Exhibit 10.37
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made this 26th day
of February, 1999 by and among SONIC AUTOMOTIVE, INC., a Delaware corporation
("BUYER"), XXXX XXXXX MOTORS, INC., a Texas corporation ("SELLER"), and X. X.
XXXXX ("STOCKHOLDER").
WITNESSETH:
WHEREAS, Seller is engaged in the business (the "BUSINESS") of owing and
operating a Honda automobile dealership business at 0000 X. Xxxxxxx Xxxxxxxxxx,
Xxxxxxxxxx, Xxxxx and 000 Xxxxxxx, Xxxxxxxxxx, Xxxxx and an automobile repair
body shop located at 0000 Xxxx Xxxxxxxxxxx, Xxxxxx, Xxxxx;
WHEREAS, Seller desires to sell and Buyer desires to buy, or to cause
one or more subsidiaries or affiliates of Buyer to buy, certain assets
pertaining to the Business, subject to the terms and conditions of this
Agreement;
WHEREAS, contemporaneously with the execution of this Agreement, Buyer
has entered into a Contract to Purchase and Sell Property (the "REAL PROPERTY
PURCHASE AGREEMENT") with X. X. Xxxxx, R. Xxxxx Xxxxx and the Xxxxxx X. Xxxxx
and R. Xxxxx Xxxxx Family Partnership, Ltd., a Texas limited partnership (the
"OWNERS"), whereby Buyer has agreed to buy, and the Owners have agreed to sell
the Real Property (used herein as defined in the Real Property Purchase
Agreement); and
WHEREAS, the consummation of the transactions contemplated by this
Agreement is subject to the consummation of the transactions contemplated by the
Real Property Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the receipt and legal sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 "ASSETS" shall mean: the New Vehicles (as defined in Section 3.1);
the Demonstrators (as defined in Section 3.2); the Used Vehicles (as defined in
Section 3.5), if any; the Parts (as defined in Section 4.3); the Miscellaneous
Inventories (as defined in Section 5.1); the Work in Progress (as defined in
Section 5.3(a)); the Prepaid Expenses (as defined in Section
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5.3(b)); the Fixtures and Equipment (as defined in Section 5.4); the
Miscellaneous Assets (as defined in Section 5.5); and the goodwill of the
Business.
1.2 "CLOSING DATE" shall mean the date, not later than the Closing Date
Deadline (as hereinafter defined), of the closing of the purchase and sale of
the Assets (the "CLOSING") which shall be a date designated by Buyer, after
receipt by Buyer of the approvals, and the satisfaction of the other conditions,
set forth in Sections 8.8, 8.13 and 8.16, or such other date as is mutually
agreed upon by the parties hereto. The Closing shall be held at the offices of
Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P., 0000 Xxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxx
Xxxxxxxx, at 9:00 a.m. on the Closing Date.
1.3 "CLOSING DATE DEADLINE" shall mean the date that is the ninetieth
(90th) day after the date of this Agreement first set forth above; provided,
however, if, as of such date, the approvals set forth in Sections 8.8, 8.13 and
8.16 of this Agreement shall not have been obtained and/or audited financial
statements contemplated by Section 8.18 hereof shall not have been completed,
Buyer may elect to extend the Closing Date Deadline for an additional thirty
(30) days. In addition to the foregoing, if Seller shall have failed to furnish
to Buyer the due diligence materials set forth in Schedule 10.5 and in Paragraph
7(a) of the Real Property Agreement by the eighth (8th) day after the date of
this Agreement (the "Due Diligence Delivery Date"), Buyer may also elect to
extend (or further extend) the Closing Date Deadline one (1) additional day for
each day after the Due Diligence Delivery Date the Seller fails to send such
materials to Buyer. In addition to the foregoing, Buyer may also elect to extend
(or further extend) the Closing Date Deadline in accordance with Paragraph 7(d)
of the Real Property Purchase Agreement. Any reference herein to the term
"Closing Date Deadline" shall mean the Closing Date Deadline, as the same may
have been so extended.
1.4 "INVENTORY DATE" shall mean the close of business on the date of
completion of the Inventory (as defined in Section 4.1), which date shall not be
more than three (3) days prior to the Closing Date, or such later date prior to
the Closing as is mutually agreed by Seller and Buyer.
1.5 "LIABILITIES" shall mean (i) all obligations of Seller, arising in
the ordinary course of business after the Closing Date, and not as a result of
any breach or default, under (A) each contract or lease of Seller set forth on
Annex A of Schedule 2.4 attached hereto, and (B) each other contract or lease of
Seller that is entered into in connection with the Business in the ordinary
course of business at any time after the date hereof and on or prior to the
Closing Date, but only if, in the case of clauses (A) and (B), Buyer has agreed
to assume such contract or lease pursuant to the Assumption Agreement (as
defined in Section 2.4 below); (ii) Seller's chargeback liability to Honda Auto
Credit for losses on applicable finance chargebacks, including with respect to
the cancellation of any extended warranties issued by Honda; and (iii) the
Inducement Fee as provided in Section 2.5 hereof.
1.6 "MANUFACTURER" shall mean American Honda Motor Co., Inc.
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ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1 SALE AND PURCHASE. Upon the terms and subject to the conditions
hereinafter set forth, at the Closing, Seller will sell, transfer and convey the
Assets to Buyer and Buyer will purchase the Assets from Seller for the
consideration set forth in this Agreement. The sale, transfer and conveyance of
the Assets will be made by execution and delivery at the Closing of a xxxx of
sale in a form reasonably satisfactory to Buyer's counsel (the "XXXX OF SALE")
and such other instruments of assignment, transfer and conveyance as Buyer shall
reasonably request. Except to the extent specifically included within the
Assets, Seller will not sell, and Buyer will not purchase, any other tangible or
intangible assets of Seller.
2.2 PURCHASE PRICE. The aggregate purchase price (the "PURCHASE PRICE")
to be paid for the Assets shall consist of Forty-Two Million One Hundred
Thousand Dollars ($42,100,000), as the purchase price for the Business and
intangible assets included in the Assets (the "BUSINESS AND INTANGIBLE ASSETS
PURCHASE PRICE"), plus the sum of: (a) the New Vehicle Purchase Price (as
defined in Section 3.1); (b) the Demonstrator Purchase Price (as defined in
Section 3.2); (c) the Used Vehicle Purchase Price (as defined in Section 3.5),
if applicable; (d) the Parts Purchase Price (as defined in Section 4.4); (e) the
Miscellaneous Inventories Purchase Price (as defined in Section 5.1); (f) the
Work in Progress and Prepaid Expenses Purchase Price (as defined in Section
5.3(a)); and (g) the Fixtures and Equipment Purchase Price (as defined in
Section 5.4). The parties acknowledge that the New Vehicle Purchase Price, the
Parts Purchase Price and the Miscellaneous Inventories Purchase Price will be
based upon information contained in Schedule 3.1 and the Inventory (as defined
in Section 4.1), all of which are to be delivered prior to the Closing Date. The
parties also acknowledge that adjustments to those categories of Assets will
have to be made to reflect ordinary course increases or decreases in those
assets between the time of delivery of such Schedule 3.1 and the Inventory and
the Closing Date, and that the related components of the Purchase Price will
have to be adjusted to reflect any such adjustments to those Assets. All of the
foregoing adjustments (with appropriate payments by the parties in cash) will be
made as promptly as possible after the Closing. Each party will use the Purchase
Price allocation described in Schedule 2.2 in all reporting to, and tax returns
filed with, the Internal Revenue Service and other state and local taxing
authorities.
2.3 PAYMENT. At the Closing, Buyer shall pay the Purchase Price as
follows:
(a) The Buyer shall deliver to Seller cash, by a certified check
or by wire transfer, to an account or accounts designated by Seller one Business
Day prior to Closing, in an amount equal to 75% of the Purchase Price. As used
herein, the term "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 Texas.
(b) In payment of the balance of the Purchase Price, Buyer shall
issue and deliver to Seller, that number of whole shares (the "SHARES") of
Buyer's Class A Convertible Preferred Stock, Series III (the "PREFERRED STOCK"),
obtained by dividing such balance of the Purchase Price
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by $1,000. No fractional shares of Preferred Stock shall be issued; any such
fraction of a share of Preferred Stock shall be paid in cash at the rate of
$1,000 per whole share of Preferred Stock. The Shares shall be convertible into
shares of Buyer's Class A Common Stock, par value $.01 per share (the "COMMON
STOCK"), and shall have such other rights and preferences as are set forth in
the Statement of Rights and Preferences of Preferred Stock attached hereto as
Exhibit A. After the Closing, Buyer's sole obligation with respect to the Shares
and the Common Stock issuable upon conversion thereof (the "CONVERSION STOCK")
shall be as follows:
(i) Buyer shall use its best reasonable efforts to make
available "current public information" about itself within the meaning of
subsection (c)(1) of Rule 144 promulgated by the SEC under the Securities Act
("RULE 144") to the extent necessary to facilitate resales of the Conversion
Stock pursuant to Rule 145(d) of the Securities Act of 1933, as amended (the
"SECURITIES ACT"); and
(ii) Buyer shall remove stock transfer instructions on and
restrictive legends from certificates representing the Conversion Stock to the
extent that either (A) the offer and sale of the Shares or the Conversion Stock
may hereafter be registered under the Securities Act and under any applicable
state securities laws or (B) Buyer has received an opinion of counsel, in form
and substance reasonably satisfactory to Buyer, that registration of such offer
and sale is not required.
2.4 ASSIGNMENT AND ASSUMPTION. At the Closing, Seller will assign to
Buyer its Liabilities, and Buyer will assume and agree to perform and discharge
the Liabilities pursuant to an assignment and assumption agreement in a form
reasonably acceptable to Seller's counsel (the "ASSUMPTION AGREEMENT").
Notwithstanding anything herein to the contrary, except as expressly provided in
this Section 2.4 and elsewhere in this Agreement and in the Assumption
Agreement, Buyer does not and will not assume or become liable for any
obligations or liabilities of Seller, of any kind whatsoever, fixed or
contingent, known or unknown (collectively, the "RETAINED LIABILITIES"), as a
result of the transactions contemplated in this Agreement. Seller shall retain
and agrees to satisfy and discharge all of the Retained Liabilities, including
the Retained Liabilities set forth on Part II of Schedule 2.4.
2.5 INDUCEMENT FEE. As an inducement to Buyer to negotiate and enter
into this Agreement and to undertake the further cost and expense of conducting
its due diligence investigation and preparing to satisfy its obligations at the
Closing, Seller hereby agrees to pay to Buyer not later than July 15, 1999 the
sum of $500,000 (the "INDUCEMENT FEE"). The Inducement Fee will be included in
the Liabilities and will become an obligation of Buyer or any other person
(including any holder of a right of first refusal, preemptive right or other
similar right), with respect to any of the Assets who purchases the Assets, or
any portion thereof, as a result of the execution and delivery by Seller of this
Agreement. The Inducement Fee will be canceled if this Agreement is terminated
for any reason other than the exercise of a right of first refusal, preemptive
right or other similar right, by an applicable automobile manufacturer or
distributor or any person claiming by, through or under it.
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2.6 NON-COMPETITION AGREEMENT. At the Closing, Seller and X. X. Xxxxx
shall enter into a non-competition agreement with Buyer in substantially the
form of Exhibit B attached hereto (the "NON-COMPETITION AGREEMENT"). $10,000 of
the Business and Intangible Assets Purchase Price shall be allocated to the
non-compete covenant set forth in the Non-Competition Agreement.
ARTICLE III
NEW VEHICLES; DEMONSTRATORS AND USED VEHICLES
3.1 NEW VEHICLES. At the Closing, Buyer shall purchase all of Seller's
untitled new 1999 and 1998 motor vehicles in Seller's stock and unsold by Seller
as of the Closing Date and which are listed on Schedule 3.1 hereto, which Seller
shall deliver to Buyer not more than three (3) days prior to the Closing (all
such vehicles are collectively referred to hereinafter as the "NEW VEHICLES").
The purchase price to be paid by Buyer for each New Vehicle shall be the price
at which the New Vehicle was invoiced to Seller by the Manufacturer, as adjusted
pursuant to this Article III (the sum of all such amounts to be paid for New
Vehicles as determined by this Article III is herein referred to as the "NEW
VEHICLE PURCHASE PRICE"). Schedule 3.1 shall set forth the model, invoice cost,
and all other information necessary to calculate the New Vehicle Purchase Price
with respect to each New Vehicle listed in such Schedule 3.1. At the Closing,
Seller shall assign to Buyer, and Buyer shall assume, without any additional
consideration therefor, by appropriate documents reasonably satisfactory to
Buyer, all unfilled retail orders and deposits made thereon. Any profits or
proceeds derived from such unfilled retail orders shall belong to Buyer. In the
event any such retail order shall be canceled or terminated, Buyer shall be
responsible for refunding any deposit made thereon provided such deposit has
been assigned to Buyer.
3.2 DEMONSTRATORS. At the Closing, Buyer shall purchase all of Seller's
untitled 1999 and 1998 motor vehicles in Seller's stock and unsold by Seller as
of the Closing Date which are used in the ordinary course of business for the
purpose of demonstration and that are listed on Schedule 3.2, which Seller shall
deliver to Buyer no more than three (3) days prior to the Closing (all such
vehicles are collectively referred to herein as the "DEMONSTRATORS"). For
purposes of this Agreement, any motor vehicle with more than 6,000 miles on its
odometer shall be deemed to be "used" rather than a "Demonstrator." The purchase
price to be paid by Buyer for each Demonstrator shall be the price at which the
Demonstrator was invoiced to Seller by the Manufacturer, as adjusted pursuant to
this Article III, and as reduced by an amount equal to ten cents ($.10)
multiplied by the amount equal to (i) the total mileage on such odometer, less
(ii) 200 miles (the sum of all such amounts to be paid for Demonstrators
hereunder is herein referred to as the "DEMONSTRATOR PURCHASE PRICE"). Schedule
3.2 shall set forth each Demonstrator's model, invoice cost, odometer reading
and all other information necessary to calculate the Demonstrator Purchase Price
with respect to such Demonstrator.
3.3 ADJUSTMENT OF NEW VEHICLE AND DEMONSTRATOR PURCHASE PRICE. The
purchase price paid for each New Vehicle and each Demonstrator purchased under
this Article III shall be: (a) increased by the dealer cost (including labor) of
any equipment and accessories which have been installed by Seller; and (b)
decreased by (i) the dealer cost (including labor) of any equipment and
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accessories which have been removed from such vehicles, (ii) all paid or unpaid
rebates, discounts, holdback for dealer account and other factory incentives
with respect to such New Vehicle or Demonstrator (including without limitation
rebates applied for and paid but not earned, incentive monies claimed on
pre-reported units and carryover allowances on 1997 models), and (iii) all
refundable advertising allowances, if any.
3.4 DAMAGED OR REPAIRED NEW VEHICLES AND DEMONSTRATORS. In the event any
New Vehicle or Demonstrator shall have been damaged prior to the Closing Date
which is not reflected on Schedule 3.1 or Schedule 3.2, or is otherwise in a
condition such that it cannot reasonably be presented as being in a first class
saleable condition, Seller and Buyer will attempt to agree on the cost to cover
such repairs or some other equitable reduction in value to reflect such
condition, which amount shall be deducted from the price to be paid for such New
Vehicle or Demonstrator. In the event Buyer and Seller cannot agree on the cost
of repairs or the amount of reduction, Buyer shall have no obligation to
purchase any such damaged New Vehicle or Demonstrator. With respect to any New
Vehicle or Demonstrator which shall have been damaged and repaired prior to the
Closing Date, Seller and Buyer will attempt to agree on an adjustment to the
price to reflect the decrease, if any, in the wholesale value of such New
Vehicle or Demonstrator resulting from such damage and repair, which amount
shall be deducted from the price to be paid for such New Vehicle or
Demonstrator. In the event Buyer and Seller cannot agree on such adjustment,
Buyer shall have no obligation to purchase such New Vehicle or Demonstrator.
Seller shall notify Buyer on or prior to the Closing Date if any New Vehicles or
Demonstrators shall have suffered any damage which is not reflected on Schedules
3.1 and 3.2.
3.5 USED VEHICLES. Buyer shall have no obligation to purchase any
vehicle from Seller other than its obligation hereunder to purchase the New
Vehicles and the Demonstrators. Seller and Buyer shall perform an inventory of
Seller's motor vehicles that are not New Vehicles or Demonstrators as of the
Inventory Date (including, without limitation, Seller's "rental fleet"), and, in
connection with such inventory, Seller and Buyer shall attempt to assign a
mutually agreed price to each such vehicle owned by Seller as of the Closing
Date. Any such vehicles as to which Seller or Buyer are unable to agree upon a
price shall not be purchased by Buyer in connection herewith. Any such vehicles
as to which Seller and Buyer shall agree upon a price are collectively referred
to herein as the "USED VEHICLES" and shall be purchased by Buyer at the Closing.
The sum of all prices assigned to such Used Vehicles to be purchased by Buyer
pursuant to the terms of this Section 3.5 shall be referred to herein as the
"USED VEHICLE PURCHASE PRICE."
ARTICLE IV
PARTS/ACCESSORIES
4.1 THE INVENTORY. Buyer and Seller shall engage a mutually acceptable
third party engaged in the business of appraising, valuing and preparing
inventories for automobile dealerships (hereinafter referred to as the
"INVENTORY SERVICE") to prepare an inventory list (the "INVENTORY") of the parts
and accessories, as well as the Miscellaneous Inventories, and either used or
held for use
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by, Seller in the Business. The Inventory (insofar as it relates to parts and
accessories) shall be posted to the Manufacturer's approved system of inventory
control. The cost of the Inventory shall be borne by Buyer. The Inventory shall
be completed by the Inventory Date. The Inventory shall identify each part and
accessory and its purchase price.
4.2 RETURNABLE AND NON-RETURNABLE PARTS AND ACCESSORIES. The Inventory
shall classify parts and accessories as "returnable" or "nonreturnable." For
purposes of this Agreement, the terms "returnable parts" and "returnable
accessories" shall describe and include only those new parts and new accessories
for vehicles which are listed (coded) in the latest current Master Parts Price
List Suggested List Prices and Dealer Prices, or other applicable similar price
lists, of the Manufacturer, with supplements or the equivalent in effect as of
the Inventory Date (the "MASTER PRICE LIST"), as returnable to the Manufacturer
at not less than the purchase price reflected in the Master Price List. The
purchase price for each "returnable part" and "returnable accessory" will be the
price listed in the Master Price List. All parts and accessories listed (coded)
in the Master Price List as non-returnable to the Manufacturer shall be
classified as "nonreturnable." The purchase price for each "nonreturnable" part
and accessory, of which type Seller has made no sales during the ninety (90) day
period prior to the Inventory Date, shall be sixty percent (60%) of the price
listed therefor in the Master Price List. The purchase price for each
"nonreturnable" part and accessory, of which type Seller has made retail sales
to one or more customers during the ninety (90) day period prior to the
Inventory Date, shall be one hundred percent (100%) of the price therefor listed
in the Master Price List. The purchase price for all "Jobber" and/or "NPN" parts
shall be equal to Seller's original cost of such parts. The purchase price for
all nuts, bolts and any other parts not addressed in this Section 4.2 shall
equal the fair market value thereof as determined by the Inventory Service.
4.3 PARTS. At the Closing, Buyer shall purchase all parts and
accessories owned by Seller at the Closing Date and listed on the Inventory (the
"PARTS") provided, however, that Buyer shall not be obligated to purchase any
damaged parts or accessories, parts and accessories with component parts
missing, superseded or otherwise obsolete parts or accessories, or used parts or
accessories. Seller agrees that if parts and accessories that Buyer is not
obligated to purchase hereunder are not removed from the Real Property within
sixty (60) days after the Closing Date, they shall become the property of Buyer
without the payment of any consideration in addition to the consideration
otherwise provided herein. Buyer agrees to provide access to Seller for the
purpose of removing such property during such sixty (60) day period.
4.4 PARTS AND PURCHASE PRICE. The purchase price for the Parts will
equal the value of such items shown on the Inventory (the "PARTS PURCHASE
PRICE").
4.5 PARTS RETURN PRIVILEGES. Seller shall assign to Buyer at Closing any
net parts return privileges under the Manufacturer's Parts Return Plans that may
have accrued to Seller prior to the Closing in respect of the Parts (and any
other special parts return authorizations in respect of the Parts which may have
been granted to Seller by the Manufacturer).
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ARTICLE V
MISCELLANEOUS INVENTORIES; WORK IN PROGRESS; FIXTURES
AND EQUIPMENT
5.1 MISCELLANEOUS INVENTORIES. At the Closing, Buyer shall purchase all
useable gas, oil and grease, all undercoat material and body materials in
unopened cans and such other miscellaneous useable and saleable articles in
unbroken lots (including office supplies) which (i) are on the dealership
premises, (ii) are owned by Seller on the Closing Date, (iii) do not represent
more than a sixty (60) day supply of the item(s) in question, and (iv) are
identified in the Inventory taken by the Inventory Service on the Inventory Date
(collectively referred to herein as the "MISCELLANEOUS INVENTORIES"). The
purchase price for the Miscellaneous Inventories shall be equal to the
replacement cost of the Miscellaneous Inventories as determined by the Inventory
Service and set forth on the Inventory (the sum of all prices of the
Miscellaneous Inventories pursuant to the terms of this Section 5.1 shall be
referred to herein as the "MISCELLANEOUS INVENTORIES PURCHASE PRICE").
5.2 MISCELLANEOUS ITEMS NOT INCLUDED IN THE INVENTORY. Buyer shall have
no obligation to purchase any such miscellaneous items that are not included in
the Miscellaneous Inventories. Seller agrees that any miscellaneous items that
are not included in the Miscellaneous Inventories and are not removed from the
Real Property within sixty (60) days after the Closing Date shall become the
property of Buyer without the payment of any consideration in addition to the
consideration otherwise provided herein. Buyer agrees to provide access to
Seller for the purpose of removing such property during such sixty (60) day
period.
5.3 WORK IN PROGRESS AND PREPAID EXPENSES.
(a) At the Closing, Buyer shall buy at Seller's actual cost for
parts and labor such shop labor and sublet repairs as Seller shall have caused
to be performed on any repair orders which are in process at the close of
business on the Closing Date for which there are adequate credit arrangements
(the "WORK IN PROGRESS") (the sum of all costs of Seller for the Work in
Progress pursuant to the terms of this Section 5.3(a) and the book value of all
Prepaid Expenses (as defined in Subsection 5.3(b) below) shall be referred to
herein as the "WORK IN PROGRESS AND PREPAID EXPENSES PURCHASE PRICE"). Buyer
shall complete such repair work and shall be entitled to the entire proceeds to
be collected for such services.
(b) At the Closing, Buyer shall purchase from Seller, at Seller's
book value therefor, all bona fide prepaid expenses of Seller, provided that
such expenses are in respect of obligations to non-affiliated parties in the
ordinary course of business and will inure to the benefit of Buyer, as set forth
in Schedule 5.3(b) hereto to be delivered to Buyer not later than five (5) days
prior to the Closing (the "PREPAID EXPENSES").
5.4 FIXTURES AND EQUIPMENT. At the Closing, Buyer shall purchase all
fixtures, machinery, equipment (including special tools and shop equipment),
furniture and all signs and
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office equipment owned by Seller and used or held for use in connection with the
Business, including the items listed on Schedule 5.4 hereto (which Seller shall
deliver to Buyer not later than five (5) days prior to the Closing) but
excluding the items set forth on Schedule 5.4(a) (collectively referred to
herein as the "FIXTURES AND EQUIPMENT"). The purchase price for the Fixtures and
Equipment shall be Seller's depreciated book value thereof, as reflected in said
Schedule 5.4 attached hereto (the "FIXTURES AND EQUIPMENT PURCHASE PRICE").
5.5 MISCELLANEOUS ASSETS. At the Closing, and without payment of any
additional consideration, Buyer shall purchase all of Seller's (i) unused shop
repair orders, parts sales tickets, accounting forms, binders, office and shop
supplies and such shop reference manuals, parts reference catalogs,
non-accounting file copies for all sales of Seller for the three (3) years
preceding the Closing Date, (ii) copies of new and used car sales records and
specifically wholesale parts sales records, new and used parts sales records,
and service sales records for the three (3) years preceding the Closing Date,
(iii) product sales training material and reference books on hand as of the
Closing Date, (iv) customer and registration lists pertaining to the sale of
motor vehicles, service files, repair orders, owner follow-up lists and similar
records relating to the operation of the Business, (v) telephone numbers and
listings used by Seller in connection with the Business, (vi) names and
addresses of Seller's service customers and prospective purchasers, (vii) all
lawfully transferrable licenses and permits of the Business, (viii) Seller's
rights to the tradename[s] listed in Schedule 5.5 hereto and any similar
variations thereof, and (ix) all rights and claims of Seller under or arising
out of the contracts and leases included in the Liabilities (all of the
foregoing items collectively referred to herein as the "MISCELLANEOUS ASSETS").
5.6 CERTAIN RECORDS OF SELLER; ACCESS BY SELLER. Seller may retain all
corporate records, financial records and correspondence which are not necessary
for the continued operation of the Business by Buyer. For a period of three (3)
years following the Closing Date, Buyer will allow Seller, their authorized
agents and representatives access, upon reasonable notice during business hours,
to the books and records regarding post Closing adjustments arising during the
three day period prior to Closing.
5.7 WARRANTY OBLIGATIONS OF SELLER. To the extent that Seller may have
issued warranties on the vehicles sold by Seller on or prior to the Closing Date
and to the extent such warranties are not included in the Work in Progress,
Buyer shall have no responsibility to perform any services required under such
warranties, unless authorized in writing by Seller accompanied by arrangements
in writing satisfactory to Buyer to assure Buyer of payment for all work
performed by Buyer, and, if such warranty services are so authorized by Seller,
Seller shall reimburse Buyer for all of Buyer's costs for parts and labor in
connection therewith at Buyer's actual cost for parts and labor. At the Closing
Date, Seller shall supply Buyer with a list to which such warranties and
guaranties, if any, are applicable, which list shall include the names of the
purchasers, the make and year model of the vehicles purchased and the date of
purchase. Seller shall also supply to Buyer at or prior to the Closing Date an
address for and a designation of the person who will be responsible for
authorizing Buyer to perform any services under such warranties, if any, issued
by Seller on vehicles sold by it on or prior to the Closing Date. Seller shall
reimburse Buyer promptly upon
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demand for all sums due or payable by Seller to Buyer hereunder and submission
of adequate supporting documentation.
5.8 ACCOUNTS RECEIVABLE. Seller shall retain all accounts receivable
arising out of the operation of the Business by Seller prior to the Closing Date
and Buyer shall retain all accounts receivable arising out of sales and/or
services of the Business after the Closing Date. After the Closing Date, Buyer
shall cooperate with Seller and shall use reasonable efforts to assist Seller in
Seller's efforts to collect Seller's accounts receivable for a period of six (6)
months after the Closing. Buyer shall accept payment of Seller's accounts
receivable, at no charge to Seller for a period of six (6) months after the
Closing, and shall forward to Seller, promptly upon receipt, all the money so
received on said accounts. Notwithstanding anything to the contrary, Buyer shall
have no responsibility to actually collect any of Seller's accounts receivable.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and the Stockholder as follows:
6.1 ORGANIZATION; POWER AND AUTHORITY; AUTHORIZATION. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of its business makes such
qualification necessary and has full corporate power and authority to own or use
the properties it purports to own and use and to carry on its business as now
being conducted. The Board of Directors of Buyer has duly approved this
Agreement, all other agreements, certificates and documents executed or to be
executed by Buyer in connection herewith, and the transactions contemplated
hereby and thereby. Buyer has full corporate power and authority to execute and
deliver this Agreement and all other agreements, certificates and documents
executed or to be executed by Buyer in connection herewith, to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. This Agreement, and all other agreements, certificates
and documents executed or to be executed by Buyer in connection herewith,
constitute or, when executed and delivered, will constitute legal, valid and
binding agreements of Buyer enforceable against Buyer in accordance with their
respective terms.
6.2 NO VIOLATION. Except as set forth on Schedule 6.2 attached hereto,
the execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
hereof do not and will not: (a) conflict with or violate any of the provisions
of Buyer's restated certificate of incorporation or by-laws, each as amended, or
any resolution of the Board of Directors or the stockholders of Buyer, (b)
violate any law, ordinance, rule or regulation or any judgment, order, writ,
injunction or decree or similar command of any court, administrative or
governmental agency or other body applicable to Buyer, (c) violate or conflict
with or result in a breach of, or constitute a default under, any material
instrument, agreement or indenture or any mortgage, deed of trust or similar
contract to which Buyer is a party or by which
10
Buyer is bound or affected, or (d) require the consent, authorization or
approval of, or notice to, or filing or registration with, any governmental body
or authority, or any other third party.
6.3 LITIGATION. There are no actions, suits or proceedings pending, or,
to the knowledge of Buyer, threatened against or affecting Buyer which might
adversely affect the power or authority of Buyer to carry out the transactions
to be performed by it hereunder.
6.4 NO MISSTATEMENTS OF OMISSIONS. To the knowledge of Buyer, no
representation or warranty made by Buyer in this Agreement, and no statement
contained in any agreement, instrument, certificate or schedule furnished or to
be furnished by Buyer pursuant hereto, 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 or warranty or such statement not
misleading.
6.5 BROKER'S AND FINDER'S FEES. Buyer has not incurred any liability to
any broker, finder or agent or any other person or entity for any fees or
commissions with respect to the transactions contemplated by this Agreement,
other than as set forth in Schedule 6.5.
6.6 CAPITALIZATION. The authorized capital stock of the Buyer, as of
February 1, 1999, consists of:
(a) 3,000,000 shares of Preferred Stock, par value $0.10 per
share, of which 300,000 shares are designated Class A Convertible Preferred
Stock and are, in turn, divided into 100,000 shares of Series I, 100,000 shares
of Series II and 100,000 shares of Series III; of which approximately 19,500
shares of Series I Preferred Stock were issued and outstanding and /or were
committed to be issued by the Buyer, approximately 20,238 shares of Series II
Preferred Stock were issued and outstanding and/or are committed to be issued by
the Buyer, and approximately 31,922 shares of Series III Preferred Stock were
issued and outstanding and/or 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 11,461,118 shares are issued and outstanding; and
(c) 15,000,000 shares of Class B Common Stock, par value $0.01
per share, of which 12,400,000 shares are issued and outstanding.
All outstanding capital stock of the Buyer is duly authorized, validly issued,
fully paid and non-assessable.
6.7 DISCLOSURE MATERIALS. The Buyer has delivered to Seller copies of
(a) the Prospectus dated November 10, 1997 (the "PROSPECTUS"), (b) Buyer's
Annual Report on Form 10-K for the Fiscal Year ended December 31, 1997, (c)
Buyer's Quarterly Report on Form 10-Q for the three-month period ended March 31,
1998, June 30, 1998 and September 30, 1998 and (d) 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 being hereinafter referred to as
its "REPORTS").
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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.
6.8 AUTHORIZATION OF SHARES. The issuance of the Shares has been or
prior to Closing shall have been, duly authorized by all necessary corporate
action of the Buyer. Upon the issuance of Shares pursuant to this Agreement,
such Shares shall be validly issued, fully paid and non-assessable.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDER
Seller and the Stockholder, jointly and severally, represent and warrant
to Buyer, as follows:
7.1 ORGANIZATION; POWER AND AUTHORITY; AUTHORIZATION. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, is duly qualified to do business and is in good standing
in every jurisdiction in which the nature of its business makes such
qualification necessary and has full corporate power and authority to own or use
the properties it purports to own and use and to carry on its business as now
being conducted. Except for the Stockholder, no person or entity has a
beneficial or legal ownership interest in Seller. Seller has full corporate
power and authority to execute and deliver this Agreement and all other
agreements, certificates and documents executed or to be executed by Seller in
connection herewith, to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. The Stockholder
has full capacity, power and authority to execute and deliver this Agreement and
all other agreements, certificates and documents executed or to be executed by
the Stockholder in connection herewith, to consummate the transactions
contemplated hereby and hereby and to perform his obligations hereunder and
thereunder. This Agreement, and all other agreements, certificates and documents
executed or to be executed by Seller in connection herewith, have been duly
authorized by all necessary corporate action and constitute or, when executed
and delivered, will constitute legal, valid and binding agreements of Seller
enforceable against Seller in accordance with their respective terms. This
Agreement, and all other agreements, certificates and documents executed or to
be executed by the Stockholder in connection herewith, constitute or, when
executed and delivered, will constitute legal, valid and binding agreements of
the Stockholder enforceable against the Stockholder in accordance with their
respective terms. Seller has never operated the Business under any tradenames
other than the tradenames listed in Section 5.5.
7.2 NO VIOLATION; CONSENTS. Except as set forth in Schedule 7.2 attached
hereto, the execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
hereof do not and will not: (a) conflict with or violate any of the provisions
of Seller's articles of incorporation and bylaws, each as amended, or any
resolution of the Directors of Seller, (b) violate any law, ordinance, rule or
regulation or any
12
judgment, order, writ, injunction or decree or similar command of any court,
administrative or governmental agency or other body applicable to any of Seller,
the Assets, the Business or the Liabilities, (c) violate or conflict with or
result in a breach of, or constitute a default under, or an event giving rise to
a right of termination of, any Contract (as defined in Section 7.10), any
material instrument, agreement or indenture or any mortgage, deed of trust or
similar contract to which Seller or the Stockholder is a party or by which any
of Seller, the Stockholder or any of the Assets are bound or affected, (d)
result in the creation or imposition of any Encumbrance upon any of the Assets,
or (e) require the consent, authorization or approval of, or notice to, or
filing or registration with, any governmental body or authority, or any other
third party.
7.3 LIABILITIES. There are no actions, suits or proceedings pending or,
to the knowledge of Seller and the Stockholder, threatened against Seller or the
Stockholder which might adversely affect the power or authority of either of
them to carry out the transactions to be performed by such party hereunder.
There are no actions, suits or proceedings pending, or, to the knowledge of
Seller and the Stockholder, threatened against or affecting Seller, other than
those adequately covered by insurance, and those disclosed on Schedule 7.3
attached hereto, and none of the actions, suits or proceedings described on
Schedule 7.3, if determined adversely to Seller, will have, or could reasonably
be expected to have, a material adverse effect upon the Assets or the
Liabilities or the business, prospects, properties, earnings, results of
operations or condition (financial or otherwise) of the Business.
7.4 TITLE TO ASSETS; ENCUMBRANCES. Except as disclosed on Schedule 7.4
attached hereto, Seller has good title to the Assets, free and clear of all
liens (including tax liens), security interests, encumbrances, actions, claims,
payments or demands of any kind and character (collectively, "ENCUMBRANCES"),
except Encumbrances disclosed on Schedule 7.4 hereto and Encumbrances for ad
valorem personal property taxes not yet due and payable. All of the Assets to be
transferred hereunder conform, as to condition and character, to the
descriptions of such Assets contained herein and will be transferred at the
Closing free and clear of all Encumbrances, except Encumbrances for ad valorem
personal property taxes not yet due and payable and Encumbrances to be satisfied
and released at the Closing. To the knowledge of Seller and the Stockholder, the
ownership and use of the Assets, and the operation of the Business, do not
infringe upon the intellectual property rights of any other person or entity.
7.5 PERMITS AND APPROVALS. Except as disclosed on Schedule 7.5 attached
hereto, there are no permits or approvals used or obtained for use by Seller
which are required under applicable law in connection with the ownership or
operation of the Business.
7.6 FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer the financial statements of
Seller described in Schedule 7.6 attached hereto (the "FINANCIAL STATEMENTS").
Except as set forth on Schedule 7.6(a), the Financial Statements have been
prepared in accordance with generally accepted accounting principles
consistently applied. Each balance sheet included in the Financial Statements
fairly presents the financial condition of Seller as of the date thereof and all
debts and liabilities of Seller,
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fixed or contingent, as of the date thereof, and each related statement of
income included in the Financial Statements fairly presents the results of the
operations of Seller and the changes in its financial position for the period
indicated, all in accordance with generally accepted accounting principles
consistently applied. To the knowledge of Seller and the Stockholder, the
Financial Statements contain adequate reserves for all reasonably anticipated
claims relating to matters with respect to which Seller is self-insured. The
Financial Statements fairly present the financial condition of Seller for the
dates and periods indicated and are in accordance with the books and records of
Seller, which books and records are true, correct and complete.
(b) Seller has no outstanding material claims, liabilities,
obligations or indebtedness of any nature, fixed or contingent, except as set
forth in the Financial Statements, or in the Schedules to this Agreement, and
except for liabilities incurred in the ordinary course of business and of the
kind and type reflected in the Financial Statements.
7.7 BROKERS AND FINDER. Except as set forth on Schedule 6.5, neither
Seller nor the Stockholder has engaged any broker or any other person or entity
who would be entitled to any brokerage commission or finder's fee in respect of
the execution of this Agreement and/or the consummation of the transactions
contemplated hereby, other than such fee or commission the entire cost of which
will be borne by Seller.
7.8 COMPLIANCE WITH LAWS.
(a) Except as set forth on Schedule 7.8 (a) attached hereto, the
Assets and the Real Property comply in all material respects with, and the
Business has been conducted in all material respects in compliance with, all
laws, rules and regulations (including all worker safety and all Environmental
Laws (as hereinafter defined)), applicable zoning and other laws, ordinances,
regulations and building codes, and neither Seller nor the Stockholder has
received any notice of any violation thereof which has not been remedied.
(b) Except as set forth on Schedule 7.8(b) attached hereto, (i)
Seller has not at any time generated, used, treated or stored Hazardous
Materials (as hereinafter defined) on, or transported Hazardous Materials to or
from, the Real Property or any property adjoining or adjacent to the Real
Property and, to the knowledge of Seller and the Stockholder, no party other
than Seller has taken such actions on or with respect to the Real Property,
provided, however, certain petroleum products are stored and handled by Seller
in the ordinary course of business in compliance in all material respects with
all Environmental Laws, (ii) Seller has not at any time released or disposed of
Hazardous Materials on the Real Property or any property adjoining or adjacent
to the Real Property, and, to the knowledge of Seller and the Stockholder, no
party other than Seller has taken any such actions on the Real Property, (iii)
Seller has at all times been in compliance in all material respects with all
Environmental Laws and the requirements of any permits issued under such
Environmental Laws with respect to the Real Property, the Assets and the
operation of the Business, except where failure to comply has not had and will
not have, and could not reasonably be expected to have, a material adverse
effect on the Assets or the Liabilities or the prospects, properties, earnings,
results of operations or condition (financial or otherwise) of the Business,
(iv) there are
14
no past, pending or, to the knowledge of Seller and the Stockholder, threatened
environmental claims against Seller, the Real Property, the Assets or the
Business, (v) to the knowledge of Seller and the Stockholder, there are no facts
or circumstances, conditions or occurrences regarding Seller, the Real Property,
the Assets or the Business that could reasonably be anticipated to form the
basis of an environmental claim against Seller, the Real Property, the Assets or
the Business or to cause the Real Property, the Assets or the Business to be
subject to any restrictions on its ownership, occupancy, use or transferability
under any Environmental Law, (vi) there are not now and, to the knowledge of
Seller and the Stockholder, never have been, any underground storage tanks
located on the Real Property, (vii) Seller has not transported or arranged for
the transportation of any Hazardous Materials to any site other than the Real
Property, and (viii) except as set forth on Schedule 7.8(b), neither Seller nor
the Stockholder has operated the Business at any location other than the Real
Property. As used herein, the term "ENVIRONMENTAL LAWS" 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 governmental authority
relating to pollution or Hazardous Materials or protection of human health or
the environment, including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA), as amended. As used herein,
the term "HAZARDOUS MATERIALS" means any waste, pollutant, chemical, hazardous
substance, toxic substance, hazardous waste, special waste, solid waste,
petroleum or petroleum-derived substance or waste, or any constituent or
decomposition product of any such pollutant, material, substance or waste,
regulated under or as defined by any presently existing environmental law.
(c) Neither Seller nor the Stockholder or any director, officer,
agent or employee of Seller or, to the knowledge of Seller and the Stockholder,
any other person or entity associated with or acting for or on behalf of Seller,
has, directly or indirectly: made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person or entity,
regardless of form, whether in money, property or services: (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of Seller.
7.9 FIXTURES AND EQUIPMENT; REAL PROPERTY. The Fixtures and Equipment
constitute in the aggregate all of the fixtures, machinery, equipment,
furniture, signs and office equipment used or intended for use by Seller in the
Business and are in good operating condition, normal wear and tear excepted. All
Demonstrators have been operated in the ordinary course of business, are
operated with dealer tags and have not had certificates of title issued with
respect to them. The structures and building systems included in the Real
Property are in good condition, maintenance and repair, normal wear and tear
excepted.
7.10 CONTRACTS. Except as disclosed on Schedule 7.10, Seller 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 of the contracts and leases set forth on or referred
to in Part I of Schedule 2.4 (collectively, the "Contracts"), including without
limitation any contract or lease to be assumed by Buyer hereunder, and there
exists no event, condition or occurrence which, after notice or lapse of time or
both, would constitute such a default. To the
15
knowledge of Seller and the Stockholder, no other party to any Contract is in
default in any respect of any of its obligations thereunder. Each of the
Contracts is valid and in full force and effect and enforceable against Seller
in accordance with their respective terms, and, to the knowledge of Seller and
the Stockholder, enforceable against the other parties thereto in accordance
with their respective terms.
7.11 ADEQUACY OF ASSETS. Except for Seller's cash and accounts
receivable, and except for any of Seller's used vehicles, miscellaneous
inventories or parts which Buyer elects not to purchase hereunder, and Seller's
rights under its dealership agreements with the Manufacturer, the Assets,
together with the Real Property and the Contracts (including all equipment
leased pursuant to the equipment leases included in the Contracts), comprise all
of the assets, properties, contracts, leases and rights necessary for Buyer to
operate the Business substantially in the manner operated by Seller prior to the
Closing. The failure by Seller to satisfy and discharge in full any of the
Retained Liabilities will not have, and could not reasonably be expected to
have, a material adverse effect upon the Assets or the Liabilities or the
prospects, properties, earnings, results of operations or condition (financial
or otherwise) of the Business.
7.12 TAXES. Seller has filed all federal, state and local governmental
tax returns required to be filed by it in accordance with the provisions of law
pertaining thereto and has paid all taxes and assessments (including, without
limitation of the foregoing, income, excise, unemployment, social security,
occupation, franchise, property and import taxes, duties or charges and all
penalties and interest in respect thereof) required by such tax returns or
otherwise to have been paid to date.
7.13 EMPLOYEES. Schedule 7.13 attached hereto discloses, as of the date
hereof, all of Seller's employees, as well as each employee's compensation
(including, separately, base pay and any incentive or commission pay), title,
length of employment, employment contract, if any, and accrued vacation time.
Except as disclosed on Schedule 7.13, Seller has no "employee benefit plan"
("EMPLOYEE BENEFIT PLAN") (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), including without
limitation, any bonus, deferred compensation, pension, profit-sharing, stock
option, employee stock purchase, secrecy agreement or covenant not to compete
with any employee. Seller is neither currently nor has ever been a party to any
collective bargaining agreement or other labor contract, and there has not been
nor is there pending or, to the knowledge of Seller and the Stockholder,
threatened any union organizational drive or application for certification of a
collective bargaining agent. Seller has been and is now in material compliance
with the "COBRA" health care continuation coverage requirements of Section 4980B
of the Internal Revenue Code of 1986, as amended, and Sections 601-608 of ERISA
and any applicable state health care continuation coverage requirements. Seller
has neither made any promises nor incurred any liability, pursuant to an
Employee Benefit Plan or otherwise, to provide medical or other welfare benefits
to retired or former employees of the Seller (other than COBRA or state mandated
continuation coverage, where applicable). Except as disclosed on Schedule 7.13,
none of Seller's employees or former employees has elected COBRA continuation
coverage or has incurred a COBRA qualifying event since June 1, 1996.
16
7.14 YEAR 2000. To the knowledge of Seller and Stockholder, without any
independent investigation, no area within its business and operations (including
those affected by the Manufacturer, suppliers, vendors and customers) will be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by Seller may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999).
7.15 NO MISSTATEMENTS OR OMISSIONS. No representation or warranty made
by Seller or the Stockholder in this Agreement, and no statement contained in
any agreement, instrument, certificate or schedule furnished or to be furnished
by Seller or the Stockholder pursuant hereto, 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 or warranty or such
statement not misleading.
ARTICLE VIII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer to perform this Agreement at the Closing are
subject to the following conditions precedent which shall be fully satisfied at
or before the Closing, unless waived in writing by Buyer.
8.1 REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of Seller and the Stockholder herein contained shall be true and
correct in all material respects on and as of the Closing Date as if made on and
as of the Closing Date, and Buyer shall have received a certificate from the
Stockholder and a duly authorized officer of Seller, dated the Closing Date, to
such effect.
8.2 COMPLIANCE WITH AGREEMENTS. Each of the agreements or obligations
required by this Agreement to be performed or complied with by Seller or the
Stockholder at or before the Closing shall have been duly performed or complied
with in all material respects, and Buyer shall have received a certificate from
the Stockholder and a duly authorized officer of Seller, dated the Closing Date,
to such effect.
8.3 NO LITIGATION. No action, suit or proceeding shall have been
instituted by a governmental agency or any other third party to prohibit or
restrain the sale contemplated by this Agreement or otherwise challenge the
power and authority of the parties to enter into this Agreement or to carry out
their obligations hereunder or the legality or validity of the sale contemplated
by this Agreement.
8.4 INVENTORY. The Inventory shall have been completed.
17
8.5 CORPORATE ORGANIZATION; ENCUMBRANCES. Seller shall have furnished to
Buyer: (a) a certificate of good standing of Seller issued by the Comptroller of
Public Accounts of the State of Texas dated no earlier than fifteen (15)
business days prior to the Closing Date; (b) a copy of the Articles of
Incorporation of Seller certified by the Secretary of State of the State of
Texas dated no earlier than fifteen (15) business days prior to the Closing
Date; (c) a certificate of Seller, dated the Closing Date, in form and substance
reasonably satisfactory to Buyer, certifying as to (i) no amendments to the
respective Articles of Incorporation of Seller since the date of the certificate
delivered in accordance with Section 8.5(b); (ii) the respective Bylaws of
Seller; and (iii) the incumbency and signatures of the officers of Seller
executing this Agreement and any other agreements, instruments or documents to
be executed by Seller in connection herewith; (d) UCC-11 search reports or other
evidence reasonably satisfactory to Buyer and its counsel that the Assets are
free and clear of all Encumbrances; and (e) such other documentation as Buyer
shall reasonably request.
8.6 BOARD RESOLUTIONS. Seller shall have furnished to Buyer a copy of
the resolutions duly adopted by the Board of Directors and the Stockholder of
Seller authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, certified by an authorized
officer of Seller as of the Closing Date.
8.7 NO DAMAGE. There shall have been no material adverse change or
development in the Assets, the Liabilities or in the prospects, properties,
earnings, results of operations or condition (financial or otherwise) of the
Business, and no event shall have occurred or circumstance shall exist that
will, or could reasonably be expected to, result in such a material adverse
change.
8.8 MOTOR VEHICLE LICENSES. Buyer shall have been licensed as a Motor
Vehicle Dealer under applicable Texas motor vehicle dealer registration laws and
shall have obtained all other authorizations, consents, licenses and permits
from applicable governmental agencies having or asserting jurisdiction, which
Buyer deems necessary or appropriate to conduct business as an automobile dealer
at each dealership location included in the Real Property.
8.9 CONSENTS AND APPROVALS. Seller shall have obtained all other
authorizations, consents and approvals from third persons and entities as are
(a) required to assign those material contracts and leases that Buyer is to
assume at Closing or (b) otherwise required of Seller to consummate the
transactions contemplated hereby.
8.10 CERTIFICATES OF ORIGIN; ETC. Seller shall have transferred to Buyer
certificates of title or origin for all New Vehicles, Demonstrators and, if
applicable, Used Vehicles and all of its registration lists, owner follow-up
lists and service files on hand as of the Closing Date with respect to the
Business.
8.11 TERMINATION OF SELLER'S AGREEMENTS WITH MANUFACTURER. Seller shall
have terminated in writing Seller's dealer agreement and any other applicable
sales and service agreements with the Manufacturer.
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8.12 XXXX OF SALE; ETC. Seller shall have executed, as appropriate, and
delivered to Buyer the Xxxx of Sale, other documents of transfer of title
contemplated hereby and any and all other documents necessary or desirable in
connection with the transfer of the Assets, which documents shall warrant title
to Buyer consistent with this Agreement and shall in all respects be in such
form as may be reasonably required by Buyer and its counsel.
8.13 MANUFACTURER APPROVAL. The Manufacturer shall have approved Buyer
or Buyer's affiliate as an authorized dealer and O. Xxxxxx Xxxxx or O. Xxxxxx
Xxxxx'x designee, as the authorized Dealer Operator, and the Manufacturer shall
have executed a dealer agreement, and any other applicable sales and service
agreements, on terms reasonably satisfactory to Buyer.
8.14 OTHER BASIC AGREEMENTS. All conditions to Buyer's obligations under
the Real Property Purchase Agreement shall have been satisfied or fulfilled
unless waived in writing by Buyer.
8.15 CHANGE OF NAME. Seller shall have delivered to Buyer all documents,
including, without limitation, resolutions of the Board of Directors and the
Stockholder of Seller, necessary to effect a change of name of Seller after the
Closing to names other than the corporate name and trade names referred to in
Section 5.5 hereof or any variation thereof.
8.16 HSR. All applicable waiting periods, if any, under the HSR Act (as
defined in Section 10.16 below) shall have expired without any indication by the
Antitrust Division (as defined in Section 10.16 below) or the FTC (as defined in
Section 10.16 below) that either of them intends to challenge the transactions
contemplated hereby or, if any such challenge or investigation is made or
commenced, there shall have occurred the conclusion of such challenge or
investigation which permits the transactions contemplated hereby in all material
respects.
8.17 NON-COMPETITION AGREEMENT. Seller and X. X. Xxxxx shall have
executed and delivered the Non-Competition Agreement to Buyer.
8.18 AUDITED FINANCIAL STATEMENTS OF BUYER. Buyer shall have completed
preparation of such audited financial statements of Seller as may be required by
applicable regulations of the Securities and Exchange Commission or by Buyer's
lenders.
8.19 OPINION OF COUNSEL. Buyer shall have received an opinion of Xxxxxx
X. Xxxx, Esq., counsel to Seller and the Stockholder, dated the Closing Date, in
form and substance reasonably satisfactory to Buyer and its counsel.
8.20 EMPLOYMENT AGREEMENT. Xxxx Xxxx shall have executed and delivered
to Buyer an Employment Agreement upon terms satisfactory to Buyer and Xxxx Xxxx.
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ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND THE STOCKHOLDER
The obligations of Seller and the Stockholder to perform this Agreement
at the Closing are subject to the following conditions precedent which shall be
fully satisfied at or before the Closing, unless waived in writing by Seller:
9.1 REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of Buyer herein contained shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of the Closing Date,
and Seller shall have received a certificate from a duly authorized officer of
Buyer, dated the Closing Date, to such effect.
9.2 COMPLIANCE WITH AGREEMENTS. Each of the agreements or obligations
required by this Agreement to be performed or complied with by Buyer at or
before the Closing shall have been duly performed or complied with in all
material respects, and Seller shall have received a certificate from a duly
authorized officer of Buyer, dated the Closing Date, to such effect.
9.3 NO LITIGATION. No action, suit or proceeding shall have been
instituted by a governmental agency or any third party to prohibit or restrain
the sale contemplated by this Agreement or otherwise challenge the power and
authority of the parties to enter into this Agreement or to carry out their
obligations hereunder or the legality or validity of the sale contemplated by
this Agreement.
9.4 INVENTORY. The Inventory shall have been completed.
9.5 CORPORATE ORGANIZATION; BOARD RESOLUTIONS. Buyer shall have
furnished to Seller and the Stockholder: (a) a certificate of good standing of
Buyer issued by the Secretary of State of the State of Delaware dated no earlier
than fifteen (15) business days prior to the Closing Date; and (b) a certificate
of Buyer, dated the Closing Date, in form and substance reasonably satisfactory
to Seller, certifying as to (i) the Certificate of Incorporation of Buyer; (ii)
the By-laws of Buyer; (iii) the incumbency and signatures of the officers of
Buyer executing this Agreement and any other agreements, instruments or
documents to be executed by Buyer in connection herewith; (iv) the resolutions
of the Board of Directors of Buyer authorizing the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby; and
(v) Certificate of Designation for Class A Preferred Stock Series III.
9.6 PAYMENT OF PURCHASE PRICE; ASSUMPTION AGREEMENTS. Buyer shall have
tendered to Seller the Purchase Price in accordance with Section 2.3 and shall
have executed and delivered the Assumption Agreement to Seller.
9.7 OTHER BASIC AGREEMENTS. All conditions to the obligations of the
Owner under the Real Property Purchase Agreement shall have been satisfied or
fulfilled, unless waived in writing by the Owner.
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9.8 HSR. All applicable waiting periods, if any, under the HSR Act shall
have expired without any indication of the Antitrust Division or the FTC that
either of them intends to challenge the transactions contemplated hereby, or, if
any such challenge or investigation is made or commenced, there shall have
occurred the conclusion of such challenge or investigation which permits the
transactions contemplated hereby in all material respects.
9.9 OPINION OF COUNSEL. Seller shall have received an opinion of Parker,
Poe, Xxxxx & Xxxxxxxxx, L.L.P., counsel to Buyer, dated the Closing Date, in
form and substance reasonably satisfactory to Seller and its counsel.
ARTICLE X
COVENANTS AND AGREEMENTS
10.1 [INTENTIONALLY LEFT BLANK]
10.2 FURTHER ASSURANCES. Seller and the Stockholder agree that they
will, at any time and from time to time, after the Closing, upon request of
Buyer, do, execute, acknowledge and deliver all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and assurances, in a
form reasonably satisfactory to Buyer's counsel, as may be reasonably required
to convey and transfer to and vest in Buyer, and protect its rights, title and
interest in and enjoyment of, all the Assets.
10.3 SATISFACTION OF CLOSING CONDITIONS. The parties hereto shall use
their reasonable best efforts to obtain, and to cooperate with each other in
obtaining, all authorizations, approvals, licenses, permits and other consents
contemplated by Articles VIII and IX.
10.4 NO MATERIAL ADVERSE CHANGES. During the period from the date of
this Agreement through the Closing Date, Seller will operate the Business only
in the ordinary course of business and in accordance with past practices. Seller
shall promptly notify Buyer of any material adverse change or development in the
Assets, the Liabilities or in the prospects, properties, earnings, results of
operations or condition (financial or otherwise) of the Business, and of the
occurrence of any event or circumstance that will, or could reasonably be
expected to, result in such a material adverse change.
10.5 ACCESS; ENVIRONMENTAL AUDIT. Until the Closing Seller shall afford
to Buyer, its attorneys, accountants and such other representatives of Buyer as
Buyer shall designate to Seller, free and full access at all reasonable times,
and upon reasonable prior notice, to the Assets and the properties, books and
records of Seller, and to interview personnel, suppliers and customers of
Seller, in order that Buyer may have full opportunity to make such due diligence
investigation as it shall reasonably desire of the Assets, the Liabilities and
the Business. Seller and the Stockholder shall, promptly after the date hereof,
furnish to Buyer the due diligence materials set forth in Schedule 10.5 hereto.
Seller shall allow an environmental consulting firm selected by Buyer (the
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"ENVIRONMENTAL AUDITOR") to have prompt access to the Real Property in order to
conduct an environmental investigation satisfactory to Buyer in scope and
reasonably acceptable to Seller (such scope being sufficient to result in a
Phase I environmental audit report and a Phase II environmental audit report, if
desired by Buyer) of, and to prepare a report with respect to, the Real Property
(the "ENVIRONMENTAL AUDIT"). Seller shall provide to the Environmental Auditor:
(a) reasonable access to all of its existing records concerning the matters
which are the subject of the Environmental Audit; and (b) reasonable access to
the employees of Seller and the last known addresses of former employees of
Seller who are most familiar with the matters which are the subject of the
Environmental Audit (Seller agreeing to use reasonable efforts to have such
former employees respond to any reasonable requests or inquiries by the
Environmental Auditor). The Environmental Auditor shall coordinate all visits to
the Real Property and conversations with employees of Seller with the
Stockholder or their designee and shall use reasonable efforts to minimize any
disruption of Seller's business in performing such investigations. Seller shall
otherwise cooperate with the Environmental Auditor in connection with the
Environmental Audit. Buyer shall bear the costs, fees and expenses in connection
with the Environmental Audit. Buyer shall bear the costs, fees and expenses in
connection with any financial audit.
10.6 INDEMNIFICATION BY SELLERS AND THE STOCKHOLDER.
(a) All representations and warranties of Seller and the
Stockholder contained herein, or in any agreement, certificate or document
executed by Seller or the Stockholder in connection herewith, shall survive the
Closing for a period of two (2) years, with the exception of the representations
and warranties contained in Section 7.12, which shall survive the Closing for
the applicable tax statutes of limitation plus 60 days and the representations
and warranties contained in Sections 7.4 and 7.8 which shall survive the Closing
indefinitely. The foregoing limitations of survival shall not in any way reduce
Seller's obligations with respect to the Retained Liabilities. All information
contained in any Schedule furnished hereunder by Seller shall be deemed a
representation and warranty by Seller and the Stockholder made in this Agreement
as to the accuracy of such information in all material respects.
(b) Seller and the Stockholder, jointly and severally, agree to
indemnify and hold harmless Buyer and its stockholders, officers, directors,
employees and agents, and their respective successors and assignees, from and
against any and all out-of-pocket (net of insurance proceeds) losses, damages,
liabilities, obligations, assessments, suits, actions, proceedings, claims or
demands, including costs, expenses and fees (including reasonable attorneys'
fees and expert witness fees) (collectively, the "LOSSES") incurred in
connection therewith, suffered by any of them or asserted against any of them or
the Assets, arising out of or based upon (i) the breach or failure of any
representation or warranty of Seller or the Stockholder contained herein, or in
any agreement, certificate or document executed by Seller or the Stockholder in
connection herewith, to be true and correct, (ii) the breach of any covenant or
agreement of Seller or the Stockholder contained in this Agreement, (iii) the
Retained Liabilities or any liability or obligation of the Stockholder, or (iv)
any arrangements or agreements made or alleged to have been made by Seller or
the Stockholder with any broker, finder or other agent in connection with the
transactions contemplated hereby (other than as described in Schedule 6.5).
Neither Seller nor the Stockholder shall be required to indemnify
22
under clause (i) of this Section 10.6(b) unless the amount of all indemnified
liabilities (including claims for indemnified liabilities) under said clause (i)
exceeds a cumulative aggregate total of $100,000, at which time rights to
indemnification for indemnified liabilities may be asserted for any amounts in
excess of such cumulative aggregate total of $100,000. The aggregate amount of
indemnification obligations of Seller and the Stockholder under clauses (i) or
(ii) of this Section 10.6(b) shall not exceed the Purchase Price.
10.7 INDEMNIFICATION BY BUYER.
(a) All representations and warranties of Buyer contained herein,
or in any agreement, certificate or document executed by Buyer in connection
herewith, shall survive the Closing for a period of two (2) years. The foregoing
limitation of survival shall not in any way reduce Buyer's obligations with
respect to the Liabilities. All information contained in any Schedule furnished
hereunder by Buyer shall be deemed a representation and warranty by Buyer made
in this Agreement as to the accuracy of such information in all material
respects.
(b) Buyer agrees to indemnify and hold harmless Seller and its
Stockholder, officers, managers, employees, agents, successors and assigns, from
and against any and all out-of-pocket (net of insurance proceeds) Losses
incurred in connection with, suffered by any of them, or asserted against any of
them, arising out of or based upon (i) the breach or failure of any
representation or warranty of Buyer contained herein, or in any agreement,
certificate or document executed by Buyer in connection herewith, to be true and
correct, (ii) the breach of any covenant or agreement of Buyer contained in this
Agreement, (iii) Buyer's failure to discharge the Liabilities, or (iv) any
arrangements or agreements made or alleged to have been made by Buyer with any
broker, finder or other agent in connection with the transactions contemplated
hereby. The aggregate amount of indemnification obligations under clauses (i) or
(ii) of this Section 10.7(b) shall not exceed the Purchase Price.
10.8 INDEMNIFICATION PROCEDURES. The indemnification provisions of
Sections 10.6 and 10.7 shall be subject to the following additional rules:
(a) Provided that the Closing shall have been completed, the
provisions of Sections 10.6 and 10.7 shall be the exclusive remedy of the
parties hereto with respect to the performance or breach of any covenant,
representation, or warranty under this Agreement or any of the documents herein
contemplated, whether based in contract, tort or otherwise. In no event shall
any party hereto be liable for punitive or exemplary damages as the result of
any matter or occurrence in connection herewith or the transactions contemplated
or permitted hereby or therein. Notwithstanding the foregoing, nothing contained
herein is intended to or shall be construed to impair or restrict each party's
right to xxx the other party for fraud or to seek equitable relief in any court
of competent jurisdiction.
(b) Each party agrees that, promptly after it becomes aware of
facts giving rise to a claim by it for indemnification pursuant to Section 10.6
or Section 10.7, as the case may be, such party will provide notice (a "CLAIM
NOTICE") thereof in writing to the each indemnifying party,
23
specifying the nature and basis for such claim and a copy of all papers served
with respect to such claim (if any). An indemnified party's failure to send or
delay in sending a Claim Notice shall not relieve an indemnifying party from
liability hereunder with respect to such claim except to the extent and only to
the extent the indemnifying party is prejudiced by such failure or delay.
(c) Any indemnifying party or parties may elect to compromise or
contest, at its own expense and by its own counsel, any liability asserted by a
third party so long as (i) the matter involves solely a claim for money, (ii)
the indemnifying party shall first acknowledge and agree in writing that the
indemnifying party is obligated to indemnify the indemnified party for such
matter hereunder, and (iii) counsel to the indemnifying party shall be
reasonably acceptable to the indemnified party. If the indemnifying party or
parties elect to compromise or contest such asserted liability, they shall
within thirty (30) days (or sooner, if the nature of the asserted liability so
requires) notify the indemnified party or parties of its intent to do so by
sending a notice to the indemnified party or parties, and each indemnified party
shall cooperate in the compromise or contest of such asserted liability. If the
indemnifying party or parties elect not to compromise or contest the asserted
liability, fails to notify the indemnified party or parties of its election as
herein provided or contests its obligation to indemnify under this Agreement,
any indemnified party (upon further notice to the indemnifying party or parties
and any other indemnified party) shall have the right to pay, compromise or
contest such asserted liability on behalf of and for the account and risk of the
indemnifying party or parties. Anything in this Section 10.8 to the contrary,
notwithstanding items (i) through (iii) above in this paragraph (c), no
indemnifying party shall, without each indemnified party's written consent,
which shall not be unreasonably withheld or delayed, settle or compromise any
asserted liability or consent to entry of any judgment which does not include an
unconditional term releasing the indemnified parties from all liability in
respect of such asserted liability. In any event, each indemnified party and
indemnifying party may participate, at their own expense, in the contest of any
asserted liability. If an indemnifying party chooses in accordance with the
provisions of this Section 10.8(c) to contest any asserted liability, the
indemnified parties shall make available to such indemnifying party any books,
records or other documents within its control that are necessary or appropriate
for, shall make its officers and employees available, on a basis reasonably
consistent with their other duties, in connection with, and shall otherwise
cooperate with, such defense.
(d) In the event that an indemnifying party shall be obligated to
indemnify an indemnified party pursuant to Sections 10.6 or 10.7, the
indemnifying party shall, upon payment of such indemnity in full, be subrogated
to all rights of the indemnified party with respect to the loss to which such
indemnification relates.
10.9 CERTAIN TAXES. Personal property, use and intangible taxes and
assessments and utility charges with respect to the Assets shall be prorated on
a per diem basis and apportioned between Seller and Buyer as of the date of the
Closing. Seller shall be liable for that portion of such taxes and assessments
relating to, or arising in respect of, periods on or prior to the Closing Date,
and Buyer shall be liable for that portion of such taxes and assessments
relating to, or arising in respect of, any period after the Closing Date. Any
taxes attributable to the sale or transfer of the Assets to Buyer hereunder
shall be paid by Seller.
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10.10 PRESS RELEASES. Except as may be required by law or the rules of
the New York Stock Exchange or as necessary in connection with the transactions
contemplated hereby, no party hereto shall (a) make any press release or other
public announcement relating to this Agreement or the transactions contemplated
hereby, without the prior approval of the other parties hereto or (b) otherwise
disclose the existence and nature of the transactions contemplated hereby to any
person or entity other than such party's accountants, attorneys, agents and
representatives, all of whom shall be subject to this nondisclosure obligation
as agents of such party. The parties shall cooperate with each other in the
preparation and dissemination of any public announcements of the transactions
contemplated by this Agreement.
10.11 NO NEGOTIATION OR DISCUSSIONS. Neither Seller nor the Stockholder
shall, directly or indirectly, at any time on or prior to the Closing Date or
the earlier termination of this Agreement, pursue, initiate, encourage or engage
in, any negotiations or discussions with, or provide any information to, any
person or entity (other than Buyer and its representatives and affiliates)
regarding the sale or possible sale to any such person or entity of any of the
Assets or capital stock of Seller or any merger or consolidation or similar
transaction involving Seller.
10.12 REGARDING THE MANUFACTURER. Seller shall promptly notify the
Manufacturer regarding the transactions contemplated by this Agreement. Buyer
shall promptly apply to the Manufacturer for, or cause an affiliate of Buyer to
apply to the Manufacturer for, the issuance of franchises to operate automobile
dealerships upon the Real Property. Effective as of the Closing, Seller shall
terminate its Dealer Sales and Service Agreements with the Manufacturer. Seller
shall fully cooperate with Buyer, and take all reasonable steps to assist Buyer,
in Buyer's efforts to obtain its own similar Dealer Sales and Service Agreements
with the Manufacturer. The parties acknowledge that Buyer's Dealer Agreements
are subject to the approval of the Manufacturer and that Buyer would be unable
to obtain its own, similar Dealer Sales and Service Agreements absent Seller's
termination of its agreements.
10.13 SELLER'S EMPLOYEES. Buyer shall have the right, but not the
obligation, to employ any or all of Seller's employees. If permitted by law and
applicable regulations, Seller shall, in consideration for the sale of
substantially all of such Seller's assets in bulk, assign and transfer to Buyer,
without additional charge therefor, the amount of reserve in such Seller's State
Unemployment Compensation Fund with respect to the Business and the
corresponding experience rate.
10.14 TERMINATION.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing:
(i) by the written mutual consent of the parties hereto
prior to the Closing Date Deadline;
25
(ii) by Buyer prior to the Closing Date Deadline in the
event of any material breach by Seller or the Stockholder of any of their
respective representations, warranties, covenants or agreements contained
herein;
(iii) by Seller prior to the Closing Date Deadline in the
event of any material breach by Buyer of any of Buyer's representations,
warranties, covenants or agreements contained herein;
(iv) at any time after the Closing Date Deadline, by
written notice by Buyer or Seller (subject to Buyer's option to elect to extend
the Closing Date Deadline in accordance with Section 1.3) to the other parties
hereto if the Closing shall not have occurred on or before the Closing Date
Deadline (as the same may have been extended in accordance with Section 1.3);
(v) by Buyer (no later than the thirtieth (30th) day after
the later of (1) the date the parties have reached agreement with respect to
Schedule 2.4, Part I - Annex A, Schedule 5.4(a), Schedule 5.5 and all Schedules
to be delivered by Seller to Buyer pursuant to Article VII hereof, and (2) all
due diligence materials described on Schedule 10.5 have been furnished to Buyer)
if Buyer is not satisfied, in its sole discretion, with the results of its due
diligence investigation;
(vi) by Buyer, by written notice to Seller, in the event
that the Manufacturer, or any other person claiming by, through or under the
Manufacturer, shall exercise any right of first refusal, preemptive right or
other similar right, with respect to any of the Assets; or
(vii) by Buyer, by written notice to Seller if, after any
initial HSR Act filing, the FTC makes a "second request" for information, or if
the FTC or the Antitrust Division challenges the transactions contemplated
hereby;
provided, however, no party may terminate this Agreement pursuant to clauses
(ii), (iii), or (iv) above if such party is in material breach of any of its
representations, warranties, covenants or agreements contained herein.
(b) In the event of termination of this Agreement pursuant to
Section 10.14(a), this Agreement shall be of no further force or effect;
provided, however, that any termination pursuant to Section 10.14(a) (other than
10.14(a)(vi)) shall not relieve: (i) Buyer of any liability under Section
10.14(c) below; (ii) Seller and the Stockholder of any liability under Section
10.14(d) below; (iii) subject to Section 10.14(e) below, any party hereto of any
liability for breach of any representation, warranty, covenant or agreement
hereunder occurring prior to such termination; or (iv) any party hereto of its
or his obligations hereunder to pay the fees and expenses of third parties;
provided, further, that any termination pursuant to Section 10.14(a)(vi) shall
not relieve Seller and the Stockholder of any liability under Section 2.5 above
or any party hereto of its or his obligations hereunder to pay the fees and
expenses of third parties.
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(c) If this Agreement is terminated by Seller pursuant to Section
10.14(a)(iv) hereof and the failure to complete the Closing on or before the
Closing Date Deadline (as the same may have been extended pursuant to Section
1.3) shall have been due to the Buyer's material breach of its representations,
warranties, covenants or agreements under this Agreement, then Buyer shall, upon
demand of Seller, promptly pay to Seller in immediately available funds, as
liquidated damages for the loss of the transaction, a termination fee of
$2,500,000 (the "BUYER TERMINATION FEE").
(d) If this Agreement is terminated by Buyer pursuant to Section
10.14(a)(iv) hereof and the failure to complete the Closing on or before the
Closing Date Deadline (as the same may have been extended pursuant to Section
1.3) shall have been due to the Stockholder's or Seller's material breach of any
of their respective representations, warranties, covenants or agreements under
this Agreement, then Seller and the Stockholder, jointly and severally, shall,
upon demand of Buyer, promptly pay to Buyer in immediately available funds, as
liquidated damages for the loss of the transaction, a termination fee of
$2,500,000 (the "SELLER TERMINATION FEE").
(e) In the case of termination of this Agreement pursuant to
Section 10.14(a)(iv) hereof, the rights of the terminating party to be paid the
Seller Termination Fee or the Buyer Termination Fee, as the case may be, shall
be such party's sole and exclusive remedy 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 Termination Fee or the Buyer
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 (including
specific performance) to which it would otherwise be entitled in the event of
breach of any other party hereto.
(f) Seller and the Stockholder acknowledge and agree that Buyer's
due diligence investigation of Seller and the Business, including without
limitation, its review of the Schedules attached hereto and the information and
documentation received from Seller, shall not constitute a waiver of, or
otherwise modify, Buyer's right to terminate this Agreement under Section
10.14(a)(v) hereof.
10.15 CONTEMPORANEOUS CLOSINGS. The parties hereto acknowledge and agree
that the consummation of the transactions contemplated by this Agreement is
subject to the consummation of the transactions contemplated by the Real
Property Purchase Agreement, and the parties intend that the closings of both
such transactions shall occur contemporaneously.
10.16 HSR. Subject to the determination by Buyer that compliance by
Seller and Buyer with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR ACT"), is not required, Seller and Buyer shall each prepare
and file 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. Buyer shall pay any HSR
Act filing fee.
27
10.17 BUYER'S FINANCIAL STATEMENTS. Seller shall allow, cooperate with
and assist Buyer's accountants, and shall instruct Seller's accountants to
cooperate, in the preparation of audited financial statements of Seller as
necessary for any required filings by Buyer with the Securities and Exchange
Commission or as required by Buyer's lenders; provided, however, that the
expense of such audit shall be borne by Buyer.
10.18 BROKER'S COMMISSION. At the Closing, Buyer shall pay the fee to
Presidio Strategies as set forth on Schedule 6.5.
ARTICLE XI
MISCELLANEOUS
11.1 ASSIGNMENT. Except as provided in this Section, this Agreement
shall not be assignable by any party hereto without the prior written consent of
the other parties. Buyer may assign this Agreement, without the consent of the
other parties hereto, to a corporation, partnership, limited liability company
or other entity controlled by Buyer, including a corporation, partnership,
limited liability company or other entity to be formed at any time prior to the
Closing Date, and to any person or entity who shall acquire all or substantially
all of the assets of Buyer or of such corporation, partnership, limited
liability company or other entity, controlled by Buyer (including any such
acquisition by merger or consolidation); provided said assignment shall be in
writing and the assignee shall assume all obligations of Buyer hereunder,
whereupon the assignee shall be substituted in lieu of Buyer named herein for
all purposes, provided, however, that Buyer originally named herein shall
continue to be liable with respect to its obligations hereunder. Buyer may
assign this Agreement, without the consent of the other parties hereto, as
collateral security, and the other parties hereto agree to execute and deliver
any acknowledgment of such assignment by Buyer as may be required by any lender
to Buyer.
11.2 GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of Texas.
11.3 ACCOUNTING MATTERS. Except as provided in Section 7.6(a) and
Schedule 7.6(a), all accounting matters required or contemplated by this
Agreement shall be in accordance with generally accepted accounting principles.
11.4 FEES AND EXPENSES. Except as otherwise specifically provided in
this Agreement, each of the parties hereto shall be responsible for the payment
of such party's fees, costs and expenses incurred in connection with the
negotiation and consummation of the transactions contemplated hereby.
11.5 AMENDMENTS; MERGER CLAUSE. This Agreement, including the
schedules and other documents referred to herein which form a part hereof,
contains the entire understanding of the parties hereto with respect to the
subject matter contained herein and therein. This Agreement may
28
not be amended except by a writing executed by all of the parties hereto. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
11.6 WAIVER. To the extent permitted by applicable law, no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party.
Any waiver by a party hereto of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach of such
provision or any other provision of this Agreement. Neither the failure nor any
delay by any party hereto in exercising any right or power under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right or power, and no single or partial exercise of any such right or power
will preclude any other or further exercise of such right or power or the
exercise of any other right or power.
11.7 NOTICES. All notices, claims, certificates, requests, demands and
other communications hereunder shall be given in writing and shall be delivered
personally or sent by facsimile or by a nationally recognized overnight courier,
postage prepaid, and shall be deemed to have been duly given when so delivered
personally or by confirmed facsimile 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 Buyer, to:
Sonic Automotive, Inc.
0000 X. Xxxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Chief Financial Officer
With a copy to:
Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Xx.
29
If to Seller or the Stockholder, to:
X. X. Xxxxx
0000 Xxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxx
Two Memorial City Plaza
820 Gessner, Suite 1360
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
11.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts. Each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but one
agreement.
11.9 KNOWLEDGE. Whenever any representation or warranty of Seller or the
Stockholder contained herein or in any other document executed and delivered in
connection herewith is based upon the knowledge of Seller or the Stockholder,
(a) such knowledge shall be deemed to include (i) the best actual knowledge,
information and belief of Seller and the Stockholder and (ii) any information
which the Stockholder would reasonably be expected to be aware of in the prudent
discharge of his duties in the ordinary course of business (including
consultation with legal counsel) on behalf of Seller, and (b) the knowledge of
the Stockholder shall be deemed to be the knowledge of Seller.
11.10 ARBITRATION.
(a) Any dispute, claim or controversy arising out of or relating
to this Agreement or the interpretation or breach hereof 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 of Buyer and Seller
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 thirty (30)
days after their appointment, either
30
arbitrator may petition the American Arbitration Association to make the
appointment. The place of arbitration shall be Dallas, 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).
(b) Nothing contained in this Section 11.10 shall prevent any
party hereto from seeking any equitable relief to which it would otherwise be
entitled from a court of competent jurisdiction.
11.11 PERMITTED SUCCESSORS; ASSIGNS; NO THIRD PARTY BENEFICIARIES.
Subject to Section 11.1, this Agreement shall 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 Seller, or any
other person, firm, corporation or legal entity, other than the parties hereto
and their successors and permitted assigns, any rights, remedies or other
benefits under or by reason of this Agreement.
11.12 HEADINGS. The article headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.13 SEVERABILITY. In the event that any provision, or part thereof, of
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.
11.14 TIME IS OF THE ESSENCE. Time is of the essence for all purposes in
this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
BUYER: SONIC AUTOMOTIVE, INC.
By: /s/ Xxxxx Xxxxx Xxxxx
---------------------------
Its: President
--------------------------
SELLER: XXXX XXXXX MOTORS, INC.
By: /s/ X.X. Xxxxx
--------------------------
Its:
--------------------------
