Exhibit 2.14
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 16th day of October, 1997, by and among CROSS-CONTINENT AUTO RETAILERS,
INC. ("Purchaser"), a Delaware corporation; XXXXXX X. XXXXX ("Xxxxx"), a
Nevada resident; XXXXXX X. XXXXXXXXX ("Xxxxxxxxx"), a California resident;
and TAR-CAR, INC. (the "Company), a California corporation, d/b/a "Toyota By
The Bay" and "Auto Central Used Car Sales and Credit Union Buying Service."
RECITALS
A. The Company owns and operates a Toyota franchised automobile
dealership located at 0000 Xxxxxxx Xxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 and
a used car lot located at 0000 Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000
(collectively, the "Dealership").
B. The Company operates the Dealership under the names "Toyota By the
Bay" and "Auto Central Used Car Sales and Credit Union Buying Service."
X. Xxxxx and Xxxxxxxxx are the owners of all of the issued and
outstanding shares of capital stock of the Company (the "Shares").
X. Xxxxx and Xxxxxxxxx shall hereinafter be collectively referred to
as the "Sellers" and individually as a "Seller".
E. Subject to the terms and conditions set forth in this Agreement,
Purchaser desires to purchase all of the Shares, and Sellers desire to sell
all of the Shares to Purchaser.
AGREEMENT
In consideration of the mutual covenants, agreements, representations,
and warranties set forth in this Agreement, Purchaser, Sellers, and the
Company agree as follows:
1. PURCHASE AND SALE OF THE SHARES. Subject to and upon the
terms and conditions of this Agreement, at the Closing (hereinafter defined)
each Seller shall sell, transfer, convey, assign, and deliver to the
Purchaser, and Purchaser shall purchase, acquire and accept from each Seller,
all of the Shares owned by such Seller, free and clear of all security
interests, liens, claims, agreements, encumbrances, or restrictions of any
kind, whether written or oral.
2. PURCHASE PRICE. The purchase price to be paid by Purchaser
to Sellers for the Shares shall be $5,500,000 (the "Purchase Price"),
subject to the adjustment set forth in Paragraph 3 of this Agreement.
3. ADJUSTMENT TO THE PURCHASE PRICE. In the event that the Company's
Net Worth (hereinafter defined) is more or less than $825,000, the Purchase
Price shall be increased or decreased by an amount equal to the difference
between $825,000 and the Net Worth, provided Purchaser and Sellers agree to
the adjustment. As used in this Agreement, the term
"Net Worth" shall mean the net worth shown on the balance sheet in the
Audited Financial Statements (hereinafter defined) as of September 30, 1997,
as adjusted by the Net Worth Adjustments (hereinafter defined), using the
values for the New Vehicle Inventory (hereinafter defined), Remarketed
Vehicle Inventory (hereinafter defined), Used Vehicle Inventory (hereinafter
defined), Parts and Accessories Inventory (hereinafter defined) and Tangible
Personal Property (hereinafter defined), as determined in accordance with
subparagraph 12(d); except (a) reserves for charge backs of finance income,
insurance premiums, and service contract income will not be deducted in
determining Net Worth, (b) the reserve for LIFO will be deducted in
determining Net Worth, (c) all accruals through October 31, 1997, including
(without limitation) accruals for vacation expenses, legal fees, property
taxes, income taxes and payroll taxes shall be included in the determination
of Net Worth, and (d) the deferred profit (the "Deferred Profit") as
established by Price Waterhouse, LLP in the Audited Financial Statements
shall not be included in the determination of Net Worth. In addition, in the
event the Capital Loan (hereinafter defined) as of October 31, 1997 is less
than $700,000, the Purchase Price shall be increased by such difference. Any
adjustment to the Purchase Price shall be applied to the various components
of the Purchase Price proportionally.
4. PAYMENT OF PURCHASE PRICE. At Closing Purchaser shall pay
the Purchase Price, as adjusted, as follows:
a. TO XXXXX:
(i) $3,150,000 in cash; and
(ii) Purchaser shall execute and deliver a promissory note
to Xxxxx in the original principal amount of $1,350,000
(the "$1,350,000 Note"), bearing interest on the unpaid
principal at the prime rate announced from time to time
by Bank of America, payable in twenty-three (23)
monthly installments of interest only, with all unpaid
principal and accrued interest being due and payable
twenty-four (24) months after the date of the
$1,350,000 Note. The $1,350,000 Note shall be in the
form of Exhibit "A" hereto.
b. TO XXXXXXXXX:
(i) $350,000 in cash;
(ii) Purchaser shall issue to Xxxxxxxxx the number of shares
of restricted common stock of Purchaser (the
"Restricted Stock") that, when multiplied by the
average closing price for the stock of Purchaser quoted
in THE WALL STREET JOURNAL for the five (5) trading
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days immediately preceding the date that the
transactions contemplated by this Agreement are
announced to the public by Purchaser (the "Announcement
Date"), will equal $100,000. Purchaser shall not issue
any fractional shares and shall pay Xxxxxxxxx cash in
lieu of any fractional shares based on the closing
price for the stock of Purchaser quoted in THE WALL
STREET JOURNAL for the five (5) trading days
immediately preceding the Announcement Date; and
(iii) Purchaser shall execute and deliver a promissory
note to Xxxxxxxxx in the original principal amount of
$50,000 (the "$50,000 Note), bearing interest on the
unpaid principal at the prime rate announced from time
to time by Bank of America, payable in twenty-three
(23) monthly installments of interest only, with all
unpaid principal and accrued interest being due and
payable twenty-four (24) months after the date of the
$50,000 Note. The $50,000 Note shall be in the form of
Exhibit "B" hereto.
The certificates representing the Restricted Stock that is issued
to Xxxxxxxxx shall bear a restrictive legend that the stock has
not been registered under applicable federal and state securities
laws. It is understood and agreed that Purchaser has not agreed
to register the Restricted Stock that is to be issued to
Xxxxxxxxx.
x. XXXXXXX' ESCROW. In addition, Purchaser shall deliver
$500,000 ($450,000 for Xxxxx and $50,000 for Xxxxxxxxx) into
an interest bearing account for twenty-four (24) months
under an escrow agreement (the "Sellers' Escrow Agreement")
between Sellers and Purchaser. The Sellers' Escrow
Agreement shall be substantially in the form of Exhibit "C"
hereto. The Sellers' Escrow Agreement shall provide (among
other things) that (i) all interest that accrues on the
amount held in escrow shall be paid to the Sellers' pro rata
at the expiration or termination of the Sellers' Escrow
Agreement, and (ii) the amount held in escrow, including
accrued interest, shall be used to pay any unaccrued
expenses that arose prior to October 31, 1997; any debts,
liabilities, or obligations of the Company at the Balance
Sheet Date (hereinafter defined) that are not reflected in
the Financial Statements (hereinafter defined); and any
claims or costs (hereinafter defined) of cancellations on
extended service contracts that were sold prior to October
31, 1997; provided, however, the Escrow Agreement shall
provide that the Escrow Agent shall pay fifty percent (50%)
of any interest to the Sellers in order for the Sellers
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to pay the income taxes due on the interest. Purchaser and
Sellers agree that if any receivables are written off prior
to Closing and after Closing payments are made on such
receivables, the payments shall be added to Sellers' escrow
account.
5. CLOSING. Subject to the terms and conditions set forth in
this Agreement, the closing ("Closing") of the purchase and sale of the
Shares shall take place at 0000 Xxxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxx 00000, or
at such other place as may be mutually agreed upon by Purchaser and Sellers,
on the earlier of (a) as soon as practicable following the date on which all
conditions to the obligations of the parties hereunder (other than those
requiring the taking of action at the Closing) have been satisfied or waived,
but not earlier than January 1, 1998, or (b) January 19, 1998, subject to the
mutual agreement of the parties to select another date. The date on which
the Closing is to occur is hereinafter referred to as the "Closing Date."
Any other provision of this Agreement to the contrary notwithstanding, if
Sellers have not obtained the consent of Toyota Motor Corporation, U.S.A.
("Toyota") prior to January 19, 1998, either Purchaser or Sellers shall have
the right to extend the Closing Date thirty (30) days by giving written
notice to the other parties.
6. TRANSACTIONS AT CLOSING. The following transactions shall
take place at Closing:
a. DELIVERIES BY SELLERS. The Sellers shall deliver the
following to the Purchaser:
(i) Stock certificates representing the Shares in duly
transferable form;
(ii) Such other documents and instruments as Purchaser may
reasonably request in order to vest in Purchaser good
and marketable title to the Shares and to any and all
right, title, interest or claim of any kind that
Sellers may have in the properties, assets or business
of the Company;
(iii) Any consent required from the landlord under that
certain Triple Net Lease ("the Dealership Lease") dated
December 21, 1988, by and between Xxxx Xxxxxx, Xxxxx
Xxxxxx, and Xxxxx Xxxxxx, and Beach Cities Toyota,
Inc.; the sublandlord under that certain Sublease
Agreement (the "Dealership Sublease") dated July 20,
1990, by and between Toyota Motor Sales, USA, Inc., and
Beach Cities Toyota, Inc.; the landlord under that
certain Ground Lease (the "Used Car Lot Lease") dated
April 16, 1990, by and between Xxxxxxx Perl, Trustee of
the Perl Property Trust and Xxxx
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Salehyan; and the sublandlord under that certain
Sublease (the "Used Car Lot Sublease") dated December
12, 1994, by and between California Auto Resale and
Tar-Car, Inc.;
(iv) A Phase I environmental site audit on all real property
currently owned, leased, or otherwise utilized by the
Company, paid for by the Sellers, in form and substance
satisfactory to Purchaser;
(v) Copies of resolutions of the Board of Directors of the
Company, duly certified by its Secretary, in form
reasonably satisfactory to Purchaser's counsel,
authorizing the execution, delivery and performance of
this Agreement and all other documents to which the
Company is a party as contemplated hereby, and all
actions to be taken by the Company hereunder and
thereunder;
(vi) A Sellers' certificate in the form of Exhibit "D"
hereto, duly executed by the Sellers and the Company;
(vii) An opinion of counsel to the Sellers, in the form
of Exhibit "E" hereto;
(viii) An Investment Letter (hereinafter defined)
executed by Xxxxxxxxx, in the form of Exhibit "F"
hereto;
(ix) A Registration Rights Agreement executed by Xxxxxxxxx,
in the form of Exhibit "G" hereto;
(x) The Sellers' Escrow Agreement;
(xi) Any instruments and other documents specifically
required by this Agreement that are not otherwise set
forth in this subparagraph 6(a); and
(xii) Any other instruments or documents deemed reasonably
necessary or desirable by the Purchaser in order to
consummate the transactions contemplated hereby.
b. DELIVERIES BY BUYER. The Buyer shall deliver the following
to the Sellers:
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(i) The cash portions of the Purchase Price, the $1,350,000
Promissory Note, the $50,000 Promissory Note, and a
stock certificate representing the Restricted Stock;
(ii) Copies of resolutions of the Board of Directors of the
Purchaser, duly certified by its secretary, in form
reasonably satisfactory to Sellers' counsel,
authorizing the execution, delivery and performance of
this Agreement and all other documents to which the
Purchaser is a party as contemplated hereby, and all
action to be taken by Purchaser hereunder and
thereunder;
(iii) The Purchaser's Escrow Agreement (hereinafter
defined);
(iv) Any instruments and other documents specifically
required by this Agreement that are not otherwise set
forth in this subparagraph 6(b); and
(v) Any other instruments or documents deemed reasonably
necessary or desirable by the Sellers in order to
consummate the transactions contemplated hereby.
7. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY.
The Sellers and the Company jointly and severally represent and warrant to
Purchaser, effective as of the date of this Agreement and again at Closing,
each of the following:
a. AUTHORITY AND BINDING AGREEMENT. Each Seller has the legal
power and capacity to enter into this Agreement and to
perform his obligations hereunder. This Agreement has been
duly and validly executed and delivered by each Seller and
the Company and is a valid and binding obligation of each
Seller and the Company (relating to those certain agreements
of the Company contained in this Agreement), enforceable
against each Seller and the Company in accordance with its
terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity. Each
Seller has (i) good and marketable title to the portion of
the Shares owned by that Seller, free and clear of any
security interests, liens, claims, agreements,
encumbrances, or restrictions of any kind, and (ii) the
complete and unrestricted right, power, and authority to
sell, transfer, and assign the Shares in accordance with
this Agreement.
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b. ORGANIZATION AND STANDING. The Company is duly
incorporated, is validly existing, and is in good standing
under the laws of the State of California and has all
necessary power and authority to own, lease, and operate its
properties and assets and to conduct its business as its
business is now being conducted. Sellers have delivered to
Purchaser complete and accurate copies of the Company's
articles of incorporation and bylaws, including all
amendments thereto and have made available to Purchaser its
minute book and stock records. Schedule 7(b) will set forth
a complete and accurate list of all officers, directors and
assumed or fictitious names of the Company as of the date of
this Agreement. The Company is qualified to do business and
is in good standing in each state in which it transacts
business. The Company does not have any subsidiaries nor any
direct or indirect equity interest in any corporation,
partnership, or other entity, except for the Company's
interest in San Diego Special Events Sales, LLC and Metro
Autoplex, Inc. The Company is a "small business corporation"
and has maintained a valid election to be an "S" corporation
under Subchapter S of the Internal Revenue Code of 1986, as
amended.
c. CAPITALIZATION. The authorized capital stock of the Company
consists of 10,000 shares of common stock, having no par
value. On the date hereof, Xxxxx owns beneficially and of
record 9,000 shares of common stock of the Company and
Xxxxxxxxx owns beneficially and of record 1,000 shares of
common stock of the Company, which collectively comprise the
Shares. The Shares (i) constitute all of the issued and
outstanding shares of capital stock of the Company, (ii)
have been validly authorized and issued, (iii) are fully
paid and nonassessable, (iv) have not been issued in
violation of any preemptive rights or of any federal or
state securities laws, and (v) are not subject to any
agreement that relates to the voting or control of any of
the Shares. There are and will be on the Closing Date no
outstanding subscriptions, options, rights, warrants,
convertible securities, or any other agreements or
commitments obligating the Company to issue, deliver, or
sell any additional shares of its capital stock of any class
or any other securities of any kind. There are no bonds,
debentures, notes, or other indebtedness or securities of
the Company having the right to vote on any matters on which
the shareholders of the Company may vote. There are no
outstanding rights, agreements, or arrangements of any kind
obligating the Company to repurchase, redeem, or otherwise
acquire any shares of capital stock or other voting
securities of the Company.
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d. NO CONFLICTS. Neither the execution and delivery of this
Agreement nor the fulfillment of or compliance with the
terms and provisions hereof will violate, conflict with, or
result in a breach of the terms, conditions or provisions
of, or constitute a default or an event which, with notice
or lapse of time or both, would constitute a default under,
(i) the articles of incorporation or bylaws of the Company,
(ii) any contract, agreement, mortgage, deed of trust, or
other instrument or obligation to which the Sellers or the
Company is a party or by which any of them is bound, except
for agreements between the Company and Toyota, which require
the consent of Toyota; the Dealership Lease, which may
require the consent of the landlord; the Dealership
Sublease, which may require the consent of the sublandlord;
the Used Car Lot Lease, which may require the consent of the
landlord; the Used Car Lot Sublease, which may require the
consent of the sublandlord; and the Capital Loan, which may
require the consent of Toyota Motor Credit Corporation;
(iii) violate any provision of any applicable law or
regulation or of any order, decree, writ or injunction of
any court or governmental body, or (iv) result in the
creation or imposition of any lien, charge, restriction,
security interest or encumbrance of any kind whatsoever on
any property or asset of the Company or on the Shares.
e. CONSENTS. No consent or approval by, or any notification
of or filing with, any governmental entity or agency or any
other person or entity is required in connection with the
execution, delivery or performance of this Agreement by
Sellers or the Company, other than consent from (i) the
California Department of Motor Vehicles, (ii) Toyota, or
(iii) the FTC and the Justice Department under the
Xxxx-Xxxxx-Xxxxxx Act.
f. REAL PROPERTY. Schedule 7(f) will set forth a complete and
accurate (i) legal description of all real property owned by
the Company, and (ii) description of each lease or sublease
of real property under which the Company holds a leasehold
interest. Each of the leases and subleases are in full
force and effect and constitutes a legal, valid and binding
obligation of the parties thereto. The Company has
performed the covenants required to be performed by it under
each of the leases and subleases to which it is a party and
is not in default under any of the leases or subleases to
which it is a party. The zoning of each tract of real
property owned, leased or otherwise utilized by the Company
permits the presently existing improvements and the
continuation of the business presently being conducted on
such real property. To the best of each Seller's and the
Company's knowledge, neither Sellers nor the Company
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is aware of any pending or proposed changes to such zoning
or of any pending or proposed condemnation action, affecting
any real property owned, leased or otherwise utilized by the
Company.
g. TANGIBLE PERSONAL PROPERTY. Schedule 7(g) will set forth a
complete and accurate description of (i) all equipment,
furniture, fixtures, and other tangible personal property
(other than inventory) owned by the Company, and (ii) each
lease of personal property under which the Company holds a
leasehold interest. Each of the leases is in full force and
effect and constitutes a legal, valid, and binding
obligation of the parties thereto. The Company has
performed the covenants required to be performed by it under
each of the leases to which it is a party and is not in
default under any of the leases to which it is a party. To
the best of each Seller's and the Company's knowledge, the
Tangible Personal Property (hereinafter defined) is in good
repair and operating condition, has been regularly and
properly maintained and fully serviced, and is suitable for
the purposes for which it is presently being used. All
Tangible Personal Property described on Schedule 7(g) shall
be at the dealerships, in good working order and condition,
and free and clear of all liens and other encumbrances. On
November 1, 1997, the Company will have Tangible Personal
Property with a value, determined in accordance with
subparagraph 12(d)(iv),of at least $350,000. As used in
this Agreement, the term "Tangible Personal Property" shall
mean all tangible personal property owned by the Company on
November 1, 1997.
h. INVENTORIES. Schedule 7(h) will set forth a complete and
accurate description of the New Vehicle Inventory
(hereinafter defined), Remarketed Vehicle Inventory
(hereinafter defined), Used Vehicle Inventory (hereinafter
defined), and Parts and Accessories Inventory (hereinafter
defined). As used in this Agreement, the term "New Vehicle
Inventory" shall mean all new vehicles and demonstrators
owned by the Company on November 1, 1997; the term
"Remarketed Vehicle Inventory" shall mean program cars
purchased through auction that are eligible for Toyota Motor
Credit Corporation's special floor planning; the term "Used
Vehicle Inventory" shall mean all used vehicles owned by
the Company on November 1, 1997; and the term "Parts and
Accessories Inventory" shall mean all parts and accessories
purchased from Toyota and other reputable and reliable
suppliers, including tires, gas, oil, grease, body shop
materials and other inventories, and owned by the Company on
November 1, 1997. To the
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best of each Seller's and the Company's knowledge, each
inventory of the Company consists of goods of a quality
and in quantities that are saleable in the ordinary course
of the Company's business with normal xxxx-up at prevailing
market prices. To the best of each Seller's and the
Company's knowledge, all Toyota parts and accessories in the
inventory of the Company are returnable for full credit and
undamaged parts and accessories that are listed for sale in
the current dealer parts and accessories price schedule for
Toyota, except as set forth on Schedule 7(h). In order for
the Company to conduct business reasonably consistent with
past and current practices, on November 1, 1997, the Company
will have the following:
(i) a Used Vehicle Inventory with a value, determined in
accordance with subparagraph 12(d)(ii), of at least
$1,200,000;
(ii) a Parts and Accessories Inventory with a value,
determined in accordance with subparagraph 12(d)(iii),
at least $325,000; and
(iii) a New Vehicle Inventory that has a value,
determined in accordance with subparagraph 12(d)(i),
equal to the outstanding balance of the floor plan
indebtedness to Toyota Motor Credit Corporation for the
purchase of the New Vehicle Inventory; and
(iv) a Remarketed Vehicle Inventory with a value, determined
in accordance with subparagraph 12(d)(v), equal to the
outstanding balance of the floor plan indebtedness to
Toyota Motor Credit Corporation for the purchase of the
Remarketed Vehicle Inventory.
The New Vehicle Inventory, the Remarketed Vehicle Inventory,
the Used Vehicle Inventory, and the Parts and Accessories
Inventory shall be free and clear of all liens and other
encumbrances, except the security interest held by Toyota
Motor Corporation to secure the (a) floor plan indebtedness
for the New Vehicle Inventory and the Remarketed Vehicle
Inventory (collectively, the "Floor Plan"), and (b) the
Capital Loan.
i. LICENSES AND PERMITS. Schedule 7(i) will set forth a
complete and accurate description of all permits, licenses,
franchises, certificates, and similar items and rights,
owned or held by the Company (hereinafter collectively
referred to as the "Licenses and Permits"). The Licenses
and Permits (i) are adequate for the operation of the
Company's business, (ii)
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are valid and in full force and effect, except as set forth
on Schedule 7(i), and (iii) will be transferred to the
Purchaser at the Closing, unless such transfer is prohibited
by law or by the terms of the item or right to be
transferred. No additional permit, license, franchise,
certificate, or similar item or right is required
by the Company for the operation of its business.
j. INTELLECTUAL PROPERTY. Schedule 7(j) will set forth a
complete and accurate description of all intellectual
property presently in use by the Company, which intellectual
property includes (without limitation) software patents,
trademarks, tradenames, service marks, copyrights, trade
secrets, customer lists, inventions, formulas, methods,
processes, advertising materials, Internet sites, and any
other proprietary information or property. There are no
outstanding licenses or consents to third parties granting
the right to use any intellectual property owned by the
Company. To the best of each Seller's and the Company's
knowledge, no intellectual property used by the Company
infringes on any rights owned or held by any other person or
entity, and no person is infringing on the rights of the
Company in any intellectual property used by the Company.
Any royalties or fees payable by the Company to any third
party by reason of the use of any intellectual property by
the Company is set forth on Schedule 7(j). No additional
intellectual property is required by the Company for the
operation of its business.
k. TITLE TO PROPERTIES AND ENCUMBRANCES. The Company has good
and marketable title to (or, in the case of leased property,
valid and subsisting leasehold interests in) all of its
properties and assets, including (without limitation) the
properties and assets that will be listed on Schedules 7(f),
7(g), 7(h), 7(i) and 7(j). The properties and assets of the
Company are subject to no liens, deeds of trust, mortgages,
encumbrances, conditional sales agreements, security
interests, claims, or restrictions of any kind or character,
except for (i) the encumbrances that will be listed on
Schedule 7(k), and (ii) liens for current taxes not yet due
and payable.
l. FINANCIAL STATEMENTS. The Company has delivered to the
Purchaser copies of a balance sheet for the Company dated
September 30, 1997 (the "Balance Sheet Date"), and
statements of income and retained earnings for the periods
ending December 31, 1996 and September 30, 1997 (hereinafter
collectively referred to as the "Financial Statements").
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The Financial Statements were prepared by Xxxxx Xxxxx,
Controller of the Company, and are unaudited. The Financial
Statements fairly present the financial condition of the
Company at the dates mentioned and the results of its
operations for the periods specified, except as set forth on
Schedule 7(l), and were prepared in accordance with its
normal and customary accounting procedures. The balance
sheet in the Financial Statements discloses all of the
debts, liabilities, and obligations of any nature (whether
absolute, accrued, contingent, or otherwise, and whether due
or to become due) of the Company as of the Balance Sheet
Date and includes appropriate reserves for all taxes and
other liabilities accrued or due at such dates but not yet
paid. Schedule 7(l) will set forth all (i) inter-Dealership
transactions, and (ii) related party transactions between
any one or more of the Dealerships, Randt, Blomquist, the
Company, and any of their affiliates.
m. INDEBTEDNESS FOR BORROWED MONEY AND GUARANTIES. Schedule
7(m) will set forth a complete and accurate description of
the Company's indebtedness for borrowed money. Sellers will
deliver to the Purchaser complete and accurate copies of all
instruments evidencing or relating to the Company's
indebtedness for borrowed money. To the best of each
Seller's and the Company's knowledge, the Company is not in
default or violation of any provision of any agreement
evidencing or relating to its indebtedness for borrowed
money. Schedule 7(m) will also set forth a complete and
accurate list of (i) all guaranties by the Company of any
obligation or liability of any person or entity, including
(without limitation) any guaranties of installment sales
contracts or leases, (ii) all warranties on vehicles that
have been sold by the Company for the last three (3) years
for which there is any contingency of liability for the
Company, and (iii) all loans from the Company to any person
or entity.
n. TAX MATTERS. To the best of each Seller's knowledge, the
Company has filed or will file all federal, state, local and
foreign tax returns and tax reports required to be filed by
it for periods ending on or prior to the Closing Date. All
such returns and reports are and will be correct and
complete in all material respects. All federal, state,
local, and foreign income, profits, franchise, property,
excise, sales, use, occupation, payroll, employment, and
other taxes and assessments for periods ending on or prior
to the Closing Date that are or will be due and payable by
either Seller, the Company, or by either Seller on behalf of
the Company have been or will be properly computed, duly
reported, fully paid, and discharged. Neither Seller is
aware of any unpaid taxes that require
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payment by the Company, except for current taxes not yet
due and payable. To the best of each Seller's and the
Company's knowledge, (i) all current taxes not yet due
and payable by the Company have been properly accrued and
are accurately reflected in the Company's balance sheet
in the Financial Statements, (ii) the Company has not
been delinquent in the payment of any tax, assessment, or
governmental charge, (iii) no issues have been raised in
writing with the Company by the Internal Revenue Service
or any other taxing authority in connection with any tax
return or tax report filed by the Company, and (iv) the
Company has not executed any waiver of the statute of
limitations on the assessment or collection of any tax.
Each Seller agrees to indemnify and hold harmless the
Purchaser with respect to any income or other tax
liabilities, penalties and interest which arise from the
operation of the Company prior to Closing or arise as a
result of the transactions contemplated by this Agreement.
o. TRANSACTIONS SINCE THE BALANCE SHEET DATE. Since the
Balance Sheet Date, (i) the Company has not incurred any
debts, liabilities, or obligations, except current
liabilities in the ordinary course of business; discharged
or satisfied any liens or encumbrances, or paid any debts,
liabilities, or obligations, except in the ordinary course
of business; mortgaged, pledged, or otherwise subjected to
any lien or other encumbrance any of its properties or
assets; canceled any debt or claim; sold or transferred any
properties or assets, except sales from inventory in the
ordinary course of business; nor entered into any
transaction other than in the ordinary course of business;
(ii) there has not been any material adverse change in the
business, operations, properties, assets, revenues,
earnings, liabilities, or condition (financial or otherwise)
of the Company; (iii) there has not been any declaration,
setting aside or payment of any dividend or other
distribution in respect of, or any direct or indirect
redemption, purchase or other acquisition of, any of the
capital stock of the Company, except for distribution of
fifty percent (50%) of the Company's profits for September
and October, 1997; (iv) the Company has not issued or sold
or contracted to issue or sell any stock, securities or
options, of any nature whatsoever; (v) the Company has not
increased the compensation, commissions, bonuses, or other
remuneration payable to any officer, director, employee, or
to any other person or entity, whether now or hereafter
payable, including any increase pursuant to any pension,
profit-sharing or other plan or commitment, (vi) there has
not been any damage, destruction or loss (whether or not
covered by insurance) affecting any asset or property of
13
the Company; (vii) the Company has not made any capital
expenditure or commitment, individually or in the
aggregate, in excess of $10,000.00, except for the
execution of a purchase order on a $40,400 smog and
emission testing machine that is required by the State of
California to do smog checks; (viii) the Company has not
made any loan or advance to any person or entity (other
than salary advances to employees that were less than
$500 per occurrence and less than $2,000 in the aggregate
to any employee) or guaranteed any obligation or
liability of any person or entity, including (without
limitation) any guaranties of any installment sales
contracts or leases, other than as will be set forth on
Schedule 7(m); (ix) the Company has not given any
indemnifications to any person or entity; (x) the
Company has not acquired any properties or assets other
than in the ordinary course of business; (xi) the Company
has not made any change in its method of accounting or
accounting practices, including (without limitation) any
change in depreciation or amortization policies or rates;
(xii) the Company has not granted any waiver or release
of any claim or right held by it; (xiii) the Company has
not amended or terminated any material contract,
agreement, or license to which it is a party; (xiv) the
Company has not made any material write-down of the value
of any asset of the Company or any material write-off as
uncollectible of any account receivable or note
receivable; (xv) the Company has not changed its past
practices in the acquisition or sale of its new vehicle,
used vehicle, or parts and accessories inventories; and
(xvi) the Company has not agreed, in writing or
otherwise, to do or permit any of the foregoing;
p. LITIGATION. Schedule 7(p) will set forth a complete and
accurate description of all actions, suits, claims,
investigations or legal, administrative or arbitration
proceedings, pending or threatened, whether at law or in
equity, involving the Company or any of its properties,
assets, or business, and all judgments, orders, decrees,
writs or injunctions of any court or governmental
department, commission, agency, instrumentality or
arbitrator applicable to either Seller or to the Company.
Neither of the Sellers nor the Company is aware of any facts
that might result in any other action, suit, claim,
investigation, or legal, administrative or arbitration
proceeding.
q. COMPLIANCE WITH LAWS.
(i) To the best of each Seller's and the Company's
knowledge, the
14
Company has complied and is in compliance in all
material respects with all federal, state, local and
foreign laws, ordinances, rules, codes, regulations,
and orders (including those related to environmental
protection and occupational safety and health)
applicable to the Company.
(ii) To the best of each Seller's and the Company's
knowledge, there are no past or present events,
conditions, circumstances, activities, practices,
incidents, plans or actions, based on or resulting from
the conduct of the business of the Company, including
the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling,
or the emission, discharge, release, or threatened
release into the environment, of any pollutant,
contaminant, chemical, or industrial toxic or hazardous
material, substance or waste, which violates any laws
and the regulations promulgated thereunder currently in
effect relating to pollution or protection of the
environment (the "Environmental Laws"), including
(without limitation) the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"),
or any plan, order, decree, judgment, injunction,
notice or demand letter from a governmental department,
commission, agency or instrumentality applicable to
the Company, or which could give rise to any common law
or other legal liability. To the best of each Seller's
and the Company's knowledge, all real property
currently or formerly owned, leased or otherwise
utilized by the Company contains no spill, deposit, or
discharge of any hazardous substance (as that term is
currently defined under CERCLA or any applicable state
law), for which the Company could be liable.
(iii) Schedule 7(q) will set forth a complete and
accurate description of (x) each underground storage
tank of any kind or nature of which the Sellers or the
Company has any knowledge that is located or that was
located on any real property currently or formerly
owned, leased or otherwise utilized by the Company, (y)
a complete history of each underground storage tank,
including the dates and types of all tests, and (z) all
land and leasehold interests formerly owned, leased or
otherwise utilized by the Company.
(iv) The Company will deliver to Purchaser copies of all
existing environmental site audits in the possession of
either Seller or the Company that cover any real
property currently or formerly owned,
15
leased, or otherwise utilized by the Company.
r. CONTRACTS AND AGREEMENTS. Schedule 7(r) will set forth a
complete and accurate description of all material written or
oral contracts and agreements to which the Company is a
party or by which it or any of its property is bound. All
such contracts and agreements are in full force and effect
and are binding upon the parties thereto, and none of the
parties thereto are in breach of any of the provisions
thereof. Schedule 7(r) will list any contracts or
agreements which have a material adverse affect or are
likely to have a material adverse affect on the business,
operations, properties, assets, revenues, earnings,
liabilities, or condition (financial or otherwise) of the
Company. Schedule 7(r) will also set forth a complete and
accurate list of all the Company's contracts in transit.
s. EMPLOYEE BENEFIT PLANS. Schedule 7(s) will set forth a
complete and accurate description of all pension,
retirement, savings, deferred compensation, profit sharing,
stock option, bonus, incentive, severance, retirement,
health, insurance and other employee benefit plans that are
binding upon the Company. The Company has complied with
the provisions of and has performed the obligations required
of it under such plans. To the best of each Seller's and
the Company's knowledge, there have been no material
defaults, breaches, or omissions by the Company or any
fiduciary under any of such plans. The Company has not
accrued any liability of any kind under any employee benefit
plan other than as set forth in the Financial Statements.
t. INSURANCE. Schedule 7(t) will set forth a complete and
accurate description of all insurance, including (without
limitation) property damage, general liability, earthquake,
flood and worker's compensation, maintained by the Company
and will summarize the substantive terms of each of the
insurance policies, including (without limitation) whether
the insurance policies are "claims made" or "occurrence"
policies. The Company is carrying insurance that is
reasonable in light of the risks attendant to the business
and activities in which the Company is engaged. All of the
insurance is in full force and effect and will not be
affected by, or terminated or lapse by reason of, the
transactions contemplated by this Agreement. The Sellers
will cause the Company to keep such insurance in full force
and effect until the Closing Date.
u. PERSONNEL. Schedule 7(u) will set forth a complete and
accurate list of
16
(i) all current employees of the Company and all
independent contractors regularly performing services on
behalf of the Company, (ii) their respective rates of
compensation, including any salary, bonus or other
payment arrangement made with any of them, and (iii) any
accrued vacation of any employees of the Company. The
Company does not have any employment agreements or
employment contracts between the Company and any person
or entity. The Company has furnished to Purchaser
complete and accurate copies of the pay plans for all
employees of the Company. No employee of the Company is
represented by any union or collective bargaining agent.
The Company is not a party to or bound by any collective
bargaining agreement, nor has the Company experienced any
strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. The Company has
not, to either Seller's knowledge, committed any unfair
labor practice. Neither Seller has any knowledge of any
organizational effort being made or threatened by or on
behalf of any labor union with respect to employees of
the Company within the past five (5) years. To the best
of each Seller's and the Company's knowledge, the Company
has (i) paid or has made provision for the payment of all
compensation due any person or entity, (ii) complied in
all material respects with all applicable laws, rules,
and regulations relating to the employment of labor,
including those related to wages, hours, collective
bargaining and the payment and withholding of taxes, and
(iii) withheld and paid to the appropriate governmental
authority, or is holding for payment not yet due to such
authority, all amounts required by law or agreement to be
withheld from the compensation of its employees.
v. ACCOUNTS RECEIVABLE. Schedule 7(v) will set forth a
complete and accurate list of all accounts receivable and
notes receivable of the Company and an aging analysis of the
accounts receivable. To the best of each Seller's and the
Company's knowledge, all accounts receivable and notes
receivable of the Company are valid and enforceable claims,
arose in the ordinary course of business, require no further
performance by the Company, and are collectible without
resort to litigation. To the best of each Seller's and the
Company's knowledge, no material objection, claim, or offset
has been made regarding any of the accounts receivable or
notes receivable. Except as will be set forth on Schedule
7(v), all of the accounts receivable and notes receivable
are current. There are and at Closing there will be no
payables or receivables due or owing between either Seller
and the Company, except for the prior month's salary or
bonus, if any, owed by the Company to Xxxxx or
17
Xxxxxxxxx.
w. BROKERS. Neither Seller nor the Company has employed,
directly or indirectly, any broker or finder, or incurred
any liability for any brokerage fees, commissions, or
finder's fees, and no broker or finder has acted directly or
indirectly for either Seller or the Company in connection
with this Agreement or the transactions contemplated by this
Agreement.
x. DELIVERY OF DOCUMENTS. Complete and accurate copies of all
written instruments listed or described on the exhibits
attached hereto or that will be attached hereto have been or
will be furnished to Purchaser. The Company will make
available to Purchaser, to the extent requested by
Purchaser, all books, records, and facilities of the
Company.
y. BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule 7(y) will
set forth a complete and accurate list of (i) the names and
addresses of all persons holding a power of attorney on
behalf of the Company, and (ii) the account numbers and
names of all banks or other financial institutions in which
the Company currently has an account, deposit, or safe
deposit box, with the names of all persons authorized to
draw on the accounts or deposits or to have access to the
boxes.
z. DISCLOSURE.
(i) To the best of each Seller's and the Company's
knowledge, there have been no events, transactions or
information relating to the Company which, singly or in
the aggregate could reasonably be expected to have a
material adverse affect on the business, operations,
properties, assets, revenues, earnings, liabilities, or
condition (financial or otherwise) of the Company. No
representation or warranty by either Seller or the
Company in this Agreement or in any of the exhibits
attached hereto, or other statement in any other
writing furnished or to be furnished to Purchaser by or
on behalf of either Seller or the Company in connection
with the transactions contemplated by this Agreement,
contains or will contain any untrue statement of a
material fact, or omits or will omit to state a
material fact necessary to make the statements
contained herein not misleading.
(ii) Neither Seller knows of any reason why the Company
cannot
18
continue its business in the same manner following
the execution of this Agreement and the Closing as it
has been operated prior thereto, except to the extent
that Purchaser causes the business of the Company to
change following the Closing, or for the possible
expiration of the Dealership Sublease on April 19,
1998. Neither Seller has any reason to believe that
at any time in the foreseeable future the business of
the Company shall be materially adversely affected by
any event, except to the extent that the Purchaser
causes the business of the Company to change following
the Closing, or for the possible expiration of the
Dealership Sublease on April 19, 1998.
8. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to each Seller, effective as of the date of this Agreement and
again at Closing, each of the following:
a. INCORPORATION. Purchaser is duly incorporated, is validly
existing, and is in good standing under the laws of the
State of Delaware. Purchaser shall deliver to Sellers a
certificate of good standing from the Delaware Secretary of
State.
b. AUTHORITY AND BINDING AGREEMENT. Purchaser has the
corporate power and authority to enter into this Agreement
and to perform its obligations hereunder. This Agreement is
a valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to the enforcement of creditors' rights generally
and by general principles of equity.
c. NO CONFLICTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated by this Agreement will result in any breach or
violation of or default under any agreement or other
instrument to which Purchaser is a party or by which it is
bound.
d. BROKERS. The Purchaser has not employed, directly or
indirectly, any broker or finder, or incurred any liability
for any brokerage fees, commissions or finders' fees, and no
broker or finder has acted directly or indirectly for the
Purchaser in connection with this Agreement or the
transactions contemplated by this Agreement.
19
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by the parties in this Agreement or in any certificate,
schedule, statement, document or instrument furnished in connection with this
Agreement shall survive the Closing. Notwithstanding any investigation,
examination or audit conducted before or after the Closing or the decision of
any party to consummate the transactions contemplated by this Agreement, each
party shall be entitled to rely upon the representations and warranties set
forth in this Agreement.
10. SELLERS' OBLIGATIONS PRIOR TO CLOSING. Each Seller agrees to do
the following prior to Closing:
a. NOTICES AND CONSENTS. Each Seller shall use his best
efforts to obtain any required approvals or consents to this
Agreement and to the transactions contemplated by this
Agreement from any person or entity from which such approval
or consent is required, including (without limitation)
consent or approval from (i) Toyota, (ii) the FTC and the
Justice Department under the Xxxx-Xxxxx-Xxxxxx Act and all
regulations promulgated thereunder, and (iii) the California
Department of Motor Vehicles.
b. CONDUCT OF BUSINESS BY THE COMPANY PRIOR TO THE CLOSING
DATE. Each Seller shall cause the Company to conduct its
operations according to the ordinary and usual course of
business reasonably consistent with past and current
practices, to maintain and preserve its business
organization, assets and properties, and vendor and supplier
relationships, and to retain the services of its officers,
employees, agents, and independent contractors, and shall
not allow the Company to engage in any practice, take any
action, or enter into any transaction outside of the
ordinary course of business. Without limiting the
generality of the foregoing, each Seller shall prohibit the
Company, without the prior written consent of Purchaser,
from directly or indirectly taking any of the actions
described in subparagraph 7(o).
c. FULL ACCESS. Each Seller shall cause the Company to permit
Purchaser and representatives of the Purchaser to have full
access to and to examine, at all reasonable times and
places, and in a manner so as not to interfere with the
normal business operations of the Company; the books,
records, properties, assets and operations of the Company.
Such examination shall include access to the officers,
directors, employees, agents and representatives of the
Company. Each Seller shall cause the Company to furnish to
Purchaser and representatives of Purchaser with
20
such financial, operating and other data and information,
and copies of documents with respect to the Company, as
Purchaser shall from time to time request. Such access and
information shall not in any way affect or diminish any of
the representations or warranties made in this Agreement.
d. AUDIT. Each Seller shall cause the Company to permit an
audit (the "Audit") to be conducted under generally accepted
auditing standards, of the books, records, and financial
statements of the Company for 1996, 1997, and any
additional period requested by the Purchaser or required by
applicable law, and shall cause Audited Financial Statements
(hereinafter defined) to be prepared in accordance with
generally accepted accounting principles, which shall
include reserves for any extended warranties, charge-backs,
inventory write downs, repossessions, contracts in transit,
and any other appropriate reserves and accruals. As used in
this Agreement, "Audited Financial Statements" shall mean an
audited (i) balance sheet dated September 30, 1997, for the
Company, and (ii) income statement for the nine (9) month
period ending September 30, 1997, for the Company. The
Audit will be conducted by Purchaser's accountants, Price
Waterhouse, LLP. Each Seller agrees to cause the full
cooperation of the officers, directors, employees, agents
and representatives of the Company in the Audit as requested
by Purchaser. The start date of the Audit is anticipated to
be October 13, 1997. In addition, as near as possible to
the Closing Date, Price Waterhouse shall review the books
and records of the Company for the period after September
30, 1997, and prepare a letter setting forth the unaudited
adjustments that should be made to the Net Worth (the "Net
Worth Adjustments").
e. NOTICE OF ADVERSE CHANGES. Each Seller shall give prompt
written notice to Purchaser of any material adverse change
in the business, operations, properties, assets, revenues,
earnings, liabilities, or condition (financial or otherwise)
of the Company.
f. STANDSTILL. From the date hereof to the earlier of the
Closing Date or the date this Agreement expires or
terminates, neither Seller shall, directly or indirectly,
through any officer, director, employee, or otherwise, (i)
solicit or initiate the submission of any proposal or offer
from any person or entity (including any officers or
employees of the Company) relating to any liquidation,
dissolution, recapitalization, merger, consolidation,
acquisition, or purchase of all or a material
21
portion of the assets and properties of the Company, or
the acquisition or purchase of any equity interest in the
Company, or (ii) participate in any negotiations
regarding, or furnish to any other person or entity any
information with respect to, or otherwise cooperate in
any manner with, or assist or participate in, facilitate
or encourage, any effort or attempt by any other person
or entity to do or seek any of the foregoing.
g. FURTHER ASSURANCES. Each Seller shall from time to time,
upon the request of Purchaser, execute and deliver to
Purchaser such further instruments and take such other
action as Purchaser may reasonably request, in order to
consummate the transactions contemplated by this Agreement
as expeditiously as possible and to place Purchaser in
possession and control of, the Shares and the assets and
properties of the Company, or to enable Purchaser to
exercise and enjoy all rights and benefits with respect
thereto.
h. INSURANCE AND RISK OF LOSS. Until the Closing, each Seller
shall cause the Company to maintain the insurance the
Company is carrying in connection with the operation of the
Dealership, including (without limitation) property damage
insurance, general liability insurance, worker's
compensation, and group health insurance. The Sellers and
the Company shall have the risk of loss for damage by fire
or other casualty to the assets and properties of the
Company before Closing. In the event of any material loss
or damage to the assets and properties of the Company prior
to Closing, Purchaser shall have the option to terminate
this Agreement.
i. ENVIRONMENTAL SITE AUDITS. On or before October 31, 1997,
the Company shall obtain a Phase I environmental site audit
on all real property owned, leased, or otherwise utilized by
the Company in order to determine whether there exists any
environmental condition which could reasonably be expected
to result in any liability, cost, or expense to the owner,
occupier, or operator of such real property arising under
any Environmental Laws.
j. CONSENT OF SUBLANDLORDS AND LANDLORDS. The Sellers shall
furnish the Purchaser with any required consent from (i) the
landlord of the Dealership Lease, (ii) the sublandlord of
the Dealership Sublease, (ii) the landlord of the Used Car
Lot Lease, and (iv) the sublandlord of the Used Car Lot
Sublease.
22
k. INVESTMENT LETTER. Xxxxxxxxx agrees to execute and deliver
an Investment Letter (the "Investment Letter") in the form
of Exhibit "G" hereto.
l. CONDOMINIUM FURNITURE. Xxxxx shall pay off the balance, if
any, of any indebtedness owed on the furniture that was
located in his condominium on Xxxxxx Street, San Diego,
California and described on Schedule 7(g), and such
furniture shall be the property of Xxxxx.
11. PURCHASER'S OBLIGATIONS PRIOR TO CLOSING. Purchaser agrees to
do the following prior to Closing:
a. DUE DILIGENCE. On or before December 1, 1997, Purchaser
shall conduct and complete all investigations, reviews and
inspections of the business, operations, properties, assets,
revenues, earnings, liabilities, and condition (financial or
otherwise) of the Company which Purchaser and Purchaser's
representatives deem necessary or desirable to make an
informed and reasonable decision to complete the
transactions contemplated by this Agreement; provided,
however, that after December 1, 1997, until the transactions
contemplated by this Agreement close or this Agreement
expires or terminates, Purchaser may conduct such additional
investigations, reviews and inspections of the business,
operations, properties, assets, revenues, earnings,
liabilities, and condition (financial or otherwise) of the
Company as Purchaser and Purchaser's representatives deem
necessary or desirable to determine whether a material
adverse change has occurred since December 1, 1997 as a
result of any act by either Seller.
b. FURTHER ASSURANCES. Purchaser shall from time to time, upon
the request of the Sellers, execute and deliver to Sellers
such further instruments and take such further action as the
Sellers may reasonably request, in order to consummate the
transactions contemplated by this Agreement as expeditiously
as possible.
c. PURCHASER'S NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
REGARDING THE COMPANY. Purchaser acknowledges that it may
possibly have access to certain confidential information of
the Company, including (without limitation) lists of
accounts, operational policies, and pricing and costs
policies (the "Confidential Information"). The Purchaser
agrees that it will not disclose such Confidential
Information to any
23
person or entity for any purpose or reason whatsoever,
except to authorized representatives of the Purchaser, or
as required by law, unless such Confidential Information
becomes known to the public generally through no fault of
the Purchaser. In the event of a breach or threatened
breach by Purchaser of the provisions of this
subparagraph, the Sellers shall be entitled to an
injunction restraining the Purchaser from disclosing, in
whole or in part, such Confidential Information. Nothing
herein shall be construed as prohibiting the Sellers from
pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
12. SELLERS' AND PURCHASER'S OBLIGATIONS PRIOR TO CLOSING.
a. ASSISTANCE. Each Seller and Purchaser agree to use their
best efforts to create a workable, smooth and orderly
transition of Purchaser's acquisition of the Company.
x. XXXX-XXXXX-XXXXXX NOTIFICATION. Within a reasonable time
after the execution and delivery of this Agreement, the
parties shall, if and to the extent required by law, file
all reports or other documents required or requested by the
FTC or the Justice Department under the Xxxx-Xxxxx-Xxxxxx
Act, and all regulations promulgated thereunder, concerning
the transactions contemplated by this Agreement, and comply
promptly with any request by the FTC or the Justice
Department for additional information concerning such
transactions, so that the waiting period specified in the
Xxxx-Xxxxx-Xxxxxx Act will expire as soon as reasonably
possible after the execution and delivery of this Agreement.
The parties agree to furnish to one another such information
concerning the Purchaser, the Sellers, and the Company as
the parties need to perform their obligations hereunder.
The Purchaser agrees to pay all filing fees and costs
due governmental agencies with regard to the notification
under and compliance with the Xxxx-Xxxxx-Xxxxxx Act and all
regulations promulgated thereunder.
c. REGISTRATION RIGHTS AGREEMENT. Xxxxxxxxx and Purchaser
agree to execute and deliver a Registration Rights Agreement
(the "Registration Rights Agreement") in the form of Exhibit
"E" hereto covering the Restricted Stock that will be
acquired by Xxxxxxxxx at Closing.
d. PHYSICAL INVENTORIES. On or before October 31, 1997,
Purchaser and
24
Sellers shall conduct a physical inventory of the New
Vehicle Inventory, the Remarketed Vehicle Inventory, the
Used Vehicle Inventory, the Parts and Accessories
Inventory, and the Tangible Personal Property. The
physical inventories shall be collectively referred to in
this Agreement as the "Physical Inventories." The value
of the New Vehicle Inventory, the Remarketed Vehicle
Inventory, the Used Vehicle Inventory, the Parts and
Accessories Inventory, and the Tangible Personal Property
shall be determined as follows:
(i) Purchaser and Sellers shall calculate the value of the
New Vehicle Inventory. The value of each new vehicle
shall be the cash sum equal to the factory invoice
price (excluding any Company internal profit) to the
Company, less any factory holdback rebate, any other
factory rebate or incentive which the Company may have
received, or to which the Company is or may become
entitled to receive, advertising credits and interest
credits, plus performed PDI (for which the Company has
not been reimbursed by Toyota) at the Company's cost
(excluding any internal profit, unless Toyota will
reimburse the Company for the profit) options added at
the Company's cost (excluding any internal profit), and
any freight and handling charges. Purchaser and
Sellers shall agree to the value of any demonstrators.
It is understood and agreed that performed PDI will not
be added to the value of any new vehicle unless Toyota
has agreed that it will reimburse the Company for such
PDI. The value of any new vehicle shall be decreased by
an amount equal to the Company's cost (excluding any
internal profit) of repair for any physically damaged
vehicle. Sellers agree that all factory rebates and
other credits on any new vehicles shall be retained by
the Company. The value of any new vehicle should be
reduced by the following percentages based on the
number of days since invoice date:
0-30 days 0%
31-60 days 5%
61-90 days 10%
Any reduction determined pursuant to this formula shall
be added back to the Net Worth as of the October 31,
1997 to determine the Net Worth of the Company for the
final acquisition price. Any other deduction as it
relates to inventory for LCM or obsolescence shall be
considered a deduction for Net Worth computational
25
purposes.
(ii) Purchaser and Sellers shall agree to the value of the
Used Vehicle Inventory. If Purchaser and Sellers fail
to agree on the value of any used vehicle, Sellers
shall purchase the used vehicle at its net book value
as reflected in the books and records of the Company
and such used vehicle shall be removed from the Used
Vehicle Inventory. Purchaser agrees to allow Sellers
to store any used vehicles purchased by Sellers from
the Used Vehicle Inventory at 0000 Xxxxxx Xxxxx, Xxx
Xxxxx, Xxxxxxxxxx, for a period of sixty (60) days in
order to allow Sellers time to sell the used vehicles.
(iii) Purchaser and Sellers shall calculate the value of
the Parts and Accessories Inventory. The value of the
Toyota parts and accessories shall be the cost of the
parts and accessories set forth in the Toyota price
schedule in effect on the date of the inventory.
Purchaser and Sellers shall agree to the value of any
non-Toyota parts and accessories. The Sellers agree
that all rebates and credits on any parts or
accessories earned on or after November 1, 1997, shall
be retained by the Company.
(iv) Purchaser and Sellers shall agree to the value of the
Tangible Personal Property.
(v) Purchaser and Sellers shall agree to the value of the
Remarketed Vehicle Inventory. If Purchaser and Sellers
fail to agree on the value of any remarketed vehicle,
Sellers shall purchase the remarketed vehicle at its
net book value as reflected in books and records of the
Company and such remarketed vehicle shall be removed
from the Remarketed Vehicle Inventory. Purchaser
agrees to allow Sellers to store any remarketed vehicle
purchased by Sellers from the Remarketed Vehicle
Inventory at 0000 Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx,
for a period of sixty (60) days in order to allow
Sellers time to sell the remarketed vehicles.
13. CONDITIONS PRECEDENT TO OBLIGATION OF PURCHASER. The obligation
of Purchaser to consummate the transactions contemplated by this Agreement is
subject to the satisfaction on or prior to the Closing Date of the following
conditions, each of which may be waived by the Purchaser:
a. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations
26
and warranties made by the Sellers and the Company in or
pursuant to this Agreement shall be true and correct in
all material respects as of the Closing Date with the
same effect as though such representations and warranties
were made on the Closing Date, except to the extent that
such representations and warranties expressly relate to
any earlier date. Sellers and the Company shall have
performed and complied with all the covenants and
agreements and satisfied all the conditions required by
this Agreement to be performed, complied with or
satisfied by Sellers and the Company on or prior to the
Closing Date. Sellers must have delivered to the
Purchaser a certificate dated as of the Closing Date
certifying that this condition has been fulfilled.
b. NO ADVERSE CHANGE. Purchaser shall have determined, to its
satisfaction, that as of the Closing Date, there has been no
material adverse change in the business, operations,
properties, assets, revenues, earnings, liabilities or
condition (financial or otherwise) of the Company.
c. EXHIBITS. Purchaser shall have timely received all exhibits
to this Agreement.
d. TRANSFER OF SHARES. The certificates representing the
Shares shall have been transferred and conveyed by Sellers
to Purchaser in a manner and by instruments acceptable to
Purchaser and its counsel, free and clear of all liens,
claims, encumbrances, or restrictions of any kind.
Contemporaneously with the consummation of the transfer of
the Shares, Sellers shall put Purchaser in full possession
and enjoyment of all properties and assets of the Company.
In addition, Purchaser shall have received the complete
stock ledgers, minute books and other corporate records of
the Company.
e. ENVIRONMENTAL SITE AUDITS. Purchaser shall have timely
received a Phase I environmental site audit on each tract of
real property owned, leased, or otherwise utilized by the
Company. If any of the environmental site audits discloses
an environmental condition which could reasonably be
expected to result in any liability, cost, or expense to the
Purchaser arising under any Environmental Laws, then the
Company shall have either (i) cured such environmental
condition and received a "no further action" letter from the
United States Environmental Protection Agency and the
applicable state agency, or (ii) given Purchaser written
notice that the Company has elected to terminate
27
this Agreement.
f. THIRD PARTY APPROVALS. This Agreement and the transactions
contemplated by this Agreement shall have received all
required approvals and consents from all persons and
entities from which such approvals or consents are required,
including (without limitation) (i) Toyota, (ii) the FTC and
the Justice Department under the Xxxx-Xxxxx-Xxxxxx Act and
the regulations promulgated thereunder, and (iii) the
California Department of Motor Vehicles. Without limiting
the generality of the foregoing, Toyota must approve
Purchaser as the dealer for the Dealership in San Diego,
California prior to Closing.
g. COMPLIANCE WITH SECURITIES LAWS. Purchaser shall have (i)
received the Investment Letter, (ii) received the
Registration Rights Agreement, and (iii) determined that all
state and federal securities laws have been fully satisfied
relating to the purchase of the Shares by Purchaser.
h. CONSENT OF SUBLANDLORDS AND LANDLORDS. The Purchaser shall
have received any required consent from (i) the landlord of
the Dealership Lease, (ii) the sublandlord of the Dealership
Sublease, (iii) the landlord of the Used Car Lot Lease, and
(iv) the sublandlord of the Used Car Lot Sublease.
i. PHYSICAL INVENTORIES. Purchaser shall have conducted the
Physical Inventories.
j. DUE DILIGENCE. Based on such examinations and inquiries as
Purchaser shall have made or shall have caused to be made in
accordance with this Agreement, the business, operations,
properties, assets, revenues, earnings, liabilities, and
condition (financial or otherwise) shall be satisfactory to
Purchaser, in Purchaser's sole judgment and discretion.
k. APPROVAL OF DOCUMENTATION. The form and substance of all
opinions, certificates, instruments and other documents
delivered to Purchaser in connection with this Agreement
shall be satisfactory in all reasonable respects to
Purchaser and Purchaser's counsel.
l. CORPORATE DIRECTORS AND OFFICERS. The composition of the
directors and officers of the Company shall be as requested
by Purchaser, effective as of the Closing Date.
28
m. OPINIONS OF COUNSEL. Each Seller shall have delivered to
Purchaser an opinion of counsel reasonably satisfactory to
Purchaser, dated as of the Closing Date, that contains such
opinions that are reasonably requested by Purchaser,
including (without limitation) an opinion that the Shares
were issued and will be transferred to Purchaser, in
compliance with all state and federal securities laws. The
Company shall have delivered to Purchaser an opinion of
counsel reasonably satisfactory to Purchaser, dated as of
the Closing Date, that contains such opinions that are
reasonably requested by Purchaser.
x. XXXX-XXXXX-XXXXXX WAITING PERIOD. The applicable waiting
period under the Xxxx-Xxxxx-Xxxxxx Act, and the regulations
promulgated thereunder, shall have expired.
o. AUDIT. Price Waterhouse shall have timely performed the
Audit and the review of the period after September 30, 1997,
prepared the Audited Financial Statements, and delivered a
copy of the Audited Financial Statements and the Net Worth
Adjustments to Purchaser.
p. ADDITIONAL INFORMATION. Each Seller and the Company shall
have furnished to Purchaser and Purchaser's counsel such
additional information, certificates, and other documents as
Purchaser shall have reasonably requested.
q. NET WORTH AND VALUE OF INVENTORIES. On October 31, 1997,
(i) the Net Worth shall be at least $825,000, (ii) the value
of the Used Vehicle Inventory shall be at least $1,200,000,
(iii) the value of the Parts and Accessories Inventory shall
be at least $325,000, (iv) the value of the Tangible
Personal Property shall be at least $350,000, (v) the value
of the New Vehicle Inventory shall be equal to the floor
plan indebtedness to Toyota Motor Credit Corporation for the
purchase of the New Vehicle Inventory, and (vi) the value of
the Remarketed Vehicle Inventory shall be equal to the floor
plan indebtedness to Toyota Motor Credit Corporation for the
purchase of Remarketed Vehicle Inventory.
r. CAPITAL LOAN. On the Closing Date, the outstanding balance
(principal and accrued interest) on the Capital Loan shall
not exceed $700,000.
14. CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS. The obligation
of each Seller to consummate the transactions contemplated by this Agreement is
subject to the satisfaction on or prior to the Closing Date of the following
conditions, each of which may be waived by the
29
Seller:
a. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties made by the Purchaser in or
pursuant to this Agreement shall be true and correct in all
material respects as of the Closing Date with the same
effect as though such representations and warranties were
made on the Closing Date, except to the extent that such
representations and warranties expressly relate to an
earlier date, and Purchaser shall have performed and
complied with all of the covenants and agreements and
satisfied all the conditions required by this Agreement to
be performed, complied with or satisfied by Purchaser on or
prior to the Closing Date. The Purchaser must have
delivered to the Sellers a certificate dated as of the
Closing Date certifying that this condition has been
fulfilled.
b. DELIVERY OF PURCHASE PRICE. The Purchaser shall have
delivered (i) the cash provided for in subparagraphs 4(a)(i)
and 4(b)(i) of this Agreement, (ii) the Restricted Stock,
(iii) the $1,350,000 Note, (iv) the $50,000 Note, and (v)
$500,000 to the escrow agent to be held under the Seller's
Escrow Agreement.
c. APPROVAL OF DOCUMENTATION. The form and substance of all
certificates and other documents required to be delivered to
Sellers in connection with this Agreement shall be
satisfactory in all reasonable respects to Sellers and
Sellers' counsel.
d. REGISTRATION RIGHTS AGREEMENT. Purchaser shall have
executed and delivered to Xxxxxxxxx the Registration Rights
Agreement.
e. EXHIBITS. Sellers shall have timely received all exhibits
to this Agreement.
f. ADDITIONAL INFORMATION. Purchaser shall have furnished to
Sellers and Sellers' counsel such additional information,
certificates, and other documents as Sellers shall have
reasonably requested.
15. SELLERS' OBLIGATIONS AFTER CLOSING.
a. INDEMNITY BY SELLERS. Sellers jointly and severally shall
indemnify, defend and hold Purchaser harmless from and
against any and all liabilities, damages, losses, claims,
costs and expenses, including (without limitation)
reasonable attorneys' fees, arising from or related to
30
(i) any breach of any representation, warranty, covenant
or agreement made by either Seller in this Agreement, or
in any certificate or other document delivered on behalf
of either Seller or the nonperformance of any covenant or
obligation of either Seller under this Agreement, (ii)
any debts, liabilities, or obligations of any nature
(whether absolute, accrued, contingent or otherwise and
whether due or to become due) of the Company at the
Balance Sheet Date that are not reflected in the
Financial Statements, (iii) the conduct of the business
or other operations of the Company prior to the Closing
Date, (iv) any condition, activity, or event existing or
occurring prior to the Closing Date arising or resulting
from any acts or omissions of the Company during the
period after the date of incorporation of the Company
that created or creates any product or environmental
liability, (v) the failure of either Seller or the
Company to comply with any federal, state, or local tax
laws for any matter occurring prior to the Closing Date
or applicable to the transactions contemplated by this
Agreement, and (vi) any and all actions, suits,
proceedings, demands and judgments, arising from or
related to any of the matters set forth in this
subparagraph 15(a).
x. XXXXXXX' NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
REGARDING THE COMPANY. Each Seller acknowledges that the
Seller has in the past, currently has, and in the future may
possibly have access to Confidential Information. Each
Seller agrees that the Seller will not disclose such
Confidential Information to any person or entity for any
purpose or reason whatsoever except to authorized
representatives of the Purchaser, or as required by law,
unless the Confidential Information becomes known to the
public generally through no fault of the Seller. In the
event of a breach or threatened breach by either of the
Sellers of this subparagraph, the Purchaser shall be
entitled to an injunction restraining the Seller from
disclosing, in whole or in part, such Confidential
Information. Nothing herein shall be construed as
prohibiting the Purchaser from pursuing any other available
remedy for such breach or threatened breach, including the
recovery of damages.
x. XXXXX'X COVENANT NOT TO COMPETE. Xxxxx agrees that he will
not, either directly or indirectly, alone or with others,
either as an employee, owner, partner, agent, stockholder,
member, director, officer or otherwise, enter into or engage
in the business of operating a new vehicle dealership, used
car lot, warranty repair business, or other related business
which may compete directly or indirectly with the Purchaser
within the San Diego metropolitan area (the "Restricted
Area") for a
31
period of three (3) years from the Closing Date (the
"Restricted Period"), provided that Xxxxx may (i) sell
any used cars he purchased from the Used Vehicle
Inventory, (ii) collect accounts and notes receivables
for the Company, and (iii) pay the debts, liabilities and
obligations for the Company, in accordance with the terms
of this Agreement. Further, Xxxxx shall not individually,
or in conjunction with others, within the Restricted
Period and Restricted Area, directly or indirectly,
solicit or hire any employee of the Company or encourage
such employee to leave such employment unless such
employee has already terminated such employment with the
Company or the Purchaser and Xxxxx have mutually agreed
in advance to the solicitation or employment. Xxxxx also
agrees that in the event of a breach of these covenants,
the Purchaser may protect its rights by injunction or
otherwise.
16. INDEMNITY BY PURCHASER. Purchaser shall indemnify, defend and
hold Sellers harmless from and against any and all liabilities, damages, losses,
claims, costs and expenses, including (without limitation) reasonable attorneys'
fees arising from or related to (a) any breach of any warranty or representation
made by Purchaser in this Agreement or the nonperformance of any covenant or
obligation of Purchaser under this Agreement, or (b) Purchaser's operation of
the Dealership on or after the Closing Date.
17. INFORMATION REGARDING THE PURCHASER.
a. INSIDER LIABILITY. Each Seller acknowledges that trading in
the Purchaser's securities by persons possessing material
non-public information may result in private lawsuits for
damages or to civil or criminal proceedings by the
Securities and Exchange Commission. Each Seller also
acknowledges that liability may be imposed on insiders who
privately disclose otherwise non-public material information
where such disclosure coincide with trading Purchaser's
securities by such insiders or by the recipients of such
information.
x. XXXXXXX' NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
REGARDING THE PURCHASER. Each Seller acknowledges that the
Seller may possibly have access to certain confidential
information of the Purchaser. Each Seller agrees that the
Seller will not disclose such confidential information to
any person or entity for any purpose or reason whatsoever
except as required by law, unless the confidential
information becomes known to the public generally through no
fault of the Seller. In the event of a breach or threatened
breach by either of the Sellers of this subparagraph,
32
the Purchaser shall be entitled to an injunction
restraining the Seller from disclosing, in whole or in
part, such confidential information. Nothing herein
shall be construed as prohibiting the Purchaser from
pursuing any other available remedy for such breach or
threatened breach, including the recovery damages.
18. TERMINATION.
a. MUTUAL CONSENT. This Agreement may be terminated by the
written consent of the parties.
b. BY THE PURCHASER. This Agreement may be terminated by
written notice of termination given by the Purchaser to each
Seller if a material default should be made by either Seller
in the observance of or in the due and timely performance by
either Seller of any of the agreements and covenants of the
Sellers herein contained, or if there shall have been a
material breach by either Seller of any of the warranties
and representations of the Sellers herein contained, or if
the conditions of this Agreement to be complied with or
performed by Sellers at or before Closing shall not have
been complied with or performed at the time required for
such compliance or performance and such noncompliance or
nonperformance shall not have been waived by the Purchaser.
c. BY THE SELLERS. This Agreement may be terminated by written
notice of termination given by the Sellers to the Purchaser
if a material default should be made by the Purchaser in the
observance of or in the due and timely performance by the
Purchaser of any of the agreements and covenants of the
Purchaser herein contained, or if there shall have been a
material breach by the Purchaser of any of the warranties
and representations of the Purchaser, of if the conditions
of this Agreement to be complied with or performed by the
Purchaser at or before Closing shall not have been complied
with or performed at the time required for such compliance
or performance and such noncompliance or nonperformance
shall not have been waived by the Sellers.
19. SECTION 338(h)(10) ELECTIONS.
a. Each Seller agrees to make elections under Section
338(h)(10) of the Internal Revenue Code and all comparable
elections under state and local tax law with respect to the
Company.
b. Purchaser and Sellers shall jointly file Form 8023-A with
the Internal
33
Revenue Service in accordance with Section 338 of the
Internal Revenue Code and the regulations thereunder no
later than the 15th day of the ninth month beginning
after the month that includes the Closing Date in
accordance with Internal Revenue Code Section 338(g) and
Treasury Regulation Section 1.338(h)(10)-1(d)(2).
c. Purchaser and Sellers shall allocate the Purchase Price to
the assets conveyed pursuant to this Agreement using a
reasonable asset valuation which will be agreed to by
Purchaser and Sellers no later than ninety (90) days after
the Closing Date. In all events, however, Purchaser and
Sellers agree to conformity of the treatment of all asset
allocations with respect to the Section 338(h)(10)
elections.
d. Purchaser agrees that it will not step-up the basis on any
fixed assets of the Company unless Purchaser and Sellers
otherwise agree.
20. MANAGEMENT AGREEMENT.
a. On the date of this Agreement, Purchaser and the Company
shall execute a management agreement (the "Management
Agreement") to be effective November 1, 1997, under which
the Purchaser will manage the Dealership and will receive a
management fee in accordance with the Management Agreement
in cash in an amount equal to the monthly net income arising
from the business and operation of the Dealership.
b. Prior to the commencement of the Management Agreement, the
Sellers agree to cause the Company to take all new cars and
trucks allocated to the Dealership, to floor plan all new
cars and trucks with Toyota Motor Credit Corporation, and
not to wholesale any new vehicles without the Purchaser's
prior written consent.
21. ADDITIONAL AGREEMENTS.
x. XXXXX'X RIGHT TO PURCHASE VEHICLES. Xxxxx shall have the
right to purchase five (5) new Toyota vehicles from any
Toyota franchised dealership owned by Purchaser over the
next five (5) years from the dealership's inventory at the
dealership's invoice cost plus $35, taxes, title, and
licensing on each vehicle. Up to three (3) of the vehicles
may be purchased during the first twelve (12) months after
the Closing Date.
34
b. PAYMENT OF OBLIGATIONS; COLLECTION OF RECEIVABLES.
Notwithstanding anything contained in this Agreement to the
contrary, prior to the Closing Date, Sellers shall assist
the Company in (i) paying all outstanding debts,
liabilities, and obligations of the Company, whether matured
or unmatured, that arose prior to November 1, 1997,
provided that the Company shall not be obligated to pay the
Floor Plan or the capital loan (the "Capital Loan") in the
original principal amount of $1,200,000 from Toyota Motor
Credit Corporation to the Company, and (ii) collecting all
receivables that arose prior to November 1, 1997.
c. NEW ACCOUNTS. Purchaser and Sellers agree that the payment
of all outstanding debts, liabilities and obligations of the
Company that arose prior to the November 1, 1997 and the
collection of all receivables that arose prior to November
1, 1997, shall be made through the Company's existing
operating accounts at Union Bank of California. The Company
shall open new operating accounts at Union Bank of
California for the transaction of the business of the
Company on and after November 1, 1997.
d. PURCHASE OF EXCESS USED CAR INVENTORY. On November 1, 1997,
Purchaser shall purchase (for cash and free of all liens,
claims, or other encumbrances) all of the Used Car Inventory
in excess of $1,200,000 (the "Excess") based on the value
determined in accordance with subparagraph 12(d)(ii). The
Excess shall be used by the Company and the Sellers to pay
all outstanding debts, liabilities, and obligations of the
Company. Notwithstanding anything contained in this
Agreement to the contrary, in the event this Agreement
expires or terminates, the Company shall repurchase (for
cash and free of all liens, claims and other encumbrances)
any of the used vehicles purchased by Purchaser that are
still owned by the Purchaser based on the value determined
in accordance with subparagraph 12(d)(ii).
e. MAINTENANCE OF RECORDS. Purchaser agrees that it will
maintain the books and records of the Company for the period
(i) required by law, or (ii) reasonably requested by the
Sellers, and will provide the Sellers with such information
from the books and records as the Sellers reasonably request
from time to time. In addition, the Purchaser agrees that
the accounting staff of the Dealership will assist the
Sellers in collecting the accounts receivable, collecting
payments on the notes receivable, and paying all outstanding
debts, liabilities, and obligations of the Company prior to
the Closing Date and thereafter as reasonably requested.
35
f. UNDISTRIBUTED 1997 PROFITS. Sellers and Purchaser agree
that Sellers shall be entitled to take their respective
portion of fifty percent (50%) of the Company's profits for
September and October, 1997. The remaining fifty percent
(50%) of such profits shall be retained by the Company.
g. RELEASE OF GUARANTEES. Purchaser agrees to use reasonable
efforts in order to obtain the release of Xxxxx and
Xxxxxxxxx from any personal guaranties they have made of any
debt or obligation of the Company, including (without
limitation) any guaranties of the Floor Plan, the Dealership
Sublease, the Used Car Lot Sublease, or the Capital Loan.
h. INVENTORY WRITEDOWN. It is understood and agreed that prior
to October 31, 1997, the Company shall write down the Parts
and Accessories Inventory by $58,000.
i. PROTEST OF TAXES. Sellers shall have the right to protest
through all administrative and legal channels, at Sellers'
sole cost and expense, any proposed adjustment that would
result in any additional tax liability for the Company for
any year for which the Sellers are liable.
j. TAXES ON LIFO RESERVE. The Purchaser agrees to pay all
income taxes payable for the recapture of the LIFO Reserve.
k. TAXES ON THE DEFERRED PROFIT. The Purchaser agrees to pay
all income taxes payable on the Deferred Profit that is
retained by the Company.
22. GENERAL PROVISIONS.
a. ENTIRE AGREEMENT. This Agreement contains and constitutes
the entire agreement between the parties regarding the
subject matter hereof and supersedes all prior agreements
and understandings between the parties relating to the
subject matter of this Agreement. There are no agreements,
understandings, restrictions, warranties or representations
between the parties relating to the subject matter hereof
other than those set forth in this Agreement. This
Agreement is not intended to have any legal effect
whatsoever, or to be a legally binding agreement, or any
evidence thereof, until it has been signed by each Seller,
the Company, and the Purchaser.
36
b. EXHIBITS. Preliminary drafts of all Schedules and Exhibits
A through E shall be prepared by the Sellers on or before
November 15, 1997 and delivered to Purchaser for Purchaser's
review. Preliminary drafts of Exhibits F and G shall be
prepared by Purchaser on or before November 15, 1997 and
delivered to Sellers for Sellers' review. Final Schedules
and Exhibits shall be prepared by the party that prepared
the preliminary drafts, initialed by the parties, and
attached to this Agreement on or before December 1, 1997.
When attached to this Agreement, the Schedules and Exhibits
shall be made a part of this Agreement by reference.
SCHEDULES:
Schedule 7(b) Officers, Directors, and Assumed Names
Schedule 7(f) Real Property
Schedule 7(g) Tangible Personal Property
Schedule 7(h) Inventories
Schedule 7(i) Licenses
Schedule 7(j) Intellectual Property
Schedule 7(k) Encumbrances
Schedule 7(l) Related Parties Transactions
Schedule 7(m) Indebtedness and Guaranties
Schedule 7(p) Litigation
Schedule 7(q) Underground Storage Tanks
Schedule 7(r) Contracts and Agreements
Schedule 7(s) Employee Benefit Plans
Schedule 7(t) Insurance
Schedule 7(u) Personnel
Schedule 7(v) Accounts Receivable
Schedule 7(y) Bank Accounts and Powers of Attorney
EXHIBITS:
Exhibit "A" $1,350,000 Note
Exhibit "B" $50,000 Note
Exhibit "C" Sellers' Escrow Agreement
Exhibit "D" Sellers' Certificate
Exhibit "E" Opinion of Sellers' Counsel
Exhibit "F" Investment Letter
Exhibit "G" Registration Rights Agreement
37
c. THIRD PARTY CONSENTS. The Sellers and the Purchaser
mutually agree to cooperate and use their respective
reasonable, good faith efforts to prepare all documentation,
to effect all filings and to obtain all permits, consents,
approvals, and authorizations of all third parties and
governmental entities as may be necessary to consummate the
transactions contemplated by this Agreement.
d. FURTHER ACTIONS. From time to time, as and when requested
by any parties hereto, the other parties shall execute and
deliver, or cause to be executed and delivered, all such
documents and instruments and shall take, or cause to be
taken, all such further or other actions as such other
parties may reasonably deem necessary or desirable to
consummate the transactions contemplated by this Agreement.
e. PUBLICITY. The parties hereto agree that no public release
or announcement concerning the terms of the transactions
contemplated by this Agreement shall be issued by any party
without the prior written consent of the other parties
(which consent shall not be unreasonably withheld), except
as such release or announcement may be required by law, in
which case the party required to make the release or
announcement shall allow the other parties reasonable time
to comment on such release or announcement in advance of
such issuance.
f. AMENDMENT. This Agreement may not be amended, modified, or
terminated except by an instrument in writing signed by all
parties to this Agreement.
g. CONSTRUCTION. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine or
neuter gender thereof or to the plurals of each, as the
identity of the person or persons or the context may
require. The descriptive headings contained in this
Agreement are for reference purposes only and are not
intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement or any provision
contained in this Agreement.
h. INVALIDITY. If any provision contained in this Agreement
shall for any reason be held to be invalid, illegal, void or
unenforceable in any respect, such provision shall be deemed
modified so as to constitute a provision conforming as
nearly as possible to such invalid, illegal, void or
unenforceable provision while still remaining valid and
enforceable; and the remaining terms or provisions contained
herein shall not be
38
affected thereby.
i. EXPENSES. Whether or not the transactions contemplated by
this Agreement are consummated, each of the parties to this
Agreement shall be responsible for its own costs and
expenses incurred in connection with the preparation and
negotiation of this Agreement and with the transactions
contemplated hereby.
j. BINDING EFFECT AND ASSIGNMENT. This Agreement shall be
binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, administrators,
executors, successors and permitted assigns. Purchaser may
assign its rights under this Agreement to an affiliated
entity, and thereafter the Purchaser and its assignee shall
be fully obligated, responsible and liable for the
performance of the Purchaser's obligations hereunder.
Neither Seller may assign any of his rights or delegate any
of his obligations hereunder. Any assignment in violation
of this Agreement shall be void.
k. ATTORNEYS' FEES. In the event any party instigates
litigation to enforce or protect its rights under this
Agreement, the party prevailing in any such litigation shall
be entitled, in addition to all other relief, to reasonable
attorneys' fees, out-of-pocket costs and disbursements
relating to such litigation.
l. NOTICES. All notices and other communications hereunder
shall be (i) in writing, dated with the current date of such
notice, and signed by the party giving such notice, and (ii)
mailed, postpaid, registered or certified, return receipt
requested, addressed to the party to be notified, or
delivered by personal delivery or by overnight courier.
Notice shall be deemed given when received by the party to
be notified or when the party to be notified refuses to
accept delivery of the notice. The initial addresses of the
parties shall be as follows:
IF TO PURCHASER:
Cross-Continent Auto Retailers, Inc.
0000 X. Xxxxxx
X.X. Xxx 000
Xxxxxxxx, Xxxxx 00000-0000
ATTENTION: XXXXXX X. XXXX
(000) 000-0000
39
IF TO SELLERS:
Xxxxxx X. Xxxxx.
0000 Xxxxxxx Xxxxx
X.X. Xxx 00000
Xxxxxx Xxxx, Xxxxxx 00000
(000) 000-0000
and
Xxxxxx X. Xxxxxxxxx
000 Xxxxxx Xxxx Xxx
Xx Xxxxx, Xxxxxxxxxx 00000
(000) 000-0000
with a copy to:
Xxxx Xxxxxxxx
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
The parties hereto shall have the right from time to time to
change their respective addresses by not less than ten (10)
days prior written notice to the other parties.
m. DEFINITION OF KNOWLEDGE. As used in this Agreement, a
Seller's or the Company's "knowledge" shall include the
knowledge of the Sellers and the employees and agents of the
Company. Each representation and warranty that is limited
to a Seller's or the Company's "knowledge" is made with the
understanding that the Seller or the Company has examined
whatever sources of information as are in the possession or
control of either Seller or the Company in order to verify
the truth and accuracy of such representation and warranty.
n. TIME IS OF THE ESSENCE. Time shall be of the essence with
respect to this Agreement and the consummation of the
transactions contemplated hereby.
o. REMEDIES. None of the remedies provided for in this
Agreement shall be the exclusive remedy of any party for a
breach of this Agreement. The parties hereto shall have the
right to seek any other remedy at law or
40
in equity in lieu of or in addition to any remedies provided
for in this Agreement.
p. SURVIVAL OF OBLIGATIONS. To the extent necessary to carry
out the terms and provisions of this Agreement, the
obligations and rights arising from or related to this
Agreement shall survive the Closing and shall not be merged
into the various documents executed and delivered at the
time of the Closing.
q. WAIVER. No waiver of any breach or default hereunder shall
be considered valid unless in writing and signed by the
party giving such waiver, and no such waiver shall be deemed
a waiver of any subsequent breach or default of the same or
similar nature.
r. GOVERNING LAW. This Agreement shall be construed, enforced,
and governed in accordance with the laws of the State of
California.
s. VENUE. The obligations of the parties to this Agreement are
performable, and venue for any legal action arising out of
this Agreement shall lie in San Diego County, California.
t. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute
one and the same instrument.
[SIGNATURE PAGE TO FOLLOW]
41
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PURCHASER: CROSS-CONTINENT AUTO RETAILERS, INC.,
a Delaware corporation
By:
----------------------------------------
Xxxxxx X. Xxxx, Vice Chairman
SELLERS:
-------------------------------------------
XXXXXX X. XXXXX
-------------------------------------------
XXXXXX X. XXXXXXXXX
COMPANY: TAR-CAR, INC., a California corporation,
d/b/a Toyota
By The Bay, Auto Central Used Car Sales
and Credit Union Buying Services
By:
----------------------------------------
Xxxxxx X. Xxxxx, President and Secretary
By:
----------------------------------------
Xxxxxx X. Xxxxxxxxx, Vice President
SPOUSAL CONSENT
I hereby (a) consent to the execution and performance of the Stock
Purchase Agreement by Xxxxxx X. Xxxxxxxxx, and (b) acknowledge that Xxxxxx X.
Xxxxxxxxx'x performance of his obligations under the Stock Purchase Agreement
will be binding upon my community interest, if any, in the Shares (as defined
in the Stock Purchase Agreement).
-------------------------------------
Xxxxx X. Xxxxxxxxx
42
