AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 25, 1997
AMONG
UNITED AUTO GROUP, INC.,
UAG KISSIMMEE MOTORS, INC.,
UAG PARAMOUNT MOTORS, INC.,
UAG CENTURY MOTORS, INC.
KISSIMMEE MOTORS, INC., D/B/A KISSIMMEE TOYOTA,
PARAMOUNT CHEVROLET GEO, INC.,
CENTURY CHEVROLET GEO, INC.
▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇,
YOUNG/AVY II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO ▇▇▇▇ ▇. ▇▇▇▇▇,
YOUNG/AVY II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
YOUNG/AVY II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
YOUNG/WAY II IRREVOCABLE TRUST
U/A DATED 12/31/96
YOUNG/TAGGART II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
YOUNG/TAGGART II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
YOUNG/▇▇▇▇ II IRREVOCABLE TRUST
U/A DATED 12/31/96
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ IRREVOCABLE GRAT TRUST
U/A DATED 3/1/97
AND
▇▇▇ ▇. ▇▇▇▇▇ IRREVOCABLE GRAT TRUST
U/A DATED 3/1/97
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGERS.................................................. 2
1.1 Certain Definitions............................................. 2
1.2 Surviving Corporation........................................... 5
1.3 Certificate of Incorporation.................................... 6
1.4 Bylaws.......................................................... 6
1.5 Directors and Officers.......................................... 6
1.6 Closing......................................................... 6
1.7 Effective Time.................................................. 7
1.8 Conversion of Companies' Stock.................................. 7
1.9 Treasury Stock.................................................. 7
1.10 Fractional Shares............................................... 7
1.11 Exchange of Companies' Stock.................................... 7
1.12 Stock Price Adjustment.......................................... 8
1.13 Leases.......................................................... 9
1.14 Registration Rights Agreement................................... 9
1.15 Net Worth Adjustment............................................ 9
1.16 Capital Loans................................................... 11
1.17 Distributions Prior to Closing.................................. 12
1.18 Satisfaction of Related Party Loans............................. 12
1.19 Effective Date.................................................. 12
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE
STOCKHOLDERS................................................. 12
2.1 Organization and Good Standing.................................. 13
2.2 Subsidiaries.................................................... 13
2.3 Capitalization.................................................. 13
2.4 Authority; Approvals and Consents............................... 14
2.5 Financial Statements............................................ 15
2.6 Absence of Undisclosed Liabilities.............................. 15
2.7 Absence of Material Adverse Effect; Conduct of Business......... 16
2.8 Taxes........................................................... 17
2.9 Legal Matters................................................... 18
2.10 Property........................................................ 19
2.11 Environmental Matters........................................... 20
2.12 Inventories..................................................... 22
2.13 Accounts Receivable............................................. 22
2.14 Insurance....................................................... 22
2.15 Contracts; etc.................................................. 23
2.16 Labor Relations................................................. 23
2.17 Employee Benefit Plans.......................................... 24
2.18 Other Benefit and Compensation Plans or Arrangements............ 27
2.19 Transactions with Insiders...................................... 28
2.20 Propriety of Past Payments...................................... 28
2.21 Interest in Competitors......................................... 29
2.22 Brokers......................................................... 29
2.23 Accounts........................................................ 29
2.24 Disclosure...................................................... 29
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS........... 30
3.1 Ownership of Shares; Title...................................... 30
3.2 Authority....................................................... 30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF UAG AND THE MERGER SUBS.... 31
4.1 Organization and Good Standing.................................. 31
4.2 Merger Subs..................................................... 31
4.3 Capitalization.................................................. 32
4.4 SEC Filings..................................................... 32
4.5 Authority; Approvals and Consents............................... 32
4.6 Disclosure...................................................... 33
4.7 Brokers......................................................... 34
4.8 Reorganization Classification; Certain Tax Representations...... 34
ARTICLE 5 COVENANTS AND ADDITIONAL AGREEMENTS.......................... 34
5.1 Access; Confidentiality......................................... 34
5.2 Furnishing Information; Announcements........................... 36
5.3 Antitrust Improvements Act Compliance........................... 36
5.4 Certain Changes and Conduct of Business......................... 36
5.5 No Intercompany Payables or Receivables......................... 39
5.6 Negotiations.................................................... 40
5.7 Consents; Cooperation........................................... 40
5.8 Additional Agreements........................................... 41
5.9 Interim Financial Statements.................................... 41
5.10 Notification of Certain Matters................................. 41
5.11 Assurance by the Stockholders................................... 42
5.12 Stockholder Vote; No Appraisal Rights........................... 42
5.13 Non-Interference................................................ 42
5.14 Personal Guarantees............................................. 42
5.15 Distributions................................................... 43
5.16 Taxes........................................................... 43
5.17 Continuity of Stockholder Interest.............................. 44
ARTICLE 6 CONDITIONS TO THE OBLIGATIONS OF UAG AND THE MERGER SUBS
TO EFFECT THE CLOSING........................................ 44
6.1 Representations and Warranties; Agreements; Covenants........... 44
6.2 Authorization; Consents......................................... 44
6.3 Opinions of the Companies' and the Stockholders' Counsel........ 45
6.4 Absence of Litigation........................................... 45
6.5 No Material Adverse Effect...................................... 45
6.6 Net Worth....................................................... 45
6.7 Completion of Due Diligence..................................... 46
6.8 Board Approval.................................................. 46
6.9 Certificates.................................................... 46
6.10 Legal Matters................................................... 46
6.11 Approval of Manufacturers and Distributors...................... 46
6.12 Environmental Laws.............................................. 47
6.13 Nondisturbance Agreements/Estoppel Certificates................. 47
6.14 Title Insurance................................................. 47
6.15 Schedules....................................................... 47
6.16 Lease Termination Agreements/Memoranda of Lease................. 47
6.17 Employment Agreements........................................... 47
6.18 Leases.......................................................... 47
6.19 Resignation of the Companies' Directors......................... 47
6.20 Acquisition of Other Companies.................................. 48
6.21 Joint Venture Agreement......................................... 48
ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF THE COMPANIES AND THE
STOCKHOLDERS TO EFFECT THE CLOSING........................... 48
7.1 Representations and Warranties; Agreements...................... 48
7.2 Authorization of the Agreement, Consents........................ 48
7.3 Opinions of UAG's and the Merger Subs' Counsel.................. 49
7.4 Absence of Litigation........................................... 49
7.5 Satisfaction of Conditions...................................... 49
7.6 Legal Matters................................................... 49
7.7 Employment Agreement............................................ 49
7.8 Lease........................................................... 50
7.9 Approval of Manufacturers and Distributors...................... 50
7.10 Acquisition of Other Companies.................................. 50
7.11 No Material Adverse Effect...................................... 50
7.12 Schedules....................................................... 50
7.13 Joint Venture Agreement......................................... 50
7.14 Certified Board Resolutions..................................... 50
ARTICLE 8 TERMINATION.................................................. 51
8.1 Termination..................................................... 51
8.2 Effect of Termination........................................... 51
ARTICLE 9 INDEMNIFICATION.............................................. 52
9.1 Indemnification by the Stockholders............................. 52
9.2 Indemnification by UAG.......................................... 53
9.3 Procedures...................................................... 54
9.4 Offset.......................................................... 56
9.5 Exclusive Monetary Remedy for Breach............................ 56
ARTICLE 10 MISCELLANEOUS ............................................... 56
10.1 Survival of Provisions.......................................... 56
10.2 [Intentionally Omitted]......................................... 57
10.3 Headings........................................................ 57
10.4 Notices......................................................... 57
10.5 Assignment...................................................... 59
10.6 Entire Agreement................................................ 59
10.7 Waiver and Amendments........................................... 59
10.8 Counterparts.................................................... 59
10.9 Accounting Terms................................................ 60
10.10 [Intentionally Omitted] ........................................ 60
10.11 Severability ................................................... 60
10.12 [Intentionally Omitted] ........................................ 60
10.13 Governing Law .................................................. 60
10.14 Time is of the Essence ......................................... 60
10.15 Attorneys' Fees ................................................ 60
10.16 Limitation on Liability of Each Trustee ........................ 61
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
September 25, 1997, is between and among United Auto Group, Inc., a Delaware
corporation ("UAG"), UAG Kissimmee Motors, Inc., a Delaware corporation ("UAG
Kissimmee"), UAG Paramount Motors, Inc., a Delaware corporation ("UAG
Paramount"), UAG Century Motors, Inc., a Delaware corporation ("UAG Century"
and, together with UAG Kissimmee and UAG Paramount, the "Merger Subs" and
individually, a "Merger Sub"), Kissimmee Motors, Inc., d/b/a Kissimmee Toyota,
an Indiana corporation ("Kissimmee Toyota"), Paramount Chevrolet Geo, Inc., an
Indiana corporation ("Paramount"), Century Chevrolet Geo, Inc., a Indiana
corporation ("Century" and, together with Kissimmee Toyota and Paramount, the
"Companies"), ▇▇▇▇ ▇. ▇▇▇▇▇, an individual resident of the state of Indiana
("▇. ▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual resident of the state of Indiana
("▇. ▇▇▇▇▇"), ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual resident of the state of
Indiana ("▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇. ▇▇▇▇, an individual resident of the state of
Indiana ("Dyer"), Young/AVY II Irrevocable Trust u/a dated 12/31/96 fbo ▇▇▇▇ ▇.
▇▇▇▇▇ (the "▇. ▇▇▇▇▇ Trust"), Young/AVY II Irrevocable Trust u/a dated 12/31/96
fbo ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "▇. ▇▇▇▇▇ Trust"), Young/AVY II Irrevocable Trust
u/a dated 12/31/96 fbo ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "▇. ▇▇▇▇▇ Trust"), Young/Way II
Irrevocable Trust u/a dated 12/31/96 (the "Young/Way Trust"), Young/Taggart II
Irrevocable Trust u/a dated 12/31/96 fbo ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "▇. ▇▇▇▇▇▇▇
Trust"), Young/Taggart II Irrevocable Trust u/a dated 12/31/96 fbo ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ (the "▇. ▇▇▇▇▇▇▇ Trust"), Young/▇▇▇▇ II Irrevocable Trust u/a dated
12/31/96 (the "Young/▇▇▇▇ Trust"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Irrevocable GRAT Trust u/a
dated 3/1/97 (the "▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust") and ▇▇▇ ▇. ▇▇▇▇▇ Irrevocable GRAT
Trust u/a dated 3/1/97 (the "▇▇▇ ▇▇▇▇▇ Trust and, together with ▇. ▇▇▇▇▇, ▇.
▇▇▇▇▇, Taggart, Dyer, ▇. ▇▇▇▇▇ Trust, ▇. ▇▇▇▇▇ Trust, ▇. ▇▇▇▇▇ Trust, Young/Way
Trust, ▇. ▇▇▇▇▇▇▇ Trust, ▇. ▇▇▇▇▇▇▇ Trust, Young/▇▇▇▇ Trust and ▇▇▇▇▇▇▇ ▇▇▇▇▇
Trust, the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Companies operate automobile dealerships and related
businesses in North Carolina, Illinois and Florida;
WHEREAS, the Stockholders own one hundred percent (100%) of the issued
and outstanding shares of capital stock of Kissimmee Toyota (the "Kissimmee
Shares");
WHEREAS, the Stockholders own one hundred percent (100%) of the issued
and outstanding capital stock of Century (the "Century Shares");
WHEREAS, the Stockholders own one hundred percent (100%) of the issued
and outstanding shares of capital stock of Paramount (the "Paramount Shares"
and, together with the Kissimmee Shares and the Century Shares, the "Shares");
WHEREAS, UAG owns all of the issued and outstanding capital stock of
each of the Merger Subs;
WHEREAS, each of the respective Stockholders of each of the Companies
has approved this Agreement, and the transactions contemplated hereby, pursuant
to action taken by unanimous written consent in accordance with the
requirements of applicable law and the articles or certificate of incorporation
and the bylaws of each such Company; and
WHEREAS, UAG desires to acquire by merger the businesses of the
Companies upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGERS
1.1 CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Affiliate" of a specified Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, and in
the case of a specified Person who is a natural person, his or her spouse,
issue, parents, siblings, estate, any Affiliate of such person and any trust
for the benefit of his or her spouse, parents and/or siblings.
(b) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(c) "CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.), as amended by
Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100
State, 1613), as amended.
(d) "Claim" shall mean any claim, action, suit, litigation,
investigation, inquiry, review or proceeding of any kind.
(e) "Closing Date" shall have the meaning ascribed to it in Section
1.6.
(f) "Closing Date Balance Sheet" shall have the meaning ascribed to it
in Section 1.15.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended
(the "Code").
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(h) "Company Agreement" shall mean any mortgage, indenture note,
agreement, contract, lease, license, franchise, obligation, instrument or other
binding commitment of any kind, whether written or oral, (including all leases
and other agreements referred to on Schedule 2.10 hereto) to which any of the
Companies is a party or by which any of the Companies or any of their assets or
properties (including the owned Real Property and the owned Improvements) may
be bound or affected, including all amendments, modifications, extensions or
renewals of any of the foregoing.
(i) "Company Financial Statements" shall have the meaning ascribed to
it in Section 2.5.
(j) "Costs" shall mean all liabilities, losses, costs, damages,
expenses and claims, including reasonable attorneys' fees, experts' fees and
consultants' fees.
(k) "Dealerships" shall mean the Companies and ▇▇▇ ▇▇▇▇▇ Chevrolet,
Inc., an Indiana corporation, ▇▇▇ ▇▇▇▇▇, Inc., an Indiana corporation, Young
Management Group, Inc., an Indiana corporation and Parkway Chevrolet, Inc., an
Indiana corporation.
(l) "Environmental Laws" shall mean all applicable requirements of
environmental, public or employee health and safety, public or community
right-to-know, ecological or natural resource laws or regulations or controls,
including all applicable requirements imposed by any law (including without
limitation common law), rule, order, or regulations of any federal, state, or
local executive, legislative, judicial, regulatory, or administrative agency,
board, or authority, or any applicable private agreement (such as covenants,
conditions and restrictions), which relate to, (i) noise, (ii) pollution or
protection of the air, surface water, groundwater, or soil, (iii) solid,
gaseous, or liquid waste generation, treatment, storage, release, presence,
disposal, or transportation, (iv) exposure to Hazardous Materials (as defined
below), or (v) regulation of the manufacture, processing, distribution and
commerce, use, or storage of Hazardous Materials, as amended and as in effect
from time to time (including without limitation the following statutes and all
regulations thereunder as amended and in effect from time to time: CERCLA,
RCRA, OSHA, and HMTA).
(m) "Environmental Permits" shall mean all permits, licenses,
approvals, authorizations, consents or registrations required under applicable
Environmental Laws in connection with the ownership, use and/or operation of
the Companies' businesses or the Real Property or Improvements.
(n) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States from time to time.
(o) "H-S-R Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
3
(p) "HMTA" shall mean the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Section 1801 et seq.)
(q) "Hazardous Materials" shall mean, collectively, (i) those
substances included within the definitions of or identified as "hazardous
chemicals," "hazardous waste," "hazardous substances," "hazardous materials,"
"toxic substances," "extremely hazardous substances," "toxic pollutants,"
"contaminants," "pollutants" or similar terms in or pursuant to, without
limitation, CERCLA, RCRA, OSHA, HMTA, and in the regulations promulgated
pursuant to such laws, all as amended, (ii) those substances listed in the
United States Department of Transportation Table (49 CFR 172.101 and amendments
thereto) or by the Environmental Protection Agency (or any successor agency) as
hazardous substances (40 CFR part 302 and amendments thereto), (iii) any
material, waste or substance which is or contains (A) petroleum, including
crude oil or any fraction thereof, natural gas, or synthetic gas usable for
fuel or any mixture thereof, (B) asbestos, (C) lead-based paint, (D)
polychlorinated biphenyls, (E) designated as a "hazardous substance" pursuant
to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33
U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water Act
(33 U.S.C. Section 1317), (F) flammable explosives, (G) radioactive materials,
and (iv) such other substances, materials and wastes which are or become
regulated or classified as hazardous, toxic or as "special wastes" under any
Environmental Laws.
(r) "Knowledge" (regardless of whether capitalized) shall mean, with
respect to any Stockholder, that the Stockholder knew (after reasonable
inquiry) of the particular matter referred to; with respect to any of the
Companies, that ▇▇▇▇▇▇▇▇, ▇. ▇▇▇▇▇, ▇. ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ or any person
responsible for overseeing the day-to-day operations of such Company, the
general manager and the office manager (or any person with similar such
responsibilities regardless of title) knew (after reasonable inquiry) of the
particular matter referred to; and with respect to UAG or the Merger Subs that
the Chief Executive Officer, President or any Vice President of UAG or the
Merger Subs knew (after reasonable inquiry) of the particular matter referred
to.
(s) "Legal Requirements" shall mean any and all laws, ordinances,
codes, rules, regulations and other requirements of all governmental,
administrative or judicial entities.
(t) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, prior assignments, conditional
and installment sale agreements or encumbrances of any kind.
(u) "Material Adverse Effect" shall mean, with respect to the
Companies, any material adverse change in, or material adverse effect on, the
business, operations, assets, operating results or financial condition of the
Companies, taken as a whole; and, with respect to UAG, any material adverse
change in, or material adverse effect on, the business, operations, assets,
operating results or financial condition of UAG.
4
(v) "OSHA" shall mean the Occupational Safety and Health Act of 1970
as amended (29 U.S.C. Section 651 et seq.).
(w) "Person" shall mean and include an individual, corporation,
partnership, limited liability company, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereof.
(x) "RCRA" shall mean the Resource Conservation and Recovery Act of
1976 (42 U.S.C. Section 6901 et seq.).
(y) "Remedial Action" shall mean any action required to (i) clean up,
remove or treat Hazardous Materials, (ii) prevent a release or threat of
release of any Hazardous Material, (iii) perform pre-remedial studies,
investigations or post-remedial monitoring and care, (iv) cure a violation of
any Environmental Law or (v) take corrective action under sections 3004(u),
3004(v) or 3008(h) of RCRA or analogous state law.
(z) "Taxes" shall mean all taxes, fees, levies or other assessments,
including but not limited to income, excise, property, sales, franchise,
withholding, social security and unemployment taxes imposed by the United
States, any state, county, local or foreign government, or any subdivision or
agency thereof or taxing authority therein, and any interest, penalties or
additions to tax relating to such taxes, charges, fees, levies or other
assessments.
(aa) "Trusts" shall mean the ▇. ▇▇▇▇▇ Trust, ▇. ▇▇▇▇▇ Trust, ▇. ▇▇▇▇▇
Trust, Young/Way Trust, ▇. ▇▇▇▇▇▇▇ Trust, ▇. ▇▇▇▇▇▇▇ Trust, Young/▇▇▇▇ Trust,
▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust and ▇▇▇ ▇▇▇▇▇ Trust.
(bb) "UAG Common Stock" shall mean the shares of common stock, par
value $.0001 per share of UAG.
(cc) "UAG Market Value" shall mean the arithmetic average of the daily
closing price per share of UAG Common Stock, rounded to four decimal places, as
reported on the New York Stock Exchange Composite Tape for each of the ten (10)
consecutive trading days ending (and including) the trading day that occurs one
trading day prior to the date on which the UAG Market Value is to be
determined.
1.2 SURVIVING CORPORATION.
Subject to the terms and conditions of this Agreement, the Indiana
Business Corporation Law (the "IBCL") and the Delaware General Corporation Law
(the "DGCL"), at the Effective Time (as defined in Section 1.7), Kissimmee
Toyota shall be merged with and into UAG Kissimmee (the "Toyota Merger"),
Paramount shall be merged with and into UAG Paramount (the "Paramount Merger")
and Century shall be merged with and into UAG Century (the "Century Merger"
and, together with the Toyota Merger and the Paramount Merger, the
5
"Mergers") and the separate corporate existences of Kissimmee Toyota, Paramount
and Century shall cease. UAG Kissimmee, UAG Paramount and UAG Century shall be
the surviving corporations in the Mergers (hereinafter sometimes referred to as
the "Surviving Corporations") and shall continue their corporate existences
under the laws of the State of Delaware.
1.3 CERTIFICATE OF INCORPORATION.
The certificate of incorporation of the respective Merger Subs shall
be the certificate of incorporation of the respective Surviving Corporations
until thereafter duly amended in accordance with their terms and the DGCL.
1.4 BYLAWS.
The bylaws of the respective Merger Subs shall be the bylaws of the
respective Surviving Corporations until thereafter duly amended in accordance
with their terms and the DGCL.
1.5 DIRECTORS AND OFFICERS.
The directors of the respective Surviving Corporations shall consist
of the persons who are the directors of the Merger Subs immediately prior to
the Effective Time, such directors to hold office from the Effective Time until
their respective successors are duly elected and qualified. The officers of the
respective Surviving Corporations shall be the officers of the respective
Merger Subs immediately prior to the Effective Time, such officers to hold
office from the Effective Time until their respective successors are duly
elected and qualified.
1.6 CLOSING.
(a) The Closing shall take place on or before November 30, 1997 at a
time and place to be agreed to by the parties; provided, however, that UAG or
the Stockholders may extend the Closing Date for a period of thirty (30) days
by giving notice to the other party prior to November 30, 1997. The date on
which the Closing occurs is herein referred to as the "Closing Date". If, on or
before the Closing Date, all of the conditions set forth herein shall have been
fulfilled or waived in accordance with the terms hereof and this Agreement
shall not have been terminated in accordance with Article 8, then the Mergers
shall be consummated (the "Merger Closings") on the Closing Date.
(b) Subject to the conditions set forth in this Agreement, at the time
of the Merger Closings the Stockholders shall execute and deliver to UAG
certificates representing the Kissimmee Shares, the Paramount Shares and the
Century Shares, duly endorsed in blank, or with separate notarized stock powers
attached thereto and signed in blank, free and clear of all Liens, security
interests, claims, restrictions, and any other encumbrances whatsoever, in
exchange for the delivery by UAG to the Stockholders of certificates
representing UAG Common Stock and cash as set forth in Sections 1.8-1.11
hereof.
6
1.7 EFFECTIVE TIME.
At the time of the Merger Closings as determined in accordance with
Section 1.6, the parties hereto shall cause certificates of merger meeting the
requirements of the DGCL and articles of merger meeting the requirements of the
IBCL (collectively, the "Merger Certificates") to be properly executed and
filed with the Secretaries of State of the States of Indiana and Delaware, as
applicable. The Mergers shall become effective at the time specified in each of
the Merger Certificates, which shall be on the date of the Merger Closings as
determined pursuant to Section 1.6. The date and time when the Mergers become
effective is hereinafter referred to as the "Effective Time".
1.8 CONVERSION OF COMPANIES' STOCK.
As of the Effective Time, by virtue of the Mergers and without any
action on the part of any holder thereof all of the Shares issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive (i) shares of UAG Common Stock having an aggregate UAG Market
Value on the date hereof equal to Twenty-Five Million Dollars ($25,000,000)
(the "UAG Shares"); and (ii) cash in the aggregate amount of Two Million Six
Hundred Thirty-One Thousand Three Hundred Seventy-Seven Dollars ($2,631,377)
less the amount of the Assumed Loans (as defined in Section 1.18).
1.9 TREASURY STOCK.
Each share of the Companies' stock issued and outstanding immediately
prior to the Effective Time that is then held in the treasury of any of the
Companies shall be retired, without any conversion thereof or payment of any
consideration therefor.
1.10 FRACTIONAL SHARES.
No scrip or fractional shares of UAG Common Stock shall be issued in
the Mergers. All shares of UAG Common Stock to which a Stockholder would
otherwise be entitled shall be aggregated. If a fractional share results from
such aggregation, then the number of shares of UAG Common Stock to which such
Stockholder shall be entitled shall be rounded up or down to the nearest whole
share of UAG Common Stock.
1.11 EXCHANGE OF COMPANIES' STOCK.
(a) Exchange. At the time of the Merger Closings, subject to the terms
and conditions hereof, upon surrender by each Stockholder of all certificates
that, immediately prior to the Effective Time, represented shares of the
Companies' stock held by each Stockholder ("Certificates"), UAG shall deliver
to such Stockholder (i) stock certificates (properly issued, executed and
countersigned, as appropriate) bearing the restrictive legend customarily
placed on securities of UAG that have not been registered under applicable
federal and state securities laws and representing the aggregate number of
whole shares of unregistered UAG Common Stock to
7
which such Stockholder shall have become entitled as set forth on Schedule 1.11
hereto and (ii) cash, if any, to which such Stockholder shall have become
entitled as set forth on Schedule 1.11. From the Effective Time until surrender
in accordance with the provisions of this Section 1.11, each Certificate shall
represent for all purposes only the right to receive the consideration provided
for herein.
(b) No Transfers After Effective Time. After the Effective Time, there
shall be no transfers on the stock transfer books of the Surviving Corporation
of the shares of Companies' stock that were outstanding immediately prior to
the Effective Time.
1.12 STOCK PRICE ADJUSTMENT.
If, on any Adjustment Date, the UAG Market Value as of such Adjustment
Date is less than Twenty-Four and 0375/100 Dollars ($24.0375) (the amount of
any such deficiency as of an Adjustment Date being referred to herein as the
"Stock Price Deficiency"), then no later than ten (10) Business Days thereafter
and as additional consideration for the stock of the Companies, UAG shall make
a cash payment to each Stockholder equal to the number of the Stockholder's
Transition UAG Shares for such Adjustment Date, multiplied by the Stock Price
Deficiency as of such Adjustment Date. Each such payment shall include (but not
be increased by) interest at the Applicable Federal Rate in accordance with
Section 1274(d) of the Code. For purposes of this Agreement, the following
terms shall have the meanings defined below:
(i) "Adjustment Date" with respect to any Stockholder shall mean
each date on which any additional UAG Shares of the Stockholder become
Unrestricted UAG Shares;
(ii) "Transition UAG Shares" with respect to any Stockholder
shall mean as of any Adjustment Date the portion of the Stockholder's UAG
Shares that first become Unrestricted UAG Shares on such Adjustment Date;
and
(iii) "Unrestricted UAG Shares" with respect to any Stockholder
shall mean as of any date (A) the portion, if any, of such Stockholder's
UAG Shares that have been registered on or before such date pursuant to the
Registration Rights Agreement (as defined in Section 1.14 hereof), plus (B)
the portion, if any, of such Stockholder's other UAG Shares that could have
been or could be sold by the Stockholder on or before such date pursuant to
Rule 144 of the Securities and Exchange Commission,determined for purposes
of this clause (B) as if (1) the maximum number of such Stockholder's other
UAG Shares that could have been sold pursuant to Rule 144 during the three
(3) month period immediately preceding such date (and all prior three (3)
month periods) were in fact sold on the first day of each such three (3)
month period and (2) all of such Stockholder's UAG Shares (other than those
registered pursuant to the Registration Rights Agreement or otherwise
registered with the consent of such Stockholder) are unregistered for
purposes of applying Rule 144. The parties acknowledge that UAG may be
required to make more than one cash payment to a particular Stockholder
pursuant to this Section 1.12 in the event that all of the Stockholder's
UAG Shares as of an Adjustment Date for the Stockholder are not
Unrestricted UAG Shares as of such Adjustment Date, but that in no event
shall UAG be required to make more than one cash payment with respect to
each UAG Share.
8
1.13 LEASES.
On the Closing Date, UAG Century shall enter into a lease for the real
property on which it operates in a form mutually acceptable to the parties (the
"Lease"). The Lease shall be for a twenty (20) year term commencing on the
Closing Date and the lessee shall have the option to renew the Lease for two
additional five year terms. The initial monthly lease rate for each Lease shall
be an amount equal to the current lease rate being paid by Century. On the
third anniversary of the Closing Date and every two years thereafter during the
initial term, the lease rate for the Lease shall increase to an amount equal to
the lease rate then in effect plus an amount equal to a percentage of the lease
rate then in effect, which percentage shall be equal to three-fourths (3/4) of
the percentage increase in the Consumer Price Index published from time to time
by the United States Department of Labor ("CPI") for All Urban Consumers (U.S.
City Average) from the time of the last adjustment. UAG will unconditionally
and irrevocably guarantee the obligations of UAG Century under the Lease.
1.14 REGISTRATION RIGHTS AGREEMENT.
At the time of the Merger Closings, UAG and the Stockholders shall
execute a piggyback registration rights agreement in a form to be agreed to by
the parties which agreement shall be subject to any existing contractual rights
of third parties (the "Registration Rights Agreement").
1.15 NET WORTH ADJUSTMENT.
(a) On the Closing Date, or as soon as practicable thereafter (but no
later than 45 days after the Closing Date), the Stockholders shall prepare and
deliver to UAG a combined balance sheet of the Companies as of the close of
business on the Closing Date (such balance sheet so delivered is referred to
herein as the "Closing Date Balance Sheet"). The Closing Date Balance Sheet
shall be prepared in accordance with GAAP applied on a basis consistent with
the accounting practices and principles set forth on Exhibit "A-1" hereto and
subject to the adjustments set forth on Exhibit "A-2" hereto. At the same time,
the Stockholders shall also prepare and deliver to UAG a schedule of Net Worth
as of the same date (as defined in Section 1.15(g)(iii) hereof ("Schedule of
Net Worth")). In connection with the preparation of the Closing Date Balance
Sheet, the Stockholders and the Companies shall permit the Reviewer (as defined
below) and other representatives of UAG to conduct a physical inventory at each
location where inventory is held by the Companies, and the Stockholders, the
Companies, and their representatives shall be permitted to observe and
participate in such inventory.
9
(b) Coopers & ▇▇▇▇▇▇▇ or such other "big 6" accounting firm (the
"Reviewer") as may be selected by UAG shall audit or otherwise review the
Closing Date Balance Sheet and the Schedule of Net Worth delivered by the
Stockholders to the extent UAG and the Reviewer deem appropriate. Within
seventy-five (75) days after delivery of the Closing Date Balance Sheet and
Schedule of Net Worth, UAG shall deliver a reviewed balance sheet (the
"Reviewed Balance Sheet") and a reviewed schedule of net worth ("Reviewed
Schedule of Net Worth") to the Stockholders. The Reviewed Balance Sheet and the
Reviewed Schedule of Net Worth shall be prepared by UAG with the Reviewer's
assistance in the same manner as is provided in subparagraph (a) above for the
Closing Date Balance Sheet and the Schedule of Net Worth.
(c) UAG and the Reviewer shall have the opportunity to consult with
the Stockholders, the Companies and each of the accountants and other
representatives of the Stockholders and the Companies and to examine the work
papers and schedules prepared by the Stockholders, the Companies and each of
such accountants after the preparation of the Closing Date Balance Sheet and
Schedule of Net Worth. The Stockholders and their representatives shall have
the opportunity to consult with UAG, the Companies and their accountants, the
Reviewer and other representatives and to examine the work papers and schedules
prepared by UAG and the Reviewer after preparation of the Reviewed Balance
Sheet and the Reviewed Schedule of Net Worth.
(d) The Stockholders shall have a period of forty-five (45) days after
delivery of the Reviewed Balance Sheet and the Reviewed Schedule of Net Worth
to present in writing to UAG all objections the Stockholders may have to any of
the matters set forth or reflected therein, which objections shall be set forth
in reasonable detail. If no objections are raised within such 45-day period,
the Reviewed Balance Sheet and Reviewed Schedule of Net Worth shall be deemed
accepted and approved by the Stockholders, in which event the net worth
reflected on the Reviewed Schedule of Net Worth shall be deemed the Final Net
Worth. If the Stockholders shall raise any objection within such 45-day period,
UAG and the Stockholders shall attempt to resolve the matter or matters in
dispute and, if resolved, the net worth agreed upon in writing by UAG and the
Stockholders shall be deemed the Final Net Worth.
(e) If such dispute cannot be resolved by UAG and the Stockholders
within sixty (60) days after the delivery of the Reviewed Balance Sheet and
Reviewed Schedule of Net Worth, then the specific matters in dispute shall be
submitted to a firm of independent public accountants mutually acceptable to
UAG and the Stockholders (or if agreement is not reached on such firm within
five (5) Business Days, a "big 6" accounting firm selected by lot after
excluding one firm designated by UAG and one firm designated by the
Stockholders provided that such firm has not previously been retained by UAG or
the Stockholders), which firm shall make a final and binding determination of
the Net Worth of the Companies as of the close of business on the Closing Date
in accordance with the provisions of this Section 1.15, which determination
shall be deemed the Final Net Worth. UAG and the Stockholders shall inform such
firm in writing as to their respective positions concerning the specific
matters in dispute, and shall make readily available to such firm any books,
records and work papers relevant to
10
such firm's resolution of the disputed matters. Such accounting firm shall send
its written determination to UAG and the Stockholders. The fees and expenses of
the accounting firm referred to in this Section 1.15(e) shall be paid one-half
by UAG and one-half by the Stockholders.
(f) UAG and the Stockholders agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected
by UAG and the Stockholders pursuant to Section 1.15(e) hereof in order that
any and all matters in dispute shall be resolved as soon as practicable.
(g) (i) If the Final Net Worth as determined through the operation of
Sections 1.15(a) through (e) hereof shall be less than the amount of the
Net Worth as of July 31, 1997 as set forth on Schedule 1.15(g)(i) (the
amount of any such deficiency being referred to herein as the "Net Worth
Deficiency"), the Stockholders shall pay to UAG at the Supplemental Closing
(as defined below), by wire transfer of immediately available funds to an
account designated in writing by UAG at least two (2) Business Days prior
to the date of the Supplemental Closing, an amount equal to the Net Worth
Deficiency.
(ii) If the Final Net Worth shall be more than the amount of the
Net Worth as of July 31, 1997 as set forth on Schedule 1.15(g)(i) (the
amount of any such excess being referred to herein as the "Net Worth
Excess"), the Merger Subs shall pay to the Stockholders at the Supplemental
Closing, by wire transfer of immediately available funds to an account
designated in writing by the Stockholders two (2) Business Days prior to
the date of the Supplemental Closing, an amount equal to the Net Worth
Excess.
(iii) "Net Worth" shall mean, as of any date, the total of all
assets minus the total of all liabilities that would be shown on the
combined balance sheet of the Companies as of the close of business on such
date prepared in accordance with GAAP applied on a basis consistent with
the accounting practices and principles set forth on Exhibit "A-1" hereto,
and subject to the adjustments set forth on Exhibit "A-2" and Schedule
1.15(g)(iii) hereto.
(iv) A supplemental closing (the "Supplemental Closing") shall
take place for purposes of this subparagraph (g) within five (5) Business
Days after the Final Net Worth is determined.
1.16 CAPITAL LOANS.
On or before the Closing Date, the Stockholders shall pay the
outstanding principal and all accrued but unpaid interest on the loans set
forth on Schedule 1.16 hereof (the "Capital Loans") in full satisfaction of the
Companies' obligations arising out of or relating to the Capital Loans. If the
Companies, or any of them, have any liabilities or obligations relating
11
to the Capital Loans as of the Closing, then the Base Price shall be reduced by
an amount equal to any remaining outstanding principal and all accrued but
unpaid interest on the Capital Loans as of such time unless such loans are paid
by the Stockholders at the Closing.
1.17 DISTRIBUTIONS PRIOR TO CLOSING.
Prior to the Closing Date, (a) the Companies shall declare cash
dividends to their respective Stockholders in the aggregate amount of Two
Million Two Hundred Fifty Thousand Dollars ($2,250,000) which dividends
include, but are not limited to, undistributed retained earnings of the
Companies from January 1, 1997 through July 31, 1997 and which dividends shall
be paid (on or before the Closing Date) from the Companies as set forth on
Schedule 1.17 hereto; (b) the Companies shall declare dividends to their
respective Stockholders in an amount equal to the estimated net income of the
Companies from August 1, 1997 through the Closing Date which dividends shall be
paid in cash on or before the Closing Date; (c) Kissimmee Toyota shall assign
to its Stockholders all of its rights under its Third Party Lease (as defined
in Section 2.10 hereof) to acquire fee simple title to the Real Property leased
thereunder and (d) Paramount shall assign to its Stockholders all of its rights
under its Third Party Lease to acquire fee simple title to the Real Property
leased thereunder.
1.18 SATISFACTION OF RELATED PARTY LOANS.
On the Closing Date, UAG shall make funds available to the Companies
in an aggregate amount equal to the unpaid balances as of the Closing Date of
the obligations of the Companies set forth on Exhibit "B" hereof (such
obligations being referred to herein as the "Assumed Loans"); which funds shall
be made available from one or more of the following sources: (i) a capital
contribution from Sub, (ii) a loan from UAG or one of its Affiliates or (iii)
additional borrowing by the Companies secured by their respective inventory.
These additional funds shall be used on the Closing Date to satisfy in full the
obligations of the Companies arising out of or relating to the Assumed Loans.
The Companies shall make all principal payments with respect to the Assumed
Loans from the date hereof through the Closing Date in the ordinary course of
business consistent with past practice and shall pay interest on the Assumed
Loans prior to the Closing Date.
1.19 EFFECTIVE DATE.
The obligations of the parties hereunder shall not take effect until
the date (the "Effective Date") on which the parties have notified each of the
Companies' manufacturers of the proposed transfer of ownership of the Companies
as contemplated by this Agreement. The parties agree to cooperate in giving
such notice to each of the Companies' manufacturers no later than five (5)
Business Days after the date hereof.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 2 are to be delivered by the Companies
and the Stockholders no later than twenty-five (25) Business Days after the
date hereof, the Companies and the Stockholders hereby jointly and severally
represent and warrant to UAG and the Merger Subs as follows:
2.1 ORGANIZATION AND GOOD STANDING.
(a) Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own, lease and
operate the properties used in its businesses and to carry on its business as
now being conducted.
(b) The Companies are duly qualified to do business and are in good
standing as a foreign corporation in each state and jurisdiction where
qualification as a foreign corporation is required. Schedule 2.1 hereto lists
(i) the states and other jurisdictions where the Companies are so qualified and
(ii) the assumed names under which the Companies conduct business.
(c) Attached to Schedule 2.1 hereto are complete and correct copies of
the Companies' Articles of Incorporation and Bylaws (including comparable
governing instruments with different names), as amended and presently in
effect.
2.2 SUBSIDIARIES.
Except as set forth on Schedule 2.2 hereto, the Companies do not have
any interest or investment in any Person.
2.3 CAPITALIZATION.
The authorized stock of each of the Companies and the number of shares
of capital stock which are issued and outstanding are set forth on Schedule 2.3
hereto. The shares listed on Schedule 2.3 hereto constitute all of the issued
and outstanding shares of capital stock of the Companies and have been validly
authorized and issued, are fully paid and nonassessable, have not been issued
in violation of any preemptive rights or of any federal or state securities law
and no personal liability attaches to the ownership thereof. There is no
security, option (other than options that will be terminated prior to Closing),
warrant, right, call, subscription, agreement, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or indirectly (i)
calls for the issuance, sale, pledge or other disposition of any shares of
capital stock of the Companies or any securities convertible into, or other
rights to acquire, any shares of capital stock of the Companies, or (ii)
obligates the Companies to grant, offer or enter into any of the foregoing, or
(iii) relates to the voting or control of such capital stock, securities
13
or rights, except as set forth on Schedule 2.3 hereto. The Companies have not
agreed to register any securities under the Securities Act of 1933, as amended
(the "Securities Act").
2.4 AUTHORITY; APPROVALS AND CONSENTS.
(a) The Companies have the corporate power and authority to enter into
this Agreement and the documents referred to herein (such documents, other than
the Leases, herein referred to as the "Documents") to which they are a party
and to perform their obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and the Documents to which they are
a party and the consummation of the transactions contemplated hereby and
thereby have been duly authorized and approved by the Board of Directors of
each of the Companies and no other corporate proceedings on the part of the
Companies are necessary to authorize and approve this Agreement and the
Documents and the transactions contemplated hereby and thereby. This Agreement
has been, and on the Closing Date the Documents will be, duly executed and
delivered by, and constitute valid and binding obligations of, each of the
Companies, enforceable against the Companies in accordance with their
respective terms.
(b) The execution, delivery and performance by each of the Companies
and the Stockholders of this Agreement and the Documents to which it or he is a
party and the consummation of the transactions contemplated hereby and thereby
do not and will not, except as set forth on Schedule 2.4:
(i) contravene any provisions of the Articles of Incorporation or
Bylaws (including any comparable governing instrument with a different
name) of any of the Companies;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any material Company Agreement
or require any consent or waiver of any party to any material Company
Agreement;
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of any of the Companies (other than the rights of UAG to acquire the Shares
pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements applicable
to any of the Companies or any of their respective businesses or
properties; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act.
14
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority is necessary to be
obtained or made by the Companies to enable the Companies to continue to
conduct their respective businesses and operations and use their respective
properties after the Closing in a manner which is in all material respects
consistent with that in which they are presently conducted.
2.5 FINANCIAL STATEMENTS.
(a) Attached as Schedule 2.5(a) are true and complete copies of the
combined balance sheets of the Dealerships (except Kissimmee Toyota) as of
December 31, 1996 and December 31, 1995, and related combined statements of
operations, changes in stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996, together with the notes
thereto and the audit report of independent certified public accountants (the
"Company Financial Statements"). The Company Financial Statements are
consistent with and in accordance with the books and records of the Dealerships
(except Kissimmee Toyota), fairly present the financial position, results of
operations, changes in stockholders' equity and cash flows of the Dealerships
(except Kissimmee Toyota) as of the dates and for the periods indicated in
conformity with GAAP consistently applied during such periods, and can be
reconciled with the financial statements and the financial records maintained
and the accounting methods applied by the Dealerships (except Kissimmee Toyota)
for federal income tax purposes.
(b) Attached as Schedule 2.5(b) is the unaudited combined balance
sheet of the Companies as of July 31, 1997 (the "Company Balance Sheet"). The
Company Balance Sheet has been prepared in accordance with GAAP applied on a
basis consistent with the accounting practices and principles set forth on
Exhibit "A-1" and subject to the adjustments on Exhibit "A-2".
(c) Attached as Schedule 2.5(c) are the monthly and year-to-date
financial statements of the Companies provided to each of the manufacturers as
of and for the periods ended July 31, 1997 and August 31, 1997 (each a "Company
Factory Statement" and collectively the "Company Factory Statements"). Each
Company Factory Statement has been prepared on a basis consistent with the
financial statements previously delivered to the applicable manufacturer by
such Company.
Subject to normal year-end adjustments, the books and accounts of the Companies
are complete and correct in all material respects and reflect all of the
transactions, items of income and expense and all assets and liabilities of the
businesses of the Companies, except where the failure to so reflect any such
items would not be material (either individually or in the aggregate) to the
Company with respect to which such item relates.
15
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
The Companies do not have any liabilities of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in Section 2.17 and 2.18
hereof or liabilities for Taxes (as defined in Section 2.8 hereof), except for
(i) obligations and liabilities (other than for breach) under any Company
Agreement set forth on Schedule 2.15 hereto or under any Company Agreement
which is not required to be disclosed on such Schedule, (ii) liabilities
reflected or reserved against on the Company Balance Sheet or included or
described in the Notes to the Company Financial Statements, (iii) liabilities
incurred in the ordinary course of business and consistent with past practice
after July 31, 1997 which, individually and in the aggregate, do not have, and
cannot reasonably be expected to have, a Material Adverse Effect, (iv)
liabilities disclosed on Schedule 2.6 hereto, and (v) liabilities of a Company
not excepted in (i) through (iv) above which, individually and in the
aggregate, are not material to such Company.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Except as set forth on Schedule 2.7(a) hereto or as expressly
permitted herein, since December 31, 1996, each Company has operated in the
ordinary course of business consistent with past practice and there has not
been:
(i) any change in the assets, properties, business, operations,
prospects, net income or financial condition of any of the Companies, and
to the Stockholders' and the Companies' knowledge, no factor, event,
condition, circumstance or prospective development exists (other than those
generally affecting the economy and the retail automobile business in each
Company's market) which has had, or can reasonably be expected to have, a
Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of any of the Companies, whether or not
covered by insurance;
(iii) any change in any method of accounting or accounting
practice of any of the Companies; or
(iv) any loss of the employment, services or benefits of any
general manager, office manager or any other key employee.
(b) Since December 31, 1996, except as set forth in Schedule 2.7(b)
hereto, the Companies have not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary course
of business consistent with past practice;
16
(ii) failed to discharge or satisfy any lien or pay or satisfy
any obligation or liability when due (whether absolute, accrued, contingent
or otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets, except for security interests granted in the
ordinary course of business consistent with past practice and mechanics
liens and liens for taxes not yet due and payable;
(iv) sold or transferred any assets or canceled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on and not cured any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof other than (A)
such write-downs and write-offs on or before July 31, 1997 that are
reflected in the Company Financial Statements or the Company Balance Sheet,
and (B) such write-downs and write-offs after July 31, 1997 that will be
reflected on the Closing Date Balance Sheet;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 15% and one-time bonuses to certain employees in connection with
the transactions contemplated by this Agreement which bonuses shall be
reflected on the Closing Date Balance Sheet or entered into any employment
or severance agreement or arrangement with any of them;
(ix) made any individual capital expenditure in excess of
$50,000, or aggregate capital expenditures in excess of $500,000, or
additions to property, plant and equipment other than ordinary repairs and
maintenance;
(x) discontinued any franchise or the sale of any material
products or material product line or program;
(xi) incurred any obligation or liability for the payment of
severance benefits; or
(xii) entered into any agreement or made any commitment to take
any action that, if taken, would cause any of the foregoing warranties in
this Section 2.7(b) to be untrue.
17
2.8 TAXES.
The Companies have each made a valid election pursuant to Section
1362(a) of the Code, to be an "S Corporation" within the meaning of Section
1361(a)(1) of the Code and have continued to qualify as such for all taxable
years since their formation and will continue to so qualify until consummation
of the transactions contemplated hereby. No Company has acquired assets of
another corporation in a transaction described in Section 381(a) of the Code
and no Company has any "net unrealized built-in gain" on which the tax imposed
pursuant to Section 1374 of the Code could be imposed upon recognition thereof,
except (in each case) as disclosed in Schedule 2.8(a) hereto. The Companies
and, for any period during all or part of which the tax liability of any other
corporation was determined on a combined or consolidated basis with the
Companies, any such other corporation, have filed timely all federal, state,
local and foreign tax returns, reports and declarations required to be filed
(or have obtained or timely applied for an extension with respect to such
filing) correctly reflecting the Taxes and all other information required to be
reported thereon and have paid, or made adequate provision for the payment of,
all Taxes which are due pursuant to such returns or pursuant to any assessment
received by the Companies or any such other corporation. Copies of all tax
returns for the fiscal years ended since December 31, 1992 will be furnished or
made available to UAG or its representatives and such copies are accurate and
complete as of the date hereof. The Companies will also furnish to UAG correct
and complete copies of all material notices and correspondence sent or received
since December 31, 1994 by the Companies to or from any federal, state or local
tax authorities. Except with respect to any "net unrealized built-in gain" set
forth on Schedule 2.8(a) hereof, (i) the Companies shall have adequately
reserved for the payment of all Taxes with respect to periods ended on or prior
to the Closing Date for which tax returns have not yet been filed, (ii) except
to the extent reserves therefor are reflected on the Company Balance Sheet, or
will be reflected on the Closing Date Balance Sheet, the Companies are not
liable, or will not become liable, for any Taxes for any period ending on or
prior to the Closing Date and (iii) in the ordinary course, the Companies make
adequate provision on their books for the payment of all Taxes (including for
the current fiscal period) owed by the Companies. Except as set forth on
Schedule 2.8(b) hereto, the Companies have not been subject to a federal or
state tax audit of any kind since December 31, 1992, and no adjustment has been
proposed by the Internal Revenue Service ("IRS") with respect to any return for
any prior or subsequent year. With respect to the audits referred to on
Schedule 2.8(b) hereto and except as indicated thereon, no such audit has
resulted in an adjustment in excess of $25,000. Neither the Companies nor the
Stockholders has knowledge of any basis for an assertion of a deficiency for
Taxes against the Companies. The Stockholders will cooperate, and will cause
their respective Affiliates to cooperate, with the Companies as reasonably
requested by UAG in the filing of any returns and in any audit or refund claim
proceedings involving Taxes for which the Companies may be liable or with
respect to which the Companies may be entitled to a refund.
2.9 LEGAL MATTERS.
(a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no
Claim pending against, or, to the knowledge of the Companies or the
Stockholders, threatened against or
18
affecting, the Companies, any ERISA Plan (as defined in Section 2.17(a) hereof)
or any of their properties or rights before or by any court, arbitrator, panel,
agency or other governmental, administrative or judicial entity, domestic or
foreign, (ii) nor is any basis known to the Stockholders or the Companies for
any such Claims which would be material individually or in the aggregate to any
Company, and (iii) the Companies are not subject to any judgment, decree, writ,
injunction, ruling or order (collectively, "Judgments") of any governmental,
administrative or judicial authority, domestic or foreign. Schedule 2.9(a)
hereto identifies each Claim and Judgment disclosed thereon which is fully
covered by an insurance policy.
(b) Except as set forth on Schedule 2.9(b), the business of the
Companies is being conducted in compliance with all Legal Requirements
applicable to the Companies or their business or properties. The Companies
hold, and are in compliance with, all franchises, licenses, permits,
registrations, certificates, consents, approvals or authorizations
(collectively, "Permits") required by all applicable Legal Requirements. A list
of all such permits is set forth on Schedule 2.9(b) hereof.
(c) The Companies own or hold all Permits material to the conduct of
their business. No event has occurred and is continuing which permits, or after
notice or lapse of time or both would permit, any modification or termination
of any Permit.
2.10 PROPERTY.
(a) Set forth on Schedule 2.10(a) hereto is a list of all interests in
real property owned by or leased to the Companies, including all real property
owned or leased by the Stockholders (directly or indirectly) and used in the
businesses of the Companies and of all options or other contracts to acquire
any such interest (collectively, the "Real Property"). With respect to any
leased Real Property owned by the Stockholders or their Affiliates, there are
no defaults by either party under and no state of facts exist which with the
giving of notice or the passage of time, or both, would constitute a default
under such leases. Except as set forth on Schedule 2.10(a), with respect to any
leased Real Property not owned by the Stockholders or any of their Affiliates
(the "Third Party Leases"), neither the Companies nor the Stockholders have (i)
knowledge of any defaults under such leases, (ii) received notice of any
defaults by any parties under such leases or (iii) any knowledge of any state
of facts which with the giving of notice or the passage of time, or both, would
constitute a default under such leases. True and correct copies of all leases
relating to the Real Property, together with any amendments and modifications
thereto, are attached as Schedule 2.10(b).
(b) Except as set forth on Schedule 2.10(b), (i) to the knowledge of
the Stockholders and the Companies all improvements to the Real Property
("Improvements") and all machinery, equipment and other tangible property owned
or used by or leased to the Companies are fit for the particular purposes for
which they are used by the Companies, (ii) such tangible properties and all
Improvements owned or leased by the Companies conform in all material respects
with all applicable Legal Requirements, (iii) to the knowledge of the
Stockholders and the Companies, such Improvements do not encroach in any
respect on property
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of others, (iv) to the knowledge of the Companies and the Stockholders there
are no material latent defects with respect to the Improvements, (v) to the
actual knowledge of the Stockholders and the Companies the Real Property is
currently zoned to permit the conduct of the respective businesses of the
Companies as presently conducted, (vi) no certificate of occupancy issued with
respect to the Improvements contains any materially adverse special conditions
or restrictions, (vii) to the knowledge of the Companies and the Stockholders,
all utilities servicing the Real Property and the Improvements are provided by
publicly-dedicated utility lines and are located within public rights-of-way
and do not cross or encumber any private land and (viii) no written notice
(and, to the knowledge of the Stockholders and the Companies, no oral notice)
of any pending, threatened or contemplated action by any governmental authority
or agency having the power of eminent domain has been given to the Companies or
the Stockholders with respect to the Real Property.
(c) All surveys, title binders, title policies and copies of any
exceptions to title relating to the Real Property or Improvements, copies of
certificates of occupancy with respect to the Improvements, and any written
verification from zoning authorities that the Real Property and Improvements
are currently zoned for the businesses as currently conducted by the Companies
and that any conditions to zoning have been met, which in each case are in the
possession of any Company or any Stockholder, will be furnished to UAG within
twenty-five (25) Business Days after the date hereof.
(d) To the actual knowledge of the Stockholders and the Companies, the
Real Property and Improvements owned by the Stockholders or their Affiliates
are owned in fee simple, free and clear of all Liens, claims and encumbrances,
except those disclosed in Schedule 2.10(d), none of which currently or, to the
knowledge of the Stockholders or their Affiliates, in the future will
materially affect the use of such Real Property or such Improvements for the
conduct of the respective businesses of the Companies as presently conducted.
Except as set forth on Schedule 2.10(d), (i) no assessments have been made
against any portion of the Real Property which are unpaid (except ad valorem
taxes for the current year that are not yet due and payable), whether or not
they have become Liens and (ii) to the knowledge of the Stockholders and the
Companies, there are no disputes concerning the location of the lines and
corners of the Real Property. No one has been granted any right to purchase or
lease such Real Property or Improvements other than pursuant to the existing
leases in favor of the Companies, which are to be terminated at the Closing by
agreement between the parties and pursuant to which the owners shall
acknowledge that there are no defaults under any such leases and that the
Companies have no liability arising out of or relating to such leases.
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the Companies,
the Real Property, the Improvements and any property formerly owned, occupied
or leased by the Companies are in compliance with all Environmental Laws, (ii)
the Companies have obtained all Environmental Permits, (iii) such Environmental
Permits are in full force and effect, and (iv) the Companies are in compliance
with all terms and conditions of such Environmental Permits.
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(b) The Companies and the Stockholders have not violated, done or
suffered any act which could give rise to liability under, and are not
otherwise exposed to liability under, any Environmental Law. No event has
occurred with respect to the Real Property, the Improvements or any property
formerly owned, occupied or leased by the Companies, which, with the passage of
time or the giving of notice, or both, would constitute a violation of or
non-compliance with any applicable Environmental Law. The Companies have no
contingent liability under any Environmental Law. There are no liens under any
Environmental Law on the Real Property.
(c) Except as set forth on Schedule 2.11(c) hereto, (i) neither the
Companies, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Companies, nor, to the
knowledge of the Companies or the Stockholders, any property adjacent to the
Real Property is being used or has been used for the treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Materials or as a landfill or other waste disposal site and there has been no
spill, release or, to the knowledge of the Companies or the Stockholders,
migration of any Hazardous Materials on or under the Real Property that could
reasonably be expected to give rise to liability (provided, however, that
certain petroleum products and other Hazardous Materials are stored and handled
on the Real Property in the ordinary course of the Companies' business in
compliance with all Environmental Laws), (ii) none of the Real Property or any
portion thereof, the Improvements or any property formerly owned, occupied or
leased by the Companies has been subject to investigation by any governmental
authority evaluating the need to investigate or undertake Remedial Action at
such property, and (iii) none of the Real Property, the Improvements or any
property formerly owned, occupied or leased by the Companies, or, to the
knowledge of the Companies or the Stockholders, any site or location where the
Companies sent waste of any kind, is identified on the current or proposed (A)
National Priorities List under ▇▇ ▇.▇.▇. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇, (▇) Comprehensive
Environmental Response Compensation and Liability Inventory System list, or (C)
any list arising from any statute analogous to CERCLA.
(d) Except as set forth on Schedule 2.11(d) hereto, there have been
and are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) friable asbestos or asbestos containing
materials, (iii) polychlorinated biphenyls ("PCB") or PCB-containing equipment,
including transformers, (iv) in-ground hydraulic lifts, or (v) to the knowledge
of the Stockholders and the Companies, wetlands (as defined under any
Environmental Law) located within any portion of the Real Property, nor have
any Liens been placed upon any portion of the Real Property, the Improvements
or any property formerly owned, occupied or leased by the Companies in
connection with any actual or alleged liability under any Environmental Law.
(e) Except as set forth on Schedule 2.11(e) hereto, (i) there is no
pending or, to the knowledge of the Stockholders and the Companies, threatened
claim, litigation, or administrative proceeding, or known prior claim,
litigation or administrative proceeding, arising under any Environmental Law
involving the Companies, the Real Property, the Improvements,
21
any property formerly owned, leased or occupied by the Companies, any offsite
contamination affecting the business of the Companies or any operations
conducted at the Real Property, (ii) there are no ongoing negotiations with or
agreements with any governmental authority relating to any Remedial Action or
other environmentally related claim, (iii) the Companies have not submitted
notice pursuant to Section 103 of CERCLA or analogous statute or notice under
any other applicable Environmental Law reporting a release of a Hazardous
Material into the environment, and (iv) the Companies have not received any
notice, claim, demand, suit or request for information from any governmental or
private entity with respect to any liability or alleged liability under any
Environmental Law, nor to the knowledge of the Stockholders and the Companies,
has any other entity whose liability therefor, in whole or in part, may be
attributed to the Companies, received such notice, claim, demand, suit or
request for information.
(f) The Stockholders and the Companies will provide to UAG, within
twenty-five (25) Business Days after the date hereof, all environmental studies
and reports in their possession and will advise UAG of any environmental
studies and reports known to them but not in their possession pertaining to the
Real Property, the Improvements, the Companies and any property formerly owned,
occupied or leased by the Companies, and will permit the testing of the soil,
groundwater, building components, tanks, containers and equipment on the Real
Property, and the Improvements, by UAG or UAG's agents or experts as they deem
necessary or appropriate to confirm the condition of such properties, provided
that (i) such testing will not unreasonably interfere with any Company's use of
the Real Property or Improvements in the operation of the business and (ii) UAG
will indemnify the Companies from any damage or loss caused by UAG's
representatives while conducting such testing.
2.12 INVENTORIES.
Except as set forth on Schedule 2.12 and Exhibit "A-1", the values at
which inventories are carried on the Company Financial Statements reflect the
normal inventory valuation policies of the Companies, and such values are in
conformity with GAAP consistently applied. The values at which inventories will
be carried on the Closing Date Balance Sheet will be in accordance with GAAP
applied on a basis consistent with the accounting practices and principles set
forth on Exhibit "A-1" hereto, and subject to the adjustments set forth on
Exhibit "A-2" hereto.
2.13 ACCOUNTS RECEIVABLE.
Except as set forth on Schedule 2.13, all accounts receivable
reflected on the Company Financial Statements are, and all accounts receivable
that will be or will have been reflected on the Closing Date Balance Sheet will
have arisen in the ordinary course of business and are not, and will not be,
subject to any material defenses, setoffs or counterclaims other than (i)
normal cash discounts accrued in the ordinary course of business and (ii) any
allowances for bad debts reflected on such statements.
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2.14 INSURANCE.
All material properties and assets of the Companies which are of an
insurable character are insured against loss or damage by fire and other risks
to the extent and in the manner reasonable in light of the risks attendant to
the businesses and activities in which the Companies are engaged and customary
for companies engaged in similar businesses or owning similar assets. Set forth
on Schedule 2.14 hereto is a list and brief description (including the name of
the insurer, the type of coverage provided, the amount of the annual premium
for the current policy period, the amount of remaining coverage and deductibles
and the coverage period) of all policies for such insurance and the Companies
have made or will make available to UAG true and complete copies of all such
policies. All such policies are in full force and effect, are underwritten by
financially secure insurers, and are sufficient for all applicable requirements
of law. No notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policy has been received by the
Companies.
2.15 CONTRACTS; ETC.
Set forth on Schedule 2.15 hereto is a complete and accurate list of
each Company Agreement which is material to the business, operations, assets or
financial condition of any of the Companies. True and complete copies of all
written Company Agreements referred to on Schedule 2.15 and Schedule 2.10
hereto, exclusive of individual vehicle titles and/or manufacturer's
certificates of origin and floor plan liens applicable to individual vehicles,
have been or will be delivered or made available to UAG, and the Companies have
provided or will provide UAG with accurate and complete written summaries of
all such Company Agreements which are unwritten. Except as set forth on
Schedule 2.15, the Companies are not, nor, to the knowledge of the Companies
and the Stockholders is, any other party thereto, in breach of or default under
any Company Agreement, and no event has occurred which (after notice or lapse
of time or both) would become a breach or default under, or would permit
modification, cancellation, acceleration or termination of, any Company
Agreement or result in the creation of any Lien upon, or any Person obtaining
any right to acquire, any properties, assets or rights of the Companies. There
are no material unresolved disputes involving the Companies under any Company
Agreement.
2.16 LABOR RELATIONS.
(a) The Companies have paid or made provision for the payment of all
salaries and accrued wages and have complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and have withheld and paid to the appropriate
governmental authority, or are holding for payment not yet due to such
authority, all amounts required by law or agreement to be withheld from the
wages or salaries of their employees.
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(b) Except as set forth on Schedule 2.16(b) hereto, (i) none of the
Companies is a party to any (A) outstanding employment agreements or contracts
with officers or employees that are not terminable at will, or that provide for
payment of any bonus or commission, (B) agreement, policy or practice that
requires it to pay termination or severance pay to salaried, non-exempt or
hourly employees (other than as required by law), or (C) collective bargaining
agreement or other labor union contract applicable to persons employed by the
Companies, (ii) neither the Stockholders nor the Companies have any knowledge
of any activities or proceedings of any labor union to organize any such
employees and (iii) the Companies have not breached or otherwise failed to
comply with any such agreements (the "Employment or Labor Agreements"). Within
twenty-five (25) Business Days after the date hereof, the Companies will
furnish to UAG complete and correct copies of all the Employment and Labor
Agreements.
(c) Except as set forth on Schedule 2.16(c), (i) there is no unfair
labor practice charge or complaint pending before the National Labor Relations
Board ("NLRB"), (ii) there is no labor strike, material slowdown or material
work stoppage or lockout actually pending or, to the Stockholders' or the
Companies' knowledge, threatened, against or affecting the Companies, and the
Companies have not experienced any strike, material slow down or material work
stoppage, lockout or other collective labor action by or with respect to
employees of the Companies during the two-year period preceding the date
hereof, (iii) there is no representation claim or petition pending before the
NLRB or any similar foreign agency and no question concerning representation
exists relating to the employees of the Companies, (iv) there are no charges
with respect to or relating to the Companies pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices, (v) the
Companies have not received formal notice from any federal, state, local or
foreign agency responsible for the enforcement of labor or employment laws of
an intention to conduct an investigation of any unresolved claim involving the
Companies and, to the knowledge of the Companies, no such investigation is in
progress and (vi) the consents of the unions that are parties to any Employment
and Labor Agreements are not required to complete the transactions contemplated
by this Agreement and the Documents.
(d) The Companies have never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. " 2101-2109, and the regulations
promulgated therein.
2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on Schedule 2.17(a) hereto is a true and complete list
of:
(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Companies or to which the Companies are required to make
contributions ("Pension Benefit Plan"); and
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(ii) each employee welfare benefit plan, as defined in Section
3(1) of ERISA, maintained by the Companies or to which the Companies are
required to make contributions ("Welfare Benefit Plan").
Within twenty-five (25) Business Days after the date hereof, true and complete
copies of all Pension Benefit Plans and Welfare Benefit Plans (collectively,
"ERISA Plans") will be delivered to or made available to UAG together with, as
applicable with respect to each such ERISA Plan, copies of trust agreements,
summary plan descriptions, all IRS determination letters or applications
therefor with respect to any Pension Benefit Plan intended to be qualified
pursuant to Section 401(a) of the Code, and valuation or actuarial reports,
accountant's opinions, financial statements, IRS Form 5500s (or 5500-C or
5500-R) and summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on Schedule
2.17(b):
(i) there is no ERISA Plan which is a "multiemployer" plan as
that term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the Companies
or the Stockholders) is threatened or about to occur which would constitute
a prohibited transaction under Section 406 of ERISA or under Section 4975
of the Code;
(iii) each ERISA Plan since its inception has complied in all
material respects with the reporting and disclosure requirements imposed
under ERISA and the Code and has timely filed Form 5500s (or 5500-C or
5500-R) and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Except as set forth on Schedule 2.17(c), each Pension Benefit Plan
intended to be qualified under Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section 401(a)
of the Code, and the trust established thereunder has been exempt from
taxation under Section 501(a) of the Code and is currently in compliance
with applicable federal laws;
(ii) has been operated, since its inception, in accordance with
its terms and there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review by
the IRS and (to the knowledge of the Companies and the Stockholders) no
such action is contemplated or under consideration and the IRS has not
asserted that any such Pension Benefit Plan
25
is not qualified under Section 401(a) of the Code or that any trust
established under such a Pension Benefit Plan is not exempt under Section
501(a) of the Code.
(d) Except as set forth on Schedule 2.17(d), with respect to each
Pension Benefit Plan which is a defined benefit plan under Section 414(j) and
each defined contribution plan under Section 414(i) of the Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the
Companies since the effective date of ERISA and all premiums due and owing
to the PBGC have been timely paid;
(ii) the PBGC has not notified the Companies or any Pension
Benefit Plan of the commencement of proceedings under Section 4042 of ERISA
to terminate any such plan;
(iii) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Companies or the Stockholders) is
threatened or about to occur which would constitute a reportable event
within the meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code); and
(v) if any of such Pension Benefit Plans were to be terminated on
the Closing Date (A) no liability under Title IV of ERISA would be incurred
by the Companies and (B) all benefits accrued to the day prior to the
Closing Date (whether or not vested) would be fully funded in accordance
with the actuarial assumptions and method utilized by such plan for
valuation purposes.
(e) With respect to each Pension Benefit Plan, Schedule 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is contemplated,
and a description of the actions taken by the PBGC and the IRS with respect
thereto.
(f) The approximate aggregate of the amounts of contributions by the
Companies to be paid or accrued under ERISA Plans for the current fiscal year
is set forth on Schedule 2.17(f) (the "Aggregate ERISA Contributions"), and the
Aggregate ERISA Contributions for the current fiscal year are not expected to
exceed the total amount set forth on Schedule 2.17(f). To the extent required
in accordance with GAAP, the Company Financial Statements reflect in the
aggregate an accrual of all amounts of employer contributions accrued but
unpaid by the Companies under the ERISA Plans as of the date of each such
Company Financial Statement.
26
(g) With respect to any Multiemployer Plan (1) the Companies have not,
since their formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of
ERISA; (2) there is no withdrawal liability of the Companies under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Companies had
occurred under each such Plan as of December 31, 1996; and (3) the Companies
have not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined
in Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) there are no liabilities of the Companies under Welfare
Benefit Plans with respect to any condition which relates to a claim filed
on or before the Closing Date.
(ii) no material claims for benefits are in dispute or
litigation.
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on Schedule 2.18(a) hereto is a true and complete list
of:
(i) each employee stock purchase, employee stock option, employee
stock ownership, deferred compensation, performance, bonus, incentive,
vacation pay, holiday pay, insurance, severance, retirement, excess benefit
or other plan, trust or arrangement which is not an ERISA Plan whether
written or oral, which the Companies maintain or are required to make
contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director or consultant of the Companies pursuant to which
payments may be required to be made at any time following the date hereof
(including, without limitation, any employment, deferred compensation,
severance, supplemental pension, termination or consulting agreement or
arrangement); and
(iii) each employee of the Companies whose aggregate compensation
for the fiscal year ended December 31, 1996 exceeded $75,000. Within
twenty-five (25) Business Days after the date hereof, there will be
provided or made available to UAG (A) true and complete copies of all of
the written plans, arrangements and agreements referred to on Schedule
2.18(a) ("Compensation Commitments") together with, where prepared by or
for the Companies, any valuation, actuarial or accountant's opinion or
other financial reports with respect to each Compensation Commit ment for
the last three years and (B) an accurate and complete written summary with
respect to any Compensation Commitment which is unwritten.
27
(b) Except as set forth on Schedule 2.18(b), each Compensation
Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by the
IRS or any other federal or state agency and (to the knowledge of the
Companies or the Stockholders) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or foreign
Taxes;
(iv) has no claims subject to dispute or litigation;
(v) complies in all respects with all applicable requirements, if
any, of the Code; and
(vi) has operated since its inception in material compliance with
the reporting and disclosure requirements imposed under ERISA and the Code.
2.19 TRANSACTIONS WITH INSIDERS.
Set forth on Schedule 2.19 hereto is a complete and accurate
description of all material transactions between the Companies or any ERISA
Plan, on the one hand, and any Insider, on the other hand, that have occurred
since January 1, 1996. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholders, any director
or officer of any of the Companies, and any Affiliate, Associate or
Relative of any of the foregoing persons;
(ii) the term "Associate" with respect to any person means (A)
any corporation, partnership, joint venture or other entity of which such
person is an officer or partner or is, directly or indirectly, through one
or more intermediaries, the beneficial owner of 30% or more of (1) any
class or type of equity securities or other profits interest or (2) the
combined voting power of interests ordinarily entitled to vote for
management or otherwise, and (B) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
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2.20 PROPRIETY OF PAST PAYMENTS.
Except as provided in Schedule 2.20, no funds or assets of the
Companies have been used for illegal purposes; no unrecorded funds or assets of
the Companies have been established for any purpose; no accumulation or use of
the Companies' corporate funds or assets has been made without being properly
accounted for in the respective books and records of the Companies; all
payments by or on behalf of the Companies have been duly and properly recorded
and accounted for in their respective books and records; no false or artificial
entry has been made in the books and records of the Companies for any reason;
no payment has been made by or on behalf of the Companies with the
understanding that any part of such payment is to be used for any purpose other
than that described in the documents supporting such payment; and the Companies
have not made, directly or indirectly, any illegal contributions to any
political party or candidate, either domestic or foreign. Except as provided in
Schedule 2.20, neither the IRS nor any other federal, state, local or foreign
government agency or entity has initiated or threatened any investigation of
any payment made by the Companies of, or alleged to be of, the type described
in this Section 2.20.
2.21 INTEREST IN COMPETITORS.
Except as set forth on Schedule 2.21, neither the Companies nor the
Stockholders, nor any of their Affiliates, have any interest, either by way of
contract or by way of investment (other than as holder of not more than 2% of
the outstanding capital stock of a publicly traded Person, so long as such
holder has no other connection or relationship with such Person) or otherwise,
directly or indirectly, in any Person other than the Companies that is engaged
in the retail sale or servicing of automobiles or light duty trucks.
2.22 BROKERS.
Neither the Companies, nor any director, officer or employee thereof,
nor the Stockholders or any representative of the Stockholders, has employed
any broker or finder or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses, in each case in connection with the
transactions contemplated by this Agreement or the Documents.
2.23 ACCOUNTS.
Schedule 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Companies and the name of each person
with any power or authority to act with respect thereto.
2.24 DISCLOSURE.
To the knowledge of the Stockholders or the Companies, neither the
Companies nor the Stockholders have made any material misrepresentation to UAG
relating to the Companies or the Shares or the Real Property or Improvements
and neither the Companies nor
29
the Stockholders have omitted to state to UAG any material fact relating to the
Companies or the Shares or the Real Property or Improvements which is necessary
in order to make the information given by or on behalf of the Companies or the
Stockholders to UAG not misleading. To the knowledge of the Companies and the
Stockholders, no fact, event, condition or contingency exists or has occurred
which has, or in the future can reasonably be expected to have, a Material
Adverse Effect, which has not been disclosed in the Company Financial
Statements or the Schedules to this Agreement (other than those generally
affecting the economy and the retail automobile business in each Company's
market).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 3 are to be delivered by the Stockholders
no later than twenty-five (25) Business Days after the date hereof, each
Stockholder hereby represents and warrants to UAG and the Merger Subs as
follows:
3.1 OWNERSHIP OF SHARES; TITLE.
Such Stockholder is the owner of record and beneficially of the number
of Shares indicated on Schedule 3.1 hereof and has, and shall transfer to the
Merger Subs at the Closing, good and marketable title to such Shares, free and
clear of any and all security interests, pledge agreements, Liens, proxies and
voting or other agreements except restrictions on transfer imposed by
applicable federal and state securities laws and under the Company Agreements
with manufacturers set forth on Schedule 2.4.
3.2 AUTHORITY.
(a) Such Stockholder has all requisite power and authority and full
legal capacity and is competent to execute, deliver and perform this Agreement
and the Documents to which such Stockholder is a party and to consummate the
transactions contemplated hereby and thereby (including the disposition of such
Stockholder's Shares to the Merger Subs as contemplated by this Agreement).
This Agreement has been duly executed and delivered by such Stockholder and
constitutes, and each of the Documents to which such Stockholder is a party
when executed and delivered by such Stockholder will constitute, a valid and
binding obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
(b) Except as set forth on Schedule 3.2, the execution, delivery and
performance of this Agreement and the Documents by such Stockholder and the
consummation of the transactions contemplated hereby and thereby do not and
will not:
30
(i) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any material contract, agreement,
commitment, understanding, arrangement or restriction to which such
Stockholder is a party or to which such Stockholder or any of such
Stockholder's assets are subject;
(ii) violate or conflict with any Legal Requirements applicable
to such Stockholder or any of such Stockholder's businesses or properties;
or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF UAG AND THE MERGER SUBS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 4 are to be delivered by UAG and the
Merger Subs no later than twenty-five (25) Business Days after the date hereof,
UAG and the Merger Subs hereby jointly and severally represent and warrant to
the Companies and the Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING.
(a) UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted.
(b) UAG is duly qualified to do business and is in good standing as a
foreign corporation in each state and jurisdiction where qualification as a
foreign corporation is required, except for such failures to be qualified and
in good standing, if any, which when taken together with all other such
failures of UAG and the Merger Subs would not, or could not reasonably be
expected to, in the aggregate have a Material Adverse Effect on UAG.
(c) UAG has made available to the Stockholders complete and correct
copies of its charter and bylaws, as amended and presently in effect.
4.2 MERGER SUBS.
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Each Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, has the corporate
power and authority to own, lease and operate the properties and assets used in
its business and to carry on its business as now being conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction where qualification as a foreign corporation is required. All of
the outstanding shares of capital stock of each of the Merger Subs have been
validly authorized and issued, are fully paid and non-assessable, have not been
issued in violation of any preemptive rights or of any federal or state
securities law.
4.3 CAPITALIZATION.
The authorized stock of UAG and the number of shares of capital stock
which are issued and outstanding are set forth on Schedule 4.3 hereto. The
shares listed on Schedule 4.3 hereto constitute all the issued and outstanding
shares of capital stock of UAG and have been validly authorized and issued, are
fully paid and nonassessable, have not been issued in violation of any
preemptive rights or of any federal or state securities law and no personal
liability attaches to the ownership thereof.
4.4 SEC FILINGS.
UAG has heretofore made available to the Stockholders UAG's Form 10-K
for the period ending December 31, 1996 and UAG's Form 10-Q for the period
ending June 30, 1997 (the "SEC Filings"). As of their respective dates, the SEC
Filings did not (and any filings by UAG pursuant to the Securities Exchange Act
of 1934, as amended, between the date hereof and the Closing Date will not)
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.5 AUTHORITY; APPROVALS AND CONSENTS.
(a) UAG and the Merger Subs have the corporate power and authority to
enter into this Agreement and the Documents to which they are a party and to
perform their obligations hereunder and thereunder. At the time of the Closing,
the execution, delivery and performance of this Agreement and the Documents to
which they are a party and the consummation of the transactions contemplated
hereby and thereby will have been duly authorized and approved by the Board of
Directors of UAG and the Merger Subs and no other corporate proceedings on the
part of UAG or the Merger Subs will be necessary to authorize and approve this
Agreement and the Documents and the transactions contemplated hereby and
thereby. This Agreement has been, and on the Closing Date the Documents will
be, duly executed and delivered by, and constitute a valid and binding
obligation of, UAG and the Merger Subs, enforceable against UAG and the Merger
Subs in accordance with their respective terms.
32
(b) Except as set forth on Schedule 4.5 hereto, the execution,
delivery and performance by UAG and the Merger Subs of this Agreement and the
Documents to which they are a party and the consummation of the transactions
contemplated hereby and thereby do not and will not:
(i) contravene any provisions of the Certificate of Incorporation
or Bylaws of UAG or the Merger Subs;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any UAG Agreement (as defined
below) or require any consent or waiver of any party to any UAG Agreement;
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of UAG or the Merger Subs;
(iv) violate or conflict in any material respect with any Legal
Requirements applicable to UAG or the Merger Subs or their respective
businesses or properties; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act.
As used in this Agreement, the term "UAG Agreement" shall mean all mortgages,
indenture notes, agreements, contracts, leases, licenses, franchises,
obligations, instruments or other commitments, arrangements or understandings
of any kind, whether written or oral, binding or non-binding, to which UAG or
the UAG Subsidiaries is a party or by which UAG or the UAG Subsidiaries or any
of their assets or properties may be bound or affected, including all
amendments, modifications, extensions or renewals of any of the foregoing, and
which involve receipts or payments by UAG or UAG Subsidiaries which exceed
$500,000 per year. "UAG Subsidiary" shall mean any corporation or other entity
in which UAG, directly or indirectly, owns beneficially securities representing
50% or more of (i) the aggregate equity or profit interests or (ii) the
combined voting power of voting interests ordinarily entitled to vote for
management or otherwise.
4.6 DISCLOSURE.
To the knowledge of UAG, neither UAG nor the Merger Subs has made any
material misrepresentation to the Companies or the Stockholders relating to
this Agreement and neither UAG nor the Merger Subs has omitted to state to the
Companies or the Stockholders any
33
material fact relating to this Agreement which is necessary in order to make
the information given by or on behalf of UAG or the Merger Subs to the
Companies or the Stockholders or their representatives at or prior to Closing
not misleading. To the knowledge of UAG, no fact, event, condition or
contingency exists or has occurred which has, or in the future can reasonably
be expected to have, a Material Adverse Effect on UAG, which has not been
disclosed to the Stockholders or disclosed in the SEC Filings.
4.7 BROKERS.
Neither UAG nor any UAG Subsidiary, nor any director, officer or
employee thereof, has employed any broker or finder or has incurred or will
incur any broker's, finder's or similar fees, commissions or expenses, in each
case in connection with the transactions contemplated by this Agreement or the
Documents.
4.8 REORGANIZATION CLASSIFICATION; CERTAIN TAX REPRESENTATIONS.
UAG represents and warrants to the Stockholders as follows:
(a) at the Effective Time, UAG will own all the stock of each Merger
Sub. No Merger Sub will issue any of its stock in the Mergers;
(b) at the Effective Time, UAG will have no plan or intention to lose
control, within the meaning of Section 368(c) of the Code, of any Merger Sub
after the Mergers occur;
(c) at the Effective time, UAG will have no plan or intention to (i)
liquidate any Merger sub, (ii) merger any Merger Sub with or into another
corporation, (iii) sell or otherwise dispose of the stock of any Merger Sub,
(iv) cause any Merger Sub to sell or otherwise dispose of any of its assets,
including assets of the Companies acquired in the Mergers, except for
dispositions in the ordinary course of business and transfers described in
Section 368(a)(2)(C) of the Code or (v) reacquire any UAG Common Stock issued
in the Mergers;
(d) neither UAG nor any Merger Sub is an investment company as defined
by Section 368(a)(2)(F)(iii) and (iv) of the Code;
(e) the acquisition of the Companies and the use of UAG Common Stock
in the acquisition have a valid business purpose; and
(f) at the Effective Time, UAG and Merger Subs plan to continue the
historic business of each Company, or to use a significant portion of each
Company's business assets in a business, following the Mergers.
34
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
(a) Between the date hereof and the earlier of termination of this
Agreement or the Closing Date, the Stockholders and the Companies will (i)
provide to the officers and other authorized representatives of UAG and the
Merger Subs full access, during normal business hours, to any and all premises,
properties, files, books, records, documents, and other information of the
Companies and will cause their officers to furnish to UAG and the Merger Subs
and their authorized representatives any and all financial, technical and
operating data and other information pertaining to the businesses and
properties of the Companies, and (ii) make available for inspection and copying
by UAG and the Merger Subs true and complete copies of any documents relating
to the foregoing. UAG and the Merger Subs will hold (and will cause their
officers, directors, employees and representatives to hold) in confidence
(unless and to the extent compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law) all
Confidential Information (as defined below) and will not disclose the same to
any third party except in connection with obtaining financing and otherwise as
may reasonably be necessary to carry out this Agreement and the transactions
contemplated hereby, including any due diligence review by or on behalf of UAG
and the Merger Subs, but only if each third party agrees to be bound by the
restrictions in this Section 5.1. If this Agreement is terminated, UAG and the
Merger Subs will promptly return to the Companies, upon the request of the
Companies, all Confidential Information furnished by the Companies and the
Stockholders to UAG or the Merger Subs, including all copies thereof. As used
herein, "Confidential Information" shall mean all information concerning the
Companies obtained by UAG or the Merger Subs from the Companies in connection
with the transactions contemplated by this Agreement, except information (x)
ascertainable or obtained from public information, (y) received from a third
party not employed by or otherwise affiliated with the Companies or (z) which
is or becomes known to the public, other than through a breach by UAG or the
Merger Subs of this Agreement.
(b) After the Closing, UAG shall provide the Stockholders and their
authorized representatives access during normal business hours to the books,
records and other information relating to the Companies and their businesses to
the extent reasonably requested by the Stockholders in connection with the Net
Worth Adjustment under Section 1.15 and the tax returns, audits and
examinations referenced in Section 5.16. The Stockholders and the Companies
will hold in confidence (unless and to the extent compelled to disclose by
judicial or administrative process, or, in the opinion of their counsel, by
other requirements of law) all UAG Confidential Information (as defined below)
and will not disclose the same to any third party except as may reasonably be
necessary to carry out this Agreement and the transactions contemplated hereby.
If this Agreement is terminated, the Stockholders will promptly return to UAG,
upon the reasonable request of UAG, all UAG Confidential Information furnished
by UAG and held by the Stockholders, including all copies thereof. As used
herein, "UAG Confidential Information" shall mean all information concerning
UAG or any of its Affiliates
35
(including the Dealerships after the Closing Date) obtained by the Stockholders
and the Companies in connection with the transactions contemplated by this
Agreement or pursuant to the provisions hereof, except information (x)
ascertained or obtained from public information, (y) received from a third
party not employed or otherwise affiliated with UAG or (z) which is or becomes
known to the public, other than through a breach by the Stockholders and the
Companies of this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholders and the Companies, on the one hand, and UAG and the
Merger Subs, on the other hand, will, as soon as practicable after reasonable
request therefor, furnish to the other all the information concerning the
Stockholders and the Companies or UAG and the Merger Subs, respectively,
required for inclusion in any statement or application made by UAG or the
Companies to any governmental or regulatory body or in connection with
obtaining any third party consent in connection with the transactions
contemplated by this Agreement. Neither the Stockholders nor the Companies, on
the one hand, nor UAG nor the Merger Subs, on the other hand, or any
representative thereof, shall issue any press releases or otherwise make any
public statement with respect to the transactions contemplated hereby without
the prior consent of the other, except as may be required by law (including
federal or state securities laws) as determined by such party's counsel in its
sole discretion.
5.3 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG and the Merger Subs and the Stockholders and the Companies, as
applicable, shall each file or cause to be filed with the Federal Trade
Commission and the United States Department of Justice any notifications
required to be filed by the respective "ultimate parent" entities under the
H-S-R Act, and the rules and regulations promulgated thereunder, with respect
to the transactions contemplated herein. The parties shall use their best
efforts to make such filings promptly, to respond to any requests for
additional information made by either of such agencies, to cause the waiting
periods under the H-S-R Act to terminate or expire at the earliest possible
date and to resist vigorously, at their respective cost and expense (including,
without limitation, the institution or defense of legal proceedings), any
assertion that the transactions contemplated herein constitute a violation of
the antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein; provided, however, that if UAG or the
Stockholders shall determine after issuance of any preliminary injunction that
continuing such resistance is not in its or their best interests, UAG or the
Stockholders, as the case may be, may, by written notice to the other party,
terminate this Agreement with the effect set forth in Section 8.2 hereof.
5.4 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Companies shall, and the Stockholders shall cause the Companies to,
conduct their businesses in the ordinary course consistent with past practices
and, without the prior written consent of
36
UAG, which consent shall not be unreasonably withheld, neither the Stockholders
nor the Companies will, except as required or permitted pursuant to the terms
hereof, permit any of the Companies to:
(i) make any material change in the conduct of its business and
operations or enter into any transaction other than in the ordinary course
of business consistent with past practices;
(ii) make any change in its Articles of Incorporation or Bylaws
(including any comparable governing instrument with a different name),
issue any additional shares of capital stock or equity securities or grant
any option, warrant or right to acquire any capital stock or equity
securities or issue any security convertible into or exchangeable for its
capital stock or alter any term of any of its outstanding securities or
make any change in its outstanding shares of capital stock or other
ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any thereof,
except pursuant to transactions in the ordinary course of business
consistent with past practices, (B) issue any securities convertible or
exchangeable for debt securities of the Company, or (C) issue any options
or other rights to acquire from the Company, directly or indirectly, debt
securities of the Company or any security convertible into or exchangeable
for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of its assets or any part thereof, except transactions
pursuant to existing contracts set forth in Schedule 2.15 hereto and
dispositions of inventory or of worn-out or obsolete equipment for fair or
reasonable value in the ordinary course of business consistent with past
practices;
(v) subject any of its assets, or any part thereof, to any Lien
or suffer such to be imposed other than such Liens as may arise in the
ordinary course of business consistent with past practices which will not
have, or cannot reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(vi) declare, set aside or pay any dividends or other
distributions (whether in cash, stock, property or any combination thereof)
in respect of any shares of its capital stock (other than distributions
pursuant to Section 1.17 hereof) or redeem (other than as permitted
pursuant to Section 1.17 hereof), retire, purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock;
37
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment)
or grant any increase in the compensation payable or to become payable to
any employee, except, in each case, in accordance with pre-existing
contractual provisions or consistent with past practices;
(ix) make or commit to make any individual capital expenditure in
excess of $50,000, or aggregate capital expenditures in excess of $150,000;
(x) pay, loan or advance (other than in the ordinary course of
business consistent with past practices) any amount to, or sell, transfer
or lease any properties or assets to, or enter into any agreement or
arrangement with, any of their Affiliates;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other Person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by the Companies (or on behalf
of the Companies) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change required
by reason of a concurrent change in GAAP or write-down the value of any
inventory or write-off as uncollectible any accounts receivable except in
the ordinary course of business consistent with past practices;
(xv) settle, release or forgive any material claim or litigation
or waive any material right;
(xvi) make, enter into, modify or amend in any material respect
or terminate any material commitment, other than in the ordinary course of
business consistent with past practice;
38
(xvii) take any other action that would cause any of the
representations and warranties made by any of the Companies or the
Stockholders in this Agreement not to remain materially true and correct;
or
(xviii) commit to take any action that, if taken, would cause any
of the foregoing covenants in this Section 5.4(a) to be violated.
(b) From and after the date hereof and until the Closing Date, the
Stockholders and the Companies will cause each of the Companies to use its
reasonable best efforts to:
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for
their current use;
(ii) comply with all applicable Environmental Laws;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due
all taxes, assessments, fees and other charges lawfully levied or assessed
against the Company unless the validity thereof is contested in good faith
and by appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the ordinary
course and in accordance with existing practices;
(v) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships that
are, at the same time, not economically beneficial to it; and
(vi) continue to conduct its business in the ordinary course
consistent with past practices.
(c) From and after the date of this Agreement and until the Closing
Date, the Stockholders shall not, except with the prior written consent of UAG
(which consent shall not be unreasonably withheld) and except as required or
permitted pursuant to the terms hereof:
(i) make any material change to the Real Property or the
Improvements;
(ii) subject the Real Property or the Improvements, or any part
thereof, to any new Lien or suffer such to be imposed other than Liens for
real estate Taxes and assessments not yet due;
39
(iii) take any other action that would cause any of the
representations or warranties made by the Stockholders or the Companies in
this Agreement not to remain materially true and correct; or
(iv) commit to take any action that, if taken, would cause any of
the foregoing covenants in this Section 5.4(c) to be violated.
5.5 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as set forth on Schedule 5.5, at the Closing there will be no
intercompany payables or intercompany receivables due and/or owing between the
Stockholders and their Affiliates (other than the Companies) on the one hand,
and the Companies, on the other hand (except for the loans set forth on Exhibit
"B" hereto which loans shall be satisfied in full on the Closing Date pursuant
to Section 1.18 hereof) and amounts due or to become due under the Lease.
5.6 NEGOTIATIONS.
Until the earlier of 120 days from the date hereof or the termination
of this Agreement, neither the Stockholders, nor the Companies, nor their
officers, directors, employees, advisors, agents, representatives or Affiliates
nor anyone acting on behalf of the Stockholders, the Companies, or such
Persons, shall, directly or indirectly, encourage, solicit, initiate or engage
in discussions or negotiations with, or provide any information to, any Person
(other than UAG or its representatives) concerning any merger, sale of assets
(other than in the ordinary course of business), liquidation, purchase or sale
of shares of capital stock or similar transaction involving any of the
Companies. The Stockholders shall promptly communicate to UAG any inquiries or
communications concerning any such transaction (including the identity of any
person making such inquiry or communication) which the Companies or the
Stockholders may receive or of which any of such parties may become aware.
5.7 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholders and the
Companies and UAG and the Merger Subs will use their respective commercially
reasonable efforts at their own expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties
and governmental authorities, and make all filings and registrations with
governmental authorities which are required on their respective parts for
(A) the consummation of the transactions contemplated by this Agreement,
(B) the ownership or leasing and operating after the Closing by the
Companies of all of their material properties and (C) the conduct after the
Closing by the Companies of their respective businesses as conducted by
them on the date hereof;
40
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
5.8 ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its commercially reasonable efforts at its own
expense to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to satisfy any condition
hereunder in its power to satisfy and to consummate and make effective as soon
as practicable the transactions contemplated by this Agreement. The
Stockholders and the Companies agree to execute and deliver any and all
documents that the respective manufacturers typically require a selling dealer
to execute in connection with the transfer of a dealership. In case at any time
after the Closing any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement, the Stockholders and the proper
officers of the Companies shall take all such reasonably necessary action.
5.9 INTERIM FINANCIAL STATEMENTS.
Within fifteen (15) days after the end of each calendar month after
the date of this Agreement and continuing until the Closing Date, the Companies
will deliver to UAG the most recent monthly and year-to-date financial
statements provided to their respective manufacturers. All such statements
shall present the financial position and results of operations of the Companies
as of the date and for the periods indicated and shall be prepared on a basis
consistent with the Company Factory Statements.
5.10 NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will give prompt notice in writing to the other parties hereto of: (i) any
information that indicates that any representation or warranty of such party
contained herein was not true and correct as of the date hereof, (ii) the
occurrence of any event which could result in the failure to satisfy a
condition specified in Article 6 or Article 7 hereof, as applicable, (iii) any
notice or other communication from any third person alleging that the consent
of such third person is or may be required in connec tion with the transactions
contemplated by this Agreement, and (iv) in the case of the Stockholders and
the Companies, any notice of, or other communication relating to, any default
or event which, with notice or lapse of time or both, would become a default
under any material Company Agreement. Each of ▇. ▇▇▇▇▇, ▇. ▇▇▇▇▇, ▇. ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ shall (x) promptly advise UAG of any event of which he has knowledge
that has, or could reasonably be
41
expected to have, a Material Adverse Effect, (y) confer on a regular basis with
one or more designated representatives of UAG to report operational matters and
to report the general status of ongoing operations, and (z) notify UAG of any
emergency or other change in the normal course of business or in the operation
of the properties of the Companies and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or adjudicatory proceedings involving the Companies or any of
their assets or operations, and will keep UAG fully informed of such events and
permit UAG's representatives access to all materials prepared in connection
therewith. Each Stockholder shall give prompt notice to UAG of any notice or
other communication from any third person asserting any right, title or
interest in any of the Shares held by the Stockholder (including, without
limitation, any threat to commence, or notice of the commencement of any action
or other proceeding with respect to any of such Shares) or the occurrence of
any other event of which the Stockholder has knowledge which could result in
any failure to consummate the sale of the Stockholder's Shares as contemplated
hereby.
5.11 ASSURANCE BY THE STOCKHOLDERS.
Each Stockholder agrees to comply with the Stockholder's covenants set
forth in this Agreement, and each Stockholder (other than the Trusts) shall, to
the extent feasible, use the Stockholder's commercially reasonable efforts to
cause each Company in which the Stockholder holds shares to comply with its
covenants set forth in this Agreement.
5.12 STOCKHOLDER VOTE; NO APPRAISAL RIGHTS.
Each Stockholder covenants and agrees (a) to vote all of the stock of
the Companies held by him in favor of the Mergers and the other transactions
contemplated by this Agreement; (b) that such Stockholder shall not demand
appraisal of the fair value of any of his or its shares of Companies' stock or
otherwise exercise any dissenter's rights pursuant to Sections 23-1-44-1 to
23-1-44-20 of the IBCL or any other applicable statute; and (c) that such
Stockholder shall not, without the prior written consent of UAG, transfer any
of such Stockholder's shares of the Companies' stock.
5.13 NON-INTERFERENCE.
After the Closing Date and for a period of five (5) years thereafter,
each Stockholder agrees, and each Stockholder shall cause its Affiliates, not
to knowingly interfere with or disrupt, or attempt to interfere with or
disrupt, the relationship, contractual or otherwise, between the Companies or
any customer, supplier, manufacturer, distributor, consultant, independent
contractor or employee of the Companies or the Merger Subs and not to solicit
or hire any employee of the Companies or the Merger Subs unless such employee
has already terminated his or her employment with the Companies or the Merger
Subs.
42
5.14 PERSONAL GUARANTEES.
UAG will use commercially reasonable efforts to cause the Stockholders
to be released as of the Closing Date from any and all personal guarantees of
any loans, leases or other indebtedness of the Companies and any personal
guarantees of the obligations of the Companies under the Third Party Leases set
forth on Schedule 2.10 hereof (collectively, the "Personal Guarantees"). In the
event that any of the Personal Guarantees are not released by the Closing Date,
UAG will indemnify and hold the Stockholders harmless from any loss with
respect to the Personal Guarantees which arises after the Closing Date.
Notwithstanding anything in this Section 5.14 to the contrary, UAG shall not be
required to cause the Stockholders to be released from or indemnify the
Stockholders for any loss with respect to any Personal Guarantees for any loans
or other indebtedness relating to the Real Property owned by the Stockholders
or their Affiliates as of the Closing Date.
5.15 DISTRIBUTIONS.
The distributions to be made by the Companies pursuant to Section 1.17
hereof shall be made prior to the Closing Date, except for distributions of
cash which may be made on or before the Closing Date.
5.16 TAXES.
(a) The parties hereto acknowledge that (i) at Closing each Company's
existence for federal income tax purposes shall cease, (ii) a final federal
income tax return for the short taxable year of each Company ending on (and
including) the Closing Date shall be due on the fifteenth (15th) day of the
third full month following the month in which the Closing occurs, and (iii)
each Company shall file such final return as an S corporation. UAG agrees to
(i) indemnify each Stockholder for the amount, if any, by which the actual or
deemed termination of the LIFO election by each Company on the Closing Date
causes the Taxes payable by the Stockholder to exceed the Taxes that would have
been payable by the Stockholder if the actual or deemed termination of the LIFO
elections did not occur until after the Closing Date, and (ii) "gross up" such
indemnification of each Stockholder to include any additional Taxes imposed on
the Stockholder as a result of additional taxable income of the Stockholder
arising from receipt of any payment under this Section 5.16(a).
(b) The federal, state and local tax returns of each Company for the
short taxable year ending on the Closing Date (the "Final Tax Returns") shall
be prepared by KPMG Peat Marwick or another firm of independent public
accountants selected by the Stockholders and approved by UAG. Each Company, UAG
and the Merger Subs covenant and agree to cooperate fully with the Stockholders
and such accounting firm(s) in the preparation of the Final Tax Returns and to
make available during normal business hours all books, records and information
that such accounting firm may reasonably request to complete the preparation of
the Final Tax Returns in a prompt, timely and complete manner. The Final Tax
Returns shall be prepared in accordance with the principles, methods and
practices used in preparing the
43
Company's previous income tax returns. Upon obtaining written approval of the
respective Merger Sub regarding each particular Final Tax Return (which
approval shall not be unreasonably withheld), the respective Company shall file
such Final Tax Return with the appropriate taxing authorities on a timely
basis.
(c) After Closing, UAG shall promptly notify the Stockholders in
writing upon receipt by UAG or any of its Affiliates of notice of any pending
or threatened federal, state or local Tax audit or assessment which may affect
the Tax liability of any of the Companies or the Stockholders for any taxable
year or period ending on or before the Closing Date. The Stockholders shall
have the sole right to represent their and the Companies' interests in any such
Tax audit or related administrative or court proceeding, and to select and
employ counsel for this purpose at their expense. The Stockholders, however,
shall not be entitled to settle, either administratively or after commencement
of litigation, any claim for Taxes which would adversely affect the Tax
liability of any Company for any period after the Closing Date without the
prior written consent of UAG which will not be unreasonably withheld. UAG
agrees, and shall cause each of its Affiliates, not to take any action
(including, but not limited to, the filing of amended tax returns) which would
cause the Taxes of any of the Companies, or the Taxes of any of the
Stockholders on income of the Companies attributable to the Stockholders, for
any taxable year or period ending on or before the Closing Date to be increased
or decreased without the prior written consent of all of the affected
Stockholders.
5.17 CONTINUITY OF STOCKHOLDER INTEREST.
The Stockholders have no present plan, intention or arrangement to
dispose of any UAG Common Stock received in the Mergers in a manner that would
cause the Mergers, or any of them, to violate the continuity of shareholder
interest requirement set forth in Treasury Regulation Section 1.368-1.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG AND THE MERGER SUBS
TO EFFECT THE CLOSING
The obligations of UAG and the Merger Subs required to be performed by
them at the Closing shall be subject to the satisfaction, at or prior to the
Closing, of each of the following conditions, each of which may be waived by
UAG or the Merger Subs as provided herein except as otherwise required by
applicable law:
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Companies and the
Stockholders contained in this Agreement shall be true and correct in all
material respects as of the date hereof and shall be true and correct in all
material respects as of the Closing as if made at such
44
time except for any changes expressly permitted hereunder. Each of the
obligations of the Companies and the Stockholders required by this Agreement to
be performed by them at or prior to the Closing shall have been duly performed
and complied with in all material respects as of the Closing. At the Closing,
UAG shall have received a certificate, dated the Closing Date and duly executed
by each Stockholder, to the effect that the conditions set forth in the two
preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Documents, and the
consummation of the transactions contemplated hereby and thereby shall have
been duly and validly taken by the Companies. All filings required to be made
under the H-S-R Act in connection with the transactions contemplated hereby
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
manufacturers with whom the Companies have entered into franchise agreements)
required to consummate the transactions contemplated hereby and all consents or
waivers shall have been made or obtained.
6.3 OPINIONS OF THE COMPANIES' AND THE STOCKHOLDERS' COUNSEL.
UAG and the Merger Subs shall have been furnished with the opinion of
counsel for the Companies and the Stockholders, dated the Closing Date, in form
and substance reasonably satisfactory to UAG and its counsel. In rendering the
foregoing opinion, such counsel may rely as to factual matters upon
certificates or other documents furnished by officers and directors of the
Companies and by government officials and upon such other documents and data as
such counsel deem appropriate as a basis for their opinions.
6.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the United States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of UAG or the Merger Subs
effectively to exercise full rights of ownership of the Shares. No action, suit
or proceeding before any court or any governmental or regulatory entity shall
be pending (or threatened by any governmental or regulatory entity), and no
investigation by any governmental or regulatory entity shall have been
commenced (and be pending), seeking to restrain or prohibit (or questioning the
validity or legality of) the consummation of the transactions contemplated by
this Agreement or seeking damages in connection therewith which UAG or the
Merger Subs, in good faith and with the advice of counsel, believes makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.
45
6.5 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1996 to the Closing Date, no
Material Adverse Effect shall have occurred with respect to the Companies.
6.6 NET WORTH.
On the Closing Date, the Net Worth of the Companies shall not be
materially less than the Net Worth set forth on Schedule 1.15(g)(i).
6.7 COMPLETION OF DUE DILIGENCE.
UAG and the Merger Subs shall have completed their due diligence
examination of the Companies, the Real Property and the Improvements and the
results of such examination, including any Phase I or Phase II environmental
audits of the Companies, shall be satisfactory to UAG and the Merger Subs. UAG
will pay the costs for a Phase I environmental audit. If, after obtaining the
results of the Phase I environmental audit, UAG determines that a Phase II
environmental audit is required, then the expenses of performing the Phase II
environmental audit shall be paid one-half by UAG and one-half by the
Stockholders; provided, however, that the Stockholders may elect not to pay any
costs of the Phase II audit but, if the Stockholders elect not to pay one-half
of the costs of the Phase II audit and the results of the Phase II audit
conclude that remediation estimated to cost more than Ten Thousand Dollars
($10,000) for any Company is recommended, the Stockholders who own Shares in
such Company shall pay the entire costs of the Phase II audit.
6.8 BOARD APPROVAL.
The Board of Directors of UAG and the Merger Subs shall have approved
the consummation of all of the transactions contemplated by this Agreement;
provided, however, that this condition shall be deemed waived after October 31,
1997 unless on or before October 31, 1997, UAG notifies the Stockholders that
this condition has not been met.
6.9 CERTIFICATES.
UAG and the Merger Subs shall have received such evidence as UAG and
the Merger Subs reasonably determine is necessary to demonstrate satisfaction
of the conditions set forth in this Article 6.
6.10 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of the Stockholders and the
Companies under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of the
46
Stockholders and the Companies in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
UAG and the Merger Subs.
6.11 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The consent, authorization and approval of each of the manufacturers
whose consent is required for the transfer of the Companies to the Merger Subs
shall have been obtained on terms no less favorable to those granted to the
Stockholders and the Companies immediately prior to the execution of this
Agreement.
6.12 ENVIRONMENTAL LAWS.
The Companies shall be in compliance in all material respects with all
applicable Environmental Laws and Environmental Permits.
6.13 NONDISTURBANCE AGREEMENTS/ESTOPPEL CERTIFICATES.
UAG shall have been provided with nondisturbance agreements and
estoppel certificates in form and substance satisfactory to UAG with respect to
the properties that are the subject of the Lease and the Third Party Leases.
6.14 TITLE INSURANCE.
UAG, at its option, shall have obtained title insurance on behalf of
the Companies with respect to the leasehold estates arising out of the Lease
and the Third Party Leases in form and substance satisfactory to UAG.
6.15 SCHEDULES.
The Companies and the Stockholders shall have delivered to UAG and the
Merger Subs all Schedules referred to in Articles 1, 2 and 3, and such
Schedules and all Exhibits hereto shall be acceptable in form and substance to
UAG and the Merger Subs.
6.16 LEASE TERMINATION AGREEMENTS/MEMORANDA OF LEASE.
The appropriate parties shall have executed lease termination
agreements and memoranda of lease in form and substance satisfactory to UAG.
6.17 EMPLOYMENT AGREEMENTS.
The appropriate parties shall have executed the Employment Agreements.
6.18 LEASES.
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The Companies and the applicable Stockholders (or their Affiliates)
shall have executed the Lease.
6.19 RESIGNATION OF THE COMPANIES' DIRECTORS.
Each of the persons who is a director of any of the Companies on the
Closing Date shall have tendered to the Merger Subs in writing his or her
resignation as such in form and substance satisfactory to UAG.
6.20 ACQUISITION OF OTHER COMPANIES.
The acquisition of ▇▇▇ ▇▇▇▇▇ Chevrolet, Inc. ("DYC"), ▇▇▇ ▇▇▇▇▇, Inc.
("DYI"), Young Management Group, Inc. ("YMG") and Parkway Chevrolet, Inc.
("Parkway") shall have been consummated.
6.21 JOINT VENTURE AGREEMENT.
A joint venture agreement between UAG and certain of the Stockholders
or their Affiliates shall have been executed in form and substance satisfactory
to the parties hereto.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANIES AND THE STOCKHOLDERS
TO EFFECT THE CLOSING
The obligations of the Companies and the Stockholders required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by the Companies and the Stockholders as provided herein except as
otherwise required by applicable law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG and the Merger Subs
contained in this Agreement shall be true and correct in all material respects
on the date made and shall be true and correct in all material respects as of
the Closing. Each of the obligations of UAG and the Merger Subs required by
this Agreement to be performed by them at or prior to the Closing shall have
been duly performed and complied with as of the Closing. At the Closing, the
Stockholders shall have received a certificate, dated the Closing Date and duly
executed by UAG and the Merger Subs to the effect that the conditions set forth
in the preceding two sentences have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS.
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(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by UAG
and the Merger Subs. All filings required to be made under the H-S-R Act in
connection with the transactions contemplated hereby shall have been made and
all applicable waiting periods with respect to each such filing, including
extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
manufacturers with whom the Companies have entered into franchise agreements)
required to consummate the transactions contemplated hereby and all consents or
waivers shall have been made or obtained.
7.3 OPINIONS OF UAG'S AND THE MERGER SUBS' COUNSEL.
The Stockholders shall have been furnished with the opinion of ▇▇▇▇▇▇
& ▇▇▇▇▇▇, counsel to UAG and the Merger Subs, dated the Closing Date, in form
and substance reasonably satisfactory to the Stockholders and their respective
counsel. In rendering the foregoing opinions, such counsel may rely as to
factual matters upon certificates or other documents furnished by officers and
directors of UAG and the Merger Subs and by government officials, and upon such
other documents and data as such counsel deems appropriate as a basis for its
opinion.
7.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the United States shall be in effect that prevents or delays
the consummation of any of the transactions contemplated hereby. No action,
suit or proceeding before any court or any governmental or regulatory entity
shall be pending (or threatened by any governmental or regulatory entity), and
no investigation by any governmental or regulatory entity shall have been
commenced (and be pending), seeking to restrain or prohibit (or questioning the
validity or legality of) the consummation of the transactions contemplated by
this Agreement or seeking damages in connection therewith which the
Stockholders, in good faith and with the advice of counsel, believe makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.
7.5 SATISFACTION OF CONDITIONS.
The Stockholders shall have received such evidence as they reasonably
determine is necessary to demonstrate satisfaction of the conditions set forth
in this Article 7.
7.6 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG or the Merger Subs under the
provisions of this
49
Agreement, and all other actions and proceedings required to be taken by or on
behalf of UAG or the Merger Subs in furtherance of the transactions
contemplated hereby, shall be reasonably satisfactory in form and substance to
counsel for the Stockholders.
7.7 EMPLOYMENT AGREEMENT.
The appropriate parties shall have entered into the Employment
Agreements.
7.8 LEASE.
The Companies and the applicable Stockholders (or their Affiliates)
shall have executed the Lease and UAG shall have executed lease guaranties in a
form mutually acceptable to the parties.
7.9 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The consent, authorization and approval of each of the manufacturers
whose consent is required for the transfer of the Companies to the Merger Subs
shall have been obtained on terms no less favorable to those granted to the
Stockholders and the Companies immediately prior to execution of this
Agreement.
7.10 ACQUISITION OF OTHER COMPANIES.
The acquisition of DYC, DYI, YMG and Parkway shall have been
consummated.
7.11 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1996 to the Closing Date, no
Material Adverse Effect shall have occurred with respect to UAG.
7.12 SCHEDULES.
UAG shall have delivered to the Stockholders all schedules referred to
in Article 4, and such Schedules and all Exhibits hereto shall be acceptable in
form and substance to the Stockholders.
7.13 JOINT VENTURE AGREEMENT.
A joint venture agreement between UAG and certain of the Stockholders
or their Affiliates shall have been executed in form and substance satisfactory
to the parties hereto.
7.14 CERTIFIED BOARD RESOLUTIONS.
50
On or before October 31, 1997, UAG shall have delivered to the
Stockholders certified resolutions of the Board of Directors of UAG and the
Merger Subs authorizing and approving all of the transactions contemplated by
this Agreement.
ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG and the Stockholders;
(ii) by either UAG or the Stockholders if the Closing shall not
have taken place on or prior to December 31, 1997, or such later date as
shall have been approved by UAG and the Stockholders;
(iii) by UAG or the Stockholders if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG or the Merger Subs if any of the conditions specified
in Article 6 hereof have not been met or waived by UAG and the Merger Subs
on or prior to December 31, 1997;
(v) by the Stockholders if the condition specified in Section
7.14 hereof is not met on or before October 31, 1997;
(vi) by the Stockholders if any of the other conditions specified
in Article 7 hereof have not been met or waived by the Stockholders on or
prior to December 31, 1997; and
(vii) by either UAG or the Stockholders if there has been a
material breach on the part of the other of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach has not
been cured (if curable) within twenty (20) Business Days following receipt
by the breaching party of written notice of such breach.
If UAG or the Stockholders shall terminate this Agreement pursuant to the
provisions hereof, such termination shall be effected by notice to the other
party specifying the provision hereof pursuant to which such termination is
made.
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8.2 EFFECT OF TERMINATION.
(a) Except for (i) liability for any breach of this Agreement prior to
its termination, (ii) the confidentiality covenants in Section 5.1 hereof and
(iii) the provisions of this Section 8.2 and Article 9 hereof, upon the
termination of this Agreement, this Agreement shall forthwith become null and
void and none of the parties hereto or any of their respective officers,
directors, employees, agents, Affiliates, consultants, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto.
(b) Upon termination of this Agreement, (i) the Stockholders shall be
entitled to recover from the Escrow Deposit the amount, if any, to which the
Stockholders are entitled to indemnification under Article 9 and shall be
entitled to recover from UAG any such indemnifiable amounts in excess of the
Escrow Deposit, (ii) UAG shall be entitled to any balance of the Escrow Deposit
after any recovery therefrom to which the Stockholders are entitled as provided
in foregoing clause (i), and (iii) UAG and the Merger Subs shall be entitled to
recover from the Stockholders the amount, if any, to which UAG and the Merger
Subs are entitled to indemnification under Article 9. The parties agree to
promptly sign such instructions and take such other actions as necessary or
appropriate to cause the distribution of the Escrow Deposit as provided in this
Section 8.2(b) following termination of this Agreement.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Subject to Sections 9.1(b) and 10.16 hereof and notwithstanding
the Closing or the delivery of the Shares, the Stockholders indemnify and agree
to fully defend, save and hold harmless on an after-tax basis UAG, the Merger
Subs, the Companies (after Closing), and any of their respective officers,
directors, employees, stockholders, advisors, representatives, agents and
Affiliates (each a "UAG Indemnified Party"), if a UAG Indemnified Party
(including the Companies after the Closing Date) shall at any time or from time
to time suffer any Costs arising, directly or indirectly, out of or resulting
from, or shall pay or become obligated to pay any sum on account of, (i) any
and all Events of Breach (as defined below) or (ii) any Claim before or by any
court, arbitrator, panel, agency or other governmental, administrative or
judicial entity, which Claim involves, arises out of or relates to the conduct
of the business of the Companies prior to the Closing Date (each a
"Stockholders Third Party Claim"), provided that the foregoing provisions of
this clause (ii) shall not apply to, and a Stockholders Third Party Claim shall
not include, (A) any liability reflected or reserved against on the Company
Balance Sheet or included or described in the Notes to the Company Financial
Statements, (B) any liability reflected or reserved against on the Closing Date
Balance Sheet, (C) any liability disclosed on Schedule 2.6 hereto, (D) any
liability for any Claim disclosed on Schedule 2.9(a) hereto or (E) any
liability for any Claims arising in the ordinary course of business of any
Company which, individually and in the aggregate, are not material to such
52
Company. As used herein, "Event of Breach" shall be and mean any one or more of
the following: (i) any untruth or inaccuracy in any representation of any
Stockholder or any of the Companies or the breach of any warranty of any
Stockholder or any of the Companies contained in this Agreement or in any
Schedule or Exhibit hereto and (ii) any failure of any Stockholder or the
Companies duly to perform or observe any term, provision, covenant, agreement
or condition on the part of the Stockholders or the Companies to be performed
or observed pursuant to this Agreement. Subject to Sections 9.1(b) and 10.16,
any indemnification to which any UAG Indemnified Party is entitled under this
Section 9.1(a) may be enforced against one or more Stockholders for any portion
of such Costs.
(b) Indemnification under foregoing Section 9.1(a) is subject to the
following limitations:
(i) No UAG Indemnified Party shall be entitled to indemnification
unless written notice describing the claim to indemnification as prescribed
in Section 9.3 is given within the applicable Survival Period (as defined
in Section 10.1 hereof).
(ii) A claim for indemnification of Costs arising out of or
resulting from any breach of a representation or warranty under this
Agreement or in any Schedule or Exhibit hereto or arising out of any
Stockholders Third Party Claim shall not be payable until, and shall only
be payable to the extent that, the aggregate amount of all such Costs
incurred or suffered by the UAG Indemnified Parties exceeds Three Hundred
Thousand Dollars ($300,000) (the "Threshold Amount"), provided that the UAG
Indemnified Parties shall be entitled to indemnification without regard to
the Threshold Amount for Costs arising out of or resulting from a breach of
Section 2.1(a) (Organization), Section 2.3 (Capitalization), Section 2.4(a)
(Authority), Section 2.8 (Taxes), or Article 3 hereof or arising out of
fraud by any of the Stockholders.
(iii) The aggregate indemnification obligation of all
Stockholders for Costs arising out of or resulting from the breach of any
representation or warranty under this Agreement or in any Schedule or
Exhibit hereto or arising out of or resulting from any Stockholders Third
Party Claim shall not exceed Eight Million Five Hundred Thousand Dollars
($8,500,000) (the "Cap"), provided that Costs arising out of or resulting
from the breach of Section 2.1(a) (Organization), Section 2.3
(Capitalization), Section 2.4(a) (Authority), Section 2.8 (Taxes) or
Article 3 hereof or arising out of fraud by the Stockholders shall not be
subject to or counted against the Cap.
9.2 INDEMNIFICATION BY UAG.
(a) Subject to Section 9.2(b) hereof, notwithstanding the Closing, UAG
indemnifies and agrees to fully defend, save and hold harmless on an after-tax
basis the Stockholders and the Companies (prior to Closing) and any of their
respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (each a "Stockholders Indemnified
Party"), if a Stockholders Indemnified Party shall at any time or from time to
time
53
suffer any Costs arising, directly or indirectly, out of or resulting from, or
shall pay or become obligated to pay any sum on account of, (i) any and all UAG
Events of Breach (as defined below) or (ii) any Claim before or by any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity, which Claim involves or relates to the conduct of the business of the
Companies after the Closing Date, provided that the foregoing provisions of
this clause (ii) shall not apply to any Claim arising out of any intentional
misconduct or gross negligence of any of the Stockholders (a "UAG Third Party
Claim"). As used herein, "UAG Event of Breach" shall be and mean any one or
more of the following: (i) any untruth or inaccuracy in any representation of
UAG or the Merger Subs or the breach of any warranty of UAG or the Merger Subs
contained in this Agreement or in any Schedule or Exhibit hereto, (ii) any
failure of UAG or the Merger Subs duly to perform or observe any term,
provision, covenant, agreement or condition on the part of UAG or the Merger
Subs to be performed or observed pursuant to this Agreement.
(b) Indemnification under foregoing Section 9.2(b) is subject to the
following limitations:
(i) No Stockholders Indemnified Party shall be entitled to
indemnification unless written notice describing a claim to indemnification
as prescribed in Section 9.3 is given within the applicable Survival Period
(as defined in Section 10.1 hereof).
(ii) A claim for indemnification of Costs arising out of or
resulting from any breach of a representation or warranty under this
Agreement or in any Schedule or Exhibit hereto arising out of any UAG Third
Party Claim (as defined in this Agreement and the Merger Agreement) shall
not be payable until, and shall only be payable to the extent that, the
aggregate amount of all such Costs incurred or suffered by the Stockholders
Indemnified Parties exceeds Three Hundred Thousand Dollars ($300,000) (the
"Stockholders Threshold Amount"), provided that the Stockholders
Indemnified Parties shall be entitled to indemnification without regard to
the Stockholders Threshold Amount for Costs arising out of or resulting
from a breach of Section 4.1(a) (Organization), Section 4.2 (Merger Subs),
Section 4.3 (Capitalization) or Section 4.5(a) (Authority) or arising out
of fraud or intentional misrepresentation by UAG.
(iii) The aggregate indemnification obligation of UAG for Costs
arising out of or resulting from the breach of any representation or
warranty under this Agreement or in any Schedule or Exhibit hereto arising
out of or resulting from any UAG Third Party Claim (as defined in this
Agreement) shall not exceed Eight Million Five Hundred Thousand Dollars
($8,500,000) (the "Stockholders Cap"), provided that Costs arising out of
or resulting from the breach of Section 4.1(a) (Organization), Section 4.2
(Merger Subs), Section 4.3 (Capitalization) or Section 4.5(a) (Authority)
or arising out of fraud or intentional misrepresentation by UAG shall not
be subject to or counted against the Stockholders Cap.
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9.3 PROCEDURES.
If (i) any Event of Breach occurs or is alleged and a UAG Indemnified
Party asserts that the Stockholders have become obligated to a UAG Indemnified
Party pursuant to Section 9.1, or if any Stockholders Third Party Claim is
begun, made or instituted as a result of which the Stockholders or the
Companies may become obligated to a UAG Indemnified Party hereunder, or (ii) a
UAG Event of Breach occurs or is alleged and a Stockholders Indemnified Party
asserts that UAG has become obligated to a Stockholders Indemnified Party
pursuant to Section 9.2, or if any UAG Third Party Claim is begun, made or
instituted as a result of which UAG may become obligated to a Stockholders
Indemnified Party hereunder (for purposes of this Article 9, any UAG
Indemnified Party and any Stockholders Indemnified Party is sometimes referred
to as an "Indemnified Party" and each party having an indemnity obligation
under this Article 9 is sometimes referred to as an "Indemnifying Party," and
any UAG Third Party Claim and any Stockholders Third Party Claim is sometimes
referred to as a "Third Party Claim," in each case as the context so requires),
such Indemnified Party shall give reasonably prompt written notice to the
Indemnifying Party stating the basis of the Indemnifying Party's obligation to
provide indemnification to the Indemnified Party under this Article 9 and
setting forth in reasonable detail the facts, to the extent then available,
concerning the Event of Breach, UAG Event of Breach or Third Party Claim, as
the case may be, and the basis upon which the Indemnified Party is claiming
indemnification. Subject to Sections 9.1(b)(i) and 9.2(b)(i), a failure or
delay by an Indemnified Party to give a reasonably prompt notice of any claim
for indemnification shall not release an Indemnifying Party's obligations with
respect to the claim, except to the extent that the Indemnifying Party can
demonstrate actual loss as a result of such failure or delay. If such notice
relates to a Third Party Claim, each Indemnifying Party, jointly and severally,
agrees to defend such Indemnified Party against any such Third Party Claim at
its sole cost and expense. Such Indemnified Party shall have the right, but not
the obligation, to participate at its own expense in the defense thereof by
counsel of such Indemnified Party's choice and shall in any event cooperate
with and assist the Indemnifying Party to the extent reasonably possible. If
the Indemnifying Party fails timely to defend against such Third Party Claim,
such Indemnified Party shall have the right to do so, including, without
limitation, the right to make any compromise or settlement thereof, and such
Indemnified Party shall be entitled to recover the entire Cost thereof from the
Indemnifying Party, including, without limitation, reasonable attorneys' fees,
disbursements and amounts paid (or of which such Indemnified Party has become
obligated to pay) as the result of such Third Party Claim. Failure by the
Indemnifying Party to notify such Indemnified Party of its or their election to
defend any such Third Party Claim within fifteen (15) days after notice thereof
shall have been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its or their right to defend such Third Party Claim. If
the Indemnifying Party assumes the defense of the particular Third Party Claim,
the Indemnifying Party shall not, in the defense of such Third Party Claim,
consent to entry of any judgment or enter into any settlement, except with the
written consent of such Indemnified Party which shall not be unreasonably
withheld. In addition, the Indemnifying Party shall not enter into any
settlement of any Third Party Claim except with the written consent of such
Indemnified Party, which consent shall not be unreasonably withheld, that does
not include as an unconditional term thereof the giving by the claimant or the
plaintiff
55
to such Indemnified Party a full release from all liability in respect of such
Third Party Claim. Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to control (but shall be entitled to participate at its or
their own expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any Third
Party Claim to the extent the Third Party Claim seeks an order, injunction or
other equitable relief against the Indemnified Party which, if successful,
could materially interfere with the business, operations, assets, condition
(financial or otherwise) or prospects of the Indemnified Party.
9.4 OFFSET.
In addition to and not in limitation of all rights of offset that an
Indemnified Party may have under applicable law, the parties agree that, at any
Indemnified Party's option, any or all amounts owing to such Indemnified Party
under this Article 9 or any other provision of this Agreement may be recovered
by the Indemnified Party by an offset against any or all amounts due to such
other parties pursuant to this Agreement.
9.5 EXCLUSIVE MONETARY REMEDY FOR BREACH.
The rights to indemnification set forth in this Article 9 shall be
exclusive of all other rights to monetary damages that any party (or such
party's successors or assigns) would otherwise have by statute or common law
for breach of any provision of this Agreement, except to the extent such claim
arises out of any party's fraud. Notwithstanding the above, the parties hereto
shall have the right to seek any non-monetary remedy in lieu of or in addition
to the rights to indemnification set forth in this Article 9 for breach of any
provision of this Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
The respective representations, warranties, covenants and agreements
of each of the parties to this Agreement shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement, regardless of
any disclosure to, or investigation made by or on behalf of, any other party on
or before the Closing Date; provided that the period of survival shall, (i)
with respect to each representation or warranty pertaining to Taxes under
Section 2.8 hereof, end for each Tax upon expiration of the statute of
limitations applicable to the Tax, (ii) with respect to the representations and
warranties in Section 2.11 (Environmental Matters), end five (5) years after
the Closing Date, (iii) with respect to the representations and warranties in
Section 2.1(a) (Organization), Section 2.3 (Capitalization), Section 2.4(a)
(Authority), Section 3.1 (Title to Shares), Section 3.2(a) (Authority), Section
4.1 (Organization), Section 4.2 (Merger Subs), Section 4.3 (Capitalization) and
Section 4.5(a) (Authority), and with respect to covenants and agreements in
this Agreement, continue indefinitely, and (iii) in any
56
other case, end three (3) years after the Closing Date (in each case, the
"Survival Period"). Notwithstanding anything herein to the contrary, each of
the representations and warranties herein shall survive with respect to any
claim asserted with respect to any breach of such representation or warranty
pursuant to Section 9.3 hereof before the expiration of such representation or
warranty until the date such claim is finally liquidated or otherwise resolved.
10.2 [INTENTIONALLY OMITTED]
10.3 HEADINGS.
The section headings herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
10.4 NOTICES.
All notices or other communications required or permitted hereunder
shall be given in writing and shall be deemed sufficient if delivered by hand,
recognized overnight delivery service for next business day delivery or
facsimile transmission (with original to follow by mail) or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Companies before the Closing Date:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
Bose, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to the Companies after the Closing Date (in addition to the
foregoing addresses):
United Auto Group, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
57
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
2700 International Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
If to the Stockholders:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
Bose, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to UAG or the Merger Subs:
United Auto Group, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
with a copy to:
▇▇▇▇▇▇ & Hardin
2700 International Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been
given as of the date so delivered or three (3) days after the date so mailed;
provided, however, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
58
10.5 ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, and the provisions of Article 9 hereof shall inure to
the benefit of the Indemnified Parties referred to therein; provided, however,
that neither this Agreement nor any of the rights, interests, or obligations
hereunder may be assigned by any of the parties hereto without the prior
written consent of the other parties. Notwithstanding the foregoing, UAG and
the Merger Subs shall have the unrestricted right to assign this Agreement and
to delegate all or any part of its obligations hereunder to any Affiliate of
UAG or the Merger Subs, but in such event UAG shall remain fully liable for the
performance of all such obligations in accordance with the terms and conditions
of this Agreement.
10.6 ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Documents. Prior drafts of this Agreement shall not be used as a basis
for interpreting this Agreement.
10.7 WAIVER AND AMENDMENTS.
Each of the Stockholders and the Companies, as one party, and UAG and
the Merger Subs, as the other party, may by written notice to the other parties
(i) extend the time for the performance of any of the obligations or other
actions of the other parties, (ii) waive any inaccuracies in the
representations or warranties of the other parties contained in this Agreement,
(iii) waive compliance with any of the covenants of the other parties contained
in this Agreement, (iv) waive performance of any of the obligations of the
other parties created under this Agreement, or (v) waive fulfillment of any of
the conditions to its own obligations under this Agreement. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach, whether or not similar.
This Agreement may be amended, modified or supplemented only by a written
instrument executed by the parties hereto.
10.8 COUNTERPARTS.
This Agreement may be executed by facsimile signature(s) and in any
number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
59
10.9 ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined or
modified in this Agreement shall have the respective meanings given to them in
accordance with GAAP.
10.10 [INTENTIONALLY OMITTED].
10.11 SEVERABILITY.
If any one or more of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
10.12 [INTENTIONALLY OMITTED].
10.13 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Indiana without giving effect to any choice or
conflict of law provision or rule that would cause the laws of any other
jurisdiction to apply.
10.14 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
10.15 ATTORNEYS' FEES.
If any party hereto brings suit against another party to this
Agreement in connection with the transactions contemplated by this Agreement
and the party against whom suit is brought (the "Defendant") is successful in
denying substantially all the relief sought by the claimant, then the Defendant
shall be entitled to recover from the claimant the reasonable attorneys= fees
and other costs and expenses incurred by the Defendant in connection with such
suit regardless of whether the suit is prosecuted to judgment. If any party
hereto brings suit against another party to this Agreement in connection with
the transactions contemplated by this Agreement and such party (the
"Plaintiff") is successful in obtaining substantially all the relief sought by
the claimant, then the Plaintiff shall be entitled to recover from the claimant
the reasonable attorneys= fees and other costs and expenses incurred by the
Plaintiff in connection with such suit regardless of whether the suit is
prosecuted to judgment.
60
10.16 LIMITATION ON LIABILITY OF EACH TRUSTEE.
UAG and the Merger Subs acknowledge and agree that the liability of
each Trust and each trustee thereunder in connection with the transactions
contemplated by this Agreement shall only be enforceable against the property
of the Trust itself, and UAG and the Merger Subs waive any right to proceed for
enforcement of any such liability against any such trustee in its personal
capacity.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By:
-------------------------------
Its:
UAG KISSIMMEE MOTORS, INC.
By:
-------------------------------
Its:
UAG PARAMOUNT MOTORS, INC.
By:
-------------------------------
Its:
UAG CENTURY MOTORS, INC.
By:
-------------------------------
Its:
[Signatures continued on following pages]
61
KISSIMMEE MOTORS, INC., D/B/A
KISSIMMEE TOYOTA
By:
-------------------------------
Its:
PARAMOUNT CHEVROLET GEO, INC.
By:
-------------------------------
Its:
CENTURY CHEVROLET GEO, INC.
By:
-------------------------------
Its:
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, individually
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, individually
----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, individually
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, individually
[Signatures continued on following pages]
62
YOUNG/AVY II IRREVOCABLE
TRUST U/A DATED 12/31/96 FBO ▇▇▇▇ ▇.
▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, TRUSTEE
YOUNG/AVY II IRREVOCABLE
TRUST U/A DATED 12/31/96 FBO
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, TRUSTEE
YOUNG/AVY II IRREVOCABLE
TRUST U/A DATED 12/31/96 FBO
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, TRUSTEE
YOUNG/WAY II IRREVOCABLE
TRUST U/A DATED 12/31/96
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, TRUSTEE
[Signatures continued on following pages]
63
YOUNG/TAGGART II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE
YOUNG/TAGGART II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO ▇▇▇▇ ▇.
▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE
YOUNG/▇▇▇▇ II IRREVOCABLE
TRUST U/A DATED 12/31/96
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, TRUSTEE
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ IRREVOCABLE GRAT
TRUST U/A DATED 3/1/97
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, TRUSTEE
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, TRUSTEE
[Signatures continued on following pages]
64
▇▇▇ ▇. ▇▇▇▇▇ IRREVOCABLE GRAT TRUST
U/A DATED 3/1/97
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, TRUSTEE
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, TRUSTEE
65