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ASSET PURCHASE AGREEMENT
by and among
SONIC AUTOMOTIVE, INC.,
M&S AUTO RESOURCES, INC.
CLEARWATER AUTO RESOURCES, INC.,
CLEARWATER COLLISION CENTER, INC.,
XXXXX XXXX,
XXXXXXX XXXXX,
XXXXXXX XXXXXXX,
and
XXXXXXX XXXXXX
Dated as of December 30, 1997
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TABLE OF CONTENTS
Page
Article 1 - Purchase and Sale of Assets; Assumption of Liabilities................................................1
1.1 Agreement of Purchase and Sale......................................................................1
1.2 Assumed Liabilities; Inducement Fee.................................................................1
1.3 Purchase Price; Allocation..........................................................................2
1.4 Instruments of Conveyance and Transfer; Dealership Leases...........................................6
1.5 Offers of Employment to Sellers' Employees..........................................................7
Article 2 - Closing...............................................................................................7
Article 3 - Representations, Warranties and Covenants of the Sellers..............................................7
3.1 Organization; Good Standing; Qualifications.........................................................7
3.2 Authority; Consent..................................................................................8
3.3 Ownership; Investments..............................................................................8
3.4 Financial Statements................................................................................8
3.5 Absence of Certain Changes..........................................................................9
3.6 Material Contracts.................................................................................10
3.7 Title to Purchased Assets and Related Matters......................................................10
3.8 Real Property of the Sellers.......................................................................10
3.9 Machinery, Equipment, Etc..........................................................................11
3.10 Inventories of the Sellers........................................................................11
3.11 Accounts Receivable of the Sellers................................................................11
3.12 Approvals, Permits and Authorizations.............................................................12
3.13 Compliance with Laws..............................................................................12
3.14 Insurance.........................................................................................12
3.15 Taxes ...........................................................................................13
3.16 Litigation........................................................................................13
3.17 Powers of Attorney................................................................................13
3.18 Broker's and Finder's Fees........................................................................13
3.19 Employee Relations................................................................................13
3.20 Compensation......................................................................................14
3.21 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc.......................................14
3.22 Accounts Payable; Other Indebtedness..............................................................14
3.23 No Undisclosed Liabilities........................................................................14
3.24 Certain Transactions..............................................................................15
3.25 Business Generally................................................................................15
3.26 Employee Benefits.................................................................................15
3.27 Sellers and Shareholders Not Foreign Persons......................................................16
3.28 Suppliers and Customers...........................................................................16
3.29 Environmental Matters.............................................................................16
3.30 Bank Accounts and Safe Deposit Boxes..............................................................18
3.31 Warranties........................................................................................18
3.32 Interest in Competitors and Related Entities......................................................18
3.33 Availability of Sellers' Employees................................................................18
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3.34 Misstatements and Omissions.......................................................................19
Article 4 - Representations and Warranties of the Buyer..........................................................19
4.1 Organization and Good Standing.....................................................................19
4.2 Authority; Consents; Enforceability................................................................19
4.3 Broker's and Finder's Fees.........................................................................19
4.4 Litigation.........................................................................................20
4.5 Financing..........................................................................................20
4.6 Misstatements or Omissions.........................................................................20
Article 5 - Pre-closing Covenants of the Sellers and the Shareholders............................................20
5.1 Provide Access to Information; Cooperation with Buyer..............................................20
5.2 Operation of Business of the Sellers...............................................................21
5.3 Certain Prohibitions...............................................................................21
5.4 Additional Information.............................................................................21
5.5 Publicity..........................................................................................22
5.6 Other Negotiations.................................................................................22
5.7 Closing Conditions.................................................................................22
5.8 Environmental Audit................................................................................22
5.9 Xxxx-Xxxxx-Xxxxxx Compliance.......................................................................23
5.10 Audit of Sellers at Buyer's Expense...............................................................23
Article 6 - Pre-closing Covenants of the Buyer...................................................................23
6.1 Publicity; Disclosure..............................................................................23
6.2 Closing Conditions.................................................................................23
6.3 Application to Automobile Manufactures and Distributors. .........................................23
6.4 Xxxx-Xxxxx-Xxxxxx Compliance.......................................................................24
Article 7 - Conditions Precedent to Obligations of the Buyer.....................................................24
7.1 Representations and Warranties.....................................................................24
7.2 Performance of Obligations of the Sellers and the Shareholders.....................................24
7.3 Closing Certificate................................................................................24
7.4 Opinion of Counsel.................................................................................24
7.5 Supporting Documents...............................................................................24
7.6 Bills of Sale, Etc.................................................................................25
7.7 Dealership Lease, Escrow Agreement and Non-Competition Agreement...................................25
7.8 Books and Records..................................................................................25
7.9 Change of Name of Sellers; Use of Sellers' Name by Buyer...........................................25
7.10 Consents..........................................................................................26
7.11 No Litigation.....................................................................................26
7.12 Authorizations....................................................................................26
7.13 No Material Adverse Change or Undisclosed Liability...............................................26
7.14 Approval of Legal Matters.........................................................................26
7.15 Adverse Laws......................................................................................26
7.16 Xxxx-Xxxxx-Xxxxxx Waiting Period..................................................................26
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Article 8 - Conditions Precedent to Obligations of the Sellers...................................................27
8.1 Representations and Warranties.....................................................................27
8.2 Performance of Obligations of the Buyer............................................................27
8.3 Closing Certificate................................................................................27
8.4 Payment of Purchase Price..........................................................................27
8.5 Opinion of Counsel.................................................................................27
8.6 Supporting Documents...............................................................................27
8.7 Approval of Legal Matters..........................................................................28
8.8 Dealership Lease and Escrow Agreement..............................................................28
8.9 No Litigation......................................................................................28
8.10 Xxxx-Xxxxx-Xxxxxx Waiting Period..................................................................28
8.11 No Material Adverse Change........................................................................28
8.12 Certificate of Designations........................................................................28
Article 9 - Transfer Taxes; Proration of Charges.................................................................29
9.1 Certain Taxes and Fees.............................................................................29
9.2 Proration of Certain Charges.......................................................................29
Article 10 - Survival of Representations and Warranties; Indemnification.........................................29
10.1 Survival of Representations and Warranties........................................................29
10.2 Agreement to Indemnify by the Sellers and Shareholders............................................29
10.3 Agreement to Indemnify by the Buyer...............................................................30
10.4 Claims for Indemnification........................................................................31
10.5 Procedures Regarding Third Party Claims...........................................................31
10.6 Effectiveness.....................................................................................32
Article 11 - Termination.........................................................................................32
11.1 Termination.......................................................................................32
11.2 Procedure and Effect of Termination...............................................................33
Article 12 - Miscellaneous Provisions............................................................................33
12.1 Access to Books and Records after Closing.........................................................33
12.2 Notices...........................................................................................33
12.3 Parties in Interest; No Third Party Beneficiaries.................................................36
12.4 Assignability.....................................................................................36
12.5 Entire Agreement; Amendment.......................................................................36
12.6 Headings..........................................................................................36
12.7 Counterparts......................................................................................36
12.8 Governing Law.....................................................................................36
12.9 Knowledge.........................................................................................36
12.10 Jurisdiction; Arbitration........................................................................37
12.11 Waivers..........................................................................................37
12.12 Severability.....................................................................................38
12.13 Expenses.........................................................................................38
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of this 30th day of December, 1997, by and among SONIC AUTOMOTIVE, INC.,
a Delaware corporation (the "BUYER"), M&S AUTO RESOURCES, INC., D/B/A CLEARWATER
TOYOTA, a Florida corporation ("CTI"), CLEARWATER AUTO RESOURCES, INC., D/B/A
CLEARWATER MITSUBISHI, a Florida corporation ("CMI"), CLEARWATER COLLISION
CENTER, INC., a Florida corporation ("CCCI" and, together with CTI and CMI,
collectively, the "SELLERS" and each, individually a "SELLER"), and Xxxxx Xxxx,
Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxx, and Xxxxxxx XxXxxx (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 March 31, 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 any 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
purchase price of $17,590,000, consisting of $4,200,000 as the purchase price
for the Sellers' Net Current Assets (as hereinafter defined) and $13,390,000 as
the purchase price for all of the other Purchased Assets, subject to adjustment
as provided in Section 1.3(c) below (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 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) $11,380,000 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 Prime 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 the Sellers 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(d). The sum of $500,000 (the "ESCROW
AMOUNT") shall be placed in escrow with First Union
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National Bank (the "ESCROW AGENT") by the Buyer in accordance with the escrow
agreement in the form of Exhibit A, with such other changes thereto as the
Escrow Agent shall reasonably request (the "ESCROW AGREEMENT"). For purposes of
this Agreement, a "BUSINESS DAY" is a day other than a Saturday, a Sunday or a
day on which banks are required or authorized to be closed in the State of North
Carolina. The term of the Escrow Agreement will be for 90 days from the Closing
Date if the Buyer shall have made no claims during such period for
indemnification pursuant to the terms of this Agreement or for a Net Current
Assets Shortfall (as defined in Section 1.3(c) below) pursuant to the terms of
this Agreement. If the Buyer shall have made no such claims during such 90-day
period, the Buyer will execute a joint instruction pursuant to the Escrow
Agreement at the end of such period instructing the Escrow Agent to pay the
Escrow Amount in immediately available funds to the Sellers pursuant to the
terms of the Escrow Agreement.
(2) (I) At the Closing, the Buyer shall issue and
deliver to the Sellers, in the respective amounts specified in Part I of
Schedule 1.3(d) hereto, 3,960 shares of the Buyer's Convertible Preferred Stock
(the "PREFERRED STOCK" or the "STOCK CONSIDERATION"). The Preferred Stock will
be convertible into shares of the Buyer's Class A Common Stock having a market
value at the time of conversion of not less than $3,960,000 and not more than
$4,356,000, as more specifically provided in the Statement of Rights and
Preferences attached as Exhibit B hereto.
(II) 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 Seller
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.
(3) Subject to the provisions of paragraph (4)
below, not later than 120 days after the first anniversary of the Effective
Closing Date, the Buyer shall pay to the Sellers an amount equal to 50% of the
Buyer's combined earnings before taxes for the 12 month period (the "EARNOUT
PERIOD") beginning on the Effective Closing Date from the three businesses
purchased hereunder (the "SUBJECT BUSINESSES"), with a maximum payment
obligation of the Buyer hereunder of $1,750,000. Such payment (hereinafter
called the "EARNOUT PAYMENT") shall be made by wire transfer of immediately
available funds to the account or accounts of the Sellers, which shall be
designated by the Sellers in writing at least one (1) Business Day prior to the
date of payment, in the respective amounts specified in Part I of Schedule
1.3(d). To the extent that the Earnout Payment is made more than 30 days after
the end of the Earnout Period, the Buyer shall also pay, subject to
3
paragraph (4) immediately below, interest at the Prime Rate (as defined in
Section 1.3(c) below) on the amount of the Earnout Payment from the 31st day
after the end of the Earnout Period to the date of payment. For purposes of
calculating such combined earnings before taxes of the Subject Businesses, the
following rules shall apply:
(I) no deduction shall be taken for federal and state income
taxes owed by the Subject Businesses;
(II) no deduction shall be taken for bad debts which have not
been processed through the Buyer's customary credit approval procedures;
(III) earnings before taxes shall be determined before any
management fee expense allocation from the Buyer;
(IV) overhead expenses or other expenses which have been
incurred by any of the Subject Businesses which are allocated to such Subject
Business but do not directly relate to the operation of such Subject Business,
or that portion so allocated which is not reasonably related to the operation of
such Subject Business, shall not be deducted in determining earnings before
taxes;
(V) earnings before taxes shall be determined prior to
calculation of the Earnout Payment;
(VI) no deduction shall be taken for goodwill of the Subject
Businesses; and
(VII) no deduction shall be taken for any interest expenses of
the Subject Businesses other than floor plan financing interest attributable to
the Subject Businesses and other interest expenses directly attributable to the
operation of the Subject Businesses.
At the time of the making of the Earnout Payment, the Buyer shall
deliver to the Sellers' Agent a statement in writing setting forth in reasonable
detail the manner in which the Earnout Payment was determined.
(4) If, as of the date of the Earnout Payment
(hereinafter called the "EARNOUT PAYMENT DATE"), any Buyer Indemnitee (as
defined in Section 10.2 below) shall have made a claim or claims for Buyer's
Damages (as defined in Section 10.2 below) and such claim or claims shall not
have been resolved prior to the Earnout Payment Date, either by mutual written
agreement between the Sellers and the Buyer or by a decision of the arbitrators
pursuant to Section 12.10 below, then the amount of the Earnout Payment shall
only be paid to the extent it exceeds the aggregate total of Buyer's Damages as
to which claims for indemnification shall have been made on or prior to the
Earnout Payment Date and not resolved on or prior thereto, and the remainder of
the Earnout Payment shall be postponed until the resolution of all such claims
for indemnification. The Sellers hereby acknowledge and agree that the Buyer
shall be entitled to set off against and to reduce the amount of the Earnout
Payment by the amount of Buyer's Damages which is either agreed to in writing by
the Sellers and the Buyer or determined pursuant to a decision of the
4
arbitrators referred to in Section 12.10 below. To the extent that such
arbitrators shall determine that the postponement of any portion of the Earnout
Payment by the Buyer was not warranted, the Buyer shall promptly pay such
portion to the Sellers, together with interest from the 31st day after the end
of the Earnout Period to the date of payment, as provided in paragraph (3)
above.
(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 Xxxxx Xxxx,
as agent for the Sellers (the "SELLERS' AGENT"), an unaudited balance sheet (the
"CLOSING BALANCE SHEET") of the Sellers as of the Effective Closing Date,
consisting of computations 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 used vehicle inventories shall only include used
vehicles as to which the Buyer and the Sellers' Agent, or their respective
designees (it being anticipated but not required that the Buyer would be
represented in these valuation negotiations by Xxxxx Xxxxx), shall have mutually
agreed regarding the appraised values thereof, based upon a physical inventory
to be conducted by them on the Business Day immediately preceding the Closing
Date; no 1997 or older vehicles (other than those scheduled on Schedule 1.3(c))
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.
"Slow moving" means (i) with respect to returnable parts, returnable parts older
than twelve months and, (ii) with respect to new vehicles, new vehicles older
than 300 days; and (iii) with respect to other inventory, as may be reasonably
determined by the Buyer, the Sellers having a right to arbitrate disputes with
respect to such other inventory provided, however, that the valuation process
described above shall control with respect to all used vehicles. 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 computation 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.
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(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 $4,200,000 (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 the Prime
Rate of NationsBank, N.A. from time to time in effect (the "PRIME RATE") from
and including the first day of the calendar month in which 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 pay up to the entire amount of the Escrow Amount to the
Buyer. 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
$4,200,000 (the "NET CURRENT ASSETS EXCESS"), the Buyer shall be obligated to
pay the amount of the Net Current Assets Excess promptly to the Sellers. In
furtherance of (but not by way of limitation of) the Buyer's obligation in the
immediately preceding sentence, the Buyer and the Sellers' Agent shall execute
and deliver to the Escrow Agent a joint instruction to pay up to the entire
amount of the Escrow Amount to the Sellers. The Buyer shall also pay interest to
the Sellers on Net Current Assets Excess at the Prime Rate from and including
the first day of the calendar month in which 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 LEASE. At the Closing, M&S Auto Resources, Inc.
will enter into a lease 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, such lease to be substantially in the form of Exhibit D (the
"DEALERSHIP LEASE"). 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
Xxxxx Xxxx and Xxxxxxx XxXxxx will enter into a non-competition agreement with
the Buyer in substantially
6
the form of Exhibit E (the "NON-COMPETITION AGREEMENT"). Neither Xxxxxxx Xxxxx
nor Xxxxxxx Xxxxxxx will be required to enter into a non-competition agreement
with the Buyer.
(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.
(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 Johnson, Blakely,
Pope, Bokor, Xxxxxx & Xxxxx, P.A., 000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx, 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 2, 1998 (the "CLOSING DATE
DEADLINE"), unless another date or place is agreed to in writing by the Sellers
and the Buyer. 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 Florida. 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.
7
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 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) the unaudited balance sheets for the Sellers as of
December 31, 1996 and the related unaudited statements of income and
stockholders' equity, as reflected in financial statements for such periods
finished to the applicable manufacturers (including the notes thereto and any
other information included therein) (collectively, the "ANNUAL FINANCIAL
STATEMENTS"); and (b) the unaudited balance sheets of the Sellers as of October
31, 1997 and the related unaudited statements of income and stockholders' equity
for the nine-month period then ended (collectively, the "INTERIM FINANCIAL
STATEMENTS") (the Annual Financial Statements and the Interim Financial
Statements are hereinafter
8
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 October 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 $50,000; (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 ordinary course of business)
having an aggregate book value of $50,000 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 $50,000 individually, or $100,000 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 $25,000 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 $50,000 or note receivable in excess of
$50,000 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.
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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 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 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 Lease 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.
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(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. Other than as disclosed on Schedule 3.8(b), 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. Except for the Leased Premises, which
are owned by CTI, 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 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 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.
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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 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 through 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. 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 and 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.
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(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 elections
have been continuously in effect since November 21, 1995 in the case of CTI,
July 27, 1989 in the case of CMI, and December 18, 1995 in the case of CCCI.
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.
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 189 employees as
of November 30, 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
13
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 as projected 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 Florida 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.
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
14
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 general 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. 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
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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, 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.
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(c) The Sellers and the Purchased Assets are and have been in
compliance in all material respects with all Environmental Laws.
(d) Neither the Sellers nor the Shareholders has received any
written or oral order, notice, complaint, request for information, claim, demand
or other communication from any government authority or other person, whether
based in contract, tort, implied or express warranty, strict liability, or any
other common law theory, or any criminal or civil statute, arising from or with
respect to (i) the presence, release or threatened release of any Hazardous
Material or any other environmental condition on, in or under the Real Property
or any other property formerly owned, used or leased by 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) To the knowledge of the Sellers, no Hazardous Materials
are or have been released, discharged, spilled or disposed of onto, or migrated
onto, the Real Property or any other property previously owned, operated or
leased by 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 best of 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 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.
17
(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), 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.
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,
18
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
19
to any such broker, finder or agent or any other person or entity claiming any
such fee or commission.
4.4 LITIGATION. There are no actions, suits, claims, investigations or
legal or administrative or arbitration proceedings pending or, to the Buyer's
knowledge, threatened or probable of assertion, against the Buyer before any
court, governmental or administrative agency or other body relating to this
Agreement and/or the transactions contemplated hereby. The Buyer is not now
under any judgment, order, writ, injunction, decree or other similar command of
any court, administrative agency or other governmental agency which relate to
this Agreement and/or the transactions contemplated hereby.
4.5 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
20
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 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 (it being understood that such operation shall be
for the account of the Buyer after the Effective Closing Date), (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, or make any cash disbursements other
than to pay ordinary course obligations reflected on the Closing Balance Sheet;
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 on or prior to the Effective Closing Date,
and (B) will not result in the Net Current Assets falling below $4,200,000.
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
21
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 release or other public announcement
relating to this Agreement or the transactions contemplated hereby, without the
prior 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 audit report is
warranted, the Buyer, on the one hand, and the Sellers, on the other hand, shall
each bear 50% of
22
the costs, fees and expenses incurred 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.
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.
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 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
23
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.
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
Johnson, Blakely, Pope, Bokor, Xxxxxx & Xxxxx, P.A., counsel to the Sellers and
the Shareholders, dated the Closing Date, in form and substance reasonably
satisfactory to the Buyer.
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 Florida dated as of a recent date as to the due incorporation or
organization and good standing of the Sellers;
24
(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
(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 LEASE, ESCROW AGREEMENT AND NON-COMPETITION AGREEMENT.
The Buyer shall have received the Dealership Lease, the Escrow Agreement and the
Non-Competition 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, to the extent necessary to effect a change
of names (including assumed or "d/b/a" 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 Florida 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
25
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.
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.
26
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.
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 Stock Consideration, and (b) placed into
escrow the Escrow Amount, 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, in form and substance reasonably satisfactory to the Sellers' Agent.
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
27
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 LEASE AND ESCROW AGREEMENT. The Sellers' Agent shall
have received the Dealership Lease, 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 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.
8.11 NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no material adverse change in the financial condition or
business operations of the Buyer, other than changes as a result of general
business and economic conditions generally affecting the industry and markets
(including the securities markets) in which the Buyer participates.
8.12 CERTIFICATE OF DESIGNATIONS. Prior to Closing, the Buyer shall
have delivered to the Sellers a commercially reasonable Certificate of
Designations with respect to the Preferred Stock, duly filed with the Delaware
Secretary of State.
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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. At the Closing, the Buyer shall furnish to the
Sellers' Agent a resale exemption certificate on form DR-1 or other appropriate
form.
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 two years, with the
exception of the representations and warranties of the Sellers contained in
Section 3.15, which shall survive the Closing until the expiration of the
applicable statutes of limitation , and the representations and warranties
contained in Sections 3.7, 3.23 and 3.29, which shall survive the Closing for a
period of three years. 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")
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:
29
(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 $50,000 (the parties hereby acknowledge
that the above stated figure of $50,000 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 postpone, offset (subject to the provisions of Section 1.3(b)(4)) and reduce
the amount payable under the Earnout Payment; and (2) the aggregate amount of
Buyer's Damages required to be paid by the Seller and the Shareholders hereunder
shall not exceed the Purchase Price.
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 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;
30
(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 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
31
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;
32
(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 within 30 days after ______________, 1998,
if, and only if, the Buyer is not satisfied, in its discretion, with the results
of the Buyer's due diligence investigation;
(e) By the Buyer, by written notice to the Sellers, in the
event that approval by any applicable automobile manufacturer or distributor of
the transactions contemplated by this Agreement is not received at least 10
Business Days prior to the Closing Date Deadline; or
(f) By the Buyer, by written notice to the Sellers, in the
event that any applicable automobile manufacturer or distributor (or any person
claiming by, through or under it) shall exercise any right of first refusal,
preemptive right or other similar right, with respect to any of the Purchased
Assets.
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 or to verify the Buyer's calculation of the Earnout Payment, 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,
33
claims, certificates, requests, demands and other communications shall be
addressed to the respective parties at the addresses set forth below or to such
other address as the person to whom notice is to be given may have furnished to
the others in writing in accordance herewith.
If to the Buyer, to:
Sonic Automotive, Inc.
0000 Xxxx Xxxxxxxxxxxx Xxxxxxxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxxx Xxxxxx
with a copy to:
Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Sellers, to the Sellers at the following addresses:
M&S Auto Resources, Inc.
00000 X. X. Xxxxxxx 00 Xxxxx
Xxxxxxxxxx, XX [ZIP]
Telecopier No.:
Attention: Xxxxx Xxxx
Clearwater Auto Resources, Inc.
00000 X. X. Xxxxxxx 00 Xxxxx
Xxxxxxxxxx, XX [ZIP]
Telecopier No.:
Attention: Xxxxx Xxxx
and
Xxxxxxx Xxxxxxx
0 Xxxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
34
Clearwater Collision Center, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxxxx, XX [ZIP]
Telecopier No.:
Attention: Xxxxx Xxxx and Xxxxxxx XxXxxx
If to the Shareholders, to:
Mr. Xxxxx Xxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telecopier No.:
Mr. Xxxxxxx Xxxxx
[INSERT ADDRESS]
Telecopier No.:
Xx. Xxxxxxx XxXxxx
[INSERT ADDRESS]
Telecopier No.:
in either case, with a copy to:
Johnson, Blakely, Pope, Bokor, Xxxxxx & Xxxxx, P.A.
000 Xxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: X.X. Xxxxxxxxx III, 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.
35
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.
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 Florida, 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.
36
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 Florida 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 of arbitration shall be Pinellas County, Florida. 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 Florida; 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.
37
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]
38
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:
M&S AUTO RESOURCES, INC.
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: President
CLEARWATER AUTO RESOURCES, INC.
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: President
CLEARWATER COLLISION CENTER, INC.
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: President
THE SHAREHOLDERS: /s/ Xxxxx Xxxx (SEAL)
XXXXX XXXX
/s/ Xxxxxxx Xxxxx (SEAL)
XXXXXXX XXXXX
/s/ Xxxxxxx Xxxxxxx (SEAL)
XXXXXXX XXXXXXX
/s/ Xxxxxxx XxXxxx (SEAL)
XXXXXXX XXXXXX
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(c) - 1997 Vehicles
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 3.8(b) - Condemnation Proceeding
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
List of Exhibits
Exhibit A - Form of Escrow Agreement
Exhibit B - Statement of Rights and Preferences of
Preferred Stock
Exhibit C - Form of Bills of Sale and Assignment
Exhibit D - Form of Dealership Lease
Exhibit E - Form of Non-Competition Agreement
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 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 current liabilities (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; and
(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 or other similar financings except for new or 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;
(x) all liabilities and obligations under any
Employee Plans, including, without limitation, all liabilities and obligations
for or arising from any "COBRA" health care continuation coverage required to be
provided under Section 4980B of the Code and Sections 601- 608 of ERISA to the
Sellers' employees, former employees and any other COBRA qualified
beneficiaries, including those who incur a COBRA qualifying event by virtue of
not being hired by Buyer; and
(xi) all employment related liabilities.
Schedule 1.3(d)
Allocation of Purchase Price and Assumed Liabilities
Part I - Allocation by Sellers
M&S Auto Clearwater Auto Clearwater Collision
Price Component Resources, Inc. Resources, Inc. Center, Inc. Totals
Closing Payment $6,430,000 $3,700,000 $1,250,000 $11,380,000
Escrow Amount 350,000 100,000 50,000 500,000
Preferred Stock 3,960,000(1) -0- -0- 3,960,000
Earnout Payment 1,400,000 -0- 350,000 1,750,000
--------------- ------------------- ------------------ ----------------
TOTALS $12,140,000 $3,800,000 $1,650,000 $17,590,000
=========== ========== ========== ===========
Part II - Allocation by Purchased Assets
The Purchase Price and Assumed Liabilities shall be allocated to the
Purchased Assets, first, to the respective book values thereof reflected on the
Closing Balance Sheet, second, to the Non- Competition Agreement in the amount
of $10,000, and third, to goodwill.
--------
1The beneficial owners of M&S Auto Resources, Inc. are Xxxxxxx Xxxxx and
Xxxxx Xxxx. As an accomodation to such Seller, the certificates of preferred
stock will be issued directly to the beneficial owners of such Seller by the
Buyer in the following amounts:
Xxxxx - 1,980 shares
Xxxx - 1,980 shares
