EXHIBIT 4.11
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of October 6, 1998 (this
"AGREEMENT") between SONIC AUTOMOTIVE, INC., a Delaware corporation (the
"BUYER"), and ▇▇▇ ▇▇▇▇▇(the "SELLER").
W I T N E S S E T H:
WHEREAS, the Seller owns in the aggregate 2,108 shares of common stock,
par value $100 per share (the "SHARES"), of ▇▇▇ ▇▇▇▇▇
Chevrolet-Cadillac-Oldsmobile-Geo, Inc., a Texas corporation (the
"CORPORATION"), which shares represent all of the issued and outstanding shares
of capital stock of the Corporation and are owned of record and beneficially by
the Seller; 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.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and representations hereinafter stated, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE
PURCHASE AND SALE
1.1 AGREEMENT OF PURCHASE AND SALE. On the terms and subject to the
conditions of this Agreement and in reliance upon the representations and
warranties of the parties herein, at the closing referred to in Article 2 hereof
(the "CLOSING"), the Seller shall sell, transfer, convey and deliver to the
Buyer, and the Buyer shall purchase from the Seller, the Shares.
1.2 PURCHASE PRICE.
(a) PURCHASE PRICE. As the purchase price to be paid by the Buyer
for the Shares, the Buyer shall pay to the Seller the sum of $12,250,000,
subject to adjustment as provided in Section 1.2(c) below (as so adjusted, the
"PURCHASE PRICE").
(b) PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid as
follows:
(1) (A) At the Closing, the sum of $8,575,000 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). A total of five hundred (500) shares of Preferred Stock (as defined in
Section 1.2(b)(2)(A) below) (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 A hereto, with such other changes
thereto as the Escrow Agent shall reasonably request (the "ESCROW AGREEMENT").
For purposes of this Agreement, a "BUSINESS DAY" is a day other than a Saturday,
a Sunday or a day on which banks are required to be closed in the State of North
Carolina.
(B) The term of the Escrow Agreement shall be for a
period of ninety (90) days from the Closing Date (or such shorter or 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 earlier or 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,
3,675 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 Statement of Rights and Preferences attached as Exhibit B
hereto. At the Closing, 3,175 shares of the Preferred Stock shall be delivered
to the Seller and 500 shares of the Preferred Stock shall be delivered to the
Escrow Agent.
(B) At the Seller's option, exercisable by written
notice to the Buyer by the Seller at or prior to the Closing (the "REGISTRATION
NOTICE"), the Buyer shall be obligated to use its reasonable best efforts to
register under the Securities Act of 1933, as amended (the "SECURITIES ACT"), on
or before December 31, 1998, the shares (the "COMMON SHARES") of the Common
Stock which are issuable upon conversion of the Preferred Stock (such Common
Shares being hereafter called the "REGISTRABLE COMMON SHARES").
(C) If requested by the managing or lead managing
underwriter for any such registered offering of the Common Shares 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 Securities and Exchange Commission. 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. Provided that the Buyer shall have
timely completed such registration of the Common Shares, the Seller shall
promptly convert the Preferred Stock into the Registrable Common Shares.
(D) In the event that the Buyer fails to timely complete
such registration of the Registrable Common Shares, the Seller may, at its
option exercisable by
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written notice to the Buyer not later than January 31, 1999, require the Buyer
to purchase up to all of the Preferred Stock held by the Seller at the price of
$1,000 per share. Such notice to the Buyer shall specify the number of shares of
Preferred Stock held by the Seller required to be purchased and a closing date
for such purchase which shall be not sooner than fifteen (15) days and not
longer than thirty (30) days from the date of delivery of such notice. At the
closing of such purchase, the Buyer shall deliver to the Seller the applicable
purchase price in the same manner that the cash portion of the Purchase Price
paid at Closing was paid against delivery by the Seller of (i) the certificates
for the shares of Preferred Stock of the Seller being purchased, duly endorsed
for transfer to the Buyer, and (ii) a certificate signed by the Seller to the
effect that such Preferred Stock of the Seller is being sold free and clear of
all encumbrances and claims of third persons. The foregoing "put" rights of the
Seller shall also apply to the shares of the Preferred Stock which are included
in the Escrow Shares; PROVIDED, HOWEVER, the obligation of the Buyer to purchase
such shares of Preferred Stock shall arise only if, as and when such shares of
the Preferred Stock are delivered to the Seller pursuant to the Escrow
Agreement.
(E) In the event the Seller does not timely deliver a
Registration Notice, the Buyer shall have no obligation to register the Common
Shares, except as hereinafter provided. Thereafter, the Buyer's sole obligations
with respect to the Preferred Stock and the Common Shares shall be to (i) use
its reasonable best efforts to make available current public information with
respect to the Buyer within the meaning of Subsection (c)(1) of Securities and
Exchange Commission ("SEC") Rule 144 ("RULE 144") to the extent necessary to
facilitate public resales by the Seller of the Common Shares pursuant to Rule
144, and (ii) use its reasonable best efforts to provide "piggyback"
registration rights with respect to the Registrable Common Shares in the event
that the Buyer shall undertake a registered public offering utilizing a
registration statement on SEC Forms S-1 or S-3 (or any successor form thereto).
In such case, the provisions of subsection 2(C) immediately above shall be
applicable. Furthermore, such piggyback registration rights shall be subject to
customary provisions, including those regarding expenses, underwriter cut-backs
and pro-rations with other holders of such registration rights, and shall
terminate at such time as the holder of such registration rights shall be free
to sell all of such holder's Registrable Common Shares under Rule 144.
(c) ADJUSTMENT PROCEDURES.
(1) Not later than 60 days after the Closing Date, the
Buyer will prepare and deliver to the Seller an unaudited balance sheet (the
"CLOSING BALANCE SHEET") of the Corporation as of the Closing Date, consisting
of a computation of the net book value of the tangible assets of the Corporation
as of the Closing Date (excluding amounts receivable from the Seller and his
Affiliates (as hereinafter defined) as of the Closing Date), less the book value
of the liabilities of the Corporation as of the Closing Date (excluding amounts
payable by the Corporation to the Seller and his Affiliates), 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; PROVIDED, HOWEVER, that (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, with any used vehicles as to which the Buyer and the Seller
cannot reach agreement as to value being valued by a
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mutually acceptable third party appraiser not later than the Closing Date, (C)
parts and accessories inventories shall include only (I) General Motors
Corporation ("GM") returnable parts and accessories, which shall be valued based
on the value of such returnable parts under applicable returnable parts and
accessories plans, and (II) salable GM nonreturnable parts and accessories and
salable non-GM parts and accessories, which shall be valued at book value in
accordance with GAAP, (D) the tangible net book value of the Corporation shall
be calculated after giving effect in accordance with GAAP to (i) the receipt by
the Corporation of the full amount of the affiliate receivables specifically
identified in Section 7.8(a) hereof, and (ii) the Permitted Bonuses and
Distributions contemplated by Section 5.5 hereof, (E) the liabilities of the
Corporation 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 in accordance with GAAP, and (F) there shall be included appropriate
write-offs for doubtful accounts receivable and bad debts and for damaged,
spoiled, obsolete or slow-moving inventory in accordance with GAAP. The tangible
net book value reflected on the Closing Balance Sheet is hereinafter called the
"NET BOOK VALUE". 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.
(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: (1) 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 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; (2) the Accountants will be instructed to determine the Net Book
Value based upon their resolution of the issues in dispute; (3) 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 (4) 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 Net Book Value, as deemed
mutually agreed by the parties or as determined by the Accountants, as
aforesaid, equals or exceeds $5,500,000 (any such excess being called the "NET
BOOK VALUE EXCESS"), the Buyer shall be obligated to (A) execute and deliver to
the Escrow Agent a joint instruction to deliver the Escrow Amount to the Seller
pursuant to the Escrow Agreement, and (B) pay any Net Book Value Excess promptly
to the Seller, together with interest on the amount of the Net Book Value Excess
at the Buyer's
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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 $5,500,000 (the "NET BOOK VALUE
SHORTFALL"), the Seller shall be obligated to pay the amount of the Net Book
Value Shortfall, together with interest thereon at the Interest Rate from the
Closing Date to the date of such payment, 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, together with
interest thereon at the Interest Rate from the Closing Date to the date of such
payment, exceeds $500,000, the Seller shall be obligated to pay the amount of
such excess promptly to the Buyer.
1.3 DELIVERY OF THE SHARES.
(a) At the Closing, the Seller shall deliver to the Buyer a
certificate or certificates representing the Shares, duly endorsed in blank or
with a fully executed stock power attached, all in proper form for transfer with
all transfer taxes, if any, paid by the Seller.
(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, other than
restrictions, if any, on resale of the Shares by the Buyer imposed by applicable
securities laws (collectively, "ENCUMBRANCES").
1.4 NON-COMPETITION AGREEMENT. At the Closing, the Seller will enter into a
non-competition agreement with the Buyer and the Corporation substantially in
the form of Exhibit C hereto (the "NON-COMPETITION AGREEMENT").
ARTICLE
CLOSING
The Closing shall take place in Baytown, Texas, at a mutually agreed
location, 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,
following the date the Buyer gives notice of the Closing to the Seller, but in
no event later than November 30, 1998 (the "CLOSING DATE DEADLINE"); PROVIDED,
HOWEVER, if as of the Closing Date Deadline, the consents or approvals of GM
contemplated in Section 7.10 shall not have been obtained and/or the audited
financial statements contemplated in Section 7.13 shall not have been completed,
the Buyer may elect to extend the Closing Date Deadline until December 31, 1998.
The date upon which the Closing shall take place is hereinafter called the
"CLOSING DATE."
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ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
3.1 OWNERSHIP OF SHARES. The Seller owns of record and beneficially all of
the Shares, 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
his 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 knows of no 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.
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
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any business which is included in the definition of the "BUYER'S BUSINESS," as
defined in the Non- Competition Agreement, (ii) has any direct or indirect
interest in any person or entity which is a lessor of assets or properties to,
material supplier of, or provider of services to, the Corporation, or (iii) has
a beneficial interest in any contract or agreement to which the Corporation 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.
(b) Except as set forth in Schedule 3.5 hereto, there are no
transactions between the Corporation and the Seller (including the Seller's
Affiliates), or any of the directors, officers or salaried employees of the
Corporation, 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 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. The Corporation
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Corporation is not qualified to do business as a foreign
corporation in any jurisdiction.
3.8 CAPITALIZATION. The authorized capital stock of the Corporation
consists only of shares of common stock, par value $100 per share, of which
2,180 are issued and outstanding and constitute the Shares. All of the Shares
are duly authorized, validly issued, fully paid and non-assessable and are held
by the Seller. Except as set forth on Schedule 3.8 hereto, there are no
preemptive rights, whether at law or otherwise, to purchase any of the
securities of the Corporation and there are no outstanding options, warrants,
"phantom" stock plans, subscriptions, agreements, plans or other commitments
pursuant to which the Corporation 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. The Corporation does not own or maintain,
directly or indirectly, any capital stock of or other equity or ownership or
proprietary interest in any other corporation, partnership, association, trust,
joint venture or other entity and does not have any commitment to contribute to
the capital of, make loans to, or share in the losses of, any such entity.
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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 the
Corporation, (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
the Corporation, (c) violate or conflict with the terms of, or result in the
acceleration of, any indebtedness or obligation of the Corporation under, or
violate or conflict with or result in a breach of, or constitute a default
under, any indenture, mortgage, deed of trust, or other material agreement or
instrument to which the Corporation is a party or by which the Corporation 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 the Corporation, (e) constitute an event permitting termination of
any agreement, license or other right of the Corporation, 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 the Corporation or any of its properties or assets.
3.11 TITLE TO ASSETS; RELATED MATTERS. The Corporation 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 include all properties and assets
(real, personal and mixed, tangible and intangible) owned by the Corporation and
used by it in the conduct of its business.
3.12 POSSESSION. The tangible assets included within the Assets are in the
possession or control of the Corporation 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.
3.13 FINANCIAL STATEMENTS.
(a) The Seller has delivered to the Buyer prior to the date hereof:
(i) the unaudited balance sheets of the Corporation as of
December 31, 1997 and the related unaudited statements of income,
stockholders' equity and changes in cash flows for the fiscal years then
ended (collectively, the "ANNUAL FINANCIAL STATEMENTS"); and
(ii) the unaudited balance sheet of the Corporation as of
August 31, 1998 and the related unaudited statements of income,
stockholders' equity and changes in cash flow for the eight month period
then ended (collectively, the "INTERIM FINANCIAL STATEMENTS") (the Annual
Financial Statements and the Interim Financial Statements are hereinafter
collectively referred to as the "FINANCIAL STATEMENTS").
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(b) The Financial Statements (i) are in accordance with the books
and records of the Corporation, which books and records are true, correct and
complete, and (ii) fully and fairly present the financial position of the
Corporation as of the dates indicated and the results of operation,
stockholders' equity and changes in cash flows of the Corporation for the
periods indicated.
3.14 ACCOUNTS RECEIVABLE. All accounts receivable of the Corporation are
collectible at the aggregate recorded amounts thereof, subject to the reserve
for doubtful accounts maintained by the Corporation in the ordinary course of
business, and are not subject to any known counterclaims or setoffs.
3.15 INVENTORIES. All inventories of the Corporation consist of items of a
quality and quantity usable and saleable in the ordinary course of business of
the Corporation, and the levels of inventories are consistent with the levels
maintained by the Corporation in the ordinary course consistent with past
practice and the Corporation's obligations under its agreements with all
applicable vehicle manufacturers and distributors. The value of new car
inventories is carried on the basis of the LIFO method, the value of used car
inventories and parts and accessories inventories is carried at cost except that
used car inventories are adjusted to the lower of cost or market on an annual
basis.
3.16 REAL PROPERTY; MACHINERY AND EQUIPMENT.
(a) OWNED REAL PROPERTY. The Corporation owns 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 Corporation is a tenant (herein collectively referred
to as the "LEASED PREMISES" or the "REAL PROPERTY"). True, correct and complete
copies of all leases of all Leased Premises (the "LEASES") have been delivered
to the Buyer. With respect to each Lease, to the knowledge of the Seller, no
event or condition currently exists which would give rise to a material repair
or restoration obligation if such Lease were to terminate. 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 the Corporation is responsible for the maintenance and repair
thereof are in normal operating condition, taking into account their age, and
have been maintained and repaired in accordance with normal industry practices.
(c) CLAIMS. Except as set forth on Schedule 3.16(c), 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; to the knowledge of the Seller, there are no outstanding
claims or persons entitled to any claim or right to a claim for a mechanics' or
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materialman's lien against the Real Property; and, to the knowledge of the
Seller, there is no person or entity other than the Corporation in or entitled
to possession of the Real Property.
(d) EASEMENTS, ETC. To the knowledge of the Seller, the Corporation
has all easements and rights, including, but not limited to, easements for power
lines, water lines, sewers, roadways and other means of ingress and egress,
necessary to conduct the business the Corporation 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. To the knowledge of the Seller, 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. To the knowledge of the Seller, 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, to the knowledge of the Seller, no notice from any governmental
body has been served upon the Corporation 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 the Corporation the need for any work,
repair, construction, alterations or installation on or in connection with said
properties which has not been complied with. To the knowledge of the Seller, all
improvements which comprise a part of the Real Property are located within the
record lines of the Real Property and none of the improvements located on the
Real Property encroach upon any adjoining property or any easements or rights of
way and no improvements located on any adjoining property encroach upon any of
the Real Property or any easements or rights of way servicing the Real Property.
(g) OWNED EQUIPMENT. For purposes of this Agreement, the term
"OWNED EQUIPMENT" means all material machinery, equipment, motor vehicles,
furniture and fixtures owned by the Corporation.
(h) LEASED EQUIPMENT. Schedule 3.16(h) hereto contains a list of
all leases or other agreements, whether written or oral, under which the
Corporation 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 (i) are in normal operating condition, maintenance and repair in
accordance with industry standards taking into account the age thereof, and (ii)
are adequate for the operations of the business of the Corporation in all
material respects substantially as it is being operated as of the date hereof.
10
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
Corporation or used in the conduct of the Corporation's business. The
Corporation is not a party to, nor 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 the Corporation that any of its
operations, activities or products infringe the patents, trademarks, trade
names, copyrights or other property rights of others or that the Corporation is
wrongfully or otherwise using the property rights of others.
(b) The Corporation has the right to use the name "▇▇▇ ▇▇▇▇▇
Chevrolet Cadillac Oldsmobile" in the State of Texas 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 Corporation 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 Corporation, other than accounts payable, as of the close of business on the
day preceding the date hereof, including, without limitation, money borrowed,
indebtedness of the Corporation owed to stockholders and former stockholders,
the deferred purchase price of assets, letters of credit and capitalized leases,
indicating, in each case, the name or names of the lender, the date of maturity,
the rate of interest, any prepayment penalties or premiums and the unpaid
principal amount of such indebtedness as of such date.
3.19 NO UNDISCLOSED LIABILITIES. The Corporation does not have any material
liabilities or obligations of any nature, known or unknown, fixed or contingent,
matured or unmatured, other than those (a) reflected in the Financial
Statements, (b) incurred in the ordinary course of business since the date of
the Financial Statements and of the type and kind reflected in the Financial
Statements, or (c) disclosed specifically on Schedule 3.19 hereto or otherwise
reasonably disclosed in this Agreement or the other Schedules hereto.
3.20 ABSENCE OF CHANGES. Since December 31, 1997, the business of the
Corporation has been operated in the ordinary course, consistent with past
practices and, except as set forth on Schedule 3.20 hereto, there has not been
incurred, nor has there occurred:
(a) Any damage, destruction or loss (whether or not covered by
insurance), adversely affecting the business or assets of the Corporation in
excess of $50,000; (b) Any
11
strikes, work stoppages or other labor disputes involving the employees of the
Corporation; Any sale, transfer, pledge or other disposition of any of the
Assets of the Corporation having an aggregate book value of $50,000 or more
(except sales of vehicles and parts inventory in the ordinary course of
business); 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 the
Corporation 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 the Corporation
(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 the Corporation to
any officer, director, stockholder, employee, consultant or agent of the
Corporation; (g) Any change in the accounting methods, procedures or practices
followed by the Corporation or any change in depreciation or amortization
policies or rates theretofore adopted by the Corporation; (h) Any material
change in policies, operations or practices of the Corporation with respect to
business operations followed by the Corporation, including, without limitation,
with respect to selling methods, returns, discounts or other terms of sale, or
with respect to the policies, operations or practices of the Corporation
concerning the employees of the Corporation; (i) Any capital appropriation or
expenditure or commitment therefor on behalf of the Corporation in excess of
$50,000 individually or $100,000 in the aggregate; (j) Any write-down or
write-up of the value of any inventory or equipment of the Corporation or any
increase in inventory levels in excess of historical levels for comparable
periods; (k) Any account receivable in excess of $50,000 or note receivable in
excess of $50,000 owing to the Corporation 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 the
Corporation 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 the Corporation; or (m) Any agreement, whether in writing or
otherwise, for the Corporation to take any of the actions enumerated in this
Section 3.20.
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 Corporation 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
Corporation 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 Corporation for all
periods prior to the date hereof have been fully paid or adequately
12
reserved for by the Corporation or, with respect to Taxes required to be
accrued, the Corporation has properly accrued or will properly accrue such Taxes
in the ordinary course of business consistent with past practice of the
Corporation.
(c) Except as set forth on Schedule 3.21 hereto, the federal income
tax returns of the Corporation have not been examined by the Internal Revenue
Service ("IRS") for the years ended 1994 through 1997. Except as set forth on
Schedule 3.21 hereto, the Corporation has not 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 the Corporation by any applicable taxing authority is
currently in progress and there are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any tax return or
report of the Corporation. Copies of all federal, state and local tax returns
and reports required to be filed by the Corporation 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) The Corporation is not now, and has never been, a member of a
consolidated group for federal income tax purposes or a consolidated, combined
or similar group for state tax purposes. No consent under Code Section 341 has
been made affecting the Corporation. The Corporation is not a party to any
agreement or arrangement that would result in the payment of any "excess
parachute payments" under Code Section 280G. The Corporation is not required to
make any adjustment under Code Section 481(a). No power of attorney relating to
Taxes is currently in effect affecting the Corporation.
3.22 COMPLIANCE WITH LAWS, ETC. The Corporation has conducted its
operations and business in compliance in all material respects with, and all of
the Assets comply in all material respects 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. The Corporation has not 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, decrees and other awards of any court or governmental
agency applicable to the Corporation or its business or operations. The Seller
has delivered to the Buyer copies of all reports, if any, of the Corporation
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 Corporation and any deficiencies noted by inspection through the Closing
Date will have been corrected by the Corporation by the Closing Date.
3.23 LITIGATION REGARDING THE CORPORATION. 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
13
the Corporation or relating to its 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
the Corporation relating to the Corporation or its assets, business 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 Corporation
to own and operate its business as presently conducted (collectively, the
"PERMITS"). All such Permits have been duly and lawfully secured or made by the
Corporation 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. None of the transactions contemplated by this Agreement
will terminate, violate or limit the effectiveness of any such Permit.
3.25 EMPLOYEES; LABOR RELATIONS. As of the date hereof, the Corporation
employed a total of approximately 106 employees. As of the date hereof, (a) the
Corporation is not delinquent in the payment (i) to or on behalf of its past or
present employees of any wages, salaries, commissions, bonuses, benefit plan
contributions or other compensation for all periods prior to the date hereof, or
(ii) of any amount which is due and payable to any state or state fund pursuant
to any workers' compensation statute, rule or regulation or any amount which is
due and payable to any workers' compensation claimant; (b) there are no
collective bargaining agreements currently in effect between the Corporation and
labor unions or organizations representing any employees of the Corporation; (c)
no collective bargaining agreement is currently being negotiated by the
Corporation; (d) to the knowledge of the Seller, there are no union
organizational drives in progress and there has been no formal or informal
request to the Corporation for collective bargaining or for an employee election
from any union or from the National Labor Relations Board; and (e) no dispute
exists between the Corporation and any of its sales representatives or, to the
knowledge of the Seller, between any such sales representatives with respect to
territory, commissions, products or any other terms of their representation.
3.26 COMPENSATION. Schedule 3.26 contains a schedule of all employees
(including sales representatives) and consultants of the Corporation 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 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 Corporation
(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 Corporation as a single
employer with the meaning of Section 414 of the Code). The term "EMPLOYEE PLAN"
shall include all plans
14
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
Corporation and maintained or contributed to by the Corporation.
(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. The Corporation does not maintain
or contribute 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 the Corporation 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)(g) of the Code
is so qualified or exempt as of the date hereof in each case as such Employee
Plan has received favorable determination letters from the Internal Revenue
Service with respect thereto. To the knowledge of the Seller, the amendments to
and operation of any Employee Plan subsequent to the issuance of such
determination letters do not adversely affect the qualified status of any such
Employee Plan. No Employee Plan has an "accumulated funding deficiency" as of
the date hereof, whether or not waived, and no waiver has been applied for. The
Corporation has made no promises or incurred any liability under any Employee
Plan or otherwise to provide health or other welfare benefits to former
employees of the Corporation, 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
Corporation's 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 the Corporation.
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
Corporation or its business 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.
15
(b) PERFORMANCE, DEFAULTS, ENFORCEABILITY. The Corporation 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 the Corporation 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 Corporation, and all
cellular telephones provided and/or paid for by the Corporation, 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 Corporation on its properties, operations, inventories, assets,
business or personnel (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims in excess of $5,000 thereunder).
Each such insurance policy identified therein is and shall remain in full force
and effect on and as of the Closing Date and the Corporation is not 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 Corporation has not, during the last three (3)
fiscal years, been denied or had revoked or rescinded any policy of insurance.
(b) Set forth on Schedule 3.32(b) hereto is a summary of
information pertaining to material property damage and personal injury claims in
excess of $5,000 against the Corporation 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 Corporation.
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 Corporation (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,
16
parts, products or services of the Corporation. There have been no breach of
warranty or breach of representation claims against the Corporation during the
past five (5) years which have resulted in any cost, expenditure or exposure to
the Corporation 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 the
Corporation.
3.35 SUPPLIERS AND CUSTOMERS. The Corporation is not 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 the Corporation.
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) The Corporation 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 the Corporation ("ENVIRONMENTAL
PERMITS"). All such Environmental Permits are in good standing, the Corporation
is and has been in compliance in all material respects with the terms and
conditions of all such Environmental Permits, and no appeal or any other action
is pending or, to the knowledge of the Seller, threatened to revoke any such
Environmental Permit.
(c) The Corporation and its business, operations and assets are in
compliance in all material respects with all Environmental Laws.
(d) Neither the Corporation nor the Seller has received any written
or oral 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 the Corporation, (ii)
any other circumstances forming the
17
basis of any actual or alleged violation by the Corporation or the Seller of any
Environmental Law or any liability of the Corporation or the Seller under any
Environmental Law, (iii) any remedial or removal action required to be taken by
the Corporation 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 the Corporation nor the Seller has entered into any
agreements concerning any removal or remediation of Hazardous Materials.
(e) No lawsuits, claims, civil actions, criminal actions,
administrative proceedings, investigations or enforcement or other actions are
pending or, to the knowledge of the Seller, threatened under any Environmental
Law with respect to the Corporation, the Seller or the Real Property.
(f) Neither the Seller or the Corporation nor, to the knowledge of
the Seller, any other person has released, discharged, spilled or disposed of
Hazardous Materials onto, and, to the knowledge of the Seller, no Hazardous
Materials have migrated onto, the Real Property or any other property previously
owned, operated or leased by the Corporation, 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 the Corporation, or to the Corporation's 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.
Notwithstanding the foregoing, certain petroleum products are stored and handled
by the Corporation in the ordinary course of business in compliance in all
material respects with all Environmental Laws.
(g) Neither the Corporation 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 either the Corporation 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.
(i) Except as set forth on Schedule 3.36 hereto, neither the
Corporation nor the Seller has installed or placed on 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.
18
(j) Except as set forth on Schedule 3.36, there have been no
environmental studies or reports made relating to the Real Property or any other
property or facility previously owned, operated or leased by the Corporation.
(k) The Corporation has not agreed to assume, defend, undertake,
guarantee, or provide indemnification for, any liability, including, without
limitation, any obligation for corrective or remedial action, of any other
person under any Environmental Law for environmental matters or conditions.
3.37 [INTENTIONALLY LEFT BLANK].
3.38 BUSINESS GENERALLY. Except as set forth on Schedule 3.38 hereto, 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 Corporation participates, which have not been disclosed in writing to the
Buyer and which could reasonably be expected to have a material adverse effect
on the business and operations of the Corporation, other than general business
and economic conditions generally affecting the industry and markets in which
the Corporation participates.
3.39 MISSTATEMENTS AND OMISSIONS. To the knowledge of the Seller, no
representation and warranty by the Seller contained in this Agreement, and no
statement contained in any certificate or Schedule furnished or to be furnished
by the Seller to the Buyer in connection with this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make such representation and warranty or
such statement not misleading.
ARTICLE
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
19
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, 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.
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:
20
(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 September
1, 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 6,600
shares of Series II Preferred Stock are issued and outstanding and/or are
committed to be issued by the Buyer, and approximately 15,000 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 5,041,462 shares are issued and outstanding; and
(c) 15,000,000 shares of Class B Common Stock, par value $0.01 per
share, of which 6,250,000 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' Agent
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 and June 30, 1998, and (iv) any 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, together with the Buyer's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, which
the Buyer will deliver to the Seller after it is filed with the SEC, being
hereinafter referred to as its "REPORTS"). Neither the Prospectus nor any of the
Reports contained, at the time of filing thereof with the SEC, any untrue
statement of any material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading.
4.10 MISSTATEMENTS AND OMISSIONS. To the knowledge of the Buyer, no
representation and warranty by the Buyer contained in this Agreement, and no
statement contained in any certificate or Schedule furnished or to be furnished
by the Buyer to the Seller in connection with this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make such representation and warranty or
such statement not misleading.
21
ARTICLE
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 Corporation 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 Corporation, and to interview personnel,
suppliers and customers of the Corporation, 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,
business and operations of the Corporation (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 business and properties of the Corporation as the Buyer
shall from time to time reasonably request. The Seller shall, promptly after the
date hereof, furnish to the Buyer the due diligence materials set forth on
Schedule 5.1 hereto.
(b) COOPERATION IN OBTAINING CONSENTS. The Seller shall promptly
notify GM of the execution and delivery of this Agreement and use reasonable
best efforts in cooperating with the Buyer in the preparation of and delivery to
all applicable automobile manufacturers or distributors, as soon as practicable
after the date hereof, of an application and other information necessary to
obtain such automobile manufacturer's or distributor's consent to or the
approval of the transactions contemplated by this Agreement.
5.2 OPERATION OF BUSINESS OF THE CORPORATION. The Seller shall cause the
Corporation 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 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 the Corporation to maintain
its books and records of account in the usual, regular and ordinary manner.
22
5.4 EMPLOYEES. The Seller shall (i) use his reasonable best efforts to
encourage such personnel of the Corporation as the Buyer may designate in
writing to remain employees of the Corporation after the date of the Closing,
and (ii) not take any action, or permit the Corporation to take any action, to
encourage any of the personnel of the Corporation to leave their positions with
the Corporation.
5.5 CERTAIN PROHIBITIONS. The Seller shall not permit the Corporation 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
the Corporation 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, except that the Corporation may pay bonuses and dividends or
make distributions as provided in Schedule 5.5 hereto (the "PERMITTED BONUSES
AND DISTRIBUTIONS") and such bonuses, dividends or distributions shall not, as
of the Closing, constitute a breach of the Seller's representations and
warranties contained in Sections 3.20(d) and 3.20(f), as applicable, or (vii)
agree to take any of the foregoing actions.
5.6 OTHER CHANGES. The Seller shall not permit the Corporation 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.
5.7 ADDITIONAL INFORMATION. The Seller shall furnish and cause the
Corporation to furnish to the Buyer such additional information with respect to
any matters or events arising or discovered subsequent to the date hereof which,
if existing or known on the date hereof, would have rendered any representation
or warranty made by the Seller or any information contained in any Schedule
hereto or in other information supplied in connection herewith then inaccurate
or incomplete. The receipt of such additional information by the Buyer shall not
operate as a waiver by the Buyer of the obligations of the Seller to satisfy the
conditions to Closing set forth in Section 7.1 hereof.
5.8 PUBLICITY. Except as may be required by law or the applicable rules or
regulations of any securities exchange, the Seller shall not (i) make or permit
the Corporation 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 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 Corporation and
its Affiliates, directors, officers and agents not to pursue, initiate,
encourage or engage in, any negotiations or discussions with, or provide any
information to, any other person or entity (other than the Buyer and its
representatives and
23
Affiliates) regarding the sale of the assets or capital stock of the Corporation
or any merger or similar transaction involving the Corporation.
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 Corporation 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
Environmental Auditor shall use reasonable efforts to coordinate all visits to
the Real Property or conversations with employees of the Corporation with the
Seller or his designee and shall use reasonable efforts to minimize any
disruption of the Corporation's business in performing its investigations. The
Seller shall cause the Corporation 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 Corporation and the last known addresses of former employees of
the Corporation 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
Corporation to cooperate with the Environmental Auditor in connection with the
Environmental Audit. The Buyer shall pay all of the costs, fees and expenses
incurred in connection with the preparation of the Phase I environmental audit
report, and the Buyer and the Seller shall each bear 50% of the costs, fees and
expenses incurred in connection with the preparation of the Phase II
environmental audit report, if any such report is recommended in the Phase I
report; provided, however, the Buyer may conduct a Phase II environmental audit
at its own expense if such audit is not recommended in the Phase I report.
5.12 AUDITED FINANCIAL STATEMENTS. The Seller shall allow, cooperate with
and assist Buyer's accountants, and shall instruct the Corporation's accountants
to cooperate, in the preparation of audited financial statements of the
Corporation 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 all
inquiries received from the FTC or the Antitrust Division for additional
information or documentation. The Buyer shall pay the filing fee under the HSR
Act.
24
ARTICLE
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 AUTOMOBILE MANUFACTURERS AND DISTRIBUTORS. Subject to
the reasonable cooperation of the Seller, the Buyer shall provide to all
applicable automobile manufacturers and distributors 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 such manufacturers and distributors 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 the assets, business and operations of the Buyer. The
Seller shall maintain in strict confidence all information obtained from the
Buyer, other than such information which is a matter of public record.
6.6 RELEASE OF PERSONAL GUARANTEES. The Buyer shall use its reasonable best
efforts to obtain the release of the Seller as of the Closing Date from his
personal guarantees of the Corporation's obligations specified in Schedule 6.6
hereto (collectively, the "PERSONAL GUARANTEES").
25
ARTICLE
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) such duly signed resignations of directors and officers of the
Corporation as the Buyer shall have previously requested;
(c) an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for the Seller, or such
other counsel to the Seller as the Seller has designated and who shall be
reasonably acceptable to the Buyer, 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 including, without limitation, any required consents of the landlords
under the Leases necessary to enable the Corporation to continue as the tenant
thereunder at the same lease rentals and on the same terms as existed prior to
the Closing;
(e) a certificate dated as of a recent date from (i) the Secretary
of State of the State of Texas to the effect that the Corporation is duly
incorporated and in good standing in such state and stating that the Corporation
owes no franchise taxes in such state and listing all documents of the
Corporation on file with said Secretary of State;
(f) a copy of the Corporation's Articles of Incorporation,
including all amendments thereto, certified as of a recent date by the Secretary
of State of the State of Texas;
26
(g)evidence, reasonably satisfactory to the Buyer, of the authority
and incumbency of the persons acting on behalf of the Corporation 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 the Corporation from the states and local jurisdictions where the
principal places of business of the Corporation and its 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 the
Corporation, and all other books and records of, or pertaining to, the business
and operations of the Corporation;
(k) estoppel letter[s] of lender[s] to the Corporation, in form and
substance reasonably satisfactory to the Buyer, with respect to amounts owing by
the Corporation 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.
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 the
Corporation, 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 the Corporation.
27
7.8 AFFILIATE AND OTHER TRANSACTIONS.
(a) Each of the $550,000 receivable owing to the Corporation from
▇▇▇ ▇▇▇▇▇ Chrysler Plymouth Jeep, Inc. and the $112,000 receivable owing to the
Corporation from R&M Realty, Inc. shall have been paid in full to the
Corporation prior to the Closing Date.
(b) All other amounts owing to the Corporation from the Seller or
any Affiliate thereof or from any of the Corporation's officers and employees
shall have either been paid in full or written off by the Corporation, in either
case, 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 GM APPROVALS. GM shall have given any required approval of the
transfer of the Shares to the Buyer and shall have given any required approval
of O. ▇▇▇▇▇▇ ▇▇▇▇▇ or his designee as the authorized dealer operator of each of
the Corporation's Chevrolet, Cadillac and Oldsmobile dealership franchises, and
GM shall have executed or agreed to execute any required dealer agreements
and/or amendments or supplements thereto in connection with the foregoing.
7.11 NON-COMPETITION AGREEMENT. ▇▇▇ ▇▇▇▇▇ shall have duly executed and
delivered to the Buyer and the Corporation the Non-Competition Agreement.
7.12 [INTENTIONALLY LEFT BLANK].
7.13 AUDITED FINANCIAL STATEMENTS. The Buyer shall have completed
preparation of such audited financial statements of the Corporation as may be
required by applicable regulations of the Securities and Exchange Commission or
by any of the Buyer's lenders. If this condition shall not have been satisfied
by the close of business on December 30, 1998, it shall be deemed to have been
waived by the Buyer.
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.
ARTICLE
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:
28
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 cash portion of the Purchase Price and delivery of the Preferred Stock to
the Seller and the Escrow Agent, all 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 their counsel;
(c) such resolutions of the Buyer, as sole shareholder of the
Corporation, and the directors of the Corporation electing directors and
appointing officers, respectively, of the Corporation, effective upon the
Closing;
(d) 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;
(e) a copy of the Buyer's Certificate of Incorporation, including
all amendments thereto, certified by the Secretary of State of the State of
Delaware;
(f) a certificate of the Secretary of an Assistant Secretary of the
Buyer as to (i) the resolutions of the Buyer's Board of Directors authorizing
this Agreement and the transactions contemplated hereby (including the issuance
of the Preferred Stock), and (ii) 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
29
satisfactory to the Seller and their 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 to the Seller the Escrow Agreement.
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 RELEASE FROM PERSONAL GUARANTEE. The Seller shall have been released as
of the Closing from his Personal Guarantee to GM or its affiliates.
8.9 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in business, results of operations or financial condition of the Buyer,
other than those occasioned as a result of events or occurrences of
industry-wide significance or application.
ARTICLE
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 two years with the exception of (i) the representations
and warranties of the Seller contained in Section 3.21, which shall survive the
Closing until the expiration of the applicable tax statutes of limitation plus a
period of sixty (60) days, (ii) the representations and warranties of the Seller
contained in Section 3.19, which shall survive the Closing until the earlier of
three years from the Closing Date or the expiration of the applicable statute of
limitations for a breach thereof, and (iii) the representations and warranties
of the Seller contained in Section 3.36, which shall survive the Closing until
the earlier of five years from the Closing Date or the expiration of the
30
applicable statute 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 Corporation 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;
(b) the breach or nonfulfillment of any covenant or agreement of
any Seller contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto (including, without
limitation, the Seller's obligation to pay taxes as provided in Schedule 5.5
hereto);
(c) 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 or generation, of Hazardous Materials generated,
stored, used, disposed of, treated, handled or shipped by the Corporation on or
before the Closing Date;
(d) 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 Corporation
prior to or on the Closing Date, but only to the extent necessary to comply with
applicable Environmental Laws or with any legal obligations to a third party;
(e) all known or unknown environmental liabilities and claims of
the Corporation 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; or
(f) 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;
PROVIDED, HOWEVER, that with respect to the foregoing indemnification obligation
of the Seller contained in paragraphs (a) and (c) through (f) of this Section
9.2, the Seller shall not have any
31
indemnification obligation until (and only to the extent that) Buyer's Damages
in respect of all claims for indemnity pursuant to all such paragraphs shall
exceed a cumulative aggregate total of $125,000; PROVIDED, FURTHER, no claim for
indemnification under paragraphs (c) through (f) of this Section 9.2 shall be
made after the fifth anniversary of the Closing Date.
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 their successors and assigns (each, a "SELLER INDEMNITEE") harmless
from or against, for and in respect of, any and all damages, losses,
obligations, liabilities, demands, judgments, injuries, penalties, claims,
actions or causes of action, encumbrances, costs, and expenses (including,
without limitation, reasonable attorneys' fees and expert witness fees)
suffered, sustained, incurred or required to be paid by any Seller Indemnitee
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;
(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;
(c) the assertion against any Seller Indemnitee of any claims,
liabilities or obligations arising out of the Buyer's operation of the business
and/or the use of the Seller's name after the Closing, except to the extent that
such claims, liabilities or obligations relate to matters which are
indemnifiable by the Seller pursuant to Section 9.2;
(d) the Personal Guarantees;
(e) the waiver by the Buyer of the condition to closing set forth
in Section 7.10 above; or
(f) the Buyer's obligation to pay Covered Taxes as provided in
Schedule 5.5 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:
32
(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
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.
33
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
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 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); PROVIDED, HOWEVER, no party may
terminate this Agreement pursuant to this Section 10.1(b) if such party is in
breach of any material representation, warranty or covenant of such party
contained in this Agreement;
(c) By written notice by the Buyer to the Seller if, after any
initial HSR Act filing, the FTC makes a "second request" for information and
clearance is not received from the FTC and the Antitrust Division prior to
December 31, 1998, or if the FTC or the Antitrust Division challenges the
transactions contemplated hereby;
(d) By the Buyer, by written notice to the Seller, in the event
that approval by any applicable automobile manufacturer or distributor of the
transactions contemplated by this Agreement is not received by the Closing Date
Deadline (as the same may have been extended pursuant to Article 2 hereof);
(e) By the Buyer, by written notice to the Seller, in the event
that any applicable automobile manufacturer or distributor (or any person
claiming by, through or under it) shall exercise any right of first refusal,
preemptive right or other similar right, with respect to the dealership business
of the Corporation; or
(f) By the Buyer (no later than the thirtieth (30th) day after the
date hereof) 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.
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
34
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 on or before the Closing Date Deadline shall have been due to the
Buyer's knowing breach of its material representations and warranties or its
material covenants or obligations under this Agreement, then the Buyer shall,
upon demand of the Seller, promptly pay to the Seller in immediately available
funds, as liquidated damages for the loss of the transaction, a termination fee
of $500,000 (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 on or before the Closing Date Deadline 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, upon demand of the Buyer, promptly pay to the Buyer in immediately
available funds, as liquidated damages for the loss of the transaction, a
termination fee of $500,000 (the "SELLER'S TERMINATION FEE").
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
Buyer's 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.
ARTICLE
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.
35
ARTICLE
MISCELLANEOUS
12.1 CERTAIN TAX RETURNS. The Seller shall cooperate with and provide
assistance to the Buyer and the Corporation in connection with the preparation
and filing of all federal, state, local and foreign income tax returns which
relate to the Corporation 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 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 Corporation or the
Buyer, or any other person, firm, corporation or legal entity, other than the
parties hereto and their successors and assigns, any rights, remedies or other
benefits under or by reason of this Agreement.
12.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including all Exhibits
and Schedules hereto) and the other writings referred to herein or delivered
pursuant hereto contain the entire understanding of the parties hereto with
respect to its subject matter. 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 the
Corporation (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
36
acknowledged or one (1) business day after the date of deposit with such
nationally recognized overnight courier. All such notices, claims, certificates,
requests, demands and other communications shall be addressed to the respective
parties at the addresses set forth below or to such other address as the person
to whom notice is to be given may have furnished to the others in writing in
accordance herewith.
If to the Buyer, to:
Sonic Automotive, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Parker, Poe, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller, to:
▇▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ Chevrolet Cadillac Oldsmobile, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
2700 International Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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 North Carolina, without giving effect
to its rules governing conflict of laws.
37
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.
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 (i) the best actual knowledge, information and belief of the
Seller and (ii) 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) as an officer of the
Corporation; PROVIDED, HOWEVER, for purposes of Section 10.4 hereof, the concept
of "knowing" shall be limited to actual knowledge.
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 Texas, 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 the interpretation or breach hereof (including, without limitation,
any of the foregoing based upon a claim to any termination fee hereunder), 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. 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
38
appointment, either arbitrator may petition the American Arbitration Association
to make the appointment. The place of arbitration shall be Houston, Texas. 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).
(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.
12.14 SELLER'S ACCESS POST CLOSING. The Buyer shall provide to the Seller
reasonable access to the books and records of the Corporation to the extent that
the Seller shall reasonably request in connection with any third party action,
suit or proceeding to which the Seller is a party or in connection with the
taking of any other action necessary or appropriate arising out of or relating
to the transactions contemplated by this Agreement.
12.15 SELLER'S HEALTHCARE COVERAGE. The Buyer shall use its reasonable best
efforts to include the Seller and his wife in the Buyer's health insurance
plans, it being understood that (a) such inclusion shall be at the Seller's sole
expense, and (b) such inclusion shall be subject to any necessary approval of
the Buyer's insurance carrier(s) for coverage thereunder and shall also be
subject to any limitations imposed by applicable state or federal law
(including, without limitation, non-discrimination provisions of applicable
law).
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
/s/ ▇▇▇ ▇▇▇▇▇
-----------------------------
▇▇▇ ▇▇▇▇▇
39
EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Statement of Rights and Preferences of Preferred Stock
Exhibit C - Form of Non-Competition Agreement
40
SCHEDULES
Schedule 32.(b) Consents and Approvals for the Seller
Schedule 3.5 Interest in other Entities
Schedule 3.7 Qualification
Schedule 3.8 Capitalization
Schedule 3.10 No Violation; Conflicts
Schedule 3.11 Encumbrances
Schedule 3.13 Financial Statements
Schedule 3.16(b) Leased Premises
ScheduClaims6(c) ScheduLeased Equipment
Schedule 3.17 Intellectual Property
Schedule 3.18 Certain Liabilities
Schedule 3.19 No Undisclosed Liabilities
Schedule 3.20 Absence of Changes
Schedule 3.21 Tax Matters
Schedule 3.22 Compliance with Laws
Schedule 3.23 Litigation Regarding Corporation
Schedule 3.24 Permits, Etc.
Schedule 3.26 Compensation
Schedule 3.27 Employee Benefits
Schedule 3.29(a) Material Agreements
Schedule 3.29(b) Required Consents for Transfers of Material Agreements
Schedule 3.31 Bank Accounts, Credit Cards and Safe Deposit Boxes
Schedule 3.32(a) Insurance Policies
Schedule 3.32(b) Property Damage and Personal Injury Claims
Schedule 3.33 Warranties
Schedule 3.34 Directors and Officers
Schedule 3.36 Environmental Matters
Schedule 3.38 Business Generally
Schedule 4.2(b) Consents and Approvals for the Buyer
Schedule 5.1 Due Diligence Materials
Schedule 5.5 Permitted Bonuses and Distributions
Annex A Bonus Automobiles
Schedule 6.6 Personal Guarantees by the Seller
41
PPAB 10/01/98
STOCK PURCHASE AGREEMENT
BETWEEN
SONIC AUTOMOTIVE, INC.
AND
▇▇▇ ▇▇▇▇▇
DATED AS OF OCTOBER 6, 1998
TABLE OF CONTENTS
Page
----
ARTICLE 1
PURCHASE AND SALE.................................................1
1.1 Agreement of Purchase and Sale..............................1
1.2 Purchase Price..............................................1
1.3 Delivery of the Shares......................................5
1.4 Non-Competition Agreement. ................................5
ARTICLE 2
CLOSING...........................................................5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER......................6
3.1 Ownership of Shares.........................................6
3.2 Seller's Power and Authority; Consents and Approvals........6
3.3 Execution and Enforceability................................6
3.4 Litigation Regarding Seller.................................6
3.5 Interest in Competitors and Related Entities; Certain
Transactions................................................6
3.6 Seller Not Foreign Person...................................7
3.7 Organization; Good Standing; Qualifications; and Power......7
3.8 Capitalization..............................................7
3.9 Subsidiaries and Investments................................7
3.10 No Violation; Conflicts.....................................8
3.11 Title to Assets; Related Matters............................8
3.12 Possession..................................................8
3.13 Financial Statements........................................8
3.14 Accounts Receivable.........................................9
3.15 Inventories.................................................9
3.16 Real Property; Machinery and Equipment......................9
3.17 Patents; Trademarks; Trade Names; Copyrights; Licenses,
Etc........................................................11
3.18 Certain Liabilities........................................11
3.19 No Undisclosed Liabilities.................................11
3.20 Absence of Changes.........................................11
3.21 Tax Matters................................................12
3.22 Compliance with Laws, Etc..................................13
3.23 Litigation Regarding the Corporation.......................13
3.24 Permits, Etc...............................................14
3.25 Employees; Labor Relations.................................14
3.26 Compensation...............................................14
3.27 Employee Benefits..........................................14
3.28 Powers of Attorney.........................................15
3.29 Material Agreements........................................15
i
3.30 Brokers' or Finders' Fees, Etc.............................16
3.31 Bank Accounts, Credit Cards, Safe Deposit Boxes and
Cellular Telephones........................................16
3.32 Insurance..................................................16
3.33 Warranties.................................................16
3.34 Directors and Officers.....................................17
3.35 Suppliers and Customers....................................17
3.36 Environmental Matters......................................17
3.37 [Intentionally Left Blank].................................19
3.38 Business Generally.........................................19
3.39 Misstatements and Omissions................................19
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER......................19
4.1 Organization and Good Standing.............................19
4.2 Buyer's Power and Authority; Consents and Approvals........19
4.3 Execution and Enforceability...............................20
4.4 Litigation Regarding Buyer.................................20
4.5 No Violation; Conflicts....................................20
4.6 Brokers' or Finders' Fees, Etc.............................20
4.7 Authorization of the Preferred Stock.......................20
4.8 Capitalization.............................................20
4.9 Disclosure Materials.......................................21
4.10 Misstatements and Omissions................................21
ARTICLE 5
PRE-CLOSING COVENANTS OF THE SELLER..............................22
5.1 Provide Access to Information; Cooperation with Buyer......22
5.2 Operation of Business of the Corporation...................22
5.3 Books of Account...........................................22
5.4 Employees..................................................23
5.5 Certain Prohibitions.......................................23
5.6 Other Changes..............................................23
5.7 Additional Information.....................................23
5.8 Publicity..................................................23
5.9 Other Negotiations.........................................23
5.10 Closing Conditions.........................................24
5.11 Environmental Audit........................................24
5.12 Audited Financial Statements...............................24
5.13 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇..........................................24
ARTICLE 6
PRE-CLOSING COVENANTS OF BUYER...................................25
6.1 Publicity..................................................25
6.2 Closing Conditions.........................................25
6.3 Application to Automobile Manufacturers and Distributors...25
6.4 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇..........................................25
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6.5 Access.....................................................25
6.6 Release of Personal Guarantees.............................25
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE BUYER AT THE CLOSING............26
7.1 Representations and Warranties.............................26
7.2 Performance of Obligations of the Seller...................26
7.3 Closing Documentation......................................26
7.4 Approval of Legal Matters..................................27
7.5 No Litigation..............................................27
7.6 No Material Adverse Change or Undisclosed Liability........27
7.7 No Adverse Laws............................................27
7.8 Affiliate and Other Transactions...........................28
7.9 Escrow Agreement...........................................28
7.10 GM Approvals. ............................................28
7.11 Non-Competition Agreement..................................28
7.12 [Intentionally Left Blank].................................28
7.13 Audited Financial Statements...............................28
7.14 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period...........................28
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE SELLER AT THE CLOSING...........28
8.1 Representations and Warranties.............................29
8.2 Performance of Obligations of the Buyer....................29
8.3 Closing Documentation......................................29
8.4 Approval of Legal Matters..................................29
8.5 No Litigation..............................................30
8.6 Escrow Agreement...........................................30
8.7 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period...........................30
8.8 Release From Personal Guarantee............................30
8.9 No Material Adverse Change.................................30
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION, ETC.............................................30
9.1 Survival...................................................30
9.2 Agreement to Indemnify by Seller...........................31
9.3 Agreement to Indemnify by Buyer............................32
9.4 Claims for Indemnification.................................32
9.5 Procedures Regarding Third Party Claims....................33
9.6 Effectiveness..............................................34
ARTICLE 10
TERMINATION......................................................34
10.1 Termination................................................34
10.2 Procedure and Effect of Termination........................34
10.3 Payment of Buyer's Termination Fee ........................35
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10.4 Payment of Seller's Termination Fee........................35
10.5 Termination Fees Exclusive Remedies for Damages............35
ARTICLE 11
CERTAIN TAXES AND EXPENSES.......................................35
11.1 Certain Taxes and Expenses.................................35
ARTICLE 12
MISCELLANEOUS....................................................36
12.1 Certain Tax Returns........................................36
12.2 Parties in Interest; No Third-Party Beneficiaries..........36
12.3 Entire Agreement; Amendments...............................36
12.4 Assignment.................................................36
12.5 Remedies...................................................36
12.6 Headings...................................................36
12.7 Notices....................................................37
12.8 Counterparts...............................................37
12.9 Governing Law..............................................38
12.10 Waivers....................................................38
12.11 Severability...............................................38
12.12 Knowledge..................................................38
12.13 Jurisdiction; Arbitration..................................38
12.14 Seller's Access Post Closing...............................39
12.15 Seller's Healthcare Coverage...............................39
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SCHEDULE 5.1
DUE DILIGENCE MATERIALS
1. COPY OF CERTIFICATE OF INCORPORATION (INCLUDING ANY AND ALL AMENDMENTS
THEREOF)
2. COPY OF BYLAWS (INCLUDING ANY AND ALL AMENDMENTS THEREOF)
3. COPIES OF STOCK LEDGERS AND MINUTE BOOKS
4. COPIES OF ANY IRS OR STATE GOVERNMENT AUTHORITY CORRESPONDENCE SINCE JANUARY
1, 1995
5. COPIES OF FEDERAL, STATE AND LOCAL TAX RETURNS OF THE COMPANY FILED FOR THE
LAST THREE FISCAL YEARS INCLUDING FORM 5500, SALES, USE AND PROPERTY TAX
RETURNS
6. COPIES OF ANY AUDITED OR REVIEWED FINANCIAL STATEMENTS FOR THE PRIOR THREE
FISCAL YEARS AND DEALER STATEMENTS FOR THE PRIOR THREE FISCAL YEARS AND
MONTHLY DEALER STATEMENTS SINCE THE MOST RECENT FISCAL YEAR END
7. CURRENT LIST (MOST RECENT MONTH END) OF AGED ACCOUNTS RECEIVABLES
8. CURRENT LIST (MOST RECENT MONTH END) OF NEW AND USED CAR INVENTORY ALONG
WITH AN AGING REPORT FOR NEW AND USED CARS
9. COPIES OF ANY LEASES OF REAL AND PERSONAL PROPERTY ENTERED INTO BY THE
COMPANY AS LESSOR OR LESSEE AND ALL DEEDS OF OWNERSHIP OF ALL REAL PROPERTY
OWNED BY THE COMPANY
10. COPIES OF ANY OUTSTANDING DEBT AGREEMENTS ENTERED INTO BY THE COMPANY
11. COPIES OF OUTSTANDING AGREEMENTS WITH RETAIL LENDERS AND WARRANTY PROVIDERS
INCLUDING FINANCE RESERVE SPLIT INFORMATION
12. COPIES OF ALL AUDIT LETTER RESPONSES FROM ATTORNEYS FOR THE LAST THREE YEARS
13. COPIES OF CORRESPONDENCE WITH MANUFACTURERS REGARDING AUDITS, SALES
PERFORMANCE AND MARKET STUDIES SINCE JANUARY 1, 1995
14. COPIES OF ALL OUTSTANDING MATERIAL WRITTEN CONTRACTS, AGREEMENTS,
UNDERSTANDINGS OR ARRANGEMENTS TO WHICH THE COMPANY IS A PARTY
15. DESCRIPTIVE SUMMARY OF ALL LITIGATION BY OR AGAINST THE COMPANY AND COPIES
OF ALL PLEADINGS AND OTHER COURT DOCUMENTS
16. COPIES OF ALL INSURANCE POLICIES MAINTAINED BY THE COMPANY
v
17. COPIES OF LOSS RUNS FOR PROPERTY AND LIABILITY AND WORKERS' COMPENSATION
INSURANCE FOR THE LAST THREE YEARS
18. COPY OF WORKERS' COMPENSATION RENEWAL CERTIFICATE
19. COPY OF MOST RECENT PREMIUM BILLING STATEMENT FOR EACH INSURANCE POLICY HELD
BY THE COMPANY
20. LIST OF ANY INCURRED BUT NOT REPORTED CLAIMS FOR ALL INSURANCE POLICIES
SINCE JANUARY 1, 1995
21. LIST OF ANY PENDING UNINSURED CLAIMS AND TO WHAT EXTENT ANY RESERVES HAVE
BEEN ESTABLISHED
22. COPIES OF ANY CURRENT EMPLOYMENT, COMMISSION, CONSULTING OR SEVERANCE
AGREEMENTS ENTERED INTO BY THE COMPANY
23. LIST OF ANY PENDING LABOR PRACTICE COMPLAINTS AND ANY GRIEVANCE OR
ARBITRATION PROCEEDINGS PENDING AGAINST THE COMPANY
24. CURRENT AGED LIST (MOST RECENT MONTH END) OF ALL ACCOUNTS PAYABLE
25. COPY OF ALL REPORTS OF THE COMPANY SINCE JANUARY 1, 1995 AS REQUIRED UNDER
THE FEDERAL OCCUPATIONAL SAFETY AND HEALTH ACT OF 1970 AND UNDER ALL OTHER
APPLICABLE HEALTH AND SAFETY LAWS AND REGULATIONS
26. COPY OF EMPLOYEE HANDBOOK AND ANY BENEFIT PLAN DOCUMENTS (I.E. HEALTH,
DENTAL, LIFE, DISABILITY, 401(K), PROFIT SHARING, ETC.)
27. LISTING OF BENEFIT PLAN AND INSURANCE POLICIES RENEWAL DATES
28. COPIES OF ANY LICENSES, PERMITS OR CONSENTS FROM OR FILINGS WITH
GOVERNMENTAL AUTHORITIES NECESSARY FOR THE COMPANY TO CARRY ON ITS BUSINESS
29. LIST OF ALL BANK ACCOUNTS AND SAFE DEPOSIT BOXES MAINTAINED BY THE COMPANY
AND A LIST OF PERSONS HAVING SIGNING POWER ON THE SAME
30. COPIES OF CORRESPONDENCE AND AGREEMENTS WITH MANUFACTURERS INCLUDING "QSO"
FOR THE LAST TWO YEARS
31. COPIES OF CORRESPONDENCE WITH EXTERNAL ACCOUNTANTS FOR THE LAST TWO YEARS
32. COPIES OF CURRENT ADVERTISING AND PROMOTIONAL MATERIALS AND ANY FEE
ARRANGEMENTS WITH THE MEDIA, INCLUDING "YELLOW PAGES" AGREEMENTS
33. ORGANIZATIONAL CHART AND NAMES OF PRINCIPAL MANAGEMENT EMPLOYEES
vi
34. COPIES OF ANY YEARLY FORECAST AND PLANS FOR THE CURRENT YEAR AND THE NEXT
THREE YEARS
35. COPIES OF THE GENERAL LEDGER TRIAL BALANCES FOR THE CURRENT AND THE PRIOR
YEARS' MONTH END
36. COPIES OF SUPPORTING INFORMATION (INVOICES, W-2'S, ETC.) FOR ALL ITEMS
CONSIDERED "ADD-BACKS"
37. COPIES OF ANY ENVIRONMENTAL SURVEYS AND REPORTS PREPARED BY OR ON BEHALF OF
THE COMPANY
38. COPIES OF ANY CORRESPONDENCE OR REPORTS SINCE JANUARY 1, 1995 RELATED TO ANY
FEDERAL, STATE OR LOCAL ENVIRONMENTAL OR HEALTH AND SAFETY INSPECTION FOR
ANY COMPANY
39. NOTICE LETTERS, INCLUDING BUT NOT LIMITED TO LETTERS FROM THE ENVIRONMENTAL
PROTECTION AGENCY OR OTHER POTENTIALLY RESPONSIBLE PARTIES ("PRPS") UNDER
CERCLA, INFORMING ANY COMPANY THAT IT MAY BE A PRP AT A CERCLA SITE
40. COMPLETE SET OF ACCOUNTING "SCHEDULES" AS OF CURRENT MONTH END
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SCHEDULE 5.5
------------
PERMITTED BONUSES AND DISTRIBUTIONS
Subject to the provisions of this Schedule 5.5, the following bonuses and
distributions may be paid or made by the Corporation prior to the Closing Date:
1. Approximately $730,000 on deposit in a GMAC money market account which
includes the Seller's Owner's Bonus for fiscal year 1997 and other amounts held
by the Corporation as agent for other third parties.
2. The Seller's Owner's Bonus accrued through the Closing Date for fiscal
year 1998.
3. Those automobiles listed on Annex A to this Schedule 5.5, which will be
distributed as a special bonus to ▇▇▇ ▇▇▇▇▇ for 1998. For purposes of
calculating the amount of such special bonus, such automobiles will be valued by
the Buyer at their fair market value.
4. Distributions of after tax earnings of the Corporation through the
Closing Date, but only if such distributions will not, in the reasonable
judgment of the Buyer, cause the Corporation's Net Book Value as of the Closing
Date (determined as provided in Section 1.2(c) of this Agreement) to be less
than $5,500,000.
The Closing Balance sheet will reflect the impact on the accounts of the
Corporation, in accordance with GAAP, of the foregoing bonuses and
distributions. The Seller will be responsible for payment of, and shall
indemnify and hold the Buyer and the Corporation harmless from and against, any
and all tax liabilities (federal, state and local) arising out of the payment or
distribution to the Seller of the foregoing bonuses and payments, except for (i)
tax liabilities as a result thereof accrued on the Closing Balance Sheet in
accordance with GAAP, and (ii) tax liabilities (federal, state and local) on the
payment of the special bonus under paragraph 3 above, but only to the extent
such bonus is taxed as bonus income (the foregoing tax liabilities in items (i)
and (ii) being collectively called "COVERED TAXES"). The Buyer shall be
responsible for the payment of, and shall indemnify the Seller for and hold the
Seller harmless from and against, all Covered Taxes.
