreement, the parties
shall use their reasonable, good faith efforts to reach such agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
BUYER: SONIC AUTOMOTIVE, INC.
By: /s/ O. ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Name: O. ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
SELLER: THE ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ REVOCABLE TRUST
By an agreement dated December 13, 2001
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Trustee
53
INDEX OF DEFINED TERMS
----------------------
-------------------------------------------------------------------------------
TERM SECTION NO.
-------------------------------------------------------------------------------
Accountants 1.2(d)(ii)
-------------------------------------------------------------------------------
Accounts Receivable 1.6
-------------------------------------------------------------------------------
Acquisition Shelf Registration Statement 1.2(b)(i)
-------------------------------------------------------------------------------
Affiliate 3.5(a)
-------------------------------------------------------------------------------v
Aged Parts 1.2(d)(i)(VII)
-------------------------------------------------------------------------------
Agreement Preamble
-------------------------------------------------------------------------------
Annual Financial Statements 3.13(a)(i)
-------------------------------------------------------------------------------
Antitrust Division 5.13
-------------------------------------------------------------------------------
Arngar Stock Purchase Agreement Exhibit A-2
-------------------------------------------------------------------------------
Assets 3.11(a)
-------------------------------------------------------------------------------
Asset Purchase Agreement 1.2(d)(i)(III)(B)
-------------------------------------------------------------------------------
Basket 9.4(b)
-------------------------------------------------------------------------------
Business Day 1.2(d)(ii)
-------------------------------------------------------------------------------
Buyer Preamble
-------------------------------------------------------------------------------
Buyer Indemnitee 9.2
-------------------------------------------------------------------------------
Buyer's Damages 9.2
-------------------------------------------------------------------------------
Closing 1.1
-------------------------------------------------------------------------------
Closing Balance Sheet 1.2(d)(i)
-------------------------------------------------------------------------------
Closing Date Article 2
-------------------------------------------------------------------------------
Closing Date Deadline Article 2
-------------------------------------------------------------------------------
Code 3.6
-------------------------------------------------------------------------------
Common Stock 1.2(a)
-------------------------------------------------------------------------------
Companies Preamble
-------------------------------------------------------------------------------
Company Preamble
-------------------------------------------------------------------------------
Control 3.5(a)
-------------------------------------------------------------------------------
Demonstrators 1.2(d)(i)(II)
-------------------------------------------------------------------------------
Designated Broker 1.2(b)(iii)(A)
-------------------------------------------------------------------------------
Distributed Assets 1.5
-------------------------------------------------------------------------------
Employee Plan 3.27(a)
-------------------------------------------------------------------------------
Encumbrances 1.3
-------------------------------------------------------------------------------
Environmental Audit 5.11
-------------------------------------------------------------------------------
Environmental Auditor 5.11
-------------------------------------------------------------------------------
Environmental Law 3.36(a)
-------------------------------------------------------------------------------
Environmental Liabilities 9.2(g)
-------------------------------------------------------------------------------
Environmental Permits 3.36(b)
-------------------------------------------------------------------------------
ERISA 3.27(a)
-------------------------------------------------------------------------------
Escrow Agent 1.2(c)
-------------------------------------------------------------------------------
Escrow Agreement 1.2(c)
-------------------------------------------------------------------------------
Escrow Shares 1.2(c)
-------------------------------------------------------------------------------
Exchange Act 1.2(b)(iii)(C)
-------------------------------------------------------------------------------
Excess Vehicles 1.2(d)(i)(III)(B)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
TERM SECTION NO.
-------------------------------------------------------------------------------
Extraordinary Collection Costs 1.6
-------------------------------------------------------------------------------
Financial Statements 3.13(a)(ii)
-------------------------------------------------------------------------------
Fixtures and Equipment 1.2(d)(i)(X)
-------------------------------------------------------------------------------
Form 8-K 4.8
-------------------------------------------------------------------------------
Form 10-K 4.8
-------------------------------------------------------------------------------
Form 10-Q 4.8
-------------------------------------------------------------------------------
401(k) Plan 5.15(b)
-------------------------------------------------------------------------------
FTC 5.13
-------------------------------------------------------------------------------
GAAP 1.2(d)(i)
-------------------------------------------------------------------------------
Hazardous Materials 3.36(a)
-------------------------------------------------------------------------------
HSR Act 5.13
-------------------------------------------------------------------------------
Indemnified Party 9.5(a)
-------------------------------------------------------------------------------
Indemnifying Party 9.5(a)
-------------------------------------------------------------------------------
Interim Financial Statements 3.13(a)(ii)
-------------------------------------------------------------------------------
Inventory 1.2(d)(i)(VI)
-------------------------------------------------------------------------------
Inventory Services 1.2(d)(i)(VI)
-------------------------------------------------------------------------------
IRS 3.21(c)
-------------------------------------------------------------------------------
Leased Equipment 3.16(h)
-------------------------------------------------------------------------------
Leased Premises 3.16(b)
-------------------------------------------------------------------------------
Leased Premises Environmental Cap 9.4(c)
-------------------------------------------------------------------------------
Leases 3.16(b)
-------------------------------------------------------------------------------
Lock-Up Period 1.2(b)(vi)
-------------------------------------------------------------------------------
Manufacturer Article 2
-------------------------------------------------------------------------------
▇▇▇▇▇▇ Preamble
-------------------------------------------------------------------------------
▇▇▇▇▇▇ Stock Purchase Agreement Exhibit A-2
-------------------------------------------------------------------------------
Master Price List 1.2(d)(i)(VII)
-------------------------------------------------------------------------------
Material Adverse Item 5.16(b)
-------------------------------------------------------------------------------
Material Agreements 3.29(a)
-------------------------------------------------------------------------------
Miscellaneous Inventories 1.2(d)(i)(VIII)
-------------------------------------------------------------------------------
Net Book Value 1.2(d)(i)
-------------------------------------------------------------------------------
Net Book Value Excess 1.2(d)(iii)
-------------------------------------------------------------------------------
Net Book Value Shortfall 1.2(d)(iii)
-------------------------------------------------------------------------------
New Vehicles 1.2(d)(i)(I)
-------------------------------------------------------------------------------
Non Returnable Parts 1.2(d)(i)(VII)
-------------------------------------------------------------------------------
Other Agreements Preamble
-------------------------------------------------------------------------------
Other Plans 5.15(b)
-------------------------------------------------------------------------------
Owned Equipment 3.16(g)
-------------------------------------------------------------------------------
Owned Real Property 3.16(a)
-------------------------------------------------------------------------------
Owned Real Property Environmental Cap 9.4(c)
-------------------------------------------------------------------------------
Permits 3.24
-------------------------------------------------------------------------------
Permitted Encumbrances 3.16(a)
-------------------------------------------------------------------------------
Piggyback Registration 1.2(b)(vii)
-------------------------------------------------------------------------------
Prospectus 1.2(b)(i)
-------------------------------------------------------------------------------
Proxy Statement 4.8
-------------------------------------------------------------------------------
Purchase Price 1.2(a)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
TERM SECTION NO.
-------------------------------------------------------------------------------
Real Property 3.16(b)
-------------------------------------------------------------------------------
Real Property Purchase Agreements Exhibit A-2
-------------------------------------------------------------------------------
Registered Common Shares 1.2(a)
-------------------------------------------------------------------------------
Registration Commencement Date 1.2(b)(vii)
-------------------------------------------------------------------------------
Reports 4.8
-------------------------------------------------------------------------------
SEC 1.2(b)(i)
-------------------------------------------------------------------------------
Securities Act 1.2(b)(iii)(C)
-------------------------------------------------------------------------------
Seller Preamble
-------------------------------------------------------------------------------
Seller Indemnitee 9.3
-------------------------------------------------------------------------------
Seller's Damages 9.3
-------------------------------------------------------------------------------
Seller's Liabilities 1.2(b)(iii)(C)
-------------------------------------------------------------------------------
Series I Preferred Stock 4.7(a)
-------------------------------------------------------------------------------
Series II Preferred Stock 4.7(a)
-------------------------------------------------------------------------------
Series III Preferred Stock 4.7(a)
-------------------------------------------------------------------------------
Shares Preamble
-------------------------------------------------------------------------------
Survival Date 9.1
-------------------------------------------------------------------------------
Taxes 3.21(a)
-------------------------------------------------------------------------------
UCC 5.1(c)
-------------------------------------------------------------------------------
Used Vehicles 1.2(d)(i)(V)
-------------------------------------------------------------------------------