EXHIBIT 4.8
THIS AGREEMENT IS SUBJECT TO ARBITRATION
PURSUANT TO THE SOUTH CAROLINA
UNIFORM ARBITRATION ACT
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of December 15, 1998 (this
"AGREEMENT") by and among SONIC AUTOMOTIVE, INC., a Delaware corporation (the
"BUYER"), JN MANAGEMENT CO. ("JN"), ▇▇▇▇▇▇▇ AUTOWORLD, INC. ("AUTOWORLD") and
▇▇▇▇▇▇▇ CHEVROLET WORLD, INC. ("CHEVROLET WORLD"), each a South Carolina
corporation (collectively, the "COMPANIES"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. (the
"SELLER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Seller, through the Companies, operates a Chevrolet
automobile dealership pursuant to dealership agreements with General Motors
Corporation (the "MANUFACTURER"); and
WHEREAS, the Seller owns, directly or indirectly, all of the shares of
JN's common stock, all of the shares of Autoworld's common stock and all of the
shares of Chevrolet World's common stock, which shares (collectively, the
"SHARES") represent all of the issued and outstanding shares of capital stock of
the Companies and are owned, directly or indirectly, of record and beneficially
by the Seller; and
WHEREAS, contemporaneously with the execution of this Agreement, the
Buyer and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III and Imports of ▇▇▇▇▇▇▇▇, LLC, and ▇▇▇▇▇▇▇
Automotive, LLC, have entered into an Asset Purchase Agreement (the "ASSET
PURCHASE AGREEMENT") with respect to the sale to the Buyer of certain automobile
dealership assets; and
WHEREAS, contemporaneously with the execution of this Agreement, the
Buyer has entered into a Contract to Purchase and Sell Property (the "REAL
PROPERTY PURCHASE AGREEMENT") with ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. (in this context, the
"OWNER"), whereby the Buyer has agreed to buy, and the Owner has agreed to sell
certain real property, as more specifically described therein; and
WHEREAS, contemporaneously with the execution of this Agreement, the
Buyer has entered into a Stock Purchase Agreement (the "REAL PROPERTY STOCK
PURCHASE AGREEMENT") with the Seller (in this context, the "OWNER"), whereby the
Buyer has agreed to buy, and the Owner has agreed to sell, all of the capital
stock of S. C. Automotive Enterprises, Inc.; and
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WHEREAS, the Asset Purchase Agreement, the Real Property Stock Purchase
Agreement and the Real Property Purchase Agreement are sometimes hereinafter
collectively called the "OTHER BASIC AGREEMENTS"; and
WHEREAS, the consummation of the transactions contemplated by this
Agreement is subject to the consummation of the transactions contemplated by the
Other Basic Agreements; 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, the acquisition by the Buyer of the Shares is to be
accomplished by the merger (the "MERGER") of the Companies with and into one or
(if so determined by the Buyer) more wholly-owned South Carolina first-tier
subsidiaries of the Buyer (the "SUBS"), to be formed by the Buyer prior to the
Closing, on the terms and subject to the conditions set forth herein (if the
Buyer determines to merge the Companies into one wholly-owned South Carolina
subsidiary of the Buyer, the defined term "SUBS" as used herein shall be deemed
to read as "SUB" and the defined term "SURVIVING COMPANIES" as used herein shall
be deemed to read as "SURVIVING COMPANY", in each case together with conforming
changes deemed made to the text of this Agreement mutatis mutandis).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and representations hereinafter stated, and intending to be legally
bound hereby and to incorporate the preceding recitations herein, the parties
agree as follows:
ARTICLE 1
THE MERGER & THE MERGER CONSIDERATION
1.1 THE MERGER.
(a) Subject to the provisions of this Agreement and the
Articles of Merger substantially in the form of Exhibit A attached hereto (the
"ARTICLES OF MERGER"), the Companies shall be merged, in a transaction intended
by the parties to be a tax free reorganization under Section 368(A) of the
Internal Revenue Code of 1986, as amended, with and into the Subs in accordance
with the provisions of the South Carolina Business Corporation Act (the "MERGER
LAW"), whereupon the existence of the Companies shall cease and the Subs shall
be the surviving corporations (the Subs and the Companies are sometimes herein
referred to as the "MERGING COMPANIES" and the Subs after the Merger are
sometimes herein referred to as the "SURVIVING COMPANIES").
(b) As soon as practicable after satisfaction of, or, to the
extent permitted hereunder, waiver of all conditions to the Merger, the Merging
Companies shall execute and file the Articles of Merger with the Secretary of
State of the State of South Carolina in accordance with the Merger Law, and
shall otherwise make all other filings or recordings required by the Merger Law
in connection with the Merger. The Merger shall become effective at such date
and time as the Articles of Merger are duly filed with, and accepted by, the
Secretary of State of the State of South Carolina (the "EFFECTIVE TIME").
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(c) At the Effective Time, the separate existence of the
Companies shall cease and the Companies shall be merged with and into the Sub
and the Sub shall be the Surviving Company, whose name thereafter shall be
SONIC-▇▇▇▇▇▇▇ CHEVROLET WORLD, INC.
(d) From and after the Effective Time: (i) the respective
Articles of Incorporation and the Bylaws of the Subs, both as in effect
immediately prior to the Effective Time, shall be the respective Articles of
Incorporation and the Bylaws of the Surviving Companies, until thereafter
amended in accordance with applicable law; (ii) the respective directors of the
Subs at the Effective Time shall become the directors of the Surviving
Companies, until their respective successors are duly elected or appointed and
qualified in accordance with applicable law; and (iii) the respective officers
of the Subs at the Effective Time shall become the initial officers of the
Surviving Companies, to serve at the pleasure of the respective boards of
directors of the Surviving Companies.
(e) At the Effective Time, by virtue of the Merger and the
applicable provisions of the Merger Law and without any further action on the
part of the Merging Companies or on the part of the Companies' shareholders:
(1) each share of common stock of each Sub
outstanding immediately prior to the Effective Time shall, automatically and
without any action on the part of the holder thereof, be converted into one
share of common stock of the respective Surviving Company; and
(2) all of the Shares shall, automatically and
without any action on the part of the Seller, cease to be outstanding and shall
be converted into the right to receive the Merger Consideration (as defined in
Section 1.2 below) in accordance with the provisions of said Section 1.2. All
Shares, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and the Seller
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration in accordance with provisions of said Section 1.2.
1.2 THE MERGER CONSIDERATION.
(a) THE MERGER CONSIDERATION. The consideration to be paid by
the Buyer for the Shares pursuant to the Merger (the "MERGER CONSIDERATION")
shall consist of the sum of (i) $4,000,000, plus (ii) the Net Book Value (as
defined in Section 1.2(c)(1) below).
(b) PAYMENT OF THE MERGER CONSIDERATION. The Merger
Consideration shall be paid as follows:
(1) (A) At the Closing, the sum of $2,581,000 shall
be payable by the Buyer to the Seller by wire transfer of immediately available
funds to the account of the Seller, which shall be designated by the Seller in
writing at least one full Business Day prior to the Closing Date (as defined in
Article 2 hereof). The sum of $500,000 (the "ESCROW AMOUNT") shall be placed in
escrow with First Union National Bank or another escrow agent mutually
acceptable to the parties hereto (the "ESCROW AGENT") by the Buyer 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"). For purposes of this Agreement, a
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"BUSINESS DAY" is a day other than a Saturday, a Sunday or a day on which banks
are required to be closed in the State of North Carolina.
(B) The term of the Escrow Agreement
shall be for a period of ninety (90) days from the Closing Date (or such longer
period of time as shall be necessary to complete the determination of Net Book
Value pursuant to Section 1.2(c) below). If, as of the date which is ninety (90)
days from the Closing Date (or such later date as shall be necessary to complete
the determination of the Net Book Value pursuant to Section 1.2(c) below), the
Buyer shall have made no claims in respect of any Net Book Value Shortfall (as
defined in 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
pay all of the Escrow Amount to the Seller pursuant to the terms of the Escrow
Agreement.
(2) (A) At the Closing, the Buyer shall issue
to the Seller 8,500 shares of the Buyer's Class A Convertible Preferred Stock,
Series II (the "PREFERRED STOCK"). The Preferred Stock will be convertible into
shares of the Buyer's Class A Common Stock, par value $.01 per share (the
"COMMON STOCK"), as provided in the Certificate of Designation, Preferences and
Rights with respect to the Preferred Stock, a copy of which is attached as
Exhibit C-1 hereto at the Closing, the Seller will execute and deliver to the
Buyer a Certificate Regarding Restricted Securities in substantially the form of
Exhibit C-2 hereto.
(B) The Seller may, by written notice
delivered at any time on or prior to the twentieth (20th) day after the date
hereof, request the Buyer to provide the Seller with a prospectus (the
"PROSPECTUS") with respect to the Buyer's offer and sale to the Seller of the
Registered Common Shares (as hereinafter defined). In the event that the Seller
shall deliver such notice to the Buyer, the Buyer shall use its best reasonable
efforts to deliver the Prospectus to the Seller at least thirty (30) days prior
to the Closing Date. At the option of the Seller, exercisable by written notice
to the Buyer (the "SELLER'S NOTICE") not sooner than twenty (20) Business Days
after the receipt by the Seller from the Buyer of the Prospectus and not later
than five (5) Business Days before the Closing, the Buyer shall be obligated to
issue to the Seller at the Closing, in lieu of up to all of the Preferred Stock,
that number of shares (the "REGISTERED COMMON SHARES") of Common Stock which,
subject to subsection (BB), would be issued on conversion of the number of
shares of the Preferred Stock specified in the Seller's Notice, up to all of the
shares of the Preferred Stock, if such number of shares of the Preferred Stock
were converted on the date of delivery of the Seller's Notice. The offer and
sale of the Registered Common Shares by the Buyer shall be registered under an
effective registration statement on Form S-4 (the "ACQUISITION SHELF
REGISTRATION STATEMENT") filed by the Buyer with the Securities and Exchange
Commission (the "SEC"). To the extent required by law, the Buyer shall prepare
as soon as reasonably practicable after the Closing a prospectus supplement or
post-effective amendment to the Acquisition Shelf Registration Statement that
would permit the offer and resale of the Registered Common Shares from time to
time by the Seller. The Buyer shall also use its best reasonable efforts to list
the Registered Common Shares for trading on the New York Stock Exchange. The
Buyer shall have no obligation to maintain the currency of any prospectus,
permit the use of any prospectus or maintain the effectiveness of the
Acquisition Shelf Registration Statement for the resale of the Registered Common
Shares once all of the Registered Common Shares that remain unsold may be sold
by the Seller without restriction pursuant to Rule 145 ("RULE 145") promulgated
by the SEC under the Securities Act of 1933, as amended, (the "SECURITIES ACT"),
or any successor regulation thereto. The Seller agrees that he
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shall effect each resale of Registered Common Shares only pursuant to a current
prospectus or supplements thereto that is a part of the Acquisition Shelf
Registration Statement (the "RESALE PROSPECTUS") with respect to which the
Buyer, for each such resale, has granted its prior consent to the use thereof.
(BB) As to any or all of the
shares of the Preferred Stock specified in the Seller's Notice, the Seller may,
in the Seller's Notice, elect to take the value of such shares of Preferred
Stock (valued at $1,000 per share) in shares of Common Stock which are subject
to the "lock-up" restrictions hereafter set forth. In such event, the Buyer will
issue and deliver to the Seller at the Closing that number of Registered Common
Shares (the "LOCK-UP REGISTERED COMMON SHARES") which would be issued on
conversion of the shares of Preferred Stock subject to such election on the date
of delivery of the Seller's Notice, but utilizing a Market Price (as defined in
the Certificate of Designation, Preferences and Rights with respect to the
Preferred Stock) which is eighty-five percent (85%) of the Market Price which
would otherwise be applicable to such conversion. Thereafter, the Seller shall
not offer, sell, contract to sell, or otherwise dispose of, any of the Lock-up
Registered Common Shares for a period of one hundred eighty (180) days from the
date of delivery of the Registered Common Shares by the Buyer.
(C) The Seller also agrees and acknowledges,
with regard to the offer or resale by him of any of the Registered Common
Shares, that:
(I) any offering of any of the
Registered Common Shares under the Resale Prospectus by the Seller will be
effected in an orderly manner through a securities dealer, acting as broker or
dealer, selected by the Buyer in its sole discretion (the "DESIGNATED BROKER");
(II) if requested by the Buyer, the
Seller will enter into one or more custody agreements with one or more banks
with respect to the Registered Common Shares so that all such Shares are held in
the custody of such bank or banks until offered pursuant to clause (I) above;
(III) the Seller will make resales
of Registered Common Shares only by one or more methods described in the Resale
Prospectus, as appropriately supplemented or amended when required;
(IV) since the Registered Common
Shares are "restricted securities" within the meaning of Rule 145, the
certificates representing the Registered Common Shares will be issued by the
Buyer to the Seller with such legends as the Buyer may reasonably require until
such Shares are offered pursuant to the foregoing terms under the Resale
Prospectus, at which time such certificates shall be tendered to the Buyer by
the Seller and a new certificate or certificates without legends shall be issued
by the Buyer to the Designated Broker in order to settle any resales by the
Seller;
(V) the Seller shall provide
the Buyer with all information concerning the Seller and its resale of the
Registered Common Shares as may then be required by the Securities Act and shall
indemnify the Buyer for any liabilities arising under the Securities Act, the
Securities Exchange Act of 1934 or any state securities laws resulting
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from any material misstatements in, or omissions of material information from,
such information provided by the Seller to the Buyer pursuant to this clause
(V);
(VI) the Seller shall pay any
and all expenses directly related to the resale of the Registered Common Shares,
including, but not limited to, the commissions or fees of the Designated Broker,
but excluding the fees and expenses of the custodial bank or banks holding the
Registered Common Shares, if applicable, which shall be borne by the Buyer; and
(VII) the Seller has received a copy
of the Buyer's most recent Annual Report on Form 10-K, Quarterly Report on Form
10-Q and proxy statement as well as all its Current Reports on Form 8-K since
the end of the Buyer's last fiscal year.
(D) The Buyer also agrees, in connection
with subsection (B) above, that:
(I) the Buyer shall pay all
expenses, including legal and accounting fees, in connection with the
preparation, filing and maintenance of the Acquisition Shelf Registration
Statement, including amendments thereto, the Resale Prospectus, including
supplements thereto, the issuance of certificates representing the Registered
Common Shares, and other expenses incurred by the Buyer in meeting its
obligations as set forth in subsection (B) above; and
(II) the Buyer shall indemnify
the Seller for any liabilities arising under the Securities Act, the Securities
Exchange Act of 1934 or any state securities laws resulting from any material
misstatements in, or omissions of material information from, the Resale
Prospectus or the Acquisition Shelf Registration Statement, including the
information incorporated by reference therein, except for liabilities required
to be indemnified by the Seller under clause (C)(V) above.
(E) To the extent that the Seller does not
timely deliver the Seller's Notice with respect to all of the shares of the
Preferred Stock, the Buyer shall deliver the Preferred Stock to the Seller at
the Closing. Thereafter, the Buyer's sole obligations with respect to such
Preferred Stock and the Common Stock issuable upon conversion thereof (the
"CONVERSION STOCK") shall be as follows:
(I) the Buyer shall use its
best reasonable efforts to make available "current public information" about
itself within the meaning of subsection (c)(1) of Rule 144 promulgated by the
SEC under the Securities Act ("RULE 144") to the extent necessary to facilitate
resales of the Conversion Stock pursuant to Rule 145(d); and
(II) the Buyer shall remove stock
transfer instructions on and restrictive legends from certificates representing
the Conversion Stock to the extent that either (x) the offer and sale of the
Preferred Stock or the Conversion Stock may hereafter be registered under the
Securities Act and under any applicable state securities laws or (y) the Buyer
has received an opinion of counsel, in form and substance reasonably
satisfactory to the Buyer, that such registration of such offer and sale is not
required; and
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(III) commencing the day after the
filing by the Buyer of its Form 8-K setting forth any required historical and
pro forma financial information concerning the acquisition transaction
contemplated by this Agreement pursuant to Item 2 of such Form, if required by
law, or otherwise commencing the date after the Closing (the "REGISTRATION
COMMENCEMENT DATE") and subject to the provisions of subsection (F) hereof, if
at any time the Buyer proposes to register any of its Common Stock under the
Securities Act in connection with the primary public offering of such securities
solely for cash on a form that would permit the registration of the resale of
the Conversion Stock by the Seller, then the Buyer shall, each such time,
promptly give the Seller written notice of such determination. Upon written
request of the Seller given within ten (10) days after the giving of such notice
by the Buyer, the Buyer shall use its best reasonable efforts to cause the
registration under the Securities Act of the offer and sale by the Seller of the
number of shares of the Conversion Stock the Seller has requested in such notice
to be registered (the "PIGGYBACK REGISTRATION"). If the Piggyback Registration
is of a type that would permit sales of the Conversion Stock from time to time
pursuant to Rule 415 promulgated by the SEC under the Securities Act, or any
successor regulation (commonly known as a "shelf registration"), then the Buyer
shall be under no obligation to cause any such shelf registration to remain
effective for more than 180 days. If necessary, the Buyer shall use its best
reasonable efforts to effect the registration of the offer and sale of the
Conversion Stock subject to the Piggyback Registration under the state
securities or blue sky laws of such states as shall be reasonably appropriate,
as determined by the Buyer in its sole discretion, for the distribution of such
Conversion Stock. The Buyer shall bear all expenses incurred in connection with
the effecting of the Piggyback Registration, except for: fees and expenses of
counsel, if any, retained by the Seller; any expenses or fees incurred in
connection with the resale of the Conversion Stock, including, but not limited
to, underwriter's fees and broker's commissions; and any blue sky registration
and filing fees in those jurisdictions where the applicable blue sky regulatory
authorities require the Seller to bear such fees, which all shall be borne by
the Seller participating therein pro rata in accordance with the relationship
between the number of the Seller's shares registered and the total number of
shares registered. The Buyer and the Seller shall indemnify each other to the
same extent as set forth in clause (D)(II) above (in the case of indemnification
by the Buyer) and clause (C)(V) above (in the case of indemnification by the
Seller). The Seller's rights to Piggyback Registration hereunder shall also be
subject to customary limitations, in the context of an underwritten offering,
regarding underwriter cutbacks and any pro-rations with other holders of
registration rights. The right to Piggyback Registration hereunder shall
terminate at such time as the holders of the Seller's Conversion Stock are able
to sell all of such Conversion Stock without restrictions under Rule 144.
(F) If requested by the managing or lead
managing underwriter for any Piggyback Registration which is an underwritten
public offering, the Seller shall execute and deliver such underwriting
agreement with the managing or lead managing underwriter in such form as is
customarily used by such underwriter with any modifications as the parties
thereto shall agree. In connection with any such registration, the Seller shall
supply to the Buyer such information as may be reasonably requested by the Buyer
in connection with the preparation and filing of a registration statement with
the SEC. The Seller shall not supply any information to the Buyer for inclusion
in such registration statement that will, taken as a whole, at the time the
registration statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
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(G) Notwithstanding any provision of
this Agreement to the contrary, the Seller shall not have any right to take any
action (and the Seller hereby agrees that it shall not take any action) to
restrain, enjoin or otherwise delay any registration as a result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement. Nothing contained in this Subsection G shall
prevent the Seller from making a claim for monetary relief.
(c) ADJUSTMENT PROCEDURES.
(1) Not later than 60 days after the Closing
Date, the Buyer will prepare and deliver to the Seller an unaudited consolidated
balance sheet (the "CLOSING BALANCE SHEET") of the Companies as of the Closing
Date, consisting of a computation of the consolidated net book value of the
tangible assets of the Companies as of the Closing Date, less the consolidated
book value of the liabilities of the Companies as of the Closing Date, all as
determined in accordance with generally accepted accounting principles
consistently applied ("GAAP") and utilizing the first in-first out (FIFO) method
of inventory accounting. In preparing the Closing Balance Sheet: (A) no 1997 or
older vehicles shall be included in new vehicle inventory; (B) used vehicle
inventories shall be valued as mutually agreed by the Buyer and the Seller,
based upon a physical inventory to be conducted by them not later than the
Business Day immediately preceding the Closing Date, PROVIDED, HOWEVER, that
with respect to any used vehicle as to which the Buyer and the Seller cannot
agree upon a value, such vehicle shall be valued as proposed by the Buyer,
except that the applicable Merging Company may sell such used vehicle prior to
the Closing Date (including a sale to the Seller) at a price to be determined by
the Seller; (C) parts inventories shall be valued in the same manner as "Parts"
are valued in the Asset Purchase Agreement; (D) the liabilities of the Companies
shall include any tax liabilities associated with the conversion from the last
in-first out (LIFO) method of accounting to the FIFO method of accounting and
tax liabilities associated with the distribution of the Hartsville properties;
(E) there shall be included appropriate write-offs for doubtful accounts
receivable and bad debts and for damaged, spoiled, obsolete or slow-moving
inventory; (F) there shall be included an appropriate reserve for liabilities of
the Companies, as well as for the "Sellers" under the Asset Purchase Agreement,
in connection with the issuance by the Companies and such "Sellers" of extended
warranties; and (G) the tangible net book value will be calculated without
giving effect to the value of any real property or leasehold improvements. The
tangible net book value reflected on the Closing Balance Sheet is hereinafter
called the "NET BOOK VALUE." The cost of parts inventory counts shall be borne
equally by the Buyer, on the one hand, and the Seller, on the other hand.
(2) 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 issues in dispute will be submitted to a "Big Six" accounting
firm mutually acceptable to the Buyer and the Seller (the "ACCOUNTANTS") for
resolution. If issues in dispute are submitted to the Accountants for
resolution: (A) each party will furnish to the Accountants such workpapers and
other documents and information relating to the disputed issues as the
Accountants may request and are available to the party or its
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subsidiaries (or its independent public accountants), and will be afforded the
opportunity to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants; (B) the
Accountants will be instructed to determine the Net Book Value based upon their
resolution of the issues in dispute; (C) such determination by the Accountants
of the Net Book Value, as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties; and (D) the Buyer
and the Seller shall each bear 50% of the fees and expenses of the Accountants
for such determination.
(3) 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 $7,581,000 (the "NET BOOK VALUE EXCESS"), the Buyer
shall be obligated to pay the amount of the Net Book Value Excess promptly to
the Seller. Payment of the Net Book Value Excess, up to $500,000 thereof (i.e.,
up to $8,081,000 of Net Book Value), shall be by the issuance of additional
shares of Preferred Stock at the rate of one whole share of Preferred Stock for
each $1,000 of such Net Book Value Excess, up to a maximum of 500 whole shares
of Preferred Stock (no fractional shares of Preferred Stock are to be issued;
any such fractional shares are to be paid in cash). The Seller shall have the
same rights with respect to such shares of Preferred Stock to elect, pursuant to
Section 1.2(b)(2)(B) and (BB), to take up to all of them in shares of registered
Common Stock, with the Seller's Notice related thereto to be given not sooner
than twenty (20) Business Days after receipt by the Seller of the Prospectus
with respect thereto and not later than ten (10) Business Days prior to the
issuance thereof by the Buyer. To the extent that the Seller does not elect to
take such shares of registered Common Stock, the provisions of Section
1.2(b)(2)(E) and (F) shall be applicable. Payment of the Net Book Value Excess
in excess of $500,000 (i.e., Net Book Value in excess of $8,081,000) shall be
made in cash in the same manner as the payment of the cash portion of the Merger
Consideration at the Closing. Payment of the Net Book Value Excess (whether the
same be paid in shares of the Buyer's stock or in cash) shall be made together
with interest, payable in cash, on the amount of the Net Book Value Excess at
the Buyer's floor plan financing rate from time to time in effect (the "INTEREST
RATE") from the Closing Date to the date of such payment. 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 $7,581,000 (the "NET BOOK VALUE
SHORTFALL"), the Seller shall be obligated to pay the amount of the Net Book
Value Shortfall promptly to the Buyer. In furtherance of such obligation of the
Seller, the parties shall execute and deliver to the Escrow Agent a joint
instruction to deliver up to all of the Escrow Amount to the Buyer. To the
extent that the Net Book Value Shortfall exceeds the Escrow Amount, the Seller
shall be obligated to pay the amount of such excess promptly to the Buyer,
together with interest, payable in cash, on the amount of such excess at the
Interest Rate from the Closing Date to the date of such payment. Any interest
earned on the Escrow Amount shall be paid to the Buyer and/or the Seller in
proportion to their respective shares of the Escrow Amount paid to them.
(4) With respect to the payment by the Buyer to
the Seller of any Net Book Value Excess in cash pursuant to Section 1.2(c)(3)
above, the Seller shall deliver to the Buyer within fifteen (15) days of such
payment, written notice of the amount of federal and state capital gains taxes,
if any, payable by the Seller on such cash payment. Such notice shall set forth
in reasonable detail a calculation of such capital gains taxes on such cash
payment pursuant to Section 1.2(c)(3) above for each Seller in accordance with
the applicable provisions of the U.S. federal and State of South Carolina income
tax laws and regulations. Within fifteen (15) days of receipt of such notice by
the Buyer, the Buyer shall reimburse the Seller for such capital
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gains tax liability by paying to the Seller cash in the amount of his tax
liabilities as set forth in such notice; PROVIDED, HOWEVER, the Buyer's
obligation under this Section 1.2(c)(4) shall not exceed a maximum aggregate
total of $378,000.
1.3 DELIVERY OF THE SHARES.
(a) At the Closing, the Seller shall deliver to the Buyer a
certificate or certificates representing all of 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. If such
certificate or certificates cannot, after a diligent search, be located, in lieu
of such certificate or certificates, the Seller shall provide an affidavit of
lost certificate and indemnity in a form reasonably satisfactory to the Buyer.
Upon such surrender by the Seller, the Seller shall be entitled to the Merger
Consideration, as more fully provided in Section 1.2 above. Until surrendered in
accordance with Section 1.3, each such certificate for the Shares shall be
deemed for all purposes to evidence only the right to receive the Merger
Consideration payable pursuant to Section 1.2.
(b) 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").
(c) It shall be a condition to the Buyer's obligations at the
Closing that all the Shares shall have been voted in favor of the Merger, such
that no appraisal or dissenters' rights under applicable law shall be available
to the Seller.
1.4 NON-COMPETITION AGREEMENT. At the Closing, the Seller will enter
into a non-competition agreement with the Buyer and the Subs substantially in
the form of Exhibit D hereto (the "NON-COMPETITION AGREEMENT"). The amount of
the Merger Consideration allocated to the Non-Competition Agreement shall be
$10,000.
1.5 SELLER'S COVENANT TO CLOSE. The Seller further covenants and agrees
to vote all of the Shares held by him in favor of the Merger, and otherwise to
take all officer, director, or shareholder actions necessary to cause the
Companies to adopt, approve, and consummate, the Merger.
ARTICLE 2
CLOSING
The Closing shall take place at the offices of Parker, Poe, ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, Charlotte, North Carolina, at 9:30 a.m., local time, on the
Closing Date. The Closing Date shall be the fifth (5th) Business Day, or such
shorter period as the Buyer may choose, but in no event sooner than January 1,
1999, following the date the Buyer gives notice of the Closing to the Seller,
but in no event later than the date which is sixty (60) days from the date of
this Agreement (the "CLOSING DATE DEADLINE"); PROVIDED, HOWEVER, if as of the
Closing Date Deadline, the consents or approvals of the Manufacturer
contemplated in Section 7.10 shall not have been obtained and/or the audited
financial statements contemplated in Section 7.13 shall
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not have been completed, or the conditions to Closing set forth in Sections 8.8
or 8.13 of the Asset Purchase Agreement shall not have been satisfied, the Buyer
may elect to extend the Closing Date Deadline for up to an additional sixty (60)
days. The date upon which the Closing shall take place is hereinafter called 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. The Seller has, and will have at the time of
the Closing, good and valid title to the Shares, free and clear of all
Encumbrances.
3.2 SELLER'S POWER AND AUTHORITY; CONSENTS AND APPROVALS.
(a) The Seller has full 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.
(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, 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 his
obligations hereunder and thereunder.
3.3 EXECUTION AND ENFORCEABILITY. This Agreement and the other
agreements, documents and instruments to be executed by the Seller in connection
herewith, and the consummation by the Seller of the transactions contemplated
hereby and thereby, have been duly authorized, executed and delivered by the
Seller and constitute, and the other agreements, documents and instruments
contemplated hereby, when 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
similar laws affecting the enforcement of creditors' rights generally.
3.4 LITIGATION REGARDING SELLER. There are no actions, suits, claims,
investigations or legal, administrative or arbitration proceedings pending or,
to the Seller's knowledge, threatened or probable of assertion, against the
Seller relating to the Shares, this Agreement or the transactions contemplated
hereby before any court, governmental or administrative agency or other body.
The Seller does not know of any basis for the institution of any such suit or
proceeding. 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 relating to the Shares, this
Agreement or the transactions contemplated hereby.
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3.5 INTEREST IN COMPETITORS AND RELATED ENTITIES; CERTAIN TRANSACTIONS.
(a) Except as set forth on Schedule 3.5 hereto, neither the
Seller nor any Affiliate of the Seller (i) has any direct or indirect interest
in any person or entity engaged or involved in any business which is competitive
with the business of any of the Companies, (ii) has any direct or indirect
interest in any person or entity which is a lessor of assets or properties to,
material supplier of, or provider of services to, any of the Companies, or (iii)
has a beneficial interest in any contract or agreement to which any of the
Companies is a party; PROVIDED, HOWEVER, that the foregoing representation and
warranty shall not apply to any person or entity, or any interest or agreement
with any person or entity, which is a publicly held corporation in which the
Seller individually owns less than 3% of the issued and outstanding voting
stock. For purposes of this Agreement, the term "AFFILIATE" shall mean any
entity directly or indirectly controlling, controlled by or under common control
with the specified person, whether by stock ownership, agreement or otherwise,
or any parent, child or sibling of such specified person and the concept of
"CONTROL" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of such person or entity,
whether through the ownership of voting securities, by contract or otherwise.
(b) Except as set forth in Schedule 3.5 hereto, there are no
transactions between any of the Companies and the Seller (including the Seller's
Affiliates), or any of the directors, officers or salaried employees of any of
the Companies, or the family members or Affiliates of any of the above (other
than for services as employees, officers and directors), including, without
limitation, any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from, the Seller, or
any such officer, director or salaried employee, family member, or Affiliate or
any corporation, partnership, trust or other entity in which such family member,
Affiliate, officer, director or employee has a substantial interest or is a
shareholder, officer, director, trustee or partner.
3.6 SELLER NOT A FOREIGN PERSON. The Seller 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; QUALIFICATIONS; AND POWER. Each of the
Companies is a corporation duly organized, validly existing and in good standing
under the laws of the State of South Carolina and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of the Companies is qualified to do business as a
foreign corporation and is in good standing in each of the jurisdictions listed
on Schedule 3.7 hereto, which are the only jurisdictions where the nature of its
business and assets requires such qualification.
3.8 CAPITALIZATION. Schedule 3.8 hereto sets forth the authorized
capital stock of each of the Companies, the number of shares of such authorized
capital stock outstanding and the identity of the record holders thereof. All of
the Shares are duly authorized, validly issued, fully paid and non-assessable
and are held by the Seller in the amounts indicated on Schedule 3.8 hereto.
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 Companies,
and there are no outstanding options, warrants, "phantom" stock plans,
subscriptions, agreements, plans or other
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commitments pursuant to which any of the Companies is or may become obligated to
sell or issue any shares of its capital stock or any other debt or equity
security, and there are no outstanding securities convertible into shares of
such capital stock or any other debt or equity security.
3.9 SUBSIDIARIES AND INVESTMENTS. None of the Companies owns or
maintains, directly or indirectly, any capital stock of or other equity or
ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity and does not have any
commitment to contribute to the capital of, make loans to, or share in the
losses of, any such entity.
3.10 NO VIOLATION; CONFLICTS. Except as set forth on Schedule 3.10
hereto, the execution and delivery by the Seller of this Agreement and the other
agreements, documents and instruments to be executed and delivered by the Seller
in connection herewith, the consummation by the Seller of the transactions
contemplated hereby and thereby and the performance by the Seller of his
obligations hereunder and thereunder do not and will not (a) conflict with or
violate any of the terms of the Articles of Incorporation or By-Laws of any of
the Companies, (b) violate or conflict with any 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, applicable to
any of the Companies, (c) violate or conflict with the terms of, or result in
the acceleration of, any indebtedness or obligation of any of the Companies
under, or violate or conflict with or result in a breach of, or constitute a
default under, any indenture, mortgage, deed of trust, agreement or instrument
to which any of the Companies is a party or by which any of the Companies or any
of its assets or properties is bound or affected, (d) result in the creation or
imposition of any Encumbrance of any nature upon any of the assets or properties
of any of the Companies, (e) constitute an event permitting termination of any
agreement, license or other right of any of the Companies, or (f) require any
authorization, approval or consent of, or any notice to or filing or
registration with, any governmental agency or body, or any other third party,
applicable to any of the Companies or any of its properties or assets.
3.11 TITLE TO ASSETS; RELATED MATTERS. Each of the Companies has good
and valid title to all assets, rights, interests and other properties, real,
personal and mixed, tangible and intangible, owned by it (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. The Assets (a)
include all properties and assets (real, personal and mixed, tangible and
intangible) owned by each of the Companies; (b) do not include (i) any contracts
for future services, prepaid items or deferred charges the full value or benefit
of which will not be usable by or transferable to the Buyer, or (ii) any
goodwill, organizational expense or other similar intangible asset.
3.12 POSSESSION. The tangible assets included within the Assets are in
the possession or control of the respective Companies and 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.
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3.13 FINANCIAL STATEMENTS.
(a) The Seller has delivered to the Buyer prior to the
date hereof:
(i) the unaudited annual balance sheets of the
Companies as of the dates stated on Schedule 3.13 hereto and the related
unaudited statements of income, stockholders' equity and changes in cash flows
for the fiscal years then ended (including the notes thereto and any other
information included therein) (collectively, the "ANNUAL FINANCIAL STATEMENTS");
and
(ii) the unaudited balance sheet of the Companies
as of the date stated on Schedule 3.13 hereto and the related unaudited
statements of income, stockholders' equity and changes in cash flow for the
interim period ended as of the date of such unaudited statements (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 with the
books and records of the respective Companies, which books and records are true,
correct and complete, (ii) fully and fairly present the financial position of
the respective Companies as of the dates indicated and the results of operation,
stockholders' equity and changes in cash flows of the respective Companies for
the periods indicated, and (iii) except as set forth in Schedule 3.13, have been
prepared in accordance with the income tax basis of accounting.
3.14 ACCOUNTS RECEIVABLE. All accounts receivable of the Companies are
collectible at the aggregate recorded amounts thereof, subject to the reserve
for doubtful accounts maintained by the Companies in the ordinary course of
business, and are not subject to any known counterclaims or setoffs.
3.15 INVENTORIES. All inventories of the Companies consist of items of
a quality and quantity usable and saleable in the ordinary course of business of
the Companies, and the levels of inventories are consistent with the levels
maintained by the Companies in the ordinary course consistent with past practice
and the respective Companies' obligations under their agreements with all
applicable vehicle manufacturers and distributors. The values at which such
inventories are carried are based on the LIFO method and are stated in
accordance with income tax basis of accounting by the Seller at the lower of
historic cost or market.
3.16 REAL PROPERTY; MACHINERY AND EQUIPMENT.
(a) OWNED REAL PROPERTY. The Companies own no real property.
(b) LEASED PREMISES. Schedule 3.16(b) hereto contains a
complete list and description (including buildings and other structures thereon)
of all real property of which the each of the Companies is a tenant (herein
collectively referred to as the "LEASED PREMISES," and also 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
are in good physical condition, ordinary wear and tear excepted, and, with
respect to each Lease, no event or condition currently exists which would give
rise to a material repair or restoration obligation if
14
such Lease were to terminate. 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). The improvements and building systems
which comprise a part of the Leased Premises as to which each of the Companies
is responsible for the maintenance and repair thereof are in good condition,
maintenance and repair, ordinary wear and tear excepted.
(c) CLAIMS. 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 there is no
person or entity other than the respective Companies in or entitled to
possession of the Real Property.
(d) EASEMENTS, ETC. Each of the Companies has all easements
and rights, including, but not limited to, easements for power lines, water
lines, sewers, roadways and other means of ingress and egress, necessary to
conduct the business such 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) CONDEMNATION. 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 the Seller does not know of any such condemnation, expropriation,
sale or taking, or have any grounds to anticipate that any 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) ZONING, ETC. Except as set forth on Schedule 3.16(f)
hereto, none of the Real Property is in violation of any public or private
restriction or any law or any building, zoning, health, safety, fire or other
law, ordinance, code or regulation, and no notice from any governmental body has
been served upon any of the Companies or upon any of the Real Property claiming
any violation of any such law, ordinance, code or regulation or requiring or
calling to the attention of such Company the need for any work, repair,
construction, alterations or installation on or in connection with said
properties which has not been complied with. 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.
15
(g) OWNED EQUIPMENT. Schedule 3.16(g) hereto sets forth a list
of all material machinery, equipment, motor vehicles, furniture and fixtures
owned by each of the Companies (collectively, the "OWNED EQUIPMENT").
(h) LEASED EQUIPMENT. Schedule 3.16(h) hereto contains a list
of all leases or other agreements, whether written or oral, under which each of
the Companies is lessee of or holds or operates any items of machinery,
equipment, motor vehicles, furniture and fixtures or other property (other than
real property) owned by any third party (collectively, the "LEASED EQUIPMENT").
(i) MAINTENANCE OF EQUIPMENT. The Owned Equipment and the
Leased Equipment are in good operating condition, maintenance and repair in
accordance with industry standards taking into account the age thereof.
3.17 PATENTS; TRADEMARKS; TRADE NAMES; 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, inventions, trade
secrets, computer software, logos, slogans, proprietary processes and formulae
and all other proprietary information, know-how and intellectual property
rights, whether patentable or unpatentable, that are owned or leased by the
Companies or used in the conduct of the Companies' business. None of the
Companies is a party to, and no Company pays a royalty to anyone under, any
license or similar agreement. There is no existing claim, or, to the knowledge
of the Seller, any basis for any claim, against any of the Companies that any of
its operations, activities or products infringe the patents, trademarks, trade
names, copyrights or other property rights of others or that any of the
Companies is wrongfully or otherwise using the property rights of others.
(b) The Companies have the right (under common law) to use the
name "▇▇▇▇▇▇▇ Chevrolet World" in the State of South Carolina and, to the
knowledge of the Seller, no person uses, or has the right to use, such name or
any derivation thereof in connection with the manufacture, sale, marketing or
distribution of products or services commonly associated with an automobile
dealership.
3.18 CERTAIN LIABILITIES.
(a) All accounts payable by the Companies to third parties as
of the date hereof arose in the ordinary course of business and none are
delinquent or past-due.
(b) Schedule 3.18 hereto sets forth a list of all indebtedness
of the Companies, other than accounts payable, as of the close of business on
the day preceding the date hereof, for money borrowed, indebtedness of the
Companies 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. None of the Companies has any
material liabilities or obligations of any nature, known or unknown, fixed or
contingent, matured or unmatured, other
16
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, or (c) disclosed
specifically on Schedule 3.19 hereto.
3.20 ABSENCE OF CHANGES. Since December 31, 1997, the businesses of the
Companies 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:
(a) Any damage, destruction or loss (whether or not covered by
insurance), adversely affecting the business or assets of any of the Companies
in excess of $50,000; (b) Any strikes, work stoppages or other labor disputes
involving the employees of any of the Companies; (c) Any sale, transfer, pledge
or other disposition of any of the Assets of any of the Companies having an
aggregate book value of $50,000 or more (except sales of vehicles and parts
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; (e) Any
amendment, termination, waiver or cancellation of any Material Agreement (as
defined in Section 3.29 hereof) or any termination, amendment, waiver or
cancellation of any material right or claim of any of the Companies under any
Material Agreement (except in each case in the ordinary course of business and
consistent with past practice); (f) Any (1) general uniform increase in the
compensation of the employees of any of the Companies (including, without
limitation, any increase pursuant to any bonus, pension, profit-sharing,
deferred compensation or other plan or commitment), (2) increase in any such
compensation payable to any individual officer, director, consultant or agent
thereof, or (3) loan or commitment therefor made by any of the Companies to any
officer, director, stockholder, employee, consultant or agent of any of the
Companies; (g) Any change in the accounting methods, procedures or practices
followed by any of the Companies or any change in depreciation or amortization
policies or rates theretofore adopted by any of the Companies; (h) Any material
change in policies, operations or practices of any of the Companies with respect
to business operations followed by any of the Companies, including, without
limitation, with respect to selling methods, returns, discounts or other terms
of sale, or with respect to the policies, operations or practices of any of the
Companies concerning the employees of any of the Companies; (i) Any capital
appropriation or expenditure or commitment therefor on behalf of any of the
Companies in excess of $50,000 individually or $100,000 in the aggregate; (j)
Any write-down or write-up of the value of any inventory or equipment of any of
the Companies or any increase in inventory levels in excess of historical levels
for comparable periods; (k) Any account receivable in excess of $50,000 or note
receivable in excess of $50,000 owing to any of the Companies which (1) has been
written off as uncollectible, in whole or in part, (2) has had asserted against
it any claim, refusal or right of setoff, or (3) the account or note debtor has
refused to, or threatened not to, pay for any reason, or such account or note
debtor has become insolvent or bankrupt; (l) Any other change in the condition
(financial or otherwise), business operations, assets, earnings, business or
prospects of any of the Companies which, in the judgment of the Seller, has, or
could reasonably be expected to have, a material adverse effect on the assets,
business or operations of any of the Companies; or (m) Any agreement, whether in
writing or otherwise, for any of the Companies to take any of the actions
enumerated in this Section 3.20.
17
3.21 TAX MATTERS.
(a) All federal, state and local tax returns and tax reports
required as of the date hereof to be filed by the Companies 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 Companies
with the appropriate governmental agencies, and all such returns and reports are
true, correct and complete.
(b) 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 Companies for
all periods prior to the date hereof have been fully paid or adequately reserved
for by the Companies or, with respect to Taxes required to be accrued, each of
the Companies has properly accrued or will properly accrue such Taxes in the
ordinary course of business consistent with past practice of such Company.
(c) Except for the tax years indicated on Schedule 3.21 hereto,
the federal income tax returns of the Companies have not been examined by the
Internal Revenue Service ("IRS"). Except as set forth on Schedule 3.21 hereto,
none of the Companies has received any notice of any assessed or proposed claim
or deficiency against it in respect of, or of any present dispute between it and
any governmental agency concerning, any Taxes. Except as set forth on Schedule
3.21 hereto, no examination or audit of any tax return or report of any of the
Companies 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 any of the Companies.
Copies of all federal, state and local tax returns and reports required to be
filed by the Companies for the years ended 1997, 1996, 1995, 1994, 1993 and
1992, together with all schedules and attachments thereto, have been delivered
by the Seller to the Buyer.
(d) Except as set forth on Schedule 3.21 hereto, none of the
Companies is now, and none has ever been, a member of a consolidated group for
federal income tax purposes or a consolidated, combined or similar group for
state tax purposes. No consent under Code Section 341 has been made affecting
any of the Companies. None of the Companies is a party to any agreement or
arrangement that would result in the payment of any "excess parachute payments"
under Code Section 280G. None of the Companies is required to make any
adjustment under Code Section 481(a). No power of attorney relating to Taxes is
currently in effect affecting any of the Companies.
3.22 COMPLIANCE WITH LAWS, ETC. Each of the Companies has conducted its
operations and business in compliance with, and all of the Assets (including all
of the Real Property) comply with, (i) all applicable laws, rules, regulations
and codes (including, without limitation, any laws, rules, regulations and codes
relating to anticompetitive 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 (ii) all
applicable orders, rules, writs, judgments, injunctions, decrees and ordinances.
None of the Companies has received any 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,
18
decrees and other awards of any court or governmental agency applicable to each
of the Companies and/or its business or operations. The Seller has delivered to
the Buyer copies of all reports, if any, of the Companies required to be
submitted under the Federal Occupational Safety and Health Act of 1970, as
amended, and under all other applicable health and safety laws and regulations.
The deficiencies, if any, noted on such reports have been corrected by the
respective Companies and any deficiencies noted by inspection through the
Closing Date will have been corrected by the respective Companies by the Closing
Date.
3.23 LITIGATION REGARDING THE COMPANIES . Except as set forth on
Schedule 3.23 hereto, there are no actions, suits, claims, investigations or
legal, administrative or arbitration proceedings pending, or, to the Seller's
knowledge, threatened or probable of assertion, against any of the Companies or
relating to any of their respective assets, business or operations or the
transactions contemplated by this Agreement, and the Seller does not know of any
basis for the institution of any such suit or proceeding. No order, writ,
judgment, injunction, decree or similar command of any court or any governmental
or administrative agency or other body has been entered against or served upon
any of the Companies relating to any of the Companies or any of their respective
assets, businesses or operations.
3.24 PERMITS, ETC. Set forth on Schedule 3.24 hereto is a list of all
governmental licenses, permits, approvals, certificates of inspection and other
authorizations, filings and registrations that are necessary for the Companies
to own and operate their respective businesses as presently conducted
(collectively, the "PERMITS"). All such Permits have been duly and lawfully
secured or made by the Companies and are in full force and effect. There is no
proceeding pending, or, to the Seller's knowledge, threatened or probable of
assertion, to revoke or limit any such Permit.
3.25 EMPLOYEES; LABOR RELATIONS. As of the date hereof, the Companies
employed the number of employees specified on Schedule 3.25 hereto. As of the
date hereof, (a) none of the Companies is delinquent in the payment (i) to or on
behalf of its past or present employees of any wages, salaries, commissions,
bonuses, benefit plan contributions or other compensation for all periods prior
to the date hereof, or (ii) of any amount which is due and payable to any state
or state fund pursuant to any workers' compensation statute, rule or regulation
or any amount which is due and payable to any workers' compensation claimant;
(b) there are no collective bargaining agreements currently in effect between
any of the Companies and labor unions or organizations representing any
employees of the Companies; (c) no collective bargaining agreement is currently
being negotiated by any of the Companies; (d) to the knowledge of the Seller,
there are no union organizational drives in progress and there has been no
formal or informal request to any of the Companies for collective bargaining or
for an employee election from any union or from the National Labor Relations
Board; and (e) no dispute exists between any of the Companies and any of their
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.
3.26 COMPENSATION. Schedule 3.26 contains a schedule of all employees
(including sales representatives) and consultants of the Companies whose
individual cash compensation for the year ended December 31, 1997, is in excess
of $100,000, together with the amount of total compensation paid to each such
person for the twelve month period ended December 31, 1997
19
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)
and related documents, established, maintained or contributed to by the
Companies (which shall include for this purpose and for the purpose of all of
the representations in this Section 3.27, the Seller and all employers, whether
or not incorporated, that are treated together with the Companies as a single
employer within the meaning of Section 414 of the Code). The term "EMPLOYEE
PLAN" shall include all plans described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and also shall
include, without limitation, any deferred compensation, stock, employee or
retiree pension benefit, welfare benefit or other similar fringe or employee
benefit 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 Companies and maintained or contributed to
by the Companies.
(b) Where applicable, each Employee Plan (i) has been
administered in material compliance with the terms of such Employee Plan and the
requirements of ERISA and the Code; and (ii) is in material compliance with the
reporting and disclosure requirements of ERISA and the Code. None of the
Companies maintains or 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 is 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 could result in any material liability (whether or not asserted
as of the date hereof) of any of the Companies or any ERISA affiliate pursuant
to Section 412 of the Code arising under or related to any event, act or
omission occurring on or prior to the date hereof. Each Employee Plan that is
intended to qualify under Section 401(a) or to be exempt under Section 501(c) of
the Code is so qualified or exempt as of the date hereof in each case as such
Employee Plan has received favorable determination letters from the Internal
Revenue Service with respect thereto. To the knowledge of the Seller, the
amendments to and operation of any Employee Plan subsequent to the issuance of
such determination letters do not adversely affect the qualified status of any
such Employee Plan. No Employee Plan has an "accumulated funding deficiency" as
of the date hereof, whether or not waived, and no waiver has been applied for.
None of the Companies has made any promises or incurred any liability under any
Employee Plan or otherwise to provide health or other welfare benefits to former
employees of the Companies, except as specifically required by law. There are no
pending or, to the best knowledge of the Seller, threatened, claims (other than
routine claims for benefit) or lawsuits with respect to any of the Companies'
Employee Plans. As used in this Section 3.27, all technical terms enclosed in
quotation marks shall have the meaning set forth in ERISA.
3.28 POWERS OF ATTORNEY. There are no persons, firms, associations,
corporations or business organizations or entities holding general or special
powers of attorney from any of the Companies.
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3.29 MATERIAL AGREEMENTS.
(a) LIST OF MATERIAL AGREEMENTS. 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 are material to the
Companies or their respective businesses or assets (collectively, the "MATERIAL
AGREEMENTS"). 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) PERFORMANCE, DEFAULTS, ENFORCEABILITY. Each of the
Companies has in all material respects performed all of its obligations required
to be performed by it to the date hereof, and is not in default or alleged to be
in default in any material respect, under any Material Agreement, and there
exists no event, condition or occurrence which, after notice or lapse of time or
both, would constitute such a default. To the knowledge of the Seller, no other
party to any Material Agreement is in default in any respect of any of its
obligations thereunder. Each of the Material Agreements is valid and in full
force and effect and enforceable against the parties thereto in accordance with
their respective terms, and, except as set forth in Schedule 3.29(b) hereto, the
consummation of the transactions contemplated by this Agreement will not (i)
require the consent of any party thereto or (ii) constitute an event permitting
termination thereof.
3.30 BROKERS' OR FINDERS' FEES, ETC. No agent, broker, investment
banker, person or firm acting on behalf of any of the Companies or the Seller or
any person, firm or corporation affiliated with the Seller or under his
authority is or will be entitled to any brokers' or finders' fee or any other
commission or similar fee directly or indirectly from any of the parties hereto
in connection with the sale of the Shares contemplated hereby, other than any
such fee or commission the entire cost of which will be borne by the Seller.
3.31 BANK ACCOUNTS, CREDIT CARDS, SAFE DEPOSIT BOXES AND CELLULAR
TELEPHONES. Schedule 3.31 hereto lists all bank accounts, credit cards and safe
deposit boxes in the name of, or controlled by, the respective Companies, and
all cellular telephones provided and/or paid for by the respective Companies,
and details about the persons having access to or authority over such accounts,
credit cards, safe deposit boxes and cellular telephones.
3.32 INSURANCE.
(a) Schedule 3.32(a) hereto contains a list of all policies of
liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and any other insurance and bonds maintained by, or on
behalf of, the Companies on their respective properties, operations,
inventories, assets, business or personnel (specifying the insurer, amount of
coverage, type of insurance, policy number and any pending claims in excess of
$5,000 thereunder). Each such insurance policy identified therein is and shall
remain in full force and effect on and as of the Closing Date and none of the
Companies is in default with respect to any provision contained in any such
insurance policy and has not failed to give any notice or present any claim
under any such insurance policy in a due and timely fashion. The insurance
maintained by, or on behalf of, the respective Companies is adequate in
accordance with the standards of business of comparable size in the industry in
which the Companies operate and no notice of cancellation or termination has
been received with respect to any such policy. None of the Companies has,
21
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 any of the Companies during the past five (5) years,
all of which are fully satisfied or are being defended by the insurance carrier
and involve no exposure to the Companies.
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 Companies (separate and distinct from any applicable manufacturers',
suppliers' or other third-parties' warranties or disclaimers of warranties)
during the past five (5) years to customers or users of the vehicles, parts,
products or services of the Companies. There have been no breach of warranty or
breach of representation claims against any of the Companies during the past
five (5) years which have resulted in any cost, expenditure or exposure to any
of the Companies of more than $100,000 individually or in the aggregate.
3.34 DIRECTORS AND OFFICERS. Set forth on Schedule 3.34 hereto is a
true and correct list of the names and titles of each director and officer of
each of the Companies.
3.35 SUPPLIERS AND CUSTOMERS. None of the Companies is required to
provide bonding or any other security arrangements in connection with any
transactions with any of its respective customers and suppliers. To the
knowledge of the Seller, no such supplier, customer or creditor intends or has
threatened, or reasonably could be expected, to terminate or modify any of its
relationships with any of the Companies.
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 present
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, 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, including, but not
limited to, any hazardous substance or constituent contained within any waste
and any other pollutant, material, substance or waste regulated under or as
defined by any Environmental Law.
(b) Each of the Companies has obtained all permits, licenses
and other authorizations or approvals required under Environmental Laws for the
conduct and operation of the Assets and the business of such Company
("ENVIRONMENTAL PERMITS"). All such Environmental Permits are in good standing,
each of the Companies is and has been in compliance with the terms and
conditions of all such Environmental Permits, and no appeal or any other action
is pending or threatened to revoke any such Environmental Permit.
22
(c) The Companies and their respective businesses, operations
and assets are and have been in compliance with all Environmental Laws in all
material respects.
(d) Except as set forth on Part (d) of Schedule 3.36 hereto,
neither any of the Companies nor the Seller has received any written 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 or any other
environmental condition on, in or under the Real Property or any other property
formerly owned, used or leased by any of the Companies, (ii) any other
circumstances forming the basis of any actual or alleged violation by any of the
Companies or the Seller of any Environmental Law or any liability of any of the
Companies or the Seller under any Environmental Law, (iii) any remedial or
removal action required to be taken by any of the Companies or the Seller 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 is the Seller aware of any facts which might
reasonably give rise to such notice or communication. Neither any of the
Companies nor the Seller has entered into any agreements concerning any removal
or remediation of Hazardous Materials.
(e) Except as set forth on Part (e) of Schedule 3.36, no
lawsuits, claims, civil actions, criminal actions, administrative proceedings,
investigations or enforcement or other actions are pending or, to the Seller's
knowledge, threatened under any Environmental Law with respect to the Companies,
the Seller or the Real Property.
(f) Except as set forth on Part (f) of Schedule 3.36, no
Hazardous Materials are or have been released, discharged, spilled or disposed
of by the Companies onto, or, to the knowledge of the Seller, migrated onto, the
Real Property or any other property previously owned, operated or leased by the
Companies, and, to the knowledge of the Seller, no environmental condition
exists (including, without limitation, the presence, release, threatened release
or disposal of Hazardous Materials) related to the Real Property, to any
property previously owned, operated or leased by any of the Companies, or to any
of the Companies' past or present operations, which would constitute a violation
of any Environmental Law or otherwise give rise to costs, liabilities or
obligations under any Environmental Law.
(g) Except as set forth on Part (g) of Schedule 3.36, neither
any of the Companies nor the Seller, nor, to the knowledge of the Seller, any of
their respective predecessors in interest, has transported or disposed of, or
arranged for the transportation or disposal of, any Hazardous Materials to any
location (i) which is listed on the National Priorities List, the CERCLIS list
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or any similar federal, state or local list, (ii) which is
the subject of any federal, state or local enforcement action or other
investigation, or (iii) about which any of the Companies or the Seller has
received or has reason to expect to receive a potentially responsible party
notice or other notice under any Environmental Law.
(h) To the knowledge of the Seller, no environmental lien has
attached or is threatened to be attached to the Real Property.
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(i) To the knowledge of the Seller, no employee of any of the
Companies in the course of his or her employment with any of the Companies has
been exposed to any Hazardous Materials or other substance, generated, produced
or used by any of the Companies which could give rise to any claim (whether or
not such claim has been asserted) against any of the Companies.
(j) Except as set forth on Schedule 3.36 hereto, none of the
Sellers has placed upon the Real Property and, to the knowledge of the Seller,
the Real Property does not contain, any: (i) septic tanks into which process
wastewater or any Hazardous Materials have been disposed; (ii) asbestos; (iii)
polychlorinated biphenyls (PCBs); (iv) underground injection or monitoring
▇▇▇▇▇; or (v) underground storage tanks.
(k) Except as set forth on Schedule 3.36, there have been no
environmental studies or reports made by the Seller or the Companies or, to the
knowledge of the Seller, any other person, relating to the Real Property or any
other property or facility previously owned, operated or leased by any of the
Companies.
(l) Except as set forth on Part (l) of Schedule 3.36, none of
the Companies has agreed to assume, defend, undertake, guarantee, or provide
indemnification for, any liability, including, without limitation, any
obligation for corrective or remedial action, of any other person under any
Environmental Law for environmental matters or conditions.
3.37 YEAR 2000 MATTERS. Except as set forth on Schedule 3.37, each of
the Companies has (i) initiated a review and assessment of all areas within its
business and operations (including those affected by the Manufacturer,
suppliers, vendors and customers) that could be adversely affected by the "Year
2000 Problem" (that is, the risk that computer applications used by such Company
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timetable as described on Schedule 3.37 for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan
and timetable, except as set forth on said Schedule 3.37.
3.38 BUSINESS GENERALLY. Except as set forth on Schedule 3.38, the
Seller is not aware of the existence of any conditions, including, without
limitation, any actual or potential competitive factors in the markets in which
the respective Companies participate, which have not been disclosed in writing
to the Buyer and which could reasonably be expected to have an adverse effect on
the business and operations of any of the Companies, other than general business
and economic conditions generally affecting the industry and markets in which
the respective Companies participate.
3.39 MISSTATEMENTS AND OMISSIONS. 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.
24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. The Buyer is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware.
4.2 BUYER'S POWER AND AUTHORITY; CONSENTS AND APPROVALS.
(a) The Buyer has all requisite corporate power and authority
to execute and deliver this Agreement and the other agreements, documents and
instruments to be executed and delivered by the Buyer in connection herewith, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder.
(b) Except as set forth in Schedule 4.2(b) hereto, no
authorization, approval or consent of, or notice to or filing or registration
with, any governmental agency or body, or any other third party, is required in
connection with the execution and delivery by the Buyer of this Agreement and
the other agreements, documents and instruments to be executed by the Buyer in
connection herewith, the consummation by the Buyer of the transactions
contemplated hereby or thereby or the performance by the Buyer of its
obligations hereunder and thereunder.
4.3 EXECUTION AND ENFORCEABILITY. This Agreement and the other
agreements, documents and instruments to be executed and delivered by the Buyer
in connection herewith, and the consummation by the Buyer of the transactions
contemplated hereby and thereby, have been duly and validly authorized, executed
and delivered by all necessary corporate action on the part of 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
creditors' 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 probable of assertion 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, or (b) violate or conflict with any
domestic law,
25
ordinance, rule or regulation, or any judgement, order, writ, injunction or
decree of any court, administrative or governmental agency or other body,
material to the Buyer.
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 AUTHORIZATION OF THE PREFERRED STOCK. The issuance of the Preferred
Stock, as well as the Common Shares issuable upon conversion of the Preferred
Stock, has been duly authorized by all necessary corporate action of the Buyer.
At the Buyer's Annual Meeting of its shareholders held on December 3, 1998, the
Buyer's shareholders authorized the Preferred Stock such that the full number of
Common Shares issuable upon conversion thereof may be issued without limitation
of the "Conversion Cap" referred to in the Certificate of Designation,
Preferences and Rights attached as Exhibit C-1 hereto. Upon the issuance of the
Preferred Stock pursuant to this Agreement, and upon the issuance of Common
Shares upon conversion of any shares of the Preferred Stock, the Preferred Stock
and/or Common Shares, as the case may be, shall be validly issued, fully paid
and non-assessable.
4.8 CAPITALIZATION. The authorized capital stock of the Buyer
consists of:
(a) 3,000,000 shares of Preferred Stock, par value $0.10 per
share, of which 300,000 shares are designated Class A Convertible Preferred
Stock and are, in turn, divided into 100,000 shares of Series I (the "SERIES I
PREFERRED STOCK"), 100,000 shares of Series II (the "SERIES II PREFERRED STOCK")
and 100,000 shares of Series III (the "SERIES III PREFERRED STOCK"); as of
October 23, 1998, approximately 19,500 shares of Series I Preferred Stock are
issued and outstanding and/or are committed to be issued by the Buyer,
approximately 10,254 shares of Series II Preferred Stock are issued and
outstanding and/or are committed to be issued by the Buyer, and approximately
30,380 shares of Series III Preferred Stock are issued and outstanding and/or
are committed to be issued by the Buyer;
(b) 50,000,000 shares of Class A Common Stock, par value $0.01
per share, of which 5,588,888 shares are issued and outstanding; and
(c) 15,000,000 shares of Class B Common Stock, par value $0.01
per share, of which 6,200,000 shares are issued and outstanding.]
All outstanding capital stock of the Buyer is duly authorized, validly issued,
fully paid and non-assessable and has been issued in conformity with all
applicable federal and state securities laws.
4.9 DISCLOSURE MATERIALS. The Buyer has delivered to the Seller copies
of (i) the Prospectus dated November 10, 1997 (the "PROSPECTUS"), (ii) the
Buyer's Annual Report on Form 10-K for the Fiscal Year ended December 31, 1997,
(iii) the Buyer's Quarterly Reports on Form 10-Q for the three-month periods
ended March 31, 1998, June 30, 1998, and September 30, 1998 and (iv) all Current
Reports on Form 8-K, filed in 1998, each in the form (excluding exhibits) filed
with the SEC (collectively, such Forms 10-K, 10-Q and 8-K being hereinafter
referred to as its "REPORTS"). Neither the Prospectus nor any of the Reports
contained, at the time
26
of filing thereof with the SEC, any untrue statement of any material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading.
4.10 MISSTATEMENTS AND OMISSIONS. No representation and warranty by the
Buyer contained in this Agreement, and no statement contained in any certificate
or Schedule furnished or to be furnished by the Buyer to the Seller in
connection with this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make such representation and warranty or such statement not misleading.
ARTICLE 5
PRE-CLOSING COVENANTS OF THE SELLER
The Seller hereby covenants and agrees that, from and after the date
hereof until the Closing:
5.1 PROVIDE ACCESS TO INFORMATION; COOPERATION WITH BUYER.
(a) ACCESS. The Seller shall afford, and cause the Companies
to afford, to the Buyer, its attorneys, accountants, and representatives, free
and full access at all reasonable times, and upon reasonable prior notice, to
the properties, books and records of the Companies, and to interview personnel,
suppliers and customers of the Companies, in order that the Buyer may have a
full opportunity to make such investigation (including the Environmental Audit
contemplated by Section 5.11 below) as it shall reasonably desire of the assets,
businesses and operations of the Companies (including, without limitation, any
appraisals or inspections thereof), and provide to the Buyer and its
representatives such additional financial and operating data and other
information as to the businesses and properties of the Companies as the Buyer
shall from time to time reasonably request.
(b) COOPERATION IN OBTAINING MANUFACTURER APPROVAL. The Seller
shall promptly notify 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 Manufacturer, as soon as
practicable after the date hereof, of an application and any other information
necessary to obtain Manufacturer's consents to or the approval of the
transactions contemplated by this Agreement.
5.2 OPERATION OF BUSINESSES OF THE COMPANIES. The Seller shall cause
each of the Companies to (a) maintain its corporate existence in good standing,
(b) operate its business substantially as presently operated and only in the
ordinary course and consistent with past operations and its obligations under
any existing agreements with all applicable automobile manufacturers or
distributors, (c) use its 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 respects with all applicable laws, rules and regulations, (e) maintain
its insurance 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
27
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 industry standards taking into account
the age thereof.
5.3 BOOKS OF ACCOUNT. The Seller shall cause each of the Companies to
maintain its books and records of account in the usual, regular and ordinary
manner.
5.4 EMPLOYEES. The Seller shall (i) use his reasonable best efforts to
encourage such personnel of the Companies as the Buyer may designate in writing
to remain employees of the Companies after the date of the Closing, and (ii) not
take any action, or permit the Companies to take any action, to encourage any of
the personnel of the Companies to leave their positions with the Companies.
5.5 CERTAIN PROHIBITIONS. The Seller shall not permit any of the
Companies to (i) issue any equity or debt security or any options or warrants,
(ii) enter into any subscriptions, agreements, plans or other commitments
pursuant to which any of the Companies is or may become obligated to issue any
of its debt or equity securities, (iii) otherwise change or modify its capital
structure, (iv) engage in any reorganization or similar transaction, (v) sell or
otherwise dispose of any of its assets, other than sales of inventory in the
ordinary course of business, (vi) 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 [OTHER THAN THE DISTRIBUTION OF THE
HARTSVILLE OPERATIONS].
5.6 OTHER CHANGES. The Seller shall not permit the Companies to take,
cause, agree to take or cause to occur any of the actions or events set forth in
Section 3.20 of this Agreement, to the extent that any of such actions or events
would reasonably be in the Seller's control.
5.7 ADDITIONAL INFORMATION. The Seller shall furnish and cause the
Companies to furnish to the Buyer such additional information with respect to
any matters or events arising or discovered subsequent to the date hereof which,
if existing or known on the date hereof, would have rendered any representation
or warranty made by the Seller or any information contained in any Schedule
hereto or in other information supplied in connection herewith then inaccurate
or incomplete in any material respects. 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; PROVIDED, HOWEVER, if such information shall be furnished to
the Buyer in a writing which shall also specifically refer to one or more
representations and warranties of the Seller contained herein which in the
absence of such information is inaccurate or incomplete in any material respect,
then if the Buyer waives the condition to Closing set forth in said Section 7.1
hereof and elects to close the transactions contemplated hereunder, the
furnishing of such additional information shall be deemed to have amended as of
the Closing any such representation and warranty so specifically referred to by
the Seller.
5.8 PUBLICITY. Except as may be required by law or the applicable rules
or regulations of any securities exchange, the Seller shall not (i) make or
permit any of the Companies to make any press release or other public
announcement relating to this Agreement or the transactions contemplated hereby,
without the prior written approval of the Buyer, and (ii) otherwise disclose
28
the existence and nature of their discussions or negotiations regarding the
transactions contemplated hereby to any person or entity other than their
accountants, attorneys and similar professionals, all of whom shall be subject
to this nondisclosure obligation as agents of the Seller, as the case may be.
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 their respective Affiliates or agents
pursue, initiate, encourage or engage in, and the Seller shall cause the
Companies and their Affiliates, directors, officers and agents not to pursue,
initiate, encourage or engage in, any negotiations or discussions with, or
provide any information to, any other person or entity (other than the Buyer and
its representatives and Affiliates) regarding the sale of the assets or capital
stock of any of the Companies or any merger or similar transaction involving any
of the Companies.
5.10 CLOSING CONDITIONS. The Seller shall use all reasonable best
efforts to satisfy promptly the conditions to Closing set forth in Article 7
hereof required herein to be satisfied by the Seller prior to the Closing.
5.11 ENVIRONMENTAL AUDIT. The Seller shall cause the Companies to allow
an environmental consulting firm selected by the Buyer (the "ENVIRONMENTAL
AUDITOR") to have prompt access to the Real Property in order to conduct an
environmental investigation, 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 Companies to provide to the Environmental Auditor: (i)
reasonable access to all its existing records concerning the matters which are
the subject of the Environmental Audit; and (ii) reasonable access to the
employees of the Companies and the last known addresses of former employees of
the Companies 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 Seller shall otherwise cooperate and cause the
Companies to cooperate with the Environmental Auditor in connection with the
Environmental Audit. The Buyer and the Seller shall each pay 50% of all of the
costs, fees and expenses incurred in connection with the preparation of the
Phase I environmental audit report and, if recommended in the Phase I
environmental report, 50% of all costs, fees and expenses incurred in connection
with the preparation of the Phase II environmental audit report.
5.12 AUDITED FINANCIAL STATEMENTS. The Seller shall allow, cooperate
with and assist Buyer's accountants, and shall instruct the Companies'
accountants to cooperate, in the preparation of audited financial statements of
the Companies as necessary for any required filings by the Buyer with the
Securities and Exchange Commission 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 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
29
all inquiries received from the FTC or the Antitrust Division for additional
information or documentation.
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 (i) 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 (ii) 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.
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. Subject to the reasonable cooperation
of the Seller, the Buyer shall provide to 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 Manufacturer to the transactions
contemplated by this Agreement.
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, respond as promptly as practicable to all inquiries received
from the FTC or the Antitrust Division for additional information or
documentation, and the Buyer shall pay all filing fees in connection therewith.
6.5 ACCESS. The Buyer shall afford to the Seller, his 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
Buyer, and to interview personnel, suppliers and customers of the Buyer, in
order that the Seller may have a full opportunity to make such investigation as
he shall reasonably desire of the assets, business and operations of the Buyer.
6.6 ADDITIONAL INFORMATION. The Buyer shall furnish to the Seller 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 Buyer or
any information contained in any Schedule hereto or in other information
supplied in connection herewith then inaccurate or incomplete in any material
respect. The receipt of such additional information by the Seller shall not
operate as a waiver by the Seller of the obligations of the Buyer to satisfy the
conditions to Closing set forth in Section
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8.1 hereof; PROVIDED, HOWEVER, if such information shall be furnished to the
Seller in a writing which shall also specifically refer to one or more
representations and warranties of the Buyer contained herein which in the
absence of such information is inaccurate or incomplete in a material respect,
then if the Seller waives the condition to Closing set forth in said Section 8.1
hereof and elects to close the transactions contemplated hereunder, the
furnishing of such additional information shall be deemed to have amended as of
the Closing any such representation and warranty so specifically referred to by
the Buyer.
6.7 BUYER'S OBLIGATION TO NOTIFY OF BREACH. In the event that the
President or the Chief Financial Officer of the Buyer shall have actual
knowledge of the breach by the Seller of any material representation, warranty,
covenant or agreement of the Seller contained in this Agreement, the Buyer shall
notify the Seller thereof within a reasonable period of time to give the Seller
an opportunity to cure such breach. The provisions of this Section 6.7 shall
create no obligation of due inquiry on the part of the Buyer, nor shall it
affect the Buyer's right to indemnification under Article 9 hereof unless the
Seller shall have confirmed such breach to the Buyer in a writing pursuant to
Section 5.7 above and the Buyer shall have waived the condition to Closing set
forth in Section 7.1 or Section 7.2, as applicable, with respect to such breach.
6.8 WAIVER OF RIGHT TO REDEEM. The Buyer hereby waives its rights to
redeem the Preferred Stock, which rights are set forth in the Certificate of
Designation, Preferences and Rights with respect to the Preferred Stock, a copy
of which is attached as Exhibit C-1 hereto.
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
performed all obligations required to be performed by the Seller under this
Agreement, and complied with all covenants for which compliance by the Seller is
required under this Agreement, prior to or at the Closing, including, without
limitation, delivery of the stock certificates and stock powers for the Shares
described in Section 1.3 hereof.
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) wire transfer instructions from the Seller, with respect
to the payment at the Closing of the cash portion of the Merger Consideration;
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(c) an opinion of ▇▇▇▇▇ Law Offices, counsel for the Seller,
dated the date of the Closing and addressed to the Buyer, in form and substance
reasonably acceptable to the Buyer and its counsel;
(d) copies of all authorizations, approvals, consents,
notices, registrations and filings referred to in Schedules 3.2(b), 3.10 and
3.29(b) hereof, other than from the Manufacturer,
(e) certificates dated as of a recent date from (i) the
Secretary of State of the State of South Carolina to the effect that each of JN,
Autoworld and Chevrolet World is duly incorporated and in good standing in such
state and stating that the Companies owe no franchise taxes in such state, and
(ii) one or more certificates of officials from the jurisdictions listed on
Schedule 3.7 hereto to the effect that the Companies are duly qualified as a
foreign corporation and is in good standing in such jurisdictions;
(f) a copy of the Articles of Incorporation of each of JN,
Autoworld and Chevrolet World, including all amendments thereto, certified as of
a recent date by the Secretary of State of the State of South Carolina;
(g) evidence, reasonably satisfactory to the Buyer, of the
authority and incumbency of the persons acting on behalf of each of the
Companies in connection with the execution of any document delivered in
connection with this Agreement;
(h) Uniform Commercial Code Search Reports on Form UCC-11 with
respect to each of the Companies from the states and local jurisdictions where
the principal places of business of the Companies and their assets are located;
(i) a certificate of the Seller as to the Seller's
non-foreign status in appropriate form;
(j) the corporate minute books and stock record books of each
of JN, Autoworld and Chevrolet World, and all other books and records of, or
pertaining to, the businesses and operations of the Companies;
(k) estoppel letters of lenders to the Companies, in form and
substance reasonably satisfactory to the Buyer, with respect to amounts owing by
the respective Companies as of the Closing; and
(l) 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.
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7.5 NO LITIGATION. No action, suit or other proceeding shall be pending
or threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain damages in respect thereof,
or involving a claim that consummation thereof would result in the violation of
any law, decree or regulation of any governmental authority having appropriate
jurisdiction, and no order, decree or ruling of any governmental authority or
court shall have been entered challenging the legality, validity or propriety
of, or otherwise relating to, this Agreement or the transactions contemplated
hereby, or prohibiting, restraining or otherwise preventing the consummation of
the transactions contemplated hereby.
7.6 NO MATERIAL ADVERSE CHANGE OR UNDISCLOSED LIABILITY. There shall
have been no material adverse change or development in the business, prospects,
properties, earnings, results of operations or financial condition of any of the
Companies, or any of its assets.
7.7 NO ADVERSE LAWS. There shall not have been enacted, adopted or
promulgated any statute, rule, regulation or order which materially adversely
affects the business or assets of any of the Companies.
7.8 AFFILIATE AND OTHER TRANSACTIONS. All amounts owing to the
Companies from the Seller or any Affiliate thereof (including the $3,081,000
receivable of Autoworld) or from any of the Companies' officers and employees
shall have been paid in full on or prior to the Closing Date.
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 APPROVALS; MOTOR VEHICLE LICENSES.
(a) The Manufacturer shall have given any required approvals
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 Companies' dealership franchises with the Manufacturer, and the Manufacturer
shall have executed any required dealer agreements and/or amendments or
supplements thereto in connection with the foregoing.
(b) The Buyer shall have been licensed as a Motor Vehicle
Dealer under applicable South Carolina motor vehicle dealer registration laws
and shall have obtained all other authorizations, consents, licenses and permits
from applicable governmental agencies having or asserting jurisdiction, which
the Buyer deems necessary or appropriate to conduct business as an automobile
dealer at each dealership location included in the Real Property.
7.11 NON-COMPETITION AGREEMENT. Seller shall have duly executed
and delivered to the Buyer and the Surviving Companies the Non-Competition
Agreement.
7.12 CANCELLATION OF STOCK OPTIONS. All outstanding options, warrants,
"phantom" stock options and other plans, agreements or arrangements of the
Companies with respect to the purchase, or the issuance of, any capital stock or
other securities of the Companies shall have been canceled and terminated prior
to the Closing at no expense to the Buyer, and the Buyer shall have received
reasonably satisfactory evidence thereof.
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7.13 AUDITED FINANCIAL STATEMENTS. The Buyer shall have completed
preparation of such audited financial statements of the Companies as may be
required by applicable regulations of the Securities and Exchange Commission 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 Federal Trade Commission 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.
7.15 OTHER BASIC AGREEMENTS. All conditions to the Buyer's obligations
to close under the Other Basic Agreements shall have been satisfied or waived by
the Buyer, and the closings under the Other Basic Agreements shall have occurred
or shall be occurring contemporaneously.
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
performed all obligations required to be performed by it under this Agreement,
and complied with all covenants for which compliance by it is required under
this Agreement, prior to or at the Closing, including, without limitation,
payment of the Merger Consideration pursuant to Section 1.2(b) hereof.
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) an opinion of Parker, Poe, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ L.L.P.,
counsel for the Buyer, dated as of the Closing Date and addressed to the Seller,
in form and substance reasonably satisfactory to the Seller and his counsel;
(c) certificates 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;
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(d) certificates dated as of a recent date from the Secretary
of State of the State of North Carolina to the effect that the Subs are 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) evidence, reasonably satisfactory to the Seller, of the
authority and incumbency of the persons acting on behalf of the Buyer in
connection with the execution of any document delivered in connection with this
Agreement; and
(g) 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 his
counsel, none of whose approval shall be unreasonably withheld or delayed.
8.5 NO LITIGATION. No action, suit or other proceeding shall be pending
or threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim that consummation thereof would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction, and no order, decree or ruling of any
governmental authority or court shall have been entered challenging the
legality, validity or propriety of, or otherwise relating to, this Agreement or
the transactions contemplated hereby, or prohibiting, restraining or otherwise
preventing the consummation of the transactions contemplated hereby.
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 Federal Trade Commission 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 BASIC AGREEMENTS. All conditions to the obligations of the
parties other than the Buyer under the Other Basic Agreements shall have been
satisfied or waived by the applicable other party, and the closings under the
Other Basic Agreements shall have occurred or shall be occurring
contemporaneously.
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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 three 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, and (ii) the representations and
warranties of the Seller contained in Sections 3.11, 3.19 and 3.36, which shall
survive the Closing until the expiration of the applicable statutes of
limitation for a breach thereof. 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 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 Surviving Companies and their respective shareholders,
officers, directors, employees, successors and assigns (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 representation and warranty contained in
Section 3.19; PROVIDED, HOWEVER, that with respect to the foregoing
indemnification obligation of the Seller contained in this paragraph (a) and the
indemnification obligation of the Seller contained in paragraph (b) immediately
below, the Seller shall not have any indemnification obligation until (and only
to the extent that) Buyer's Damages in respect of all claims for indemnity
pursuant to this paragraph (a) and said paragraph (b) shall exceed a cumulative
aggregate total of $150,000;
(b) the untruth, inaccuracy or breach of any representation
and warranty of the Seller contained in or made pursuant to Section 3.19,
including in any Schedule or certificate delivered hereunder in connection
therewith;
(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) any loss of life, injury to persons or property, or damage
to natural resources caused by the actual, alleged, or threatened release,
storage, transportation, treatment
36
or generation, of Hazardous Materials generated, stored, used, disposed of,
treated, handled or shipped by the Companies on or before the Closing Date;
(e) any cleanup of Hazardous Materials released, disposed of
or discharged: (i) on, beneath or adjacent to the Real Property prior to or on
the date of the Closing; or (ii) at any other location if such substances were
generated, used, stored, treated, transported or released by the Companies prior
to or on the Closing Date; PROVIDED, HOWEVER, such cleanup obligation shall only
be to the level required of an applicable governmental agency or as COMMERCIALLY
reasonably necessary to satisfy the requirements of a lender to or prospective
purchaser of the Real Property.
(f) all known or unknown environmental liabilities and claims
of the Companies or arising out of the ownership the Shares prior to the
Closing, including, without limitation, the presence, release or threatened
release of Hazardous Materials and any liabilities or obligations arising under
any Environmental Law, including but not limited to the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), as amended;
(g) any and all costs of installing pollution control
equipment or other equipment to bring any of the Real Property into compliance
with any Environmental Law if such equipment is installed because any of the
Real Property was not in compliance with any Environmental Laws as of the date
of the Closing; or
(h) all liabilities of any of the Companies for Taxes arising
out of the distribution of the Hartsville operations, except to the extent
accrued on the Closing Balance Sheet.
Notwithstanding the provisions of paragraphs (e), (f) and (g) immediately above,
the term "Buyer's Damages" as applicable to said paragraphs shall not include
any amounts due and payable to the Buyer or the Surviving Company from any
governmental agency under the "SUPERB" or other government funded remediation
program, so long as such amounts paid do not result in any continuing liability
or obligation of the Buyer or the Surviving Companies based upon such payment.
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 his heirs, 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 the Seller
Indemnitee 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 contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in connection
herewith; or
37
(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 CLAIMS FOR INDEMNIFICATION. No claim for indemnification with
respect to a breach of a representation and warranty shall be made under this
Agreement after the applicable Survival Date unless prior to such Survival Date
the Buyer Indemnitee or the Seller Indemnitee, as the case may be, shall have
given the Seller or the Buyer, as the case may be, written notice of such claim
for indemnification based upon actual loss sustained, or potential loss
anticipated, as a result of the existence of any claim, demand, suit, or cause
of action against such Buyer Indemnitee or Seller Indemnitee, as the case may
be.
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.
(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, (ii) the Indemnifying Party confirms, in writing, its
obligation hereunder to indemnify and hold harmless the Indemnified Party with
respect to such damages in their entirety pursuant to Sections 9.2 or 9.3
hereof, as the case may be, and (iii) the Indemnifying Party shall have made
provision which, in the reasonable judgment of the Indemnified Party, is
adequate to 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; PROVIDED, that such settlement is paid in full by the Indemnifying
Party and will not have any direct or indirect continuing material adverse
effect upon the Indemnified Party.
(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
38
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 dispose of such action, proceeding or claim and enter into any
monetary compromise or settlement; PROVIDED, HOWEVER, in the event that the
Indemnified Party shall settle or compromise any action, proceeding or claim for
which indemnification is due under Sections 9.2 or 9.3 hereof, as the case may
be, it shall act reasonably and in good faith in doing so.
(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 EFFECTIVENESS. 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.
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 written notice by
the Buyer or the Seller to the other party (ies) hereto if such other party
(ies) is (are) in breach of any of its (their) material representations,
warranties, covenants or agreements contained herein; PROVIDED, HOWEVER, the
breaching party (ies) shall have the right to cure such breach prior to the
Closing Date Deadline (as the same may have been extended pursuant to Article 2
hereof) if, in connection with any such cure by the Seller or the Buyer, and
provided that the Buyer has not elected to extend the Closing Date Deadline
pursuant to Article 2 hereof, the Seller or the Buyer, as the case may be, may
elect to extend the Closing Date Deadline as provided in said Article 2 in order
to complete such cure;
(c) At any time after the Closing Date Deadline (as the same
may have been extended pursuant to Article 2 hereof), by written notice by the
Buyer or the Seller to the other party(ies) 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);
(d) By written notice by the Buyer to 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;
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(e) By the Buyer, by written notice to the Seller, in the
event that approval by Manufacturer is not received by the Closing Date Deadline
(as the same may have been extended pursuant to Article 2 hereof);
(f) By the Buyer or the Seller, by written notice to the
Seller or the Buyer, as the case may be, in the event that any Manufacturer (or
any person claiming by, through or under any Manufacturer) shall exercise any
right of first refusal, preemptive right or other similar right, with respect to
the dealership business of the Companies;
(g) By the Buyer (no later than the thirtieth (30th) day after
all due diligence materials described on Schedule 10.1(f) have been furnished to
Buyer) if the Buyer is not satisfied, in its sole discretion, with the results
of the Buyer's due diligence investigation contemplated by Section 5.1(a)
hereof; or
(h) By the Seller, not later than the thirtieth (30th) day
after the date of this Agreement, if the Seller is not satisfied in its sole
discretion, with the results of the Seller's due diligence investigation of the
Buyer;
PROVIDED, HOWEVER, no party may terminate this Agreement pursuant to Section
10.1(b) or (c) above if such party, at the time of such termination, is in
breach of any material representation, warranty or covenant of such party
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 shall not relieve (i) the Buyer of any liability under Section 10.3
below, (ii) the Seller of any liability under Section 10.4 below, or (iii)
except as provided in Section 10.5 below, any party hereto of any liability for
breach of any representation and warranty, covenant or agreement hereunder
occurring prior to such termination. 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.
10.3 PAYMENT OF BUYER'S TERMINATION FEE. If this Agreement is
terminated by the Seller pursuant to Section 10.1(b) above and the failure to
complete the Closing shall have been due to the Buyer's breach of its material
representations and warranties or its material covenants or obligations under
this Agreement, then the Buyer shall, within ten days after receipt by the Buyer
of written notice from the Seller, promptly pay to the Seller in immediately
available funds, as liquidated damages for the loss of the transaction and not
as a penalty, a termination fee of $1,000,000 (the "BUYER'S TERMINATION FEE").
10.4 PAYMENT OF SELLER'S TERMINATION FEE. If this Agreement is
terminated by the Buyer pursuant to Section 10.1(b) above and the failure to
complete the Closing shall have been due to the Seller's breach of any of his
material representations and warranties or any of his material covenants or
obligations under this Agreement, then the Seller shall, within ten days after
receipt by the Seller of written notice by the Buyer, promptly pay to the Buyer
in immediately available funds, as liquidated damages for the loss of the
transaction and not as a penalty, a termination fee of $1,000,000 (the "SELLER'S
TERMINATION FEE").
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10.5 TERMINATION FEES EXCLUSIVE REMEDIES FOR DAMAGES. The respective
rights of the parties to terminate this Agreement under Section 10.1(b) and to
be paid the Seller's Termination Fee or the Buyer's Termination Fee, as the case
may be, shall be the respective parties' sole and exclusive remedies for
damages; in the event of such termination by either party, such party shall have
no right to equitable relief for any breach or alleged breach of this Agreement,
other than for specific performance for the payment of the Seller's Termination
Fee or the Buyers' Termination Fee, as the case may be. Nothing contained in
this Agreement shall prevent any party from electing not to exercise any right
it may have to terminate this Agreement and, instead, seeking any equitable
relief to which it would otherwise be entitled in the event of breach by any
other party hereto.
10.6 TERMINATION OF OTHER BASIC AGREEMENTS. Upon the termination of any
of the Other Basic Agreements in accordance with its terms, this Agreement shall
automatically termiante; provided, however, no such termination shall release
any party hereto of any liability for breach of any representation, warranty,
covenant or agreement hereunder arising prior to such termination.
ARTICLE 11
CERTAIN TAXES AND EXPENSES
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 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.
ARTICLE 12
MISCELLANEOUS
12.1 CERTAIN TAX RETURNS. The Seller shall cooperate with and provide
assistance to the Buyer and the Surviving Companies in connection with the
preparation and filing of all federal, state, local and foreign income tax
returns which relate to the Surviving Companies and to periods prior to Closing
but which are not required to be filed until after the Closing.
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 heirs, successors and assigns of the
parties hereto. Nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon or give to any employee of the Companies or
the Buyer, or any other person, firm, corporation or legal entity, other than
the
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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. Disclosure of an item in one Schedule shall
be deemed a disclosure for purposes of all other provisions of this Agreement,
but only insofar as such disclosure could reasonably be interpreted as being
applicable to such other provisions. There are no representations, promises,
warranties, covenants or undertakings other than as expressly set forth herein
or therein. 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 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
or any of the Surviving Companies (including any such acquisition by merger or
consolidation); PROVIDED, FURTHER, that no such assignment shall release the
Buyer from its obligations hereunder without the consent of the Seller. Nothing
contained in this Agreement shall prohibit its assignment by the Buyer as
collateral security and the Seller hereby agrees to execute any acknowledgment
of such assignment by the Buyer as may be required by any lender to the Buyer.
12.5 REMEDIES. Except as expressly provided in this Agreement to the
contrary, each of the parties to this Agreement is entitled to all remedies in
the event of breach provided at law or in equity, specifically including, but
not limited to, specific performance.
12.6 HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.7 NOTICES. All notices, claims, certificates, requests, demands and
other communications hereunder shall be given in writing and shall be delivered
personally, sent by telecopier or sent by a nationally recognized overnight
courier, postage prepaid, and shall be deemed to have been duly given when so
delivered personally, or when telecopier receipt is acknowledged or one (1)
business day after the date of deposit with such nationally recognized overnight
courier. All such notices, claims, certificates, requests, demands and other
communications shall be addressed to the respective parties at the addresses set
forth below or to such other address as the person to whom notice is to be given
may have furnished to the others in writing in accordance herewith.
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If to the Buyer, to:
Sonic Automotive, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Parker, Poe, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller or the Companies, to the Seller at:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇ Law Offices
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: T. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
12.8 COUNTERPARTS. 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.
12.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of South Carolina, without giving
effect to its rules governing conflict of laws.
12.10 WAIVERS. Any party to this Agreement may, by written notice to
the other parties hereto, waive any provision of this Agreement from which such
party is entitled to receive a benefit. The waiver by any party hereto of a
breach by another party of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach by such other party of such
provision or any other provision of this Agreement.
12.11 SEVERABILITY. 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;
43
PROVIDED, HOWEVER, this Section 12.11 shall not be applied if the effect thereof
would be to invalidate any provision contained herein which requires the
contemporaneous closings of all transactions under this Agreement and under the
Other Basic Agreements.
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 (A) the best actual knowledge, information and belief of the
Seller and (B) any information which the Seller would reasonably be expected to
be aware of in the prudent discharge of his duties in the ordinary course of
business (including consultation with legal counsel) on behalf of the Companies.
12.13 JURISDICTION; ARBITRATION.
(a) Subject to the other provisions of this Section 12.13, any
judicial proceeding brought with respect to this Agreement must be brought in
any court of competent jurisdiction in the State of South Carolina, and, by
execution and delivery of this Agreement, each party hereto (i) accepts,
generally and unconditionally, the exclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, and (ii) irrevocably waives
any objection it may now or hereafter have as to the venue of any such suit,
action or proceeding brought in such court or that such court is an inconvenient
forum.
(b) Any dispute, claim or controversy arising out of or
relating to this Agreement (except for accounting matters provided for in
Section 1.2(c) hereto) or to the Other Basic Agreements, or the interpretation
or breach hereof or thereof (including, without limitation, any of the foregoing
based upon a claim to any termination fee hereunder or thereunder), shall be
resolved by binding arbitration under the commercial arbitration rules of the
American Arbitration Association (the "AAA RULES") to the extent such AAA Rules
are not inconsistent with this Agreement. To the extent practicable, all
existing disputes or controversies or claims under this Agreement and the Other
Basic Agreements shall be consolidated as one action. Judgment upon the award of
the arbitrators may be entered in any court having jurisdiction thereof or such
court may be asked to judicially confirm the award and order its enforcement, as
the case may be. The demand for arbitration shall be made by any party hereto
within a reasonable time after the claim, dispute or other matter in question
has arisen, and in any event shall not be made after the date when institution
of legal proceedings, based on such claim, dispute or other matter in question,
would be barred by the applicable statute of limitations. The arbitration panel
shall consist of three (3) arbitrators, one of whom shall be appointed by each
party hereto within thirty (30) days after any request for arbitration
hereunder. The two arbitrators thus appointed shall choose the third arbitrator
within thirty (30) days after their appointment; PROVIDED, HOWEVER, that if the
two arbitrators are unable to agree on the appointment of the third arbitrator
within 30 days after their appointment, either arbitrator may petition the
American Arbitration Association to make the appointment. The place of
arbitration shall be Charlotte, North Carolina. The arbitrators shall be
instructed to render their decision within sixty (60) days after their selection
and to allocate all costs and expenses of such arbitration (including legal and
accounting fees and expenses of the respective parties) to the parties in the
proportions that reflect their relative success on the merits (including the
successful assertion of any defenses).
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(c) Nothing contained in this Section 12.13 shall prevent any
party hereto from seeking any equitable relief to which it would otherwise be
entitled from a court of competent jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
SONIC AUTOMOTIVE, INC.
By: /s/ O. ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: O. ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
JN MANAGEMENT CO.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: President
▇▇▇▇▇▇▇ AUTOWORLD, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: President
▇▇▇▇▇▇▇ CHEVROLET WORLD, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: President
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.