ASSET PURCHASE AGREEMENT
by and among
SONIC AUTOMOTIVE, INC.,
XXXX & XXXX, INC.
and
XXXXXXX XXXX
Dated as of August ___, 1997
TABLE OF CONTENTS
Page
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Article 1
Purchase and Sale of Assets; Assumption of Liabilities................1
1.1 Agreement of Purchase and Sale...................................1
1.2 Assumed Liabilities..............................................1
1.3 Purchase Price; Allocation.......................................1
1.4 Instruments of Conveyance and Transfer; Employment Agreement....3
1.5 Offers of Employment to Seller's Employees.......................4
Article 2
Closing...............................................................4
Article 3
Representations and Warranties of the Seller...........................5
3.1 Organization; Good Standing; Qualifications.......................5
3.2 Authority; Consent................................................5
3.3 Ownership; Investments............................................5
3.4 Financial Statements..............................................6
3.5 Absence of Certain Changes........................................6
3.6 Material Contracts................................................7
3.7 Title to Purchased Assets and Related Matters.....................7
3.8 Real Property of the Seller.......................................8
3.9 Machinery, Equipment, Etc.........................................8
3.10 Inventories of the Seller........................................8
3.11 Accounts Receivable of the Seller................................9
3.12 Approvals, Permits and Authorizations............................9
3.13 Compliance with Laws.............................................9
3.14 Insurance.......................................................10
3.15 Taxes...........................................................10
3.16 Litigation......................................................10
3.17 Powers of Attorney..............................................11
3.18 Broker's and Finder's Fees......................................11
3.19 Employee Relations..............................................11
3.20 Compensation....................................................11
3.21 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc.....11
3.22 Accounts Payable................................................12
3.23 No Undisclosed Liabilities......................................12
3.24 Certain Transactions............................................12
3.25 Business Generally..............................................12
3.26 Employee Benefits...............................................12
3.27 Seller and Shareholder Not Foreign Persons......................13
3.28 Suppliers and Customers.........................................13
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3.29 Environmental Matters...........................................14
3.30 Bank Accounts and Safe Deposit Boxes............................15
3.31 Warranties......................................................16
3.32 Interest in Competitors and Related Entities....................16
3.33 Availability of Seller's Employees..............................16
3.34 Misstatements and Omissions.....................................16
Article 4
Representations and Warranties of the Buyer...........................16
4.1 Organization and Good Standing...................................16
4.2 Authority; Consents; Enforceability..............................16
4.3 Broker's and Finder's Fees.......................................17
4.4 Litigation.......................................................17
4.5 Misstatements or Omissions.......................................17
Article 5
Pre-closing Covenants of the Shareholder and the Seller...............17
5.1 Provide Access to Information; Cooperation with Buyer............18
5.2 Operation of Business of the Seller..............................18
5.3 Other Changes....................................................19
5.4 Additional Information...........................................19
5.5 Publicity........................................................19
5.6 Other Negotiations...............................................19
5.7 Closing Conditions...............................................20
5.8 Environmental Audit..............................................20
5.9 Xxxx-Xxxxx-Xxxxxx Compliance.....................................20
5.10 Audit of Seller at Buyer's Expense..............................20
Article 6
Pre-closing Covenants of the Buyer....................................20
6.1 Publicity; Disclosure............................................20
6.2 Closing Conditions...............................................21
6.3 Application to Automobile Manufactures and Distributors..........21
6.4 Xxxx-Xxxxx-Xxxxxx Compliance.....................................21
Article 7
Conditions Precedent to Obligations of the Buyer......................21
7.1 Representations and Warranties...................................21
7.2 Performance of Obligations of the Seller.........................21
7.3 Closing Certificate..............................................22
7.4 Opinion of Counsel...............................................22
7.5 Supporting Documents.............................................22
7.6 Xxxx of Sale, Etc................................................22
7.7 Other Agreements.................................................22
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7.8 Books and Records................................................23
7.9 Change of Name of Seller; Use of Seller's Name by Buyer..........23
7.10 Consents........................................................23
7.11 No Litigation...................................................23
7.12 Authorizations..................................................23
7.13 No Material Adverse Change or Undisclosed Liability.............23
7.14 Approval of Legal Matters.......................................23
7.15 Adverse Laws....................................................24
7.16 Xxxx-Xxxxx-Xxxxxx Waiting Period................................24
Article 8
Conditions Precedent to Obligations of the Seller.....................24
8.1 Representations and Warranties...................................24
8.2 Performance of Obligations of the Buyer..........................24
8.3 Closing Certificate..............................................24
8.4 Payment of Purchase Price........................................24
8.5 Opinion of Counsel...............................................24
8.6 Supporting Documents.............................................25
8.7 Approval of Legal Matters........................................25
8.8 Employment Agreement.............................................25
8.9 No Litigation....................................................25
8.10 Xxxx-Xxxxx-Xxxxxx Waiting Period................................25
Article 9
Transfer Taxes; Proration of Charges..................................26
9.1 Certain Taxes and Fees...........................................26
9.2 Proration of Certain Charges.....................................26
Article 10
Survival of Representations and Warranties; Indemnification...........26
10.1 Survival of Representations and Warranties......................26
10.2 Agreement to Indemnify by the Seller and Shareholder............26
10.3 Agreement to Indemnify by the Buyer.............................27
10.4 Claims for Indemnification .....................................27
10.5 Procedures Regarding Third Party Claims.........................28
10.6 Effectiveness...................................................29
Article 11
Termination and Termination Fee.......................................29
11.1 Termination.....................................................29
11.2 Procedure and Effect of Termination ...........................30
Article 12
Miscellaneous Provisions..............................................30
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12.1 Access to Books and Records after Closing.......................30
12.2 Notices.........................................................31
12.3 Parties in Interest; No Third Party Beneficiaries...............32
12.4 Assignability...................................................32
12.5 Entire Agreement; Amendment.....................................32
12.6 Headings........................................................33
12.7 Counterparts....................................................33
12.8 Governing Law...................................................33
12.9 Knowledge.......................................................33
12.10 Arbitration....................................................33
12.11 Waivers........................................................34
12.12 Severability...................................................34
12.13 Expenses.......................................................34
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of this____ day August, 1997, by and among SONIC AUTOMOTIVE, INC., a Delaware
corporation (the "Buyer"), XXXX & XXXX, INC., a South Carolina corporation (the
"Seller"), and XXXXXXX XXXX, the sole shareholder of the Seller (the
"Shareholder").
W I T N E S S E T H:
In consideration of the mutual representations, warranties, covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
1.1 Agreement of Purchase and Sale. On the terms and subject to the
conditions of this Agreement, at the Closing (as defined in Article 2 hereof),
the Seller shall sell, transfer, convey, assign and deliver (or cause to be
sold, transferred, conveyed, assigned and delivered) to the Buyer, and the Buyer
shall purchase and accept delivery of, all of the Seller's right, title and
interest in and to all of the assets of the Seller of every kind, character and
description, tangible or intangible, and wherever located, including, without
limitation, the assets described on Schedule 1.1(a), but excluding, however, the
assets described on Schedule 1.1(b) (the "Excluded Assets"); said assets, other
than the Excluded Assets, are hereinafter called the "Purchased Assets". The
Purchased Assets will be sold free and clear of all mortgages, deeds of trust,
liens, pledges, charges, security interests, contractual restrictions, claims or
encumbrances of any kind or character (collectively, "Encumbrances"), other than
the Encumbrances set forth on Schedule 1.1(c) (the "Permitted Encumbrances").
1.2 Assumed Liabilities. On the terms and subject to the conditions of this
Agreement and in reliance upon the representations and warranties contained
herein, at the Closing the Buyer shall assume and undertake to perform all of
the liabilities and obligations of the Seller specifically described on Schedule
1.2 (the "Assumed Liabilities"). Except for the Assumed Liabilities, the Buyer
shall not assume, and the Seller shall retain and remain responsible for, any
and all liabilities and obligations of the Seller of any nature whatsoever,
whether past, current or future, whether accrued, contingent, known or unknown
(such retained liabilities and obligations being hereinafter called the
"Retained Liabilities").
1.3 Purchase Price; Allocation.
(a) Purchase Price. In addition to the assumption by the Buyer of the
Assumed Liabilities, as the full consideration to be paid by the Buyer for the
Purchased Assets, the Buyer shall pay to the Seller the aggregate purchase price
of $18,000,000 (the "Purchase Price"), subject to adjustment as set forth in
Section 1.3(c).
(b) Payment of Purchase Price. $17,000,000 of the Purchase Price shall be
payable to the Seller at Closing by wire transfer of immediately available funds
to the account
of the Seller, which shall be designed by the Seller in writing at least one
full Business Day prior to the Closing Date. The sum of $1,000,000 (the
"Escrowed Amount") shall be placed in an interest bearing escrow with Chicago
Title and Trust Company, or another escrow agent reasonably satisfactory to the
Buyer and the Seller (the "Escrow Agent"), by the Buyer in accordance with the
escrow agreement in the form of Exhibit 1.3(A), with such other changes thereto
as the Escrow Agent shall reasonably request (the "Escrow Agreement"). The sole
purpose of the Escrowed Amount shall be to secure the repayment of any shortfall
in Net Book Value pursuant to Section 1.3(c)(2) below. For purposes of this
Agreement, a "Business Day" is a day other than a Saturday, a Sunday or a day on
which banks are required or authorized to be closed in the State of North
Carolina.
(c) Adjustment Procedures.
(1) Not later than 60 days after the Closing Date, the Buyer will prepare
and deliver to the Seller an unaudited balance sheet (the "Closing Balance
Sheet") of the Seller as of the Closing Date, consisting of a computation of the
tangible book value as of the Closing Date of the Purchased Assets (excluding
goodwill and other intangible assets) less the book value as of the Closing Date
of the Assumed Liabilities, all as determined in accordance with the same
accounting principles utilized in preparing the Seller's tax basis balance sheet
as at December 31, 1996 included in the Financial Statements (as defined in
Section 3.4(a). Notwithstanding the foregoing, the Seller's new and used car
inventory reflected in the Closing Balance Sheet shall be based upon the values
shown on the Seller's books and records as of the Closing Date; however, the
determination of such values shall be based upon the same methodology utilized
in determining new and used car inventory values reflected in the December 31,
1996 tax basis balance sheet included in the Financial Statements. The tangible
net book value reflected on the Closing Balance Sheet is hereinafter called the
"Net Book Value". The Buyer shall make reasonably available to the Seller and
its agents the services of Xxxxx XxXxxxxxx for the purpose of assisting the
Seller in evaluating the Buyer's computation of Net Book Value and preparation
of the Closing Balance Sheet. The Buyer warrants that Xx. XxXxxxxxx'x good faith
assistance to the Seller shall not in any way prejudice her position as an
employee of the Buyer. Further, the Buyer shall make freely available to the
Seller all books and records as the Seller or its agents may reasonably require
in order to evaluate the Buyer's computation of Net Book Value and preparation
of the Closing Balance Sheet. If within 30 days following delivery of the
Closing Balance Sheet (or the next Business Day if such 30th day is not a
Business Day), the Seller has not given the Buyer notice of the Seller's
objection to the computation of the Net Book Value as set forth in the Closing
Balance Sheet (such notice to contain a statement in reasonable detail of the
nature of the Seller's objection), then the Net Book Value reflected in the
Closing Balance Sheet will be deemed mutually agreed by the Buyer and the
Seller. If the Seller shall have given such notice of objection in a timely
manner, then the issues in dispute will be submitted to a "Big Six" accounting
firm mutually acceptable to the Buyer and the Seller (the "Accountants") for
resolution. With respect to any such submission and dispute, the Buyer shall
again make reasonably available to the Seller and its agents the services of
Xxxxx XxXxxxxxx without prejudice to her employment and shall further grant her
(and Seller or its agents) access to all relevant books and records of the Buyer
as she (and Seller or its agents) may reasonably require. If issues in dispute
are submitted to the Accountants for resolution, (i) each party will
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furnish to the Accountants such workpapers and other documents and information
relating to the disputed issues as the Accountants may request and are available
to the party or its subsidiaries (or its independent public accountants), and
will be afforded the opportunity to present to the Accountants any material
relating to the determination and to discuss the determination with the
Accountants; (ii) the Accountants will be instructed to determine the Net Book
Value based upon their resolution of the issues in dispute; (iii) such
determination by the Accountants of the Net Book Value, as set forth in a notice
delivered to both parties by the Accountants, will be binding and conclusive on
the parties; and (iv) the Buyer and the Seller shall each bear 50% of the fees
and expenses of the Accountants for such determination.
(2) To the extent that the Net Book Value, as deemed mutually agreed by the
parties or as determined by the Accountants, as aforesaid, is less than
$10,500,000, the Seller shall be obligated to pay the amount of such shortfall
promptly to the Buyer, together with interest on such amount at the prime rate
of NationsBank, N.A. from time to time in effect (the "Prime Rate") from the
Closing Date to the date of payment, up to the Escrowed Amount. In furtherance
of such obligation of the Seller, the parties shall execute and deliver to the
Escrow Agent a joint instruction to pay such shortfall, plus interest, as
aforesaid, to the Buyer, with any remaining balance of the Escrowed Amount to be
paid to the Seller. To the extent that the amount of such shortfall in the Net
Book Value, plus interest as aforesaid, shall exceed the Escrowed Amount, the
Seller shall have no obligation to pay such excess to the Buyer, it being
understood that the Buyer's sole recourse for any such shortfall in Net Book
Value shall be to the Escrowed Amount. Any interest earned on investments of the
Escrowed Amount shall be paid to the Seller. To the extent that the Net Book
Value, as deemed mutually agreed by the parties or as determined by the
Accountants, as aforesaid, exceeds $10,500,000, the Buyer shall be obligated to
(i) execute and deliver to the Escrow Agent a joint instruction to pay the
entire amount of the Escrowed Amount to the Seller, and (ii) pay the amount of
such excess promptly to the Seller, together with interest on the amount of such
excess at the Prime Rate from the Closing Date to the date of payment.
(d) Allocation. The allocation of the Purchase Price and the Assumed
Liabilities shall be as set forth in Schedule 1.3(d); provided, however, that
the amount of the Purchase Price allocated to the Non-Competition Agreement (as
defined below) shall be $10,000. The Buyer and the Seller shall use such
allocation in all tax returns filed by them.
1.4 Instruments of Conveyance and Transfer; Employment Agreement.
(a) Instruments of Conveyance and Transfer. At the Closing, the Seller
shall deliver to the Buyer a Xxxx of Sale and Assignment, substantially in the
form of Exhibit 1.4(A) (the "Xxxx of Sale"), and such other instruments of
assignment, conveyance and transfer, as shall be necessary to vest in the Buyer
good title to the Purchased Assets in accordance herewith. Simultaneously
therewith, the Seller shall take all steps as may be required to transfer to the
Buyer actual possession and exclusive operating control of the Purchased Assets.
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(b) Employment Agreement. At the Closing, the Shareholder will enter into
an employment agreement with the Buyer, substantially in the form of Exhibit
1.4(B)(the "Employment Agreement").
(c) Non-Competition Agreement. At the Closing, the Seller and the
Shareholder will enter into a non-competition agreement with the Buyer
substantially in the form of Exhibit 1.4(C) (the "Non-Competition Agreement").
(d) Further Assurances. The Seller further agrees that, from and after the
Closing, it will execute and deliver to the Buyer such additional instruments
and documents and take such further action as the Buyer may reasonably request
in order to more fully vest, record and/or perfect the Buyer's title to, or
interest in, the Purchased Assets.
(e) Shareholder's Covenant to Close. The Shareholder further covenants and
agrees to take all necessary officer, director and stockholder actions to cause
the Seller to perform its obligations at and prior to the Closing, as
contemplated by this Agreement.
1.5 Offers of Employment to Seller's Employees. On or before the Closing
Date, the Buyer shall offer employment to those employees of the Seller listed
on Schedule 1.5 attached hereto, utilizing pay plans (and, in the case of Xxxxx
XxXxxxxxx, an employment agreement) substantially the same as those in effect
with the Seller as of the date hereof. The Buyer may also offer employment to
such of the Seller's other employees as the Buyer shall select, in its sole
discretion, such employment to begin on or after the date of the Closing and to
be upon terms and conditions as determined by the Buyer in its sole discretion.
Notwithstanding the foregoing, the Buyer shall have no obligation to employ any
person, except as contemplated by the first sentence of this Section 1.5, and
the Seller shall be and remain responsible after the Closing for termination
expense or liability, if any, with regard to any of the Seller's employees not
offered employment by the Buyer pursuant to this paragraph on or prior to the
Closing Date. The Buyer agrees that any employee of the Seller who is offered
and accepts employment by the Buyer within 30 days of the Closing shall receive
credit for service with the Seller for purposes of determining such employee's
eligibility for holidays, sick days and vacation benefits and also for purposes
of determining eligibility (including without limitation, waiting periods under
group health plans) and vesting under any other employee benefit plans,
programs, policies or other arrangements covering such employee established,
continued or otherwise sponsored by the Buyer after the Closing.
ARTICLE 2
CLOSING
The transactions contemplated hereby shall take place at a closing (the
"Closing") at the offices of Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P., 0000
Xxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx at 10:00 a.m. local time on the fifth
(5th) Business Day, or such shorter period as the Buyer may choose, following
the date the Buyer gives notice of the Closing to the Seller, but in no event
later than November 1, 1997 (the"Closing Date Deadline"), unless another date or
place is agreed
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to in writing by the Seller and the Buyer. The date on which the Closing
actually occurs is hereinafter referred to as the "Closing Date".
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
3.1 Organization; Good Standing; Qualifications. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of South Carolina. The Seller is qualified as a foreign corporation
and in good standing in the jurisdictions listed on Schedule 3.1, which
jurisdictions are the only jurisdictions where the nature of the Seller's
business and its assets require such qualification.
3.2 Authority; Consent. The Seller has full corporate power and authority
to carry on its business as now conducted, to execute and deliver this Agreement
and the other agreements, documents and instruments contemplated hereby, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. The execution and delivery by the Seller
of this Agreement and the other agreements, documents and instruments
contemplated hereby, the consummation by the Seller of the transactions
contemplated hereby and thereby and the performance by the Seller of its
obligations hereunder and thereunder: (i) have been duly and validly authorized
by all necessary corporate action, including, without limitation, all necessary
shareholder action; and (ii) do not and will not, except as set forth on
Schedule 3.2, (A) conflict with or violate any of the provisions of the
certificate of incorporation or by-laws, each as amended, of the Seller, (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 the Seller, the Purchased Assets
or the Assumed Liabilities, (C) violate or conflict with the terms of, or result
in the acceleration of, any indebtedness or obligation of the Seller under, or
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 the Seller is a party or by which the Seller
or any of the Purchased Assets or Assumed Liabilities are bound or affected, (D)
result in the creation or imposition of any Encumbrance upon any of the
Purchased 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.
3.3 Ownership; Investments.
(a) Ownership. All issued and outstanding shares of capital stock of the
Seller are held of record and beneficially by the Shareholder, free and clear of
any Encumbrances. The Seller has no outstanding securities or other instruments,
agreements or arrangements of any character or nature whatsoever under which the
Seller is or may be obligated to issue any shares of its capital stock.
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(b) Investments. Except as set forth on Schedule 3.3, the Seller does not
own, directly or indirectly, any shares of capital stock or other equity
ownership or proprietary or membership interest in any corporation, limited
liability company, partnership, association, trust, joint venture or other
entity, and does not have any commitment to contribute to the capital of, make
loans to, or share in the losses of, any enterprise.
3.4 Financial Statements. The Seller has delivered to the Buyer prior to
the date hereof: (a) the audited balance sheet for the Seller as of December 31,
1996, and the related audited statement of income, stockholders' equity and
changes in cash flows of the Seller for the fiscal year then ended (including
the notes thereto and any other information included therein), (collectively,
the "Annual Financial Statements"); and (b) the unaudited balance sheet of the
Seller as of June 30, 1997 and the related unaudited statement of income,
stockholders' equity and changes in cash flow for the six month period then
ended (collectively, the "Interim Financial Statements"; the Annual Financial
Statements and the Interim Financial Statements are hereinafter collectively
referred to as the "Financial Statements"). The Financial Statements (i) are in
accordance with the books and records of the Seller, which books and records are
true, correct and complete, (ii) fully and fairly present the financial
condition and results of the operations of the Seller as of and for the periods
indicated, and (iii) have been prepared utilizing tax basis accounting
principles in accordance with the Code (as defined in Section 3.26(a) below) and
applicable regulations thereunder.
3.5 Absence of Certain Changes. Since December 31, 1996, the Seller has
operated its business in the ordinary course, consistent with past practices
and, except as set forth on Schedule 3.5, there has not been incurred, nor has
there occurred: (a) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Purchased Assets or the business of the
Seller in excess of $100,000; (b) any sale, transfer, pledge or other
disposition of any tangible or intangible assets of the Seller (except sales of
vehicle and parts inventory in the ordinary course of business) having an
aggregate book value of $100,000 or more; (c) any termination, amendment,
cancellation or waiver of any Material Contract (as defined in Section 3.6
hereof) or any termination, amendment, cancellation or waiver of any rights or
claims of the Seller under any Material Contract (except in each case in the
ordinary course of business and consistent with past practices); (d) any change
in the accounting methods, procedures or practices followed by the Seller or any
change in depreciation or amortization policies or rates theretofore adopted by
the Seller; (e) any material change in policies, operations or practices with
respect to business operations followed by the Seller, including, without
limitation, with respect to selling methods, returns, discounts or other terms
of sale, or with respect to the policies, operations or practices of the Seller
concerning the employees of the Seller or the employee benefit plans of the
Seller; (f) any capital appropriation or expenditure or commitment therefor on
behalf of the Seller in excess of $100,000 individually, or $200,000 in the
aggregate; (g) any general uniform increase, other than in the ordinary course
of business, in the cash or other compensation of employees of any of the
Seller, or any increase in excess of $50,000 in any such compensation payable to
any individual officer, director, consultant or agent thereof, or any loans or
commitments therefor made by the Seller to any persons, including any officers,
directors, stockholders, employees, consultants or agents of the Seller or any
of their affiliates; (h) any account receivable in excess of $100,000 or note
receivable in excess of $100,000 owing to the Seller which (i) has been written
off as uncollectible, in whole
6
or in part, (ii) has had asserted against it any claim, refusal or right of set
off, or (iii) the account or note debtor has refused to, or threatened not to,
pay for any reason, or such account or note debtor has become insolvent or
bankrupt; (i) any write-down or write-up of the value of any inventory or
equipment of the Seller or any increase in inventory levels in excess of
historical levels for comparable periods; (j) any other change in the condition
(financial or otherwise), business operations, assets, earnings, business or
prospects of the Seller which has, or could reasonably be expected to have, a
material adverse effect on the Purchased Assets or the business or operations of
the Seller; or (k) any agreement, whether in writing or otherwise, by the Seller
to take or do any of the actions enumerated in this Section 3.5. Since June 30,
1997, the Seller has paid no dividends and made no distributions in excess of
its net income from and after that date. For purposes of this Agreement, the
term "affiliate" shall mean any entity directly or indirectly controlling,
controlled by or under common control with the specified person, whether by
stock ownership, agreement or otherwise, or any parent, child or sibling of such
specified person and the concept of "control" means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such person or entity, whether through the ownership of voting
securities, by contract or otherwise.
3.6 Material Contracts.
(a) List of Material Contracts. Set forth on Schedule 3.6 is a list of all
contracts, agreements, documents, instruments, guarantees, plans, understandings
or arrangements, written or oral, which are material to the business of the
Seller, as currently conducted or to the Purchased Assets or the Assumed
Liabilities (collectively, the "Material Contracts"). True copies of all written
Material Contracts and written summaries of all oral Material Contracts
described or required to be described on Schedule 3.6 have been furnished to the
Buyer.
(b) Performance, Defaults, Enforceability. The 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 Material Contract, and there exists no event, condition or
occurrence which, after notice or lapse of time or both, would constitute such a
default. To the knowledge of the Seller, no other party to any Material Contract
is in default in any respect of any of its obligations thereunder. Each of the
Material Contracts is valid and in full force and effect and enforceable against
the parties thereto in accordance with their respective terms, and, except as
set forth in Schedule 3.6, the transfer and assignment to the Buyer of all of
the Material Contracts, will not (i) require the consent of any party thereto or
(ii) constitute an event permitting termination thereof.
3.7 Title to Purchased Assets and Related Matters. The Seller has good and
valid title to all of the Purchased Assets, free and clear of all Encumbrances,
except those described on Schedule 3.7. Except as set forth in Schedule 3.7, the
Purchased Assets (including, without limitation, the Material Contracts) and the
Leased Premises (as defined in Section 3.8 below) include all properties and
assets (tangible and intangible, and all leases, licenses and other agreements)
utilized by the Seller in carrying on its business in the ordinary course.
Except as set forth on Schedule 3.7, the Purchased Assets (i) are in the
exclusive possession and control of the Seller and
7
no person or entity other than the Seller are entitled to possession of any
portion of the Purchased Assets; and (ii) do not include any contracts for
future services, prepaid items or deferred charges the full value or benefit of
which will not be usable by or transferable to the Buyer, or any goodwill,
organizational expense or other similar intangible asset.
3.8 Real Property of the Seller.
(a) Owned Real Property. Except as set forth on Schedule 3.8, the Seller
owns no real property.
(b) Leased Premises. Schedule 3.8 contains a complete list and description
(including buildings and other structures thereon and the name of the owner
thereof) of all real property which is used by the Seller in its business and
operation identifying the existing leases thereof which are to be assigned to
the Buyer (such existing leases being hereinafter called the "Existing Leases").
All such real property on Schedule 3.8 is hereinafter collectively called either
the "Real Property" or the "Leased Premises". True, correct and complete copies
of all Existing Leases have been delivered to the Buyer.
(c) Easements, etc. The Real Property enjoys all easements and rights of
way over the property of others necessary for the operation of the Seller's
business. No portion of the Real Property has been condemned or otherwise taken
by any public authority, and the Seller has no knowledge of any pending or
threatened condemnation or taking thereof. None of the buildings or improvements
on the Real Property encroaches on any adjoining property or on any easements or
rights of way. The Seller has no knowledge of any event or condition which
currently exists which would create a legal or other impediment to the use of
the Real Property as currently used, or would increase the additional charges or
other sums payable by the tenant under any of the Existing Leases (including,
without limitation, any pending tax reassessment or other special assessment
affecting the Real Property). The buildings and improvements (including building
systems) which comprise a part of the Real Property are in good condition,
maintenance and repair, ordinary wear and tear excepted. There is no person or
entity other than the Seller in or entitled to possession of the Real Property.
3.9 Machinery, Equipment, Etc. Schedule 3.9 sets forth a list of all
material machinery, equipment, tools, motor vehicles, furniture and fixtures
owned by the Seller and included in the Purchased Assets, including which items
are owned by the Seller and which items are leased to the Seller (collectively,
the "Equipment"). With respect to Equipment which is leased, Schedule 3.9 also
contains a list of all leases or other agreements, whether written or oral,
relating thereto. The Equipment is in good operating condition, maintenance and
repair in accordance with industry standards taking into account the age thereof
and ordinary wear and tear excepted.
3.10 Inventories of the Seller. All inventories of the Seller included in
the Purchased Assets consist of items of a quality and quantity usable and
salable in the normal course of its business, are generally sufficient to do
business in the ordinary course, and the levels of inventories are consistent
with the levels maintained by the Seller in the ordinary course consistent
8
with past practices and the Seller's obligations under its agreements with all
applicable vehicle manufacturers or distributors. The values at which such
inventories are carried are based on (i) the LIFO method, in the case of new car
and parts inventories, and (ii) the FIFO method, in the case of used car
inventories; furthermore, the values of new and used car inventories presently
shown on the Seller's books and records have been determined utilizing the same
methodology used in determining new and used car inventory values reflected in
the December 31, 1996 tax basis balance sheets included in the Financial
Statements.
3.11 Accounts Receivable of the Seller. All accounts receivable of the
Seller included in the Purchased Assets are collectible at the aggregate
recorded amounts thereof, subject to the reserve for doubtful accounts, in the
ordinary course of the Seller's business, and are not subject to any known
offsets or counterclaims.
3.12 Approvals, Permits and Authorizations. Set forth on Schedule 3.12 is a
list of all governmental licenses, permits, certificates of inspection, other
authorizations, filings and registrations which are necessary for the Seller to
own the Purchased Assets and to operate its business as presently conducted
(collectively, the "Authorizations"). All Authorizations have been duly and
lawfully secured or made by the Seller and are in full force and effect. There
is no proceeding pending or, to the Seller's knowledge, threatened or probable
of assertion, to revoke or limit any Authorization. Except as indicated on
Schedule 3.12, all Authorizations may be lawfully transferred to the Buyer as
contemplated by this Agreement and, except as indicated on Schedule 3.12, none
of the transactions contemplated by this Agreement will terminate, violate or
limit the effectiveness, either by virtue of the terms thereof or because of the
non-assignability thereof, of any Authorization.
3.13 Compliance with Laws. The Seller has conducted its operations and
business in compliance with, and all of the Purchased Assets and Leased Premises
comply with (i) all applicable laws, rules, regulations and codes (including,
without limitation, any laws, rules, regulations and codes relating to
anticompetitive practices, contracts, discrimination, employee benefits,
employment, health, safety, fire, building and zoning, but excluding
Environmental Laws which are the subject of Section 3.29 hereof) and (ii) all
applicable orders, rules, writs, judgments, injunctions, decrees and ordinances.
The Seller has not received any notification of any asserted present or past
failure by it to comply with such laws, rules or regulations, or such orders,
rules, writs, judgments, injunctions, decrees or ordinances. Set forth on
Schedule 3.13 are all orders, writs, judgments, injunctions, decrees and other
awards of any court or any governmental instrumentality applicable to the
Purchased Assets or the Seller or its business and operations. The Seller has
delivered to the Buyer copies of all reports, if any, of the Seller required
under the Federal Occupational Safety and Health Act of 1970, as amended, and
under all other applicable health and safety laws and regulations. The
deficiencies, if any, noted on such reports or any deficiencies noted by
inspection through the Closing Date have been corrected by the Seller.
9
3.14 Insurance.
(a) Schedule 3.14 of this Agreement sets forth a list of all policies of
liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and any other insurance and bonds maintained by, or on
behalf of, the Seller on its properties, operations, inventories, assets,
business or personnel (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims in excess of $5,000 thereunder).
Each such insurance policy identified therein is and shall remain in full force
and effect on and as of the Closing Date and the Seller is not in default with
respect to any provision contained in any such insurance policy and has not
failed to give any notice or present any claim under any such insurance policy
in a due and timely fashion. The insurance maintained by, or on behalf of, the
Seller is adequate in accordance with the standards of business of comparable
size in the industry in which the Seller operates and no notice of cancellation
or termination has been received with respect to any such policy. The Seller has
not, during the last three (3) fiscal years, been denied or had revoked or
rescinded any policy of insurance.
(b) Set forth on Schedule 3.14 is a summary of information pertaining to
property damage and personal injury claims in excess of $5,000 against the
Seller during the past five (5) years, all of which are fully satisfied or are
being defended by the insurance carrier and involve no exposure to the Seller.
3.15 Taxes. All federal, state and local tax returns and reports required
as of the date hereof to be filed by the Seller for taxable periods ending prior
to the date hereof have been duly and timely filed by the Seller with the
appropriate governmental agencies, and all such returns and reports are true,
correct and complete. All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise, payroll, withholding, employment,
estimated and other taxes of any nature, including interest, penalties and other
additions to such taxes ("Taxes"), payable by, or due from, the Seller for all
periods arising on or prior to the Closing Date have been fully paid or
adequately reserved for by the Seller or, with respect to Taxes required to be
accrued, the Seller has properly accrued or will properly accrue such Taxes in
the ordinary course of business consistent with past practice of the Seller. The
Seller made a valid election to be treated as an "S Corporation" for federal
income tax purposes which election, as of the Closing, will have been
continuously in effect since January 1, 1996. Nothing contained in this Section
3.15 shall relieve the Buyer from its obligations to pay any Taxes which are
included in the Assumed Liabilities; and the payment of such Taxes by the Buyer
shall not relieve the Seller from any liability it may have under this Section
3.15.
3.16 Litigation. Except as set forth in Schedule 3.16, there are no
actions, suits, claims, investigations or legal or administrative or arbitration
proceedings pending, or to the Seller's knowledge, threatened or probable of
assertion, against the Seller with respect to the Purchased Assets or the
Assumed Liabilities or the business of the Seller. The Seller knows of no basis
for the institution of any such suit or proceeding. The Seller is not now under
any judgment, order, writ, injunction, decree, award or other similar command of
any court, administrative agency or other
10
governmental authority applicable to the business of the Seller or any of the
Purchased Assets or Assumed Liabilities.
3.17 Powers of Attorney. Except as set forth in Schedule 3.17, there are no
persons, firms, associates, corporations, business organizations or other
entities holding general or special powers of attorney from the Seller.
3.18 Broker's and Finder's Fees. Except as disclosed to the Buyer, the
Seller 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, and the Seller hereby agrees to
assume all liability to any such broker, finder or agent or any other person or
entity claiming any such fee or commission.
3.19 Employee Relations. The Seller employs a total of approximately 132
employees as of July 31, 1997. Except as set forth in Schedule 3.19: (a) the
Seller is not delinquent in the payment (i) to or on behalf of any past or
present employees of any cash or other compensation for all periods prior to the
date hereof or the date of the Closing, as the case may be, or (ii) of any
amount which is due and payable to any state or state fund pursuant to any
workers' compensation statute, rule or regulation or any amount which is due and
payable to any workers' compensation claimant; (b) there are no collective
bargaining agreements currently in effect between the Seller and any labor
unions or organizations representing any employees of the Seller; (c) no
collective bargaining agreement is currently being negotiated by the Seller; (d)
there are no union organizational drives in progress and there has been no
formal or informal request to the Seller for collective bargaining or for an
employee election from any union or from the National Labor Relations Board; and
(e) no dispute exists between the Seller and any of its sales representatives
or, to the knowledge of the Seller, between any such sales representatives with
respect to territory, commissions, products or any other terms of their
representation.
3.20 Compensation. Schedule 3.20 contains a schedule of all employees
(including sales representatives) and consultants of the Seller whose individual
cash compensation for the year ended December 31, 1996, or projected for the
year ended December 31, 1997, is in excess of $75,000, together with the amount
of total compensation paid to each such person for the twelve month period ended
December 31, 1996 and the current aggregate base salary or hourly rate
(including any bonus or commission) for each such person.
3.21 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc. Except as
set forth on Schedule 3.21, there are no patents, trademarks, trade names,
service marks, service names and registered copyrights which are material to the
Seller's business and there are no applications therefor or licenses thereof,
inventions, computer software, logos or slogans, which are owned or leased by
the Seller or used in the conduct of the Seller's business. The Seller is not
individually or jointly a party to, nor pays a royalty to anyone under, any
license or similar agreement. There is no existing claim, or, to the knowledge
of the Seller, any basis for any claim, against the Seller that any of its
operations, activities or products infringe the patents, trademarks, trade
names, copyrights or other property rights of others or that the Seller is
wrongfully or
11
otherwise using the property rights of others. The Seller is the owner of the
names set forth on Schedule 3.21 (the "Proprietary Names") in the State of
Georgia and, to the knowledge of the Seller, no person uses, or has the right to
use, such name or any derivation thereof in connection with the manufacture,
sale, marketing or distribution of products or services commonly associated with
an automobile dealership.
3.22 Accounts Payable. All accounts payable of the Seller to third parties
as of the date hereof arose in the ordinary course of business and none are
delinquent or past due.
3.23 No Undisclosed Liabilities. The Seller does not have any material
liabilities or obligations of any nature, known or unknown, fixed or contingent,
matured or unmatured, other than those (a) reflected in the Financial
Statements, (b) incurred in the ordinary course of business since the date of
the Financial Statements, or (c) disclosed specifically on Schedule 3.23.
3.24 Certain Transactions. Except as set forth in Schedule 3.24, there are
no contracts, agreements or other arrangements between the Seller and the
Shareholder (including the Shareholder's affiliates), or the Seller's or
Shareholder's (including the Shareholder's affiliates) directors, officers or
salaried employees, or the family members or affiliates of any of the above
(other than for services in the ordinary course as employees, officers and
directors).
3.25 Business Generally. The Seller is not aware of the existence of any
conditions, including, without limitation, any actual or potential competitive
factors in the markets in which the Seller participates, which have not been
disclosed to the Buyer and which could reasonably be expected to have a material
adverse effect on the business and operations of the Seller, other than general
business and economic conditions affecting the industry and markets in which the
Seller participates.
3.26 Employee Benefits.
(a) The Seller has listed on Schedule 3.26, and has delivered to the Buyer,
true and complete copies of all Employee Plans (as defined below) and related
documents, established, maintained or contributed to by the Seller (which shall
include for this purpose and for the purpose of all of the representations in
this Section 3.26, the Shareholder and all employers, whether or not
incorporated, that are treated together with the Seller as a single employer
with the meaning of Section 414 of the Code). The term "Employee Plan" shall
include all plans described in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and also shall include, without
limitation, any deferred compensation, stock, employee or retiree pension
benefit, welfare benefit or other similar fringe or employee benefit plan,
program, policy, contract or arrangement, written or oral, qualified or
nonqualified, funded or unfunded, foreign or domestic, covering employees or
former employees of the Seller and maintained or contributed to by the Seller.
As used in this Agreement, "Code" shall mean the Internal Revenue Code of 1986,
as amended.
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(b) Where applicable, each Employee Plan (i) has been administered in
material compliance with the terms of such Employee Plan and the requirements of
ERISA and the Code; and (ii) is in material compliance with the reporting and
disclosure requirements of ERISA and the Code. The Seller does not maintain or
contribute to, and have never maintained or contributed to, an Employee Plan
subject to Title IV of ERISA or a "multiemployer plan." There are no facts
relating to any Employee Plan that (i) have resulted in a "prohibited
transaction" of a material nature or have resulted or is reasonably likely to
result in the imposition of a material excise tax, penalty or liability pursuant
to Section 4975 of the Code, (ii) have resulted in a material breach of
fiduciary duty or violation of Part 4 of Title I of ERISA, or (iii) have
resulted or could result in any material liability (whether or not asserted as
of the date hereof) of the Seller or any ERISA affiliate pursuant to Section 412
of the Code arising under or related to any event, act or omission occurring on
or prior to the date hereof. Each Employee Plan that is intended to qualify
under Section 401(a) or to be exempt under Section 501(c)(g) of the Code is so
qualified or exempt as of the date hereof in each case as such Employee Plan has
received favorable determination letters from the Internal Revenue Service with
respect thereto. To the knowledge of the Seller, the amendments to and operation
of any Employee Plan subsequent to the issuance of such determination letters do
not adversely affect the qualified status of any such Employee Plan. No Employee
Plan has an "accumulated funding deficiency" as of the date hereof, whether or
not waived, and no waiver has been applied for. The Seller has made no promises
or incurred any liability under any Employee Plan or otherwise to provide health
or other welfare benefits to former employees of the Seller, except as
specifically required by law. There are no pending or, to the best knowledge of
the Seller, threatened claims (other than routine claims for benefit) or
lawsuits with respect to any of Seller's Employee Plans. As used in this Section
3.26, all technical terms enclosed in quotation marks shall have the meaning set
forth in ERISA.
3.27 Seller and Shareholder Not Foreign Persons. Neither the Seller nor the
Shareholder is a "foreign person" as that term is defined in the Code and the
regulations promulgated pursuant thereto, and the Buyer has no obligation under
Section 1445 of the Code to withhold or pay over to the IRS any part of the
"amount realized" (as such term is defined in the regulations issued under
Section 1445 of the Code) by the Seller and/or the Shareholder in the
transactions contemplated hereby.
3.28 Suppliers and Customers. The Seller is not required to provide bonding
or any other security arrangements in connection with any transactions with any
of its customers or suppliers. To the knowledge of the Seller, no such supplier,
customer or creditor intends or has threatened, or reasonably could be expected,
to terminate or modify any of their respective relationships with the Seller.
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3.29 Environmental Matters.
(a) For purposes of this Section 3.29, the following terms shall have the
following meaning: (i) "Environmental Law" means all present and future federal,
state and local laws, statutes, regulations, rules, ordinances and common law,
and all judgments, decrees, orders, agreements, or permits, issued, promulgated,
approved or entered thereunder by any government authority relating to
pollution, Hazardous Materials, worker safety or protection of human health or
the environment. (ii) "Hazardous Materials" means any waste, pollutant,
chemical, hazardous material, hazardous substance, toxic substance, hazardous
waste, special waste, solid waste, petroleum or petroleum-derived substance or
waste (regardless of specific gravity), or any constituent or decomposition
product of any such pollutant, material, substance or waste, including, but not
limited to, any hazardous substance or constituent contained within any waste
and any other pollutant, material, substance or waste regulated under or as
defined by any Environmental Law.
(b) The Seller has obtained all permits, licenses and other authorizations
or approvals required under Environmental Laws for the conduct and operation of
the Purchased Assets ("Environmental Permits"). All such Environmental Permits
are in good standing, the Seller is and has been in compliance with the terms
and conditions of all such Environmental Permits, and no appeal or any other
action is pending or threatened to revoke any such Environmental Permit.
(c) The Seller and the Purchased Assets are and have been in compliance
with all Environmental Laws.
(d) Neither the Seller nor the Shareholder has received any written or oral
order, notice, complaint, request for information, claim, demand or other
communication from any government authority or other person, whether based in
contract, tort, implied or express warranty, strict liability, or any other
common law theory, or any criminal or civil statute, arising from or with
respect to (i) the presence, release or threatened release of any Hazardous
Material or any other environmental condition on, in or under the Real Property
or any other property formerly owned, used or leased by the Seller, (ii) any
other circumstances forming the basis of any actual or alleged violation by the
Seller of any Environmental Law or any liability of the Seller under any
Environmental Law, (iii) any remedial or removal action required to be taken by
the Seller under any Environmental Law, or (iv) any harm, injury or damage to
real or personal property, natural resources, the environment or any person
alleged to have resulted from the foregoing, nor is the Seller aware of any
facts which might reasonably give rise to such notice or communication. The
Seller has not entered into any agreements concerning any removal or remediation
of Hazardous Materials
(e) No lawsuits, claims, civil actions, criminal actions, administrative
proceedings, investigations or enforcement or other actions are pending or
threatened under any Environmental Law with respect to the Seller or the Real
Property.
14
(f) No Hazardous Materials are or have been released, discharged, spilled
or disposed of onto, or migrated onto, the Real Property or any other property
previously owned, operated or leased by the Seller, and no environmental
condition exists (including, without limitation, the presence, release,
threatened release or disposal of Hazardous Materials) related to the Real
Property, to any property previously owned, operated or leased by the Seller, or
to the Seller's past or present operations, which would constitute a violation
of any Environmental Law or otherwise give rise to costs, liabilities or
obligations under any Environmental Law.
(g) Neither the Seller nor any of its predecessors in interest has
transported or disposed of, or arranged for the transportation or disposal of,
any Hazardous Materials to any location (i) which is listed on the National
Priorities List, the CERCLIS list under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or any similar
federal, state or local list, (ii) which is the subject of any federal, state or
local enforcement action or other investigation, or (iii) about which the Seller
or the Shareholder has received or have reason to expect to receive a
potentially responsible party notice or other notice under any Environmental
Law.
(h) No environmental lien has attached or is threatened to be attached to
the Real Property.
(i) No employee of the Seller in the course of his or her employment with
the Seller has been exposed to any Hazardous Materials or other substance,
generated, produced or used by the Seller which could give rise to any claim
(whether or not such claim has been asserted) against the Seller.
(j) Except as set forth on Schedule 3.29, the Real Property does not
contain any: (i) septic tanks into which process wastewater or any Hazardous
Materials have been disposed; (ii) asbestos; (iii) polychlorinated biphenyls
(PCBs); (iv) underground injection or monitoring xxxxx; or (v) underground
storage tanks.
(k) The Seller has not agreed to assume, defend, undertake, guarantee, or
provide indemnification for, any liability, including, without limitation, any
obligation for corrective or remedial action, of any other person under any
Environmental Law for environmental matters or conditions.
(l) Except as set forth on Schedule 3.29, there have been no environmental
studies or reports made relating to the Real Property or any other property or
facility previously owned, operated or leased by the Seller.
3.30 Bank Accounts and Safe Deposit Boxes. Schedule 3.30 lists all bank
accounts, credit cards and safe deposit boxes in the name of, or controlled by,
the Seller, and details about the persons having access to or authority over
such accounts, credit cards and safe deposit boxes.
15
3.31 Warranties. Set forth on Schedule 3.31 are descriptions or copies of
the forms of all express warranties and disclaimers of warranty made by the
Seller (separate and distinct from any applicable manufacturers', suppliers' or
other third-parties' warranties or disclaimers of warranties) during the past
five (5) years to customers or users of the vehicles, parts, products or
services of the Seller. There have been no breach of warranty or breach of
representation claims against the Seller during the past five (5) years which
have resulted in any cost, expenditure or exposure to the Seller of more than
$100,000 individually or in the aggregate.
3.32 Interest in Competitors and Related Entities. Except as set forth on
Schedule 3.32, neither the Shareholder nor any affiliate of the Shareholder (i)
has any direct or indirect interest in any person or entity engaged or involved
in any business which is competitive with the business of the Seller, (ii) has
any direct or indirect interest in any person or entity which is a lessor of
assets or properties to, material supplier of, or provider of services to, the
Seller, or (iii) has a beneficial interest in any contract or agreement to which
the Seller is a party; provided, however, the foregoing representation and
warranty shall not apply to any person or entity, or any interest or agreement
with any person or entity, which is a publicly held corporation in which the
Shareholder and his affiliates individually and collectively own less than 3% of
the issued and outstanding voting stock.
3.33 Availability of Seller's Employees. There have been no actions taken
by the Seller, its affiliates, or any of their respective shareholders,
officers, directors, members, partners, managers or employees, to discourage, or
in any way prevent, any of the employees of the Seller from being hired by the
Buyer after Closing, and as of the Closing each of the Seller's employees will
be available without penalty for employment by the Buyer.
3.34 Misstatements and Omissions. No representation or warranty made by the
Seller in this Agreement, and no statement contained in any certificate or
Schedule furnished or to be furnished by the Seller or the Shareholder 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 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
4.1 Organization and Good Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2 Authority; Consents; Enforceability.
(a) Authority. The Buyer has full corporate power and authority to execute
and deliver the Agreement and the other agreements and documents and instruments
contemplated hereby, to consummate the transactions contemplated hereby and
thereby and to perform its
16
obligations hereunder and thereunder. The execution and delivery by the Buyer of
this Agreement and the other agreements, documents and instruments contemplated
hereby, the consummation by the Buyer of the transactions contemplated hereby
and thereby and the performance by the Buyer of its obligations hereunder and
thereunder: (i) have been duly and validly authorized by all necessary corporate
action on the part of the Buyer; and (ii) do not and will not, except as set
forth on Schedule 4.2, (A) conflict with or violate any of the provisions of the
Certificate of Incorporation or By-laws of the 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 the Buyer or any of its assets, or (C) violate or conflict
with the terms of, or result in the acceleration of, any indebtedness or
obligation of the Buyer under, or violate or conflict with or result in a breach
by the Buyer of, or constitute a default under, any material instrument,
agreement or indenture or any mortgage, deed of trust or similar contract to
which the Buyer is a party or by which the Buyer or any of its assets may be
otherwise 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.
4.3 Broker's and Finder's Fees. The 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, and
the Buyer hereby agrees to assume all liability to any such broker, finder or
agent or any other person or entity claiming any such fee or commission.
4.4 Litigation. There are no actions, suits, claims, investigations or
legal or administrative or arbitration proceedings pending or, to the Buyer's
knowledge, threatened or probable of assertion, against the Buyer before any
court, governmental or administrative agency or other body relating to this
Agreement and/or the transactions contemplated hereby. The Buyer is not now
under any judgment, order, writ, injunction, decree or other similar command of
any court, administrative agency or other governmental agency which relate to
this Agreement and/or the transactions contemplated hereby.
4.5 Misstatements or Omissions. No representation or warranty made by the
Buyer in this Agreement, and no statement contained in any certificate or
Schedule furnished or to be furnished by the Buyer to the Seller and/or the
Shareholder pursuant hereto, contains or will contain an 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 5
PRE-CLOSING COVENANTS
OF THE SHAREHOLDER AND THE SELLER
The Seller, and the Shareholder to the extent set forth below, hereby
covenant and agree that from and after the date hereof until the Closing:
17
5.1 Provide Access to Information; Cooperation with Buyer.
(a) Access. The Seller and the Shareholder shall afford to the Buyer, its
attorneys, accountants, and such other representatives of the Buyer as the Buyer
shall designate to the Seller, free and full access at all reasonable times, and
upon reasonable prior notice, to the Purchased Assets and the properties, books
and records of the Seller, and to interview personnel, suppliers and customers
of the Seller, in order that the Buyer may have full opportunity to make such
investigation as it shall reasonably desire of the Purchased Assets, Assumed
Liabilities and the business and operations of the Seller. In addition, the
Seller shall provide to the Buyer and its representatives such additional
financial and operating data and other information in respect of the Purchased
Assets, Assumed Liabilities and the business and operations of the Seller as the
Buyer shall from time to time reasonably request.
(b) Cooperation in IPO Preparation. The Seller and the Shareholder shall,
at the Buyer's sole expense, cooperate with the Buyer in the preparation of any
description of the transactions contemplated by this Agreement deemed by the
Buyer, in its sole discretion, as necessary for the completion of any
registration statement, prospectus or amendment or supplement thereto prepared
in connection with the closing of the Initial Public Offering ("IPO") of the
Buyer's securities.
(c) Cooperation in Obtaining Consents. The Seller and Shareholder shall use
reasonable best efforts in cooperating with the Buyer in the preparation of and
delivery to all applicable automobile manufacturers or distributors, as soon as
practicable after the date hereof, of an application and other information
necessary to obtain such automobile manufacturer's or distributor's consent to
or the approval of the transactions contemplated by this Agreement as
contemplated by Section 7.10.
5.2 Operation of Business of the Seller. At all times before the Closing,
the Seller shall (a) maintain its corporate existence in good standing, (b)
operate its business substantially as presently operated and only in the
ordinary course and consistent with past operations and its obligations under
any existing agreements with all applicable automobile manufacturers or
distributors, (c) use its reasonable best efforts to preserve intact its present
business organizations and employees and its relationships with persons having
business dealings with its, including, but not limited to, all applicable
automobile manufacturers or distributors and any floor plan financing creditors,
(d) comply in all respects with all applicable laws, rules and regulations, (e)
maintain its insurance coverages, (f) pay all Taxes, charges and assessments
when due, subject to any valid objection or contest of such amounts asserted in
good faith and adequately reserved against, (g) make all debt service payments
when contractually due and payable, (h) pay all accounts payable and other
current liabilities when due, (i) maintain the Employee Plans, (j) maintain the
property, plant and equipment included in the Purchased Assets in good operating
condition in accordance with industry standards taking into account the age
thereof, (k) maintain its books and records of account in the usual, regular and
ordinary manner, (l) use its reasonable best efforts to encourage such personnel
of the Seller as the Buyer may designate in writing to become employees of the
Buyer after the date of the Closing, (m) use its reasonable best efforts to
preserve the current
18
terms and conditions of the Existing Leases related to the Leased Property, and
(n) not pay any dividends or make any distributions in excess of its net income,
and otherwise use its reasonable best efforts to pay dividends to the
Shareholder only to the extent that such payment will, as nearly as possible,
result in a net book value of not less than $10,500,000.
5.3 Other Changes. The Seller shall not, without the prior written consent
of the Buyer (a) engage in any reorganization or similar transaction, (b) agree
to take any of the foregoing actions, (c) enter into any contract, agreement,
undertaking or commitment which would have been required to be set forth in
Schedule 3.6 if in effect on the date hereof or enter in to any contract,
agreement, undertaking or commitment which cannot be assigned to the Buyer or a
permitted assignee of the Buyer, or (d) take, cause, agree to take or cause, or
permit to occur any of the actions or events set forth in Section 3.5 of this
Agreement.
5.4 Additional Information. The Seller shall furnish to the Buyer such
additional information with respect to any matters or events arising or
discovered subsequent to the date hereof which, if existing or known on the date
hereof, would have rendered any representation or warranty made by the Seller or
any information contained in any Schedule hereto or in other information
supplied in connection herewith then inaccurate or incomplete. The receipt of
such additional information by the Buyer shall not operate as a waiver by the
Buyer of the obligation of the Seller to satisfy the conditions to Closing set
forth in Section 7.1 hereof; provided, however, if such information shall be
furnished to the Buyer in a writing which shall also specifically refer to one
or more representations and warranties of the Seller contained herein which in
the absence of such information is inaccurate or incomplete, then if the Buyer
waives in writing the condition to Closing set forth in said Section 7.1 hereof
and elects to close the transactions contemplated hereunder, the furnishing of
such additional information shall be deemed to have amended as of the Closing
any such representation and warranty so specifically referred to by the Seller.
5.5 Publicity. Except as may be required by law or as necessary in
connection with the transactions contemplated hereby, the Seller and the
Shareholder shall not (i) make any press release or other public announcement
relating to this Agreement or the transactions contemplated hereby, without the
prior written approval of the Buyer and (ii) otherwise disclose the existence
and nature of their discussions or negotiations regarding the transactions
contemplated hereby to any person or entity other than their accountants,
attorneys and similar professionals, all of whom shall be subject to this
nondisclosure obligation as agents of the Seller and the Shareholder, as the
case may be. The Seller and the Shareholder shall cooperate with the Buyer in
the preparation and dissemination of any public announcements of the
transactions contemplated by this Agreement.
5.6 Other Negotiations. Neither the Seller nor the Shareholder shall
pursue, initiate, encourage or engage in any negotiations or discussions with,
or provide any information to, any person or entity (other than the Buyer and
its representatives and affiliates) regarding the sale of the assets, capital
stock or membership interests of any of the Seller or any merger or
consolidation or similar transaction involving the Seller.
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5.7 Closing Conditions. The Seller shall use all reasonable best efforts to
satisfy promptly the conditions to Closing set forth in Article 7 hereof
required herein to be satisfied by the Seller.
5.8 Environmental Audit. The Seller shall allow an environmental consulting
firm selected by the Buyer (the "Environmental Auditor") to have prompt access
to the Property in order to conduct an environmental investigation, satisfactory
to the Buyer in scope (such scope being sufficient to result in a Phase I
environmental audit report and a Phase II environmental audit report, if desired
by the Buyer), of, and to prepare a report with respect to, the Real Property
(the "Environmental Audit"). The Seller shall provide to the Environmental
Auditor: (i) reasonable access to all of its existing records concerning the
matters which are the subject of the Environmental Audit; and (ii) reasonable
access to the employees of the Seller and the last known addresses of former
employees of the Seller who are most familiar with the matters which are the
subject of the Environmental Audit (the Seller agreeing to use reasonable
efforts to have such former employees respond to any reasonable requests or
inquiries by the Environmental Auditor). The Seller shall otherwise cooperate
with the Environmental Auditor in connection with the Environmental Audit. The
Buyer and the Seller shall each bear 50% of the costs, fees and expenses
incurred in connection with the preparation of the Environmental Audit;
provided, however, the Seller shall not be obligated to share in the costs, fees
or expenses of any Phase II testing unless such testing was warranted based upon
the relevant Phase I test.
5.9 Xxxx-Xxxxx-Xxxxxx Compliance. Subject to the determination by the Buyer
that any of the following actions is not required, the Seller shall promptly
prepare and file Notification and Report Forms under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act") with the Federal
Trade Commission (the "FTC") and respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division of the Department of
Justice (the "Antitrust Division") for additional information or documentation.
5.10 Audit of Seller at Buyer's Expense. The Seller shall allow, cooperate
with and assist the Buyer and the Buyer's accountants, and shall instruct the
Seller's accountants to cooperate, in the preparation of audited financial
statements of the Seller as necessary for the IPO; provided that the expense of
such audit shall be borne by the Buyer.
ARTICLE 6
PRE-CLOSING COVENANTS OF THE BUYER
The Buyer hereby covenants and agrees that, from and after the date hereof
until the Closing:
6.1 Publicity; Disclosure. Except as may be required by law or as necessary
in connection with the transactions contemplated hereby or in connection with
the preparation and filing of any registration statement regarding the IPO, the
Buyer shall not (i) make any press release or other public announcement relating
to this Agreement or the transactions contemplated hereby, without the prior
written approval of the Seller and the Shareholder, or (ii) otherwise disclose
the
20
existence and nature of its discussions or negotiations regarding the
transactions contemplated hereby to any person or entity other than its
accountants, attorneys and similar professionals, all of whom shall be subject
to this nondisclosure obligation as agents of the Buyer. The Buyer shall
cooperate with the Seller and the Shareholder in the preparation and
dissemination of any public announcements of the transactions contemplated by
this Agreement. Subject to the Buyer's legal obligations and the advice of its
IPO underwriters, the Buyer shall submit to the Seller for its pre-approval
(such approval shall not be unreasonably withheld) of the content of any
disclosures in the IPO context about the transactions contemplated hereby.
6.2 Closing Conditions. The Buyer shall use all reasonable
best efforts to satisfy promptly the conditions to Closing set forth in Article
8 hereof required herein to be satisfied by the Buyer.
6.3 Application to Automobile Manufactures and Distributors. Subject to the
reasonable cooperation of the Seller, the Buyer shall provide to all applicable
automobile manufacturers and distributors promptly after the execution and
delivery of this Agreement any application or other information with respect to
such application necessary in connection with the seeking of the consents of
such manufacturers and distributors contemplated by Section 7.10.
6.4 Xxxx-Xxxxx-Xxxxxx Compliance. Subject to the determination by the Buyer
that any of the following actions is not required, the Buyer shall promptly
prepare and file Notification and Report Forms under the HSR Act with the FTC
and respond as promptly as practicable to all inquiries received from the FTC or
the Antitrust Division for additional information or documentation, and Buyer
shall pay all filing fees in connection therewith.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement at the Closing and the
consummation by the Buyer of the transactions contemplated hereby are subject to
the satisfaction or fulfillment by the Seller, prior to or at the Closing, of
each of the following conditions, unless waived in writing by the Buyer:
7.1 Representations and Warranties. The representations and warranties made
by the Seller in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing
Date as though such representations and warranties were made at and as of such
times.
7.2 Performance of Obligations of the Seller. The Seller and the
Shareholder shall have performed and complied with all their covenants,
agreements, obligations and restrictions pursuant to this Agreement required to
be performed or complied with by them prior to or at the Closing.
21
7.3 Closing Certificate. The Seller shall have delivered a certificate,
signed by the Seller's President and dated the Closing Date, certifying to the
satisfaction of the conditions set forth in Sections 7.1 and 7.2 hereof.
7.4 Opinion of Counsel. The Buyer shall have received an opinion of
Kaufman, Chaiken, Xxxxxx & Klorfein, counsel to the Seller and Shareholder,
dated the Closing Date, in substantially the form of Exhibit 7.4.
7.5 Supporting Documents. The Buyer shall have received from the Seller the
following:
(a) A Certificate of the Secretary of State of the State of South Carolina
dated as of a recent date as to the due incorporation and good standing of the
Seller;
(b) To the extent applicable, one or more certificates of officials from
the jurisdictions listed on Schedule 3.1 hereto as to the good standing of the
Seller in such jurisdictions;
(c) A certificate of the Secretary or an Assistant Secretary of the Seller
dated the Closing Date and certifying (i) that attached thereto are true,
complete and correct copies of the certificate of incorporation and by-laws of
the Seller, as amended to and as in effect on the date of such certification,
(ii) that attached thereto are true, complete and correct copies of the
resolutions duly adopted by the Board of Director of the Seller and Shareholder,
approving the transactions contemplated hereby and authorizing the execution,
delivery and performance by the Seller of this Agreement and the sale and
transfer of the Purchased Assets, as in effect on the date of such
certification, and (iii) as to the incumbency and signatures of those officers
of the Seller executing any instrument or other document delivered in connection
with such transactions;
(d) Uniform Commercial Code Search Reports on Form UCC-11 with respect to
the Seller from the states and local jurisdictions where the principal places of
business of the Seller and the Purchased Assets are located; and
(e) Such additional supporting documents and other information as the Buyer
or its counsel may reasonably request.
7.6 Xxxx of Sale, Etc. The Buyer shall have received from the Seller a duly
executed Xxxx of Sale and all necessary deeds, assignments, documents and
instruments to effect the transfers, conveyances and assignments to the Buyer
referred to in Article 1 hereof, and the Seller shall have taken such action as
shall be necessary to put the Buyer in actual possession and exclusive control
of each of the Purchased Assets (including, without limitation, the delivery of
keys).
7.7 Other Agreements. The Buyer shall have received the Employment
Agreement and the Non-Competition Agreement, duly executed by the parties
thereto other than the Buyer.
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7.8 Books and Records. The Buyer shall have received all books and records
of, or pertaining to, the business of the Seller and the Purchased Assets and
Assumed Liabilities, except to the extent included in the Excluded Assets.
7.9 Change of Name of Seller; Use of Seller's Name by Buyer. The Seller
shall have delivered to the Buyer all documents, including, without limitation,
resolutions of the Board of Directors of the Seller and the Shareholder,
necessary to effect a change of name of the Seller after the Closing to a name
other than the Seller's name or any variation thereof which names shall be
sufficiently different from the name of the Buyer and the Proprietary Names as
to distinguish them upon the records in the office of the Secretary of State of
Georgia from such names. The Seller shall also have delivered to the Buyer a
written consent to the use by the Buyer or any parent, subsidiary or affiliate
of the Buyer, or any successor or assignee of any thereof, of the Proprietary
Names or any variant thereof and an agreement satisfactory to the Buyer that the
Seller will not use the Proprietary Names or any variant thereof, except as may
be necessary for the winding up of the affairs of the Seller.
7.10 Consents. The Buyer shall have received duly executed copies of all
consents, authorizations, approvals, notices, registrations and filings referred
to in Schedules 3.2 and 3.6, which are required for the Seller to consummate the
transactions contemplated hereby, and including, but not limited to, the
consents of all applicable automobile manufacturers and distributors and
consents of the respective landlords for the assignment of the Existing Leases.
7.11 No Litigation. No action, suit or other proceeding shall be pending or
threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain damages in respect thereof,
or involving a claim that consummation thereof would result in a violation of
any law, rule, decree or regulation of any governmental authority having
appropriate jurisdiction, and no order, decree or ruling of any governmental
authority or court shall have been entered challenging the legality, validity or
propriety of this Agreement or the transactions contemplated hereby or
prohibiting, restraining or otherwise preventing the consummation of the
transactions contemplated hereby.
7.12 Authorizations. The Buyer shall have received evidence of the transfer
to the Buyer of all Authorizations referred to in Section 3.12 of this Agreement
or, to the extent the Authorizations are not transferrable, the Seller shall
have effectively obtained or made on behalf of the Buyer, or assisted the Buyer
in obtaining or making, all such Authorizations.
7.13 No Material Adverse Change or Undisclosed Liability. There shall have
been no material adverse change or development in the business, prospects,
properties, earnings, results of operations or financial condition of the Seller
or any of the Purchased Assets or Assumed Liabilities.
7.14 Approval of Legal Matters. The form of all instruments, certificates
and documents to be executed and delivered by the Seller to the Buyer pursuant
to this Agreement and
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all legal matters in respect of the transactions as herein contemplated shall be
reasonably satisfactory to the Buyer and its counsel, none of whose approval
shall be unreasonably withheld or delayed.
7.15 Adverse Laws. No statute, rule, regulation or order shall have been
adopted or promulgated which materially adversely affects the Purchased Assets,
the Assumed Liabilities or the business of the Seller.
7.16 Xxxx-Xxxxx-Xxxxxx Waiting Period. All applicable waiting periods under
the HSR Act shall have expired without any indication by the Antitrust Division
or the FTC that either of them intends to challenge the transactions
contemplated hereby or, if any such challenge or investigation is made or
commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SELLER
The obligations of the Seller under this Agreement at the Closing and the
consummation by the Seller of the transactions contemplated hereby are subject
to the satisfaction or fulfillment by the Buyer, prior to or at the Closing, of
each of the following conditions, unless waived in writing by the Seller:
8.1 Representations and Warranties. The representations and warranties made
by the Buyer in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing
Date as though such representations and warranties were made at and as of such
times.
8.2 Performance of Obligations of the Buyer. The Buyer shall have performed
and complied with all its covenants, agreements, obligations and restrictions
pursuant to this Agreement required to be performed or complied with prior to or
at the Closing.
8.3 Closing Certificate. The Buyer shall have delivered a certificate,
signed by the Buyer's President and dated the Closing Date, certifying to the
satisfaction of the conditions set forth in Sections 8.1 and 8.2 hereto.
8.4 Payment of Purchase Price. The Buyer shall have tendered to the Seller
payment of the portion of the Purchase Price payable at the Closing and shall
have placed into escrow the Escrowed Amount.
8.5 Opinion of Counsel. The Seller shall have received an opinion of
Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P., counsel to the Buyer, dated the Closing
Date, in substantially the form of Exhibit 8.5.
24
8.6 Supporting Documents. The Seller shall have received the following:
(a) A certificate of the Secretary of State of the State of Delaware dated
as of a recent date as to the due incorporation and good standing of the Buyer;
(b) A certificate of the Secretary or an Assistant Secretary of the Buyer
dated the Closing Date, and certifying (i) that attached thereto is a true,
complete and correct copy of the certificate of incorporation and by-laws of the
Buyer, as amended and as in effect on the date of such certification, (ii) that
attached thereto are true, complete and correct copies of the resolutions duly
adopted by the Board of Directors of the Buyer approving the transactions
contemplated hereby and authorizing the execution, delivery and performance by
the Buyer of this Agreement, as in effect on the date of such certification, and
(iii) as to the incumbency and signatures of certain officers of the Buyer
executing any instrument or other document delivered in connection with such
transactions; and
(c) Copies of all authorizations, consents, approvals, notices, filings and
registrations referred to in Section 4.2 hereof.
8.7 Approval of Legal Matters. The form of all certificates, instruments
and documents to be executed and/or delivered by the Buyer to the Seller
pursuant to this Agreement and all legal matters in respect of the transactions
as herein contemplated shall be reasonably satisfactory to the Seller and its
counsel, none of whose approval shall be unreasonably withheld or delayed.
8.8 Employment Agreement. The Shareholder shall have received the
Employment Agreement, duly executed by the Buyer.
8.9 No Litigation. No action, suit or other proceeding shall be pending or
threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain damages in respect thereof,
or involving a claim that consummation thereof would result in a violation of
any law, rule, decree or regulation of any governmental authority having
appropriate jurisdiction, and no order, decree or ruling of any governmental
authority or court shall have been entered challenging the legality, validity or
propriety of this Agreement or the transactions contemplated hereby or
prohibiting, restraining or otherwise preventing the consummation of the
transactions contemplated hereby.
8.10 Xxxx-Xxxxx-Xxxxxx Waiting Period. All applicable waiting periods under
the HSR Act shall have expired without any indication by the Antitrust Division
or the FTC that either of them intends to challenge the transactions
contemplated hereby, or, if any such challenge or investigation is made or
commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
25
ARTICLE 9
TRANSFER TAXES; PRORATION OF CHARGES
9.1 Certain Taxes and Fees. All sales, transfer, documentary, stamp,
recording and other similar taxes and/or fees and Taxes which may be due or
payable in connection with the sale of the Purchased Assets pursuant hereto
shall be borne by the Seller.
9.2 Proration of Certain Charges. The following taxes, charges and payments
("Charges") shall, to the extent not reflected in the Closing Balance Sheet, be
prorated on a per diem basis and apportioned between the Seller and the Buyer as
of the date of the Closing: personal property, use, intangible taxes, utility
charges, rental or lease charges, license fees, general assessments imposed with
respect to the Purchased Assets, employee payrolls and insurance premiums. The
Seller shall be liable for that portion of the Charges relating to, or arising
in respect of, periods on or prior to the Closing Date and the Buyer shall be
liable for that portion of the Charges relating to, or arising in respect of,
any period after the Closing Date.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
10.1 Survival of Representations and Warranties. All statements contained
in any schedule or certificate delivered hereunder or in connection herewith by
or on behalf of any of the parties pursuant to this Agreement shall be deemed
representations and warranties by the respective parties hereunder unless
otherwise expressly provided herein. The representations and warranties of the
Seller and the Buyer contained in this Agreement, including those contained in
any Schedule or certificate delivered hereunder or in connection herewith, shall
survive the Closing * with the exception of the representations and warranties
of the Seller contained in Sections 3.7 and 3.15, which shall survive the
Closing * . As to each representation and warranty of the parties hereto, the
date to which such representation and warranty shall survive is hereinafter
referred to as the "Survival Date."
10.2 Agreement to Indemnify by the Seller and Shareholder. Subject to the
terms and conditions of Sections 10.4 and 10.5 hereof, the Seller and the
Shareholder hereby agree, jointly and severally, to indemnify and save the
Buyer, its affiliates, and their respective shareholders, officers, directors,
employees, successors and assigns (each, a "Buyer Indemnitee") harmless from and
against, for and in respect of, any and all demands, judgments, injuries,
penalties, fines, damages, losses, obligations, liabilities, claims, actions or
causes of action, encumbrances, costs, expenses (including, without limitation,
reasonable attorneys' fees, consultants' fees and expert witness fees),
suffered, sustained, incurred or required to be paid by any Buyer Indemnitee
(collectively, "Buyer's Damages") arising out of, based upon, in connection with
or as a result of:
* Confidential portions omitted and filed separately with the Commission.
26
(a) the untruth, inaccuracy or breach of any representation and warranty of
the Seller contained in or made pursuant to this Agreement, including in any
Schedule or certificate delivered hereunder or in connection herewith; provided,
however, the Seller and the Shareholder shall have no obligation to pay Buyer's
Damages pursuant to this Subsection 10.2(a) unless and until (and only to the
extent that) all claims with respect of Buyer's Damages exceed a cumulative
aggregate total of * ;
(b) the breach or nonfulfillment of any covenant or agreement of the Seller
or the Shareholder contained in this Agreement or in any other agreement
document or instrument delivered hereunder or pursuant hereto;
(c) the assertion against any Buyer Indemnitee or any of the Purchased
Assets of any liability or obligation arising out of or based upon any of the
Retained Liabilities; or
(d) all claims of creditors asserted by reason of the parties'
non-compliance with any applicable bulk sales laws, except to the extent that
amounts owed to such creditors are included in the Assumed Liabilities.
10.3 Agreement to Indemnify by the Buyer. Subject to the terms and
conditions of Sections 10.4 and 10.5 hereof, the Buyer hereby agrees to
indemnify and save the Seller and the Shareholder, their affiliates and their
respective shareholders, officers, directors, employees, successors and assigns
(each, a "Seller Indemnitee") harmless from and against, for and in respect of,
any and all demands, judgments, injuries, penalties, damages, losses,
obligations, liabilities, claims, actions or causes of action, encumbrances,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expert witness fees) suffered, sustained, incurred or required to be paid by
any Seller Indemnitee arising out of, based upon, in connection with or as a
result of:
(a) the untruth, inaccuracy or breach of any representation and warranty of
the Buyer contained in or made pursuant to this Agreement, including in any
Schedule or certificate delivered hereunder or in connection herewith;
(b) the breach or nonfulfillment of any covenant or agreement of the Buyer
contained in this Agreement or in any other agreement, document or instrument
delivered hereunder or pursuant hereto; or
(c) the assertion against any Seller Indemnitee of any of the Assumed
Liabilities.
10.4 Claims for Indemnification. No claim for indemnification with respect
to a breach of a representation and warranty shall be made under this Agreement
after the applicable
* Confidential portions omitted and filed separately with the Commission.
27
Survival Date unless prior to such Survival Date the Buyer Indemnitee or the
Seller Indemnitee, as the case may be, shall have given the Seller or the Buyer,
as the case may be, written notice of such claim for indemnification based upon
actual loss sustained, or potential loss anticipated, as a result of the
existence of any claim, demand, suit or cause of action against such Buyer
Indemnitee or Seller Indemnitee, as the case may be.
10.5 Procedures Regarding Third Party Claims. The procedures to be followed
by the Buyer and the Seller and the Shareholder with respect to indemnification
hereunder regarding claims by third persons shall be as follows:
(a) Promptly after receipt by any Buyer Indemnitee or Seller Indemnitee, as
the case may be, of notice of the commencement of any action or proceeding
(including, without limitation, any notice relating to a tax audit) or the
assertion of any claim by a third person, which the person receiving such notice
has reason to believe may result in a claim by it for indemnity pursuant to this
Agreement, such person (the "Indemnified Party") shall give notice of such
action, proceeding or claim to the party against whom indemnification pursuant
hereto is sought (the "Indemnifying Party"), setting forth in reasonable detail
the nature of such action or claim, including copies of any written
correspondence from such third person to such Indemnified Party.
(b) The Indemnifying Party shall be entitled, at its own expense, to
participate in the defense of such action, proceeding or claim, and, if (i) the
action, proceeding or claim involved seeks (and continues to seek) solely
monetary damages, (ii) the Indemnifying Party confirms, in writing, its
obligation hereunder to indemnify and hold harmless the Indemnified Party with
respect to such damages in their entirety pursuant to Sections 10.2 or 10.3
hereof, as the case may be, and (iii) the Indemnifying Party shall have made
provision which, in the reasonable judgment of the Indemnified Party, is
adequate to satisfy any adverse judgment as a result of its indemnification
obligation with respect to such action, proceeding or claim, then the
Indemnifying Party shall be entitled to assume and control such defense with
counsel chosen by the Indemnifying Party and approved by the Indemnified Party,
which approval shall not be unreasonably withheld or delayed. The Indemnified
Party shall be entitled to participate therein after such assumption, the costs
of such participation following such assumption to be at its own expense. Upon
assuming such defense, the Indemnifying Party shall have full rights to enter
into any monetary compromise or settlement which is dispositive of the matters
involved; provided, that such settlement is paid in full by the Indemnifying
Party and will not have any direct or indirect continuing material adverse
effect upon the Indemnified Party.
(c) With respect to any action, proceeding or claim as to which (i) the
Indemnifying Party does not have the right to assume the defense or (ii) the
Indemnifying Party shall not have exercised its right to assume the defense, the
Indemnified Party shall assume and control the defense of and contest such
action, proceeding or claim with counsel chosen by it and approved by the
Indemnifying Party, which approval shall not be unreasonably withheld. The
Indemnifying Party shall be entitled to participate in the defense of such
action, the cost of such participation to be at its own expense. The
Indemnifying Party shall be obligated to pay the reasonable attorneys' fees and
expenses of the Indemnified Party to the extent that such fees and expenses
relate to claims as to which indemnification is due under Sections 10.2 or 10.3
hereof, as the case may be. The
28
Indemnified Party shall have full rights to dispose of such action and enter
into any monetary compromise or settlement; provided, however, in the event that
the Indemnified Party shall settle or compromise any claims involved in the
action insofar as they relate to, or arise out of, the same facts as gave rise
to any claim for which indemnification is due under Sections 10.2 or 10.3
hereof, as the case may be, it shall act reasonably and in good faith in doing
so.
(d) Both the Indemnifying Party and the Indemnified Party shall cooperate
fully with one another in connection with the defense, compromise or settlement
of any such claim, proceeding or action, including, without limitation, by
making available to the other all pertinent information and witnesses within its
control.
10.6 Effectiveness. The provisions of this Article 10 shall be effective
upon consummation of the Closing, and prior to the Closing, shall have no force
and effect.
ARTICLE 11
TERMINATION AND TERMINATION FEE
11.1 Termination. Notwithstanding any other provision herein contained to
the contrary, this Agreement may be terminated at any time prior to the Closing
Date as follows:
(a) This Agreement may be terminated by written consent of the parties
hereto;
(b) The Buyer may terminate this Agreement by giving written notice to the
Seller at any time after the Closing Date Deadline (provided, however, that the
Buyer may not terminate under this subsection (b) if the Buyer is in breach of
any material representation, warranty, or covenant of the Buyer contained in
this Agreement);
(c) The Seller may terminate this Agreement by giving written notice to the
Buyer at any time after the Closing Date Deadline (provided, however, that the
Seller may not terminate under this subsection (c) if the Seller is in breach of
any material representation, warranty, or covenant contained in this Agreement);
(d) The Buyer may terminate this Agreement if, after any initial HSR Act
filing, the FTC makes a "second request" for information, or the FTC or the
Antitrust Division challenges the transactions contemplated hereby; provided
that the Buyer delivers written notice to the Seller of its termination
hereunder within fifteen (15) days of the Buyer's receipt of such second request
or of notice of such challenge; or
(e) The Buyer may terminate this Agreement within thirty (30) days of the
date hereof if the Buyer is not satisfied, in its discretion, with the results
of the Buyer's due diligence investigation contemplated by Section 5.1(a),
including without limitation the Environmental Audit.
29
11.2 Procedure and Effect of Termination. If either party terminates this
Agreement pursuant to Section 11.1 above, all rights and obligations of the
parties hereunder shall terminate without any liability of any party to any
other party except as set forth below:
(a) If this Agreement is terminated by the Buyer pursuant to the provisions
of Section 11.1(b) above and the failure to complete the Closing on or before
the Closing Date Deadline shall have been due to the breach of any material
representation, warranty or covenant of the Seller or the Shareholder under this
Agreement, then the Seller shall, on demand of the Buyer, promptly pay to the
Buyer in immediately available funds, as liquidated damages for the loss of the
transaction and not as a penalty, a termination fee of $1,000,000 (the "Seller's
Termination Fee").
(b) If this Agreement is terminated by the Seller pursuant to the
provisions of Section 11.1(c) above and the failure to complete the Closing on
or before the Closing Date Deadline shall have been due to the breach of any
material representation, warranty or covenant of the Buyer under this Agreement,
then the Buyer shall, upon demand of the Seller, promptly pay to the Seller in
immediately available funds, as liquidated damages for the loss of the
transaction and not as a penalty, a termination fee of $1,000,000 (the "Buyer's
Termination Fee").
The respective rights of the parties to terminate this Agreement under Sections
11.1(b) or 11.1(c), as the case may be, and to be paid the Seller's Termination
Fee or the Buyer's Termination Fee, as the case may be, shall be the respective
parties' sole and exclusive remedies for damages for breach of this Agreement;
in this regard, the parties hereto agree that (i) they reasonably anticipate
that the damages for breach of this Agreement, as contemplated by Sections
11.1(b) or 11.1(c), will be difficult to ascertain because of their
indefiniteness or uncertainty, and (ii) the Seller's Termination Fee and the
Buyer's Termination Fee are reasonable estimates of such damages. In the event
of such termination by either party pursuant to Section 11.1(b) or 11.1(c), as
the case may be, such party shall have no right to equitable relief for any
breach or alleged breach of this Agreement, other than for specific performance
for the payment of the Seller's Termination Fee or the Buyer's Termination Fee,
as the case may be.
(c) Except as specifically provided in this Section 11.2, nothing contained
in this Section 11.2 shall prevent any party from seeking any equitable relief,
including specific performance, to which it would otherwise be entitled in the
event of breach of this Agreement by the other party.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Access to Books and Records after Closing. The Buyer shall, following
the Closing, give, and shall cause to be given, to the Seller and its authorized
representatives such access, during normal business hours and upon prior notice,
to such books and records constituting part of the Purchased Assets as shall be
reasonably necessary for the Seller in connection with the preparation and
filing of the Seller's tax returns for periods prior to the Closing, and to make
extracts and copies of such books and records.
30
12.2 Notices. All notices, claims, certificates, requests, demands and
other communications hereunder shall be given in writing and shall be delivered
personally or sent by telecopier or by a nationally recognized overnight
courier, postage prepaid, and shall be deemed to have been duly given when so
delivered personally or sent by telecopier, with receipt confirmed, or one (1)
Business Day after the date of deposit with such nationally recognized overnight
courier. All such notices, claims, certificates, requests, demands and other
communications shall be addressed to the respective parties at the addresses set
forth below or to such other address as the person to whom notice is to be given
may have furnished to the others in writing in accordance herewith.
If to the Buyer, to:
Sonic Automotive, Inc.
0000 Xxxx Xxxxxxxxxxxx Xxxxxxxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxxx Xxxxxx
with a copy to:
Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Seller, to:
Xxxx & Xxxx, Inc.
0000 Xxxxxxxxx Xxxxxxxxxx Xxxx.
Xxxxxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx Xxxx
31
If to the Shareholder, to:
Xxxxxxx Xxxx
0000 Xxxxxxxxx Xxxxxxxxxx Xxxx.
Xxxxxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
in either case, with a copy to:
Kaufman, Chaiken, Xxxxxx & Klorfein
000 Xxxxxxxxx Xxxxxx Xxxxxxx, X.X. Xxxxx 000
Xxxxxxx, Xxxxxxx 00000-0000
Telecopier No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
The Buyer, the Seller or the Shareholder may change the address or
telecopier number to which such communications are to be directed by giving
written notice to the others in the manner provided in this Agreement.
12.3 Parties in Interest; No Third Party Beneficiaries.
(a) Subject to Section 12.4 hereof, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
(b) Nothing in this Agreement, expressed or implied, is intended or shall
be construed to confer upon or give to any employee of the Seller (other than
Xxxxx XxXxxxxxx to the extent she is referred to herein), 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.
12.4 Assignability. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties, provided that the
Buyer may assign its rights under this Agreement to any affiliate of the Buyer
presently existing or hereafter formed and to any person or entity that shall
acquire all or substantially all of the assets of the Buyer; provided, however,
that no such assignment by the Buyer shall release it from its obligations
hereunder without the consent of the Seller.
12.5 Entire Agreement; Amendment. This Agreement and the other writings
referred to herein or delivered pursuant hereto contain the entire understanding
of the parties hereto and supersedes all prior agreements and understandings
between the parties hereto with respect to its subject matter. This Agreement
may be amended or modified only by a written instrument duly executed by the
parties hereto.
32
12.6 Headings. The article, section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but one
agreement.
12.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without giving effect to its
principles of conflicts of law.
12.9 Knowledge. Whenever any representation or warranty of the Seller
contained herein or in any other document executed and delivered in connection
herewith is based upon the knowledge of the Seller, such knowledge shall be
deemed to include the knowledge, if any, of the Seller or the Shareholder.
12.10 Arbitration. (a) Subject to the other provisions of this Section
12.10, any dispute, claim or controversy arising out of or relating to this
Agreement, or the interpretation or breach hereof (including, without
limitation, any of the foregoing based upon a claim to any termination fee
hereunder, but not including disputes regarding Net Book Value which shall be
conclusively resolved pursuant to the provision of Section 1.3 herein), shall be
resolved by binding arbitration under the commercial arbitration rules of the
American Arbitration Association (the AAAA 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 the Seller and the Buyer within thirty (30) days after any request for
arbitration hereunder. The two arbitrators thus appointed shall choose the third
arbitrator within thirty (30) days after their appointment; provided, however,
that if the two arbitrators are unable to agree on the appointment of the third
arbitrator within 30 days after their appointment, either arbitrator may
petition the American Arbitration Association to make the appointment. The place
of arbitration shall be Columbia, South Carolina. The arbitrators shall be
instructed to render their decision within sixty (60) days after their selection
and to allocate all costs and expenses of such arbitration (including legal and
accounting fees and expenses of the respective parties) to the parties in the
proportions that reflect their relative success on the merits (including the
successful assertion of any defenses).
(b) Nothing contained in this Section 12.10 shall prevent any party hereto
from seeking any equitable relief to which it would otherwise be entitled from
any court of competent jurisdiction.
33
12.11 Waivers. Any party to this Agreement may, by written notice to the
other parties hereto, waive any provision of this Agreement from which such
party is entitled to receive a benefit. The waiver by any party hereto of a
breach 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.
12.12 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.
12.13 Expenses. Except as otherwise set forth herein, each party shall be
responsible for its own legal fees and other costs and expenses incurred in
connection with this Agreement and the negotiation and consummation of the
transactions contemplated hereby.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
THE BUYER: SONIC AUTOMOTIVE, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
------------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President & Chief Financial Officer
THE SELLER: XXXX & XXXX, INC.
By: /s/ Xxxxxxx X. Xxxx, Xx.
------------------------------------------------
Name: Xxxxxxx Xxxx
Title: President
THE SHAREHOLDER: /s/ Xxxxxxx X. Xxxx, Xx. (SEAL)
------------------------------------------
XXXXXXX XXXX
List of Schedules
-----------------
Schedule 1.1(a) - Purchased Assets
Schedule 1.1(b) - Excluded Assets
Schedule 1.1(c) - Permitted Encumbrances
Schedule 1.2 - Assumed Liabilities
Schedule 1.3(d) - Allocation of Purchase Price and Assumed
Liabilities
Schedule 1.5 - Certain Employees of Seller to be Offered
Employment by Buyer
Schedule 3.1 - Jurisdictions of Foreign Qualification of
Seller
Schedule 3.2 - Required Authorizations and Consents to
Agreement -- Seller
Schedule 3.3 - Investments
Schedule 3.5 - Certain Changes
Schedule 3.6 - Material Contracts
- Required Consents for Transfers of Material
Contracts
Schedule 3.7 - Encumbrances
Schedule 3.8 - Real Property; Leased Premises
Schedule 3.9 - Equipment
Schedule 3.12 - Approvals, Permits and Authorizations
Schedule 3.13 - Compliance with Laws
Schedule 3.14 - Insurance Policies
- Insured Property Damage and Personal
Injury Claims
Schedule 3.16 - Litigation
Schedule 3.17 - Powers of Attorney
Schedule 3.19 - Employee Relations
Schedule 3.20 - Compensation
Schedule 3.21 - Patents; Trademarks; Trade Names;
Copyrights; Licenses; Etc. and Proprietary
Names
Schedule 3.23 - Other Liabilities
Schedule 3.24 - Affiliate Transactions
Schedule 3.26 - Employee Plans
Schedule 3.29 - Environmental Matters
Schedule 3.30 - Bank Accounts and Safe Deposit Boxes
Schedule 3.31 - Warranties
Schedule 3.32 - Interests in Competitors
Schedule 4.2 - Required Authorizations and Consents to
Agreement -- Buyer
2
List of Exhibits
----------------
Exhibit 1.3(A) - Form of Escrow Agreement
Exhibit 1.4(A) - Form of Xxxx of Sale and Assignment
Exhibit 1.4(B) - Form of Employment Agreement
Exhibit 1.4(C) - Form of Non-Competition Agreement
Exhibit 7.4 - Form of opinion of counsel for the Seller
Exhibit 8.5 - From of opinion of counsel for the Buyer
