Exhibit 2.2
Execution Copy 1/10/02
STOCK PURCHASE AGREEMENT
(ARNGAR)
THIS STOCK PURCHASE AGREEMENT dated as of January 11, 2002 (this
"Agreement") by and between SONIC AUTOMOTIVE, INC., a Delaware corporation (the
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"Buyer"), and THE ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ REVOCABLE TRUST, a trust formed pursuant to
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an agreement dated December 13, 2001 (the "Seller").
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WITNESSETH:
WHEREAS, Arngar, Inc., a North Carolina corporation (the "Company") is
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engaged in (i) a Cadillac automobile dealership business located at ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and (ii) an Oldsmobile automobile dealership business
located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "Oldsmobile Real
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Property"); and
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WHEREAS, the Seller owns the issued and outstanding shares of common
stock of the Company (collectively, the "Shares"), which shares represent all of
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the issued and outstanding shares of capital stock of the Company; and
WHEREAS, the Buyer desires to purchase the Shares from the Seller, and
the Seller is willing to sell the Shares to the Buyer upon the terms and
conditions hereinafter set forth; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Buyer and other parties referred to on Exhibit A-1 hereto are
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entering into the agreements listed on said Exhibit A-1 (such agreements on such
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Exhibit A-1, excluding this Agreement, being hereinafter collectively called the
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"Other Agreements"); and
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WHEREAS, contemporaneously with the execution and delivery of this
Agreement, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual resident of the State of Michigan
("▇▇▇▇▇▇"), and the Buyer have entered into a Guaranty Agreement, pursuant to
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which ▇▇▇▇▇▇ guarantees to the Buyer the performance of all of the obligations
and liabilities of the Seller hereunder; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Seller is notifying the Manufacturer (as defined in Article 2
below) of the transactions contemplated by this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and representations hereinafter stated, and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1
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PURCHASE AND SALE
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1.1 Agreement of Purchase and Sale. On the terms and subject to the
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conditions of this Agreement and in reliance upon the representations and
warranties of the parties herein, at the closing referred to in Article 2 hereof
(the "Closing"), the Seller shall transfer, convey and deliver to the Buyer, and
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the Buyer shall acquire from the Seller, the Shares.
1.2 The Purchase Price.
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(a) The Purchase Price. As the full purchase price to be paid
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by the Buyer for the Shares (the "Purchase Price") shall be an aggregate amount
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consisting of the sum of (i) [***], plus (ii) the Net Book Value (as defined in
Section 1.2(c)(i) below), plus (iii) the amount by which [***] exceeds the
depreciated book value as of the Closing of the Owned Real Property (as defined
in Section 3.16(a) below), including the improvements located thereon (such
excess amount being hereinafter called the "Real Property Component").
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(b) Payment of the Purchase Price. The Purchase Price shall be
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paid as follows:
(i) Two (2) days prior to the Closing, the Seller shall
deliver to the Buyer a certificate setting forth the Seller's estimate of the
Net Book Value as of the Closing (the "Estimated Net Book Value"). Provided that
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the Buyer, in its reasonable discretion, shall determine that the Estimated Net
Book Value is acceptable (such determination to be without prejudice to the
rights of the parties hereunder with respect to the determination of the Net
Book Value pursuant to Section 1.2(c) below), the Buyer shall pay, in addition
to the Escrowed Amount (as defined in Section 1.2(b)(ii) below), an amount equal
to the sum of [***] plus (ii) the Estimated Net Book Value and the Real Property
Component, to the Seller, by wire transfer to an account or accounts designated
to the Buyer by the Seller at least one Business Day prior to the Closing Date
(as defined in Article 2 below). For purposes of this Agreement, a "Business
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Day" is a day other than a Saturday, a Sunday or a day on which banks are
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required to be closed in the State of North Carolina.
(ii) At the Closing, the Buyer shall place into escrow
with First Union National Bank or another escrow agent mutually acceptable to
the parties hereto (the "Escrow Agent") the sum of [***] (the "Escrow Amount"),
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all in accordance with the escrow agreement in the form of Exhibit B hereto,
with such other changes thereto as the Escrow Agent shall reasonably request
(the "Escrow Agreement"). The term of the Escrow Agreement shall be for a period
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of ninety (90) days from the Closing Date (or such longer period of time as
shall be necessary to complete the determination of the Net Book Value pursuant
to Section 1.2(c) below) (the "Escrow Termination Date"). To the extent that, as
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of the Escrow Termination Date, the Buyer shall have made no claims for
indemnification pursuant to Article 9 below or for a Net Book Value Shortfall
pursuant to Section 1.2(c) below, the Buyer will execute a joint instruction
with the Seller pursuant to the Escrow Agreement to instruct the Escrow Agent to
deliver all of the Escrow Amount to the Seller pursuant to the terms of the
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
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Escrow Agreement. Interest on the Escrow Amount shall be paid to the Buyer and
the Seller in the proportions of the Escrow Amount paid to them.
(c) Adjustment Procedures.
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(i) Not later than 60 days after the Closing Date, the Buyer
will prepare and deliver to the Seller, an unaudited balance sheet (the "Closing
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Balance Sheet") of the Company as of the Closing Date, consisting of a
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computation of the net book value of the tangible assets of the Company
(excluding the Distributed Assets, as defined in Section 1.5 hereof) as of the
Closing Date, less the book value of the liabilities of the Company as of the
Closing Date, all in accordance with generally accepted accounting principles
("GAAP") as consistently applied by the Company and subject to the exceptions to
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GAAP set forth on Schedule 3.13, and subject to the additional principles set
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forth below. The tangible net book value reflected on the Closing Balance Sheet
is hereinafter called the "Net Book Value." The Closing Balance Sheet will be
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prepared in accordance with the following additional principles: (A) it will
utilize the first in-first out (FIFO) method of inventory accounting; (B) the
liabilities of the Company shall include any Tax (as defined in Section 3.21(a))
liabilities associated with the conversion from the last in-first out (LIFO)
method of accounting to the FIFO method of accounting; (C) there shall not be
included a reserve for doubtful accounts receivable and bad debts; (D) any
receivables due the Company from the Seller or any of the directors, officers,
employees or Affiliates (as defined in Section 3.5 below) of the Company or the
Seller shall be excluded as assets, provided, that any such receivables from
employees that are not material in amount and are in the ordinary course of the
Company's business and for which there are in place reimbursement arrangements
acceptable to the Buyer shall be included as assets; (E) the liabilities of the
Company shall include appropriate accruals for all Tax liabilities, and all
other costs and expenses, of the Company associated with the distribution of the
Distributed Assets; (F) in the event that the Distributed Assets are subject to
any liabilities or encumbrances which are not satisfied and discharged in full
at or prior to Closing, such liabilities and encumbrances shall be included as
liabilities of the Company; (G) the assets of the Company shall include the
depreciated book value of the Owned Real Property, including the improvements
located thereon, but shall not include leasehold improvements unless they are
subject to Leases with third parties; and (H) the values of the following asset
categories shall be calculated as follows:
(I) New Vehicles. The value of the Company's untitled
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new 2001 and 2002 model year motor vehicles (excluding Demonstrators (as defined
below), service loaners, rental car vehicles, company-owned vehicles, conversion
vans, vehicles for commercial and/or municipal use or sale, or similar-type
vehicles), with an aggregate maximum of [***] 2001 Cadillacs (including those
under Demonstrators below), in stock and unsold as of the Closing Date
(collectively, the "New Vehicles") shall be the price at which the New Vehicle
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was invoiced to the Company by the Manufacturer (as defined in Article 2 below);
provided, however, the value of New Vehicles acquired by the Company in the
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ordinary course of the Company's business pursuant to a dealer trade with a
party other than an Affiliate of the Company or ▇▇▇▇▇▇, shall be the amount paid
to the other dealer for such New Vehicle; provided, further, that the value of
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New Vehicles shall be adjusted pursuant to clauses (III) and (IV) below and that
the price of any pre-reported sold vehicles for which the sale cannot be
reversed shall be as mutually agreed by the Buyer and the Seller. In the event
the Buyer and the Seller cannot agree upon a price with respect to any such
pre-reported sold vehicle, the Closing
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
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Balance Sheet shall allocate no value to such vehicle and the Seller may cause
the Company to divest such vehicle prior to Closing in accordance with Section
1.5.
(II) Demonstrators. The value of the Company's untitled new
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2001 and 2002 model year motor vehicles (excluding service loaners, rental car
vehicles, company-owned vehicles, conversion vans, vehicles for commercial
and/or municipal use or sale, and similar-type vehicles), with an aggregate
maximum of five (5) 2001 Cadillacs (including those under New Vehicles above),
in stock and unsold as of the Closing Date which is either (A) used in the
ordinary course of business for the purpose of demonstration or (B) has, as of
the Closing Date, more than 500 miles on its odometer (collectively, the
"Demonstrators") shall be the price at which the Demonstrator was invoiced to
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the Company by the Manufacturer, as adjusted pursuant to clauses (III) and (IV).
Any Demonstrator having an odometer reading in excess of 6,000 miles and any
prior model year (as of the Closing Date) motor vehicle as well as any 2001
Cadillacs in excess of [***] shall be treated as a used vehicle under Clause V
below.
(III) Adjustment to Value of New Vehicles and Demonstrators.
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The value of each New Vehicle and each Demonstrator shall be: (x) increased by
the dealer cost of any equipment and accessories which have been installed by
the Company in the ordinary course of business; and (y) decreased by (1) the
dealer cost of any equipment and accessories which have been removed from such
vehicles, (2) [***] of any factory floorplan assistance relative to such
vehicles, (3) all paid or unpaid rebates, discounts, holdback for dealer account
and other factory incentives (including without limitation rebates applied for
and paid but not earned and incentive monies claimed on pre-reported units), and
(4) refundable advertising allowances, if any, provided, with respect to clauses
(3) and (4), no such decrease shall be made if the incentive or allowance is
unpaid as of the Closing Date and will accrue to the benefit of the Company
after the Closing Date.
(IV) Damaged New Vehicles and Demonstrators. If any New
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Vehicles or Demonstrators shall have suffered any damage on or prior to the
Closing Date, the Seller and the Buyer will attempt to agree on the cost to
cover such repairs, which amount shall be deducted from the value of such New
Vehicle or Demonstrator. With respect to any New Vehicle or Demonstrator which
shall have been damaged and repaired prior to the Closing Date and with respect
to which notification of such damage must be given to any purchaser pursuant to
applicable state law, the Seller and the Buyer will attempt to agree on an
adjustment to the price to reflect the decrease, if any, in the wholesale value
of such New Vehicle or Demonstrator resulting from such damage and repair, which
amount shall be deducted from the value of such New Vehicle or Demonstrator. In
the event the Buyer and the Seller cannot agree on the cost of repairs, the
amount of reduction or such adjustment, the Closing Balance Sheet shall allocate
no value to such damaged New Vehicle or Demonstrator, and the Seller may cause
the Company to divest any such damaged New Vehicle or Demonstrator prior to
Closing in accordance with Section 1.5.
(V) Used Vehicles. The value of each motor vehicle owned
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by the Company that is not a New Vehicle or a Demonstrator as of the Closing
Date, including prior model year new vehicles, demonstrator automobiles having
an odometer reading in excess of 6,000 miles, service loaners, rental car
vehicles, company-owned vehicles, conversion vans, vehicles for commercial
and/or municipal use or sale, and similar-type vehicles as well as any 2001
Cadillacs in excess of [***] (collectively, the "Used Vehicles"), shall be
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valued based
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
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upon the valuation method set forth in Exhibit C hereto; provided, however, such
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valuation will assign no value to those used vehicles older than the 1995 model
year or with an odometer reading in excess of 70,000 miles that have not been
reconditioned and have not passed a safety inspection consistent with the
Company's past practices. With respect to any Used Vehicle for which no value is
established in accordance with this clause (V) or Exhibit C attached hereto, the
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Closing Balance Sheet shall allocate no value to such Used Vehicle, and the
Seller may cause the Company to divest any such Used Vehicle prior to Closing in
accordance with Section 1.5.
(VI) Inventory. The Buyer and the Seller shall engage a
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mutually acceptable third party engaged in the business of appraising, valuing
and preparing inventories for automobile dealerships (hereinafter referred to as
the "Inventory Service") to prepare an inventory list (the "Inventory") of the
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parts and accessories, as well as the Miscellaneous Inventories (as defined in
Clause VIII below), owned by the Company. The Inventory (insofar as it relates
to parts and accessories) shall be posted to the Manufacturer's approved systems
of inventory control and will show each item extended by its unit price. The
Inventory shall be completed as of the Closing Date. The Inventory shall
identify each part and accessory and its purchase price. The cost of the
Inventory shall be borne equally by the Buyer and the Seller.
(VII) Returnable and Nonreturnable Replacement Parts and
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Accessories. The Inventory shall classify replacement parts and accessories as
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"returnable" or "nonreturnable." For purposes of this Agreement, the terms
"returnable parts" and "returnable accessories" shall describe and include only
those new undamaged replacement parts and new undamaged accessories (excluding
prior model year vehicle accessories) for vehicles which are listed (coded) in
the latest current Master Parts Price List Suggested List Prices and Dealer
Prices, or other applicable similar price lists, of the Manufacturer, with
supplements or the equivalent in effect as of the Closing Date (the "Master
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Price List"), as returnable to the Manufacturer at not less than the purchase
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price reflected in the Master Price List or in the most recent applicable price
list. The value of each "returnable part" and "returnable accessory" will be the
price therefor listed in the Master Price List with no reduction for stock order
discounts or any other discounts; [***]. As used herein, the term "Aged Parts"
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shall mean, with respect to the Company, all items in inventory of those stock
keeping units of "returnable parts" and "returnable accessories" for which the
Company has had no bona-fide sale to an unaffiliated third party at arm's length
within [***] months of the Closing Date. All parts and accessories listed
(coded) in the Master Price List as nonreturnable to the Manufacturer shall be
classified as "nonreturnable." The value for each "nonreturnable" part and
accessory, non-Manufacturer part or accessory, "Jobber" or "NPN" parts and
accessories (collectively, the "Nonreturnable Parts"), shall be equal to [***]
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percent ([***]%) of dealer cost; provided, however, in the event that the
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aggregate value for Nonreturnable Parts (determined as aforesaid) for the
Company exceeds [***] percent ([***]%) of the aggregate value for the parts
Inventory with respect to the Company, the value for such Nonreturnable Parts
whose aggregate value (determined as aforesaid) is in excess of [***] percent
([***]%) of the aggregate value for the parts Inventory shall be as mutually
agreed by the Buyer and the Seller. The value of any
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
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other parts not addressed in this subsection shall equal a value as mutually
agreed between the Buyer and the Seller. Special accessories such as vogue
tires, custom wheels, chrome trim, gold trim, tops, CD players, etc., which are
compatible with current model year New Vehicles will be valued at dealer cost;
provided, however, the amount of such special accessory inventory shall not
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exceed a supply that will reasonably equip [***] vehicles per store. The value
of special accessories in excess of that needed to reasonably equip [***]
vehicles per store, as well as special accessories for prior model year
vehicles, will be valued as mutually agreed between the Buyer and the Seller.
The Closing Balance Sheet shall allocate no value to any damaged parts or
accessories, parts and accessories with component parts missing, superseded or
obsolete parts or accessories, or used parts or accessories and the Seller may
cause the Company to divest any such parts or accessories prior to Closing in
accordance with Section 1.5. As to any item for which the value must be mutually
agreed between the Buyer and the Seller, if an agreed upon value cannot be
reached for such item, no value shall be allocated to such item and the Seller
may cause the Company to divest any such item prior to Closing in accordance
with Section 1.5.
(VIII) Miscellaneous Inventories. "Miscellaneous
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Inventories" shall include all useable gas, oil and grease, all undercoat
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material and body materials in unopened cans and such other miscellaneous
useable and saleable articles in unbroken lots (including office supplies) which
are owned by the Company on the Closing Date provided that Miscellaneous
Inventories shall not include any miscellaneous inventories which represent more
than a sixty (60) day supply of any particular item(s). The value of the
Miscellaneous Inventories shall be equal to the replacement cost of the
Miscellaneous Inventories as determined by the Inventory Service and set forth
on the Inventory. The Closing Balance Sheet shall allocate no value to any
miscellaneous items that are not included in the Miscellaneous Inventories,
including such items of miscellaneous inventories which represent more than a
sixty (60) day supply of such item, and the Seller may cause the Company to
divest any such miscellaneous items prior to Closing in accordance with Section
1.5.
(IX) Work in Process. The value of any repair orders which
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are in process at the opening of business on the Closing Date shall be the
Company's actual cost for parts and labor for such orders as the Company shall
have caused to be performed.
(X) Fixtures and Equipment. The value of all fixtures,
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machinery, equipment (including special tools and shop equipment reasonably
necessary for the servicing of motor vehicles), furniture and all signs and
office equipment (including, without limitation, computer equipment used in
normal dealership operations) owned by the Company and used or held for use in
the Company's business, but excluding leasehold improvements unless they are
located at premises which are subject to a Lease and any vehicles used or held
for use in the Company's business, such as (without limitation) Company-owned
vehicles, service loaners, and rental car vehicles (collectively, "Fixtures and
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Equipment"), shall be the Company's depreciated book value thereof; provided,
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however, the Closing Balance Sheet shall allocate no value to any items of
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Fixtures and Equipment which (a) are leased, or (b) are not physically
identifiable.
(XI) Prepaid Expenses. The Closing Balance Sheet will
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include as an asset the amount of all prepaid expenses of the Company to the
extent the amount
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
6
of such prepaid expenses can be used by the Company at the Company's actual
cost, prorated as of the Closing Date.
(XII) Oldsmobile Assets. The parties acknowledge that the
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value of the Company's Oldsmobile assets and leasehold improvements shall not be
included in the Net Book Value of the Company (and Seller shall cause such
assets and leasehold improvements to be divested by the Company prior to the
Closing in accordance with Section 1.5) unless, prior to the Closing, Argonaut
Holdings allows either (A) the continuation after the Closing of the Lease with
respect to the Oldsmobile Real Property and agrees to fix the rent through the
first ten (10) year extension term at $14,000 per month or less, or (B) the
Buyer to purchase the Oldsmobile Real Property for One Million Three Hundred
Thousand Dollars ($1,300,000) or less. In the event such Oldsmobile assets and
leasehold improvements are included in the Net Book Value of the Company, and if
the Seller elects and the Manufacturer will approve, the Buyer will pay the
Seller for unpaid transition assistance payments and assume the Seller's rights
to receive the remaining payments from the Manufacturer; provided, however, the
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Seller shall not, nor shall the Seller permit the Company to, enter into any
agreement which would require the Buyer and/or the Company to stop selling
Oldsmobile vehicles prior to the end of production. Assuming that the Oldsmobile
assets and leasehold improvements are distributed to the Seller as Distributed
Assets, the Seller shall also cause the Company to distribute to the Seller all
of the liabilities and obligations of the Company with respect to the Oldsmobile
dealership business, of every kind whatsoever, fixed or contingent, known or
unknown (collectively, the "Oldsmobile Liabilities"), including, without
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limitation, all leasing arrangements with Argonaut Holdings. In the event that
the value of the Company's Oldsmobile assets and leasehold improvements are not
included in the Net Book Value of the Company, then the Oldsmobile Liabilities
shall not be included in the Net Book Value of the Company.
(ii) If within 30 days following delivery of the Closing
Balance Sheet (or the next Business Day if such 30th day is not a Business Day),
the Seller has not given the Buyer notice of the Seller's objection to the
computation of the Net Book Value as set forth in the Closing Balance Sheet
(such notice to contain a statement in reasonable detail of the nature of the
Seller's objection), then the Net Book Value reflected in the Closing Balance
Sheet will be deemed mutually agreed by the Buyer and the Seller. If the Seller
shall have given such notice of objection in a timely manner then the Buyer and
the Seller shall use their reasonable best efforts to resolve the items in
dispute. If the Buyer and the Seller are unable to resolve their dispute within
thirty (30) days from the date of the Seller's notice of objection, then the
issues in dispute will be submitted to the Detroit, Michigan office of a "Big
Five" or other accounting firm which is mutually acceptable to the Buyer and the
Seller (the "Accountants") for resolution. If issues in dispute are submitted to
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the Accountants for resolution: (A) each party will furnish to the Accountants
such work papers and other documents and information relating to the disputed
issues as the Accountants may request and are available to the party or its
subsidiaries (or its independent public accountants), with a copy of such work
papers, documents and information being provided to the other party, and will be
afforded the opportunity to present to the Accountants any material relating to
the determination (with a copy of such material being provided to the other
party) and, at the request of the Accountants, the parties may jointly conduct a
conference with the Accountants to discuss the determination; (B) the
Accountants will be instructed to determine the Net Book Value based upon their
resolution of the issues in dispute; (C) such determination by the Accountants
of the Net Book Value, as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the
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parties; and (D) the Buyer and the Seller shall each bear 50% of the fees and
expenses of the Accountants for such determination.
(iii) If the Net Book Value, as deemed mutually agreed by
the parties or as determined by the Accountants, as aforesaid, is at least equal
to the Estimated Net Book Value, or if there is a Net Book Value Excess (as
defined below), the Buyer and the Seller shall, except to the extent there are
pending claims for indemnity, promptly execute and deliver to the Escrow Agent a
joint instruction to pay the entire Escrow Amount, including all interest
accrued thereon under the Escrow Agreement, to the Seller. To the extent that
the Net Book Value, as deemed mutually agreed by the parties or as determined by
the Accountants, as aforesaid, is greater than the Estimated Net Book Value, the
Buyer shall be obligated to pay the amount of such excess (the "Net Book Value
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Excess"), together with interest on the amount of the Net Book Value Excess at
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the Buyer's floor plan financing rate from time to time in effect (the "Interest
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Rate") from the Closing Date to the date of such payment, promptly to the
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Seller. The payment of the Net Book Value Excess, plus interest as aforesaid,
shall be made by wire transfer to the Seller in the manner specified in Section
1.2(b)(i) above. To the extent that the Net Book Value, as deemed mutually
agreed by the parties or as determined by the Accountants, as aforesaid, is less
than the Estimated Net Book Value, the Seller shall be obligated to pay the
amount of such shortfall (the "Net Book Value Shortfall"), together with
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interest on the amount of the Net Book Value Shortfall at the Interest Rate from
the Closing Date to the date of such payment, in cash, promptly to the Buyer. In
furtherance of such obligation of the Seller, the Buyer and the Seller shall
promptly execute and deliver to the Escrow Agent a joint instruction to pay up
to all of the Escrow Amount, plus interest earned on the portion of the Escrow
Amount so paid, to the Buyer, with the balance, if any, of the Escrow Amount,
plus interest as aforesaid, paid to the Seller. To the extent that the Net Book
Value Shortfall, plus interest at the Interest Rate as aforesaid, exceeds the
value of the Escrow Amount plus interest earned on the Escrow Amount, the Seller
shall be obligated to pay in cash or by wire transfer the amount of such excess
promptly to the Buyer.
1.3 Delivery of the Shares. At the Closing, the Seller shall deliver
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to the Buyer a certificate or certificates representing the Shares, duly
endorsed in blank or with a fully executed stock power attached, all in proper
form for transfer with all transfer taxes, if any, paid by the Seller. The
Shares shall be delivered to the Buyer free and clear of all liens, pledges,
encumbrances, claims, security interests, charges, voting trusts, voting
agreements, other agreements, rights, options, warrants or restrictions or
claims of any kind, nature or description (collectively, "Encumbrances").
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1.4 Other Agreements. It is the intention of the Buyer and the Seller
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that the Closing under this Agreement take place concurrently with the
respective closings under the Other Agreements.
1.5 Certain Divestitures Prior to Closing. Prior to the Closing, the
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Company may distribute to the Seller certain New Vehicles, Demonstrators, Used
Vehicles, parts and accessories, and/or Miscellaneous Inventories, as
contemplated by Section 1.2(c)(i) above (herein collectively referred to as the
"Distributed Assets"). Such distribution shall be without representation or
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warranty of any kind by the Company and the Seller acknowledges that the
Distributed Assets shall be distributed by the Company "AS IS - WHERE IS". The
Buyer shall reasonably cooperate in the Seller's efforts to effectuate a
divestiture of the Oldsmobile assets, if
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applicable. The Seller shall have a period of thirty (30) days following the
closing to remove the Distributed Assets from the premises. The Buyer shall, and
shall cause the Company to, provide timely and reasonable access to the Seller
for the purpose of removing the Distributed Assets during such thirty (30) day
period. If the Oldsmobile Liabilities are distributed to the Seller, as
contemplated by Section 1.2(c)(i)(XII), the Oldsmobile Liabilities shall also be
referred to herein as "Distributed Liabilities".
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1.6 Owned Real Property Rider. Reference is hereby made to the Owned
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Real Property Rider attached hereto as Exhibit A-2 (the "Owned Real Property
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Rider"), which is incorporated herein by reference. All references herein to
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"this Agreement" shall be deemed to include the Owned Real Property Rider.
1.7 Accounts Receivable - Collections
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(a) Commencing on and from the Closing Date, the Buyer shall
cause the Company to make reasonably diligent and continuing efforts to timely
collect all accounts receivable of the Company reflected on the Closing Balance
Sheet (the "Accounts Receivable"); provided, however, (i) the Company shall not
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be obligated to continue to do business with any account debtor if it believes
that such continuation will not be in its best interests, and (ii) the Company
will not be obligated to incur any Extraordinary Collection Costs (as
hereinafter defined), nor will the Company incur any Extraordinary Collection
Costs or compromise, settle or accept less than the full amount due in
satisfaction of any account without the prior written approval of the Seller to
be obtained in each case. As used herein, "Extraordinary Collection Costs" means
------------------------------
direct out-of-pocket fees and expenses paid to outside debt collection agencies
and/or attorneys for services in connection with the collection of the Accounts
Receivable.
(b) All monies received by the Company from account debtors
shall be credited to the account of the remitting debtor in the order of the
longest outstanding indebtedness due on the account; provided, however, the
-------- -------
Company shall not be obligated to credit such monies to any disputed amount of
such accounts which the Seller reasonably agrees is in dispute.
(c) Any amounts due on the Accounts Receivable which are not
collected or realized by the Company within one hundred twenty (120) days after
the date the respective Accounts Receivable were billed shall be deemed
uncollectible and the Company shall have no further obligation to collect such
amounts and the Seller shall, promptly upon demand by the Company, pay such
amounts to the Company or its designee and the Company shall, upon such payment,
assign to the Seller the specific accounts in respect to which such payment is
being made free and clear of all security interests, liens, charges and
encumbrances.
(d) In the event that a court of competent jurisdiction in a
proceeding under any federal or state bankruptcy, insolvency or other similar
law then in effect with respect to any account debtor shall order the Company to
repay any of the Accounts Receivable collected and credited to the account of
such account debtor, the amount of such repayment(s), plus the amount of all the
reasonable costs and expenses of the Company (including reasonable attorneys'
fees) incurred and/or paid in such proceeding, shall become the obligation of
the Seller to the Company, payable on demand of the Company and the Company
shall, upon receipt of such
9
payment, assign to the Seller, without recourse and against an appropriate
indemnity in favor of the Company, any rights of the Company with respect to
such bankruptcy proceedings.
ARTICLE 2
---------
CLOSING
-------
The Closing shall take place at a mutually agreed upon location in
Detroit, Michigan at 9:30 a.m., local time, the date which is the sixtieth
(60/th/) day after the date of this Agreement (the "Closing Date Deadline"),
---------------------
subject to prior receipt by the Buyer of the approvals of General Motors
Corporation (the "Manufacturer") contemplated in Sections 7.10 and 8.11 and
------------
provided that the audited financial statements contemplated in Section 7.13
shall have been completed and the other conditions to Closing set forth in
Article 7 and Article 8 shall have been satisfied. If, as of the Closing Date
Deadline, the Buyer shall not have obtained such approvals and/or such audited
financial statements and other conditions to closing shall not have been
completed or satisfied, the Buyer shall have the option (a) to terminate this
Agreement if it appears unlikely that the approvals of the Manufacturer required
by Sections 7.10 and 8.11 above shall be forthcoming, or (b) to extend the
Closing Date Deadline for an additional thirty (30) day period. In addition to
the foregoing, if the Seller reasonably believes that the approvals of the
Manufacturer required by Sections 7.10 and 8.11 above will be forthcoming, the
Seller may elect to extend the original Closing Date Deadline for an additional
thirty (30) days. The date upon which the Closing shall take place is
hereinafter called the "Closing Date." The Closing shall be deemed to be
------------
effective as of the opening of business on the Closing Date.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF THE SELLER
--------------------------------------------
The Seller hereby represents and warrants to the Buyer, as follows:
3.1 Ownership of Shares.
-------------------
(a) The Seller owns of record and beneficially the Shares. The
Seller has, and will have at the time of the Closing, good and valid title to
the Shares to be sold by the Seller hereunder, free and clear of all
Encumbrances.
(b) The Shares include all shares of capital stock of the
Company acquired from ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on December 4, 2001. The
agreements pursuant to which such shares were acquired (the "▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇
----------------
Agreements") are validly binding and enforceable agreements of ▇▇▇▇▇▇ and/or the
----------
Seller, and to the knowledge of the Seller, the other parties thereto, and were
executed, delivered and consummated by Messrs. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ with full
knowledge of the transactions contemplated by this Agreement.
10
3.2 The Seller's Power and Authority; Consents and Approvals.
--------------------------------------------------------
(a) The Seller is a trust duly formed and validly existing under
the laws of the State of Michigan. The Seller has full trust capacity, right,
power and authority to execute and deliver this Agreement and the other
agreements, documents and instruments to be executed and delivered by the Seller
in connection herewith, to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. ▇▇▇▇▇▇, as the
sole trustee of the Seller, has the full power and authority to execute and
deliver this Agreement on behalf of the Seller, and to execute and deliver all
other agreements, documents and instruments to be executed and delivered by the
Seller pursuant hereto.
(b) Except as set forth on Schedule 3.2(b) hereto, no
---------------
authorization, approval or consent of, or notice to or filing or registration
with, any governmental agency or body, or any other third party with respect to
a Material Agreement, is required in connection with the execution and delivery
by the Seller of this Agreement and the other agreements, documents and
instruments to be executed and delivered by the Seller in connection herewith,
the consummation of the transactions contemplated hereby and thereby and the
performance by the Seller of its obligations hereunder and thereunder.
3.3 Execution and Enforceability. This Agreement has been duly executed
----------------------------
and delivered by the Seller and constitutes, and the other agreements, documents
and instruments to be executed by the Seller in connection herewith, when duly
executed and delivered by the Seller, shall constitute, the legal, valid and
binding obligations of the Seller, enforceable against the Seller in accordance
with their respective terms except to the extent that enforceability may be
limited by bankruptcy, insolvency and other securities laws affecting the
enforcement of creditors' rights generally and general equity principles.
3.4 Litigation Regarding the Seller and ▇▇▇▇▇▇. There are no actions,
------------------------------------------
suits, claims, investigations or legal, administrative or arbitration
proceedings pending or, to the Seller's knowledge, threatened against the Seller
or ▇▇▇▇▇▇ relating to the Shares, this Agreement or the transactions
contemplated hereby before any court, governmental or administrative agency or
other body. No judgment, order, writ, injunction, decree or other similar
command of any court or governmental or administrative agency or other body has
been entered against or served upon the Seller or ▇▇▇▇▇▇ relating to the Shares,
this Agreement or the transactions contemplated hereby.
3.5 Interest in Competitors and Related Entities; Certain Transactions.
------------------------------------------------------------------
(a) Except as set forth on Schedule 3.5 hereto, neither the Seller
------------
or ▇▇▇▇▇▇, nor any Affiliate of the Seller or ▇▇▇▇▇▇, (i) has any direct or
indirect interest in any person or entity engaged or involved in the business of
owning and operating automobile and truck dealerships, which business includes,
without limitation, the marketing and selling of new and used vehicles, the
servicing of automobiles and trucks, collision and repair servicing of
automobiles and trucks, or the provision of financing and insurance to the
automotive customers, (ii) has any direct or indirect interest in any person or
entity which is a lessor of assets or properties to, material supplier of, or
provider of services to, the Company, or (iii) has a beneficial interest in any
contract or agreement to which the Company is a party; provided, however, that
the foregoing representation and warranty shall not apply to any person or
entity,
11
or any interest or agreement with any person or entity, which is a publicly held
corporation in which the Seller or ▇▇▇▇▇▇, as the case may be, individually owns
less than 3% of the issued and outstanding voting stock. For purposes of this
Agreement, the term "Affiliate" shall mean any entity directly or indirectly
---------
controlling, controlled by or under common control with the specified person,
whether by stock ownership, agreement or otherwise, or any parent, child or
sibling of such specified person and the concept of "control" means the
------
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of such person or entity, whether through the
ownership of voting securities, by contract or otherwise.
(b) Except as set forth in Schedule 3.5 hereto, there are no
------------
transactions between the Company and the Seller or ▇▇▇▇▇▇ (including the
Seller's or ▇▇▇▇▇▇'▇ Affiliates), or any of the directors, officers or salaried
employees of the Company, the family members of ▇▇▇▇▇▇, or the Affiliates of any
of the above (other than for services as employees, officers and directors),
including, without limitation, any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from, the
Seller or ▇▇▇▇▇▇, or any such officer, director or salaried employee, family
member of ▇▇▇▇▇▇, or Affiliate or any corporation, partnership, trust or other
entity in which such family member, Affiliate, officer, director or, to the
knowledge of the Seller, salaried employee has a substantial interest or is a
shareholder, officer, director, trustee or partner.
3.6 The Seller Not Foreign Person. Each of the Seller and ▇▇▇▇▇▇ is a
-----------------------------
"United States person" as that term is defined in Section 7701(a)(30) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
----
promulgated thereunder.
3.7 Organization; Good Standing, Etc. The Company is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
its incorporation and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Company is not qualified, and the nature of its business does not require it to
be qualified, to do business as a foreign corporation in any other
jurisdictions.
3.8 Capitalization. The authorized capital stock of the Company is set
--------------
forth on Schedule 3.8 hereto. The Shares constitute all of the issued and
------------
outstanding shares of capital stock of the Company. All of the Shares are duly
authorized, validly issued, fully paid and non-assessable and are held by the
Seller. Except as set forth on Schedule 3.8 hereto, there are no preemptive
------------
rights, whether at law or otherwise, to purchase any of the securities of the
Company, and there are no outstanding options, warrants, "phantom" stock plans,
subscriptions, agreements, plans or other commitments pursuant to which the
Company is or may become obligated to sell or issue any shares of its capital
stock or any other debt or equity security, and there are no outstanding
securities convertible or exchangeable into shares of such capital stock or any
other debt or equity security. There are no voting trusts, shareholder
agreements or other agreements, instruments or rights of any kind or nature
outstanding or in effect with respect to shares of capital stock of the Company.
3.9 Subsidiaries and Investments. The Company does not own or maintain,
----------------------------
directly or indirectly, any capital stock of or other equity or ownership or
proprietary interest in any other corporation, partnership, association, trust,
joint venture or other entity and does not have any
12
commitment to contribute to the capital of, make loans to, or share in the
losses of, any such entity.
3.10 No Violation; Conflicts. Except as set forth on Schedule 3.10
----------------------- -------------
hereto, the execution and delivery by the Seller of this Agreement and the other
agreements, documents and instruments to be executed and delivered by the Seller
in connection herewith, the consummation by the Seller of the transactions
contemplated hereby and thereby and the performance by the Seller of its
obligations hereunder and thereunder do not and will not (a) conflict with or
violate any of the terms of the Articles of Incorporation or By-Laws of the
Company, or the trust agreement of the Seller, (b) violate or conflict with any
domestic law, ordinance, rule or regulation, or any judgment, order, writ,
injunction, decree or similar command of any court, administrative or
governmental agency or other body, material to the Company, (c) violate or
conflict with the terms of, or result in the acceleration of, any indebtedness
or obligation of the Company under, or violate or conflict with or result in a
breach of, or constitute a default under, any indenture, mortgage, deed of
trust, or Material Agreement (as defined in Section 3.29) to which the Company
is a party or by which the Company or any of its assets or properties is bound,
(d) result in the creation or imposition of any Encumbrance of any nature upon
any of the assets or properties of the Company, (e) constitute an event
permitting termination of any Material Agreement of the Company, or (f) require
any authorization, approval or consent of, or any notice to or filing or
registration with, any governmental agency or body, or any other third party
with respect to a Material Agreement, in each case, applicable to the Company or
any of its properties or assets.
3.11 Title to Assets; Related Matters.
--------------------------------
(a) The Company has good and valid title to all assets, rights,
interests and properties, tangible and intangible, owned by it, other than the
Distributed Assets (collectively, the "Assets"), free and clear of all
------
Encumbrances, except those specified on Schedule 3.11 and liens for Taxes not
-------------
yet due and payable; provided, however, the foregoing shall not apply to the
-------- -------
Real Property.
(b) The Assets include all properties and assets (real, personal
and mixed, tangible and intangible) owned by the Company and used or held for
use in the conduct of its business other than the Distributed Assets.
3.12 Possession. The tangible assets included within the Assets are
----------
physically identifiable and are in the possession or control of the Company and,
except as set forth on Schedule 3.12, no other person or entity has a right to
-------------
possession or claims possession of all or any part of such Assets, except the
rights of lessors of Leased Equipment and Leased Premises (each as defined in
Section 3.16 hereof) under their respective contracts and leases.
3.13 Financial Statements.
--------------------
(a) The Seller has delivered to the Buyer prior to the date
hereof:
(i) the audited balance sheets of the Company and the related
audited statements of income, stockholders' equity and changes in cash flows for
the last two fiscal years
13
of the Company (including the notes thereto and any other information included
therein) (collectively, the "Annual Financial Statements"); and
---------------------------
(ii) the monthly year-to-date unaudited balance sheet of the
Company and the related unaudited statements of income, stockholders' equity and
changes in cash flow (collectively, the "Interim Financial Statements"; the
----------------------------
Annual Financial Statements and the Interim Financial Statements are hereinafter
collectively referred to as the "Financial Statements").
--------------------
(b) The Financial Statements (i) are in accordance in all material
respects with the books and records of the Company, which books and records are
true, correct and complete in all material respects, (ii) fairly present the
financial condition of the Company as of the dates indicated and the results of
operations, changes in stockholders' equity and cash flow of the Company for the
periods indicated, and (iii) except as set forth in Schedule 3.13, have been
prepared in accordance with GAAP consistently applied by the Company, subject,
in the case of unaudited financial statements, to the absence of footnotes and
for normal year-end adjustments.
3.14 [Intentionally Left Blank].
3.15 Inventories. The levels of the inventories of the Company are
-----------
materially consistent with the levels maintained by the Company in the ordinary
course consistent with past practice and the Company's obligations under its
respective agreements with the Manufacturer and all applicable distributors. The
values at which such inventories are carried are based on the LIFO method and
are stated in accordance with GAAP by the Company at the lower of historic cost
or market. To the knowledge of the Seller, an adequate reserve has been
established by the Company for damaged, spoiled, obsolete, defective, or
slow-moving goods and such reserve is consistent with both the operation of the
Company in the ordinary course of business and past practice.
3.16 Real Property; Machinery and Equipment.
--------------------------------------
(a) Schedule 3.16(a) hereto contains a complete list and brief
----------------
description of all real property owned by the Company and a summary description
of the improvements (including buildings and other structures) located thereon
(collectively, the "Owned Real Property"). As of the Closing, the Company shall
-------------------
have good and marketable and indefeasible title to the Owned Real Property and
shall hold such Owned Real Property in fee simple or its equivalent under local
law, free and clear of all building use restrictions, exceptions, variances,
limitations or other title defects of any nature whatsoever, except those set
forth in Schedule 3.16(a) hereto and the "Permitted Exceptions" under the Owned
----------------
Real Property Rider (the "Permitted Encumbrances"). Except as set forth on
----------------------
Schedule 3.16(a) hereto, there are no leases, written or oral, affecting all or
----------------
any part of the Owned Real Property. The only real property (other than the
Leased Premises) used by the Company in connection with the Company's businesses
is the Owned Real Property. To the knowledge of the Seller, the Owned Real
Property (including, without limitation, the roof, the walls and all plumbing,
wiring, electrical, heating, air conditioning, fire protection and other
systems, as well as all paved areas, included therein or located thereat) is in
good working order, condition and repair and is not in need of maintenance or
repairs except for maintenance and repairs which are routine, ordinary and not
material in nature or cost. The Owned Real Property is currently used in all
material
14
respects in accordance with applicable restrictions and regulations. Neither the
Seller nor the Company is in material violation of any restrictive covenant
encumbering the Owned Real Property (if any) and there are no assessments owed
pursuant to such restrictions. None of the Owned Real Property constitutes
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code, and none of the Owned Real Property is subject to a
lease, safe harbor lease or other arrangement as a result of which the Company
is not treated as the owner for federal income tax purposes.
(b) Schedule 3.16(b) hereto contains a complete list and
----------------
description (including buildings and other structures thereon and the name of
the owner thereof) of all real property of which the Company is a tenant (herein
collectively referred to as the "Leased Premises," and, together with the Owned
---------------
Real Property, sometimes collectively referred to as the "Real Property"). True,
-------------
correct and complete copies of all leases of all Leased Premises (the "Leases")
------
have been delivered to the Buyer. The Leased Premises (including, without
limitation, the roof, the walls and all plumbing, wiring, electrical, heating,
air conditioning, fire protection and other systems, as well as all paved areas,
included therein or located thereat) are in good working order, condition and
repair and are not in need of maintenance or repairs except for maintenance and
repairs which are routine, ordinary and not material in nature or cost. With
respect to each Lease, to the knowledge of the Seller, no event or condition
currently exists which would give rise to a material repair or restoration
obligation if such Lease were to terminate. Except as set forth in the Leases,
the Seller has no knowledge of any event or condition which currently exists
which would create a legal or other impediment to the use of the Leased Premises
as currently used, or would increase the additional charges or other sums
payable by the tenant under any of the Leases (including, without limitation,
any pending Tax reassessment or other special assessment affecting the Leased
Premises).
(c) To the knowledge of the Seller, there has been no work
performed, services rendered or materials furnished in connection with repairs,
improvements, construction, alteration, demolition or similar activities with
respect to the Real Property for at least ninety (90) days before the date
hereof; there are no outstanding claims or persons entitled to any claim or
right to a claim for a mechanics' or materialman's lien against the Real
Property; and except as set forth in the leases, there is no person or entity
other than the Company in or entitled to possession of the Real Property.
(d) To the knowledge of the Seller, the Company has all easements
and rights, including, but not limited to, easements for power lines, water
lines, sewers, roadways and other means of ingress and egress, necessary to
conduct the businesses the Company now conducts, all such easements and rights
are perpetual, unconditional appurtenant rights to the Real Property, and none
of such easements or rights are subject to any forfeiture or divestiture rights.
(e) Neither the whole nor any portion of any of the Real Property
has been condemned, expropriated, ordered to be sold or otherwise taken by any
public authority, with or without payment or compensation therefor, and, to the
knowledge of the Seller, no such condemnation, expropriation, sale or taking is
threatened or contemplated. The Seller has no knowledge of any pending
assessments which would affect the Real Property.
(f) None of the Real Property is in violation in any material
respect of any public or private restriction or any law or any building, zoning,
health, safety, fire or other law,
15
ordinance, code or regulation, and no notice from any governmental body has been
served upon the Company or upon any of the Real Property claiming any violation
in any material respect of any such law, ordinance, code or regulation or
requiring or calling to the attention of the Company the need for any work,
repair, construction, alterations or installation on or in connection with said
properties which has not been complied with in all material respects. To the
knowledge of the Seller, all improvements which comprise a part of the Real
Property are located within the record lines of the Real Property and none of
the improvements located on the Real Property encroach upon any adjoining
property or any easements or rights of way and no improvements located on any
adjoining property encroach upon any of the Real Property or any easements or
rights of way servicing the Real Property.
(g) Schedule 3.16(g) hereto sets forth a list of all material
----------------
machinery, equipment, motor vehicles, furniture and fixtures owned by the
Company (collectively, the "Owned Equipment").
---------------
(h) Schedule 3.29(a) hereto contains a list of all Material
----------------
Agreements, whether written or oral, under which the Company is lessee of or
holds or operates any items of machinery, equipment, motor vehicles, furniture
and fixtures or other property (other than real property) owned by any third
party (collectively, the "Leased Equipment").
----------------
(i) The Owned Equipment and the Leased Equipment are, taken as a
whole, in good operating condition, maintenance and repair taking into account
the age thereof.
3.17 Patents; Trademarks; Tradenames; Service Marks; Copyrights;
-----------------------------------------------------------
Licenses, Etc.
-------------
(a) Except as set forth on Schedule 3.17 hereto, there are no
-------------
patents, trademarks, trade names, service marks, service names and copyrights,
and there are no applications therefor or licenses thereof, whether patentable
or unpatentable, that are owned or leased by the Company or used in the conduct
of the Company's businesses. The Company is not a party to, and the Company pays
no royalty to anyone under, any license or similar agreement. Neither the
Company nor the Seller has received a written claim, and, to the knowledge of
the Seller, there is no reasonable basis for any claim, against the Company that
any of its operations, activities or products infringe the patents, trademarks,
trade names, copyrights or other property rights of others or that the Company
is otherwise wrongfully using the property rights of others. Neither the Company
nor the Seller has asserted any claim and, to the knowledge of the Seller, there
is no reasonable basis for any claim by the Company against any third party that
the operations, activities or products of such third party infringe the patents,
trademarks, trade names, service marks, service names, copyrights or other
property rights of the Company or that such third party is otherwise wrongfully
using the property rights of the Company.
(b) To the knowledge of the Seller, the Company has the right to
use in the State or States set forth opposite the Company's name on Schedule
--------
3.17 hereto, the names "▇▇▇▇▇▇" and "▇▇▇ ▇▇▇▇▇▇" and the other tradenames and
----
service marks listed opposite the Company's name on Schedule 3.17 hereto,
-------------
including without limitation the tradename "▇▇▇▇▇▇ ▇▇▇▇▇▇" pursuant to the terms
and conditions of that certain Agreement dated November 30, 2001, and, except as
set forth on Schedule 3.17, to the knowledge of the Seller, no person uses,
-------------
16
or has the right to use, such names, tradenames or service marks or any
derivation thereof in connection with the manufacture, sale, marketing or
distribution of products or services commonly associated with an automobile
dealership in the territory in which the Company operates its businesses.
3.18 Certain Liabilities.
-------------------
(a) All accounts payable by the Company to third parties as of the
date hereof arose in the ordinary course of business and none are delinquent or
past-due.
(b) Schedule 3.18 hereto sets forth a list of all indebtedness of
-------------
the Company, other than accounts payable, as of the close of business on the day
preceding the date hereof, including, without limitation, money borrowed,
indebtedness of the Company owed to stockholders and former stockholders, the
deferred purchase price of assets, letters of credit and capitalized leases,
indicating, in each case, the name or names of the lender, the date of maturity,
the rate of interest, any prepayment penalties or premiums and the unpaid
principal amount of such indebtedness as of such date.
3.19 No Undisclosed Liabilities. The Company has no material
--------------------------
liabilities or obligations of any nature, known or unknown, fixed or contingent,
matured or unmatured (including, without limitation, any of the foregoing which
may be owed to the Seller, ▇▇▇▇▇▇ or any of its or his Affiliates), other than
those (a) reflected in the Financial Statements, (b) incurred in the ordinary
course of business since the date of the Financial Statements and of the type
and kind reflected in the Financial Statements, (c) disclosed specifically on
Schedule 3.19 hereto or otherwise reasonably disclosed in this Agreement or the
-------------
other schedules hereto, or (d) executory obligations under any Material
Agreements or under any other contracts entered into in the ordinary course of
business.
3.20 Absence of Changes. Since October 31, 2001, the businesses of the
------------------
Company have been operated in the ordinary course, consistent with past
practices and, except as set forth on Schedule 3.20 hereto, there has not been
-------------
incurred, nor has there occurred, except as contemplated in Section 1.5 hereof
and except for matters generally affecting the Company's industry: (a) any
damage, destruction or loss (whether or not covered by insurance), adversely
affecting the businesses or assets of the Company in excess of $50,000; (b) any
strikes, work stoppages or other material labor disputes involving the employees
of the Company; (c) any sale, transfer, pledge or other disposition of any of
the assets of the Company having an aggregate book value of $50,000 or more
(except sales of vehicles and parts and accessories inventory in the ordinary
course of business); (d) any declaration or payment of any dividend or other
distribution in respect of its capital stock or any redemption, repurchase or
other acquisition of its capital stock other than distributions reflected in the
Closing Balance Sheet; (e) any amendment, termination, waiver or cancellation of
any Material Agreement (as defined in Section 3.29 hereof) or any termination,
amendment, waiver or cancellation of any material right or claim of the Company
under any Material Agreement (except in each case in the ordinary course of
business and consistent with past practice); (f) any (i) general uniform
increase in the compensation of the employees of the Company (including, without
limitation, any increase pursuant to any bonus, pension, profit-sharing,
deferred compensation or other plan or commitment), other than in the ordinary
course of business, (ii) increase in any such compensation payable to any
individual officer, director, consultant or agent thereof, other than
17
in the ordinary course of business, or (iii) loan or commitment therefor made by
the Company to any officer, director, stockholder, employee, consultant or agent
of the Company; (g) any change in the accounting methods, procedures or
practices followed by the Company or any change in depreciation or amortization
policies or rates theretofore adopted by the Company; (h) any material change in
policies, operations or practices of the Company with respect to business
operations followed by the Company, including, without limitation, with respect
to selling methods, returns, discounts or other terms of sale, or with respect
to the policies, operations or practices of the Company concerning the employees
of the Company; (i) any capital appropriation or expenditure or commitment
therefor on behalf of the Company in excess of $50,000 individually or $100,000
in the aggregate; (j) any write-down or write-up of the value of any inventory
or equipment of the Company or any increase in inventory levels in excess of
historical levels for comparable periods; (k) any account receivable in excess
of $50,000 or note receivable in excess of $50,000 owing to the Company which
(1) has been written off as uncollectible, in whole or in part, (2) has had
asserted against it any claim, refusal or right of setoff, or (3) the account or
note debtor has refused to, or threatened not to, pay for any reason, or such
account or note debtor has become insolvent or bankrupt; (l) any other change in
the condition (financial or otherwise), business operations, assets, earnings or
business of the Company which has, or could reasonably be expected to have, a
material adverse effect on the assets, business or operations of the Company; or
(m) any agreement, whether in writing or otherwise, for the Company to take any
of the actions enumerated in this Section 3.20.
3.21 Tax Matters.
-----------
(a) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise, payroll, withholding, employment,
estimated and other taxes of any nature, including interest, penalties and other
additions to such taxes ("Taxes"), payable by, or due from, the Company for all
-----
periods prior to the date hereof have been fully paid or adequately reserved for
by the Company or, with respect to Taxes required to be accrued, the Company has
properly accrued or will properly accrue such Taxes in the ordinary course of
business consistent with past practice of the Company. References herein to
"Tax" are references to one or more Taxes.
(b) All federal, state and local Tax returns and Tax reports
required as of the date hereof to be filed by the Company for taxable periods
ending prior to the date hereof have been duly and timely filed prior to the due
date thereof (as such due date may have been lawfully extended) by the Company
with the appropriate governmental agencies, and all such returns and reports are
true, correct and complete in all material respects.
(c) The federal and state income Tax returns of the Company have
been audited by the Internal Revenue Service ("IRS") or are closed by the
---
applicable statutes of limitations for all taxable years through the date set
forth on Schedule 3.21. Except as set forth on Schedule 3.21 hereto, the Company
------------- -------------
has not received any written notice of any assessed or proposed claim or
deficiency against it in respect of, or of any present dispute between it and
any governmental agency concerning, any Taxes. Except as set forth on Schedule
--------
3.21 hereto, no examination or audit of any Tax return or report of the Company
----
by any applicable Taxing authority is currently in progress and there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax return or report of the Company. Copies of all federal,
state and local Tax returns and reports required to be filed by the Company for
the
18
years ended 2000, 1999 and 1998, together with all schedules and attachments
thereto, have been delivered by the Seller to the Buyer.
(d) The Company is not now, nor has it ever been, a member of a
consolidated group for federal income Tax purposes or a consolidated, combined
or similar group for state Tax purposes. No consent under Code Section 341 has
been made affecting the Company. The Company is not a party to any agreement or
arrangement that would result in the payment of any "excess parachute payments"
under Code Section 280G. The Company is not required to make any adjustment
under Code Section 481(a). No power of attorney relating to Taxes is currently
in effect affecting the Company.
3.22 Compliance with Laws, Etc. The Company has conducted its
-------------------------
respective operations and businesses in material compliance with, and all of the
Assets (including all of the Real Property and Leased Equipment) comply in all
material respects with, (a) all applicable laws, rules, regulations and codes
(including, without limitation, any laws, rules, regulations and codes relating
to anti-competitive practices, contracts, discrimination, employee benefits,
employment, health, safety, fire, building and zoning, but excluding
Environmental Laws which are the subject of Section 3.36 hereof) and (b) all
applicable orders, rules, writs, judgments, injunctions, decrees and ordinances.
The Company has not received in the past five (5) years any written notification
of any asserted present or past failure by it to comply with such laws, rules or
regulations, or such orders, writs, judgments, injunctions, decrees or
ordinances. Set forth on Schedule 3.22 hereto are all orders, writs, judgments,
-------------
injunctions, decrees and other awards of any court or governmental agency
applicable to the Company and/or its businesses or operations. The Seller has
delivered to the Buyer copies of all reports in the Seller's possession, or
reasonably available to the Seller, if any, of the Company required to be
submitted since January 1, 1996 under the Federal Occupational Safety and Health
Act of 1970, as amended, and under all other applicable health and safety laws
and regulations. The deficiencies, if any, noted on such reports have been
corrected by the Company and any deficiencies noted by inspection through the
Closing Date will have been corrected by the Company by the Closing Date.
3.23 Litigation Regarding the Company. Except as set forth on Schedule
-------------------------------- --------
3.23 hereto, there are no actions, suits, claims, investigations or legal,
----
administrative or arbitration proceedings pending, or, to the Seller's
knowledge, threatened against the Company or relating to any of its assets,
businesses or operations or the transactions contemplated by this Agreement, and
the Seller does not know of any reasonable basis for the institution of any such
suit or proceeding. Except as set forth on Schedule 3.23, to the knowledge of
-------------
the Seller, all actions, suits or proceedings pending or, to the knowledge of
the Seller, threatened against or affecting the Company are covered in full by
insurance, without any reservations of rights, subject only to the payment of
applicable deductibles. No order, writ, judgment, injunction, decree or similar
command of any court or any governmental or administrative agency or other body
has been entered against or served upon the Company relating to the Company or
any of its assets, business or operations.
3.24 Permits, Etc. Set forth on Schedule 3.24 hereto is a list of all
------------ -------------
material governmental licenses, permits, approvals, certificates of inspection
and other authorizations, filings and registrations that are necessary for the
Company to own and operate its businesses as presently conducted (collectively,
the "Permits"). All such Permits have been duly and lawfully secured or made by
-------
the Company and are in full force and effect. There is no proceeding
19
pending, or, to the Seller's knowledge, threatened or probable of assertion, to
revoke or limit any such Permit. Except as set forth on Schedule 3.24 hereto,
-------------
none of the transactions contemplated by this Agreement will terminate, violate
or limit the effectiveness of any such Permit.
3.25 Employees; Labor Relations. As of the date hereof, the Company
--------------------------
employs the total number of employees set forth on Schedule 3.25. As of the date
-------------
hereof: (a) the Company is not delinquent in the payment (i) to or on behalf of
its past or present employees of any wages, salaries, commissions, bonuses,
benefit plan contributions or other compensation for all periods prior to the
date hereof, or (ii) of any amount which is due and payable to any state or
state fund pursuant to any workers' compensation statute, rule or regulation or
any amount which is due and payable to any workers' compensation claimant; (b)
there are no collective bargaining agreements currently in effect between the
Company and labor unions or organizations representing any employees of the
Company; (c) no collective bargaining agreement is currently being negotiated by
the Company; (d) to the knowledge of the Seller, there are no union
organizational drives in progress and there has been no formal or informal
request to the Company for collective bargaining or for an employee election
from any union or from the National Labor Relations Board; and (e) to the
knowledge of the Seller, no dispute exists between the Company and any of its
sales representatives or, to the knowledge of the Seller, between any such sales
representatives with respect to territory, commissions, products or any other
terms of their representation. No employees of the Company will be entitled to
any severance or other payment in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
3.26 Compensation. Schedule 3.26 contains a schedule of all employees
------------ -------------
(including sales representatives) and consultants of the Company (a) whose
individual cash compensation for the year ended December 31, 2000 is in excess
of $100,000, or (b) whose individual cash compensation is expected to exceed
$100,000 in the current calendar year, together with the amount of total
compensation paid to each such person for the twelve month period ended December
31, 2000 and the current aggregate base salary or hourly rate (including any
bonus or commission) for each such person.
3.27 Employee Benefits.
-----------------
(a) The Seller has listed on Schedule 3.27 and has delivered to
-------------
the Buyer true and complete copies of all Employee Plans (as defined below)
established, maintained or contributed to by or on behalf of the Company (which
shall include for this purpose and for the purpose of all of the representations
in this Section 3.27, all employers, whether or not incorporated, that are
treated together with the Company as a single employer within the meaning of
Section 414 of the Code). The term "Employee Plan" shall include all plans
-------------
described in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and also shall include, without limitation, any
-----
deferred compensation, stock, employee or retiree pension benefit, welfare
benefit or other similar fringe or employee benefit plan, program, policy,
contract or arrangement, written or oral, qualified or nonqualified, funded or
unfunded, foreign or domestic, covering employees or former employees of the
Company and maintained or contributed to by the Company.
(b) Where applicable, each Employee Plan (i) has been administered
in material compliance with the terms of such Employee Plan and the requirements
of ERISA, the
20
Code and all other applicable laws; and (ii) is in material compliance with the
reporting and disclosure requirements of ERISA and the Code. The Company neither
maintains nor contributes to, and has never maintained or contributed to, an
Employee Plan subject to Title IV of ERISA or a "multiemployer plan." There are
no facts relating to any Employee Plan that (i) have resulted in a "prohibited
transaction" of a material nature or have resulted or are reasonably likely to
result in the imposition of a material excise tax, penalty or liability pursuant
to Section 4975 of the Code, (ii) have resulted in a material breach of
fiduciary duty or violation of Part 4 of Title I of ERISA, or (iii) have
resulted or are reasonably likely to result in any material liability (whether
or not asserted as of the date hereof) of the Company or any ERISA affiliate
pursuant to Section 412 of the Code arising under or related to any event, act
or omission occurring on or prior to the date hereof. Each Employee Plan that is
intended to qualify under Section 401(a) or to be exempt under Section 501(c) of
the Code is so qualified or exempt as of the date hereof in each case as such
Employee Plan has received favorable determination letters from the Internal
Revenue Service with respect thereto. To the knowledge of the Seller, the
amendments to and operation of any Employee Plan subsequent to the issuance of
such determination letters do not adversely affect the qualified status of any
such Employee Plan. No Employee Plan has an "accumulated funding deficiency" as
of the date hereof, whether or not waived, and no waiver has been applied for.
The Company has not made any promises or incurred any liability under any
Employee Plan or otherwise to provide health or other welfare benefits to
current or future retirees or other former employees of the Company, except as
specifically required by law. Neither the Company nor the Seller has received
any written claims and, to the knowledge of the Seller, there are no threatened
claims (other than routine claims for benefit) or lawsuits with respect to the
Company's Employee Plans. Schedule 3.27 hereto sets forth a list of the
Company's employees or former employees who are currently receiving COBRA
continuation coverage. As used in this Section 3.27, all technical terms
------------
enclosed in quotation marks shall have the meaning set forth in ERISA or the
Code, as the case may be. No termination, "back-end" load or other similar fee
or expense is payable in connection with the termination and winding up of any
of the Employee Plans in accordance with Section 5.15 below.
3.28 Powers of Attorney. There are no persons, firms, associations,
------------------
corporations or business organizations or entities holding general or special
powers of attorney from the Company.
3.29 Material Agreements.
-------------------
(a) Set forth on Schedule 3.29(a) hereto is a list or, where
----------------
indicated, a brief description of all leases and all other contracts,
agreements, documents, instruments, guarantees, plans, understandings or
arrangements, written or oral, which, in all cases, are material to the Company
or its businesses or assets (collectively, the "Material Agreements"). For
-------------------
purposes of this Agreement, a "material" contract, lease or other obligation
contemplated by this Section 3.29(a) shall be any contract, lease or other
obligation of the Company which either (a) gives rise to an ordinary course
payment obligation of $5,000 per month or more or (b) is not terminable upon
notice of thirty (30) days or less without penalty. True copies of all written
Material Agreements and written summaries of all oral Material Agreements
described or required to be described on Schedule 3.29(a) have been furnished to
----------------
the Buyer.
(b) The Company has in all material respects performed all of its
obligations required to be performed by it to the date hereof, and is not in
default or alleged to be in default
21
in any material respect, under any Material Agreement, and there exists no
event, condition or occurrence which, after notice or lapse of time or both,
would constitute such a default. To the knowledge of the Seller, no other party
to any Material Agreement is in default in any material respect of any of its
obligations thereunder. Each of the Material Agreements is valid and in full
force and effect and enforceable against the Company, and, to the knowledge of
the Seller, the other parties thereto in accordance with their respective terms,
and, except as set forth in Schedule 3.29(b) hereto, the consummation of the
----------------
transactions contemplated by this Agreement will not (i) require the consent of
any party thereto or (ii) constitute an event permitting termination thereof.
3.30 Brokers' or Finders' Fees, Etc. No agent, broker, investment
------------------------------
banker, person or firm acting on behalf of the Company, the Seller, or ▇▇▇▇▇▇ or
any person, firm or corporation affiliated with ▇▇▇▇▇▇ or under his authority is
or will be entitled to any brokers' or finders' fee or any other commission or
similar fee directly or indirectly from any of the parties hereto in connection
with the sale of the Shares contemplated hereby, other than any such fee or
commission the entire cost of which will be borne by the Seller.
3.31 Bank Accounts, Credit Cards, Safe Deposit Boxes and Cellular
------------------------------------------------------------
Telephones. Schedule 3.31 hereto lists all bank accounts, credit cards and safe
---------- -------------
deposit boxes in the name of, or controlled by, the Company, and all cellular
telephones provided and/or paid for by the Company, and details about the
persons having access to or authority over such accounts, credit cards, safe
deposit boxes and cellular telephones.
3.32 Insurance.
---------
(a) Schedule 3.32(a) hereto contains a list of all policies of
----------------
liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and any other insurance and bonds maintained by, or on
behalf of, the Company on its properties, operations, inventories, assets,
business or personnel (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims in excess of $5,000 thereunder).
The Company is not in material default with respect to any provision contained
in any such insurance policy or has failed to give any notice or present any
material claim under any such insurance policy in a due and timely fashion. No
notice of cancellation or termination has been received with respect to any such
policy. The Company has not, during the last three (3) fiscal years, been denied
or had revoked or rescinded any policy of insurance.
(b) Set forth on Schedule 3.32(b) hereto is a summary of
----------------
information pertaining to material property damage and personal injury claims in
excess of $5,000 against the Company during the past five (5) years, all of
which are fully satisfied or are being defended by the insurance carrier.
3.33 Warranties. Set forth on Schedule 3.33 hereto are descriptions or
---------- -------------
copies of the forms of all express warranties and disclaimers of warranty made
by the Company (separate and distinct from any applicable manufacturers',
suppliers' or other third-parties' warranties or disclaimers of warranties)
during the past two (2) years to customers or users of the vehicles, parts,
products or services of the Company. There have been no breach of warranty or
breach of representation claims against the Company during the past five (5)
years which have resulted in
22
any cost, expenditure or exposure to the Company of more than $50,000
individually or in the aggregate (on annual basis).
3.34 Directors and Officers. Set forth on Schedule 3.34 hereto is a
---------------------- -------------
true and correct list of the names and titles of each director and officer of
the Company.
3.35 Suppliers and Customers. The Company is not required to provide
-----------------------
bonding or any other security arrangements in connection with any transactions
with any of its customers and suppliers.
3.36 Environmental Matters.
---------------------
(a) For purposes of this Section 3.36, the following terms shall
have the following meaning: (i) "Environmental Law" means all applicable
-----------------
federal, state and local laws, statutes, regulations, rules, ordinances and
common law, and all judgments, decrees, orders, agreements, or permits, issued,
promulgated, approved or entered thereunder by any government authority relating
to pollution, Hazardous Materials, worker safety or protection of human health
or the environment; (ii) "Hazardous Materials" means any waste, pollutant,
-------------------
chemical, hazardous material, hazardous substance, toxic substance, hazardous
waste, special waste, solid waste, asbestos, radioactive materials,
polychlorinated biphenyls, petroleum or petroleum-derived substance or waste
(regardless of specific gravity), or any constituent or decomposition product of
any such pollutant, material, substance or waste, regulated under or as defined
by any Environmental Law.
(b) The Company has obtained all permits, licenses and other
authorizations or approvals required under Environmental Laws for the lawful
conduct and operation of the Assets and the businesses of the Company in all
material respects ("Environmental Permits"). All such Environmental Permits are
---------------------
in good standing, the Company is and has been in compliance in all material
respects with the terms and conditions of all such Environmental Permits
applicable to it, and, to the knowledge of the Seller, no appeal or any other
action is pending or threatened to revoke any such Environmental Permit.
(c) The Company and its businesses, operations and assets are and
have been in compliance in all material respects with all Environmental Laws.
(d) Neither the Company, the Seller nor ▇▇▇▇▇▇ has received in the
past five (5) years any written (or oral in the case of ▇▇▇▇▇▇) order, notice,
complaint, request for information, claim, demand or other communication from
any government authority or other person, whether based in contract, tort,
implied or express warranty, strict liability, or any other common law theory,
or any criminal or civil statute, arising from or with respect to (i) the
presence, release or threatened release of any Hazardous Material on, in or
under the Real Property or any other property formerly owned, used or leased by
the Company, (ii) any other circumstances forming the basis of any actual or
alleged violation by the Company, the Seller or ▇▇▇▇▇▇ of any Environmental Law
or any liability of the Company, the Seller or ▇▇▇▇▇▇ under any Environmental
Law, (iii) any remedial or removal action required to be taken by the Company,
the Seller or ▇▇▇▇▇▇ under any Environmental Law, or (iv) any harm, injury or
damage to real or personal property, natural resources, the environment or any
person alleged to have resulted from the foregoing, nor does the Seller have
knowledge of any facts which might
23
reasonably give rise to such notice or communication. Except as set forth on
Schedule 3.36, none of the Company, the Seller or ▇▇▇▇▇▇ is a party to any
-------------
agreements concerning any removal or remediation of Hazardous Materials.
(e) No lawsuits, claims, civil actions, criminal actions,
administrative proceedings, investigations or enforcement or other actions are
pending or, to the knowledge of the Seller, threatened under any Environmental
Law with respect to the Company, the Seller, ▇▇▇▇▇▇ or the Real Property.
(f) No Hazardous Materials are or have been released, discharged,
spilled or disposed of or have migrated onto, the Real Property or any other
property previously owned, operated or leased by the Company in material
violation of, or so as to impose liability under, any Environmental Law, and no
environmental condition exists (including, without limitation, the presence,
release, threatened release or disposal of Hazardous Materials) related to the
Real Property, to any property previously owned, operated or leased by the
Company, or to the Company's past or present operations, which would constitute
a material violation of, or otherwise impose liability under, any Environmental
Law.
(g) To the knowledge of the Seller, none of the Company, the
Seller or ▇▇▇▇▇▇, or any of their respective predecessors in interest, has
transported or disposed of, or arranged for the transportation or disposal of,
any Hazardous Materials to any location (i) which is listed on the National
Priorities List, the CERCLIS list under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or any similar
federal, state or local list, (ii) which is the subject of any federal, state or
local enforcement action or other investigation, or (iii) about which the
Company, the Seller or ▇▇▇▇▇▇ has received or has reason to expect to receive a
potentially responsible party notice or other notice under any Environmental
Law.
(h) No environmental lien has attached or, to the knowledge of the
Seller, is threatened to be attached to the Real Property.
(i) No employee of the Company in the course of his or her
employment with the Company has been exposed to any Hazardous Materials or other
substance, generated, produced or used by the Company which could impose
liability (whether or not a claim has been asserted) against the Company.
(j) Except as set forth on Schedule 3.36 hereto, the Real Property
-------------
does not contain any: (i) septic tanks into which process wastewater or any
Hazardous Materials have been disposed; (ii) asbestos in a form which requires
removal or remediation; (iii) polychlorinated biphenyls (PCBs) in a form which
requires removal or remediation; (iv) underground injection or monitoring ▇▇▇▇▇;
or (v) underground storage tanks.
(k) To the knowledge of the Seller, except as set forth on
Schedule 3.36, there have been no environmental studies or reports made relating
-------------
to the Real Property or, to the knowledge of the Seller, any other property or
facility previously owned, operated or leased by the Company.
24
(l) The Company has not agreed to assume, defend, undertake,
guarantee, or provide indemnification for, any liability, including, without
limitation, any obligation for corrective or remedial action, of any other
person or entity under any Environmental Law for environmental matters or
conditions.
3.37 [Intentionally Left Blank].
3.38 Manufacturer Communications. Except as set forth on Schedule 3.38,
--------------------------- -------------
the Manufacturer has not (a) notified the Company in writing, or ▇▇▇▇▇▇ in any
manner, of any deficiency in dealership operations, including, but not limited
to, the following areas: (i) brand imaging, (ii) facility conditions, (iii)
sales efficiency, (iv) customer satisfaction, (v) warranty work and
reimbursement, or (vi) sales incentives; (b) otherwise advised the Company in
writing, or ▇▇▇▇▇▇ in any manner, of a present or future need for facility
improvements or upgrades in connection with the Company's business; or (c)
notified the Company in writing, or ▇▇▇▇▇▇ in any manner, of the awarding or
possible awarding of its franchise to an entity or entities other than the
Company in the Metropolitan Statistical Area in which the Company operates.
3.39 Misstatements and Omissions. To the knowledge of the Seller, no
---------------------------
representation and warranty by the Seller contained in this Agreement, and no
statement contained in any certificate or Schedule furnished or to be furnished
by the Seller to the Buyer in connection with this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make such representation and warranty or
such statement not misleading.
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer hereby represents and warrants to the Seller as follows:
4.1 Organization and Good Standing. The Buyer is a corporation duly
------------------------------
organized and validly existing and in good standing under the laws of the State
of Delaware.
4.2 Buyer's Power and Authority; Consents and Approvals.
---------------------------------------------------
(a) The Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and the other agreements, documents and
instruments to be executed and delivered by the Buyer in connection herewith, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder.
(b) Except as set forth in Schedule 4.2(b) hereto, no
---------------
authorization, approval or consent of, or notice to or filing or registration
with, any governmental agency or body, or any other third party, is required in
connection with the execution and delivery by the Buyer of this Agreement and
the other agreements, documents and instruments to be executed by the Buyer in
connection herewith, the consummation by the Buyer of the transactions
contemplated hereby or thereby or the performance by the Buyer of its
obligations hereunder and thereunder.
25
4.3 Execution and Enforceability. This Agreement has been executed and
----------------------------
delivered by the Buyer and this Agreement constitutes, and the other agreements,
documents and instruments to be executed and delivered by the Buyer in
connection herewith, when executed and delivered by the Buyer, shall constitute
the legal, valid and binding obligations of the Buyer, enforceable against the
Buyer in accordance with their respective terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditor's rights generally and general equity
principles.
4.4 Litigation Regarding Buyer. There are no actions, suits, claims,
--------------------------
investigations or legal, administrative or arbitration proceedings pending or,
to the Buyer's knowledge, threatened or against the Buyer relating to this
Agreement or the transactions contemplated hereby before any court, governmental
or administrative agency or other body, and no judgment, order, writ,
injunction, decree or other similar command of any court or governmental or
administrative agency or other body has been entered against or served upon the
Buyer relating to this Agreement or the transactions contemplated hereby.
4.5 No Violation; Conflicts. The execution and delivery by the Buyer
-----------------------
of this Agreement and the other agreements, documents and instruments to be
executed and delivered by the Buyer in connection herewith, the consummation by
the Buyer of the transactions contemplated hereby and thereby and the
performance by the Buyer of its obligations hereunder and thereunder do not and
will not (a) conflict with or violate any of the terms of the Certificate of
Incorporation or By-Laws of the Buyer, (b) violate or conflict with any domestic
law, ordinance, rule or regulation, or any judgment, order, writ, injunction or
decree of any court, administrative or governmental agency or other body,
material to the Buyer or (c) violate any material agreement to which the Buyer
is a party or by which the Buyer is bound.
4.6 Brokers' or Finders' Fees, Etc. No agent, broker, investment
------------------------------
banker, person or firm acting on behalf of the Buyer or any person, firm or
corporation affiliated with the Buyer or under its authority is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with the
sale of the Shares contemplated hereby.
4.7 Investment/Operational Interest.
-------------------------------
(a) The Buyer has sufficient knowledge and experience in financial
and business matters to enable it to evaluate the merits and risks of the
transactions contemplated by this Agreement.
(b) The Buyer is acquiring the Shares for its own account, for
investment or operational purposes, and not with a view to resale or for
distribution of all or any portion of the Shares.
4.8 Misstatements and Omissions. To the knowledge of the Buyer, no
---------------------------
representation and warranty by the Buyer contained in this Agreement, and no
statement contained in any certificate or Schedule furnished or to be furnished
by the Buyer to the Seller in connection with this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make such representation and warranty or
such statement not misleading.
26
ARTICLE 5
---------
PRE-CLOSING COVENANTS OF THE SELLER
-----------------------------------
The Seller hereby covenants and agrees that, from and after the date
hereof until the Closing:
5.1 Provide Access to Information; Cooperation with Buyer.
-----------------------------------------------------
(a) As promptly as possible after the date hereof, but in no event
later than thirty (30) days after the date of this Agreement, the Seller shall
deliver to the Buyer all of the due diligence materials described on Schedule
--------
5.1 hereto. The Seller shall afford, and cause the Company to afford, to the
---
Buyer, its attorneys, accountants, and representatives, free and full access at
all reasonable times, and upon reasonable prior notice, to the properties, books
and records of the Company, and to interview personnel, suppliers and customers
of the Company, in order that the Buyer may have a full opportunity to make such
investigation (including the persons performing the Inspections contemplated by
the Owned Real Property Rider) as it shall reasonably desire of the assets,
businesses and operations of the Company (including, without limitation, any
appraisals or inspections thereof), and provide to the Buyer and its attorneys,
accountants and representatives, such additional financial and operating data
and other information as to the businesses and properties of the Company as the
Buyer shall from time to time reasonably request. The Seller's contact person(s)
for purposes of arranging such access and requesting such additional information
is ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. All initial due diligence contacts shall be approved by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
(b) The Seller shall promptly notify the Manufacturer of the
execution and delivery of this Agreement, and thereafter shall use reasonable
best efforts in cooperating with the Buyer in the preparation of and delivery to
the Manufacturer, as soon as practicable after the date hereof, of applications
and any other information necessary to obtain the Manufacturer's consent to or
the approval of the transactions contemplated by this Agreement. At the request
of the Buyer, the Seller shall use its reasonable best efforts to assist the
Buyer in effecting any one-time parts return offered by the Manufacturer, and
will promptly pay over to the Buyer any monies received from the Manufacturer
related thereto. The Seller's contact person for purposes of requests by the
Buyer for such assistance is ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
(c) Within twenty (20) days after the date hereof, the Seller will
obtain from a nationally recognized provider and provide to the Buyer, at the
Seller's expense, a Uniform Commercial Code ("UCC") search report, judgment lien
---
reports and federal, state and local tax lien reports, with respect to the
Company from all jurisdictions in which the Company and its assets are located.
The Seller will obtain and provide to the Buyer separate UCC reports with
respect to the Company's corporate name and all other names it has used in the
last five (5) years. If the Seller does not timely provide such reports to the
Buyer, the Buyer may obtain such reports, and the Seller shall reimburse the
Buyer for all expenses incurred by the Buyer in connection therewith.
27
5.2 Operation of Businesses of the Company. Except as otherwise
--------------------------------------
provided in this Agreement, the Seller shall cause the Company to (a) maintain
its corporate existence in good standing, (b) operate its businesses
substantially as presently operated and only in the ordinary course and
consistent with past operations and its obligations under any existing
agreements with all applicable automobile manufacturers or distributors, (c) use
its reasonable best efforts to preserve intact its present business
organizations and employees and its relationships with persons having business
dealings with them, including, but not limited to, all applicable automobile
manufacturers or distributors and any floor plan financing creditors, (d) comply
in all material respects with all applicable laws, rules and regulations, (e)
maintain its insurance policies or, if any insurance policy terminates, obtain a
replacement insurance policy with substantially similar coverages, (f) pay all
Taxes, charges and assessments when due, subject to any valid objection or
contest of such amounts asserted in good faith and adequately reserved against,
(g) make all debt service payments when contractually due and payable, (h) pay
all accounts payable and other current liabilities when due, (i) maintain the
Employee Plans and each plan, agreement and arrangement listed on Schedule 3.27,
-------------
and (j) maintain its property, plant and equipment in good operating condition
in accordance with past practices. Notwithstanding the foregoing, the Company
may pay any or all amounts due from the Company to the Seller or any Affiliate
thereof prior to the Closing and such payments shall be reflected in the Closing
Balance Sheet.
5.3 Books of Account. The Seller shall cause the Company to
-----------------
maintain its books and records of account in the usual, regular and ordinary
manner.
5.4 Employees. The Seller shall (a) use its reasonable best efforts
---------
(which shall not require the payment of money outside of the ordinary course) to
encourage such personnel of the Company as the Buyer may designate in writing to
remain employees of the Company after the date of the Closing, and (b) not take
any action, or permit the Company to take any action, to encourage any of the
personnel of the Company to leave their positions with the Company.
5.5 Certain Prohibitions. The Seller shall not permit the Company to
--------------------
(a) issue any equity or debt security or any options or warrants, (b) enter into
any subscriptions, agreements, plans or other commitments pursuant to which the
Company is or may become obligated to issue any of its debt or equity
securities, (c) otherwise change or modify its capital structure, (d) engage in
any reorganization or similar transaction or sell or otherwise dispose of any of
its assets, other than sales of inventory in the ordinary course of business,
(e) declare or make payment of any dividend or other distribution in respect of
its capital stock or redeem, repurchase or otherwise acquire any of its capital
stock unless such dividend, redemption, repurchase or acquisition is reflected
in the Closing Balance Sheet, or (f) agree to take any of the foregoing actions.
5.6 Other Changes. The Seller shall not take, nor shall they permit
-------------
the Company to take, cause, agree to take or cause to occur any of the actions
or events set forth in Sections 3.20(c)-(j) and (m) of this Agreement.
5.7 Additional Information. The Seller shall furnish and cause the
----------------------
Company to furnish to the Buyer such additional information with respect to any
matters or events arising or discovered subsequent to the date hereof which, if
existing or known on the date hereof, would have rendered any representation or
warranty made by the Seller or any information contained in
28
any Schedule hereto or in other information supplied in connection herewith then
inaccurate or incomplete. The receipt of such additional information by the
Buyer shall not operate as a waiver by the Buyer of the obligations of the
Seller to satisfy the conditions to Closing set forth in Section 7.1 hereof.
5.8 Publicity. Except as may be required by law or the rules of the
---------
New York Stock Exchange, or as necessary in connection with the transaction
contemplated hereby, the Seller shall not (a) make or permit the Company to make
any press release or other public announcement relating to this Agreement or the
transactions contemplated hereby, without the prior written approval of the
Buyer, and (b) otherwise disclose the existence and nature of its discussions or
negotiations regarding the transactions contemplated hereby to any person or
entity other than its accountants, attorneys and similar professionals, all of
whom shall be subject to this nondisclosure obligation as agents of the Seller.
The Seller shall cooperate with the Buyer in the preparation and dissemination
of any public announcements of the transactions contemplated by this Agreement.
5.9 Other Negotiations. The Seller shall not pursue, initiate,
------------------
encourage or engage in, nor shall any of its respective Affiliates or agents
pursue, initiate, encourage or engage in, and the Seller shall cause the Company
and its Affiliates, directors, officers and agents not to pursue, initiate,
encourage or engage in, any negotiations or discussions with, or provide any
information to, any other person or entity (other than the Buyer and its
representatives and Affiliates) regarding the sale of the assets or capital
stock of the Company or any merger or similar transaction involving the Company.
5.10 Closing Conditions. The Seller shall use all reasonable best
------------------
efforts to satisfy promptly the conditions to Closing set forth in Article 7
hereof required herein to be satisfied by the Seller prior to the Closing;
provided that the Seller shall not be required to pay any amount (outside of the
ordinary course) in order to obtain any consent or approval hereunder.
5.11 Environmental Audit; Inspections. The Seller shall cause the
--------------------------------
Company to allow an environmental consulting firm selected by the Buyer (the
"Environmental Auditor") to have prompt access to the Real Property in order to
---------------------
conduct an environmental investigation of the Owned Real Property, as
contemplated by the Owned Real Property Rider, and the Leased Premises, as
contemplated by Section 9.6 below, and otherwise satisfactory to the Buyer in
scope (such scope being sufficient to result in a Phase I environmental audit
report and a Phase II environmental audit report, if desired by the Buyer), of,
and to prepare a report with respect to, the Real Property (the "Environmental
-------------
Audit"). The Seller shall cause the Company to provide to the Environmental
-----
Auditor: (a) reasonable access to all its existing records concerning the
matters which are the subject of the Environmental Audit; and (b) reasonable
access to the employees of the Company and the last known addresses of former
employees of the Company who are most familiar with the matters which are the
subject of the Environmental Audit (the Seller agreeing to use reasonable
efforts to have such former employees respond to any reasonable requests or
inquiries by the Environmental Auditor). The Environmental Auditor shall
coordinate visits to the Real Property and conversations with employees of the
Company with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, who shall reasonably cooperate with the Buyer in
such regard, and shall use reasonable efforts to minimize disruption of the
Company's business performing such investigations and to restore the Real
Property to its prior condition. The Seller shall otherwise cooperate and cause
the Company to cooperate with the Environmental Auditor in connection
29
with the Environmental Audit. The Buyer shall bear 100% of the costs, fees and
expenses incurred in connection with the Environmental Audit. The Seller shall
cause the Company to reasonably cooperate with the persons performing the
Inspections contemplated by the Owned Real Property Rider.
5.12 Audited Financial Statements. The Seller shall allow, cooperate
----------------------------
with and assist the Buyer's accountants, and shall instruct the Company's
accountants to cooperate, in the preparation of audited financial statements of
the Company as necessary for any required filings by the Buyer with the
Securities and Exchange Commission (the "SEC") or with the Buyer's lenders;
---
provided that the expense of such audit shall be borne by the Buyer.
5.13 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Subject to the determination by the Buyer and
-----------------
the Seller that any of the following actions is not required, the Seller shall
promptly prepare and file Notification and Report Forms under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act")
-------
with the Federal Trade Commission (the "FTC") and the Antitrust Division of the
---
Department of Justice (the "Antitrust Division"), and respond as promptly as
------------------
practicable to all inquiries received from the FTC or the Antitrust Division for
additional information or documentation
5.14 Curing Breaches of Representations and Warranties. Upon written
-------------------------------------------------
notice by the Buyer of the discovery by the Buyer prior to the Closing of a
breach of any representation and warranty of the Seller contained in this
Agreement, the Seller will, if requested in writing by the Buyer, at its
expense, undertake reasonable efforts to cure such breach prior to the Closing.
If the Buyer shall have requested the Seller to cure any such breach pursuant to
this Section 5.14 and the Seller shall have cured such breach prior to the
Closing, the Buyer shall not be entitled to claim such breach as a failure of
the Buyer's condition to close under Section 7.1 below.
5.15 Concerning Employee Plans.
-------------------------
(a) The Seller and the Company will permit the Buyer and its
agents to perform due diligence with respect to the Employee Plans, including
without limitation by providing the Buyer with (i) access to all benefit plan
administrators, record keepers, custodians, agents and advisers, (ii) evidence
of the Company's 401(k) plan's tax-qualified status and timely Form 5500
filings, (iii) such documentation that the Company may have or may reasonably
obtain that will allow the Buyer to determine the amount, if any, of fees, loads
or other charges that will be triggered by the ceasing of new contributions to
the current Company's 401(k) plan or otherwise by virtue of the transactions
contemplated hereby and (iv) such other documentation as the Buyer shall request
with respect to the Company's 401(k) plan.
(b) Effective as of the Closing, the Seller shall remove the
Company as a plan sponsor of and/or participating employer in any Employee Plan
that includes a cash or deferred arrangement under Section 401(k) of the Code
(the "401(k) Plan") and, if applicable, shall provide for the sponsorship of any
-----------
such plan to be assumed by another entity owned or controlled by the Seller. In
addition, the Seller shall cause the 401(k) Plan to be amended as of the Closing
Date to (i) bring the 401(k) Plan into compliance with current applicable law,
(ii) provide that the employees of the Company who are participants in the
401(k) Plan shall be deemed to incur a "severance from employment" for purposes
of Section 401(k)(2) of the Code in connection with the consummation of the
transactions contemplated by this Agreement, (iii)
30
fully vest all accounts of all such participants in the 401(k) Plan, and (iv)
provide for the distribution of all such accounts. In addition, subject to
acceptance by the Buyer's 401(k) plan, the Seller shall cause the 401(k) Plan to
allow employees of the Company who are participants therein to roll over
outstanding participant loans to the Buyer's 401(k) plan and the Seller's 401(k)
Plan shall not treat such outstanding loans as in default. The Seller shall also
cause the Company to initiate the termination of all Employee Plans as of the
Closing Date and shall provide the Buyer at Closing with documentation
satisfactory to the Buyer to such effect; provided, however, that the Buyer
shall have the option, in its sole discretion and exercised by the delivery to
the Seller of a written request, to require the Seller to cause the Company to
transfer any or all of the Company's plans or related insurance policies to the
Buyer (or other related entity which will continue the Company's business).
Notwithstanding the foregoing, if the Company participates in any other Employee
Plans in which other entities owned or controlled by the Seller will continue to
participate after the Closing (hereinafter called "Other Plans"), the Seller
-----------
shall cause the Company to terminate its participation in any or all of such
Other Plans as of the Closing Date. At the Closing, the Seller shall deliver to
the Buyer resolutions of the Board of Directors of the Company and other
applicable entities and related plan amendments reflecting the foregoing 401(k)
Plan amendments, plan terminations and termination of the Company's sponsorship
of and participation in the 401(k) Plan and Other Plans. The Seller shall
deliver drafts of the foregoing documents to the Buyer at least fifteen (15)
days prior to the Closing. The Seller shall reimburse the Buyer for all fees and
expenses (including but not limited to attorneys' fees) paid or incurred by the
Company or the Buyer in connection with the foregoing amendments and/or
terminations of Employee Plans, except to the extent provided by this Agreement
or included in the Closing Balance Sheet. The Seller shall retain all liability
and responsibility for the 401(k) Plan and Other Plans.
5.16 Schedules.
---------
(a) The Schedules attached or to be attached to this Agreement
pursuant to Article III hereof are deemed to constitute an integral part of this
Agreement and to supplement the representations, warranties, covenants or
agreements of the Seller contained in this Agreement. The inclusion of any item
of any such Schedule shall not be construed as an indication of the materiality
or lack of materiality of such item. Each item disclosed in such Schedules shall
be deemed to be disclosed for all sections of this Agreement to which such
disclosure could reasonably be construed to apply.
(b) Prior to the Closing, the Seller may amend any Schedule
attached to this Agreement pursuant to Article III hereof from time to time by
written notice to the Buyer, in order to provide supplemental and updating
information; provided, however, no such amendment shall be effective if such
amendment, either alone or in combination with any prior or contemporaneous
amendments to any of the Schedules, discloses a Material Adverse Item not
previously disclosed in the Schedules. For purposes of this Section 5.16(b) (and
not to be construed as a definition of materiality for any other purpose in this
Agreement) a "Material Adverse Item" shall mean (i) any event, occurrence or
---------------------
state of facts which does, or could reasonably be expected to, (A) prohibit or
prevent or substantially restrain or delay the sale contemplated by this
Agreement, (B) substantially impair or challenge the power and authority of the
Seller to enter into this Agreement or carry out its obligations hereunder, or
(C) substantially impair or challenge the legality or validity of the sale
contemplated by this Agreement, or (ii) any single item or group of related
items outside the ordinary course of
31
business (including, without limitation, contracts or leases) which adversely
affects, or could reasonably be expected to adversely affect, the Assets, the
Shares, the Real Property or the Company (including, without limitation, its
financial condition or results or operations) by [***] or more.
ARTICLE 6
---------
PRE-CLOSING COVENANTS OF BUYER
------------------------------
The Buyer hereby covenants and agrees that, from and after the date
hereof until the Closing:
6.1 Publicity. Except as may be required by law or by the rules of the
---------
New York Stock Exchange, or as necessary in connection with the transactions
contemplated hereby, the Buyer shall not (a) make any press release or other
public announcement relating to this Agreement or the transactions contemplated
hereby, without the prior written approval of the Seller, or (b) otherwise
disclose the existence and nature of its discussions or negotiations regarding
the transactions contemplated hereby to any person or entity other than its
accountants, attorneys and similar professionals, all of whom shall be subject
to this nondisclosure obligation as agents of the Buyer. The Buyer shall
cooperate with the Seller in the preparation and dissemination of any public
announcement of the transactions contemplated by this Agreement.
6.2 Closing Conditions. The Buyer shall use all reasonable best
-------------------
efforts to satisfy promptly the conditions to Closing set forth in Article 8
hereof required herein to be satisfied by the Buyer prior to the Closing.
6.3 Application to Manufacturer. With the reasonable cooperation of
---------------------------
the Seller, the Buyer shall provide to the Manufacturer as promptly as
practicable after the execution and delivery of this Agreement any application
or other information with respect to such application necessary in connection
with the seeking of the consents of the Manufacturer to the transactions
contemplated by this Agreement and the issuance of a franchise to operate an
automobile dealership on the Real Property or at such other location as the
Buyer shall determine in its sole discretion. For purposes of the Buyer's
application to the Manufacturer, as contemplated herein, the address of the
Manufacturer and the relevant contact persons at the Manufacturer is set forth
on Schedule 6.3 hereto.
------------
6.4 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Subject to the determination by the Buyer that
-----------------
any of the following actions is not required, the Buyer shall promptly prepare
and file Notification and Report Forms under the HSR Act with the FTC and the
Antitrust Division, and subject to Section 10.1(d) hereof, respond as promptly
as practicable to all inquiries received from the FTC or the Antitrust Division
for additional information or documentation, and the Buyer shall pay all filing
fees in connection therewith.
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
32
ARTICLE 7
---------
CONDITIONS TO OBLIGATIONS OF THE BUYER AT THE CLOSING
-----------------------------------------------------
The obligations of the Buyer to perform this Agreement at the Closing
are subject to the satisfaction at or prior to the Closing of the following
conditions, unless waived in writing by the Buyer:
7.1 Representations and Warranties. The representations and warranties
------------------------------
made by the Seller in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing as
though made at and as of the Closing.
7.2 Performance of Obligations of the Seller. The Seller shall have
----------------------------------------
delivered the stock certificates and stock powers for the Shares, as described
in Section 1.3 hereof, and shall have performed in all material respects all
other obligations required to be performed by the Seller under this Agreement,
and complied in all material respects with all covenants for which compliance by
the Seller is required under this Agreement, prior to or at the Closing
7.3 Closing Documentation. The Buyer shall have received the following
---------------------
documents, agreements and instruments from the Seller:
(a) a certificate signed by the Seller and dated the date of the
Closing certifying as to the satisfaction of the conditions set forth in
Sections 7.1 and 7.2 hereof;
(b) such duly signed resignations of the directors and officers of
the Company as the Buyer shall have previously requested;
(c) wire transfer instructions from the Seller, with respect to the
payment at the Closing of the Purchase Price;
(d) an opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., and such Michigan counsel
reasonably acceptable to the Buyer, dated the date of the Closing and addressed
to the Buyer, in substantially the form of Exhibit D hereto;
---------
(e) copies of all authorizations, approvals, consents, notices,
registrations and filings referred to in Schedules 3.2(b), 3.10 and 3.29(b)
---------------- ---- -------
hereof, specifically including any consents required under the Leases, other
than from the Manufacturer;
(f) with respect to the Company, certificates dated as of a recent
date from (i) the Secretary of State of the State of incorporation of the
Company to the effect that the Company is duly incorporated and in good standing
in such state and, if available, stating that the Company owes no franchise
taxes in such state and listing all documents of the Company on file with said
Secretary of State, and (ii) the Secretary of State of each State in which the
Company is qualified as a foreign corporation to the effect that the Company is
duly qualified and authorized to do business in such State and, if available,
stating that the Company owes no franchise taxes in such State;
33
(g) a copy of the Articles of Incorporation of the Company,
including all amendments thereto, certified as of a recent date by the Secretary
of State of the State of incorporation of the Company;
(h) evidence, reasonably satisfactory to the Buyer, of the
authority and incumbency of the persons acting on behalf of the Company in
connection with the execution of any document delivered in connection with this
Agreement;
(i) Uniform Commercial Code Search Reports on Form UCC-11 with
respect to the Company from the states and local jurisdictions where the
principal place of business of the Company and its assets are located, updating
the UCC reports referred to in Section 5.1(c);
(j) a certificate of the Seller as to the Seller's non-foreign
status in appropriate form;
(k) with respect to the Company, the corporate minute books and
stock record books of the Company, and all other books and records of, or
pertaining to, the businesses and operations of the Company;
(l) payoff letters of lenders to the Company, in form and substance
reasonably satisfactory to the Buyer, with respect to amounts owing by the
Company as of the Closing;
(m) a release from the Seller and ▇▇▇▇▇▇, in form and substance
reasonably satisfactory to the Buyer, with respect to all claims, demands,
causes of action, obligations, debts and liabilities, which the Seller or ▇▇▇▇▇▇
may have against the Company arising out of transactions or occurrences prior to
the Closing;
(n) estoppel certificates and/or subordination and non-disturbance
agreements, in form and substance reasonably acceptable to the Buyer, from the
owners, lessors and/or mortgagees of real property that is leased by the
Company;
(o) the documents required of the Seller under the Owned Real
Property Rider; and
(p) such other instruments and documents as the Buyer shall
reasonably request not inconsistent with the provisions hereof.
7.4 Approval of Legal Matters. The form of all instruments,
-------------------------
certificates and documents to be executed and delivered by the Seller to the
Buyer pursuant to this Agreement and all legal matters in respect of the
transactions as herein contemplated shall be reasonably satisfactory to the
Buyer and its counsel, none of whose approval shall be unreasonably withheld or
delayed.
7.5 No Litigation. No action, suit or proceeding shall have been
-------------
instituted by a governmental agency or any other third party to prohibit or
restrain the sale contemplated by this Agreement or otherwise challenge the
power and authority of the Buyer or the Seller to enter into
34
this Agreement or to carry out their obligations hereunder or the legality or
validity of the sale contemplated by this Agreement.
7.6 No Material Adverse Change. There shall have been no material
--------------------------
adverse change or development in the business, prospects, properties, earnings,
results of operations or financial condition of the Company, or any of its
assets; provided that the foregoing shall not apply to changes generally
occurring in the Company's industry.
7.7 No Adverse Laws. There shall not have been enacted, adopted or
---------------
promulgated any statute, rule, regulation or order which materially adversely
affects the business or assets of the Company.
7.8 Affiliate and Other Transactions. All amounts owing to the Company
--------------------------------
from the Seller or any Affiliate thereof or from the Company's officers and
employees shall have been paid in full on or prior to the Closing Date, except
for employee receivables included in the Closing Balance Sheet in accordance
with Section 1.2(c).
7.9 Escrow Agreement. The Seller and the Escrow Agent shall have
----------------
duly executed and delivered to the Buyer the Escrow Agreement.
7.10 Manufacturer Approval. The Manufacturer shall have given any
---------------------
required approval of the transfer of the Shares to the Buyer and shall have
given any required approval of O. ▇▇▇▇▇▇ ▇▇▇▇▇ or his designee as the authorized
dealer operator of the Company's dealership franchises with the Manufacturer at
the present dealership locations, and the Manufacturer shall have executed any
required dealer agreements and/or amendments or supplements thereto in
connection with the foregoing.
7.11 Other Agreements. The closings under the Other Agreements shall
----------------
have occurred or shall be occurring simultaneously with the Closing.
7.12 Cancellation of Stock Options. All outstanding options, warrants,
-----------------------------
"phantom" stock options and other plans, agreements or arrangements of the
Company with respect to the purchase, or the issuance of, or otherwise relating
to, any capital stock or other securities of the Company shall have been
canceled and terminated prior to the Closing at no expense to the Buyer, and the
Buyer shall have received reasonably satisfactory evidence thereof.
7.13 Audited Financial Statements. The Buyer shall have completed
----------------------------
preparation of such audited financial statements of the Company as may be
required by applicable regulations of the SEC or by any of the Buyer's lenders.
7.14 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period. All applicable waiting periods
--------------------------------
under the HSR Act shall have expired without any indication by the Antitrust
Division or the FTC that either of them intends to challenge the transactions
contemplated hereby or, if any such challenge or investigation is made or
commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
35
7.15 Owned Real Property Rider. The Seller shall have performed all of
-------------------------
its obligations under the Owned Real Property Rider and the conditions to the
Buyer's obligations under the Owned Real Property Rider shall have been
satisfied or fulfilled.
ARTICLE 8
---------
CONDITIONS TO OBLIGATIONS OF THE SELLER AT THE CLOSING
------------------------------------------------------
The obligations of the Seller to perform this Agreement at the Closing
are subject to the satisfaction at or prior to the Closing of the following
conditions, unless waived in writing by the Seller:
8.1 Representations and Warranties. The representations and warranties
------------------------------
made by the Buyer in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing as
though made at and as of the Closing.
8.2 Performance of Obligations of the Buyer. The Buyer shall have paid
---------------------------------------
the Purchase Price pursuant to Section 1.2(b) hereof and shall have performed in
all material respects all other obligations required to be performed by it under
this Agreement, and complied in all material respects with all other covenants
for which compliance by it is required under this Agreement, prior to or at the
Closing
8.3 Closing Documentation. The Seller shall have received the following
---------------------
documents, agreements and instruments from the Buyer:
(a) a certificate signed by a duly authorized signatory of the
Buyer and dated as of the Closing Date certifying as to the satisfaction of the
conditions set forth in Sections 8.1 and 8.2 hereof;
(b) payment of the portion of the Purchase Price payable to the
Seller at the Closing pursuant to Section 1.2 hereof;
(c) an opinion of Parker, Poe, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ L.L.P., counsel
for the Buyer, dated as of the Closing Date and addressed to the Seller, in
substantially the form of Exhibit E hereto;
---------
(d) a certificate dated as of a recent date from the Secretary of
State of the State of Delaware to the effect that the Buyer is duly incorporated
and in good standing in such State;
(e) a copy of the Buyer's Certificate of Incorporation, including
all amendments thereto, certified by the Secretary of State of the State of
Delaware;
(f) a certificate of the Secretary or an Assistant Secretary of the
Buyer as to (i) the bylaws of the Buyer, (ii) the resolutions of the Buyer's
Board of Directors authorizing this Agreement and the transactions contemplated
hereby, and (iii) the authority and incumbency of
36
the persons acting on behalf of the Buyer in connection with the execution of
any document delivered in connection with this Agreement;
(g) the documents required of the Buyer under the Owned Real
Property Rider;
(h) a release from the Company and the Buyer, in form and
substance reasonably satisfactory to the Seller, with respect to all claims,
demands, causes of action, obligations, debts and liabilities, which the Company
or the Buyer may have against ▇▇▇▇▇▇, arising out of or based upon the acts or
omissions of ▇▇▇▇▇▇, in his capacity as an officer, director, employee or agent
of the Company; and
(i) such other instruments and documents as the Seller shall
reasonably request not inconsistent with the provisions hereof.
8.4 Approval of Legal Matters. The form of all certificates,
-------------------------
instruments and documents to be executed or delivered by the Buyer to the Seller
pursuant to this Agreement and all legal matters in respect of the transactions
as herein contemplated shall be reasonably satisfactory to the Seller and its
counsel, none of whose approval shall be unreasonably withheld or delayed.
8.5 No Litigation. No action, suit or proceeding shall have been
-------------
instituted by a governmental agency or any other third party to prohibit or
restrain the sale contemplated by this Agreement or otherwise challenge the
power and authority of the Buyer or the Seller to enter into this Agreement or
to carry out their obligations hereunder or the legality or validity of the sale
contemplated by this Agreement.
8.6 Escrow Agreement. The Buyer and the Escrow Agent shall have duly
----------------
executed and delivered the Escrow Agreement to the Seller.
8.7 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period. All applicable waiting periods
--------------------------------
under the HSR Act shall have expired without any indication of the Antitrust
Division or the FTC that either of them intends to challenge the transactions
contemplated hereby, or, if any such challenge or investigation is made or
commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
8.8 Other Agreements. The closings under the Other Agreements shall
----------------
have occurred or shall be occurring contemporaneously with the Closing.
8.9 Owned Real Property Rider. The Buyer shall have performed all of
-------------------------
its obligations under the Owned Real Property Rider and the conditions to the
Seller's obligations under the Owned Real Property Rider shall have been
satisfied or fulfilled.
8.10 Approvals and Consents. The Seller shall have all approvals,
----------------------
consents, notices, registrations and filings referred to in Schedules 3.2(b),
----------------
3.10 and 3.29(b) hereof, including any consents required under the Leases other
---- -------
than from the Manufacturer. The Seller acknowledges that it is the Seller's
obligation to use best reasonable efforts to obtain such authorizations,
consents and approvals.
37
8.11 Manufacturer Approval. The Manufacturer shall have given any
---------------------
required approval of the transfer of the Shares to the Buyer and shall have
given any required approval of O. ▇▇▇▇▇▇ ▇▇▇▇▇ or his designee as the authorized
dealer operator of the Company's dealership franchises with the Manufacturer at
the present dealership locations, and the Manufacturer shall have executed any
required dealer agreements and/or amendments or supplements thereto in
connection with the foregoing.
ARTICLE 9
---------
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC.
-----------------------------------------------------------------
9.1 Survival. All statements contained in any Schedule or certificate
--------
delivered hereunder or in connection herewith by or on behalf of any of the
parties pursuant to this Agreement shall be deemed representations and
warranties by the respective parties hereunder unless otherwise expressly
provided herein. The representations and warranties of the Seller or the Buyer
contained in this Agreement, including those contained in any Schedule or
certificate delivered hereunder or in connection herewith, shall survive the
Closing for a period of [***] years with the exception of (i) the
representations and warranties of the Seller contained in Section 3.21, which
shall survive the Closing until the expiration of the applicable tax statutes of
limitation plus a period of sixty (60) days, (ii) the representations and
warranties of the Seller contained in Sections 3.19 and 3.36, which shall
survive the Closing for a period of [***] years, and (iii) the representations
and warranties of the Seller contained in Sections 3.1(a) and 3.11(a), which
shall survive the Closing indefinitely. As to each representation and warranty
of the parties hereto, the date to which such representation and warranty shall
survive is hereinafter referred to as the "Survival Date".
-------------
9.2 Agreement to Indemnify by the Seller. Subject to the terms and
------------------------------------
conditions of Sections 9.4 and 9.5 hereof, the Seller hereby agrees to indemnify
and save the Buyer, the Company, their respective subsidiaries, officers and
directors, and the permitted successors and assigns of each of the foregoing
(each, a "Buyer Indemnitee") harmless from and against, for and in respect of,
----------------
any and all damages, losses, obligations, liabilities, demands, judgments,
injuries, penalties, claims, actions or causes of action, encumbrances, costs,
and expenses (including, without limitation, reasonable attorneys' fees and
expert witness fees), suffered, sustained, incurred or required to be paid by
any Buyer Indemnitee (collectively, "Buyer's Damages") arising out of, based
---------------
upon, in connection with, or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Seller contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in connection
herewith, excluding any breach of any representation and warranty contained in
Sections 3.1(a), 3.2(a), 3.3, 3.6, 3.11(a) and 3.19;
(b) the untruth, inaccuracy or breach of any representation and
warranty contained in Sections 3.1(a), 3.2(a), 3.3, 3.6, 3.11(a) and 3.19 above;
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
38
(c) the breach or nonfulfillment of any covenant or agreement of
the Seller contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto;
(d) the presence, at any time during the period commencing on the
Closing Date and ending on the [***] anniversary of the Closing Date, of
Hazardous Materials at, on, under or around the Real Property, in violation of,
or so as to impose liability under, any applicable Environmental Laws
(including, without limitation, the soil, groundwater, surface water, sediment
or other media) which resulted from events that occurred or conditions that
existed prior to the Closing ( Buyer's Damages relating to the facts and
circumstances set forth in this clause (d) are referred to as, the
"Environmental Liabilities");
-------------------------
(e) any and all actions, suits, claims, investigations and legal,
administrative and arbitration proceedings listed or referred to in Schedule
--------
3.23;
----
(f) any and all Taxes arising out of or based upon the Distributed
Assets or the Distributed Liabilities or the distribution thereof as
contemplated by Section 1.5;
(g) the ▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇ Agreements; or
(h) the Oldsmobile Liabilities, unless the Oldsmobile assets have
been included in the Net Book Value pursuant to Section 1.2(c)(i)(XII) above.
9.3 Agreement to Indemnify by Buyer. Subject to the terms and
-------------------------------
conditions of Sections 9.4 and 9.5 hereof, the Buyer hereby agrees to indemnify
and save the Seller and its successors and assigns (each, a "Seller Indemnitee")
-----------------
harmless from or against, for and in respect of, any and all damages, losses,
obligations, liabilities, demands, judgments, injuries, penalties, claims,
actions or causes of action, encumbrances, costs, and expenses (including,
without limitation, reasonable attorneys' fees and expert witness fees)
suffered, sustained, incurred or required to be paid by any Seller Indemnitee
(collectively, "Seller's Damages") arising out of, based upon or in connection
----------------
with or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Buyer (regardless of any knowledge thereof by the Seller at or
prior to the Closing) contained in or made pursuant to this Agreement, including
in any Schedule or certificate delivered hereunder or in connection herewith;
(b) the breach or nonfulfillment of any covenant or agreement of
the Buyer contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto.
9.4 Limitations on Indemnification.
------------------------------
(a) No claim for indemnification with respect to a breach of a
representation and warranty shall be made under this Agreement after the
applicable Survival Date unless prior to such Survival Date the Buyer Indemnitee
or the Seller Indemnitee, as the case may be, shall have given the Seller or the
Buyer, as the case may be, written notice of such claim for indemnification
based upon actual loss sustained, or potential loss anticipated, as a result of
the
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
39
existence of any claim, demand, suit, or cause of action against such Buyer
Indemnitee or Seller Indemnitee, as the case may be. No claim for
indemnification pursuant to Section 9.2(d) or Section 9.2(c) insofar as such
claim relates to a breach of Section 9.6 below shall be made by any Buyer
Indemnitee after the [***] anniversary of the Closing Date unless prior to such
date the Buyer Indemnitee shall have given the Sellers written notice of such
claim for indemnification based upon actual loss sustained, or potential loss
anticipated as a result of the existence of any claim, demand, suit, or cause of
action against such Buyer Indmenitee.
(b) The Seller shall have no indemnification liability under this
Agreement unless and until (and only to the extent that) all claims with respect
to such Buyer's Damages pursuant to this Agreement and for "Buyer's Damages"
under the ▇▇▇▇▇▇ Stock Purchase Agreement (as defined on Exhibit A-1) and
-----------
"Losses" under the ▇▇▇▇▇▇ Asset Purchase Agreement (as defined on Exhibit A-1)
-----------
exceed a cumulative aggregate total of [***] (the "Basket"); provided, however,
------ -------- -------
the foregoing Basket limitation shall not apply to (1) claims under Sections
9.2(b), (2) claims under Section 9.2(c), in so far as such claims relate to a
breach of Section 9.6 below, (3) claims pursuant to Section 9.2(d) through (h),
or (4) claims based upon fraud. With respect to any claim for indemnity under
Section 9.2(a) above, if the matter is also the basis for a claim for indemnity
under any other provision of Section 9.2 for which the Basket limitation is not
applicable, the Basket limitation shall not be applicable to such claim.
(c) Except in the case of claims based upon fraud, the aggregate
indemnification liability of the Seller under this Agreement and the "Seller"
under the ▇▇▇▇▇▇ Stock Purchase Agreement and the "Sellers" and the
"Stockholder" under the ▇▇▇▇▇▇ Asset Purchase Agreement shall be [***], which
amount is inclusive of indemnification obligations contemplated by the
Environmental Indemnification Cap (as defined below). Notwithstanding the
foregoing, the Seller shall have no indemnification obligations hereunder with
respect to indemnification obligations contemplated by the Environmental
Indemnification Cap to the extent such indemnification obligations would require
payments by the Seller in excess of the Environmental Indemnification Cap. As
used in this Agreement, the "Environmental Indemnification Cap" shall mean the
---------------------------------
obligations under this Agreement and the Other Agreements to (i) remediate
environmental contamination, including, without limitation, pursuant to (A)
Paragraph 5(e) of the Owned Real Property Rider, (B) Paragraph 7(e) of the
respective Real Property Purchase Agreements, (C) Section 9.6 below, (D) Section
9.6 of the ▇▇▇▇▇▇ Stock Purchase Agreement or (E) Section 10.9 of the ▇▇▇▇▇▇
Asset Purchase Agreement, and/or (ii) indemnify for Environmental Liabilities or
breaches of representations or warranties with respect to environmental matters,
in either case with respect to the Owned Real Property and/or the Leased
Premises, and the "Owned Real Property" and/or the "Leased Premises" under each
of the ▇▇▇▇▇▇ Stock Purchase Agreement and the ▇▇▇▇▇▇ Asset Purchase Agreement,
in the maximum aggregate amount of [***].
(d) In connection with any claim for indemnification with respect
to which the Buyer or the Seller, as the case may be, have an enforceable claim
against any third party (contractual or otherwise) on account of the item for
which such claim for indemnification has been made, the Buyer or the Seller, the
Buyer or the Seller, as the case may be, shall, at the time of payment by the
indemnifying party of the claim for indemnification, assign to the other party
such claim; provided, however, the assignee of such claim shall further protect
-------- -------
and indemnify the
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
40
assignor in connection with the pursuit by the assignee of such claim against
such third party; provided, further, however, this clause (d) shall not require
-------- ------- -------
the assignment of any claims under any insurance policy.
(e) No Buyer Indemnitee or Seller Indemnitee, as the case may be,
shall be entitled to indemnification pursuant to this Article 9 to the extent of
any insurance (including title insurance) proceeds received by the Buyer
Indemnitee or Seller Indemnitee, as the case may be, in connection with the
facts giving rise to such indemnification (and the Buyer Indemnitee or Seller
Indemnitee shall seek full recovery under all insurance policies covering any
Buyer's Damages or Seller's Damages, as the case may be, to the extent
permitted), provided that this clause (e) shall not be applicable to the extent
it would give the insurance company a basis to deny coverage with respect to the
particular claim involved.
(f) No Buyer Indemnitee shall be entitled to indemnification
pursuant to this Article 9 to the extent that an applicable reserve for such
Buyer' Damages was included in the Closing Balance Sheet.
(g) With respect to the Seller's obligations to pay Buyer's
Damages pursuant to Section 9.2 of this Agreement, the Buyer shall first make
demand for payment under the Escrow Agreement.
(h) The provisions of this Article 9 shall be effective upon
consummation of the Closing, and prior to the Closing, shall have no force and
effect. Following the Closing, except in the case of claims based upon fraud,
the sole and exclusive remedy for the breach of any representation, warranty or
covenant contained in, or otherwise relating to, this Agreement shall be
indemnification provided for in this Agreement.
9.5 Procedures Regarding Third Party Claims. The procedures to be
---------------------------------------
followed by the Buyer and the Seller with respect to indemnification hereunder
regarding claims by third persons which could give rise to an indemnification
obligation hereunder shall be as follows:
(a) Promptly after receipt by any Buyer Indemnitee or Seller
Indemnitee, as the case may be, of notice of the commencement of any action or
proceeding (including, without limitation, any notice relating to a Tax audit)
or the assertion of any claim by a third person which the person receiving such
notice has reason to believe may result in a claim by it for indemnity pursuant
to this Agreement, such person (the "Indemnified Party") shall give a written
-----------------
notice of such action, proceeding or claim to the party against whom
indemnification pursuant hereto is sought (the "Indemnifying Party"), setting
------------------
forth in reasonable detail the nature of such action, proceeding or claim,
including copies of any documents and written correspondence from such third
person to such Indemnified Party; provided, however, that failure to give such
-------- -------
notice promptly shall not relieve the Indemnifying Party of its or his
obligations hereunder except to the extent it or he shall have been materially
prejudiced by such failure.
(b) The Indemnifying Party shall be entitled, at its own expense,
to participate in the defense of such action, proceeding or claim, and, if (i)
the action, proceeding or claim involved seeks (and continues to seek) solely
monetary damages and is a matter other than a tax audit, (ii) the Indemnifying
Party confirms, in writing, its obligation hereunder to indemnify and
41
hold harmless the Indemnified Party with respect to such damages in their
entirety pursuant to Sections 9.2 or 9.3 hereof, as the case may be, and (iii)
the Indemnifying Party shall be, in the reasonable judgment of the Indemnified
Party, able to adequately satisfy any adverse judgment as a result of its
indemnification obligation with respect to such action, proceeding or claim,
then the Indemnifying Party shall be entitled to assume and control such defense
with counsel chosen by the Indemnifying Party and approved by the Indemnified
Party, which approval shall not be unreasonably withheld or delayed. The
Indemnified Party shall be entitled to participate therein after such
assumption, the costs of such participation following such assumption to be at
its own expense. Upon assuming such defense, the Indemnifying Party shall have
full rights to enter into any monetary compromise or settlement which is
dispositive of the matters involved, subject to the consent of the Indemnified
Party, such consent not to be unreasonably withheld or delayed.
(c) With respect to any action, proceeding or claim as to which
(i) the Indemnifying Party does not have the right to assume the defense or (ii)
the Indemnifying Party shall not have exercised its right to assume the defense,
the Indemnified Party shall assume and control the defense of and contest such
action, proceeding or claim with counsel chosen by it and approved by the
Indemnifying Party, which approval shall not be unreasonably withheld. The
Indemnifying Party shall be entitled to participate in the defense of such
action, proceeding or claim, the cost of such participation to be at its own
expense. The Indemnifying Party shall be obligated to pay the reasonable
attorneys' fees and expenses of the Indemnified Party to the extent that such
fees and expenses relate to claims as to which indemnification is due under
Sections 9.2 or 9.3 hereof, as the case may be. The Indemnified Party shall have
full rights to enter into any monetary compromise or settlement which is
dispositive of the matters involved, subject to the consent of the Indemnified
Party, such consent not to be unreasonably withheld or delayed.
(d) Both the Indemnifying Party and the Indemnified Party shall
cooperate fully with one another in connection with the defense, compromise or
settlement of any such action, proceeding or claim, including, without
limitation, by making available to the other all pertinent information and
witnesses within its control.
9.6 Remediation of Leased Premises.
------------------------------
(a) Following the execution of this Agreement, the Buyer may, at
its option, commission the Environmental Audit with respect to the Leased
Premises. The Environmental Audit shall be conducted in accordance with
standards and procedures selected by the Buyer and the Environmental Auditor,
and may include, without limitation, drilling and soil borings at the Leased
Premises at locations specified by the Environmental Auditor, collecting and
analyzing samples of the soil, groundwater, surface water, sediment or other
media at, on, under or around the Leased Premises, and sampling for the presence
of any Hazardous Materials on the Leased Premises, and shall otherwise be
conducted as provided in Section 5.11 above. In doing the Environmental Audit,
the Buyer shall not unreasonably interfere with the respective Company's
business operations and shall restore the Leased Premises to its prior
condition.
(b) If the Environmental Audit disclose that Hazardous Materials
are present at, on, under or around the Leased Premises in violation of, or so
as to impose liability under, applicable Environmental Laws (including without
limitation, the soil, ground water, surface water, sediment or other media) then
the Buyer and the Environmental Auditor in consultation
42
with the Seller shall formulate a plan to remove and/or remediate such Hazardous
Materials in accordance with all applicable Environmental Laws to the level
required by the applicable governmental agency. The remediation shall be done by
remediation firms selected by the Buyer and the Environmental Auditor in
accordance with the remediation plan formulated in consultation with the Seller
and the Seller shall be reasonably apprised of the status of the remediation and
the costs incurred on an ongoing basis. The remediation shall be complete upon
the receipt of documentation evidencing the satisfaction of the applicable
governmental agency.
(c) If at any time during the period commencing on the Closing
Date and ending on the fifth anniversary date of the Closing Date, Hazardous
Materials are found to be present at, on, under or around the Leased Premises,
in violation of, or so as to impose liability under, any applicable
Environmental Laws (including without limitation, the soil, groundwater, surface
water, sediment or other media) which resulted from events that occurred or
conditions that existed prior to the Closing and provided that such Hazardous
Materials were not the subject of remediation pursuant to Paragraph (b) above,
the Seller, at its expense, shall be obligated to remediate and/or remove such
Hazardous Material in accordance with all applicable Environmental Laws to the
level required by the applicable governmental agency; provided, however, that
the Buyer's recovery shall be subject to the Environmental Indemnification Cap.
Any costs in excess of such amount shall be the responsibility of the Buyer. In
connection with such remediation, the Buyer shall: provide the Seller with
access to the Leased Premises to conduct its own investigation or testing with
regards to the matter, provide the Seller with the results, including analytical
data, of any investigation or testing conducted by the Buyer or, if available to
the Buyer, any third party, provide the Seller with a copy of, or otherwise
inform the Seller of, any contact with any governmental agency with respect
thereto, and cooperate in good faith with such Seller in performing such tasks
as it and its technical professionals and representatives may reasonably request
as being necessary to complete any environmental investigations or environmental
remediation being undertaken by them pursuant to this Section 9.6(c), with the
Buyer being compensated for any such services rendered.
ARTICLE 10
----------
TERMINATION
-----------
10.1 Termination. Notwithstanding any other provision herein contained
-----------
to the contrary, this Agreement may be terminated at any time prior to the
Closing Date:
(a) By the written mutual consent of the Buyer and the Seller;
(b) At any time prior to the Closing Date Deadline (as the same
may have been extended pursuant to Article 2 hereof) by the Buyer or the Seller,
as the case may be, by written notice to the other party(ies) hereto, in the
event of a material breach by the other party of any of its respective
representations, warranties, covenants or agreements contained in this Agreement
which breach is not cured within thirty (30) days (or such shorter period ending
on the Closing Date Deadline) after receipt of notice of such breach from the
other party;
(c) At any time after the Closing Date Deadline (as the same may
have been extended pursuant to Article 2 hereof), by written notice by the Buyer
or the Seller to the other
43
party hereto if the Closing shall not have been completed on or before the
Closing Date Deadline (as the same may have been extended pursuant to Article 2
hereof); provided, however, the Buyer shall not be entitled to terminate this
-------- -------
Agreement under this clause (c) prior to the extended Closing Date Deadline
unless it appears unlikely that the conditions to Closing contained in Section
7.10 above shall not be satisfied prior to such extended Closing Date Deadline;
(d) By written mutual consent of the Buyer and the Seller if, after any
initial HSR Act filing, the FTC makes a "second request" for information, or if
the FTC or the Antitrust Division challenges the transactions contemplated
hereby;
(e) By written notice by the Buyer or the Seller to the other party, in
the event that any Manufacturer (or any person claiming by, through or under
such Manufacturer) shall exercise any right of first refusal, preemptive right
or other similar right, with respect to the dealership business of the Company;
or
(f) By the Buyer, by written notice to the Seller, pursuant to the
Owned Real Property Rider;
provided, however, no party may terminate this Agreement pursuant to Section
-------- -------
10.1(b) or (c) above if such party is in material breach of any representation,
warranty, covenant or agreement of such party contained in this Agreement. In
addition to any other provisions of this Agreement providing for termination, if
any of the Other Agreements is terminated for any reason thereunder, then either
the Buyer or the Seller may terminate this Agreement by notice in writing to the
other party(ies) hereto; provided, however: (a) the Buyer may not terminate this
-------- -------
Agreement pursuant to this clause if such Other Agreement is terminated because
the Buyer was in material breach of any of its representations, warranties,
covenants or agreements contained in such Other Agreement; (b) the Seller may
not terminate this Agreement pursuant to this clause if such Other Agreement is
terminated because the Seller or any of the other "sellers" under such Other
Agreement was in material breach of any of its representations, warranties,
covenants or agreements contained in such Other Agreement; or (c) no party
hereto may terminate this Agreement pursuant to this clause if such party is in
material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement.
10.2 Procedure and Effect of Termination. In the event of termination of
-----------------------------------
this Agreement pursuant to Section 10.1, this Agreement shall be of no further
force or effect; provided, however, that any termination pursuant to Section
10.1(b), (c), (d) or (f) shall not relieve any party hereto of any liability for
breach of any representation and warranty, covenant or agreement hereunder
occurring prior to such termination. No termination of this Agreement shall
affect any liability of the Buyer or the Seller to pay the fees and expenses of
third parties. In addition, in the event of any such termination, all filings,
applications and other submissions made pursuant to this Agreement or prior to
the execution of this Agreement in contemplation thereof shall, to the extent
practicable, be withdrawn from the agency or other entity to which made.
44
ARTICLE 11
----------
OTHER COVENANTS
---------------
11.1 Certain Taxes and Expenses.
--------------------------
(a) All sales, use, transfer, intangible, excise, documentary
stamp, recording, gross income, gross receipts and other similar Taxes or fees
which may be due or payable in connection with the consummation of the
transactions contemplated hereby shall be paid 50% by the Buyer and 50% by the
Seller.
(b) Except as otherwise herein provided, the Seller and the Buyer
shall be responsible for the payment of their respective fees, costs and
expenses incurred in connection with the negotiation and consummation of the
transactions contemplated hereby and shall not be liable to the other party or
parties for the payment of any such fees, costs and expenses.
11.2 Concerning Names. The Seller acknowledges and agrees that the
----------------
Buyer has acquired all of the goodwill of the Company and, in so doing, all of
the Company's right, title and interest in and to its names, tradenames and
service marks in, or referenced in, Section 3.17(b) above, including without
limitation the tradename "▇▇▇▇▇▇ ▇▇▇▇▇▇" pursuant to the terms and conditions of
that certain Agreement dated November 30, 2001, and shall be free to use, from
and after the Closing, such names, tradenames and service marks, and derivations
thereof, in the manufacture, sale, marketing or distribution of products or
services commonly associated with an automobile dealership. Accordingly, the
Seller, for itself ▇▇▇▇▇▇ and the Affiliates of ▇▇▇▇▇▇, hereby agrees that, from
and after the Closing, the Seller shall not, directly or indirectly, use in the
State of North Carolina, any of the names, tradenames and service marks referred
to in Section 3.17(b) above, or any derivation thereof, in connection with (a)
the manufacture, sale, marketing or distribution of products or services
commonly associated with an automobile dealership or (b) any other business
where the use of such names, tradenames and service marks, or any derivation
thereof, would cause confusion with any of the names, tradenames and service
marks referred to in said Section 3.17(b); provided, however, notwithstanding
-------- -------
the foregoing, nothing contained in this Section 11.2 shall prohibit the family
members of ▇▇▇▇▇▇ from owning and operating an automobile dealership business
under a name which includes the name "▇▇▇▇▇▇", provided that, (i) such
dealership is not located within one hundred (100) miles of the Company's
business and (ii) the name "▇▇▇▇▇▇" is not used alone and is used only in
conjunction with such family member's full name (e.g., ▇▇▇▇▇▇ ▇▇▇▇▇▇) and in no
event is used in conjunction with the name "▇▇▇▇▇▇", "Don" or other derivations
thereof.
[***]
[***] These portions of this exhibit have been omitted and filed separately with
the Commission pursuant to a request for confidential treatment.
45
ARTICLE 12
----------
MISCELLANEOUS
-------------
12.1 Certain Tax Returns. Following the Closing, (a) the Buyer shall,
-------------------
and shall cause the Company to, reasonably cooperate with and provide reasonable
assistance to the Seller, including reasonable access to the Company's systems,
in connection with the preparation and filing of all federal, state, local and
foreign income Tax returns which relate to the Company's 2001 tax year, and (b)
the Seller shall reasonably cooperate with and provide reasonable assistance to
the Buyer and the Company in connection with the preparation and filing of all
federal, state, local and foreign income Tax returns which relate to the
Company's 2002 tax year and to the period from January 1, 2002 to the Closing
Date. At least twenty (20) days prior to the filing of such Tax returns, the
preparing party shall provide a copy of such returns to the other party for such
party's approval, such approval not to be unreasonably withheld or delayed.
12.2 Parties in Interest; No Third-Party Beneficiaries. Subject to
-------------------------------------------------
Section 12.4 hereof, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the respective successors and assigns of the parties
hereto. Nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon or give to any employee of the Company or the Buyer, or
any other person, firm, corporation or legal entity, other than the parties
hereto and their successors and assigns, any rights, remedies or other benefits
under or by reason of this Agreement.
12.3 Entire Agreement; Amendments. This Agreement (including all
----------------------------
Exhibits and Schedules hereto) and the other writings referred to herein or
delivered pursuant hereto contain the entire understanding of the parties hereto
with respect to its subject matter. Except for the Confidentiality Agreement
between the Buyer and ▇▇▇▇▇▇ which shall remain in full force and effect until
Closing, this Agreement supersedes all prior agreements and understandings
between the parties hereto with respect to its subject matter. This Agreement
may be amended or modified only by a written instrument duly executed by the
parties hereto.
12.4 Assignment. This Agreement shall not be assignable by any party
----------
hereto without the prior written consent of the other parties; provided,
--------
however, the Buyer may, without the consent of the Seller, assign its rights and
-------
obligations hereunder to any Affiliate of the Buyer presently existing or
hereafter formed and to any person or entity that shall acquire all or
substantially all of the assets of the Buyer (including any such acquisition by
merger or consolidation); provided, further, that no such assignment shall
-------- -------
release the Buyer from its obligations hereunder without the consent of the
Seller. Nothing contained in this Agreement shall prohibit its assignment by the
Buyer as collateral security and the Seller hereby agrees to execute any
acknowledgment of such assignment by the Buyer as may be required by any lender
to the Buyer.
12.5 Remedies. Except as expressly provided in this Agreement to the
--------
contrary, each of the parties to this Agreement is entitled to all remedies in
the event of breach provided at law or in equity, specifically including, but
not limited to, specific performance.
46
12.6 Headings. The Article and Section headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.7 Notices. All notices, claims, certificates, requests, demands and
-------
other communications hereunder shall be given in writing and shall be delivered
personally, sent by telecopier or sent by a nationally recognized overnight
courier, postage prepaid, and shall be deemed to have been duly given when so
delivered personally, or when telecopier receipt is acknowledged or one (1)
Business Day after the date of deposit with such nationally recognized overnight
courier. All such notices, claims, certificates, requests, demands and other
communications shall be addressed to the respective parties at the addresses set
forth below or to such other address as the person to whom notice is to be given
may have furnished to the others in writing in accordance herewith.
If to the Buyer, to:
Sonic Automotive, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Parker, Poe, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller or the Company (prior to the
Closing), to the Seller at:
The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Trust
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
47
12.8 Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, and all such counterparts together shall
constitute but one agreement. This Agreement may be executed by one or more
facsimile signatures.
12.9 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Michigan, without giving effect to
its rules governing conflict of laws.
12.10 Waivers. To the extent permitted by applicable law, no claim or
-------
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by a party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by all the parties
hereto. Any waiver by a party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of such provision or any other provision of this Agreement. Neither the failure
nor any delay by any party hereto in exercising any right or power under this
Agreement or the documents referred to in this Agreement will operate as a
waiver of such right or power, and no single or partial exercise of any such
right or power will preclude any other or further exercise of such right or
power or the exercise of any other right or power.
12.11 Severability; Construction.
--------------------------
(a) In the event that any provision, or part thereof, in this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions, or parts thereof, shall
not in any way be affected or impaired thereby.
(b) This Agreement shall be construed equitably in accordance with
its terms, without regard to the degree to which the Seller or the Buyer, or
their respective legal counsel, have participated in the drafting of this
Agreement.
12.12 Knowledge. Whenever any representation or warranty of the Seller
---------
contained herein or in any other document executed and delivered in connection
herewith is based upon the knowledge of the Seller, such knowledge shall be
deemed to include the actual knowledge, information and belief of any of ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, or the general manager of the Company, after due inquiry of
the dealership management of the Company.
12.13 No Publicity. Except as may be required by law or the rules of
------------
the New York Stock Exchange or as necessary in connection with the transactions
contemplated hereby, after the Closing, no party hereto shall (a) make any press
release or other public announcement relating to this Agreement or the
transactions contemplated hereby, without the prior approval of the other
parties hereto or (b) otherwise disclose the existence and nature of the
transactions contemplated hereby to any person or entity other than such party's
accountants, attorneys, agents and representatives, all of whom shall be subject
to this nondisclosure obligation as agents of such party.
12.14 Cooperation in SEC Filings. At the request of the Buyer and at
--------------------------
the Buyer's expense, the Seller shall reasonably cooperate in the preparation by
the Buyer of all filings to be made by the Buyer with the SEC including, without
limitation any filing with respect to any
48
periodic filing or any registered offering of its securities by the Buyer and
the closing of the offering registered thereby.
12.15 Dispute Resolution. In the event of any dispute or disagreement
------------------
between the parties relating to this Agreement, the Buyer and the Seller agree
to use their reasonable best efforts to attempt to resolve such dispute or
disagreement through good faith negotiations for a thirty (30) day period prior
to initiating any judicial or equitable proceeding in connection with such
dispute; provided, however, a party shall not be obligated to participate in
-------- -------
such negotiations to the extent that the failure to seek judicial or equity
remedies prior to the expiration of such thirty (30) day period would materially
prejudice such in pursuing any such remedy.
12.16 Good Faith Efforts. Whenever the parties are required to agree or
------------------
attempt to agree on a certain matter or issue under this Agreement, the parties
shall use their reasonable, good faith efforts to reach such agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
BUYER: SONIC AUTOMOTIVE, INC.
By: /s/ O. ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: O. ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
SELLER: THE ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ REVOCABLE TRUST
By an agreement dated December 13, 2001
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Trustee
50
INDEX OF DEFINED TERMS
----------------------
--------------------------------------------------------------------------------
TERM SECTION NO.
--------------------------------------------------------------------------------
Accountants 1.2(c)(ii)
--------------------------------------------------------------------------------
Accounts Receivable 1.7
--------------------------------------------------------------------------------
Affiliate 3.5(a)
--------------------------------------------------------------------------------
Aged Parts 1.2(c)(i)(VII)
--------------------------------------------------------------------------------
Agreement Preamble
--------------------------------------------------------------------------------
Annual Financial Statements 3.13(a)(i)
--------------------------------------------------------------------------------
Antitrust Division 5.13
--------------------------------------------------------------------------------
Assets 3.11
--------------------------------------------------------------------------------
Basket 9.4(b)
--------------------------------------------------------------------------------
Business Day 1.2(b)(i)
--------------------------------------------------------------------------------
Buyer Preamble
--------------------------------------------------------------------------------
Buyer Indemnitee 9.2
--------------------------------------------------------------------------------
Buyer's Damages 9.2
--------------------------------------------------------------------------------
Closing 1.1
--------------------------------------------------------------------------------
Closing Balance Sheet 1.2(c)(i)
--------------------------------------------------------------------------------
Closing Date Article 2
--------------------------------------------------------------------------------
Closing Date Deadline Article 2
--------------------------------------------------------------------------------
Code 3.6
--------------------------------------------------------------------------------
Company Preamble
--------------------------------------------------------------------------------
Control 3.5(a)
--------------------------------------------------------------------------------
Demonstrators 1.2(c)(i)(II)
--------------------------------------------------------------------------------
Distributed Assets 1.5
--------------------------------------------------------------------------------
Distributed Liabilities 1.5
--------------------------------------------------------------------------------
Employee Plan 3.27(a)
--------------------------------------------------------------------------------
Encumbrances 1.3
--------------------------------------------------------------------------------
Environmental Audit 5.11
--------------------------------------------------------------------------------
Environmental Auditor 5.11
--------------------------------------------------------------------------------
Environmental Law 3.36(a)
--------------------------------------------------------------------------------
Environmental Liabilities 9.2(g)
--------------------------------------------------------------------------------
Environmental Permits 3.36(b)
--------------------------------------------------------------------------------
ERISA 3.27(a)
--------------------------------------------------------------------------------
Escrow Agent 1.2(b)(ii)
--------------------------------------------------------------------------------
Escrow Agreement 1.2(b)(ii)
--------------------------------------------------------------------------------
Escrow Amount 1.2(b)(ii)
--------------------------------------------------------------------------------
Escrow Termination Date 1.2(b)(ii)
--------------------------------------------------------------------------------
Estimated Net Book Value 1.2(b)(i)
--------------------------------------------------------------------------------
Extraordinary Collection Costs 1.7
--------------------------------------------------------------------------------
Financial Statements 3.13(a)(ii)
--------------------------------------------------------------------------------
Fixtures and Equipment 1.2(c)(i)(X)
--------------------------------------------------------------------------------
401(k) Plan 5.15(b)
--------------------------------------------------------------------------------
FTC 5.13
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TERM SECTION NO.
--------------------------------------------------------------------------------
GAAP 1.2(c)(i)
--------------------------------------------------------------------------------
Hazardous Materials 3.36(a)
--------------------------------------------------------------------------------
HSR Act 5.13
--------------------------------------------------------------------------------
Indemnified Party 9.5(a)
--------------------------------------------------------------------------------
Indemnifying Party 9.5(a)
--------------------------------------------------------------------------------
Interest Rate 1.2(c)(iii)
--------------------------------------------------------------------------------
Interim Financial Statements 3.13(a)(ii)
--------------------------------------------------------------------------------
Inventory 1.2(c)(i)(VI)
--------------------------------------------------------------------------------
Inventory Services 1.2(c)(i)(VI)
--------------------------------------------------------------------------------
IRS 3.21(c)
--------------------------------------------------------------------------------
Leased Equipment 3.16(h)
--------------------------------------------------------------------------------
Leased Premises 3.16(b)
--------------------------------------------------------------------------------
Leased Premises Environmental Cap 9.4(c)
--------------------------------------------------------------------------------
Leases 3.16(b)
--------------------------------------------------------------------------------
Manufacturer Article 2
--------------------------------------------------------------------------------
Master Price List 1.2(c)(i)(VII)
--------------------------------------------------------------------------------
▇▇▇▇▇▇ Preamble
--------------------------------------------------------------------------------
▇▇▇▇▇▇ Asset Purchase Agreement Exhibit A-1
--------------------------------------------------------------------------------
▇▇▇▇▇▇ Stock Purchase Agreement Exhibit A-1
--------------------------------------------------------------------------------
Material Adverse Item 5.16(b)
--------------------------------------------------------------------------------
Material Agreements 3.29(a)
--------------------------------------------------------------------------------
Miscellaneous Inventories 1.2(c)(i)(VIII)
--------------------------------------------------------------------------------
Net Book Value 1.2(c)(i)
--------------------------------------------------------------------------------
Net Book Value Excess 1.2(c)(iii)
--------------------------------------------------------------------------------
Net Book Value Shortfall 1.2(c)(iii)
--------------------------------------------------------------------------------
New Vehicles 1.2(c)(i)(I)
--------------------------------------------------------------------------------
Nonreturnable Parts 1.2(c)(i)(VII)
--------------------------------------------------------------------------------
Oldsmobile Liabilities 1.2(c)(i)(XII)
--------------------------------------------------------------------------------
Oldsmobile Real Property Preamble
--------------------------------------------------------------------------------
Other Agreements Preamble
--------------------------------------------------------------------------------
Other Plans 5.15(b)
--------------------------------------------------------------------------------
Owned Equipment 3.16(g)
--------------------------------------------------------------------------------
Owned Real Property 3.16(a)
--------------------------------------------------------------------------------
Owned Real Property Environmental Cap 9.4(c)
--------------------------------------------------------------------------------
Owned Real Property Rider 1.6
--------------------------------------------------------------------------------
▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇ Agreements 3.2(b)
--------------------------------------------------------------------------------
Permits 3.24
--------------------------------------------------------------------------------
Permitted Encumbrances 3.16(a)
--------------------------------------------------------------------------------
Purchase Price 1.2(a)
--------------------------------------------------------------------------------
Real Property 3.16(b)
--------------------------------------------------------------------------------
Real Property Component 1.2(a)
--------------------------------------------------------------------------------
Real Property Purchase Agreements Exhibit A-1
--------------------------------------------------------------------------------
SEC 5.12
--------------------------------------------------------------------------------
Seller Preamble
--------------------------------------------------------------------------------
Seller's Damages 9.3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TERM SECTION NO.
--------------------------------------------------------------------------------
Seller Indemnitee 9.3
--------------------------------------------------------------------------------
Shares Preamble
--------------------------------------------------------------------------------
Survival Date 9.1
--------------------------------------------------------------------------------
Taxes 3.21(a)
--------------------------------------------------------------------------------
UCC 5.1(c)
--------------------------------------------------------------------------------
Used Vehicles 1.2(c)(i)(V)
--------------------------------------------------------------------------------