Exhibit 10.3
FINAL 2/4/98
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of this 4th day of February, 1998, by and among: SONIC AUTOMOTIVE, INC., a
Delaware corporation (the "Buyer"), XXXXXXXX JEEP EAGLE, INC., an Ohio
corporation d/b/a Volkswagen West, Jeep Eagle West, Xxxxxxxx KIA and Trader
Bud's Westside Chrysler Plymouth, XXXXXXXX LINCOLN MERCURY, INC., an Ohio
corporation d/b/a Xxxxxxxx Lincoln Mercury, TRADER BUD'S WESTSIDE DODGE, INC.,
an Ohio corporation d/b/a Trader Bud's Westside Dodge, TOYOTA WEST, INC., an
Ohio corporation d/b/a Toyota West, and XXXXXXXX HYUNDAI, INC., an Ohio
corporation d/b/a Xxxxxxxx Hyundai, Xxxxxxxx Isuzu and Xxxxxxxx Subaru
(collectively, the "Sellers" and each, individually, a "Seller"); and Xxx X.
Xxxxxxxx, Xxx X. Xxxxxxxx and Xxx X. Xxxxxxxx, as Trustee of the Xxx X.
Xxxxxxxx, Xx. Special Irrevocable Trust (collectively, the "Shareholders" and
each, individually, a "Shareholder").
W I T N E S S E T H:
In consideration of the mutual representations, warranties, covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
1.1 Agreement of Purchase and Sale. On the terms and subject to the
conditions of this Agreement, at the Closing (as defined in Article 2 hereof),
the Sellers shall sell, transfer, convey, assign and deliver (or cause to be
sold, transferred, conveyed, assigned and delivered) to the Buyer, and the Buyer
shall purchase and accept delivery of, all of the Sellers' right, title and
interest in and to all of the assets of the Sellers of every kind, character and
description, tangible or intangible, real, personal or mixed, and wherever
located, including, without limitation, the assets described on Schedule 1.1(a),
but excluding, however, the assets described on Schedule 1.1(b) (the "Excluded
Assets"); said assets, other than the Excluded Assets, are hereinafter called
the "Purchased Assets". The Purchased Assets will be sold free and clear of all
mortgages, deeds of trust, liens, pledges, charges, security interests,
contractual restrictions, claims or encumbrances of any kind or character
(collectively, "Encumbrances"), other than the Encumbrances set forth on
Schedule 1.1(c) (the "Permitted Encumbrances").
1.2 Assumed Liabilities; Inducement Fee.
(a) Assumed Liabilities. On the terms and subject to the conditions
of this Agreement and in reliance upon the representations and warranties
contained herein, at the Closing the Buyer shall assume and undertake to perform
all of the liabilities and obligations of the Sellers specifically described on
Schedule 1.2 (the "Assumed Liabilities"). Except for the Assumed Liabilities,
the Buyer shall not assume, and the Sellers shall retain and remain responsible
for, any and all liabilities and obligations of the Sellers of any nature
whatsoever, whether past, current or
future, whether accrued, contingent, known or unknown (such retained liabilities
and obligations being hereinafter called the "Retained Liabilities").
(b) Inducement Fee. As an inducement to the Buyer to negotiate and
enter into this Agreement and to undertake the further cost and expense of
conducting its due diligence investigation and preparing to satisfy its
obligations at the Closing, the Sellers hereby agree, jointly and severally, to
pay to Sonic Automotive, Inc., not later than April 30, 1998, the sum of
$500,000 (the "Inducement Fee"). The Inducement Fee will be an Assumed Liability
and will become an obligation of the Buyer or any other person (including any
holder of a right of first refusal, preemptive right or other similar right,
with respect to any of the Purchased Assets) who purchases the Purchased Assets,
or any portion thereof, based upon the terms of this Agreement. The Inducement
Fee will be reflected as a liability in the Closing Balance Sheet (as defined in
Section 1.3(c) below), but will not be taken into account in determining the Net
Current Assets (as defined in Section 1.3(a) below), notwithstanding the
provisions of said Section 1.3(c). The Inducement Fee will be canceled if this
Agreement is terminated for any reason other than the exercise of a right of
first refusal, preemptive right or other similar right, by an applicable
automobile manufacturer or distributor or any person claiming by, through or
under it.
1.3 Purchase Price; Allocation.
(a) Purchase Price. In addition to the assumption by the Buyer of
the Assumed Liabilities, as the full consideration to be paid by the Buyer for
the Purchased Assets, the Buyer shall pay to the Sellers the aggregate a
purchase price of $46,750,000, consisting of $8,000,000, subject to adjustment
as provided in Section 1.3(c) below, as the purchase price for the Sellers' Net
Current Assets (as hereinafter defined) and $38,750,000 as the purchase price
for all of the other Purchased Assets (collectively, the "Purchase Price"). As
used in this Agreement, the term "Net Current Assets" shall mean (i) all of the
Purchased Assets as of the close of business on the last day of the calendar
month immediately preceding the calendar month in which the Closing occurs (the
"Effective Closing Date") which would, in conformity with generally accepted
accounting principles applied in a manner consistent with those used in the
preparation of the Financial Statements referred to in Section 3.4 below
("GAAP"), be included under current assets on a balance sheet as at such date,
MINUS (ii) all of the Assumed Liabilities as of the close of business on the
Effective Closing Date which would, in conformity with GAAP, be included under
current liabilities on a balance sheet as at such date.
(b) Payment of Purchase Price. The Purchase Price shall be paid as
follows:
(1) (A) $32,725,000 of the Purchase Price plus (B) interest on
such amount from and including the first day of the calendar month in which the
Closing occurs to the date of payment at the Interest Rate (as defined in
Section 1.3(c) below) (the "Closing Payment") shall be payable to the Sellers at
Closing by wire transfer of immediately available funds to the account or
accounts of the Sellers, which shall be designated by Xxx Xxxxxxxx, as agent for
the Sellers (the "Sellers' Agent"), in writing at least one full Business Day
prior to the Closing Date, in the respective amounts specified in Part I of
Schedule 1.3(e). For purposes of this Agreement, a "Business Day" is a day other
than a Saturday, a Sunday or a day on which banks are required or authorized to
be closed in the State of North Carolina.
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(2) (A) At the Closing, the Buyer shall issue to the Sellers,
in the respective amounts specified in Part I of Schedule 1.3(d) hereto, 14,025
shares of the Buyer's Convertible Preferred Stock (the "Preferred Stock"). The
Preferred Stock will be convertible into shares of the Buyer's Class A Common
Stock having an aggregate market value at the time of conversion equal to
$14,025,000, as more specifically provided in the Summary of Rights and
Preferences attached as Exhibit A hereto. At the Closing, 11,525 shares of the
Preferred Stock (the "Closing Shares") will be delivered to the Sellers in the
respective amounts specified in Part I of Schedule 1.3(d) hereto and 2,500
shares of the Preferred Stock (the "Escrow Shares") shall be placed in escrow
with First Union National Bank (the "Escrow Agent") by the Buyer in accordance
with the escrow agreement in the form of Exhibit B hereto, with such other
changes thereto as the Escrow Agent shall reasonably request (the "Escrow
Agreement").
(B) The term of the Escrow Agreement shall be for (I)
ninety days (or such longer period of time (not to exceed an additional 60 days)
as shall be necessary to complete the determination of Net Current Assets
pursuant to Section 1.3(c) below) with respect to 500 of the Escrow Shares and
(II) one year with respect to 2,000 of the Escrow Shares. If, at the end of
ninety days from the Closing Date (or such later date (not to exceed an
additional 60 days) as shall be necessary to complete the determination of the
Net Current Assets), the Buyer shall have made no claims in respect of any Net
Current Assets Shortfall (as defined in Section 1.3(c) below) or for
indemnification pursuant to the terms of this Agreement, the Buyer will execute
a joint instruction pursuant to the Escrow Agreement to instruct the Escrow
Agent to pay 500 of the Escrow Shares to the Sellers pursuant to the terms of
the Escrow Agreement. If, at the end of one year from the Closing Date, the
Buyer shall have made no claims for indemnification pursuant to the terms of
this Agreement, the Buyer will execute a joint instruction pursuant to the
Escrow Agreement to instruct the Escrow Agent to pay 2,000 of the Escrow Shares
to the Sellers pursuant to the terms of the Escrow Agreement.
(C) The Buyer shall use its reasonable best efforts to
make available current public information with respect to the Buyer within the
meaning of Subsection (c)(1) of Securities and Exchange Commission Rule 144
("Rule 144") to the extent necessary to facilitate public resales by the Sellers
of the Buyer's Class A Common Stock issuable upon conversion of the Preferred
Stock, pursuant to Rule 144. The Buyer shall remove any and all stop transfer
instructions and shall remove any restrictive legend on the certificates with
respect to the Preferred Stock and any such Class A Common Stock then owned by
the Sellers to the extent that either (i) such Preferred Stock or Class A Common
stock may hereafter be registered under the Securities Act of 1933, as amended,
and under any applicable state securities or blue sky laws, or (ii) the Buyer
has received an opinion of counsel reasonably satisfactory to the Buyer, in form
and substance reasonably satisfactory to the Buyer, that such registration is
not required. Upon receipt of reasonable evidence that the requirements of Rule
144(k) have been complied with (including an opinion of counsel reasonably
satisfactory to the Buyer to such effect), the Buyer shall remove any and all
stop transfer instructions and shall remove any restrictive legend on such
certificates.
(c) Adjustment Procedures.
(1) Not later than 60 days after the Closing Date (as defined
in Article 2 hereof), the Buyer will prepare and deliver to the Sellers' Agent
an unaudited balance sheet (the "Closing Balance Sheet") of the Sellers as of
the Effective Closing Date, consisting of computations
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of (A) the Net Current Assets, and (B) the tangible book value as of the
Effective Closing Date of the Purchased Assets (excluding goodwill and other
intangible assets) less the book value as of the Effective Closing Date of the
Assumed Liabilities, all as determined in accordance with GAAP; provided,
however, that: new vehicle inventories shall be valued at factory invoice less
factory holdback, dealer rebates, and any other factory incentives; used vehicle
inventories shall include those vehicles of the respective Sellers chosen by the
Buyer on an "all or nothing" basis, meaning that, as to each Seller, the Buyer
shall be free to choose either all or none (but not some) of such Seller's used
vehicles, it being understood that the Buyer shall not be required, in any case,
to choose any used vehicles of the Seller which have been in such Seller's used
vehicle inventory for more than 60 days as of the Closing Date; no 1997 or older
vehicles (other than up to a total of 15 1997 new vehicles acceptable to the
Buyer) shall be included in new vehicle inventory; and there shall be included
appropriate reserves and/or write-offs for doubtful accounts receivable and bad
debts and for damaged, spoiled, obsolete, defective or slow-moving inventory. As
used herein, the term "slow moving" means (i) with respect to returnable parts,
returnable parts older than twelve months, (ii) with respect to new vehicles,
new vehicles older than 300 days, and (iii) with respect to other inventory
(excluding used vehicles), as may be reasonably determined by the Buyer, the
Sellers having a right to arbitrate disputes with respect to such other
inventory. If within 30 days following delivery of the Closing Balance Sheet (or
the next Business Day if such 30th day is not a Business Day), the Sellers'
Agent has not given the Buyer notice of the Sellers' objection to the
computations of the Net Current Assets as set forth in the Closing Balance Sheet
(such notice to contain a statement in reasonable detail of the nature of the
Sellers' objection), then the Net Current Assets reflected in the Closing
Balance Sheet will be deemed mutually agreed by the Buyer and the Sellers. If
the Sellers' Agent shall have given such notice of objection in a timely manner,
then the issues in dispute will be submitted to a "Big Six" accounting firm
mutually acceptable to the Buyer and the Sellers' Agent (the "Accountants") for
resolution. If issues in dispute are submitted to the Accountants for
resolution, (i) each party will furnish to the Accountants such workpapers and
other documents and information relating to the disputed issues as the
Accountants may request and are available to the party or its subsidiaries (or
its independent public accountants), and will be afforded the opportunity to
present to the Accountants any material relating to the determination and to
discuss the determination with the Accountants; (ii) the Accountants will be
instructed to determine the Net Current Assets based upon their resolution of
the issues in dispute; (iii) such determination by the Accountants of the Net
Current Assets, as set forth in a notice delivered to the parties by the
Accountants, will be binding and conclusive on the parties; and (iv) the Buyer
and the Sellers shall each bear 50% of the fees and expenses of the Accountants
for such determination.
(2) To the extent that the Net Current Assets, as deemed
mutually agreed by the parties or as determined by the Accountants, as
aforesaid, is less than $8,000,000 (the "Net Current Assets Shortfall"), the
Sellers shall be obligated, jointly and severally, to pay the amount of the Net
Current Assets Shortfall, together with interest on such amount at a rate equal
to the Buyer's floor plan financing rate from time to time in effect (the
"Interest Rate") from and including the first day of the calendar month in which
the Closing occurs to the date of payment, promptly to the Buyer. In furtherance
of (but not by way of limitation of) the Sellers' obligation in the immediately
preceding sentence, the Sellers' Agent and the Buyer shall execute and deliver
to the Escrow Agent a joint instruction to deliver up to 500 of the Escrow
Shares to the Buyer, with the balance of such 500 of the Escrow Shares to be
delivered to the Sellers so long as no claim by the Buyer for indemnification
shall then be pending pursuant to this Agreement. To the extent that the Net
Current Assets, as deemed mutually agreed by the parties or as determined by the
Accountants,
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as aforesaid, is at least equal to $8,000,000, the Buyer shall be obligated to
execute and deliver to the Escrow Agent a joint instruction to deliver 500 of
the Escrow Shares to the Sellers pursuant to the Escrow Agreement (except to the
extent of any pending claim by the Buyer for indemnification pursuant to this
Agreement). To the extent that the Net Current Assets, as deemed mutually agreed
by the parties or as determined by the Accountants, as aforesaid, is greater
than $8,000,000 (the "Net Current Assets Excess"), the Buyer shall be obligated
to pay the amount of the Net Current Assets Excess in cash promptly to the
Sellers, together with interest thereon at the Interest Rate from and including
the first day of the calendar month in which the Closing occurs to the date of
payment.
(d) Allocation. The allocation of the Purchase Price and the Assumed
Liabilities as among the respective Sellers and as among the Purchased Assets
shall be as set forth in Part II of Schedule 1.3(d).
1.4 Instruments of Conveyance and Transfer; Dealership Leases.
(a) Instruments of Conveyance and Transfer. At the Closing, each of
the Sellers shall deliver to the Buyer a Xxxx of Sale and Assignment,
substantially in the form of Exhibit C (the "Bills of Sale"), and such other
instruments of assignment, conveyance and transfer, as shall be necessary to
vest in the Buyer good title to the Purchased Assets in accordance herewith.
Simultaneously therewith, the Sellers shall take all steps as may be required to
transfer to the Buyer actual possession and exclusive operating control of the
Purchased Assets.
(b) Dealership Leases. At the Closing, certain of the Shareholders
or their affiliates will enter into leases with the Buyer or a permitted
assignee of the Buyer, as lessee, regarding the Leased Premises (as defined in
Section 3.8(a) below) owned by them (the "Dealership Leases"). The Dealership
Leases will each be for a term of ten years with two five-year renewal options
in the tenant, and will otherwise be substantially in the form of Exhibit D
hereto. For purposes of this Agreement, the term "affiliate" shall mean any
entity directly or indirectly controlling, controlled by or under common control
with the specified person, whether by stock ownership, agreement or otherwise,
or any parent, child or sibling of such specified person and the concept of
"control" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of such person or entity,
whether through the ownership of voting securities, by contract or otherwise.
(c) Non-Competition Agreement. At the Closing, the Sellers and the
Shareholders will enter into a non-competition agreement with the Buyer (the
"Non-Competition Agreement"). The Non-Competition Agreement shall be for a term
of three years, will cover the Standard Metropolitan Statistical Areas served by
the Sellers and by the Buyer and its affiliates as of the Closing, and will
otherwise be substantially in the form of Exhibit E hereto.
(d) Further Assurances. The Sellers further agree that, from and
after the Closing, they will execute and deliver to the Buyer such additional
instruments and documents and take such further action as the Buyer may
reasonably request in order to more fully vest, record and/or perfect the
Buyer's title to, or interest in, the Purchased Assets.
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(e) Shareholders' Covenant to Close. The Shareholders further
covenant and agree to take all necessary officer, director and stockholder,
partner or member actions to cause the Sellers to perform their obligations at
and prior to the Closing, as contemplated by this Agreement.
1.5 Offers of Employment to Sellers' Employees. On or before the Closing
Date, the Buyer may offer employment to such of the Sellers' employees as the
Buyer shall select, in its sole discretion, such employment to begin on or after
the date of the Closing and to be upon such terms and conditions as determined
by the Buyer in its sole discretion, but the parties hereto acknowledge and
agree that the Buyer has no obligation to employ any person.
ARTICLE 2
CLOSING
The sale and purchase of the Purchased Assets contemplated hereby shall
take place at a closing (the "Closing") at the offices of Kemp, Schaeffer, Xxxx
& Xxxxxxxx Co., L.P.A., 00 Xxxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxx 00000, at 10:00
a.m. local time on the fifth (5th) Business Day, or such shorter period as the
Buyer may choose, following the date the Buyer gives notice of the Closing to
the Sellers, but in no event later than March 17, 1998 (the "Closing Date
Deadline"); provided, however, if as of the Closing Date Deadline, the consents
or approvals of all applicable automobile manufacturers and distributors
contemplated in Section 7.10 shall not have been obtained and/or the audited
financial statements contemplated in Section 7.17 shall not have been completed,
the Buyer may, so long as it is using its reasonable best efforts to obtain such
consents or approvals and/or to complete such audited financial statements,
elect to extend the Closing Date Deadline for up to an additional 60 days. The
date on which the Closing actually occurs is hereinafter referred to as the
"Closing Date".
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLERS
The Sellers, jointly and severally, hereby represent and warrant to the
Buyer as follows:
3.1 Organization; Good Standing; Qualifications. Each of the Sellers is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio. Each of the Sellers is qualified as a foreign corporation
and is in good standing in the jurisdictions listed with respect to it on
Schedule 3.1, which jurisdictions are the only jurisdictions where the nature of
such Seller's business and its assets require such qualification.
3.2 Authority; Consent. Each of the Sellers has full corporate power and
authority to carry on its business as now conducted, to execute and deliver this
Agreement and the other agreements, documents and instruments contemplated
hereby, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. The execution and delivery by
each of the Sellers of this Agreement and the other agreements, documents and
instruments contemplated hereby, the consummation by each of the Sellers of the
transactions contemplated hereby and thereby and the performance by each of the
Sellers of its obligations hereunder and thereunder: (i) have been duly and
validly authorized by all necessary corporate
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action, including, without limitation, all necessary shareholder action; and
(ii) do not and will not, except as set forth on Schedule 3.2, (A) conflict with
or violate any of the provisions of the certificate of incorporation or by-laws,
each as amended, with respect to any of the Sellers, (B) violate any law,
ordinance, rule or regulation or any judgment, order, writ, injunction or decree
or similar command of any court, administrative or governmental agency or other
body applicable to any of the Sellers, the Purchased Assets or the Assumed
Liabilities, (C) violate or conflict with the terms of, or result in the
acceleration of, any indebtedness or obligation of any of the Sellers under, or
violate or conflict with or result in a breach of, or constitute a default
under, any material instrument, agreement or indenture or any mortgage, deed of
trust or similar contract to which any of the Sellers is a party or by which any
of the Sellers or any of the Purchased Assets or Assumed Liabilities are bound
or affected, (D) result in the creation or imposition of any Encumbrance upon
any of the Purchased Assets, or (E) require the consent, authorization or
approval of, or notice to, or filing or registration with, any governmental body
or authority, or any other third party.
3.3 Ownership; Investments.
(a) Ownership. All issued and outstanding shares of capital stock of
the Sellers are held of record and beneficially by the Shareholders, free and
clear of any Encumbrances. No Seller has any outstanding securities or other
instruments, agreements or arrangements of any character or nature whatsoever
under which such Seller is or may be obligated to issue any shares of its
capital stock.
(b) Investments. Except as set forth on Schedule 3.3, the Sellers do
not own, directly or indirectly, any shares of capital stock or other equity
ownership or proprietary or membership interest in any corporation, limited
liability company, partnership, association, trust, joint venture or other
entity, and they do not have any commitment to contribute to the capital of,
make loans to, or share in the losses of, any enterprise.
3.4 Financial Statements. The Sellers have delivered to the Buyer prior to
the date hereof: (a) unaudited balance sheets of the Sellers as of December 31,
1996 and December 31, 1997, together with related statements of income for the
years then ended (collectively, the "Annual Financial Statements"); and (b)
unaudited balance sheets of the Sellers as of January 31, 1998, together with
related statements of income for the one month period then ended (collectively,
the "Interim Financial Statements") (the Annual Financial Statements and the
Interim Financial Statements are hereinafter collectively referred to as the
"Financial Statements"). The Financial Statements (i) are in accordance with the
books and records of the Sellers, which books and records are true, correct and
complete, (ii) fully and fairly present the financial condition and results of
the operations of the Sellers as of and for the periods indicated, and (iii)
have been prepared in accordance with generally accepted accounting principles
consistently applied, except as set forth on Schedule 3.4.
3.5 Absence of Certain Changes. Since December 31, 1997 the Sellers have
operated their businesses in the ordinary course, consistent with past practices
and, except as set forth on Schedule 3.5, there has not been incurred, nor has
there occurred: (a) Any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Purchased Assets or the business of any of
the Sellers in excess of $100,000; (b) Any sale, transfer, pledge or other
disposition of any tangible or intangible assets of any of the Sellers (except
sales of vehicle and parts inventory in the
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ordinary course of business) having an aggregate book value of $100,000 or more;
(c) Any termination, amendment, cancellation or waiver of any Material Contract
(as defined in Section 3.6 hereof) or any termination, amendment, cancellation
or waiver of any rights or claims of any of the Sellers under any Material
Contract (except in each case in the ordinary course of business and consistent
with past practices); (d) Any change in the accounting methods, procedures or
practices followed by any of the Sellers or any change in depreciation or
amortization policies or rates theretofore adopted by the Sellers; (e) Any
material change in policies, operations or practices with respect to business
operations followed by any of the Sellers, including, without limitation, with
respect to selling methods, returns, discounts or other terms of sale, or with
respect to the policies, operations or practices of the Sellers concerning the
employees of the Sellers or the employee benefit plans of the Sellers; (f) Any
capital appropriation or expenditure or commitment therefor on behalf of the
Sellers in excess of $100,000 individually, or $200,000 in the aggregate; (g)
Any general uniform increase, other than in the ordinary course of business, in
the cash or other compensation of employees of any of the Sellers, or any
increase in excess of $50,000 in any such compensation payable to any individual
officer, director, consultant or agent thereof, or any loans or commitments
therefor made by any of the Sellers to any persons, including any officers,
directors, stockholders, employees, consultants or agents of the Sellers or any
of their affiliates; (h) Any account receivable in excess of $100,000 or note
receivable in excess of $100,000 owing to any of the Sellers which (i) has been
written off as uncollectible, in whole or in part, (ii) has had asserted against
it any claim, refusal or right of setoff, or (iii) the account or note debtor
has refused to, or threatened not to, pay for any reason, or such account or
note debtor has become insolvent or bankrupt; (i) any write-down or write-up of
the value of any inventory or equipment of the Sellers or any increase in
inventory levels in excess of historical levels for comparable periods; (j) Any
other change in the condition (financial or otherwise), business operations,
assets, earnings, business or prospects of any of the Sellers which has, or
could reasonably be expected to have, a material adverse effect on the Purchased
Assets or the business or operations of the Sellers; or (k) Any agreement,
whether in writing or otherwise, by any of the Sellers to take or do any of the
actions enumerated in this Section 3.5.
3.6 Material Contracts.
(a) List of Material Contracts. Set forth on Schedule 3.6(a) is a
list of all contracts, agreements, documents, instruments, guarantees, plans,
understandings or arrangements, written or oral, which require the payment of
$50,000 or more in any twelve-month period, or do not require payment but which
are otherwise material to the business of the Sellers, as currently conducted,
or to the Purchased Assets or the Assumed Liabilities (collectively, the
"Material Contracts"). True copies of all written Material Contracts and written
summaries of all oral Material Contracts described or required to be described
on Schedule 3.6(a) have been furnished to the Buyer.
(b) Performance, Defaults, Enforceability. The Sellers have in all
material respects performed all of their obligations required to be performed by
them to the date hereof, and are not in default or alleged to be in default in
any material respect, under any Material Contract, and there exists no event,
condition or occurrence which, after notice or lapse of time or both, would
constitute such a default. To the knowledge of the Sellers, no other party to
any Material Contract is in default in any respect of any of its obligations
thereunder. Each of the Material Contracts is valid and in full force and effect
and enforceable against the parties thereto in accordance with their respective
terms, and, except as set forth in Schedule 3.6(b), the transfer and assignment
to the
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Buyer of all of the Material Contracts, will not (i) require the consent of any
party thereto or (ii) constitute an event permitting termination thereof.
3.7 Title to Purchased Assets and Related Matters. The Sellers have good
and valid title to all of the Purchased Assets, free and clear of all
Encumbrances, except those described on Schedule 3.7. Except as set forth in
Schedule 3.7, the Purchased Assets (including, without limitation, the Material
Contracts) and the Leased Premises (as defined in Section 3.8 below) include all
properties and assets (real, personal and mixed, tangible and intangible, and
all leases, licenses and other agreements) utilized by the Sellers in carrying
on their business in the ordinary course. Except as set forth on Schedule 3.7,
the Purchased Assets (i) are in the exclusive possession and control of the
Sellers and no person or entity other than the Sellers are entitled to
possession of any portion of the Purchased Assets; and (ii) do not include any
contracts for future services, prepaid items or deferred charges the full value
or benefit of which will not be usable by or transferable to the Buyer, or any
goodwill, organizational expense or other similar intangible asset.
3.8 Real Property of the Sellers.
(a) Leased Premises. Schedule 3.8(a) contains a complete list and
description (including buildings and other structures thereon and the name of
the owner thereof) of all real property which is used by the Sellers in their
respective businesses and operations, indicating which parcels of such real
property are to be leased under the Dealership Leases to the Buyer and which
parcels are subject to existing leases which are to be assigned to the Buyer
(such existing leases being hereinafter called the "Existing Leases"). All such
real property on Schedule 3.8(a) is hereinafter collectively called either the
"Real Property" or the "Leased Premises". True, correct and complete copies of
all Existing Leases have been delivered to the Buyer.
(b) Easements, etc. The Real Property enjoys all easements and
rights of way over the property of others necessary for the operation of the
Sellers' businesses. No portion of the Real Property has been condemned or
otherwise taken by any public authority, and the Sellers have no knowledge of
any pending or threatened condemnation or taking thereof. None of the buildings
or improvements on the Real Property encroaches on any adjoining property or on
any easements or rights of way. The Sellers have no knowledge of any event or
condition which currently exists which would create a legal or other impediment
to the use of the Real Property as currently used, or would increase the
additional charges or other sums payable by the tenant under any of the
Dealership Leases or Existing Leases (including, without limitation, any pending
tax reassessment or other special assessment affecting the Real Property). The
buildings and improvements (including building systems) which comprise a part of
the Real Property are in good condition, maintenance and repair, ordinary wear
and tear excepted. There is no person or entity other than the Sellers in or
entitled to possession of the Real Property.
(c) Owned Real Property. None of the Sellers owns any real property.
3.9 Machinery, Equipment, Etc. Schedule 3.9 sets forth a list of all
material machinery, equipment, tools, motor vehicles, furniture and fixtures
owned by each of the Sellers and included in the Purchased Assets, including
which items are owned by the Sellers and which items are leased to the Sellers
(collectively, the "Equipment"). With respect to Equipment which is leased,
Schedule 3.9 also contains a list of all leases or other agreements, whether
written or oral, relating
9
thereto. The Equipment is in good operating condition, maintenance and repair in
accordance with industry standards taking into account the age thereof and
ordinary wear and tear excepted.
3.10 Inventories of the Sellers. All inventories of the Sellers included
in the Purchased Assets consist of items that, to the Sellers' knowledge, are of
a quality and quantity usable and salable in the normal course of their
businesses, are generally sufficient to do business in the ordinary course, and
the levels of inventories are consistent with the levels maintained by the
Sellers in the ordinary course consistent with past practices and the Sellers'
obligations under their agreements with all applicable vehicle manufacturers or
distributors. The values at which such inventories are carried are based on the
FIFO method and are stated in accordance with generally accepted accounting
principles consistently applied by the Sellers at the lower of historic cost or
market. An adequate reserve has been established for damaged, spoiled, obsolete,
defective or slow-moving goods and such reserve is consistent with both the
operation of the Sellers' businesses in the ordinary course and past practice.
3.11 Accounts Receivable of the Sellers. All accounts receivable of the
Sellers included in the Purchased Assets are collectible at the aggregate
recorded amounts thereof, subject to the reserve for doubtful accounts, in the
ordinary course of the Sellers' business, and are not subject to any known
offsets or counterclaims. An adequate reserve for doubtful accounts has been
established and such reserve is consistent with both the operations of the
Sellers' business in the ordinary course and its past practices.
3.12 Approvals, Permits and Authorizations. Set forth on Schedule 3.12 is
a list of all governmental licenses, permits, certificates of inspection, other
authorizations, filings and registrations which are necessary for the Sellers to
own the Purchased Assets and to operate their businesses as presently conducted
(collectively, the "Authorizations"). All Authorizations have been duly and
lawfully secured or made by the Sellers and are in full force and effect. There
is no proceeding pending or, to the Sellers' knowledge, threatened or probable
of assertion, to revoke or limit any Authorization. Except as indicated on
Schedule 3.12, all Authorizations may be lawfully transferred to the Buyer as
contemplated by this Agreement and, except as indicated on Schedule 3.12, none
of the transactions contemplated by this Agreement will terminate, violate or
limit the effectiveness, either by virtue of the terms thereof or because of the
non-assignability thereof, of any Authorization.
3.13 Compliance with Laws. The Sellers have conducted their operations and
businesses in compliance with, and all of the Purchased Assets and Leased
Premises comply with (i) all applicable laws, rules, regulations and codes
(including, without limitation, any laws, rules, regulations and codes relating
to anticompetitive practices, contracts, discrimination, employee benefits,
employment, health, safety, fire, building and zoning, but excluding
Environmental Laws which are the subject of Section 3.29 hereof) and (ii) all
applicable orders, rules, writs, judgments, injunctions, decrees and ordinances.
The Sellers have not received any notification of any asserted present or past
failure by them to comply with such laws, rules or regulations, or such orders,
rules, writs, judgments, injunctions, decrees or ordinances. Set forth on
Schedule 3.13 are all orders, writs, judgments, injunctions, decrees and other
awards of any court or any governmental instrumentality applicable to the
Purchased Assets or the Sellers or their businesses and operations. The Sellers
have delivered to the Buyer copies of all reports, if any, of the Sellers
required under the Federal Occupational Safety and Health Act of 1970, as
amended, and under all other applicable health and
10
safety laws and regulations. The deficiencies, if any, noted on such reports or
any deficiencies noted by inspection through the Closing Date have been
corrected by the Sellers.
3.14 Insurance.
(a) Schedule 3.14(a) of this Agreement sets forth a list of all
policies of liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and any other insurance and bonds maintained by, or on
behalf of, the Sellers on their properties, operations, inventories, assets,
businesses or personnel (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims in excess of $5,000 thereunder).
Each such insurance policy identified therein is and shall remain in full force
and effect on and as of the Closing Date and the Sellers are not in default with
respect to any provision contained in any such insurance policy and have not
failed to give any notice or present any claim under any such insurance policy
in a due and timely fashion. To the best of the Sellers' knowledge, the
insurance maintained by, or on behalf of, the Sellers is adequate in accordance
with the standards of business of comparable size in the industry in which the
Sellers operate. No notice of cancellation or termination has been received with
respect to any such policy. The Sellers have not, during the last three (3)
fiscal years, been denied or had revoked or rescinded any policy of insurance.
(b) Set forth on Schedule 3.14(b) is a summary of information
pertaining to property damage and personal injury claims in excess of $10,000
against any of the Sellers during the past three (3) years, all of which are
fully satisfied or are being defended by the insurance carrier and involve no
exposure to the Sellers.
3.15 Taxes. All federal, state and local tax returns and reports required
as of the date hereof to be filed by the Sellers for taxable periods ending
prior to the date hereof have been duly and timely filed by the Sellers with the
appropriate governmental agencies, and all such returns and reports are true,
correct and complete. All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise, payroll, withholding, employment,
estimated and other taxes of any nature, including interest, penalties and other
additions to such taxes ("Taxes"), payable by, or due from, the Sellers for all
periods arising on or prior to the Closing Date have been fully paid or
adequately reserved for by the Sellers or, with respect to Taxes required to be
accrued, the Sellers have properly accrued or will properly accrue such Taxes in
the ordinary course of business consistent with past practice of the Sellers.
Each of the Sellers has made a valid election to be treated as an "S
Corporation" for federal income tax purposes which election has been
continuously in effect since the first day of the first tax year of each Seller.
3.16 Litigation. Except as set forth in Schedule 3.16, there are no
actions, suits, claims, investigations or legal or administrative or arbitration
proceedings pending, or to the Sellers' knowledge, threatened or probable of
assertion, against any of the Sellers with respect to the Purchased Assets or
the Assumed Liabilities or the businesses of the Sellers. The Sellers know of no
basis for the institution of any such suit or proceeding. None of the Sellers is
now under any judgment, order, writ, injunction, decree, award or other similar
command of any court, administrative agency or other governmental authority
applicable to the businesses of the Sellers or any of the Purchased Assets or
Assumed Liabilities.
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3.17 Powers of Attorney. Except as set forth in Schedule 3.17, there are
no persons, firms, associates, corporations, business organizations or other
entities holding general or special powers of attorney from any of the Sellers.
3.18 Broker's and Finder's Fees. Except as disclosed to the Buyer, none of
the Sellers or the Shareholders has incurred any liability to any broker, finder
or agent or any other person or entity for any fees or commissions with respect
to the transactions contemplated by this Agreement, and the Sellers hereby,
jointly and severally, agree to assume all liability to any such broker, finder
or agent or any other person or entity claiming any such fee or commission.
3.19 Employee Relations. The Sellers employ a total of [INSERT NUMBER]
employees as of December 31, 1997. Except as set forth in Schedule 3.19: (a)
none of the Sellers is delinquent in the payment (i) to or on behalf of any past
or present employees of any cash or other compensation for all periods prior to
the date hereof or the date of the Closing, as the case may be, or (ii) of any
amount which is due and payable to any state or state fund pursuant to any
workers' compensation statute, rule or regulation or any amount which is due and
payable to any workers' compensation claimant; (b) there are no collective
bargaining agreements currently in effect between the Sellers and labor unions
or organizations representing any employees of the Sellers; (c) no collective
bargaining agreement is currently being negotiated by the Sellers; (d) there are
no union organizational drives in progress and there has been no formal or
informal request to any of the Sellers for collective bargaining or for an
employee election from any union or from the National Labor Relations Board; and
(e) no dispute exists between any of the Sellers and any of their sales
representatives or, to the knowledge of the Sellers, between any such sales
representatives with respect to territory, commissions, products or any other
terms of their representation.
3.20 Compensation. Schedule 3.20 contains a schedule of all employees
(including sales representatives) and consultants of the Sellers whose
individual cash compensation for the year ended December 31, 1997, is in excess
of $100,000, together with the amount of total compensation paid to each such
person for the twelve month period ended December 31, 1997 and the current
aggregate base salary or hourly rate (including any bonus or commission) for
each such person.
3.21 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc. Except
as set forth on Schedule 3.21, there are no patents, trademarks, trade names,
service marks, service names and registered copyrights which are material to the
Sellers' businesses, and there are no applications therefor or licenses thereof,
inventions, computer software, logos or slogans, which are owned or leased by
the Sellers or used in the conduct of the Sellers' business. The Sellers are not
individually or jointly a party to, nor pay a royalty to anyone under, any
license or similar agreement. There is no existing claim, or, to the knowledge
of the Sellers, any basis for any claim, against any of the Sellers that any of
their operations, activities or products infringe the patents, trademarks, trade
names, copyrights or other property rights of others or that any of the Sellers
is wrongfully or otherwise using the property rights of others. The Sellers are
the owners of the names set forth on Schedule 3.21 (the "Proprietary Names") in
the State of Ohio and, to the knowledge of the Sellers, no person uses, or has
the right to use, such name or any derivation thereof in connection with the
manufacture, sale, marketing or distribution of products or services commonly
associated with an automobile dealership.
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3.22 Accounts Payable; Other Indebtedness. All accounts payable of the
Sellers to third parties as of the date hereof arose in the ordinary course of
business and none are delinquent or past due. Schedule 3.22 hereto sets forth a
list of all indebtedness of the Sellers, other than accounts payable, as of the
close of business on the day preceding the date hereof, including, without
limitation, money borrowed, indebtedness of the Sellers owed to stockholders and
former stockholders, the deferred purchase price of assets, letters of credit
and capitalized leases, indicating, in each case, the name or names of the
lender, the date of maturity, the rate of interest, any prepayment penalties or
premiums, whether (and to what extent) such indebtedness is secured, and the
unpaid principal amount of such indebtedness as of such date.
3.23 No Undisclosed Liabilities. The Sellers do not have any material
liabilities or obligations of any nature, known or unknown, fixed or contingent,
matured or unmatured, other than those (a) reflected in the Financial
Statements, (b) incurred in the ordinary course of business since the date of
the Financial Statements and of the type and kind reflected in the Financial
Statements, or (c) disclosed specifically on Schedule 3.23.
3.24 Certain Transactions. Except as set forth in Schedule 3.24, there are
no contracts, agreements or other arrangements between the Sellers and any of
the Shareholders (including the Shareholders' affiliates), or the Sellers' or
Shareholders' (including the Shareholders' affiliates) directors, officers or
salaried employees, or the family members or affiliates of any of the above
(other than for services in the ordinary course as employees, officers and
directors).
3.25 Business Generally. The Sellers are not aware of the existence of any
conditions, including, without limitation, any actual or potential competitive
factors in the markets in which the Sellers participate, which have not been
disclosed to the Buyer and which could reasonably be expected to have a material
adverse effect on the businesses and operations of any of the Sellers, other
than business and economic conditions generally affecting the industry and
markets in which the Sellers participate.
3.26 Employee Benefits.
(a) The Sellers have listed on Schedule 3.26 and have delivered to
the Buyer true and complete copies of all Employee Plans (as defined below) and
related documents, established, maintained or contributed to by the Seller
(which shall include for this purpose and for the purpose of all of the
representations in this Section 3.26, the Shareholders and all employers,
whether or not incorporated, that are treated together with the Sellers as a
single employer within the meaning of Section 414 of the Internal Revenue Code
of 1986, as amended (the "Code")). The term "Employee Plan" shall include all
plans described in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and also shall include, without limitation, any
deferred compensation, stock, employee or retiree pension benefit, welfare
benefit or other similar fringe or employee benefit plan, program, policy,
contract or arrangement, written or oral, qualified or nonqualified, funded or
unfunded, foreign or domestic, covering employees or former employees of the
Sellers and maintained or contributed to by the Sellers.
(b) Where applicable, each Employee Plan (i) has been administered
in material compliance with the terms of such Employee Plan and the requirements
of ERISA and the Code; and (ii) is in material compliance with the reporting and
disclosure requirements of ERISA and the Code.
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The Sellers do not maintain or contribute to, and have never maintained or
contributed to, an Employee Plan subject to Title IV of ERISA or a
"multiemployer plan." There are no facts relating to any Employee Plan that (i)
have resulted in a "prohibited transaction" of a material nature or have
resulted or is reasonably likely to result in the imposition of a material
excise tax, penalty or liability pursuant to Section 4975 of the Code, (ii) have
resulted in a material breach of fiduciary duty or violation of Part 4 of Title
I of ERISA, or (iii) have resulted or could result in any material liability
(whether or not asserted as of the date hereof) of the Sellers or any ERISA
affiliate pursuant to Section 412 of the Code arising under or related to any
event, act or omission occurring on or prior to the date hereof. Each Employee
Plan that is intended to qualify under Section 401(a) or to be exempt under
Section 501(c)(g) of the Code is so qualified or exempt as of the date hereof in
each case as such Employee Plan has received favorable determination letters
from the Internal Revenue Service with respect thereto. To the knowledge of the
Sellers, the amendments to and operation of any Employee Plan subsequent to the
issuance of such determination letters do not adversely affect the qualified
status of any such Employee Plan. No Employee Plan has an "accumulated funding
deficiency" as of the date hereof, whether or not waived, and no waiver has been
applied for. The Sellers have made no promises or incurred any liability under
any Employee Plan or otherwise to provide health or other welfare benefits to
former employees of the Sellers, except as specifically required by law. There
are no pending or, to the best knowledge of the Sellers, threatened claims
(other than routine claims for benefit) or lawsuits with respect to any of
Sellers' Employee Plans. As used in this Section 3.26, all technical terms
enclosed in quotation marks shall have the meaning set forth in ERISA.
3.27 Sellers and Shareholders Not Foreign Persons. Neither the Sellers nor
any of the Shareholders is a "foreign person" as that term is defined in the
Code and the regulations promulgated pursuant thereto, and the Buyer has no
obligation under Section 1445 of the Code to withhold or pay over to the IRS any
part of the "amount realized" (as such term is defined in the regulations issued
under Section 1445 of the Code) by the Sellers and/or the Shareholders in the
transactions contemplated hereby.
3.28 Suppliers and Customers. The Sellers are not required to provide
bonding or any other security arrangements in connection with any transactions
with any of its respective customers or suppliers. To the knowledge of the
Sellers, no such supplier, customer or creditor intends or has threatened, or
reasonably could be expected, to terminate or modify any of their respective
relationships with the Sellers.
3.29 Environmental Matters.
(a) For purposes of this Section 3.29, the following terms shall
have the following meaning: (i) "Environmental Law" means all present and future
federal, state and local laws, statutes, regulations, rules, ordinances and
common law, and all judgments, decrees, orders, agreements, or permits, issued,
promulgated, approved or entered thereunder by any government authority relating
to pollution, Hazardous Materials, worker safety or protection of human health
or the environment. (ii) "Hazardous Materials" means any waste, pollutant,
chemical, hazardous material, hazardous substance, toxic substance, hazardous
waste, special waste, solid waste, petroleum or petroleum-derived substance or
waste (regardless of specific gravity), or any constituent or decomposition
product of any such pollutant, material, substance or waste, including,
14
but not limited to, any hazardous substance or constituent contained within any
waste and any other pollutant, material, substance or waste regulated under or
as defined by any Environmental Law.
(b) The Sellers have obtained all permits, licenses and other
authorizations or approvals required under Environmental Laws for the conduct
and operation of the Purchased Assets ("Environmental Permits"). All such
Environmental Permits are in good standing, the Sellers are and have been in
compliance with the terms and conditions of all such Environmental Permits, and
no appeal or any other action is pending or threatened to revoke any such
Environmental Permit.
(c) The Sellers and the Purchased Assets are and have been in
compliance with all Environmental Laws.
(d) Neither the Sellers nor the Shareholders have received any
written or oral order, notice, complaint, request for information, claim, demand
or other communication from any government authority or other person, whether
based in contract, tort, implied or express warranty, strict liability, or any
other common law theory, or any criminal or civil statute, arising from or with
respect to (i) the presence, release or threatened release of any Hazardous
Material or any other environmental condition on, in or under the Real Property
or any other property formerly owned, used or leased by any of the Sellers, (ii)
any other circumstances forming the basis of any actual or alleged violation by
the Sellers of any Environmental Law or any liability of any of the Sellers
under any Environmental Law, (iii) any remedial or removal action required to be
taken by any of the Sellers under any Environmental Law, or (iv) any harm,
injury or damage to real or personal property, natural resources, the
environment or any person alleged to have resulted from the foregoing, nor are
the Sellers aware of any facts which might reasonably give rise to such notice
or communication. None of the Sellers has entered into any agreements concerning
any removal or remediation of Hazardous Materials
(e) No lawsuits, claims, civil actions, criminal actions,
administrative proceedings, investigations or enforcement or other actions are
pending or threatened under any Environmental Law with respect to any of the
Sellers or the Real Property.
(f) None of the Sellers has released, discharged, spilled or
disposed of Hazardous Materials onto the Real Property and, to the knowledge of
the Sellers, no Hazardous Materials are or have been released, discharged,
spilled or disposed of by any other person onto, or have migrated onto, the Real
Property or any other property previously owned, operated or leased by any of
the Sellers, and, to the knowledge of the Sellers, no environmental condition
exists (including, without limitation, the presence, release, threatened release
or disposal of Hazardous Materials) related to the Real Property, to any
property previously owned, operated or leased by any of the Sellers, or to the
Sellers' past or present operations, which would constitute a violation of any
Environmental Law or otherwise give rise to costs, liabilities or obligations
under any Environmental Law.
(g) None of the Sellers nor, to the Sellers' knowledge, any of their
predecessors in interest has transported or disposed of, or arranged for the
transportation or disposal of, any Hazardous Materials to any location (i) which
is listed on the National Priorities List, the CERCLIS list under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or any similar federal, state or local list, (ii) which is the subject
of any federal, state or local enforcement action or other investigation, or
(iii) about which any of the Sellers or the
15
Shareholders have received or have reason to expect to receive a potentially
responsible party notice or other notice under any Environmental Law.
(h) To the knowledge of the Sellers, no environmental lien has
attached or is threatened to be attached to the Real Property.
(i) To the knowledge of the Sellers, no employee of any of the
Sellers in the course of his or her employment with the Sellers has been exposed
to any Hazardous Materials or other substance, generated, produced or used by
any of the Sellers which could give rise to any claim (whether or not such claim
has been asserted) against any of the Sellers.
(j) Except as set forth on Schedule 3.29(j), the Real Property does
not contain any: (i) septic tanks into which process wastewater or any Hazardous
Materials have been disposed; (ii) asbestos; (iii) polychlorinated biphenyls
(PCBs); (iv) underground injection or monitoring xxxxx; or (v) underground
storage tanks.
(k) None of the Sellers has agreed to assume, defend, undertake,
guarantee, or provide indemnification for, any liability, including, without
limitation, any obligation for corrective or remedial action, of any other
person under any Environmental Law for environmental matters or conditions.
(l) Except as set forth on Schedule 3.29(l), to the Sellers'
knowledge, there have been no environmental studies or reports made relating to
the Real Property or any other property or facility previously owned, operated
or leased by any of the Sellers.
3.30 Bank Accounts and Safe Deposit Boxes. Schedule 3.30 lists all bank
accounts, credit cards and safe deposit boxes in the name of, or controlled by,
any of the Sellers, and details about the persons having access to or authority
over such accounts, credit cards and safe deposit boxes.
3.31 Warranties. Set forth on Schedule 3.31 are descriptions or copies of
the forms of all express warranties and disclaimers of warranty made by any of
the Sellers (separate and distinct from any applicable manufacturers',
suppliers' or other third-parties' warranties or disclaimers of warranties)
during the past five (5) years to customers or users of the vehicles, parts,
products or services of any of the Sellers. There have been no breach of
warranty or breach of representation claims against any of the Sellers during
the past five (5) years which have resulted in any cost, expenditure or exposure
to any of the Sellers of more than $100,000 individually or in the aggregate.
3.32 Interest in Competitors and Related Entities. Except as set forth on
Schedule 3.32, no Shareholder and no affiliate of any Shareholder (i) has any
direct or indirect interest in any person or entity engaged or involved in any
business which is competitive with the business of the Sellers, (ii) has any
direct or indirect interest in any person or entity which is a lessor of assets
or properties to, material supplier of, or provider of services to, any of the
Sellers, or (iii) has a beneficial interest in any contract or agreement to
which any of the Sellers are a party; provided, however, the foregoing
representation and warranty shall not apply to any person or entity, or any
interest or agreement with any person or entity, which is a publicly held
corporation in which the Shareholders individually and collectively own less
than 3% of the issued and outstanding voting stock.
16
3.33 Availability of Sellers' Employees. There have been no actions taken
by the Sellers, their affiliates, or any of their respective shareholders,
officers, directors, members, partners, managers or employees, to discourage, or
in any way prevent, any of the employees of the Sellers from being hired by the
Buyer after Closing, and as of the Closing each of the Sellers' employees will
be available without penalty for employment by the Buyer.
3.34 Misstatements and Omissions. No representation or warranty made by
the Sellers in this Agreement, and no statement contained in any certificate or
Schedule furnished or to be furnished by the Sellers or any of the Shareholders
pursuant hereto, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
such representation or warranty or such statement not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Sellers as follows:
4.1 Organization and Good Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2 Authority; Consents; Enforceability.
(a) Authority. The Buyer has full corporate power and authority to
execute and deliver the Agreement and the other agreements and documents and
instruments contemplated hereby, to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder. The
execution and delivery by the Buyer of this Agreement and the other agreements,
documents and instruments contemplated hereby, the consummation by the Buyer of
the transactions contemplated hereby and thereby and the performance by the
Buyer of its obligations hereunder and thereunder: (i) have been duly and
validly authorized by all necessary corporate action on the part of the Buyer;
and (ii) do not and will not, except as set forth on Schedule 4.2(a), (A)
conflict with or violate any of the provisions of the Certificate of
Incorporation or By-laws of the Buyer, (B) violate any law, ordinance, rule or
regulation or any judgment, order, writ, injunction or decree or similar command
of any court administrative or governmental agency or other body applicable to
the Buyer or any of its assets, or (C) violate or conflict with the terms of, or
result in the acceleration of, any indebtedness or obligation of the Buyer
under, or violate or conflict with or result in a breach by the Buyer of, or
constitute a default under, any material instrument, agreement or indenture or
any mortgage, deed of trust or similar contract to which the Buyer is a party or
by which the Buyer or any of its assets may be otherwise bound or affected; or
(D) require the consent, authorization or approval of, or notice to, or filing
or registration with, any governmental body or authority, or any other third
party.
4.3 Broker's and Finder's Fees. The Buyer has not incurred any liability
to any broker, finder or agent or any other person or entity for any fees or
commissions with respect to the transactions contemplated by this Agreement, and
the Buyer hereby agrees to assume all liability to any such broker, finder or
agent or any other person or entity claiming any such fee or commission.
17
4.4 Litigation. There are no actions, suits, claims, investigations or
legal or administrative or arbitration proceedings pending or, to the Buyer's
knowledge, threatened or probable of assertion, against the Buyer before any
court, governmental or administrative agency or other body relating to this
Agreement and/or the transactions contemplated hereby. The Buyer is not now
under any judgment, order, writ, injunction, decree or other similar command of
any court, administrative agency or other governmental agency which relate to
this Agreement and/or the transactions contemplated hereby.
4.5 Financing. As of the date hereof and as of the Closing Date, the Buyer
has sufficient funds, or sources of financing available to it, to enable it to
perform its obligations at the Closing.
4.6 Misstatements or Omissions. No representation or warranty made by the
Buyer in this Agreement, and no statement contained in any certificate or
Schedule furnished or to be furnished by the Buyer to the Sellers and/or the
Shareholders pursuant hereto, contains or will contain an untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make such representation or warranty or such statement not misleading.
ARTICLE 5
PRE-CLOSING COVENANTS
OF THE SELLERS AND THE SHAREHOLDERS
The Sellers and the Shareholders hereby covenant and agree that from and
after the date hereof until the Closing:
5.1 Provide Access to Information; Cooperation with Buyer.
(a) Access. The Sellers shall afford to the Buyer, its attorneys,
accountants, and such other representatives of the Buyer as the Buyer shall
designate to the Sellers, free and full access at all reasonable times, and upon
reasonable prior notice, to the Purchased Assets and the properties, books and
records of the Sellers, and to interview personnel, suppliers and customers of
the Sellers, in order that the Buyer may have full opportunity to make such
investigation as it shall reasonably desire of the Purchased Assets, Assumed
Liabilities and the businesses and operations of the Sellers. In addition, the
Sellers shall provide to the Buyer and its representatives such additional
financial and operating data and other information in respect of the Purchased
Assets, Assumed Liabilities and the business and properties of the Sellers as
the Buyer shall from time to time reasonably request.
(b) Cooperation in Obtaining Consents. The Sellers and Shareholders
shall use reasonable best efforts in cooperating with the Buyer in the
preparation of and delivery to all applicable automobile manufacturers or
distributors, as soon as practicable after the date hereof, of an application
and other information necessary to obtain such automobile manufacturer's or
distributor's consent to or the approval of the transactions contemplated by
this Agreement as contemplated by Section 7.10.
5.2 Operation of Business of the Sellers. At all times before the Closing,
the Sellers shall (a) maintain their corporate existence in good standing, (b)
operate their businesses substantially as
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presently operated and only in the ordinary course and consistent with past
operations and their obligations under any existing agreements with all
applicable automobile manufacturers or distributors, (c) use their reasonable
best efforts to preserve intact their present business organizations and
employees and their relationships with persons having business dealings with
them, including, but not limited to, all applicable automobile manufacturers or
distributors and any floor plan financing creditors, (d) comply in all respects
with all applicable laws, rules and regulations, (e) maintain their insurance
coverages, (f) pay all Taxes, charges and assessments when due, subject to any
valid objection or contest of such amounts asserted in good faith and adequately
reserved against, (g) make all debt service payments when contractually due and
payable, (h) pay all accounts payable and other current liabilities when due,
(i) maintain the Employee Plans, (j) maintain the property, plant and equipment
included in the Purchased Assets in good operating condition in accordance with
industry standards taking into account the age thereof, (k) maintain their books
and records of account in the usual, regular and ordinary manner, and (l) use
their reasonable best efforts to encourage such personnel of the Sellers as the
Buyer may designate in writing to become employees of the Buyer after the date
of the Closing.
5.3 Certain Prohibitions. The Sellers shall not, without the prior written
consent of the Buyer (a) engage or take part in, or agree to engage or take part
in, any reorganization or similar transaction, (b) enter into any contract,
agreement, undertaking or commitment which would have been required to be set
forth in Schedule 3.6(a) if in effect on the date hereof or enter in to any
contract, agreement, undertaking or commitment which cannot be assigned to the
Buyer or a permitted assignee of the Buyer, (c) sell or otherwise dispose of any
of their respective assets, other than sales of inventory in the ordinary course
of business, (d) take, cause, agree to take or cause, or permit to occur any of
the actions or events set forth in Section 3.5 of this Agreement, or (e) declare
or make payment of any dividend or other distribution of cash or other property
in respect of any of their capital stock, or redeem, purchase or otherwise
acquire any such capital stock; provided, however, the Buyer's consent to the
payment of dividends by the Sellers will not be withheld so long as the Sellers
shall have demonstrated, to the reasonable satisfaction of the Buyer, that such
dividends (A) are only out of retained earnings for periods ending prior to
January 1, 1998, and (B) will not result in the Net Current Assets falling below
$8,000,000.
5.4 Additional Information. The Sellers shall furnish to the Buyer such
additional information with respect to any matters or events arising or
discovered subsequent to the date hereof which, if existing or known on the date
hereof, would have rendered any representation or warranty made by the Sellers
or any information contained in any Schedule hereto or in other information
supplied in connection herewith then inaccurate or incomplete. The receipt of
such additional information by the Buyer shall not operate as a waiver by the
Buyer of the obligation of the Sellers to satisfy the conditions to Closing set
forth in Section 7.1 hereof; provided, however, if such information shall be
furnished to the Buyer in a writing which shall also specifically refer to one
or more representations and warranties of the Sellers contained herein which in
the absence of such information is inaccurate or incomplete, then if the Buyer
waives in writing the condition to Closing set forth in said Section 7.1 hereof
and elects to close the transactions contemplated hereunder, the furnishing of
such additional information shall be deemed to have amended as of the Closing
any such representation and warranty so specifically referred to by the Sellers.
5.5 Publicity. Except as may be required by law or as necessary in
connection with the transactions contemplated hereby, the Sellers and the
Shareholders shall not (i) make any press
19
release or other public announcement relating to this Agreement or the
transactions contemplated hereby, without the prior written approval of the
Buyer and (ii) otherwise disclose the existence and nature of their discussions
or negotiations regarding the transactions contemplated hereby to any person or
entity other than their accountants, attorneys and similar professionals, all of
whom shall be subject to this nondisclosure obligation as agents of the Sellers
and the Shareholders, as the case may be. The Sellers and the Shareholders shall
cooperate with the Buyer in the preparation and dissemination of any public
announcements of the transactions contemplated by this Agreement.
5.6 Other Negotiations. Neither the Sellers nor any of the Shareholders
shall pursue, initiate, encourage or engage in any negotiations or discussions
with, or provide any information to, any person or entity (other than the Buyer
and its representatives and affiliates) regarding the sale of the assets,
capital stock or membership interests of any of the Sellers or any merger or
consolidation or similar transaction involving any of the Sellers.
5.7 Closing Conditions. The Sellers shall use all reasonable best efforts
to satisfy promptly the conditions to Closing set forth in Article 7 hereof
required herein to be satisfied by the Sellers.
5.8 Environmental Audit. The Sellers shall allow an environmental
consulting firm selected by the Buyer (the "Environmental Auditor") to have
prompt access to the Property in order to conduct an environmental
investigation, satisfactory to the Buyer in scope (such scope being sufficient
to result in a Phase I environmental audit report and a Phase II environmental
audit report, if desired by the Buyer), of, and to prepare a report with respect
to, the Property (the "Environmental Audit"). The Sellers shall provide to the
Environmental Auditor: (i) reasonable access to all of their existing records
concerning the matters which are the subject of the Environmental Audit; and
(ii) reasonable access to the employees of the Sellers and the last known
addresses of former employees of the Sellers who are most familiar with the
matters which are the subject of the Environmental Audit (the Sellers agreeing
to use reasonable efforts to have such former employees respond to any
reasonable requests or inquiries by the Environmental Auditor). The Sellers
shall otherwise cooperate with the Environmental Auditor in connection with the
Environmental Audit. The Buyer shall bear 100% of the costs, fees and expenses
in connection with any Phase I environmental audit report; if, based upon such
Phase I environmental audit report, a Phase II environmental report is
warranted, the Buyer, on the one hand, and the Sellers, on the other hand, shall
each bear 50% of the costs, fees and expenses in connection with the preparation
of such Phase II environmental audit report; provided however, the Sellers shall
have the right to require that a different environmental consulting firm,
selected by the Sellers and reasonably acceptable to the Buyer, be the
"Environmental Auditor" for such Phase II environmental audit report; and
provided further, that the maximum payment obligations of the Sellers with
respect to their share of the costs, fees and expenses of the Phase II
environmental audit shall be $10,000 per location.
5.9 Xxxx-Xxxxx-Xxxxxx Compliance. Subject to the determination by the
Buyer that any of the following actions is not required, the Sellers shall
promptly prepare and file Notification and Report Forms under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act")
with the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and respond as promptly as
practicable to all inquiries received from the FTC or the Antitrust Division for
additional information or documentation. The filing fees with respect to the
filing under the HSR Act shall be borne solely by the Buyer.
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5.10 Audit of Sellers at Buyer's Expense. The Sellers shall allow,
cooperate with and assist Buyer's accountants, and shall instruct the Seller's
accountants to cooperate, in the preparation of audited financial statements of
the Sellers as necessary for any required filings by the Buyer with the
Securities and Exchange Commission or with the Buyer's lenders; provided,
however, that the expense of such audit shall be borne by the Buyer.
ARTICLE 6
PRE-CLOSING COVENANTS OF THE BUYER
The Buyer hereby covenants and agrees that, from and after the date hereof
until the Closing:
6.1 Publicity; Disclosure. Except as may be required by law or by the
rules of the New York Stock Exchange, or as necessary in connection with the
transactions contemplated hereby, the Buyer shall not (i) make any press release
or other public announcement relating to this Agreement or the transactions
contemplated hereby, without the prior written approval of the Sellers' Agent,
or (ii) otherwise disclose the existence and nature of its discussions or
negotiations regarding the transactions contemplated hereby to any person or
entity other than its accountants, attorneys and similar professionals, all of
whom shall be subject to this nondisclosure obligation as agents of the Buyer.
The Buyer shall cooperate with the Sellers and the Shareholders in the
preparation and dissemination of any public announcements of the transactions
contemplated by this Agreement.
6.2 Closing Conditions. The Buyer shall use all reasonable best efforts to
satisfy promptly the conditions to Closing set forth in Article 8 hereof
required herein to be satisfied by the Buyer.
6.3 Application to Automobile Manufactures and Distributors. Subject to
the reasonable cooperation of the Sellers, the Buyer shall provide to all
applicable automobile manufacturers and distributors as promptly as possible
after the execution and delivery of this Agreement any application or other
information with respect to such application necessary in connection with the
seeking of the consents of such manufacturers and distributors contemplated by
Section 7.10.
6.4 Xxxx-Xxxxx-Xxxxxx Compliance. Subject to the determination by the
Buyer that any of the following actions is not required, the Buyer shall
promptly prepare and file Notification and Report Forms under the HSR Act with
the FTC and respond as promptly as practicable to all inquiries received from
the FTC or the Antitrust Division for additional information or documentation,
and Buyer shall pay all filing fees in connection therewith. In addition, the
Buyer shall pay the Sellers' reasonable out-of-pocket expenses in connection
with responding to any "second request" of the FTC, so long as the Buyer shall
not have terminated this Agreement pursuant to Section 11.1(c) below.
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ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement at the Closing and the
consummation by the Buyer of the transactions contemplated hereby are subject to
the satisfaction or fulfillment by the Sellers, prior to or at the Closing, of
each of the following conditions, unless waived in writing by the Buyer:
7.1 Representations and Warranties. The representations and warranties
made by the Sellers in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing
Date as though such representations and warranties were made at and as of such
times.
7.2 Performance of Obligations of the Sellers and the Shareholders. The
Sellers and the Shareholders shall have performed and complied with all their
covenants, agreements, obligations and restrictions pursuant to this Agreement
required to be performed or complied with prior to or at the Closing.
7.3 Closing Certificate. The Sellers shall have delivered a certificate,
signed by each of the Sellers' respective Presidents, and dated the Closing
Date, certifying to the satisfaction of the conditions set forth in Sections 7.1
and 7.2 hereof.
7.4 Opinion of Counsel. The Buyer shall have received an opinion of Kemp,
Schaeffer, Xxxx & Xxxxxxxx Co., L.P.A., counsel to the Sellers and the
Shareholders, dated the Closing Date, substantially in the form of Exhibit F
hereto.
7.5 Supporting Documents. The Buyer shall have received from the Sellers
the following:
(a) One or more certificates of the Secretary of State of the State
of Ohio dated as of a recent date as to the due incorporation or organization
and good standing of the Sellers;
(b) To the extent applicable, one or more certificates of officials
from the jurisdictions listed on Schedule 3.1 hereto as to the good standing of
the Sellers in such jurisdictions;
(c) A certificate of the Secretary or an Assistant Secretary of each
of the Sellers dated the Closing Date and certifying (i) that attached thereto
are true, complete and correct copies of the certificates of incorporation and
by-laws of the Sellers, each as amended to and as in effect on the date of such
certification, (ii) that attached thereto are true, complete and correct copies
of the resolutions duly adopted by the Boards of Directors and shareholders of
the Sellers, approving the transactions contemplated hereby and authorizing the
execution, delivery and performance by the Sellers of this Agreement and the
sale and transfer of the Purchased Assets, as in effect on the date of such
certification, and (iii) as to the incumbency and signatures of those officers
of the Sellers executing any instrument or other document delivered in
connection with such transactions;
(d) Uniform Commercial Code Search Reports on Form UCC-11 with
respect to each of the Sellers from the states and local jurisdictions where the
principal places of business of the Sellers and the Purchased Assets are
located; and
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(e) Such reasonable additional supporting documents and other
information as the Buyer or its counsel may reasonably request.
7.6 Bills of Sale, Etc. The Buyer shall have received from the respective
Sellers duly executed Bills of Sale and all necessary deeds, assignments,
documents and instruments to effect the transfers, conveyances and assignments
to the Buyer referred to in Article 1 hereof, and the Sellers shall have taken
such action as shall be necessary to put the Buyer in actual possession and
exclusive control of each of the Purchased Assets (including, without
limitation, the delivery of keys).
7.7 Dealership Leases, Non-Competition Agreement, and Escrow Agreement.
The Buyer shall have received the Dealership Leases, the Non-Competition
Agreement and the Escrow Agreement, duly executed by the parties thereto other
than the Buyer.
7.8 Books and Records. The Buyer shall have received all books and records
of, or pertaining to, the businesses of the Sellers and the Purchased Assets and
Assumed Liabilities, except to the extent included in the Excluded Assets.
7.9 Change of Name of Sellers; Use of Sellers' Name by Buyer. The Sellers
shall have delivered to the Buyer all documents, including, without limitation,
resolutions of the respective Boards of Directors and the shareholders of each
of the Sellers, necessary to effect a change of names of each of the Sellers
after the Closing to names other than the Proprietary Names or any variation
thereof, which names shall be sufficiently different from the name of the Buyer
and the Proprietary Names as to distinguish them upon the records in the office
of the Secretary of State of Ohio from such names. The Sellers shall also have
delivered to the Buyer a written consent to the use by the Buyer or any parent,
subsidiary or affiliate of the Buyer, or any successor or assignee of any
thereof, of the Proprietary Names or any variant thereof and an agreement
satisfactory to the Buyer that the Sellers will not use the Proprietary Names or
any variant thereof, except as may be necessary for the winding up of the
affairs of the Sellers.
7.10 Consents. The Buyer shall have received duly executed copies of all
consents, authorizations, approvals, notices, registrations and filings referred
to in Schedules 3.2 and 3.6(b), which are required for the Sellers to consummate
the transactions contemplated hereby, and including, but not limited to, the
consents of all applicable automobile manufacturers and distributors.
7.11 No Litigation. No action, suit or other proceeding shall be pending
or threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain damages in respect thereof,
or involving a claim that consummation thereof would result in a violation of
any law, rule, decree or regulation of any governmental authority having
appropriate jurisdiction, and no order, decree or ruling of any governmental
authority or court shall have been entered challenging the legality, validity or
propriety of this Agreement or the transactions contemplated hereby or
prohibiting, restraining or otherwise preventing the consummation of the
transactions contemplated hereby.
23
7.12 Authorizations. The Buyer shall have received evidence of the
transfer to the Buyer of all Authorizations referred to in Section 3.12 of this
Agreement or, to the extent the Authorizations are not transferrable, the
Sellers shall have effectively obtained or made on behalf of the Buyer, or
assisted the Buyer in obtaining or making, all such Authorizations.
7.13 No Material Adverse Change or Undisclosed Liability. There shall have
been no material adverse change or development in the business, prospects,
properties, earnings, results of operations or financial condition of any of the
Sellers or any of the Purchased Assets or Assumed Liabilities.
7.14 Approval of Legal Matters. The form of all instruments, certificates
and documents to be executed and delivered by the Sellers to the Buyer pursuant
to this Agreement and all legal matters in respect of the transactions as herein
contemplated shall be reasonably satisfactory to the Buyer and its counsel, none
of whose approval shall be unreasonably withheld or delayed.
7.15 Adverse Laws. No statute, rule, regulation or order shall have been
adopted or promulgated which materially adversely affects the Purchased Assets,
the Assumed Liabilities or the businesses of the Sellers.
7.16 Xxxx-Xxxxx-Xxxxxx Waiting Period. All applicable waiting periods
under the HSR Act shall have expired without any indication by the Antitrust
Division or the FTC that either of them intends to challenge the transactions
contemplated hereby or, if any such challenge or investigation is made or
commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
7.17 Audited Financial Statements. The Buyer shall have completed
preparation of such audited financial statements of the Sellers as may be
required by applicable regulations of the Securities and Exchange Commission.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SELLERS
The obligations of the Sellers under this Agreement at the Closing and the
consummation by the Sellers of the transactions contemplated hereby are subject
to the satisfaction or fulfillment by the Buyer, prior to or at the Closing, of
each of the following conditions, unless waived in writing by the Sellers:
8.1 Representations and Warranties. The representations and warranties
made by the Buyer in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing
Date as though such representations and warranties were made at and as of such
times.
8.2 Performance of Obligations of the Buyer. The Buyer shall have
performed and complied with all its covenants, agreements, obligations and
restrictions pursuant to this Agreement required to be performed or complied
with prior to or at the Closing.
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8.3 Closing Certificate. The Buyer shall have delivered a certificate,
signed by the Buyer's President or a Vice President and dated the Closing Date,
certifying to the satisfaction of the conditions set forth in Sections 8.1 and
8.2 hereto.
8.4 Payment of Purchase Price. The Buyer shall have (a) tendered to the
Sellers the Closing Payment and the Closing Shares, and (b) placed into escrow
the Escrow Shares, as contemplated by Section 1.3(b) above.
8.5 Opinion of Counsel. The Sellers shall have received an opinion of
Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P., counsel to the Buyer, dated the Closing
Date, substantially in the form of Exhibit G hereto.
8.6 Supporting Documents. The Sellers shall have received the following:
(a) A certificate of the Secretary of State of the State of Delaware
dated as of a recent date as to the due incorporation and good standing of the
Buyer;
(b) A certificate of the Secretary or an Assistant Secretary of the
Buyer dated the Closing Date, and certifying (i) that attached thereto is a
true, complete and correct copy of the certificate of incorporation and by-laws
of the Buyer, as amended and as in effect on the date of such certification,
(ii) that attached thereto are true, complete and correct copies of the
resolutions duly adopted by the Board of Directors of the Buyer approving the
transactions contemplated hereby and authorizing the execution, delivery and
performance by the Buyer of this Agreement, as in effect on the date of such
certification, and (iii) as to the incumbency and signatures of certain officers
of the Buyer executing any instrument or other document delivered in connection
with such transactions; and
(c) Copies of all authorizations, consents, approvals, notices,
filings and registrations referred to in Section 4.2(a) hereof.
8.7 Approval of Legal Matters. The form of all certificates, instruments
and documents to be executed and/or delivered by the Buyer to the Sellers
pursuant to this Agreement and all legal matters in respect of the transactions
as herein contemplated shall be reasonably satisfactory to the Sellers and its
counsel, none of whose approval shall be unreasonably withheld or delayed.
8.8 Dealership Leases and Escrow Agreement. The Sellers' Agent shall have
received the Dealership Leases, duly executed by the Buyer or a permitted
assignee of the Buyer, and the Escrow Agreement, duly executed by the parties
thereto other than the Sellers.
8.9 No Litigation. No action, suit or other proceeding shall be pending or
threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain damages in respect thereof,
or involving a claim that consummation thereof would result in a violation of
any law, rule, decree or regulation of any governmental authority having
appropriate jurisdiction, and no order, decree or ruling of any governmental
authority or court shall have been entered challenging the legality, validity or
propriety of this Agreement or the transactions contemplated
25
hereby or prohibiting, restraining or otherwise preventing the consummation of
the transactions contemplated hereby.
8.10 Xxxx-Xxxxx-Xxxxxx Waiting Period. All applicable waiting periods
under the HSR Act shall have expired without any indication by the Antitrust
Division or the FTC that either of them intends to challenge the transactions
contemplated hereby, or, if any such challenge or investigation is made or
commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
ARTICLE 9
TRANSFER TAXES; PRORATION OF CHARGES
9.1 Certain Taxes and Fees. All sales, transfer, documentary, stamp,
recording and other similar taxes and/or fees and Taxes which may be due or
payable in connection with the sale of the Purchased Assets pursuant hereto
shall be borne by the Sellers.
9.2 Proration of Certain Charges. The following taxes, charges and
payments ("Charges") shall, to the extent not reflected in the Closing Balance
Sheet, be prorated on a per diem basis and apportioned between the Sellers and
the Buyer as of the date of the Closing: personal property, use, intangible
taxes, utility charges, rental or lease charges, license fees, general
assessments imposed with respect to the Purchased Assets, employee payrolls and
insurance premiums. The Sellers shall be liable for that portion of the Charges
relating to, or arising in respect of, periods on or prior to the Closing Date
and the Buyer shall be liable for that portion of the Charges relating to, or
arising in respect of, any period after the Closing Date.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
10.1 Survival of Representations and Warranties. All statements contained
in any schedule or certificate delivered hereunder or in connection herewith by
or on behalf of any of the parties pursuant to this Agreement shall be deemed
representations and warranties by the respective parties hereunder unless
otherwise expressly provided herein. The representations and warranties of the
Sellers and the Buyer contained in this Agreement, including those contained in
any Schedule or certificate delivered hereunder or in connection herewith, shall
survive the Closing for a period of three years with the exception of the
representations and warranties of the Sellers contained in Sections 3.7, 3.15,
3.23 and 3.29, which shall survive the Closing until the expiration of the
applicable statutes of limitation. As to each representation and warranty of the
parties hereto, the date to which such representation and warranty shall survive
is hereinafter referred to as the "Survival Date."
10.2 Agreement to Indemnify by the Sellers and Shareholders. Subject to
the terms and conditions of Sections 10.4 and 10.5 hereof, each of the Sellers
and the Shareholders hereby agrees, jointly and severally, to indemnify and save
the Buyer, its affiliates, and their respective shareholders, officers,
directors, employees, successors and assigns (each, a "Buyer Indemnitee")
26
harmless from and against, for and in respect of, any and all demands,
judgments, injuries, penalties, fines, damages, losses, obligations,
liabilities, claims, actions or causes of action, encumbrances, costs, expenses
(including, without limitation, reasonable attorneys' fees, consultants' fees
and expert witness fees), suffered, sustained, incurred or required to be paid
by any Buyer Indemnitee (collectively, "Buyer's Damages") arising out of, based
upon, in connection with or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Sellers contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in connection
herewith; provided, however, the Sellers and the Shareholders shall have no
obligation to pay Buyer's Damages pursuant to this Subsection 10.2(a) unless and
until (and only to the extent that) all claims in respect of Buyer's Damages
exceed a cumulative aggregate total of $100,000 (the parties hereby acknowledge
that the above stated figure of $100,000 was established to facilitate the
administration of claims for indemnification by the Buyer; accordingly, such
figure is not intended by any of the parties as, and shall not be construed or
interpreted as, an expression or understanding of the parties in respect of the
term "material" or the concept of materiality as used in this Agreement);
(b) the breach or nonfulfillment of any covenant or agreement of any
of the Sellers or the Shareholders contained in this Agreement or in any other
agreement document or instrument delivered hereunder or pursuant hereto;
(c) the assertion against any Buyer Indemnitee or any of the
Purchased Assets of any liability or obligation arising out of or based upon the
ownership or operation, prior to the Closing, of the Purchased Assets and the
Leased Premises including, without limitation, any of the Retained Liabilities,
but excluding, however, any of the Assumed Liabilities; or
(d) all claims of creditors asserted by reason of the parties'
non-compliance with any applicable bulk sales laws.
With respect to the Sellers' and the Shareholders' obligations to pay
Buyer's Damages pursuant to Section 10.2 of this Agreement: (1) the Buyer, on
behalf of any Buyer Indemnitee, shall be entitled (but shall not be obligated)
to make demand for payment under the Escrow Agreement; and (2) the aggregate
amount of Buyer's Damages required to be paid by the Sellers and the
Shareholders hereunder shall not exceed the Purchase Price. To the extent that
the Buyer shall make a demand for payment of Buyer's Damages under the Escrow
Agreement, the number of Escrow Shares payable to the Buyer shall be that number
shares of Preferred Stock which, if converted on the date of payment, would be
convertible into that number of shares of the Buyer's Class A Common Stock
having an aggregate market value (based upon the average closing price per share
of the Buyer's Class A Common Stock on the New York Stock Exchange for the
twenty consecutive trading days immediately preceding the date of conversion)
equal to the amount of Buyer's Damages so demanded by the Buyer.
10.3 Agreement to Indemnify by the Buyer. Subject to the terms and
conditions of Sections 10.4 and 10.5 hereof, the Buyer hereby agrees to
indemnify and save the Sellers and the Shareholders (each, a "Seller
Indemnitee") harmless from and against, for and in respect of, any and all
demands, judgments, injuries, penalties, damages, losses, obligations,
liabilities, claims, actions or causes of action, encumbrances, costs and
expenses (including, without limitation, reasonable
27
attorneys' fees and expert witness fees) suffered, sustained, incurred or
required to be paid by any Seller Indemnitee arising out of, based upon, in
connection with or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Buyer contained in or made pursuant to this Agreement, including
in any Schedule or certificate delivered hereunder or in connection herewith;
(b) the breach or nonfulfillment of any covenant or agreement of the
Buyer contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto;
(c) the assertion against any Seller Indemnitee of any of the
Assumed liabilities; or
(d) the assertion against any Seller Indemnitee of any claims,
liabilities, or obligations arising from the Buyer's operation of the Purchased
Assets and the Leased Premises after the Closing Date, except to the extent that
such claims, liabilities or obligations arise out of or are based upon the
Retained Liabilities.
10.4 Claims for Indemnification. No claim for indemnification with respect
to a breach of a representation and warranty shall be made under this Agreement
after the applicable Survival Date unless prior to such Survival Date the Buyer
Indemnitee or the Seller Indemnitee, as the case may be, shall have given the
Sellers or the Buyer, as the case may be, written notice of such claim for
indemnification based upon actual loss sustained, or potential loss anticipated,
as a result of the existence of any claim, demand, suit or cause of action
against such Buyer Indemnitee or Seller Indemnitee, as the case may be.
10.5 Procedures Regarding Third Party Claims. The procedures to be
followed by the Buyer and the Sellers and the Shareholders with respect to
indemnification hereunder regarding claims by third persons shall be as follows:
(a) Promptly after receipt by any Buyer Indemnitee or Seller
Indemnitee, as the case may be, of notice of the commencement of any action or
proceeding (including, without limitation, any notice relating to a tax audit)
or the assertion of any claim by a third person, which the person receiving such
notice has reason to believe may result in a claim by it for indemnity pursuant
to this Agreement, such person (the "Indemnified Party") shall give notice of
such action, proceeding or claim to the party against whom indemnification
pursuant hereto is sought (the "Indemnifying Party"), setting forth in
reasonable detail the nature of such action or claim, including copies of any
written correspondence from such third person to such Indemnified Party.
(b) The Indemnifying Party shall be entitled, at its own expense, to
participate in the defense of such action, proceeding or claim, and, if (i) the
action, proceeding or claim involved seeks (and continues to seek) solely
monetary damages, (ii) the Indemnifying Party confirms, in writing, its
obligation hereunder to indemnify and hold harmless the Indemnified Party with
respect to such damages in their entirety pursuant to Sections 10.2 or 10.3
hereof, as the case may be, and (iii) the Indemnifying Party shall have made
provision which, in the reasonable judgment of the Indemnified Party, is
adequate to satisfy any adverse judgment as a result of its indemnification
obligation with respect to such action, proceeding or claim, then the
Indemnifying Party shall be
28
entitled to assume and control such defense with counsel chosen by the
Indemnifying Party and approved by the Indemnified Party, which approval shall
not be unreasonably withheld or delayed. The Indemnified Party shall be entitled
to participate therein after such assumption, the costs of such participation
following such assumption to be at its own expense. Upon assuming such defense,
the Indemnifying Party shall have full rights to enter into any monetary
compromise or settlement which is dispositive of the matters involved; provided
that such settlement is paid in full by the Indemnifying Party and will not have
any direct or indirect continuing material adverse effect upon the Indemnified
Party.
(c) With respect to any action, proceeding or claim as to which (i)
the Indemnifying Party does not have the right to assume the defense or (ii) the
Indemnifying Party shall not have exercised its right to assume the defense, the
Indemnified Party shall assume and control the defense of and contest such
action, proceeding or claim with counsel chosen by it and approved by the
Indemnifying Party, which approval shall not be unreasonably withheld. The
Indemnifying Party shall be entitled to participate in the defense of such
action, the cost of such participation to be at its own expense. The
Indemnifying Party shall be obligated to pay the reasonable attorneys' fees and
expenses of the Indemnified Party to the extent that such fees and expenses
relate to claims as to which indemnification is due under Sections 10.2 or 10.3
hereof, as the case may be. The Indemnified Party shall have full rights to
dispose of such action and enter into any monetary compromise or settlement;
provided, however, in the event that the Indemnified Party shall settle or
compromise any claims involved in the action insofar as they relate to, or arise
out of, the same facts as gave rise to any claim for which indemnification is
due under Sections 10.2 or 10.3 hereof, as the case may be, it shall act
reasonably and in good faith in doing so.
(d) Both the Indemnifying Party and the Indemnified Party shall
cooperate fully with one another in connection with the defense, compromise or
settlement of any such claim, proceeding or action, including, without
limitation, by making available to the other party all pertinent information and
witnesses within its control.
10.6 Effectiveness. The provisions of this Article 10 shall be effective
upon consummation of the Closing, and prior to the Closing, shall have no force
and effect.
ARTICLE 11
TERMINATION
11.1 Termination. Notwithstanding any other provision herein contained to
the contrary, this Agreement may be terminated at any time prior to the Closing
Date:
(a) By written consent of the parties hereto;
(b) At any time after the Closing Date Deadline, by written notice
by the Buyer or the Sellers to the other party(ies) hereto if the Closing shall
not have been completed on or before the Closing Date Deadline; provided,
however, no party may terminate this Agreement pursuant to this Section 11.1(b)
if such party is in breach of any material representation, warranty or covenant
of such party contained in this Agreement;
29
(c) By the Buyer if, after any initial HSR Act filing, the FTC makes
a "second request" for information, or the FTC or the Antitrust Division
challenges the transactions contemplated hereby; provided that the Buyer
delivers a written notice to the Sellers of its termination hereunder within 15
days of the Buyer's receipt of such second request or of notice of such
challenge;
(d) By the Buyer, by written notice to the Sellers, in the event
that approval by any applicable automobile manufacturer or distributor of the
transaction contemplated by this Agreement is not received at least 10 Business
Day prior to the Closing Date Deadline;
(e) By the Buyer, by written notice to the Seller, in the event that
any automobile manufacturer or distributor shall exercise any right of first
refusal, preemptive right or other similar right, with respect to any of the
Purchased Assets; or
(f) By the Buyer within 60 days of ________________, 1998 if, and
only if, the Buyer is not satisfied, in its discretion, with the results of the
Buyer's due diligence investigation.
11.2 Procedure and Effect of Termination. In the event of termination
pursuant to Section 11.1, this Agreement shall be of no further force or effect;
provided, however, that any termination pursuant to Section 11.1 shall not
relieve any party hereto of any liability for breach of any representation and
warranty, covenant or agreement hereunder occurring prior to such termination.
In the event of any termination pursuant to Section 11.1, all filings,
applications and other submissions made pursuant to this Agreement or prior to
the execution of this Agreement in contemplation thereof shall, to the extent
practicable, be withdrawn from the agency or other entity to which made.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Access to Books and Records after Closing. The Buyer shall, following
the Closing, give, and shall cause to be given, to the Sellers and its
authorized representatives such access, during normal business hours and upon
prior notice, to such books and records constituting part of the Purchased
Assets as shall be reasonably necessary for the Sellers in connection with the
preparation and filing of the Sellers' tax returns for periods prior to the
Closing, and to make extracts and copies of such books and records at the
expense of the Sellers.
12.2 Notices. All notices, claims, certificates, requests, demands and
other communications hereunder shall be given in writing and shall be delivered
personally or sent by telecopier or by a nationally recognized overnight
courier, postage prepaid, and shall be deemed to have been duly given when so
delivered personally or sent by telecopier, with receipt confirmed, or one (1)
Business Day after the date of deposit with such nationally recognized overnight
courier. All such notices, claims, certificates, requests, demands and other
communications shall be addressed to the respective parties at the addresses set
forth below or to such other address as the person to whom notice is to be given
may have furnished to the others in writing in accordance herewith.
30
If to the Buyer, to:
Sonic Automotive, Inc.
0000 Xxxx Xxxxxxxxxxxx Xxxxxxxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxxx Xxxxxx
with a copy to:
Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Xx.
If to the Sellers, to the Sellers' Agent at the following address:
Xxx X. Xxxxxxxx
c/o Toyota West
0000 Xxxxxxxx Xxxxx
X.X. Xxx 00000
Xxxxxxxx, Xxxx 00000
Telecopier No.: [TO BE SUPPLIED]
Attention: Xxx X. Xxxxxxxx
If to the Shareholders, to:
Xx. Xxx X. Xxxxxxxx
c/o Toyota West
0000 Xxxxxxxx Xxxxx
X.X. Xxx 00000
Xxxxxxxx, Xxxx 00000
Telecopier No.: [TO BE SUPPLIED]
Xx. Xxx X. Xxxxxxxx
c/o Toyota West
0000 Xxxxxxxx Xxxxx
X.X. Xxx 00000
Xxxxxxxx, Xxxx 00000
Telecopier No.: [TO BE SUPPLIED]
31
Xx. Xxx X. Xxxxxxxx, as Trustee of the
Xxx X. Xxxxxxxx, Xx. Special Irrevocable
Trust
c/o Toyota West
0000 Xxxxxxxx Xxxxx
X.X. Xxx 00000
Xxxxxxxx, Xxxx 00000
Telecopier No: [TO BE SUPPLIED]
in either case, with a copy to:
Kemp, Schaeffer, Xxxx & Xxxxxxxx Co., L.P.A.
00 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
The Buyer, the Sellers or the Shareholders may change the address or
telecopier number to which such communications are to be directed by giving
written notice to the others in the manner provided in this Agreement.
12.3 Parties in Interest; No Third Party Beneficiaries.
(a) Subject to Section 12.4 hereof, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto.
(b) Nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon or give to any employee of the Sellers, or any
other person, firm, corporation or legal entity, other than the parties hereto
and their successors and permitted assigns, any rights, remedies or other
benefits under or by reason of this Agreement.
12.4 Assignability. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties, provided that
Buyer may assign its rights under this Agreement to any affiliate of Buyer
presently existing or hereafter formed and to any person or entity that shall
acquire all or substantially all of the assets of the Buyer; provided, however,
that no such assignment by the Buyer shall release it from its obligations
hereunder without the consent of the Sellers. Nothing contained in this
Agreement shall prohibit its assignment by the Buyer as collateral security and
the Sellers hereby agree to execute any acknowledgment of such assignment by the
Buyer as may be required by any lender to the Buyer.
12.5 Entire Agreement; Amendment. This Agreement and the other writings
referred to herein or delivered pursuant hereto contain the entire understanding
of the parties hereto and supersedes all prior agreements and understandings
between the parties hereto with respect to its subject matter. This Agreement
may be amended or modified only by a written instrument duly executed by the
parties hereto.
32
12.6 Headings. The article, section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but one
agreement.
12.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to its
principles of conflicts of law.
12.9 Knowledge. Whenever any representation or warranty of the Sellers
contained herein or in any other document executed and delivered in connection
herewith is based upon the knowledge of the Sellers, (i) such knowledge shall be
deemed to include (A) the best actual knowledge, information and belief of any
of the Sellers or the Shareholders and (B) any information which any Shareholder
would reasonably be expected to be aware of in the prudent discharge of his or
her duties in the ordinary course of business (including consultation with legal
counsel) on behalf of any Seller, and (ii) the knowledge of any Seller or
Shareholder shall be deemed to be the knowledge of all the Sellers and
Shareholders.
12.10 Jurisdiction; Arbitration.
(a) Subject to the other provisions of this Section 12.10, any
judicial proceeding brought with respect to this Agreement must be brought in
any court of competent jurisdiction in the State of Ohio, and, by execution and
delivery of this Agreement, each party (i) accepts, generally and
unconditionally, the exclusive jurisdiction of such courts and any related
appellate court, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement, and (ii) irrevocably waives any
objection it may now or hereafter have as to the venue of any such suit, action
or proceeding brought in such court or that such court is an inconvenient forum.
(b) Any dispute, claim or controversy arising out of or relating to
this Agreement, or the interpretation or breach hereof (including, without
limitation, any of the foregoing based upon a claim to any termination fee
hereunder), shall be resolved by binding arbitration under the commercial
arbitration rules of the American Arbitration Association (the "AAA Rules") to
the extent such AAA Rules are not inconsistent with this Agreement. Judgment
upon the award of the arbitrators may be entered in any court having
jurisdiction thereof or such court may be asked to judicially confirm the award
and order its enforcement, as the case may be. The demand for arbitration shall
be made by any party hereto within a reasonable time after the claim, dispute or
other matter in question has arisen, and in any event shall not be made after
the date when institution of legal proceedings, based on such claim, dispute or
other matter in question, would be barred by the applicable statute of
limitations. The arbitration panel shall consist of three (3) arbitrators, one
of whom shall be appointed by each party hereto within thirty (30) days after
any request for arbitration hereunder. The two arbitrators thus appointed shall
choose the third arbitrator within thirty (30) days after their appointment;
provided, however, that if the two arbitrators are unable to agree on the
appointment of the third arbitrator within 30 days after their appointment,
either arbitrator may petition the American Arbitration Association to make the
appointment. The place
33
of arbitration shall be Columbus, Ohio. The arbitrators shall be instructed to
render their decision within sixty (60) days after their selection and to
allocate all costs and expenses of such arbitration (including legal and
accounting fees and expenses of the respective parties) to the parties in the
proportions that reflect their relative success on the merits (including the
successful assertion of any defenses).
(c) Nothing contained in this Section 12.10 shall prevent any party
hereto from seeking any equitable relief to which it would otherwise be entitled
from a court of competent jurisdiction in the State of North Carolina; nothing
contained in this Section 12.10 shall prevent the Buyer from enforcing the
Non-Competition Agreement in any court of competent jurisdiction.
12.11 Waivers. Any party to this Agreement may, by written notice to the
other parties hereto, waive any provision of this Agreement from which such
party is entitled to receive a benefit. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach of such provision or any other provision of this
Agreement.
12.12 Severability. In the event that any provision, or part thereof, of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions, or parts
thereof, shall not in any way be affected or impaired thereby.
12.13 Expenses. Except as otherwise set forth herein, each party shall be
responsible for its own legal fees and other costs and expenses incurred in
connection with this Agreement and the negotiation and consummation of the
transactions contemplated hereby.
[Signatures begin on following page]
34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
THE BUYER: SONIC AUTOMOTIVE, INC.
By: /s/ O. Xxxxxx Xxxxx
--------------------------------
Name: O. Xxxxxx Xxxxx
Title: Chief Executive Officer
THE SELLERS:
XXXXXXXX JEEP EAGLE, INC.
By: /s/ Xxx X. Xxxxxxxx
--------------------------------
Name: Xxx X. Xxxxxxxx
Title: President
XXXXXXXX LINCOLN MERCURY, INC.
By: /s/ Xxx X. Xxxxxxxx
--------------------------------
Name: Xxx X. Xxxxxxxx
Title: President
TRADER BUD'S WESTSIDE DODGE, INC.
By: /s/ Xxx X. Xxxxxxxx
--------------------------------
Name: Xxx X. Xxxxxxxx
Title: President
TOYOTA WEST, INC.
By: /s/ Xxx X. Xxxxxxxx
--------------------------------
Name: Xxx X. Xxxxxxxx
Title: Xxxxxxxxx
00
XXXXXXXX XXXXXXX, INC.
By: /s/ Xxx X. Xxxxxxxx
--------------------------------
Name: Xxx X. Xxxxxxxx
Title: President
THE SHAREHOLDERS: /s/ Xxx X. Xxxxxxxx (SEAL)
------------------------------------
XXX X. XXXXXXXX
/s/ Xxx E, Xxxxxxxx (SEAL)
------------------------------------
XXX X. XXXXXXXX
/s/ Xxx X. Xxxxxxxx (SEAL)
------------------------------------
XXX X. XXXXXXXX, AS TRUSTEE
OF THE XXX X. XXXXXXXX, XX.
SPECIAL IRREVOCABLE TRUST
36
List of Schedules
Schedule 1.1(a) - Purchased Assets
Schedule 1.1(b) - Excluded Assets
Schedule 1.1(c) - Permitted Encumbrances
Schedule 1.2 - Assumed Liabilities
Schedule 1.3(d) - Allocation of Purchase Price and Assumed
Liabilities
Schedule 3.1 - Jurisdictions of Foreign Qualification of
Sellers
Schedule 3.2 - Required Authorizations and Consents to
Agreement
Schedule 3.3 - Investments
Schedule 3.4 - Financial Statements of the Sellers
Schedule 3.5 - Certain Changes
Schedule 3.6(a) - Material Contracts
Schedule 3.6(b) - Required Consents for Transfers of Material
Contracts
Schedule 3.7 - Encumbrances
Schedule 3.8(a) - Real Property; Leased Premises
Schedule 3.9 - Equipment
Schedule 3.12 - Approvals, Permits and Authorizations
Schedule 3.13 - Compliance with Laws
Schedule 3.14(a) - Insurance Policies
Schedule 3.14(b) - Property Damage and Personal Injury
Claims
Schedule 3.16 - Litigation
Schedule 3.17 - Powers of Attorney
Schedule 3.19 - Employee Relations
Schedule 3.20 - Compensation
Schedule 3.21 - Patents; Trademarks; Trade Names;
Copyrights; Licenses; Etc. and Proprietary
Names
Schedule 3.22 - Accounts Payable and Other Indebtedness
Schedule 3.23 - Other Liabilities
Schedule 3.24 - Affiliate Transactions
Schedule 3.26 - Employee Plans
Schedule 3.29(j) - Certain Environmental Conditions
Schedule 3.29(l) - Environmental Studies and Reports
Schedule 3.30 - Bank Accounts, Credit Cards and Safe
Deposit Boxes
Schedule 3.31 - Warranties
Schedule 3.32 - Interests in Competitors
Schedule 4.2(a) - Buyer Consents
2
List of Exhibits
Exhibit A - Preferred Stock Statement of Rights and
Preferences
Exhibit B - Form of Escrow Agreement
Exhibit C - Form of Bills of Sale and Assignment
Exhibit D - Form of Dealership Leases
Exhibit E - Form of Non-Competition Agreement
Exhibit F - Form of Legal Opinion of Counsel for the
Sellers and the Shareholders
Exhibit G - Form of Legal Opinion of Counsel for the
Buyer
Schedule 1.1(a)
Purchased Assets
The Purchased Assets shall include, without limitation, the
following, all to the extent not included in the Excluded Assets:
(a) all machinery, equipment (both mobile and non-mobile),
computers, computer programs, databases and related manuals and other materials
necessary for the development, use, installation, maintenance and modification
of such computer programs and databases, tapes, tools, furniture, furnishings,
automobiles, trucks, vehicles, tools, dies, molds, signs, supplies and parts and
other tangible personal property (including any of the foregoing purchased
subject to any conditional sales or title retention agreement in favor of any
third party), whether owned, leased or subleased;
(b) all accounts and notes receivable, advances held by the
Sellers, and all debts and obligations due to the Sellers from their customers
and others, howsoever evidenced, and whether or not previously written-off by
the Sellers, and all obligations and loans, if any, due to the Sellers as of the
Closing from any and all employees of the Sellers;
(c) all inventories, including, without limitation, all new
and used vehicle and parts inventories, goods, supplies, fuel oil, spare parts,
packing containers, replacement and component parts, and office and other
supplies, including all such inventories held at any location controlled by the
Sellers and all such inventories previously purchased and in transit to the
Sellers at such locations;
(d) all rights to products sold or leased and to any products
under research or development prior to or on the Closing;
(e) all security, utility or similar deposits and prepaid
expenses of the Sellers;
(f) all of the rights of the Sellers under all contracts,
arrangements, commitments, sales orders, purchase orders, invoices, license and
technology agreements, leases and agreements and all warranties, claims and
causes of action against third parties and under insurance policies, including
any of the Sellers' right to receive goods and services pursuant to such
contracts and to assert claims and take other rightful actions in respect of
breaches, defaults and other violations of such contracts and otherwise;
(g) all designs, plans, non-marketing trade secrets,
inventions, processes, procedures, research records, manufacturing know-how and
manufacturing formulae, wherever located;
(h) all books, records, manuals and other materials,
including, without limitation, all records and materials maintained at any and
all offices and other locations of the Sellers, all accounting and financial
records, files, computer tapes, advertising matter, catalogues,
brochures, price lists, correspondence, mailing lists, lists of customers and
suppliers, distribution lists, art work, photographs, production data, sales and
promotional materials and records, purchasing materials and records, personnel
records, credit records, manufacturing and quality control records and
procedures, blueprints, research and development files, records, data and
laboratory books, patent disclosures, media materials and plates, sales order
files and litigation files, stationary and business forms;
(i) all interest of the Sellers in and to their telephone and
telex numbers and all listings pertaining to the Sellers in all telephone books
and directories;
(j) to the extent their transfer is permitted by law, all
governmental licenses, permits, approvals, license applications, license
amendment applications and product registrations;
(k) all bank accounts;
(l) all cash paid by customers of the Sellers, or otherwise,
whether or not deposited with a trustee or other depository;
(m) all goodwill of the Sellers;
(n) all trademarks, service marks and trade names and
registered user names, all rights to the Proprietary Names (as defined in the
Agreement) and all logos, tradestyles and variants thereof, of the Seller, and
all existing and pending registrations or applications in connection with the
foregoing; and
(o) all insurance policies.
Schedule 1.1(b)
Excluded Assets
The Sellers will retain and not sell, convey, assign, transfer or
deliver to the Buyer, and the Buyer shall not purchase or acquire, the following
Excluded Assets:
(a) all real property owned by the Sellers;
(b) the minute books, stock ledgers and other related
corporate books and records of the Sellers;
(c) refunds for Taxes of the Sellers, except for Taxes accrued
for or reserved against in the Closing Balance Sheet, and all claims therefor;
(d) all segregated funds and other assets of the Sellers
corresponding to Employee Plans of the Sellers that are not assumed by the Buyer
according to Schedule 1.2;
(e) all governmental licenses, permits, approvals, license
applications, license amendment applications and product registrations the
transfer of which is not permitted by law;
(f) any loans or advances to employees or to the Sellers,
their affiliates, or their respective officers, directors or shareholders.
Schedule 1.1(c)
Permitted Encumbrances
Those Encumbrances listed on Schedule 3.7 which secure only the payment of
indebtedness included in the Assumed Liabilities.
Schedule 1.2
Assumed Liabilities
The Buyer shall assume the following liabilities and obligations of
the Sellers:
(a) all liabilities and obligations (i) set forth in the
balance sheets included in the Financial Statements, (ii) of the type and kind
set forth in such balance sheets and incurred by the Sellers in the ordinary
course of business from the date of such balance sheets to the Closing Date, and
(iii) set forth in the Closing Balance Sheet;
(b) the Inducement Fee; and
(c) all continuing obligations under the Material Contracts
listed on Schedule 3.6 arising after the Closing in the ordinary course of
business and not as a result of any breach or default of the Sellers thereunder.
* * * * * * * * * * * * *
Notwithstanding the foregoing and without limiting the generality of
the definition of "Retained Liabilities" set forth in the Agreement, the Buyer
shall not assume, and the Sellers shall retain and be responsible for, the
following Retained Liabilities, unless specifically included in the Assumed
Liabilities:
(i) those liabilities payable to the Sellers, their
affiliates, or their respective officers, directors or shareholders;
(ii) all real property mortgage indebtedness owed by any of
the Sellers;
(iii) all liabilities and obligations under lines of credit,
long and short term indebtedness to financial institutions and other similar
financings, except for new and used vehicle "floor planning" lines;
(iv) all liabilities and obligations for Taxes, except to the
extent accrued for or reserved against in the Closing Balance Sheet;
(v) all liabilities and obligations under any contract or
agreement which is not fully and effectively assigned to the Buyer (including
any required consent or approval as specified in Schedule 3.2 or 3.6(b) and such
consent or approval has not been obtained by the Sellers or waived by the
Buyer);
(vi) all liabilities for any and all pending or threatened
litigation existing at the time of the Closing;
(vii) all known or unknown environmental liabilities and claims
arising out of the ownership or operation of the Purchased Assets prior to the
Closing, including, without limitation, the presence, release or threatened
release of Hazardous Materials and any liabilities or obligations arising under
any Environmental Law, including but not limited to the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), as amended;
(viii) all known or unknown product liabilities and claims arising
out of the sale of products or the furnishing of services prior to the Closing;
(ix) all liabilities and obligations relating to the Excluded
Assets; and
(x) all employment related liabilities.
